PETROLEUM & RESOURCES CORPORATION - FORM N-CSRS - JUNE 30, 2012

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-02736
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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)

 

 

Lawrence L. Hooper, Jr.
Petroleum & Resources Corporation
7 Saint Paul Street, Suite 1140
Baltimore, Maryland 21202

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(Name and address of agent for service)

 

 

Registrant's telephone number, including area code: (410) 752-5900
Date of fiscal year end: December 31
Date of reporting period: June 30, 2012

Item 1. Reports to Stockholders.

  LOGO

 


LETTER TO STOCKHOLDERS

 

 

 

We submit herewith the financial statements of Petroleum & Resources Corporation (the “Corporation”) for the six months ended June 30, 2012. Also provided are a schedule of investments and other financial information.

 

Net assets of the Corporation at June 30, 2012 were $27.69 per share on 25,654,466 shares outstanding, compared with $28.58 per share at December 31, 2011 on 25,641,018 shares outstanding. On March 1, 2012, a distribution of $0.10 per share was paid, consisting of $0.03 from 2011 investment income, $0.01 from 2011 short-term capital gain, $0.05 from 2011 long-term capital gain, and $0.01 from 2012 investment income, all taxable in 2012. A 2012 investment income dividend of $0.10 per share was paid June 1, 2012, and another $0.10 per share investment income dividend has been declared to stockholders of record August 10, 2012, payable September 1, 2012. The table on page 14 shows the annual distribution rate over the past five years.

 

Net investment income for the six months ended June 30, 2012 amounted to $5,834,292, compared with $4,831,147 for the same six month period in 2011. These earnings are equal to $0.23 and $0.19 per share, respectively.

 

Net capital gain realized on investments for the six months ended June 30, 2012 amounted to $19,185,714, or $0.75 per share.

 

Performance comparisons for the Corporation, relevant benchmarks, and a Lipper peer group are as follows:

 

 

Performance Comparisons      YTD        1 Year        3 Year*        5 Year*  

Petroleum & Resources:

                     

NAV

       (2.3 )%         (11.3 )%         12.6        0.1

Market Price

       (1.3 )%         (12.3 )%         12.1        (0.8 )% 

Lipper Global Natural Resources Funds Index

       (5.9 )%         (23.3 )%         5.8        (4.4 )% 

Dow Jones U.S. Oil and Gas Index†

       (2.5 )%         (9.0 )%         12.2        0.9

Dow Jones U.S. Basic Materials Index†

       1.7        (15.9 )%         16.8        0.6
Market indices do not include expenses and transaction costs, which are deducted from Fund and Lipper returns.
* Annualized

 

 

Douglas G. Ober has informed the Board of Directors of his plans to retire within the next eighteen months. Daniel E. Emerson, Lead Director of the Board, in commenting on Mr. Ober’s announcement, said “Doug has done an outstanding job guiding the Corporation through some remarkably turbulent times over the past 21 years. His steady hand and unflappable adherence to his investment principles has served, and will continue to serve, our stockholders well. He has built a strong team at the Corporation and when he does step down, the Fund will continue in good hands. With his announcement, he has given us the time to carefully identify his successor.”

 

 

 

Investors 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, links for electronic delivery of stockholder reports, and other useful content.

 

 

By order of the Board of Directors,

 

LOGO
LOGO

Douglas G. Ober

Chairman and

Chief Executive Officer

 

July 12, 2012

Nancy J.F. Prue

President

 

 

 

 

 


PORTFOLIO REVIEW

 

 

June 30, 2012

(unaudited)

 

 

TEN LARGEST EQUITY PORTFOLIO HOLDINGS

 

      Market Value        % of Net Assets  

Exxon Mobil Corp.

   $ 124,797,855           17.6

Chevron Corp.

     90,730,000           12.8   

Schlumberger Ltd.

     37,323,250           5.3   

Occidental Petroleum Corp.

     30,877,200           4.3   

Anadarko Petroleum Corp.

     19,860,000           2.8   

Dow Chemical Co.

     17,325,000           2.4   

Freeport-McMoRan Copper & Gold Inc.

     16,592,090           2.3   

Praxair, Inc.

     16,309,500           2.3   

CF Industries Holdings, Inc.

     16,287,528           2.3   

Noble Energy, Inc.

     16,115,800           2.3   
  

 

 

      

 

 

 

Total

   $ 386,218,223           54.4
                     

 

SECTOR WEIGHTINGS

 

 

LOGO

 

2


STATEMENT OF ASSETS AND LIABILITIES

 

 

 

June 30, 2012

(unaudited)

 

Assets

     

Investments* at value:

     

Common stocks (cost $426,001,952)

   $ 685,370,217      

Short-term investments (cost $28,061,986)

     28,061,986      

Securities lending collateral (cost $4,364,089)

     4,364,089       $ 717,796,292   

Cash

     

Receivables:

        158,250   

Investment securities sold

        28,499   

Dividends and interest

        865,094   

Prepaid expenses and other assets

              729,002   

Total Assets

              719,577,137   

Liabilities

     

Open written option contracts* at value (proceeds $1,837,703)

        1,628,436   

Obligations to return securities lending collateral

        4,364,089   

Accrued pension liabilities

        2,516,065   

Accrued expenses and other liabilities

              662,267   

Total Liabilities

              9,170,857   

Net Assets

            $ 710,406,280   

Net Assets

     

Common Stock at par value $0.001 per share, authorized 50,000,000 shares;
issued and outstanding 25,654,466 shares (includes 38,596 restricted shares, 9,600 nonvested or deferred restricted stock units, and 5,975 deferred stock units) (note 6)

      $ 25,655   

Additional capital surplus

        431,766,509   

Accumulated other comprehensive income (note 5)

        (1,803,982

Undistributed net investment income

        1,928,507   

Undistributed net realized gain on investments

        18,912,059   

Unrealized appreciation on investments

              259,577,532   

Net Assets Applicable to Common Stock

            $ 710,406,280   

Net Asset Value Per Share of Common Stock

              $27.69   

 

* See Schedule of Investments on page 11 and Schedule of Outstanding Written Option Contracts on page 13.

