Greenspring Fund,
Incorporated
<LOGO>
SEMI-ANNUAL REPORT
JUNE 30, 1999
This report is authorized for distribution
only to shareholders who have received a
copy of the official Prospectus of the
Greenspring Fund, Incorporated.
July 1999
Dear Fellow Shareholders:
The Greenspring Fund rebounded sharply during the second quarter of 1999,
as value investing came back into favor. After experiencing, during 1998
and the early part of 1999, the sharpest period of relative underperformance
in decades, value investors once again achieved strong absolute and relative
return performance. It appears that the pendulum that had swung farther and
farther in the direction of large-cap growth stocks during the last several
years has begun to swing back towards value stocks. Although the growth-
to-value shift during the second quarter was significant, it still has a
long way to go before reaching even average relative valuations between
the two investment styles.
More specific to Greenspring Fund's shareholders, the Fund gained 10.7%
during the quarter and ended at its highest valuation level of 1999, as well
as its highest level since August of 1998. Some of the credit for the strong
performance during the quarter belongs to the large number of takeover bids
received during the last several months by the companies in the portfolio
(e.g. Columbia Gas, CTG Resources, Data Processing Resources, Imperial Credit
Commercial Mortgage Investment, and Long Beach Financial). These merger
proposals are an indication of how sharply undervalued so many of the
securities in the Fund were. In fact, there were probably more takeover
bids for securities in the Greenspring Fund's portfolio during the past
quarter than in any three-month period in memory. Because so many securities
still sell at large discounts to their intrinsic values, we expect that value
investors will remain the beneficiaries of a large number of takeover bids
during the foreseeable future.
1
Our research efforts remain focused on industry groups and companies that
continue to sell at considerable discounts to their fundamental values. Even
with the recent rebound in the overall stock market, many cheap stocks and
inexpensive sectors still exist, many of which have terrific growth prospects.
Two industry sectors, in particular, where we have spent considerable research
time are information technology services and natural gas distribution
companies. Both sectors are inexpensive when compared with historical norms
and have very distinct catalysts that should drive the stock prices higher
over the next twelve months. As a result, we purchased stocks in both sectors
during the quarter and we would like to present our investment thesis for each.
Information technology ("IT") services companies provide services such as
consulting, design and implementation of software, Year 2000 ("Y2K")
remediation, and development of e-commerce and other emerging technology
strategies. As a sector, these companies, during the last several years,
have traded at price/earnings ratios close to their 25-30% growth rates.
During early 1999, however, a massive sell-off occurred in these companies'
stocks as investors began to worry about the effect of Y2K on overall IT
spending. The fear was twofold: first, some of these companies derived a
significant amount of their business directly from Y2K remediation, a business
that will become insignificant by the end of 1999 and early 2000. Consequently,
these Y2K specialists had to aggressively grow their non-Y2K revenues to offset
their declining Y2K business. Secondly, concerns rose that user companies
would put a freeze on any new IT spending until after January 1, 2000.
Investors feared that companies might be reluctant to tamper with or expand
their computer systems once their systems were Y2K compliant. In combination,
these worries helped drive down the valuations on these securities to levels
where their price/earnings ratios were, in some cases, less than 50% of their
growth rates.
Based on our research and view of the growth prospects for IT services, the
overall demand dynamics for the sector are so strong that, even if there is a
"lockdown" on some types of IT spending during the second half of 1999, this
will only add to the large pent-up demand for IT services during 2000 and
beyond. Driving this demand are ever-changing technological developments that
force businesses to continually develop new capabilities internally or
outsource them. Managements have come to realize that technology can be a
revenue generator for their organizations, not just a cost saver
and efficiency driver. The emergence of the Internet and e-commerce
as major corporate initiatives has been a rapidly growing force driving
IT spending. Companies risk being left behind by their competitors
or caught off guard by entrepreneurial start-ups if they neglect to invest
in the latest technology. The Internet and other emerging technologies
have significantly reduced the barriers of entry to many industries.
