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1997 ANNUAL REPORT
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================
Petroleum
& Resources
Corporation
================(R)
I N V E S T I N G I N R E S O U R C E S F O R T H E F U T U R E(R)
<PAGE>
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1997 AT A GLANCE
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THE COMPANY
o a closed-end equity investment company
emphasizing natural resources stocks
o objectives: preservation of capital
reasonable income
opportunity for capital gain
o internally-managed
o low expense ratio
o low turnover
STOCK DATA
NYSE Symbol PEO
Market Price as of 12/31/97 $36 1/2
Discount 12.0%
52-Week Range $31 1/2-$42 13/16
Shares Outstanding 13,422,787
SUMMARY FINANCIAL INFORMATION
Year Ended December 31
1997 1996
- --------------------------------------------------------------------------------
Net asset value per share $ 41.46 $ 37.09
Total net assets 556,452,549 484,588,990
Unrealized appreciation 250,201,593 191,783,672
Net investment income 10,026,876 10,048,674
Total realized gain 20,397,716 17,410,824
Total return (based on market value) 11.7% 31.2%
Total return (based on net asset value) 18.9% 25.5%
Expense ratio 0.47% 0.63%
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1997 DIVIDENDS AND DISTRIBUTIONS
Amount
Paid (per share) Type
- --------------------------------------------------------------------------------
March 1, 1997 $0.08 Long-term capital gain
March 1, 1997 0.12 Investment income
June 1, 1997 0.20 Investment income
September 1, 1997 0.20 Investment income
December 27, 1997 1.35 Long-term capital gain
December 27, 1997 0.13 Short-term capital gain
December 27, 1997 0.25 Investment income
- --------------------------------------------------------------------------------
$2.33
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1998 ANNUAL MEETING OF STOCKHOLDERS
Location: The Luxury Collection Hotel, Houston, Texas
Date: March 31, 1998
Holders of Record: February 13, 1998
[Petroleum & Resources Corporation Logo here] 1
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PORTFOLIO REVIEW
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TEN LARGEST PORTFOLIO HOLDINGS (12/31/97)
Market Value % of Net Assets
------------ ---------------
Royal Dutch Petroleum Co. $ 47,034,751 8.5
Exxon Corp. 20,191,875 3.6
Mobil Corp. 17,325,000 3.1
General Electric Co. 14,675,000 2.6
Enron Corp. $12.97 Conv. Pfd. Ser. J 14,183,202 2.6
British Petroleum plc ADR 14,177,681 2.5
Schlumberger Ltd. 13,862,100 2.5
Transocean Offshore Inc. 11,083,125 2.0
"Shell" Transport and Trading Co. plc ADR 10,500,000 1.9
Texaco, Inc. 10,155,891 1.8
------------ ----
Total $173,188,625 31.1%
SECTOR WEIGHTINGS (12/31/97)
[BAR GRAPH APPEARS HERE--SEE PLOT POINTS BELOW]
Internationals 24.5%
Domestics 11.7
Producers 11.9
Distributors 17.3
Services 15.4
Basic Materials 4.8
Capital Goods & Other 7.3
Paper & Forest Products 4.0
Cash & Equivalent 3.1
2 [Petroleum & Resources Corporation Logo Here]
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LETTER TO STOCKHOLDERS
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We are pleased to submit the financial statements for the year ended December
31, 1997. In addition, there is a schedule of investments provided along with
other financial information.
THE YEAR IN REVIEW
Total assets of the Corporation reached an all-time high in 1997 as natural
resource stocks continued to provide our shareholders with favorable returns.
For the calendar year, the return on net assets, including income and capital
gains distributions, was 18.9%. Total dividends and distributions paid in 1997
reached $2.33 per share, increasing by more than 9% over the prior year.
In a volatile energy environment, crude oil prices, while remaining at
attractive levels, were under downward pressure during most of last year. From a
lofty $26 per barrel price in January, West Texas Intermediate crude oil
declined sharply during the first quarter. The initial price drop reflected the
resumption of Iraqi oil exports, the impact of mild domestic weather patterns on
petroleum product consumption and the expansion of global petroleum inventories.
During the summer months, prices stabilized ($20-$21) as favorable worldwide
economic activity promoted unparalleled energy usage in most major consuming
countries. At the same time, production from non-OPEC countries fell below
anticipated levels and, with a disruption of Iraqi oil output, energy markets
tightened considerably. For the full year, worldwide petroleum consumption
increased 2.7% to a record level of approximately 74 million barrels per day. By
year end, oil prices retreated, again falling below $19 per barrel, as the
return of Iraqi oil exports coincided with the uncertainty over the impact of
the Southeast Asia economic turmoil on energy consumption.
Domestic natural gas prices experienced significant volatility with a roller
coaster trading pattern during the year, initially declining 50% from January
highs to March lows as a mild winter reduced gas usage. After a quiet summer
period, natural gas prices unexpectedly surged in the third quarter, rebounding
past the earlier peak. A combination of disappointing production trends and
expanding gas-fired electric utility demand dramatically tightened the gas
supply-demand balance. At year end, the gas market replicated the first quarter
performance with prices dropping sharply again as moderate early winter
temperatures impacted consumption. Despite these wide fluctuations, the average
price for 1997 was relatively unchanged from the prior year.
