As filed with the Securities and Exchange Commission on April 30, 1999.
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. 21 X
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Post-Effective Amendment No. 21 X
Greenspring Fund, Incorporated
(Exact Name of Registrant as Specified in Charter)
2330 West Joppa Road, Suite 110
Lutherville, Maryland 21093-4641
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (410)823-5353
Mr. Charles vK. Carlson, President
2330 West Joppa Road, Suite 110
Lutherville, Maryland 21093-4641
(Name and address of Agent for Service)
Copies To: Ralph V. De Martino, Esq.
De Martino Finkelstein Rosen & Virga
1818 N Street, N.W., Suite 400
Washington, D.C. 20036
Telephone: (202)659-0494
Telecopier: (202)659-1290
Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date.
It is proposed that this filing will become effective (check appropriate line)
immediately upon filing pursuant to paragraph (b)
X on May 1, 1999 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on May 1, 1999 pursuant to paragraph (a), of Rule 485.
The Registrant has registered an indefinite number of shares of Common Stock
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Registrant filed with the Commission a Rule 24f-2
Notice for the Registrant's most recent fiscal year on February 26, 1999.
<PAGE>
Greenspring Fund,
Incorporated
Prospectus
May 1, 1999
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
Greenspring Fund at a Glance 2
Performance 3
Fund Expenses 5
Investment Objective, Principal Investment Strategies
and Related Risks 5
Organization, Management and Capital Stock 9
Purchase of Shares 12
Redemption of Shares 16
Dividends, Distributions and Taxes 19
Financial Highlights 22
Appendix A 23
<PAGE>
GREENSPRING FUND AT A GLANCE
The following general information about Greenspring Fund (the "Fund") may
be helpful in determining if we are an appropriate investment for you.
Investment Objective. Long-term capital appreciation through a total return
approach to investing. Income is an important, but secondary, factor.
Principal Investment Strategies. We primarily invest in companies whose
stocks we consider undervalued relative to their peers or the general market.
We often select those companies that possess a catalyst such as management
changes, industry developments, new products or changing corporate structures
that may result in the appreciation of the security. We incorporate the
timing of the catalyst into our exit strategy. We may also invest in bonds
of companies whose securities are rated below investment grade. In addition,
we may invest in bonds and preferred stocks that are convertible into
common stock of the issuer. Convertible securities have general
characteristics similar to bonds and common stocks and provide the opportunity
of capital appreciation should the underlying common stock increase in value.
We may also invest in companies in the process of financial restructurings,
reorganizations, corporate turnarounds, and liquidations.
Type of Investments. A combination of common stocks, preferred stocks, bonds
(which may be high yield, high risk), convertible bonds, government securities
and money market instruments.
Principal Investment Risks. All investments carry risk, which means that
you could lose money. Although we invest in companies we consider undervalued
relative to their peers or the general market, there is a risk that these value
2
<PAGE>
securities may decline or may not reach what the portfolio manager believes is
its full value. We invest in companies regardless of market capitalization.
Small capitalization securities tend to be more volatile and less liquid
than large capitalization securities, which can negatively affect our ability
to purchase or sell these securities. Bonds have two main sources of risk,
which are interest rate risk and credit risk. Interest rate risk is the chance
that interest rates may rise causing bond prices to fall. Credit risk is the
chance that a bond's credit rating could be downgraded because of some adverse
business event, which reduces its ability to make timely payments of principal
and interest. In addition, bonds rated below investment grade are more
sensitive to economic conditions and individual corporate developments than
those of higher-rated securities, which may adversely affect their value.
Type of Investors. We are designed for long-term investors seeking capital
appreciation with some dividend income. You should not invest in us for
short-term financial needs or for short-term investment in the stock market.
PERFORMANCE
The following information provides an indication of the risk of investing
with us. The bar chart shows our performance in each calendar year over a
ten-year period. The table shows how our average annual returns for one,
five and ten years compare with those of broad-based securities market
indices with similar investment objectives. In the past, we compared our
performance to the Lipper Growth & Income Fund Index. Our investment
strategies are better reflected by the Russell 2000 Index. Accordingly,
the Russell 2000 Index is used in the table below. Our past performance is
3
<PAGE>
not an indication of our future performance.
Best and Worst Performing Quarters
During the Last 10 Years
Quarter/Year Total Return
Best March 31, 1991 10.06%
Worst September 30, 1998 -19.55%
Average Returns Compared To Broad-Based Indices
1 Year 5 Years 10 Years
Greenspring Fund -15.97% 9.31% 9.91%
Russell 2000 Index -2.55% 11.87% 12.92%
Lipper Balanced Fund Index 15.09% 13.87% 13.32%
4
<PAGE>
FUND EXPENSES
You may incur the following expenses if you buy and hold our shares:
Shareholder Fees (paid directly from your investment) None
Annual Operating Expenses (expenses deducted from assets)
Management fees 0.77%
Other expenses (refer to Annual Report) 0.24%
Total Operating Expenses 1.01%
Compare the cost of investing with us to the cost of investing with other
mutual funds using the following example. Assume that:
* You invest $10,000 with us for the periods indicated.
* You redeem at the end of each of the periods indicated.
* Your investment has a 5% total return each year.
* Our operating expenses remain the same each year.
1 Year 3 Years 5 Years 10 Years
$103 $322 $558 $1,236
Your actual costs and our performance may be higher or lower than the above
example.
Investment Objective, Principal Investment Strategies and Related Risks
Investment Objective. Our principal investment objective is to provide you
with long-term capital appreciation through a total return approach to
5
<PAGE>
investing. In pursuing our objective, we invest in a combination of common
stocks, preferred stocks, bonds (which may be high yield, high risk),
convertible bonds and government securities. From time to time, we
may invest in money market instruments. Current income is an
important, but secondary, factor in the selection of our investments.
Principal Investment Strategies. We invest in a diversified portfolio of
securities we consider undervalued relative to their peers or the general
market. We may invest in companies regardless of market capitalization, sales,
total assets or earnings. Small capitalization securities tend to be
more volatile and less liquid than larger capitalization securities.
Our strategies include:
* Value-oriented Equity Securities. Value investing generally emphasizes
equities of companies which may be out of favor or from which the market
does not expect strong growth. We will buy equities that trade at levels
which we believe represent a discount to their historical valuations, the
valuations of their peers, the valuations of the overall market, and/or
the company's value as a private company. We research each security
separately and, where appropriate, analyze the company's:
* profitability
* balance sheet strength
* ability to generate free cash flow
* value of unrecognized assets
* ability to capitalize upon the company's assets and anticipated
economic trends
Other characteristics that we look for in our equity investments may include,
but are not limited to:
* A high quality, deep management team. We prefer to invest in companies
that historically have acted in their shareholders' best interests and have
managed their companies with the goal of improving the stock price. Often,
6
<PAGE>
these management teams have a significant investment in the company's stock,
helping to ensure that the interests of the shareholders are aligned with
the management team.
* Financial Strength. Companies that generate free cash flow are preferable
over companies that need to raise capital to finance future growth. Free
cash flow can be used to benefit shareholders through growth opportunities,
dividend increases, stock repurchases or debt reduction.
* Strong Industry Position. We prefer to invest in companies that we
believe have a strong position within their industry peer group. Companies
with strong industry positions are better able to effectively adjust to
industry changes.
* Workout Investments. Workout investments are special situation investments
such as financial restructurings, reorganizations, corporate turnarounds, and
liquidations. We anticipate a company-specific event at the time of purchase,
which usually controls the performance of the investment more than other
developments in the financial markets.
If we cannot find securities that meet our investment criteria, short-term
money market-type reserves may be utilized, which should reduce downside
volatility during periods of market weakness. As a result of investing
in money market instruments, we may not achieve our investment objective.
Market Capitalization. Market capitalization measures the size and value of
a company. It is calculated by multiplying a company's current market value
per share by the total number of shares outstanding. A company's market
capitalization falls into the category of micro-cap, small-cap, mid-cap or
large-cap. We may invest in securities from each category.
7
<PAGE>
Bonds. We can invest a portion of the portfolio in corporate or government
bonds, convertible bonds, Rule 144A securities, high yield, high risk bonds,
investment grade bonds and bonds that are in default at the time of purchase.
Bonds are rated by credit agencies as to their credit quality. We do not
limit our investment in bonds to any certain Standard and Poor's Corporation
("S & P") or Moody's Investor Service, Inc. ("Moody's") credit category.
(See Appendix).
The following table illustrates the percentage of our total investments
during 1998 represented by 1) bonds rated by S & P and Moody's, separated
into each applicable rating category by monthly dollar weighted average and
2) bonds not rated, which is not necessarily an unfavorable rating. The
composition of the bonds held during 1998 is not an indication of the future
composition of the portfolio.
Rating Categories
S & P Moody's Percentage
AAA Aaa 0.44%
A 0.20%
Baa 0.20%
BB 1.75%
Ba 1.53%
B 10.44%
B 11.62%
CCC 1.29%
Caa 2.10%
Unrated 6.14%
Unrated 4.41%
8
<PAGE>
Other Investments. We can also invest in repurchase agreements and foreign
securities as well as write or purchase call options (covered and uncovered)
and put options. We have not used these investment practices recently.
Please refer to the Statement of Additional Information for a more detailed
description of these investment practices.
Diversification and Concentration. We invest in many securities and industries
to provide you with a diversified portfolio. A diversified portfolio reduces
the risk of any one security's poor performance having a significant effect
on the portfolio's total performance, but it does not eliminate all risk. We
normally limit our investment in a specific security to 5% of total Fund
assets at the time of purchase. We also limit our concentration in one
particular industry to less than 25% of total Fund assets at the time of
purchase.
Principal Investment Risks. You may encounter the following risks by
investing with us:
* General Risks
* Value investing may be out of favor.
* Industry sectors may be out of favor.
* We may be unable to sell an investment quickly without a substantial
price concession.
* The stock market may drop.
* Company-specific Risks
* Free cash flow may not be used as expected.
* The timing of expected developments may take longer to occur than
originally anticipated.
* Unexpected announcements such as unfavorable earnings reports may
depress the value of a security we own.
* General Bond Risks
* Interest rates may rise causing bond prices to fall.
8
<PAGE>
* The issuer may default on principal and/or interest payments.
* We may experience difficulty selling a bond because of a thin trading
market.
* Our investment in high yield bonds may have greater risk and price
fluctuation than higher-rated securities.
* Bonds with longer maturities are typically more volatile than those
with shorter maturities.
* High Yield Bond Risks
* Prices and yields may be more volatile than higher-rated securities.
* Credit risk may be higher since issuers are more vulnerable to
financial setbacks and recession than more creditworthy companies.
* Deteriorating economic conditions or rising interest rates may
weaken the issuer's ability to pay interest and repay principal than
issuers of higher-rated securities.
* High yield bonds may be less liquid than bonds that are higher-rated.
ORGANIZATION, MANAGEMENT AND CAPITAL STOCK
Organization. We are a no-load fund that first offered our shares to the
public on July 1, 1983.
Portfolio Management. Charles vK. Carlson is the President, Chairman of the
Board of Directors and portfolio manager of Greenspring Fund. He has been
President since March 1993, Chairman of the Board of Directors since January
1994 and portfolio manager since January 1987. Mr. Carlson also holds the
position of President and Director of Corbyn Investment Management and Key
Equity Management Corporation. He graduated from The Johns Hopkins University
with a degree in Political Economy. He is a Chartered Financial Analyst.
9
<PAGE>
Investment Advisor. Key Equity Management Corporation ("Key Equity"),
organized in 1982, is the investment advisor of the Fund. Key Equity, located
at 2330 West Joppa Road, Suite 108, Lutherville, Maryland 21093, is a
wholly-owned subsidiary of Corbyn Investment Management ("Corbyn"), an
investment advisor providing investment management services for pension
funds, endowments and individuals since 1973. Subject to the supervision of
our Board of Directors, Key Equity makes our investment decisions, provides
us with investment objectives, policies and limitations, places our orders
to purchase and sell securities and provides us with a program of continuous
investment management.
