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, 2017

 

Date of reporting period: June 30, 2017

 

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*
1991		$	131,639,511			$	11.87															$	43,465,583
1992			165,599,864				14.33			$	.20			$	.66			$	.86				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
Six mos. to
June 30, 2017***			741,555,535				29.89				.03				.17				.20				376,343,103
Total dividends and distributions for the period***:										$	7.20			$	38.71			$	45.91

*

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 exchange under the symbol CET. On June 30, 2017, the closing market price was $24.93 per share.

To the Stockholders of

Central Securities Corporation:

Financial statements for the six months ended June 30, 2017 reviewed by our independent registered public accounting firm and other pertinent information are submitted herewith.

Comparative net assets are as follows:

		June 30, 2017 (Unaudited)				December 31, 2016
Net assets		$	741,555,535			$	674,683,352
Net assets per share of Common Stock		$	29.89			$	27.12
Shares of Common Stock outstanding			24,810,631				24,881,665

 

Comparative operating results are as follows:

		Six months ended June 30,
		2017 (Unaudited)				2016 (Unaudited)
Net investment income		$	3,696,314			$	2,402,060
Per share of Common Stock			.15	*			.10	*
Net realized gain from investment transactions			11,964,994				7,029,473
Increase in net unrealized appreciation of investments			57,818,328				13,567,081
Increase in net assets resulting from operations			73,479,636				22,998,614

*

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

A distribution of $.20 per share of Common Stock was paid on June 27, 2017 to stockholders of record as of June 13, 2017. Stockholders will be sent a notice concerning the taxability of all 2017 distributions in early 2018.

During the first six months of 2017, the Corporation purchased 74,034 shares of its Common Stock at an average price of $23.18 per share. 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.

As we recently announced, the Board of Directors has elected my son, Wilmot H. Kidd IV, as a new director of the Corporation. His election is part of the Board of Directors’ long-term succession planning and it is not anticipated that he will be a manager of the Corporation in the future.

Stockholders’ inquiries are welcome.

Central Securities Corporation

Wilmot H. Kidd, President

630 Fifth Avenue
New York, NY 10111
July 26, 2017

PRINCIPAL PORTFOLIO CHANGES

April 1 to June 30, 2017
(Unaudited)
(Common Stock unless specified otherwise)

		Number of Shares
		Purchased				Sold				Held June 30, 2017
AIA Group Ltd. ADR							12,000			—
Coherent, Inc.							10,000			360,000
Hess Corporation			230,000							230,000
John Wiley & Sons Inc. Class A							200,000			—
Kennedy-Wilson Holdings, Inc.			7,700							110,000
Kinsale Capital Group, Inc.			100,000							100,000
Sonus Networks, Inc.			190,000							940,000

 

TEN LARGEST INVESTMENTS

June 30, 2017
(Unaudited)

		Cost				Value				Percent of Net Assets				Year First Acquired
		(millions)
The Plymouth Rock Company, Inc.		$	0.7			$	132.2				17.8	%			1982
Coherent, Inc.			8.9				81.0				10.9				2007
Analog Devices, Inc.			6.2				35.0				4.7				1987
Intel Corporation			8.4				29.7				4.0				1986
Motorola Solutions, Inc.			14.1				26.0				3.5				2000
Capital One Financial Corporation			16.9				24.0				3.2				2013
Medtronic plc			18.4				22.2				3.0				2009
The Bank of New York Mellon Corporation			8.4				20.4				2.8				1993
Rayonier Inc.			21.1				20.1				2.7				2014
Citigroup Inc.			14.6				20.1				2.7				2013

 

DIVERSIFICATION OF INVESTMENTS

June 30, 2017
(Unaudited)

