February 27, 1998
Mr. Kevin Ruppert
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Greenspring Fund, Incorporated
File No. 811-3627
Dear Mr. Ruppert:
Transmitted for your review is Greenspring Fund, Incorporated's
(the "Fund") Post-Effective Amendment No. 20. The Fund is seeking to update
and improve both its advisory agreement and its fundamental policies, the
details of which are outlined in the Fund's Definitive Proxy filed on February
19, 1998. The Fund's Post-Effective Amendment No. 20 assumes that shareholders
approve each proposal.
Should you have any comments, please contact Ralph De Martino, the Fund's
Counsel, at (202) 659-0494. Thank you.
Sincerely,
/s/Elizabeth C. Agresta
Elizabeth C. Agresta
Administrator
Attachments
<PAGE>
As filed with the Securities and Exchange Commission on February 27, 1998
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. 20 X
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 20 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)
on (date) pursuant to paragraph (b)
X 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 27, 1998.
<PAGE>
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 . . . . . . . 1
Item 2. Synopsis . . . . . . . . 2
Item 3. Financial Highlights Table 4
Item 4. General Description of
Registrant . . . . . . . 5
Item 5. Management of the Fund . . 8
Item 6. Capital Stock and Other
Securities . . . . 11
Item 7. Purchase of Shares . . . . 14
Item 8. Redemption of Shares . . . 17
Item 9. Pending Legal Proceedings N/A
Part B Location in Statement of
Additional Information
Item 10. Cover Page. . . . . . . . . 1
Item 11. Table of Contents. . . . . . 2
Item 12. General Information and
History. . . . . . . . . . 3
Item 13. Investment Objectives and
Policies . . . . . . . . . 3
Item 14. Management of the Fund . . . 7
Item 15. Control Persons and
Principal Holders of
Securities. . . . . . . . . 8
Item 16. Investment Advisory and
Other Services . . . . . . 8
Item 17. Brokerage Allocation and
Other Services . . . . . . 9
Item 18. Capital Stock and Other
Securities . . . . . . . . 9
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered. . . . . . . 9
Item 20. Taxes. . . . . . . . . . . . . . 10
<PAGE>
Part B (Continued)
Item 21. Underwriters . . . . . . . . . . . N/A
Item 22. Calculations of Yield
Quotations of Money
Market Funds . . . . . . . . . . . N/A
Item 23. Financial Statements . . . . . . . Incorporated by reference
Information required to be included in Part C is
set forth under the appropriate Item so numbered
in Part C of this Registration Statement.
<PAGE>
GREENSPRING FUND,
INCORPORATED
[LOGO]
PROSPECTUS
May 1, 1998
<PAGE>
CONTENTS
Synopsis . . . . . . . . . . . . . . . . . . . 2
Fund Expenses . . . . . . . . . . . . . . 2
Total Return Performance. . . . . . . . . 2
Financial Highlights Table . . . . . . . . . . 3
General Information. . . . . . . . . . . . . . 5
Organization. . . . . . . . . . . . . . . 5
Investment Objective. . . . . . . . . . . 5
Investment Program. . . . . . . . . . . . 5
Description of Investments. . . . . . . . 6
Management of the Fund . . . . . . . . . . . . 8
Discussion of Fund Performance . . . . . . . .10
Capital Stock. . . . . . . . . . . . . . . . .11
Shareholder Inquiries . . . . . . . . . .11
Dividends, Distributions and Taxes. . . .12
Purchase of Shares . . . . . . . . . . . . . .14
Initial Investment. . . . . . . . . . . .14
Additional Investments. . . . . . . . . .15
Automatic Investment Plan . . . . . . . .16
Other Purchase Information. . . . . . . .16
Net Asset Value Per Share . . . . . . . .17
Redemption of Shares . . . . . . . . . . . . .17
Telephone Redemptions . . . . . . . . . .19
Systematic Withdrawal Plan. . . . . . . .19
Signature Guarantee . . . . . . . . . . .20
Appendix A . . . . . . . . . . . . . . . . . .21<PAGE>
GREENSPRING FUND,
INCORPORATED
MAY 1, 1998
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 May
1, 1998, 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. The SEC maintains an Internet site at http://www.sec.gov
that contains the Prospectus, the Statement of Additional Information,
quarterly reports to shareholders and other information regarding 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. <PAGE>
SYNOPSIS
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 daily net assets)
Management Fees 0.75%
Other Expenses (See Annual Report) 0.25%
Total Fund Operating Expenses 1.00%
The following example illustrates the expenses you would bear directly or
indirectly on a $1,000 investment over various time periods assuming a 5%
annual return and redemption at the end of each time period.
1 Year-$10 Years-$32 5 Years-$55 10 Years-$122
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. The Fund's Annual Report
to Shareholders discusses the Fund's performance during 1997 and can
be obtained from the Fund at no charge.
2
<PAGE>
FINANCIAL HIGHLIGHTS TABLE
The following table provides information regarding per share income and
capital changes for the period December 31, 1988 through December 31, 1997.
It is based on a single share outstanding throughout each fiscal year. This
information should be read in conjunction with the Fund's financial statement
s appearing in the Fund's Annual Report to Shareholders, which is
incorporated by reference into the Statement of Additional Information and
this Prospectus. The Fund's financial statements and financial highlights
table for the latest six fiscal years have been audited by Coopers & Lybrand
L.L.P. Prior periods were audited by a different accounting firm.
The unqualified opinion of the independent accountant covering the most recent
five years is contained in the Fund's December 31, 1997 Annual Report to
Shareholders.<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year $11.89 $12.50 $12.83 $11.32 $12.91 $13.78 $13.96 $13.39 $15.05 $17.24
Income from Operations
Net Investment Income 1.44 0.67 0.68 0.49 0.51 0.40 0.51 0.70 0.74* 0.50
Net Realized and Unrealized
Gain/Loss on Investments 0.46 0.63 (1.51) 1.69 1.59 1.59 (0.12) 1.78 2.60* 3.58
Total From Investment Operations 1.90 1.30 (0.83) 2.18 2.10 1.99 0.39 2.48 3.34 4.08
Less Distributions
Net Investment Income (1.26) (0.79) (0.68) (0.52) (0.51) (0.40) (0.51) (0.68) (0.59) (0.67)
Net Realized Gain on
Investments (0.03) (0.18) 0.00 (0.07) (0.72) (1.41) (0.45) (0.07) (0.56) (0.60)
Distributions in Excess
of Net Investment Income - - - - - - - - - (0.01)
Distributions in Excess
of Net Realized Gains - - - - - - - (0.07) - -
Total Distributions (1.29) (0.97) (0.68) (0.59) (1.23) (1.81) (0.96) (0.82) (1.15) (1.28)
Net Asset Value, End of Year $12.50 $12.83 $11.32 $12.91 $13.78 $13.96 $13.39 $15.05 $17.24 $20.04
Total Return 15.98% 10.60% (6.51%)19.34% 16.52% 14.65% 2.83% 18.79% 22.65% 23.95%
Ratio/Supplemental Data
Net Assets, End of Year (000's) $21,208$22,119$18,989$18,916$20,004$29,885 $50,322$71,839$91,492$181,214
Ratio of Expenses to
Average Net Assets 1.29% 1.27% 1.31% 1.33% 1.48% 1.31% 1.27% 1.06% 1.04% 1.00%
Ratio of Net Investment
Income to Average Net Assets 11.13% 6.23% 4.82% 3.79% 3.68% 2.78% 4.03% 4.97% 4.69%* 3.10%
Portfolio Turnover Rate 198.76% 71.26% 90.27% 70.21% 100.17% 121.79% 76.55% 65.19% 60.74% 46.17%
Average Commission Paid
Per Share N/A+ N/A+ N/A+ N/A+ N/A+ N/A+ N/A+ N/A+ $0.0477$0.0527
</TABLE>
*Amounts include reclassifications to conform to current year presentation.
+Disclosure not required in prior periods.
4
<PAGE>
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 (the "1940 Act"). 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. The objective of this diversification of security
types is to enhance the total return of the Fund's portfolio and to
preserve its principal during uncertain market conditions.
The Fund's fundamental policies are subject to restrictions as described in
the Statement of Additional Information and may be changed only with approval of
at least a majority of the outstanding shares of the Fund.
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 is designed for long-term investors and should not be relied on for
short-term financial needs or for short-term investment in the stock market.
The Fund reserves the right to reject a purchase order if it believes
it is being used as a vehicle for timing the 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
relative to the general market and the company's industry peers. The Advisor
researches each security separately and analyzes the company's profitability,
the strength of its balance sheet, its ability to generate free cash flow,
5
<PAGE>
the value of unrecognized assets, management's ability to capitalize upon the
company's assets and anticipated economic trends. 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 fluctuates given the Advisor's evaluation of the
outlook forspecific 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 types 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.
DESCRIPTION OF INVESTMENTS
COMMON STOCK
Common stock is issued by a company to raise cash for business purposes and
represents ownership in the issuing company. The price of common stock is
affected by both short and long-term influences. Factors that affect the
market value of a common stock include market conditions, interest rates,
investor perception and other company, political and economic news.
PREFERRED STOCK
Preferred stock also represents ownership in a company. Preferred stock
ranks after bonds and before common stock in its claim on income for dividend
payments and on assets should the company be liquidated.
CONVERTIBLE SECURITIES
Convertible securities are bonds, preferred stocks and other securities that
normally pay a fixed rate of interest or dividend and give the owner the option
to convert the security into common stock. While the value of convertible
securities depends in part on interest rate changes and the credit quality of
the issuer, the price will also change based on the price of the underlying
stock. While convertible securities generally have less potential
for gain than common stock, their income provides a cushion against a stock
price decline. They generally pay less income than non-convertible bonds.
CORPORATE DEBT SECURITIES
A debt security, also referred to as a bond, is a loan made to an issuing
company or by an investor. The Fund may invest in debt securities without
regard to their rating by Standard & Poor's Corporation ("S & P") or
Moody's Investors Service, Inc. ("Moody's). (See Appendix A). S & P and Moody's
rate securities as to their credit quality, which may be helpful in judging
the assurance of interest and principal payments. S & P and
6
<PAGE>
Moody's 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. Because credit ratings may not be timely changed to
reflect subsequent events, the Advisor continuously monitors the issuers of
non-investment grade debt securities 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 debt securities' 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 price of the Fund's debt securities, 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 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) - .73%; BBB
(S & P) - .59%, Baa (Moody's) - .47%; BB (S & P) - 2.45%, Ba (Moody's) - 1.02%;
B (S & P) - 12.13%, B (Moody's) - 14.50%; CCC (S & P) - 1.05%, Caa (Moody's) -
.53%; D (S & P) - .39%, Ca (Moody's) - .39% and (2) bonds not rated, which is
not indicative of an unfavorable rating, is S & P - 3.17% and Moody's - 2.87%.
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.
7
<PAGE>
RULE 144A SECURITIES
Rule 144A securities are subject to certain legal or contractual restrictions
on their resale, which may cause them to be illiquid. The National
Association of Securities Dealers ("NASD") maintains a computerized market in
certain Rule 144A securities (known as the "PORTAL Market"). For many other
Rule 144A securities, there is an active secondary trading market maintained
by large, national broker-dealers who provide continuous bid and asked
quotations for such securities. As a general rule, the Adviser intends to
limit the investment by the Fund in Rule 144A securities to those described
above.
OTHER INVESTMENTS
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.
MANAGEMENT OF THE FUND
The Board of Directors supervises the management of the Fund. The Statement
of Additional Information, under "Management of the Fund," contains general
background information about each Director. The executive officers
of the Fund, whose services are provided by the Fund's Advisor, serve without
compensation from the Fund.
