CENTRAL SECURITIES CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 10, 2004
NOTICE is hereby given that the Annual Meeting of Stockholders of Central
Securities Corporation will be held at The University Club, One West 54th
Street, 9th Floor, New York, New York on Wednesday, March 10, 2004 at 11 A.M.,
for the following purposes:
1. To elect a board of five directors;
2. To act upon a proposal to ratify the selection of KPMG LLP as
independent auditors for the Corporation for the ensuing year; and
3. To act upon such other matters as may properly come before the
meeting.
The Board of Directors has fixed the close of business on January 23, 2004
as the record date for the determination of stockholders entitled to notice of
and to vote at the meeting, and only stockholders of record on such date are
entitled to vote on these matters at the meeting or any adjournment thereof.
By order of the Board of Directors
MARLENE A. KRUMHOLZ
Secretary
New York, New York
February 5, 2004
A proxy is enclosed with this Notice and Proxy Statement. Please complete,
SIGN and promptly return your proxy in the enclosed envelope. This will assure a
quorum and save further solicitation costs.
PROXY STATEMENT
---------------
February 5, 2004
CENTRAL SECURITIES CORPORATION
375 PARK AVENUE
NEW YORK, NEW YORK 10152
(Tel. No. 212-688-3011)
This Proxy Statement and the enclosed proxy card are first being mailed to
stockholders on or about February 5, 2004 in connection with the solicitation of
proxies by the Board of Directors of Central Securities Corporation (the
"Corporation") for use at the Annual Meeting of Stockholders of the Corporation
to be held on March 10, 2004, or any adjournment thereof (the "Meeting").
Properly executed proxies received by the Corporation prior to the Meeting will
be voted in accordance with the specific voting instructions indicated on the
proxy. If no instructions are specified, the shares will be voted for the
nominees for director and in favor of proposal (2). Any proxy may be revoked at
any time before it is exercised at the Meeting by the delivery or mailing of
written notice to the Secretary of the Corporation, by executing and delivering
a later-dated proxy or by appearing and voting in person by ballot at the
Meeting.
The record date for stockholders entitled to vote at the Meeting is the
close of business on January 23, 2004. On that date, the Corporation had
outstanding 19,681,077 shares of Common Stock.
The holders of the Corporation's Common Stock shall be entitled to one
vote per share. The presence, in person or by proxy, of a majority of the issued
and outstanding stock of the Corporation shall constitute a quorum for the
transaction of business at the Meeting.
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, OF
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS,
AND OF EXECUTIVE OFFICERS
The following table sets forth information as of December 31, 2003
regarding the share ownership of each person who is known to the Corporation to
have been a beneficial owner of more than five percent of the Common Stock of
the Corporation, of each nominee for election to the Board of Directors of the
Corporation, and of all directors and executive officers as a group:
Name of Nominee to
the Board of Directors Amount and
or Name and Address Nature of Beneficial Percent
of Beneficial Owner Ownership(1) of Class(2)
---------------------- ------------------- -----------
Donald G. Calder* ......................... 59,910(3)
Jay R. Inglis* ............................ 1,628
Christian A. Johnson
Endeavor Foundation(4) .................. 6,648,240 33.8
1060 Park Avenue
New York, New York 10128
Dudley D. Johnson* ........................ 43,138(5)
Wilmot H. Kidd* ........................... 2,300,766(6)(8) 11.7
375 Park Avenue
New York, New York 10152
Mrs. Wilmot H. Kidd ....................... 2,300,766(6)(8) 11.7
1060 Park Avenue
New York, New York 10128
C. Carter Walker, Jr.* .................... 470,103(7)(8) 2.4
All directors and officers
as a group .............................. 2,495,105(8) 12.7
----------
* Indicates nominee for election to the Board of Directors.
(1) Except as otherwise indicated, to the Corporation's knowledge the
beneficial owner had sole investment power and sole voting power with respect to
the shares shown opposite the name of such beneficial owner.
(2) As calculated on the basis of 19,692,777 shares of Common Stock
outstanding on December 31, 2003, Messrs. Calder, Inglis and Johnson each owned
less than 1% of the outstanding Common Stock.