														Percent of Net Assets
		Issues				Cost				Value				June 30, 2017				December 31, 2016 (a)
Common Stocks:
Insurance			4			$	18,111,034			$	155,447,800				21.0	%			21.3	%
Technology Hardware
and Equipment			4				38,529,951				126,080,300				17.0				14.2
Diversified Financial			6				53,106,931				76,602,400				10.3				10.6
Semiconductor			2				14,576,768				64,701,200				8.7				9.6
Banks			3				34,542,346				50,534,200				6.8				7.7
Health Care			3				34,435,012				46,250,150				6.2				5.6
Diversified Industrial			3				10,133,824				38,228,670				5.2				5.7
Media			3				19,784,869				23,626,000				3.2				4.8
Energy			3				23,162,241				23,468,750				3.2				2.4
Real Estate			2				23,429,006				22,234,500				3.0				2.8
Retailing			2				10,493,020				21,971,000				3.0				2.6
Other			6				34,874,765				42,377,900				5.7				5.6
Short-Term Investments			2				44,981,369				44,981,369				6.1				6.7

(a)

Certain amounts from December 2016 have been adjusted to conform to June 2017 presentation.

STATEMENT OF INVESTMENTS

June 30, 2017
(Unaudited)

COMMON STOCKS 93.2%

Shares						Value
				Banks 6.8%
	300,000			Citigroup Inc.		$	20,064,000
	200,000			JPMorgan Chase & Co.			18,280,000
	220,000			Wells Fargo & Company			12,190,200
							50,534,200
				Commercial & Professional Services 1.5%
	700,000			Heritage-Crystal Clean, Inc. (a)			11,130,000
				Consumer Durables 1.2%
	700,000			TRI Pointe Group, Inc. (a)			9,233,000
				Consumer Services 0.5%
	30,000			Wynn Resorts Ltd.			4,023,600
				Diversified Financial 10.3%
	150,000			American Express Company			12,636,000
	400,000			The Bank of New York Mellon Corporation			20,408,000
	10			Berkshire Hathaway Inc. Class A (a)			2,547,000
	290,000			Capital One Financial Corporation			23,959,800
	210,000			The Charles Schwab Corporation			9,021,600
	200,000			Encore Capital Group, Inc. (a)			8,030,000
							76,602,400
				Diversified Industrial 5.2%
	405,000			Brady Corporation Class A			13,729,500
	307,000			General Electric Company			8,292,070
	70,000			Roper Technologies, Inc.			16,207,100
							38,228,670
				Energy 3.2%
	230,000			Hess Corporation			10,090,100
	230,000			Murphy Oil Corporation			5,894,900
	125,000			Occidental Petroleum Corporation			7,483,750
							23,468,750
				Health Care 6.2%
	85,000			Johnson & Johnson			11,244,650
	250,000			Medtronic plc			22,187,500
	200,000			Merck & Co., Inc.			12,818,000
							46,250,150

 

Shares						Value
				Insurance 21.0%
	21,000			Alleghany Corporation (a)		$	12,490,800
	100,000			Kinsale Capital Group, Inc.			3,731,000
	28,424			The Plymouth Rock Company, Inc. Class A (b)(c)			132,171,600
	160,000			Progressive Corporation			7,054,400
							155,447,800
				Media 3.2%
	18,000			Cable One, Inc.			12,796,200
	210,000			Liberty Global plc Class C (a)			6,547,800
	200,000			Liberty Global plc LiLAC Class C (a)			4,282,000
							23,626,000
				Metals and Mining 0.2%
	150,000			Freeport-McMoRan Inc. (a)			1,801,500
				Real Estate 3.0%
	110,000			Kennedy-Wilson Holdings, Inc.			2,095,500
	700,000			Rayonier Inc.			20,139,000
							22,234,500
				Retailing 3.0%
	13,000			Amazon.com, Inc. (a)			12,584,000
	100,000			Tiffany & Co.			9,387,000
							21,971,000
				Semiconductor 8.7%
	450,000			Analog Devices, Inc.			35,010,000
	880,000			Intel Corporation			29,691,200
							64,701,200
				Software and Services 2.2%
	10,000			Alphabet Inc. Class A (a)			9,296,800
	100,000			Microsoft Corporation			6,893,000
							16,189,800
				Technology Hardware and Equipment 17.0%
	360,000			Coherent, Inc. (a)			80,996,400
	310,000			Keysight Technologies, Inc. (a)			12,068,300
	300,000			Motorola Solutions, Inc.			26,022,000
	940,000			Sonus Networks, Inc. (a)			6,993,600
							126,080,300
				Total Common Stocks (cost $315,179,767)			691,522,870

 

SHORT-TERM INVESTMENTS 6.1%

Principal						Value
				U.S. Treasury Bills 6.1%
$	45,000,000			U.S. Treasury Bills 0.86% - 0.89%, due 7/13/17 – 7/27/17 (d)
				(cost $44,981,369)		$44,981,369
				Total Investments (cost $360,161,136) (e) (99.3%)		736,504,239
				Cash, receivables and other assets less liabilities (0.7%)		5,051,296
				Net Assets (100%)		$741,555,535

(a)

Non-dividend paying.

