Letter to Stockholders
-------------------------------------------------------------------------------
We herewith submit the financial statements for the nine months ended Septem-
ber 30, 2001. In addition, a schedule of investments and summary financial in-
formation for the Company are provided.
Net assets of the Company at September 30, 2001 were $16.31 per share on
80,980,062 shares outstanding, compared with $23.72 per share at December 31,
2000 on 82,292,262 shares outstanding. On March 1, 2001, a distribution of
$0.08 per share was paid consisting of $0.04 from 2000 long-term capital gain,
$0.03 from 2000 investment income, and $0.01 from 2001 investment income, all
taxable in 2001. Regular 2001 investment income dividends of $0.08 per share
were paid on June 1, 2001 and September 1, 2001.
Net investment income for the nine months ended September 30, 2001 amounted to
$16,690,050, compared with $14,087,205 for the same period in 2000. These
earnings are equal to $0.20 and $0.17 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, 2001 amounted to $111,204,399, the equivalent of $1.37 per share.
Both the Standard & Poor's 500 Index and the Dow Jones Industrial Average are
off sharply from the beginning of the year. After two years of outperforming
the S&P 500 Index, Adams Express has underperformed the Index thus far in
2001. There are a number of reasons for our performance which we will review
in this report. However, we want our shareholders to know that we have re-
mained true to our investment philosophy and the policies we use in following
that philosophy. We are still vitally concerned with the preservation of our
shareholders' capital, providing a reasonable income, and an opportunity for
capital gain.
For many years, the typical holding in the Adams Express portfolio has been a
company with a large market capitalization, a strong balance sheet, and good
growth prospects for the next several years. There have been limited invest-
ments in economically cyclical industries, our preference being companies
which do well regardless of the vagaries of the economy. Thus, sector emphasis
has been placed on health care, financials, telecommunications, and utilities,
while steel, housing, capital goods, and transportation have been de-empha-
sized. Technology had been considered less cyclical until very recently, so we
have not hesitated to invest in that sector.
Historically, in times of uncertainty, investors have sought safety in large
capitalization stocks. Since late last year, however, investors have been act-
ing in what might be described as a counter-intuitive fashion. Despite a great
deal of uncertainty about the health of the U.S. economy, as well as of the
rest of the world, investors have eschewed large-capitalization stocks, and
have bought small-caps, cyclicals, and value stocks. As a result, the largest
capitalization stocks have performed worse than any other group. The Adams Ex-
press portfolio, with its emphasis on this group as well as non-cyclicals and
growth-oriented stocks, has therefore underperformed in a market that has been
declining overall.
In addition, our performance would have been better if we had anticipated the
severity of the economic downturn and the rapid and significant deterioration
in the fundamentals of the technology and telecommunications industries. With
the bursting of the Internet "bubble," the demand for networking and data com-
munications equipment essentially evaporated, as did the need for additional
communications services. While there were no Internet investments in the port-
folio, we did have large holdings in technology companies which relied on the
growth of the Internet for orders.
With the re-opening of the market after the tragic events of September 11, in-
vestors have begun to shift their interests again, and Adams Express has
outperformed the market as a whole in an extremely volatile environment. We
believe that, once the political and economic landscapes settle down, earnings
expectations should improve and the market trend should turn upward.
Letter to Stockholders
-------------------------------------------------------------------------------
The companies represented in the portfolio are some of the best in the world.
Many have declined severely in value, far more than a recession or slowing in
growth should warrant. We have reviewed all of our holdings and sold a number
of companies whose recovery may take longer to accomplish. We believe that the
current portfolio should bring the type of investment returns our shareholders
have traditionally come to expect.
Today's market is a difficult test of long-term investing, but those who main-
tain a long-term perspective should be rewarded--not only in Adams but in eq-
uities overall.
----------------
As we look to the future, we are pleased to announce the addition of Mr. Ed-
ward J. Kelly, III to the Board of Directors of the Company, effective October
1, 2001. Mr. Kelly is President and Chief Executive Officer of Mercantile
Bankshares Corporation, a multi-bank holding company based in Baltimore, Mary-
land with assets of approximately $9 billion. Mr. Kelly was previously a Man-
aging Director of J.P. Morgan Chase in New York where he was the head of that
bank's Global Financial Institutions Division. He brings a wealth of invest-
ment knowledge and experience to the Board of Directors.