Consequently, all corporations must spend on IT to compete in this new
business environment. With this increase in demand for new technologies,
plus an delayed projects as a result of Y2K growth rates for the IT service
2
industry should continue to be 25 - 30% during 2000 and beyond, regardless of
what happens during 1999. The IT services companies' multiples should rise
again toward their growth rates, leading to substantial capital appreciation
in the prices of their securities.
Another major issue for IT services companies is the supply/demand
imbalance that exists for IT personnel in the United States. Companies
need high-tech personnel and cannot find enough well-trained employees to
support their internal operations. Therefore, these companies often rely upon
outside IT organizations for either personnel or services. This imbalance is
not only a major demand factor for IT services companies but also a leading
cause of the continuing consolidation of the industry. Over the past several
years, many IT services firms have grown through acquisition. These
acquisitions usually provided new niche services to the acquiring entity and
added geographic diversity. Most acquisitions took the form of public companies
acquiring smaller private consulting practices. This consolidation should
continue and spread to the publicly traded, smaller IT services companies.
Many small, rapidly growing, niche public companies are trading at deep
discounts to their private market values. Furthermore, many companies in
the industry looking to do acquisitions have pristine balance sheets with
little or no debt, significant amounts of cash, and are strong free cash
flow generators.
There are many companies in the IT services sector from which to choose.
We have focused on those that have minimal exposure to direct Y2K spending,
are led by strong management teams, and have thoroughly developed business
plans. Some of the companies in which we have invested are solely in IT
services, others provide staff augmentation, and some are a blend of
services and staffing. Because there are so many undervalued companies,
many of which fit our investment criteria, we have purchased a basket of
several companies, with smaller-sized positions than is typical for the
Greenspring Fund. However, with so many investment opportunities, we
thought it prudent to own many of the fast growing, well managed companies
instead of just one or two. Current holdings include the common stock of
Alternative Resources, Cambridge Technology Partners, Ciber Inc., Complete
Business Solutions, Mastech Corp., Modis Professional Services, RCM
Technologies, SPR Inc., Sterling Commerce, and the convertible bonds of
Data Processing Resources and Metamor Worldwide.
A second industry sector in which the Greenspring Fund invested during the
second quarter were local natural gas distribution companies ("LDC's").
These companies deliver natural gas to residential, industrial, or
commercial customers. The gas utilities were attractive because they were
selling at historically low valuations based on a variety of measures,
including price-to-earnings, price-to-book value, and relative yield. One
of the reasons for the group's low valuation was the mildness of the last
two winters, which resulted in less consumption of gas and, consequently,
3
lower earnings. Additionally, many natural gas utilities have gas
exploration and production operations, the results of which were negatively
affected by the unexpected drop in the price of natural gas. Furthermore,
because most of these companies pay significant dividends, they are often
traded in the same manner as fixed income investments and, as such, trade
in an inverse relationship to the direction of interest rates. Consequently,
as investors began to expect that the Federal Reserve would be raising
interest rates, selling pressure emerged on these stocks.
All of these factors combined to drive down the stock prices of LDC
companies to very attractive levels. Our investment thesis is predicated
upon the following factors: 1) A growing demand exists for natural gas
because it is an environmentally friendly fuel that is cost-competitive
compared to other fuels and it is a domestic natural resource, the price
of which is not at the mercy of OPEC. In addition, most of the new
electric power plants are fueled by natural gas, as are the majority of
independent power producers. 2) Abnormally warm winters will not always
be the case; as more normal winter weather returns, the demand for natural
gas will increase. Nevertheless, even if warm winters persist, the
depressed valuations already reflect the lower earnings levels associated
with the warm weather. 3) Merger activity has been prevalent in this
sector and will continue, and possibly accelerate, in our opinion. Over
the last six months, ten LDC's have received merger proposals. As
natural gas and electric utilities have been introduced to deregulation
and competition, the ability to deliver both electricity and natural gas
has become an important marketing tool. Because gas and electric
companies share many of the same skills and back office operations,
consolidation leads to cost reductions, which are very beneficial in the
competitive market that deregulations has created. As cable, telephone,
and Internet providers look for ways to lock up their customer base, we
would not be surprised to see businesses other than electric and natural
gas utilities begin to acquire these companies.
