UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
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: December 31, 2006
Item 1. Reports to Stockholders.
================================================================================
CENTRAL SECURITIES CORPORATION
----------
SEVENTY-EIGHTH ANNUAL REPORT
2006
================================================================================
SIGNS OF THE TIMES
"For decades, the trade deficit has been a political and journalistic
lightning rod, inspiring countless predictions of America's imminent economic
collapse. The reality is different. Our imports grow with our economy and
population while our exports grow with foreign economies, especially those of
industrialized countries. Though widely criticized as an imbalance, the trade
deficit and related capital inflow reflect U.S. growth, not weakness -- they
link the younger, faster-growing U.S. with aging, slower-growing economies
abroad.
"Since the 2001 recession, the U.S. economy has created 9.3 million new
jobs, compared with 360,000 in Japan and 1.1 million in the euro zone excluding
Spain. This despite our trade deficit and their trade surpluses. Like the U.S.,
Spain (3.6 million new jobs) and the U.K. (1.3 million new jobs) ran trade
deficits and created jobs rapidly in this five-year period. Wages are rising
solidly in these three. The economics is clear (for once) that a liberal trading
environment allows more jobs with higher wages as people specialize." (David
Malpass, The Wall Street Journal, December 21, 2006)
----------
"Trade measurements do a much better job of capturing the flow of physical
products, which can be precisely measured by shipping manifests, than that of
services, America's strong suit. Much of the latter involve the dark matter of
intellectual property, such as consulting, training and financial- management
services that often move electronically and are uninvoiced.
"The sale in the U.S. of a $700 Dell computer might generate a negative
trade balance of $450, representing the purchase from Asian companies of various
components shipped for assembly in the U.S. Yet that same transaction might
generate only a $30 profit for the Asian vendors working on slender margins,
while the American companies -- Dell for its mark-up, Microsoft for its software
and Intel for its microprocessor -- might realize a profit of about $250. The
U.S. comes out a big winner, even though, through the prism of the trade
balance, it appears to be sucking wind." (Jonathan R. Laing, Barron's, December
23, 2006)
----------
"Today, the U.S. stands out as the only leading industrial power -- over
time India could prove the other -- with a surging population. Due to
immigration and higher birth rates, the U.S. population is now growing two to
three times faster than South Korea's and Britain's, and also far faster than
China's. Our other major competitors, such as Russia, Japan and Germany, are
either demographically stagnant or are already about to start losing population.
"These demographic changes are remarkable. At the height of the Cold War,
the former Soviet Union was more populous than the U.S. In 2050 the remnant of
that empire, the Russian Republic, will have barely one-third to one-fourth the
population of the U.S." (Joel Kotkin, The Wall Street Journal, October 17, 2006)
----------
"Because of its deeply rooted culture of immigration, the U.S. has a huge
advantage in such a world. If we are smart, we can still cream off the most
first-round intellectual draft choices from around the world -- more than any
other country -- and bring that talent to our shores to start companies and work
in others.
"We have gone from the Iron Age to the Industrial Age to the Information
Age to the Talent Age, and countries that make it easy to draw in human talent
will have a distinct advantage today.
"Anybody out there try to become a Swiss citizen lately? It's not so easy
-- and it's also not an accident that Switzerland's most famous product is the
cuckoo clock." (Thomas L. Friedman, The New York Times, April 5, 2006)
[ 2 ]
SIGNS OF THE TIMES
"In 1930 we found 10 billion new barrels of oil in the world and we used
1.5 billion. We reached a peak in 1964 when we found 48 billion barrels and used
approximately 12 billion. In 1988, we found 23 billion barrels and used 23
billion barrels. That was the crossover when we started finding less than we
were using. In 2005, we found about 5 billion to 6 billion and we used 30
billion. These numbers are just overwhelming." (Charles Maxwell, Barron's,
October 16, 2006)
----------
"Art prices in the U.S. rose this year by an average of 27 percent -- the
steepest ever, according to Artprice.com, which tracks global auction prices.
Depending on which index you consult, overall prices are either close to or
above the level they reached during the peak of the last art boom in 1990. 'It
certainly feels like a bubble to me,' says one long-standing collector.
"Michael Moses, an associate professor at New York University's Stern
School of Business, is more sanguine. 'The last five years, prices have been
growing faster than they have in the past 25 years. We are growing at a rate
that may not be sustainable if you believe in mean reversion. However, prices
are not growing as fast as they were during 1985-90, the peak of the last market
boom, and that indicates that we are not at the bubble yet'." (Deborah Brewster
and Peter Aspden, Financial Times, December 29, 2006)
----------
"From 2001 to 2006, the number of federal regulatory personnel has risen
by one-third; regulatory budgets are up by 52% after inflation; and the Federal
Register -- which prints all that regulatory verbiage -- has climbed by more
than 10,000 pages." (Tale of the Red Tape, The Wall Street Journal, May 11,
2006)
Total Pages in the Number of
Federal Register Regulators
------------------ ----------
1970....................................... 20,036 90,000
1980....................................... 87,012 146,000
1990....................................... 53,620 152,000
2000....................................... 67,702 175,000
2006....................................... 78,000 241,000
----------
"In 1962, G.M. had four hundred and sixty-four thousand U.S. employees and
was paying benefits to forty thousand retirees and their spouses, for a
dependency ratio of one pensioner to 11.6 employees. Last year, it had a hundred
and forty-one thousand workers and paid benefits to four hundred and fifty-three
thousand retirees, for a dependency ratio of 3.2 to 1." (Malcolm Gladwell, The
New Yorker, August 28, 2006)
----------
"Recently, we've read on the pages of The Wall Street Journal that we've
reached the end of the personal computer era and that the open, broad industry
approach that has enabled today's rich computing experiences doesn't apply to
the world of digital devices.
