THE ADAMS EXPRESS COMPANY

 

 

Board of Directors

 

Enrique R. Arzac 2,4		Roger W. Gale 1,4,5
Phyllis O. Bonanno 2,4		Thomas H. Lenagh 2,3
Kenneth J. Dale 3,4		Kathleen T. McGahran 1,3,5
Daniel E. Emerson 1,3,5		Douglas G. Ober 1
Frederic A. Escherich 2,3		Craig R. Smith 1,4,5

1.	Member of Executive Committee

2.	Member of Audit Committee

3.	Member of Compensation Committee

4.	Member of Retirement Benefits Committee

5.	Member of Nominating and Governance Committee

 

Officers

 

Douglas G. Ober		Chairman and Chief Executive Officer
Joseph M. Truta		President
David D. Weaver		Executive Vice President
Lawrence L. Hooper, Jr.		Vice President, General Counsel and Secretary
Maureen A. Jones		Vice President, Chief Financial Officer and Treasurer
David R. Schiminger		Vice President—Research
D. Cotton Swindell		Vice President—Research
Brian S. Hook		Assistant Treasurer
Christine M. Sloan		Assistant Treasurer
Geraldine H. Paré		Assistant Secretary

 

 

Stock Data

 

 

Market Price (3/31/09)		$7.52
Net Asset Value (3/31/09)		$8.76
Discount:		14.2%

 

New York Stock Exchange ticker symbol: ADX

NASDAQ Mutual Fund Quotation Symbol: XADEX

Newspaper stock listings are generally under the abbreviation: AdaEx

 

 

Distributions in 2009

 

 

From Investment Income (paid or declared)		$	0.08
From Net Realized Gains			0.02
Total		$	0.10

 

 

2009 Dividend Payment Dates

 

 

March 1, 2009

June 1, 2009

September 1, 2009*

December 28, 2009*

 

*Anticipated

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LETTER TO STOCKHOLDERS

 

 

 

 

We submit herewith the financial statements of The Adams Express Company (the Company) for the three months ended March 31, 2009. Also provided are a schedule of investments and other financial information.

 

Net assets of the Company at March 31, 2009 were $8.76 per share on 86,767,691 shares outstanding, compared with $9.61 per share at December 31, 2008 on 87,406,443 shares outstanding. On March 1, 2009, a distribution of $0.05 per share was paid, consisting of $0.02 from 2008 investment income, $0.02 from 2008 long-term capital gain, and $0.01 from 2009 investment income, all taxable in 2009. On April 9, 2009 an investment income dividend of $0.05 per share was declared to stockholders of record May 15, 2009, payable June 1, 2009.

 

Net investment income for the three months ended March 31, 2009 amounted to $3,033,510, compared with $5,702,605 for the same three month period in 2008. These earnings are equal to $0.03 and $0.07 per share, respectively.

 

Net capital gain realized on investments for the three months ended March 31, 2009 amounted to $19,462,868, or $0.22 per share.

 

For the three months ended March 31, 2009, the total return on the net asset value (with dividends and capital gains reinvested) of the Company’s shares was (8.1)%. The total return on the market value of the Company’s shares for the period was (5.6)%. These compare to a (11.0)% total return for the Standard & Poor’s 500 Composite Stock Index and a (9.8)% total return for the Lipper Large-Cap Core Mutual Fund Average over the same time period.

 

For the twelve months ended March 31, 2009, the Company’s total return on net asset value was (34.8)% and on market value was (35.2)%. Comparable figures for the S&P 500 and the Lipper Large-Cap Core Mutual Fund Average were (38.1)% and (37.3)%, respectively.

 

The Annual Meeting was held on March 19, 2009 in Baltimore, Maryland. The results of the voting at the Annual Meeting are shown on page 14. The presentation concerning the Company’s performance and the outlook for the remainder of the year can be found on the Company’s website under Events.

 

 

Joseph M. Truta, President of the Company for the past 23 years, is retiring at the end of June, 2009 after 40 years of service. Mr. Truta joined the Company in 1969, when it was still headquartered in New York City. His contributions over the years were recognized and the appreciation of The Board of Directors and management were expressed at the Annual Meeting.

 

Maureen A. Jones, Vice President, Chief Financial Officer and Treasurer, is retiring at the end of May, 2009 after 21 years with the Company. Ms. Jones has been instrumental in applying a great many new financial standards and requirements to the Company’s financial statements during her years of service. She was also recognized for her contributions at the Annual Meeting.

 

While both Mr. Truta and Ms. Jones will be greatly missed, we have been planning for both of these retirements for some period of time and have plans in place for the successors to these important members of senior management.

 

 

 

Current and potential stockholders can find information about the Company, including the daily net asset value (NAV) per share, the market price, and the discount/premium to the NAV, on our website at www.adamsexpress.com. Also available on the website are a history of the Company, historical financial information, and other useful content. Further information regarding stockholder services is located on page 15 of this report.

