SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 1 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT / /
OF 1940
Amendment No. 2 / X /
(Check appropriate box or boxes.)
Sparrow Funds - File Nos. 333-59877 and 811-08897
(Exact Name of Registrant as Specified in Charter)
225 S. Meramec Ave., Suite 732, St. Louis, MO 63105
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (314) 725-6161
Gerald R. Sparrow, Sparrow Funds, 225 S. Meramec Ave., Suite 732 Tower, St.
Louis, MO 63105
(Name and Address of Agent for Service)
With copy to:
Donald S. Mendelsohn, Brown, Cummins & Brown Co., L.P.A.
3500 Carew Tower, Cincinnati, Ohio 45202
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/ / on 9/20/99 pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date)pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Sparrow Growth Fund
Prospectus
January __, 2000
INVESTMENT OBJECTIVE:
Long term capital appreciation
225 South Meramec Avenue
Suite 732 Tower
St. Louis, Missouri 63105
(888)-727-3301
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
ABOUT THE FUND
FEES AND EXPENSES OF INVESTING IN THE FUND
HOW TO BUY SHARES
HOW TO REDEEM SHARES
DETERMINATION OF NET ASSET VALUE
DIVIDENDS, DISTRIBUTIONS AND TAXES
MANAGEMENT OF THE FUND
FINANCIAL HIGHLIGHTS
FOR MORE INFORMATION
<PAGE>
ABOUT THE FUND
Investment Objective
The investment objective of the Sparrow Growth Fund is long term capital
appreciation.
Principal Strategies
The Fund invests primarily in a broad range of common stocks which the
Fund's adviser believes have above average prospects for appreciation, based on
a proprietary investment model developed by the adviser. The model looks at a
variety of factors to select stocks ("core momentum growth stocks") which the
adviser believes demonstrate strong earnings momentum. These momentum factors
include expanding profit margins, accelerating earnings, positive earnings
surprises, positive earnings estimate revisions, and positive relative price
strength.
Although the Fund may invest in stocks of all market capitalization
ranges, it is anticipated that the majority of the Fund's investments will be in
common stocks of large capitalization companies (over $10 billion). The adviser
seeks to limit investment risk by diversifying the Fund's investments across a
broad range of economic sectors.
While it is anticipated that the Fund will diversify its investments
across a range of industries and sectors, certain industries are likely to be
overweighted compared to others because the adviser seeks the best investment
values regardless of industry. The industries in which the Fund may be
overweighted will vary at different points in the economic cycle.
The Fund may sell a stock if the Fund's adviser believes more
attractive alternatives are available or the stock's momentum factors have
deteriorated. As a stock appreciates, the Fund may sell part of its position in
the stock if the adviser believes that the stock represents too large a
percentage of the Fund's portfolio.
Principal Risks of Investing in the Fund
o Company Risk. The value of the Fund may decrease in response to the
activities and financial prospects of an individual company in the Fund's
portfolio. The value of an individual company can be more volatile than the
market as a whole.
o Market Risk. Overall stock market risks may also affect the value of the
Fund. Factors such as domestic economic growth and market conditions,
interest rate levels, and political events affect the securities markets
and could cause the Fund's share price to fall.
o Industry Risk. If the Fund's portfolio is overweighted in a certain
industry, any negative development affecting that industry will have a
greater impact on the Fund than a fund that is not overweighted in that
industry.
o The adviser's investment strategy may result in a higher portfolio turnover
rate than other stock funds. A higher portfolio turnover would result in
correspondingly greater brokerage commission expenses (which would lower
the Fund's total return) and could result in additional distributions to
shareholders which may be treated as ordinary income for tax purposes.
o An investment in the Fund is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
o The Fund is not a complete investment program. As with any mutual fund
investment, the Fund's returns will vary and you could lose money.
<PAGE>
Is the Fund right for You?
The Fund may be suitable for:
o Long term investors seeking a fund with a growth investment strategy o
Investors willing to accept price fluctuations in their investment o Investors
who can tolerate the risks associated with common stock investments
General
The investment objective of the Fund may be changed without shareholder
approval.
From time to time, the Fund may take temporary defensive positions which
are inconsistent with the Fund's principal investment strategies, in attempting
to respond to adverse market, economic, political, or other conditions. For
example, the Fund may hold all or a portion of its assets in money market
instruments, securities of no-load mutual funds or repurchase agreements. If the
Fund invests in shares of another mutual fund, the shareholders of the Fund
generally will be subject to duplicative management fees. As a result of
engaging in these temporary measures, the Fund may not achieve its investment
objective. The Fund may also invest in such instruments at any time to maintain
liquidity or pending selection of investments in accordance with its policies.
How the Fund has Performed
The bar chart shows changes in the Fund's returns since the Fund's
inception. The table shows how the Fund's average annual total returns compare
over time to those of a broad-based securities market index.
(Total return as of December 31) [Insert bar chart with the following data
points*:
1999...............(__)%
During the period shown, the highest return for a quarter was (__)% (Q_,
1999); and the lowest return was (__)% (Q_, 1999).
Average Annual Total Returns:
One Year Since Inception
The Fund (___)% (___)%
S&P 500 Index (___)% (___)%
<PAGE>
FEES AND EXPENSES OF INVESTING IN THE FUND
The tables describe the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<S> <C>
Shareholder Fees (fees paid directly from your investment)(1)
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)..........................5.75%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends ...................................................NONE
Maximum Deferred Sales Charge (Load)
(as a percentage of the lower of original purchase or redemption proceeds)(2)....................................NONE
Redemption Fee ................................................................................................NONE
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees...............................................................................................2.50%
Distribution (12b-1) Fees(3)....................................................................................0.00%
Other Expenses................................................................................................0.00%
Total Annual Fund Operating Expenses..........................................................................2.50%
</TABLE>
1 Processing organizations may impose transactional fees on shareholders
(See "Purchasers Without a Sales Charge" for a definition of "processing
organizations").
2 A deferred sales charge of 1.00% is assessed on redemptions of shares that
were purchased without an initial sales charge because they were purchases
of $1 million or more or purchases by qualified retirement plans with at
least 200 eligible employees if the redemption occurs within 18 months of
purchase.
3 Distribution expenses incurred by the Fund under the 12b-1 Distribution
Plan are paid by the Fund's adviser. Example:
The example below is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example uses
the same assumptions as other mutual fund prospectuses: a $10,000 initial
investment for the time periods indicated, reinvestment of dividends and
distributions, 5% annual total return, constant operating expenses, and sale of
all shares at the end of each time period. Although your actual expenses may be
different, based on these assumptions your costs will be:
1 year 3 years 5 years 10 years
------ -------- ------- --------
$ $ $ $
<PAGE>
HOW TO BUY SHARES
You may invest any amount you choose, subject to the following
schedule:
<TABLE>
<S> <C> <C>
- -------------------------------------------- ----------------------------------------- ------------------------------------------
TYPE OF INVESTMENT MINIMUM INITIAL INVESTMENT MINIMUM SUBSEQUENT INVESTMENT
- -------------------------------------------- ----------------------------------------- ------------------------------------------
Taxable Accounts $10,000 $500
- -------------------------------------------- ----------------------------------------- ------------------------------------------
Qualified Retirement Accounts $2,000 $100
- -------------------------------------------- ----------------------------------------- ------------------------------------------
Qualified Retirement Accounts with No minimum Required $100/month for minimum of 12
Automatic Investment Plan consecutive months
- -------------------------------------------- ----------------------------------------- ------------------------------------------
Educational IRA's $500 -0-
- -------------------------------------------- ----------------------------------------- ------------------------------------------
Educational IRA's with Automatic No minimum Required $100/month for minimum of 5
Investment Plans consecutive months
- -------------------------------------------- ----------------------------------------- ------------------------------------------
</TABLE>
Initial Purchase - You may open an account and make an initial investment
through securities dealers having a sales agreement with the Fund's distributor.
You may also invest directly by mail or by wire:
By Mail- To purchase shares by mail, follow these steps:
o complete and sign the investment application form which accompanies this
Prospectus;
o write a check (subject to the minimum amounts) made payable to the Fund;
o mail the application and check to:
<TABLE>
<S> <C> <C>
U.S. Mail: Sparrow Growth Fund Overnight: Sparrow Growth Fund
c/o Unified Fund Services, Inc. c/o Unified Fund Services, Inc.
