VOLUMETRIC FUND, INC.
To Our Shareholders:
Thanks to a 7.4% advance in the fourth quarter, Volumetric's net
asset value closed the year at $19.66, up 5.2% in 1999, 1 cent away
from our all time record high of $19.67. (Adjusted for distributions.)
According to the Value Line Geometric Index, the average stock actually
declined 1.4% in 1999. The New York Stock Exchange Composite Index,
which we have been using for historical comparison over the past 21
years, had advanced 9.1% in 1999. The NYSE Index is a weighted index,
the Value Line is not. (In a weighted index large capitalization stocks
count proportionately more than small cap stocks; in an unweighted
index all stocks count the same.) The Volumetric Index, the value of a
hypothetical investment of $10,000 in Volumetric Fund on January 1,
1979, has now grown to $141,866, the highest ever for a year end. Our
average annual return over the past 21 years is 14.0%, as compared to
the NYSE Index that has a 13.0% average return for the same period.
As we indicated in our year-end correspondence, 1999 was a unique
year in stock market history. The Nasdaq, dominated heavily by
technology and Internet stocks, siphoned off huge amounts of money from
traditional stocks traded on the New York Stock Exchange. A large
percentage of the stocks representing the Nasdaq Index are newly
established and very risky Internet companies that did not exist a few
years ago. Volumetric typically acquires only well established
technology companies with a proven history. For example, our portfolio
now contains some well-known Nasdaq names, such as Dell, Intel,
Microsoft, Global Crossing, 3Com and others.
As of December 31, the Fund had net assets of over $21.0
million. Our portfolio consisted of 61 stocks, representing 89.3% of
net assets, and 10.7% in cash and cash equivalents.
FOURTH QUARTER PORTFOLIO CHANGES
Our five best performing stocks at year-end were: Tyco
International, up 266%, Varian Semiconductor, up 198%, Global Crossing,
up 170%, General Instrument, up 162% and Vishay Intertechnology, up
145%. We have reduced our position in Tyco during the quarter, due to
profit taking. General Instrument was acquired by Motorola in January
of 2000. We received Motorola stock in exchange for General Instrument
stock. At year end, we had 61 stocks in our portfolio. Out of these, we
had 51 gainers and 10 losers.
The following stocks were added to our portfolio in the fourth
quarter: Abbott Laboratories, Activision, American Express, American
General, Bell Atlantic, Bethlehem Steel, Callaway Golf, Checkpoint
Systems, Compaq, Costco Wholesale, Donaldson Lufkin Jenrette, Forest
Laboratories, General Motors, Global Marine, Hanna MA, Harley-Davidson,
Hormel, Intel, Louisiana Pacific, MGM Grand, Millipore, Omnicom, Pogo
Producing, Praxair, Qwest, 3Com, Toll Brothers, USX US Steel,
Weyerhaeuser and Wilmington Trust.
The following stocks were sold: Anheuser Busch, Asarco (in a
tender offer), Bristol-Myers Squibb, Caterpillar, Chevron, Circuit
City, Colgate Palmolive, Dean Foods, Exxon, Goodyear Tire, Interpublic
Group, Kellogg, Micron Technology, Nucor, Pfizer, Polaroid,
Schlumberger, Sonoco Products, Tidewater and Wells Fargo.
CAPITAL GAIN DISTRIBUTIONS
On December 31, 1999, Volumetric Fund declared an annual capital
gain distribution of $1.16 per share to shareholders of record at
December 31, 1999. Reinvesting shareholders received 6.27% more
Volumetric shares on January 1, 2000. At the same time, the Fund's NAV
was reduced by $1.16 per share, from the year-end, unaudited NAV of
$19.65 to the reinvestment price of $18.49. Our new all time record
high is now $18.51, as adjusted on January 1.
UPDATE AND OUTLOOK
Due mostly to higher interest rates, the stock market opened 2000
with its worse January performance since 1970. Some of the popular
market indices were down as much as 10% before recovering partially in
early February. As of February 8, our NAV declined 4.3% to $17.70, from
the beginning of the year, and 4.4% from our newly adjusted record high
of $18.51. Meanwhile, for temporary defensive purposes, we have
increased our cash in our money market account from 10% to 17% since
the beginning of the year.
