​	NYSE Symbol	​	​	ADX​	​
​	Market Price	​	​	$15.03​	​
​	52-Week Range	​	​	$12.78 – $15.90​	​
​	Discount	​	​	14.4%​	​
​	Shares Outstanding	​	​	101,735,657​	​

Summary Financial Information

2017 Dividends and Distributions

2018 Annual Meeting of Shareholders

Location: Adams Funds, 500 East Pratt Street, Suite 1300, Baltimore, MD 21202
Date: April 19, 2018
Time: 9:00 a.m.

Dear Fellow Shareholders,

The U.S. stock market generated solid gains in 2017, with the S&P 500 returning 21.8%, extending the second longest bull market in history. Adams Diversified Equity Fund comfortably exceeded the return of the market, generating a total return on net asset value of 26.2% and a total return on market price of 29.4%. Our peer group, the Lipper Large-Cap Core Funds Average, returned 20.7%. Our strong performance would put us in the top 10% of our peer group for the year. The Fund distributed 9.8% to shareholders in 2017, exceeding its 6.0% commitment.

A robust economy, strong earnings growth, and expectations for pro-business policies from the Trump administration drove the stock market. Bolstered by the strength in the economy, in March the Fed raised interest rates for the third time since the financial crisis. Two additional rate hikes followed, in line with the plan it outlined at the beginning of the year. Despite a number of geopolitical issues in North Korea, Russia, and China, the stock market’s volatility was at record lows during 2017. The year ended with the passage of the largest overhaul of the U.S. tax system in decades.

2017 Market Recap

2017 was a very good year for stocks both in the U.S. and around the world. The S&P 500 Index hit a record high 62 times. It was the first time since the Index was created in 1957 that it posted a positive total return in every month of the year.

The positive momentum that began with the presidential election in November 2016 continued into 2017. Optimism over the Trump administration’s pro-business agenda, calling for fewer regulations and lower taxes, both of which are considered positive for economic activity and corporate earnings, drove the stock market to new highs. The administration was able to reduce bank regulations early in the year, but it took until the end of the year to pass tax reform, which lowered rates for both corporations and individuals.

“The underlying fundamentals remain strong for companies, which should lead to higher profitability and sustain the economic expansion.”​

The market's move was supported by strong global economic growth, low inflation, and a robust labor market. Consumer confidence reached the highest level in 16 years and inflation remained muted at under 2.0%. U.S. Gross Domestic Product (GDP) rose to over 3.0% for two consecutive quarters in 2017, the first time since 2014, and unemployment fell to 4.1%, a 17-year low.

Strong earnings results in the first quarter, particularly in the Technology sector, drove the stock market higher. This was a meaningful reversal as the sector had underperformed late in 2016. The term FANG, an acronym which stands for Facebook, Apple, Netflix, and Google, gained popularity due to the significant share price appreciation of these stocks in 2017.

The solid earnings momentum continued into the second quarter. For the first time since 2011, earnings results for S&P 500 companies increased double-digits for two consecutive quarters. The market experienced a brief pullback in June, led by concerns over valuations of technology companies, but stocks quickly recovered.

A steadily-expanding U.S. economy and positive investor sentiment contributed to market gains in the third quarter. The growth of online shopping, driven primarily by Amazon, led to a shakeout in the retail sector. There were a record number of store closings and bankruptcy filings in 2017, as sales shifted from traditional

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brick and mortar stores to online retailers. The fear of Amazon entering new markets and causing massive disruptions to the retail industry led to periodic sell-offs in categories that were considered the next target.

In the fourth quarter, after lacking a major legislative win, the Trump administration focused on passing a massive tax reform bill. Hopes of a corporate tax cut becoming a reality led to a rotation into Financials and Industrials, sectors with the highest domestic tax rates. The President signed the bill at the end of the year, which lowered the corporate tax rate to 21% from 35% and also reduced individual tax rates. The lower corporate tax rate should bode well for earnings growth in 2018.

