UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-00248
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THE ADAMS EXPRESS COMPANY
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(Exact name of registrant as specified in charter)
7 Saint Paul Street, Suite 1140, Baltimore, Maryland 21202
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(Address of principal executive offices) (Zip code)
Lawrence L. Hooper, Jr.
The Adams Express Company
7 Saint Paul Street
Suite 1140
Baltimore, Maryland 21202
Registrant's telephone number, including area code: 410-752-5900
Date of fiscal year end: December 31, 2004
Date of reporting period: December 31, 2004
Item 1. Reports to Stockholders.
2004 AT A GLANCE
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The Company
. a closed-end equity investment company
. objectives: preservation of capital
reasonable income
opportunity for capital gain
. internally-managed
. low expense ratio
. low turnover
Stock Data (12/31/04)
NYSE Symbol.............. ADX
Market Price.......... $13.12
52-Week Range $12.06 - $13.91
Discount............... 12.8%
Shares Outstanding 86,135,292
Summary Financial Information
Year Ended December 31
2004 2003
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Net asset value per share $ 15.04 $ 14.36
Total net assets 1,295,548,900 1,218,862,456
Unrealized appreciation 343,670,412 282,112,491
Net investment income 19,008,405 15,613,355
Total realized gain 54,713,903 49,120,443
Total return (based on market value) 13.2% 25.2%
Total return (based on net asset value) 12.1% 26.3%
Expense ratio 0.43% 0.47%
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2004 Dividends and Distributions
Amount
Paid (per share) Type
-----------------------------------------------------
March 1, 2004 $0.01 Long-term capital gain
March 1, 2004 0.01 Short-term capital gain
March 1, 2004 0.03 Investment income
June 1, 2004 0.05 Investment income
September 1, 2004 0.05 Investment income
December 27, 2004 0.63 Long-term capital gain
December 27, 2004 0.01 Short-term capital gain
December 27, 2004 0.11 Investment income
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$0.90
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2005 Annual Meeting of Stockholders
Location: The Radisson Hotel at Cross Keys, Baltimore, Maryland
Date: April 27, 2005
Time: 9:30 a.m.
PORTFOLIO REVIEW
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Ten Largest Portfolio Holdings (12/31/04)
Market Value % of Net Assets
------------ ---------------
General Electric Co. $ 54,301,050 4.2
Petroleum & Resources Corporation* 51,198,990 4.0
American International Group, Inc. 48,508,788 3.8
AMBAC Financial Group, Inc. 31,209,400 2.4
Pfizer Inc. 30,116,800 2.3
Wells Fargo & Co. 24,860,000 1.9
Target Corp. 23,887,800 1.8
Cisco Systems, Inc. 23,160,000 1.8
PepsiCo, Inc. 22,968,000 1.8
Aqua America, Inc. 22,131,000 1.7
------------ ----
Total $332,341,828 25.7%
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*Non-controlled affiliate
Sector Weightings (12/31/04)
[CHART]
1
THE ADAMS EXPRESS COMPANY
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Calendar Market Cumulative Cumulative Total Total net
Years Value market value market value market asset
of of capital of income value value
original gains dividends
shares distributions taken in
taken in shares
shares
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1990 $ 9,391 $ 682 $ 399 $10,472 $11,942
1991 12,097 1,719 916 14,732 15,666
1992 12,733 2,738 1,329 16,800 17,203
1993 11,380 3,439 1,518 16,337 18,079
1994 9,948 4,018 1,753 15,719 18,093
1995 11,775 5,927 2,617 20,319 23,468
1996 12,574 7,688 3,386 23,648 28,377
1997 15,399 11,271 4,773 31,443 37,070
1998 16,951 14,674 5,862 37,487 45,809
1999 21,368 21,596 8,006 50,970 61,164
2000 20,055 23,850 7,944 51,849 58,565
2001 13,580 19,570 5,912 39,062 44,089
2002 10,094 16,076 4,832 31,002 35,548
2003 11,852 20,749 6,193 38,794 44,889
2004 12,530 23,985 7,372 43,887 50,309
Illustration of an assumed
15 year investment of $10,000
(unaudited)
Investment income dividends and capital gains distributions are taken in
additional shares. This chart covers the years 1990-2004. Fees for the
reinvestment of interim dividends are assumed as 2% of the amount reinvested
(maximum of $2.50) and commissions of $0.05 per share. There is no charge for
reinvestment of year-end distributions. No adjustment has been made for any
income taxes payable by stockholders on income dividends or on capital gains
distributions, or the sale of any shares. These results should not be
considered representative of the dividend income or capital gain or loss which
may be realized in the future.
[CHART]
2
LETTER TO STOCKHOLDERS
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Each year at this time we share with you our perspective on the past year. In
addition, we discuss what the new year might hold for the economy, equity
markets in general, and your Fund.
The Year in Review
We are pleased to report that the Fund had a total return on net asset value of
12.1% for the year, compared to the 10.9% return of the Standard & Poor's 500
Index and the 5.3% return of the Dow Jones Industrial Average. In what proved
to be a difficult year for equities, the broad diversification of the Fund and
its emphasis on relatively low risk, dividend-paying stocks was responsible for
the index-beating performance.
The equity markets were quite volatile during the year, as they were strongly
influenced by a number of factors. As a result, by the end of the third quarter
the indices were approximately where they started the year. One of the largest
factors impacting the markets was the price of oil, which spiked several times
and reached a high of $55.17 in October. Investor concern over the effect of
energy prices on economic growth resulted in heavy selling and a market decline
each time the oil price rose sharply.
A second factor influencing the markets was the action taken by the Federal
Reserve in the second half of the year. Concerned about the absolute level of
interest rates and some early signs of inflationary pressures, the Fed raised
the Fed Funds rate five times, taking it from 1%, the lowest it had been in
over 40 years, to 2.25%. The Fed further indicated that it would continue to
raise the rate until there was evidence of a balance between monetary stimulus
and inflation. The markets initially reacted negatively as expectations of
higher rates were incorporated in valuations. As the second half progressed,
inflation remained tame and the economy continued to grow at a solid pace, so
investors began to view the rate moves as healthy. By raising rates during a
period of good growth and modest inflation, the Fed was giving itself room to
lower rates should the economy show signs of weakening.
Other factors weighing on the markets included the apparent deterioration of
the situation in Iraq and the U.S. Presidential election. The cost of
supporting the Iraqi interim government in dollars and lives mounted steadily,
with no end in sight, as the year wore on. The strongly opposing views of the
Presidential candidates insured a tough election battle and a close race.
Fortunately, there was a clear winner in the end, rather than the predicament
that occurred in 2000. The pro-business views of the eventual winner, Mr. Bush,
were reflected in the market rally in the final two months of the year.
After ten months of volatility but essentially no upward movement, the 9%
increase in the S&P 500 Index in November and December was indicative of
investor confidence in the outlook. The full year return on the Index of 10.9%
was less than half that of the prior year, but more in line with long-term
averages. As might be expected, energy stocks were the best performers, with a
return of 31.5%, and utilities and telecommunications services companies also
turned in strong performances, providing returns of 20% or better. After
stellar returns in 2003, technology stocks were poor performers in 2004 with a
2.6% return, while health care stocks were the weakest with a 1.7% return.
Our sector results were mixed in 2004. We maintained an overweight position
relative to the S&P 500 Index in energy, industrial, health care, and utility
stocks, and we outperformed the Index sector in health care and were even in
the industrials. Our reductions in holdings of large pharmaceutical companies
in 2003 in favor of health care equipment and services companies worked well
for the Fund in 2004 as the drug companies endured a lot of adverse publicity.
Our portfolio did not have sufficient exposure to oil service stocks to beat
the Index in energy and we have avoided nuclear utilities, which were the
best-performing names in the utility sector. We were underweighted in consumer,
financial, and technology stocks, in part due to early sales, and outperformed
the Index in all of them. This combination enabled the Fund to generate a 12.1%
return and beat the Index by 120 basis points or 11.0%.
Within the Index, the stocks of smaller to medium capitalization (less than $14
billion) companies performed better than those of the largest capitalization
(greater than $25 billion) companies. This was also the case in 2003, as
investors gravitated to the stocks of companies with the greatest leverage to
economic growth. Part of the outperformance of the Adams Express portfolio
relative to the S&P 500 Index is explained by the fact that only 44% of the
Fund falls in the largest capitalization group whereas 66% of the value of the
Index is in that group. It should be noted, though, that only 70% of our
portfolio is represented in the Index at all and several of our holdings not
included in the Index would fall in the largest capitalization group.
Interestingly, the stocks with the highest beta, or volatility relative to the
market, did far worse than lower-beta stocks. While investors wanted better
returns, they appeared unwilling to take added risks to obtain them.
Consequently, our focus on lower-risk stocks, characterized by low betas,
boosted our returns in 2004. The relative performance of higher- and
lower-yielding stocks also showed investors' tendency to avoid risk, as stocks
with higher yields had returns almost twice
3
LETTER TO STOCKHOLDERS (CONTINUED)
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those with lower yields. With our emphasis on the generation of income, we
benefited from the better performance of higher-dividend-paying stocks during
the year. The opposite was the case in 2003, despite the favorable change in
tax laws enacted that year related to dividends.