 

 

 

By order of the Board of Directors,

Douglas G. Ober,

Chairman and

Chief Executive Officer

Joseph M. Truta,

President

 

April 9, 2009

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STATEMENT OF ASSETS AND LIABILITIES

 

 

 

March 31, 2009

(unaudited)

 

Assets
Investments* at value:
Common stocks (cost $861,399,513)		$	650,460,248
Non-controlled affiliate, Petroleum & Resources Corporation (cost $34,735,404)			40,017,964
Short-term investments (cost $72,640,848)			72,640,848
Securities lending collateral (cost $67,838,908)			67,838,908		$	830,957,968
Cash						349,426
Receivables:
Investment securities sold						1,584,586
Dividends and interest						897,481
Prepaid expenses and other assets						1,831,953
Total Assets						835,621,414
Liabilities
Investment securities purchased						3,236,740
Open written option contracts at value (proceeds $438,569)						294,150
Obligations to return securities lending collateral						67,838,908
Accrued pension liabilities						3,968,980
Accrued expenses						280,460
Total Liabilities						75,619,238
Net Assets					$	760,002,176
Net Assets
Common Stock at par value $0.001 per share, authorized 150,000,000 shares; issued and outstanding 86,767,691 shares (includes 112,823 restricted shares, 15,000 nonvested or deferred restricted stock units, and 8,825 deferred stock units) (note 6)					$	86,768
Additional capital surplus						949,070,434
Accumulated other comprehensive income (note 5)						(5,733,742	)
Undistributed net investment income						2,159,381
Undistributed net realized gain on investments						19,931,621
Unrealized appreciation/(depreciation) on investments						(205,512,286	)
Net Assets Applicable to Common Stock					$	760,002,176
Net Asset Value Per Share of Common Stock						$8.76

 

* See Schedule of Investments on pages 9 and 10.

 

The accompanying notes are an integral part of the financial statements.

 

2

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STATEMENT OF OPERATIONS

 

 

 

Three Months Ended March 31, 2009

(unaudited)

 

Investment Income
Income:
Dividends:
From unaffiliated issuers		$	4,494,709
From non-controlled affiliate			174,942
Interest and other income			139,089
Total income			4,808,740
Expenses:
Investment research			793,376
Administration and operations			467,435
Transfer agent, registrar, and custodian			99,613
Directors’ fees			96,542
Reports and stockholder communications			68,859
Travel, training, and other office expenses			49,187
Investment data services			43,900
Occupancy			42,510
Auditing and accounting services			32,460
Insurance			26,176
Legal services			11,096
Other			44,076
Total expenses			1,775,230
Net Investment Income			3,033,510
Change in Accumulated Other Comprehensive Income (note 5)			302,053
Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions			19,095,616
Net realized gain distributed by regulated investment company (non-controlled affiliate)			109,339
Net realized gain on written option contracts			257,913
Change in unrealized appreciation on securities			(93,588,764	)
Change in unrealized appreciation on written option contracts			58,302
Net Loss on Investments			(74,067,594	)
Change in Net Assets Resulting from Operations		$	(70,732,031	)

 

The accompanying notes are an integral part of the financial statements.

 

3

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STATEMENTS OF CHANGES IN NET ASSETS

 

 

 

		Three Months Ended March 31, 2009				Year Ended December 31, 2008
		(unaudited)
From Operations:
Net investment income		$	3,033,510			$	21,085,039
Net realized gain on investments			19,462,868				32,965,241
Change in unrealized appreciation on investments			(93,530,462	)			(522,436,794	)
Change in accumulated other comprehensive income (note 5)			302,053				(4,055,632	)
Change in net assets resulting from operations			(70,732,031	)			(472,442,146	)
Distributions to Stockholders from:
Net investment income			(2,628,357	)			(22,378,500	)
Net realized gain from investment transactions			(1,765,938	)			(32,528,278	)
Decrease in net assets from distributions			(4,394,295	)			(54,906,778	)
From Capital Share Transactions:
Value of shares issued in payment of distributions (note 4)			5,208				17,225,925
Cost of shares purchased (note 4)			(4,891,825	)			(28,955,931	)
Deferred compensation (notes 4, 6)			2,976				611,546
Change in net assets from capital share transactions			(4,883,641	)			(11,118,460	)
Total Change in Net Assets			(80,009,967	)			(538,467,384	)
Net Assets:
Beginning of period			840,012,143				1,378,479,527
End of period (including undistributed net investment income of $2,159,381 and $1,754,228, respectively)		$	760,002,176			$	840,012,143

 

The accompanying notes are an integral part of the financial statements.

 

4

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

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 is an internally-managed fund whose investment objectives are preservation of capital, the attainment of reasonable income from investments, and an opportunity for capital appreciation.

 

The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates made by Company management. Management believes that estimates and security valuations are appropriate; however, actual results may differ from those estimates, and the security valuations reflected in the financial statements may differ from the value the Company ultimately realizes upon sale of the securities.

 

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 stockholders are recognized on the ex-dividend date, and interest income is recognized on the accrual basis.

 

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 and money market funds) are valued at amortized cost which approximates fair value. Purchased and written options are valued at the last quoted bid and asked price, respectively. Money market funds are valued at net asset value on the day of valuation.

 

In accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”), fair value is defined as the price that the Company would receive upon selling an investment in an orderly transaction to an independent buyer. FAS 157 established a three-tier hierarchy to establish classification of fair value measurements, summarized as follows:

 

•

Level 1 — fair value is determined based on market data obtained from independent sources; for example, quoted prices in active markets for identical investments,

•

Level 2 — fair value is determined using other assumptions obtained from independent sources; for example, quoted prices for similar investments,

•

Level 3 — fair value is determined using the Company’s own assumptions, developed based on the best information available in the circumstances.