(b)

Affiliate as defined in the Investment Company Act of 1940 – see Note 5.

(c)

Valued based on Level 3 inputs – see Note 2.

(d)

Valued based on Level 2 inputs – see Note 2.

(e)

Aggregate cost for Federal tax purposes is substantially the same.

See accompanying notes to financial statements.

STATEMENT OF ASSETS AND LIABILITIES

June 30, 2017
(Unaudited)

Assets:
Investments:
General portfolio securities at market value
(cost $314,469,167)		$	559,351,270
Securities of affiliated companies (cost $710,600)
(Notes 5 and 6)			132,171,600
Short-term investments (cost $44,981,369)			44,981,369			$	736,504,239
Cash, receivables and other assets:
Cash			5,541,144
Dividends receivable			472,380
Office equipment and leasehold improvements, net			8,604
Other assets			74,367				6,096,495
Total Assets							742,600,734
Liabilities:
Payable for securities purchased			422,016
Accrued expenses and other liabilities			623,183
Total Liabilities							1,045,199
Net Assets						$	741,555,535
Net Assets are represented by:
Common Stock $1 par value: authorized 40,000,000 shares;
issued 24,884,665 (Notes 3 and 8)						$	24,884,665
Surplus:
Paid-in		$	328,333,517
Undistributed net realized gain from
investment transactions			10,376,444
Undistributed net investment income			3,334,084				342,044,045
Net unrealized appreciation of investments							376,343,103
Treasury stock, at cost (74,034 shares of
Common Stock) (Note 3)							(1,716,278	)
Net Assets						$	741,555,535
Net Asset Value Per Common Share
(24,810,631 shares outstanding)						$	29.89

 

See accompanying notes to financial statements.

STATEMENT OF OPERATIONS

For the six months ended June 30, 2017
(Unaudited)

Investment Income
Income:
Dividends from unaffiliated companies		$	4,116,095
Dividends from affiliated companies (Note 5)			2,225,883
Interest			145,999			$	6,487,977
Expenses:
Investment research			1,252,515
Administration and operations			814,161
Occupancy and office operating expenses			243,685
Directors’ fees			147,701
Software and information services			74,046
Legal, auditing and tax preparation fees			60,243
Stockholder communications and meetings			51,000
Franchise and miscellaneous taxes			46,028
Travel and related expenses			31,784
Transfer agent, registrar and custodian fees and expenses			27,491
Miscellaneous			43,009				2,791,663
Net investment income							3,696,314
Net Realized and Unrealized Gain (loss) On Investments
Net realized gain from investment transactions			11,964,994
Increase in net unrealized appreciation of investments			57,818,328
Net gain on investments							69,783,322
Increase in Net Assets Resulting from Operations						$	73,479,636

 

See accompanying notes to financial statements.

STATEMENTS OF CHANGES IN NET ASSETS

For the six months ended June 30, 2017
and the year ended December 31, 2016

		Six months ended June 30, 2017 (Unaudited)				Year ended December 31, 2016
From Operations:
Net investment income		$	3,696,314			$	4,581,232
Net realized gain from investment transactions			11,964,994				19,002,173
Increase in net unrealized appreciation of investments			57,818,328				89,051,768
Increase in net assets resulting
from operations			73,479,636				112,635,173
Distributions to Stockholders From:
Net investment income			(744,319	)			(4,904,353	)
Net realized gain from investment transactions			(4,217,807	)			(19,107,993	)
Decrease in net assets from distributions			(4,962,126	)			(24,012,346	)
From Capital Share Transactions: (Notes 3 and 8)
Distribution to stockholders reinvested in Common Stock			—				8,040,340
Issuance of shares of Common Stock to directors and employees			70,951				234,297
Cost of treasury stock purchased			(1,716,278	)			(5,084,639	)
Increase (decrease) in net assets from capital
share transactions			(1,645,327	)			3,189,998
Total increase in net assets			66,872,183				91,812,825
Net Assets:
Beginning of period			674,683,352				582,870,527
End of period (including undistributed net investment income
of $3,334,084 and $382,089, respectively)		$	741,555,535			$	674,683,352

 

See accompanying notes to financial statements.

