N-CSRS 1 e27851_ncsrs.txt SEMI-ANNUAL REPORT 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, President 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, 2007 Date of reporting period: June 30, 2007 Item 1. Reports to Stockholders. ================================================================================ -------------------------------------------------------------------------------- CENTRAL SECURITIES CORPORATION ---------- SEMI-ANNUAL REPORT JUNE 30, 2007 -------------------------------------------------------------------------------- ================================================================================ 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 ---- ------ -------- ----- --------- -------- -------- ---- -------------- 1996 $356,685,785 $9,102,050 $25.64 $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 2002 361,942,568 -- 18.72 .14 .14 1.11 22,869,274 119,501,484 2003 478,959,218 -- 24.32 .09 .11 1.29 24,761,313 229,388,141 2004 529,468,675 -- 26.44 .11 .11 1.21 25,103,157 271,710,179 2005 573,979,905 -- 27.65 .28 .28 1.72 31,669,417 302,381,671 2006 617,167,026 -- 30.05 .36 .58 1.64 36,468,013 351,924,627 Six mos. to June 30, 2007** 678,277,359 -- 33.03 .33 .17 .03 18,046,062 392,382,036
---------- 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 under the symbol CET. On June 29, 2007 (the last trading day of the six-month period) the market quotations were: $29.00 low, $29.24 high and $29.05 last sale. [ 2 ] To the Stockholders of CENTRAL SECURITIES CORPORATION: Financial statements for the six months ended June 30, 2007 reviewed by our independent registered public accounting firm and other pertinent information are submitted herewith. Comparative net assets are as follows:
June 30, 2007 December 31, (Unaudited) 2006 ------------ ------------ Net assets.......................................................... $678,277,359 $617,167,026 Net assets per share of Common Stock................................ 33.03 30.05 Shares of Common Stock outstanding.............................. 20,538,195 20,538,195 Comparative operating results are as follows:
Six months ended June 30, ---------------------------- 2007 2006 (Unaudited) (Unaudited) ------------ ------------ Net investment income............................................... $ 6,714,501 $ 5,975,548 Per share of Common Stock....................................... .33* .29* Net realized gain on sale of investments............................ 18,046,062 17,949,636 Increase in net unrealized appreciation of investments.............. 40,457,409 19,834,895 Increase in net assets resulting from operations.................... 65,217,972 43,760,079
---------- * Per-share data are based on the average number of Common shares outstanding. A dividend of $.20 per share of Common Stock was paid on June 22, 2007. Stockholders will be sent a notice concerning the taxability of all 2007 distributions in January 2008. During the first six months of 2007 the Corporation did not repurchase any of its Common Stock. However, 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 stockholders. Purchases may be made on the American Stock Exchange or in transactions directly with stockholders. Stockholders' inquiries are welcome. CENTRAL SECURITIES CORPORATION WILMOT H. KIDD, President 630 Fifth Avenue New York, NY 10111 July 25, 2007 [ 3 ] TEN LARGEST INVESTMENTS June 30, 2007 (Unaudited)
Percent of Year First Cost Value Net Assets Acquired ---- ----- ---------- -------- (millions) The Plymouth Rock Company, Inc.................... $ 2.2 $148.4 21.9% 1982 The Bank of New York Company, Inc................. 15.5 36.3 5.3 1993 Agilent Technologies, Inc......................... 22.5 36.2 5.3 2005 Murphy Oil Corporation............................ 3.7 35.7 5.3 1974 Brady Corporation................................. 3.5 33.8 5.0 1984 Capital One Financial Corporation................. 5.1 26.7 3.9 1994 Convergys Corporation............................. 13.9 24.2 3.6 1998 Roper Industries, Inc............................. 9.0 23.4 3.5 2003 Intel Corporation................................. 0.4 23.3 3.4 1986 Sonus Networks, Inc............................... 9.7 21.3 3.1 2005
PRINCIPAL PORTFOLIO CHANGES April 1 to June 30, 2007 (Unaudited) (Common Stock unless specified otherwise)
Number of Shares ---------------------------------------- Held June 30, Purchased Sold 2007 --------- ---- ---- Arch Coal, Inc.................................... 100,000 -- A.S.V., Inc....................................... 94,000 294,000 Capital One Financial Corporation................. 30,000 340,000 Cincinnati Bell Inc............................... 400,000 -- Convergys Corporation............................. 400,000 1,000,000 Cypress Semiconductor Corporation................. 255,000 -- GeoMet, Inc....................................... 79,000 780,000 Meritage Homes Corporation........................ 80,000 80,000 Neoware, Inc...................................... 100,000 1,400,000 Nexen Inc......................................... 160,000(a) 320,000 PolyOne Corporation............................... 75,000 -- Radisys Corporation............................... 610,000 610,000 SLM Corporation................................... 100,000 200,000 -- The TriZetto Group, Inc........................... 15,000 990,000 Verigy Ltd........................................ 35,381 80,001
