FORM
N-CSR
CERTIFIED
SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company
Act file number: 811-00248
-------------------------------------------------------------------------
ADAMS
DIVERSIFIED EQUITY FUND, INC.
-------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
500 East
Pratt Street, Suite 1300, Baltimore, Maryland 21202
-------------------------------------------------------------------------
(Address of principal executive offices)
Janis F.
Kerns
Adams Diversified Equity Fund, Inc.
500 East Pratt Street, Suite 1300
Baltimore, Maryland 21202
-------------------------------------------------------------------------
(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: December 31, 2021
Item 1. Reports to
Stockholders.
ADAMS
DIVERSIFIED EQUITY
FUND
GET THE LATEST NEWS AND
INFORMATION
The Fund
•
a closed-end equity investment company
•
objectives: preservation of capital, reasonable income, and
opportunity for capital gain
•
internally managed
•
annual distribution of at least 6%
Stock Data (12/31/21)
|
NYSE
Symbol |
|
|
ADX
|
|
|
Market
Price |
|
|
$19.41
|
|
|
52-Week
Range |
|
|
$16.83 –
$22.31
|
|
|
Discount |
|
|
13.7%
|
|
|
Shares
Outstanding |
|
|
117,872,178
|
|
Summary Financial Information
Year Ended December 31,
|
|
|
2021
|
|
|
2020
|
|
Net
asset value per share (NASDAQ: XADEX) |
|
|
|
$ |
22.50 |
|
|
|
|
$ |
20.06 |
|
|
Total net assets |
|
|
|
|
2,652,527,878 |
|
|
|
|
|
2,227,273,138 |
|
|
Average net assets |
|
|
|
|
2,484,625,557 |
|
|
|
|
|
1,953,121,673 |
|
|
Unrealized appreciation on investments |
|
|
|
|
1,254,853,066 |
|
|
|
|
|
957,405,934 |
|
|
Net
investment income |
|
|
|
|
19,062,427 |
|
|
|
|
|
21,779,322 |
|
|
Net
realized gain (loss) |
|
|
|
|
308,581,793 |
|
|
|
|
|
90,980,777 |
|
|
Total return (based on market price) |
|
|
|
|
29.9% |
|
|
|
|
|
16.4% |
|
|
Total return (based on net asset value) |
|
|
|
|
29.8% |
|
|
|
|
|
18.8% |
|
|
Ratio of expenses to average net assets |
|
|
|
|
0.56% |
|
|
|
|
|
0.60% |
|
|
Annual distribution rate |
|
|
|
|
15.7% |
|
|
|
|
|
6.8% |
|
|
2021 Dividends and Distributions
Paid
|
|
|
Amount
(per share)
|
|
|
Type
|
|
February 26, 2021 |
|
|
|
$ |
0.02 |
|
|
|
Long-term capital gain
|
|
February 26, 2021 |
|
|
|
|
0.03 |
|
|
|
Investment
income |
|
June 1,
2021 |
|
|
|
|
0.05 |
|
|
|
Investment
income |
|
September
1, 2021 |
|
|
|
|
0.05 |
|
|
|
Investment
income |
|
December 22, 2021 |
|
|
|
|
2.41 |
|
|
|
Long-term capital gain
|
|
December 22, 2021 |
|
|
|
|
0.35 |
|
|
|
Short-term capital gain
|
|
December 22, 2021 |
|
|
|
|
0.07 |
|
|
|
Investment income |
|
|
|
|
|
$ |
2.98 |
|
|
|
|
|
2022 Annual Meeting of Shareholders
Location: Adams Funds, 500
East Pratt Street, Suite 1300, Baltimore, MD 21202
Date: April 21, 2022
Time: 9:00 a.m.
Letter from Chief Executive Officer and President
Mark E. Stoeckle
Dear Fellow Shareholders,
The world threw a lot at us in 2021. The pandemic continued, with
successive waves that put infection rates at or near all-time highs
at year-end. Inflation rose to levels not seen in decades.
Geopolitical tensions continued to create uncertainty. Through it
all, we persevered. The U.S. economy grew at its fastest pace since
1984. Unemployment, a major concern entering 2021 at 6.7%, dropped
to its lowest level since the pandemic began. The S&P 500 Index
ended the year at near-record levels, with a 28.7% advance that was
broadly mirrored across U.S. equity markets. It was not an easy
year by any stretch, given the tragedy of more than 800,000
coronavirus-related deaths in the U.S. since the onset of the
pandemic. Still, in purely economic and investing terms, it was a
good one. That is a testament to the resilience of our society, the
economy, and the markets.
Our Fund generated a 29.8% total return on net asset value over the
past 12 months, outperforming the S&P 500 and beating our peer
group by three percentage points. Our total return on market price
was 29.9%. We distributed 15.7% to our shareholders in 2021, far
exceeding our 6% commitment.
“We were pleased to generate a 29.8% return in 2021, compared to a
28.7% return for the S&P 500 Index and three percentage points
ahead of our peer group.”
The economy grew nicely in 2021. Fiscal and monetary stimulus, the
vaccine rollout, and pent-up consumer demand were undoubtedly key
drivers of the country’s 5.7% GDP growth. That pace still feels
somewhat remarkable, considering the depth of 2020’s recession and
the challenges we faced in 2021. Inflationary pressures rose
sharply, and were stronger and more persistent than many expected,
fueled by rising demand for goods, supply chain disruptions, and
temporary shortages. The consumer price index (CPI) recorded eight
straight months above 5%, with December’s 7% reading the highest in
almost 40 years. While the labor market improved, companies in many
industries struggled to find workers to meet surging demand. In
December, the Fed said it would act more aggressively to taper its
asset-buying programs and signaled a willingness to raise interest
rates if necessary.
We were impressed by the ability of U.S. companies to continue to
grow profits and generate high levels of cash flow under these
unusual and difficult circumstances. At year-end, before
fourth-quarter earnings season kicked off, year-over-year earnings
growth for the S&P 500 was estimated to be approximately 45%,
which would be nine times the average over the past 10 years. That
kind of resilience reassures us as we all continue the transition
from the depths of the pandemic toward normalcy in 2022.
2021 Market Recap
U.S. equities largely followed a steady and mostly uninterrupted
advance throughout the year, with just one pullback of 5% or more,
compared to an historical average of three per year. In terms of
sector and asset-class leadership, it was a tale of two markets.
Early on, following the rollout of vaccines, economically sensitive
and cyclical stocks benefited from optimism surrounding economic
reopening and synchronized global growth. As the year progressed,
concerns about the persistence of inflation, along with the rise of
the Delta variant and supply chain disruptions eventually started
to weigh on equity markets. In response, investor sentiment started
to shift back toward technology and growth stocks.
Letter To Shareholders (continued)
U.S. stocks continued to outperform their developed and emerging
market peers, buoyed by strong retail spending, home sales, and
manufacturing activity. Sector leadership for the year mirrored the
shifting attitudes of the market. Energy and Financials recorded
their strongest relative returns in years and were two of the top
performing sectors in the S&P 500, while the growth-oriented
Technology sector also outperformed the broad market.
Energy stocks benefited from sharply rising oil prices, with West
Texas Intermediate (WTI) crude prices up more than 55% for the
year. Demand continued to improve throughout the year, putting
upward pressure on prices. Restraint on the part of oil producers
also bolstered energy prices, as many companies, including the
large, diversified players, showed discipline in controlling
expenses and limiting new investments. They focused instead on cash
flow generation and rewarding shareholders with dividends and stock
buybacks.
Financials, another attractively valued sector entering 2021,
benefited from strong economic growth and the improving
unemployment picture to advance 35.0%. Following positive stress
tests, U.S. banks released tens of billions of loan-loss reserves
and announced robust capital deployments, including dividend hikes
and share buybacks. While low interest rates continued to weigh on
net interest margins, the steepening yield curve helped revenues.
High levels of trading volume, coming off records in 2020,
continued to drive fee income for banks and capital markets
firms.
Portfolio Performance
We were pleased to generate a 29.8% return in 2021, compared to a
28.7% return for the S&P 500 Index and three percentage points
ahead of our peer group, the Morningstar U.S. Large Blend category.
Our Health Care, Financials, and Information Technology investments
were the primary contributors to our relative performance, while
Consumer Discretionary, Industrials, and Consumer Staples
investments detracted the most.
Our Health Care investments increased 32.2%, exceeding the sector’s
return of 26.1%. The sector was the largest contributor to our
relative performance for the year, driven by strong stock
selection. Eli Lilly and Company shares surged 65.9%, benefiting
from the company’s strong pipeline across multiple therapeutic
areas, including Alzheimer’s disease and cancer. Investors also
appreciated Lilly’s efforts to pour capital into new drug
development and reduce costs to improve margins. Early in 2021, we
invested in the pet and livestock testing firm Idexx Laboratories.
Increased pet ownership during the pandemic, as well as pet owners’
willingness to spend more on their animals, helped drive strong
revenue growth and improved guidance. We exited the position in
October after the stock rose 48.6% and valuation levels became
excessive. With an advance of 54.9%, CVS Health also bolstered
relative performance, as more and more consumers visited stores for
COVID-19 tests and vaccinations. CVS also continues to see benefits
from its merger with Aetna, which has allowed it to offer consumers
a more comprehensive health care solution.
Stock selection in the Financials sector generated significant
relative return, as our investments increased 39.2% compared to
35.0% for the sector. Credit sensitive stocks such as credit card
companies and banks, which stand to benefit from rising interest
rates, generated strong returns. Capital One Financial was a key
contributor, returning 49.8% as loan losses continued to be far
lower than expected. This allowed the company to release sizeable
loan loss reserves, which boosted profits and dividend
payments.
The Consumer Discretionary sector, underpinned by the ongoing
economic expansion, was bifurcated into winners and losers during
the year. The automobiles and components industry group posted
market-beating gains, led by Tesla, which gained 49.7%. Our
underweight in the stock was one cause of underperformance in the
sector. Tesla’s electric vehicle (EV) and battery products continue
to resonate with investors amid a rush to EV names, despite its
extraordinary valuation. We remain comfortable with our underweight
position despite the recent strength. We also lost ground in
retailing stocks, including our position in Amazon, which
disappointed in 2021 with a 2.4% return. While Amazon’s capital
spending was higher than the market expected during the year, we
believe they are investing to achieve greater operating efficiency
and better execution in the future. We remain confident in the
company’s growth path and comfortable with our overweight
position.
Letter To Shareholders (continued)
Outlook for 2022
A year ago, we were optimistic, backed by forthcoming government
stimulus, the vaccine rollout, and supportive Fed policy. Still, we
expected that equity market gains would moderate compared to 2020.
They didn’t, of course, which was good news. Heading into 2022,
we’re in a similar state of mind, though we expect more moderate
returns for different reasons this time.
There are plenty of risks to our outlook, starting with the
possibility that variants and the lingering pandemic may slow or
delay economic growth. However, we also believe that we enter the
new year in a much better place. We’re not worried so much that
COVID could drag down the whole economy, or that government and
society will shut everything down. Instead, we’re focused on
identifying and investing in companies that are positioned to
thrive through the pandemic uncertainty.
The Fed is in a delicate place, balancing continued support of
employment and economic growth with tapering and managing
inflation. It’s likely the Fed and other central banks will start
to raise interest rates, but in a way that’s more tolerant of or
patient with inflation. Inflation is likely to remain an issue, and
potentially a key market driver of 2022. We believe rising prices
will likely impact us as individuals in our daily lives. The costs
of fuel, energy, food, rents, and the like will be a pain point for
many, especially since it has been so long since we’ve all worried
about inflation. Still, we do not expect that inflation will surge
to the point that it will cause real market shifts or weigh heavily
on broad equity markets.
Although the Financials sector performed well in 2021, we see
additional opportunities for the sector to generate solid returns
in 2022. The sector tends to benefit from rising interest rates,
which can help expand profit margins for banks, insurers, and
capital markets firms. Banks and other financial firms also tend to
benefit from expanding spreads between the interest they pay on
customer deposits and what they earn from making loans. Further
strengthening in the economy would likely also help banks continue
to reduce non-performing assets.
We also continue to see the Energy sector as well positioned for
2022. Oil prices will likely remain elevated as demand continues to
recover to pre-pandemic levels. There will likely be some
volatility, much as we saw toward the end of 2021, given the risk
of the pandemic and geopolitical issues such as upheaval in Iran or
discontent within OPEC. However, we are optimistic about the profit
outlook with prices well above the $35-$40 per barrel it costs U.S.
shale companies to produce oil and believe prices will likely
remain high enough to support margins, returns to investors, and
improving balance sheets. Oil and gas companies continuing to
practice fiscal restraint is an important caveat to our
outlook.
