GREENSPRING FUND,
INCORPORATED
(LOGO)
SEMI-ANNUAL REPORT
JUNE 30, 1998
This report is authorized for distribution
only to shareholders who have received a
copy of the official Prospectus of the
Greenspring Fund, Incorporated.
<PAGE>
July 1998
Dear Shareholders:
The second quarter of 1998 was, without question, a very frustrating
period for the Greenspring Fund. We are happy to have the quarter behind us,
and we look forward to improved performance during the remainder of the year.
In this letter, we will discuss several securities that have contributed to
the Fund's lackluster performance. This review will also help to explain the
reasons for our confidence and optimism about the Fund's ability to provide a
strong showing during the second half of 1998. Despite the frustration and
disappointment experienced so far in 1998, we are very excited about the
prospects for many of the Fund's securities, especially several holdings that
have disappointed us during the last several months.
The Greenspring Fund's investment philosophy has always been to invest
in securities that are not dependent upon a strong market for positive
performance. Historically, the Greenspring Fund has shielded its shareholders
from a significant amount of the market's volatility by focusing on investments
whose performance is driven more by company-specific events. Unfortunately, we
have just gone through a period during which several of our larger holdings have
experienced weakness. In some cases, factors specific to those companies caused
the weakness, but in other cases it was because the companies were victims of
the "small-cap malaise" that has recently resulted in a sharp dichotomy between
the performance of securities of large, familiar companies and those of small,
lesser-known companies. This dichotomy is clearly reflected in a recent study
by Birini Associates, which showed that almost 27% of the stocks in the small
cap Russell 2000 Index had declined by 30% or more from their 52-week high,
compared with less than 14% of the stocks in the Standard & Poor's 500 Index.
According to Lipper Analytical Services, during the second quarter of 1998,
"Small Cap" mutual funds declined 4.1% on the average, while the larger cap
S & P 500 gained 3.3%. After constant and thorough examination of the
Greenspring Fund's portfolio, we are very confident that the recent setbacks
experienced by several of the Fund's larger holdings are temporary, not
permanent, in nature. Despite this trying time, we believe as firmly as ever
that the Greenspring Fund's investment philosophy is a sound, low risk,
rewarding way to invest over the long run.
<PAGE>
Specifically, the holdings that have most negatively affected the
Greenspring Fund's performance so far in 1998 are the following: 1) our
collective investments in companies that invest in specialized real estate-
related securities and assets, 2) the common stock of Tidewater Inc., and
3) the common stock of Barringer Technologies. A brief discussion of the
factors that have restrained the performance of these securities and a review
of their current prospects should instill in you the same kind of enthusiasm and
optimism that we currently have for these securities.
We have invested a significant portion of the Fund's assets in the
securities of companies that share several common characteristics, including
the following: 1) they invest in real estate, real estate-related securities or
mortgages; 2) they are sponsored by large and successful real estate or
specialty finance companies; 3) they are leaders in their chosen niche;
4) most are still in the process of fully investing the cash raised in recent
public offerings; 5) they chose the real estate investment trust as the most
tax-efficient corporate structure; and 6) their stocks have recently experienced
declines of 15-20% (with the exception of Resource Asset Investment Trust),
despite having fulfilled all operational promises. Such companies currently
held in the portfolio are AMRESCO Capital Trust, Anthracite Capital, Chastain
Capital, Criimi Mae, Imperial Credit Commercial Mortgage, Ocwen Asset Investment
Corp., and Resource Asset Trust.
We strongly believe that the recent declines are temporary setbacks and
that these securities will prove to be excellent total return investments from
current prices. It is our view that the principal reason these stocks have not
yet performed well is due to a supply/demand imbalance in the sector. The
supply of these types of securities has greatly increased during the last
several months due to a proliferation of initial public offerings. Because of
their attractive business models, successful and opportunistic real estate and
specialty finance companies have sought to emulate the early pioneers in the
industry, and fee-hungry investment bankers have been only too willing to aid
them in their efforts to come public. Unfortunately, the demand for these
securities so far has been weaker than we anticipated, as a broad base of
investors has yet to develop for the group. Although they are technically
real estate investment trusts and own a variety of real estate-related assets,
they are different from the typical "bricks and mortar" REIT. And even though
they originate and make commercial mortgage loans, they are not banks or
thrifts. Consequently, they suffer from an identity crisis that has resulted
in the supply of these securities overwhelming the current demand, with the
result being downward pressure on the stock prices.
