UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSRS

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

 

Investment Company Act File Number 811-179

 

Name of registrant as specified in charter: Central Securities Corporation

 

Address of principal executive offices:

630 Fifth Avenue

Suite 820

New York, New York 10111

 

Name and address of agent for service:

Central Securities Corporation, Wilmot H. Kidd, Chief Executive Officer

630 Fifth Avenue

Suite 820

New York, New York 10111

 

Registrant’s telephone number, including area code: 212-698-2020

 

Date of fiscal year end: December 31, 2018

 

Date of reporting period: June 30, 2018

 

Item 1. Reports to Stockholders.

 

 

CENTRAL SECURITIES CORPORATION

(Organized on October 1, 1929 as an investment company, registered as such with the Securities
and Exchange Commission under the provisions of the Investment Company Act of 1940.)

25-YEAR HISTORICAL DATA

						Per Share of Common Stock
						Net asset value				Source of dividends and distributions								Total dividends and distributions				Unrealized appreciation of investments at end of period
Year		Total net assets								Ordinary income*				Long-term capital gains*
1992			$	165,599,864			$	14.33															$	70,586,429
1993				218,868,360				17.90			$	.18			$	1.42			$	1.60				111,304,454
1994				226,639,144				17.60				.22				1.39				1.61				109,278,788
1995				292,547,559				21.74				.33				1.60				1.93				162,016,798
1996				356,685,785				25.64				.28				1.37				1.65				214,721,981
1997				434,423,053				29.97				.34				2.08				2.42				273,760,444
1998				476,463,575				31.43				.29				1.65				1.94				301,750,135
1999				590,655,679				35.05				.26				2.34				2.60				394,282,360
2000				596,289,086				32.94				.32				4.03				4.35				363,263,634
2001				539,839,060				28.54				.22				1.58	**			1.80	**			304,887,640
2002				361,942,568				18.72				.14				1.11				1.25				119,501,484
2003				478,959,218				24.32				.11				1.29				1.40				229,388,141
2004				529,468,675				26.44				.11				1.21				1.32				271,710,179
2005				573,979,905				27.65				.28				1.72				2.00				302,381,671
2006				617,167,026				30.05				.58				1.64				2.22				351,924,627
2007				644,822,724				30.15				.52				1.88				2.40				356,551,394
2008				397,353,061				17.79				.36				2.10				2.46				94,752,477
2009				504,029,743				22.32				.33				.32				.65				197,256,447
2010				593,524,167				26.06				.46				.44				.90				281,081,168
2011				574,187,941				24.96				.43				.57				1.00				255,654,966
2012				569,465,087				24.53				.51				.43				.94				247,684,116
2013				648,261,868				26.78				.12				3.58				3.70				305,978,151
2014				649,760,644				26.18				.16				1.59				1.75				293,810,819
2015				582,870,527				23.53				.12				1.86				1.98				229,473,007
2016				674,683,352				27.12				.30				.68				.98				318,524,775
2017				826,331,789				32.86				.28				.72				1.00				460,088,116
Six mos. to
June 30, 2018***				845,131,777				33.61				.05				.20				.25				458,358,301
Total dividends and distributions for the period***:											$	7.30			$	38.80			$	46.10

*

Computed on the basis of the Corporation’s status as a “regulated investment company” for Federal income tax purposes. Dividends from ordinary income include short-term capital gains.

**

Includes non-taxable return of capital of $.55.

***

Unaudited.

The Common Stock is listed on the NYSE American under the symbol CET. On June 29, 2018 (the last trading day of the six-month period), the closing market price was $27.86 per share.

To the Stockholders of

Central Securities Corporation:

Financial statements for the six months ended June 30, 2018 reviewed by our independent registered public accounting firm and other pertinent information are submitted herewith.

Comparative net assets are as follows:

		June 30, 2018 (Unaudited)				December 31, 2017
Net assets		$	845,131,777			$	826,331,789
Net assets per share of Common Stock		$	33.61			$	32.86
Shares of Common Stock outstanding			25,146,616				25,143,616

Comparative operating results are as follows:

		Six months ended June 30,
		2018 (Unaudited)				2017 (Unaudited)
Net investment income		$	7,274,776			$	3,696,314
Per share of Common Stock			.29	*			.15	*
Net realized gain from investment transactions			19,459,211				11,964,994
Increase (decrease) in net unrealized appreciation of investments			(1,729,815	)			57,818,328
Increase in net assets resulting from operations			25,004,172				73,479,636

*

Based on the average number of shares of Common Stock outstanding during the period.

