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, Chief Executive Officer

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, 2018

Date of reporting period: December 31, 2018

Item 1. Reports to Stockholders.

     The Corporation declared two distributions to holders of Common Stock in 2018, $.25 per share paid on June 26 in cash and $1.20 per share paid on December 20 in cash or in additional shares of Common Stock at the stockholder’s option. For Federal income tax purposes, of the $1.45 paid, $.56 represents ordinary income and $.89 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 distribution paid in December, the holders of 44% of the outstanding shares of Common Stock elected stock, and they received 494,048 Common shares at a price of $27.07 per share.

     During 2018, the Corporation purchased 153,010 shares of its Common Stock at an average price of $26.03 per share. 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.

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     Central’s net asset value, adjusted for the reinvestment of distributions to shareholders, decreased by 3.9% during 2018. Over the same period, Central’s shares decreased by 4.5%. For comparative purposes, the S&P 500 Index decreased by 4.4%, while the Russell 2000, a broad index composed of smaller companies decreased by 11.0%.

     Long-term returns on an annualized basis are shown below.

     After a moderate increase during the first nine months, the major stock market indexes declined abruptly in the fourth quarter last year. Against this backdrop, we made few portfolio changes during the year. Our annual portfolio turnover rate was 8%. During the year, Central purchased three new holdings and sold seven, ending the year with 36. The new investments were Kemper Corporation, Cogent Communications and Star Group. We sold Cable One, Tiffany, Murphy Oil, Kennedy-Wilson, Encore Capital, Freeport-McMoRan and General Electric. At year end, Central’s ten largest investments (shown on page 8) comprised 56% of net assets.

     The five most significant positive contributors to Central’s 2018 results, in order of importance, were Plymouth Rock, Motorola Solutions, Keysight Technologies, Merck and Amazon. The biggest detractors were Coherent, Capital One, Citigroup, TRI-Pointe and Hess. Coherent deserves special mention. It was the largest contributor to Central’s results in 2016 and 2017 before becoming the largest detractor last year. Still, combining all three years it handily outpaced the S&P 500, returning an average of 17% per year. This experience illustrates one of the more difficult situations long-term investors face: what action to take, if any, when after a significant multi-year gain, an important holding undergoes a large drawdown. In this case, we reevaluated the holding and chose to maintain our investment. We remain confident in Coherent’s management and market position. It should be noted that during this period, our Coherent holding has not remained constant. We reduced our holding by 23% since the beginning of 2017 before adding shares in the second half of 2018.

     Central’s largest and most important investment continues to be Plymouth Rock, a privately-held company in which we invested at its inception in 1982. The Plymouth Rock Group of Companies together write and manage over $1.2 billion in personal and commercial auto, homeowners and umbrella insurance in Massachusetts, New Hampshire, Connecticut, New York, New Jersey and Pennsylvania. We currently own 23% of Plymouth Rock.

     Plymouth Rock had a productive year in 2018. Among other things, the company entered the New York market. Shareholders may find Plymouth Rock’s annual reports to stockholders at www.plymouthrock.com/about/financial-information/annual-reports. The reports include audited financial statements and a letter from CEO Jim Stone which reviews notable events and achievements of the previous year and sets forth plans for the coming year. Taken together, the reports provide a detailed history of the company. It is expected that the company’s 2018 annual report will be available in April.

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     The electronification of trading has been much commented upon both in the financial press and by experienced investors. One observer has estimated that truly active investors comprise only about 10% of daily trading activity. Market participants have different time horizons: some focus on seconds, minutes and hours; others focus on months and years; and still others focus on multiple years. In recent years, more stock market activity is thought to be generated by those focused on the shortest time horizons, the “so called” high-frequency traders who trade electronically using algorithms they have developed. Some investors have complained that this has introduced an unacceptable level of market volatility and risk and that it should be curtailed or more closely regulated. Others are pleased with the low costs and effectiveness of electronic markets. Central invests with a long-term view and does not trade actively. Thus, electronic trading has not had a significant effect on Central’s investment operations.

     Looking forward, investors are confronted with some serious concerns and questions. Is the international regime of free trade existing since World War II breaking down, and are investors facing a world with less trade each year rather than more? World debt is $247 trillion according to the Institute of International Finance. Many countries and companies are vulnerable to a protracted rise in interest costs, constraining global central bank flexibility. The debt and growing wealth inequality have concerned many economists and are most likely behind the populist movements experienced by democracies around the world. These issues have combined to create a more uncertain investing environment.

     Central is an independent, internally-managed investment company. We invest for long-term growth of capital. It is our goal to own a limited number of companies that generate superior returns. Honest and capable management working in the interest of all shareholders is of the utmost importance in our consideration of new investments. We attempt to purchase investments at a reasonable price in relation to their probable and potential intrinsic value looking out three to five years. We then want to be able to hold them through the inevitable stock market ups and downs. We believe Central’s ability to take a long-term view has been and will continue to be advantageous to shareholders.

Stockholder’s inquiries are welcome.

