Letter to Stockholders
-------------------------------------------------------------------------------
We are pleased to submit the financial statements for the six months ended
June 30, 2001. Also provided are the report of independent accountants, a
schedule of investments, and summary financial information for the Company.
Net assets of the Company at June 30, 2001 were $19.79 per share on 81,621,562
shares outstanding, compared with $23.72 per share at December 31, 2000 on
82,292,262 shares outstanding. On March 1, 2001, a distribution of $0.08 per
share was paid consisting of $0.04 from 2000 long-term capital gain, $0.03
from 2000 investment income, and $0.01 from 2001 investment income, all tax-
able in 2001. A 2001 investment income dividend of $0.08 per share was paid on
June 1, 2001 and another $0.08 investment income dividend has been declared to
shareholders of record August 17, 2001, payable September 1, 2001.
Net investment income for the six months ended June 30, 2001 amounted to
$9,693,681, compared with $8,799,608 for the same period in 2000. These earn-
ings are equal to $0.12 and $0.11 per share, respectively, on the average num-
ber of shares outstanding during each period.
Net capital gain realized on investments for the six months ended June 30,
2001 amounted to $119,495,677, the equivalent of $1.46 per share.
Current and potential shareholders can find information about the Company, in-
cluding the daily net asset value (NAV) per share, the market price, and the
discount/ premium to the NAV, at its site on the Internet. The address for the
site is www.adamsexpress.com. Also available at the website are a brief his-
tory of the Company, historical financial information, and more general indus-
try material. Further information regarding shareholder services is located on
page 14 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 opportu-
nity for capital appreciation.
By order of the Board of Directors,
/s/ Douglas G. Ober
Douglas G. Ober, /s/ Joseph M. Truta
Chairman and Chief Joseph M. Truta,
President
Executive Officer
July 20, 2001
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
June 30, 2001
Assets
Investments* at value:
Common stocks and convertible securities
(cost $933,125,667) $1,515,586,530
Non-controlled affiliate, Petroleum &
Resources Corporation
(cost $26,585,260) 52,149,974
Short-term investments (cost $45,677,579) 45,794,779 $1,613,531,283
-----------------------------------------------------------------------------
Cash 119,209
Securities lending collateral 191,480,920
Receivables:
Investment securities sold 5,459,326
Dividends and interest 874,474
Prepaid expenses and other assets 6,785,394
-----------------------------------------------------------------------------
Total Assets 1,818,250,606
-----------------------------------------------------------------------------
Liabilities
Investment securities purchased 6,108,700
Open written option contracts at value
(proceeds $721,635) 452,650
Obligations to return securities lending
collateral 191,480,920
Accrued expenses 4,874,122
-----------------------------------------------------------------------------
Total Liabilities 202,916,392
-----------------------------------------------------------------------------
Net Assets $1,615,334,214
-----------------------------------------------------------------------------
Net Assets
Common Stock at par value $1.00 per share,
authorized 150,000,000 shares; issued and
outstanding 81,621,562 shares $ 81,621,562
Additional capital surplus 801,630,401
Undistributed net investment income 3,651,384
Undistributed net realized gain on investments 120,019,105
Unrealized appreciation on investments 608,411,762
-----------------------------------------------------------------------------
Net Assets Applicable to Common Stock $1,615,334,214
-----------------------------------------------------------------------------
Net Asset Value Per Share of Common Stock $19.79
-----------------------------------------------------------------------------
*See Schedule of Investments on pages 8 through 10.
The accompanying notes are an integral part of the financial statements.