---------- (a) Stock split. [ 4 ] DIVERSIFICATION OF INVESTMENTS June 30, 2007 (Unaudited)
Percent of Net Assets --------------------- June 30,December 31, Issues Cost Value 2007 2006 ------ ---- ----- ---- ---- Common Stocks: Insurance............................ 3 $ 3,633,747 $150,152,440 22.1% 21.8% Electronics.......................... 8 54,636,326 119,647,986 17.6 16.8 Manufacturing........................ 5 40,745,493 96,264,720 14.2 14.0 Energy............................... 6 48,554,175 93,182,591 13.7 12.5 Banking and Finance.................. 2 20,552,122 62,929,600 9.3 9.3 Information Technology............... 2 22,968,258 38,122,400 5.6 6.7 Business Services.................... 3 23,719,309 37,066,000 5.5 10.9 Other................................ 6 14,708,837 24,534,566 3.7 4.5 Short-Term Investments.................. 3 56,497,967 56,497,967 8.3 3.5
FINANCIAL HIGHLIGHTS
Six Mos. Ended June 30, 2007 (Unaudited) 2006 2005 2004 2003 2002 ----------- ---- ---- ---- ---- ---- Per Share Operating Performance Net asset value, beginning of period ............... $30.05 $27.65 $26.44 $24.32 $18.72 $28.54 Net investment income* ............................. .33 .36 .28 .11 .09 .14 Net realized and unrealized gain (loss) on securities* ................................... 2.85 4.26 2.93 3.33 6.91 (8.71) ------ ------ ------ ------ ------ ------ Total from investment operations ................................. 3.18 4.62 3.21 3.44 7.00 (8.57) Less: Dividends from net investment income ............... .17 .36 .28 .11 .11 .14 Distributions from capital gains ................... .03 1.86 1.72 1.21 1.29 1.11 ------ ------ ------ ------ ------ ------ Total distributions .......................... .20 2.22 2.00 1.32 1.40 1.25 ------ ------ ------ ------ ------ ------ Net asset value, end of period ..................... $33.03 $30.05 $27.65 $26.44 $24.32 $18.72 ====== ======= ======= ======= ======= ======= Per share market value, end of period .............. $29.05 $26.65 $23.80 $22.85 $20.89 $16.28 Total investment return, market(%). ................ 9.76 21.31 14.04 16.16 36.22 (31.23) Total investment return, NAV(%) .................... 10.58 18.55 13.75 15.40 39.32 (29.43) Ratios/Supplemental Data: Net assets, end of period(000) ..................... $678,277 $617,167 $573,980 $529,469 $478,959 $361,943 Ratio of expenses to average net assets(%) ........................................ .48+ .53 .54 .55 .56 .50 Ratio of net investment income to average net assets(%) ............................ 1.32+ 1.23 1.02 .41 .42 .57 Portfolio turnover rate(%) ......................... 6.33 17.55 15.83 16.72 12.90 19.50
---------- * Per-share data are 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. [ 5 ] STATEMENT OF INVESTMENTS June 30, 2007 (Unaudited) PORTFOLIO SECURITIES 91.7% STOCKS (COMMON UNLESS SPECIFIED OTHERWISE)
Prin. Amt. or Shares Value ---------- ----- Banking and Finance 9.3% 875,000 The Bank of New York Company, Inc.............. $ 36,260,000 340,000 Capital One Financial Corporation.............. 26,669,600 ------------ 62,929,600 ------------ Business Services 5.5% 1,000,000 Convergys Corporation (a)...................... 24,240,000 200,000 Hewitt Associates, Inc. (a).................... 6,400,000 200,000 IMS Health Inc................................. 6,426,000 ------------ 37,066,000 ------------ Chemicals 1.2% 150,000 Rohm and Haas Company......................... 8,202,000 ------------ Communications 0.9% 1,005,000 Arbinet-thexchange, Inc. (a).................. 6,060,150 ------------ Electronics 17.6% 942,400 Agilent Technologies, Inc. (a)................. 36,225,856 430,000 Analog Devices, Inc............................ 16,185,200 980,000 Intel Corporation.............................. 23,265,102 350,000 Motorola, Inc.................................. 6,195,000 610,000 Radisys Corporation (a)........................ 7,564,000 1,800,000 Solectron Corporation (a)...................... 6,624,000 2,500,000 Sonus Networks, Inc. (a)....................... 21,300,000 80,001 Verigy Ltd. (a)................................ 2,288,828 ------------ 119,647,986 ------------ Energy 13.7% 375,000 Berry Petroleum Company Class A................ 14,130,000 234,328 Chevron Corporation............................ 19,739,791 780,000 GeoMet, Inc. (a)............................... 5,974,800 555,000 McMoRan Exploration Co. (a).................... 7,770,000 600,000 Murphy Oil Corporation......................... 35,664,000 320,000 Nexen Inc...................................... 9,904,000 ------------ 93,182,591 ------------ Health Care 1.1% 120,000 Abbott Laboratories............................ 6,426,000 134,900 Vical Inc. (a)................................. 700,131 ------------ 7,126,131 ------------ Homebuilding 0.3% 80,000 Meritage Homes Corporation (a)................. 2,140,000 ------------
