UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-00248
---------------------------------------------
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: December 31, 2008
Item 1. Reports to Stockholders.
Generation after generation - We Grow with you tm
[Graphic]
The Adams Express Company
Annual Report 2008
2008 AT A GLANCE
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The Company
.. a closed-end equity investment company
.. objectives: preservation of capital
reasonable income
opportunity for capital gain
.. internally-managed
.. low expense ratio
.. low turnover
Stock Data (12/31/08)
NYSE Symbol............. ADX
Market Price.......... $8.03
52-Week Range $7.20 - $13.74
Discount...............16.4%
Shares Outstanding87,406,443
Summary Financial Information
Year Ended December 31
2008 2007
------------------------------------------------------------------------
Net asset value per share $ 9.61 $ 15.72
Total net assets 840,012,143 1,378,479,527
Unrealized (depreciation)/appreciation (111,981,824) 410,454,970
Net investment income 21,085,039 25,884,799
Net realized gain 32,965,241 60,426,376
Total return (based on market price) (38.9)% 9.4%
Total return (based on net asset value) (34.4)% 6.5%
Expense ratio 0.48% 0.44%
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2008 Dividends and Distributions
Amount
Paid (per share) Type
-------------------------------------------------------
March 1, 2008 $0.01 Long-term capital gain
March 1, 2008 0.01 Short-term capital gain
March 1, 2008 0.03 Investment income
June 1, 2008 0.05 Investment income
September 1, 2008 0.05 Investment income
December 27, 2008 0.36 Long-term capital gain
December 27, 2008 0.13 Investment income
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$0.64
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2009 Annual Meeting of Stockholders
Location: Sheraton Baltimore North Hotel, Towson, MD
Date: March 19, 2009
Time: 9:00 a.m.
PORTFOLIO REVIEW
--------------------------------------------------------------------------------
(unaudited)
Ten Largest Portfolio Holdings (12/31/08)
Market Value % of Net Assets
------------ ---------------
Petroleum & Resources Corporation* $ 42,445,283 5.0
Microsoft Corp. 22,939,200 2.7
General Electric Co. 22,485,600 2.7
Pfizer Inc. 19,835,200 2.4
PepsiCo, Inc. 19,717,200 2.4
Oracle Corp. 19,503,000 2.3
Procter & Gamble Co. 19,473,300 2.3
Unilever plc ADR 18,416,000 2.2
Genentech, Inc. 18,240,200 2.2
Exxon Mobil Corp. 17,163,450 2.0
------------ ----
Total $220,218,433 26.2%
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* Non-controlled affiliate
Sector Weightings (12/31/08)
[CHART]
Consumer 20.7%
Energy 12.3%
Financial 10.1%
Health Care 15.8%
Industrials 13.4%
Information Technology 11.7%
Materials 1.1%
Telecom Services 1.4%
Utilities 3.0%
Short-Term Investments 10.6%
1
LETTER TO STOCKHOLDERS
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The Year in Review
In a stock market widely recognized as the worst since the Great Depression of
the 1930s, the Fund was able to again beat its benchmarks, the Standard &
Poor's 500 and the Lipper Large-Cap Core Mutual Fund Average. It is not
particularly satisfying, however, to relate that, while outperforming, the
return of the Fund was -34.4% compared to the S&P's -37.0% and the Large-Cap
Core Average of -37.2%. As disappointing as these returns were, most markets
overseas had even worse results.
Sectors of the portfolio with some of the best relative performance were not
areas traditionally emphasized in our investment activities. Those sectors
included consumer discretionary, technology, and telecommunication services.
With our relatively low exposure in these sectors, the outperformance was only
a modest help to the Fund's overall return. While the performance of the
financial sector was the weakest in absolute terms, the Fund benefited from its
underweight position and outperformance relative to the benchmark. Our
substantial health care holdings, comprising one of our larger sector
investments, outperformed the industry sector by a wide margin. Consumer
staples, as is often the case during recessionary periods, also performed
better than the overall market. Our overweighting of the energy and industrial
sectors, on the other hand, did not serve us well in 2008. Our focus on
dividend-paying stocks was an important factor in our better overall results as
investors placed increased emphasis on cash generation and payouts. The
build-up of cash and short-term investments in the second half of the year
likewise contributed to the strong relative performance of the Fund.
The financial deterioration which began in 2007 accelerated in 2008, forcing
the government to take the radical step of providing capital to banks and
insurance companies in an effort to stabilize them and avert a complete
collapse of the financial system in this country. In addition, large quantities
of outstanding debt instruments were purchased or guaranteed by the Treasury
Department to reduce the banks' exposure to losses. Several mergers of
investment banks were also arranged. Similar measures were taken in numerous
other countries as the crisis spread around the world.
With markedly reduced availability of credit from banks, the rest of the
economy sank into recession late in 2007 and has yet to recover. Dramatic
increases in energy prices in the first half of the year further hampered
activity and sparked inflation fears. As with the credit crisis, the recession
spread to other countries, reducing trade and further exacerbating the
situation. The impact of the worldwide recession was quickly reflected in
energy prices, which fell in the second half of the year even faster than they
had risen earlier. The unemployment rate rose as companies in many industries
reduced their activity and staffing. The deteriorating state of the domestic
economy, as well as most others around the world, severely impacted stock
prices, commodity prices, and the political landscape. Along with most others,
the Fund was unable to avoid much of the devastation, causing the net
unrealized gain in the portfolio to become an unrealized loss.
Investment Results
At the end of 2008, our net assets were $840,012,143 or $9.61 per share on
87,406,443 shares outstanding. This compares with $1,378,479,527 or $15.72 per
share on 87,668,847 shares outstanding a year earlier.
Net investment income for 2008 was $21,085,039 compared to $25,884,799 for
2007. These earnings are equal to $0.25 and $0.30 per share, respectively, on
the average number of shares outstanding throughout each year. Our 0.48%
expense ratio (expenses to average net assets) in 2008 was once again very low
compared to the fund industry in general.
Net realized gains amounted to $32,965,241 during the year, while the
unrealized appreciation on investments decreased from $410,454,970 at
December 31, 2007 to $(111,981,824) at year end.
Dividends and Distributions
The total dividends and distributions paid in 2008 were $0.64 per share
compared to $1.03 in 2007. The table on page 19 shows the history of our
dividends and distributions over the past fifteen years, including the annual
rate of distribution as a percentage of the average daily market price of the
Company's Common Stock. In 2008, the annual rate of distribution was 5.61%
compared to 7.15% in 2007. As announced on November 13, 2008, a year-end
distribution consisting of investment income of $0.13 per share and capital
gains of $0.36 per share was made on December 27, 2008, both realized and
taxable in 2008. On January 8, 2009, an additional distribution of $0.05 per
[PHOTO]
Douglas G. Ober,
Chairman and Chief
Executive Officer
2
share was declared to shareholders of record on February 13, 2009, payable
March 1, 2009, representing the balance of undistributed net investment income
and capital gains earned during 2008 and an initial distribution from 2009 net
investment income, all taxable to shareholders in 2009.
Outlook for 2009
The dramatic actions taken in 2008 by the government to rebuild the financial
system and bail out other industries have yet to bear fruit. A second tranche
of capital for the banking sector is currently being allocated and the new
administration is putting together a massive stimulus program. We believe these
unprecedented efforts to increase liquidity in the markets and jump-start the
economy will eventually bear fruit. The quick success of these measures is not
assured, however, and the likelihood of the recession extending until late in
2009 or into 2010 appears high. Until such time as there are indications of
either a turnaround or a further decline, we do not expect to see the stock
market move outside of its current trading range.
A successful stimulus plan should begin to show results by the third quarter of
this year, initially in the arrest of the decline in economic activity. The
stock market should begin to recover ahead of the overall economy as valuations
begin to capture the rising expectations of investors. Such an economic and
market recovery may be impeded by the magnitude of the recessions outside the
United States. As indicated previously, other countries have been taking
measures similar to those by the U.S. to stem the declines in their economies.
If those are not successful, the reverberations are likely to be felt
domestically and any recovery delayed by several quarters. Likewise, given the
importance of the U.S. consumer's spending to the GDP, further declines in home
and stock prices in this country could also result in a more protracted and
deeper recession.
