FIRST QUARTER REPORT
March 31, 1996
Petroleum
& Resources
Corporation
<PAGE>
LETTER TO STOCKHOLDERS
We are pleased to submit the financial statements of the Corporation for the
three months ended March 31, 1996, a schedule of investments and a list of
principal changes in portfolio securities for the first quarter.
Net assets of the Corporation at March 31, 1996 were $32.90 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 has been declared to common
shareholders of record May 20, 1996, payable June 1, 1996.
Net investment income for the three months ended March 31, 1996 amounted to
$2,022,477 compared with $2,119,185 for the same period in 1995. These earnings
are equal to $0.16 and $0.17 per common share, respectively, on the average
number of common shares outstanding during each period.
Net capital gain realized on investments for the three months ended March 31,
1996 amounted to $2,667,738, the equivalent of $0.21 per common share.
The Annual Meeting, held on March 26, 1996 in Tampa, Florida, was well attended
by shareholders. Upon conclusion of the formal segment of the meeting,
management reviewed the portfolio's performance in 1995 and discussed the
outlook for energy in the future. Stockholder questions were then entertained on
subjects ranging from specific stock holdings to the Corporation's expense
ratio. The results of the voting at the Annual Meeting are shown on page 10.
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
April 19, 1996
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996 (unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments* at value:
Common stocks and convertible securities
(cost $259,189,942) $394,699,395
Short-term investments (cost $21,248,120) 21,248,120 $415,947,515
- ---------------------------------------------------------------------------------------------------------------
Cash 89,829
Receivables:
Investment securities sold 3,034,844
Dividends and interest 905,285
Prepaid expenses 1,029,650
- ---------------------------------------------------------------------------------------------------------------
Total Assets 421,007,123
LIABILITIES
Investment securities purchased 429,350
Open option contracts at value (proceeds $230,842) 235,625
Accrued expenses 1,165,462
Total Liabilities 1,830,437
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS $419,176,686
===============================================================================================================
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 222,157
Undistributed net realized gain on investments 2,594,826
Unrealized appreciation on investments 135,504,670
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON STOCK $419,176,686
===============================================================================================================
NET ASSET VALUE PER SHARE OF COMMON STOCK $32.90
===============================================================================================================
</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
Three Months Ended March 31, 1996 (unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income:
Dividends $ 2,169,317
Interest 537,248
- ---------------------------------------------------------------------------------------------------------------
Total income 2,706,565
Expenses:
Investment research 301,027
Administration and operations 139,491
Directors' fees 37,150
Reports and stockholder communications 47,583
Transfer agent, registrar and custodian expenses 41,395
Auditing services 10,887
Legal services 25,900
Occupancy and other office expenses 29,731
Travel, telephone and postage 19,352
Other 31,572
- ---------------------------------------------------------------------------------------------------------------
Total expenses 684,088
NET INVESTMENT INCOME 2,022,477
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS
Net realized gain on security transactions 2,667,738
Change in unrealized appreciation on investments 15,629,377
- ---------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 18,297,115
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $20,319,592
===============================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Three Months Year ended
ended December 31,
March 31, 1996 1995
(unaudited)
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 2,022,477 $ 10,592,549
Net realized gain on investments 2,667,738 15,059,861
Change in unrealized appreciation on investments 15,629,377 59,383,437
- ---------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations 20,319,592 85,035,847
DIVIDENDS TO STOCKHOLDERS FROM:
Net investment income (2,038,301) (10,770,861)
Net realized gain from investment transactions (509,576) (15,103,966)
- ---------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (2,547,877) (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 17,771,715 69,125,573
NET ASSETS:
Beginning of period 401,404,971 332,279,398
- ---------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of
$222,157 and $237,981, respectively) $419,176,686 $401,404,971
===============================================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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--Invest-ment 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 March 31, 1996 was $280,643,863, and net
unrealized appreciation aggregated $135,534,494, of which the related gross
unrealized appreciation and depreciation were $145,640,904 and $10,106,410,
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 (UNAUDITED)
3. INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than options and short-term
investments, during the three months ended March 31, 1996 were $10,527,973 and
$13,337,547, respectively. Option transactions comprised an insignificant
portion of operations during the period ended March 31, 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 three months ended March 31, 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 480,000 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 three months ended March 31, 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 March 31, 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 March 31, 1996, there were 365,000
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 three months ended
March 31, 1996 was $38,941, and consisted of service expense of $13,870,
interest expense of $28,104, expected return on plan assets of $62,803, and a
net amortization credit of $18,112.
