LETTER TO SHAREHOLDERS
We submit herewith the summary financial information of The Adams Express Company (the Fund) for the three months ended March 31, 2013.
Net assets of the Fund at March 31, 2013 were $13.58 per share on 93,098,844 shares outstanding, compared with $12.43 per share at December 31, 2012 on 93,029,724 shares outstanding. On March 1, 2013, a distribution of $0.05 per share was paid, consisting of $0.03 of net investment income, $0.01 short-term capital gain, and $0.01 long-term capital gain, all realized in 2012 and taxable in 2013. On April 11, 2013, an investment income dividend of $0.05 per share was declared to shareholders of record May 15, 2013, payable June 3, 2013. These constitute the first two payments toward our annual 6% minimum distribution rate commitment.
Net investment income for the three months ended March 31, 2013 amounted to $3,914,552, compared with $3,606,304 for the same three month period in 2012. These earnings are equal to $0.04 per share for both periods.
Net capital loss realized on investments for the three months ended March 31, 2013 amounted to $(9,723,598), or $(0.10) per share.
For the three months ended March 31, 2013, the total return on the net asset value (with dividends and capital gains reinvested) of the Fund’s shares was 9.7%. The total return on the market price of the Fund’s shares for the period was 11.3%. These compare to a 10.6% total return for the Standard & Poor’s 500 Composite Stock Index (“S&P 500”) and a 10.3% total return for the Lipper Large-Cap Core Mutual Funds Average over the same time period.
For the twelve months ended March 31, 2013, the Fund’s total return on net asset value was 11.9% and on market price was 13.8%. Comparable figures for the S&P 500 and the Lipper Large-Cap Core Mutual Fund Average were 14.0% and 12.9%, respectively.
The Fund’s Annual Meeting of Shareholders was held on March 19, 2013 in Baltimore, Maryland. The results of the voting at the meeting are shown on page 7.
The Board of Directors has selected Kathleen T. McGahran, Ph.D., to serve as the Chair of the Board of Directors, effective March 19, 2013. Dr. McGahran has been a member of the Board since 2003 and is the first non-executive director to serve as Board Chair.
We are pleased to announce that on March 19, 2013, Mr. Brian S. Hook was elected Vice President of the Fund. Mr. Hook has served as Chief Financial Officer since 2012, as Treasurer since 2009 and joined the Fund as Assistant Treasurer in 2008.
Investors can find the daily net asset value (NAV) per share, the market price, and the discount/premium to the NAV of the Fund on our website at www.adamsexpress.com. Also available there are a history of the Fund, historical financial information, links for electronic delivery of shareholder reports, and other useful content.
By order of the Board of Directors,
Mark E. Stoeckle
Chief Executive Officer
David D. Weaver
President
April 11, 2013
SUMMARY FINANCIAL INFORMATION
(unaudited)
| 2013 | 2012 | |||||||
| At March 31: | ||||||||
Net asset value per share |
$ | 13.58 | $ | 12.92 | ||||
Market price per share |
11.74 | 10.98 | ||||||
Shares outstanding |
93,098,844 | 91,108,554 | ||||||
