[LOGO OF PETROLEUM & RESOURCES CORPORATION]
Annual Report
2002
investing in resources
for the future\R\
2002 AT A GLANCE
--------------------------------------------------------------------------------
THE COMPANY STOCK DATA
.. a closed-end equity investment company NYSE Symbol................... PEO
emphasizing natural resources stocks Market Price as of 12/31/02 $19.18
.. objectives: preservation of capital Discount..................... 8.6%
reasonable income 52-Week Range....... $25.74-$17.31
opportunity for capital gain Shares Outstanding..... 21,510,067
.. internally-managed
.. low expense ratio
.. low turnover
SUMMARY FINANCIAL INFORMATION
Year Ended December 31
2002 2001
-----------------------------------------------------------------
Net asset value per share $ 20.98 $ 24.90
Total net assets 451,275,463 526,491,798
Unrealized appreciation 118,780,607 200,798,077
Net investment income 8,983,077 10,098,102
Total realized gain 14,332,921 22,308,303
Total return (based on market value) (13.7)% (8.7)%
Total return (based on net asset value) (11.1)% (19.0)%
Expense ratio 0.49% 0.35%
-----------------------------------------------------------------
2002 DIVIDENDS AND DISTRIBUTIONS
Amount
Paid (per share) Type
-----------------------------------------------------
March 1, 2002 $0.08 Long-term capital gain
March 1, 2002 0.01 Short-term capital gain
March 1, 2002 0.04 Investment income
June 1, 2002 0.13 Investment income
September 1, 2002 0.13 Investment income
December 27, 2002 0.59 Long-term capital gain
December 27, 2002 0.13 Investment income
-----------------------------------------------------
$1.11
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2003 ANNUAL MEETING OF STOCKHOLDERS
Location: Hyatt Regency O'Hare, Chicago, Illinois
Date: March 25, 2003
Time: 10:00 a.m.
Holders of Record: February 14, 2003
PORTFOLIO REVIEW
--------------------------------------------------------------------------------
TEN LARGEST PORTFOLIO HOLDINGS (12/31/02)
Market Value % of Net Assets
------------------------------------------------------
Exxon Mobil Corp. $ 36,687,000 8.1
Royal Dutch Petroleum Co. 29,053,200 6.4
ChevronTexaco Corp. 19,944,000 4.4
BP plc ADR 19,593,300 4.4
BJ Services Co. 12,924,000 2.9
Equitable Resources Inc. 12,649,440 2.8
Anadarko Petroleum Corp. 11,975,000 2.7
Ocean Energy, Inc. 10,983,500 2.4
TotalFina Elf ADR 8,937,500 2.0
Apache Corp. 8,776,460 1.9
------------------------------------------------------
Total $171,523,400 38.0%
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SECTOR WEIGHTINGS (12/31/02)
[CHART]
Internationals 26.6%
Domestics 7.0%
Producers 13.8%
Distributors 16.7%
Services 13.3%
Basic Materials & Other 8.2%
Paper & Forest Products 3.1%
Cash & Equivalent 10.7%
1
LETTER TO STOCKHOLDERS
--------------------------------------------------------------------------------
Each year at this time we appreciate the opportunity to share with you our
perspective on the past year. In addition, we discuss what the new year might
hold for the economy, energy and equity markets in general, and your fund.
THE YEAR IN REVIEW
The return on net assets, including income and capital gains distributions for
the calendar year, was a decrease of 11.1%, besting the 22.1% negative rate of
return for the Standard & Poor's 500 Stock Index. Similarly, the Dow Jones
Energy Index fell 15.4% and the average natural resources mutual fund provided
a negative return of 6.3%.
For the second consecutive year, the major energy indices declined. Within the
various energy sub-sectors, mid-sized exploration companies were the leading
performers, increasing 0.8%. Major international oils and oil service companies
also outperformed the general stock market, with declines of 15.7% and 8.7%,
respectively. Continuing investor concern over the financial viability of many
natural gas pipeline and electrical power generators caused a substantial
decrease in their equity valuations. Our diverse holdings in basic industries
generated mixed results, with paper and forest products stocks recording
declines, and our other holdings collectively outperforming the S&P 500.
Despite surprisingly strong commodity prices throughout most of the year, the
Dow Jones Energy Index recorded a disappointing performance. Energy equities
declined 6.9% over the first six weeks of the year reflecting concern over weak
energy commodity pricing. In mid-February, the Index reversed course as both
OPEC and non-OPEC countries adhered to their newly-reduced oil production quota
guidelines. By early April, energy equities had rallied up 17.9%. Over the
summer, the weak general stock market overshadowed events impacting the energy
markets, causing a drop of 32.2%. In August, as oil prices reached $30 per
barrel, the Index rebounded 20.1%. During the remainder of the year, energy
stocks were quite volatile, responding to constantly shifting news concerning
hostilities in Iraq, civil strife in Venezuela and the potential for
significant oil production shortfalls. On a positive note, domestic natural gas
prices surged at year-end, responding to substantially colder than normal
temperatures. For the fourth quarter, the Energy Index advanced 7.1%.
Oil Industry
The year began with the oil markets fully supplied, inventories high and
worldwide economic activity stagnant. Crude oil prices declined from $20 per
barrel to a low of $18 in late January, reflecting excess OPEC oil production.
After surprisingly strong production quota compliance by the OPEC nations, oil
prices stabilized in the low $20's per barrel. In March, a series of global
political events unfolded, which pushed the oil price over $25 per barrel -- a
high level that would continue for the remainder of the year. Initially,
strikes by oil workers in Venezuela and then a 30 day oil embargo by Iraq
reduced petroleum supply and tightened the oil market. While supply and demand
remained in reasonable balance, oil prices commanded a $4 per barrel premium to
offset possible additional supply disruptions. By September, oil prices reached
$30 per barrel as tensions between the United Nations and Iraq escalated and
war appeared imminent. At year-end, with United Nations inspectors aggressively
searching for Iraqi weapons violations and Venezuela continuing under civil
strife, concerns over oil supply interruptions caused crude oil prices to
escalate to a two-year high of $32 per barrel.