 

The Company’s investments at March 31, 2009 were classified as follows:

 

		Investment in securities			Written options
Level 1		$	830,957,968			$294,150
Level 2			—			—
Level 3			—			—
Total		$	830,957,968		$	294,150

 

 

2. Federal Income Taxes

 

The Company’s policy is to distribute all of its taxable income to its stockholders 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 at March 31, 2009 was $1,036,127,422 and net unrealized depreciation aggregated $(205,169,454), of which the related gross unrealized appreciation and depreciation were $88,376,741 and $293,546,195, respectively.

 

Distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Accordingly, annual reclassifications are made within the Company’s capital accounts to reflect income and gains available for distribution under income tax regulations. Any income tax-related interest or penalties would be classified as income tax expense.

 

3. Investment Transactions

 

The Company’s investment decisions are made by a committee of management, and recommendations to that committee are made by the research staff. Purchases and sales of portfolio securities, other than options and short-term investments, during the three months ended March 31, 2009 were $49,609,036 and $36,449,681, respectively.

 

The Company is subject to changes in the value of equity securities held (equity price risk) in the normal course of pursuing its investment objectives. The Company may purchase and write option contracts to increase or decrease its equity price risk exposure or may write option contracts to generate additional income. Option contracts generally entail risks associated with counterparty credit, illiquidity, and unfavorable equity price movements. The Company has mitigated counterparty credit and illiquidity risks by trading its options through an exchange. The risk of unfavorable equity price movements is limited for purchased options to the premium paid and for written options by writing only covered call or collateralized put option contracts, which require the Company to segregate certain securities or cash at its custodian when the option is written. A schedule of outstanding option contracts as of March 31, 2009 can be found on page 12.

 

When the Company writes (purchases) an option, an amount equal to the premium received (paid) by the Company is recorded as a liability (asset) and is subsequently marked to market daily in the Statement of Assets and Liabilities, with any related change recorded as an unrealized gain or loss in the Statement of Operations. Premiums received (paid) from unexercised options are treated as realized gains (losses) on the expiration date. Upon the exercise of written put (purchased call) option contracts, premiums received (paid) are deducted from (added to) the cost basis of the underlying securities purchased. Upon the exercise of written call (purchased put) option contracts, premiums received (paid) are added to (deducted from) the proceeds from the sale of underlying securities in determining whether there is a realized gain or loss.

 

Transactions in written covered call and collateralized put options during the three months ended March 31, 2009 were as follows:

 

		Covered Calls							Collateralized Puts
		Contracts			Premiums				Contracts			Premiums
Options outstanding, December 31, 2008		200			$	22,650			732			$	94,717
Options written		1,200				179,022			4,850				512,893
Options terminated in closing purchase transactions		—				—			(350	)			(49,125	)
Options expired		(400	)			(50,122	)		(1,532	)			(173,016	)
Options exercised		—				—			(850	)			(98,450	)
Options outstanding, March 31, 2009		1,000			$	151,550			2,850			$	287,019

 

5

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NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

 

 

4. Capital Stock

 

The Company has 10,000,000 authorized and unissued preferred shares, $0.001 par value.

 

On December 27, 2008, the Company issued 2,149,685 shares of its Common Stock at a price of $8.01 per share (the average market price on December 8, 2008) to stockholders of record on November 21, 2008 who elected to take stock in payment of the year-end distribution from 2008 capital gain and investment income. During 2008, 898 shares were issued at a weighted average price of $10.31 per share as dividend equivalents to holders of deferred stock units and restricted stock units under the 2005 Equity Incentive Compensation Plan.

 

During 2009, the Company has issued 703 shares of its Common Stock at a weighted average price of $7.37 per share as dividend equivalents to holders of deferred stock units and restricted stock units under the 2005 Equity Incentive Compensation Plan.

 

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 2009 and 2008 were as follows:

 

		Shares						Amount
		Three months ended March 31, 2009			Year ended December 31, 2008			Three months ended March 31, 2009				Year ended December 31, 2008
Shares issued in payment of distributions		703			2,150,583			$	5,208			$	17,225,925
Shares purchased (at a weighted average discount from net asset value of 15.5% and 14.8%, respectively)		(676,675	)		(2,457,547	)			(4,891,825	)			(28,955,931	)
Net activity under the 2005 Equity Incentive Compensation Plan		37,220			44,560				2,976				611,546
Net change		(638,752	)		(262,404	)		$	(4,883,641	)		$	11,118,460

 

5. Retirement Plans

 

The Company’s non-contributory qualified defined benefit pension plan (“qualified plan”) covers all employees with at least one year of service. In addition, the Company has a non-contributory nonqualified defined benefit plan which provides eligible employees with retirement benefits to supplement the qualified plan. Benefits are based on length of service and compensation during the last five years of employment.

 

The funded status of the plans is recognized as an asset (overfunded plan) or a liability (underfunded plan) in the Statement of Assets and Liabilities. Changes in the prior service costs and accumulated actuarial gains and losses are recognized as accumulated other comprehensive income, a component of net assets, in the year in which the changes occur.