We compensate Key Equity monthly based on the following fee structure:
Average Daily Net Assets Fee
$0 - $250,000,000 .75%
$250,000,000 - $500,000,000 .70%
Over $500,000,000 .65%
For the year ended December 31, 1998, we paid Key Equity an annual effective
rate of .77% of our average daily net assets. Prior to May 1, 1998, we
calculated Key Equity's fee based on a flat rate of .75% of month-end net
assets. Pursuant to a new investment advisory agreement approved by
shareholders, we now calculate Key Equity's fee with a step down fee
structure based on daily net assets.
Administrator. Corbyn Investment Management, Inc. is the administrator of
the Fund. Corbyn provides administrative services and personnel for fund
accounting, regulatory reporting and other administrative matters. Corbyn's
address is 2330 West Joppa Road, Suite 108, Lutherville, Maryland 21093.
We compensate Corbyn with a monthly fee of $2,500 plus:
10
<PAGE>
Average Daily Net Assets Fee
$0 - $250,000,000 .04%
$250,000,000 - $500,000,000 .03%
Over $500,000,000 .025%
As of April 1, 1999, Corbyn had discretionary authority over individual accounts
holding 18% of Fund shares. Corbyn, either alone or in combination with Key
Equity, may be deemed to have a controlling interest in the Fund. Both Corbyn
and Key Equity maintain that they do not control the Fund.
Transfer Agent. PFPC, Inc. ("PFPC") is our transfer agent. PFPC's address is
400 Bellevue Parkway, Suite 108, Wilmington, Delaware 19809.
Capital Stock. Greenspring 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.
We hold a Meeting of Shareholders when certain non-routine matters must be
approved. However, if you own at least 10% of our outstanding shares, you
may call a special meeting for the purpose of voting on the removal of any
of our directors.
11
<PAGE>
PURCHASE OF SHARES
We offer the following types of accounts:
Type of Account Initial Investment
Individual/Joint $2,000
Trust $2,000
Corporate/Partnership/Other $2,000
Gift to Minor $1,000
Automatic Investment Plan $1,000
Systematic Withdrawal Plan $10,000
Traditional/Roth/Simple/SEP IRA $1,000
Initial Investment. You need the following information to open an account:
* a completed application
* a check payable to the Greenspring Fund, Incorporated
We accept checks drawn in U.S. currency on a U.S bank. We do not accept
cash, credit cards, third party checks (except for rollover accounts) or
checks drawn on foreign banks.
Send your completed application and check to:
Regular Mail Overnight
Greenspring Fund Greenspring Fund
c/o PFPC, Inc. c/o PFPC, Inc.
P.O. Box 8997 400 Bellevue Parkway
Wilmington, DE 19899 Wilmington, DE 19809
12
<PAGE>
You can also wire funds to PFPC Trust Company for a fee of $7.50. Wiring
instructions are:
PFPC, Inc.
c/o PFPC Trust Company
Philadelphia, PA
ABA #031-0000-53
DDA #86-0172-6639
For credit to the Greenspring Fund
Further credit (your name)
Your Greenspring Fund account number
Before wiring your funds, please call PFPC at (800) 576-7498 to establish an
account number. After speaking with a customer service representative, fax
your completed application to (302) 791-4176.
Additional Investments. You can purchase additional shares by mailing:
* the detachable investment slip from your account statement or
* a letter indicating the amount of your purchase, your account number and
the name in which your account is registered
* a check, the minimum of which must be $100, payable to the Greenspring Fund
You can also wire funds as described above. We may reject any purchase of
additional shares below $100.
We do not accept telephone orders for the purchase of shares. We make some
exceptions for brokerage firms with whom we have certain operating
relationships. We authorize these brokerage firms to accept orders from
their clients on behalf of us until the close of the New York Stock Exchange
(the "Exchange"). The brokers must transmit the order to PFPC by 8:00 p.m.
Eastern Standard Time to receive that day's closing share price. We can
13
<PAGE>
modify, limit or terminate our telephone order procedures anytime.
Automatic Investment Plan. You can purchase shares on a monthly basis through
an arrangement with your bank and PFPC. PFPC will deduct a predetermined
amount from your bank account on or about the 20th of each month. The minimum
amount is $100. You will receive a Statement of Account reflecting this
purchase and your bank account will reflect the charge. To participate in this
plan, please fill out the Automatic Investment Plan section on the Account
Registration Form and mail it to PFPC. Please verifify that your bank is able
to accept Automated Clearing House ("ACH") transactions and/or is a member of
an ACH association. Your monthly investment normally becomes active within
30 days after we receive your application.
Confirmation of Transactions. You will receive a Statement of Account
confirming each transaction made. The Statement of Account shows the date
of the transaction, the number of shares purchased, the share price and the
total balance of shares in your account. Please review your Statement of
Account and report any discrepancies to PFPC.
We can decline a purchase order if accepting the order would not be in the
best interest of existing shareholders.
You will be responsible for any loss incurred if your check or wire does not
clear your bank. If you are an existing shareholder, we reserve the right to
redeem shares from any identically registered account as reimbursement for the
loss.
We do not issue certificates representing shares purchased unless specifically
requested in writing.
14
<PAGE>
Other Purchase Information. If you purchase our shares through a broker, bank
or other service provider, you will receive confirmation of your purchase from
them. We will not have records of your transactions. A broker, bank or other
service provider may impose charges for its services, have different minimums
for first-time or additional investments or impose other restrictions that are
not applicable if you purchase shares directly from us.
Shareholder Inquiries. You can access information on your account 24 hours a
day, seven days a week from any touch-tone phone. Simply call (800) 576-7498
and follow the menu instructions. You can reach a customer service
representative at (800) 576-7498 between the hours of 8:30 a.m. and 5:00 p.m.
Eastern Standard Time during any business day.
You can change the address on your account by calling PFPC. PFPC will mail a
confirmation of your change of address to both your old and new address.
We will mail you 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 also include financial statements.
To reduce expenses, we mail one report to each household regardless of the
number of accounts registered to the household. You can request additional
copies at no extra charge.
Share Price. We calculate our share price (commonly referred to as net asset
value) each day the Exchange is open for business. We will not calculate our
share price on a day the Exchange is closed for a national holiday. We
compute our share price by subtracting our total liabilities (accrued expenses
and other liabilities) from our total assets (investments, receivables and
other assets) and dividing by the total number of shares outstanding.
15
<PAGE>
Our net asset value is listed in the Wall Street Journal and most major
newspapers. You can also call us at (800) 366-3863 after 4:30 p.m. Eastern
Standard Time any business day and listen to our daily recording.
We must receive your purchase order before the close of the Exchange for you
to receive that day's closing net asset value. If we receive your purchase
order after the close of the Exchange, you will receive the next day's closing
net asset value.
Pricing of Shares. We value our securities using price quotes from the
principal market in which they trade. If a market quote is not available, we
value the security at fair market value as determined in good faith by our
Advisor as directed by our Board of Directors.
We value short-term investments at amortized cost, which approximates fair
market value.
REDEMPTION OF SHARES
You can redeem shares any day the Exchange is open for business. You can
redeem up to $10,000 by telephone (if previously set up on your account) or
by fax. Any redemption over $10,000 must:
* be in writing
* have your original signature
* be signature guaranteed
* be mailed or sent by overnight delivery.
We make exceptions for certain brokerage firms with whom we have operating
relationships.
Your proceeds will be mailed to you within seven days of your redemption
request. If you are redeeming shares recently purchased by check,
16
<PAGE>
your proceeds may be delayed until your check has cleared, which may take up
to fifteen days after the purchase date.
Telephone Redemptions. You can redeem up to $10,000 by calling PFPC at
(800) 576-7498 before the close of the Exchange. You must provide certain
information to PFPC on a recorded line to protect your account from any
fraudulent instructions. Your proceeds will be mailed to the address of
record. If you request your proceeds to be sent by wire, PFPC will only
wire to your bank of record.
We will not be responsible for the authenticity of your instructions if
reasonable security procedures are followed. If reasonable security
procedures are not followed, we may be liable for any losses. We can modify,
limit or terminate our telephone procedures at anytime.
Letter of Redemption. You can redeem shares by mailing a letter to
PFPC with the following information:
* your account number
* the dollar value or number of shares you wish to redeem
* the preferred method of payment, whether by check, ACH or wire (if by ACH
or wire, enclose proper banking information)
* your signature and the signature of anyone else listed on the account
* a signature guarantee if the dollar value of the redemption is over $10,000
* any supporting legal documentation that may be required
* any outstanding certificates representing shares to be redeemed
You may fax your redemption request if it is under $10,000 and no signature
guarantee is required. PFPC's fax number is (302) 791-4176. Please do not
17
<PAGE>
fax a letter of redemption request for an amount greater than $10,000.
Systematic Withdrawal Plan. You can authorize PFPC to automatically redeem
a predetermined number of shares or dollar value from your account on or
about the 25th of each month or quarter-end. You must have a minimum of
$10,000 in your account to begin this plan. You can redeem a minimum of
$100 each month or quarter. To participate in this plan, please fill out
the Systematic Withdrawal Plan section on the Account Registration Form and
mail it to PFPC.
Signature Guarantee. Signature guarantees are required to protect your
account from fraud. You must provide a signature guarantee for the following:
* a redemption request over $10,000
* a redemption request within 30 days of an address change
* a redemption request where the proceeds are mailed to an address different
from your address of record
* a redemption request where the proceeds are wired to a bank or brokerage
account different from your bank or brokerage account of record
* a redemption request where the proceeds are payable to someone other than
you
* any request to transfer redemption proceeds to an account with a registration
different from yours
* to add or change wire instructions
* to change your name due to marriage or divorce
* to add or change a TOD beneficiary
You can obtain a signature guarantee from a bank, broker-dealer, credit union,
any securities exchange or association, clearing agency, savings association
or trust company. A notary public can not provide a signature guarantee.
18
<PAGE>
Redemptions in Kind. We normally pay all redemptions in cash, but we can
fulfill a redemption request with payment in whole or in part in the form of
our portfolio securities.
Account Balance. We reserve the right to automatically redeem your account
and mail you the proceeds if your balance is below $1,000 due to redemptions
during the year. We will not redeem your account if your balance is below
$1,000 due to market conditions. We will notify you in writing 60 days prior
to the redemption of your account.
Incorrect Tax Identification Number. We reserve the right to automatically
redeem your account if you furnish an incorrect social security or tax
identification number. We will notify you in writing 30 days prior to the
redemption of your account.
Temporary Suspension of Redemptions. We can temporarily suspend any
redemption requests in case of emergency as directed by the Securities and
Exchange Commission.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions. Each year, we distribute substantially all of
our net investment income and realized capital gains, if any. We declare
dividends in July and December. Capital gains, if any, are declared in
December. Dividends are derived from dividend and interest income we
receive from securities in the portfolio. Capital gains are derived from
selling a security at a price higher than our cost. You can elect how you
wish to receive your dividends and capital gains on your Account Registration
Form or by letter. You have the following options:
* reinvest all dividends and capital gains
* receive dividends in cash and reinvest capital gains
19
<PAGE>
* reinvest dividends and receive capital gains in cash
* receive all dividends and capital gains in cash
If you decide to receive your dividends and capital gains in cash, you may
choose one of the following methods of payment:
* check
* ACH (electronically credited to your bank account)
* wire transfer (for a fee of $7.50)
If the post office cannot deliver your check to your address of record or
your check remains uncashed for six months, we will cancel your check and
reinvest the proceeds into your account at the net asset value on the date
of cancellation. We will not accrue interest on your uncashed distribution.
Thereafter, we will automatically reinvest your future dividends and capital
gains.
