ADAMS EXPRESS COMPANY - FORM N-30B - MARCH 31, 2014

 

LETTER TO SHAREHOLDERS

 

 

 

 

We are pleased to present the summary financial information of The Adams Express Company (the Fund) for the three months ended March 31, 2014.

 

Net assets of the Fund at March 31, 2014 were $15.18 per share on 94,048,123 shares outstanding, compared with $15.09 per share at December 31, 2013 on 94,223,617 shares outstanding. On March 3, 2014, a distribution of $0.05 per share was paid, consisting of $0.01 of net investment income, $0.01 short-term capital gain, and $0.02 long-term capital gain, realized in 2013, and $0.01 of net investment income realized in 2014, all taxable in 2014. On April 10, 2014, an investment income dividend of $0.05 per share was declared to shareholders of record May 14, 2014, payable June 2, 2014. These constitute the first two payments toward our annual 6% minimum distribution rate commitment.

 

Net investment income for the three months ended March 31, 2014 amounted to $4,324,530, compared with $3,914,552 for the same three-month period in 2013. These earnings are equal to $0.05 and $0.04 per share, respectively.

 

Net capital gain realized on investments for the three months ended March 31, 2014 amounted to $41,897,696, or $0.45 per share.

 

For the three months ended March 31, 2014, the total return on the net asset value ("NAV") (with dividends and capital gains reinvested) of the Fund's shares was 1.0%. The total return on the market price of the Fund's shares for the period was (0.3)%. These compare to a 1.8% total return for the Standard& Poor's 500 Composite Stock Index ("S&P 500") and a 1.7% total return for the Lipper Large-Cap Core Mutual Funds Average over the same time period.

 

For the twelve months ended March 31, 2014, the Fund's total return on NAV was 19.3% and on market price was 18.0%. Comparable figures for the S&P 500 and the Lipper Large-Cap Core Mutual Fund Average were 21.9% and 21.2%, respectively.

 

The Fund repurchased 190,800 shares of its common stock during the three months ended March 31, 2014. The shares were repurchased at an average price of $12.87 and a weighted average discount to NAV of 13.9%.

 

 

 

Investors can find the daily NAV per share, the market price, the discount/premium to the NAV per share of the Fund, and quarterly changes in portfolio securities on our website at www.adamsexpress.com. Also available there are a history of the Fund, historical financial information, links for electronic delivery of shareholder reports, and other useful content.

 

By order of the Board of Directors,

LOGO

 

Mark E. Stoeckle

Chief Executive Officer

 

April 10, 2014

SUMMARY FINANCIAL INFORMATION

 

 

 

(unaudited)

 

       2014        2013  
At March 31:          

Net asset value per share

      $ 15.18         $ 13.58   

Market price per share

      $ 12.98         $ 11.74   

Shares outstanding

        94,048,123           93,098,844   

Total net assets

      $ 1,427,592,834         $ 1,264,090,765   

Unrealized appreciation on investments

      $ 360,832,391         $ 261,436,736   

For the three months ended March 31:

          

Net investment income

      $ 4,324,530         $ 3,914,552   

Net realized gain/(loss)

      $ 41,897,696         $ (9,723,598 ) 

Cost of shares repurchased

      $ 2,455,232         $ --         

Shares repurchased

        190,800           --         

Total return (based on market price)

        (0.3)%           11.3%   

Total return (based on net asset value)

        1.0%           9.7%   

Key ratios:

          

Net investment income to average net assets (annualized)

        1.23%           1.29%   

Expenses to average net assets (annualized)

        0.64%           0.75%   

Portfolio turnover (annualized)

        63.6%           42.4%   

Net cash & short-term investments to net assets

        0.7%           0.9%   

 

 

FIVE YEAR DISTRIBUTION HISTORY

 

 

 

(unaudited)

 