2
Statement of Operations
--------------------------------------------------------------------------------
Six Months Ended June 30, 2001
Investment Income
Income:
Dividends:
From unaffiliated issuers $ 9,942,425
From non-controlled affiliate 191,376
Interest and other income 1,706,599
-----------------------------------------------------------------------------
Total income 11,840,400
-----------------------------------------------------------------------------
Expenses:
Investment research 863,885
Administration and operations 359,492
Directors' fees 99,000
Reports and stockholder communications 204,125
Transfer agent, registrar and custodian expenses 232,041
Auditing and accounting services 50,264
Legal services 12,250
Occupancy and other office expenses 112,860
Travel, telephone and postage 64,343
Other 148,459
-----------------------------------------------------------------------------
Total expenses 2,146,719
-----------------------------------------------------------------------------
Net Investment Income 9,693,681
-----------------------------------------------------------------------------
Realized Gain and Change in Unrealized Appreciation on
Investments
Net realized gain on security transactions 119,438,264
Net realized gain distributed by regulated investment company
(non-controlled affiliate) 57,413
Change in unrealized appreciation on investments (439,057,582)
-----------------------------------------------------------------------------
Net Loss on Investments (319,561,905)
-----------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $(309,868,224)
-----------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
3
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
Six Months Year Ended
Ended June 30, 2001 December 31, 2000
------------------- -----------------
From Operations:
Net investment income $ 9,693,681 $ 20,941,465
Net realized gain on investments 119,495,677 128,091,337
Change in unrealized appreciation on
investments (439,057,582) (251,193,342)
--------------------------------------------------------------------------------
Change in net assets resulting from
operations (309,868,224) (102,160,540)
--------------------------------------------------------------------------------
Dividends to Stockholders from:
Net investment income (9,809,836) (17,702,862)
Net realized gain from investment
transactions (3,278,334) (128,205,341)
--------------------------------------------------------------------------------
Decrease in net assets from
distributions (13,088,170) (145,908,203)
--------------------------------------------------------------------------------
From Capital Share Transactions:
Value of shares issued in payment of
exercised options and distributions -0- 77,508,318
Cash in lieu of fractional shares issued
in payment of 3-for-2 stock split -0- (123,043)
Cost of shares purchased (Note 4) (13,272,370) (48,555,429)
--------------------------------------------------------------------------------
Change in net assets from capital share
transactions (13,272,370) 28,829,846
--------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (336,228,764) (219,238,897)
Net Assets:
Beginning of period 1,951,562,978 2,170,801,875
--------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $3,651,384 and
$3,767,539, respectively) $1,615,334,214 $1,951,562,978
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
4
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 invest-
ment 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 (excluding
purchased options) are valued at amortized cost. Purchased and written options
are valued at the last quoted asked price.
Affiliated Companies -- Investments in companies 5% or more of whose outstand-
ing voting securities are held by the Company are defined as "Affiliated Com-
panies" in Section 2(a)(3) of the Investment Company Act of 1940.
Security Transactions and Investment Income -- Investment transactions are ac-
counted 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 distribu-
tions to shareholders are recognized on the ex-dividend date, and interest in-
come is recognized on the accrual basis.
2. Federal Income Taxes
The Company's policy is to distribute all of its taxable income to its share-
holders in compliance with the requirements of the Internal Revenue Code ap-
plicable 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, 2001 was $1,005,353,991, and net
unrealized appreciation aggregated $608,898,927, of which the related gross
unrealized appreciation and depreciation were $734,971,477 and $126,072,550,
respectively.
Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. Accordingly, peri-
odic reclassifications are made within the Company's capital accounts to re-
flect income and gains available for distribution under income tax regula-
tions.
3. Investment Transactions
Purchases and sales of portfolio securities, other than options and short-term
investments, during the six months ended June 30, 2001 were $198,517,618 and
$218,361,921, respectively. Options may be written or purchased by the Compa-
ny. The Company, as writer of an option, bears the market risk of an unfavor-
able change in the price of the security underlying the written option. The
risk associated with purchasing options is limited to the premium originally
paid. Option transactions comprised an insignificant portion of operations
during the period ended June 30, 2001. 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 has 10,000,000 authorized and unissued preferred shares without
par value.
On October 19, 2000 the Company effected a 3-for-2 stock split. All references
to the number of outstanding shares and per share amounts have been adjusted
retroactively to reflect the stock split.
