LETTER TO STOCKHOLDERS
--------------------------------------------------------------------------------
We submit herewith the financial statements for the nine months ended September
30, 2002. Also provided are a schedule of investments, and summary financial
information.
Net assets of the Company at September 30, 2002 were $11.89 per share on
82,787,962 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. Investment income
dividends of $0.08 per share were paid on June 1, 2002 and September 1, 2002.
Net investment income for the nine months ended September 30, 2002 amounted to
$12,692,865, compared with $16,690,050 for the same period in 2001. These
earnings are equal to $0.15 and $0.20 per share, respectively, on the average
number of shares outstanding during each period.
Net capital gain realized on investments for the nine months ended September
30, 2002 amounted to $30,363,944, the equivalent of $0.37 per share.
Current and potential shareholders can find information about the Company,
including the daily net asset value (NAV) per share, the market price, and the
discount/premium to the NAV, at its site on the Internet. The address for the
site is www.adamsexpress.com. Also available at the website are a brief history
of the Company, historical financial information, and more general industry
material. Further information regarding shareholder services is located on page
13 of this report.
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
October 18, 2002
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
September 30, 2002
(unaudited)
Assets
Investments* at value:
Common stocks and convertible securities
(cost $718,041,200) $756,689,238
Non-controlled affiliate, Petroleum & Resources Corporation
(cost $26,585,260) 36,457,138
Short-term investments (cost $187,146,482) 186,988,802 $ 980,135,178
---------------------------------------------------------------------------------------
Cash 111,406
Securities lending collateral 71,875,537
Receivables:
Investment securities sold 484,811
Dividends and interest 517,501
Prepaid expenses and other assets 7,010,338
-----------------------------------------------------------------------------------------------------
Total Assets 1,060,134,771
-----------------------------------------------------------------------------------------------------
Liabilities
Open written option contracts at value (proceeds $826,859) 781,375
Obligations to return securities lending collateral 71,875,537
Accrued expenses 2,866,087
-----------------------------------------------------------------------------------------------------
Total Liabilities 75,522,999
-----------------------------------------------------------------------------------------------------
Net Assets $ 984,611,772
-----------------------------------------------------------------------------------------------------
Net Assets
Common Stock at par value $1.00 per share, authorized 150,000,000 shares;
issued and outstanding 82,787,962 shares $ 82,787,962
Additional capital surplus 821,248,455
Undistributed net investment income 1,348,913
Undistributed net realized gain on investments 30,818,722
Unrealized appreciation on investments 48,407,720
-----------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Stock $ 984,611,772
-----------------------------------------------------------------------------------------------------
Net Asset Value Per Share of Common Stock $11.89
-----------------------------------------------------------------------------------------------------
*See Schedule of Investments on pages 8 through 10.
The accompanying notes are an integral part of the financial statements.
2
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
Nine Months Ended September 30, 2002
(unaudited)
Investment Income
Income:
Dividends:
From unaffiliated issuers $ 13,129,034
From non-controlled affiliate 593,266
Interest and other income 1,839,406
---------------------------------------------------------------------------------------------------------
Total income 15,561,706
---------------------------------------------------------------------------------------------------------
Expenses:
Investment research 935,134
Administration and operations 616,671
Directors' fees 152,250
Reports and stockholder communications 255,090
Transfer agent, registrar and custodian expenses 288,571
Auditing and accounting services 72,352
Legal services 67,869
Occupancy and other office expenses 246,213
Travel, telephone and postage 101,709
Other 132,982
---------------------------------------------------------------------------------------------------------
Total expenses 2,868,841
---------------------------------------------------------------------------------------------------------
Net Investment Income 12,692,865
---------------------------------------------------------------------------------------------------------
Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions 30,210,843
Net realized gain distributed by regulated investment company (non-controlled affiliate) 153,101
Change in unrealized appreciation on investments (376,585,839)
---------------------------------------------------------------------------------------------------------
Net Loss on Investments (346,221,895)
---------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $(333,529,030)
---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
3
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
Nine Months Ended Year Ended
September 30, 2002 December 31, 2001
------------------ -----------------
(unaudited)
From Operations:
Net investment income $ 12,692,865 $ 21,091,920
Net realized gain on investments 30,363,944 113,686,714
Change in unrealized appreciation on investments (376,585,839) (622,475,783)
-------------------------------------------------------------------------------------------------
Change in net assets resulting from operations (333,529,030) (487,697,149)
-------------------------------------------------------------------------------------------------
Dividends to Stockholders from:
Net investment income (15,132,072) (21,153,837)
Net realized gain from investment transactions (5,110,262) (111,923,436)
-------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (20,242,334) (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) (29,983,180) (30,709,784)
-------------------------------------------------------------------------------------------------
Change in net assets from capital share transactions (29,983,180) 37,577,760
-------------------------------------------------------------------------------------------------
Total Decrease in Net Assets (383,754,544) (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 $1,348,913 and $3,788,120, respectively) $ 984,611,772 $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 September 30, 2002 was $931,685,686 and net
unrealized appreciation aggregated $48,894,971, of which the related gross
unrealized appreciation and depreciation were $279,786,968 and $230,891,997,
respectively.
Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. Accordingly, annual
reclassifications are made within the Company's capital accounts to reflect
income and gains available for distribution under income tax regulations.
3. Investment Transactions
Purchases and sales of portfolio securities, other than options and short-term
investments, during the nine months ended September 30, 2002 were $132,645,762
and $267,101,694, 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 September 30, 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
------------------------- --------------------------
Nine months Nine months
ended Year ended ended Year ended
September 30, December 31, September 30, 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 12%
and 10.0%,
respectively) (2,445,300) (1,814,400) (29,983,180) (30,709,784)
------------------------------------------------------------------------
Total decrease (2,445,300) (1,814,400) $(29,983,180) $(30,709,784)
------------------------------------------------------------------------
Net change (2,445,300) 2,941,000 $(29,983,180) $ 37,577,760
------------------------------------------------------------------------
On September 30, 2002, the Company held a total of 2,445,300 shares of its
Common Stock at a cost of $29,983,180. 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 nine months ended September 30, 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. 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 those 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 September 30,
2002, there were outstanding exercisable options to purchase 56,255 common
shares at $2.6042-19.5500 per share (weighted average price of $12.7343), and
unexercisable options to purchase 202,768 common shares at $2.6042-19.5500 per
share (weighted average price of $11.3503). The weighted average remaining
contractual life of outstanding exercisable and unexercisable options is 5.5335
years and 6.2104 years, respectively. Total compensation expense recognized for
the nine months ended September 30, 2002 related to the stock options and stock
appreciation rights plan was $(566,011). At September 30, 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 5 years of employment. The
Company's current funding policy is to contribute annually to the plan only
those amounts that can be deducted for federal income tax purposes. As of
September 30, 2002, the plan assets, consisting of investments in individual
stocks, bonds and mutual funds were $11,028,306. 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 September 30, 2002 was
$6,000,348. Prepaid pension cost included in other assets at September 30, 2002
was $6,237,786.
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 September 30, 2002 for employees
and former employees of the Company was $2,325,129. Aggregate remuneration paid
or accrued during the nine months ended September 30, 2002 to officers and
directors amounted to $1,108,681, which includes a credit of $566,011 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 September 30, 2002, the Company had securities on loan of $65,082,731 and
held collateral of $71,875,537.
-----------------
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
--------------------------------------------------------------------------------
------------------------
Nine Months Ended
---------------------
(unaudited)
Year Ended December 31
Sept. 30, Sept. 30, ------------------------------------------------------
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 0.15 0.20 0.26 0.26 0.25 0.30 0.29
Net realized gains and change in unrealized
appreciation and other changes (4.11) (7.39) (6.32) (1.63) 6.54 3.78 4.22
---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (3.96) (7.19) (6.06) (1.37) 6.79 4.08 4.51
---------------------------------------------------------------------------------------------------------------------------
Capital share repurchases 0.04 0.02 0.04 0.09 -- -- --
---------------------------------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income (0.18) (0.20) (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 (0.24) (0.24) (1.65) (1.85) (1.63) (1.40) (1.30)
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.89 $16.31 $16.05 $23.72 $26.85 $21.69 $19.01
---------------------------------------------------------------------------------------------------------------------------
Per share market price, end of period $10.28 $14.90 $14.22 $21.00 $22.38 $17.75 $16.13
Total Investment Return
Based on market price (26.4)% (28.1)% (24.7)% 1.7% 36.1% 19.3% 33.1%
Based on net asset value (24.5)% (30.3)% (24.7)% (4.3)% 33.6% 23.7% 30.7%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $984,612 $1,320,680 $1,368,366 $1,951,563 $2,170,802 $1,688,080 $1,424,170
Ratio of expenses to average net assets 0.31%+ 0.14%+ 0.19% 0.24% 0.32% 0.22% 0.39%
Ratio of net investment income to
average net assets 1.38%+ 1.33%+ 1.33% 0.97% 1.06% 1.48% 1.61%
Portfolio turnover 16.12%+ 21.29%+ 19.15% 12.74% 15.94% 22.65% 17.36%
Number of shares outstanding at
end of period (in 000's)* 82,788 80,980 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
--------------------------------------------------------------------------------
September 30, 2002
(unaudited)
Prin. Amt.