"The reality is a little different. The truth is that the model which has
fueled the incredible popularity and affordability of the PC will continue to
drive innovation and choice in the burgeoning area of personal devices such as
cell phones, digital players and mobile PCs. As such, the PC is becoming more
important and popular as a key enabler for these new digital scenarios in every
corner of the world, from Indianapolis to Istanbul. If anything, it is, to
paraphrase Churchill, perhaps the end of the beginning; the end of the first
phase in the life of a young and evolving technology that is just now becoming
as ubiquitous as the TV or the automobile." (Bill Gates and Paul Otellini, The
Wall Street Journal, May 15, 2006)
[ 3 ]
CENTRAL SECURITIES CORPORATION
(Organized on October 1, 1929 as an investment company, registered as
such with the Securities and Exchange Commission under the
provisions of the Investment Company Act of 1940.)
TEN YEAR HISTORICAL DATA
Per Share of Common Stock
-------------------------------------------------
Total Convertible Net Net Net realized Unrealized
net Preference asset investment Divi- Distribu- investment appreciation
Year assets Stock(A) value income(B) dends(C) tions(C) gain of investments
---- ------ ----------- ----- ---------- -------- --------- ------------ --------------
1996 $356,685,785 $9,102,050 $25.64 $214,721,981
1997 434,423,053 9,040,850 29.97 $.24 $.34 $2.08 $30,133,125 273,760,444
1998 476,463,575 8,986,125 31.43 .29 .29 1.65 22,908,091 301,750,135
1999 590,655,679 -- 35.05 .26 .26 2.34 43,205,449 394,282,360
2000 596,289,086 -- 32.94 .32 .32 4.03 65,921,671 363,263,634
2001 539,839,060 -- 28.54 .18 .22 1.58* 13,662,612 304,887,640
2002 361,942,568 -- 18.72 .14 .14 1.11 22,869,274 119,501,484
2003 478,959,218 -- 24.32 .09 .11 1.29 24,761,313 229,388,141
2004 529,468,675 -- 26.44 .11 .11 1.21 25,103,157 271,710,179
2005 573,979,905 -- 27.65 .28 .28 1.72 31,669,417 302,381,671
2006 617,167,026 -- 30.05 .36 .58 1.64 36,468,013 351,924,627
----------
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 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.
The Common Stock is listed on the American Stock Exchange under the symbol
CET. On December 29, 2006 (the last trading day of the year) the market
quotations were: $26.64 low, $26.85 high and $26.65 last sale.
Central's results to December 29, 2006 versus the S&P 500:
Central's Central's Standard &
Average Annual Total Return NAV Return Market Return Poor's 500
--------------------------- ---------- ------------- ----------
One Year.............................. 18.6% 21.3% 15.8%
Five Year............................. 8.9% 8.8% 6.2%
Ten Year.............................. 11.2% 10.2% 8.4%
Fifteen Year.......................... 16.1% 17.1% 10.6%
Twenty Year........................... 14.4% 14.3% 11.8%
[ 4 ]
To the Stockholders of
CENTRAL SECURITIES CORPORATION:
Financial statements for the year 2006, as reported upon by our
independent registered public accounting firm, and other pertinent information
are submitted herewith.
Comparative net assets are as follows:
December 31, December 31,
2006 2005
------------ ------------
Net assets.......................................... $617,167,026 $573,979,905
Net assets per share of Common Stock................ 30.05 27.65
Shares of Common Stock outstanding.............. 20,538,195 20,762,159
Comparative operating results are as follows:
Year 2006 Year 2005
--------- ---------
Net investment income............................... $ 7,269,692 $ 5,684,776
Per share of Common Stock....................... .36* .28*
Net realized gain on sale of investments............ 36,468,013 31,669,417
Increase in net unrealized appreciation
of investments.................................... 49,542,956 30,671,492
Increase in net assets resulting from operations.... 93,280,661 68,025,685
----------
* Per-share data are based on the average number of Common shares
outstanding during the year.
The Corporation made two distributions to holders of Common Stock in 2006,
a cash dividend of $.20 per share paid on June 23 and an optional distribution
of $2.02 per share in cash, or one share of Common Stock for each 12 shares
held, paid on December 27. For Federal income tax purposes, of the $2.22 paid in
2006, $.58 represents ordinary income and $1.64 represents long-term capital
gains. Separate tax notices have been mailed to stockholders. With respect to
state and local taxes, the character of distributions may vary. Stockholders
should consult with their tax advisors on this matter.
In the optional distribution paid in December, the holders of 54% of the
outstanding shares of Common Stock elected stock, and they received 884,685
Common shares.
During 2006 the Corporation repurchased 1,108,649 shares of its Common
Stock at an average price per share of $25.07. 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 private transactions directly
with stockholders.
[ 5 ]
Equity markets surprised most observers last year with stronger than
expected results. As measured by the S&P 500 and Russell 2000, market values
increased by 15.8% and 18.4%, respectively. The biggest contributors to
Central's 18.6% increase were Plymouth Rock, Convergys, Kerr-McGee,
TransMontaigne, Bank of New York, and Sonus Networks. Intel, McMoRan and Capital
One were the largest detractors. We were slightly more active last year as
measured by turnover which increased to 18%. Some of the activity was
involuntary, however, as Kerr-McGee and TransMontaigne were sold in conjunction
with mergers. Nine new investments were added and nine sold, and we ended the
year with thirty-nine holdings. The ten largest, shown on page eight, accounted
for 63% of Central's net assets.
