[LOGO of Adams Express Company]
Annual Report
2002
building for the future
with solid investments\R\
2002 AT A GLANCE
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The Company Stock Data
.. a closed-end equity investment company NYSE Symbol................... ADX
.. objectives: preservation of capital Market Price as of 12/31/02 $10.57
reasonable income Discount.................... 12.8%
opportunity for capital gain 52-Week Range........ $14.55-$9.86
.. internally-managed Shares Outstanding..... 84,536,250
.. low expense ratio
.. low turnover
Summary Financial Information
Year Ended December 31
2002 2001
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Net asset value per share $ 12.12 $ 16.05
Total net assets 1,024,810,092 1,368,366,316
Unrealized appreciation 94,587,538 424,993,559
Net investment income 16,738,360 21,091,920
Total realized gain 44,530,335 113,686,714
Total return (based on market value) (20.6)% (24.7)%
Total return (based on net asset value) (19.4)% (24.7)%
Expense ratio 0.34% 0.19%
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2002 Dividends and Distributions
Amount
Paid (per share) Type
-----------------------------------------------------
March 1, 2002 $0.03 Long-term capital gain
March 1, 2002 0.03 Short-term capital gain
March 1, 2002 0.02 Investment income
June 1, 2002 0.08 Investment income
September 1, 2002 0.08 Investment income
December 27, 2002 0.51 Long-term capital gain
December 27, 2002 0.01 Investment income
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$0.76
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2003 Annual Meeting of Stockholders
Location: Hyatt Regency O'Hare, Chicago, Illinois
Date: March 25, 2003
Time: 11:00 a.m.
Holders of Record: February 14, 2003
PORTFOLIO REVIEW
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Ten Largest Portfolio Holdings (12/31/02)
Market Value % of Net Assets
---------------------------------------------------------------
American International Group, Inc. $ 44,178,600 4.3
Petroleum & Resources Corporation* 38,091,413 3.7
General Electric Co. 28,793,875 2.8
United Technologies Corp. 23,537,200 2.3
Wells Fargo & Co. 23,435,000 2.3
Cisco Systems, Inc. 22,990,500 2.2
AMBAC Financial Group, Inc. 22,496,000 2.2
Johnson & Johnson 19,335,600 2.0
HCA Inc. 18,675,000 1.8
PepsiCo, Inc. 18,576,800 1.8
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Total $260,109,988 25.4%
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*Non-controlled affiliate
Sector Weightings (12/31/02)
[CHART]
Consumer 11.0%
Energy 5.2%
Financial 16.6%
Health Care 14.0%
Industrials 12.1%
Information
Technology 9.3%
Materials 1.9%
Telecom Serives 4.9%
Utilities 9.2%
Cash & Equivalent 15.2%
1
LETTER TO STOCKHOLDERS
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Each year at this time we appreciate the opportunity to 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
The year 2002 began on a slow note, as companies expressed their guarded
optimism as to revenue and earnings growth in the first quarter but cautious
views on the outlook for the rest of the year. As the quarter progressed, the
strong economic growth in the period became evident, yet investor confidence
did not revive. Consequently, the Dow Jones Industrials showed a slight gain
and the other principal market indices showed losses.
In the second quarter, revelations of improper accounting, executive greed, and
general company malfeasance were followed by bankruptcy filings of record size
and government investigations of managements. The robust economic growth of the
first quarter nearly disappeared and the possibility of a double-dip recession
became a concern. These worries impacted the stock market quite negatively and
by late July, the Dow Jones Industrials had fallen 23%. The Standard & Poor's
500 was down 30% and the NASDAQ was off 37%.
The Securities and Exchange Commission, in an effort to restore investor
confidence, set new rules for financial statements, with threats of criminal
charges against managements if fraud were uncovered. This was the first of a
number of steps taken by the Bush Administration and Congress to shore up the
financial markets. The Sarbanes-Oxley Act was passed by Congress in July in an
effort to make sweeping changes in the way companies do business and in the
oversight responsibilities of corporate boards of directors. A brief rally
ensued, but the market began to slide again and continued to drop until early
October. At that point, the market indices were down by 27% for the Dow, 32%
for the S&P 500, and 43% for the NASDAQ.
In October and November, the first signs of a turnaround became evident. The
economy had strengthened in the third quarter and security valuations had begun
to look attractive enough to interest investors. Individuals, having pulled $98
billion out of equity mutual funds in the June-October period, began to put
some money back into stocks. As was the pattern earlier in the year, however,
the market rally ran out of steam in December. Leading economic indicators were
weak, the probability of war with Iraq increased, and the holiday selling
season was lackluster. Consumer spending, the bulwark of the economy through
the worst of the industrial slowdown, seemed to be losing strength, while the
industrial sector was not yet recovering measurably.
No sector of the market provided a positive return in 2002. The consumer
staples group lost the least, with a (4.4)% return. This is an area in which we
increased our investments during the year, though we remain underweighted
relative to the S&P 500 Index. The fund's largest sector holdings, in
financials, returned (9.6)%, over 5% better than the sector index. Other
outperforming sectors included our industrials by nearly 15% and utilities by
7%. Both the industrials and utilities are overweighted in our portfolio
relative to the index. The two portfolio sectors which underperformed their
comparable sector indices were health care and technology. Our holdings in
energy (including Petroleum & Resources Corporation), telecommunications
services, materials and the consumer discretionary group performed in line with
the comparable industry sectors.