<PAGE>
We strongly believe that demand for these securities will strengthen
significantly as the companies finish investing the pools of cash they raised in
their public offerings. As managements complete their initial investments
during the next several months, the companies will begin paying significant
dividends that should attract the attention of a much broader base of investors.
The annualized dividend rate that we project for the fourth quarter of 1998 will
result in a yield of about 11% on the average, based upon current prices. In
an interest rate environment in which U.S. Treasury securities yield less than
6% and the S&P 500 yields less than 2%, an 11% dividend yield will surely
attract the attention of investors, especially since we anticipate that the
dividend will continue to grow during 1999. We expect that this increased
recognition will drive the price of the securities up several points, resulting
in outstanding total returns regardless of the direction of the financial
markets. The fact that many of these companies are now selling for less than
book value, which consists of cash and recent investments, should limit the
downside risk from current prices.
Our investment in Tidewater has been the second largest contributor to the
Fund's disappointing performance during the first half of 1998. Tidewater owns
and operates the world's largest fleet of boats dedicated to servicing the
offshore energy industry. The factors that attracted us to Tidewater were its
market-leading position, its debt-free balance sheet, and the tremendous amount
of free cash flow the Company generates. At the time that we bought stock in
Tidewater, the price of oil was approximately $16 per barrel and analysts
expected the Company to earn about $4.50 per share in 1998 and generate almost
$6.00 per share in free cash flow. Due to weakening oil prices and fears of
an oversupply of service boats in the Gulf of Mexico, Tidewater's stock price
had declined from a peak of $70 per share in November of 1997 to a price in the
low 40's. We believed that the stock was "washed out" at that point, and that
the downside risk would be limited by the Company's $200 million share buyback
and the stock's low valuation relative to the market (a price/earnings ratio
of nine times versus more than twenty times for the S&P 500).
Unfortunately, the decline in the price of oil continued, dropping below
$12 per barrel at one point, and industry analysts continued to reduce their
earnings estimates for Tidewater. The stock reacted negatively, trading as
low as $31.50 per share during mid-June, as portfolio managers sharply reduced
their exposure to the unpopular oil services sector. Our confidence in our
Tidewater investment remains strong, however, and we feel that at current
prices, the negatives have been discounted and the investment thesis for
Tidewater is compelling. The new, lower earnings estimates for Tidewater are
around $3.50 per share, meaning that the shares trade for about nine times
depressed earnings (considerably less than half the market multiple). Even
<PAGE>
at these reduced earnings levels, the Company should generate almost $5.00
per share in free cash flow. It is a rare occasion that we can buy stock in
a market-leading company that has an impeccable balance sheet and sells for
less than seven times free cash flow during a period of depressed earnings.
Furthermore, its substantial free cash flow and strong balance sheet give the
Company a great deal of flexibility to take advantage of the current market
conditions, either by purchasing a greater amount of its depressed stock or by
acquiring another company at a bargain price. We strongly believe that our
Tidewater investment, currently the largest equity position in the Fund, will be
an excellent long-term investment.
The Fund's investment in Barringer Technologies has been the third
largest contributor to 1998's lackluster performance. Barringer Technologies is
a manufacturer of highly sensitive equipment used to detect and identify trace
amounts of explosives and illegal drugs. It is an undiscovered and under-
followed small capitalization security that we believe has tremendous potential
from current prices. Since the beginning of the year, Barringer's stock price
has declined from more than $14 per share to less than $8, although the
Company's fundamental outlook has changed only modestly. Barringer's stock
price suffered for three principal reasons: 1) the small-cap malaise, that
has affected many companies of similar size; 2) a poor decision to conduct a
secondary stock offering at $12 per share in late March. The purpose of the
offering was to raise cash to diversify its product line, yet management has
been very slow to employ the cash; and 3) an announcement on July 1 that second
quarter earnings would be less than analysts' expectations due to a delay in
the receipt of several orders.