(3) Includes 7,820 shares of Common Stock owned by Mr. Calder's wife and
8,628 shares of Common Stock owned by the Donald Grant and Ann Martin Calder
Foundation (the "Calder Foundation"). Mr. Calder is the President and Treasurer
of the Calder Foundation. He disclaims beneficial ownership of all such shares.
(4) Mrs. W. H. Kidd, whose husband is the President of the Corporation, is
President and Trustee of the Christian A. Johnson Endeavor Foundation.
(5) Includes 18,760 shares of Common Stock held in the Young & Franklin
Inc. Retirement Income Trust of which Mr. Johnson is trustee and 1,218 shares of
Common Stock held by the Disosway Foundation. Mr. Johnson is the Trustee of the
Disosway Foundation. He disclaims beneficial ownership of all such shares.
(Footnotes continued on following page)
2
(Footnotes continued from previous page)
(6) An aggregate of 2,300,766 shares of Common Stock were included in the
shares beneficially owned by each of Mr. and Mrs. Kidd. The shares set forth for
each of Mr. Kidd and Mrs. Kidd include 371,379 shares of Common Stock owned by
Mr. Kidd as to which Mr. and Mrs. Kidd had shared investment power and shared
voting power and as to which Mrs. Kidd disclaims beneficial ownership; 870,550
shares of Common Stock owned by Mrs. Kidd or held in trusts for her benefit as
to which Mr. and Mrs. Kidd had shared investment power and shared voting power
and as to which Mr. Kidd disclaims beneficial ownership; and 1,032,912 shares of
Common Stock owned by Mr. and Mrs. Kidd's children or held in trusts for their
benefit or for the benefit of other family members as to which Mr. and Mrs. Kidd
had shared investment power and shared voting power and as to which Mr. and Mrs.
Kidd disclaim beneficial ownership. The shares set forth for each of Mr. and
Mrs. Kidd also include 25,925 shares of Common Stock held in trust for the
benefit of the children of Mr. C. Carter Walker, Jr. as to which Mr. Kidd had
shared investment power and shared voting power and as to which Mr. and Mrs.
Kidd disclaim beneficial ownership.
(7) Includes 39,109 shares of Common Stock owned by Mr. Walker's wife as
to which Mr. Walker had shared investment power and shared voting power and
380,440 shares of Common Stock held in trust for the benefit of Mrs. Wilmot H.
Kidd or her children as to which Mr. Walker had shared investment power and
shared voting power. Mr. Walker disclaims beneficial ownership of all such
shares.
(8) An aggregate of 380,440 shares of Common Stock were included in the
shares beneficially owned by each of Mr. Kidd, Mrs. Kidd, and Mr. Walker.
The share ownership of Wilmot H. Kidd, President of the Corporation, is
given above. No other executive officer of the Corporation owns, beneficially or
otherwise, any shares of stock of the Corporation.
VALUE OF Beneficial SHARE Ownership by Directors
The dollar range of the value of equity securities of the Corporation
beneficially owned by each director as of December 31, 2003 is as follows:
Dollar Range of
Independent Directors Share Ownership
--------------------- ---------------
Donald G. Calder Over $100,000
Jay R. Inglis $10,001 - $50,000
Dudley D. Johnson Over $100,000
C. Carter Walker, Jr. Over $100,000
Interested Director
-------------------
Wilmot H. Kidd Over $100,000
3
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors, executive officers and persons who own more than ten
percent of a registered class of the Corporation's equity securities to file
with the Securities and Exchange Commission (the "SEC") initial reports of
ownership and reports of changes in ownership of Common Stock of the
Corporation. Officers, directors and greater than ten percent beneficial owners
are required by SEC regulation to furnish the Corporation with copies of all
Section 16(a) forms they file.
To the Corporation's knowledge, based solely on review of copies of such
reports furnished to the Corporation and written representations that no other
such reports were required, all Section 16(a) filing requirements applicable to
its officers, directors and greater than ten percent beneficial owners were
complied with.