The Adams Express Company portfolio is comprised primarily of
large-capitalization stocks, historically representing the most stable and
conservatively-managed companies in the investment universe. For the three-year
period ending in 2002, the largest-capitalization stocks of the S&P 500 have
had the poorest returns of the entire index. In our opinion, one major reason
for this poor performance last year was the disillusionment of investors with
the financial reports provided by these companies. The number of large
companies using accounting gimmickry to meet Wall Street earnings expectations
was apparently much larger than had been thought, causing the level of trust in
all financial reports to decline markedly. While the Sarbanes-Oxley legislation
should ameliorate this situation somewhat, it will take time.
For the year ended December 31, 2002, the return on net assets of the Company,
including income and capital gains, was (19.4)%, better than the (22.1)% return
for the Standard & Poor's 500 Index but trailing the (15.0)% return for the Dow
Jones Industrials. The discount from net asset value of the Adams Express
Company's stock price widened from 11.4% to 12.8%, producing a return based on
market prices of (20.6)%.
2
LETTER TO STOCKHOLDERS (CONTINUED)
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Investment Results
At the end of 2002 our net assets were $1,024,810,092 or $12.12 per share on
84,536,250 shares outstanding as compared with $1,368,366,316 or $16.05 per
share on 85,233,262 shares outstanding a year earlier.
Net investment income for 2002 was $16,738,360 compared to $21,091,920 for
2001. These earnings are equal to $0.20 and $0.26 per share, respectively, on
the average number of shares outstanding throughout the year. In 2002, our
0.34% expense ratio (expenses to average net assets) was once again at a very
low level compared to the industry.
Net realized gains amounted to $44,530,335 during the year, while the
unrealized appreciation on investments decreased from $424,993,559 at December
31, 2001 to $94,587,538 at year end.
Dividends and Distributions
The total dividends and distributions paid in 2002 were $0.76 per share
compared to $1.65 in 2001. As announced on November 14, 2002, a year-end
distribution consisting of investment income of $0.01 and capital gains of
$0.51 was made on December 27, 2002, both realized and taxable in 2002. On
January 9, 2003, an additional distribution of $0.05 per share was declared
payable March 1, 2003, representing the balance of undistributed net investment
income and capital gains earned during 2002 and an initial distribution from
2003 net investment income, all taxable to shareholders in 2003.
Net investment income for the Company in the year 2002 was substantially less
than in prior years. We are not alone in experiencing this drop in investment
income. In recent years, many companies have reduced their dividends. Some, who
used to give a small annual increase, have ceased doing so, while others have
simply discontinued paying any dividends, often choosing instead to repurchase
shares on the theory that this will increase stock prices. The widespread
reduction in dividends is starkly demonstrated by the decline in the dividend
yield for the S&P 500, which has fallen from over 3.5% in 1990 to 1.8% at the
end of 2002. At the same time, we have come into a period of sharply declining
interest rates, which limits the amount we can earn on our short-term
investments.
These factors have made it very difficult for Adams Express to maintain a
long-term portfolio that addresses one of our fundamental objectives - to
provide a reasonable income. Because finding companies that pay a high dividend
and also fit our investment criteria has been increasingly difficult, we
consequently - but reluctantly - decided to limit the interim distribution to
$0.05. We will continue to manage the portfolio with a long-term view and hope
that future conditions will be such that increased income distributions will be
possible. The reduction or elimination of double taxation of corporate
dividends should have a positive impact on conditions. As always, annual
capital gains cannot be predicted.
Outlook for 2003
As mentioned, the final quarter of 2002 concluded with a soft holiday selling
season and little indication of future spending intentions on the part of
consumers or corporations. The boom in home refinancing, which has provided
much of the wherewithal for consumer spending, has essentially been completed.
Factory utilization remains well below 100%, so in most industries there is no
apparent need to add capacity in the near term. Fundamentally, we do not see
much impetus to economic growth in this country and would expect to see only
modest increases in corporate revenues and earnings.
There are, however, a number of events taking place that may have a significant
impact on the economy. During 2002, the price of oil rose by over 50% as
tensions between the U.S. and Iraq escalated, with the expectation of war
growing at year-end. The situation was compounded by the general strike in
Venezuela, which brought oil production in that country to a near halt. Should
the price of oil remain at the current high level, economic growth both here
and abroad would be negatively impacted. At a recent meeting, the OPEC
ministers agreed to increase production as necessary to bring the price of oil
back to a more reasonable level. There does not appear, however, to be
sufficient current reserve capacity in the rest of OPEC to supplant fully the
Iraqi and Venezuelan production, so there will likely be some economic drag
from energy prices.
A major stimulus to economic growth in this country has been proposed by the
government in the form of a variety of fiscal policy changes. While there is
doubt that a final bill, including tax incentives and government expenditures,
will take the form of the initial proposal, there is very likely to be a
sizeable fiscal stimulus package assembled. This would presumably begin to
impact the U.S. economy early in the second half of the year, with growth
accelerating through the
3
LETTER TO STOCKHOLDERS (CONTINUED)
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period. This stimulus is likely to be at least partially offset by increased
state and local taxation, though, as those entities try to balance their
budgets.
The short-term effects on the stock market of a potential war in Iraq and a
shift in fiscal policy are difficult to predict. We are fortunate to be able to
take a longer-term perspective with our investments and have made a number of
changes to the portfolio in order to position it best to reflect an improving
economic outlook later in the year. We also have a large holding of cash and
equivalents (15.8% of assets at year-end) with which to take advantage of
opportunities for investment as they present themselves.
Share Repurchase Program
On December 12, 2002, 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 only be repurchased as long as the discount
of the market price of the shares from the net asset value is greater than 10%.
From the beginning of 2003 through February 13, a total of 453,100 shares have
been repurchased at a total cost of $4,870,775 and a weighted average discount
from net asset value of 11.8%.
