FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-00248
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THE ADAMS EXPRESS COMPANY
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(Exact name of registrant as specified in charter)

 

 

7 Saint Paul Street, Suite 1140, Baltimore, Maryland 21202
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(Address of principal executive offices)

 

 

Lawrence L. Hooper, Jr.
The Adams Express Company
7 Saint Paul Street, Suite 1140
Baltimore, Maryland 21202
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(Name and address of agent for service)

 

 

Registrant's telephone number, including area code: (410) 752-5900
Date of fiscal year end: December 31
Date of reporting period: June 30, 2013

Item 1. Reports to Stockholders.

 

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LETTER TO SHAREHOLDERS

 

 

 

We submit herewith the financial statements of The Adams Express Company (the Fund) for the six months ended June 30, 2013. Also provided are a schedule of investments and other financial information.

 

Net assets of the Fund at June 30, 2013 were $13.73 per share on 92,687,368 shares outstanding, compared with $12.43 per share at December 31, 2012 on 93,029,724 shares outstanding. On March 1, 2013, a distribution of $0.05 per share was paid, consisting of $0.03 of net investment income, $0.01 short-term capital gain, and $0.01 long-term capital gain, all realized in 2012 and taxable in 2013. A 2013 net investment income dividend of $0.05 per share was paid June 3, 2013, and another $0.05 per share net investment income dividend has been declared to shareholders of record August 15, 2013, payable September 3, 2013. These constitute the first three payments toward our annual 6% minimum distribution rate commitment.

 

Net investment income for the six months ended June 30, 2013 amounted to $7,432,226, compared with $7,210,547 for the same six month period in 2012. These earnings are equal to $0.08 per share in each period.

 

Net capital gain realized on investments for the six months ended June 30, 2013 amounted to $26,817,557, or $0.29 per share.

 

For the six months ended June 30, 2013, the total return on the net asset value (with dividends and capital gains reinvested) of the Fund’s shares was 11.4%. The total return on the market value of the Fund’s shares for the period was 14.0%. These compare to a 13.8% total return for the Standard & Poor’s 500 Composite Stock Index (“S&P 500”) and a 13.2% total return for the Lipper Large-Cap Core Mutual Funds Average over the same time period.

 

For the twelve months ended June 30, 2013, the Fund’s total return on net asset value was 18.2% and on market value was 20.7%. Comparable figures for the S&P 500 and the Lipper Large-Cap Core Mutual Funds Average were 20.6% and 20.4%, respectively.

 

The Fund resumed its share repurchases in the first half of 2013 and purchased 389,822 shares of the Fund’s common stock during the period. The shares were repurchased at an average price of $12.12 and a weighted average discount to net asset value (NAV) of 13.1%, resulting in a $0.01 increase to NAV per share.

 

 

 

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

 

 

 

By order of the Board of Directors,

Mark E. Stoeckle

Chief Executive Officer

 

David D. Weaver

President

 

July 10, 2013

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PORTFOLIO REVIEW

 

 

 

June 30, 2013

(unaudited)

 

 

Ten Largest Equity Portfolio Holdings

 

		Market Value				% of Net Assets
Petroleum & Resources Corporation*		$	56,156,356				4.4	%
SPDR S&P ETF Trust			39,202,450				3.1
Apple Inc.			36,835,440				2.9
JPMorgan Chase & Co.			31,674,000				2.4
Pfizer Inc.			30,530,900				2.4
iShares US Real Estate ETF			30,207,450				2.4
Chevron Corp.			27,809,900				2.2
General Electric Co.			25,393,050				2.0
QUALCOMM Inc.			24,432,000				1.9
Microsoft Corp.			24,171,000				1.9
Total		$	326,412,546				25.6	%

*Non-controlled affiliate

 

 

Sector Weightings

 

 

2

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STATEMENT OF ASSETS AND LIABILITIES

 

 

 

June 30, 2013

(unaudited)

 

Assets
Investments* at value:
Common stocks (cost $985,416,541)		$	1,202,207,357
Non-controlled affiliate, Petroleum & Resources Corporation (cost $34,735,404)			56,156,356
Short-term investments (cost $12,186,322)			12,186,322			$	1,270,550,035
Cash							240,007
Dividends and interest receivable							1,401,825
Prepaid pension cost							2,028,934
Prepaid expenses and other assets							3,362,024
Total Assets							1,277,582,825
Liabilities
Open written option contracts* at value (proceeds $298,257)							204,670
Accrued pension liabilities							3,355,489
Accrued expenses and other liabilities							1,325,107
Total Liabilities							4,885,266
Net Assets						$	1,272,697,559
Net Assets
Common Stock at par value $0.001 per share, authorized 150,000,000 shares; issued and outstanding 92,687,368 shares (includes 161,645 restricted shares, 18,000 nonvested or deferred restricted stock units, and 14,598 deferred stock units) (note 6)						$	92,687
Additional capital surplus							1,009,290,175
Accumulated other comprehensive income (note 5)							(1,634,806	)
Undistributed net investment income							2,832,212
Undistributed net realized gain on investments							23,811,936
Unrealized appreciation on investments							238,305,355
Net Assets Applicable to Common Stock						$	1,272,697,559
Net Asset Value Per Share of Common Stock							$13.73

 

* See Schedule of Investments on page 11 and Schedule of Outstanding Written Option Contracts on page 13.

