BRAZOS MUTUAL FUNDS
OCTOBER 2, 2000
SUPPLEMENT TO
PROSPECTUS DATED MARCH 29, 2000
FOR
CLASS Y SHARES OF BRAZOS MICRO CAP GROWTH PORTFOLIO
CLASS Y AND CLASS A SHARES OF BRAZOS SMALL CAP GROWTH PORTFOLIO
CLASS Y AND CLASS A SHARES OF BRAZOS MID CAP GROWTH PORTFOLIO
CLASS Y AND CLASS A SHARES OF BRAZOS REAL ESTATE SECURITIES PORTFOLIO
CLASS Y AND CLASS A SHARES OF BRAZOS MULTI CAP GROWTH PORTFOLIO
On page 26, the paragraph under Federal Taxes is deleted and replaced with the
following:
Each Portfolio contemplates declaring as dividends each year all or
substantially all of its taxable income, including its net capital gain.
Distributions attributable to the net capital gain of a Portfolio will be
taxable to you as long-term capital gain, regardless of how long you have held
your shares. Other Portfolio distributions, including amounts attributable to
dividends, interest and short-term capital gains of the Portfolio, will
generally be taxable as ordinary income. You will be subject to income tax on
Portfolio distributions regardless whether they are paid in cash or reinvested
in additional shares.
Because the Small Cap, Mid Cap and Multi Cap Portfolios seek capital
appreciation as opposed to current income, the Company anticipates that most of
the distributions from these Portfolios will be taxed as capital gains. From
time to time, however, distributions from the Micro Cap Portfolio (and possibly
the Small Cap, Mid Cap and Multi Cap Portfolios) may be distributions from
ordinary income in an amount that exceeds capital gains distributions, primarily
as a result of portfolio turnover. Distributions from the Real Estate Portfolio
are likely to represent both capital appreciation and income, and thus are
likely to constitute both capital gain and ordinary income.
You should note that if you purchase shares just before a distribution, you will
be taxed for that distribution like other shareholders, even though that
distribution represents simply a return of part of your investment. This is
known as "buying into a dividend." You may wish to defer your purchase until
after the record date for the distribution, so as to avoid this tax impact.
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Portfolio, based on the
difference between your tax basis in the shares and the amount you receive for
them. Generally, this gain or loss will be long-term or short-term depending on
whether your holding period for the shares exceeds 12 months, except that any
loss realized on shares held for six months or
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less will be treated as a long-term capital loss to the extent of any capital
gain dividends that were received on the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.