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The proxy statement for the Annual Meeting of Stockholders to be held in
Chicago, Illinois on March 25, 2003, will be mailed on or about February 21,
2003 to holders of record on February 14, 2003.
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
February 14, 2003
-------------------------
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.
4
STATEMENT OF ASSETS AND LIABILITIES
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December 31, 2002
Assets
Investments* at value:
Common stocks and convertible securities
(cost $741,368,200) $825,098,427
Non-controlled affiliate, Petroleum & Resources Corporation
(cost $27,963,162) 38,091,413
Short-term investments (cost $155,489,346) 155,489,346 $1,018,679,186
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Cash 99,096
Securities lending collateral 63,374,239
Receivables:
Investment securities sold 4,182,144
Dividends and interest 798,202
Prepaid expenses and other assets 7,184,650
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Total Assets 1,094,317,517
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Liabilities
Investment securities purchased 2,080,622
Open written option contracts at value (proceeds $1,228,000) 498,940
Obligations to return securities lending collateral 63,374,239
Accrued expenses and other liabilities 3,553,624
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Total Liabilities 69,507,425
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Net Assets $1,024,810,092
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Net Assets
Common Stock at par value $1.00 per share, authorized 150,000,000 shares;
issued and outstanding 84,536,250 shares $ 84,536,250
Additional capital surplus 837,980,262
Undistributed net investment income 4,872,269
Undistributed net realized gain on investments 2,833,773
Unrealized appreciation on investments 94,587,538
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Net Assets Applicable to Common Stock $1,024,810,092
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Net Asset Value Per Share of Common Stock $12.12
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*See schedule of investments on pages 13 through 16.
The accompanying notes are an integral part of the financial statements.
5
Investment Income
Income:
Dividends:
From unaffiliated issuers $ 17,292,223
From non-controlled affiliate 842,054
Interest and other income 2,662,914
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Total income 20,797,191
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Expenses:
Investment research 1,399,322
Administration and operations 905,139
Directors' fees 209,750
Reports and stockholder communications 351,620
Transfer agent, registrar and custodian expenses 373,541
Auditing and accounting services 96,608
Legal services 89,386
Occupancy and other office expenses 303,049
Travel, telephone and postage 133,507
Other 196,909
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Total expenses 4,058,831
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Net Investment Income 16,738,360
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Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions 43,248,115
Net realized gain distributed by regulated investment company
(non-controlled affiliate) 1,282,220
Change in unrealized appreciation on investments (330,406,021)
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Net Loss on Investments (285,875,686)
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Change in Net Assets Resulting from Operations $(269,137,326)
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The accompanying notes are an integral part of the financial statements.
6
STATEMENTS OF CHANGES IN NET ASSETS
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For the Year Ended
------------------------------
Dec. 31, 2002 Dec. 31, 2001
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From Operations:
Net investment income $ 16,738,360 $ 21,091,920
Net realized gain on investments 44,530,335 113,686,714
Change in unrealized appreciation on investments (330,406,021) (622,475,783)
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Change in net assets resulting from operations (269,137,326) (487,697,149)
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Distributions to Stockholders From:
Net investment income (15,955,830) (21,153,837)
Net realized gain from investment transactions (47,121,926) (111,923,436)
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Decrease in net assets from distributions (63,077,756) (133,077,273)
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From Capital Share Transactions:
Value of shares issued in payment of exercised options and distributions 26,003,033 68,287,544
Cost of shares purchased (note 4) (37,344,175) (30,709,784)
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Change in net assets from capital share transactions (11,341,142) 37,577,760
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Total Decrease in Net Assets (343,556,224) (583,196,662)
Net Assets:
Beginning of year 1,368,366,316 1,951,562,978
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End of year (including undistributed net investment
income of $4,872,269 and $3,788,120, respectively) $1,024,810,092 $1,368,366,316
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The accompanying notes are an integral part of the financial statements.
7
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, including options, at December 31, 2002 was $924,832,397, and net
unrealized appreciation aggregated $95,074,789, of which the related gross
unrealized appreciation and depreciation were $299,619,812 and $204,545,023,
respectively. As of December 31, 2002, the tax basis of distributable earnings
was $1,332,166 of undistributed ordinary income and $1,907,258 of undistributed
long-term capital gain.
Distributions paid by the Company during the year ended December 31, 2002 were
classified as ordinary income of $18,510,961, and long-term capital gain of
$44,566,795. 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
Purchases and sales of portfolio securities, other than options and short-term
investments, during the year ended December 31, 2002 were $187,187,537 and
$310,239,542, 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 December 31,
2002 can be found on page 17.
Transactions in written covered call and collateralized put options during the
year ended December 31, 2002 were as follows:
Covered Calls Collateralized Puts
-------------------- ---------------------
Contracts Premiums Contracts Premiums
--------- ---------- --------- -----------
Options outstanding,
December 31,
2001 1,400 $ 179,644 800 $ 88,697
Options written 12,446 1,371,372 18,725 2,156,419
Options terminated in
closing purchase
transactions (1,899) (233,629) (855) (123,686)
Options expired (5,029) (621,374) (8,887) (1,065,796)
Options exercised (871) (131,957) (3,588) (391,690)
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Options outstanding,
December 31,
2002 6,047 $ 564,056 6,195 $ 663,944
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All investment decisions are made by a committee, and no one person is
primarily responsible for making recommendations to that committee.
4. Capital Stock
The Company has 10,000,000 authorized and unissued preferred shares without par
value.
On December 27, 2001, the Company issued 4,755,400 shares of its Common Stock
at a price of $14.36 per share (the average market price on December 10, 2001)
to stockholders of record November 19, 2001 who elected to take stock in
payment of the distribution from 2001 capital gain and investment income.