Total net assets |
1,264,090,765 | 1,176,974,864 | ||||||
Unrealized appreciation on investments |
261,436,736 | 183,348,558 | ||||||
For the three months ended March 31: |
||||||||
Net investment income |
3,914,552 | 3,606,304 | ||||||
Net realized (loss)/gain |
(9,723,598 | ) | 6,513,940 | |||||
Total return (based on market price) |
11.3% | 14.4% | ||||||
Total return (based on net asset value) |
9.7% | 12.5% | ||||||
Key ratios: |
||||||||
Net investment income to average net assets (annualized) |
1.29% | 1.29% | ||||||
Expenses to average net assets (annualized) |
0.75% | 0.62% | ||||||
Portfolio turnover (annualized) |
42.4% | 28.8% | ||||||
Net cash & short-term investments to net assets |
0.9% | 6.1% | ||||||
FIVE YEAR DISTRIBUTION HISTORY
(unaudited)
Year |
Income Dividends Per Share |
Short-Term Capital Gains Distributions Per Share |
Long-Term Capital Gains Distributions Per Share |
Total Dividends and Distributions Per Share |
Annual Distribution Rate* |
|||||||||||||||
2008 |
$ | 0.26 | $ | 0.01 | $ | 0.37 | $ | 0.64 | 5.7 | % | ||||||||||
2009 |
0.15 | 0.05 | 0.25 | 0.45 | 5.2 | |||||||||||||||
2010 |
0.14 | 0.09 | 0.28 | 0.51 | 5.1 | |||||||||||||||
2011 |
0.15 | 0.07 | 0.43 | 0.65 | 6.1 | |||||||||||||||
2012 |
0.18 | 0.10 | 0.39 | 0.67 | 6.3 | |||||||||||||||
|
|
|||||||||||||||||||
| Average: | 5.7 | % | ||||||||||||||||||
| * | The annual distribution rate is the total dividends and capital gain distributions during the year divided by the average month-end market price of the Fund’s Common Stock for the calendar year in years prior to 2011 and for the twelve months ended October 31 beginning in 2011, which is consistent with the calculation to determine the minimum distribution rate commitment announced in September 2011. |
2
PORTFOLIO REVIEW
March 31, 2013
(unaudited)
Ten Largest Equity Portfolio Holdings
| Market Value | % of Net Assets | |||||||
Petroleum & Resources Corp.* |
$ | 56,812,389 | 4.5 | % | ||||
Apple Inc. |
41,164,590 | 3.3 | ||||||
JPMorgan Chase & Co. |
28,476,000 | 2.3 | ||||||
QUALCOMM Inc. |
26,780,000 | 2.1 | ||||||
International Business Machines Corp. |
22,396,500 | 1.8 | ||||||
Honeywell International Inc. |
22,228,250 | 1.8 | ||||||
Merck & Co., Inc. |
22,115,000 | 1.7 | ||||||
Lowe’s Companies, Inc. |
20,856,000 | 1.6 | ||||||
Wells Fargo & Co. |
20,714,400 | 1.6 | ||||||
Walt Disney Co. |
20,448,000 | 1.6 | ||||||
|
|
|
|
|||||
Total |
$ | 281,991,129 | 22.3 | % | ||||
|
|
|
|
|||||
*Non-controlled affiliated closed-end fund |
||||||||
Sector Weightings
3
SCHEDULE OF INVESTMENTS
March 31, 2013
(unaudited)
| Shares | Value (A) | |||||||
Common Stocks — 99.1% |
||||||||
Consumer Discretionary — 11.1% |
||||||||
Bed Bath & Beyond Inc. (C) |
215,000 | $ | 13,850,300 | |||||
Coach, Inc. |
130,000 | 6,498,700 | ||||||
Dollar General Corp. (C) |
250,000 | 12,645,000 | ||||||
Lowe’s Companies, Inc. |
550,000 | 20,856,000 | ||||||
Marriott International Inc. (Class A) |
300,000 | 12,669,000 | ||||||
McDonald’s Corp. |
180,000 | 17,944,200 | ||||||
Newell Rubbermaid Inc. |
400,000 | 10,440,000 | ||||||
Panera Bread Co. (Class A) (C) |
15,000 | 2,478,600 | ||||||
Ryland Group, Inc. |
333,500 | 13,880,270 | ||||||