Investment Results
At the end of 2004 our net assets were $1,295,548,900 or $15.04 per share on
86,135,292 shares outstanding. This compares with $1,218,862,456 or $14.36 per
share on 84,886,412 shares outstanding a year earlier.
Net investment income for 2004 was $19,008,405 compared to $15,613,355 for
2003. These earnings are equal to $0.23 and $0.19 per share, respectively, on
the average number of shares outstanding throughout each year. It should be
noted that in 2004 we received $2,400,000, or 3 cents per share, in an
extraordinary dividend from Microsoft Corp. This accounted for a significant
portion of the increase in income from a year ago. As Microsoft is not expected
to repeat such a payment in 2005, shareholders should not expect to see a
similar increase in earnings per share in 2005. In 2004, our 0.43% expense
ratio (expenses to average net assets) was once again at a very low level
compared to the industry. This ratio was not impacted by the Microsoft dividend.
Net realized gains amounted to $54,713,903 during the year, while the
unrealized appreciation on investments increased from $282,112,491 at December
31, 2003 to $343,670,412 at year end.
Dividends and Distributions
The total dividends and distributions paid in 2004 were $0.90 per share
compared to $0.78 in 2003. As announced on November 11, 2004, a year-end
distribution consisting of investment income of $0.11 and capital gains of
$0.64 was made on December 27, 2004, both realized and taxable in 2004. On
January 13, 2005, an additional distribution of $0.05 per share was declared
payable March 1, 2005, representing the balance of undistributed net investment
income and capital gains earned during 2004 and an initial distribution from
2005 net investment income, all taxable to shareholders in 2005.
Outlook for 2005
With a relatively lackluster holiday selling season on the consumer side and no
year-end surge in capital spending in the industrial sector, it appears that
the final quarter of 2004 will show annualized U.S. real economic growth of
about 3.5% over the third quarter and real GDP for the year of about 3.6%. Most
economists agree that this represents a level of growth that should be
sustainable for an extended period of time, barring exogenous factors. We
believe, however, that there are a number of factors which are likely to dampen
growth in 2005 from this level.
First among these factors is the probable continued high cost of energy for
consumers and businesses. Early indications are that OPEC members are generally
in favor of crude oil prices of $35 per barrel or more. As the only producers
with any spare capacity, these nations will be able to control supply to
international markets. Worldwide demand for oil, having grown over 3% in 2004
as a result of strong economies, particularly in China and India, is unlikely
to slow much in 2005. We can therefore expect that prices will average between
$35 and $40 per barrel, with probable spikes to higher levels.
The second factor that may impede growth is likely to be periodic increases in
short-term interest rates. The Federal Reserve has made it relatively clear
that it will continue to take action to drive up interest rates in 2005. With
the Federal Funds rate currently 2.25% and an apparent Fed target of 3-4%, we
can expect four or five increases to occur during the year. This would serve to
dampen the financing of receivables and inventory at businesses. The spread
between short and long-term interest rates is quite wide at this point, so we
do not expect much increase in longer rates as the spread is allowed to narrow
to a more normal range. Therefore, capital spending should not be impacted
significantly by the rise in short-term rates. With capacity utilization in
manufacturing industries running between 77% and 80%, one would expect
companies to be planning and purchasing equipment for expansion in 2005 unless
they anticipate a dramatic slowing in economic growth. While companies do not
appear to anticipate this, purchasing managers did not choose to take advantage
of the beneficial depreciation rules which expired in 2004, so they may not be
expecting capacity to tighten further this year.
The amount of U.S. government spending during the year will also have an effect
on the growth of the economy. After a budget deficit of nearly $500 billion in
fiscal 2004, the Bush administration has been working to reduce the size of the
deficit for 2005 and beyond by cutting the budget where possible. This is
likely to cut into spending for defense, highways, and agriculture, among
others. While not a large part of the economy, government spending tends to
have multiplier effects across numerous industries.
The strength of the dollar and the U.S. trade deficit also have a bearing on
economic growth. The dollar has been declining since early 2002 and the
government does not seem inclined to take measures to halt the slide. Despite
the decline, the deficit in trade has not diminished significantly, as U.S.
consumers continue to buy foreign goods at higher and higher prices. Nor has it
enabled U.S. companies to raise their prices
4
LETTER TO STOCKHOLDERS (CONTINUED)
--------------------------------------------------------------------------------
on similar goods. To date the trade deficit has been funded through the
purchase of U.S. debt by the counterparty countries, notably China, but they
may discontinue this should the dollar continue to fall. Any such slowdown in a
willingness to accept dollars would first impact government debt markets, but
would reverberate throughout all financial markets.
These and other factors will exert varying levels of influence on the
performance of the economy in 2005, in turn impacting corporate earnings and
the equity markets. Our belief is that the growth of the economy will moderate
further from 2004's 3.6% level, to about 3% in 2005. The operating earnings of
companies in the S&P 500, after experiencing an increase of 18% in 2003 and
likely growth of about 19% in 2004, will probably only be up in single digits
in 2005. On a fundamental basis, slower growth in earnings would translate into
a more modest rise in stock prices, especially if there is any downward
movement in the price/earnings ratio, which often happens in the later stages
of an economic cycle. Thus, we are not looking for returns to exceed those of
2004.
With the Adams Express portfolio broadly diversified across industry sectors,
as noted in the chart on page 1, we would expect to generate reasonable returns
in 2005. The stock market has generated double-digit returns, well above
long-term averages, for the last two years. We expect that returns in 2005 will
not be as great, given the current stage of the economic cycle. As previously
discussed, we have been emphasizing lower-risk, dividend-paying stocks for some
time. Investors in general are expected to continue to reduce the relative risk
in their portfolios and focus more on income generation, the result being that
those stocks and our portfolio should perform better than the market. We have
taken steps to reduce the investments in the portfolio which perform best in
the early part of an economic cycle, chiefly industrials, and those which are
most sensitive to rising interest rates, especially smaller banks. The
long-term outlook reflected in our investment portfolio does not dictate that
we make wholesale changes in order to anticipate normal economic fluctuations.
The amount of cash and short-term investments stood at 2.6% of net assets at
year end, compared to 3.9% one year ago.
Share Repurchase Program
On December 9, 2004, the Board of Directors authorized the repurchase by
management of an additional 5% of the outstanding shares of the Company over
the ensuing year. The repurchase program is subject to the same restriction as
in the past, namely that shares can be repurchased when the discount of the
market price of the shares from the net asset value is 10% or greater.
From the beginning of 2005 through January 20, 2005, a total of 257,500 shares
have been repurchased at a total cost of $3,333,750 and a weighted average
discount from net asset value of 11.9%.
The proxy statement for the Annual Meeting of Stockholders to be held in
Baltimore, Maryland on April 27, 2005, is expected to be mailed on or about
March 15, 2005.
By order of the Board of Directors,
/s/ Douglas G.Ober /s/ Joseph M. Truta
Douglas G. Ober, Joseph M. Truta,
Chairman and Chief President
Executive Officer
January 21, 2005
5
STATEMENT OF ASSETS AND LIABILITIES
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December 31, 2004
Assets
Investments* at value:
Common stocks and convertible securities
(cost $885,230,183) $1,205,833,311
Non-controlled affiliate, Petroleum & Resources Corporation
(cost $27,963,162) 51,198,990
Short-term investments (cost $33,913,453) 33,913,453
Securities lending collateral (cost $60,243,741) 60,243,741 $1,351,189,495
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Cash 214,825
Dividends and interest receivable 1,349,652
Prepaid pension cost 5,642,052
Prepaid expenses and other assets 1,542,899
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Total Assets 1,359,938,923
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Liabilities
Open written option contracts at value (proceeds $654,431) 822,975
Obligations to return securities lending collateral 60,243,741
Accrued expenses and other liabilities 3,323,307
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Total Liabilities 64,390,023
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Net Assets $1,295,548,900
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Net Assets
Common Stock at par value $1.00 per share, authorized 150,000,000 shares;
issued and outstanding 86,135,292 shares $ 86,135,292
Additional capital surplus 859,365,727
Undistributed net investment income 5,038,545
Undistributed net realized gain on investments 1,338,924
Unrealized appreciation on investments 343,670,412
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Net Assets Applicable to Common Stock $1,295,548,900
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Net Asset Value Per Share of Common Stock $15.04
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*See schedule of investments on pages 13 through 16.
The accompanying notes are an integral part of the financial statements.
6
Investment Income
Income:
Dividends:
From unaffiliated issuers $ 22,751,240
From non-controlled affiliate 913,558
Interest and other income 678,988
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Total income 24,343,786
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Expenses:
Investment research 2,342,204
Administration and operations 1,138,258
Directors' fees 273,875
Reports and stockholder communications 328,839
Transfer agent, registrar and custodian expenses 346,468
Auditing and accounting services 112,015
Legal services 146,161
Occupancy and other office expenses 320,770
Travel, telephone and postage 100,049
Other 226,742
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Total expenses 5,335,381
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Net Investment Income 19,008,405
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Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions 53,005,946
Net realized gain distributed by regulated investment company
(non-controlled affiliate) 1,707,957
Change in unrealized appreciation on investments 61,557,921
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Net Gain on Investments 116,271,824
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Change in Net Assets Resulting from Operations $135,280,229
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The accompanying notes are an integral part of the financial statements.