 

The accompanying notes are an integral part of the financial statements.

 

3


STATEMENT OF OPERATIONS

 

 

 

Six Months Ended June 30, 2012

(unaudited)

 

Investment Income

  

Income:

  

Dividends (net of $26,206 in foreign taxes)

   $ 7,770,732   

Interest and other income

     676,279   

Total income

     8,447,011   

Expenses:

  

Investment research

     1,043,563   

Administration and operations

     690,210   

Directors’ fees

     263,682   

Travel, training, and other office expenses

     122,763   

Investment data services

     113,952   

Reports and stockholder communications

     99,638   

Transfer agent, registrar, and custodian

     82,615   

Occupancy

     57,632   

Audit and accounting services

     45,174   

Insurance

     37,397   

Legal services

     14,995   

Other

     41,098   

Total expenses

     2,612,719   

Net Investment Income

     5,834,292   

Realized Gain and Change in Unrealized Appreciation on Investments

  

Net realized gain on security transactions

     17,173,859   

Net realized gain on written option contracts

     2,011,855   

Change in unrealized appreciation on investments

     (42,059,448

Change in unrealized appreciation on written option contracts

     (616,590

Net Loss on Investments

     (23,490,324

Other Comprehensive Income (note 5)

  

Defined benefit pension plans:

  

Net actuarial loss arising during period

     (95,634

Amortization of net loss

     152,499   

Effect of settlement (non-recurring)

     172,838   

Other Comprehensive Income

     229,703   

Change in Net Assets Resulting from Operations

   $ (17,426,329

 

The accompanying notes are an integral part of the financial statements.

 

4


STATEMENTS OF CHANGES IN NET ASSETS

 

 

 

     (unaudited)
Six Months  Ended
June 30, 2012
    Year Ended
December 31, 2011
 

From Operations:

    

Net investment income

   $ 5,834,292      $ 10,208,955   

Net realized gain on investments

     19,185,714        39,332,517   

Change in unrealized appreciation on investments

     (42,676,038     (49,850,819

Change in accumulated other comprehensive income (note 5)

     229,703        (853,586

Decrease in net assets resulting from operations

     (17,426,329     (1,162,933

Distributions to Stockholders from:

    

Net investment income

     (3,589,085     (9,671,069 )

Net realized gain from investment transactions

     (1,531,184     (39,180,757 )

Decrease in net assets from distributions

     (5,120,269     (48,851,826 )

From Capital Share Transactions:

    

Value of shares issued in payment of distributions (note 4)

     6,372        20,801,833  

Deferred compensation (notes 4, 6)

     135,814        288,115   

Increase in net assets from capital share transactions

     142,186        21,089,948   

Total Decrease in Net Assets

     (22,404,412     (28,924,811

Net Assets:

    

Beginning of period

     732,810,692        761,735,503   

End of period (including undistributed net investment
income of $1,928,507 and $(316,700) respectively)

   $ 710,406,280      $ 732,810,692   

 

The accompanying notes are an integral part of the financial statements.

 

5


NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

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 closed-end 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.

 

The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates made by Corporation management. Management believes that estimates and security valuations are appropriate; however, actual results may differ from those estimates, and the security valuations reflected in the financial statements may differ from the value the Corporation ultimately realizes upon sale of the securities.

 

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 specific identification. Dividend income and distributions to stockholders are recognized on the ex-dividend date, and interest income is recognized on the accrual basis.

 

Security Valuation—The Corporation’s investments are reported at fair value as defined under accounting principles generally accepted in the United States of America. 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 and money market funds) are valued at amortized cost, which approximates fair value. Purchased and written options are valued at the last quoted bid and asked price, respectively. Money market funds are valued at net asset value on the day of valuation.

 

Various inputs are used to determine the fair value of the Corporation’s investments. These inputs are summarized in the following three levels:

 

   

Level 1 — fair value is determined based on market data obtained from independent sources; for example, quoted prices in active markets for identical investments,

   

Level 2 — fair value is determined using other assumptions obtained from independent sources; for example, quoted prices for similar investments,

   

Level 3 — fair value is determined using the Corporation’s own assumptions, developed based on the best information available in the circumstances.

 

The Corporation’s investments at June 30, 2012 were classified as follows:

 

    Level 1     Level 2     Level 3     Total  

Common stocks

  $ 685,370,217      $       —            $       —            $ 685,370,217   

Short-term investments

    13,062,211        14,999,775        —              28,061,986   

Securities lending collateral

    4,364,089              —              —              4,364,089   

Total investments

  $ 702,796,517      $ 14,999,775      $       —            $ 717,796,292   

Written options

  $ (1,628,436   $       —            $       —            $ (1,628,436

 

There were no transfers into or from Level 1 or Level 2 during the six months ended June 30, 2012.