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
8
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
Board of Directors may deem advisable. Transactions in Common Stock for 2002
and 2001 were as follows:
Shares Amount
---------------------- --------------------------
2002 2001 2002 2001
---------- ---------- ------------ ------------
Shares issued in
payment of dividends 2,426,788 4,755,400 $ 26,003,033 $ 68,287,544
Shares purchased (at a
weighted average
discount from net
asset value of 10.9%
and 10.0%,
respectively) (3,123,800) (1,814,400) (37,344,175) (30,709,784)
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Net change (697,012) 2,941,000 $(11,341,142) $ 37,577,760
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The cost of the 697,012 shares of Common Stock held by the Company at December
31, 2002 amounted to $7,554,426.
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 2002, there were
345,567 options outstanding with a weighted average exercise price of $8.7445
per share. During 2002, the Company granted options, including stock
appreciation rights, for 68,073 shares of common stock with a weighted average
exercise price of $14.2482 per share. During the year, stock appreciation
rights relating to 96,384 stock option shares were exercised at a weighted
average market price of $12.6173 per share and the stock options relating to
these rights which had a weighted average exercise price of $3.3392 per share
were cancelled. Stock options and stock appreciation rights relating to 58,233
shares, and having a weighted average exercise price of $10.8055, were
cancelled. At December 31, 2002, there were outstanding exercisable options to
purchase 56,255 common shares at $2.6042-$19.0400 per share (weighted average
price of $12.3445), and unexercisable options to purchase 202,768 common shares
at $2.6042-$19.0400 per share (weighted average price of $10.87). The weighted
average remaining contractual life of outstanding exercisable and unexercisable
options was 5.2835 years and 5.9604 years, respectively. Total compensation
expense recognized in 2002 related to the stock option and stock appreciation
rights plan was $(508,725). At December 31, 2002, there were 1,256,531 shares
available for future option grants.
5. Retirement Plans
The Company provides retirement benefits for its employees under a
non-contributory qualified defined benefit pension plan. The benefits are based
on years of service and compensation during the last five years of employment.
The Company's current funding policy is to contribute annually to the plan only
those amounts that can be deducted for federal income tax purposes. The plan
assets consist primarily of investments in individual stocks, bonds, and mutual
funds.
The actuarially computed net pension cost credit for the year ended December
31, 2002 was $4,453, and consisted of service expense of $217,675, interest
expense of $405,224, expected return on plan assets of $836,561, and net
amortization expense of $209,209.
In determining the actuarial present value of the projected benefit obligation,
the interest rate used for the weighted average discount rate was 7.25%, the
expected rate of annual salary increases was 7.0%, and the expected long-term
rate of return on plan assets was 8.0%.
On January 1, 2002, the projected benefit obligation for service rendered to
date was $5,701,564. During 2002, the projected benefit obligation increased
due to service cost and interest cost of $217,675 and $405,224 respectively,
and decreased due to benefits paid in the amount of $224,521. The projected
benefit obligation at December 31, 2002 was $6,099,942.
On January 1, 2002, the fair value of plan assets was $10,569,275. During 2002,
the fair value of plan assets increased due to the expected return on plan
assets of $836,561 and decreased due to benefits paid in the amount of
$224,521. At December 31, 2002, the fair value of plan assets amounted to
$11,181,315, which resulted in excess plan assets of $5,081,373. The remaining
components of prepaid pension cost on December 31, 2002 included $645,437 in
unrecognized loss and $511,959 in unrecognized prior service cost. Prepaid
pension cost included in other assets at December 31, 2002 was $6,238,769.
In addition, the Company has a nonqualified benefit plan which provides
employees with defined retirement benefits to supplement the qualified plan. The
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
Company does not provide postretirement medical benefits.
6. Expenses
The cumulative amount of accrued expenses at December 31, 2002 for employees
and former employees of the Company was $2,560,205. Aggregate remuneration paid
or accrued during the year ended December 31, 2002 to key employees and
directors amounted to $1,625,437.
7. Portfolio Securities Loaned
The Company makes loans of securities to brokers, secured by cash deposits,
U.S. Government securities, or bank letters of credit. The Company accounts for
securities lending transactions as secured financing and receives compensation
in the form of fees or retains a portion of interest on the investment of any
cash received as collateral. The Company also continues to receive interest or
dividends on the securities loaned. The loans are secured by collateral of at
least 102%, at all times, of the fair value of the securities loaned plus
accrued interest. Gain or loss in the fair value of the securities loaned that
may occur during the term of the loan will be for the account of the Company.
At December 31, 2002, the Company had securities on loan of $58,937,364, and
held cash collateral of $63,374,239.
-------------------------
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.
