THE ADAMS EXPRESS COMPANY
- -----------------------------------------------------------
Board of Directors
Enrique R. Arzac(3,4) Augustine R. Marusi(1,3)
Leigh Carter(1,2) W. Perry Neff(1,4)
Allan Comrie(1,3) Douglas G. Ober(1)
Daniel E. Emerson(1,3) Landon Peters(1,3)
Thomas H. Lenagh(2,4) John J. Roberts
W.D. MacCallan(2,4) Robert J.M. Wilson(2,4)
1. Member of Executive Committee
2. Member of Audit Committee
3. Member of Compensation Committee
4. Member of Retirement Committee
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
Simeon F. Wooten, III Vice President--Research
Lawrence L. Hooper, Jr. Secretary and
General Counsel
Maureen A. Jones Treasurer
Dana M. Cannon Assistant Treasurer
Geraldine H. Stegner Assistant Secretary
- -----------------------------------------------------------
Stock Data
- -----------------------------------------------------------
Price (9/30/97) $24.75
Net Asset Value (9/30/97) $29.48
Discount: 16.0%
New York Stock Exchange and Pacific Exchange ticker sym-
bol: ADX
Newspaper stock listings are generally under the abbrevia-
tion: AdaEx
- -----------------------------------------------------------
Distributions in 1997
- -----------------------------------------------------------
From Investment Income $0.27
From Net Realized Gains 0.09
-----
Total $0.36
=====
- -----------------------------------------------------------
1997 Dividend Payment Dates
- -----------------------------------------------------------
March 1, 1997
June 1, 1997
September 1, 1997
December 27, 1997*
*Anticipated
[Recycled Logo] Printed on recycled paper
THIRD QUARTER REPORT
- -----------------------------------------------------------
September 30, 1997
[Adams Express Company Logo]
BUILDING FOR THE FUTURE
WITH SOLID INVESTMENTS(R)
<PAGE>
LETTER TO STOCKHOLDERS
- -------------------------------------------------------------------------------
We are pleased to submit the financial statements of the Company for the nine
months ended September 30, 1997, a schedule of investments and a list of
principal changes in portfolio securities for the third quarter.
Net assets of the Company at September 30, 1997 were $29.48 per share as
compared with $23.71 per share at December 31, 1996 on the 48,036,528 shares
outstanding on each date. The total return on net assets (with reinvestment of
income and capital gains distributions) for the period was 26.0%. On March 1,
1997, a distribution of $0.12 per share was paid consisting of $0.08 from 1996
long-term capital gain, $0.01 from 1996 short-term capital gain, $0.01 from 1996
investment income and $0.02 from 1997 investment income. All are taxable in
1997. A regular 1997 investment income dividend of $0.12 per share was paid to
shareholders on June 1, 1997 and September 1, 1997.
Net investment income for the nine months ended September 30, 1997 amounted to
$15,138,081, compared with $17,772,006 for the same period in 1996. These
earnings are equal to $0.32 and $0.38 respectively, per share, on the average
number of shares outstanding during each period.
Net capital gain realized on investments for the nine months ended September 30,
1997 amounted to $66,271,875, the equivalent of $1.38 per share.
On July 10, 1997, the Board of Directors elected Ms. Dana M. Cannon to the
position of Assistant Treasurer to succeed Ms. Rose Marie Carlsson, who retired
on July 16, 1997 after twenty-four years of much appreciated service.
The Company is an internally managed equity fund whose investment policy is
essentially based on the primary objectives of preservation of capital, the
attainment of reasonable income from investments and, in addition, an
opportunity for capital appreciation.