7
STATEMENTS OF CHANGES IN NET ASSETS
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For the Year Ended
------------------------------
Dec. 31, 2004 Dec. 31, 2003
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From Operations:
Net investment income $ 19,008,405 $ 15,613,355
Net realized gain on investments 54,713,903 49,120,443
Change in unrealized appreciation on investments 61,557,921 187,524,953
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Change in net assets resulting from operations 135,280,229 252,258,751
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Distributions to Stockholders From:
Net investment income (20,157,724) (14,099,163)
Net realized gain from investment transactions (55,099,990) (50,229,205)
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Decrease in net assets from distributions (75,257,714) (64,328,368)
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From Capital Share Transactions:
Value of shares issued in payment of distributions 35,690,590 32,667,930
Cost of shares purchased (note 4) (19,026,661) (26,545,949)
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Change in net assets from capital share transactions 16,663,929 6,121,981
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Total Increase in Net Assets 76,686,444 194,052,364
Net Assets:
Beginning of year 1,218,862,456 1,024,810,092
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End of year (including undistributed net investment
income of $5,038,545 and $6,386,461, respectively) $1,295,548,900 $1,218,862,456
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The accompanying notes are an integral part of the financial statements.
8
NOTES TO FINANCIAL STATEMENTS
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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 at December 31, 2004 was $1,006,863,288, and net unrealized
appreciation aggregated $344,326,207, of which the related gross unrealized
appreciation and depreciation were $460,886,167 and $116,559,960, respectively.
As of December 31, 2004, the tax basis of distributable earnings was $2,660,113
of undistributed ordinary income and $0 of undistributed long-term capital gain.
Distributions paid by the Company during the year ended December 31, 2004 were
classified as ordinary income of $22,205,063, and long-term capital gain of
$53,052,651. In comparison, distributions paid by the Company during the year
ended December 31, 2003 were classified as ordinary income of $17,389,281, and
long-term capital gain of $46,939,087. The distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Accordingly, periodic reclassifications are made within
the Company's capital accounts to reflect income and gains available for
distribution under income tax regulations.
3. Investment Transactions
The Company's investment decisions are made by a committee, 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 year ended December 31, 2004 were $161,361,633 and
$187,414,341, respectively. Options may be written (sold) or purchased by the
Company. The Company, as writer of an option, bears the risks of possible
illiquidity of the option markets and from movements in security values. The
risk associated with purchasing an option is limited to the premium originally
paid. A schedule of outstanding option contracts as of December 31, 2004 can be
found on page 17.
Transactions in written covered call and collateralized put options during the
year ended December 31, 2004 were as follows:
Covered Calls Collateralized Puts
------------------- --------------------
Contracts Premiums Contracts Premiums
--------- --------- --------- ----------
Options outstanding,
December 31, 2003 1,850 $ 229,289 3,100 $ 385,022
Options written 8,815 954,922 10,015 1,114,010
Options purchased 1,500 176,595
Options terminated in
closing purchase
transactions (1,300) (143,465) (3,107) (364,867)
Options expired (4,115) (439,777) (8,403) (996,125)
Options exercised (1,650) (214,620) (450) (46,553)
----------------------------------------------------------------
Options outstanding,
December 31, 2004 3,600 $ 386,349 2,655 $ 268,082
----------------------------------------------------------------
4. Capital Stock
The Company has 10,000,000 authorized and unissued preferred shares without par
value.
On December 27, 2003, the Company issued 2,702,062 shares of its Common Stock
at a price of $12.09 per share (the average market price on December 8, 2003)
to stockholders of record November 24, 2003 who elected to take stock in
payment of the distribution from 2003 capital gain and investment income.
On December 27, 2004, the Company issued 2,745,430 shares of its Common Stock
at a price of $13.00 per share (the average market price on December 13, 2004)
to stockholders of record November 23, 2004 who elected to take stock in
payment of the distribution from 2004 capital gain and investment income.
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
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 2004 and 2003 were as follows:
Shares Amount
---------------------- --------------------------
2004 2003 2004 2003
---------- ---------- ------------ ------------
Shares issued in
payment of
distributions 2,745,430 2,702,062 $ 35,690,590 $ 32,667,930
Shares purchased (at a
weighted average
discount from net
asset value of 13.0%
and 11.2%,
respectively) (1,496,550) (2,351,900) (19,026,661) (26,545,949)
--------------------------------------------------------------------------
Net change 1,248,880 350,162 $ 16,663,929 $ 6,121,981
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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 optionees to surrender their rights to exercise
their options and receive cash or shares in an amount equal to the difference
between the option price and the fair market value of the common stock at the
date of surrender.
Under the plan, the exercise price of the options and related stock
appreciation rights is reduced by the per share amount of capital gain paid by
the Company during subsequent years. At the beginning of 2004, there were
229,364 options outstanding with a weighted average exercise price of $12.07
per share. During 2004, the Company granted options, including stock
appreciation rights, for 62,067 shares of Common Stock with an original
weighted average exercise price of $12.57 per share. During the year, stock
appreciation rights relating to 8,134 stock option shares were exercised at a
weighted average market price of $13.05 per share and the stock options
relating to these rights which had a weighted average exercise price of $3.79
per share were cancelled. At December 31, 2004, there were outstanding
exercisable options to purchase 119,283 common shares at $3.15-$17.77 per share
(weighted average price of $12.38), and unexercisable options to purchase
164,014 common shares at $4.74-$17.77 per share (weighted average price of
$11.31). The weighted average remaining contractual life of outstanding
exercisable and unexercisable options was 6.00 years and 6.82 years,
respectively. Total compensation expense recognized in 2004 related to the
stock option and stock appreciation rights plan was $275,601. At December 31,
2004, there were 1,180,685 shares available for future option grants.
In December 2004, the Financial Accounting Standards Board revised the
Statement of Financial Accounting Standards No. 123, Share-Based Payment which
establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. It also addresses
transactions in which an entity incurs liabilities in exchange for goods or
services that are based on the fair value of the entity's equity instruments or
that may be settled by the issuance of those equity instruments. Currently, the
Company recognizes compensation cost for a stock option award over the award's
vesting period. The revised FAS 123 is effective as of the beginning of the
first interim or annual reporting period that begins after June 15, 2005. The
Company is currently evaluating the impact it will have on its operations and
financial statements.
5. Retirement Plans
The Company provides retirement benefits for its employees under a
non-contributory qualified defined benefit pension plan and a non-contributory
nonqualified defined benefit pension plan. The benefits are based on years of
service and compensation during the last five years of employment.
The Company uses a December 31 measurement date for its plans.
2004 2003
---------- -----------
Change in benefit obligation
Benefit obligation at beginning of year $7,343,955 $ 7,599,183
Service cost 307,074 245,148
Interest cost 451,715 476,892
Actuarial loss 508,456 524,055
Benefits paid (261,880) (1,501,323)
-----------------------------------------------------------------------
Benefit obligation at end of year $8,349,320 $ 7,343,955
-----------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year $9,442,594 $ 9,649,491
Actual return on plan assets 777,347 1,275,582
Employer contribution 18,844 18,844
Benefits paid (261,880) (1,501,323)
-----------------------------------------------------------------------
Fair value of plan assets at end of year $9,976,905 $ 9,442,594
-----------------------------------------------------------------------
Funded status $1,627,585 $ 2,098,639
Unrecognized net loss 1,542,040 1,177,291
Unrecognized prior service cost 503,135 631,112
-----------------------------------------------------------------------
Net amount recognized $3,672,760 $ 3,907,042
-----------------------------------------------------------------------
10
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
Amounts recognized in the statement of assets and
liabilities consist of:
2004 2003
----------- -----------
Prepaid pension cost $ 5,642,052 $ 5,757,045
Accrued pension cost (1,969,292) (1,850,003)
-------------------------------------------------
Net amount recognized $ 3,672,760 $ 3,907,042
-------------------------------------------------
The accumulated benefit obligation for all defined benefit pension plans was
$6,710,981 and $5,810,411 at December 31, 2004 and 2003, respectively.
2004 2003
--------- -----------
Components of net periodic pension cost
Service cost $ 307,074 $ 245,148
Interest cost 451,715 476,892
Actual return on plan assets (777,347) (1,275,582)
Amortization of prior service cost 127,977 169,524
Amortization of net loss 113,201 162,272
Deferred asset gain 30,506 555,370
---------------------------------------------------------------
Net periodic pension cost $ 253,126 $ 333,624
---------------------------------------------------------------
Assumptions used to determine benefit obligations and costs are:
2004 2003
---- ----
Discount rate 5.75% 6.25%
Expected long-term return on plan assets 8.00% 8.00%
Rate of compensation increase 7.00% 7.00%
The assumption for the expected long-term return on plan assets is based on the
actual long-term historical returns realized by the plan assets, weighted
according to the current asset mix.
