CHADBOURNE, PARKE, WHITESIDE & WOLFF

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.' , -,CHADBOURNE, PARKE, WHITESIDE & WOLFF30 ROCKEFELLER PLAZA. NEW YORK, !\. Y. 101 1212) 641-5800 Ii i;: : NN(2WUITELEX 62052a STc;., ; NEDMUND S. MUSKIEDONALO L. DEMINGROBERT A. HOWESg¡ tLRil E: i;.ARTHY WU TELEX 646n8 . : .". .JAMES K, CRIMMINSMARCIA E CARPENI ¡ ., " '''''''''''-,,''' . ,l", . . /¡.,.:)' ' .'.'. :,. .' CHARLES e. LAURENPAUL G. PENNOYER. .JR.PETER M. WARD,JOHN WILCOXJANET C. BROWN ii t f¡ Y:.R ¡ L""lI.Ç;(f .-¿ (P:-- ',-: ,::,' . : ,, H i 1! ò A R.CHARI.l':"; H. HARF'fDAVID R. BAKEREDMUND E. HARVEYMICHAEL B. WEIRWILLIAM M. BRADNER, JR.RAYMOND R. FLETCHER, JR.EDWARD C. /4cLEAN, JR.STUART D, BAKERZACHARY SHIMERNiCHOLAS B. ANGELLGEORGE E. ZEITLINNORMAN SINRICHWILLIAM .I. GEENDONALD I STRAUBERDANIEL .I. O'NEILLPAUL A. RANDOURMALCOLM E. MARTINEDWARD P. SMITHWILLIAM .J. CALISE, JR.EUGENE R. SULLIVAN, JR.WHITNEY i. GERARDR. TIMMIS WARE GA SH.KBg KEi;L I I ¡) . .- Í :., .; . . . -¿. GE 'Á . ÓI R.b i i : ;, gN becliQu./7c,;-, .¿¿. ,. . . ':1. J .' .' .,C': ! WASHINGTON OFFICETHOMASJ.GALLAGHER.ii'J .F . / 1101VERMONT AVENUE.N. ME C. KATZ ':' L':Le . 0 ( . . '-. c':.,¿'- , (2021 2eg'3000GILBERT L. KLEMANN, II ,-. --" --'--'7'- . t' ", ';;. ,;,:. - Ì' , . ;' WUI TELEX Q04256 g HR '1:. 61 ER ¡PUbli C' 10 '(jf- --iiz¿" . r:;. "" ' '/ TRT TELEX 140162VERONICAM.AHERN. ¡Availability .01 J' '.:.\.: . c-,".:.1.". " U.A.E F1CES ,. - .-.,",,,, ,,, ' ,., . '.'.' ",.:""" i'., " "'. .; , '. " '. CHADBOURNE. PARKE & AFRIDICOUNSEL. I .:;O.BOXQ2t52'DUBAIWILLIAMH. MATHERSMarch P.7, 1984UNITEDARAB EMIRATES. .:.J ('l' OÙBAI INTERNATIONAL TRADE CENTRE.GARYALVINLURIETEL. :i73e2 :451"5M.D.KEYESOFFICESALSO TELEXIN ABU DHABIFREDERICK W. TAYLOR. JR. AND SHARJAH, U. A. E.eW:l "" 'Trro IN NEW YORKInvestment Company Act of 1940/Section 17 (f); Rule 17f-2(, .Division of Investment ManagementSecur.i ties and Exchange Commission450 Fifth Street, N. W.Washington, D.C. 20549Re: The Adams Express CompanyFile No. 811-2624.Dear Sirs:We are counsel to The Adams Express Company (the"Company"), a closed-end investment company reg istered ('under the Investment Company Act of 1940 (the "1940 Act").The Bank of New York (the "Bank") acts as '.custodian ofthe Company's portfolio of securities in accordance withRule 17f-2 promulgated under the 1940 Act.As a sourceof income, the Company has in the past loaned certain ofthe securities in its portfolio to qualified borrowers whocollateralize such loans to the extent of no less than102% of the full market value of the securities loaned.The Company's Board of Directors exercises close and

