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LETTER TO STOCKHOLDERS

 

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We submit herewith the financial statements of the Company for the three months ended March 31, 2007. Also provided are a schedule of investments and other summary financial information.

 

Net assets of the Company at March 31, 2007 were $16.10 per share on 86,079,089 shares outstanding, compared with $15.86 per share at December 31, 2006 on 86,838,223 shares outstanding. On March 1, 2007, a distribution of $0.05 per share was paid, consisting of $0.03 from 2006 investment income, $0.01 from 2006 short-term capital gain, and $0.01 from 2007 investment income, all taxable in 2007. On April 12, 2007 an investment income dividend of $0.05 per share was declared to stockholders of record May 17, 2007, payable June 1, 2007.

 

Net investment income for the three months ended March 31, 2007 amounted to $5,658,809, compared with $3,995,963 for the same period in 2006. These earnings are equal to $0.07 and $0.05 per share.

 

Net capital gain realized on investments for the three months ended March 31, 2007 amounted to $13,403,733, or $0.16 per share.

 

The total return on the market value (with dividends and capital gains reinvested) of the Company’s shares was 1.5% for the three months ended March 31, 2007. The total return on the net asset value of the Company’s shares in the period was 1.9%. These compare to a 0.6% total return for the Standard & Poor’s 500 Composite Stock Index and a 0.5% total return for the Lipper Large Cap Core Mutual Fund Average over the same time period.

 

For the twelve months ended March 31, 2007, the Company’s total return on market value was 12.4% and on net asset value was 10.9%, as the discount narrowed during the period. Comparable figures for the S&P 500 and the Lipper Large Cap Core Mutual Fund Average were 11.8% and 9.9%, respectively.

 

The Annual Meeting was held on March 27, 2007 in Baltimore, Maryland. The results of the voting at the Annual Meeting are shown on page 14.

 

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

 

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After serving 31 years on the Company’s Board of Directors, Mr. John J. Roberts retired in March 2007. During Mr. Robert’s tenure on the Board, the Fund’s net assets grew by 600 percent. His extensive international business experience was a major contributor to the Company’s growth. We thank him for his deep commitment to the Company and wish him well in his retirement.

 

By order of the Board of Directors,

Douglas G. Ober,

Chairman and

Chief Executive Officer

Joseph M. Truta,

President

 

April 13, 2007

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STATEMENT OF ASSETS AND LIABILITIES

 

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March 31, 2007

(unaudited)

 

Assets
Investments* at value:
Common stocks and convertible securities (cost $878,795,199)		$	1,261,931,044
Non-controlled affiliate, Petroleum & Resources Corporation (cost $34,735,404)			75,727,984
Short-term investments (cost $46,197,227)			46,197,227
Securities lending collateral (cost $28,643,337)			28,643,337		$	1,412,499,592
Cash						382,806
Dividends and interest receivable						1,347,751
Prepaid pension cost						3,378,884
Prepaid expenses and other assets						2,375,756
Total Assets						1,419,984,789
Liabilities
Investment securities purchased						647,916
Open written option contracts at value (proceeds $595,314)						939,650
Obligations to return securities lending collateral						28,643,337
Accrued expenses						3,461,708
Total Liabilities						33,692,611
Net Assets					$	1,386,292,178
Net Assets
Common Stock at par value $0.001 per share, authorized 150,000,000 shares; issued and outstanding 86,079,089 shares (includes 91,514 restricted shares, 6,000 restricted stock units, and 3,634 deferred stock units) (Note 6)					$	86,079
Additional capital surplus						943,557,562
Accumulated other comprehensive income (Note 5)						(1,763,035	)
Undistributed net investment income						6,825,485
Undistributed net realized gain on investments						13,801,998
Unrealized appreciation on investments						423,784,089
Net Assets Applicable to Common Stock					$	1,386,292,178
Net Asset Value Per Share of Common Stock						$16.10

 

*See Schedule of Investments on pages 8 and 9.