Key Equity Management Corporation, located at 2330 West Joppa Road, Suite 108,
Lutherville, Maryland 21093 was organized in October 1982 solely 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. Subject to the supervision of the Board of Directors
of the Fund, the Advisor will make investment decisions for the Fund, provide
the Fund with investment objectives, policies and limitations, place orders to
8
<PAGE>
purchase and sell securities for the Fund and provide a program of continuous
investment management for the Fund in accordance with the 1940 Act.
As compensation for the services provided and expenses assumed by the Advisor,
the Fund will pay the Advisor at the end of each calendar month an advisory
fee of .75% of average daily net assets up to $250,000,000, .70%
of average daily net assets between $250,000,000 and $500,000,000 and .65% of
average daily net assets in excess of $500,000,000. The advisory fee is
computed daily as a percentage of the Fund's net assets.
For the year ended December 31, 1997, 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 1.00% of the Fund's total average daily net assets.
Corbyn, located at 2330 West Joppa Road, Suite 108, Lutherville, MD
21093, serves as administrator of the Fund pursuant to an Administrative
Services Agreement. As administrator, Corbyn provides administrative services
and personnel for fund accounting, regulatory reporting and other
administrative matters.
As compensation, the Fund pays Corbyn a monthly fee of $2,500 plus .04% of
average daily net assets up to $250,000,000, .03% of average daily net assets
between $250,000,000 and $500,000,000 and .025% of average daily net assets in
excess of $500,000,000.
PFPC Inc. ("PFPC"), located at 400 Bellevue Parkway, Wilmington, DE 19809, is
the transfer agent for the Fund.
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 and a Director of Corbyn
Investment Management and Key Equity Management Corporation. A Chartered
Financial Analyst, he received his B.S. degree in Political Economy in 1982
from The Johns Hopkins University.
9
<PAGE>
DISCUSSION OF FUND PERFORMANCE
The performance of the Fund during 1997, including the relevant market
conditions and the investment strategies and techniques pursued by the Fund's
Advisor, is discussed in the shareholder letter in the Annual Report, which
can be obtained from the Fund without charge.
Graph
Lipper Balanced Lipper Growth & Income Greenspring Fund,
Fund Index Fund Index Incorporated
12/21/87 $10,000 $10,000 $10,000
03/31/88 10,149 10,857 10,562
06/30/88 10,553 11,556 11,301
09/30/88 10,574 11,671 11,528
12/31/88 10,787 11,946 11,598
03/31/89 11,316 12,718 12,025
06/30/89 12,131 13,597 12,513
09/30/89 12,947 14,699 12,890
12/31/89 13,090 14,646 12,827
03/31/90 12,740 14,213 13,312
06/30/90 13,361 14,834 13,163
09/30/90 12,169 12,911 12,279
12/31/90 13,011 13,835 11,992
03/31/91 14,470 15,729 13,198
06/30/91 14,474 15,714 13,677
09/30/91 15,289 16,605 13,878
12/31/91 16,416 17,583 14,311
03/31/92 16,242 17,657 14,780
06/30/92 16,467 17,945 14,953
09/30/92 16,975 18,457 15,827
12/31/92 17,630 19,520 16,676
03/31/93 18,437 20,677 18,035
06/30/93 18,799 20,936 18,227
09/30/93 19,477 21,880 19,028
12/31/93 19,688 22,420 19,119
03/31/94 19,054 21,694 19,527
06/30/94 18,897 21,807 19,539
09/30/94 19,436 22,707 19,917
12/31/94 19,197 22,267 19,660
03/31/95 20,345 24,012 20,740
06/30/95 21,773 25,984 22,165
09/30/95 22,947 27,920 22,915
12/31/95 23,922 29,170 23,354
03/31/96 24,458 30,845 24,735
06/30/96 24,954 31,638 25,107
09/30/96 25,608 32,659 26,308
12/31/96 27,034 35,207 28,643
03/31/97 27,153 35,798 29,540
06/30/97 30,061 40,814 32,182
09/30/97 31,991 44,230 34,950
12/31/97 32,455 44,694 35,502
Average annual total returns for the one, five and ten year periods ended
December 31, 1997 were 23.95%, 16.31% and 13.51%, 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.
From time to time, the Fund's performance may be compared to other mutual funds
with similar investment objectives and to the industry as a whole with data
received from ranking services and publications such as Lipper
Analytical Services, Inc. ("Lipper") and Morningstar, Inc ("Morningstar").
Although the Fund considers itself a Balanced fund, the Fund is categorized
as a Growth and Income fund by Lipper and a Domestic Hybrid fund
by Morningstar.
10
<PAGE>
CAPITAL STOCK
The Fund has authorized 60,000,000 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.
As of April 1, 1998, Corbyn had discretionary authority over accounts holding
__ % of the Fund. Corbyn, either alone or in combination with the Advisor,
may be deemed to have a controlling interest in the Fund. Both Corbyn
and the Advisor maintain that they do not control the Fund.
The expenses associated with convening an Annual Meeting are significant and are
not cost effective when the meeting is used to approve matters that can be
routinely decided by the Board of Directors. Therefore, the Fund
will only hold Annual Meetings in the event non-routine matters must be
approved. 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. If a meeting is held and a shareholder
can not attend, a shareholder may vote by proxy. Before the meeting, the
Fund will mail proxy materials explaining the issues to be voted upon and
include a voting card to be returned to the Fund.
SHAREHOLDER INQUIRIES
For shareholder account information, PFPC 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. Shareholders with
inquiries regarding the Fund's investment objectives and policies and the
composition of the Fund's portfolio should contact the Fund at (800) 366-3863
between the hours of 8:30 a.m. and 4:30 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),
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<PAGE>
the name(s) on the account and both the old and new addresses. When
PFPC receives notification of a change of address, a confirmation will be mailed
to you.
Shareholders will receive periodic reports that include the portfolio manager's
comments on his strategies and results along with a list of current portfolio
holdings. The Semi-Annual and Annual reports will also include
financial statements. To reduce Fund expenses, the Fund mails one report to
each household regardless of the number of accounts registered to each
household. If additional copies are needed, please call (800) 366-3863.
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 by distributing
all of its net income and realized gains to shareholders. For
income tax purposes, distributions will be taxable as ordinary income to the
extent derived from the Fund's investment income and net short-term capital
gains. Pursuant to the Taxpayer's Relief Act of 1997, two different
tax rates apply to distributions of net realized long-term capital gains.
Net realized capital gains on assets held for more than one year but less
than 18 months will be taxed at 28% ("mid-term gains") and net realized capital
gains on assets held for more than 18 months will be taxed at 20% ("long-term
capital gains"). The Fund will inform shareholders of the amount and nature
of such income or gains. Distributions of mid-term and long-term
capital gains will be taxable as such, regardless of how long the shareholder
has held the 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.
Shareholders should elect on their Account Registration Form how they wish to
receive distributions. If no election is made, all distributions will
automatically 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.
The Fund has four options to choose from: reinvest all dividends and capital
gains, pay dividends in cash and reinvest capital gains, reinvest dividends
and pay capital gains in cash or pay dividends and capital gains in cash.
Any election can be changed by notifying PFPC in writing prior to the record
date for a particular distribution. Dividends and capital gains paid in cash
can be electronically credited to a shareholder's bank account by attaching a
voided check when completing an Account Registration Form. A Statement of
Account will be mailed to shareholders when dividend and capital gains are
paid whether they are paid in cash or reinvested in additional shares.
If a shareholder has elected to receive dividends and/or capital gain
12
<PAGE>
distributions in cash and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record or the checks remain
uncashed for six months, the checks will be canceled and the proceeds will be
reinvested in the Fund at the net asset value on the date of cancellation.
No interest will accrue on amounts represented by uncashed distributions.
Such shareholder's distribution option will automatically be converted to having
all dividend and other distributions reinvested in additional shares.
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-term, mid-term or long-term capital gains or losses, depending on how
long the shareholder owned the shares. 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 advisors regarding specific tax questions.
Generally, by January 31, PFPC will mail shareholders information on the tax
status of dividends, capital gains and redemptions made during the preceding
year. Please retain these account records in a safe place, as they will
be required for tax purposes.
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<PAGE>
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 or 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, a SEP-IRA, a SIMPLE IRA or a ROTH IRA and mail along with a
check, payable to Greenspring Fund, Incorporated, to Greenspring
Fund, Incorporated, c/o PFPC, P.O. Box 752, Wilmington, DE 19899. All courier
deliveries, including overnight express, should be mailed to Greenspring Fund,
Incorporated, c/o PFPC, 400 Bellevue Parkway, Wilmington, DE 19809. If opening
a corporate, partnership or trust account, no documents are needed in addition
to the Account Registration Form.
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. The Fund will not
accept cash, credit cards, third-party checks (except for rollover
accounts) or checks drawn on foreign banks.
Shares of the Fund will be purchased at the Fund's net asset value next
determined after PFPC 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 PFPC. Any purchase order for shares received by PFPC by mail or wire prior
to the close of the Exchange will be valued at the closing net asset
value on that day. Brokerage firms with whom the Fund has certain operating
relationships are authorized to accept purchase orders from customers on
behalf of the Fund until the close of the Exchange. These orders will
then be transmitted to PFPC on any business day by 8:00 p.m. Eastern Standard
Time and 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. PFPC 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. Please review
14
<PAGE>
your Statement of Account carefully upon receipt to verify your transaction.
Any discrepancies should be reported to PFPC promptly.
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, PNC Bank. Prior to wiring funds, the shareholder should notify PFPC of
the investment so an account number can be established. PFPC's telephone
number is (800)576-7498. A signed and completed Account Registration Form can
be sent by telecopy (fax) to PFPC to establish an account after notifying PFPC
of the incoming wire. PFPC's fax number is (302)_________. Funds should be
wired to:
PFPC
c/o PNC Bank
Philadelphia, PA
ABA # 031-0000-53
DDA # 86-0179-6639
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. The
Fund may impose a wiring fee.
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 PFPC 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.
Please mail PFPC 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. Additional purchases may
also be made by wiring monies to PNC Bank as described above. The Fund reserves
15
<PAGE>
the right to reject any purchase of additional shares which is below the
minimum amount required.
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 the
shareholder's bank and PFPC. The minimum initial investment for the
Automatic Investment Plan is $1,000. PFPC will arrange for a predetermined
amount of money, selected by the shareholder (the minimum per month is $100), to
be deducted on or about the 20th of the month from the shareholder's checking
account to purchase shares of the Fund. The shareholder will receive a
confirmation from PFPC 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 PFPC. 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 investment
dealer, bank or other service provider ("processing intermediary"), all
recordkeeping, transaction processing and payments of distributions relating to
the beneficial owner's account will be performed by the processing intermediary
and not by the Fund. Since the Fund will have no record of the beneficial
owner's transactions, a beneficial owner should contact the processing
intermediary 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 processing intermediary. If an
investor purchases or redeems shares of the Fund through a processing
intermediary, the processing intermediary may impose charges for its services,
have different minimums for first-time or additional investments or impose
other restrictions which are not applicable if the investor buys shares
directly from the Fund.
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<PAGE>
NET ASSET VALUE PER SHARE
The Fund's shares 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 traded primarily on a principal securities exchange are valued at the
last reported sales price on the exchange of major listing. 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 or securities
which are restricted as to public sale 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 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 p.m. 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. A proper redemption request will be executed at the next
computed net asset value after receipt of the request. 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
17
<PAGE>
be signed in exactly the same way as the shares are registered, including the
signature of each joint owner, if applicable. A redemption request for
corporate accounts requires a corporate resolution and a signature guarantee. A
redemption request for partnership and trust accounts requires the cover and
signature pages of the agreements.
PFPC 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. 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 on page 20.
