N-30D 1 e13652.txt SEMI-ANNUAL REPORT ================================================================================ CENTRAL SECURITIES CORPORATION ---------- SEMI-ANNUAL REPORT JUNE 30, 2002 ================================================================================ 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.) TEN YEAR HISTORICAL DATA
Per Share of Common Stock ------------------------------------ Total Convertible Net Net Net realized Unrealized net Preference asset investment Divi- Distribu- investment appreciation Year assets Stock(A) value income(B) dends(C) tions(C) gain of investments ---- ------ --------- ----- ---------- -------- -------- ------------ -------------- 1991 $131,639,511 $10,022,100 $11.87 $43,465,583 1992 165,599,864 10,019,000 14.33 $.12 $.20 $ .66 $8,304,369 70,586,429 1993 218,868,360 9,960,900 17.90 .14 .18 1.42 16,407,909 111,304,454 1994 226,639,144 9,687,575 17.60 .23 .22 1.39 16,339,601 109,278,788 1995 292,547,559 9,488,350 21.74 .31 .33 1.60 20,112,563 162,016,798 1996 356,685,785 9,102,050 25.64 .27 .28 1.37 18,154,136 214,721,981 1997 434,423,053 9,040,850 29.97 .24 .34 2.08 30,133,125 273,760,444 1998 476,463,575 8,986,125 31.43 .29 .29 1.65 22,908,091 301,750,135 1999 590,655,679 -- 35.05 .26 .26 2.34 43,205,449 394,282,360 2000 596,289,086 -- 32.94 .32 .32 4.03 65,921,671 363,263,634 2001 539,839,060 -- 28.54 .18 .22 1.58* 13,662,612 304,887,640 6 mos. to June 30, 450,557,971 -- 23.97 .09 .10 -- 24,051,213 194,490,838 2002**
----------- A - At liquidation preference. B - Excluding gains or losses realized on sale of investments and the dividend requirement on the Convertible Preference Stock which was redeemed on August 1, 1999. C - Computed on the basis of the Corporation's status as a "regulated investment company" for Federal income tax purposes. Dividends are from undistributed net investment income. Distributions are from long-term investment gains. * Includes a non-taxable return of capital of $.55. ** Unaudited. The Common Stock is listed on the American Stock Exchange. On June 28, 2002 (the last trading day of the six-month period), the market quotations were as follows: Common Stock .............................. $21.00 low, $21.25 high and $21.19 last sale [2] To the Stockholders of CENTRAL SECURITIES CORPORATION: Financial statements for the six months ended June 30, 2002 reviewed by our independent accountants and other pertinent information are submitted herewith. Comparative net assets are as follows:
June 30, 2002 December 31, (Unaudited) 2001 ----------- ---- Net assets ................................................ $450,557,971 $539,839,060 Net assets per share of Common Stock ...................... 23.97 28.54 Shares of Common Stock outstanding .................... 18,799,499 18,914,599
Comparative operating results are as follows: Six months ended June 30, ----------------------------- 2002 2001 (Unaudited) (Unaudited) ----------- ---------- Net investment income ..................................... $ 1,724,727 $ 2,267,409 Per share of Common Stock ............................. .09* .13* Net realized gain on sale of investments .................. 24,051,213 8,771,659 Decrease in net unrealized appreciation of investments .... (110,396,802) (12,989,643) Decrease in net assets resulting from operations .......... (84,620,862) (1,950,575)
---------- * Per-share data are based on the average number of Common shares outstanding. A dividend of $.10 per share was paid on June 21, 2002 to holders of Common Stock. Stockholders will be sent a notice concerning the taxability of all 2002 distributions in January 2003. During the first six months of 2002 the Corporation repurchased 115,100 shares of its Common Stock at an average price per share of $24.13. These shares were purchased on the American Stock Exchange. The Corporation may from time to time purchase Common Stock in such amounts and at such prices as the Board of Directors may deem advisable in the best interests of stockholders. Stockholders' inquiries are welcome. CENTRAL SECURITIES CORPORATION WILMOT H. KIDD, President 375 Park Avenue New York, NY 10152 July 24, 2002 [3] TEN LARGEST INVESTMENTS June 30, 2002 (Unaudited) % of Year First Cost Value Net Assets Acquired ---- ----- ---------- -------- (millions) The Plymouth Rock Company, Inc. ...... $ 2.2 $48.2 10.7% 1982 Capital One Financial Corporation .... 