THIRD QUARTER REPORT
- --------------------------------------------------------------------------------
September 30, 1998
[Adams Express Company Logo](R)
BUILDING FOR THE FUTURE
WITH SOLID INVESTMENTS(R)
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
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 (9/30/98) $23.125
Net Asset Value (9/30/98) $28.45
Discount: 18.7%
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
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
[Recycle Logo] Printed on recycled paper
<PAGE>
LETTER TO STOCKHOLDERS
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We are pleased to submit the financial statements for the nine months ended
September 30, 1998. In addition, a schedule of investments and summary financial
information for the Company are provided.
Net assets of the Company at September 30, 1998 were $28.45 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 1.2%. 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. Regular 1998 investment income
dividends of $0.12 per share were paid on June 1, 1998 and September 1, 1998.
Net investment income for the nine months ended September 30, 1998 amounted to
$17,006,249, compared with $15,138,081 for the same period in 1997. These
earnings are equal to $0.34 and $0.32, respectively, per share, on the average
number of shares outstanding during each period.
Net capital gain realized on investments for the nine months ended September 30,
1998 amounted to $82,197,825, the equivalent of $1.65 per share.
Current and potential shareholders can find information about the Company,
including the daily net asset value (NAV) per share and the market price
discount to the NAV, at its site on the Worldwide Web. The address for the site
is www.adamsexpress.com. Also available at the website are a brief history of
the Company, historical financial information, and more general industry
material.
Included with this report is a press release from the Closed-End Fund
Association discussing a recent study released by CDA/Wiesenberger. The study
examines the effects of the conversion of closed-end funds into open-end funds
and the damage done to long-term investors. The study concludes that such
conversions usually result in a dramatic decline in the assets of a fund
following conversion, the generation of significant capital gains necessitated
by the liquidation of holdings to meet redemptions, and a marked increase in a
fund's expense ratio. The complete study can be found at the CDA/Wiesenberger
website: www.wiesenberger.com/adx.htm.
Effective September 1, 1998, the Automatic Dividend Reinvestment Plan was
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 sponsors and administers
the Plan. Under theBuyDIRECT plan, shareholders are able to reinvest their
dividends (as under the dividend reinvestment plan that it replaced) and first
time shareholders, as well as existing shareholders, are 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 10 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
October 16, 1998
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
September 30, 1998 (unaudited)
Assets
Investments* at value:
Common stocks and convertible securities
(cost $740,990,287) $1,305,387,073
Non-controlled affiliate, Petroleum & Resources
Corporation (cost $22,153,015) 38,519,791
Short-term investments (cost $74,023,292) 74,023,292 $1,417,930,156
- ----------------------------------------------------------------
Cash 108,900
Collateral for securities loaned 84,760,737
Receivables:
Investment securities sold 145,615
Dividends and interest 1,701,280
Prepaid expenses and other assets 4,205,750
- --------------------------------------------------------------------------------
Total Assets 1,508,852,438
- --------------------------------------------------------------------------------
Liabilities
Investment securities purchased 15,045
Open option contracts at value (proceeds $641,653) 710,038
Payable upon return of securities loaned 84,760,737
Accrued expenses 2,457,704
- --------------------------------------------------------------------------------
Total Liabilities 87,943,524
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Net Assets $1,420,908,914
================================================================================
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 3,343,807
Undistributed net realized gain on investments 82,753,226
Unrealized appreciation on investments 580,695,177
- --------------------------------------------------------------------------------
Net Assets Applicable to Common Stock $1,420,908,914
================================================================================
Net Asset Value Per Share of Common Stock $28.45
================================================================================
*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
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Nine Months Ended September 30, 1998 (unaudited)
<TABLE>
<S> <C>
Investment Income
Income:
Dividends:
From unaffiliated issuers $ 14,126,554
From non-controlled affiliate 595,696
Interest 4,427,592
- -------------------------------------------------------------------------------------------------------------
Total income 19,149,842
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Expenses:
Investment research 603,780
Administration and operations 423,088
Directors' fees 134,250
Reports and stockholder communications 186,598
Transfer agent, registrar and custodian expenses 262,889
Auditing services 37,581
Legal services 22,642
Occupancy and other office expenses 181,000
Travel, telephone and postage 101,255
Other 190,510
- -------------------------------------------------------------------------------------------------------------
Total expenses 2,143,593
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Net Investment Income 17,006,249
- -------------------------------------------------------------------------------------------------------------
Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions 82,106,179
Net realized gain distributed by regulated investment company (non-controlled affiliate) 91,646
Change in unrealized appreciation on investments (84,483,859)
- -------------------------------------------------------------------------------------------------------------
Net Loss on Investments (2,286,034)
- -------------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $14,720,215
=============================================================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Year Ended
Ended Sept. 30, 1998 Dec. 31, 1997
(unaudited)
<S> <C> <C>
From Operations:
Net investment income $ 17,006,249 $ 20,784,601
Net realized gain on investments 82,197,825 71,696,127
Change in unrealized appreciation on investments (84,483,859) 242,729,911
- --------------------------------------------------------------------------------------------------
Change in net assets resulting from operations 14,720,215 335,210,639
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Dividends to Stockholders from:
Net investment income (15,484,264) (21,136,073)
Net realized gain from investment transactions (2,497,462) (73,015,523)
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Decrease in net assets from distributions (17,981,726) (94,151,596)
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From Capital Share Transactions:
Value of common shares issued in payment of optional distributions -0- 44,350,986
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Total increase (decrease) in net assets (3,261,511) 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 $3,343,807 and $1,821,822, respectively) $1,420,908,914 $1,424,170,425
==================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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1. Significant Accounting Policies
The Adams Express Company (the Company) is registered under the Investment
Company Act of 1940 as a diversified investment company. The Company's
investment objectives as well as the nature and risk of its investment
transactions are set forth in the Company's registration statement.
Security Valuation -- Investments in securities traded on a national security
exchange are valued at the last reported sale price on the day of valuation.
Over-the-counter and listed securities for which a sale price is not available
are valued at the last quoted bid price. Short-term investments are valued at
amortized cost. Options are valued at the last sale price or last quoted asked
price.
Affiliated Companies -- Investments in companies 5% or more of whose outstanding
voting securities are held by the Company are defined as "Affiliated Companies"
in Section 2(a)(3) of the Investment Company Act of 1940.
Security Transactions and Investment Income -- Investment transactions are
accounted for on the trade date. Gain or loss on sales of securities and options
is determined on the basis of identified cost. Dividend income and distributions
to shareholders are recognized on the ex-dividend date, and interest income is
recognized on the accrual basis.
2. Federal Income Taxes
The Company's policy is to distribute all of its taxable income to its
shareholders in compliance with the requirements of the Internal Revenue Code
applicable to regulated investment companies. Therefore, no federal income tax
provision is required. For federal income tax purposes, the identified cost of
securities, including options, at September 30, 1998 was $837,389,467, and net
unrealized appreciation aggregated $581,182,342, of which the related gross
unrealized appreciation and depreciation were $622,368,122 and $41,185,780,
respectively.
Distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. Accordingly, periodic
reclassifications are made within the Company's capital accounts to reflect
income and gains available for distribution under income tax regulations.
3. Investment Transactions
Purchases and sales of portfolio securities, other than options and short-term
investments, during the nine months ended September 30, 1998 were $210,196,011
and $257,139,034, respectively. Option transactions comprised an insignificant
portion of operations during the period ended September 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 nine months ended September 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 nine
months ended September 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 49,226 stock option shares were
exercised at a weighted average market price of $26.1334 per share and the stock
options relating to those rights, which had a weighted average exercise price of
$11.9102 per share, were cancelled. In addition, stock options and stock
appreciation rights relating to 36,959 shares, which had a weighted average
exercise price of $16.1834, were cancelled. At September 30, 1998, there were
outstanding exercisable options to purchase 50,202 common shares at
$6.435-$18.770 per share (weighted average price of $12.5237), and unexercisable
options to purchase 204,099 common shares at $11.715-$25.325 per share (weighted
average price of $15.4599). The weighted average remaining contractual life of
outstanding exercisable and unexercisable options is 5.7631 years and 6.5002
years, respectively. Total compensation expense recognized for the nine months
ended September 30, 1998 related to the stock options and stock appreciation
rights plan was $(235,163). At September 30, 1998, there were 932,078 shares
available for future option grants.
5. Retirement Plans
The Company provides retirement benefits for its employees under a
non-contributory qualified defined benefit pension plan. The benefits are based
on years of service and compensation during the last 36 months of employment.
The Company's current funding policy is to contribute annually to the plan only
those amounts that can be deducted for federal income tax purposes. The plan
assets consist primarily of investments in mutual funds.
