PEO Adams Natural Resources Fund Inc

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number: 811-02736
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ADAMS NATURAL RESOURCES FUND, INC.
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(Exact name of registrant as specified in charter)

 

 

500 East Pratt Street, Suite 1300, Baltimore, Maryland 21202
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(Address of principal executive offices)

 

 

Janis F. Kerns
Adams Natural Resources Fund, Inc.
500 East Pratt Street, Suite 1300
Baltimore, Maryland 21202
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(Name and address of agent for service)

 

 

Registrant's telephone number, including area code: (410) 752-5900
Date of fiscal year end: December 31
Date of reporting period: December 31, 2024

 

 

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 Kenneth J. Dale, Frederich A. Escherich, Mary Chris Jammet, Lauriann C. Kloppenburg, 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 2024 and 2023 were $109,472 and $104,259, respectively.

 

(b) Audit-Related Fees. There were no audit-related fees in 2024 or 2023.

 

(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 2024 and 2023 were $16,015 and $14,310, respectively.

 

(d) All Other Fees. The aggregate other fees rendered to the registrant by PricewaterhouseCoopers LLP for 2024 and 2023 were $424 and $229, 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 pursuant to paragraphs (b) through (d) for the registrant in 2024 and 2023 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 2024 and 2023 were $16,439 and $14,539, 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.

 

(i) Not applicable.

 

(j) Not applicable.

 

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: Kenneth J. Dale, Frederic A. Escherich, Mary Chris Jammet, Lauriann C. Kloppenburg, 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. Financial Statements and Financial Highlights for Open-End Management Investment Companies.

 

(a) Not applicable.

 

(b) Not applicable.

 

Item 8. Changes in and Disagreements with Accountants for Open-End Management Investment Companies.

 

Not applicable.

 

 

Item 9. Proxy Disclosures for Open-End Management Investment Companies.

 

(1) Not applicable.

 

(2) Not applicable.

 

(3) Not applicable.

 

Item 10. Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies.

 

(1) Not applicable.

 

(2) Not applicable.

 

(3) Not applicable.

 

(4) Not applicable.

 

Item 11. Statement Regarding Basis for Approval of Investment Advisory Contract.

 

(1) Not applicable.

 

(2) Not applicable.

 

Item 12. 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 generally vote against operating company proposals to create a staggered board of directors. We support closed-end fund proposals to create a staggered board of directors. In conformance with these principals, for operating companies in the portfolio, we will generally vote in favor of shareholder proposals to eliminate the staggered election of directors.

 

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 13. Portfolio Managers of Closed-End Management Investment Companies.

 

(a)	(1) As of the date of this filing, James P. Haynie, Chief Executive Officer and President, and Gregory W. Buckley, Executive Vice President, comprise the two-person portfolio management team for the registrant. Mr. Haynie has been a member of the portfolio management team since August 19, 2013, serving as Executive Vice President until January 21, 2015, and President until April 20, 2023. Mr. Buckley has been a member of the portfolio management team since April 20, 2023. Prior to that, he served as Vice President- Research since April 16, 2015, and a senior equity analyst since September 9, 2013. Mr. Haynie is the lead member of the portfolio management team. Messrs. Haynie and Buckley 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, 2024, Mr. Haynie also serves on the portfolio management team for the registrant's non-controlling affiliate, Adams Diversified Equity Fund, Inc. ("ADX"), an internally managed registered investment company with total net assets of $2,662,523,552. Mr. Haynie is Chief Executive Officer of ADX. The registrant is a non-diversified fund focusing on the energy and natural resources sectors and ADX 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, 2024, 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 primarily of independent director members of the Board of Directors ("Committee"). 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 ADX 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 blend of the S&P 500 Energy Sector and the S&P 500 Materials Sector. Using these calculations, the incentive compensation can be less than or exceed the established target.

  

	The structure of the compensation that the portfolio manager receives from ADX is the same as that for the registrant with the exception that the portfolio manager’s incentive compensation is based on a comparison with the performance of a 50/50 blend of the S&P 500 Index and the Morningstar U.S. Large Blend Funds Category.
	(4) Using a valuation date of December 31, 2024, Mr. Haynie beneficially owned equity securities in the registrant valued between $500,001 and $1,000,000. Mr. Buckley beneficially owned equity securities in the registrant valued between $100,001 and $500,000.
(b)	Not applicable.