VOTING PROCEDURES
The election of directors requires the affirmative vote of a plurality of
the shares of Common Stock present in person or represented by proxy at the
Meeting and entitled to so vote. Shares of Common Stock represented by proxies
which are marked "withhold authority" with respect to the election of any one or
more nominees for election as director will not be voted with respect to the
nominee or nominees so indicated. The ratification of the selection of
independent auditors of the Corporation requires the affirmative vote of a
majority of the shares of Common Stock present in person or represented by proxy
at the Meeting and entitled to so vote. Shares of Common Stock represented by
proxies which are marked "abstain" with respect to this matter will be counted
for the purpose of determining the number of shares present and entitled to
vote, and shall therefore have the same effect as if the shares represented
thereby were voted against such matter. Broker non-votes (where a nominee
holding shares for a beneficial owner has not received voting instructions from
the beneficial owner and such nominee does not possess or choose to exercise his
discretionary authority with respect thereto) will be treated as present but not
entitled to vote at the Meeting for the purpose of determining the number of
votes needed with respect to each item to be voted upon, and shall therefore
have no effect on such vote.
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors recommends the election of five directors to hold
office until the next Annual Meeting of Stockholders and until their successors
are elected and qualified. If any nominee for director is unable or declines to
serve, for any reason not now foreseen, the discretionary authority provided in
the proxy will be exercised to vote for a substitute. All the nominees have
consented to become directors and all were elected at the last Annual Meeting of
Stockholders.
Duly authorized proxies for Common Stock will be voted for the election of
Mr. Donald G. Calder, Mr. Jay R. Inglis, Mr. Dudley D. Johnson, Mr. Wilmot H.
Kidd and Mr. C. Carter Walker, Jr.
4
The following table indicates the age, principal occupations during the
last five years and positions (if any) with the Corporation, and the year each
nominee was first elected to the Board of Directors:
Principal Occupations Director of
(last five years) Corporation
and Position (if any) Continuously
Nominee Age with the Corporation Since
------- --- --------------------- ------------
Independent Directors:
Donald G. Calder........ 66 President, G. L. Ohrstrom & Co., Inc. (private 1982
investment firm); Director of Brown-Forman
Corporation, Carlisle Companies
Incorporated and Roper Industries, Inc.
(manufacturing companies)
Jay R. Inglis........... 69 Executive Vice President, National Marine
Underwriters 1973
(insurance management company) since
2001; Executive Vice President, Holt
Corporation (insurance holding company)
prior thereto
Dudley D. Johnson....... 64 President, Young & Franklin Inc. (private 1984
manufacturing company)
C. Carter Walker, Jr. .. 69 Private Investor 1974
Interested Director:
Wilmot H. Kidd.......... 62 Investment and research - President,
Central Securities Corporation 1972
The Board of Directors held ten regular meetings in 2003. All directors
attended at least 75% of the meetings of the Board of Directors and meetings of
the committees on which they served. The Board of Directors maintains an Audit
Committee and during 2003 formed a Nominating Committee. Both the Audit
Committee and the Nominating Committee consist of Messrs. Calder, Inglis,
Johnson and Walker, each of whom are independent as defined in Section 121(A) of
the American Stock Exchange's listing standards and none of whom are "interested
persons" as defined under the Investment Company Act of 1940. The Board of
Directors does not have a Compensation Committee.
The first meeting of the Nominating Committee was held January 28, 2004.
This committee is responsible for the review and recommendation of candidates
for the Board of Directors. The committee operates subject to a charter which is
attached to this proxy statement as Exhibit A. The Nominating Committee will
consider director nominee recommendations by stockholders provided the names of
such nominees, accompanied by relevant biographical information, are submitted
in writing to the Secretary of the Corporation. Any such recommendation must be
accompanied by a written statement from the individual of his or her consent to
be named as a candidate and, if nominated and elected, to serve as a director.
In making its recommendations, the Nominating Committee identifies
candidates who meet the current needs of the Board. The Nominating Committee
does not have any specific minimum qualifications that must be met by a nominee.
