1997 Highlights
* Net asset value per share increased 18.2%
* Total net assets were up 24.8% to $17.8 million
* Dividend distribution of $2.89 was declared on December 31, 1997
* Volumetric has opened an internet web site: www.volumetric.com
* Automatic Investment Plans have been introduced
To Our Shareholders:
We are pleased to introduce our new logo with the 1997 Annual Report.
In September of 1998 we will celebrate our 20th birthday. Our new logo will
commemorate our twentieth anniversary and carry us into the next
millennium.
Volumetric Fund's net asset value (NAV) gained 18.2% in 1997 and
closed out the year at $20.30 per share, up $3.13. We achieved this despite
a minor decline of 2.4% in the fourth quarter, that was due mostly to the
turmoil in the Asian stock markets. This was the third year in a row that
the Fund gained more than 15%. We are also pleased to announce that the
Volumetric Index closed out 1997 at a year-end high of $121,987. This index
measures the value of a $10,000 hypothetical investment in the Fund on
January 1, 1979, with dividends reinvested. Our average annual return since
1979 was 14.7%, as compared to the NYSE Index that had a 13.0% average
return in the same period. During 1997, the large-cap weighted NYSE Index
advanced 30.1%. Since its inception Volumetric has outperformed the New
York Stock Exchange Composite Index in 12 out of the past 19 years.
As of December 31, the Fund had net assets of $17.8 million, up 25%
in 1997, and a year-end record. Our portfolio consists of 58 stocks,
representing 85.7% of net assets, and 14.3% in cash and equivalents.
FOURTH QUARTER PORTFOLIO CHANGES
Our five best performing stocks at year-end were: Warner Lambert, up
182%, Mercantile Bancorp, up 133%, Navistar, up 118%, Tyco International,
up 111% and Ecolab up 65%. Our average stock was up 27.8%. Our best pick in
the fourth quarter was Pacific Scientific. Shortly after we bought this
stock on November 24, it received a tender offer. By the end of the year
this stock moved up 53%. Among our other stocks, Westinghouse was renamed
CBS after its broadcasting arm. This stock has gained 35% since we bought
it in June. Also, CUC International merged with HFS, now called Cendant. It
is up 28% since our purchase in September.
During the fourth quarter the following stocks were added to our
portfolio: Alza, America West Holdings, Ashland, Inc., Ballard Medical
Products, Bandag, Browning-Ferris, Champion Enterprises, Cincinnati Bell,
Dow Chemical, Fleet Financial, JP Morgan, Lancaster Colony, Litton
Industries, Omnicare, Pacific Scientific, Questar, Sotheby's Holdings, Toro
and Wachovia Bancorp.
The following stocks were sold in the fourth quarter: Alcoa, Allied
Signal, Anheuser-Busch, Aviall, Bergen Brunswig, Brunswick, Bethlehem
Steel, Chock Full o' Nuts, Consolidated Cigar, Echlin, Federal Express,
General Motors, Gtech Holdings, Harsco, Illinois Central, John Alden
Financial, Louisiana Pacific, Mitel, Murphy Oil, Oceaneering, Pope &
Talbot, Quaker State, Scientific Atlanta, Shopko, Standard Motor Products,
Toys `R' Us, Texaco, Varian Associates, Whirlpool and Zale.
DIVIDENDS AND DISTRIBUTIONS
On December 31, 1997, Volumetric Fund declared an annual distribution
of $2.89 per share -- representing $2.02 long-term capital gains and $0.87
short-term capital gains -- to shareholders of record at December 31, 1997.
Reinvesting shareholders received more Volumetric shares, about 1 share for
each 6 shares they had on January 1, 1998. At the same time, our NAV was
reduced by $2.89 per share, from $20.30 to the reinvestment price of
$17.41, which was also our 1998 opening price.
GROWTH AND PROTECTION
Our two year old "Strength and Protection" system is continuing to
perform very well. Our triple objectives, consistent growth with high
strength stocks, downside protection and below average volatility, were
successfully achieved in 1997.