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 March 31, 1996 is $1,009,590.
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 three months ended March 31,
1996 to officers and directors amounted to $410,959 of which $37,150 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 $156,781 for the three months ended
March 31, 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 March 31, 1996, the
value of security loans outstanding was $6,371,850.
5
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Three Months Ended
(unaudited)
March 31, March 31, Year Ended December 31
- ---------------------------------------------------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <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 0.16 0.17 0.86 0.94 0.92 1.06 1.20
Net realized gains and change in
unrealized appreciation and
other changes 1.43 2.30 5.90 (1.64) 3.30 0.81 0.72
- ---------------------------------------------------------------------------------------------------------------
Total from investment operations 1.59 2.47 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 (0.16) (0.16) (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 (0.20) (0.20) (2.09) (2.10) (2.24) (2.28) (2.44)
Net asset value, end of period $32.90 $29.11 $31.51 $26.84 $29.64 $27.66 $28.07
===============================================================================================================
Per share market price, end of
period $29.875 $27.50 $28.25 $25.25 $27.50 $25.25 $26.00
TOTAL INVESTMENT RETURN
Based on market price 6.5% 9.8% 20.5% (0.7)% 17.4% 4.8% 12.4%
Based on net asset
value(doubledagger) 5.1% 9.1% 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) $419,177 $360,416 $401,405 $332,279 $355,837 $320,241 $314,024
Ratio of expenses to average net
assets 0.67%** 0.78%** 0.57% 0.42% 0.57% 0.52% 0.59%
Ratio of net investment income
to average net assets 2.00%** 2.48%** 2.89% 3.19% 2.61% 2.79% 3.06%
Portfolio turnover 11.01%** 11.40%** 15.86% 10.95% 10.16% 15.06% 11.41%
Average brokerage commission rate $0.07 -- -- -- -- -- --
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.
(doubledagger) Total return based on net asset value as published by Lipper
Analytical Services, Inc.
** Ratios presented on annualized basis.
6
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Prin. Amt.
or Shares Value (A)
<S> <C> <C>
STOCKS AND CONVERTIBLE SECURITIES--94.1%
ENERGY--77.3%
INTERNATIONALS -- 23.4%
British Petroleum plc ADR 103,958 $11,045,538
Chevron Corp. 125,000 7,015,625
ENIS.p.A. ADS 100,000 3,612,500
Exxon Corp. 175,000 14,262,500
Mobil Corp. 120,000 13,905,000
Royal Dutch Petroleum Co. 230,000 32,487,500
"Shell" Transport and Trading
Co., plc ADR 80,000 6,420,000
Texaco Inc. 60,000 5,145,000
TOTAL S.A. ADR 122,209 4,155,106
-----------
98,048,769
-----------
DOMESTICS--12.1%
Amerada Hess Corp. 65,000 3,575,000
Amoco Corp. 50,000 3,612,500
Ashland Oil, Inc., $3.125 Conv.
Pfd. 75,000 4,678,125
Atlantic Richfield Co. 70,000 8,330,000
Murphy Oil Corp. 100,000 4,287,500
Pennzoil Co. 6.50% Conv.
Exch. Sr. Debs. due 2003 $2,000,000 2,670,000
Pennzoil Co. 35,000 1,391,250
Phillips Petroleum Co. 150,000 5,925,000
Tesoro Petroleum Corp. (C) 300,000 2,550,000
Ultramar Corp. 125,000 3,609,375
Unocal Corp. $3.50 Conv.
Pfd. (B) 65,000 3,591,250
Unocal Corp. 150,000 5,006,250
Valero Energy Corp.
$3.125 Conv. Pfd 30,000 1,556,250
-----------
50,782,500
-----------
PRODUCERS--14.8%
Anadarko Petroleum Corp. 77,719 4,313,405
Apache Corp. 6.00% Conv. Sub.
Debs. due 2002 (B) $3,000,000 3,232,500
Devon Energy Corp. 135,500 3,184,250
Enron Oil & Gas Co. 190,000 5,011,250
Enserch Exploration Inc. (C) 250,000 2,593,750
Imperial Oil Ltd. 105,488 4,166,776
Louisiana Land & Expl. Co. 100,000 4,662,500
Noble Affiliates Inc. 4.25%
Conv. Sub. Debs. due 2003 $3,000,000 3,060,000
Occidental Petroleum Corp.