10
THE ADAMS EXPRESS COMPANY
--------------------------------------------------------------------------------
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
--------------------------------------------------------------
1988 $ 9,863 $ 879 $ 321 $11,063 $12,083
1989 10,448 1,990 864 13,302 15,618
1990 9,863 2,794 1,356 14,013 15,979
1991 12,705 4,720 2,285 19,710 20,959
1992 13,373 6,203 2,890 22,466 23,006
1993 11,952 6,876 3,027 21,855 24,184
1994 10,448 7,363 3,210 21,021 24,196
1995 12,367 10,288 4,532 27,187 31,399
1996 13,206 12,799 5,621 31,626 37,952
1997 16,173 18,153 7,744 42,070 49,597
1998 17,803 23,005 9,353 50,161 61,296
1999 22,442 33,138 12,641 68,221 81,866
2000 21,063 35,874 12,447 69,384 78,371
2001 14,263 28,871 9,139 52,273 59,000
2002 10,602 23,505 7,380 41,487 47,571
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 1988-2002. Assumes commissions
of $0.05 per share on the initial shares invested. Fees for the reinvestment of
dividends are assumed as outlined on page 21. 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]
Cumulative Cumulative
Market Value Market Value
Market Value of Shares Net Asset of Shares from
of Original from Income Value of Capital Gains
Shares Dividends Total Shares Distributions
------------ ----------- ------------ -------------
1988 $9,863 $11,063 $12,083 $10,742
1989 10,448 13,302 15,618 12,438
1990 9,863 14,013 15,979 12,657
1991 12,705 19,710 20,959 17,425
1992 13,373 22,466 23,006 19,576
1993 11,952 21,855 24,184 18,828
1994 10,448 21,021 24,196 17,811
1995 12,367 27,187 31,399 22,655
1996 13,206 31,626 37,952 26,005
1997 16,173 42,070 49,597 34,326
1998 17,803 50,161 61,296 40,808
1999 22,442 68,221 81,866 55,580
2000 21,063 69,384 78,371 56,937
2001 14,263 52,273 59,000 43,134
2002 10,602 41,487 47,571 34,107
11
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Year Ended December 31
------------------------------------------------------
2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------
Per Share Operating Performance*
Net asset value, beginning of year $16.05 $23.72 $26.85 $21.69 $19.01
--------------------------------------------------------------------------------------------------
Net investment income 0.20 0.26 0.26 0.25 0.30
Net realized gains and change
in unrealized appreciation (3.38) (6.21) (1.51) 6.71 3.90
--------------------------------------------------------------------------------------------------
Total from investment operations (3.18) (5.95) (1.25) 6.96 4.20
--------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income (0.19) (0.26) (0.22) (0.26) (0.30)
Distributions from net realized gains (0.57) (1.39) (1.63) (1.37) (1.10)
--------------------------------------------------------------------------------------------------
Total distributions (0.76) (1.65) (1.85) (1.63) (1.40)
--------------------------------------------------------------------------------------------------
Capital share repurchases 0.05 0.04 0.10 -- --
Reinvestment of distributions (0.04) (0.11) (0.13) (0.17) (0.12)
--------------------------------------------------------------------------------------------------
Total capital share transactions 0.01 (0.07) (0.03) (0.17) (0.12)
--------------------------------------------------------------------------------------------------
Net asset value, end of year $12.12 $16.05 $23.72 $26.85 $21.69
--------------------------------------------------------------------------------------------------
Per share market price, end of year $10.57 $14.22 $21.00 $22.38 $17.75
--------------------------------------------------------------------------------------------------
Total Investment Return
Based on market price (20.6)% (24.7)% 1.7% 36.1% 19.3%
Based on net asset value (19.4)% (24.7)% (4.3)% 33.6% 23.7%
Ratios/Supplemental Data
Net assets, end of year (in 000's) $1,024,810 $1,368,366 $1,951,563 $2,170,802 $1,688,080
Ratio of expenses to average net assets 0.34% 0.19% 0.24% 0.32% 0.22%
Ratio of net investment income to
average net assets 1.42% 1.33% 0.97% 1.06% 1.48%
Portfolio turnover 17.93% 19.15% 12.74% 15.94% 22.65%
Number of shares outstanding at
end of year (in 000's)* 84,536 85,233 82,292 80,842 77,815
--------------------------------------------------------------------------------------------------
* 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.
12
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
December 31, 2002
Prin. Amt.
or Shares Value (A)
-------------------------------------------------------------------
Stocks and Convertible Securities -- 84.2%
Consumer -- 11.0%
BJ's Wholesale Club, Inc. (B).......... 475,000 $ 8,692,500
Brinker International Inc. (B)......... 515,000 16,608,750
Coca-Cola Co........................... 200,000 8,764,000
Dean Foods Co. (B)..................... 477,400 17,711,540
Hershey Foods Corp..................... 70,000 4,720,800
PepsiCo, Inc........................... 440,000 18,576,800
Procter & Gamble Co.................... 170,000 14,609,800
Safeway, Inc. (B) (C).................. 415,000 9,694,400
Target Corp............................ 460,000 13,800,000
------------
113,178,590
------------
Energy -- 5.2%
BP plc ADR (C)......................... 270,000 10,975,501
Exxon Mobil Corp....................... 130,000 4,542,200
Petroleum & Resources Corporation (D).. 1,985,996 38,091,413
------------
53,609,114
------------
Financial -- 16.6%
Banking -- 10.1%
BankNorth Group, Inc................... 474,000 10,712,400
Federal Home Loan Mortgage Corp........ 160,000 9,448,000
Investors Financial Services Corp...... 495,000 13,558,050
Mellon Financial Corp.................. 420,000 10,966,200
Provident Bankshares Corp.............. 335,021 7,742,681
Wachovia Corp.......................... 380,000 13,847,200
Wells Fargo & Co....................... 500,000 23,435,000
Wilmington Trust Corp.................. 420,000 13,305,600
------------
103,015,131
------------
Insurance -- 6.5%
AMBAC Financial Group, Inc............. 400,000 22,496,000
American International Group, Inc...... 763,675 44,178,600
------------
66,674,600
------------
13
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
December 31, 2002
Prin. Amt.