----------------
Current and potential shareholders can find information about the Company, in-
cluding 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 his-
tory of the Company, historical financial information, and more general indus-
try material. Further information regarding shareholder services is located on
page 14 of this report.
By order of the Board of Directors,
/s/ Douglas G. Ober
Douglas G. Ober,
Chairman and Chief /s/ Joseph M. Truta
Executive Officer Joseph M. Truta,
President
October 19, 2001
2
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
September 30, 2001
(unaudited)
Assets
Investments* at value:
Common stocks and convertible securities
(cost $926,929,253) $1,241,590,638
Non-controlled affiliate, Petroleum &
Resources Corporation
(cost $26,585,260) 43,365,813
Short-term investments (cost $24,355,860) 24,355,860 $1,309,312,311
-----------------------------------------------------------------------------
Cash 76,267
Securities lending collateral 131,726,012
Receivables:
Investment securities sold 10,162,069
Dividends and interest 1,038,133
Prepaid expenses and other assets 6,870,475
-----------------------------------------------------------------------------
Total Assets 1,459,185,267
-----------------------------------------------------------------------------
Liabilities
Open written option contracts at value
(proceeds $385,943) 510,540
Obligations to return securities lending
collateral 131,726,012
Accrued expenses 6,268,683
-----------------------------------------------------------------------------
Total Liabilities 138,505,235
-----------------------------------------------------------------------------
Net Assets $1,320,680,032
-----------------------------------------------------------------------------
Net Assets
Common Stock at par value $1.00 per share,
authorized 150,000,000 shares; issued and
outstanding 80,980,062 shares $ 80,980,062
Additional capital surplus 792,519,907
Undistributed net investment income 4,134,895
Undistributed net realized gain on investments 111,727,827
Unrealized appreciation on investments 331,317,341
-----------------------------------------------------------------------------
Net Assets Applicable to Common Stock $1,320,680,032
-----------------------------------------------------------------------------
Net Asset Value Per Share of Common Stock $16.31
-----------------------------------------------------------------------------
*See Schedule of Investments on pages 9 through 11.
The accompanying notes are an integral part of the financial statements.
3
Statement of Operations
--------------------------------------------------------------------------------
Nine Months Ended September 30, 2001
(unaudited)
Investment Income
Income:
Dividends:
From unaffiliated issuers $ 15,367,349
From non-controlled affiliate 688,954
Interest and other income 2,399,851
-----------------------------------------------------------------------------
Total income 18,456,154
-----------------------------------------------------------------------------
Expenses:
Investment research 101,620
Administration and operations 395,263
Directors' fees 144,250
Reports and stockholder communications 254,214
Transfer agent, registrar and custodian expenses 326,832
Auditing and accounting services 78,485
Legal services 15,719
Occupancy and other office expenses 179,118
Travel, telephone and postage 87,588
Other 183,015
-----------------------------------------------------------------------------
Total expenses 1,766,104
-----------------------------------------------------------------------------
Net Investment Income 16,690,050
-----------------------------------------------------------------------------
Realized Gain and Change in Unrealized Appreciation on
Investments
Net realized gain on security transactions 111,146,986
Net realized gain distributed by regulated investment company
(non-controlled affiliate) 57,413
Change in unrealized appreciation on investments (716,152,003)
-----------------------------------------------------------------------------
Net Loss on Investments (604,947,604)
-----------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $(588,257,554)
-----------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
4
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
Nine Months Ended Year Ended
September 30, 2001 December 31, 2000
------------------ -----------------
(unaudited)
From Operations:
Net investment income $ 16,690,050 $ 20,941,465
Net realized gain on investments 111,204,399 128,091,337
Change in unrealized appreciation on
investments (716,152,003) (251,193,342)
---------------------------------------------------------------------------------
Change in net assets resulting from
operations (588,257,554) (102,160,540)
---------------------------------------------------------------------------------
Dividends to Stockholders from:
Net investment income (16,322,694) (17,702,862)
Net realized gain from investment
transactions (3,278,334) (128,205,341)
---------------------------------------------------------------------------------
Decrease in net assets from distributions (19,601,028) (145,908,203)
---------------------------------------------------------------------------------
From Capital Share Transactions:
Value of shares issued in payment of
exercised options and distributions --0-- 77,508,318
Cash in lieu of fractional shares issued
in payment of 3-for-2 stock split --0-- (123,043)
Cost of shares purchased (Note 4) (23,024,364) (48,555,429)
---------------------------------------------------------------------------------
Change in net assets from capital share
transactions (23,024,364) 28,829,846
---------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (630,882,946) (219,238,897)
Net Assets:
Beginning of period 1,951,562,978 2,170,801,875
---------------------------------------------------------------------------------
End of period (including undistributed net
investment
income of $4,134,895 and $3,767,539,
respectively) $1,320,680,032 $1,951,562,978
---------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
5
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 invest-
ment 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 outstand-
ing voting securities are held by the Company are defined as "Affiliated Com-
panies" in Section 2(a)(3) of the Investment Company Act of 1940.
