PETROLEUM & RESOURCES CORPORATION - FORM N-CSRS - JUNE 30, 2010

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, 2010

Item 1. Reports to Stockholders.

corresp


LETTER TO STOCKHOLDERS

 

 

 

 

We submit herewith the financial statements of Petroleum & Resources Corporation (the “Corporation”) for the six months ended June 30, 2010. Also provided are the report of the independent registered public accounting firm, a schedule of investments, and other financial information.

 

The tragic accident and oil spill in the Gulf of Mexico in April, in which eleven lives were lost and the coastlines of several states affected, have had a major impact on the energy industry in the Unites States. Clean up efforts are likely to continue for a long time. Safety concerns as well as the pollution of water and beaches have led the U.S. government to declare a moratorium on deepwater drilling for six months and a reassessment of regulations on shallow water activities. The companies directly involved in the oil spill have lost as much as 50% of their market value and the stocks of the rest of the industry have been under intense pressure. In the short term, production and revenue losses will depend on the length of time companies will have to forgo operations in the Gulf of Mexico; in the longer term, additional restrictions and regulation of offshore drilling will drive the price of crude oil higher due to higher operating costs as well as access to fewer reservoirs. As we get clarification on the regulatory environment and evaluate our holdings in that light, we will no doubt continue to make adjustments to the portfolio to reflect what is a very different outlook for the energy industry than we held just three months ago.

 

Net assets of the Corporation at June 30, 2010 were $22.90 per share on 24,339,526 shares outstanding, compared with $26.75 per share at December 31, 2009 on 24,327,307 shares outstanding. On March 1, 2010, a distribution of $0.10 per share was paid, consisting of $0.01 from 2009 investment income, $0.05 from 2009 short-term capital gain, $0.02 from 2009 long-term capital gain, and $0.02 form 2010 investment income, all taxable in 2010. A 2010 investment income dividend of $0.10 per share was paid June 1, 2010, and $0.10 per share investment income dividend has been declared to shareholders of record August 13, 2010, payable September 1, 2010.

 

Net investment income for the six months ended June 30, 2010 amounted to $4,185,877, compared with $3,468,336 for the same six month period in 2009. These earnings are equal to $0.17 and $0.15 per share, respectively.

 

Net capital gain realized on investments for the six months ended June 30, 2010 amounted to $9,993,596, or $0.41 per share.

 

For the six months ended June 30, 2010, the total return on net asset value (with dividends and capital gains reinvested) of shares of the Corporation was (13.6)%. The total return on the market value of the Corporation’s shares for the period was (15.1)%. These compare to a (12.7)% total return in the Dow Jones U.S. Oil and Gas Index, a (9.8)% total return in the Dow Jones U.S. Basic Materials Index, and a (6.7)% total return for the Standard & Poor’s 500 Composite Stock Index (“S&P 500”) over the same time period.

 

For the twelve months ended June 30, 2010, the Corporation’s total return on net asset value was 4.3% and on market value was 3.6%. Comparable figures for the Dow Jones U.S. Oil & Gas Index, the Dow Jones U.S. Basic Materials Index, and the S&P 500 were 1.5%, 25.8%, and 14.4%, respectively.

 

 

 

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.

 

Beginning August 2010, we will be updating our website with investment returns on NAV and market price on a monthly basis.

 

 

 

By order of the Board of Directors,

Douglas G. Ober,

Chairman, President and

Chief Executive Officer

 

July 14, 2010


PORTFOLIO REVIEW

 

 

June 30, 2010

(unaudited)

 

 

TEN LARGEST EQUITY PORTFOLIO HOLDINGS

 

      Market Value      % of Net Assets  

Exxon Mobil Corp.

   $ 72,389,300      13.0

Chevron Corp.

     63,788,400      11.5   

Occidental Petroleum Corp.

     30,373,955      5.4   

Schlumberger Ltd.

     26,286,500      4.7   

ConocoPhillips

     17,181,500      3.1   

Apache Corp.

     16,838,000      3.0   

Freeport-McMoRan Copper & Gold Inc.

     16,260,750      2.9   

Royal Dutch Shell plc ADR

     16,205,994      2.9   

Noble Energy, Inc.

     15,685,800      2.8   

Praxair, Inc.

