CENTRAL SECURITIES CORPORATION

EIGHTY-FOURTH ANNUAL REPORT

2012

CENTRAL SECURITIES CORPORATION

Statement of Investments

December 31, 2012

(a) Non-dividend paying.

(b) Non-dividend paying, however paid one or more special dividends in 2012.

(c) Affiliated company as defined in the Investment Company Act of 1940.

(d) Valued based on Level 3 inputs – see Note 2.

(e) Dividends paid in additional shares – see Note 5.

(f) Aggregate cost for Federal tax purposes is substantially the same.

See accompanying notes to financial statements.

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2012

See accompanying notes to financial statements.

STATEMENT OF OPERATIONS

For the year ended December 31, 2012

See accompanying notes to financial statements.

STATEMENTS OF CHANGES IN NET ASSETS

For the years ended December 31, 2012 and 2011

See accompanying notes to financial statements.

STATEMENT OF CASH FLOWS

For the year ended December 31, 2012

See accompanying notes to financial statements.

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—Marketable common and preferred stocks are valued at the last or closing sale price or, if unavailable, at the closing bid price. Written options are valued at the last quoted asked price. Securities for which no ready market exists are valued at estimated fair value pursuant to procedures adopted 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 and net capital gains to its stockholders. Management has analyzed positions taken on the Corporation’s tax returns and has determined that no provision for income taxes is required in the accompanying financial statements. The Corporation’s Federal, state and local tax returns for the current and previous three fiscal years remain subject to examination by the relevant taxing authorities.

Use of Estimates—The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results may differ from those estimates.

Other—Security transactions are accounted for as of the trade date, and cost of securities sold is determined by specific identification. Dividend income and distributions to stockholders are recorded on the ex-dividend date.

     2. Fair Value Measurements—The Corporation’s investments are categorized below in three broad hierarchical levels based on market price observability as follows:

     The designated Level for a security is not necessarily an indication of the risk associated with investing in that security.

     The Corporation’s investments as of December 31, 2012 are classified as follows:

     The Corporation’s investment in GeoMet, Inc. Series A Preferred Stock will be transferred from Level 1 to Level 2 if there are no actual market trades in the security on a valuation date. The security will be transferred back to Level 1 if there are market trades on a subsequent valuation date. On December 31, 2012, this investment was considered Level 1, and its value was based on the closing sale price. On December 31, 2011, this investment was considered Level 2, and its value was based on the closing bid price. There were no other transfers of investments between Levels 1, 2 and 3 during the year ended December 31, 2012.

NOTES TO FINANCIAL STATEMENTS — Continued

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

     Unrealized appreciation of Level 3 investments held as of December 31, 2012 decreased during the year by $3,428,600, which is included in the above table. In valuing Level 3 investments, the Corporation considers the results of various valuation methods. Consideration is also given to corporate governance, marketability, professional appraisals of portfolio companies, company and industry results and outlooks, and general market conditions. Management then recommends a value for each investment in light of all the information available. All of this information is subsequently presented to and discussed with the Corporation’s Board of Directors, which selects the value. The determination of fair value involves subjective judgments. As a result, using fair value to price a security may result in a price materially different from the price used by other investors or the price that may be realized upon the actual sale of the security.

     In valuing the Plymouth Rock Level 3 investment as of December 31, 2012, management used a number of significant unobservable inputs to develop a range of possible values for the investment. It used a comparable company approach that applied average market multiples from selected publicly traded companies to financial information from each of Plymouth Rock’s major business segments. The market multiples used were price-to-book value, price-to-earnings and price-to-revenue. Management also used a discounted cash flow model based on a forecasted earnings growth rate ranging from 2.5%-4% and a weighted average cost of capital of 10%. Transactions in Plymouth Rock’s shares were also considered. The values obtained from weighting the three methods described above (with greater weight given to the comparable company approach) were then discounted by 20% and 40% for the lack of marketability of the shares, which represents the range of discount rates management believes market participants would apply. The resulting range of values, together with the underlying support, other information about Plymouth Rock’s financial condition and results of operations and its industry outlook, were considered by management, which recommended a value for the investment. All of this information was subsequently considered by the Corporation’s directors, who selected the value.

