N-30B-2 1 third04b.txt THIRD QUARTER REPORT September 30, 2004 Volumetric Fund, Inc. 3 A No-Load Mutual Fund _____________________________ Third Quarter Report 2004 Volumetric Fund, Inc. To our shareholders: Due to higher oil prices and interest rates, stock prices closed lower in the third quarter, despite an improving economy. Although our NAV decreased 3.2% to $19.35, we are still up 3.2% year to date. We continue to beat all the major market indexes this year, as shown below. We remain enthusiastic about our disciplined, mathematics based 'Volume and Range' system. As we mentioned in our prior reports, this system was introduced over 4 years ago on September 1, 2000. Since then we have significantly outperformed the stock market. Cumulative results are summarized in the following table. Third Year to Since Quarter Date 9/1/2000* Volumetric Fund - 3.2% + 3.2% + 17.0% Dow-Jones Ind. - 3.4 - 3.6 - 10.3 NYSE Index - 0.5 + 2.0 - 6.8 S&P 500 - 2.3 + 0.2 - 26.7 NASDAQ - 7.4 - 5.3 - 55.2 *Introduction of 'Volume and Range' system The Volumetric Index which measures the value of a $10,000 hypothetical investment in Volumetric on January 1, 1979, with all distributions reinvested, stood at $157,151 on September 30, about 3% below its record high of $162,219 that was established on June 30, 2004.. PORTFOLIO REVIEW During the third quarter we purchased 39 new stocks and sold 42. Currently, we have 78 stocks in our portfolio including 66 gainers and 12 losers. Our best percentage gainer is takeover stock Metro-Goldwin- Meyer with a 218% unrealized gain. It is followed by McDonalds with a 119% gain. Our worst stock is Talbot with a 10% loss. Our average stock is up 19.3%. We have increased our cash position to 12.4%, at the end of third quarter, up from 5.2% since June 30, 2004. We added the following stocks to our portfolio during the third quarter: Adaptec, AG Edwards, AGCO Corp., American Express, Bellsouth, Boston Scientific, Cooper Cameron, Dow Chemical, Eastman Kodak, Electronic Data Systems, Fox Entertainment, Genzyme, Hain Celestial Group, Helen of Troy, Home Depot, International Rectifier, Jefferson- Pilot, JM Smucker, Knight Ridder, Kohl's, Lincoln National, Liz Claiborne, Millipore, Mylan Laboratories, National Semiconductor, Newmont Mining, North Fork Bancorp, Omnicare, Pall Corp., Perkin Elmer, Pioneer Natural Resources, Ryland Group, SBC Communications, Schwab Charles, Shopko Stores, Talbots, Texas Instruments, VeriSign and Watson Phamareuticals. The following stocks were sold since July 1: ABM Industries, Amerada Hess, Amsouth, Autodesk, Benchmark Electronics, Boise Cascade, Brink's, Brocade Communications, California Pizza Kitchen, Coca Cola Enterprises, Cognos, Conagra, Disney, Dow-Jones Diamonds Trust, First Data, Gencorp, General Electric, General Motors, Genesco, Intel, Interpublic Group, Intuit, Long Drug Stores, McKesson, Nasdaq 100 Trust, Option Care, Pentair, Perot Systems, Pinnacle Systems, PNC Financial, Pride International, Safeway, Scientific Atlanta, Siebel Systems, Smithfield Foods, Steris, Sungard Data S., Tetratech, Thermo-electron, Thomas & Betts, Valspar and Varian. Among the stocks sold our top five winners were: Autodesk with a 171% realized gain, followed by Scientific Atlanta with 111%, Option Care with 96%, Pentair with 88% and Thermoelectron with 62% gain, respectively. Our ten largest stock holdings, expressed as a percentage of total net assets, are shown in the following table: TOP TEN COMMON STOCK HOLDINGS ----------------------------- (as of 9/30/2004) % of Total % Gain EGL, Inc. 1.96% 85.5% McDonalds 1.88 118.8 Carnival Corp. 1.61 85.4 Norfolk Southern 1.42 56.8 Smith International 1.40 63.1 Sherwin-Williams 1.30 49.2 McCormick 1.32 50.2 CNF, Inc. 1.31 24.8 Anixter 1.31 44.1 Banknorth Group 1.29 49.8 PROXY VOTING INFORMATION Information is now available to shareholders who are interested in the Fund's proxy voting record regarding its securities. This information is available without charge upon request. It may be obtained either by calling the Fund's toll-free number, 800-541-3863, or by visiting the SEC's website at www.sec.org. There you have to