        Year        

    Income
Dividends
Per Share		      Short-Term
Capital Gains
Distributions
Per Share		      Long-Term
Capital Gains
Distributions
Per Share		      Total
Dividends and
Distributions
Per Share		      Annual
Distribution
Rate*		  

2009

    $  0.15       $  0.05       $  0.25       $  0.45         5.2 % 

2010

      0.14         0.09         0.28         0.51         5.1   

2011

      0.15         0.07         0.43         0.65         6.1   

2012

      0.18         0.10         0.39         0.67         6.3   

2013

      0.22         0.17         0.45         0.84         7.1   

 

* The annual distribution rate is the total dividends and distributions per share divided by the Fund's average month-end stock price. For years prior to 2011, the average month-end stock price is determined for the calendar year. For 2011 and later, the average month-end stock price is determined for the twelve months ended October 31, which is consistent with the calculation used for the annual 6% minimum distribution rate commitment adopted in September 2011.

 

2

PORTFOLIO REVIEW

 

 

 

March 31, 2014

(unaudited)

 

 

Ten Largest Equity Portfolio Holdings

        Market Value        % of Net Assets  

Petroleum & Resources Corp.*

      $ 61,054,730           4.3 % 

Apple Inc.

        50,077,842           3.5   

Google Inc. (Class A)

        39,565,105           2.8   

JPMorgan Chase & Co.

        36,426,000           2.6   

Wells Fargo & Co.

        35,763,060           2.5   

Pfizer Inc.

        33,844,844           2.4   

Walt Disney Co.

        30,234,432           2.1   

Gilead Sciences, Inc.

        29,336,040           2.1   

Union Pacific Corp.

        29,181,130           2.0   

Chevron Corp.

        27,943,850           2.0   
    

 

 

       

 

 

  

     Total                

      $ 373,427,033           26.3 % 
    

 

 

       

 

 

  

 

*Non-controlled affiliated closed-end fund

          

 

 

Sector Weightings

 

 

LOGO

 

3

SCHEDULE OF INVESTMENTS

 

 

 

March 31, 2014

(unaudited)

 

    Shares     Value (A)  

Common Stocks — 99.3%

    

Consumer Discretionary — 12.0%

    

Bed Bath & Beyond Inc. (B)

     120,200      $ 8,269,760   

BorgWarner Inc.

     137,000        8,421,390   

Comcast Corp. (Class A)

     452,300        22,624,046   

Dollar General Corp. (B)

     271,400        15,057,272   

GNC Holdings, Inc.

     189,000        8,319,780   

Hanesbrands Inc.

     152,000        11,624,960   

Lowe's Companies, Inc.

     550,000        26,895,000   

Magna International Inc.

     126,000        12,135,059   

McDonald's Corp.

     180,000        17,645,400   

Walt Disney Co.

     377,600        30,234,432   

Whirlpool Corp.

     66,000        9,864,360   
   

 

 

  
      171,091,459   
   

 

 

  

Consumer Staples — 9.4%

    

Bunge Ltd.

     100,000        7,951,000   

Coca-Cola Co.

     300,000        11,598,000   

CVS/Caremark Corp.

     314,000        23,506,040   

Diageo plc ADR

     59,400        7,400,646   

General Mills Inc.

     252,400        13,079,368   

PepsiCo, Inc. (F)

     263,500        22,002,250   

Philip Morris International Inc.

     262,800        21,515,436   

Procter & Gamble Co.

     175,000        14,105,000   

Unilever plc ADR

    306,250        13,101,375   
   

 

 

  
      134,259,115   
   

 

 

  

Energy — 10.1%

    

Anadarko Petroleum Corp.

     105,400        8,933,704   

Chevron Corp.

     235,000        27,943,850   

EOG Resources, Inc.

     68,600        13,457,262   

Exxon Mobil Corp. (E) (F)

     105,000        10,256,400   

Halliburton Co.

     147,801        8,704,001   

Petroleum & Resources Corp. (C)

     2,186,774        61,054,730   

Schlumberger Ltd.

