UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number | 811-08897 |
Sparrow Funds
(Exact name of registrant as specified in charter)
11330 Olive Boulevard Suite 230 St. Louis, MO 63141
(Address of principal executive offices) | (Zip code) |
John Swhear
Unified Fund Services, Inc.
2960 N. Meridian St., Suite 300
Indianapolis, IN 46208
(Name and address of agent for service)
Registrant's telephone number, including area code: | 314-725-6161 |
Date of fiscal year end: | 8/31 |
Date of reporting period: | 8/31/07 |
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.

Annual Report
August 31, 2007
Fund Adviser:
Sparrow Capital Management, Inc.
11330 Olive Boulevard, Suite 230
St. Louis, Missouri 63141
Toll Free: (888) 727-3301
MANAGEMENT’S DISCUSSION & ANALYSIS
The Sparrow Growth Fund (Class A) had a total return of 16.77% for the twelve months ended August 31, 2007 compared to a total return of 15.13% for the Standard & Poor’s 500 Index (S&P 500). Our longer term results can be found on pages 2 to 4 of this report. During this period, the Fund held on average 40-45 stocks, and we remained close to fully invested throughout most of the period.
Over the past year, the Fund initiated new positions in the following stocks: China Life, AT&T, Western Union, Sadia, SunLife, Genesee & Wyoming, Canon, EON AG, BHP Billiton, Clarcor, General Electric, Middleby, Novo Nordisk, Church & Dwight, ABB Ltd, Heartland Payment Systems, Wimm-Bill-Dann Foods, and Central European Distributors.
The Fund eliminated the following stocks: Boyd Gaming, Harmon, Zale’s, Lifetime Brands, UCBH Holdings, Commerce Bancorp, Walgreen’s, General Dynamics, RC2 Corp, Ryland, Hershey’s, Florida Rock, Bank of America, World Acceptance Corp, and Cryptologic.
The net result of this turnover was to reduce the Fund’s exposure to the slowing housing market in the United States, as well as to eliminate positions in companies where we felt the fundamentals were deteriorating, or there was limited upside potential. We used the proceeds from these sales, as well as net inflows into the Fund, to add exposure to faster growing international markets and other positions that we felt were well positioned for future growth. We tended to concentrate our new positions in companies with improving fundamentals. Among some of the key factors we focused on were: improving operating margins, companies with the ability to raise prices, improving return on invested capital, and positive earnings revision trends.
We believe the positive relative performance of the Fund compared to the S&P 500 was primarily due to stock selection, rather than any factors related to sector weightings, as the Fund’s management team primarily spends its time on individual stock selection.
Key Contributors to Results:
A number of international stocks helped to contribute to the Fund’s performance over the past twelve months. The best performing stocks in the Fund were: China Life up 108%, Florida Rock up 78%, Volvo up 65%, Johnson Controls up 60%, Stericycle up 50%, Homex Development up 49%, Nike up 42%, Makita up 34% and Sadia up 34%. In all, the Fund held 26 stocks which were up in excess of 10% for the twelve months.
Key Detractors to Results:
The Fund had only seven stocks that declined more than 10% for the trailing 12 months, and four of the positions have been eliminated. Among the worst performers in the Fund were: Cryptologic down 25%, Western Union down 18%, World Acceptance Corp down 16%, Ryland down 12%, Walgreen’s down 11%, and Genesee & Wyoming down 11%.
As always, we appreciate your business and remain focused on taking care of our shareholders.
The Fund’s past performance does not guarantee future results. The views expressed are those of Sparrow Capital Management, Inc. as of August 31, 2007, and are not intended as a forecast or as investment recommendations. The S&P 500 Index is a widely recognized unmanaged index of equity prices and is representative of a broader market and range of securities than is found in the Fund’s portfolio. Individuals cannot invest directly in the Index, however, an individual can invest in ETFs or other investment vehicles that attempt to track the performance of a benchmark index. Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing.
The Fund’s prospectus contains this and other information about the Fund and may be obtained by calling 1-888-727-3301. Please read the prospectus carefully before investing. Information regarding the Fund’s holdings are subject to change at any time.
The Fund is distributed by Unified Financial Securities, Inc., Indianapolis, IN 46204, Member FINRA.
INVESTMENT RESULTS


*In compliance with SEC guidelines, these returns reflect the deduction of maximum sales charges and other recurring fees. The returns shown assume reinvestment of all capital gains and dividend distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The returns are shown for each of the required periods and reflect any changes in price per share over those periods. Class A shares are sold with a maximum initial sales charge of 5.75% or if exempt, a 1.00% Contingent Deferred Sales Charge (CDSC) if redeemed within 18 months of purchase. Class C shares are sold with no initial sales charge, but are subject to a CDSC of up to 2.00% if redeemed within the first two years of purchase and an annual 12b-1 fee of 1.00%. Effective September 15, 2006, the CDSC on Class C shares was lowered to 2.00%. Prior to September 15, 2006 the CDSC on Class C shares was 2.50%.
**The S&P 500 Index is a widely recognized unmanaged index of equity prices and is representative of a broader market and range of securities than is found in the Fund’s portfolio. The Index returns do not reflect the deduction of expenses, which have been deducted from the Fund’s returns. The Index returns assume reinvestment of all distributions and do not reflect the deduction of taxes and fees. Individuals cannot invest directly in the Index, however, an individual can invest in exchange-traded funds or other investment vehicles that attempt to track the performance of a benchmark index.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by calling 1-888-727-3301.

