1998 ANNUAL REPORT
PETROLEUM
& RESOURCES
CORPORATION (R)
INVESTING IN RESOURCES FOR THE FUTURE (R)
<PAGE>
1998 AT A GLANCE
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 12/31/98 $30 5/8
Discount 10.7%
52-Week Range $40 1/8-$27 3/4
Shares Outstanding 13,841,375
SUMMARY FINANCIAL INFORMATION
YEAR ENDED DECEMBER 31
1998 1997
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Net asset value per share $ 34.30 $ 41.46
Total net assets 474,821,118 556,452,549
Unrealized appreciation 155,040,245 250,201,593
Net investment income 11,060,345 10,026,876
Total realized gain 20,532,408 20,397,716
Total return (based on market value) (10.0)% 11.7%
Total return (based on net asset value) (11.1)% 18.9%
Expense ratio 0.31% 0.47%
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1998 DIVIDENDS AND DISTRIBUTIONS
AMOUNT
PAID (PER SHARE) TYPE
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March 1, 1998 $0.08 Long-term capital gain
March 1, 1998 0.12 Investment income
June 1, 1998 0.20 Investment income
September 1, 1998 0.20 Investment income
December 28, 1998 1.39 Long-term capital gain
December 28, 1998 0.04 Short-term capital gain
December 28, 1998 0.26 Investment income
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$2.29
==============================================================
1999 ANNUAL MEETING OF STOCKHOLDERS
LOCATION: The Pierre, New York, New York
DATE: March 30, 1999
TIME: 11:00 a.m.
HOLDERS OF RECORD: February 12, 1999
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PORTFOLIO REVIEW
TEN LARGEST PORTFOLIO HOLDINGS (12/31/98)
MARKET VALUE % OF NET ASSETS
------------ ---------------
Royal Dutch Petroleum Co. $ 41,555,501 8.8
Exxon Corp. 24,131,250 5.1
Mobil Corp. 20,910,000 4.4
General Electric Co. 20,400,000 4.3
Enron Corp. $13.65 Conv. Pfd. Ser. J 19,472,578 4.1
British Petroleum plc ADR 16,145,878 3.4
Schlumberger Ltd. 10,638,425 2.2
Texaco Inc. 9,899,075 2.1
Chevron Corp. 9,123,125 1.9
"Shell" Transport and Trading Co. plc ADR 8,925,000 1.9
------------ -------
Total $181,200,832 38.2%
[BAR CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
SECTOR WEIGHTINGS (12/31/98)
Internationals 29%
Domestics 10.2%
Producers 9%
Distributors 20.3%
Services 8.5%
Basic Materials 4.2%
Capital Goods
& Other 6.7%
Paper & Forest
Products 6.2%
Cash & Equivalent 5.6%
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LETTER TO STOCKHOLDERS
In a difficult investing environment, your Corporation again provided returns
superior to most other natural resources funds. We are pleased to submit the
financial statements for the year ended December 31, 1998. In addition, there is
a schedule of investments provided along with other financial information and
the report of independent accountants.
THE YEAR IN REVIEW
Crude oil began the year at a normalized trading price of $18 per barrel.
However, in the extremely difficult energy environment that followed, oil prices
recorded a very disappointing trend, declining over 33% from that January high
price to $12 per barrel at year-end. The initial price decline during the first
half reflected the combination of substantial additional oil production from
OPEC countries and reduced consumption, caused by mild winter weather patterns
in the U.S. and the economic problems of Southeast Asia. In July, oil ministers
from OPEC agreed on production cuts exceeding 2.6 million barrels per day. With
compliance by OPEC averaging over 90% during the summer months, worldwide
inventory levels stabilized, allowing oil prices to generally trade in a $14-$15
per barrel range. Unfortunately, this calm was short lived as prices plunged
almost 20% during the fourth quarter. Consistently high Iraqi production levels,
unseasonably warm winter weather, and the inability of OPEC to further reduce
its output contributed to an unexpected build in worldwide inventories, renewing
pricing pressure. During December, oil prices dropped to $10.70 per barrel, the
lowest price of the past twelve years. On a positive note, oil prices recovered
to $12 per barrel during the final weeks of 1998, as cold weather arrived and
the military conflict with Iraq escalated.
Domestic natural gas prices remained relatively attractive through the first
half of 1998 despite the El Nino-related warm winter weather and the subsequent
build up of gas storage levels to 15% above normal. The burden of this excess
inventory position and the onset of another very mild November-December period
finally pushed natural gas prices sharply lower during the fourth quarter. This
combination of factors caused gas consumption to decline modestly and resulted
in average natural gas prices dropping by 17% for the full year.