You may want to avoid purchasing shares shortly before a distribution
because a portion of the purchase price represents the distribution. Please
inquire about our distribution schedule.
Taxes. You will be taxed on any dividends and capital gains regardless if
they are paid in cash or reinvested into your account. Dividends and
short-term capital gain distributions will be taxed as ordinary income.
Long-term capital gain distributions will be taxed at long-term capital gain
rates. We will inform you of the amount and nature of such income or gains.
You will be taxed on any redemption of shares. You will recognize a capital
gain or loss in an amount equal to the difference between your cost basis and
the proceeds received. Your gain or loss will be characterized as short- or
long-term depending on how long you have owned the shares. The wash sale rule
20
<PAGE>
prevents you from recognizing a loss if you purchase identical shares within
30 days before or after the date of redemption.
You may be subject to backup withholding if:
* you furnish an incorrect tax identification number
* the IRS notifies us that you are subject to backup withholding
* you fail to certify that you are not subject to backup withholding
* you live outside the U.S. and are not a U.S. citizen
You may also be subject to state and local taxes. Please consult a tax advisor
with specific questions.
Preparing for the Year 2000. Many computer systems currently use a two-digit
date field to represent the date. Unless these systems are changed or modified,
they may not be able to distinguish the Year 1900 from the Year 2000 and,
therefore, may calculate inaccurate information.
We have assessed our internal systems and are upgrading hardware and software so
our systems will be capable of processing accurate information in the Year
2000. We are working with third parties to ensure that their systems will
also be compliant. We are developing contingency plans so that any
noncompliance will not materially affect our operations.
The Year 2000 issue will impact companies, organizations, governmental
entities, and markets in which we invest. Foreign companies and markets may
not be as prepared as domestic companies and markets. Despite our efforts,
noncompliant computer systems could have a material adverse effect on our
business, operations or financial condition. Our performance could be hurt
if a computer-system failure at a company or governmental entity affects
the price of a security in our portfolio or if the cost to correct systems
is substantial.
21
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand our
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that you would have earned (or lost) on an investment in
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, are included in our Annual
Report, which is available upon request.
22
<PAGE>
GREENSPRING FUND, INCORPORATED
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 20.04 $ 17.24 $ 15.05 $ 13.39 $ 13.96
Income From Investment Operations
Net Investment Income 0.76 0.50 0.74 0.70 0.51
Net Realized and Unrealized
Gain/Loss on Investments (3.91) 3.58 2.60 1.78 (0.12)
Total From Investment Operations (3.15) 4.08 3.34 2.48 0.39
Less Distributions
Net Investment Income (0.75) (0.67) (0.59) (0.68) (0.51)
Net Realized Gain on Investments (0.04) (0.60) (0.56) (0.07) (0.45)
Distributions in Excess of Net Investment Income - (0.01) - - -
Distributions in Excess of Net Realized Gains - - - (0.07) -
Total Distributions (0.79) (1.28) (1.15) (0.82) (0.96)
Net Asset Value, End of Period $ 16.10 $ 20.04 $ 17.24 $ 15.05 $ 13.39
Total Return (15.97%) 23.95% 22.65% 18.79% 2.83%
Ratios/Supplemental Data
Net Assets, End of Period (000's) $113,884 $181,214 $ 91,492 $ 71,839 $ 50,322
Ratio of Expenses to Average Net Assets 1.01% 1.00% 1.04% 1.06% 1.27%
Ratio of Net Investment Income to Average Net Assets 3.77% 3.10% 4.69% 4.97% 4.03%
Portfolio Turnover 71.62% 46.17% 60.74% 65.19% 76.55%
</TABLE>
23
<PAGE>
APPENDIX A
Description of Corporate Bond Ratings
Standard & Poor's Corporation
The bond ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources that 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 obligor 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.
24
<PAGE>
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
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 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.
25
<PAGE>
Moody's Investors Service, Inc.
Aaa - Judged to be of the best quality and carry the smallest degree of
investment risk. Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Judged to be of high quality with minimal investment risk. They are
rated lower than Aaa bonds because margins of protection may not be as large
as Aaa securities or fluctuation of protective elements may be of greater
amplitude or there may not be other elements present. Consequently, the long-
term risks appear somewhat larger than with Aaa securities.
A - Possess many favorable investment attributes with adequate security for
repayment of principal and payment of interest; elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Neither highly protected nor poorly secured with interest payments and
principal security appearing adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
26
<PAGE>
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 that 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.
27
<PAGE>
GREENSPRING FUND, INCORPORATED
2330 West Joppa Road, Suite 110
Lutherville, MD 21093
(410) 823-5353
(800) 366-3863
SEC File Number: 811-3627
The Statement of Additional Information includes additional information about
Greenspring Fund.
You can obtain additional information about our investments by calling
(800) 366-3863 and requesting a Semi-Annual or Annual Report at no charge.
The Annual Report discusses the market conditions and investment strategies
that significantly affected our performance during 1998.
You can also obtain the Prospectus, Statement of Additional Information and
quarterly reports from the SEC's internet site at http://www.sec.gov or
by e-mailing us at [email protected].
Information about the Fund can be reviewed and copied at the Commission's
Public Reference Room in Washington, D.C. Information on the operation of
the public reference room may be obtained by calling the Commission at
(800) SEC-0330.
If you have questions regarding your account, call Shareholder Services at
(800) 576-7498.
DIRECTORS TRANSFER AGENT
Charles vK. Carlson, Chairman PFPC, Inc.
William E. Carlson 400 Bellevue Parkway
David T. Fu Wilmington, DE 19809
Michael J. Fusting (800) 576-7498
Michael T. Godack
Richard Hynson, Jr. ADMINISTRATOR
Corbyn Investment Mangement, Inc.
OFFICERS 2330 West Joppa Road, Suite 108
Charles vK. Carlson Lutherville, MD 21093
President and Chief Executive Officer
CUSTODIAN
Michael T. Godack PFPC Trust Company
Sr. Vice President and Chief 200 Stevens Drive, Suite 440
Compliance Officer Lester, PA 19113
Michael J. Fusting INDEPENDENT ACCOUNTANTS
Sr. Vice President and Chief PricewaterhouseCoopers LLP
Financial Officer 250 W. Pratt Street
Baltimore, MD 21201
Elizabeth C. Agresta
Secretary and Treasurer LEGAL COUNSEL
De Martino Finkelstein Rosen & Virga
INVESTMENT ADVISOR 1818 N Street, N.W., Suite 400
Key Equity Management Corporation Washington, DC 20036-2492
2330 West Joppa Road, Suite 108
Lutherville, MD 21093
<PAGE>
GREENSPRING FUND, INCORPORATED
(the "Fund")
FORM N-1A, PART B
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Fund's Prospectus dated May 1, 1999. You can
request a Prospectus 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 about the
Fund. The Fund's financial statements for the year ended December 31, 1998
and the report of independent accountants are included in the Fund's Annual
Report and are hereby incorporated by reference.
This Statement of Additional Information is dated May 1, 1999.
<PAGE>
TABLE OF CONTENTS
ORGANIZATION 2
DESCRIPTION OF THE FUND AND ITS INVESTMENTS
AND RISKS (SEE ALSO PAGES 5 - 9 IN PROSPECTUS) 2
MANAGEMENT OF THE FUND (SEE ALSO PAGES 9 - 11 IN PROSPECTUS) 5
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 6
INVESTMENT ADVISORY AND OTHER SERVICES 6
BROKERAGE ALLOCATION 7
CAPITAL STOCK 8
PURCHASE, REDEMPTION AND PRICING OF THE FUND'S
SHARES (SEE ALSO PAGES 12 - 19 IN PROSPECTUS) 8
TAXES (SEE ALSO PAGES 19 - 21 IN PROSPECTUS) 8
TOTAL RETURN PERFORMANCE 9
FINANCIAL STATEMENTS 9
<PAGE>
Organization
Greenspring Fund, Incorporated was incorporated under the laws of the State
of Maryland in October 1982. The Fund first offered its shares to the public
on July 1, 1983.
Description of the Fund and Its Investments and Risks
Description. The Fund is an open-end, diversified investment management
company.
Investment Strategies. The Fund primarily invests in companies whose stocks
it considers undervalued relative to their peers and the general market. The
Fund also invests in companies in the process of financial restructurings,
reorganizations, corporate turnarounds, and liquidations.
Investment Risks. The Fund invests in companies that it considers to be
undervalued relative to their peers and the general market. However, there is
the risk that these value stocks may decline or may not reach what the
portfolio manager believes is its full value. Bonds have two main sources of
risk, which are interest rate risk and credit risk. Interest rate risk is the
chance that interest rates may rise causing bond prices to fall. Credit risk
is the chance that a bond's credit rating could be downgraded because of some
adverse business event, which reduces its ability to make timely payments of
principal and interest.
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
2
<PAGE>
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.
Investment Program. The Fund invests in a combination of common stocks,
preferred stocks, bonds (which may be high yield), convertible bonds,
government securities, and money market instruments. The Fund also reserves
the right to invest in repurchase agreements, foreign securities, write or
purchase call options (covered or uncovered), and write or purchase put options.
Repurchase Agreements. The Fund may invest in repurchase agreements 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. 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.
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.
The Fund may sell uncovered call options. 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 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 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.
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.
3
<PAGE>
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 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 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.
Non-Investment Grade Debt Securities. The Fund may invest in non-investment
grade debt securities. The total return and yield of non-investment grade
debt securities, commonly referred to as "high yield" bonds, can be expected
to fluctuate more than the total return and yield of investment grade debt
securities, but not as much as those of common stock. High yield bonds
(those rated below BBB or Baa or in default) are regarded as predominantly
speculative with respect to the issuer's continuing ability to meet principal
and interest payments.
The high yield bond 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 high yield 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 high yield
bonds.
The market for high yield bonds may be thinner and less active than that for
higher quality securities, which can adversely affect the price at which
these securities are sold. If market quotations are not available, high yield
bonds will be valued in accordance with standards established by the Board of
Directors, including the use of outside pricing services. Judgment plays a
greater role in valuing high yield bonds than is the case for securities for
which more external sources for quotations and last-sale information is
available. To the extent the Fund owns illiquid or restricted high yield
bonds, these bonds may involve special registration responsibilities,
liabilities and costs, and liquidity and valuation difficulties.
The economy and interest rates affect high yield bonds 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. High yield bonds are subject to a greater risk of default than
high-grade debt securities. During an economic downturn or substantial period
of rising interest rates, highly leveraged issuers may experience financial
stress which would adversely affect their ability to obtain additional
financing. If the issuer of a 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 high yield bonds and the Fund's asset value.
Furthermore, in the case of high yield bonds structured as zero coupon or
pay-in-kind securities, their market prices are affected to a greater
extent by interest rate changes and thereby, tend to be more speculative
and volatile than securities which pay interest periodically and in cash.
High yield bonds present 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 high yield bond'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 high yield bonds than in the case of
investment grade debt securities.
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 generally not registered with the
4
<PAGE>
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.
Portfolio Turnover. While the Fund generally invests in securities for the
purpose of seeking long-term capital gains, the Fund's investment philosophy
may dictate the frequent realization of short-term gains and losses, which
may result in a portfolio turnover rate higher than other mutual funds. The
portfolio turnover rate for 1998 and 1997 were 71.62% and 46.17%, respectively.
Management of the Fund
The Board of Directors supervises the management of the Fund. The following
list summarizes information on the officers and directors of the Fund for the
past 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).
<TABLE>
<CAPTION>
<S> <C> <C>
Name, Address and Age Position(s) Held with Registrant Principal Occupation(s)
During Past Five Years
Elizabeth C. Agresta Secretary and Treasurer Administrator of the Fund.
Age 31
Charles vK. Carlson, CFA* President, Chairman of the President and Director of the
Age 39 Board and Chief Executive Officer the Fund's Advisor and of Corbyn.