Target Corp. |
120,000 | 8,214,000 | ||||||
Walt Disney Co. |
360,000 | 20,448,000 | ||||||
|
|
|||||||
| 139,924,070 | ||||||||
|
|
|||||||
Consumer Staples — 10.0% |
||||||||
Bunge Ltd. |
100,000 | 7,383,000 | ||||||
Coca-Cola Co. |
300,000 | 12,132,000 | ||||||
CVS/Caremark Corp. |
295,000 | 16,222,050 | ||||||
Diageo plc ADR |
50,000 | 6,292,000 | ||||||
General Mills, Inc. |
230,000 | 11,341,300 | ||||||
PepsiCo, Inc. (G) |
250,000 | 19,777,500 | ||||||
Philip Morris International Inc. |
160,000 | 14,833,600 | ||||||
Procter & Gamble Co. |
175,000 | 13,485,500 | ||||||
Safeway Inc. (F) |
340,000 | 8,959,000 | ||||||
Senomyx, Inc. (C) |
1,093,700 | 2,307,707 | ||||||
Unilever plc ADR |
325,000 | 13,728,000 | ||||||
|
|
|||||||
| 126,461,657 | ||||||||
|
|
|||||||
Energy — 10.4% |
||||||||
Anadarko Petroleum Corp. |
50,000 | 4,372,500 | ||||||
Chevron Corp. |
141,000 | 16,753,620 | ||||||
CONSOL Energy Inc. (F) |
73,700 | 2,480,005 | ||||||
Exxon Mobil Corp. (G) |
105,000 | 9,461,550 | ||||||
Halliburton Co. |
150,000 | 6,061,500 | ||||||
Kinder Morgan Inc. |
170,000 | 6,575,600 | ||||||
National Oilwell Varco, Inc. |
100,000 | 7,075,000 | ||||||
Peabody Energy Corp. |
38,560 | 815,544 | ||||||
Petroleum & Resources Corp. (D) |
2,186,774 | 56,812,389 | ||||||
Phillips 66 |
128,850 | 9,015,635 | ||||||
Schlumberger Ltd. (F) |
120,000 | 8,986,800 | ||||||
Seadrill Ltd. (B) |
40,000 | 1,488,400 | ||||||
Spectra Energy Corp. |
55,280 | 1,699,860 | ||||||
|
|
|||||||
| 131,598,403 | ||||||||
|
|
|||||||
Financials — 15.1% |
||||||||
ACE Ltd. (C) |
165,000 | 14,680,050 | ||||||
Affiliated Managers Group, Inc. (C) |
51,700 | 7,939,569 | ||||||
American Campus Communities Inc. |
90,000 | 4,080,600 | ||||||
AXIS Capital Holdings, Ltd. |
220,000 | 9,156,400 | ||||||
Bank of America Corp. |
830,000 | 10,109,400 | ||||||
Bank of New York Mellon Corp. |
323,775 | 9,062,462 | ||||||
Capital One Financial Corp. |
245,000 | 13,462,750 | ||||||
Digital Realty Trust, Inc. (B) |
90,000 | 6,021,900 | ||||||
Fifth Third Bancorp. |
665,000 | 10,846,150 | ||||||
HCP, Inc. |
125,000 | 6,232,500 | ||||||
JPMorgan Chase & Co. |
600,000 | 28,476,000 | ||||||
MetLife Inc. |
435,000 | 16,538,700 | ||||||
PNC Financial Services Group, Inc. |
150,000 | 9,975,000 | ||||||
T. Rowe Price Group, Inc. |
100,000 | 7,487,000 | ||||||
U.S. Bancorp. |
470,000 | 15,947,100 | ||||||
Wells Fargo & Co. |
560,000 | 20,714,400 | ||||||
|
|
|||||||
| 190,729,981 | ||||||||
|
|
|||||||
Health Care — 14.2% |
||||||||
Catamaran Corp. (C) |
180,000 | 9,545,400 | ||||||
Celgene Corp. (C) (F) |
120,000 | 13,909,200 | ||||||
Covidien plc |
120,000 | 8,140,800 | ||||||
Express Scripts Holding Co. (C) |
255,000 | 14,700,750 | ||||||
Gilead Sciences, Inc. (C) |
414,000 | 20,257,020 | ||||||
Hologic Inc. (C) |
420,000 | 9,492,000 | ||||||
McKesson Corp. |
116,000 | 12,523,360 | ||||||
MEDNAX, Inc. (C) |
70,000 | 6,274,100 | ||||||
Medtronic, Inc. |
65,000 | 3,052,400 | ||||||
Merck & Co., Inc. |
500,000 | 22,115,000 | ||||||
Pfizer Inc. |
690,000 | 19,913,400 | ||||||
Teva Pharmaceutical Industries Ltd. ADR |
220,000 | 8,729,600 | ||||||
UnitedHealth Group Inc. |
287,500 | 16,447,875 | ||||||