1) High strength. Volumetric's year-end portfolio contains strong,
high momentum stocks. Out of our 58 stocks, 54 are within 15% of their 52-
week record highs. We have 53 winning stocks and only 5 losers, none down
more than 6.2%.
2) Strong protection. We are very proud of our protection system. In
the past two years there has been three corrections in the stock market:
July of 1996, April of 1997 and October of 1997. In each of these
corrections at least three out of four of the major indices, Dow Jones,
NASDAQ, S&P 500 and NYSE Index, dropped more than 10%. At none of these
times did Volumetric's NAV drop more than 9.7% from its record high.
3) Low volatility. We have described in previous reports the low
volatility of Volumetric Fund. The results are now in for 1997. During the
past year the Dow-Jones and the S&P 500 Index fluctuated more than 1% in
31% of all trading days. On the other hand, Volumetric's NAV fluctuated
more than 1% only 13% of all trading days.
UPDATE AND OUTLOOK
After a flat January the market has started to move higher in
February. Our NAV has advanced 4.8% from the opening price of $17.41 to a
1998 record high of $18.24, as of February 10. This is equivalent to
$127,811 by the Volumetric Index, a new all time high. Our volume indicator
has turned bullish in late January. Consequently, we have reduced our cash
from 14.3% to 5.8% since December 31.
We are confident that our "Strength and Protection" system will
provide us with continued good returns as we approach our twentieth
anniversary. Also, low interest rates augur well for the stock market.
Thank you for your trust. Please call us, if you have any questions.
Sincerely,
February 10, 1998
Gabriel J. Gibs Irene J. Zawitkowski
President Executive Vice President
THE FOLLOWING CHARTED INFORMATION WAS PRESENTED AS A LINE GRAPH IN THE
ANNUAL REPORT SHOWING THE COMPARISION OF CHANGE IN VALUE OF A $10,000
INVESTMENT IN VOLUMETRIC FUNDS AND THE NEW YORK STOCK EXCHANGE COMPOSITE
INDEX.
(All dividends reinvested)
YEAR VOLUMETRIC NYSE INDEX
1978 $ 10,000 $ 10,000
1979 $ 11,630 $ 11,550
1980 $ 15,991 $ 14,456
1981 $ 18,712 $ 13,198
1982 $ 21,876 $ 15,046
1983 $ 26,321 $ 17,664
1984 $ 27,696 $ 17,894
1985 $ 36,524 $ 22,564
1986 $ 39,225 $ 25,723
1987 $ 38,637 $ 25,646
1988 $ 46,349 $ 28,954
1989 $ 53,743 $ 33,587
1990 $ 50,963 $ 31,068
1991 $ 68,902 $ 38,524
1992 $ 76,331 $ 40,334
1993 $ 77,839 $ 43,521
1994 $ 76,104 $ 42,128
1995 $ 89,336 $ 55,314
1996 $103,189 $ 71,160
1997 $121,987 $ 92,728
Average Annual Total Returns as of 12/31/97
1 Year 5 Years 10 Years Since 1-1-79
10.23% 10.16% 12.74% 14.65%
PAST PERFORMANCE IS NOT PREDITIVE OF FUTURE PERFORMANCE
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout each year)
<TABLE>
<S> <C> <C> <C> <C> <C>
Years ended December 31 1997 1996 1995 1994 1993
Net asset value, beginning of year $18.38 $16.81 $14.33 $16.09 $16.48
Income from investment operations:
Net investment income (0.03) 0.03 0.03 0.03 0.02
Net realized and unrealized
gains and losses on securities 3.16 2.44 2.45 (0.36) 0.30
---- ---- ---- ------ ----
Total from investment operations 3.13 2.47 2.48 (0.33) 0.32
---- ---- ---- ------ ----
Less distributions:
Dividends from net investment income (0.35) (0.06) 0.00 (0.03) (0.08)
Distributions from capital gains (0.86) (0.84) 0.00 (1.40) (0.63)
----- ----- ----- ----- ------
Total distributions (1.21) (0.90) 0.00 (1.43) (0.71)
------ ----- ----- ------ ------
Net asset value, end of year $20.30 $18.38 $16.81 $14.33 $16.09
====== ===== ====== ====== ======
Total return 18.23% 15.52% 17.31% -2.23% 2.00%
====== ====== ====== ====== ======
Ratios and Supplemental Data:
Net assets, end of period
(in thousands) $17,832 $14,286 $12,489 $11,156 $11,765
Ratio of expenses to average
net assets 1.96% 1.99% 1.95% 1.99% 2.00%
Ratio of net inv. income to
average net assets -0.17% 0.19% 0.21% 0.19% 0.12%
Portfolio turnover rate 213% 154% 159% 150% 177%
Average commission rate per share* $0.025 $0.028
</TABLE>
*Disclosure required for fiscal years beginning after Septmeber 1, 1995.
