As filed with the Securities and Exchange Commission on April 30, 1996
File No. 2-81956
811-3627
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N - 1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post Effective Amendment No. 18 X
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 18 X
Greenspring Fund, Incorporated
(Exact Name of Registrant as Specified in Charter)
2330 West Joppa Road, Suite 110
Lutherville, Maryland 21093-4641
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (410)823-5353
Mr. Charles vK. Carlson, President
2330 West Joppa Road, Suite 110
Lutherville, Maryland 21093-4641
(Name and address of Agent for Service)
Copies To: Ralph V. De Martino, Esq.
De Martino Finkelstein Rosen & Virga
1818 N Street, N.W., Suite 400
Washington, D.C. 20036
Telephone: (202)659-0494
Telecopier: (202)659-1290
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date.
It is proposed that this filing will become effective (check appropriate line)
immediately upon filing pursuant to paragraph (b)
X on April 30, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a), of Rule 485.
The Registrant has registered an indefinite number of shares of Common Stock
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Registrant filed with the Commission a Rule 24f-2
Notice for the Registrant's most recent fiscal year on February 26, 1996.
Greenspring Fund, Incorporated
Cross Reference Sheet
Pursuant to Rule 495
N-1A Item Number Location and Page of Prospectus
Part A
Item 1. Cover Page . . . . . Cover Page, Page 1
Item 2. Synopsis . . . . . . Fund Expenses, Page 2
Item 3. Financial Highlights Table.. Financial Highlights Table, Page 3
Item 4. General Description of
Financial Statements. Cover Page, Page 1; Investment
Objectives, Page 5; Investment Program,
Page 6
Item 5. Management of the Fund.... Management of the Fund, Page 9
Item 6. Capital Stock and Other
Securities . . . . Capital Stock, Page 12
Item 7. Purchase of Shares . . . Purchase of Shares, Page 16
Item 8. Redemption of Shares . . Redemption of Shares, Page 21
Item 9. Pending Legal Proceedings Not Applicable<PAGE>
<PAGE>
<PAGE>
Part B
Item 10. Cover Page . . . . . . . . Cover Page, Page 1
Item 11. Table of Contents. . . . . Table of Contents, Page 2
Item 12. General Information
and History . . . . . Not Applicable
Item 13. Investment Objectives
and Policies. . . . . Investment Objectives, Page 3;
Investment Policies, Page 3;
Investment Program, Page 5
Item 14. Management of the Fund . . Management of the Fund, Page 8
Item 15. Control Persons and
Principal Holders of
Securities. . . . . . Control Persons and Principal Holders
of Securities, Page 10
Item 16. Investment Advisory
and Other Services . . Investment Advisor and Advisory
Agreement, Page 10
Item 17. Brokerage Allocation
and Other Services. . . Portfolio Transactions and Brokerage,
Page 11
Item 18. Capital Stock and
Other Securities. . . . Not Applicable
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered . . . . . Purchase, Redemption and Pricing of the
Fund's Shares, Page 11
Item 20. Taxes. . . . . . . . . . . . Taxes, Page 12
Item 21. Underwriters . . . . . . . . Not Applicable
Item 22. Calculations of Yield
Quotations of Money
Market Funds . . . . . . Not Applicable
Item 23. Financial Statements . . . . Statement of Assets and Liabilities,
Statement of Operations, Statement of
Changes in Net Assets, Notes to Financial
Statements, Financial Highlights Table,
Portfolio of Investments: Was filed in
the Annual Report for the Fiscal Year
ended December 31, 1995, and is hereby
incorporated by reference.
<PAGE>
Information required to be included in Part C is set forth under the
appropriate Item so numbered in Part C of this Registration Statement.
GREENSPRING FUND,
INCORPORATED
APRIL 30, 1996
The Greenspring Fund (the "Fund") is a no-load mutual fund
that seeks long-term growth of capital from a mixture of
equity and debt securities. Current income is an important,
but secondary, factor in the selection of the Fund's
investments. The Fund strives for superior risk-averse
performance through steady and consistent investment gains.
For further details, see "Investment Objective" on page 5.
Shares of the Fund are purchased and redeemed at the
current net asset value per share. There are no sales
commissions or other charges on any transactions. The
Fund does not pay "12b-1 fees" (marketing fees) to promote
or distribute its shares.
This Prospectus, which should be retained for future
reference, is designed to set forth concisely the information
that an investor should know about the Fund before
investing. A Statement of Additional Information, dated
April 30, 1996, has been filed with the Securities and
Exchange Commission and is incorporated by reference into
this Prospectus. A copy of the Statement of Additional
Information may be obtained, without charge, by writing or
calling the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
FUND EXPENSES
The following table illustrates all expenses and fees incurred
during the most recent fiscal year.
Shareholder Transaction Expenses None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.75%
Other Expenses (See Annual Report) 0.31%
Total Fund Operating Expenses 1.06%
The following example illustrates the expenses you would
incur on a $1,000 investment over various time periods
assuming a 5% annual return and redemption at the end of
each time period. The purpose of this information is to
assist the investor in understanding the various costs and
expenses that an investor in the Fund will bear directly or
indirectly.
1 Year-$11 3 Years-$34 5 Years-$58 10 Years-$129
This example, which is hypothetical, should not be
considered a representation of past or future expenses or
performance. Actual fees and expenses may be greater or
less than those indicated. Moreover, while the example
assumes a 5% annual return, the Fund's actual
performance will vary and may result in an actual return
greater or less than 5%.
TOTAL RETURN PERFORMANCE
Throughout the year, the Fund may include in its
communications to current and prospective shareholders
figures reflecting total return over various time periods.
Total return is the rate of return on an amount invested in
the Fund from the beginning until the end of the stated
period. Average annual return is the annual compounded
percentage change in the value of an amount invested in the
Fund from the beginning until the end of the stated period.
Both rates of return assume the reinvestment of all dividends
and distributions. The Fund's total return is a historical
measure of past performance and is not intended to indicate
future performance. Because investment return and
principal value will fluctuate, the Fund's shares may become
worth more or less than their original cost. Further
information on the Fund's performance is discussed in the
Fund's Annual Report to Shareholders, which can be
obtained without charge from the Fund.
FINANCIAL HIGHLIGHTS TABLE
The following table provides information regarding per share
income and capital changes for the period December 31,
1986 through December 31, 1995. It is based on a single
share outstanding throughout each fiscal year. This
information should be read in conjunction with the Fund's
financial statements appearing in the Fund's Annual Report
to Shareholders, which are incorporated by reference into
the Statement of Additional Information and this Prospectus.
The Fund's financial statements and financial highlights table
for the years ended December 31, 1992, 1993, 1994 and 1995
have been audited by Coopers & Lybrand L.L.P. Prior
periods were audited by Arthur F. Bell, Jr. & Associates,
L.L.C. The unqualified opinion of the independent
accountants covering the most recent five years is contained
in the Fund's December 31, 1995 Annual Report to
Shareholders.
GENERAL INFORMATION
ORGANIZATION
The Fund is a no-load, open-end, diversified management
investment company registered with the Securities and
Exchange Commission under the Investment Company Act
of 1940. It was incorporated in Maryland on October 21,
1982 and first offered its shares to the public on July 1, 1983.
INVESTMENT OBJECTIVE
The Fund's principal objective is to provide long-term
growth of capital for its shareholders through a total return
approach to investing. In pursuing its investment objective,
the Fund invests primarily in common stocks, but may also
invest in preferred stocks, debt securities, securities not
publicly traded and money market instruments in order to
enhance the total return of the Fund's portfolio and for
temporary defensive purposes in order to preserve its
principal during uncertain market conditions. The Fund's
active portfolio management may result in a higher level of
taxable capital gains than other mutual funds.
The Fund's investment policies are subject to restrictions as
described in the Statement of Additional Information. The
Fund's investment objective and investment policies, unless
otherwise specified, are not fundamental policies and may be
changed without shareholder approval. Shareholders will be
notified prior to a material change. Fundamental policies,
which are listed in the Statement of Additional Information
under "Investment Policies", may be changed only with
approval of at least a majority of the outstanding shares of
the Fund. Operating policies of the Fund, which are also
listed in the Statement of Additional Information under
"Investment Policies", are subject to change by the Board of
Directors without shareholder approval. However, the Fund
will not change any operating policy without notice to its
shareholders.
An investor should keep in mind that every investment
carries risk. Although the Fund seeks to reduce risk by
diversification, a diversified portfolio does not eliminate all
risk and the Fund can not assure its shareholders that it will
achieve its investment objective. The Fund's share price will
fluctuate with changes in the market value of its securities.
Therefore, an investment in the Fund may be worth more or
less when redeemed than when purchased.
The Fund is not meant to be a vehicle for playing short-term
swings in the stock market.
INVESTMENT PROGRAM
The Fund pursues its investment objective by investing in a
diversified portfolio of securities that the Fund's Advisor,
Key Equity Management Corporation ("Key Equity" or the
"Advisor"), believes are undervalued after analyzing the
company's profitability, the strength of its balance sheet, its
ability to generate free cash flow, the value of unrecognized
assets, management's ability to capitalize upon the company's
assets and anticipated economic trends. The Advisor
researches and analyzes each security separately and seeks
to purchase those securities that are undervalued relative to
the general market and the company's industry peers. The
Fund has no specific criteria such as market capitalization,
level of assets, sales or earnings, or industry type that would
make a security unsuitable for purchase. Consequently, the
proportion of the Fund's assets invested in particular
companies and industries will vary over time depending upon
the Advisor's evaluation of the outlook for specific industries
and companies.
The Advisor looks for companies that may be somewhat out-
of-favor, where the adverse conditions that caused the
security to be out-of-favor are believed to be already
discounted by the investment community and reflected in the
price of the company's securities. Consequently, the risks
associated with these type of investments may be somewhat
limited. Additionally, the Advisor selects those out-of-favor
companies that possess a catalyst that may result in
increased investor sponsorship. Such catalysts include
management changes, industry developments, new products
and changing corporate structures. The Fund may also
invest a portion of its assets in the securities of companies in
the process of financial reorganization or liquidation. Such
an investment is done only after careful analysis of the firm's
assets, earnings power, and timing of the reorganization or
liquidation proceedings.
The Fund also reserves the right to invest in repurchase
agreements, foreign securities and write or purchase call
options, covered and uncovered, as well as write or purchase
put options; however, the Fund has not utilized these
investment practices recently. For a more detailed
description of these investment practices, please refer to the
Statement of Additional Information.
If the Fund's Advisor cannot find securities that meet its
investment criteria, short-term money market-type reserves
may be utilized, which should reduce downside volatility
during periods of market weakness.
NON-INVESTMENT GRADE DEBT SECURITIES
The Fund may invest in debt securities that are unrated or
rated in the medium to lowest rating categories by Standard
& Poor's Corporation ("S & P") or Moody's Investors
Service, Inc. ("Moody's). (See Appendix A). The ratings of
S & P and Moody's signify their opinions as to the credit
quality of the securities which they undertake to rate.
Ratings are relative and arbitrary and, although they may be
helpful in judging the assurance of interest and principal
payments, it should be noted that they do not evaluate the
market value risk of these securities, which are inclined to be
less sensitive to interest rate fluctuations than higher-rated
securities, but more sensitive to changing economic
conditions or individual corporate developments. Also, since
the credit rating agencies may fail to timely change the credit
ratings to reflect subsequent events, the Advisor continuously
monitors the issuers of high yield bonds in its portfolio to
determine if the issuers will have sufficient cash flow and
profits to meet required principal and interest payments and
to assure the bonds' liquidity so the Fund can meet
redemption requests. If the rating of an instrument held by
the Fund changes, the Fund will reassess its investment and
may retain the portfolio security.
Fluctuations in the prevailing levels of interest rates may
have an inverse effect on the Fund's bond holdings, but not
the income received by the Fund from its debt securities.
