THE ADAMS EXPRESS COMPANY
--------------------------------------------------------------------------------
Board of Directors
Enrique R. Arzac/2,4/ Douglas G. Ober/1/
Daniel E. Emerson/1,3/ Landon Peters/1,3/
Edward J. Kelly, III/1,4/ John J. Roberts/2,4/
Thomas H. Lenagh/3,4/ Susan C. Schwab/1,3/
W.D. MacCallan/2,4/ Robert J.M. Wilson/1,3/
W. Perry Neff/1,2/
1. Member of Executive Committee
2. Member of Audit Committee
3. Member of Compensation Committee
4. Member of Retirement Benefits Committee
Officers
Douglas G. Ober Chairman and
Chief Executive Officer
Joseph M. Truta President
Richard F. Koloski Executive Vice President
Lawrence L. Hooper, Jr. Vice President, Secretary
and General Counsel
Maureen A. Jones Vice President and
Chief Financial Officer
Christine M. Sloan Assistant Treasurer
Geraldine H. Pare Assistant Secretary
--------
Stock Data
--------
Price (6/30/02) $ 12.26
Net Asset Value (6/30/02) $ 13.91
Discount: 11.9%
New York Stock Exchange and Pacific Exchange ticker symbol: ADX
NASDAQ Mutual Fund Quotation Symbol: XADEX
Newspaper stock listings are generally under the abbreviation: AdaEx
----------------
Distributions in 2002
----------------
From Investment Income
(paid or declared) $0.18
From Net Realized Gains 0.06
-----
Total $0.24
=====
----------------------
2002 Dividend Payment Dates
----------------------
March 1, 2002
June 1, 2002
September 1, 2002
December 27, 2002*
*Anticipated
[LOGO] Adams Express Company
[LOGO] ADAMS
EXPRESS
COMPANY (R)
SEMI-ANNUAL REPORT
-------------------------------
June 30, 2002
LETTER TO STOCKHOLDERS
--------------------------------------------------------------------------------
We submit herewith the financial statements for the six months ended June 30,
2002. Also provided are the report of independent accountants, a schedule of
investments, and summary financial information.
Net assets of the Company at June 30, 2002 were $13.91 per share on 84,186,862
shares outstanding, compared with $16.05 per share at December 31, 2001 on
85,233,262 shares outstanding. On March 1, 2002, a distribution of $0.08 per
share was paid consisting of $0.03 from 2001 long-term capital gain, $0.03 from
2001 short-term capital gain, $0.01 from 2001 investment income, and $0.01 from
2002 investment income, all taxable in 2002. A 2002 investment income dividend
of $0.08 per share was paid on June 1, 2002 and another $0.08 investment income
dividend has been declared to shareholders of record August 16, 2002, payable
September 1, 2002.
Net investment income for the six months ended June 30, 2002 amounted to
$8,398,640, compared with $9,693,681 for the same period in 2001. These
earnings are equal to $0.10 and $0.12 per share, respectively, on the average
number of shares outstanding during each period.
Net capital gain realized on investments for the six months ended June 30, 2002
amounted to $17,358,767, the equivalent of $0.21 per share.
Mr. Richard F. Koloski, Executive Vice President of the Company since 1986, has
announced his intention to retire on March 31, 2003. We will utilize the
intervening nine months to make an orderly transition in the management team.
Current and potential shareholders can find information about the Company,
including the daily net asset value (NAV) per share, the market price, and the
discount/premium to the NAV, at its site on the Internet. The address for the
site is www.adamsexpress.com. Also available at the website are a brief history
of the Company, historical financial information, and more general industry
material. Further information regarding shareholder services is located on page
14 of this report.
The Company is an internally-managed equity fund whose investment policy is
essentially based on the primary objectives of preservation of capital, the
attainment of reasonable income from investments and, in addition, an
opportunity for capital appreciation.