The asset allocations at December 31, 2004 and 2003, by asset category are as
follows:
2004 2003
---- ----
Asset Category
Equity Securities & Equity Mutual Funds 71% 72%
Fixed Income Mutual Funds 25% 27%
Cash 4% 1%
Equity securities include The Adams Express Company Common Stock in the amount
of $610,779 (6% of total plan assets) and $546,226 (6% of total plan assets) at
December 31, 2004, and 2003, respectively.
The primary objective of the Company's pension plan is to provide capital
appreciation, current income, and preservation of capital through a portfolio
of stocks and fixed income securities. The equity portion of the portfolio may
range from 50% to 75% of total portfolio assets. The fixed income portion of
the portfolio may range from 25% to 50% of total portfolio assets and cash may
range from 0% to 25% of total portfolio assets. Subject to these allocation
ranges, the portfolio may be invested in any of the following securities:
common stocks, preferred stocks, American Depository Receipts, foreign
securities, mutual funds, convertible securities, municipal bonds, corporate
bonds, US government securities, and US government agency securities.
The Company'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
Company deems appropriate in order to provide assets sufficient to meet
benefits to be paid to plan participants. The Company anticipates making
contributions in the amount of $18,844 to the plans in 2005.
The following benefit payments, which reflect expected future service, are
expected to be paid:
- Pension Benefits
----------------
2005 $ 221,384
2006 359,677
2007 346,954
2008 574,213
2009 559,173
Years 2010-2014 3,024,691
The Company also sponsors a defined contribution plan that covers substantially
all employees. The Company expensed contributions of $147,811 and $147,466 for
the years ended December 31, 2004 and December 31, 2003, respectively. The
Company does not provide postretirement medical benefits.
6. Expenses
The amount of accrued expenses at December 31, 2004 for employees and former
employees of the Company was $3,231,380. Aggregate remuneration paid or accrued
during the year ended December 31, 2004 to key employees and directors amounted
to $2,653,834.
7. Portfolio Securities Loaned
The Company makes loans of securities to brokers, secured by cash, 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. At December 31, 2004, the Company had securities on loan of
$66,820,080, and held collateral of $69,026,966, consisting of noncash
collateral of $8,783,225 in U.S. treasury obligations and cash collateral of
$60,243,741 invested in a money market fund, certificates of deposit, and
commercial paper.
11
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Year Ended December 31
------------------------------------------------------
2004 2003 2002 2001 2000
--------------------------------------------------------------------------------------------------
Per Share Operating Performance
Net asset value, beginning of year $14.36 $12.12 $16.05 $23.72 $26.85
--------------------------------------------------------------------------------------------------
Net investment income 0.23* 0.19 0.20 0.26 0.26
Net realized gains and change
in unrealized appreciation 1.39 2.85 (3.38) (6.21) (1.51)
--------------------------------------------------------------------------------------------------
Total from investment operations 1.62 3.04 (3.18) (5.95) (1.25)
--------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income (0.24) (0.17) (0.19) (0.26) (0.22)
Distributions from net realized gains (0.66) (0.61) (0.57) (1.39) (1.63)
--------------------------------------------------------------------------------------------------
Total distributions (0.90) (0.78) (0.76) (1.65) (1.85)
--------------------------------------------------------------------------------------------------
Capital share repurchases 0.02 0.04 0.05 0.04 0.10
Reinvestment of distributions (0.06) (0.06) (0.04) (0.11) (0.13)
--------------------------------------------------------------------------------------------------
Total capital share transactions (0.04) (0.02) 0.01 (0.07) (0.03)
--------------------------------------------------------------------------------------------------
Net asset value, end of year $15.04 $14.36 $12.12 $16.05 $23.72
--------------------------------------------------------------------------------------------------
Per share market price, end of year $13.12 $12.41 $10.57 $14.22 $21.00
--------------------------------------------------------------------------------------------------
Total Investment Return
Based on market price 13.2% 25.2% (20.6)% (24.7)% 1.7%
Based on net asset value 12.1% 26.3% (19.4)% (24.7)% (4.3)%
Ratios/Supplemental Data
Net assets, end of year (in 000's) $1,295,549 $1,218,862 $1,024,810 $1,368,366 $1,951,563
Ratio of expenses to average net assets 0.43% 0.47% 0.34% 0.19% 0.24%
Ratio of net investment income to
average net assets 1.54% 1.45% 1.42% 1.33% 0.97%
Portfolio turnover 13.43% 12.74% 17.93% 19.15% 12.74%
Number of shares outstanding at
end of year (in 000's) 86,135 84,886 84,536 85,233 82,292
--------------------------------------------------------------------------------------------------
* In 2004 the Fund received $2,400,000, or $0.03 per share, in an extraordinary
dividend from Microsoft Corp.
12
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
December 31, 2004
Shares Value (A)
-------------------------------------------------------------------
Stocks and Convertible Securities -- 97.0%
Consumer -- 15.0%
Consumer Discretionary -- 8.2%
BJ's Wholesale Club, Inc. (B)........... 500,000 $ 14,565,000
Brinker International Inc. (B).......... 400,000 14,028,000
Clear Channel Communications Inc........ 300,000 10,047,000
Gannett Co., Inc........................ 87,500 7,148,750
Mattel, Inc............................. 575,000 11,206,750
Newell Rubbermaid Inc. (C).............. 515,000 12,457,850
Ryland Group Inc........................ 220,000 12,658,800
Target Corp............................. 460,000 23,887,800
------------
105,999,950
------------
Consumer Staples -- 6.8%
Coca-Cola Co............................ 200,000 8,326,000
Dean Foods Co. (B)...................... 506,600 16,692,470
PepsiCo, Inc............................ 440,000 22,968,000
Procter & Gamble Co..................... 340,000 18,727,200
Safeway, Inc. (B)....................... 423,000 8,350,020
Unilever plc ADR (C).................... 345,000 13,634,400
------------
88,698,090
------------
Energy -- 9.0%
BP plc ADR.............................. 270,000 15,768,001
ConocoPhillips.......................... 200,000 17,366,000
Exxon Mobil Corp........................ 130,000 6,663,800
Murphy Oil Corp......................... 155,300 12,493,885
Petroleum & Resources Corporation (D)... 1,985,996 51,198,990
Schlumberger Ltd. (C)................... 190,000 12,720,500
------------
116,211,176
------------
Financial -- 17.7%
Banking -- 11.5%
Bank of America Corp.................... 440,000 20,675,600
Compass Bancshares Inc.................. 300,000 14,601,000
Fifth Third Bancorp..................... 200,000 9,456,000
Investors Financial Services Corp. (C).. 400,000 19,992,000
North Fork Bancorporation, Inc.......... 450,000 12,982,500
Provident Bankshares Corp............... 335,021 12,184,731
Wachovia Corp........................... 370,000 19,462,000
Wells Fargo & Co........................ 400,000 24,860,000
Wilmington Trust Corp. (C).............. 420,000 15,183,000
------------
149,396,831
------------
Insurance -- 6.2%
AMBAC Financial Group, Inc.............. 380,000 31,209,400
American International Group, Inc....... 738,675 48,508,788
------------
79,718,188
------------
13
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
December 31, 2004
Shares Value (A)
---------------------------------------------------------------------
Health Care -- 12.5%
Abbott Laboratories....................... 350,000 $ 16,327,500
Bristol-Myers Squibb Co................... 345,000 8,838,900
Enzon Pharmaceuticals, Inc. (B) (C)....... 67,088 920,447
Genentech, Inc. (B) (C)................... 250,000 13,610,000
HCA Inc. (C).............................. 450,000 17,982,000
Johnson & Johnson......................... 265,000 16,806,300
Laboratory Corp. of America Holdings (B).. 250,000 12,455,000
MedImmune, Inc. (C)....................... 225,000 6,099,750
Medtronic Inc............................. 310,000 15,397,700
Pfizer Inc................................ 1,120,000 30,116,800
Wyeth Co.................................. 325,000 13,841,750
Zimmer Holdings Inc. (B).................. 125,000 10,015,000
------------
162,411,147
------------
Industrials -- 11.6%
Canadian National Railway Co.............. 255,000 15,618,750
Donnelley (R.R.) & Sons Co................ 300,000 10,587,000
Emerson Electric Co....................... 200,000 14,020,000
General Electric Co....................... 1,487,700 54,301,050
Illinois Tool Works Inc................... 125,000 11,585,000
Parker-Hannifin Corp...................... 55,000 4,165,700
3M Co..................................... 160,000 13,131,200
United Parcel Service, Inc................ 80,000 6,836,800
United Technologies Corp.................. 200,000 20,670,000
------------
150,915,500
------------
Information Technology -- 14.8%
Communication Equipment -- 2.7%
Avaya Inc. (B)............................ 600,000 10,320,000
Corning Inc. (B).......................... 1,170,000 13,770,900