 

2.    FEDERAL INCOME TAXES

 

No federal income tax provision is required since the Corporation’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income to its stockholders. Additionally, management has analyzed and concluded that tax positions included in federal income tax returns from the previous three years that remain subject to examination do not require any provision. Any income tax-related interest or penalties would be recognized as income tax expense. As of June 30, 2012, the identified cost of securities for federal income tax purposes was $458,428,027 and net unrealized appreciation aggregated $259,368,265, consisting of gross unrealized appreciation of $289,665,502 and gross unrealized depreciation of $30,297,237.

 

Distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Such differences are primarily related to the Corporation’s retirement plans and equity-based compensation. Differences that are permanent are periodically reclassified in the capital accounts of the Corporation’s financial statements and have no impact on net assets.

 

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, 2012 were $39,598,218 and $62,283,120, respectively.

 

6


NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

 

 

 

The Corporation is subject to changes in the value of equity securities held (“equity price risk”) in the normal course of pursuing its investment objectives. The Corporation may purchase and write option contracts to increase or decrease its equity price risk exposure or may write option contracts to generate additional income. Option contracts generally entail risks associated with counterparty credit, liquidity, and unfavorable equity price movements. The Corporation has mitigated counterparty credit and liquidity risks by trading its options through an exchange. The risk of unfavorable equity price movements is limited for purchased options to the premium paid and for written options by writing only covered call or collateralized put option contracts, which require the Corporation to segregate certain securities or cash at its custodian when the option is written. A schedule of outstanding written option contracts as of June 30, 2012 can be found on page 13.

 

When the Corporation writes (purchases) an option, an amount equal to the premium received (paid) by the Corporation is recorded as a liability (asset) and is subsequently marked to market daily in the Statement of Assets and Liabilities, with any related change recorded as an unrealized gain or loss in the Statement of Operations. Premiums received (paid) from unexercised options are treated as realized gains (losses) on the expiration date. Upon the exercise of written put (purchased call) option contracts, premiums received (paid) are deducted from (added to) the cost basis of the underlying securities purchased. Upon the exercise of written call (purchased put) option contracts, premiums received (paid) are added to (deducted from) the proceeds from the sale of underlying securities in determining whether there is a realized gain or loss.

 

Transactions in written covered call and collateralized put options during the six months ended June 30, 2012 were as follows:

 

     Covered Calls     Collateralized Puts  
     Contracts     Premiums     Contracts     Premiums  

Options outstanding, December 31, 2011

     2,243      $ 387,334        4,208      $ 1,057,666   

Options written

     15,272        1,898,141        16,702        3,109,445   

Options terminated in closing purchase transactions

     (450     (76,483     (4,233     (850,493

Options expired

     (8,589     (1,174,055     (10,169     (1,875,028

Options exercised

     (800     (143,122     (1,606     (495,702

Options outstanding, June 30, 2012

     7,676      $ 891,815        4,902      $ 945,888   

 

4.    CAPITAL STOCK

 

The Corporation has 5,000,000 authorized and unissued preferred shares, $0.001 par value.

 

During 2012, 247 shares of Common Stock were issued at a weighted average price of $25.55 per share as dividend equivalents to holders of deferred stock units and restricted stock units under the 2005 Equity Incentive Compensation Plan.

 

On December 27, 2011, the Corporation issued 837,497 shares of its Common Stock at a price of $24.81 per share (the average market price on December 7, 2011) to stockholders of record on November 21, 2011, who elected to take stock in payment of the distribution from 2011 capital gain and investment income. During 2011, 870 shares were issued at a weighted average price of $26.83 per 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 2012 and 2011 were as follows:

 

    Shares     Amount  
    Six months
ended
June 30,
2012
    Year ended
December 31,
2011
    Six months
ended
June 30,
2012
    Year ended
December 31,
2011
 

Shares issued in
payment of dividends

    247        838,367      $ 6,372      $ 20,801,833   

Net activity under the 2005 Equity Incentive Compensation Plan

    13,201        12,953        135,814        288,115   

Net change

    13,448        851,320      $ 142,186      $ 21,089,948   

 

5.    RETIREMENT PLANS

 

Defined Contribution Plans — The Corporation sponsors a qualified defined contribution plans for all employees with at least six months of service and a nonqualified defined contribution plan for eligible employees to supplement the qualified plan. The Corporation expensed contributions to the plans in the amount of $79,771, a portion thereof based on company performance, for the six months ended June 30, 2012. The Corporation does not provide postretirement medical benefits.

 

Defined Benefit Plans — On October 1, 2009, the Corporation froze its non-contributory qualified and nonqualified defined benefit pension plans. Benefits are based on length

 

7


NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

 

 

of service and compensation during the last five years of employment through September 30, 2009, with no additional benefits being accrued beyond that date.

 

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 and are subsequently amortized into net periodic pension cost. Non-recurring settlement costs are recognized in net periodic pension cost when a plan participant receives a lump-sum benefit payment and includes the amount of which is in excess of the present value of the projected benefit and any unamortized actuarial losses attributable to the portion of the projected benefit obligation being satisfied.

 

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. The Corporation made no contributions to the qualified plan and contributed $18,205 to the nonqualified plan during the six months ended June 30, 2012, and anticipates making additional contributions of up to $940,000 in the aggregate over the remainder of 2012.

