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. Stegner Assistant Secretary
--------
Stock Data
--------
Price (3/31/02) $14.12
Net Asset Value (3/31/02) $15.81
Discount: 10.7%
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 2002
----------------
From Investment Income
(paid or declared) $0.10
From Net Realized Gains 0.06
-----
Total $0.16
=====
----------------------
2002 Dividend Payment Dates
----------------------
March 1, 2002
June 1, 2002
September 1, 2002*
December 27, 2002*
*Anticipated
[GRAPHIC]
BUILDING FOR THE FUTURE
WITH SOLID INVESTMENTS (R)
[LOGO] ADAMS
EXPRESS
COMPANY (R)
FIRST QUARTER REPORT
-------------------------------
March 31, 2002
LETTER TO STOCKHOLDERS
--------------------------------------------------------------------------------
We submit herewith the financial statements for the three months ended March
31, 2002 a schedule of investments, and summary financial information.
Net assets of the Company at March 31, 2002 were $15.81 per share on 84,916,462
shares outstanding, compared with $16.05 per share at December 31, 2001 on
85,233,262 shares outstanding. On March 1, 2002, a distribution of $0.08 per
share was paid consisting of $0.03 from 2001 long-term capital gain, $0.03 from
2001 short-term capital gain, $0.01 from 2001 investment income, and $0.01 from
2002 investment income, all taxable in 2002. A regular 2002 investment income
dividend of $0.08 per share has been declared to shareholders of record May 17,
2002, payable June 1, 2002.
Net investment income for the three months ended March 31, 2002 amounted to
$4,377,616, compared with $5,180,500 for the same period in 2001. These
earnings are equal to $0.05 and $0.06 per share, respectively, on the average
number of shares outstanding during each period.
Net capital gain realized on investments for the three months ended March 31,
2002 amounted to $4,325,777, the equivalent of $0.05 per share.
The Annual Meeting, held on March 26, 2002 in Phoenix, Arizona, was very well
attended by shareholders. The results of the voting at the Annual Meeting are
shown on page 13.
We encourage you to visit our newly-revamped website at www.adamsexpress.com,
where 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. We have given the website a new look and
have made it even easier to navigate and find up-to-date information about the
Company. 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 14 of this report.
We are pleased to announce effective March 26, 2002, the Board of Directors
elected Ms. Maureen A. Jones to Vice President and Chief Financial Officer. Ms.
Jones has been the Company's Treasurer since 1993 and was elected Vice
President and Treasurer in 1998.
-----------------
The Company is an internally-managed equity fund whose investment policy is
essentially based on the primary objectives of preservation of capital, the
attainment of reasonable income from investments and, in addition, 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
April 19, 2002
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
March 31, 2002
(unaudited)
Assets
Investments* at value:
Common stocks and convertible securities
(cost $807,493,644) $1,187,636,687
Non-controlled affiliate, Petroleum & Resources Corporation
(cost $26,585,260) 48,322,453
Short-term investments (cost $101,199,425) 101,199,425 $1,337,158,565
-----------------------------------------------------------------------------------------
Cash 81,991
Securities lending collateral 114,908,616
Receivables:
Investment securities sold 1,365,331
Dividends and interest 1,313,868
Prepaid expenses and other assets 7,204,196
-------------------------------------------------------------------------------------------------------
Total Assets 1,462,032,567
-------------------------------------------------------------------------------------------------------
Liabilities
Open written option contracts at value (proceeds $793,177) 569,610
Obligations to return securities lending collateral 114,908,616
Accrued expenses 3,665,900
-------------------------------------------------------------------------------------------------------
Total Liabilities 119,144,126
-------------------------------------------------------------------------------------------------------
Net Assets $1,342,888,441
-------------------------------------------------------------------------------------------------------
Net Assets
Common Stock at par value $1.00 per share, authorized 150,000,000 shares;
issued and outstanding 84,916,462 shares $ 84,916,462
Additional capital surplus 844,622,265
Undistributed net investment income 6,463,076
Undistributed net realized gain on investments 4,782,835
Unrealized appreciation on investments 402,103,803
-------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Stock $1,342,888,441
-------------------------------------------------------------------------------------------------------
Net Asset Value Per Share of Common Stock $15.81
-------------------------------------------------------------------------------------------------------
*See Schedule of Investments on pages 8 through 10.
The accompanying notes are an integral part of the financial statements.
