SEMI-ANNUAL REPORT
----------------------------------------------
JUNE 30, 1977
[Adams Express Company Logo](R)
BUILDING FOR THE FUTURE
WITH SOLID INVESTMENTS(R)
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
R.M. Carlsson Assistant Treasurer
Geraldine H. Stegner Assistant Secretary
----------
Stock Data
----------
Price (6/30/97) $23.25
Net Asset Value (6/30/97) $27.64
Discount: 15.9%
New York Stock Exchange and Pacific Exchange ticker symbol: ADX
Newspaper stock listings are generally under the abbreviation: AdaEx
---------------------
Distributions in 1997
---------------------
From Investment Income $0.27
(paid or declared)
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
[recycle logo] Printed on recycled paper
<PAGE>
LETTER TO STOCKHOLDERS
- --------------------------------------------------------------------------------
We are pleased to submit the financial statements of the Company for the six
months ended June 30, 1997, a schedule of investments and a list of principal
changes in portfolio securities for the second quarter and the report of the
independent accountants.
Net assets of the Company at June 30, 1997 were $27.64 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 17.7%. 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 another $0.12 investment income
dividend has been declared payable September 1, 1997 to shareholders of record
August 18, 1997.
Net investment income for the six months ended June 30, 1997 amounted to
$10,077,115, compared with $12,140,425 for the same period in 1996. These
earnings are equal to $0.21 and $0.26 respectively, per share, on the average
number of shares outstanding during each period.
Net capital gain realized on investments for the six months ended June 30, 1997
amounted to $45,721,265, the equivalent of $0.95 per share.
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
July 18, 1997
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1997
<TABLE>
<S><C>
Assets
Investments* at value:
Non-controlled affiliate, Petroleum & Resources
Corporation (cost $22,153,015) $ 40,667,735
Common stocks and convertible securities
(cost $696,562,347) 1,245,798,565
Short-term investments (cost $39,662,798) 39,662,798 $1,326,129,098
- -----------------------------------------------------------------------------------
Cash 236,430
Receivables:
Investment securities sold 462,010
Dividends and interest 1,918,701
Prepaid expenses and other assets 3,669,711
- ----------------------------------------------------------------------------------------------------
Total Assets 1,332,415,950
- ----------------------------------------------------------------------------------------------------
Liabilities
Investment securities purchased 1,055,937
Open option contracts at value (proceeds $681,014) 1,093,813
Accrued expenses 2,347,177
- ----------------------------------------------------------------------------------------------------
Total Liabilities 4,496,927
- ----------------------------------------------------------------------------------------------------
Net Assets $1,327,919,023
====================================================================================================
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 5,044,930
Undistributed net realized gain on investments 45,770,236
Unrealized appreciation on investments 567,338,139
- ----------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Stock $1,327,919,023
====================================================================================================
Net Asset Value Per Share of Common Stock $27.64
====================================================================================================
</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
- --------------------------------------------------------------------------------
Six Months Ended June 30, 1997
<TABLE>
<S><C>
Investment Income
Income:
Dividends:
From unaffiliated issuers $ 9,027,113
From non-controlled affiliate 366,582
Interest 3,207,888
- ---------------------------------------------------------------------------------------------------------------
Total income 12,601,583
- ---------------------------------------------------------------------------------------------------------------
Expenses:
Investment research 1,298,436
Administration and operations 417,629
Directors' fees 91,350
Reports and stockholder communications 129,046
Transfer agent, registrar and custodian expenses 194,793
Auditing services 30,042
Legal services 21,600
Occupancy and other office expenses 99,983
Travel, telephone and postage 94,849
Other 146,740
- ---------------------------------------------------------------------------------------------------------------
Total expenses 2,524,468
- ---------------------------------------------------------------------------------------------------------------
Net Investment Income 10,077,115
- ---------------------------------------------------------------------------------------------------------------
Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions 45,629,619
Net realized gain distributed by regulated investment company (non-controlled affiliate) 91,646
Change in unrealized appreciation on investments 144,889,014
- ---------------------------------------------------------------------------------------------------------------
