SPARROW GROWTH FUND
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SCHEDULE OF INVESTMENTS
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As of February 29, 2000 (Unaudited)
Number Market
of Shares Value
--------- -----
Common Stocks - 98.75%
Biological Products - 5.88%
Amgen Inc. * 6,380 435,036
Building Material - 3.98%
Home Depot Inc. 5,100 294,206
Components - 3.55%
Adaptec Inc. * 6,410 262,810
Computers/Technology - 22.76%
EMC Corp. * 4,140 492,660
Lexmark Int'l Corp. * 3,620 431,685
Oracle Corp. * 5,600 415,800
Sun Microsystems * 3,600 342,900
Diversified Conglomerates - 4.99%
Tyco International Ltd. 9,720 368,753
Drugs & Healthcare - 3.21%
Kimberly Clark Corp. 4,600 237,763
Electronics - 6.94%
Motorola Inc. 3,010 513,205
Food & Beverage - 3.64%
SYSCO Corp. 8,200 269,062
Financial Services - 8.06%
American Express Co. 1,900 254,956
Morgan Stanley, Dean Witter & Co. 4,840 340,918
Number Market
of Shares Value
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Industrial Conglomerate - 3.90%
General Electric Company 2,180 $ 288,305
Oil &Gas - 3.45%
Kerr-McGhee Corp. 5,700 255,075
Retail - 7.71%
Best Buy Inc. * 5,600 304,500
Wal Mart Stores Inc. 5,460 265,834
Software /Computer - 10.42%
Adobe Systems Inc. 5,000 510,000
Microsoft Corp. * 2,915 260,528
Telecommunications - 3.41%
Western Wireless Corp. * 5,200 252,200
Utilities - 6.85%
Calpine Corp. * 5,540 506,910
Total Common Stocks
(Cost $5,585,984) 7,303,106
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Money Market - 1.43%
Firstar U.S. Money Market Fund
(Cost $105,956) 105,956
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Total Investments - 100.18%
(Cost $5,691,940) 7,409,062
Other Assets and Liabilities, Net - (0.18%) (13,112)
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Net Assets - 100% $7,395,950
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*Non-income producing security.
The accompanying notes are an integral part of these financial statements.
<PAGE>
SPARROW GROWTH FUND
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STATEMENT OF ASSETS AND LIABILITIES
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As of February 29, 2000 (Unaudited)
ASSETS:
Investments, at value (cost $5,691,940) ................. $ 7,409,062
Cash.................................................... 362
Receivables:
Interest ......................................... 566
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Total assets ............................................ 7,409,990
LIABILITIES:
Accrued management fees ................................ 14,040
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Total liabilities ....................................... 14,040
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NET ASSETS ................................................... $ 7,395,950
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Net assets consist of:
Paid-in capital ......................................... 6,244,682
Undistributed net investment income (loss)............... (90,201)
Net realized gain (loss) on investments ................. (475,654)
Net unrealized appreciation on investments .............. 1,717,123
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Net assets ................................................... $ 7,395,950
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Shares of capital stock
outstanding (no par value,
unlimited shares authorized)............................. 476,897
Shares:
Net asset value and offering and redemption price per share (based on net
assets of $7,395,950 and 476,897 shares of beneficial interest
outstanding).................................................. $15.51
Offering price per share (NAV/94.25%)......................... $16.46
The accompanying notes are an integral part of these financial statements.
<PAGE>
SPARROW GROWTH FUND
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STATEMENT OF OPERATIONS
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For the six months ended February 29, 2000 (Unaudited)
INVESTMENT INCOME:
Interest ................................................ $ 3,437
Dividends ............................................... 11,584
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Total investment income ............................ 15,021
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EXPENSES:
Management Expense ..................................... 77,285
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Total expenses ...................................... 77,285
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NET INVESTMENT LOSS ......................................... (62,264)
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REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized appreciation (depreciation) on investments.. (383,551)
Net change in unrealized
appreciation on investments ........................ 1,361,071
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Net gain on investments ................................. 977,520
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INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 915,256
==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
SPARROW GROWTH FUND
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STATEMENT OF CHANGES IN NET ASSETS
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For the six months ended February 29, 2000 (Unaudited)
<TABLE>
<S> <C> <C>
INCREASE IN NET ASSETS 2000(a) 1999(b)
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Operations:
Net investment (loss).................................... $ (62,264) $ (27,936)
Net realized appreciation (depreciation) on investments.. (383,551) (92,103)
Net change in unrealized appreciation on investments 1,361,071 356,051
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Increase in net assets from operations .................. 915,256 236,012
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Capital share transactions:
Proceeds from shares sold ............................... 1,605,509 5,115,416
Cost of shares repurchased............................... (443,872) (132,374)
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.........................Net increase in net assets from
capital share transactions ......................... 1,161,637 4,983,045
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.......................................................
TOTAL INCREASE IN NET ASSETS ................................. 2,076,893 5,219,057
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NET ASSETS:
Beginning of period ..................................... 5,319,057 100,000
End of period (including undistributed net investment loss
of $62,264 and $27,936, respectively)................. $ 7,395,950 $5,319,057
========= =========
OTHER INFORMATION:
Share transactions:
Sold .................................................... 110,231 396,883
Repurchased ............................................. (30,981) (9,246)
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NET INCREASE IN SHARES OUTSTANDING ........................... 79,250 387,637
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</TABLE>
(a) For the six months ended February 29, 2000
(b) For the Period October 4, 1998 (commencement of investment operations) to
August 31, 1999
The accompanying notes are an integral part of these financial statements.