Corbyn.
William E. Carlson* Director Partner of Shapiro and
36 S. Charles Street, Olander (a law firm) from
20th Floor February 1990 to present.
Baltimore, MD 21201
Age 41
David T. Fu Director Vice President of
1246 Harbour Glen Court Empyrean Group (a
Arnold, MD 21212 consolidator of information
Age 42 technology service companies)
from November 1998 to
present. Managing Director
of Galway Partners L.L.C. (a
merchant bank) from January
1995 to October 1998. Director
of Bell Atlantic Information
Services (a division of the
telephone company) from
September 1993 to January 1995.
Michael J. Fusting* Sr. Vice President, Chief Vice President, Treasurer,
Age 38 Financial Officer and Director and Director of the Fund's
Advisor. Managing Director
of Corbyn.
Michael T. Godack* Sr. Vice President, Chief Sr. Vice President and
Age 45 Compliance Officer and Director Managing Director of Corbyn.
Richard Hynson, Jr.* Director Sr. Vice President and
Age 55 Managing Director of Corbyn.
Independent directors and directors who are not employees of the Fund or
companies affiliated with the Fund are compensated $1,000 for attending the
annual Board of Directors meeting plus $350 for each other meeting attended.
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 are not compensated by the Fund or its Advisor, but may
be compensated by Corbyn.
5
<PAGE>
Control Persons and Principal Holders of Securities
As of April 1, 1999, approximately 5,619,798 shares of capital stock of the
Fund were outstanding. The following shareholders are the recordholders of
5% or more of the outstanding shares of the Fund:
Name/Address Amount/Nature of Ownership Percentage of Ownership
Corbyn Investment Management, Inc 1,013,655 18%
2330 West Joppa Road, Suite 108 Record
Lutherville, MD 21093
Charles Schwab & Co., Inc. 992,504 18%
101 Montgomery Street Record
San Francisco, CA 94104
Corbyn is an investment research management company organized in the State
of Maryland and 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, which may result in the purchase or sale of a particular security
for its clients simultaneously with the Fund. The purchase or sale of a
security for such clients does not create an obligation to buy or sell 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 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 allocated among the clients
participating in the transaction.
As of April 1, 1999, the officers and directors of the Fund, as a group,
beneficially and of record owned, directly or indirectly, approximately
55,694 shares of the Fund, representing approximately 1% of the Fund's
outstanding shares.
Investment Advisory and Other Services
Investment Advisor. 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 the Board of Directors on
February 11, 1999. 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
Investment Company Act of 1940 (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.
The Fund compensates the Advisor at the end of each calendar month with a
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 1996, 1997
and 1998 were $581,258, $1,028,465 and $1,249,348, respectively. At December
31, 1998, investment advisory fees payable to the Advisor amounted to $74,147.
Each year, the Advisory Agreement must be approved by a majority of the Board
of Directors or by vote of the holders of a majority of the outstanding voting
securities of the Fund. Additionally, the Agreement must be approved annually
by a majority of the directors of the Fund who are not parties to the Agreement
or "interested persons" of any such party (as defined in the 1940 Act) by
votes cast in person at a meeting called for this purpose. The Agreement
may be terminated at any time by the Board of Directors or by the vote of the
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.
6
<PAGE>
Administrator. Corbyn Investment Management, Inc., 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.
The Fund compensates Corbyn with 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.
The administrative fees paid by the Fund for 1998 were $60,397. At December
31, 1998, adminstrative fees payable to Corbyn were $6,455.
Transfer Agent. PFPC, Inc. ("PFPC") is the transfer agent for the Fund.
PFPC's address is 400 Bellevue Parkway, Suite 108, Wilmington, Delaware 19809.
Custodian. PFPC Trust Company is the custodian for the Fund. PFPC Trust
Company's address is 200 Stevens Drive, Suite 440, Lester, Pennsylvania 19113.
Independent Accountants. PricewaterhouseCoopers LLP ("PwC") are the
independent accountants for the Fund. The financial statements for the year
ended December 31, 1998 and the report of PwC are included in the Fund's
Annual Report, which are incorporated by reference into this Statement of
Additional Information.
Brokerage Allocation
The Fund's officers implement Key Equity's investment decisions. Key Equity
also selects the brokerage firms used to complete securities transactions.
The Fund's Board of Directors reviews all decisions and selections quarterly.
Broker-dealers are selected to effect securities transactions for the Fund
based on which can obtain the most favorable combination of price and
execution for a transaction. The Fund does not base its execution decisions
solely on whether the lowest possible commission can be obtained. Key Equity
determines if the commission is reasonable relative to the value of the
brokerage and research services provided for that particular transaction or
for overall services provided. Key Equity evaluates the overall quality and
reliability of broker-dealers and the services they provide, including their
general execution capabilities.
The Fund will compare commissions charged on transactions to commissions charged
by other brokers on similar transactions in order to ascertain that commissions
are within a reasonable range. Key Equity may pay a higher brokerage commission
to brokers who provide quality, comprehensive and frequent research studies
(such as investlment and market research and economic analysis) that assist
Key Equity in its investment-decision responsibilities. Obtaining a low
commission is secondary to obtaining a favorable security, which is usually
more beneficial to the Fund.
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 1996, 1997 and 1998, the total brokerage commissions paid by
the Fund were $135,471, $211,753 and $286,565, respectively. Total brokerage
commissions were substantially higher in 1998 due to active portfolio trading.
The Fund's officers and directors and Key Equity's officers, directors and
shareholders are not affiliated with any brokers used by the Fund.
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.
7
<PAGE>
Purchase, Redemption and Pricing of the Fund's Shares
Purchase of Shares. Shares of the Fund can be purchased any day the New York
Stock Exchange (the "Exchange") is open for business. The Fund must receive
your purchase order prior to the close of the Exchange for you to receive
that day's closing net asset value. If your purchase order is received after
the close of the Exchange, you will receive the next day's closing net asset
value.
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 (accrued expenses
and other liabilities) from its total assets (investments, receivables and
other assets) and dividing 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. The Exchange will be closed during 1999 on Saturdays and Sundays
and on January 1 (New Year's Day), January 18 (Martin Luther King, Jr. Day),
February 15 (President's Day), April 2 (Good Friday), May 31 (Memorial Day),
July 5 (Independence Day), September 6 (Labor Day), November 25 (Thanksgiving
Day) and December 24 (Christmas Eve).
Redemption in Kind. The Fund expects to make all redemptions in cash. The
Fund reserves the right to fulfill a redemption request with a payment in
whole or in part in the form of the Fund's portfolio 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 any 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.
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; and (c) distribute at least
90% 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 the 10-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 1998, the Fund made the following distributions:
Ordinary Dividends Per Share $.75
Long-Term Capital Gains Distribution Per Share $.04225
8
<PAGE>
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.
If, in any taxable year, the Fund should not qualify as a regulated investment
company under the Code: (i) the Fund would be taxed at normal corporate rates
on the entire amount of its taxable income, if any, without deduction for
dividends or other distributions to shareholders; and (ii) the Fund's
distributions to the extent made out of the Fund's current or accumulated
earnings and profits would be taxable to shareholders as ordinary dividends
(regardless of whether they would otherwise have been considered capital
gain dividends).
Total Return Performance
The Fund's total return includes the reinvestment of all dividends and
capital gains for the periods shown. 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, 1998 was -15.97%, 9.31% and
9.91%, respectively. The cumulative total return of the Fund for the one,
five and ten year periods ended December 31, 1998 was -15.97%, 56.03% and
157.20%, respectively.
Financial Statements
The following financial statements are incorporated by reference from the
Registrant's Annual Report to Shareholders dated December 31, 1998:
Portfolio of Investments, December 31, 1998
Statement of Assets and Liabilities, December 31, 1998
Statement of Operations for the Year Ended December 31, 1998
Statement of Changes in Net Assets for the Years Ended
December 31, 1998 and 1997
Notes to Financial Statements, December 31, 1998
Financial Highlights Table for the Years Ended December 31, 1998;
1997; 1996; 1995; and 1994
Report of Independent Accountants
Performance Since Inception
9
<PAGE>
PART C
OTHER INFORMATION
Item 23.
a(1) Articles of Incorporation of the Registrant, filed as Exhibit a(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.
a(2) Amendment to the Articles of Incorporation of Registrant, dated May 8,
1990, filed as Exhibit a(2) 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.
a(3) Amendment to the Articles of Incorporation of Registrant, dated April 28,
1998, filed as Exhibit a(3) to the Registrant's Post-Effective Amendment
No. 20 (File No. 2-81956 and 811-3627) on April 30, 1998, which is hereby
incorporated by reference.
b(1) By-laws of the Registrant, filed as Exhibit b(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(2) Amendment to the By-Laws, dated May 8, 1990, filed as Exhibit b(2) 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.
c Specimen certificate for shares of common stock of the Registrant, filed
as Exhibit c 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.
d Investment Advisory Agreement, filed as Exhibit d to the Registrant's
Post-Effective Amendment No. 20 (File No. 2-81956 and 811-3627) on April
30, 1998, which is hereby incorporated by reference.
g(1)Custodian Agreement, dated October 1, 1994, between the Registrant and
Wilmington Trust Company, filed as Exhibit g(1) to the Registrant's Post
Effective Amendment No. 17 on September 1, 1994, which is hereby
incorporated by reference.
g(2)Assignment Agreement to the Custodial Agreement of the Registrant, dated
January 5, 1998, filed as Exhibit g(2) to the Registrant's Post-Effective
Amendment No. 20 (File No. 2-81956 and 811-3627) on April 28, 1998, which
is hereby incorporated by reference.
g(3)Custodial Fees (schedule of remuneration), dated October 1, 1994, filed
as Exhibit g(3) to the Registrant's Post-Effective Amendment No. 17
(File No. 2-81956 and 811-3627) on March 29, 1995, which is hereby
incorporated by reference.
g(4)Assignment Agreement to the Custodial Agreement of the Registrant, dated
December 31, 1998, filed herewith.
h(1)Order Placement Procedures Amendment to the Charles Schwab Operating
Agreement, dated January 6, 1998, filed as Exhibit h(1) to the Registrant's
Post-Effective Amendment No. 20 (File No. 2-81956 and 811-3627) on April
28, 1998, which is hereby incorporated by reference.
h(2)Transfer Agent Agreement, dated October 1, 1998, between the Registrant
and PFPC Inc., filed herewith.
h(3)Administrative Services Agreement of the Registrant, dated May 1, 1998,
filed as Exhibit h(3) to the Registrant's Post-Effective Amendment No. 20
(File No. 2-81956 and 811-3627) on April 28, 1998, which is hereby
incorporated by reference.
h(4)Retirement Plan Order Processing Amendment to the Charles Schwab Operating
Agreement, dated October 15, 1998, filed herewith.
h(5)Administration Agreement, dated January 11, 1999, among the Registrant,
Fidelity Brokerage Services and National Financial Services Corporation,
filed herewith.
h(6)Model plan used in establishing a retirement plan, filed as Exhibit 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.
i Opinion and Consent of Counsel, filed herewith.
j Opinion and Statement of Consent of PricewaterhouseCoopers LLP, filed
herewith.
<PAGE>
l Agreement of Registrant providing the initial capital, filed as Exhibit l
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.
n Financial Data Schedule, filed herewith.
Item 24. 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 April 1, 1999, approximately xx%
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 26
below for further information regarding Key Equity Management Corporation.
Item 25. 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 paidby 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 26. 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.
<PAGE>
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 27. Principal Underwriters
The Registrant does not have any principal underwriter of its shares.
Item 28. 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:
PFPC Trust Company
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 29. Management Services
The Registrant has disclosed all management-related service contracts in
Part A and B.