If any stock certificates were issued for shares that are included in the
redemption request, the certificates must be presented in properly endorsed
form. Redemptions will not become effective until the Fund has received all
of the required, properly executed, documents. Requests for redemption by
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. You will be notified promptly in writing by the Fund if
your redemption request cannot be accepted.
Payment will be made for the shares redeemed within five business days after
the redemption request is processed by PFPC, 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 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
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<PAGE>
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.
TELEPHONE REDEMPTIONS
The Fund will accept telephone redemptions for amounts up to $10,000. The Fund
may make exceptions for brokers with whom the Fund has certain operating
relationships. These brokerage firms are authorized to accept redemption orders
from customers on behalf of the Fund until the close of the Exchange. These
orders will then be transmitted to PFPC on any business day by 8:00 p.m. Eastern
Standard Time and be valued at the closing net asset value on that day.
Telephone redemptions can only be made by calling PFPC at (800)576-7498 by 4:00
p.m. Eastern Standard Time. To protect your account from losses resulting from
unauthorized or fraudulent telephone instructions, PFPC will request the
registered name, the account number, and the Social Security or tax
identification number listed on the account. The telephone call will be
recorded. The proceeds of any telephone redemption will be made payable to the
exact registrant(s) and mailed to the address of record within
five business days of the request. In the case of a telephone redemption by
wire, the wire will be made only in accordance with the shareholder's prior
written instructions. The Fund will not be responsible for the authenticity
of transaction instructions received by telephone, provided that reasonable
security procedures have been followed. If reasonable security procedures are
not followed, the Fund may be liable for any losses. The Fund reserves the
right to modify or limit its procedures for telephone redemptions or to
terminate them at any time.
SYSTEMATIC WITHDRAWAL PLAN
The Fund offers a Systematic Withdrawal Plan whereby shareholders may request
that a check drawn in a predetermined amount be sent to them each month or
calendar quarter. A shareholder's account must have Fund shares with a value
19
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of at least $10,000 in order to start a Systematic Withdrawal Plan. The minimum
amount that may be drawn each month or quarter is $100. This Plan may be
terminated or modified at any time without charge or penalty.
A withdrawal under the Systematic Withdrawal Plan involves a redemption of
shares on or about the 25th of each month and may result in a gain or loss for
federal income tax purposes.
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, any redemption request where the proceeds
are being mailed to an address other than the address of record, any redemption
request where the shareholder is instructing the Fund to wire the
proceeds to a bank or brokerage account different from the bank or brokerage
account of record, any redemption request where the redemption proceeds are to
be paid to someone other than the registered owner(s), any request
to transfer redemption proceeds to an account with a different registration than
the shareholder, and if there has been a name change due to marriage or divorce.
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.
20
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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 - While such debt will likely have some quality and protective
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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.
CCC - Identifiable vulnerability to default and are dependent upon
favorable business, financial and economic conditions to meet timely
payment of interest and repayment of principal. In the event of
adverse business, financial and economic conditions, they are not likely to
have the capacity to pay interest and repay principal.
CC, C - Subordinated to senior debt that is assigned an actual or implied
"CCC" or "CCC-" rating. A "C" rated bond also may involve a situation
where a bankruptcy petition has been filed, but debt service payments
are continued.
D - Involve a situation where interest payments or principal payments are
not made on the date due even if the applicable grace period has not
expired, unless Standard & Poor's believes such payments will be made
during such grace period and may also involve the filing of a bankruptcy
petition if debt service payments are jeopardized.
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
22
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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.
C - Lowest rated class of bonds and can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
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<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 Chief Compliance Officer
Michael J. Fusting
Sr. Vice President and Chief
Financial Officer
Elizabeth C. Agresta
Secretary and Treasurer
INVESTMENT ADVISOR
Key Equity Investment Management
2330 West Joppa Road, Suite 108
Lutherville, MD 21093-7207
TRANSFER AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
(800) 576-7498
CUSTODIAN
PNC Bank
Airport Business Center
200 Stevens Drive, Suite 440
Lester, PA 19113
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
250 W. Pratt Street
Baltimore, MD 21201
LEGAL COUNSEL
DeMartino Finkelstein Rosen & Virga
1818 N Street, N.W., Suite 400
Washington, DC 20036-2492
<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 May 1, 1998, 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 SEC maintains an Internet site at
http://www.sec.gov that contains the Prospectus, the Statement of Additional
Information, quarterly reports to shareholders and other information regarding
the Fund.
The date of this Statement of Additional Information is May 1, 1998.
<PAGE>
TABLE OF CONTENTS
Page
Investment Objectives and Policies (Page 5 in Prospectus) 3
Investment Objective . . . . . . . . . 3
Investment Policies . . . . . . . . . . 3
Investment Program . . . . . . . . . . . . . 4
Repurchase Agreements . . . . . . . . . 4
Options . . . . . . . . . . . . . . . . 4
Call Options. . . . . . . . . . . . . . 4
Put Options . . . . . . . . . . . . . . 5
Federal Income Tax Treatment of Options 5
Non-Investment Grade Debt Securities. . 6
Foreign Securities. . . . . . . . . . . 6
Total Return Performance . . . . . . . . . . 6
Management of the Fund (Page 8 in Prospectus) 7
Control Persons and Principal Holders of Securities 8
Investment Advisor and Advisory Agreement. . 8
Portfolio Transactions and Brokerage . . . . 9
Purchase, Redemption and Pricing of the Fund's Shares
(Pages 14 - 20 in Prospectus). . . . . . . . . . 9
Net Asset Value Per Share (Page 17 in Prospectus) 9
Pricing of Securities Being Offered . . 10
Taxes (Page 12 in Prospectus). . . . . . . . 10
<PAGE>
Investment Objectives and Policies
The following information supplements the Fund's discussion of its investment
objective and program on page 5 of the Prospectus.
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. The objective of this diversification of security
types is to enhance the total return of the Fund's portfolio and to preserve its
principal during uncertain market conditions.
Investment Policies
Fundamental Policies
The Fund's fundamental policies 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; provided that up to 25% of
its total assets may be invested without regard to such limitation;
and the Fund may not purchase any securities which would cause the
Fund at the time of purchase to own more than 10 percent of the
outstanding voting securities of an issuer;
2) 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;
3) invest in companies for the purpose of exercising management or
control;
4) purchase or sell real estate, although it may invest in securities
representing interests in real estate or fixed income obligations
directly or indirectly secured by real estate and the securities of
companies whose business involves the purchase or sale of real estate;
5) purchase or sell commodities or commodity contracts;
6) purchase securities on margin or effect short sales of securities;
7) make loans, except that it may acquire debentures, notes and other
debt securities that are traded or able to be traded pursuant to legal
provisions allowing for the resale of securities;
8) 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;
9) mortgage, pledge or hypothecate securities;
10) act as securities underwriter, except to the extent that it may be
regarded as a statuatory underwriter upon disposition of any of its
securities for purposes of the Securities Act of 1933;
11) 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;
12) issue any obligations, bonds, notes or other senior securities except
as otherwise allowed by the foregoing restrictions.
3
<PAGE>
Investment Program
Repurchase Agreements
The Fund may invest in repurchase agreements with domestic banks or broker-
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 or broker-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 a security under an agreement defaults on its obligation to repurchase
the underlying security at a time when the value of this security has declined,
the seller may incur a loss upon disposition of it. If the seller becomes
insolvent and subject to liquidation or reorganization under bankruptcy, a court
may determine that the underlying security is 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 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 will be valued at the last quoted sales price each day. 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 option will be
valued at 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
4
<PAGE>
assumes 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.
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 if 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 times 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 holder of the options
the right to sell and the Fund 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 in writing put options is that the market
price of the underlying security declines 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 short, mid or long-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 short, mid or long-term
capital gain or loss upon the sale or expiration of the option. Upon
the exercise of a call option by the Fund (buyer), the Fund will increase the
cost basis of the underlying security by the amount of 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
losses on options sold or purchased in hedging transactions will be
treated as ordinary income or losses.
5
<PAGE>
Non-Investment Grade Debt Securities
The non-investment grade debt securities market's growth has paralleled 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 non-investment grade debt securities market and on
the value of these securities in the Fund's portfolio, as well as the ability of
the 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 non-investment grade debt securities.
The market for non-investment grade debt securities 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 debt 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 non-
investment grade 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 non-investment grade debt
securities, these securities may involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties.
The economy and interest rates affect non-investment grade debt securities
differently from other securities. The prices and, therefore, yields of these
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. Non-investment grade debt securities 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 debt security
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 non-investment
grade debt securities and the Fund's asset value. Furthermore, in the case of
non-investment grade debt securities 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.
Non-investment grade debt securities present risks based on payment
expectations. These 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 non-investment grade debt
security's value will decrease in a rising interest rate market. In addition,
there is a higher risk of non-payment of interest and/or principal by issuers
of non-investment grade debt securities than in the case of investment grade
debt securities.
Special tax considerations are associated with investing in non-investment grade
debt securities 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 the risk of
fluctuations in the value of the currencies in which the foreign securities
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, 1997 were 23.95%, 16.31% and 13.51%,
respectively. The cumulative total return of the Fund for the one, five and
ten year periods ended December 31, 1997 were 23.95%, 112.90% and 255.02%,
respectively.
6
<PAGE>
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 principal occupations 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 (brothers).
Principal
Occupation(s)
During
Name, Address and Age Position(s) Held with Registrant Past Five Years
Elizabeth C. Agresta Secretary and Treasurer Administrator of the
Age 30 Fund.
Charles vK. Carlosn, CFA* President, Chairman of the President and
Age 38 Board and Chief Executive Director of the
Officer Fund's Adviser and
Corbyn Investment
Management, Inc.
William E. Carlson* Director Partner of Shapiro
36 S. Charles Street and Olander (a law
20th Floor firm) from
Baltimore, MD 21201 February 1990 to
Age 40 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.
David T. Fu Director Managing Director
1246 Harbour Glen Ct. of Galway Partners
Arnold, MD 21012 L.L.C. (a merchant
Age 41 bank) from January
1995 to present.
Director of Bell
Atlantic Information
Services (a division
of the telephone
company) from
September 1993
to January 1995.
Vice President of
Network
Management, Inc.
(a data processing
services company)
from February 1992 to
September 1993.
Michael J. Fusting* Sr. Vice President, Chief Vice President,
Age 37 Financial Officer and Treasurer, and
Director Director of the
Fund's Adviser.
Managing Director
of Corbyn
Investment, Inc.
Michael T. Godack* Sr. Vice President, Chief Director and Vice
Age 44 Compliance Officer and President of the
Director Fund's Adviser.
Managing Director
of Corbyn
Investment, Inc.
Richard Hynson, Jr.* Director Sr. Vice President
Age 54 and Managing Director
of Corbyn
Investment, Inc.
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 Board of Directors
meeting plus $350 for each other meeting attended and reasonable out-of-pocket
expenses incurred in connection with attending such meetings. Such fees are
subject to adjustment in the future upon appropriate action by the Board of
Directors. 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.
7
<PAGE>
Control Persons and Principal Holders of Securities
As of April 1, 1998 there were approximately ________ 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:
<TABLE>
<CAPTION>
<S> <C> <C>
Name/Address Amount/Nature of Ownership Percentage of Ownership
Corbyn Investment Management Record _____
2330 West Joppa Road, Suite 108
Lutherville, MD 21093
Charles Schwab & Co., Inc. Record ____
101 Montgomery Street
San Francisco, CA 94104
National Financial Services Corp. Record ____
P.O. Box 3730
New York, NY 10008
</TABLE>
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 April 1, 1998, the officers and directors of the Fund, as a group,
beneficially and of record owned, directly or indirectly, approximately ________
shares of the Fund, representing approximately ___% of the Fund's outstanding
shares.
