UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-02736
---------------------------------------------
PETROLEUM & RESOURCES CORPORATION
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(Exact name of registrant as specified in charter)
7 Saint Paul Street, Suite 1140, Baltimore, Maryland 21202
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(Address of principal executive offices) (Zip code)
Lawrence L. Hooper, Jr.
Petroleum & Resources Corporation
7 Saint Paul Street
Suite 1140
Baltimore, Maryland 21202
Registrant's telephone number, including area code: 410-752-5900
Date of fiscal year end: December 31, 2007
Date of reporting period: June 30, 2007
Item 1: Reports to Stockholders.
PETROLEUM & RESOURCES CORPORATION
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Board of Directors
Enrique R. Arzac /1,4,5/ Thomas H. Lenagh/ 2,3/
Phyllis O. Bonanno /1,4,5/ Kathleen T. McGahran/ 2,4/
Daniel E. Emerson /1,3,5/ Douglas G. Ober/ 1/
Frederic A. Escherich/ Craig R. Smith/ 2,4/
2,3/
Roger W. Gale /1,3,5/
1.Member of Executive Committee
2.Member of Audit Committee
3.Member of Compensation Committee
4.Member of Retirement Benefits Committee
5.Member of Nominating and Governance Committee
Officers
Douglas G. Ober Chairman, President and
Chief Executive Officer
Joseph M. Truta Executive Vice President
Lawrence L. Hooper, Jr. Vice President,
General Counsel and
Secretary
Maureen A. Jones Vice President,
Chief Financial Officer
and Treasurer
Nancy J.F. Prue Vice President
Robert E. Sullivan Vice President -- Research
Christine M. Sloan Assistant Treasurer
Geraldine H. Pare Assistant Secretary
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Stock Data
--------
Market Price (6/30/07) $38.62
Net Asset Value (6/30/07) $42.86
Discount: 9.9%
New York Stock Exchange ticker symbol: PEO
NASDAQ Mutual Fund Quotation Symbol: XPEOX
Newspaper stock listings are generally under the abbreviation: PetRs
----------------
Distributions in 2007
----------------
From Investment Income (paid or declared) $0.29
From Net Realized Gains 0.10
-----
Total $0.39
=====
-----------------------
2007 Dividend Payment Dates
-----------------------
March 1, 2007
June 1, 2007
September 1, 2007
December 27, 2007*
*Anticipated
Petroleum & Resources Corporation
Semi-Annual Report
June 30, 2007
INVESTING IN RESOURCES FOR THE FUTURE/R
[GRAPHIC]
LETTER TO STOCKHOLDERS
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We submit herewith the financial statements of the Petroleum & Resources
Corporation (the Corporation) for the six months ended June 30, 2007. In
addition, there are the report of the independent registered public accounting
firm, a schedule of investments, and other financial information.
Net assets of the Corporation at June 30, 2007 were $42.86 per share on
21,877,275 shares outstanding, compared with $36.61 per share at December 31,
2006 on 22,180,867 shares outstanding. On March 1, 2007, a distribution of
$0.13 per share was paid, consisting of $0.07 from 2006 long-term capital gain,
$0.03 from 2006 short-term capital gain and $0.03 from 2006 investment income,
all taxable in 2007. A 2007 investment income dividend of $0.13 per share was
paid on June 1, 2007, and another $0.13 investment income dividend has been
declared to shareholders of record August 14, 2007, payable September 1, 2007.
Net investment income for the six months ended June 30, 2007 amounted to
$4,576,717, compared with $5,219,727 for the same period in 2006. These
earnings are equal to $0.21 and $0.25 per share.
Net capital gain realized on investments for the six months ended June 30, 2007
amounted to $54,762,148, or $2.50 per share.
The total return on net asset value (with dividends and capital gains
reinvested) of shares of the Corporation was 17.9% for the six months ended
June 30, 2007. The total return on the market value of the Corporation's shares
in the period was 16.3%. These compare to a 17.4% gain for the Dow Jones Oil
and Gas Index and a 7.0% total return for the Standard & Poor's 500 Composite
Stock Index over the same time period.
For the twelve months ended June 30, 2007, the Corporation's total return on
net asset value was 22.6% and on market value was 26.5%, as the discount
narrowed during the period. Comparable figures for the Dow Jones Oil & Gas
Index and the S&P 500 were 26.0% and 20.6%, respectively.
In June 2007, the Board of Directors of the Corporation adopted Amended and
Restated Bylaws for the Corporation. Further information may be found on page
16 of this report.
Current and potential stockholders 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, on our website at www.peteres.com. Also available
on the website are a brief history of the Corporation, historical financial
information, and other useful content. Further information regarding
stockholder services is located on page 18 of this report.
-----------------
By order of the Board of Directors,
/s/
Douglas G. Ober,
Chairman, President and
Chief Executive Officer
July 13, 2007
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
June 30, 2007
Assets
Investments* at value:
Common stocks and convertible securities
(cost $312,710,833) $858,066,591
Short-term investments (cost $77,861,832) 77,861,832
Securities lending collateral (cost $40,462,282) 40,462,282 $976,390,705
--------------------------------------------------------------------------------------------
Cash 289,870
Receivables:
Investment securities sold 5,608,098
Dividends and interest 724,469
Prepaid expenses and other assets 573,846
---------------------------------------------------------------------------------------------------------
Total Assets 983,586,988
---------------------------------------------------------------------------------------------------------
Liabilities
Investment securities purchased 1,237,244
Open written option contracts at value (proceeds $243,173) 764,850
Obligations to return securities lending collateral 40,462,282
Accrued expenses 3,447,034
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Total Liabilities 45,911,410
---------------------------------------------------------------------------------------------------------
Net Assets $937,675,578
---------------------------------------------------------------------------------------------------------
Net Assets
Common Stock at par value $0.001 per share, authorized 50,000,000 shares;
issued and outstanding 21,877,275 shares (includes 24,724 restricted shares,
3,200 restricted stock units, and 1,695 deferred stock units) (Note 6) $ 21,877
Additional capital surplus 338,954,641
Accumulated other comprehensive income (Note 5) (1,866,206)
Undistributed net investment income 1,066,498
Undistributed net realized gain on investments 54,664,687
Unrealized appreciation on investments 544,834,081
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Net Assets Applicable to Common Stock $937,675,578
---------------------------------------------------------------------------------------------------------
Net Asset Value Per Share of Common Stock $42.86
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* See Schedule of Investments on pages 9 and 10.
The accompanying notes are an integral part of the financial statements.