P.O. Box 6110 431 North Pennsylvania Street
Indianapolis, Indiana 46206-6110 Indianapolis, Indiana 46204
</TABLE>
By Wire- You may also purchase shares of the Fund by wiring federal
funds from your bank, which may charge you a fee for doing so. To wire money,
you must call the Fund's transfer agent at (888) 727-3301 to set up your account
and obtain an account number. You should be prepared at that time to provide the
information on the application. Then, provide your bank with the following
information for purposes of wiring your investment:
Firstar Bank, N.A.
ABA #0420-0001-3
Attn: Sparrow Growth Fund
Account Name _________________(write in shareholder name)
For the Account # ______________(write in account number) D.D.A.# 488921529
You must mail a signed application to Firstar Bank, N.A (the Fund's
custodian), at the above address in order to complete your initial wire
purchase. Wire orders will be accepted only on a day on which the Fund,
custodian and transfer agent are open for business. A wire purchase will not be
considered made until the wired money is received and the purchase is accepted
by the Fund. Any delays which may occur in wiring money, including delays which
may occur in processing by the banks, are not the responsibility of the Fund or
the transfer agent. There is presently no fee for the receipt of wired funds,
but the Fund may charge shareholders for this service in the future.
<PAGE>
Automatic Investment Plan
You may make regular investments in the Fund with an Automatic
Investment Plan by completing the appropriate section of the account application
and attaching a voided personal check. Investments may be made monthly to allow
dollar-cost averaging by automatically deducting a minimum of $250 per month (or
$100 per month for a Qualified Retirement Plan, for a minimum 12 month period)
from your bank checking account. Educational IRA contributions may be made
monthly by automatically deducting a minimum of $100 per month for five
consecutive months from your checking account. You may change the amount of your
monthly purchase at any time.
Sales Charge
Shares of the Fund are purchased at the public offering price. The
public offering price is the next determined net asset value per share plus a
sales charge as shown in the following table. Certain persons may be entitled to
purchase shares of the Fund without paying a sales commission. See "Purchases
Without a Sales Charge".
<TABLE>
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- --------------------------------------- ------------------------------------- --------------------------------
Sales Charge as of % of:
Public Net
Offering Amount Dealer Reallowance as % of
Amount of Investment Price Invested Public Offering Price
- --------------------------------------- ------------------------------------- --------------------------------
Less than $50,000 5.75% 6.10% 5.25%
$50,000 but less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.50% 3.63% 3.00%
$250,000 but less than $500,000 2.50% 2.56% 2.15%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None None None
- --------------------------------------- ------------------------------------- --------------------------------
</TABLE>
There is no initial sales charge on purchases of $1 million or more, or
purchases by qualified retirement plans with at least 200 eligible employees.
However, a contingent deferred sales charge ("CDSC") of 1% will be imposed if
you redeem these shares within eighteen months of purchase, based on the lower
of the shares' cost or current net asset value. Any shares acquired by
reinvestment of distributions will be redeemed without a CDSC.
In determining whether a CDSC is payable, the Fund will first redeem
shares not subject to any charge. The CDSC will be waived on redemptions of
shares arising out of the death or post-purchase disability of a shareholder or
settlor of a living trust account, and on redemptions in connection with certain
withdrawals from IRA or other retirement plans. The Fund's distributor receives
the entire amount of any CDSC you pay. See the SAI for additional information
about the CDSC.
Except as stated below, the Fund's distributor pays investment dealers
of record commissions on sales of $1 million or more based on an investor's
cumulative purchases during the one-year period beginning with the date of the
initial purchase at net asset value. Each subsequent one-year measuring period
for these purposes will begin with the first net asset value purchase following
the end of the prior period. Such commissions are paid at the rate of 1.00% of
the amount under $3 million, 0.50% of the next $47 million and 0.25% thereafter.
On sales to qualified retirement plans for which no sales charge was
paid because the plan had at least 200 eligible employees, the Fund's
distributor pays commissions during each one-year measuring period, determined
as described above, at the rate of 1.00% of the first $2 million, 0.80% of the
next $1 million, 0.50% of the next $16 million and 0.25% thereafter.
Under certain circumstances, the Fund's distributor may change the
reallowance to dealers and may also compensate dealers out of its own assets.
Dealers engaged in the sale of shares of the Fund may be deemed to be
underwriters under the Securities Act of 1933. The Fund's distributor retains
the entire sales charge on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
For purposes of determining the applicable sales charge, a "purchaser"
includes an individual, his spouse and their children under the age of 21,
purchasing shares for his or their own account; or a trustee or other fiduciary
purchasing shares for a single fiduciary account although more than one
beneficiary may be involved; or employees of a common employer, provided that
economies of scale are realized through remittances from a single source and
quarterly confirmation of such purchases; or an organized group, provided that
the purchases are made through a central administration, or a single dealer, or
by other means which result in economy of sales effort or expense.
Shares of the Fund are sold on a continuous basis at the public
offering price next determined after receipt of a purchase order by the Trust.
Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Fund's distributor by 5:00 p.m., Eastern
time, that day are confirmed at the public offering price determined as of the
close of the regular session of trading on the New York Stock Exchange on that
day. It is the responsibility of dealers to transmit properly completed orders
so that they will be received by the Fund's distributor by 5:00 p.m., Eastern
time. Dealers may charge a fee for effecting purchase orders. Direct purchase
orders received by 4:00 p.m., Eastern time, are confirmed at that day's public
offering price. Direct investments received after 4:00 p.m. and others received
from dealers after 5:00 p.m. are confirmed at the public offering price next
determined on the following business day.
Distribution Plan
The Fund has adopted a Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940 under which the Fund is authorized to incur distribution
expenses at a maximum annual rate of 0.50% of the average daily net assets of
the Fund. All distribution expenses incurred by the Fund are paid by the Fund's
adviser pursuant to the management agreement between the Fund and adviser.
Additional Investments
You may purchase additional shares of the Fund at any time (subject to
minimum investment requirements) by mail, wire, or automatic investment. Each
additional mail purchase request must contain:
-your name -the name of your account(s)
-your account number(s) -a check made payable to Sparrow Growth Fund
Checks should be sent to the Sparrow Growth Fund at the address listed above. A
bank wire should be sent as outlined above.
Purchases Without a Sales Charge
The persons described below may purchase and redeem shares of the Fund
without paying a sales charge. In order to purchase shares without paying a
sales charge, you must notify the Transfer Agent as to which conditions apply.
o Trustees, directors, officers and employees of the Trust, the
adviser and service providers of the Trust, including members
of the immediate family of such individuals and employee
benefit plans of such entities;
o Broker-dealers with selling agreements with the Fund's
distributor or otherwise entitled to be compensated under the
Fund's 12b-1 Distribution Plan (and employees, their immediate
family members and employee benefit plans of such entities);
o Registered representatives (and their immediate family
members) of broker-dealers with selling agreements with the
Fund's distributor;
o Tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the
Fund;
o Financial planners, registered investment advisers, bank
trust departments and other financial intermediaries with
service agreements with the Fund's distributor (and employees,
their immediate family members and employee benefit plans of
such entities);
o Clients (who pay a fee to the relevant administrator or
financial intermediary) of administrators of tax-qualified
plans, financial planners, registered investment advisers,
bank trust departments and other financial intermediaries,
provided the administrator or financial intermediary has an
agreement with the Fund's distributor or the Fund for this
purpose;
o Clients of the Fund's adviser who were not introduced to the
adviser by a financial intermediary and, prior to the
effective date of the Fund, executed investment management
agreements with the adviser;
o Separate accounts of insurance companies, provided the
insurance company has an agreement with the Fund's
distributor or the Fund for this purpose;
o Participants in wrap account programs, provided the
broker-dealer, registered investment adviser or bank offering
the program has an agreement with the Fund's distributor or
the Fund for this purpose.
In addition, shares of the Fund may be purchased at net asset value
through processing organizations (broker-dealers, banks or other financial
institutions) that have a sales agreement or have made special arrangements with
the Fund's distributor. When shares are purchased this way, the processing
organization, rather than its customer, may be the shareholder of record of the
shares. The minimum initial and subsequent investments in the Fund for
shareholders who invest through a processing organization generally will be set
by the processing organization. Processing organizations may also impose other
charges and restrictions in addition to or different from those applicable to
investors who remain the shareholder of record of their shares. Thus, an
investor contemplating investing with the Fund through a processing organization
should read materials provided by the processing organization in conjunction
with this Prospectus.