2
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
Three Months Ended March 31, 2002
(unaudited)
Investment Income
Income:
Dividends:
From unaffiliated issuers $ 4,893,036
From non-controlled affiliate 95,688
Interest and other income 538,701
--------------------------------------------------------------------------------------------------------
Total income 5,527,425
--------------------------------------------------------------------------------------------------------
Expenses:
Investment research 342,286
Administration and operations 283,398
Directors' fees 57,250
Reports and stockholder communications 142,841
Transfer agent, registrar and custodian expenses 90,163
Auditing and accounting services 23,734
Legal services 7,916
Occupancy and other office expenses 55,467
Travel, telephone and postage 31,064
Other 115,690
--------------------------------------------------------------------------------------------------------
Total expenses 1,149,809
--------------------------------------------------------------------------------------------------------
Net Investment Income 4,377,616
--------------------------------------------------------------------------------------------------------
Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions 4,172,676
Net realized gain distributed by regulated investment company (non-controlled affiliate) 153,101
Change in unrealized appreciation on investments (22,889,756)
--------------------------------------------------------------------------------------------------------
Net Loss on Investments (18,563,979)
--------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $(14,186,363)
--------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
3
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
Three Months Ended Year Ended
March 31, 2002 December 31, 2001
------------------ -----------------
(unaudited)
From Operations:
Net investment income $ 4,377,616 $ 21,091,920
Net realized gain on investments 4,325,777 113,686,714
Change in unrealized appreciation on investments (22,889,756) (622,475,783)
-------------------------------------------------------------------------------------------------
Change in net assets resulting from operations (14,186,363) (487,697,149)
-------------------------------------------------------------------------------------------------
Dividends to Stockholders from:
Net investment income (1,702,660) (21,153,837)
Net realized gain from investment transactions (5,107,982) (111,923,436)
-------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (6,810,642) (133,077,273)
-------------------------------------------------------------------------------------------------
From Capital Share Transactions:
Value of shares issued in payment of exercised options and
distributions --- 68,287,544
Cost of shares purchased (Note 4) (4,480,870) (30,709,784)
-------------------------------------------------------------------------------------------------
Change in net assets from capital share transactions (4,480,870) 37,577,760
-------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (25,477,875) (583,196,662)
Net Assets:
Beginning of period 1,368,366,316 1,951,562,978
-------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $6,463,076 and $3,788,120, respectively) $1,342,888,441 $1,368,366,316
-------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
4
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
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 March 31, 2002 was $935,360,688, and net
unrealized appreciation aggregated $402,591,054, of which the related gross
unrealized appreciation and depreciation were $526,496,674 and $123,905,620,
respectively.
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 three months ended March 31, 2002 were $84,197,276 and
$103,904,124, respectively. Options may be written 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 options is limited to the premium originally paid.
Option transactions comprised an insignificant portion of operations during the
period ended March 31, 2002. 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.
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 2002 and 2001 were as follows:
Shares Amount
------------------------ -------------------------
Three months Three months
ended Year ended ended Year ended
March 31, December 31, March 31, December 31,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Shares issued in
payment of
dividends -- 4,755,400 $ -- $ 68,287,544
------------------------------------------------------------------------
Total increase -- 4,755,400 -- $ 68,287,544
------------------------------------------------------------------------
Shares purchased
(at a weighted
average discount
from net asset
value of 11.4%
and 10.0%,
respectively) (316,800) (1,814,400) (4,480,870) (30,709,784)
------------------------------------------------------------------------
------------------------------------------------------------------------
Total decrease (316,800) (1,814,400) $(4,480,870) $(30,709,784)
------------------------------------------------------------------------
Net change (316,800) 2,941,000 $(4,480,870) $ 37,577,760
------------------------------------------------------------------------
On March 31, 2002 the Company held a total of 316,800 shares of its Common
Stock at a cost of $4,480,870. There were no shares of its Common Stock held at
December 31, 2001.
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.
5
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
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, 345,567 options
were outstanding, with a weighted average exercise price of $8.7445 per share.