By order of the Board of Directors,
/s/ Douglas G. Ober /s/ Joseph M. Truta
___________________ ___________________
Douglas G. Ober, Joseph M. Truta,
Chairman and Chief President
Executive Officer
October 17, 1997
<PAGE>
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
September 30, 1997 (unaudited)
<TABLE>
<S> <C>
Assets
Investments* at value:
Common stocks and convertible securities
(cost $714,188,260) $1,326,296,291
Non-controlled affiliate, Petroleum & Resources
Corporation (cost $22,153,015) 45,965,996
Short-term investments (cost $41,657,726) 41,657,726 $1,413,920,013
- ----------------------------------------------------------------------------------------------
Cash 118,481
Receivables:
Investment securities sold 1,822,004
Dividends and interest 1,938,935
Prepaid expenses and other assets 3,720,517
- ---------------------------------------------------------------------------------------------------------------
Total Assets 1,421,519,950
- ---------------------------------------------------------------------------------------------------------------
Liabilities
Investment securities purchased 1,743,125
Open option contracts at value (proceeds $684,514) 785,688
Accrued expenses 2,743,223
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities 5,272,036
- ---------------------------------------------------------------------------------------------------------------
Net Assets $1,416,247,914
===============================================================================================================
Net Assets
Common Stock at par value $1.00 per share, authorized 75,000,000
shares; issued and outstanding 48,036,528 shares $ 48,036,528
Additional capital surplus 661,729,190
Undistributed net investment income 4,341,512
Undistributed net realized gain on investments 66,320,846
Unrealized appreciation on investments 635,819,838
- ---------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Stock $1,416,247,914
===============================================================================================================
Net Asset Value Per Share of Common Stock $29.48
===============================================================================================================
</TABLE>
*See Schedule of Investments on pages 6 through 8.
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Nine Months Ended September 30, 1997 (unaudited)
<TABLE>
<S> <C>
Investment Income
Income:
Dividends:
From unaffiliated issuers $ 13,850,210
From non-controlled affiliate 595,696
Interest 4,415,135
- --------------------------------------------------------------------------------------------------------------
Total income 18,861,041
- --------------------------------------------------------------------------------------------------------------
Expenses:
Investment research 1,873,192
Administration and operations 674,340
Directors' fees 130,600
Reports and stockholder communications 190,026
Transfer agent, registrar and custodian expenses 293,534
Auditing services 49,750
Legal services 29,537
Occupancy and other office expenses 179,045
Travel, telephone and postage 121,301
Other 181,635
- --------------------------------------------------------------------------------------------------------------
Total expenses 3,722,960
- --------------------------------------------------------------------------------------------------------------
Net Investment Income 15,138,081
- --------------------------------------------------------------------------------------------------------------
Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions 66,180,229
Net realized gain distributed by regulated investment company (non-controlled affiliate) 91,646
Change in unrealized appreciation on investments 213,370,713
- --------------------------------------------------------------------------------------------------------------
Net Gain on Investments 279,642,588
- --------------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $294,780,669
==============================================================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Nine Months Year Ended
Ended Sept. 30, 1997 Dec. 31, 1996
-------------------- -------------
(unaudited)
<S> <C>
From Operations:
Net investment income $ 15,138,081 $ 24,237,044
Net realized gain on investments 66,271,875 57,853,036
Change in unrealized appreciation on investments 213,370,713 113,359,376
- --------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations 294,780,669 195,449,456
- --------------------------------------------------------------------------------------------------------------
Dividends to Stockholders from:
Net investment income (12,969,863) (24,006,069)
Net realized gain from investment transactions (4,323,288) (55,398,620)
- --------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (17,293,151) (79,404,689)
- --------------------------------------------------------------------------------------------------------------
From Capital Share Transactions:
Value of common shares issued in payment of optional distributions -0- 36,484,715
- --------------------------------------------------------------------------------------------------------------
Total Increase in Net Assets 277,487,518 152,529,482
Net Assets:
Beginning of period 1,138,760,396 986,230,914
- --------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $4,341,512 and $2,173,294, respectively) $1,416,247,914 $1,138,760,396
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Adams Express Company (the Company) is registered under the Investment
Company Act of 1940 as a diversified investment company. The Company's
investment objectives as well as the nature and risk of its investment
transactions are set forth in the Company's registration statement.
Security Valuation -- Investments in securities traded on a national security
exchange are valued at the last reported sale price on the day of valuation.
Over-the-counter and listed securities for which a sale price is not available
are valued at the last quoted bid price. Short-term investments are valued at
amortized cost. Options are valued at the last sale price or last quoted asked
price.
Affiliated Companies -- Investments in companies 5% or more of whose outstanding
voting securities are held by the Company are defined as "Affiliated Companies"
in Section 2(a)(3) of the Investment Company Act of 1940.
