1998 HIGHLIGHTS
* VOLUMETRIC FUND CELEBRATES ITS 20TH ANNIVERSARY.
* NET ASSET VALUE PER SHARE INCREASED 10.6%.
* TOTAL NET ASSETS REACH $20 MILLION.
* DIVIDEND DISTRIBUTION OF $0.56 WAS DECLARED ON 12/31/98.
* NO-FEE ROTH IRA HAS BEEN INTRODUCED.
To Our Shareholders:
Volumetric Fund has just completed its twentieth year of operation. We are
pleased to report that for the fourth year in a row, the Fund achieved a
double digit rate of return. Volumetric's net asset value (NAV) gained 10.6%
in 1998 and closed out the year at $19.25, up $1.84. This was attained even
though the stock market suffered a 20% decline from August through early
October, its worse drop since 1990. The market bottomed out on October 8, when
the Federal Reserve announced a surprise cut in interest rates. We are also
pleased that the Volumetric Index closed out 1998 at $134,918, the highest
ever for a year end. 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 in the past 20 years was 14.5%, as compared to the NYSE
Index that had a 13.2% average return in the same period. During 1998, the
large-cap weighted NYSE Index advanced 16.5%.
As of December 31, the Fund had net assets of $20.5 million, up 15.2% in 1998.
Our portfolio consisted of 57 stocks, representing 93.2% of net assets, and
6.8% in cash and cash equivalents.
FOURTH QUARTER PORTFOLIO CHANGES
During the fourth quarter Volumetric Fund's net asset value advanced 8.9%. Our
five best performing stocks at year-end were: Warner Lambert, up 411%, Tyco
International, up 254%, Bindley-Western, up 169%, Symbol Technology, up 154%
and Ecolab up 116%. Our stocks had an average gain of 36.1%.
The following stocks were added to our portfolio in the fourth quarter:
Alaska Air Group, American International, AT & T, Bank One, Bank of New York,
Bob Evans Farms, Case, Clorox, Cooper Tire, Crown Cork, Dayton Hudson, Exxon,
FMC, Gannett, Great A & P, Heinz, Merrill Lynch, Papa John International,
Premark, Proctor & Gamble, Rite Aid, Southern Co., Sundstrand, Synovus
Financial, Temple Inland, Toro and Universal Foods.
The following stocks were sold: Aon Corp., Arvin Industries, Eagle Hardware,
Eastman Kodak, Gerber Scientific, Home Depot, Homestake Mining, King World
Productions, La-Z-Boy, Mobil, National City, Omnicare, Southwest Airlines,
Unisys, Wachovia Bancorp and Wal-Mart. The three most profitable sales were
Unisys, Wal-Mart and Home Depot with 138%, 90% and 86% net gains,respectively.
DIVIDENDS AND DISTRIBUTIONS
On December 31, 1998, Volumetric Fund declared an annual capital gain
distribution of $0.56 per share to shareholders of record at December 31,
1998. Reinvesting shareholders received 3.0% more Volumetric shares on
January 1, 1999. At the same time, the Fund's NAV was reduced by $0.56 per
share, from $19.25 to the reinvestment price of $18.69, which was also our
1999 opening price.
NO FEE ROTH IRAs
We have introduced in 1998, the "no-fee" Roth IRA account, thanks to the new
tax laws. It is an excellent way to plan for your retirement. Although
contributions are not tax deductible, all the appreciation in your Roth IRA
account may be withdrawn tax-free at or after your retirement. There is an
another important advantage. A Roth IRA may be kept indefinitely. Unlike the
traditional IRA, withdrawals are not required after the age of 70 1/2.
Furthermore, your Roth IRA may be "cashed-in" income-tax free by your
beneficiary. (Estate taxes may apply.) Please call us, if you have any
questions.
UPDATE AND OUTLOOK
The market opened mixed in January. This was followed by a drop in early
February. The New York Stock Exchange Composite Index declined 1.5% in 1999,
as of February 5. The average stock, as measured by the Value Line Geometric
Index, was down 3.4%. Our NAV was down 2.5% from its post dividend opening
price of $18.69 to $18.22 in the same period. Meanwhile, we have increased our
cash position from 7%, since the beginning of the year, to 20%, as a
protective measure.