Consumer Staples and Utilities were laggards in 2021. While we’re
not necessarily expecting a sector-wide surge in stock prices this
year, we do view some areas and companies as undervalued after
years of underperforming broader markets. We take comfort in our
sector-neutral, diversified approach, which gives us exposure to
what we believe are underappreciated opportunities in these sectors
and elsewhere.
We begin 2022 amid uncertainty surrounding the pandemic, inflation,
and the Fed’s path forward. One thing is virtually certain, after
years of strong returns for equities, there will likely be some
bumps in the road ahead. But remember, when markets turn volatile
(and in fact, even if they do keep rising) there are companies that
will outperform. It is our job to find those opportunities. We
believe our disciplined approach will allow us to do just that, by
identifying quality companies, executing at high levels, and
trading at attractive valuations.
We appreciate your trust and look forward to the year ahead.
By order of the Board of Directors,
Mark E. Stoeckle
Chief Executive Officer and President
January 28, 2022
The
following shows the value of hypothetical $10,000 investments in
the Fund at market price and in the Fund’s benchmark over the past
10 years with dividends and distributions reinvested. All Fund
distributions are reinvested at the price received in the Fund’s
dividend reinvestment plan. Amounts do not reflect taxes paid by
shareholders on distributions or the sale of shares. Past
performance does not predict future performance.
|
|
Average Annual
Total Returns at 12/31/21
|
|
|
|
|
|
|
|
Years
|
|
|
|
|
|
|
|
1
|
|
|
3
|
|
|
5
|
|
|
10
|
|
|
|
|
ADX Market
Price |
|
|
|
|
29.9 |
% |
|
|
|
27.3 |
% |
|
|
|
20.8 |
% |
|
|
|
17.1 |
% |
|
|
|
S&P 500
Index |
|
|
|
|
28.7 |
% |
|
|
|
26.1 |
% |
|
|
|
18.5 |
% |
|
|
|
16.6 |
% |
|
|
|
Morningstar U.S. Large Blend Category |
|
|
|
|
26.7 |
% |
|
|
|
24.6 |
% |
|
|
|
17.1 |
% |
|
|
|
15.5 |
% |
|
Disclaimers
This report contains “forward-looking statements” within the
meaning of the Securities Act of 1933 and the Securities Exchange
Act of 1934. By their nature, all forward-looking statements
involve risks and uncertainties, and actual results could differ
materially from those contemplated by the forward-looking
statements. Several factors that could materially affect the Fund’s
actual results are the performance of the portfolio of stocks held
by the Fund, the conditions in the U.S. and international financial
markets, the price at which shares of the Fund will trade in the
public markets, and other factors discussed in the Fund’s periodic
filings with the Securities and Exchange Commission.
This report is transmitted to the shareholders of the Fund for
their information. It is not a prospectus, circular or
representation intended for use in the purchase or sale of shares
of the Fund or of any securities mentioned in the report. The rates
of return will vary and the principal value of an investment will
fluctuate. Shares, if sold, may be worth more or less than their
original cost. Past performance is no guarantee of future
investment results.
December 31, 2021
(unaudited)
Ten Largest Equity Portfolio Holdings
|
|
|
Market
Value
|
|
|
Percent
of Net Assets
|
|
Microsoft
Corporation |
|
|
|
$ |
207,879,392 |
| |
|
|
7.8% |
|
|
Apple
Inc. |
|
|
|
|
174,675,609 |
| |
|
|
6.6 |
|
|
Alphabet
Inc. Class A |
|
|
|
|
120,227,160 |
| |
|
|
4.5 |
|
|
Amazon.com, Inc. |
|
|
|
|
105,698,578 |
| |
|
|
4.0 |
|
|
UnitedHealth Group Incorporated |
|
|
|
|
66,985,476 |
| |
|
|
2.5 |
|
|
Meta
Platforms, Inc. Class A |
|
|
|
|
65,050,090 |
| |
|
|
2.5 |
|
|
NVIDIA
Corporation |
|
|
|
|
61,351,346 |
| |
|
|
2.3 |
|
|
Bank of
America Corp. |
|
|
|
|
51,092,316 |
| |
|
|
1.9 |
|
|
Thermo
Fisher Scientific Inc. |
|
|
|
|
45,772,664 |
| |
|
|
1.7 |
|
|
Berkshire Hathaway Inc. Class B |
|
|
|
|
45,089,200 |
|
|
|
|
1.7 |
|
|
|
|
|
|
$ |
943,821,831 |
|
|
|
|
35.5% |
|
|
Sector Weightings
Statement of Assets and Liabilities
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at value*: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaffiliated issuers (cost
$1,348,050,397)
|
|
|
|
$ |
2,600,431,821 |
|
|
|
|
|
|
|
|
|
Non-controlled affiliate (cost
$33,970,033)
|
|
|
|
|
36,125,506 |
|
|
|
|
|
|
|
|
|
Other investment in controlled
affiliate (cost $150,000)
|
|
|
|
|
466,000 |
|
|
|
|
|
|
|
|
|
Short-term investments (cost
$25,420,221)
|
|
|
|
|
25,420,390 |
|
|
|
|
$ |
2,662,443,717 |
|
|
|
Cash |
|
|
|
|
|
|
|
|
|
|
258,094 |
|
|
|
Investment securities sold |
|
|
|
|
|
|
|
|
|
|
14,039,675 |
|
|
|
Dividends receivable |
|
|
|
|
|
|
|
|
|
|
850,536 |
|
|
|
Prepaid expenses and other assets |
|
|
|
|
|
|
|
|
|
|
4,061,730 |
|
|
|
Total Assets
|
|
|
|
|
|
|
|
|
|
|
2,681,653,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities purchased |
|
|
|
|
|
|
|
|
|
|
19,748,687 |
|
|
|
Due
to officers and directors (note 8) |
|
|
|
|
|
|
|
|
|
|
4,706,107 |
|
|
|
Accrued expenses and other liabilities |
|
|
|
|
|
|
|
|
|
|
4,671,080 |
|
|
|
Total
Liabilities
|
|
|
|
|
|
|
|
|
|
|
29,125,874 |
|
|
|
Net Assets
|
|
|
|
|
|
|
|
|
|
$ |
2,652,527,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock at
par value $0.001 per share, authorized 150,000,000 shares; issued
and outstanding 117,872,178 shares (includes 47,108 deferred stock
units) (note 7)
|
|
|
|
|
|
|
|
|
|
$ |
117,872 |
|
|
|
Additional capital surplus |
|
|
|
|
|
|
|
|
|
|
1,400,225,187 |
|
|
|
Total distributable earnings (loss) |
|
|
|
|
|
|
|
|
|
|
1,252,184,819 |
|
|
|
Net Assets
Applicable to Common Stock
|
|
|
|
|
|
|
|
|
|
$ |
2,652,527,878 |
|
|
|
Net Asset Value Per
Share of Common Stock
|
|
|
|
|
|
|
|
|
|
$ |
22.50 |
|
|
*
See Schedule of Investments beginning on page 16.
The accompanying notes are an integral part of the financial
statements.
Year Ended December 31, 2021
|
Investment
Income |
|
|
|
|
|
|
|
Income:
|
|
|
|
|
|
|
|
Dividends (includes $1,858,758 from
affiliates)
|
|
|
|
$ |
31,896,672 |
|
|
Other income
|
|
|
|
|
1,067,005 |
|
|
Total Income
|
|
|
|
|
32,963,677 |
|
|
Expenses:
|
|
|
|
|
|
|
|
Investment research compensation and
benefits
|
|
|
|
|
7,189,717 |
|
|
Administration and operations
compensation and benefits
|
|
|
|
|
3,278,747 |
|
|
Occupancy and other office
expenses
|
|
|
|
|
712,590 |
|
|
Investment data services
|
|
|
|
|
826,675 |
|
|
Directors’ compensation
|
|
|
|
|
511,083 |
|
|
Shareholder reports and
communications
|
|
|
|
|
331,716 |
|
|
Transfer agent, custody, and listing
fees
|
|
|
|
|
356,398 |
|
|
Accounting, recordkeeping, and other
professional fees
|
|
|
|
|
408,399 |
|
|
Insurance
|
|
|
|
|
158,918 |
|
|
Audit and tax services
|
|
|
|
|
111,321 |
|
|
Legal services
|
|
|
|
|
15,686 |
|
|
Total
Expenses
|
|
|
|
|
13,901,250 |
|
|
Net Investment
Income
|
|
|
|
|
19,062,427 |
|
|
|
|
|
|
|
|
|
|
Realized
Gain (Loss) and Change in Unrealized Appreciation |
|
|
|
|
|
|
|
Net realized gain (loss) on
investments
|
|
|
|
|
311,703,728 |
|
|
Net realized gain (loss) on total
return swap agreements
|
|
|
|
|
(3,253,141 |
) |
|
Net realized gain distributed by
non-controlled affiliate
|
|
|
|
|
131,206 |
|
|
Change in
unrealized appreciation on investments (includes $11,261,886 from
affiliates)
|
|
|
|
|
297,447,132 |
|
|
Net Gain (Loss)
|
|
|
|
|
606,028,925
|
|
|
Change in Net Assets from Operations |
|
|
|
$
|
625,091,352
|
|
The accompanying notes are an integral part of the financial
statements.
Statements of Changes in Net Assets
|
|
|
For the Year
Ended December 31,
|
|
|
2021
|
|
|
2020
|
|
From
Operations: |
|
|
|
|
|
| |
|
|
|
|
Net investment income
|
|
|
|
$ |
19,062,427 |
| |
|
$ |
21,779,322 |
|
Net realized gain (loss)
|
|
|
|
|
308,581,793 |
| |
|
|
90,980,777 |
|
Change in unrealized
appreciation
|
|
|
|
|
297,447,132 |
|
|
|
|
237,184,938 |
|
Change in Net Assets from
Operations
|
|
|
|
|
625,091,352
|
|
|
|
|
349,945,037
|
|
|
|
|
|
|
|
| |
|
|
|
|
Distributions to Shareholders
from:
Total distributable
earnings
|
|
|
|
|
(330,861,024 |
) |
|
|
|
(111,999,772 |
) |
|
|
|
|
|
|
| |
From
Capital Share Transactions: |
|
|
|
|
|
| |
|
|
|
|
Value of shares issued in payment of
distributions (note 5)
|
|
|
|
|
131,024,412 |
| |
|
|
39,309,604 |
|
Cost of shares purchased (note
5)
|
|
|
|
|
– |
|
|
|
|
(1,573,374 |
) |
Change in Net
Assets from Capital Share Transactions
|
|
|
|
|
131,024,412 |
|
|
|
|
37,736,230 |
|
Total Change in Net
Assets
|
|
|
|
|
425,254,740 |
| |
|
|
275,681,495 |
|
|
|
|
|
|
|
| |
|
|
|
|
Net
Assets: |
|
|
|
|
|
| |
|
|
|
|
Beginning of year
|
|
|
|
|
2,227,273,138 |
|
|
|
|
1,951,591,643 |
|
End of year
|
|
|
|
$ |
2,652,527,878 |
|
|
|
$ |
2,227,273,138 |
|
The accompanying notes are an integral part of the financial
statements.
Notes To Financial Statements
Adams Diversified Equity Fund, Inc. (the “Fund”) is registered
under the Investment Company Act of 1940 (“1940 Act”) as a
diversified investment company. The Fund 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.
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation — The
accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of
America (“GAAP”) for investment companies, which require the use of
estimates by Fund management. Management believes that estimates
and valuations are appropriate; however, actual results may differ
from those estimates and the valuations reflected in the financial
statements may differ from the value the Fund ultimately realizes.
Additionally, unpredictable events such as natural disasters, war,
terrorism, global pandemics, and similar public health threats may
significantly affect the economy, markets, and companies in which
the Fund invests. The Fund could be negatively impacted if the
value of portfolio holdings are harmed by such events.
Affiliates — The 1940 Act
defines “affiliated companies” as those companies in which the Fund
owns 5% or more of the outstanding voting securities. Additionally,
those companies in which the Fund owns more than 25% of the
outstanding voting securities are considered to be “controlled” by
the Fund. The Fund and its affiliates, Adams Natural Resources
Fund, Inc. (“PEO”) and Adams Funds Advisers, LLC (“AFA”), have a
shared management team.
PEO — The
Fund owns 2,186,774 shares of PEO, a non-diversified, closed-end
investment company, representing 8.9% of its outstanding shares.
The Fund accounts for PEO as a portfolio investment that meets the
definition of a non-controlled affiliate. Directors of the Fund are
also directors of PEO.