Lucent Technologies Inc. (B) (C).......... 2,820,000 10,603,200
------------
34,694,100
------------
Computer Related -- 9.2%
BEA Systems Inc. (B)...................... 800,000 7,088,000
BMC Software Inc. (B)..................... 70,000 1,302,000
Cisco Systems, Inc. (B)................... 1,200,000 23,160,000
Dell Inc. (B)............................. 400,000 16,856,000
Diamondcluster International Inc. (B)..... 497,500 7,129,175
Microsoft Corp............................ 800,000 21,368,000
Oracle Corp. (B).......................... 880,000 12,073,600
Sapient Corp. (B)......................... 1,150,000 9,096,500
Siebel Systems Inc. (B)................... 800,000 8,400,000
Sun Microsystems, Inc. (B)................ 515,000 2,770,700
Symantec Corp. (B)........................ 400,000 10,304,000
------------
119,547,975
------------
Electronics -- 2.9%
Cree, Inc. (B) (C)........................ 500,000 20,040,000
Intel Corp................................ 310,000 7,250,900
Solectron Corp. (B)....................... 1,850,000 9,860,500
------------
37,151,400
------------
14
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
December 31, 2004
Shares Value (A)
------------------------------------------------------------------
Materials -- 5.5%
Air Products and Chemicals, Inc........ 250,000 $ 14,492,500
duPont (E.I.) de Nemours and Co........ 400,000 19,620,000
Martin Marietta Materials, Inc......... 133,600 7,168,976
Rohm & Haas Co. (C).................... 400,000 17,692,000
Smurfit-Stone Container Corp. (B) (C).. 650,000 12,142,000
--------------
71,115,476
--------------
Telecom Services -- 4.2%
Alltel Corp............................ 350,000 20,566,000
BellSouth Corp......................... 200,000 5,558,000
SBC Communications Inc................. 595,000 15,333,150
Vodafone Group plc ADS................. 492,613 13,487,758
--------------
54,944,908
--------------
Utilities -- 6.7%
Aqua America, Inc. (C)................. 900,000 22,131,000
Black Hills Corp....................... 245,000 7,516,600
CINergy Corp. (C)...................... 300,000 12,489,000
Duke Energy Corp....................... 611,560 15,490,815
Keyspan Corp........................... 336,100 13,259,145
MDU Resources Group, Inc............... 575,000 15,341,000
--------------
86,227,560
--------------
Total Stocks and Convertible Securities
(Cost $913,193,345) (E)................ $1,257,032,301
--------------
15
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
December 31, 2004
Prin. Amt. Value (A)
----------------------------------------------------------------------------------------------------
Short-Term Investments -- 2.6%
U.S. Government Obligations -- 1.5%
U.S. Treasury Bills, 2.00%, due 2/17/05............................. $20,000,000 $ 19,947,778
--------------
Commercial Paper -- 1.1%
AIG Funding Inc., 2.23%, due 1/11/05................................ 1,970,000 1,968,780
American General Finance, Inc., 2.27%, due 1/4/05................... 5,000,000 4,999,054
Toyota Motor Credit Corp., 2.22%, due 1/6/05........................ 7,000,000 6,997,841
--------------
13,965,675
--------------
Total Short-Term Investments
(Cost $33,913,453).................................................. 33,913,453
--------------
Securities Lending Collateral -- 4.7%
Money Market Fund
BNY Institutional Cash Reserves Fund, 2.35%, due 1/3/05............. 29,041,898
--------------
Certificates of Deposit
Wells Fargo Bank, 2.35%, due 1/28/05................................ 1,500,392
--------------
Commercial Paper
Amsterdam Funding, 2.36%, due 1/25/05............................... 2,994,669
Bank of Ireland, 2.35%, due 1/12/05................................. 2,248,384
Clipper Receivables Corp., 2.36%, due 1/28/05....................... 2,994,075
Corp. Asset SEC Australia, 2.39%, due 1/18/05....................... 1,997,416
Fairway Finance Corp., 2.36%, due 1/20/05........................... 2,995,656
Ivory Funding Corp., 2.36%, due 1/25/05............................. 1,497,335
Kitty Hawk Funding Corp., 2.35%, due 1/21/05........................ 1,497,729
Liberty Street Funding Corp., 2.36%, due 1/28/05.................... 1,247,531
Mane Funding Corp., 2.36%, due 1/20/05.............................. 2,995,731
Nieuw Amsterdam, 2.37%, due 2/1/05.................................. 2,494,380
Surrey Funding Corp., 2.35%, due 1/26/05............................ 1,247,696
Three Pillars Funding Inc., 2.35%, due 1/26/05...................... 998,157
Tulip Funding, 2.35%, due 1/20/05................................... 1,497,828
Windmill Funding Corp., 2.36%, due 1/24/05.......................... 2,994,864
--------------
29,701,451
--------------
Total Securities Lending Collateral
(Cost $60,243,741).................................................. 60,243,741
--------------
Total Investments -- 104.3%
(Cost $1,007,350,539)............................................... 1,351,189,495
Cash, receivables and other assets, less liabilities -- (4.3)%.... (55,640,595)
--------------
Net Assets -- 100.0%.................................................. $1,295,548,900
--------------------------------------------------------------------------------
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) Presently non-dividend paying.
(C) All or a portion of these securities are on loan. See Note 7 to Financial
Statements.
(D) Non-controlled affiliate, a closed-end sector fund, registered as an
investment company under the Investment Company Act of 1940.
(E) The aggregate market value of stocks held in escrow at December 31, 2004
covering open call option contracts written was $21,206,350. In addition,
the required aggregate market value of securities segregated by the
custodian to collateralize open put option contracts written was
$11,858,438.
16
SCHEDULE OF OUTSTANDING OPTION CONTRACTS
--------------------------------------------------------------------------------
December 31, 2004
Contracts Contract
(100 shares Strike Expiration Appreciation/
each) Security Price Date (Depreciation)
----------------------------------------------------------------------------------
COVERED CALLS
150 AMBAC Financial Group, Inc.......... $ 80 Jan 05 $ (31,950)
250 AMBAC Financial Group, Inc.......... 85 Feb 05 (7,841)
200 American International Group Inc.... 70 Feb 05 9,399
250 American International Group Inc.... 80 Feb 05 24,399
200 American International Group Inc.... 70 May 05 (12,801)
200 Brinker International Inc........... 40 Jan 05 17,299
100 ConocoPhillips...................... 80 Jan 05 (56,300)
200 Cree, Inc........................... 45 Mar 05 (18,801)
100 Illinois Tool Works Inc............. 105 Mar 05 6,600
150 Investors Financial Services Corp... 50 Jan 05 8,549
200 Keyspan Corp........................ 40 Feb 05 8,954
100 Laboratory Corp. of America Holdings 45 Jan 05 (41,675)
200 Parker-Hannifin Corp................ 65 Feb 05 (211,350)
200 Ryland Group Inc.................... 52.50 Jan 05 (89,801)
200 Symantec Corp....................... 27.50 Jan 05 4,700
300 Symantec Corp....................... 32.50 Apr 05 (581)
250 Target Corp......................... 55 Apr 05 1,499
150 3M Co............................... 90 Jan 05 16,650
100 United Technologies Corp............ 110 Feb 05 3,700
100 Zimmer Holdings Inc................. 90 Mar 05 3,700
----- ---------
3,600 $(365,651)
----- ---------
COLLATERALIZED PUTS
250 Bunge Ltd........................... 50 Apr 05 5,499
250 Investors Financial Services Corp... 30 Jan 05 23,099
120 Martin Marietta Materials, Inc...... 45 Jul 05 390
85 Martin Marietta Materials, Inc...... 45 Apr 05 4,420
150 Medtronic Inc....................... 45 Feb 05 9,300
200 Murphy Oil Corp..................... 60 Jan 05 22,199
175 Murphy Oil Corp..................... 65 Jan 05 17,003
375 North Fork Bancorporation, Inc...... 26.63 Feb 05 11,800
200 Ryland Group Inc.................... 30 Jan 05 18,700
150 Schlumberger Ltd.................... 50 Jan 05 14,550
100 Target Corp......................... 35 Jan 05 9,200
100 United Parcel Service, Inc.......... 65 Jan 05 10,700
150 United Parcel Service, Inc.......... 65 Jan 05 13,050
250 Wachovia Corp....................... 40 Jan 05 19,500
100 Zimmer Holdings Inc................. 60 Mar 05 17,700
----- ---------
2,655 197,107
----- ---------
$(168,544)
=========
17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
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 December 31, 2004, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the five years in the period then ended, 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 the auditing 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 December 31, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 13, 2005
-------------------------
HISTORICAL FINANCIAL STATISTICS
--------------------------------------------------------------------------------
Dividends Distributions
From Net From Net
Net Asset Investment Realized
Value Of Shares Value Income Gains
Dec. 31 Net Assets Outstanding* Per Share* Per Share* Per Share*
-----------------------------------------------------------------------
1990 $ 529,482,769 47,219,010 $11.21 $.44 $ .71
1991 661,895,779 49,121,246 13.47 .36 .73
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
2002 1,024,810,092 84,536,250 12.12 .19 .57
2003 1,218,862,456 84,886,412 14.36 .17 .61
2004 1,295,548,900 86,135,292 15.04 .24 .66
--------
* Adjusted to reflect the 3-for-2 stock split effected in October 2000.