Right of Accumulation
Any "purchaser" (as defined above) may buy shares of the Fund at a
reduced sales charge by aggregating the dollar amount of the new purchase and
the total net asset value of all shares of the Fund then held by the purchaser
and applying the sales charge applicable to such aggregate. In order to obtain
such discount, the purchaser must provide sufficient information at the time of
purchase to permit verification that the purchase qualifies for the reduced
sales charge. The right of accumulation is subject to modification or
discontinuance at any time with respect to all shares purchased thereafter.
Letter of Intent
A Letter of Intent for amounts of $50,000 or more provides an
opportunity for an investor to obtain a reduced sales charge by aggregating
investments over a 13 month period, provided that the investor refers to such
Letter when placing orders. For purposes of a Letter of Intent, the "Amount of
Investment" as referred to in the preceding sales charge table includes all
purchases of shares of the Fund over the 13 month period based on the total
amount of intended purchases plus the value of all shares previously purchased
and still owned. An alternative is to compute the 13 month period starting up to
90 days before the date of execution of a Letter of Intent. Each investment made
during the period receives the reduced sales charge applicable to the total
amount of the investment goal. If the goal is not achieved within the period,
the investor must pay the difference between the sales charges applicable to the
purchases made and the charges previously paid, or an appropriate number of
escrowed shares will be redeemed. Please contact the Transfer Agent to obtain a
Letter of Intent application.
Tax Sheltered Retirement Plans
Since the Fund is oriented to longer-term investments, the Fund may be
an appropriate investment medium for tax-sheltered retirement plans, including:
individual retirement plans (IRAs); simplified employee pensions (SEPs); 401(k)
plans; qualified corporate pension and profit-sharing plans (for employees); tax
deferred investment plans (for employees of public school systems and certain
types of charitable organizations); and other qualified retirement plans. You
should contact the Fund's transfer agent for the procedure to open an IRA or SEP
plan, as well as more specific information regarding these retirement plan
options. Please consult with an attorney or tax adviser regarding these plans.
You must pay custodial fees for your IRA by redemption of sufficient shares of
the Fund from the IRA unless you pay the fees directly to the IRA custodian.
Call the Fund's transfer agent about the IRA custodial fees.
<PAGE>
Other Purchase Information
The Fund may limit the amount of purchases and refuse to sell to any
person. If your check or wire does not clear, you will be responsible for any
loss incurred by the Fund. If you are already a shareholder, the Fund can redeem
shares from any identically registered account in the Fund as reimbursement for
any loss incurred. You may be prohibited or restricted from making future
purchases in the Fund.
HOW TO REDEEM SHARES
You may receive redemption payments by check or federal wire transfer.
The proceeds may be more or less than the purchase price of your shares,
depending on the market value of the Fund's securities at the time of your
redemption. Presently there is no charge for wire redemptions; however, the Fund
may charge for this service in the future. Any charges for wire redemptions will
be deducted from your Fund account by redemption of shares. If you redeem your
shares through a broker/dealer or other institution, you may be charged a fee by
that institution.
By Mail - You may redeem any part of your account in the Fund by mail.
Your request should be addressed to:
<TABLE>
<S> <C> <C>
U.S. Mail: Sparrow Growth Fund Overnight: Sparrow Growth Fund
c/o Unified Fund Services, Inc. c/o Unified Fund Services, Inc.
P.O. Box 6110 431 North Pennsylvania Street
Indianapolis, Indiana 46206-6110 Indianapolis, Indiana 46204
</TABLE>
Your request for a redemption must include your letter of instruction,
including the Fund name, account number, account name(s), the address, and the
dollar amount or number of shares you wish to redeem. This request must be
signed by all registered share owner(s) in the exact name(s) and any special
capacity in which they are registered. The Fund may require that signatures be
guaranteed by a bank or member firm of a national securities exchange. Signature
guarantees are for the protection of shareholders. At the discretion of the Fund
or the Fund's transfer agent, a shareholder, prior to redemption, may be
required to furnish additional legal documents to insure proper authorization.
By Telephone - You may redeem any part of your account in the Fund by
calling the Fund's transfer agent at (888) 727-3301. You must first complete the
Optional Telephone Redemption and Exchange section of the investment application
to institute this option. The Fund, the transfer agent and the custodian are not
liable for following redemption or exchange instructions communicated by
telephone that they reasonably believe to be genuine. However, if they do not
employ reasonable procedures to confirm that telephone instructions are genuine,
they may be liable for any losses due to unauthorized or fraudulent
instructions. Procedures employed may include recording telephone instructions
and requiring a form of personal identification from the caller.
The Fund or the transfer agent may terminate the telephone redemption
and exchange procedures at any time. During periods of extreme market activity,
it is possible that shareholders may encounter some difficulty in telephoning
the Fund, although neither the Fund nor the transfer agent has ever experienced
difficulties in receiving and in a timely fashion responding to telephone
requests for redemptions or exchanges. If you are unable to reach the Fund by
telephone, you may request a redemption or exchange by mail.
Additional Information - If you are not certain of the requirements for
a redemption please call the Fund's transfer agent at (888) 727-3301.
Redemptions specifying a certain date or share price cannot be accepted and will
be returned. You will be mailed the proceeds on or before the fifth business day
following the redemption. However, payment for redemption made against shares
purchased by check will be made only after the check has been collected, which
normally may take up to fifteen calendar days. Also, when the New York Stock
Exchange is closed (or when trading is restricted) for any reason other than its
customary weekend or holiday closing, or under any emergency circumstances (as
determined by the Securities and Exchange Commission) the Fund may suspend
redemptions or postpone payment dates.
Because the Fund incurs certain fixed costs in maintaining shareholder
accounts, the Fund may require you to redeem all of your shares in the Fund on
30 days' written notice if the value of your shares in the Fund is less than
$2,000 due to redemption, or such other minimum amount as the Fund may determine
from time to time. An involuntary redemption constitutes a sale. You should
consult your tax advisor concerning the tax consequences of involuntary
redemptions. You may increase the value of your shares in the Fund to the
minimum amount within the 30-day period. Your shares are subject to redemption
at any time if the Board of Trustees determines in its sole discretion that
failure to so redeem may have materially adverse consequences to all or any of
the shareholders of the Fund.
DETERMINATION OF NET ASSET VALUE
The price you pay for your shares is based on the Fund's net asset
value per share (NAV). The NAV is calculated at the close of trading (normally
4:00 p.m. Eastern time) on each day the New York Stock Exchange is open for
business (the Stock Exchange is closed on weekends, Federal holidays and Good
Friday). The NAV is calculated by dividing the value of the Fund's total assets
(including interest and dividends accrued but not yet received) minus
liabilities (including accrued expenses) by the total number of shares
outstanding. Requests to purchase and sell shares are processed at the NAV next
calculated after we receive your order in proper form.
The Fund's assets are generally valued at their market value. If market
prices are not available, or if an event occurs after the close of the trading
market that materially affects the values, assets may be valued at their fair
value.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions. The Fund typically distributes
substantially all of its net investment income in the form of dividends and
taxable capital gains to its shareholders on an annual basis. These
distributions are automatically reinvested in the Fund unless you request cash
distributions on your application or through a written request. The Fund expects
that its distributions will consist primarily of [capital gains.]
Taxes. In general, selling shares of the Fund and receiving
distributions (whether reinvested or taken in cash) are taxable events.
Depending on the purchase price and the sale price, you may have a gain or a
loss on any shares sold. Any tax liabilities generated by your transactions or
by receiving distributions are your responsibility. You may want to avoid making
a substantial investment when a Fund is about to make a capital gains
distribution because you would be responsible for any taxes on the distribution
regardless of how long you have owned your shares.
Early each year, the Fund will mail to you a statement setting forth
the federal income tax information for all distributions made during the
previous year. If you do not provide your taxpayer identification number, your
account will be subject to backup withholding.
The tax considerations described in this section do not apply to
tax-deferred accounts or other non-taxable entities. Because each investor's tax
circumstances are unique, please consult with your tax advisor about your
investment.
