SPARROW FUNDS, 497, 2000-12-19

SPARROW FUNDS
497, 2000-12-19

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Sparrow Growth Fund
Class A
Class C

Prospectus
November 1, 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.

TABLE OF CONTENTS

PAGE
ABOUT THE FUND
Investment Objective
Principal Strategies
Principal Risks of Investing in the Fund
Is the Fund Right for You?
General
How the Fund has Performed

FEES AND EXPENSES OF INVESTING IN THE FUND

HOW TO BUY SHARES
Initial Purchase
Automatic Investment Plan
Sales Charge
Distribution Plan
Additional Investments
Purchases Without a Sales Charge
Right of Accumulation
Letter of Intent
Tax Sheltered Retirement Plans
Other Purchase Information

HOW TO REDEEM SHARES
By Mail
By Telephone
Additional Information

DETERMINATION OF NET ASSET VALUE

DIVIDENDS, DISTRIBUTIONS AND TAXES

MANAGEMENT OF THE FUND
Past Performance of Similar Accounts

FINANCIAL HIGHLIGHTS

FOR MORE INFORMATION

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 industry sectors, certain industry sectors are likely to be
overweighted compared to others because the adviser seeks the best investment
values regardless of industry sector. For example, the Fund may be over-
weighted in the technology sector, although the sectors 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

* Company Risk. The value of the Fund may decrease in response to the ac
tivities 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.

* 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.

* Sector Risk. If the Fund's portfolio is overweighted in a certain
industry sector, any negative development affecting that sector will
have a greater impact on the Fund than a fund that is not overweighted
in that sector. The Fund may have a greater concentration in technology
companies and weakness in this sector could result in significant
losses to the Fund. Technology companies may be significantly affected
by falling prices and profits and intense competition, and their
products may be subject to rapid obsolescence.

* Portfolio Turnover Risk. 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.

* 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.

* 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.

Is the Fund right for You?

The Fund may be suitable for:

* Long term investors seeking a fund with a growth investment strategy
* Investors willing to accept price fluctuations in their investment
* 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 and table below show the variability of the Fund's returns, which
is one indicator of the risks of investing in the Fund. The bar chart shows
changes in the Fund's returns from year to year since the Fund's inception as
represented by the performance of Class A. Sales loads are not reflected in the
bar chart, and if these amounts were reflected, returns would be less than those
shown. The table shows how the Fund's Class A average annual total returns over
time compared to those of a broad-based securities market index. Of course, the
Fund's past performance is not necessarily an indication of future performance.

Class A Annual Total Returns as of December 31*

-------------------------------------------------------------------------------
[bar chart]

Returns for 1999: 24.15%
-------------------------------------------------------------------------------

*Class A's year to date return as of September 30, 2000 was 8.33%.
During the period shown in the chart for Class A, the highest return for a
quarter was 18.27% (Q4, 1999); and the lowest return was (5.20)% (Q3, 1999).

Average Annual Total Returns for the periods ended December 31, 1999:

The returns in the following table include the effect of Class A and Class C's
maximum applicable sales charge (load) imposed on purchases and Class C's max-
imum applicable contingent deferred sales charge ("CDSC").

One Year Since Inception 1
---------- ------------------
Class A Shares 17.01% 37.34%
Class C Shares2 N/A N/A
S&P 500 Index 19.53% 36.06%

1 October 4, 1998
2 As of December 31, 1999, Class C shares had not been issued; accordingly
performance information is not available for Class C shares.

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> <C>
Shareholder Fees (fees paid directly from your investment)1 Class A Class C
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)...............................................................................5.75% NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends........................ NONE NONE
Maximum Deferred Sales Charge (Load)
(as a percentage of the lower of original purchase or redemption proceeds).......... NONE2 1.00%3
Redemption Fee..................................................................... NONE NONE

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees..................................................................... 1.75% 1.75%
Distribution (12b-1) Fees (including 0.25% shareholder services fee only for
Class C)............................................................................ 0.50% 1.00%
Other Expenses...................................................................... 0.00% 0.00%
Total Annual Fund Operating Expenses................................................ 2.25% 2.75%
</TABLE>

1 Processing organizations may impose transactional fees on shareholders (See
"Purchasers Without a Sales Charge" for a definition of "processing organiza
tions").
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 On Class C shares redeemed within one year of purchase.

