LETTER TO STOCKHOLDERS
We are pleased to submit the financial statements of the Corporation for the
six months ended June 30, 1996, a schedule of investments and a list of
principal changes in portfolio securities for the second quarter and the
report of the independent accountants.
Net assets of the Corporation at June 30, 1996 were $34.45 per common share as
compared with $31.51 per common share at December 31, 1995 on the 12,739,383
common shares outstanding on each date. On March 1, 1996, a distribution of
$0.20 per share was paid consisting of $0.03 from 1995 long-term capital gain,
$0.01 from 1995 short-term capital gain, $0.02 from 1995 investment income and
$0.14 from 1996 investment income, all taxable in 1996. A regular 1996
investment income dividend of $0.20 per share was paid June 1, 1996 and another
$0.20 investment income dividend has been declared to common shareholders of
record August 19, 1996, payable September 1, 1996.
Net investment income for the six months ended June 30, 1996 amounted to
$5,160,207 compared with $5,314,641 for the same period in 1995. These earnings
are equal to $0.40 and $0.43 per common share, respectively, on the average
number of common shares outstanding during each period.
Net capital gain realized on investments for the six months ended June 30, 1996
amounted to $8,299,365, the equivalent of $0.65 per common share.
The Corporation is an internally managed equity fund emphasizing petroleum and
natural resource investments. The investment policy of the fund is based on the
primary objectives of preservation of capital, the attainment of reasonable
income from investments and, in addition, an opportunity for capital
appreciation.
By order of the Board of Directors,
/s/ Douglas G. Ober
Douglas G. Ober,
Chairman and
Chief Executive Officer
/s/ Richard F. Koloski
Richard F. Koloski,
President
July 19, 1996
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
<TABLE>
<S> <C>
ASSETS
Investments* at value:
Common stocks and convertible securities
(cost $253,494,860) $402,425,423
Short-term investments (cost $39,312,379) 39,312,379 $441,737,802
- ---------------------------------------------------------------------------------------------------------------------------
Cash 23,432
Receivables:
Investment securities sold 31,889
Dividends and interest 1,066,311
Prepaid expenses 1,061,900
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets 443,921,334
LIABILITIES
Investment securities purchased 3,494,897
Open option contracts at value (proceeds $269,366) 206,563
Accrued expenses 1,333,012
- ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities 5,034,472
NET ASSETS $438,886,862
NET ASSETS
Common Stock at par value $1.00 per share, authorized
25,000,000 shares; issued and outstanding 12,739,383 shares $ 12,739,383
Additional capital surplus 268,115,650
Undistributed net investment income 812,010
Undistributed net realized gain on investments 8,226,453
Unrealized appreciation on investments 148,993,366
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON STOCK $438,886,862
===========================================================================================================================
NET ASSET VALUE PER SHARE OF COMMON STOCK $34.45
</TABLE>
* See Schedule of Investments on pages 7 and 8.
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Income:
Dividends $ 5,067,422
Interest 1,339,255
- ---------------------------------------------------------------------------------------------------------------------------
Total income 6,406,677
Expenses:
Investment research 485,722
Administration and operations 234,507
Directors' fees 75,150
Reports and stockholder communications 88,944
Transfer agent, registrar and custodian expenses 85,880
Auditing services 24,270
Legal services 67,900
Occupancy and other office expenses 56,030
Travel, telephone and postage 43,922
Other 84,145
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 1,246,470
NET INVESTMENT INCOME 5,160,207
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS
Net realized gain on security transactions 8,299,365
Change in unrealized appreciation on investments 29,118,073
NET GAIN ON INVESTMENTS 37,417,438
- ---------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $42,577,645
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year ended
ended December 31,
June 30, 1996 1995
<S> <C>
From Operations:
Net investment income $ 5,160,207 $ 10,592,549
Net realized gain on investments 8,299,365 15,059,861
Change in unrealized appreciation on investments 29,118,073 59,383,437
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations 42,577,645 85,035,847
Dividends to Stockholders from:
Net investment income (4,586,178) (10,770,861)
Net realized gain from investment transactions (509,576) (15,103,966)
- ---------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (5,095,754) (25,874,827)
From Capital Share Transactions:
Value of common shares issued in payment of optional distributions -0- 9,964,553
- ---------------------------------------------------------------------------------------------------------------------------
Total Increase in Net Assets 37,481,891 69,125,573
Net Assets:
Beginning of period 401,404,971 332,279,398
- ---------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of
$812,010 and $237,981, respectively) $438,886,862 $401,404,971
===========================================================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Petroleum & Resources Corporation (the Corporation) is registered under the
Investment Company Act of 1940 as a diversified investment company. The
Corporation's investment objectives as well as the nature and risk of its
investment transactions are set forth in the Corporation's registration
statement.
