FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-00248
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THE ADAMS EXPRESS COMPANY
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(Exact name of registrant as specified in charter)

 

 

7 Saint Paul Street, Suite 1140, Baltimore, Maryland 21202
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(Address of principal executive offices)

 

 

Lawrence L. Hooper, Jr.
The Adams Express Company
7 Saint Paul Street, Suite 1140
Baltimore, Maryland 21202
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(Name and address of agent for service)

 

 

Registrant's telephone number, including area code: (410) 752-5900
Date of fiscal year end: December 31
Date of reporting period: June 30, 2011

Item 1. Reports to Stockholders.

 

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LETTER TO STOCKHOLDERS

 

 

 

We submit herewith the financial statements of The Adams Express Company (the “Company”) for the six months ended June 30, 2011. Also provided are a schedule of investments and other financial information.

 

Net assets of the Company at June 30, 2011 were $12.89 per share on 88,920,404 shares outstanding, compared with $12.65 per share at December 31, 2010 on 88,885,186 shares outstanding. On March 1, 2011, a distribution of $0.05 per share was paid, consisting of $0.02 from 2010 investment income, $0.01 from 2010 short-term capital gain, $0.01 from 2010 long-term capital gain, and $0.01 from 2011 investment income, all taxable in 2011. A 2011 investment income dividend of $0.05 per share was paid June 1, 2011, and another $0.05 per share investment income dividend has been declared to stockholders of record August 12, 2011, payable September 1, 2011.

 

Net investment income for the six months ended June 30, 2011 amounted to $6,322,814, compared with $6,008,733 for the same six month period in 2010. These earnings are equal to $0.07 per share in each period.

 

Net capital gain realized on investments for the six months ended June 30, 2011 amounted to $13,366,455, or $0.15 per share.

 

For the six months ended June 30, 2011, the total return on the net asset value (with dividends and capital gains reinvested) of the Company’s shares was 2.8%. The total return on the market value of the Company’s shares for the period was 4.8%. These compare to a 6.0% total return for the Standard & Poor’s 500 Composite Stock Index (“S&P 500”) and a 5.2% total return for the Lipper Large-Cap Core Mutual Funds Average over the same time period.

 

For the twelve months ended June 30, 2011, the Company’s total return on net asset value was 25.8% and on market value was 29.4%. Comparable figures for the S&P 500 and the Lipper Large-Cap Core Mutual Funds Average were 30.7% and 28.6%, respectively.

 

For the twelve months ended June 30, 2011, the annual distribution rate (total dividends and capital gain distributions as a percentage of the average daily market price of the Company’s Common Stock) was 4.8%. The table on page 14 shows the annual distribution rate over the last ten years.

 

 

 

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, links for electronic delivery of stockholder reports, and other useful content.

 

 

 

By order of the Board of Directors,

Douglas G. Ober,

Chairman and

Chief Executive Officer

 

David D. Weaver,

President

 

July 14, 2011

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PORTFOLIO REVIEW

 

 

 

June 30, 2011

(unaudited)

 

 Ten Largest Equity Portfolio Holdings

 

		Market Value				% of Net Assets
Petroleum & Resources Corp.*		$	64,487,965				5.6	%
Oracle Corp.			36,201,000				3.2
Apple Inc.			31,888,650				2.8
JPMorgan Chase & Co.			22,926,400				2.0
Pepsico, Inc.			21,129,000				1.8
McDonald’s Corp.			21,080,000				1.8
Chevron Corp.			20,568,000				1.8
Procter & Gamble Co.			20,024,550				1.8
Prudential Financial, Inc.			19,712,900				1.7
Walt Disney Co.			18,739,200				1.6
Total		$	276,757,665				24.1	%

*Non-controlled affiliate

 

 

Sector Weightings

 

 

2

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STATEMENT OF ASSETS AND LIABILITIES

 

 

 

June 30, 2011

(unaudited)

 

