LETTER TO STOCKHOLDERS
We are pleased to present summary financial information of The Adams Express Company (the Company) for the nine months ended September 30, 2010.
Net assets of the Company at September 30, 2010 were $11.78 per share on 87,428,532 shares outstanding, compared with $11.95 per share at December 31, 2009 on 87,415,193 shares outstanding. Total distributions paid thus far in 2010 amount to $0.15 per share. On March 1, 2010, a distribution of $0.05 per share was paid, consisting of $0.01 from 2009 investment income, $0.02 from 2009 short-term capital gain, $0.01 from 2009 long-term capital gain, and $0.01 from 2010 investment income, all taxable in 2010. A 2010 investment income dividend of $0.05 per share was paid June 1, 2010, and another $0.05 per share investment income dividend was paid September 1, 2010.
Net investment income for the nine months ended September 30, 2010 amounted to $9,045,923, compared with $9,109,755 for the same nine month period in 2009. These earnings are equal to $0.10 and $0.11 per share, respectively.
Net capital gain realized on investments for the nine months ended September 30, 2010 amounted to $20,412,767, or $0.23 per share.
For the nine months ended September 30, 2010, the total return on the net asset value (with dividends and capital gains reinvested) of the Company’s shares was 0.1%. The total return on the market value of the Company’s shares for the period was 0.1%. These compare to a 3.9% total return for the Standard & Poor’s 500 Composite Stock Index (“S&P 500”) and a 2.3% total return for the Lipper Large-Cap Core Mutual Fund Average over the same time period.
For the twelve months ended September 30, 2010, the Company’s total return on net asset value was 6.4% and on market value was 6.7%. Comparable figures for the S&P 500 and the Lipper Large-Cap Core Mutual Fund Average were 10.2% and 8.0%, respectively.
Enclosed with this Report is a stockholder survey. Please take the time to complete your survey — we want your input on these important questions to help us serve you better. You can either answer the survey online at the web address shown on the survey, which is the most cost effective way, or put the completed survey in the mail. Thank you for your participation.
Current and potential stockholders 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, on our website at www.adamsexpress.com. Also available on the website are a history of the Company, historical financial information, and other useful content.
By order of the Board of Directors,
Douglas G. Ober,
Chairman and
Chief Executive Officer
David D. Weaver,
President
October 14, 2010
SUMMARY FINANCIAL INFORMATION
Nine Months Ended September 30
(unaudited)
| 2010 | 2009 | |||||||
| Net asset value per share |
$ | 11.78 | $ | 11.59 | ||||
| Total net assets |
1,029,561,550 | 998,184,870 | ||||||
| Unrealized appreciation |
62,748,859 | 31,895,564 | ||||||
| Net investment income |
9,045,923 | 9,109,755 | ||||||
| Net realized gain |
20,412,767 | 26,041,418 | ||||||
| Market price |
9.96 | 9.77 | ||||||
| Shares outstanding |
87,428,532 | 86,117,331 | ||||||
| Shares repurchased |
28,300 | 1,320,849 | ||||||
| Total return (based on market price) |
0.1% | 23.9% | ||||||
| Total return (based on net asset value) |
0.1% | 22.9% | ||||||
