Greenspring Fund,
Incorporated
<LOGO>
FIRST QUARTER REPORT
MARCH 31, 2000
This report is authorized for distribution
only to shareholders who have received a
copy of the official Prospectus of the
Greenspring Fund, Incorporated.
April 2000
Dear Fellow Shareholders:
The equity markets are currently in the midst of a dramatic sell-off in the
formerly high-flying NASDAQ companies. In a mirror image of the stock market
that frustrated "value" investors during the last several years, money is
moving rapidly out of "growth" stocks that had been selling at historically
high valuation levels (especially the so-called "new economy" stocks) and
into stocks of companies that, while lacking glamorous and exciting "stories,"
have excellent track records of producing strong earnings and positive cash
flows.
At present, the NASDAQ is solidly in negative territory year-to-date, after
being up as much as 24% as of March 10. From the NASDAQ's high point, through
April 14, that index has declined more than 34%. We are pleased to report that
during that same volatile period, the Greenspring Fund performed very well,
declining less than one-half of one percent.
We believe that this stock market correction has farther to go on the
downside especially in the high-flying securities, where performance had
outstripped fundamentals. The excellent relative performance achieved by value-
oriented managers such as the Greenspring Fund should continue in such a stock
market environment. A question that was often asked during the last several
years was, "If/when the NASDAQ came back to reality and its valuations declined
significantly, would value stocks be able to produce positive performance
in that environment, or would all stocks be swept downward in a broad-based
sell-off?" The strong relative performance of the Fund during recent periods
of weakness in the growth stock sector is encouraging, and we believe that
value securities will continue to fare well if the NASDAQ continues its sharp
sell-off.
The principal reason for our confidence lies in the fact that so many
companies outside of the technology sector are benefiting from strong operating
fundamentals, yet their stocks are valued at historically modest levels
relative to those strong earnings. Despite generating solid earnings and cash
flow during the last several years, these companies' stock prices have
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languished or deteriorated steadily, to the great frustration of their
managements and investors. Although the stock prices of many such companies
have begun to recover, especially the larger, well recognized ones, most have a
long way to appreciate before reaching fair valuation levels.
We have written in previous letters of the increasing level of corporate
merger and acquisition (M&A) activity. With companies' stock prices so
depressed, company stock buybacks, liquidations, buyouts (whether friendly or
unfriendly), and management-led buyouts have begun to proliferate. Such M&A
activity has helped the performance of the Greenspring Fund during the last
several months and, we believe, will continue to do so in the future. Our
holdings in AMRESCO Capital Trust, Columbia Energy Group, CTG Resources,
Imperial Credit Commercial Mortgage, MCN Energy, Metamor Worldwide, Payless
ShoeSource, Spiros Development, Sylvan Learning Systems, Transportation
Technologies, and Union Pacific Resources benefited from such transactions.
We believe several additional companies currently in the portfolio are also
likely to be beneficiaries of such activity, as M&A activity may accelerate
in the near term with acquiring companies attempting to take advantage of
the still depressed valuations before someone else "beats them to the punch."
Another reason for our optimism is the continuing health of the U.S.
economy. The greater productivity resulting from the incredible technological
advances of the last several years has helped power the economy and, at the
same time, has helped to keep inflation generally low. The Federal Reserve
has steadily bumped up interest rates during the last year in response to its
fears about the increased price of crude oil and its serious concerns about
the "irrational exuberance" of the financial markets. We believe that the
Federal Reserve was attempting to force some air out of the balloon before it
got so big that it would burst and lead to a crash in the financial markets.
The recent action in the stock market points toward a diminishing necessity
for the Federal Reserve to raise interest rates aggressively. While future
rate increases are still likely, the magnitude of such increases will probably
be tempered and more readily absorbed by the economy.
In such an environment, we expect that the Greenspring Fund's investment
philosophy will do quite well. In equities, we continue to look for strong,
well-capitalized companies with leading market positions in their industries
and shareholder-oriented management teams. We believe that during the last
several years investors have focused too much on those companies that have
developed the technological advances, and not enough on those companies that
will utilize and benefit from these breakthroughs. With our view that the
Federal Reserve will be less aggressive in raising interest rates, we
have become more constructive towards industries that are thought to be
sensitive to interest rate movements, such as banking and insurance. We
recently increased our exposure to large, regional banks through our purchase
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of the John Hancock Bank and Thrift Opportunity Fund, a very highly regarded
closed-end fund that we were able to purchase at a 15% discount to its net
asset value. We already have significant exposure to the insurance industry
through our holdings in PartnerRe, ReliaStar Financial, and UnumProvident and
should benefit from improved investor sentiment in this out-of-favor sector.