Volumetric's portfolio is well balanced. Because of higher
interest rates, we have increased our position in technology stocks and
reduced our exposure to financial and cyclical stocks. Indeed,
technology and communication stocks now represent about 35% of our
portfolio, as of February 8. Technology stocks are relatively less
affected by higher interest rates. Our other major groups are:
cyclicals (18%), leisure, entertainment and publishing (11%), retail
and consumer products, (8%), oils (8%), business services (6%), drugs
and medical (4%) metals (2%), financials (2%), utilities (1%) and
miscellaneous (5%).
We expect the short term outlook to be volatile for the stock
market. However, despite the poor January and higher interest rates we
are still cautiously optimistic about 2000. Once the Fed finishes its
tightening and the economy cools down, the market should resume its
upward trend. Election years generally have been good for stocks.
Indeed, to some extent, this year reminds us of the election year of
1980. The first quarter of that year was also very weak due to a sudden
rise of interest rates orchestrated by the Fed. However, by late
spring, the Fed reversed its course, and the stock market had a great
year. Interestingly, in the first quarter of 1980, Volumetric was down
7.1%. However, by year end we were up 37.5%. Of course, we do not claim
we can repeat that years performance. Nevertheless, we are setting our
objective for at least a 15% return by the end of 2000.
. Thank you for your confidence in Volumetric Fund. Please do not
hesitate to call us, if you have any questions.
February 9, 2000 Sincerely,
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.
Comparision of Change in the Value of a $10,000 Investment in Volumetric
Fund Versus the New York Stock Exchange Composite Index*
(Years Ending 12/31)
<TABLE>
<S> <C> <C>
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
1999 $141,866 $117,909
</TABLE>
Average Annual Total Returns of the Fund(as of 12/31/99)*
1 Year 5 Years 10 Years Since 1/1/79
5.2% 13.4% 10.7% 14.0%
*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 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Net asset value, beginning of year $19.25 $20.30 $18.38 $16.81 $14.33
Income from investment operations:
Net investment income (0.06) (0.02) (0.03) 0.03 0.03
Net realized and unrealized
gains and losses on securities 1.03 1.86 3.16 2.44 2.45
----- ----- ----- ----- -----
Total from investment operations 0.97 1.84 3.13 2.47 2.48
----- ----- ----- ----- -----
Less distributions from:
Net investment income 0.00 0.00 0.00 (0.06) 0.00
Capital gains (0.56) (2.89) (1.21) (0.84) 0.00
------ ------ ------ ------ ----
Total distributions (0.56) (2.89) (1.21) (0.90) 0.00
------ ------ ------ ------ ----
Net asset value, end of year $19.66 $19.25 $20.30 $18.38 $16.81
======= ======= ======= ======= =======
Total return 5.19% 10.57% 18.23% 15.52% 17.31%
====== ====== ======= ======= ======
Ratios and Supplemental Data:
Net assets, end of period
(in thousands) $21,044 $20,539 $17,832 $14,286 $12,489
Ratio of expenses to average
net assets 1.90% 1.97% 1.96% 1.99% 1.95%
Ratio of net investment income to
average net assets (0.32%) (0.13%) (0.17%) 0.19% 0.21%
Portfolio turnover rate 232% 237%2 213% 154% 159%
</TABLE>
The accompanying notes are an integral part of these financial statements.