Security Valuation--Investments in securities traded on national security
exchanges are valued at the last reported sale price on the day of valuation.
Over-the-counter and listed securities for which a sale price is not available
are valued at the last quoted bid price. Short-term investments are stated at
cost which, when combined with accrued interest receivable, approximates value.
Options are valued at the last sale price or last quoted asked price.
Securities Transactions and Investment Income--Investment transactions are
accounted for on the trade date. Gain or loss on sales of securities and options
is determined on the basis of identified cost. Dividend income and distributions
to shareholders are recognized on the ex-dividend date, and interest income is
recognized on the accrual basis.
2. FEDERAL INCOME TAXES
The Corporation's policy is to distribute all its taxable income to its
shareholders in compliance with the requirements of the Internal Revenue Code
applicable to regulated investment companies. Therefore, no federal income tax
provision is required. For federal income tax purposes, the identified cost of
securities, including options, at June 30, 1996 was $292,983,977, and net
unrealized appreciation aggregated $149,023,191, of which the related gross
unrealized appreciation and depreciation were $156,941,769 and $7,918,578,
respectively.
Distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. Accordingly, periodic
reclassifications are made within the Corporation's capital accounts to reflect
income and gains available for distribution under income tax regulations.
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than options and short-term
investments, during the three months ended June 30, 1996 were $26,323,016 and
$40,286,952, respectively. Option transactions comprised an insignificant
portion of operations during the period ended June 30, 1996. All investment
decisions are made by a committee, and no one person is primarily responsible
for making recommendations to that committee.
4. CAPITAL STOCK
In May 1993, the Corporation redeemed its $1.575 Convertible Preferred Shares
for $15.00 plus accrued dividends of $0.35 per share. The Corporation has
3,000,000 unissued preferred shares without par value.
The Corporation may purchase shares of its Common Stock from time to time at
such prices and amounts as the Board of Directors may deem advisable. No
purchases were made during the six months ended June 30, 1996.
The Corporation has an employee incentive stock option and stock appreciation
rights plan which provides for the issuance of options and stock appreciation
rights for the purchase of up to 815,000 shares of the Corporation's common
stock at 100% of the fair market value at date of grant. There were 105,465
stock options and stock appreciation rights that expired unissued. Options are
exercisable beginning not less than one year after the date of grant and extend
over ten years from the date of grant. Stock appreciation rights are exercisable
beginning not less than two years after the date of grant and extend over the
period during which the option is exercisable. The stock appreciation rights
allow the optionees to surrender their rights to exercise their options and
receive cash in an amount equal to the difference between the option price and
the fair market value of the common stock at the date of surrender. Under the
plan, the exercise price of the options and related stock appreciation rights is
reduced by the per share amount of capital gain paid by the Corporation during
the subsequent years. During the six months ended June 30, 1996, no options or
stock appreciation rights were granted, stock appreciation rights relating to
10,000 stock option shares were exercised at market prices of $28.750-$28.875
per share and the stock options relating to these rights which had an exercise
price of $19.945 per share were cancelled. At June 30, 1996, there were
outstanding exercisable options to purchase 74,400 common shares at
$18.800-$25.373 per share and unexercisable options to purchase 120,750 common
shares at $21.385-$28.210 per share. At June 30, 1996, there were 363,404 shares
available for future option grants.
5. RETIREMENT PLANS
The Corporation provides retirement benefits for its employees under a
non-contributory qualified defined benefit pension plan. The benefits are based
on years of service and compensation during the last 36 months of employment.
The Corporation's current funding policy is to contribute annually to the plan
only those amounts that can be deducted for federal income tax purposes.