Security Transactions and Investment Income -- Investment transactions are ac-
counted 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 distribu-
tions to shareholders are recognized on the ex-dividend date, and interest in-
come is recognized on the accrual basis.
2. Federal Income Taxes
The Company's policy is to distribute all of its taxable income to its share-
holders in compliance with the requirements of the Internal Revenue Code ap-
plicable 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, 2001 was $977,893,748, and net
unrealized appreciation aggregated $331,804,506, of which the related gross
unrealized appreciation and depreciation were $532,012,574 and $200,208,068,
respectively.
Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. Accordingly, peri-
odic reclassifications are made within the Company's capital accounts to re-
flect income and gains available for distribution under income tax regula-
tions.
3. Investment Transactions
Purchases and sales of portfolio securities, other than options and short-term
investments, during the nine months ended September 30, 2001 were $259,640,316
and $275,882,081, respectively. Options may be written or purchased by the
Company. The Company, as writer of an option, bears the market risk of an un-
favorable change in the price of the security underlying the written option.
The risk associated with purchasing options is limited to the premium origi-
nally paid. Option transactions comprised an insignificant portion of opera-
tions during the period ended September 30, 2001. 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 October 19, 2000 the Company effected a 3-for-2 stock split. All references
to the number of outstanding shares and per share amounts have been adjusted
retroactively to reflect the stock split.
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 2001 and 2000 were as follows:
Shares Amount
------ ------
Nine months Nine months
ended Year ended ended Year ended
September 30, December 31, September 30, December 31,
2001 2000 2001 2000
------------- ------------ ------------- ------------
Shares issued in payment
of dividends 3,517,794 $77,391,468
Shares issued in payment
of stock option
exercise 3,068 116,850
Shares issued for 3-for-
2 stock split 26,262,073 --
Cash in lieu of
fractional shares
issued in payment of 3-
for-2 stock split (123,043)
--------------------------------------------------------------------------------
Total increase -- 29,782,935 -- 77,385,275
--------------------------------------------------------------------------------
Shares purchased (at a
weighted average
discount from net asset
value of 10.0% and
13.7%, respectively) (1,312,200) (1,385,500) $ (23,024,364) (48,555,429)
--------------------------------------------------------------------------------
Total decrease (1,312,200) (1,385,500) (23,024,364) (48,555,429)
--------------------------------------------------------------------------------
Net change (1,312,200) 28,397,435 $ (23,024,364) $28,829,846
--------------------------------------------------------------------------------
On September 30, 2001 the Company held a total of 1,312,200 shares of its com-
mon stock at a cost of $23,024,364. There were no shares of its common stock
held at December 31, 2000.