Portfolio Performance

We were pleased with the very strong relative performance of the Fund in 2017. The 26.2% return surpassed the S&P 500 Index and our peer group, the Lipper Large-Cap Core Funds Average, by 4.4% and 5.5%, respectively. Technology, Industrials, and Consumer Discretionary were the primary drivers of our outperformance this year. Energy was the most volatile sector and proved to be the most challenging for the Fund. It was the only sector with a negative total return for the year.

Our holdings in Technology increased 46.0% in 2017. Semiconductor stocks generated strong results, led by Lam Research, which increased 76.2%. The company manufactures equipment to fabricate high-density semiconductor chips used in smartphones, data centers, and automobiles. Within software, Adobe Systems increased 70.2% due primarily to the company's successful shift toward a subscription-based model for its publishing and design software. Benefiting from the solid secular growth trends in e-commerce and digital advertising, Facebook generated a 53.4% return for the year.

The Industrials sector increased 31.4% and benefited from accelerated capital spending as companies began investing for growth. Our position in Boeing, the top performing stock in the sector, increased 94.8% and was the key driver of our outperformance. After investing heavily for years in the production of new planes, Boeing is now favorably positioned within its current product-development cycle and, as a result, is generating strong cash flow. This has been returned to shareholders in the form of share buybacks and increased dividends. The Fund also benefited from an underweight position (relative to the S&P 500) in General Electric, which was down 42.9% for the year.

Good stock selection within the Consumer Discretionary sector enabled us to avoid some of the names that were most impacted by Amazon’s push into retail. Our holding in Amazon, which increased 56.0% in 2017, was a primary driver of our strong performance within this sector. Investments in home improvement retailers Home Depot and Lowe's, which were largely unaffected by the trend toward e-commerce, also contributed to our solid results.

After a weak first six months, energy stocks recovered nearly all of their declines in the second half of the year, driven by a rebound in oil prices. However, the sector was still down 0.6% for the year. The weakest performer within our Energy holdings was Anadarko Petroleum. A well explosion in April, which led to fears of additional drilling restrictions in its Colorado market, negatively impacted the stock's performance. With this uncertainty, we exited our position in the stock.

Outlook for 2018

We anticipate a continuation of the current conditions of strong U.S. and global economic growth and slowly rising interest rates in 2018. The underlying fundamentals remain strong for companies, which, combined with the new tax legislation, should lead to higher profitability and sustain the economic expansion.

The new tax bill benefits those companies that generate most of their revenue domestically and have higher effective tax rates, such as banks, retailers, industrials, and energy companies. Early in 2018, we expect to see these companies raise earnings guidance for the year.

This year will bring changes to the Federal Reserve as Janet Yellen’s term as Fed Chair ends in February 2018. President Trump has appointed Jerome Powell to replace her, and he is expected to maintain the

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strategy of gradually raising interest rates. The Fed has indicated it will raise rates three times in 2018. We expect that raising short-term rates gradually should prevent the economy from overheating. The unwinding of the Fed’s $4 trillion balance sheet, which began in October 2017, will continue in 2018. It is somewhat unclear what impact this will have on markets, given that nothing this size has ever occurred.

The combination of better growth and low inflation has been the backdrop to a long recovery since the financial crisis. The S&P 500 has gone for a year without a correction of 3.0%, the longest period on record. We expect volatility to increase from the record low levels in 2017. In addition, if inflation were to accelerate due to stronger-than-expected economic growth, the pace of Fed rate increases could increase and valuation multiples would likely compress. Geopolitical risks remain elevated, with issues in North Korea, Russia, and China. The recent developments in the Middle East are also concerning. The UK’s planned exit from the European Union also creates uncertainty.

In the face of these unknowns, we continue to find attractive opportunities in U.S. equity markets. We expect the Financials sector to benefit from improving economic growth, fewer regulations, lower taxes, and rising short-term interest rates. Recent increases in short-term rates had a positive impact on bank profits in 2017, as net interest margins began to improve after multiple years of headwinds. Despite its well-publicized problems, we see Wells Fargo as well positioned to benefit from the current environment. The new management team's commitment to tightening controls, reducing expenses, and increasing capital returns should lead to higher earnings growth. Based on this thesis, the Fund added to its position in Wells Fargo in the fourth quarter. We also see opportunities for regional banks, such as SunTrust Bank and Signature Bank, to outperform given their higher sensitivity to rising short-term interest rates.