The actuarially computed net pension cost credit for the nine months ended
September 30, 1998 was $424,084, and consisted of service expense of $139,520,
interest expense of $194,797, expected return on plan assets of $599,140, and a
net amortization credit of $159,261.
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
September 30, 1998 was $4,031,659.
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)
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6. Expenses
The cumulative amount of accrued expenses at September 30, 1998 for employees
and former employees of the Company was $2,332,468. Aggregate remuneration paid
or accrued during the nine months ended September 30, 1998 to officers and
directors amounted to $783,250.
Research, accounting and other office services provided to and reimbursed by the
Company's non-controlled affiliate, Petroleum & Resources Corporation, amounted
to $353,682 for the nine months ended September 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 Company accounts for
securities lending transactions as secured financing and receives compensation
in the form of fees or retains a portion of interest on the investment of any
cash received as collateral. The Company also continues to receive interest or
dividends on the securities loaned. The loans are secured by collateral at least
equal, at all times, to the fair value of the securities loaned plus accrued
interest. Gain or loss in the fair value of the securities loaned that may occur
during the term of the loan will be for the account of the Company. At September
30, 1998, the Company had outstanding loans of $79,012,096 and held collateral
of $84,760,737.
8. Year 2000
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
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<TABLE>
<CAPTION>
Nine Months Ended
-------------------
(unaudited) Year Ended December 31
Sept. 30, Sept. 30, --------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <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 0.34 0.32 0.43 0.52 0.50 0.51 0.48
Net realized gains and change in
unrealized appreciation and other
changes (0.04) 5.81 6.33 3.55 4.54 (0.71) 1.18
- ---------------------------------------------------------------------------------------------------------------
Total from investment operations 0.30 6.13 6.76 4.07 5.04 (0.20) 1.66
Less distributions
Dividends from net investment
income (0.31) (0.27) (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 (0.36) (0.36) (1.96) (1.72) (1.66) (1.60) (1.63)
Dilution resulting from the rights
offering -- -- -- -- -- -- (0.73)
Net asset value, end of period $28.45 $29.48 $28.51 $23.71 $21.36 $17.98 $19.78
===============================================================================================================
Per share market price, end of period $23.125 $24.75 $24.1875 $19.75 $18.50 $15.625 $17.875
Total Investment Return
Based on market price (3.1)% 27.4% 33.1% 16.4% 29.5% (3.7)% (2.7)%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $1,420,909 $1,416,248 $1,424,170 $1,138,760 $986,231 $798,298 $840,610
Ratio of expenses to average
net assets 0.19%+ 0.39%+ 0.39% 0.34% 0.46% 0.33% 0.36%
Ratio of net investment income to
average net assets 1.51%+ 1.60%+ 1.61% 2.30% 2.51% 2.65% 2.33%
Portfolio turnover 19.18%+ 21.73%+ 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>
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+ 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
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September 30, 1998 (unaudited)
Prin. Amt.
or Shares Value(A)
---------- --------
Stocks And Convertible
Securities -- 94.5%
Basic Materials -- 2.2%
Consolidated Papers, Inc. 225,000 $ 5,653,125
du Pont (E.I.) de
Nemours & Co. 250,000 14,062,500
Mead Corp. 400,000 11,775,000
--------------
31,490,625
--------------
Capital Goods -- 9.2%
Boeing Co. 198,400 6,807,600
Caterpillar Inc. 270,000 12,015,000
Corning, Inc. 445,000 13,099,687
Deere & Co. 280,000 8,470,000
Dover Corp. 260,000 8,027,500
Emerson Electric Co. 73,000 4,544,250
General Electric Co. 655,000 52,113,438
The BFGoodrich Co. 110,000 3,609,375
Minnesota Mining &
Manufacturing Co. 170,000 12,526,875
Pall Corp. 450,000 9,984,375
--------------
131,198,100
--------------
Consumer -- 14.4%
Consumer Distribution -- 2.0%
American Stores Co. 100,000 3,218,750
Borders Group, Inc. (B) 195,000 4,338,750
Dillard's, Inc. 200,000 5,662,500
Penney (J.C.) Co., Inc. 180,000 8,088,750
Polo Ralph Lauren Corp. (B) 175,000 3,489,063
Tiffany &Co. 150,000 4,706,250
--------------
29,504,063
--------------
Consumer Services -- 3.1%
Cracker Barrel Old Country
Store, Inc. 330,500 7,518,875+
Houston Industries Inc. 7.00%
Conv. DECS due 2000 150,000 11,446,875
McDonald's Corp. 305,000 18,204,688
MediaOne Group, Inc. (B) 150,000 6,665,625
--------------
43,836,063
--------------
Prin. Amt.