The Fund's large cash/short-term investment position will gradually be put to
use in the industries and companies which we believe have the greatest
opportunities to benefit from the anticipated recovery in both the domestic and
overseas economies. We will use the market's current period of volatility to
build these positions, as valuations disconnect from the long-term
fundamentals. The Fund will then be in a position to take the best advantage of
the market's recovery as it unfolds. We constantly strive, as managers and
shareholders, to position the Fund for success, turning challenging times such
as these into opportunities for the future.
Share Repurchase Program
On December 11, 2008, the Board of Directors authorized the repurchase by
management of up to 5% of the outstanding shares of the Company over the
ensuing year. The repurchase program is subject to the same restriction as in
the past, namely that shares can be repurchased when the discount of the market
price of the shares from the net asset value is 10% or greater.
From the beginning of 2009 through January 23, 2009, a total of 206,800 shares
have been repurchased at a total cost of $1,580,545 and a weighted average
discount from net asset value of 15.5%.
-----------------
This Annual Report, along with the proxy statement for the Annual Meeting of
Stockholders to be held in Baltimore on March 19, 2009, are expected to be
mailed on or about February 17, 2009.
By order of the Board of Directors,
/s/ Douglas G. Ober /s/ Joseph M. Truta
Douglas G. Ober, Joseph M. Truta,
Chairman and Chief President
Executive Officer
January 27, 2009
3
STATEMENT OF ASSETS AND LIABILITIES
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December 31, 2008
Assets
Investments* at value:
Common stocks
(cost $829,280,884) $709,503,064
Non-controlled affiliate, Petroleum & Resources Corporation
(cost $34,735,404) 42,445,283
Short-term investments (cost $89,342,508) 89,342,508
Securities lending collateral (cost $116,405,576) 116,405,576 $ 957,696,431
----------------------------------------------------------------------------------------------
Cash 401,407
Dividends and interest receivable 1,213,315
Prepaid expenses and other assets 1,952,343
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Total Assets 961,263,496
------------------------------------------------------------------------------------------------------------
Liabilities
Open written option contracts at value (proceeds $117,367) 31,250
Obligations to return securities lending collateral 116,405,576
Accrued pension liabilities 4,029,451
Accrued expenses and other liabilities 785,076
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Total Liabilities 121,251,353
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Net Assets $ 840,012,143
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Net Assets
Common Stock at par value $0.001 per share, authorized 150,000,000 shares;
issued and outstanding 87,406,443 shares (includes 107,926 restricted shares,
13,500 nonvested or deferred restricted stock units, and 8,268 deferred stock
units) (note 6) $ 87,406
Additional capital surplus 953,953,437
Accumulated other comprehensive income (note 5) (6,035,795)
Undistributed net investment income 1,754,228
Undistributed net realized gain on investments 2,234,691
Unrealized appreciation/(depreciation) on investments (111,981,824)
------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Stock $ 840,012,143
------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share of Common Stock $9.61
------------------------------------------------------------------------------------------------------------
*See schedule of investments on pages 13 through 15.
The accompanying notes are an integral part of the financial statements.
4
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
Year Ended December 31, 2008
Investment Income
Income:
Dividends:
From unaffiliated issuers $ 23,929,649
From non-controlled affiliate 918,445
Interest and other income 1,813,952
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Total income 26,662,046
----------------------------------------------------------------------------------
Expenses:
Investment research 2,182,538
Administration and operations 1,230,205
Directors' fees 391,010
Transfer agent, registrar, and custodian 330,759
Reports and stockholder communications 311,350
Travel, training, and other office expenses 295,182
Investment data services 215,637
Occupancy 154,870
Auditing and accounting services 132,404
Insurance 99,492
Legal services 51,845
Other 181,715
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Total expenses 5,577,007
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Net Investment Income 21,085,039
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Change in Accumulated Other Comprehensive Income (note 5) (4,055,632)
----------------------------------------------------------------------------------
Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions 25,753,050
Net realized gain distributed by regulated investment company
(non-controlled affiliate) 5,620,009
Net realized gain on written option contracts 1,592,182
Change in unrealized appreciation on investments (522,436,794)
----------------------------------------------------------------------------------
Net Loss on Investments (489,471,553)
----------------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $(472,442,146)
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The accompanying notes are an integral part of the financial statements.
5
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the Year Ended
------------------------------
Dec. 31, 2008 Dec. 31, 2007
---------------------------------------------------------------------------------------------------
From Operations:
Net investment income $ 21,085,039 $ 25,884,799
Net realized gain on investments 32,965,241 60,426,376
Change in unrealized appreciation on investments (522,436,794) (8,301,286)
Change in accumulated other comprehensive income (note 5) (4,055,632) (156,058)
---------------------------------------------------------------------------------------------------
Change in net assets resulting from operations (472,442,146) 77,853,831
---------------------------------------------------------------------------------------------------
Distributions to Stockholders From:
Net investment income (22,378,500) (27,409,018)
Net realized gain from investment transactions (32,528,278) (60,607,292)
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Decrease in net assets from distributions (54,906,778) (88,016,310)
---------------------------------------------------------------------------------------------------
From Capital Share Transactions:
Value of shares issued in payment of distributions 17,225,925 33,223,573
Cost of shares purchased (note 4) (28,955,931) (22,516,525)
Deferred compensation (notes 4, 6) 611,546 516,648
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Change in net assets from capital share transactions (11,118,460) 11,223,696
---------------------------------------------------------------------------------------------------
Total Change in Net Assets (538,467,384) 1,061,217
Net Assets:
Beginning of year 1,378,479,527 1,377,418,310
---------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $1,754,228 and $3,033,710, respectively) $ 840,012,143 $1,378,479,527
---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
6
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 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 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.
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 December 31, 2008 were classified as follows:
Investment in
securities Written options
------------- ---------------
Level 1 $915,003,923 $31,250
Level 2 42,692,508* --
Level 3 -- --
--------------------------------------
Total $957,696,431 $31,250
--------------------------------------
*Consists of short-term investments other than money market funds.
2. Federal Income Taxes
The Company's policy is to distribute all of its taxable income to its
shareholders in compliance with the requirements of the Internal Revenue Code
applicable to regulated investment companies. Therefore, no federal income tax
provision is required. For federal income tax purposes, the identified cost of
securities at December 31, 2008 was $1,069,277,121, and net unrealized
depreciation aggregated $(111,580,690), which the related gross unrealized
appreciation and depreciation were $141,991,563 and $253,572,253, respectively.
As of December 31, 2008, the tax basis of distributable earnings was $1,009,961
of undistributed ordinary income and $1,767,023 of undistributed long-term
capital gain.
Distributions paid by the Company during the year ended December 31, 2008 were
classified as ordinary income of $23,253,237 and long-term capital gain of
$31,653,541. In comparison, distributions paid by the Company during the year
ended December 31, 2007 were classified as ordinary income of $34,249,231 and
long-term capital gain of $53,767,079. The distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles. Accordingly, periodic reclassifications are
made within the Company's capital accounts to reflect income and gains
available for distribution under income tax regulations. Any income tax-related
interest or penalties would be classified as income tax expense.
7
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
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 year ended December 31, 2008 were $193,895,367 and
$229,341,563, respectively. Options may be written (sold) or purchased by the
Company. For written options, covered calls or collateralized puts require
deposits of securities or cash to be segregated with the custodian to guarantee
delivery or payment if the options are exercised. When an option is written, an
amount equal to the premium received by the Company is recorded as a liability
and is subsequently adjusted to the current fair value of the option written.
Premiums received from unexercised options are treated as realized gains from
investments on the expiration date. Premiums received from exercised put
options reduce the cost basis of the securities purchased, and premiums
received from exercised call options are added to the proceeds from the sale of
the underlying security in determining whether there is a realized gain or
loss. The Company as writer of an option bears the risks of possible
illiquidity of the option markets and the unfavorable change in the price of
the security underlying the written option. The risk associated with purchasing
an option is limited to the premium originally paid for the option. A schedule
of outstanding option contracts as of December 31, 2008 can be found on page 16.