MANAGEMENT OF THE FUND
The Fund retains Sparrow Capital Management Incorporated, 225 South
Meramec Avenue, Suite 732 Tower, St. Louis, Missouri 63105 to manage the Fund's
investments. The adviser is an independent investment counselor and registered
investment adviser which, together with its affiliated minority owned investment
management firm, Buford, Dickson, Harper & Sparrow Inc., has over $70 million of
core momentum growth stock assets under management. Clients primarily include
high net worth individuals and families, but also include a number of
institutional clients such as pension funds. The firm was founded in 1988 and is
100% owned by the President and founder, Gerald R. Sparrow. The sole investment
focus of the firm is "core momentum growth stocks" (as defined in "Principal
Strategies"). The investment decisions of the Fund are made by the adviser's
investment committee, which is primarily responsible for the day-to-day
management of the Fund's portfolio.
The Fund is authorized to pay the adviser a fee equal to an annual
average rate of 2.50% of its average daily net assets. The adviser pays all of
the operating expenses of the Fund except brokerage, taxes, interest, fees and
expenses on non-interested person trustees and extraordinary expenses. It should
be noted that most investment companies pay their own operating expenses
directly, while the Fund's expenses, except those specified above, are paid by
the adviser.
Past Performance of Similar Accounts
The Fund's adviser has been managing equity accounts with investment
objectives, policies and strategies substantially similar to the Fund since
January 1996. The data provided below illustrates the past performance of the
Fund's adviser in managing all such accounts, as compared to the S&P 500.
Accounts managed by the adviser prior to 1996 have been excluded because the
investment strategies used were significantly different from those of the Fund.
The persons responsible for the performance of the accounts are the same as
those responsible for the investment management of the Fund. As of December 31,
1999, the assets in those accounts totaled approximately $__ million.
The performance of the accounts managed by the Fund's adviser does not
represent the historical performance of the Fund and should not be considered
indicative of future performance of the Fund. Results may differ because of,
among other things, differences in brokerage commissions, account expenses,
including management fees (the use of the Fund's expense structure possibly
would have lowered the performance results), any sales load imposed, the size of
positions taken in relation to account size and diversification of securities,
timing of purchases and sales, and availability of cash for new investments. In
addition, the managed accounts are not subject to certain investment
limitations, diversification requirements, and other restrictions imposed by the
Investment Company Act and the Internal Revenue Code which, if applicable, may
have adversely affected the performance results of the managed accounts
composite. The results for different periods may vary.
Growth of an initial investment of $10,000 with reinvestment1
[Graph with the following plot points:
Core Growth
Equity Accounts S&P 500
December 31, 1995 $10,000 $10,000
December 31, 1996 $12,800 $12,290
December 31, 1997 $17,613 $16,395
December 31, 1998 $______ $______
December 31,1999 $_______ $______
1 Line graph shows value of $10,000 invested on December 31, 1995 and
held through December 31, 1998 compared to the unmanaged Standard &
Poor's 500 Index. Please see footnotes and text following the chart
below.
Annual Returns
Core Growth Equity Accounts(1) S&P 500(2)
1999 +____% + ____%
1998 +____% + ____%
1997 +37.6% + 33.4%
1996 +28.0% + 22.9%
1 The composite rate of return is weighted using beginning-of-quarter
market values plus weighted cash flows. Performance figures are net of
management fees and all expenses of the accounts, and include the reinvestment
of dividends and capital gains. Total expenses of the other accounts were in
some cases lower than Fund expenses. To the extent Fund expenses are higher than
expenses of the other accounts, the rate of return for the other accounts would
be reduced. The performance composite was calculated using a method that differs
from, and will produce a different result than, the standardized SEC
calculation.
2 The S&P 500 Index is a widely recognized, unmanaged index of market
activity based upon the aggregate performance of a selected portfolio of
publicly traded common stocks, including monthly adjustments to reflect the
reinvestment of dividends and other distributions. The Index reflects the total
return of securities comprising the Index, including changes in market prices as
well as accrued investment income, which is presumed to be reinvested.
Performance figures for the Index do not reflect deduction of transaction costs
or expenses, including management fees.
Average Annual Return1
Sparrow Core Growth S&P 500
Growth Fund Equity Accounts Index
One year ______% _______% _______%
Since Fund
Inception (10/4/98) ______% N/A ________%
Since Core Growth Equity
Account Inception (1/1/96) N/A _______% ________%
1 Average Annual Returns for the periods ended December 31, 1999 for the Core
Growth Equity Accounts and S&P 500 Index are calculated using calculations
which differ from the standardized SEC calculation.
<PAGE>
FINANCIAL HIGHLIGHTS
The following condensed supplementary financial information for the
period October 4, 1998 (commencement of operations) through August 31, 1999 is
derived from the audited financial statements of the Fund. The financial
statements of the Fund have been audited by McCurdy & Associates CPA's, Inc.,
independent public accountants, and are included in the Fund's Annual Report.
The Annual Report contains additional performance information and is available
upon request and without charge.
(For a fund share outstanding throughout the period)
For the period
October 4, 1998
(commencement
of operations)
Through
August 31, 1999
Net asset value, beginning of period $ 10.00
Loss from investment operations:
Net investment loss................................... (0.13)
Net realized and unrealized gain on
investments........................................ 3.51
------
Total from investment operations...................... 3.38
------
Less distributions:
Dividends from net investment income.................. 0.00
Distribution from net realized gains on investments... 0.00
------
Total distributions................................... 0.00
------
Net asset value, end of period........................ 13.38
======
Total return.......................................... 33.80%
Ratios/supplemental data
Net assets end of period.............................. $5,319,057
Ratio of expenses to average net assets(b)............ 2.50%
Ratio of net investment income to average net assets(b) (1.03%)
Portfolio turnover.................................... 166.41%
(a) For the period October 4, 1998 (commencement of investment operations) to
August 31, 1999
(b) Annualized
<PAGE>
FOR MORE INFORMATION
Several additional sources of information are available to you. The
Statement of Additional Information (SAI), incorporated into this prospectus by
reference, contains detailed information on Fund policies and operations.
Shareholder reports contain management's discussion of market conditions,
investment strategies and performance results as of the Fund's latest
semi-annual or annual fiscal year end.
Call the Funds at (888)-727-3301 to request free copies of the SAI and the
Fund's annual and semi-annual reports, to request other information about the
Fund and to make shareholder inquiries.
You may review and copy information about the Funds (including the SAI
and other reports) at the Securities and Exchange Commission Public Reference
Room in Washington, D.C. Call the SEC at 800-SEC-0330 for room hours and
operation. You may also obtain reports and other information about the Fund on
the SEC's Internet site at http.//www.sec.gov, and copies of this information
may be obtained by sending a written request and duplicating fee to the Public
Reference Section of the SEC, Washington, D.C. 20549-6609.
Investment Company Act #811-_______
<PAGE>
SPARROW GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
January __, 1999
This Statement of Additional Information ("SAI") is not a prospectus.
It should be read in conjunction with the Prospectus of Sparrow Growth Fund
dated January __ 1999. This SAI incorporates by reference the Fund's Annual
Report to Shareholders for the fiscal year ended August 31, 1999 ("Annual
Report"). A free copy of the Prospectus or Annual Report can be obtained by
writing the Transfer Agent at P.O. Box 6110, Indianapolis, Indiana 46206-6110,
or by calling 1-888-727-3301.
TABLE OF CONTENTS
PAGE
DESCRIPTION OF THE TRUST
AND FUND......................................................................1
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK
CONSIDERATIONS................................................................2
CONTINGENT DEFERRED SALES CHARGES.............................................3
INVESTMENT LIMITATIONS........................................................3
THE INVESTMENT ADVISER........................................................5
TRUSTEES AND OFFICERS.........................................................6
PORTFOLIO TRANSACTIONS AND BROKERAGE..........................................7
DISTRIBUTION PLAN.............................................................8
DETERMINATION OF SHARE PRICE..................................................8
INVESTMENT PERFORMANCE........................................................9
CUSTODIAN....................................................................10
TRANSFER AGENT...............................................................10
ACCOUNTANTS..................................................................10
DISTRIBUTOR..................................................................11
FINANCIAL STATEMENTS.........................................................11
<PAGE>
DESCRIPTION OF THE TRUST AND FUND
Sparrow Growth Fund (the "Fund") was organized as a series of Sparrow
Funds (the "Trust") on July 14, 1998. The Trust is an open-end investment
company established under the laws of Ohio by an Agreement and Declaration of
Trust dated July 14, 1998 (the "Trust Agreement"). The Trust Agreement permits
the Trustees to issue an unlimited number of shares of beneficial interest of
separate series without par value. The Fund is the only series currently
authorized by the Trustees.