     138,300        13,484,250   
   

 

 

  
      143,834,197   
   

 

 

  

Financials — 16.6%

    

Allstate Corp.

     392,000        22,179,360   

American Tower Corp.

     105,000        8,596,350   

Berkshire Hathaway Inc. (Class B) (B)

     65,200        8,148,044   

Capital One Financial Corp.

     245,000        18,904,200   

Citigroup Inc.

     540,000        25,704,000   

iShares US Real Estate ETF

     147,722        9,996,348   

JPMorgan Chase & Co.

     600,000        36,426,000   

Lincoln National Corp.

     270,000        13,680,900   

NASDAQ OMX Group, Inc.

     360,000        13,298,400   

Prudential Financial, Inc.

     195,000        16,506,750   

Simon Property Group, Inc.

     89,500        14,678,000   

SLM Corp.

     520,000        12,729,600   

Wells Fargo & Co.

     719,000        35,763,060   
   

 

 

  
      236,611,012   
   

 

 

  

Health Care — 13.9%

    

AbbVie Inc.

     280,000        14,392,000   

Aetna Inc.

     252,000        18,892,440   

Allergan, Inc.

     120,000        14,892,000   

Biogen IDEC Inc. (B)

     47,000        14,375,890   

Celgene Corp. (B)

     120,000        16,752,000   

Covidien plc

     120,000        8,839,200   

Gilead Sciences, Inc. (B)

     414,000        29,336,040   

McKesson Corp.

    116,000        20,482,120   

Merck & Co., Inc.

     480,000        27,249,600   

Pfizer Inc.

     1,053,700        33,844,844   
   

 

 

  
      199,056,134   
   

 

 

  

Industrials — 10.9%

    

Boeing Co.

     205,000        25,725,450   

Delta Air Lines, Inc.

     205,000        7,103,250   

Dover Corp.

     176,000        14,388,000   

Eaton Corp. plc

     205,000        15,399,600   

Emerson Electric Co.

     150,000        10,020,000   

General Electric Co.

     246,500        6,381,885   

Honeywell International Inc.

     287,500        26,668,500   

Union Pacific Corp.

     155,500        29,181,130   

United Technologies Corp.

     174,500        20,388,580   
   

 

 

  
      155,256,395   
   

 

 

  

Information Technology — 18.5%

  

  

Analog Devices, Inc.

     136,100        7,232,354   

Apple Inc. (F)

     93,300        50,077,842   

Automatic Data Processing, Inc.

     164,000        12,670,640   

Cisco Systems, Inc.

     625,000        14,006,250   

Facebook, Inc. (Class A) (B)

     187,000        11,264,880   

Google Inc. (Class A) (B)

     35,500        39,565,105   

Intel Corp.

     435,000        11,227,350   

International Business Machines Corp.

     42,800        8,238,572   

MasterCard, Inc. (Class A)

     230,000        17,181,000   

Microsoft Corp.

     618,800        25,364,612   

NetApp, Inc.

     161,700        5,966,730   

Oracle Corp.

     526,000        21,518,660   

QUALCOMM Inc.

     151,400        11,939,404   

Seagate Technology plc

     199,000        11,175,840   

Visa Inc.

     80,500        17,376,730   
   

 

 

  
      264,805,969   
   

 

 

  

Materials — 3.3%

    

CF Industries Holdings, Inc.

     38,531        10,042,720   

Eastman Chemical Co.

     85,000        7,327,850   

LyondellBasell Industries  N.V. (Class A)

     238,000        21,167,720   

Praxair, Inc.

    67,500        8,840,475   
   

 

 

  
      47,378,765   
   

 

 

  

 

4

SCHEDULE OF INVESTMENTS (CONTINUED)

 

 

 

March 31, 2014

(unaudited)

 

        
Principal/
Shares		     Value (A)  

Telecommunication Services — 2.0%

    

SBA Communications Corp. (Class A) (B)

     90,000      $ 8,186,400   

Verizon Communications Inc.