Transactions in written covered call and collateralized put options during the
year ended December 31, 2008 were as follows:
Covered Calls Collateralized Puts
------------------- --------------------
Contracts Premiums Contracts Premiums
--------- --------- --------- ----------
Options outstanding,
December 31, 2007 1,757 $ 197,788 1,726 $ 194,530
Options written 6,050 733,652 8,482 1,054,904
Options terminated in
closing purchase
transactions (1,150) (147,824) -- --
Options expired (5,714) (668,577) (6,800) (838,821)
Options exercised (743) (92,389) (2,676) (315,896)
-----------------------------------------------------------------
Options outstanding,
December 31, 2008 200 $ 22,650 732 $ 94,717
-----------------------------------------------------------------
4. Capital Stock
The Company has 10,000,000 authorized and unissued preferred shares, $0.001 par
value.
On December 27, 2007, the Company issued 2,381,872 shares of its Common Stock
at a price of $13.945 per share (the average market price on December 10, 2007)
to stockholders of record November 21, 2007 who elected to take stock in
payment of the distribution from 2007 capital gain and investment income. In
addition, 597 shares were issued at a weighted average price of $14.00 per
share as dividend equivalents to holders of deferred stock units and restricted
stock units under the 2005 Equity Incentive Compensation Plan.
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 November 21, 2008 who elected to take stock in payment
of the distribution from 2008 capital gain and investment income. In addition,
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.
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 2008 and 2007 were as follows:
Shares Amount
---------------------- --------------------------
2008 2007 2008 2007
---------- ---------- ------------ ------------
Shares issued in
payment of
distributions 2,150,583 2,382,469 $ 17,225,925 $ 33,223,573
Shares purchased (at
a weighted average
discount from net
asset value of
14.8% and 13.2%,
respectively) (2,457,547) (1,585,773) (28,955,931) (22,516,525)
Net activity under the
2005 Equity
Incentive
Compensation
Plan 44,560 33,928 611,546 516,648
---------------------------------------------------------------------------
Net change (262,404) 830,624 $(11,118,460) $ 11,223,696
---------------------------------------------------------------------------
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
8
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
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 uses a December 31 measurement date for its plans.
2008 2007
----------- -----------
Change in benefit obligation
Benefit obligation at beginning of year $10,630,813 $ 9,850,091
Service cost 345,420 487,315
Interest cost 459,209 568,495
Actuarial (gain)/loss 784,450 (124,121)
Plan changes 89,030 --
Benefits paid (156,908) (150,967)
-------------------------------------------------------------------------
Benefit obligation at end of year $12,152,014 $10,630,813
-------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year $11,003,091 $10,834,484
Actual return on plan assets (2,723,620) 319,574
Employer contribution -- --
Benefits paid (156,908) (150,967)
-------------------------------------------------------------------------
Fair value of plan assets at end of year $ 8,122,563 $11,003,091
-------------------------------------------------------------------------
Funded status $(4,029,451) $ 372,278
-------------------------------------------------------------------------
Items recognized in accumulated other comprehensive income:
2008 2007
---------- ----------
Prior service cost $ 234,938 $ 241,768
Net loss 5,800,857 1,738,395
-------------------------------------------------------------
Accumulated other comprehensive income $6,035,795 $1,980,163
-------------------------------------------------------------
In 2009, the Company estimates that $105,232 of prior service cost and $546,123
of net losses, for a total of $651,355, will be amortized from accumulated
other comprehensive income into net periodic pension cost.
The accumulated benefit obligation for all defined benefit pension plans was
$10,812,861 and $9,086,788 at December 31, 2008 and 2007, respectively.
2008 2007
--------- ---------
Components of net periodic pension cost
Service cost $ 345,420 $ 487,315
Interest cost 459,209 568,495
Expected return on plan assets (691,794) (855,553)
Prior service cost component 95,860 94,508
Net loss component 137,401 162,625
--------------------------------------------------------------
Net periodic pension cost $ 346,096 $ 457,390
--------------------------------------------------------------
2008 2007
---------- ---------
Changes recognized in accumulated other
comprehensive income
Net loss $4,199,863 $ 413,191
Prior service cost 89,030 --
Amortization of net loss (137,401) (162,625)
Amortization of prior service cost (95,860) (94,508)
-----------------------------------------------------------------
Change in accumulated other comprehensive
income $4,055,632 $ 156,058
-----------------------------------------------------------------
Assumptions used to determine benefit obligations are:
2008 2007
----- -----
Discount rate 6.32% 6.00%
Rate of compensation increase 7.00% 7.00%
The assumptions used to determine net periodic pension cost are:
2008 2007
----- -----
Discount rate 6.00% 5.75%
Expected long-term return on plan assets 7.25% 8.00%
Rate of compensation increase 7.00% 7.00%
The assumption used to determine expected long-term return on plan assets was
based on historical and future expected returns of multiple asset classes in
order to develop a risk-free real rate of return and risk premiums for each
asset class. The overall rate for each asset class was developed by combining a
long-term inflation component, the risk-free real rate of return, and the
associated risk premium. A weighted average rate was developed based on those
overall rates and the target asset allocation of the plan.
The asset allocations at December 31, 2008 and 2007, by asset category, were as
follows:
2008 2007
---- ----
Asset Category
Equity Mutual Funds & Securities 44% 43%
Fixed Income Mutual Funds 56% 57%
Equity securities included common stock of the Company in the amount of
$455,444 (5% of total plan assets) and $778,577 (7% of total plan assets) at
December 31, 2008 and 2007, respectively. The primary objective of the
Company's pension plan is to provide capital appreciation, current income, and
preservation of capital through a diversified portfolio of stocks and fixed
income securities.
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. The Company made no contributions to
the plans in 2008 and anticipates contributions of approximately $500,000 in
2009.
The following benefit payments, which reflect expected future service and
certain assumptions, are eligible to be paid in the years indicated:
Pension Benefits
----------------
2009 $5,140,000
2010 321,800
2011 312,600
2012 303,700
2013 294,900
Years 2014-2018 3,976,000
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
The Company also sponsors a defined contribution plan that covers substantially
all employees. The Company expensed contributions to this plan of $169,438 and
$187,345 for the years ended December 31, 2008 and December 31, 2007,
respectively. 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 10 years from date
of grant, if not exercised.
A summary of option activity under the 1985 Plan as of December 31, 2008, and
changes during the period then ended, is presented below:
Weighted- Weighted-
Average Average
Exercise Remaining
Options Price Life (Years)
------- --------- ------------
Outstanding at December 31, 2007 146,804 $11.63 3.47
Exercised (10,386) 8.70 --
Forfeited (14,022) 15.62 --
-----------------------------------------------------------------
Outstanding at December 31, 2008 122,396 $11.05 2.80
-----------------------------------------------------------------
Exercisable at December 31, 2008 74,096 $10.51 2.61
-----------------------------------------------------------------
The options outstanding as of December 31, 2008 are set forth below:
Weighted Weighted
Average Average
Options Exercise Remaining
Exercise price Outstanding Price Life (Years)
-------------- ----------- -------- ------------
$7.00-$9.24 25,062 $ 7.74 2.91
$9.25-$11.49 60,208 9.87 3.53
$11.50-$13.74 -- -- --
$13.75-$16.00 37,126 15.18 1.55
-------------------------------------------------------------------
Outstanding at December 31, 2008 122,396 $11.05 2.80
-------------------------------------------------------------------
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 year ended December 31, 2008 was $(328,271).
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
achieving certain performance targets. If performance targets are not achieved,
all or a portion of the performance-based restricted shares 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 December 31, 2008 is 3,252,162 shares.
A summary of the status of the Company's awards granted under the 2005 Plan as
of December 31, 2008, and changes during the year then ended, is presented
below:
Weighted Average
Grant-Date Fair
Awards Shares/Units Value
------ ------------ ----------------
Balance at December 31, 2007 91,221* $13.29
Granted:
Restricted stock 35,878 13.10
Restricted stock units 7,500 12.49
Deferred stock units 2,961 11.40
Vested & issued (7,866) 13.20
Forfeited -- --
-------------------------------------------------------------
Balance at December 31, 2008
(includes 103,354 performance-
based awards and 26,340
nonperformance-based awards) 129,694 $13.15
-------------------------------------------------------------
*Includes 3,750 units previously denoted as vested that were deferred.