[ 6 ]
Prin. Amt. or Shares Value ---------- ----- Information Technology Services 5.6% 1,400,000 Neoware, Inc. (a)(b)........................... $ 18,956,000 ------------ 990,000 The TriZetto Group, Inc. (a)................... 19,166,400 ------------ 38,122,400 ------------ Insurance 22.1% 10,000 Erie Indemnity Co. Class A.................... 540,400 70,000 The Plymouth Rock Company, Inc. Class A (b)(c)................................ 148,400,000 2,000 White Mountains Insurance Group, Ltd........... 1,212,040 ------------ 150,152,440 ------------ Manufacturing 14.2% 294,000 A.S.V., Inc. (a)............................... 5,080,320 910,000 Brady Corporation Class A...................... 33,797,400 400,000 Dover Corporation.............................. 20,460,000 410,000 Roper Industries, Inc.......................... 23,411,000 400,000 Tyco International Ltd......................... 13,516,000 ------------ 96,264,720 ------------ Retail Trade 0.2% 28,751 Aerogroup International, Inc. (a)(c)........... 1,006,285 ------------ Total Portfolio Securities (cost $229,518,267)(d).................... 621,900,303 ------------ SHORT-TERM INVESTMENTS 8.3% Commercial Paper 4.2% 16,589,000 American Express 5.0986% - 5.1189% due 7/3/07 - 8/8/07........................... 16,561,732 12,016,000 Citigroup Funding 5.0950% - 5.1421% due 7/25/07 - 8/8/07.......................... 11,966,955 ------------ 28,528,687 ------------ U.S. Treasury Bills 4.1% 28,427,000 U.S. Treasury Bills 4.7013% - 4.8190% due 9/27/07 - 12/20/07........................ 27,969,280 ------------ Total Short-Term Investments (cost $56,497,967)(d)..................... 56,497,967 ------------ Total Investments (100.0%) (cost $286,016,234)....................... 678,398,270 Cash, receivables and other assets less liabilities (0.0%)................... (120,911) ------------ Net Assets (100%)........................... $678,277,359 ============
---------- (a) Non-dividend paying. (b) Affiliate as defined in the Investment Company Act of 1940. (c) Valued at estimated fair value. (d) Aggregate cost for Federal tax purposes is substantially the same. See accompanying notes to financial statements. [ 7 ] STATEMENT OF ASSETS AND LIABILITIES June 30, 2007 (Unaudited)
ASSETS: Investments: General portfolio securities at market value (cost $210,557,118) (Note 1).............................. $454,544,303 Securities of affiliated companies (cost $18,961,149) (Notes 1, 5 and 6)........................................ 167,356,000 Short-term investments (cost $56,497,967)................... 56,497,967 $678,398,270 ------------ Cash, receivables and other assets: Cash........................................................ 61,591 Dividends and interest receivable........................... 25,219 Receivable for securities sold.............................. 227,536 Office equipment and leasehold improvements, net............ 348,753 Other assets................................................ 89,612 752,711 ------------ ------------- Total Assets............................................ 679,150,981 LIABILITIES: Payable for securities purchased................................ 687,580 Accrued expenses and reserves................................... 186,042 ------------ Total Liabilities....................................... 873,622 ------------- NET ASSETS.......................................................... $678,277,359 ============ NET ASSETS are represented by: Common Stock $1 par value: authorized 30,000,000 shares; issued 20,820,859 (Note 2)................. $20,820,859 Surplus: Paid-in..................................................... $250,426,845 Undistributed net gain on sales of investments.............. 15,601,669 Undistributed net investment income......................... 5,974,976 272,003,490 ------------ Net unrealized appreciation of investments...................... 392,382,036 Treasury stock, at cost (282,664 shares of Common Stock) (Note 2)...................................................... (6,929,026) ------------- NET ASSETS.......................................................... $678,277,359 ============ NET ASSET VALUE PER COMMON SHARE (20,538,195 shares outstanding)................................... $33.03 ======
See accompanying notes to financial statements. [ 8 ] STATEMENT OF OPERATIONS For the six months ended June 30, 2007 (Unaudited)