630 Fifth Avenue
New York, New York 10111
January 30, 2019

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TEN LARGEST INVESTMENTS

December 31, 2018

(unaudited)

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DIVERSIFICATION OF INVESTMENTS

December 31, 2018

(unaudited)

(a) Certain amounts from 2017 have been adjusted to conform to 2018 presentation.

PRINCIPAL PORTFOLIO CHANGES

October 1 to December 31, 2018

(Common Stock unless specified otherwise)
(unaudited)

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STATEMENT OF INVESTMENTS

December 31, 2018

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SHORT-TERM INVESTMENTS 6.6%

See accompanying notes to financial statements.

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STATEMENT OF ASSETS AND LIABILITIES

December 31, 2018

See accompanying notes to financial statements.

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See accompanying notes to financial statements.

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See accompanying notes to financial statements.

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See accompanying notes to financial statements.

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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 U.S. generally accepted accounting principles.

Security Valuation—Marketable common stocks are valued at the last or closing sale price or, if unavailable, at the closing bid price. 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. 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. Interest income is accrued daily.

Recently Issued Accounting Pronouncements—In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-02, “Leases.” The new standard generally requires a lessee for an operating lease to recognize on its statement of assets and liabilities (1) an asset for its right to use the underlying asset over the lease term and (2) an offsetting liability representing its obligation to make lease payments over the lease term. The new standard is effective for years beginning after December 15, 2018, including interim periods within those years. The new standard is expected to result in an increase in the Corporation’s total assets and total liabilities, but is not expected to have a material effect on net assets.

     In August 2018, the Securities and Exchange Commission released its Final Rule on Disclosure Update and Simplification (the “Final Rule”), which is intended to simplify an issuer’s disclosure compliance efforts by removing redundant or outdated disclosure requirements without significantly altering the mix of information provided to investors. Effective with the current reporting period, the Corporation adopted the Final Rule. As a result, the Corporation no longer presents the components of distributable earnings on the Statement of Assets and Liabilities or the sources of distributions to shareholders and the amount of undistributed net investment income on the Statements of Changes in Net Assets.

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NOTES TO FINANCIAL STATEMENTS — Continued

     In August 2018, the FASB issued Accounting Standards Update 2018-13, “Fair Value Measurement (Topic 820) — Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which introduces new fair value disclosure requirements as well as eliminates and modifies certain existing fair value disclosure requirements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with earlier adoption permitted. Management is evaluating the implications of ASU 2018-13, and any impact on the financial statement disclosures has not yet been determined.

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, 2018 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 December 31, 2018 increased during the year by $25,581,600, which is included in the above table.

In valuing the Plymouth Rock Level 3 investment as of December 31, 2018, 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 utilized the following valuation multiples from selected publicly traded companies: price-to-book value (range: 0.6 – 3.3); price-to-earnings (range: 7.6 – 87.7); and price-to-revenue (range 0.5 – 1.5). Management also used a discounted cash flow model based on a forecasted return on equity ranging from 8%-9% and a weighted average cost of capital of 11%. An independent valuation of Plymouth Rock’s shares was also considered. The value obtained from weighting the three approaches described above (with greater weight given to the comparable company approach) was then discounted for lack of marketability by 20% and 40%, a range 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, its corporate

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NOTES TO FINANCIAL STATEMENTS — Continued

governance, the insurance industry outlook and transacted values in Plymouth Rock’s shares were also considered. These values as multiples of Plymouth Rock’s book value were also considered. Based upon all of the above information, the Corporation’s directors selected the value for the investment which implied a discount for lack of marketability in the higher end of the above range.

     Significant increases (decreases) in the value of the price-to-book value multiple, price-to-earnings multiple, price-to-revenue multiple and return on equity in isolation would have resulted 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 have resulted in a lower (higher) range of fair value measurements.

     3.    Common Stock and Dividend Distributions—The Corporation purchased 153,010 shares of its Common Stock in 2018 at an average price of $26.03 per share representing an average discount from net asset value of 19.4%. 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 two distributions to holders of Common Stock in 2018, $.25 per share paid on June 26 in cash and $1.20 per share paid on December 20 in cash or in additional shares of Common Stock at the stockholder’s option. In connection with the December 20 distribution, 84,326 treasury shares were distributed and 409,722 shares of Common Stock were issued, all at a price of $27.07 per share.

     The tax character of dividends and distributions paid during the year was ordinary income, $14,065,080 and long-term capital gain, $22,357,455; for 2017, it was $6,947,102 and $17,863,929, respectively. As of December 31, 2018, for tax purposes, undistributed ordinary income was $705,940 and undistributed long-term realized capital gain was $1,842,143. Dividends and distributions are determined in accordance with income tax 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, 2018.

     4.    Investment Transactions—The aggregate cost of securities purchased and the aggregate proceeds of securities sold during the year ended December 31, 2018, excluding short-term investments, were $62,973,243 and $70,170,665, respectively.

     As of December 31, 2018, the tax cost of investments was $371,778,016. Net unrealized appreciation was $392,947,674 consisting of gross unrealized appreciation and gross unrealized depreciation of $415,710,608 and $22,762,934, respectively.