The Fund does not issue share certificates. All shares are held in
non-certificate form registered on the books of the Fund and the Fund's transfer
agent for the account of the shareholder. Each share of a series represents an
equal proportionate interest in the assets and liabilities belonging to that
series with each other share of that series and is entitled to such dividends
and distributions out of income belonging to the series as are declared by the
Trustees. The shares do not have cumulative voting rights or any preemptive or
conversion rights, and the Trustees have the authority from time to time to
divide or combine the shares of any series into a greater or lesser number of
shares of that series so long as the proportionate beneficial interest in the
assets belonging to that series and the rights of shares of any other series are
in no way affected. In case of any liquidation of a series, the holders of
shares of the series being liquidated will be entitled to receive as a class a
distribution out of the assets, net of the liabilities, belonging to that
series. Expenses attributable to any series are borne by that series. Any
general expenses of the Trust not readily identifiable as belonging to a
particular series are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. No shareholder
is liable to further calls or to assessment by the Trust without his or her
express consent.
Any Trustee of the Trust may be removed by vote of the shareholders
holding not less than two-thirds of the outstanding shares of the Trust. The
Trust does not hold an annual meeting of shareholders. When matters are
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each whole share he owns and fractional votes for fractional shares he owns.
All shares of the Fund have equal voting rights and liquidation rights. The
Declaration of Trust can be amended by the Trustees, except that any amendment
that adversely effects the rights of shareholders must be approved by the
shareholders affected. Each share of the Fund is subject to redemption at any
time if the Board of Trustees determines in its sole discretion that failure to
so redeem may have materially adverse consequences to all or any of the Fund's
shareholders.
As of December 1, 1999 the following persons may be deemed to
beneficially own five percent (5%) or more of the Fund [___________].
[As of December 1, 1999, the officers and Trustees as a group
beneficially owned less than 1% of the Fund.]
Upon sixty days prior written notice to shareholders, the Fund may make
redemption payments in whole or in part in securities or other property if the
Trustees determine that existing conditions make cash payments undesirable. For
other information concerning the purchase and redemption of shares of the Fund,
see "How to Buy Shares" and "How to Redeem Shares" in the Fund's Prospectus. For
a description of the methods used to determine the share price and value of the
Fund's assets, see "Determination of Net Asset Value" in the Fund's Prospectus.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS
This section contains a discussion of some of the investments the Fund
may make and some of the techniques it may use.
Equity Securities. The Fund invests in common stock and other types of
equity securites. Equity securities consist of common stock, preferred stock,
and common stock equivalents (such as convertible preferred stock and
convertible debentures, rights, and warrants) and investment companies which
invest primarily in the above. Convertible preferred stock is preferred stock
that can be converted into common stock pursuant to its terms. Convertible
debentures are debt instruments that can be converted into common stock pursuant
to their terms. Warrants are options to purchase equity securities at a
specified price for a specified time period. Rights are similar to warrants, but
normally have a short duration and are distributed by the issuer to its
shareholders. The Fund's adviser will limit the Fund's investment in convertible
securities to those rated A or better by Moodys Investors Service, Inc. or
Standard & Poor's Rating Group or, if unrated, of comparable quality in the
opinion of the Fund's adviser. Equity securities also include common stocks and
common stock equivalents of domestic real estate investment trusts and other
companies which operate as real estate corporations or which have a significant
portion of their assets in real estate. The Fund will not acquire any direct
ownership of real estate.
Equity securities include S&P Depositary Receipts ("SPDRs") and other
similar instruments. SPDRs are shares of a publicly traded unit investment trust
which owns the stock included in the S&P 500 Index, and changes in the price of
the SPDRs track the movement of the Index relatively closely. Similar
instruments may track the movement of other stock indexes.
The Fund may invest in foreign equity securities by purchasing American
Depository Receipts (ADRs). An ADR is a certificate evidencing ownership of
shares of a foreign-based issuer held in trust by a bank or similar financial
institution. They are alternatives to the direct purchase of the underlying
securities in their national markets and currencies. To the extent that the Fund
does invest in foreign securities, such investments may be subject to special
risks. For example, there may be less information publicly available about a
foreign company than about a U.S. company, and foreign companies are not
generally subject to accounting, auditing and financial reporting standards and
practices comparable to those in the U.S. Other risks associated with
investments in foreign securities include changes in restrictions on foreign
currency transactions and rates of exchanges, changes in the administrations or
economic and monetary policies of foreign governments, the imposition of
exchange control regulations, the possibility of expropriation decrees and other
adverse foreign governmental action, the imposition of foreign taxes, less
liquid markets, less government supervision of exchanges, brokers and issuers,
difficulty in enforcing contractual obligations, delays in settlement of
securities transactions and greater price volatility. In addition, investing in
foreign securities will generally result in higher commissions than investing in
similar domestic securities.
Repurchase Agreements. A repurchase agreement is a short term
investment in which the purchaser (i.e., the Fund) acquires ownership of an
obligation issued by the U.S. Government or by an agency of the U.S. Government
(a "U.S. Government obligation") (which may be of any maturity) and the seller
agrees to repurchase the obligation at a future time at a set price, thereby
determining the yield during the purchaser's holding period (usually not more
than seven days from the date of purchase). Any repurchase transaction in which
the Fund engages will require full collateralization of the seller's obligation
during the entire term of the repurchase agreement. In the event of a bankruptcy
or other default of the seller, the Fund could experience both delays in
liquidating the underlying security and losses in value. However, the Fund
intends to enter into repurchase agreements only with the Custodian, other banks
with assets of $1 billion or more and registered securities dealers determined
by the Fund's adviser to be creditworthy. The Fund's adviser monitors the
creditworthiness of the banks and securities dealers with which the Fund engages
in repurchase transactions.
CONTINGENT DEFERRED SALES CHARGES
[A contingent deferred sales charge ("CDSC") of 1.00%, based on the
lower of the shares' cost and current net asset value, will be imposed on
purchases of $1 million or more, or purchases by qualified retirement plans with
at least 200 eligible employees, if the shares are redeemed within eighteen
months of purchase. No CDSC is imposed on shares of any class subject to a CDSC
("CDSC Shares") to the extent that the CDSC Shares redeemed (i) are no longer
subject to the holding period therefor, or (ii) resulted from reinvestment of a
distribution on CDSC Shares. In determining whether the CDSC applies to each
redemption of CDSC Shares, CDSC Shares not subject to a CDSC are redeemed first.
The Fund will waive any CDSC on redemptions, (a) in the case of
individual, joint or Uniform Transfers to Minors Act accounts, in the event of
death or post-purchase disability of a shareholder, (b) for the purpose of
paying benefits pursuant to tax-qualified retirement plans ("Benefit Payments"),
or, (c) in the case of living trust accounts, in the event of death or
post-purchase disability of the settlor of the trust. Benefit payments currently
include, without limitation, (1) distributions from an IRA due to death or
disability, (2) a return of excess contributions to an IRA or 401(k) plan, and
(3) distributions from retirement plans qualified under Section 401(a) of the
Code or from a 403(b) plan due to death, disability, retirement or separation
from service. These waivers may be changed at any time.]
INVESTMENT LIMITATIONS
Fundamental. The investment limitations described below have been
adopted by the Trust with respect to the Fund and are fundamental
("Fundamental"), i.e., they may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. As used in the Prospectus and
this Statement of Additional Information, the term "majority" of the outstanding
shares of the Fund means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting; or
(2) more than 50% of the outstanding shares of the Fund. Other investment
practices which may be changed by the Board of Trustees without the approval of
shareholders to the extent permitted by applicable law, regulation or regulatory
policy are considered non-fundamental ("Non-Fundamental").
1. Borrowing Money. The Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
2. Senior Securities. The Fund will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is consistent with or permitted by the Investment
Company Act of 1940, as amended, the rules and regulations promulgated
thereunder or interpretations of the Securities and Exchange Commission or its
staff.
3. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. Real Estate. The Fund will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts).
5. Commodities. The Fund will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude the Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. Concentration. The Fund will not invest 25% or more of its total
assets in any particular industry. This limitation is not applicable to
investments in obligations issued or guaranteed by the U.S. government, its
agencies and instrumentalities or repurchase agreements with respect thereto.
