GREENSPRING FUND,
INCORPORATED
THIRD QUARTER REPORT
SEPTEMBER 30, 1996
This report is authorized for distribution
only to shareholders who have received a
copy of the official Prospectus of the
Greenspring Fund, Incorporated.
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October 1996
Dear Shareholders:
It is often said that the stock market is an arena in which
emotions can be measured by a pendulum that swings between fear
and greed. The third quarter of 1996 was a period that
illustrated this idea particularly well. During the first
several weeks of the quarter, in early-to-mid July, investors
were emotionally bailing out of stocks. The pendulum was
clearly on the fear side. At its low on July 24, the NASDAQ
Composite Index had declined 12% and certain sectors of the
market, such as the technology group, had suffered huge
double-digit losses. During the ensuing weeks, market
sentiment improved and the stock market stabilized,
setting the stage for a strong rally during the last several
weeks of September. As the pendulum swung toward the greed
side, investors began racing back to the stock market, fearing
that they might miss out on strong gains. By September 30,
the NASDAQ Composite had recovered from its losses and managed
to post a small gain for the quarter.
The Greenspring Fund's approach to investing attempts to
eliminate such pendulum-like swings in emotion, and the
resulting volatility in performance. As we have stated
repeatedly in the past, the Fund's investment objective is to
provide shareholders with steady, consistent performance
throughout most market environments. We seek to avoid the
volatility of the financial markets. To do this, we need to
stay cool during turbulent times and remain analytical during
emotionally-charged periods in the stock market. We have
designed our investment philosophy so that, if properly
implemented, we and our shareholders can "sleep well at night,"
while others are tossing and turning with uncertainty.
The third quarter of 1996 was a good example of how the
Greenspring Fund's investment philosophy results in volatility
that is significantly less than most mutual funds. July 24
marked the low point of the quarter for most investors.
However, whereas the NASDAQ Composite had declined 12% as of
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that date, the Greenspring Fund had suffered a loss of only
2.3%. The Fund participated in the ensuing rally
and finished the quarter with a solid total return gain of
4.8%. By preserving its capital well during the decline and
then opportunistically increasing exposure to stocks after
prices had declined significantly, the Greenspring Fund was able
to achieve a solid, total return performance,
which bettered the returns of 2.7% and 2.9% for "Balanced" and
"Growth and Income" funds, respectively, as measured by Lipper
Analytical Services.
To achieve the Greenspring Fund's investment objective of
steady, consistent performance, we focus our research efforts on
the individual merits of prospective investments, not on
guessing the short-term direction of the general stock market.
As much as possible, we attempt to buy securities that are
absolute values, not just relative values. This means
that the securities are good buys based on their own merits,
as opposed to being just cheap relative to the market. Most
importantly, we search for securities where success is not
dependent upon a favorable stock market. Ideally, these
investments will be capable of providing a positive total
return, even in a declining stock market environment.
We are not proponents of traditional market-timing
techniques, whereby one attempts to predict the direction of the
financial markets and then construct an asset allocation model
accordingly. This kind of approach can be quite risky because,
if one's crystal ball does not work properly, the portfolio
may then experience increased volatility or suffer
significant opportunity costs. Certain market-timers may have a
hot hand from time to time, but over the long run they have
not been able to achieve superior results. The recent Forbes
400 list of the country's wealthiest individuals includes the
names of several fundamental, bottom-up investors, but no market-
timers.
The Greenspring Fund's approach of putting blinders on when
it comes to forecasting general market moves, and not trying
to predict what we feel is the unpredictable, can actually be
viewed as a backdoor way of market timing. By avoiding the
emotional pressures at market extremes, fundamental value
investors should be buying more securities when the
market is low and values are more abundant (such as in the early
weeks of July). Conversely, value investors should not get
swept into the frenzy of a frothy market that has risen sharply
and should be buying fewer securities when stock prices have
already risen and values have eroded.
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Historically, our investment approach has allowed the
Greenspring Fund to produce strong absolute returns while
subjecting the Fund's portfolio to significantly less risk than
the market, and the most recent quarter was no exception. Our
fundamental approach to investing applies to both equities and
fixed-income investments. It is a total-return approach designed
to limit volatility, yet provide attractive long-term
returns. The Greenspring Fund's performance so far this year
is good testament to the success of such a strategy, and we are
confident that our philosophy will serve shareholders well
during the balance of 1996 and for years to come.