     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 year ended December 31, 2018, unrealized appreciation from the Corporation’s investment in Plymouth Rock increased by $25,581,600 and the Corporation received dividends of $9,714,755 from Plymouth Rock. The Chief Executive Officer of the Corporation is a director of Plymouth Rock.

     6.    Restricted Securities—The Corporation may from time to time invest in securities the resale of which is restricted. On December 31, 2018, the Corporation’s restricted securities consisted of 28,424 shares of Plymouth Rock Class A stock that were acquired on December 15, 1982 at a cost of $710,600.

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NOTES TO FINANCIAL STATEMENTS — Continued

This security had a value of $170,544,000 at December 31, 2018, which was equal to 22.3% 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 year ended December 31, 2018.

     8.    Compensation and Benefit Plans—The aggregate remuneration paid to all officers during the year ended December 31, 2018 was $3,513,840.

     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 year ended December 31, 2018, the Corporation contributed $241,061 to the plan, which represented 15% of total qualifying compensation.

     The Corporation maintains an incentive compensation plan (the “2012 Plan”) which permits the granting 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 931,963 remain available for future grants at December 31, 2018. 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. The 2012 Plan is administered by the Corporation’s Compensation and Nominating Committee.

     A summary of awards of unrestricted shares of Common Stock granted and issued in 2018 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 initial election to the Board of Directors and annually after re-election at the Corporation’s annual meeting. The aggregate value of these awards made in 2018 was $82,470. This amount plus cash payments of $180,000 made to all non-employee directors are included in Directors’ fees expense in the accompanying Statement of Operations.

     9.    Operating Lease Commitment—The Corporation has an operating lease for office space that expires on June 30, 2019. Rent expense for the year ended December 31, 2018 was $426,644. Future minimum rental commitments under the lease are $187,442 in 2019. The lease agreement contains escalation clauses relating to operating costs and real property taxes.

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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, 2018. 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.

See accompanying notes to financial statements.

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OTHER INFORMATION

Direct Registration

     The Corporation utilizes direct registration, a system that allows for book-entry ownership and the electronic transfer of the Corporation’s shares. Stockholders may find direct registration a convenient way of managing their investment. Stockholders wishing certificates may request them.

     A pamphlet which describes the features and benefits of direct registration, including the ability of shareholders to deposit certificates with our transfer agent, can be obtained by calling Computershare Trust Company at 1-800-756-8200, calling the Corporation at 1-866-593-2507 or visiting our website: www.centralsecurities.com under Contact Us.

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, 2018 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.

Quarterly Portfolio Information

     The Corporation files its complete schedule of portfolio holdings with the SEC for the first 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.

Privacy Policy

     In order to conduct its business, the Corporation, through its transfer agent, Computershare Trust Company, collects and maintains certain nonpublic personal information about our stockholders of record in connection with their transactions in shares of our securities. This information includes the shareholder’s address, tax identification number and number of shares. We do not collect or maintain personal information about stockholders whose shares are held in “street name” by a financial institution such as a bank or broker.

     We do not disclose any nonpublic personal information about our stockholders to third parties unless necessary to process a transaction, service an account or as otherwise permitted by law.

     To protect your personal information internally, we restrict access to nonpublic personal information about our stockholders to those employees who need to know that information to provide services to our stockholders.

Forward-Looking Statements

     This report may contain “forward-looking statements” within the meaning of the Securities Exchange Act of 1934. You can identify forward-looking statements by words such as “believe,” “expect,” “may,” “anticipate,” and other similar expressions when discussing prospects for particular portfolio holdings and/or markets, generally. By their nature, all forward-looking statements involve risks and uncertainties, and actual results could differ materially from those contemplated by the forward-looking statements. We cannot assure future results and disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

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BOARD OF DIRECTORS AND OFFICERS

The Corporation is a stand-alone investment company. The address of each Director and officer is c/o Central Securities Corporation, 630 Fifth Avenue, New York, New York 10111. All Directors serve for a term of one year and are elected by stockholders at the Corporation’s annual meeting. Officers serve at the pleasure of the Board of Directors.

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BOARD OF DIRECTORS

Wilmot H. Kidd, Chairman
L. Price Blackford, Lead Independent Director
Simms C. Browning
Donald G. Calder
David C. Colander
Jay R. Inglis
Wilmot H. Kidd IV
C. Carter Walker, Jr., Director Emeritus

OFFICERS

Wilmot H. Kidd, Chief Executive Officer
John C. Hill, President
Marlene A. Krumholz, Vice President and Secretary
Andrew J. O’Neill, Vice President
Lawrence P. Vogel, Vice President and Treasurer

OFFICE

630 Fifth Avenue
New York, NY 10111
212-698-2020
866-593-2507 (toll-free)
www.centralsecurities.com

TRANSFER AGENT AND REGISTRAR

Computershare Trust Company, N.A.
P.O. Box 505000, Louisville, KY 40233
800-756-8200
www.computershare.com/investor

CUSTODIAN

UMB Bank, n.a.
Kansas City, MO

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

KPMG LLP
New York, NY

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