Natural Gas Industry
Soft demand and record high storage levels were the central themes entering
2002. Natural gas prices remained at depressed levels throughout the winter.
However, beginning in March, gas prices increased 50% matching the sharp
upswing in crude oil prices. After evidence developed that domestic gas
production was declining at a rate significantly above forecast, gas prices
advanced further. With cold weather arriving during the fourth quarter, natural
gas prices jumped another 35%, resulting in a year-over-year increase of 97%.
Electric Power
2002 saw a worsening of the crisis of investor confidence in the utility and
power industry. Investors experienced a loss of confidence in the managements
and reporting practices of power companies. Credit rating agencies took a much
more aggressive approach toward utilities, resulting in numerous credit rating
downgrades and higher capital costs. While weather-related demand provided some
relief for the industry, excess capacity in unregulated power coupled with weak
economic demand led to wholesale pricing pressure.
INVESTMENT RESULTS
Net assets of the Corporation on December 31, 2002 were $451,275,463 or $20.98
per share on 21,510,067 shares outstanding as compared with $526,491,798 or
$24.90 per share on 21,147,563 shares outstanding a year earlier.
Net investment income for 2002 was $8,983,077 compared to $10,098,102 for 2001.
These earnings are equivalent to $0.42 and $0.49 per share, respectively, on
the average number of shares outstanding throughout each year. In 2002, our
0.49% expense ratio (expenses to average net assets) was once again at a very
low level compared to the industry.
2
LETTER TO STOCKHOLDERS (CONTINUED)
--------------------------------------------------------------------------------
Net realized gains amounted to $14,332,921 during the year, while the
unrealized appreciation on investments decreased from $200,798,077 at December
31, 2001 to $118,780,607 at year end.
DIVIDENDS AND DISTRIBUTIONS
Total dividends and distributions paid in 2002 were $1.11 per share compared to
$1.50 in 2001. As announced on November 14, 2002, a year-end distribution
consisting of investment income of $0.13 and capital gains of $0.59 was made on
December 27, 2002, both realized and taxable in 2002. On January 9, 2003, an
additional distribution of $0.13 per share was declared payable March 1, 2003,
representing the balance of undistributed net investment income and capital
gains earned in 2002 and an initial distribution from 2003 net investment
income, all taxable to shareholders in 2003.
OUTLOOK FOR 2003
In recent months, the performance of energy equities has lagged the surge in
petroleum prices, reflecting investor concern that these elevated prices will
dampen worldwide economic growth and petroleum consumption. We continue to
believe that investor interest in the various energy sectors will return once
economic activity improves, military conflicts lessen, and energy prices
stabilize.
Crude Oil
As we stated in last year's report, the prospects for oil markets will continue
to be significantly influenced by OPEC's ability to remain united and by the
pace of recovery of energy demand. However, in the nearer term, multiple
geopolitical events will substantially impact this forecast. Military action
against Iraq and a continuing oil workers strike in Venezuela will
significantly influence the pricing environment. Oil markets are not expected
to return to normal until these conflicts subside and global production levels
stabilize. Oil prices currently exceed $30 per barrel with ongoing, event
driven, pricing volatility. Assuming a peaceful resolution with Iraq or a
relatively short conflict with no major damage to oil facilities, crude oil
prices should return to a more normal level in the mid $20's per barrel. With
worldwide economic activity forecast to strengthen during the second half of
2003, a substantial rebound in oil demand should follow. This environment
should enable OPEC to maintain a reasonable degree of unity, which will be
positive for the energy markets.
Natural Gas
Cold temperature-related demand continues to benefit the natural gas market,
generating very high prices during January. While weather patterns will be
turbulent over the heating season, gas market fundamentals should remain
positive. North American natural gas supply will be the ongoing major issue.
Domestic gas production declined approximately 4% last year and a 2-3% drop is
forecast in 2003. With supplies constrained throughout the year, natural gas
prices should remain at very attractive levels.
Electric Power
The fundamentals in the power industry remain challenging in 2003. Excess
capacity in unregulated generation will maintain pricing pressure. Merchant
power producers have large amounts of debt maturing. In addition, they face
significant capital spending requirements to complete their construction
programs. Regulatory investigations are ongoing and pose headline risk to the
industry. As the economy recovers, excess capacity should moderate and prices
should firm, leading to improvement in the financial position of the industry.
SHARE REPURCHASE PROGRAM
On December 12, 2002, the Board of Directors authorized the repurchase by
management of an additional 5% of the outstanding shares of the Corporation
over the ensuing year. The repurchase program is subject to the same
restriction as in the past, namely that shares can only be repurchased as long
as the discount of the market price of the shares from the net asset value is
greater than 8%.
From the beginning of 2003 through February 13, a total of 15,700 shares have
been repurchased at a total cost of $305,932 and a weighted average discount
from net asset value of 8.8%.
----------
The proxy statement for the Annual Meeting of Stockholders to be held in
Chicago, Illinois on March 25, 2003, will be mailed on or about February 21,
2003 to holders of record on February 14, 2003.