or Shares Value (A)
- ---------- ------------
Stocks and Convertible Securities -- 80.6%
Consumer -- 11.0%
BJ's Wholesale Club, Inc. (B) 425,000 $ 8,079,250
Brinker International Inc. (B)(D) 515,000 13,338,500
Coca-Cola Co. 200,000 9,592,000
Dean Foods Co. (B)(D) 477,400 18,990,972
Hershey Foods Corp. 70,000 4,343,500
PepsiCo, Inc. 440,000 16,258,000
Procter & Gamble Co. 170,000 15,194,600
Safeway, Inc. (B) 415,000 9,254,500
Target Corp. 460,000 13,579,200
------------
108,630,522
------------
Energy -- 5.6%
BP plc ADR 270,000 10,773,001
Exxon Mobil Corp. 130,000 4,147,000
Murphy Oil Corp. (D) 50,000 4,103,500
Petroleum & Resources
Corporation (C) 1,913,761 36,457,138
------------
55,480,639
------------
Financial -- 17.1%
Banking -- 10.7%
BankNorth Group, Inc. 474,000 11,257,500
Federal Home Loan Mortgage
Corp. 150,000 8,385,000
Investors Financial Services
Corp. 600,000 16,242,000
Mellon Financial Corp. 420,000 10,890,600
Provident Bankshares Corp. 335,021 7,229,763
Wachovia Corp. 380,000 12,422,200
Wells Fargo & Co. 550,000 26,488,000
Wilmington Trust Corp. 420,000 12,146,400
------------
105,061,463
------------
Insurance -- 6.4%
AMBAC Financial Group, Inc. 400,000 21,556,000
American International Group,
Inc. 763,675 41,773,023
------------
63,329,023
------------
Prin. Amt.
or Shares Value (A)
- ---------- ------------
Health Care -- 14.6%
Abbott Laboratories 350,000 $ 14,140,000
Affymetrix Inc. (B)(D) 210,000 4,368,000
Applera Corp. - Applied
Biosystems Group 210,000 3,843,000
Bristol-Myers Squibb Co. 345,000 8,211,000
Enzon, Inc. (B)(D) 100,000 1,924,000
Genentech, Inc. (B) 300,000 9,789,000
GlaxoSmithKline plc ADR (D) 250,360 9,621,335
HCA Inc. 400,000 19,044,000
Johnson & Johnson 360,000 19,468,800
Lilly (Eli) & Co. 190,000 10,514,600
Pfizer Inc. 484,500 14,060,190
Pharmacia Corp. 368,900 14,342,832
Vertex Pharmaceuticals Inc. (B) 248,016 4,585,816
Wyeth Co. 300,000 9,540,000
------------
143,452,573
------------
Industrials -- 10.5%
Black & Decker Corp. 300,000 12,579,000
Corning Inc. (B)(D) 1,170,000 1,872,000
General Electric Co. 1,182,500 29,148,625
3M Co. 155,000 17,045,350
United Parcel Service, Inc. 315,000 19,696,950
United Technologies Corp. 400,000 22,596,000
------------
102,937,925
------------
8
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
September 30, 2002
(unaudited)
Prin. Amt.
or Shares Value (A)
----------- -----------
Information Technology -- 8.2%
Communication Equipment -- 2.0%
Ericsson (L.M.) Telephone Co.