Within Health Care, managed care companies are positioned to benefit from secular and cyclical tailwinds, driven by changes in the health care industry and the aging population. In the fourth quarter, CVS Health announced plans to acquire Aetna, the third largest health care insurer, providing the combined entity with tremendous leverage and effectively creating a one-stop shop for health care services. The Fund held positions in both companies and we continue to weigh the long-term potential of the combination. We also initiated a position in UnitedHealth Group, a best-in-class managed care company with a differentiated business model. We like the company's focus on the vertical integration of physicians and facilities.

We view certain biotechnology stocks as attractive investment opportunities offering strong growth potential, attractive valuations, and several near-term catalysts, including potential positive drug pipeline results. Additionally, the FDA has facilitated a record number of drug approvals in recent years and appears to be working more efficiently with drug companies. These companies should also benefit from the new tax legislation facilitating overseas cash repatriation. Within this group, Alexion Pharmaceuticals is well positioned to benefit from its pipeline and its focus on rare diseases, a market with less competition.

The Fund has generated strong returns over the past several years and we are optimistic about 2018. No matter what the new year brings, we will remain focused on identifying quality companies that are executing at the highest levels and are trading at attractive valuations to generate superior returns for our shareholders over the long-term.

We thank you for investing in Adams Funds.

By order of the Board of Directors,

Mark E. Stoeckle
Chief Executive Officer & President
January 19, 2018

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(unaudited)

This chart shows the value of hypothetical $10,000 investments in the Fund at net asset value and market price over the past 15 years. All Fund distributions are reinvested at the price received in the Fund’s dividend reinvestment plan. Returns do not reflect taxes paid by shareholders on distributions or the sale of shares.

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Source: Thomson Reuters

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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.

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December 31, 2017
(unaudited)

Ten Largest Equity Portfolio Holdings

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Non-controlled affiliated closed-end fund

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Sector Weightings

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December 31, 2017

*

See Schedule of Investments beginning on page 16.

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

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Year Ended December 31, 2017

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

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

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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.

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% of its outstanding shares. The Fund accounts for PEO as a portfolio investment that meets the definition of a non-controlled affiliate. During 2017, the Fund received dividends and long-term capital gain distributions of $1,005,916 and $1,574,477, respectively, from its investment in PEO and recognized a change in unrealized appreciation on its investment in PEO of $(721,635). 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 provides advisory services to an external party and earns advisory fee revenue based on assets under management. AFA’s profit can fluctuate due to the level of assets under management, as driven by the number of client relationships, level of client investment activity, and client investment performance, and will impact the Fund’s valuation of its investment in AFA. As of December 31, 2017, AFA had assets under management of $91 million invested entirely from one client; failure to maintain this existing relationship or to develop new relationships could impact AFA’s ability to generate revenue. To the extent that AFA’s operating costs exceed its revenue earned, the Fund may be required to provide additional capital to AFA. For tax purposes, AFA’s revenues and expenses are consolidated with those of the Fund and, as such, the advisory fee revenue generated by AFA is monitored closely to ensure that it does not exceed an amount that would jeopardize the Fund’s status as a regulated investment company. During 2017, the Fund recognized a change in unrealized appreciation on its investment in AFA of $35,000.

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

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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 percentage 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 time spent for portfolio managers, relative market values of portfolio securities covered for research staff, and relative net assets for all others. Expense allocations are updated quarterly, except for those related to payroll, which are updated annually.

For the year ended December 31, 2017, expenses of $1,064,360 and $395,694 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 as of December 31, 2017.

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. Interest income is recognized on an accrual basis.

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 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:

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Level 1 — fair value is determined based on market data obtained from independent sources; for example, quoted prices in active markets for identical investments;

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Level 2 — fair value is determined using other assumptions obtained from independent sources; for example, quoted prices for similar investments;

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Level 3 — fair value is determined using the Fund’s own assumptions, developed based on the best information available under the circumstances.

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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.