VOLUMETRIC FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
COMMON STOCKS: 89.3%
MARKET
SHARES COMPANY VALUE
<TABLE>
<S> <C> <C>
Air Transportation: 1.4%
3,700 UAL Corp.* $ 286,981
----------
Auto/Auto Parts: 1.2%
3,500 General Motors 254,406
----------
Banking: 2.0%
10,000 Amsouth 193,125
4,800 Wilmington Trust 231,600
----------
424,725
----------
Building/Construction:0.9%
10,000 Toll Brothers* 186,250
----------
Business Services: 5.2%
8,800 Automatic Data Processing 474,100
5,200 Interpublic Group 299,975
3,200 Omnicom 320,000
---------
1,094,075
---------
Chemicals: 2.1%
20,000 Hanna, MA 218,750
4,200 Praxair 211,313
---------
430,063
---------
Communications: 7.3%
4,000 Bell Atlantic 246,250
4,000 Cablevision* 302,000
13,530 Global Crossing* 676,500
7,000 Qwest* 301,000
---------
1,525,750
---------
Computers, Hardware:6.3%
8,000 Compaq 217,500
5,800 Dell Computer* 295,800
3,200 Intel 263,400
7,000 3 Com* 329,000
6,600 Varian Semiconductor* 224,400
---------
1,330,100
---------
Computers, Software: 4.0%
12,000 Activision* 183,750
3,000 Microsoft* 350,250
14,000 Peoplesoft* 298,375
--------
832,375
--------
Consumer Products: 1.4%
2,700 Procter & Gamble 295,819
--------
Drugs: 4.1%
5,300 Abbott Laboratories 192,456
5,100 Forest Laboratories* 313,331
3,900 Johnson & Johnson 363,675
--------
869,462
--------
Electrical/Electronics:7.9%
20,000 Checkpoint Systems* 203,750
7,700 General Instrument* 654,500
5,400 Millipore 208,575
18,750 Vishay Intertechnology* 592,969
---------
1,659,794
---------
Entertainment: 6.5%
19,000 Callaway Golf 336,063
13,400 Harrah's Entertainment* 354,263
18,600 Hollywood Park* 417,338
5,100 MGM Grand 256,594
---------
1,364,258
---------
Financial Services: 2.3%
1,700 American Express 282,625
4,000 Donaldson Lufkin Jenrette 193,500
---------
476,125
---------
Foods: 1.1%
5,800 Hormel Foods 235,625
---------
Forest Products: 3.6%
3,600 International Paper 203,175
19,000 Louisiana Pacific 267,188
4,000 Weyerheauser 287,250
---------
757,613
---------
Gold: 1.4%
11,700 Newmont Mining* 286,650
---------
Indices: 6.9%
4,000 Dow-Jones Diamonds 460,750
6,800 S&P 500 Depository Rec 998,750
---------
1,459,500
---------
Insurance: 1.2%
3,400 American General 257,975
---------
Machinery: 4.9%
20,000 AGCO 268,750
3,300 Harley-Davidson 211,406
15,000 Toro 559,688
---------
1,039,844
---------
Metals/Steel: 1.8%
20,000 Bethlehem Steel* 167,500
6,700 USX US Steel 221,100
---------
388,600
---------
Misc./Diversified: 4.1%
2,900 Minnesota Mining & Manuf. 283,838
20,000 Morrison Knudsen* 156,250
11,500 Pall Corp. 247,969
4,500 Tyco International 175,500
---------
863,557
---------
Oil/Oil Services: 4.3%
13,000 Global Marine* 216,125
7,600 Kerr-McGee 471,200
11,000 Pogo Producing 224,125
---------
911,450
---------
Precision Instruments:0.7%
6,600 Varian, Inc.* 148,500
---------
Publishing: 3.9%
5,400 Dow Jones & Co. 367,200
7,200 McGraw-Hill 443,700
---------
810,900
---------
Retail: 2.8%
2,300 Costco Wholesale* 209,875
5,500 Wal-Mart Stores 380,188
---------
590,063
---------
</TABLE>
TOTAL COMMON STOCKS
(COST:$14,786,743) 18,780,456
----------
CASH EQUIVALENTS/RECEIVABLES: 10.7%
Cash 109,036
Chase Manhattan Premium
Market Rate Acct. 2,736,669
Receivable from brokers,others 7,333
Dividends and interest receivable 20,662
----------
TOTAL CASH
EQUIVALENTS/RECEIVABLES 2,873,700
-----------
TOTAL ASSETS 21,654,156
LIABILITIES: Payable to brokers (610,280)
------------
NET ASSETS $21,043,876
============
VOLUMETRIC SHARES OUTSTANDING 1,070,550
-----------
NET ASSET VALUE PER SHARE $19.66
===========
NUMBER OF SHAREHOLDER ACCOUNTS 1,175
-----------
*Security is non-income producing.
