BOARD OF DIRECTORS
Enrique R. Arzac(1,3) Augustine R. Marusi(1,3)
Allan Comrie(1,3) W. Perry Neff(3,4)
Daniel E. Emerson(2,4) Douglas G. Ober(1)
Thomas H. Lenagh(2,4) Landon Peters(1,2)
W.D. MacCallan(1,3) John J. Roberts(1,4)
Robert J.M. Wilson(2,4)
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
Maureen A. Jones Vice President and Treasurer
Lawrence L. Hooper, Jr. Secretary and
General Counsel
Dana M. Cannon Assistant Treasurer
Geraldine H. Stegner Assistant Secretary
----------
STOCK DATA
----------
Price (3/31/98) $39.0625
Net Asset Value (3/31/98) $43.18
Discount: 9.5%
New York Stock Exchange and Pacific Exchange
ticker symbol: PEO
Newspaper stock listings are generally under the
abbreviation: PetRs
---------------------
DISTRIBUTIONS IN 1998
---------------------
From Investment Income $0.32
(Paid or declared)
From Net Realized Gains 0.08
-----
Total $0.40
=====
---------------------------
1998 DIVIDEND PAYMENT DATES
---------------------------
March 1, 1998
June 1, 1998
September 1, 1998*
December 27, 1998*
*Anticipated
[recycled logo] Printed on Recycled Paper
FIRST QUARTER REPORT
March 31, 1998
PETROLEUM
& RESOURCES
CORPORATION(R)
INVESTING IN RESOURCES
FOR THE FUTURE(R)
<PAGE>
LETTER TO STOCKHOLDERS
We are pleased to submit the financial statements of the Corporation for the
three months ended March 31, 1998. In addition there is a schedule of
investments provided along with other financial information.
Net assets of the Corporation at March 31, 1998 were $43.18 per common share, as
compared with $41.46 per common share at December 31, 1997 on the 13,422,787
common shares outstanding on each date. The total return on net assets (with
reinvestment of income and capital gains distributions) for the period was 4.7%.
On March 1, 1998, a distribution of $0.20 per share was paid consisting of $0.08
from 1997 long-term capital gain, $0.03 from 1997 investment income and $0.09
from 1998 investment income, all taxable in 1998. A regular 1998 investment
income dividend of $0.20 per share has been declared to common shareholders of
record May 20, 1998, payable June 1, 1998.
Net investment income for the three months ended March 31, 1998 amounted to
$1,997,276, compared with $2,320,975 for the same period in 1997. These earnings
are equivalent to $0.15 and $0.18 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,
1998 amounted to $4,220,357, the equivalent of $0.31 per common share.
The Annual Shareholders Meeting was held on March 31, 1998 in Houston,
Texas. The results of the voting at the meeting are shown on page 10.
Upon conclusion of the business portion of the meeting, management reviewed the
portfolio's performance in 1997 and discussed the outlook for energy in the
future.
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 17, 1998
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998
(unaudited)
ASSETS
Investments* at value:
Common stocks and convertible securities
(cost $281,598,768) $551,352,151
Short-term investments (cost $27,254,571) 27,254,571 $578,606,722
- ---------------------------------------------------------------
Cash 25,195
Receivables:
Investment securities sold 1,415,328
Dividends and interest 900,982
Prepaid expenses 1,256,379
- --------------------------------------------------------------------------------
Total Assets 582,204,606
- --------------------------------------------------------------------------------
LIABILITIES
Investment securities purchased 477,138
Open option contracts at value (proceeds $226,555) 218,437
Accrued expenses 1,963,498
- --------------------------------------------------------------------------------
Total Liabilities 2,659,073
- --------------------------------------------------------------------------------
NET ASSETS $579,545,533
================================================================================
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 investment income 386,542
Undistributed net realized gain on investments 4,193,074
Unrealized appreciation on investments 269,761,501
- --------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON STOCK $579,545,533
================================================================================
NET ASSET VALUE PER SHARE OF COMMON STOCK $43.18
================================================================================
* 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, 1998
(unaudited)
INVESTMENT INCOME
Income:
Dividends $ 2,205,235
Interest 525,364
- --------------------------------------------------------------------------------
Total income 2,730,599
- --------------------------------------------------------------------------------
Expenses:
Investment research 356,716
Administration and operations 157,843
Directors' fees 51,750
Reports and stockholder communications 44,408
Transfer agent, registrar and custodian expenses 32,120
Auditing services 12,990
Legal services 5,145
Occupancy and other office expenses 27,431
Travel, telephone and postage 18,433
Other 26,487
- --------------------------------------------------------------------------------
Total expenses 733,323
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,997,276
- --------------------------------------------------------------------------------
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS
Net realized gain on security transactions 4,220,357