An investor who buys Barringer's stock today at $8 per share, however,
is buying a company with close to $5 per share in cash, no debt, a market-
leading position in a rapidly growing industry, and the prospects of earning
(untaxed) $.85-$.90 per share. As investors become better aware of Barringer's
positive attributes, we expect its stock to appreciate sharply from current
levels. Alternatively, if the company's strong prospects continue to go
unappreciated by the investment community, it is likely that Barringer's
management will sell the company to a larger company. In a sign of "putting
their money where their mouth is," Barringer's management recently announced
a stock buyback of one million shares, representing about 12.50% of the
outstanding shares.
We truly believe that the Greenspring Fund's period of disappointing
relative and absolute performance is coming to an end. We appreciate the
loyalty and support of our fellow shareholders. All of the employees and
<PAGE>
officers of the Greenspring Fund and its investment advisor have significant
holdings in the Fund. The Greenspring Fund is unique compared with most mutual
funds in that it is not part of a family of funds; consequently, each and
every member of the staff is totally dedicated and committed to improving the
investment performance and service provided to the Greenspring Fund's
shareholders. Our investment philosophy, which has historically generated
very successful risk-adjusted returns, remains the same and will not change.
Most importantly, we are very excited about the prospects for the Greenspring
Fund during the balance of the year and we truly look forward to reporting on
more positive results as the year progresses.
Respectfully,
/s/Charles vK. Carlson
Charles vK. Carlson
President
<PAGE>
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
COMMON STOCKS (70.43%)
Shares Value
Banking (12.92%)
40,500 Astoria Financial Corp. $ 2,166,750
31,000 BostonFed Bancorp, Inc. 724,625
36,000 Chase Manhattan Corp. 2,718,000
50,000 Columbia Bancorp, Inc. 900,000
89,728 Crestar Financial Corp. 4,895,784
50,000 Dime Bancorp, Inc. 1,496,875
34,000 GA Financial, Inc. 624,750
22,300 Long Island Bancorp, Inc. 1,354,725
28,409 Magna Group, Inc. 1,605,108
15,000 Mercantile Bankshares Corp. 522,188
33,000 *PFF Bancorp, Inc. 614,625
21,100 PS Financial, Inc. 282,213
67,140 Patriot Bank Corp. 1,084,734
16,500 Rocky Ford Financial Corp. 237,187
100,000 Staten Island Bancorp 2,275,000
28,600 Statewide Financial Corp. 600,600
57,487 *Sun Bancorp, Inc. 1,523,405
23,626,569
Business Services (2.78%)
124,500 *Consolidation Capital Corp. 2,799,308
64,400 Standard Register Company 2,278,150
5,077,458
Construction (2.72%)
68,000 *Emcor Group, Inc. 1,300,500
26,800 *Shaw Group Inc. 696,800
157,000 *Walter Industries 2,973,188
4,970,488
<PAGE>
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
COMMON STOCKS (CON'T)
Shares Value
Consumer Products/Services (5.07%)
179,066 *Bolle Inc. $ 984,863
36,600 First Brands Corporation 937,875
19,900 Genesee Corporation Class B 656,700
460,000 *Host Marriott Services 6,698,750
9,278,188
Electric Power (.18%)
23,650 *NRG Generating, Inc. 337,013
337,013
Energy Services (4.92%)
273,200 Tidewater Inc. 9,015,600
9,015,600
Financial Services (18.59%)
539,925 !AMRESCO Capital Trust 6,985,280
166,900 Anthracite Capital, Inc. 2,315,738
50,000 Chastain Capital Corporation 643,750
220,300 Criimi Mae Inc. 3,056,663
68,500 *ITLA Capital Corp. 1,421,375