By order of the Board of Directors,
/s/ Douglas G. Ober /s/ Richard F. Koloski
Douglas G. Ober, Richard F. Koloski,
Chairman and Chief President
Executive Officer
February 14, 2003
3
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
December 31, 2002
Assets
Investments* at value:
Common stocks and convertible securities
(cost $281,785,710) $400,507,697
Short-term investments (cost $48,241,451) 48,241,451 $448,749,148
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Cash 69,969
Securities lending collateral 47,362,964
Receivables:
Investment securities sold 1,510,573
Dividends and interest 537,880
Prepaid expenses and other assets 1,848,981
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Total Assets 500,079,515
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Liabilities
Open written option contracts at value (proceeds $90,620) 32,000
Obligations to return securities lending collateral 47,362,964
Accrued expenses and other liabilities 1,409,088
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Total Liabilities 48,804,052
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Net Assets $451,275,463
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Net Assets
Common Stock at par value $1.00 per share, authorized
50,000,000 shares; issued and outstanding 21,510,067 shares $ 21,510,067
Additional capital surplus 307,650,405
Undistributed net investment income 1,474,891
Undistributed net realized gain on investments 1,859,493
Unrealized appreciation on investments 118,780,607
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Net Assets Applicable to Common Stock $451,275,463
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Net Asset Value Per Share of Common Stock $20.98
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* See schedule of investments on pages 11 through 13.
The accompanying notes are an integral part of the financial statements.
4
Investment Income
Income:
Dividends $ 10,467,257
Interest and other income 890,221
--------------------------------------------------------------------------------
Total income 11,357,478
--------------------------------------------------------------------------------
Expenses:
Investment research 817,002
Administration and operations 516,325
Directors' fees 209,750
Reports and stockholder communications 231,426
Transfer agent, registrar and custodian expenses 168,874
Auditing and accounting services 75,153
Legal services 51,273
Occupancy and other office expenses 130,135
Travel, telephone and postage 78,568
Other 95,895
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Total expenses 2,374,401
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Net Investment Income 8,983,077
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Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions 14,332,921
Change in unrealized appreciation on investments (82,017,470)
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Net Loss on Investments (67,684,549)
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Change in Net Assets Resulting from Operations $(58,701,472)
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The accompanying notes are an integral part of the financial statements.
5
STATEMENTS OF CHANGES IN NET ASSETS
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For the Year Ended
---------------------------
Dec. 31, 2002 Dec. 31, 2001
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From Operations:
Net investment income $ 8,983,077 $ 10,098,102
Net realized gain on investments 14,332,921 22,308,303
Change in unrealized appreciation on investments (82,017,470) (164,346,055)
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Change in net assets resulting from operations (58,701,472) (131,939,650)
-------------------------------------------------------------------------------------------
Distributions to Stockholders From:
Net investment income (9,069,217) (8,877,046)
Net realized gain from investment transactions (14,302,830) (22,032,850)
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Decrease in net assets from distributions (23,372,047) (30,909,896)
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From Capital Share Transactions:
Value of shares issued in payment of distributions 9,954,365 13,159,002
Cost of shares purchased (note 4) (3,097,181) (11,990,525)
-------------------------------------------------------------------------------------------
Change in net assets from capital share transactions 6,857,184 1,168,477
-------------------------------------------------------------------------------------------
Total Decrease in Net Assets (75,216,335) (161,681,069)
Net Assets:
Beginning of year 526,491,798 688,172,867
-------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $1,474,891 and $1,264,018, respectively) $451,275,463 $ 526,491,798
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The accompanying notes are an integral part of the financial statements.
6
NOTES TO FINANCIAL STATEMENTS
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1. SIGNIFICANT ACCOUNTING POLICIES
Petroleum & Resources Corporation (the Corporation) is registered under the
Investment Company Act of 1940 as a 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 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 (excluding
purchased options) are valued at amortized cost. Purchased and 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 December 31, 2002 was $330,029,338, and net
unrealized appreciation aggregated $118,810,430, of which the related gross
unrealized appreciation and depreciation were $155,185,936 and $36,375,506,
respectively. As of December 31, 2002, the tax basis of distributable earnings
was $596,228 of undistributed ordinary income and $1,755,172 of undistributed
long-term capital gain.
Distributions paid by the Corporation during the year ended December 31, 2002
were classified as ordinary income of $9,280,692 and capital gain of
$14,091,355. The 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, 2002 were $45,721,644 and
$42,742,264, respectively. Options may be written (sold) or purchased by the
Corporation. 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. The risk associated with purchasing an option is limited to the premium
originally paid. A schedule of outstanding option contracts as of December 31,
2002 can be found on page 14.
Transactions in written covered call and collateralized put options during the
year ended December 31, 2002 were as follows:
Covered Calls Collateralized Puts
------------------- -------------------
Contracts Premiums Contracts Premiums
--------- --------- --------- ---------
Options outstanding,
December 31, 2001 200 $ 30,849 500 $ 53,423
Options written 2,275 264,148 2,750 410,186
Options expired (1,450) (180,271) (1,950) (273,146)
Options exercised (400) (56,498) (1,000) (158,071)
--------------------------------------------------------------
Options outstanding,
December 31, 2002 625 $ 58,228 300 $ 32,392
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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 has 5,000,000 authorized and unissued preferred shares without
par value.
On December 27, 2001, the Corporation issued 579,054 shares of its Common Stock
at a price of $22.725 per share (the average market price on December 10, 2001)
to stockholders of record November 19, 2001 who elected to take stock in
payment of the distribution from 2001 capital gain and investment income.
On December 27, 2002, the Corporation issued 521,854 shares of its Common Stock
at a price of $19.075 per share (the average market price on December 9, 2002)
to stockholders of record November 25, 2002 who elected to take stock in
payment of the distribution from 2002 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.
Transactions in Common Stock for 2002 and 2001 were as follows:
Shares Amount
------------------ -------------------------
2002 2001 2002 2001
-------- -------- ----------- ------------
Shares issued in payment of
dividends 521,854 579,054 $ 9,954,365 $ 13,159,002
Shares purchased
(at an average discount
from net asset value of
8.9% and 9.4%,
respectively) (159,350) (429,150) (3,097,181) (11,990,525)
--------------------------------------------------------------------------
Net change 362,504 149,904 $ 6,857,184 $ 1,168,477
--------------------------------------------------------------------------
7
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
The cost of the 14,900 shares of Common Stock held by the Corporation at
December 31, 2002 and the 42,832 shares of Common Stock held at December 31,
2001 amounted to $285,217 and $1,061,166, respectively.