The Nominating Committee considers, among other things, an individual's
judgment, background and experience including business experience, industry
experience, and financial background. The Nominating Committee also considers
whether the individual meets the independence requirements of the American Stock
Exchange and whether the individual would be considered an "interested director"
under the Investment Company Act of 1940. With respect to nomination of
continuing
5
directors, the individual's past service to the Board is also considered. In
addition, the Nominating Committee is guided by the following criteria: each
Director should have integrity and the ability to work constructively with
others; each Director should have sufficient time available to devote to the
affairs of the Corporation in order to carry out the responsibilities of a
Director; and each director should be free of any conflict which would interfere
with the proper performance of the responsibilities of a Director. There are no
differences in the manner in which the Nominating Committee evaluates nominees
for directors based on whether the nominee is recommended by a stockholder.
The Audit Committee operates pursuant to a charter which is attached to
this proxy statement as Exhibit B. The Audit Committee assists the Board of
Directors by overseeing the accounting and financial reporting process of the
Corporation and the audits of its financial statements. The Audit Committee met
four times during 2003.
Stockholders may send written communications to any member of the Board of
Directors c/o Corporate Secretary, Central Securities Corporation, 375 Park
Avenue, New York, New York, 10152. All communications will be compiled by the
Corporate Secretary and submitted to the director.
Each of the Corporation's directors is encouraged to attend the annual
meeting of stockholders in person. All of the Corporation's directors attended
the Corporation's 2003 Annual Meeting.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed the audited financial statements of the
Corporation for the year ended December 31, 2003, and has met with management
and KPMG LLP, the Corporation's independent auditors, to discuss the audited
financial statements.
The Audit Committee received from KPMG LLP written disclosures regarding
their independence and the letter required by Independence Standards Board
Standard No. 1, and has discussed with KPMG LLP their independence. In
connection with its review, the Audit Committee has also discussed with KPMG LLP
the matters required to be discussed by Statement of Auditing Standards No. 61.
Based on its review and discussions with management and KPMG LLP, the
Audit Committee recommended to the Board of Directors that the audited financial
statements be included in the Corporation's Annual Report to Stockholders for
the year ended December 31, 2003.
Members of the Audit Committee:
Donald G. Calder
Jay R. Inglis
Dudley D. Johnson
C. Carter Walker, Jr.
EXECUTIVE OFFICERS OF THE CORPORATION
The executive officers of the Corporation are Mr. Wilmot H. Kidd,
President, Mr. Charles N. Edgerton, Vice President and Treasurer, and Ms.
Marlene A. Krumholz, Secretary. Information concerning Mr. Kidd is given above
under "Election of Directors." Mr. Edgerton, 59, was elected Vice President in
1989 and has
6
been Treasurer since 1985. Ms. Krumholz, 40, joined the Corporation in November
2000 and was elected Secretary effective January 1, 2001. Ms. Krumholz was
Senior Manager, PricewaterhouseCoopers LLP (public accounting) prior thereto.
Executive officers serve as such until the election of their successors.
COMPENSATION
The table below sets forth for all directors and for each of the three
highest-paid executive officers the aggregate compensation received from the
Corporation for 2003 for services in all capacities:
Pension or
Retirement
Benefits
Accrued
Name of Person, Aggregate as Part of
Position Compensation Expenses(1)
--------------- ------------ -----------
Donald G. Calder
Director ................................ $ 25,000
Jay R. Inglis
Director ................................ 26,000
Dudley D. Johnson
Director ................................ 25,000
C. Carter Walker, Jr.
Director ................................ 26,000
Wilmot H. Kidd
President and Director(2) ............... 700,000 $30,000
Charles N. Edgerton
Vice President and Treasurer ............ 252,000(3) 30,000
Marlene A. Krumholz
Secretary ............................... 169,000(3) 25,350
----------
(1) Represents contributions to the Corporation's Profit Sharing Plan.
(2) All remuneration received by Mr. Kidd was in his capacity as President
of the Corporation.
(3) Includes compensation of $37,000 and $25,000 accrued in 2003 for Mr.
Edgerton and Ms. Krumholz, respectively, deferred until January, 2004.