633,175 Imperial Credit Commercial Mortgage 8,270,848
332,400 *Long Beach Financial Corp. 3,656,400
230,700 Ocwen Asset Investment Corp. 3,820,969
83,700 *Ocwen Financial, Inc. 2,249,437
100,000 Resource Asset Investment Trust 1,593,750
34,014,210
<PAGE>
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
COMMON STOCKS (CON'T)
Shares Value
Instrumentation (2.85%)
362,700 *Barringer Technologies $ 3,422,981
179,900 *OSI Systems, Inc. 1,799,000
5,221,981
Insurance (4.78%)
75,000 PartnerRe Holdings, Ltd. 3,825,000
102,416 Reliastar Financial Corp. 4,915,968
8,740,968
Manufacturing (7.57%)
299,300 *Griffon Corporation 3,834,781
20,000 *Middleby Corp. 122,500
171,000 Rohn Industries, Inc. 801,563
69,600 *Scott Technologies Class A 1,017,900
193,247 *Scott Technologies Class B 2,898,705
165,000 U.S. Industries, Inc. 4,083,750
35,000 Woodward Governor Company 1,080,625
13,839,824
Natural Resources (1.78%)
32,500 Mitchell Energy & Development Corp. Cl. A 650,000
98,730 Penn Virginia Corp. 2,554,639
3,900 United States Lime & Minerals 35,100
3,239,739
Optical Products (2.45%)
505,844 *Lumen Technologies 4,489,365
4,489,365
<PAGE>
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
COMMON STOCKS (CON'T)
Shares Value
Real Estate (3.82%)
174,800 *Mark Centers Trust $ 1,300,075
232,700 Prime Retail, Inc. 2,777,856
175,945 The Town and Country Trust 2,914,089
6,992,020
Total Common Stocks (Cost $103,742,852) 128,843,423
PREFERRED STOCKS (4.14%)
Convertible Pfd. Stock (2.49%)
222,620 Prime Retail, Inc., 8.50% Pfd. B 4,563,710
Total Convertible Pfd. Stock 4,563,710
Non-Convertible Pfd. Stocks (1.65%)
1,000 BankUnited Capital Trust, 10.25%, Series A 1,080,000
94,500 *RB Asset, Inc., $3.75, Series A 1,937,250
Total Non-Convertible Pfd. Stocks 3,017,250
Total Pfd. Stocks (Cost $7,803,107) 7,580,960
<PAGE>
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
BONDS (21.43%)
Principal
Amount Value
Convertible Bonds (13.21%)
$ 1,500,000 Alexander Haagen Properties, Inc.
7.50%, 1/15/01 $ 1,451,720
9,940,000 Corporate Express, Inc., 4.50%, 7/1/00 9,219,350
2,000,000 Emcor Group, 5.75%, 4/1/05 1,924,166
1,176,000 Kelley Oil & Gas Partners, Ltd., 8.50%, 4/1/00 1,164,975
946,000 Kelley Oil & Gas Partners, Ltd.,
7.875%, 12/15/99 1,538,525
500,000 Liberty Properties Limited Partnership,
8.00%, 7/1/01 636,680
20,000,000 +Sunbeam Corp., 0.00%, 3/25/18 4,543,760
3,900,000 The Learning Company, 5.50%, 11/1/00 3,685,500
Total Convertible Bonds 24,164,676
Non-Convertible Bonds (8.22%)
2,445,000 Bay View Capital Corp., 9.125%, 8/15/07 2,530,575
1,000,000 Scott Technologies, 9.875%, 10/1/99 1,034,870
2,701,000 Homeland Stores, 10.00%, 8/1/03 2,565,950
2,525,000 Host Marriott Travel Plaza, 9.50%, 5/15/05 2,695,438
1,000,000 +Life Savings Bank, 13.50%, 3/15/04 1,001,250
400,000 Ocwen Financial, 11.875%, 10/1/03 452,000
1,855,000 USA Mobile, 14.00%, 11/1/04 2,042,819
1,670,000 U.S. Shoe, 8.625%, 10/1/02 1,695,050
1,000,000 U.S. Treasury, 7.125%, 9/30/99 1,018,906
Total Non-Convertible Bonds 15,036,858
Total Bonds (Cost $39,745,552) 39,201,534
<PAGE>
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
COMPANIES IN LIQUIDATION (2.60%)
Shares/
Principal
Amount Value
282,196 *!Atlantic Realty Trust $ 2,610,313
583,800 *!EQK Realty Investors 1 407,434
581,450 *!Hi Shear Industries, Inc. 1,562,647
2,900,000 Lomas Mortgage USA, Class 3 Claim 174,000
Total Companies in Liquidation
(Cost $5,534,346) 4,754,394
SHORT-TERM INVESTMENTS (.84%)