2
STATEMENT OF OPERATIONS
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Six Months Ended June 30, 2007
Investment Income
Income:
Dividends $ 5,969,262
Interest and other income 1,240,325
-------------------------------------------------------------------------------
Total income 7,209,587
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Expenses:
Investment research 1,189,466
Administration and operations 683,408
Directors' fees 187,809
Reports and stockholder communications 129,631
Transfer agent, registrar and custodian expenses 84,166
Auditing and accounting services 46,082
Legal services 37,908
Occupancy and other office expenses 145,245
Travel, telephone and postage 43,262
Other 85,893
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Total expenses 2,632,870
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Net Investment Income 4,576,717
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Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions 54,762,148
Change in unrealized appreciation on investments 82,436,062
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Net Gain on Investments 137,198,210
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Change in Net Assets Resulting from Operations $141,774,927
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The accompanying notes are an integral part of the financial statements.
3
STATEMENTS OF CHANGES IN NET ASSETS
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Six Months Ended Year Ended
June 30, 2007 December 31, 2006
---------------- -----------------
From Operations:
Net investment income $ 4,576,717 $ 9,844,108
Net realized gain on investments 54,762,148 69,700,053
Change in unrealized appreciation on investments 82,436,062 33,586,674
Change in accumulated other comprehensive income (Note 5) 100,769 (1,966,975)
---------------------------------------------------------------------------------------------
Change in net assets resulting from operations 141,875,696 111,163,860
---------------------------------------------------------------------------------------------
Distributions to Stockholders from:
Net investment income (3,510,219) (9,928,393)
Net realized gain from investment transactions (2,217,601) (69,654,826)
---------------------------------------------------------------------------------------------
Decrease in net assets from distributions (5,727,820) (79,583,219)
---------------------------------------------------------------------------------------------
From Capital Share Transactions:
Value of shares issued in payment of distributions 8,014 46,212,047
Cost of shares purchased (Note 4) (10,785,958) (28,033,719)
Deferred compensation (Notes 4,6) 258,407 374,618
---------------------------------------------------------------------------------------------
Change in net assets from capital share transactions (10,519,537) 18,552,946
---------------------------------------------------------------------------------------------
Total Increase in Net Assets 125,628,339 50,133,587
Net Assets:
Beginning of period 812,047,239 761,913,652
---------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $1,066,498 and $0, respectively) $937,675,578 $812,047,239
---------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
4
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 is an internally-managed fund emphasizing petroleum and other
natural resource investments. The investment objectives of the Corporation are
preservation of capital, the attainment of reasonable income from investments,
and an opportunity for capital appreciation.
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 (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 stockholders 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
stockholders 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 at June 30, 2007 was $431,005,124 and net unrealized appreciation
aggregated $545,385,581, of which the related gross unrealized appreciation and
depreciation were $546,928,697 and $1,543,116, respectively.
Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. Accordingly, annual
reclassifications are made within the Corporation's capital accounts to reflect
income and gains available for distribution under income tax regulations. Any
income tax-related interest or penalties would be classified as income tax
expense.
Effective June 29, 2007, the Corporation adopted Financial Accounting Standards
Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in
Income Taxes, a clarification of FASB Statement No. 109, Accounting for Income
Taxes. FIN 48 establishes financial reporting rules regarding recognition and
measurement of tax positions taken or expected to be taken on a tax return. The
adoption of FIN 48 had no impact on the Corporation's net assets or results of
operations.
3. INVESTMENT TRANSACTIONS
The Corporation's investment decisions are made by a committee of management,
and recommendations to that committee are made by the research staff.
Purchases and sales of portfolio securities, other than options and short-term
investments, during the six months ended June 30, 2007 were $9,607,073 and
$75,086,311, respectively. Options may be written (sold) or purchased by the
Corporation. The Corporation, as writer of an option, bears the risks of
possible illiquidity of the option markets and from movements in security
values. The risk associated with purchasing an option is limited to the premium
originally paid. A schedule of outstanding option contracts as of June 30, 2007
can be found on page 12.
Transactions in written covered call and collateralized put options during the
six months ended June 30, 2007 were as follows:
Covered Calls Collateralized Puts
------------------- -------------------
Contracts Premiums Contracts Premiums
--------- --------- --------- ---------
Options outstanding,
December 31, 2006 1,125 $ 242,584 750 $ 85,950
Options written 3,240 397,053 2,025 232,145
Options terminated in
closing purchase
transactions (400) (115,917) (100) (14,345)
Options expired (1,425) (212,339) (1,725) (198,377)
Options exercised (1,100) (173,581) -- --
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Options outstanding,
June 30, 2007 1,440 $ 137,800 950 $ 105,373
---------------------------------------------------------------
4. CAPITAL STOCK
The Corporation has 5,000,000 authorized and unissued preferred shares, $0.001
par value.
On December 27, 2006, the Corporation issued 1,369,675 shares of its Common
Stock at a price of $33.73 per share (the average market price on December 11,
2006) to stockholders of record on November 21, 2006 who elected to take stock
in payment of the distribution from 2006 capital gain and investment income. In
addition, 376 shares were issued at a weighted average price of $33.76 per
share as dividend equivalents to holders of deferred stock units and restricted
stock units under the 2005 Equity Incentive Compensation Plan.
During 2007, the Corporation has issued 230 shares of its Common Stock at a
weighted average price of $33.47 per
5
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
share as dividend equivalents to holders of deferred stock units and restricted
stock units under the 2005 Equity Incentive Compensation Plan.
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 2007 and 2006 were as follows:
Shares Amount
---------------------- --------------------------
Six months Six months
ended Year ended ended Year ended
June 30, December 31, June 30, December 31,
2007 2006 2007 2006
---------- ------------ ------------ ------------
Shares issued in
payment of
dividends 230 1,370,051 $ 8,014 $ 46,212,047
Shares purchased (at
a weighted average
discount from net
asset value of 9.8%
and 10.1%,
respectively) (319,047) (827,959) (10,785,958) (28,033,719)
Net activity under the
Equity-Based
Compensation
Plans 15,225 17,703 258,407 374,618
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Net change (303,592) 559,795 $(10,519,537) $ 18,552,946
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5. RETIREMENT PLANS
The Corporation's non-contributory qualified defined benefit pension plan
covers all employees with at least one year of service. In addition, the
Corporation has a non-contributory nonqualified defined benefit plan which
provides eligible employees with retirement benefits to supplement the
qualified plan. Benefits are based on length of service and compensation during
the last five years of employment.
The funded status of the plans is recognized as an asset (overfunded plan) or a
liability (underfunded plan) in the Statement of Assets and Liabilities.
Changes in the prior service costs and accumulated actuarial gains and losses
are recognized as accumulated other comprehensive income, a component of net
assets, in the year in which the changes occur.