Energy stocks recorded a very disappointing year, outperforming the S&P 500 in
only the months of April and September. Reflecting the continual weakening of
commodity prices through August, the Dow Jones Energy Index declined 14% versus
a 1% drop for the S&P 500 for the eight-month period. In September, energy
stocks recorded their strongest performance, advancing 13%. OPEC production cut
compliance, a threatened Iraqi oil production shutdown and a series of Gulf of
Mexico hurricanes combined to strengthen both oil and natural gas prices and to
attract investor interest in energy equities. Unfortunately, as these positive
fundamental industry factors moderated, oil prices renewed their downtrend and
energy stocks again significantly underperformed the surging broad equity
markets. While the various energy sectors experienced widely divergent stock
market performance for the full year, all sectors fell short of the strong S&P
500 gain. Major oil companies and natural gas pipeline stocks turned in the best
results, with both sectors advancing approximately 13%. In contrast, most
companies in the exploration and production business and oil service industry
experienced declines exceeding 25%. Our paper and forest product stocks all
recorded modest gains and our diverse holdings in basic industries produced
attractive returns. Cash and short term investments at year-end stood at 5.6% of
net assets compared to 3.1% the prior year.
Total dividends and distributions paid in 1998 were $2.29 per share. The return
on net assets, including income and capital gains distributions for the calendar
year, was (11.1)%. For a comparison with the Corporation's performance in 1998,
the rate of return was 28.7% for the Standard & Poor's 500 Stock Index, the Dow
Jones Energy Index declined 2.0%, and the average natural resources mutual fund
provided a return of (23.9)%.
INVESTMENT RESULTS
Net assets of the Corporation on December 31, 1998 were $474,821,118 or $34.30
per common share on 13,841,375 common shares outstanding as compared with
$556,452,549 or $41.46 per common share on 13,422,787 common shares outstanding
a year earlier.
Net investment income for the year 1998 was $11,060,345 compared to $10,026,876
for the year 1997. These earnings are equivalent to $0.82 and $0.77 per common
share, respectively, on the average number of common shares outstanding
throughout each year.
Net realized gains amounted to $20,532,408 during the year, while the unrealized
appreciation on investments decreased from $250,201,593 at December 31, 1997 to
$155,040,245 at year end.
DIVIDENDS AND DISTRIBUTIONS
As announced on November 13, 1998, a year-end distribution consisting of
investment income of $0.26 and capital gains of $1.43 was made on December 28,
1998, both realized and taxable in 1998. On January 14, 1999, an additional
distribution of $0.20 per share was declared payable March 1, 1999, representing
the balance of undistributed net investment income and capital gains earned in
1998 and an initial distribution
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from 1999 net investment income, taxable to shareholders in 1999.
OUTLOOK for 1999
As we move into 1999, depressed crude oil prices of $12 per barrel are expected
to recover from the most significant downturn of the past decade. This low oil
price environment has damaged oil industry profitability, resulting in a
substantial reduction of company capital budgets and the initiation of major
consolidations. The closing of the BP Amoco merger kicked off the year and the
Exxon/Mobil union is moving ahead. The momentum for such actions to improve
profitability is gaining strength and we expect 1999 to witness additional
mergers throughout the various energy sectors.
Due to low oil prices, productive capacity will be reduced as capital
expenditure cuts exceeding 20% from last year's levels have been announced by
many major oil companies. A significant decline in drilling activity is already
underway. This environment of less exploration spending will lower production
from non-OPEC countries and should create a bottom in oil prices. Of near term
significance, only a severe winter heating season will initiate a substantial
drawdown of excess petroleum inventories. Then, the OPEC meeting anticipated for
February would hopefully further enhance production discipline. These supply
side adjustments, combined with moderate worldwide demand growth, should enable
crude oil prices to approach $15 per barrel by year-end.
Domestic natural gas prices are also expected to recover as the year unfolds.
The inventory overhang resulting from the record-setting warm temperatures of
1998 will diminish as normal winter heating consumption patterns materialize.
Reduced drilling activity will quickly impact production levels, as natural
field depletion, particularly in the Gulf of Mexico, becomes apparent.
YEAR 2000 READINESS DISCLOSURE
As the millennium approaches, the Corporation, along with other investment
companies and financial institutions, could be adversely affected if computer
systems and embedded technology do not properly process and calculate
date-related information relating to Year 2000 ("Y2K"). The date problem relates
to computer programs which only use two digits to identify the date. For
example, 00 could be interpreted as 1900. Therefore, all computer programs must
process data using appropriate date coding. The Corporation has established a
Year 2000 project team, which reports directly to the Chairman of the Board. The
project team has been testing its in-house hardware and software systems for the
Y2K issue and monitoring the Year 2000 compliance status of the Corporation's
principal outside vendors. The Corporation's custodian bank and transfer agent,
The Bank of New York, has confirmed it will meet all interim and final
regulatory deadlines and will be fully compliant in 1999. Since the Corporation
has investments in companies that may be materially adversely affected by the
Year 2000 issue, the Corporation could also be adversely affected. For this
reason, all of the companies whose securities are held in the Corporation's
portfolio have been sent surveys to determine their Y2K readiness. The
Securities Industry Association (SIA) is scheduled to perform industry tests in
March and April 1999 and the Corporation, along with its industry vendors, is
planning to participate. The Corporation has incurred no significant costs and
does not reasonably expect any additional significant costs relating to the Year
2000 issue. A contingency plan is being formulated to deal with utility power
outages and other Y2K problems, which may have a direct effect on the
Corporation. Despite these efforts, there is no assurance that any adverse
impact on the Corporation will be avoided.