With respect to the percentages adopted by the Trust as maximum
limitations on its investment policies and limitations, an excess above the
fixed percentage will not be a violation of the policy or limitation unless the
excess results immediately and directly from the acquisition of any security or
the action taken. This paragraph does not apply to the borrowing policy set
forth in paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment
company, whether organized as a trust, association or corporation, or a personal
holding company, may be merged or consolidated with or acquired by the Trust,
provided that if such merger, consolidation or acquisition results in an
investment in the securities of any issuer prohibited by said paragraphs, the
Trust shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all of the securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.
Non-Fundamental. The following limitations have been adopted by the
Trust with respect to the Fund and are Non-Fundamental (see "Investment
Restrictions" above).
1. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
2. Borrowing. The Fund will not engage in borrowing.
3. Margin Purchases. The Fund will not purchase securities or evidences
of interest thereon on "margin." This limitation is not applicable to short term
credit obtained by the Fund for the clearance of purchases and sales or
redemption of securities, or to arrangements with respect to transactions
involving options, futures contracts, short sales and other permitted
investments and techniques.
4. Options. The Fund will not purchase or sell puts, calls, options or
straddles.
5. Loans. The Fund will not loan its portfolio securities.
6. Reverse Repurchase Agreements. The Fund will not enter into reverse
repurchase agreements.
THE INVESTMENT ADVISER
The Fund's investment adviser is Sparrow Capital Management
Incorporated (the "Adviser"). Gerald R. Sparrow is the controlling shareholder
of the Adviser. Under the terms of the management agreement (the "Agreement"),
the Adviser manages the Fund's investments subject to approval of the Board of
Trustees and pays all of the expenses of the Fund except brokerage, taxes,
interest, fees and expenses of the non-interested person trustees and
extraordinary expenses. As compensation for its management services and
agreement to pay the Fund's expenses, the Fund is obligated to pay the Adviser a
fee computed and accrued daily and paid monthly at an annual rate of 2.50% of
the average daily net assets of the Fund. The Adviser may waive all or part of
its fee, at any time, and at its sole discretion, but such action shall not
obligate the Adviser to waive any fees in the future. For the period October 4,
1998 (commencement of operations) through August 31, 1999, the Fund paid
advisory fees of $____.
The Adviser retains the right to use the name "Sparrow" in connection
with another investment company or business enterprise with which the Adviser is
or may become associated. The Trust's right to use the name "Sparrow"
automatically ceases ninety days after termination of the Agreement and may be
withdrawn by the Adviser on ninety days written notice.
The Adviser may make payments to banks or other financial institutions
that provide shareholder services and administer shareholder accounts. The
Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Fund believes that
the Glass-Steagall Act should not preclude a bank from providing such services.
However, state securities laws on this issue may differ from the interpretations
of federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law. If a bank were prohibited
from continuing to perform all or a part of such services, management of the
Fund believes that there would be no material impact on the Fund or its
shareholders. Banks may charge their customers fees for offering these services
to the extent permitted by applicable regulatory authorities, and the overall
return to those shareholders availing themselves of the bank services will be
lower than to those shareholders who do not. The Fund may from time to time
purchase securities issued by banks which provide such services; however, in
selecting investments for the Fund, no preference will be shown for such
securities.
TRUSTEES AND OFFICERS
The Board of Trustees supervises the business activities of the Trust.
The names of the Trustees and executive officers of the Trust are shown below.
Each Trustee who is an "interested person" of the Trust, as defined in the
Investment Company Act of 1940, is indicated by an asterisk.
<TABLE>
<S> <C> <C>
Name, Age Position Principal Occupations
and Address During Past 5 Year
Gerald R. Sparrow* Trustee, President Director, President and Treasurer of Sparrow Capital
Age: 40 and Treasurer Management Incorporated; President of Buford Dickson
225 S. Meramec Avenue, #732 Harper Sparrow, an Advisory company; General partner
St. Louis, MO 63105 of Sparrow Fund L.P., an Advisory company.
Alex Ramos* Trustee and Secretary Analyst for Sparrow Capital Management Incorporated from
Age: 25 August 1997 through present.
225 S. Meramec Avenue, #732
ST. Louis, MO 63105
Herschel W. Townsend Trustee Pharmacist for Schnucks, a grocery/pharmacy, from January,
Age: 59 1991 through present
1589 Sierra Vista Plaza
St. Louis, MO 63138
Donald D. Woodruff Trustee President of Robinson, Inc. a retail (sales of hearing aids)
Age: 43 company from June, 1992 through present.
2526 Woodson Road
St. Louis, MO 63114
</TABLE>
Trustee fees are Trust expenses. The compensation paid to the Trustees
for the fiscal year ended August 31, 1999 is set forth in the following table.
<PAGE>
Total Compensation
from Trust (the Trust is
not in a Fund Complex)
Gerald R. Sparrow 0
Alex Ramos 0
Herschel W. Townsend 0
Donald D. Woodruff 0
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust,
the Adviser is responsible for the Fund's portfolio decisions and the placing of
the Fund's portfolio transactions. In placing portfolio transactions, the
Adviser seeks the best qualitative execution for the Fund, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received. Consistent with
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc., and subject to its obligation of seeking best qualitative execution, the
Adviser may give consideration to sales of shares of the Trust as a factor in
the selection of brokers and dealers to execute portfolio transactions.
The Adviser is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Fund and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Adviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the Trust and to other
accounts over which it exercises investment discretion.
Research services include supplemental research, securities and
economic analyses, statistical services and information with respect to the
availability of securities or purchasers or sellers of securities and analyses
of reports concerning performance of accounts. The research services and other
information furnished by brokers through whom the Fund effects securities
transactions may also be used by the Adviser in servicing all of its accounts.
Similarly, research and information provided by brokers or dealers serving other
clients may be useful to the Adviser in connection with its services to the
Fund. Although research services and other information are useful to the Fund
and the Adviser, it is not possible to place a dollar value on the research and
other information received. It is the opinion of the Board of Trustees and the
Adviser that the review and study of the research and other information will not
reduce the overall cost to the Adviser of performing its duties to the Fund
under the Agreement.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities are
normally purchased directly from the issuer, an underwriter or a market maker.
To the extent that the Trust and another of the Adviser's clients seek
to acquire the same security at about the same time, the Trust may not be able
to acquire as large a position in such security as it desires or it may have to
pay a higher price for the security. Similarly, the Trust may not be able to
obtain as large an execution of an order to sell or as high a price for any
particular portfolio security if the other client desires to sell the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one client, the resulting
participation in volume transactions could produce better executions for the
Trust. In the event that more than one client wants to purchase or sell the same
security on a given date, the purchases and sales will normally be made by
random client selection. For the period October 4, 1998 (commencement of
operations) through August 31, 1999, the Fund paid brokerage commissions of
$_____.
DISTRIBUTION PLAN
The Fund has adopted a Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940 under which the Fund is authorized to incur distribution
expenses at a maximum annual rate of 0.50% of the average daily net assets of
the Fund. All distribution expenses incurred by the Fund are paid by the Adviser
pursuant to the management agreement between the Fund and Adviser. The expenses
may include, but are not limited to, the following: (a) payments to securities
dealers and others that are engaged in the sale of Shares, that may be advising
shareholders of the Trust regarding the purchase of Fund shares, that hold
shares of the Fund in omnibus accounts or as shareholders of record, or provide
shareholder support or administrative services; (b) costs of preparing, printing
and distributing prospectuses and statements of additional information and
reports of the Fund for recipients other than existing shareholders of the Fund;
(c) costs of formulating and implementing marketing and promotional activities;
(d) costs of preparing, printing and distributing sales literature; and (e)
costs of implementing and operating the Distribution Plan. The Plan is designed
to promote the sale of shares of the Fund.
The Trustees expect that the Plan will significantly enhance the Fund's
ability to distribute its shares. The Plan has been approved by the Fund's Board
of Trustees, including a majority of the Trustees who are not "interested
persons" of the Fund and who have no direct or indirect financial interest in
the Plan or any related agreement, by a vote cast in person. Continuation of the
Plan and the related agreements must be approved by the Trustees annually, in
the same manner, and the Plan or any related agreement may be terminated at any
time without penalty by a majority of such independent Trustees or by a majority
of the outstanding shares of the Fund. Any amendment increasing the maximum
percentage payable under the Plan must be approved by a majority of the
outstanding shares of the Fund, and all other material amendments to the Plan or
any related agreement must be approved by a majority of the independent
Trustees.
