UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number: 811-00248
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THE ADAMS EXPRESS COMPANY
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(Exact name of registrant as specified in charter)
7 Saint Paul Street, Suite 1140, Baltimore, Maryland 21202
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(Address of principal executive offices) (Zip code)
Lawrence L. Hooper, Jr.
The Adams Express Company
7 Saint Paul Street
Suite 1140
Baltimore, Maryland 21202
Registrant's telephone number, including area code: 410-752-5900
Date of fiscal year end: December 31, 2008
Date of reporting period: September 30, 2008
Item 1: SCHEDULE OF INVESTMENTS.
SCHEDULE OF INVESTMENTS
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September 30, 2008
(unaudited)
Shares Value (A)
--------- -------------
Common Stocks -- 90.4%
Consumer -- 18.9%
Consumer Discretionary -- 5.1%
Harley-Davidson, Inc. (B) 130,000 $ 4,849,000
Lowe's Companies, Inc. 600,000 14,214,000
McDonald's Corp. 75,000 4,627,500
Newell Rubbermaid Inc. 400,000 6,904,000
Ryland Group Inc. (B)(C) 343,500 9,109,620
Target Corp. (C) 320,000 15,696,000
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55,400,120
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Consumer Staples -- 13.8%
Avon Products, Inc. (C) 375,000 15,588,750
Bunge Ltd. (B) 130,000 8,213,400
Coca-Cola Co. 200,000 10,576,000
CVS/Caremark Corp. 275,000 9,256,500
Dean Foods Co. (B) 340,000 7,942,400
Del Monte Foods Co. 1,300,000 10,140,000
Hansen Natural Corp. (B)(C)(D) 375,000 11,343,750
PepsiCo, Inc. 360,000 25,657,200
Procter & Gamble Co. 315,000 21,952,350
Safeway Inc. 390,000 9,250,800
Unilever plc ADR 800,000 21,768,000
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151,689,150
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Energy -- 15.9%
Chevron Corp. 150,000 12,372,000
ConocoPhillips 295,000 21,608,750
CONSOL Energy Inc. 200,000 9,178,000
Exxon Mobil Corp. 215,000 16,696,900
Halliburton Co. 300,000 9,717,000
Petroleum & Resources
Corporation (E) 2,186,774 64,553,568
Schlumberger Ltd. 380,000 29,674,200
Transocean Inc. (D) 90,000 9,885,600
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173,686,018
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Financials -- 11.1%
Banking -- 9.7%
Bank of America Corp. 730,000 25,550,000
Bank of New York Mellon Corp. 403,775 13,154,990
PNC Financial Services Group,
Inc. (The) 200,000 14,940,000
Prosperity Bancshares, Inc. 250,000 8,497,500
State Street Corp. 260,000 14,788,800
Visa Inc. 170,000 10,436,300
Wells Fargo & Co. (B) 225,000 8,444,250
Wilmington Trust Corp. (B) 363,000 10,465,290
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106,277,130
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Shares Value (A)
--------- -------------
Insurance -- 1.4%
Prudential Financial, Inc. (B) 210,000 $ 15,120,000
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Health Care -- 12.9%
Abbott Laboratories 320,000 18,425,600
Bristol-Myers Squibb Co. (B) 345,000 7,193,250
Genentech, Inc. (D) 220,000 19,509,600
Johnson & Johnson 255,000 17,666,400
Medtronic, Inc. 310,000 15,531,000
Pfizer Inc. 1,120,000 20,652,800
Senomyx, Inc. (D) 984,400 4,459,332
Teva Pharmaceutical Industries
Ltd. ADR 370,000 16,942,300
Wyeth Co. 325,000 12,005,500
Zimmer Holdings, Inc. (D) 140,000 9,038,400
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141,424,182
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Industrials -- 13.3%
Cintas Corp. 300,000 8,613,000
Curtiss-Wright Corp. (B) 360,000 16,362,000
Emerson Electric Co. 300,000 12,237,000
General Electric Co. 1,388,000 35,394,000
Harsco Corp. 125,000 4,648,750
Illinois Tool Works Inc. 250,000 11,112,500
Masco Corp. (B) 450,000 8,073,000
Oshkosh Corp. 305,000 4,013,800
3M Co. 160,000 10,929,600
Spirit AeroSystems Holdings,
Inc. (D) 550,000 8,838,500
Tata Motors Ltd. ADR 1,000,000 7,660,000