 

The Company’s policy is to contribute annually to the plans those amounts that can be deducted for federal income tax purposes, plus additional amounts as the Company deems appropriate in order to provide assets sufficient to meet benefits to be paid to plan participants. During the three months ended March 31, 2009, the Company did not contribute to the plans. The Company expects to contribute approximately $500,000 to the plans in 2009.

 

The following tables aggregate the components of the plans’ net periodic pension cost and changes in accumulated other comprehensive income:

 

		Three months ended March 31, 2009				Year ended December 31, 2008
Service cost		$	74,439			$	345,420
Interest cost			142,551				459,209
Expected return on plan assets			(114,527	)			(691,794	)
Prior service cost component			26,309				95,860
Net loss component			113,226				137,401
Net periodic pension cost		$	241,998			$	346,096

 

		Three months ended March 31, 2009			Year ended December 31, 2008
Net gain/(loss)		$	162,518		$	(4,199,863	)
Prior service cost			—			(89,030	)
Amortization of net loss			113,226			137,401
Amortization of prior service cost			26,309			95,860
Change in accumulated other comprehensive income		$	302,053		$	(4,055,632	)

 

The Company also sponsors a defined contribution plan that covers substantially all employees. For the three months ended March 31, 2009, the Company expensed contributions of $52,995. The Company does not provide postretirement medical benefits.

 

6. Equity-Based Compensation

 

Although the Stock Option Plan of 1985 (“1985 Plan”) has been discontinued and no further grants will be made under this plan, unexercised grants of stock options and stock appreciation rights granted in 2004 and prior years remain outstanding. The exercise price of the unexercised options and related stock appreciation rights is the fair market value on date of grant, reduced by the per share amount of capital gains paid by the Company during subsequent years. All options and related stock appreciation rights terminate ten years from date of grant, if not exercised.

 

A summary of option activity under the 1985 Plan as of March 31, 2009, and changes during the three month period then ended, is presented below:

 

		Options			Weighted- Average Exercise Price			Weighted- Average Remaining Life (Years)
Outstanding at December 31, 2008		122,396			$	11.05		2.80
Exercised		(18,222	)			7.31		—
Expired		(6,840	)			8.91		—
Outstanding at March 31, 2009		97,334			$	11.88		2.52
Exercisable at March 31, 2009		64,868			$	11.33		2.83

 

The options outstanding as of March 31, 2009 are set forth below:

 

Exercise Price		Options Outstanding		Weighted Average Exercise Price			Weighted Average Remaining Life (Years)
$9.00-$10.74		60,208		$	9.85		3.28
$10.75-$12.49		—			—		—
$12.50-$14.24		—			—		—
$14.25-$16.00		37,126			15.16		1.30
Outstanding at March 31, 2009		97,334		$	11.88		2.52

 

6

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NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

 

 

Compensation cost resulting from stock options and stock appreciation rights granted under the 1985 Plan is based on the intrinsic value of the award, recognized over the award’s vesting period, and remeasured at each reporting date through the date of settlement. The total compensation cost/(credit) recognized for the three months ended March 31, 2009 was $0.

 

The 2005 Equity Incentive Compensation Plan (“2005 Plan”), adopted at the 2005 Annual Meeting, permits the grant of stock options, restricted stock awards and other stock incentives to key employees and all non-employee directors. The 2005 Plan provides for the issuance of up to 3,413,131 shares of the Company’s Common Stock, including both performance and nonperformance-based restricted stock. Performance-based restricted stock awards vest at the end of a specified three year period, with the ultimate number of shares earned contingent on achievement of certain performance targets. If performance targets are not achieved, all or a portion of the performance-based awards are forfeited and become available for future grants. Nonperformance-based restricted stock awards vest ratably over a three year period and nonperformance-based restricted stock units (granted to non-employee directors) vest over a one year period. Payment of awards may be deferred if elected. It is the current intention that employee grants will be performance-based. The 2005 Plan provides for accelerated vesting in the event of death or retirement. Non-employee directors also may elect to defer a portion of their cash compensation, with such deferred amount to be paid by delivery of deferred stock units. Outstanding awards are granted at fair market value on grant date. The number of shares of Common Stock which remains available for future grants under the 2005 Plan at March 31, 2009 is 3,200,349 shares.

 

A summary of the status of the Company’s awards granted under the 2005 Plan as of March 31, 2009, and changes during the three month period then ended, is presented below:

Awards		Shares/ Units			Weighted Average Grant-Date Fair Value
Balance at December 31, 2008		129,694			$	13.15
Granted:
Restricted stock		48,595				8.21
Restricted stock units		6,750				7.26
Deferred stock units		557				7.96
Vested & issued		(44,222	)			12.89
Forfeited		(4,726	)			8.21
Balance at March 31, 2009 (includes 108,251 performance-based awards and 28,397 nonperformance-based awards)		136,648			$	11.12

Compensation costs resulting from awards granted under the 2005 Plan are based on the fair value of the award on grant date (determined by the average of the high and low price on grant date) and recognized on a straight-line basis over the requisite service period. For those awards with performance conditions, compensation costs are based on the most probable outcome and, if such goals are not met, compensation cost is not recognized and any previously recognized compensation cost is reversed. The total compensation costs for the period ended March 31, 2009 for restricted stock granted to employees were $91,776. The total compensation costs for the period ended March 31, 2009 for restricted stock units granted to non-employee directors were $18,042. As of March 31, 2009, there were total unrecognized compensation costs of $728,530, a component of additional capital surplus, related to nonvested equity-based compensation arrangements granted under the 2005 Plan. Those costs are expected to be recognized over a weighted average period of 2.01 years. The total fair value of shares and units vested during the three month period ended March 31, 2009 was $535,746.