 

The accompanying notes are an integral part of the financial statements.

 

3

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STATEMENT OF OPERATIONS

 

 

 

Six Months Ended June 30, 2013

(unaudited)

 

Investment Income
Income:
Dividends:
From unaffiliated issuers (net of $46,048 in foreign taxes)		$	11,657,603
From non-controlled affiliate			349,884
Interest and other income			382,108
Total income			12,389,595
Expenses:
Investment research			2,634,378
Administration and operations			1,127,933
Travel, training, and other office expenses			279,684
Directors’ fees			188,052
Transfer agent, registrar, and custodian			158,428
Investment data services			140,612
Reports and shareholder communications			125,600
Legal services			99,179
Occupancy			72,167
Insurance			55,370
Audit and accounting services			53,283
Other			22,683
Total expenses			4,957,369
Net Investment Income			7,432,226
Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions			26,251,197
Net realized gain distributed by regulated investment company (non-controlled affiliate)			87,471
Net realized gain on written option contracts			478,889
Change in unrealized appreciation on securities			95,398,545
Change in unrealized appreciation on written option contracts			(154,560	)
Net Gain on Investments			122,061,542
Other Comprehensive Income (note 5)
Defined benefit pension plans:
Net actuarial gain arising during period			213,331
Amortization of net loss			130,034
Effect of settlement (non-recurring)			903,700
Other Comprehensive Income			1,247,065
Change in Net Assets Resulting from Operations		$	130,740,833

 

The accompanying notes are an integral part of the financial statements.

 

4

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STATEMENTS OF CHANGES IN NET ASSETS

 

 

 

		(unaudited) Six Months  Ended June 30, 2013				Year Ended December 31, 2012
From Operations:
Net investment income		$	7,432,226			$	17,547,510
Net realized gain on investments			26,817,557				47,997,411
Change in unrealized appreciation on investments			95,243,985				80,550,174
Change in accumulated other comprehensive income (note 5)			1,247,065				(243,338	)
Increase in net assets resulting from operations			130,740,833				145,851,757
Distributions to Shareholders from:
Net investment income			(7,436,332	)			(16,392,876	)
Net realized gain from investment transactions			(1,838,155	)			(44,625,641	)
Decrease in net assets from distributions			(9,274,487	)			(61,018,517	)
From Capital Share Transactions:
Value of shares issued in payment of distributions (note 4)			6,557				20,118,651
Cost of shares purchased (note 4)			(4,724,925	)			—
Deferred compensation (notes 4, 6)			(47,456	)			311,468
Change in net assets from capital share transactions			(4,765,824	)			20,430,119
Total Increase in Net Assets			116,700,522				105,263,359
Net Assets:
Beginning of period			1,155,997,037				1,050,733,678
End of period (including undistributed net investment income of $2,832,212 and $2,836,318, respectively)		$	1,272,697,559			$	1,155,997,037

 

The accompanying notes are an integral part of the financial statements.

 

5

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

1. Significant Accounting Policies

 

The Adams Express Company (the Fund) is registered under the Investment Company Act of 1940 as a diversified investment company. The Fund is an internally-managed closed-end fund whose investment objectives are preservation of capital, the attainment of reasonable income from investments, and an opportunity for capital appreciation.

 

The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates made by Fund management. Management believes that estimates and security valuations are appropriate; however, actual results may differ from those estimates, and the security valuations reflected in the financial statements may differ from the value the Fund ultimately realizes upon sale of the securities.

 

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.

 

Expenses — The Fund shares certain costs for investment research and data services, administration and operations, travel, training, office expenses, occupancy, accounting and legal services, insurance, and other miscellaneous items with its non-controlled affiliate, Petroleum & Resources Corporation. Shared expenses that are not solely attributable to one fund are allocated to each fund based on relative net asset values or, in the case of investment research staff and related costs, relative market values of portfolio securities in the particular sector of coverage. Expense allocations are updated quarterly, as appropriate, except those related to payroll, which are updated annually.

 

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 specific identification. Dividend income and distributions to shareholders are recognized on the ex-dividend date, and interest income is recognized on the accrual basis.

 

Security Valuation — The Fund’s investments are reported at fair value as defined under accounting principles general accepted in the United States of America. Investments in securities traded on national security exchanges 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 and money market funds) are valued at amortized cost, which approximates fair value. Purchased and written options are valued at the last quoted bid and asked price, respectively. Money market funds are valued at net asset value on the day of valuation.

 

Various inputs are used to determine the fair value of the Fund’s investments. These inputs are summarized in the following three levels:

 

•

Level 1 — fair value is determined based on market data obtained from independent sources; for example, quoted prices in active markets for identical investments,

•

Level 2 — fair value is determined using other assumptions obtained from independent sources; for example, quoted prices for similar investments,

•

Level 3 — fair value is determined using the Fund’s own assumptions, developed based on the best information available in the circumstances.