Net Gain on Investments 190,610,279
- ---------------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $200,687,394
===============================================================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended
Ended June 30, 1997 Dec. 31, 1996
------------------- -------------
<S><C>
From Operations:
Net investment income $ 10,077,115 $ 24,237,044
Net realized gain on investments 45,721,265 57,853,036
Change in unrealized appreciation on investments 144,889,014 113,359,376
- ---------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations 200,687,394 195,449,456
- ---------------------------------------------------------------------------------------------------------------
Dividends to Stockholders from:
Net investment income (7,205,479) (24,006,069)
Net realized gain from investment transactions (4,323,288) (55,398,620)
- ---------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (11,528,767) (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 189,158,627 152,529,482
Net Assets:
Beginning of period 1,138,760,396 986,230,914
- ---------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $5,044,930 and $2,173,294, respectively) $1,327,919,023 $1,138,760,396
===============================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 June 30, 1997 was $758,984,808, and net
unrealized appreciation aggregated $567,825,304, of which the related gross
unrealized appreciation and depreciation were $579,458,330 and $11,633,026,
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 six months ended June 30, 1997 were $146,410,413 and
$133,215,440, respectively. Option transactions comprised an insignificant
portion of operations during the period ended June 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 six months ended June 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 six months ended June 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 six
months ended June 30, 1997 stock appreciation rights relating to 61,569 stock
option shares were exercised at market prices of $20.250-$20.500 per share and
the stock options relating to these rights, which had exercise prices of
$8.005-$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 June 30, 1997,
there were outstanding exercisable options to purchase 68,450 common shares at
$7.4800-$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 six months ended June 30, 1997 related to the stock options and stock
appreciation rights plan was $984,881. At June 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 six months ended June
30, 1997 was $255,802, and consisted of service expense of $89,338, interest
expense of $163,186, expected return on plan assets of $383,672, and a net
amortization credit of $124,654.
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
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
net asset existing at January 1, 1987, which is being amortized over 15 years.
Prepaid pension cost included in other assets at June 30, 1997 was $3,351,772.
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 June 30, 1997 for employees and
former employees of the Company was $2,202,433. Aggregate remuneration paid or
accrued during the six months ended June 30, 1997 to officers and directors
amounted to $1,668,920.
Research, accounting and other office services provided to and reimbursed by the
Company's non-controlled affiliate, Petroleum & Resources Corporation, amounted
to $252,275 for the six months ended June 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 June 30, 1997, the value of security
loans outstanding was $22,472,838.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
--------------------- Year Ended December 31
June 30, June 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 0.21 0.26 0.52 0.50 0.51 0.48 0.46
Net realized gains and change in
unrealized appreciation and other
changes 3.96 1.57 3.55 4.54 (0.71) 1.18 1.43
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.17 1.83 4.07 5.04 (0.20) 1.66 1.89
Less distributions
Dividends from net investment
income (0.15) (0.21) (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 (0.24) (0.24) (1.72) (1.66) (1.60) (1.63) (1.62)
Dilution resulting from the rights
offering -- -- -- -- -- (0.73) --
Net asset value, end of period $27.64 $22.95 $23.71 $21.36 $17.98 $19.78 $20.48
====================================================================================================================
Per share market price, end of period $23.25 $19.125 $19.75 $18.50 $15.625 $17.875 $20.00
Total Investment Return
Based on market price 19.0% 4.7% 16.4% 29.5% (3.7)% (2.7)% 14.1%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $1,327,919 $1,059,677 $1,138,760 $986,231 $798,298 $840,610 $696,925
Ratio of expenses to average
net assets 0.42%+ 0.39%+ 0.34% 0.46% 0.33% 0.36% 0.49%
Ratio of net investment income to
average net assets 1.67%+ 2.36%+ 2.30% 2.51% 2.65% 2.33% 2.30%
Portfolio turnover 23.29%+ 22.41%+ 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
- --------------------------------------------------------------------------------
June 30, 1997
Prin. Amt.
or Shares Value(A)
---------- --------
Stocks And Convertible
Securities -- 96.9%
Basic Materials -- 3.1%
Consolidated Papers, Inc. 100,000 $ 5,400,000
du Pont (E.I.) de
Nemours & Co. 280,000 17,605,000
Inco Ltd. 5.75% Conv.