During the three months ended March 31, 2002, the Company granted options
including stock appreciation rights for 60,704 shares of common stock with a
weighted average exercise price of $14.3305. Stock appreciation rights relating
to 20,003 stock option shares were exercised at a weighted average market price
of $14.26 per share and the stock options relating to those rights, which had a
weighted average exercise price of $3.4284 per share, were cancelled. Stock
options and stock appreciation rights relating to 47,006 shares, and having a
weighted average exercise price of $9.7376, were cancelled. At March 31, 2002,
there were outstanding exercisable options to purchase 138,287 common shares at
$2.6042-19.5500 per share (weighted average price of $7.6773), and
unexercisable options to purchase 200,975 common shares at $2.6042-19.5500 per
share (weighted average price of $11.3244). The weighted average remaining
contractual life of outstanding exercisable and unexercisable options is 4.1705
years and 6.9333 years, respectively. Total compensation expense recognized for
the three months ended March 31, 2002 related to the stock options and stock
appreciation rights plan was $(133,089). At March 31, 2002, there were
1,252,673 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. The plan
assets, consisting of investments in individual stocks, bonds and mutual funds
were $11,181,316. 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
long-term expected rate of return on plan assets was 8.0%. The projected
benefit obligation as of March 31, 2002 was $6,099,942. Prepaid pension cost
included in other assets at March 31, 2002 was $6,235,429.
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 March 31, 2002 for employees and
former employees of the Company was $3,197,628. Aggregate remuneration paid or
accrued during the three months ended March 31, 2002 to officers and directors
amounted to $230,422, which includes a credit of $133,089 for stock options and
stock appreciation rights.
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 March 31, 2002, the Company had securities on loan of $110,684,865 and held
collateral of $114,908,616.
-----------------
Forward-Looking Statements
This report contains "forward-looking statements" within the meaning of the
Securities Act of 1933 and the Securities and 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.
6
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Three Months Ended
--------------------
(unaudited)
Year Ended December 31
March 31, March 31, -----------------------------------
2002 2001 2001 2000 1999 1998 1997
--------- --------- ------- ------ ------ ------ ------
Per Share Operating Performance*
Net asset value, beginning of period $16.05 $23.72 $23.72 $26.85 $21.69 $19.01 $15.80
------------------------------------------------------------------------------------------------
Net investment income 0.05 0.06 0.26 0.26 0.25 0.30 0.29
Net realized gains and change in
unrealized appreciation and other
changes (0.22) (4.22) (6.32) (1.63) 6.54 3.78 4.22
------------------------------------------------------------------------------------------------
Total from investment operations (0.17) (4.16) (6.06) (1.37) 6.79 4.08 4.51
------------------------------------------------------------------------------------------------
Capital share repurchases 0.01 0.01 0.04 0.09 -- -- --
------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income (0.02) (0.04) (0.26) (0.22) (0.26) (0.30) (0.29)
Distributions from net realized gains (0.06) (0.04) (1.39) (1.63) (1.37) (1.10) (1.01)
------------------------------------------------------------------------------------------------
Total distributions (0.08) (0.08) (1.65) (1.85) (1.63) (1.40) (1.30)
------------------------------------------------------------------------------------------------
Net asset value, end of period $15.81 $19.49 $16.05 $23.72 $26.85 $21.69 $19.01
------------------------------------------------------------------------------------------------
Per share market price, end of period $14.12 $17.52 $14.22 $21.00 $22.38 $17.75 $16.13
Total Investment Return
Based on market price (0.1)% (16.3)% (24.7)% 1.7% 36.1% 19.3% 33.1%
Based on net asset value (0.9)% (17.5)% (24.7)% (4.3)% 33.6% 23.7% 30.7%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $1,342,888 $1,596,852 $1,368,366 $1,951,563 $2,170,802 $1,688,080 $1,424,170
Ratio of expenses to average net assets 0.34%+ 0.21%+ 0.19% 0.24% 0.32% 0.22% 0.39%
Ratio of net investment income to
average net assets 1.31%+ 1.14%+ 1.33% 0.97% 1.06% 1.48% 1.61%
Portfolio turnover 26.96%+ 33.65%+ 19.15% 12.74% 15.94% 22.65% 17.36%
Number of shares outstanding at
end of period (in 000's)* 84,916 81,927 85,233 82,292 80,842 77,815 74,924
--------
* Prior years have been adjusted to reflect the 3-for-2 stock split effected in
October, 2000.
+ Ratios presented on an annualized basis.