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 895,522 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 2002, there were
148,997 options outstanding with a weighted average exercise price of $17.1543
per share. During 2002, the Corporation granted options, including stock
appreciation rights, for 23,769 shares of common stock with an exercise price
of $23.1350 per share. During the year, stock appreciation rights relating to
20,754 stock option shares were exercised at a weighted average market price of
$22.4884 per share and the stock options relating to these rights which had a
weighted average exercise price of $12.2539 per share were cancelled. At
December 31, 2002, there were 27,808 outstanding exercisable options to
purchase common shares at $9.1217-$25.3438 per share (weighted average price of
$16.8761) and unexercisable options to purchase 124,204 common shares at
$9.1217-$25.3438 per share (weighted average price of $18.3327). The weighted
average remaining contractual life of outstanding exercisable and unexercisable
options was 4.9166 years and 6.0014 years, respectively. The total compensation
expense recognized in 2002 for the stock option and stock appreciation rights
plan was $(178,953). At December 31, 2002, there were 274,929 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 five years 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, bonds and
mutual funds.
The actuarially computed net pension cost for the year ended December 31, 2002
was $157,956, and consisted of service cost of $127,443, interest cost of
$243,780, expected return on plan assets of $334,038, and net amortization
expense of $120,771.
In determining the actuarial present value of the projected benefit obligation,
the interest rate used for the weighted average discount rate was 7.25%, the
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, 2002, the projected benefit obligation for service rendered to
date was $3,403,647. During 2002, the projected benefit obligation increased
due to service cost and interest cost of $127,443 and $243,780, respectively,
and decreased due to benefits paid in the amount of $82,329. The projected
benefit obligation at December 31, 2002 was $3,692,541.
On January 1, 2002, the fair value of plan assets was $4,216,632. During 2002,
the fair value of plan assets increased due to the expected return on plan
assets of $334,038 and decreased due to benefits paid in the amount of $82,329.
At December 31, 2002, the fair value of plan assets amounted to $4,468,341,
which resulted in excess plan assets of $775,800. The remaining components of
prepaid pension cost at December 31, 2002 included $483,064 in unrecognized
loss and $279,565 in unrecognized prior service cost. Prepaid pension cost
included in other assets at December 31, 2002 was $1,538,429.
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, 2002 for employees
and former employees of the Corporation was $1,220,787. Aggregate remuneration
paid or accrued during the year ended December 31, 2002 to key employees and
directors amounted to $766,126.
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, 2002, the Corporation had
securities on loan of $45,410,331, and held cash collateral of $47,362,964.
8
PETROLEUM & RESOURCES CORPORATION
--------------------------------------------------------------------------------
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
--------------------------------------------------------------
1988 $10,080 $ 563 $ 403 $11,046 $13,066
1989 12,960 1,399 1,193 15,552 17,908
1990 12,060 2,029 1,706 15,795 17,974
1991 12,478 2,923 2,328 17,729 19,144
1992 12,118 3,696 2,767 18,581 20,358
1993 13,198 4,997 3,600 21,795 23,495
1994 12,118 5,537 3,972 21,627 22,993
1995 13,558 7,288 5,196 26,042 29,053
1996 16,682 10,242 7,228 34,152 36,447
1997 17,518 12,269 8,339 38,126 43,312
1998 14,702 11,900 7,744 34,346 38,462
1999 15,480 14,475 8,939 38,894 47,613
2000 19,663 21,140 12,124 52,927 63,353
2001 16,891 20,305 11,155 48,351 51,319
2002 13,810 17,988 9,938 41,736 45,652
ILLUSTRATION OF AN ASSUMED 15 YEAR INVESTMENT OF $10,000
(unaudited)
Investment income dividends and capital gains distri- butions are taken in
additional shares. This chart covers the years 1988-2002. Assumes commissions
of $0.05 per share on the initial shares invested. Fees for the reinvestment of
dividends are assumed as outlined on page 17. No adjustment has been made for
any income taxes payable by stockholders on income dividends or on capital
gains distributions or the sale of any shares. These results should not be
considered representative of the dividend income or capital gain or loss which
may be realized in the future.