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:
<TABLE>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
Class A $1261 $1749 $3085 $798
Class C
if you sold your shares
at the end of the period $885 $1506 $3178 $289
if you stayed in the Fund $885 $1506 $3178 $289

</TABLE>

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 Automatic Investment Plan No minimum Required $100/month for minimum
of 12 consecutive months
Educational IRA's $500 -0-
Educational IRA's with Automatic
Investment Plans No minimum Required $100/month for minimum
of 5 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:

ByMail- To purchase shares by mail, follow these steps: * complete and sign the
investment application form which accompanies this
Prospectus;
* write a check (subject to the minimum amounts) made payable to the Fund; *
mail the application and check to:

U.S. Mail: Sparrow Growth Fund Overnight: Sparrow Growth Fund
c/o Unified Financial Services, Inc. c/o Unified Financial 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.

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

Class A Shares

Class A 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".

Sales Charge as a % 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 employees. However, a
contingent deferred sales charge ("CDSC") of 1% will be imposed if you redeem
the 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 dealer of record receives 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 dealer of record
receives 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.

Class C Shares

The dealer of record receives a 1.00% commission on sales of Class C
Shares. You, however, do not pay an initial sales charge and all of your
purchase payment is immediately invested in the Fund. Class C Shares are subject
to a contingent deferred sales charge ("CDSC") of 1.00% if you redeem the shares
within one year of purchase, based on the lower of the shares' cost or current
NAV. Any shares acquired by reinvestment of distributions will be redeemed
without a CDSC.

Additional Information (Class A and Class C Shares)

Shares of the Fund are sold on a continuous basis at the public
offering price (for Class A Shares) or net asset value (for Class C Shares) 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 (for Class A Shares) or net asset value
(for Class C Shares) 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 (for Class A Shares) or
net asset value (for Class C Shares). 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 Plans

Each class has adopted a plan under Rule 12b-1 that allows the class to
pay for services provided to shareholders. Class A shares pay annual 12b-1
expenses of 0.50% and Class C shares pay annual 12b-1 expenses of 1.00% (0.25%
for service fees and 0.75% for distribution fees). Because these fees are paid
out of the Fund's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.

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 ad-
ditional 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 (Class A Shares Only)

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.

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; 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);
Registered representatives (and their immediate family members) of broker-
dealers with selling agreements with the Fund's distributor; Tax-qualified plans
when proceeds from repayments of loans to participants are invested (or
reinvested) in the Fund; 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); 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; 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; Separate
accounts of insurance companies, provided the insurance company has an agreement
with the Fund's distributor or the Fund for this purpose; 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 re- strictions in addition to or different from those applicable to
investors who remain the shareholder of record of their shares. Thus, an
investor con- templating investing with the Fund through a processing
organization should read materials provided by the processing organization in
conjunction with this Pro- spectus.

Right of Accumulation (Class A Shares Only)

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 (Class A Shares Only)

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.

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. Any applicable CDSC will be subtracted from your redemption amount
or your account, as you direct. 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 based on 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 $200 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.

During the fiscal year ended August 31, 2000, the Fund paid the adviser
a fee equal to 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 $150 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 itital investment of $10,000 with reinvestment (1)

[chart]

1995 1999
---- ----
Sparrow $10,000 $35,101
S&P 500 $10,000 $25,492

-------------------------------------------------------------------------------

1 Line graph shows value of $10,000 invested on December 31, 1995 and held
through December 31, 1999 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 +29.0% + 21.0%
1998 +45.1% + 28.6%
1997 +42.5% + 33.3%
1996 +31.6% + 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.
<TABLE>
<S> <C> <C> <C>

Average Annual Return1

Sparrow Core Growth S&P 500
Growth Fund Equity Accounts Index

One year 24.15% 29.00% 21.04%
Since Fund
Inception (10/4/98) 44.05% N/A 36.06%
Since Core Growth Equity
Account Inception (1/1/96) N/A 35.94% 26.33%
</TABLE>

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.

