<PAGE>
LETTER TO STOCKHOLDERS
- -------------------------------------------------------------------------------
We are pleased to submit the financial statements of the Corporation for the
six months ended June 30, 1999. In addition, there is a report of independent
accountants and a schedule of investments provided along with other financial
information.
Net assets of the Corporation at June 30, 1999 were $40.56 per share, compared
with $34.30 per share at December 31, 1998, on the 13,841,375 shares outstanding
on each date. The total return on net assets (with reinvestment of income and
capital gains distributions) for the period was 19.8%. On March 1, 1999, a
distribution of $0.20 per share was paid consisting of $0.10 from 1998 long-term
capital gain, $0.02 from 1998 investment income and $0.08 from 1999 investment
income, all taxable in 1999. A regular 1999 investment income dividend of $0.20
per share was paid June 1, 1999, and another $0.20 investment income dividend
has been declared July 8, 1999 and is payable September 1, 1999 to shareholders
of record August 19, 1999.
Net investment income for the six months ended June 30, 1999 amounted to
$4,641,864, compared with $5,112,174 for the same period in 1998. These earnings
are equal to $0.34 and $0.38 per share, respectively, on the average number of
shares outstanding during each period.
Net capital gain realized on investments for the six months ended June 30,
1999 amounted to $4,992,645, the equivalent of $0.36 per share.
Year 2000 Readiness Disclosure: As the countdown continues to the Year 2000, 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 Corporation's Y2K project team has completed testing of in-house
hardware and software systems and, based on the testing results, anticipates
being Year 2000 ready. The Corporation's custodian and transfer agent, The Bank
of New York, has confirmed that it will also be Year 2000 ready. The Corporation
has incurred no significant costs relating to the Year 2000 issue. Despite these
efforts, there is no assurance that any adverse impact on the Corporation will
be avoided.
Current and potential shareholders can find information about the Corporation,
including the daily net asset value (NAV) per share, the market price, and the
discount/premium to the NAV, at its site on the Internet. The address for the
site is www.peteres.com. Also available at the website are a brief history of
the Corporation, historical financial information, and more general industry
material. Further information regarding shareholder services is located on
page 11 of this report.
The Corporation is an internally-managed equity fund emphasizing petroleum and
other natural resource investments. The investment policy of the fund is based
on the primary objectives of preservation of capital, the attainment of
reasonable income from investments and, in addition, an opportunity for capital
appreciation.
By order of the Board of Directors,
/s/ Douglas G. Ober,
Douglas G. Ober,
Chairman and
Chief Executive Officer
/s/ Richard F. Koloski,
Richard F. Koloski,
President
July 16, 1999
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1999
<TABLE>
<S> <C> <C>
Assets
Investments* at value:
Common stocks and convertible securities
(cost $303,323,520) $540,632,266
Short-term investments (cost $20,186,621) 20,186,621 $560,818,887
- ----------------------------------------------------------------------------
Cash 51,934
Securities lending collateral 48,371,313
Receivables:
Investment securities sold 1,793,910
Dividends and interest 586,723
Prepaid expenses 1,546,807
- ----------------------------------------------------------------------------
Total Assets 613,169,574
- ----------------------------------------------------------------------------
Liabilities
Investment securities purchased 1,588,627
Open option contracts at value (proceeds
$356,232) 197,688
Obligations to return securities lending collateral 48,371,313
Accrued expenses 1,665,826
- ----------------------------------------------------------------------------
Total Liabilities 51,823,454
- ----------------------------------------------------------------------------
Net Assets $561,346,120
============================================================================
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 1,080,021
Undistributed net realized gain on investments 4,919,047
Unrealized appreciation on investments 237,467,290
- ----------------------------------------------------------------------------
Net Assets Applicable to Common Stock $561,346,120
============================================================================
Net Asset Value per Share of Common Stock $40.56
============================================================================
</TABLE>
* See Schedule of Investments on pages 7 and 8.