-----------------
Mr. Augustine R. Marusi resigned from the Board of Directors as of October 8,
1999. Mr. Marusi joined the Board in 1987 while he was an Advisory Director of
Borden, Inc. His keen insight, warm personality, and extensive business
knowledge have been of great value to the Corporation. We would like to take
this opportunity to express our sincere appreciation for his 11 years of service
and wish him well in the future.
Effective January 4, 1999, Ms. Christine M. Griffith was elected by the Board of
Directors as Assistant Treasurer. Ms. Griffith was formerly a Manager at
PricewaterhouseCoopersLLP.
The proxy statement for the Annual Meeting of Stockholders to be held in New
York City on March 30, 1999, will be mailed on or about February 16, 1999 to
holders of record on February 12, 1999.
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 22, 1999
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STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
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<CAPTION>
<S> <C> <C>
ASSETS
Investments* at value:
Common stocks and convertible securities
(cost $292,341,736) $447,315,552
Short-term investments (cost $26,723,215) 26,723,215 $474,038,767
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Cash 67,508
Securities lending collateral 21,006,641
Dividends and interest receivable 815,621
Prepaid expenses 1,443,315
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TOTAL ASSETS 497,371,852
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LIABILITIES
Open written option contracts at value (proceeds $174,369) 107,940
Obligations to return securities lending collateral 21,006,641
Accrued expenses 1,436,153
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TOTAL LIABILITIES 22,550,734
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NET ASSETS $474,821,118
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NET ASSETS
Common Stock at par value $1.00 per share, authorized
25,000,000 shares; issued and outstanding 13,841,375 shares $ 13,841,375
Additional capital surplus 304,038,387
Undistributed net investment income 590,571
Undistributed net realized gain on investments 1,310,540
Unrealized appreciation on investments 155,040,245
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NET ASSETS APPLICABLE TO COMMON STOCK $474,821,118
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NET ASSET VALUE PER SHARE OF COMMON STOCK $34.30
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</TABLE>
* SEE SCHEDULE OF INVESTMENTS ON PAGES 12 THROUGH 14.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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STATEEMNT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
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<CAPTION>
<S> <C>
INVESTMENT INCOME
Income:
Dividends $10,373,494
Interest 2,275,399
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TOTAL INCOME 12,648,893
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Expenses:
Investment research 392,078
Administration and operations 287,302
Directors' fees 182,750
Reports and stockholder communications 210,691
Transfer agent, registrar and custodian expenses 159,617
Auditing services 43,830
Legal services 10,578
Occupancy and other office expenses 91,884
Travel, telephone and postage 80,037
Other 129,781
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TOTAL EXPENSES 1,588,548
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NET INVESTMENT INCOME 11,060,345
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REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS
Net realized gain on security transactions 20,532,408
Change in unrealized appreciation on investments (95,161,348)
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NET LOSS ON INVESTMENTS (74,628,940)
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CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $(63,568,595)
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
--------------------------------
DEC. 31, 1998 DEC. 31, 1997
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FROM OPERATIONS:
Net investment income $11,060,345 $ 10,026,876
Net realized gain on investments 20,532,408 20,397,716
Change in unrealized appreciation on investments (95,161,348) 58,417,921
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CHANGE IN NET ASSETS RESULTING FROM OPERATIONS (63,568,595) 88,842,513
DIVIDENDS TO STOCKHOLDERS FROM:
Net investment income (10,469,774) (10,060,682)
Net realized gain from investment transactions
distributed to common stockholders (20,268,408) (20,382,678)
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DECREASE IN NET ASSETS FROM DISTRIBUTIONS (30,738,182) (30,443,360)
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FROM CAPITAL SHARE TRANSACTIONS:
Value of common shares issued in payment of optional
distributions 12,675,346 13,464,406
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TOTAL INCREASE (DECREASE) IN NET ASSETS (81,631,431) 71,863,559
NET ASSETS:
Beginning of year 556,452,549 484,588,990
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End of year (including undistributed net investment
income of $590,571 and -0-, respectively) $474,821,118 $556,452,549
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Petroleum & Resources Corporation (the Corporation) is registered under the
Investment Company Act of 1940 as a diversified investment company. The
Corporation's investment objectives as well as the nature and risk of its
investment transactions are set forth in the Corporation's registration
statement.