[CHART]
Cumulative Cumulative
Market Value Market Value
Market Value of Shares Net Asset of Shares from
of Original from Income Value of Capital Gains
Investments Dividends Total Shares Distributions
------------ ----------- ------------ -------------
1988 $10,080 $11,046 $13,066 $10,643
1989 12,960 15,552 17,908 14,359
1990 12,060 15,795 17,974 14,089
1991 12,478 17,729 19,144 15,401
1992 12,118 18,581 20,358 15,814
1993 13,198 21,795 23,495 18,195
1994 12,118 21,627 22,993 17,655
1995 13,558 26,042 29,053 20,846
1996 16,682 34,152 36,447 26,924
1997 17,518 38,126 43,312 29,787
1998 14,702 34,346 38,462 26,602
1999 15,480 38,894 47,613 29,955
2000 19,663 52,927 63,353 40,803
2001 16,891 48,351 51,319 37,196
2002 13,810 41,736 45,652 31,798
9
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Year Ended December 31
---------------------------------------------
2002 2001 2000 1999 1998
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Per Share Operating Performance*
Net asset value, beginning of year $24.90 $32.69 $26.32 $22.87 $27.64
-------------------------------------------------------------------------------------------------------
Net investment income 0.42 0.49 0.37 0.48 0.55
Net realized gains and change in
unrealized appreciation (3.20) (6.81) 7.67 4.67 (3.73)
-------------------------------------------------------------------------------------------------------
Total from investment operations (2.78) (6.32) 8.04 5.15 (3.18)
-------------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income (0.43) (0.43) (0.39) (0.48) (0.52)
Distributions from net realized gains (0.68) (1.07) (1.35) (1.07) (1.01)
-------------------------------------------------------------------------------------------------------
Total distributions (1.11) (1.50) (1.74) (1.55) (1.53)
-------------------------------------------------------------------------------------------------------
Capital share repurchases 0.01 0.06 0.28 0.01 --
Reinvestment of distributions (0.04) (0.03) (0.21) (0.16) (0.06)
-------------------------------------------------------------------------------------------------------
Total capital share transactions (0.03) 0.03 0.07 (0.15) (0.06)
-------------------------------------------------------------------------------------------------------
Net asset value, end of year $20.98 $24.90 $32.69 $26.32 $22.87
-------------------------------------------------------------------------------------------------------
Per share market price, end of year $19.18 $23.46 $27.31 $21.50 $20.42
-------------------------------------------------------------------------------------------------------
Total Investment Return
Based on market price (13.7)% (8.7)% 36.1% 13.3% (10.0)%
Based on net asset value (11.1)% (19.0)% 33.1% 23.8% (11.1)%
Ratios/Supplemental Data
Net assets, end of year (in 000's) $451,275 $526,492 $688,173 $565,075 $474,821
Ratio of expenses to average net assets 0.49% 0.35% 0.59% 0.43% 0.31%
Ratio of net investment income to average net assets 1.84% 1.67% 1.24% 1.86% 2.13%
Portfolio turnover 9.69% 6.74% 7.68% 11.89% 12.70%
Number of shares outstanding at end of year
(in 000's)* 21,510 21,148 21,054 21,471 20,762
-------------------------------------------------------------------------------------------------------
* Adjusted to reflect the 3-for-2 stock split effected in October, 2000.
Certain prior year amounts have been reclassified to conform to current year
presentation.
10
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
December 31, 2002
Shares Value (A)
----------------------------------------------------------------------------------------
Stocks and Convertible Securities -- 88.7%
Energy -- 77.4%
Internationals -- 26.6%
BP plc ADR................................................ 482,000 $ 19,593,300
ChevronTexaco Corp........................................ 300,000 19,944,000
Exxon Mobil Corp.......................................... 1,050,000 36,687,000
Royal Dutch Petroleum Co.................................. 660,000 29,053,200
"Shell" Transport and Trading Co., plc ADR................ 150,000 5,838,000
TotalFinaElf ADR (B)...................................... 125,000 8,937,500
-------------
120,053,000
-------------
Domestics -- 7.0%
Amerada Hess Corp......................................... 50,000 2,752,500
ConocoPhillips............................................ 140,310 6,789,601
Kerr McGee Corp........................................... 177,153 7,847,878
Murphy Oil Corp........................................... 140,000 5,999,000
Unocal Capital Trust $3.125 Conv. Pfd. (B)................ 72,540 3,681,405
Unocal Corp............................................... 150,000 4,587,000
-------------
31,657,384
-------------
Producers -- 13.8%
Anadarko Petroleum Corp. (B).............................. 250,000 11,975,000
Apache Corp. (B).......................................... 154,000 8,776,460
Devon Energy Corp......................................... 80,000 3,672,000
EOG Resources, Inc........................................ 200,000 7,984,000
Noble Energy.............................................. 125,000 4,693,750
Occidental Petroleum Corp................................. 175,000 4,978,750
Ocean Energy, Inc......................................... 550,000 10,983,500
Pioneer Natural Resources Co. (C)......................... 235,000 5,933,750
Stone Energy Corp. (C).................................... 104,300 3,479,448
-------------
62,476,658
-------------
Distributors -- 16.7%
Atmos Energy Corp......................................... 139,500 3,253,140
Duke Energy Corp. 8.25% Conv. Pfd. due 2004 (B)........... 160,000 2,545,600
Duke Energy Corp. (B)..................................... 115,000 2,247,100
El Paso Corp. (B)......................................... 210,000 1,461,600
Energen Corp.............................................. 250,000 7,275,000
Equitable Resources Inc................................... 361,000 12,649,440
Keyspan Corp.............................................. 220,000 7,752,800
Kinder Morgan, Inc........................................ 162,500 6,868,875
MDU Resources Group, Inc.................................. 200,000 5,162,000
National Fuel Gas Co...................................... 200,000 4,146,000
New Jersey Resources Corp................................. 277,500 8,766,225
Northwestern Corp. (B).................................... 200,000 1,016,000
Questar Corp. (B)......................................... 268,000 7,455,760
TECO Energy, Inc. (B)..................................... 200,000 3,094,000
Williams Companies, Inc. 9.0% FELINE PACS due 2005 (B).... 120,000 956,400
