GREENSPRING FUND,
INCORPORATED
SEMI-ANNUAL REPORT
JUNE 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.
<PAGE>
July 1996
Dear Shareholders:
Real estate investment trusts ("REITs") have comprised a
significant portion of the Greenspring Fund portfolio during the
last three years. While some of the special situation REIT
investments have worked out quite well, particularly with our
bond investments, other REIT investments have been much less
profitable than expected. Fortunately, where performance has
been disappointing, it has been mitigated somewhat
by the receipt of significant dividends. We thought it would
be useful to examine our original investment thesis,
subsequent developments, and then discuss our current view of
the REIT marketplace.
Our original REIT investment thesis centered on three main
points. First, REITs fit in well with the "modified contrary
opinion" facet of the Greenspring Fund's investment
philosophy. Commercial real estate was no longer in the
"actively disliked" stage of the cycle. During the late
1980's and early 1990's, many real estate operators suffered
substantial losses as property values declined dramatically.
In our opinion, commercial real estate was at this time
gradually recovering, but the improvement in real estate
fundamentals was being "passively ignored" by the investment
community. Secondly, we felt that REITs would increasingly be
viewed as an ideal way to invest in the real estate recovery.
The supply and demand characteristics of the marketplace would
help propel REIT stocks higher, as institutional real estate
investors would prefer the liquidity of the stock
market and begin to aggressively purchase REIT stocks as
opposed to their former method of buying illiquid real estate
properties. Thirdly, the market performance of REITs had
historically shown relatively little correlation with the
performance of the stock and bond markets.
Consequently, we believed that REITs could provide steady,
consistent total returns regardless of the direction of the
financial markets.
So what happened? In retrospect, two of the three principal
points of our REIT investment thesis were on target. However, on
one of the points where we were on track, our theory worked to
our disadvantage. The performance of REIT securities did show
very little correlation to the stock market. The stock market
surged, but, our REITs did not -- not exactly the illustration
of non-market sensitivity we had anticipated!
<PAGE>
The commercial real estate market did, for the most part,
continue its gradual recovery and REITs have benefited.
Apartment, office, and industrial properties have all
experienced increasing occupancies and rents. Property values
have appreciated and new construction has been
prudently pursued. One area of weakness, retail-oriented
REITs, has been negatively affected by the financial
difficulties of certain retailers during the last couple of
years. Fortunately, these REITs have weathered the storm
fairly well, with only a very small minority having to resort
to trimming their dividends. In general, the market dynamics
across most of the country can be described as healthy and
slowly improving. This condition is far from the distressed
days of the early 1990's, but also a long way off
from the booming period of the 1980's.
We, unfortunately, misjudged the supply and demand
characteristics of the REIT market. The demand for REITs from
institutional real estate investors did not develop nearly as
quickly, nor as strongly as we had anticipated. At the same
time, the supply of REITs ballooned, as fee-hungry investment
bankers pushed one REIT after another into the marketplace.
The resulting supply/demand imbalance overshadowed the
positive dynamics of the recovery in the real estate
market. While the business operations of the REITs performed
quite well, the stock market performance of REITs did not
mirror the strength of the underlying fundamentals. This
disappointing performance served to further
discourage additional institutional investment in REITs.
Moreover, a strong stock market made the stable, slow-growth
nature of REITs seem unattractive and their defensive
characteristics unnecessary. At present,
investment bankers have turned off the IPO spigot, but new,
incremental demand for REITs remains lackluster.
So, where does all this leave us today? It is a portfolio
manager's job to continually reassess the risk/reward
characteristics of each investment in the portfolio. The past
success or disappointment of an investment should be excluded
from the investment decision-making process. Such ideas as
never selling a winner, automatically selling a loser,
or selling a disappointing stock only when it returns to its
cost basis are all examples of attempting to appease the
portfolio manager's psyche. The only question, absent tax
considerations, that should be asked by the portfolio manager
is, "Are the risk/reward characteristics of the investment
from today's price positive enough to warrant continuing to
hold the security?" Whether or not the investment has been
successful to date should be virtually irrelevant to an
objective-thinking portfolio manager.