This graph shows the value of a hypothetical initial investment of $10,000 in the Sparrow Growth Fund, Class A shares and the S&P 500 Index on October 4, 1998 (inception date of the Fund, Class A shares) and held through August 31, 2007. The S&P 500 Index is a widely recognized unmanaged index of common stock prices. The Fund’s returns reflect the deduction of the maximum initial sales load and other recurring fees. The Index returns do not reflect expenses, which have been deducted from the Fund’s returns. These performance figures include the change in value of the stocks in the Index plus the reinvestment of dividends and are not annualized. The returns shown do not reflect deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment returns and principal values will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. THE FUND’S RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE OR PREDICT FUTURE RESULTS. Current performance may be lower or higher than the performance data quoted. For more information on the Sparrow Growth Fund, and to obtain performance data current to the most recent month-end, please call 1-888-727-3301 to request a prospectus. You should carefully consider the investment objectives, potential risks, management fees, and charges and expenses of the Fund before investing. The Fund’s prospectus contains this and other information about the Fund, and should be read carefully before investing.

This graph shows the value of a hypothetical initial investment of $10,000 in the Sparrow Growth Fund, Class C shares and the S&P 500 Index on November 9, 2000 (inception date of the Fund, Class C shares) and held through August 31, 2007. The S&P 500 Index is a widely recognized unmanaged index of common stock prices. The Index returns do not reflect expenses, which have been deducted from the Fund’s returns. These performance figures include the change in value of the stocks in the Index plus the reinvestment of dividends and are not annualized. The returns shown do not reflect deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment returns and principal values will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. THE FUND’S RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE OR PREDICT FUTURE RESULTS. Current performance may be lower or higher than the performance data quoted. For more information on the Sparrow Growth Fund, and to obtain performance data current to the most recent month-end, please call 1-888-727-3301 to request a prospectus. You should carefully consider the investment objectives, potential risks, management fees, and charges and expenses of the Fund before investing. The Fund’s prospectus contains this and other information about the Fund, and should be read carefully before investing.
FUND HOLDINGS – (Unaudited)

1 As a percent of net assets
2 Companies consist of market capitalizations less than $10 billion.
The Fund typically invests in a broad range of foreign and U.S. common stocks which Sparrow Capital Management Incorporated, the Fund’s adviser, believes have above-average prospects for appreciation. The Fund may invest in stocks of all market capitalization ranges based on the adviser’s assessment of the relative opportunities and risks of each category.
AVAILABILITY OF PORTFOLIO SCHEDULE - (Unaudited)
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available at the SEC’s website at www.sec.gov. The Fund’s Form N-Qs may be reviewed and copied at the Public Reference Room in Washington DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
ABOUT YOUR FUND’S EXPENSES - (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period, March 1, 2007, and held for the entire period through August 31, 2007.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Sparrow Growth Fund Class A | Beginning Account Value March 1, 2007 | Ending Account Value August 31, 2007 | Expenses Paid During Period* March 1, 2007 through August 31, 2007 |
Actual | $1,000.00 | $1,048.31 | $11.72 |
Hypothetical** | $1,000.00 | $1,013.77 | $11.52 |
* Expenses are equal to the Fund’s Class A annualized expense ratio of 2.27%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the partial year period). The expense ratio is calculated based on the number of days in the second half of the year and is slightly higher than the annualized ratio as are more days in the last six months compared to the first six months of the year. The Fund’s Class A total expense ratio is 2.25% for the entire fiscal year.
**Assumes a 5% return before expenses.
Sparrow Growth Fund Class C | Beginning Account Value March 1, 2007 | Ending Account Value August 31, 2007 | Expenses Paid During Period* March 1, 2007 through August 31, 2007 |
Actual | $1,000.00 | $1,044.95 | $14.42 |
Hypothetical | $1,000.00 | $1,011.11 | $14.18 |
* Expenses are equal to the Fund’s Class C annualized expense ratio of 2.80%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the partial year period). The expense ratio is calculated based on the number of days in the second half of the year and is slightly higher than the annualized ratio as there are more days in the last six months compared to the first six months of the year. The Fund’s Class C total expense ratio is 2.75% for the entire fiscal year.