 

7. Officer and Director Compensation

 

The aggregate remuneration paid during the three months ended March 31, 2009 to officers and directors amounted to $1,283,636, of which $117,265 was paid as fees and compensation to directors who were not officers. These amounts represent the taxable income to the Company’s officers and directors and therefore differ from the amounts reported in the accompanying Statement of Operations that are recorded and expensed in accordance with generally accepted accounting principles.

 

8. Portfolio Securities Loaned

 

The Company makes loans of securities to approved brokers to earn additional income. It receives as collateral cash deposits, U.S. Government securities, or bank letters of credit valued at 102% of the value of the securities on loan. The market value of the loaned securities is calculated based upon the most recent closing prices and any additional required collateral is delivered to the Company on the next business day. Cash deposits are placed in a registered money market fund. 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. 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 March 31, 2009, the Company had securities on loan of $67,669,766 and held cash collateral of $67,838,908; additional collateral was delivered the next business day in accordance with the procedure described above. The Company is indemnified by the Custodian, serving as lending agent, for loss of loaned securities and has the right under the lending agreement to recover the securities from the borrower on demand.

 

 

 

 

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. The rates of return will vary and the principal value of an investment will fluctuate. Shares, if sold, may be worth more or less than their original cost. Past performance is not indicative of future
investment results.

 

7

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FINANCIAL HIGHLIGHTS

 

 

 

 

*	In 2007, the Company received $5,100,000, or $0.06 per share, in a special cash dividend from Dean Foods Co., of which $2,295,000, or $0.03 per share, was considered a taxable dividend.

**	In 2004, the Company received $2,400,000, or $0.03 per share, in an extraordinary dividend from Microsoft Corp.

†	Ratios presented on an annualized basis. For 2009, ratios of expenses and net investment income to average net assets are 0.87% and 1.63%, respectively, after adjusting for non-recurring compensation expenses during the remainder of the year.

 

8

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SCHEDULE OF INVESTMENTS

 

 

 

March 31, 2009

(unaudited)

 

		Shares		Value (A)
Stocks — 90.8%
Consumer — 23.2%
Consumer Discretionary — 6.9%
Lowe’s Companies, Inc.		600,000		$	10,950,000
McDonald’s Corp.		250,000			13,642,500
Newell Rubbermaid Inc. (B)		400,000			2,552,000
Ryland Group Inc.		343,500			5,722,710
Target Corp.		320,000			11,004,800
Walt Disney Co. (B)		480,000			8,716,800
					52,588,810
Consumer Staples — 16.3%
Avon Products, Inc.		435,000			8,365,050
Bunge Ltd. (B)(C)		160,000			9,064,000
Coca-Cola Co.		300,000			13,185,000
CVS/Caremark Corp.		285,000			7,834,650
Dean Foods Co. (D)		340,000			6,147,200
Del Monte Foods Co.		1,300,000			9,477,000
Hansen Natural Corp. (C)(D)		375,000			13,500,000
PepsiCo, Inc.		360,000			18,532,800
Procter & Gamble Co.		315,000			14,833,350
Safeway Inc. (B)		390,000			7,874,100
Unilever plc ADR		800,000			15,144,000
					123,957,150
Energy — 12.4%
Chevron Corp.		150,000			10,086,000
ConocoPhillips		150,000			5,874,000
CONSOL Energy Inc.		200,000			5,048,000
Exxon Mobil Corp. (E)		215,000			14,641,500
Halliburton Co.		300,000			4,641,000
Petroleum & Resources Corporation (F)		2,186,774			40,017,964
Schlumberger Ltd.		105,000			4,265,100
Transocean Ltd. (D)		160,000			9,414,400
					93,987,964
Financials — 8.2%
Banking — 7.4%
Bank of America Corp.		885,000			6,035,700
Bank of New York Mellon Corp.		403,775			11,406,644
Goldman Sachs Group, Inc. (C)		60,000			6,361,200
JPMorgan Chase & Co.		125,000			3,322,500
PNC Financial Services Group, Inc.		200,000			5,858,000
State Street Corp.		230,000			7,079,400
Visa Inc. (B)		190,000			10,564,000
Wells Fargo & Co. (B)		425,000			6,052,000
					56,679,444