Assets
Investments* at value:
Common stocks (cost $895,768,270)		$	1,035,876,459
Non-controlled affiliate, Petroleum & Resources Corporation (cost $34,735,404)			64,487,965
Short-term investments (cost $43,471,600)			43,471,600
Securities lending collateral (cost $13,613,550)			13,613,550			$	1,157,449,574
Cash							247,550
Investment securities sold							1,281,635
Dividends and interest receivable							925,505
Prepaid pension cost							1,688,547
Prepaid expenses and other assets							2,628,580
Total Assets							1,164,221,391
Liabilities
Investment securities purchased							209,097
Open written option contracts* at value (proceeds $442,714)							295,157
Obligations to return securities lending collateral							13,613,550
Accrued pension liabilities							2,972,304
Accrued expenses and other liabilities							634,731
Total Liabilities							17,724,839
Net Assets						$	1,146,496,552
Net Assets
Common Stock at par value $0.001 per share, authorized 150,000,000 shares; issued and outstanding 88,920,404 shares (includes 125,445 restricted shares, 17,250 nonvested or deferred restricted stock units, and 11,105 deferred stock units) (note 6)						$	88,920
Additional capital surplus							972,264,119
Accumulated other comprehensive income (note 5)							(1,915,636	)
Undistributed net investment income							538,121
Undistributed net realized gain on investments							5,512,721
Unrealized appreciation on investments							170,008,307
Net Assets Applicable to Common Stock						$	1,146,496,552
Net Asset Value Per Share of Common Stock							$12.89

 

* See Schedule of Investments on page 11 and Schedule of Outstanding Written Option Contracts on page 13.

 

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

 

3

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STATEMENT OF OPERATIONS

 

 

 

Six Months Ended June 30, 2011

(unaudited)

 

Investment Income
Income:
Dividends:
From unaffiliated issuers		$	8,848,737
From non-controlled affiliate			328,016
Interest and other income			174,472
Total income			9,351,225
Expenses:
Investment research			1,184,370
Administration and operations			745,522
Directors’ fees			232,808
Reports and stockholder communications			161,971
Transfer agent, registrar, and custodian			148,355
Investment data services			129,492
Travel, training, and other office expenses			124,028
Occupancy			79,147
Audit and accounting services			68,212
Insurance			53,060
Legal services			27,814
Other			73,632
Total expenses			3,028,411
Net Investment Income			6,322,814
Change in Accumulated Other Comprehensive Income (note 5)			120,486
Realized Gain and Change in Unrealized Appreciation on Investments
Net realized gain on security transactions			12,357,924
Net realized gain distributed by regulated investment company (non-controlled affiliate)			109,339
Net realized gain on written option contracts			899,192
Change in unrealized appreciation on securities			10,771,657
Change in unrealized appreciation on written option contracts			14,960
Net Gain on Investments			24,153,072
Change in Net Assets Resulting from Operations		$	30,596,372

 

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

 

4

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STATEMENTS OF CHANGES IN NET ASSETS

 

 

 

		(unaudited) Six Months  Ended June 30, 2011				Year Ended December 31, 2010
From Operations:
Net investment income		$	6,322,814			$	13,366,543
Net realized gain on investments			13,366,455				30,884,988
Change in unrealized appreciation on investments			10,786,617				64,513,706
Change in accumulated other comprehensive income (note 5)			120,486				171,005
Change in net assets resulting from operations			30,596,372				108,936,242
Distributions to Stockholders from:
Net investment income			(7,110,808	)			(12,238,096	)
Net realized gain from investment transactions			(1,773,253	)			(32,345,159	)
Decrease in net assets from distributions			(8,884,061	)			(44,583,255	)
From Capital Share Transactions:
Value of shares issued in payment of distributions (note 4)			7,922				15,216,156
Cost of shares purchased (note 4)			—				(287,751	)
Deferred compensation (notes 4, 6)			104,353				363,235
Increase in net assets from capital share transactions			112,275				15,291,640
Total Increase in Net Assets			21,824,586				79,644,627
Net Assets:
Beginning of period			1,124,671,966				1,045,027,339
End of period (including undistributed net investment income of $538,121 and $1,326,115, respectively)		$	1,146,496,552			$	1,124,671,966

 

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

 

5

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

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

 

Security Valuation — The Company’s investments are reported at fair value as defined under accounting principles general accepted in the United States of America. Investments in securities traded on national security exchanges 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.

 

Various inputs are used to determine the fair value of the Company’s investments. These inputs are summarized in the following three levels:

 

•

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 June 30, 2011 were classified as follows:

 

		Level 1				Level 2				Level 3				Total
Common stocks		$	1,100,364,424			$	—			$	—			$	1,100,364,424
Short-term investments			40,000				43,431,600				—				43,471,600
Securities lending collateral			13,613,550				—				—				13,613,550
Total investments		$	1,114,017,974			$	43,431,600			$	—			$	1,157,449,574
Written options		$	(295,157	)		$	—			$	—			$	(295,157	)

 

There were no transfers into or from Level 1 or Level 2 during the six months ended June 30, 2011.

