CET Central Securities Corp

CENTRAL SECURITIES CORPORATION

SEMI-ANNUAL REPORT

JUNE 30, 2024

CENTRAL SECURITIES CORPORATION

(Organized on October 1, 1929 as an investment company, registered as such with the
Securities and Exchange Commission under the provisions of the Investment Company Act of 1940)

25-YEAR HISTORICAL DATA

*Computed on the basis of the Corporation’s status as a “regulated investment company” for Federal income tax purposes. Dividends from ordinary income include short-term capital gains.

**Includes non-taxable return of capital of $.55.

***Unaudited.

The Common Stock is listed on the NYSE American under the symbol CET. On June 28, 2024 (the last day of the trading period), the closing market price was $44.02 per share.

To the Stockholders of

Central Securities Corporation:

Financial statements for the six months ended June 30, 2024 reviewed by our independent registered public accounting firm and other pertinent information are submitted herewith.

Comparative net assets are as follows:

Comparative operating results are as follows:

A distribution of $.20 per share was paid on June 26, 2024 to stockholders of record as of June 14, 2024. Stockholders will be sent a notice concerning the taxability of all 2024 distributions in early 2025.

During the first six months of 2024, the Corporation (“Central”) did not purchase any shares of its Common Stock. The Corporation may from time to time purchase its Common Stock in such amounts and at such prices as the Board of Directors deems advisable in the best interests of stockholders. Purchases may be made in the open market or in private transactions directly with stockholders.

Lawrence P. Vogel, Vice President and Treasurer of the Corporation, retired at the end of May 2024 after fourteen years of service. We will miss his wise judgment and counsel, and we wish him well in his retirement. Joseph T. Malone joined Central in April 2024 and was elected Vice President and Treasurer upon Larry’s retirement. Joe has extensive experience in the investment company industry.

Stockholder inquiries are welcome.

630 Fifth Avenue
New York, NY 10111
July 26, 2024

TEN LARGEST INVESTMENTS

(excluding short-term investments)

June 30, 2024

(Unaudited)

PRINCIPAL PORTFOLIO CHANGES

April 1 to June 30, 2024

(Common Stock unless specified otherwise)
(Unaudited)

DIVERSIFICATION OF INVESTMENTS

June 30, 2024

(Unaudited)

STATEMENT OF INVESTMENTS

June 30, 2024

(Unaudited)

(a)Non-dividend paying.

(b)Affiliate as defined in the Investment Company Act of 1940 and restricted. See Note 5 and Note 6.

(c)Value determined based on Level 3 significant unobserable inputs. See Note 2.

(d)Value determined based on Level 2 inputs. See Note 2.

See accompanying notes to statement of investments.

STATEMENT OF ASSETS AND LIABILITIES

June 30, 2024
(Unaudited)

STATEMENT OF OPERATIONS

For the six months ended June 30, 2024
(Unaudited)

STATEMENTS OF CHANGES IN NET ASSETS

For the six months ended June 30, 2024
and the year ended December 31, 2023

STATEMENT OF CASH FLOWS

For the six months ended June 30, 2024
(Unaudited)

NOTES TO FINANCIAL STATEMENTS — (Unaudited)

1. Significant Accounting Policies—Central Securities Corporation (the “Corporation”) is registered under the Investment Company Act of 1940, as amended, as a non-diversified, closed-end management investment company. The following is a summary of the significant accounting policies consistently followed by the Corporation in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles applicable to U.S. investment companies.

Security Valuation—Marketable common stocks are valued at the last or closing sale price or, if unavailable, at the closing bid price at the valuation date. Investments in money market funds are valued at net asset value per share. Other short-term investments are valued at amortized cost, which approximates fair value. Securities for which no ready market exists are valued at estimated fair value pursuant to procedures adopted by the Board of Directors. The determination of fair value involves subjective judgments. As a result, using fair value to price a security may result in a price materially different from the price used by other investors or the price that may be realized upon the actual sale of the security.

Federal Income Taxes—It is the Corporation’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and net capital gains to its stockholders. Management has analyzed positions taken on the Corporation’s tax returns and has determined that no provision for income taxes is required in the accompanying financial statements.

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

Leases—The Corporation recognizes operating leases on its statement of assets and liabilities at the lease commencement date as (1) a liability representing its obligation to make lease payments over the lease term and (2) a corresponding right-of-use (“ROU”) asset for its right to use the underlying asset over the lease term. The lease liability is measured at the inception of the lease at the present value of the unpaid fixed and certain variable lease payments using the rate of interest the Corporation would have paid on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Lease expense for fixed lease payments is recognized on a straight-line basis over the lease term and is included in Occupancy and office operating expenses in the Statement of Operations. Variable payments for utilities and for increases in building operating expenses and real estate taxes are expensed as incurred and also are included in Occupancy and office operating expenses. See Note 9.

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.

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

•Level 1—Quoted prices in active markets for identical investments;

•Level 2—Other significant observable inputs obtained from independent sources, for example, quoted prices in active markets for similar investments;

•Level 3—Significant unobservable inputs including the Corporation’s own assumptions based upon the best information available. The Corporation’s only Level 3 investment is The Plymouth Rock Company Incorporated Class A Common Stock (“Plymouth Rock”).

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

NOTES TO FINANCIAL STATEMENTS — continued (Unaudited)

The Corporation’s investments as of June 30, 2024 are classified as follows:

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

Unrealized appreciation of Level 3 investments still held as of June 30, 2024 increased during the six months ended June 30, 2024 by $56,848,000, which is included in the above table.