<PAGE>
SPARROW GROWTH FUND
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FINANCIAL HIGHLIGHTS (Unaudited)
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<TABLE>
<S> <C> <C>
2000(a) 1999(b)
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PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period......................... $13.38 $ 10.00
Loss from investment operations:
Net investment income loss............................... (0.25) (0.13)
Net realized and unrealized
gain on investments................................. 2.38 3.51
---- ----
Total from investment operations.............................. 2.13 3.38
Less distributions:
Distributions from net
investment income .................................. 0.00 0.00
Distributions from net realized
gains on investments............................. 0.00 0.00
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Total distributions .......................................... 0.00 0.00
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Net asset value, end of period ............................... $ 15.51 $13.38
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TOTAL RETURN (d).............................................. 15.92% 33.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ............................... $7,395,950 $5,318,057
Ratio of expenses to average net assets (c).............. 2.50% 2.50%
Ratio of net investment income to average net assets (c). (2.01)% (1.03)%
Portfolio turnover ...................................... 65.52% 166.41%
</TABLE>
(a) For the six months ended February 29, 2000
(b) For the period October 4, 1998 (commencement of investment operations)to
August 31, 1999
(c) Annualized
(d) Not annualized
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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(Unaudited)
Note 1 - General
The Sparrow Growth Fund (the "Fund") was organized as a series of Sparrow Funds,
an Ohio business trust (the "Trust") on July 14, 1998. The investment adviser to
the Fund is Sparrow Capital Management Incorporated (the "Adviser"). The
investment objective is to provide shareholders with long term capital
appreciation.
Note 2 - Significant Accounting Policies
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements. These policies are in
conformity with generally accepted accounting principles.
A) Security Valuations
The value of an individual share in the Fund (net asset value) is calculated by
dividing the total value of the Fund's investments and other assets (including
accrued income), less any liabilities (including estimated accrued expenses), by
the number of shares outstanding, rounded to the nearest cent. Net asset value
per share is determined as of the close of regular trading on the floor of the
New York Stock Exchange (currently 4:00 p.m., Eastern time); on each day that
the exchange is open for business and any other day on which there is sufficient
trading in the Fund's securities to materially affect the net asset value. The
net asset value per share of the Fund will fluctuate. 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 by the Board of Trustees of the Trust.
B) Securities Transactions and Investment Income
Securities transactions are recorded on a trade date basis. The cost of
securities sold is determined using the first-in-first-out method. Interest
income is recorded on the accrual basis and dividend income is recorded on the
ex-dividend date.
C) Dividends and Distributions to Shareholders
The Fund intends to distribute substantially all of its net investment income as
dividends to its shareholders on an annual basis and intends to distribute its
net long-term capital gains and its net short-term capital gains at least once a
year.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cont.)
- --------------------------------------
(Unaudited)
C) Dividends and Distributions to Shareholders (cont.)
Income dividend and capital gain distributions are automatically reinvested in
additional shares at net asset value per share on the distribution date, unless
the shareholder has elected to receive payment in cash.
D) Federal Income Taxes
The Fund intends to qualify each year as a "Regulated Investment Company" under
the Internal Revenue Code of 1986, as amended. By so qualifying, the Fund will
not be subject to federal income taxes to the extent that it distributes
substantially all of its net investment income and any realized capital gains.
For federal income tax purposes, dividends paid by the Fund from ordinary income
are taxable to shareholders as ordinary income, but may be eligible in part for
the dividends received deductions for corporations. Pursuant to the Tax Reform
Act of 1986 (the "Tax Reform Act"), all distributions of net short-term capital
gains to individuals are taxed at the same rate as ordinary income. Net realized
gains or losses may differ for financial and tax reporting purposes for the Fund
primarily as a result of losses from wash sales which are not recognized for tax
purposes until the corresponding shares are sold.
E) Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 3 - Agreements and Other Transactions with Affiliates
The Fund retains Sparrow Capital Management Incorporated, (the "Adviser") 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 $100 million of core momentum growth stock assets under
management. 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 "Investment Objective and Strategies and
Risk Considerations" in the Fund's Prospectus). 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 of
non-interested person trustees and extraordinary expenses.
The Fund retains Unified Fund Services, Inc., (the "Administrator") to manage
the Fund's business affairs and provide the Fund with fund accounting and
administrative services, including all regulatory reporting and necessary office
equipment, personnel and facilities. The Fund also retains Unified Fund
Services, Inc. (the "Transfer Agent") to serve as transfer agent, dividend
paying agent and shareholder service agent. For its services as Administrator,
Unified Fund Services, Inc. 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. The Fund retains Unified Management
Corporation, (the "Distributor") to act as the principal
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cont.)
- --------------------------------------
(Unaudited)
Note 3 - Agreements and Other Transactions with Affiliates (cont.)
distributor of the Fund's shares. The services of the Administrator, Transfer
Agent and Distributor are operating expenses paid by the Adviser.
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Plan") 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. The Board of Trustees has currently authorized an
annual rate of 0.25%. 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.
Note 4- Investment Transactions
For the period ended February 29, 2000, the cost of purchases and proceeds from
sales, excluding short-term investments, were $5,158,995 and $4,012,092
respectively.
Note 5- Unrealized Appreciation (Depreciation)
At February 29, 2000, the composition of gross unrealized appreciation
(depreciation) of investment securities is as follows:
Appreciation Depreciation Net Appreciation
------------ ------------ ----------------
The Sparrow Growth Fund $1,993,121 ($275,999) $ 1,717,122