As with the IT services companies, we have purchased several of the LDC's,
but in smaller positions than is typical. Current holdings include
Chesapeake Utilities, CTG Resources, Laclede Gas Company, NUI Corp., and
Piedmont Natural Gas. Many of the LDC's have had strong appreciation
during the last several weeks. We are still researching the sector, however,
and hope to be adding to our investments, as additional undervalued
opportunities are uncovered.
We have spent a considerable amount of time and effort repositioning the
Greenspring Fund during the last several months. Our goal, in the event that
value investing were to remain out of favor, was to increasingly concentrate
on those companies that were more in control of their financial destinies,
and less dependent upon Wall Street. We believe that this repositioning, and
4
the resulting increase in portfolio activity, is largely behind us. Most of
the companies currently in the portfolio are financially strong, have leading
positions within their respective industries and are not overly dependent
upon Wall Street for future financing needs.
We are very excited about the strong progress the Greenspring Fund has made
recently and we are determined to continue its success. We realize that we
still have a way to go before the Greenspring Fund returns to its old highs.
We are very optimistic about the Greenspring Fund's potential because we feel
the portfolio is well positioned currently and we are continuing to uncover
many promising investment ideas. We are looking forward to reporting on
continued success as the year progresses.
Respectfully,
/s/Charles vK. Carlson
Charles vK. Carlson
President
5
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
COMMON STOCKS (54.23%)
Shares Value
Banks - Regional (2.98%)
10,000 Bank United Corp. $ 401,875
10,000 Mercantile Bankshares Corp. 353,750
24,576 SunTrust Banks, Inc. 1,706,496
--------------
2,462,121
--------------
Business and Public Services (.89%)
4,054 *Building One Services 56,249
123,000 *NovaCare Employee Services 338,250
18,950 *Waste Industries, Inc. 338,731
--------------
733,230
--------------
Energy (1.91%)
5,800 Anadarko Petroleum Corp. 213,513
8,400 Apache Corp. 327,600
5,400 Burlington Resources, Inc. 233,550
5,300 Mitchell Energy Class A 102,356
9,700 Mitchell Energy Class B 178,238
9,730 Penn Virginia Corp. 192,168
20,000 Union Pacific Resources Group, Inc. 326,250
--------------
1,573,675
--------------
Financial Services (9.81%)
152,100 AMRESCO Capital Trust 1,444,950
314,000 *Chastain Capital Corp. 2,080,250
186,175 Imperial Credit Commercial Mortgage 2,013,017
23,550 *Imperial Credit Industries Inc. 167,059
94,000 *Long Beach Financial Corp. 1,380,625
80,125 Resource Asset Investment Trust 1,011,578
--------------
8,097,479
--------------
6
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
COMMON STOCKS (CON'T)
Shares Value
Food Services (3.50%)
355,245 *Host Marriott Services $ 2,886,366
--------------
2,886,366
--------------
Gold and Silver Mining (.46%)
10,000 Newmont Mining Corp. 198,750
15,000 Placer Dome Inc. 177,188
--------------
375,938
--------------
Healthcare (3.22%)
28,000 *Concentra Managed Care 414,750
25,800 *Dura Pharmaceuticals 307,988
129,500 *HEALTHSOUTH Corp. 1,934,406
--------------
2,657,144
--------------
Industrial Gases (.10%)
20,000 *Valley Natural Gases 86,250
--------------
86,250
--------------
Information Technology Services (4.35%)
53,200 *Alternative Resources Corp. 384,040
16,500 *Cambridge Technology Partners 289,781
21,000 *Ciber Inc. 401,625
60,000 *Complete Business Solutions 1,076,250
26,500 *Mastech Corp. 493,563
38,800 *Modis Professional Services Inc. 533,500
2,500 *RCM Technologies 32,500
25,000 *SPR Inc. 132,812
6,800 *Sterling Commerce Inc. 248,200
--------------
3,592,271
--------------
7
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
COMMON STOCKS (CON'T)