Management assists the Board of Directors in the determination of the fair value of Plymouth Rock. In valuing the Plymouth Rock Level 3 investment as of June 30, 2024, management considered Plymouth Rock’s financial condition and results of operations, the insurance industry outlook, and any transactions in Plymouth Rock’s shares. Management used significant unobservable inputs to develop a range of values for the investment. It used a comparable company approach that utilized the following valuation multiples from selected publicly traded companies: price-to-book value (range: 0.9–2.7; average: 1.7); price-to-historical earnings (range: 16.7–50.1; average: 31.6); and price-to-forward earnings estimates (range: 11.8–24.1; average: 17.3). Management also used Plymouth Rock’s book value and a discounted cash flow model based on a forecasted return on equity of approximately 13% and a cost of capital of approximately 12%. The average of these values was then discounted for lack of marketability and control of the Plymouth Rock shares. Management considered a discount range of 25% to 35%, a range management believes market participants would apply. An independent valuation of Plymouth Rock’s shares obtained by Plymouth Rock was also considered. Management presented and discussed the above information with the Corporation’s directors, who approved the value for the investment.

Increases (decreases) in the price-to-book value multiple, price-to-historical earnings multiple, price-to-forward earnings estimate multiple, return on equity rate and book value in isolation would result in a higher (lower) range of fair values. Increases (decreases) in the discount for lack of marketability and control or cost of capital in isolation would result in a lower (higher) range of fair values.

3. Common Stock—During the six months ended June 30, 2024, the Corporation did not purchase any shares of its Common Stock. The Corporation may from time to time purchase its Common Stock in such amounts and at such prices as the Board of Directors may deem advisable in the best interests of the stockholders. Purchases will only be made at prices less than net asset value per share, thereby increasing the net asset value of shares held by the remaining stockholders. Shares so acquired may be held as treasury stock available for stock distributions, or may be retired.

4. Investment Transactions—The aggregate cost of securities purchased and the aggregate proceeds of securities sold during the six months ended June 30, 2024, excluding short-term investments, were $77,815,625 and $83,663,408, respectively.

As of June 30, 2024, the tax cost of investments was $510,978,151. Net unrealized appreciation was $981,119,062 consisting of gross unrealized appreciation and gross unrealized depreciation of $986,115,093 and $4,996,031, respectively.

NOTES TO FINANCIAL STATEMENTS — continued (Unaudited)

5. Affiliated Companies—Plymouth Rock is an affiliated company as defined in the Investment Company Act of 1940 due to the Corporation’s ownership of 5% or more of the company’s outstanding voting securities. During the six months ended June 30, 2024, unrealized appreciation from the Corporation’s investment in Plymouth Rock increased by $56,848,000 and the Corporation received dividends of $5,477,589 from Plymouth Rock. The Chairman of the Corporation is a director of Plymouth Rock. The Chief Executive Officer of the Corporation is a director of certain subsidiaries of Plymouth Rock.

6. Restricted Securities—The Corporation may from time to time invest in securities the resale of which is restricted. On June 30, 2024, the Corporation’s only restricted security consisted of 28,424 shares of Plymouth Rock Class A stock that were acquired on December 15, 1982 at a cost of $710,600. This security had a value of $360,984,800 at June 30, 2024, which was equal to 24.2% of the Corporation’s net assets. The Corporation does not have the right to demand registration of this security.

7. Bank Line of Credit—The Corporation has entered into a $25 million uncommitted, secured revolving line of credit with UMB Bank, n.a. (“UMB”), the Corporation’s custodian. All borrowings are payable on demand of UMB. Interest on any borrowings is payable monthly at a rate based on the federal funds rate, subject to a minimum annual rate of 2.50%. No borrowings were made during the six months ended June 30, 2024.

8. Compensation and Benefit Plans—The aggregate compensation expense for all officers during the six months ended June 30, 2024 was $2,033,458, of which $1,277,625 was paid during the period.

Officers and other employees participate in a 401(k) profit sharing plan. The Corporation has agreed to contribute 3% of each participant’s qualifying compensation to the plan, which is immediately vested. Contributions in excess of 3% may be made at the discretion of the Board of Directors and vest after three years of service. During the six months ended June 30, 2024, the Corporation accrued $153,188 related to the plan.

9. Operating Lease—The Corporation leases office space under a lease that was amended effective April 27, 2022 to extend the lease term until June 30, 2033. The lease includes fixed payments for occupancy and variable payments for certain utilities and for the Corporation’s share of increases in building operating expenses and real estate taxes.

The lease extension was accounted for as a lease modification as of the effective date. The Corporation determined that the lease was an operating lease. As of the effective date of the lease extension, the Corporation measured its lease liability and corresponding ROU asset at approximately $2.9 million, which was the present value of the fixed payments less estimated incentive payments to be received under the lease using a discount rate of 4.89%.

Total lease expense for the six months ended June 30, 2024 was $182,383 substantially all of which was operating lease cost.

NOTES TO FINANCIAL STATEMENTS — continued (Unaudited)

Fixed amounts due under the lease as of June 30, 2024 are as follows:

FINANCIAL HIGHLIGHTS

The following table shows per share operating performance data, total returns, ratios and supplemental data for the six months ended June 30, 2024 and each year in the five-year period ended December 31, 2023. 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. Distributions that may be taken in shares are assumed to be reinvested at the price designated by the Corporation.

(a)Based on the average number of shares outstanding during the period.

(b)Annualized, not necessarily indicative of full year ratio.

See accompanying notes to financial statements.

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Central Securities Corporation:

Results of Review of Interim Financial Information