ADR (B)(D) 2,000,000 $ 720,000
Lucent Technologies Inc. (B)(D) 400,000 304,000
Nokia Corp. ADR (D) 1,380,000 18,285,000
-----------
19,309,000
-----------
Computer Related -- 4.8%
BEA Systems Inc. (B)(D) 400,000 2,072,000
BMC Software Inc. (B) 310,000 4,051,700
Cisco Systems, Inc. (B) 1,755,000 18,392,400
DiamondCluster International Inc.
(B) 497,500 1,621,850
Oracle Corp. (B) 880,000 6,916,800
Sapient Corp. (B)(D) 1,150,000 1,184,500
Siebel Systems Inc. (B) 470,000 2,702,500
Sun Microsystems Inc. (B) 515,000 1,333,850
Symantec Corp. 3.00% Conv. Sub.
Notes due 2006 $ 500,000 630,000
Symantec Corp. (B)(D) 250,000 8,417,500
-----------
47,323,100
-----------
Electronics -- 1.4%
Intel Corp. 690,000 9,584,100
Solectron Corp. (B)(D) 2,000,000 4,220,000
-----------
13,804,100
-----------
Prin. Amt.
or Shares Value (A)
---------- ------------
Materials -- 1.5%
Albemarle Corp. 125,000 $ 3,161,250
Rohm & Haas Co. 360,000 11,160,000
------------
14,321,250
------------
Telecom Services -- 3.6%
Alltel Corp. 210,000 8,427,300
BellSouth Corp. 440,000 8,078,400
SBC Communications Inc. 620,000 12,462,000
Vodafone Group plc
ADS (D) 492,614 6,320,231
------------
35,287,931
------------
Utilities -- 8.5%
Black Hills Corp. (D) 410,000 10,737,900
CINergy Corp. 440,000 13,829,200
Duke Energy Corp. 8.25% Conv.
Pfd. due 2004 (D) 400,000 6,540,000
Duke Energy Corp. (D) 355,000 6,940,250
Keyspan Corp. (D) 400,000 13,400,000
Northwestern Corp. (D) 500,000 4,880,000
Philadelphia Suburban Corp. (D) 865,000 17,559,500
TECO Energy, Inc. (D) 650,000 10,322,000
------------
84,208,850
------------
Total Stocks and Convertible Securities
(Cost $744,626,460) (E) 793,146,376
------------
9
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
September 30, 2002
(unaudited)
Prin. Amt. Value (A)
----------- -----------
Short-Term Investments -- 19.0%
U.S. Government Obligations -- 5.5%
U.S. Treasury Bills,
1.55%, due
11/21/02-12/26/02 $54,200,000 $54,029,448
-----------
Certificates of Deposit -- 1.5%
Mercantile-Safe Deposit &
Trust Co., 1.90 - 1.95%,
due 10/15/02 - 11/20/02 15,000,000 15,000,000
-----------
Commercial Paper -- 12.0%
AIG Funding, Inc.,
1.70-1.74%,
due 10/15/02-10/22/02 15,000,000 14,985,589
ChevronTexaco Corp.,
1.72-1.74%,
due 10/03/02-11/04/02 15,000,000 14,985,885
Coca-Cola Enterprises, Inc.
1.71%,
due 10/22/02 5,170,000 5,164,843
GMAC MINT, 1.76-1.77%,
due 10/24/02-11/07/02 15,000,000 14,976,829
General Electric Capital
Corp., 1.75-1.76%,
due 10/17/02-11/14/02 15,000,000 14,986,910
IBM Corp., 1.57%,
due 11/26/02 12,185,000 12,155,241
Prin. Amt.
or Shares Value (A)
----------- ------------
Toyota Motor Credit Corp.,
1.72%, due 11/05/02 $15,000,000 $ 14,974,917
W.W. Grainger Inc., 1.72%,
due 12/20/02 $10,500,000 10,509,676
Wells Fargo Financial, Inc.,
1.76-1.78%, due
10/03/02-10/10/02 $15,000,000 14,995,764
------------
117,735,654
------------
Purchased Options -- 0.0%
Cisco Systems, Inc., Put,
October 2002,
Strike Price $10 300,000 120,000
TECO Energy, Inc., Put
November 2002,
Strike Price $15 122,000 103,700
------------
223,700
------------
Total Short-Term Investments
(Cost $187,146,482) 186,988,802
------------
Total Investments -- 99.6% (Cost
$931,772,942) 980,135,178
Cash, receivables and other
assets, less
liabilities - 0.4% 4,476,594
------------
Net Assets -- 100.0% $984,611,772
============
--------------------------------------------------------------------------------
Notes:
(A) See note 1 to financial statements. Securities are listed on the New York
Stock Exchange, the American Stock Exchange or the NASDAQ, except
restricted securities.
