THE ADAMS EXPRESS COMPANY
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
Enrique R. Arzac(1,3) Augustine R. Marusi(1,3)
Allan Comrie(1,3) W. Perry Neff(3,4)
Daniel E. Emerson(2,4) Douglas G. Ober(1)
Thomas H. Lenagh(2,4) Landon Peters(1,2)
W.D. MacCallan(1,3) John J. Roberts(1,4)
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
Maureen A. Jones VICE PRESIDENT AND TREASURER
Lawrence L. Hooper, Jr. SECRETARY AND
GENERAL COUNSEL
Dana M. Cannon ASSISTANT TREASURER
Geraldine H. Stegner ASSISTANT SECRETARY
- --------------------------------------------------------------------------------
STOCK DATA
- --------------------------------------------------------------------------------
Price (6/30/98) $26.875
Net Asset Value (6/30/98) $31.87
Discount: 15.7%
New York Stock Exchange and Pacific Exchange ticker symbol: ADX
Newspaper stock listings are generally under the abbreviation: Adaex
- --------------------------------------------------------------------------------
DISTRIBUTIONS IN 1998
- --------------------------------------------------------------------------------
From Investment Income $0.31
(paid or declared)
From Net Realized Gains 0.05
-----
Total $0.36
=====
- --------------------------------------------------------------------------------
1998 DIVIDEND PAYMENT DATES
- --------------------------------------------------------------------------------
March 1, 1998
June 1, 1998
September 1, 1998
December 27, 1998*
*Anticipated
[Recycled Logo] Printed on recycled paper
SEMI-ANNUAL REPORT
- --------------------------------------------------------------------------------
JUNE 30, 1998
[ADAMS EXPRESS COMPANY LOGO HERE](R)
BUILDING FOR THE FUTURE
WITH SOLID INVESTMENTS(R)
<PAGE>
LETTER TO STOCKHOLDERS
- --------------------------------------------------------------------------------
In this semi-annual report, you will find our financial statements for the six
months ended June 30, 1998. In addition, the report of independent accountants,
a schedule of investments, and summary financial information for the Company are
provided.
Net assets of the Company at June 30, 1998 were $31.87 per share, as compared
with $28.51 per share at December 31, 1997 on the 49,949,239 shares outstanding
on each date. The total return on net assets (with reinvestment of income and
capital gains distributions) for the period was 12.8%. On March 1, 1998, a
distribution of $0.12 per share was paid consisting of $0.05 from 1997 long-term
capital gain, $0.02 from 1997 investment income and $0.05 from 1998 investment
income. All are taxable in 1998. A regular 1998 investment income dividend of
$0.12 per share was paid on June 1, 1998, and another $0.12 investment income
dividend has been declared payable September 1, 1998 to shareholders of record
August 20, 1998.
Net investment income for the six months ended June 30, 1998 amounted to
$10,226,154, compared with $10,077,115 for the same period in 1997. These
earnings are equal to $0.20 and $0.21, 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, 1998
amounted to $55,643,767, the equivalent of $1.11 per share.
As you may have noticed in prior reports, the Company has established a site on
the Internet to provide information to current and potential shareholders. The
site has been substantially expanded in the past quarter and the Worldwide Web
address has been changed to www.adamsexpress.com. In addition to the daily net
asset value per share of the fund and the market price discount to the NAV, you
will find a brief history of the Company, historical financial information,
press releases, and other information of interest to shareholders. Comments and
inquiries can be sent via e-mail to [email protected].
Effective September 1, 1998, the current Automatic Dividend Reinvestment Plan
will be replaced with The Bank of New York's BuyDIRECT(SM*) Plan. The Bank of
New York ("the Bank") is the transfer agent for the Company and will sponsor and
administer the Plan.Under the BuyDIRECT plan, shareholders will be able to
reinvest their dividends (as under the current dividend reinvestment plan that
it replaces) and first time shareholders, as well as existing shareholders, will
also be able to acquire shares directly from the Bank without the need of going
through a broker, at a substantial cost savings.To obtain further information,
please see page 11 of this report.
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.
*BuyDIRECT is a service mark of The Bank of New York.