VOLUMETRIC FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends.........................................$ 197,776
Interest.......................................... 120,940
----------
TOTAL INVESTMENT INCOME........................ 318,716
EXPENSES
Management fee (Note 2)........................... 386,094
----------
INVESTMENT INCOME - NET........................... (67,378)
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments.................. 1,237,863
Unrealized appreciation of investments
Beginning of year............... $ 4,125,066
End of year........................3,993,713
-----------
Decrease in unrealized appreciation............... (131,353)
------------
NET GAIN ON INVESTMENTS.............................. 1,106,510
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................................. $ 1,039,132
=============
</TABLE>
VOLUMETRIC FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended
<TABLE>
<S> <C> <C>
12/31/1999 12/31/1998
---------- ----------
CHANGES RESULTING FROM OPERATIONS
Investment income - net................. $ (67,378) $ (25,759)
Net realized gain on investments........ 1,237,863 598,568
Increase (decrease) in unrealized
appreciation.......................... (131,353) 1,352,897
----------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 1,039,132 1,925,706
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS: (NOTE 1d)
From realized gain on investments (597,637) (2,538,832)
----------- ----------
CAPITAL SHARE TRANSACTIONS (NOTE 3)
Net increase from capital share
transactions........................... 63,108 3,320,129
--------- ---------
NET INCREASE IN NET ASSETS................ 504,603 2,707,003
NET ASSETS:
BEGINNING OF YEAR.................. 20,539,273 17,832,270
----------- ----------
END OF YEAR.......................$ 21,043,876 $ 20,539,273
============ ============
</TABLE>
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 investment 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. 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 1999 contain 1998s distributions. Distributions
are taxable to shareholders in the year earned by the Fund.
During the two years ending December 31, 1999, the Board of
Directors declared the following distributions:
1999 1998
---- ----
<TABLE>
<S> <C> <C>
Record Date: December 31, 1999 December 31, 1998
Ex-Dividend Date: January 3, 2000 January 4, 1999
Payment Date: January 7, 2000 January 8, 1999
Distribution: $ 1.16 per share $ 0.56 per share
</TABLE>
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,
registration fees, state franchise taxes, 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, 1999, there were 2,000,000 shares of $0.01 par value
common stock authorized.
Year Ended Year Ended
December 31, 1999 December 31, 1998
<TABLE>
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
------- --------- -------- ---------
Shares sold 67,114 $1,262,577 151,744 $2,853,014
Distributions
reinvested 31,552 588,425 143,008 2,489,761
------- ---------- -------- ----------
98,666 1,851,002 294,752 5,342,775
Shares redeemed (95,326) (1,787,894) (106,031) (2,022,646)
-------- ----------- --------- -----------
Net increase 3,340 $ 63,108 188,721 $3,320,129
======= ========== ======== ===========
</TABLE>
4. Purchases and Sales of Securities
For the year ended December 31, 1999, purchases and sales of securities
aggregated $45,659,138 and $47,137,285 respectively. At December 31,
1999, the cost of investments for Federal income tax purposes was
$14,786,743. Accumulated net unrealized appreciation on investments was
$3,993,713 consisting of $4,197,479 and $203,766 gross unrealized
appreciation and depreciation, respectively.
5. Composition of Net Assets
At December 31, 1999 Net Assets consisted of:
Common stock at par value....................... $ 10,706
Capital paid in
(including reinvested distributions).......... 15,800,663
Net unrealized appreciation of securities....... 3,993,713
Undistributed net realized gains................. 1,238,794
-----------
$21,043,876
===========
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, 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 periods then
ended, and the financial highlights for each of the years presented.
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 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, 1999, by correspondence with
the Fund's independent custodian and brokers. We believe that our
audits provide 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, 1999,
and the results of its operations for the year then ended, changes in
its net assets for each of the two years in the periods then ended, and
financial highlights for each of the years presented, in conformity
with generally accepted accounting principles.
New York, New York
Feuer, Orlando, Pye & Co. LLP
February 8, 2000 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 Advisor Board of Directors
and
Transfer Agent William P. Behrens
Jeffrey J. Castaldo
Volumetric Advisers, Inc. Richard C. Friedenberg
Pearl River, New York Gabriel J. Gibs, Chairman
Anna Karpati
Custodian Wayne W. Moshier
Marcel A. Olbrecht
The Chase Manhattan Stephen J. Samitt
Bank, N.A. David Seidenberg
New York, New York Raymond W. Sheriden
Irene J. Zawitkowski
Officers
Gabriel J. Gibs
President, Portfolio Manager
Irene J. Zawitkowski
Executive Vice President
Jeffrey M. Gibs
Senior Vice President
Raymond W. Sheriden
Vice President
David L. Seidenberg
Treasurer