     14,932,643      2.7   
               

Total

   $ 289,942,842      52.0
               

 

SECTOR WEIGHTINGS

 

 

 

2


STATEMENT OF ASSETS AND LIABILITIES

 

 

 

June 30, 2010

 

Assets

     

Investments* at value:

     

Common stocks (cost $386,716,611)

   $ 537,679,300   

Short-term investments (cost $21,323,732)

     21,323,732   

Securities lending collateral (cost $14,969,735)

     14,969,735    $ 573,972,767   

Cash

        195,512   

Receivables:

     

Investment securities sold

        1,566,722   

Dividends and interest

        532,765   

Prepaid expenses and other assets

            408,516   

Total Assets

            576,676,282   

Liabilities

     

Investment securities purchased

        739,800   

Open written option contracts* at value (proceeds $634,465)

        760,026   

Obligations to return securities lending collateral

        14,969,735   

Accrued pension liabilities

        2,432,582   

Accrued expenses and other liabilities

            428,526   

Total Liabilities

            19,330,669   

Net Assets

          $ 557,345,613   

Net Assets

     

Common Stock at par value $0.001 per share, authorized 50,000,000 shares;
issued and outstanding 24,339,526 shares (includes 27,663 restricted shares, 8,800 nonvested or deferred restricted stock units, and 3,747 deferred stock units) (note 6)

      $ 24,340   

Additional capital surplus

        398,641,042   

Accumulated other comprehensive income (note 5)

        (1,281,537

Undistributed net investment income

       
(583,418

Undistributed net realized gain on investments

        9,708,058   

Unrealized appreciation on investments

            150,837,128   

Net Assets Applicable to Common Stock

          $ 557,345,613   

Net Asset Value Per Share of Common Stock

            $22.90   

 

* 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, 2010

 

Investment Income

  

Income:

  

Dividends

   $ 6,042,168   

Interest and other income

     30,426   

Total income

     6,072,594   

Expenses:

  

Investment research

     636,249   

Administration and operations

     460,978   

Directors’ fees

     198,311   

Reports and stockholder communications

     125,909   

Investment data services

     82,741   

Travel, training, and other office expenses

     80,911   

Transfer agent, registrar, and custodian

     73,145   

Auditing and accounting services

     60,414   

Occupancy

     58,088   

Insurance

     34,174   

Legal services

     18,937   

Other

     56,860   

Total expenses

     1,886,717   

Net Investment Income

     4,185,877   

Change in Accumulated Other Comprehensive Income (note 5)

     69,335   

Realized Gain and Change in Unrealized Appreciation on Investments

  

Net realized gain on security transactions

     9,369,456   

Net realized gain on written option contracts

     624,140   

Change in unrealized appreciation on investments

     (102,514,983

Change in unrealized appreciation on written option contracts

     (309,235

Net Loss on Investments

     (92,830,622

Change in Net Assets Resulting from Operations

   $ (88,575,410

 

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

 

4


STATEMENTS OF CHANGES IN NET ASSETS

 

 

 

 

     Six Months Ended
June 30, 2010
    Year Ended
December 31, 2009
 

From Operations:

    

Net investment income

   $ 4,185,877      $ 6,706,626   

Net realized gain on investments

     9,993,596        24,709,496   

Change in unrealized appreciation on investments

     (102,824,218     102,205,614   

Change in accumulated other comprehensive income (note 5)

     69,335        2,327,392   

Change in net assets resulting from operations

     (88,575,410     135,949,128   

Distributions to Stockholders from:

    

Net investment income

     (3,161,308     (8,800,886

Net realized gain from investment transactions

     (1,687,184     (24,485,239

Decrease in net assets from distributions

     (4,848,492     (33,286,125

From Capital Share Transactions:

    

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

     8,964        13,102,449   

Cost of shares purchased (note 4)

     —            (4,043,629

Deferred compensation (notes 4, 6)

     42,228        59,558   

Change in net assets from capital share transactions

     51,192        9,118,378   

Total Change in Net Assets

     (93,372,710     111,781,381   

Net Assets:

    

Beginning of period

     650,718,323        538,936,942   

End of period (including undistributed net investment
income of $(583,418) and $(1,607,987) respectively)

   $ 557,345,613      $ 650,718,323   

 