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 17, 1998
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1998
<TABLE>
<S><C>
ASSETS
Investments* at value:
Common stocks and convertible securities
(cost $750,111,655) $1,507,527,624
Non-controlled affiliate, Petroleum & Resources
Corporation (cost $22,153,015) 43,961,249
Short-term investments (cost $36,217,473) 36,217,473 $1,587,706,346
- ----------------------------------------------------------------------------------------------
Cash 196,098
Receivables:
Investment securities sold 5,253,254
Dividends and interest 1,682,726
Prepaid expenses and other assets 4,087,835
- ---------------------------------------------------------------------------------------------------------------
Total Assets 1,598,926,259
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES
Investment securities purchased 2,208,240
Open option contracts at value (proceeds $1,354,961) 1,639,500
Accrued expenses 3,265,362
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities 7,113,102
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS $1,591,813,157
===============================================================================================================
NET ASSETS
Common Stock at par value $1.00 per share, authorized 75,000,000
shares; issued and outstanding 49,949,239 shares $ 49,949,239
Additional capital surplus 704,167,465
Undistributed net investment income 2,557,621
Undistributed net realized gain on investments 56,199,168
Unrealized appreciation on investments 778,939,664
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON STOCK $1,591,813,157
===============================================================================================================
NET ASSET VALUE PER SHARE OF COMMON STOCK $31.87
===============================================================================================================
</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, 1998
<TABLE>
<S><C>
INVESTMENT INCOME
Income:
Dividends:
From unaffiliated issuers $ 9,491,284
From non-controlled affiliate 366,582
Interest 2,645,783
- --------------------------------------------------------------------------------------------------------------
Total income 12,503,649
- --------------------------------------------------------------------------------------------------------------
Expenses:
Investment research 1,074,752
Administration and operations 444,292
Directors' fees 98,250
Reports and stockholder communications 128,118
Transfer agent, registrar and custodian expenses 159,751
Auditing services 19,749
Legal services 22,595
Occupancy and other office expenses 126,207
Travel, telephone and postage 73,622
Other 130,159
- --------------------------------------------------------------------------------------------------------------
Total expenses 2,277,495
- --------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 10,226,154
- --------------------------------------------------------------------------------------------------------------
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS
Net realized gain on security transactions 55,552,121
Net realized gain distributed by regulated investment company (non-controlled affiliate) 91,646
Change in unrealized appreciation on investments 113,760,628
- --------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 169,404,395
- --------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $179,630,549
==============================================================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, 1998 DEC. 31, 1997
------------------- -------------
<S><C>
FROM OPERATIONS:
Net investment income $ 10,226,154 $ 20,784,601
Net realized gain on investments 55,643,767 71,696,127
Change in unrealized appreciation on investments 113,760,628 242,729,911
- --------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations 179,630,549 335,210,639
- --------------------------------------------------------------------------------------------------------------
DIVIDENDS TO STOCKHOLDERS FROM:
Net investment income (9,490,355) (21,136,073)
Net realized gain from investment transactions (2,497,462) (73,015,523)
- --------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (11,987,817) (94,151,596)
- --------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Value of common shares issued in payment of optional distributions -0- 44,350,986
- --------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 167,642,732 285,410,029
NET ASSETS:
Beginning of period 1,424,170,425 1,138,760,396
- --------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $2,557,621 and $1,821,822, respectively) $1,591,813,157 $1,424,170,425
==============================================================================================================
</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, 1998 was $809,634,479, and net
unrealized appreciation aggregated $779,426,828, of which the related gross
unrealized appreciation and depreciation were $796,380,734 and $16,953,906,
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, 1998 were $149,391,222 and
$161,048,744, respectively. Option transactions comprised an insignificant
portion of operations during the period ended June 30, 1998. 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, 1998.
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 1998, 312,118 options were outstanding,
with a weighted average exercise price of $13.6549 per share. During the six
months ended June 30, 1998, the Company granted options including stock
appreciation rights for 28,368 shares of common stock with an exercise price of
$25.375; stock appreciation rights relating to 43,675 stock option shares were
exercised at a weighted average market price of $25.9252 per share and the stock
options relating to those rights, which had a weighted average exercise price of
$11.6503 per share, were cancelled. At June 30, 1998, there were outstanding
exercisable options to purchase 55,753 common shares at $6.435-$18.770 per share
(weighted average price of $12.6663), and unexercisable options to purchase
241,058 common shares at $11.715-$25.325 per share (weighted average price of
$15.5709). The weighted average remaining contractual life of outstanding
exercisable and unexercisable options is 6.0309 years and 6.7901 years,
respectively. Total compensation expense recognized for the six months ended
June 30, 1998 related to the stock options and stock appreciation rights plan
was $673,337. At June 30, 1998, there were 895,119 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, 1998 was $286,414, and consisted of service expense of $93,013, interest
expense of $129,865, expected return on plan assets of $403,118, and a net
amortization credit of $106,174.