$3.00 Conv. Exch. Pfd. 30,000 1,878,750
Occidental Petroleum Corp. 265,000 7,055,625
Oryx Energy Co. 7.50% Conv.
Sub. Debs. due 2014 $1,500,000 1,342,500
Oryx Energy Co. (C) 85,000 1,179,375
Parker & Parsley Petroleum
Co. 200,000 4,600,000
Seagull Energy Corp. (C) 190,000 4,298,750
Southwestern Energy Co. 200,000 2,400,000
Union Pacific Resources 50,000 1,325,000
Union Texas Petroleum Holdings,
Inc. 185,000 3,653,750
Vastar Resources, Inc. 125,000 4,078,125
-----------
62,036,306
-----------
</TABLE>
<TABLE>
<CAPTION>
Prin. Amt.
or Shares Value (A)
<S> <C> <C>
DISTRIBUTORS--16.9%
AGL Resources, Inc. 200,000 $ 3,675,000
Coastal Corp. 78,800 3,112,600
Consolidated Natural Gas Co. 46,600 2,027,100
Enron Corp. 6.25% Exch Notes
due 1998 175,000 4,440,625
Enron Corp. $11.604 Conv.
Pfd. Ser. J 25,000 12,583,595
Enron Global Power & Pipelines
L.L.C. 150,000 3,862,500
Equitable Resources Inc. 100,000 2,925,000
KN Energy, Inc. 89,200 2,776,350
MCN Corp. 190,000 4,393,750
National Fuel Gas Co. 100,000 3,462,500
New Jersey Resources, Inc. 185,000 5,341,875
NorAm Energy $3.00 Conv. Exch.
Pfd. Ser. A 33,400 1,352,700
Panhandle Eastern Corp. 125,000 3,890,625
Questar Corp. 125,200 4,131,600
Sonat, Inc. 60,500 2,178,000
Tenneco Inc. 90,000 5,028,750
United Cities Gas Co. 200,000 3,550,000(dagger)
Washington Gas Light Co. 100,000 2,187,500
-----------
70,920,070
-----------
SERVICES--10.1%
BJ Services Co. (C) 166,300 5,571,050
Camco International Inc. 130,000 4,095,000
Coflexip ADR 50,000 1,068,750(dagger)
Diamond Offshore Drilling, Inc. (C) 45,000 1,929,375
Schlumberger Ltd. 96,100 7,603,913
Sonat Offshore Drilling 150,000 7,650,000
Tidewater, Inc. 150,000 5,700,000
Weatherford/Enterra Inc. (C) 120,000 4,185,000
Western Atlas Inc. (C) 75,000 4,500,000
-----------
42,303,088
-----------
BASIC INDUSTRIES--16.8%
PAPER AND FOREST PRODUCTS--5.4%
Consolidated Papers, Inc. 65,000 3,656,250
International Paper Co. 140,000 5,530,000
Kimberly-Clark Corp. 60,000 4,462,500
Mead Corp. 70,000 3,780,000
Rayonier Inc. 45,000 1,631,250
Weyerhaeuser Co. 80,000 3,690,000
-----------
22,750,000
-----------
ENVIRONMENTAL CONTROL--1.1%
Calgon Carbon Corp. 184,800 2,240,700
WMX Technologies Inc. 80,000 2,540,000
-----------
4,780,700
-----------
OTHER--10.3%
Air Products & Chemicals, Inc. 85,000 4,643,125
Deere Corp. 120,000 4,995,000
Dover Corp. 100,200 4,584,150
Freeport-McMoRan Copper &
Gold Inc. 7% Conv. Exch. Pfd. 125,000 3,953,125
General Electric Co. 100,000 7,787,500
Inco Ltd. 7.75% Conv. Debs.
due 2016 $3,500,000 3,657,500
Jacobs Engineering Group,
Inc. (C) 150,000 4,237,500
7
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Prin. Amt.