In the last few years most of the stock market gains came from large
capitalization stocks, suchas represented by the Dow, NYSE and S&P Indices.For
example, even though these indices had double digit gains in 1998, the average
stock on the New York Stock Exchange actually ended the year down 6%. Until
there is a change and the market broadens out to mid-size and smaller stocks,
Volumetric will concentrate its future purchases in large-cap stocks.
The combination of the current strong economy and low interest rates bodes
well for the stock market for 1999. However, our technical market indicators
currently suggest that a cautious posture is advisable. Consequently, in the
coming weeks, we expect to increase our cash reserves for temporary
defensive purposes. We will invest the cash in the money market or in treasury
securities. Thank you for your confidence in Volumetric Fund. Please do not
hesitate to call us, if you have any questions.
February 8, 1999 Sincerely,
/S/ Gabriel Gibs /S/Irene Zawitkowski
Gabriel J. Gibs Irene J. Zawitkowski
President Executive Vice President
THE FOLLOWING CHARTED INFORMATION WAS PRESENTED AS A BAR GRAPH IN THE ANNUAL
REPORT SHOWING THE COMPARISION OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
VOLUMETRIC FUND 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
1998 $134,918 $108,074
Average Annual Total Returns of the Fund(as of 12/31/98)*
1 Year 3 Years 5 Years 10 Years Since 1/1/79
10.6% 14.8% 11.9% 11.8% 14.5%
*All distributions and dividends were reinvested. Past performance is not
predicitive of future performance.
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout each year)
<TABLE>
<S> <C> <C> <C> <C> <C>
Years ended December 31 1998 1997 1996 1995 1994
------ ------ ------ ------ ------
Net asset value, beginning of year $20.30 $18.38 $16.81 $14.33 $16.09
Income from investment operations:
Net investment income 0.00 0.00 0.03 0.03 0.03
Net realized and unrealized
gains and losses on securities 1.84 3.13 2.44 2.45 (0.36)
----- ----- ----- ----- ------
Total from investment operations 1.84 3.13 2.47 2.48 (0.33)
----- ----- ----- ----- ------
Less distributions from:
Net investment income (0.87) (0.35) (0.06) 0.00 (0.03)
Capital gains (2.02) (0.86) (0.84) 0.00 (1.40)
------ ------ ------ ----- ------
Total distributions (2.89) (1.21) (0.90) 0.00 (1.43)
------ ------ ------ ----- ------
Net asset value, end of year $19.25 $20.30 $18.38 $16.81 $14.33
====== ====== ====== ====== ======
Total return 10.57% 18.23% 15.52% 17.31% 2.23%
======= ======= ======= ======= =======
Ratios and Supplemental Data:
Net assets, end of period
(in thousands) $20,539 $17,832 $14,286 $12,489 $11,156
Ratio of expenses to average
net assets 1.97% 1.96% 1.99% 1.95% 1.99%
Ratio of net investment income
to average net assets 0.00 0.00 0.19% 0.21% 0.19%
Portfolio turnover rate 237% 213% 154% 159% 150%
</TABLE>
The accompanying notes are an integral part of these financial statements.