The Corporation's policy is to contribute annually to the plans those amounts
that can be deducted for federal income tax purposes, plus additional amounts
as the Corporation deems appropriate in order to provide assets sufficient to
meet benefits to be paid to plan participants. During the six months ended June
30, 2007, the Corporation contributed $15,604 to the plans and expects to
contribute an additional $315,604 to the plans during the remainder of 2007.
The following table aggregates the components of the plans' net periodic
pension cost.
Six months
ended Year ended
June 30, December 31,
2007 2006
---------- ------------
Service Cost $ 174,176 $ 334,876
Interest Cost 187,347 327,991
Expected return on plan assets (184,376) (343,422)
Amortization of prior service cost 18,859 37,717
Amortization of net loss 113,082 225,362
Deferred asset gain -- 31,224
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Net periodic pension cost $ 309,088 $ 613,748
----------------------------------------------------------
The Corporation also sponsors a defined contribution plan that covers
substantially all employees. For the six months ended June 30, 2007, the
Corporation expensed contributions of $52,684. The Corporation does not provide
postretirement medical benefits.
6. EQUITY-BASED COMPENSATION
Although the Stock Option Plan of 1985 ("1985 Plan") has been discontinued and
no further grants will be made under this plan, unexercised grants of stock
options and stock appreciation rights granted in 2004 and prior years remain
outstanding. The exercise price of the unexercised options and related stock
appreciation rights is the fair market value on date of grant, reduced by the
per share amount of capital gains paid by the Corporation during subsequent
years. All options and related stock appreciation rights terminate 10 years
from date of grant, if not exercised.
A summary of option activity under the 1985 Plan as of June 30, 2007, and
changes during the six month period then ended is presented below:
Weighted- Weighted-
Average Average
Exercise Remaining
Options Price Life (Years)
------- --------- ------------
Outstanding at December 31, 2006 83,914 $16.19 4.46
Exercised (22,000) 15.60 --
----------------------------------------------------------------
Outstanding at June 30, 2007 61,914 $15.49 3.99
----------------------------------------------------------------
Exercisable at June 30, 2007 23,224 $15.11 2.72
----------------------------------------------------------------
The options outstanding as of June 30, 2007 are set forth below:
Weighted Weighted
Average Average
Options Exercise Remaining
Exercise Price Outstanding Price Life (Years)
-------------- ----------- -------- ------------
$9.00-$11.99 3,975 $ 9.61 1.50
$12.00-$14.99 22,774 12.94 3.69
$15.00-$17.99 18,191 16.70 5.36
$18.00-$21.99 16,974 19.00 3.50
--------------------------------------------------------------
Outstanding at June 30, 2007 61,914 $15.49 3.99
--------------------------------------------------------------
Compensation cost resulting from stock options and stock appreciation rights
granted under the 1985 Plan is based on
6
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
the intrinsic value of the award, recognized over the award's vesting period,
and remeasured at each reporting date through the date of settlement. The total
compensation cost recognized for the six months ended June 30, 2007 was
$394,627.
The 2005 Equity Incentive Compensation Plan ("2005 Plan"), adopted at the 2005
Annual Meeting, permits the grant of stock options, restricted stock awards and
other stock incentives to key employees and all non-employee directors. The
2005 Plan provides for the issuance of up to 872,639 shares of the
Corporation's Common Stock, including both performance and nonperformance-based
restricted stock. Performance-based restricted stock awards vest at the end of
a specified three year period, with the ultimate number of awards earned
contingent on achievement of certain performance targets. If performance
targets are not achieved, all or a portion of the performance-based awards are
forfeited and become available for future grants. Nonperformance-based
restricted stock awards vest ratably over a three year period and
nonperformance-based restricted stock units (granted to non-employee directors)
vest over a one year period. It is the current intention that employee grants
will be performance-based. The 2005 Plan provides for accelerated vesting in
the event of death or retirement. Non-employee directors also may elect to
defer a portion of their cash compensation, with such deferred amount to be
paid by delivery of deferred stock units. Outstanding awards are granted at
fair market value on grant date. The number of shares of Common Stock which
remain available for future grants under the 2005 Plan at June 30, 2007 is
831,063 shares.
The Corporation pays dividends and dividend equivalents on outstanding awards,
which are charged to net assets when paid. Dividends and dividend equivalents
paid on restricted awards that are later forfeited are reclassified to
compensation expense.
A summary of the status of the Corporations's awards granted under the 2005
Plan as of June 30, 2007, and changes during the six month period then ended is
presented below:
Weighted Average
Shares/ Grant-Date Fair
Awards Units Value
------ ------- ----------------
Balance at December 31, 2006 21,398 $33.16
Granted:
Restricted stock 10,983 31.34
Restricted stock units 3,200 34.70
Deferred stock units 406 33.04
Vested (5,542) 31.78
Forfeited (826) 34.32
------------------------------------------------------------------
Balance at June 30, 2007 (includes 23,182
performance-based awards and 6,437
nonperformance-based awards) 29,619 $32.88
------------------------------------------------------------------
Compensation costs resulting from awards granted under the 2005 Plan are based
on the fair value of the award on grant date (determined by the average of the
high and low price on grant date) and recognized on a straight-line basis over
the requisite service period. For those awards with performance conditions,
compensation costs are based on the most probable outcome and, if such goals
are not met, compensation cost is not recognized and any previously recognized
compensation cost is reversed. The total compensation costs for restricted
stock granted to employees for the period ended June 30, 2007 were $136,750.
The total compensation costs for restricted stock units granted to non-employee
directors for the period ended June 30, 2007 were $60,059. As of June 30, 2007,
there were total unrecognized compensation costs of $617,653, a component of
additional capital surplus, related to nonvested equity-based compensation
arrangements granted under the 2005 Plan. Those costs are expected to be
recognized over a weighted average period of 1.83 years.
7. OFFICER AND DIRECTOR COMPENSATION
The aggregate remuneration paid during the six months ended June 30, 2007 to
officers and directors amounted to $1,615,711, of which $190,991 was paid as
fees and compensation to directors who were not officers. These amounts
represent the taxable income to the Corporation's officers and directors and
therefore differ from the amounts reported in the accompanying Statement of
Operations that are recorded and expensed in accordance with generally accepted
accounting principles.
8. 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 at all times by collateral of at least 102% of the fair value of the
securities loaned plus accrued interest. Gain or loss in the fair value of
securities loaned that may occur during the term of the loan will be for the
account of the Corporation. At June 30, 2007, the Corporation had securities on
loan of $39,970,359 and held collateral of $40,462,282, consisting of an
investment trust fund which may invest in money market instruments, commercial
paper, repurchase agreements, U.S. Treasury Bills, and U.S. agency obligations.
