T H E A D A M S E X P R E S S C O M P A N Y
- -------------------------------------------------
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 (3/31/97) $20.25
Net Asset Value (3/31/97) $23.80
Discount: 14.9%
New York Stock Exchange and Pacific Stock Exchange ticker symbol: ADX
Newspaper stock listings are generally under the abbreviation: AdaEx
---------------------
Distributions in 1997
---------------------
From Investment Income $0.15
(paid or declared)
From Net Realized Gains 0.09
-----
Total $0.24
=====
---------------------------
1997 Dividend Payment Dates
---------------------------
March 1, 1997
June 1, 1997
September 1, 1997*
December 27, 1997*
*Anticipated
[recycled logo] Printed on recycled paper
F I R S T Q U A R T E R R E P O R T
- ---------------------------------------
March 31, 1997
[Adams Express Company Logo](TM)
B U I L D I N G F O R T H E F U T U R E
W I T H S O L I D I N V E S T M E N T S(R)
<PAGE>
L E T T E R T O S T O C K H O L D E R S
- --------------------------------------------------------------------------------
We are pleased to submit the financial statements of the Company for the three
months ended March 31, 1997, a schedule of investments and a list of
principal changes in portfolio securities for the first quarter.
Net assets of the Company at March 31, 1997 were $23.80 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 1.1%. 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 has been
declared to shareholders of record May 19, 1997, payable June 1, 1997.
Net investment income for the three months ended March 31, 1997 amounted to
$4,948,637 compared with $5,403,958 for the same period in 1996. These earnings
are equal to $0.10 and $0.12, respectively, per share, on the average number of
shares outstanding during each period.
Net capital gain realized on investments for the three months ended March 31,
1997 amounted to $31,689,791, the equivalent of $0.66 per share.
The Annual Shareholders Meeting was held on March 25, 1997 in San Francisco,
California, where a substantial number of shareholders live. Attendance at the
meeting was the highest in a number of years. Upon conclusion of the formal
segment of the meeting, management reviewed the portfolio's performance in 1996
and discussed the outlook for the future. Stockholder questions were then
entertained on subjects ranging from specific stock holdings to the Company's
expense ratio, among the lowest in the industry. The results of the voting at
the Annual Meeting are shown on page 10.
Mr. Jeffrey G. Whitney, Vice President and Secretary, elected to take early
retirement from the Company after twenty-four years of much-appreciated
service. Mr. Lawrence L. Hooper, Jr., a partner in the Baltimore,
Maryland-based law firm of Tydings &Rosenberg LLP, was elected Secretary and
General Counsel effective April 1, 1997. Ms. Joan E. Sinclair, Vice
President-Research, retired on March 31, 1997 after twenty-two years of 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
April 18, 1997
<PAGE>
S T A T E M E N T O F A S S E T S A N D L I A B I L I T I E S
- --------------------------------------------------------------------------------
March 31, 1997 (unaudited)
<TABLE>
<S><C>
Assets
Investments* at value:
Non-controlled affiliate, Petroleum & Resources
Corporation (cost $22,153,015) $ 38,233,399
Common stocks and convertible securities
(cost $633,378,663) 1,013,179,561
Short-term investments (cost $85,471,426) 85,471,426 $1,136,884,386
- ----------------------------------------------------------------------------------------------
Cash 141,566
Receivables:
Investment securities sold 5,364,037
Dividends and interest 2,045,569
Prepaid expenses and other assets 3,518,287
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets 1,147,953,845
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities
Investment securities purchased 2,456,269
Open option contracts at value (proceeds $684,200) 539,830
Accrued expenses 1,746,779
- ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities 4,742,878
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets $1,143,210,967
===========================================================================================================================
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 5,680,835
Undistributed net realized gain on investments 31,738,762
Unrealized appreciation on investments 396,025,652
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Stock $1,143,210,967
===========================================================================================================================
Net Asset Value Per Share of Common Stock $23.80
===========================================================================================================================
</TABLE>
*See Schedule of Investments on pages 6 through 8.