 

2. Federal Income Taxes

 

No federal income tax provision is required since the Company’s policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income to its stockholders. Additionally, management has analyzed and concluded that tax positions included in federal income tax returns from the previous three years that remain subject to examination do not require any provision. Any income tax-related interest or penalties would be recognized as income tax expense. As of June 30, 2011, the identified cost of securities for federal income tax purposes was $992,603,065, and net unrealized appreciation aggregated $164,846,509, consisting of gross unrealized appreciation of $267,324,447 and gross unrealized depreciation of $(102,477,938).

 

Distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Such differences are primarily related to the Company’s retirement plans, equity-based compensation, and loss deferrals for wash sales. Differences that are permanent are periodically reclassified in the capital accounts of the Company’s financial statements and have no impact on net assets.

 

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 six months ended June 30, 2011 were $110,390,342 and $112,842,300, respectively.

 

The Company is subject to changes in the value of equity securities held (“equity price risk”) in the normal course of pursuing its investment objectives. The Company may purchase and write option contracts to increase or decrease its equity price risk exposure or may write option contracts to generate additional income. Option contracts generally entail risks associated with counterparty credit, illiquidity, and unfavorable equity price movements. The Company has mitigated counterparty credit and illiquidity risks by trading its options through an exchange. The risk of unfavorable equity price movements is limited for purchased options to the premium paid and for written options by writing only covered call or collateralized put option contracts, which require the Company to segregate certain securities or cash at its custodian when the option is written. A schedule of outstanding written option contracts as of June 30, 2011 can be found on page 13.

 

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NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

 

 

 

When the Company writes (purchases) an option, an amount equal to the premium received (paid) by the Company is recorded as a liability (asset) and is subsequently marked to market daily in the Statement of Assets and Liabilities, with any related change recorded as an unrealized gain or loss in the Statement of Operations. Premiums received (paid) from unexercised options are treated as realized gains (losses) on the expiration date. Upon the exercise of written put (purchased call) option contracts, premiums received (paid) are deducted from (added to) the cost basis of the underlying securities purchased. Upon the exercise of written call (purchased put) option contracts, premiums received (paid) are added to (deducted from) the proceeds from the sale of underlying securities in determining realized gain or loss.

 

Transactions in written covered call and collateralized put options during the six months ended June 30, 2011 were as follows:

 

		Covered Calls								Collateralized Puts
		Contracts				Premiums				Contracts				Premiums
Options outstanding, December 31, 2010			142			$	14,334				442			$	152,563
Options written			4,427				596,859				4,058				717,571
Options terminated in closing purchase transactions			(300	)			(32,991	)			—				—
Options expired			(3,075	)			(412,664	)			(2,228	)			(473,388	)
Options exercised			(25	)			(1,238	)			(500	)			(118,332	)
Options outstanding, June 30, 2011			1,169			$	164,300				1,772			$	278,414

 

4. Capital Stock

 

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

 

During 2011, 711 shares of Common Stock were issued at a weighted average price of $11.09 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, 2010, the Company issued 1,455,912 shares of its Common Stock at a price of $10.445 per share (the average market price on December 8, 2010) to stockholders of record on November 19, 2010 who elected to take stock in payment of the distribution from 2010 capital gain and investment income. During 2010, 883 shares were issued at a weighted average price of $10.30 per share as dividend equivalents to holders of deferred stock units and restricted stock units under the 2005 Equity Income 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 2011 and 2010 were as follows:

 

		Shares								Amount
		Six months ended June 30, 2011				Year ended December 31, 2010				Six months ended June 30, 2011				Year ended December  31, 2010
Shares issued in payment of distributions			711				1,456,795			$	7,922			$	15,216,156
Shares purchased (at a weighted average discount from net asset value of 15.6%)			—				(28,300	)			—				(287,751	)
Net activity under the 2005 Equity Incentive Compensation Plan			34,507				41,498				104,353				363,235
Net change			35,218				1,469,993			$	112,275			$	15,291,640

 

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. Both plans were frozen as of October 1, 2009. Benefits are based on length of service and compensation during the last five years of employment through September 30, 2009, with no additional benefits being accrued beyond that date.

