<PAGE>
Petroleum & Resources Corporation
-------------------------------------------------
Board of Directors [ART APPEARS HERE]
Enrique R. Arzac/1,4/ Douglas G. Ober/1/
Daniel E. Emerson/2,4/ Landon Peters/2,4/
Thomas H. Lenagh/2,3/ John J. Roberts/1,4/
W. D. MacCallan/1,3/ Susan C. Schwab/1,3/
W. Perry Neff/1,2/ Robert J.M. Wilson/3,4/
[P&R Corporation LOGO]
1. Member of Executive Committee
2. Member of Audit Committee
3. Member of Compensation Committee
4. Member of Retirement Benefits Committee
Third Quarter Report
Officers --------------------
September 30, 2000
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. Sloan Assistant Treasurer
Geraldine H. Stegner Assistant Secretary
----------
Stock Data
----------
Price (9/30/00) $42.0625
Net Asset Value (9/30/00) $50.65
Discount: 17.0%
New York Stock Exchange and Pacific Exchange
ticker symbol: PEO
NASDAQ Mutual Fund Quotation Symbol: XPEOX
Newspaper stock listings are generally under the
abbreviation: PetRs
---------------------
Distributions in 2000
---------------------
From Investment Income $0.47
From Net Realized Gains 0.13
-----
Total $0.60
=====
---------------------------
2000 Dividend Payment Dates
---------------------------
March 1, 2000
June 1, 2000
September 1, 2000 investing in resources
December 27, 2000* for the future(R)
*Anticipated
<PAGE>
LETTER TO STOCKHOLDERS
-------------------------------------------------------------------------------
We are pleased to submit the financial statements of the Corporation for the
nine months ended September 30, 2000. In addition, there is a schedule of
investments provided along with other financial information.
Net assets of the Corporation at September 30, 2000 were $50.65 per share,
compared with $39.48 per share at December 31, 1999, on the 13,637,630 shares
and 14,314,180 shares outstanding on each respective date. On March 1, 2000, a
distribution of $0.20 per share was paid consisting of $0.13 from 1999 long-
term capital gain, $0.03 from 1999 investment income and $0.04 from 2000 in-
vestment income, all taxable in 2000. Regular 2000 investment income dividends
of $0.20 per share were paid on June 1, 2000 and September 1, 2000.
Net investment income for the nine months ended September 30, 2000 amounted to
$5,737,251, compared with $7,758,637 for the same period in 1999. These earn-
ings are equal to $0.41 and $0.56 per share, respectively, on the average num-
ber of shares outstanding during each period.
Net capital gain realized on investments for the nine months ended Septem-
ber 30, 2000 amounted to $18,094,949, the equivalent of $1.33 per share.
As noted on page 6 of this report, the Corporation realized a total investment
return on its net asset value (with reinvestment of income and capital gains
distributions) of 30.4% in the nine months ended September 30, 2000. The
return on the market price of our stock was 32.6%, reflecting the narrowing of
the discount of the market price from the net asset value. Both of these
figures compare favorably to the (1.39)% return of the Standard & Poor's 500
Composite Index. All energy sectors recorded attractive stock market gains,
with major natural gas pipelines, oil service companies and offshore drillers
the best performers.
On September 20, 2000, the Board of Directors declared a 3-for-2 split of the
Corporation's shares in the form of a 50% stock dividend to be paid on October
19, 2000. The excellent performance of the Corporation this year has been
reflected in the stock price and the Board felt that by splitting the stock,
it would be more attractive to investors and its liquidity would increase.
This would serve the shareholders well. Specific information regarding the
split will be mailed to shareholders with their new shares.
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 10 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 rea-
sonable income from investments and, in addition, an opportunity for capital
appreciation.