Williams Companies, Inc................................... 200,000 540,000
-------------
75,189,940
-------------
11
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
December 31, 2002
Shares Value (A)
---------------------------------------------------------------------
Services -- 13.3%
Baker Hughes, Inc......................... 110,000 $ 3,540,900
BJ Services Co. (B)(C).................... 400,000 12,924,000
Core Laboratories N.V. (C)................ 209,400 2,376,690
GlobalSantaFe Corp. (B)................... 200,000 4,864,000
Grant Prideco Inc. (C).................... 308,000 3,585,120
Nabors Industries Ltd. (C)................ 200,000 7,054,000
Noble Corp. (C)........................... 135,000 4,745,250
Schlumberger Ltd.......................... 190,000 7,997,100
Transocean Inc............................ 200,000 4,640,000
Weatherford International, Ltd. (B)(C).... 205,000 8,185,650
------------
59,912,710
------------
Basic Industries -- 11.3%
Basic Materials & Other -- 8.2%
Albemarle Corp. (B)....................... 190,000 5,405,500
Arch Coal Inc. (B)........................ 210,000 4,533,900
Engelhard Corp............................ 124,900 2,791,515
General Electric Co....................... 350,000 8,522,500
Ingersoll-Rand Co. Ltd.................... 70,000 3,014,200
Philadelphia Suburban Corp................ 305,000 6,283,000
Rohm & Haas Co............................ 200,000 6,496,000
------------
37,046,615
------------
Paper and Forest Products -- 3.1%
Boise Cascade Corp. 7.5% ACES due 2004.... 51,000 2,141,490
Boise Cascade Corp........................ 205,000 5,170,100
MeadWestvaco Corp. (B).................... 60,000 1,482,600
Temple-Inland Inc. (B).................... 120,000 5,377,200
------------
14,171,390
------------
Total Stocks and Convertible Securities
(Cost $281,785,710) (D)....................... 400,507,697
------------
12
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
December 31, 2002
Prin. Amt. Value (A)
----------------------------------------------------------------------------------------------
Short-Term Investments -- 10.7%
U.S. Government Obligations -- 2.0%
U.S. Treasury Bills, 1.04-1.15%, due 2/06/03-2/20/03............. $ 9,100,000 $ 9,086,635
------------
Certificates of Deposit -- 2.2%
Mercantile-Safe Deposit & Trust Co., 1.25%, due 3/27/03.......... 10,000,000 10,000,000
------------
Commercial Paper -- 6.5%
AIG Funding, Inc., 1.26%, due 1/7/03............................. 1,000,000 999,790
American General Finance, Inc., 1.32%, due 1/14/03-1/16/03....... 3,450,000 3,448,184
Cargill, Inc., 1.35%, due 1/2/03................................. 1,790,000 1,789,933
Coca-Cola Enterprises, Inc., 1.28%, due 1/21/03.................. 3,080,000 3,077,810
General Electric Capital Corp., 1.26-1.34%, due 1/16/03-1/30/03.. 5,000,000 4,996,902
GMAC MINT, 1.35%, due 1/14/03.................................... 5,000,000 4,997,563
Kraft Foods Inc., 1.27%, due 1/23/03............................. 4,850,000 4,846,236
Wells Fargo Financial, Inc., 1.28-1.29%, due 1/7/03-1/14/03...... 5,000,000 4,998,398
------------
29,154,816
------------
Total Short-Term Investments
(Cost $48,241,451)................................................. 48,241,451
------------
Total Investments -- 99.4%
(Cost $330,027,161)................................................ 448,749,148
Cash, receivables and other assets, less liabilities -- 0.6%..... 2,526,315
------------
Net Assets -- 100%................................................... $451,275,463
--------------------------------------------------------------------------------
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) All or a portion of these securities are on loan. See Note 7 to Financial
Statements.
(C) Presently non-dividend paying.
(D) The aggregate market value of stocks held in escrow at December 31, 2002
covering open call option contracts written was $1,777,875. In addition,
the required aggregate market value of securities segregated by the
custodian to collaterize open put option contracts written was $1,175,000.
-------------------------
FORWARD-LOOKING STATEMENTS
This report contains "forward-looking statements" within the meaning of the
Securities Act of 1933 and the Securities Exchange Act of 1934. By their
nature, all forward-looking statements involve risks and uncertainties, and
actual results could differ materially from those contemplated by the
forward-looking statements. Several factors that could materially affect the
Corporation's actual results are the performance of the portfolio of stocks
held by the Corporation, the conditions in the U.S. and international
financial, petroleum and other markets, the price at which shares of the
Corporation will trade in the public markets, and other factors discussed in
the Corporation's periodic filings with the Securities and Exchange Commission.
13
SCHEDULE OF OUTSTANDING OPTION CONTRACTS
--------------------------------------------------------------------------------
December 31, 2002
Contracts Contract
(100 shares Strike Expiration Appreciation/
each) Security Price Date (Depreciation)
---------------------------------------------------------------------
COVERED CALLS
100 Amerada Hess Corp...... $75 Jan 03 $ 16,724
100 Apache Corp............ 65 Jan 03 14,600
425 TECO Energy, Inc....... 20 Feb 03 16,404
--- --------
625 47,728
--- --------
COLLATERALIZED PUTS
100 Ingersoll-Rand Co. Ltd. 37.50 Jan 03 7,150
100 Ingersoll-Rand Co. Ltd. 40 Jan 03 7,099
100 Ingersoll-Rand Co. Ltd. 40 Feb 03 (3,357)
--- --------
300 10,892
--- --------
$ 58,620
========
-------------------------
CHANGES IN PORTFOLIO SECURITIES
--------------------------------------------------------------------------------
During the Three Months Ended December 31, 2002
(unaudited)
Shares
--------------------------------------
Held
Additions Reductions Dec. 31, 2002
----------------------------------------------------------------------
Albemarle Corp................. 30,000 190,000
Arch Coal Inc.................. 20,000 210,000
Baker Hughes, Inc.............. 20,000 110,000
Ingersoll-Rand Co. Ltd......... 70,000 70,000
MDU Resources Group, Inc....... 200,000 200,000
Murphy Oil Corp................ 70,000/(1)/ 10,000 140,000
Weatherford International, Ltd. 15,000 205,000
Amerada Hess Corp.............. 30,000 50,000
El Paso Corp................... 90,000 210,000
Engelhard Corp................. 75,100 124,900
Exxon Mobil Corp............... 110,000 1,050,000
MeadWestvaco Corp.............. 90,000 60,000
Royal Dutch Petroleum Co....... 10,000 660,000
--------
/(1)/By stock split.