<PAGE>
With that philosophy in mind, we strongly believe that
the REIT securities currently in the portfolio are attractive
investments from current prices. Although several of the
holdings have disappointed investors in the past, we firmly
believe that there is very little risk associated with them
currently. These investments should provide strong total
returns from this point forward.
At current prices, the common stock REITs in the
Greenspring Fund provide excellent dividend yields, which,
when combined with a point or two of capital appreciation,
should provide total returns in the 15-20% range. If the
general stock market surges as it did during 1995, then this
kind of performance may not appear impressive. However, if
the market is less buoyant, then these numbers will be very
attractive. Furthermore, REIT stocks have historically held
up very well during the equity bear markets of the last 25
years. Therefore, if the stock market becomes
difficult, it is entirely possible that buyers will flock to
the safe haven provided by REITs, thus improving the
supply/demand factors in the market and leading to even more
capital appreciation.
The steady returns that REITs should provide, together with
many other attractive investments in the portfolio, give us
reason for optimism for a strong third quarter and second half of
1996 for the Greenspring Fund. We are somewhat leery about the
prospects for the overall stock market at this time, however.
Despite records inflows into mutual funds recently, the major
averages have not been able to sustain any corresponding
meaningful advance. We believe that if the market as
a whole encounters tough times, the Greenspring Fund will do
very well on a relative basis. Yet if the market surges as it
did during 1995, we will again participate, but to a lesser
degree than the major market averages. As always, the Greenspring
Fund will continue to focus on preserving capital and providing
absolute returns, not relative returns, to our shareholders.
Respectfully,
Charles vK. Carlson
President
<PAGE>
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
COMMON STOCKS (63.82%)
Shares Value
Banking (12.37%)
500 Avondale Financial Corp.<F1> $ 6,719
31,000 BostonFed Bancorp, Inc. 372,000
49,400 Charter Financial, Inc. 565,012
20,800 Chase Manhattan Corp. 1,469,000
15,000 Coast Savings Financial, Inc.<F1> 491,250
25,000 Columbia Bancorp, Inc. 468,750
44,864 Crestar Financial Corp. 2,394,616
50,000 Dime Bancorp, Inc.<F1> 650,000
34,000 GA Financial, Inc.<F1> 374,000
30,000 Imperial Thrift & Loan<F1> 442,500
10,000 Mercantile Bankshares Corp. 255,000
33,000 PFF Bancorp, Inc.<F1> 367,125
37,300 Patriot Bank Corp. 475,575
26,000 SIS Bancorp, Inc.<F1> 471,250
28,600 Statewide Financial Corp.<F1> 353,925
9,156,722
Consumer Products/Services (5.01%)
52,400 American Safety Razor<F1> 530,550
5,900 CHIC By H.I.S.<F1> 30,975
36,600 First Brands Corporation 988,200
5,300 Genesee Corporation Class B 243,800
50,000 Host Marriott Services<F1> 362,500
20,000 Nutramax Products, Inc.<F1> 170,000
79,000 The Scotts Company<F1> 1,382,500
3,708,525
Defense (1.24%)
11,000 Lockheed Martin 924,000
924,000 <PAGE>
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
COMMON STOCKS (CON'T)
Shares Value
Environmental Services (2.15%)
121,000 Alliance Global Enviromental Fund $ 1,589,437
<F1> 1,589,437
Industrial Services (.52%)
92,500 General Physics Corp. 381,563
381,563
Healthcare Products/Services (.41%)
51,200 Mediq, Inc.<F1> 300,800
300,800
Insurance (6.27%)
75,000 PartnerRe Holdings, Ltd. 2,240,625
51,208 Reliastar Financial Corp. 2,208,345
4,100 Transport Holdings, Inc.<F1> 188,600
4,637,570
Manufacturing (15.87%)
2,100 Charter Power Systems 72,975
383,100 Griffon Corporation<F1> 3,112,688
200,000 Sterling Chemical, Inc.<F1> 2,325,000