SECURITY VALUATION -- Investments in securities traded on national 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, 1998 was $319,143,065, and net
unrealized appreciation aggregated $155,070,071, of which the related gross
unrealized appreciation and depreciation were $199,268,461 and $44,198,390,
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, 1998 were $62,535,320 and
$79,240,119, respectively. The Corporation, as writer of an option, bears the
market risk of an unfavorable change in the price of the security underlying the
written option. Option transactions comprised an insignificant portion of
operations during the year ended December 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
On December 28, 1998, the Corporation issued 418,588 shares of its common stock
at a price of $30.2812 per share (market value) to stockholders of record
November 23, 1998 who elected to take stock in payment of the distribution from
1998 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, 1998
The Corporation has 5,000,000 authorized and 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 the subsequent years. At the beginning of 1998, there were
148,259 options outstanding at a weighted average exercise price of $19.758 per
share. During 1998, the Corporation granted options, including stock
appreciation rights, for 14,098 shares of common stock with an exercise price of
$35.365 per share. During the year stock appreciation rights relating to 16,445
stock option shares were exercised at a weighted average market price of
$37.6701 per share and the
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
stock options relating to these rights which had a weighted average exercise
price of $18.9084 per share were cancelled. At December 31, 1998, there were
49,832 outstanding exercisable options to purchase common shares at
$15.5550-$30.8675 per share (weighted average price of $19.337) and
unexercisable options to purchase 96,080 common shares at $17.035-$35.365 per
share (weighted average price of $24.9125). The weighted average remaining
contractual life of outstanding exercisable and unexercisable options was 5.1036
years and 6.8170 years respectively. The total compensation expense recognized
in 1998 for the stock options and stock appreciation rights plan was $(224,633).
At December 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 year ended December 31,
1998 was $128,349, and consisted of service cost of $93,583, interest cost of
$162,771, expected return on plan assets of $323,839, and net amortization
credit of $212,348.
In determining the actuarial present value of the projected benefit obligation,
the interest rate used for the weighted-average discount rate and expected rate
of annual salary increases was 7.0%, and the expected long-term rate of return
on plan assets was 8.0%.
On January 1, 1998, the projected benefit obligation for service rendered to
date was $2,362,410. During 1998, the projected benefit obligation increased due
to service cost and interest cost of $93,583 and $162,771, respectively, and
decreased due to benefits paid in the amount of $74,237. The projected benefit
obligation at December 31, 1998 was $2,544,527.
On January 1, 1998, the fair value of plan assets was $4,085,098. During 1998,
the fair value of plan assets increased due to the expected return on plan
assets of $323,839 and decreased due to benefits paid in the amount of $74,237.
At December 31, 1998, the projected fair value of plan assets amounted to
$4,334,700, which resulted in excess plan assets of $1,790,173. The remaining
components of prepaid pension cost at December 31, 1998 included $470,421 in
unrecognized gain, $171,021 in unrecognized prior service cost and $111,298 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 other
assets at December 31, 1998 was $1,379,475.
In addition, the Corporation has a nonqualified 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, 1998 for employees and
former employees of the Corporation was $1,319,151. Aggregate remuneration paid
or accrued during the year ended December 31, 1998 to officers and directors
amounted to $564,488.
Research, accounting and other office services provided by and reimbursed to The
Adams Express Company, an investment company which owned 8.3% of the
Corporation's common stock, amounted to $478,379 for the year ended December 31,
1998.
7. PORTFOLIO SECURITIES LOANED
The Corporation makes loans of securities to brokers, secured by cash deposits,
U.S. Government securities, or bank letters of credit. The Corporation accounts
for securities lending transactions as secured financing and receives
compensation in the form of fees or retains a portion of interest on the
investment of any cash received as collateral. The Corporation also continues to
receive interest or dividends on the securities loaned. The loans are secured by
collateral of at least 102%, at all times, of the fair value of the securities
loaned plus accrued interest. Gain or loss in the fair value of securities
loaned that may occur during the term of the loan will be for the account of the
Corporation. At December 31, 1998, the Corporation had securities on loan of
$20,608,485 and held collateral of $21,006,641.
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[GRAPH APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
PETROLEUM & RESOURCES CORPORATION
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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
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1984 $ 9,042 $ 746 $ 404 $10,192 $10,516
1985 9,042 1,669 953 11,664 12,365
1986 9,802 3,303 1,743 14,848 14,029
1987 7,014 3,423 1,910 12,347 14,453
1988 7,098 4,163 2,410 13,671 16,171
1989 9,126 6,242 3,937 19,305 22,229
1990 8,492 6,605 4,400 19,497 22,186
1991 8,788 7,845 5,233 21,866 23,607
1992 8,535 8,659 5,658 22,852 25,032
1993 9,295 10,609 6,854 26,758 28,840
1994 8,535 10,890 7,088 26,513 28,182
1995 9,549 13,504 8,842 31,895 35,575
1996 11,746 18,162 11,862 41,770 44,582
1997 12,337 20,896 13,341 46,574 52,903
1998 10,351 19,398 11,906 41,655 46,957
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ILLUSTRATION OF AN ASSUMED
15 YEAR INVESTMENT OF $10,000
(UNAUDITED)
Investment income dividends and capital gains distributions are taken in
additional shares. This chart covers the years 1984-1998. 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.