Debs. due 2004 $4,000,000 4,710,000
Olin Corp. 350,000 13,671,875
--------------
41,386,875
--------------
Capital Goods -- 10.9%
Boeing Co. 198,400 10,527,600
Caterpillar Inc. 135,000 14,495,625
Cemex, S.A. de C.V. 4.25%
Conv. Sub. Debs. due 1997(B) $4,000,000 3,950,000
Deere & Co. 270,000 14,816,250
Dover Corp. 92,500 5,700,313
Emerson Electric Co. 73,000 4,019,563
General Electric Co. 660,000 42,900,000
The BFGoodrich Co. 110,000 4,764,375
Minnesota Mining &
Manufacturing Co. 200,000 20,450,000
Pall Corp. 450,000 10,462,500
Rockwell International Corp. 215,000 12,738,750
--------------
144,824,976
--------------
Consumer -- 15.1%
Consumer Distribution -- 2.4%
Borders Group, Inc. (C) 490,000 11,821,250
Dillard Department Stores, Inc. 200,000 6,925,000
Penney (J.C.) Co., Inc. 200,000 10,437,500
Polo Ralph Lauren Corp. (C) 110,000 3,011,250
--------------
32,195,000
--------------
Consumer Services -- 2.8%
Cracker Barrel Old Country
Store, Inc. 350,000 9,275,000+
McDonald's Corp. 315,000 15,218,438
Scandinavian Broadcasting
System SA 7.25% Conv. Sub.
Debs. due 2005 $3,000,000 3,000,000+
Time Warner Inc. 150,000 7,237,500
US WEST Media Group, Inc. (C) 150,000 3,037,500
--------------
37,768,438
--------------
Prin. Amt.
or Shares Value(A)
---------- --------
Consumer Staples -- 9.9%
CPC International Inc. 127,500 $ 11,769,844
Campbell Soup Co. 380,000 19,000,000
Coca-Cola Co. 170,000 11,560,000
Crown Cork &
Seal Co., Inc. 205,000 10,954,688
Gillette Co. 229,560 21,750,810
Interstate Bakeries Corp. 180,000 10,676,250
Kimberly-Clark Corp. 340,000 16,915,000
PepsiCo, Inc. 320,000 12,020,000
Procter & Gamble Co. 115,000 16,243,750
--------------
130,890,342
--------------
Energy -- 8.7%
British Petroleum plc ADR 160,000 11,980,000
Enron Corp. 6.25%
Exch. Notes due 1998 411,900 7,877,588
Enron Corp. 100,000 4,081,250
MCN Energy Group Inc. 400,000 12,250,000
Mobil Corp. 120,000 8,385,000
Petroleum & Resources
Corporation (D) 1,145,570 40,667,735
Royal Dutch Petroleum Co. 180,000 9,720,000
Schlumberger Ltd. 54,200 6,775,000
Union Pacific Resources Group Inc. 275,102 6,843,162
Unocal Capital Trust
$3.125 Conv. Pfd. 111,600 6,305,400+
--------------
114,885,135
--------------
Financial -- 15.0%
Banking -- 10.1%
Associates First Capital Corp.
Ser. A 273,400 15,173,700
Banc One Corp. 300,000 14,531,250
Federal Home Loan Mortgage Corp. 360,000 12,600,000
Investors Financial Services Corp. 289,700 13,760,750+
Mellon Bank Corp. 330,000 14,891,250
National City Corp. 80,000 4,200,000
Norwest Corp. 330,000 18,562,500
Peoples Heritage Financial Group 237,000 8,976,375+
Provident Bankshares Corp. 137,812 5,736,425+
Southwest Bancorp. of Texas, Inc. (C) 175,000 4,834,375
Wachovia Corp. 190,000 11,079,375
Wilmington Trust Corp. 210,000 9,607,500+
--------------
133,953,500
--------------
6
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
June 30, 1997
Prin. Amt.
or Shares Value(A)
---------- --------
Insurance -- 4.9%
AMBAC Financial Group, Inc. 189,800 $ 14,495,975
American International Group, Inc. 180,000 26,887,500
Reinsurance Group of America, Inc. 199,900 11,494,250
Salomon Inc. 7.625% Exch. Notes
due 1999 (B) 375,000 12,843,750
--------------
65,721,475
--------------
Health Care -- 11.3%
Drugs -- 6.7%
ALZA Corp. (C) 470,000 13,630,000
Elan Corp., plc ADR (C) 460,000 20,815,000
Forest Laboratories, Inc. (C) 165,000 6,837,188
Lilly (Eli) & Co. 150,000 16,396,875
Merck & Co., Inc. 150,000 15,346,875
SmithKline Beecham plc ADR 180,000 16,492,500
--------------
89,518,438
--------------
Medical Supplies and Services -- 4.6%
Abbott Laboratories 240,000 16,020,000
Allergan, Inc. 151,300 4,813,231
American Retirement Corp. (C) 151,100 2,682,025
Beckman Instruments, Inc. 175,000 8,443,750
Integrated Health Services, Inc.