search for Form N-PX at Volumetric Fund's site. DIVIDEND NEWS Volumetric Fund will declare its annual dividend and capital gain distributions on December 31, 2004. The exact date of record, ex- dividend and payment dates will be determined by the Board of Directors. The ex-dividend date is expected to be January 3, 2005. For information regarding projected dividends and distributions please give us a call around the middle or late December. HAPPY 30TH BIRTHDAY IRA! Individual Retirement Accounts (IRAs) were signed into existence September 1974. Today, about 31% of our Fund's net assets are derived from traditional, Roth and other retirement accounts of our shareholders. . We would like to remind you that IRA contribution limits have been raised to $3,000 since 2002, and $3,500 if you are age 50 or above. As you know, your Volumetric IRA accounts are completely free of any annual or set-up fees and charges. NEW SEC REGULATIONS The Securities and Exchange Commission (SEC) has adopted new regulations regarding governance of mutual funds. These include rules requiring that mutual fund boards must have at least 75% independent directors and that a fund must have an independent chairman of the board. The compliance date for these rules is January 16, 2006. These new rules are quite controversial. Two of the five SEC commissioners voted against the new rules. Furthermore, the U.S. Chamber of Commerce has filed a lawsuit against the SEC challenging the new governance rules claiming that the SEC has exceeded its federal statuary mandate and infringes upon state law. At this point, it is premature to conclude the final resolution of this matter. The vast majority of mutual funds and Volumetric Fund's management agree with the Chamber that the proposed SEC regulations are unnecessary. Currently, the Volumetric Fund has nine directors. If the regulations are upheld the number of independent directors will have to be increased from five to seven. Furthermore, an independent director will have to be named as chairman. The positions of chief executive officer (CEO) and president would not be affected. Irrespective of the fate of these regulations, Volumetric Fund will be able to comply with the new proposed requirements. UPDATE AND OUTLOOK Volumetric and the stock market opened on the upside in early October. As of October 6th, the Fund's NAV closed at $19.82 up 2.4% since September 30 and up 5.7% year to date. We have reduced our cash from 12.4% since the end of the quarter to 5.7%. Fourth quarters are traditionally strong in election years. Indeed, according to the Stock Trader's Almanac, there was only one losing fourth quarter for the Dow-Jones Industrials in the last 50 years. It was 1964 when the Dow-Jones closed down 1.4%. Consequently, we remain optimistic and believe that a double digit return for Volumetric this year is achievable. October 7, 2004 Sincerely, /s/Gabriel J. Gibs /s/Irene J. Zawitkowski Gabriel J. Gibs Irene J. Zawitkowski Chairman and CEO President VOLUMETRIC FUND, INC. STATEMENT OF NET ASSETS September 30, 2004 (Unaudited) COMMON STOCKS: 87.6% MARKET SHARES COMPANY VALUE Aerospace/Defense: 1.2% 6,700 Raytheon $254,466 ------------- Air Transport: 3.1% 9,300 Alaska Air Group* 230,454 13,500 EGL, Inc.* 408,510 ------------- 638,964 ------------- Apparel: 1.1% 6,100 Liz Claiborne 230,092 ------------- Auto/Auto Parts: 1.1% 5,900 Genuine Parts 226,442 ------------- Banking: 3.4% 7,700 Banknorth Group 269,500 5,200 North Fork Bancorp. 231,140 3,500 Zion Bancorp 213,640 ------------- 714,280 ------------- Building/Construction: 1.3% 2,900 Ryland Group 268,714 ------------- Business/Consumer Services: 3.3% 5,600 ChoicePoint, Inc.* 238,840 11,700 Electronic Data Systems 226,863 17,500 ServiceMaster Industries 225,050 ------------- 690,753 ------------- Chemicals: 4.8% 7,000 Albemarle 245,630 5,200 Dow Chemical 234,936 5,500 Rohm & Haas 236,335 6,300 Sherwin-Williams 276,948 ------------- 993,849 ------------- Communications: 2.3% 9,000 Bellsouth 244,080 8,800 SBC Communications 228,360 ------------- 472,440 ------------- Computers, Hardware: 0.9% 25,000 Adaptec, Inc.