Also of interest to us are companies involved in the exploration,
production and marketing of natural gas. Natural gas has evolved into the
fuel of choice and its use continues to grow, both in the summer through its
increasing use as fuel for peak-usage power plants and in the winter as a
clean and efficient heating source. Although abundantly available in recent
years, the growing demand for natural gas has increasingly outstripped the
slower-growing supply. If the upcoming summer is marked by above-average
temperatures or next winter's temperatures are close to normal, instead of
repeating the warmer-than-average temperatures of the last two years, the
price of natural gas could move sharply higher. We have been structuring
the portfolio to take advantage of such price movements and anticipate that
we will continue to increase our exposure to this area.
Our emphasis in fixed income securities remains the same. We continue
to focus on bonds that have special characteristics that should allow them to
appreciate even if interest rates continue to climb. This has been an area of
great success for the Greenspring Fund during what has been a very challenging
environment for most fixed income investors during the last several years. There
continues to be a multitude of interesting investment opportunities in this
area that we will be focusing on as existing holdings mature, or are sold
either because the story has "played out," or because a better opportunity
is uncovered.
The Greenspring Fund bounced back nicely during the month of March and has
since held its value well during a difficult period in which many investors
have experienced sharp declines. We are pleased to report the positive results,
but remain as eager and determined as ever to continue this progress. We still
have some distance to go before we reach our former highs, yet we are encouraged
by the fact that we have made some significant strides toward achieving that
goal. We look forward to continuing this progress during the current quarter.
Respectfully,
/s/Charles vK. Carlson
Charles vK. Carlson
President
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GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
COMMON STOCKS (63.73%)
Shares Value
------ -----
Banks - Regional (2.61%)
10,000 Mercantile Bankshares Corp. $ 305,625
17,076 SunTrust Banks, Inc. 986,139
-----------
1,291,764
-----------
Building Materials (1.11%)
11,500 Martin Marietta Materials, Inc. 546,250
-----------
546,250
-----------
Business and Public Services (2.69%)
58,900 *Barnett Inc. 647,900
30,000 *Sylvan Learning Systems, Inc. 478,125
18,600 *Waste Industries, Inc. 204,600
-----------
1,330,625
-----------
Diversified Natural Gas (7.98%)
29,400 Columbia Energy Group 1,741,950
3,600 El Paso Natural Gas Corporation 145,350
2,700 Equitable Resources, Inc. 120,994
35,500 Kinder Morgan, Inc. 1,224,750
38,300 Questar Corp. 710,943
-----------
3,943,987
-----------
Energy Services (.84%)
25,500 *NS Group 415,969
-----------
415,969
-----------
Engineering Services (.05%)
4,500 *Baker (Michael) Corp. 23,344
-----------
23,344
-----------
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GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
COMMON STOCKS (CON'T)
Shares Value
------ -----
Financial Services (3.14%)
98,300 AMRESCO Capital Trust $ 1,001,431
51,075 Resource Asset Investment Trust 549,056
-----------
1,550,487
-----------
Healthcare (4.34%)
28,600 *Alza Corp. 1,074,288
76,500 *Spiros Development Corp. 1,071,000
-----------
2,145,288
-----------
Information Technology Services (1.87%)
20,000 *Condor Technology Solutions, Inc. 15,000
73,300 *Modis Professional Services, Inc. 907,087
-----------
922,087
-----------
Insurance (11.95%)
54,750 PartnerRe, Ltd. 2,015,484
54,900 Reliastar Financial Corp. 1,859,738
119,500 UnumProvident Corp. 2,031,500
-----------
5,906,722
-----------
Leisure and Entertainment (.84%)
7,000 The Seagram Company Ltd. 416,500
-----------
416,500
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GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
COMMON STOCKS (CON'T)
Shares Value
------ -----
Manufacturing (1.84%)
49,200 *Middleby Corporation $ 279,825
27,275 Woodward Governor Company 627,325
-----------
907,150
-----------
Multi-Industry (4.41%)
17,000 Tredagar Corporation 457,937
155,800 U.S. Industries, Inc. 1,723,538
-----------
2,181,475
-----------
Natural Gas Transmission/Distribution (5.16%)
5,500 Chesapeake Utilities Corporation 93,156
5,000 Eastern Enterprises 299,375
31,800 Nicor, Inc. 1,047,412
42,585 Piedmont Natural Gas Company, Inc. 1,109,872
-----------
2,549,815
-----------