By order of the Board of Directors,
Douglas G. Ober,
Chairman and
Chief Executive Officer
Richard F. Koloski,
President
October 20, 2000
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
September 30, 2000
(unaudited)
<TABLE>
<S> <C> <C>
Assets
Investments* at value:
Common stocks and convertible securities
(cost $308,677,995) $672,821,530
Short-term investments (cost $18,748,492) 18,748,492 $691,570,022
-----------------------------------------------------------------------------
Cash 52,988
Securities lending collateral 80,932,747
Receivables:
Investment securities sold 3,826,173
Dividends and interest 580,173
Prepaid expenses 1,859,517
-----------------------------------------------------------------------------
Total Assets 778,821,620
-----------------------------------------------------------------------------
Liabilities
Investment securities purchased 3,150,000
Open option contracts at value (proceeds
$145,059) 67,500
Obligations to return securities lending collat-
eral 80,932,747
Accrued expenses 3,956,001
-----------------------------------------------------------------------------
Total Liabilities 88,106,248
-----------------------------------------------------------------------------
Net Assets $690,715,372
-----------------------------------------------------------------------------
Net Assets
Common Stock at par value $1.00 per share, autho-
rized
50,000,000 shares; issued and outstanding
13,637,630 shares $ 13,637,630
Additional capital surplus 295,042,146
Undistributed net investment income (283,108)
Undistributed net realized gain on investments 18,097,610
Unrealized appreciation on investments 364,221,094
-----------------------------------------------------------------------------
Net Assets Applicable to Common Stock $690,715,372
-----------------------------------------------------------------------------
Net Asset Value per Share of Common Stock $50.65
-----------------------------------------------------------------------------
</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
--------------------------------------------------------------------------------
Nine Months Ended September 30, 2000
(unaudited)
<TABLE>
<S> <C>
Investment Income
Income:
Dividends $ 7,652,479
Interest 848,214
----------------------------------------------------------------------------
Total income 8,500,693
----------------------------------------------------------------------------
Expenses:
Investment research 1,543,758
Administration and operations 553,477
Directors' fees 141,500
Reports and stockholder communications 158,257
Transfer agent, registrar and custodian expenses 103,976
Auditing and accounting services 52,961
Legal services 45,043
Occupancy and other office expenses 59,592
Travel, telephone and postage 46,858
Other 58,020
----------------------------------------------------------------------------
Total expenses 2,763,442
----------------------------------------------------------------------------
Net Investment Income 5,737,251
----------------------------------------------------------------------------
Realized Gain and Change in Unrealized Appreciation on Invest-
ments
Net realized gain on security transactions 18,094,949
Change in unrealized appreciation on investments 133,755,141
----------------------------------------------------------------------------
Net Gain on Investments 151,850,090
----------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $157,587,341
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Year ended
ended December 31,
Sept. 30, 2000 1999
-------------- ------------
(unaudited)
<S> <C> <C>
From Operations:
Net investment income $ 5,737,251 $ 9,806,876
Net realized gain on investments 18,094,949 22,803,830
Change in unrealized appreciation on investments 133,755,141 75,425,708
---------------------------------------------------------------------------------
Increase in net assets resulting from operations 157,587,341 108,036,414
---------------------------------------------------------------------------------
Dividends to Stockholders from:
Net investment income (6,480,654) (9,965,792)
Net realized gain from investment transactions (1,827,095) (22,284,614)
---------------------------------------------------------------------------------
Decrease in net assets from distributions (8,307,749) (32,250,406)
---------------------------------------------------------------------------------
From Capital Share Transactions:
Value of shares issued in payment of optional dis-
tributions -- 15,851,054
Cost of shares purchased (note 4) (23,639,221) (1,383,179)
---------------------------------------------------------------------------------
Change in net assets from capital share transac-
tions (23,639,221) 14,467,875
---------------------------------------------------------------------------------
Total Increase in Net Assets 125,640,371 90,253,883
Net Assets:
Beginning of period 565,075,001 474,821,118
---------------------------------------------------------------------------------
End of period (including undistributed net invest-
ment income of
$(283,108) and $460,295, respectively) $690,715,372 $565,075,001
---------------------------------------------------------------------------------
</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 non-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 September 30, 2000 was $327,464,162, and net
unrealized appreciation aggregated $364,250,919, of which the related gross
unrealized appreciation and depreciation were $382,314,816 and $18,063,897,
respectively.