* 190,000 ------------- Computers, Software: 3.2% 4,000 Affiliated Computer Services* 222,680 12,000 Comverse Technology* 225,960 8,000 Microsoft 221,200 ------------- 669,840 ------------- Consumer Products: 1.0% 7,700 Helen of Troy* 209,594 ------------- Drugs: 4.1% 4,400 Genzyme* 239,404 11,000 Mylan Laboratories 198,000 7,300 Watson Pharmaceuticals* 215,058 5,200 Wyeth 194,480 ------------- 846,942 ------------- Electrical/Electronics: 4.5% 7,800 Anixter* 273,702 6,300 International Rectifier* 216,090 15,000 National Semiconductor* 232,350 10,000 Texas Instruments 212,800 ------------- 934,942 ------------- Financial Services: 5.3% 4,300 Affiliated Managers Group* 230,222 4,500 American Express 231,570 5,500 Edwards, AG 190,410 8,500 First American Corporation 262,055 22,000 Schwab Charles 202,180 ------------- 1,116,437 ------------- Foods/Beverage: 4.1% 3,600 Anheuser-Busch 179,820 12,500 Hain Celestial Group* 221,000 8,000 McCormick & Company 274,720 4,200 Smucker, JM 186,522 ------------- 862,062 ------------- Forest Products: 1.3% 4,000 Temple Inland 268,600 ------------- Gold: 1.1% 4,900 Newmont Mining* 223,097 ------------- Insurance: 4.4% 5,500 AFLAC 215,655 4,600 Jefferson Pilot 228,436 5,100 Lincoln National 239,700 4,500 Torchmark 239,310 ------------- 923,101 ------------- MARKET SHARES COMPANY VALUE Internet Services: 1.1% 12,000 Verisign* $238,560 ------------- Leisure/Entertainment: 4.9% 7,100 Carnival Corp. 335,759 15,000 Caesars Entertainment* 250,500 8,900 Fox Entertainment* 246,886 17,000 Metro-Goldwin-Mayer, Inc. 196,690 ------------- 1,029,835 ------------- Machinery: 2.9% 11,000 AGCO* 248,820 2,400 Cooper Cameron* 131,616 9,000 Pall Corp. 220,320 ------------- 600,756 ------------- Medical:/Healthcare: 1.0% 7,600 Omnicare 215,536 ------------- Metals/Steel: 1.3% 8,000 Alcoa 268,720 ------------- Misc./Diversified: 3.2% 7,100 Eastman Kodak 228,762 3,000 ITT Industries 239,970 4,100 Millipore* 196,185 ------------- 664,917 ------------- Oil/Oil Services: 3.6% 6,500 Pioneer Natural Resources 224,120 4,800 Smith International* 291,504 4,800 Weatherford International* 244,896 ------------- 760,520 ------------- Precision Instruments: 1.5% 5,800 Boston Scientific* 230,434 4,900 Perkin Elmer 84,378 ------------- 314,812 ------------- Publishing: 1.1% 3,500 Knight Ridder 229,075 ------------- Railroads: 2.5% 6,600 CSX, Inc. 219,120 10,000 Norfolk Southern 297,400 ------------- 516,520 ------------- Restaurants: 1.9% 14,000 McDonald's Corp. 392,420 ------------- Retail: 6.4% 5,900 Costco 244,909 10,000 Dillard's Inc. 197,400 6,000 Home Depot 235,200 4,600 Kohl's* 221,674 14,000 Shopko Stores* 243,740 7,500 Talbot's 185,925 ------------- 1,328,848 ------------- Trucking: 3.6% 7,100 Arkansas Best 260,002 6,700 CNF, Inc. 274,633 3,000 United Parcel Service 227,760 ------------- 762,395 ------------- Utilities: 1.1% 9,500 Energy East 239,210 ------------- TOTAL COMMON STOCKS: (COST $15,745,418) 18,296,739 ------------- CASH EQUIVALENTS & RECEIVABLES LESS LIABILITIES: 12.4% Cash 87,531 JP Morgan Prime Money Market Fund 2,337,222 Receivable from broker for securities sold 375,319 Dividends and interest receivable 14,555 ------------- TOTAL CASH EQUIVALENTS/ RECEIVABLES 2,814,627 ------------- TOTAL ASSETS 21,111,366 LIABILITIES: Payable for securities purchased (223,340) --------------- NET ASSETS: 100.0% $20,888,026 ============== VOLUMETRIC SHARES OUTSTANDING 1,079,259 ------------- NET ASSET VALUE PER SHARE $19.35 ------------- * Non-income producing security Volumetric Fund, Inc. 87 Violet Drive Pearl River, New York 10965 Tel: 845-623-7637 800-541-FUND www.volumetric.com Investment Adviser and Transfer Agent Volumetric Advisers, Inc. Pearl River, New York Custodian J.P. Morgan Chase New York, New York Independent Auditors BKD, LLP Kansas City, Missouri Board of Directors William P. Behrens Louis Bollag Jeffrey J. Castaldo Gabriel J. Gibs, Chairman Josef Haeupl Stephen Samitt David L. Seidenberg Raymond W. Sheridan Irene J. Zawitkowski Officers Gabriel J. Gibs Chairman, CEO, Portfolio Co-Manager Irene J. Zawitkowski President, Portfolio Co-Manager Raymond W. Sheridan Vice President, Treasurer