     

A distribution of $.25 per share of Common Stock was paid on June 26, 2018 to stockholders of record as of June 11, 2018. Stockholders will be sent a notice concerning the taxability of all 2018 distributions in early 2019.

During the first six months of 2018, the Corporation did not purchase any shares of its Common Stock. The Corporation may from time to time purchase its Common Stock in such amounts and at such prices as the Board of Directors deems advisable in the best interests of stockholders. Purchases may be made in the open market or in private transactions directly with stockholders.

Stockholders’ inquiries are welcome.

Central Securities Corporation

Wilmot H. Kidd, Chief Executive Officer

630 Fifth Avenue
New York, NY 10111
July 25, 2018

PRINCIPAL PORTFOLIO CHANGES

April 1 to June 30, 2018
(Unaudited)

		Number of Shares
			Purchased				Sold			Held June 30, 2018
Alphabet Inc. Class A			3,000							15,000
Capital One Financial Corporation			10,000							300,000
Cogent Communications Holdings, Inc.			200,000							200,000
Kemper Corporation			200,000							200,000
Medtronic plc							50,000			200,000
Murphy Oil Corporation							61,000			—
Star Group, L.P.			454,108							454,108
Tiffany & Co.							80,000			—

 

TEN LARGEST INVESTMENTS
(excluding short-term investments)
June 30, 2018
(Unaudited)

 

		Cost				Value				Percent of Net Assets				Year First Acquired
		(millions)
The Plymouth Rock Company, Inc. Class A		$	0.7			$	159.2				18.8	%			1982
Coherent, Inc.			7.7				49.3				5.8				2007
Hess Corporation			31.2				46.8				5.5				2017
Analog Devices, Inc.			6.2				43.2				5.1				1987
Intel Corporation			7.6				41.8				4.9				1986
Motorola Solutions, Inc.			14.1				34.9				4.1				2000
Capital One Financial Corporation			17.8				27.6				3.3				2013
Rayonier Inc.			21.1				27.1				3.2				2014
Amazon.com, Inc.			3.8				22.1				2.6				2014
The Bank of New York Mellon Corporation			8.4				21.6				2.6				1993

 

DIVERSIFICATION OF INVESTMENTS

June 30, 2018
(Unaudited)

														Percent of Net Assets
		Issues				Cost				Value				June 30, 2018				December 31, 2017 (a)
Common Stocks:
Insurance			6			$	37,567,853			$	209,468,770				24.8	%			20.7	%
Technology Hardware
and Equipment			4				40,013,216				111,473,302				13.2				17.5
Semiconductor			2				13,769,771				84,920,400				10.0				9.5
Diversified Financial			5				45,773,581				77,393,400				9.2				10.1
Diversified Industrial			4				19,857,321				54,229,150				6.4				6.5
Banks			3				35,133,800				52,462,400				6.2				6.5
Energy			1				31,227,477				46,823,000				5.5				3.5
Real Estate and Homebuilding			3				36,923,617				43,822,500				5.2				4.4
Health Care			3				30,744,887				39,575,900				4.7				5.2
Software and Services			2				15,740,802				26,798,850				3.2				2.3
Retailing			1				3,814,861				22,097,400				2.6				3.1
Other			6				32,343,143				32,203,558				3.8				3.8
Short-Term Investments			3				43,800,889				43,800,889				5.2				6.7

(a)

Certain amounts from December 2017 have been adjusted to conform to June 2018 presentation.

STATEMENT OF INVESTMENTS

June 30, 2018
(Unaudited)