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
S T A T E M E N T O F O P E R A T I O N S
- --------------------------------------------------------------------------------
Three Months Ended March 31, 1997 (unaudited)
<TABLE>
<S><C>
Investment Income
Income:
Dividends:
From unaffiliated issuers $ 4,358,580
From non-controlled affiliate 137,468
Interest 1,615,187
- ---------------------------------------------------------------------------------------------------------------------------
Total income 6,111,235
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment research 602,405
Administration and operations 140,198
Directors' fees 43,600
Reports and stockholder communications 68,822
Transfer agent, registrar and custodian expenses 97,318
Auditing services 14,970
Legal services 14,400
Occupancy and other office expenses 50,359
Travel, telephone and postage 51,102
Other 79,424
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 1,162,598
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment Income 4,948,637
- ---------------------------------------------------------------------------------------------------------------------------
Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions 31,598,145
Net realized gain distributed by regulated investment company (non-controlled affiliate) 91,646
Change in unrealized appreciation on investments (26,423,473)
- ---------------------------------------------------------------------------------------------------------------------------
Net Gain on Investments 5,266,318
- ---------------------------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $ 10,214,955
===========================================================================================================================
</TABLE>
S T A T E M E N T O F C H A N G E S I N N E T A S S E T S
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Year Ended
Ended March 31, 1997 Dec. 31, 1996
-------------------- -------------
(unaudited)
<S><C>
From Operations:
Net investment income $ 4,948,637 $ 24,237,044
Net realized gain on investments 31,689,791 57,853,036
Change in unrealized appreciation on investments (26,423,473) 113,359,376
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations 10,214,955 195,449,456
- ---------------------------------------------------------------------------------------------------------------------------
Dividends to Stockholders from:
Net investment income (1,441,096) (24,006,069)
Net realized gain from investment transactions (4,323,288) (55,398,620)
- ---------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (5,764,384) (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 4,450,571 152,529,482
Net Assets:
Beginning of period 1,138,760,396 986,230,914
- ---------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $5,680,835 and $2,173,294, respectively) $1,143,210,967 $1,138,760,396
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
N O T E S T O F I N A N C I A L S T A T E M E N T S (U N A U D I T E D)
- --------------------------------------------------------------------------------
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 March 31, 1997 was $741,065,365, and net
unrealized appreciation aggregated $396,503,221, of which the related gross
unrealized appreciation and depreciation were $412,584,972 and $16,081,751,
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 three months ended March 31, 1997 were $60,143,406 and
$96,644,269, respectively. Option transactions comprised an insignificant
portion of operations during the period ended March 31, 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 three months ended March 31, 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 gain paid by the Company during
subsequent years. At the beginning of 1997, 396,175 options were outstanding at
exercise prices of $7.480-$19.535. During the three months ended March 31, 1997,
no options or stock appreciation rights were granted; stock appreciation rights
relating to 44,416 stock option shares were exercised at market prices of
$20.375-$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. At March 31,
1997, there were outstanding exercisable options to purchase 85,693 common
shares at $7.4800-$17.1475 per share and unexercisable options to purchase
266,066 common shares at $13.195-$19.535 per share. Total compensation expense
recognized for the three months ended March 31, 1997 related to the stock
options and stock appreciation rights plan was $380,752. At March 31, 1997,
there were 913,825 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 three months ended
March 31, 1997 was $127,901, and consisted of service expense of $44,669,
interest expense of $81,593, expected return on plan assets of $191,836, and a
net amortization credit of $62,327.
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>
N O T E S T O F I N A N C I A L S T A T E M E N T S (C O N T I N U E D)
- --------------------------------------------------------------------------------
over 15 years. Prepaid pension cost included in other assets at March 31, 1997
was $3,223,871.
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 March 31, 1997 for employees and
former employees of the Company was $1,622,933. Aggregate remuneration paid or
accrued during the three months ended March 31, 1997 to officers and directors
amounted to $716,813.
Research, accounting and other office services provided to and reimbursed by the
Company's non-controlled affiliate, Petroleum & Resources Corporation, amounted
to $134,223 for the three months ended March 31, 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 March 31, 1997, the value of security
loans outstanding was $42,506,600.