 

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

 

2

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STATEMENT OF OPERATIONS

 

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Three Months Ended March 31, 2007

(unaudited)

 

Investment Income
Income:
Dividends:
From unaffiliated issuers		$	6,497,518
From non-controlled affiliate			131,206
Interest and other income			728,224
Total income			7,356,948
Expenses:
Investment research			756,112
Administration and operations			367,333
Directors’ fees			100,773
Reports and stockholder communications			87,479
Transfer agent, registrar and custodian expenses			84,491
Auditing and accounting services			30,330
Legal services			32,696
Occupancy and other office expenses			170,254
Travel, telephone and postage			25,326
Other			43,345
Total expenses			1,698,139
Net Investment Income			5,658,809
Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions			13,250,659
Net realized gain distributed by regulated investment company (non-controlled affiliate)			153,074
Change in unrealized appreciation on investments			5,027,833
Net Gain on Investments			18,431,566
Change in Net Assets Resulting from Operations		$	24,090,375

 

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

 

3

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STATEMENTS OF CHANGES IN NET ASSETS

 

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		Three Months Ended March 31, 2007				Year Ended December 31, 2006
		(unaudited)
From Operations:
Net investment income		$	5,658,809			$	19,691,488
Net realized gain on investments			13,403,733				56,553,881
Change in unrealized appreciation on investments			5,027,833				102,278,889
Change in accumulated other comprehensive income (note 5)			61,070				(1,824,105	)
Change in net assets resulting from operations			24,151,445				176,700,153
Distributions to Stockholders from:
Net investment income			(3,465,912	)			(19,554,259	)
Net realized gain from investment transactions			(868,719	)			(56,771,240	)
Decrease in net assets from distributions			(4,334,631	)			(76,325,499	)
From Capital Share Transactions:
Value of shares issued in payment of distributions			3,556				31,661,698
Cost of shares purchased (Note 4)			(11,165,881	)			(21,770,315	)
Deferred compensation (Notes 4,6)			219,379				423,621
Change in net assets from capital share transactions			(10,942,946	)			10,315,004
Total Change in Net Assets			8,873,868				110,689,658
Net Assets:
Beginning of period			1,377,418,310				1,266,728,652
End of period (including undistributed net investment income of $6,825,485 and $4,632,588, respectively)		$	1,386,292,178			$	1,377,418,310

 

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

 

4

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

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1. Significant Accounting Policies

 

The Adams Express Company (the Company) is registered under the Investment Company Act of 1940 as a diversified investment company. The Company is an internally-managed fund whose investment objectives are preservation of capital, the attainment of reasonable income from investments, and an opportunity for capital appreciation.

 

Security Valuation — Investments in securities traded on a national security exchange are valued at the last reported sale price on the day of valuation. Over-the-counter and listed securities for which a sale price is not available are valued at the last quoted bid price. Short-term investments (excluding purchased options) are valued at amortized cost. Purchased and written options are valued at the last quoted asked price.

 

Affiliated Companies — Investments in companies 5% or more of whose outstanding voting securities are held by the Company are defined as “Affiliated Companies” in Section 2(a)(3) of the Investment Company Act of 1940.

 

Security Transactions and Investment Income — Investment transactions are accounted for on the trade date. Gain or loss on sales of securities and options is determined on the basis of identified cost. Dividend income and distributions to stockholders are recognized on the ex-dividend date, and interest income is recognized on the accrual basis.

 

2. Federal Income Taxes

 

The Company’s policy is to distribute all of its taxable income to its stockholders in compliance with the requirements of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income tax provision is required. For federal income tax purposes, the identified cost of securities at March 31, 2007 was $987,883,916 and net unrealized appreciation aggregated $424,615,676, of which the related gross unrealized appreciation and depreciation were $485,201,590 and $60,585,914, respectively.

 

Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Accordingly, annual reclassifications are made within the Company’s capital accounts to reflect income and gains available for distribution under income tax regulations.

 

3. Investment Transactions

 

The Company’s investment decisions are made by a committee of management, and recommendations to that committee are made by the research staff.

 

Purchases and sales of portfolio securities, other than options and short-term investments, during the three months ended March 31, 2007 were $33,286,614 and $34,857,407, respectively. Options may be written (sold) or purchased by the Company. The Company, as writer of an option, bears the risks of possible illiquidity of the option markets and from movements in security values. The risk associated with purchasing an option is limited to the premium originally paid. A schedule of outstanding option contracts as of March 31, 2007 can be found on page 11.