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

 

5


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 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 identified cost. 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 a national security exchange 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, 2010 were classified as follows:

 

    Level 1     Level 2   Level 3   Total  

Common stocks

  $ 537,679,300      $       —         $       —           $537,679,300   

Short-term investments

    14,644,944        6,678,788     —           21,323,732   

Securities lending collateral

    14,969,735              —           —           14,969,735   

Total investments

  $ 567,293,979      $ 6,678,788   $       —         $ 573,972,767   
                             

Written options

  $ (760,026   $       —         $       —         $ (760,026
                             

 

There were no transfers into or from Level 1 or Level 2 during the six months ended June 30, 2010.

 

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, 2010, the identified cost of securities for federal income tax purposes was $423,010,078, and net unrealized appreciation aggregated $150,962,689, consisting of gross unrealized appreciation of $201,690,296 and gross unrealized depreciation of $(50,727,607).

 

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, 2010 were $76,700,373 and $71,593,945, 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, illiquidity, and unfavorable equity price movements. The Corporation has mitigated counterparty credit and illiquidity 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 option contracts as of June 30, 2010 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, 2010 were as follows:

 

     Covered Calls     Collateralized Puts  
     Contracts     Premiums     Contracts     Premiums  

Options outstanding, December 31, 2009

   1,435      $ 153,916      812      $ 188,773   

Options written

   5,459        561,090      5,822        876,171   

Options terminated in closing purchase transactions

   (367     (39,928   (197     (23,653

Options expired

   (3,130     (291,366   (2,932     (483,095

Options exercised

   (563     (60,154   (1,692     (247,289

Options outstanding, June 30, 2010

   2,834      $ 323,558      1,813      $ 310,907   

 

4.    CAPITAL STOCK

 

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

 

During 2010, the Corporation has issued 375 shares of its Common Stock at a weighted average price of $23.86 per share as dividend equivalents to holders of deferred stock units and restricted stock units under the 2005 Equity Incentive Compensation Plan.

 

On December 28, 2009, the Corporation issued 580,521 shares of its Common Stock at a price of $22.54 per share (the average market price on December 9, 2009) to stockholders of record on November 20, 2009 who elected to take stock in payment of the distribution from 2009 capital gain and investment income. During 2009, 896 shares were issued at a weighted average price of $19.45 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 2010 and 2009 were as follows:

 

    Shares     Amount  
    Six months
ended
June 30,
2010
  Year ended
December 31,
2009
    Six months
ended
June 30,
2010
  Year ended
December 31,
2009
 

Shares issued in
payment of
dividends

  375   581,417      $ 8,964   $ 13,102,449   

Shares purchased (at a weighted average discount from net asset value of 11.9%)

    (215,835         (4,043,629

Net activity under the 2005 Equity Incentive Compensation Plan

  11,844   3,069        42,228     59,558   

Net change

  12,219   368,651      $ 51,192   $ 9,118,378   

 

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. Both plans were frozen as of October 1, 2009. Benefits are based on length of service and compensation during the last five years of employment

 

7


NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

 

 

 

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.

 

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 contributions of $15,604 to the plans during the six months ended June 30, 2010, and anticipates making additional contributions of up to $500,000 over the remainder of 2010.

 

Items impacting the Corporation’s earnings were:

 

     Six months
ended
June 30,
2010
    Year ended
December 31,
2009
 

Components of net periodic pension cost

    

Service cost

   $ —            $ 174,661   

Interest cost

     129,907        400,099   

Expected return on plan assets

     (81,683     (196,462

Prior service cost component

            11,397   

Net loss component

     70,168        322,484   

Effect of settlement (non-recurring)

            983,675   

Effect of curtailment (non-recurring)

            50,803   

Net periodic pension cost

   $ 118,392      $ 1,746,657   

 

     Six months
ended
June 30,
2010
    Year ended
December 31,
2009
 

Changes recognized in accumulated other comprehensive income

    

Net loss

   $ (833   $ (1,067,829

Amortization of net loss

     70,168        322,484   

Amortization of prior service cost

            11,397   

Effect of settlement (non-recurring)

            983,675   

Effect of curtailment (non-recurring)

            2,077,665   

Change in accumulated other comprehensive income

   $ 69,335      $ 2,327,392   

 

The Corporation also sponsors qualified and nonqualified defined contribution plans. The Corporation expensed contributions to the plans in the amount of $34,118 for six months ended June 30, 2010. 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 ten years from date of grant, if not exercised.