The actuarially computed net pension cost credit for the six months ended June
30, 1996 was $77,881, and consisted of service expense of $27,740, interest
expense of $56,208, expected return on plan assets of $125,605, and a net
amortization credit of $36,224.
In determining the actuarial present value of the projected benefit obligation,
the interest rate used for the weighted-average discount rate and the expected
rate of annual salary increase was 7.0% and the expected long-term rate of
return on plan assets was 8.0%.
On January 1, 1996, the accumulated benefit obligation, including vested
benefits, was $1,234,281. The fair value of the plan assets was $3,173,883 and
the projected benefit obligation for service rendered to date was $1,639,654.
This resulted in excess plan assets of $1,534,229 of which $244,464 is the
remaining portion of the unrecognized net asset existing at January 1, 1987
which is being amortized over 15 years. Prepaid pension cost included in prepaid
expenses at June 30, 1996 is $1,048,530.
In addition, the Corporation has a nonqualified unfunded benefit plan which
provides employees with defined retirement benefits to supplement the qualified
plan. The Corporation does not provide postretirement medical benefits.
6. EXPENSES
Aggregate remuneration paid or accrued during the six months ended June 30, 1996
to officers and directors amounted to $678,192 of which $75,150 was paid as fees
to directors who were not officers.
Research, accounting and other office services provided by and reimbursed to The
Adams Express Company, an investment company which owned 9.0% of the
Corporation's common stock, amounted to $290,720 for the six months ended June
30, 1996.
7. PORTFOLIO SECURITIES LOANED
The Corporation makes loans of securities to brokers, collateralized by cash
deposits, U.S. Government securities, or bank letters of credit, the value of
which exceeds the market value of such loaned securities. At June 30, 1996, the
value of security loans outstanding was $2,718,750.00.
5
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30 Year Ended December 31
---------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
<S> <C>
Per Share Operating
Performance*
Net asset value, beginning of
period $31.51 $26.84 $26.84 $29.64 $27.66 $28.07 $28.59
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income 0.40 0.43 0.86 0.94 0.92 1.06 1.20
Net realized gains and change in
unrealized appreciation and
other changes 2.94 3.11 5.90 (1.64) 3.30 0.81 0.72
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.34 3.54 6.76 (0.70) 4.22 1.87 1.92
Less distributions
Dividends from net investment
income
To preferred shareholders(dagger) -- -- -- -- (0.12) (0.28) (0.29)
To common shareholders (0.36) (0.36) (0.87) (0.92) (0.82) (0.77) (0.92)
Distributions from net realized
gains
To common shareholders (0.04) (0.04) (1.22) (1.18) (1.30) (1.23) (1.23)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (0.40) (0.40) (2.09) (2.10) (2.24) (2.28) (2.44)
Net asset value, end of period $34.45 $29.98 $31.51 $26.84 $29.64 $27.66 $28.07
===========================================================================================================================
Per share market price, end of
period $30.25 $27.75 $28.25 $25.25 $27.50 $25.25 $26.00
Total Investment Return
Based on market price 8.5% 11.5% 20.5% (0.7)% 17.4% 4.8% 12.4%
Based on net asset
value(dagger)(dagger) 10.3% 13.3% 25.9% (1.7)% 14.7% 6.7% 7.1%
Ratios/Supplemental Data
Net assets applicable to common
stock, end of period
(in 000's) $438,887 $371,111 $401,405 $332,279 $355,837 $320,241 $314,024
Ratio of expenses to average net
assets 0.60%** 0.64%** 0.57% 0.42% 0.57% 0.52% 0.59%
Ratio of net investment income
to average net assets 2.47%** 3.00%** 2.89% 3.19% 2.61% 2.79% 3.06%
Portfolio turnover 13.51%** 16.64%** 15.86% 10.95% 10.16% 15.06% 11.41%
Average brokerage commission rate $0.06 -- -- -- -- -- --
Number of shares outstanding at
end of period (in 000's) 12,739 12,380 12,739 12,380 12,007 11,580 11,186
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Selected data for each share of common stock outstanding
throughout each period.
(dagger) See note 4 to financial statements.
(dagger)(dagger) Total return based on net asset value as published by Lipper
Analytical Services, Inc.