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 exercis-
able 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 ex-
ercisable 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 sur-
render. Under the plan, the exercise price of the options and related stock
appreciation
6
Notes to Financial Statements (continued)
-------------------------------------------------------------------------------
rights is reduced by the per share amount of capital gain paid by the Company
during subsequent years. At the beginning of 2001, 339,403 options were out-
standing, with a weighted average exercise price of $8.1169 per share. During
the nine months ended September 30, 2001, the Company granted options includ-
ing stock appreciation rights for 44,214 shares of common stock with a
weighted average exercise price of $20.5776. Stock appreciation rights relat-
ing to 31,728 stock option shares were exercised at a weighted average market
price of $17.3764 per share and the stock options relating to those rights,
which had a weighted average exercise price of $4.7495 per share, were can-
celled. At September 30, 2001, there were outstanding exercisable options to
purchase 110,412 common shares at $3.7033-$20.5417 per share (weighted average
price of $7.1115), and unexercisable options to purchase 241,477 common shares
at $3.7033-$20.5417 per share (weighted average price of $11.3144). The
weighted average remaining contractual life of outstanding exercisable and
unexercisable options is 3.4080 years and 5.7761 years, respectively. Total
compensation expense recognized for the nine months ended September 30, 2001
related to the stock options and stock appreciation rights plan was
$(1,200,828). At Sep- tember 30, 2001, there were 1,266,371 shares available
for future option grants.
5. Retirement Plans
The Company provides retirement benefits for its employees under a non-con-
tributory qualified defined benefit pension plan. The benefits are based on
years of service and compensation during the last 5 years of employment. The
Company's current funding policy is to contribute annually to the plan only
those amounts that can be deducted for federal income tax purposes. The plan
assets consist of investments in individual stocks, bonds and mutual funds.
The actuarially computed net pension cost credit for the nine months ended
September 30, 2001 was $312,657, and consisted of service cost of $153,308,
interest cost of $271,685, expected return on plan assets of $672,835, and net
amortization credit of $64,815.
In determining the actuarial present value of the projected benefit obliga-
tion, the interest rate used for the weighted average discount rate was 7.5%,
the expected rate of annual salary increases was 7.0%, and the long-term ex-
pected rate of return on plan assets was 8.0%.
On January 1, 2001, the projected benefit obligation for service rendered to
date was $4,932,613. During the nine months ended September 30, 2001, the pro-
jected benefit obligation increased due to service cost and interest cost of
$153,308 and $271,685, respectively, and decreased due to benefit payments in
the amount of $154,003. The projected benefit obligation September 30, 2001
was $5,203,603.
On January 1, 2001, the actual fair value of plan assets was $11,316,574. Dur-
ing the nine months ended September 30, 2001, the fair value of plan assets
increased due to the expected return on plan assets of $672,835 and decreased
due to benefit payments in the amount of $154,003. At September 30, 2001, the
projected fair value of plan assets amounted to $11,835,406, which resulted in
excess plan assets of $6,631,803. The remaining components of prepaid pension
cost at September 30, 2001 included $934,123 in unrecognized net gain,
$456,399 in unrecognized prior service cost and $23,981 is the remaining por-
tion of the unrecognized net asset existing at January 1, 1987, which is being
amortized over 15 years. Prepaid pension cost included in other assets at Sep-
tember 30, 2001 was $6,130,098.
In addition, the Company has a nonqualified benefit plan which provides em-
ployees 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, 2001 for employees
and former employees of the Company was $3,991,226. Aggregate remuneration
paid or accrued during the nine months ended September 30, 2001 to officers
and directors amounted to $325,588, which includes a credit of $1,200,828 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 compen-
sation 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 in-
terest or dividends on the securities loaned. The loans are secured by collat-
eral 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, 2001, the Company had securities on loan of
$124,215,716 and held collateral of $131,726,012.
----------------
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 Com-
pany, 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.