Investment Advisor and Advisory Agreement
Key Equity Management Corporation, a wholly-owned subsidiary of Corbyn
Investment Management, Inc., is the Fund's Advisor and is located at 2330 West
Joppa Road, Suite 108, Lutherville, Maryland 21093. Key Equity was organized
in October 1982 solely to act as investment advisor to the Fund and does not
have any operating history prior to July 1, 1983.
The Investment Advisory Agreement between Key Equity and the Fund is dated May
1, 1998 and was most recently approved by shareholders on April 6, 1998 at a
Special Meeting of Shareholders. Subject to the supervision of the Board of
Directors of the Fund, the Advisor will make investment decisions for the Fund,
provide the Fund with investment objectives, policies and limitations, place
orders to purchase and sell securities for the Fund and provide a program of
continuous investment management for the Fund in accordance with the 1940
Act. The Advisor shall pay the compensation and expenses of all of its
directors, officers and employees who serve as officers and executive
employees of the Fund (including the Fund's share of payroll taxes for such
persons), and the Advisor shall make available, without expense to the Fund, the
services of its directors, officers and employees who may be duly-elected
officers of the Fund, subject to their individual consent to serve and to any
limitations imposed by law. The Advisor will furnish, without cost to the Fund,
or provide and pay the cost of, such office facilities, furnishings and
office equipment as may be required by the Fund.
As compensation for the services provided and expenses assumed by the Advisor,
the Fund will pay the Advisor at the end of each calendar month an advisory fee
computed daily of .75% of average daily net assets up to $250,000,000, .70% of
average daily net assets between $250,000,000 and $500,000,000 and .65% of
average daily net assets in excess of $500,000,000.
The investment advisory fees paid by the Fund for the years 1995, 1996 and 1997
were $494,166, $581,258 and $1,028,465, respectively. At December 31, 1997,
investment advisory fees payable to the Advisor amounted to $90,792.
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
8
<PAGE>
cast in person at a meeting called for this purpose. 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. The Advisor may also terminate the Agreement by notifying
the Fund 60 days prior to the termination date.
Corbyn Investment Management, Inc. ("Corbyn"), the parent company of the Fund's
Advisor, serves as the administrator of the Fund pursuant to an Administrative
Services Agreement dated May 1, 1998. Corbyn is located at 2330 West Joppa
Road, Suite 108, Lutherville, Maryland 21093. As administrator, Corbyn
provides administrative services and personnel for fund accounting, regulatory
reporting and other administrative matters.
As compensation, the Fund pays Corbyn a monthly fee of $2,500 plus .04% of
average daily net assets up to $250,000,000, .03% of average daily net assets
between $250,000,000 and $500,000,000 and .025% of average daily net assets in
excess of $500,000,000.
Portfolio Transactions and Brokerage
The Fund's officers implement the investment decisions for the Fund recommended
by its Advisor. The Advisor also selects the brokerage firms used by the Fund to
complete securities transactions. All decisions and selections are reviewed
quarterly by the Fund's Board of Directors.
The Advisor selects broker-dealers to effect securities transactions for the
Fund based on which broker-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
commission cost may be obtained. The Advisor determines if the amount of
commission 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 charged by other
brokers on similar transactions in order to ascertain that commissions are
within a reasonable range. Obtaining a low commission, though, is secondary
to obtaining a favorable security, which is usually more beneficial to the
Fund. 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 a mark up or mark
down.
For the years 1995, 1996 and 1997, the total brokerage commissions paid by the
Fund were $154,298, $135,471 and $211,753, 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.
The net asset value per share is calculated as of the close of the regular
session of the New York Stock Exchange each day the Exchange is open for
business. It is expected the Exchange will be closed during 1998 on Saturdays
and Sundays and on January 1 (New Year's Day), January 19 (Martin Luther King,
Jr. Day), February 16 (President's Day), April 10 (Good Friday), May 25
(Memorial Day), July 3 (Independence Day), September 7 (Labor Day), November 26
(Thanksgiving Day) and December 25 (Christmas Day), 1998.
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
9
<PAGE>
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 traded primarily on a principal securities exchange are valued at the
last reported sales price on the exchange of major listing. 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.
The Fund may invest in securities which are restricted as to public sale. Such
securities are valued at fair value as determined in good faith by the Advisor
as directed by the Board of Directors.
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
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 must (a) diversify its
holdings so that at the end of each fiscal quarter (i) at least 50% of the value
of the Fund's total assets must be represented by cash and cash equivalents,
U.S. government securities, securities of other regulated investment companies
and other securities, which does not include investments in the securities
of any one issuer that represents more than 5% of the value of the Fund's total
assets or more than 10% of the issuer's outstanding voting securities and (ii)
not more than 25% of the value of the Fund's total assets invested in the
securities (other than U.S. 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, income from securities on loan and
gains (without including losses) from the sale or other disposition of
securities; (c) derive less than 30% of its gross income from gains (without
including losses) on the sale or other disposition of securities held for less
than three months; and (d) distribute at least 90 percent of the Fund's taxable
income for 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 the10-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.
For 1997, the Fund made the following distributions:
Ordinary Dividends Per Share $.683
Short-Term Capital Gains Distribution Per Share $.32422
Long-Term Capital Gains Distribution Per Share $.27265
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.
10
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Part A:
Financial Highlights Table for the Years Ended
December 31, 1997; 1996; 1995; 1994; 1993; 1992;
1991; 1990; 1989; and 1988.
Part B:
The following financial statements are incorporated by reference
from the Registrant's Annual Report to Shareholders dated December 31,
1997:
Portfolio of Investments, December 31, 1997
Statement of Assets and Liabilities, December 31, 1997
Statement of Operations for the Year Ended December 31, 1997
Statement of Changes in Net Assets for the Years Ended
December 31, 1997 and 1996
Notes to Financial Statements, December 31, 1997
Financial Highlights Table For the Years Ended
December 31, 1997; 1996; 1995; 1994; and 1993;
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 is filed as Exhibit 5 to the Registrant's Post-
Effective Amendment No. 20 (File No. 2-81956 and 811-3627).
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 Assignment Agreement to the Custodial Agreement of the
Registrant - Copy of the Assignment Agreement to the Custodial
Agreement of the Registrant, dated January 5, 1998, is filed as
<PAGE>
Exhibit 8(a) to the Registrant's Post-Effective Amendment No. 20 (File
No. 2-81956 and 811-3627).
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 Order Placement Procedures Amendment to the Charles Schwab
Operating Agreement - Copy of the Order Placement Procedures Amendment
to the Charles Schwab Operating Agreement, dated January 6, 1998, is
filed as Exhibit 9(a) to the Registrant's Post-Effective Amendment No.
20 (File No. 2-81956 and 811-3627).
9(b) Copy of the Assignment Agreement to the Transfer Agent Agreement of
the Registrant - Copy of the Assignment Agreement to the Transfer
Agent Agreement of the Registrant, dated January 5, 1998, is filed
as Exhibit 9(b) to the Registrant's Post-Effective Amendment
No. 20 (File No. 2-81956 and 811-3627).
9(c) Copy of the Administrative Services Agreement of the Registrant - Copy
of the Administrative Services Agreement of the Registrant, dated May
1, 1998, is filed as Exhibit 9(c) to the Registrant's Post-Effective
Amendment No. 20 (File No. 2-81956 and 811-3627).
10 Not Applicable (Copy of Opinion and Consent of Counsel)
11 Copies of the Independent Certified Public Accountant's Opinion and
Statement of Consent - the Opinion and Statement of Consent of Coopers
& Lybrand L.L.P., dated January 30, 1998 and February 27, 1998,
respectively, are attached as Exhibit 11 to the Registrant's Post-
Effective Amendment No. 20 (File No. 2-81956 and 811-3627).
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 Financial Data
Schedule was filed with Rule 24F-2 and is hereby incorporated
by reference.
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 Mrs. 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 __% 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 April 1, 1998, 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 $.01 per share) ________
<PAGE>
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, Chairman
of the Board of Directors and Chief Executive Officer of Greenspring Fund, Inc;
President and Director of Corbyn Investment Management, Inc.
Michael Timothy Godack
Vice-President and Director of Key Equity Management Corporation; Senior
Vice-President, Chief Compliance Officer and Director of the Greenspring Fund,
Inc.; Managing Director of Corbyn Investment Management, Inc.
Michael Joseph Fusting
Vice-President, Treasurer and Director of Key Equity Management Corporation; Sr.
Vice-President, Chief Financial Officer and Director of 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.
<PAGE>
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:
PNC Bank
Airport Business Center
200 Stevens Drive, Suite 440
Lester, PA 19113
(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:
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
(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:
Elizabeth C. Agresta
Greenspring Fund, Incorporated
2330 West Joppa Road, Suite 110
Lutherville, Maryland 21093
Item 31. Management Services
The Registrant has disclosed all management-related service contracts in
Part A and B.
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(a)
under the Securities Act of 1933 and has duly caused this Pre-Effective
Amendment No. 20 to be signed on its behalf by the undersigned, thereto duly
authorized, in the County of Baltimore and State of Maryland on the 27th day of
February, 1998.
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.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
S/Charles vK. Carlson President and Chairman of the Board February 27, 1998
Charles vK. Carlson (Chief Executive Officer)
S/William E. Carlson Director
William E. Carlson
S/David T. Fu Director
David T. Fu
S/Michael J. Fusting Vice-President, Treasurer
Michael J. Fusting and Director (Chief Financial Officer)
S/Michael T. Godack Senior Vice President, Secretary
Michael T. Godack and Director
S/Richard Hynson, Jr. Director
Richard Hynson, Jr.
<PAGE>
EXHIBIT 5
COPY OF THE
INVESTMENT ADVISORY AGREEMENT
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, effective commencing on May 1, 1998, between Key Equity Management
Corporation, a Maryland corporation (the "Advisor") and Greenspring Fund,
Incorporated, a Maryland corporation (the "Fund").
WHEREAS, the Fund is a Maryland corporation organized under Articles of
Incorporation dated October 21, 1982 (the "Articles") and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
diversified management investment company; and
WHEREAS, the Fund wishes to retain the Advisor to render investment advisory
services to the Fund and the Advisor is willing to furnish such services to the
Fund; and
WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended (the "Advisers Act");
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the Fund and the Advisor as follows:
1. APPOINTMENT. The Fund hereby appoints the Advisor to act as investment
advisor to the Fund for the periods and on the terms set forth in this
Agreement. The Advisor accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided. The
Advisor will furnish, without cost to the Fund, or provide and pay the cost
of, such office facilities, furnishings, and office equipment as may be
required by the Fund.
2. INVESTMENT ADVISORY DUTIES.
(A) Subject to the supervision of the Board of Directors of the Fund,
the Advisor will (I) provide a program of continuous investment management for
the Fund in accordance with the 1940 Act, the Fund's investment objectives,
policies and limitations as stated in the Fund's Prospectus (the "Prospectus")
and Statement of Additional Information included as part of the Fund's
Registration Statement filed with the Securities and Exchange Commission, as
they may be amended from time to time, copies of which shall be provided to
the Advisor by the Fund; (ii) make investment decisions for the Fund; and (iii)
place orders to purchase and sell for the Fund.
(B) In performing its investment management services to the Fund
hereunder, the Advisor will provide the Fund with ongoing investment guidance
and policy direction, including oral and/or written research, analysis, advice,
statistical and economic data and judgments regarding individual investments,
general economic conditions and trends and long-range investment policy. The
Advisor will determine the securities, instruments, repurchase agreements,
options, futures and other investments and techniques that the Fund will
purchase, sell, enter into or use, and will provide an ongoing evaluation of the
Fund's investments. The Advisor will determine what portion of the Fund's
investments shall be invested in securities and other assets, and what portion,
if any, should be held invested in money market equivalents or held in cash
reserves. Subject to the approval of the Board of Directors (including a
majority of the Fund's Directors who are not "interested persons" of the Fund
as defined in the 1940 Act) and of the shareholders of the Fund, the Advisor
may delegate to a sub-advisor its duties enumerated in Section 2 hereof. The
Advisor shall continue to supervise the performance of any such sub-advisor and
shall report regularly thereon to the Fund's Board of Directors.