** Ratios presented on an annualized basis.
6
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1996
<TABLE>
<CAPTION>
Prin. Amt.
or Shares Value (A)
<S> <C>
Stocks And Convertible Securities--91.7%
Energy--77.5%
Internationals -- 22.4%
British Petroleum plc ADR 103,958 $11,110,511
Chevron Corp. 110,000 6,490,000
Exxon Corp. 175,000 15,203,125
Mobil Corp. 120,000 13,485,000
Royal Dutch Petroleum Co. 230,000 35,362,500
"Shell" Transport and Trading
Co., plc ADR 80,000 7,040,000
Texaco Inc. 60,000 5,032,500
TOTAL S.A. ADR 122,209 4,537,009
- ---------------------------------------------------------------------------------------------------------------------------
98,260,645
Domestics--11.3%
Amerada Hess Corp. 65,000 3,485,625
Amoco Corp. 50,000 3,606,250
Ashland Oil, Inc., $3.125 Conv.
Pfd. 75,000 4,790,625
Atlantic Richfield Co. 55,000 6,503,750
Murphy Oil Corp. 100,000 4,537,500
Pennzoil Co. 6.50% Conv.
Exch. Sr. Debs.
due 2003 $2,000,000 2,855,000
Pennzoil Co. 35,000 1,618,750
Phillips Petroleum Co. 120,000 5,025,000
Tesoro Petroleum Corp. (C) 300,000 3,450,000
Ultramar Corp. 125,000 3,625,000
Unocal Corp.
$3.50 Conv. Pfd. (B) 65,000 3,640,000
Unocal Corp. 150,000 5,043,750
Valero Energy Corp.
$3.125 Conv. Pfd 30,000 1,575,000
- ---------------------------------------------------------------------------------------------------------------------------
49,756,250
Producers--16.3%
Anadarko Petroleum Corp. 77,719 4,507,702
Apache Corp. 6.00% Conv. Sub.
Debs. due 2002 (B) $3,000,000 3,615,000
Barrett Resources Corp. 61,000 1,814,750
Devon Energy Corp. 153,000 3,748,500
Enron Oil & Gas Co. 190,000 5,296,250
Enserch Exploration Inc. (C) 250,000 2,718,750
Imperial Oil Ltd. 105,488 4,456,868
Louisiana Land & Expl. Co. 100,000 5,762,500
Noble Affiliates Inc. 4.25%
Conv. Sub. Debs. due 2003 $3,000,000 3,285,000
Occidental Petroleum Corp.
$3.00 Conv. Exch. Pfd. 30,000 1,863,750
Occidental Petroleum Corp. 265,000 6,558,750
Oryx Energy Co. 7.50% Conv.
Sub. Debs. due 2014 $1,500,000 1,320,000
Oryx Energy Co. (C) 85,000 1,381,250
Parker & Parsley Petroleum Co. 200,000 5,550,000
Seagull Energy Corp. (C) 190,000 4,750,000
Southwestern Energy Co. 200,000 2,825,000
Union Pacific Resources
Group, Inc. 110,000 2,942,500
United Meridian Corp. (C) 123,500 4,446,000
Vastar Resources, Inc. 125,000 4,671,875
- ---------------------------------------------------------------------------------------------------------------------------
71,514,445
Distributors--16.9%
AGL Resources, Inc. 200,000 3,775,000
Coastal Corp. 78,800 3,289,900
Consolidated Natural Gas Co. 46,600 2,434,850
</TABLE>
<TABLE>
<CAPTION>
Prin. Amt.
or Shares Value (A)
<S> <C>
Enron Corp. 6.25% Exch Notes
due 1998 175,000 $ 4,571,875
Enron Corp. $11.604 Conv.