353,000 UNR Industries, Inc. 3,397,625
110,000 U.S. Industries, Inc.<F1> 2,653,750
2,000 Woodward Governor Company 182,500
11,744,538
Media (2.74%)
111,000 US West Media Group<F1> 2,025,750
2,025,750
<PAGE>
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
COMMON STOCKS (CON'T)
Shares Value
Natural Resources (3.64%)
232,600 Castle Energy Corp.<F1> $ 2,384,150
4,300 Norex America, Inc.<F1> 85,462
4,865 Penn Virginia Corp. 170,275
3,900 U.S. Lime & Minerals 53,625
2,693,512
Real Estate (9.97%)
295,000 Mark Centers Trust 3,060,625
60,000 Prime Retail, Inc. 678,750
277,045 The Town and Country Trust 3,636,216
7,375,591
Companies in Liquidation (3.63%)
4,700 Aerospace Creditors Liquidating
Trust<F1> 16,450
207,400 EQK Realty Investors 1<F1> 311,100
385,560 Hi Shear Industries, Inc.<F1> 2,361,555
2,689,105
Total Common Stocks
(Cost $39,772,804) 47,227,113
PREFERRED STOCKS (5.20%)
Convertible Pfd. Stock (1.33%)
54,500 Prime Retail, Inc. 981,000
Total Convertible Preferred Stock 981,000
<PAGE>
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
PREFERRED STOCKS (CON'T)
Shares/
Principal
Amount Value
Non-Conv. Pfd. Stocks (3.87%)
14,500 Illinois Power Company,
Adj. Rate Pfd., Series A $ 609,000
94,500 River Bank America 15%,
Series A 2,256,188
Total Non-Conv. Pfd. Stocks 2,865,188
Total Preferred Stocks
(Cost, $3,551,344) 3,846,188
BONDS (24.15%)
Convertible Bonds (6.74%)
$ 1,500,000 Alexander Haagen Properties, Inc.
7.50%, 1/15/01 1,322,500
2,000,000 Bell Sports Corp., 4.25%, 11/15/00 1,508,334
1,176,000 Kelley Oil & Gas Partners, Ltd.,
8.50%, 4/1/00 1,064,280
685,000 Kelley Oil & Gas Partners, Ltd.,
7.875%, 12/15/99 592,525
500,000 Liberty Properties Limited
Partnership, 8.00%, 7/1/01 505,000
Total Convertible Bonds 4,992,639
<PAGE>
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
BONDS (CON'T)
Principal
Amount Value
Non-Conv. Bonds (17.41%)
$ 1,500,000 B.F. Saul Real Estate
Investment Trust,
11.625%, 4/1/02 $ 1,548,750
513,000 Kelley Oil & Gas,
13.50%, 6/15/99 544,100
3,500,000 Lomas Mortgage,
10.25%, 10/1/02 2,162,346
2,604,000 Seven-Up/RC Bottling
Company of Southern
California, 11.50%, 8/1/99 1,823,615
1,904,000 Tyco Toys, Inc.,
10.125%, 8/15/02 1,840,930
1,840,000 UNC Inc., 9.125%, 7/15/03 1,777,900
1,000,000 U.S. Treasury, 7.125%, 9/30/99 1,022,188
2,102,000 Zapata Corp., 10.25%, 3/15/97 2,163,746
Total Non-Conv. Bonds 12,883,575
Total Bonds
(Cost $16,899,500) 17,876,214
SHORT-TERM INVESTMENTS (3.19%)
Rodney Square Money
Market Fund 2,363,713
Total Short-Term
Investments
(Cost $2,363,713) 2,363,713
Total Investments
in Securities (96.36%)
(Cost $62,587,361) 71,313,228
Other Assets Less
Liabilities (3.64%) 2,692,546
Total Net Assets (100.00%) $ 74,005,774
<F1>Non-income producing securities
<PAGE>
GREENSPRING FUND, INCORPORATED
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
(UNAUDITED)
ASSETS
Investments, at market value
(cost, $62,587,361) $ 71,313,228
Receivable for securities sold 3,261,942
Interest receivable 323,516
Cash 140,238
Receivable for Fund shares sold 25,000
Dividends receivable 16,693
Prepaid expense 1,903
Purchased interest 1,379
Total Assets 75,083,899
LIABILITIES
Payable for securities purchased 992,666
Due to investment advisor 46,238
Accrued expenses 37,931
Payable for Fund shares repurchased 1,290
Total Liabilities 1,078,125
NET ASSETS
Capital stock $.01 par value;
authorized 30,000,000 shares;
outstanding, 4,574,651 $ 74,005,774
NET ASSETS CONSIST OF:
Capital stock at par value $ 45,747
Paid in capital 61,318,322
Undistributed net investment income 1,678,390
Undistributed net realized gains 2,237,448
Net unrealized appreciation of investments 8,725,867
Net Assets $ 74,005,774
NET ASSET VALUE PER SHARE $ 16.18
The accompanying notes are an integral part of
these financial statements.