 

The Fund’s investments at June 30, 2013 were classified as follows:

 

		Level 1				Level 2				Level 3				Total
Common stocks		$	1,258,363,713			$	—			$	—			$	1,258,363,713
Short-term investments			12,186,322				—				—				12,186,322
Total investments		$	1,270,550,035			$	—			$	—			$	1,270,550,035
Written options		$	(204,670	)		$	—			$	—			$	(204,670	)

 

There were no transfers into or from Level 1 or Level 2 during the six months ended June 30, 2013.

 

New Accounting Pronouncements — In February 2013, the Financial Accounting Standards Board issued new guidance, effective for annual and interim periods beginning after December 15, 2012, requiring disclosure of items reclassified out of accumulated other comprehensive income. Adoption had no effect on Fund net assets or results of operations and no material impact on the financial statements.

 

2. Federal Income Taxes

 

No federal income tax provision is required since the Fund’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income to its shareholders. Additionally, management has analyzed and concluded that tax positions included in federal income tax returns from the previous three years that remain subject to examination do not require any provision. Any income tax-related interest or penalties would be recognized as income tax expense. As of June 30, 2013, the identified cost of securities for federal income tax purposes was $1,034,854,760 and net unrealized appreciation aggregated $235,695,275, consisting of gross unrealized appreciation of $257,874,124 and gross unrealized depreciation of $22,178,849.

 

Distributions are determined in accordance with our annual 6% minimum distribution rate commitment, based on the Fund’s average market price, and income tax regulations, which may differ from generally accepted accounting principles. Such differences are primarily related to the Fund’s retirement plans, equity-based compensation, and loss deferrals for wash sales. Differences that are permanent are reclassified in the capital accounts of the Fund’s financial statements and have no impact on net assets.

 

3. Investment Transactions

 

The Fund’s investment decisions are made by a committee of management, and recommendations to that committee are made by the research staff. Purchases and sales of portfolio securities, other than options and short-term investments, during the six months ended June 30, 2013 were $475,151,701 and $492,059,231, respectively.

 

6

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NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

 

 

 

The Fund is subject to changes in the value of equity securities held (“equity price risk”) in the normal course of pursuing its investment objectives. The Fund may purchase and write option contracts to increase or decrease its equity price risk exposure or may write option contracts to generate additional income. Option contracts generally entail risks associated with counterparty credit, liquidity, and unfavorable equity price movements. The Fund has mitigated counterparty credit and liquidity risks by trading its options through an exchange. The risk of unfavorable equity price movements is limited for purchased options to the premium paid and for written options by writing only covered call or collateralized put option contracts, which require the Fund to segregate certain securities or cash at its custodian when the option is written. A schedule of outstanding written option contracts as of June 30, 2013 can be found on page 13.

 

When the Fund writes (purchases) an option, an amount equal to the premium received (paid) by the Fund is recorded as a liability (asset) and is subsequently marked to market daily in the Statement of Assets and Liabilities, with any related change recorded as an unrealized gain or loss in the Statement of Operations. Premiums received (paid) from unexercised options are treated as realized gains (losses) on the expiration date and are separately identified in the Statement of Operations. Upon the exercise of written put (purchased call) option contracts, premiums received (paid) are deducted from (added to) the cost basis of the underlying securities purchased. Upon the exercise of written call (purchased put) option contracts, premiums received (paid) are added to (deducted from) the proceeds from the sale of underlying securities in determining whether there is a realized gain or loss.

 

Transactions in written covered call and collateralized put options during the six months ended June 30, 2013 were as follows:

 

		Covered Calls								Collateralized Puts
		Contracts				Premiums				Contracts				Premiums
Options outstanding, December 31, 2012			1,775			$	212,261				1,946			$	310,460
Options written			3,592				300,405				3,480				452,570
Options terminated in closing purchase transactions			(1,805	)			(148,840	)			—				—
Options expired			(2,263	)			(232,797	)			(4,158	)			(559,113	)
Options exercised			(343	)			(25,239	)			(100	)			(11,450	)
Options outstanding, June 30, 2013			956			$	105,790				1,168			$	192,467

 

4. Capital Stock

 

The Fund has 10,000,000 authorized and unissued preferred shares, $0.001 par value.

 

During 2013, the Fund issued 569 shares of Common Stock at a weighted average price of $11.41 per share as dividend equivalents to holders of deferred stock units and restricted stock units under the 2005 Equity Incentive Compensation Plan.

 

On December 27, 2012, the Fund issued 1,923,171 shares of its Common Stock at a price of $10.455 per share (the average market price on December 10, 2012) to shareholders of record on November 19, 2012, who elected to take stock in payment of the distribution from 2012 capital gain and investment income. During 2012, 1,125 shares were issued at a weighted average price of $10.53 per share as dividend equivalents to holders of deferred stock units and restricted stock units under the 2005 Equity Income Compensation Plan.