VOLUMETRIC FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
COMMON STOCKS: 93.2%
SHARES COMPANY MARKET VALUE
Aerospace/Defense: 3.1%
5,800 General Dynamics $342,200
5,600 Sundstrand Corp. 290,500
--------
632,700
--------
Air Transportation: 1.8%
8,400 Alaska Air Group* 371,700
--------
Auto/Auto Parts: 1.4%
14,000 Cooper Tire & Rubber 286,125
--------
Banking: 4.4%
8,800 Bank of New York 354,200
5,800 Bank One 296,163
10,700 Synovus Financial 256,800
--------
907,163
--------
Beverage: 3.2%
6,100 Anheuser-Busch 400,313
6,400 Pepsico, Inc. 261,600
--------
661,913
--------
Building/Construction: 1.4%
10,000 Ryland Group 288,750
--------
Business Services: 3.6%
4,400 Automatic Data Process 352,825
8,000 Metzler Group* 389,500
--------
742,325
--------
Chemicals: 1.4%
7,800 Ecolab 282,263
--------
Communications: 1.3%
3,500 AT & T 265,125
--------
Computers: 5.2%
2,200 IBM 405,625
3,300 Intel 391,256
2,000 Microsoft* 277,375
---------
1,074,256
---------
Consumer Products: 3.1%
2,900 Clorox 338,756
3,300 Procter & Gamble 301,331
-------
640,087
-------
Drugs: 8.5%
4,700 Abbott Laboratories 230,300
3,900 Johnson & Johnson 327,113
4,100 Lilly, Ely 364,388
2,500 Merck 368,750
6,000 Warner-Lambert 451,125
---------
1,741,676
---------
Electrical/Electronics: 4.2%
9,750 Symbol Technology 623,391
5,500 Thomas & Betts 238,219
--------
861,610
--------
Financial Services: 3.1%
5,250 Fiserv* 270,025
5,600 Merrill Lynch & Co. 373,800
--------
643,825
--------
Foods: 3.9%
11,000 Bob Evans Farms 286,688
4,600 Heinz 260,475
9,500 Universal Foods 260,656
--------
807,819
--------
Forest Products: 3.0%
8,700 Crown Cork & Seal 268,069
5,700 Temple-Inland 338,081
--------
606,150
--------
Indices: 4.0%
6,700 S&P 500 Depository Rec 826,194
--------
Insurance: 3.0%
2,500 American Internl Group 241,563
4,900 Jefferson Pilot 367,500
--------
609,063
--------
Machinery: 4.7%
10,000 Case 218,125
12,800 Pall Corp. 324,000
15,000 Toro 427,500
--------
969,625
--------
Medical: 6.5%
4,800 Baxter International 308,700
13,333 Bindley-Western 656,667
4,800 Cardinal Health 364,200
---------
1,329,567
---------
Misc./Diversified: 5.4%
4,400 FMC Corp.* 246,400
8,500 Premark International 294,313
7,406 Tyco International 558,690
---------
1,099,403
---------
Oil/Oil Services: 2.5%
3,300 Chevron 273,694
3,400 Exxon 248,625
--------
522,319
--------
Publishing: 3.3%
4,800 Gannett 309,600
3,600 McGraw-Hill 366,750
--------
676,350
--------
Restaurants: 1.5%
7,000 Papa Johns Internl* 308,875
--------
Retail: 5.0%
6,200 Dayton-Hudson 336,350
11,500 Great A & P 340,688
7,100 Rite Aid 353,225
---------
1,030,263
---------
Textile/Apparel: 0.9%
25,000 Phillips-Van Heusen 179,688
--------
Utilities: 3.8%
4,100 Carolina Power & Light 192,956
8,400 Southern Company 244,125
7,500 Texas Utilities 350,156
--------
787,237
--------
TOTAL COMMON STOCKS
(COST: $15,027,027) 19,152,093
----------
CASH EQUIVALENTS/RECEIVABLES
LESS PAYABLES: 6.8%
Cash 45,142
Chase Manhattan Prem
Mkt Rate Acct 1,305,180
Receivable from brokers,
others 7,703
Dividends and interest
receivable 29,155
----------
TOTAL CASH EQUIVALENTS/
RECEIVABLES 1,387,180
----------
TOTAL ASSETS 20,539,273
LIABILITIES 0
-----------
NET ASSETS $20,539,273
===========
VOLUMETRIC SHARES OUTSTAND 1,067,210
NET ASSET VALUE PER SHARE $19.25
==========
NUMBER OF SHAREHOLDER ACCOUNTS 1,206
*Security is non-income producing.
VOLUMETRIC FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
INVESTMENT INCOME
Dividends................................................ $224,861
Interest................................................. 132,554
--------
TOTAL INVESTMENT INCOME................................. 357,415
EXPENSES
Management fee (Note 2)................................... 383,174
--------
INVESTMENT INCOME - NET................................... (25,759)
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments.......................... 598,568
Unrealized appreciation of investments
Beginning of year..........................$2,772,169
End of year................................ 4,125,066
----------
Increase in unrealized appreciation.................... 1,352,897
---------
NET GAIN ON INVESTMENTS................................... 1,951,465
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $1,925,706
==========
VOLUMETRIC FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended
12/31/98 12/31/97
--------- ---------
CHANGES RESULTING FROM OPERATIONS
Investment income - net............................ $(25,759) $(24,340)
Net realized gain on investments................... 598,568 2,578,673
Increase in unrealized appreciation................ 1,352,897 102,045
--------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPER... 1,925,706 2,656,378
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS: (NOTE 1d)
From realized gain on investments............... (2,538,832) (940,710)
----------- ----------
CAPITAL SHARE TRANSACTIONS (NOTE 3)
Net increase from capital share transactions....... 3,320,129 1,830,018
---------- ---------
NET INCREASE IN NET ASSETS......................... 2,707,003 3,545,686
NET ASSETS:
BEGINNING OF YEAR................................ 17,832,270 14,286,584
----------- -----------
END OF YEAR..................................... $20,539,273 $17,832,270
=========== ===========
The accompanying notes are an integral part of these financial statements
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
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. The Fund's investment objective
is capital growth. Its secondary objective is downside protection. The
following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
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 method.