     420,000        19,979,400   
   

 

 

  
      28,165,800   
   

 

 

  

Utilities — 2.6%

    

AGL Resources Inc.

     145,000        7,099,200   

Edison International

     148,000        8,378,280   

NextEra Energy, Inc.

     81,000        7,745,220   

NRG Energy, Inc.

     238,000        7,568,400   

Pinnacle West Capital Corp.

     115,000        6,285,900   
   

 

 

  
      37,077,000   
   

 

 

  

Total Common Stocks
(Cost $1,056,697,915)

   

     1,417,535,846   
   

 

 

  

Short-Term Investments — 0.5%

  

  

Money Market Account — 0.5%

  

  

M&T Bank, 0.15%

   $ 6,741,619        6,741,619   
   

 

 

  

Money Market Funds — 0.0%

  

  

Fidelity Institutional Money Market - Money Market Portfolio (Institutional Class), 0.09% (D)

     100,000        100,000   
   

 

 

  
   

Total Short-Term Investments
(Cost $6,841,619)

       6,841,619   
   

 

 

  

Total Investments — 99.8%
(Cost $1,063,539,534)

       1,424,377,465   

Cash, receivables, prepaid expenses and
other assets, less liabilities — 0.2%

   

     3,215,369   
   

 

 

  

Net Assets — 100.0%

     $ 1,427,592,834   
   

 

 

  

 

Notes:

(A) Common stocks are listed on the New York Stock Exchange or the NASDAQ and are valued at the last reported sale price on the day of valuation.
(B) 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) Rate presented is as of period-end and represents the annualized yield earned over the previous seven days.
(E) All or a portion of this security is pledged to cover open written call option contracts. Aggregate market value of such pledged securities is $390,720.
(F) All or a portion of this security is pledged to collateralize open written put option contracts with an aggregate market value to deliver upon exercise of $300,000.

 

 

 

This report is transmitted to the shareholders of The Adams Express Company for their information. It is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in the report. The rates of return will vary and the principal value of an investment will fluctuate. Shares, if sold, may be worth more or less than their original cost. Past performance is no guarantee of future investment results.

 

5

OTHER INFORMATION

 

 

 

Dividend Payment Schedule

 

The Fund presently pays dividends four times a year, as follows: (a) three interim distributions on or about March 1, June 1, and September 1, and (b) a "year-end" distribution, payable in late December, consisting of the estimated balance of the net investment income for the year, the net realized capital gains earned through October 31 and, if applicable, a return of capital. Shareholders may elect to receive the year-end distribution in stock or cash. In connection with this distribution, all shareholders of record are sent a dividend announcement notice and an election card in mid-November. Shareholders holding shares in "street" or brokerage accounts may make their election by notifying their brokerage house representative.

 

Statement on Quarterly Filing of Complete Portfolio Schedule

 

In addition to publishing its complete schedule of portfolio holdings in the First and Third Quarter Reports to shareholders, the Fund also files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the Commission's website: www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room, and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also posts a link to its Forms N-Q on its website: www.adamsexpress.com under the headings "Investment Information", "Financial Reports" and then "SEC Filings".

 

Proxy Voting Policies and Record

 

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities owned by the Fund and the Fund's proxy voting record for the 12-month period ended June 30, 2013 are available (i) without charge, upon request, by calling the Fund's toll free number at (800) 638-2479; (ii) on the Fund's website: www.adamsexpress.com under the headings "About Adams Express" and "Corporate Information"; and (iii) on the Securities and Exchange Commission's website: www.sec.gov.

 

Short Sales of Securities

 

The Board of Directors has approved a change to the Fund's investment policy on making short sales of securities that expands the Fund's practice on when it may engage in short selling. With the change, the Fund may engage in short sales as part of an investment strategy that involves "paired trades" in which the Fund opportunistically sells short a security and takes a corresponding long position in another security in order to take advantage of market inefficiencies in the pricing of the two securities.