7
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
--------------------
Six Months Ended
------------------
Year Ended December 31
June 30, June 30, --------------------------------------------
2007 2006 2006 2005 2004 2003 2002
-------- -------- -------- -------- -------- -------- --------
Per Share Operating Performance
Net asset value, beginning of period $36.61 $35.24 $35.24 $28.16 $24.06 $20.98 $24.90
-----------------------------------------------------------------------------------------------------------------
Net investment income 0.21 0.25 0.47 0.53* 0.41 0.38 0.42
Net realized gains and increase (decrease) in
unrealized appreciation 6.25 3.62 4.91 8.29 5.05 3.89 (3.20)
Change in accumulated other comprehensive
income (note 5) -- -- (0.09) -- -- -- --
-----------------------------------------------------------------------------------------------------------------
Total from investment operations 6.46 3.87 5.29 8.82 5.46 4.27 (2.78)
-----------------------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income (0.16) (0.16) (0.47) (0.56) (0.44) (0.38) (0.43)
Distributions from net realized gains (0.10) (0.10) (3.33) (1.22) (0.88) (0.81) (0.68)
-----------------------------------------------------------------------------------------------------------------
Total distributions (0.26) (0.26) (3.80) (1.78) (1.32) (1.19) (1.11)
-----------------------------------------------------------------------------------------------------------------
Capital share repurchases 0.05 0.07 0.15 0.10 0.01 0.02 0.01
Reinvestment of distributions -- -- (0.27) (0.06) (0.05) (0.02) (0.04)
-----------------------------------------------------------------------------------------------------------------
Total capital share transactions 0.05 0.07 (0.12) 0.04 (0.04) 0.00 (0.03)
-----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $42.86 $38.92 $36.61 $35.24 $28.16 $24.06 $20.98
-----------------------------------------------------------------------------------------------------------------
Per share market price, end of period $38.62 $33.99 $33.46 $32.34 $25.78 $23.74 $19.18
Total Investment Return
Based on market price 16.3% 5.9% 15.3% 32.3% 14.4% 30.8% (13.7)%
Based on net asset value 17.9% 11.3% 15.7% 32.0% 23.3% 21.2% (11.1)%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $937,676 $824,479 $812,047 $761,914 $618,887 $522,941 $451,275
Ratio of expenses to average net assets 0.61%+ 0.54%+ 0.60% 0.59% 0.56% 0.74% 0.49%
Ratio of net investment income to
average net assets 1.07%+ 1.30%+ 1.22% 1.61% 1.58% 1.75% 1.84%
Portfolio turnover 2.36%+ 12.46%+ 9.95% 10.15% 13.44% 10.20% 9.69%
Number of shares outstanding at
end of period (in 000's) 21,877 21,184 22,181 21,621 21,980 21,737 21,510
--------------------
--------
* In 2005 the Corporation received dividend income of $3,032,857, or $0.14 per
share, as a result of Precision Drilling Corp.'s reorganization.
+ Ratiospresented on an annualized basis.
8
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
June 30, 2007
Shares Value (A)
- --------- ------------
Stocks And Convertible Securities -- 91.5%
Energy -- 85.2%
Integrated -- 34.3%
Chevron Corp. 650,000 $ 54,756,000
ConocoPhillips 556,891 43,715,944
Exxon Mobil Corp. 1,245,000 104,430,600
Hess Corp. (B) 195,000 11,497,200
Marathon Oil Co. 240,000 14,390,400
Murphy Oil Corp. 216,500 12,868,760
Royal Dutch Shell plc ADR 265,000 21,518,000
Suncor Energy 100,000 8,992,000
Total S.A. ADR 220,000 17,815,600
Valero Energy Corp. 425,000 31,390,500
------------
321,375,004
------------
Exploration & Production -- 15.4%
Apache Corp. 158,200 12,907,538
Devon Energy Corp. 330,000 25,835,700
EOG Resources, Inc. 310,000 22,648,600
Forest Oil Corp (B)(C) 37,000 1,563,620
Newfield Exploration Co. (C) 175,000 7,971,250
Noble Energy, Inc. 430,000 26,827,700
Occidental Petroleum Corp. 400,000 23,152,000
XTO Energy Inc. 390,000 23,439,000
------------
144,345,408
------------
Services -- 22.1%
Baker Hughes, Inc. 205,000 17,246,650
BJ Services Co. 240,000 6,825,600
Bronco Drilling Co., Inc. (B)(C) 240,000 3,938,400
ENSCO International, Inc. (B) 209,150 12,760,242
GlobalSantaFe Corp. 290,000 20,952,500
Grant Prideco Inc. (C) 308,000 16,579,640
Hercules Offshore, Inc. (B)(C) 250,000 8,095,000
Nabors Industries Ltd. (C) 520,000 17,357,600
Noble Corp. 200,000 19,504,000
Schlumberger Ltd. (B) 560,000 47,566,400
TODCO (C) 200,000 9,442,000
Weatherford International,
Ltd. (C) 493,560 27,264,254
------------
207,532,286
------------
Shares Value (A)
- ------- ------------
Utilities -- 13.4%
AGL Resources Inc. 170,000 $ 6,881,600
Duke Energy Corp. 217,624 3,982,519
Energen Corp. 400,000 21,976,000
Equitable Resources Inc. 450,000 22,302,000
MDU Resources Group, Inc. 375,000 10,515,000
National Fuel Gas Co. (B) 200,000 8,662,000
New Jersey Resources Corp. 200,000 10,204,000
Questar Corp. 360,000 19,026,000
SEMCO Energy, Inc. 670,300 5,208,230
Spectra Energy Corp. 108,812 2,824,760
Williams Companies, Inc. 450,000 14,229,000
------------
125,811,109
------------
Basic Industries -- 6.3%
Basic Materials & Other -- 6.3%
Air Products and Chemicals, Inc. 115,000 9,242,550
Aqua America, Inc. (B) 281,000 6,319,690
du Pont (E.I.) de Nemours and Co. 157,500 8,007,300
Florida Rock Industries Inc. 105,000 7,087,500
General Electric Co. 454,800 17,409,744
Rohm & Haas Co. 200,000 10,936,000
------------
59,002,784
------------