DETERMINATION OF SHARE PRICE
The price (net asset value) of the shares of the Fund is determined as
of 4:00 p.m., Eastern time on each day the Trust is open for business and on any
other day on which there is sufficient trading in the Fund's securities to
materially affect the net asset value. The Trust is open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
Securities which are traded on any exchange or on the NASDAQ
over-the-counter market are valued at the last quoted sale price. Lacking a last
sale price, a security is valued at its last bid price except when, in the
Adviser's opinion, the last bid price does not accurately reflect the current
value of the security. All other securities for which over-the-counter market
quotations are readily available are valued at their last bid price. When market
quotations are not readily available, when the Adviser determines the last bid
price does not accurately reflect the current value or when restricted
securities are being valued, such securities are valued as determined in good
faith by the Adviser, subject to review of the Board of Trustees of the Trust.
Fixed income securities generally are valued by using market
quotations, but may be valued on the basis of prices furnished by a pricing
service when the Adviser believes such prices accurately reflect the fair market
value of such securities. A pricing service utilizes electronic data processing
techniques based on yield spreads relating to securities with similar
characteristics to determine prices for normal institutional-size trading units
of debt securities without regard to sale or bid prices. When prices are not
readily available from a pricing service, or when restricted or illiquid
securities are being valued, securities are valued at fair value as determined
in good faith by the Adviser, subject to review of the Board of Trustees. Short
term investments in fixed income securities with maturities of less than 60 days
when acquired, or which subsequently are within 60 days of maturity, are valued
by using the amortized cost method of valuation, which the Board has determined
will represent fair value.
The Fund's Prospectus, in the section "How to Buy Shares" describes
certain types of investors for whom sales charges will be waived. The Trustees
have determined that the Fund incurs no appreciable distribution expenses in
connection with sales to these investors and that it is therefore appropriate to
waive sales charges for these investors.
INVESTMENT PERFORMANCE
The Fund may periodically advertise "average annual total return."
"Average annual total return," as defined by the Securities and Exchange
Commission, is computed by finding the average annual compounded rates of return
(over the one, five and ten year periods) that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
applicable period of the hypothetical $1,000
investment made at the beginning of the
applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates, that the maximum sales load is
deducted from the initial $1,000 and that a complete redemption occurs at the
end of the applicable period. If the Fund has been in existence less than one,
five or ten years, the time period since the date of the initial public offering
of shares will be substituted for the periods stated.
The Fund may also advertise performance information (a
"non-standardized quotation") which is calculated differently from average
annual total return. A non-standardized quotation of total return may be a
cumulative return which measures the percentage change in the value of an
account between the beginning and end of a period, assuming no activity in the
account other than reinvestment of dividends and capital gains distributions. A
non-standardized quotation may also be an average annual compounded rate of
return over a specified period, which may be a period different from those
specified for average annual total return. In addition, a non-standardized
quotation may be an indication of the value of a $10,000 investment (made on the
date of the initial public offering of the Fund's shares) as of the end of a
specified period. These non-standardized quotations do not include the effect of
the applicable sales load which, if included, would reduce the quoted
performance. A non-standardized quotation of total return will always be
accompanied by the Fund's average annual total return as described above.
The Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time periods
used in calculating non-standardized investment performance should be considered
when comparing the Fund's performance to those of other investment companies or
investment vehicles. The risks associated with the Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue. For the period October
4, 1998 (commencement of operations) through August 31, 1999, the Fund's average
total return was ___%.
From time to time, in advertisements, sales literature and information
furnished to present or to prospective shareholders, the performance of the Fund
may be compared to indices of broad groups of unmanaged securities considered to
be representative of or similar to the portfolio holdings of the Fund or
considered to be representative of the stock market in general. The Fund may use
the Standard & Poor's 500 Stock Index or the Dow Jones Industrial Average.
In addition, the performance of the Fund may be compared to other
groups of mutual funds tracked by any widely used independent research firm
which ranks mutual funds by overall performance, investment objectives and
assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The
objectives, policies, limitations and expenses of other mutual funds in a group
may not be the same as those of the Fund. Performance rankings and ratings
reported periodically in national financial publications such as Barron's and
Fortune also may be used.
CUSTODIAN
Firstar Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, is
Custodian of the Fund's investments. The Custodian acts as the Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Fund's request and
maintains records in connection with its duties.
TRANSFER AGENT
Unified Fund Services, Inc. ("Unified"), 431 North Pennsylvania Street,
Indianapolis, Indiana 46204, acts as the Fund's transfer agent and, in such
capacity, maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of the Fund's shares, acts as dividend and distribution disbursing
agent and performs other accounting and shareholder service functions. In
addition, Unified, in its capacity as Fund administrator, provides the Fund with
certain monthly reports, record-keeping and other management-related services.
For its services as administrator, Unified receives a monthly fee from the
Adviser equal to an annual average rate of 0.10% of the Fund's average daily net
assets subject to an annual minimum fee of $18,000. For the period October 4,
1998 (commencement of operations) through August 31, 1999, Unified received $__
from the Adviser (not the Fund) for its services as administrator.
ACCOUNTANTS
The firm of McCurdy & Associates CPA's, 27955 Clemens Road, Westlake,
Ohio 44145, has been selected as independent public accountants for the Fund for
the fiscal year ending August 31, 2000. McCurdy & Associates performs an annual
audit of the Fund's financial statements and provides financial, tax and
accounting consulting services as requested.
DISTRIBUTOR
Unified Management Corporation, Inc., 431 North Pennsylvania Street,
Indianapolis, Indiana 46204, is the exclusive agent for distribution of shares
of the Fund. The Distributor is obligated to sell shares of the Fund on a best
efforts basis only against purchase orders for the shares. Shares of the Fund
are offered to the public on a continuous basis.
FINANCIAL STATEMENTS
The financial statements and independent auditor's report required to
be included in the statement of additional information are hereby incorporated
by reference to the Fund's Annual Report to the shareholders for the period
ended August 31, 1999. The Trust will provide the Annual Report without charge
by calling the Fund at (888)-727-3301.
Sparrow Funds
PART C. OTHER INFORMATION
- ------- -----------------
Item 23. Exhibits
- -----------------
(a) Articles of Incorporation. Copy of Registrant's Agreement
and Declaration of Trust, which was filed as an Exhibit to
Registrant's Registration Statement, is hereby incorporated
by reference.
(b) By-Laws. Copy of Registrant's By-Laws, which was filed as an
Exhibit to Registrant's Registration Statement, is hereby
incorporated by reference.
(c) Instruments Defining Rights of Security Holders. - None.
(d) Investment Advisory Contracts. Copy of Registrant's
Management Agreement with its Adviser, Sparrow Capital
Management, Incorporated, which was filed as an Exhibit
to Registrant's Pre-Effective Amendment No.1, is hereby
incorporated by reference.
(e) Underwriting Contracts.
(i) Copy of Registrant's Distribution Agreement with Unified
Management Corporation, which was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1, is hereby
incorporated by reference.
(ii)Copy of Registrant's form of Dealer Agreement, which was
filed as an Exhibit to Registrant's Pre-Effective
Amendment No. 1, is hereby incorporated by reference.
(f) Bonus or Profit Sharing Contracts. - None.
(g) Custodian Agreements. Copy of Registrant's Agreement with
the Custodian, Firstar Bank, N.A., which was filed as an
Exhibit to Registrant's Pre-Effective Amendment No. 1, is
hereby incorporated by reference.
(h) Other Material Contracts. - None.
(i) Legal Opinion.
(i) Opinion of Brown, Cummins & Brown Co., L.P.A. which was
filed as an Exhibit to Registrant's Registration
Statement, is hereby incorporated by reference.
(ii) Consent of Brown, Cummins & Brown Co., L.P.A. is filed
herewith.
(j) Other Opinions. Consent of independent public accountants is
filed herewith.
(k) Omitted Financial Statements. - None.
(l) Initial Capital Agreements. Copy of Letter of Initial
Stockholders, which was filed as an Exhibit to Registrant's
Pre-Effective Amendment No. 1, is hereby incorporated by
reference.
(m) Rule 12b-1 Plan. Copy of 12b-1 Distribution Expense Plan,
which was filed as an Exhibit to Registrant's Pre-Effective
Amendment No. 1, is hereby incorporated by reference.
(n) Financial Data Schedule. - None.
(o) Rule 18f-3 Plan - None.
(p) Power of Attorney.
(i) Power of Attorney for Registrant and Certificate with
respect thereto, which was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1, is hereby
incorporated by reference.