In concert with the sharp decline in oil and natural gas prices during the first
four months, energy stocks were disappointing relative performers, with the Dow
Jones Energy Index advancing 5.0% compared to an 8.2% gain for the S&P 500. Over
the ensuing six months, these stock market trends reversed as the Energy Index
recorded a very strong 19.2% advance, outpacing the broad equity markets.
Relatively tight energy markets and rising commodity prices generated a
favorable operating environment. Over this period, we maintained our overall
energy holdings at approximately 80% of the portfolio. The last two months of
1997, however, were particularly unfavorable for energy stock performance.
Investor concerns over excess crude oil supply and falling oil and natural gas
prices caused the Energy Index to decline 3.6% in contrast to an increase of
6.1% in the S&P 500. For the full year, the various energy sectors experienced
widely divergent stock market performance, with oil service companies recording
very strong gains. Major oil companies performed in line with the S&P 500, while
natural gas-related stocks turned in lackluster results. Although our holdings
in basic industries generated attractive returns, paper and forest products
stocks remained disappointing. Cash and short term investments at year end stood
at 3.l% of net assets compared to 4.3% the prior year.
For a comparison with the Corporation's performance in 1997, the rate of return
was 33.3% for the Standard & Poor's 500 Stock Index and the Dow Jones Energy
Index rose 20.7%.
INVESTMENT RESULTS
Net assets of the Corporation on December 31, 1997 were $556,452,549 or $41.46
per common share on 13,422,787 common shares outstanding as compared with
$484,588,990 or $37.09 per common share on 13,065,819 common shares outstanding
a year earlier.
Net investment income for the year 1997 was $10,026,876 compared to $10,048,674
for the year 1996. These earnings are equivalent to $0.77 and $0.79 per common
share, respectively, on the average number of common shares outstanding
throughout each year.
Net realized gains amounted to $20,397,716 during the year, while the unrealized
appreciation on investments increased from $191,783,672 at December 31, 1996 to
$250,201,593 at year end.
[Petroleum & Resources Corporation Logo Here] 3
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LETTER TO STOCKHOLDERS
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DIVIDENDS AND DISTRIBUTIONS
As announced on November 13, 1997, a year-end distribution consisting of
investment income of $0.25 and capital gains of $1.48 was made on December 27,
1997, both realized and taxable in 1997. On January 8, 1998, an additional
distribution of $0.20 per share was declared payable March 1, 1998, representing
the balance of undistributed net investment income and capital gains earned in
1997 and an initial distribution from 1998 net investment income, taxable to
shareholders in 1998.
OUTLOOK FOR 1998
The outlook for crude oil prices is quite uncertain this year as three factors
will be particularly significant. First, the degree of hostilities between Iraq
and the U.S. will impact the level of oil supply as Iraqi exports may fluctuate
from zero to one million barrels per day. With the worldwide oil markets in
relatively good balance, a swing of this magnitude will disrupt crude oil
pricing. Second, while the impact of weather during both summer and winter
seasons is always an important determinant of oil usage, the El Nino phenomenon
is forecast to produce unusual weather disturbances and uncertain energy
consumption trends. Finally, the influence of the economic crises in Southeast
Asia on petroleum product demand is a major unknown. This region accounts for
approximately 25% of worldwide consumption and has been growing in excess of 6%
the past several years. Current forecasts suggest a growth rate of only 2-3% for
this year.
On the positive side, global demand growth should still exceed 2%, approaching
76 million barrels per day. In the U.S., demand growth of 1% is anticipated
versus 1.5% last year. With non-OPEC sources expected to supply about 50% of
this growth, the call on OPEC production will expand significantly.
Additionally, heightened political tensions exist in several major oil exporting
countries which may lead to unexpected supply disruptions.
West Texas Intermediate crude oil price is forecast to trade generally in an
$17-$20 per barrel range during 1998. Excess oil supply and mild temperatures
will keep prices under pressure during the first quarter. However, ongoing
worldwide petroleum demand growth will rebalance the markets during the summer
months, with oil prices expected to approach $20 per barrel later in the year.
Natural gas prices are forecast to decline 6-8% from the attractive average
levels maintained over the past two years. The El Nino-related mild winter
anticipated for the current season will limit gas consumption during the
important heating period. While pricing pressure will occur during the current
quarter, gas prices will strengthen later this year as demand growth exceeds the
slow expansion of productive capacity.
Mergers and restructuring remain an active theme in all energy sectors and were
highlighted in 1997 by numerous combinations within the worldwide petroleum
refining and marketing business. This consolidation trend will continue with the
spotlight turning to the natural gas pipeline and electric utility industries.
----------
Mr. Leigh Carter retired from the Board of Directors as of December 31, 1997.
Mr. Carter joined the Board in 1987 while he was President and Chief Operating
Officer of the BFGoodrich Co., and Chairman of the Board of Tremco, Inc. He has
been an invaluable source of knowledge and wisdom during his ten years of
service as a director of the Corporation. We wish to express our sincere
appreciation to him and, along with the Board of Directors, wish him well in all
his future endeavors.
