United States

Securities and Exchange Commission

Washington, DC20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF

REGISTERED MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number 811-00179

 

Central Securities Corporation

(Exact name of registrant as specified in charter)

630 Fifth Avenue, Eighth Floor

New York, N.Y. 10111

(Address of principal executive offices)

 

Registrant’s telephone number including area code: 212-698-2020

 

Date of fiscal year end: December 31

Date of reporting period: September 30, 2011

 

 

Item 1. Schedule of Investments.

 

 

 
  

CENTRAL SECURITIES CORPORATION

Statement of Investments

September 30, 2011

(Unaudited)

 

COMMON STOCKS 98.5 %

 

Shares     Value
    Banking and Finance 4.1%  
925,000   The Bank of New York Mellon Corporation $  17,195,750
100,000   JPMorgan Chase & Co.  3,012,000
223,794   NewStar Financial, Inc. (a)  2,090,236
      22,297,986
       
    Commercial Services 1.4%  
413,712   Heritage-Crystal Clean, Inc. (a) 7,513,010
       
    Diversified Industrial 10.7%  
740,000   Brady Corporation Class A 19,558,200
220,000   Carlisle Companies Inc. 7,013,600
200,000   General Electric Company 3,044,000
100,000   Precision Castparts Corporation 15,546,000
180,000   Roper Industries, Inc. 12,403,800
    57,565,600
       
    Energy 8.6%  
350,000   Canadian Oil Sands Ltd.  6,751,500
200,000   Devon Energy Corporation 11,088,000
2,000,000   GeoMet, Inc. (a)(b)  1,460,000
627,200   McMoRan Exploration Co. (a) 6,228,096
280,000   Murphy Oil Corporation  12,364,800
320,000   QEP Resources, Inc. 8,662,400
      46,554,796
    Health Care 2.5%  
100,000   Johnson & Johnson 6,369,000
100,000   Medtronic, Inc. 3,324,000
100,000   Merck & Co. Inc. 3,270,000
228,000   Vical Inc. (a) 565,440
      13,528,440
    Insurance 32.3%  
69,900    The Plymouth Rock Company, Inc. Class A (b)(d) 174,750,000
        
    Retailing 1.4%  
20,000   Aerogroup International, Inc. (a)(d) 415,200
220,000   Walgreen Co. 7,235,800
      7,651,000
 
  

 

Shares     Value
    Semiconductor 15.0%  
720,000   Analog Devices, Inc. $  22,500,000
858,300   CEVA, Inc. (a) 20,865,273
1,500,000   Intel Corporation 32,002,500
1,050,000   Mindspeed Technologies, Inc. (a)  5,460,000
     80,827,773
       
    Software and Services 4.5%  
1,700,000   Convergys Corporation (a) 15,946,000
1,190,000   Xerox Corporation 8,294,300
     24,240,300
       
    Technology Hardware and Equipment 15.3%  
700,000   Agilent Technologies, Inc. (a)  21,875,000
801,000   Coherent, Inc. (a)  34,410,960
630,000   Flextronics International Ltd. (a)  3,546,900
220,000   Motorola Solutions, Inc.  9,218,000
1,190,000   RadiSys Corporation (a)  7,282,800
3,000,000   Sonus Networks, Inc. (a) 6,480,000
     82,813,660
       
    Telecommunication Services 2.7%  
145,425   Primus Telecommunications Group, Inc. (a) 1,545,868
500,000   Vodafone Group Plc ADR 12,830,000
     14,375,868
       
    Total Common Stocks (cost $321,591,104) 532,118,433
       
       
  PREFERRED STOCKS 0.3%   
       
    Energy 0.3%  
230,585   GeoMet, Inc. Series A Convertible Redeemable Preferred Stock (b)(c) 1,902,326
       
    Total Preferred Stocks (cost $2,027,220) 1,902,326
       
    Total Investments (cost $323,618,324)(e)(98.8%)  534,020,759
    Cash, receivables and other assets less liabilities (1.2%) 6,316,468
    Net Assets (100%) $540,337,227

 

(a) Non-dividend paying.

(b) Affiliate as defined in the Investment Company Act of 1940.

(c) Valued based on Level 2 Inputs – See Note 2.

(d) Valued based on Level 3 Inputs – See Note 2.

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

 

See accompanying notes to statement of investments.

 
  

CENTRAL SECURITIES CORPORATION

NOTES TO STATEMENT OF INVESTMENTS

 

1. Security Valuation – Marketable common and preferred stocks are valued at the last or closing sale price or, if unavailable, at the closing bid price. Securities for which no ready market exists are valued at estimated fair value by the Board of Directors.

 

As of September 30, 2011, the tax cost of investments was $323,618,324. Net unrealized appreciation was $210,402,435 consisting of gross unrealized appreciation and gross unrealized depreciation of $279,725,502 and $69,323,067, respectively.

 

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 assumptions obtained from independent sources, for example, quoted prices for similar investments, or the use of models or other valuation methodologies; 
· Level 3 – Significant unobservable inputs including the Corporation’s own assumptions based upon the best information available. Investments categorized as Level 3 include securities in which there is little, if any, market activity. The Corporation’s Level 3 investments consist of The Plymouth Rock Company, Inc. and Aerogroup International, Inc. 

 

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 September 30, 2011 are classified as shown below:

 

  Level 1   Level 2   Level 3   Total
Common stocks $356,953,233    —     $175,165,200   $532,118,433
Preferred stocks  —     $1,902,326    —      1,902,326
Total investments $356,953,233   $1,902,326   $175,165,200   $534,020,759

 

There were no significant transfers of investments between Levels 1, 2, or 3 during the nine months ended September 30, 2011. The following is a reconciliation of the change in the value of Level 3 investments:

 

Balance as of December 31, 2010  $168,455,000 
Net realized gains and change in unrealized appreciation of investments   7,008,200 
Sales   (298,000)
Balance as of September 30, 2011  $175,165,200 

 

 

The change in unrealized appreciation of Level 3 investments held at September 30, 2011 included in the above table was $6,950,200. In valuing Level 3 investments, the Corporation considers the results of various valuation methods, which may include comparable company valuation analyses, discounted future cash flow models and recent private transactions. Consideration is also given to corporate governance, marketability, independent appraisals obtained from portfolio companies, company and industry results and outlooks, and general market conditions. 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.

 

 
  

3. 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 September 30, 2011, such investments had an aggregate value of $175,165,200, which was equal to 32.4% of the Corporation’s net assets. Investments in restricted securities at September 30, 2011, including acquisition dates and cost, were:

 

Company Shares Security Date Acquired Cost
AeroGroup International, Inc. 20,000 Common Stock 6/14/05 $     11,719
The Plymouth Rock Company, Inc. 60,000 Class A Common Stock 12/15/82 1,500,000
The Plymouth Rock Company, Inc. 9,900 Class A Common Stock 6/9/84 692,986

Item 2. Controls and Procedures.


(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers have concluded that the Registrant’s Disclosure Controls and Procedures 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) Internal Control Over Financial Reporting. During the last fiscal quarter, there was no significant change in the Registrant’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 3. Exhibits.

(a) Certifications.

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

President

 

Date: October 20, 2011

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 capacities and on the dates indicated.

 

By: /s/ Wilmot H. Kidd

President

 

Date: October 20, 2011

 

By: /s/ Lawrence P. Vogel

Vice President and Treasurer

 

Date: October 20, 2011