(C) The Advisor shall be responsible for selecting members of
securities exchanges, brokers and dealers (such members, brokers and dealers
being hereinafter referred to as "brokers") for the execution of the Fund's
portfolio transactions consistent with the Fund's brokerage policy and, when
applicable, the negotiation of commissions in connection therewith. All
decisions and placements shall be made in accordance with the following
principles:
(i) Purchase and sale orders will usually be placed with brokers
that are selected by the Advisor as able to achieve "best execution" of such
orders. "Best execution" shall mean prompt and reliable execution at the most
favorable securities price, taking into account the other provisions
hereinafter set forth. The determination of what may constitute best execution
and price in the execution of a securities transaction by a broker involves a
number of considerations, including, without limitation, the overall direct
net economic result to the Fund (involving both price paid or received and any
commissions and other costs paid), the efficiency with which the transaction is
executed, the ability to effect the transaction at all where a large block is
involved, availability of the broker to stand ready to execute possibly
difficult transactions in the future, and the financial strength and stability
of the broker. Such considerations are judgmental and are weighed by the
Advisor in determining the overall reasonableness of brokerage commissions.
(ii) In selecting brokers for portfolio transactions, the Advisor
shall take into account its past experience as to brokers qualified to achieve
"best execution," including brokers who specialize in any foreign securities
held by the Fund.
(iii) If the Board of Directors so authorizes the Advisor, the
Advisor may allocate brokerage business to brokers who have provided brokerage
and research services, as such services are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended (the "1934 Act") for the
<PAGE>
Fund and/or other accounts, if any, for which the Advisor exercises investment
discretion (as defined in Section 3(a)(35) of the 1934 Act) and, as to
transactions for which fixed minimum commission rates are not applicable, to
pay a commission for effecting a securities transaction in excess of the amount
another broker would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker, viewed in terms of either that particular transaction or the Advisor's
overall responsibilities with respect to the Fund and the other accounts, if
any, as to which it exercises investment discretion. In reaching
such determination, the Advisor will not be required to place or attempt to
place a specific dollar value on the research or execution services of a broker
or on the portion of any commission reflecting either of said
services. In demonstrating that such determinations were made in good faith,
the Advisor shall be prepared to show that all commissions were allocated and
paid for purposes contemplated by the Fund's brokerage policy; that the
research services provide lawful and appropriate assistance to the Advisor in
the performance of its investment decision-making responsibilities, and that the
commissions were within a reasonable range. Whether commissions were within a
reasonable range shall be based on any available information as to the
level of commissions known to be charged by other brokers on comparable
transactions, but there shall be taken into account the Fund's policies that
(a) obtaining a low commission is deemed secondary to obtaining
a favorable securities price, since it is recognized that usually it is more
beneficial to the Fund to obtain a favorable price than to pay the lowest
commission; and (b) the quality, comprehensiveness and frequency of
research studies which are provided for the Advisor are useful to the Advisor in
performing its advisory services under this Agreement. Research services
provided by brokers to the Advisor are considered to be in addition to, and
not in lieu of, services required to be performed by the Advisor under this
Agreement. Research furnished by brokers through which the Fund effects
securities transactions may be used by the Advisor for any of its accounts,
and not all such research may be used by the Advisor for the Fund. When
execution of portfolio transactions is allocated to brokers trading on exchanges
with fixed brokerage commission rates, account may be taken of various services
provided by the broker.
(iv) Purchases and sales of portfolio securities within
the United States other than on a securities exchange shall be executed with
primary market makers acting as principal, except where, in the judgment of
the Advisor, better prices and execution may be obtained on a commission basis
or from other sources.
(D) The Advisor further agrees that, in performing its duties hereunder, it
will:
(i) comply with the 1940 Act and all rules and
regulations thereunder, the Advisers Act, the Internal Revenue Code (the "Code")
and all other applicable federal and state laws and regulations, and with any
applicable procedures adopted by the Directors;
(ii) use reasonable efforts to manage the Fund so
that it will qualify, and continue to qualify, as a regulated investment
company under Subchapter M of the Code and regulations issued thereunder;
(iii) place orders pursuant to its investment
determinations for the Fund directly with the issuer, or with any broker or
dealer, in accordance with applicable policies expressed in the Fund's
Prospectus and/or Statement of Additional Information and/or in this Agreement
and in accordance with applicable legal requirements;
(iv) furnish to the Fund whatever statistical
information the Fund may reasonably request with respect to the Fund's assets or
contemplated investments. In addition, the Advisor will keep the Fund and
its Directors informed of developments materially affecting the Fund's
investments and shall, on the Advisor's own initiative, furnish to the Fund from
time to time whatever information the Advisor believes appropriate for this
purpose;
(v) make available to the Fund, promptly upon its
request, such copies of the Advisor's investment records and ledgers with
respect to the Fund as may be required to assist the Fund in its
compliance with applicable laws and regulations. The Advisor will furnish
the Directors with such periodic and special reports regarding the Fund as
they may reasonably request; and
(vi) immediately notify the Fund in the event that the
Advisor or any of its affiliates (a) becomes aware that it is subject to a
statutory disqualification that prevents the Advisor from serving as investment
advisor pursuant to this Agreement; or (b) becomes aware that it is the subject
of an administrative inquiry, proceeding or enforcement action by the Securities
and Exchange Commission ("SEC") or other regulatory authority. The Advisor
further agrees to notify the Fund immediately of any material fact known to
the Advisor respecting or relating to the Advisor that is not contained in the
Fund's Registration Statement, or any amendment or supplement thereto that may
reasonably be required to be disclosed therein, and of any statement contained
therein that becomes untrue in any material respect.
3. ALLOCATION OF CHARGES AND EXPENSES. Except as otherwise specifically
provided in this Section 3, the Advisor shall pay the compensation and expenses
<PAGE>
of all of its directors, officers and employees who serve as officers and
executive employees of the Fund (including the Fund's share of payroll taxes
for such persons), and the Advisor shall make available, without expenses to the
Fund, the service of its directors, officers and employees who may be
duly-elected officers of the Fund, subject to their individual consent to
serve and to any limitations imposed by law.
The Advisor shall not be required to pay any expenses of the Fund other than
those specifically allocated to the Advisor in this Section 3. In particular,
but without limiting the generality of the foregoing, the Advisor shall not
be responsible, except to the extent of the reasonable compensation of such of
the Fund's employees as are officers or employees of the Advisor whose services
may be involved, for the following expenses of the Fund; organization and
certain offering expenses of the Fund (including out-of-pocket expenses, but
not including the Advisor's overhead and employee costs); fees payable to the
Advisor and to any other Fund advisors or consultants; legal expenses; auditing
and accounting expenses; interest expenses; telephone, telex, facsimile,
postage and other communications expenses; taxes and governmental
fees; fees, dues and expenses incurred by or with respect to the Fund in
connection with membership in investment company trade organizations; costs of
insurance relating to fidelity coverage for the Fund's officers and employees;
fees and expenses of the Fund's custodian, any sub-custodian, transfer agent,
registrar, or dividend disbursing agent; payments to the Advisor for maintaining
the Fund's financial books and records and calculating the daily net asset value
pursuant to Section 4 hereof, other payments for portfolio pricing or valuation
services to pricing agents, accountants, bankers and other specialists, if any;
expenses of preparing share certificates; other expenses in connection with the
issuance, offering, distribution, sale or redemption of securities issued by the
Fund; expenses relating to investor relations; expenses of registering and
qualifying shares of the Fund for sale; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
or other assets of the Fund or of entering into other transactions or
engaging in any investment practices with respect to the Fund; expenses of
printing and distributing Prospectuses, Statements of Additional Information,
reports, notices and dividends to stockholders; costs of stationery; any
litigation expenses; costs of stockholders' meetings; the compensation and all
expenses (specifically including travel expenses relating to the Fund's
business) of officers, directors and employees of the Fund who are not officers
or employees of the Advisor, and travel expenses (or an appropriate portion
thereof) of officers or directors of the Fund who are officers, directors or
employees of the Advisor to the extent that such expenses relate to attendance
at meetings of the Board of Directors of the Fund with respect
to matters concerning the Fund, or any committees thereof or advisors thereto.
4. COMPENSATION. As compensation for the services provided and expenses
assumed by the Advisor under this Agreement, the Fund will pay the Advisor at
the end of each calendar month an advisory fee as set forth in Schedule A
hereto. The advisory fee is computed daily as a percentage of the Fund's net
assets. The "net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (Eastern time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such other time. The value of net assets of the Fund shall always be determined
pursuant to the applicable provisions of the articles and the Registration
Statement. If, pursuant to such provisions, the determination of net asset
value is suspended for any particular business day, then for the purposes of
this Section 4, the value of the net assets of the Fund as last
determined shall be deemed to be the value of its net assets as of the close of
regular trading on the New York Stock Exchange, or as of such other time as the
value of the net assets of the Fund's securities may lawfully
be determined, on that day. If the determination of the net asset value of the
shares of the Fund has been so suspended for a period including any month when
the Advisor's compensation is payable at the end of such month, then such value
shall be computed on the basis of the value of the net assets of the Fund as
last determined (whether during or prior to such month). If the Fund determines
the value of the net assets more than once on any day, then the last such
determination thereof on that day shall be deemed to be the sole determination
thereof on that day for the purposes of this Section 4.
In the event that the Advisor's gross compensation hereunder shall, when added
to the other expenses of the Fund, cause the aggregate expenses of the Fund
to exceed the maximum expenses permitted under the lowest applicable expense
limitation established pursuant to the statutes or regulations of any
jurisdiction in which the shares of the Fund may be qualified for offer and
sale, the total compensation paid or payable to the Advisor shall be reduced
(but not below zero), to the extent necessary to cause the Fund not
to exceed such expense limitation. Except to the extent that such reduction has
been reflected in lowered monthly payments to the Advisor, the Advisor shall
refund to the Fund the amount by which the total of payments received by the
Advisor are in excess of such expense limitation as promptly as practicable
after the end of such fiscal year, provided that the Advisor shall not be
required to pay the Fund an amount greater than the fee otherwise payable to
the Advisor in respect of such year. As used in this Section 4, "expenses"
shall mean those expenses included in the applicable expense limitation having
the broadest specifications thereof and "expense limitation" shall mean a
limitation on the maximum annual expenses which may be incurred by an investment
company as determined by applicable law. The words "lowest applicable expense
limitation" shall be deemed to be that which results in the largest reduction of
the Advisor's compensation for any fiscal year of the Fund; provided, however,
that nothing in this Agreement shall limit the Advisor's fees if not required
by an applicable statute or regulation referred to above in this Section 4.
5. BOOKS AND RECORDS. The Advisor agrees to maintain such books and records
with respect to its services to the Fund as are required by Section 31 of the
1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the
manner required by that Section, and those rules and legal provisions.
<PAGE>
The Advisor also agrees that records it maintains and preserves pursuant to
Rules 31a-1 and 31a-2 under the 1940 Act in connection with its
services hereunder are the property of the Fund and will be surrendered promptly
to the Fund upon its request. The Advisor further agrees that it will furnish
to regulatory authorities having the requisite authority any information or
reports in connection with its services hereunder which may be requested in
order to determine whether the operations of the Fund are being conducted in
accordance with applicable law and regulations.
6. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Advisor shall exercise
its best judgment in rendering the services provided by it under this Agreement.