7
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
March 31, 2002
(unaudited)
Prin. Amt.
or Shares Value (A)
- ---------- ------------
Stocks and Convertible Securities -- 92.0%
Consumer -- 12.2%
BJ's Wholesale Club, Inc. 425,000 $ 18,997,500
Brinker International Inc. 500,000 16,205,000
Coca-Cola Co. 170,000 8,884,200
Dean Foods Co. 238,700 18,074,364
Hershey Foods Corp. 255,000 17,477,700
PepsiCo, Inc. 400,000 20,600,000
Procter & Gamble Co. 170,000 15,315,300
Safeway, Inc. 400,000 18,008,000
Target Corp. 435,000 18,757,200
Tiffany & Co. 330,000 11,731,500
------------
164,050,764
------------
Energy -- 5.7%
BP plc ADR (B) 270,000 14,337,001
Exxon Mobil Corp. 316,836 13,886,922
Petroleum & Resources
Corporation (C) 1,913,761 48,322,453
------------
76,546,376
------------
Financial -- 19.2%
Banking -- 12.6%
BankNorth Group, Inc. 474,000 12,489,900
Citigroup Inc. 285,000 14,113,206
Federal Home Loan Mortgage
Corp. 345,000 21,862,650
Greenpoint Financial Corp. 435,000 19,009,500
Investors Financial Services
Corp. 300,000 22,815,000
Mellon Financial Corp. 420,000 16,207,800
Provident Bankshares Corp. 335,021 8,040,515
Wachovia Corp. 380,000 14,090,400
Wells Fargo & Co. 550,000 27,170,000
Wilmington Trust Corp. 210,000 14,135,100
------------
169,934,071
------------
Insurance -- 6.6%
AMBAC Financial Group, Inc. 569,400 33,634,458
American International Group,
Inc. 759,375 54,781,314
------------
88,415,772
------------
Prin. Amt.
or Shares Value (A)
- ---------- ------------
Health Care -- 15.8-%
Abbott Laboratories 350,000 $ 18,410,000
Affymetrix Inc. (B)(D) 210,000 6,085,800
Applera Corp. - Applied
Biosystems Group 210,000 4,693,500
Bristol-Myers Squibb Co. 300,000 12,147,000
Caliper Technologies (B)(D) 225,000 2,918,250
Elan Corp., plc ADR (D) 200,000 2,782,000
Enzon, Inc. (B) 100,000 4,429,000
Genentech, Inc. (D) 300,000 15,135,000
GlaxoSmithKline plc ADR (B) 250,360 11,766,920
HCA Inc. (B) 390,000 17,191,200
Human Genome Sciences
Inc. (D) 200,000 4,358,000
Johnson & Johnson (B) 360,000 23,382,000
Lilly (Eli) & Co. 190,000 14,478,000
Merck & Co., Inc. 250,000 14,395,000
Pfizer Inc. 415,000 16,492,100
Pharmacia Corp. 368,900 16,630,012
Vertex Pharmaceuticals Inc. (D) 248,016 6,909,726
Wyeth Co. 300,000 19,695,000
------------
211,898,508
------------
Industrials -- 12.9%
Black & Decker Corp. 300,000 13,962,000
Canadian National Railway Co.
5.25% Conv. Pfd. QUIDS
due 2029 170,000 11,264,200
Canadian National Railway
Co. (B) 85,000 4,246,600
Corning Inc. (B) 1,170,000 8,915,400
General Electric Co. (B) 1,300,000 48,685,000
ITT Industries 200,000 12,608,000
Minnesota Mining &
Manufacturing Co. 215,000 24,727,150
United Parcel Service, Inc. (B) 315,000 19,152,000
United Technologies Corp. 400,000 29,680,000
------------
173,240,350
------------
8
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
March 31, 2002
(unaudited)
Prin. Amt
or Shares Value (A)
--------- -----------
Information Technology -- 12.7%
Communication Equipment -- 3.4%
Ericsson (L.M.) Telephone Co.
ADR 2,000,000 $ 8,360,000
Lucent Technologies Inc. (B) 400,000 1,892,000
Motorola, Inc. (B) 495,622 7,037,832
Nokia Corp. ADR (B) 1,380,000 28,621,200
-----------
45,911,032
-----------
Computer Related -- 6.6%
BEA Systems Inc. (B)(D) 400,000 5,484,000
BMC Software Inc. (D) 310,000 6,029,500
Cisco Systems, Inc. (D) 1,755,000 29,712,150
DiamondCluster International
Inc. (B)(D) 497,500 6,427,700
Oracle Corp. (D) 880,000 11,264,000
Sapient Corp. (D) 1,150,000 5,462,500
Siebel Systems Inc. (D) 255,000 8,315,550
Sun Microsystems Inc. (D) 515,000 4,542,300
Symantec Corp. 3.00% Conv.