By order of the Board of Directors,
/s/ DOUGLAS G. OBER
Douglas G. Ober,
Chairman and
Chief Executive Officer
/s/ JOSEPH M. TRUTA
Joseph M. Truta,
President
July 19, 2002
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
June 30, 2002
Assets
Investments* at value:
Common stocks and convertible securities
(cost $782,684,172) $995,406,799
Non-controlled affiliate, Petroleum & Resources Corporation
(cost $26,585,260) 43,576,327
Short-term investments (cost $127,195,530) 127,122,030 $1,166,105,156
---------------------------------------------------------------------------------------
Cash 67,074
Securities lending collateral 96,528,169
Receivables:
Investment securities sold 3,060,358
Dividends and interest 947,679
Prepaid expenses and other assets 7,097,859
-----------------------------------------------------------------------------------------------------
Total Assets 1,273,806,295
-----------------------------------------------------------------------------------------------------
Liabilities
Investment securities purchased 1,211,114
Open written option contracts at value (proceeds $1,151,137) 1,393,730
Obligations to return securities lending collateral 96,528,169
Accrued expenses 3,866,341
-----------------------------------------------------------------------------------------------------
Total Liabilities 102,999,354
-----------------------------------------------------------------------------------------------------
Net Assets $1,170,806,941
-----------------------------------------------------------------------------------------------------
Net Assets
Common Stock at par value $1.00 per share, authorized 150,000,000 shares;
issued and outstanding 84,186,862 shares $ 84,186,862
Additional capital surplus 835,698,012
Undistributed net investment income 3,710,921
Undistributed net realized gain on investments 17,813,545
Unrealized appreciation on investments 229,397,601
-----------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Stock $1,170,806,941
-----------------------------------------------------------------------------------------------------
Net Asset Value Per Share of Common Stock $13.91
-----------------------------------------------------------------------------------------------------
*See Schedule of Investments on pages 8 through 10.
The accompanying notes are an integral part of the financial statements.
2
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
Six Months Ended June 30, 2002
Investment Income
Income:
Dividends:
From unaffiliated issuers $ 9,057,364
From non-controlled affiliate 344,477
Interest and other income 1,133,063
---------------------------------------------------------------------------------------------------------
Total income 10,534,904
---------------------------------------------------------------------------------------------------------
Expenses:
Investment research 716,205
Administration and operations 460,635
Directors' fees 107,750
Reports and stockholder communications 202,218
Transfer agent, registrar and custodian expenses 182,834
Auditing and accounting services 47,079
Legal services 49,156
Occupancy and other office expenses 187,236
Travel, telephone and postage 78,628
Other 104,523
---------------------------------------------------------------------------------------------------------
Total expenses 2,136,264
---------------------------------------------------------------------------------------------------------
Net Investment Income 8,398,640
---------------------------------------------------------------------------------------------------------
Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions 17,205,666
Net realized gain distributed by regulated investment company (non-controlled affiliate) 153,101
Change in unrealized appreciation on investments (195,595,958)
---------------------------------------------------------------------------------------------------------
Net Loss on Investments (178,237,191)
---------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $(169,838,551)
---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
3
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 2002 December 31, 2001
---------------- -----------------
From Operations:
Net investment income $ 8,398,640 $ 21,091,920
Net realized gain on investments 17,358,767 113,686,714
Change in unrealized appreciation on investments (195,595,958) (622,475,783)
-------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations (169,838,551) (487,697,149)
-------------------------------------------------------------------------------------------------------------
Dividends to Stockholders from:
Net investment income (8,475,839) (21,153,837)
Net realized gain from investment transactions (5,110,262) (111,923,436)
-------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (13,586,101) (133,077,273)
-------------------------------------------------------------------------------------------------------------
From Capital Share Transactions:
Value of shares issued in payment of exercised options and distributions -- 68,287,544
Cost of shares purchased (Note 4) (14,134,723) (30,709,784)
-------------------------------------------------------------------------------------------------------------
Change in net assets from capital share transactions (14,134,723) 37,577,760
-------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (197,559,375) (583,196,662)
Net Assets:
Beginning of period 1,368,366,316 1,951,562,978
-------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $3,710,921 and $3,788,120, respectively) $1,170,806,941 $1,368,366,316
-------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
4
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. Significant Accounting Policies
The Adams Express Company (the Company) is registered under the Investment
Company Act of 1940 as a diversified investment company. The Company's
investment objectives as well as the nature and risk of its investment
transactions are set forth in the Company's registration statement.
Security Valuation -- 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) are valued at amortized cost. Purchased and written options
are valued at the last quoted asked price.
Affiliated Companies -- Investments in companies 5% or more of whose
outstanding voting securities are held by the Company are defined as
"Affiliated Companies" in Section 2(a)(3) of the Investment Company Act of 1940.
Security Transactions and Investment Income -- Investment transactions are
accounted for on the trade date. Gain or loss on sales of securities and
options is determined on the basis of identified cost. Dividend income and
distributions to shareholders are recognized on the ex-dividend date, and
interest income is recognized on the accrual basis.