2.5 31.1 6.9 1994 American Management Systems, Inc. .... 20.8 28.7 6.4 1984 Murphy Oil Corporation ............... 7.0 20.6 4.6 1976 Intel Corporation .................... .5 20.5 4.5 1986 The Bank of New York Company, Inc. ... 4.0 20.3 4.5 1993 Household International, Inc. ........ 3.0 19.9 4.4 1992 Brady Corporation .................... 2.6 19.6 4.4 1984 PolyOne Corporation .................. 16.0 18.0 4.0 1992 Analog Devices, Inc. ................. .7 17.8 4.0 1990 PRINCIPAL PORTFOLIO CHANGES April 1 to June 30, 2002 (Unaudited) (Common Stock unless specified otherwise) Number of Shares ------------------------------------ Held June 30, Purchased Sold 2002 --------- ---- ---- Accenture Ltd. ......................... 170,000 270,000 Analog Devices, Inc. ................... 10,000 600,000 ArvinMeritor, Inc. ..................... 130,000 300,000 Arch Capital Group Ltd. ................ 135,000 200,000 Capital One Financial Corporation ...... 20,000 510,000 Convergys Corporation .................. 70,000 770,000 Everest Re Group Ltd. .................. 20,000 20,000 Genuity Inc. ........................... 60,000** 3,230,000* 230,000 Impath Inc. ............................ 60,000 410,000 Kerr-McGee Corporation ................. 60,000 210,000 Merck & Co., Inc. ...................... 100,000 100,000 Murphy Oil Corporation ................. 50,000 250,000 PartnerRe Ltd. ......................... 50,000 50,000 Peerless Systems Corporation ........... 150,000 200,000 ProBusiness Services, Inc. ............. 20,000 180,000 SunGard Data Systems Inc. .............. 10,000 590,000 U.S. Treasury Note 3.00% due 1/31/04 ... $21,852,000 -- Vical Incorporated ..................... 50,000 150,000 Wind River Systems, Inc. ............... 200,000 500,000 ----------- * Reverse stock split. ** Post-reverse stock split. [4] STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited)
ASSETS: Investments: General portfolio securities at market value (cost $190,199,974) (Note 1) ............................... $336,214,220 Securities of affiliated companies (cost $3,462,486) (Notes 1, 5 and 6) ......................................... 51,939,078 Short-term investments (cost $62,339,901) .................... 62,339,901 $450,493,199 ------------ Cash, receivables and other assets: Cash ......................................................... 35,534 Dividends receivable ......................................... 203,200 Office equipment, net ........................................ 36,869 Other assets ................................................. 39,270 314,873 ------------ ------------ Total Assets ............................................. 450,808,072 LIABILITIES: Payable for securities purchased ................................. 105,300 Accrued expenses and reserves .................................... 144,801 ------------ Total Liabilities ........................................ 250,101 ------------ NET ASSETS ........................................................... $450,557,971 ============ NET ASSETS are represented by: Common Stock at par value, $1.00 per share, authorized 30,000,000 shares; issued 19,178,295 (Note 2) .................. $19,178,295 Surplus: Paid-in ...................................................... $222,729,261 Undistributed net gain on sales of investments ............... 23,956,783 Undistributed net investment income .......................... (63,294) 246,622,750 ------------ Net unrealized appreciation of investments ....................... 194,490,838 Treasury stock, at cost (378,796 shares of Common Stock) (Note 2) ....................................................... (9,733,912) ------------ NET ASSETS ........................................................... $450,557,971 ============ NET ASSET VALUE PER COMMON SHARE ..................................... $23.97 ======