Sub. Notes due 2006 500,000 701,250
Symantec Corp. (B)(D) 250,000 10,302,500
-----------
88,241,450
-----------
Electronics -- 2.7%
Intel Corp. 690,000 20,982,900
Solectron Corp. (B)(D) 2,000,000 15,600,000
-----------
36,582,900
-----------
Materials -- 1.2%
Engelhard Corp. 175,000 5,430,250
Rohm & Haas Co. 260,000 10,990,200
-----------
16,420,450
-----------
Prin. Amt.
or Shares Value (A)
----------- --------------
Telecom Services -- 4.7%
Cellular and Wireless -- 1.5%
Nextel Communications Inc.
5.25% Conv. Notes
due 2010 (E) $10,000,000 $ 5,075,000
Nextel Communications
Inc. (B)(D) 1,040,000 5,595,200
Vodafone Group plc
ADS (B) 492,614 9,078,867
--------------
19,749,067
--------------
Telephone -- 3.2%
BellSouth Corp. 440,000 16,218,400
SBC Communications Inc. (B) 700,000 26,208,000
--------------
42,426,400
--------------
Utilities -- 7.6%
Black Hills Corp. 450,000 15,066,000
CINergy Corp. 440,000 15,730,000
Duke Energy Corp. 8.25%
Conv. Pfd. due 2004 400,000 10,284,000
Duke Energy Corp. (B) 355,000 13,419,000
Keyspan Corp. 400,000 14,556,000
Northwestern Corp. 500,000 11,000,000
Philadelphia Suburban
Corp. 165,000 3,877,500
TECO Energy, Inc. 650,000 18,609,500
--------------
102,542,000
--------------
Total Stocks and Convertible Securities
(Cost $834,078,904) (F) 1,235,959,140
--------------
9
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
March 31, 2002
(unaudited)
Prin. Amt. Value (A)
----------- -----------
Short-Term Investments -- 7.5%
U.S. Government Obligations -- 1.9%
U.S. Treasury Bills,
1.65%, due 5/23/02 $25,000,000 $24,939,694
-----------
Certificates of Deposit -- 0.7%
Mercantile-Safe Deposit &
Trust Co., 1.80%, due
4/9/02 10,000,000 10,000,000
-----------
Commercial Paper -- 4.9%
AIG Funding Inc., 1.80%,
due 4/9/02-4/11/02 6,450,000 6.447,180
ChevronTexaco Inc., 1.78-
1.79%, due 4/16/02-
4/18/02 15,000,000 14,987,839
GMAC MINT, 1.88-1.90%,
due 4/4/02-5/7/02 12,975,000 12,963,299
General Electric Capital
Corp., 1.79-1.80%,
due 4/2/02-4/23/02 13,280,000 13,272,030
Prin. Amt. Value (A)
----------- --------------
IBM Corp., 1.73%, due
4/11/02 $ 3,610,000 $ 3,608,265
Wells Fargo Financial, Inc.,
1.82%, due 4/25/02-
4/30/02 15,000,000 14,981,118
--------------
66,259,731
--------------
Total Short-Term Investments
(Cost $101,199,425) 101,199,425
--------------
Total Investments
(Cost $935,278,329) 1,337,158,565
Cash, receivables and other
assets, less liabilities 5,729,876
--------------
Net Assets -- 100.0% $1,342,888,441
==============
--------------------------------------------------------------------------------
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) All or a portion of these securities is on loan. See Note 7 to Financial
Statements.
(C) Non-controlled affiliate, a closed-end sector fund.
(D) Presently non-dividend paying.
(E) Restricted security (Nextel Communications Inc. 5.25% Conv. Notes due 2010,
acquired 1/21/00, cost $10,000,000).
(F) The aggregate market value of stocks held in escrow at March 31, 2002
covering open call option contracts written was $4,610,450. In addition,
the aggregate market value of securities segregated by the custodian
required to collateralize open put option contracts written was $3,025,000.