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Six Months Ended June 30, 1999
<TABLE>
<S> <C>
Investment Income
Income:
Dividends $ 5,183,522
Interest 822,837
- ---------------------------------------------------------------------------
Total income 6,006,359
- ---------------------------------------------------------------------------
Expenses:
Investment research 719,992
Administration and operations 233,168
Directors' fees 95,000
Reports and stockholder communications 79,037
Transfer agent, registrar and custodian expenses 72,833
Auditing services 23,362
Legal services 14,066
Occupancy and other office expenses 48,199
Travel, telephone and postage 36,084
Other 42,754
- ---------------------------------------------------------------------------
Total expenses 1,364,495
- ---------------------------------------------------------------------------
Net Investment Income 4,641,864
- ---------------------------------------------------------------------------
Realized Gain and Change in Unrealized Appreciation on Invest-
ments
Net realized gain on security transactions 4,992,645
Change in unrealized appreciation on investments 82,427,045
- ---------------------------------------------------------------------------
Net Gain on Investments 87,419,690
- ---------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $92,061,554
===========================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
ended Year ended
June 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
From Operations:
Net investment income $ 4,641,864 $ 11,060,345
Net realized gain on investments 4,992,645 20,532,408
Change in unrealized appreciation on investments 82,427,045 (95,161,348)
- ------------------------------------------------------------------------------
Change in net assets resulting from operations 92,061,554 (63,568,595)
- ------------------------------------------------------------------------------
Dividends to Stockholders from:
Net investment income (4,152,414) (10,469,774)
Net realized gain from investment transactions (1,384,138) (20,268,408)
- ------------------------------------------------------------------------------
Decrease in net assets from distributions (5,536,552) (30,738,182)
- ------------------------------------------------------------------------------
From Capital Share Transactions:
Value of common shares issued in payment of op-
tional distributions -0- 12,675,346
- ------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 86,525,002 (81,631,431)
Net Assets:
Beginning of period 474,821,118 556,452,549
- ------------------------------------------------------------------------------
End of period (including undistributed net in-
vestment income of
$1,080,021 and $590,571, respectively) $561,346,120 $474,821,118
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Petroleum & Resources Corporation (the Corporation) is registered under the
Investment Company Act of 1940 as a diversified investment company. The
Corporation's investment objectives as well as the nature and risk of its
investment transactions are set forth in the Corporation's registration
statement.
Security Valuation--Investments in securities traded on national security
exchanges are valued at the last reported sale price on the day of valuation.
Over-the-counter and listed securities for which a sale price is not available
are valued at the last quoted bid price. Short-term investments are valued at
amortized cost. Written options are valued at the 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 June 30, 1999 was $323,678,004, and net
unrealized appreciation aggregated $237,497,115, of which the related gross
unrealized appreciation and depreciation were $260,698,210 and $23,201,095,
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 six months ended June 30, 1999 were $30,004,741 and
$23,737,206, 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 period ended June 30, 1999. 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 six months ended June 30, 1999.
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 holders 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 1999, there were
145,912 options outstanding at a weighted average exercise price of $23.0084 per
share. During the six months ended June 30, 1999, the Corporation granted
options including stock appreciation rights for 16,565 shares of common stock
with an exercise price of $30.1875. During the period stock appreciation rights
relating to 11,446 stock option shares were exercised at a weighted average
market price of $36.1924 per share and the stock options relating to these
rights, which had a weighted average exercise price of $20.1928 were cancelled.
At June 30, 1999, there were outstanding exercisable options to purchase 41,640
common shares at $15.455-$35.265 (weighted average price of $20.2268) per share
and unexercisable options to purchase 109,391 common shares at $16.935-$35.265
per share (weighted average price of $25.3004). The weighted average remaining
contractual life of outstanding exercisable and unexercisable options was 4.8638
years and 6.8557 years, respectively. The total compensation expense for stock
options and stock appreciation rights recognized for the six months ended June
30, 1999 was $539,537. At June 30, 1999, there were 333,783 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 six months ended June
30, 1999 was $58,245, and consisted of service cost of $49,320, interest cost
of $88,259, expected return on plan assets of $171,725, and net amortization
credit of $24,099.