 

A summary of option activity under the 1985 Plan as of June 30, 2010, and changes during the six month period then ended is presented below:

 

     Options     Weighted-
Average
Exercise
Price
   Weighted-
Average
Remaining
Life (Years)

Outstanding at December 31, 2009

   19,143      $ 8.88    2.49

Exercised

   (4,322     8.69   

Cancelled

              —   

Outstanding at June 30, 2010

   14,821      $ 8.84    2.14

Exercisable at June 30, 2010

   5,292      $ 11.10    0.66

 

The options outstanding as of June 30, 2010 are set forth below:

 

Exercise Price

  Options
Outstanding
  Weighted
Average
Exercise
Price
  Weighted
Average
Remaining
Life (Years)

$5.00-$6.99

  5,185   $ 5.52   2.50

$7.00-$8.99

  864     8.69   1.50

$9.00-$10.99

  4,344     10.06   3.50

$11.00-$12.99

  4,428     11.57   0.50

Outstanding at June 30, 2010

  14,821   $ 8.84   2.14

 

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/(credit) recognized for the six months ended June 30, 2010 was $(38,470).

 

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 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 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.

 

8


NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

 

 

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. Payments 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 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, 2010 is 800,970 shares.

 

A summary of the status of the Corporations’s awards granted under the 2005 Plan as of June 30, 2010, 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, 2009

   34,502      $ 28.41

Granted:

    

    Restricted stock

   12,275        24.43

    Restricted stock units

   3,600        23.65

    Deferred stock units

   365        23.95

Vested & issued

   (7,775     27.54

Forfeited

   (2,757     31.34

Balance at June 30, 2010 (includes
25,577 performance-based awards and
14,633 nonperformance-based awards)

   40,210      $ 26.70

 

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 the period ended June 30, 2010 for restricted stock granted to employees were $33,893. The total compensation costs for the period ended June 30, 2010 for restricted stock units granted to non-employee directors were $39,561. As of June 30, 2010, there were total unrecognized compensation costs of $460,700, 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 1.84 years. The total fair value of shares and units vested during the six month period ended June 30, 2010 was $189,397.

 

7.    OFFICER AND DIRECTOR COMPENSATION

 

The aggregate remuneration paid during the six months ended June 30, 2010 to officers and directors amounted to $1,228,012, of which $246,481 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, 2010, the Corporation had securities on loan of $14,382,730 and held cash collateral of $14,969,735. 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 $49,073 in the first half of 2010, and its estimated portion of future minimum rental commitments are as follows:

 

2010

   $ 47,999

2011

     95,850

2012

     93,791

2013

     91,736

2014

     91,810

2015 & 2016

     140,933

Total

   $ 562,119

 

9


FINANCIAL HIGHLIGHTS

 

 

 

    Six Months Ended                      
    June 30,
2010
    June 30,
2009
    Year Ended December 31
        2009   2008   2007   2006   2005

Per Share Operating Performance

               
   

Net asset value, beginning of period

  $26.75      $22.49      $22.49   $42.99   $36.61   $35.24   $28.16
   

Net investment income

  0.17      0.15      0.28   0.43   0.46   0.47   0.53*
   

Net realized gains and increase (decrease) in unrealized appreciation

  (3.82)      0.89      5.37   (17.71)   10.37   4.91   8.29
   

Change in accumulated other comprehensive income (note 5)

  0.00      (0.01)      0.10   (0.07)   0.00   (0.09)  
   

Total from investment operations

  (3.65)      1.03      5.75   (17.35)   10.83   5.29   8.82
   

Less distributions

             
   

Dividends from net investment income

  (0.13)      (0.21)      (0.37)   (0.38)   (0.49)   (0.47)   (0.56)
   

Distributions from net realized gains

  (0.07)      (0.05)      (1.03)   (2.61)   (3.82)   (3.33)   (1.22)
   

Total distributions

  (0.20)      (0.26)      (1.40)   (2.99)   (4.31)   (3.80)   (1.78)
   

