Adams Diversified Equity Fund Announces Initiatives to Enhance Shareholder Value

Rhea-AI Summary

Adams Diversified Equity Fund (NYSE: ADX) announced two major initiatives to enhance shareholder value. The fund will implement a managed distribution policy providing an 8% annual distribution rate based on the fund's average net asset value (NAV). Quarterly distributions will start in Q3 2024, replacing the previous 6% commitment. Additionally, a tender offer will be conducted for 10% of outstanding shares at 98% of NAV, commencing July 5, 2024, and ending August 2, 2024. These actions aim to provide stable, consistent returns and better liquidity options for shareholders.

Positive

• Introduction of an 8% managed distribution policy, improving from a previous 6% commitment.
• Quarterly distributions to offer more predictable income for shareholders.
• Tender offer priced at 98% of NAV provides liquidity for shareholders wishing to rebalance portfolios.
• Long-term commitment to shareholder value with a nearly 100-year history of consistent fund management.

Negative

• Implementation of the tender offer means the fund's NAV could be temporarily reduced by the repurchase of shares.
• Potential dilution of shares if a significant number of shareholders opt for cash payouts instead of stock distributions.

News Market Reaction – ADX

+3.86%

1 alert

+3.86% News Effect

On the day this news was published, ADX gained 3.86%, reflecting a moderate positive market reaction.

Data tracked by StockTitan Argus on the day of publication.

8% Annual Rate Managed Distribution Policy and a Tender Offer for 10% of Outstanding Shares at 98% of NAV

BALTIMORE, May 24, 2024 (GLOBE NEWSWIRE) -- Adams Diversified Equity Fund, Inc. (NYSE: ADX) today announced two initiatives reflecting our ongoing commitment to long-term shareholder value creation: the implementation of a managed distribution policy (“Policy”) that will provide a higher annual distribution rate more evenly on a quarterly basis throughout the year and a tender offer expected to commence on July 5, 2024. These initiatives underscore our dedication to delivering long-term value, competitive performance, and stable, consistent distributions to our valued shareholders.

MANAGED DISTRIBUTION POLICY

Under the new Policy, the Fund commits to distribute a minimum 8% annual rate of the Fund’s average net asset value (“NAV”) to shareholders beginning with the third quarter distribution expected to be paid at the end of August 2024. The Fund expects to distribute 2% of average NAV for each quarterly distribution, with the fourth quarter distribution expected to be the greater of 2% of average NAV or the amount needed to satisfy minimum distribution requirements of the Internal Revenue Code for regulated investment companies. Average NAV will be based on the average of the previous four quarter-end NAVs per share prior to each declaration date. The distributions may consist of year-to-date estimated net investment income, capital gains, and/or return of capital, and will be payable in shares of common stock or optionally in cash by specific shareholder election. This Policy will provide regular, more predictable distributions and replaces the 6% minimum annual distribution commitment based on market value that the Fund had established and met since 2011. The Fund’s distribution level will be monitored and may be changed in the future by the Board as warranted.

Fund CEO James Haynie said, “We believe that this new Policy will be another attractive feature of the Fund, adding to its strong value proposition and further benefiting our shareholders. The very strong relative returns and low expense ratio the Fund has provided will now be enhanced by a more consistent, higher level of distributions throughout the year.”

TENDER OFFER

In addition, the Fund will conduct a tender offer for 10% of its outstanding shares at a price of 98% of NAV per share. A tender offer provides liquidity at a predetermined price to shareholders seeking to rebalance their portfolios, without having to sell their shares on the open market. The tender offer period is expected to commence on July 5, 2024 and expire on August 2, 2024.  Specific terms and conditions of the tender offer will be forthcoming in offering materials to be distributed to the Fund's shareholders.

CONTINUED FOCUS ON LONG-TERM VALUE

For nearly 100 years, Adams Funds has consistently implemented enhancements to Fund management and governance to meet market realities and changing dynamics, and today’s announcements are an embodiment of this focus. They are part of a core strategy to deliver competitive performance and stable, consistent distributions to shareholders. As fellow shareholders, the Board of Directors and everyone at Adams Funds remain steadfast in our mission to align our interests with those of our shareholders, fostering a culture of transparency, trust, and long-term value creation.

Tender Offer Statement

The Fund has not commenced the tender offer described in this press release.  This announcement is not a recommendation, an offer to purchase or a solicitation of an offer to sell shares of the Fund and the above statements are not intended to constitute an offer to participate in any tender offer. Information about the tender offer, including its commencement, will be provided by future public announcements.  Shareholders will be notified in accordance with the requirements of the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, either by publication or mailing or both.  The tender offer will be made only by an offer to purchase, a related letter of transmittal, and other documents to be filed with the SEC.  Shareholders of the Fund should read the offer to purchase and tender offer statement and related exhibits when those documents are filed and become available, as they will contain important information about the tender offer.  These and other filed documents will be available to investors for free both at the website of the SEC and from the Fund.

About Adams Funds

Since 1929, Adams Funds has consistently helped generations of investors reach their investment goals. Adams Funds is comprised of two closed-end funds, Adams Diversified Equity Fund, Inc. (NYSE: ADX) and Adams Natural Resources Fund, Inc. (NYSE: PEO). The Funds are actively managed by an experienced team with a disciplined approach and have paid dividends for more than 85 years across many market cycles. The Funds are committed to paying a minimum annual distribution rate of 8% of NAV or more, providing reliable income to long-term investors. Shares can be purchased through our transfer agent or through a broker. For more information about Adams Funds, please visit: adamsfunds.com.

For further information please contact: adamsfunds.com/about/contact or 800.638.2479 

FAQ

What is the new managed distribution policy announced by Adams Diversified Equity Fund?

The new policy commits to an annual distribution rate of 8% of the Fund’s average NAV, with quarterly distributions starting in Q3 2024.

When will the tender offer for Adams Diversified Equity Fund commence and expire?

The tender offer will commence on July 5, 2024, and expire on August 2, 2024.

At what price will the tender offer for Adams Diversified Equity Fund shares be made?

The tender offer will be made at a price of 98% of the Fund's NAV per share.

What is the significance of the tender offer by Adams Diversified Equity Fund?

The tender offer provides shareholders with liquidity options at a predetermined price, helping them rebalance portfolios without selling shares on the open market.

What replaces the previous 6% distribution commitment by Adams Diversified Equity Fund?

The previous 6% distribution commitment based on market value is being replaced by an 8% annual distribution rate based on average NAV.