In determining the actuarial present value of the projected benefit obligation,
the interest rate used for the weighted average discount rate was 6.75%, the
expected rate of annual salary increases was 7.0%, and the long-term expected
rate of return on plan assets was 8.0%.
On January 1, 1999, the projected benefit obligation for service rendered to
date was $2,652,012. During the six months ended June 30, 1999, the projected
benefit obligation increased due to service cost and interest cost of $49,320
and $88,259, respectively, and decreased due to benefit payments in the amount
of $36,950. The projected benefit obligation at June 30, 1999 was $2,752,641.
On January 1, 1999, the actual fair value of plan assets was $4,330,062. During
the six months ended June 30, 1999, the fair value of plan assets increased due
to the expected return on plan assets of $171,725 and decreased due to benefit
payments in the amount of $36,950. At June 30, 1999, the projected fair value of
plan assets amounted to $4,464,837, which resulted in excess plan assets of
$1,712,196. The remaining components of prepaid pension cost at June 30, 1999
included $536,348 in unrecognized net gain, $354,620 in unrecognized prior
service cost and $92,748 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 June 30, 1999 was $1,437,720.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
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 June 30, 1999 for employees and
former employees of the Corporation was $1,602,911. Aggregate remuneration
paid or accrued during the six months ended June 30, 1999 to officers and
directors amounted to $949,881.
Research, accounting and other office services provided by and reimbursed to
The Adams Express Company, an investment company which owns 8.3% of the
Corporation's common stock, amounted to $205,880 for the six months ended June
30, 1999.
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 June 30, 1999, the Corporation had outstanding loans of
$47,224,421 and held collateral of $48,371,313.
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
--------------------
Year Ended December 31
June 30, June 30, --------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance
Net asset value,
beginning of period $34.30 $41.46 $41.46 $37.09 $31.51 $26.84 $29.64
- --------------------------------------------------------------------------------------------
Net investment income 0.34 0.38 0.82 0.77 0.79 0.86 0.94
Net realized gains and
change in unrealized
appreciation
(depreciation) and
other changes 6.32 (0.34) (5.69) 5.93 6.93 5.90 (1.64)
- --------------------------------------------------------------------------------------------
Total from investment
operations 6.66 0.04 (4.87) 6.70 7.72 6.76 (0.70)
Less distributions
Dividends from net
investment income (0.30) (0.32) (0.78) (0.77) (0.82) (0.87) (0.92)
Distributions from net
realized gains (0.10) (0.08) (1.51) (1.56) (1.32) (1.22) (1.18)
- --------------------------------------------------------------------------------------------
Total distributions (0.40) (0.40) (2.29) (2.33) (2.14) (2.09) (2.10)
- --------------------------------------------------------------------------------------------
Net asset value, end of
period $40.56 $41.10 $34.30 $41.46 $37.09 $31.51 $26.84
============================================================================================
Per share market price,
end of period $34.75 $38.375 $30.625 $36.50 $34.75 $28.25 $25.25
Total Investment Return
Based on market price 14.9% 6.3% (10.0)% 11.7% 31.2% 20.5% (0.7)%
Based on net asset value 19.8% 0.2% (11.1)% 18.9% 25.5% 26.5% (2.0)%
Ratios/Supplemental Data
Net assets, end of
period (in 000's) $561,346 $551,693 $474,821 $556,453 $484,589 $401,405 $332,279
Ratio of expenses to
average net assets 0.55%+ 0.42%+ 0.31% 0.47% 0.63% 0.57% 0.42%
Ratio of net investment
income to average net
assets 1.85%+ 1.82%+ 2.13% 1.91% 2.31% 2.89% 3.19%
Portfolio turnover 9.93%+ 12.61%+ 12.70% 13.09% 15.50% 15.86% 10.95%
Number of shares
outstanding at end of
period (in 000's) 13,841 13,423 13,841 13,423 13,066 12,739 12,380
</TABLE>
- --------
+Ratios presented on an annualized basis.