Security Transactions and Investment Income -- Investment transactions are
accounted for on the trade date. Gain or loss on sales of securities and options
is determined on the basis of identified cost. Dividend income and distributions
to shareholders are recognized on the ex-dividend date, and interest income is
recognized on the accrual basis.
2. Federal Income Taxes
The Company's policy is to distribute all of its taxable income to its
shareholders in compliance with the requirements of the Internal Revenue Code
applicable to regulated investment companies. Therefore, no federal income tax
provision is required. For federal income tax purposes, the identified cost of
securities including options, at September 30, 1997 was $778,297,524, and net
unrealized appreciation aggregated $636,307,003, of which the related gross
unrealized appreciation and depreciation were $642,791,771 and $6,484,768,
respectively.
Distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. Accordingly, periodic
reclassifications are made within the Company's capital accounts to reflect
income and gains available for distribution under income tax regulations.
3. Investment Transactions
Purchases and sales of portfolio securities, other than options and short-term
investments, during the nine months ended September 30, 1997 were $207,293,142
and $196,556,938, respectively. Option transactions comprised an insignificant
portion of operations during the period ended September 30, 1997. 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 may purchase shares of its Common Stock from time to time at such
prices and amounts as the Board of Directors may deem advisable. No purchases
were made during the nine months ended September 30, 1997.
The Company has 10,000,000 unissued preferred shares without par value.
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 2,050,000 shares of the Company's common stock at 100%
of the fair market value at date of grant. Options are exercisable beginning not
less than one year after the date of grant and extend and vest over ten years
from the date of grant. Stock appreciation rights are exercisable beginning not
less than two years after the date of grant and extend over the period during
which the option is exercisable. The stock appreciation rights allow the
optionees to surrender their rights to exercise their options and receive cash
or shares in an amount equal to the difference between the option price and the
fair market value of the common stock at the date of surrender. Under the plan,
the exercise price of the options and related stock appreciation rights is
reduced by the per share amount of capital gains paid by the Company during
subsequent years. At the beginning of 1997, 396,175 options were outstanding at
exercise prices of $7.570-$19.625. During the nine months ended September 30,
1997, the Company granted options including stock appreciation rights for 7,935
shares of common stock with an exercise price of $20.25 per share. During the
nine months ended September 30, 1997 stock appreciation rights relating to
74,395 stock option shares were exercised at market prices of $20.250-$24.125
per share and the stock options relating to these rights, which had exercise
prices of $7.480-$15.255 per share, were cancelled. In addition, stock options
and stock appreciation rights relating to 17,597 shares, which had exercise
prices of $15.165-19.535, were cancelled during the second quarter. At September
30, 1997, there were outstanding exercisable options to purchase 55,714 common
shares at $7.9150-$17.1475 per share and unexercisable options to purchase
256,404 common shares at $13.195-$20.250 per share. Total compensation expense
recognized for the nine months ended September 30, 1997 related to the stock
options and stock appreciation rights plan was $1,410,266. At September 30,
1997, there were 923,487 shares available for future option grants.
5. Retirement Plans
The Company provides retirement benefits for its employees under a
non-contributory qualified defined benefit pension plan. The benefits are based
on years of service and compensation during the last 36 months 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 primarily of investments in mutual funds.
The actuarially computed net pension cost credit for the nine months ended
September 30, 1997 was $383,701, and consisted of service expense of $134,009,
interest expense of $244,779, expected return on plan assets of $575,508, and a
net amortization credit of $186,981.
In determining the actuarial present value of the projected benefit obligation,
the interest rate used for the weighted-average discount rate was 7.50%, the
expected rate of annual salary increases was 7.0%, and the expected long-term
rate of return on plan assets was 8.0%.
On January 1, 1997, the accumulated benefit obligation, including vested
benefits, was $3,567,110. The fair value of the plan assets was $9,715,752 and
the projected benefit obligation for service rendered to date was $4,475,562,
which resulted in excess plan assets of $5,240,190. The remaining components of
prepaid pension cost at January 1, 1997 included $2,029,896 in unrecognized net
gain, $508,900 in unrecognized prior service cost and $623,224 is the remaining
portion of the unrecognized net asset existing at January 1, 1987, which is
being amortized
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
over 15 years. Prepaid pension cost included in other assets at September 30,
1997 was $3,479,671.