Shares Value
Insurance (4.87%)
55,000 PartnerRe, Ltd. $ 2,055,625
44,900 Reliastar Financial Corp. 1,964,375
--------------
4,020,000
--------------
Leisure and Entertainment (1.65%)
27,000 The Seagram Company Ltd. 1,360,125
--------------
1,360,125
--------------
Manufacturing (.93%)
9,000 *Middleby Corp. 57,375
27,275 Woodward Governor Company 709,150
--------------
766,525
--------------
Multi-Industry (4.83%)
22,350 *Griffon Corporation 174,609
126,925 U.S. Industries, Inc. 2,157,725
128,400 *Walter Industries 1,661,175
--------------
3,993,509
--------------
Natural Gas Transmission and
Distribution (2.65%)
2,500 Chesapeake Utilities 46,406
17,000 Columbia Energy Group 1,065,688
5,000 CTG Resources 181,875
20,000 Laclede Gas Co. 465,000
8,800 NUI Corp. 220,000
6,800 Piedmont Natural Gas 211,650
--------------
2,190,619
--------------
8
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
COMMON STOCKS (CON'T)
Shares Value
Office Products (2.53%)
53,875 Standard Register Company $ 1,656,656
20,000 United Stationers Inc. 440,000
--------------
2,096,656
--------------
Real Estate (1.00%)
46,050 The Town and Country Trust 823,144
--------------
823,144
--------------
Retail - Specialty (1.85%)
28,500 *Payless ShoeSource 1,524,750
--------------
1,524,750
--------------
Savings Institutions (5.64%)
34,057 Astoria Financial Corp. 1,496,379
15,000 BostonFed Bancorp, Inc. 269,532
45,000 Dime Bancorp, Inc. 905,625
27,000 GA Financial, Inc. 394,875
30,000 *ITLA Capital Corp. 472,500
33,000 *PFF Bancorp, Inc. 618,750
5,000 *Seacoast Financial Services Corp. 56,875
24,550 Staten Island Bancorp 441,900
--------------
4,656,436
--------------
9
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
COMMON STOCKS (CON'T)
Shares/
Principal
Amount Value
Utilities - Electric and Gas (1.06%)
11,000 Carolina Power & Light $ 470,937
13,700 Constellation Energy Group 405,863
--------------
876,800
--------------
Total Common Stocks (Cost $38,704,516) 44,773,038
==============
PREFERRED STOCK (4.52%)
233,229 Prime Retail, Inc., 8.50% Pfd. B 3,731,664
--------------
Total Pfd. Stock (Cost $4,215,953) 3,731,664
==============
BONDS (34.62%)
Convertible Bonds (20.86%)
$ 500,000 Cellstar Corp., 5.00%, 10/15/02 352,500
1,268,000 Centertrust Retail Properties,
7.50%, 1/15/01 1,197,864
562,000 Concentra Managed Care, 6.00%, 12/15/01 536,710
4,845,000 Corporate Express, Inc., 4.50%, 7/1/00 4,527,047
2,300,000 Data Processing Resources, 5.25%, 4/1/05 2,243,937
1,050,000 Dura Pharmaceuticals, 3.50%, 7/15/02 797,344
2,200,000 Metamor Worldwide, 2.94%, 8/15/04 1,774,667
4,562,000 NovaCare, 5.50%, 1/15/00 4,214,148
1,603,000 The Learning Company, 5.50%, 11/1/00 1,578,955
--------------
17,223,172
--------------
10
GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
Principal
Amount Value
Non-Convertible Bonds (13.76%)
$ 2,445,000 Bay View Capital Corp.,
9.125%, 8/15/07 $ 2,298,300
1,566,000 CAI Wireless Systems, 0.00%, 10/14/04 770,276
2,177,000 Homeland Stores, 10.00%, 8/1/03 1,785,140
1,917,000 Host Marriott Travel Plaza,
9.50%, 5/15/05 1,979,303
500,000 People's Choice TV Corp., 0.00%, 6/1/04 478,125
2,400,000 Sprint Spectrum, 11.00%, 8/15/06 2,706,000
1,380,000 Woolworth Corporation, 7.00%, 6/1/00 1,344,637
--------------
11,361,781
--------------
Total Bonds (Cost $27,977,909) 28,584,953
==============
COMPANIES IN LIQUIDATION (1.86%)
581,450 *!Hi Shear Industries, Inc. 1,499,036
2,900,000 $*Lomas Mortgage USA, Class 3 Claim 37,120
--------------
Total Companies in Liquidation
(Cost $1,308,195) 1,536,156
==============
SHORT-TERM INVESTMENTS (3.11%)
2,566,305 Temporary Investment Fund, Inc. 2,566,305
--------------
Total Short-Term Investments
(Cost $2,566,305) 2,566,305
==============
Total Investments (98.34%)
(Cost $74,772,878) 81,192,116
Other Assets Less Liabilities (1.66%) 1,370,237
--------------
Total Net Assets (100%) $ 82,562,353