6
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1999
<TABLE>
<CAPTION>
Prin. Amt.
or Shares Value (A)
---------- ---------
<S> <C> <C>
Stocks And Convertible Securities--96.4%
Energy--77.9%
Internationals--30.0%
BP Amoco plc ADR 220,999 $ 23,978,392
Chevron Corp. 110,000 10,456,875
Exxon Corp. 330,000 25,451,250
Mobil Corp. 240,000 23,700,000
Royal Dutch Petroleum Co. 868,000 52,297,002
"Shell" Transport and Trading Co., plc ADR 240,000 11,130,000
Texaco Inc. 186,775 11,650,091
TotalFina S.A. ADR 140,000 9,021,250
------------
167,684,860
------------
Domestics--9.6%
Amerada Hess Corp. 55,000 3,272,500
Atlantic Richfield Co. 80,000 6,685,000
Conoco Inc. 104,000 2,899,000
Kerr McGee Corp. 181,253 9,096,635
Murphy Oil Corp. 110,000 5,369,375
Phillips Petroleum Co. 90,000 4,528,125
Tesoro Petroleum Corp. (B) 300,000 4,781,250
TOSCO Corp. 175,000 4,539,063
Unocal Capital Trust $3.125 Conv. Pfd. 72,540 4,044,105
Unocal Corp. 150,000 5,943,750
Valero Energy Corp. 125,000 2,679,688
------------
53,838,491
------------
Producers--8.4%
Anadarko Petroleum Corp. 180,000 6,626,250
Apache Corp. 97,783 3,813,537
Barrett Resources Corp. (B) 120,400 4,620,350
Burlington Resources, Inc. 55,000 2,378,750
Enron Oil & Gas Co. 290,000 5,872,500
Noble Affiliates Inc. 91,855 2,589,163
Occidental Petroleum Corp. $3.00 Conv. Exch. Pfd. 30,000 1,738,125
Occidental Petroleum Corp. 175,000 3,696,875
Ocean Energy Inc. (B) 622,450 5,991,081
Union Pacific Resources Group, Inc. 225,816 3,683,624
Vastar Resources, Inc. 125,000 6,554,688
------------
47,564,943
------------
Distributors--19.4%
AGL Resources, Inc. 200,000 3,687,500
Atmos Energy Corp. 200,000 5,000,000
Coastal Corp. 220,000 8,855,000
Columbia Energy Group 60,000 3,761,250
Consolidated Natural Gas Co. 75,000 4,556,250
El Paso Natural Gas Co. 170,000 5,981,875
Energen Corp. 353,900 6,591,388
Enron Corp. $13.65 Conv. Pfd. Ser. J 25,000 27,897,182
Equitable Resources Inc. 160,000 6,040,000
</TABLE>
<TABLE>
<CAPTION>
Prin. Amt.