		Shares		Value (A)
Insurance — 0.8%
Prudential Financial, Inc. (B)		310,000		$	5,896,200
Health Care — 14.2%
Abbott Laboratories		320,000			15,264,000
Bristol-Myers Squibb Co.		345,000			7,562,400
Hospira Inc. (D)		300,000			9,258,000
Johnson & Johnson		255,000			13,413,000
Medtronic, Inc.		310,000			9,135,700
Pfizer Inc.		1,120,000			15,254,400
Senomyx, Inc. (D)		984,400			1,565,196
Teva Pharmaceutical Industries Ltd. ADR		370,000			16,668,500
Wyeth Co.		325,000			13,988,000
Zimmer Holdings, Inc. (D)		150,000			5,475,000
					107,584,196
Industrials — 12.4%
Cintas Corp. (B)		300,000			7,416,000
Curtiss-Wright Corp.		360,000			10,098,000
Emerson Electric Co.		300,000			8,574,000
General Electric Co. (B)		1,488,000			15,043,680
Harsco Corp.		310,000			6,872,700
Illinois Tool Works Inc.		250,000			7,712,500
Masco Corp. (B)		450,000			3,141,000
Oshkosh Corp. (B)		330,000			2,224,200
Spirit AeroSystems Holdings, Inc. (B)(D)		720,000			7,178,400
Tata Motors Ltd. ADR		1,000,000			4,930,000
3M Co. (B)		160,000			7,955,200
United Technologies Corp.		300,000			12,894,000
					94,039,680
Information Technology — 13.0%
Communication Equipment — 0.9%
Corning Inc.		500,000			6,635,000
Computer Related — 9.4%
Automatic Data Processing Inc. (B)		300,000			10,548,000
Cisco Systems, Inc. (D)		850,000			14,254,500
Dell Inc. (D)		585,000			5,545,800
Microsoft Corp. (B)		1,180,000			21,676,600
Oracle Corp. (D)		1,100,000			19,877,000
					71,901,900
Electronics — 2.7%
Broadcom Corp. (D)		400,000			7,992,000
Intel Corp.		840,000			12,642,000
					20,634,000

 

9

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SCHEDULE OF INVESTMENTS (CONTINUED)

 

 

 

March 31, 2009

(unaudited)

 

		Shares		Value (A)
Materials — 1.3%
du Pont (E.I.) de Nemours and Co.		460,000		$	10,271,800
Telecom Services — 1.3%
AT&T Corp.		400,000			10,080,000
Utilities — 4.8%
Atmos Energy Corp.		123,400			2,853,008
MDU Resources Group, Inc.		562,500			9,078,750
Northeast Utilities		350,000			7,556,500
Northwest Natural Gas Co.		200,000			8,684,000
Spectra Energy Corp. (B)		305,780			4,323,730
WGL Holdings, Inc.		113,600			3,726,080
					36,222,068
Total Stocks (Cost $896,134,917)					690,478,212
Short-Term Investments — 9.6%
Money Market Funds — 9.6%
Fidelity Institutional Money Market – Government Portfolio, 0.51% (G)		20,034,766			20,034,766
Fidelity Institutional Money Market – Treasury Only Portfolio, 0.26% (G)		11,748,292			11,748,292

		Shares		Value (A)
Fidelity Institutional Money Market – Treasury Portfolio, 0.32% (G)		20,000,185		$	20,000,185
Vanguard Federal Money Market, 0.58% (G)		20,047,239			20,047,239
Vanguard Admiral Treasury Money Market, 0.43% (G)		810,366			810,366
					72,640,848
Total Short-Term Investments (Cost $72,640,848)					72,640,848
Total Securities Lending Collateral — 8.9% (Cost $67,838,908)
Money Market Funds —  8.9%
Invesco Aim Short-Term Investment Trust – Liquid Assets Portfolio (Institutional Class), 0.79% (G)		67,838,908			67,838,908
Total Investments — 109.3% (Cost $1,036,614,673)					830,957,968
Cash, receivables, prepaid expenses and other assets, less liabilities — (9.3)%					(70,955,792	)
Net Assets — 100%				$	760,002,176

 

 

Notes:

(A)	See note 1 to financial statements. Securities are listed on the New York Stock Exchange or the NASDAQ.

(B)	A portion of shares held are on loan. See note 8 to financial statements.

(C)	All or a portion of this security is pledged to cover open written call option contracts. Aggregate market value of such pledged securities is $6,216,350.

(D)	Presently non-dividend paying.

(E)	All or a portion of this security is pledged to collateralize open written put option contracts with an aggregate value to deliver upon exercise of $9,752,500.

(F)	Non-controlled affiliate, a closed-end sector fund, registered as an investment company under the Investment Company Act of 1940.

(G)	Rate presented is as of period-end and represents the annualized yield earned over the previous seven days.

 

10

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PORTFOLIO SUMMARY

 

 

 

March 31, 2009

(unaudited)

 

 

Ten Largest Portfolio Holdings

 

		Market Value			% of Net Assets
Petroleum & Resources Corporation*		$	40,017,964		5.3	%
Microsoft Corp.			21,676,600		2.9
Oracle Corp.			19,877,000		2.6
PepsiCo, Inc.			18,532,800		2.4
Teva Pharmaceutical Industries Ltd. ADR			16,668,500		2.2
Abbott Laboratories			15,264,000		2.0
Pfizer Inc.			15,254,400		2.0
Unilever plc ADR			15,144,000		2.0
General Electric Co.			15,043,680		2.0
Procter & Gamble Co.			14,833,350		1.9
		$	192,312,294		25.3	%