Because yields on debt securities available for purchase by
the Fund vary over time, no specific yield on debt securities
purchased by the Fund can be assured. In addition, if debt
securities contain call, pre-payment or redemption
provisions, during a period of declining interest rates, these
securities are likely to be redeemed, and the Fund may be
unable to replace them with securities having as high of a
yield.
During the Fund's most recent fiscal year, the percentage of
the Fund's total investments represented by: (1) bonds rated
by a nationally recognized statistical rating organization,
separated into each applicable rating category by monthly
dollar-weighted average is AAA (S & P)/ Aaa (Moody's) -
1.56%; A (S & P)/A (Moody's) - 1.02%; BBB (S&P) -
1.51%, Baa (Moody's) - 1.39%; Ba (Moody's) - 2.07%; BB,
B (S & P) - 13.99%, B (Moody's) - 12.01%; Caa (Moody's) -
2.91%, D (S & P) - 1.21% and (2) bonds not rated, which is
not indicative of an unfavorable rating, is S & P - 14.08%
and Moody's - 12.41%. The foregoing dollar weighted
average ratings of the Fund's portfolio should not be
considered indicative of the future composition of the bonds
held in the Fund's portfolio. See "Non-Investment Grade
Debt Securities" in the Statement of Additional Information.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the
supervision of its Board of Directors. The Statement of
Additional Information, under "Management of the Fund,"
contains general background about each Director. The
executive officers of the Fund, whose services are provided
by the Fund's Advisor serve without compensation from the
Fund.
The Fund has entered into an investment advisory agreement
with Key Equity, located at 2330 West Joppa Road, Suite
108, Lutherville, Maryland 21093. Key Equity was organized
in October 1982, with its sole business to act as investment
advisor to the Fund. Key Equity is a wholly-owned
subsidiary of Corbyn Investment Management, Inc.
("Corbyn"), an investment advisor providing investment
management services for pension funds, endowments and
individuals since 1973. Key Equity manages the investment
of the Fund's assets and continuously reviews, supervises and
administers the Fund's investment program subject to
direction by the Fund's Board of Directors.
In return for its services, the Fund pays Key Equity a
monthly fee, accrued daily, at an annual rate of .75% of the
Fund's month-end net assets. This fee may be in excess of
that paid by other mutual funds. For the year ended
December 31, 1995, the total advisory fee paid by the Fund
to Key Equity represented an annual effective rate of .75%
of the Fund's total average daily net assets. Total expenses
incurred in the same time period by the Fund (including the
advisory fee) represented an annual effective rate of 1.06%
of the Fund's total average daily net assets.
Charles vK. Carlson is President, Chairman of the Board of
Directors and portfolio manager of the Fund. He has been
President of the Fund since March 1993, Chairman of the
Board of Directors since January 1994 and portfolio manager
of the Fund since January 1987. Prior to becoming
President of the Fund, Mr. Carlson was Senior Vice
President of the Fund from March 1991 to March 1993. He
has been a Director of the Fund since January 1987. Mr.
Carlson is also the President of Corbyn Investment
Management and has been since December 1991.
Additionally, Mr. Carlson is President and Director of Key
Equity Management Corporation. He has been President of
Key Equity since February 1992 and Director since May
1989. A Chartered Financial Analyst, he received his B.S.
degree in Political Economy in 1982 from The Johns
Hopkins University.
DISCUSSION OF FUND PERFORMANCE
Those factors, including the relevant market conditions and
the investment strategies and techniques pursued by the
Fund's Advisor, that materially affected the performance of
the Fund during 1995 are discussed in the shareholder letter
in the Annual Report, which can be obtained from the Fund
without charge.
Average annual total returns for the one, five and ten year
periods ended December 31, 1995 were 18.79%, 14.26% and
11.46%, respectively. Average annual returns for more than
one year assume a compounded rate of return and are not
the Fund's year-by-year results, which fluctuated over the
periods shown. Past performance is not predictive of future
performance.
CAPITAL STOCK
The Fund has authorized 30,000,000 shares of $.01 par value
common stock. All shares are of the same class, with equal
rights and privileges. Each share is entitled to one vote and
participates equally in dividends and distributions declared.
The shares are fully paid and non-assessable when issued,
are transferable, and have no preemptive, conversion, or
exchange rights.
The Fund's shares have non-cumulative voting rights, which
means that the holders of more than 50% of the shares
voting for the election of directors may elect 100% of the
directors if they choose to do so and, in this event, the
holders of the remaining shares will not be able to elect any
directors.
Inasmuch as Corbyn had, as of February 29, 1996,
discretionary authority over accounts holding 24% of the
Fund, Corbyn, either alone or in combination with the
Advisor, may be deemed to be controlling persons of the
Fund. Both Corbyn and the Advisor maintain that they do
not control the Fund.
On May 8, 1990, at its Annual Meeting of shareholders, the
Fund's shareholders approved an amendment of the Fund's
Articles of Incorporation and By-Laws providing that the
Fund shall not be required to hold an Annual Meeting of
stockholders in any year in which none of the following is
required to be acted upon by stockholders pursuant to the
Investment Company Act of 1940: (1) Election of Directors;
(2) Approval of the Investment Advisory Agreement; (3)
Ratification of the selection of independent public
accountants; and (4) Approval of a Distribution Agreement.
Therefore, the Fund does not intend to hold an Annual
Meeting of shareholders. The Fund will, however, call a
meeting of shareholders for the purpose of voting upon the
question of removal of any director upon receipt of written
request to do so by the record holders of not less than 10
percent of the outstanding shares of the Fund.
SHAREHOLDER INQUIRIES
Rodney Square Management Corporation ("Rodney
Square"), located at 1105 North Market Street, 3rd Floor,
Wilmington, DE 19890, is the transfer agent for the Fund.
For shareholder account information, Rodney Square
shareholder service representatives can be reached at (800)
576-7498 between the hours of 9:00 a.m. and 5:00 p.m.
Eastern Standard Time during any business day.
To change the address on your account, send a written
request signed by all registered owners of your account.
Please include the account number(s), the name(s) on the
account and both the old and new addresses. When Rodney
Square receives notification of a change of address, a
confirmation will be mailed to you.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund has qualified and intends to continue to qualify
under Subchapter M of the Internal Revenue Code as a
regulated investment company. The Fund will distribute all
of its net income and realized gains to shareholders, which
will be taxable as ordinary income or long-term capital gains
to shareholders. Shareholders may be proportionately liable
for taxes on these distributions unless shareholders are not
subject to tax on their income and would not be required to
pay tax on amounts distributed to them. The Fund will
inform shareholders of the amount and nature of such
income or gains. Any dividends paid by the Fund will
increase or decrease in relation to the income received by
the Fund from its investments.
Each distribution declared by the Fund will, at the option of
each shareholder at the time of the initial purchase of
shares, be paid in cash or in additional shares, but may be
changed by notifying Rodney Square in writing prior to the
record date for a particular distribution. At the
shareholder's option, distributions made in cash can be wired
directly to a shareholder's bank account or paid by a check.
If electing to have the cash payment wired, please include
wiring instructions when completing an Account Registration
Form. Distributions will be reinvested in full and fractional
shares of the Fund at the next computed net asset value at
the close of business on the ex-dividend date. If no election
is made, all distributions will automatically be reinvested in
shares of the Fund. There are no charges in connection with
the reinvestment of distributions. A Statement of Account
will be mailed to shareholders when dividend and capital
gains distributions are made whether they are paid in cash
or reinvested in additional shares.
The election to reinvest dividends and distributions paid by
the Fund in additional shares of the Fund will not affect the
tax treatment of such dividends and distributions, which will
be treated as received by the shareholder and then used to
purchase shares of the Fund. Ordinary income distributions,
such as distributions from net investment income and
distributions of net short-term capital gains, are taxable to
shareholders as ordinary income whether received in cash or
in additional shares. Some portion of the dividends paid by
the Fund may be eligible for the 70% dividends-received
deduction for corporate shareholders to the extent that the
Fund's income is derived from certain dividends received
from domestic corporations. Capital gains distributions are
taxable as long-term capital gains regardless of how long the
shares of the Fund have been owned. Generally, by January
31, Rodney Square will mail to shareholders information on
the tax status of dividends, distributions and redemptions
made during the preceding year. Please retain these account
records in a safe place, as they will be required for tax
purposes.
Investors should consider the tax implications of buying
shares immediately prior to a distribution. Investors who
purchase shares shortly before the record date for a
distribution will pay a per share price that includes the value
of the anticipated distribution and will be taxed on the
distribution when received even though the distribution
represents a return of a portion of the purchase price.
Redemptions of shares of the Fund will be taxable
transactions for Federal income tax purposes. Generally, a
capital gain or loss will be recognized in an amount equal to
the difference between the shareholder's basis in the shares
and the proceeds received. Such gains or losses will be
characterized as short- or long-term, depending on how long
the shares were owned. A loss recognized on the disposition
of shares of the Fund will be disallowed under the wash sale
rule if identical shares are acquired 30 days before or after
the date of disposition. See "Taxes" in the Statement of
Additional Information.
The Fund may be required to withhold Federal income tax
at the rate of 31% from dividend, capital gain and
redemption payments to shareholders (a) who fail to furnish
the Fund with and to certify the payee's correct taxpayer
identification number or social security number, (b) when
the Internal Revenue Service notifies the Fund that the
payee has failed to report properly certain interest and
dividend income to the IRS and to respond to notices to that
effect or (c) when the payee fails to certify that he is not
subject to backup withholding. Investors should be sure to
provide this information when completing the Account
Registration Form. Certain foreign accounts may be subject
to U.S. withholding tax on ordinary distributions.
In addition to Federal taxes, a shareholder may be subject to
state or local taxes on payments received from the Fund.
For a further discussion of certain tax consequences of
investing in shares of the Fund, see "Taxes" in the Statement
of Additional Information. Shareholders are urged to
consult their own tax advisers regarding specific tax
questions.
PURCHASE OF SHARES
INITIAL INVESTMENT
The minimum initial investment in the Fund is $2,000, except
for an Individual Retirement Account, a Gift to a Minor
account and an account opened through the Automatic
Investment Plan, the minimums for which are $1,000. To
make an initial investment in the Fund, please complete and
sign an Account Registration Form for a regular account or
complete the necessary forms for an Individual Retirement
Account or Simplified Employee Pension Plan and mail
along with a check, payable to Greenspring Fund, to
Greenspring Fund, c/o Rodney Square, P.O. Box 8987,
Wilmington, DE 19899. All courier deliveries, including
overnight express, should be mailed to Greenspring Fund,
c/o Rodney Square, 1105 N. Market Street, 3rd Floor,
Wilmington, DE 19890. The Fund does not accept telephone
orders for the purchase of shares, except it will accept
telephone orders from brokerage firms with whom the Fund
has certain operating relationships. The Fund reserves the
right to modify or limit its procedures for telephone orders
or to terminate them at any time. Checks should be drawn
in U.S. currency on a U.S. bank.
If an investor purchases or redeems shares of the Fund
through an investment dealer, bank or other institution, that
institution may impose charges for its services.
Shares of the Fund will be purchased at the Fund's net asset
value next determined after Rodney Square receives the
purchase order or application on each day the New York
Stock Exchange (the "Exchange") is open for regular trading
and the purchase order or application is determined to be in
good form by Rodney Square. Any purchase order for
shares received by Rodney Square by mail or wire prior to
the close of the Exchange, which is 4:00 p.m. Eastern
Standard Time, will be valued at the closing net asset value
on that day. Purchase orders or applications received after
the close of the Exchange will be deemed received on the
next business day and be valued at the net asset value
computed on that business day. There is no sales charge
included in the price of the shares and all purchases will be
in full and fractional shares carried out to three decimal
places. Rodney Square will mail a confirmation of each
transaction, in the form of a Statement of Account, showing
the date of the transaction, the number of shares involved,
the net asset value per share and the total balance of shares
in the account after the transaction.