or Shares Value (A)
----------------------------------------------------------------------------
Health Care -- 14.0%
Abbott Laboratories............................. 350,000 $ 14,000,000
Affymetrix Inc. (B)............................. 210,000 4,806,900
Bristol-Myers Squibb Co......................... 345,000 7,986,750
Enzon Pharmaceuticals, Inc. (B) (C)............. 100,000 1,672,000
Genentech, Inc. (B)............................. 300,000 9,948,000
GlaxoSmithKline plc ADR (C)..................... 250,360 9,378,486
HCA Inc. (C).................................... 450,000 18,675,000
Johnson & Johnson............................... 360,000 19,335,600
Lilly (Eli) & Co. (C)........................... 190,000 12,065,000
Pfizer Inc...................................... 484,500 14,811,165
Pharmacia Corp.................................. 368,900 15,420,020
Vertex Pharmaceuticals Inc. (B)................. 248,016 3,931,054
Wyeth Co........................................ 300,000 11,220,000
------------
143,249,975
------------
Industrials -- 12.1%
Black & Decker Corp............................. 300,000 12,867,000
Boeing Co....................................... 300,000 9,897,000
Canadian National Railway Co.................... 107,300 4,459,388
Corning Inc. (B) (C)............................ 1,170,000 3,872,700
General Electric Co............................. 1,182,500 28,793,875
Ingersoll-Rand Co. Ltd.......................... 162,200 6,984,332
R.R. Donnelley & Sons Co........................ 500,000 10,885,000
3M Co........................................... 145,000 17,878,500
United Parcel Service, Inc. (C)................. 80,000 5,046,400
United Technologies Corp........................ 380,000 23,537,200
------------
124,221,395
------------
Information Technology -- 9.3%
Communication Equipment -- 1.8%
Ericsson (L.M.) Telephone Co. ADR (B)(C)........ 200,000 1,348,000
Lucent Technologies Inc. (B)(C)................. 400,000 504,000
Nokia Corp. ADR (B)............................. 1,050,000 16,275,000
------------
18,127,000
------------
Computer Related -- 6.1%
BEA Systems Inc. (B)............................ 400,000 4,588,000
BMC Software Inc. (B)........................... 310,000 5,304,100
Cisco Systems, Inc. (B)......................... 1,755,000 22,990,500
Diamondcluster International Inc. (B)........... 497,500 1,562,150
Oracle Corp. (B)................................ 880,000 9,504,000
Sapient Corp. (B)............................... 1,150,000 2,357,500
Siebel Systems Inc. (B)(C)...................... 770,000 5,759,600
Sun Microsystems, Inc. (B)...................... 515,000 1,601,650
Symantec Corp. 3.00% Conv. Sub. Notes due 2006.. $500,000 704,688
Symantec Corp. (B)(C)........................... 200,000 8,090,000
------------
62,462,188
------------
14
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
December 31, 2002
Prin. Amt.
or Shares Value (A)
-----------------------------------------------------------------------------
Electronics -- 1.4%
Intel Corp....................................... 510,000 $ 7,940,700
Solectron Corp. (B)(C)........................... 2,000,000 7,100,000
------------
15,040,700
------------
Materials -- 1.9%
Albemarle Corp................................... 225,000 6,401,250
Rohm & Haas Co................................... 400,000 12,992,000
------------
19,393,250
------------
Telecom Services -- 4.9%
Alltel Corp...................................... 275,000 14,025,000
BellSouth Corp................................... 415,000 10,736,050
SBC Communications Inc........................... 595,000 16,130,450
Vodafone Group plc ADS (C)....................... 492,614 8,926,157
------------
49,817,657
------------
Utilities -- 9.2%
Black Hills Corp.(C)............................. 374,500 9,931,740
CINergy Corp..................................... 440,000 14,836,800
Duke Energy Corp. 8.25% Conv. Pfd. due 2004 (C).. 400,000 6,364,000
Duke Energy Corp................................. 355,000 6,936,700
Keyspan Corp..................................... 400,000 14,096,000
MDU Resources Group, Inc......................... 450,000 11,614,500
Northwestern Corp. (C)........................... 500,000 2,540,000
Philadelphia Suburban Corp....................... 875,000 18,025,000
TECO Energy, Inc. (C)............................ 650,000 10,055,500
------------
94,400,240
------------
Total Stocks and Convertible Securities
(Cost $769,331,362) (E).......................... 863,189,840
------------
15
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
December 31, 2002
Prin. Amt. Value (A)
-------------------------------------------------------------------------------------------------
Short-Term Investments -- 15.2%
U.S. Government Obligations -- 5.5%
U.S. Treasury Bills, 1.04-1.15%, due 2/6/03-3/27/03............... $56,805,000 $ 56,676,144
--------------
Certificates of Deposit -- 1.5%
Mercantile-Safe Deposit & Trust Co., 1.25%, due 1/23/03-3/27/03... 15,000,000 15,000,000
--------------
Commercial Paper -- 8.2%
AIG Funding, Inc., 1.30% due 1/9/03............................... 3,550,000 3,548,974
American General Finance, Inc., 1.32%, due 1/14/03-1/30/03........ 10,390,000 10,380,958
BellSouth Corp., 1.24-1.27%, due 1/16/03-1/23/03.................. 13,575,000 13,565,243
Coca-Cola Enterprises, Inc., 1.29%, due 1/21/03................... 15,000,000 14,989,250
GMAC MINT, 1.36%, due 1/7/03...................................... 15,000,000 14,996,600
General Electric Capital Corp., 1.18-1.34%, due 1/02/03-1/21/03... 15,000,000 14,990,808
Kraft Foods Inc., 1.25%, due 1/23/03.............................. 4,850,000 4,846,295
Wells Fargo Financial, Inc., 1.24%, due 1/23/03................... 6,500,000 6,495,074
--------------
83,813,202
--------------
Total Short-Term Investments
(Cost $155,489,346)............................................... 155,489,346
--------------
Total Investments -- 99.4%
(Cost $924,820,708)............................................... 1,018,679,186
Cash, receivables and other assets, less liabilities -- 0.6%.... 6,130,906
--------------
Net Assets -- 100.0%................................................ $1,024,810,092
--------------------------------------------------------------------------------
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, 2002
covering open call option contracts written was $18,323,959. In addition,
the required aggregate market value of securities segregated by the
custodian to collateralize open put option contracts written was
$23,626,250.