Plymouth Rock, our largest holding, appears to have had another excellent
year. Since this letter precedes its annual report, audited results for 2006 are
not yet available. The Plymouth Rock annual report will be available on the
company's website at www.prac.com in early April. Net income for calendar 2006
should approximate $50 million. This amount includes a release of excess
reserves from prior years and CEO James M. Stone cautions that, for this reason,
an increase in net income will be difficult to achieve in 2007. Market
conditions for automobile insurance continue to be very competitive and the
regulatory changes in Massachusetts we referred to last year are still pending,
so there is a fair amount of uncertainty about the coming year. On the other
hand, the company's information technology project, Matrix, is well into its
implementation phase and completion is expected this year. Hal Belodoff, the
company's COO, and his team have done an excellent job of keeping this very
important project close to original budget and schedule.
Looking at Plymouth Rock in a broader perspective, for the past two years
top management has concentrated on investment in infrastructure, the development
of management talent and the integration of the High Point acquisition. As a
result, the company is in a stronger position to grow shareholder value than at
any time in its history.
Plymouth Rock is not publicly traded and its value is determined by
Central's Board of Directors based primarily on an independent appraisal
obtained by Plymouth Rock. In addition, we consider management, corporate
governance, the company and industry outlooks, industry statistics,
marketability and other factors including any recent private transactions.
The only significant changes among our large investments were substantial
additions to our holdings of Agilent and Bank of New York. The latter, in
December, announced its intention to merge with Mellon Bank. Initially, it
appears that the combination will be one of the leaders in the businesses of
securities servicing and asset management, with increased economies of scale and
opportunities for growth.
As noted above, markets were surprisingly favorable last year and
investors seem to have an abundance of confidence. One observer noted, with a
twist on President Roosevelt's observation, that, with respect to the stock
market, "the main thing we have to fear is lack of fear itself". For the past
two years we have commented about the proliferation of new private equity
partnerships. We see this trend as a reflection of the significant amount of
liquid capital seeking gainful employment. These partnerships, contributing as
they have to record merger and acquisition activity, evoke memories of the
conglomerate era of the 1960's, when companies like Litton Industries, ITT and
Teledyne were buying companies at a rapid pace and promising investors that the
acquired companies would be more professionally managed as a result. It is not
clear how far the trend will go this time, but it has already had an effect on
expectations and prices. Investors, perhaps sensing an increasing possibility of
corporate takeovers have bid up the prices of small and medium size
[ 6 ]
companies in relation to large ones and equity markets seem to be offering less
opportunity for the risks assumed. We think our practice of concentrating on a
limited number of companies we know in depth, a practice which has served us
well in the past, is a sensible course to follow in this market climate as well.
Our investment approach continues to be based on the long-term view. We
try to make investments at a reasonable price based on a three to five year
outlook. Many investors are forced to have a shorter time horizon, and we
believe that our ability to take a long-term view has been an advantage for
Central stockholders. It is also important, in our view, to consider the
alignment of management's interests with those of stockholders when making
investments.
Our long-standing practice has been to keep about one half of our assets
invested in a small number of companies, with the remainder in a more
diversified portfolio. We believe the risk associated with this approach can be
reduced through in-depth knowledge of the companies in which we invest. Ideally,
we want to hold growing, profitable companies for an extended period of time.
Significant growth for any one company will not last indefinitely, however, and
over time the composition of Central's assets will change as long-term holdings
are reduced or sold and the proceeds redeployed.
It is our goal to provide shareholders with investment results that will
be judged as superior over the long-term. We continue to believe that under
reasonably favorable economic conditions our investment approach will provide
satisfactory results.
Shareholder inquiries are welcome.
CENTRAL SECURITIES CORPORATION
WILMOT H. KIDD, President
630 Fifth Avenue
New York, NY 10111
January 24, 2007
[ 7 ]
TEN LARGEST INVESTMENTS
December 31, 2006
(unaudited)
Percent of Year First
Cost Value Net Assets Acquired
---- ----- ---------- ----------
(millions)
The Plymouth Rock Company, Inc. ............................ $ 2.2 $133.0 21.6% 1982
Convergys Corporation ...................................... 24.1 36.9 6.0 1998
The Bank of New York Company, Inc. ......................... 15.5 34.4 5.6 1993
Brady Corporation .......................................... 3.5 33.9 5.5 1984
Agilent Technologies, Inc. ................................. 22.5 32.8 5.3 2005
Murphy Oil Corporation ..................................... 3.7 30.5 4.9 1974
Capital One Financial Corporation .......................... 2.2 23.0 3.7 1994
The TriZetto Group, Inc. ................................... 7.2 21.1 3.4 2002
Roper Industries, Inc. ..................................... 9.0 20.6 3.3 2003
Intel Corporation .......................................... 0.4 19.8 3.2 1986
PRINCIPAL PORTFOLIO CHANGES
October 1 to December 31, 2006
(Common Stock unless specified otherwise)
(unaudited)
Number of Shares
--------------------------------------------
Held
Purchased Sold December 31, 2006
--------- ---- -----------------
Berry Petroleum Company............................. 200,000 200,000
GeoMet, Inc......................................... 100,000 370,000
Motorola, Inc....................................... 150,000 350,000
Neoware, Inc........................................ 500,000 1,500,000
PolyOne Corporation................................. 484,000 125,000
Verigy Ltd.......................................... 115,382(a) 115,382
----------
(a) Received in a distribution from Agilent Technologies, Inc.