AFA — In
April 2015, Fund shareholders authorized the Fund to provide
investment advisory services to external parties, and the
Securities and Exchange Commission granted no-action relief under
section 12(d)(3) of the 1940 Act to allow the Fund to create a
separate, wholly-owned entity for this purpose. The Fund provided
the initial capital for the start-up costs of AFA, a Maryland
limited liability company, and the Fund is the sole member and
General Manager, as provided by the Operating Agreement between AFA
and the Fund. This structure mitigates the risk of potential
liabilities for the Fund associated with any claims that may arise
against AFA during the ordinary course of conducting its business.
Given that AFA is an operating company that provides no services to
the Fund, the Fund accounts for AFA as a portfolio investment that
meets the definition of a controlled affiliate.
AFA’s profit is dependent on it having assets under management. At
December 31, 2021, AFA had no assets under management. Failure to
develop new relationships will impact AFA’s ability to generate
revenue, and accordingly, the Fund’s valuation of its investment in
AFA. While unlikely, to the extent that AFA’s operating costs
exceed its assets held, the Fund may be required to provide
additional capital to AFA to sustain its operations. For tax
purposes, AFA’s operating income (or loss) is consolidated with
that of the Fund.
Expenses — The Fund and its
affiliates share personnel, systems, and other infrastructure items
and are charged a portion of the shared expenses. To protect the
Fund from potential conflicts of interest, policies and procedures
are in place covering the sharing of expenses among the entities.
Expenses solely attributable to an entity are charged to that
entity. Expenses that are not solely attributable to one entity are
allocated in accordance with the Fund’s expense sharing policy. The
Fund’s policy dictates that expenses, other than those related to
personnel, are attributed to AFA based on the average estimated
amount of time spent by all personnel on AFA-related activities
relative to overall job functions; the remaining portion is
attributed to the Fund and PEO based on relative net assets.
Personnel-related expenses are attributed to AFA based on the
individual’s time spent on AFA-related activities; the remaining
portion is attributed to the Fund and PEO based on relative market
values of portfolio securities covered for research staff and
relative
Notes To Financial Statements (continued)
net assets for all others. Expense allocations are updated
quarterly. Because AFA has no assets under management, only those
expenses directly attributable to AFA are charged to AFA.
For the year ended December 31, 2021, shared expenses totaled
$17,596,434, of which $3,693,089 and $2,095 were charged to PEO and
AFA, respectively, in accordance with the Fund’s expense sharing
policy. There were no amounts due to, or due from, its affiliates
at December 31, 2021.
Investment Transactions, Investment
Income, and Distributions — The Fund's investment decisions
are made by the portfolio management team with recommendations from
the research staff. Policies and procedures are in place covering
the allocation of investment opportunities among the Fund and its
affiliates to protect the Fund from potential conflicts of
interest. Investment transactions are accounted for on trade date.
Realized gains and losses on sales of investments are recorded on
the basis of specific identification. Dividend income and
distributions to shareholders are recognized on the ex-dividend
date.
Valuation — The Fund’s
financial instruments are reported at fair value, which is defined
as the price that would be received from selling an asset or paid
to transfer a liability in an orderly transaction between market
participants at the measurement date. The Fund has a Valuation
Committee (“Committee”) so that financial instruments are
appropriately priced at fair value in accordance with GAAP and the
1940 Act. Subject to oversight and approval by the Board of
Directors, the Committee establishes methodologies and procedures
to value securities for which market quotations are not readily
available.
GAAP establishes the following hierarchy that categorizes the
inputs used to measure fair value:
•
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 Fund’s own
assumptions, developed based on the best information available
under the circumstances.
Investments in securities traded on national exchanges are valued
at the last reported sale price as of the close of regular trading
on the relevant exchange on the day of valuation. Over-the-counter
and listed equity securities for which a sale price is not
available are valued at the last quoted bid price. Money market
funds are valued at net asset value. These securities are generally
categorized as Level 1 in the hierarchy.
Total return swap agreements are valued using independent,
observable inputs, including underlying security prices, dividends,
and interest rates. These securities are generally categorized as
Level 2 in the hierarchy.
The Fund’s investment in its controlled affiliate, AFA, is valued
by methods deemed reasonable in good faith by the Committee.
Because AFA has no client assets under management, the Committee
uses AFA’s total assets, comprised solely of cash, to approximate
fair value. There was no uncertainty surrounding this input
Notes To Financial Statements (continued)
at
the reporting date. Fair value determinations are reviewed on a
regular basis and updated as needed. Given the absence of market
quotations or observable inputs, the Fund’s investment in AFA is
categorized as Level 3 in the hierarchy.
At December 31, 2021, the Fund’s financial instruments were
classified as follows:
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks |
|
|
|
$ |
2,636,557,327 |
|
|
|
|
$ |
— |
|
|
|
|
$ |
— |
|
|
|
|
$ |
2,636,557,327 |
|
|
Other investments |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
466,000 |
|
|
|
|
|
466,000 |
|
|
Short-term investments |
|
|
|
|
25,420,390 |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
25,420,390 |
|
|
Total investments |
|
|
|
$ |
2,661,977,717 |
|
|
|
|
$ |
— |
|
|
|
|
$ |
466,000 |
|
|
|
|
$ |
2,662,443,717 |
|
|
|
|
|
|
|
|
The following is a reconciliation of the change in the value of
Level 3 investments: |
|
Balance at December 31, 2020 |
|
|
|
|
|
|
|
|
|
$ |
466,000 |
|
|
Purchases |
|
|
|
|
|
|
|
|
|
|
— |
|
|
Change in unrealized appreciation on investments in
the Statement of Operations |
|
|
|
|
|
|
|
|
|
|
— |
|
|
Balance at December 31, 2021 |
|
|
|
|
|
|
|
|
|
$ |
466,000 |
|
|
2. FEDERAL INCOME TAXES
No federal income tax provision is required since the Fund’s policy
is to qualify as a regulated investment company under the Internal
Revenue Code and to distribute substantially all of its taxable
income and gains to its shareholders. Additionally, management has
analyzed the tax positions included in federal income tax returns
from the previous three years that remain subject to examination,
and concluded no provision was required. Any income tax-related
interest or penalties would be recognized as income tax expense. At
December 31, 2021, the identified cost of securities for
federal income tax purposes was $1,409,047,109 and net unrealized
appreciation aggregated $1,253,396,608, consisting of gross
unrealized appreciation of $1,272,970,521 and gross unrealized
depreciation of $19,573,913.
Distributions are determined in accordance with the Fund’s annual
6% minimum distribution rate commitment, based on the Fund’s
average market price, and income tax regulations, which may differ
from GAAP. Such differences are primarily related to the Fund’s
retirement plans, equity-based compensation, wash sales, tax
straddles for total return swaps, and investment in AFA.
Differences that are permanent, while not material for the year
ended December 31, 2021, are reclassified in the capital
accounts of the Fund’s financial statements and have no impact on
net assets. For tax purposes, distributions paid by the Fund during
the years ended December 31, 2021 and December 31, 2020
were classified as ordinary income of $61,051,501 and $20,660,825,
respectively, and long-term capital gain of $269,744,674 and
$91,333,875, respectively. The tax basis of distributable earnings
at December 31, 2021 was $487,950 of undistributed ordinary
income and $1,178,971 of undistributed long-term capital
gain.
3. INVESTMENT TRANSACTIONS
Purchases and sales of portfolio investments, other than short-term
investments, securities lending collateral, and derivative
transactions, during the year ended December 31, 2021 were
$1,591,997,533 and $1,774,891,109, respectively.
4. DERIVATIVES
During the year ended December 31, 2021, the Fund invested in
derivative instruments. The Fund uses derivatives for a variety of
purposes, including, but not limited to, the ability to gain or
limit exposure to particular market sectors or securities, to
provide additional capital gains, to limit equity price risk in the
normal course of pursuing its investment objectives, and/or to
obtain leverage.
Notes To Financial Statements (continued)
Total Return Swap
Agreements — The Fund utilizes total return swap agreements
in carrying out a paired trade strategy, where it enters into a
long contract for a single stock and a short contract for a sector
exchange-traded fund in comparable notional amounts. Total return
swap agreements involve commitments based on a notional amount to
pay interest in exchange for a market-linked return of a reference
security. Upon closing a long contract, the Fund will receive a
payment to the extent the total return of the reference security is
positive for the contract period and exceeds the offsetting
interest rate obligation or will make a payment if the total return
is negative for the contract period. Upon closing a short contract,
the Fund will receive a payment to the extent the total return of
the reference security is negative for the contract period and
exceeds the offsetting interest rate obligation or will make a
payment if the total return is positive for the contract period.
The fair value of each total return swap agreement is determined
daily and the change in value is recorded as a change in unrealized
appreciation on total return swap agreements in the Statement of
Operations. Payments received or made upon termination during the
period are recorded as a realized gain or loss on total return swap
agreements in the Statement of Operations.
Total return swap agreements entail risks associated with
counterparty credit, liquidity, and equity price risk. Such risks
include that the Fund or the counterparty may default on its
obligation, that there is no liquid market for these agreements,
and that there may be unfavorable changes in the price of the
reference security. To mitigate the Fund’s counterparty credit
risk, the Fund enters into master netting and collateral
arrangements with the counterparty. A master netting agreement
allows either party to terminate the agreement prior to termination
date and provides the ability to offset amounts the Fund owes the
counterparty against the amounts the counterparty owes the Fund for
a single net settlement. The Fund’s policy is to net all derivative
instruments subject to a netting agreement and offset the value of
derivative liabilities against the value of derivative assets. The
net cumulative unrealized gain (asset) on open total return swap
agreements or the net cumulative unrealized loss (liability) on
open total return swap agreements is presented in the Statement of
Assets and Liabilities. At December 31, 2021, there were no open
total return swap agreements. During the year ended December 31,
2021, the average daily notional amounts of open long and short
total return swap agreements, an indicator of the volume of
activity, were $14,807,002 and $(14,762,421), respectively.
A collateral arrangement requires each party to provide collateral
with a value, adjusted daily and subject to a minimum transfer
amount, equal to the net amount owed to the other party under the
agreement. The counterparty provides cash collateral to the Fund
and the Fund provides collateral by segregating portfolio
securities, subject to a valuation allowance, into a tri-party
account at its custodian. At December 31, 2021, there were no
securities pledged as collateral and no cash collateral was held by
the Fund.
5. CAPITAL STOCK
The Fund has 10,000,000 authorized and unissued preferred shares,
$0.001 par value.
On December 22, 2021, the Fund issued 6,840,167 shares of its
Common Stock at a price of $19.14 per share (the average market
price on December 8, 2021) to shareholders of record
November 22, 2021, who elected to take stock in payment of the
year-end distribution. During the year ended December 31, 2021, the
Fund issued 5,446 shares of Common Stock at a weighted average
price of $19.03 per share as dividend equivalents to holders of
deferred stock units and restricted stock units under the 2005
Equity Incentive Compensation Plan. Additionally, 895 shares were
canceled.
On December 23, 2020, the Fund issued 2,294,374 shares of its
Common Stock at a price of $17.11 per share (the average market
price on December 9, 2020) to shareholders of record
November 23, 2020, who elected to take stock in payment of the
year-end distribution. During the year ended December 31, 2020, the
Fund issued 3,226 shares of Common Stock at a weighted average
price of $16.38 per share as dividend equivalents to holders of
deferred stock units and restricted stock units under the 2005
Equity Incentive Compensation Plan.
Notes To Financial Statements (continued)
The Fund may purchase shares of its Common Stock from time to time,
in accordance with parameters set by the Board of Directors, at
such prices and amounts as the portfolio management team deems
appropriate. This includes repurchases under the Fund’s enhanced
discount management and liquidity program when fund shares trade at
prices below 15% of net asset value for at least 30 consecutive
trading days. The enhanced program also provides that the Fund will
engage in a proportional tender offer to repurchase shares when the
discount exceeds 19% for 30 consecutive trading days, not to exceed
one such offer in any twelve-month period. Transactions in its
Common Stock for 2021 and 2020 were as follows:
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Shares issued in payment of distributions |
|
|
|
|
6,845,613 |
|
|
|
|
|
2,297,600 |
|
|
|
|
$ |
131,024,412 |
|
|
|
|
$ |
39,309,604 |
|
Shares
purchased (at a weighted average discount from net asset value of
15.1% in 2020)
|
|
|
|
|
— |
|
|
|
|
|
(135,192) |
|
|
|
|
|
— |
|
|
|
|
|
(1,573,374 |
) |
Shares canceled |
|
|
|
|
(895) |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
Net change |
|
|
|
|
6,844,718 |
|
|
|
|
|
2,162,408 |
|
|
|
|
$ |
131,024,412 |
|
|
|
|
$ |
37,736,230 |
|
6. RETIREMENT PLANS
The Fund sponsors a qualified defined contribution plan for all
employees with at least six months of service and a nonqualified
defined contribution plan for eligible employees to supplement the
qualified plan. The Fund matches employee contributions made to the
plans and, subject to Board approval, may also make a discretionary
contribution to the plans. During the year ended December 31, 2021,
the Fund recorded matching contributions of $431,064 and a
liability, representing the 2021 discretionary contribution, of
$350,781.