*Non-controlled affiliate

 

 

Sector Weightings

 

 

11

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SCHEDULE OF OUTSTANDING OPTION CONTRACTS

 

 

 

March 31, 2009

(unaudited)

 

Contracts (100 shares each)		Security		Strike Price		Contract Expiration Date				Value
COVERED CALLS
100		Bunge Ltd.		$70		Apr		09		$	1,500
150		Bunge Ltd.		85		Jul		09			10,500
100		Goldman Sachs Group, Inc.		120		Apr		09			21,800
200		Goldman Sachs Group, Inc.		150		Jul		09			58,200
150		Hansen Natural Corp.		40		May		09			21,000
150		Hansen Natural Corp.		45		Jun		09			13,500
150		Hansen Natural Corp.		50		Jun		09			6,000
1,000											132,500
COLLATERALIZED PUTS
100		Avon Products, Inc.		17.50		May		09			10,000
100		Bunge Ltd.		22.50		Apr		09			500
100		Bunge Ltd.		30		Apr		09			500
100		CVS/Caremark Corp.		20		May		09			2,000
250		Exxon Mobil Corp.		60		Apr		09			13,000
100		Goldman Sachs Group, Inc.		45		Apr		09			900
150		Goldman Sachs Group, Inc.		70		Apr		09			5,700
150		Harsco Corp.		20		Apr		09			10,500
150		Hospira Inc.		20		May		09			3,000
200		JPMorgan Chase & Co.		20		Apr		09			11,800
150		JPMorgan Chase & Co.		21		Apr		09			11,250
100		PepsiCo, Inc.		42.50		Apr		09			1,000
150		Procter & Gamble Co.		42.50		Apr		09			4,500
200		Procter & Gamble Co.		45		Apr		09			14,000
100		Procter & Gamble Co.		40		Jul		09			13,500
100		Prudential Financial, Inc.		12.50		Apr		09			5,000
100		Prudential Financial, Inc.		12.50		May		09			15,000
150		Transocean Ltd.		40		Apr		09			1,500
100		Walt Disney Co.		17.50		Apr		09			5,500
100		Visa Inc.		45		May		09			11,000
100		Visa Inc.		40		Jun		09			10,000
100		Zimmer Holdings, Inc.		30		Jun		09			11,500
2,850											161,650
										$	294,150

 

 

 

Common Stock

Listed on the New York Stock Exchange

 

The Adams Express Company

Seven St. Paul Street, Suite 1140, Baltimore, MD 21202

(410) 752-5900 or (800) 638-2479

Website: www.adamsexpress.com

E-mail: contact@adamsexpress.com

Counsel: Chadbourne & Parke LLP

Independent Registered Public Accounting Firm: PricewaterhouseCoopers LLP

Transfer Agent & Registrar: American Stock Transfer & Trust Co.

Custodian of Securities: Brown Brothers Harriman & Co.

 

 

12

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CHANGES IN PORTFOLIO SECURITIES

 

 

 

During the Three Months Ended March 31, 2009

(unaudited)

 

 

		Shares
		Additions		Reductions			Held March 31, 2009
Atmos Energy Corp.		123,400					123,400
Avon Products, Inc.		30,000					435,000
Bank of America Corp.		85,000					885,000
Coca-Cola Co.		60,000					300,000
du Pont (E.I.) de Nemours and Co.		100,000					460,000
General Electric Co.		100,000					1,488,000
Goldman Sachs Group, Inc.		70,000		10,000			60,000
Harsco Corp.		60,000					310,000
JPMorgan Chase & Co.		125,000					125,000
McDonald’s Corp.		115,000					250,000
Northwest Natural Gas Co.		200,000					200,000
Prudential Financial Inc.		75,000					310,000
State Street Corp.		45,000		75,000			230,000
Visa Inc.		10,000					190,000
Walt Disney Co.		480,000					480,000
WGL Holdings, Inc.		113,600					113,600
Genentech, Inc.				220,000	(1)		—
Prosperity Bancshares, Inc.				160,000			—
Schlumberger Ltd.				35,000			105,000
Wilmington Trust Corp.				363,000			—

 

(1)	Received $95.00 cash for each share surrendered.

 

HISTORICAL FINANCIAL STATISTICS

 

 

 

(unaudited)

 

Dec. 31		Value Of Net Assets			Shares Outstanding*		Net Asset Value Per Share*			Market Value Per Share*			Dividends From Investment Income Per Share*				Distributions From Net Realized Gains Per Share*				Total Dividends and Distributions Per Share*				Annual Rate of Distribution**
1999		$	2,170,801,875		80,842,241		$	26.85		$	22.38		$	.26			$	1.37			$	1.63			8.53	%
2000			1,951,562,978		82,292,262			23.72			21.00			.22				1.63				1.85			7.76
2001			1,368,366,316		85,233,262			16.05			14.22			.26				1.39				1.65			9.44
2002			1,024,810,092		84,536,250			12.12			10.57			.19				.57				.76			6.14
2003			1,218,862,456		84,886,412			14.36			12.41			.17				.61				.78			6.80
2004			1,295,548,900		86,135,292			15.04			13.12			.24				.66				.90			7.05
2005			1,266,728,652		86,099,607			14.71			12.55			.22				.64				.86			6.65
2006			1,377,418,310		86,838,223			15.86			13.87			.23				.67				.90			6.80
2007			1,378,479,527		87,668,847			15.72			14.12			.32				.71				1.03			7.15
2008			840,012,143		87,406,443			9.61			8.03			.26				.38				.64			5.61
March 31, 2009			760,002,176		86,767,691			8.76			7.52			.08	†			.02	†			.10	†		—

 

*	Adjusted to reflect the 3-for-2 stock split effected in October 2000.