 

The Fund 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 2013 and 2012 were as follows:

 

		Shares								Amount
		Six months ended June 30, 2013				Year ended December 31, 2012				Six months ended June 30, 2013				Year ended December  31, 2012
Shares issued in payment of distributions			569				1,924,296			$	6,557			$	20,118,651
Shares purchased (at an average discount from net asset value of 13.1%)			(389,822	)			—				(4,724,925	)			—
Net activity under the 2005 Equity Incentive Compensation Plan			46,897				31,529				(47,456	)			311,468
Net change			(342,356	)			1,955,825			$	(4,765,824	)		$	20,430,119

 

5. Retirement Plans

 

Defined Contribution Plans — The Fund sponsors a qualified defined contribution plan for all employees with at least six months of service and a nonqualified defined contribution plan for eligible employees to supplement the qualified plan. The Fund expensed contributions to the plans in the amount of $134,193, a portion thereof based on company performance, for the six months ended June 30, 2013. The Fund does not provide postretirement medical benefits.

 

Defined Benefit Plans — On October 1, 2009, the Fund froze its non-contributory qualified and nonqualified defined benefit pension plans. Benefits are based on length of service and compensation during the last five years of employment through September 30, 2009, with no additional benefits being accrued beyond that date.

 

The funded status of the plans is recognized as an asset (overfunded plan) or a liability (underfunded plan) in the Statement of Assets and Liabilities. Changes in the prior service costs and accumulated actuarial gains and losses are recognized as accumulated other comprehensive income, a component of net assets, in the year in which the changes occur and are subsequently amortized into net periodic pension cost. Non-recurring settlement costs are recognized in net periodic pension cost when a plan participant receives a lump-sum benefit payment and includes any unamortized actuarial losses attributable to the portion of the projected benefit obligation being satisfied.

 

The Fund’s policy is to contribute annually to the plans those amounts that can be deducted for federal income tax purposes, plus additional amounts as the Fund deems appropriate in order to provide assets sufficient to meet benefits to be paid to plan participants. The Fund made no contributions to the qualified plan and contributed $27,664 to the nonqualified plan during

 

7

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NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

 

 

the six months ended June 30, 2013, and anticipates making additional nonqualified contributions of $57,503 in 2013.

 

Items impacting the Fund’s net periodic pension cost included in investment research and administration expenses and accumulated other comprehensive income were:

 

		Six months ended June 30, 2013				Year ended December 31, 2012
Components of net periodic pension cost
Interest cost		$	159,901			$	359,366
Expected return on plan assets			(173,415	)			(278,506	)
Net loss component			130,034				268,331
Effect of settlement (non-recurring)			903,700				187,740
Net periodic pension cost		$	1,020,220			$	536,931

 

		Six months ended June 30, 2013				Year ended December 31, 2012
Accumulated other comprehensive income
Defined benefit pension plans:
Balance at beginning of period		$	(2,881,871	)		$	(2,638,533	)
Net actuarial gain/(loss) arising during period			213,331				(699,409	)
Reclassifications to net periodic pension cost:
Amortization of net loss			130,034				268,331
Effect of settlement (non-recurring)			903,700				187,740
Balance at end of period		$	(1,634,806	)		$	(2,881,871	)

 

6. Equity-Based Compensation

 

The 2005 Equity Incentive Compensation Plan (“2005 Plan”), adopted at the 2005 Annual Meeting and re-approved at the 2010 Annual Meeting, permits the grant of restricted stock awards (both performance and nonperformance-based), as well as stock option and other stock incentives to key employees and all non-employee directors. Performance-based restricted stock awards vest at the end of a specified three year period, with the ultimate number of shares earned contingent on achieving certain performance targets. If performance targets are not achieved, all or a portion of the performance-based restricted shares are forfeited and become available for future grants. Nonperformance-based restricted stock awards typically vest ratably over a three year period and nonperformance-based restricted stock units (granted to non-employee directors) vest over a one year period. Payment of awards may be deferred, if elected. It is the current intention that employee grants will be performance-based. The 2005 Plan provides for accelerated vesting in the event of death or retirement. Non-employee directors also may elect to defer a portion of their cash compensation, with such deferred amount to be paid by delivery of deferred stock units. Outstanding awards were granted at fair market value on grant date. The 2005 Plan provides for the issuance of up to 3,413,131 shares of the Fund’s Common Stock, of which 3,061,443 shares remain available for future grants at June 30, 2013.