The Fund reserves the right to decline to accept a purchase
order upon receipt when, in the judgement of the Fund, it
would not be in the best interests of the existing
shareholders to accept the order. In the case of a check
requiring special handling, the Fund reserves the right to
delay the processing of a purchase order until the check is
converted into Federal Funds by the Fund's custodian bank.
Shares of the Fund may also be purchased by wiring funds
to the Fund's custodian bank, Wilmington Trust Company.
Prior to wiring funds, Rodney Square must be advised of the
investment so an account number can be established. A
signed and completed Account Registration Form can be
sent by telecopy (fax) to Rodney Square to establish an
account after notifying Rodney Square of the incoming wire,
but the original must be mailed to Rodney Square shortly
after the purchase is made. Rodney Square's fax number is
(302) 427-4511. Funds should be wired to:
Rodney Square
c/o Wilmington Trust Company
Wilmington, DE
ABA# 0311-0009-2
DDA# 2656-8560
For Credit to the Greenspring Fund
Further Credit (Shareholder's Name)
Fund Account Number
If you are planning to wire funds, it is suggested that you
instruct your bank early in the day so the wire transfer can
be accomplished the same day.
If your check or wire does not clear, you will be responsible
for any loss the Fund incurs. If you are already a
shareholder, the Fund reserves the right to direct Rodney
Square to redeem shares from any identically registered
account as reimbursement for any loss incurred.
ADDITIONAL INVESTMENTS
Additional purchases of shares may be made in minimum
amounts of $100 by mailing either the detachable investment
slip found at the bottom of a recent account statement or a
letter indicating the amount of the purchase, your account
number, and the name in which your account is registered
along with a check, payable to Greenspring Fund,
Incorporated, to Rodney Square, or by wiring monies to
Wilmington Trust Company as described above. Please
specify the account number in the purchase request to assure
proper crediting.
Generally, certificates representing the shares are not issued.
This saves the Fund the cost of issuing the certificates, saves
the shareholders the trouble of safekeeping the certificates,
and facilitates redemptions and transfers. However, share
certificates are available at any time upon written request at
no additional cost to shareholders. No certificates will be
issued for fractional shares.
AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan permits a shareholder to
automatically purchase shares of the Fund on a monthly
basis through an arrangement with his bank and Rodney
Square. The minimum initial investment for the Automatic
Investment Plan is $1,000. Rodney Square will arrange for
a predetermined amount of money, selected by the
shareholder (the minimum per month is $100), to be
deducted on the 20th of the month from the shareholder's
checking account to purchase shares of the Fund. The
shareholder will receive a confirmation from Rodney Square
and his checking account will reflect the amount charged. A
shareholder may utilize this service by filing an Automatic
Investment Plan application with a voided personal check
with Rodney Square. The shareholder's bank must be able
to accept Automated Clearing House ("ACH") transactions
and/or be a member of an ACH association. The
Automatic Investment Plan normally becomes active within
30 days after the application is received.
OTHER PURCHASE INFORMATION
If shares of the Fund are held in a "street name" account
with an Authorized Dealer, all recordkeeping, transaction
processing and payments of distributions relating to the
beneficial owner's account will be performed by the
Authorized Dealer and not by the Fund. Since the Fund will
have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Dealer to
purchase or redeem shares, to make changes in or give
instructions concerning the account or to obtain information
about the account. The transfer of shares in a "street name"
account to an account with another dealer or to an account
directly with the Fund involves special procedures and will
require the beneficial owner to obtain historical purchase
information about the shares in the account from the
Authorized Dealer.
NET ASSET VALUE PER SHARE
The Fund's shares of stock are purchased and redeemed at
the current net asset value per share. The Fund determines
the net asset value per share by subtracting its total
liabilities (including accrued expenses and dividends payable)
from its total assets (the current market value of securities
the Fund holds plus cash or other assets including income
accrued but not yet received) and dividing the result by the
total number of shares outstanding.
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 listings. 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
either 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 market value as determined in
good faith by the Advisor as directed by the Board of
Directors.
The net asset value per share is calculated as of the close of
the regular session of the New York Stock Exchange
(currently 4:00 pm Eastern Standard Time) each day the
Exchange is open for business. The net asset value appears
daily in the Wall Street Journal and most major newspapers
and is also available by calling the Fund at (800) 366-3863
after 4:30 pm Eastern Standard Time each business day.
REDEMPTION OF SHARES
Shares of the Fund may be redeemed at no charge on any
day that the Exchange is open for business. All redemptions
will be effected as of the day that the Fund's net asset value
is next determined after the receipt of a proper request to
do so. Payment will be made for the shares redeemed
within seven days after the redemption request is processed
by Rodney Square, in accordance with the procedures set
forth below. Redemptions of shares recently purchased by
check will not be mailed until all checks in payment for the
purchase of shares to be redeemed have been collected,
which may take up to 15 days. When payment for recently
purchased shares is made by certified check or wired funds,
redemptions will be made within seven days. The value of
the shares upon redemption may be more or less than the
shareholder's cost depending on the value of the Fund at
that time.
The redemption of shares held in a retirement account may
involve the imposition of charges by the Fund's custodian.
These costs are detailed in Greenspring Fund's Retirement
Account Package available at no charge from the Fund.
Redemption requests should be made in writing to Rodney
Square. Rodney Square does not accept redemption
requests sent by telecopy (fax) unless the request is first
authorized by the Fund. The Fund's fax number is (410)
823-0903. The Fund does not accept telephone redemptions,
except it will accept telephone redemptions from brokerage
firms with whom the Fund has certain operating
relationships. The Fund reserves the right to modify or limit
its procedures for telephone or telecopy redemptions or to
terminate them at any time. Requests for redemption by
telephone, telegram and requests which are subject to any
special conditions or which specify an effective date other
than as described in this Prospectus cannot be accepted.
A proper redemption request includes a written request
which specifies the account number and the number of
shares or the dollar amount to be redeemed. The request
must be signed in exactly the same way as the shares are
registered, including the signature of each joint owner, if
applicable. If any stock certificates were issued for shares
that are included in the redemption request, the certificates
must be presented in properly endorsed form. If the amount
to be redeemed is greater than $10,000, all of the signatures
on the redemption request and/or certificate must be
signature guaranteed as described below. Further
documentation may be requested from corporations,
administrators, executors, trustees, custodians or others who
hold shares in a fiduciary or representative capacity to
evidence the authority of the person or entity making the
request. Redemptions will not become effective until the
Fund has received all of the required, properly executed,
documents. You will be notified promptly in writing by the
Fund if your redemption request cannot be accepted.
The Fund may suspend the right of redemption for any
period during which a) the New York Stock Exchange is
closed or the Securities and Exchange Commission
determines that trading on the Exchange is restricted; b) the
Securities and Exchange Commission determines there is an
emergency as a result of which it is not reasonably
practicable for the Fund to sell its portfolio securities or to
calculate the fair value of its net assets; or c) for such other
periods as the Securities and Exchange Commission may by
order permit for the protection of the Fund's shareholders.
The Fund expects to make all redemptions in cash. For
those shareholders for which it is applicable, the Fund
reserves the right to fulfill a request for redemption by
making a payment in whole or in part in the form of a pro
rata distribution of the Fund's readily marketable securities.
These securities would be valued the same way the securities
are valued in calculating the net asset value of the Fund.
The Fund is governed by Rule 18f-1 under the Investment
Company Act of 1940. Therefore, the Fund is obligated to
redeem shares, with respect to one shareholder during any
90-day period, solely in cash up to the lesser of $250,000 or
1% of the net asset value of the Fund at the beginning of the
period.
The Fund reserves the right to automatically redeem any
account where the account balance falls below $1,000 due to
redemptions by the shareholder. Such redemptions will not
be implemented if the value of a shareholder's account falls
below the minimum account balance due to market
conditions. Shareholders will be notified in writing 60 days
prior to the automatic redemption of their account.
The Fund also reserves the right to involuntarily redeem the
account of any shareholder who has failed to furnish a
certified social security or tax identification number ("TIN")
to the Fund. This will reduce unnecessary expenses
associated with the maintenance of an account of any
shareholder who fails to provide a TIN, and, therefore,
should benefit a majority of the Fund's shareholders. The
Fund will notify shareholders in writing 30 days prior to
involuntarily redeeming shares.
SIGNATURE GUARANTEE
Signature guarantees are required for shareholders'
protection and to prevent fraudulent redemptions. A
signature guarantee will be required for any redemption
request over $10,000, any redemption request where there
has been an address change within 30 days, and, regardless
of the amount, if the redemption proceeds are to be paid to
someone other than the registered owner(s).
A signature guarantee can be obtained from commercial
banks that are FDIC members, trust companies, firms that
are members of a domestic stock exchange and foreign
branches of any of the above. A notary public is not an
acceptable guarantor.
The signature guarantee must appear together with the
signature(s) of the registered owner(s) on the written request
for redemption, on a separate instrument of assignment
(stock power) which may be obtained from banks or
stockbrokers, or on all stock certificates surrendered for
redemption, in which case the signature guarantees must also
appear on the letter of stock power if shares held on deposit
in non-certificate form are also being redeemed.
APPENDIX A
Description of Corporate Bond Ratings
Standard & Poor's Corporation
The ratings are based on current information furnished by
the issuer or obtained by Standard & Poor's from other
sources it considers reliable. Standard & Poor's does not
perform any audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The
ratings may be changed, suspended or withdrawn as a result
of changes in, or unavailability of, such information or for
other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default-capacity and willingness of the
obliger as to the timely payment of interest
and repayment of principal in accordance
with the terms of the obligations.
II. Nature and provisions of the obligation.
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy,
reorganization or other arrangement under
the laws of bankruptcy and other laws
affecting creditors' rights.
AAA - The highest rating assigned by Standard &
Poor's with extremely strong capacity to pay
interest and repay principal.
AA - Differs from the higher rated issues minimally
with a very strong capacity to pay interest
and repay principal.
A - Somewhat more susceptible to the adverse
effects of changes in circumstances and
economic conditions than debt in higher
rated categories with strong capacity to
pay interest and repay principal.
BBB - Normally exhibits adequate protection
parameters but adverse economic conditions or
changing circumstances are more likely to
weaken the capacity to pay interest and
repay principal for debt in this category
than in higher rated categories.
BB, B, CCC, CC, C - While such debt will likely
have some quality and protective
characteristics, these are outweighed by
large uncertainties or major risk
exposures to adverse conditions and are
predominantly speculative with respect to
paying interest and repaying principal.
Moody's Investors Service, Inc.
Aaa - Judged to be of the best quality and carry the
smallest degree of investment risk. Interest
payments are protected by a large or
exceptionally stable margin and principal is
secure. While the various protective
elements are likely to change,
such changes as can be visualized are most
unlikely to impair the fundamentally strong
position of such issues.
Aa - Judged to be of high quality with minimal
investment risk. They are rated lower than
Aaa bonds because margins of protection may
not be as large as Aaa securities or
fluctuation of protective elements may be
of greater amplitude or there may
not be other elements present. Consequently,
the long term risks appear somewhat larger
than with Aaa securities.
A - Possess many favorable investment attributes
with adequate security for repayment of
principal and payment of interest;
elements may be present
which suggest a susceptibility to impairment
sometime in the future.
Baa - Neither highly protected nor poorly secured
with interest payments and principal security
appearing adequate for the present, but
certain protective elements may be lacking or
may be characteristically unreliable over
any great length of time. Such bonds lack
outstanding investment
characteristics and in fact have speculative
characteristics as well.
Ba - Judged to have speculative elements and often
the protection of interest and principal
payments may be only moderate and thereby not
well safeguarded during both good and bad
times over the future. Uncertainty of
position characterizes
bonds in this class.
B - Generally lack characteristics of a desirable
investment with minimal assurance of interest
and principal payments or of maintenance of
other terms of the contract over any long
period of time.