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 restricted
stock granted to employees
10
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
for the year ended December 31, 2008 were $497,408. The total compensation
costs for restricted stock units granted to non-employee directors for the year
ended December 31, 2008 were $100,793. As of December 31, 2008, there were
total unrecognized compensation costs of $451,496, 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 1.60 years. The total fair value of shares vested
and issued during the year ended December 31, 2008 was $101,961.
7. Officer and Director Compensation
The aggregate remuneration paid during the year ended December 31, 2008 to
officers and directors amounted to $2,566,568, of which $314,031 was paid 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
December 31, 2008, the Company had securities on loan of $115,709,562 and held
cash collateral of $116,405,576; 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.
9. New Accounting Pronouncements
In March 2008, the Financial Accounting Standards Board issued the Statement of
Financial Accounting Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities ("FAS 161"), which is effective for fiscal
years and interim periods beginning after November 15, 2008. FAS 161 requires
enhanced disclosures about derivative and hedging activities, including how
such activities are accounted for and their effect on financial position,
performance and cash flows. Application of the standard is not expected to
materially impact the Company's financial statements and related disclosures.
11
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Year Ended December 31
----------------------------------------------------
2008 2007 2006 2005 2004
------------------------------------------------------------------------------------------------------
Per Share Operating Performance
Net asset value, beginning of year $15.72 $15.86 $14.71 $15.04 $14.36
------------------------------------------------------------------------------------------------------
Net investment income 0.25 0.30* 0.23 0.22 0.23**
Net realized gains and increase (decrease)
in unrealized appreciation (5.68) 0.61 1.86 0.32 1.39
Change in accumulated
other comprehensive income (0.05) 0.00 (0.02) -- --
------------------------------------------------------------------------------------------------------
Total from investment operations (5.48) 0.91 2.07 0.54 1.62
------------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income (0.26) (0.32) (0.23) (0.22) (0.24)
Distributions from net realized gains (0.38) (0.71) (0.67) (0.64) (0.66)
------------------------------------------------------------------------------------------------------
Total distributions (0.64) (1.03) (0.90) (0.86) (0.90)
------------------------------------------------------------------------------------------------------
Capital share repurchases 0.05 0.04 0.04 0.05 0.02
Reinvestment of distributions (0.04) (0.06) (0.06) (0.06) (0.06)
------------------------------------------------------------------------------------------------------
Total capital share transactions 0.01 (0.02) (0.02) (0.01) (0.04)
------------------------------------------------------------------------------------------------------
Net asset value, end of year $9.61 $15.72 $15.86 $14.71 $15.04
------------------------------------------------------------------------------------------------------
Per share market price, end of year $8.03 $14.12 $13.87 $12.55 $13.12
------------------------------------------------------------------------------------------------------
Total Investment Return
Based on market price (38.9)% 9.4% 17.9% 2.2% 13.2%
Based on net asset value (34.4)% 6.5% 15.0% 4.5% 12.1%
Ratios/Supplemental Data
Net assets, end of year (in 000's) $840,012 $1,378,480 $1,377,418 $1,266,729 $1,295,549
Ratio of expenses to average net assets 0.48% 0.44% 0.50% 0.45% 0.43%
Ratio of net investment income to
average net assets 1.82% 1.82% 1.50% 1.44% 1.54%
Portfolio turnover 18.09% 10.46% 10.87% 12.96% 13.43%
Number of shares outstanding at
end of year (in 000's) 87,406 87,669 86,838 86,100 86,135
------------------------------------------------------------------------------------------------------
* 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.
12
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
December 31, 2008
Shares Value (A)
------------------------------------------------------------------
Stocks -- 89.5%
Consumer -- 20.7%
Consumer Discretionary -- 5.0%
Lowe's Companies, Inc. (B)............. 600,000 $ 12,912,000
McDonald's Corp........................ 135,000 8,395,650
Newell Rubbermaid Inc.................. 400,000 3,912,000
Ryland Group Inc. (B).................. 343,500 6,069,645
Target Corp. (B) (C)................... 320,000 11,049,600
------------
42,338,895
------------
Consumer Staples -- 15.7%
Avon Products, Inc..................... 405,000 9,732,150
Bunge Ltd. (B)......................... 160,000 8,283,200
Coca-Cola Co........................... 240,000 10,864,800
CVS/Caremark Corp...................... 285,000 8,190,900
Dean Foods Co. (B) (D)................. 340,000 6,109,800
Del Monte Foods Co..................... 1,300,000 9,282,000
Hansen Natural Corp. (D)............... 375,000 12,573,750
PepsiCo, Inc........................... 360,000 19,717,200
Procter & Gamble Co. (B)............... 315,000 19,473,300
Safeway, Inc........................... 390,000 9,270,300
Unilever plc ADR....................... 800,000 18,416,000
------------
131,913,400
------------
Energy -- 12.3%
Chevron Corp........................... 150,000 11,095,500
ConocoPhillips (B)..................... 150,000 7,770,000
CONSOL Energy Inc...................... 200,000 5,716,000
Exxon Mobil Corp....................... 215,000 17,163,450
Halliburton Co......................... 300,000 5,454,000
Petroleum & Resources Corporation (E).. 2,186,774 42,445,283
Schlumberger Ltd....................... 140,000 5,926,200
Transocean Inc. (D).................... 160,000 7,560,000
------------
103,130,433
------------
Financial -- 10.1%
Banking -- 9.2%
Bank of America Corp................... 800,000 11,264,000
Bank of New York Mellon Corp........... 403,775 11,438,946
PNC Financial Services Group Inc. (B).. 200,000 9,800,000
Prosperity Bancshares, Inc. (B)........ 160,000 4,734,400
State Street Corp. (B)................. 260,000 10,225,800
Visa Inc............................... 180,000 9,441,000
Wells Fargo & Co. (B).................. 425,000 12,529,000
Wilmington Trust Corp. (B)............. 363,000 8,073,120
------------
77,506,266
------------
Insurance -- 0.9%
Prudential Financial Inc............... 235,000 7,111,100
------------
13
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
December 31, 2008
Shares Value (A)
----------------------------------------------------------------------
Health Care -- 15.8%
Abbott Laboratories........................ 320,000 $ 17,078,400
Bristol-Myers Squibb Co. (B)............... 345,000 8,021,250
Genentech, Inc. (D)........................ 220,000 18,240,200
Hospira Inc. (D)........................... 300,000 8,046,000
Johnson & Johnson.......................... 255,000 15,256,650
Medtronic, Inc. (B)........................ 310,000 9,740,200
Pfizer Inc................................. 1,120,000 19,835,200
Senomyx, Inc. (D).......................... 984,400 2,746,476
Teva Pharmaceutical Industries Ltd. ADR.... 370,000 15,750,900
Wyeth Co................................... 325,000 12,190,750
Zimmer Holdings, Inc. (D).................. 150,000 6,063,000
------------
132,969,026
------------
Industrials -- 13.4%
Cintas Corp................................ 300,000 6,969,000
Curtiss-Wright Corp. (B)................... 360,000 12,020,400
Emerson Electric Co........................ 300,000 10,983,000
General Electric Co........................ 1,388,000 22,485,600
Harsco Corp................................ 250,000 6,920,000
Illinois Tool Works Inc. (B)............... 250,000 8,762,500
Masco Corp. (B)............................ 450,000 5,008,500
Oshkosh Corp. (B).......................... 330,000 2,933,700
Spirit AeroSystems Holdings, Inc. (B) (D).. 720,000 7,322,400
Tata Motors Ltd. ADR....................... 1,000,000 4,450,000
3M Co...................................... 160,000 9,206,400
United Technologies Corp................... 300,000 16,080,000
------------
113,141,500
------------
Information Technology -- 11.7%
Communication Equipment -- 0.6%
Corning Inc................................ 500,000 4,765,000
------------
Computer Related -- 8.8%
Automatic Data Processing Inc. (B)......... 300,000 11,802,000
Cisco Systems, Inc. (D).................... 850,000 13,855,000
Dell Inc. (D).............................. 585,000 5,990,400
Microsoft Corp............................. 1,180,000 22,939,200
Oracle Corp. (D)........................... 1,100,000 19,503,000
------------
74,089,600
------------
Electronics -- 2.3%
Broadcom Corp. (B) (D)..................... 400,000 6,788,000
Intel Corp. (B)............................ 840,000 12,314,400
------------
19,102,400
------------
Materials -- 1.1%
du Pont (E.I.) de Nemours and Co........... 360,000 9,108,000
------------
14
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
December 31, 2008
Prin. Amt.