United Technologies Corp. 300,000 18,018,000
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145,900,150
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Information Technology -- 11.5%
Communication Equipment -- 0.7%
Corning Inc. 500,000 7,820,000
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Computer Related -- 8.7%
Automatic Data Processing Inc. 300,000 12,825,000
Cisco Systems, Inc. (D) 850,000 19,176,000
Dell Inc. (D) 585,000 9,640,800
Microsoft Corp. 1,180,000 31,494,200
Oracle Corp. (D) 1,100,000 22,341,000
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95,477,000
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Electronics -- 2.1%
Broadcom Corp. (D) 400,000 7,452,000
Intel Corp. 840,000 15,733,200
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23,185,200
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9
SCHEDULE OF INVESTMENTS (CONTINUED)
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September 30, 2008
(unaudited)
Shares/
Prin. Amt Value (A)
----------- --------------
Materials -- 2.8%
Air Products and Chemicals,
Inc. 230,000 $ 15,752,700
du Pont (E.I.) de Nemours
and Co. (C) 360,000 14,508,000
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30,260,700
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Telecom Services -- 1.0%
AT&T Corp. 400,000 11,168,000
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Utilities -- 3.0%
MDU Resources Group, Inc. 562,500 16,312,500
Northeast Utilities 350,000 8,977,500
Spectra Energy Corp. (B) 305,780 7,277,564
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32,567,564
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Total Common Stocks
(Cost $870,586,260) 989,975,214
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Short-Term Investments -- 9.1%
U.S. Government Obligations -- 2.0%
U.S. Treasury Bills,
1.87%, due 11/13/08 (F) $22,500,000 22,449,744
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Time Deposit -- 0.0%
Bank of America,
3.47%, due 10/1/08 305,631
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Commercial Paper -- 7.1%
American Express Credit
Corp., 2.42 - 2.50%, due
10/9/08 - 10/20/08 $6,600,000 6,594,809
Prin. Amt. Value (A)
----------- --------------
Chevron Funding Corp.,
2.20 - 2.30%, due
10/16/08 - 10/21/08 $10,700,000 $ 10,687,772
Coca-Cola Corp., 2.10%, due
10/29/08 7,200,000 7,188,240
General Electric Capital Corp.,
2.15% - 2.30%, due
10/1/08 - 10/7/08 15,000,000 14,997,962
Prudential Funding, LLC,
2.33 - 2.60%, due
10/9/08 - 10/28/08 14,400,000 14,381,636
Toyota Motor Credit Corp.,
2.22 - 2.35%, due
10/7/08 - 10/28/08 15,000,000 14,986,490
United Parcel Service, Inc.,
1.35%, due 10/30/08 8,400,000 8,390,865
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77,227,774
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Total Short-Term Investments
(Cost $99,983,149) 99,983,149
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Total Securities Lending Collateral -- 7.7%
(Cost $83,987,981)
Brown Brothers Investment
Trust, 2.32% (G) 83,987,981
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Total Investments -- 107.2%
(Cost $1,054,557,390) 1,173,946,344
Cash, receivables, prepaid pension cost,
prepaid expenses and other assets, less
liabilities -- (7.2)% (79,324,327)
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Net Assets -- 100% $1,094,622,017
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Notes:
(A)See note 1 to financial statements. Securities are listed on the New York
Stock Exchange, the American 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
$3,961,650.
(D)Presently non-dividend paying.
(E)Non-controlled affiliate, a closed-end sector fund, registered as an
investment company under the Investment Company Act of 1940.
(F)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
$3,400,000.
(G)Rate presented is as of period-end and represents the annualized yield
earned over the previous seven days.