STATEMENT OF CASH FLOWS

For the six months ended June 30, 2017
(Unaudited)

Cash Flows from Operating Activities:
Increase in net assets from operations						$73,479,636
Adjustments to increase in net assets
from operations:
Purchases of securities		$	(24,330,767	)
Proceeds from securities sold			29,250,080
Net decrease in short-term investments			5,587
Net realized gain from investment transactions			(11,964,994	)
Increase in net unrealized appreciation of investments			(57,818,328	)
Depreciation and amortization			3,642
Non-cash stock compensation			70,951
Changes in operating assets and liabilities:
Decrease in dividends receivable			132,120
Increase in office equipment and leasehold improvements			(707	)
Increase in other assets			(7,509	)
Increase in payable for securities purchased			422,016
Increase in accrued expenses and reserves			473,182
Total adjustments						(63,764,727)
Cash provided by operating activities						9,714,909
Cash Flows from Financing Activities:
Dividends and distributions paid			(4,962,126	)
Treasury stock purchased			(1,716,278	)
Cash used in financing activities						(6,678,404)
Net increase in cash						3,036,505
Cash at beginning of period						2,504,639
Cash at end of period						$5,541,144
Supplemental Disclosure of Cash Flow Information:
Non-cash financing activities not included herein consist of:
Issuance of shares of Common Stock to directors						$70,951

 

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 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. 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.

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.

NOTES TO FINANCIAL STATEMENTS — continued (unaudited)

The Corporation’s investments as of June 30, 2017 are classified as follows:

		Level 1				Level 2				Level 3				Total Value
Common stocks		$	559,351,270				—			$	132,171,600			$	691,522,870
Short-term investments			—			$	44,981,369				—				44,981,369
Total		$	559,351,270			$	44,981,369			$	132,171,600			$	736,504,239

 

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

Balance as of December 31, 2016		$	125,065,600
Change in net unrealized appreciation of
investments included in increase in
net assets resulting from operations			7,106,000
Balance as of June 30, 2017		$	132,171,600

 

Unrealized appreciation of Level 3 investments held at June 30, 2017 increased by $7,106,000 during the six months ended June 30, 2017, which is included in the above table.

In valuing the Plymouth Rock Level 3 investment as of June 30, 2017, 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: 0.7–2.8); price-to-earnings (range: 11.7–35.1); and price-to-revenue (range: 0.6–1.4). Management also used a discounted cash flow model based on a forecasted return on equity ranging from 7%–8% and a weighted average cost of capital of 10%. 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 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.

NOTES TO FINANCIAL STATEMENTS — continued (unaudited)

3. Common Stock — During the six months ended June 30, 2017, the Corporation purchased 74,034 shares of its Common Stock at an average price of $23.18 per share representing an average discount from net asset value of 18.7%. 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, 2017, excluding short-term investments, were $24,330,767 and $29,250,080, respectively.

As of June 30, 2017, based on cost for Federal income tax purposes, the aggregate gross unrealized appreciation and depreciation for all securities were $392,489,336 and $16,146,233, 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 Plymouth Rock’s outstanding voting securities. During the six months ended June 30, 2017, the Corporation received dividends of $2,225,883 from Plymouth Rock. The President 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, 2017, 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 $132,171,600 at June 30, 2017, which was equal to 17.8% 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, 2017.

8. Compensation and Benefit Plans — The aggregate compensation expense for all officers during the six months ended June 30, 2017 was $1,661,761, of which $1,285,000 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, 2017, the Corporation accrued $117,829 related to the plan.