==============
*Non-income producing securities
$Illiquid, Board-valued
!Non-controlled affiliated issuer
11
GREENSPRING FUND, INCORPORATED
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
ASSETS
Investments, at market value (Cost $74,772,878) $ 81,192,116
Receivable for securities sold 749,710
Interest receivable 673,656
Dividends receivable 93,397
Prepaid Expense 2,225
Receivable for Fund shares 1,701
--------------
82,712,805
--------------
LIABILITIES
Accrued expenses 64,395
Due to investment advisor 51,475
Payable for Fund shares 34,582
--------------
150,452
--------------
NET ASSETS
Capital stock, $.01 par value, authorized
60,000,000 shares, outstanding, 4,912,051 $ 82,562,353
==============
NET ASSETS CONSIST OF:
Capital stock at par value 49,121
Paid in capital 79,421,950
Undistributed net investment income 2,596,176
Accumulated net realized losses (5,924,132)
Unrealized appreciation of investments 6,419,238
--------------
$ 82,562,353
==============
NET ASSET VALUE PER SHARE $ 16.81
==============
The accompanying notes are an integral part of these financial statements.
12
GREENSPRING FUND, INCORPORATED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
NET INVESTMENT INCOME
Income
Interest $ 2,037,372
Dividend 992,434
--------------
Total Income 3,029,806
--------------
Expenses
Investment advisory fees 345,907
Transfer agent fees 38,366
Administrative fees 33,448
Registration fees 19,518
Miscellaneous fees 17,758
Custody fees 17,112
Professional fees 14,335
Reports to shareholders 7,014
Directors fees 3,400
Fidelity bond 1,583
--------------
Total Expenses 498,441
--------------
Net Investment Income 2,531,365
--------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (2,240,911)
Net change in unrealized depreciation of
investments 2,420,648
--------------
179,737
--------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 2,711,102
==============
The accompanying notes are an integral part of these financial statements.
13
GREENSPRING FUND, INCORPORATED
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
Six Months Ended Year Ended
June 30, December 31,
1999 1998
----- ----
OPERATIONS:
Net investment income $ 2,531,365 $ 6,086,473
Net realized loss from investments (2,240,911) (3,675,986)
Net change in unrealized
appreciation/(depreciation) of
investments 2,420,648 (31,714,271)
-------------- --------------
2,711,102 (29,303,784)
-------------- --------------
DISTRIBUTION TO SHAREHOLDERS:
Net investment income 0 (6,021,662)
Net realized gain on investments 0 (383,500)
-------------- --------------
0 (6,405,162)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Sale of 372,675 and 2,232,947 shares 6,054,171 43,748,839
Distributions reinvested of 0 and
333,475 shares 0 5,898,814
Redemption of 2,532,544 and
4,538,952 shares (40,087,379) (81,268,578)
-------------- -------------
(34,033,208) (31,620,925)
-------------- -------------
TOTAL DECREASE IN NET ASSETS (31,322,106) (67,329,871)
NET ASSETS AT BEGINNING OF PERIOD 113,884,459 181,214,330
-------------- -------------
NET ASSETS AT END OF PERIOD $ 82,562,353 $ 113,884,459
============== =============
The accompanying notes are an integral part of these financial statements.
14
GREENSPRING FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
Note 1 - Significant Accounting Policies
Greenspring Fund, Incorporated (the "Fund") is a diversified open-end
management investment company registered under the Investment Company Act
of 1940, as amended.
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
Investment transactions and related investment income - Investment transactions
are recorded on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis. Dividends determined
to be a return of capital are recorded as a reduction of the cost basis of the
security. Realized gains and losses from investment transactions are reported
on an identified cost basis.