or Shares Value (A)
---------- ---------
<S> <C> <C>
KN Energy, Inc. 8.25% PEPS Units due 2001 130,000 $ 3,363,750
National Fuel Gas Co. 100,000 4,850,000
New Jersey Resources, Inc. 185,000 6,925,938
Northwestern Corp. 200,000 4,837,500
Questar Corp. 268,000 5,125,500
Western Gas Resources Inc. 186,000 2,976,000
Williams Companies, Inc. 200,000 8,512,500
------------
108,961,633
------------
Services--10.5%
BJ Services Co. (B) 200,000 5,887,500
Diamond Offshore Drilling, Inc. 96,800 2,746,700
ENSCO International, Inc. 140,000 2,791,250
Global Industries Ltd. (B) 243,400 3,118,563
Halliburton Co. 150,000 6,787,500
Nabors Industries, Inc. (B) 245,000 5,971,875
Petroleum Geo-Services ASA ADR (B) 210,000 3,123,750
Santa Fe International Corp. 120,000 2,760,000
Schlumberger Ltd. 229,400 14,609,913
Transocean Offshore Inc. 230,000 6,037,500
Weatherford International, Inc. (B) 139,000 5,090,875
------------
58,925,426
------------
Basic Industries--18.5%
Basic Materials--5.5%
Avery Dennison Corp. 45,000 2,716,875
E.I. du Pont de Nemours & Co. 80,000 5,465,000
Engelhard Corp. 210,000 4,751,250
Freeport-McMoRan Copper & Gold Inc. Ser. A (B) 127,603 2,137,350
Newpark Resources, Inc. (B) 420,000 3,727,500
Southdown, Inc. 100,000 6,425,000
United Water Resources Inc. 250,000 5,671,875
------------
30,894,850
------------
Capital Goods & Other--5.8%
Dover Corp. 200,400 7,014,000
General Electric Co. 200,000 22,600,000
Owens-Illinois, Inc. (B) 93,000 3,039,938
------------
32,653,938
------------
Paper and Forest Products--7.2%
Boise Cascade Corp. 205,000 8,789,375
Consolidated Papers, Inc. 275,000 7,356,250
Fort James Corp. 220,000 8,332,500
Mead Corp. 210,000 8,767,500
Temple-Inland, Inc. 100,000 6,862,500
------------
40,108,125
------------
Total Stocks And Convertible Securities
(Cost $303,323,520) (C) 540,632,266
------------
</TABLE>
7
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
- -------------------------------------------------------------------------------
June 30, 1999
<TABLE>
<CAPTION>
Prin. Amt. Value (A)
---------- ---------
<S> <C> <C>
Short-Term Investments--3.6%
U.S. Government Obligations--1.4%
U.S. Treasury Bills, 4.49%, due 8/26/99 $8,000,000 $7,944,074
----------
Commercial Paper--2.2%
Chevron USA, 5.10%, due 7/30/99 2,008,000 1,999,750
Chevron UK Investment plc, 4.87%, due 7/15/99 3,000,000 2,994,318
Ford Motor Credit Corp.,
4.98%-5.22%
due 7/8/99-7/20/99 3,215,000 3,208,268
</TABLE>
<TABLE>
<CAPTION>
Prin. Amt. Value (A)
---------- ---------
<S> <C> <C>
General Electric Capital Corp., 5.05%, due 7/27/99 $4,055,000 $ 4,040,211
------------
12,242,547
------------
Total Short-Term Investments
(Cost $20,186,621) 20,186,621
------------
Total Investments
(Cost $323,510,141) 560,818,887
Cash, receivables and other
assets, less liabilities 527,233
------------
Net Assets--100.0% $561,346,120
============
</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 June 30, 1999
covering open call option contracts written was $835,625. In addition, the
aggregate market value of securities segregated by the custodian required to
collateralize open put option contracts written was $6,782,500.
HISTORICAL FINANCIAL STATISTICS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Dividends Distributions
Common Asset from Net from Net
Value of Shares Value per Investment Realized
Dec. 31 Net Assets Outstanding Share Income Gains
- -------- ------------ ----------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
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............... 566,452,549 13,422,787 41.46 .77 1.56
1998............... 474,821,118 13,841,375 34.30 .78 1.51
June 30, 1999...... 561,346,120 13,841,375 40.56 .50* .10
</TABLE>
- --------
* Paid or declared.
- ----------------------------------------------------------------------------
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.