Wellcare Health Plans, Inc. (C) |
100,000 | 5,796,000 | ||||||
Zimmer Holdings, Inc. |
115,000 | 8,650,300 | ||||||
|
|
|||||||
| 179,547,205 | ||||||||
|
|
|||||||
Industrials — 10.3% |
||||||||
Boeing Co. |
210,000 | 18,028,500 | ||||||
Caterpillar Inc. |
120,000 | 10,436,400 | ||||||
Eaton Corporation plc |
205,000 | 12,556,250 | ||||||
Emerson Electric Co. |
160,000 | 8,939,200 | ||||||
FedEx Corp. |
75,000 | 7,365,000 | ||||||
General Electric Co. |
730,000 | 16,877,600 | ||||||
Honeywell International Inc. |
295,000 | 22,228,250 | ||||||
Masco Corp. |
365,000 | 7,391,250 | ||||||
Terex Corp. (C) (F) |
265,000 | 9,121,300 | ||||||
United Technologies Corp. |
184,500 | 17,237,835 | ||||||
|
|
|||||||
| 130,181,585 | ||||||||
|
|
|||||||
Information Technology — 18.1% |
|
|||||||
Apple Inc. (G) |
93,000 | 41,164,590 | ||||||
Automatic Data Processing, Inc. |
200,000 | 13,004,000 | ||||||
Broadcom Corp. (Class A) |
225,000 | 7,800,750 | ||||||
Cisco Systems, Inc. |
700,000 | 14,637,000 | ||||||
Cognizant Technology Solutions Group (Class A) (C) |
160,000 | 12,257,600 | ||||||
eBay Inc. (C) |
280,000 | 15,181,600 | ||||||
Google Inc. (Class A) (C) |
18,000 | 14,292,540 | ||||||
Intel Corp. |
570,000 | 12,454,500 | ||||||
International Business Machines Corp. |
105,000 | 22,396,500 | ||||||
MasterCard, Inc. |
23,000 | 12,445,990 | ||||||
Microsoft Corp. |
700,000 | 20,027,000 | ||||||
Oracle Corp. |
500,000 | 16,170,000 | ||||||
QUALCOMM Inc. |
400,000 | 26,780,000 | ||||||
|
|
|||||||
| 228,612,070 | ||||||||
|
|
|||||||
Materials — 3.7% |
||||||||
CF Industries Holdings, Inc. (F) |
38,531 | 7,335,145 | ||||||
Dow Chemical Co. |
175,000 | 5,572,000 | ||||||
Eastman Chemical Co. |
85,000 | 5,938,950 | ||||||
Freeport-McMoRan Copper & Gold Inc. |
165,700 | 5,484,670 | ||||||
LyondellBasell Industries N.V. (Class A) |
158,000 | 9,999,820 | ||||||
Potash Corporation of Saskatchewan Inc. (F) |
130,100 | 5,106,425 | ||||||
Praxair, Inc. (F) |
67,500 | 7,528,950 | ||||||
|
|
|||||||
| 46,965,960 | ||||||||
|
|
|||||||
4
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 2013
(unaudited)
| Principal/ Shares |
Value (A) | |||||||
Telecom Services — 3.7% |
||||||||
AT&T Corp. |
550,000 | $ | 20,179,500 | |||||
CenturyLink, Inc. |
345,000 | 12,119,850 | ||||||
Verizon Communications Inc. |
300,000 | 14,745,000 | ||||||
|
|
|||||||
| 47,044,350 | ||||||||
|
|
|||||||
Utilities — 2.5% |
||||||||
Calpine Corp. (C) |
300,000 | 6,180,000 | ||||||
IDACORP, Inc. |
135,000 | 6,516,450 | ||||||
NiSource Inc. |
210,000 | 6,161,400 | ||||||
South Jersey Industries, Inc. |
100,000 | 5,559,000 | ||||||
Wisconsin Energy Corp. |
160,000 | 6,862,400 | ||||||
|
|
|||||||
| 31,279,250 | ||||||||
|
|
|||||||
Total Common Stocks |
|
1,252,344,531 | ||||||
|
|
|||||||
Short-Term Investments — 1.3% |
|
|||||||
Money Market Account — 0.1% |
|
|||||||
M&T Bank, 0.15% |
$ | 1,134,617 | 1,134,617 | |||||
|
|
|||||||
Money Market Funds — 1.2% |
|
|||||||
Fidelity Institutional Money Market – Money Market Portfolio (Institutional Class), 0.14% (E) |
15,100,000 | 15,100,000 | ||||||
RBC U.S. Government Money Market (Institutional Class I), 0.01% (E) |
10,000 | 10,000 | ||||||