**Assumes a 5% return before expenses.
Sparrow Growth Fund | | | | |
Schedule of Investments | | | | |
August 31, 2007 | | | | |
| | | | |
Common Stocks - 98.45% | | Shares | | Value |
| | | | |
Accident & Health Insurance - 2.15% | | | |
StanCorp Financial Group, Inc. | 6,400 | | $ 301,440 |
| | | | |
Agricultural Products - Livestock & Animal Specialties - 2.02% |
Sadia S.A. (a) | | 5,700 | | 283,575 |
| | | | |
Aircraft Engines & Engine Parts - 2.80% | | |
United Technologies Corp. | | 5,260 | | 392,554 |
| | | | |
Beverages - 2.04% | | | | |
PepsiCo, Inc. | | 4,200 | | 285,726 |
| | | | |
Book: Publishing or Publishing and Printing - 1.44% | |
McGraw-Hill Companies, Inc. | 4,000 | | 201,840 |
| | | | |
Commercial Banks - 1.91% | | | | |
Allied Irish Banks plc (AIB) (a) | 5,200 | | 267,124 |
| | | | |
Crude Petroleum & Natural Gas - 6.83% | | |
Chesapeake Energy Corp. | | 8,300 | | 267,758 |
Occidental Petroleum Corp. | | 6,600 | | 374,154 |
XTO Energy, Inc. | | 5,800 | | 315,288 |
| | | | 957,200 |
| | | | |
Dental Equipment & Supplies - 1.63% | | | |
DENTSPLY International, Inc. | 5,800 | | 228,404 |
| | | | |
Electric, Gas & Sanitary Services - 2.56% | | |
E.ON AG (a) | | 6,400 | | 358,272 |
| | | | |
Electronic & Other Electrical Equipment (No Computer Equipment) - 1.58% |
General Electric Co. | | 5,700 | | 221,559 |
| | | | |
Fire, Marine & Casualty Insurance - 2.17% | | |
United Fire & Casualty Co. | | 8,000 | | 303,920 |
| | | | |
Food & Kindred Products - 2.22% | | | |
Altria Group, Inc. | | 3,400 | | 235,994 |
Kraft Foods, Inc. - Class A | | 2,352 | | 75,405 |
| | | | 311,399 |
| | | | |
Footwear - 2.21% | | | | |
Wolverine World Wide, Inc. | | 11,800 | | 310,222 |
| | | | |
General Building Contractors - Residential Buildings - 2.36% |
Desarrolladora Homex S.A. de C.V. (a) (b) | 6,000 | | 330,600 |
| | | | |
General Industrial Machinery & Equipment - 2.57% | |
Illinois Tool Works, Inc. | | 6,200 | | 360,654 |
| | | | |
Hazardous Waste Management - 1.77% | | |
Stericycle, Inc. (b) | | 4,980 | | 248,502 |
| | | | |
*See accompanying notes which are an integral part of these financial statements. |
| | | | |
| | | | |
Sparrow Growth Fund | | | | |
Schedule of Investments - continued | | | |
August 31, 2007 | | | | |
| | | | |
Common Stocks - 98.45% - continued | Shares | | Value |
| | | | |
Life Insurance - 6.98% | | | | |
China Life Insurance Co. Ltd. (a) | 8,533 | | $ 622,312 |
Sun Life Financial, Inc. | | 7,400 | | 356,088 |
| | | | 978,400 |
| | | | |
Metal Mining - 2.70% | | | | |
BHP Billiton Ltd. (a) | | 6,000 | | 378,900 |
| | | | |
Metalworking Machinery & Equipment - 2.86% | | |
Makita Corp. (a) | | 10,400 | | 400,504 |
| | | | |
Motor Vehicle Parts & Accessories - 2.54% | | |
CLARCOR, Inc. | | 9,200 | | 356,224 |
| | | | |
Motor Vehicles & Passenger Car Bodies - 2.65% | |
Volvo AB (a) | | 21,500 | | 371,950 |
| | | | |
Petroleum Refining - 2.71% | | | | |
Royal Dutch Shell plc (a) | | 4,900 | | 379,015 |
| | | | |
Pharmaceutical Preparations - 1.68% | | | |
Novo Nordisk A/S (a) | | 2,100 | | 234,801 |
| | | | |
Photographic Equipment & Supplies - 2.41% | | |
CANON, Inc. (a) | | 5,900 | | 337,008 |
| | | | |
Public Building and Related Furniture - 1.13% | | |
Johnson Controls, Inc. | | 1,400 | | 158,340 |
| | | | |
Railroads, Line-Haul Operating - 2.31% | | |
Genesee & Wyoming, Inc. - Class A (b) | 11,800 | | 323,084 |
| | | | |
Refrigeration & Service Industry Machinery - 2.00% | |
Middleby Corp. (b) | | 3,800 | | 279,452 |
| | | | |
Retail - Building Materials, Hardware, Garden Supply - 2.13% |
Tractor Supply Co. (b) | | 6,200 | | 298,592 |
| | | | |
Retail - Department Stores - 2.34% | | | |
Sears Holdings Corp. (b) | | 2,286 | | 328,178 |
| | | | |
Retail - Miscellaneous Retail - 3.33% | | | |
First Cash Financial Services, Inc. (b) | 17,390 | | 372,494 |
Western Union Company | | 5,000 | | 94,150 |
| | | | 466,644 |
| | | | |
Rubber & Plastics Footware - 1.87% | | | |
NIKE, Inc. - Class B | | 4,640 | | 261,417 |
| | | | |
Services - Business Services - 1.36% | | | |
Heartland Payment Systems, Inc. | 6,400 | | 190,592 |
| | | | |
*See accompanying notes which are an integral part of these financial statements. |
| | | | |
Sparrow Growth Fund | | | | |
Schedule of Investments - continued | | | |
August 31, 2007 | | | | |
| | | | |
Common Stocks - 98.45% - continued | Shares | | Value |
| | | | |
Services - Consumer Credit Reporting, Collection Agencies - 2.46% |
Portfolio Recovery Associates, Inc. | 6,700 | | $ 344,112 |
| | | | |
Services - Management Consulting - 1.64% | | |
ABB Ltd. (a) | | 9,300 | | 229,338 |
| | | | |
Soap, Detergents, Cleaning Preparations, Perfumes, Cosmetics - 1.38% |
Church & Dwight Co., Inc. | | 4,300 | | 193,199 |
| | | | |
Sugar and Confectionary Products - 2.54% | | |
Wm. Wrigley Jr. Co. | | 6,100 | | 355,325 |
| | | | |
Telephone Communications - 6.31% | | | |
AT&T, Inc. | | 8,900 | | 354,843 |
China Mobile Ltd. (a) | | 7,800 | | 528,762 |
| | | | 883,605 |
| | | | |
Wholesale - Beer, Wine & Distilled Alcoholic Beverages - 0.81% |
Central European Distribution Corp. (b) | 2,600 | | 114,036 |
| | | | |
Wholesale - Groceries & Related Products - 4.05% | |
Sysco Corp. | | 9,950 | | 332,131 |
Wimm-Bill-Dann Foods (a) | | 2,300 | | 235,428 |
| | | | 567,559 |
| | | | |
TOTAL COMMON STOCKS (Cost $10,745,712) | | 13,793,266 |
| | | | |
Preferred Stock - 0.41% | | | | |
Chesapeake Energy Corp., 4.50% | 600 | | 56,850 |
| | | | |
TOTAL PREFERRED STOCK (Cost $56,808) | | 56,850 |
| | | | |
Money Market Securities - 1.12% | | | |
First American Government Obligations Fund - Class Y, 4.91% (c) | 156,421 | | 156,421 |
| | | | |
TOTAL MONEY MARKET (Cost $156,421) | | 156,421 |
| | | | |
| | | | |
TOTAL INVESTMENTS (Cost $10,958,941) - 99.98% | $14,006,537 |
| | | | |
Other assets less liabilities - 0.02% | | | 3,582 |
| | | | |
TOTAL NET ASSETS - 100.00% | | | $14,010,119 |
| | | | |
| | | | |
(a) American Depositary Receipt. | | | |
(b) Non-income producing. | | | | |
(c) Variable rate security; the money market rate shown represents the rate at August 31, 2007. |
*See accompanying notes which are an integral part of these financial statements.