 

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 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 and are subsequently amortized into net periodic pension cost.

 

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 contributions of $177,664 to the plans during the six months ended June 30, 2011, and anticipates making additional contributions of up to $300,000 over the remainder of 2011.

 

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NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

 

 

 

Items impacting the Company’s earnings were:

 

		Six months ended June 30, 2011				Year ended December 31, 2010
Components of net periodic pension cost
Interest cost		$	194,990			$	416,835
Expected return on plan assets			(218,455	)			(450,684	)
Net loss component			95,547				182,378
Net periodic pension cost		$	72,082			$	148,529
		Six months ended June 30, 2011				Year ended December 31, 2010
Changes recognized in accumulated other comprehensive income
Net gain/(loss)		$	24,940			$	(11,373	)
Amortization of net loss			95,546				182,378
Change in accumulated other comprehensive income		$	120,486			$	171,005

 

The Company also sponsors qualified and nonqualified defined contribution plans. The Company expensed contributions to the plans in the amount of $169,373 for the six months ended June 30, 2011. The Company does not provide postretirement medical benefits.

 

6. Equity-Based Compensation

 

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, however, 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 June 30, 2011, and changes during the six month period then ended, is presented below:

 

		Options				Weighted- Average Exercise Price				Weighted- Average Remaining Life (Years)				Aggregate Intrinsic Value
Outstanding at December 31, 2010			43,729			$	10.74				0.74
Expired or cancelled			(11,902	)			14.70				—
Outstanding at June 30, 2011			31,827			$	9.24	*			0.50			$	59,748
Exercisable at June 30, 2011			24,856			$	9.18				0.50			$	48,603

 

*	Exercise prices range from $8.70 to $9.42.

 

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 six months ended June 30, 2011 was $14,215.

 

The 2005 Equity Incentive Compensation Plan (“2005 Plan”), adopted at the 2005 Annual Meeting and re-approved at the 2010 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 were 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 June 30, 2011 is 3,147,182 shares.

 

A summary of the status of the Company’s awards granted under the 2005 Plan as of June 30, 2011, and changes during the six month period then ended, is presented below:

 

Awards		Shares/ Units				Weighted Average Grant-Date Fair Value
Balance at December 31, 2010			138,638			$	10.49
Granted:
Restricted stock			40,189				11.06
Restricted stock units			6,750				11.19
Deferred stock units			881				11.16
Vested & issued			(27,884	)			12.93
Forfeited			(4,774	)			13.18
Balance at June 30, 2011 (includes 124,965 performance-based awards and 28,835 nonperformance-based awards)			153,800			$	10.02

 

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 ended June 30, 2011 were $149,987. The total compensation costs for restricted

 

8

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NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 

 

 

stock units granted to non-employee directors for the period ended June 30, 2011 were $36,921. As of June 30, 2011, there were total unrecognized compensation costs of $702,983, 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 1.88 years. The total fair value of shares and units vested and issued during the six month period ended June 30, 2011 was $303,507.

 

7. Officer and Director Compensation

 

The aggregate remuneration paid during the six months ended June 30, 2011 to officers and directors amounted to $1,594,788, of which $234,718 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 June 30, 2011, the Company had securities on loan of $13,483,540 and held cash collateral of $13,613,550; 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. Operating Lease Commitment

 

The Company leases office space and equipment under operating lease agreements expiring at various dates through the year 2016. Petroleum & Resources Corporation, the Company’s non-controlled affiliate, shares in the rental payments, based on a predetermined cost sharing methodology. The Company recognized rental expense of $71,341 in the first half of 2011, and its estimated portion of future minimum rental commitments are as follows:

 

2011		$	74,699
2012			146,580
2013			144,637
2014			145,086
2015			145,345
2016			69,685
Total		$	726,032

 

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FINANCIAL HIGHLIGHTS

 

 

 

 

 

*	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.

†	Ratios presented on an annualized basis.

††	For 2009, the ratios of expenses and net investment income to average net assets were 0.76% and 1.44%, respectively, after adjusting for non-recurring pension expenses.