COMMON STOCKS 94.8%

Shares						Value
				Banks 6.2%
	280,000			Citigroup Inc.		$	18,737,600
	180,000			JPMorgan Chase & Co.			18,756,000
	270,000			Wells Fargo & Company			14,968,800
							52,462,400
				Communications Services 2.4%
	200,000			Cogent Communications Holdings, Inc.			10,680,000
	210,000			Liberty Global plc Class C (a)			5,588,100
	200,000			Liberty Latin America Ltd. Class C (a)			3,876,000
							20,144,100
				Consumer Services 0.6%
	30,000			Wynn Resorts Ltd.			5,020,200
				Diversified Financial 9.2%
	150,000			American Express Company			14,700,000
	400,000			The Bank of New York Mellon Corporation			21,572,000
	10			Berkshire Hathaway Inc. Class A (a)			2,820,400
	300,000			Capital One Financial Corporation			27,570,000
	210,000			The Charles Schwab Corporation			10,731,000
							77,393,400
				Diversified Industrial 6.4%
	400,000			Brady Corporation Class A			15,420,000
	500,000			General Electric Company			6,805,000
	700,000			Heritage-Crystal Clean, Inc. (a)			14,070,000
	65,000			Roper Technologies, Inc.			17,934,150
							54,229,150
				Energy 5.5%
	700,000			Hess Corporation			46,823,000
				Health Care 4.7%
	85,000			Johnson & Johnson			10,313,900
	200,000			Medtronic plc			17,122,000
	200,000			Merck & Co., Inc.			12,140,000
							39,575,900

 

Shares						Value
				Insurance 24.8%
	21,000			Alleghany Corporation (a)		$	12,074,370
	200,000			Aspen Insurance Holdings Ltd			8,140,000
	200,000			Kemper Corporation			15,130,000
	100,000			Kinsale Capital Group, Inc.			5,486,000
	28,424			The Plymouth Rock Company, Inc. Class A (b)(c)			159,174,400
	160,000			Progressive Corporation			9,464,000
							209,468,770
				Metals and Mining 0.3%
	150,000			Freeport-McMoRan Inc.			2,589,000
				Real Estate and Homebuilding 5.2%
	250,000			Kennedy-Wilson Holdings, Inc.			5,287,500
	700,000			Rayonier Inc.			27,083,000
	700,000			TRI Pointe Group, Inc. (a)			11,452,000
							43,822,500
				Retailing 2.6%
	13,000			Amazon.com, Inc. (a)			22,097,400
				Semiconductor 10.0%
	450,000			Analog Devices, Inc.			43,164,000
	840,000			Intel Corporation			41,756,400
							84,920,400
				Software and Services 3.2%
	15,000			Alphabet Inc. Class A (a)			16,937,850
	100,000			Microsoft Corporation			9,861,000
							26,798,850
				Technology Hardware and Equipment 13.2%
	315,000			Coherent, Inc. (a)			49,272,300
	295,000			Keysight Technologies, Inc. (a)			17,413,850
	300,000			Motorola Solutions, Inc.			34,911,000
	1,387,100			Ribbon Communications Inc. (a)			9,876,152
							111,473,302
				Utilities 0.5%
	454,108			Star Group, L.P.			4,450,258
				Total Common Stocks (cost $342,910,329)			801,268,630

 

SHORT-TERM INVESTMENTS 5.2%

Shares						Value
				Money Market Fund 0.5%
3,833,247				Fidelity Institutional Money Market Fund Treasury
				Only Portfolio – Class I		$	3,833,247
Principal
				U.S. Treasury Bills 4.7%
$	40,000,000			U.S. Treasury Bills 1.82%, due 7/12/18 – 7/26/18 (d)			39,967,642
				Total Short-Term Investments (cost $43,800,889)			43,800,889
				Total Investments (cost $386,711,218)(100.0%)			845,069,519
				Cash, receivables and other assets less liabilities (0.0%)			62,258
				Net Assets (100%)		$	845,131,777

 

(a)

Non-dividend paying.

(b)

Affiliate as defined in the Investment Company Act of 1940 and restricted. See Note 5 and Note 6..

(c)

Valued based on Level 3 inputs. See Note 2.

(d)

Valued based on Level 2 inputs. See Note 2.

 

See accompanying notes to financial statements.