,CHADBOGR!\E. PARKE, WHITESIDE & WOLFFDivision of Investment1'1anag ement-2-Mar ch 7, 19 84continuous control of the' Company' s securities loan programin accordance with its business judgment.The Company now proposes to enter into an agree ent wi th the Bank to appoint the Bank its agent to loansecur i ties owned by :the Company a?d held by the Bank in anaccount for the Company's benefit. The proposedloan agency agreement (the "Agreement") wouldsecuritiesmaintain theCompany ¡ S control Over which secur i ties are loaned, towhom they are loaned, and the value of colla teral. against-which they are loaned. In adãi tion, the Agreement would'prov ide tha t the Bpnk may ioan securi ties only to thoseprospective borrowers tha t meet the Bank's standards forcredi tworthiness, thus providing a se ond, independenteval ua tion of prospective borrowers that is not currentlyav ilable to the Company.The Agreement would provide that loans of securities could be made to any 'enti ty named on a list agreed toby the company and the Bank from time to time, other thanany entity whose name the Company has notified the Bank todelete from such list. In deleting names from such list,the Company will evaluate prospective borrowers in thesame manner as it currently evaluates the qualif.ications.and creditworthiness of prospective borrowers of it securities under the Company's existing securities loan

CHADBOURNE. PARKE. WHITESIDE & WOLFFDivision of InvestmentManagement-3-Ma r c h 7, 1 9 8 4program. As is the case with the Company's existingsecur i ties loan program, loans made under the Agreementwould be collateralized by bank letters of credit, securities and cash equal to not less than 102% of the marketvalue of the loaned secur i ties. The Bank may accept aletter of credit as collateral only if it was issued by abank named on a list agreed to by the Company and the Bankfrom time to time. In evaluating the names on such list,the Company will evaluate each bank in' the same manner asit currently evaluates banks when the Company accepts letters of credit as collateral for loans made under itsexisting . ecuri ties loan program.The Agreement would require the Bank to terminateany loan whenever it receives (a) oral or wri tten instructions to termina te such loan from an off icer of the Companydesignated by the Company as authorized (an "AuthorizedPerson") to give such notice, (b) a written instruction froman Authorized Person tha.t the name of the borrower is to bedeleted from the list of potential borrowers or that thename of the bank which issued a letter of credit as col-la teral for the loan is to be deleted from the list ofbanks, or (c) notice of anydefaul t in connectiqn with theloan. The Bank may a t any time termina te any loan in itsabsolute discretion and, as stated above, the Bank mustter inate any loan upon receiving notice from an Authorized

CHADBOURKE, PARKE. WHITESIDE & WOLFFDivision of InvestmentManagement-4-March 7, 1984Person. Therefore the Co pany, acting through its AuthorizedPersons, retains full discretion and power to prevent- anyloan from being made or to terminate any loan once made.As the Company i s agent under the Agreement, theBank would undertake to make colla teralized loans ofsecur i ties for the Company i s account in conjunction 'wi thsimilar loans made for the accounts òf other lenders ofsecurities, mostly pension and profit-sharing funds.Al though th Company would still exercise its businessjudgment in. controlling the loans made by the Bank, theCompany anticip t s tha tit would obtain significantbenefi ts under the Agreement from the Bank i s economiesof scale and access to markets. In addition, the Bankwould perform certain administrative functions under theAgreement at lower cost to the Company than that availableunder the Company i s existing securities loan program. Asincentive to the Bank to make profitable loans for theCompany and as full compensation under the Agreement, theCompany would pay a fee to the Bank equal to a percentageof èarnings on ,loans of securities made under the Agreement.We note tha t the staff of the Commission hasacknowledged that secur i ties loan agency arrang ents substantially similar to the Agreement meet the requirementsof Section l7(f) of the 1940 Act and Rule l7f-2 thereunder.

.CHADBOUR:s'E, PARRE. WHITESIDE & WOLFFDivision of InvestmentManagement-5-March.7, 1984In rendering no-action advice concerning the applicationof Rule 1 7f 2 in Twentieth Century Investors, Inc. (avail-able November 26, 1982) and United States & Foreicrn Securi"'. ties Corporation (available November 26, 1982), the staffof the Commission noted tha t the agent for the securitiesloan programs therein described would guarantee return tothe lender of the loaned securities and payment when due ofall interest, dividends and distributions in respect thereof,provisions not present in the Agreement The Company hasadvised us that current market conditions and competi tionamong thos e insti tu tions lending securities have severelylimi ted the yields earned by the Company under its existingsecuri ties loan program and the fees tha t might be earnedby the Company under a securities loan agency agreementsimilar to the Agreement but with the borrower i s performanceguaranteed by the agent.As wi th other investment decisions, the Company i smanagement and Board of Directors have pr imary and ul tima teresponsibility for evaluating the relative risks and bene-fits of any proposed transaction. The Company assumes theburden of evaluating and selecting borrowers of securitiesand issuers of collateral in making loans under its existings'ecuri ties loan program and would continue to do so forloans'made under the Agreement. Al though under the Agreewent