 

10

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SCHEDULE OF INVESTMENTS

 

 

 

June 30, 2011

(unaudited)

 

		Shares				Value (A)
Stocks — 96.0%
Consumer — 19.2%
Consumer Discretionary — 9.5%
Columbia Sportswear Co. (B)			200,000			$	12,680,000
Lowe’s Companies, Inc.			600,000				13,986,000
Marriott International Inc. (Class A)			300,000				10,647,000
McDonald’s Corp. (F)			250,000				21,080,000
Newell Rubbermaid Inc.			400,000				6,312,000
Ryland Group, Inc.			613,500				10,141,155
Target Corp.			320,000				15,011,200
Walt Disney Co.			480,000				18,739,200
							108,596,555
Consumer Staples — 9.7%
Avon Products, Inc.			329,600				9,228,800
Bunge Ltd.			155,000				10,687,250
Coca-Cola Co.			225,000				15,140,250
CVS/Caremark Corp.			295,000				11,086,100
PepsiCo, Inc. (G)			300,000				21,129,000
Procter & Gamble Co.			315,000				20,024,550
Safeway Inc.			340,000				7,945,799
Unilever plc ADR			500,000				16,195,000
							111,436,749
Energy — 12.3%
Chevron Corp.			200,000				20,568,000
CONSOL Energy Inc.			73,700				3,572,976
Exxon Mobil Corp. (G)			215,000				17,496,700
Halliburton Co.			150,000				7,650,000
National Oilwell Varco, Inc.			100,000				7,821,000
Peabody Energy Corp.			28,400				1,673,044
Petroleum & Resources Corporation (D)			2,186,774				64,487,965
Spectra Energy Corp.			405,780				11,122,430
Transocean Ltd. (C)			95,000				6,133,200
							140,525,315
Financials — 13.1%
Banks — 3.0%
PNC Financial Services Group, Inc.			270,000				16,094,700
Wells Fargo & Co.			635,000				17,818,100
							33,912,800
Diversified Financials — 8.4%
American Express Co.			350,000				18,095,000
Bank of America Corp.			1,385,000				15,179,600
Bank of New York Mellon Corp.			403,775				10,344,716
JPMorgan Chase & Co.			560,000				22,926,400
Morgan Stanley			400,000				9,204,000
State Street Corp.			193,000				8,702,370
T. Rowe Price Group, Inc.			200,000				12,068,000
							96,520,086
Insurance — 1.7%
Prudential Financial, Inc.			310,000				19,712,900
		Shares				Value (A)
Health Care — 12.9%
Abbott Laboratories			210,000			$	11,050,200
Bristol-Myers Squibb Co. (B)			159,061				4,606,407
Celgene Corp. (C)			161,700				9,753,744
Gilead Sciences, Inc. (C)			250,000				10,352,500
Hospira, Inc. (C)			175,000				9,915,500
Johnson & Johnson			255,000				16,962,600
Life Technologies Corp. (C) (F)			200,000				10,414,000
Medtronic, Inc. (F)			350,000				13,485,500
Pfizer Inc.			800,000				16,480,000
Senomyx, Inc. (C)			1,284,400				6,601,816
Teva Pharmaceutical Industries Ltd. ADR			330,000				15,912,600
UnitedHealth Group Inc.			247,500				12,766,050
Zimmer Holdings, Inc. (C)			150,000				9,480,000
							147,780,917
Industrials — 10.5%
Caterpillar Inc.			140,000				14,904,400
Curtiss-Wright Corp.			320,000				10,358,400
Emerson Electric Co.			200,000				11,250,000
FedEx Corp.			115,000				10,907,750
General Electric Co.			708,000				13,352,880
Goodrich Corp.			125,000				11,937,500
Masco Corp.			825,000				9,924,750
Norfolk Southern Corp.			200,000				14,986,000
Spirit AeroSystems Holdings, Inc. (Class A) (C)			500,000				11,000,000
United Technologies Corp.			130,000				11,506,300
							120,127,980
Information Technology — 19.9%
Semiconductors — 2.2%
Broadcom Corp. (C)			200,000				6,728,000
Intel Corp.			840,000				18,614,400
							25,342,400
Software & Services — 8.4%
Automatic Data Processing, Inc.			300,000				15,804,000
Cognizant Technology Solutions Group (Class A) (C)			150,000				11,001,000
Google Inc. (Class A) (C)			30,000				15,191,400
Microsoft Corp.			700,000				18,200,000
Oracle Corp.			1,100,000				36,201,000
							96,397,400
Technology Hardware & Equipment — 9.3%
ADTRAN, Inc.			318,400				12,325,264
Apple Inc. (C)			95,000				31,888,650
Cisco Systems, Inc.			850,000				13,268,500
F5 Networks, Inc. (C) (F)			50,000				5,512,500
Hewlett-Packard Co.			300,000				10,920,000
NetApp, Inc. (C)			300,000				15,834,000
QUALCOMM Inc.			300,000				17,037,000
							106,785,914