10
PRINCIPAL CHANGES IN PORTFOLIO SECURITIES
--------------------------------------------------------------------------------
During the Three Months Ended March 31, 2002
(unaudited)
Shares
---------------------------------------
Held
Additions Reductions March 31, 2002
--------- ---------- --------------
BEA Systems, Inc................................................... 30,000 400,000
BJ's Wholesale Club, Inc........................................... 87,500 425,000
Brinker International, Inc......................................... 475,000 500,000
Bristol-Myers Squibb Co............................................ 20,000 300,000
CINergy Corp....................................................... 140,000 440,000
Dean Foods Co...................................................... 110,000 238,700
PepsiCo, Inc....................................................... 65,000 400,000
Pfizer Inc......................................................... 115,000 415,000
Rohm & Haas Co..................................................... 260,000 260,000
Safeway, Inc....................................................... 330,000 400,000
Siebel Systems Inc................................................. 60,000 255,000
Symantec Corp...................................................... 125,000/(1)/ 30,000 250,000
Target Corp........................................................ 435,000 435,000
Black Hills Corp................................................... 105,000 450,000
Cisco Systems, Inc................................................. 80,000 1,755,000
Citigroup Inc...................................................... 116,023 285,000
Engelhard Corp..................................................... 355,000 175,000
Genentech, Inc..................................................... 50,000 300,000
General Electric Co................................................ 300,000 1,300,000
Investors Financial Services Corp.................................. 187,500 300,000
ITT Industries..................................................... 155,000 200,000
Ivex Packaging Corp................................................ 520,000 --
Minnesota Mining & Manufacturing Co................................ 70,000 215,000
Mirant Corp........................................................ 400,000 --
Oracle Corp........................................................ 300,000 880,000
Qwest Communications International, Inc. 5.75% TRENDS Pfd. due 2003 538,000 --
RCN Corp........................................................... 94,000 --
Time Warner Telecom Inc............................................ 404,500 --
Tiffany & Co....................................................... 20,000 330,000
--------
(1) By stock split.
11
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*
----------- ---------- ------------ --------- -------------- -------------
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
March 31, 2002 (unaudited) 1,342,888,441 84,916,462 15.81 .10+ .06
--------
* 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
Website: www.adamsexpress.com
E-mail: contact@adamsexpress.com
Telephone: (410) 752-5900 or (800) 638-2479
Counsel: Chadbourne & Parke L.L.P.
Independent Accountants: PricewaterhouseCoopers LLP
Transfer Agent, Registrar & Custodian of Securities
The Bank of New York
101 Barclay Street
New York, NY 10286
The Bank's Shareholder Relations Department: (877) 260-8188
E-mail: Shareowner-svcs@bankofny.com
12
ANNUAL MEETING OF STOCKHOLDERS
--------------------------------------------------------------------------------
The Annual Meeting of Stockholders was held on March 26, 2002. For those
nominated, the following votes were cast for directors:
votes
votes for withheld
---------- ---------
(A) Enrique R. Arzac: 71,572,617 1,332,360
(B) Daniel E. Emerson: 71,306,905 1,598,072
(C) Edward J. Kelly, III: 71,627,785 1,277,192
(D) Thomas H. Lenagh: 71,009,025 1,895,952
(E) W.D. MacCallan: 71,381,711 1,523,286
(F) W. Perry Neff: 71,413,563 1,491,563
(G) Douglas G. Ober: 71,519,852 1,385,125
(H) Landon Peters: 71,452,424 1,452,553
(I) John J. Roberts: 71,304,701 1,600,276
(J) Susan C. Schwab: 71,618,103 1,286,874
(K) Robert J.M. Wilson: 71,241,929 1,663,048
A proposal to approve and ratify the selection of PricewaterhouseCoopers LLP as
the firm of independent accountants of the Company for 2002 was approved with
71,735,554 votes for, 596,061 votes against, and 573,362 votes abstaining.
-----------------
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
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 Transfer Agent
The Adams Express Company The Bank of New York
Lawrence L. Hooper, Jr., Shareholder Relations
Vice President, Secretary Dept.-8W
and General Counsel P.O. Box 11258
Seven St. Paul Church Street Station
Street, Suite 1140 New York, NY 10286
Baltimore, MD 21202 (877) 260-8188
(800) 638-2479 Website:
Website: http://stock.bankofny.com
www.adamsexpress.com E-mail:
E-mail: Shareowner-svcs@
contact@adamsexpress.com bankofny.com
*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.
14