ADAMS EXPRESS COMPANY - FORM N-30B - SEPTEMBER 30, 2013

LOGO

LETTER TO SHAREHOLDERS

 

 

 

 

We are pleased to present the summary financial information of The Adams Express Company (the Fund) for the nine months ended September 30, 2013.

 

Net assets of the Fund at September 30, 2013 were $14.40 per share on 92,216,170 shares outstanding, compared with $12.43 per share at December 31, 2012 on 93,029,724 shares outstanding. On March 1, 2013, a distribution of $0.05 per share was paid, consisting of $0.03 of net investment income, $0.01 short-term capital gain, and $0.01 long-term capital gain, all realized in 2012 and taxable in 2013. A 2013 net investment income dividend of $0.05 per share was paid June 3, 2013, and another $0.05 per share net investment income dividend was paid September 3, 2013. These constitute the first three payments toward our annual 6% minimum distribution rate commitment.

 

Net investment income for the nine months ended September 30, 2013 amounted to $13,091,372, compared with $11,882,313 for the same nine-month period in 2012. These earnings are equal to $0.14 and $0.13 per share, respectively.

 

Net capital gain realized on investments for the nine months ended September 30, 2013 amounted to $53,761,077, or $0.58 per share.

 

For the nine months ended September 30, 2013, the total return on the net asset value (with dividends and capital gains reinvested) of the Fund’s shares was 17.3%. The total return on the market price of the Fund’s shares for the period was 18.5%. These compare to a 19.8% total return for the Standard & Poor’s 500 Composite Stock Index (“S&P 500”) and a 19.5% total return for the Lipper Large-Cap Core Mutual Funds Average over the same time period.

 

For the twelve months ended September 30, 2013, the Fund’s total return on net asset value was 17.0% and on market price was 16.1%. Comparable figures for the S&P 500 and the Lipper Large-Cap Core Mutual Fund Average were 19.3% and 19.7%, respectively.

 

 

The Fund repurchased 860,045 shares of its common stock during the nine months ended September 30, 2013. The shares were repurchased at an average price of $12.26 and a weighted average discount to net asset value (NAV) of 13.6%, resulting in a $0.02 increase to NAV per share.

 

 

 

In July 2013, the Board of Directors named James P. Haynie as President of the Fund, succeeding David D. Weaver who resigned from the Fund. Mr. Haynie was most recently the Chief Investment Officer, Equities and Senior Portfolio Manager for BNP Paribas Investment Partners. He has over 27 years of experience in financial services and asset management.

 

 

 

Investors can find the daily NAV per share, the market price, the discount/premium to the NAV per share of the Fund, and quarterly changes in portfolio securities on our website at www.adamsexpress.com. Also available there are a history of the Fund, historical financial information, links for electronic delivery of shareholder reports, and other useful content.

 

By order of the Board of Directors,

LOGO

Mark E. Stoeckle

Chief Executive Officer

 

LOGO

James P. Haynie

President

 

October 9, 2013

SUMMARY FINANCIAL INFORMATION

 

 

 

(unaudited)

 

       2013        2012  
At September 30:          

Net asset value per share

      $ 14.40         $ 13.08   

Market price per share

      $ 12.39         $ 11.34   

Shares outstanding

        92,216,170           91,106,376   

Total net assets

      $ 1,327,695,459         $ 1,191,713,637   

Unrealized appreciation on investments

      $ 271,307,404         $ 172,325,689   

For the nine months ended September 30:

          

Net investment income

      $ 13,091,372         $ 11,882,313   

Net realized gain

      $ 53,761,077         $ 34,438,399   

Shares repurchased

        860,045           —         

Total return (based on market price)

        18.5%           19.3%   

Total return (based on net asset value)

        17.3%           14.9%   

Key ratios:

          

Net investment income to average net assets (annualized)*

        1.38%           1.40%   

Expenses to average net assets (annualized)**

        0.71%           0.64%   

Portfolio turnover (annualized)

        68.2%           27.1%   

Net cash & short-term investments to net assets

        1.2%           2.0%   

 

* The annualized ratios of net investment income to average net assets for the nine months ended in 2013 and 2012 were 1.45% and 1.43%, respectively, after adjusting for non-recurring pension expenses.
** The annualized ratios of expenses to average net assets for the nine months ended in 2013 and 2012 were 0.64% and 0.61%, respectively, after adjusting for non-recurring pension expenses.