or Shares Value (A)
<S> <C> <C>
Medusa Corp. 140,000 $ 4,287,500
Union Pacific Corp. 60,000 4,117,500
Stocks under accumulation 815,062
-----------
43,077,962
-----------
TOTAL STOCKS AND CONVERTIBLE SECURITIES
(Cost $259,189,942) (D) 394,699,395
-----------
SHORT-TERM INVESTMENTS--5.1%
CERTIFICATES OF DEPOSIT--2.4%
NBD Bank, N.A., Detroit,
5.19%, due 4/25/96 $5,000,000 5,000,000
Wachovia Bank of
Georgia, N.A., 5.18%,
due 4/11/96 $5,000,000 5,000,000
-----------
10,000,000
-----------
</TABLE>
<TABLE>
<CAPTION>
Prin. Amt. Value (A)
<S> <C> <C>
COMMERCIAL PAPER--2.7%
Coca-Cola Co., 5.22%
due 4/30/96 $2,816,000 $ 2,803,750
General Electric Capital Corp.,
5.19-5.35%,
due 4/18/96-5/2/96 4,886,000 4,869,868
J.C. Penney Funding Corp.,
5.18%, due 4/4/96 2,010,000 2,008,843
PepsiCo, Inc., 5.25%,
due 5/2/96 1,573,000 1,565,659
------------
11,248,120
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $21,248,120) 21,248,120
------------
TOTAL INVESTMENT
(Cost $280,438,062) 415,947,515
Cash, receivables and other
assets, less liabilities 3,229,171
------------
NET ASSETS--100.0% $419,176,686
============
</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 March 31, 1996
covering open call-option contracts written was $8,718,750. In addition,
the required aggregate market value of securities segregated by the
custodian to collateralize open put option contracts written was $3,325,000.
HISTORICAL FINANCIAL STATISTICS
<TABLE>
<CAPTION>
Value of
Net Assets Net Per Common Share
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> <C> <C> <C> <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
March 31, 1996 (unaudited) 419,176,686 12,739,383 32.90 .36* .04
</TABLE>
- -----------
*Paid or declared.
8
<PAGE>
PRINCIPAL CHANGES IN PORTFOLIO SECURITIES
During the Three Months Ended March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares
Held
Additions Reductions March 31, 1996
<S> <C> <C> <C>
Diamond Offshore Drilling, Inc. 45,000 45,000
KN Energy, Inc. 48,000 89,200
Panhandle Eastern Corp. 125,000 125,000
Sonat, Inc. 60,500 60,500
Kerr-McGee Corp. 65,000 --
Mitchell Energy & Development Corp. 127,500 --
Mobil Corp. 10,000 120,000
Rayonier Inc. 65,000 45,000
Texaco Inc. 20,000 60,000
Unocal Corp. 25,000 150,000
</TABLE>
--------------------------
COMMON STOCK
Listed on the New York Stock Exchange
and the Pacific Stock Exchange
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
THE CORPORATE OFFICE ADDRESS: Seven St. Paul Street, Suite 1140,
Baltimore, MD 21202
THE CORPORATE OFFICE TELEPHONE: (410) 752-5900 or (800) 638-2479
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>
ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders was held on March 26, 1996. For those
nominated, the following votes were cast for directors:
votes for votes withheld
(A) Enrique R. Arzac: 11,023,135 183,768
(B) Leigh Carter: 10,996,253 210,650
(C) Allan Comrie: 10,973,599 233,304
(D) Daniel E. Emerson: 10,996,104 210,799
(E) Thomas H. Lenagh: 10,971,132 235,771
(F) W. David MacCallan: 11,015,577 191,326
(G) Augustine R. Marusi: 10,972,719 234,184
(H) W. Perry Neff: 10,977,660 229,243
(I) Douglas G. Ober: 11,020,023 186,880
(J) Landon Peters: 10,992,575 214,328
(K) John J. Roberts: 10,982,163 224,740
(L) Robert J.M. Wilson: 11,004,240 202,663
A proposal to approve and ratify the selection of Coopers & Lybrand L.L.P. as
the firm of independent accountants of the Corporation for 1996 was approved
with 10,999,561 votes for, 93,451 votes against and 113,891 votes abstaining.
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
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Stock Data
----------
Price (3/31/96) $29.875
Net Asset Value (3/31/96) $32.90
Discount: 9.2%
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) $0.36
From Net Realized Gains 0.04
Total $0.40
---------------------------
1996 Dividend Payment Dates
---------------------------
March 1, 1996
June 1, 1996
September 1, 1996*
December 27, 1996*
*Anticipated
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