 

A summary of the status of the Fund’s awards granted under the 2005 Plan as of June 30, 2013, and changes during the six month period then ended, is presented below:

 

Awards		Shares/ Units				Weighted Average Grant-Date Fair Value
Balance at December 31, 2012			170,199			$	10.57
Granted:
Restricted stock			92,922				11.25
Restricted stock units			5,250				11.67
Deferred stock units			2,654				11.26
Vested & issued			(31,003	)			10.02
Forfeited			(45,779	)			10.51
Balance at June 30, 2013 (includes 114,557 performance-based awards and 79,666 nonperformance-based awards)			194,243			$	10.96

 

Compensation costs resulting from awards granted under the 2005 Plan are based on the fair value of the award on grant date (determined by the average of the high and low price on grant date) and recognized on a straight-line basis over the requisite service period. For those awards with performance conditions, compensation costs are based on the most probable outcome and, if such goals are not met, compensation cost is not recognized and any previously recognized compensation cost is reversed. The total compensation costs/(credits) for restricted stock granted to employees for the period ended June 30, 2013 were $(17,138). The total compensation costs for restricted stock units granted to non-employee directors for the period ended June 30, 2013 were $31,552. As of June 30, 2013, there were total unrecognized compensation costs of $1,152,371, a component of additional capital surplus, related to nonvested equity-based compensation arrangements granted under the 2005 Plan. That cost is expected to be recognized over a weighted average period of 1.73 years. The total fair value of shares and units vested and issued during the six month period ended June 30, 2013 was $349,076.

 

 

7. Officer and Director Compensation

 

The aggregate remuneration paid during the six months ended June 30, 2013 to officers and directors amounted to $2,669,415, of which $206,252 was paid to directors who were not officers. These amounts represent the taxable income to the Fund’s officers and directors and therefore differ from the amounts reported in the accompanying Statement of Operations that are recorded and expensed in accordance with generally accepted accounting principles.

 

8. Portfolio Securities Loaned

 

The Fund makes loans of securities to approved brokers to earn additional income. It receives as collateral cash deposits, U.S. Government securities, or bank letters of credit valued at 102% of the value of the securities on loan. The market value of the loaned securities is calculated based upon the most recent closing prices and any additional required collateral is delivered to the Fund on the next business day. Cash deposits are placed in a registered money market fund. The Fund 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 Fund also continues to receive interest or dividends on the securities

 

8

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NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

 

 

loaned. 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 Fund. At June 30, 2013, the Fund had no outstanding securities on loan. The Fund is indemnified by the Custodian, serving as lending agent, for the loss of loaned securities and has the right under the lending agreement to recover the securities from the borrower on demand.

 

9. Operating Lease Commitment

 

The Fund leases office space and equipment under operating lease agreements expiring at various dates through the year 2016. The Fund recognized rental expense of $74,951 in the first half of 2013, and its minimum rental commitments are as follows:

 

2013		$	78,436
2014			158,558
2015			158,836
2016			76,736
Total		$	472,566

 

9

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FINANCIAL HIGHLIGHTS

 

 

 

		(unaudited) Six Months Ended										Year Ended December 31
		June 30, 2013				June 30, 2012						2012				2011				2010				2009				2008
Per Share Operating Performance
Net asset value, beginning of period			$12.43				$11.54						$11.54				$12.65				$11.95				$9.61				$15.72
Net investment income			0.08				0.08						0.19				0.16				0.15				0.13				0.25
Net realized gains and increase (decrease) in unrealized appreciation			1.30				0.83						1.41				(0.56)				1.10				2.64				(5.68)
Change in accumulated other comprehensive income (note 5)			0.01				—						—				(0.01)				—				0.04				(0.05)
Total from investment operations			1.39				0.91						1.60				(0.41)				1.25				2.81				(5.48)
Less distributions
Dividends from net investment income			(0.08)				(0.08)						(0.18)				(0.15)				(0.14)				(0.15)				(0.26)
Distributions from net realized gains			(0.02)				(0.02)						(0.49)				(0.50)				(0.37)				(0.30)				(0.38)
Total distributions			(0.10)				(0.10)						(0.67)				(0.65)				(0.51)				(0.45)				(0.64)
Capital share repurchases (note 4)			0.01				—						—				—				—				0.02				0.05
Reinvestment of distributions			—				—						(0.04)				(0.05)				(0.04)				(0.04)				(0.04)
Total capital share transactions			0.01				—						(0.04)				(0.05)				(0.04)				(0.02)				0.01
Net asset value, end of period			$13.73				$12.35						$12.43				$11.54				$12.65				$11.95				$9.61
Market price, end of period			$11.97				$10.55						$10.59				$9.64				$10.72				$10.10				$8.03
Total Investment Return
Based on market price			14.0%				10.5%						16.9%				(4.2)%				11.5%				32.1%				(38.9)%
Based on net asset value			11.4%				8.0%						14.7%				(2.8)%				11.2%				30.6%				(34.4)%
Ratios/Supplemental Data
Net assets, end of period (in 000’s)			$1,272,698				$1,125,291						$1,155,997				$1,050,734				$1,124,672				$1,045,027				$840,012
Ratio of expenses to average net assets*			0.80%	†			0.68%	†					0.65%				0.55%				0.58%				0.90%				0.48%
Ratio of net investment income to average net assets**			1.19%	†			1.28%	†					1.54%				1.25%				1.29%				1.30%				1.82%
Portfolio turnover			76.99%	†			27.72%	†					27.40%				21.50%				16.15%				15.05%				18.09%
Number of shares outstanding at end of period (in 000’s)			92,687				91,106						93,030				91,074				88,885				87,415				87,406

 

*

For the six months ended in 2013 and 2012, the annualized ratios of expenses to average net assets were 0.65% and 0.63%, respectively, after adjusting for non-recurring pension expenses as described in footnote 5. For calendar years 2012 and 2009, the adjusted ratios were 0.63% and 0.76%, respectively.