- ----------------------------------------------------------------------------
8
<PAGE>
PRINCIPAL CHANGES IN PORTFOLIO SECURITIES
- --------------------------------------------------------------------------------
During the Three Months Ended June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares or Principal Amount
----------------------------------
Held
Additions Reductions June 30, 1999
--------- ---------- -------------
<S> <C> <C> <C>
Avery Dennison Corp. ...................... 45,000 45,000
Columbia Energy Group...................... 60,000 60,000
Engelhard Corp. ........................... 210,000 210,000
Owens-Illinois, Inc. ...................... 93,000 93,000
Petroleum Geo-Services ASA ADR............. 60,000 210,000
Ashland Inc. .............................. 115,950 --
Deere & Co. ............................... 120,000 --
Loews Corp. 3.125% Exch. Sub. Debs. due
2007...................................... $1,500,000 --
Washington Gas Light Co. .................. 100,000 --
</TABLE>
----------------------
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]
9
<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 statements 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 June 30, 1999 and the results of
its operations, the changes in its net assets and the financial highlights for
each of the periods presented, 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 June 30, 1999, by
correspondence with custodians and brokers, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
July 6, 1999
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 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
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 brokerage house 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.
<TABLE>
<S> <C>
Initial Enrollment $7.50
</TABLE>
A one-time fee for new accounts who are not currently registered holders.
<TABLE>
<S> <C>
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
</TABLE>
<TABLE>
<S> <C>
Sale of Shares
Service Fee $10.00
Brokerage Commission $0.05 per share
Deposit of Certificates for safekeeping Included
Book to Book Transfers Included
</TABLE>
To transfer shares to another participant or to a new participant
Fees are subject to change at any time.
Minimum and Maximum Cash Investments
<TABLE>
<S> <C>
Initial minimum investment (non-holders) $500.00
Minimum optional investment (existing holders) $50.00
Maximum per transaction $25,000.00
Maximum per year NONE
</TABLE>
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 The Transfer
Petroleum & Re- Agent
sources Corp. The Bank of
Lawrence L. Hooper, New York
Jr., Shareholder
Vice President, Relations
Secretary and Gen- Dept.-8W
eral Counsel P.O. Box 11258
Seven St. Paul Church Street
Street, Suite 1140 Station
Baltimore, MD 21202 New York, NY
(800) 638-2479 10286
Website: (800) 432-8224
www.peteres.com Website:
E-mail: http://stock.bankofny.com
[email protected] E-mail:
Shareowner-
[email protected]
*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.
11
<PAGE>
Petroleum & Resources Corporation
- --------------------------------------------------------------------------------
Board of Directors
Enrique R. Arzac/1/,/3/ W. Perry Neff/1/,/3/
Allan Comrie/1/,/2/ Douglas G. Ober/1/
Daniel E. Emerson/2/,/4/ Landon Peters/2/,/4/
Thomas H. Lenagh/3/,/4/ John J. Roberts/1/,/4/
W.D. MacCallan/1/,/3/ 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
Lawrence L. Hooper, Jr. Vice President,
Secretary and
General Counsel
Maureen A. Jones Vice President and
Treasurer
Christine M. Griffith Assistant Treasurer
Geraldine H. Stegner Assistant Secretary
----------
Stock Data
----------
<TABLE>
<S> <C>
Price (6/30/99) $34.75
Net Asset Value (6/30/99) $40.56
Discount: 14.3%
</TABLE>
New York Stock Exchange and Pacific Exchange ticker symbol: PEO
Newspaper stock listings are generally under the abbreviation: PetRs
---------------------
Distributions in 1999
---------------------
<TABLE>
<S> <C>
From Investment Income $0.50
(paid or declared)
From Net Realized Gains 0.10
-----
Total $0.60
=====
</TABLE>
---------------------------
1999 Dividend Payment Dates
---------------------------
March 1, 1999
June 1, 1999
September 1, 1999
December 27, 1999*
*Anticipated