In addition, the Company has a nonqualified unfunded benefit plan which provides
employees with defined retirement benefits to supplement the qualified plan. The
Company does not provide postretirement medical benefits.
6. Expenses
The cumulative amount of accrued expenses at September 30, 1997 for employees
and former employees of the Company was $2,595,898. Aggregate remuneration paid
or accrued during the nine months ended September 30, 1997 to officers and
directors amounted to $2,466,718.
Research, accounting and other office services provided to and reimbursed by the
Company's non-controlled affiliate, Petroleum & Resources Corporation, amounted
to $353,367 for the nine months ended September 30, 1997.
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 value of which exceeds the
market value of such loaned securities. The Company receives compensation for
lending securities in the form of fees. The Company continues to receive
dividends on the securities loaned. At September 30, 1997, the value of security
loans outstanding was $23,378,944.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
-------------------
(unaudited) Year Ended December 31
Sept. 30, Sept. 30, -----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C>
Per Share Operating Performance
Net asset value, beginning of period $23.71 $21.36 $21.36 $17.98 $19.78 $20.48 $20.21
- -------------------------------------------------------------------------------------------------------------------
Net investment income 0.32 0.38 0.52 0.50 0.51 0.48 0.46
Net realized gains and change in
unrealized appreciation and other
changes 5.81 2.43 3.55 4.54 (0.71) 1.18 1.43
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations 6.13 2.81 4.07 5.04 (0.20) 1.66 1.89
Less distributions
Dividends from net investment
income (0.27) (0.33) (0.52) (0.52) (0.50) (0.45) (0.46)
Distributions from net realized gains (0.09) (0.03) (1.20) (1.14) (1.10) (1.18) (1.16)
- -------------------------------------------------------------------------------------------------------------------
Total distributions (0.36) (0.36) (1.72) (1.66) (1.60) (1.63) (1.62)
Dilution resulting from the rights
offering -- -- -- -- -- (0.73) --
Net asset value, end of period $29.48 $23.81 $23.71 $21.36 $17.98 $19.78 $20.48
===================================================================================================================
Per share market price, end of period $24.75 $20.125 $19.75 $18.50 $15.625 $17.875 $20.00
Total Investment Return
Based on market price 27.4% 10.8% 16.4% 29.5% (3.7)% (2.7)% 14.1%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $1,416,248 $1,099,350 $1,138,760 $986,231 $798,298 $840,610 $696,925
Ratio of expenses to average
net assets 0.39%+ 0.40%+ 0.34% 0.46% 0.33% 0.36% 0.49%
Ratio of net investment income to
average net assets 1.60%+ 2.29%+ 2.30% 2.51% 2.65% 2.33% 2.30%
Portfolio turnover 21.73%+ 22.84%+ 19.60% 23.98% 19.23% 21.40% 17.97%
Average brokerage commission rate $0.06 $0.07 $0.07 -- -- -- --
Number of shares outstanding at
end of period (in 000's) 48,037 46,166 48,037 46,166 44,390 42,498 34,027
</TABLE>
- ----------
+ Ratios presented on an annualized basis.
This report, including the financial statements herein, is transmitted to the
stockholders of The Adams Express Company for their information. It is not a
prospectus, circular or representation intended for use in the purchase or
sale of shares of the Company or of any securities mentioned in the report.
5
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
September 30, 1997 (unaudited)
Prin. Amt.
or Shares Value(A)
--------- --------
Stocks And Convertible
Securities -- 96.9%
Basic Materials -- 3.3%
Consolidated Papers, Inc. 100,000 $ 5,550,000
du Pont (E.I.) de
Nemours & Co. 250,000 15,390,625
Inco Ltd. 5.75% Conv.