Total Stocks And Convertible Securities
(Cost $312,710,833) (D) $858,066,591
------------
9
SCHEDULE OF INVESTMENTS (continued)
--------------------------------------------------------------------------------
June 30, 2007
Prin. Amt. Value (A)
- ----------- -----------
Short-Term Investments -- 8.3%
U.S. Government Obligations -- 1.5%
U.S. Treasury Bills,
4.27-4.70%, due
8/2/07-8/16/07 $14,120,000 $14,046,835
-----------
Time Deposit -- 0.0%
Bank of America Corp.,
4.64%, due 7/2/07 231,718
-----------
Commercial Paper -- 6.8%
American Express Credit Corp.,
5.25%, due 7/5/07 5,700,000 5,696,675
American General Finance, Inc.,
5.26%, due 7/26/07 3,800,000 3,786,133
AIG Funding, Inc.,
5.26%, due 7/5/07 3,200,000 3,198,130
Cargill Global Funding, plc,
5.25%, due 7/2/07 7,000,000 6,998,979
Chevron Funding Corp.,
5.22-5.23%, due
7/19/07-7/31/07 6,500,000 6,480,062
Coca-Cola Co.,
5.22%, due 7/12/07 7,000,000 6,988,835
General Electric Capital Services
Corp., 5.24%, due 7/24/07 6,700,000 6,677,570
Prin. Amt. Value (A)
- ----------- ------------
Nestle Capital Co.,
5.20-5.21%, due
7/12/07-7/17/07 $ 4,900,000 $ 4,890,833
Prudential Funding, LLC,
5.22%, due 7/17/07-8/2/07 6,800,000 6,777,728
Toyota Motor Credit Corp.,
5.21-5.23%, due 7/3/07-7/17/07 6,600,000 6,593,011
United Parcel Service of America,
Inc.,
5.14-5.15%, due 7/3/07-7/10/07 5,500,000 5,495,323
------------
63,583,279
------------
Total Short-Term Investments
(Cost $77,861,832) 77,861,832
------------
Total Securities Lending Collateral -- 4.3%
(Cost $40,462,282)
Brown Brothers Investment
Trust, 5.28%, due 7/2/07 40,462,282
------------
Total Investments -- 104.1%
(Cost $431,034,947) 976,390,705
Cash, receivables, prepaid
expenses and other
assets, less liabilities -- (4.1)% (38,715,127)
------------
Net Assets -- 100.0% $937,675,578
============
--------------------------------------------------------------------------------
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)Some of the shares of this company are on loan. See note 8 to financial
statements.
(C)Presently non-dividend paying.
(D)The aggregate market value of stocks held in escrow at June 30, 2007
covering open call option contracts written was $9,478,170. In addition, the
aggregate market value of securities segregated by the Corporation's
custodian required to collateralize open put option contracts written was
$4,325,000.
10
PORTFOLIO SUMMARY
--------------------------------------------------------------------------------
June 30, 2007
(unaudited)
TEN LARGEST PORTFOLIO HOLDINGS
Market Value % of Net Assets
------------------------------------------------------------
Exxon Mobil Corp. $104,430,600 11.1%
Chevron Corp. 54,756,000 5.8
Schlumberger Ltd. 47,566,400 5.1
ConocoPhillips 43,715,944 4.7
Valero Energy Corp. 31,390,500 3.3
Weatherford International, Ltd. 27,264,254 2.9
Noble Energy, Inc. 26,827,700 2.9
Devon Energy Corp. 25,835,700 2.8
XTO Energy Inc. 23,439,000 2.5
Occidental Petroleum Corp. 23,152,000 2.5
------------ ----
Total $408,378,098 43.6%
------------------------------------------------------------
SECTOR WEIGHTINGS
[CHART]
Integrated 34.3%
Exploration & Production 15.4%
Services 22.1%
Utilities 13.4%
Basic Materials & Other 6.3%
Short-Term Investments 8.3%
11
SCHEDULE OF OUTSTANDING OPTION CONTRACTS
--------------------------------------------------------------------------------
June 30, 2007
Contracts Contract
(100 shares Strike Expiration Appreciation/
each) Security Price Date (Depreciation)
------------------------------------------------------------------------
COVERED CALLS
240 Marathon Oil Co. $62.50 Oct 07 $ (67,560)
100 Noble Energy, Inc. 70 Aug 07 5,200
200 Occidental Petroleum Corp. 55 Aug 07 (67,601)
400 Questar Corp. 45 Jul 07 (301,601)
100 Rohm & Haas Co. 55 Oct 07 (11,037)
100 Suncor Energy 95 Sep 07 (18,300)
300 Suncor Energy 100 Sep 07 (35,401)
----- ---------
1,440 (496,300)
----- ---------
COLLATERALIZED PUTS
150 Exxon Mobil Corp. 65 Jul 07 16,649
150 Forest Oil Corp. 35 Aug 07 10,800
100 Lubrizol Corp. 55 Dec 07 (39,300)
100 Lubrizol Corp. 60 Dec 07 (24,300)
250 Southwestern Energy Co. 35 Sep 07 14,874
200 Southwestern Energy Co. 40 Sep 07 (4,100)
----- ---------
950 (25,377)
----- ---------
$(521,677)
=========
12
CHANGES IN PORTFOLIO SECURITIES
--------------------------------------------------------------------------------
During the Three Months Ended June 30, 2007
(unaudited)
Shares
--------------------------------------
Held
Additions Reductions June 30, 2007
--------- ---------- -------------
Bronco Drilling Co., Inc........ 235,400 240,000
Chevron Corp.................... 15,000 650,000
Marathon Oil Co................. 120,000/(1)/ 240,000
Questar Corp.................... 180,000/(1)/ 20,000 360,000
Air Products and Chemicals, Inc. 10,000 115,000
Aqua America, Inc............... 71,000 281,000
BJ Services Co.................. 180,000 240,000
BP plc ADR...................... 180,000 --
Holly Corp...................... 360,000 --
Martin Marietta Materials, Inc.. 5,000 --
Valero Energy Corp.............. 10,000 425,000
--------
/(1)/By stock split.
-----------------
Common Stock
Listed on the New York Stock 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 Registered Public Accounting Firm: PricewaterhouseCoopers LLP
Transfer Agent & Registrar: American Stock Transfer & Trust Co.
Custodian of Securities: Brown Brothers Harriman & Co.