Sparrow Growth Fund | | |
Statement of Assets and Liabilities | |
August 31, 2007 | | |
| | |
Assets | | |
Investments in securities, at market value (cost $10,958,941) | $14,006,537 |
Dividends receivable | | 29,000 |
Interest receivable | | 1,119 |
Total assets | | 14,036,656 |
| | |
Liabilities | | |
Accrued advisory fees | | 20,173 |
Accrued 12b-1 fees | | 6,364 |
Total liabilities | | 26,537 |
| | |
Net Assets | | $14,010,119 |
| | |
Net Assets consist of: | | |
Paid in capital | | $11,265,203 |
Accumulated net realized (loss) on investments | (302,680) |
Net unrealized appreciation on investments | 3,047,596 |
| | |
Net Asset Value | | $14,010,119 |
| | |
Class A: | | |
| | |
Net Assets | | $12,559,859 |
| | |
Shares outstanding (unlimited number of shares authorized) | 751,765 |
| | |
Net asset value | | $ 16.71 |
| | |
Offering price per share ($16.71 / 94.25%) | $ 17.73 |
| | |
Redemption price per share ($16.71 * 99%) (a) | $ 16.54 |
| | |
Class C: | | |
| | |
Net Assets | | $ 1,450,260 |
| | |
Shares outstanding (unlimited number of shares authorized) | 90,393 |
| | |
Net asset value and offering price per share | $ 16.04 |
| | |
Redemption price per share ($16.04 * 98%) (b) | $ 15.72 |
| | |
| | |
(a) The Fund charges a 1.00% contingent deferred sales charge ("CDSC") on certain Class A shares |
purchased without an initial sales charge and redeemed within 18 months of purchase (See Note 2). |
(b) Effective September 15, 2006, the Fund charges a 2.00% CDSC on Class C shares redeemed within two |
years of purchase. | | |
*See accompanying notes which are an integral part of these financial statements.
Sparrow Growth Fund | |
Statement of Operations | |
For the Fiscal Year ended August 31, 2007 | |
| | |
Investment Income | |
Dividend income (net of foreign taxes on dividends of $7,168) | $ 203,552 |
Interest income | 12,110 |
Total Income | 215,662 |
| | |
Expenses | | |
Investment advisor fee | 217,359 |
12b-1 fee (Class A - $55,977; Class C - $12,252) | 68,229 |
Total Expenses | 285,588 |
Net Investment (Loss) | (69,926) |
| | |
| | |
Realized & Unrealized Gain |
Net realized gain on investment securities | 395,389 |
Change in unrealized appreciation (depreciation) on investment securities | 1,435,957 |
Net realized and unrealized gain on investment securities | 1,831,346 |
Net increase in net assets resulting from operations | $ 1,761,420 |
*See accompanying notes which are an integral part of these financial statements.
Sparrow Growth Fund | | | | |
Statements of Changes In Net Assets | | |
| | | | | |
| | | Year | | Year |
| | | ended | | ended |
Increase (Decrease) in Net Assets | August 31, 2007 | | August 31, 2006 |
Operations | | | | |
Net investment (loss) | | $ (69,926) | | $ (58,982) |
Net realized gain on investment securities | 395,389 | | 502,062 |
Change in unrealized appreciation (depreciation) | 1,435,957 | | 212,955 |
Net increase in net assets resulting from operations | 1,761,420 | | 656,035 |
| | | | | |
Capital Share Transactions | | | |
Proceeds from shares sold | | | |
Class A | | 3,892,945 | | 1,664,613 |
Class C | | 402,780 | | 439,310 |
Amount paid for shares repurchased | | | | |
Class A | | (978,889) | | (1,356,358) |
Class C | | (37,833) | | (11,522) |
Net (decrease) in net assets resulting | | |
from share transactions | 3,279,003 | | 736,043 |
Total increase in Net Assets | 5,040,423 | | 1,392,078 |
| | | | | |
Net Assets | | | | |
Beginning of year | | 8,969,696 | | 7,577,618 |
| | | | | |
End of year | | $14,010,119 | | $ 8,969,696 |
| | | | | |
Accumulated undistributed net investment income | |
included in net assets at end of period | $ - | | $ - |
| | | | | |
Capital Share Transactions - A Shares | | |
Shares sold | | 250,109 | | 117,178 |
Shares repurchased | | (60,656) | | (98,305) |
| | | | | |
Net increase from capital share transactions | 189,453 | | 18,873 |
| | | | | |
Capital Share Transactions - C Shares | | |
Shares sold | | 26,012 | | 31,823 |
Shares repurchased | | (2,613) | | (897) |
| | | | | |
Net increase from capital share transactions | 23,399 | | 30,926 |
*See accompanying notes which are an integral part of these financial statements.