18
CHANGES IN PORTFOLIO SECURITIES
--------------------------------------------------------------------------------
During the Three Months Ended December 31, 2004
(unaudited)
Principal Amount or Shares
------------------------------------------
Held
Additions Reductions Dec. 31, 2004
--------- ---------- -------------
Clear Channel Communications Inc.............. 95,000 300,000
Martin Marietta Materials, Inc................ 133,600 133,600
Murphy Oil Corp............................... 155,300 155,300
North Fork Bancorporation, Inc................ 450,000/(1)/ 450,000
Pfizer Inc.................................... 20,000 1,120,000
Ryland Group Inc.............................. 155,000/(2)/ 220,000
Symantec Corp................................. 229,291/(3)/ 44,291 400,000
Unilever plc ADR.............................. 45,000 345,000
Zimmer Holdings Inc........................... 15,000 125,000
AMBAC Financial Group, Inc.................... 10,000 380,000
BellSouth Corp................................ 115,000 200,000
BMC Software Inc.............................. 240,000 70,000
Donnelley (R.R.) & Sons Co.................... 55,000 300,000
Enzon Pharmaceuticals, Inc.................... 32,912 67,088
Hershey Foods Corp............................ 140,000 --
Illinois Tool Works Inc....................... 10,000 125,000
Investors Financial Services Corp............. 30,000 400,000
Keyspan Corp.................................. 63,900 336,100
Laboratory Corp. of America Holdings.......... 50,000 250,000
Parker-Hannifin Corp.......................... 170,000 55,000
Symantec Corp. 3.00% Conv. Sub. Notes due 2006 $500,000/(3)/ --
3M Co......................................... 5,000 160,000
United Technologies Corp...................... 65,000 200,000
--------
(1) Received 125,100 shares by stock split.
(2) Received 110,000 shares by stock split.
(3) Converted Symantec Corp. 3.00% Conv. Sub. Notes due 2006 into 29,291 common
shares of Symantec Corp. Received 200,000 shares by stock split.
-------------------------
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
(410) 752-5900 or (800) 638-2479
Website: www.adamsexpress.com
E-mail: contact@adamsexpress.com
Counsel: Chadbourne & Parke L.L.P.
Independent Registered Public Accounting Firm: PricewaterhouseCoopers LLP
Transfer Agent & Registrar: American Stock Transfer & Trust Co.
Custodian of Securities: The Bank of New York
19
OTHER INFORMATION
--------------------------------------------------------------------------------
Statement on Quarterly Filing of Complete Portfolio Schedule
In addition to publishing its complete schedule of portfolio holdings in the
First and Third Quarter Reports to shareholders, the Company also files its
complete schedule of portfolio holdings with the Securities and Exchange
Commission for the first and third quarters of each fiscal year on Form N-Q.
The Company's Forms N-Q are available on the Commission's website at
www.sec.gov. The Company'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 Company
also posts its Forms N-Q on its website at: www.adamsexpress.com. under the
heading "Financial Reports".
Annual Certification
The Company's CEO has submitted to the New York Stock Exchange the annual CEO
certification as required by Section 303A.12(a) of the NYSE Listed Company
Manual.
Proxy Voting Policies and Record
A description of the policies and procedures that the Company uses to determine
how to vote proxies relating to portfolio securities owned by the Company and
information as to how the Company voted proxies relating to portfolio
securities during the 12 month period ended June 30, 2004 are available (i)
without charge, upon request, by calling the Company's toll free number at
(800) 638-2479; (ii) on the Company's website by clicking on "Corporate
Information" heading on the website; and (iii) on the Securities and Exchange
Commission's website at http//www.sec.gov.
Forward-Looking Statements
This report contains "forward-looking statements" within the meaning of the
Securities Act of 1933 and the Securities Exchange Act of 1934. By their
nature, all forward-looking statements involve risks and uncertainties, and
actual results could differ materially from those contemplated by the
forward-looking statements. Several factors that could materially affect the
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.
Privacy Policy
In order to conduct its business, The Adams Express 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.
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 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.
20
SHAREHOLDER INFORMATION AND SERVICES
--------------------------------------------------------------------------------
WE ARE OFTEN ASKED --
How do I invest in Adams Express?
Adams Express Common Stock is listed on the New York Stock Exchange and the
Pacific Exchange. The stock's ticker symbol is "ADX" and may be bought and sold
through registered investment security dealers. Your broker will be able to
assist you in this regard. In addition, stock may be purchased through our
transfer agent, American Stock Transfer & Trust Company's INVESTORS CHOICE Plan
(see page 22).
Where do I get information on the stock's price, trading and/or net asset value?
The daily net asset value (NAV) per share and closing market price may be
obtained from our website at www.adamsexpress.com. The daily NAV is also
available on the NASDAQ Mutual Fund Quotation System under the symbol XADEX.
The week-ending NAV is published on Saturdays in various newspapers and on
Mondays in The Wall Street Journal in a table titled "Closed-End Funds." The
table compares the net asset value at the close of the week's last business day
to the market price of the shares, and shows the amount of the discount or
premium.
Adams Express daily trading is shown in the stock tables of most daily
newspapers, usually with the abbreviated form "AdaEx." Local newspapers
determine, usually by volume of traded shares, which securities to list. If
your paper does not carry our listing, please telephone the Company at (800)
638-2479 or visit our website.
How do I replace a lost certificate(s) or how do I correct a spelling error on
my certificate?
Your Adams Express stock certificates are valuable documents and should be kept
in a safe place. For tax purposes, keep a record of each certificate, including
the cost or market value of the shares it covers at the time acquired. If a
certificate is lost, destroyed or stolen, notify the transfer agent immediately
so a "stop transfer" order can be placed on the records to prevent an
unauthorized transfer of your certificate. The necessary forms and requirements
to permit the issuance of a replacement certificate will then be sent to you. A
certificate can be replaced only after the receipt of an affidavit regarding
the loss accompanied by an open surety bond, for which a small premium is paid
by the stockholder.
In the event a certificate is issued with the holder's name incorrectly
spelled, a correction can only be made if the certificate is returned to the
transfer agent with instructions for correcting the error. Transferring shares
to another name also requires that the certificate be forwarded to the transfer
agent with the appropriate assignment forms completed and the signature of the
registered owner Medallion guaranteed by a bank or member firm of The New York
Stock Exchange, Inc.
Is direct deposit of my dividend checks available?
Yes, our transfer agent offers direct deposit of your interim dividend checks.
You can request direct deposit with American Stock Transfer either on-line or
by calling them at the phone number provided on page 22. At this time, AST does
not offer direct deposit of your year-end distribution checks. We have been
advised by AST that it will be able to offer this service for the 2005 year-end
distribution.
Who do I notify of a change of address?
The transfer agent.
We go to Florida (Arizona) every winter. How do we get our mail from Adams
Express?
The transfer agent can program a seasonal address into its system; simply send
the temporary address and the dates you plan to be there to the transfer agent.
I want to give shares to my children, grandchildren, etc. as a gift. How do I
go about it?
Giving shares of Adams Express is simple and is handled through our transfer
agent. The stock transfer rules are clear and precise for most forms of
transfer. They will vary slightly depending on each transfer, so write to the
transfer agent stating the exact intent of your gift plans and the transfer
agent will send you the instructions and forms necessary to effect your
transfer.
21
SHAREHOLDER INFORMATION AND SERVICES (CONTINUED)
--------------------------------------------------------------------------------
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.
INVESTORS CHOICE
INVESTORS CHOICE is a direct stock purchase and sale plan, as well as a
dividend reinvestment plan, sponsored and administered by our transfer agent,
American Stock Transfer & Trust Company (AST). The Plan provides registered
stockholders and interested first time investors an affordable alternative for
buying, selling, and reinvesting in Adams Express shares.
The costs to participants in administrative service fees and brokerage
commissions for each type of transaction are listed below.
Initial Enrollment and
Optional Cash Investments
Service Fee $2.50 per investment
Brokerage Commission $0.05 per share
Reinvestment of Dividends*
Service Fee 2% of amount invested
(maximum of $2.50 per investment)
Brokerage Commission $0.05 per share
Sale of Shares
Service Fee $10.00
Brokerage Commission $0.05 per share
Deposit of Certificates for safekeeping $7.50
Book to Book Transfers Included
To transfer shares to another participant or to a new
participant
Fees are subject to change at any time.
Minimum and Maximum Cash Investments
Initial minimum investment (non-holders) $500.00
Minimum optional investment
(existing holders) $50.00
Electronic Funds Transfer
(monthly minimum) $50.00
Maximum per transaction $25,000.00
Maximum per year NONE
A brochure which further details the benefits and features of INVESTORS CHOICE
as well as an enrollment form may be obtained by contacting AST.