F I N A N C I A L H I G H L I G H T S
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
----------------------
(unaudited) Year Ended December 31
March 31, March 31, ----------------------------------------------
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 0.10 0.12 0.52 0.50 0.51 0.48 0.46
Net realized gains and change in
unrealized appreciation and other
changes 0.11 0.79 3.55 4.54 (0.71) 1.18 1.43
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.21 0.91 4.07 5.04 (0.20) 1.66 1.89
Less distributions
Dividends from net investment
income (0.03) (0.09) (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 (0.12) (0.12) (1.72) (1.66) (1.60) (1.63) (1.62)
Dilution resulting from the rights
offering -- -- -- -- -- (0.73) --
Net asset value, end of period $23.80 $22.15 $23.71 $21.36 $17.98 $19.78 $20.48
===========================================================================================================================
Per share market price, end of period $20.25 $19.125 $19.75 $18.50 $15.625 $17.875 $20.00
Total Investment Return
Based on market price 3.1% 4.0% 16.4% 29.5% (3.7)% (2.7)% 14.1%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $1,143,211 $1,022,614 $1,138,760 $986,231 $798,298 $840,610 $696,925
Ratio of expenses to average
net assets 0.40%+ 0.44%+ 0.34% 0.46% 0.33% 0.36% 0.49%
Ratio of net investment income to
average net assets 1.70%+ 2.14%+ 2.30% 2.51% 2.65% 2.33% 2.30%
Portfolio turnover 22.01%+ 15.23%+ 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>
S C H E D U L E O F I N V E S T M E N T S
- --------------------------------------------------------------------------------
March 31, 1997 (unaudited)
Prin. Amt.
or Shares Value(A)
---------- --------
Stocks And Convertible
Securities -- 92.0%
Basic Materials -- 4.1%
Consolidated Papers, Inc. 100,000 $ 5,212,500
du Pont (E.I.) de
Nemours & Co. 140,000 14,840,000
Inco Ltd. 5.75% Conv.
Debs. due 2004 $4,000,000 4,970,000
Kimberly-Clark Corp. 170,000 16,915,000
Olin Corp. 127,200 5,056,200
------------
46,993,700
------------
Capital Goods -- 11.0%
Boeing Co. 99,200 9,783,600
Caterpillar Inc. 135,000 10,833,750
Cemex, S.A. de C.V. 4.25%
Conv. Sub. Debs. due 1997(B) $4,000,000 3,920,000
Cooper Industries, Inc. 7.05%
Conv. Sub. Debs. due 2015 $3,279,000 3,475,740
Deere & Co. 270,000 11,745,000
Dover Corp. 68,600 3,601,500
Emerson Electric Co. 73,000 3,285,000
General Electric Co. 340,000 33,745,000
The BFGoodrich Co. 110,000 4,028,750
Minnesota Mining &
Manufacturing Co. 200,000 16,925,000
Pall Corp. 450,000 10,406,250
Rockwell International Corp. 215,000 13,948,125
------------
125,697,715
------------
Consumer -- 13.6%
Consumer Distribution -- 2.0%
Borders Group, Inc. (C) 390,000 7,410,000
Dillard Department Stores, Inc. 200,000 6,300,000
Penney (J.C.) Co., Inc. 200,000 9,525,000
------------
23,235,000
------------
Consumer Services -- 3.2%
Cracker Barrel Old Country
Store, Inc. 350,000 9,143,750+
McDonald's Corp. 315,000 14,883,750
Scandinavian Broadcasting
System SA 7.25% Conv. Sub.
Debs. due 2005 $3,000,000 2,670,000+
Studio Plus Hotels (C) 37,500 646,875
Time Warner Inc. 150,000 6,487,500
US WEST Media Group, Inc. (C) 150,000 2,775,000
------------
36,606,875
------------
Prin. Amt.
or Shares Value(A)
---------- --------
Consumer Staples -- 8.4%
CPC International Inc. 127,500 $ 10,455,000
Campbell Soup Co. 380,000 17,622,500
Coca-Cola Co. 180,000 10,035,000
Crown Cork &
Seal Co., Inc. 205,000 10,583,125
Gillette Co. 239,560 17,398,045
Interstate Bakeries Corp. 130,000 6,142,500
PepsiCo, Inc. 320,000 10,360,000
Procter & Gamble Co. 115,000 13,196,250
------------
95,792,420
------------
Energy -- 9.1%
British Petroleum plc ADR 80,000 10,980,000
Enron Corp. 6.25%
Exch. Notes due 1998 411,900 8,855,850
MCN Corp. 400,000 11,250,000
Mobil Corp. 60,000 7,837,500
Petroleum & Resources
Corporation (D) 1,145,570 38,233,399
Royal Dutch Petroleum Co. 45,000 7,875,000
Schlumberger Ltd. 54,200 5,812,950
Union Pacific Resources Group Inc. 275,102 7,358,979
Unocal Capital Trust
$3.125 Conv. Pfd. 111,600 6,026,400+
------------
104,230,078
------------
Financial -- 12.3%
Banking -- 7.5%
Associates First Capital Corp.
