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, 2006
Date of reporting period: June 30, 2006
Item 1. Reports to Stockholders.
================================================================================
CENTRAL SECURITIES CORPORATION
----------
SEMI-ANNUAL REPORT
JUNE 30, 2006
================================================================================
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
---- ------ -------- ----- --------- -------- --------- ------------ --------------
1995 $292,547,559 $ 9,488,350 $21.74 $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
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
Six mos. to
June 30,
2006** 600,191,449 -- 29.69 .29 .16 .04 17,949,636 322,216,566
----------
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 30,
2006 the market quotations were as follows:
Common Stock ....................................... $25.25 low, $25.39 high
and $25.35 last sale
[2]
To the Stockholders of
Central Securities Corporation:
Financial statements for the six months ended June 30, 2006 reviewed by
our independent registered public accounting firm and other pertinent
information are submitted herewith.
Comparative net assets are as follows:
June 30,
2006 December 31,
(Unaudited) 2005
----------- ----
Net assets ................................... $600,191,449 $573,979,905
Net assets per share of Common Stock ......... 29.69 27.65
Shares of Common Stock outstanding ....... 20,215,359 20,762,159
Comparative operating results are as follows:
Six months ended June 30,
-------------------------
2006 2005
(Unaudited) (Unaudited)
----------- -----------
Net investment income ............................ $ 5,975,548 $ 4,385,014
Per share of Common Stock .................... .29* .22*
Net realized gain on sale of investments ......... 17,949,636 33,035,041
Increase in netunrealized
appreciation of investments .................. 19,834,895 5,539,894
Increase in netassets resulting from operations .. 43,760,079 42,959,949
----------
* 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 23, 2006.
Stockholders will be sent a notice concerning the taxability of all 2006
distributions in January 2007.
During the first six months of 2006 the Corporation repurchased 546,800
shares of its Common Stock at an average price per share of $24.69. 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. 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, 2006
[3]
TEN LARGEST INVESTMENTS
June30, 2006
(Unaudited)
% of Year First
Cost Value Net Assets Acquired
---- ----- ---------- --------
(millions)
The Plymouth Rock Company, Inc. ............................ $ 2.2 $119.0 19.8% 1982
Brady Corporation .......................................... 3.5 33.5 5.6 1984
Murphy Oil Corporation ..................................... 3.7 33.5 5.6 1974
Convergys Corporation ...................................... 24.1 30.2 5.0 1998
The Bank of New York Company, Inc. ......................... 15.5 28.2 4.7 1993
Kerr-McGee Corporation ..................................... 11.7 27.7 4.6 2001
Capital One Financial Corporation .......................... 1.4 25.6 4.3 1994
Agilent Technologies, Inc. ................................. 19.6 25.2 4.2 2005
Dover Corporation .......................................... 13.0 19.8 3.3 2003
Roper Industries, Inc. ..................................... 9.0 19.2 3.2 2003
PRINCIPAL PORTFOLIO CHANGES
April 1 to June 30, 2006
(Unaudited)
(Common Stock unless specified otherwise)
Number of Shares
----------------------------------
Held
June 30,
Purchased Sold 2006
--------- ---- ----
Agilent Technologies, Inc. ................ 50,000 800,000
Arbinet-thexchange, Inc. .................. 540,100 900,000
Brady Corporation ......................... 10,000 910,000
Ceridian Corporation ...................... 21,600 400,200
Hewitt Associates, Inc. ................... 100,000 100,000
IMS Health, Inc. .......................... 320,000 320,000
Kerr-McGee Corporation .................... 200,000 (a) 400,000
McMoRan Exploration Co. ................... 20,200 520,200
Merck & Co., Inc. ......................... 100,000 --
Neoware, Inc. ............................. 350,000 350,000
Pfizer Inc. ............................... 100,000 --
PolyOne Corporation ....................... 350,000 620,000
TransMontaigne Inc. ....................... 125,000 1,100,000
Tyco International Ltd .................... 200,000 200,000
White Mountains Insurance Group, Ltd ...... 2,000 2,000
----------
(a) Stock split.