14
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 December 31, 2002, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
accounting principles generally accepted in the United States of America. 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 audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, 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, 2002 by
correspondence with the custodian and brokers provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 8, 2003
-------------------------
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
(410)752-5900 or (800)638-2479
Website: www.peteres.com
E-mail: contact@peteres.com
Counsel: Chadbourne & Parke L.L.P.
Independent Accountants: PricewaterhouseCoopers LLP
Transfer Agent, Registrar & Custodian of Securities: The Bank of New York
15
SHAREHOLDER INFORMATION 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 our
transfer agent, the Bank of New York's BuyDIRECT Purchase and Sale Plan (see
page 17).
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 daily NAV is also available
on the NASDAQ Mutual Fund Quotation System under the symbol XPEOX. 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 I correct a spelling error on
my certificate?
Your Petroleum stock certificates are valuable documents and should be kept in
a safe place. For tax purposes, keep a record of each certificate, including
the cost or market value of the shares it covers at the time acquired. If a
certificate is lost, destroyed or stolen, notify the Transfer Agent immediately
so a "stop transfer" order can be placed on the records to prevent an
unauthorized transfer of your certificate. The necessary forms and requirements
to permit the issuance of a replacement certificate will then be sent to you. A
certificate can be replaced only after the receipt of an affidavit regarding
the loss accompanied by an open penalty bond, for which a small premium is paid
by the stockholder.
In the event a certificate is issued with the holder's name incorrectly
spelled, a correction can only be made if the certificate is returned to the
Transfer Agent with instructions for correcting the error. 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, electronic transfer of
funds is not offered 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 Transfer Agent.
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 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 Transfer Agent will send
you the instructions and forms necessary to effect your transfer.
16
SHAREHOLDER INFORMATION 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 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. The plan provides registered stockholders and interested first
time investors an affordable alternative for buying, selling, and reinvesting
in Petroleum & Resources shares.
The costs to participants in administrative service fees and brokerage
commissions for each type of transaction are listed below.
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 this Plan or contact The Bank of New York
about the BuyDIRECT Plan.
----------
The Corporation
Petroleum & Resources Corporation
Lawrence L. Hooper, Jr.
Vice President, Secretary and General Counsel
Seven St. Paul Street, Suite 1140, Baltimore, MD 21202
(800) 638-2479
Website: www.peteres.com
E-mail: contact@peteres.com
The Transfer Agent
The Bank of New York
Address Shareholder Inquiries to:
Shareholder Relations Department
P.O. Box 11258 Church Street Station
New York, NY 10286
(866) 723-8330
Website: www.stockbny.com
E-mail: Shareowner-svcs@bankofny.com
Send Certificates for Transfer
and Address Changes to:
Receive and Deliver Department
P.O. Box 11002 Church Street Station
New York, NY 10286
*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.
17
HISTORICAL FINANCIAL STATISTICS
--------------------------------------------------------------------------------
Dividends Distributions
From Net From Net
Net Asset Investment Realized
Value of Shares Value Income Gains
Dec. 31 Net Assets Outstanding* Per Share* Per Share* Per Share*
---------------------------------------------------------------------
1988 $248,370,688 14,996,376 $16.19 $1.11 $1.54
1989 322,866,019 15,576,900 16.56 .61 .80
1990 308,599,851 16,189,934 19.06 .73 .83
1991 314,024,187 16,778,358 18.71 .61 .82
1992 320,241,282 17,369,255 18.44 .51 .82
1993 355,836,592 18,010,007 19.76 .55 .87
1994 332,279,398 18,570,450 17.89 .61 .79
1995 401,404,971 19,109,075 21.01 .58 .81
1996 484,588,990 19,598,729 24.73 .55 .88
1997 556,452,549 20,134,181 27.64 .51 1.04
1998 474,821,118 20,762,063 22.87 .52 1.01
1999 565,075,001 21,471,270 26.32 .48 1.07
2000 688,172,867 21,053,644 32.69 .39 1.35
2001 526,491,798 21,147,563 24.90 .43 1.07
2002 451,275,463 21,510,067 20.98 .43 .68
--------
*Adjusted for 3-for-2 stock split effected in October, 2000.
-------------------------
PETROLEUM & RESOURCES CORPORATION
PRIVACY POLICY
In order to conduct its business, Petroleum & Resources Corporation collects
and maintains certain nonpublic personal information about our stockholders of
record with respect to their transactions in shares of our securities. This
information includes the stockholder's address, tax identification or Social
Security number, share balances, and dividend elections. We do not collect or
maintain personal information about stockholders whose shares of our securities
are held in "street name" by a financial institution such as a bank or broker.
We do not disclose any nonpublic personal information about you, our other
stockholders or our former stockholders to third parties unless necessary to
process a transaction, service an account or as otherwise permitted by law.
To protect your personal information internally, we restrict access to
nonpublic personal information about our stockholders to those employees who
need to know that information to provide services to our stockholders. We also
maintain certain other safeguards to protect your nonpublic personal
information.
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. The rates of return will vary and the principal 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.
18
BOARD OF DIRECTORS
--------------------------------------------------------------------------------
Number of
Portfolios
in Fund
Position Term Length Complex
Personal Held with of of Time Principal Occupations Overseen Other
Information the Fund Office Served During the Last 5 Years by Director Directorships
--------------------------------------------------------------------------------------------------------------------------
Independent Directors
Enrique R. Arzac Director One Since Professor of Finance and Two Director of The Adams
7 St. Paul Street, Year 1987 Economics, formerly Vice Dean Express Company and Credit
Suite 1140 of Academic Affairs of the Suisse Asset Management
Baltimore, MD 21202 Graduate School of Business, Funds (8 funds) (investment
Age 61 Columbia University. companies).