     Significant increases (decreases) in the value of the price-to-book value multiple, price-to-earnings multiple, price-to-revenue multiple and earnings growth rate in isolation would result in a higher (lower) range of fair value measurements. Significant increases (decreases) in the value of the discount for lack of marketability or weighted average cost of capital in isolation would result in a lower (higher) range of fair value measurements.

     3. Common Stock and Dividend Distributions—The Corporation purchased 122,661 shares of its Common Stock in 2012 at an average price of $20.55 per share representing an average discount from net asset value of 18.1%. It may from time to time purchase Common Stock in such amounts and at such prices as the Board of Directors may deem advisable in the best interests of the stockholders. Purchases will only be made at less than net asset value per share, thereby increasing the net asset value of shares held by the remaining stockholders. Shares so acquired may be held as treasury stock available for stock distributions, or may be retired.

     The Corporation declared three distributions to holders of Common Stock in 2012, $.20 per share paid on June 26 in cash, $.54 per share paid on December 21 in cash or in additional shares of Common Stock at the stockholder’s option and $.20 per share paid on January 16, 2013 in cash. In connection with the December 21 distribution, 120,770 treasury shares were distributed and 205,382 common shares were issued, all at a price of $19.20 per share.

     The tax character of dividends and distributions paid during the year was ordinary income, $11,747,485 and long-term capital gain, $9,851,359; for 2011, they were $9,795,138 and $12,984,253, respectively. As of December 31, 2012, for tax purposes, undistributed ordinary income was $999,466 and undistributed long-term realized capital gain was $2,028,854. Dividends and distributions are determined in accordance with income tax

NOTES TO FINANCIAL STATEMENTS — Continued

regulations which may differ from generally accepted accounting principles. Financial statements are adjusted for permanent book-tax differences; such adjustments were not material for the year ended December 31, 2012.

     4. Investment Transactions—The aggregate cost of securities purchased and the aggregate proceeds of securities sold during the year ended December 31, 2012, excluding option transactions and other short-term investments, were $19,880,783 and $47,459,131, respectively.

     As of December 31, 2012, based on cost for Federal income tax purposes, the aggregate gross unrealized appreciation and depreciation for all securities were $302,488,839 and $54,804,723 respectively.

     5. Affiliated Companies—The Plymouth Rock Company, Inc. and GeoMet, Inc. are affiliated companies as defined in the Investment Company Act of 1940 due to the Corporation’s ownership of 5% or more of these companies’ outstanding voting securities. During the year ended December 31, 2012, the Corporation received dividends of $8,080,703 from Plymouth Rock and sold 120 shares of Plymouth Rock at a gain of $370,800. The Corporation also received dividends of 31,144 additional shares of GeoMet Series A Preferred Stock. Net unrealized appreciation related to affiliated companies decreased by $5,716,629 for the year ended December 31, 2012 to $148,409,267. The President of the Corporation is a director of Plymouth Rock.

     6. Restricted Securities—The Corporation from time to time invests in securities the resale of which is restricted. The Corporation does not have the right to demand registration of the restricted securities. On December 31, 2012, such investments had an aggregate value of $164,410,200, which was equal to 28.9% of the Corporation’s net assets. Investments in restricted securities at December 31, 2012, including acquisition dates and cost, were:

     7. Options Written—From time to time, the Corporation writes option contracts to generate additional return. When the Corporation writes an option, a liability is recorded in an amount equal to the premium received and is subsequently marked to market in the Statement of Assets and Liabilities, with any related change recorded as an unrealized gain or loss in the Statement of Operations. Upon the exercise of written call option contracts, premiums received are added to the proceeds from the sale of the underlying securities in determining whether there is a realized gain or loss. Upon the exercise of written put options, premiums received are subtracted from the cost of the purchase of the underlying securities. On the expiration date, premiums received from unexercised options are treated as realized gains in the Statement of Operations.

     When writing a covered call option, the Corporation forgoes, during the option’s life, the opportunity to profit from increases in the market value of the security underlying the call option above the sum of the option premium received and the exercise price of the call, but has retained the risk of loss should the price of the underlying security decline below the exercise price minus the option premium received.