Sparrow Growth Fund - Class A | | | | | | | | |
Financial Highlights | | | | | | | | | |
(For a share outstanding throughout the period) | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | Year | | Year | | Year | | Year | | Year |
| | ended | | ended | | ended | | ended | | ended |
| | August | | August | | August | | August | | August |
| | 31, 2007 | | 31, 2006 | | 31, 2005 | | 31, 2004 | | 31, 2003 |
| | | | | | | | | | |
Selected Per Share Data | | | | | | | | | |
Net asset value, beginning of period | $ 14.31 | | $ 13.10 | | $ 11.64 | | $ 10.97 | | $ 10.46 |
| | | | | | | | | | |
Income from investment operations | | | | | | | | |
Net investment (loss) | (0.08) | | (0.09) | | (0.11) | | (0.14) | | (0.11) (a) |
Net realized and unrealized gain (loss) | 2.48 | | 1.30 | | 1.57 | | 0.81 | | 0.62 |
Total from investment operations | 2.40 | | 1.21 | | 1.46 | | 0.67 | | 0.51 |
| | | | | | | | | | |
Net asset value, end of period | $ 16.71 | | $ 14.31 | | $ 13.10 | | $ 11.64 | | $ 10.97 |
| | | | | | | | | | |
Total Return (b)(c) | 16.77% | | 9.24% | | 12.54% | | 6.11% | | 4.88% |
| | | | | | | | | | |
Ratios and Supplemental Data | | | | | | | | |
Net assets, end of period (000) | $ 12,560 | | $ 8,045 | | $ 7,119 | | $ 6,690 | | $ 5,931 |
Ratio of expenses to average net assets | 2.25% | | 2.25% | | 2.25% | | 2.25% | | 2.29% |
| | | | | | | | |
Ratio of net investment income to average net assets | (0.52)% | | (0.71)% | | (0.87)% | | (2.00)% | | (1.12)% |
Portfolio turnover rate | 36.36% | | 37.87% | | 49.94% | | 78.12% | | 164.65% |
| | | | | | | | | | |
| | | | | | | | | | |
|
(a) Net investment income (loss) per share is based on average shares outstanding during the period. |
(b) Total return calculation does not reflect load. |
(c) Total return in the above table represents the rate that the investor would have earned on an investment in the Fund, assuming reinvestment of dividends. |
*See accompanying notes which are an integral part of these financial statements.
Sparrow Growth Fund - Class C | | | | | | | | |
Financial Highlights | | | | | | | | | |
(For a share outstanding throughout the period) | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | Year | | Year | | Year | | Year | | Year |
| | ended | | ended | | ended | | ended | | ended |
| | August | | August | | August | | August | | August |
| | 31, 2007 | | 31, 2006 | | 31, 2005 | | 31, 2004 | | 31, 2003 |
| | | | | | | | | | |
Selected Per Share Data | | | | | | | | | |
Net asset value, beginning of period | $ 13.80 | | $ 12.72 | | $ 11.35 | | $ 10.78 | | $ 10.30 |
| | | | | | | | | | |
Income from investment operations | | | | | | | | |
Net investment (loss) | (0.14) | | (0.09) | | (0.11) | | (0.13) | | (0.20) (a) |
Net realized and unrealized gain (loss) | 2.38 | | 1.17 | | 1.48 | | 0.70 | | 0.68 |
Total from investment operations | 2.24 | | 1.08 | | 1.37 | | 0.57 | | 0.48 |
| | | | | | | | | | |
Net asset value, end of period | $ 16.04 | | $ 13.80 | | $ 12.72 | | $ 11.35 | | $ 10.78 |
| | | | | | | | | | |
Total Return (b)(c) | 16.23% | | 8.49% | | 12.07% | | 5.29% | | 4.66% |
| | | | | | | | | | |
Ratios and Supplemental Data | | | | | | | | |
Net assets, end of period (000) | $ 1,450 | | $ 925 | | $ 459 | | $ 227 | | $ 202 |
Ratio of expenses to average net assets | 2.75% | | 2.75% | | 2.74% | | 2.75% | | 2.72% |
Ratio of net investment income to average net assets | (1.00)% | | (1.21)% | | (1.36)% | | (2.00)% | | (2.11)% |
Portfolio turnover rate | 36.36% | | 37.87% | | 49.94% | | 78.12% | | 164.65% |
| | | | | | | | | | |
| | | | | | | | | | |
(a) Net investment income (loss) per share is based on average shares outstanding during the period. | | |
(b) Total return calculation does not reflect load. | | | | | | |
(c) Total return in the above table represents the rate that the investor would have earned on an investment in the Fund, assuming reinvestment of dividends. | | | | |
*See accompanying notes which are an integral part of these financial statements.
Sparrow Growth Fund
Notes to the Financial Statements
August 31, 2007
The Sparrow Growth Fund (the “Fund”) was organized as a series of Sparrow Funds (the “Trust”) on July 14, 1998 and commenced operations on October 4, 1998. The Trust is an open-end diversified investment company established under the laws of Ohio by an Agreement and Declaration of Trust dated July 14, 1998 (the “Trust Agreement”). The Fund’s investment objective is to provide long-term capital appreciation. The Trust Agreement permits the Board of Trustees (the “Board”) to issue an unlimited number of shares of beneficial interest of separate series. The Board has authorized two classes of shares: Class A shares and Class C shares. Each class is subject to different expenses and a different sales charge structure. The investment adviser to the Fund is Sparrow Capital Management, Inc. (the “Adviser”).
NOTE 2. | SIGNIFICANT ACCOUNTING POLICIES |
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles.