Debs. due 2004 $4,000,000 4,320,000
Mead Corp. 65,000 4,696,250
Olin Corp. 350,000 16,384,375
--------------
46,341,250
--------------
Capital Goods -- 10.4%
Boeing Co. 198,400 10,800,400
Caterpillar Inc. 270,000 14,563,125
Cemex, S.A. de C.V. 4.25%
Conv. Sub. Debs. due 1997(B) $4,000,000 3,985,000
Deere & Co. 260,000 13,975,000
Dover Corp. 120,000 8,145,000
Emerson Electric Co. 73,000 4,206,625
General Electric Co. 655,000 44,580,938
The BFGoodrich Co. 110,000 4,977,500
Minnesota Mining &
Manufacturing Co. 200,000 18,487,500
Pall Corp. 450,000 9,703,125
Rockwell International Corp. 215,000 13,531,563
--------------
146,955,776
--------------
Consumer -- 15.1%
Consumer Distribution -- 2.6%
American Stores Co. 240,000 5,850,000
Borders Group, Inc. (C) 260,000 7,150,000
Dillard Department Stores, Inc. 200,000 8,762,500
Penney (J.C.) Co., Inc. 200,000 11,650,000
Polo Ralph Lauren Corp. (C) 125,000 3,273,438
--------------
36,685,938
--------------
Consumer Services -- 2.9%
Cracker Barrel Old Country
Store, Inc. 350,000 11,331,250+
McDonald's Corp. 315,000 15,001,875
Scandinavian Broadcasting
System SA 7.25% Conv. Sub.
Debs. due 2005 $3,000,000 3,090,000+
Time Warner Inc. 150,000 8,128,125
US WEST Media Group, Inc. (C) 150,000 3,346,875
--------------
40,898,125
--------------
Prin. Amt.
or Shares Value(A)
--------- --------
Consumer Staples -- 9.6%
CPC International Inc. 127,500 $ 11,809,687
Campbell Soup Co. 380,000 18,620,000
Coca-Cola Co. 170,000 10,370,000
Crown Cork & Seal Co., Inc. 4.5%
Conv. Pfd. 260,000 11,570,000
Crown Cork &
Seal Co., Inc. 45,000 2,075,625
Gillette Co. 229,560 19,813,898
Interstate Bakeries Corp. 69,000 4,752,375
Kimberly-Clark Corp. 340,000 16,638,750
PepsiCo, Inc. 320,000 12,980,000
Procter & Gamble Co. 230,000 15,884,375
Ralston Purina Co. 7.00% SAILS
due 2000 180,000 12,183,750
--------------
136,698,460
--------------
Energy -- 8.9%
British Petroleum plc ADR 150,000 13,621,875
Enron Corp. 6.25%
Exch. Notes due 1998 411,900 9,242,006
Enron Corp. 100,000 3,850,000
MCN Energy Group Inc. 400,000 12,800,000
Mobil Corp. 120,000 8,880,000
Petroleum & Resources
Corporation (D) 1,145,570 45,965,996
Royal Dutch Petroleum Co. 180,000 9,990,000
Schlumberger Ltd. 88,400 7,442,175
Union Pacific Resources Group Inc. 275,102 7,204,234
Unocal Capital Trust
$3.125 Conv. Pfd. 111,600 6,807,600+
--------------
125,803,886
--------------
Financial -- 15.5%
Banking -- 10.5%
Associates First Capital Corp.
Ser. A 273,400 17,019,150
Banc One Corp. 300,000 16,800,000
Federal Home Loan Mortgage Corp. 360,000 12,690,000
Investors Financial Services Corp. 274,700 11,331,375+
Mellon Bank Corp. 330,000 18,067,500
National City Corp. 80,000 4,925,000
Norwest Corp. 330,000 20,212,500
Peoples Heritage Financial Group 237,000 10,028,063+
Provident Bankshares Corp. 137,812 7,855,284+
Southwest Bancorp. of Texas, Inc.(C) 175,000 5,162,500
Wachovia Corp. 190,000 13,680,000
Wilmington Trust Corp. 210,000 11,471,250+
--------------
149,242,622
--------------
6
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
September 30, 1997 (unaudited)
Prin. Amt.