or Shares Value(A)
---------- --------
Consumer Staples -- 9.3%
Best Foods Inc. 255,000 $ 12,351,562
Campbell Soup Co. 380,000 19,071,250
Coca-Cola Co. 170,000 9,796,250
Dean Foods Co. 250,000 11,046,875
Fort James Corp. 450,000 14,765,625
Gillette Co. 439,120 16,796,340
Interstate Bakeries Corp. 138,000 4,278,000
Ivex Packaging Corp. (B) 510,000 7,395,000
PepsiCo, Inc. 295,000 8,684,063
Procter & Gamble Co. 230,000 16,358,750
Ralston Purina
7.00% SAILS due 2000 180,000 11,160,000
--------------
131,703,715
--------------
Energy -- 6.8%
British Petroleum plc ADR 150,000 13,078,125
Enron Corp. 6.25%
Exch. Notes due 1998 411,900 7,156,763
Enron Corp. 100,000 5,350,000
Mobil Corp. 120,000 9,112,500
Petroleum & Resources
Corporation (C) 1,145,570 38,519,791
Royal Dutch Petroleum Co. 180,000 8,572,500
Schlumberger Ltd. 88,400 4,497,350
Unocal Capital Trust
$3.125 Conv. Pfd. 111,600 5,789,250+
Williams Companies, Inc. 137,000 3,938,750
--------------
96,015,029
--------------
Financial -- 18.1%
Banking -- 11.3%
Associates First Capital Corp. Ser. A 273,400 17,839,350
Banc One Corp. 330,000 14,004,375
Federal Home Loan Mortgage Corp. 360,000 17,865,000
Greenpoint Financial Corp. 425,000 13,546,875
Investors Financial Services Corp. 240,000 11,760,000+
Mellon Bank Corp. 210,000 11,550,000
National City Corp. 80,000 5,275,000
Norwest Corp. 550,000 19,800,000
Peoples Heritage Financial Group 474,000 8,502,375+
Provident Bankshares Corp. 289,405 7,343,657+
Southwest Bancorp. of Texas, Inc. (B) 350,000 5,468,750+
Wachovia Corp. 190,000 16,197,500
Wilmington Trust Corp. 210,000 10,920,000+
--------------
160,072,882
--------------
6
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
September 30, 1998 (unaudited)
Prin. Amt.
or Shares Value(A)
---------- --------
Insurance -- 6.8%
AMBAC Financial Group, Inc. 379,600 $ 18,220,800
American International Group, Inc. 405,000 31,741,875
Annuity & Life Re (Holdings), Ltd. (B) 700,000 13,825,000+
Reinsurance Group of America, Inc. 299,850 17,672,409
Salomon Smith Barney Holdings, Inc.
7.625% Exch. Notes due 1999 (D) 375,000 15,000,000
--------------
96,460,084
--------------
Health Care -- 13.6%
Drugs -- 10.1%
ALZA Corp. (B) 500,000 21,687,500
American Home Products 305,000 16,050,625
Chiron Corp. (B) 435,000 8,645,625+
Elan Corp., plc ADR (B) 350,000 25,221,875
Forest Laboratories, Inc. (B) 330,000 11,343,750
Lilly (Eli) & Co. 310,000 24,276,875
Merck & Co., Inc. 170,000 22,025,625
SmithKline Beecham plc ADR 260,000 14,235,000
--------------
143,486,875
--------------
Medical Supplies and Services -- 3.5%
Abbott Laboratories 480,000 20,850,000
American Retirement Corp.
5.75% Conv. Sub. Debs.
due 2002 $4,000,000 3,440,000
American Retirement Corp. (B) 151,100 2,351,494
Integrated Health Services, Inc.