Short-term investments (excluding money market funds) are valued at amortized cost, which approximates fair value. Debt securities are generally traded in the over-the-counter market with prices obtained from an independent pricing service, which considers the yield or price of comparable bonds as well as prices quoted by dealers who make markets in such securities. 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. The Committee uses market-based valuation multiples, including price-to-earnings and price-to-book value, and discounted free cash flow analysis, or a combination thereof to estimate fair value. The Committee also considers discounts for illiquid investments, such as AFA. Fair value determinations are

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reviewed on a regular basis and updated as needed. Due to the inherent uncertainty of the value of Level 3 assets, estimated fair value may differ significantly from the value that would have been used had an active market existed. Any change in the estimated fair value of Level 3 investments is recognized in the Fund’s Statement of Operations in Change in unrealized appreciation on investments. 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, 2017, the Fund’s financial instruments were classified as follows:

There were no transfers between levels during the year ended December 31, 2017.

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. As of December 31, 2017, the identified cost of securities for federal income tax purposes was $1,136,165,730 and net unrealized appreciation aggregated $651,989,522, consisting of gross unrealized appreciation of $659,714,063 and gross unrealized depreciation of $7,724,541.

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, and investment in AFA. Differences that are permanent, while not material for the year ended December 31, 2017, 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, 2017 and December 31, 2016 were classified as ordinary income of $27,655,564 and $17,518,194, respectively, and as long-term capital gain of $108,356,146 and $78,513,621, respectively. The tax basis of distributable earnings at December 31, 2017 was $2,665,855 of undistributed ordinary income and $880,317 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, 2017 were $647,901,669 and $713,356,719, respectively.

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4. DERIVATIVES

During the year ended December 31, 2017, the Fund invested in derivative instruments. The Fund may use 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 income, to limit equity price risk in the normal course of pursuing its investment objectives, and/or to obtain leverage.

Total Return Swap Agreements — The Fund may use total return swap agreements to manage exposure to certain risks and/or to enhance performance. Total return swap agreements are bilateral contracts between the Fund and a counterparty in which the Fund, in the case of a long contract, agrees to receive the positive total return (and pay the negative total return) of an underlying equity security and to pay a financing amount, based on a notional amount and a referenced interest rate, over the term of the contract. In the case of a short contract, the Fund agrees to pay the positive total return (and receive the negative total return) of the underlying equity security and to receive or pay a financing rate, based on a notional amount and a referenced interest rate, over the term of the contract. The fair value of each total return swap agreement is determined daily with the change in the fair value recorded as a change in unrealized appreciation on total return swap agreements in the Statement of Operations. Upon termination of a swap agreement, the Fund recognizes a realized gain (loss) on total return swap agreements in the Statement of Operations equal to the net receivable (payable) amount under the terms of the agreement.

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 underlying equity 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 to net amounts due across multiple agreements upon settlement, providing for a single net settlement with a counterparty. Pursuant to master netting arrangements, the net cumulative unrealized gain (asset) on open total return swap agreements and net cumulative unrealized loss (liability) on open total return swap agreements are presented in the Statement of Assets and Liabilities. The Fund’s policy is to net all derivative instruments subject to a netting agreement. As of December 31, 2017, there were no outstanding total return swap agreements. During the year ended December 31, 2017, the average daily notional amounts of open long and (short) total return swap agreements, an indicator of the volume of activity during the year, were $33,232,718 and $(31,945,391), 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. As of December 31, 2017, 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, 2017, the Fund issued 3,311,063 shares of its Common Stock at a price of $14.83 per share (the average market price on December 8, 2017) to shareholders of record November 22, 2017, who elected to take stock in payment of the year-end distribution from 2017 capital gain and investment income. During 2017, the Fund issued 3,467 shares of Common Stock at a weighted average price of $14.78 per share as dividend equivalents to holders of deferred stock units and restricted stock units under the 2005 Equity Incentive Compensation Plan.

On December 28, 2016, the Fund issued 2,516,928 shares of its Common Stock at a price of $12.71 per share (the average market price on December 12, 2016) to shareholders of record on November 25, 2016,

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who elected to take stock in payment of the year-end distribution from 2016 capital gain and investment income. During 2016, the Fund issued 2,684 shares of Common Stock at a weighted average price of $12.71 per share as dividend equivalents to holders of deferred stock units and restricted stock units under the 2005 Equity Income Compensation Plan.