[ 8 ]
DIVERSIFICATION OF INVESTMENTS
December 31, 2006
(unaudited)
Percent of
Net Assets
December 31
------------
Issues Cost Value 2006 2005
------ ---- ----- ---- ----
Common Stocks:
Insurance............................. 3 $ 3,633,747 $134,738,660 21.8% 19.0%
Electronics........................... 9 50,219,443 103,464,220 16.8 17.3
Manufacturing......................... 4 36,086,657 86,291,200 14.0 11.5
Energy................................ 7 42,155,582 76,990,382 12.5 15.8
Business Services..................... 4 50,396,349 67,150,196 10.9 5.9
Banking and Finance................... 2 17,620,470 57,494,750 9.3 7.3
Information Technology Services....... 2 25,880,449 40,940,500 6.6 6.0
Chemicals............................. 3 5,331,118 12,595,500 2.0 3.3
Other................................. 5 11,768,818 15,351,852 2.5 5.4
Short-Term Investments................... 2 21,473,056 21,473,056 3.5 8.4
FINANCIAL HIGHLIGHTS
2006 2005 2004 2003 2002
---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value, beginning of year.......... $ 27.65 $ 26.44 $ 24.32 $ 18.72 $ 28.54
Net investment income*...................... .36 .28 .11 .09 .14
Net realized and unrealized gain (loss)
on securities*............................ 4.26 2.93 3.33 6.91 (8.71)
-------- -------- -------- -------- --------
Total from investment operations...... 4.62 3.21 3.44 7.00 (8.57)
Less:
Dividends from net investment income........ .36 .28 .11 .11 .14
Distributions from capital gains............ 1.86 1.72 1.21 1.29 1.11
-------- -------- -------- -------- --------
Total distributions................... 2.22 2.00 1.32 1.40 1.25
-------- -------- -------- -------- --------
Net asset value, end of year................ $ 30.05 $ 27.65 $ 26.44 $ 24.32 $ 18.72
======== ======== ======== ======== ========
Per share market value, end of year......... $ 26.65 $ 23.80 $ 22.85 $ 20.89 $ 16.28
Total return based on market(%)............. 21.31 14.04 16.16 36.22 (31.23)
Total return based on NAV(%)................ 18.55 13.75 15.40 39.32 (29.43)
Ratios/Supplemental Data:
Net assets, end of year(000)................ $617,167 $573,980 $529,469 $478,959 $361,943
Ratio of expenses to average net assets(%).. .53 .54 .55 .56 .50
Ratio of net investment income to average
net assets(%)............................. 1.23 1.02 .41 .42 .57
Portfolio turnover rate(%).................. 17.55 15.83 16.72 12.90 19.50
----------
* Based on the average number of shares outstanding during the year.
See accompanying notes to financial statements.
[ 9 ]
STATEMENT OF INVESTMENTS
December 31, 2006
PORTFOLIO SECURITIES 96.4%
STOCKS (COMMON UNLESS SPECIFIED OTHERWISE)
Prin. Amt.
or Shares Value
---------- -----
Banking and Finance 9.3%
875,000 The Bank of New York Company, Inc. ............. $ 34,448,750
300,000 Capital One Financial Corporation .............. 23,046,000
------------
57,494,750
------------
Business Services 10.9%
400,200 Ceridian Corporation (a) ....................... 11,197,596
1,550,000 Convergys Corporation (a) ...................... 36,859,000
400,000 Hewitt Associates, Inc. Class A (a) ............ 10,300,000
320,000 IMS Health Inc. ................................ 8,793,600
------------
67,150,196
------------
Chemicals 2.0%
100,000 The Dow Chemical Company ....................... 3,990,000
125,000 PolyOne Corporation (a) ........................ 937,500
150,000 Rohm and Haas Company .......................... 7,668,000
------------
12,595,500
------------
Communications 1.2%
1,005,000 Arbinet-thexchange Inc. (a) .................... 5,517,450
400,000 Cincinnati Bell Inc. (a) ....................... 1,828,000
------------
7,345,450
------------
Electronics 16.8%
942,400 Agilent Technologies, Inc. (a) ................. 32,842,640
430,000 Analog Devices, Inc. ........................... 14,134,100
120,000 Cirrus Logic, Inc. (a) ......................... 825,600
255,000 Cypress Semiconductor Corporation (a) .......... 4,301,850
980,000 Intel Corporation .............................. 19,845,000
350,000 Motorola, Inc. ................................. 7,196,000
1,800,000 Solectron Corporation (a) ...................... 5,796,000
2,500,000 Sonus Networks, Inc. (a) ....................... 16,475,000
115,382 Verigy Ltd. (a) ................................ 2,048,030
------------
103,464,220
------------
Energy 12.5%
100,000 Arch Coal, Inc. ................................ 3,003,000
200,000 Berry Petroleum Company Class A ................ 6,202,000
234,328 Chevron Corporation ............................ 17,230,138
370,000 GeoMet, Inc. (a) ............................... 3,848,000
520,200 McMoRan Exploration Co. (a) .................... 7,397,244
600,000 Murphy Oil Corporation ......................... 30,510,000
160,000 Nexen Inc. ..................................... 8,800,000
------------
76,990,382
------------
[ 10 ]
Prin. Amt.
or Shares Value
---------- -----
Health Care 1.1%
120,000 Abbott Laboratories ............................ $ 5,845,200
134,900 Vical Inc. (a) ................................. 867,407
------------
6,712,607
------------
Information Technology Services 6.6%
1,500,000 Neoware, Inc. (a)(b) ........................... 19,815,000
1,150,000 The TriZetto Group, Inc. (a) ................... 21,125,500
------------
40,940,500
------------
Insurance 21.8%
10,000 Erie Indemnity Co. Class A ..................... 579,800
70,000 The Plymouth Rock Company, Inc. ................