CHA.DBOVRKE, PARKE, WHITESIDE & WOLFFDivision of InvestmentManagement-6-March 7, 1984the Bank would not guara tee the performance of the bor-rower, the Bank would evaluate the credi tworL iness ofprospective borrowers, exercise discretion in makingparticular loans and accepting collateral, and value dailythe collateral to ensure that it equals no less than 102%of the market value of the loaned securities. These obli-ga tions of .the Bank would add a second level of protectionfor the Company 's stockhold er s that is not now present. Webelieve that to meet the requirements of Rule 17f 2 theAgreement need not require the Bank to guarantee the performance of a borrower.We would apprecia te your advice as to whetheryou concur in our views set forth herein. Because theCompany is currently considering entering into the Agree-ment, we would appreciate your prompt response to ourinquiry. . If any further information is needed or if wecan be helpful in any other way, please contact the undersigned or, in my absence, Christopher G. Karras of thisoffice, by collect telephone (212) 541-5800.Very truly yours, .o.

CHADBOURNE, PARKE, WHITESIDE & WOLFF30 ROCKEFELLER PLAZA. NEW YORK, N. Y. 10112JOHN WILCOX.JANET C. BROWNDAVID R. BAKEREDMUND E. HARVEYMICHAEL B. WEIRWILLIAM M. BRADNER, JR.EDWARD C. McLEAN, JR.STUART D. BAKERZACHARY SHIMERNICHOLAS B. ANGELLGEORGE E. ZEITLINNORMAN SINRICH(2 12) 54 i -5800RICHARD J. NEYMICHAEL K, GLENNBERNARD W. McCARTHYDANIEL E. LEACHMARCIA E. CARPENIEDMUND S. MUSKIEDONALD L. DEMINGROBERT A. HOWESPAUL G. PENNOYER. JR,PETER M. WARDWILLIAM J. GEENDONALD I STRAUBER- DANIEL J. O'NEILLPAUL A. RANDOURMALCOLM E. MARTINEDWARD P. SMITHWILLIAM .J. CALISE. JR.EUGENE R. SULLIVAN, .JR.WHITNEY i. GERARDR. TIMMIS WAREOF COUNSELWUI TELEX 620520WU TELEX 645383TELECOPIER (2 1 2) 586-7713LESLIE JOHN SCHREYERSTANNARD DUNNCHARLES B. LAURENFRANK B. STONEHAROLD L. WARNER. .JR.MELVIN D. GOODMANGEORGE BOYD, JR. . M. A. K. AFRIDI-HENRY J. OECHLER. JR.CHARLES K. O'NEILLRIGDON H. BOYKINTHOMAS E. BEZANSONGEORGE T. MANNINGJOHN B.O'SULLIVANWASHINGTON OFFICE1101 VERMONT AVENUE. N, W.WASHINGTON. D, C. 20005JEROME C. KATZGILBERT L. KLEMANN. II(202) 289'3000KEITH MARTIN.PETER R. KOLYERVERONICA M. AHERN-WUI TELEX Q04256TRT TELEX 140162TELECOPIER (2021 28Q'B517U.A.E, OFFICESCHADBOURNE, PARKE & AFRIDIDUBAI INTERNATIONAL TRADE CENTRECOUNSELWILLIAM H. MATHERSALVIN D. LURIEGARY M, KEYESFREDERICK W. TAYLOR. JR.-NOT ADMITTED IN NEW YOftKP. O. BOX 9262' DjJBAIUNITED ARAB EMIRATESI,). 984 TEL. 373625: TELEX '046145July 12, t. OFFICES ALSO IN ABU DHABIr SECURITIES A!lO mHANGtNRiM M' u. A. E.RECEIVEDMr. Thomas S. HarmanDivision of Investment ManagementSecuri ties and Exchange Commission450 Fifth street, N.W.Washington D.C. 20549. 0!l-.'JUL 1 3 1984OFFll,E f C!-IlEf cnUMSElnlYtSin OF IiI mi1E1n MAlUGEMElIt. .:Re: The Adams Expres s CoFile Number: 811-262panyDear Mr. Harman:Reference is made to my letter of March 7, 1984reques ting your advice as to our views regarding theapplicabili ty of and requirements under Section 17 (f) ofthe Investment Company Act of 1940 and Rule l7f-2 thereunder to certain securities loan transactions proposed tobe entered into by The Adams Express Company (the "Company").This letter is in response to the four questions you raisedin our telephone conversation on JUlY 11, 1984 i as follows:1. You have asked whether the collateralunderlying securities loans will include accrued interestand dividends. I am advised that, under the proposed arrangements, the dividends payable on corporate stocks and accruedinterest on corporate bonds will not be collateralized;however i interest accrued on government securities that arethe subject of loans is collateralized. It may be notedin this connection that the proposed arrangements call forcollateralization at 102% of the market value of any loansecurities, with such collateral being marked to market; thus,it is likely that in substantially all securities loan transactions the margin of 2% of market value will be sufficient'. I