In determining the actuarial present value of the projected benefit obligation,
the interest rate used for the weighted-average discount rate and the expected
rate of annual compensation increases were 7.0%, and the expected long-term rate
of return on plan assets was 8.0%.
On January 1, 1998, the accumulated benefit obligation, including vested
benefits, was $2,956,682. The fair value of the plan assets was $10,137,850 and
the projected benefit obligation for service rendered to date was $3,809,875,
which resulted in excess plan assets of $6,327,975. The remaining components of
prepaid pension cost at January 1, 1998 included $2,235,823 in unrecognized net
gain, $432,583 in unrecognized prior service cost and $383,688 is the remaining
portion of the unrecognized net asset existing at January 1, 1987, which is
being amortized over 15 years. Prepaid pension cost included in other assets at
June 30, 1998 was $3,893,989.
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.
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
6. EXPENSES
The cumulative amount of accrued expenses at June 30, 1998 for employees and
former employees of the Company was $3,173,497. Aggregate remuneration paid or
accrued during the six months ended June 30, 1998 to officers and directors
amounted to $1,369,487.
Research, accounting and other office services provided to and reimbursed by the
Company's non-controlled affiliate, Petroleum & Resources Corporation, amounted
to $252,842 for the six months ended June 30, 1998.
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 accounts for securities
lending transactions as secured financing. 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, 1998, the value of security
loans outstanding was $21,559,700.
8. YEAR 2000 (UNAUDITED)
The Company along with other investment companies and financial institutions
could be adversely affected if computer systems do not properly process and
calculate date-related information relating to the Year 2000. The Company is
taking steps designed to address the Year 2000 issue as far as its own computer
systems are concerned. We have also requested assurances from our service
providers that they are taking comparable steps. The Company does not expect to
incur any significant costs in order to address the Year 2000 problem. There is
no assurance, nevertheless, that any adverse impact on the Company will be
avoided.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------- YEAR ENDED DECEMBER 31
JUNE 30, JUNE 30, ------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ---- ---- ---- ---- ----
<S><C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $28.51 $23.71 $23.71 $21.36 $17.98 $19.78 $20.48
- ----------------------------------------------------------------------------------------------------------------
Net investment income 0.20 0.21 0.43 0.52 0.50 0.51 0.48
Net realized gains and change in
unrealized appreciation and other
changes 3.40 3.96 6.33 3.55 4.54 (0.71) 1.18
- ----------------------------------------------------------------------------------------------------------------
Total from investment operations 3.60 4.17 6.76 4.07 5.04 (0.20) 1.66
Less distributions
Dividends from net investment
income (0.19) (0.15) (0.44) (0.52) (0.52) (0.50) (0.45)
Distributions from net realized gains (0.05) (0.09) (1.52) (1.20) (1.14) (1.10) (1.18)
- ----------------------------------------------------------------------------------------------------------------
Total distributions (0.24) (0.24) (1.96) (1.72) (1.66) (1.60) (1.63)
Dilution resulting from the rights
offering -- -- -- -- -- -- (0.73)
Net asset value, end of period $31.87 $27.64 $28.51 $23.71 $21.36 $17.98 $19.78
================================================================================================================
Per share market price, end of period $26.875 $23.25 $24.1875 $19.75 $18.50 $15.625 $17.875
TOTAL INVESTMENT RETURN
Based on market price 12.1% 19.0% 33.1% 16.4% 29.5% (3.7)% (2.7)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,591,813 $1,327,919 $1,424,170 $1,138,760 $986,231 $798,298 $840,610
Ratio of expenses to average
net assets 0.30%+ 0.42%+ 0.39% 0.34% 0.46% 0.33% 0.36%
Ratio of net investment income to
average net assets 1.33%+ 1.67%+ 1.61% 2.30% 2.51% 2.65% 2.33%
Portfolio turnover 19.91%+ 23.29%+ 17.36% 19.60% 23.98% 19.23% 21.40%
Average brokerage commission rate $0.06 $0.06 $0.06 $0.07 -- -- --
Number of shares outstanding at
end of period (in 000's) 49,949 48,037 49,949 48,037 46,166 44,390 42,498
</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, 1998
PRIN. AMT.