For Non-registered Shareholders
For shareholders whose stock is held by a broker in "street" name, the AST
INVESTORS CHOICE Direct Stock Purchase and Sale Plan remains available through
many registered investment security dealers. If your shares are currently held
in a "street" name or brokerage account, please contact your broker for details
about how you can participate in AST's Plan or contact AST.
----------
The Company
The Adams Express Company
Lawrence L. Hooper, Jr.
Vice President, General Counsel and Secretary
Seven St. Paul Street, Suite 1140, Baltimore, MD 21202
(800) 638-2479
Website: www.adamsexpress.com
E-mail: contact@adamsexpress.com
The Transfer Agent
American Stock Transfer & Trust Company
Address Shareholder Inquiries to:
Shareholder Relations Department
59 Maiden Lane
New York, NY 10038
(877) 260-8188
Website: www.amstock.com
E-mail: info@amstock.com
Investors Choice Mailing Address:
Attention: Dividend Reinvestment
P.O. Box 922
Wall Street Station
New York, NY 10269
Website: www.InvestPower.com
E-mail: info@InvestPower.com
*The year-end dividend and capital gain distribution will usually be made in
newly issued shares of common stock. There are no fees or commissions in
connection with this dividend and capital gain distribution when made in newly
issued shares.
22
BOARD OF DIRECTORS
--------------------------------------------------------------------------------
Number of
portfolios
in fund
Position Term Length complex
Personal held with of of time Principal Occupations overseen Other
Information the fund office served during the last 5 years by director directorships
-------------------------------------------------------------------------------------------------------------------------------
Independent Directors
Enrique R. Arzac, Ph.D. Director One Since Professor of Finance and Two Director of Petroleum &
7 St. Paul Street, Year 1983 Economics, formerly Vice Dean Resources Corporation and
Suite 1140 of Academic Affairs of the Credit Suisse Asset
Baltimore, MD 21202 Graduate School of Business, Management Funds (8 funds)
Age 63 Columbia University. (investment companies).
-------------------------------------------------------------------------------------------------------------------------------
Phyllis O. Bonanno Director One Since President & CEO of International Two Director of Petroleum &
7 St. Paul Street, Year Nov. Trade Solutions, Inc. Resources Corporation
Suite 1140 2003 (consultants). Formerly, (investment company), Borg-
Baltimore, MD 21202 President of Columbia College, Warner Inc. (industrial),
Age 61 Columbia, South Carolina, and Mohawk Industries, Inc.
Vice President of Warnaco Inc. (carpets and flooring). The
(apparel). Canadian-American Business
Council, and Board of Advisors
for APTE, Inc. (software).
-------------------------------------------------------------------------------------------------------------------------------
Daniel E. Emerson Director One Since Chairman, The National YMCA Two Director of Petroleum &
7 St. Paul Street, Year 1982 Fund Inc. Retired Executive Vice Resources Corporation
Suite 1140 President of NYNEX Corp., (investment company).
Baltimore, MD 21202 (communications), Retired
Age 80 Chairman of The Board of both
NYNEX Information Resources
Co. and NYNEX Mobile
Communications Co. Previously
Executive Vice President and
Director of New York Telephone
Company.
-------------------------------------------------------------------------------------------------------------------------------
Thomas H. Lenagh Director One Since Financial Advisor, Chairman of Two Director of Petroleum &
7 St. Paul Street, Year 1968 the Board, Photonics Product Resources Corporation and
Suite 1140 Group (crystals). Formerly Cornerstone Funds, Inc. (3
Baltimore, MD 21202 Chairman of the Board and CEO funds) (investment
Age 86 of Greiner Engineering Inc. companies).
(formerly Systems Planning
Corp.) (consultants). Formerly
Treasurer and Chief Investment
Officer of the Ford Foundation
(charitable foundation).
-------------------------------------------------------------------------------------------------------------------------------
W. D. MacCallan Director One Since Retired Chairman of the Board Two Director of Petroleum &
7 St. Paul Street, Year 1971 and CEO of the Company (since Resources Corporation
Suite 1140 1991) and Petroleum & (investment company).
Baltimore, MD 21202 Resources Corporation (since
Age 77 1991). Formerly consultant to the
Company and Petroleum &
Resources Corporation.
-------------------------------------------------------------------------------------------------------------------------------
Kathleen T. McGahran, Director One Since Principal & Director of Pelham Two Director of Petroleum &
Ph.D., J.D., C.P.A. Year Nov. Associates, Inc. (executive Resources Corporation
7 St. Paul Street, 2003 education). Adjunct Associate (investment company).
Suite 1140 Professor, Columbia Executive
Baltimore, MD 21202 Education, Graduate School of
Age 54 Business, Columbia University.
Formerly Associate Dean and
Director of Executive Education,
and Associate Professor,
Columbia University.
-------------------------------------------------------------------------------------------------------------------------------
W. Perry Neff, J.D. Director One Since Private Financial Consultant. Two Director of Petroleum &
7 St. Paul Street, Year 1987 Retired Executive Vice President Resources Corporation
Suite 1140 of Chemical Bank. (investment company).
Baltimore, MD 21202
Age 77
-------------------------------------------------------------------------------------------------------------------------------
23
BOARD OF DIRECTORS (CONTINUED)
--------------------------------------------------------------------------------
Number of
portfolios
in fund
Position Term Length complex
Personal held with of of time Principal Occupations overseen Other
Information the fund office served during the last 5 years by director directorships
------------------------------------------------------------------------------------------------------------------------
Independent Directors (continued)
Landon Peters Director One Since Private Investor. Former Two Director of Petroleum &
7 St. Paul Street, Year 1974 Investment Manager, YMCA Resources Corporation
Suite 1140 Retirement Fund. Formerly (investment company).
Baltimore, MD 21202 Executive Vice President and
Age 74 Treasurer and prior thereto
Senior Vice President and
Treasurer of The Bank of New
York.
------------------------------------------------------------------------------------------------------------------------
John J. Roberts Director One Since Senior Advisor, formerly Vice- Two Director of Petroleum &
7 St. Paul Street, Year 1976 Chairman External Affairs, Resources Corporation
Suite 1140 American International Group, (investment company) and
Baltimore, MD 21202 Inc. (insurance). Formerly Honorary Director of
Age 82 Chairman and CEO of American American International
International Underwriters Group, Inc.
Corporation. Previously
President of American
International Underwriters
Corporation-U.S./ Overseas
Operations.
------------------------------------------------------------------------------------------------------------------------
Susan C. Schwab, Ph.D. Director One Since President/CEO, University Two Director of Petroleum &
7 St. Paul Street, Year 2000 System of Maryland Foundation. Resources Corporation
Suite 1140 Former Dean, School of Public (investment company) and
Baltimore, MD 21202 Policy at the University of Calpine Corp. (energy).
Age 49 Maryland, College Park.
Previously Director of Corporate
Business Development at
Motorola, Inc. (electronics).
------------------------------------------------------------------------------------------------------------------------
Robert J. M. Wilson Director One Since Retired President of the Two Director of Petroleum &
7 St. Paul Street, Year 1975 Company (since 1986) and Resources Corporation
Suite 1140 retired President of Petroleum & (investment company).
Baltimore, MD 21202 Resources Corporation (since
Age 84 1986).
------------------------------------------------------------------------------------------------------------------------
Interested Director
Douglas G. Ober Director, One Director Chairman & CEO of the Two Director of Petroleum &
7 St. Paul Street, Chairman Year Since Company and Petroleum & Resources Corporation
Suite 1140 and 1989; Resources Corporation. (investment company).
Baltimore, MD 21202 CEO Chairman
Age 58 of the
Board
Since
1991
------------------------------------------------------------------------------------------------------------------------
24
THE ADAMS EXPRESS COMPANY
--------------------------------------------------------------------------------
Board Of Directors
Enrique R. Arzac/(1)(2) / W. Perry Neff/(2)(4)/
Phyllis O. Bonanno/(1)(3)/ Douglas G. Ober/(1)/
Daniel E. Emerson/(1)(3) / Landon Peters/(2)(3)/
Thomas H. Lenagh/(1)(4) / John J. Roberts/(1)/
W.D. MacCallan/(3)(4) / Susan C. Schwab/(2)(4)/
Kathleen T. Robert J.M. Wilson/(1)(3)/
McGahran/(2)(4)/
--------
/(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
Lawrence L. Hooper, Jr. Vice President, General
Counsel and Secretary
Maureen A. Jones Vice President, Chief
Financial Officer and
Treasurer
Stephen E. Kohler Vice President -- Research
D. Cotton Swindell Vice President -- Research
Christine M. Sloan Assistant Treasurer
Geraldine H. Pare Assistant Secretary
Item 2. Code of Ethics.
On June 12, 2003, the Board of Directors adopted a code of
ethics that applies to registrant's principal executive
officer and principal financial officer. The code of ethics
is available on registrant's website at:
www.adamsexpress.com. Since the code of ethics was adopted
there have been no amendments to it nor have any waivers
from any of its provisions been granted.
Item 3. Audit Committee Financial Expert.