2. Federal Income Taxes
The Company's policy is to distribute all of its taxable income to its
shareholders in compliance with the requirements of the Internal Revenue Code
applicable to regulated investment companies. Therefore, no federal income tax
provision is required. For federal income tax purposes, the identified cost of
securities, including options, at June 30, 2002 was $937,147,941 and net
unrealized appreciation aggregated $229,884,852, of which the related gross
unrealized appreciation and depreciation were $404,077,856 and $174,193,004,
respectively.
Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. Accordingly, annual
reclassifications are made within the Company's capital accounts to reflect
income and gains available for distribution under income tax regulations.
3. Investment Transactions
Purchases and sales of portfolio securities, other than options and short-term
investments, during the six months ended June 30, 2002 were $108,006,620 and
$165,281,582, respectively. Options may be written or purchased by the Company.
The Company, as writer of an option, bears the market risk of an unfavorable
change in the price of the security underlying the written option. The risk
associated with purchasing options is limited to the premium originally paid.
Option transactions comprised an insignificant portion of operations during the
period ended June 30, 2002. All investment decisions are made by a committee,
and no one person is primarily responsible for making recommendations to that
committee.
4. Capital Stock
The Company has 10,000,000 authorized and unissued preferred shares without par
value.
On December 27, 2001, the Company issued 4,755,400 shares of its Common Stock
at a price of $14.36 per share (the average market price on December 10, 2001)
to stockholders of record November 19, 2001 who elected to take stock in
payment of the distribution from 2001 capital gain and investment income.
The Company may purchase shares of its Common Stock from time to time at such
prices and amounts as the Board of Directors may deem advisable. Transactions
in Common Stock for 2002 and 2001 were as follows:
Shares Amount
----------------------- --------------------------
Six months Six months
ended Year ended ended Year ended
June 30, December 31, June 30, December 31,
2002 2001 2002 2001
---------- ------------ ------------ ------------
Shares issued in
payment of
dividends -- 4,755,400 $ -- $ 68,287,544
------------------------------------------------------------------------
Total increase -- 4,755,400 -- $ 68,287,544
------------------------------------------------------------------------
Shares purchased
(at a weighted
average discount
from net asset
value of 10.5%
and 10.0%,
respectively) (1,046,400) (1,814,400) (14,134,723) (30,709,784)
------------------------------------------------------------------------
------------------------------------------------------------------------
Total decrease (1,046,400) (1,814,400) $(14,134,723) $(30,709,784)
------------------------------------------------------------------------
Net change (1,046,400) 2,941,000 $(14,134,723) $ 37,577,760
------------------------------------------------------------------------
On June 30, 2002, the Company held a total of 1,046,400 shares of its Common
Stock at a cost of $14,134,723. There were no shares of its Common Stock held
at December 31, 2001.
The Company has an employee incentive stock option and stock appreciation
rights plan which provides for the issuance of options and stock appreciation
rights for the purchase of up to 2,610,146 shares of the Company's Common Stock
at 100% of the fair market value at date of grant. Options are exercisable
beginning not less than one year after the date of grant and extend and vest
over ten years from the date of grant. Stock appreciation rights are
exercisable beginning not less than two years after the date of grant and
extend over the period during which the option is exercisable. The stock
appreciation rights allow the holders to surrender their rights to exercise
their options and receive cash or shares in an amount equal to the difference
between the option price and the fair market value of the Common Stock at the
date of surrender.
5
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
Under the plan, the exercise price of the options and related stock
appreciation rights is reduced by the per share amount of capital gain paid by
the Company during subsequent years. At the beginning of 2002, 345,567 options
were outstanding, with a weighted average exercise price of $8.7445 per share.
During the six months ended June 30, 2002, the Company granted options
including stock appreciation rights for 68,073 shares of common stock with a
weighted average exercise price of $14.2482. Stock appreciation rights relating
to 36,441 stock option shares were exercised at a weighted average market price
of $13.9803 per share and the stock options relating to those rights, which had
a weighted average exercise price of $3.7077 per share, were cancelled. Stock
options and stock appreciation rights relating to 58,233 shares, and having a
weighted average exercise price of $10.8055, were cancelled. At June 30, 2002,
there were outstanding exercisable options to purchase 116,198 common shares at
$2.6042-19.5500 per share (weighted average price of $7.7721), and
unexercisable options to purchase 202,768 common shares at $2.6042-19.5500 per
share (weighted average price of $11.3503). The weighted average remaining
contractual life of outstanding exercisable and unexercisable options is 3.6026
years and 6.4604 years, respectively. Total compensation expense recognized for
the six months ended June 30, 2002 related to the stock options and stock
appreciation rights plan was $(404,767). At June 30, 2002, there were 1,256,531
shares available for future option grants.