 

 

FIVE YEAR DISTRIBUTION HISTORY

 

 

 

(unaudited)

 

Year

    Income
Dividends
Per Share		      Short-Term
Capital Gains
Distributions
Per Share		      Long-Term
Capital Gains
Distributions
Per Share		      Total
Dividends and
Distributions
Per Share		      Annual
Distribution
Rate*		  

2008

    $ 0.26       $ 0.01       $ 0.37       $  0.64             5.7 % 

2009

       0.15          0.05          0.25         0.45             5.2   

2010

      0.14         0.09         0.28         0.51             5.1   

2011

      0.15         0.07         0.43         0.65             6.1   

2012

      0.18         0.10         0.39         0.67             6.3   
              

 

 

  
                  Average:         5.7 % 

 

* The annual distribution rate is the total dividends and capital gain distributions during the year divided by the average month-end market price of the Fund’s Common Stock for the calendar year in years prior to 2011 and for the twelve months ended October 31 beginning in 2011, which is consistent with the calculation to determine the annual 6% minimum distribution rate commitment announced in September 2011.

 

2

PORTFOLIO REVIEW

 

 

 

September 30, 2013

(unaudited)

 

 

Ten Largest Equity Portfolio Holdings

        Market Value        % of Net Assets  

Petroleum & Resources Corp.*

      $ 59,174,104           4.4 % 

Apple Inc.

        46,864,525           3.5   

Pfizer Inc.

        31,293,900           2.4   

JPMorgan Chase & Co.

        31,014,000           2.3   

Citigroup Inc.

        28,620,900           2.2   

Chevron Corp.

        28,552,500           2.1   

Wells Fargo & Co.

        27,684,400           2.1   

General Electric Co.

        27,330,160           2.1   

Lowe’s Companies, Inc.

        26,185,500           2.0   

iShares US Real Estate ETF

        26,111,123           2.0   
    

 

 

       

 

 

  

     Total                

      $ 332,831,112           25.1 % 
    

 

 

       

 

 

  

 

*Non-controlled affiliated closed-end fund

          

 

 

Sector Weightings

 

 

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3

SCHEDULE OF INVESTMENTS

 

 

 

September 30, 2013

(unaudited)

 

    Shares     Value (A)

Common Stocks — 98.8%

    

Consumer Discretionary — 11.0%

    

Bed Bath & Beyond Inc. (B)

     120,200      $ 9,298,672

Comcast Corp.

     452,300        20,421,345

Consumer Discretionary SPDR Fund

     202,900        12,301,827

Dollar General Corp. (B)

     271,400        15,323,244

Lowe’s Companies, Inc.

     550,000        26,185,500

Marriott International Inc. (Class A)

     300,000        12,618,000

McDonald’s Corp.

     180,000        17,317,800

Target Corp.

     135,800        8,688,484

Walt Disney Co.

     377,600        24,351,424
   

 

 
      146,506,296
   

 

 

Consumer Staples — 9.5%

    

Bunge Ltd.

     100,000        7,591,000

Coca-Cola Co.

     300,000        11,364,000

CVS/Caremark Corp.

     314,000        17,819,500

Diageo plc ADR

     59,400        7,548,552

General Mills Inc.

     252,400        12,095,008

PepsiCo, Inc. (F)

     263,500        20,948,250

Philip Morris International Inc.

     262,800        22,755,852

Procter & Gamble Co.

     175,000        13,228,250

Unilever plc ADR

    325,000        12,538,500
   

 

 
      125,888,912
   

 

 

Energy — 10.4%

    

Anadarko Petroleum Corp.

     105,400        9,801,146

Chevron Corp. (E)

     235,000        28,552,500

EOG Resources, Inc.

     68,600        11,612,608

Exxon Mobil Corp. (F)

     105,000        9,034,200

Halliburton Co.

     147,801        7,116,618

Petroleum & Resources Corp. (C)

     2,186,774        59,174,104

Schlumberger Ltd. (E)

     138,300        12,220,188
   

 

 
      137,511,364
   

 

 

Financials — 16.0%

    

ACE Ltd. (B)

     233,000        21,799,480

Allstate Corp.

     355,000        17,945,250

Bank of New York Mellon Corp.

     323,775        9,774,767

Berkshire Hathaway Inc. (Class B) (B)

     65,200        7,400,852

Capital One Financial Corp.

     245,000        16,841,300

Citigroup Inc.

     590,000        28,620,900

Fifth Third Bancorp.

     665,000        11,996,600

iShares US Real Estate ETF

     409,522        26,111,123

JPMorgan Chase & Co.

     600,000        31,014,000

MetLife Inc.

     273,000        12,817,350

Wells Fargo & Co.

     670,000        27,684,400
   

 

 
      212,006,022
   

 

 

Health Care — 13.5%

    

Aetna Inc.

     205,000        13,124,100

Allergan, Inc.

     128,000        11,577,600

Biogen IDEC Inc. (B)

     30,000        7,222,800

Celgene Corp. (B)

     120,000        18,471,600

Covidien plc

     120,000        7,312,800

Express Scripts Holding Co. (B)

     255,000        15,753,900

Gilead Sciences, Inc. (B)

     414,000        26,015,760

McKesson Corp.