Distributions are determined in accordance with income tax regulations which
may differ from accounting principles generally accepted in the United States
of America. 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 nine months ended September 30, 2000 were $39,295,760
and
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
-------------------------------------------------------------------------------
$69,148,982, 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 September 30, 2000. All investment deci-
sions 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. At the
beginning of 2000, the Corporation had purchased and was holding 43,200 shares
of common stock at a total cost of $1,383,179 and a weighted average discount
from net asset value of 17.8%. During the nine months ended September 30,
2000, the Corporation purchased 676,550 shares of common stock at a total cost
of $23,639,221 and a weighted average discount from net asset value of 17.1%.
At September 30, 2000, the Corporation held a total of 719,750 shares of its
common stock.
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 exercis-
able 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 ex-
ercisable 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 sur-
render.
Under the plan, the exercise price of the options and related stock apprecia-
tion rights is reduced by the per share amount of capital gain paid by the
Corporation during subsequent years. At the beginning of 2000, there were
148,916 options outstanding at a weighted average exercise price of $22.4389
per share. During the nine months ended September 30, 2000, the Corporation
granted options including stock appreciation rights for 15,223 shares of com-
mon stock with an exercise price of $33.50. During the period stock apprecia-
tion rights relating to 11,074 stock option shares were exercised at a
weighted average market price of $37.7279 per share and the stock options re-
lating to these rights, which had a weighted average exercise price of
$19.5632 were cancelled. At September 30, 2000, there were outstanding exer-
cisable options to purchase 62,098 common shares at $13.815-33.625 (weighted
average price of $19.2366) per share and unexercisable options to purchase
90,967 common shares at $18.2125-33.6250 per share (weighted average price of
$26.5925). The weighted average remaining contractual life of outstanding ex-
ercisable and unexercisable options was 3.9833 years and 6.8316 years, respec-
tively. The total compensation expense for stock options and stock apprecia-
tion rights recognized for the nine months ended September 30, 2000 was
$1,271,402. At September 30, 2000, there were 320,907 shares available for fu-
ture 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 individual stocks and bonds
and mutual funds.
The actuarially computed net pension cost credit for the nine months ended
September 30, 2000 was $111,618, and consisted of service cost of $65,274, in-
terest cost of $146,623, expected return on plan assets of $267,896, and net
amortization credit of $55,619.
In determining the actuarial present value of the projected benefit obliga-
tion, the interest rate used for the weighted average discount rate was 8.0%,
the expected rate of annual salary increases was 7.0%, and the long-term ex-
pected rate of return on plan assets was 8.0%.
On January 1, 2000, the projected benefit obligation for service rendered to
date was $2,480,710. During the nine months ended September 30, 2000, the pro-
jected benefit obligation increased due to service cost and interest cost of
$65,274 and $146,623, respectively, and decreased due to benefit payments in
the amount of $55,496. The projected benefit obligation at September 30, 2000
was $2,637,111.
On January 1, 2000, the actual fair value of plan assets was $4,501,921. Dur-
ing the nine months ended September 30, 2000, the fair value of plan assets
increased due to the expected return on plan assets of $267,896 and decreased
due to benefit payments in the amount of $55,496. At September 30, 2000, the
projected fair value of plan assets amounted to $4,714,321, which resulted in
excess plan as-
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
-------------------------------------------------------------------------------
sets of $2,077,210. The remaining components of prepaid pension cost at Sep-
tember 30, 2000 included $721,172 in unrecognized net gain, $297,917 in unrec-
ognized prior service cost and $46,373 is the remaining portion of the unrec-
ognized net asset existing at January 1, 1987, which is being amortized over
15 years. Prepaid pension cost included in other assets at September 30, 2000
was $1,607,582.
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 September 30, 2000 for employees
and former employees of the Corporation was $2,787,780. Aggregate remuneration
paid or accrued during the nine months ended September 30, 2000 to officers
and directors amounted to $1,963,027.
Research, accounting and other office services provided by and reimbursed to
The Adams Express Company, an investment company which owns 8.9% of the Corpo-
ration's common stock, amounted to $125,083 for the nine months ended Septem-
ber 30, 2000.
7. PORTFOLIO SECURITIES LOANED
The Corporation makes loans of securities to brokers, secured by cash depos-
its, 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 in-
vestment 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 securi-
ties loaned plus accrued interest. Gain or loss in the fair value of securi-
ties loaned that may occur during the term of the loan will be for the account
of the Corporation. At September 30, 2000, the Corporation had outstanding
loans of $78,010,339 and held collateral of $80,932,747.