Change in unrealized appreciation on investments 19,559,908
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 23,780,265
- --------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $25,777,541
================================================================================
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, 1998 1997
-------------- -------------
(unaudited)
<S><C>
FROM OPERATIONS:
Net investment income $ 1,997,276 $ 10,026,876
Net realized gain on investments 4,220,357 20,397,716
Change in unrealized appreciation on investments 19,559,908 58,417,921
- -----------------------------------------------------------------------------------------------
Change in net assets resulting from operations 25,777,541 88,842,513
- -----------------------------------------------------------------------------------------------
DIVIDENDS TO STOCKHOLDERS FROM:
Net investment income (1,610,734) (10,060,682)
Net realized gain from investment transactions (1,073,823) (20,382,678)
- -----------------------------------------------------------------------------------------------
Decrease in net assets from distributions (2,684,557) (30,443,360)
- -----------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Value of common shares issued in payment
of optional distributions -0- 13,464,406
- -----------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 23,092,984 71,863,559
NET ASSETS:
Beginning of period 556,452,549 484,588,990
- -----------------------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $386,542 and $0, respectively) $579,545,533 $556,452,549
===============================================================================================
</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--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 March 31, 1998 was $309,041,951, and net
unrealized appreciation aggregated $269,791,325, of which the related gross
unrealized appreciation and depreciation were $275,918,502 and $6,127,177,
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 (continued)
3. INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than options and short-term
investments, during the three months ended March 31, 1998 were $10,146,739 and
$21,598,557, respectively. Option transactions comprised an insignificant
portion of operations during the period ended March 31, 1998. All investment
decisions are made by a committee, and no one person is primarily responsible
for making recommendations to that committee.
4. CAPITAL STOCK
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, 1998.
The Corporation has 5,000,000 unissued preferred shares without par value.
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.
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 subsequent years. At the beginning of 1998, there were
148,259 options outstanding at a weighted average exercise price of $19.7580 per
share. During the three months ended March 31, 1998, the Corporation granted
options including stock appreciation rights for 14,098 shares of common stock
with an exercise price of $36.875; stock appreciation rights relating to 6,534
stock option shares were exercised at a weighted average market price of
$35.1875 per share and the stock options relating to these rights, which had a
weighted average exercise price of $21.2127 per share, were cancelled. At March
31, 1998, there were outstanding exercisable options to purchase 41,035 common
shares at $16.9850-$32.2975 (weighted average price of $19.2035) per share and
unexercisable options to purchase 114,788 common shares at $18.465-$36.795 per
share (weighted average price of $25.7011). The weighted average remaining
contractual life of outstanding exercisable and unexercisable options was 4.9735
years and 7.3141 years, respectively. The total compensation expense for stock
options and stock appreciation rights recognized for the three months ended
March 31, 1998 was $262,102. At March 31, 1998, there were 336,250 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 investments in mutual funds.
The actuarially computed net pension cost credit for the three months ended
March 31, 1998 was $21,000, and consisted of service expense of $17,146,
interest expense of $39,567, expected return on plan assets of $67,593, and a
net amortization credit of $10,120.
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 compensation increase was 7.0% and the expected long-term rate of
return on plan assets was 8.0%.
On January 1, 1998, the accumulated benefit obligation, including vested
benefits, was $1,669,968. The fair value of the plan assets was $4,085,098 and
the projected benefit obligation for service rendered to date was $2,362,410,
which resulted in excess plan assets of $1,722,688. The remaining components of
prepaid pension cost included $518,918 in unrecognized net gain, $195,754 in
unrecognized prior service cost and $143,398 is the remaining portion of the
unrecognized net asset existing at January 1, 1988, which is being amortized
over 15 years. Prepaid pension cost included in prepaid expenses at March 31,
1998 was $1,237,719.
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 March 31, 1998 for employees and
former employees of the Corporation was $1,894,646. Aggregate remuneration paid
or accrued during the three months ended March 31, 1998 to officers and
directors amounted to $471,630.