Class A (b)(c) ................................. 133,000,000
2,000 White Mountains Insurance Group ................ 1,158,860
------------
134,738,660
------------
Manufacturing 14.0%
910,000 Brady Corporation Class A ...................... 33,924,800
400,000 Dover Corporation .............................. 19,608,000
410,000 Roper Industries, Inc. ......................... 20,598,400
400,000 Tyco International Ltd. ........................ 12,160,000
------------
86,291,200
------------
Retail Trade 0.2%
28,751 Aerogroup International, Inc. (a)(c) ........... 1,293,795
------------
Total Portfolio Securities
(cost $243,092,633)(d) ........................ 595,017,260
SHORT-TERM INVESTMENTS 3.5%
Commercial Paper 0.7%
4,508,000 American Express Credit Corp. 5.0592%
due 1/3/07 ................................... 4,506,735
U.S. Treasury Bills 2.8%
17,100,000 U.S. Treasury Bill 4.9550% due 3/1/07 .......... 16,966,321
------------
Total Short-Term Investments
(cost $21,473,056)(d) ........................ 21,473,056
Total Investments
(cost $264,565,689) (99.9%) ................ 616,490,316
Cash, receivables and other assets
less liabilities (0.1%) .................... 676,710
------------
Net Assets (100%) ............................ $617,167,026
============
----------
(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.
[ 11 ]
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2006
ASSETS:
Investments:
General portfolio securities at market value
(cost $222,203,178) (Note 1).......................... $442,202,260
Securities of affiliated companies (cost $20,889,455)
(Notes 1, 5 and 6) ................................... 152,815,000
Short-term investments (cost $21,473,056)............... 21,473,056 $616,490,316
------------
Cash, receivables and other assets:
Cash.................................................... 80,343
Dividends and interest receivable....................... 101,948
Receivable for securities sold.......................... 364,849
Office equipment and leasehold improvements, net........ 385,662
Other assets............................................ 80,066 1,012,868
------------ ------------
Total Assets........................................ 617,503,184
LIABILITIES:
Accrued expenses and reserves............................... 336,158
------------
Total Liabilities................................... 336,158
------------
NET ASSETS...................................................... $617,167,026
============
NET ASSETS are represented by:
Common Stock $1 par value: authorized
30,000,000 shares; issued 20,820,859 (Note 2)............. $ 20,820,859
Surplus:
Paid-in................................................... $250,426,845
Undistributed net realized gain on sale
of investments.......................................... 696,848
Undistributed net investment income....................... 226,873 251,350,566
------------
Net unrealized appreciation of investments.................. 351,924,627
Treasury stock, at cost (282,664 shares of Common Stock)
(Note 2).................................................. (6,929,026)
------------
NET ASSETS...................................................... $617,167,026
============
NET ASSET VALUE PER COMMON SHARE
(20,538,195 shares outstanding)............................. $30.05
======
See accompanying notes to financial statements.
[ 12 ]
STATEMENT OF OPERATIONS
For the year ended December 31, 2006
INVESTMENT INCOME
Income:
Dividends (net of foreign withholding taxes of $4,204)..... $ 8,072,205
Interest................................................... 2,340,971 $10,413,176
-----------
Expenses:
Administration and operations.............................. 889,558
Investment research........................................ 843,814
Occupancy costs............................................ 448,911
Franchise and miscellaneous taxes.......................... 156,844
Directors' fees............................................ 134,250
Employees' retirement plans................................ 127,900
Insurance.................................................. 97,651
Stationery, supplies, printing and postage................. 93,144
Listing, software and sundry fees.......................... 92,356
Legal, auditing and tax fees............................... 81,742
Travel and telephone....................................... 44,471
Transfer agent and registrar fees and expenses............. 36,403
Custodian fees............................................. 32,235
Publications and miscellaneous............................. 64,205 3,143,484
----------- -----------
Net investment income.......................................... 7,269,692
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain from investment transactions................. 36,468,013
Net increase in unrealized appreciation of investments......... 49,542,956
-----------
Net gain on investments.................................... 86,010,969
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................... $93,280,661
===========
See accompanying notes to financial statements.
[ 13 ]
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 2006 and 2005
2006 2005
---- ----
FROM OPERATIONS:
Net investment income ...................... $ 7,269,692 $ 5,684,776
Net realized gain on investments ........... 36,468,013 31,669,417
Net increase in unrealized appreciation
of investments ........................... 49,542,956 30,671,492
------------- -------------
Increase in net assets resulting from
operations ............................. 93,280,661 68,025,685
------------- -------------
DISTRIBUTIONS TO STOCKHOLDERS FROM:
Net investment income ...................... (7,185,071) (5,649,605)
Net realized gain from investment
transactions ............................. (36,564,651) (34,198,713)
------------- -------------
Decrease in net assets from
distributions .......................... (43,749,722) (39,848,318)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS: (Note 2)
Distribution to stockholders reinvested in
Common Stock ............................. 21,444,764 20,773,125
Cost of shares of Common Stock repurchased . (27,788,582) (4,439,262)
------------- -------------
Increase (Decrease) in net assets from
capital share transactions ............. (6,343,818) 16,333,863
------------- -------------
Total increase in net assets ......... 43,187,121 44,511,230
NET ASSETS:
Beginning of year .......................... 573,979,905 529,468,675
------------- -------------
End of year (including undistributed
net investment income of $226,873 and
$136,692, respectively) .................. $ 617,167,026 $ 573,979,905
============= =============
See accompanying notes to financial statements.