Capital share repurchases

  0.00      0.02      0.02   0.08   0.10   0.15   0.10
   

Reinvestment of distributions

  0.00      0.00      (0.11)   (0.24)   (0.24)   (0.27)   (0.06)
   

Total capital share transactions

  0.00      0.02      (0.09)   (0.16)   (0.14)   (0.12)   0.04
   

Net asset value, end of period

  $22.90      $23.28      $26.75   $22.49   $42.99   $36.61   $35.24
   

Market price, end of period

  $19.97      $20.44      $23.74   $19.41   $38.66   $33.46   $32.34
   

Total Investment Return

             
   

Based on market price

  (15.1)%      6.7%      30.3%   (42.2)%   28.9%   15.3%   32.3%
   

Based on net asset value

  (13.6)%      4.9%      26.7%   (39.8)%   31.0%   15.7%   32.0%
   

Ratios/Supplemental Data

             
   

Net assets, end of period (in 000’s)

  $557,346      $552,908      $650,718     $538,937     $978,920     $812,047     $761,914  
   

Ratio of expenses to average net assets

  0.60% †    0.87% †    0.96%††   0.51%   0.54%   0.60%   0.59%
   

Ratio of net investment income to
average net assets

  1.33% †    1.32% †    1.18%††   1.10%   1.12%   1.22%   1.61%
   

Portfolio turnover

  11.73%      8.45%      14.35%   16.89%   7.36%   9.95%   10.15%
   

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

  24,340        23,746        24,327     23,959     22,768     22,181     21,621  

 

  * 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.
  † Ratios presented on an annualized basis.
†† 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.

 

10


SCHEDULE OF INVESTMENTS

 

 

 

June 30, 2010

 

     Shares   Value (A)

Stocks — 96.5%

 

Energy —  72.7%

   

Exploration & Production — 22.4%

 

Anadarko Petroleum Corp. (E)

  300,000   $ 10,827,000

Apache Corp.

  200,000     16,838,000

Devon Energy Corp.

  110,000     6,701,200

Energen Corp.

  250,000     11,082,500

EOG Resources, Inc.

  120,000     11,804,400

Forest Oil Corp. (C)

  100,000     2,736,000

Newfield Exploration Co. (C)

  50,000     2,443,000

Noble Energy, Inc.

  260,000     15,685,800

Oasis Petroleum, Inc. (C)

  200,000     2,900,000

Occidental Petroleum Corp.

  393,700     30,373,955

Pioneer Natural Resources Co.

  140,000     8,323,000

Southwestern Energy Co. (C)

  134,400     5,193,216
       
      124,908,071
       

Integrated — 34.0%

 

Chevron Corp.

  940,000     63,788,400

ConocoPhillips

  350,000     17,181,500

Exxon Mobil Corp. (F)

  1,268,430     72,389,300

Hess Corp.

  250,000     12,585,000

Royal Dutch Shell plc ADR (B)

  322,700     16,205,994

Total S.A. ADR

  162,000     7,231,680
       
      189,381,874
       

Pipelines — 2.2%

 

Spectra Energy Corp.

  208,812     4,190,857

Williams Companies, Inc.

  450,000     8,226,000
       
      12,416,857
       

Services — 14.1%

 

Baker Hughes, Inc.

  105,000     4,364,850

Halliburton Co.

  400,000     9,820,000

Nabors Industries Ltd. (C)

  520,000     9,162,400

National Oilwell Varco, Inc.

  138,538     4,581,452

Noble Corp. (C)(E)

  270,000     8,345,700

Schlumberger Ltd.

  475,000     26,286,500

Transocean Ltd. (C)

  257,953     11,950,962

Weatherford International,
Ltd. (C)

  300,000     3,942,000
       
      78,453,864
       

Basic Materials — 13.2%

   

Chemicals — 5.4%

 

Dow Chemical Co.

  320,800     7,609,376

Potash Corporation of Saskatchewan Inc.

  90,000     7,761,600

Praxair, Inc.

  196,508     14,932,643
       
      30,303,619
       

Industrial Metals —  4.1%

 

Cliffs Natural Resources Inc. (E)

  139,000     6,555,240

Freeport-McMoRan Copper & Gold Inc.

  275,000     16,260,750
       
      22,815,990
       

Mining — 3.7%

 

CONSOL Energy Inc.