5.75% Conv. Sub. Debs. due 2001 $6,675,000 7,943,250
Integrated Health Services, Inc.
6% Conv. Sub. Debs. due 2003 $500,000 605,000
Life Technologies, Inc. 307,500 8,533,125+
MedPartners Inc. (C) 373,000 8,066,125
ONCOR, Inc. (C) 900,000 3,487,500
--------------
60,594,006
--------------
Technology -- 15.9%
Communication Equipment -- 4.8%
Ericsson (L.M.) Telephone Co. 4.25%
Conv. Sub. Debs. due 2000 $120,000 630,000+
Ericsson (L.M.) Telephone Co. ADR 440,000 17,325,000+
Lucent Technologies Inc. 64,816 4,670,803
Motorola, Inc. LYONs due 2009 $650,000 906,750
Motorola, Inc. 160,000 12,180,000
Nokia Corp. Pfd. ADR 150,000 11,062,500
Northern Telecom Ltd. 190,000 17,290,000
--------------
64,065,053
--------------
Computer Related -- 8.6%
Cisco Systems, Inc. (C) 215,000 14,431,875+
Computer Sciences Corp.(C) 136,000 9,809,000
DST Systems Inc. (C) 400,000 13,325,000
First Data Corp. 343,980 15,113,621
Hewlett-Packard Co. 440,000 24,640,000
QuickResponse Services, Inc. (C) 350,000 12,687,500+
Sabre Group Holdings, Inc. (C) 455,000 12,341,875
Sterling Commerce, Inc. (C) 344,657 11,330,599
--------------
113,679,470
--------------
Prin. Amt.
or Shares Value(A)
---------- --------
Electronics -- 2.5%
Intel Corp. 85,000 $ 12,054,063+
Solectron Corp. (C) 300,000 21,018,750
--------------
33,072,813
--------------
Transportation -- 4.3%
Delta Air Lines, Inc. 150,071 12,399,616
Federal Express Corp. (C) 260,000 15,047,500
Illinois Central Corp. 210,000 7,336,875
Ryder System, Inc. 400,000 13,200,000
Union Pacific Corp. 130,000 9,075,625
--------------
57,059,616
--------------
Utilities -- 12.4%
Electric And Gas Utilities-- 6.2%
Black Hills Corp. 370,000 10,545,000
CINergy Corp. 300,000 10,443,750
DPL Inc. 400,000 9,850,000
Empresa Nacional de
Electricidad, S.A. ADR 150,000 12,759,375
LG&E Energy Corp. 400,000 8,825,000
Public Service Co. of Colo. 250,000 10,390,625
TECO Energy, Inc. 300,000 7,668,750
United Water Resources Inc. 292,200 5,661,375
Washington Gas Light Co. 257,000 6,457,125
--------------
82,601,000
--------------
Telephone Utilities -- 6.2%
AirTouch Communications (C) 200,000 5,500,000
Ameritech Corp. 155,000 10,530,313
BellSouth Corp. 220,000 10,202,500
GTE Corp. 250,000 10,968,750
LCI International, Inc. (C) 460,000 10,120,000
NEXTEL Communications, Inc. (C) 120,000 2,272,500
SBC Communications Inc. 200,000 12,375,000
Tele Danmark A/S ADS 260,000 6,792,500
WorldCom, Inc. (C) 420,000 13,440,000+
--------------
82,201,563
--------------
Other -- 0.2%
Stocks under accumulation 2,048,600
--------------
Total Stocks and Convertible
Securities
(Cost $718,715,362)(E) $1,286,466,300
--------------
7
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
June 30, 1997
Prin. Amt. Value(A)
---------- --------
Short-Term Investments -- 3.0%
Certificates of Deposit -- 2.1%
Fifth Third Bank, Cincinnati,
5.51%, due 7/31/97 $ 7,400,000 $ 7,400,000
Mercantile-Safe Deposit &
Trust Co., 5.80%,
due 7/3/97-7/10/97 10,000,000 10,000,000
Wachovia Bank of Georgia N.A.,
5.50%, due 7/10/97 10,000,000 10,000,000
--------------
27,400,000
--------------
Prin. Amt. Value(A)
---------- --------
Commercial Paper -- 0.9%
General Electric Capital Corp.,
5.55-5.62%,
due 7/7/97-7/17/97 $7,780,000 $ 7,762,798
USAA Capital Corp.,
5.56%, due 7/1/97 4,500,000 4,500,000
--------------
12,262,798
--------------
Total Short-Term Investments
(Cost $39,662,798) 39,662,798
--------------
Total Investments
(Cost $758,378,160) 1,326,129,098
Cash, receivables and other
assets, less liabilities 1,789,925
--------------
Net Assets-- 100.0% $1,327,919,023
==============
================================================================================
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 June 30, 1997
covering open call contracts written was $15,191,313. In addition, the
required aggregate market value of securities segregated by the custodian
to collateralize open put option contracts written was $15,312,500.