or Shares Value (A)
---------------------------------------------------------------------------------------------------------
Telecom Services -- 1.4%
AT&T Corp................................................................. 400,000 $ 11,400,000
-------------
Utilities -- 3.0%
MDU Resources Group, Inc.................................................. 562,500 12,138,750
Northeast Utilities....................................................... 350,000 8,421,000
Spectra Energy Corp....................................................... 305,780 4,812,977
-------------
25,372,727
-------------
Total Stocks
(Cost $864,016,288)......................................................... 751,948,347
-------------
Short-Term Investments -- 10.6%
U.S. Government Obligations -- 1.5%
U.S. Treasury Bills, 0.22%, due 2/12/09 (F)............................... $12,500,000 12,496,792
-------------
Commercial Paper -- 3.6%
Chevron Funding Co., 1.05%, due 1/14/09................................... $ 3,300,000 3,298,749
ConocoPhillips, 1.25%, due 1/6/09-1/13/09................................. $15,000,000 14,995,458
Hewlett Packard Co., 0.25%, due 1/5/09.................................... $ 5,600,000 5,599,844
Toyota Motor Credit Corp., 1.19-1.44%, due 1/26/09-1/30/09................ $ 6,100,000 6,093,987
-------------
29,988,038
-------------
Money Market Funds -- 5.5%
Fidelity Institutional Money Market - Government Portfolio, 1.02% (G)..... 20,000,000 20,000,000
Fidelity Institutional Money Market - Treasury Only Portfolio, 0.54% (G).. 5,600,000 5,600,000
Fidelity Institutional Money Market - Treasury Portfolio, 0.34% (G)....... 1,000,000 1,000,000
Vanguard Federal Money Market, 1.74% (G).................................. 20,000,000 20,000,000
Vanguard Admiral Treasury Money Market, 0.93% (G)......................... 50,000 50,000
-------------
46,650,000
-------------
Time Deposit -- 0.0%
Wells Fargo Bank, 0.06%, due 1/2/09....................................... 207,678
-------------
Total Short-Term Investments
(Cost $89,342,508).......................................................... 89,342,508
-------------
Total Securities Lending Collateral -- 13.9%
(Cost $116,405,576)
Money Market Funds -- 13.9%
Invesco Aim Short-Term Investment Trust - Liquid Assets Portfolio
(Institutional Class), 1.67% (G)........................................ 116,405,576
-------------
Total Investments -- 114.0%
(Cost $1,069,764,372)....................................................... 957,696,431
Cash, receivables, prepaid expenses and other assets, less
liabilities -- (14.0)%.................................................. (117,684,288)
-------------
Net Assets -- 100.0%.......................................................... $ 840,012,143
--------------------------------------------------------------------------------
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
$690,600.
(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
$1,812,000.
(G) Rate presented is as of period-end and represents the annualized yield
earned over the previous seven days.
15
SCHEDULE OF OUTSTANDING OPTION CONTRACTS
--------------------------------------------------------------------------------
December 31, 2008
Contracts Contract
(100 shares Strike Expiration
each) Security Price Date Value
------------------------------------------------------------
COVERED CALLS
200 Target Corp........... $ 65 Jan 09 $ 1,000
--- -------
COLLATERALIZED PUTS
150 Bank of America Corp.. 10 Jan 09 1,050
132 Coca-Cola Co.......... 35 Feb 09 3,300
150 State Street Corp..... 35 Jan 09 18,000
100 State Street Corp..... 22.50 Feb 09 6,500
200 Target Corp........... 22.50 Jan 09 1,400
--- -------
732 30,250
--- -------
$31,250
=======
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
To the Board of Directors and Stockholders of The Adams Express Company:
In our opinion, the accompanying statement of assets and liabilities, including
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 (the
"Company") at December 31, 2008, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in
the period then ended, 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 express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the auditing standards
of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. 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 presentation. We believe that our
audits, which included confirmation of securities at December 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 11, 2009
16
CHANGES IN PORTFOLIO SECURITIES
--------------------------------------------------------------------------------
During the Three Months Ended December 31, 2008
(unaudited)
Shares
----------------------------------
Held
Additions Reductions Dec. 31, 2008
--------- ---------- -------------
Avon Products, Inc................ 30,000 405,000
Bank of America Corp.............. 70,000 800,000
Bunge Ltd......................... 30,000 160,000
Coca-Cola Co...................... 40,000 240,000
CVS/Caremark Corp................. 10,000 285,000
Harsco Corp....................... 125,000 250,000
Hospira Inc....................... 300,000 300,000
McDonald's Corp................... 60,000 135,000
Oshkosh Corp...................... 25,000 330,000
Spirit AeroSystems Holdings, Inc.. 170,000 720,000
Transocean Inc.................... 70,000 160,000
Visa Inc.......................... 10,000 180,000
Wells Fargo & Co.................. 200,000 425,000
Zimmer Holdings, Inc.............. 10,000 150,000
WGL Holdings, Inc................. 50,000 50,000 --
ConocoPhillips.................... 145,000 150,000
Harley-Davidson, Inc.............. 130,000 --
Prosperity Bancshares, Inc........ 90,000 160,000
Schlumberger Ltd.................. 240,000 140,000
-------------------------
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.
17
THE ADAMS EXPRESS COMPANY
--------------------------------------------------------------------------------
Calendar Market Cumulative Cumulative Total Total net
year value market value market value market asset
end of of capital of income value value
original gains dividends
shares distributions taken in
taken in shares
shares
---------------------------------------------------------------
1994 $ 8,703 $ 615 $ 256 $ 9,574 $11,020
1995 10,301 1,444 638 12,383 14,300
1996 11,000 2,370 1,035 14,405 17,286
1997 13,472 4,032 1,655 19,159 22,587
1998 14,829 5,814 2,194 22,837 27,906
1999 18,693 9,219 3,149 31,061 37,273
2000 17,544 10,825 3,218 31,587 35,679
2001 11,880 9,410 2,502 23,792 26,853
2002 8,831 7,923 2,124 18,878 21,647
2003 10,368 10,444 2,810 23,622 27,334
2004 10,961 12,284 3,476 26,721 30,631
2005 10,485 13,050 3,754 27,289 31,985
2006 11,588 15,865 4,707 32,160 36,774
2007 11,796 17,834 5,527 35,157 39,141
2008 6,709 11,082 3,675 21,466 25,689
Illustration of an assumed
15 year investment of $10,000
(unaudited)
Investment income dividends and capital gains distributions are taken in
additional shares. This chart covers the years 1994-2008. Fees for the
reinvestment of interim dividends are assumed as 2% of the amount reinvested
(maximum of $2.50) and commissions of $0.05 per share. There is no charge for
reinvestment of year-end distributions. No adjustment has been made for any
income taxes payable by stockholders on income dividends or on capital gains
distributions, or the sale of any shares. These results should not be
considered representative of the dividend income or capital gain or loss which
may be realized in the future.
[CHART]
18
HISTORICAL FINANCIAL STATISTICS
--------------------------------------------------------------------------------
(unaudited)
Dividends Distributions Total
From From Net Dividends
Net Asset Market Investment Realized and Annual
Value Of Shares Value Value Income Gains Distributions Rate of
Dec. 31 Net Assets Outstanding* Per Share* Per Share* Per Share* Per Share* Per Share* Distribution**
----------------------------------------------------------------------------------------------------------------
1994 $ 798,297,600 66,584,985 $11.99 $10.42 $.33 $ .73 $1.06 9.27%
1995 986,230,914 69,248,276 14.24 12.33 .35 .76 1.11 9.53
1996 1,138,760,396 72,054,792 15.80 13.17 .35 .80 1.15 8.95
1997 1,424,170,425 74,923,859 19.01 16.13 .29 1.01 1.30 8.65
1998 1,688,080,336 77,814,977 21.69 17.75 .30 1.10 1.40 8.17
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
--------
* 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.