Ser. A 75,000 3,225,000
Federal Home Loan Mortgage Corp. 360,000 9,810,000
Investors Financial Services Corp. 276,200 8,458,625+
Mellon Bank Corp. 165,000 12,003,750
National City Corp. 80,000 3,730,000
Norwest Corp. 330,000 15,262,500
Peoples Heritage Financial Group 237,000 7,287,750+
Provident Bankshares Corp. 131,250 5,053,125+
Southwest Bancorp. of Texas, Inc. (C) 85,000 1,636,250
Wachovia Corp. 190,000 10,355,000
Wilmington Trust Corp. 210,000 8,925,000+
------------
85,747,000
------------
6
<PAGE>
S C H E D U L E O F I N V E S T M E N T S (C O N T I N U E D)
- --------------------------------------------------------------------------------
March 31, 1997 (unaudited)
Prin. Amt.
or Shares Value(A)
---------- --------
Insurance -- 4.8%
AMBAC Inc. 199,800 $12,887,100
American International Group, Inc. 180,000 21,127,500
Reinsurance Group of America, Inc. 199,900 9,695,150
Salomon Inc. 7.625% Exch. Notes
due 1999 (B) 375,000 10,875,000
-----------
54,584,750
-----------
Health Care -- 10.4%
Drugs -- 5.8%
ALZA Corp. (C) 460,000 12,650,000
Elan Corp., plc ADR (C) 460,000 15,697,500
Lilly (Eli) & Co. 150,000 12,337,500
Merck & Co., Inc. 160,000 13,480,000
SmithKline Beecham plc ADR 180,000 12,600,000
-----------
66,765,000
-----------
Medical Supplies and Services -- 4.6%
Abbott Laboratories 250,000 14,031,250
Allergan, Inc. 151,300 4,406,613
Beckman Instruments, Inc. 175,000 7,350,000
Integrated Health Services, Inc.
5.75% Conv. Sub. Debs. due 2001 $6,675,000 6,942,000
Integrated Health Services, Inc.
6% Conv. Sub. Debs. due 2003 $500,000 525,000
Life Technologies, Inc. 307,500 8,071,875+
MedPartners Inc. (C) 373,000 7,926,250
ONCOR, Inc. (C) 900,000 3,262,500
-----------
52,515,488
-----------
Technology -- 14.4%
Communication Equipment -- 4.6%
Ericsson (L.M.) Telephone Co. 4.25%
Conv. Sub. Debs. due 2000 $120,000 555,000+
Ericsson (L.M.) Telephone Co. ADR 440,000 14,877,500+
Lucent Technologies Inc. 64,816 3,402,840
Motorola, Inc. LYONs due 2009 $650,000 725,563
Motorola, Inc. 160,000 9,680,000
NEXTEL Communications, Inc. 120,000 1,605,000
Nokia Corp. Pfd. ADR 150,000 8,737,500
Northern Telecom Ltd. 190,000 12,421,250
-----------
52,004,653
-----------
Computer Related -- 5.9%
Computer Sciences Corp.(C) 136,000 8,449,000
DST Systems Inc. (C) 175,000 4,987,500
Electronic Data Systems Corp. 168,936 6,778,557
First Data Corp. 343,980 11,652,323
QuickResponse Services, Inc. (C) 355,000 9,363,125+
Sabre Group Holdings, Inc. (C) 455,000 11,488,750
Sterling Commerce, Inc. (C) 344,657 9,995,053
Sterling Software, Inc. (C) 185,000 5,110,625
-----------
67,824,933
-----------
Prin. Amt.