 

Transactions in written covered call and collateralized put options during the three months ended March 31, 2007 were as follows:

 

		Covered Calls							Collateralized Puts
		Contracts			Premiums				Contracts			Premiums
Options outstanding, December 31, 2006		3,745			$	497,618			2,103			$	220,313
Options written		2,425				309,613			1,635				185,739
Options terminated in closing purchase transactions		(450	)			(63,898	)		—				—
Options expired		(1,850	)			(215,587	)		(1,903	)			(181,664	)
Options exercised		(1,100	)			(156,820	)		—				—
Options outstanding, March 31, 2007		2,770			$	370,926			1,835			$	224,388

 

4. Capital Stock

 

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

 

On December 27, 2006, the Company issued 2,301,959 shares of its Common Stock at a price of $13.75 per share (the average market price on December 11, 2006) to stockholders of record on November 21, 2006 who elected to take stock in payment of the year-end distribution from 2006 capital gain and investment income. In addition, 722 shares were issued at a weighted average price of $13.43 per share as dividend equivalents to holders of deferred stock units and restricted stock units under the 2005 Equity Incentive Compensation Plan.

 

During 2007, the Company has issued 253 shares of its Common Stock at a weighted average price of $13.97 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 2007 and 2006 were as follows:

 

		Shares						Amount
		Three months ended March 31, 2007			Year ended December 31, 2006			Three months ended March 31, 2007				Year ended December 31, 2006
Shares issued in payment of distributions		253			2,302,681			$	3,556			$	31,661,698
Shares purchased (at a weighted average discount from net asset value of 13.3% and 13.9%, respectively)		(804,174	)		(1,623,542	)			(11,165,881	)			(21,770,315	)
Net activity under the Equity Based Compensation Plans		44,787			59,477				219,379				423,621
Net change		(759,134	)		738,616			$	(10,942,946	)		$	10,315,004

 

5

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NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

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5. Retirement Plans

 

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

 

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

 

The Company’s policy is to contribute annually to the plans those amounts that can be deducted for federal income tax purposes, plus additional amounts as the Company deems appropriate in order to provide assets sufficient to meet benefits to be paid to plan participants. During the three months ended March 31, 2007, the Company did not contribute to the plans. The Company does not anticipate making any contribution to the overfunded plan in 2007.

 

The following table aggregates the components of the plans’ net periodic pension cost:

 

		Three months ended March 31, 2007				Year ended December 31, 2006
Service cost		$	121,829			$	460,969
Interest cost			142,124				518,015
Expected return on plan assets			(213,888	)			(922,155	)
Amortization of prior service cost			23,627				119,776
Amortization of net (gain)/loss			40,656				180,764
Deferred asset gain			—				128,119
Net periodic pension cost		$	114,348			$	485,488

 

The Company also sponsors a defined contribution plan that covers substantially all employees. For the three months ended March 31, 2007, the Company expensed contributions of $47,654. 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 March 31, 2007, and changes during the three month period then ended, is presented below:

 

		Options			Weighted- Average Exercise Price			Weighted- Average Remaining Life (Years)
Outstanding at December 31, 2006		201,990			$	11.81		4.79
Exercised		(43,910	)			10.33
Outstanding at March 31, 2007		158,080			$	12.21		4.15
Exercisable at March 31, 2007		91,558			$	12.58		3.47

 

The options outstanding as of March 31, 2007 are set forth below:

 

Exercise Price		Options Outstanding		Weighted Average Exercise Price			Weighted Average Remaining Life (Years)
$8.25-$10.49		48,517		$	9.33		3.63
$10.50-$12.74		58,415			11.03		5.29
$12.75-$14.99		—			—		—
$15.00-$17.25		51,148			16.28		3.34
Outstanding at March 31, 2007		158,080		$	12.21		4.15

 

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 recognized for the three months ended March 31, 2007 was $41,441.

 

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 awards earned contingent on achievement of certain performance targets. If performance targets are not achieved, all or a portion of the performance-based awards are forfeited and become available for future grants. Nonperformance-based restricted stock awards vest ratably over a three year period and nonperformance-based restricted stock units (granted to non-employee directors) vest over a one year period. It is the current intention that employee grants will be performance-based. The 2005 Plan provides for accelerated vesting in the event of death or retirement. Non-employee directors also may elect to defer a portion of their cash compensation, with such deferred amount to be paid by delivery of deferred stock units. Outstanding awards are granted at fair market value on grant date. The number of shares of Common Stock which remains available for future grants under the 2005 Plan at March 31, 2007 is 3,289,816 shares.

 

The Company pays dividends and dividend equivalents on outstanding awards, which are charged to net assets when paid. Dividends and dividend equivalents paid on restricted awards that are later forfeited are reclassified to compensation expense.