7
Financial Highlights
--------------------------------------------------------------------------------
Nine Months Ended
----------------------
(unaudited)
Year Ended December 31
Sept. 30, Sept. 30, -----------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---------- ---------- ----------- ----------- ----------- ----------- -----------
Per Share Operating Performance*
Net asset value, beginning of period $23.72 $26.85 $26.85 $21.69 $19.01 $15.80 $14.24
------------------------------------------------------------------------------------------------------------------------------
Net investment
income 0.20 0.17 0.26 0.25 0.30 0.29 0.35
Net realized gains and change in
unrealized appreciation and other
changes (7.39) 1.53 (1.63) 6.54 3.78 4.22 2.36
------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (7.19) 1.70 (1.37) 6.79 4.08 4.51 2.71
------------------------------------------------------------------------------------------------------------------------------
Capital share
repurchases 0.02 0.10 0.09 -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
Less
distributions
Dividends from net investment income (0.20) (0.19) (0.22) (0.26) (0.30) (0.29) (0.35)
Distributions from net realized gains (0.04) (0.05) (1.63) (1.37) (1.10) (1.01) (0.80)
------------------------------------------------------------------------------------------------------------------------------
Total
distributions (0.24) (0.24) (1.85) (1.63) (1.40) (1.30) (1.15)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.31 $28.41 $23.72 $26.85 $21.69 $19.01 $15.80
------------------------------------------------------------------------------------------------------------------------------
Per share market price, end of period $14.90 $25.75 $21.00 $22.38 $17.75 $16.13 $13.17
Total Investment Return
Based on market
price (28.1)% 10.2% 1.7% 36.1% 19.3% 33.1% 16.4%
Based on net
asset value (30.3)% 6.8% (4.3)% 33.6% 23.7% 30.7% 21.0%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $1,320,680 $2,238,273 $1,951,563 $2,170,802 $1,688,080 $1,424,170 $1,138,760
Ratio of expenses to average net assets 0.14%+ 0.31%+ 0.24% 0.32% 0.22% 0.39% 0.34%
Ratio of net investment income to
average net
assets 1.33%+ 0.85%+ 0.97% 1.06% 1.48% 1.61% 2.30%
Portfolio
turnover 21.29%+ 12.24%+ 12.74% 15.94% 22.65% 17.36% 19.60%
Number of shares outstanding at
end of period (in 000's)* 80,980 78,801 82,292 80,842 77,815 74,924 72,055
--------
* Prior year data have been adjusted to reflect the 3-for-2 stock split ef-
fected in October, 2000.
+ Ratios presented on an annualized basis.
8
Schedule of Investments
--------------------------------------------------------------------------------
September 30, 2001
(unaudited)
Prin. Amt.
or Shares Value (A)
---------- ---------
Stocks And Convertible Securities -- 97.3%
Basic Materials -- 1.8%
Engelhard Corp. 530,000 $12,243,000
Mead Corp. 400,000 11,072,000
-----------
23,315,000
-----------
Capital Goods -- 10.1%
Black & Decker Corp. 300,000 9,360,000
General Electric Co. 1,650,000 61,380,000
ITT Industries 355,000 15,904,000
Minnesota Mining &
Manufacturing Co. 285,000 28,044,000
United Technologies Corp. 400,000 18,600,000
-----------
133,288,000
-----------
Communication Services -- 8.1%
Telecommunications --
Cellular and Wireless -- 1.9%
Nextel Communications Inc.
5.25% Conv. Notes
due 2010 (B) $10,000,000 4,737,500
Nextel Communications Inc.
(C)(D) 1,040,000 9,006,400
Vodafone Group plc ADS (C) 492,614 10,817,793
-----------
24,561,693
-----------
Telephone -- 6.2%
American Tower Corp.
5.00% Conv. Notes
due 2010 (B) $10,000,000 7,100,000
BellSouth Corp. 440,000 18,282,000
Global Crossing Ltd. 6.75%
Conv. Pfd. due 2012 (C) 40,000 1,400,000
Qwest Communications
International, Inc.
5.75% TRENDS Pfd.
due 2003 (B) 538,000 18,426,500
RCN Corp. (C)(D) 280,000 896,000
SBC Communications Inc. 700,000 32,984,000
Time Warner Telecom Inc. (C)(D) 404,500 2,932,625
-----------
82,021,125
-----------
Prin. Amt.
