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: 811-02624
Name of Registrant: THE ADAMS EXPRESS COMPANY
Address of Registrant: 7 St. Paul Street, Suite 1140
Baltimore, MD 21202
Name and address of agent for service: Lawrence L. Hooper, Jr., Esq.
7 St. Paul Street, Suite 1140
Baltimore, MD 21202
Registrant's telephone number, including area code: (410) 752-5900
Date of fiscal year end: December 31
Date of reporting period: January 1, 2003 - June 30, 2003
Item 1: Reports to Shareholders
[LOGO] Adams Express Company
[LOGO] ADAMS
EXPRESS
COMPANY (R)
SEMI-ANNUAL REPORT
-------------------------------
June 30, 2003
LETTER TO STOCKHOLDERS
--------------------------------------------------------------------------------
We submit herewith the audited financial statements of the Company for the six
months ended June 30, 2003. Also provided are the report of independent
auditors, a schedule of investments and summary financial information.
Net assets of the Company at June 30, 2003 were $13.06 per share on 82,909,150
shares outstanding, compared with $12.12 per share at December 31, 2002 on
84,536,250 shares outstanding. On March 1, 2003, a distribution of $0.05 per
share was paid, consisting of $0.03 from 2002 long-term capital gain, $0.01
from 2002 investment income, and $0.01 from 2003 investment income, all taxable
in 2003. A 2003 investment income dividend of $0.05 per share was paid on June
1, 2003 and another $0.05 investment income dividend has been declared to
shareholders of record August 15, 2003, payable September 1, 2003.
Net investment income for the six months ended June 30, 2003 amounted to
$7,115,861, compared with $8,398,640 for the same period in 2002. These
earnings are equal to $0.09 and $0.10 per share, respectively, on the average
number of shares outstanding during each period.
Net capital gain realized on investments for the six months ended June 30, 2003
amounted to $8,263,047, the equivalent of $0.10 per share.
Current and potential shareholders can find information about the Company,
including the daily net asset value (NAV) per share, the market price, and the
discount/premium to the NAV, at its site on the Internet. The address for the
website is www.adamsexpress.com. Also available at the website are a brief
history of the Company, historical financial information, and more general
industry material. Further information regarding shareholder services is
located on page 15 of this report.
The Company is an internally-managed equity fund whose investment policy is
based on the primary objectives of preservation of capital, the attainment of
reasonable income from investments, and an opportunity for capital appreciation.
By order of the Board of Directors,
/s/ DOUGLAS G. OBER
Douglas G. Ober,
Chairman and
Chief Executive Officer
/s/ JOSEPH M. TRUTA
Joseph M. Truta,
President
July 18, 2003
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
June 30, 2003
Assets
Investments* at value:
Common stocks and convertible securities
(cost $773,592,739) $923,393,949
Non-controlled affiliate, Petroleum & Resources Corporation
(cost $27,963,162) 40,911,528
Short-term investments (cost $113,219,000) 113,219,000
Securities lending collateral (cost $166,977,546) 166,977,546 $1,244,502,023
---------------------------------------------------------------------------------------
Cash 133,088
Receivables:
Investment securities sold 1,641,045
Dividends and interest 795,934
Prepaid expenses and other assets 6,901,725
-----------------------------------------------------------------------------------------------------
Total Assets 1,253,973,815
-----------------------------------------------------------------------------------------------------
Liabilities
Investment securities purchased 597,663
Open written option contracts at value (proceeds $1,465,033) 1,325,750
Obligations to return securities lending collateral 166,977,546
Accrued expenses 2,667,154
-----------------------------------------------------------------------------------------------------
Total Liabilities 171,568,113
-----------------------------------------------------------------------------------------------------
Net Assets $1,082,405,702
-----------------------------------------------------------------------------------------------------
Net Assets
Common Stock at par value $1.00 per share, authorized 150,000,000 shares;
issued and outstanding 82,909,150 shares $ 82,909,150
Additional capital surplus 821,894,891
Undistributed net investment income 6,138,476
Undistributed net realized gain on investments 8,574,326
Unrealized appreciation on investments 162,888,859
-----------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Stock $1,082,405,702
-----------------------------------------------------------------------------------------------------
Net Asset Value Per Share of Common Stock $13.06
-----------------------------------------------------------------------------------------------------
*See Schedule of Investments on pages 8 through 10.
The accompanying notes are an integral part of the financial statements.