 

A summary of the status of the Company’s awards granted under the 2005 Plan as of March 31, 2007, and changes during the three month period then ended, is presented below:

 

Awards		Shares/ Units			Weighted Average Grant-Date Fair Value
Balance at December 31, 2006		70,493			$	12.92
Granted:
Restricted stock		32,720				13.73
Restricted stock units		6,000				14.07
Deferred stock units		485				13.79
Vested		(8,550	)			13.24
Forfeited		—				—
Balance at March 31, 2007 (includes 82,220 performance-based awards and 18,928 nonperformance-based awards)		101,148			$	13.17

 

6

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NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

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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 for the period ending March 31, 2007 were $104,398. The total compensation costs for restricted stock units granted to non-employee directors for the period ended March 31, 2007 were $29,523. As of March 31, 2007, there were total unrecognized compensation costs of $927,551, a component of additional capital surplus, related to nonvested equity-based compensation arrangements granted under the 2005 Plan. Those costs are expected to be recognized over a weighted average period of 2.08 years.

 

7. Expenses

 

The aggregate remuneration paid during the three months ended March 31, 2007 to officers and directors amounted to $1,513,383, of which $135,041 was paid as fees and compensation to directors who were not officers. These amounts represent the taxable income to the Company’s officers and directors and therefore differ from the amounts reported in the accompanying Statement of Operations that are recorded and expensed in accordance with generally accepted accounting principles.

 

8. Portfolio Securities Loaned

 

The Company makes loans of securities to brokers, secured by cash deposits, U.S. Government securities, or bank letters of credit. 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. The loans are secured at all times by collateral of at least 102% of the fair value of the securities loaned plus accrued interest. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan will be for the account of the Company. At March 31, 2007, the Company had securities on loan of $28,050,440 and held collateral of $28,643,337, consisting of an investment trust fund which may invest in money market instruments, commercial paper, repurchase agreements, U.S. Treasury Bills, and U.S. agency obligations.

FINANCIAL HIGHLIGHTS

 

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		Three Months Ended
		(unaudited)
		March 31, 2007			March 31, 2006			Year Ended December 31
								2006		2005			2004		2003		2002
Per Share Operating Performance
Net asset value, beginning of period		$15.86			$14.71			$14.71		$15.04			$14.36		$12.12		$16.05
Net investment income		0.07			0.05			0.23		0.22			0.23*		0.19		0.20
Net realized gains and increase (decrease) in unrealized appreciation		0.20			0.75			1.86		0.32			1.39		2.85		(3.38)
Change in accumulated other comprehensive income (note 5)		—			—			(0.02)		—			—		—		—
Total from investment operations		0.27			0.80			2.07		0.54			1.62		3.04		(3.18)
Less distributions
Dividends from net investment income		(0.04)			(0.03)			(0.23)		(0.22)			(0.24)		(0.17)		(0.19)
Distributions from net realized gains		(0.01)			(0.02)			(0.67)		(0.64)			(0.66)		(0.61)		(0.57)
Total distributions		(0.05)			(0.05)			(0.90)		(0.86)			(0.90)		(0.78)		(0.76)
Capital share repurchases		0.02			0.02			0.04		0.05			0.02		0.04		0.05
Reinvestment of distributions		—			—			(0.06)		(0.06)			(0.06)		(0.06)		(0.04)
Total capital share transactions		0.02			0.02			(0.02)		(0.01)			(0.04)		(0.02)		0.01
Net asset value, end of period		$16.10			$15.48			$15.86		$14.71			$15.04		$14.36		$12.12
Per share market price, end of period		$14.02			$13.30			$13.87		$12.55			$13.12		$12.41		$10.57
Total Investment Return
Based on market price		1.5%			6.4%			17.9%		2.2%			13.2%		25.2%		(20.6)%
Based on net asset value		1.9%			5.6%			15.0%		4.5%			12.1%		26.3%		(19.4)%
Ratios/Supplemental Data
Net assets, end of period (in 000’s)		$1,386,292			$1,320,511			$1,377,418		$1,266,729			$1,295,549		$1,218,862		$1,024,810
Ratio of expenses to average net assets		0.49%	†		0.53%	†		0.50%		0.45%			0.43%		0.47%		0.34%
Ratio of net investment income to average net assets		1.64%	†		1.23%	†		1.50%		1.44%			1.54%		1.45%		1.42%
Portfolio turnover		10.04%	†		11.31%	†		10.87%		12.96%			13.43%		12.74%		17.93%
Number of shares outstanding at end of period (in 000’s)		86,079			85,309			86,838		86,100			86,135		84,886		84,536

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

†	Ratios presented on an annualized basis.