[4]
DIVERSIFICATION OF INVESTMENTS
June 30, 2006
(Unaudited)
Percent of Net Assets
---------------------
June 30, December 31,
Issues Value Cost 2006 2005
------ ----- ---- ---- ----
Common Stocks:
Insurance ................................ 3 $120,494,000 $ 3,633,747 20.1% 19.0%
Energy ................................... 6 106,331,316 49,873,253 17.7 15.8
Electronics .............................. 8 82,979,900 41,292,830 13.8 17.3
Manufacturing ............................ 4 77,963,900 30,820,977 13.0 11.5
Banking and Finance ...................... 2 53,810,000 16,887,586 9.0 7.3
Business Services ........................ 4 50,845,888 43,776,676 8.5 5.5
Information Technology Services .......... 3 25,119,166 19,682,812 4.2 6.4
Chemicals ................................ 4 17,395,720 8,551,736 2.9 3.3
Health Care .............................. 3 14,573,700 14,696,949 2.4 3.5
Other .................................... 3 7,961,530 6,041,988 1.3 1.9
Short-Term Investments ............................ 3 46,159,619 46,159,619 7.7 8.4
FINANCIAL HIGHLIGHTS
Six Mos. Ended
June 30, 2006
(Unaudited) 2005 2004 2003 2002 2001
----------- ---- ---- ---- ---- ----
Per Share Operating Performance
Net asset value, beginning of period ........ $ 27.65 $ 26.44 $ 24.32 $ 18.72 $ 28.54 $ 32.94
Net investment income* ...................... .29 .28 .11 .09 .14 .18
Net realized and unrealized gain (loss)
on securities* ............................ 1.95 2.93 3.33 6.91 (8.71) (2.78)
----------- ----------- ----------- ----------- ----------- ------------
Total from investment
operations .......................... 2.24 3.21 3.44 7.00 (8.57) (2.60)
Less:
Dividends from net investment income** ...... .16 .28 .11 .11 .14 .22
Distributions from capital gains** .......... .04 1.72 1.21 1.29 1.11 1.03
Return of capital** ......................... -- -- -- -- -- .55
----------- ----------- ----------- ----------- ----------- ------------
Total distributions ................... .20 2.00 1.32 1.40 1.25 1.80
----------- ----------- ----------- ----------- ----------- ------------
Net asset value, end of period .............. $ 29.69 $ 27.65 $ 26.44 $ 24.32 $ 18.72 $ 28.54
=========== =========== =========== =========== =========== ===========
Per share market value, end of period ....... $ 25.35 $ 23.80 $ 22.85 $ 20.89 $ 16.28 $ 25.31
Total investment return, market(%) .......... 6.52 14.04 16.16 36.22 (31.23) (2.42)
Total investment return, NAV(%) ............. 8.12 13.75 15.40 39.32 (29.43) (6.54)
Ratios/Supplemental Data:
Net assets, end of period(000) .............. $ 600,191 $ 573,980 $ 529,469 $ 478,959 $ 361,943 $ 539,839
Ratio of expenses to average net
assets(%) ................................. .41+ .54 .55 .56 .50 .45
Ratio of net investment income to
average net assets(%) ..................... 1.31+ 1.02 .41 .42 .57 .60
Portfolio turnover rate(%) .................. 8.25 15.83 16.72 12.90 19.50 10.32
----------
* Per-share data are based on the average number of shares outstanding
during the period.
** Computed on the basis of the Corporation's status as a "regulated
investment company" for Federal income tax purposes.
+ Annualized, not necessarily indicative of full year ratio. See
accompanying notes to financial statements.