Pfd. Ser. J 25,000 13,948,595
Enron Global Power & Pipelines
L.L.C. 150,000 3,637,500
Equitable Resources Inc. 100,000 2,825,000
KN Energy, Inc. 110,000 3,685,000
MCN Corp. 190,000 4,631,250
National Fuel Gas Co. 100,000 3,600,000
New Jersey Resources, Inc. 185,000 5,318,750
NorAm Energy Corp. 146,100 1,588,838
PanEnergy Corp. 125,000 4,109,375
Questar Corp. 125,200 4,256,800
Sonat, Inc. 60,500 2,722,500
Tenneco Inc. 90,000 4,601,250
United Cities Gas Co. 200,000 3,025,000(dagger)
Washington Gas Light Co. 100,000 2,200,000
- ---------------------------------------------------------------------------------------------------------------------------
74,221,483
Services--10.6%
BJ Services Co. (C) 130,000 4,566,250
Camco International Inc. 130,000 4,403,750
Diamond Offshore Drilling,
Inc. (C) 48,400 2,758,800
Halliburton Co. 40,000 2,220,000
Schlumberger Ltd. 96,100 8,096,425
SEACOR Holdings, Inc. 70,000 3,132,500(dagger)
Sonat Offshore Drilling 150,000 7,575,000
Tidewater, Inc. 130,000 5,703,750
Weatherford/Enterra Inc. (C) 120,000 3,600,000
Western Atlas Inc. (C) 75,000 4,368,750
- ---------------------------------------------------------------------------------------------------------------------------
46,425,225
Basic Industries--14.2%
Basic Materials--4.4%
Air Products & Chemicals,
Inc. 85,000 4,898,125
Calgon Carbon Corp. 184,800 2,494,800
Freeport-McMoRan Copper &
Gold Inc. 7% Conv. Exch.
Pfd. 125,000 3,875,000
Inco Ltd. 7.75% Conv. Debs.
due 2016 $3,500,000 3,780,000
Medusa Corp. 140,000 4,340,000
- ---------------------------------------------------------------------------------------------------------------------------
19,387,925
- ---------------------------------------------------------------------------------------------------------------------------
Capital Goods & Other--7.0%
Deere & Co. 120,000 4,800,000
Dover Corp. 100,200 4,609,200
General Electric Co. 100,000 8,675,000
Jacobs Engineering Group,
Inc. (C) 150,000 3,956,250
Quaker State Corp. 131,600 1,974,000
Union Pacific Corp. 60,000 4,192,500
WMX Technologies Inc. 80,000 2,620,000
- ---------------------------------------------------------------------------------------------------------------------------
30,826,950
Paper and Forest Products--2.8%
Consolidated Papers, Inc. 65,000 3,380,000
Kimberly-Clark Corp. 65,000 5,021,250
Mead Corp. 70,000 3,631,250
- ---------------------------------------------------------------------------------------------------------------------------
12,032,500
Total Stocks And Convertible Securities
(Cost $253,494,860) (D) $402,425,423
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
June 30, 1996
<TABLE>
<CAPTION>
Prin. Amt. Value (A)
<S> <C>
Short-Term Investments--8.9%
Certificates Of Deposit --3.4%
NationsBank N.A. (Carolinas),
5.30%, due 7/18/96 $5,000,000 $ 5,000,000
SouthTrust Bank of
Alabama, N.A.,
5.25%, due 7/11/96 5,000,000 5,000,000
U.S. Bank of
Washington, N.A.,
5.32%, due 7/3/96 5,000,000 5,000,000
- ---------------------------------------------------------------------------------------------------------------------------
15,000,000
</TABLE>
<TABLE>
<CAPTION>
Prin. Amt. Value (A)
<S> <C>
Commercial Paper -- 5.5%
AT&T Capital Corp., 5.32%,
due 7/18/96 $5,012,376 $ 5,012,376
Chevron Oil Finance Co.,
5.35%, due
7/2/96-7/31/96 4,319,348 4,319,348
Ford Motor Credit Corp.,
5.34%, due 7/25/96 4,982,200 4,982,200
General Electric Capital Corp.,
5.29-5.35%,
due 7/11/96-7/25/96 4,986,103 4,986,103
Penney (J.C.) Funding Corp.,
5.33%, due 7/18/96 5,012,352 5,012,352
- ---------------------------------------------------------------------------------------------------------------------------
24,312,379
Total Short-Term Investments
(Cost $39,312,379) 39,312,379
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments
(Cost $292,807,239) 441,737,802
Cash, receivables and other
assets, less liabilities (2,850,940)
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets-- 100.0% $438,886,862
===========================================================================================================================
</TABLE>
Notes:
(A) See note 1 to financial statements. Securities are listed on the New
York Stock Exchange or the American Stock Exchange except restricted
securities and also those marked ((dagger)), which are traded
"Over-the-Counter."