 

7

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SCHEDULE OF INVESTMENTS

 

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March 31, 2007

(unaudited)

 

 

		Shares		Value (A)
Stocks and Convertible Securities — 96.5%
Consumer — 17.6%
Consumer Discretionary — 7.0%
BJ’s Wholesale Club, Inc. (B)		500,000		$	16,915,000
Clear Channel Communications, Inc.		175,000			6,132,000
Comcast Corp. (B)		525,000			13,623,750
Gannett Co., Inc.		112,500			6,332,625
Harley-Davidson, Inc.		120,000			7,050,000
Newell Rubbermaid Inc.		400,000			12,436,000
OSI Restaurant Partners, Inc.		315,000			12,442,500
Ryland Group Inc. (C)		135,000			5,695,650
Target Corp.		290,000			17,185,400
					97,812,925
Consumer Staples — 10.6%
Avon Products, Inc.		430,000			16,021,800
Bunge Ltd.		180,000			14,799,600
Coca-Cola Co.		200,000			9,600,000
Dean Foods Co. (B)		340,000			15,891,600
Del Monte Foods Co.		1,115,000			12,800,200
PepsiCo, Inc.		400,000			25,424,000
Procter & Gamble Co.		340,000			21,474,400
Safeway Inc.		390,000			14,289,600
Unilever plc ADR		550,000			16,538,500
					146,839,700
Energy — 12.1%
ConocoPhillips		345,000			23,580,750
ENSCO International, Inc.		209,150			11,377,760
Exxon Mobil Corp.		215,000			16,221,750
Marathon Oil Co.		120,000			11,859,600
Murphy Oil Corp.		38,500			2,055,900
Petroleum & Resources Corporation (D)		2,186,774			75,727,984
Schlumberger Ltd.		380,000			26,258,000
					167,081,744
Financials — 18.7%
Banking — 15.0%
BankAtlantic Bancorp, Inc.		880,000			9,644,800
Bank of America Corp.		610,000			31,122,200
Bank of New York Co., Inc. (The)		375,000			15,206,250
Compass Bancshares Inc.		300,000			20,640,000
Fifth Third Bancorp (C)		280,000			10,833,200
Investors Financial Services Corp.		382,500			22,242,375
Morgan Stanley		170,000			13,389,200
PNC Financial Services Group Inc.		200,000			14,394,000
Prosperity Bancshares, Inc.		200,000			6,948,000
Wachovia Corp.		470,000			25,873,500
Wells Fargo & Co.		650,000			22,379,500
Wilmington Trust Corp.		363,000			15,307,710
					207,980,735

		Shares		Value (A)
Insurance — 3.7%
AMBAC Financial Group, Inc.		200,000		$	17,278,000
American International Group, Inc.		500,000			33,610,000
					50,888,000
Health Care — 12.5%
Abbott Laboratories		320,000			17,856,000
Advanced Medical Optics, Inc. (B)		325,000			12,090,000
Bristol-Myers Squibb Co.		345,000			9,577,200
CVS/Caremark Corp.		208,750			7,126,725
Genentech, Inc. (B)		220,000			18,066,400
Johnson & Johnson		255,000			15,366,300
MedImmune, Inc. (B)		225,000			8,187,750
Medtronic, Inc.		310,000			15,208,600
Pfizer Inc.		1,120,000			28,291,200
Teva Pharmaceutical Industries Ltd. ADR		385,000			14,410,550
Wyeth Co.		325,000			16,259,750
Zimmer Holdings, Inc. (B)		125,000			10,676,250
					173,116,725
Industrials — 13.0%
Cintas Corp. (C)		300,000			10,830,000
Curtiss-Wright Corp.		460,000			17,728,400
Emerson Electric Co.		400,000			17,236,000
General Electric Co.		1,487,700			52,605,072
Illinois Tool Works Inc.		250,000			12,900,000
Masco Corp. (C)		450,000			12,330,000
Oshkosh Truck Corp.		270,000			14,310,000
3M Co.		160,000			12,228,800
United Parcel Service, Inc.		155,000			10,865,500
United Technologies Corp.		300,000			19,500,000
					180,533,772
Information Technology — 11.0%
Communication Equipment — 1.3%
Avaya Inc. (B)		600,000			7,086,000
Corning Inc. (B)		500,000			11,370,000
					18,456,000
Computer Related — 8.1%
Automatic Data Processing Inc.		300,000			14,520,000
BEA Systems, Inc. (B)		800,000			9,272,000
Cisco Systems, Inc. (B)		850,000			21,700,500
Dell Inc. (B)		585,000			13,577,850
Microsoft Corp.		1,180,000			32,886,600
Oracle Corp. (B)		1,100,000			19,943,000
					111,899,950
Electronics — 1.6%
Cree, Inc. (B)(C)		375,000			6,172,500
Intel Corp.		800,000			15,304,000
					21,476,500