    116,000        14,882,800

Merck & Co., Inc.

     500,000        23,805,000

Pfizer Inc.

     1,090,000        31,293,900

Zimmer Holdings, Inc.

     115,000        9,446,100
   

 

 
      178,906,360
   

 

 

Industrials — 11.2%

    

Boeing Co.

     210,000        24,675,000

Caterpillar Inc.

    120,000        10,004,400

Eaton Corporation plc

     205,000        14,112,200

Emerson Electric Co.

     160,000        10,352,000

FedEx Corp.

     86,000        9,813,460

General Electric Co.

     1,144,000        27,330,160

Honeywell International Inc.

     295,000        24,496,800

Masco Corp.

     365,000        7,767,200

United Technologies Corp.

     184,500        19,892,790
   

 

 
      148,444,010
   

 

 

Information Technology — 17.6%

  

  

Analog Devices, Inc.

     136,100        6,403,505

Apple Inc. (F)

     98,300        46,864,525

Automatic Data Processing, Inc.

     200,000        14,476,000

Cisco Systems, Inc.

     700,000        16,394,000

eBay Inc. (B)

     226,000        12,608,540

Google Inc. (Class A) (B)

     25,500        22,335,705

Intel Corp.

     665,000        15,241,800

International Business Machines Corp.

     110,800        20,517,944

MasterCard, Inc.

     23,000        15,473,940

Microsoft Corp.

     618,800        20,612,228

NetApp, Inc.

     161,700        6,891,654

Oracle Corp.

     526,000        17,447,420

QUALCOMM Inc.

     151,400        10,198,304

Seagate Technology plc

     199,000        8,704,260
   

 

 
      234,169,825
   

 

 

Materials — 3.0%

    

CF Industries Holdings, Inc.

     38,531        8,123,491

Eastman Chemical Co.

     85,000        6,621,500

LyondellBasell Industries N.V. (Class A)

     238,000        17,428,740

Praxair, Inc.

    67,500        8,114,175
   

 

 
      40,287,906
   

 

 

 

4

SCHEDULE OF INVESTMENTS (CONTINUED)

 

 

 

September 30, 2013

(unaudited)

 

        
Principal/
Shares		     Value (A)  

Telecom Services — 2.6%

    

AT&T Corp.

     584,000      $ 19,750,880   

Verizon Communications Inc.

     315,000        14,697,900   
   

 

 

  
      34,448,780   
   

 

 

  

Utilities — 2.4%

    

NiSource Inc.

     236,000        7,290,040   

Pinnacle West Capital Corp.

     115,000        6,295,100   

Utilities Select Sector SPDR Fund

     515,000        19,235,250   
   

 

 

  
      32,820,390   
   

 

 

  

S&P 500 Index — 1.6%

    

SPDR S&P ETF Trust

     125,000        21,012,500   
   

 

 

  

Total Common Stocks
(Cost $1,040,692,076)

   

     1,312,002,365   
   

 

 

  

Short-Term Investments — 1.0%

  

  

Money Market Account — 1.0%

  

  

M&T Bank, 0.15%

   $ 13,321,378        13,321,378   
   

 

 

  

Money Market Funds — 0.0%

  

  

Fidelity Institutional Money Market – Money Market Portfolio (Institutional Class), 0.08% (D)

     100,000        100,000   

RBC U.S. Government Money Market (Institutional Class I), 0.01% (D)

     10,000        10,000   

Vanguard Federal Money Market, 0.01% (D)

     10,000        10,000   

Western Asset Institutional Government Reserves (Institutional Class), 0.04% (D)

     10,000        10,000   
   

 

 

  
      130,000   
   

 

 

  

Total Short-Term Investments
(Cost $13,451,378)

       13,451,378   
   

 

 

  

Total Investments — 99.8%
(Cost $1,054,143,454)

       1,325,453,743   

Cash, receivables, prepaid expenses and
other assets, less liabilities — 0.2%

   

     2,241,716   
   

 

 

  

Net Assets — 100.0%

     $ 1,327,695,459   
   

 

 

  

 

Notes:

(A) Common stocks are listed on the New York Stock Exchange or the NASDAQ and are valued at the last reported sale price on the day of valuation.
(B) Presently non-dividend paying.
(C) Non-controlled affiliate, a closed-end sector fund, registered as an investment company under the Investment Company Act of 1940.
(D) Rate presented is as of period-end and represents the annualized yield earned over the previous seven days.
(E) All or a portion of this security is pledged to cover open written call option contracts. Aggregate market value of such pledged securities is $3,738,850.
(F) All or a portion of this security is pledged to collateralize open written put option contracts with an aggregate market value to deliver upon exercise of $2,350,000.