13
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
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
(the Corporation) at June 30, 2007, 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at June 30, 2007 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
July 13, 2007
14
HISTORICAL FINANCIAL STATISTICS
--------------------------------------------------------------------------------
(unaudited)
Dividends Distributions Total
From From Net Dividends
Net Asset Market Investment Realized and Annual
Value Of Shares Value Per Value Income Gains Distributions Rate of
Dec. 31 Net Assets Outstanding* Share* Per Share* Per Share* Per Share* Per Share* Distribution**
------- ---------- ------------ --------- ---------- ---------- ------------- ------------- --------------
1997 $556,452,549 20,134,181 $27.64 $24.33 $.51 $1.04 $1.55 6.37%
1998 474,821,118 20,762,063 22.87 20.42 .52 1.01 1.53 6.48
1999 565,075,001 21,471,270 26.32 21.50 .48 1.07 1.55 7.00
2000 688,172,867 21,053,644 32.69 27.31 .39 1.35 1.74 6.99
2001 526,491,798 21,147,563 24.90 23.46 .43 1.07 1.50 5.61
2002 451,275,463 21,510,067 20.98 19.18 .43 .68 1.11 5.11
2003 522,941,279 21,736,777 24.06 23.74 .38 .81 1.19 5.84
2004 618,887,401 21,979,676 28.16 25.78 .44 .88 1.32 5.40
2005 761,913,652 21,621,072 35.24 32.34 .56 1.22 1.78 5.90
2006 812,047,239 22,180,867 36.61 33.46 .47 3.33 3.80 11.26
June 30, 2007 937,675,578 21,877,275 42.86 38.62 .29+ .10+ .39+ --
--------
*Adjusted for 3-for-2 stock split effected in October 2000.
**The Annual Rate of Distribution is the total dividends and capital gain
distributions during the year divided by the average daily market price of
the Corporation's Common Stock.
+Paid or declared.
15
AMENDED AND RESTATED BYLAWS
--------------------------------------------------------------------------------
In June 2007, the Board of Directors of the Corporation adopted Amended and
Restated Bylaws for the Corporation. Among other changes, the Amended and
Restated Bylaws:
. add procedures and informational requirements governing the calling of a
stockholder-requested special meeting of stockholders;
. add informational requirements and modify the timing for the advance
notice of stockholder nominees for the Board of Directors and of other
stockholder proposals--stockholders are now generally required to notify
the Corporation in writing of any proposal which they intend to present
at an annual meeting of stockholders, including any nominations for
director, between 120 and 150 days prior to the first anniversary of the
mailing date of the notice for the prior year's annual meeting of
stockholders.
. implement changes to conform to the charter of the Corporation as
recently amended and restated by the stockholders, and
. include updates to conform to changes in Maryland law and current
corporate governance practice.
As a result of the changes to the advance notice bylaws summarized above, the
advance notice of Director nominees and any other proposals that a stockholder
seeks to bring before the 2008 Annual Meeting but does not seek to have
included in the Corporation's proxy statement and form of proxy for that
meeting must be received at the office of the Corporation no earlier than
September 19, 2007, and no later than October 19, 2007. Please note that these
dates are different from those that were provided in the Corporation's proxy
statement for the 2007 Annual Meeting, which dates are no longer correct.
The foregoing is only a summary and is qualified in its entirety by reference
to the Amended and Restated Bylaws, a copy of which will be filed with the
Securities and Exchange Commission as an exhibit to the Corporation's next
report on Form NSAR. The Amended and Restated Bylaws are also available upon
written request to the Secretary of the Corporation.
-----------------
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.
16
OTHER INFORMATION
--------------------------------------------------------------------------------
STATEMENT ON QUARTERLY FILING OF COMPLETE PORTFOLIO SCHEDULE
In addition to publishing its complete schedule of portfolio holdings in the
First and Third Quarter Reports to stockholders, the Corporation files its
complete schedule of portfolio holdings with the Securities and Exchange
Commission for the first and third quarters of each fiscal year on Form N-Q.
The Corporation's Forms N-Q are available on the Commission's website at
www.sec.gov. The Corporation's Forms N-Q may be reviewed and copied at the
Commission's Public Reference Room, and information on the operation of the
Public Reference Room may be obtained by calling (800) SEC-0330. The
Corporation also posts its Forms N-Q on its website at: www.peteres.com under
the heading "Financial Reports".
PROXY VOTING POLICIES AND RECORD
A description of the policies and procedures that the Corporation uses to
determine how to vote proxies relating to portfolio securities owned by the
Corporation and information as to how the Corporation voted proxies relating to
portfolio securities during the 12 month period ended June 30, 2007 are
available (i) without charge, upon request, by calling the Corporation's toll
free number at (800) 638-2479; (ii) on the Corporation's website by clicking on
"Corporate Information" heading on the website; and (iii) on the Securities and
Exchange Commission's website at http//www.sec.gov.
PRIVACY POLICY
In order to conduct its business, Petroleum & Resources Corporation, through
its transfer agent, currently American Stock Transfer & Trust Company, 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.
17
STOCKHOLDER 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
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.
INVESTORS CHOICE
INVESTORS CHOICE is a direct stock purchase and sale plan, as well as a
dividend reinvestment plan, sponsored and administered by our transfer agent,
American Stock Transfer & Trust Company (AST). 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 and
Optional Cash Investments
Service Fee $2.50 per investment
Brokerage Commission $0.05 per share
Reinvestment of Dividends*
Service Fee 2% 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 $7.50
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 INVESTORS CHOICE
as well as an enrollment form may be obtained by contacting AST.
For Non-Registered Stockholders
For stockholders whose stock is held by a broker in "street" name, the AST
INVESTORS CHOICE Direct Stock Purchase and Sale 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 AST's Plan or contact AST.
----------
The Corporation
Petroleum & Resources Corporation
Lawrence L. Hooper, Jr.
Vice President, General Counsel and Secretary
Seven St. Paul Street, Suite 1140, Baltimore, MD 21202
(800) 638-2479
Website: www.peteres.com
E-mail: contact@peteres.com
The Transfer Agent
American Stock Transfer & Trust Company
Address Stockholder Inquiries to:
Stockholder Relations Department
59 Maiden Lane
New York, NY 10038
(866) 723-8330
Website: www.amstock.com
E-mail: info@amstock.com
Investors Choice Mailing Address:
Attention: Dividend Reinvestment
P.O. Box 922
Wall Street Station
New York, NY 10269-0560
Website: www.amstock.com
E-mail: info@amstock.com
*The year-end dividend and capital gain distribution will usually be made in
newly issued shares of common stock. There are no fees or commissions in
connection with this dividend and capital gain distribution when made in newly
issued shares.
18
Item 2: Code(s) of Ethics for senior financial officers -
Item not applicable to semi-annual report.
Item 3: Audit Committee Financial Expert - Item not
applicable to semi-annual report.
Item 4: Principal Accountant Fees and Services - Item not
applicable to semi-annual report.
Item 5: Audit Committee of Listed Registrants - Item not
applicable to semi-annual report.
Item 6: Schedule of Investments - This schedule is included
as part of the report to shareholders filed under Item 1 of
this form.
Item 7: Disclosure of Proxy Voting Policies and Procedures
for Closed-End Management Investment Companies - Item not
applicable to semi-annual report.