(ii) Powers of Attorney for the Trustees and Officers, which
was filed as an Exhibit to Registrant's Pre-Effective
Amendment No. 1, is hereby incorporated by reference.
Item 24. Persons Controlled by or Under Common Control with the Registrant
- --------------------------------------------------------------------------
None.
Item 25. Indemnification
- ------------------------
(a) Article VI of the Registrant's Declaration of Trust
provides for indemnification of officers and Trustees
as follows:
Section 6.4 Indemnification of
Trustees, Officers, etc. Subject to and
except as otherwise provided in the
Securities Act of 1933, as amended, and the
1940 Act, the Trust shall indemnify each of
its Trustees and officers (including persons
who serve at the Trust's request as
directors, officers or trustees of another
organization in which the Trust has any
interest as a shareholder, creditor or
otherwise (hereinafter referred to as a
"Covered Person") against all liabilities,
including but not limited to amounts paid in
satisfaction of judgments, in compromise or
as fines and penalties, and expenses,
including reasonable accountants' and
counsel fees, incurred by any Covered Person
in connection with the defense or
disposition of any action, suit or other
proceeding, whether civil or criminal,
before any court or administrative or
legislative body, in which such Covered
Person may be or may have been involved as a
party or otherwise or with which such person
may be or may have been threatened, while in
office or thereafter, by reason of being or
having been such a Trustee or officer,
director or trustee, and except that no
Covered Person shall be indemnified against
any liability to the Trust or its
Shareholders to which such Covered Person
would otherwise be subject by reason of
willful misfeasance, bad faith, gross
negligence or reckless disregard of the
duties involved in the conduct of such
Covered Person's office.
Section 6.5 Advances of Expenses.
The Trust shall advance attorneys' fees or
other expenses incurred by a Covered Person
in defending a proceeding to the full extent
permitted by the Securities Act of 1933, as
amended, the 1940 Act, and Ohio Revised Code
Chapter 1707, as amended. In the event any
of these laws conflict with Ohio Revised
Code Section 1701.13(E), as amended, these
laws, and not Ohio Revised Code Section
1701.13(E), shall govern.
Section 6.6 Indemnification Not
Exclusive, etc. The right of indemnification
provided by this Article VI shall not be
exclusive of or affect any other rights to
which any such Covered Person may be
entitled. As used in this Article VI,
"Covered Person" shall include such person's
heirs, executors and administrators. Nothing
contained in this article shall affect any
rights to indemnification to which personnel
of the Trust, other than Trustees and
officers, and other persons may be entitled
by contract or otherwise under law, nor the
power of the Trust to purchase and maintain
liability insurance on behalf of any such
person.
The Registrant may not pay for insurance which
protects the Trustees and officers against
liabilities rising from action involving willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of
their offices.
(b) The Registrant may maintain a standard mutual fund
and investment advisory professional and directors
and officers liability policy. The policy, if
maintained, would provide coverage to the Registrant,
its Trustees and officers, and could cover its
Advisers, among others. Coverage under the policy
would include losses by reason of any act, error,
omission, misstatement, misleading statement, neglect
or breach of duty.
<PAGE>
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
trustees, officers and controlling persons of the
Registrant pursuant to the provisions of Ohio law and
the Agreement and Declaration of the Registrant or the
By-Laws of the Registrant, or otherwise, the Registrant
has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against
public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or
paid by a trustee, officer or controlling person of the
Trust in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities
being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
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 Adviser
- --------- ----------------------------------------------------
A. Sparrow Capital Management Incorporated ("Sparrow"),
225 S. Meramec Ave., Suite 732 Tower, St. Louis, MO
63105, adviser to Sparrow Funds, is a registered
investment adviser.
(1) Sparrow has engaged in no other business during
the past two fiscal years.
(2) The following list sets forth other substantial
business activities of the officers and directors
of Sparrow: None.
Item 27. Principal Underwriters
- -------- ----------------------
(a) Unified Management Corporation, the Registrant's
distributor, acts as distributor for the following funds:
Industry Leaders Fund The Julius Baer Investment Funds
104 Summit Ave. 330 Madison Ave.
Summit, NJ 07902 New York, NY 10017
Labrador Mutual Fund Milestone Funds
2344 Corte De La Jara 1 Executive Blvd.
Pleasanton, CA 94566 Yonkers, NY 10701
Lindbergh Funds Securities Management & Timing Funds
5520 Telegraph Road #204 620 Woodmere Ave. Suite B
St. Louis, MO 63129 Traverse City, MI 49686
Sparrow Funds Firstar Select Funds
225 S. Meramec Ave., Suite 732 431 N. Pennsylvania St.
St. Louis, MO 63105 Indianapolis, IN 46204
The Unified Funds Regional Opportunity Fund
431 N. Pennsylvania St. 700 W. Pete Rose Way
Indianapolis, IN 46204 Longworth Hall Suite 127
Cincinnati, OH 45203
(b) Information with respect to each director and officer
of Unified Management Corporation is incorporated by
reference to Schedule A of Form BD filed by it under
the Securities Exchange Act of 1934 (File No.
8-23508).
(c) Not applicable.
Item 28. Location of Accounts and Records
- ------- ---------------------------------
Unified Fund Services, Inc.
431 N. Pennsylvania Street
Indianapolis, IN 46204
Will maintain physical possession of the accounts, books, and
other documents required to be maintained by Rule 31a-1(b)(1),
31a-1(b)(2), and 31a-1(b)(4) through 31a-1(b)(11).
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
Will maintain physical possession of the accounts, books, and
other documents required to be maintained by Rule 31a-1(b)(3).
Unified Management Corporation
431 N. Pennsylvania Street
Indianapolis, IN 46204
Will maintain physical possession of the accounts, books, and
other documents required to be maintained by a principal
underwriter under by Rule 31a-1(d).
Sparrow Capital Management, Incorporated
225 S. Meramec Ave., Suite 732 Tower
St. Louis, MO 63105
Will maintain physical possession of the accounts, books, and
other documents required to be maintained by Rule 31a-1(f).
Item 29. Management Services
- ----------------------------
None.
Item 30. Undertakings
- ---------------------
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cincinnati, State of Ohio on the 15th day of
November, 1999.
Sparrow Funds
By: /S/
Donald S. Mendelsohn
Attorney -in-Fact
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 dates indicated.
Gerald R. Sparrow *
President,Treasurer, Trustee,
Cheif Financial Officer
Alex Ramos *
Secretary, Trustee
_________________
Dawn Michelle Jones
Trustee
Herschel W. Townsend *
Trustee
Donald D. Woodruff *
Trustee
*By /s/
Donald S. Mendelsohn
Attorney-in-Fact
November 15, 1999
<PAGE>
EXHIBIT INDEX
PAGE
1. Consent of Brown, Cummins & Brown Co., L.P.A..................EX-99.B10
2. Consent of McCurdy & Associates, CPA's, Inc...................EX-99.B11
BROWN, CUMMINS & BROWN CO., L.P.A.
ATTORNEYS AND COUNSELORS AT LAW
3500 Carew Tower
J.W. Brown (1911-1995) 441 Vine Street JoAnn M. Strasser
James R. Cummins Cincinnati, Ohio 45202 Aaron A. Vanderlaan
Robert S. Brown Telephone (513) 381-2121
Donald S. Mendelsohn Telecopier (513) 381-2125 Of Counsel
Lynne Skilken Gilbert Bettman
Amy G. Applegate
Kathryn Knue Przywara
Melanie S. Corwin
November 15, 1999
Sparrow Funds
225 South Meramec
Suite 732 Tower
St. Louis, Missouri 63105
Re: Sparrow Funds, File Nos. 333-59877 and 811-8897
-----------------------------------------------
Ladies and Gentlemen:
A legal opinion that we prepared was filed with the Registration
Statement (the "Legal Opinion"). We hereby give you our consent to incorporate
by reference the Legal Opinion into Post-Effective Amendment No. 1 to your
Registration Statement (the "Amendment"), and consent to all references to us in
the Amendment.
Very truly yours,
/s/
Brown, Cummins & Brown Co., L.P.A.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated September 27, 1999 and to all references to our firm included in or made a
part of this Post-Effective Amendment No. 1 to Sparrow Funds' Registration
Statement on Form N-1A (file no. 333-59877), including the references to our
firm under the heading "Financial Highlights" in the Prospectus and heading
"Accountants" in the Statement of Additional Information
/s/
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
November 15, 1999