[ 14 ]
STATEMENT OF CASH FLOWS
For the year ended December 31, 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets from
operations............................ $ 93,280,661
Adjustments to net increase in net
assets from operations:
Purchase of securities................ ($96,203,336)
Proceeds from securities sold......... 112,397,652
Net sales of short-term investments... 26,778,948
Net realized gain from investments.... (36,468,013)
Increase in unrealized appreciation... (49,542,956)
Depreciation and amortization......... 84,077
Changes in operating assets
and liabilities:
Increase in dividends and
interest receivable............... (6,573)
Increase in receivable for
securities sold................... (364,849)
Increase in office equipment and
leasehold improvements............ (6,116)
Decrease in other assets............ 4,809
Increase in accrued expenses
and reserves...................... 22,877
Decrease in payable for
securities purchased.............. (108,000)
------------
Total adjustments..................... (43,411,480)
------------
Net cash provided by operating activities... 49,869,181
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends and distributions paid........ (22,304,958)
Treasury shares repurchased............. (27,788,582)
------------
Cash flows used in financing activities..... (50,093,540)
------------
Net decrease in cash........................ (224,359)
Cash at beginning of year................... 304,702
------------
Cash at end of year......................... $ 80,343
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash financing activities not
included herein consist of:
Reinvestment of dividends and
distributions to stockholders................................ $ 21,444,764
See accompanying notes to financial statements.
[ 15 ]
NOTES TO FINANCIAL STATEMENTS
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--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 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. Interest income is accrued daily.
New Accounting Pronouncements--In June 2006, the Financial Accounting
Standards Board issued Interpretation 48, "Accounting for Uncertainty in
Income Taxes": an interpretation of FASB Statement No. 109 ("FIN 48"). FIN
48 sets forth a threshold for financial statement recognition, measurement
and disclosure of a tax position taken or expected to be taken on a tax
return. FIN 48 is effective for fiscal years beginning after December 15,
2006. Management is currently evaluating the impact, if any, of the
adoption of FIN 48, but the effect on the financial statements is expected
to be immaterial.
In September 2006, the FASB issued Statement 157 ("SFAS 157"), "Fair Value
Measurements". This Statement defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles and
expands disclosures about fair value measurements. SFAS 157 will be
effective at the beginning of the Corporation's 2008 fiscal year. The
Corporation is currently assessing the effect of this pronouncement on our
financial statements.
2. Common Stock and Dividend Distributions--The Corporation repurchased
1,108,649 shares of its Common Stock in 2006 at an average price of $25.07 per
share representing an average discount from net asset value of 13.52%. It may
from time to time purchase Common Stock in such amounts and at such prices as
the Board of Directors may deem advisable in the best interests of the
stockholders. Purchases will only be made at less than net asset value per
share, thereby increasing the net asset value of shares held by the remaining
stockholders. Shares so acquired may be held as treasury stock and available for
optional stock distributions, or may be retired.
[ 16 ]
NOTES TO FINANCIAL STATEMENTS -- Continued
The Corporation made two distributions to holders of Common Stock in 2006,
a cash dividend of $.20 per share paid on June 23 and an optional distribution
of $2.02 per share in cash, or one share of Common Stock for each 12 shares
held, paid on December 27. In the optional distribution, 884,685 shares of
Common Stock held as treasury shares by the Corporation were distributed.
The tax character of dividends and distributions paid during the year was
ordinary income of $11,563,375 and long-term capital gain of $32,186,347. As of
December 31, 2006, for tax purposes, undistributed ordinary income was $238,385
and undistributed long-term realized capital gain was $696,848.
3. Investment Transactions--The aggregate cost of securities purchased and
the aggregate proceeds of securities sold during the year ended December 31,
2006, excluding short-term investments, were $96,203,336 and $112,397,652,
respectively.
As of December 31, 2006, based on cost for Federal income tax purposes,
the aggregate gross unrealized appreciation and depreciation for all securities
were $353,657,916 and $1,733,289, respectively.
4. Operating Expenses--The aggregate remuneration paid during the year
ended December 31, 2006 to officers and directors amounted to $1,667,327, of
which $134,250 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 of employment. The amount
contributed for the year ended December 31, 2006 was $120,900.
5. Affiliates--The Plymouth Rock Company, Inc. and Neoware Inc., Inc. are
affiliates as defined in the Investment Company Act of 1940. The Corporation
received dividends of $4,185,300 from affiliates during the year ended December
31, 2006. Unrealized appreciation related to affiliates increased by $21,629,894
for the year 2006 to $131,925,545.
6. Restricted Securities--The Corporation from time to time invests in
securities the resale of which is restricted. On December 31, 2006 such
investments had an aggregate value of $134,293,795, which was equal to 21.8% of
the Corporation's net assets. Investments in restricted securities at December
31, 2006, including acquisition dates and cost, were:
Company Shares Security Date Acquired Cost
------------------------------- ------ ------------- ------------- ----
Aerogroup International, Inc. 28,751 Common Stock 6/14/05 $ 17,200
The Plymouth Rock Company, Inc. 60,000 Class A Stock 12/15/82 1,500,000
The Plymouth Rock Company, Inc. 10,000 Class A Stock 6/9/84 699,986
The Corporation does not have the right to demand registration of the
restricted securities. Unrealized appreciation related to restricted securities
increased by $25,149,264 for the year ended December, 31, 2006 to $132,076,963.
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 $2.7 million.
The lease agreement contains escalation clauses relating to operating costs and
real property taxes. Future minimum rental commitments under the lease are
$314,241 per year through 2008, $329,172 for 2009 and $341,806 annually
thereafter.