Effective January 1, 1998, Ms. Maureen A. Jones was promoted to Vice President
and Treasurer. Ms. Jones was formerly Treasurer of the Corporation.
The proxy statement for the Annual Meeting of Stockholders to be held in
Houston, Texas on March 31, 1998, will be mailed on or about February 17, 1998
to holders of record on February 13, 1998.
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
January 16, 1998
4 [Petroleum & Resources Corporation Logo Here]
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STATEMENT OF ASSETS AND LIABILITIES
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December 31, 1997
<TABLE>
<S> <C>
ASSETS
Investments* at value:
Common stocks and convertible securities
(cost $288,959,359) $539,070,556
Short-term investments (cost $17,005,407) 17,005,407 $556,075,963
- --------------------------------------------------------------------------------
Cash 79,078
Dividends and interest receivable 1,053,891
Prepaid expenses 1,216,719
- --------------------------------------------------------------------------------------------------------------
Total Assets 558,425,651
- --------------------------------------------------------------------------------------------------------------
LIABILITIES
Open written option contracts at value (proceeds $111,646) 21,250
Accrued expenses 1,951,852
- --------------------------------------------------------------------------------------------------------------
Total Liabilities 1,973,102
- --------------------------------------------------------------------------------------------------------------
Net Assets $556,452,549
==============================================================================================================
NET ASSETS
Common Stock at par value $1.00 per share, authorized
25,000,000 shares; issued and outstanding 13,422,787 shares $ 13,422,787
Additional capital surplus 291,781,629
Undistributed net realized gain on investments 1,046,540
Unrealized appreciation on investments 250,201,593
- --------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON STOCK $556,452,549
==============================================================================================================
NET ASSET VALUE PER SHARE OF COMMON STOCK $41.46
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</TABLE>
* See schedule of investments on pages 13 through 15.
The accompanying notes are an integral part of the financial statements.
[Petroleum & Resources Corporation Logo Here] 5
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STATEMENT OF OPERATIONS
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Year Ended December 31, 1997
INVESTMENT INCOME
Income:
Dividends $10,207,653
Interest 2,303,029
- --------------------------------------------------------------------------------
Total income 12,510,682
- --------------------------------------------------------------------------------
Expenses:
Investment research 1,067,454
Administration and operations 462,041
Directors' fees 184,350
Reports and stockholder communications 168,477
Transfer agent, registrar and custodian expenses 171,730
Auditing services 53,912
Legal services 29,999
Occupancy and other office expenses 108,283
Travel, telephone and postage 97,875
Other 139,685
- --------------------------------------------------------------------------------
Total expenses 2,483,806
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 10,026,876
- --------------------------------------------------------------------------------
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS
Net realized gain on security transactions 20,397,716
Change in unrealized appreciation on investments 58,417,921
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 78,815,637
- --------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $88,842,513
================================================================================
The accompanying notes are an integral part of the financial statements.
6 [Petroleum & Resources Corporation Logo Here]
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STATEMENTS OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
For the Year Ended
------------------------------------
Dec. 31, 1997 Dec. 31, 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
FROM OPERATIONS:
Net investment income $ 10,026,876 $ 10,048,674
Net realized gain on investments 20,397,716 17,410,824
Change in unrealized appreciation on investments 58,417,921 71,908,379
- --------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations 88,842,513 99,367,877
- --------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO STOCKHOLDERS FROM:
Net investment income (10,060,682) (10,446,294)
Net realized gain from investment transactions
distributed to common stockholders (20,382,678) (16,815,986)
- --------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (30,443,360) (27,262,280)
- --------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Value of common shares issued in payment of optional distributions 13,464,406 11,078,422
- --------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 71,863,559 83,184,019
NET ASSETS:
Beginning of year 484,588,990 401,404,971
- --------------------------------------------------------------------------------------------------------------------
End of year (including no undistributed net investment income) $556,452,549 $484,588,990
====================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
[Petroleum & Resources Corporation Logo Here] 7
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NOTES TO FINANCIAL STATEMENTS
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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 securities
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 valued at
amortized cost. Written options are valued at the last sale price or last quoted
asked price.
Security 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 of 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 December 31, 1997 was $305,956,191, and net
unrealized appreciation aggregated $250,231,418, of which the related gross
unrealized appreciation and depreciation were $258,173,201 and $7,941,783,
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.
3. INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than options and short-term
investments, during the year ended December 31, 1997 were $65,601,789 and
$68,606,209, respectively. Option transactions comprised an insignificant
portion of operations during the year ended December 31, 1997. 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
5,000,000 unissued preferred shares without par value.
On December 27, 1997, the Corporation issued 356,968 shares of its common stock
at a price of $37.7188 per share (market value) to stockholders of record
November 24, 1997 who elected to take stock in payment of the distribution from
1997 capital gain and investment income.
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 year ended December 31, 1997.
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. Options are exercisable
beginning not less than one year after the date of grant and extend and vest
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 or shares 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.