 

Items impacting the Corporation’s net investment income and accumulated other comprehensive income were:

 

    Six months
ended
June 30,
2012
    Year ended
December 31,
2011
 

Components of net periodic pension cost

   

Interest cost

  $ 117,560      $ 244,878   

Expected return on plan assets

    (110,720     (213,408

Net loss component

    152,499        181,415   

Effect of settlement (non-recurring)

    172,838          

Net periodic pension cost

  $ 332,177      $ 212,885   
    Six months
ended
June 30,
2012
    Year ended
December 31,
2011
 

Accumulated other comprehensive income

   

Defined benefit pension plans:

   

Balance at beginning of period

  $ (2,033,685   $ (1,180,099

Current period other comprehensive income

    229,703        (853,586

Balance at end of period

  $ (1,803,982   $ (2,033,685

 

6.    EQUITY-BASED COMPENSATION

 

The 2005 Equity Incentive Compensation Plan (“2005 Plan”), adopted at the 2005 Annual Meeting and re-approved at the 2010 Annual Meeting, permits the grant of restricted stock awards (both performance and nonperformance based), as well as stock options and other stock incentives, to key employees and all non-employee directors. Performance-based restricted stock awards vest at the end of a specified three year period, with the ultimate number of shares earned contingent on achieving certain performance targets. If performance targets are not achieved, all or a portion of the performance-based restricted shares 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. Payment of awards may be deferred, if elected. 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 were granted at fair market value on grant date. The 2005 Plan provides for the issuance of up to 872,639 shares of the Corporation’s Common Stock, of which 773,175 shares remain available for future grants at June 30, 2012.

 

A summary of the status of the Corporations’s awards granted under the 2005 Plan as of June 30, 2012, and changes during the six month period then ended is presented below:

 

Awards

   Shares/
Units
    Weighted Average
Grant-Date Fair
Value
 

Balance at December 31, 2011

     47,694      $ 25.69   

Granted:

    

    Restricted stock

     14,873        25.08   

    Restricted stock units

     3,200        26.71   

    Deferred stock units

     257        25.47   

Vested & issued

     (9,210     23.52   

Forfeited

     (2,643     21.65   

Balance at June 30, 2012 (includes
37,326 performance-based awards and
16,845 nonperformance-based awards)

     54,171      $ 25.93   

 

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,

 

8


NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

 

 

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, 2012 were $147,250. The total compensation costs for restricted stock units granted to non-employee directors for the period ended June 30, 2012 were $44,432. As of June 30, 2012, there were total unrecognized compensation costs of $567,882, a component of additional capital surplus, related to nonvested equity-based compensation arrangements granted under the 2005 Plan. That cost is expected to be recognized over a weighted average period of 1.69 years. The total fair value of shares and units vested and issued during the six month period ended June 30, 2012 was $232,710.

 

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, however, 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, 2012, and changes during the six month period then ended is presented below:

 

    Options     Weighted-
Average
Exercise
Price
    Weighted-
Average
Remaining
Life (Years)
    Aggregate
Intrinsic
Value
 

Outstanding at December 31, 2011

    5,208      $ 7.37        1.68     

Exercised

    (864     6.23             $ 16,351   

Outstanding and exercisable at June 30, 2012

    4,344      $ 7.54     1.50      $ 71,350   
* Actual exercise price for all outstanding options

 

Compensation cost resulting from stock options and stock appreciation rights granted under the 1985 Plan is based on 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, 2012 was $803.

 

7.    OFFICER AND DIRECTOR COMPENSATION

 

The aggregate remuneration paid during the six months ended June 30, 2012 to officers and directors amounted to $1,379,247, of which $275,863 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 approved brokers to earn additional income. It receives as collateral cash deposits, U.S. Government securities, or bank letters of credit valued at 102% of the value of the securities on loan. The market value of the loaned securities is calculated based upon the most recent closing prices and any additional required collateral is delivered to the Corporation on the next business day. Cash deposits are placed in a registered money market fund. 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. 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, 2012, the Corporation had securities on loan of $4,507,681 and held cash collateral of $4,364,089; additional collateral was delivered the next business day in accordance with the procedure described above. The Corporation is indemnified by the Custodian, serving as lending agent, for loss of loaned securities and has the right under the lending agreement to recover the securities from the borrower on demand.

 

9. OPERATING LEASE COMMITMENT

 

The Corporation shares office space and equipment with its non-controlling affiliate, The Adams Express Company, under operating lease agreements expiring at various dates through the year 2016. Rental payments are based on a predetermined cost sharing methodology. The Corporation recognized rental expense of $54,283 in the first half of 2012, and its estimated portion of future minimum rental commitments are as follows:

 

2012

   $ 53,311   

2013

     105,400   

2014

     105,705   

2015

     105,891   

2016

     51,157   

Total

   $ 421,464   

 

9


FINANCIAL HIGHLIGHTS

 

 

 

    (unaudited)
Six Months Ended
                               
    June 30,
2012
    June 30,
2011
    Year Ended December 31  
        2011     2010     2009     2008     2007  

Per Share Operating Performance

               
   

Net asset value, beginning of period

    $28.58        $30.73         $30.73         $26.75         $22.49         $42.99         $36.61    
   

Net investment income

    0.23        0.19         0.41         0.35         0.28         0.43         0.46    
   

Net realized gains and increase (decrease) in unrealized appreciation

    (0.93     2.98         (0.42)        4.97         5.37         (17.71)        10.37    
   

Change in accumulated other comprehensive income (note 5)

    0.01        —            (0.03)        0.01         0.10         (0.07)          
   