 

6

OTHER INFORMATION (CONTINUED)

 

 

 

Electronic Delivery of Shareholder Reports

 

The Fund offers shareholders the benefits and convenience of viewing Quarterly and Annual Reports and other shareholder materials on-line. With your consent, paper copies of these documents will cease with the next mailing and will be provided via e-mail. Reduce paper mailed to your home and help lower the Fund's printing and mailing costs. To enroll, please visit the following websites:

 

Registered shareholders with AST: www.amstock.com/main

 

Shareholders using brokerage accounts: http://enroll.icsdelivery.com/ADX

 

Privacy Policy

 

In order to conduct its business, the Fund, through its transfer agent, American Stock Transfer & Trust Company, collects and maintains certain nonpublic personal information about our shareholders of record with respect to their transactions in shares of our securities. This information includes the shareholder's address, tax identification or Social Security number, share balances, and dividend elections. We do not collect or maintain personal information about shareholders whose shares of our securities are held in "street name" by a financial institution such as a bank or broker.

 

We do not disclose any nonpublic personal information about you, our other shareholders or our former shareholders to third parties unless necessary to process a transaction, service an account or as otherwise permitted by law.

 

To protect your personal information internally, we restrict access to nonpublic personal information about our shareholders to those employees who need to know that information to provide services to our shareholders. We also maintain certain other safeguards to protect your nonpublic personal information.

 

 

 

The Adams Express Company

 

Seven St. Paul Street, Suite 1140, Baltimore, MD 21202

(410) 752-5900          (800) 638-2479

Website: www.adamsexpress.com

E-mail: contact@adamsexpress.com

 

 

 

Counsel: Chadbourne & Parke LLP

Independent Registered Public Accounting Firm: PricewaterhouseCoopers LLP

Custodian of Securities: Brown Brothers Harriman & Co.

Transfer Agent & Registrar: American Stock Transfer & Trust Company, LLC

Stockholder Relations Department

6201 15th Avenue

Brooklyn, NY 11219

(877) 260-8188

Website: www.amstock.com

E-mail: info@amstock.com

 

THE ADAMS EXPRESS COMPANY

 

 

Board of Directors

 

Enrique R. Arzac 1,3,5

   Roger W. Gale 2,4

Phyllis O. Bonanno 1,3,5

   Kathleen T. McGahran 1,2,3,5,6

Kenneth J. Dale 2,4

  

Craig R. Smith 2,3

Frederic A. Escherich 1,4,5

   Mark E. Stoeckle 1
1. Member of Executive Committee
2. Member of Audit Committee
3. Member of Compensation Committee
4. Member of Retirement Benefits Committee
5. Member of Nominating and Governance Committee
6. Chair of the Board

 

Officers

 

Mark E. Stoeckle

  

Chief Executive Officer

James P. Haynie, CFA

  

President

Nancy J.F. Prue, CFA

  

Executive Vice President

Brian S. Hook, CFA, CPA

  

Vice President, Chief Financial Officer and Treasurer

Lawrence L. Hooper, Jr.

  

Vice President, General Counsel and Secretary

David R. Schiminger, CFA

  

Vice President-Research

D. Cotton Swindell, CFA

  

Vice President-Research

Christine M. Sloan, CPA

  

Assistant Treasurer

 

Stock Data

 

Market Price (3/31/14)

    $ 12.98   

Net Asset Value (3/31/14)

    $ 15.18   

Discount:

      14.5%   

 

New York Stock Exchange ticker symbol: ADX

NASDAQ Quotation Symbol for NAV: XADEX

 

Distributions in 2014

 

From Investment Income (paid or declared)

    $ 0.07   

From Net Realized Gains

      0.03   
  

 

 

  

Total

    $ 0.10   
  

 

 

  

 

2014 Dividend Payment Dates

 

March 3, 2014

June 2, 2014

September 2, 2014*

December 29, 2014*

 

*Anticipated