Temporary Investment Fund, Inc. 1,541,819
Total Short-Term Investments
(Cost $1,541,819) 1,541,819
Total Investments in Securities (99.44%)
(Cost $158,367,676) 181,922,130
Other Assets Less Liabilities (.56%) 1,028,525
Total Net Assets (100%) $182,950,655
*Non-income producing securities
+144A security, representing 3.03% of net assets
!Non-controlled affiliated issuer
<PAGE>
GREENSPRING FUND, INCORPORATED
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
ASSETS
Investments, at market value (Cost $158,367,676) $ 181,922,130
Receivable for securities sold 1,725,670
Interest receivable 760,947
Receivable for Fund shares sold 247,605
Dividends receivable 213,768
Purchased interest 43,347
Prepaid expense 2,522
Total Assets 184,915,989
LIABILITIES
Payable for securities purchased 1,588,464
Payable for Fund shares repurchased 171,646
Due to investment advisor 114,339
Accrued expenses 90,885
Total Liabilities 1,965,334
NET ASSETS
Capital stock, $.01 par value, authorized
60,000,000 shares, outstanding, 9,221,832 $182,950,655
NET ASSETS CONSIST OF:
Capital stock at par value 92,219
Paid in capital 148,672,328
Undistributed net investment income 3,443,190
Undistributed net realized gains 7,188,464
Net unrealized appreciation of investments 23,554,454
Net Assets $182,950,655
NET ASSET VALUE PER SHARE $ 19.84
The accompanying notes are an integral part of these financial statements.
<PAGE>
GREENSPRING FUND, INCORPORATED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
INVESTMENT INCOME
Income
Interest $ 2,434,241
Dividend from non-affiliated issuers 1,842,018
Other Income 136,377
Total Income $ 4,412,636
Expenses
Investment advisory fees 732,187
Administrative 96,690
Transfer agent fees 42,600
Registration fees 32,876
Custody fees 21,092
Professional fees 19,658
Reports to shareholders 17,046
Directors fees 4,100
Fidelity bond 1,697
Filing fees 1,500
Total Expenses 969,446
Net Investment Income 3,443,190
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 6,812,199
Net change in unrealized appreciation of investments (12,158,406)
Net Realized and Unrealized Gain on Investments (5,346,207)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (1,903,017)
The accompanying notes are an integral part of these financial statements.
<PAGE>
GREENSPRING FUND, INCORPORATED
STATEMENTS OF CHANGES IN NET ASSETS
Six months
Ended
June 30, Year Ended
1998 December 31,
(Unaudited) 1997
OPERATIONS:
Net investment income $ 3,443,190 $ 4,251,920
Net realized gain from investments 6,812,199 5,155,949
Net change in unrealized appreciation of
investments (12,158,406) 19,033,538
Net increase(decrease) in net assets
resulting from operations (1,903,017) 28,441,407
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - (5,151,311)
Net realized gain on investments - (5,054,261)
Distributions in excess of net
investment income - (127,012)
Net decrease in net assets from
distributions to shareholders - (10,332,584)
CAPITAL STOCK TRANSACTIONS:
Sale of 1,710,705 and 4,683,274 shares 34,802,560 89,108,348
Distributions reinvested of 0 and
486,121 shares - 9,527,618
Redemptions of 1,533,323 and
1,433,404 shares (31,163,218) (27,022,113)
Increase in net assets from capital stock
transactions 3,639,342 71,613,853
TOTAL INCREASE IN NET ASSETS 1,736,325 89,722,676
NET ASSETS AT BEGINNING OF PERIOD 181,214,330 91,491,654
NET ASSETS AT END OF PERIOD $182,950,655 $181,214,330
The accompanying notes are an integral part of these financial statements.