or Shares Value (A)
---------- ---------
Consumer -- 6.7%
BJ's Wholesale Club, Inc. 330,000 $15,711,300
Coca-Cola Co. 170,000 7,964,500
Dean Foods Co. (C) 300,000 13,875,000
Hershey Foods Corp. 110,000 7,190,700
Ivex Packaging Corp. (D) 520,000 8,866,000
PepsiCo, Inc. 315,000 15,277,500
Procter & Gamble Co. 170,000 12,374,300
Tiffany & Co. (C) 350,000 7,577,500
-----------
88,836,800
-----------
Energy -- 8.3%
BP plc ADR 270,000 13,275,902
Calpine Capital Trust 5.75%
Conv. Pfd. HIGH TIDES (C) 182,250 13,395,375
Calpine Corp. (C)(D) 40,000 912,400
Enron Corp. (C) 450,000 12,253,500
Exxon Mobil Corp. 316,836 12,483,338
Petroleum & Resources
Corporation (E) 1,913,761 43,365,813
Williams Companies, Inc. 500,000 13,650,000
-----------
109,336,328
-----------
Financial -- 20.4%
Banking -- 12.3%
BankNorth Group, Inc. 474,000 10,579,680
Citigroup Inc. 401,023 16,241,436
Federal Home Loan Mortgage
Corp. 345,000 22,425,000
Greenpoint Financial Corp. (C) 435,000 15,268,500
Investors Financial Services
Corp. 510,000 29,396,400
Mellon Financial Corp. 420,000 13,578,600
Provident Bankshares Corp. 335,021 6,934,944
Wachovia Corp. 380,000 11,780,000
Wells Fargo & Co. 550,000 24,447,500
Wilmington Trust Corp. 210,000 11,592,000
-----------
162,244,060
-----------
Insurance -- 8.1%
AMBAC Financial Group, Inc. 569,400 31,151,874
American International Group,
Inc. 759,375 59,231,251
Annuity & Life Re (Holdings),
Ltd. 500,000 16,975,000
-----------
107,358,125
-----------
9
Schedule of Investments (continued)
--------------------------------------------------------------------------------
September 30, 2001
(unaudited)
Prin. Amt
or Shares Value (A)
--------- ---------
Health Care -- 18.1%
Abbott Laboratories 350,000 $ 18,147,500
Affymetrix Inc. (C)(D) 210,000 3,370,500
American Home Products
Corp. 300,000 17,475,000
Applera Corp. - Applied
Biosystems Group 210,000 5,124,000
Baxter International Inc. 510,000 28,075,500
Bristol-Myers Squibb Co. 105,000 5,833,800
Caliper Technologies (C)(D) 200,800 1,857,400
Elan Corp., plc ADR (C)(D) 550,000 26,647,500
Genentech, Inc. (D) 400,000 17,600,000
GlaxoSmithKline plc ADR 250,360 14,050,204
HCA Inc. (C) 390,000 17,280,900
Human Genome Sciences
Inc. (C)(D) 200,000 6,162,000
Johnson & Johnson 360,000 19,944,000
Lilly (Eli) & Co. 190,000 15,333,000
Merck & Co., Inc. 250,000 16,650,000
Pfizer Inc. 165,000 6,616,500
Pharmacia Corp. 368,900 14,962,584
Vertex Pharmaceuticals
Inc. (D) 248,016 4,474,209
------------
239,604,597
------------
Technology -- 12.4%
Communication Equipment -- 4.3%
Corning Inc. 1,170,000 10,319,400
Ericsson (L.M.) Telephone Co.
ADR 2,000,000 6,980,000
Lucent Technologies Inc. 400,000 2,292,000
Motorola, Inc. 495,622 7,731,703
Nokia Corp. ADR (C) 1,840,000 28,796,000
------------
56,119,103
------------
Computer Related -- 5.3%
BEA Systems Inc. (C)(D) 370,000 3,548,300
BMC Software Inc. (D) 310,000 3,937,000
Cisco Systems, Inc. (D) 1,835,000 22,350,300
DiamondCluster International
Inc. (C)(D) 472,500 4,654,125
Oracle Corp. (D) 1,180,000 14,844,400
QRS Corp. (C)(D) 417,500 3,507,000
Sapient Corp. (D) 1,150,000 4,427,500
Siebel Systems Inc. (D) 195,000 2,536,950
Sun Microsystems Inc. (D) 515,000 4,259,050
Symantec Corp. (C)(D) 182,500 6,327,275
------------
70,391,900
------------
Electronics -- 2.8%
Intel Corp. 690,000 14,069,100
Solectron Corp. (D) 2,000,000 23,300,000
------------
37,369,100
------------
Prin. Amt.
or Shares Value (A)
---------- ---------
Transportation -- 2.1%
Canadian National Railway Co.