Item 30. 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
Post-Effective Amendment No. 21 to be signed on its behalf by the undersigned,
thereto duly authorized, in the County of Baltimore and State of Maryland on
the 26th day of February, 1999.
Greenspring Fund, Incorporated
By: /s/Charles vK. Carlson
Charles vK. Carlson, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title Date
/s/Charles vK. Carlson President and Chairman of the
Charles vK. Carlson Board (Chief Executive Officer) April 30, 1999
/s/William E. Carlson Director April 30, 1999
William E. Carlson
/s/David T. Fu Director April 30, 1999
David T. Fu
/s/Michael J. Fusting Director
Michael J. Fusting (Chief Financial Officer) April 30, 1999
/s/Michael T. Godack Senior Vice President,
Michael T. Godack Chief Compliance Officer
and Director April 30, 1999
/s/Richard Hynson, Jr. Director April 30, 1999
Richard Hynson, Jr.
<PAGE>
EXHIBIT G(4)
ASSIGNMENT OF CUSTODIAL AGREEMENT
<PAGE>
November 27, 1998
Re: Greenspring Fund, Incorporated
NOTICE OF ASSIGNMENT
Reference is made to the Custodian Services Agreement ("Agreement") by and
between PNC Bank, National Association ("PNC Bank") and the above referenced
entity. The purpose of this notice is to give you 30 days prior written
notice that PNC Bank intends to assign its rights and duties under the
Agreement to PNC Bank Corp's wholly-owned, indirect subsidiary, PFPC Trust
Company, effective December 31, 1998.
PNC Bank, N.A.
<PAGE>
EXHIBIT H(2)
TRANSFER AGENT AGREEMENT
<PAGE>
TRANSFER AGENCY SERVICES AGREEMENT
THIS AGREEMENT is made as of September 30, 1998 by and between PFPC INC.,
a Delaware corporation ("PFPC"), and THE GREENSPRING FUND, INC., a Maryland
corporation (the "Fund").
WITNESSETH:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent to its
investment portfolios listed on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time (each a "Portfolio"),
and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Definitions. As Used in this Agreement:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Authorized Person" means any officer of the Fund and any other person
duly authorized by the Fund's Board of Directors to give Oral
Instructions and Written Instructions on behalf of the Fund and
listed on the Authorized Persons Appendix attached hereto and made a
part hereof or any amendment thereto as may be received by PFPC. An
Authorized Person's scope of authority may be limited by the Fund
by setting forth such limitation in the Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Change of Control" means a change in ownership or control
(not including transactions between wholly-owned direct or indirect
subsidiaries of a common parent) of 25% or more of the beneficial
ownership of the shares of common stock or shares of beneficial interest
of an entity or its parents(s).
(f) "Oral Instructions" mean oral instructions received by PFPC from an
Authorized Person or from a person reasonably believed by PFPC to be
an Authorized Person.
(g) "SEC" means the Securities and Exchange Commission.
(h) "Securities Laws" mean the 1933 Act, the 1934 Act, the 1940 Act and
the CEA.
(i) "Shares" mean the shares of beneficial interest of any series or class
of the Fund.
(j) "Written Instructions" mean written instructions signed by an Authorized
Person and received by PFPC. The instructions may be delivered by hand,
mail, tested telegram, cable, telex or facsimile sending device.
2. Appointment. The Fund hereby appoints PFPC to serve as transfer
agent, registrar, dividend disbursing agent and shareholder servicing
agent to the Fund in accordance with the terms set forth in this
Agreement. PFPC accepts such appointment and agrees to furnish such
services.
3. Delivery of Documents. The Fund has provided or, where applicable,
will provide PFPC with the following:
(a) Certified or authenticated copies of the resolutions of the Fund's
Board of Directors, approving the appointment of PFPC or its
affiliates to provide services to the Fund and approving this
Agreement;
(b) A copy of the Fund's most recent effective registration statement;
(c) A copy of the advisory agreement with respect to each investment
Portfolio of the Fund (each, a Portfolio);
(d) A copy of the distribution agreement with respect to each class of
Shares of the Fund;
<PAGE>
(e) A copy of each Portfolio's administration agreements if PFPC is not
providing the Portfolio with such services;
(f) Copies of any shareholder servicing agreements made in respect of
the Fund or a Portfolio; and
(g) Copies (certified or authenticated where applicable) of any and all
amendments or supplements to the foregoing.
4. Compliance with Rules and Regulations. PFPC undertakes to comply
with all applicable requirements of the Securities Laws and any laws,
rules and regulations of governmental authorities having jurisdiction
with respect to the duties to be performed by PFPC hereunder.
Except as specifically set forth herein, PFPC assumes no responsibility
for such compliance by the Fund or any of its investment portfolios.
5. Instructions.
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person (or from a
person reasonably believed by PFPC to be an Authorized Person)
pursuant to this Agreement. PFPC may assume that any Oral Instruction
or Written Instruction received hereunder is not in any way
inconsistent with the provisions of organizational documents or
this Agreement or of any vote, resolution or proceeding of the Fund's
Board of Directors or of the Fund's shareholdeRS, unless and until
PFPC receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions confirming
Oral Instructions so that PFPC receives the Written Instructions by
the close of business on the same day that such Oral Instructions
are received. The fact that such confirming Written Instructions
are not received by PFPC shall in no way invalidate the transactions
or enforceability of the transactions authorized by the Oral
Instructions. Where Oral Instructions or Written Instructions
reasonably appear to have been received from an Authorized Person,
PFPC will incur no liability to the Fund in acting upon such Oral
Instructions or Written Instructions provided that PFPC's actions
comply with the other provisions of this Agreement.
6. Right to Receive Advice.
(a) Advice of the Fund. If PFPC is in doubt as to any action it should or
should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any question of
law pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel of its own choosing
(who may be counsel for the Fund, the Fund's investment adviser or PFPC,
at the option of PFPC).
(c) Conflicting Advice. In the event of a conflict between directions,
advice or Oral Instructions or Written Instructions PFPC receives from
the Fund, and the advice it receives from counsel, PFPC may rely upon
and follow the advice of counsel. In the event PFPC so relies on the
advice of counsel, PFPC remains liable for any action or omission on
the part of PFPC which constitutes willful misfeasance, bad faith,
gross negligence or reckless disregard by PFPC of any duties, obligations
or responsibilities set forth in this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral
Instructions or Written Instructions it receives from the Fund or from
counsel and which PFPC believes, in good faith, to be consistent with
those directions, advice or Oral Instructions or Written Instructions.
Nothing in this section shall be construed so as to impose an obligation
upon PFPC (i) to seek such directions, advice or Oral Instructions or
Written Instructions, or (ii) to act in accordance with such directions,
advice or Oral Instructions or Written Instructions unless, under the
terms of other provisions of this Agreement, the same is a condition
of PFPC's properly taking or not taking such action. Nothing in this
subsection shall excuse PFPC when an action or omission on the part of
PFPC constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard by PFPC of any duties, obligations or responsibilities
set forth in this Agreement.
7. Records; Visits. The books and records pertaining to the Fund,
<PAGE>
which are in the possession or under the control of PFPC, shall be the
property of the Fund. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable securities
laws, rules and regulations. The Fund and Authorized Persons shall
have access to such books and records at all times during PFPC's normal
business hours. Upon the reasonable request of the Fund, copies of any
such books and records shall be provided by PFPC to the Fund or to an
Authorized Person, at the Fund's expense.
8. Confidentiality. PFPC agrees to keep confidential all records of the
Fund and information relating to the Fund and its shareholders, unless
the release of such records or information is otherwise consented to,
in writing, by the Fund. The Fund agrees that such consent shall not be
unreasonably withheld and may not be withheld where PFPC may be exposed
to civil or criminal contempt proceedings or when required to divulge
such information or records to duly constituted authorities.
9. Cooperation with Accountants. PFPC shall cooperate with the Fund's
independent public accountants and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the
expression of their opinion, as required by the Fund.
10. Disaster Recovery. PFPC shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to
the extent appropriate equipment is available. In the event of equipment
failures, PFPC shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions. PFPC shall have
no liability with respect to the loss of data or service interruptions
caused by equipment interruption is not caused by PFPC's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its
duties or obligations under this Agreement.
11. Compensation. As compensation for services rendered by PFPC during
the term of this Agreement, the Fund will pay to PFPC a fee or fees
as may be agreed to from time to time in writing by the Fund and PFPC.
12. Indemnification. The Fund agrees to indemnify and hold harmless
PFPC and its affiliates from all taxes, charges, expenses, assessments,
claims and liabilities (including, without limitation, liabilities
arising under the Securities Laws and any state and foreign securities
and blue sky laws, and amendments thereto), and expenses, including
(without limitation) attorneys' fees and disbursements, arising
directly or indirectly from (i) any action or omission to act which
PFPC takes (a) at the request or on the direction of or in reliance
on the advice of the Fund or (b) upon Oral Instructions or Written
Instructions or (ii) the acceptance, processing and/or negotiation of
checks or other methods utilized for the purchase of Shares. Neither
PFPC, nor any of its affiliates, shall be indemnified against any
liability (or any expenses incident to such liability) arising out of
PFPC's or its affiliates' own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties and obligations under
this Agreement, provided that in the absence of finding to the
contrary the acceptance, processing and/or negotiation of a
fraudulent payment for the purchase of Shares shall be presumed not
to have been the result of PFPC's or its affiliates own willful
misfeasance, bad faith, gross negligence or reckless disregard of such
duties and obligations.
13. Responsibility of PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the
Fund except as specifically set forth herein or as may be specifically
agreed to by PFPC in writing. PFPC shall be obligated to exercise
care and diligence in the performance of its duties hereunder,
to act in good faith and to use its best efforts, within reasonable
limits, in performing services provided for under this Agreement.
PFPC shall be liable for any damages arising out of PFPC's failure
to perform its duties under this Agreement to the extent such
damages arise out of PFPC's willful misfeasance, bad faith, gross
negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any
other provision of this Agreement, (i) PFPC, shall not be liable
for losses beyond its control, provided that PFPC has acted in
accordance with the standard of care set forth above; and
(ii) PFPC shall not be under any duty or obligation to inquire
into and shall not be liable for (A) the validity or invalidity or
authority or lack thereof of any Oral Instruction or Written
Instruction, notice or other instrument which conforms to the
<PAGE>
applicable requirements of this Agreement, and which PFPC
reasonably believes to be genuine; or (B) subject to Section 10,
delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or
military authority, national emergencies, labor difficulties,
fire, flood, catastrophe, acts of God, insurrection, war, riots or
failure of the mails, transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC nor its affiliates shall be liable to the Fund for
any consequential, special or indirect losses or damages which the
Fund may incur or suffer by or as a consequence of PFPC's or its
affiliates' performance of the services provided hereunder, whether or
not the likelihood of such losses or damages was known by PFPC
or its affiliates.
14. Description of Services.
(a) Services Provided on an Ongoing Basis, If Applicable.
(i) Maintain proper shareholder registrations;
(ii) Review new applications and correspond with shareholders to
complete or correct information;
(iii) Direct payment processing of checks or wires;
(iv) Prepare and certify stockholder lists in conjunction with proxy
solicitations;
(v) Countersign share certificates;
(vi) Prepare and mail to shareholders confirmation of activity;
(vii) Provide toll-free lines for direct shareholder use, plus
customer liaison staff for on-line inquiry response;
(viii) Mail duplicate confirmations to broker-dealers of their clients'
activity, whether executed through the broker-dealer or directly
with PFPC;
(ix) Provide periodic shareholder lists and statistics to the clients;
(x) Prepare periodic mailing of year-end tax and statement information;
and
(xi) Notify on a timely basis the investment adviser, accounting
agent, and custodian of fund activity.
(b) Services Provided by PFPC Under Oral Instructions or Written
Instructions.
(i) Accept and post daily Fund purchases and redemptions;
(ii) Accept, post and perform shareholder transfers;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Issue and cancel certificates (when requested in writing by
the shareholder).