Caa - Are of poor standing and may be in default
or elements of danger with respect to
principal or
interest may be present.
Ca - Represent obligations which are speculative in
a high degree and are often in default or
have other marked shortcomings.
CONTENTS
Synopsis. . . . . . . . . . .2
Fund Expenses. . . . . .2
Total Return Performance2
Financial Highlights Table. .3
General Information . . . . .5
Organization . . . . . .5
Investment Objective . .5
Investment Program . . .6
Non-Investment Grade
Debt Securities 7
Management of the Fund. . . .9
Discussion of Fund
Performance 11
Capital Stock . . . . . . . 12
Shareholder Inquiries. 13
Dividends,
Distributions and
Taxes 13
Purchase of Shares. . . . . 16
Initial Investment . . 16
Additional Investments 18
Automatic Investment
Plan 19
Other Purchase
Information 19
Net Asset Value Per
Share 20
Redemption of Shares. . . . 21
Signature Guarantee. . 24
Appendix A. . . . . . . . . 25
PROSPECTUS
APRIL 30, 1996<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
<PAGE>
FINANCIAL HIGHLIGHTS
Net Asset Value, Beginning of Year
Income From Investment Operations
Net Investment Income
Net Realized and Unrealized Gain/Loss on
Investments
Total From Investment Operations
Less Distributions
Net Investment Income
Net Realized Gain on Investments
Distributions in Excess of Net Realized Gains
Total Distributions
Net Asset Value, End of Year
Total Return
Ratios/Supplemental Data
Net Assets, End of Year (000's)
Ratio of Expenses to Average Net Assets
Ratio of Net Investment Income to Average Net Assets
Portfolio Turnover Rate
<PAGE>
1986
$ 13.85
0.75
1.21
1.96
( 0.74)
( 1.46)
( - )
( 2.20)
$ 13.61
15.95%
$ 14,000
1.46%
5.55%
501.65%
<PAGE>
1987
$ 13.61
1.12
0.07
1.19
( 1.65)
( 1.26)
( - )
( 2.91)
$ 11.89
9.26%
$ 18,416
1.36%
8.57%
929.30%
<PAGE>
1988
$ 11.89
1.44
0.46
1.90
( 1.26)
( 0.03)
( - )
( 1.29)
$ 12.50
15.98%
$ 21,208
1.29%
11.13%
198.76%
<PAGE>
1989
$ 12.50
0.67
0.63
1.30
( 0.79)
( 0.18)
( - )
( 0.97)
$ 12.83
10.60%
$ 22,119
1.27%
6.23%
71.26%
<PAGE>
1990
$ 12.83
0.68
( 1.51)
( 0.83)
( 0.68)
0.00
( - )
( 0.68)
$ 11.32
( 6.51%)
$ 18,989
1.31%
4.82%
90.27%
<PAGE>
1991
$ 11.32
0.49
1.69
2.18
( 0.52)
( 0.07)
( - )
( 0.59)
$ 12.91
19.34%
$ 18,916
1.33%
3.79%
70.21%
<PAGE>
1992
$ 12.91
0.51
1.59
2.10
( 0.51)
( 0.72)
( - )
( 1.23)
$ 13.78
16.52%
$ 20,004
1.48%
3.68%
100.17%
<PAGE>
1993
$ 13.78
0.40
1.59
1.99
( 0.40)
( 1.41)
( - )
( 1.81)
$ 13.96
14.65%
$29,885
1.31%
2.78%
121.79%
<PAGE>
1994
$ 13.96
0.51
( 0.12)
0.39
( 0.51)
( 0.45)
( - )
( 0.96)
$ 13.39
2.83%
$ 50,322
1.27%
4.03%
76.55%
<PAGE>
<PAGE>
1995
$ 13.39
0.70
1.78
2.48
( 0.68)
( 0.07)
( 0.07)
( 0.82)
$ 15.05
18.79%
$ 71,839
1.06%
4.97%
65.19%
<PAGE>
ACCOUNT REGISTRATION FORM
GREENSPRING FUND, INCORPORATED
DO NOT USE THIS FORM TO OPEN AN INDIVIDUAL RETIREMENT ACCOUNT
[ ] INDIVIDUAL OR JOINT REGISTRANT*
*Joint tenancy with right of survivorship unless otherwise indicated.
Owner's First Name Initial Last Name
Joint Owner's First Name Initial Last Name
[ ] GIFT TO A MINOR
Custodian's First Name Initial Last Name
As Custodian For:
Minor's First Name Initial Last Name
Under the Uniform Gifts to Minors Act
(State)
[ ] TRUST
Trustee's(s') Name(s)
Name of Trust Agreement
For the Benefit Of:
Beneficiary's(ies') Name(s)
Date of Trust Agreement
Please include a copy of the page(s) of the trust designating the
trustee(s) and naming the beneficiary(ies).
[ ] CORPORATION OR OTHER ENTITY
TYPE: [ ] Corporation [ ] Partnership [ ] Other
Name of Entity
Include a copy of the corporate resolution.
MAILING ADDRESS
Street
City State Zip Code
( ) ( )
Home Telephone Business Telephone
TAX IDENTIFICATION NUMBER
- - or -
Social Security Number Tax Identification Number
If Gift to a Minor account, use Minor's Social Security Number.
DUPLICATE STATEMENTS
Name
Company or Organization
Street
City State Zip Code
AUTOMATIC INVESTMENT PLAN
You can invest each month by an Automated Clearing House ("ACH")
deduction from your checking account. Please fill out the following
information, attach a voided check and return it to Greenspring Fund
(c/o Rodney Square Management Corporation, P.O. Box 8987,
Wilmington, DE 19899). You will receive a confirmation of each
transaction, occurring on the 20th of each month, and the deduction
from your bank account will appear on your monthly bank statement.
Your first automatic monthly investment will occur approximately 30
days after your application is received.
Monthly investment amount (minimum is $100) to
begin on the 20th of , 19 .
As a convenience to me, you are hereby requested and authorized to pay
and charge to my account debits drawn on my account as indicated
above. This authority is to remain in effect until revoked by me in
writing and, until you actually receive such notice, I agree you shall be
fully protected in honoring any such debit. I further agree that if any
such debit be dishonored, whether with or without cause and whether
intentionally or inadvertantly, you shall be under no liability whatsoever.
Name of Bank
Address of Bank
City State Zip Code
Bank Account Name(s)
( )
Bank Account Number Bank Telephone
Signature
Signature
INVESTMENT
Minimum initial investment is $2,000 for a regular account and $1,000
for an Automatic Investment Plan or a Gift to a Minor account. Checks
should be made payable to Greenspring Fund, Incorporated.
Amount of check enclosed:
Amount wired:
See the Prospectus for wiring instructions.
SIGNATURE
The undersigned certifies that I (we) have full authority and legal
capacity to purchase shares of the Greenspring Fund and affirms that I
(we) have received and read a current Prospectus for the Fund and
agree to be bound by its terms. Furthermore, the undersigned certifies,
under penalty of perjury, that the Social Security or Tax Identification
Number given is correct, and that I (we) am (are) NOT currently subject
to IRS backup withholding because 1) I (we) have not been notified, or
2) notification has been revoked. (Cross out "NOT" if you are currently
subject to backup withholding.)
WELCOME TO GREENSPRING FUND!
Signature Date
Signature Date
If you should need help completing this form or need additional
information, please call Rodney Square Management Corporation, the
Fund's transfer agent, at (800) 576-7498.
<PAGE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Greenspring Fund, Incorporated
("the Fund")
FORM N-1A, PART B
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the Fund's Prospectus dated April 30, 1996, which may be
obtained by calling the Fund at (410) 823-5353 or(800)366-3863 or by writing
to Greenspring Fund, Incorporated, 2330 West Joppa Road, Suite 110,
Lutherville, Maryland 21093-4641.
The date of this Statement of Additional Information is April 30, 1996.
<PAGE>
TABLE OF CONTENTS
Page
Investment Objectives and Policies (Page 5 in Prospectus). . . . . . . . 3
Investment Objective. . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Policies . . . . . . . . . . . . . . . . . . . . . . . . 3
Fundamental Policies . . . . . . . . . . . . . . . . . . . . . 3
Operating Policies . . . . . . . . . . . . . . . . . . . . . . 4
Investment Program . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . 5
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Call Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Put Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Federal Income Tax Treatment of Options . . . . . . . . . . . . . . 6
Non-investment Grade Debt Securities. . . . . . . . . . . . . . . . 7
Foreign Securities. . . . . . . . . . . . . . . . . . . . . . . . . 7
Total Return Performance . . . . . . . . . . . . . . . . . . . . . . . . 8
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Management of the Fund (Page 9 in Prospectus). . . . . . . . . . . . . . 8
Control Persons and Principal Holders of Securities. . . . . . . . . . . 10
Investment Advisor and Advisory Agreement. . . . . . . . . . . . . . . . 10
Portfolio Transactions and Brokerage . . . . . . . . . . . . . . . . . . 11
Purchase, Redemption and Pricing of the Fund's Shares
(Pages 16, 17, 18, 19, 20, 21, 22, 23 and 24 in Prospectus) . . . . 11
Net Asset Value Per Share (Page 20 in Prospectus). . . . . . . . . . . . 11
Pricing of Securities Being Offered. . . . . . . . . . . . . . . . . . . 12
Taxes (Page 13 in Prospectus). . . . . . . . . . . . . . . . . . . . . . 12
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Legal Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Independent Accountants. . . . . . . . . . . . . . . . . . . . . . . . . 13
Investment Objectives and Policies
The following information supplements the discussion of the Fund's investment
objective and program discussed on page 5 of the Prospectus. Unless otherwise
specified, the investment program and policies of the Fund are not fundamental
policies. Any operating policies of the Fund are subject to change by its Board
of Directors without shareholder approval. However, shareholders will be
notified of a material change.
Investment Objective
The Fund's principal objective is to provide long-term growth of capital for its
shareholders through a total return approach to investing. In pursuing its
investment objective, the Fund invests primarily in common stocks, but may
also invest in preferred stocks, debt securities, securities not publicly
traded and money market instruments in order to enhance the total return of the
Fund's portfolio and for temporary defensive purposes in order to preserve its
principal during uncertain market conditions.
Investment Policies
Fundamental Policies
Fundamental policies of the Fund may not be changed without the approval of
the lesser of (1) 67% of the Fund's shares present at a meeting of shareholders
if the holders of more than 50% of the outstanding shares are present in person
or by proxy or (2) more than 50% of the Fund's outstanding shares.
The Fund may not:
1) purchase any securities which would cause more than 5% of its total
assets at the time of such purchase to be invested in the securities
of any issuer, except the U.S. Government;
2) purchase any securities which would cause the Fund at the time of
such purchase to own more than 10% of the outstanding securities of
any class of issuer;
3) purchase any securities which would cause more than 25% of its
total assets at the time of such purchase to be concentrated in the
securities of issuers engaged in any one industry;
4) invest in companies for the purpose of exercising management or
control;
5) purchase or sell real estate, although it may invest in the
securities of companies whose business involves the purchase or
sale of real estate;
6) purchase or sell commodities or commodity contracts;
7) purchase the securities of any other investment company except in
the open market in a transaction involving no commission or profit
to a sponsor or dealer (other than a customary sales load or
broker's commission, if applicable), or as a part of a merger,
consolidation or acquisition.
The purchase of securities of other investment companies is also
limited by the Investment Company Act of 1940 (the "1940 Act"). The
1940 Act provides, in general, that a registered investment company
(the "Acquiring Company") may not acquire any security issued by
another investment company (the "Acquired Company") if the Acquiring
Company immediately after the acquisition owns in the aggregate:
(a) more than 3% of the total outstanding voting stock of the Acquired
Company; (b) securities of the Acquired Company having an aggregate
value in excess of 5% of the value of the total assets of the
Acquiring Company; or (c) securities issued by all investment
companies having an aggregate value in excess of 10% of the total
assets of the Acquiring Company. Investors may incur duplicate fees
to the extent that the Fund invests in other investment companies.