**	The annual rate of distribution is the total dividends and capital gain distributions during the year divided by the average daily market price of the Company’s Common Stock.

†	Paid or declared.

 

13

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ANNUAL MEETING OF STOCKHOLDERS

 

 

 

The Annual Meeting of Stockholders was held on March 19, 2009. The following votes were cast for directors:

 

		Votes For		Votes Withheld
Enrique R. Arzac		68,470,153		3,438,645
Phyllis O. Bonanno		69,410,642		2,498,157
Kenneth J. Dale		69,385,066		2,523,733
Daniel E. Emerson		67,929,485		3,979,313
Frederic A. Escherich		69,438,197		2,470,602
Roger W. Gale		69,477,229		2,431,570
Thomas H. Lenagh		67,796,708		4,112,091
Kathleen T. McGahran		69,528,814		2,379,985
Douglas G. Ober		68,408,911		3,499,888
Craig R. Smith		69,491,717		2,417,082

 

A proposal to approve and ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for 2009 was approved with 70,245,610 votes for, 967,118 votes against, and 696,070 shares abstaining.

 

OTHER INFORMATION

 

 

 

Statement on Quarterly Filing of Complete Portfolio Schedule

 

In addition to publishing its complete schedule of portfolio holdings in the First and Third Quarter Reports to stockholders, the Company files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Company’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Company’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room, and information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. The Company also posts its Forms N-Q on its website at www.adamsexpress.com under the heading “Financial Reports” and then “All Other SEC Filings”.

 

Proxy Voting Policies and Record

 

A description of the policies and procedures that the Company uses to determine how to vote proxies relating to portfolio securities owned by the Company and information as to how the Company voted proxies relating to portfolio securities during the 12 month period ended June 30, 2008 are available (i) without charge, upon request, by calling the Company’s toll free number at (800) 638-2479; (ii) on the Company’s website by clicking on “Corporate Information” heading on the website; and (iii) on the Securities and Exchange Commission’s website at www.sec.gov.

 

Privacy Policy

 

In order to conduct its business, the Company, through its transfer agent, currently American Stock Transfer & Trust Company, collects and maintains certain nonpublic personal information about our stockholders of record with respect to their transactions in shares of our securities. This information includes the stockholder’s address, tax identification or Social Security number, share balances, and dividend elections. We do not collect or maintain personal information about stockholders whose shares of our securities are held in “street name” by a financial institution such as a bank or broker.

 

We do not disclose any nonpublic personal information about you, our other stockholders or our former stockholders to third parties unless necessary to process a transaction, service an account or as otherwise permitted by law.

 

To protect your personal information internally, we restrict access to nonpublic personal information about our stockholders to those employees who need to know that information to provide services to our stockholders. We also maintain certain other safeguards to protect your nonpublic personal information.

 

14

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STOCKHOLDER 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.

 

INVESTORS CHOICE

 

INVESTORS CHOICE is a direct stock purchase and sale plan, as well as a dividend reinvestment plan, sponsored and administered by our transfer agent, American Stock Transfer & Trust Company (AST). The Plan provides registered stockholders and interested first time investors an affordable alternative for buying, selling, and reinvesting in Adams Express shares.

 

The costs to participants in administrative service fees and brokerage commissions for each type of transaction are listed below.

 

Initial Enrollment and Optional Cash Investments
Service Fee		$2.50 per investment
Brokerage Commission		$0.05 per share
Reinvestment of Dividends*
Service Fee		2% 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 $7.50
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 INVESTORS CHOICE as well as an enrollment form may be obtained by contacting AST.

 

For Non-Registered Stockholders

 

For stockholders whose stock is held by a broker in “street” name, the AST INVESTORS CHOICE Direct Stock Purchase and Sale 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 AST’s Plan or contact AST.

 

 

 

The Company

The Adams Express Company

Lawrence L. Hooper, Jr.

Vice President, General Counsel and Secretary

Seven St. Paul Street, Suite 1140, Baltimore, MD 21202

(800) 638-2479

Website: www.adamsexpress.com

E-mail: contact@adamsexpress.com

 

The Transfer Agent

American Stock Transfer & Trust Company

Address Stockholder Inquiries to:

Stockholder Relations Department

59 Maiden Lane

New York, NY 10038

(877) 260-8188

Website: www.amstock.com

E-mail: info@amstock.com

 

Investors Choice Mailing Address:

Attention: Dividend Reinvestment

P.O. Box 922

Wall Street Station

New York, NY 10269-0560

Website: www.amstock.com

E-mail: info@amstock.com

 

*The year-end dividend and capital gain distribution will usually be made in newly issued shares of common stock. There are no fees or commissions in connection with this dividend and capital gain distribution when made in newly issued shares.

 

15