| Key ratios: |
||||||||
| Net investment income to average net assets (annualized) |
1.18% | 1.42% | ||||||
| Expenses to average net assets (annualized) |
0.58% | 0.83% | ||||||
| Portfolio turnover |
9.48% | 10.40% | ||||||
| Net cash & short-term investments to net assets |
1.7% | 3.7% | ||||||
RETURNS ON NET ASSET VALUE
As of September 30, 2010
(unaudited)
2
FIVE YEAR DISTRIBUTION HISTORY
(unaudited)
| Year |
Income Dividends Per Share |
Short-Term Capital Gains Per Share |
Long-Term Capital Gains Per Share |
Total Distributions Per Share |
Dividend Yield* |
Annual Rate of Distribution** |
||||||||||||||||||
| 2005 |
$ | 0.22 | $ | 0.09 | $ | 0.55 | $ | 0.86 | 1.7 | % | 6.7 | % | ||||||||||||
| 2006 |
0.23 | 0.04 | 0.63 | 0.90 | 1.7 | 6.8 | ||||||||||||||||||
| 2007 |
0.32 | 0.08 | 0.63 | 1.03 | 2.2 | 7.2 | ||||||||||||||||||
| 2008 |
0.26 | 0.01 | 0.37 | 0.64 | 2.3 | 5.6 | ||||||||||||||||||
| 2009 |
0.15 | 0.05 | 0.25 | 0.45 | 1.7 | 5.2 | ||||||||||||||||||
| Average: | 1.9 | % | 6.3 | % | ||||||||||||||||||||
| * | The dividend yield is the total income dividends during the year divided by the average daily market price of the Company’s Common Stock. |
| ** | The annual rate of distribution is the total dividends and capital gain distributions during the year divided by the average daily market price of the Company’s Common Stock. |
CHANGES IN PORTFOLIO SECURITIES
During the Three Months Ended September 30, 2010
(unaudited)
| Shares | ||||||||||||
| Additions | Reductions | Held Sept. 30, 2010 |
||||||||||
| Bunge Ltd. |
20,000 | 180,000 | ||||||||||
| Cliffs Natural Resources Inc. |
9,000 | 120,000 | ||||||||||
| CVS/Caremark Corp. |
10,000 | 295,000 | ||||||||||
| Dow Chemical Co. |
73,500 | 287,300 | ||||||||||
| Life Technologies Corp. |
200,000 | 200,000 | ||||||||||
| General Electric Co. |
255,000 | 1,233,000 | ||||||||||
| Hansen Natural Corp. |
60,000 | 200,000 | ||||||||||
| Hospira, Inc. |
25,000 | 175,000 | ||||||||||
| Potash Corporation of Saskatchewan Inc. |
11,250 | 42,750 | ||||||||||
| Spirit AeroSystems Holdings, Inc. |
165,000 | 555,000 | ||||||||||
| State Street Corp. |
4,548 | 265,452 | ||||||||||
3
PORTFOLIO SUMMARY
September 30, 2010
(unaudited)
Ten Largest Equity Portfolio Holdings
| Market Value | % of Net Assets | |||||
| Petroleum & Resources Corporation* |
$ | 50,580,083 | 4.9 | % | ||
| Oracle Corp. |
29,535,000 | 2.9 | ||||
| Microsoft Corp. |
28,898,200 | 2.8 | ||||
| PepsiCo, Inc. |
23,918,400 | 2.3 | ||||
| United Technologies Corp. |
21,369,000 | 2.1 | ||||
| JPMorgan Chase & Co. |
21,319,200 | 2.1 | ||||
| Apple Inc. |
21,281,250 | 2.1 | ||||
| Unilever plc ADR |
20,468,940 | 2.0 | ||||
| General Electric Co. |
20,036,250 | 1.9 | ||||
| Procter & Gamble Co. |
18,890,550 | 1.8 | ||||
| Total |
$ | 256,296,873 | 24.9 | % | ||
| *Non-controlled affiliate |
||||||
Sector Weightings
4
SCHEDULE OF INVESTMENTS
September 30, 2010
(unaudited)
| Shares | Value (A) | ||||
| Stocks — 98.3% | |||||
| Consumer — 23.1% |
|||||
| Consumer Discretionary — 8.7% |
|||||
| Columbia Sportswear Co. (B) |
200,000 | $ | 11,688,000 | ||
| Lowe's Companies, Inc. |
600,000 | 13,374,000 | |||
| McDonald's Corp. (F) |
250,000 | 18,627,500 | |||
| Newell Rubbermaid Inc. |
400,000 | 7,124,000 | |||
| Ryland Group, Inc. |
343,500 | 6,155,520 | |||