Vanguard Federal Money Market, 0.01% (E) |
10,000 | 10,000 | ||||||
Western Asset Institutional Government Reserves (Institutional Class), 0.05% (E) |
10,000 | 10,000 | ||||||
|
|
|||||||
| 15,130,000 | ||||||||
|
|
|||||||
Total Short-Term Investments |
16,264,617 | |||||||
|
|
|||||||
Securities Lending
Collateral — 0.2% |
|
|||||||
Money Market Funds — 0.2% |
|
|||||||
Invesco Short-Term Investment Trust — Liquid Assets Portfolio (Institutional Class), 0.11% (E) |
2,814,093 | |||||||
|
|
|||||||
Total Investments — 100.6% |
1,271,423,241 | |||||||
Cash, receivables, prepaid expenses and other assets, less liabilities — (0.6)% |
|
(7,332,476 | ) | |||||
|
|
|||||||
Net Assets — 100.0% |
$ | 1,264,090,765 | ||||||
|
|
|||||||
Notes:
| (A) | Common stocks are listed on the New York Stock Exchange or the NASDAQ and are valued at the last reported sale price on the day of valuation. |
| (B) | A portion of shares held are on loan. |
| (C) | Presently non-dividend paying. |
| (D) | Non-controlled affiliate, a closed-end sector fund, registered as an investment company under the Investment Company Act of 1940. |
| (E) | Rate presented is as of period-end and represents the annualized yield earned over the previous seven days. |
| (F) | All or a portion of this security is pledged to cover open written call option contracts. Aggregate market value of such pledged securities is $7,067,113. |
| (G) | All or a portion of this security is pledged to collateralize open written put option contracts with an aggregate market value to deliver upon exercise of $11,078,600. |
5
OTHER INFORMATION
Dividend Payment Schedule
The Fund 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, the net realized capital gains earned through October 31 and, if applicable, a return of capital. Shareholders may elect to receive the year-end distribution in stock or cash. In connection with this distribution, all shareholders of record are sent a dividend announcement notice and an election card in mid-November. Shareholders holding shares in “street” or brokerage accounts may make their election by notifying their brokerage house representative.
Statement on Quarterly Filing of Complete Portfolio Schedule
In addition to publishing its complete schedule of portfolio holdings in the First and Third Quarter Reports to shareholders, the Fund 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 Fund’s Forms N-Q are available on the Commission’s website: www.sec.gov. The Fund’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 Fund also posts a link to its Forms N-Q on its website: www.adamsexpress.com under the headings “Investment Information”, “Financial Reports” and then “SEC Filings”.
Proxy Voting Policies and Record
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities owned by the Fund and the Fund’s proxy voting record for the 12-month period ended June 30, 2012 are available (i) without charge, upon request, by calling the Fund’s toll free number at (800) 638-2479; (ii) on the Fund’s website: www.adamsexpress.com under the headings “About Adams Express” and “Corporate Information”; and (iii) on the Securities and Exchange Commission’s website: www.sec.gov.