5.75% Conv. Sub. Debs. due 2001 $6,675,000 5,573,625
Integrated Health Services, Inc. 180,564 3,058,302
Sunrise Assisted Living, Inc. (B) 440,000 15,097,500+
--------------
50,370,921
--------------
Technology -- 14.6%
Communication Equipment -- 4.5%
Ericsson (L.M.) Telephone Co. 4.25%
Conv. Sub. Debs. due 2000 $120,000 600,000+
Ericsson (L.M.) Telephone Co. ADR 750,000 13,781,250+
Lucent Technologies Inc. 105,000 7,271,250
Motorola, Inc. LYONs due 2009 $650,000 507,000
Motorola, Inc. 150,000 6,431,250
Nokia Corp. Pfd. ADR 300,000 23,475,000
Northern Telecom Ltd. 380,000 12,183,750
--------------
64,249,500
--------------
Computer Related -- 7.0%
Affiliated Computer Services, Inc. (B) 63,500 1,936,750
Cisco Systems, Inc. (B) 468,750 28,974,609+
DST Systems Inc. (B) 360,000 18,990,000
First Data Corp. 343,980 8,083,530
Hewlett-Packard Co. 275,000 14,557,813
QRS Corp. (B) 425,000 13,546,875+
Sterling Commerce, Inc. (B) 400,000 13,850,000
--------------
99,939,577
--------------
Prin. Amt.
or Shares Value(A)
---------- --------
Electronics -- 3.1%
Intel Corp. 170,000 $ 14,577,500+
Solectron Corp. (B) 600,000 28,875,000
--------------
43,452,500
--------------
Transportation -- 2.5%
Delta Air Lines, Inc. 150,071 14,594,405
FDX Corp. (B) 260,000 11,651,250
Ryder System, Inc. 400,000 9,950,000
--------------
36,195,655
--------------
Utilities -- 13.1%
Electric And Gas Utilities -- 6.0%
Black Hills Corp. 555,000 14,915,625
CINergy Corp. 300,000 11,475,000
Endesa, S.A. ADR 450,000 9,900,000
LG&E Energy Corp. 400,000 11,100,000
New Century Energy 250,000 12,171,875
TECO Energy, Inc. 300,000 8,568,750
United Water Resources Inc. 600,000 10,200,000
Washington Gas Light Co. 257,000 7,115,688
--------------
85,446,938
--------------
Telephone Utilities -- 7.1%
AirTouch Communications, Inc. (B) 115,000 6,555,000
Ameritech Corp. 310,000 14,725,000
BellSouth Corp. 220,000 16,555,000
MCI WorldCom, Inc. (B) 420,000 20,527,500+
MediaOne Group, Inc. 6.25% PIES
due 2001 85,000 4,749,375
Nextel Communications Inc. (B) 140,000 2,826,250+
Qwest CommunicationsInternational,
Inc. (B) 536,406 16,796,212+
SBC Communications Inc. 400,000 17,750,000
--------------
100,484,337
--------------
Total Stocks and Convertible
Securities
(Cost $763,143,302)(E) 1,343,906,864
--------------
7
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
September 30, 1998 (unaudited)
Prin. Amt.
or Shares Value(A)
---------- --------
Short-Term Investments -- 5.2%
U.S. Government Obligations -- 1.4%
U.S. Treasury Bills,
4.92%, due 11/27/98 $20,000,000 $ 19,844,737
--------------
Certificates of Deposit -- 0.7%
Harris Trust & Savings Bank,
5.45%, due 10/22/98 5,000,000 5,000,000
Old Kent Bank, 5.40%,
due 10/29/98 5,000,000 5,000,000
--------------
10,000,000
--------------
Commercial Paper -- 3.1%
Chevron UK Investment PLC,
5.52%, due 10/23/98 8,040,000 8,012,878
Deere (John) Capital Corp.,
5.25-5.30%,
due 10/8/98-10/22/98 4,742,000 4,730,738
Prin. Amt.
or Shares Value(A)
---------- --------
Ford Motor Credit Corp.,
5.54%, due 10/8/98 $ 9,221,000 $ 9,211,067
General Electric Capital Corp.,
5.38-5.53%,
due 10/1/98-10/2/98 11,620,000 11,619,359
Texaco Inc., 5.33-5.53%,
due 10/2/98-10/15/98 10,615,000 10,604,513
--------------
44,178,555
--------------
Total Short-Term Investments
(Cost $74,023,292) 74,023,292
--------------
Total Investments
(Cost $837,166,594) 1,417,930,156
Cash, receivables and other
assets, less liabilities 2,978,758
--------------
Net Assets -- 100.0% $1,420,908,914
==============
==================================================================
Notes:
(A) See note 1 to financial statements. Securities are listed on the New York
Stock Exchange, the American Stock Exchange or the Toronto Stock Exchange
except restricted securities and also those marked (+), which are traded
"Over-the-Counter."
(B) 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 September 30, 1998
covering open call option contracts written was $7,822,525. In addition, the
aggregate market value of securities segregated by the custodian required to
collateralize open put option contracts written was $13,841,250.