[ 17 ]
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
CENTRAL SECURITIES CORPORATION
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Central Securities Corporation (the
"Corporation") as of December 31, 2006, and the related statements of operations
and cash flows for the year then ended, the statements of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and financial highlights are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2006 by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Central Securities Corporation as of December 31, 2006, and the results of its
operations and its cash flows for the year then ended, the changes in its net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period then ended in
conformity with U.S. generally accepted accounting principles.
KPMG LLP
New York, NY
January 24, 2007
--------------------------------------------------------------------------------
Quarterly Portfolio Information
The Corporation files its complete schedule of portfolio holdings with the SEC
for the first quarter 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.
[ 18 ]
BOARD OF DIRECTORS AND OFFICERS
Principal Occupations (last five years)
Independent Directors Age and Position with the Corporation (if any)
--------------------- --- ------------------------------------------
SIMMS C. BROWNING 66 Retired since 2003; Vice President,
Director since 2005 Neuberger Berman, LLC
(asset management) prior thereto
DONALD G. CALDER 69 President, G.L. Ohrstrom & Co. Inc.
Director since 1982 (private investment firm); Director of
Brown-Forman Corporation, Carlisle
Companies Incorporated and Roper
Industries, Inc. (manufacturing companies)
JAY R. INGLIS 72 Vice President and General Counsel,
Director since 1973 International Claims Management, Inc.
since 2006; Executive Vice President,
National Marine Underwriters (insurance
managementcompany) prior thereto
DUDLEY D. JOHNSON 67 President, Young & Franklin Inc. (private
Director since 1984 manufacturing company)
C. CARTER WALKER, JR. 72 Chairman, Central Securities Corporation;
Director since 1974 Private investor
Interested Director
-------------------
WILMOT H. KIDD 65 Investment and research--President,
Director since 1972 Central Securities Corporation
----------
CHARLES N. EDGERTON 62 Vice President and Treasurer,
Central Securities Corporation
MARLENE A. KRUMHOLZ 43 Secretary, Central Securities Corporation
The address of each Director and Officer is c/o Central Securities Corporation,
630 Fifth Avenue, New York, New York 10111.
----------
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.
[ 19 ]
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 Company, 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
[ 20 ]
Item 2. Code of Ethics. The Registrant has adopted a code of ethics that applies
to its principal executive officer and principal financial officer. This code of
ethics is filed as an attachment on this form.
Item 3. Audit Committee Financial Experts. The Board of Directors of the
Corporation has determined that none of the members of its Audit Committee (the
"Committee") meet the definition of "Audit Committee Financial Expert" as the
term has been defined by the Securities and Exchange Commission ("SEC"). The
Board of Directors considered the possibility of adding a member that would
qualify as an Audit Committee Financial Expert, but has determined that the
Committee has sufficient expertise to perform its duties. In addition, the
Committee's charter authorizes the Committee to engage a financial expert should
it determine that such assistance is required.
Item 4. Principal Accountant Fees and Services.
2006 2005
---- ----
Audit fees ........................... $37,000(1) $35,500(1)
Audit-related fees ................... 0 0
Tax fees ............................. 15,400(2) 14,750(2)
All other fees ....................... 0 0
------- -------
Total fees ........................... $52,400 $50,250
======= =======
(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 2006
(described in the footnotes to the table above) and related fees were approved
in advance by the Audit Committee.
Item 5. Audit Committee of Listed Registrants. The registrant has a
separately-designated standing audit committee. Its members are: Simms C.
Browning, Donald G. Calder, Jay R. Inglis, Dudley D. Johnson and C. Carter
Walker, Jr.
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.
CENTRAL SECURITIES CORPORATION
PROXY VOTING GUIDELINES
Central Securities Corporation is involved in many matters of corporate
governance through the proxy voting process. We exercise our voting
responsibilities with the primary goal of maximizing the long-term value of our
investments. Our consideration of proxy issues is focused on the investment
implications of each proposal.
Our management evaluates and votes each proxy ballot that we receive. We do not
use a proxy voting service. Our Board of Directors has approved guidelines in
evaluating how to vote a particular proxy ballot. We recognize that a company's
management is entrusted with the day-to-day operations of the company, as well
as longer term strategic planning, subject to the oversight of the company's
board of directors. Our guidelines are based on the belief that a company's
shareholders have a responsibility to evaluate company performance and to
exercise the rights and duties pertaining to ownership.
When determining whether to invest in a particular company, one of the key
factors we consider is the ability and integrity of its management. As a result,
we believe that recommendations of management on any issue, particularly routine
issues, should be given substantial weight in determining how proxies should be
voted. Thus, on most issues, our votes are cast in accordance with the company's
recommendations. When we believe management's recommendation is not in the best
interests of our stockholders, we will vote against management's recommendation.
Due to the nature of our business and our size, it is unlikely that conflicts of
interest will arise in our voting of proxies of public companies. We do not
engage in investment banking nor do we have private advisory clients or any
other businesses. In the unlikely event that we determine that a conflict does
arise on a proxy voting issue, we will defer that proxy vote to our independent
directors.
We have listed the following, specific examples of voting decisions for the
types of proposals that are frequently presented. We generally vote according to
these guidelines.
We may, on occasion, vote otherwise when we believe it to be in the best
interest of our stockholders:
Election of Directors - We believe that good governance starts with an
independent board, unfettered by significant ties to management, in which all
members are elected annually. In addition, key board committees should be
entirely independent.
o We support the election of directors that result in a board made up
of a majority of independent directors who do not appear to have
been remiss in the performance of their oversight responsibilities.
o We will withhold votes for non-independent directors who serve on
the audit, compensation or nominating committees of the board.
o We consider withholding votes for directors who missed more than
one-fourth of the scheduled board meetings without good reason in
the previous year.
o We generally oppose the establishment of classified boards of
directors and will support proposals that directors stand for
election annually.
o We generally oppose limits to the tenure of directors or
requirements that candidates for directorships own large amounts of
stock before being eligible for election.