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 $116,627 for the three months ended
March 31, 1998.
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 March
31, 1998, the value of security loans outstanding was $1,157,813.
5
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Three Months Ended
------------------
(unaudited) Year Ended December 31
March 31, March 31, --------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- ---- ---- ---- ---- ----
<S><C>
PER SHARE OPERATING
PERFORMANCE*
Net asset value, beginning of
period $41.46 $37.09 $37.09 $31.51 $26.84 $29.64 $27.66
- ---------------------------------------------------------------------------------------------------------------
Net investment income 0.15 0.18 0.77 0.79 0.86 0.94 0.92
Net realized gains and change in
unrealized appreciation and
other changes 1.77 (0.79) 5.93 6.93 5.90 (1.64) 3.30
- ---------------------------------------------------------------------------------------------------------------
Total from investment operations 1.92 (0.61) 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 (0.12) (0.12) (0.77) (0.82) (0.87) (0.92) (0.82)
Distributions from net realized
gains
To common shareholders (0.08) (0.08) (1.56) (1.32) (1.22) (1.18) (1.30)
- ---------------------------------------------------------------------------------------------------------------
Total distributions (0.20) (0.20) (2.33) (2.14) (2.09) (2.10) (2.24)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $43.18 $36.28 $41.46 $37.09 $31.51 $26.84 $29.64
===============================================================================================================
Per share market price, end of
period $39.0625 $33.375 $36.50 $34.75 $28.25 $25.25 $27.50
TOTAL INVESTMENT RETURN
Based on market price 7.6% (3.4)% 11.7% 31.2% 20.5% (0.7)% 17.4%
RATIOS/SUPPLEMENTAL DATA
Net assets applicable to common
stock, end of period
(in 000's) $579,546 $473,992 $556,453 $484,589 $401,405 $332,279 $355,837
Ratio of expenses to average net
assets 0.35%+ 0.34%+ 0.47% 0.63% 0.57% 0.42% 0.57%
Ratio of net investment income
to average net assets 1.63%+ 1.94%+ 1.91% 2.31% 2.89% 3.19% 2.61%
Portfolio turnover 7.67%+ 13.29%+ 13.09% 15.50% 15.86% 10.95% 10.16%
Average brokerage commission rate $0.06 $0.07 $0.06 $0.06 -- -- --
Number of shares outstanding at
end of period (in 000's) 13,423 13,066 13,423 13,066 12,739 12,380 12,007
- --------------
* Selected data for each share of common stock outstanding throughout each
period.
+ Ratios presented on an annualized basis.
</TABLE>
6
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(unaudited)
Prin. Amt.
or Shares Value (A)
---------- ---------
STOCKS AND CONVERTIBLE SECURITIES--95.1%
ENERGY--77.5%
INTERNATIONALS -- 25.0%
British Petroleum plc ADR 177,916 $ 15,311,896
Chevron Corp. 110,000 8,834,375
Exxon Corp. 330,000 22,316,250
Mobil Corp. 240,000 18,390,000
Royal Dutch Petroleum Co. 868,000 49,313,251
"Shell" Transport and Trading
Co., plc ADR 240,000 10,620,000
Texaco Inc. 186,775 11,253,194
TOTAL S.A. ADR 150,000 9,009,375
------------
145,048,341
------------
DOMESTICS--10.9%
Amoco Corp. 50,000 4,318,750
Ashland Inc. 115,950 6,565,669
Atlantic Richfield Co. 90,000 7,076,250
Kerr McGee Corp. 94,100 6,545,831
Murphy Oil Corp. 100,000 5,012,500
Pennzoil Co. 6.50% Conv.
Exch. Sr. Debs. due 2003 $2,000,000 3,840,000
Phillips Petroleum Co. 90,000 4,494,375
Tesoro Petroleum Corp. (B) 300,000 5,362,500
TOSCO Corp. 175,000 6,168,750
Unocal Capital Trust $3.125
Conv. Pfd. 72,540 4,062,240+
Unocal Corp. 150,000 5,803,125
Valero Energy Corp. 125,000 4,171,875
------------
63,421,865
------------
PRODUCERS--12.3%
Anadarko Petroleum Corp. 90,000 6,210,000
Apache Corp. 97,783 3,593,525
Barrett Resources Corp. (B) 125,000 4,367,187
Burlington Resources 80,000 3,835,000
Devon Energy Corp. 152,400 5,924,550
Enron Oil & Gas Co. 190,000 4,358,125
Noble Affiliates Inc. 91,855 3,823,464
Occidental Petroleum Corp.