<PAGE>
GREENSPRING FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
Note 1 - Significant Accounting Policies
Greenspring Fund, Incorporated ("the Fund") is a diversified open-end
management investment company registered under the Investment Company Act
of 1940, as amended.
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
Investment transactions and related investment income - Investment transactions
are recorded on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis. Dividends determined
to be a return of capital are recorded as a reduction of the cost basis of the
security. Realized gains and losses from investment transactions are reported
on an identified cost basis.
Valuation of investments - Securities listed on a national securities exchange
or the NASDAQ National Market are valued at the last reported sale price on the
exchange of major listing as of the close of the regular session of the New York
Stock Exchange.
Securities which are traded principally in the over-the-counter market, listed
securities for which no sale was reported on the day of valuation, listed
securities for which the last reported sale price is not in the context of the
highest closing bid price and the lowest closing offering price, and listed
securities whose primary market is believed by the Advisor to be over-the-
counter are valued at the mean of the closing bid and asked prices obtained
from sources that the Advisor deems appropriate.
Short-term investments are valued at amortized cost which approximates fair
market value. The value of securities that mature, or have an announced call,
within 60 days will be amortized on a straight line basis from the market value
one day preceding the beginning of the amortization period.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by the Advisor as directed by the Board
of Directors.
<PAGE>
GREENSPRING FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
Note 1 - Significant Accounting Policies (Con't)
Income Taxes - It is the policy of the Fund to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies.
Accordingly, the Fund intends to distribute substantially all of its taxable
income. Therefore, no federal income tax provision is required. In order for
the Fund's capital accounts and distributions to shareholders to reflect the tax
character of certain transactions, reclassifications were made during the
period. The net results of operations and net assets were not affected by the
reclassifications.
Dividends and distributions to stockholders - The Fund records dividends and
distributions to stockholders on the ex-dividend date.
Redemption of capital stock - A stockholder may request redemption of some or
all of his shares on any day that the New York Stock Exchange is open for
business. The redemption price per share is the net asset value per share as of
the close of business on the day that the redemption request is received by
the Fund. Payment for shares will be made within five business days after
receipt of the redemption request.
Note 2 - Dividends and Distributions of 1998 Taxable Earnings
It is the Fund's policy to declare dividends from net investment income and
distributions from net realized gains as determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These dividends are either distributed to shareholders or reinvested by the Fund
in additional shares of common stock, which are issued to stockholders. For
those reinvesting the dividend, the number of shares issued is based on the net
asset value per share as of the close of business on the business day previous
to the payment date.
Note 3 - Purchases and Sales of Investments
For the six months ended June 30, 1998, purchases and sales of investments,
other than short-term investments, aggregated $81,842,733 and $66,779,203,
respectively.
<PAGE>
GREENSPRING FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
Note 3 - Purchases and Sales of Investments (Con't)
For federal income tax purposes, the cost of investments owned at June 30, 1998
was $158,367,676. Net unrealized appreciation of such investments aggregated
$23,554,454, which was composed of appreciation of $32,758,396 for those
securities having an excess of value over cost, and depreciation of $9,203,942
for those securities having an excess of cost over value.
Note 4 - Transactions with Related Parties
The Fund's investment advisor, Key Equity Management Corporation ("Key
Equity"), is a wholly-owned subsidiary of Corbyn Investment Management
("Corbyn"). Under an agreement between the Fund and Key Equity, the Fund pays
Key Equity a fee of 0.75% of the first $250 million of average daily net
assets, 0.70% of average daily net assets between $250 million and $500 million
and 0.65% of average daily net assets in excess of $500 million, which is
computed daily and paid monthly. Investment advisory fees incurred for the
six months ended June 30, 1998 were $732,187. At June 30, 1998, investment
advisory fees payable amounted to $114,339.