OR SHARES VALUE(A)
--------- ---------
STOCKS AND CONVERTIBLE
SECURITIES -- 97.5%
BASIC MATERIALS -- 2.4%
Consolidated Papers, Inc. 225,000 $ 6,131,250
du Pont (E.I.) de
Nemours & Co. 250,000 18,671,875
Mead Corp. 400,000 12,700,000
--------------
37,503,125
--------------
CAPITAL GOODS -- 9.6%
Boeing Co. 198,400 8,841,200
Caterpillar Inc. 270,000 14,284,688
Corning, Inc. 340,000 11,815,000
Deere & Co. 260,000 13,739,375
Dover Corp. 260,000 8,905,000
Emerson Electric Co. 73,000 4,407,375
General Electric Co. 655,000 59,523,125
The BFGoodrich Co. 110,000 5,458,750
Minnesota Mining &
Manufacturing Co. 200,000 16,437,500
Pall Corp. 450,000 9,225,000
--------------
152,637,013
--------------
CONSUMER -- 16.5%
CONSUMER DISTRIBUTION -- 2.7%
American Stores Co. 100,000 2,418,750
Borders Group, Inc. (B) 195,000 7,215,000
Dillard Department Stores, Inc. 200,000 8,287,500
Penney (J.C.) Co., Inc. 200,000 14,462,500
Polo Ralph Lauren Corp. (B) 140,000 3,920,000
Tiffany &Co. 150,000 7,200,000
--------------
43,503,750
--------------
CONSUMER SERVICES -- 3.1%
Cracker Barrel Old Country
Store, Inc. 320,000 10,160,000+
Houston Industries Inc. 7.00%
Conv. DECS due 2000 150,000 11,175,000
McDonald's Corp. 305,000 21,045,000
Mediaone Group, Inc. (B) 150,000 6,590,625
--------------
48,970,625
--------------
PRIN. AMT.
OR SHARES VALUE(A)
--------- ---------
CONSUMER STAPLES -- 10.7%
Best Foods Inc. 255,000 $ 14,805,938
Campbell Soup Co. 380,000 20,187,500
Coca-Cola Co. 170,000 14,535,000
Dean Foods Co. 100,000 5,493,750
Fort James Corp. 350,000 15,618,750
Gillette Co. 439,120 24,974,950
Interstate Bakeries Corp. 138,000 4,579,875
Ivex Packaging Corp. (B) 400,000 9,300,000
Kimberly-Clark Corp. 340,000 15,597,500
PepsiCo, Inc. 320,000 13,180,000
Procter & Gamble Co. 230,000 20,944,375
Ralston Purina
7.00% SAILS due 2000 180,000 11,430,000
--------------
170,647,638
--------------
ENERGY -- 6.8%
British Petroleum plc ADR 150,000 13,237,500
Enron Corp. 6.25%
Exch. Notes due 1998 411,900 8,238,000
Enron Corp. 100,000 5,406,250
MCN Energy Group Inc. 226,000 5,650,000
Mobil Corp. 120,000 9,195,000
Petroleum & Resources
Corporation (C) 1,145,570 43,961,249
Royal Dutch Petroleum Co. 180,000 9,866,250
Schlumberger Ltd. 88,400 6,038,825
Unocal Capital Trust
$3.125 Conv. Pfd. 111,600 6,026,400+
--------------
107,619,474
--------------
FINANCIAL -- 19.2%
BANKING -- 12.1%
Associates First Capital Corp. Ser. A 273,400 21,034,712
Banc One Corp. 330,000 18,418,125
Federal Home Loan Mortgage Corp. 360,000 16,942,500
Investors Financial Services Corp. 274,700 14,559,100+
Mellon Bank Corp. 200,000 13,937,500
National City Corp. 80,000 5,680,000
NationsBank Corp. 300,000 23,006,250
Norwest Corp. 620,000 23,250,000
Peoples Heritage Financial Group 474,000 11,198,250+
Provident Bankshares Corp. 289,405 8,537,453+
Southwest Bancorp. of Texas, Inc. (B) 350,000 6,584,375
Wachovia Corp. 190,000 16,055,000
Wilmington Trust Corp. 210,000 12,783,750+
--------------
191,987,015
--------------
6
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
June 30, 1998
PRIN. AMT.