CHADBOURNE, PARKE. WHITESIDE & WOLFFMr. Thomas 8. Harman-2-July 12, 1984to cover accrued quarterly dividends inasmuch as mostcorporate stocks do not carry annual dividends of 8% or more.Furthermore, it is normal practice that the dividends bepaid, or credited through DTC, on the payment date or within one day following the payment date so that the Companywould receive credit therefor wi thin one day of payment.As to U.8. government securities collateral, theaccrued interest on such obligations is permitted under theproposed arrangements and is included as part of the col-lateral.2. You have asked who receives the loan premium.The proposed agreement with. The Bank of New York (the "Bank")will provide for the Company to pay to the Bank a loan feein an amount equal to a percentage of the earnings onloaned securities and, for this purpose, earnings includethe difference between any rebate paid to a borrower and -therate of return earned on cash collateral as well as anyfees paid by borrowers on loans collateralized by lettersof credit. The Bank will initially receive any such earningsor loan fees and will credit the Company's account for theamounts payable to the Company after retention of the Bank'sfee. The current arrangemente call for the Company toreceive 60% of earnings on securities loans but such percentage is subject to adjustment upwards or downwards,depending upon experience under the proposed agreement andfuture negotiations with respect thereto. .3. You have asked what are the permissibleinvestments of cash collateral and whether they includeinvestments in securities of the Bank. The proposed agreement will provide for cash collateral to be invested inobligations issued or guaranteed as to interest and principalby the U. 8. goverli.ment or agencies or instrumentalitiesthereof, or commercial paper, certificates of deposit,bankers' acceptances, repurchase agreements with respectto the same, and/or bank time deposits issued or guaranteedas to interest and principal by an entity, except a broker/dealer, named on a list given to the Company by the Bankfrom time to time, other than an entity that the Companyhas notified the Bank to delete from such list. It isanticipated that the Bank of New York would be such aneligible entity, and the Company has determined that an investment of cash collateral in securities of theBank willbe limited to an aggregate principal amount of 10,000,000a t anyone time.

CHADBOURNE. PARKE, WHITESIDE & WOLFF-3-Mr. Thomas S. HarmanJuly 12, 19844. You have asked whether, if a letter ofcredit is involved,the Bank can be an issuer of' suchletter of credit. The propose agreement precludes th tthe Bank of New York will be an issuer of any letters ofcredit used as collateral for loans of the Company i ssecuri ties.I trust the foregoing is responsive to yourquestions and if you need further clarification, I wouldappreciate your calling me.'Z o. Very truly yours,Robert A. Howescc: Mr. Simeon F. WootenThe Adams Express Company

. l' it !."l,.'; i.': ', l .' ll',. t':. . YJ;i P.IIØ.:. '.d I."- r .RESPONSE OF THE OFFICE OF CHIEF COONSELDIVISION OF INVES'IMENT MANAGEMENTSEP 7 1984Our Ref. No. 84- 140-CCThe Adams Express CompanyFile No. 811-2624We would not recommend that the Commission take any enforcementaction pursuant to section 17 (f) of the Investment Company Act of 1940or rule 17f-2 thereunder if The Adams Express Company (the "Company")lends its portfolio securities as proposed. Our position is based onthe understanding that the Company's board of directors will remainresponsible for determining who may borrow the Company's securities andthe propriety of any loan. Our position is also based upon the factsand representations in your letters of March 7 and July 12, 1984,and upon the representations made to Thomas S. Harman by Robert A. Howeson August 7, 1984, that:(1) the Bank of New York ("BNY") will value daily thecollateral supporting the securities loaned to ensure that the collateral equals no less than 102%of the market value of the loaned securities;(2) the Company will retain full discretion and powerto prevent any loan from being made or to terminateany loan once made;(3) the Company will receive all dividends, interest,and distributions on the securities it lends;(4) the valuation of any securities lent, for the purposeof determining the amount of the collateral to bedeposited thereon, will include accrued interest;(5) any cash collateral invested with BNYwill be limitedto an aggregate pr incipal amount of 10,000,000 at anyone time and BNY will pay interest on such cash collateral at a rate that is competitive ,with what it paysits other customers and with what other banks pay; and(6) any letter of credit accepted as collateral will beirrevocable and will not be issued by BNY.61/ , !f Thomas S. HarmanAttorney

CHADBOURNE. PARKE. WHITESIDE & WOLFF Division of Investment Management-3-Ma r c h 7, 1 9 8 4 program. As is the case with the Company's existing secur i

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