Total from investment operations

    (0.69     3.17         (0.04)        5.33         5.75         (17.35)        10.83    
   

Less distributions

               
   

Dividends from net investment income

    (0.14     (0.14)        (0.39)        (0.32)        (0.37)        (0.38)        (0.49)   
   

Distributions from net realized gains

    (0.06     (0.06)        (1.58)        (0.95)        (1.03)        (2.61)        (3.82)   
   

Total distributions

    (0.20     (0.20)        (1.97)        (1.27)        (1.40)        (2.99)        (4.31)   
   

Capital share repurchases

    —            —            —            —            0.02         0.08         0.10    
   

Reinvestment of distributions

    —            —            (0.14)        (0.08)        (0.11)        (0.24)        (0.24)   
   

Total capital share transactions

    —            —            (0.14)        (0.08)        (0.09)        (0.16)        (0.14)   
   

Net asset value, end of period

    $27.69        $33.70        $28.58        $30.73         $26.75         $22.49         $42.99    
   

Market price, end of period

    $23.96        $29.49        $24.48        $27.01         $23.74         $19.41         $38.66    
   

Total Investment Return

               
   

Based on market price

    (1.3)%        9.9%        (2.3)%        19.6%        30.3%        (42.2)%        28.9%   
   

Based on net asset value

    (2.3)%        10.4%        0.3%        20.8%        26.7%        (39.8)%        31.0%   
   

Ratios/Supplemental Data

               
   

Net assets, end of period (in 000’s)

    $710,406        $835,707        $732,811        $761,736        $650,718        $538,937        $978,920   
   

Ratio of expenses to average net assets†

    0.70% ††      0.52% ††       0.56%        0.64%        0.96%        0.51%        0.54%   
   

Ratio of net investment income to
average net assets†

    1.57% ††      1.16% ††      1.29%        1.32%        1.18%        1.10%        1.12%   
   

Portfolio turnover

    11.03% ††      21.33% ††      16.40%        16.79%        14.35%        16.89%        7.36%   
   

Number of shares outstanding at
end of period (in 000’s)

    25,654        24,802        25,641        24,790        24,327        23,959        22,768   

 

  † For 2009, the ratios of expenses and net investment income to average net assets were 0.78% and 1.36%, respectively, after adjusting for non-recurring pension expenses as described in footnote 5. For 2012, the adjusted ratios were 0.66% and 1.62%, respectively.
†† Ratios presented on an annualized basis.

 

10


SCHEDULE OF INVESTMENTS

 

 

 

June 30, 2012

(unaudited)

 

     Shares     Value (A)  

Common Stocks — 96.5%

  

 

Energy — 75.4%

   

Exploration & Production — 20.9%

  

 

Anadarko Petroleum Corp. (E)

    300,000      $ 19,860,000   

Apache Corp.

    160,000        14,062,400   

Devon Energy Corp.

    135,000        7,828,650   

Energen Corp.

    175,000        7,897,750   

EOG Resources, Inc.

    130,000        11,714,300   

EQT Corp.

    140,000        7,508,200   

Forest Oil Corp. (C)

    200,000        1,466,000   

Marathon Oil Corp.

    175,000        4,474,750   

Midstates Petroleum Co., Inc. (C)

    225,000        2,184,750   

Newfield Exploration Co. (C)

    80,000        2,344,800   

Noble Energy, Inc. (E)

    190,000        16,115,800   

Oasis Petroleum, Inc. (B) (C) (E)

    150,000        3,627,000   

Occidental Petroleum Corp.

    360,000        30,877,200   

Pioneer Natural Resources Co. (E)

    100,000        8,821,000   

QEP Resources, Inc.
(with attached rights)

    190,000        5,694,300   

Southwestern Energy Co. (C)

    55,000        1,756,150   

WPX Energy, Inc. (C)

    150,000        2,427,000   
   

 

 

 
      148,660,050   
   

 

 

 

Integrated Oil & Gas — 35.4%

  

 

Chevron Corp.

    860,000        90,730,000   

ConocoPhillips

    250,000        13,970,000   

Exxon Mobil Corp. (E) (F)

    1,458,430        124,797,855   

Hess Corp.

    225,000        9,776,250   

Royal Dutch Shell plc
(Class A) ADR (E)

    184,662        12,451,759   
   

 

 

 
      251,725,864   
   

 

 

 

Pipelines — 3.6%

  

 

Kinder Morgan Inc.

    250,000        8,055,000   

Spectra Energy Corp.

    208,812        6,068,077   

Williams Companies, Inc.

    400,000        11,528,000   
   

 

 

 
      25,651,077   
   

 

 

 

Refiners — 1.8%

   

Marathon Petroleum Corp.

    190,000        8,534,800   

Phillips 66 (C)

    125,000        4,155,000   
   

 

 

 
      12,689,800   
   

 

 

 

Services — 13.7%

  

 

Baker Hughes, Inc. (E)

    60,000        2,466,000   

Halliburton Co.

    427,500        12,136,725   

Nabors Industries Ltd. (C)

    119,000        1,713,600   

National Oilwell Varco, Inc. (E)

    250,000        16,110,000   

Oil States International, Inc. (C)

    140,000        9,268,000   

Schlumberger Ltd.

    575,000        37,323,250   

Seadrill Ltd. (B)

    200,003        7,104,107   

Transocean Ltd. (C)

    145,000        6,485,850   

Weatherford International, Ltd. (C)

    400,000        5,052,000   
   

 

 

 
      97,659,532   
   

 

 

 

Basic Materials — 17.6%

   

Chemicals — 12.4%

  

 

Air Products and Chemicals, Inc.