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> <C> <C> <C> <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
September 30, 1998 (unaudited)... 1,420,908,914 49,949,239 28.45 .31 .05
</TABLE>
8
<PAGE>
PRINCIPAL CHANGES IN PORTFOLIO SECURITIES
- --------------------------------------------------------------------------------
During the Three Months Ended September 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Shares
-----------------------------------------
Held
Additions Reductions Sept. 30, 1998
--------- ---------- --------------
<S> <C> <C> <C>
American Home Products 155,000 305,000
American International Group, Inc. 135,000(1) 405,000
Dean Foods Co. 150,000 250,000
Fort James Corp. 100,000 450,000
Cisco Systems, Inc. 156,250(1) 10,000 468,750
Corning, Inc. 105,000 445,000
Greenpoint Financial Corp. 541,100 116,100 425,000
Ivex Packaging Corp. 110,000 510,000
MediaOne Group, Inc., 6.25% PIES due 2001 85,000 85,000
QRS Corp. 75,000 425,000
Williams Companies, Inc. 137,000 137,000
AirTouch Communications, Inc. 85,000 115,000
DST Systems Inc. 40,000 360,000
Ericsson (L.M.)Telephone Co. ADR 40,000 750,000
GTECorp. 250,000 --
IKON Office Solutions, Inc. 353,700 --
Kimberly-Clark Corp. 340,000 --
Life Technologies, Inc. 307,500 --
MCN Energy Group Inc. 226,000 --
Minnesota Mining &Manufacturing Co. 30,000 170,000
Merck & Co., Inc. 40,000 170,000
NationsBank Corp. 300,000 --
Norwest Corp. 70,000 550,000
</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>
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" distribution, payable in late December, consisting of the estimated
balance of the net investment income for the year and the net realized capital
gain earned through October 31st. Stockholders may elect to receive the year-end
distribution in stock or cash. In connection with this distribution, all
stockholders of record are sent a dividend announcement notice and an election
card in mid-November.
STOCKHOLDERS HOLDING SHARES IN "STREET" OR BROKERAGE ACCOUNTS MAY MAKE THEIR
ELECTION BY NOTIFYING THEIR BROKERAGE HOUSE REPRESENTATIVE.
BuyDIRECT(SM)*
BuyDIRECT is a direct purchase and sale plan, as well as a dividend reinvestment
plan, sponsored and administered by our transfer agent, The Bank of New York. On
September 1, 1998, the Automatic Dividend Reinvestment Plan was replaced and
enhanced by BuyDIRECT. The Plan provides registered stockholders and interested
first time investors an affordable alternative for buying, selling, and
reinvesting in Adams Express shares without going through a broker. Direct
purchase plans are growing in popularity and Adams Express is pleased to be one
of the first closed-end funds to offer such a plan.
The costs to participants in administrative service fees and brokerage
commissions for each type of transaction are listed below. Please note that the
fees for the reinvestment of dividends as well as the $0.05 per share commission
for each share purchased under the Plan are the same fees that you have been
paying under the previous reinvestment plan and have not increased since 1973.
Initial Enrollment $7.50
A one-time fee for new accounts who are not currently registered holders.
Optional Cash Investments
Service Fee $2.50 per investment
Brokerage Commission $0.05 per share
Reinvestment of Dividends**
Service Fee 10% of amount invested
(maximum of $2.50 per investment)
Brokerage Commission $0.05 per share
Sale of Shares
Service Fee $10.00
Brokerage Commission $0.05 per share
Deposit of Certificates for safekeeping Included
Book to Book Transfers Included
To transfer shares to another participant or to a new participant
Fees are subject to change at any time.
Minimum and Maximum Cash Investments
Initial minimum investment (non-holders) $500.00
Minimum optional investment
(existing holders) $50.00
Maximum per transaction $25,000.00
Maximum per year NONE
A brochure which further details the benefits and features of BuyDIRECT as well
as an enrollment form may be obtained by contacting The Bank of New York.
For Non-Registered Shareholders
For shareholders whose stock is held by a broker in "street" name, The Bank of
New York's Dividend Reinvestment Plan remains available through many 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 or contact The Bank of New York about the BuyDIRECT
Plan.
--------------
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.-8W
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
*BuyDIRECT is a service mark of The Bank of New York.
**The year-end dividend and capital gain distribution will be made in newly
issued shares of common stock. There will be no fees or commissions in
connection with this dividend and capital gains distribution.
10