STATEMENT OF ASSETS AND LIABILITIES

June 30, 2018
(Unaudited)

ASSETS:
Investments:
Securities of unaffiliated companies
(cost $342,199,729)		$	642,094,230
Securities of affiliated companies (cost $710,600)
(Notes 5 and 6)			159,174,400
Short-term investments (cost $43,800,889)			43,800,889			$	845,069,519
Cash, receivables and other assets:
Cash			242,060
Dividends receivable			369,917
Other assets			77,686				689,663
Total Assets							845,759,182
LIABILITIES:
Accrued expenses and other liabilities			627,405
Total Liabilities							627,405
NET ASSETS						$	845,131,777
NET ASSETS are represented by:
Common Stock $1 par value: authorized 40,000,000 shares;
issued 25,146,616 (Notes 3 and 8)						$	25,146,616
Surplus:
Paid-in		$	335,330,348
Undistributed net realized gain from
investment transactions			19,678,886
Undistributed net investment income			6,617,626				361,626,860
Net unrealized appreciation of investments							458,358,301
NET ASSETS						$	845,131,777
NET ASSET VALUE PER COMMON SHARE
(25,146,616 shares outstanding)						$	33.61

 

See accompanying notes to financial statements.

STATEMENT OF OPERATIONS

For the six months ended June 30, 2018
(Unaudited)

INVESTMENT INCOME
Income:
Dividends from unaffiliated companies		$	4,951,752
Dividends from affiliated companies (Note 5)			4,857,377
Interest			312,060			$	10,121,189
Expenses:
Investment research			1,261,453
Administration and operations			841,007
Occupancy and office operating expenses			237,098
Directors’ fees			169,970
Software and information services			84,830
Transfer agent, registrar and custodian fees and expenses			46,438
Franchise and miscellaneous taxes			45,867
Stockholder communications and meetings			45,598
Legal, auditing and tax preparation fees			39,128
Travel and related expenses			28,460
Miscellaneous			46,564				2,846,413
Net investment income							7,274,776
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from unaffiliated companies			19,459,211
Decrease in net unrealized appreciation of investments in
unaffiliated companies			(15,941,815	)
Increase in net unrealized appreciation of investments in
affiliated companies			14,212,000
Net gain on investments							17,729,396
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS						$	25,004,172

 

See accompanying notes to financial statements.

STATEMENTS OF CHANGES IN NET ASSETS

For the six months ended June 30, 2018
and the year ended December 31, 2017

		Six months ended June 30, 2018 (Unaudited)				Year ended December 31, 2017
FROM OPERATIONS:
Net investment income		$	7,274,776			$	6,911,428
Net realized gain from investment transactions			19,459,211				20,731,782
Increase (decrease) in net unrealized appreciation of investments			(1,729,815	)			141,563,341
Increase in net assets resulting
from operations			25,004,172				169,206,551
DISTRIBUTIONS TO STOCKHOLDERS FROM:
Net investment income			(1,257,331	)			(6,698,990	)
Net realized gain from investment transactions			(5,029,323	)			(18,112,041	)
Decrease in net assets from distributions			(6,286,654	)			(24,811,031	)
FROM CAPITAL SHARE TRANSACTIONS: (Notes 3 and 8)
Distribution to stockholders reinvested in Common Stock			—				8,708,796
Issuance of shares of Common Stock to directors and employees			82,470				260,399
Cost of treasury stock purchased			—				(1,716,278	)
Increase in net assets from capital
share transactions			82,470				7,252,917
Total increase in net assets			18,799,988				151,648,437
NET ASSETS:
Beginning of period			826,331,789				674,683,352
End of period (including undistributed net investment income
of $6,617,626 and $600,181, respectively)		$	845,131,777			$	826,331,789

 

See accompanying notes to financial statements.

STATEMENT OF CASH FLOWS

For the six months ended June 30, 2018
(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
Increase in net assets from operations						$25,004,172
Adjustments to increase in net assets
from operations:
Purchases of securities		$	(55,957,872	)
Proceeds from securities sold			41,699,091
Net decrease in short-term investments			11,180,794
Net realized gain from investment transactions			(19,459,211	)
Decrease in net unrealized appreciation of investments			1,729,815
Depreciation and amortization			2,666
Non-cash stock compensation			82,470
Changes in operating assets and liabilities:
Decrease in dividends receivable			97,983
Decrease in other assets			1,619
Decrease in payable for securities purchased			(990,062	)
Increase in accrued expenses and other liabilities			475,003
Total adjustments						(21,137,704)
Cash provided by operating activities						3,866,468
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends and distributions paid			(6,286,654	)
Cash used in financing activities						(6,286,654)
Net decrease in cash						(2,420,186)
Cash at beginning of period						2,662,246
Cash at end of period						$242,060
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash financing activities not included herein consist of:
Issuance of shares of Common Stock to directors						$82,470

 

See accompanying notes to financial statements.