    100,000        8,073,000   

CF Industries Holdings, Inc. (E)

    84,069        16,287,528   

Dow Chemical Co.

    550,000        17,325,000   

FMC Corp. (E)

    260,000        13,904,800   

LyondellBasell Industries N.V. (Class A) (E)

    135,000        5,436,450   

Potash Corporation of
Saskatchewan Inc. (E)

    240,000        10,485,600   

Praxair, Inc. (E)

    150,000        16,309,500   
   

 

 

 
      87,821,878   
   

 

 

 

Industrial Metals — 4.5%

  

 

Cliffs Natural Resources Inc. (E)

    142,000        6,999,180   

Freeport-McMoRan Copper & Gold Inc. (E)

    487,000        16,592,090   

Molycorp, Inc. (B) (C)

    89,800        1,935,190   

Teck Resources Ltd. (Class B)

    200,000        6,188,000   
   

 

 

 
      31,714,460   
   

 

 

 

Mining — 0.7%

  

 

Peabody Energy Corp.

    192,440        4,718,629   
   

 

 

 

Utilities — 3.5%

   

MDU Resources Group, Inc.

    211,000        4,559,710   

National Fuel Gas Co.

    100,000        4,698,000   

New Jersey Resources Corp.

    280,000        12,210,800   

Questar Corp.

    156,300        3,260,417   
   

 

 

 
      24,728,927   
   

 

 

 

Total Common Stocks
(Cost $426,001,952)

      685,370,217   
   

 

 

 

 

11


SCHEDULE OF INVESTMENTS (CONTINUED)

 

 

 

June 30, 2012

(unaudited)

 

     Principal/
Shares
    Value (A)  

Short-Term Investments — 3.9%

  

 

Commercial Paper — 2.1%

  

 

ENI Finance USA Inc.,
0.54%, due 7/2/12

  $ 15,000,000      $ 14,999,775   
   

 

 

 

Money Market Account — 1.8%

  

 

M&T Bank, 0.25%

  $ 13,022,211        13,022,211   
   

 

 

 
   

Money Market Funds — 0.0%

  

 

Fidelity Institutional Money
Market - Government
Portfolio, 0.01% (D)

    10,000        10,000   

RBC U.S. Government Money
Market (Institutional Class I), 0.01% (D)

    10,000        10,000   

Vanguard Federal Money
Market, 0.01% (D)

    10,000        10,000   

Western Asset Institutional
Government Reserves
(Institutional Class),
0.05% (D)

    10,000        10,000   
   

 

 

 
      40,000   
   

 

 

 

Total Short-Term Investments

  

 

(Cost $28,061,986)

    $ 28,061,986   
   

 

 

 

Securities Lending Collateral — 0.6%

  

 

(Cost $4,364,089)

   

Money Market Funds — 0.6%

  

 

Invesco Short-Term
Investment Trust - Liquid
Assets Portfolio
(Institutional Class), 0.16% (D)

    4,364,089      $ 4,364,089   
   

 

 

 

Total Investments — 101.0%

      717,796,292   

(Cost $458,428,027)

   

Cash, receivables, prepaid expenses
and other assets, less
liabilities — (1.0)%

      (7,390,012
   

 

 

 

Net Assets — 100.0%

  

  $ 710,406,280   
   

 

 

 

 

Notes:

(A) Securities are listed on the New York Stock Exchange or the NASDAQ and are valued at the last reported sale price on the day of valuation. See note 1 to financial statements.
(B) A portion of shares held are on loan. See note 8 to financial statements.
(C) Presently non-dividend paying.
(D) Rate presented is as of period-end and represents the annualized yield earned over the previous seven days.
(E) All or a portion of this security is pledged to cover open written call option contracts. Aggregate market value of such pledged securities is $49,927,266.
(F) All or a portion of this security is pledged to collateralize open written put option contracts with an aggregate market value to deliver upon exercise of $24,684,500.

 

 

 

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 no guarantee of future investment results.

 

12


SCHEDULE OF OUTSTANDING WRITTEN OPTION CONTRACTS

 

 

 

June 30, 2012

(unaudited)

 

Contracts

(100 shares

each)

       Security   

Strike
Price

    

Contract

Expiration

Date

       Value  
  COVERED CALLS   
  1,000        

Anadarko Petroleum Corp.

   $    80              Aug     
12
          $ 46,000   
  400        

Baker Hughes, Inc.

   47        Jul     
12
          4,400   
  200        

Baker Hughes, Inc.

   50        Oct     
12
          8,800   
  200        

CF Industries Holdings, Inc.

   195        Aug     
12
          197,000   
  168        

CF Industries Holdings, Inc.

   220        Aug     
12
          31,920   
  168        

CF Industries Holdings, Inc.

   250        Aug     
12
          2,520   
  355        

Cliffs Natural Resources Inc.

   57.50        Jul     
12
          6,745   
  355        

Cliffs Natural Resources Inc.

   60        Jul     
12
          4,615   
  256        

Cliffs Natural Resources Inc.

   95        Jul     
12
          1,024   
  250        

Exxon Mobil Corp.

   95        Jul     
12
          500   
  800        

FMC Corp.

   60        Oct     
12
          96,000   
  974        

Freeport-McMoRan Copper & Gold Inc.