5. Retirement Plans
The Company provides retirement benefits for its employees under a
non-contributory qualified defined benefit pension plan. The benefits are based
on years of service and compensation during the last 5 years of employment. The
Company's current funding policy is to contribute annually to the plan only
those amounts that can be deducted for federal income tax purposes. The plan
assets, consisting of investments in individual stocks, bonds and mutual funds
were $10,875,296. In determining the actuarial present value of the projected
benefit obligation, the interest rate used for the weighted average discount
rate was 7.25%, the expected rate of annual salary increases was 7.0%, and the
long-term expected rate of return on plan assets was 8.0%. The projected
benefit obligation as of June 30, 2002 was $5,900,753. Prepaid pension cost
included in other assets at June 30, 2002 was $6,235,429.
In addition, the Company has a nonqualified benefit plan which provides
employees with defined retirement benefits to supplement the qualified plan.
The Company does not provide postretirement medical benefits.
6. Expenses
The cumulative amount of accrued expenses at June 30, 2002 for employees and
former employees of the Company was $2,966,800. Aggregate remuneration paid or
accrued during the six months ended June 30, 2002 to officers and directors
amounted to $820,633, which includes a credit of $404,767 for stock options and
stock appreciation rights.
7. Portfolio Securities Loaned
The Company makes loans of securities to brokers, secured by cash deposits,
U.S. Government securities, or bank letters of credit. The Company 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 Company also continues to receive interest or
dividends on the securities loaned. The loans are secured by collateral of at
least 102%, at all times, of the fair value of the securities loaned plus
accrued interest. Gain or loss in the fair value of the securities loaned that
may occur during the term of the loan will be for the account of the Company.
At June 30, 2002, the Company had securities on loan of $92,065,139 and held
collateral of $96,528,169.
-----------------
Forward-Looking Statements
This report contains "forward-looking statements" within the meaning of the
Securities Act of 1933 and the Securities and Exchange Act of 1934. By their
nature, all forward-looking statements involve risks and uncertainties, and
actual results could differ materially from those contemplated by the
forward-looking statements. Several factors that could materially affect the
Company's actual results are the performance of the portfolio of stocks held by
the Company, the conditions in the U.S. and international financial markets,
the price at which shares of the Company will trade in the public markets, and
other factors discussed in the Company's periodic filings with the Securities
and Exchange Commission.
6
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
------------------------
Six Months Ended
----------------------
Year Ended December 31
June 30, June 30, ------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
Per Share Operating Performance*
Net asset value, beginning of period $16.05 $23.72 $23.72 $26.85 $21.69 $19.01 $15.80
------------------------------------------------------------------------------------------------------------------------
Net investment income 0.10 0.12 0.26 0.26 0.25 0.30 0.29
Net realized gains and change in
unrealized appreciation and other
changes (2.10) (3.91) (6.32) (1.63) 6.54 3.78 4.22
------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.00) (3.79) (6.06) (1.37) 6.79 4.08 4.51
------------------------------------------------------------------------------------------------------------------------
Capital share repurchases 0.02 0.02 0.04 0.09 -- -- --
------------------------------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income (0.10) (0.12) (0.26) (0.22) (0.26) (0.30) (0.29)
Distributions from net realized gains (0.06) (0.04) (1.39) (1.63) (1.37) (1.10) (1.01)
------------------------------------------------------------------------------------------------------------------------
Total distributions (0.16) (0.16) (1.65) (1.85) (1.63) (1.40) (1.30)
------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.91 $19.79 $16.05 $23.72 $26.85 $21.69 $19.01
------------------------------------------------------------------------------------------------------------------------
Per share market price, end of period $12.26 $17.87 $14.22 $21.00 $22.38 $17.75 $16.13
Total Investment Return
Based on market price (12.8)% (14.2)% (24.7)% 1.7% 36.1% 19.3% 33.1%
Based on net asset value (12.3)% (15.9)% (24.7)% (4.3)% 33.6% 23.7% 30.7%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $1,170,807 $1,615,334 $1,368,366 $1,951,563 $2,170,802 $1,688,080 $1,424,170
Ratio of expenses to average net assets 0.33%+ 0.24%+ 0.19% 0.24% 0.32% 0.22% 0.39%
Ratio of net investment income to
average net assets 1.30%+ 1.10%+ 1.33% 0.97% 1.06% 1.48% 1.61%
Portfolio turnover 18.16%+ 23.09%+ 19.15% 12.74% 15.94% 22.65% 17.36%
Number of shares outstanding at
end of period (in 000's)* 84,187 81,622 85,233 82,292 80,842 77,815 74,924
------------------------
--------
* Prior years have been adjusted to reflect the 3-for-2 stock split effected in
October, 2000.