8 [Petroleum & Resources Corporation Logo Here]
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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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. At the beginning of 1997, there were
164,895 options outstanding at a weighted average exercise price of $23.9982 per
share. During 1997, the Corporation granted options, including stock
appreciation rights, for 3,094 shares of common stock with an exercise price of
$32.3125 per share. During the year stock appreciation rights relating to 14,963
stock option shares were exercised at a weighted average market price of
$35.7281 per share and the stock options relating to these rights which had a
weighted average exercise price of $21.0995 per share were cancelled. In
addition, stock options and stock appreciation rights relating to 4,767 shares,
which had a weighted average exercise price of $29.4540, were cancelled. At
December 31, 1997, there were outstanding exercisable options to purchase 47,569
common shares at $17.0650-$32.3775 per share (weighted average price of
$19.5486) and unexercisable options to purchase 100,690 common shares at
$18.5450- $32.3775 per share (weighted average paid of $19.8570). The weighted
average remaining contractural life of outstanding exercisable and unexercisable
options was 5.3509 years and 5.9601 years respectively. The total compensation
expense recognized in 1997 for the stock options and stock appreciation rights
plan was $516,980. At December 31, 1997, there were 350,348 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
plan assets consist primarily of mutual funds.
The actuarially computed net pension cost credit for the year ended December 31,
1997 was $90,305, and consisted of service expense of $74,548, interest expense
of $172,033, expected return on plan assets of $293,385, and a net amortization
credit of $43,501.
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, 1997, the accumulated benefit obligation, including vested
benefits, was $1,602,189. The fair value of the plan assets was $3,701,040 and
the projected benefit obligation for service rendered to date was $2,327,498,
which resulted in excess plan assets of $1,373,542. The remaining components of
prepaid pension cost included $263,895 in unrecognized net gain, $220,486 in
unrecognized prior service cost and $203,719 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 December 31,
1997 was $1,216,719.
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
The cumulative amount of accrued expenses at December 31, 1997 for employees and
former employees of the Corporation was $1,847,270. Aggregate remuneration paid
or accrued during the year ended December 31, 1997 to officers and directors
amounted to $1,428,368.
Research, accounting and other office services provided by and reimbursed to The
Adams Express Company, an investment company which owned 8.5% of the
Corporation's common stock, amounted to $475,342 for the year ended December 31,
1997.
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. The Corporation
receives compensation for lending securities in the form of fees. The
Corporation continues to receive dividends on the securities loaned. At December
31, 1997, the value of security loans outstanding was $3,262,500.
[Petroleum & Resources Corporation Logo Here] 9
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PETROLEUM & RESOURCES CORPORATION
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ILLUSTRATION OF AN ASSUMED
15 YEAR INVESTMENT OF $10,000
Investment income dividends and capital gains distributions are taken in
additional shares. This chart covers the years 1983-1997. These results should
not be considered representative of the dividend income or capital gain or loss
which may be realized in the future. No adjustment has been made for any income
taxes payable by stockholders on income dividends or on capital gains
distributions.
Calendar Market Cumulative Cumulative Total Total net
Years value market value market value market asset
of of capital of income value value
original gains dividends
shares distributions taken in
taken in shares
shares
- --------------------------------------------------------------------------------
1983 $10,077 $ 716 $ 526 $11,319 $11,972
1984 9,336 1,534 954 11,824 12,199
1985 9,336 2,617 1,583 13,536 14,350
1986 10,121 4,603 2,531 17,255 16,303
1987 7,242 4,534 2,583 14,359 16,809
1988 7,329 5,393 3,175 15,897 18,804
1989 9,423 7,986 5,055 22,464 25,867
1990 8,769 8,368 5,551 22,688 25,817
1991 9,074 9,831 6,523 25,428 27,452
1992 8,812 10,768 7,034 26,614 29,154
1993 9,598 13,111 8,449 31,158 33,582
1994 8,812 13,385 8,684 30,881 32,825
1995 9,859 16,525 10,765 37,149 41,436
1996 12,128 22,151 14,371 48,650 51,926
1997 12,739 25,413 16,124 54,276 61,651
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
10 [Petroleum & Resources Corporation Logo Here]
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FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE*
Net asset value, beginning of year $37.09 $31.51 $26.84 $29.64 $27.66
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income 0.77 0.79 0.86 0.94 0.92
Net realized gains and change in unrealized
appreciation and other changes 5.93 6.93 5.90 (1.64) 3.30
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 6.70 7.72 6.76 (0.70) 4.22
Less distributions
Dividends from net investment income
To preferred shareholders+ -- -- -- -- (0.12)
To common shareholders (0.77) (0.82) (0.87) (0.92) (0.82)
Distributions from net realized gains
To common shareholders (1.56) (1.32) (1.22) (1.18) (1.30)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (2.33) (2.14) (2.09) (2.10) (2.24)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $41.46 $37.09 $31.51 $26.84 $29.64
===========================================================================================================================
Per share market price, end of year $36.50 $34.75 $28.25 $25.25 $27.50
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN
Based on market price 11.7% 31.2% 20.5% (0.7)% 17.4%
RATIOS/SUPPLEMENTAL DATA
Net assets applicable to common stock, end of year
(in 000's) $556,453 $484,589 $401,405 $332,279 $355,837
Ratio of expenses to average net assets 0.47% 0.63% 0.57% 0.42% 0.57%
Ratio of net investment income to average net assets 1.91% 2.31% 2.89% 3.19% 2.61%
Portfolio turnover 13.09% 15.50% 15.86% 10.95% 10.16%
Average brokerage commission rate $0.06 $0.06 -- -- --
Number of common shares outstanding at end of year
(in 000's) 13,423 13,066 12,739 12,380 12,007
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Selected data for each share of common stock outstanding throughout each year.