See accompanying notes to financial statements and independent accountants' review report. [5] STATEMENT OF OPERATIONS For the six months ended June 30, 2002 (Unaudited) INVESTMENT INCOME Income: Dividends ...................................... $ 1,969,752 Interest ....................................... 733,757 $2,703,509 ----------- Expenses: Administration and operations .................. 265,375 Investment research ............................ 233,876 Rent and utilities ............................. 89,093 Franchise and miscellaneous taxes .............. 70,952 Listing, software and sundry fees .............. 55,581 Directors' fees ................................ 48,000 Insurance ...................................... 43,702 Legal, auditing and tax fees ................... 29,815 Stationery, supplies, printing and postage ..... 29,605 Publications ................................... 23,082 Transfer agent and registrar fees and expenses . 20,426 Custodian fees ................................. 15,455 Travel and telephone ........................... 11,819 Employees' retirement plans .................... 7,600 Miscellaneous .................................. 34,401 978,782 ----------- ------------ Net investment income .............................. 1,724,727 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain from security transactions ....... 24,051,213 Net decrease in unrealized appreciation of investments ......................................(110,396,802) ----------- Net loss on investments ........................ (86,345,589) ----------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................................... ($84,620,862) =========== See accompanying notes to financial statements and independent accountants' review report. [6] STATEMENTS OF CHANGES IN NET ASSETS For the six months ended June 30, 2002 and the year ended December 31, 2001
Six months ended June 30, Year ended 2002 December 31, (Unaudited) 2001 --------- ---- FROM OPERATIONS: Net investment income ...................................... $ 1,724,727 $ 3,335,304 Net realized gain on investments ........................... 24,051,213 13,662,612 Net decrease in unrealized appreciation of investments ....................................... (110,396,802) (58,375,994) ------------- ------------- Decrease in net assets resulting from operations ...................................... (84,620,862) (41,378,078) ------------- ------------- DISTRIBUTIONS TO STOCKHOLDERS FROM: Net investment income ...................................... (1,882,451) (3,956,197) Net realized gain from investment transactions ............. -- (18,650,364) Return of capital .......................................... -- 9,911,422 ------------- ------------- Decrease in net assets from distributions .............. (1,882,451) (32,517,983) ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: (Note 2) Distribution to stockholders reinvested in Common Stock .... -- 18,466,903 Cost of shares of Common Stock repurchased ................. (2,777,776) (1,020,808) ------------- ------------- Increase (decrease) in net assets from capital share transactions ................................... (2,777,776) 17,446,035 ------------- ------------- Total decrease in net assets ....................... (89,281,089) (56,450,026) NET ASSETS: Beginning of period ........................................ 539,839,060 596,289,086 ------------- ------------- End of period (including undistributed net investment income of ($63,294) and $0, respectively) ....................... $ 450,557,971 $ 539,839,060 ============= =============
See accompanying notes to financial statements and independent accountants' review report. [7] STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited) PORTFOLIO SECURITIES (86.2%) STOCKS (COMMON UNLESS SPECIFIED OTHERWISE) Prin. Amt. or Shares Value ---------- ----- Banking and Finance 18.4% 600,000 The Bank of New York Company, Inc. ............ $ 20,250,000 510,000 Capital One Financial Corporation ............. 31,135,500 400,000 Household International, Inc. ................. 19,880,000 300,000 Wachovia Corporation .......................... 11,454,000 ------------ 82,719,500 ------------ Business Services 0.6% 180,000 ProBusiness Services, Inc.(a) ................. 2,622,420 ------------ Chemicals 6.7% 1,600,000 PolyOne Corporation ........................... 