-------------------------
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.
19
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 shareholders, the Company 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 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 1-800-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".
Annual Certification
The Company's CEO has submitted to the New York Stock Exchange the annual CEO
certification as required by Section 303A.12(a) of the NYSE Listed Company
Manual.
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.
Forward-Looking Statements
This report contains "forward-looking statements" within the meaning of the
Securities Act of 1933 and the Securities Exchange Act of 1934. By their
nature, all forward-looking statements involve risks and uncertainties, and
actual results could differ materially from those contemplated by the
forward-looking statements. Several factors that could materially affect the
Company's actual results are the performance of the portfolio of stocks held by
the Company, the conditions in the U.S. and international financial markets,
the price at which shares of the Company will trade in the public markets, and
other factors discussed in the Company's periodic filings with the Securities
and Exchange Commission.
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.
20
STOCKHOLDER INFORMATION AND SERVICES
--------------------------------------------------------------------------------
WE ARE OFTEN ASKED --
How do I invest in Adams Express?
Adams Express Common Stock is listed on the New York Stock Exchange. The
stock's ticker symbol is "ADX" and may be bought and sold through registered
investment security dealers. Your broker will be able to assist you in this
regard. In addition, stock may be purchased through our transfer agent,
American Stock Transfer & Trust Company's INVESTORS CHOICE Plan (see page 23).
Where do I get information on the stock's price, trading and/or net asset value?
The daily net asset value (NAV) per share and closing market price may be
obtained from our website at www.adamsexpress.com. The daily NAV is also
available on the NASDAQ Mutual Fund Quotation System under the symbol XADEX.
The week-ending NAV is published on Saturdays in various newspapers.
Adams Express daily trading is shown in the stock tables of many daily
newspapers, often with the abbreviated form "AdaEx." Local newspapers
determine, usually by volume of traded shares, which securities to list. If
your paper does not carry our listing, please telephone the Company at (800)
638-2479 or visit our website.
How do I replace a lost certificate(s) or how do I correct a spelling error on
my certificate?
Your Adams Express stock certificates are valuable documents and should be kept
in a safe place. For tax purposes, keep a record of each certificate, including
the cost or market value of the shares it covers at the time acquired. If a
certificate is lost, destroyed or stolen, notify the transfer agent immediately
so a "stop transfer" order can be placed on the records to prevent an
unauthorized transfer of your certificate. The necessary forms and requirements
to permit the issuance of a replacement certificate will then be sent to you. A
certificate can be replaced only after the receipt of an affidavit regarding
the loss accompanied by an open surety bond, for which a small premium is paid
by the stockholder.
In the event a certificate is issued with the holder's name incorrectly
spelled, a correction can only be made if the certificate is returned to the
transfer agent with instructions for correcting the error. Transferring shares
to another name also requires that the certificate be forwarded to the transfer
agent with the appropriate assignment forms completed and the signature of the
registered owner Medallion guaranteed by a bank or member firm of The New York
Stock Exchange, Inc.
Is direct deposit of my dividend checks available?
Yes, our transfer agent offers direct deposit of your interim dividend and
year-end distribution checks. You can request direct deposit with American
Stock Transfer either on-line or by calling them at the phone number provided
on page 23.
Who do I notify of a change of address?
The transfer agent.
We go to Florida (Arizona) every winter. How do we get our mail from Adams
Express?
The transfer agent can program a seasonal address into its system; simply send
the temporary address and the dates you plan to be there to the transfer agent.
I want to give shares to my children, grandchildren, etc. as a gift. How do I
go about it?
Giving shares of Adams Express is simple and is handled through our transfer
agent. The stock transfer rules are clear and precise for most forms of
transfer. They will vary slightly depending on each transfer, so write to the
transfer agent stating the exact intent of your gift plans and the transfer
agent will send you the instructions and forms necessary to effect your
transfer.
How do I transfer shares held at American Stock Transfer (AST)?
There are many circumstances that require the transfer of shares to new
registrations, e.g., marriage, death, a child reaching the age of maturity, or
giving shares as a gift. Each situation requires different forms of
documentation to support the transfer. You may obtain transfer instructions and
download the necessary forms from our transfer agent's website:
www.amstock.com. Click on Shareholder Services, then General Shareholder
Information and Transfer Instructions.
21
STOCKHOLDER INFORMATION AND SERVICES (CONTINUED)
--------------------------------------------------------------------------------
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
(waived if sold) $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:
Shareholder 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.
22
BOARD OF DIRECTORS
--------------------------------------------------------------------------------
Number of
portfolios
in fund
Position Term Length complex
Personal held with of of time Principal Occupations overseen Other
Information the fund office served during the last 5 years by director directorships
---------------------------------------------------------------------------------------------------------------------------------
Independent Directors
Enrique R. Arzac, Ph.D. Director One Since Professor of Finance and Two Director of Petroleum &
7 St. Paul Street, Year 1983 Economics, formerly, Vice Dean Resources Corporation and
Suite 1140 of Academic Affairs of the Credit Suisse Asset
Baltimore, MD 21202 Graduate School of Business, Management Funds
Age 67 Columbia University. (31 funds) (investment
companies), Epoch Holdings
Corporation (asset
management), and
Starcomms Plc
(telecommunications).
---------------------------------------------------------------------------------------------------------------------------------
Phyllis O. Bonanno Director One Since President & CEO of International Two Director of Petroleum &
7 St. Paul Street, Year 2003 Trade Solutions, Inc. Resources Corporation
Suite 1140 (consultants). Formerly, (investment company), Borg-
Baltimore, MD 21202 President of Columbia College, Warner Inc. (industrial),
Age 65 Columbia, South Carolina, and Mohawk Industries, Inc.
Vice President of Warnaco Inc. (carpets and flooring).
(apparel).
---------------------------------------------------------------------------------------------------------------------------------
Kenneth J. Dale Director One Since Senior Vice President and Chief Two Director of Petroleum &
7 St. Paul Street, Year 2008 Financial Officer of The Resources Corporation
Suite 1140 Associated Press. (investment company)
Baltimore, MD 21202
Age 52
---------------------------------------------------------------------------------------------------------------------------------
Daniel E. Emerson Director One Since Retired Executive Vice Two Director of Petroleum &
7 St. Paul Street, Year 1982 President of NYNEX Corp. Resources Corporation
Suite 1140 (communications), retired (investment company).
Baltimore, MD 21202 Chairman of the Board of both
Age 84 NYNEX Information Resources
Co. and NYNEX Mobile
Communications Co. Previously
Executive Vice President and
Director of New York Telephone
Company.
---------------------------------------------------------------------------------------------------------------------------------
Frederic A. Escherich Director One Since Private Investor. Formerly, Two Director of Petroleum &
7 St. Paul Street, Year 2006 Managing Director and head of Resources Corporation
Suite 1140 Mergers and Acquisitions (investment company).
Baltimore, MD 21202 Research and the Financial
Age 56 Advisory Department with
J.P. Morgan.
---------------------------------------------------------------------------------------------------------------------------------
Roger W. Gale, Ph.D. Director One Since President & CEO of GF Energy, Two Director of Petroleum &
7 St. Paul Street, Year 2005 LLC (consultants to electric Resources Corporation
Suite 1140 power companies). Formerly, (investment company), Ormat
Baltimore, MD 21202 member of management group, Technologies, Inc.
Age 62 PA Consulting Group (energy (geothermal and renewable
consultants). energy), and U.S. Energy
Association.
---------------------------------------------------------------------------------------------------------------------------------
Thomas H. Lenagh Director One Since Financial Advisor. Formerly, Two Director of Petroleum &
7 St. Paul Street, Year 1968 Chairman of the Board and CEO Resources Corporation,
Suite 1140 of Greiner Engineering Inc. Cornerstone Funds, Inc. (3
Baltimore, MD 21202 (formerly Systems Planning funds) (investment
Age 90 Corp.) (consultants). Formerly, companies), and Photonics
Treasurer and Chief Investment Product Group, Inc.
Officer of the Ford Foundation (crystals).