Securities Valuations - Equity securities are valued by using market quotations furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market value of such securities. Securities that are traded on any stock exchange are valued by the pricing service at the last quoted sale price. Lacking a last sale price, an exchange traded security is valued by the pricing service at its last bid price. Securities traded in the NASDAQ over-the-counter market are valued by the pricing service at the NASDAQ Official Closing Price. The Fund’s assets are generally valued at their market value. If market prices are not available or, in the Adviser’s opinion, market prices do not reflect fair value, or if an event occurs after the close of trading, but before the Fund’s NAV calculation that materially affects fair value, the Adviser may provide a fair value of a portfolio security according to policies approved by the Fund’s Board of Trustees. For example, if trading in a particular stock is halted and does not resume before the Fund calculates its NAV, the Adviser may need to determine a fair value for the security using the Fund’s pricing guidelines.
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. If the Adviser decides that a price provided by the pricing services does not accurately reflect the fair market value of the securities, 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 in conformity with guidelines adopted by and subject to review of the Board. 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 a fair value.
Federal Income Taxes- The Fund makes no provision for federal income tax. The Fund intends to continue to qualify each year as a “regulated investment company” under subchapter M of the Internal Revenue Code of 1986, as amended, by distributing substantially all of its net investment income and net realized capital gains. If the required amount of net investment income is not distributed, the Fund could incur a tax expense.
Security Transactions and Related Income - The Fund follows industry practice and records security transactions on the trade date. The specific identification method is used for determining gains or losses for financial statement and income tax purposes. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Discounts and premiums on securities purchased are amortized or accreted using the effective interest method. Withholding taxes on foreign dividends have been provided for in accordance with the Fund’s understanding of the applicable country’s tax rules and rates.
Sparrow Growth Fund
Notes to the Financial Statements
August 31, 2007 - continued
NOTE 2. | SIGNIFICANT ACCOUNTING POLICIES - continued |
Dividends and Distributions - The Fund typically distributes to its shareholders as dividends substantially all of its net investment income and taxable capital gains at least annually. These distributions, which are recorded on the ex-dividend date, are automatically reinvested in the Fund unless shareholders request cash distributions on their application or through a written request. The treatment for financial reporting purposes of distributions made to shareholders during the year from net investment income or net realized capital gains may differ from their ultimate treatment for federal income tax purposes. These differences are caused primarily by differences in the timing of the recognition of certain components of income, expense or realized capital gain for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of the net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications will have no effect on net assets, results of operations or net asset values per share of the Fund. As of August 31, 2007, net investment loss of $69,926 was reclassed to paid-in capital.
Sales Charges – With respect to Class A Shares, there is a 5.75% maximum initial sales charge, except on purchases of $1 million or more or purchases by qualified retirement plans with at least 200 eligible employees; however, those shares exempted from the initial sales charge will be subject to a contingent deferred sales charge (“CDSC”) of 1%, based on the lower of the shares’ cost or current net asset value (“NAV”), if the shares are redeemed within eighteen months of purchase. With respect to Class C Shares, there is no initial sales charge. However, effective as of September 15, 2006, Class C Shares are subject to a CDSC of 2.00% based on the lower of the shares’ cost or current NAV, if the shares are redeemed within two years of purchase. 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. Prior to September 15, 2006, the CDSC on Class C Shares was 2.50%.
Allocation of Income and Expenses, Realized and Unrealized Gains and Losses – Income, realized gains and losses, unrealized appreciation and depreciation, and Fund-wide expenses are allocated to each class based on the net assets of that class in relation to the net assets of the Fund (e.g., the "relative net assets" method).
Accounting for Uncertainty in Income Taxes - In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 – Accounting for Uncertainty in Income Taxes that requires the tax effects of certain tax positions to be recognized. These tax positions must meet a “more likely than not” standard that, based on their technical merits, have a more than 50 percent likelihood of being sustained upon examination. FASB Interpretation No. 48 is effective for fiscal periods beginning after December 15, 2006. At adoption, the financial statements must be adjusted to reflect only those tax positions that are more likely than not of being sustained. Management of the Fund is currently evaluating the impact that FASB Interpretation No. 48 will have on the Fund’s financial statements.
Fair Value Measurements - In September 2006, FASB issued Statement on Financial Accounting Standards (SFAS) No. 157 “Fair Value Measurements.” This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosure about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of August 31, 2007, the Fund does not believe that the adoption of SFAS No. 157 will impact the amounts reported in the financial statements, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements reported on the statement of changes in net assets for a fiscal period.
NOTE 3. | AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES |
The Fund retains Sparrow Capital Management, Inc. to manage the Fund’s investments. The President of the Adviser is also a trustee of the Fund.
Sparrow Growth Fund
Notes to the Financial Statements
August 31, 2007 - continued
NOTE 3. | AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES - continued |
Under the terms of the management agreement (the “Agreement”), the Adviser manages the Fund’s investments and pays all of the Fund’s operating expenses, except brokerage fees and commissions, taxes, borrowing costs (such as interest and dividend expenses on securities sold short), Rule 12b-1 distribution expenses, 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. In addition, as required under the Agreement, the Adviser paid fees owed to Trustees who were not “interested persons” of the Trust (as the term is defined under the Investment Company Act of 1940) of $3,000 during the fiscal year ended August 31, 2007. 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 Class A and Class C shares. 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, 2007, the Adviser received fees of $217,359 from the Fund. As of August 31, 2007, the Adviser was owed $20,173 by the Fund.