7. EQUITY-BASED COMPENSATION
The Fund’s 2005 Equity Incentive Compensation Plan, adopted at the
2005 Annual Meeting and reapproved at the 2010 Annual Meeting,
expired on April 27, 2015. Restricted stock units granted to
nonemployee directors that are 100% vested, but payment of which
has been deferred at the election of the director, remain
outstanding at December 31, 2021.
Outstanding awards were granted at fair market value on grant date
(determined by the average of the high and low price on that date)
and earn an amount equal to the Fund’s per share distribution,
payable in reinvested shares, which are paid concurrently with the
payment of the original share grant. A summary of the activity
during the year ended December 31, 2021 is as follows:
Awards
|
|
|
Units
|
|
|
Weighted Average
Grant-Date
Fair Value
|
|
Balance at December 31, 2020 |
|
|
|
|
49,714 |
|
|
|
|
$ |
12.95 |
|
|
Reinvested dividend equivalents |
|
|
|
|
5,446 |
|
|
|
|
|
19.03 |
|
|
Issued |
|
|
|
|
(8,052) |
|
|
|
|
|
13.89 |
|
|
Balance at December 31, 2021 |
|
|
|
|
47,108 |
|
|
|
|
$ |
13.29 |
|
|
At December 31, 2021, the Fund had no unrecognized
compensation cost. The total fair value of awards issued during the
year ended December 31, 2021 was $140,266.
8. OFFICER AND DIRECTOR COMPENSATION
The aggregate remuneration paid by the Fund during the year ended
December 31, 2021 to officers and directors amounted to $6,831,226,
of which $651,349 was paid to independent directors. These amounts
represent the taxable income, including $140,266 in deferred
director compensation from previous years, to the Fund’s officers
and directors and, therefore, may differ from the amounts reported
in the accompanying Statement of Operations that are recorded and
expensed in accordance with GAAP. At December 31, 2021, $4,706,107
was due to officers and directors, representing amounts related to
estimated cash compensation
Notes To Financial Statements (continued)
and estimated retirement plan discretionary contributions payable
to officers, and reinvested dividend payments on restricted stock
awards payable to directors.
9. PORTFOLIO SECURITIES LOANED
The Fund makes loans of securities to approved brokers to earn
additional income. The loans are collateralized by cash and/or U.S.
Treasury and government agency obligations 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 Fund on
the next business day. On loans collateralized by cash, the cash
collateral is invested in a registered money market fund. The Fund
accounts for securities lending transactions as secured financing
and retains a portion of the income from lending fees and interest
on the investment of cash collateral. The Fund also continues to
receive dividends on the securities loaned. Gain or loss in the
fair value of securities loaned that may occur during the term of
the loan will be for the account of the Fund. At December 31, 2021,
the Fund had no securities on loan. The Fund is indemnified by the
custodian, serving as lending agent, for the loss of loaned
securities and has the right under the lending agreement to recover
the securities from the borrower on demand.
10. LEASES
The Fund and its affiliates jointly lease office space and
equipment under non-cancelable lease agreements expiring at various
dates through 2026. Payments are made in aggregate pursuant to
these agreements but are deemed variable for each entity, as the
allocable portion to each entity fluctuates when applying the
expense sharing policy among all affiliates at each payment date.
Variable payments of this nature do not require recognition of an
asset or an offsetting liability in the Statement of Assets and
Liabilities and are recognized as rental expense on a straight-line
basis over the lease term within occupancy and other office
expenses in the Statement of Operations. During the year, the Fund
recognized rental expense of $398,755.
|
|
|
Year Ended
December 31,
|
|
|
2021
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Per
Share Operating Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of year |
|
|
|
|
$20.06 |
|
|
|
|
|
$17.93 |
|
|
|
|
|
$14.89 |
|
|
|
|
|
$17.55 |
|
|
|
|
|
$15.22 |
|
|
Net investment income
|
|
|
|
|
0.17 |
|
|
|
|
|
0.20 |
|
|
|
|
|
0.20 |
|
|
|
|
|
0.20 |
|
|
|
|
|
0.22 |
|
|
Net realized gain (loss) and change in unrealized
appreciation
|
|
|
|
|
5.42 |
|
|
|
|
|
3.01 |
|
|
|
|
|
4.31 |
|
|
|
|
|
(0.87) |
|
|
|
|
|
3.55 |
|
|
Total from operations |
|
|
|
|
5.59 |
|
|
|
|
|
3.21 |
|
|
|
|
|
4.51 |
|
|
|
|
|
(0.67) |
|
|
|
|
|
3.77 |
|
|
Less
distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
(0.20) |
|
|
|
|
|
(0.19) |
|
|
|
|
|
(0.22) |
|
|
|
|
|
(0.21) |
|
|
|
|
|
(0.22) |
|
|
Net realized gain
|
|
|
|
|
(2.78) |
|
|
|
|
|
(0.84) |
|
|
|
|
|
(1.20) |
|
|
|
|
|
(1.79) |
|
|
|
|
|
(1.16) |
|
|
Total distributions |
|
|
|
|
(2.98) |
|
|
|
|
|
(1.03) |
|
|
|
|
|
(1.42) |
|
|
|
|
|
(2.00) |
|
|
|
|
|
(1.38) |
|
|
Capital share repurchases (note
5)
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
0.02 |
|
|
|
|
|
0.03 |
|
|
|
|
|
0.03 |
|
|
Reinvestment of distributions
|
|
|
|
|
(0.17) |
|
|
|
|
|
(0.05) |
|
|
|
|
|
(0.07) |
|
|
|
|
|
(0.02) |
|
|
|
|
|
(0.09) |
|
|
Total capital share transactions |
|
|
|
|
(0.17) |
|
|
|
|
|
(0.05) |
|
|
|
|
|
(0.05) |
|
|
|
|
|
0.01 |
|
|
|
|
|
(0.06) |
|
|
Net asset value, end of year
|
|
|
|
|
$22.50 |
|
|
|
|
|
$20.06 |
|
|
|
|
|
$17.93 |
|
|
|
|
|
$14.89 |
|
|
|
|
|
$17.55 |
|
|
Market price, end of year |
|
|
|
|
$19.41 |
|
|
|
|
|
$17.29 |
|
|
|
|
|
$15.77 |
|
|
|
|
|
$12.62 |
|
|
|
|
|
$15.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Investment Return (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on market price
|
|
|
|
|
29.9% |
|
|
|
|
|
16.4% |
|
|
|
|
|
36.6% |
|
|
|
|
|
-3.6% |
|
|
|
|
|
29.4% |
|
|
Based on net asset value
|
|
|
|
|
29.8% |
|
|
|
|
|
18.8% |
|
|
|
|
|
31.6% |
|
|
|
|
|
-2.6% |
|
|
|
|
|
26.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of year (in
millions)
|
|
|
|
|
$2,653 |
|
|
|
|
|
$2,227 |
|
|
|
|
|
$1,952 |
|
|
|
|
|
$1,581 |
|
|
|
|
|
$1,786 |
|
|
Ratio of expenses to average net
assets
|
|
|
|
|
0.56% |
|
|
|
|
|
0.60% |
|
|
|
|
|
0.65% |
|
|
|
|
|
0.56% |
|
|
|
|
|
0.56% |
|
|
Ratio of net
investment income to average net assets
|
|
|
|
|
0.77% |
|
|
|
|
|
1.12% |
|
|
|
|
|
1.18% |
|
|
|
|
|
1.14% |
|
|
|
|
|
1.30% |
|
|
Portfolio turnover
|
|
|
|
|
64.4% |
|
|
|
|
|
58.7% |
|
|
|
|
|
61.6% |
|
|
|
|
|
58.4% |
|
|
|
|
|
39.2% |
|
|
Number of shares
outstanding at end of year (in 000’s)
|
|
|
|
|
117,872 |
|
|
|
|
|
111,027 |
|
|
|
|
|
108,865 |
|
|
|
|
|
106,206 |
|
|
|
|
|
101,736 |
|
|
(a)
Total investment return is calculated assuming a purchase of a Fund
share at the beginning of the period and a sale on the last day of
the period reported either at net asset value or market price per
share, excluding any brokerage commissions. Distributions are
assumed to be reinvested at the price received in the Fund’s
dividend reinvestment plan.
The accompanying notes are an integral part of the financial
statements.
|
|
|
Shares
|
|
|
Value (a)
|
|
Common Stocks — 99.4%
|
|
Communication
Services — 10.2%
|
|
Alphabet Inc. Class A (b)
|
|
|
|
|
41,500 |
|
|
|
|
$ |
120,227,160 |
|
AT&T Inc.
|
|
|
|
|
361,482 |
|
|
|
|
|
8,892,457 |
|
Charter Communications, Inc. Class A
(b)
|
|
|
|
|
23,200 |
|
|
|
|
|
15,125,704 |
|
Comcast Corporation Class A
|
|
|
|
|
434,300 |
|
|
|
|
|
21,858,319 |
|
Meta Platforms, Inc. Class A
(b)
|
|
|
|
|
193,400 |
|
|
|
|
|
65,050,090 |
|
Netflix, Inc. (b)
|
|
|
|
|
39,131 |
|
|
|
|
|
23,574,080 |
|
Walt Disney Company (b)
|
|
|
|
|
105,800 |
|
|
|
|
|
16,387,362 |
|
|
|
|
|
|
271,115,172 |
|
Consumer Discretionary — 12.1%
|
|
Amazon.com, Inc. (b)
|
|
|
|
|
31,700 |
|
|
|
|
|
105,698,578 |
|
Capri Holdings Limited (b)
|
|
|
|
|
201,600 |
|
|
|
|
|
13,085,856 |
|
Darden Restaurants, Inc.
|
|
|
|
|
94,300 |
|
|
|
|
|
14,205,352 |
|
General Motors Company (b)
|
|
|
|
|
196,300 |
|
|
|
|
|
11,509,069 |
|
Hilton Worldwide Holdings, Inc.
(b)
|
|
|
|
|
114,400 |
|
|
|
|
|
17,845,256 |
|
Home Depot, Inc.
|
|
|
|
|
27,300 |
|
|
|
|
|
11,329,773 |
|
Lowe’s Companies, Inc.
|
|
|
|
|
48,700 |
|
|
|
|
|
12,587,976 |
|
Lululemon Athletica Inc. (b)
|
|
|
|
|
16,300 |
|
|
|
|
|
6,380,635 |
|
NIKE, Inc. Class B
|
|
|
|
|
87,600 |
|
|
|
|
|
14,600,292 |
|
O’Reilly Automotive, Inc. (b)
|
|
|
|
|
27,600 |
|
|
|
|
|
19,491,948 |
|
Target Corporation
|
|
|
|
|
113,500 |
|
|
|
|
|
26,268,440 |
|
Tesla, Inc. (b)
|
|
|
|
|
33,300 |
|
|
|
|
|
35,190,774 |
|
TJX Companies, Inc.
|
|
|
|
|
190,500 |
|
|
|
|
|
14,462,760 |
|
Ulta Beauty, Inc. (b)
|
|
|
|
|
41,100 |
|
|
|
|
|
16,947,174 |
|
|
|
|
|
|
319,603,883 |
|
Consumer Staples —
5.8%
|
|
Coca-Cola Company
|
|
|
|
|
437,200 |
|
|
|
|
|
25,886,612 |
|
Costco Wholesale Corporation
|
|
|
|
|
54,600 |
|
|
|
|
|
30,996,420 |
|
Estee Lauder Companies Inc. Class
A
|
|
|
|
|
56,500 |
|
|
|
|
|
20,916,300 |
|
PepsiCo, Inc.
|
|
|
|
|
78,800 |
|
|
|
|
|
13,688,348 |
|
Philip Morris International
Inc.
|
|
|
|
|
294,700 |
|
|
|
|
|
27,996,500 |
|
Procter & Gamble Company
|
|
|
|
|
115,350 |
|
|
|
|
|
18,868,953 |
|
Walmart Inc.
|
|
|
|
|
115,500 |
|
|
|
|
|
16,711,695 |
|
|
|
|
|
|
155,064,828 |
|
Schedule of Investments (continued)
|
|
|
Shares
|
|
|
Value (a)
|
|
Energy — 3.0%
|
|
Adams Natural Resources Fund, Inc.