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FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
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1998 1997 1996 1995 1994
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PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $41.46 $37.09 $31.51 $26.84 $29.64
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Net investment income 0.82 0.77 0.79 0.86 0.94
Net realized gains and change in unrealized
appreciation and other changes (5.69) 5.93 6.93 5.90 (1.64)
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Total from investment operations (4.87) 6.70 7.72 6.76 (0.70)
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Less distributions
Dividends from net investment income (0.78) (0.77) (0.82) (0.87) (0.92)
Distributions from net realized gains (1.51) (1.56) (1.32) (1.22) (1.18)
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Total distributions (2.29) (2.33) (2.14) (2.09) (2.10))
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Net asset value, end of year $34.30 $41.46 $37.09 $31.51 $26.84
==========================================================================================================
Per share market price, end of year $30.625 $36.50 $34.75 $28.25 $25.25
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TOTAL INVESTMENT RETURN
Based on market price (10.0)% 11.7% 31.2% 20.5% (0.7)%
RATIOS/SUPPLEMENTAL DATA
Net assets applicable to common stock, end
of year (in 000's) $474,821 $556,453 $484,589 $401,405 $332,279
Ratio of expenses to average net assets 0.31% 0.47% 0.63% 0.57% 0.42%
Ratio of net investment income to average
net assets 2.13% 1.91% 2.31% 2.89% 3.19%
Portfolio turnover 12.70% 13.09% 15.50% 15.86% 10.95%
Average brokerage commission rate $0.06 $0.06 $0.06 -- --
Number of common shares outstanding at end of
year (in 000's) 13,841 13,423 13,066 12,739 12,380
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</TABLE>
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SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
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PRIN. AMT.
OR SHARES VALUE (A)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
STOCKS AND CONVERTIBLE SECURITIES -- 94.1%
ENERGY -- 77.0%
INTERNATIONALS -- 29.0%
British Petroleum plc ADR.................................. 177,916 $16,145,878
Chevron Corp............................................... 110,000 9,123,125
Exxon Corp................................................. 330,000 24,131,250
Mobil Corp................................................. 240,000 20,910,000
Royal Dutch Petroleum Co................................... 868,000 41,555,501
"Shell" Transport and Trading Co., plc ADR................. 240,000 8,925,000
Texaco Inc................................................. 186,775 9,899,075
Total S.A. ADR............................................. 140,000 6,965,000
-------------
137,654,829
-------------
DOMESTICS -- 10.2%
Amoco Corp................................................. 50,000 2,993,750
Ashland, Inc............................................... 115,950 5,609,081
Atlantic Richfield Co...................................... 100,000 6,537,500
Conoco Inc. (B)............................................ 104,000 2,158,000
Kerr McGee Corp............................................ 110,000 4,207,500
Murphy Oil Corp............................................ 110,000 4,537,500
Phillips Petroleum Co...................................... 90,000 3,836,250
Tesoro Petroleum Corp. (B)................................. 300,000 3,637,500
Tosco Corp................................................. 175,000 4,528,125
Unocal Capital Trust $3.125 Conv. Pfd...................... 72,540 3,531,791
Unocal Corp................................................ 150,000 4,378,125
Valero Energy Corp......................................... 125,000 2,656,250
-------------
48,611,372
-------------
PRODUCERS -- 9.0%
Anadarko Petroleum Corp.................................... 180,000 5,557,500
Apache Corp................................................ 97,783 2,475,132
Barrett Resources Corp. (B)................................ 120,400 2,889,600
Burlington Resources Inc................................... 55,000 1,969,688
Devon Energy Corp.......................................... 137,900 4,231,806
Enron Oil & Gas Co......................................... 290,000 5,002,500
Noble Affiliates Inc....................................... 91,855 2,261,929
Occidental Petroleum Corp. $3.00 Conv. Exch. Pfd........... 30,000 1,408,125
Occidental Petroleum Corp.................................. 175,000 2,953,125
Ocean Energy, Inc. (B)..................................... 436,150 2,780,456
Oryx Energy Co. (B)........................................ 193,100 2,594,781
Seagull Energy Corp. (B)................................... 200,000 1,262,500
Union Pacific Resources Group, Inc......................... 225,816 2,046,458
Vastar Resources, Inc...................................... 125,000 5,398,438
-------------
42,832,038
-------------
</TABLE>
[PETROLEUM & RESOURCES CORPORATION LOGO APPEARS HERE]
12
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRIN. AMT.