| Target Corp. |
320,000 | 17,100,800 | |||
| Walt Disney Co. |
480,000 | 15,892,800 | |||
| 89,962,620 | |||||
| Consumer Staples — 14.4% |
|||||
| Avon Products, Inc. |
324,600 | 10,422,906 | |||
| Bunge Ltd. (B) |
180,000 | 10,648,800 | |||
| Coca-Cola Co. |
250,000 | 14,630,000 | |||
| CVS/Caremark Corp. |
295,000 | 9,283,650 | |||
| Dean Foods Co. (C) |
425,000 | 4,339,250 | |||
| Del Monte Foods Co. |
800,000 | 10,488,000 | |||
| Hansen Natural Corp. (C) (F) |
200,000 | 9,324,000 | |||
| Mead Johnson Nutrition Co. |
117,383 | 6,680,267 | |||
| PepsiCo, Inc. (G) |
360,000 | 23,918,400 | |||
| Procter & Gamble Co. |
315,000 | 18,890,550 | |||
| Safeway Inc. |
390,000 | 8,252,400 | |||
| Unilever plc ADR (B) |
703,400 | 20,468,940 | |||
| 147,347,163 | |||||
| Energy — 10.7% |
|||||
| Chevron Corp. |
200,000 | 16,210,000 | |||
| CONSOL Energy Inc. |
200,000 | 7,392,000 | |||
| Exxon Mobil Corp. (G) |
215,000 | 13,284,850 | |||
| Halliburton Co. |
150,000 | 4,960,500 | |||
| Petroleum & Resources Corporation (D) |
2,186,774 | 50,580,083 | |||
| Spectra Energy Corp. |
405,780 | 9,150,338 | |||
| Transocean Ltd. (C) |
135,000 | 8,679,150 | |||
| 110,256,921 | |||||
| Financials — 13.2% |
|||||
| Banks — 2.6% |
|||||
| PNC Financial Services Group, Inc. |
270,000 | 14,015,700 | |||
| Wells Fargo & Co. |
525,000 | 13,193,250 | |||
| 27,208,950 | |||||
| Diversified Financials — 9.0% |
|||||
| American Express Co. |
350,000 | 14,710,500 | |||
| Bank of America Corp. |
1,385,000 | 18,157,350 | |||
| Bank of New York Mellon Corp. |
403,775 | 10,550,642 | |||
| JPMorgan Chase & Co. |
560,000 | 21,319,200 | |||
| Morgan Stanley |
300,000 | 7,404,000 | |||
| State Street Corp. |
265,452 | 9,996,921 | |||
| T. Rowe Price Group, Inc. |
200,000 | 10,013,000 | |||
| 92,151,613 | |||||
| Insurance — 1.6% |
|||||
| Prudential Financial, Inc. |
310,000 | 16,795,800 | |||
| Health Care — 13.3% |
|||||
| Abbott Laboratories |
320,000 | : | 16,716,800 | ||
| Bristol-Myers Squibb Co. |
159,061 | 4,312,144 | |||
| Gilead Sciences, Inc. (C) |
250,000 | 8,902,500 | |||
| Hospira, Inc. (C) (F) |
175,000 | 9,976,750 | |||
| Johnson & Johnson |
255,000 | 15,799,800 | |||
| Life Technologies Corp. (C) |
200,000 | 9,338,000 | |||
| Medtronic, Inc. |
350,000 | 11,753,000 | |||
| Pfizer Inc. |
1,015,125 | 17,429,696 | |||
| Senomyx, Inc. (B) (C) |
1,284,400 | 5,111,912 | |||
| Teva Pharmaceutical Industries Ltd. ADR |
330,000 | 17,407,500 | |||
| UnitedHealth Group Inc. |
350,000 | 12,288,500 | |||
| Zimmer Holdings, Inc. (C) |
150,000 | 7,849,500 | |||
| 136,886,102 | |||||
| Industrials — 13.0% |
|||||
| Cintas Corp. |
300,000 | 8,265,000 | |||
| Curtiss-Wright Corp. |
360,000 | 10,908,000 | |||
| Emerson Electric Co. |
300,000 | 15,798,000 | |||
| General Electric Co. |
1,233,000 | 20,036,250 | |||
| Harsco Corp. |
310,000 | 7,619,800 | |||
| Illinois Tool Works Inc. |
250,000 | 11,755,000 | |||
| Masco Corp. |
450,000 | 4,954,500 | |||
| Norfolk Southern Corp. |
200,000 | 11,902,000 | |||
| Oshkosh Corp. (C) |
380,000 | 10,450,000 | |||
| Spirit AeroSystems Holdings, |
555,000 | 11,061,150 | |||
| United Technologies Corp. |
300,000 | 21,369,000 | |||
| 134,118,700 | |||||
| Information Technology — 18.7% |
|||||
| Semiconductors — 2.9% |
|||||
| Broadcom Corp. |
400,000 | 14,156,000 | |||