[5]
STATEMENT OF INVESTMENTS
June 30, 2006
(Unaudited)
PORTFOLIO SECURITIES 92.9%
STOCKS (COMMON UNLESS SPECIFIED OTHERWISE)
Prin. Amt.
or Shares Value
--------- -----
Banking and Finance 9.0%
875,000 The Bank of New York Company, Inc............. $ 28,175,000
300,000 Capital One Financial Corporation ............ 25,635,000
------------
53,810,000
------------
Business Services 8.5%
400,200 Ceridian Corporation(a) ...................... 9,780,888
1,550,000 Convergys Corporation(a) ..................... 30,225,000
100,000 Hewitt Associates, Inc.(a) ................... 2,248,000
320,000 IMS Health, Inc. ............................. 8,592,000
------------
50,845,888
------------
Chemicals 2.9%
100,000 The Dow Chemical Company ..................... 3,903,000
620,000 PolyOne Corporation(a) ....................... 5,443,600
150,000 Rohm and Haas Company ........................ 7,518,000
40,328 Tronox Inc. Class B .......................... 531,120
------------
17,395,720
------------
Communications 1.2%
900,000 Arbinet-thexchange, Inc.(a) .................. 5,049,000
500,000 Cincinnati Bell Inc.(a) ...................... 2,050,000
------------
7,099,000
------------
Electronics 13.8%
800,000 Agilent Technologies, Inc.(a) ................ 25,248,000
430,000 Analog Devices, Inc. ......................... 13,820,200
100,000 Cirrus Logic, Inc.(a) ........................ 814,000
255,000 Cypress Semiconductor Corp.(a) ............... 3,707,700
980,000 Intel Corporation ............................ 18,620,000
200,000 Motorola, Inc. ............................... 4,030,000
2,000,000 Solectron Corporation(a) ..................... 6,840,000
2,000,000 Sonus Networks, Inc.(a)....................... 9,900,000
------------
82,979,900
------------
Energy 17.7%
234,328 Chevron Corporation .......................... 14,542,396
400,000 Kerr-McGee Corporation ....................... 27,740,000
520,200 McMoRan Exploration Co.(a) ................... 9,155,520
600,000 Murphy Oil Corporation ....................... 33,516,000
160,000 Nexen Inc. ................................... 9,046,400
1,100,000 TransMontaigne Inc.(a) ....................... 12,331,000
------------
106,331,316
------------
Health Care 2.4%
120,000 Abbott Laboratories .......................... 5,233,200
450,000 Schering-Plough Corporation .................. 8,563,500
140,000 Vical Inc.(a) ................................ 777,000
------------
14,573,700
------------
[6]
Prin. Amt.
or Shares Value
--------- -----
Information Technology Services 4.2%
350,000 Neoware, Inc.(a) ............................. $ 4,301,500
1,025,400 The TriZetto Group, Inc.(a) .................. 15,165,666
900,000 Unisys Corporation(a) ........................ 5,652,000
------------
25,119,166
------------
Insurance 20.1%
10,000 Erie Indemnity Co. Class A ................... 520,000
70,000 The Plymouth Rock Company, Inc.
Class A(b)(c) ................................ 119,000,000
2,000 White Mountains Insurance Group, Ltd. ........ 974,000
------------
120,494,000
------------
Manufacturing 13.0%
910,000 Brady Corporation Class A .................... 33,524,400
400,000 Dover Corporation ............................ 19,772,000
410,000 Roper Industries, Inc. ....................... 19,167,500
200,000 Tyco International Ltd. ...................... 5,500,000
------------
77,963,900
------------
Retail Trade 0.1%
28,751 Aerogroup International, Inc.(a)(c) .......... 862,530
------------
Total Portfolio Securities
(cost $235,258,554)(d) 557,475,120
------------
SHORT-TERM INVESTMENTS 7.7%
Commercial Paper 3.5%
10,301,000 Citigroup Funding Inc.