Each director who is not an officer is paid an annual retainer of $12,000,
a fee of $1,000 for each Board of Directors meeting attended in person, and $500
for participating in a Board of Directors meeting by telephone. Each member of
the Audit Committee is paid $1,000 for each Audit Committee meeting attended.
Directors are reimbursed for their out-of-pocket expenses incurred in attending
meetings.
Profit Sharing Plan
Generally, all salaried employees of the Corporation are eligible to
participate in the Profit Sharing Plan. The Plan provides for contributions by
the Corporation from its profits of up to 25% of an employee's compensation. The
vested contributions credited to an employee's account are payable at normal
(age 65), early, or disability retirement, death or other termination of
employment and may be paid in various forms, including a lump sum cash payment
or a monthly annuity. For the year ended 2003, the Corporation contributed 15%
of employee compensation to the Plan, subject to Internal Revenue Code
limitations. The officers referred to above are fully vested in all
contributions to the Plan.
7
Employees may withdraw the amounts of any voluntary contributions made
prior to 1991 and may, under certain conditions, withdraw or borrow against
vested Corporation contributions. Under the Plan, each employee is permitted to
invest the assets in his account in the capital stock of one or more regulated
investment companies from a selection provided from time to time by the Plan
Administrator. Such regulated investment companies include, among others, U.S.
Treasury funds; short-term, government and international bond funds; and general
and specialized stock funds.
AUDIT FEES
During the last two fiscal years, the Corporation engaged KPMG LLP for its
services as follows:
2003 2002
-------- --------
Audit fees ................................ $33,050(1) $32,000(1)
Audit-related fees ........................ 0 0
Tax fees .................................. 13,500(2) 13,000(2)
All other fees ............................ 0 0
------- -------
Total ..................................... $46,550 $45,000
======= =======
----------
(1) Includes fees for review of the semi-annual report to stockholders
and audit of the annual report to stockholders.
(2) Includes fees for services performed with respect to tax compliance
and tax planning.
Pursuant to its charter, the Audit Committee is responsible for
recommending the selection, approving compensation and overseeing the
independence, qualifications and performance of the independent accountants. The
Audit Committee's policy is to pre-approve all audit and permissible non-audit
services provided by the independent accountants. In assessing requests for
services by the independent accountants, the Audit Committee considers whether
such services are consistent with the auditor's independence; whether the
independent accountants are likely to provide the most effective and efficient
service based upon their familiarity with the Corporation; and whether the
service could enhance the Corporation's ability to manage or control risk or
improve audit quality. The Audit Committee may delegate pre-approval authority
to one or more of its members. Any pre-approvals by a member under this
delegation are to be reported to the Audit Committee at its next scheduled
meeting.
All of the audit and tax services provided by KPMG LLP in fiscal year 2003
(described in the footnotes to the table above) and related fees were approved
in advance by the Audit Committee.
PROPOSAL 2. RATIFICATION OF INDEPENDENT AUDITORS
Stockholders are invited to ratify the selection of KPMG LLP as
independent auditors of the Corporation for the year 2004. KPMG LLP has no
direct or material indirect financial interest in the Corporation other than its
employment in such capacity.
At a meeting held January 28, 2004, a majority of the directors who were
not "interested persons" (as defined under the Investment Company Act of 1940)
selected KPMG LLP to act as auditors for the Corporation during 2004. A
representative of KPMG LLP is not expected to be present at the Corporation's
Annual Meeting of Stockholders.
The Board of Directors recommends a vote FOR this selection.
8
OTHER MATTERS
The Board of Directors knows of no other matters which may properly be,
and are likely to be, brought before the Meeting. However, if any proper matters
are brought before the Meeting, the persons named in the enclosed form of proxy
will have discretionary authority to vote thereon according to their best
judgment.
2005 STOCKHOLDER PROPOSALS
Any stockholder proposals for inclusion in the Corporation's proxy
statement for the 2005 Annual Meeting of Stockholders pursuant to Rule 14a-8 of
the Securities and Exchange Act of 1934 ("14a-8 proposals") must be received by
the Corporation at its office at New York, New York prior to October 7, 2004.