+ See note 4 to financial statements.
[Petroleum & Resources Corporation Logo Here] 11
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QUARTERLY RESULTS OF INVESTMENT OPERATIONS
================================================================================
Unaudited
Shown in thousands of dollars and per common share:
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------------------------
March 31, 1997 June 30, 1997 September 30, 1997 December 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Total investment income $ 2,726 $ 0.21 $ 3,575 $0.27 $ 3,317 $0.25 $ 2,893 $ 0.22
Net investment income 2,321 0.18 2,876 0.22 2,423 0.19 2,407 0.18
Net realized gain/(loss) and
change in unrealized
appreciation (10,305) (0.79) 48,018 3.67 66,006 5.05 (24,903) (1.90)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------------------------
March 31, 1996 June 30, 1996 September 30, 1996 December 31, 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Total investment income $ 2,707 $ 0.21 $ 3,700 $0.29 $ 3,556 $0.28 $ 2,824 $ 0.22
Net investment income 2,022 0.16 3,138 0.25 2,706 0.21 2,183 0.17
Net realized gain and
change in unrealized
appreciation 18,297 1.44 19,120 1.50 9,711 0.76 42,191 3.31
</TABLE>
- --------------------------------------------------------------------------------
COMMON STOCK
Listed on the New York Stock Exchange
and the Pacific Exchange
TRANSFER AGENT, REGISTRAR & CUSTODIAN OF SECURITIES
The Bank of New York
101 Barclay Street
New York, NY 10007
The Bank's Shareholder Relations Department: (800) 432-8224
E-Mail Address: [email protected]
The Corporate Office Address: Seven St. Paul Street,
Suite 1140, Baltimore, MD 21202
The Corporate Website Address: www.peteres.com
The Corporate E-mail Address: [email protected]
The Corporate Office Telephone: (410) 752-5900 or (800) 638-2479
Counsel: Chadbourne & Parke L.L.P.
Independent Accountants: Coopers & Lybrand L.L.P.
12 [Petroleum & Resources Corporation Logo Here]
<PAGE>
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SCHEDULE OF INVESTMENTS
================================================================================
December 31, 1997
<TABLE>
<CAPTION>
Prin. Amt.
or Shares Value (A)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Stocks and Convertible Securities -- 96.9%
Energy -- 80.8%
Internationals -- 24.5%
British Petroleum plc ADR 177,916 $ 14,177,681
Chevron Corp. 110,000 8,470,000
Exxon Corp. 330,000 20,191,875
Mobil Corp. 240,000 17,325,000
Royal Dutch Petroleum Co. 868,000 47,034,751
"Shell" Transport and Trading Co., plc ADR 240,000 10,500,000
Texaco Inc. 186,775 10,155,891
Total S.A. ADR 150,000 8,362,500
------------
136,217,698
------------
Domestics -- 11.7%
Amerada Hess Corp. 50,000 2,743,750
Amoco Corp. 50,000 4,256,250
Ashland, Inc. 115,950 6,225,066
Atlantic Richfield Co. 90,000 7,211,250
Kerr McGee Corp. 94,100 5,957,706
Murphy Oil Corp. 100,000 5,418,750
Pennzoil Co. 6.50% Conv. Exch. Sr. Debs. due 2003 $2,000,000 3,715,000
Phillips Petroleum Co. 90,000 4,376,250
Tesoro Petroleum Corp. (C) 300,000 4,650,000
TOSCO Corp. 175,000 6,617,188
Unocal Capital Trust $3.125 Conv. Pfd. 72,540 4,075,841+
Unocal Corp. 150,000 5,821,875
Valero Energy Corp. 125,000 3,929,688
------------
64,998,614
------------
Producers -- 11.9%
Anadarko Petroleum Corp. 90,000 5,461,875
Apache Corp. 6.00% Conv. Sub. Debs. due 2002 (B) $3,000,000 3,427,500
Barrett Resources Corp. (C) 125,000 3,781,250
Burlington Resources Inc. 80,000 3,585,000
Devon Energy Corp. 152,400 5,867,400
Enron Oil & Gas Co. 190,000 4,025,625
Noble Affiliates Inc. 91,855 3,237,889
Occidental Petroleum Corp. $3.00 Conv. Exch. Pfd. 30,000 2,490,000
Occidental Petroleum Corp. 175,000 5,129,687
Ocean Energy, Inc. (C) 120,000 5,917,500
Oryx Energy Co. 7.50% Conv. Sub. Debs. due 2014 $1,500,000 1,515,000
Oryx Energy Co. (C) 85,000 2,167,500
Seagull Energy Corp. (C) 230,000 4,743,750
Talisman Energy, Inc. (C) 55,000 1,670,625
Union Pacific Resources Group, Inc. 225,816 5,476,038
United Meridian Corp. (C) 123,500 3,473,438
Vastar Resources, Inc. 125,000 4,468,750
------------
66,438,827
------------
</TABLE>
[Petroleum & Resources Corporation Logo Here] 13
<PAGE>
================================================================================
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
December 31, 1997
<TABLE>
<CAPTION>
Prin. Amt.