 

11

---

SCHEDULE OF INVESTMENTS (CONTINUED)

 

 

 

June 30, 2011

(unaudited)

 

 

		Principal/ Shares				Value (A)
Materials — 6.1%
Air Products and Chemicals, Inc.			35,000			$	3,345,300
CF Industries Holdings, Inc. (F)			35,031				4,962,842
Cliffs Natural Resources Inc. (F)			120,000				11,094,000
Dow Chemical Co.			400,000				14,400,000
Freeport-McMoRan Copper & Gold Inc.			253,000				13,383,700
Potash Corporation of Saskatchewan Inc. (F)			173,400				9,882,066
Praxair, Inc.			75,000				8,129,250
Teck Resources Ltd. (Class B)			100,000				5,074,000
							70,271,158
Utilities — 2.0%
MDU Resources Group, Inc.			473,100				10,644,750
Northeast Utilities			350,000				12,309,500
							22,954,250
Total Common Stocks (Cost $930,503,674)							1,100,364,424
Short-Term Investments — 3.8%
Time Deposits — 3.1%
Citibank, 0.03%, due 7/1/11		$	15,405,338				15,405,338
M&T Bank, 0.90%		$	20,026,528				20,026,528
							35,431,866
Commercial Paper — 0.7%
Toyota Credit de Puerto Rico, 0.12%, due 7/11/11		$	8,000,000				7,999,734
		Shares				Value (A)
Money Market Funds — 0.0%
Fidelity Institutional Money Market - Government Portfolio, 0.01% (E)			10,000			$	10,000
RBC U.S. Government Money Market (Institutional Class I), 0.01% (E)			10,000				10,000
Vanguard Federal Money Market, 0.01% (E)			10,000				10,000
Western Asset Institutional Government Reserves (Institutional Class), 0.02% (E)			10,000				10,000
							40,000
Total Short-Term Investments (Cost $43,471,600)							43,471,600
Securities Lending Collateral — 1.2% (Cost $13,613,550)
Money Market Funds — 1.2%
Invesco Short-Term Investment Trust - Liquid Assets Portfolio (Institutional Class), 0.08% (E)			13,613,550				13,613,550
Total Investments — 101.0% (Cost $987,588,824)							1,157,449,574
Cash, receivables, prepaid expenses and other assets, less liabilities — (1.0)%							(10,953,022
Net Assets — 100.0%						$	1,146,496,552

 

Notes:

(A)	Securities are listed on the New York Stock Exchange or the NASDAQ and are valued at the last reported sale price on the day of valuation. See note 1 to financial statements.

(B)	A portion of shares held are on loan. See note 8 to financial statements.

(C)	Presently non-dividend paying.

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

(E)	Rate presented is as of period-end and represents the annualized yield earned over the previous seven days.

(F)	All or a portion of this security is pledged to cover open written call option contracts. Aggregate market value of such pledged securities is $9,581,235.

(G)	All or a portion of this security is pledged to collateralize open written put option contracts with an aggregate market value to deliver upon exercise of $13,912,000.

 

 

 

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 no guarantee of future investment results.

 

12

---

SCHEDULE OF OUTSTANDING WRITTEN OPTION CONTRACTS

 

 

 

June 30, 2011

(unaudited)

 