+ Ratios presented on an annualized basis.
7
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
June 30, 2002
Prin. Amt.
or Shares Value (A)
- ---------- ------------
Stocks and Convertible Securities -- 88.7%
Consumer -- 12.9%
BJ's Wholesale Club, Inc. (B) 425,000 $ 16,362,500
Brinker International Inc. (B) 500,000 15,875,000
Coca-Cola Co. (B) 185,000 10,360,000
Dean Foods Co. (B) 477,400 17,807,020
Hershey Foods Corp. 255,000 15,937,500
PepsiCo, Inc. 400,000 19,280,000
Procter & Gamble Co. 170,000 15,181,000
Safeway, Inc. 400,000 11,676,000
Target Corp. 435,000 16,573,500
Tiffany & Co. 330,000 11,616,000
------------
150,668,520
------------
Energy -- 6.0%
BP plc ADR 270,000 13,632,301
Exxon Mobil Corp. 316,836 12,964,929
Petroleum & Resources
Corporation (C) 1,913,761 43,576,327
------------
70,173,557
------------
Financial -- 19.1%
Banking -- 12.2%
BankNorth Group, Inc. 474,000 12,333,480
Citigroup Inc. 285,000 11,043,755
Federal Home Loan Mortgage
Corp. 150,000 9,180,000
Greenpoint Financial Corp. (B) 300,000 14,730,000
Investors Financial Services
Corp. 600,000 20,124,000
Mellon Financial Corp. 420,000 13,200,600
Provident Bankshares Corp. 335,021 7,936,659
Wachovia Corp. 380,000 14,508,400
Wells Fargo & Co. 550,000 27,533,000
Wilmington Trust Corp. 420,000 12,810,000
------------
143,399,894
------------
Insurance -- 6.9%
AMBAC Financial Group,
Inc. (B) 440,000 29,568,000
American International Group,
Inc. 759,375 51,812,157
------------
81,380,157
------------
Prin. Amt.
or Shares Value (A)
- ---------- ------------
Health Care -- 14.1%
Abbott Laboratories 350,000 $ 13,177,500
Affymetrix Inc. (D) 210,000 5,037,900
Applera Corp. - Applied
Biosystems Group 210,000 4,092,900
Bristol-Myers Squibb Co. 320,000 8,224,000
Caliper Technologies (B)(D) 225,000 1,878,750
Enzon, Inc. (B)(D) 100,000 2,461,000
Genentech, Inc. (D) 300,000 10,050,000
GlaxoSmithKline plc ADR (B) 250,360 10,800,530
HCA Inc. 400,000 19,000,000
Johnson & Johnson 360,000 18,813,600
Lilly (Eli) & Co. 190,000 10,716,000
Merck & Co., Inc. 250,000 12,660,000
Pfizer Inc. 415,000 14,525,000
Pharmacia Corp. 368,900 13,815,305
Vertex Pharmaceuticals Inc. (D) 248,016 4,037,700
Wyeth Co. 300,000 15,360,000
------------
164,650,185
------------
Industrials -- 12.6%
3M Co. 207,900 25,571,700
Black & Decker Corp. (B) 300,000 14,460,000
Canadian National Railway Co.
5.25% Conv. Pfd. QUIDS
due 2029 170,000 11,585,500
Corning Inc. (B) 1,170,000 4,153,500
General Electric Co. 1,300,000 37,765,000
ITT Industries 100,000 7,060,000
United Parcel Service, Inc. (B) 315,000 19,451,250
United Technologies Corp. 400,000 27,160,000
------------
147,206,950
------------
8
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
June 30, 2002
Prin. Amt
or Shares Value (A)
--------- -----------
Information Technology -- 9.4%
Communication Equipment -- 2.0%
Ericsson (L.M.) Telephone Co.
