Basically its a step down set-up to use a No 1 morse centre in a No 2 taper bore. Hole through the small centre is probably an extraction device. Put a bar through and use wedges against the step down adapter or spacer to push it out by contacting aprt of the machine when the spindle carrying it is retracted. Flat ended centres like that are often too short to reach the extraction drift slots in spindles or adapters. Could be got commercially with teh hole at one time, I have one somewhere.
Clive.