The Advisor shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund or the holders of the Fund's shares in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Advisor against any liability to the Fund or to holders of the Fund's shares to
which the Advisor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of the Advisor's directors, employees or other affiliates of
the Advisor performing services with respect to the Fund.
7. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Advisor are not exclusive, and that nothing in this Agreement shall prevent the
Advisor from providing similar services to other investment companies or to
other series of investment companies, or from engaging in other activities,
provided such other services and activities do not, during the term of the
Agreement, interfere in a material manner with the Advisor's ability to meet
its obligations to the Fund hereunder. When the Advisor recommends the purchase
or sale of the same security for the Fund, it is understood that in light of its
fiduciary duty to the Fund, such transactions will be executed on a basis that
is fair and equitable to the Fund. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Advisor
nor any of its directors, officers or employees shall act as a principal or
agent or receive any commission, provided that portfolio transactions for the
Fund may be executed through firms affiliated with the Advisor, in accordance
with applicable legal requirements. If the Advisor provides any advice to its
clients concerning the shares of the Fund, the Advisor shall act solely as
investment counsel for such clients and not in any way on behalf of the Fund.
8. DURATION AND TERMINATION. This Agreement shall continue until May 1,
2000, and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by (a)
the Directors or (b) a vote of a "majority" (as defined in the 1940 Act) of
the Fund's outstanding voting securities (as defined in the 1940 Act), provided
that in either event the continuance is also approved by a majority of the
Directors who are not "interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. Notwithstanding the foregoing, this
Agreement may be terminated (a) at any time without penalty by the Fund upon the
vote of a majority of the Directors or by vote of the majority
of the Fund's outstanding voting securities, upon sixty (60) days written notice
to the Advisor or (b) by the Advisor at any time without penalty, upon sixty
(60) days written notice to the Fund. Notwithstanding the foregoing, this
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act).
9. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged, or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (a) a majority of the outstanding
voting securities of the Fund, and (b) a majority of the Directors, including a
majority of Directors who are not interested persons of any party
to this Agreement, cast in person at a meeting called for the purpose of voting
on such approval, if such approval is required by applicable law.
10. MISCELLANEOUS.
A. This Agreement shall be governed by the laws of the State of
Maryland, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules, regulations or
orders of the SEC thereunder.
B. The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
C. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected hereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
D. Nothing herein shall be construed as constituting the Advisor as
an agent of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their officers designated below as of May 1, 1998.
GREENSPRING FUND, INCORPORATED
By: ___________________________________
Its: ___________________________________
KEY EQUITY MANAGEMENT CORPORATION
By: ____________________________________
Its: ____________________________________
<PAGE>
SCHEDULE A
TO THE INVESTMENT ADVISORY AGREEMENT
DATED MAY 1, 1998 BETWEEN
GREENSPRING FUND, INC. AND
KEY EQUITY MANAGEMENT CORPORATION
Pursuant to Section 4 of this Agreement, the Fund shall pay the Advisor, at
the end of each calendar month, compensation computed daily at an annual rate of
the Fund's average daily net assets as follows:
AVERAGE DAILY NET ASSETS FEE
$0 to $259,000,000 0.75%
$250,000,000 to $500,000,000 0.70%
in excess of $500,000,000 0.65%
<PAGE>
EXHIBIT 8(a)
COPY OF THE
ASSIGNMENT AGREEMENT
TO THE CUSTODIAL AGREEMENT
<PAGE>
ASSIGNMENT AGREEMENT
This Agreement is entered into as of January 5, 1998 by and among
Greenspring Fund, Incorporated (the "Fund"), Wilmington Trust Company ("WTC")
and PNC Bank, N.A. ("PNC").
WHEREAS, the Fund and WTC entered into a Custody Agreement
(the "Fund Agreement") as of October 1, 1994 pursuant to which WTC provides
certain services to the Fund as described therein;
WHEREAS, WTC wishes to assign its right, title and interest in and
under the Fund Agreement and its duties and obligations under the Fund Agreement
to PNC, and such assignment is acceptable to the Fund;
NOW THEREFORE, the parties hereto, in consideration of the
premises and agreements contained herein, and intending to be legally bound
hereby, agree as follows:
1. Assignment. WTC hereby assigns all of its right, title and
interest in and under the Fund Agreement, and its duties and
obligations under the Fund Agreement arising from the date hereof,
to PNC. PNC hereby accepts such assignment.
2. Acceptance by Fund. The Fund hereby accepts and agrees
to the assignment described in Section 1 hereof.
3. Fund Agreement. The Fund Agreement shall remain
unchanged except as is consistent with the provisions hereof.
4. Governing Law. This Agreement shall be governed by
Delaware law, without regard to principles of conflicts of law.
5. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
6. Execution. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. The
facsimile signature of any party to this Agreement shall constitute the
valid and binding execution hereof by such party.
7. Further Actions. Each party agrees to perform such further
acts and execute such further documents as may be necessary to
effectuate the purposes hereof.
IN WITNESS WHEREOF, the parties to this Agreement have
caused this Agreement to be executed as of the day and year first above written.
GREENSPRING FUND, WILMINGTON TRUST COMPANY
INCORPORATED
By: __________________ By: _______________________
Title: ________________ Title: ____________________
PNC BANK, N.A.
By: ____________________
Title: Chairman
<PAGE>
EXHIBIT 9(a)
COPY OF THE
ORDER PLACEMENT PROCEDURES
AMENDMENT TO THE
CHARLES SCHWAB OPERATING AGREEMENT
<PAGE>
ORDER PLACEMENT PROCEDURES AMENDMENT
TO THE OPERATING AGREEMENT
This Order Placement Procedures Amendment ("Amendment") is
made as of December 1, 1997, by and between Charles Schwab & Co., Inc.
("Schwab"), a California corporation; and each registered investment company
("Fund Company") executing this Amendment on its own behalf and on behalf of
each of the series or classes of shares ("Fund(s)"), which are parties to an
Operating Agreement with Schwab, made as of September 14, 1993, as amended
thereafter ("Operating Agreement"). This Amendment amends the Operating
Agreement. In the event that there are no Funds, then the term "Fund(s)" shall
mean "Fund Company." Capitalized terms used, but not defined, in this Amendment
shall have the respective meanings given to them in the Operating Agreement.
WHEREAS, Schwab and Fund Company, on its own behalf and on
behalf of the Funds, have entered into the Operating Agreement pursuant to which
shares of the Funds are made available for purchase and redemption by Schwab's
brokerage customers through Schwab's Mutual Fund Marketplace ("MFMP"); and
WHEREAS, Schwab and Fund Company desire to amend the
Operating Agreement to authorize Schwab to receive customer orders for purchase
and redemption of Fund shares on each business day up until the time at which
the Fund prices its shares, and to transmit those orders to the Fund or its
transfer agent or another Fund-designated agent (each of the three is
individually referred to herein as the "Order Accepter"), as appropriate, after
the time at which the Fund prices its shares, subject to the terms and
conditions of this Amendment.
NOW THEREFORE, in consideration of the foregoing and the
mutual promises set forth below, the parties hereto agree as follows:
1. Authorization to Receive Orders. Fund Company hereby
designates and authorizes Schwab to receive purchase and redemption orders in
proper form ("Orders") from Schwab customers on the Fund's behalf for purposes
of Rule 22c-1, so that any such Schwab customer will receive the share price
next computed by the Fund after the time at which such customer places its order
with Schwab, as more specifically provided in this Amendment.
2. Sub-Designees of Schwab. Fund Company further agrees
that Schwab may designate and authorize such intermediaries as it deems
necessary, appropriate or desirable, pursuant to such terms as are consistent
with this Amendment ("Sub-Designees"), to receive orders from their customers on
the Fund's behalf for purposes of Rule 22c-1, so that any such customer will
receive the share price next computed by the Fund after the time at which such
customer places its order with the intermediary, as more specifically provided
in this Amendment. Schwab shall be liable to Fund Company and the Funds for
the observance of the terms of this Amendment by the Sub-Designee.
3. Receipt and Transmission of Orders. Schwab agrees that,
except as set forth in Section 4b below, (a) Orders received by Schwab or a Sub-
Designee prior to the close of the New York Stock Exchange (generally, 4:00 p.m.
Eastern Time) ("Market Close") on any Business Day will be transmitted by Schwab
to the Order Accepter by 8:00 p.m. Eastern Time on the same Business Day ("Day 1
Trades"); and (b) Orders received by Schwab or Sub-Designees after Market Close
on any Business Day will be transmitted by Schwab to the Order Accepter by 8:00
p.m. Eastern Time on the next Business Day ("Day 2 Trades").
4. Fund's Pricing of Orders.
a. Fund Company agrees that, except as set forth in Section
4b below, Day 1 Trades will be effected at the net asset value of each Fund's
shares ("Net Asset Value") calculated as of Market Close on Day 1, provided such
trades are received by the Order Acceptor by 8:00 p.m. Eastern Time on Day 1;
and Day 2 Trades will be effected at the Net Asset Value calculated as of Market
Close on Day 2, provided such trades are received by the Order Accepter by 8:00
p.m. Eastern Time on Day 2. Fund Company agrees that, consistent with the
foregoing, Day 1 Trades will have been received by the Fund prior to Market
Close on Day 1, and Day 2 Trades will have been received by the Fund prior to
Market Close on Day 2, for all purposes, including, without limitation,
effecting distributions.
b. Notwithstanding Sections 3 and 4a above, Fund
Company agrees that, if Schwab is prevented for transmitting Day 1 Trades to the
Order Accepter by 8:00 p.m. Eastern Time on Day 1 due to unforeseen
<PAGE>
circumstances, such as computer system failures, natural catastrophes, or other
emergencies or human error, then Schwab may transmit such Day 1 Trades by 9:30
a.m. Eastern Time on Day 2, and such Day 1 Trades will be effected at the Net
Asset Value calculated as of Market Close on Day 1, provided that Schwab
notifies the Order Accepter of such contingency prior to 8:00 p.m. Eastern Time
on Day 1.
5. Settlement. In accordance with the Operating Agreement,
Schwab and Fund Company will settle Day 1 Trades on Day 2 and will settle Day 2
Trades on Day 3.
6. Representations and Warranties.
a. Fund Company represents and warrants that each Fund's
Board of Directors or Board of Trustees has authorized the Fund Company and each
Fund to enter into this Amendment, or will ratify the action of the Fund Company
and each Fund of entering into this Amendment within four months after the date
of this Amendment.
b. Fund Company represents and warrants that it will cause
each Fund's Board of Directors or Board of Trustees thereafter periodically to
review the terms of this Amendment.
c. Fund Company represents and warrants that the person
signing this Amendment on its behalf and on behalf of each Fund is an officer so
authorized to execute this Amendment.
d. Schwab represents and warrants that Schwab's internal
control structure over the processing and transmission of Orders for Fund
transactions is suitably designed to prevent or detect on a timely basis Orders
received after Market Close from being aggregated with Orders received before
Market Close, and to minimize errors that could result in late transmission of
Orders to the Funds under Section 4b above.
e. Schwab represents and warrants that it will cause an
independent public accountant or other qualified independent party annually to
review Schwab's internal controls and prepare a written report to Schwab
concerning their adequacy for the obligations undertaken by Schwab under this
Amendment.
f. Schwab represents and warrants that it will also require
each Sub-Designee to retain an independent public accountant or other qualified
independent party annually to review Sub-Designee's internal controls and
prepare a written report to Schwab and the Sub-Designee concerning their
adequacy for the obligations undertaken by Sub-Designee as set forth in this
Amendment.
g. Schwab represents and warrants that, upon its receipt of
its internal control report and those of any Sub-Designee, described in Sections
6d and 6e respectively, it will make them available to Fund Company or any Fund
upon request.