     When writing a put option, the Corporation has the obligation during the option’s life to purchase the securities underlying the option at an agreed-upon exercise price. The Corporation’s obligation is secured by segregating with its custodian liquid investments with a value at least equal to the amount the Corporation would be required to pay if the option were exercised. The Corporation will lose money if the securities purchased decrease in value below the exercise price by more than the premium received by the Corporation for writing the option.

     The Corporation’s activity in written options during the year ended December 31, 2012 is summarized as follows:

NOTES TO FINANCIAL STATEMENTS — Continued

     8. Bank Line of Credit—The Corporation has entered into a $25 million uncommitted, secured revolving line of credit with UMB Bank, n.a. (“UMB”), the Corporation’s custodian. All borrowings are payable on demand of UMB. Interest on any borrowings is payable monthly at a rate based on the federal funds rate, subject to a minimum annual rate of 2.50% No borrowings were made during the year ended December 31, 2012.

     9. Compensation and Benefit Plans—The aggregate remuneration paid during the year ended December 31, 2012 to all officers was $2,431,750, including stock awards (described below) valued at $136,570. Officers and other employees participate in a 401(k) and profit sharing plan. The Corporation has agreed to contribute at least 3% of each participant’s qualifying compensation to the plan, which is immediately vested. Contributions in excess of 3% may be made at the discretion of the Board of Directors and vest after three years of service. During the year ended December 31, 2012, the Corporation contributed $182,221 to the plan.

     The Corporation has adopted and its stockholders have approved an incentive compensation plan (the “2012 Plan”) that is administered by the Corporation’s Compensation and Nominating Committee (the “Committee”). The 2012 Plan permits the grant of awards of unrestricted stock, restricted stock, restricted stock units and cash to full-time employees and non-employee directors of the Corporation. The 2012 Plan provides for the issuance of up to 1,000,000 shares of the Corporation’s Common Stock over the ten-year life of the 2012 Plan, of which 990,320 remain available for future grants at December 31, 2012. The 2012 Plan limits the amount of shares that can be awarded to any one person in total or within a certain time period. Any award made under the 2012 Plan may be subject to performance conditions. A summary of awards of unrestricted shares of Common Stock granted and issued in 2012 is presented below. The fair value of unrestricted stock is the average of the high and low prices of the Corporation’s Common Stock on the grant date.

     Pursuant to the terms of the 2012 plan, each non-employee director is awarded 500 shares of vested unrestricted Common Stock at his initial election to the Board of Directors or at his continuation of service as a director after the Corporation’s annual meeting. The aggregate value of these awards made in 2012 was $64,827. This amount plus cash payments of $165,250 made to all non-employee directors are included in Directors’ Fees expense in the accompanying Statement of Operations.

     On December 12, 2012, the Corporation granted a performance-based award to an officer, effective January 1, 2013. Achievement of this award is based on the Corporation satisfying at least one of three performance goals determined by the Committee over the period from January 1, 2013 through June 30, 2014 (the “Performance Period”). The maximum amount that can be paid under this grant is $1,000,000, although the Committee has full discretion to reduce the award down to zero. Any amount awarded at the end of the Performance Period may be paid in cash or in Common Stock of the Corporation at the determination of the Committee. The Corporation will accrue compensation expense relating to this award ratably during the Performance Period when it believes any of the performance goals are probable of achievement.

     10. Operating Lease Commitment—The Corporation has entered into an operating lease for office space, which expires in 2014. The lease agreement contains escalation clauses relating to operating costs and real property taxes. Future minimum rental commitments under the lease are $341,806 in 2013 and $170,903 in 2014.

FINANCIAL HIGHLIGHTS

     The following table shows per share operating performance data, total returns, ratios and supplemental data for each year in the five-year period ended December 31, 2012. This information has been derived from information contained in the financial statements and market price data for the Corporation’s shares.

     The Corporation’s total returns reflect changes in market price or net asset value, as applicable, and assume reinvestment of all distributions. Distributions that are payable only in cash are assumed to be reinvested at the market price or net asset value, as applicable, on the payable date of the distribution. Cash distributions payable in subsequent years are assumed to be reinvested at the year end market price or net asset value as applicable. Distributions that may be taken in shares are assumed to be reinvested at the price designated by the Corporation.

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

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, 2012, 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 and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2012 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, 2012, 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
February 1, 2013