OR SHARES VALUE(A)
--------- ---------
INSURANCE -- 7.1%
AMBAC Financial Group, Inc. 379,600 $ 22,206,600
American International Group, Inc. 270,000 39,420,000
Annuity & Life Re (Holdings), Ltd. (B) 700,000 15,487,500+
Reinsurance Group of America, Inc. 299,850 17,728,631
Salomon Smith Barney Holdings, Inc.
7.625% Exch. Notes due 1999 (D) 375,000 18,046,875
--------------
112,889,606
--------------
HEALTH CARE -- 12.5%
DRUGS -- 8.4%
ALZA Corp. (B) 500,000 21,625,000
American Home Products 150,000 7,762,500
Chiron Corp. (B) 410,000 6,431,875+
Elan Corp., plc ADR (B) 350,000 22,509,375
Forest Laboratories, Inc. (B) 330,000 11,797,500
Lilly (Eli) & Co. 310,000 20,537,500
Merck & Co., Inc. 210,000 28,087,500
SmithKline Beecham plc ADR 260,000 15,730,000
--------------
134,481,250
--------------
MEDICAL SUPPLIES AND SERVICES -- 4.1%
Abbott Laboratories 480,000 19,680,000
American Retirement Corp.
5.75% Conv. Sub. Debs.
due 2002 $4,000,000 3,760,000
American Retirement Corp. (B) 151,100 2,682,025
Integrated Health Services, Inc.
5.75% Conv. Sub. Debs. due 2001 $6,675,000 7,743,000
Integrated Health Services, Inc. 180,564 6,771,150
Life Technologies, Inc. 307,500 9,647,813+
Sunrise Assisted Living, Inc. (B) 440,000 15,125,000+
--------------
65,408,988
--------------
TECHNOLOGY -- 15.3%
COMMUNICATION EQUIPMENT -- 5.3%
Ericsson (L.M.) Telephone Co. 4.25%
Conv. Sub. Debs. due 2000 $120,000 915,000+
Ericsson (L.M.) Telephone Co. ADR 790,000 22,613,750+
Lucent Technologies Inc. 110,000 9,150,625
Motorola, Inc. LYONs due 2009 $650,000 636,188
Motorola, Inc. 150,000 7,884,375
Nokia Corp. Pfd. ADR 300,000 21,825,000
Northern Telecom Ltd. 380,000 21,565,000
--------------
84,589,938
--------------
COMPUTER RELATED -- 7.6%
Affiliated Computer Services, Inc. (B) 63,500 2,444,750
Cisco Systems, Inc. (B) 322,500 29,690,156+
DST Systems Inc. (B) 400,000 22,400,000
First Data Corp. 343,980 11,458,834
Hewlett-Packard Co. 300,000 17,962,500
IKON Office Solutions, Inc. 353,700 5,150,756
QRS Corp. (B) 350,000 13,168,750+
Sterling Commerce, Inc. (B) 400,000 19,400,000
--------------
121,675,746
--------------
PRIN. AMT.