**

For the six months ended in 2013 and 2012, the annualized ratios of net investment income to average net assets were 1.34% and 1.33%, respectively, after adjusting for non-recurring pension expenses as described in footnote 5. For calendar years 2012 and 2009, the adjusted ratios were 1.56% and 1.44%, respectively.

†	Ratios presented on an annualized basis.

 

10

---

SCHEDULE OF INVESTMENTS

 

 

 

June 30, 2013

(unaudited)

 

		Shares				Value (A)
Common Stocks — 98.9%
Consumer Discretionary — 10.6%
Bed Bath & Beyond Inc. (B)			105,000			$	7,449,750
Coach, Inc.			130,000				7,421,700
Comcast Corp.			400,000				16,752,000
Dollar General Corp. (B)			250,000				12,607,500
Lowe’s Companies, Inc.			550,000				22,495,000
Marriott International Inc. (Class A)			300,000				12,111,000
McDonald’s Corp.			180,000				17,820,000
Ryland Group, Inc. (E)			180,500				7,238,050
Target Corp.			120,000				8,263,200
Walt Disney Co.			360,000				22,734,000
							134,892,200
Consumer Staples — 9.5%
Bunge Ltd.			100,000				7,077,000
Coca-Cola Co.			300,000				12,033,000
CVS/Caremark Corp.			295,000				16,868,100
Diageo plc ADR			50,000				5,747,500
General Mills Inc.			230,000				11,161,900
PepsiCo, Inc. (F)			250,000				20,447,500
Philip Morris International Inc.			250,000				21,655,000
Procter & Gamble Co.			175,000				13,473,250
Unilever plc ADR			325,000				13,146,250
							121,609,500
Energy — 10.0%
Anadarko Petroleum Corp.			50,000				4,296,500
Chevron Corp.			235,000				27,809,900
Exxon Mobil Corp. (F)			105,000				9,486,750
Halliburton Co.			150,000				6,258,000
Kinder Morgan Inc.			170,000				6,485,500
Petroleum & Resources Corp. (C)			2,186,774				56,156,356
Phillips 66			128,850				7,590,553
Schlumberger Ltd.			120,000				8,599,200
							126,682,759
Financials — 16.7%
ACE Ltd. (B)			221,000				19,775,080
Affiliated Managers Group, Inc. (B)			51,700				8,475,698
Allstate Corp.			355,000				17,082,600
AXIS Capital Holdings, Ltd.			278,000				12,726,840
Bank of New York Mellon Corp.			323,775				9,081,889
Capital One Financial Corp.			245,000				15,388,450
Citigroup Inc.			416,000				19,955,520
Fifth Third Bancorp.			665,000				12,003,250
iShares US Real Estate ETF			455,000				30,207,450
JPMorgan Chase & Co.			600,000				31,674,000
MetLife Inc.			273,000				12,492,480
Wells Fargo & Co.			560,000				23,111,200
							211,974,457
Health Care — 13.4%
Allergan, Inc.			128,000			$	10,782,720
Biogen IDEC Inc. (B)			30,000				6,456,000
Celgene Corp. (B)			120,000				14,029,200
Covidien plc			120,000				7,540,800
Express Scripts Holding Co. (B)			255,000				15,730,950
Gilead Sciences, Inc. (B)			414,000				21,200,940
McKesson Corp.			116,000				13,282,000
Merck & Co. Inc.			500,000				23,225,000
Pfizer Inc.			1,090,000				30,530,900
UnitedHealth Group Inc.			287,500				18,825,500
Zimmer Holdings, Inc.			115,000				8,618,100
							170,222,110
Industrials — 10.5%
Boeing Co.			210,000				21,512,400
Caterpillar Inc.			120,000				9,898,800
Eaton Corporation plc			205,000				13,491,050
Emerson Electric Co.			160,000				8,726,400
FedEx Corp.			75,000				7,393,500
General Electric Co.			1,095,000				25,393,050
Honeywell International Inc.			295,000				23,405,300
Masco Corp.			365,000				7,113,850
United Technologies Corp.			184,500				17,147,430
							134,081,780
Information Technology — 16.9%
Apple Inc. (F)			93,000				36,835,440
Automatic Data Processing, Inc.			200,000				13,772,000
Cisco Systems, Inc.			700,000				17,017,000
eBay Inc. (B)			280,000				14,481,600
Google Inc. (Class A) (B)			18,000				15,846,660
Intel Corp.			570,000				13,805,400
International Business Machines Corp.			105,000				20,066,550
MasterCard, Inc.			23,000				13,213,500
Microsoft Corp.			700,000				24,171,000
Oracle Corp.			691,000				21,227,520
QUALCOMM Inc.			400,000				24,432,000
							214,868,670
Materials — 2.8%
CF Industries Holdings, Inc. (E)			38,531				6,608,067
Eastman Chemical Co.			85,000				5,950,850
LyondellBasell Industries N.V. (Class A)			238,000				15,769,880
Praxair, Inc.			67,500				7,773,300
							36,102,097
Telecom Services — 2.9%
AT&T Corp.			584,000				20,673,600
Verizon Communications Inc.			315,000				15,857,100
							36,530,700