The accompanying notes are an integral part of these financial statements.
VOLUMETRIC FUND, INC.
STATEMENT OF ASSETS AND LIABLIITIES
December 31, 1997
COMMON STOCK 85.7%
SHARES COMPANY MARKET
Aerospace/Defense: 4.3%
2,900 General Dynamics 251,575
4,800 Litton Industries 276,000
4,000 Precision Castparts 241,250
--------
768,825
--------
Air Transportation: 4.5%
2,200 AMR 282,700
14,000 America West Holdings* 260,750
10,500 Southwest Airlines 258,563
-------
802,013
-------
Autos/Auto Parts: 4.4%
4,600 Bandag 245,813
6,000 Ford 291,375
10,000 Navistar* 248,125
-------
785,313
-------
Banking: 6.3%
3,300 Fleet Financial 247,913
6,600 Mercantile Bancorp 405,900
2,000 Morgan, JP 225,750
3,100 Wachovia Bancorp 251,488
---------
1,131,051
---------
Building/Construction: 3.0%
11,600 Champion Enterprises* 238,525
11,000 Toll Brothers* 294,250
-------
532,775
-------
Chemicals: 3.8%
2,500 Dow Chemical 253,750
3,900 Ecolab 216,206
5,200 Goodrich, B.F. 215,475
-------
685,431
-------
Communications: 2.4%
4,400 Chris Craft* 230,175
5,200 Harte Hanks 192,400
-------
422,575
-------
Computers: 3.3%
4,000 Hewlett-Packard 249,500
24,000 Unisys* 333,000
-------
582,500
-------
Consumer Products: 1.0%
3,200 Lancaster Colony 180,400
-------
Drugs: 2.9%
8,500 Alza Corp. 270,406
2,000 Warner-Lambert 248,375
-------
518,781
-------
Electrical/Electronics: 4.9%
12,400 Baldor Electric 268,925
15,000 Pacific Scientific 358,125
6,500 Symbol Technology 245,375
-------
872,425
-------
Entertainment: 2.9%
9,000 CBS 264,938
2,500 Disney, Walt 247,500
-------
512,438
-------
Environmental Services: 1.4%
6,800 Browning-Ferris 251,600
-------
Financial Services: 2.4%
7,400 Cendant Corp.* 254,375
3,500 Fiserv* 171,938
-------
426,313
-------
Foods: 1.1%
13,000 Ben & Jerry's Homemade Inc. 201,500
-------
Forest Products: 1.4%
7,400 Sonoco Products 256,688
-------
Home Furnishings: 1.1%
4,400 La-Z-Boy 189,750
-------
Indices: 4.4%
8,000 S&P 500 Depository Receipts 776,500
-------
Insurance: 1.2%
6,300 Leucadia National 217,350
-------
Machinery: 3.9%
4,500 Deere 262,125
2,700 GATX 195,919
5,600 Toro 238,700
-------
696,744
-------
Medical: 5.9%
10,000 Ballard Medical Products 242,500
10,000 Bindley-Western 308,750
3,200 Cardinal Health 240,400
8,100 Omnicare 251,100
---------
1,042,750
---------
Misc./Diversified: 5.2%
10,000 Ogden 281,875
9,000 Trimas 309,375
7,406 Tyco International 333,733
-------
924,983
-------
Oil/Oil Services: 1.5%
5,000 Ashland, Inc. 268,438
-------
Real Estate: 1.3%
7,300 Excel Realty Trust 229,950
-------
Restaurants: 2.4%
8,400 Cracker Barrel Old Country Store 280,350
20,400 TCBY 154,275
-------
434,625
-------
Retail: 5.0%
6,000 Home Depot 353,250
13,400 Sotheby's Holdings 251,250
7,500 Wal-Mart 295,781
-------
900,281
-------
Trucking: 1.2%
6,700 Ryder System 219,425
-------
Utilitites:2.5%
7,900 Cincinnati Bell 244,900
4,600 Questar Corp. 205,275
-------