$3.00 Conv. Exch. Pfd. 30,000 2,220,000
Occidental Petroleum Corp. 175,000 5,107,813
Ocean Energy, Inc. (B) 436,150 10,276,784
Oryx Energy Co. 7.50% Conv.
Sub. Debs. due 2014 $1,500,000 1,496,250
Oryx Energy Co. (B) 125,000 3,250,000
Seagull Energy Corp. (B) 230,000 4,413,125
Talisman Energy, Inc. (B) 55,000 1,650,000
Union Pacific Resources
Group, Inc. 225,816 5,391,357
Vastar Resources, Inc. 125,000 5,429,688
------------
71,346,868
------------
DISTRIBUTORS--16.6%
AGL Resources, Inc. 200,000 4,300,000
Atmos Energy Corp. 200,000 5,925,000
Coastal Corp. 110,000 7,163,750
El Paso Natural Gas Co. 75,000 5,296,875
Energen Corp. 350,000 7,700,000
Enron Corp. 6.25% Exch Notes
due 1998 175,000 3,871,875
Prin. Amt.
or Shares Value (A)
---------- ---------
Enron Corp. $12.97 Conv.
Pfd. Ser. J 25,000 $15,825,470
Equitable Resources Inc. 100,000 3,325,000
KN Energy, Inc. 120,000 7,087,500
LG&E Energy Corp. 150,000 3,871,875
MCN Corp. 190,000 7,101,250
National Fuel Gas Co. 100,000 4,700,000
New Jersey Resources, Inc. 185,000 7,249,688
Questar Corp. 134,000 5,569,375
Washington Gas Light Co. 100,000 2,737,500
Western Gas Resources Inc. 235,000 4,465,000
------------
96,190,158
------------
SERVICES--12.7%
BJ Services Co. (B) 200,000 7,287,500
Camco International Inc. 130,000 7,865,000
Diamond Offshore Drilling, Inc. 96,800 4,392,300
ENSCO International, Inc. 200,000 5,575,000
EVI Inc. (B) 25,000 1,157,813
Halliburton Co. 140,000 7,017,500
Loews Corp. 3.125%
Exch. Sub. Debs Due 2027 1,500,000 1,432,500
Santa Fe International Corp. 110,000 4,173,125
Schlumberger Ltd. 172,200 13,044,150
Transocean Offshore Inc. 230,000 11,830,625
Weatherford/Enterra Inc. (B) 120,000 5,092,500
Western Atlas Inc. (B) 59,000 4,565,125
------------
73,433,138
------------
BASIC INDUSTRIES--17.5%
BASIC MATERIALS--4.8%
Calgon Carbon Corp. 184,800 2,159,850
du Pont (E.I.) de Nemours & Co. 80,000 5,440,000
Freeport-McMoRan Copper &
Gold Inc. 127,603 2,384,581
Inco Ltd. 5.75% Conv. Debs.
due 2004 $3,000,000 2,947,500
Medusa Corp. 100,000 6,112,500
Olin Corp. 100,000 4,693,750
United Water Resources, Inc. 233,700 4,221,206
------------
27,959,387
------------
CAPITAL GOODS & OTHER--7.0%
Caterpillar Inc. 100,000 5,506,250
Deere & Co. 110,000 6,813,125
Dover Corp. 200,400 7,615,200
General Electric Co. 200,000 17,237,500
Quaker State Corp. 192,300 3,617,644
------------
40,789,719
------------
PAPER AND FOREST PRODUCTS--5.7%
Boise Cascade 150,000 5,409,375
Consolidated Papers, Inc. 67,800 4,339,200
Fort James Corp. 150,000 6,918,750
Kimberly-Clark Corp. 130,000 6,516,250
Mead Corp. 145,000 5,192,813
Temple-Inland, Inc. 75,000 4,659,375
------------
33,035,763
------------
OTHER
Stocks under accumulation 126,912
------------
TOTAL STOCKS AND CONVERTIBLE SECURITIES
(Cost $281,598,768) (C) 551,352,151
------------
7
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
March 31, 1998
(unaudited)
Prin. Amt. Value (A)
---------- ---------
SHORT-TERM INVESTMENTS--4.7%
U.S. GOVERNMENT OBLIGATIONS--0.9%
U.S. Treasury Bills 5.14%,
due 5/28/98 $5,000,000 $ 4,959,317
------------
4,959,317
------------
CERTIFICATES OF DEPOSIT --0.9%
Old Kent Bank & Trust,
5.45%, due 3/12/98 5,000,000 5,000,000
------------
5,000,000
------------
COMMERCIAL PAPER -- 2.9%
Chevron UK Investment PLC,
5.53%, due 4/2/98 5,000,000 4,999,232
Ford Motor Credit Corp.,
5.53%, due 4/16/98 5,400,000 5,387,558
Prin. Amt. Value (A)
---------- ---------
Deere (John) Capital Corp.,
5.48%, due 4/23/98 $3,750,000 $ 3,737,442
General Electric Capital Corp.,
5.56%-5.57%,
due 4/16/98-4/23/98 3,175,000 3,171,022
------------
17,295,254
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $27,254,571) 27,254,571
------------
TOTAL INVESTMENTS
(Cost $308,853,339) 578,606,722
Cash, receivables and other
assets, less liabilities 938,811
------------
NET ASSETS-- 100.0% $579,545,533
============
=========================================================================
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) Presently non-dividend paying.