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. Transactions
in common stock for 2001 and 2000 were as follows:
Shares Amount
------ ------
Six months Six months
ended Year ended ended Year ended
June 30, December 31, June 30, December 31,
2001 2000 2001 2000
---------- ------------ ---------- ------------
Shares issued in payment of
dividends 3,517,794 $77,391,468
Shares issued in payment of
stock option exercise 3,068 116,850
Shares issued for 3-for-2
stock split 26,262,073 --
Cash in lieu of fractional
shares issued in payment
of 3-for-2 stock split (123,043)
-------------------------------------------------------------------------------
Total increase -- 29,782,935 -- 77,385,275
-------------------------------------------------------------------------------
Shares purchased (at a
weighted average discount
from net asset value of
10.2% and 13.7%,
respectively) (670,700) (1,385,500) $(13,272,370) (48,555,429)
-------------------------------------------------------------------------------
Total decrease (670,700) (1,385,500) (13,272,370) (48,555,429)
-------------------------------------------------------------------------------
Net change (670,700) 28,397,435 $(13,272,370) $28,829,846
-------------------------------------------------------------------------------
On June 30, 2001 the Company held a total of 670,700 shares of its common
stock at a cost of $13,272,370. There were no shares of its common stock held
at December 31, 2000.
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 2,610,146 shares of the Company's common
stock at 100% of the fair market value at date of grant. Options are exercis-
able 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 ex-
ercisable 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 holders 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 sur-
render. Under the plan, the exercise price of the options and related stock
appreciation
5
Notes to Financial Statements (continued)
-------------------------------------------------------------------------------
rights is reduced by the per share amount of capital gain paid by the Company
during subsequent years. At the beginning of 2001, 339,403 options were out-
standing, with a weighted average exercise price of $8.1169 per share. During
the six months ended June 30, 2001, the Company granted options including
stock appreciation rights for 44,214 shares of common stock with a weighted
average exercise price of $20.5776. Stock appreciation rights relating to
15,629 stock option shares were exercised at a weighted average market price
of $19.24 per share and the stock options relating to those rights, which had
a weighted average exercise price of $5.3121 per share, were cancelled. At
June 30, 2001, there were outstanding exercisable options to purchase 126,511
common shares at $3.7033-$20.5417 per share (weighted average price of
$6.7414), and unexercisable options to purchase 241,477 common shares at
$3.7033-$20.5417 per share (weighted average price of $11.3144). The weighted
average remaining contractual life of outstanding exercisable and
unexercisable options is 3.5443 years and 6.0261 years, respectively. Total
compensation expense recognized for the six months ended June 30, 2001 related
to the stock options and stock appreciation rights plan was $(596,795). At
June 30, 2001, there were 1,266,371 shares available for future option grants.
5. Retirement Plans
The Company provides retirement benefits for its employees under a non-con-
tributory 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 of investments in individual stocks, bonds and mutual funds.
The actuarially computed net pension cost credit for the six months ended June
30, 2001 was $208,438, and consisted of service cost of $102,206, interest
cost of $181,123, expected return on plan assets of $448,557, and net amorti-
zation credit of $43,210.
In determining the actuarial present value of the projected benefit obliga-
tion, the interest rate used for the weighted average discount rate was 7.5%,
the expected rate of annual salary increases was 7.0%, and the long-term ex-
pected rate of return on plan assets was 8.0%.
On January 1, 2001, the projected benefit obligation for service rendered to
date was $4,932,613. During the six months ended June 30, 2001, the projected
benefit obligation increased due to service cost and interest cost of $102,206
and $181,123, respectively, and decreased due to benefit payments in the
amount of $102,669. The projected benefit obligation June 30, 2001 was
$5,113,273.
On January 1, 2001, the actual fair value of plan assets was $11,316,574. Dur-
ing the six months ended June 30, 2001, the fair value of plan assets in-
creased due to the expected return on plan assets of $448,557 and decreased
due to benefit payments in the amount of $102,669. At June 30, 2001, the pro-
jected fair value of plan assets amounted to $11,662,462, which resulted in
excess plan assets of $6,549,189. The remaining components of prepaid pension
cost at June 30, 2001 included $960,216 in unrecognized net gain, $484,867 in
unrecognized prior service cost and $47,961 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, 2001
was $6,025,879.