450,175
-------
TOTAL COMMON STOCKS
(Cost $12,509,430) 15,281,599
----------
CASH EQUIVALENTS/RECEIVABLES
LESS LIABLILITIES 14.3%
Cash 127,741
Chase Manhattan Premium Mrkt
Rate Acct 3,562,022
Due from brokers 346,666
Dividends and interest receivable 27,507
---------
TOTAL CASH EQUIVALENTS/RECEIVABLES 4,063,936
----------
TOTAL ASSETS 19,345,535
Liabilities:due to brokers (1,513,265)
----------
NET ASSETS 17,832,270
==========
Volumetric Fund Shares Outstanding 878,489
NET ASSET VALUE PER SHARE $20.30
========
Number of shareholders accounts 1,153
--------
*Security is non-income producing.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATMENTS
VOLUMETRIC FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
INVESTMENT
INCOME
Dividends...................................... $ 219,302
Interest....................................... 73,607
--------
TOTAL INVESTMENT INCOME.................... 292,909
EXPENSES
Management fee (Note 2)........................ 317,249
--------
INVESTMENT INCOME - NET........................ (24,340)
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments............... 2,578,673
Unrealized appreciation of investments
Beginning of year............. $2,670,124
End of year................... 2,772,169
----------
Increase in unrealized appreciation....... 102,045
--------
NET GAIN ON INVESTMENTS........................... 2,680,718
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,656,378
==========
VOLUMETRIC FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended
12/31/97 12/31/96
--------- ----------
CHANGES RESULTING FROM OPERATIONS
Investment income - net.................... $ (24,340) $ 25,374
Net realized gain on investments........... 2,578,673 867,188
Increase in unrealized appreciation........ 102,045 1,032,607
---------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... 2,656,378 1,925,169
---------- ---------
DISTRIBUTIONS TO SHAREHOLDERS: (NOTE 1d)
From net investment income................. (272,106) (44,589)
From net realized gain on investments...... (668,604) (624,251)
---------- ----------
TOTAL DISTRIBUTIONS.................... (940,710) (668,840)
---------- -----------
CAPITAL SHARE TRANSACTIONS (NOTE 3)
Net increase from capital share
transactions........................ 1,830,018 541,494
---------- ---------
NET INCREASE IN ASSETS..................... 3,545,686 1,797,823
NET ASSETS:
BEGINNING OF YEAR....................... 14,286,584 12,488,761
----------- -----------
END OF YEAR............................. $17,832,270 $14,286,584
=========== ===========
The accompanying notes are an integral part of these financial statements.
VOLUMETRIC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1997
The Fund, incorporated on July 25, 1986, is registered with the
Securities and Exchange Commission under the Investment Company Act of
1940, as amended, as a diversified, open-end management company.