(c)(f)
|
|
|
|
|
2,186,774 |
| |
|
$ |
36,125,506 |
|
ConocoPhillips
|
|
|
|
|
215,000 |
| |
|
|
15,518,700 |
|
EOG Resources, Inc.
|
|
|
|
|
160,900 |
| |
|
|
14,292,747 |
|
Marathon Petroleum Corporation
|
|
|
|
|
216,700 |
|
|
|
|
13,866,633 |
|
|
|
|
|
|
79,803,586 |
|
Financials —
10.6%
|
|
American International Group,
Inc.
|
|
|
|
|
373,600 |
| |
|
|
21,242,896 |
|
Bank of America Corp.
|
|
|
|
|
1,148,400 |
| |
|
|
51,092,316 |
|
Berkshire Hathaway Inc. Class B
(b)
|
|
|
|
|
150,800 |
| |
|
|
45,089,200 |
|
Capital One Financial
Corporation
|
|
|
|
|
56,700 |
| |
|
|
8,226,603 |
|
JPMorgan Chase & Co.
|
|
|
|
|
190,500 |
| |
|
|
30,165,675 |
|
MetLife, Inc.
|
|
|
|
|
422,600 |
| |
|
|
26,408,274 |
|
Moody’s Corporation
|
|
|
|
|
80,000 |
| |
|
|
31,246,400 |
|
Morgan Stanley
|
|
|
|
|
383,500 |
| |
|
|
37,644,360 |
|
Wells Fargo & Company
|
|
|
|
|
620,000 |
|
|
|
|
29,747,600 |
|
|
|
|
|
|
280,863,324 |
|
Health Care —
13.4%
|
|
AbbVie, Inc.
|
|
|
|
|
319,200 |
| |
|
|
43,219,680 |
|
AmerisourceBergen Corporation
|
|
|
|
|
178,300 |
| |
|
|
23,694,287 |
|
Centene Corporation (b)
|
|
|
|
|
204,400 |
| |
|
|
16,842,560 |
|
CVS Health Corporation
|
|
|
|
|
382,900 |
| |
|
|
39,499,964 |
|
Eli Lilly and Company
|
|
|
|
|
149,600 |
| |
|
|
41,322,512 |
|
IQVIA Holdings Inc. (b)
|
|
|
|
|
79,700 |
| |
|
|
22,486,558 |
|
Johnson & Johnson
|
|
|
|
|
120,200 |
| |
|
|
20,562,614 |
|
Laboratory Corporation of America
Holdings (b)
|
|
|
|
|
48,700 |
| |
|
|
15,302,027 |
|
Regeneron Pharmaceuticals, Inc.
(b)
|
|
|
|
|
30,100 |
| |
|
|
19,008,752 |
|
Thermo Fisher Scientific Inc.
|
|
|
|
|
68,600 |
| |
|
|
45,772,664 |
|
UnitedHealth Group
Incorporated
|
|
|
|
|
133,400 |
|
|
|
|
66,985,476 |
|
|
|
|
|
|
354,697,094 |
|
|
Schedule of Investments (continued)
|
|
|
Shares
|
|
|
Value (a)
|
|
Industrials — 7.7%
|
|
Carrier Global Corporation
|
|
|
|
|
483,800 |
|
|
|
|
$ |
26,241,312 |
|
Caterpillar Inc.
|
|
|
|
|
115,100 |
|
|
|
|
|
23,795,774 |
|
General Dynamics Corporation
|
|
|
|
|
109,800 |
|
|
|
|
|
22,890,006 |
|
General Electric Company
|
|
|
|
|
71,512 |
|
|
|
|
|
6,755,738 |
|
Honeywell International Inc.
|
|
|
|
|
93,600 |
|
|
|
|
|
19,516,536 |
|
Industrial Select Sector SPDR
Fund
|
|
|
|
|
69,000 |
|
|
|
|
|
7,300,890 |
|
Parker-Hannifin Corporation
|
|
|
|
|
74,100 |
|
|
|
|
|
23,572,692 |
|
Quanta Services, Inc.
|
|
|
|
|
191,900 |
|
|
|
|
|
22,003,254 |
|
Raytheon Technologies
Corporation
|
|
|
|
|
258,900 |
|
|
|
|
|
22,280,934 |
|
Union Pacific Corporation
|
|
|
|
|
118,900 |
|
|
|
|
|
29,954,477 |
|
|
|
|
|
|
204,311,613 |
|
Information
Technology — 29.0%
|
|
Adobe Inc. (b)
|
|
|
|
|
68,700 |
|
|
|
|
|
38,957,022 |
|
Analog Devices, Inc.
|
|
|
|
|
100,600 |
|
|
|
|
|
17,682,462 |
|
Apple Inc.
|
|
|
|
|
983,700 |
|
|
|
|
|
174,675,609 |
|
Arista Networks, Inc. (b)
|
|
|
|
|
149,200 |
|
|
|
|
|
21,447,500 |
|
CDW Corp.
|
|
|
|
|
81,000 |
|
|
|
|
|
16,587,180 |
|
Cisco Systems, Inc.
|
|
|
|
|
271,900 |
|
|
|
|
|
17,230,303 |
|
Intuit Inc.
|
|
|
|
|
47,600 |
|
|
|
|
|
30,617,272 |
|
Lam Research Corporation
|
|
|
|
|
42,600 |
|
|
|
|
|
30,635,790 |
|
Mastercard Incorporated Class
A
|
|
|
|
|
95,900 |
|
|
|
|
|
34,458,788 |
|
Micron Technology, Inc.
|
|
|
|
|
130,200 |
|
|
|
|
|
12,128,130 |
|
Microsoft Corporation
|
|
|
|
|
618,100 |
|
|
|
|
|
207,879,392 |
|
NVIDIA Corporation
|
|
|
|
|
208,600 |
|
|
|
|
|
61,351,346 |
|
Oracle Corporation
|
|
|
|
|
122,200 |
|
|
|
|
|
10,657,062 |
|
Palo Alto Networks, Inc. (b)
|
|
|
|
|
37,300 |
|
|
|
|
|
20,767,148 |
|
PayPal Holdings, Inc. (b)
|
|
|
|
|
40,700 |
|
|
|
|
|
7,675,206 |
|
QUALCOMM Incorporated
|
|
|
|
|
157,500 |
|
|
|
|
|
28,802,025 |
|
Visa Inc. Class A
|
|
|
|
|
171,700 |
|
|
|
|
|
37,209,107 |
|
|
|
|
|
|
768,761,342 |
|
|
Schedule of Investments (continued)
|
|
|
Shares
|
|
|
Value (a)
|
|
Materials — 2.2%
|
|
Air Products and Chemicals,
Inc.
|
|
|
|
|
52,400 |
|
|
|
|
$ |
15,943,224 |
|
LyondellBasell Industries N.V.
|
|
|
|
|
111,200 |
|
|
|
|
|
10,255,976 |
|
Sherwin-Williams Company
|
|
|
|
|
65,300 |
|
|
|
|
|
22,996,048 |
|
Steel Dynamics, Inc.
|
|
|
|
|
165,100 |
|
|
|
|
|
10,247,757 |
|
|
|
|
|
|
59,443,005 |
|
Real Estate — 2.9%
|
|
CBRE Group, Inc. Class A (b)
|
|
|
|
|
126,000 |
|
|
|
|
|
13,672,260 |
|
Equinix, Inc.
|
|
|
|
|
26,500 |
|
|
|
|
|
22,414,760 |
|
Prologis, Inc.
|
|
|
|
|
140,300 |
|
|
|
|
|
23,620,908 |
|
Simon Property Group, Inc.
|
|
|
|
|
100,500 |
|
|
|
|
|
16,056,885 |
|
|
|
|
|
|
75,764,813 |
|
Utilities —
2.5%
|
|
CenterPoint Energy, Inc.
|
|
|
|
|
490,300 |
|
|
|
|
|
13,684,273 |
|
Evergy, Inc.
|
|
|
|
|
202,600 |
|
|
|
|
|
13,900,386 |
|
Exelon Corporation
|
|
|
|
|
290,400 |
|
|
|
|
|
16,773,504 |
|
NextEra Energy, Inc.
|
|
|
|
|
243,900 |
|
|
|
|
|
22,770,504 |
|
|
|
|
|
|
67,128,667 |
|
Total Common Stocks
|
|
(Cost $1,382,020,430)
|
|
|
|
|
|
|
|
|
|
|
2,636,557,327 |
|
|
Schedule of Investments (continued)
|
|
|
Shares
|
|
|
Value (a)
|
|
Other Investments — 0.0%
|
|
Financials —
0.0%
|
|
Adams Funds Advisers, LLC
(b)(d)(f)
|
|
|
|
|
|
| |
|
|
|
|
(Cost $150,000)
|
|
|
|
|
|
|
|
|
$ |
466,000 |
|
Short-Term Investments — 1.0%
|
|
Money Market Funds — 1.0%
|
|
Morgan Stanley
Institutional Liquidity Funds
Prime Portfolio, 0.06% (e)
|
|
|
|
|
14,309,895 |
| |
|
|
14,311,326 |
|
Northern Institutional Treasury
Portfolio, 0.01% (e)
|
|
|
|
|
11,109,064 |
|
|
|
|
11,109,064 |
|
Total Short-Term Investments
|
|
(Cost $25,420,221)
|
|
|
|
|
|
|
|
|
|
25,420,390 |
|
Total — 100.4%
|
|
(Cost $1,407,590,651)
|
|
|
|
|
|
| |
|
|
2,662,443,717 |
|
Other Assets Less Liabilities — (0.4)% |
|
|
|
|
|
|
|
|
|
(9,915,839 |
) |
Net Assets —
100.0% |
|
|
|
|
|
| |
|
$
|
2,652,527,878
|
|
|
(a)
Common stocks are listed on the New York Stock Exchange or NASDAQ
and are valued at the last reported sale price on the day of
valuation. See note 1 to financial statements.
(b)
Presently non-dividend paying.
(c)
Non-controlled affiliate, a closed-end sector fund, registered as
an investment company under the Investment Company Act of
1940.
(d)
Controlled affiliate valued using fair value procedures.
(e)
Rate presented is as of period-end and represents the annualized
yield earned over the previous seven days.
(f)
During the year ended December 31, 2021, investments in affiliates
were as follows:
|
Affiliate
|
|
|
Shares
held
|
|
|
Net realized gain
(loss) and
long-term capital
gain
distributions
|
|
|
Dividend
income and
short-term
capital gain
distributions
|
|
|
Change in
unrealized
appreciation
|
|
|
Value
|
|
|
Adams Funds Advisers, LLC (controlled) |
|
|
|
|
n/a |
|
|
|
|
$ |
— |
|
|
|
|
$ |
— |
|
|
|
|
$ |
— |
|
|
|
|
$ |
466,000 |
|
|
|
Adams Natural Resources Funds, Inc. (non-controlled) |
|
|
|
|
2,186,774 |
|
|
|
|
|
131,206 |
|
|
|
|
|
1,858,758 |
|
|
|
|
|
11,261,886 |
|
|
|
|
|
36,125,506 |
|
|
|
Total |
|
|
|
|
|
|
|
|
|
$ |
131,206 |
|
|
|
|
$ |
1,858,758 |
|
|
|
|
$ |
11,261,886 |
|
|
|
|
$ |
36,591,506 |
|
|
The accompanying notes are an integral part of the financial
statements.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Adams Diversified
Equity Fund, Inc.
Opinion on the Financial Statements
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Adams
Diversified Equity Fund, Inc. (the “Fund”) as of December 31, 2021,
the related statement of operations for the year ended December 31,
2021, the statement of changes in net assets for each of the two
years in the period ended December 31, 2021, including the related
notes, and the financial highlights for each of the five years in
the period ended December 31, 2021 (collectively referred to as the
“financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of
the Fund as of December 31, 2021, the results of its operations for
the year then ended, the changes in its net assets for each of the
two years in the period ended December 31, 2021 and the financial
highlights for each of the five years in the period ended December
31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s
management. Our responsibility is to express an opinion on the
Fund’s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Fund in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance
with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement,
whether due to error or fraud.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. Our procedures included confirmation of securities
owned as of December 31, 2021 by correspondence with the custodian
and brokers, when replies were not received from brokers, we
performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 11, 2022
We have served as the Fund’s auditor since 1929.