FINANCIAL HIGHLIGHTS

The following condensed supplementary financial information for Class A
shares for the period October 4, 1998 (commencement of operations) through
August 31, 1999 and for fiscal year ended August 31, 2000 is derived from the
audited financial statements of the Fund. As of August 31, 2000, Class C shares
had not been issued; accordingly, financial highlights are not available for
Class C shares. 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 in formation and is available upon request and without charge.

(For a fund share outstanding throughout the period)

<TABLE>
<S> <C> <C>
Year ended Period ended
August 31, August 31,
2000 1999 (a)
Selected Per Share Data
Net asset value, beginning of period $13.38 $10.00
Income from investment operations
Net investment loss (0.30) (0.13)
Net realized and unrealized gain 4.86 3.51
Total from investment operations 4.56 3.38
Less Distributions
From net investment income 0.00 0.00
From net realized gain 0.00 0.00
Total distributions 0.00 0.00

Net asset value, end of period $17.94 $13.38

Total Return 34.08% 33.80%(b)

Ratios and Supplemental Data
Net assets, end of period $8,646,430 $5,319,057
Ratio of expenses to average net assets 2.50% 2.50%(c)
Ratio of net investment income to
average net assets (2.00)% (1.03)%(c)
Portfolio turnover rate 117.57% 166.41%
</TABLE>

(a) For the period October 4, 1998 (commencement of operations) through August
31, 1999
(b) For periods of less than a full year, total returns are not annualized.
(c) Annualized

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. Annual and semi-
annual reports contain management's discussion of market conditions and invest-
ment strategies that significantly affected the Fund's performance, and per-
formance 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 Fund (including the SAI and other
reports) at the Securities and Exchange Commission (SEC) Public Reference Room
in Washington, D.C. Call the SEC at 1-202-942-8090 for room hours and operation.
You may also obtain reports and other information about the Fund on the EDGAR
Database on the SEC's Internet site at http.//www.sec.gov, and copies of this
information may be obtained, after paying a duplicating fee, by electronic
request at the following e-mail address: [email protected], or by writing the
SEC's Public Reference Section of the SEC, Washington, D.C. 20549-0102.

Investment Company Act #811-08897

<PAGE>

SPARROW GROWTH FUND

STATEMENT OF ADDITIONAL INFORMATION

November 1, 2000

This Statement of Additional Information ("SAI") is not a prospectus.
It should be read in conjunction with the Prospectus of Sparrow Growth Fund
dated November 1, 2000. This SAI incorporates by reference the Fund's Annual
Report to Shareholders for the fiscal year ended August 31, 2000 ("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..............................................2

ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK
CONSIDERATIONS.................................................................3

CONTINGENT DEFERRED SALES CHARGES..............................................4

INVESTMENT LIMITATIONS.........................................................5

THE INVESTMENT ADVISER.........................................................6

TRUSTEES AND OFFICERS..........................................................7

PORTFOLIO TRANSACTIONS AND BROKERAGE...........................................8

DISTRIBUTION PLANS.............................................................9

DETERMINATION OF SHARE PRICE..................................................10

INVESTMENT PERFORMANCE........................................................11

CUSTODIAN.....................................................................12

TRANSFER AGENT................................................................12

ACCOUNTANTS...................................................................12

DISTRIBUTOR...................................................................12

FINANCIAL STATEMENTS..........................................................13

<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 shares of the Fund are divided into two classes, designated Class A and
Class C shares. The differing sales charges and other expenses applicable to the
different classes of the Fund's shares may affect the performance of those
classes. Broker/dealers and others entitled to receive compensation for selling
or servicing Fund shares may receive more with respect to one class than
another. The Board of Trustees of the Trust does not anticipate that there will
be any conflicts among the interests of the holders of the different classes of
Fund shares. On an ongoing basis, the Board will consider whether any such
conflict exists and, if so, take appropriate action. More information concerning
the classes of shares of the Fund may be obtained by calling 1-888-727-3301.

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 October 25, 2000, the following persons may be deemed to ben-
eficially own five percent (5%) or more of the Fund: Gerald R. Sparrow, 8933
Lawn, Brentwood, Missouri 63144 - 12.82%;Michael Rehkemper, 17217 Saint Rost
Road, Trenton, New Jersey 62293 - 7.53%;Donald J. Zugmaier, 6315 Alpha, Alton,
Illinois 62002 - 7.37%; Rehkemper & Son, Inc., 17817 Saint Rose Road, Saint
Rose, Illinois 62230 - 5.09%;and Richard G. Utley, 1545 Thoroughbred,
Florissant, Missouri 63033 - 5.04%.