   35        Jul     
12
          57,466   
  500        

LyondellBasell Industries N.V. (Class A)

   45        Aug     
12
          32,500   
  500        

National Oilwell Varco, Inc.

   80        Aug     
12
          5,500   
  200        

Noble Energy, Inc.

   100        Aug     
12
          5,000   
  250        

Oasis Petroleum, Inc.

   35        Aug     
12
          1,250   
  250        

Pioneer Natural Resources Co.

   100        Jul     
12
          20,000   
  100        

Pioneer Natural Resources Co.

   130        Sep     
12
          3,500   
  110        

Pioneer Natural Resources Co.

   145        Sep     
12
          2,750   
  240        

Potash Corporation of Saskatchewan Inc.

   47.50        Sep     
12
          26,640   
  150        

Praxair, Inc.

   120        Jul     
12
          2,250   
  250        

Royal Dutch Shell plc (Class A) ADR

   80        Jul     
12
          2,500   

 

 

              
    

 

 

 
  7,676                
       558,880   

 

 

              
    

 

 

 
  COLLATERALIZED PUTS   
  168        

CF Industries Holdings, Inc.

   140        Aug     
12
          7,896   
  84        

CF Industries Holdings, Inc.

   140        Nov     
12
          28,560   
  250        

Exxon Mobil Corp.

   65        Jul     
12
          500   
  250        

Exxon Mobil Corp.

   65        Oct     
12
          9,500   
  1,000        

FMC Corp.

   42.50        Jul     
12
          25,000   
  300        

Halliburton Co.

   31        Jul     
12
          81,300   
  500        

LyondellBasell Industries N.V. (Class A)

   39        Sep     
12
          145,000   
  250        

Midstates Petroleum Co., Inc.

   12.50        Sep     
12
          80,000   
  500        

National Oilwell Varco, Inc.

   65        Aug     
12
          190,000   
  300        

Oil States International, Inc.

   70        Sep     
12
          285,000   
  250        

Pioneer Natural Resources Co.

   85        Sep     
12
          167,500   
  400        

Seadrill Ltd.

   33.85        Jul     
12
          14,000   
  400        

Southwestern Energy Co.

   24        Sep     
12
          14,800   
  250        

Southwestern Energy Co.

   27        Sep     
12
          20,500   

 

 

              
    

 

 

 
  4,902                
       1,069,556   

 

 

              
    

 

 

 
    

Total Option Liability (Unrealized Gain of $209,267)

  

       $1,628,436   
                 

 

 

 

 

13


CHANGES IN PORTFOLIO SECURITIES

 

 

 

During the Three Months Ended June 30, 2012

(unaudited)

 

     Shares  
     Additions     Reductions      Held
June 30, 2012
 

Alpha Natural Resources, Inc.

     600        600             —   

Anadarko Petroleum Corp.

     25,000           300,000   

Apache Corp.

     20,000           160,000   

EOG Resources, Inc.

     20,000           130,000   

Exxon Mobil Corp.

     100,000           1,458,430   

FMC Corp.

     130,000 (1)         260,000   

LyondellBasell Industries N.V. (Class A)

     60,000           135,000   

Midstates Petroleum Co., Inc.

     225,000           225,000   

Phillips 66

     125,000 (2)         125,000   

Pioneer Natural Resources Co.

     25,000           100,000   

Royal Dutch Shell plc (Class A) ADR

     2,389 (3)         184,662   

Transocean Ltd.

     45,000           145,000   

ConocoPhillips

       100,000         250,000   

Northeast Utilities

       37,000             —   

Peabody Energy Corp.

       12,500         192,440   

 

(1)

By stock split.

(2)

Received 0.5 share for each share of ConocoPhillips owned.

(3)

In lieu of cash dividend.

 

HISTORICAL FINANCIAL STATISTICS

 

 

 

(unaudited)

 

Dec. 31

 

Value Of
Net Assets

    Shares
Outstanding
    Net Asset
Value Per
Share
    Market
Value
Per Share
    Dividends
From
Investment
Income
Per Share
    Distributions
From Net
Realized
Gains
Per Share
    Total
Dividends
and
Distributions
Per Share
   

Annual
Distribution
Rate*
 

2002

  $ 451,275,463        21,510,067      $ 20.98      $ 19.18      $ .43      $ .68      $ 1.11        5.1

2003

    522,941,279        21,736,777        24.06        23.74        .38        .81        1.19        5.8   

2004

    618,887,401        21,979,676        28.16        25.78        .44        .88        1.32        5.4   

2005

    761,913,652        21,621,072        35.24        32.34        .56        1.22        1.78        5.9   

2006

    812,047,239        22,180,867        36.61        33.46        .47        3.33        3.80        11.2   

2007

    978,919,829        22,768,250        42.99        38.66        .49        3.82        4.31        11.6   

2008

    538,936,942        23,958,656        22.49        19.41        .38        2.61        2.99        8.9   

2009

    650,718,323        24,327,307        26.75        23.74        .37        1.03        1.40        6.6   

2010

    761,735,503        24,789,698        30.73        27.01        .32        .95        1.27        5.5   

2011

    732,810,692        25,641,018        28.58        24.48        .39        1.58        1.97        7.1   

June 30, 2012

    710,406,280        25,654,466        27.69        23.96        .24 †      .06 †      0.30 †        

 

  * The annual distribution rate is the total dividends and capital gain distributions during the year divided by the average month-end market price of the Corporation’s Common Stock for the year.
  † Paid or declared.