Valuation of investments - Securities listed on a national securities exchange
or the NASDAQ National Market are valued at the last reported sale price on
the exchange of major listing as of the close of the regular session of the
New York Stock Exchange.
Securities which are traded principally in the over-the-counter market, listed
securities for which no sale was reported on the day of valuation, listed
securities for which the last reported sale price is not in the context of the
highest closing bid price and the lowest closing offering price, and listed
securities whose primary market is believed by the Advisor to be over-the-
counter are valued at the mean of the closing bid and asked prices obtained
from sources that the Advisor deems appropriate.
Short-term investments are valued at amortized cost which approximates fair
market value. The value of securities that mature, or have an announced call,
within 60 days will be amortized on a straight line basis from the market
value one day preceding the beginning of the amortization period.
Securities for which market quotations are not readily available are valued
at fair value as determined in good faith by the Advisor as directed by the
Board of Directors.
15
GREENSPRING FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
(UNAUDITED)
Note 1 - Significant Accounting Policies (Con't)
In determining fair value, the Advisor, as directed by the Board of Directors,
considers all relevant qualitative and quantitative information available.
These factors are subject to change over time and are reviewed periodically.
The values assigned to fair value investments are based on available
information and do not necessarily represent amounts that might ultimately
be realized, since such amounts depend on future developments inherent in
long-term investments. Further, because of the inherent uncertainty of
valuation, those estimated values may differ significantly from the values
that would have been used had a ready market of the investments existed,
and the differences could be material.
As of June 30, 1999, $37,120 or .04% of net assets were valued by the Advisor.
Income Taxes - It is the policy of the Fund to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies.
Accordingly, the Fund intends to distribute substantially all of its taxable
income. Therefore, no federal income tax provision is required.
Dividends and distributions to stockholders - The Fund records dividends and
distributions to stockholders on the ex-dividend date.
Note 2 - Dividends and Distributions of 1999 Taxable Earnings
It is the Fund's policy to declare dividends from net investment income and
distributions from net realized gains as determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles.
These dividends are either distributed to shareholders or reinvested by the
Fund in additional shares of common stock, which are issued to stockholders.
For those reinvesting the dividend, the number of shares issued is based on
the net asset value per share as of the close of business on the
business day previous to the payment date.
As of June 30, 1999, the Fund had capital loss carryforwards of $1,852,590
for federal income tax purposes which may be applied against future net
taxable realized gains of each succeeding year until the earlier of their
utilization or expiration in 2006.
16
GREENSPRING FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
(UNAUDITED)
Note 3 - Purchases and Sales of Investments
For the six months ended June 30, 1999, purchases and sales of investments,
other than short-term investments, aggregated $31,128,807 and $61,281,542,
respectively.
For federal income tax purposes, the cost of investments owned at June 30, 1999
was $74,772,878. Net unrealized appreciation of such investments aggregated
$6,419,238 which was composed of appreciation of $11,344,957 for those
securities having an excess of value over cost, and depreciation of $4,925,719
for those securities having an excess of cost over value.
Note 4 - Transactions with Related Parties
The Fund's investment advisor, Key Equity Management Corporation ("Key Equity")
is a wholly-owned subsidiary of Corbyn Investment Management ("Corbyn").
Under an agreement between the Fund and Key Equity, the Fund pays Key Equity
a fee of 0.75% of the first $250 million of average daily net assets, 0.70% of
average daily net assets between $250 million and $500 million and 0.65% of
average daily net assets in excess of $500 million, which is computed daily
and paid monthly. Investment advisory fees incurred for the six months
ended June 30, 1999 were $345,907. At June 30, 1999, investment advisory fees
payable amounted to $51,475.
The Fund entered into an Administrative Services Agreement with Corbyn on May
1, 1998. As administrator, Corbyn provides administrative services and
personnel for fund accounting, regulatory reporting and other administrative
matters. As compensation, the Fund pays Corbyn a fee of $2,500 a month plus
0.04% of average daily net assets up to $250 million, 0.03% of average daily
net assets between $250 million and $500 million and 0.025% of average daily
net assets in excess of $500 million, which is computed daily and paid monthly.