ADR (B) 2,000,000 $ 2,880,000
Lucent Technologies Inc. (B) 400,000 664,000
Nokia Corp. ADR 1,380,000 19,982,400
-----------
23,526,400
-----------
Computer Related -- 5.3%
BEA Systems Inc. (D) 400,000 3,764,000
BMC Software Inc. (B)(D) 310,000 5,146,000
Cisco Systems, Inc. (D) 1,755,000 24,482,250
DiamondCluster International
Inc. (D) 497,500 2,975,050
Oracle Corp. (D) 880,000 8,333,600
Sapient Corp. (D) 1,150,000 1,219,000
Siebel Systems Inc. (D) 340,000 4,834,800
Sun Microsystems Inc. (D) 515,000 2,580,150
Symantec Corp. 3.00% Conv.
Sub. Notes due 2006 500,000 606,250
Symantec Corp. (B)(D) 250,000 8,212,500
-----------
62,153,600
-----------
Electronics -- 2.1%
Intel Corp. 690,000 12,606,300
Solectron Corp. (B)(D) 2,000,000 12,300,000
-----------
24,906,300
-----------
Materials -- 1.3%
Albemarle Corp. 30,000 922,500
Rohm & Haas Co. 360,000 14,576,400
-----------
15,498,900
-----------
Prin. Amt.
or Shares Value (A)
----------- --------------
Telecom Services -- 4.1%
Cellular and Wireless -- 1.1%
Nextel Communications Inc.
5.25% Conv. Notes
due 2010 (E) $10,000,000 $ 4,225,000
Nextel Communications
Inc. (B)(D) 600,000 1,926,000
Vodafone Group plc
ADS (B) 492,614 6,724,174
--------------
12,875,174
--------------
Telephone -- 3.0%
BellSouth Corp. 440,000 13,860,000
SBC Communications Inc. 700,000 21,350,000
--------------
35,210,000
--------------
Utilities -- 9.2%
Black Hills Corp. (B) 420,800 14,563,889
CINergy Corp. 440,000 15,835,600
Duke Energy Corp. 8.25%
Conv. Pfd. due 2004 (B) 400,000 9,000,000
Duke Energy Corp. 355,000 11,040,500
Keyspan Corp. (B) 400,000 15,060,000
Northwestern Corp. (B) 500,000 8,475,000
Philadelphia Suburban
Corp. 855,000 17,271,000
TECO Energy, Inc. (B) 650,000 16,087,500
--------------
107,333,489
--------------
Total Stocks and Convertible Securities
(Cost $809,269,432) (F) 1,038,983,126
--------------
9
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
June 30, 2002
Prin. Amt. Value (A)
----------- -----------
Short-Term Investments -- 10.9%
U.S. Government Obligations -- 1.7%
U.S. Treasury Bills,
1.68%, due 8/22/02 $20,000,000 $19,951,466
-----------
Certificates of Deposit -- 1.3%
Mercantile-Safe Deposit &
Trust Co., 1.80 - 2.03%,
due 7/16/02 - 8/22/02 15,000,000 15,000,000
-----------
Commercial Paper -- 7.9%
ChevronTexaco Inc.,
1.74 - 1.76%, due
7/11/02 - 8/16/02 15,000,000 14,984,095
Coca-Cola Co. 1.73%,
due 7/25/02 - 8/6/02 14,200,000 14,177,856
GMAC New Center Asset
Trust, 1.81%, due 7/9/02 14,065,000 14,259,343
General Electric Capital
Corp., 1.74 - 1.78%,
due 7/23/02 - 7/31/02 15,000,000 14,979,725
IBM Corp., 1.73 - 1.74%,
due 8/5/02 - 9/5/02 9,625,000 9,602,779
Pfizer Inc., 1.70%,
due 8/1/02 4,025,000 4,019,108
Prin. Amt. Value (A)
----------- --------------
Procter & Gamble Co.,
1.70%, due 7/31/02 $ 2,125,000 $ 2,121,990
Unilever Capital Corp.,
1.70%, due 8/20/02 2,000,000 1,995,278
Verizon Network Funding,
1.74%, due 7/17/02 5,760,000 5,755,546
Wells Fargo Financial, Inc.,
1.75%, due 8/20/02 10,350,000 10,324,844
--------------
92,020,564
--------------
Purchased Options -- 0.0%
Cisco Systems, Inc. Put,
October 2002,
Strike Price $10 30,000 150,000
--------------
Total Short-Term Investments
(Cost $127,195,530) 127,122,030
--------------
Total Investments -- 99.6%
(Cost $936,464,962) 1,166,105,156
Cash, receivables and other
assets, less
liabilities - 0.4% 4,701,785
--------------
Net Assets -- 100.0% $1,170,806,941
==============
--------------------------------------------------------------------------------
Notes:
(A) See note 1 to financial statements. Securities are listed on the New York
Stock Exchange, the American Stock Exchange or the NASDAQ, except
restricted securities.