 

11

---

SCHEDULE OF INVESTMENTS (CONTINUED)

 

 

 

June 30, 2013

(unaudited)

 

		Principal/ Shares				Value (A)
Utilities — 2.5%
NiSource Inc.			456,000			$	13,059,840
Pinnacle West Capital Corp.			345,000				19,137,150
							32,196,990
S&P 500 Index — 3.1%
SPDR S&P ETF Trust			245,000				39,202,450
Total Common Stocks (Cost $1,020,151,945)							1,258,363,713
Short-Term Investments — 0.9%
Money Market Account — 0.9%
M&T Bank, 0.15%		$	12,056,322				12,056,322
Money Market Funds — 0.0%
Fidelity Institutional Money Market - Money Market Portfolio (Institutional Class), 0.12% (D)			100,000				100,000
RBC U.S. Government Money Market (Institutional Class I), 0.01% (D)			10,000				10,000
Vanguard Federal Money Market, 0.02% (D)			10,000			$	10,000
Western Asset Institutional Government Reserves (Institutional Class), 0.04% (D)			10,000				10,000
							130,000
Total Short-Term Investments (Cost $12,186,322)							12,186,322
Total Investments — 99.8% (Cost $1,032,338,267)							1,270,550,035
Cash, receivables, prepaid expenses and other assets, less liabilities — 0.2%							2,147,524
Net Assets — 100.0%						$	1,272,697,559

 

Notes:

(A)	Common stocks are listed on the New York Stock Exchange or the NASDAQ and are valued at the last reported sale price on the day of valuation. See note 1 to financial statements.

(B)	Presently non-dividend paying.

(C)	Non-controlled affiliate, a closed-end sector fund, registered as an investment company under the Investment Company Act of 1940.

(D)	Rate presented is as of period-end and represents the annualized yield earned over the previous seven days.

(E)	All or a portion of this security is pledged to cover open written call option contracts. Aggregate market value of such pledged securities is $4,569,400.

(F)	All or a portion of this security is pledged to collateralize open written put option contracts with an aggregate market value to deliver upon exercise of $9,922,000.

 

12

---

SCHEDULE OF OUTSTANDING WRITTEN OPTION CONTRACTS

 

 

 

June 30, 2013

(unaudited)

 

Contracts (100 shares each)				Security		Strike Price		Contract Expiration Date								Value
	COVERED CALLS
	56			CF Industries Holdings, Inc.		$225			Aug				13			$	1,120
	900			Ryland Group, Inc.		55			Jul				13				4,500
	956																5,620
	COLLATERALIZED PUTS
	58			Biogen IDEC Inc.		190			Jul				13				4,640
	58			Biogen IDEC Inc.		200			Jul				13				11,310
	76			CF Industries Holdings, Inc.		170			Aug				13				51,300
	200			Halliburton Co.		36			Jul				13				1,200
	316			LyondellBasell Industries N.V. (Class A)		55			Sep				13				50,560
	460			Occidental Petroleum Corp.		85			Aug				13				80,040
	1,168																199,050
				Total Option Liability (Unrealized Gain of $93,587)												$	204,670

 

13

---

HISTORICAL FINANCIAL STATISTICS

 

 

 

(unaudited)

 

Dec. 31		Value Of Net Assets				Shares Outstanding				Net Asset Value Per Share				Market Value Per Share				Income Dividends Per Share				Capital  Gains Distributions Per Share				Total Dividends and Distributions Per Share				Annual Distribution Rate*
2002		$	1,024,810,092				84,536,250			$	12.12			$	10.57			$	.19			$	.57			$	.76				6.2	%
2003			1,218,862,456				84,886,412				14.36				12.41				.17				.61				.78				6.8
2004			1,295,548,900				86,135,292				15.04				13.12				.24				.66				.90				7.1
2005			1,266,728,652				86,099,607				14.71				12.55				.22				.64				.86				6.7
2006			1,377,418,310				86,838,223				15.86				13.87				.23				.67				.90				6.8
2007			1,378,479,527				87,668,847				15.72				14.12				.32				.71				1.03				7.1
2008			840,012,143				87,406,443				9.61				8.03				.26				.38				.64				5.7
2009			1,045,027,339				87,415,193				11.95				10.10				.15				.30				.45				5.2
2010			1,124,671,966				88,885,186				12.65				10.72				.14				.37				.51				5.1
2011			1,050,733,678				91,073,899				11.54				9.64				.15				.50				.65				6.1
2012			1,155,997,037				93,029,724				12.43				10.59				.18				.49				.67				6.3
June 30, 2013			1,272,697,559				92,687,368				13.73				11.97				.13	†			.02	†			.15	†			—

 

*

The annual distribution rate is the total dividends and capital gain distributions during the year divided by the average month-end market price of the Fund’s Common Stock for the calendar year in years prior to 2011 and for the twelve months ended October 31 beginning in 2011, which is consistent with the calculation to determine the annual minimum 6% distribution rate commitment announced in September 2011.