or Shares Value (A)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Distributors -- 17.3%
AGL Resources Inc. 200,000 $ 4,087,500
Atmos Energy Corp. 200,000 6,050,000
Coastal Corp. 110,000 6,813,125
El Paso Natural Gas Co. 75,000 4,987,500
Energen Corp. 175,000 6,956,250
Enron Corp. 6.25% Exch. Notes due 1998 175,000 3,609,375
Enron Corp. $12.97 Conv. Pfd. Ser. J 25,000 14,183,202
Equitable Resources Inc. 100,000 3,537,500
KN Energy, Inc. 150,000 8,100,000
LG&E Energy Corp. 150,000 3,721,875
MCN Corp. 190,000 7,671,250
National Fuel Gas Co. 100,000 4,868,750
New Jersey Resources, Inc. 185,000 7,411,562
Questar Corp. 134,000 5,979,750
Washington Gas Light Co. 100,000 3,093,750
Western Gas Resources Inc. 235,000 5,199,375
-----------
96,270,764
-----------
Services -- 15.4%
BJ Services Co. (C) 100,000 7,193,750
Camco International Inc. 130,000 8,279,375
Diamond Offshore Drilling, Inc. 96,800 4,658,500
ENSCO International, Inc. 200,000 6,700,000
EVI Inc. 5% Conv. Sub Debs Due 2027 (B) 60,000 2,748,750
Halliburton Co. 140,000 7,262,500
Loews Corp. 3.125% Exch. Sub. Debs Due 2007 $1,500,000 1,492,500
Santa Fe Int'l Corp. 90,000 3,667,500
Schlumberger Ltd. 172,200 13,862,100
SEACOR Holdings, Inc. (C) 70,000 4,217,500
Tidewater, Inc. 90,000 4,983,750
Transocean Offshore Inc. 230,000 11,083,125
Weatherford/Enterra Inc. (C) 120,000 5,250,000
Western Atlas Inc. (C) 59,000 4,366,000
-----------
85,765,350
-----------
Basic Industries -- 16.1%
Basic Materials -- 4.8%
Calgon Carbon Corp. 184,800 1,986,600
duPont (E.I.) deNemours & Co. 80,000 4,805,000
Freeport-McMoRan Copper & Gold Inc. Ser. A 127,603 1,953,921
Inco Ltd. 5.75% Conv. Debs. due 2004 $3,000,000 2,887,500
Medusa Corp. 100,000 4,181,250
Olin Corp. 140,000 6,562,500
United Water Resources, Inc. 208,700 4,082,694
-----------
26,459,465
-----------
</TABLE>
14 [Petroleum & Resources Corporation Logo Here]
<PAGE>
================================================================================
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
December 31, 1997
<TABLE>
<CAPTION>
Prin. Amt.
or Shares Value (A)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
CAPITAL GOODS & OTHER -- 7.3%
Caterpillar Inc. 100,000 $ 4,850,000
Deere & Co. 110,000 6,407,500
Dover Corp. 200,400 7,239,450
General Electric Co. 200,000 14,675,000
Jacobs Engineering Group, Inc. (C) 150,000 3,806,250
Quaker State Corp. 250,000 3,531,250
------------
40,509,450
------------
PAPER AND FOREST PRODUCTS -- 4.0%
Boise Cascade Corp. 150,000 4,537,500
Consolidated Papers, Inc. 67,800 3,618,825
Kimberly-Clark Corp. 130,000 6,410,625
Mead Corp. 140,000 3,920,000
Temple-Inland, Inc. 75,000 3,923,438
------------
22,410,388
------------
TOTAL STOCKS AND CONVERTIBLE SECURITIES
(Cost $288,959,359) (D) 539,070,556
------------
Short-Term Investments -- 3.1%
U.S. GOVERNMENT OBLIGATIONS -- .9%
U.S. Treasury Bills, 5.14%, due 2/26/98 $5,000,000 4,960,022
------------
4,960,022
------------
COMMERCIAL PAPER -- 2.2%
Chevron UK Investment plc, 5.82%, due 1/15/98 $5,030,000 5,018,615
Ford Motor Credit Corp., 6.02-6.10%, due 1/5/98-1/8/98 $3,259,000 3,256,115
General Electric Capital Corp., 5.92%, due 1/8/98 $3,775,000 3,770,655
------------
12,045,385
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $17,005,407) 17,005,407
------------
TOTAL INVESTMENTS
(Cost $305,964,766) 556,075,963
Cash, receivables and other assets, less liabilities 376,586
------------
NET ASSETS-- 100% $556,452,549
===========================================================================================================================
</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 (+), 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, EVI Inc. 5% Conv. Sub Debs Due 2027 acquired
10/29/97, cost $3,001,250).