 

 

 

This report is transmitted to the shareholders 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 Fund 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 no guarantee of future investment results.

 

5

OTHER INFORMATION

 

 

 

Dividend Payment Schedule

 

The Fund 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, the net realized capital gains earned through October 31 and, if applicable, a return of capital. Shareholders may elect to receive the year-end distribution in stock or cash. In connection with this distribution, all shareholders of record are sent a dividend announcement notice and an election card in mid-November. Shareholders holding shares in “street” or brokerage accounts may make their election by notifying their brokerage house representative.

 

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 shareholders, the Fund also 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 Fund’s Forms N-Q are available on the Commission’s website: www.sec.gov. The Fund’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 1-800-SEC-0330. The Fund also posts a link to its Forms N-Q on its website: www.adamsexpress.com under the headings “Investment Information”, “Financial Reports” and then “SEC Filings”.

 

Proxy Voting Policies and Record

 

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities owned by the Fund and the Fund’s proxy voting record for the 12-month period ended June 30, 2013 are available (i) without charge, upon request, by calling the Fund’s toll free number at (800) 638-2479; (ii) on the Fund’s website: www.adamsexpress.com under the headings “About Adams Express” and “Corporate Information”; and (iii) on the Securities and Exchange Commission’s website: www.sec.gov.

 

 

6

OTHER INFORMATION (CONTINUED)

 

 

Electronic Delivery of Shareholder Reports

 

The Fund offers shareholders the benefits and convenience of viewing Quarterly and Annual Reports and other shareholder materials on-line. With your consent, paper copies of these documents will cease with the next mailing and will be provided via e-mail. Reduce paper mailed to your home and help lower the Fund’s printing and mailing costs. To enroll, please visit the following websites:

 

Registered shareholders with AST: www.amstock.com/main

 

Shareholders using brokerage accounts: http://enroll.icsdelivery.com/ADX

 

Privacy Policy

 

In order to conduct its business, the Fund, through its transfer agent, American Stock Transfer & Trust Company, collects and maintains certain nonpublic personal information about our shareholders of record with respect to their transactions in shares of our securities. This information includes the shareholder’s address, tax identification or Social Security number, share balances, and dividend elections. We do not collect or maintain personal information about shareholders 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 shareholders or our former shareholders 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 shareholders to those employees who need to know that information to provide services to our shareholders. We also maintain certain other safeguards to protect your nonpublic personal information.

 

 

 

The Adams Express Company

 

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

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

Website: www.adamsexpress.com

E-mail: contact@adamsexpress.com

 

 

 

Counsel: Chadbourne & Parke LLP

Independent Registered Public Accounting Firm: PricewaterhouseCoopers LLP

Custodian of Securities: Brown Brothers Harriman & Co.

Transfer Agent & Registrar: American Stock Transfer & Trust Company, LLC

Stockholder Relations Department

6201 15th Avenue

Brooklyn, NY 11219

(877) 260-8188

Website: www.amstock.com

E-mail: info@amstock.com

 

7

THE ADAMS EXPRESS COMPANY

 

 

 

Board of Directors

 

Enrique R. Arzac 1,3,5

   Roger W. Gale 2,4

Phyllis O. Bonanno 1,3,5

   Kathleen T. McGahran  1,2,3,5,6

Kenneth J. Dale 2,4

   Craig R. Smith 2,3

Frederic A. Escherich 1,4,5

   Mark E. Stoeckle 1
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
6. Chair of the Board

 

 

Officers

 

Mark E. Stoeckle

  

Chief Executive Officer

James P. Haynie, CFA

  

President

Nancy J.F. Prue, CFA

  

Executive Vice President

Brian S. Hook, CFA, CPA

  

Vice President, Chief Financial Officer and Treasurer

Lawrence L. Hooper, Jr.

  

Vice President, General Counsel and Secretary

David R. Schiminger, CFA

  

Vice President—Research

D. Cotton Swindell, CFA

  

Vice President—Research

Christine M. Sloan, CPA

  

Assistant Treasurer

 

 

Stock Data

 

Market Price (9/30/13)

    $ 12.39   

Net Asset Value (9/30/13)

    $ 14.40   

Discount:

      14.0%   

 

New York Stock Exchange ticker symbol: ADX

 

NASDAQ Quotation Symbol for NAV: XADEX

 

 

Distributions in 2013

 

From Investment Income

    $ 0.13   

From Net Realized Gains

      0.02   
  

 

 

  

Total

    $ 0.15   
  

 

 

  

 

 

2013 Dividend Payment Dates

 

March 1, 2013

June 3, 2013

September 3, 2013

December 27, 2013*

 

*Anticipated