Respectfully,
Charles vK. Carlson
President
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GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
COMMON STOCKS (59.74%)
Shares Value
Banking (12.32%)
500 *Avondale Financial Corp. $ 7,187
600 *Bank Plus Corp. 6,375
31,000 BostonFed Bancorp, Inc. 410,750
49,400 Charter Financial, Inc. 617,500
20,800 Chase Manhatten Corp. 1,666,600
15,000 *Coast Savings Financial, Inc. 480,000
25,000 Columbia Bancorp, Inc. 475,000
44,864 Crestar Financial Corp. 2,646,976
50,000 *Dime Bancorp, Inc. 668,750
34,000 GA Financial, Inc. 446,250
30,000 *Imperial Thrift & Loan 408,750
10,000 Mercantile Bankshares Corp. 296,250
33,000 *PFF Bancorp, Inc. 408,375
37,300 Patriot Bank Corp. 540,850
16,000 *SIS Bancorp, Inc. 360,000
28,600 Statewide Financial Corp. 375,375
9,814,988
Consumer Prod./Services (7.34%)
52,400 *American Safety Razor 622,250
36,600 First Brands Corporation 956,175
13,800 Genesee Corporation Class B 579,600
50,000 *Host Marriott Services 406,250
180,880 *Seven-Up/RC Bottling Company
of Southern California 1,763,580
79,000 *The Scotts Company 1,520,750
5,848,605
Defense (1.25%)
11,000 Lockheed Martin Corp. 991,375
991,375
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GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
COMMON STOCKS (CON'T)
Shares Value
Environmental Services (2.69%)
121,000 *Alliance Global Environmental Fund $ 1,589,437
42,881 *ATC Environmental, Inc. 552,093
2,141,530
Industrial Services (.49%)
92,500 General Physics Corp. 393,125
393,125
Healthcare Products/Services (.46%)
62,500 *Mediq, Inc. 367,187
367,187
Insurance (6.10%)
75,000 PartnerRe Holdings, Ltd. 2,137,500
51,208 Reliastar Financial Corp. 2,432,380
4,100 *Transport Holdings, Inc. 284,950
4,854,830
Manufacturing (13.13%)
11,300 Charter Power Systems 290,975
383,100 *Griffon Corporation 3,783,113
421,000 UNR Industries, Inc. 2,789,125
110,000 *U.S. Industries, Inc. 2,887,500
7,550 Woodward Governor Company 709,700
10,460,413
Media (.87%)
41,000 *US West Media Group 691,875
691,875
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GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
COMMON STOCKS (CON'T)
Shares Value
Natural Resources (3.17%)
242,600 *Castle Energy Corp. $ 2,092,425
8,300 *Norex Industries, Inc. 222,025
4,865 Penn Virginia Corp. 175,140
3,900 U.S. Lime & Minerals 35,588
2,525,178
Real Estate (9.84%)
295,000 Mark Centers Trust 3,208,125
60,000 Prime Retail, Inc. 720,000
277,045 The Town and Country Trust 3,913,261
7,841,386
Companies in Liquidation (2.08%)
4,700 *Aerospace Creditors Liquidating Trust 17,919
225,400 *EQK Realty Investors 1 309,925
532,260 *Hi Shear Industries, Inc. 1,330,650
1,658,494
Total Common Stocks
(Cost $37,785,602) 47,588,986
PREFERRED STOCKS (5.03%)
Convertible Preferred Stock (1.39%)
54,500 Prime Retail, Inc. 1,110,438
Total Convertible Preferred Stock 1,110,438
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GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
PREFERRED STOCKS (CON'T)
Shares/
Principal
Amount Value
Non-Convertible Pfd. Stocks (3.64%)
14,500 Illinois Power Company,
Adj. Rate Pfd., Series A $ 628,937
94,500 *River Bank America 15%, Series A 2,268,000
Total Non-Convertible Pfd. Stocks 2,896,937
Total Preferred Stocks
(Cost $3,551,344) 4,007,375
BONDS (21.42%)
Convertible Bonds (6.66%)
$ 1,500,000 Alexander Haagen Properties, Inc.,
7.50%, 1/15/01 1,358,750
100,000 Audiovox Corp., 6.25%, 3/15/01 73,250
2,000,000 Bell Sports Corp., 4.25%, 11/15/00 1,520,834
1,176,000 Kelley Oil & Gas Partners, Ltd.,
8.50%, 4/1/00 1,117,200
685,000 Kelley Oil & Gas Partners, Ltd.,
7.875%, 12/15/99 628,488
500,000 Liberty Properties Limited Partnership,
8.00%, 7/1/01 540,000