  125,000     4,220,000

International Coal Group,
Inc. (B) (C)

  3,000,000     11,550,000

Massey Energy Co. (E)

  172,500     4,717,875
       
      20,487,875
       

Utilities — 10.6%

   

AGL Resources Inc.

  165,000     5,910,300

EQT Corp.

  300,000     10,842,000

MDU Resources Group, Inc.

  375,000     6,761,250

National Fuel Gas Co.

  200,000     9,176,000

New Jersey Resources Corp.

  290,000     10,208,000

Northeast Utilities

  200,000     5,096,000

Questar Corp.

  240,000     10,917,600
       
      58,911,150
       

Total Stocks (Cost $386,716,611)

  $ 537,679,300
       

 

11


SCHEDULE OF INVESTMENTS (CONTINUED)

 

 

 

June 30, 2010

 

     Prin. Amt/
Shares
  Value (A)

Short-Term Investments — 3.8%

 

Commercial Paper — 1.2%

 

Chevron Funding Corp.,
0.14%, due 07/07/10

  $ 4,179,000   $ 4,178,903

HSBC Finance Corp.,
0.15%, due 07/12/10

  $ 2,500,000     2,499,885
       
      6,678,788
       
   

Money Market Funds — 2.6%

 

Fidelity Institutional Money Market - Government Portfolio, 0.04% (D)

    23,449     23,449

RBC U.S. Government Money Market (Institutional Class I), 0.12% (D)

    14,573,116     14,573,116

Vanguard Federal Money Market, 0.02% (D)

    18,649     18,649

Western Asset Institutional Government Money Market (Class I), 0.10% (D)

    29,730     29,730
       
      14,644,944
       

Total Short-Term Investments

 

(Cost $21,323,732)

      21,323,732
       

Total Securities Lending Collateral — 2.7%

 

(Cost $14,969,735 )

   

Money Market Funds — 2.7%

 

Invesco Short-Term Investment Trust - Liquid Assets Portfolio (Institutional Class), 0.21% (D)

    14,969,735     14,969,735
       

Total Investments —  103.0%

        573,972,767   

(Cost $423,010,078 )

   

Cash, receivables, prepaid expenses and other assets, less liabilities — (3.0)%

        (16,627,154
           

Net Assets — 100%

      557,345,613
         

 

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 $9,730,044.
(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 $7,529,000.

 

 

 

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.

 

12


SCHEDULE OF OUTSTANDING WRITTEN OPTION CONTRACTS

 

 

 

June 30, 2010

 

 

Contracts

(100 shares

each)

     Security   

Strike
Price

    

Contract

Expiration

Date

    

Value

COVERED CALLS
750     

Anadarko Petroleum Corp.

   $  42.50          Jul   10      $ (48,000)
350     

Anadarko Petroleum Corp.

   47.50      Aug   10        (42,700)
334     

Cliffs Natural Resources Inc.

   90      Jul   10        (1,336)
400     

Massey Energy Co.

   55      Jul   10        (1,200)
500     

Noble Corp.

   32      Jul   10        (45,000)
500     

Noble Corp.

   31      Aug   10        (112,500)
                         
2,834                       (250,736)
                         
COLLATERALIZED PUTS
500     

Baker Hughes, Inc.

   39      Aug   10        (112,500)
110     

Cliffs Natural Resources Inc.

   48      Jul   10        (35,750)
500     

Halliburton Co.

   24      Aug   10        (89,500)
75     

Massey Energy Co.

   44      Jul   10        (126,000)
128     

Praxair, Inc.

   70      Jul   10        (7,040)
500     

Schlumberger Ltd.

   52.50      Aug   10        (138,500)
                         
1,813                       (509,290)
                         
                      $(760,026)
                       

 

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, 2010, the results of its operations, the changes in its net assets and the financial highlights for each of the 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

PricewaterhouseCoopers LLP

Baltimore, Maryland

July 16, 2010

 

13


CHANGES IN PORTFOLIO SECURITIES

 

 

 

During the Three Months Ended June 30, 2010

(unaudited)

 

     Shares
     Additions     Reductions     Held
June 30, 2010

Anadarko Petroleum Corp.

   110,000        300,000

Cliffs Natural Resources Inc.