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
June 30, 1997 ................. 1,327,919,023 48,036,528 27.64 .27* .09
</TABLE>
- --------------
*paid or declared.
8
<PAGE>
PRINCIPAL CHANGES IN PORTFOLIO SECURITIES
- --------------------------------------------------------------------------------
During the Three Months Ended June 30, 1997
<TABLE>
<CAPTION>
Shares or Principal Amount
-------------------------------------------------
Held
Additions Reductions June 30, 1997
--------- ---------- -------------
<S> <C>
American Retirement Corp. 151,100 151,100
Associates First Capital Corp. Ser. A 198,400 273,400
Banc One Corp. 300,000 300,000
Boeing Co. 99,200(1) 198,400
Borders Group, Inc. 100,000 490,000
British Petroleum plc ADR 80,000(1) 160,000
Cisco Systems, Inc. 215,000 215,000
du Pont (E.I.) de Nemours & Co. 140,000(1) 280,000
DST Systems Inc. 225,000 400,000
Enron Corp. 100,000 100,000
Federal Express Corp. 50,000 260,000
Forest Laboratories, Inc. 165,000 165,000
General Electric Co. 340,000(1) 20,000 660,000
Hewlett-Packard Co. 440,000(2) 440,000
Interstate Bakeries Corp. 50,000 180,000
Investors Financial Services Corp. 38,500 25,000 289,700
Kimberly-Clark Corp. 170,000(1) 340,000
LCI International, Inc. 125,000 460,000
Mellon Bank Corp. 165,000(1) 330,000
Mobil Corp. 60,000(1) 120,000
Olin Corp. 222,800 350,000
Polo Ralph Lauren Corp. 110,000 110,000
Provident Bankshares Corp. 6,562(1) 137,812
Royal Dutch Petroleum Co. 135,000(1) 180,000
Southwest Bancorp. of Texas, Inc. 90,000 175,000
United Water Resources Inc. 292,200 292,200
Bell Atlantic Corp. 100,000 --
Cooper Industries, Inc. 7.05%
Conv. Sub Debs. due 2015 $3,279,000 --
Electronic Data Systems Corp. 168,936 --
Itron, Inc. 195,000 --
Sterling Software, Inc. 185,000 --
Verifone, Inc. 476,000(3) --
</TABLE>
- --------------
(1) By stock dividend or stock split.
(2) Received 1 share for each share of Verifone, Inc.
(3) 440,000 shares due to merger with Hewlett-Packard Co., 36,000 shares sold.
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Stockholders of
THE ADAMS EXPRESS COMPANY:
We have audited the accompanying statement of assets and liabilities of The
Adams Express Company, including the schedule of investments, as of June 30,
1997, and the related statement of operations for the six months then ended, the
statement of changes in net assets for the six months ended June 30, 1997 and
the year ended December 31, 1996, and the financial highlights for the six
months ended June 30, 1997 and 1996 and for each of the five years in the period
ended December 31, 1996. These financial statements and financial highlights are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of June
30, 1997, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Adams Express Company as of June 30, 1997, the results of its operations, the
changes in its net assets, and financial highlights for each of the respective
periods stated in the first paragraph, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
July 8, 1997
10
<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.
11