69,000 Mediq, Inc., 7.25%, 6/1/06 65,722
Total Convertible Bonds 5,304,244
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GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
BONDS (CON'T)
Principal
Amount Value
Non-Convertible Bonds (12.04%)
$ 1,500,000 B.F. Saul Real Estate
Investment Trust, 11.625%, 4/1/02 $ 1,587,188
513,000 Kelley Oil & Gas, 13.50%, 6/15/99 582,255
400,000 Ocwen Financial, 11.875%, 10/1/03 418,750
1,904,000 Tyco Toys, Inc., 10.125%, 8/15/02 1,923,040
1,840,000 UNC Inc., 9.125%, 7/15/03 1,803,200
1,000,000 U.S. Treasury, 7.125%, 9/30/99 1,022,813
2,241,000 Zapata Corp., 10.25%, 3/15/97 2,258,509
Total Non-Convertible Bonds 9,595,755
Bonds in Reorganization (2.72%)
3,500,000 Lomas Mortgage, 10.25%, 10/1/02 2,163,437
Total Bonds in Reorganization 2,163,437
Total Bonds (Cost $15,747,706) 17,063,436
SHORT-TERM INVESTMENTS (13.44%)
Commercial Paper (10.04%)
2,000,000 American Express Credit Corp,
5.37%, 10/7/96 2,000,000
2,000,000 Chevron Oil Finance Corp.,
5.33%, 10/15/96 2,000,000
2,000,000 Ford Motor Credit Corp.,
5.42%, 10/24/96 2,000,000
2,000,000 General Electric Corp.,
5.36%, 10/21/96 2,000,000
Total Commercial Paper 8,000,000
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GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
SHORT-TERM INVESTMENTS (CON'T)
Value
Other Short-Term Investments (3.40%)
Rodney Square Money Market $ 2,702,877
Total Other Short-Term Investments 2,702,877
Total Short-Term Investments
(Cost $10,702,877) 10,702,877
Total Investments in Securities (99.63%)
(Cost $67,787,529) 79,362,674
Other Assets Less Liabilities (.37%) 291,585
Total Net Assets (100%) $ 79,654,259
*Non-income producing securities
Securities listed on a national securities exchange or the NASDAQ
National Market are valued at the last reported sales price on
the exchange of major listing as of the close of the regular
session of the New York Stock Exchange (currently 4:00 P.M.
Eastern Standard Time). Securities which are traded principally
in the over-the-counter market, listed securities
for which no sale was reported on the day of valuation, listed
securities for which the last reported sale price is not in the
context of the highest closing bid price and the lowest closing
offering price and listed securities whose primary market is
believed by the Advisor to be over-the-counter are valued at the
mean of the closing bid and ask prices obtained from
sources that the Advisor deems appropriate. Short-term
investments are valued at amortized cost which approximates fair
market value. The value of securities that mature or have an
announced call within 60 days will be amortized on a straightline
basis from the market value one day preceding the beginning of
the amortization period.
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Greenspring Fund, Incorporated
2330 West Joppa Road, Suite 110
Lutherville, MD 21093
(410) 823-5353
(800) 366-3863
DIRECTORS
Charles vK. Carlson, Chairman
William E. Carlson
David T. Fu
Michael J. Fusting
Michael T. Godack
Richard Hynson, Jr.
OFFICERS
Charles vK. Carlson
President and Chief Executive Office
Michael T. Godack
Sr. Vice President and Secretary
Michael J. Fusting
Vice President, Treasurer, and Chief
Financial Officer
INVESTMENT ADVISOR
Key Equity Management Corporation
2330 West Joppa Road, Suite 108
Lutherville, MD 21093-7207
TRANSFER AGENT
Rodney Square Management Corporation
1105 North Market Street, Third Floor
Wilmington, DE 19890
(800) 576-7498
CUSTODIAN
Wilmington Trust Company
1100 North Market Street
Wilmington, DE 19890
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
217 East Redwood Street
Baltimore, MD 21202-3316
LEGAL COUNSEL
DeMartino Finkelstein Rosen & Virga
1818 N Street, N.W.
Washington, DC 20036-2492