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. Transactions in Common Stock for 2017 and 2016 were as follows:

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 plan and, subject to Board approval, may also make a discretionary contribution to the plans. During 2017, the Fund recorded matching contributions of  $265,492. As of December 31, 2017, the Fund recorded a liability in the amount of  $223,975, included in Accrued expenses and other liabilities in the accompanying Statement of Assets and Liabilities, representing the 2017 discretionary contribution.

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 awards granted prior to the Plan’s expiration remain outstanding as of December 31, 2017 and vest on various dates through September 2, 2018, provided the service condition set forth in the award at grant is satisfied. Also outstanding are restricted stock units granted to nonemployee directors that are 100% vested, but payment of which has been deferred at the election of the director.

Outstanding awards were granted at fair market value on grant date (determined by the average of the high and low price on that date). Awards earn an amount equal to the Fund’s per share distribution, payable in either cash (employees) or reinvested shares (non-employee directors). Reinvested shares are fully vested and paid concurrently with the payment of the original share grant. A summary of the activity related to nonvested restricted shares and deferred stock units for the year ended December 31, 2017 is as follows:

Compensation cost is based on the fair market value of the award on grant date and recognized on a straight-line basis over the vesting period. Any compensation cost recognized related to an award that is subsequently forfeited due to unmet service conditions is reversed. Total compensation cost related to

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equity-based compensation for the year ended December 31, 2017 was $259,990. As of December 31, 2017, the Fund had unrecognized compensation cost of $11,795, a component of additional capital surplus, related to nonvested awards that will be recognized over a weighted average period of 0.67 years. The total fair value of awards vested and issued during the year ended December 31, 2017 was $636,538.

8. OFFICER AND DIRECTOR COMPENSATION

The aggregate remuneration paid by the Fund during the year ended December 31, 2017 to officers and directors amounted to $5,148,477, of which $457,500 was paid to independent directors. These amounts represent the taxable income 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.

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, 2017, 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. OPERATING LEASE COMMITMENTS

The Fund and its affiliates lease office space and equipment under operating lease agreements expiring at various dates through the year 2026. The Fund recognized rental expense of $294,762 in 2017, and its estimated portion of the minimum rental commitments are as follows:

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Financial Highlights

*

Total investment return assumes reinvestment of all distributions at the price received in the Fund’s dividend reinvestment plan.

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**

Ratios of expenses to average net assets were 0.67% and 0.63% in 2015 and 2013, respectively, after adjusting for non-recurring pension-related settlement charges. The adjusted ratios of net investment income to average net assets were 1.08% and 1.50% in 2015 and 2013, respectively.​

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December 31, 2017

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December 31, 2017

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December 31, 2017

18

December 31, 2017

(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.

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(b)

Presently non-dividend paying.

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(c)

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

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(d)

Controlled affiliate valued using fair value procedures.

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(e)

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

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19​

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, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of Fund as of December 31, 2017, 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, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 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, 2017 by correspondence with the custodian and transfer agent. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Baltimore, MD
February 16, 2018

We have served as the Fund's auditor since 1929.

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During the Six Months Ended December 31, 2017
(unaudited)

The transactions presented above are those purchases or sales during the period that exceeded .30% of period-end net assets.

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(unaudited)

*

The annual distribution rate is the total dividends and distributions per share divided by the Fund’s average month-end stock price. For years prior to 2011, the average month-end stock price is determined for the calendar year. For 2011 and later, 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.​

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Other Information

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 Payment Schedule

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.

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 shareholders of record 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 name” by a financial institution such as a bank or broker.

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 shareholders to those employees who need to know that information to provide services to our 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, 2017 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 under the headings “Funds” and then “Reports & Literature”; and (iii) on the Securities and Exchange Commission’s website: www.sec.gov.

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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 with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website: www.sec.gov . The Fund’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room, and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also posts a link to its Forms N-Q on its website: www.adamsfunds.com; select Fund name and click the headings "Funds" and then "Reports & Literature".

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.

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.

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.

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Directors

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.

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Officers

All officers serve for a term of one year upon their election by the Board of Directors at the annual organization meeting. The address for each officer is the Fund’s office.

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