The board of directors has determined that at least one of
the members of registrant's audit committee meets the
definition of audit committee financial expert as that term
is defined by the Securities and Exchange Commission. The
two directors on the registrant's audit committee whom the
board of directors has determined meet such definition are
Enrique R. Arzac and Kathleen T. McGahran, both of whom are
independent pursuant to paragraph (a)(2) of this Item.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. The aggregate fees billed for professional
services rendered by its independent auditors,
PricewaterhouseCoopers LLP, for the audits of the Companys
annual and semi-annual financial statements for 2004 and
2003 were $54,712 and $54,007, respectively.
(b) Audit Related Fees. There were no audit-related fees in
2004 and 2003.
(c) Tax Fees. The aggregate fees billed to registrant for
professional services rendered by PricewaterhouseCoopers LLP
for the review of registrant's excise tax calculations and
preparations of federal, state and excise tax returns for
2004 and 2003 were $9,950 and $8,255, respectively.
(d) All Other Fees. The aggregate fees billed to registrant
by PricewaterhouseCoopers LLP other than for the services
referenced above for 2004 and 2003 was $0.
(e) (1) Audit Committee Pre-Approval Policy. As of 2004,
all services to be performed for registrant by
PricewaterhouseCoopers LLP must be pre-approved by the audit
committee. All services performed in 2004 were pre-approved
by the committee.
(2) Not applicable.
(f) Not applicable.
(g) The aggregate fees billed by PricewaterhouseCoopers LLP
for non-audit professional services rendered to registrant
for 2004 and 2003 were $9,950 and $8,255, respectively.
(h) The registrant's audit committee has considered the
provision by PricewaterhouseCoopers LLP of the non-audit
services described above and found that they are compatible
with maintaining PricewaterhouseCoopers LLPs independence.
Item 5. Audit Committee of Listed registrant's.
(a) The registrant has a standing audit committee
established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934. The members of the audit
committee are: Enrique R. Arzac, chairman, Kathleen T.
McGahran, W. Perry Neff, Landon Peters and Susan C. Schwab.
(B) Not applicable.
Item 6. Schedule of Investments - This schedule is included
as part of the report to shareholders filed under Item 1 of
this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures
for Closed-End Management Investment Companies.
PROXY VOTING POLICIES & PROCEDURES
The Adams Express Company (Adams) follows long-standing
general guidelines for the voting of portfolio company
proxies and takes very seriously its responsibility to vote
all such proxies. The portfolio company proxies are
evaluated by our research staff and voted by our portfolio
management team, and we annually provide the Board of
Directors with a report on how proxies were voted during the
previous year. We do not use an outside service to assist us
in voting our proxies.
As an internally-managed investment company, Adams uses its
own staff of research analysts and portfolio managers. In
making the decision to invest in a company for the
portfolio, among the factors the research team analyzes is
the integrity and competency of the companys management. We
must be satisfied that the companies we invest in are run by
managers with integrity. Therefore, having evaluated this
aspect of our portfolio companies managements, we give
significant weight to the recommendations of the companys
management in voting on proxy issues.
We vote proxies on a case-by-case basis according to what we
deem to be the best long-term interests of our shareholders.
The key over-riding principle in any proxy vote is that
stockholders be treated fairly and equitably by the
portfolio companys management. In general, on the election
of directors and on routine issues that we do not believe
present the possibility of an adverse impact upon our
investment, after reviewing whether applicable corporate
governance requirements as to board and committee
composition have been met, we will vote in accordance with
the recommendations of the companys management. When we
believe that the managements recommendation is not in the
best interests of our stockholders, we will vote against
that recommendation.
Our general guidelines for when we will vote contrary to the
recommendation of the portfolio company managements
recommendation are:
Stock Options
Our general guideline is to vote against stock option plans
that we believe are unduly dilutive of our stock holdings in
the company. We use a general guideline that we will vote
against any stock option plan that results in dilution in
shares outstanding exceeding 4%. Most stock option plans are
established to motivate and retain key employees and to
reward them for their achievement. An analysis of a stock
option plan can not be made in a vacuum but must be made in
the context of the companys overall compensation scheme. In
voting on stock option plans, we give consideration to
whether the stock option plan is broad-based in the number
of employees who are eligible to receive grants under the
plan. We generally vote against plans that permit re-pricing
of grants or the issuance of options with exercise prices
below the grant date value of the companys stock.
Corporate Control/ Governance Issues
Unless we conclude that the proposal is favorable to our
interests as a long-term shareholder in the company, we have
a long-standing policy of voting against proposals to create
a staggered board of directors. Staggered boards are used to
help create a roadblock to a possible takeover of a company
or to entrench incumbent management and board. In
conformance with that policy, we will generally vote in
favor of shareholder proposals to eliminate the staggered
election of directors.
Unless we conclude that the proposal is favorable to our
interests as a long-term shareholder in the company, our
general policy is to vote against amendments to a companys
charter that can be characterized as anti-takeover
provisions. For example, we generally vote in favor of
stockholder proposals to rescind or require a stockholder
vote on anti-takeover provisions such as poison pills and
the like.
With respect to so-called golden parachutes and other
severance packages, it is our general policy to vote against
proposals relating to future employment contracts that
provide that compensation will be paid to any director,
officer or employee that is contingent upon a merger or
acquisition of the company.
We generally vote for proposals to require that the majority
of a board of directors consist of independent directors and
vote against proposals to establish a retirement plan for
non-employee directors.
We have found that most stockholder proposals relating to
social issues focus on very narrow issues that either fall
within the authority of the companys management, under the
oversight of its board of directors, to manage the day-to-
day operations of the company or concern matters that are
more appropriate for global solutions rather than company-
specific ones. We consider these proposals on a case-by-case
basis but usually are persuaded managements position is
reasonable and vote in accordance with managements
recommendation on these types of proposals.
Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
This disclosure requirement, which is effective for annual
reports for fiscal years ending on or after December 31,
2005, is not applicable to Registrant at this time.
Item 9. Purchases of Equity Securities by Closed-End
Management Investment Company and Affiliated Purchasers.
Maximum
Total Number (or
Number of Approximate
Shares (or Dollar Value)
Total Units) of Shares (or
Number Purchased Units) that
of Average as Part of May Yet Be
Shares Price Publicly Purchased
(or Paid per Announced Under the
Units) Share (or Plans or Plans or
Period(2) Purchased Unit) Programs Programs
-------- --------- --------- --------- ---------
Jul. 2004 166,000 $ 12.45 166,000 3,468,847
Aug. 2004 261,800 $ 12.33 261,800 3,207,047
Sep. 2004 249,150 $ 12.76 249,150 2,957,897
Oct. 2004 239,500 $ 12.95 239,500 2,718,397
Nov 2004 43,100 $ 13.34 43,100 2,675,297
Dec 2004 59,200 $ 13.05 59,200 4,113,253
-------- --------- --------- --------- ---------
Total 1,018,750(1) $ 12.69 1,018,750(2) 4,113,253(2)
(1) There were no shares purchased other than through a
publicly announced plan or program.
(2.a) The Plan was announced on December 11, 2003 and was
reapproved on December 9, 2004.
(2.b) The share amount approved in 2003 was 5% of
outstanding shares, or approximately 4,112,647 shares, and
in 2004 was 5% of outstanding shares, or approximately
4,172,453 shares.
(2.c) The Plan will expire on or about December 9, 2005.
(2.d) None.
(2.e) None.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to the procedures by which
shareholders may recommend nominees to the registrant's
board of directors made or implemented after the registrant
last provided disclosure in response to the requirements of
Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or
this Item.
Item 11. Controls and Procedures.
Conclusions of principal officers concerning controls and
procedures.
(a) As of February 11, 2005, an evaluation was performed
under the supervision and with the participation of the
officers of registrant, including the principal executive
officer (PEO) and principal financial officer (PFO), of the
effectiveness of registrant's disclosure controls and
procedures. Based on that evaluation, the registrant's
officers, including the PEO and PFO, concluded that, as of
February 11, 2005, the registrant's disclosure controls and
procedures were reasonably designed so as to ensure that
material information relating to the registrant is made
known to the PEO and PFO.
(b) There have been no significant changes in the
registrant's internal control over financial reporting (as
defined in Rule 30a-3(d) under the Investment Company Act of
1940 (17 CFR 270.30a-3(d)) that occurred during the
registrant's last fiscal half-year that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits attached hereto. (Attach certifications as
exhibits)
(1) Not applicable. See registrant's response to Item 2,
above.
(2) Separate certifications by the registrant's principal
executive officer and principal financial officer, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 and
required by Rule 30a-2 under the Investment Company Act of
1940, are attached.
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.
THE ADAMS EXPRESS COMPANY
BY: /s/ Douglas G. Ober
-----------------------
Douglas G. Ober
Chief Executive Officer
(Principal Executive Officer)
Date: February 11, 2005
Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, this report
has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates
indicated.
BY: /s/ Douglas G. Ober
-----------------------
Douglas G. Ober
Chief Executive Officer
(Principal Executive Officer)
Date: February 11, 2005
BY: /s/ Maureen A. Jones
-----------------------
Maureen A. Jones
Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: February 11, 2005