(c) Purchase of Shares. PFPC shall issue and credit an account of an
investor, in the manner described in the Fund's prospectus, once
it receives:
(i) A purchase order;
<PAGE>
(ii) Proper information to establish a shareholder account; and
(iii) Confirmation of receipt or crediting of funds for such order
to the Fund's custodian.
(d) Redemption of Shares. PFPC shall redeem Shares only if that
function is properly authorized by the certificate of incorporation
or resolution of the Fund's Board of Directors. Shares shall be
redeemed and payment therefor shall be made in accordance with the
Fund's prospectus, when the recordholder tenders Shares in proper
form and directs the method of redemption. If Shares are received in
proper form, Shares shall be redeemed before the funds are provided to
PFPC from the Fund's custodian (the "Custodian"). If the record-
holder has not directed that redemption proceeds be wired, when
the Custodian provides PFPC with funds, the redemption check shall
be sent to and made payable to the recordholder, unless:
(i) the surrendered certificate is drawn to the order of an assignee
or holder and transfer authorization is signed by the
recordholder; or
(ii) Transfer authorizations are signed by the recordholder when
Shares are held in book-entry form.
When a broker-dealer notifies PFPC of a redemption desired by a
customer, and the Custodian provides PFPC with funds, PFPC shall
prepare and send the redemption check to the broker-dealer and make
payable to the broker-dealer on behalf of its customer.
(e) Dividends and Distributions. Upon receipt of a resolution of the
Fund's Board of Directors authorizing the declaration and payment of
dividends and distributions, PFPC shall issue dividends and
distributions declared by the Fund in Shares, or, upon shareholder
election, pay such dividends and distributions in cash, if provided
for in the Fund's prospectus. Such issuance or payment, as well as
payments upon redemption as described above, shall be made after
deduction and payment of the required amount of funds to be withheld
in accordance with any applicable tax laws or other laws, rules or
regulations. PFPC shall mail to the Fund's shareholders
such tax forms and other information, or permissible substitute
notice, relating to dividends and distributions paid by the Fund as
are required to be filed and mailed by applicable law, rule or
regulation. PFPC shall prepare, maintain and file with the IRS and
other appropriate taxing authorities reports relating to all dividends
above a stipulated amount paid by the Fund to its shareholders as
required by tax or other law, rule or regulation.
(f) Shareholder Account Services.
(i) PFPC may arrange, in accordance with the prospectus, for issuance
of Shares obtained through:
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders, checks and
applications.
(ii) PFPC may arrange, in accordance with the prospectus, for a
shareholder's:
- Exchange of Shares for shares of another fund with which the
Fund has exchange privileges;
- Automatic redemption from an account where that shareholder
participates in a automatic redemption plan; and/or
- Redemption of Shares from an account with a checkwriting privilege.
(g) Communications to Shareholders. Upon timely Written Instructions,
PFPC shall mail all communications by the Fund to its shareholders,
including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund shares;
<PAGE>
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax form information.
In addition, PFPC will receive and tabulate the proxy cards for the
meetings of the Fund's shareholders.
(h) Records. PFPC shall maintain records of the accounts for each
shareholder showing the following information:
(i) Name, address and United States Tax Identification or Social
Security number;
(ii) Number and class of Shares held and number and class of Shares
for which certificates, if any, have been issued, including
certificate numbers and denominations;
(iii) Historical information regarding the account of each shareholder,
including dividends and distributions paid and the date and price
for all transactions on a shareholder's account;
(iv) Any stop or restraining order placed against a shareholder's
account;
(v) Any correspondence relating to the current maintenance of a
shareholder's account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the transfer agent to
perform any calculations contemplated or required by this
Agreement.
(i) Lost or Stolen Certificates. PFPC shall place a stop notice
against any certificate reported to be lost or stolen and comply
with all applicable federal regulatory requirements for reporting
such loss or alleged misappropriation. A new certificate shall be
registered and issued only upon:
(i) The shareholder's pledge of a lost instrument bond or
such other appropriate indemnity bond issued by a surety
company approved by PFPC; and
(ii) Completion of a release and indemnification agreement signed by
the shareholder to protect PFPC and its affiliates.
(j) Shareholder Inspection of Stock Records. Upon a request from
any Fund shareholder to inspect stock records, PFPC will notify the
Fund and the Fund will issue instructions granting or denying each
such request. Unless PFPC has acted contrary to the Fund's
instructions, the Fund agrees and does hereby, release PFPC from any
liability for refusal of permission for a particular shareholder to
inspect the Fund's stock records.
(k) Withdrawal of Shares and Cancellation of Certificates.
Upon receipt of Written Instructions, PFPC shall cancel outstanding
certificates surrendered by the Fund to reduce the total amount of
outstanding shares by the number of shares surrendered by the Fund.
15. Duration and Termination. This Agreement shall continue until
terminated by the Fund or by PFPC on ninety (90) days' prior written
notice to the other party.
16. Change of Control. Notwithstanding any other provision of this
Agreement, in the event of an agreement to enter into a transaction
that would result in a Change of Control of the Fund's adviser or
sponsor, the Fund's ability to terminate the Agreement will be
suspended from the time of such agreement until one year after the
Change of Control.
<PAGE>
17. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if
to PFPC, at 400 Bellevue Parkway, Wilmington, Delaware 19809;
(b) if to the Fund, at 2330 W. Joppa Road, Suite 110, Lutherville, MD
21093, Attn: Administrator or (c) if to neither of the foregoing, at
such other address as shall have been given by like notice to the
sender of any such notice or other communication by the other party.
If notice is sent by confirming telegram, cable, telex or facsimile
sending device, it shall be deemed to have been given immediately.
If notice is sent by first-class mail, it shall be deemed to have been
given three days after it has been mailed. If notice is sent by
messenger, it shall be deemed to have been given on the day it is
delivered.
18. Amendments. This Agreement, or any term thereof, may be changed or
waived only by a written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
19. Delegation; Assignment. PFPC may assign its rights and delegate
its duties hereunder to any affiliate (as defined in the 1940 Act)
of or any majority-owned direct or indirect subsidiary of PFPC
or PNC Bank Corp., provided that (i) PFPC gives the company 30 days
prior written notice of such assignment or delegation, (ii) the assignee
or delegate agrees to comply with the relevant provision of the 1940
act, and (iii) PFPC and such assignee or delegate promptly provide
such information as the Company may reasonably request, and respond
to such questions as the Company may reasonably ask,
relative to the assignment or delegation (including, without limitation,
the capabilities of the assignee or delegate).
20. Counterparts. 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.
21. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the
purposes hereof.
22. Miscellaneous.
(a) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties and supersedes
all prior agreements and understandings relating to the subject
matter hereof, provided that the parties may embody in one or more
separate documents their agreement, if any, with respect to delegated
duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or
effect.
(c) Governing Law. This Agreement shall be deemed to be a contract made
in Delaware and governed by Delaware law, without regard to principles
of conflicts of law.
(d) Partial Invalidity. 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.
(e) 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.
(f) Facsimile Signatures. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof
by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: Steven Turowski
Title: Sr. Vice President
<PAGE>
THE GREENSPRING FUND, INC.
By: Michael J. Fusting
Title: Sr. Vice President
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of September 30, 1998, is Exhibit A to that
certain Transfer Agency Services Agreement dated as of September 30, 1998
between PFPC Inc. and The Greenspring Fund, Inc.
PORTFOLIOS
The Greenspring Fund
<PAGE>
AUTHORIZED PERSONS APPENDIX
Name (Type) Signature
Charles vK. Carlson, President /s/Charles vK. Carlson
Michael J. Fusting, Sr. Vice President /s/Michael J. Fusting
Michael T. Godack, Sr. Vice President /s/Michael T. Godack
Elizabeth C. Agresta, Secretary/Treasurer /s/Elizabeth C. Agresta
<PAGE>
GREENSPRING FUND, INC.
RE: Transfer Agency Services Fees
Dear Sir/Madam:
This letter constitutes our agreement with respect to compensation to be
paid to PFPC Inc. ("PFPC") under the terms of the Transfer Agency Services
Agreement dated September 30, 1998 between The Greenspring Fund, Inc.
("you" or the "Fund") and PFPC (the "Agreement") for service provided on
behalf of each of the Fund's investment portfolios ("Portfolio"). Pursuant
to paragraph 11 of the Agreement, and in consideration of the services to be
provided to each Portfolio, the Fund will pay PFPC certain fees and
reimburse PFPC for its out-of-pocket expenses incurred on its behalf, as
follows:
1) Account Fee:
Annual, Semi-Annual, Quarterly Dividend $14.00 per account per annum
Monthly Dividend $15.00 per account per annum
Daily Accrual Dividend $18.00 per account per annum
Inactive Account $.30 per account per month
Fees shall be calculated and paid monthly based on one-twelfth (1/12th) of
the annual fee. An inactive account is defined as having a zero balance
with no dividend payable. Inactive accounts are purged annually after
year-end tax reporting.
2) Transaction Charges:
Master/Omnibus Account $1.00 per purchase/redemption
3) Minimum Monthly Fee:
The minimum monthly fee will be $2,500 for each portfolio/class, exclusive
of transaction charges, FundServ/Networking charges, and out-of-pocket
expenses.
4) Out-of-Pocket Expenses include, but are not limited to, telephone lines,
forms, envelopes, postage, overnight delivery, mailgrams, hardware/phone
lines for transmissions, microfilm/microfiche, wire fees ($7.50 per wire),
proxies, record retention, b/c notices, account transcripts, ad hoc
reports/labels/user tapes, searches for lost shareholders for eschestment,
conversion and deconversion expenses, travel expenses, training expenses and
expenses incurred at the direction of the Fund. Out-of-pocket expenses
are billed as they are incurred.
5) Shareholder Expenses include, but are not limited to: IRA/Keough
processing, exchange fees between portfolios, requests for account
transcripts, returned checks, lost certificate bonding, overnight delivery
as requested by the shareholder, and wire fee for disbursement if requested
by the shareholder. Shareholder expenses are billed as they are incurred.
6) Miscellaneous
Consolidated statements, audio response and development/programming costs
will be quoted upon occurrence.
Any fee, out-of-pocket expenses or shareholder expenses not paid within
30 days of the date of the original invoice will be charged a late payment
fee of 1% per month until payment of the fees are received by PFPC.
The fee for the period from the date hereof until the end of the year shall
be prorated according to the proportion which such period bears to the full
annual period.
<PAGE>
This fee letter does not include provisions for FundServ/Networking fees,
wire order desk charges, new account opening charges, 12b-1 calculation
charges, ACH charges and exchange fees. Should such fees and/or charges
become applicable, the Fund and PFPC will negotiate such fees and/or charges
in good faith, provided that in no event will PFPC be required to provide
any services related to any such fee or charge until the Fund agrees to pay
such fees or charges as are acceptable to PFPC.
If the foregoing accurately sets forth our agreement and you intend to be
legally bound thereby, please execute a copy of this letter and return it to
us.
Very Truly Yours,
PFPC Inc.
By: Steve Turowski
Sr. Vice President
Agreed and Accepted:
Greenspring Fund, Incorporated
By: Michael J. Fusting
Sr. Vice President
<PAGE>
EXHIBIT H(4)
RETIREMENT PLAN ORDER PROCESSING
AMENDMENT TO THE OPERATING AGREEMENT
<PAGE>
RETIREMENT PLAN ORDER PROCESSING AMENDMENT
TO THE OPERATING AGREEMENT
This Retirement Plan Order Processing Amendment is made as of
October 15, 1998, by and between Charles Schwab & Co., Inc. ("Schwab"),
a California corporation; The Charles Schwab Trust Company ("CSTC"), a
California banking corporation; and each registered investment company
("Fund Company") listed on Schedule I hereto, executing this Amendment on
its own behalf and on behalf of each of its 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"),
including such Funds as are listed on Schedule II hereto, which are excluded
from participation in retirement plan order processing under this Amendment
("Excluded Funds"). This Amendment amends the Operating Agreement. In the
event that there are no Funds, then the term "Fund(s)" shall mean
"Fund Company."