OR SHARES VALUE (A)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
DISTRIBUTORS --20.3%
AGL Resources Inc. 200,000 $ 4,612,500
Atmos Energy Corp.......................................... 200,000 6,450,000
Coastal Corp............................................... 220,000 7,727,500
Consolidated Natural Gas Co................................ 100,000 5,400,000
El Paso Energy Corp........................................ 150,000 5,221,875
Energen Corp............................................... 353,900 6,901,050
Enron Corp. $13.65 Conv. Pfd. Ser. J....................... 25,000 19,472,578
Equitable Resources Inc.................................... 100,000 2,912,500
KNEnergy, Inc. 8.25% PEPS Units due 2001................... 130,000 4,883,125
LG&E Energy Corp........................................... 150,000 4,246,875
National Fuel Gas Co....................................... 100,000 4,518,750
New Jersey Resources, Inc.................................. 185,000 7,307,500
Northwestern Corp.......................................... 178,300 4,713,806
Questar Corp............................................... 268,000 5,192,500
Washington Gas Light Co.................................... 100,000 2,700,000
Western Gas Resources Inc.................................. 186,000 1,069,500
Williams Companies, Inc.................................... 102,000 3,181,125
-------------
96,511,184
-------------
SERVICES -- 8.5%
BJ Services Co. (B)........................................ 200,000 3,125,000
Diamond Offshore Drilling, Inc............................. 96,800 2,292,950
ENSCOInternational, Inc.................................... 140,000 1,496,250
Global Industries Ltd...................................... 243,000 4,443,750
Halliburton Co............................................. 150,400 1,490,825
Loews Corp. 3.125% Exch. Sub. Debs due 2007................ $1,500,000 1,192,500
Nabors Industries, Inc. (B)................................ 245,000 3,307,500
Petroleum Geo-Services ASA ADR (B)......................... 100,000 1,575,000
Santa Fe Int'l Corp........................................ 120,000 1,740,000
Schlumberger Ltd........................................... 229,400 10,638,425
Transocean Offshore Inc.................................... 230,000 6,166,875
Weatherford/Enterra Inc. (B)............................... 139,000 2,693,125
-------------
40,162,200
-------------
BASIC INDUSTRIES -- 17.1%
BASIC MATERIALS -- 4.2%
E.I. duPont deNemours & Co................................. 80,000 4,245,000
Freeport-McMoRan Copper & Gold Inc. Ser. A (B)............. 127,603 1,236,154
Newpark Resources, Inc. (B)................................ 420,000 2,861,250
Southdown, Inc............................................. 100,000 5,918,750
United Water Resources, Inc................................ 250,000 5,984,375
-------------
20,245,529
-------------
</TABLE>
[PETROLEUM & RESOURCES CORPORATION LOGO APPEARS HERE]
13
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRIN. AMT.
OR SHARES VALUE (A)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL GOODS & OTHER -- 6.7%
Deere & Co................................................. 120,000$ 3,945,000
Dover Corp................................................. 200,400 7,339,650
General Electric Co........................................ 200,000 20,400,000
-------------
31,684,650
-------------
PAPER AND FOREST PRODUCTS -- 6.2%
Boise Cascade Corp......................................... 150,000 4,650,000
Consolidated Papers, Inc................................... 220,000 6,050,000
Fort James Corp............................................ 178,000 7,120,000
Mead Corp.................................................. 200,000 5,862,500
Temple-Inland, Inc......................................... 100,000 5,931,250
-------------
29,613,750
-------------
TOTAL STOCKS AND CONVERTIBLE SECURITIES
(Cost $292,341,736) (C)......................................... 447,315,552
-------------
SHORT-TERM INVESTMENTS -- 5.6%
U.S. GOVERNMENT OBLIGATIONS -- 1.5%
U.S. Treasury Bills, 4.45%, due 2/25/99....................... $7,000,000 6,952,431
-------------
CERTIFICATES OF DEPOSIT -- 1.0%
First National Bank of Chicago, 5.20%, due 1/28/99............ $5,000,000 5,000,000
-------------
COMMERCIAL PAPER -- 3.1%
Chevron USA, 5.43%, due 1/7/99................................ $5,000,000 4,995,475
Ford Motor Credit Corp., 5.51%, due 1/7/99.................... $4,065,000 4,061,268
General Electric Capital Corp., 5.60%, due 1/13/99............ $1,965,000 1,961,332
Texaco Inc., 6.10%, due 1/4/99................................ $3,755,000 3,752,709
-------------
14,770,784
-------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $26,723,215).............................................. 26,723,215
-------------
TOTAL INVESTMENTS
(Cost $319,064,951)............................................. 474,038,767
Cash, receivables and other assets, less liabilities.......... 782,351
-------------
NET ASSETS-- 100%.................................................. $474,821,118
=============================================================================================
</TABLE>
Notes:
(A) See note 1 to financial statements. Securities are listed on the New York
Stock Exchange, the American Stock Exchange, or the NASDAQ.
(B) Presently non-dividend paying.
(C) The aggregate market value of stocks held in escrow at December 31, 1998
covering open call option contracts written was $4,265,625. In addition, the
required aggregate market value of securities segregated by the custodian to
collaterize open put option contracts written was $6,870,625.