 

 

Item 14. 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
1/1/24-1/31/24			8,553			$	21.05				8,553				942,093
2/1/24-2/28/24			0				--				0				942,093
3/1/24-3/31/24			0				--				0				942,093
4/1/24-4/30/24			26,305				23.74				26,305				915,788
5/1/24-5/31/24			26,102				23.42				26,102				889,686
6/1/24-6/30/24			0				--				0				889,686
7/1/24-7/31/24			0				--				0				889,686
8/1/24-8/31/24			0				--				0				889,686
9/1/24-9/30/24			0				--				0				889,686
10/1/24-10/31/24			0				--				0				889,686
11/1/24-11/30/24			0				--				0				889,686
12/1/24-12/31/24			0				--				0				889,686
Total			60,960			$	23.23				60,960

 

(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. On September 22, 2020, the registrant announced an enhanced discount management and liquidity program whereby the registrant will purchase shares, subject to certain restrictions, when the discount exceeds 15% of net asset value for at least 30 consecutive trading days. The enhanced program also provides the registrant will engage in a proportional tender offer to purchase shares when the discount exceeds 19% of net asset value for 30 consecutive trading days, not to exceed one such offer in any twelve-month period.

 

(2b) The share amount approved in 2014 was 5% of then-outstanding shares, or 1,332,000 shares.

 

(2c) The share repurchase plan has no expiration date.

 

(2d) None.

 

(2e) None.

 

Item 15. Submission of Matters to a Vote of Security Holders.

 

On June 2, 2024, the Board of Directors adopted updated requirements related to the procedures by which shareholders may recommend nominees to the registrant's Board of Directors. The Amended and Restated Bylaws ("Bylaws"), filed as an attachment to the registrant’s Form 8-K filed on June 6, 2024, include updates to director nominee qualifications and related disclosure and certification requirements required in shareholder nominee submissions. The Bylaws clarify experience and service standards for director nominees, including matters related to conduct and fiduciary responsibilities. The changes also clarify related disclosure and certification requirements in shareholder nominee submissions.

 

Item 16. 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 17. 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 $139,415.

  

	(2) Rebates paid to borrowers were $110,185, fees deducted from a pooled cash collateral reinvestment product were $664, and revenue generated by the securities lending program paid to the securities lending agent was $8,568.
	(3) The aggregate fees related to securities lending activities were $119,417.
	(4) Net income from securities lending activities was $19,998.
(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 18. Recovery of Erroneously Awarded Compensation.

 

(a) Not applicable.

 

(b) Not applicable.

 

Item 19. Exhibits.

 

(a)	(1)	Not applicable; see registrant's response to Item 2 above.
	(2)	Not applicable.
	(3)	Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
	(4)	Not applicable.
	(5)	Not applicable.
(b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Adams Natural Resources Fund, Inc.
By:	/s/ James P. Haynie
	James P. Haynie
	Chief Executive Officer & President
	(Principal Executive Officer)
Date:	February 21, 2025

 

 

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/ James P. Haynie
	James P. Haynie
	Chief Executive Officer & President
	(Principal Executive Officer)
Date:	February 21, 2025
By:	/s/ Brian S. Hook
	Brian S. Hook
	Vice President & Chief Financial Officer
	(Principal Financial Officer)
Date:	February 21, 2025

 

 

Exhibit 99.CERT

 

CERTIFICATIONS

 

I, James P. Haynie, certify that:
1.	I have reviewed this report on Form N-CSR of Adams Natural Resources Fund, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
	a.     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;   b.     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.     Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
	d.     Disclosed in this report any change in the registrant's internal control over financial reporting 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; and
5.	The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and   b.     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: February 21, 2025	/s/ James P. Haynie
	James P. Haynie Chief Executive Officer & President (Principal Executive Officer)

 

 

I, Brian S. Hook, certify that:
1.	I have reviewed this report on Form N-CSR of Adams Natural Resources Fund, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
	a.     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;   b.     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;   c.     Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and   d.     Disclosed in this report any change in the registrant's internal control over financial reporting 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; and
5.	The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and   b.     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: February 21, 2025	/s/ Brian S. Hook
	Brian S. Hook Vice President & Chief Financial Officer (Principal Financial Officer)

 

Exhibit 99.906CERT

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

 

In connection with the Certified Shareholder Report of Adams Natural Resources Fund, Inc. (the Fund) on Form N-CSR for the year ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, James P. Haynie, Chief Executive Officer and President of the Fund, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund.

 

 

BY:	/s/ James P. Haynie
	James P. Haynie
	Chief Executive Officer & President
	(Principal Executive Officer)

 

 

DATE:

February 21, 2025

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form with the electronic version of this written statement required by Section 906, has been provided to the Fund and will be retained by the Fund and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

 

In connection with the Certified Shareholder Report of Adams Natural Resources Fund, Inc. (the Fund) on Form N-CSR for the year ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Brian S. Hook, Vice President and Chief Financial Officer of the Fund, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund.

 

 

BY:	/s/ Brian S. Hook
	Brian S. Hook
	Vice President & Chief Financial Officer
	(Principal Financial Officer)

 

 

DATE:

February 21, 2025

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form with the electronic version of this written statement required by Section 906, has been provided to the Fund and will be retained by the Fund and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

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