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");
WHEREAS, Schwab has designated CSTC as its agent to perform
certain functions under the Operating Agreement, including communication of
aggregate purchase and redemption orders for Fund shares to each Fund, for
which Schwab remains fully responsible to Fund Company and the Funds;
WHEREAS, Schwab and Fund Company desire to amend the Operating
Agreement to facilitate the purchase and redemption of Fund shares on behalf
of certain retirement plans ("Plans") for which CSTC acts as trustee or
custodian of the trust funds under the Plans and for which an entity
identified on Schedule III, as amended by Schwab from time to time, acts as
recordkeeper ("Recordkeeper"), subject to the terms and conditions of this
Amendment; and
WHEREAS, Fund Company wishes to appoint CSTC as a limited purpose
co-transfer agent to each Fund's named transfer agent to facilitate such
purchases and redemptions on behalf of the Plans, and CSTC wishes to accept
this appointment.
NOW THEREFORE, in consideration of the foregoing and the mutual
promises set forth below, the parties hereto agree as follows:
1. Agency Appointment and Acceptance. Fund Company hereby appoints
CSTC to be a limited purpose co-transfer agent to each Fund's named transfer
agent for the purpose of receiving instructions in proper form from the
persons designated to direct investment of the Plan assets ("Instructions")
from which are derived orders for purchases and redemptions of Fund shares
("Orders"). CSTC hereby accepts the appointment as limited purpose
co-transfer agent to each Fund's named transfer agent.
2. Agents of CSTC. CSTC, as a co-transfer agent, may engage such
sub-agents as it deems necessary, appropriate or desirable to carry out its
obligation as a limited purpose co-transfer agent to each Fund's named
transfer agent under Section 1 of this Amendment, pursuant to such terms as
are consistent with the agreements set forth in this Amendment and as CSTC
deems necessary, appropriate or desirable. CSTC shall, however, remain fully
responsible to Fund Company and the Funds for any obligations performed by
CSTC's agents under this Section 2. These agents of CSTC shall be
the Recordkeepers and shall each be a service company and a limited purpose
sub-transfer agent to CSTC as co-transfer agent to each Fund's named t
ransfer agent.
3. CSTC's Receipt and Transmission of Orders. CSTC agrees that
(a) Orders derived from Instructions received by Recordkeepers prior to
the close of the New York Stock Exchange (generally, 4:00 p.m. Eastern Time)
("Market Close") on any Business Day ("Day 1") will be transmitted by CSTC
to the Fund by 10:00 a.m. Eastern Time on the next Business Day ("Day 2")
(such Orders are referred to herein as "Day 1 Trades"); and (b) Orders
derived from Instructions received by Recordkeepers after Market Close on
any Business day ("Day 1") will be transmitted by CSTC to the Fund
by 10:00 a.m. Eastern Time on the second Business Day following Day 1 ("Day 3")
(such Orders are referred to herein as "Day 2 Trades").
<PAGE>
4. Fund's Pricing of Orders. Fund Company agrees that 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 Fund by 10:00 a.m. Eastern Time on Day 2; 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 Fund by 10:00 a.m.
Eastern Time on Day 3. 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.
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. Provision of Net Asset Value. In accordance with the Operating
Agreement, Fund Company will provide Schwab the Net Asset Value calculated
as of Market Close on each Business Day by 7:00 p.m. Eastern Time on such
Business Day.
7. Representations and Warranties as to Transfer Agency. CSTC
represents and warrants that it is registered as a transfer agent under
Section 17A of the Securities Exchange Act of 1934, as amended ("1934 Act"),
and CSTC will amend its TA-1 filing to disclose its appointment pursuant to
this Amendment as a limited purpose co-transfer agent to each Fund's named
transfer agent. CSTC further represents and warrants that each Recordkeeper
appointed by CSTC pursuant to Section 2 of this Amendment shall be registered
as a transfer agent under Section 17A of the 1934 Act, and that it shall cause
each Recordkeeper to amend its TA-1 to disclose its appointment as a service
company and a limited purpose sub-transfer agent to CSTC as co-transfer agent
to each Fund's named transfer agent.
Fund Company represents and warrants that the Funds' named transfer
agent is set forth on Schedule IV hereto, as amended by Fund Company from
time to time.
8. Books and Records. To the extent required under the Investment
Company Act of 1940, as amended ("1940 Act"), and the rules thereunder,
CSTC agrees that such records maintained by it or each Recordkeeper
hereunder are the property of the Funds and will be preserved, maintained,
and made available in accordance with the 1940 Act and the rules thereunder.
Copies, or if required originals, of such records shall be surrendered
promptly to a Fund and its agents (or independent accountants) upon request. T
This Section 8 shall survive termination of this Amendment.
9. Role and Relationship of CSTC. The parties acknowledge and
agree that, except as specifically provided in this Amendment, and for the
sole and limited purpose set forth herein, CSTC acts as an agent for Schwab
under the Operating Agreement in connection with the effectuation of Orders
subject to this Amendment. CSTC shall not be nor hold itself out as an
agent of any Fund other than as provided herein.
10. Role and Relationship of Recordkeepers. The parties acknowledge
and agree that, except as specifically provided in this Amendment and for
the sole and limited purpose set forth herein, the Recordkeepers act as
agents of the Plans in connection with the effectuation of Orders subject to
this Amendment. The parties agree that the Recordkeepers are not agents of
the Funds other than as provided herein, and CSTC shall ensure that the
Recordkeepers do not hold themselves out as an agent of any Fund other
than as provided herein.
11. Insurance Coverage. CSTC shall maintain, and shall cause
each Recordkeeper to maintain, general liability insurance, at all times
that this Amendment is in effect, that is reasonable and customary in light
of its duties hereunder. Such general liability insurance coverage shall be
issued by a qualified insurance carrier, with limits of not less than $5
million.
12. Termination. Fund Company will provide Schwab and CSTC 90 days'
prior written notice if purchase orders for a Fund's shares may no longer
be effected in accordance with this Amendment. Such termination shall not
affect the remaining provisions of this Amendment as to such Fund, and
redemption orders shall continue to be effected pursuant to this Amendment.
Schwab and CSTC may terminate this Amendment as to a Fund upon 90 days' prior
written notice to Fund Company.
<PAGE>
Any termination of the Operating Agreement by Fund Company shall
not apply to transactions effected pursuant to this Amendment prior to 90
days after the date the Fund Company provides written notice of such
termination to Schwab and CSTC.
13. Indemnification. Schwab and CSTC, on the one hand, and Fund
Company, on the other, agree to indemnify and hold harmless Fund Company,
on the one hand, and Schwab and CSTC, on the other, together with each of
its directors, officers, employees and agents, from and against any and all
losses, liabilities, demands, claims, actions and expenses (including,
without limitation, reasonable attorney's fees) ("Losses") arising out of
or in connection with any breach by Schwab or CSTC, on the one hand, and
Fund Company, on the other, of its obligations under this Amendment, except
to the extent such breach was a direct consequence of an act or omission of
an indemnified party constituting negligence or willful misconduct. In no
event will any party be liable for consequential, incidental, special or
indirect damages resulting to an indemnified party subject to this Amendment.
This Section 13 shall survive termination of this Amendment.
14. Proprietary Information. The parties agree that all books, records,
information, and data pertaining to the business of the other party which
are exchanged or received pursuant to the negotiation or carrying out of this
Amendment, including but not limited to the information on Schedule III, as
amended by Schwab from time to time, and any reports regarding Fund
shareholdings of the Plans or the Recordkeepers that CSTC may provide to
Fund Company from time to time as part of its obligations as a limited
purpose co-transfer agent to each Fund's named transfer agent, shall be
kept confidential and shall not be otherwise used or voluntarily disclosed
to any other person, except as may be required by law or judicial process.
Fund Company expressly agrees not to use nor permit others to use any such
books, records, information, or data to solicit Plans, sponsors of Plans, or
Recordkeepers. This Section 14 shall survive termination of this Amendment.
15. 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.
CHARLES SCHWAB & CO., INC. THE GREENSPRING FUND,
INCORPORATED, on its own behalf
and on behalf of each Fund.
By: /s/ Fred Potts
Fred Potts
Vice President/Mutual Funds By: /s/ Michael J. Fusting
Operations Administration Name: Michael J. Fusting
Date: 11/12/98 Date: 11/9/98
Title: Sr. Vice President
THE CHARLES SCHWAB
TRUST COMPANY
By: /s/ Gregory Munson
Gregory Munson
Vice President
Date: 11/19/98
<PAGE>
Schedule I
to the Retirement Plan Order Processing Amendment to the Operating Agreement,
made as of October 15, 1998
FUND COMPANY
The Greenspring Fund, Incorporated
<PAGE>
Schedule II
to the Retirement Plan Order Processing Amendment to the Operating Agreement,
made as of October 15, 1998
EXCLUDED FUNDS
<PAGE>
Schedule III
to the Retirement Plan Order Processing Amendment to the Operating Agreement,
made as of October 15, 1998
RECORDKEEPERS
Schwab Retirement Plan Services, Inc.
<PAGE>
Schedule IV
to the Retirement Plan Order Processing Amendment to the Operating Agreement,
made as of October 15, 1998
NAMED TRANSFER AGENT
PFPC, Inc.
<PAGE>
EXHIBIT H(5)
ADMINISTRATION AGREEMENT
<PAGE>
ADMINISTRATION AGREEMENT
(Transaction Fee Funds)
This Agreement is made as of the 11 day of January, 1999 between:
(1) Fidelity Brokerage Services, Inc. ("FSBI") and National Financial
Services Corporation ("NFSC") (together "Fidelity"), and (2) the undersigned
("Fund/Agent").
RECITALS
A. Fund/Agent is either (i) an open-end investment company
with one or more series or classes of shares (each such series or class of
shares a "Fund"), (ii) an investment adviser to or administrator for the
Funds, (iii) the principal underwriter or distributor for the Funds, or (iv)
the transfer agent for the Funds;
B. Fidelity acts as broker for its customers to effect the purchase,
redemption and exchange of shares of investment companies;
C. Fund/Agent desires that Fidelity include one or more Funds among the
investment companies which Fidelity makes available to its customers; and
D. Fidelity agrees to make Funds available on the terms and conditions
set forth herein.
TERMS AND CONDITIONS
A. Set Up for Administration of Funds
1. Upon agreement between Fidelity and Fund/Agent, Fidelity shall set
up one or more Funds on Fidelity's transaction processing and recordkeeping
system in order to provide administrative services to customers with respect
to such Fund(s). Such administrative services may include, but not be
limited to, the following:
* purchase, redemption and exchange of Fund shares
* Fund transaction clearance and settlement
* collection and crediting of Fund distributions
* maintenance of customers' Fund information such as share
balance(s), dividend information and transaction history
* sending of confirmations, statements, prospectuses and other
materials as may be required by applicable law or regulation
* tax reporting to customers
2. Each party agrees that it shall provide to the other such
information and documentation necessary to fulfill its respective obligations
hereunder, and that it shall comply with such operating policies and procedures
as the parties may adopt from time to time.
3. Fund/Agent agrees that is shall either: (1) make arrangements for
all transactions processed pursuant to this Agreement to be processed pursuant
to this Agreement to be processed through the National Securities Clearing
Corporation Fund/SERV system, or (2) obtain proper authority for NFSC to
transmit to the Fund or its Agent daily manual trades until 5:00 p.m. Eastern
Time, or such other time as set forth on Exhibit A, which trades shall remain
eligible for that day's public offering price provided Fidelity received the
order by the close of trading that day.