In addition, the Company has a nonqualified benefit plan which provides em-
ployees with defined retirement benefits to supplement the qualified plan. The
Company does not provide postretirement medical benefits.
6. Expenses
The cumulative amount of accrued expenses at June 30, 2001 for employees and
former employees of the Company was $4,694,530. Aggregate remuneration paid or
accrued during the six months ended June 30, 2001 to officers and directors
amounted to $1,109,826, which includes a credit of $596,795 for stock options
and stock appreciation rights.
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 compen-
sation 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 in-
terest or dividends on the securities loaned. The loans are secured by collat-
eral of at least 102%, at all times, of 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 June 30, 2001, the Company had securities on loan of
$182,458,854 and held collateral of $191,480,920.
6
Financial Highlights
--------------------------------------------------------------------------------
Six Months Ended
-----------------------
Year Ended December 31
June 30, June 30, -----------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
--------- ----------- ----------- ----------- ----------- ----------- -----------
Per Share Operating Performance*
Net asset value, beginning of period $23.72 $26.85 $26.85 $21.69 $19.01 $15.80 $14.24
-----------------------------------------------------------------------------------------------------------------------------
Net investment
income 0.12 0.11 0.26 0.25 0.30 0.29 0.35
Net realized gains and change in
unrealized appreciation and other
changes (3.91) 1.55 (1.63) 6.54 3.78 4.22 2.36
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations (3.79) 1.66 (1.37) 6.79 4.08 4.51 2.71
-----------------------------------------------------------------------------------------------------------------------------
Capital share
repurchases 0.02 0.08 0.09 -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Less
distributions
Dividends from net investment income (0.12) (0.11) (0.22) (0.26) (0.30) (0.29) (0.35)
Distributions from net realized gains (0.04) (0.05) (1.63) (1.37) (1.10) (1.01) (0.80)
-----------------------------------------------------------------------------------------------------------------------------
Total
distributions (0.16) (0.16) (1.85) (1.63) (1.40) (1.30) (1.15)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.79 $28.43 $23.72 $26.85 $21.69 $19.01 $15.80
-----------------------------------------------------------------------------------------------------------------------------
Per share market price, end of period $17.87 $24.58 $21.00 $22.38 $17.75 $16.13 $13.17
Total Investment Return
Based on market
price (14.2)% 10.6% 1.7% 36.1% 19.3% 33.1% 16.4%
Based on net
asset value (15.9)% 6.6% (4.3)% 33.6% 23.7% 30.7% 21.0%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $1,615,334 $2,250,925 $1,951,563 $2,170,802 $1,688,080 $1,424,170 $1,138,760
Ratio of expenses to average net assets 0.24%+ 0.34%+ 0.24% 0.32% 0.22% 0.39% 0.34%
Ratio of net investment income to
average net
assets 1.10%+ 0.81%+ 0.97% 1.06% 1.48% 1.61% 2.30%
Portfolio
turnover 23.09%+ 11.76%+ 12.74% 15.94% 22.65% 17.36% 19.60%
Number of shares outstanding at
end of period (in 000's)* 81,622 79,187 82,292 80,842 77,815 74,924 72,055
--------
* Prior year data have been adjusted to reflect the 3-for-2 stock split ef-
fected in October, 2000.
+ Ratios presented on an annualized basis.
7
Schedule of Investments
--------------------------------------------------------------------------------
June 30, 2001
Prin. Amt.
or Shares Value (A)
---------- ---------
Stocks And Convertible Securities -- 97.1%
Basic Materials --1.5%
Engelhard Corp. 530,000 $ 13,668,700
Mead Corp. 400,000 10,856,000
-------------
24,524,700
-------------
Capital Goods -- 12.0%
Black & Decker Corp. 300,000 11,838,000
General Electric Co. 1,855,000 90,431,251
ITT Industries 355,000 15,708,750
Minnesota Mining & Manufacturing Co. 285,000 32,518,500
Pall Corp. 600,000 14,118,000
United Technologies Corp. 390,000 28,571,400
-------------
193,185,901
-------------
Communication Services -- 9.9%
Telecommunications -- Cellular and Wireless -- 2.2%
MediaOne Group, Inc.