2
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
Six Months Ended June 30, 2003
Investment Income
Income:
Dividends:
From unaffiliated issuers $ 8,506,972
From non-controlled affiliate 337,619
Interest and other income 976,097
------------------------------------------------------------------------------------------------------
Total income 9,820,688
------------------------------------------------------------------------------------------------------
Expenses:
Investment research 1,117,586
Administration and operations 652,148
Directors' fees 109,000
Reports and stockholder communications 225,567
Transfer agent, registrar and custodian expenses 206,350
Auditing and accounting services 48,462
Legal services 23,325
Occupancy and other office expenses 204,325
Travel, telephone and postage 53,425
Other 64,639
------------------------------------------------------------------------------------------------------
Total expenses 2,704,827
------------------------------------------------------------------------------------------------------
Net Investment Income 7,115,861
------------------------------------------------------------------------------------------------------
Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions 8,084,307
Net realized gain distributed by regulated investment company (non-controlled affiliate) 178,740
Change in unrealized appreciation on investments 68,301,321
------------------------------------------------------------------------------------------------------
Net Gain on Investments 76,564,368
------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $83,680,229
------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
3
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 2003 December 31, 2002
---------------- -----------------
From Operations:
Net investment income $ 7,115,861 $ 16,738,360
Net realized gain on investments 8,263,047 44,530,335
Change in unrealized appreciation on investments 68,301,321 (330,406,021)
-------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations 83,680,229 (269,137,326)
-------------------------------------------------------------------------------------------------------------
Dividends to Stockholders from:
Net investment income (5,849,654) (15,955,830)
Net realized gain from investment transactions (2,522,494) (47,121,926)
-------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (8,372,148) (63,077,756)
-------------------------------------------------------------------------------------------------------------
From Capital Share Transactions:
Value of shares issued in payment of exercised options and distributions -- 26,003,033
Cost of shares purchased (Note 4) (17,712,471) (37,344,175)
-------------------------------------------------------------------------------------------------------------
Change in net assets from capital share transactions (17,712,471) (11,341,142)
-------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 57,595,610 (343,556,224)
Net Assets:
Beginning of period 1,024,810,092 1,368,366,316
-------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $6,138,476 and $4,872,269, respectively) $1,082,405,702 $1,024,810,092
-------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
4
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. Significant Accounting Policies
The Adams Express Company (the Company) is registered under the Investment
Company Act of 1940 as a diversified investment company. The Company's
investment objectives as well as the nature and risk of its investment
transactions are set forth in the Company's registration statement.
Security Valuation -- Investments in securities traded on a national security
exchange are valued at the last reported sale price on the day of valuation.
Over-the-counter and listed securities for which a sale price is not available
are valued at the last quoted bid price. Short-term investments (excluding
purchased options) are valued at amortized cost. Purchased and written options
are valued at the last quoted asked price.
Affiliated Companies -- Investments in companies 5% or more of whose
outstanding voting securities are held by the Company are defined as
"Affiliated Companies" in Section 2(a)(3) of the Investment Company Act of 1940.
Security Transactions and Investment Income -- Investment transactions are
accounted for on the trade date. Gain or loss on sales of securities and
options is determined on the basis of identified cost. Dividend income and
distributions to shareholders are recognized on the ex-dividend date, and
interest income is recognized on the accrual basis.
2. Federal Income Taxes
The Company's policy is to distribute all of its taxable income to its
shareholders in compliance with the requirements of the Internal Revenue Code
applicable to regulated investment companies. Therefore, no federal income tax
provision is required. For federal income tax purposes, the identified cost of
securities, including options, at June 30, 2003 was $1,082,590,946 and net
unrealized appreciation aggregated $163,376,110, of which the related gross
unrealized appreciation and depreciation were $336,955,027 and $173,578,917,
respectively.
Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. Accordingly, annual
reclassifications are made within the Company's capital accounts to reflect
income and gains available for distribution under income tax regulations.
3. Investment Transactions
Purchases and sales of portfolio securities, other than options and short-term
investments, during the six months ended June 30, 2003 were $74,002,120 and
$48,338,622, respectively. Options may be written (sold) or purchased by the
Company. The Company, as writer of an option, bears the market risk of an
unfavorable change in the price of the security underlying the written option.
The risk associated with purchasing an option is limited to the premium
originally paid. A schedule of outstanding option contracts as of June 30, 2003
can be found on pages 11 and 12.
Transactions in written covered call and collateralized put options during the
six months ended June 30, 2003 were as follows:
Covered Calls Collateralized Puts
------------------- --------------------
Contracts Premiums Contracts Premiums
--------- --------- --------- ----------
Options outstanding,
December 31, 2002 6,047 $ 564,056 6,195 $ 663,944
Options written 5,300 711,310 12,150 1,306,501
Options terminated in closing
purchase transactions (2,100) (208,348) (750) (88,454)
Options expired (4,097) (390,956) (9,265) (924,898)
Options exercised (700) (103,220) (580) (64,902)
------------------------------------------------------------------------
Options outstanding,
June 30, 2003 4,450 $ 572,842 7,750 $ 892,191
------------------------------------------------------------------------
All investment decisions are made by a committee, and no one person is
primarily responsible for making recommendations to that committee.
4. Capital Stock
The Company has 10,000,000 authorized and unissued preferred shares without par
value.
On December 27, 2002, the Company issued 2,426,788 shares of its Common Stock
at a price of $10.715 per share (the average market price on December 9, 2002)
to stockholders of record November 25, 2002 who elected to take stock in
payment of the distribution from 2002 capital gain and investment income.
The Company may purchase shares of its Common Stock from time to time at such
prices and amounts as the Board of Directors may deem advisable.