 

8

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SCHEDULE OF INVESTMENTS (CONTINUED)

 

---

 

March 31, 2007

(unaudited)

 

		Shares		Value (A)
Materials — 5.2%
Air Products and Chemicals, Inc.		250,000		$	18,472,500
du Pont (E.I.) de Nemours and Co.		360,000			17,794,800
Florida Rock Industries Inc.		200,000			13,458,000
Martin Marietta Materials, Inc.		14,600			1,973,920
Rohm & Haas Co.		400,000			20,688,000
					72,387,220
Telecom Services — 2.8%
Alltel Corp.		300,000			18,600,000
AT&T Corp.		400,000			15,772,000
Windstream Corp.		310,178			4,556,515
					38,928,515
Utilities — 3.6%
Aqua America, Inc.		608,000			13,649,600
Duke Energy Corp.		611,560			12,408,552
MDU Resources Group, Inc.		562,500			16,166,250
Spectra Energy Corp.		305,780			8,032,840
					50,257,242
Total Stocks and Convertible Securities (Cost $913,530,603) (E)				$	1,337,659,028

		Prin. Amt.			Value (A)
Short-Term Investments — 3.3%
U.S. Government Obligations —1.2%
U.S. Treasury Bills, 5.00%, due 5/17/07		$	16,500,000		$	16,394,583
Time Deposit — 0.0%
Citibank, N.A., 4.69%, due 4/2/07						348,083
Commercial Paper — 2.1%
American General Finance, Inc., 5.20 - 5.25%, due 4/3/07-4/5/07			10,800,000			10,795,392
Chevron Funding Corp., 5.21%, due 4/19/07			5,900,000			5,884,630
General Electric Capital Corp., 5.22 - 5.23%, due 4/5/07-4/26/07			9,500,000			9,479,802
Toyota Motor Credit Corp., 5.22%, due 4/12/07			3,300,000			3,294,737
						29,454,561
Total Short-Term Investments (Cost $46,197,227)						46,197,227
Total Securities Lending Collateral — 2.1% (Cost $28,643,337)
Brown Brothers Investment Trust, 5.26%, due 4/2/07						28,643,337
Total Investments — 101.9% (Cost $988,371,167)						1,412,499,592
Cash, receivables, prepaid pension cost, prepaid expenses and other assets, less liabilities — (1.9)%						(26,207,414	)
Net Assets — 100%					$	1,386,292,178

---

Notes:

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

(B)	Presently non-dividend paying.

(C)	Some of the shares of this company are on loan. See note 8 to financial statements.

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

(E)	The aggregate market value of stocks held in escrow at March 31, 2007 covering open call option contracts written was $17,688,210. In addition, the aggregate market value of securities segregated by the Company’s custodian required to collateralize open put option contracts written was $9,290,000.

 

9

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PORTFOLIO SUMMARY

 

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March 31, 2007

(unaudited)

 

 

Ten Largest Portfolio Holdings

 

		Market Value			% of Net Assets
Petroleum & Resources Corporation*		$	75,727,984		5.5
General Electric Co.			52,605,072		3.8
American International Group, Inc.			33,610,000		2.4
Microsoft Corp.			32,886,600		2.4
Bank of America Corp.			31,122,200		2.2
Pfizer Inc.			28,291,200		2.0
Schlumberger Ltd.			26,258,000		1.9
Wachovia Corp.			25,873,500		1.9
PepsiCo, Inc.			25,424,000		1.8
ConocoPhillips			23,580,750		1.7
Total		$	355,379,306		25.6	%

*Non-controlled affiliate

 

 

Sector Weightings

 

10

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SCHEDULE OF OUTSTANDING OPTION CONTRACTS

 

---

 

March 31, 2007

(unaudited)

 