The Fund entered into an Administrative Services Agreement with Corbyn on May
1, 1998. As administrator, Corbyn provides administrative services and
personnel for fund accounting, regulatory reporting and other administrative
matters. As compensation, the Fund pays Corbyn a fee of $2,500 a month plus
0.04% of average daily net assets up to $250 million, 0.03% of average daily
net assets between $250 million and $500 million and 0.025% of average daily
net assets in excess of $500 million, which is computed daily and paid monthly.
Administrative fees incurred for the two months ended June 30, 1998 were
$17,814.
Certain of the Fund's officers and directors are also officers and directors of
Key Equity and Corbyn Investment Management. At June 30, 1998, investors for
whom Corbyn Investment Management was investment advisor held 1,324,341 shares
of the Fund's common stock.
Note 5 - Investment in Non-Controlled Affiliates
Affiliated issuers, as defined in the Investment Company Act of 1940, are
issuers in which the Fund held 5% or more of the outstanding voting securities.
<PAGE>
GREENSPRING FUND, INCORPORATED
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION> Year Ended December 31,
<S> <C> <C> <C> <C> <C> <C>
(Unaudited)
For the six
months ended
June 30,
1998 1997 1996 1995 1994 1993
Net Asset Value, Beginning of Period $ 20.04 $ 17.24 $ 15.05 $ 13.39 $ 13.96 $ 13.78
Income From Investment Operations
Net Investment Income 0.37 0.50 0.74# 0.70 0.51 0.40
Net Realized and Unrealized Gain/Loss on Investments (0.57) 3.58 2.60# 1.78 (0.12) 1.59
Total From Investment Operations (0.20) 4.08 3.34 2.48 0.39 1.99
Less Distributions
Net Investment Income - (0.67) (0.59) (0.68) (0.51) (0.40)
Net Realized Gain on Investments - (0.60) (0.56) (0.07) (0.45) (1.41)
Distributions in Excess of Net Investment Income - (0.01) - - - -
Distributions in Excess of Net Realized Gains - - - (0.07) - -
Total Distributions - (1.28) (1.15) (0.82) (0.96) (1.81)
Net Asset Value, End of Period $ 19.84 $ 20.04 $ 17.24 $ 15.05 $ 13.39 $ 13.96
Total Return (0.97%) 23.95% 22.65% 18.79% 2.83% 14.65%
Ratios/Supplemental Data
Net Assets, End of Period (000's) $182,951 $181,214 $ 91,492 $ 71,839 $ 50,322 $ 29,885
Ratio of Expenses to Average Net Assets 1.00%* 1.00% 1.04% 1.06% 1.27% 1.31%
Ratio of Net Investment Income to Average Net Assets 3.57%* 3.10% 4.69%# 4.97% 4.03% 2.78%
Portfolio Turnover 39.13% 46.17% 60.74% 65.19% 76.55% 121.79%
</TABLE>
*Annualized
#Amounts include reclassifications to conform to current year presentation.
<PAGE>
Greenspring Fund, Incorporated
Performance Since Inception
How $10,000 invested
on 7/1/83 would have grown*
Chart
7/1/83 $10,000
12/31/83 11,223
12/31/84 12,692
12/31/85 15,238
12/31/86 17,668
12/31/87 19,304
12/31/88 22,389
12/31/89 24,762
12/31/90 23,149
12/31/91 27,626
12/31/92 32,190
12/31/93 36,906
12/31/94 37,952
12/31/95 45,082
12/31/96 55,291
12/31/97 68,532
6/30/98 67,848
*Figures include changes in principal value, reinvested dividends, and capital
gains distributions. Cumulative total return represents past performance. Past
expense limitations increased the Fund's return. Investment returns and
principal value will vary and shares will be worth more or less at redemption
than at original purchase.
Average annual total returns for the one, five and ten year periods ended June
30, 1998 were 9.22%, 14.03%, and 12.02%, 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.
<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 Management Corporation
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
PriceWaterhouseCoopers LLP
250 W. Pratt Street
Baltimore, MD 21201-2304
LEGAL COUNSEL
DeMartino Finkelstein Rosen & Virga
1818 N Street, N.W., Suite 400
Washington, DC 20036-2492