B. FEES
1. Start Up Fees
Fund/Agent shall pay to NFSC a one-time start up fee ("Start Up Fee")
for Fidelity's initial set up and preparation to support a new group or family
<PAGE>
of Funds. The amount of the Start Up Fee is set forth on Exhibit B, and
shall be due and payable to NFSC the earlier of 30 days from the execution
of this Agreement or the availability of any such Fund to Fidelity customers.
The identity and description of each Fund which is subject to this Agreement
shall be set forth on Exhibit A, as amended from time to time.
2. CUSIP Fee
Fund/Agent shall pay to NFSC a fee ("CUSIP Fee") to add any Fund
to Fidelity's computer system in order to make such Fund available to Fidelity's
customers. The amount of the CUSIP Fee is set forth on Exhibit B, and shall
be due and payable to NFSC upon the earlier of the addition of the Fund to
Exhibit A, or the availability of such Fund to Fidelity's customers.
3. Maintenance Fee
Fund/Agent shall pay to NFSC an annual maintenance fee
("Maintenance Fee") with respect to certain Funds as set forth on Exhibit B.
4. Fidelity may change the fees set forth in this Agreement and any
Exhibits hereto upon 90 days prior written notice to Fund/Agent and any
changes in fees shall be effective at expiration of such 90 days or such
earlier time as the parties may agree.
5. Fund/Agent represents to Fidelity that it has the requisite authority
to enter into this Agreement and to properly make payment of any fee due to
Fidelity hereunder.
C. INDEMNIFICATION
Fund/Agent shall indemnify and hold harmless Fidelity and each
officer, employee and agent of Fidelity from and against any and all claims,
demands, actions, losses, damages, liabilities, or costs, charges, counsel
fees, and expenses of any nature ("Losses") arising our of (i) any inaccuracy
or omission in any Fund prospectus or supplement thereto, registration
statement, annual report or proxy statement of any Fund or Fund/Agent or any
advertising or promotional material generated by any Funds or Fund/Agent
and (ii) any breach by Fund/Agent of this Agreement or any representation
herein.
D. CONFIDENTIALITY
Each party acknowledges and understands that any and all technical,
trade secret, or business information, including, without limitation,
financial information, business or marketing strategies or plans, product
development or customer information, which is disclosed to the other or is
otherwise obtained by the other, its affiliates, agents or representatives
during the term of this Agreement (the "Proprietary Information") is
confidential and proprietary, constitutes trade secrets of the owner, and is
of great value and importance to the success of the owner's business. Each
party agrees to use its best efforts (the same being not less than that
employed to protect his own proprietary information) to safeguard the
Proprietary Information and to prevent the unauthorized, negligent or
inadvertent use or disclosure thereof. Neither party shall, without the
prior written approval of any officer of the other, directly or indirectly,
disclose the Proprietary Information to any person or business entity except
for a limited number of employees, attorney, accountants, and other advisors
of the other on a need-to-know basis or any may be required by law or
regulation. Each party shall promptly notify the other in writing of any
unauthorized, negligent or inadvertent use or disclosure of Proprietary
Information. Each party shall be liable under this Agreement to the other
for any use or disclosure in violation of this Agreement by it employees,
attorneys, accountants, or other advisors or agents. This Section D shall
continue in full force and effect notwithstanding the termination of this
Agreement.
E. DURATION and TERMINATION of AGREEMENT
With respect to any Fund, this Agreement shall become effective upon
the date such Fund is identified on Exhibit A, and this Agreement is approved
by the Fund or its Board of Trustees if such approval is required by the fund
<PAGE>
or its Board of Trustees. This Agreement is terminable as to any Fund by any
party upon 90 days written notice thereof to the other parties or upon default
hereof provided that such default shall not terminate this Agreement to the
extent the defaulting party has been notified of such default by the non-
defaulting party and the defaulting party cures such default within 10
business days of notice of such default.
Notwithstanding the termination of this Agreement with respect
to any Fund, Fund/Agent will remain obligated to pay NFSC the annual
Maintenance Fee which was payable to Fidelity as of the most recent payment
due date prior to such termination.
F. MISCELLANEOUS
1. Custody- Fund/Agent acknowledges that Fund shares maintained by
the Fund for Fidelity Customers hereunder are held in custody for the exclusive
benefit of customers of NFSC and shall be held free of any right, charge,
security interest, lien or claim against Fidelity in favor or the Fund or its
agents acting on behalf of the Fund.
2. Transaction Charges- During the term of this Agreement, Fidelity
may assess against or collect from its brokerage customers any transaction
fee upon the purchase, redemption or exchange of Funds in its sole discretion.
3. Use of Fidelity Investments Name- Fund/Agent will not, nor will
Fund/Agent cause or permit any Fund to, describe or refer to the "Fidelity
Investments" or any derivation thereof, or to FMR Corp. or any affiliate
thereof, or to the services or relationship contemplated by this Agreement
in any advertisement or promotional materials or activities without the
prior written consent of an authorized officer of Fidelity.
4. Nonexclusivity- Fund/Agent acknowledges that Fidelity may enter
into agreements similar to this Agreement with other investment companies,
investment company sponsors, or service providers to investment companies.
5. Force Majeure- Neither Fidelity nor its affiliates shall be liable
to Fund/Agent or any Fund for any damage, claim or other loss whatsoever
caused by circumstances or events beyond its reasonable control.
6. Notices- All notices and communications required or permitted by
this Agreement shall be in writing and delivered personally or sent by first
class mail unless otherwise agreed. All such notices and other communications
shall be made:
if to Fidelity, to: Fidelity Investments
82 Devonshire Street, E16A
Boston, MA 02109
ATTN: Joyce LaBell
if to Fund/Agent, to: Greenspring Fund
2330 West Joppa Road Suite 110
Lutherville, MD 21093
ATTN: Elizabeth Agresta
7. Except as provided herein, this Agreement and Exhibits hereto
may be amended only upon written agreement of the parties.
8. This Agreement may not be transferred or assigned by either
Fund/Agent or Fidelity, and shall be construed in accordance with the
laws of the commonwealth of Massachusetts.
<PAGE>
Fund/Agent Fidelity Brokerage Services, Inc.
By: /s/Michael J. Fusting By: /s/ Matthew L. Sadler
Name: Michael J. Fusting Name: Matthew L. Sadler
Title: Sr. Vice President Title: Sr. Vice President
Fund or
Company: Greenspring Fund
National Financial Services Corporation
By: /s/ Robert Adams
Name: Robert Adams
Title: Vice President
<PAGE>
EXHIBIT A
FUND NAME CUSIP TRADING SYMBOL ORDER DEADLINE
Greenspring Fund 395724107 GRSPX 4:00pm EST
<PAGE>
EXHIBIT B
FEES Due Pursuant to Section:B
1. Start up Fee = $ -
2. CUSIP Fee = $1,000/cusip
3. Maintenance Fees
Each Fund which does not participate in the NSCC Fund/SERV
networking level 3 system will be subjected to per Fund annual maintenance
fee based on December brokerage month-end assets in accordance with the
following schedule:
Fund Assets Annual Maintenance Fee
Less than $2.5 million $4,500.00
$2.5 million - $5.0 million $3,000.00
greater than $5.0 million -0-
The annual Maintenance Fee for a Fund shall be waived if such Fund has been
included on Exhibit A and subject to the terms of this Agreement for less
than 12 months prior to the fee calculation date. NFSC will not charge
Fund/Agent an annual Maintenance Fee for any Fund if the average assets per
Fund exceeds $5 million (as measured by dividing the total market value of
all Fund shares subject to this Agreement as of December month-end by the
total number of Funds subject to this Agreement).
<PAGE>
EXHIBIT I
OPINION AND CONSENT
OF COUNSEL
<PAGE>
April 29, 1999
Board of Directors
Greenspring Fund, Incorporated
2330 West Joppa Road
Suite 110
Lutherville, Maryland 21093-4641
Gentlemen:
Greenspring Fund, Incorporated (the "Fund") is a corporation organized under
the laws of the State of Maryland on October 21, 1982. We understand that
the Fund is proposing to file a Post-Effective Amendment to its Registration
Statement on Form N-1A (as amended, the "Registration Statement") under the
Investment Company Act of 1940 and the Securities Act of 1933 (the "Act").
We, as counsel, have examined copies, either certified, otherwise represented
by management of the Fund to be genuine or otherwise proved to be genuine,
of the Fund's Articles of Incorporation and By-Laws, as now in effect, the
minutes of meetings of its directors and shareholders and other documents
related to its organization and operation, communications with or from
government officials, and the Registration Statement. Based upon the
foregoing, it is our opinion that:
1. The Fund is duly organized and legally existing under the laws of the
State of Maryland.
2. The Fund is authorized to issue 60,000,000 shares of Capital Stock,
par value $.01 per share, including those shares now issued and
outstanding (the "Capital Stock").
3. The shares of Capital Stock of the Fund when sold, will be legally
issued, fully paid and nonassessable.
This opinion is expressly limited to the matters expressed in Items 1, 2 and
3 above; we have not been asked and have not given any opinion or substantive
legal advice to the Fund on any matter other than the subject matter of this
opinion.
We hereby consent to the inclusion of this firm's name, address and telephone
number under the caption "Legal Counsel" in the Prospectus filed as part
of the Fund's Registration Statement.
Very truly yours,
DE MARTINO FINKELSTEIN ROSEN & VIRGA
By: /s/Ralph V. De Martino
Ralph V. De Martino, a Principal
<PAGE>
EXHIBIT J
OPINION AND CONSENT
OF INDEPENDENT ACCOUNTANTS
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and the
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 21 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated January 29, 1999, relating to the financial
statements and financial highlights appearing in the December 31, 1998
Annual Report to Shareholders of Greenspring Fund, Inc., which is hereby
incorporated by reference into the Registration Statement. We also consent
to the references to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Independent Accountants" in the
Statement of Additional Information.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Baltimore, MD
April 30, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Greenspring Fund, Incorporated
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and changes in net assets and the financial
highlights present fairly, in all material aspects, the financial position
of Greenspring Fund, Incorporated (the "Fund") at December 31, 1998, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at December 31, 1998, by correspondence with custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, MD
January 29, 1999
<PAGE>
EHHIBIT N
FINANCIAL DATA SCHEDULE
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 108334887
<INVESTMENTS-AT-VALUE> 112333477
<RECEIVABLES> 2263635
<ASSETS-OTHER> 841
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 114597953
<PAYABLE-FOR-SECURITIES> 252088
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 461406
<TOTAL-LIABILITIES> 713494
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 113433560
<SHARES-COMMON-STOCK> 7071920
<SHARES-COMMON-PRIOR> 9044450
<ACCUMULATED-NII-CURRENT> 64811
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3683221)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3998590
<NET-ASSETS> 113884459
<DIVIDEND-INCOME> 3328813
<INTEREST-INCOME> 4257892
<OTHER-INCOME> 136555
<EXPENSES-NET> 1636787
<NET-INVESTMENT-INCOME> 6086473
<REALIZED-GAINS-CURRENT> (3675986)
<APPREC-INCREASE-CURRENT> (31714271)
<NET-CHANGE-FROM-OPS> (29303784)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6021662
<DISTRIBUTIONS-OF-GAINS> 383500
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2232947
<NUMBER-OF-SHARES-REDEEMED> 4538952
<SHARES-REINVESTED> 333475
<NET-CHANGE-IN-ASSETS> (67329871)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 376265
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1249348
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1636787
<AVERAGE-NET-ASSETS> 161427356
<PER-SHARE-NAV-BEGIN> 20.04
<PER-SHARE-NII> .76
<PER-SHARE-GAIN-APPREC> (3.91)
<PER-SHARE-DIVIDEND> (.75)
<PER-SHARE-DISTRIBUTIONS> (.04)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.10
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