INVESTMENT INCOME Income: Dividends (net of foreign withholding taxes of $2,157).......... $ 7,132,399 ----------- Interest........................................................ 1,113,842 $8,246,241 ----------- Expenses: Investment research............................................. 433,125 Administration and operations................................... 368,375 Occupancy costs................................................. 232,330 Franchise and miscellaneous taxes............................... 102,686 Insurance....................................................... 73,981 Directors' fees................................................. 71,000 Stationery, supplies, printing and postage...................... 60,109 Listing, software and sundry fees............................... 52,166 Travel and telephone............................................ 29,702 Legal, auditing and tax fees.................................... 28,656 Transfer agent and registrar fees and expenses.................. 19,344 Custodian fees.................................................. 16,291 Miscellaneous................................................... 43,975 1,531,740 ----------- ---------- Net investment income............................................... 6,714,501 NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain from investment transactions...................... 18,046,062 Net increase in unrealized appreciation of investments.............. 40,457,409 ----------- Net gain on investments......................................... 58,503,471 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $65,217,972 ===========
See accompanying notes to financial statements. [ 9 ] STATEMENTS OF CHANGES IN NET ASSETS For the six months ended June 30, 2007 and the year ended December 31, 2006
Six months ended June 30, Year ended 2007 December 31, (Unaudited) 2006 ----------- ------------ FROM OPERATIONS: Net investment income........................................... $ 6,714,501 $ 7,269,692 Net realized gain on investments................................ 18,046,062 36,468,013 Net increase in unrealized appreciation of investments.......... 40,457,409 49,542,956 ------------ ------------ Increase in net assets resulting from operations............ 65,217,972 93,280,661 ------------ ------------ DISTRIBUTIONS TO STOCKHOLDERS FROM: Net investment income........................................... (3,409,015) (7,185,071) Net realized gain from investment transactions.................. (698,624) (36,564,651) ------------ ------------ Decrease in net assets from distributions................... (4,107,639) (43,749,722) ----------- ----------- FROM CAPITAL SHARE TRANSACTIONS: (Note 2) Distribution to stockholders reinvested in Common Stock......... -- 21,444,764 Cost of shares of Common Stock repurchased...................... -- (27,788,582) ------------ ------------ Decrease in net assets from capital share transactions........................................ -- (6,343,818) ------------ ------------ Total increase in net assets............................ 61,110,333 43,187,121 NET ASSETS: Beginning of period............................................. 617,167,026 573,979,905 ------------ ------------ End of period (including undistributed net investment income of $5,974,976 and $226,873, respectively)..................... $678,277,359 $617,167,026 ============ ============
See accompanying notes to financial statements. [ 10 ] STATEMENT OF CASH FLOWS For the six months ended June 30, 2007 (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES: Net increase in net assets from operations...................... $ 65,217,972 Adjustments to net increase in net assets from operations: Purchase of securities........................................ ($37,217,631) Proceeds from securities sold................................. 68,596,390 Net purchase of short-term investments........................ (35,024,911) Net realized gain from investments............................ (18,046,062) Proceeds from class action settlement......................... 241,669 Increase in unrealized appreciation........................... (40,457,409) Depreciation and amortization................................. 41,036 Changes in operating assets and liabilities: Decrease in dividends and interest receivable............... 76,729 Decrease in receivable for securities sold.................. 137,313 Increase in office equipment and leasehold improvements.................................... (4,127) Increase in other assets.................................... (9,546) Increase in payable for securities purchased................ 687,580 Decrease in accrued expenses and reserves................... (150,116) ------------ Total adjustments............................................. (61,129,085) ------------ Net cash provided by operating activities........................... 4,088,887 CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid.................................................. (4,107,639) ------------ Cash flows used in financing activities............................. (4,107,639) ------------ Net decrease in cash................................................ (18,752) Cash at beginning of period......................................... 80,343 ------------ Cash at end of period............................................... $ 61,591 ============