NOTES TO FINANCIAL STATEMENTS — (Unaudited)

1. Significant Accounting Policies — Central Securities Corporation (the “Corporation”) is registered under the Investment Company Act of 1940, as amended, as a non-diversified, closed-end management investment company. The following is a summary of the significant accounting policies consistently followed by the Corporation in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles.

Security Valuation — Marketable common stocks are valued at the last or closing sale price or, if unavailable, at the closing bid price. Investments in money market funds are valued at net asset value per share. Other short-term investments are valued at amortized cost, which approximates fair value. Securities for which no ready market exists are valued at estimated fair value pursuant to procedures adopted by the Board of Directors. The determination of fair value involves subjective judgments. As a result, using fair value to price a security may result in a price materially different from the price used by other investors or the price that may be realized upon the actual sale of the security.

Federal Income Taxes — It is the Corporation’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net capital gains to its stockholders. Management has analyzed positions taken on the Corporation’s tax returns and has determined that no provision for income taxes is required in the accompanying financial statements.

Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results may differ from those estimates.

Other — Security transactions are accounted for as of the trade date, and cost of securities sold is determined by specific identification. Dividend income and distributions to stockholders are recorded on the ex-dividend date. Interest income is accrued daily.

Recently Issued Accounting Pronouncement — In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-02, “Leases.” The new standard generally requires a lessee for an operating lease to recognize on its statement of assets and liabilities (1) an asset for its right to use the underlying asset over the lease term and (2) an offsetting liability representing its obligation to make lease payments over the lease term. The new standard is effective for years beginning after December 15, 2018, including interim periods within those years. The new standard is expected to result in an increase in the Corporation’s total assets and total liabilities, but is not expected to have a material impact on its financial statements.

NOTES TO FINANCIAL STATEMENTS — continued (unaudited)

2. Fair Value Measurements — The Corporation’s investments are categorized below in three broad hierarchical levels based on market price observability as follows:

•

Level 1 — Quoted prices in active markets for identical investments;

•

Level 2 — Other significant observable inputs obtained from independent sources, for example, quoted prices in active markets for similar investments;

•

Level 3 — Significant unobservable inputs including the Corporation’s own assumptions based upon the best information available. The Corporation’s only Level 3 investment is The Plymouth Rock Company, Inc. Class A Common Stock (“Plymouth Rock”).

The designated Level for a security is not necessarily an indication of the risk associated with investing in that security.

The Corporation’s investments as of June 30, 2018 are classified as follows:

		Level 1				Level 2				Level 3				Total Value
Common stocks		$	642,094,230				—			$	159,174,400			$	801,268,630
Short-term investments			—			$	43,800,889				—				43,800,889
Total		$	642,094,230			$	43,800,889			$	159,174,400			$	845,069,519

 

The following is a reconciliation of the change in the value of Level 3 investments:

Balance as of December 31, 2017		$	144,962,400
Change in net unrealized appreciation of
investments included in increase in
net assets resulting from operations			14,212,000
Balance as of June 30, 2018		$	159,174,400

 

Unrealized appreciation of Level 3 investments held at June 30, 2018 increased by $14,212,000 during the six months ended June 30, 2018, which is included in the above table.

In valuing the Plymouth Rock Level 3 investment as of June 30, 2018, management used a number of significant unobservable inputs to develop a range of possible values for the investment. It used a comparable company approach that utilized the following valuation multiples from selected publicly traded companies: price-to-book value (range: 0.6–3.6); price-to-earnings (range: 7.0–115.7); and price-to-revenue (range: 0.5–1.5). Management also used a discounted cash flow model based on a forecasted return on equity ranging from 8%–9% and a weighted average cost of capital of 11%. An independent valuation of Plymouth Rock’s shares was also considered. The value obtained from weighting the three approaches described above (with greater weight given to the comparable company approach) was then discounted for lack of marketability by 20% and 40%, a range management believes market participants would apply. The resulting range of values, together with the underlying support, other information about Plymouth Rock’s financial condition and results of operations, its corporate governance, the insurance industry outlook, and transacted values in Plymouth Rock’s shares were

NOTES TO FINANCIAL STATEMENTS — continued (unaudited)

considered. These values as multiples of Plymouth Rock’s book value were also considered. Based upon all of the above information, the Corporation’s directors selected the value for the investment, which implied a discount for lack of marketability in the higher end of the above range.