--------------------------------------------------------------------------------------------------------------------------
Daniel E. Emerson Director One Since Chairman, The National YMCA Two Director of The Adams
7 St. Paul Street, Year 1987 Fund Inc. Retired Executive Vice Express Company
Suite 1140 President of NYNEX Corp. (investment company).
Baltimore, MD 21202 (communications), Retired
Age 78 Chairman of The Board of both
NYNEX Information Resources
Co. and NYNEX Mobile
Communications Co. Previously
Executive Vice President and
Director of New York Telephone
Company.
--------------------------------------------------------------------------------------------------------------------------
Edward J. Kelly, III Director One Since President and Chief Executive Two Director of The Adams
7 St. Paul Street, Year October Officer of Mercantile Bankshares Express Company
Suite 1140 2001 Corporation. Formerly Managing (investment company),
Baltimore, MD 21202 Director with J.P. Morgan Chase Hartford Financial Services
Age 49 & Co. (investment bank and Group, Constellation Energy
global financial institution). Group, CIT Group
(commercial finance), and
CSX Corp. (transportation);
and member of Board of
Trustees of Johns Hopkins
University.
--------------------------------------------------------------------------------------------------------------------------
Thomas H. Lenagh Director One Since Financial Advisor, Chairman of Two Director of Gintel Fund,
7 St. Paul Street, Year 1987 the Board, Inrad Corp. (crystals). Cornerstone Funds, Inc.
Suite 1140 Formerly Chairman of the Board (3 funds) and The Adams
Baltimore, MD 21202 and CEO of Greiner Engineering Express Company
Age 84 Inc. (formerly Systems Planning (investment companies).
Corp.) (consultants), and Chief
Investment Officer of the Ford
Foundation (charitable
foundation).
--------------------------------------------------------------------------------------------------------------------------
W. D. MacCallan Director One Since Retired Chairman of the Board Two Director of The Adams
7 St. Paul Street, Year 1971 and CEO of the Corporation and Express Company
Suite 1140 The Adams Express Company. (investment company).
Baltimore, MD 21202 Formerly consultant to the
Age 75 Corporation and The Adams
Express Company.
--------------------------------------------------------------------------------------------------------------------------
W. Perry Neff Director One Since Private Financial Consultant. Two Director of The Adams
7 St. Paul Street, Year 1971 Retired Executive Vice President Express Company
Suite 1140 of Chemical Bank. (investment company).
Baltimore, MD 21202
Age 75
--------------------------------------------------------------------------------------------------------------------------
19
BOARD OF DIRECTORS (CONTINUED)
--------------------------------------------------------------------------------
Number of
Portfolios
in Fund
Position Term Length Complex
Personal Held with of of Time Principal Occupations Overseen Other
Information the Fund Office Served During the Last 5 Years by Director Directorships
--------------------------------------------------------------------------------------------------------------------------
Independent Directors (continued)
Landon Peters Director One Since Private Investor. Former Two Director of The Adams
7 St. Paul Street, Year 1987 Investment Manager, YMCA Express Company
Suite 1140 Retirement Fund. Formerly (investment company).
Baltimore, MD Executive Vice President and
21202 Treasurer and prior thereto Senior
Age 72 Vice President and Treasurer of
The Bank of New York.
--------------------------------------------------------------------------------------------------------------------------
John J. Roberts Director One Since Senior Advisor, formerly Vice-- Two Honorary Director of
7 St. Paul Street, Year 1987 Chairman External Affairs, American International
Suite 1140 American International Group, Group, Inc. Director of The
Baltimore, MD Inc. (insurance). Formerly Adams Express Company
21202 Chairman and CEO of American (investment company).
Age 80 International Underwriters
Corporation. Previously
President of American
International Underwriters
Corporation-U.S./ Overseas
Operations.
--------------------------------------------------------------------------------------------------------------------------
Susan C. Schwab Director One Since Dean of the School of Public Two Director of The Adams
7 St. Paul Street, Year 2000 Affairs at the University of Express Company
Suite 1140 Maryland, College Park. (investment company) and
Baltimore, MD Formerly Director of Corporate Calpine Corp.
21202 Business Development at
Age 47 Motorola, Inc. (electronics).
--------------------------------------------------------------------------------------------------------------------------
Robert J. M. Wilson Director One Since Retired President of the Two Director of The Adams
7 St. Paul Street, Year 1975 Corporation and retired President Express Company
Suite 1140 of The Adams Express (investment company).
Baltimore, MD Company.
21202
Age 82
--------------------------------------------------------------------------------------------------------------------------
Interested Director
Douglas G. Ober Director, One Director Chairman & CEO of the Two Director of The Adams
7 St. Paul Street, Chairman Year Since Corporation and The Adams Express Company
Suite 1140 and CEO 1989; Express Company. (investment company).
Baltimore, MD Chairman
21202 of the
Age 56 Board
Since
1991
--------------------------------------------------------------------------------------------------------------------------
20
PETROLEUM & RESOURCES CORPORATION
--------------------------------------------------------------------------------
Board Of Directors
Enrique R. Arzac/(2)(4)/ Douglas G. Ober/(1)/
Daniel E. Emerson/(1)(3)/ Landon Peters/(1)(3)/
Edward J. Kelly, III/(1)(4)/ John J. Roberts/(2)(4)/
Thomas H. Lenagh/(3)(4)/ Susan C. Schwab/(1)(3)/
W.D. MacCallan/(2)(4)/ Robert J.M. Wilson/(1)(3)/
W. Perry Neff/(1)(2)/
--------
/(1)/ Member of Executive Committee
/(2)/ Member of Audit Committee
/(3)/ Member of Compensation Committee
/(4)/ Member of Retirement Benefits 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
Chief Financial Officer
Christine M. Sloan Assistant Treasurer
Geraldine H. Pare Assistant Secretary
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
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