(B) Presently non-dividend paying.
(C) Non-controlled affiliate, a closed-end sector fund.
(D) Some or all of these securities are on loan. See Note 7 to Financial
Statements.
(E) The aggregate market value of stocks held in escrow at September 30, 2002
covering open call option contracts written was $13,461,386. In addition,
the aggregate market value of securities segregated by the custodian
required to collateralize open put option contracts written was $13,775,000.
-----------------
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.
10
CHANGES IN PORTFOLIO SECURITIES
--------------------------------------------------------------------------------
During the Three Months Ended September 30, 2002
(unaudited)
Principal Amount or Shares
--------------------------------------------------
Held
Additions Reductions September 30, 2002
--------- ----------- ------------------
Albemarle Corp.......................... 95,000 125,000
Alltel Corp............................. 210,000 210,000
American International Group, Inc....... 4,300 763,675
Brinker International Inc............... 15,000 515,000
Bristol-Myers Squibb Co................. 25,000 345,000
Canadian National Railway Co............ 220,915/(1)/ 220,915 --
Coca-Cola Co............................ 15,000 200,000
Ericsson (L.M.) Telephone Co. ADR rights 2,000,000/(2)/ 2,000,000 --
Murphy Oil Corp......................... 50,000 50,000
Monsanto Co............................. 62,931/(3)/ 62,931 --
PepsiCo., Inc........................... 40,000 440,000
Pfizer Inc.............................. 69,500 484,500
Philadelphia Suburban Corp.............. 10,000 865,000
Safeway, Inc............................ 15,000 415,000
Siebel Systems Inc...................... 130,000 470,000
Target Corp............................. 25,000 460,000
AMBAC Financial Group, Inc.............. 40,000 400,000
Black Hills Corp........................ 10,800 410,000
Caliper Technologies.................... 225,000 --
Canadian National Railway Co.
5.25% Conv. Pfd. QUIDS due 2029........ 170,000/(1)/ --
Citigroup Inc........................... 285,000 --
Exxon Mobil Corp........................ 186,836 130,000
General Electric Co..................... 117,500 1,182,500
Greenpoint Financial Corp............... 300,000 --
Hershey Foods Corp...................... 185,000 70,000
ITT Industries.......................... 100,000 --
Merck & Co., Inc........................ 250,000 --
Nextel Communications Inc.
5.25% Conv. Notes due 2010............. $10,000,000 --
Nextel Communications Inc............... 600,000 --
SBC Communications Inc.................. 80,000 620,000
3M Co................................... 52,900 155,000
Tiffany & Co............................ 330,000 --
--------
/(1) /Received 1.2995 shares of Canadian National Railway Co. common stock for
each convertible preferred share of Canadian National Railway Co. 5.25%
Conv. Pfd. QUIDS due 2029.
/(2) /Received 1 right for each of Ericsson (L.M.) Telephone Co. ADR held.
/(3) /Received .17 share of Monsanto Co. for each share of Pharmacia Corp. held.
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
September 30, 2002 (unaudited) 984,611,772 82,787,962 11.89 .18 .06
--------
* Prior years have been adjusted to reflect the 3-for-2 stock split effected in
October, 2000.
-----------------
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
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.
13
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
--------
Stock Data
--------
Price (9/30/02) $10.28
Net Asset Value (9/30/02) $11.89
Discount: 13.5%
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 $0.18
From Net Realized Gains 0.06
-----
Total $0.24
=====
----------------------
2002 Dividend Payment Dates
----------------------
March 1, 2002
June 1, 2002
September 1, 2002
December 27, 2002*
*Anticipated
[GRAPHIC]
[LOGO] ADAMS
EXPRESS
COMPANY (R)
THIRD QUARTER REPORT
-------------------------------
September 30, 2002