6.25% PIES due 2001 85,000 4,861,150
Nextel Communications Inc.
5.25% Conv. Notes
due 2010 (B) $10,000,000 6,112,500
Nextel Communications Inc. (C)(D) 1,040,000 18,200,000
Vodafone Group plc ADS (C) 287,500 6,425,625
-------------
35,599,275
-------------
Telecommunications -- Long Distance -- 2.6%
MCI Group Inc. 22,000 354,200
Qwest Communications International, Inc.
5.75% TRENDS Pfd.
due 2003 (B) 538,000 30,262,500
Williams Communications Group, Inc. (C)(D) 911,200 2,688,039
WorldCom, Inc. (D) 550,000 7,810,000
-------------
41,114,739
-------------
Telephone -- 5.1%
American Tower Corp.
5.00% Conv. Notes
due 2010 (B) $10,000,000 8,000,000
BellSouth Corp. 440,000 17,718,800
Global Crossing Ltd. 6.75% Conv. Pfd. due 2012 40,000 4,620,000
Global Crossing Ltd. (C)(D) 644,000 5,564,160
RCN Corp. (C)(D) 280,000 1,537,200
SBC Communications Inc. 787,960 31,565,678
Time Warner Telecom Inc. (C)(D) 404,500 13,558,840
-------------
82,564,678
-------------
Prin. Amt.
or Shares Value (A)
---------- ---------
Consumer -- 4.3%
Coca-Cola Co. (C) 170,000 $ 7,650,000
Dean Foods Co. 300,000 12,060,000
Ivex Packaging Corp. (D) 700,000 13,300,000
PepsiCo, Inc. (C) 295,000 13,039,000
Procter & Gamble Co. 170,000 10,846,000
Tiffany & Co. (C) 350,000 12,677,000
------------
69,572,000
------------
Energy -- 9.2%
BP plc ADR 270,000 13,459,501
Calpine Capital Trust 5.75% Conv. Pfd. HIGH TIDES 182,250 24,284,813
Calpine Corp. (C)(D) 40,000 1,512,000
Enron Corp. 450,000 22,050,000
Exxon Mobil Corp. 158,418 13,837,812
Petroleum & Resources
Corporation (E) 1,913,761 52,149,974
Schlumberger Ltd. 88,400 4,654,260
Williams Companies, Inc. 500,000 16,475,000
------------
148,423,360
------------
Financial -- 19.0%
Banking -- 11.8%
BankNorth Group, Inc. 474,000 10,736,100
Citigroup Inc. 401,023 21,190,062
Federal Home Loan Mortgage Corp. 345,000 24,150,000
Greenpoint Financial Corp. 435,000 16,704,000
Investors Financial Services Corp. 558,500 37,419,500
Mellon Financial Corp. 420,000 19,320,000
Provident Bankshares Corp. 335,021 8,355,435
Wachovia Corp. (C) 190,000 13,518,500
Wells Fargo & Co. 550,000 25,536,500
Wilmington Trust Corp. 210,000 13,156,500
------------
190,086,597
------------
Insurance -- 7.2%
AMBAC Financial Group, Inc. 569,400 33,139,080
American International Group, Inc. 759,375 65,306,251
Annuity & Life Re (Holdings), Ltd. 513,000 18,339,750
------------
116,785,081
------------
8
Schedule of Investments (continued)
--------------------------------------------------------------------------------
June 30, 2001
Prin. Amt
or Shares Value (A)
--------- ---------
Health Care -- 14.8%
Abbott Laboratories 350,000 $ 16,803,500
Affymetrix Inc. (D) 210,000 4,630,500
American Home Products Corp. 300,000 17,532,000
Applera Corp. - Applied Biosystems Group (C) 210,000 5,617,500
Baxter International 510,000 24,990,000
Caliper Technologies (C)(D) 175,000 3,683,750
Elan Corp., plc ADR (C)(D) 550,000 33,550,000
Genentech, Inc. (D) 375,000 20,662,500
GlaxoSmithKline plc ADR (C) 250,360 14,070,232
HCA Inc. 180,000 8,134,200
Human Genome Sciences Inc. (C)(D) 200,000 12,050,000
Johnson & Johnson 360,000 18,000,000
Lilly (Eli) & Co. 190,000 14,060,000