The Fund retains Unified Fund Services, Inc. (“Unified”) to manage the Fund’s business affairs and provide the Fund with administrative, transfer agency, and fund accounting services, including all regulatory reporting and necessary office equipment, personnel and facilities. Unified Financial Securities, Inc. (the “Distributor”) acts as the principal distributor of the Fund’s shares. The services of the administrator, transfer agent, fund accountant, and Distributor are operating expenses paid by the Adviser.
Each class has adopted a Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 (each “Plan”) under which each class is authorized to incur distribution expenses at a maximum annual rate of 0.50% of the average daily net assets for Class A and 1.00% of the average daily net assets for Class C, including a 0.25% shareholder services fee only for Class C. The expenses may include, but are not limited to, the following: (a) payments, including incentive compensation, to securities dealers or other financial intermediaries, financial institutions, investment advisers and others that are engaged in the sale of shares, or that may be advising shareholders of the Trust regarding the purchase, sale or retention of shares; (b) expenses of maintaining personnel (including personnel of organizations with which the Trust has entered into agreements related to the Plans) who engage in or support distribution of 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 the Plans. Each Plan is designed to promote the sale of shares of the Fund. For the fiscal year ended August 31, 2007, Class A incurred 12b-1 expenses of $55,977 and Class C incurred 12b-1 expenses of $12,252, all of which was paid to the Adviser. As of August 31, 2007, the Adviser was owed $6,364 in 12b-1 fees.
NOTE 4. | INVESTMENT TRANSACTIONS |
For the fiscal year ended August 31, 2007, purchases and sales of investment securities, other than short-term investments and short-term U.S. government obligations, were as follows:

Sparrow Growth Fund
Notes to the Financial Statements
August 31, 2007 - continued
NOTE 4. | INVESTMENT TRANSACTIONS - continued |
As of August 31, 2007, the net unrealized appreciation of investments for tax purposes was as follows:

At August 31-, 2007, the aggregate cost of securities for federal income tax purposes was $10,958,941.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
NOTE 6. | BENEFICIAL OWNERSHIP |
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund (or class) creates a presumption of control of the fund (or class), under Section 2(a)(9) of the Investment Company Act of 1940. As of August 31, 2007, no person beneficially owned 25% or more of Class A shares of the Fund. A.G. Edwards owned, for the benefit of its customers, 38.22% of Class C shares of the Fund as of August 31, 2007. As a result, A.G. Edwards may be deemed to control Class C shares.
NOTE 7. | RELATED PARTY TRANSACTIONS |
The Adviser, Distributor and Sun Security Bank (the “Bank”) have entered into a tri-party financing agreement pursuant to which the Adviser has established an escrow account with the Bank to fund the up-front commissions due to qualifying broker-dealers selling Class C shares of the Fund. The agreement allows the Distributor to pay any such commissions due out of the Adviser’s escrow account held at the Bank. In turn, the Fund reimburses the Adviser for such payments in the form of Rule 12b-1 fees paid out during the initial year of investment in the Fund. For the fiscal year ended August 31, 2007, no up-front commissions were paid by the Distributor to qualifying broker-dealers out of the escrow account.
NOTE 8. | CAPITAL LOSS CARRYFORWARDS |
At August 31, 2007, the Fund has capital loss carryforwards of $302,680, which are available for offset against future taxable net capital gains. The loss carryforwards expire as follows:

To the extent that these carryforwards are used to offset future realized capital gains, it is probable that the amount, which is offset, will not be distributed.
Sparrow Growth Fund
Notes to the Financial Statements
August 31, 2007 - continued
NOTE 9. | DISTRIBUTION TO SHAREHOLDERS |
There were no capital gain or income distributions for the fiscal years ended 2006 and 2007.
As of August 31, 2007, the components of distributable earnings (accumulated losses) on a tax basis were as follows:

TRUSTEES & OFFICERS OF THE TRUST - (Unaudited)
Name, Address*, and Age | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee |
Gerald R. Sparrow** Age: 48 | Trustee, President , Secretary, Treasurer | Indefinite Term; Since inception. | Director and President of Sparrow Capital Management, Inc.; Former President of Buford Dickson Harper Sparrow, an advisory company from 1995 to March 2004; General partner of Sparrow Fund L.P., an advisory company. | 1 | None |
Suzanne L. Brake*** Age: 26 | Chief Compliance Officer | Indefinite; Since October, 2005 | Chief Compliance Officer of the Trust and Sparrow Capital Management, Inc. since October 2005; Student, St. Louis University, 2001 to 2005. | 0 | None |
* Address if each Officer is 11330 Olive Boulevard, Suite 230, St. Louis, MO 63141
** Mr. Sparrow is an “interested” person because he is the president of the Adviser.
*** Ms. Brake is an “interested” person because she is employed by the Adviser.
The following table provides information regarding each Trustee who is not an “interested person” of the Trust, as defined in the Investment Company Act of 1940.
Name, Address*, and Age | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee |
Richard N. Priest Age: 76 | Independent Trustee | Indefinite Term; since 2003 | Vice President (Retired) of the New York Stock Exchange | 1 | South Side Day Nursery; Missouri Bar Association Advisory Committee |
Donald D. Woodruff Age: 51 | Independent Trustee | Indefinite Term; Since inception. | President of Robinson, Inc. a retail (sales of hearing aids) company from June 1992 through present. | 1 | None |
* Address if each Trustee is 11330 Olive Boulevard, Suite 230, St. Louis, MO 63141
Trustee & Officer Remuneration: Under the Agreement, the Adviser is obligated to pay most if the Fund’s operating expenses. As required under the Agreement, the Adviser pays each independent trustee $250 per board meeting. The board has determined that such nominal fees from the Adviser do not affect such trustees' independence. The officers do not receive any compensation from the Trust.
Additional information about the trustees is available in the Fund's Statement of Additional Information which is available, without charge, upon request by calling (888) 727-3301.