 

14


OTHER INFORMATION

 

 

 

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.

 

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 also 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 1-800-SEC-0330. The Corporation also posts a link to its Forms N-Q on its website at: www.peteres.com under the headings “Investment Information”, “Financial Reports” and then “SEC Filings”.

 

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 the Corporation’s proxy voting record for the 12-month period ended June 30, 2012 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 at www.peteres.com under the headings “About Petroleum & Resources” and “Corporate Information”; and (iii) on the Securities and Exchange Commission’s website at www.sec.gov.

 

PRIVACY POLICY

 

In order to conduct its business, the 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.

 

 

 

Petroleum & Resources Corporation

 

Seven St. Paul Street, Suite 1140, Baltimore, MD 21202

(410) 752-5900            (800) 638-2479

Website: www.peteres.com

E-mail: contact@peteres.com

Counsel: Chadbourne & Parke LLP

Independent Registered Public Accounting Firm: PricewaterhouseCoopers LLP

Custodian of Securities: Brown Brothers Harriman & Co.

 

Transfer Agent & Registrar: American Stock Transfer & Trust Company

Stockholder Relations Department

59 Maiden Lane

New York, NY 10038

(866) 723-8330

Website: www.amstock.com

E-mail: info@amstock.com

 

15

 

PETROLEUM & RESOURCES CORPORATION

 

 

Board of Directors

 

Enrique R. Arzac 2,3

  Roger W. Gale 2,4

Phyllis O. Bonanno 1,3,5

  Kathleen T. McGahran 2,3

Kenneth J. Dale 2,4

  Douglas G. Ober 1

Daniel E. Emerson 1,3,5

  Craig R. Smith 1,3,5

Frederic A. Escherich 1,4,5

 
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, CFA

 

Chairman and Chief Executive Officer

Nancy J.F. Prue, CFA

 

President

David D. Weaver, CFA

 

Executive Vice President

Lawrence L. Hooper, Jr.

 

Vice President, General Counsel and Secretary

Michael A. Kijesky, CFA

 

Vice President—Research

Brian S. Hook, CFA, CPA

 

Chief Financial Officer and Treasurer

Christine M. Sloan, CPA

 

Assistant Treasurer

 

 

Stock Data

 

 

Market Price (6/30/12)

   $ 23.96   

Net Asset Value (6/30/12)

   $ 27.69   

Discount

     13.5%   

 

New York Stock Exchange ticker symbol: PEO

 

NASDAQ Quotation Symbol for NAV: XPEOX

 

 

Distributions in 2012

 

 

From Investment Income (paid or declared)

   $ 0.24   

From Net Realized Gains

     0.06   
  

 

 

 

Total

   $ 0.30   
  

 

 

 

 

 

2012 Dividend Payment Dates

 

 

March 1, 2012

June 1, 2012

September 1, 2012

December 27, 2012*

 

*Anticipated


Item 2. Code of Ethics.

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. Investments.

(a) This schedule is included as part of the Report to Stockholders filed under Item 1 of this form.

(b) Not applicable.

 

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.

 

 

Total Number of Shares
(or Units Purchased)

 

Average Price Paid
per Share (or Unit)

 

 

Total Number of Shares
(or Units) Purchased as
Part of Publicly Announced Plans or Programs

 

Maximum Number of
Shares (or Units) That
May Yet Be Purchased
Under the Plans or Programs

 
 

----------------------------------

 

----------------------------------

 

----------------------------------

 

----------------------------------

 

January 2012

0

 

$0.00

 

0

 

1,240,156

 

February 2012

0

 

$0.00

 

0

 

1,240,156

 

March 2012

0

 

$0.00

 

0

 

1,240,156

 

April 2012

0

 

$0.00

 

0

 

1,240,156

 

May 2012

0

 

$0.00

 

0

 

1,240,156

 

June 2012

0

 

$0.00

 

0

 

1,240,156

(2)
 

----------------------------------

 

----------------------------------

 

----------------------------------

 

 

Total

0

(1)

$0.00

 

0

(2)

(1) There were no shares purchased other than through a publicly announced plan or program.

(2.a) The Plan was announced on December 8, 2011.

(2.b) The share amount approved in 2011 was 5% of outstanding shares, or 1,240,156 shares.

(2.c) Unless reapproved, the Plan will expire on December 31, 2012.

(2.d) None.

(2.e) None.

 

Item 10. Submission of Matters to a Vote of Security Holders.

There were no material changes to the procedures by which shareholders may recommend nominees to the registrant's Board of Directors made or implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (as required by Item 22(b)(15) of Schedule 14A), or this Item.

 

Item 11. Controls and Procedures.

(a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of the disclosure controls and procedures as of a date within 90 days of the filing date of this report.

(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) that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

 

Item 12. Exhibits.

(a)

(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(a) under the Investment Company Act of 1940, are attached.

(3)

Written solicitation to purchases securities: not applicable.


(b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached.

 

 

 

 

SIGNATURES

   
 

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 
  Chairman and Chief Executive Officer 
  (Principal Executive Officer) 
   
Date: July 20, 2012
 


   
  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.
   
   
By:

/s/ Douglas G. Ober

  Douglas G. Ober 
  Chairman and Chief Executive Officer 
  (Principal Executive Officer) 
   
Date: July 20, 2012
   
   
By:  /s/ Brian S. Hook 
  Brian S. Hook 
  Chief Financial Officer and Treasurer 
  (Principal Financial Officer) 
   
Date: July 20, 2012