Merck & Co., Inc. 250,000 15,977,500
Pharmacia Corp. (C) 368,900 16,950,955
Vertex Pharmaceuticals Inc. (D) 248,016 12,276,792
------------
238,989,429
------------
Technology -- 16.3%
Communication Equipment -- 5.8%
Corning Inc. 1,170,000 19,550,700
Ericsson (L.M.) Telephone Co. ADR (C) 3,133,333 16,982,665
Lucent Technologies Inc. 508,920 3,155,304
Motorola, Inc. 495,622 8,207,500
Nokia Corp. ADR (C) 1,840,000 40,553,600
Nortel Networks Corp. 600,000 5,454,000
------------
93,903,769
------------
Computer Related -- 7.0%
BEA Systems Inc. (C)(D) 152,500 4,683,275
BMC Software Inc. (D) 310,000 6,987,400
Cisco Systems, Inc. (D) 1,835,000 33,397,000
DiamondCluster International Inc. (D) 447,500 5,696,675
Oracle Corp. (D) 1,180,000 22,420,000
QRS Corp. (C)(D) 530,000 8,798,000
Sapient Corp. (D) 1,150,000 11,212,500
Siebel Systems Inc. (D) 100,000 4,690,000
Sun Microsystems Inc. (D) 500,000 7,860,000
Symantec Corp. (D) 182,500 7,973,425
------------
113,718,275
------------
Electronics -- 3.5%
Intel Corp. 690,000 20,182,500
Solectron Corp. (C)(D) 2,000,000 36,600,000
------------
56,782,500
------------
Prin. Amt.
or Shares Value (A)
---------- ---------
Transportation -- 1.8%
Canadian National Railway Co. 5.25% Conv. Pfd. QUIDS
due 2029 170,000 $ 9,571,000
Canadian National Railway Co. (C) 85,000 3,442,500
United Parcel Service, Inc. 265,000 15,317,000
-------------
28,330,500
-------------
Utilities -- 8.3%
Black Hills Corp. 555,000 22,327,650
CINergy Corp. 300,000 10,485,000
Duke Energy Corp. 8.25% Conv. Pfd. due 2004 400,000 10,260,000
Duke Energy Corp. 355,000 13,848,550
Keyspan Corp. 400,000 14,592,000
Mirant Corp. (C)(D) 400,000 13,760,000
Northwestern Corp. 500,000 11,200,000
Orion Power Holdings, Inc. (C) 750,000 17,857,500
TECO Energy, Inc. 650,000 19,825,000
-------------
134,155,700
-------------
Total Stocks and Convertible Securities
(Cost $959,710,927) (F) 1,567,736,504
-------------
9
Schedule of Investments (continued)
-------------------------------------------------------------------------------
June 30, 2001
Prin. Amt. Value (A)
---------- ---------
Short-Term Investments -- 2.8%
U.S. Government Obligations -- 0.7%
U.S. Treasury Bills,
3.54%, due 8/23/01 $12,000,000 $ 11,937,449
--------------
Commercial Paper -- 2.1%
Chevron USA,
3.75%, due 7/05/01 9,815,000 9,810,875
Ford Motor Credit Corp.,
3.92%, due 7/05/01-7/10/01 13,340,000 13,331,155
General Electric Capital Corp., 3.83-3.96%,
due 7/03/01-7/12/01 10,580,000 10,571,300
--------------
33,713,330
--------------
No. of
Contracts Value (A)
--------- ---------
Purchased Options -- 0.0%
Calpine Corp, Put, July 2001, Strike Price $45 20,000 $ 144,000
Total Short-Term Investments
(Cost $45,677,579) 45,794,779
--------------
Total Investments
(Cost $1,005,388,506) 1,613,531,283
Cash, receivables and other assets, less liabilities 1,802,931
--------------
Net Assets -- 100.0% $1,615,334,214
==============
-------------------------------------------------------------------------------
Notes:
(A) See note 1 to financial statements. Securities are listed on the New York
Stock Exchange, the American Stock Exchange or the NASDAQ, except re-
stricted securities.