8) purchase securities on margin or effect short sales of securities;
9) make loans, except that it may acquire publicly distributed bonds,
debentures, notes and other debt securities;
10) borrow money, except for temporary emergency purposes, and
then only in amounts not exceeding the lesser of 10% of its total
assets valued at cost or 5% of its total assets valued at market;
11) mortgage, pledge or hypothecate securities;
12) act as securities underwriter, except to the extent that it may
be regarded as an underwriter upon disposition of any of its
securities for purposes of the Securities Act of 1933;
13) deal with any of its officers or directors or with any firm of
which any of its officers or directors is an officer, director or
member as principal in the purchase or sale of portfolio securities;
or effect portfolio transactions through any such officer, director
or firm as agent or broker unless the Fund pays no more than the
customary brokerage charges for such services;
14) purchase or obtain the securities of any issuer if any officer or
director of the Fund owns more than .5% or if all officers and
directors of the Fund together own more than 5% of the securities
of such issuer, provided, that as a matter of operating policy, the
Fund has determined that such limitations will also apply to the
officers and directors of its investment advisor; or
15) issue any obligations, bonds, notes or other senior securities.
Operating Policies
The following restrictions are operating policies which are subject to change by
the Board of Directors without shareholder approval. However, the Fund will not
change any operating policy without notice to the shareholders. The Fund may
not:
1) invest more than 5% of its total assets in the securities of issuers
engaged in continuous operation for less than three years;
2) purchase any securities which will cause more than 5% of its total
assets at the time of such purchase to be invested in securities
which may not be publicly sold without registration under
the Securities Act of 1933 or are otherwise illiquid and not readily
marketable;
3) invest in straddles or spreads;
4) purchase participations or other direct interests in oil, gas or
other mineral exploration or development programs;
5) purchase any securities which would cause more than 2% of its total
assets at the time of such purchase to be invested in warrants which
are not listed on the New York Stock Exchange or
the American Stock Exchange or more than 5% of its total assets to be
invested in warrants acquired by the Fund in units or attached to debt
securities;
6) purchase or sell real estate, including limited partnership interests
unless those limited partnership interests are listed on a nationally
recognized securities exchange, although it may
invest in real estate investments trusts or securities of companies
which invest in real estate; and
7) invest in oil, gas or mineral leases or development programs, but
may invest in securities of companies that invest or sponsor oil,
gas or mineral leases or development programs.
Investment Program
Repurchase Agreements
The Fund may invest in repurchase agreements with domestic banks, brokers or
dealers either for temporary defensive purposes due to market conditions or to
generate income from its excess cash balances. A repurchase agreement is an
agreement under which the Fund acquires a money market instrument from a
domestic bank, broker or dealer, subject to resale to the seller at
an agreed upon price and date (normally, the next business day). The resale
price reflects an agreed upon interest rate effective for the period the
instrument is held by the Fund and is unrelated to the interest rate on the
underlying instrument.
The use of repurchase agreements involves certain risks. For example, if the
seller of securities under an agreement defaults on its obligation to repurchase
the underlying securities at a time when the value of these securities has
declined, the seller may incur a loss upon disposition of them. If the seller
becomes insolvent and subject to liquidation or reorganization under bankruptcy,
a court may determine that the underlying securities are collateral for a loan
by the Fund and therefore subject to sale by the trustee in bankruptcy. It is
expected that these risks can be controlled through careful monitoring
procedures.
Options
The Fund may purchase and sell both call options and put options that are listed
on an organized securities exchange. Although these investment practices will be
used primarily in a hedging function to reduce principal fluctuations or to
generate additional income, they do involve certain risks which are different in
some respects from the investment risks associated with similar funds
which do not engage in such activities. The Fund will not write an option, if,
as a result, the aggregate market value of all portfolio securities covered by
call options or subject to put options exceeds 25% of the market value of the
Fund's net assets.
Since inception of the Fund, the only two options transactions in the Fund's
portfolio enacted were during 1987 and 1991 when covered calls were sold against
a security.
The current market value of a put or call option which has been purchased will
be recorded as an asset on the Fund's statement of assets and liabilities. This
asset will be adjusted daily to the option's current market value which will
be valued at the last quoted sales price, or, if the option has not been traded
or if the last sales price is not within the context of the highest closing
bid and the lowest closing offer, the mean of the bid and asked price on the day
the valuations are made. The assets will be extinguished upon the expiration of
the option, the selling of an identical option in a closing transaction or the
delivery of the underlying security upon the exercise of the option.
Call Options
A call option is a short-term contract pursuant to which the purchaser of the
call option, in return for a premium paid, has the right to buy the security
underlying the option at a specified exercise price at any time during the term
of the option. The writer ("seller") of the call option, who receives the
premium, has the obligation, upon exercise of the option, to deliver the
underlying security against payment of the exercise price during the option
period. A writer is required to deposit in escrow the underlying security or
other assets in order to secure his obligation to deliver the underlying
security.
The Fund may write ("sell") covered call options for the purpose of reducing
the effect of price fluctuations of the securities owned by the Fund. Options
will be sold on the basis of investment considerations consistent with the
Fund's investment objectives. These options will generally be written on
securities which, in the opinion of the Fund, are not expected to make any major
price moves in the near future but which, over the long term, are deemed to be
attractive investments for the Fund.
Options written by the Fund will normally have expiration dates ranging up to
nine months. However, the Fund does not have any control over when it may be
required to sell the underlying securities, since it may be assigned an exercise
notice at any time prior to the expiration of its obligation as a writer. The
exercise price of the options may be below, equal to, or above the current
market value of the underlying securities at the time the options are written.
Although the Fund has no current intention to sell uncovered call options, the
Fund reserves the right to do so. In writing an uncovered call option, the
writer obligates itself to deliver the underlying security at the exercise
price, even though, at the time the option is written, it does not own the
underlying security. Once the option has been written, the Fund will establish
and maintain for the term of the option a segregated account consisting of
cash and U.S. government securities equal to the fluctuating market value of the
underlying securities. If the holder of the option wishes to exercise its
option to buy the underlying security from the writer, the writer must make
arrangements to purchase and deliver the underlying security.
There are risks involved when writing uncovered equity call options. The writer
has assumed the risk of an increase in the price of the underlying security
above the exercise price so long as his obligation as a writer continues.
Should this increase occur, the writer may be issued a notice to exercise the
option and would therefore be required to sell the underlying security at the
exercise price which may be less than the price it must pay or may have paid
to acquire the security, thereby reducing its profit or incurring
a loss. Conversely, should the price of the security decline, the writer has
retained the risk of a loss, which will be offset in whole or in part by the
premium received.
Closing transactions may be effected in order to realize a profit on an
outstanding option or to prevent an underlying security from being called.
Effecting a closing transaction will also permit the Fund to write another
option on the underlying security with either a different expiration date or
exercise price or both.
If the Fund effects a closing purchase transaction and the cost is less (more)
than the premium received from the writing of the option, a profit (loss) will
be realized. Because increases in the market price of the underlying security
will generally effect increases in the market price of an option, any loss
resulting from the repurchase of the option is likely to be offset in whole or
in part by the appreciation of the underlying security owned by the Fund.
The Fund may purchase call options, which may give the Fund the right to buy an
underlying security at the exercise price any time during the option period.
The Fund will not commit more that 5% of its total assets at the time of
purchase to the purchasing of call options. The Fund may purchase a call option
for the purpose of acquiring an underlying security for its portfolio. This
would give the Fund the ability to fix its cost of acquiring the stock at the
exercise price of the call option plus the premium paid, which at time may
cost the Fund less than purchasing the security directly. The Fund is also
partially protected from any unexpected decline in the market price of the
underlying security as long as it holds the option and, therefore, can allow
the option to expire, incurring a loss only to the extent of the premium paid
for the option. The Fund may also purchase a closing call to liquidate a
position and to extinguish its obligation pursuant to a call it has sold.
Put Options
The Fund may write ("sell") put options, which give the Fund the right to sell
and the writer the obligation to buy the underlying security at the exercise
price during the option period. The Fund will generally write put options
when it wishes to purchase the underlying security at a price lower than the
current market price of the security. The Fund will provide that such options
will be offset at the time of the sale by a segregated account consisting of
cash, U.S. Government securities or high-grade debt securities equal in value
to the amount the Fund will be obligated to pay upon exercise of the put.
This amount must be maintained until the put is exercised, has expired or the
Fund has purchased a closing put, which is a put of the same series as
the one previously sold. The risk the Fund would take in writing put options
would be that the market price of the underlying security would decline below
the exercise price less the premiums received. The daily valuation of put
options is substantially identical to that of call options.
The Fund may purchase put options, which give the Fund the right to sell the
underlying security at the exercise price at any time during the option period.
Put options may be purchased for defensive purposes in order to protect
against an anticipated decline in the value of its securities. This
protection would be provided only during the life of the option when the Fund,
as the holder of the option, is able to sell the underlying security at the
put exercise price regardless of that security's current market price.
Purchasing put options involves the risk of losing the entire premium (purchase
price of the option). No more that 5% of the Fund's total net assets, at the
time of purchase, will be committed to the purchasing of put options.
Federal Income Tax Treatment of Options
Set forth below is a brief summary of the federal income tax consequences of
options. It is not intended to be, a complete and detailed description of all
possible tax consequences. Investors should consult their own tax advisors for
more complete information. The summary below assumes that options purchased
by the Fund are capital assets.
When puts and calls written by the Fund (seller) expire unexercised, the premium
received becomes a short-term capital gain at the time of such expiration.
When a covered call written by the Fund is exercised, the amount realized on
the sale of the underlying security is increased by the amount of the premium in
determining gain or loss, and the gain or loss on the sale of the
security is long- or short-term, depending on the holding period of the
underlying security. When puts written by the Fund are exercised, the Fund
will reduce the cost basis of the underlying security by the amount of the
premium received. The Fund will recognize either a long- or short-term capital
gain or loss upon the sale or expiration of the option. Upon the exercise of
an option by the Fund (buyer), if it is a call option, the Fund will increase
the cost basis of the underlying security by the amount value paid
for the option. If it is a put option, the Fund will reduce the amount realized
on the sale of the underlying security by the amount paid for the put option.
Because of tax considerations, the Fund may be limited in its ability to write
or purchase options with an exercise period of less than three months. Gains
or loss on options sold or purchased in hedging transactions will be treated as
ordinary income or loss.
Non-Investment Grade Debt Securities
The high yield bond market is relatively new. Its growth has parallelled a long
economic expansion and has not weathered a recession in its present size and
form. An economic downturn or increase in interest rates is likely to have a
negative effect on the high yield bond market and on the value of high yield
bonds in the Fund's portfolio, as well as the ability of the bonds' issuers
to repay principal and interest. Securities of companies in reorganization
proceedings are relatively unaffected by such events or by changes in prevailing
interest rates. Adverse publicity and investor perceptions, whether or not
based upon rational analysis, may also affect the value and liquidity of high
yield bonds.
The market for non-investment grade bonds may be thinner and less active than
that for higher quality securities, which can adversely affect the price at
which these securities are sold. If market quotations are not available,
non-investment grade securities will be valued in accordance with standards
established by the Board of Directors, including the use of outside pricing
services.
Judgment plays a greater role in valuing high yield corporate debt-securities
than is the case for securities for which more external sources for quotations
and last-sale information is available. To the extent the Fund owns illiquid or
restricted high yield bonds, these securities may involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties.
The economy and interest rates affect high yield securities differently from
other securities. The prices and, therefore, yields of high yield bonds have
been found to be less sensitive to interest rate changes than higher-rated
investments, but more sensitive to adverse economic changes or individual
corporate developments. High yield bonds are subject to a greater risk of
default than high-grade debt securities. During an economic downturn or
substantial period of rising interest rates, highly leveraged issuers
may experience financial stress which would adversely affect their ability to
obtain additional financing. If the issuer of a bond owned by the Fund defaults,
the Fund may incur additional expenses to seek recovery. In addition, periods
of economic uncertainty and changes can be expected to result in increased
volatility of market prices of high yield bonds and the Fund's asset value.