| Intel Corp. |
840,000 | 16,153,200 | |||
| 30,309,200 | |||||
| Software & Services — 9.0% |
|||||
| Automatic Data Processing, Inc. |
300,000 | 12,609,000 | |||
| Google Inc. (C) |
29,000 | 15,247,910 | |||
| Microsoft Corp. |
1,180,000 | 28,898,200 | |||
| Oracle Corp. |
1,100,000 | 29,535,000 | |||
| Visa Inc. |
90,000 | 6,683,400 | |||
| 92,973,510 | |||||
| Technology Hardware & Equipment — 6.8% |
|||||
| Apple Inc. (C) |
75,000 | 21,281,250 | |||
| Cisco Systems, Inc. (C) |
850,000 | 18,615,000 | |||
| Dell Inc. (C) |
285,000 | 3,693,600 | |||
| Hewlett-Packard Co. |
300,000 | 12,621,000 | |||
| QUALCOMM Inc. |
300,000 | 13,536,000 | |||
| 69,746,850 | |||||
SCHEDULE OF INVESTMENTS (CONTINUED)
September 30, 2010
(unaudited)
| Shares or Prin. Amt. |
Value (A) | |||||||
| Materials — 4.2% |
||||||||
| Cliffs Natural Resources Inc. (F) |
120,000 | $ | 7,670,400 | |||||
| Dow Chemical Co. |
287,300 | 7,889,258 | ||||||
| Freeport-McMoRan Copper & Gold Inc. (F) |
135,000 | 11,527,650 | ||||||
| Potash Corporation of Saskatchewan Inc. |
42,750 | 6,157,710 | ||||||
| Praxair, Inc. (F) |
109,292 | 9,864,696 | ||||||
| 43,109,714 | ||||||||
| Utilities — 2.1% |
||||||||
| MDU Resources Group, Inc. |
562,500 | 11,221,875 | ||||||
| Northeast Utilities |
350,000 | 10,349,500 | ||||||
| 21,571,375 | ||||||||
| Total Stocks |
1,012,438,518 | |||||||
| Short-Term Investments — 1.4% |
| |||||||
| Time Deposits — 1.0% |
||||||||
| Wilmington Trust FSB, 0.90% (E) |
$ | 10,693,103 | 10,693,103 | |||||
| Money Market Funds — 0.4% |
|
|||||||
| Fidelity Institutional Money Market – Government Portfolio, 0.06% (E) |
50,789 | 50,789 | ||||||
| RBC U.S. Government Money Market (Institutional Class I), 0.14% (E) |
3,356,350 | 3,356,350 | ||||||
| Vanguard Federal Money Market, 0.04% (E) |
35,500 | 35,500 | ||||||
| Western Asset Institutional Government Money Market (Class I), 0.09% (E) |
53,033 | 53,033 | ||||||
| 3,495,672 | ||||||||
| Total Short-Term Investments (Cost $14,188,775) |
14,188,775 | |||||||
| Total Securities Lending
Collateral — 3.1% |
| |||||||
| Money Market Funds — 3.1% |
|
|||||||
| Invesco Short-Term Investment Trust – Liquid Assets Portfolio (Institutional Class), 0.23% (E) |
32,186,374 | 32,186,374 | ||||||
| Total Investments — 102.8% |
1,058,813,667 | |||||||
| Cash, receivables, prepaid expenses and other assets, less liabilities — (2.8)% |
(29,252,117 | ) | ||||||
| Net Assets — 100% |
$ | 1,029,561,550 | ||||||
Notes:
| (A) | Securities 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) | A portion of shares held are on loan. |
| (C) | Presently non-dividend paying. |
| (D) | Non-controlled affiliate, a closed-end sector fund, registered as an investment company under the Investment Company Act of 1940. |
| (E) | Rate presented is as of period-end and, for money market funds, represents the annualized yield earned over the previous seven days. |
| (F) | All or a portion of this security is pledged to cover open written call option contracts. Aggregate market value of such pledged securities is $5,991,213. |
| (G) | All or a portion of this security is pledged to collateralize open written put option contracts with an aggregate value to deliver upon exercise of $400,000. |
6
OTHER INFORMATION
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.