(B) Restricted securities (American Tower Corp. 5% Conv. Notes due 2010, ac-
quired 2/9/00-4/13/00, cost $10,037,239, Nextel Communications Inc. 5.25%
Conv. Notes due 2010, acquired 1/21/00, cost $10,000,000, and Qwest Commu-
nications International, Inc. 5.75% TRENDS Pfd. due 2003, acquired
12/4/98-2/21/01, cost $32,969,481).
(C) All or a portion of these securities is on loan. See Note 7 to Financial
Statements.
(D) Presently non-dividend paying.
(E) Non-controlled affiliate.
(F) The aggregate market value of stocks held in escrow at June 30, 2001 cov-
ering open call option contracts written was $6,782,650. In addition, the
aggregate market value of securities segregated by the custodian required
to collateralize open put option contracts written was $6,920,000.
10
Report of Independent Accountants
-------------------------------------------------------------------------------
To the Board of Directors and Stockholders of The Adams Express Company:
In our opinion, the accompanying statement of assets and liabilities, includ-
ing the schedule of investments, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Adams Express Company (here-
after referred to as the "Company") at June 30, 2001, and the results of its
operations, the changes in its net assets and the financial highlights for
each of the fiscal periods presented, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Company's management; our responsibility is to ex-
press an opinion on these financial statements based on our audits. We con-
ducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial state-ments are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presenta-tion. We believe that our audits, which included confirmation
of securities at June 30, 2001, by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
July 11, 2001
11
Principal Changes in Portfolio Securities
--------------------------------------------------------------------------------
During the Three Months Ended June 30, 2001
Shares
--------------------------------------
Held
Additions Reductions June 30, 2001
--------- ---------- -------------
Abbott Laboratories.................... 95,000 350,000
Affymetrix Inc. ....................... 210,000 210,000
Applera Corp.--Applied Biosystems
Group................................. 210,000 210,000
Baxter International................... 255,000(/1/) 510,000
BEA Systems Inc. ...................... 152,500 152,500
Caliper Technologies................... 175,000 175,000
Genentech, Inc. ....................... 105,000 375,000
HCA Inc. .............................. 180,000 180,000
Johnson & Johnson...................... 180,000(/1/) 360,000
Mirant Corp. .......................... 90,000 400,000
Siebel Systems, Inc. .................. 100,000 100,000
Annuity & Life Re (Holdings), Ltd. .... 182,000 513,000
ALZA Corp. ............................ 480,000 --
Calpine Capital Trust 5.75% Conv. Pfd.
HIGH TIDES............................ 20,250 182,250
First Data Corp. ...................... 175,000 --
Investors Financial Services Corp. .... 71,500 558,500
Ivex Packaging Corp. .................. 228,000 700,000
Nortel Networks Corp. ................. 890,000 600,000
Symantec Corp. ........................ 40,000 182,500
--------
(/1/)By stock split.
-------------------
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 pur-
chase or sale of shares of the Company or of any securities mentioned in the
report. The rates of return will vary and the market value of an investment
will fluctuate. Shares, if sold, may be worth more or less than their origi-
nal cost. Past performance is not indicative of future investment results.