Contracts (100 shares each)				Security		Strike Price		Contract Expiration Date						Value
	COVERED CALLS
	33			CF Industries Holdings, Inc.		$    185		Aug			11			$	(891)
	100			CF Industries Holdings, Inc.		200		Nov			11				(11,700)
	260			Cliffs Natural Resources Inc.		110		Oct			11				(46,800)
	200			F5 Networks, Inc.		140		Oct			11				(47,000)
	200			Life Technologies Corp.		60		Aug			11				(7,000)
	100			McDonald’s Corp.		85		Sep			11				(17,600)
	200			Medtronic, Inc.		46		Aug			11				(800)
	76			Potash Corporation of Saskatchewan Inc.		70		Sep			11				(1,976)
	1,169														(133,767)
	COLLATERALIZED PUTS
	100			CF Industries Holdings, Inc.		130		Jul			11				(9,800)
	85			CF Industries Holdings, Inc.		125		Aug			11				(27,625)
	100			CF Industries Holdings, Inc.		130		Aug			11				(45,500)
	100			Caterpillar Inc.		85		Aug			11				(4,000)
	200			Celgene Corp.		50		Oct			11				(15,000)
	300			Cognizant Technology Solutions Group (Class A)		70		Jul			11				(21,000)
	100			F5 Networks, Inc.		92.50		Jul			11				(2,500)
	150			F5 Networks, Inc.		80		Aug			11				(9,750)
	100			FedEx Corp.		80		Jul			11				(800)
	100			PNC Financial Services Group, Inc.		55		Jul			11				(1,200)
	200			PNC Financial Services Group, Inc.		52.50		Aug			11				(8,200)
	40			Peabody Energy Corp.		52.50		Jul			11				(680)
	40			Peabody Energy Corp.		57.50		Jul			11				(3,560)
	157			Praxair, Inc.		85		Oct			11				(11,775)
	1,772														(161,390)
														$	(295,157)

 

13

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CHANGES IN PORTFOLIO SECURITIES

 

 

 

During the Three Months Ended June 30, 2011

(unaudited)

 

		Shares
		Additions				Reductions				Held June 30, 2011
ADTRAN, Inc.			50,000								318,400
Air Products and Chemicals, Inc.			35,000								35,000
Apple Inc.			8,000								95,000
Avon Products, Inc.			25,000								329,600
Cognizant Technology Solutions Group (Class A)			150,000								150,000
F5 Networks, Inc.			50,000								50,000
Freeport-McMoRan Copper & Gold Inc.			10,000								253,000
Marriott International Inc. (Class A)			300,000								300,000
National Oilwell Varco, Inc.			50,000								100,000
Peabody Energy Corp.			28,400								28,400
Potash Corporation of Saskatchewan Inc.			3,750								173,400
Abbott Laboratories							100,000				210,000
Bunge Ltd.							25,000				155,000
Curtiss-Wright Corp.							40,000				320,000
General Electric Co.							350,000				708,000
MDU Resources Group, Inc.							39,000				473,100
Mead Johnson Nutrition Co.							117,383				—
Microsoft Corp.							480,000				700,000
Oshkosh Corp.							380,000				—
PepsiCo, Inc.							60,000				300,000
Praxair, Inc.							34,292				75,000
Safeway Inc.							50,000				340,000
Transocean Ltd.							10,000				95,000
Unilever plc ADR							73,400				500,000
UnitedHealth Group Inc.							2,500				247,500
United Technologies Inc.							70,000				130,000

 

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 Distribution Rate*
2001		$	1,368,366,316				85,233,262			$	16.05			$	14.22			$	.26			$	1.39			$	1.65				9.4	%
2002			1,024,810,092				84,536,250				12.12				10.57				.19				.57				.76				6.1
2003			1,218,862,456				84,886,412				14.36				12.41				.17				.61				.78				6.8
2004			1,295,548,900				86,135,292				15.04				13.12				.24				.66				.90				7.1
2005			1,266,728,652				86,099,607				14.71				12.55				.22				.64				.86				6.7
2006			1,377,418,310				86,838,223				15.86				13.87				.23				.67				.90				6.8
2007			1,378,479,527				87,668,847				15.72				14.12				.32				.71				1.03				7.2
2008			840,012,143				87,406,443				9.61				8.03				.26				.38				.64				5.6
2009			1,045,027,339				87,415,193				11.95				10.10				.15				.30				.45				5.2
2010			1,124,671,966				88,885,186				12.65				10.72				.14				.37				.51				5.1
June 30, 2011			1,146,496,552				88,920,404				12.89				11.14				.13	†			.02	†			.15	†			—

 

*	The annual distribution rate 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.

 

14

---

OTHER INFORMATION

 

 

 

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.

 

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 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 a link to its Forms N-Q on its website at www.adamsexpress.com under the headings “Investment Information”, “Financial Reports” and then “SEC Filings”.