See accompanying notes to financial statements. [ 11 ] 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. The policies are in conformity with generally accepted accounting principles. Security Valuation -- Securities are valued at the last sale or official closing price or, if unavailable, at the closing bid price. Corporate discount notes and U.S. Treasury Bills 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 generally accepted accounting principles 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 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. New Accounting Pronouncements -- In September 2006, the Financial Accounting Standards Board issued Statement 157 ("SFAS 157"), "Fair Value Measurements". This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 will be effective at the beginning of the Corporation's 2008 fiscal year. The Corporation is currently assessing the effect of this pronouncement on our financial statements. As of June 30, 2007, the Corporation adopted Financial Accounting Standards Board Interpretation 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"). Management has determined that the implementation of FIN 48 had no impact in the financial statements. 2. Common Stock -- The Corporation did not repurchase any shares of its Common Stock in the first six months of 2007. 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 and 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, 2007, excluding short-term investments, were $37,217,631 and $68,596,390, respectively. As of June 30, 2007, based on cost for Federal income tax purposes, the aggregate gross unrealized appreciation and depreciation for all securities were $396,764,568 and $4,382,532, respectively. [ 12 ] NOTES TO FINANCIAL STATEMENTS -- continued (unaudited) 4. Operating Expenses -- The aggregate remuneration paid during the six months ended June 30, 2007 to officers and directors amounted to $808,500, of which $71,000 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 of employment. No contributions were made to the plan for the six months ended June 30, 2007. 5. Affiliates -- The Plymouth Rock Company, Inc. and Neoware Inc. are affiliates as defined in the Investment Company Act of 1940. During the six months ended June 30, 2007, the Corporation received dividends of $5,039,300 from affiliates and incurred a realized loss of $786,644 from the sale of shares of an affiliate. Unrealized appreciation related to affiliates increased by $16,469,306 for the six months ended June 30, 2007 to $148,394,851. 6. Restricted Securities -- The Corporation from time to time invests in securities the resale of which is restricted. On June 30, 2007 such investments had an aggregate value of $149,406,285, which was equal to 22.0% of the Corporation's net assets. Investments in restricted securities at June 30, 2007, including acquisition dates and cost, were:
Company Shares Security Date Acquired Cost ------------------------------- ------ ------------ ------------- --------- Aerogroup International, Inc. 28,751 Common Stock 6/21/05 $ 17,200 The Plymouth Rock Company, Inc. 60,000 Class A Stock 12/15/82 1,500,000 The Plymouth Rock Company, Inc. 10,000 Class A Stock 6/9/84 699,986
The Corporation does not have the right to demand registration of the restricted securities. Unrealized appreciation related to restricted securities increased by $15,112,490 for the six months ended June 30, 2007 to $147,189,453. 7. Operating Lease Commitment -- The Corporation has entered into an operating lease for office space which expires in 2014 and provides for future minimum rental payments in the aggregate amount of approximately $2.5 million. The lease agreement contains escalation clauses relating to operating costs and real property taxes. Future minimum rental commitments under the lease are $314,241 per year through 2008, $329,172 for 2009 and $341,806 annually thereafter. [ 13 ] -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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, 2007, and the related statements of operations, changes in net assets, cash flows and financial highlights for the six-month period ended June 30, 2007. 