Contracts (100 shares each)		Security		Strike Price		Contract Expiration Date				Appreciation/ (Depreciation)
COVERED CALLS
200		Air Products and Chemicals, Inc.		$    80		Jun		07		$	5,399
100		Bunge Ltd.		70		Apr		07			(116,125	)
150		Bunge Ltd.		75		Apr		07			(95,701	)
100		Bunge Ltd.		80		Apr		07			(21,300	)
100		Bunge Ltd.		90		Jul		07			(15,800	)
375		Comcast Corp.		33		Jul		07			24,874
100		Harley-Davidson, Inc.		80		May		07			10,499
250		Investors Financial Services Corp.		50		Apr		07			(180,126	)
100		Marathon Oil Co.		105		Apr		07			14,724
100		Martin Marietta Materials, Inc.		130		Apr		07			(51,528	)
100		Morgan Stanley		75		Apr		07			(19,301	)
100		Morgan Stanley		80		Apr		07			(2,800	)
100		Morgan Stanley		85		Jul		07			(6,800	)
200		Ryland Group Inc.		65		Jul		07			39,398
250		Safeway Inc.		40		Sep		07			(8,376	)
100		Target Corp.		65		Apr		07			12,200
100		Target Corp.		70		Jul		07			9,950
45		3M Co.		85		Apr		07			5,490
100		United Technologies Corp.		75		May		07			12,200
100		Zimmer Holdings, Inc.		85		Jun		07			(19,301	)
2,770											(402,424	)
COLLATERALIZED PUTS
150		Advanced Medical Optics, Inc.		35		Apr		07			18,298
250		ENSCO International, Inc.		40		Jun		07			37,998
100		Exxon Mobil Corp.		65		Jul		07			6,100
150		Florida Rock Industries Inc.		40		Jun		07			8,549
250		Oshkosh Truck Corp.		45		July		07			4,249
150		Oshkosh Truck Corp.		50		Jul		07			(10,950	)
100		PNC Financial Services Group, Inc.		72.50		May		07			(11,800	)
100		PNC Financial Services Group, Inc.		70		Aug		07			(12,300	)
100		Ryland Group Inc.		40		Apr		07			2,750
100		Ryland Group Inc.		42.50		Apr		07			(4,800	)
35		Ryland Group Inc.		40		Jul		07			(6,405	)
250		3M Co.		70		Jul		07			15,499
100		Wachovia Corp.		50		Apr		07			10,900
1,835											58,088
										$	(344,336	)

 

11

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CHANGES IN PORTFOLIO SECURITIES

 

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During the Three Months Ended March 31, 2007

(unaudited)

 

		Shares
		Additions			Reductions			Held March 31, 2007
CVS/Caremark Corp.		208,750	(1)					208,750
Oshkosh Truck Corp.		270,000						270,000
PNC Financial Services Group, Inc.		200,000						200,000
Ryland Group Inc.		85,000						135,000
Spectra Energy Corp.		305,780	(2)					305,780
Comcast Corp.		175,000	(3)		15,000			525,000
Bunge Ltd.					20,000			180,000
Caremark Rx Inc.					245,000	(1)		—
Clear Channel Communications, Inc.					175,000			175,000
Donnelley (R.R.) & Sons Co.					100,000			—
Essex Corp.					174,800	(4)		—
Harley-Davidson, Inc.					45,000			120,000
Martin Marietta Materials, Inc.					68,400			14,600
Morgan Stanley					30,000			170,000
Safeway Inc.					33,000			390,000
Target Corp.					10,000			290,000

---

(1)	Received 208,750 shares of CVS/Caremark Corp. for 125,000 shares of Caremark Rx Inc. surrendered. Sold 120,000 shares of Caremark Rx Inc. prior to the merger.

(2)	Received .50 share of Spectra Energy Corp. for each share of Duke Energy Corp. held.

(3)	By stock split.

(4)	Received $24.00 for each share of Essex Corp. surrendered as a result of merger with Northrop Grumman Corp.

 

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12

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HISTORICAL FINANCIAL STATISTICS

---

 

(unaudited)

 

Dec. 31		Value Of Net Assets			Shares Outstanding*		Net Asset Value Per Share*			Market Value Per Share*			Dividends From Investment Income Per Share*				Distributions From Net Realized Gains Per Share*				Total Dividends and Distributions Per Share*				Annual Rate of Distribution**
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
March 31, 2007			1,386,292,178		86,079,089			16.10			14.02			.09	†			.01	†			.10	†		—

---

*

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

**

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

†

Paid or declared.