   11,140        139,000

Dow Chemical Co.

   320,800        320,800

Exxon Mobil Corp.

   248,430 (1)      1,268,430

Forest Oil Corp.

   10,523        100,000

Freeport-McMoran Copper & Gold Inc.

   40,000        275,000

Halliburton Co.

   50,000      350,000      400,000

Massey Energy Co.

   12,500        172,500

Oasis Petroleum, Inc.

   200,000        200,000

Schlumberger Ltd.

   225,000        475,000

Southwestern Energy Co.

   10,000        134,400

New Jersey Resources Corp.

     10,000      290,000

Noble Corp.

     370,000      270,000

Occidental Petroleum Corp.

     46,300      393,700

Southwest Gas Corp.

     77,070      —    

Total S.A. ADR

     38,000      162,000

Transocean Ltd.

     50,000      257,953

Weatherford International, Ltd.

     70,000      300,000

WGL Holdings, Inc.

     222,275      —    

XTO Energy Inc.

     426,500 (1)    —    

 

(1)

Received 248,430 shares of Exxon Mobil Corp. for 350,000 shares of XTO Energy Inc.

 

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
Rate of
Distribution**
 

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   

2007

   
978,919,829
  22,768,250     42.99     38.66     .49        3.82        4.31      11.61   

2008

    538,936,942   23,958,656     22.49     19.41     .38        2.61        2.99      8.88   

2009

    650,718,323   24,327,307     26.75     23.74     .37        1.03        1.40      6.57   

June 30, 2010

    557,345,613   24,339,526     22.90     19.97     .23 †      .07 †      .30 †      

 

  * 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.

 

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 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 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, 2010 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; 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.

 

 

 

The Corporation

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 2,4

 

Roger W. Gale 2,4

Phyllis O. Bonanno 2,4

 

Thomas H. Lenagh 2,3

Kenneth J. Dale 3,4

 

Kathleen T.  McGahran   1,3, 5

Daniel E. Emerson 1,3,5

 

Douglas G. Ober 1

Frederic A. Escherich 1,4,5

 

Craig R. Smith 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

Nancy J.F. Prue

 

Executive Vice President

David D. Weaver

 

Executive Vice President

Lawrence L. Hooper, Jr.

 

Vice President, General Counsel and Secretary

Brian S. Hook

 

Treasurer

Christine M. Sloan

 

Assistant Treasurer

Geraldine H. Paré

 

Assistant Secretary

 

 

Stock Data

 

 

Market Price (6/30/10)

   $ 19.97

Net Asset Value (6/30/10)

   $ 22.90

Discount:

     12.8%

 

New York Stock Exchange ticker symbol: PEO

 

NASDAQ Quotation Symbol for NAV: XPEOX

 

 

Distributions in 2010

 

 

From Investment Income (paid or declared)

   $ 0.23

From Net Realized Gains

     0.07
      

Total

   $ 0.30
      

 

 

2010 Dividend Payment Dates

 

 

March 1, 2010

June 1, 2010

September 1, 2010

December 27, 2010*

 

*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 2010

 

0

 

$0.00

 

0

 

1,187,329

 

February 2010

 

0

 

$0.00

 

0

 

1,187,329

 

March 2010

 

0

 

$0.00

 

0

 

1,187,329

 

April 2010

 

0

 

$0.00

 

0

 

1,187,329

 

May 2010

 

0

 

$0.00

 

0

 

1,187,329

 

June 2010

 

0

 

$0.00

 

0

 

1,187,329(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 10, 2009.

(2.b) The share amount approved in 2009 was 5% of outstanding shares, or 1,187,329 shares.

(2.c) Unless reapproved, the Plan will expire on December 31, 2010.

(2.d) None.

(2.e) None.

 

Item 10. Submissions 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 (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), 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 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, President and Chief Executive Officer 
  (Principal Executive Officer) 
 
Date:  July 23, 2010 
 
 
  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 
  Chairman, President and Chief Executive Officer 
  (Principal Executive Officer) 
 
Date:  July 23, 2010 
 
 
 
 
 
By:  /s/ Brian S. Hook 
  Brian S. Hook 
  Treasurer 
  (Principal Financial Officer) 
 
Date:  July 23, 2010