4.8674% - 4.9180% due 7/5/06 - 7/12/06 ...... 10,289,978
10,996,000 General Electric Capital Corporation
4.9585% - 5.1457% due 7/19/06 - 8/16/06 ..... 10,953,654
------------
21,243,632
------------
U.S. Treasury Bills 4.2%
25,029,000 U.S. Treasury Bills 4.5906% - 4.6853%
due 8/3/06 - 8/10/06 ....................... 24,915,987
Total Short-Term Investments
(cost $46,159,619)(d) .................... 46,159,619
------------
Total Investments (100.6%) 603,634,739
Cash, receivables and other assets
less liabilities (0.6%) ................. (3,443,290)
------------
Net Assets (100%) ......................... $600,191,449
============
----------
(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, 2006
(Unaudited)
ASSETS:
Investments:
General portfolio securities at market value
(cost $233,058,568) (Note 1) ............................................ $ 438,475,120
Securities of affiliated companies (cost $2,199,986)
(Notes 1, 5 and 6) ...................................................... 119,000,000
Short-term investments (cost $46,159,619) ................................. 46,159,619 $ 603,634,739
-------------
Cash, receivables and other assets:
Cash ...................................................................... 32,658
Dividends and interest receivable ......................................... 89,169
Office equipment and leasehold improvements, net .......................... 425,520
Prepaid expenses and other assets ......................................... 74,057 621,404
------------- -------------
Total Assets .......................................................... 604,256,143
LIABILITIES:
Payable for securities purchased .............................................. 3,902,710
Accrued expenses and reserves ................................................. 161,984
-------------
Total Liabilities ..................................................... 4,064,694
-------------
NET ASSETS ........................................................................ $ 600,191,449
=============
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 ................................................................... $ 251,255,509
Undistributed net gain on sales of investments ............................ 17,524,598
Undistributed net investment income ....................................... 3,281,134 272,061,241
=============
Net unrealized appreciation of investments .................................... 322,216,566
Treasury stock, at cost (605,500 shares of Common Stock)
(Note 2) .................................................................... (14,907,217)
-------------
NET ASSETS ........................................................................ $ 600,191,449
=============
NET ASSET VALUE PER COMMON SHARE
(20,215,359 shares outstanding) ................................................. $29.69
======
See accompanying notes to financial statements.
[8]
STATEMENT OF OPERATIONS
For the six months ended June 30, 2006
(Unaudited)
INVESTMENT INCOME
Income:
Dividends (net of foreign withholding taxes of $2,089) ......................... $ 6,027,091
Interest ....................................................................... 1,166,021 $ 7,193,112
----------- -----------
Expenses:
Administration and operations .................................................. 323,750
Occupancy costs ................................................................ 227,814
Investment research ............................................................ 218,750
Franchise and miscellaneous taxes .............................................. 97,294
Directors' fees ................................................................ 69,250
Stationery, supplies, printing and postage ..................................... 54,935
Listing, software and sundry fees .............................................. 51,471
Insurance ...................................................................... 50,560
Legal, auditing and tax fees ................................................... 26,293
Travel and telephone ........................................................... 24,818
Transfer agent and registrar fees and expenses ................................. 16,688
Custodian fees ................................................................. 15,455
Miscellaneous .................................................................. 40,486 1,217,564
----------- -----------
Net investment income .............................................................. 5,975,548
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain from security transactions ....................................... 17,949,636
Net increase in unrealized appreciation of investments ............................. 19,834,895
-----------
Net gain on investments ........................................................ 37,784,531
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ....................................................................... $43,760,079
===========
See accompanying notes to financial statements.