Significant increases (decreases) in the price-to-book value multiple, price-to-earnings multiple, price-to-revenue multiple and return on equity rate in isolation would result in a higher (lower) range of fair value measurements. Significant increases (decreases) in the discount for lack of marketability or weighted average cost of capital in isolation would result in a lower (higher) range of fair value measurements.

3. Common Stock — During the six months ended June 30, 2018, the Corporation did not purchase any shares of its Common Stock. The Corporation may from time to time purchase its Common Stock in such amounts and at such prices as the Board of Directors may deem advisable in the best interests of the stockholders. Purchases will only be made at less than net asset value per share, thereby increasing the net asset value of shares held by the remaining stockholders. Shares so acquired may be held as treasury stock available for stock distributions, or may be retired.

4. Investment Transactions — The aggregate cost of securities purchased and the aggregate proceeds of securities sold during the six months ended June 30, 2018, excluding short-term investments, were $55,957,872 and $41,699,091, respectively.

As of June 30, 2018, the tax cost of investments was $386,711,218. Net unrealized appreciation was $458,358,301 consisting of gross unrealized appreciation and gross unrealized depreciation of $470,662,114 and $12,303,813, respectively.

5. Affiliated Companies — Plymouth Rock is an affiliated company as defined in the Investment Company Act of 1940 due to the Corporation’s ownership of more than 5% of the company’s outstanding voting securities. During the six months ended June 30, 2018, unrealized appreciation from the Corporation’s investment in Plymouth Rock increased by $14,212,000 and the Corporation received dividends of $4,857,377 from Plymouth Rock. The Chief Executive Officer of the Corporation is a director of Plymouth Rock.

6. Restricted Securities — The Corporation may from time to time invest in securities the resale of which is restricted. On June 30, 2018, the Corporation’s restricted securities consisted of 28,424 shares of Plymouth Rock that were acquired on December 15, 1982 at a cost of $710,600. These securities had a value of $159,174,400 at June 30, 2018, which was equal to 18.8% of the Corporation’s net assets. The Corporation does not have the right to demand registration of this security.

7. Bank Line of Credit — The Corporation has entered into a $25 million uncommitted, secured revolving line of credit with UMB Bank, n.a. (“UMB”), the Corporation’s custodian. All borrowings are payable on demand of UMB. Interest on any borrowings is payable monthly at a rate based on the federal funds rate, subject to a minimum annual rate of 2.50%. No borrowings were made during the six months ended June 30, 2018.

NOTES TO FINANCIAL STATEMENTS — continued (unaudited)

8. Compensation and Benefit Plans — The aggregate compensation expense for all officers during the six months ended June 30, 2018 was $1,676,918, of which $1,290,000 was paid during the period.

Officers and other employees participate in a 401(k) and profit sharing plan. The Corporation has agreed to contribute 3% of each participant’s qualifying compensation to the plan, which is immediately vested. Contributions in excess of 3% may be made at the discretion of the Board of Directors and vest after three years of service. During the six months ended June 30, 2018, the Corporation accrued $120,499 related to the plan.

The Corporation maintains an incentive compensation plan (the “2012 Plan”) which permits the grant of awards of unrestricted stock, restricted stock, restricted stock units and cash to full-time employees and non-employee directors of the Corporation. The 2012 Plan provides for the issuance of up to 1,000,000 shares of the Corporation’s Common Stock over the ten-year life of the 2012 Plan, of which 941,156 remain available for future grants at June 30, 2018. The 2012 Plan limits the amount of shares that can be awarded to any one person in total or within a certain time period. Any award made under the 2012 Plan may be subject to performance conditions. The 2012 Plan is administered by the Corporation’s Compensation and Nominating Committee.

Pursuant to the terms of the 2012 Plan, each non-employee director is awarded 500 shares of vested unrestricted Common Stock at his initial election to the Board of Directors or at his continuation of service as a director after the Corporation’s annual meeting. During the six months ended June 30, 2018, non-employee directors were granted a total of 3,000 shares of Common Stock valued at $27.49 per share, which was the average of the high and low prices of the Corporation’s Common Stock on the grant date. The aggregate share value of $82,470 plus cash payments of $87,500 made to all non-employee directors are included in Directors’ Fees expense in the accompanying Statement of Operations.