18,000,000 300,000 Rohm and Haas Company ......................... 12,147,000 ------------ 30,147,000 ------------ Computer Software & Services 17.3% 270,000 Accenture Ltd.(a) ............................. 5,130,000 1,500,000 American Management Systems, Incorporated(a) .. 28,665,000 770,000 Convergys Corporation(a) ...................... 14,999,600 200,000 Peerless Systems Corporation(a) ............... 322,000 590,000 SunGard Data Systems Inc.(a) .................. 15,623,200 1,200,000 Unisys Corporation(a) ......................... 10,800,000 500,000 Wind River Systems, Inc.(a) ................... 2,505,000 ------------ 78,044,800 ------------ Electronics 12.4% 600,000 Analog Devices, Inc.(a) ....................... 17,820,000 1,350,000 Flextronics International Ltd.(a) ............. 9,625,500 1,120,000 Intel Corporation ............................. 20,462,400 330,000 Motorola, Inc. ................................ 4,758,600 500,000 Solectron Corporation(a) ...................... 3,075,000 ------------ 55,741,500 ------------ Energy 7.1% 210,000 Kerr-McGee Corporation ........................ 11,245,500 250,000 Murphy Oil Corporation ........................ 20,625,000 ------------ 31,870,500 ------------ [8] Prin. Amt. or Shares Value ---------- ----- Health Care 2.9% 410,000 Impath Inc.(a) ................................ $ 7,359,500 100,000 Merck & Co., Inc. ............................. 5,064,000 150,000 Vical Incorporated(a) ......................... 792,000 ------------ 13,215,500 ------------ Insurance 12.7% 200,000 Arch Capital Group Ltd.(a) .................... 5,630,000 20,000 Everest Re Group Ltd. ......................... 1,119,000 50,000 PartnerRe Ltd. ................................ 2,447,500 70,000 The Plymouth Rock Company, Inc. Class A(b)(c) ............................... 48,230,000 ------------ 57,426,500 ------------ Manufacturing 6.0% 300,000 ArvinMeritor, Inc. ............................ 7,200,000 560,400 Brady Corporation Class A ..................... 19,614,000 ------------ 26,814,000 ------------ Telecommunications 1.3% 330,000 AT&T Wireless Services, Inc.(a) ............... 1,930,500 1,100,000 Broadwing Inc.(a) ............................. 2,860,000 230,000 Genuity Inc.(a) ............................... 874,000 ----------- 5,664,500 ----------- Transportation 0.8% 533,757 Transport Corporation of America, Inc. Class B(a)(b) ............................... 3,709,078 ------------ Miscellaneous 0.0% Grumman Hill Investments, L.P.(a)(c) .......... 178,000 ------------ Total Portfolio Securities (cost $193,662,460) ....................... 388,153,298 ------------ [9] Prin. Amt. or Shares Value ---------- ----- SHORT-TERM INVESTMENTS 13.8% $20,305,000 General Electric Capital Corp. 1.604%-1.623% due 7/17/02-8/14/02 ........................ $ 20,274,572 10,231,000 General Motors Acceptance Corp. 1.804% due 7/24/02 ................................ 10,219,234 9,870,000 John Deere Credit Corp. 1.601%-1.854% due 7/10/02 ................................ 9,865,613 22,020,000 Prudential Funding Corp. 1.473%-1.553% due 7/31/02-8/21/02 ........................ 21,980,482 ------------ Total Short-Term Investments (cost $62,339,901) .................... 62,339,901 ------------ Total Investments (cost $256,002,361) (100.0%) .......... 450,493,199 Cash, receivables and other assets less liabilities (0.0%) ............... 64,772 ------------ Net Assets (100%) ....................... $450,557,971 ============ ------------ (a) Non-dividend paying. (b) Affiliate as defined in the Investment Company Act of 1940. (c) Valued at estimated fair value. See accompanying notes to financial statements and independent accountants' review report. [10] NOTES TO FINANCIAL STATEMENTS-- (unaudited) 1. Significant Accounting Policies -- 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. The policies are in conformity with accounting principles generally accepted in the United States of America. Security Valuation -- Securities are valued at the last sale price or, if unavailable, at the closing bid price. Corporate discount notes are valued at amortized cost, which approximates market value. Securities for which no ready market exists, including The Plymouth Rock Company, Inc. Class A Common Stock, are valued at estimated fair value by the Board of Directors. 