[9]
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended June 30, 2006
and the year ended December 31, 2005
Six months
ended
June 30, Year ended
2006 December 31,
(Unaudited) 2005
----------- ----
FROM OPERATIONS:
Net investment income .......................................................... $ 5,975,548 $ 5,684,776
Net realized gain on investments ............................................... 17,949,636 31,669,417
Net increase in unrealized appreciation of investments ......................... 19,834,895 30,671,492
------------- -------------
Increase in net assets resulting from operations ........................... 43,760,079 68,025,685
------------- -------------
DISTRIBUTIONS TO STOCKHOLDERS FROM:
Net investment income .......................................................... (3,254,369) (5,649,605)
Net realized gain from investment transactions ................................. (795,263) (34,198,713)
------------- -------------
Decrease in net assets from distributions .................................. (4,049,632) (39,848,318)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS: (Note 2)
Distribution to stockholders reinvested in Common Stock ........................ -- 20,773,125
Cost of shares of Common Stock repurchased ..................................... (13,498,903) (4,439,262)
------------- -------------
Increase (decrease) in net assets from capital
share transactions ....................................................... (13,498,903) 16,333,863
------------- -------------
Total increase in net assets ........................................... 26,211,544 44,511,230
NET ASSETS:
Beginning of period ............................................................ 573,979,905 529,468,675
------------- -------------
End of period (including undistributed net investment income
of $3,281,134 and $136,692, respectively) .................................... $ 600,191,449 $ 573,979,905
============= =============
See accompanying notes to financial statements.
[10]
STATEMENT OF CASH FLOWS
For the six months ended June 30, 2006
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets from operations .................................. $ 43,760,079
Adjustments to net increase in net assets
from operations:
Purchase of securities .................................................... ($44,532,787)
Proceeds from securities sold ............................................. 50,042,805
Net sales of short-term investments ....................................... 2,092,385
Net realized gain from investments ........................................ (17,949,636)
Increase in unrealized appreciation ....................................... (19,834,895)
Depreciation and amortization ............................................. 41,737
Changes in operating assets and liabilities:
Decrease in dividends and interest receivable ........................... 6,206
Increase in office equipment and
leasehold improvements ................................................ (3,633)
Decrease in other assets ................................................ 10,818
Increase in payable for securities purchased ............................ 3,880,165
Decrease in accrued expenses and reserves ............................... (151,298)
-----------
Total adjustments ......................................................... (26,398,133)
------------
Net cash provided by operating activities ....................................... 17,361,946
Cash flows from financing
ACTIVITIES:
Dividends paid .............................................................. (4,049,632)
Treasury shares repurchased ................................................. (13,584,358)
-----------
Cash flows used in financing activities ......................................... (17,633,990)
------------
Net decrease in cash ............................................................ (272,044)
Cash at beginning of period ..................................................... 304,702
------------
Cash at end of period ........................................................... $ 32,658
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash financing activities not included herein consist of:
Payable for treasury shares repurchased ....................................... $ 22,545
See accompanying notes to financial statements.
[11]
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 U.S. generally
accepted accounting principles.
Security Valuation -- Securities are valued at the last or closing sale
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 U.S. 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 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 546,800 shares of its
Common Stock in the first six months of 2006 at an average price of $24.69 per
share, representing an average discount from net asset value of 13.41%. 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 maybe retired.
3. Investment Transactions -- The aggregate cost of securities purchased
and the aggregate proceeds of securities sold during the six months ended June
30, 2006, excluding short-term investments, were $44,532,787 and $50,042,805,
respectively.
As of June 30, 2006, based on cost for Federal income tax purposes, the
aggregate gross unrealized appreciation and depreciation for all securities were
$328,565,140 and $6,348,574, respectively.
4. Operating Expenses -- The aggregate remuneration paid during the six
months ended June 30, 2006 to officers and directors amounted to $551,750, of
which $69,250 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, 2006.
[12]
NOTES TO FINANCIAL STATEMENTS -- continued (unaudited)
5. Affiliates -- The Plymouth Rock Company, Inc. is an affiliate as
defined in the Investment Company Act of 1940. During the six months ended June
30, 2006, the Corporation received dividends of $4,185,300 from affiliates and
earned a realized gain of $4,059,424 from the sale of shares of an affiliate.
Unrealized appreciation related to affiliates increased by $6,504,363 for the
six months ended June 30, 2006 to $116,800,014.