(C) Presently non-dividend paying.
(D) The aggregate market value of stocks held in escrow at December 31, 1997
covering open call option contracts written was $4,418,125.
[Petroleum & Resources Corporation Logo Here] 15
<PAGE>
================================================================================
PRINCIPAL CHANGES IN PORTFOLIO SECURITIES
================================================================================
During the Three Months Ended December 31, 1997
<TABLE>
<CAPTION>
Shares
----------------------------------------------
Held
Additions Reductions Dec. 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Burlington Resources Inc. 106,750(1) 26,750 80,000
Dover Corp. 100,200(2) 200,400
El Paso Natural Gas Co. 25,000 75,000
EVI Inc. 5% Conv. Sub Debs Due 2027 60,000 60,000
Mead Corp. 70,000(2) 140,000
Talisman Energy, Inc. 55,000 55,000
Texaco Inc. 86,775(3) 186,775
UNOVA, Inc. 59,000(4) 59,000 --
Amerada Hess Corp. 15,000 50,000
Louisiana Land & Expl. Co. 70,000(1) --
Monterey Resources Inc. 250,000(3) --
Phillips Petroleum Co. 30,000 90,000
SEACOR Holdings, Inc. 20,000 70,000
Ultramar Diamond Shamrock Corp. 125,000 --
</TABLE>
- ----------
(1) Received 106,750 Burlington Resources Inc. in exchange for 70,000 shares of
Louisiana Land & Expl. Co.
(2) By stock split
(3) Received 86,775 shares of Texaco Inc. in exchange for 250,000 shares of
Monterey Resources Inc.
(4) Received 1 share of UNOVA, Inc. for each share of Western Atlas, Inc. held.
- --------------------------------------------------------------------------------
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 the report.
- --------------------------------------------------------------------------------
16 [Petroleum & Resources Corporation Logo Here]
<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
December 31, 1997, 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
period then ended, and the financial highlights for each of the five years in
the period then ended. 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
December 31, 1997, 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 December 31, 1997, and 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
January 6, 1998
[Petroleum & Resources Corporation Logo Here] 17
<PAGE>
================================================================================
SHAREHOLDER INFO AND SERVICES
================================================================================
WE ARE OFTEN ASKED --
HOW DO I INVEST IN PETROLEUM & RESOURCES?
Petroleum's common stock is listed on the New York Stock Exchange and Pacific
Exchange. Our stock's ticker symbol is "PEO." Our stock may be bought and sold
through registered investment security dealers. Your broker will be happy to
assist you in this regard. Additional stock may be purchased through the Bank of
New York's Automatic Dividend Reinvestment Plan (see page 19).
WHERE DO I GET INFORMATION ON THE STOCK'S PRICE, TRADING AND/OR NET ASSET VALUE?
The net asset value per share is published on Saturdays in various newspapers
and on Mondays in The Wall Street Journal in a table titled "Closed-End Funds."
The table compares the net asset value at the close of the week's last business
day to the market price of the shares, and shows the amount of the discount or
premium.
Petroleum's daily trading is shown in the stock tables of most daily newspapers,
usually with the abbreviated form "PetRs." Local newspapers determine, usually
by volume of traded shares, which securities to list. If your paper does not
carry our listing, please telephone the Corporation at (800) 638-2479.
You can also obtain this information by visiting our website located at
"www.peteres.com".
HOW DO I REPLACE A LOST CERTIFICATE(S) OR HOW DO I CORRECT A SPELLING ERROR ON
MY CERTIFICATE?
Your Petroleum stock certificates are valuable documents and should be kept in a
safe place. For tax purposes, keep a record of each certificate, including the
cost or market value of the shares it covers at the time acquired. If a
certificate is lost, destroyed or stolen, notify the transfer agent immediately
so a "stop transfer" order can be placed on the records to prevent an
unauthorized transfer of your certificate. The necessary forms and requirements
to permit the issuance of a replacement certificate will then be sent to you. A
certificate can be replaced only after the receipt of an affidavit regarding the
loss accompanied by an open penalty bond, for which a small premium is paid by
the stockholder.
In the event a certificate is issued with the holder's name incorrectly spelled,
a correction can only be made if the certificate is returned to the transfer
agent with instructions for correcting the error. To transfer shares to another
name also requires that the certificate be forwarded to the Transfer Agent with
the appropriate assignment forms completed and the signature of the registered
owner Medallion guaranteed by a bank or member firm of The New York Stock
Exchange, Inc.
CAN YOU SEND MY DIVIDEND CHECKS DIRECTLY TO MY BANK?
Yes, supply the Transfer Agent with your bank's name, your branch's mailing
address and your account number at your bank. (Sorry, we cannot electronically
transfer funds at this time.)
WHO DO INOTIFY OF A CHANGE OF ADDRESS?
The Transfer Agent.
I'M GETTING TWO CHECKS OR TWO STATEMENTS OR TWO REPORTS. WHAT SHOULD I DO?