(B) All or a portion of these securities is on loan. See Note 7 to Financial
Statements.
(C) Non-controlled affiliate, a closed-end sector fund.
(D) Presently non-dividend paying.
(E) Restricted security (Nextel Communications Inc. 5.25% Conv. Notes due 2010,
acquired 1/21/00, cost $10,000,000).
(F) The aggregate market value of stocks held in escrow at June 30, 2002
covering open call option contracts written was $25,481,380. In addition,
the aggregate market value of securities segregated by the custodian
required to collateralize open put option contracts written was $16,906,250.
-----------------
This report, including the financial statements herein, is transmitted to the
stockholders of The Adams Express Company for their information. It is not a
prospectus, circular or representation intended for use in the purchase or
sale of shares of the Company or of any securities mentioned in the report.
The rates of return will vary and the market value of an investment will
fluctuate. Shares, if sold, may be worth more or less than their original
cost. Past performance is not indicative of future investment results.
10
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Board of Directors and Stockholders of
The Adams Express Company:
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 The Adams Express Company
(hereafter referred to as the "Company") at June 30, 2002, and the results of
its operations, the changes in its net assets and the financial highlights for
each of the fiscal periods presented, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatements. 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, 2002, by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
July 10, 2002
11
CHANGES IN PORTFOLIO SECURITIES*
--------------------------------------------------------------------------------
During the Three Months Ended June 30, 2002
Shares
--------------------------------------
Held
Additions Reductions June 30, 2002
--------- ---------- -------------
Albemarle Corp.................... 30,000 30,000
Bristol-Myers Squibb Co........... 20,000 320,000
Coca-Cola Co...................... 15,000 185,000
Dean Foods Co..................... 238,700 477,400
HCA Inc........................... 10,000 400,000
Investors Financial Services Corp. 300,000/(1)/ 600,000
Philadelphia Suburban Corp........ 690,000 855,000
Rohm & Haas Co.................... 100,000 360,000
Siebel Systems, Inc............... 85,000 340,000
Wilmington Trust Corp............. 210,000/(1)/ 420,000
Agere Systems, Inc. Class A....... 4,311/(2)/ 4,311 --
Agere Systems, Inc. Class B....... 105,825/(3)/ 105,825 --
AMBAC Financial Group, Inc........ 129,400 440,000
Black Hills Corp.................. 29,200 420,800
Canadian National Railway Corp.... 85,000 --
Elan Corp......................... 200,000 --
Engelhard Corp.................... 175,000 --
Federal Home Loan Mortgage Corp... 195,000 150,000
Greenpoint Financial Corp......... 135,000 300,000
Human Genome Sciences, Inc........ 200,000 --
ITT Industries.................... 100,000 100,000
3M Co............................. 7,100 207,900
Motorola Inc...................... 495,622 --
Nextel Communications Inc......... 440,000 600,000
J.M. Smucker Co................... 3,400/(4)/ 3,400 --
--------
* In our previous quarterly reports, this unaudited schedule disclosed only
"principal changes" in portfolio securities. We have changed this schedule
to reflect all purchases and sales of portfolio securities during the
quarter.
(1) By stock split.
(2) Received .011 share of Agere Class A common stock for each share of Lucent
Technologies Inc. held.
(3) Received .265 share of Agere Class B common stock for each share of Lucent
Technologies Inc. held.
(4) Received .02 share of J.M. Smucker Co. common stock for each share of
Procter & Gamble Co. held.