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
-------------------
(unaudited)
Year Ended December 31
Sept. 30, Sept. 30, -------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance
Net asset value,
beginning of period $39.48 $34.30 $34.30 $41.46 $37.09 $31.51 $26.84
------------------------------------------------------------------------------------------------
Net investment income 0.41 0.56 0.72 0.82 0.77 0.79 0.86
Net realized gains and
change in unrealized
appreciation
(depreciation) and
other changes 11.36 6.09 6.79 (5.69) 5.93 6.93 5.90
------------------------------------------------------------------------------------------------
Total from investment
operations 11.77 6.65 7.51 (4.87) 6.70 7.72 6.76
Less distributions
Dividends from net
investment income (0.47) (0.50) (0.72) (0.78) (0.77) (0.82) (0.87)
Distributions from net
realized gains (0.13) (0.10) (1.61) (1.51) (1.56) (1.32) (1.22)
------------------------------------------------------------------------------------------------
Total distributions (0.60) (0.60) (2.33) (2.29) (2.33) (2.14) (2.09)
------------------------------------------------------------------------------------------------
Net asset value, end of
period $50.65 $40.35 $39.48 $34.30 $41.46 $37.09 $31.51
------------------------------------------------------------------------------------------------
Per share market price,
end of period $42.0625 $33.8125 $32.25 $30.625 $36.50 $34.75 $28.25
Total Investment Return
Based on market price 32.6% 12.5% 13.3% (10.0)% 11.7% 31.2% 20.5%
Based on net asset value 30.4% 19.8% 23.8% (11.1)% 18.9% 25.5% 26.5%
Ratios/Supplemental Data
Net assets, end of
period (in 000's) $690,715 $558,468 $565,075 $474,821 $556,453 $484,589 $401,405
Ratio of expenses to
average net assets 0.60%/+/ 0.44%/+/ 0.43% 0.31% 0.47% 0.63% 0.57%
Ratio of net investment
income to average net
assets 1.25%/+/ 1.98%/+/ 1.86% 2.13% 1.91% 2.31% 2.89%
Portfolio turnover 8.81%/+/ 13.72%/+/ 11.89% 12.70% 13.09% 15.50% 15.86%
Number of shares
outstanding at end of
period (in 000's) 13,638 13,841 14,314 13,841 13,423 13,066 12,739
</TABLE>
--------
/+/Ratios presented on an annualized basis.
6
<PAGE>
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
Shares Value (A)
------- ---------
<S> <C> <C>
Stocks And Convertible Securities -- 97.4%
Energy -- 86.5%
Internationals -- 25.7%
BP Amoco plc ADR 482,000 $ 25,546,000
Chevron Corp. 150,000 12,787,500
Exxon Mobil Corp. 607,231 54,119,460
Petrobras ADS (B) 120,000 3,607,500
Royal Dutch Petroleum Co. 850,000 50,946,872
"Shell" Transport and Trading Co., plc ADR 240,000 11,745,000
Texaco Inc. 186,775 9,805,688
TotalFinaElf ADR 125,000 9,179,688
------------
177,737,708
------------
Domestics -- 8.6%
Amerada Hess Corp. 100,000 6,693,750
Conoco Inc. Class B 300,000 8,081,250
Kerr McGee Corp. 181,253 12,008,011
Murphy Oil Corp. 110,000 7,129,375
Phillips Petroleum Co. 60,000 3,765,000
Tesoro Petroleum Corp. (B) 300,000 2,981,250
TOSCO Corp. 175,000 5,457,813
Unocal Capital Trust $3.125
Conv. Pfd. 72,540 3,490,988
Unocal Corp. 150,000 5,315,625
Valero Energy Corp. 125,000 4,398,438
------------
59,321,500
------------
Producers -- 9.8%
Anadarko Petroleum Corp. 297,746 19,788,218
Apache Corp. 130,000 7,686,250
Devon Energy Corp 122,500 7,368,375
EOG Resources Inc. 255,000 9,913,125
Noble Affiliates Inc. 125,000 4,640,625
Occidental Petroleum Corp. 175,000 3,817,188
Ocean Energy Inc. (B) 550,000 8,490,625
Stone Energy Corp. (B) 104,300 5,736,500
------------
67,440,906
------------
Distributors -- 12.6%
Atmos Energy Corp. 200,000 4,125,000