or Shares Value(A)
--------- --------
Insurance -- 5.0%
AMBAC Financial Group, Inc. 379,600 $ 15,444,975
American International Group, Inc. 270,000 27,860,625
Reinsurance Group of America, Inc. 299,850 12,256,369
Salomon Inc. 7.625% Exch. Notes
due 1999 (B) 375,000 14,812,500
--------------
70,374,469
--------------
Health Care -- 11.5%
Drugs -- 6.6%
ALZA Corp. (C) 500,000 14,500,000
Elan Corp., plc ADR (C) 460,000 23,028,750
Forest Laboratories, Inc. (C) 165,000 6,950,625
Lilly (Eli) &Co. 150,000 18,150,000
Merck & Co., Inc. 140,000 13,991,250
SmithKline Beecham plc ADR 360,000 17,595,000
--------------
94,215,625
--------------
Medical Supplies and Services -- 4.9%
Abbott Laboratories 240,000 15,345,000
American Retirement Corp.
5.75% Conv. Sub. Debs
due 2002 $4,000,000 4,000,000
American Retirement Corp. (C) 151,100 3,059,775
Beckman Instruments, Inc. 80,000 3,405,000
Integrated Health Services, Inc.
5.75% Conv. Sub. Debs. due 2001 $6,675,000 7,375,875
Integrated Health Services, Inc.
6% Conv. Sub. Debs. due 2003 $500,000 556,250
Integrated Health Services, Inc. 125,000 4,179,687
Life Technologies, Inc. 307,500 9,301,875+
MedPartners Inc. 6.50% TAPS
due 2000 100,000 2,143,750
MedPartners Inc. (C) 273,000 5,852,438
ONCOR, Inc. (C) 900,000 4,556,250
Sunrise Assisted Living, Inc. 250,000 9,031,250
--------------
68,807,150
--------------
Technology -- 16.6%
Communication Equipment -- 5.1%
Ericsson (L.M.) Telephone Co. 4.25%
Conv. Sub. Debs. due 2000 $120,000 795,000+
Ericsson (L.M.) Telephone Co. ADR 440,000 21,092,500+
Lucent Technologies Inc. 64,816 5,274,402
Motorola, Inc. LYONs due 2009 $650,000 853,125
Motorola, Inc. 150,000 10,781,250
Nokia Corp. Pfd. ADR 150,000 14,071,875
Northern Telecom Ltd. 190,000 19,748,125
--------------
72,616,277
--------------
Computer Related -- 8.5%
Cisco Systems, Inc. (C) 215,000 15,708,438+
Computer Sciences Corp.(C) 136,000 9,622,000
DST Systems Inc. (C) 400,000 14,800,000
First Data Corp. 343,980 12,920,749
Hewlett-Packard Co. 380,000 26,433,750
QuickResponse Services, Inc. (C) 350,000 11,987,500+
Sabre Group Holdings, Inc. (C) 400,000 14,325,000
Sterling Commerce, Inc. (C) 400,000 14,375,000
--------------
120,172,437
--------------
Prin. Amt.
or Shares Value(A)
--------- --------
Electronics -- 3.0%
Intel Corp. 170,000 $ 15,693,125+
Solectron Corp. (C) 600,000 26,700,000
--------------
42,393,125
--------------
Transportation -- 4.6%
Delta Air Lines, Inc. 150,071 14,134,812
Federal Express Corp. (C) 260,000 20,800,000
Illinois Central Corp. 210,000 7,717,500
Ryder System, Inc. 400,000 14,375,000
Union Pacific Corp. 130,000 8,141,250
--------------
65,168,562
--------------
Utilities -- 10.9%
Electric And Gas Utilities -- 5.1%
Black Hills Corp. 370,000 10,845,625
CINergy Corp. 300,000 10,031,250
Empresa Nacional de
Electricidad, S.A. ADR 450,000 9,675,000
LG&E Energy Corp. 400,000 8,875,000
New Century Energy 250,000 10,390,625
TECO Energy, Inc. 300,000 7,350,000
United Water Resources Inc. 453,900 8,453,888
Washington Gas Light Co. 257,000 6,585,625
--------------
72,207,013
--------------
Telephone Utilities -- 5.8%
AirTouch Communications (C) 200,000 7,087,500
Ameritech Corp. 155,000 10,307,500
BellSouth Corp. 220,000 10,175,000
GTE Corp. 250,000 11,343,750
LCI International, Inc. (C) 460,000 12,247,500
NEXTEL Communications, Inc. (C) 120,000 3,465,000
SBC Communications Inc. 200,000 12,287,500
WorldCom, Inc. (C) 420,000 14,857,500+
--------------
81,771,250
--------------
Other -- 0.1%
Stocks under accumulation 1,910,322
--------------
Total Stocks and Convertible
Securities
(Cost $736,341,275)(E) $1,372,262,287
--------------
7
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
September 30, 1997 (unaudited)
Prin. Amt. Value(A)
--------- --------