OR SHARES VALUE(A)
--------- ---------
ELECTRONICS -- 2.4%
Intel Corp. 170,000 $ 12,601,250+
Solectron Corp. (B) 600,000 25,237,500
--------------
37,838,750
--------------
TRANSPORTATION -- 3.0%
Delta Air Lines, Inc. 150,071 19,396,677
FDX Corp. (B) 260,000 16,315,000
Ryder System, Inc. 400,000 12,625,000
--------------
48,336,677
--------------
UTILITIES -- 12.1%
ELECTRIC AND GAS UTILITIES -- 5.1%
Black Hills Corp. 555,000 12,765,000
CINergy Corp. 300,000 10,500,000
Endesa, S.A. ADR 450,000 9,731,250
LG&E Energy Corp. 400,000 10,825,000
New Century Energy 250,000 11,359,375
TECO Energy, Inc. 300,000 8,043,750
United Water Resources Inc. 600,000 10,800,000
Washington Gas Light Co. 257,000 6,874,750
--------------
80,899,125
--------------
TELEPHONE UTILITIES -- 7.0%
AirTouch Communications, Inc. (B) 200,000 11,687,500
Ameritech Corp. 310,000 13,911,250
BellSouth Corp. 220,000 14,767,500
GTE Corp. 250,000 13,906,250
Nextel Communications Inc. (B) 120,000 2,985,000+
Qwest CommunicationsInternational,
Inc. (B) 536,406 18,707,159+
SBC Communications Inc. 400,000 16,000,000
WorldCom, Inc. (B) 420,000 20,343,750+
--------------
112,308,409
--------------
OTHER
Stocks under accumulation 191,744
--------------
TOTAL STOCKS AND CONVERTIBLE
SECURITIES
(Cost $772,264,670)(E) 1,551,488,873
--------------
7
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
June 30, 1998
PRIN. AMT. VALUE(A)
--------- ---------
SHORT-TERM INVESTMENTS -- 2.3%
U.S. GOVERNMENT OBLIGATIONS -- 1.3%
U.S. Treasury Bills,
5.02%,
due 8/27/98 $20,000,000 $ 19,841,152
--------------
COMMERCIAL PAPER -- 1.0%
Ford Motor Credit Corp.,
5.63-5.85%,
due 7/2/98-7/9/98 7,585,000 7,577,617
Prin. Amt. Value(A)
--------- ---------
General Electric Capital Corp.,
5.30%, due 7/2/98 $8,800,000 $ 8,798,704
--------------
16,376,321
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $36,217,473) 36,217,473
--------------
TOTAL INVESTMENTS
(Cost $808,482,143) 1,587,706,346
Cash, receivables and other
assets, less liabilities 4,106,811
--------------
NET ASSETS -- 100.0% $1,591,813,157
==============
================================================================================
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) Presently non-dividend paying.
(C) Non-controlled affiliate.
(D) Restricted security (Salomon Smith Barney Holdings, Inc. 7.625% Exch. Notes
due 1999, acquired 5/8/96, cost $10,017,100).
(E) The aggregate market value of stocks held in escrow at June 30, 1998
covering open call contracts written was $30,578,625. In addition, the
aggregate market value of securities segregated by the custodian required to
collateralize open put option contracts written was $16,701,500.
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>
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
1997........................... 1,424,170,425 49,949,239 28.51 .44 1.52
June 30, 1998.................. 1,591,813,157 49,949,239 31.87 .31* .05
</TABLE>
- ---------
*paid or declared.
8
<PAGE>
PRINCIPAL CHANGES IN PORTFOLIO SECURITIES
- --------------------------------------------------------------------------------
DURING THE THREE MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT
-------------------------------------------
HELD
ADDITIONS REDUCTIONS JUNE 30, 1998
--------- ---------- -------------
<S><C>
Abbott Laboratories 240,000(1) 480,000
American Home Products 150,000 150,000
Annuity and Life Re (Holdings), Ltd. 700,000 700,000
Best Foods Inc. 127,500(1) 255,000
Chiron Corp. 410,000 410,000
Consolidated Papers Inc. 125,000(1) 225,000
Corning, Inc. 230,000 340,000
Dean Foods Co. 100,000 100,000
Ericsson (L.M.) Telephone Co. ADR 395,000(1) 45,000 790,000
Gillette Co. 219,560(1) 439,120
Houston Industries Inc., 7.00% Conv. DECS due 2000 150,000 150,000
IKON Office Solutions, Inc. 168,700 353,700
Ivex Packaging Corp. 400,000 400,000
Lucent Technologies Inc. 64,816(1) 19,632 110,000
Mead Corp. 245,000 400,000
NationsBank Corp. 100,000 300,000
Nokia Corp. Pfd. ADR 150,000(1) 300,000
Peoples Heritage Financial Group 237,000(1) 474,000
Southwest Bancorp. of Texas, Inc. 175,000(1) 350,000
American Stores Co. 157,000 100,000
Elan Corp., plc ADR 110,000 350,000
Hewlett-Packard Co. 80,000 300,000
Inco Ltd. 5.75% Conv. Debs. due 2004 $4,000,000 --
MCN Energy Group Inc. 174,000 226,000
Mellon Bank Corp. 130,000 200,000
Olin Corp. 250,000 --
Rockwell International Corp. 215,000 --
Sabre Group Holdings, Inc. 300,000 --
Scandinavian Broadcasting Systems SA 7.25% Conv. Sub. Debs. due 2005 $3,000,000 --
Time Warner Inc. 135,000 --
Union Pacific Resources Group Inc. 275,102 --
</TABLE>
- ---------
(1) By stock split.