(C) The aggregate market value of stocks held in escrow at March 31, 1998
covering open call option contracts written was $5,171,875. In addition, the
required aggregate market value of securities segregated by the custodian to
collateralize open put option contracts written was $2,975,000.
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>
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
March 31, 1998 (unaudited) 579,545,533 13,422,787 43.18 .32* .08
</TABLE>
- --------------
*Paid or declared.
8
<PAGE>
PRINCIPAL CHANGES IN PORTFOLIO SECURITIES
During the Three Months Ended March 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Shares or Principal Amount
------------------------------------------------
Held
Additions Reductions March 31, 1998
--------- ---------- --------------
<S><C>
BJ Services Co. 100,000(1) 200,000
Energen Corp. 175,000(1) 350,000
EVI Inc. 25,000 25,000
Fort James Corp. 150,000 150,000
Ocean Energy, Inc. 316,150(2) 436,150
Oryx Energy Co. 40,000 125,000
Santa Fe International Corp. 20,000 110,000
Amerada Hess Corp. 50,000 --
EVI Inc. 5% Conv. Sub Debs Due 2027 60,000 --
Jacobs Engineering Group 150,000 --
Quaker State Corp. 57,700 192,300
KN Energy, Inc. 30,000 120,000
Olin Corp. 40,000 100,000
SEACOR Holdings, Inc. 70,000 --
Tidewater, Inc. 90,000 --
United Meridian Corp. 123,500(2) --
</TABLE>
- -------------
(1) By stock split.
(2) Received 2.34 shares for each share of Ocean Energy, Inc. held and 1.3
shares in exchange for each share of United Meridian Corp. held. Also
includes 4,000 shares sold separately.
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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 10286
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.
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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.
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9
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders was held on March 31, 1998. For those
nominated, the following votes were cast for directors:
votes for votes withheld
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(A) Enrique R. Arzac: 11,655,087 197,656
(B) Allan Comrie: 11,597,030 255,713
(C) Daniel E. Emerson: 11,624,340 228,403
(D) Thomas H. Lenagh: 11,568,497 284,246
(E) W. D. MacCallan: 11,646,516 206,227
(F) Augustine R. Marusi: 11,572,878 279,865
(G) W. Perry Neff: 11,612,280 240,463
(H) Douglas G. Ober: 11,667,250 185,493
(I) Landon Peters: 11,643,077 209,666
(J) John J. Roberts: 11,627,021 225,722
(K) Robert J.M. Wilson: 11,634,165 218,578
A proposal to approve and ratify the selection of Coopers & Lybrand L.L.P. as
the firm of independent accountants of the Corporation for 1998 was approved
with 11,632,982 votes for, 90,369 votes against and 129,392 votes abstaining.
10
<PAGE>
SHAREHOLDER INFO AND SERVICES
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
Secretary and General Dept.-11E
Counsel P.O. Box 11258
Seven St. Paul Street, Church Street Station
Suite 1140 New York, NY 10286
Baltimore, MD 21202 (800) 432-8224
(800) 638-2479 Website: http://stock.
Website: bankofny.com
www.peteres.com E-mail:
E-mail: Shareowner-svcs@
[email protected] bankofny.com
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