or Shares Value(A)
---------- --------
Electronics -- 3.9%
Intel Corp. 75,000 $ 10,434,375+
Itron, Inc. (C) 195,000 3,705,000+
Solectron Corp. (C) 300,000 15,037,500
Verifone, Inc. (C) 476,000 15,470,000
--------------
44,646,875
--------------
Transportation -- 4.3%
Delta Air Lines, Inc. 150,071 12,624,723
Federal Express Corp. (C) 210,000 10,946,250
Illinois Central Corp. 210,000 6,641,250
Ryder System, Inc. 400,000 11,700,000
Union Pacific Corp. 130,000 7,377,500
--------------
49,289,723
--------------
Utilities -- 12.7%
Electric And Gas Utilities-- 6.3%
Black Hills Corp. 365,400 9,591,750
CINergy Corp. 300,000 10,237,500
DPL Inc. 400,000 9,650,000
Empresa Nacional de
Electricidad, S.A. ADR 150,000 9,731,250
LG&E Energy Corp. 400,000 9,650,000
Public Service Co. of Colo. 250,000 9,687,500
TECO Energy, Inc. 300,000 7,200,000
Washington Gas Light Co. 257,000 5,782,500
--------------
71,530,500
--------------
Telephone Utilities -- 6.4%
AirTouch Communications (C) 200,000 4,600,000
Ameritech Corp. 155,000 9,493,750
Bell Atlantic Corp. 100,000 6,075,000
BellSouth Corp. 220,000 9,267,500
GTE Corp. 250,000 11,656,250
LCI International, Inc. (C) 335,000 5,611,250
SBC Communications Inc. 200,000 10,500,000
Tele Danmark A/S ADS 260,000 6,792,500
WorldCom, Inc. 420,000 9,240,000
--------------
73,236,250
--------------
Other -- 0.1%
Stocks under accumulation 712,000
--------------
Total Stocks and Convertible
Securities
(Cost $655,531,678)(E) 1,051,412,960
--------------
7
<PAGE>
S C H E D U L E O F I N V E S T M E N T S (C O N T I N U E D)
- --------------------------------------------------------------------------------
March 31, 1997 (unaudited)
Prin. Amt. Value(A)
---------- --------
Short-Term Investments -- 7.5%
Certificates of Deposit -- 4.4%
Mercantile-Safe Deposit &
Trust Co., 5.56%,
due 4/3/97-4/10/97 $10,000,000 $10,000,000
NBD Bank N.A., Detroit,
5.28%, due 4/24/97 10,000,000 10,000,000
Northern Trust Co., Chicago,
5.26%, due 4/17/97 10,000,000 10,000,000
Old Kent Bank & Trust Co.,
5.45%, due 5/1/97 5,000,000 5,000,000
U.S. Bank of Washington,
5.31%, due 4/17/97 5,000,000 5,000,000
Wachovia Bank of Georgia N.A.,
5.53%, due 5/1/97 10,000,000 10,000,000
-----------
50,000,000
-----------
Commercial Paper -- 3.1%
Chevron UK Investment PLC,
5.30%, due 4/10/97 8,050,000 8,039,020
Prin. Amt. Value(A)
---------- --------
Coca-Cola Co.,
5.35%, due 4/30/97 $5,685,000 $ 5,659,871
Ford Motor Credit Corp.,
5.32-5.35%,
due 4/17/97-4/24/97 9,905,000 9,871,871
General Electric Capital Corp.,
5.30%, due 4/3/97 7,030,000 7,027,859
USAA Capital Corp.,
5.55%, due 5/6/97 4,900,000 4,872,805
--------------
35,471,426
--------------
Total Short-Term Investments
(Cost $85,471,426) 85,471,426
--------------
Total Investments
(Cost $741,003,104) 1,136,884,386
Cash, receivables and other
assets, less liabilities 6,326,581
--------------
Net Assets-- 100.0% $1,143,210,967
==============
================================================================================
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 March 31, 1997
covering open call contracts written was $26,245,625. In addition, the required
aggregate market value of securities segregated by the custodian to
collateralize open put option contracts written was $5,837,500.
H I S T O R I C A L F I N A N C I A L S T A T I S T I C S
- --------------------------------------------------------------------------------
<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
March 31, 1997 (unaudited) .... 1,143,210,967 48,036,528 23.80 .15* .09
</TABLE>
- -------------
*paid or declared.