Principal Changes in Portfolio Securities
During the Six Months Ended December 31, 2021
(unaudited)
|
|
|
Dollar Amount Traded
in the Period
|
|
|
Percent of Net Assets
Held at Period-End
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Raytheon Technologies
Corporation
|
|
|
|
$ |
22,507,394 |
|
|
|
|
|
0.8% |
|
|
General Dynamics Corporation
|
|
|
|
|
21,682,173 |
|
|
|
|
|
0.9 |
|
|
Charter Communications, Inc. Class
A
|
|
|
|
|
20,905,153 |
|
|
|
|
|
0.6 |
|
|
American International Group,
Inc.
|
|
|
|
|
20,703,173 |
|
|
|
|
|
0.8 |
|
|
Moody’s Corporation
|
|
|
|
|
20,647,260* |
|
|
|
|
|
1.2 |
|
|
NextEra Energy, Inc.
|
|
|
|
|
19,672,895 |
|
|
|
|
|
0.9 |
|
|
Regeneron Pharmaceuticals,
Inc.
|
|
|
|
|
18,470,546 |
|
|
|
|
|
0.7 |
|
|
Walmart Inc.
|
|
|
|
|
17,336,295 |
|
|
|
|
|
0.6 |
|
|
Analog Devices, Inc.
|
|
|
|
|
17,038,109 |
|
|
|
|
|
0.7 |
|
|
Netflix, Inc.
|
|
|
|
|
16,542,457* |
|
|
|
|
|
0.9 |
|
|
EOG Resources, Inc.
|
|
|
|
|
15,618,316 |
|
|
|
|
|
0.5 |
|
|
Palo Alto Networks, Inc.
|
|
|
|
|
15,460,370 |
|
|
|
|
|
0.8 |
|
|
Union Pacific Corporation
|
|
|
|
|
15,142,572* |
|
|
|
|
|
1.1 |
|
|
Darden Restaurants, Inc.
|
|
|
|
|
15,067,320 |
|
|
|
|
|
0.5 |
|
|
Laboratory Corporation of America
Holdings
|
|
|
|
|
15,057,889 |
|
|
|
|
|
0.6 |
|
|
Thermo Fisher Scientific Inc.
|
|
|
|
|
14,901,711* |
|
|
|
|
|
1.7 |
|
|
Eli Lilly and Company
|
|
|
|
|
14,666,669* |
|
|
|
|
|
1.6 |
|
|
Exelon Corporation
|
|
|
|
|
13,409,859 |
|
|
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reductions |
|
|
|
|
|
|
|
|
|
|
|
|
|
IDEXX Laboratories, Inc.
|
|
|
|
|
26,980,498 |
|
|
|
|
|
— |
|
|
Boeing Company
|
|
|
|
|
22,478,501 |
|
|
|
|
|
— |
|
|
FedEx Corporation
|
|
|
|
|
22,399,945 |
|
|
|
|
|
— |
|
|
Universal Health Services, Inc.
Class B
|
|
|
|
|
20,691,357 |
|
|
|
|
|
— |
|
|
PayPal Holdings, Inc.
|
|
|
|
|
18,685,827 |
|
|
|
|
|
0.3 |
|
|
Microsoft Corporation
|
|
|
|
|
17,704,680 |
|
|
|
|
|
7.8 |
|
|
T. Rowe Price Group
|
|
|
|
|
17,425,007 |
|
|
|
|
|
— |
|
|
Microchip Technology
Incorporated
|
|
|
|
|
16,229,379 |
|
|
|
|
|
— |
|
|
Constellation Brands, Inc. Class
A
|
|
|
|
|
15,879,280 |
|
|
|
|
|
— |
|
|
Public Service Enterprise Group
Incorporated
|
|
|
|
|
15,747,282 |
|
|
|
|
|
— |
|
|
Huntington Ingalls Industries,
Inc.
|
|
|
|
|
15,639,258 |
|
|
|
|
|
— |
|
|
General Electric Company
|
|
|
|
|
15,416,317 |
|
|
|
|
|
0.3 |
|
|
Berkshire Hathaway Inc. Class
B
|
|
|
|
|
15,326,852 |
|
|
|
|
|
1.7 |
|
|
Southern Company
|
|
|
|
|
15,235,701 |
|
|
|
|
|
— |
|
|
CMS Energy Corporation
|
|
|
|
|
14,703,208 |
|
|
|
|
|
— |
|
|
Micron Technology, Inc.
|
|
|
|
|
14,155,237 |
|
|
|
|
|
0.5 |
|
|
Abbott Laboratories
|
|
|
|
|
13,854,769 |
|
|
|
|
|
— |
|
|
Capital One Financial
Corporation
|
|
|
|
|
13,567,475 |
|
|
|
|
|
0.3 |
|
|
*
Addition to an existing position
The transactions presented above are those that exceeded .50% of
period-end net assets, representing new positions, fully-eliminated
positions, and the largest additions and reductions to existing
portfolio securities, as noted, and exclude those in sector
exchange-traded funds.
Historical Financial Statistics
Year
|
|
|
(000’s)
Value of
Net Assets
|
|
|
(000’s)
Shares
Outstanding
|
|
|
Net Asset
Value
Per Share
|
|
|
Market
Value
Per Share
|
|
|
Income
Dividends
Per Share
|
|
|
Capital
Gains
Distributions
Per Share
|
|
|
Return of
Capital
Distributions
Per Share
|
|
|
Total
Dividends
and
Distributions
Per Share
|
|
|
Annual
Distribution
Rate*
|
|
2007 |
|
|
|
$ |
1,378,480 |
|
|
|
|
|
87,669 |
|
|
|
|
$ |
15.72 |
|
|
|
|
$ |
14.12 |
|
|
|
|
$ |
.32 |
|
|
|
|
$ |
.71 |
|
|
|
|
$ |
— |
|
|
|
|
$ |
1.03 |
|
|
|
|
|
7.1 |
% |
2008 |
|
|
|
|
840,012 |
|
|
|
|
|
87,406 |
|
|
|
|
|
9.61 |
|
|
|
|
|
8.03 |
|
|
|
|
|
.26 |
|
|
|
|
|
.38 |
|
|
|
|
|
— |
|
|
|
|
|
.64 |
|
|
|
|
|
5.7 |
|
2009 |
|
|
|
|
1,045,027 |
|
|
|
|
|
87,415 |
|
|
|
|
|
11.95 |
|
|
|
|
|
10.10 |
|
|
|
|
|
.15 |
|
|
|
|
|
.30 |
|
|
|
|
|
— |
|
|
|
|
|
.45 |
|
|
|
|
|
5.2 |
|
2010 |
|
|
|
|
1,124,672 |
|
|
|
|
|
88,885 |
|
|
|
|
|
12.65 |
|
|
|
|
|
10.72 |
|
|
|
|
|
.14 |
|
|
|
|
|
.37 |
|
|
|
|
|
— |
|
|
|
|
|
.51 |
|
|
|
|
|
5.1 |
|
2011 |
|
|
|
|
1,050,734 |
|
|
|
|
|
91,074 |
|
|
|
|
|
11.54 |
|
|
|
|
|
9.64 |
|
|
|
|
|
.15 |
|
|
|
|
|
.50 |
|
|
|
|
|
— |
|
|
|
|
|
.65 |
|
|
|
|
|
6.1 |
|
2012 |
|
|
|
|
1,155,997 |
|
|
|
|
|
93,030 |
|
|
|
|
|
12.43 |
|
|
|
|
|
10.59 |
|
|
|
|
|
.18 |
|
|
|
|
|
.49 |
|
|
|
|
|
— |
|
|
|
|
|
.67 |
|
|
|
|
|
6.3 |
|
2013 |
|
|
|
|
1,421,551 |
|
|
|
|
|
94,224 |
|
|
|
|
|
15.09 |
|
|
|
|
|
13.07 |
|
|
|
|
|
.22 |
|
|
|
|
|
.62 |
|
|
|
|
|
— |
|
|
|
|
|
.84 |
|
|
|
|
|
7.1 |
|
2014 |
|
|
|
|
1,527,773 |
|
|
|
|
|
96,287 |
|
|
|
|
|
15.87 |
|
|
|
|
|
13.68 |
|
|
|
|
|
.20 |
|
|
|
|
|
.98 |
|
|
|
|
|
— |
|
|
|
|
|
1.18 |
|
|
|
|
|
8.8 |
|
2015 |
|
|
|
|
1,472,144 |
|
|
|
|
|
97,914 |
|
|
|
|
|
15.04 |
|
|
|
|
|
12.83 |
|
|
|
|
|
.14 |
|
|
|
|
|
.79 |
|
|
|
|
|
— |
|
|
|
|
|
.93 |
|
|
|
|
|
6.8 |
|
2016 |
|
|
|
|
1,513,498 |
|
|
|
|
|
99,437 |
|
|
|
|
|
15.22 |
|
|
|
|
|
12.71 |
|
|
|
|
|
.18 |
|
|
|
|
|
.81 |
|
|
|
|
|
— |
|
|
|
|
|
.99 |
|
|
|
|
|
7.8 |
|
2017 |
|
|
|
|
1,785,772 |
|
|
|
|
|
101,736 |
|
|
|
|
|
17.55 |
|
|
|
|
|
15.03 |
|
|
|
|
|
.22 |
|
|
|
|
|
1.16 |
|
|
|
|
|
— |
|
|
|
|
|
1.38 |
|
|
|
|
|
9.8 |
|
2018 |
|
|
|
|
1,580,889 |
|
|
|
|
|
106,206 |
|
|
|
|
|
14.89 |
|
|
|
|
|
12.62 |
|
|
|
|
|
.21 |
|
|
|
|
|
1.79 |
|
|
|
|
|
— |
|
|
|
|
|
2.00 |
|
|
|
|
|
12.9 |
|
2019 |
|
|
|
|
1,951,592 |
|
|
|
|
|
108,865 |
|
|
|
|
|
17.93 |
|
|
|
|
|
15.77 |
|
|
|
|
|
.22 |
|
|
|
|
|
1.20 |
|
|
|
|
|
— |
|
|
|
|
|
1.42 |
|
|
|
|
|
9.6 |
|
2020 |
|
|
|
|
2,227,273 |
|
|
|
|
|
111,027 |
|
|
|
|
|
20.06 |
|
|
|
|
|
17.29 |
|
|
|
|
|
.19 |
|
|
|
|
|
.84 |
|
|
|
|
|
— |
|
|
|
|
|
1.03 |
|
|
|
|
|
6.8 |
|
2021 |
|
|
|
|
2,652,528 |
|
|
|
|
|
117,872 |
|
|
|
|
|
22.50 |
|
|
|
|
|
19.41 |
|
|
|
|
|
.20 |
|
|
|
|
|
2.78 |
|
|
|
|
|
— |
|
|
|
|
|
2.98 |
|
|
|
|
|
15.7 |
|
*
The annual distribution rate is the total dividends and
distributions per share divided by the Fund’s average month-end
stock price. The average month-end stock price is determined for
the twelve months ended October 31, which is consistent with
the calculation used for the annual 6% minimum distribution rate
commitment adopted in September 2011.
(unaudited)
Summary Fund Information
Investment
Objectives: The Fund’s investment objectives are
preservation of capital, reasonable income, and opportunity for
capital gain. These objectives have been in place since the Fund’s
inception in 1929, although they may be changed by the Board of
Directors.
Investment
Strategy and Policies: The Fund is an internally-managed
diversified large-cap U.S. equity fund that seeks to outperform the
S&P 500 and invests at least 80% of its assets in highly liquid
S&P 500 stocks. It has broad flexibility in the selection of
stocks, but maintains a “sector neutral” approach, meaning that the
Fund’s investments by sector approximate the S&P 500 sector
percentages.
In addition, the Fund maintains the following fundamental
investment policies that may change only with shareholder
approval:
•
Up to 25% of assets may be invested in any one industry.
•
Up to 20% of assets may be invested in commodities (other than
physical commodities), including swaps.
•
Up to 5% of assets may be invested in real property.
Principal Risks:
Market Risk. The Fund could
lose money over short periods due to short- term market movements
and over longer periods during more prolonged market downturns.
Local, regional or global events such as war, acts of terrorism,
the spread of infectious illness or other public health issue,
recessions, or other events could have a significant impact on the
Fund and its investments. Additionally, closed-end funds are
particularly impacted by investor sentiment that could result in
trading at increased premiums or discounts to the Fund’s NAV.
Equity Securities Risk.
Equity securities are subject to changes in value, and their values
may be more volatile than those of other asset classes. The S&P
500 is comprised of common stocks, which generally subject their
holders to more risks than preferred stocks and debt securities
because common stockholders’ claims are subordinated to those of
holders of preferred stocks and debt securities.