Transactions in Common Stock for 2003 and 2002 were as follows:
Shares Amount
----------------------- --------------------------
Six months Six months
ended Year ended ended Year ended
June 30, December 31, June 30, December 31,
2003 2002 2003 2002
---------- ------------ ------------ ------------
Shares issued in
payment of
dividends -- 2,426,788 $ -- $ 26,003,033
Shares purchased
(at a weighted
average discount
from net asset
value of 11.1%
and 10.9%,
respectively) (1,627,100) (3,123,800) (17,712,471) (37,344,175)
----------------------------------------------------------------------
Net change (1,627,100) (697,012) $(17,712,471) $(11,341,142)
----------------------------------------------------------------------
5
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
On June 30, 2003, the Company held a total of 2,324,112 shares of its Common
Stock at a cost of $25,266,897. The Company held 697,012 shares of its Common
Stock at a cost of $7,554,426 on December 31, 2002.
The Company has an employee incentive stock option and stock appreciation
rights plan which provides for the issuance of options and stock appreciation
rights for the purchase of up to 2,610,146 shares of the Company's Common Stock
at 100% of the fair market value at date of grant. Options are exercisable
beginning not less than one year after the date of grant and extend and vest
over ten years from the date of grant. Stock appreciation rights are
exercisable beginning not less than two years after the date of grant and
extend over the period during which the option is exercisable. The stock
appreciation rights allow the holders to surrender their rights to exercise
their options and receive cash or shares in an amount equal to the difference
between the option price and the fair market value of the Common Stock at the
date of surrender.
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 2003, 259,023 options
were outstanding, with a weighted average exercise price of $11.1902 per share.
During the six months ended June 30, 2003, the Company granted options
including stock appreciation rights for 57,398 shares of Common Stock with a
weighted average exercise price of $10.975. During the six months ended June
30, 2003, stock appreciation rights relating to 33,838 stock option shares were
exercised at a weighted average market price of $11.6328 per share and the
stock options relating to these rights with a weighted average exercise price
of $3.1327 per share were cancelled. Stock options and stock appreciation
rights relating to 43,619 shares, and with a weighted average exercise price of
$11.1632, were cancelled. At June 30, 2003, there were outstanding exercisable
options to purchase 86,711 common shares at $2.6042-$19.0100 per share
(weighted average price of $13.6111), and unexercisable options to purchase
152,253 common shares at $4.3883-$19.0100 per share (weighted average price of
$11.4735). The weighted average remaining contractual life of outstanding
exercisable and unexercisable options is 6.6987 years and 6.9680 years,
respectively. Total compensation expense recognized for the six months ended
June 30, 2003 related to the stock options and stock appreciation rights plan
was $(64,348). At June 30, 2003, there were 1,242,752 shares available for
future option grants.
5. Retirement Plans
The Company provides retirement benefits for its employees under a
non-contributory qualified defined benefit pension plan. The benefits are based
on years of service and compensation during the last 5 years of employment. The
Company's current funding policy is to contribute annually to the plan only
those amounts that can be deducted for federal income tax purposes. As of June
30, 2003, the plan assets, consisting of investments in individual stocks,
bonds and mutual funds were $9,538,724. In determining the actuarial present
value of the projected benefit obligation, the interest rate used for the
weighted average discount rate was 6.75%, the expected rate of annual salary
increases was 7.0%, and the long-term expected rate of return on plan assets
was 8.0%. The projected benefit obligation as of June 30, 2003 was $6,145,677.
Prepaid pension cost included in other assets at June 30, 2003 was $5,847,452.
In addition, the Company has a nonqualified benefit plan which provides
employees with defined retirement benefits to supplement the qualified plan.
The Company does not provide postretirement medical benefits.
6. Expenses
The cumulative amount of accrued expenses at June 30, 2003 for employees and
former employees of the Company was $2,326,390. Aggregate remuneration paid or
accrued during the six months ended June 30, 2003 to key employees and
directors amounted to $787,784.
7. Portfolio Securities Loaned
The Company makes loans of securities to brokers, secured by cash deposits,
U.S. Government securities, or bank letters of credit. The Company accounts for
securities lending transactions as secured financing and receives compensation
in the form of fees or retains a portion of interest on the investment of any
cash received as collateral. The Company also continues to receive interest or
dividends on the securities loaned. The loans are secured at all times by
collateral of at least 102% of the fair value of the securities loaned plus
accrued interest. Gain or loss in the fair value of the securities loaned that
may occur during the term of the loan will be for the account of the Company.
At June 30, 2003, the Company had securities on loan of $160,654,047 and held
collateral of $166,977,546, consisting of repurchase agreements and a
certificate of deposit.