[PETROLEUM & RESOURCES CORPORATION LOGO APPEARS HERE]
14
<PAGE>
PRINCIPAL CHANGES IN PORTFOLIO SECURITIES
DURING THE THREE MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
----------------------------------------
HELD
ADDITIONS REDUCTIONS DEC. 31, 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Conoco, Inc........................................ 104,000 104,000
Consolidated Papers, Inc........................... 45,000 220,000
Enron Oil & Gas Co................................. 100,000(1) 290,000
KN Energy, Inc. 8.25% PEPS Units due 2001.......... 130,000 130,000
Northwestern Corp.................................. 178,300 178,300
Petroleum Geo-Services ASA ADR..................... 100,000 100,000
Temple-Inland, Inc................................. 15,000 100,000
Williams Companies, Inc............................ 40,800 102,000
Burlington Resources, Inc.......................... 25,000 55,000
Caterpillar Inc.................................... 100,000 --
Enron Corp. 6.25% Exch. Notes due 1998............. 175,000(1) --
KN Energy Inc...................................... 120,000 --
Talisman Energy, Inc............................... 55,000 --
</TABLE>
- -----------
(1) Received a share of Enron Oil and Gas Co. for each share of Enron Corp.
6.25% Exch. Notes due 1998 and also sold 75,000 shares separately.
----------------------------
COMMON STOCK
Listed on the New York Stock Exchange
and the Pacific Exchange
PETROLEUM & RESOURCES CORPORATION
Seven St. Paul Street, Suite 1140, Baltimore, MD 21202
WEBSITE: www.peteres.com
E-MAIL: [email protected]
TELEPHONE: (410) 752-5900 or (800) 638-2479
COUNSEL: Chadbourne & Parke L.L.P.
INDEPENDENT ACCOUNTANTS: PricewaterhouseCoopers LLP
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: [email protected]
[PETROLEUM & RESOURCES CORPORATION LOGO APPEARS HERE]
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
PETROLEUM & RESOURCES CORPORATION:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statement of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Petroleum & Resources Corporation,
hereafter referred to as the "Corporation", at December 31, 1998, and the
results of its operations for the year then ended, the changes in its 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 in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Corporation's management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998, by
correspondence with custodians and brokers, provide a reasonable basis for the
opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Baltimore, Maryland
January 12, 1999
[PETROLEUM & RESOURCES CORPORATION LOGO APPEARS HERE]
16
<PAGE>
SHAREHOLDER INFO AND SERVICES
WE ARE OFTEN ASKED --
HOW DO I INVEST IN PETROLEUM & RESOURCES?
Petroleum & Resources common stock is listed on the New York Stock Exchange and
Pacific Exchange. The stock's ticker symbol is "PEO" and may be bought and sold
through registered investment security dealers. Your broker will be able to
assist you in this regard. In addition, stock may be purchased through the Bank
of New York's BuyDIRECT Purchase and Sale Plan (see page 18).
WHERE DO I GET INFORMATION ON THE STOCK'S PRICE, TRADING AND/OR NET ASSET VALUE?
The DAILY net asset value (NAV) per share and closing market price may be
obtained from our website at www.peteres.com. The WEEK-ENDING NAV 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 or visit
our website.
HOW DO I REPLACE A LOST CERTIFICATE(S) OR HOW DO ICORRECT 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. Transferring 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, provide the Transfer Agent with your bank's name, your branch's mailing
address and your account number at your bank. (Sorry, the Bank cannot
electronically transfer funds at this time.)
WHO DO I NOTIFY OF A CHANGE OF ADDRESS?
The Transfer Agent.
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 its system; simply send
the temporary address and the dates you plan to be there to the Bank.
I WANT TO GIVE SHARES TO MY CHILDREN, GRANDCHILDREN, ETC. AS A GIFT. HOW DO I GO
ABOUT IT?
Giving shares of Petroleum is simple and is handled through our Transfer Agent.
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.
[PETROLEUM & RESOURCES CORPORATION LOGO APPEARS HERE]
17
<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 1, June 1 and September 1 and (b)
a "year-end" distribution, payable in late December, consisting of the estimated
balance of the net investment income for the year and the net realized capital
gain earned through October 31. Stockholders may elect to receive the year-end
distribution in stock or cash. In connection with this distribution, all
REGISTERED STOCKHOLDERS OF RECORD are sent a dividend announcement notice and an
election card in mid-November.
STOCKHOLDERS HOLDING SHARES IN "STREET" OR BROKERAGE ACCOUNTS MAY MAKE THEIR
ELECTIONS BY NOTIFYING THEIR BROKER REPRESENTATIVE.
BUYDIRECT(SM)*
BuyDIRECT is a direct purchase and sale plan, as well as a dividend reinvestment
plan, sponsored and administered by our Transfer Agent, The Bank of New York. On
September 1, 1998, the Automatic Dividend Reinvestment Plan was replaced and
enhanced by BuyDIRECT. The plan provides registered stockholders and interested
first time investors an affordable alternative for buying, selling, and
reinvesting in Petroleum & Resources shares without going through a broker.