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 Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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 financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles. We have previously audited, in accordance with standards established by the Public Company Accounting Oversight Board (United States), the statement of changes in net assets for the year ended December 31, 2006 and financial highlights for each of the five years in the period ended December 31, 2006, and in our report dated January 24, 2007 we expressed an unqualified opinion on those financial statements. KPMG LLP New York, NY July 25, 2007 -------------------------------------------------------------------------------- [ 14 ] Direct Registration The Corproation 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. Annual Meeting of Stockholders The annual meeting of stockholders of the Corporation was held on March 14, 2007. At the meeting all of the directors of the Corporation were reelected by the following vote of the holders of the Common Stock: Simms C. Browning, 19,430,480 shares in favor, 67,869 withheld; Donald G. Calder, 19,401,717 shares in favor, 96,632 shares withheld; Jay R. Inglis, 19,394,489 shares in favor, 103,860 shares withheld; Dudley D. Johnson, 19,409,204 shares in favor, 89,145 shares withheld; Wilmot H. Kidd, 19,077,411 shares in favor, 420,938 shares withheld; and C. Carter Walker, Jr., 19,406,264 shares in favor, 92,085 shares withheld. In addition, the selection of KPMG LLP as independent auditors of the Corporation for the year 2007 was ratified by the following vote of the holders of the Common Stock: 19,373,522 shares in favor, 61,726 shares against, 63,101 shares abstaining. 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, 2007 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 the third quarter 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. [ 15 ] BOARD OF DIRECTORS Donald G. Calder, Chairman Simms C. Browning Jay R. Inglis Dudley D. Johnson Wilmot H. Kidd C. Carter Walker, Jr. OFFICERS Wilmot H. Kidd, President Charles N. Edgerton, Vice President and Treasurer William E. Sheeline, Vice President Marlene A. Krumholz, Secretary 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 Comapany, N.A. P.O. Box 43069, Providence, RI 02940-3069 800-756-8200 www.computershare.com CUSTODIAN UMB Bank, N. A. Kansas City, MO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP New York, NY [ 16 ] 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. Schedule of Investments. Schedule is included as a part of the report to shareholders filed under Item 1 of this Form. 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. Mr. Wilmot H. Kidd is the President and portfolio manager of the Corporation and has served in that capacity since 1973. He manages no other accounts and accordingly, the Registrant is not aware of any material conflicts with his management of the Corporation's investments. Mr. Kidd's compensation consists primarily of a fixed base salary and a bonus. His compensation is reviewed and approved by the Board of Directors annually. His compensation may be adjusted from year to year based on the Board of Directors perception of overall performance and his management responsibilities. As of June 30, 2007, Mr. Kidd's investment in Central Securities common stock exceeded $1 million. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
----------------------------------------------------------------------------------------------------------------------------------- (d) Maximum Number (or Approximate Dollar (c) Total Number of Value) of Shares Shares (or Units) (or Units) that (a) Total Number of (b) Average Price Purchased as Part May Yet Be Shares (or Units) Paid per Share of Publicly Announced Purchased Under the Period Purchased (or Unit) Plans or Programs Plans or Programs ----------------------------------------------------------------------------------------------------------------------------------- Month #1 (January 1 through 0 NA NA NA January 31) ----------------------------------------------------------------------------------------------------------------------------------- Month #2 (February 1 through 0 NA NA NA February 28) ----------------------------------------------------------------------------------------------------------------------------------- Month #3 (March 1 through 0 NA NA NA March 31) ----------------------------------------------------------------------------------------------------------------------------------- Month #4 (April 1 through 0 NA NA NA April 30) ----------------------------------------------------------------------------------------------------------------------------------- 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 6, 2007. 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-2(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. Exhibits. (a) 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. (b) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act. Attached hereto. (c) 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. 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 President August 8, 2007 -------------- 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 President August 8, 2007 -------------- Date By: /s/ Charles N. Edgerton ----------------------- Charles N. Edgerton Treasurer August 8, 2007 -------------- Date