 

Proxy Voting Policies and Record

 

A description of the policies and procedures that the Company uses to determine how to vote proxies relating to portfolio securities owned by the Company and the Company’s proxy voting record for the 12-month period ended June 30, 2011 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 at www.adamsexpress.com under the headings “About Adams Express” and “Corporate Information”; and (iii) on the Securities and Exchange Commission’s website at www.sec.gov.

 

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.

 

 

The Company

The Adams Express Company

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

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

Website: www.adamsexpress.com

E-mail: contact@adamsexpress.com

Counsel: Chadbourne & Parke LLP

Independent Registered Public Accounting Firm: PricewaterhouseCoopers LLP

Custodian of Securities: Brown Brothers Harriman & Co.

 

Transfer Agent & Registrar: American Stock Transfer & Trust Company

Stockholder Relations Department

59 Maiden Lane

New York, NY 10038

(877) 260-8188

Website: www.amstock.com

E-mail: info@amstock.com

 

15

---

THE ADAMS EXPRESS COMPANY

 

 

Board of Directors

 

Enrique R. Arzac 2,3		Roger W. Gale 2,4
Phyllis O. Bonanno 3,4		Thomas H. Lenagh 2,4
Kenneth J. Dale 2,4		Kathleen T. McGahran  1,3,5
Daniel E. Emerson 1,3,5		Douglas G. Ober 1
Frederic A. Escherich 1,4,5		Craig R. Smith 1,3,5

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, CFA		Chairman and Chief Executive Officer
David D. Weaver, CFA		President
Nancy J. F. Prue, CFA		Executive Vice President
Lawrence L. Hooper, Jr.		Vice President, General Counsel and Secretary
Richard A. Church		Vice President—Research
David R. Schiminger, CFA		Vice President—Research
D. Cotton Swindell, CFA		Vice President—Research
Brian S. Hook, CFA, CPA		Treasurer
Christine M. Sloan, CPA		Assistant Treasurer
Geraldine H. Paré		Assistant Secretary

 

 

Stock Data

 

 

Market Price (6/30/11)		$11.14
Net Asset Value (6/30/11)		$12.89
Discount:		13.6%

 

New York Stock Exchange ticker symbol: ADX

 

NASDAQ Quotation Symbol for NAV: XADEX

 

 

Distributions in 2011

 

 

From Investment Income (paid or declared)		$	0.13
From Net Realized Gains			0.02
Total		$	0.15

 

 

2011 Dividend Payment Dates

 

 

March 1, 2011

June 1, 2011

September 1, 2011

December 27, 2011*

 

*Anticipated

 

---

Item 2. Code of Ethics.

Item not applicable to semi-annual report.

Item 3. Audit Committee Financial Expert.

Item not applicable to semi-annual report.

Item 4. Principal Accountant Fees and Services.

Item not applicable to semi-annual report.

Item 5. Audit Committee of Listed Registrants.

Item not applicable to semi-annual report.

Item 6. 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.

Item not applicable to semi-annual report.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

(a) Item not applicable to semi-annual report.

(b) There has been no change in any of the portfolio managers identified in registrant's most recent annual report on Form N-CSR.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

	Total Number of Shares (or Units Purchased)		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs
	------------------------		------------------------		------------------------		------------------------
January 2011	0		$0.00		0		4,371,484
February 2011	0		$0.00		0		4,371,484
March 2011	0		$0.00		0		4,371,484
April 2011	0		$0.00		0		4,371,484
May 2011	0		$0.00		0		4,371,484
June 2011	0		$0.00		0		4,371,484	(2)
	---------------------		---------------------		---------------------
Total	0	(1)	$0.00		0	(2)

 

(1) There were no shares purchased other than through a publicly announced plan or program.

(2.a) The Plan was announced on December 9, 2010.

(2.b) The share amount approved in 2010 was 5% of outstanding shares, or 4,371,484 shares.

(2.c) Unless reapproved, the Plan will expire on December 31, 2011.

(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 407(c)(2)(iv) of Regulation S-K
(17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.

Item 11. 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 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
	Chairman and Chief Executive Officer
	(Principal Executive Officer)
Date:	July 22, 2011
	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
	Chairman and Chief Executive Officer
	(Principal Executive Officer)
Date:	July 22, 2011
By:	/s/ Brian S. Hook
	Brian S. Hook
	Treasurer
	(Principal Financial Officer)
Date:	July 22, 2011