NOTES TO FINANCIAL STATEMENTS — continued (unaudited)

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 951,213 remain available for future grants at June 30, 2017. 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, 2017, non-employee directors were granted a total of 3,000 shares of Common Stock valued at $23.6504 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 $70,951 plus cash payments of $76,750 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, 2017, 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, 2017 aggregate $749,768 as follows: $187,442 in 2017, $374,884 in 2018 and $187,442 in 2019. The lease agreement contains escalation clauses relating to operating costs and real property taxes. The landlord may terminate the lease with one-year’s notice, in which case the Corporation’s rental commitment would end as of the termination date.

FINANCIAL HIGHLIGHTS

The following table shows per share operating performance data, total returns, ratios and supplemental data for the six months ended June 30, 2017 and each year in the five-year period ended December 31, 2016. 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. Cash distributions payable in subsequent years are assumed to be reinvested at the year-end market price or net asset value as applicable. Distributions that may be taken in shares are assumed to be reinvested at the price designated by the Corporation.

		Six Months Ended June 30, 2017 (Unaudited)				2016				2015				2014				2013				2012
Per Share Operating Performance
Net asset value, beginning of period		$	27.12			$	23.53			$	26.18			$	26.78			$	24.53			$	24.96
Net investment income*			.15				.19				.14				.13				.10				.53
Net realized and unrealized gain (loss)
on investments*			2.80				4.41				(.83	)			1.12				6.13				.03
Total from investment
operations			2.95				4.60				(.69	)			1.25				6.23				.56
Less:
Dividends from net investment
income			.03				.20				.12				.14				.12				.51
Distributions from capital gains			.17				.78				1.86				1.61				3.58				.43
Total distributions			.20				.98				1.98				1.75				3.70				.94
Net change from capital share
transactions			.02				(.03	)			.02				(.10	)			(.28	)			(.05	)
Net asset value, end of period		$	29.89			$	27.12			$	23.53			$	26.18			$	26.78			$	24.53
Per share market value,
end of period		$	24.93			$	21.79			$	19.02			$	21.97			$	21.72			$	19.98
Total investment return,
market (%)			15.33				19.97				(4.71	)			9.52				28.40				1.25
Total investment return, NAV (%)			10.95				20.44				(1.23	)			5.35				28.36				2.70
Ratios/Supplemental Data:
Net assets, end of period (000)		$	741,556			$	674,683			$	582,871			$	649,761			$	648,262			$	569,465
Ratio of expenses to average net
assets (%)			.78	†			.88				.72				.67				.77				.79
Ratio of net investment income to
average net assets (%)			.72	†			.75				.56				.47				.38				2.14
Portfolio turnover rate (%)			3.65				9.48				25.48				13.07				16.72				3.55

*

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, 2017 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 15, 2017. 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			22,388,688				446,754
Simms C. Browning			22,322,697				512,745
Donald G. Calder			22,330,387				505,055
David C. Colander			22,370,986				464,456
Jay R. Inglis			22,284,499				550,943
Wilmot H. Kidd			22,338,023				497,419
C. Carter Walker, Jr.			22,305,660				529,782

 

A proposal to ratify the selection of KPMG LLP as independent auditors of the Corporation for the year 2017 was approved with 22,500,178 votes for, 262,512 votes against and 72,752 shares abstaining.

A proposal recommending the reapproval of the Central Securities Corporation 2012 Incentive Compensation Plan was approved with 15,900,601 votes for, 454,269 votes against and 145,084 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.

OFFICERS

Wilmot H. Kidd, President
John C. Hill, Vice 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 30170, College Station, TX 77842-3170
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)	19,700	$22.25	NA	NA
Month #2 (February 1 through February 28)	22,799	$23.17	NA	NA
Month #3 (March 1 through March 31)	15,648	$23.60	NA	NA
Month #4 (April 1 through April 30)	15,887	$23.95	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	74,034	$23.18	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, 2017.

 

 

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. 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

President

 

August 11, 2017

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 11, 2017

Date

 

 

 

 

By: /s/ Lawrence P. Vogel

Lawrence P. Vogel

Vice President and Treasurer

 

August 11, 2017

Date