12
Historical Financial Statistics
--------------------------------------------------------------------------------
Dividends Distributions
Net from from
Asset Net Investment Net Realized
Value of Shares Value per Income Gains
December 31 Net Assets Outstanding* Share* Per Share* Per Share*
----------- ---------- ------------ --------- -------------- -------------
1991.................... $ 661,895,779 49,121,246 $13.47 $.36 $ .73
1992.................... 696,924,779 51,039,938 13.65 .31 .77
1993.................... 840,610,252 63,746,498 13.19 .30 .79
1994.................... 798,297,600 66,584,985 11.99 .33 .73
1995.................... 986,230,914 69,248,276 14.24 .35 .76
1996.................... 1,138,760,396 72,054,792 15.80 .35 .80
1997.................... 1,424,170,425 74,923,859 19.01 .29 1.01
1998.................... 1,688,080,336 77,814,977 21.69 .30 1.10
1999.................... 2,170,801,875 80,842,241 26.85 .26 1.37
2000.................... 1,951,562,978 82,292,262 23.72 .22 1.63
June 30, 2001........... 1,615,334,214 81,621,562 19.79 .20+ .04
--------
* Prior years have been adjusted to reflect the 3-for-2 stock split effected
in October, 2000.
+ Paid or declared.
-------------------
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: contact@adamsexpress.com
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: (877) 260-8188
E-mail: Shareowner-svcs@bankofny.com
13
Shareholder Information and Services
-------------------------------------------------------------------------------
DIVIDEND PAYMENT SCHEDULE
The Company presently pays dividends four times a year, as follows: (a) three
interim distributions on or about March 1, June 1, and September 1, 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 31. 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.
BuyDIRECTSM*
BuyDIRECT is a direct purchase and sale plan, as well as a dividend reinvest-
ment plan, sponsored and administered by our transfer agent, The Bank of New
York. The Plan provides registered stockholders and interested first time in-
vestors an affordable alternative for buying, selling, and reinvesting in
Adams Express shares. Direct purchase plans are growing in popularity and
Adams Express is pleased to participate in such a plan.
The costs to participants in administrative service fees and brokerage commis-
sions 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 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
Electronic Funds Transfer (monthly minimum) $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 regis-
tered 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 the Plan or contact The Bank of New York
about the BuyDIRECT Plan.
-----------
The Company The Transfer Agent
The Adams Express The Bank of New York
Company Shareholder Relations Dept.-8W
Lawrence L. P.O. Box 11258
Hooper, Jr., Church Street Station
Vice President, New York, NY 10286
Secretary and (877) 260-8188
General Counsel Website:
Seven St. Paul http://stock.bankofny.com
Street, E-mail:
Suite 1140 Shareowner-svcs@ bankofny.com
Baltimore, MD
21202
(800) 638-2479
Website:
www.adamsexpress.com
E-mail:
contact@adamsexpress.com
*BuyDIRECT is a service mark of The Bank of New York.
**The year-end dividend and capital gain distribution may be made in newly is-
sued shares of common stock in which event there would be no fees or commis-
sions in connection with this dividend and capital gain distribution.
14
The Adams Express Company
----------------------------------------------------
Board of Directors
Enrique R. Arzac/2,4/ Douglas G. Ober/1/
Daniel E. Emerson/1,4/ Landon Peters/3,4/
Thomas H. Lenagh/2,3/ John J. Roberts/2,4/
W.D. MacCallan/1,4/ Susan C. Schwab/1,3/
W. Perry Neff/1,2/ Robert J.M. Wilson/1,3/
1. Member of Executive Committee
2. Member of Audit Committee
3. Member of Compensation Committee
4. Member of Retirement Benefits 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
Lawrence L. Hooper, Jr. Vice President,
Secretary and
General Counsel
Maureen A. Jones Vice President and
Treasurer
Christine M. Sloan Assistant Treasurer
Geraldine H. Stegner Assistant Secretary
----------
Stock Data
----------
Price (6/30/01) $17.87
Net Asset Value (6/30/01) $19.79
Discount: 9.7%
New York Stock Exchange and Pacific Exchange
ticker symbol: ADX
NASDAQ Mutual Fund Quotation Symbol: XADEX
Newspaper stock listings are generally under the
abbreviation: AdaEx
---------------------
Distributions in 2001
---------------------
From Investment Income $0.20
(paid or declared)
From Net Realized Gains 0.04
-----
Total $0.24
=====
---------------------------
2001 Dividend Payment Dates
---------------------------
March 1, 2001
June 1, 2001
September 1, 2001
December 27, 2001*
*Anticipated
[Adams Express Logo]
Semi-Annual Report
------------------
June 30, 2001