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 to its stockholders. Therefore, no Federal income taxes have been accrued. Use of Estimates -- The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates. Other -- Security transactions are accounted for on the date the securities are purchased or sold, and cost of securities sold is determined by specific identification. Dividend income and distributions to stockholders are recorded on the ex-dividend date. 2. Common Stock -- The Corporation repurchased 115,100 shares of its Common Stock in the first six months of 2002 at an average price of $24.13 per share representing an average discount from net asset value of 12.8%. It may from time to time purchase 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 optional stock distributions, or may be retired. 3. Investment Transactions -- The aggregate cost of securities purchased and the aggregate proceeds of securities sold during the six months ended June 30, 2002 (excluding short-term investments and U.S. Government securities), were $32,353,513 and $31,926,576, respectively. Purchases and sales of U.S. Government securities aggregated $21,845,171 and $21,940,774, respectively. As of June 30, 2002, based on cost for Federal income tax purposes, the aggregate gross unrealized appreciation and depreciation for all securities were $224,553,383 and $30,062,545, respectively. 4. Operating Expenses -- The aggregate remuneration paid during the six months ended June 30, 2002 to officers and directors amounted to $513,000, of which $48,000 was paid as fees to directors who were not officers. Benefits to employees are provided through a profit sharing retirement plan. Contributions to the plan are made at the discretion of the Board of Directors, and each participant's benefits vest after three years. No contributions were made to the plan for the six months ended June 30, 2002. [11] NOTES TO FINANCIAL STATEMENTS-- continued (unaudited) 5. Affiliates -- The Plymouth Rock Company, Inc. and Transport Corporation of America, Inc. are affiliates as defined in the Investment Company Act of 1940. The Corporation received dividends of $328,300 from affiliates during the six months ended June 30, 2002. Unrealized appreciation related to affiliates increased by $5,043,413 for the six months ended June 30, 2002 to $48,476,591. 6. Restricted Securities -- The Corporation from time to time invests in securities the resale of which is restricted. On June 30, 2002 such investments had an aggregate value of $48,408,000, which was equal to 10.7% of the Corporation's net assets. Investments in restricted securities at June 30, 2002, including acquisition dates and cost, were:
Company Shares Security Date Purchased Cost ---------------------------------- ---------- ------------------- ------------- ---------- Grumman Hill Investments, L.P. Limited Partnership 9/11/85 $ 21,647 Interest The Plymouth Rock 70,000 Class A Common 12/15/82 1,500,000 Company, Inc. Stock 6/9/84 699,986
In general, the Corporation does not have the right to demand registration of the restricted securities. Unrealized appreciation related to restricted securities increased by $4,032,581 for the six months ended June 30, 2002 to $46,186,367. [12] FINANCIAL HIGHLIGHTS
Six Mos. Ended June 30, 2002 (Unaudited) 2001 2000 1999 1998 1997 ---------- ---- ---- ---- ---- ----- Per Share Operating Performance Net asset value, beginning of period ...... $ 28.54 $ 32.94 $ 35.05 $ 31.43 $ 29.97 $ 25.64 Net investment income* .................... .09 .18 .32 .30 .34 .29 Net realized and unrealized gain (loss) on securities ........................... (4.56) (2.78) 1.92 5.96 3.11 6.51 -------- -------- -------- -------- -------- -------- Total from investment operations ........................ (4.47) (2.60) 2.24 6.26 3.45 6.80 Less: Dividends from net investment income** To Preference Stockholders ............ -- -- -- .04 .05 .05 To Common Stockholders ................ .10 .22 .32 .26 .29 .34 Distributions from capital gains** To Common Stockholders ................ .00 1.03 4.03 2.34 1.65 2.08 -------- -------- -------- -------- -------- -------- Return of Capital** To Common Stockholders ................ -- .55 -- -- -- -- Total distributions ................. .10 1.80 4.35 2.64 1.99 2.47 -------- -------- -------- -------- -------- -------- Net asset value, end of period ............ 23.97 $ 28.54 $ 32.94 $ 35.05 $ 31.43 $ 29.97 ======== ======== ======== ======== ======== ======== Per share market value, end of period ........................... $ 21.19 $ 25.31 $ 28.25 $ 27.25 $ 24.38 $ 29.69 Total investment return, market(%) ............................... (16.46)+ (2.42) 17.75 22.96 (11.57) 35.60 Total investment return, NAV(%) ........... (15.66)+ (6.54) 7.02 31.79 13.75 26.08 Ratios/Supplemental Data: Net assets, end of period(000) ............ $450,558 $539,839 $596,289 $590,656 $476,464 $434,423 Ratio of expenses to average net assets for Common(%) .................... .38++ .45 .38 .45 .51 .54 Ratio of net investment income to average net assets for Common(%) ............................... .61++ .60 .83 .89 1.09 .99 Portfolio turnover rate(%) ................ 11.24+ 10.32 13.54 12.06 6.21 10.92
------------- * Per-share data are based on the average number of Common Shares outstanding during the period. ** Computed on the basis of the Corporation's status as a regulated investment company" for Federal income tax purposes. + Not annualized. ++ Annualized, not necessarily indicative of full year ratio. See accompanying notes to financial statements and independent accountants' review report. [13] -------------------------------------------------------------------------------- INDEPENDENT ACCOUNTANTS' REVIEW REPORT TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF CENTRAL SECURITIES CORPORATION We have reviewed the accompanying statement of assets and liabilities, including the statement of investments, of Central Securities Corporation as of June 30, 2002, and the related statements of operations, changes in net assets and financial highlights for the six-month period ended June 30, 2002. These financial statements are the responsibility of the management of Central Securities Corporation. We have conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the statement of changes in net assets for the year ended December 31, 2001, and financial highlights for each of the five years in the period ended December 31, 2001, and in our report dated January 30, 2002 we expressed an unqualified opinion on those statements. KPMG LLP New York, NY July 18, 2002 -------------------------------------------------------------------------------- ANNUAL MEETING OF STOCKHOLDERS -- (unaudited) The annual meeting of stockholders of the Corporation was held on March 13, 2002. At the meeting all of the directors of the Corporation were reelected by the following vote of the holders of the Common Stock: Donald G. Calder, 17,840,571 shares in favor, 148,767 shares withheld; Jay R. Inglis, 17,822,404 shares in favor, 166,934 shares withheld; Dudley D. Johnson, 17,841,873 shares in favor, 147,465 shares withheld; Wilmot H. Kidd, 17,778,875 shares in favor, 210,463 shares withheld; and C. Carter Walker, Jr., 17,836,456 shares in favor, 152,882 shares withheld. In addition, the selection of KPMG LLP as independent auditors of the Corporation for the year 2002 was ratified by the following vote of the holders of the Common Stock: 17,894,266 shares in favor, 36,645 shares against, 58,427 shares abstaining. [14] BOARD OF DIRECTORS DONALD G. CALDER DUDLEY D. JOHNSON President Chairman G. L. Ohrstrom & Co., Inc. Young & Franklin Inc. New York, NY Liverpool, NY JAY R. INGLIS WILMOT H. KIDD Executive Vice President President National Marine Underwriters, Inc. New York, NY C. CARTER WALKER, JR. Washington, CT OFFICERS WILMOT H. KIDD, President CHARLES N. EDGERTON, Vice President and Treasurer MARLENE A. KRUMHOLZ, Secretary OFFICE 375 Park Avenue, New York, NY 10152 212-688-3011 www.centralsecurities.com CUSTODIAN UMB Bank, N. A. P.O. Box 419226, Kansas City, MO 64141-6226 TRANSFER AGENT AND REGISTRAR EquiServe Trust Company P.O. Box 43069, Providence, RI 02940-3069 201-324-0313 www.equiserve.com INDEPENDENT AUDITORS KPMG LLP 757 Third Avenue, New York, NY 10017 [15]