6
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
-------------------------
Six Months Ended
----------------------
Year Ended December 31
June 30, June 30, ------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
Per Share Operating Performance*
Net asset value, beginning of period $12.12 $16.05 $16.05 $23.72 $26.85 $21.69 $19.01
-----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.09 0.10 0.20 0.26 0.26 0.25 0.30
Net realized gains and change in unrealized
appreciation and other changes 0.92 (2.10) (3.38) (6.21) (1.51) 6.71 3.90
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.01 (2.00) (3.18) (5.95) (1.25) 6.96 4.20
-----------------------------------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income (0.07) (0.10) (0.19) (0.26) (0.22) (0.26) (0.30)
Distributions from net realized gains (0.03) (0.06) (0.57) (1.39) (1.63) (1.37) (1.10)
-----------------------------------------------------------------------------------------------------------------------------
Total distributions (0.10) (0.16) (0.76) (1.65) (1.85) (1.63) (1.40)
-----------------------------------------------------------------------------------------------------------------------------
Capital share repurchases 0.03 0.02 0.05 0.04 0.10 -- --
Reinvestment of distributions -- -- (0.04) (0.11) (0.13) (0.17) (0.12)
-----------------------------------------------------------------------------------------------------------------------------
Total capital share transactions 0.03 0.02 0.01 (0.07) (0.03) (0.17) (0.12)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.06 $13.91 $12.12 $16.05 $23.72 $26.85 $21.69
-----------------------------------------------------------------------------------------------------------------------------
Per share market price, end of period $11.81 $12.26 $10.57 $14.22 $21.00 $22.38 $17.75
Total Investment Return
Based on market price 12.8% (12.8)% (20.6)% (24.7)% 1.7% 36.1% 19.3%
Based on net asset value 8.7% (12.3)% (19.4)% (24.7)% (4.3)% 33.6% 23.7%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $1,082,406 $1,170,807 $1,024,810 $1,368,366 $1,951,563 $2,170,802 $1,688,080
Ratio of expenses to average net assets 0.53%+ 0.33%+ 0.34% 0.19% 0.24% 0.32% 0.22%
Ratio of net investment income to
average net assets 1.39%+ 1.30%+ 1.42% 1.33% 0.97% 1.06% 1.48%
Portfolio turnover 10.91%+ 18.16%+ 17.93% 19.15% 12.74% 15.94% 22.65%
Number of shares outstanding at
end of period (in 000's)* 82,909 84,187 84,536 85,233 82,292 80,842 77,815
-------------------------
--------
* Prior years have been adjusted to reflect the 3-for-2 stock split effected in
October 2000. Certain prior year amounts have been reclassified to conform to
current year presentation.
+ Ratios presented on an annualized basis.
7
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
June 30, 2003
Prin. Amt.
or Shares Value (A)
- ---------- ------------
Stocks and Convertible Securities -- 89.1%
Consumer -- 12.8%
Consumer Discretionary -- 5.8%
BJ's Wholesale Club, Inc. (B)(D) 500,000 $ 7,530,000
Black & Decker Corp. (D) 300,000 13,035,000
Brinker International Inc. (B)(D) 515,000 18,550,300
Gannett Co., Inc. 87,500 6,720,875
Target Corp. 460,000 17,406,400
------------
63,242,575
------------
Consumer Staples -- 7.0%
Coca-Cola Co. 200,000 9,282,000
Dean Foods Co. (B)(D) 562,500 17,718,750
Hershey Foods Corp. 70,000 4,876,200
PepsiCo, Inc. 440,000 19,580,000
Procter & Gamble Co. 170,000 15,160,600
Safeway, Inc. (B)(D) 423,000 8,654,580
------------
75,272,130
------------
Energy -- 6.6%
BP plc ADR (D) 270,000 11,345,401
ConocoPhillips 200,000 10,960,000
Exxon Mobil Corp. 130,000 4,668,300
Petroleum & Resources
Corporation (C) 1,985,996 40,911,528
Schlumberger Ltd. (D) 70,000 3,329,900
------------
71,215,129
------------
Financials -- 16.0%
Banking -- 9.7%
BankNorth Group, Inc. 474,000 12,096,480
Compass Bancshares Inc. 210,000 7,335,300
Federal Home Loan Mortgage
Corp. 160,000 8,123,200
Fifth Third Bancorp 100,000 5,734,000
Investors Financial Services
Corp. (D) 520,000 15,085,200
Provident Bankshares Corp. 335,021 8,512,895
Wachovia Corp. 380,000 15,184,800
Wells Fargo & Co. 400,000 20,160,000
Wilmington Trust Corp. 420,000 12,327,000
------------
104,558,875
------------
Insurance -- 6.3%
AMBAC Financial Group, Inc. 400,000 26,500,000
American International Group,
Inc. 763,675 42,139,587
------------
68,639,587
------------
Prin. Amt.
or Shares Value (A)
- ---------- ------------
Health Care -- 13.7%
Abbott Laboratories 350,000 $ 15,316,000
Affymetrix Inc. (B)(D) 210,000 4,139,100
Bristol-Myers Squibb Co. 345,000 9,366,750
Enzon Pharmaceuticals, Inc.