7. Prospectus Disclosure. Fund Company shall ensure that the
prospectus of each Fund adequately discloses that (i) the Fund has authorized
one or more brokers to accept on its behalf purchase and redemption orders; (ii)
that such brokers are authorized to designate other intermediaries to accept
purchase and redemption orders on the Fund's behalf; (iii) that the Fund will be
deemed to have received a purchase or redemption order when an authorized broker
or, if applicable, a broker's authorized designee, accepts the order; and (iv)
that customer orders will be priced at the Fund's Net Asset Value next computed
after they are accepted by an authorized broker or the broker's authorized
broker or the broker's authorized designee. This disclosure may be contained in
the Statement of Additional Information of the Fund ("SAI") if the SAI is
incorporated into the prospectus. If adequate disclosure is not currently
contained in the prospectus (including any incorporated SAI), then it may be
added at the next regular printing of the prospectus, provided such printing
occurs within a reasonable time after the date of this Amendment.
8. Effectiveness. This Amendment shall become effective 10
days after written notice by Schwab to Fund Company.
9. Effect of Amendment. This Amendment is intended to
amend and supplement the provisions of the Operating Agreement. In the event of
a conflict between the provisions of this Amendment and the provisions of the
Operating Agreement, the provisions of this Amendment shall control. All other
provisions of the Operating Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, this Agreement has been executed by a
duly authorized representative of the parties hereto.
CHARLES SCHWAB & CO., INC.
By: /s/Fred Potts
Fred Potts
Vice President/Mutual Funds
Operations Administration
Date: January 6, 1998
GREENSPRING FUND, INCORPORATED, on its own behalf and
on behalf of each Fund
By: /s/Charles vK. Carlson
Charles vK. Carlson
President
Date: October 17, 1997
<PAGE>
EXHIBIT 9(b)
COPY OF THE
ASSIGNMENT AGREEMENT
TO THE
TRANSFER AGENT AGREEMENT
ASSIGNMENT AGREEMENT
<PAGE>
This Agreement is entered into as of January 5, 1998 by and among
Greenspring Fund, Incorporated (the "Fund"), Rodney Square Management
Corporation ("RSMC") and PFPC Inc. ("PFPC").
WHEREAS, the Fund and RSMC entered into a Transfer Agent
Agreement (the "Fund Agreement") as of October 1, 1994 and amended as of
September 30, 1997, pursuant to which RSMC provides certain services to the Fund
as described therein;
WHEREAS, RSMC and PFPC have reached an agreement pursuant
to which RSMC will sell its mutual fund servicing business to PFPC;
WHEREAS, RSMC wishes to assign its right, title and interest in and
under the Fund Agreement and its duties and obligations under the Fund Agreement
to PFPC, and such assignment is acceptable to the Fund;
NOW THEREFORE, the parties hereto, in consideration of the
premises and agreements contained herein, and intending to be legally bound
hereby, agree as follows:
1. Assignment. RSMC hereby assigns all of its right,
title and interest in and under the Fund Agreement, and its
duties and obligations under the Fund Agreement arising
from the date hereof, to PFPC. PFPC hereby accepts such
assignment.
2. Acceptance by Fund. The Fund hereby accepts
and agrees to the assignment described in Section 1 hereof.
3. Fund Agreement. The Fund Agreement shall
remain unchanged except as is consistent with the
provisions hereof.
4. Governing Law. This Agreement shall be
governed by Delaware law, without regard to principles of
conflicts of law.
5. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted
assigns.
6. Execution. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument. The facsimile signature of any party to
this Agreement shall constitute the valid and binding
execution hereof by such party.
7. Further Actions. Each party agrees to perform
such further acts and execute such further documents as may
be necessary to effectuate the purposes hereof.
IN WITNESS WHEREOF, the parties to this Agreement have
caused this Agreement to be executed as of the day and year first above written.
GREENSPRING FUND, WILMINGTON TRUST COMPANY
INCORPORATED
By: ________________ By: ____________________
Title: _____________ Title: _________________
PFPC BANK, N.A.
By: ________________
Title: Chairman
<PAGE>
EXHIBIT 9(c)
COPY OF THE
ADMINISTRATIVE SERVICES AGREEMENT
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") made as of the 1 day of
May, 1998, by and between Greenspring Fund, Incorporated, a
Maryland corporation (the "Fund"), and Corbyn Investment Management, Inc., a
Maryland corporation (the "Administrator").
WHEREAS, the Fund is engaged in business as an open-end
management investment company and registered as such under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund desires to retain the Administrator to provide
administrative services to the Fund in the manner and on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound, do hereby agree as follows:
(C) DUTIES AND RESPONSIBILITIES OF THE ADMINISTRATOR.
The Administrator shall oversee the administration of the
Fund's business and affairs set forth herein and shall provide certain services
required for effective administration of the Fund. In connection therewith, the
Administrator shall:
(a) PERSONNEL. Provide, without additional
remuneration from or other cost to the Fund, the services of individuals
competent to perform all of the Administrator's obligations under this
Agreement.
(b) AGENTS. Assist the Fund in selecting, coordinating
the activities of, supervising and acting as liaison with any other person or
agent engaged by the Fund, including the Fund's depository agent or custodian,
consultants, transfer agents, intermediaries with respect to mutual fund
alliance programs, dividend disbursing agent, sub-administrator, independent
accountants, and independent legal counsel. The Administrator shall also
monitor the functions of such persons and agents, including without limitation
the compliance of the Fund and the Fund's custodians with Rule 17f-5 under the
1940 Act, if appropriate.
(c) DIRECTORS AND OFFICERS. Authorize and permit
the Administrator's directors, officers and employees that may be elected or
appointed as directors or officers of the Fund to serve in such capacities,
without remuneration from or additional cost to the Fund.
(d) BOOKS AND RECORDS. Maintain customary records,
on behalf of the Fund, in connection with the performance of the Administrator's
duties under this Agreement. The Administrator also will monitor and oversee
the performance of the agents specified in Section 1(b) above, to ensure that
all financial, accounting, corporate, and other records required to be
maintained and preserved by the Fund or on its behalf will be maintained in
accordance with applicable laws and regulations.
(e) COST OVERSIGHT. Monitor and review activities and
procedures of the Fund and its agents identified in Section 1(b) above, in order
to identify and seek to obtain possible service improvements and cost
reductions. In connection therewith, the Administrator shall, on a quarterly
basis, prepare and submit to the Fund a pro forma budget or similar document
concerning the estimated costs of providing the services to the Fund and shall
monitor and periodically report to the Fund's Board of Directors information and
analysis about the actual expenses incurred in providing such services.
(f) FUND ACCOUNTING AND COMPLIANCE
POLICIES AND PROCEDURES. Developing, reviewing, maintaining, and
monitoring the effectiveness of Fund accounting, pricing, bonding and
compliance, including portfolio valuation procedures, expense allocation
procedures, and personal trading procedures and the Fund's Code of Ethics. The
Administrator also will assist and coordinate participation by the Fund and its
agents in any audit by its outside auditors or any examination by federal or
state regulatory authorities or any self-regulatory organization. The
Administrator also will oversee and coordinate the activities of Fund
accountants, outside counsel, and other experts in these audits or
examinations.
<PAGE>
(g) FUND SYSTEMS. The Administrator will assist in
developing, implementing, and monitoring the Fund's use of automated
communications systems with brokers, dealers, custodians, and other service
providers, including without limitation trade clearance systems.
(h) REPORTS TO THE FUND. Furnish to or place at the
disposal of the Fund such information, reports, evaluations, analysis, and
opinions relating to its administrative functions, as the Fund may, at any time
or from time to time, reasonably request or as the Administrator may deem
helpful to the Fund. The Administrator also will assist in the preparation of
agendas and other materials for meetings of the Fund's Board of Directors and
will attend such meetings.
(i) REPORTS AND FILINGS. Provide appropriate assistance
in the development and/or preparation of all reports and communications by the
Fund to Fund shareholders and all reports and filings necessary to maintain the
registrations and qualifications of the Fund's shares under applicable
securities law.
(j) SHAREHOLDER INQUIRIES. Respond to all inquiries
from Fund shareholders or otherwise answer communications from Fund shareholders
if such inquiries or communications are directed to the Administrator. If any
such inquiry or communication would be more properly answered by one of the
agents listed in Sections 1(b) above, the Administrator will coordinate, as
needed, the provision of their response.
(D) ALLOCATION OF EXPENSES.
(a) EXPENSES PAID BY THE ADMINISTRATOR.
(i) In General. The Administrator shall bear all of
its own expenses in connection with the performance of its duties under this
Agreement.
(ii) Salaries and Fees of Directors and Officers.
The Administrator shall pay all salaries, expenses and fees, if any, of the
directors, officers and employees of the Administrator who are directors,
officers or employees of the Fund.
(iii) Waiver or Assumption and Reimbursement of
Fund Expenses by the Administrator. The waiver or assumption and reimbursement
by the Administrator of any expense of the Fund that the Administrator is not
required by this Agreement to waive, assume or reimburse, shall not obligate the
Administrator to waive, assume, or reimburse the same or any similar expense of
the Fund on any subsequent occasion, unless so required pursuant to a separate
agreement between the Fund and the Administrator.
(b) EXPENSES PAID BY THE FUND. The Fund shall
bear all expenses of its organization, operation and business not specifically
waived, assumed or agreed to be paid by the Administrator as provided in this
Agreement or any other agreement between the Fund and the Administrator, and as
described in the Fund's then-current Prospectus and Statement of Additional
Information.
(E) FEES.
(a) COMPENSATION RATE. As compensation for all
services rendered, facilities provided, and expenses paid and any expense waived
or assumed and reimbursed by the Administrator, the Fund shall pay the
Administrator a fee, payable each month, as follows: Two Thousand Five Hundred
Dollars ($2,500) plus a fraction of the Average Daily Net Assets ("ADNA")
computed as follows: four (4) basis points of that portion of ADNA up to $250
million, three (3) basis points of that portion of ADNA between $250 million to
$500 million, and two and one-half (2.5) basis points of that portion of ADNA in
excess of $500 million.
(b) METHOD OF COMPUTATION. The Administrator's
fee shall accrue on each calendar day and the sum of the daily fee accruals
shall be paid monthly to the Administrator by the fifth (5th) business day of
the next calendar month. The daily fee accruals shall be computed by
<PAGE>
multiplying the fraction of one (1) over the number of calendar days in the
year by the applicable rates described in Section 3(a) above, and multiplying
this product by the net assets of the fund, as determined in accordance with
the current Prospectus of the Fund and applicable law, as of the close of
business on the last preceding business day on which the Fund was open for
business.
(c) PRORATION OF FEE. If this Agreement becomes
effective or terminates before the end of any month, the fee for the period from
the effective date to the end of such month or from the beginning of such month
to the date of termination, as the case may be, shall be prorated according to
the proportion which such period bears to the full month in which such
effectiveness or termination occurs.
4. ADMINISTRATOR'S USE OF THE SERVICES OF
OTHERS. The Administrator may, at its own cost, employ, retain or otherwise
avail itself of the services or facilities of other persons or organizations for
the purpose of providing the Administrator or the Fund with such information,
advice or assistance as the Administrator may deem necessary, appropriate or
convenient for the discharge of its obligations hereunder or otherwise helpful
to the Administrator including consulting, monitoring and evaluating services
concerning the Fund.