 

---

 

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 L.L.P.

Independent Registered Public Accounting Firm: PricewaterhouseCoopers LLP

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

Custodian of Securities: Brown Brothers Harriman & Co.

 

13

---

ANNUAL MEETING OF STOCKHOLDERS

 

---

 

 

The Annual Meeting of Stockholders was held on March 27, 2007. For those directors nominated, the following votes were cast:

 

		votes for		votes withheld
Enrique R. Arzac:		70,583,552		3,419,242
Phyllis O. Bonanno:		70,467,549		3,535,245
Daniel E. Emerson:		70,174,177		3,828,617
Frederic A. Escherich:		70,559,411		3,443,383
Roger W. Gale:		70,574,820		3,427,973
Thomas H. Lenagh:		69,997,823		4,004,971
Kathleen T. McGahran:		70,567,991		3,434,803
Douglas G. Ober:		70,551,661		3,451,133
Craig R. Smith:		70,492,681		3,510,113

A proposal to approve and ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for 2007 was approved with 72,756,592 votes for, 758,889 votes against, and 487,304 shares abstaining.

 

 

OTHER INFORMATION

 

---

 

 

Statement on Quarterly Filing of Complete Portfolio Schedule

 

In addition to publishing its complete schedule of portfolio holdings in the First and Third Quarter Reports to stockholders, the Company files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Company’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Company’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room, and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Company also posts its Forms N-Q on its website at www.adamsexpress.com under the heading “Financial Reports”.

 

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, 2006 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 http//www.sec.gov.

 

Privacy Policy

 

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

 

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

 

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

 

14

---

STOCKHOLDER INFORMATION AND SERVICES

 

---

 

 

DIVIDEND PAYMENT SCHEDULE

 

The Company presently pays dividends four times a year, as follows: (a) three interim distributions on or about March 1, June 1, and September 1, and (b) a “year-end” distribution, payable in late December, consisting of the estimated balance of the net investment income for the year and the net realized capital gain earned through October 31. Stockholders may elect to receive the year-end distribution in stock or cash. In connection with this distribution, all stockholders of record are sent a dividend announcement notice and an election card in mid-November.

 

Stockholders holding shares in “street” or brokerage accounts may make their election by notifying their brokerage house representative.

 

INVESTORS CHOICE

 

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

 

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

 

Initial Enrollment and Optional Cash Investments
Service Fee		$2.50 per investment
Brokerage Commission		$0.05 per share
Reinvestment of Dividends*
Service Fee		2% of amount invested
(maximum of $2.50 per investment)
Brokerage Commission		$0.05 per share
Sale of Shares
Service Fee		$10.00
Brokerage Commission		$0.05 per share
Deposit of Certificates for safekeeping $7.50
Book to Book Transfers		Included

To transfer shares to another participant or to a new participant

 

Fees are subject to change at any time.

Minimum and Maximum Cash Investments

Initial minimum investment (non-holders)		$500.00
Minimum optional investment (existing holders)		$50.00
Electronic Funds Transfer (monthly minimum)		$50.00
Maximum per transaction		$25,000.00
Maximum per year		NONE

 

A brochure which further details the benefits and features of INVESTORS CHOICE as well as an enrollment form may be obtained by contacting AST.

 

For Non-Registered Stockholders

 

For stockholders whose stock is held by a broker in “street” name, the AST INVESTORS CHOICE Direct Stock Purchase and Sale Plan remains available through many registered investment security dealers. If your shares are currently held in a “street” name or brokerage account, please contact your broker for details about how you can participate in AST’s Plan or contact AST.

 

---

 

The Company

The Adams Express Company

Lawrence L. Hooper, Jr.

Vice President, General Counsel and Secretary

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

(800) 638-2479

Website: www.adamsexpress.com

E-mail: contact@adamsexpress.com

 

The Transfer Agent

American Stock Transfer & Trust Company

Address Stockholder Inquiries to:

Stockholder Relations Department

59 Maiden Lane

New York, NY 10038

(877) 260-8188

Website: www.amstock.com

E-mail: info@amstock.com

 

Investors Choice Mailing Address:

Attention: Dividend Reinvestment

P.O. Box 922

Wall Street Station

New York, NY 10269-0560

Website: www.amstock.com

E-mail: info@amstock.com

 

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

 

15