As of October 25, 2000, the officers and Trustees as a group beneficially
owned 14.13% 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

For Class A shares, 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.

For Class C shares, a CDSC of 1.00%, based on the lower of the shares' cost
and current net asset value, will be imposed on redemptions of shares within one
year 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.

<PAGE>

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,
borrowing costs (such as interestand dividend expenses),Rule 12b-1 distribution
expenses, fees and expenses of the non-interested person trustees and extra-
ordinary 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 1.75% 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 fiscal year ended August
31,2000 and the period October 4, 1998 (commencement of operations) through
August 31, 1999, the Fund paid advisory fees of $175,828 and $ 67,443,
respectively.

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. 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.

<PAGE>

<TABLE>

============================== ======================= ================================================================
Name, Age Position Principal Occupations
and Address During Past 5 Years

------------------------------ ----------------------- ----------------------------------------------------------------
Gerald R. Sparrow Trustee, President Director, President and Tresurer of Sparrow Capital
225 S. Meramec Avenue, and Treasurer Management Incorporated; President of Buford
#732 Dickson Harper Sparrow, an advisory company;
St. Louis, MO 63105 General partner of Sparrow L.P., an advisory
Year of Birth: 1959 company.
-----------------------------------------------------------------------------------------------------------------------
Alex Ramos* Trustee and Secretary Analyst for Sparrow Capital Management Incorporated from
Year of Birth:1974 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,
Year of Birth: 1940 1991 through present.
2073 Washington Crossing
Washington, MO 63090
------------------------------ ----------------------- ----------------------------------------------------------------
Donald D. Woodruff Trustee President of Robinson, Inc. a retail (sales of hearing aids)
Year of Birth: 1956 company from June, 1992 through present.
8831 Manchester Road
St. Louis, MO 63144
============================== ======================= ================================================================
</TABLE>

Trustee fees are Trust expenses. The compensation paid to the Trustees for
the fiscal year ended August 31, 2000 is set forth in the following table.

================================== =============================
Total Compensation
from Trust (the Trust is
Name 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 fiscal year ended August 31, 2000 and the
period October 4,1998 (commencement of operations) through August 31,1999, the
Fund paid brokerage commissions of $21,794 and $28,547, respectively.

The Trust, Advisor and Fund's distributor have each adopted a Code of
Ethics (the "Code") under Rule 17j-1 of the Investment Company Act of 1940. The
personnel subject to the Code are permitted to invest in securities, including
securities that may be purchased or held by the Fund. You may obtain a copy of
the Code from the Securities and Exchange Comission.

DISTRIBUTION PLANS

The Fund has adopted Plans pursuant to Rule 12b-1 under the Investment
Company Act of 1940 with regard to Class A shares and Class C shares. Under the
Class A Plan, 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 for Class A
shares. 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 Plans. Under the Class C plan, the Fund pays the Adviser a fee
equal to 1.00% of the average daily net assets of the Fund's Class C shares. Of
this fee, the Adviser receives 0.75% for the distribution services described
above. The remaining 0.25% is paid to the Adviser for payment of service fees.
The Plans are designed to promote the sale of shares of the Fund.

The Trustees expect that each Plan will significantly enhance the
Fund's ability to distribute its shares. The Plans have 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 each Plan and the related agreements must be approved by the
Trustees annually, in the same manner, and either 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 a Plan must be approved by a
majority of the outstanding shares of the applicable class of the Fund, and all
other material amendments to a 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 fiscal year
ended August 31, 2000 and the period October 4, 1998 (commencement of
operations) through August 31, 2000, the Fund's average annual total returns
were 35.6% and 31.66%, respectively.

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 fiscal year ended
August 31, 2000, and the period October 4, 1998 (commencement of operations)
through August 31, 1999, Unified received $15,000 and $18,000, respectively,
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, 2001. 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, 2000. The Trust will provide the Annual Report without charge by
calling the Fund at (888)-727-3301.