6. Restricted Securities -- The Corporation from time to time invests in
securities the resale of which is restricted. On June 30, 2006 such investments
had an aggregate value of $119,862,530, which was equal to 20.0% of the
Corporation's net assets. Investments in restricted securities at June 30, 2006,
including acquisition dates and cost, were:
Company Shares Security Date Purchased Cost
----------------------------- ------ ------------ -------------- --------
Aerogroup International, Inc. 28,751 Common Stock 6/21/05 $ 17,200
The Plymouth Rock 70,000 Class A Common 12/15/82 1,500,000
Company, Inc. 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 $10,717,645 for the six months ended June 30, 2006 to $117,645,344.
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 $2.8 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 for 2006 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, 2006, and the related statements of operations, changes in net assets,
cash flows and financial highlights for the six-month period ended June 30,
2006. 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, 2005 and financial
highlights for each of the five years in the period ended December 31, 2005, and
in our report dated January 27, 2006 we expressed an unqualified opinion on
those financial statements.
KPMG LLP
New York, NY
July 25, 2006
--------------------------------------------------------------------------------
[14]
Direct Registration
In December 2005, the Corproation initiated 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 8,
2006. 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,
18,104,413 shares in favor, 433,072 withheld; Donald G. Calder, 18,148,315
shares in favor, 389,170 shares withheld; Jay R. Inglis, 18,123,367 shares in
favor, 414,118 shares withheld; Dudley D. Johnson, 18,146,473 shares in favor,
391,012 shares withheld; Wilmot H. Kidd, 18,123,554 shares in favor, 413,391
shares withheld; and C. Carter Walker, Jr., 18,145,276 shares in favor, 392,209
shares withheld.
In addition, the selection of KPMG LLP as independent auditors of the
Corporation for the year 2006 was ratified by the following vote of the holders
of the Common Stock: 18,135,964 shares in favor, 323,216 shares against, 78,305
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, 2006 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
C. Carter Walker, Jr., Chairman
Simms C. Browning
Donald G. Calder
Jay R. Inglis
Dudley D. Johnson
Wilmot H. Kidd
OFFICERS
Wilmot H. Kidd, President
Charles N. Edgerton, Vice President and Treasurer
Marlene A. Krumholz, Secretary
OFFICE
630 Fifth Avenue
New York, NY 10111
212-698-2020
866-593-2507 (toll-free)
www.centralsecurities.com
CUSTODIAN
UMB Bank, N. A.
Kansas City, MO
TRANSFER AGENT AND REGISTRAR
Computershare Trust Comapany, N.A.
P.O. Box 43069, Providence, RI 02940-3069
800-756-8200
www.computershare.com
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, 2006, 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
(a) Total (c) Total Number of Approximate Dollar
Period Number of (b) Average Shares (or Units) Value) of Shares (or
Shares (or Price Paid per Purchased as Part of Units) that May Yet Be
Units) Share (or Publicly Announced Purchased Under the
Purchased Unit) Plans or Programs Plans or Programs
-----------------------------------------------------------------------------------------------------------------
Month #1 (January 1 0 NA NA NA
through January 31)
-----------------------------------------------------------------------------------------------------------------
Month #2 (February 1 451,600 $24.66 NA NA
through February 28)
-----------------------------------------------------------------------------------------------------------------
Month #3 (March 1 46,600 $24.56 NA NA
through March 31)
-----------------------------------------------------------------------------------------------------------------
Month #4 (April 1 15,800 $25.32 NA NA
through April 30)
-----------------------------------------------------------------------------------------------------------------
Month #5 (May 1 0 NA NA NA
through May 31)
-----------------------------------------------------------------------------------------------------------------
Month #6 (June 1 32,800 $24.91 NA NA
through June 30)
-----------------------------------------------------------------------------------------------------------------
Total 546,800 $24.69 NA NA
-----------------------------------------------------------------------------------------------------------------
All shares purchased except the following were made in open market transactions
as authorized by the Board of Directors. In February 2006, 406,000 shares were
purchased in a private transaction directly from a stockholder.
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 3, 2006.
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
July 28, 2006
-------------
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
July 28, 2006
-------------
Date
By: /s/ Charles N. Edgerton
-----------------------
Charles N. Edgerton
Treasurer
July 28, 2006
-------------
Date