Coastal Corp. 220,000 16,307,500
El Paso Energy Corp. 110,000 6,778,750
Energen Corp. 275,000 8,181,250
Equitable Resources Inc. 180,500 11,439,188
Kinder Morgan, Inc. 8.25% PEPS Units due 2001 130,000 7,182,500
National Fuel Gas Co. 100,000 5,606,250
New Jersey Resources, Inc. 185,000 7,515,625
Northwestern Corp. 200,000 3,900,000
</TABLE>
<TABLE>
<CAPTION>
Shares Value (A)
------ ---------
<S> <C> <C>
Questar Corp. 268,000 $ 7,453,750
Williams Companies, Inc. 200,000 8,450,000
------------
86,939,813
------------
Services -- 15.2%
BJ Services Co. (B) 200,000 12,225,000
Core Laboratories (B) 209,400 5,143,388
Diamond Offshore Drilling, Inc. 96,800 3,968,800
ENSCO International, Inc. 120,000 4,590,000
Global Industries Ltd. (B) 200,000 2,500,000
Grant Prideco Inc. (B) 139,000 3,049,313
Halliburton Co. 150,000 7,340,625
Nabors Industries, Inc. (B) 225,000 11,790,000
Petroleum Geo-Services ASA ADR (B) 250,000 4,312,500
Santa Fe International Corp. 180,000 8,111,250
Schlumberger Ltd. 229,400 18,882,488
Transocean Sedco Forex Inc. 260,000 15,242,500
Weatherford International, Inc. (B) 190,000 8,170,000
------------
105,325,864
------------
Electrical Power -- 14.6%
Calpine Capital Trust 5.75% Conv. Pfd. HIGH TIDES 87,500 16,045,313
Calpine Corp. (B) 60,000 6,262,500
Duke Energy Corp. 88,000 7,546,000
Dynegy, Inc. Class A 200,000 11,400,000
Enron Corp. $27.30 Conv. Pfd. Ser. J 23,000 55,019,738
Southern Energy 6.25%
Conv. Pfd. 8,000 530,500
Southern Energy Co. (B) 125,000 3,921,875
------------
100,725,926
------------
Basic Industries -- 10.9%
Basic Materials & Other -- 7.8%
Dover Corp. 140,000 6,571,250
Engelhard Corp. 300,000 4,875,000
Freeport-McMoRan Copper & Gold Inc. Ser. A (B) 127,603 1,052,725
General Electric Co. 570,000 32,881,875
Newpark Resources, Inc. (B) 370,000 3,422,500
Southdown, Inc. 75,000 5,343,750
------------
54,147,100
------------
Paper and Forest Products -- 3.1%
Boise Cascade Corp. 205,000 5,445,313
Fort James Corp. 205,600 6,283,650
Mead Corp. 210,000 4,908,750
Temple-Inland, Inc. 120,000 4,545,000
------------
21,182,713
------------
Total Stocks And Convertible Securities
(Cost $308,677,995) (C) 672,821,530
------------
</TABLE>
7
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
-------------------------------------------------------------------------------
September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
Prin. Amt. Value (A)
---------- ---------
<S> <C> <C>
Short-Term Investments -- 2.7%
U.S. Government Obligations -- 1.0%
U.S. Treasury Bills, 6.11%, due 11/24/00 $7,000,000 $6,935,863
----------
Certificates of Deposit -- 0.4%
Old Kent Bank & Trust, 6.48%,
due 10/24/00 3,015,000 3,015,000
----------
Commercial Paper -- 1.3%
Chevron USA, 6.55%,
due 10/2/00 2,285,000 2,284,584
Ford Motor Credit Corp.,
6.49%, due 10/10/00 2,500,000 2,495,944
</TABLE>
<TABLE>
<CAPTION>
Prin. Amt. Value (A)
---------- ---------
<S> <C> <C>
GE Capital Corp, 6.49%,
due 10/05/00 $4,020,000 $ 4,017,101
------------
8,797,629
------------
Total Short-Term Investments
(Cost $18,748,492) 18,748,492
------------
Total Investments
(Cost $327,426,487) 691,570,022
Cash, receivables and other
assets, less liabilities (854,650)
------------
Net Assets--100.0% $690,715,372
============
</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 September 30, 2000
covering open call option contracts written was $3,469,375. In addition,
the aggregate market value of securities segregated by the custodian re-
quired to collateralize open put option contracts written was $2,250,000.