Furthermore, in the case of high yield bonds structured as zero coupon or pay-
in-kind securities, their market prices are affected to a greater extent by
interest rate changes and, thereby, tend to be more speculative and
volatile than securities which pay interest periodically and in cash.
High yield bonds present risk based on payment expectations. For example,
high yield bonds may contain redemption or call provisions. If an issuer
exercises these provisions in a declining interest rate market, the
Fund may have to replace the security with a lower yielding security, resulting
in a decreased return for investors. Conversely, a high yield bond's value will
decrease in a rising interest rate market, as will the value of the Fund's
assets. In addition, there is ahigher risk of non-payment of interest
and/or principal by issuers of high-yield bonds than in the case of investment
grade bonds.
New laws and proposed new laws may have a negative impact on the market for high
yield bonds. As examples, recent legislation requires federally-insured savings
and loan associations to divest themselves of their investments in high yield
bonds and pending proposals are designed to limit the use of tax and other
advantages of high yield bonds. While no initiatives affecting the Fund
have prevailed, any such proposals, if enacted, could have a material negative
effect on the Fund's net asset value and investment practices.
Special tax considerations are associated with investing in high yield bonds
structured as zero coupon or pay-in-kind securities. The Fund reports the
interest on these securities as income even though it receives no cash interest
until the security's maturity or payment date.
Foreign Securities
The Fund may invest in securities principally traded in markets outside the
United States. Investments in foreign securities involve risks that are
different in some respects from investments in securities of U.S.
issuers such as the risk of fluctuations in the value of the currencies in
which they are denominated. Such a fluctuation could make the security worth
less in U.S. dollars even though its worth is more in its home country.
Investments in foreign securities may also be subject to local economic or
political risks such as political instability of some foreign governments and
the possibility of expropriation or confiscatory taxation, imposition of
withholding taxes on dividend or interest payments and limitations
on the removal of funds or other assets of the Fund. There also may be less
publicly available information about foreign securities and governments than
domestic ones. Foreign securities are not registered with the Securities and
Exchange Commission and are generally not subject to the regulatory
controls imposed on domestic securities. Securities of some foreign companies
are less liquid and more volatile than securities of domestic companies and
incur higher custodian charges.
Total Return Performance
The Fund's total return calculations quoted in advertising reflect all aspects
of the Fund's return including the reinvestment of all capital gains
distributions and income dividends for the periods shown and any change in the
Fund's net asset value per share over the period without regard to tax
consequences to the shareholder. Such performance information is based on
historical results and is not intended to indicate future performance. Average
annual returns are calculated by determining the growth or decline in value of
a hypothetical historical investment in the Fund over a stated period and then
calculating the annually compounded percentage rate that would have produced
the same result if the rate of growth or decline in value had been constant
over the period. In addition, the Fund may quote cumulative total returns
reflecting the change in value of an investment over a stated period of time.
The average annual total return of the Fund for the one, five
and ten year periods ended December 31, 1995 were 18.79%, 14.26% and 11.46%,
respectively. The cumulative total return of the Fund for the one, five and
ten year periods ended December 31, 1995 were 18.79%, 94.74% and 195.85%,
respectively.
Portfolio Turnover
While the Fund generally invests in securities for the purpose of seeking
long-term capital gains, the Fund's investment philosophy
may dictate the frequent realization of short-term gains and losses, which
may result in a portfolio turnover rate higher than many other mutual funds.
The portfolio turnover rates for 1995 and 1994 were 65.19% and 76.55%,
respectively.
With the Fund's emphasis on the preservation of capital, certain equities may be
sold at an earlier date than anticipated at the time of purchase. This may be
the case if a sale is warranted by the attainment of the security's price
objective or by a change in the company's investment prospects, economic
conditions or the state of the financial markets. The Fund may also from time
to time purchase equities whose prices are expected to rise over the short term,
but whose longer-term prospects may or may not be attractive. The purchase and
sale of these securities may also lead to a higher than average portfolio
turnover rate. To the extent that the Fund's strategies result in short-term
gains, shareholders will be taxed on such gains at ordinary income rates.
Management of the Fund
The following is a list of the officers and directors of the Fund, and a brief
statement of their present positions and principaloccupations during the last
five years. Unless otherwise noted, the address of each is 2330 West Joppa Road,
Suite 110, Lutherville, Maryland 21093-4641. The Fund's directors who are
considered "interested persons" as that term is defined under Section 2(a)(19)
of the Investment Company Act of 1940 are noted with an asterisk (*). The
individuals so noted are "interested persons" on the basis of their positions
with the Fund's investment advisor, Key Equity Management Corporation
("Advisor") and the Advisor's parent company, Corbyn Investment Management,
Inc. ("Corbyn") except that Mr. William E. Carlson is an "interested person"
by virtue of his familial relationship with Charles vK. Carlson (they are
brothers).
Fletcher, Lewis & Company, Inc., a broker/dealer affiliated with the Fund and
its Adviser through its management, ceased operations in October, 1991.
<PAGE>
Principal
Position(s) Held Occupation(s) During
Name With Registrant Past Five Years
Charles vK. Carlson, CFA*
Age 36
President and Chairman of
the Board<PAGE>
President and Director of the Fund's
Advisor. President of Corbyn
Investment Management, Inc. from
December 1991 to present. Executive
Vice President of Corbyn Investment
Management, Inc. from October 1987
to December 1991.<PAGE>
Michael T. Godack*
Age 42
<PAGE>
Sr. Vice President, Secretary, and
Director<PAGE>
Vice President and Director of the
Fund's Advisor. Managing Director
of Corbyn Investment Management,
Inc.
<PAGE>
Michael J. Fusting, CFA, CPA*
Age 35<PAGE>
Vice President, Treasurer, and
Director<PAGE>
Vice President, Treasurer, and
Director of the Fund's Advisor.
Managing Director of Corbyn
Investment Management, Inc. since
May 1991.
<PAGE>
Richard Hynson, Jr.*
Age 52
<PAGE>
Director<PAGE>
Sr. Vice President and Managing
Director of Corbyn Investment
Management, Inc.
<PAGE>
David T. Fu
1246 Harbor Glen Court
Arnold, MD 21012
Age 39 <PAGE>
Director<PAGE>
Managing Director of Galway
Partners, L.L.C. from January 1995 to
present. Director of Bell Atlantic
Information Services from September
1993 to January 1995. Vice President
of Network Management, Inc. from
February 1992 to September 1993.
Sales Director of Hamilton Avnet
Computer from February 1990 to
February 1992.
<PAGE>
William E. Carlson*
117 E. Churchill Street
Baltimore, MD 21230
Age 38<PAGE>
Director<PAGE>
Partner of Shapiro and Olander from
February 1990 to present. Appointed
and commenced service as a director
on February 15, 1994 to fill vacancy
left by Daniel R. Long, III who
resigned due to competing personal
responsibilities.<PAGE>
<PAGE>
Directors who are not employees of the Fund or companies affiliated with the
Fund will receive a fee of $1,000 for attending the annual meeting plus $350
for each other meeting attended besides the annual meeting and reasonable
out-of-pocket expenses incurred in connection with attending such meetings.
Directors, as well as officers, who are "interested persons" of the Fund do
not receive remuneration from the Fund or from its Advisor, but may receive
remuneration from Corbyn Investment Management.
<PAGE>
Control Persons and Principal Holders of Securities
As of February 29, 1996, there were approximately 4,558,389 shares of capital
stock of the Fund outstanding. Of those shares, the following shareholders
are the recordholders of 5% or more of the outstanding shares of the Fund:
Name/Address Amount/Nature of Ownership Percentage of Ownership
Corbyn Investment Management 1,097,486 24%
2330 West Joppa Road, Suite 108 Record
Lutherville, MD 21093
Charles Schwab & Co., Inc. 835,956 18%
101 Montgomery Street Record
San Francisco, CA 94104
Corbyn Investment Management, an investment research management company
organized in the State of Maryland, is affiliated with the Fund through its
management and with the Fund's Advisor through its management and ownership.
Certain clients of Corbyn may have investment objectives similar to that of the
Fund. Recommendations may be made from time to time which result in the purchase
or sale of a particular security by advisory clients simultaneously with the
Fund. The acquisition or disposition of a security for such clients does not
create an obligation to acquire or dispose of the security for the
Fund. If transactions on behalf of more than one client during the same period
increase the demand for securities being purchased or the supply of the
securities being sold, there may be an adverse effect on price and the ability
of the Fund to obtain or dispose of the full amount of the security which it
seeks to purchase or sell. If Corbyn's clients and the Fund are purchasing a
given security on the same day from the same broker-dealer, the price of the
transaction may be averaged and the average price allocated among the clients
participating in the transaction.
As of March 25, 1996, the officers and directors of the Fund, as a group,
beneficially and of record owned, directly or indirectly,
approximately 31,293 shares of the Fund, representing approximately .69% of the
Fund's outstanding shares.
Investment Advisor and Advisory Agreement
The Fund's investment advisor, Key Equity Management Corporation, a wholly-owned
subsidiary of Corbyn Investment Management, Inc., is located at 2330 West Joppa
Road, Suite 108, Lutherville, Maryland 21093. Key Equity was organized in
October, 1982 and does not have any operating history prior to July 1, 1983.
Key Equity's sole business is to act as investment advisor to the Fund.
Under an Investment Advisory Agreement dated February 28, 1986, which was most
recently approved by the shareholders of the Fund on May 8, 1990, the Advisor
will furnish the Fund with investment research, advice and supervision and will
continuously provide the Fund with an investment program consistent with
policies adopted by the Fund and declared by its Board of Directors.
The Advisor will also supervise the Fund's relations with its custodian,
auditors and federal and state regulatory bodies, will furnish the office space
and all necessary office facilities, equipment and personnel for managing the
investments of the Fund and maintaining its organization and will pay the
salaries and fees of all executive officers and directors of the Fund and for
all clerical services relating to the research oriented work of the Fund's
investment portfolio. However, Corbyn has and may continue to furnish the
office facilities, equipment and salaries as described above, through the
Advisor, at no additional cost to the Fund.
In return for these services, the Fund will pay its Advisor a monthly fee,
accrued daily, at an annual rate of .75% of the Fund's month-end net asset
value. The advisory fee may be reduced to the extent that the Fund's annual
expenses exceed, in any fiscal year, 1.50% of the average daily net assets up
to $30,000,000 and 1% of the average daily net assets over $30,000,000.
Reimbursements of fees paid in excess of this limitation, if any, will be on a
monthly basis. For this purpose, expenses exclude taxes, brokerage fees and
commissions and extraordinary expenses, as determined by the Advisor, such as
litigation.
The investment advisory fees paid by the Fund, under the Investment Advisory
Agreement, which was in effect for the years 1993, 1994 and 1995 were $196,810,
$307,474 and 494,166, respectively. At December 31, 1995, investment advisory
fees payable to the Advisor amounted to $44,801.
The Agreement between the Advisor and the Fund remains in effect from year to
year if such continuance is approved in the manner required by the 1940 Act and,
in respect to its continuance, if the Advisor does not notify the Fund at least
60 days prior to the termination date or 60 days prior to such date in any year
thereafter that it does not desire such continuance. Each year, the Agreement
must be approved by a majority of the Board of Directors or by vote of the
holders of a majority of the outstanding voting securities of the Fund.
Additionally, the Agreement must be approved annually by a majority of the
directors of the Fund who are not parties to the Agreement or "interested
persons" of any such party (as defined in the 1940 Act) by votes
cast in person at a meeting called for this purpose. The Agreement was last
approved on February 15, 1996, the date of the last annual Board of Directors
meeting. The Agreement may be terminated at any time by the Board of Directors
or by the vote of a majority of the outstanding voting securities of the Fund,
without penalty, on 60-days written notice to the Advisor and will
terminate automatically in the event of its assignment.