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 1998 contain 1997's distributions. Dividends are taxable to
shareholders in the year earned by the Fund. During the two years ending
December 31, 1998, the Board of Directors declared the following
distributions:
1998 1997
---- ----
Record Date: December 31, 1998 December 31, 1997
Ex-Dividend Date: January 4, 1999 January 2, 1998
Payment Date: January 8, 1999 January 9, 1998
Distribution: $ 0.56 per share $ 2.89 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 periods. Actual results could
differ from those estimates.
2. Management Fee
The Fund is managed by Volumetric Advisers, Inc. whose president and principal
stockholder is 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 officer salaries, professional fees, custodian 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 an annual rate of 2% of the first $10
million of 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 of over $100 million.
3. Capital Share Transactions
At December 31, 1998, there were 2,000,000 shares of $0.01 par value common
stock authorized.
Year Ended Year Ended
December 31, 1998 December 31, 1997
Shares Amount Shares Amount
------- -------- ------ --------
Shares sold 151,744 $2,853,014 126,373 $2,424,964
Dividends reinvested 143,008 2,489,761 53,591 920,153
-------- ---------- -------- ----------
294,752 5,342,775 179,964 3,345,117
Shares redeemed (106,031) (2,022,646) (78,922) (1,515,099)
-------- ----------- --------- -----------
Net increase 188,721 $3,320,129 101,042 $1,830,018
======== =========== ========= ===========
4. Purchases and Sales of Securities
For the year ended December 31, 1998, purchases and sales of securities
aggregated $47,853,362 and $45,934,333 respectively. At December 31, 1998,
the cost of investments for Federal income tax purposes was $15,027,027.
Accumulated net unrealized appreciation on investments was $4,125,066
consisting of $4,218,776 and $93,710 of gross unrealized appreciation and
depreciation respectively.
5. Composition of Net Assets
At December 31, 1998 Net Assets consisted of:
Capital stock at par value................................ $ 10,672
Capital paid in (including reinvested dividends)............ 15,804,967
Net unrealized appreciation of securities................... 4,125,066
Undistributed net realized gains............................ 598,568
-----------
$20,539,273
===========
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., as of December 31, 1998, 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 the financial statements and
financial highlights based on our audits.
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
financial highlights are free of material misstatements. 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, 1998, by
correspondence with the Fund's independent custodian. We believe that our
audits 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, 1998, and the results of its
operations for the year then ended, and changes in its net assets for each
of the two years in the periods then ended, and financial highlights for
each of the years indicated therein, in conformity with generally accepted
accounting principles.
New York, New York Feuer, Orlando, Pye & Co. CPA's L.L.P.
February 8, 1999 Certified Public Accountants
Volumetric Fund, Inc.
87 Violet Drive
Pearl River
New York, 10965
Tel: 914-623-7637
800-541-FUND
www.volumetric.com
Investment Adivser
and
Transfer Agent
Volumetric Advisers, Inc.
Pearl River, New York
Custodian
The Chase Manhattan Bank, N.A.
New York, New York
Board of Directors
William P. Behrens
Jeffrey J. Castaldo
Richard C. Friedenberg
Gabriel J. Gibs, Chairman
Anna Karpati
Wayne W. Moshier
Marcel A. Olbrecht
Stephen J. Samitt
David L. Seidenberg
Raymond W. Sheridan
Irene J. Zawitkowski
Officers
Gabriel J. Gibs
President, Portfolio Manager
Irene J. Zawitkowski
Executive Vice President
Jeffrey M. Gibs
Senior Vice President
Raymond W. Sheridan
Vice President
David L. Seidenberg
Treasurer