------------
COMMON STOCK
Listed on the New York Stock Exchange
and the Pacific Exchange
THE ADAMS EXPRESS COMPANY
Seven St. Paul Street, Suite 1140, Baltimore, MD 21202
WEBSITE: www.adamsexpress.com
E-MAIL: [email protected]
TELEPHONE: (410) 752-5900 or (800) 638-2479
COUNSEL: Chadbourne & Parke L.L.P.
INDEPENDENT ACCOUNTANTS: PricewaterhouseCoopers LLP
TRANSFER AGENT, REGISTRAR & CUSTODIAN OF SECURITIES
The Bank of New York
101 Barclay Street
New York, NY 10286
The Bank's Shareholder Relations Department: (800) 432-8224
E-mail: [email protected]
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,
1998, 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, 1998 and
the year ended December 31, 1997, and the financial highlights for the six
months ended June 30, 1998 and 1997 and for each of the five years in the period
ended December 31, 1997. 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, 1998, 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, 1998, 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.
PricewaterhouseCoopers LLP
Baltimore, Maryland
July 8, 1998
10
<PAGE>
SHAREHOLDER INFO AND SERVICES
- --------------------------------------------------------------------------------
DIVIDEND PAYMENT SCHEDULE
The Company presently pays dividends four times a year, as follows: (a) three
interim distributions on or about March, June and September 1st and (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 the year-end
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.
Stockholders holding shares in "street" or brokerage accounts may make their
election by notifying their brokerage house representative.
AUTOMATIC DIVIDEND REINVESTMENT PLAN (Until September 1, 1998)
For Registered Stockholders
Stockholders of record of Adams Express stock have an additional way to increase
their investment in the Company.
The Bank of New York's Automatic Dividend Reinvestment Plan provides that its
participants' distributions are automatically invested in additional shares of
the Company's common stock. New shares acquired are held on a book basis by the
Bank.
Additionally, after enrolling in the plan, participants are eligible to make
cash payments in any amount from $25.00.
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.
A brochure and enrollment card may be obtained by contacting the Bank at (800)
432-8224.
For Non-Registered Shareholders
For shareholders whose stock is held by a broker in "street" name, The Bank of
New York's Automatic Dividend Reinvestment Plan is now available through many
registered investment security dealers. If your shares are currently held in a
"street" name or brokerage account, please contact your broker for details about
how you can participate in this Plan.
WHAT'S NEW?
BuyDIRECT(SM*)
Commencing with the dividend payable September 1st, The Bank of New York will
offer BuyDIRECT, an enhanced version of the Automatic Dividend Reinvestment Plan
which has existed since 1973. BuyDIRECT provides both registered stockholders
and interested first time investors an affordable alternative for buying and
selling Adams Express Company shares. It also will replace the current Automatic
Dividend Reinvestment Plan.
If you are already registered in the Automatic Dividend Reinvestment Plan, you
will automatically be enrolled in BuyDIRECT without further action on your part.
A Plan brochure will be mailed to current participants in early August.
All other registered shareholders will receive a copy of the BuyDIRECT brochure
and enrollment form along with their September 1st dividend checks.
After August 1st, interested investors may request a copy of the Plan brochure
from The Bank of New York at the number or addresses listed below.
*BuyDirect is a service mark of The Bank of New York
The Company The Transfer Agent
The Adams Express Company The Bank of New York
Lawrence L. Hooper, Jr., Shareholder Relations
Secretary and General Counsel Dept.-11E
Seven St. Paul Street, P.O. Box 11258
Suite 1140 Church Street Station
Baltimore, MD 21202 New York, NY 10286
(800) 638-2479 (800) 432-8224
Website: Website:
www.adamsexpress.com http://stock.bankofny.com
E-mail: E-mail:
contact @adamsexpress.com Shareowner-svcs@
bankofny.com
11