<PAGE>
GREENSPRING FUND, INCORPORATED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
INVESTMENT INCOME
Interest $ 1,159,374
Dividend 756,311
Other income 36,845
Total Income $ 1,952,530
Expenses
Investment advisory fees 274,567
Administrative 39,341
Transfer agent fees 19,518
Registration fees 19,130
Custodian fees 10,357
Professional fees 10,000
Reports to shareholders 5,515
Directors fees 3,400
Fidelity bond 1,335
Filing fees 355
Total Expenses 383,518
Net Investment Income 1,569,012
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 2,723,853
Net change in unrealized appreciation
of investments 910,842
Net Realized and Unrealized Gain
on Investments 3,634,695
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 5,203,707
The accompanying notes are an integral part of
these financial statements.
<PAGE>
GREENSPRING FUND, INCORPORATED
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCREASE(DECREASE) IN NET ASSETS
Six Months Ended Year Ended
June 30, 1996 December 31,
(Unaudited) 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,569,012 $ 3,249,208
Net realized gain/loss from investments 2,723,853 ( 127,537)
Net change in unrealized appreciation of
investments 910,842 7,706,761
Net increase in net assets resulting from
operations 5,203,707 10,828,432
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - (3,139,831)
Net realized gain on investments - ( 289,108)
Distributions in excess of net realized gains - ( 358,868)
Net decrease in net assets from distributions
to shareholders - (3,787,807)
CAPITAL STOCK TRANSACTIONS:
Sale of 580,534 and 1,664,602 shares 9,176,212 24,026,990
Distributions reinvested of 0 and 232,278
shares - 3,419,563
Redemptions of 780,261 and 881,936
shares (12,213,240) (12,970,297)
Increase in net assets from capital stock
stock transactions ( 3,037,028) 14,476,256
TOTAL INCREASE IN NET ASSETS 2,166,679 21,516,881
NET ASSETS AT BEGINNING OF PERIOD 71,839,095 50,322,214
NET ASSETS AT END OF PERIOD $ 74,005,774 $ 71,839,095
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
GREENSPRING FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
Note 1 - Significant Accounting Policies
Greenspring Fund, Incorporated ("the Fund") is a diversified
open-end management investment company registered under the
Investment Company Act of 1940, as amended.
Investment transactions and related investment income -
Investment transactions are recorded on the trade date.
Dividend income is recorded on the ex-dividend date and interest
income is recorded on the accrual basis. Dividends determined to
be a return of capital are recorded as a reduction of the cost
basis of the security. Realized gains and losses from
investment transactions and unrealized appreciation and
depreciation of investments are reported on an identified cost
basis.
Valuation of investments - Securities listed on a national
securities exchange or the NASDAQ National Market are valued
at the last reported sale 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
asked 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.
Securities for which market quotations are not readily available
are valued at fair value as determined in good faith by the
Advisor as directed by the Board of Directors.
<PAGE>
GREENSPRING FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
Note 1 - Significant Accounting Policies (Con't)
Income Taxes - It is the policy of the Fund to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies. Accordingly, the Fund intends to
distribute substantially all of its taxable income. Therefore,
no federal income tax provision is required.
Dividends and distributions to stockholders - The Fund records
dividends and distributions to stockholders on the ex-dividend
date.
Redemption of capital stock - A stockholder may request
redemption of some or all of his shares on any day that the
New York Stock Exchange is open for business. The redemption
price per share is the net asset value per share as of the
close of business on the day that the redemption
request is received by the Fund. Payment for shares will be
made within seven days after receipt of the redemption request.