(B) Restricted securities (Apache Corp. 6.00% Conv. Sub. Debs. due 2002
acquired 12/6/94, cost $3,000,000, Unocal Corp. $3.50 Conv. Pfd. acquired
7/21/92, cost $3,255,625).
(C) Presently non-dividend paying.
(D) The aggregate market value of stocks held in escrow at June 30, 1996
covering open call-option contracts written was $9,431,250. In addition,
the required aggregate market value of securities segregated by the
custodian to collateralize open put option contracts written was $3,925,000.
HISTORICAL FINANCIAL STATISTICS
<TABLE>
<CAPTION>
Value of Per Common Share
Net Assets Net ----------------------------------
Applicable Asset Dividends Distributions
to Common Value per from Net from Net
Common Shares Common Investment Realized
Dec. 31 Stock Outstanding Share Income Gains
<S> <C>
1985 $237,489,296 8,372,627 $28.36 $1.38 $2.34
1986 246,071,990 8,979,978 27.40 1.45 2.89
1987 234,062,235 9,636,306 24.29 1.67 2.31
1988 248,370,688 9,997,584 24.84 .92 1.20
1989 322,866,019 10,384,600 31.09 1.20 1.20
1990 308,599,851 10,793,289 28.59 1.10 1.25
1991 314,024,187 11,185,572 28.07 .92 1.23
1992 320,241,282 11,579,503 27.66 .77 1.23
1993 355,836,592 12,006,671 29.64 .82 1.30
1994 332,279,398 12,380,300 26.84 .92 1.18
1995 401,404,971 12,739,383 31.51 .87 1.22
June 30, 1996 438,886,862 12,739,383 34.45 .56* .04
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Paid or declared.
8
<PAGE>
PRINCIPAL CHANGES IN PORTFOLIO SECURITIES
During the Three Months Ended June 30, 1996
<TABLE>
<CAPTION>
Shares
------------------------------------------------
Held
Additions Reductions June 30, 1996
<S> <C>
Barrett Resources Corp. 61,000 61,000
Halliburton Co. 40,000 40,000
NorAm Energy Corp. 146,100 146,100
Quaker State Corp. 131,600 131,600
SEACOR Holdings, Inc. 70,000 70,000
Union Pacific Resources Group, Inc. 60,000 110,000
United Meridian Corp. 90,000 123,500(1)
Atlantic Richfield Co. 15,000 55,000
BJ Services Co. 36,300 130,000
Chevron Corp. 15,000 110,000
Coflexip ADR 50,000 --
ENI S.p.A. ADS 100,000 --
International Paper Co. 140,000 --
NorAm Energy $3.00 Conv. Exch. Pfd. Ser. A 33,400 --
Phillips Petroleum Co. 30,000 120,000
Rayonier Inc. 45,000 --
Tidewater Inc. 20,000 130,000
Union Texas Petroleum Holdings, Inc. 185,000 --
Weyerhaeuser Co. 80,000 --
</TABLE>
(1) Includes shares previously listed under "Stocks under accumulation" in the
Schedule of Investments.
------------------
Common Stock
Listed on the New York Stock Exchange
and the Pacific Stock Exchange
The Corporate Office Address: Seven St. Paul Street,
Suite 1140, Baltimore, MD 21202
The Corporate Office Telephone: (410) 752-5900 or (800) 638-2479
Transfer Agent, Registrar & Custodian of Securities
The Bank of New York
101 Barclay Street, 11E
New York, NY 10007
The Bank's Shareholder Relations Department: (800) 432-8224
Counsel: Chadbourne & Parke L.L.P.
Independent Accountants: Coopers & Lybrand L.L.P.
This report, including the financial statements herein, is transmitted to the
stockholders of Petroleum & Resources Corporation for their
information. It is not a prospectus, circular or representation intended for
use in the purchase or sale of shares of the Corporation or of any
securities mentioned in this report.