Pursuant to Rule 14a-4 of the Securities and Exchange Act of 1934, the
Corporation has discretionary voting authority with respect to any non-Rule
14a-8 proposals for the 2005 Annual Meeting of Stockholders that are not
received by the Corporation prior to December 21, 2004.
MISCELLANEOUS
The Corporation will pay all costs of soliciting proxies in the
accompanying form. Solicitation will be made by mail, and officers and regular
employees of the Corporation may also solicit proxies by telephone or personal
interview. The Corporation will request brokers, banks and nominees who hold
stock in their names to furnish this proxy material to the beneficial owners
thereof and to solicit proxies from them, and will reimburse such brokers, banks
and nominees for their out-of-pocket and reasonable clerical expenses in
connection therewith.
A copy of the Annual Report including financial statements for the year
ended December 31, 2003 is enclosed.
Please date, sign and return the enclosed proxy at your earliest
convenience. No postage is required for mailing in the United States.
9
EXHIBIT A
CENTRAL SECURITIES CORPORATION
NOMINATING COMMITTEE CHARTER
Committee Composition
The Nominating Committee of Central Securities Corporation (the
"Corporation") shall be composed of all of the Independent Directors of the
Corporation. Other Directors of the Corporation, while not serving as members of
the Committee, nonetheless will be expected to have a role in the nominating
process by identifying and recommending potential candidates to the Committee
for its consideration, and by otherwise assisting the Committee in the discharge
of its responsibilities.
Board Nominations
1. The Committee shall review candidates for and recommend to the Board of
Directors nominations for Directors of the Corporation.
2. Persons nominated as Independent Directors may not be "interested persons"
of the Corporation as that term is defined in the Investment Company Act
of 1940, as amended (the "1940 Act"). With respect to such nominees, the
Committee shall carefully evaluate their independence from any service
providers to the Corporation. The Committee shall also consider the effect
of any relationships beyond those delineated in the 1940 Act that might
impair independence, e.g. business, financial or family relationships with
the Corporation's senior officers or with Corporation service providers.
In determining nominees' qualifications for Board membership, the
Committee may consider such other factors as it may determine to be
relevant to fulfilling the role of being a member of the Board of
Directors.
Other Powers and Responsibilities
1. The Committee shall meet as necessary in connection with any vacancy on or
addition to the Board, and otherwise from time to time as it deems
appropriate to perform its responsibilities.
2. The Committee shall have the resources and authority appropriate to
discharge its responsibilities. It may consult with counsel to the
Corporation concerning the requirements of the 1940 Act applicable to the
selection and qualification of independent directors.
3. The Committee shall recommend to the Board any revisions or modifications
to this Charter that the Committee deems necessary or appropriate to the
effective exercise of its responsibilities.
A-1
EXHIBIT B
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF CENTRAL SECURITIES CORPORATION
AUTHORITY AND PURPOSE
By resolution adopted December 17, 1973, the Board of Directors of Central
Securities Corporation (the "Corporation") created an Audit Committee of the
Board of Directors (the "Audit Committee"). The purpose of the Audit Committee
is to oversee the accounting and financial reporting processes of the
Corporation and the audits of its financial statements.
The Corporation's management is responsible for the preparation of the
Corporation's financial statements and for maintaining appropriate accounting
and financial reporting principles and policies as well as internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. The independent auditors are responsible for
auditing the Corporation's financial statements.
The Corporation's management and independent auditors have more time,
knowledge and detailed information on the Corporation than do the members of the
Audit Committee. Therefore, in carrying out its oversight responsibilities, the
Audit Committee is not providing any special assurance as to the Corporation's
financial statements nor any professional certification as to the independent
auditors' work. The members of the Audit Committee shall be entitled to rely
upon the integrity of the individuals and organizations within and outside the
Corporation from whom it receives information and the accuracy of the
information provided to them by such individuals or organizations absent actual
knowledge to the contrary. The Audit Committee shall have the authority to
engage independent counsel and other advisers, as it deems necessary or
appropriate. The Corporation shall provide appropriate funding, as determined by
the Audit Committee, for payment of compensation to the independent auditors or
to any adviser employed by the Audit Committee or for ordinary administrative
expenses.