During the six months ended June 30, 2018, no other awards were granted under the 2012 Plan.

9. Operating Lease Commitment — The Corporation has an operating lease for office space that expires at June 30, 2019. Future minimum rental commitments under the lease at June 30, 2018 aggregate $374,884 as follows: $187,442 in 2018 and $187,442 in 2019. The lease agreement contains escalation clauses relating to operating costs and real property taxes.

FINANCIAL HIGHLIGHTS

The following table shows per share operating performance data, total returns, ratios and supplemental data for the six months ended June 30, 2018 and each year in the five-year period ended December 31, 2017. This information has been derived from information contained in the financial statements and market price data for the Corporation’s shares.

The Corporation’s total returns reflect changes in market price or net asset value, as applicable, and assume reinvestment of all distributions. Distributions that are payable only in cash are assumed to be reinvested at the market price or net asset value, as applicable, on the payable date of the distribution. Distributions that may be taken in shares are assumed to be reinvested at the price designated by the Corporation.

		Six Months Ended June 30, 2018 (Unaudited)				2017				2016				2015				2014				2013
Per Share Operating Performance
Net asset value, beginning of period		$	32.86				27.12			$	23.53			$	26.18			$	26.78			$	24.53
Net investment income*			.29				.28				.19				.14				.13				.10
Net realized and unrealized gain (loss)
on investments*			.71				6.52				4.41				(.83	)			1.12				6.13
Total from investment
operations			1.00				6.80				4.60				(.69	)			1.25				6.23
Less:
Dividends from net investment
income			.05				.27				.20				.12				.14				.12
Distributions from capital gains			.20				.73				.78				1.86				1.61				3.58
Total distributions			.25				1.00				.98				1.98				1.75				3.70
Net change from capital share
transactions			—				(.06	)			(.03	)			.02				(.10	)			(.28	)
Net asset value, end of period		$	33.61			$	32.86			$	27.12			$	23.53			$	26.18			$	26.78
Per share market value,
end of period		$	27.86			$	27.40			$	21.79			$	19.02			$	21.97			$	21.72
Total investment return,
market (%)			2.59				30.55				19.97				(4.71	)			9.52				28.40
Total investment return, NAV (%)			3.04				25.63				20.44				(1.23	)			5.35				28.36
Ratios/Supplemental Data:
Net assets, end of period (000)		$	845,132			$	826,332			$	674,683			$	582,871			$	649,761			$	648,262
Ratio of expenses to average net
assets (%)			.68	†			.75				.88				.72				.67				.77
Ratio of net investment income to
average net assets (%)			1.16	†			.92				.75				.56				.47				.38
Portfolio turnover rate (%)			5.35				6.03				9.48				25.48				13.07				16.72

*

Based on the average number of shares outstanding during the period.

†

Annualized, not necessarily indicative of full year ratio.

 

See accompanying notes to financial statements.

OTHER STOCKHOLDER INFORMATION

Direct Registration

The Corporation utilizes direct registration, a system that allows for book-entry ownership and the electronic transfer of the Corporation’s shares. Stockholders may find direct registration a convenient way of managing their investment. Stockholders wishing certificates may request them.

A pamphlet which describes the features and benefits of direct registration, including the ability of shareholders to deposit certificates with our transfer agent, can be obtained by calling Computershare Trust Company at 1-800-756-8200, calling the Corporation at 1-866-593-2507 or visiting our website: www.centralsecurities.com under Contact Us.

Proxy Voting Policies and Procedures

The policies and procedures used by the Corporation to determine how to vote proxies relating to portfolio securities and the Corporation’s proxy voting record for the twelve-month period ended June 30, 2018 are available: (1) without charge, upon request, by calling us at our toll-free telephone number (1-866-593-2507), (2) on the Corporation’s website at www.centralsecurities.com and (3) on the Securities and Exchange Commission’s website at www.sec.gov.