5. OWNERSHIP AND CONFIDENTIALITY OF RECORDS.
All records required to be maintained and preserved by the Fund, pursuant to
rules or regulations of the Securities and Exchange Commission under Section 31
(a) of the 1940 Act, and maintained and preserved by the Administrator on behalf
of the Fund, are the property of the Fund and shall be surrendered by the
Administrator promptly on request by the Fund. The Administrator shall not
disclose or use any record or information obtained pursuant to this Agreement in
any manner whatsoever except as expressly authorized by this Agreement and
applicable law. The Administrator shall keep confidential any information
obtained in connection with its duties hereunder and shall disclose such
information only if the Fund has authorized such disclosure or if such
disclosure is expressly required by applicable law or federal or state
regulatory authorities.
6. REPORTS TO THE ADMINISTRATOR. The Fund shall
furnish or otherwise make available to the Administrator such Prospectuses,
Statements of Additional Information, financial statements, proxy statements,
reports and other information relating to the business and affairs of the Fund,
as the Administrator may, at any time or from time to time, reasonably require
in order to discharge its obligations under this Agreement.
7. SERVICES TO OTHER CLIENTS. Nothing herein contained
shall limit the freedom of the Administrator or any affiliated person of the
Administrator to render corporate administrative services to other investment
companies or to engage in other business activities; however, so long as this
Agreement or any extension, renewal or amendment hereof shall remain in effect
or until the Administrator shall otherwise consent, the Administrator shall be
the only administrator to the Fund.
8. LIMITATION OF LIABILITY OF THE ADMINISTRATOR AND INDEMNIFICATION BY THE
FUND.
(a) LIMITATION OF LIABILITY OF THE ADMINISTRATOR.
(i) Neither the Administrator nor any of its
directors, officer, employees or agents performing services for the Fund, at the
direction or request of the Administrator in connection with the Administrator's
discharge of its obligations undertaken or reasonably assumed with respect to
this Agreement, shall be liable for any act or omission in the course of or in
connection with the Administrator's services hereunder, including any error of
judgment or mistake of law or for any loss suffered by the Fund, in connection
with the matters to which this Agreement relates; provided that nothing herein
contained shall be construed to protect the Administrator or any such
person against any liability to the Fund or its shareholders to which the .
Administrator or such person would otherwise be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its or their duties
on behalf of the Fund.
(iii) The Administrator may apply to the Board of
Directors of the Fund at any time for instructions and may consult counsel for
the Fund or its own counsel and with accountants and other experts with respect
to any matter arising in connection with the Administrator's duties, and the
<PAGE>
Administrator shall not be liable or accountable for any action taken or omitted
by it in good faith in accordance with such instruction or with the opinion of
such counsel, accountants or other experts.
(iv) The Administrator shall at all times have the
right to mitigate or cure any and all losses, damages, costs, charges, fees,
disbursements, payments and liabilities to the Fund and its shareholders.
2. INDEMNIFICATION BY THE FUND.
(i) As long as the Administrator acts in good faith
and with due diligence and without negligence, the Fund shall indemnify the
Administrator and hold it harmless from and against any and all actions, suits
and claims, whether groundless or otherwise, and from and against any and all
losses, damages (excluding consequential, punitive or other indirect damages),
costs, charges, reasonable counsel fees and disbursements, payments, expenses
and liabilities (including reasonable investigation expenses) arising directly
or indirectly out of the administrative services or any other services rendered
to the Fund hereunder. The indemnity and defense provisions set forth herein
shall indefinitely survive the termination of this Agreement.
(ii) The rights hereunder shall include the right
to reasonable advances of defense expenses in the event of any pending or
threatened litigation with respect to which indemnification hereunder may
ultimately be merited. In order that the indemnification provision contained
herein shall apply, however, it is understood that if in any case the Fund may
be asked to indemnify or hold the Administrator harmless, the Board of Directors
of the Fund shall be fully and promptly advised of all pertinent facts
concerning the situation in question; and it is further understood that the
Administrator will use all reasonable care to identify and notify the
Board of Directors of the Fund promptly concerning any situation which presents
or appears likely to present the probability of such a claim for indemnification
against the Fund, but failure to do so in good faith shall not affect the rights
hereunder.
(iii) The Administrator shall secure and maintain a
fidelity bond, or be covered by an affiliate's blanket fidelity bond, in at
least the amount required by Rule 17g-1 under the 1940 Act for joint insurance
bonds of investment companies.
9. INDEMNIFICATION BY THE ADMINISTRATOR.
(a) The Administrator shall indemnify the Fund, its officers
and directors and hold them harmless from and against any and all actions, suits
and claims, whether groundless or otherwise, and from and against any and all
losses, damages (excluding consequential, punitive or other indirect damages),
costs, charges, reasonable counsel fees and disbursements, payments, expenses
and liabilities (including reasonable investigation expenses) arising directly
or indirectly out of the administrative services or any other services rendered
to the Fund hereunder and arising or based upon the willful misfeasance, bad
faith or negligence of the Administrator, its directors, officers, employees and
agents in the performance of its or their duties on behalf of the Fund. The
indemnity and defense provisions set forth herein shall indefinitely survive the
termination of this Agreement.
(b) The rights hereunder shall include the right to reasonable
advances of defense expenses in the event of any pending or threatened
litigation with respect to which indemnification hereunder may ultimately be
merited. In order that the indemnification provision contained herein shall
apply, however, it is understood that if in any case the Administrator may be
asked to indemnify or hold the Fund, its officers and directors harmless, the
Administrator shall be fully and promptly advised of all pertinent facts
concerning the situation in question; and it is further understood that the
Fund will use all reasonable care to identify and notify the Administrator
promptly concerning any situation which presents or appears likely to present
the probability of such a claim for indemnification against the Administrator,
but failure to do so in good faith shall not affect the rights hereunder.
10. FORCE MAJEURE. In the event the Administrator is unable
to perform its obligations or duties under the terms of this Agreement because
of any act of God, strike, riot, act of war, equipment failure, power failure or
damage or other causes reasonably beyond its control, the Administrator shall
not be liable for any and all losses, damages, costs, charges, counsel fees,
payments, expenses or liability to any other party (whether or not a party to
this Agreement) resulting from such failure to perform its obligations or duties
under this Agreement or otherwise from such causes.
<PAGE>
This provision, however, shall in no way excuse the Administrator from being
liable to the Fund for any and all losses, damages, costs, charges, counsel
fees, payments and expenses incurred by the Fund due to the non-performance or
delay in performance by the Administrator of its duties and obligation under
this Agreement if such non-performance or delay in performance could reasonably
have been prevented by the Administrator through back-up systems and other
procedures commonly employed by other administrators in the mutual fund
industry, provided that the Administrator shall have the right, at all times, to
mitigate or cure any losses, including by making adjustments or corrections to
any current or former shareholder accounts.
11. RETENTION OF SUB-ADMINISTRATOR. The
Administrator may retain a sub-administrator to perform corporate administrative
services to the Fund upon sixty (60) days prior written notice to the Fund. The
retention of a sub-administrator shall be at the cost and expense of the
Administrator. The Administrator shall pay and shall be solely responsible for
the payment of the fees of the sub-administrator for the performance of its
services for the Fund.
12. TERM OF AGREEMENT. The term of this Agreement shall
begin on the day and year first written above and, unless sooner terminated as
hereinafter provided, shall continue in effect for an initial period that will
expire on May 1, 2000. Thereafter, this Agreement shall continue in effect from
year to year, subject to the termination provisions and all other terms and
conditions hereof. The Administrator shall furnish to the Fund, promptly upon
its request, such information as may be reasonably necessary to evaluate the
terms of this Agreement or any extension, renewal or amendment thereof.
The assignment (as that term is defined in Section 2(a)(4) of the 1940
Act and rules thereunder) of this Agreement or any rights or obligations
thereunder by either party shall be prohibited and, of no force or effect,
without the written consent of the other party. This Agreement shall inure to
the benefit of and be binding upon the parties and their respected permitted
successors and assigns.
13. TERMINATION OF AGREEMENT. This Agreement may be
terminated by any of the parties hereto, without the payment of any penalty:
(a) for a material breach of this Agreement, upon thirty (30)
days prior written notice to the other parties; provided, that this Agreement
shall not terminate if such material breach is cured within such thirty (30) day
period.
(b) following the initial term of this Agreement, for any
reason, upon ninety (90) days prior written notice to the other parties;
provided, that in the case of termination by the Fund such action shall have
been authorized by resolution of the Board of Directors of the Fund or by a vote
of a majority of the outstanding voting securities of the Fund. In the case of
termination by the Administrator, such termination shall not be effective
until the Fund and the Administrator shall have contracted with one or more
persons to serve as successor administrator(s) for the Fund and such
person(s) shall have assumed such position.
14. AMENDMENT OF AGREEMENT. Any amendment to this
Agreement shall be in writing and signed by the parties hereto; provided, that
no material amendment shall be effective unless authorized by resolution of the
Board of Directors of the Fund or by a majority of the outstanding voting
securities of the Fund.
15. MISCELLANEOUS.
(a) NOTICES. Any notice under this Agreement shall be
given in writing, addressed and delivered, or mailed postpaid (i) if to the
Administrator, to Corbyn Investment Management, Inc., 2330 West Joppa Road,
Suite 108, Lutherville, Maryland 21093-7207, Attention: President; and (ii)
if to the Fund, to Greenspring Fund, Incorporated, 2330 West Joppa Road, Suite
110, Lutherville, Maryland 21093-4641, Attention: President, with a copy
delivered by like means to De Martino Finkelstein Rosen & Virga, 1818 N Street,
N.W., Suite 400, Washington, D.C. 20036, Attention: Ralph V. De Martino.
(b) CAPTIONS. The captions contained in this Agreement
are included for convenience of reference only and in no way define or delineate
any of the provisions hereof or otherwise affect their construction or effect.
<PAGE>
(c) INTERPRETATION. Nothing herein contained shall
be deemed to require the Fund to take any action contrary to its Articles of
Incorporation or By-Laws, or any applicable statutory or regulatory requirement
to which it is subject or by which it is bound, or to relieve or deprive the
Board of Directors of its responsibility for and control of the conduct of the
affairs of the Fund.
(d) DEFINITIONS. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
validly issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
relaxed by a rule, regulation or order of the Securities and Exchange
Commission, whether of special or of general application, such provision shall
be deemed to incorporate the effect of such rule, regulation or order.
(e) SEVERABILITY. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
(f) GOVERNING LAW. Except insofar as the 1940 Act or
other federal laws and regulations may be controlling, this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Maryland.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be signed by their respective officers thereunto duly authorized and their
respective corporate seals to be hereunto affixed, as of the day and year first
above written.
ATTEST: GREENSPRING FUND, INCORPORATED
______________________________ By: _____________________________
Title: ______________________ Title:____________________________
ATTEST: CORBYN INVESTMENT MANAGEMENT, INC.
______________________________ By: _____________________________
Title: _______________________ Title:____________________________
<PAGE>
EXHIBIT 11
COPIES OF THE
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S
OPINION
AND
STATEMENT OF CONSENT
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of
Directors of Greenspring Fund, Incorporated
We have audited the accompanying statement of assets and liabilities
of Greenspring Fund, Incorporated, including the schedule of portfolio of
investments, as of December 31, 1997, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended and the financial highlights for the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Greenspring Fund, Incorporated as of December 31, 1997, the results
of its operations, the changes in its net assets and the financial highlights
for the periods stated in the first paragraph, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 30, 1998<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Greenspring Fund, Incorporated
We consent to the incorporation by reference in Post-Effective
Amendment No. 20 to the Registration Statement of Greenspring Fund, Incorporated
on Form N-1A (Files Nos. 2-81956 and 811-3627) of our report dated January 30,
1998, on our audit of the Fund's financial statements and financial highlights,
which report is included in the Fund's Annual Report to Shareholders for the
year ended December 31, 1997, which is incorporated by reference in the
Registration Statement. We also consent to the reference to our Firm under the
caption "Financial Highlights Table" in the Prospectus.
/s/Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Baltimore, MD
February 27, 1998
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