8
<PAGE>
P R I N C I P A L C H A N G E S I N P O R T F O L I O
S E C U R I T I E S
- --------------------------------------------------------------------------------
During the Three Months Ended March 31, 1997 (unaudited)
<TABLE>
<CAPTION>
Shares or Principal Amount
------------------------------------------------
Held
Additions Reductions March 31, 1997
--------- ---------- --------------
<S><C>
ALZA Corp. 460,000 460,000
Black Hills Corp. 52,700 365,400
Borders Group, Inc. 195,000(1) 390,000
Campbell Soup Co. 190,000(1) 380,000
Emerson Electric Co. 36,500(1) 73,000
Federal Express Corp. 210,000 210,000
Federal Home Loan Mortgage Corp. 270,000(1) 360,000
Gillette Co. 239,560(2) 239,560
Inco Ltd. 5.75% Conv. Debs. due 2004 $4,000,000 $4,000,000
Interstate Bakeries Corp. 46,600 130,000
Investors Financial Services Corp. 45,000 276,200
NEXTEL Communications, Inc. 120,000(3) 120,000
Olin Corp. 127,200 127,200
Public Service Co. of Colo. 40,000 250,000
QuickResponse Services, Inc. 137,000 355,000
Southwest Bancorp. of Texas, Inc. 85,000 85,000
Studio Plus Hotels 227,500 190,000 37,500
Verifone, Inc. 163,500 476,000
WorldCom, Inc. 420,000(4) 420,000
AMR Corp. 57,000 --
AT&T Co. 200,000 --
Abbott Laboratories 40,000 250,000
Air Products & Chemicals, Inc. 150,000 --
Brinker International Inc. 345,000 --
Cooper Industries, Inc. 7.05% Conv. Sub. Debs.
due 2015 $1,261,000 $3,279,000
Granite Construction Inc. 365,000 --
Home Depot, Inc. 80,000 --
Houghton Mifflin Co. 175,400 --
Inco Ltd. 7.75% Conv. Debs. due 2016 $5,000,000 --
Intel Corp. 10,000 75,000
International Flavors & Fragrances, Inc. 100,000 --
Lilly (Eli) & Co. 19,200 150,000
Lincoln National Corp. 140,000 --
Rockwell International Corp. 35,000 215,000
Ryder System, Inc. 100,000 400,000
</TABLE>
- ----------------
(1) By stock split.
(2) Received .904 shares for each share of Duracell International Inc.
(3) Received 1 share for each share of First Chicago Corp. 5.50% DECS due 1997.
(4) Received 2.1 shares for each share of MFS Communications Co.
9
<PAGE>
A N N U A L M E E T I N G O F S T O C K H O L D E R S
- --------------------------------------------------------------------------------
The Annual Meeting of Stockholders was held on March 25, 1997. For those
nominated, the following votes were cast for directors:
votes for votes withheld
--------- --------------
(A) Enrique R. Arzac: 40,291,578 598,202
(B) Leigh Carter: 40,238,480 651,300
(C) Allan Comrie: 40,139,934 749,846
(D) Daniel E. Emerson: 40,220,757 669,023
(E) Thomas H. Lenagh: 40,020,574 869,206
(F) W. David MacCallan: 40,320,778 569,002
(G) Augustine R. Marusi: 40,060,195 829,585
(H) W. Perry Neff: 40,297,616 592,164
(I) Douglas G. Ober: 40,355,114 534,666
(J) Landon Peters: 40,312,152 577,628
(K) John J. Roberts: 40,199,367 690,413
(L) Robert J.M. Wilson: 40,178,288 711,492
A proposal to approve and ratify the selection of Coopers & Lybrand L.L.P. as
the firm of independent accountants of the Company for 1997 was approved with
40,234,669 votes for, 292,699 votes against and 362,412 votes abstaining.
10
<PAGE>
D I V I D E N D P A Y M E N T S C H E D U L E A N D T H E
A U T O M A T I C D I V I D E N D R E I N V E S T M E N T P L A N
- --------------------------------------------------------------------------------
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 gain 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 gain
distribution to the extent possible.
(2) Full shares of stock for the capital gain 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 gain 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
11