Short-Term Investments -- 2.9%
U.S. Government Obligations --1.0%
U.S. Treasury Bills,
4.79-5.12%, due 11/28/97 $15,000,000 $ 14,877,895
--------------
Certificates of Deposit -- 0.7%
Mercantile-Safe Deposit &
Trust Co., 5.75%,
due 10/2/97 5,000,000 5,000,000
Harris Trust & Savings
Bank, Chicago, IL.,
5.50%, due 10/23/97 5,000,000 5,000,000
--------------
10,000,000
--------------
Prin. Amt. Value(A)
---------- --------
Commercial Paper -- 1.2%
Chevron UK Investment PLC,
5.51%, due 10/9/97 $5,500,000 $ 5,493,266
Ford Motor Credit Corp.,
5.51-5.53%,
due 10/16/97-10/23/97 3,185,000 3,176,598
General Electric Capital Corp.,
5.56%, due 10/9/97 8,120,000 8,109,967
--------------
16,779,831
--------------
Total Short-Term Investments
(Cost $41,657,726) 41,657,726
--------------
Total Investments
(Cost $777,999,001) 1,413,920,013
Cash, receivables and other
assets, less liabilities 2,327,901
--------------
Net Assets-- 100.0% $1,416,247,914
==============
================================================================================
Notes:
(A) See note 1 to financial statements. Securities are listed on the New York
Stock Exchange, the American Stock Exchange or the Toronto Stock Exchange
except restricted securities and also those marked (+), which are traded
"Over-the-Counter."
(B) Restricted securities (Cemex, S.A. de C.V. 4.25% Conv. Sub. Debs. due
1997, acquired 9/28/94, cost $4,053,999, Salomon Inc. 7.625% Exch. Notes
due 1999, acquired 5/8/96, cost $10,017,100).
(C) Presently non-dividend paying.
(D) Non-controlled affiliate.
(E) The aggregate market value of stocks held in escrow at September 30, 1997
covering open call contracts written was $19,615,938. In addition, the
required aggregate market value of securities segregated by the custodian
to collateralize open put option contracts written was $11,400,000.
HISTORICAL FINANCIAL STATISTICS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Dividends Distributions
Asset from from
Common Value Net Investment Net Realized
Value of Shares per Income Gains
Dec. 31 Net Assets Outstanding Share per Share per Share
- ------- ---------- ---------- ----- --------- ---------
<S> <C>
1987........................... $ 427,225,965 26,833,998 $15.92 $.78 $2.66
1988........................... 455,825,580 28,295,508 16.11 .50 1.32
1989........................... 550,091,129 29,982,939 18.35 .70 1.36
1990........................... 529,482,769 31,479,340 16.82 .66 1.06
1991........................... 661,895,779 32,747,497 20.21 .54 1.09
1992........................... 696,924,779 34,026,625 20.48 .46 1.16
1993........................... 840,610,252 42,497,665 19.78 .45 1.18
1994........................... 798,297,600 44,389,990 17.98 .50 1.10
1995........................... 986,230,914 46,165,517 21.36 .52 1.14
1996........................... 1,138,760,396 48,036,528 23.71 .52 1.20
September 30, 1997 (unaudited). 1,416,247,914 48,036,528 29.48 .27 .09
</TABLE>
8
<PAGE>
PRINCIPAL CHANGES IN PORTFOLIO SECURITIES
- --------------------------------------------------------------------------------
During the Three Months Ended September 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Shares or Principal Amount
------------------------------------------------
Held
Additions Reductions Sept. 30, 1997
--------- ---------- --------------
<S> <C>
AMBAC Financial Group, Inc. 189,800(1) 379,600
American International Group, Inc. 90,000(1) 270,000
American Retirement Corp. $4,000,000 $4,000,000
American Stores Co. 240,000 240,000
Caterpillar Inc. 135,000(1) 270,000
Crown Cork & Seal Co., Inc. 4.5% Conv. Pfd. 260,000 260,000
Empresa Nacional de Electricidad S.A. ADR 450,000(1) 150,000 450,000
Integrated Health Services, Inc. 125,000 125,000