(B)(D) 100,000 1,252,000
Genentech, Inc. (B)(D) 225,000 16,227,000
GlaxoSmithKline plc ADR 175,000 7,094,500
HCA Inc. (D) 450,000 14,418,000
Johnson & Johnson 360,000 18,612,000
Laboratory Corp. of America
Holdings (B)(D) 335,000 10,100,250
Lilly (Eli) & Co. (D) 60,000 4,138,200
Pfizer Inc. 1,000,960 34,182,785
Wyeth Co. 300,000 13,665,000
------------
148,511,585
------------
Industrials -- 11.7%
Boeing Co. 300,000 10,296,000
Canadian National Railway Co. 170,000 8,204,200
General Electric Co. 1,177,500 33,770,700
Ingersoll-Rand Co. Ltd. 250,000 11,830,000
R.R. Donnelley & Sons Co. 500,000 13,070,000
3M Co. (D) 135,000 17,412,300
United Parcel Service, Inc. (D) 80,000 5,096,000
United Technologies Corp. (D) 380,000 26,915,400
------------
126,594,600
------------
8
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
June 30, 2003
Prin. Amt.
or Shares Value (A)
---------- -----------
Information Technology -- 12.5%
Communication Equipment -- 1.8%
Corning Inc. (B)(D) 1,170,000 $ 8,646,300
Lucent Technologies Inc. (B)(D) 400,000 812,000
Nokia Corp. ADR (D) 640,000 10,515,200
-----------
19,973,500
-----------
Computer Related -- 9.0%
BEA Systems Inc. (B)(D) 740,000 8,036,400
BMC Software Inc. (B)(D) 310,000 5,062,300
Cisco Systems, Inc. (B)(D) 1,755,000 29,115,450
DiamondCluster International Inc.
(B)(D) 497,500 1,845,725
Microsoft Corp. 785,000 20,103,850
Oracle Corp. (B) 880,000 10,577,600
Sapient Corp. (B) 1,150,000 3,185,500
Siebel Systems Inc. (B)(D) 770,000 7,345,800
Sun Microsystems Inc. (B) 515,000 2,369,000
Symantec Corp. 3.00% Conv. Sub.
Notes due 2006 (E) $500,000 705,938
Symantec Corp. (B)(D) 200,000 8,772,000
-----------
97,119,563
-----------
Electronics -- 1.7%
Intel Corp. 510,000 10,599,840
Solectron Corp. (B)(D) 2,000,000 7,480,000
-----------
18,079,840
-----------
Prin. Amt.
or Shares Value (A)
---------- ------------
Materials -- 1.7%
Albemarle Corp. (D) 225,400 $ 6,304,438
Rohm & Haas Co. 400,000 12,412,000
------------
18,716,438
------------
Telecom Services -- 4.9%
Alltel Corp. 350,000 16,877,000
BellSouth Corp. 415,000 11,051,450
SBC Communications Inc. 595,000 15,202,250
Vodafone Group plc
ADS (D) 492,614 9,679,855
------------
52,810,555
------------
Utilities -- 9.2%
Black Hills Corp. 374,500 11,497,150
CINergy Corp. (D) 440,000 16,187,600
Duke Energy Corp. 8.25% Conv.
Pfd. due 2004 (D) 400,000 6,344,000
Duke Energy Corp. (D) 355,000 7,082,250
Keyspan Corp. 400,000 14,180,000
MDU Resources Group, Inc. 450,000 15,070,500
Northwestern Corp. (B) 41,800 83,600
Philadelphia Suburban Corp. 875,000 21,332,500
TECO Energy, Inc. (D) 650,000 7,793,500
------------
99,571,100
------------
Total Stocks and Convertible Securities
(Cost $801,555,901) (F) 964,305,477
------------
9
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
June 30, 2003
Prin. Amt. Value (A)
----------- ------------
Short-Term Investments -- 10.5%
U.S. Government Obligations -- 3.2%
U.S. Treasury Bills,
0.94%, due 8/21/03 $35,000,000 $ 34,953,392
------------
Certificates of Deposit -- 1.4%
Mercantile-Safe Deposit &
Trust Co., 1.00%, due
7/22/03-7/25/03 15,000,000 15,000,000
------------
Commercial Paper -- 5.9%
AIG Funding, Inc.,
0.92%, due 7/15/03 2,365,000 2,364,154
American General Finance
Corp., 1.22%, due
7/3/03 12,600,000 12,599,146
Chevron UK,
1.21%, due 7/15/03 15,000,000 14,992,942
GMAC New Center Asset
Trust, 1.03%,
due 7/17/03 7,375,000 7,371,624
General Electric Capital
Corp., 0.99-1.24%,
due 7/8/03-8/5/03 14,695,000 14,688,381
Toyota Motor Credit
Corp.,
1.18%, due 7/17/03 6,550,000 6,548,321
Wells Fargo & Co.,
1.01%, due 7/31/03 4,705,000 4,701,040
------------
63,265,608
------------
Total Short-Term Investments
(Cost $113,219,000) 113,219,000
------------
Prin. Amt. Value (A)
----------- --------------
Investments of Proceeds from Security Lending -- 15.4%
Credit Industrial ET
Commerical NY,
Certificate of Deposit,
1.06%, due 7/28/03 $ 7,000,824
CS First Boston,
repurchase agreement,
1.38%, due 7/1/03 47,444,819
Daiwa Securities America Inc.,
repurchase agreement,
1.40%, due 7/1/03 64,574,005
Goldman Sachs & Co.
repurchase agreement,
1.43%, due 7/1/03 47,957,898
--------------
Total Investments of Proceeds
from Security Lending
(Cost $166,977,546) 166,977,546
--------------
Total Investments -- 115.0%
(Cost $1,081,752,447) 1,244,502,023
Cash, receivables and other
assets, less
liabilities -- (15.0)% (162,096,321)
--------------
Net Assets -- 100.0% $1,082,405,702
==============
--------------------------------------------------------------------------------
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) Non-controlled affiliate, a closed-end sector fund, registered as an
investment company under the Investment Company Act of 1940.