Item 8: Portfolio Managers of Closed-End Management
Investment Companies - Item not applicable to semi-annual
report.
Item 9: Purchases of Equity Securities by Closed-End
Management Investment Company and Affiliated Purchasers.
Maximum
Total Number (or
Number of Approximate
Shares (or Dollar Value)
Total Units) of Shares (or
Number Purchased Units) that
of Average as Part of May Yet Be
Shares Price Publicly Purchased
(or Paid per Announced Under the
Units) Share (or Plans or Plans or
Period(2) Purchased Unit) Programs Programs
-------- --------- --------- --------- ---------
Jan. 2007 51,425 $ 31.64 51,425 921,230
Feb. 2007 58,500 $ 33.03 58,500 862,730
Mar. 2007 145,052 $ 33.50 145,052 717,678
Apr. 2007 37,970 $ 35.52 37,970 679,708
May 2007 0 $ 0 0 679,708
June 2007 26,100 $ 39.06 26,100 653,608
-------- --------- --------- --------- ---------
Total 319,047(1) $ 33.81 319,047(2) 653,608(2)
(1) There were no shares purchased other than through a
publicly announced plan or program.
(2.a) The Plan was reapproved on December 14, 2006.
(2.b) The share amount approved in 2006 was 5% of
outstanding shares, or approximately 1,045,164 shares.
(2.c) Unless reapproved, the Plan will expire on or about
December 13, 2007.
(2.d) None.
(2.e) None.
Item 10. Submission of Matters to a Vote of Security Holders.
In June 2007, Registrant's Board of Directors adopted
Amended and Restated Bylaws for the Corporation that, among
other changes, make material changes to the procedures by
which stockholders may recommend nominees to Registrant's
Board of Directors. In general, the changes add
informational requirements and modify the timing for the
advance notice of stockholder nominees for the Board of
Directors and of other stockholder proposals -- stockholders
are now generally required to notify the Corporation in
writing of any proposal which they intend to present at an
annual meeting of stockholders, including any nominations
for director, between 120 and 150 days prior to the first
anniversary of the mailing date of the notice for the prior
year's annual meeting of stockholders.
The Amended and Restated Bylaws governing the advance notice
requirements for stockholders who wish to recommend Director
nominees provide as follows:
Section 2.9. Advance Notice of Stockholder Nominees for
Director and Other Stockholder Proposals.
(a) Annual Meetings of Stockholders.
(1) Nominations of individuals for election to
the Board of Directors and the proposal of other business to
be considered by the stockholders may be made at an annual
meeting of stockholders (i) pursuant to the Corporation's
notice of meeting, (ii) by or at the direction of the Board
of Directors or (iii) by any stockholder of the Corporation
who was a stockholder of record both at the time of giving
of notice by the stockholder as provided for in this Section
2.9(a) and at the time of the annual meeting, who is
entitled to vote at the meeting and who has complied with
this Section 2.9(a).
(2) For nominations or other business to be
properly brought before an annual meeting by a stockholder
pursuant to clause (iii) of paragraph (a)(1) of this Section
2.9, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation and such
other business must otherwise be a proper matter for action
by the stockholders. To be timely, a stockholder's notice
shall set forth all information required under this Section
2.9 and shall be delivered to the Secretary at the principal
executive office of the Corporation not earlier than the
150th day prior to the first anniversary of the Date of
Mailing of the Notice (as defined herein) for the preceding
year's annual meeting nor later than 5:00 p.m., Eastern
Time, on the 120th day prior to the first anniversary of the
Date of Mailing of the Notice for the preceding year's
annual meeting; provided, however, that in the event that
the date of the annual meeting is advanced or delayed by
more than 30 days from the first anniversary of the date of
the preceding year's annual meeting, notice by the
stockholder to be timely must be so delivered not earlier
than the 150th day prior to the date of such annual meeting
and not later than 5:00 p.m., Eastern Time, on the later of
the 120th day prior to the date of such annual meeting or
the tenth day following the day on which public announcement
of the date of such meeting is first made. The public
announcement of a postponement or adjournment of an annual
meeting shall not commence a new time period for the giving
of a stockholder's notice as described above. Such
stockholder's notice shall set forth (i) as to each
individual whom the stockholder proposes to nominate for
election or reelection as a director, (A) the name, age,
business address and residence address of such individual,
(B) the class, series and number of any shares of stock of
the Corporation that are beneficially owned by such
individual, (C) the date such shares were acquired and the
investment intent of such acquisition, (D) whether such
stockholder believes any such individual is, or is not, an
"interested person" of the Corporation, as defined in the
Investment Company Act of 1940, as amended, and the rules
promulgated thereunder (the "Investment Company Act") and
information regarding such individual that is sufficient, in
the discretion of the Board of Directors or any committee
thereof or any authorized officer of the Corporation, to
make such determination and (E) all other information
relating to such individual that is required to be disclosed
in solicitations of proxies for election of directors in an
election contest (even if an election contest is not
involved), or is otherwise required, in each case pursuant
to Regulation 14A (or any successor provision) under the
Exchange Act and the rules thereunder (including such
individual's written consent to being named in the proxy
statement as a nominee and to serving as a director if
elected); (ii) as to any other business that the stockholder
proposes to bring before the meeting, a description of such
business, the reasons for proposing such business at the
meeting and any material interest in such business of such
stockholder and any Stockholder Associated Person (as
defined below), individually or in the aggregate, including
any anticipated benefit to the stockholder and the
Stockholder Associated Person therefrom; (iii) as to the
stockholder giving the notice and any Stockholder Associated
Person, (A) the class, series and number of all shares of
stock of the Corporation which are owned by such stockholder
and by such Stockholder Associated Person, if any, (B) the
nominee holder for, and number of, shares owned beneficially
but not of record by such stockholder and by any such
Stockholder Associated Person, (C) whether and the extent to
which any hedging or other transaction or series of
transactions has been entered into by or on behalf of, or
any other agreement, arrangement or understanding (including
any short position or any borrowing or lending of shares)
has been made, the effect or intent of which is to mitigate
loss to or manage risk of share price changes for, or to
increase the voting power of, such stockholder or any such
Stockholder Associated Person with respect to any share of
stock of the Corporation (collectively, "Hedging
Activities") and (D) a general description of whether and
the extent to which such stockholder or such Stockholder
Associated Person has engaged in Hedging Activities with
respect to shares of stock of any other closed-end
investment company; (iv) as to the stockholder giving the
notice and any Stockholder Associated Person covered by
clauses (ii) or (iii) of this paragraph (2) of this Section
2.9(a), the name and address of such stockholder, as they
appear on the Corporation's stock ledger and current name
and address, if different, and of such Stockholder
Associated Person; and (v) to the extent known by the
stockholder giving the notice, the name and address of any
other stockholder supporting the nominee for election or
reelection as a director or the proposal of other business
on the date of such stockholder's notice.