(charitable foundation).
---------------------------------------------------------------------------------------------------------------------------------
23
BOARD OF DIRECTORS (CONTINUED)
--------------------------------------------------------------------------------
Number of
portfolios
in fund
Position Term Length complex
Personal held with of of time Principal Occupations overseen Other
Information the fund office served during the last 5 years by director directorships
---------------------------------------------------------------------------------------------------------------------------------
Independent Directors (continued)
Kathleen T. McGahran, Director One Since President & CEO of Pelham Two Director of Petroleum &
Ph.D., J.D., C.P.A. Year 2003 Associates, Inc. (executive Resources Corporation
7 St. Paul Street, education), and Adjunct (investment company).
Suite 1140 Associate Professor, Tuck School
Baltimore, MD 21202 of Business, Dartmouth College.
Age 58 Formerly, Associate Dean and
Director of Executive Education
and Associate Professor,
Columbia University.
---------------------------------------------------------------------------------------------------------------------------------
Craig R. Smith, M.D. Director One Since President, Williston Two Director of Petroleum &
7 St. Paul Street, Year 2005 Consulting LLC (consultants to Resources Corporation
Suite 1140 pharmaceutical and (investment company),
Baltimore, MD 21202 biotechnology industries), and LaJolla Pharmaceutical
Age 62 Chief Operating Officer and Company, and Depomed,Inc.
Director of Algenol (specialty
Biofuels Inc. pharmaceuticals).
(ethanol manufacturing).
Formerly, Chairman, President &
CEO of Guilford
Pharmaceuticals
(pharmaceuticals &
biotechnology).
---------------------------------------------------------------------------------------------------------------------------------
Interested Director
Douglas G. Ober Director, One Director Chairman & CEO of the Two Director of Petroleum &
7 St. Paul Street, Chairman Year Since Company and Petroleum & Resources Corporation
Suite 1140 and 1989; Resources Corporation. (investment company).
Baltimore, MD 21202 CEO Chairman
Age 62 of the
Board
Since
1991
----------------------------------------------------------------------------------------------------------------------------------
24
THE ADAMS EXPRESS COMPANY
--------------------------------------------------------------------------------
Board Of Directors
Enrique R. Arzac /2,4/ Roger W. Gale /1,3,5/
Phyllis O. Bonanno /1,4,5/ Thomas H. Lenagh /2,3/
Kenneth J. Dale /3,4/ Kathleen T. McGahran /1,4,5/
Daniel E. Emerson /1,3,5/ Douglas G. Ober /1/
Frederic A. Escherich /2,3/ Craig R. Smith /2,4/
--------
/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. Pare Assistant Secretary
Graphic
THE ADAMS EXPRESS COMPANY
SEVEN ST.PAUL STREET
SUITE 1140
BALTIMORE, MD 21202
(410)752-5900 OR (800)638-2479
www.adamsexpress.com
Item 2. Code of Ethics.
On June 12, 2003, the Board of Directors adopted a code of
ethics that applies to Registrant's principal executive
officer and principal financial officer. The code of ethics
is available on Registrant's website at:
www.adamsexpress.com. Since the code of ethics was adopted
there have been no amendments to it nor have any waivers
from any of its provisions been granted.
Item 3. Audit Committee Financial Expert.
The board of directors has determined that at least one of
the members of Registrant's audit committee meets the
definition of audit committee financial expert as that term
is defined by the Securities and Exchange Commission. The
director on the Registrant's audit committee whom the board
of directors has determined meets such definition is
Enrique R. Arzac, who is independent pursuant to paragraph
(a)(2) of this Item.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. The aggregate fees for professional
services rendered by its independent auditors,
PricewaterhouseCoopers LLP, for the audits of the Company's
annual and semi-annual financial statements for 2008 and
2007 were $80,462 and $76,630 respectively.
(b) Audit-Related Fees. There were no audit-related
fees in 2008 and 2007.
(c) Tax Fees. The aggregate fees to Registrant for
professional services rendered by PricewaterhouseCoopers LLP
for the review of Registrant's excise tax calculations and
preparations of federal, state and excise tax returns for
2008 and 2007 were $12,674 and $12,070, respectively.
(d) All Other Fees. The aggregate fees to Registrant by
PricewaterhouseCoopers LLP other than for the services
referenced above for 2008 and 2007 were $4,770 and $5,766,
respectively, which related to the Company's cash incentive
plan and the 2005 Equity Incentive Compensation Plan, and
preparation of a report to the Company's Compensation
Committee.
(e) (1) Audit Committee Pre-Approval Policy. As of
2008, all services to be performed for Registrant by
PricewaterhouseCoopers LLP must be pre-approved by the audit
committee. All services performed in 2008 were pre-approved
by the committee.
(2) Not applicable.
(f) Not applicable.
(g) The aggregate fees for non-audit professional
services rendered by PricewaterhouseCoopers LLP to
Registrant for 2008 and 2007 were $17,444 and $17,836,
respectively.
(h) The Registrant's audit committee has considered
the provision by PricewaterhouseCoopers LLP of the non-audit
services described above and found that they are compatible
with maintaining PricewaterhouseCoopers LLP's independence.
Item 5. Audit Committee of Listed Registrants.
(a) The Registrant has a standing audit committee
established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934. The members of the audit
committee are: Enrique R. Arzac, Chair, Frederic A.
Escherich, Thomas H. Lenagh, and Craig R. Smith.
(b) Not applicable.
Item 6. Schedule of Investments.
(a) This schedule is included as part of the report
to stockholders filed under Item 1 of this form.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures
for Closed-End Management Investment Companies.
PROXY VOTING GUIDELINES
The Adams Express Company (Adams) follows long-standing
general guidelines for the voting of portfolio company
proxies and takes very seriously its responsibility to vote
all such proxies. The portfolio company proxies are
evaluated by our research staff and voted by our portfolio
management team, and we annually provide the Board of
Directors with a report on how proxies were voted during the
previous year. We do not use an outside service to assist us
in voting our proxies.
As an internally-managed investment company, Adams uses its
own staff of research analysts and portfolio managers. In
making the decision to invest in a company for the
portfolio, among the factors the research team analyses is
the integrity and competency of the company's management. We
must be satisfied that the companies we invest in are run by
managers with integrity. Therefore, having evaluated this
aspect of our portfolio companies' managements, we give
significant weight to the recommendations of the company's
management in voting on proxy issues.
We vote proxies on a case-by-case basis according to what we
deem to be the best long-term interests of our shareholders.
The key over-riding principle in any proxy vote is that
stockholders be treated fairly and equitably by the
portfolio company's management. In general, on the election
of directors and on routine issues that we do not believe
present the possibility of an adverse impact upon our
investment, after reviewing whether applicable corporate
governance requirements as to board and committee
composition have been met, we will vote in accordance with
the recommendations of the company's management. When we
believe that the management's recommendation is not in the
best interests of our stockholders, we will vote against
that recommendation.
Our general guidelines for when we will vote contrary to the
recommendation of the portfolio company management's
recommendation are:
Stock Options
Our general guideline is to vote against stock option plans
that we believe are unduly dilutive of our stock holdings in
the company. We use a general guideline that we will vote
against any stock option plan that results in dilution in
shares outstanding exceeding 4%. Most stock option plans are
established to motivate and retain key employees and to
reward them for their achievement. An analysis of a stock
option plan can not be made in a vacuum but must be made in
the context of the company's overall compensation scheme. In
voting on stock option plans, we give consideration to
whether the stock option plan is broad-based in the number
of employees who are eligible to receive grants under the
plan. We generally vote against plans that permit re-pricing
of grants or the issuance of options with exercise prices
below the grant date value of the company's stock.
Corporate Control/Governance Issues
Unless we conclude that the proposal is favorable to our
interests as a long-term shareholder in the company, we have
a long-standing policy of voting against proposals to create
a staggered board of directors. In conformance with that
policy, we will generally vote in favor of shareholder
proposals to eliminate the staggered election of directors.
Unless we conclude that the proposal is favorable to our
interests as a long-term shareholder in the company, our
general policy is to vote against amendments to a company's
charter that can be characterized as blatant anti-takeover
provisions.