Derivatives Risk. The Fund
invests in total return swaps agreements, which entail counterparty
credit, liquidity, and equity price risks. Such risks include that
the Fund or the counterparty may default on its obligation, that
there is no liquid market for these agreements, and that there may
be unfavorable changes in the price of the reference
security.
Annual Certification
The Fund’s CEO has submitted to the New York Stock Exchange the
annual CEO certification as required by Section 303A.12(a) of the
NYSE Listed Company Manual.
Distribution Commitment and Payment Schedule
The Fund established an annual 6% minimum distribution rate
commitment that has been met or exceeded since its adoption in
2011. The commitment is not a guarantee, and may be changed by the
Board should market or other conditions warrant. Distributions are
generated from portfolio income and capital gains derived from
managing the portfolio. If such earnings do not meet the
distribution commitment, or it’s deemed in the best interest of
shareholders, the Fund may return capital.
The Fund presently pays distributions four times a year, as
follows: (a) three interim distributions on or about March 1, June
1, and September 1, and (b) a “year-end” distribution, payable in
late December, consisting of the estimated balance of the net
investment income for the year, the net realized capital gains
earned through October 31 and, if applicable, a return of capital.
Shareholders may elect to receive the year-end distribution in
stock or cash. In connection with this distribution, all
shareholders of record are sent a distribution announcement notice
and an election card in mid-November. Shareholders holding shares in “street” or
brokerage accounts may make their election by notifying their
brokerage house representative.
Other Information (continued)
Electronic Delivery of Shareholder Reports
The Fund offers shareholders the benefits and convenience of
viewing Quarterly and Annual Reports and other shareholder
materials online. With your consent, paper copies of these
documents will cease with the next mailing and will be provided via
e-mail. Reduce paper mailed to your home and help lower the Fund’s
printing and mailing costs. To enroll, please visit the following
websites:
Registered shareholders with the Fund's transfer agent, American
Stock Transfer & Trust Company ("AST"): www.astfinancial.com
Shareholders using brokerage accounts: http://enroll.icsdelivery.com/ADX
Privacy Policy
In order to conduct its business, the Fund, through AST, collects
and maintains certain nonpublic personal information about our
registered shareholders with respect to their transactions in
shares of our securities. This information includes the
shareholder’s address, tax identification or Social Security
number, share balances, and dividend elections. We do not collect
or maintain personal information about shareholders whose shares of
our securities are held in “street” or brokerage accounts.
We do not disclose any nonpublic personal information about you,
our other shareholders, or our former shareholders to third parties
unless necessary to process a transaction, service an account, or
as otherwise permitted by law.
To protect your personal information internally, we restrict access
to nonpublic personal information about our registered
shareholders to those employees who need to know that information
to provide services to such shareholders. We also maintain certain
other safeguards to protect your nonpublic personal
information.
Proxy Voting Policies and Record
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities
owned by the Fund and the Fund’s proxy voting record for the
12-month period ended June 30, 2021 are available (i) without
charge, upon request, by calling the Fund’s toll free number at
(800) 638-2479; (ii) on the Fund’s website: www.adamsfunds.com; and (iii) on
the Securities and Exchange Commission’s website: www.sec.gov.
Statement on Quarterly Filing of Complete Portfolio Schedule
In addition to publishing its complete schedule of portfolio
holdings in the First and Third Quarter Reports to Shareholders,
the Fund also files its complete schedule of portfolio holdings for
the first and third quarters of each fiscal year with the
Securities and Exchange Commission on Form N-PORT. The form is
available on the Commission’s website: www.sec.gov. The Fund also posts a link
to its filings on its website: www.adamsfunds.com.
INVESTORS CHOICE
INVESTORS CHOICE is a direct stock purchase and sale plan, as well
as a distribution reinvestment plan, sponsored and administered by
AST. The Plan provides registered shareholders and interested first
time investors an affordable alternative for buying, selling, and
reinvesting in Fund shares. A brochure which further details the
benefits and features of INVESTORS CHOICE as well as an enrollment
form may be obtained by contacting AST.
Other Information (continued)
The costs to participants in administrative service fees and
brokerage commissions for each type of transaction are listed
below. Fees are
subject to change at any time.
|
|
Fees
|
|
|
|
Minimum and Maximum Cash
Investments:
|
|
|
|
|
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
(waived if sold)
Book to Book Transfers Included
To transfer shares to another participant or to a new
participant
* The year-end distribution will usually be made in newly issued
shares of Common Stock. There are no fees or commissions in
connection with this distribution when made in newly issued
shares.
|
|
|
|
Initial minimum investment (non-holders) $250
Minimum optional investment (existing
holders) $50
Electronic funds transfer (monthly
minimum) $50
Maximum per transaction $25,000
Maximum per year NONE
INVESTORS CHOICE
Mailing Address:
Attention: Dividend Reinvestment
P.O. Box 922
Wall Street Station
New York, NY 10269‑0560
Website:
www.astfinancial.com
E‑mail:
info@astfinancial.com
|
|
|
For shareholders 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.
Name (Age)
Director Since |
|
|
Principal Occupation(s)
During Past 5 Years |
|
|
Number of
Portfolios in
Fund Complex
Overseen by
Director |
|
|
Other Current Directorships
|
|
Independent Directors |
|
Enrique R. Arzac, Ph.D. (80)
1983 |
|
|
Professor Emeritus
Graduate School of Business, Columbia University |
|
|
Two |
|
|
Mirae Asset Discovery Funds (3 open-end funds)
Credit Suisse Next Investors,
LLC
|
|
Kenneth J. Dale (65)
2008 |
|
|
Senior Vice President and Chief
Financial Officer
The Associated Press
|
|
|
Two |
|
|
|
|
Frederic A. Escherich (69)
2006 |
|
|
Private Investor
|
|
|
Two |
|
|
|
|
Roger W. Gale, Ph.D. (75)
2005 |
|
|
Retired President & CEO
GF Energy, LLC
|
|
|
Two |
|
|
|
|
Mary Chris Jammet (54)
2020 |
|
|
Principal
Bristol Partners LLC |
|
|
Two |
|
|
MGM Resorts International
|
|
Lauriann C. Kloppenburg (61)
2017 |
|
|
Retired Chief Strategy Officer and
Chief Investment Officer ‑ Equity Group
Loomis, Sayles & Co.,
LP
|
|
|
Two |
|
|
Transamerica Funds |
|
Kathleen T. McGahran,
Ph.D., J.D., CPA (71)
2003
Chair of the Board |
|
|
Retired President &
CEO
Pelham Associates, Inc. |
|
|
Two |
|
|
|
|
Jane Musser Nelson (63)
2021 |
|
|
Retired Managing Director,
Investments
Cambridge Associates
|
|
|
Two |
|
|
First Eagle Alternative Capital BDC, Inc. |
|
Interested Director |
|
Mark E. Stoeckle (65)
2013 |
|
|
Chief Executive
Officer
Adams Diversified Equity Fund, Inc. Adams Natural Resources Fund,
Inc.
President
Adams Diversified Equity Fund, Inc.
|
|
|
Two |
|
|
|
|
All Directors serve for a term of one year upon their election at
the Annual Meeting of Shareholders. The address for each Director
is the Fund’s office.
Name (Age)
Employee Since |
|
|
Principal Occupation(s) During
Past 5 Years
|
|
Mark E. Stoeckle (65)
2013 |
|
|
Chief Executive Officer of
the Fund and Adams Natural Resources Fund, Inc. and President of
the Fund |
|
James P. Haynie, CFA (59)
2013 |
|
|
Executive Vice President of
the Fund and President of
Adams Natural Resources Fund, Inc. |
|
D. Cotton Swindell, CFA (58)
2002 |
|
|
Executive Vice President
|
|
Brian S. Hook, CFA, CPA (52)
2008 |
|
|
Vice President, Chief Financial
Officer and Treasurer of the Fund and Adams Natural
Resources Fund, Inc. |
|
Janis F. Kerns (58)
2018 |
|
|
Vice President, General Counsel,
Secretary and Chief Compliance Officer of the Fund and Adams
Natural Resources Fund, Inc. (since 2018); Of Counsel, Nelson,
Mullins, Riley & Scarborough, LLP (prior to 2018) |
|
Gregory W. Buckley (51)
2013 |
|
|
Vice President – Research
of the Fund (since 2019) and Adams Natural Resources Fund,
Inc. |
|
Xuying Chang, CFA (45)
2014 |
|
|
Vice President – Research
of the Fund (since 2018); Senior Research Analyst of the Fund
(prior to 2018) |
|
Steven R. Crain, CFA (50)
2012 |
|
|
Vice President – Research
|
|
Michael A. Kijesky, CFA (51)
2009 |
|
|
Vice President – Research
of the Fund (since 2019) and Adams Natural Resources Fund,
Inc. |
|
Michael E. Rega, CFA (62)
2014 |
|
|
Vice President – Research
of the Fund and Adams Natural
Resources Fund, Inc.
|
|
David R. Schiminger, CFA (50)
2002 |
|
|
Vice President – Research
|
|
Jeffrey R. Schollaert, CFA (46) 2015 |
|
|
Vice President – Research
of the Fund (since 2017) and Adams Natural Resources Fund, Inc.
(since 2019) |
|
Christine M. Sloan, CPA (49)
1999 |
|
|
Assistant Treasurer and Director
of Human Resources of the Fund and Adams Natural Resources
Fund, Inc. (since 2018); Assistant Treasurer of the Fund and Adams
Natural Resources Fund, Inc. (prior to 2018) |
|
All officers serve until the time at which their successor is
elected and qualified, unless they earlier resign, die, or are
removed by the Board of Directors. The address for each officer is
the Fund’s office.
Service Providers
|
Independent
Registered Public Accounting Firm
|
|
|
PricewaterhouseCoopers LLP
|
|
|
Custodian of Securities
|
|
|
The Northern Trust Company
|
|
|
Transfer Agent
& Registrar
|
|
|
American Stock Transfer & Trust Company, LLC
Stockholder Relations Department
6201 15th
Avenue
Brooklyn, NY 11219
(877) 260‑8188
Website:
www.astfinancial.com
E‑mail:
info@astfinancial.com |
|
Trusted by investors for
generations®
ADAMS FUNDS
500
East Pratt Street
Suite 1300
Baltimore, MD 21202
410.752.5900
800.638.2479
Please
visit our website
adamsfunds.com
Item 2. Code of
Ethics.
On June 12, 2003, the Board of Directors adopted a code of ethics
that applies to the registrant's principal executive officer and
principal financial officer. The code of ethics is available on the
registrant's website at: www.adamsfunds.com.
Item 3. Audit Committee Financial Expert.
The Board of Directors has determined that at least one of the
members of the registrant's audit committee meets the definition of
audit committee financial expert as that term is defined by the
Securities and Exchange Commission. The directors on the
registrant's audit committee whom the Board of Directors has
determined meet such definition are Enrique R. Arzac, Kenneth J.
Dale, Mary Chris Jammet, and Jane Musser Nelson, who are each
independent pursuant to paragraph (a)(2) of this Item.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. The aggregate fees for professional services
rendered by the registrant's independent registered public
accounting firm, PricewaterhouseCoopers LLP, for the audit of the
registrant's annual financial statements for 2021 and 2020 were
$108,590 and $105,430, respectively.
(b) Audit-Related Fees. There were no audit-related fees in 2021 or
2020.
(c) Tax Fees. The aggregate fees for professional services rendered
to the registrant by PricewaterhouseCoopers LLP for the review of
the registrant's excise tax calculations and preparations of
federal, state, and excise tax returns for 2021 and 2020 were
$12,730 and $22,360, respectively.
(d) All Other Fees. The aggregate other fees rendered to the
registrant by PricewaterhouseCoopers LLP for 2021 and 2020 were
$3,711 and $2,277, respectively. Fees were related to licenses for
technical reference tools.
(e) |
(1) |
The
audit committee's policy is to pre-approve all audit and
permissible non-audit services provided by the independent
accountants. In assessing requests for services by the independent
accountants, the audit committee considers whether such services
are consistent with the auditor's independence; whether the
independent accountants are likely to provide the most effective
and efficient service based upon their familiarity with the
registrant; and whether the service could enhance the registrant's
ability to manage or control risk or improve financial statement
audit quality. The audit committee may delegate pre-approval
authority to its Chair. Any pre-approvals by the Chair under this
delegation are to be reported to the audit committee at its next
scheduled meeting. |
|
|
|
|
(2) |
Zero percent of services performed by PricewaterhouseCoopers
LLP for the registrant in 2021 and 2020 were approved pursuant to
pre-approval waivers described in paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X. |
(f) Not applicable.