(D) Some or all of these securities are on loan. See note 7 to financial
statements.
(E) Restricted security (Symantec Corp. 3.00% Conv. Sub. Notes due 2006
acquired 10/18/01, cost $500,000).
(F) The aggregate market value of stocks held in escrow at June 30, 2003
covering open call option contracts written was $27,771,950. In addition,
the aggregate market value of securities segregated by the custodian
required to collateralize open put option contracts written was $28,993,750.
10
SCHEDULE OF OUTSTANDING OPTION CONTRACTS
--------------------------------------------------------------------------------
June 30, 2003
Contracts Contract
(100 shares Strike Expiration Appreciation/
each) Security Price Date (Depreciation)
----------- -------- ------ ---------- --------------
COVERED CALLS
250 Affymetrix Inc. $ 35 Aug 03 $ 23,124
250 American International Group, Inc. 60 Aug 03 11,379
150 American International Group, Inc. 65 Aug 03 12,149
250 American International Group, Inc. 100 Jan 04 26,249
250 Federal Home Loan Mortgage Corp. 60 Oct 03 2,623
100 Federal Home Loan Mortgage Corp. 65 Oct 03 7,300
350 Genentech, Inc. 60 Jul 03 (410,901)
250 Genentech, Inc. 60 Sep 03 (318,502)
250 GlaxoSmithKline, plc ADR 42.50 Aug 03 3,874
100 Hershey Foods Corp. 75 Aug 03 6,549
250 Johnson & Johnson 65 Oct 03 26,498
250 Nokia Corp. 20 Jan 04 9,374
100 Procter & Gamble Co. 90 Jul 03 1,600
100 Procter & Gamble Co. 95 Jul 03 9,000
100 Procter & Gamble Co. 100 Oct 03 7,000
100 Symantec Corp. 50 Jul 03 14,499
100 Symantec Corp. 55 Jul 03 16,099
200 Symantec Corp. 55 Oct 03 21,098
100 3M Co. 135 Jul 03 6,600
250 3M Co. 150 Jul 03 26,384
100 3M Co. 150 Oct 03 9,999
250 United Technologies Corp. 75 Aug 03 17,499
100 United Technologies Corp. 75 Jan 04 (2,501)
150 United Technologies Corp. 90 Jan 04 (1,501)
100 Wachovia Corp. 42.50 Oct 03 600
----- ------------
4,450 (473,908)
----- ------------
COLLATERALIZED PUTS
100 Albemarle Corp. 22.50 Dec 03 5,100
250 Alltel Corp. 35 Jul 03 30,249
250 Alltel Corp. 40 Jul 03 37,699
250 BEA Systems Inc. 10 Jul 03 17,749
350 BEA Systems Inc. 7.50 Sep 03 26,424
150 Boeing Co. 22.50 Aug 03 12,150
250 Canadian National Railway Co. 35 Jul 03 17,624
250 ConocoPhillips 47.50 Aug 03 18,999
150 ConocoPhillips 50 Aug 03 10,574
250 ConocoPhillips 45 Nov 03 17,749
100 ConocoPhillips 50 Nov 03 (1)
100 Fifth Third Bancorp 50 Jul 03 8,100
150 Fifth Third Bancorp 45 Aug 03 23,249
200 Fifth Third Bancorp 40 Nov 03 13,449
150 Fifth Third Bancorp 45 Jan 04 2,324
100 Fifth Third Bancorp 50 Jan 04 4,074
200 Federal Home Loan Mortgage Corp. 45 Jul 03 24,725
250 Gannett Co., Inc. 60 Jul 03 32,499
150 Gannett Co., Inc. 70 Jul 03 12,749
250 Gannett Co., Inc. 55 Oct 03 22,499
100 Gannett Co., Inc. 60 Oct 03 15,599
100 Gannett Co., Inc. 65 Oct 03 9,349
100 Gannett Co., Inc. 70 Oct 03 6,999
250 Gannett Co., Inc. 65 Jan 04 (4,751)
100 Hershey Foods Corp. 55 Aug 03 8,100
250 Investors Financial Services Corp. 22.50 Jul 03 25,099
250 Investors Financial Services Corp. 20 Oct 03 14,474
250 Laboratory Corp. of America Holdings 25 Aug 03 16,374
500 Microsoft Corp. 17.50 Jul 03 27,624
250 Microsoft Corp. 23.75 Jul 03 21,499
11
SCHEDULE OF OUTSTANDING OPTION CONTRACTS (CONTINUED)
--------------------------------------------------------------------------------
June 30, 2003
COLLATERALIZED PUTS (Continued)
Contracts Contract
(100 shares Strike Expiration Appreciation/
each) Security Price Date (Depreciation)
----------- -------- ------ ---------- --------------
150 Microsoft Corp. $ 25 Jul 03 $ 8,399
250 Microsoft Corp. 22.50 Oct 03 14,999
250 Procter & Gamble Co. 65 Jul 03 27,499
100 Rohm & Haas Co. 25 Jul 03 7,099
100 Rohm & Haas Co. 30 Jul 03 5,099
100 Schlumberger Ltd. 45 Aug 03 999
250 Target Corp. 22.50 Jul 03 21,499
250 United Parcel Service, Inc. 50 Jul 03 31,249
100 United Parcel Service, Inc. 45 Oct 03 10,500
150 Wyeth Co. 35 Oct 03 7,499
----- ---------
7,750 613,191
----- ---------
$ 139,283
=========
CHANGES IN PORTFOLIO SECURITIES
--------------------------------------------------------------------------------
During the Three Months Ended June 30, 2003
(unaudited)
Shares
-----------------------------------------
Held
Additions Reductions June 30, 2003
--------- ---------- -------------
BEA Systems Inc..................... 305,000 740,000
Compass Bancshares Inc.............. 35,000 210,000
ConocoPhillips...................... 200,000 200,000
Dean Foods Co....................... 212,500/(1)/ 127,400 562,500