16
SCHEDULE OF OUTSTANDING OPTION CONTRACTS
--------------------------------------------------------------------------------
December 31, 2002
Contracts Contract
(100 shares Strike Expiration Appreciation/
each) Security Price Date (Depreciation)
--------------------------------------------------------------------------------
COVERED CALLS
250 Affymetrix Inc.................... $35 Feb 03 $ 18,999
150 American International Group, Inc. 80 Jan 03 14,999
100 American International Group, Inc. 80 Feb 03 8,100
250 American International Group, Inc. 100 Jan 04 17,499
2,000 Cisco Systems, Inc................ 25 Jan 04 90,994
100 Federal Home Loan Mortgage Corp... 70 Jan 03 11,500
150 HCA Inc........................... 55 Feb 03 28,574
250 Investors Financial Services Corp. 32.50 Jan 03 19,999
150 Johnson & Johnson................. 65 Jan 03 12,900
100 Procter & Gamble Co............... 105 Jan 03 9,550
100 Symantec Corp..................... 45 Jan 03 12,854
100 3M Co............................. 140 Jan 03 19,499
100 3M Co............................. 145 Jan 03 9,425
1,697 TECO Energy, Inc.................. 20 Feb 03 65,501
400 United Technologies Corp.......... 75 Jan 03 36,899
150 Wells Fargo & Co.................. 55 Jan 03 13,574
----- --------
6,047 390,866
----- --------
COLLATERALIZED PUTS
150 Alltel Corp....................... 35 Jan 03 17,249
250 Boeing Co......................... 25 Jan 03 21,249
250 Canadian National Railway Co...... 40 Feb 03 1,499
250 Canadian National Railway Co...... 40 Apr 03 (14,876)
250 Canadian National Railway Co...... 35 Jul 03 (11,126)
350 Coca-Cola Co...................... 40 Jan 03 29,749
250 Federal Home Loan Mortgage Co..... 50 Jan 03 31,249
150 General Electric Co............... 17.50 Jan 03 13,650
250 HCA Inc........................... 35 Jan 03 18,999
250 HCA Inc........................... 32.50 Feb 03 10,124
500 Hershey Foods Corp................ 55 Feb 03 83,097
150 Ingersoll-Rand Co. Ltd............ 37.50 Jan 03 10,725
250 Ingersoll-Rand Co. Ltd............ 40 Jan 03 17,749
250 Ingersoll-Rand Co. Ltd............ 40 Feb 03 (8,393)
25 Ingersoll-Rand Co. Ltd............ 32.50 Mar 03 1,012
20 MDU Resources Group, Inc.......... 22.50 Jan 03 1,420
50 MDU Resources Group, Inc.......... 20 Apr 03 2,550
200 Murphy Oil Corp................... 30 Jan 03 4,649
500 Murphy Oil Corp................... 32.50 Jan 03 12,624
500 Murphy Oil Corp................... 35 Jan 03 11,499
150 PepsiCo, Inc...................... 37.50 Jan 03 11,400
150 Procter & Gamble Co............... 65 Jan 03 15,750
150 Procter & Gamble Co............... 55 Apr 03 10,575
100 Rohm & Haas Co.................... 30 Jan 03 9,700
100 Rohm & Haas Co.................... 35 Jan 03 (10,401)
250 Target Corp....................... 25 Jan 03 18,999
200 United Parcel Service, Inc........ 55 Apr 03 6,099
250 Wyeth Co.......................... 30 Jan 03 21,374
----- --------
6,195 338,194
----- --------
$729,060
========
17
CHANGES IN PORTFOLIO SECURITIES
--------------------------------------------------------------------------------
During the Three Months Ended December 31, 2002
(unaudited)
Shares
------------------------------------
Held
Additions Reductions Dec. 31, 2002
---------------------------------------------------------------------------------
Albemarle Corp......................... 100,000 225,000
Alltel Corp............................ 65,000 275,000
BJ's Wholesale Club, Inc............... 50,000 475,000
Boeing Co.............................. 300,000 300,000
Canadian National Railway Co........... 107,300 107,300
Federal Home Loan Mortgage Corp........ 10,000 160,000
HCA Inc................................ 50,000 450,000
Ingersoll-Rand Co. Ltd................. 162,200 162,200
MDU Resources Group, Inc............... 450,000 450,000
Petroleum & Resources Corporation...... 72,235/(1)/ 1,985,996
Philadelphia Suburban Corp............. 10,000 875,000
R.R. Donnelley & Sons Co............... 500,000 500,000
Rohm & Haas Co......................... 40,000 400,000
Siebel Systems Inc..................... 300,000 770,000
Applera Corp.--Applied Biosystems Group 210,000 --
BellSouth Corp......................... 25,000 415,000
Black Hills Corp....................... 35,500 374,500
Ericsson (L.M.) Telephone Co. ADR...... 1,800,000 200,000/(2)/
Intel Corp............................. 180,000 510,000
Investors Financial Services Corp...... 105,000 495,000
Murphy Oil Corp........................ 50,000 --
Nokia Corp. ADR........................ 330,000 1,050,000
SBC Communications Inc................. 25,000 595,000
Symantec Corp.......................... 50,000 200,000
3M Co.................................. 10,000 145,000
United Parcel Service, Inc............. 235,000 80,000
United Technologies Corp............... 20,000 380,000
Wells Fargo & Co....................... 50,000 500,000
--------
/(1)/ Received 72,235 shares through dividend reinvestment.