With respect to so-called golden parachutes and other
severance packages, it is our general policy to vote against
proposals relating to future employment contracts that
provide that compensation will be paid to any director,
officer or employee that is contingent upon a merger or
acquisition of the company.
We generally vote for proposals to require that the majority
of a board of directors consist of independent directors and
vote against proposals to establish a retirement plan for
non-employee directors.
We have found that most stockholder proposals relating to
social issues focus on very narrow issues that either fall
within the authority of the company's management, under the
oversight of its board of directors, to manage the day-to-
day operations of the company or concern matters that are
more appropriate for global solutions rather than company-
specific ones. We consider these proposals on a case-by-case
basis but usually are persuaded management's position is
reasonable and vote in accordance with management's
recommendation on these types of proposals.
Item 8. Portfolio Managers of Closed-End Management
Investment Companies.
(a)(1) As of the date of this filing, Douglas G. Ober,
Chairman and Chief Executive Officer, Joseph M. Truta,
President, and David W. Weaver, Executive Vice President,
comprise the 3 person portfolio management team for the
Registrant. Mr. Ober and Mr. Truta have served as portfolio
managers for the Registrant since 1991 and Mr. Weaver since
March 2008. Prior thereto, Mr. Weaver served as Vice
President-Research from January 2007 to March 2008 and as a
research analyst from 2004 to January 2007. Mr. Ober is the
lead member of the portfolio management team. Messrs. Ober,
Truta and Weaver receive investment recommendations from a
team of research analysts and make decisions jointly about
any equity transactions in the portfolio. Concurrence of the
portfolio managers is required for an investment
recommendation to be approved.
(2) As of the date of this filing, Mr. Ober and Mr.
Truta also serve on the portfolio management team for
Registrant's non-controlled affiliate, Petroleum & Resources
Corporation (Petroleum), a registered investment company
with total net assets of $538,936,942 as of December 31,
2008. Mr. Ober is Chairman, Chief Executive Officer and
President of Petroleum, and Mr. Truta is Executive Vice
President. The Petroleum fund is a non-diversified fund
focusing on the energy and natural resources sectors and the
Registrant is a diversified fund with a different focus, and
there are few material conflicts of interest that may arise
in connection with the portfolio managers' management of
both funds. The funds do not buy or sell securities or
other portfolio holdings to or from the other, and
procedures and policies are in place covering the sharing of
expenses and the allocation of investment opportunities,
including bunched orders and investments in initial public
offerings, between the funds.
(3) The portfolio managers are compensated through a
three-component plan, consisting of salary, annual cash
incentive compensation, and equity incentive compensation.
The value of each component in any year is determined by the
Compensation Committee, comprised solely of independent
director members of the Board of Directors ("Committee").
The Committee has periodically employed a compensation
consultant to review the plan and its components. Salaries
are determined by using appropriate industry surveys and
information about the local market as well as general
inflation statistics. Cash incentive compensation is based
on a combination of absolute and relative fund performance,
with a two-thirds weighting, and individual success at
meeting goals and objectives set by the Board of Directors
at the beginning of each year, with a one-third weighting.
Target incentives are set annually based on 80% of salary
for the Chief Executive Officer and 60% of salary for the
President and Executive Vice President. The fund performance
used in determining cash incentive compensation is measured
over both a one-year period, accounting for two-thirds of
the calculation, and a three-year period, which accounts for
one-third. The total return on net asset value of the Fund
over each of the two periods is used to determine a base
percentage of target, which, for 2008, was then adjusted by
performance relative to the S&P 500 Index. Using these
calculations, the cash incentive compensation can range from
0% to a maximum of 200% of the established target. Equity
incentive compensation, based on a plan approved by
stockholders in 2005, can take several forms. Following
approval of the plan, grants of restricted stock were made
to the portfolio managers in April 2005, with vesting in
equal proportions over a three year period. The size of the
grants was determined by the Committee with the assistance
of an outside compensation consultant. Grants of restricted
stock were also made on January 10, 2008 (previous grants
had been made on January 11, 2007, and January 12, 2006),
which vest three years after grant, but only upon the
achievement of specified performance criteria. For the 2008
grants, the target number of restricted shares will vest if,
on the January 1 prior to the vest date ("measurement
date"), the Registrant's total three year net asset value
("NAV") return meets or exceeds the three year total NAV
return of a hypothetical portfolio comprised of a 50/50
blend of the S&P 500 Index and the Lipper Large-Cap Core
Mutual Fund Average ("Hypothetical Portfolio"). Depending on
the level of Registrant's outperformance or underperformance
of the Hypothetical Portfolio on the measurement date, an
additional number of shares, a lesser percentage, or no
shares will be earned and vest.
(4) Using a valuation date of December 31, 2008, Mr.
Ober beneficially owns equity securities in Registrant
valued over $1,000,000. Mr. Truta beneficially owns equity
securities in Registrant valued over $1,000,000. Mr. Weaver
beneficially owns equity securities in Registrant valued
between $100,001 and $500,000.
(b) Not applicable.
Item 9: Purchases of Equity Securities by Closed-End
Management Investment Company and Affiliated Purchasers.
Maximum
Total Number (or
Number of Approximate
Shares (or Dollar Value)
Total Units) of Shares (or
Number Purchased Units) that
of Average as Part of May Yet Be
Shares Price Publicly Purchased
(or Paid per Announced Under the
Units) Share (or Plans or Plans or
Period Purchased Unit) Programs Programs
-------- --------- --------- --------- ---------
Jan. 2008 159,576 $12.64 159,576 4,026,760
Feb. 2008 174,918 $12.75 174,918 3,851,842
Mar. 2008 240,814 $12.44 240,814 3,611,028
Apr. 2008 239,900 $12.89 239,900 3,371,128
May 2008 108,100 $13.12 108,100 3,263,028
June 2008 140,000 $12.47 140,000 3,123,028
Jul. 2008 521,160 $11.73 521,160 2,601,868
Aug. 2008 342,752 $12.08 342,752 2,259,116
Sep. 2008 279,219 $11.44 279,219 1,979,897
Oct. 2008 0 $0 0 1,979,897
Nov. 2008 0 $0 0 1,979,897
Dec. 2008 251,108 $8.00 251,108 4,024,224(2)
-------- --------- --------- ---------
Total 2,457,547(1) $11.78 2,457,547(2)
(1) There were no shares purchased other than through a
publicly announced plan or program.
(2.a) The Plan was announced on December 13, 2007.
(2.b) The share amount approved for 2008 was 5% of
outstanding shares, or approximately 4,268,436 shares.
(2.c) The Plan was set to expire December 2008, but was
extended by the Board on December 11, 2008 for twelve
months, authorizing purchases of up to 5% of the outstanding
shares, or approximately 4,275,332 shares, through December
2009.
(2.d) None.
(2.e) None.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to the procedures by which
shareholders may recommend nominees to the Registrant's
board of directors made or implemented after the Registrant
last provided disclosure in response to the requirements of
Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or
this Item.
Item 11. Controls and Procedures.
Conclusions of principal officers concerning controls and
procedures.
(a) The Registrant's principal executive officer and
principal financial officer have concluded that the
Registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940)
are effective based on their evaluation of the disclosure
controls and procedures as of a date within 90 days of the
filing date of this report.
(b) There have been no significant changes in the
Registrant's internal control over financial reporting (as
defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the Registrant's second fiscal
quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial
reporting.
Item 12. Exhibits.
(a)(1) Not applicable. See Registrant's response to Item
2 above.
(2) Separate certifications by the Registrant's
principal executive officer and principal financial officer,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
and required by Rule 30a-2(a) under the Investment Company
Act of 1940, are attached.
(3) Written solicitation to purchase securities: not
applicable.
(b) A certification by the Registrant's principal executive
officer and principal financial officer, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 and required by Rule
30a-2(b) under the Investment Company Act of 1940, is
attached.
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
-----------------------
Douglas G. Ober
Chief Executive Officer
(Principal Executive Officer)
Date: February 23, 2009
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
-----------------------
Douglas G. Ober
Chief Executive Officer
(Principal Executive Officer)
Date: February 23, 2009
BY: /s/ Maureen A. Jones
-----------------------
Maureen A. Jones
Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: February 23, 2009