Fifth Third Bancorp................. 100,000 100,000
Investors Financial Services Corp... 25,000 520,000
Laboratory Corp. of America Holdings 10,000 335,000
Microsoft Corp...................... 470,000 785,000
Pfizer Inc.......................... 516,460/(2)/ 1,000,960
Safeway, Inc........................ 8,000 423,000
Schlumberger Ltd.................... 70,000 70,000
Genentech, Inc...................... 75,000 225,000
General Electric Co................. 5,000 1,177,500
GlaxoSmithKline plc ADR............. 75,360 175,000
Lilly (Eli) & Co.................... 130,000 60,000
Nokia Corp. ADR..................... 410,000 640,000
Northwestern Corp................... 458,200 41,800
Pharmacia Corp...................... 368,900/(2)/ --
3M Co............................... 10,000 135,000
Vertex Pharmaceuticals Inc.......... 70,000 --
--------
/(1)/ By stock split.
/(2)/ By merger, received 1.4 shares of Pfizer Inc. common stock for each share
of Pharmacia Corp. common stock held.
12
REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
To the Board of Directors and Stockholders of
The Adams Express Company:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Adams Express Company
(hereafter referred to as the "Company") at June 30, 2003, and the results of
its operations, the changes in its net assets and the financial highlights for
each of the fiscal periods presented, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at June 30, 2003, by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
July 10, 2003
-----------------
This report, including the financial statements herein, is transmitted to the
stockholders of The Adams Express Company for their information. It is not a
prospectus, circular or representation intended for use in the purchase or
sale of shares of the Company or of any securities mentioned in the report.
The rates of return will vary and the market value of an investment will
fluctuate. Shares, if sold, may be worth more or less than their original
cost. Past performance is not indicative of future investment results.
13
HISTORICAL FINANCIAL STATISTICS
--------------------------------------------------------------------------------
Dividends Distributions
Net from from
Asset Net Investment Net Realized
Value of Shares Value per Income Gains
December 31 Net Assets Outstanding* Share* per Share* per Share*
----------- ---------- ------------ --------- -------------- -------------
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
June 30, 2003 1,082,405,702 82,909,150 13.06 .12+ .03
--------
* Prior years have been adjusted to reflect the 3-for-2 stock split effected in
October 2000.
+ Paid or declared.
-----------------
Common Stock
Listed on the New York Stock Exchange
and the Pacific Exchange
The Adams Express Company
Seven St. Paul Street, Suite 1140, Baltimore, MD 21202
(410) 752-5900 or (800) 638-2479
Website: www.adamsexpress.com
E-mail: contact@adamsexpress.com
Counsel: Chadbourne & Parke L.L.P.
Independent Auditors: PricewaterhouseCoopers LLP
Transfer Agent, Registrar & Custodian of Securities: The Bank of New York
14
SHAREHOLDER INFORMATION AND SERVICES
--------------------------------------------------------------------------------
DIVIDEND PAYMENT SCHEDULE
The Company presently pays dividends four times a year, as follows: (a) three
interim distributions on or about March 1, June 1, and September 1, and (b) a
"year-end" distribution, payable in late December, consisting of the estimated
balance of the net investment income for the year and the net realized capital
gain earned through October 31. Stockholders may elect to receive the year-end
distribution in stock or cash. In connection with this distribution, all
stockholders of record are sent a dividend announcement notice and an election
card in mid-November.
Stockholders holding shares in "street" or brokerage accounts may make their
election by notifying their brokerage house representative.
BuyDIRECT/SM/*
BuyDIRECT is a direct purchase and sale plan, as well as a dividend
reinvestment plan, sponsored and administered by our transfer agent, The Bank
of New York. The Plan provides registered stockholders and interested first
time investors an affordable alternative for buying, selling, and reinvesting
in Adams Express shares.
The costs to participants in administrative service fees and brokerage
commissions for each type of transaction are listed below.
Initial Enrollment $7.50
A one-time fee for new accounts who are not currently
registered holders.