Privacy Policy
In order to conduct its business, the Fund, through its transfer agent, American Stock Transfer & Trust Company, collects and maintains certain nonpublic personal information about our shareholders of record with respect to their transactions in shares of our securities. This information includes the shareholder’s address, tax identification or Social Security number, share balances, and dividend elections. We do not collect or maintain personal information about shareholders 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 shareholders or our former shareholders 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 shareholders to those employees who need to know that information to provide services to our shareholders. We also maintain certain other safeguards to protect your nonpublic personal information.
6
ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders was held on March 19, 2013. The following votes were cast for directors:
| Votes For | Votes Withheld | |||||||
Enrique R. Arzac |
59,028,321 | 19,720,930 | ||||||
Phyllis O. Bonanno |
59,210,272 | 19,538,979 | ||||||
Kenneth J. Dale |
59,901,609 | 18,847,642 | ||||||
Frederic A. Escherich |
59,993,921 | 18,755,330 | ||||||
Roger W. Gale |
59,858,743 | 18,890,508 | ||||||
Kathleen T. McGahran |
59,652,167 | 19,097,084 | ||||||
Craig R. Smith |
59,830,955 | 18,918,296 | ||||||
Mark E. Stoeckle |
70,658,903 | 8,090,348 | ||||||
A proposal to approve and ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Fund for 2013 was approved with 63,075,604 votes for, 696,131 votes against, and 14,977,516 shares abstaining.
The Adams Express Company
Seven St. Paul Street, Suite 1140, Baltimore, MD 21202
(410) 752-5900 (800) 638-2479
Website: www.adamsexpress.com
E-mail: contact@adamsexpress.com
Counsel: Chadbourne & Parke LLP
Independent Registered Public Accounting Firm: PricewaterhouseCoopers LLP
Custodian of Securities: Brown Brothers Harriman & Co.
Transfer Agent & Registrar: American Stock Transfer & Trust Company
Stockholder Relations Department
59 Maiden Lane
New York, NY 10038
(877) 260-8188
Website: www.amstock.com
E-mail: info@amstock.com
This report is transmitted to the shareholders 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 Fund or of any securities mentioned in the report. The rates of return will vary and the principal value of an investment will fluctuate. Shares, if sold, may be worth more or less than their original cost. Past performance is no guarantee of future investment results.
7
THE ADAMS EXPRESS COMPANY
Board of Directors
Enrique R. Arzac 1,3,5 |
Roger W. Gale 2,4 |
|
Phyllis O. Bonanno 1,3,5 |
Kathleen T. McGahran 1,2,3,5,6 |
|
Kenneth J. Dale 2,4 |
Craig R. Smith 2,3 |
|
Frederic A. Escherich 1,4,5 |
Mark E. Stoeckle 1 |
| 1. | Member of Executive Committee |
| 2. | Member of Audit Committee |
| 3. | Member of Compensation Committee |
| 4. | Member of Retirement Benefits Committee |
| 5. | Member of Nominating and Governance Committee |
| 6. | Chair of the Board |
Officers
Mark E. Stoeckle |
Chief Executive Officer |
|
David D. Weaver, CFA |
President |
|
Nancy J. F. Prue, CFA |
Executive Vice President |
|
Brian S. Hook, CFA, CPA |
Vice President, Chief Financial Officer and Treasurer |
|
Lawrence L. Hooper, Jr. |
Vice President, General Counsel and Secretary |
|
Richard A. Church |
Vice President—Research |
|
David R. Schiminger, CFA |
Vice President—Research |
|
D. Cotton Swindell, CFA |
Vice President—Research |
|
Christine M. Sloan, CPA |
Assistant Treasurer |
Stock Data
Market Price (3/31/13) |
$ | 11.74 | ||
Net Asset Value (3/31/13) |
$ | 13.58 | ||
Discount: |
13.6% |
New York Stock Exchange ticker symbol: ADX
NASDAQ Quotation Symbol for NAV: XADEX
Distributions in 2013
From Investment Income (paid or declared) |
$ | 0.08 | ||
From Net Realized Gains |
0.02 | |||
|
|
|||
Total |
$ | 0.10 | ||
|
|
2013 Dividend Payment Dates
March 1, 2013
June 3, 2013
September 3, 2013*
December 27, 2013*
*Anticipated