1. Significant Accounting Policies
a) Valuation of Securities: Each security is valued at the last reported
sales price.
b) Securities Transactions and Investment Income: Securities are recorded
on a trade date basis. Realized gains and losses are recorded using the
identified cost basis. Dividend income is recorded on the ex-dividend
date and interest income is recognized on the accrual basis.
c) Federal Income Taxes: The Fund as a Regulated Investment Company
complies with Subchapter M of the Internal Revenue Code and distributes to
its shareholders all net taxable income.
d) Distributions to Shareholders: It is the Fund's policy to distribute
all net investment income and all net realized gains, in excess of any
available capital loss carryovers, at year end. Distributions to
shareholders are recorded on the ex-dividend date in the financial
statements and accordingly, the statement of changes in net assets and
financial highlight tables for 1997 contain 1996's distributions. Dividends
are taxable to shareholders in the year earned by the Fund. During the two
periods ending December 31, 1997, the Board of Directors declared the
following distributions:
1997 1996
Record Date: December 31, 1997 December 31, 1996
Ex-Dividend Date: January 2, 1998 January 2, 1997
Payment Date: January 9, 1998 January 6, 1997
Dividend: $ 2.89 per share $ 1.21 per share
e) Use of Estimates: The preparation of the 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 at the date of the financial statements
and the reported amounts of revenue and expense during the reported
period. Actual results could differ from those estimates.
2. Management Fee
The Fund's investment advisor is Volumetric Advisers, Inc. whose
president and principal stockholder is also the President of the Fund.
Pursuant to the advisory agreement, the Adviser manages the Fund,
provides investment advice and performs as the Fund's transfer agent.
The Fund's only expense is its advisory fee. All other expenses of the
Fund including officers' salaries, professional fees, custodian fees,
registration fees, marketing expenses, insurance, shareholder reports and
proxy statements are paid by the Investment Adviser.
As compensation for the above services, the Investment Adviser receives
from the Fund a fee, payable monthly, at annual rate of 2% of the first
$10 million of the Fund's average net assets, 1.9% of the next $15
million of average net assets, and thereafter declining incrementally to
1.5% on average net assets over $100 million.
3. Capital Share Transactions
At December 31, 1997. there were 1,000,000 shares of $0.01 par value
common stock authorized.
Year Ended Year Ended
December 31, 1997 December 31, 1996
SHARES AMOUNT SHARES AMOUNT
Shares sold 126,373 $2,424,964 62,518 $1,040,539
Distributions reinvested 52,591 920,153 41,225 $ 655,886
------- ---------- ------- ----------
179,964 3,345,117 103,743 1,696,425
Shares redeemed (78,922) (1,515,099) (69,452) (1,154,931)
-------- ----------- -------- -----------
Net increase 101,042 1,830,018 34,291 $ 541,494
======== =========== ======== ===========
4. Purchases and Sales of Securities
For the year ended December 31, 1997, purchases and sales of securities
aggregated $33,616,031 and $34,319,667 respectively. At December 31,
1997, the cost of investments for Federal income tax purposes was
$12,509,430. Accumulated net unrealized appreciation on investments was
$2,772,169 consisting of $2,802,914 and $(30,745) of gross unrealized
appreciation and depreciation, respectively.
5. Composition of Net Assets
At December 31, 1997 Net Assets consisted of:
Common stock at par value............................... $ 8,785
Capital paid in (including reinvested dividends)........ 13,437,693
Net unrealized appreciation of securities............... 2,772,169
Undistributed net investment income..................... 0
Undistributed net realized gains........................ 1,613,623
-----------
$17,832,270
===========
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Directors of Volumetric Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
Volumetric Fund, Inc., including the schedule of investments in securities
as of December 31, 1997, 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 periods then ended, and the financial highlights for each
of the years indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted this audit 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
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. Our
procedures included confirmation of the securities owned as of December 31,
1997, by correspondence with the Fund's independent custodian and brokers.
We believe that this audit provides a reasonable basis for our opinion.
In our opinion the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Volumetric Fund, Inc. as of December 31, 1997, the results of
its operations for the year then ended, and the changes in its net assets
for each of the two years in the periods then ended, and the financial
highlights for each of the years indicated therein, in conformity with
generally accepted accounting principles.
Feuer & Orlando, CPA's L.L.P.
New York, New York
February 9, 1998