(g) The aggregate fees for non-audit professional services rendered
by PricewaterhouseCoopers LLP to the registrant for 2021 and 2020
were $16,441 and $24,637, respectively.
(h) The registrant's audit committee has considered the provision
by PricewaterhouseCoopers LLP of the non-audit services described
above and found that they are compatible with maintaining
PricewaterhouseCoopers LLP's independence.
Item 5. Audit Committee of Listed Registrants.
(a) The registrant has a standing audit committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act
of 1934. The members of the Audit Committee are: Enrique R. Arzac,
Kenneth J. Dale, Roger W. Gale, Mary Chris Jammet, and Jane Musser
Nelson.
(b) Not applicable.
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.
PROXY VOTING GUIDELINES
The registrant follows long-standing general guidelines for the
voting of portfolio company proxies and takes very seriously its
responsibility to vote all such proxies. The portfolio company
proxies are evaluated by our research staff and voted by our
portfolio management team, and we annually provide the Board of
Directors with a report on how proxies were voted during the
previous year. We do not use an outside service to assist us in
voting our proxies.
While the policy is to vote all of the proxies for portfolio
companies, as a general matter, securities that the registrant has
loaned will not be recalled to facilitate proxy voting (in which
case the borrower of the security is entitled to vote the proxy).
However, if the registrant's management becomes aware of a material
vote with respect to the loaned securities in time to recall the
security and has determined in good faith that the importance of
the matter to be voted on outweighs the loss in lending revenue
that would result from recalling the security (i.e., a
controversial upcoming merger or acquisition, or some other
significant matter), the security will be recalled for voting.
As an internally-managed investment company, the registrant uses
its own staff of research analysts and portfolio managers. In
making the decision to invest in a company for the portfolio, among
the factors the research team analyzes is the integrity and
competency of the company's management. We must be satisfied that
the companies we invest in are run by managers with integrity.
Therefore, having evaluated this aspect of our portfolio companies'
managements, we give significant weight to the recommendations of
the company's management in voting on proxy issues.
We vote proxies on a case-by-case basis according to what we deem
to be the best long-term interests of our shareholders. The key
over-riding principle in any proxy vote is that stockholders be
treated fairly and equitably by the portfolio company's management.
In general, on the election of directors and on routine issues that
we do not believe present the possibility of an adverse impact upon
our investment, after reviewing whether applicable corporate
governance requirements as to board and committee composition have
been met, we will vote in accordance with the recommendations of
the company's management. When we believe that the management's
recommendation is not in the best interests of our stockholders, we
will vote against that recommendation.
Our general guidelines for when we will vote contrary to the
portfolio company management's recommendation are:
Stock Options
Our general guideline is to vote against stock option plans that we
believe are unduly dilutive of our stock holdings in the company.
We use a general guideline that we will vote against any stock
option plan that results in dilution in shares outstanding
exceeding 4%.
Most stock option plans are established to motivate and retain key
employees and to reward them for their achievement. An analysis of
a stock option plan cannot be made in a vacuum but must be made in
the context of the company's overall compensation scheme. In voting
on stock option plans, we give consideration to whether the stock
option plan is broad-based in the number of employees who are
eligible to receive grants under the plan. We generally vote
against plans that permit re-pricing of grants or the issuance of
options with exercise prices below the grant date value of the
company's stock.
Executive Compensation
On proposals relating to executive compensation, we generally vote
against proposals that fail to require or demonstrate effective
linkage between pay and the company's performance over time, and
for proposals that require or demonstrate such effective
linkage.
It is our general policy to vote against proposals relating to
future employment contracts that provide that compensation will be
paid to any director, officer or employee that is contingent upon a
merger or acquisition of the company.
Corporate Control/Governance Issues
Unless we conclude that the proposal is favorable to our interests
as a long-term shareholder in the company, we have a long-standing
policy of voting against proposals to create a staggered board of
directors. In conformance with that policy, we will generally vote
in favor of shareholder proposals to eliminate the staggered
election of directors.
Unless we conclude that the proposal is favorable to our interests
as a long-term shareholder in the company, our general policy is to
vote against amendments to a company's charter that can be
characterized as blatant anti-takeover provisions.
We generally vote for proposals to require that the majority of a
board of directors consist of independent directors and vote
against proposals to establish a retirement plan for non-employee
directors.
We generally vote for proposals to require that all members of the
company's Audit, Compensation, and Nominating committees be
independent of management.
We have found that most stockholder proposals relating to social
issues focus on very narrow issues that either fall within the
authority of the company's management, under the oversight of its
board of directors, to manage the day-to-day operations of the
company or concern matters that are more appropriate for global
solutions rather than company-specific ones. We consider these
proposals on a case-by-case basis but usually are persuaded if
management's position is reasonable and vote in accordance with
management's recommendation on these types of proposals.
Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
(a) |
(1)
As of the date of this filing, Mark E. Stoeckle, Chief Executive
Officer and President, James P. Haynie, Executive Vice President,
and D. Cotton Swindell, Executive Vice President, comprise the
three-person portfolio management team for the registrant. Mr.
Stoeckle has served as portfolio manager for the registrant since
February 11, 2013. Mr. Haynie has been a member of the portfolio
management team since August 19, 2013, serving as President until
January 21, 2015. D. Cotton Swindell has served as Executive Vice
President and on the portfolio management team since January 21,
2015; prior thereto, Mr. Swindell served as Vice President -
Research. Mr. Stoeckle is the lead member of the portfolio
management team. Messrs. Stoeckle, Haynie, and Swindell receive
investment recommendations from a team of research analysts and
make decisions jointly about any investment transactions in the
portfolio. |
|
|
|
(2)
As of December 31, 2021, Messrs. Stoeckle and Haynie also serve on
the portfolio management team for the registrant's non-controlled
affiliate, Adams Natural Resources Fund, Inc. ("PEO"), an
internally managed registered investment company with total net
assets of $470,588,987. Mr. Stoeckle is Chief Executive Officer of
PEO and Mr. Haynie is President. PEO is a non-diversified fund
specializing in the energy and natural resources sectors and the
registrant is a diversified product with a broader focus. There are
few material conflicts of interest that may arise in connection
with the portfolio management of the funds. The funds do not buy or
sell securities or other portfolio holdings to or from the other,
and policies and procedures are in place covering the sharing of
expenses and the allocation of investment opportunities, including
bunched orders and investments in initial public offerings, between
the funds. |
|
|
|
(3) As of December 31, 2021, the registrant's portfolio managers
are compensated through a plan consisting of salary and annual cash
incentive compensation, of which the amount in any year is
determined by the Compensation Committee, comprised solely of
independent director members of the Board of Directors
("Committee"). The Committee has periodically employed a
compensation consultant to review the plan. The structure and
methods used to determine the compensation of the portfolio
managers were as follows: Salaries are determined by using
appropriate industry surveys and information about the local
market. Incentive compensation is based on a combination of
relative fund performance of the registrant and PEO, and individual
performance. Target incentives are set annually based on aggregate
compensation less salary for each position. Fund performance used
in determining incentive compensation is measured over a one-year
period, accounting for one-fourth of the calculation, a three-year
period, which accounts for one-half, and a five-year period, which
accounts for one-fourth. The registrant's return on portfolio
assets over each of these periods is used to determine performance
relative to a 50/50 blend of the S&P 500 Index and the
Morningstar U.S. Large Blend Funds Category. Using these
calculations, the incentive compensation can be less than or exceed
the established target.
The structure of the compensation that the portfolio managers
receive from PEO is the same as that for the registrant with the
exception that the portfolio managers' incentive compensation is
based on a comparison with the performance of an 80/20 blend of Dow
Jones U.S. Oil and Gas Index and Dow Jones U.S. Basic Materials
Index through September 30, 2018 and, to better align with PEO’s
investment strategy, a blend of the S&P 500 Energy Sector and
the S&P 500 Materials Sector thereafter.
|
|
|
|
(4)
Using a valuation date of December 31, 2021, Messrs. Stoeckle,
Haynie, and Swindell each beneficially owned equity securities in
the registrant valued over $1,000,000, |
|
|
(b) |
Not
applicable. |
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 |
|
1/1/21-1/31/21 |
|
|
|
0 |
|
|
|
-- |
|
|
|
0 |
|
|
|
4,921,252 |
|
2/1/21-2/28/21 |
|
|
|
0 |
|
|
|
-- |
|
|
|
0 |
|
|
|
4,921,252 |
|
3/1/21-3/31/21 |
|
|
|
0 |
|
|
|
-- |
|
|
|
0 |
|
|
|
4,921,252 |
|
4/1/21-4/30/21 |
|
|
|
0 |
|
|
|
-- |
|
|
|
0 |
|
|
|
4,921,252 |
|
5/1/21-5/31/21 |
|
|
|
0 |
|
|
|
-- |
|
|
|
0 |
|
|
|
4,921,252 |
|
6/1/21-6/30/21 |
|
|
|
0 |
|
|
|
-- |
|
|
|
0 |
|
|
|
4,921,252 |
|
7/1/21-7/31/21 |
|
|
|
0 |
|
|
|
-- |
|
|
|
0 |
|
|
|
4,921,252 |
|
8/1/21-8/31/21 |
|
|
|
0 |
|
|
|
-- |
|
|
|
0 |
|
|
|
4,921,252 |
|
9/1/21-9/30/21 |
|
|
|
0 |
|
|
|
-- |
|
|
|
0 |
|
|
|
4,921,252 |
|
10/1/21-10/31/21 |
|
|
|
0 |
|
|
|
-- |
|
|
|
0 |
|
|
|
4,921,252 |
|
11/1/21-11/30/21 |
|
|
|
0 |
|
|
|
-- |
|
|
|
0 |
|
|
|
4,921,252 |
|
12/1/21-12/31/21 |
|
|
|
0 |
|
|
|
-- |
|
|
|
0 |
|
|
|
4,921,252 |
|
Total |
|
|
|
0 |
|
|
|
-- |
|
|
|
0 |
|
|
|
|
|
(1) There were no shares purchased other than through a publicly
announced plan or program.
(2a) The share repurchase plan was announced on December 11, 2014,
with an additional authorization announced on December 18, 2018. On
September 22, 2020, the Fund announced an enhanced discount
management and liquidity program whereby purchases will occur when
fund shares trade at prices below 15% of net asset value for at
least 30 consecutive trading days.
(2b) The share amount approved in 2014 was 5% of then-outstanding
shares, or 4,667,000 shares, and 5,314,566 additional shares were
approved in 2018.
(2c) The share repurchase plan has no expiration date.
(2d) None.
(2e) 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 (as required by Item 22(b)(15) of Schedule 14A), 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 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. Disclosures of Securities Lending Activities for
Closed-End Management Investment Companies.
(a)
Dollar amounts of income and fees/compensation related to
securities lending activities during the most recent fiscal year
are: |
|
|
(1) |
Gross
income from securities lending activities was $66,145. |
|
|
(2) |
Rebates
paid to borrowers were $(1,991), fees deducted from a pooled cash
collateral reinvestment product were $427, and revenue generated by
the securities lending program paid to the securities lending agent
was $20,310. |
|
|
(3) |
The
aggregate fees related to securities lending activities were
$18,746. |
|
|
(4) |
Net
income from securities lending activities was $47,399. |
|
(b)
Services provided by the securities lending agent in the most
recent fiscal year for lending of the Fund's portfolio securities
in accordance with its securities lending authorization agreement,
included: identifying and approving borrowers, selecting securities
to be loaned, negotiating loan terms, recordkeeping of all loan and
dividend activity, receiving and holding collateral from borrowers,
monitoring loan and collateral values on a daily basis, requesting
additional collateral as required, and arranging for return of
loaned securities at loan termination. When cash collateral is
received from the borrower, the security lending agent invests the
cash in a registered money market fund. |
Item 13. Exhibits.
(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.
Adams
Diversified Equity Fund, Inc. |
|
|
|
|
By: |
/s/
Mark E. Stoeckle |
|
|
Mark
E. Stoeckle |
|
|
Chief
Executive Officer & President |
|
|
(Principal
Executive Officer) |
|
|
|
|
Date: |
February
23, 2022 |
|
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/
Mark E. Stoeckle |
|
|
Mark
E. Stoeckle |
|
|
Chief
Executive Officer & President |
|
|
(Principal
Executive Officer) |
|
|
|
|
Date: |
February
23, 2022 |
|
|
|
|
By: |
/s/
Brian S. Hook |
|
|
Brian
S. Hook |
|
|
Vice
President, Chief Financial Officer & Treasurer |
|
|
(Principal
Financial Officer) |
|
|
|
|
Date: |
February
23, 2022 |
|
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