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 stockholders, the Company 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 Company’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Company’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 Company also posts its Forms N-Q on its website at 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 Company uses to determine how to vote proxies relating to portfolio securities owned by the Company and the Company’s proxy voting record for the 12-month period ended June 30, 2010 are available (i) without charge, upon request, by calling the Company’s toll free number at (800) 638-2479; (ii) on the Company’s website at www.adamsexpress.com; and (iii) on the Securities and Exchange Commission’s website at www.sec.gov.
Privacy Policy
In order to conduct its business, the Company, through its transfer agent, currently American Stock Transfer & Trust Company, collects and maintains certain nonpublic personal information about our stockholders of record with respect to their transactions in shares of our securities. This information includes the stockholder’s address, tax identification or Social Security number, share balances, and dividend elections. We do not collect or maintain personal information about stockholders whose shares of our securities are held in “street name” by a financial institution such as a bank or broker.
We do not disclose any nonpublic personal information about you, our other stockholders or our former stockholders to third parties unless necessary to process a transaction, service an account or as otherwise permitted by law.
To protect your personal information internally, we restrict access to nonpublic personal information about our stockholders to those employees who need to know that information to provide services to our stockholders. We also maintain certain other safeguards to protect your nonpublic personal information.
The Company
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
Stockholder Relations Department
59 Maiden Lane
New York, NY 10038
(877) 260-8188
Website: www.amstock.com
E-mail: info@amstock.com
7
THE ADAMS EXPRESS COMPANY
Board of Directors
| Enrique R. Arzac 2,4 |
Roger W. Gale 2,4 | |
| Phyllis O. Bonanno 2,4 |
Thomas H. Lenagh 2,3 | |
| Kenneth J. Dale 3,4 |
Kathleen T. McGahran 1,3,5 | |
| Daniel E. Emerson 1,3,5 |
Douglas G. Ober 1 | |
| Frederic A. Escherich 1,4,5 |
Craig R. Smith 1,3,5 |
| 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 |
Officers
| Douglas G. Ober |
Chairman and Chief Executive Officer | |
| David D. Weaver |
President | |
| Nancy J. F. Prue |
Executive Vice President | |
| Lawrence L. Hooper, Jr. |
Vice President, General Counsel and Secretary | |
| Richard A. Church |
Vice President–Research | |
| David R. Schiminger |
Vice President–Research | |
| D. Cotton Swindell |
Vice President–Research | |
| Brian S. Hook |
Treasurer | |
| Christine M. Sloan |
Assistant Treasurer | |
| Geraldine H. Paré |
Assistant Secretary |
Stock Data
| Market Price (9/30/10) |
$ | 9.96 | ||
| Net Asset Value (9/30/10) |
$ | 11.78 | ||
| Discount |
15.5% |
New York Stock Exchange ticker symbol: ADX
NASDAQ Quotation Symbol for NAV: XADEX
Distributions in 2010
| From Investment Income |
$ | 0.12 | ||
| From Net Realized Gains |
0.03 | |||
| Total |
$ | 0.15 | ||
2010 Dividend Payment Dates
March 1, 2010
June 1, 2010
September 1, 2010
December 27, 2010*
*Anticipated