Portfolio Transactions and Brokerage
The Advisor recommends investment decisions for the Fund which are implemented
by the Fund's officers. Consistent with the policies adopted by the Fund, the
Advisor also selects the brokerage firms which complete securities transactions
for the Fund. All decisions and selections are subject to review quarterly by
the Fund's Board of Directors.
The initial criterion which is applied by the Advisor in selecting brokers and
dealers to effect securities transactions for the Fund is whether brokers and
dealers can obtain the most favorable combination of price and execution for
the transactions. This does not mean that the Fund must base its execution
decisions solely on whether the lowest possible commissions costs may be
obtained. The Advisor determines if the amount of commissions is reasonable in
relation to the value of the brokerage and research services provided, viewed
in the terms of either that particular transaction or the overall
responsibilities to the Fund and that the services provided by a broker provide
the Advisor with lawful and appropriate assistance in the performance of its
investment decision-making responsibilities. In seeking to achieve the best
combination of price and execution, an effort is made to evaluate the overall
quality and reliability of broker-dealers and the
services they provide, including their general execution capabilities and
financial condition.
Commissions paid by the Fund will be compared to commissions known to be
charged by other brokers on similar transactions in order to ascertain that
commissions are within a reasonable range. The Fund's policy that obtaining
a low commission is secondary to obtaining a favorable security price will be
taken into consideration since it is recognized that it is usually more
beneficial to the Fund to obtain a favorable price than to pay the lowest
commission. The Advisor may pay a higher brokerage commission than may be
charged by other brokers to brokers who provide quality, comprehensive and
frequent research studies (such as investment and market research and securities
and economic analysis) to the Fund and its Advisor, which are useful in
performing the advisory activities under contract with the Fund. There is no
current arrangement to do so.
With respect to securities traded only on the over-the-counter market, orders
are executed on a principal basis with primary market makers in such securities,
except when, in the opinion of the Advisor, the Fund may obtain better prices
or executions on a commission basis. Portfolio transactions placed through
dealers serving as primary market makers are effected at net prices,
without commissions, but which include compensation in the form of mark up or
mark down.
During 1995, all the Fund's brokerage commissions were paid to firms which
provided the Fund's Advisor with research services.
For the years 1993, 1994, and 1995 the total brokerage commissions paid by the
Fund were $79,770, $93,888 and 154,298, respectively. No officer or director of
the Fund, nor any officer, director or shareholder of the Fund's Advisor, has
any direct or indirect affiliation with any person employed as a broker by or on
behalf of the Fund.
Purchase, Redemption and Pricing of the Fund's Shares
Net Asset Value Per Share
The Fund's shares of stock are purchased and redeemed at the Fund's current net
asset value per share. The Fund determines the net asset value per share by
subtracting its liabilities (including accrued expenses and
dividends payable) from its total assets (the current market value of the
securities the Fund holds plus cash or other assets, including interest accrued
but not yet received) and dividing the result by the total number of shares
outstanding. Securities for which market quotations are not readily available
will be valued at their fair value as determined under the supervision of the
officers of the Fund, as authorized by the Board of Directors. The net asset
value per share is calculated as of the close of trading on the Exchange each
day the Exchange is open for business.
The Fund's shares are offered for sale on a continuing basis at the current net
asset value per share. Orders received by the Fund prior to the close of the New
York Stock Exchange (the "Exchange") on any day the Exchange is open for
business will be valued at the net asset value per share effective at the close
of the Exchange on that day. It is expected the Exchange will be closed
during 1996 on Saturdays and Sundays and on January 1 (New Year's Day), February
19 (President's Day), April 5 (Good Friday), May 27 (Memorial Day), July 4
(Independence Day), September 2 (Labor Day), November 28 (Thanksgiving Day)
and December 25 (Christmas Day), 1996. Orders received after the close of the
Exchange will be valued at the net asset value computed on the
next business day. There is no sales charge included in the price of the shares.
All purchases and redemptions will be in full and fractional shares carried out
to three decimal places.
The Fund expects to make all redemptions in cash. For those shareholders for
which it is applicable, the Fund reserves the right to honor any request for
redemption by making a payment in whole or in part in the form of a pro rata
distribution of the Fund's readily marketable securities. These securities
would be valued the same way the securities are valued in calculating the net
asset value of the Fund. The Fund is governed by Rule 18f-1 under the
Investment Company Act of 1940. Therefore, the Fund is obligated to redeem
shares, with respect to one shareholder during any 90-day period,
solely in cash up to the lesser of $250,000 or 1% of the net asset value of
the Fund at the beginning of the period.
Pricing of Securities Being Offered
Securities listed on a national securities exchange or the NASDAQ National
Market System are valued at the last reported sales price on the exchange of
major listings. 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 sales 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 either 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 market value as determined in good faith by the Advisor as directed
by the Board of Directors.
Taxes
Set forth below is a brief summary of the Federal income tax consequences of an
investment in the Fund. It is not intended to be a complete and detailed
description of all possible tax consequences. Investors should consult their
own tax advisors for more complete information.
The Fund intends to qualify each year as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986 ("the Code") as amended. To
qualify as a regulated investment company, the Fund, among other things, must
(a) diversify its holdings so that at the end of each fiscal quarter (i) at
least 50% of the value of its total assets is represented by cash and cash
items (including receivables), Government securities, securities of other
regulated investment companies and other securities generally limited, in
respect of any one issuer, to an amount not greater than 5% of the total assets
of the Fund taken at market value and to not more than 10% of the outstanding
voting securities of such issuer and (ii) not more than 25% of the value of
its total assets is invested in the securities (other than Government securities
or securities of other regulated investment companies) of any one issuer;
(b) derive at least 90% of its gross income from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock or securities or foreign currencies or other income derived with respect
to the Fund's business of investing in such stock, securities or currencies;
and (c) derive less than 30% of its gross income from the sale or other
disposition of stock, securities and certain options, futures or forward
contracts or certain foreign currencies held less than three months.
If the Fund qualifies as a regulated investment company, and provided that at
least 90% of its investment company taxable income earned in the taxable year
(computed without regard to the deduction for dividends paid) and at least 90%
of its net interest income earned in the taxable year is distributed to its
shareholders, the Fund, in computing its investment company taxable income
and the amount of its net capital gain subject to tax, will be entitled to a
dividends-paid deduction for the ordinary dividends and capital gains
distributions that it distributes to shareholders during the taxable year.
In addition, in each calendar year, the Fund is required to distribute the
sum of 98% of the ordinary income earned in such calendar year, 98% of the
capital gain net income earned in the 12-month period ending October 31 and
any undistributed ordinary income and undistributed capital gain net income
from the prior year or the Fund will be subject to a non-deductible 4% excise
tax on the undistributed amount. For purposes of this excise tax, amounts on
which the Fund pays income tax are treated as distributed.
Dividends from the Fund may be ordinary income dividends or capital gains
dividends and such dividends will be includable in the income of the
shareholders whether received in cash or reinvested in shares of the Fund.
The characterization of a dividend as a capital gain dividend will be designated
in a notice mailed to shareholders. Capital gains distributions are taxable to
shareholders as long term capital gains, regardless of how long the shares of
the Fund have been held. Stockholders may also be required to include in income
a designated portion of the Fund's undistributed net capital gain, but will
be entitled to a credit for tax on such amount that was paid by the Fund and
to an increase in the basis of their shares for 65% of the amount included in
income. All or a portion of distributions received by corporate shareholders of
the Fund may not qualify for the dividends-received deduction depending, among
other things, upon the amount of dividend income received by the Fund.
Distributions from the Fund in excess of the Fund's current and accumulated
earnings and profits will not be treated as a dividend. Instead, such
distribution will be a non-taxable return of capital applied first to reduce
the shareholder's adjusted basis in his shares, and to the extent that such
distribution exceeds the shareholder's adjusted basis, the excess will be
treated as a gain from the sale of the shares. For 1995, the Fund made the
following distributions:
Ordinary Dividends Per Share $.68
Short-Term Capital Gains Distribution Per Share $.07
Long-Term Capital Gains Distribution Per Share $.07
Assuming the shares are a capital asset, any gain or loss realized upon a sale
or redemption of shares by a shareholder will be treated as long-term a capital
gain or loss if the shares have been held for more than one year. Otherwise,
the sale will be treated as a short-term capital gain or loss, except that
any loss realized by a shareholder upon the sale of shares will be treated as a
long-term capital loss to the extent of any capital gain distributions received
by the shareholder plus any undistributed net capital gain which he has included
in income.
Dividends and distributions are generally taxable to shareholders in the year in
which received. Dividends declared by the Fund in October, November or December
of a calendar year, but paid during January of the following calendar year,
will be treated as received by shareholders on December 31.
Custodian
Wilmington Trust Company, whose address is Rodney Square North, 1100 North
Market Street, Wilmington, DE 19890-0001, acts as custodian for the Fund's
investments. Wilmington Trust Company does not have any part in determining
the investment policies of the Fund.
Legal Counsel
The law firm of De Martino Finkelstein Rosen & Virga, whose address is 1818 N
Street, N.W., Suite 400, Washington, D.C. 20036, serves as outside legal counsel
for the Fund.
Independent Accountants
Coopers & Lybrand L.L.P., Certified Public Accountants, whose address is 217
East Redwood Street, Baltimore, Maryland 21202, has been retained as the
independent accountants to the Fund. The financial statements of the Fund for
the year ended December 31, 1995 and the report ofindependent accountants are
included in the Fund's Annual Report for the fiscal year ended December 31,
1995, which is incorporated by reference into this Statement of Additional
Information.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Part A:
Financial Highlights Table for the Years Ended December 31, 1995;
1994; 1993; 1992; 1991; 1990; 1989; 1988; 1987; and 1986.
Part B:
The following financial statements are incorporated by reference from
the Registrant's Annual Report to Shareholders dated December 31,
1995:
Portfolio of Investments, December 31, 1995
Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the Year Ended December 31, 1995
Statement of Changes in Net Assets for the Years Ended December 31,
1995 and 1994
Notes to Financial Statements, December 31, 1995
Financial Highlights Table For the Years Ended December 31, 1995;
1994; 1993; 1992; and 1991
Report of Independent Accountants
Performance Since Inception
(b) Exhibits:
Exhibit
Number Description
1(a) Copy of the Articles of Incorporation of Registrant - Copy of the
Articles of Incorporation of the Registrant was filed
as Exhibit 1 to the Registrant's Registration Statement on Form N-1
(File No. 2-81956 and 811-3627) on February 11, 1983, which is hereby
incorporated by reference.
(b) Copy of the amendment to the Articles of Incorporation of Registrant -
Copy of the amendment to the Articles of Incorporation of Registrant,
dated May 8, 1990, was filed as Exhibit 1 (a) to the Registrant's
Post-Effective Amendment No. 12 (File No. 2-81956 and 811-3627) on
April 29, 1992, which is hereby incorporated by reference.
2(a) Copy of the By-laws of the Registrant - Copy of the By-laws of the
Registrant was filed as Exhibit 2 to the Registrant's Registration
Statement on Form N-1 (File No. 2-81956 and 811-3627) on February 11,
1983, which is hereby incorporated by reference.
(b) Copy of the amendment to the By-Laws of Registrant - Copy of the
amendment to the By-Laws, dated May 8, 1990, was filed as Exhibit 2
(b) to the Registrant's Post-Effective Amendment No. 12 (File No.
2-81956 and 811-3627) on April 29, 1992, which is hereby incorporated
by reference.
3 Not Applicable (Copy of the voting trust agreement)
4 Specimen certificate for shares of common stock of the Registrant was
filed as Exhibit 4 to the Registrant's Registration Statement on Form
N-1 (File No. 2-81956 and 811-3627) on February 11, 1983, which is
hereby incorporated by reference.