†	Paid or declared.

 

 

 

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

 

14

---

OTHER INFORMATION

 

 

 

Dividend Payment Schedule

 

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

 

Statement on Quarterly Filing of Complete Portfolio Schedule

 

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

 

Proxy Voting Policies and Record

 

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

 

Privacy Policy

 

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

 

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

 

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

 

 

 

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

 

15

 

---

THE ADAMS EXPRESS COMPANY

 

 

Board of Directors

 

Enrique R. Arzac 1,3,5		Roger W. Gale 2,4
Phyllis O. Bonanno 1,3,5		Kathleen T. McGahran  1,2,3,5,6
Kenneth J. Dale 2,4		Craig R. Smith 2,3
Frederic A. Escherich 1,4,5		Mark E. Stoeckle 1

1.	Member of Executive Committee

2.	Member of Audit Committee

3.	Member of Compensation Committee

4.	Member of Retirement Benefits Committee

5.	Member of Nominating and Governance Committee

6.	Chair of the Board

 

Officers

 

Mark E. Stoeckle		Chief Executive Officer
David D. Weaver, CFA		President
Nancy J. F. Prue, CFA		Executive Vice President
Brian S. Hook, CFA, CPA		Vice President, Chief Financial Officer and Treasurer
Lawrence L. Hooper, Jr.		Vice President, General Counsel and Secretary
Richard A. Church		Vice President—Research
David R. Schiminger, CFA		Vice President—Research
D. Cotton Swindell, CFA		Vice President—Research
Christine M. Sloan, CPA		Assistant Treasurer

 

Stock Data

 

Market Price (6/30/13)		$	11.97
Net Asset Value (6/30/13)		$	13.73
Discount:			12.8%

 

New York Stock Exchange ticker symbol: ADX

 

NASDAQ Quotation Symbol for NAV: XADEX

 

Distributions in 2013

 

From Investment Income (paid or declared)		$	0.13
From Net Realized Gains			0.02
Total		$	0.15

 

2013 Dividend Payment Dates

 

March 1, 2013

June 3, 2013

September 3, 2013

December 27, 2013*

 

*Anticipated

 

---

Item 2. Code of Ethics.

Item not applicable to semi-annual report.

 

Item 3. Audit Committee Financial Expert.

Item not applicable to semi-annual report.

 

Item 4. Principal Accountant Fees and Services.

Item not applicable to semi-annual report.

 

Item 5. Audit Committee of Listed Registrants.

Item not applicable to semi-annual report.

 

Item 6. Investments.

(a) This schedule is included as part of the Report to Stockholders filed under Item 1 of this form.

(b) Not applicable.

 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Item not applicable to semi-annual report.

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Item not applicable to semi-annual report.

 

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

	Total Number of Shares (or Units Purchased)		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs
	----------------------------------		----------------------------------		----------------------------------		----------------------------------
January 2013	0		$0.00		0		4,555,295
February 2013	0		$0.00		0		4,555,295
March 2013	0		$0.00		0		4,555,295
April 2013	0		$0.00		0		4,555,295
May 2013	184,105		$12.26		184,105		4,371,190
June 2013	205,717		$12.00		205,717		4,165,473	(2)
	----------------------------------		----------------------------------		----------------------------------
Total	389,822	(1)	$12.12		389,822	(2)

 

(1) There were no shares purchased other than through a publicly announced plan or program.

(2.a) The Plan was announced on December 13, 2012.

(2.b) The share amount approved in 2012 was 5% of outstanding shares, or 4,555,295 shares.

(2.c) Unless reapproved, the Plan will expire on December 31, 2013.

(2.d) None.

(2.e) None.

 

Item 10. Submission of Matters to a Vote of Security Holders.

There were no material changes to the procedures by which shareholders may recommend nominees to the registrant's Board of Directors made or implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (as required by Item 22(b)(15) of Schedule 14A), or this Item.

 

Item 11. Controls and Procedures.

(a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of the disclosure controls and procedures as of a date within 90 days of the filing date of this report.

(b) There have been no significant changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

 

Item 12. Exhibits.

(a)	(1)	Not applicable. See registrant's response to Item 2 above.
	(2)	Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
	(3)	Written solicitation to purchases securities: not applicable.
(b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached.

 

 

SIGNATURES
	Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
The Adams Express Company
By:	/s/ Mark E. Stoeckle
	Mark E. Stoeckle
	Chief Executive Officer
	(Principal Executive Officer)
Date:	July 29, 2013
	Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
By:	/s/ Mark E. Stoeckle
	Mark E. Stoeckle
	Chief Executive Officer
	(Principal Executive Officer)
Date:	July 29, 2013
By:	/s/ Brian S. Hook
	Brian S. Hook
	Vice President, Chief Financial Officer and Treasurer
	(Principal Financial Officer)
Date:	July 29, 2013