12
HISTORICAL FINANCIAL STATISTICS
--------------------------------------------------------------------------------
Dividends Distributions
Net from from
Asset Net Investment Net Realized
Value of Shares Value per Income Gains
December 31 Net Assets Outstanding* Share* per Share* per Share*
----------- ---------- ------------ --------- -------------- -------------
1992......... $ 696,924,779 51,039,938 $13.65 $.31 $ .77
1993......... 840,610,252 63,746,498 13.19 .30 .79
1994......... 798,297,600 66,584,985 11.99 .33 .73
1995......... 986,230,914 69,248,276 14.24 .35 .76
1996......... 1,138,760,396 72,054,792 15.80 .35 .80
1997......... 1,424,170,425 74,923,859 19.01 .29 1.01
1998......... 1,688,080,336 77,814,977 21.69 .30 1.10
1999......... 2,170,801,875 80,842,241 26.85 .26 1.37
2000......... 1,951,562,978 82,292,262 23.72 .22 1.63
2001......... 1,368,366,316 85,233,262 16.05 .26 1.39
June 30, 2002 1,170,806,941 84,186,862 13.91 .18+ .06
--------
* Prior years have been adjusted to reflect the 3-for-2 stock split effected in
October, 2000.
+ Paid or declared.
-----------------
Common Stock
Listed on the New York Stock Exchange
and the Pacific Exchange
The Adams Express Company
Seven St. Paul Street, Suite 1140, Baltimore, MD 21202
Website: www.adamsexpress.com
E-mail: contact@adamsexpress.com
Telephone: (410) 752-5900 or (800) 638-2479
Counsel: Chadbourne & Parke L.L.P.
Independent Accountants: PricewaterhouseCoopers LLP
Transfer Agent, Registrar & Custodian of Securities
The Bank of New York
101 Barclay Street
New York, NY 10286
The Bank's Shareholder Relations Department: (877) 260-8188
E-mail: Shareowner-svcs@bankofny.com
13
SHAREHOLDER INFORMATION AND SERVICES
--------------------------------------------------------------------------------
DIVIDEND PAYMENT SCHEDULE
The Company 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
election by notifying their brokerage house representative.
BuyDIRECT/SM/*
BuyDIRECT is a direct purchase and sale plan, as well as a dividend
reinvestment plan, sponsored and administered by our transfer agent, The Bank
of New York. The Plan provides registered stockholders and interested first
time investors an affordable alternative for buying, selling, and reinvesting
in Adams Express shares.
The costs to participants in administrative service fees and brokerage
commissions for each type of transaction are listed below.
Initial Enrollment $7.50
A one-time fee for new accounts who are not currently
registered holders.
Optional Cash Investments
Service Fee $2.50 per investment
Brokerage Commission $0.05 per share
Reinvestment of Dividends**
Service Fee 10% of amount invested
(maximum of $2.50 per investment)
Brokerage Commission $0.05 per share
Sale of Shares
Service Fee $10.00
Brokerage Commission $0.05 per share
Deposit of Certificates for safekeeping Included
Book to Book Transfers Included
To transfer shares to another participant or to a new
participant
Fees are subject to change at any time.
Minimum and Maximum Cash Investments
Initial minimum investment (non-holders) $500.00
Minimum optional investment
(existing holders) $50.00
Electronic Funds Transfer (monthly
minimum) $50.00
Maximum per transaction $25,000.00
Maximum per year NONE
A brochure which further details the benefits and features of BuyDIRECT as well
as an enrollment form may be obtained by contacting The Bank of New York.
For Non-Registered Shareholders
For shareholders whose stock is held by a broker in "street" name, The Bank of
New York's Dividend Reinvestment Plan remains available through many registered
investment security dealers. If your shares are currently held in a "street"
name or brokerage account, please contact your broker for details about how you
can participate in the Plan or contact The Bank of New York about the BuyDIRECT
Plan.
-----------------
The Company The Transfer Agent
The Adams Express Company The Bank of New York
Lawrence L. Hooper, Jr., Shareholder Relations
Vice President, Secretary Dept.-8W
and General Counsel P.O. Box 11258
Seven St. Paul Church Street Station
Street, Suite 1140 New York, NY 10286
Baltimore, MD 21202 (877) 260-8188
(800) 638-2479 Website:
Website: http://stock.bankofny.com
www.adamsexpress.com E-mail:
E-mail: Shareowner-svcs@
contact@adamsexpress.com bankofny.com
*BuyDIRECT is a service mark of The Bank of New York.
**The year-end dividend and capital gain distribution will usually be made in
newly issued shares of common stock. There would be no fees or commissions in
connection with this dividend and capital gain distribution when made in newly
issued shares.
14