Send the duplicate labels to the Transfer Agent with a short note.
WE GO TO FLORIDA (ARIZONA) EVERY WINTER. HOW DO WE GET OUR MAIL FROM PETROLEUM &
RESOURCES?
The Transfer Agent can program a seasonal address into their system; simply send
the temporary address and the dates you plan to be there to the Bank (check
dividend payments dates).
I WANT TO GIVE SHARES TO MY CHILDREN, GRANDCHILDREN, ETC. AS A GIFT. HOW DO I GO
ABOUT IT?
The stock transfer rules, designed to protect you, the investor, are clear and
precise for most forms of transfer. They will vary slightly depending on each
transfer, so write to the Transfer Agent stating the exact intent of your gift
plans and the Agent will send you the instructions and forms necessary to effect
your transfer.
18 [Petroleum & Resources Corporation Logo Here]
<PAGE>
================================================================================
SHAREHOLDER INFO AND SERVICES (CONTINUED)
================================================================================
DIVIDEND PAYMENT SCHEDULE
The Corporation presently pays dividends four times a year, as follows: (a)
Three interim distributions 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.
AUTOMATIC DIVIDEND REINVESTMENT PLAN
FOR REGISTERED STOCKHOLDERS
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 enrolling in the Plan, participants' 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 address below.
WHAT'S NEW IN 1998?
For shareholders whose stock is held by a broker in "street" name, The Bank of
New York's Automatic Dividend Reinvestment Plan is now available through many
registered investment security dealers. If your shares are currently held in a
"street" name or brokerage account, please contact your broker for details about
how you can participate in this Plan.
----------
THE CORPORATION THE TRANSFER AGENT
Petroleum & Resources Corp. The Bank of New York
Lawrence L. Hooper, Jr., Shareholder Relations Dept.-11E
Secretary and General Counsel P.O. Box 11258
Seven St. Paul Street, Suite 1140 Church Street Station
Baltimore, MD 21202 New York, NY 10286
(800) 638-2479 (800) 432-8224
Website: Website: http://stock.bankofny.com
www.peteres.com E-mail:
E-mail: [email protected]
[email protected]
[Petroleum & Resources Corporation Logo Here] 19
<PAGE>
================================================================================
HISTORICAL FINANCIAL STATISTICS
================================================================================
<TABLE>
<CAPTION>
Per Common Share
Value of ------------------------------
Net Assets Net Asset Dividends Distributions
Applicable to Common Value Per From Net From Net
Common Shares Common Investment Realized
Dec. 31 Stock Outstanding Share Income Gains
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
1983 $230,402,841 7,545,378 $30.54 $1.52 $1.87
1984 219,202,630 7,941,979 27.60 1.26 2.27
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
1996 484,588,990 13,065,819 37.09 .82 1.32
1997 556,452,549 13,422,787 41.46 .77 1.56
</TABLE>
----------
STOCK DATA
----------
Price (12/31/97) $36.50
Net Asset Value (12/31/97) $41.46
Discount: 12.0%
New York Stock Exchange and Pacific Exchange ticker symbol: PEO
Newspaper stock listings are generally under the abbreviation: PetRs
20 [Petroleum & Resources Corporation Logo Here]
<PAGE>
================================================================================
PETROLEUM & RESOURCES CORPORATION
================================================================================
<TABLE>
<S> <C>
BOARD OF DIRECTORS (with their principal affiliations) OFFICERS
Enrique R. Arzac(3,4) Augustine R. Marusi(1,3) Douglas G. Ober
Professor of Finance Chairman Emeritus Chairman and
and Economics Borden Inc. Chief Executive Officer
Columbia University
W. Perry Neff(1,4) Richard F. Koloski
Allan Comrie(1,3) Retired Executive Vice President President
Retired President of Chemical Bank
U.S. & Foreign Joseph M. Truta
Securities Corporation Douglas G. Ober(1) Executive Vice President
Chairman of the Corporation
Daniel E. Emerson(1,3) Nancy J.F. Prue
Retired Executive Vice President Landon Peters(1,3) Vice President -- Research
NYNEX Corporation Private Investor
Maureen A. Jones
Thomas H. Lenagh(2,4) John J. Roberts Vice President and Treasurer
Financial Advisor Vice Chairman, American
International Group, Inc. Lawrence L. Hooper, Jr.
W.D. MacCallan(2,4) Secretary and General Counsel
Retired Chairman of the Robert J.M. Wilson(2,4)
Corporation and The Adams Retired President of the Dana M. Cannon
Express Company Corporation and The Adams Assistant Treasurer
Express Company
Geraldine H. Stegner
Assistant Secretary
</TABLE>
1. Member of Executive Committee
2. Member of Audit Committee
3. Member of Compensation Committee
4. Member of Retirement Benefits Committee
[Petroleum & Resources Corporation Logo Here]
<PAGE>
Petroleum & Resources Corporation
Seven St. Paul Street, Suite 1140
Baltimore, MD 21202
(410) 752-5900 or (800) 638-2479
Contact us on the Web at:
www.peteres.com
[PEO/NYSE Logo Here]
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