The following affirms and sets forth in detail the membership
requirements, structure and responsibilities of the Audit Committee.
MEMBERSHIP REQUIREMENTS
1. The Audit Committee shall be elected by the Board of Directors and shall
be comprised solely of independent directors, and each member of the Audit
Committee shall be free from any relationship that, in the opinion of the
Board of Directors, would interfere with the exercise of independent
judgment as an Audit Committee member.
2. The members of the Audit Committee shall meet the independence and
experience requirements of the exchange on which the Corporation's stock
is listed and rules and regulations of the Securities and Exchange
Commission ("SEC"), in each case as in effect from time to time. Members
of the Audit Committee may not, other than in their capacity as members of
the Audit Committee, the Board of
B-1
Directors of the Corporation, or any other committee of the Board of
Directors, accept directly or indirectly any consulting, advisory, or
other compensatory fee from the Corporation or be an "interested person"
of the Corporation (as defined in Section 2(a)(19) of the Investment
Company Act of 1940).
STRUCTURE
1. The number of directors comprising the Audit Committee shall be no fewer
than three, such number to be determined from time to time by the Board of
Directors.
2. Unless a Chair is elected by the full Board of Directors, the members of
the Audit Committee may designate a Chair by majority vote.
3. The Audit Committee shall meet formally at least four times each year or
more frequently as circumstances may dictate, and it shall meet privately
(without members of management present) with the independent auditors at
its discretion to discuss any matters that the Audit Committee or the
independent auditors believe should be discussed.
RESPONSIBILITIES
Independent Auditors
The Audit Committee shall recommend annually the independent auditors to
be selected by the Board of Directors subject to ratification by the vote of the
stockholders of the Corporation. The Audit Committee shall be directly
responsible for compensation and oversight of the work of the independent
auditors (including resolution of disagreements between management and the
independent auditors regarding financial reporting). The independent auditors
are ultimately accountable to the Audit Committee and the Board of Directors as
representatives of the stockholders of the Corporation.
In carrying out these responsibilities, the Audit Committee shall:
1. Pre-approve all audit and permitted non-audit services that the
independent auditors provide to the Corporation. This pre-approval shall
be based on the consideration of whether the non-audit services provided
by the Corporation's auditor are compatible with maintaining the auditor's
independence. This pre-approval requirement may be waived with respect to
the provision of non-audit services in the limited circumstances defined
in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934.
The Audit Committee may delegate to one or more designated members of the
Audit Committee the authority to grant the pre-approvals required above.
The decision of any member to whom authority is delegated under this
paragraph to pre-approve an activity shall be presented to the full Audit
Committee at its next scheduled meeting.
2. Receive annually from the independent auditors a formal written statement
delineating all relationships between the auditors and the Corporation in
accordance with Independence Standards Board Standard 1.
3. Actively engage in a dialogue with the independent auditors regarding any
disclosed relationship or services performed by the independent auditors
that might impact the objectivity and independence of the auditors and
take, or recommend that the full Board of Directors take, appropriate
action to oversee and satisfy itself annually of the independence of the
independent auditors.
B-2
4. Receive annually from the independent auditors an engagement letter and
review the fees and other compensation to be paid to the independent
auditors.
5. Review and discuss with the independent auditors the proposed scope,
staffing, reliance upon management and general audit approach of the
year-end audit.
6. Communicate to the independent auditors that they are ultimately
accountable to the Audit Committee and the Board of Directors as the
representatives of the stockholders of the Corporation.
Financial Reporting
It shall be the responsibility of the Audit Committee to assist the Board
of Directors by providing oversight on matters pertaining to the accounting,
financial reporting, internal control and audit activities of the Corporation.
In carrying out these responsibilities, the Audit Committee shall:
1. Review and discuss with management and the independent auditors, following
the conclusion of the year-end audit, the audited financial statements to
be included in the Corporation's annual report to stockholders under
Section 30(e) of the Investment Company Act of 1940 and Rule 30d-1
thereunder, including discussion of certain matters required to be
communicated to audit committees in accordance with AICPA Statement of
Auditing Standards No. 61 ("SAS 61").