Administrative fees incurred for the six months ended June 30, 1999 were
$33,448. At June 30, 1999, administrative fees payable amounted to $5,245.
As of June 30, 1999, investors for whom Corbyn Investment Management was
investment advisor held 864,415 shares of the Fund's common stock.
17
GREENSPRING FUND, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
(UNAUDITED)
Note 5 - Investment in Non-Controlled Affiliates
Affiliated issuers, as defined in the Investment Company Act of 1940, are
issuers in which the Fund held 5% or more of the outstanding voting securities.
18
GREENSPRING FUND, INCORPORATED
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
For the Six
Months Ended
June 30, 1999 1998 1997 1996 1995 1994
------------- ---- ---- ---- ---- ----
Net Asset Value, Beginning of Period $16.10 $20.04 $17.24 $15.05 $13.39 $13.96
------ ------ ------ ------ ------ ------
Income From Investment Operations
Net Investment Income 0.52 0.76 0.50 0.74 0.70 0.51
Net Realized and Unrealized Gain/Loss on Investments 0.19 (3.91) 3.58 2.60 1.78 (0.12)
------ ------- ------ ------ ------ -------
Total From Investment Operations 0.71 (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 $16.81 $16.10 $20.04 $17.24 $15.05 $13.39
====== ====== ====== ====== ====== ======
Total Return 4.41% (15.97%) 23.95% 22.65% 18.79% 2.83%
====== ======== ====== ====== ====== ======
Ratios/Supplemental Data
Net Assets, End of Period (000's) $82,562 $113,884 $181,214 $91,492 $71,839 $50,322
======= ======== ======== ======= ======= =======
Ratio of Expenses to Average Net Assets 1.07%* 1.01% 1.00% 1.04% 1.06% 1.27%
======= ======== ======== ======= ======= =======
Ratio of Net Investment Income to Average Net Assets 5.44%* 3.77% 3.10% 4.69% 4.97% 4.03%
======= ======== ======== ======= ======= =======
Portfolio Turnover 35.20% 71.62% 46.17% 60.74% 65.19% 76.55%
======= ======== ======== ======= ======= =======
*Annualized
</TABLE>
19
GREENSPRING FUND, INCORPORATED
PERFORMANCE SINCE INCEPTION
Chart
07/01/83 $10,000
12/31/83 11,223
12/31/84 12,692
12/31/85 15,238
12/31/86 17,668
12/31/87 19,304
12/31/88 22,389
12/31/89 24,762
12/31/90 23,149
12/31/91 27,626
12/31/92 32,190
12/31/93 36,906
12/31/94 37,952
12/31/95 45,082
12/31/96 55,291
12/31/97 68,532
12/31/98 57,585
06/30/99 60,125
Figures include changes in principal value, reinvested dividends and capital
gains distributions. Cumulative total return represents pastperformance.
Past expense limitations increased the Fund's return. Investment returns
and principal value will vary and shares will be worth more or less at
redemption than at original purchase.
Average annual total returns for the one, five and ten year periods ended
June 30, 1999 were -11.38%, 9.77% and 9.55%, respectively. Average annual
returns for more than one year assume a compounded rate of return and are
not the Fund's year-be-year results, which fluctuated over the periods
shown.
20
Greenspring Fund, Incorporated
2330 West Joppa Road, Suite 110
Lutherville, MD 21093
(410) 823-5353
(800) 366-3863
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 Management,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 Airport Business Center
Chief Compliance Officer 200 Stevens Drive, Suite 440
Lester, PA 19113
Michael J. Fusting
Sr. Vice President and INDEPENDENT ACCOUNTANTS
Chief Financial Officer PricewaterhouseCoopers LLP
250 W. Pratt Street
Elizabeth C. Agresta Baltimore, MD 21201-2304
Secretary and Treasurer
INVESTMENT ADVISOR LEGAL COUNSEL
Key Equity Management Corporation Kirkpatrick & Lockhart LLP
2330 West Joppa Road, Suite 108 1800 Massachusetts Avenue, N.W.
Lutherville, MD 21093 Washington, DC 20036-1800