HISTORICAL FINANCIAL STATISTICS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dividends Distributions
Net from Net from Net
Common Asset Investment Realized
Value of Shares Value per Income Gains
Dec. 31 Net Assets Outstanding Share per Share per Share
-------- ------------ ----------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
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
1999.................... 565,075,001 14,314,180 39.48 .72 1.61
September 30, 2000
(unaudited)............ 690,715,372 13,637,630 50.65 .47 .13
</TABLE>
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This report, including the financial statements herein, is transmitted
to the stockholders of Petroleum & Resources Corporation for their in-
formation. 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. The rates of return will vary and
the market value of an investment will fluctuate. Shares, if sold, may
be worth more or less than their original cost. Past performance is not
indicative of future investment results.
--------------------------------------------------------------------------
8
<PAGE>
PRINCIPAL CHANGES IN PORTFOLIO SECURITIES
--------------------------------------------------------------------------------
During the Three Months Ended September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
Shares
-------------------------------------------
Held
Additions Reductions Sept. 30, 2000
--------- ---------- --------------
<S> <C> <C> <C>
Anadarko Petroleum Corp. ......... 102,746/(1)/ 297,746
Core Laboratories................. 54,400 209,400
Duke Energy Corp. ................ 88,000 88,000
Dynegy, Inc. Class A.............. 100,000/(2)/ 200,000
Engelhard Corp. .................. 50,000 300,000
Noble Affiliates, Inc. ........... 33,145 125,000
Petrobras ADS..................... 120,000 120,000
Southern Energy Co. .............. 125,000 125,000
Avery Dennison Corp. ............. 26,600 --
Calpine Corp. .................... 20,000 60,000
Columbia Energy Group............. 100,000 --
EOG Resources Inc. ............... 35,000 255,000
Energen Corp. .................... 78,900 275,000
Fort James Corp. ................. 64,400 205,600
Nabors Industries, Inc. .......... 20,000 225,000
Southdown, Inc. .................. 25,000 75,000
Union Pacific Resources Group,
Inc. ............................ 225,816/(1)/ --
</TABLE>
--------
/(1)/Received .455 shares Anadarko Petroleum Corp. for each share of Union Pa-
cific Resources Group, Inc. held.
/(2)/By stock split.
----------------------
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 10007
The Bank's Shareholder Relations Department: (800) 432-8224
E-mail: [email protected]
9
<PAGE>
SHAREHOLDER INFORMATION 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 es-
timated 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 elec-
tion 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 reinvest-
ment plan, sponsored and administered by our transfer agent, The Bank of New
York. The Plan provides registered stockholders and interested first time in-
vestors an affordable alternative for buying, selling, and reinvesting in Pe-
troleum & Resources shares. Direct purchase plans are growing in popularity and
Petroleum & Resources is pleased to participate in such a plan.
The costs to participants in administrative service fees and brokerage commis-
sions 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
Electronic Funds Transfer (monthly minimum) $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 the Plan or contact The Bank of New York about
the BuyDIRECT Plan.
----------
The Corporation The Transfer Agent
Petroleum & Resources Corp. The Bank of New York
Lawrence L. Hooper, Jr., Shareholder Relations
Vice President, Secretary and Dept.-8W
General 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:
Website: http://stock.bankofny.com
www.peteres.com E-mail:
E-mail: Shareowner-svcs@
[email protected] bankofny.com
*BuyDIRECT is a service mark of The Bank of New York.
**The year-end dividend and capital gain distribution may be made in newly is-
sued shares of common stock in which event there would be no fees or commis-
sions in connection with this dividend and capital gain distribution.
10