Direct purchase plans are growing in popularity and Petroleum & Resources is
pleased to be one of the first closed-end funds to participate in such a plan.
The costs to participants in administrative service fees and brokerage
commissions for each type of transaction are listed below. Please note that the
fees for the reinvestment of dividends as well as the $0.05 per share commission
for each share purchased under the Plan have not increased since 1973.
Initial Enrollment $7.50
A ONE-TIME FEE FOR NEW ACCOUNTS WHO ARE NOT CURRENTLY REGISTERED HOLDERS.
Optional Cash Investments
Service Fee $2.50 per investment
Brokerage Commission $0.05 per share
Reinvestment of Dividends**
Service Fee 10% of amount invested
(maximum of $2.50 per investment)
Brokerage Commission $0.05 per share
Sale of Shares
Service Fee $10.00
Brokerage Commission $0.05 per share
Deposit of Certificates for safekeeping Included
Book to Book Transfers Included
TO TRANSFER SHARES TO ANOTHER PARTICIPANT OR TO A NEW PARTICIPANT
FEES ARE SUBJECT TO CHANGE AT ANY TIME.
MINIMUM AND MAXIMUM CASH INVESTMENTS
Initial minimum investment (non-holders) $500.00
Minimum optional investment
(existing holders) $50.00
Maximum per transaction $25,000.00
Maximum per year NONE
A brochure which further details the benefits and features of BuyDIRECT as well
as an enrollment form may be obtained by contacting The Bank of New York.
FOR NON-REGISTERED SHAREHOLDERS
For shareholders whose stock is held by a broker in "street" name, The Bank of
New York's Automatic Dividend Reinvestment Plan remains 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 or contact The Bank of New York about the
BuyDIRECT Plan.
---------------------
THE CORPORATION
Petroleum & Resources Corp.
Lawrence L. Hooper, Jr.,
Secretary and General Counsel
Seven St. Paul Street,
Suite 1140
Baltimore, MD 21202
(800) 638-2479
Website:
www.peteres.com
E-mail:
[email protected]
THE TRANSFER AGENT
The Bank of New York
Shareholder Relations Dept.-8W
P.O. Box 11258
Church Street Station
New York, NY 10286
(800) 432-8224
Website: http://stock.bankofny.com
E-mail:
Shareowner-svcs@
bankofny.com
* BuyDIRECT is a service mark of The Bank of New York
**The year-end dividend and capital gain distribution will usually be made in
newly issued shares of common stock. There will be no fees or commissions in
connection with this dividend and capital gain distribution when made in newly
issued shares.
[PETROLEUM & RESOURCES CORPORATION LOGO APPEARS HERE]
18
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL FINANCIAL STATISTICS
VALUE OF PER COMMON SHARE
-----------------------------
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> <C> <C> <C> <C>
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
1998 474,821,118 13,841,375 34.30 .78 1.51
</TABLE>
----------
STOCK DATA
----------
Price (12/31/98) $305/8
Net Asset Value (12/31/98) $34.30
Discount: 10.7%
New York Stock Exchange and Pacific Exchange ticker symbol: PEO
Newspaper stock listings are generally under the abbreviation: PetRs
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
[PETROLEUM & RESOURCES CORPORATION LOGO APPEARS HERE]
19
<PAGE>
PETROLEUM & RESOURCES CORPORATION
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS (with their principal affiliations)
Enrique R. Arzac(1,3)
PROFESSOR OF FINANCE
AND ECONOMICS
COLUMBIA UNIVERSITY
Allan Comrie(1,3)
RETIRED PRESIDENT OF
U.S. & FOREIGN
SECURITIES CORPORATION
Daniel E. Emerson(2,4)
RETIRED EXECUTIVE VICE PRESIDENT
NYNEX CORPORATION
Thomas H. Lenagh(2,4)
FINANCIAL ADVISOR
W.D. MacCallan(1,3)
RETIRED CHAIRMAN OF THE CORPORATION AND THE ADAMS EXPRESS COMPANY
W. Perry Neff(3,4)
RETIRED EXECUTIVE VICE PRESIDENT
CHEMICAL BANK
Douglas G. Ober(1)
CHAIRMAN OF THE CORPORATION
Landon Peters(1,2)
PRIVATE INVESTOR
John J. Roberts(1,4)
SENIOR ADVISOR, AMERICAN
INTERNATIONAL GROUP, INC.
Robert J.M. Wilson(2,4)
RETIRED PRESIDENT OF THE CORPORATION AND THE ADAMS EXPRESS COMPANY
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
Christine M. Griffith
ASSISTANT TREASURER
Geraldine H. Stegner
ASSISTANT SECRETARY
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 APPEARS HERE]
20
<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
[GRAPHIC APPEARS HERE]
Printed on Recycled Paper
