THE SPARROW GROWTH FUND
CLASS C PLAN OF DISTRIBUTION
PURSUANT TO RULE 12b-1
ADOPTED AUGUST 30, 2000
WHEREAS, The Sparrow Funds, an Ohio business trust (the "Trust"), engages
in business as an open-end management investment company and is registered as
such under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest without par value (the "Shares"), which may be divided into
one or more series of Shares; and
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Qualified Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Section 36(a) and (b) of the 1940 Act, that there is a
reasonable likelihood that this Plan will benefit the Sparrow Growth Fund (the
"Fund") and the Class C shareholders of the Fund, have approved this Plan by
votes cast in person at a meeting called for the purpose of voting hereon and on
any agreements related hereto;
NOW THEREFORE, the Trust hereby adopts this Plan for the Class C Shares of
the Fund, in accordance with Rule 12b-1 under the 1940 Act, on the following
terms and conditions:
1. Distribution Activities. Subject to the supervision of the Trustees
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of the Trust, the Trust may, directly or indirectly, engage in any
activities related to the distribution of Class C Shares of the Fund,
which activities may include, but are not limited to, the following:
(a) payments, including incentive compensation, to securities dealers
or other financial intermediaries, financial institutions, investment
advisors and others that are engaged in the sale of Class C Shares, or
that may be advising shareholders of the Trust regarding the purchase,
sale or retention of Class C Shares; (b) expenses of maintaining
personnel (including personnel of organizations with which the Trust
has entered into agreements related to this Plan) who engage in or
support distribution of Class C Shares; (c) 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; (d) costs of formulating and implementing
marketing and promotional activities, including, but not limited to,
sales seminars, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (e) costs of
preparing, printing and distributing sales literature; (f) costs of
obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Trust may, from time to
time, deem advisable; and (g) costs of implementing and operating this
Plan. The Trust is authorized to engage in the activities listed
above, and in any other activities related to the distribution of
Class C Shares, either directly or through other persons with which
the Trust has entered into agreements related to this Plan.
2. Annual Fee. The Fund will pay the Fund's investment adviser ("the
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Adviser") an annual fee for the Adviser's services in connection with
the sales and promotion of the Fund, including its expenses in
connection therewith (collectively, "Distribution Expenses"). The
annual fee paid to the Adviser under this Plan will be calculated
daily and paid monthly by the Fund on the first day of each month at
an annual rate of 0.75% of the average daily net assets of the Class C
shares of the Fund. Payments received by the Adviser pursuant to this
Plan are in addition to fees paid by the Fund pursuant to the
Management Agreement.
3. Service Fees. In addition to the payments provided for in Section 2
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and in order to further enhance the distribution of the Fund's Class C
Shares, the Fund shall pay the Adviser a rate of 0.25% of the average
daily net assets of the Class C Shares of the Fund for payments made
to securities dealers or other financial intermediaries, financial
institutions, investment advisors and others that (a) hold Class C
Shares for shareholders in omnibus accounts or as shareholders of
record or provide shareholder support or administrative services to
the Fund and its shareholders or (b) render shareholder support
services not otherwise provided by the Trust's transfer agent,
including, but not limited to, allocated overhead, office space and
equipment, telephone facilities and expenses, answering routine
inquiries regarding the Trust, processing shareholder transactions,
and providing such other shareholder services as the Trust may
reasonably request. If the NASD adopts a definition of "service fees"
for purposes of Section 26(d) of the Rules of Fair Practice of the
NASD (or any successor to such rule) that differs from the definition
of service fees hereunder, the definition of service fees hereunder
shall be automatically amended, without further action of the parties,
to conform to such NASD definition.
4. Term and Termination.
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(a) This Plan shall become effective upon the first issuance of
Class C shares.
(b) Unless terminated as herein provided, this Plan shall
continue in effect for one year from the effective date and shall
continue in effect for successive periods of one year thereafter,
but only so long as each such continuance is specifically
approved by votes of a majority of both (i) the Trustees of the
Trust and (ii) the Qualified Trustees, cast in person at a
meeting called for the purpose of voting on such approval.
(c) This Plan may be terminated at any time by the vote of a
majority of the Rule 12b-1 Trustees or by vote of a majority of
the outstanding voting securities (as defined in the 1940 Act) of
the Class C Shares of the Fund. If this Plan is terminated, the
Fund will not be required to make any payments for expenses
incurred after the date of termination.
5. Amendments. All material amendments to this Plan must be approved
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in the manner provided for annual renewal of this Plan in Section 4(b)
hereof. In addition, this Plan may not be amended to increase
materially the amount of expenditures provided for in Sections 2 and 3
hereof unless such amendment is approved by a vote of the majority of
the outstanding voting securities of the Class C Shares of the Fund
(as defined in the 1940 Act).
6. Selection and Nomination of Trustees. While this Plan is in effect,
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the selection and nomination of Trustees who are not interested
persons (as defined in the 1940 Act) of the Trust shall be committed
to the discretion of the Trustees who are not interested persons of
the Trust.
7. Quarterly Reports. The Treasurer of the Trust shall provide to the
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Trustees and the Trustees shall review, at least quarterly, a written
report of the amounts expended pursuant to this Plan and any related
agreement and the purposes for which such expenditures were made.
8. Recordkeeping. The Trust shall preserve copies of this Plan and any
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related agreement and all reports made pursuant to Section 7 hereof,
for a period of not less than six years from the date of this Plan,
the agreements or such reports, as the case may be, the first two
years in an easily accessible place.
9. Limitation of Liability. A copy of the Agreement and Declaration of
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Trust of the Trust is on file with the Secretary of the State of Ohio
and notice is hereby given that this Plan is executed on behalf of the
Trustees of the Trust as trustees and not individually and that the
obligations of this instrument are not binding upon the Trustees, the
shareholders of the Trust individually or the assets or property of
any other series of the Trust, but are binding only upon the assets
and property of the Fund.