2. Review and discuss reports from the independent auditor regarding (i) all
critical accounting policies and practices used; (ii) all alternative
treatments of financial information within generally accepted accounting
principles that have been discussed with management of the Corporation,
ramifications of the use of such alternative disclosures and treatments,
and the treatment preferred by the independent auditors; and (iii) other
material written communications between the independent auditors and
management of the Corporation.
3. Discuss and consider the independent auditors' judgments about the quality
and appropriateness of the Corporation's accounting principles as applied
in its financial reporting in accordance with SAS 61.
4. Discuss with management and the independent auditors significant issues
regarding the Corporation's internal controls, including any significant
findings prepared by the independent auditors with respect thereto.
5. Inquire into any changes in the Corporation's accounting principles and
practices and the effect of any changes in accounting standards that may
materially affect the Corporation's financial reporting practices.
6. Advise the Board of Directors whether, based on these reviews and
discussions and its assessment of the independent auditors' independence,
the Audit Committee recommends that the audited financial statements be
included in the Corporation's annual report to stockholders under Section
30(e) of the Investment Company Act of 1940 and Rule 30d-1 thereunder.
7. Establish procedures for (i) receipt, retention and treatment of
complaints received by the Corporation regarding accounting, internal
accounting controls, or auditing matters ("Accounting Matters") and (ii)
the confidential, anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
B-3
Other Duties
In addition to the foregoing responsibilities, the Audit Committee shall:
1. Prepare annually a report to stockholders to be included in the
Corporation's proxy statement as required by the SEC.
2. Review with the Corporation's certifying officers on Form N-CSR
disclosure, based on their most recent evaluation:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize, and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls.
3. Determine annually whether any member of the Audit Committee is an "Audit
Committee Financial Expert" as defined in Item 3 of Form N-CSR.
4. Review and reassess the adequacy of this Charter at least annually, make
recommendations to the Board of Directors, as conditions dictate, to
update this Charter, and direct that this Charter be included as an
exhibit to the Corporation's proxy statement at least every three years in
accordance with SEC regulations.
5. Perform any other activities consistent with this Charter, the
Corporation's by-laws, and governing law as the Audit Committee or the
Board of Directors deems necessary or appropriate, including causing an
investigation to be made into any matter brought to the attention of the
Audit Committee within the scope of its duties.
B-4
P R O X Y
CENTRAL SECURITIES CORPORATION
Proxy Solicited on Behalf of the Board of Directors of
the Company for Annual Meeting March 10, 2004
The undersigned hereby appoints WILMOT H. KIDD and MARLENE A. KRUMHOLZ, and each
of them, as attorneys with power of substitution, to represent the undersigned
at the annual meeting of stockholders of Central Securities Corporation to be
held at The University Club, One West 54th Street, 9th Floor, New York, New York
on March 10, 2004 at 11:00 o'clock A.M., and at any adjournment thereof, on all
matters which may properly come before the meeting.
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PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_____________________________________ _____________________________________
_____________________________________ _____________________________________
_____________________________________ _____________________________________
|X| Please mark 1224
votes as in
this example.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR election of directors and FOR Proposal 2.
1. Election of Directors.
Nominees: (01) Donald G. Calder, (02) Jay R. Inglis, (03) Dudley D. Johnson,
(04) Wilmot H. Kidd and (05) C. Carter Walker, Jr.
FOR WITHHELD
|_| |_|
|_| _________________________________________________________________
For all nominees except as noted above
2. Approval of KPMG LLP as independent FOR AGAINST ABSTAIN
auditors for 2004. |_| |_| |_|
3. In their discretion, upon such other matters as may properly come before
the meeting or any adjournments thereof.
Mark box at right if you plan to attend the Annual Meeting. |_|
Mark box at right if an address change or comment has been |_|
noted on the reverse side of this card.
This proxy must be signed exactly as name appears hereon. Joint owners should
each sign. Executors, administrators, trustees, etc., should give full title as
such. If the signer is a corporation, please sign full corporate name by duly
authorized officer.
Signature: ______________________________________________ Date: ________________
Signature: ______________________________________________ Date: ________________