Note 2 - Dividends and Distributions of 1996 Taxable Earnings
It is the Fund's policy to declare dividends from net investment
income and distributions from net realized gains as determined in
accordance with income tax regulations which may differ from
generally accepted accounting principles.
These dividends are either distributed to shareholders or
reinvested by the Fund in additional shares of common stock,
which are issued to stockholders. For those reinvesting the
dividend, the number of shares issued is based on the net asset
value per share as of the close of business on the business day
previous to the payment date.
Note 3 - Purchases and Sales of Investments
For the six months ended June 30, 1996, purchases and sales of
investments, other than short-term investments, aggregated
$28,770,386 and $35,807,547, respectively.
For federal income tax purposes, the cost of investments owned at
June 30, 1996 was $62,587,361. Net unrealized appreciation of
such investments aggregated $8,725,867, which was composed of
appreciation of $9,988,847 for those securities having an excess
of value over cost, and depreciation of $1,262,980 for those
securities having an excess of cost over value.
<PAGE>
GREENSPRING FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
Note 4 - Investment Advisory Agreement and Related Party
Transactions
The Fund's investment advisor, Key Equity Management Corporation
("Key Equity"), is a wholly-owned subsidiary of Corbyn Investment
Management. Under an agreement between the Fund and Key Equity,
the Fund pays Key Equity a monthly fee at an annual rate of .75%
of the Fund's month-end net assets. The Fund's total expenses,
excluding interest, taxes, brokerage commissions and
extraordinary expenses, may not exceed 1.5% of average daily net
assets (1% of average daily net assets in excess of $30,000,000).
Investment advisory fees incurred for the six months ended June
30, 1996 were $274,567. At June 30, 1996, investment
advisory fees payable amounted to $46,238.
Certain of the Fund's officers and directors are also officers
and directors of Key Equity and Corbyn Investment Management. At
June 30, 1996, investors for whom Corbyn Investment Management
was investment advisor held 1,094,678 shares of the Fund's
common stock.
<PAGE>
GREENSPRING FUND, INCORPORATED
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
(Unaudited)
For the six months ended
June 30, Year Ended December 31,
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 15.05 $ 13.39 $ 13.96 $ 13.78 $ 12.91 $ 11.32
Income From Investment Operations
Net Investment Income 0.34 0.70 0.51 0.40 0.51 0.49
Net Realized and Unrealized
Gain/Loss on Investments 0.79 1.78 (0.12) 1.59 1.59 1.69
Total From Investment Operations 1.13 2.48 0.39 1.99 2.10 2.18
Less Distributions
Net Investment Income - (0.68) (0.51) (0.40) (0.51) (0.52)
Net Realized Gain on Investments - (0.07) (0.45) (1.41) (0.72) (0.07)
Distributions in Excess of
Net Realized Gains - (0.07) ( - ) ( - ) ( - ) ( - )
Total Distributions - (0.82) (0.96) (1.81) (1.23) (0.59)
Net Asset Value, End of Period $ 16.18 $ 15.05 $ 13.39 $ 13.96 $ 13.78 $ 12.91
Total Return 7.51% 18.79% 2.83% 14.65% 16.52% 19.34%
Ratios/Supplemental Data
Net Assets, End of Period (000's) $ 74,006 $ 71,839 $ 50,322 $ 29,885 $ 20,004 $ 18,916
Ratio of Expenses to Average Net Assets 1.05%<F2> 1.06% 1.27% 1.31% 1.48% 1.33%
Ratio of Net Investment Income
to Average Net Assets 4.35%<F2> 4.97% 4.03% 2.78% 3.68% 3.79%
Portfolio Turnover 40.82% 65.19% 76.55% 121.79% 100.17% 70.21%
Average Commission Paid Per Share $ 0.0478 - - - - -
<FN>
<F2>Annualized
</FN>
</TABLE>
<PAGE>
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 Officer
Michael T. Godack
Sr. Vice President and Secretary
Michael J. Fusting
Vice President, Treasurer and Chief
Financial Officer
INVESTMENT ADVISOR
Key Equity Investment Management
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 E. Redwood Street
Baltimore, MD 21202-3316
LEGAL COUNSEL
DeMartino Finkelstein Rosen & Virga
1818 N Street, N.W.
Washington, DC 20036-2492