(3) Notwithstanding anything in this subsection
(a) of this Section 2.9 to the contrary, in the event that
the number of directors to be elected to the Board of
Directors is increased and there is no public announcement
of such action at least 130 days prior to the first
anniversary of the date of mailing of the notice of the
preceding year's annual meeting, a stockholder's notice
required by this Section 2.9(a) shall also be considered
timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered
to the Secretary at the principal executive office of the
Corporation not later than 5:00 p.m., Eastern Time, on the
tenth day following the day on which such public
announcement is first made by the Corporation.
(4) For purposes of this Section 2.9,
"Stockholder Associated Person" of any stockholder shall
mean (i) any person controlling, directly or indirectly, or
acting in concert with, such stockholder (including, without
limitation, any person who is a member of a "group" for
purposes of Section 13(d) of the Exchange Act, or any
successor provision, that includes such stockholder), (ii)
any beneficial owner of shares of stock of the Corporation
owned of record or beneficially by such stockholder and
(iii) any person controlling, controlled by or under common
control with such Stockholder Associated Person.
(b) Special Meetings of Stockholders. Only such
business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting
pursuant to the Corporation's notice of meeting.
Nominations of individuals for election to the Board of
Directors may be made at a special meeting of stockholders
at which directors are to be elected (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction
of the Board of Directors or (iii) provided that the Board
of Directors has determined that directors shall be elected
at such special meeting, by any stockholder of the
Corporation who is a stockholder of record both at the time
of giving of notice provided for in this Section 2.9 and at
the time of the special meeting, who is entitled to vote at
the meeting and who complied with the notice procedures set
forth in this Section 2.9. In the event the Corporation
calls a special meeting of stockholders for the purpose of
electing one or more individuals to the Board of Directors,
any such stockholder may nominate an individual or
individuals (as the case may be) for election as a director
as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (2) of this
Section 2.9(a) shall be delivered to the Secretary at the
principal executive office of the Corporation not earlier
than the 150th day prior to such special meeting and not
later than 5:00 p.m., Eastern Time, on the later of the
120th day prior to such special meeting or the tenth day
following the day on which public announcement is first made
of the date of the special meeting and of the nominees
proposed by the Board of Directors to be elected at such
meeting. The public announcement of a postponement or
adjournment of a special meeting shall not commence a new
time period for the giving of a stockholder's notice as
described above.
(c) General.
(1) Upon written request by the Secretary or the
Board of Directors or any committee thereof, any stockholder
proposing a nominee for election as a director or any
proposal for other business at a meeting of stockholders
shall provide, within five Business Days of delivery of such
request (or such other period as may be specified in such
request), written verification, satisfactory, in the
discretion of the Board of Directors or any committee
thereof or any authorized officer of the Corporation, to
demonstrate the accuracy of any information submitted by the
stockholder pursuant to this Section 2.9. If a stockholder
fails to provide such written verification within such
period, the information as to which written verification was
requested may be deemed not to have been provided in
accordance with this Section 2.9.
(2) Only such individuals who are nominated in
accordance with this Section 2.9 shall be eligible for
election by stockholders as directors, and only such
business shall be conducted at a meeting of stockholders as
shall have been brought before the meeting in accordance
with this Section 2.9. The chairman of the meeting shall
have the power to determine whether a nomination or any
other business proposed to be brought before the meeting was
made or proposed, as the case may be, in accordance with
this Section 2.9.
(3) For purposes of this Section 2.9, (a) the
"Date of Mailing of the Notice" shall mean the date of the
proxy statement for the solicitation of proxies for election
of directors and (b) "public announcement" shall mean
disclosure (i) in a press release reported by the Dow Jones
News Service, Associated Press, Business Wire, PR Newswire
or comparable news service or (ii) in a document publicly
filed by the Corporation with the Securities and Exchange
Commission pursuant to the Exchange Act or the Investment
Company Act.
(4) Notwithstanding the foregoing provisions of
this Section 2.9, a stockholder shall also comply with all
applicable requirements of state law and of the Exchange Act
and the rules and regulations thereunder with respect to the
matters set forth in this Section 2.9. Nothing in this
Section 2.9 shall be deemed to affect any right of a
stockholder to request inclusion of a proposal in, nor the
right of the Corporation to omit a proposal from, the
Corporation's proxy statement pursuant to Rule 14a-8 (or any
successor provision) under the Exchange Act.
The Amended and Restated Advance Notice Bylaws apply to
Registrant's 2008 Annual Meeting, and the advance notice of
Director nominees and any other proposals that a stockholder
seeks to bring before the 2008 Annual Meeting but does not
seek to have included in the Corporation's proxy statement
and form of proxy for that meeting must be received at the
office of the Corporation no earlier than September 19,
2007, and no later than October 19, 2007.
Item 11. Controls and Procedures.
Conclusions of principal officers concerning controls and
procedures.
(a) As of July 23, 2007, an evaluation was performed
under the supervision and with the participation of the
officers of registrant, including the principal executive
officer (PEO) and principal financial officer (PFO), of the
effectiveness of registrant's disclosure controls and
procedures. Based on that evaluation, the registrant's
officers, including the PEO and PFO, concluded that, as of
July 23, 2007, the registrant's disclosure controls and
procedures were reasonably designed so as to ensure that
material information relating to the registrant is made
known to the PEO and PFO.
(b) There have been no significant changes in the
registrant's internal control over financial reporting (as
defined in Rule 30a-3(d) under the Investment Company Act of
1940 (17 CFR 270.30a-3(d)) that occurred during the
registrant's last fiscal half-year that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits attached hereto. (Attach certifications as
exhibits)
(1) Not applicable. See registrant's response to Item 2,
above.
(2) Separate certifications by the registrant's principal
executive officer and principal financial officer, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 and
required by Rule 30a-2 under the Investment Company Act of
1940, are attached.
A certification by the registrant's principal executive
officer and principal financial officer, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, is attached.
Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, the
registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PETROLEUM & RESOURCES CORPORATION
BY: /s/ Douglas G. Ober
-----------------------
Douglas G. Ober
Chief Executive Officer
(Principal Executive Officer)
Date: July 23, 2007
Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, this report
has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates
indicated.
BY: /s/ Douglas G. Ober
-----------------------
Douglas G. Ober
Chief Executive Officer
(Principal Executive Officer)
Date: July 23, 2007
BY: /s/ Maureen A. Jones
-----------------------
Maureen A. Jones
Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: July 23, 2007