Compensation - We believe that appropriately designed equity-based compensation
plans can be an effective way to align the interests of long-term shareholders
and the interests of management, employees, and directors. We are opposed to
plans that substantially dilute our ownership interest in the company, provide
participants with excessive awards, or have inherently objectionable structural
features without offsetting advantages to the company's stockholders.
We evaluate proposals related to compensation on a case-by case basis.
o We generally support stock option plans that are incentive based and
not excessive.
o We generally oppose the ability to re-price options without
compensating factors when the underlying stock has fallen in value.
o We support measures intended to increase the long-term stock
ownership by executives including requiring stock acquired through
option exercise to be held for a substantial period of time.
o We generally support stock purchase plans to increase company stock
ownership by employees, provided that shares purchased under the
plan are acquired for not less than 85% of their market value.
o We generally oppose change-in-control provisions in non-salary
compensation plans, employment contracts, and severance agreements
which benefit management and would be costly to shareholders if
triggered.
Corporate Structure and Shareholder Rights - We generally oppose anti-takeover
measures and other proposals designed to limit the ability of shareholders to
act on possible transactions. We support proposals when management can
demonstrate that there are sound financial or business reasons.
o We generally support proposals to remove super-majority voting
requirements and oppose amendments to bylaws which would require a
super-majority of shareholder votes to pass or repeal certain
provisions.
o We will evaluate proposals regarding shareholders rights plans
("poison pills") on a case-by-case basis considering issues such as
the term of the arrangement and the level of review by independent
directors.
o We will review proposals for changes in corporate structure such as
changes in the state of incorporation or mergers individually. We
generally oppose proposals where management does not offer an
appropriate rationale.
o We generally support share repurchase programs.
o We generally support the general updating of or corrective
amendments to corporate charters and by-laws.
o We generally oppose the elimination of the rights of shareholders to
call special meetings.
Approval of Independent Auditors - We believe that the relationship between the
company and its auditors should be limited primarily to the audit engagement and
closely related activities that do not, in the aggregate, raise the appearance
of impaired independence.
o We generally support management's proposals regarding the approval
of independent auditors.
o We evaluate on a case-by-case basis instances in which the audit
firm appears to have a substantial non-audit relationship with the
company or companies affiliated with it.
Social and Corporate Responsibility Issues - We believe that ordinary business
matters are primarily the responsibility of management and should be approved
solely by the corporation's board of directors. Proposals in this category,
initiated primarily by shareholders, typically request that the company disclose
or amend certain business practices. We generally vote with management on these
types of proposals, although we may make exceptions in certain instances where
we believe a proposal has substantial economic implications.
o We generally oppose shareholder proposals which apply restrictions
related to social, political, or special interest issues which
affect the ability of the company to do business or be competitive
and which have significant financial impact.
o We generally oppose proposals which require that the company provide
costly, duplicative, or redundant reports, or reports of a
non-business nature.
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 December 31, 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
Number of (b) Average Shares (or Units) Value) of Shares (or
Shares Price Paid Purchased as Part of Units) that May Yet Be
(or Units) per Share Publicly Announced Purchased Under the
Period Purchased (or Unit) Plans or Programs Plans or Programs
----------------------------------------------------------------------------------------------------------------
Month #1 (July 1 16,500 $25.10 NA NA
through July 31)
----------------------------------------------------------------------------------------------------------------
Month #2 (August 1 7,900 $25.18 NA NA
through August 31)
----------------------------------------------------------------------------------------------------------------
Month #3 (September 1 520,353 $25.42 NA NA
through September 30)
----------------------------------------------------------------------------------------------------------------
Month #4 (October 1 17,096 $26.25 NA NA
through October 31)
----------------------------------------------------------------------------------------------------------------
Month #5 (November 1 0 NA NA NA
through November 30)
----------------------------------------------------------------------------------------------------------------
Month #6 (December 1 0 NA NA NA
through December 31)
----------------------------------------------------------------------------------------------------------------
Total 561,849 $25.43 NA NA
----------------------------------------------------------------------------------------------------------------
All shares purchased except the following were made in open market transactions
as authorized by the Board of Directors. In September 2006, 517,353 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 6, 2007.
Item 11. Controls and Procedures.
(a) The Principal Executive Officer and Principal Financial Officer of Central
Securities Corporation (the "Corporation") have concluded that the Corporation's
Disclosure Controls and Procedures (as defined in Rule 30a-2(c) under the
Investment Company Act
of 1940) are effective based on their evaluation of the Disclosure Controls and
Procedures as of a date within 90 days of the filing date of this report.
(b) There have been no changes in the Corporation's internal control over
financial reporting (as defined in Rule 30a-3(d)) under the Investment Company
Act of 1940 that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the Corporation's internal control over financial reporting.
Item 12. Exhibits. (a) Any code of ethics, or amendment thereto, that is the
subject of the disclosure required by Item 2, to the extent that the registrant
intends to satisfy the Item 2 requirements through filing of an exhibit.
Attached hereto.
(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
February 6, 2007
----------------
Date
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capabilities and on the
dates indicated.
By: /s/ Wilmot H. Kidd
------------------
Wilmot H. Kidd
President
February 6, 2007
----------------
Date
By: /s/ Charles N. Edgerton
-----------------------
Charles N. Edgerton
Treasurer
February 6, 2007
----------------
Date