/(2)/ Reverse stock split received .10 share for each share held.
18
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Board of Directors and Stockholders of The Adams Express Company:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Adams Express Company
(hereafter referred to as the "Company") at December 31, 2002, and the results
of its operations, the changes in its net assets and the financial highlights
for each of the fiscal periods presented, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material 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, 2002 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 8, 2003
-------------------------
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 Accountants: PricewaterhouseCoopers LLP
Transfer Agent, Registrar & Custodian of Securities: The Bank of New York
19
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, The Bank of New York's BuyDIRECT Purchase and Sale Plan (see
page 21).
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 penalty 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.
Can you send my dividend checks directly to my bank?
Yes, provide the Transfer Agent with your bank's name, your branch's mailing
address and your account number at your bank. (Sorry, electronic transfer of
funds is not offered at this time.)
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.
20
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.
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 this 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: Shareowner-svcs@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.
21
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*
-----------------------------------------------------------------------
1988 $ 455,825,580 42,443,262 $10.74 $.33 $ .88
1989 550,091,129 44,974,408 12.23 .47 .91
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
--------
*Adjusted to reflect the 3-for-2 stock split effected in October, 2000.
-------------------------
THE ADAMS EXPRESS COMPANY
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.
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 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 61 Columbia University. (investment companies).
--------------------------------------------------------------------------------------------------------------------------
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 78 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.
--------------------------------------------------------------------------------------------------------------------------
Edward J. Kelly, III Director One Since President and Chief Executive Two Director of Petroleum &
7 St. Paul Street, Year October Officer of Mercantile Bankshares Resources Corporation
Suite 1140 2001 Corporation. Formerly Managing (investment company),
Baltimore, MD 21202 Director with J.P. Morgan Chase Hartford Financial Services
Age 49 & Co. (investment bank and Group, Constellation Energy
global financial institution). Group, CIT Group
(commercial finance), and
CSX Corp. (transportation);
and member of Board of
Trustees of Johns Hopkins
University.
--------------------------------------------------------------------------------------------------------------------------
Thomas H. Lenagh Director One Since Financial Advisor, Chairman of Two Director of Gintel Fund,
7 St. Paul Street, Year 1968 the Board, Inrad Corp. (crystals). Clemente Strategic Fund and
Suite 1140 Formerly Chairman of the Board Petroleum & Resources
Baltimore, MD 21202 and CEO of Greiner Engineering Corporation (investment
Age 84 Inc. (formerly Systems Planning companies).
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 and Resources Corporation
Suite 1140 Petroleum & Resources (investment company).
Baltimore, MD 21202 Corporation. Formerly consultant
Age 75 to the Company and Petroleum &
Resources Corporation.
--------------------------------------------------------------------------------------------------------------------------
W. Perry Neff 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 75
--------------------------------------------------------------------------------------------------------------------------
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 72 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 Honorary Director of
7 St. Paul Street, Year 1976 Chairman External Affairs, American International
Suite 1140 American International Group, Group, Inc. and Director of
Baltimore, MD 21202 Inc. (insurance). Formerly Petroleum & Resources
Age 80 Chairman and CEO of American Corporation (investment
International Underwriters company).
Corporation. Previously
President of American
International Underwriters
Corporation-U.S./ Overseas
Operations.
------------------------------------------------------------------------------------------------------------------------
Susan C. Schwab Director One Since Dean of the School of Public Two Director of Petroleum &
7 St. Paul Street, Year 2000 Affairs at the University of Resources Corporation
Suite 1140 Maryland, College Park. (investment company) and
Baltimore, MD 21202 Formerly Director of Corporate Calpine Corp.
Age 47 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 and retired President of Resources Corporation
Suite 1140 Petroleum & Resources (investment company).
Baltimore, MD 21202 Corporation.
Age 82
------------------------------------------------------------------------------------------------------------------------
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 CEO 1989 Resources Corporation. (investment company).
Baltimore, MD 21202 Chairman
Age 56 of the
Board
Since
1991
------------------------------------------------------------------------------------------------------------------------
24
THE ADAMS EXPRESS COMPANY
--------------------------------------------------------------------------------
Board Of Directors
Enrique R. Arzac/(2)(4)/ Douglas G. Ober/(1)/
Daniel E. Emerson/(1)(3)/ Landon Peters/(1)(3)/
Edward J. Kelly, III/(1)(4)/ John J. Roberts/(2)(4)/
Thomas H. Lenagh/(3)(4)/ Susan C. Schwab/(1)(3)/
W.D. MacCallan/(2)(4)/ Robert J.M. Wilson/(1)(3)/
W. Perry Neff/(1)(2)/
--------
/(1)/ Member of Executive Committee
/(2)/ Member of Audit Committee
/(3)/ Member of Compensation Committee
/(4)/ Member of Retirement Benefits Committee
Officers
Douglas G. Ober Chairman and
Chief Executive Officer
Joseph M. Truta President
Richard F. Koloski Executive Vice President
Lawrence L. Hooper, Jr. Vice President, Secretary and
General Counsel
Maureen A. Jones Vice President and
Chief Financial Officer
Christine M. Sloan Assistant Treasurer
Geraldine H. Pare Assistant Secretary
THE ADAMS EXPRESS COMPANY
Seven St. Paul Street, Suite 1140
Baltimore, MD 21202
(410) 752-5900 or (800) 638-2479
Contact us on the Web at:
www.adamsexpress.com
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