5 Copy of the Investment Advisory Agreement - Copy of the Investment
Advisory Agreement was filed as Exhibit 5 to the Registrant's
Post-Effective Amendment No. 5 (File No. 2-81956 and 811-3627) on
May 16, 1986, which is hereby incorporated by reference.
6 Not Applicable (Copy of the underwriting or distribution contract)
7 Not Applicable (Copy of all bonus, profit sharing or similar contacts)
8(a) Copy of the Custodial Agreement of the Registrant - Copy of the
Custodial Agreement of the Registrant, dated October 1, 1994, was
filed as Exhibit 8(a) to the Registrant's Post-Effective Amendment
No. 17 (File No. 2-81956 and 811-3627) on March 29, 1995.
8(b) Copy of the Custodial Fees (schedule of remuneration) of the
Registrant - Copy of the Custodial Fees (schedule of remuneration),
dated October 1, 1994, was filed as Exhibit 8(b) to the Registrant's
Post-Effective Amendment No. 17 (File No. 2-81956 and 811-3627) on
March 29, 1995.
9(a) Copy of the Charles Schwab Operating Agreement - Copy of the Charles
Schwab Operating Agreement, dated September 14, 1993, was filed as
Exhibit 9 to the Registrant's Post-Effective Amendment No. 16
(File No. 2-81956 and 811-3627) on March 31, 1994, which is hereby
incorporated by reference.
9(b) Copy of the Transfer Agent Agreement of the Registrant - Copy of the
Transfer Agent Agreement of the Registrant, dated October 1, 1994,
was filed as Exhibit 9(b) to the Registrant's Post-Effective
Amendment No. 17 (File No. 2-81956 and 811-3627) on March 29, 1995.
10 An Opinion and Consent of Counsel was filed with Form 24f-2 on
February 26, 1996.
11 Copies of the Independent Certified Public Accountants' Opinions and
Statements of Consent - the Opinions and Statements of Consent of
Coopers & Lybrand L.L.P., dated January 19, 1996 and April 24, 1996,
respectively, and Arthur F. Bell, Jr. and Associates, dated January
30, 1992 and April 11, 1996, respectively, are attached as
Exhibit 11 to the Registrant's Post-Effective Amendment No. 18 (File
No. 2-81956 and 811-3627) as filed on April 30, 1996.
12 Not Applicable (Copy of financial statements omitted from Item 23)
13 Copies of agreements of Registrant providing the initial capital of
$100,000.00 - Copies of agreements of Registrant's providing the
initial capital was filed as Exhibit 13 to the Registrant's
Registration Statement of Form N-1 (File No. 2-81956 and 811-3627)
on April 30, 1983, which is hereby incorporated by reference.
14 Copy of model plan used in establishing a retirement plan - Copy of
model plan used in establishing a retirement plan was filed as Exhibit
14 to the Registrant's Post-Effective Amendment No. 3 (File No.
2-81956 and 811-3627) on February 6, 1985, which is hereby
incorporated by reference.
15 Not Applicable (Copy of any plan entered into describing the financing
and distribution of the Registrant's shares).
16 Copy of Schedule of Computation of Performance of Registrant - Copy of
the Schedule of Computation of the Registrant was filed as Exhibit 16
to the Registrant's Post-Effective Amendment No. 9 (File No. 2-81956
and 811-3627) on May 10, 1989, which is hereby incorporated by
reference.
17 Copy of a Financial Data Schedule - A copy of a Financial Data
Schedule is being filed as Exhibit 17 to the Registrant's
Post-Effective Amendment No. 18 (File No. 2-81956 and 811-3627) on
April 30, 1996.
Item 25. Persons Controlled by or Under Common Control with Registrant
Charles vK. Carlson is President of Corbyn Investment Management, Inc. and
Messrs. Godack, Hynson, Trump and Fusting and Karla Moore are Managing Directors
of Corbyn Investment Management, Inc. Messrs. Carlson, Godack, Trump and Fusting
are also directors of Key Equity Management Corporation. Corbyn Investment
Management, Inc. owns 100% of the total outstanding stock of Key Equity
Management Corporation. As of the date of this filing, approximately 24% of
the Fund's outstanding stock was owned by various private counsel clients of
Corbyn Investment Management, Inc., as to which Corbyn Investment
Management, Inc. has discretionary authority. See the response to Item 28 below
for further information regarding Key Equity Management Corporation.
Item 26. Number of Holders of Securities
As of March 29, 1996, the number of record holders of each class of securities
of the Registrant was as follows:
Title of Class Number of Record Holders
Common Stock (par value 2,713
$.01 per share)
Item 27. Indemnification
Under the terms of the Registrant's Articles of Incorporation and By-Laws, the
registrant may indemnify any person to the extent permitted by law.
Section 2-418 of the Maryland General Corporation Law generally provides that
corporations may indemnify officers and directors, including indemnification for
judgments, fines, settlement amounts and reasonable expenses actually incurred,
if the officer or director acted in good faith. However, if the proceeding is
one by or in the right of the corporation, indemnification may be made
only against reasonable expenses and may not be made in respect of any
proceeding in which the director shall have been adjudged to be liable to the
corporation. The statute provides that the termination of any proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent creates a rebuttable presumption that the director did
not meet the requisite standard of good faith. This statute also provides that
the corporation may maintain insurance on behalf of directors, officers,
employees and agents for liabilities arising out of such persons' actions on
behalf of the corporation in good faith.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless if in the opinion of its counsel,
the matter has been settled by a controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisor
Key Equity Management Corporation (the "Advisor") was incorporated on October
21, 1982 to act in the capacity of investment advisor to the Fund. As stated
in the Fund's Statement of Additional Information, officers and directors of the
Advisor are also directors of the Fund and Corbyn Investment Management.
Corbyn Investment Management is a registered investment advisor
with its principal business address as 2330 West Joppa Road, Suite 108,
Lutherville, Maryland 21093.
Set forth below is a list of each officer and director of the Advisor indicating
each business, profession, vocation or employment of a substantial nature in
which each such person is engaged:
Charles vK. Carlson
President and Director of Key Equity Management Corporation; President and
Chairman of the Board of Directors of Greenspring Fund, Inc; President of
Corbyn Investment Management, Inc.
Michael Timothy Godack
Vice-President and Director of Key Equity Management Corporation; Senior
Vice-President, Secretary, and Director of the Greenspring Fund, Inc.;
Managing Director of Corbyn Investment Management, Inc.
Michael J. Fusting
Vice-President, Treasurer, and Director of Key Equity Management Corporation;
Vice-President, Treasurer and Director of the Greenspring Fund, Inc.;
Managing Director of Corbyn Investment Management, Inc.
David Allen Trump
Vice President and Director of Key Equity Management Corporation; Managing
Director of Corbyn Investment Management, Inc.
Karla Keller Moore
Secretary and Director of Key Equity Management Corporation; Managing Director
and Secretary of Corbyn Investment Management, Inc.
Item 29. Principal Underwriters
The Registrant does not have any principal underwriter of its shares.
Item 30. Location of Accounts and Records:
(a) With respect to the required books and records to be maintained by the
Registrant's Custodian under Section 31(a) of the 1940 Act, the address is:
Wilmington Trust Corporation
Wilmington Trust Center
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
(b) With respect to the required books and records to be maintained by the
Registrant's Transfer Agent under Section 31(a) of the 1940 Act, the address is:
Rodney Square Management Corporation
1105 North Market Street, 3rd Floor
Wilmington, DE 19890
(c) With respect to all other required books and records to be maintained by
the Registrant at its principal office and the Registrant's Investment Advisor
under Section 31(a) of the 1940 Act, the person maintaining physical possession
and the address are:
Michael T. Godack
Greenspring Fund, Incorporated
2330 West Joppa Road, Suite 110
Lutherville, Maryland 21093
Item 31. Management Services
The Registrant is not a party to any management-related service contract.
Item 32. Undertakings
Not Applicable<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to the Rule 485(b)
under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 18 to be signed on its behalf by the undersigned, thereto duly
authorized, in the County of Baltimore and State of Maryland on the 18th day of
April, 1996.
Greenspring Fund, Incorporated
By: S/Charles vK. Carlson
Charles vK. Carlson, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
Signature Title Date
S/Charles vK. Carlson President and Chairman of the Board April 18, 1996
Charles vK. Carlson (Principal Executive Officer)
S/Michael T. Godack Senior Vice President, Secretary
Michael T. Godack and Director
S/Michael J. Fusting Vice-President, Treasurer
Michael J. Fusting and Director (Principal
Financial Officer)
S/Richard Hynson, Jr. Director
Richard Hynson, Jr.
S/David T. Fu Director
David T. Fu
S/William E. Carlson Director
William E. Carlson<PAGE>
EXHIBIT 11
COPIES OF THE
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS'
OPINIONS
AND
STATEMENTS OF CONSENT<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to the Rule 485(b)
under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 18 to be signed on its behalf by the undersigned, thereto duly
authorized, in the County of Baltimore and State of Maryland on the 18th day
of April, 1996.
Greenspring Fund, Incorporated
By: S/Charles vK. Carlson
Charles vK. Carlson, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title Date
President and Chairman of the Board April 18, 1996
S/Charles vK. Carlson (Principal Executive Officer)
Charles vK. Carlson
S/Michael T. Godack Senior Vice President,
Michael T. Godack Secretary and Director
S/Michael J. Fusting Vice-President, Treasurer
Michael J. Fusting and Director (Principal
Financial Officer)
S/Richard Hynson, Jr. Director
Richard Hynson, Jr.
S/David T. Fu Director
David T. Fu
S/William E. Carlson Director
William E. Carlson<PAGE>
EXHIBIT 17
COPY OF THE
FINANCIAL DATA SCHEDULE
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<RESTATED>
<CIK> 0000711322
<NAME> GREENSPRING FUND, INCORPORATED
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 63,679,999
<INVESTMENTS-AT-VALUE> 71,495,024
<RECEIVABLES> 1,110,726
<ASSETS-OTHER> 701
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 72,606,451
<PAYABLE-FOR-SECURITIES> 495,985
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 271,371
<TOTAL-LIABILITIES> 767,356
<SENIOR-EQUITY> 47,744
<PAID-IN-CAPITAL-COMMON> 64,353,353
<SHARES-COMMON-STOCK> 4,774,378
<SHARES-COMMON-PRIOR> 3,759,434
<ACCUMULATED-NII-CURRENT> 109,378
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 486,405
<ACCUM-APPREC-OR-DEPREC> 7,815,025
<NET-ASSETS> 71,839,095
<DIVIDEND-INCOME> 1,210,291
<INTEREST-INCOME> 2,718,489
<OTHER-INCOME> 13,564
<EXPENSES-NET> 693,136
<NET-INVESTMENT-INCOME> 3,249,208
<REALIZED-GAINS-CURRENT> (127,537)
<APPREC-INCREASE-CURRENT> 7,706,761
<NET-CHANGE-FROM-OPS> 10,828,432
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,139,831)
<DISTRIBUTIONS-OF-GAINS> (289,108)
<DISTRIBUTIONS-OTHER> (358,868)
<NUMBER-OF-SHARES-SOLD> 1,664,602
<NUMBER-OF-SHARES-REDEEMED> 881,936
<SHARES-REINVESTED> 232,278
<NET-CHANGE-IN-ASSETS> 21,516,881
<ACCUMULATED-NII-PRIOR> 289,108
<ACCUMULATED-GAINS-PRIOR> 108,264
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 494,166
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 693,136
<AVERAGE-NET-ASSETS> 65,340,177
<PER-SHARE-NAV-BEGIN> 13.39
<PER-SHARE-NII> .70
<PER-SHARE-GAIN-APPREC> 1.78
<PER-SHARE-DIVIDEND> (.68)
<PER-SHARE-DISTRIBUTIONS> (.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.05
<EXPENSE-RATIO> 1.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>