Optional Cash Investments
Service Fee $2.50 per investment
Brokerage Commission $0.05 per share
Reinvestment of Dividends**
Service Fee 10% of amount invested
(maximum of $2.50 per investment)
Brokerage Commission $0.05 per share
Sale of Shares
Service Fee $10.00
Brokerage Commission $0.05 per share
Deposit of Certificates for safekeeping Included
Book to Book Transfers Included
To transfer shares to another participant or to a new
participant
Fees are subject to change at any time.
Minimum and Maximum Cash Investments
Initial minimum investment (non-holders) $500.00
Minimum optional investment (existing holders) $50.00
Electronic Funds Transfer (monthly minimum) $50.00
Maximum per transaction $25,000.00
Maximum per year NONE
A brochure which further details the benefits and features of BuyDIRECT as well
as an enrollment form may be obtained by contacting The Bank of New York.
For Non-Registered Shareholders
For shareholders whose stock is held by a broker in "street" name, The Bank of
New York's Dividend Reinvestment Plan remains available through many registered
investment security dealers. If your shares are currently held in a "street"
name or brokerage account, please contact your broker for details about how you
can participate in the Plan or contact The Bank of New York about the BuyDIRECT
Plan.
-----------------
The Company
The Adams Express Company
Lawrence L. Hooper, Jr.
Vice President, Secretary and General Counsel
Seven St. Paul Street, Suite 1140,
Baltimore, MD 21202
(800) 638-2479
Website: www.adamsexpress.com
E-mail: contact@adamsexpress.com
The Transfer Agent
The Bank of New York
Address Shareholder Inquiries to:
Shareholder Relations Department
P.O. Box 11258 Church Street Station
New York, NY 10286
(877) 260-8188
Website: www.stockbny.com
E-mail: Shareowners@bankofny.com
Send Certificates for Transfer
and Address Changes to:
Receive and Deliver Department
P.O. Box 11002 Church Street Station
New York, NY 10286
*BuyDIRECT is a service mark of The Bank of New York.
**The year-end dividend and capital gain distribution will usually be made in
newly issued shares of common stock. There would be no fees or commissions in
connection with this dividend and capital gain distribution when made in newly
issued shares.
15
<![CDATA[
THE ADAMS EXPRESS COMPANY
--------------------------------------------------------------------------------
Board of Directors
Enrique R. Arzac/ 2,4/ Douglas G. Ober/ 1/
Daniel E. Emerson/ 1,3/ Landon Peters/ 2,3/
Edward J. Kelly, III/ 1,4/ John J. Roberts/ 1,2/
Thomas H. Lenagh/ 1,4/ Susan C. Schwab/ 1,3/
W.D. MacCallan/ 3,4/ Robert J.M. Wilson/ 1,3/
W. Perry Neff/ 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
Stephen E. Kohler Vice President--Research
Lawrence L. Hooper, Jr. Vice President, Secretary
and General Counsel
Maureen A. Jones Vice President and
Chief Financial Officer
Christine M. Sloan Assistant Treasurer
Geraldine H. Pare Assistant Secretary
--------
Stock Data
--------
Price (6/30/03) $11.81
Net Asset Value (6/30/03) $13.06
Discount: 9.6%
New York Stock Exchange and Pacific Exchange ticker symbol: ADX
NASDAQ Mutual Fund Quotation Symbol: XADEX
Newspaper stock listings are generally under the abbreviation: AdaEx
----------------
Distributions in 2003
----------------
From Investment Income (paid or declared) $0.12
From Net Realized Gains 0.03
-----
Total $0.15
=====
----------------------
2003 Dividend Payment Dates
----------------------
March 1, 2003
June 1, 2003
September 1, 2003
December 27, 2003*
*Anticipated
Item 2: Code(s) of Ethics for senior financial officers - Item not applicable to
semi-annual report.
Item 3: Audit Committee Financial Expert - Item not applicable to semi-annual
report.
Item 4: Principal Accountant Fees and Services - Item not applicable to
semi-annual report.
Item 5: Audit Committee of Listed Registrants - Item not applicable to
semi-annual report.
Item 6: Reserved.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Item not applicable to semi-annual report.
Item 8: Reserved.
Item 9: Controls and Procedures.
(a) The registrant's Principal Executive Officer and Principal Financial
Officer have evaluated the registrant's disclosure controls and procedures
within 90 days of this filing and have concluded that the registrant's
disclosure controls and procedures were effective, as of that date, in
ensuring that information required to be disclosed by the registrant in
this Form N-CSR was recorded, processed, summarized, and reported timely.
(b) Internal Controls. There were no significant changes in Registrant's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Item 10: Exhibits attached hereto. (Attach certifications as exhibits)
(a) Not required at this time.
(b) 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.
A certification by the registrant's principal executive officer and principal
financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is
attached.
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
Chairman & CEO
Date: July 28, 2003
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.
THE ADAMS EXPRESS COMPANY
BY: /s/ Douglas G. Ober
-----------------------
Douglas G. Ober
Chairman & CEO
Date: : July 28, 2003
THE ADAMS EXPRESS COMPANY
BY: /s/ Maureen A. Jones
-----------------------
Maureen A. Jones
Chief Financial Officer
Date: : July 28, 2003
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