5.25% Conv. Pfd. QUIDS
due 2029 170,000 $ 9,232,700
Canadian National Railway
Co. (C) 85,000 3,234,250
United Parcel Service, Inc. 300,000 15,594,000
-------------
28,060,950
-------------
Utilities -- 9.3%
Black Hills Corp. 555,000 16,938,600
CINergy Corp. 300,000 9,261,000
Duke Energy Corp. 8.25%
Conv. Pfd. due 2004 400,000 10,520,000
Duke Energy Corp. (C) 355,000 13,436,750
Keyspan Corp. 400,000 13,296,000
Mirant Corp. (C)(D) 400,000 8,760,000
Northwestern Corp. 500,000 11,000,000
Orion Power Holdings, Inc. (D) 712,000 18,156,000
Philadelphia Suburban Corp. 132,000 3,466,320
TECO Energy, Inc. (C) 650,000 17,615,000
-------------
122,449,670
-------------
Total Stocks and Convertible Securities
(Cost $953,514,513) (F) 1,284,956,451
-------------
10
Schedule of Investments (continued)
-------------------------------------------------------------------------------
September 30, 2001
(unaudited)
Prin. Amt. Value (A)
---------- ---------
Short-Term Investments -- 1.9%
U.S. Government Obligations -- 0.4%
U.S. Treasury Bills,
3.33%, due 11/23/01 $5,000,000 $ 4,975,488
--------------
Commercial Paper -- 1.5%
Chevron USA,
2.90%, due 10/02/01 4,125,000 4,124,668
Ford Motor Credit Corp.,
3.00%, due 10/11/01 9,290,000 9,282,258
General Electric Capital
Corp., 3.12%,
due 10/04/01 5,975,000 5,973,446
--------------
19,380,372
--------------
Value (A)
---------
Total Short-Term Investments
(Cost $24,355,860) $ 24,355,860
--------------
Total Investments
(Cost $977,870,373) 1,309,312,311
Cash, receivables and other assets, less
liabilities 11,367,721
--------------
Net Assets -- 100.0% $1,320,680,032
==============
-------------------------------------------------------------------------------
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 re-
stricted securities.
(B) Restricted securities (American Tower Corp. 5% Conv. Notes due 2010, ac-
quired 2/9/00-4/13/00, cost $10,037,239, Nextel Communications Inc. 5.25%
Conv. Notes due 2010, acquired 1/21/00, cost $10,000,000, and Qwest Commu-
nications International, Inc. 5.75% TRENDS Pfd. due 2003, acquired
12/4/98-2/21/01, cost $32,969,481).
(C) All or a portion of these securities is on loan. See Note 7 to Financial
Statements.
(D) Presently non-dividend paying.
(E) Non-controlled affiliate, a closed-end sector fund.
(F) The aggregate market value of stocks held in escrow at September 30, 2001
covering open call option contracts written was $5,018,050. In addition,
the aggregate market value of securities segregated by the custodian re-
quired to collateralize open put option contracts written was $1,693,650.
11
Principal Changes in Portfolio Securities
--------------------------------------------------------------------------------
During the Three Months Ended September 30, 2001
(unaudited)
Shares
------------------------------------------------
Held
Additions Reductions September 30, 2001
--------- ---------- ------------------
BEA Systems Inc. ............ 217,500 370,000
BJ's Wholesale Club, Inc. ... 330,000 330,000
Bristol-Myers Squibb Co. .... 105,000 105,000
Exxon Mobil Corp. ........... 158,418(/1/) 316,836
HCA Inc. .................... 210,000 390,000
Hershey Foods Corp. ......... 110,000 110,000
Pfizer Inc. ................. 165,000 165,000
Philadelphia Suburban
Corp. ...................... 132,000 132,000
Siebel Systems Inc. ......... 95,000 195,000
Vodafone Group plc ADS....... 205,114(/2/) 492,614
Wachovia Corp. .............. 190,000(/1/) 380,000
Ericsson (L.M.) Telephone Co.
ADR......................... 1,133,333 2,000,000
General Electric Co. ........ 205,000 1,650,000
Investors Financial Services
Corp. ...................... 48,500 510,000
Ivex Packaging Corp. ........ 180,000 520,000
MediaOne Group, Inc. 6.25%
PIES due 2001............... 85,000(/2/) --
Nortel Networks Corp. ....... 600,000 --
Pall Corp. .................. 600,000 --
SBC Communications Inc. ..... 87,960 700,000
Schlumberger Ltd. ........... 88,400 --
WorldCom, Inc. .............. 550,000 --
--------
(/1/)By stock split.