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
PETROLEUM & RESOURCES CORPORATION:
We have audited the accompanying statement of assets and liabilities of
Petroleum & Resources Corporation, including the schedule of investments, as of
June 30, 1996, and the related statement of operations for the six months then
ended, the statement of changes in net assets for the six months ended June 30,
1996 and the year ended December 31, 1995, and the financial highlights for the
six months ended June 30, 1996 and 1995 and for each of the five years in the
period ended December 31, 1995. These financial statements and financial
highlights are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these 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. Our procedures included confirmation of investments owned as of June
30, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. 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
Petroleum & Resources Corporation as of June 30, 1996, the results of its
operations, the changes in its net assets, and financial highlights for each of
the respective periods stated in the first paragraph, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
July 10, 1996
10
<PAGE>
DIVIDEND PAYMENT SCHEDULE &
AUTOMATIC DIVIDEND REINVESTMENT PLAN
The Corporation presently pays dividends four times a year, as follows: (a)
Three interim investment income dividends on or about March, June and September
1st. (b) A "year-end" payment consisting of the estimated balance of the net
investment income for the year and the net realized capital gain earned through
October 31st, payable in late December. Stockholders may elect to receive this
payment in stock or cash. In connection with this payment, all stockholders of
record are sent a dividend announcement notice and an election card in
mid-November. The following options are available:
(1) Full shares of stock for the combined income dividend and capital gain
distribution to the extent possible.
(2) Full shares of stock for the capital gain distribution to the extent
possible. Fractional shares and the income dividend are paid in cash. Without a
timely response, stockholders will be paid in accordance with this option.
(3) Both the income dividend and capital gain distribution in cash.
Stockholders holding shares in "street" or brokerage accounts may make one of
the above elections by notifying their brokerage house representative.
Stockholders of record of Petroleum stock have two additional ways to increase
their investment in the Corporation.
The Bank of New York's Automatic Dividend Reinvestment Plan provides that its
participants' four distributions are automatically invested in additional shares
of Petroleum common stock. New shares acquired are held on a book basis by the
Bank.
Additionally, after the participants' first dividend is reinvested, they are
eligible to make cash payments in any amount from $50.00.
The Bank provides participants with reinvestment confirmations after each
dividend or cash payment. The Bank's fee for this service is 10% of the amount
received up to a maximum of $2.50 for the interim dividend payments and cash
payments. There is no charge for the "year-end" distribution.
The Bank's plan also provides for the deposit of certificate shares into the
participants "book share" account for a one-time charge of $5.00.
A brochure and enrollment card may be obtained by calling the Bank at (800)
432-8224 or by writing to:
The Bank of New York
Dividend Reinvestment
P.O. Box 11258
Church Street Station
New York, NY 10277
11
<PAGE>
Board of Directors
Enrique R. Arzac(3,4) Augustine R. Marusi(1,3)
Leigh Carter(1,3) W. Perry Neff(1,4)
Allan Comrie(2,4) Douglas G. Ober(1)
Daniel E. Emerson(1,3) Landon Peters(1,3)
Thomas H. Lenagh(2,4) John J. Roberts
W.D. MacCallan(2,4) Robert J.M. Wilson(1,2)
1. Member of Executive Committee
2. Member of Audit Committee
3. Member of Compensation Committee
4. Member of Retirement Committee
Officers
Douglas G. Ober Chairman and
Chief Executive Officer
Richard F. Koloski President
Joseph M. Truta Executive Vice President
Nancy J. F. Prue Vice President--Research
J. G. Whitney Vice President and Secretary
Maureen A. Jones Treasurer
R. M. Carlsson Assistant Treasurer
Geraldine H. Stegner Assistant Secretary
----------
Stock Data
----------
Price (6/30/96) $30.25
Net Asset Value (6/30/96) $34.45
Discount: 12.2%
New York Stock Exchange and Pacific Stock Exchange ticker symbol: PEO
Newspaper stock listings are generally under the abbreviation: PetRs
---------------------
Distributions in 1996
---------------------
From Investment Income
(Paid or declared) $0.56
From Net Realized Gains 0.04
Total $0.60
---------------------------
1996 Dividend Payment Dates
---------------------------
March 1, 1996
June 1, 1996
September 1, 1996
December 27, 1996*
* Anticipated
[Recycled logo] Printed on Recycled Paper
SEMI-ANNUAL REPORT
June 30, 1996
[Petroleum & Resources Corporation logo]
Investing in Resources for the Future