PROXY VOTING
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted those proxies during the most recent 12-month period ended June 30 are available without charge, upon request: (1) by calling the Fund at (888) 727-3301; and (2) on the SEC’s website at www.sec.gov.
TRUSTEES |
Gerald R. Sparrow |
Richard N. Priest |
Donald D. Woodruff |
Gerald R. Sparrow, President, Secretary and Treasurer
Suzanne L. Brake, Chief Compliance Officer |
Sparrow Capital Management, Inc.
11330 Olive Blvd, Suite 230
St. Louis, MO 63141
DISTRIBUTOR |
Unified Financial Securities, Inc. |
2960 N. Meridian St, Suite 300
Indianapolis, IN 46208
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Cohen Fund Audit Services, Ltd.
800 Westpoint Pkwy, Suite 1100
Westlake, OH 44145
LEGAL COUNSEL
Thompson Coburn, LLP
One US Bank Plaza
St. Louis, MO 63101
CUSTODIAN
U.S. Bank, N.A.
425 Walnut St.
Cincinnati, OH 45202
ADMINISTRATOR, TRANSFER AGENT
AND FUND ACCOUNTANT
Unified Fund Services, Inc.
2960 N. Meridian St, Suite 300
Indianapolis, IN 46208
This report is intended only for the information of shareholders or those who have received the Fund’s prospectus which contains information about its management fee and expenses. Please read the prospectus carefully before investing.
Distributed by Unified Financial Securities, Inc. Member FINRA/SIPC
Item 2. Code of Ethics.
(a) As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.
(b) For purposes of this item, “code of ethics” means written standards that are reasonably designed to deter wrongdoing and to promote:
(1) | Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
(2) | Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant; |
(3) | Compliance with applicable governmental laws, rules, and regulations; |
(4) | The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and |
(5) | Accountability for adherence to the code. |
(c) Amendments:
During the period covered by the report, there have not been any amendments to the provisions of the Funds’ code of ethics, but the Advisors have adopted a new Code of Ethics. We will provide it to any person who requests it, free of charge pursuant to Item 2 (f)(3).
(d) Waivers:
During the period covered by the report, the registrant has not granted any express or implicit waivers from the provisions of the code of ethics.
(e) Not Applicable
(f) A copy of the Code of Ethics may be provided, without charge, upon request. You may call toll-free (888) 727-3301 to request a copy of the Code of Ethics.
Item 3. Audit Committee Financial Expert.
(a) The registrant’s Board of Trustees has determined that the registrant does not have an audit committee financial expert. The Board of Trustees has determined that, although none of its members meet the technical definition of an audit committee financial expert, the Board of Trustees has sufficient financial expertise to adequately perform its duties without the addition of a qualified expert.
Item 4. Principal Accountant Fees and Services.
FY 2007 $ 13,250
FY 2006 $ 13,240
Registrant
FY 2007 N/A
FY 2006 N/A
Nature of the fees:
Registrant
FY 2007 $1,800
FY 2006 $1,700
Nature of the fees: Review of the 1120-RICs & Excise Returns
Registrant
FY 2007 $0
FY 2006 $0
Nature of the fees:
(e) | (1) Audit Committee’s Pre-Approval Policies |
The Audit Committee Charter requires the Audit Committee to be responsible for the selection, retention or termination of auditors and, in connection therewith, to (i) evaluate the proposed fees and other compensation, if any, to be paid to the auditors, (ii) evaluate the independence of the auditors, (iii) pre-approve all audit services and, when appropriate, any non-audit services provided by the independent auditors to the Trust, (iv) pre-approve, when appropriate, any non-audit services provided by the independent auditors to the Trust's investment adviser, or any entity controlling, controlled by, or under common control with the investment adviser and that provides ongoing services to the Trust if the engagement relates directly to the operations and financial reporting of the Trust, and (v) receive the auditors’ specific representations as to their independence;
| (2) | Percentages of Services Approved by the Audit Committee |
Registrant
Audit-Related Fees: 0%
Tax Fees: 0%
All Other Fees: 0%
(f) | During the audit of registrant's financial statements for the most recent fiscal year, less than 50 percent of the hours expended on the principal accountant's engagement were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. |
(g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant:
Registrant
FY 2007 $0
FY 2006 $0
(h) Not applicable. The auditor performed no services for the registrant’s investment adviser or any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant.
Item 5. Audit Committee of Listed Companies. NOT APPLICABLE
Item 6. Schedule of Investments. NOT APPLICABLE – schedule filed with Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. NOT APPLICABLE – applies to closed-end funds only
Item 8. Portfolio Managers of Closed-End Management Investment Companies. NOT APPLICABLE – applies to closed-end funds only.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. NOT APPLICABLE – applies to closed-end funds only
Item 10. Submission of Matters to a Vote of Security Holders. NOT APPLICABLE
The registrant has not adopted procedures by which shareholders may recommend nominees to the registrant's board of trustees.
Item 11. Controls and Procedures.
(a) Based on an evaluation of the registrant’s disclosure controls and procedures as of October 31, 2007, the disclosure controls and procedures are reasonably designed to ensure that the information required in filings on Forms N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no significant changes in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Code is filed herewith
(a)(2) Certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 and required by Rule 30a-2under the Investment Company Act of 1940 are filed herewith.
(a)(3) Not Applicable – there were no written solicitations to purchase securities under Rule 23c-1 during the period
(b) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Sparrow Funds
By
* /s/ Gerald Sparrow__________
Gerald Sparrow, President
Date 10/31/2007 _____________
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By
* /s/ Gerald Sparrow
Gerald Sparrow, President and Treasurer
Date 10/31/2007