Quarterly Portfolio Information

The Corporation files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Corporation’s Form N-Q filings are available on the SEC’s website at www.sec.gov. Those forms may be reviewed and copied at the SEC’s Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Annual Meeting of Stockholders

The annual meeting of stockholders of the Corporation was held on March 21, 2018. At the meeting, all of the directors of the Corporation were reelected by the following vote of the holders of the Common Stock:

		In Favor				Withheld
L. Price Blackford			22,404,634				402,031
Simms C. Browning			22,265,477				541,188
Donald G. Calder			22,172,389				634,276
David C. Colander			22,394,770				411,895
Jay R. Inglis			22,080,105				726,560
Wilmot H. Kidd			22,366,214				440,451
Wilmot H. Kidd IV			22,046,065				760,600

 

A proposal to ratify the selection of KPMG LLP as independent auditors of the Corporation for the year 2018 was approved with 22,547,634 votes for, 226,024 votes against and 33,007 shares abstaining.

BOARD OF DIRECTORS
Wilmot H. Kidd, Chairman
L. Price Blackford, Lead Independent Director
Simms C. Browning
Donald G. Calder
David C. Colander
Jay R. Inglis
Wilmot H. Kidd IV
C. Carter Walker, Jr., Director Emeritus

OFFICERS

Wilmot H. Kidd, Chief Executive Officer
John C. Hill, President
Marlene A. Krumholz, Vice President and Secretary
Andrew J. O’Neill, Vice President
Lawrence P. Vogel, Vice President and Treasurer

OFFICE

630 Fifth Avenue
New York, NY 10111
212-698-2020
866-593-2507 (toll-free)
www.centralsecurities.com

TRANSFER AGENT AND REGISTRAR

Computershare Trust Company, N.A.
P.O. Box 505000, Louisville, KY 40233
800-756-8200
www.computershare.com

CUSTODIAN

UMB Bank, n.a.
Kansas City, MO

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

KPMG LLP
New York, NY

Item 2. Code of Ethics. The information required by this Item is only required in an annual report on this Form N-CSR.

 

 

Item 3. Audit Committee Financial Experts. The information required by this Item is only required in an annual report on this Form N-CSR.

 

 

Item 4. Principal Accountant Fees and Services. The information required by this Item is only required in an annual report on this Form N-CSR.

 

 

Item 5. Audit Committee of Listed Registrants. The information required by this Item is only required in an annual report on this Form N-CSR.

 

Item 6. Investments.

(a) Schedule is included as a part of the report to shareholders filed under Item 1 of this Form.

 

(b) Not applicable.

 

Item 7. Disclose Proxy Voting Policies and Procedures for Closed-End Management Companies. The information required by this Item is only required in an annual report on this Form N-CSR.

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies. The information required by this Item is only required in an annual report on this Form N-CSR.

 

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

 

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
Month #1 (January 1 through January 31)	-0-	NA	NA	NA
Month #2 (February 1 through February 28)	-0-	NA	NA	NA
Month #3 (March 1 through March 31)	-0-	NA	NA	NA
Month #4 (April 1 through April 30)	-0-	NA	NA	NA
Month #5 (May 1 through May 31)	-0-	NA	NA	NA
Month #6 (June 1 through June 30)	-0-	NA	NA	NA
Total	-0-	NA	NA	NA

 

Item 10. Submission of Matters to a Vote of Security Holders. There have been no changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors since such procedures were last described in the Corporation’s proxy statement dated February 7, 2018.

 

 

Item 11. Controls and Procedures.

 

(a) The Principal Executive Officer and Principal Financial Officer of Central Securities Corporation (the “Corporation”) have concluded that the Corporation’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 changes in the Corporation’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

 

 

Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

 

(a) The information required by this Item is only required in an annual report on this Form N-CSR.

 

(b) The information required by this Item is only required in an annual report on this Form N-CSR.

 

 

Item 13. Exhibits.

(a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit. The information required by this Item is only required in an annual report on this Form N-CSR.

 

(a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940. Attached hereto.

 

(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not Applicable.

 

(b) Certifications of the principal executive officer and principal financial officer, as required by Rule 30a-2(b) under the Investment Company Act of 1940. Attached hereto.

 

 

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.

 

Central Securities Corporation

 

 

By: /s/ Wilmot H. Kidd

Wilmot H. Kidd

Chief Executive Officer

 

August 9, 2018

Date

 

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 capabilities and on the dates indicated.

 

 

 

 

By: /s/ Wilmot H. Kidd

Wilmot H. Kidd

Chief Executive Officer

 

August 9, 2018

Date

 

 

 

 

By: /s/ Lawrence P. Vogel

Lawrence P. Vogel

Vice President and Treasurer

 

August 9, 2018

Date