10
PORTFOLIO SUMMARY
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September 30, 2008
(unaudited)
Ten Largest Portfolio Holdings
Market Value % of Net Assets
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Petroleum & Resources Corporation* $ 64,553,568 5.9%
General Electric Co. 35,394,000 3.2
Microsoft Corp. 31,494,200 2.9
Schlumberger Ltd. 29,674,200 2.7
PepsiCo, Inc. 25,657,200 2.4
Bank of America Corp. 25,550,000 2.3
Oracle Corp. 22,341,000 2.1
Procter & Gamble Co. 21,952,350 2.0
Unilever plc ADR 21,768,000 2.0
ConocoPhillips 21,608,750 1.9
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Total $299,993,268 27.4%
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*Non-controlled affiliate
Sector Weightings
[CHART]
Consumer 18.9%
Energy 15.9%
Financials 11.1%
Health Care 12.9%
Industrials 13.3%
Information Technology 11.5%
Materials 2.8%
Telecom Services 1.0%
Utilities 3.0%
Short-Term Investments 9.1%
11
SCHEDULE OF OUTSTANDING OPTION CONTRACTS
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September 30, 2008
(unaudited)
Contracts Contract
(100 shares Strike Expiration
each) Security Price Date Value
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COVERED CALLS
250 Avon Products, Inc................ $ 45 Nov 08 $ 32,500
200 du Pont (E.I.) de Nemours and Co.. 55 Oct 08 2,000
200 Hansen Natural Corp............... 50 Dec 08 21,000
200 Ryland Group Inc.................. 50 Oct 08 1,000
200 Target Corp....................... 65 Jan 09 16,000
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1,050 72,500
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COLLATERALIZED PUTS
200 Coca-Cola Co...................... 50 Oct 08 11,000
200 Coca-Cola Co...................... 45 Nov 08 7,000
200 Hansen Natural Corp............... 15 Dec 08 42,000
150 McDonald's Corp................... 55 Dec 08 24,000
250 Oshkosh Corp...................... 15 Oct 08 65,000
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1,000 149,000
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$221,500
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12
(SELECTED) 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 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.
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) are valued at
amortized cost which approximates fair value. Purchased and
written options are valued at the last quoted asked price.
The Company adopted Financial Accounting Standard Board
Statement of Financial Accounting Standards No. 157, Fair
Value Measurements ("FAS 157"), effective January 1, 2008.
There was no impact on the fair value of assets individually
or in aggregate upon adoption. In accordance with 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 September 30, 2008 are
classified as follows:
Investment in
securities Written options
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Level 1 $989,975,214 $221,500
Level 2 183,971,130* --
Level 3 -- --
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Total $1,173,946,344 $221,500
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* Consists of short-term investments and securities lending
collateral.
For federal income tax purposes, the identified cost of
securities at September 30, 2008 was $1,054,070,139 and net
unrealized appreciation aggregated $119,876,205, of which
the related gross unrealized appreciation and depreciation
were $268,342,031 and $148,465,826, respectively.
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 an
investment trust fund that may invest in money market
instruments, commercial paper, repurchase agreements, U.S.
Treasury Bills and U.S. agency obligations. 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 September 30, 2008, the Company had
securities on loan of $86,018,707 and held cash collateral
of $83,987,981; 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.
Item 2. CONTROLS AND PROCEDURES.
Conclusions of principal officers concerning controls and
procedures:
(a) As of October 24, 2008, an evaluation was performed
under the supervision and with the participation of the
officers of The Adams Express Company (the "Company"),
including the principal executive officer ("PEO") and
principal financial officer ("PFO"), of the effectiveness
of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's officers, including the
PEO and PFO, concluded that, as of October 24, 2008, the
Company's disclosure controls and procedures were reasonably
designed so as to ensure: (1) that information required to
be disclosed by the Company on Form N-Q is recorded,
processed, summarized and reported within the time periods
specified by the rules and forms of the Securities and
Exchange Commission; and (2) that material information
relating to the Company is made known to the PEO and PFO as
appropriate to allow timely decisions regarding required
disclosure.
(b) There have been no significant changes in the Company's
internal control over financial reporting (as defined in
Rule 30 a-3(d) under the Investment Company Act of 1940 (17
CFR 270.30a-3(d)) that occurred during the Company's last
fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Company's
internal control over financial reporting.
Item 3. EXHIBITS.
The certifications of the principal executive officer and
principal financial officer pursuant to Rule 30a-2(a) under
the Investment Company Act of 1940 are attached hereto as
Form N-Q Certifications.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, the
registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE ADAMS EXPRESS COMPANY
BY: /s/ Douglas G. Ober
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Douglas G. Ober
Chief Executive Officer
Date: October 24, 2008
Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, this report
has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates
indicated.
BY: /s/ Douglas G. Ober
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Douglas G. Ober
Chief Executive Officer
(Principal Executive Officer)
Date: October 24, 2008
BY: /s/ Maureen A. Jones
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Maureen A. Jones
Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: October 24, 2008