Oil and Gas Exploration and Production (6.92%)
5,800 Anadarko Petroleum Corp. 224,388
8,400 Apache Corp. 417,900
44,800 Mitchell Energy, Class A 980,000
21,350 Mitchell Energy, Class B 469,700
20,000 Union Pacific Resources Group, Inc. 290,000
14,000 Vastar Resources, Inc. 1,040,375
-----------
3,422,363
-----------
Savings Institutions (1.17%)
1,275 BostonFed Bancorp, Inc. 14,105
11,000 Coastal Bancorp, Inc. 180,125
30,000 *ITLA Capital Corp. 382,500
-----------
576,730
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GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
COMMON STOCKS (CON'T)
Shares Value
------ -----
Semiconductor (1.49%)
24,000 *S3 Incorporated $ 504,000
11,800 *Speedfam - IPEC, Inc. 234,525
-----------
738,525
-----------
Software and Services (3.50%)
11,100 *Network Associates, Inc. 357,975
26,400 Shared Medical Systems 1,369,500
-----------
1,727,475
-----------
Telecommunications (1.82%)
16,000 AT & T Corp. 900,000
-----------
900,000
-----------
Total Common Stocks (Cost $27,352,998) 31,496,556
===========
PREFERRED STOCK (4.67%)
288,629 *Prime Retail, Inc., 8.50% Pfd. B 2,309,032
-----------
Total Pfd. Stock (Cost $4,764,535) 2,309,032
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GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
BONDS (26.16%)
Principal
Amount/
Shares Value
------ -----
Convertible Bonds (21.91%)
$3,730,000 Ann Taylor Stores, 0.55%, 6/18/19 $ 1,613,225
500,000 Cellstar Corp., 5.00%, 10/15/02 371,250
1,268,000 Center Trust Inc., 7.50%, 1/15/01 1,174,882
1,050,000 Dura Pharmaceuticals, 3.50%, 7/15/02 870,844
1,000,000 HEALTHSOUTH Corp., 3.25%, 4/1/03 785,000
1,500,000 Kellstrom Industries, 5.50%, 6/15/03 731,250
2,402,000 Kellstrom Industries, 5.75%, 10/15/02 1,245,036
3,320,000 Network Associates, 0.00%, 2/18/18 1,284,425
954,000 Personnel Group of America, 5.75%, 7/1/04 632,025
500,000 Speedfam - IPEC, Inc., 6.25%, 9/15/04 398,125
1,951,000 Waste Management, 4.00%, 2/1/02 1,724,196
-----------
10,830,258
-----------
Non-Convertible Bonds (4.25%)
250,000 Anacomp, Inc., 10.875%, 4/1/04 228,438
2,403,000 Bay View Capital Corp., 9.125%, 8/15/07 1,874,340
-----------
2,102,778
-----------
Total Bonds (Cost $13,994,830) 12,933,036
===========
COMPANIES IN LIQUIDATION (2.94%)
581,450 *!Hi Shear Industries, Inc. 1,453,625
-----------
Total Companies in Liquidation
(Cost $1,308,195) 1,453,625
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GREENSPRING FUND, INCORPORATED
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
SHORT-TERM INVESTMENTS (1.62%)
Principal
Amount Value
------ -----
$ 799,395 Temporary Investment Fund, Inc. $ 799,395
-----------
Total Short-Term Investments
(Cost $799,395) 799,395
===========
Total Investments (99.12%)
(Cost $48,219,953) 48,991,644
Call options outstanding - 50 Mitchell
Energy, Class B June/30 (premium received
$3,000) ( 1,563)
Other Assets Less Liabilities (.88%) 435,379
------------
Total Net Assets (100%) $49,425,460
============
* Non-income producing securities
! Non-controlled affiliated issuer
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GREENSPRING FUND, INCORPORATED
PERFORMANCE SINCE INCEPTION
<CHART>
HOW $10,000 INVESTED ON 7/1/83 WOULD HAVE GROWN*
7/01/83 $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
12/31/99 59,108
3/31/00 58,571
*Figures include changes in principal value, reinvested dividends and capital
gains distributions. Cumulative total return represents past performance. Past
expense limitations increased the Fund's return. Investment returns and
principal value will vary and shares will be worth more or less at redemption
than at original purchase.
Average annual total returns for the one, five and ten year periods ended
March 31, 2000 were 7.88%, 7.91% and 8.59%, respectively. Average annual
returns for more than one year assume a compounded rate of return and are not
the Fund's year-by-year results, which fluctuated over the periods shown.
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Greenspring Fund, Incorporated
2330 West Joppa Road, Suite 110
Lutherville, MD 21093
(410) 823-5353
(800) 366-3863
greenspringfund.com
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 Chief Compliance 8800 Tinicum Blvd.
Officer Third Floor, Suite 200
Philadelphia, PA 19153
Michael J. Fusting
Sr. Vice President and Chief Financial INDEPENDENT ACCOUNTANTS
Officer PricewaterhouseCoopers LLP
250 W. Pratt Street
Elizabeth Agresta Swam Baltimore, MD 21201-2304
Secretary and Treasurer
INVESTMENT ADVISOR LEGAL COUNSEL
Corbyn Investment Management, Inc. Kirkpatrick & Lockhart LLP
2330 West Joppa Road, Suite 108 1800 Massachusetts Avenue, N.W.
Lutherville, MD 21093 Washington, DC 20036-1800