MedPartners Inc. 6.50% TAPS 100,000 100,000
Mead Corp. 45,000 65,000(2)
Procter & Gamble Co. 115,000(1) 230,000
Ralston Purina Co. 7.00% SAILS due 2000 180,000 180,000
Reinsurance Group of America 99,950(1) 299,850
SmithKline Beecham plc ADR 180,000(1) 360,000
Schlumberger Ltd. 54,200(1) 20,000 88,400
Solectron Corp. 300,000(1) 600,000
Sunrise Assisted Living, Inc. 250,000 250,000
United Water Resources, Inc. 161,700 453,900
Allergan Inc. 151,300 --
Beckman Instruments, Inc. 95,000 80,000
Borders Group, Inc. 230,000 260,000
Crown Cork & Seal Co., Inc. 160,000 45,000
DPL Inc. 400,000 --
Hewlett-Packard Co. 60,000 380,000
Interstate Bakeries Corp. 111,000 69,000
MedPartners Inc. 100,000 273,000
Tele Danmark A/S ADS 260,000 --
</TABLE>
- ----------
(1) By stock split.
(2) Includes shares previously listed under "Stock under Accumulation" in the
Schedule of Investments.
9
<PAGE>
DIVIDEND PAYMENT SCHEDULE AND THE
AUTOMATIC DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
The Company presently pays dividends four times a year, as follows: (a) Three
interim investment income dividends on or about March, June and September 1st.
(b) A "year-end" payment consisting of the estimated balance of the net
investment income for the year and the net realized capital gains earned
through October 31st, payable in late December. Stockholders may elect to
receive this payment in stock or cash. In connection with this payment, all
stockholders of record are sent a dividend announcement notice and an election
card in mid-November. The following options are available:
(1) Full shares of stock for the combined income dividend and capital gains
distribution to the extent possible.
(2) Full shares of stock for the capital gains distribution to the extent
possible. Fractional shares and the income dividend are paid in cash. Without
a timely response, stockholders will be paid in accordance with this option.
(3) Both the income dividend and capital gains distribution in cash.
Stockholders holding shares in "street" or brokerage accounts may make one of
the above elections by notifying their brokerage house representative.
Stockholders of record of Adams stock have two additional ways to increase
their investment in the Company.
The Bank of New York's Automatic Dividend Reinvestment Plan provides that its
participants' four distributions are automatically invested in additional
shares of Adams common stock. New shares acquired are held on a book basis by
the Bank.
Additionally, after the participants' first dividend is reinvested, they are
eligible to make cash payments in any amount from $25.00.
The Bank provides participants with reinvestment confirmations after each
dividend or cash payment. The Bank's fee for this service is 10% of the amount
received up to a maximum of $2.50 for the interim dividend payments and cash
payments. There is no charge for the "year-end" distribution.
The Bank's plan also provides for the deposit of certificate shares into the
participant's "book share" account for a one-time charge of $5.00.
A brochure and enrollment card may be obtained by calling the Bank at (800)
432-8224 or by writing to:
The Bank of New York
Dividend Reinvestment
P.O. Box 11258
Church Street Station
New York, NY 10277
---------------------------------
Common Stock
Listed on the New York Stock Exchange
and the Pacific Exchange
Transfer Agent, Registrar & Custodian of Securities
The Bank of New York
101 Barclay Street, 11E
New York, NY 10007
The Bank's Shareholder Relations Department: (800) 432-8224
The Company Office Address: Seven St. Paul Street, Suite 1140,
Baltimore, MD 21202
The Company Office Telephone: (410) 752-5900 or (800) 638-2479
Counsel: Chadbourne & Parke L.L.P.
Independent Accountants: Coopers & Lybrand L.L.P.
10