(/2/)Received Vodafone Group plc ADS in exchange for MediaOne Group, Inc. 6.25%
PIES due 2001.
-------------------
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 pur-
chase 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 origi-
nal cost. Past performance is not indicative of future investment results.
12
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*
----------- ---------- ------------ --------- -------------- -------------
1991.................... $ 661,895,779 49,121,246 $13.47 $.36 $ .73
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
September 30, 2001
(unaudited)............ 1,320,680,032 80,980,062 16.31 .20 .04
--------
* 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
13
Shareholder Information and Services
-------------------------------------------------------------------------------
DIVIDEND PAYMENT SCHEDULE
The Company presently pays dividends four times a year, as follows: (a) three
interim distributions on or about March 1, June 1, and September 1, and (b) a
"year-end" distribution, payable in late December, consisting of the estimated
balance of the net investment income for the year and the net realized capital
gain earned through October 31. Stockholders may elect to receive the year-end
distribution in stock or cash. In connection with this distribution, all
stockholders of record are sent a dividend announcement notice and an election
card in mid-November.
Stockholders holding shares in "street" or brokerage accounts may make their
election by notifying their brokerage house representative.
BuyDIRECTSM*
BuyDIRECT is a direct purchase and sale plan, as well as a dividend reinvest-
ment plan, sponsored and administered by our transfer agent, The Bank of New
York. The Plan provides registered stockholders and interested first time in-
vestors an affordable alternative for buying, selling, and reinvesting in
Adams Express shares. Direct purchase plans are growing in popularity and
Adams Express is pleased to participate in such a plan.
The costs to participants in administrative service fees and brokerage commis-
sions for each type of transaction are listed below. Please note that the fees
for the reinvestment of dividends as well as the $0.05 per share commission
for each share purchased under the Plan have not increased since 1973.
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 regis-
tered 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 The Bank of New York
Company Shareholder Relations Dept.-8W
Lawrence L. P.O. Box 11258
Hooper, Jr., Church Street Station
Vice President, New York, NY 10286
Secretary and (877) 260-8188
General Counsel Website:
Seven St. Paul http://stock.bankofny.com
Street, E-mail:
Suite 1140 Shareowner-svcs@ bankofny.com
Baltimore, MD
21202
(800) 638-2479
Website:
www.adamsexpress.com
E-mail:
contact@adamsexpress.com
*BuyDIRECT is a service mark of The Bank of New York.
**The year-end dividend and capital gain distribution may be made in newly is-
sued shares of common stock in which event there would be no fees or commis-
sions in connection with this dividend and capital gain distribution.
14
THE ADAMS EXPRESS COMPANY
--------------------------------------------------------------------------------
Board of Directors
Enrique R. Arzac/2,4/ Douglas G. Ober/1/
Daniel E. Emerson/1,4/ Landon Peters/3,4/
Edward J. Kelly, III* John J. Roberts/2,4/
Thomas H. Lenagh/2,3/ Susan C. Schwab/1,3/
W.D. MacCallan/1,4/ 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
* Effective October 1, 2001
Officers
Douglas G. Ober Chairman and
Chief Executive Officer
Joseph M. Truta President
Richard F. Koloski Executive Vice President
Richard B. Tumolo Vice President--Research
Lawrence L. Hooper, Jr. Vice President,
Secretary and
General Counsel
Maureen A. Jones Vice President and
Treasurer
Christine M. Sloan Assistant Treasurer
Geraldine H. Stegner Assistant Secretary
----------
Stock Data
----------
Price (9/30/01) $14.90
Net Asset Value (9/30/01) $16.31
Discount: 8.6%
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 2001
---------------------
From Investment Income $0.20
From Net Realized Gains 0.04
-----
Total $0.24
=====
---------------------------
2001 Dividend Payment Dates
---------------------------
March 1, 2001
June 1, 2001
September 1, 2001
December 27, 2001*
*Anticipated
[GRAPHIC]
[LOGO] ADAMS EXPRESS COMPANY
Third Quarter Report
--------------------
September 30, 2001