BRAZOS MUTUAL FUNDS, 497, 1998-02-19

BRAZOS MUTUAL FUNDS
497, 1998-02-19

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BRAZOS/JMIC Micro Cap Growth Portfolio
BRAZOS/JMIC Real Estate Securities Portfolio
BRAZOS/JMIC Small Cap Growth Portfolio
1-800-426-9157

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

PROSPECTUS February 17, 1998

INVESTMENT OBJECTIVES

Brazos Mutual Funds (the "Fund") is an open-end, management investment
company known as a "mutual fund." The Fund consists of multiple series of shares
each of which has different investment objectives and investment policies. The
BRAZOS/JMIC Micro Cap Growth, BRAZOS/JMIC Real Estate Securities, and
BRAZOS/JMIC Small Cap Growth Portfolios (the "Portfolios") each currently offers
only one class of shares. The securities offered in this Prospectus are shares
of three diversified, no-load Portfolios managed by John McStay Investment
Counsel.

BRAZOS/JMIC Real Estate Securities Portfolio. The objective of the BRAZOS/JMIC
Real Estate Securities Portfolio is to provide a balance of income and
appreciation (with reasonable risk to principal) by investing primarily in
equity securities of companies which are principally engaged in the real estate
industry.

There can be no assurance that the Portfolios will meet their stated
objectives.

ABOUT THIS PROSPECTUS

Keep this Prospectus for future reference. It contains information you
should know before you invest. A "Statement of Additional Information" ("SAI")
containing additional information about the Fund has been filed with the
Securities and Exchange Commission. Such Statement is dated February 17, 1998
and has been incorporated by reference into this Prospectus. For a free copy of
the SAI write to the Fund or call the Fund's Administrator at the telephone
number above.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<PAGE>

PROSPECTUS
Dated February 17, 1998

Investment Adviser
JOHN MCSTAY INVESTMENT COUNSEL
5949 Sherry Lane
Suite 1560
Dallas, TX 75225

PROVIDENT DISTRIBUTORS, INC.

TABLE OF CONTENTS

Fund Expenses...............................................................3
Financial Highlights........................................................5
Prospectus Summary..........................................................6
Risk Factors................................................................7
Investment Objectives.......................................................8
Investment Policies.........................................................8
Other Investment Policies..................................................10
Investment Limitations.....................................................15
Purchase of Shares.........................................................16
Redemption of Shares.......................................................20
Shareholder Services.......................................................22
Valuation of Shares........................................................23
Performance Calculations...................................................23
Dividends, Capital Gains Distributions and Taxes...........................24
Investment Adviser.........................................................25
Administrative Services....................................................30
Distributor................................................................31
Portfolio Transactions.....................................................31
General Information........................................................32

No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Fund's Statement of
Additional Information, in connection with the offering made by this Prospectus
and, if given or made, such information or its representations must not be
relied upon as having been authorized by the Fund. This Prospectus does not
constitute an offering by the Fund in any jurisdiction in which such offering
may not lawfully be made.

<PAGE>

FUND EXPENSES

The following table illustrates expenses and fees a shareholder of the
Portfolios will incur. Additional transaction fees may be charged if a
broker-dealer or other financial intermediary deals with the Fund on your
behalf. Please see "Purchase of Shares" for further information.

Shareholder Transaction Expenses
<TABLE>
<CAPTION>
BRAZOS/JMIC BRAZOS/JMIC BRAZOS/JMIC
Micro Cap Real Estate Small Cap
Growth Securities Growth
Portfolio Portfolio Portfolio
<S> <C> <C> <C>

Sales Load Imposed on Purchases............................ NONE NONE NONE
Sales Load Imposed on Reinvested Dividends................. NONE NONE NONE
Deferred Sales Load........................................ NONE NONE NONE
Redemption Fees............................................ NONE 1%* NONE
Exchange Fees.............................................. NONE NONE NONE
</TABLE>

*Shares of BRAZOS/JMIC Real Estate Securities Portfolio that are held
90 days or more may be redeemed without cost. Shares of BRAZOS/JMIC Real Estate
Securities Portfolio held less than 90 days are subject to a 1% redemption fee
which is retained by the Fund for the benefit of the remaining shareholders. The
fee is intended to encourage long-term investment in the BRAZOS/JMIC Real Estate
Securities Portfolio, to avoid transaction and other expenses caused by early
redemption, and to facilitate portfolio management.

The table below shows the expenses an investor in the Portfolios would
bear directly or indirectly. The expenses and fees listed are based on the
Portfolios' operating costs incurred during the fiscal period ending November
30, 1997, except for the BRAZOS/JMIC Micro Cap Growth Portfolio, which are
estimates.

Annual Fund Operating Expenses
(As a Percentage of Average Net Assets)
<TABLE>
<CAPTION>
BRAZOS/JMIC BRAZOS/JMIC BRAZOS/JMIC
Micro Cap Real Estate Small Cap
Growth Securities Growth
Portfolio Portfolio Portfolio
<S> <C> <C> <C>

Investment Advisory Fees (After Fee Waivers)................... 1.10% 0.37% 0.50%
12b-1 Fees .................................................... NONE NONE NONE
Other Expenses................................................. 0.37% 0.74% 0.70%
Administrative Fees ......................................... 0.13% 0.14% 0.15%
Total Operating Expenses (After Fee Waivers)................... 1.60%(1) 1.25%(1) 1.35%(1)
</TABLE>
(1) The Adviser has voluntarily agreed to waive a portion of its advisory
fees and to assume expenses otherwise payable by the Portfolios (if
necessary) in order to keep the expense ratio from exceeding 1.60%,
1.25% and 1.35% of average daily net assets for the BRAZOS/JMIC Micro
Cap Growth, BRAZOS/JMIC Real Estate Securities and BRAZOS/JMIC Small
Cap Growth Portfolios, respectively. Without the fee waiver, the annual
investment advisory fees would be 1.20%, .90% and .90% of average net
assets for the BRAZOS/JMIC Micro Cap Growth, BRAZOS/JMIC Real Estate

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<PAGE>

Securities and BRAZOS/JMIC Small Cap Growth Portfolios, respectively.
In addition the Administrator, Accounting Agent and Transfer Agent have
agreed to waive a portion of their fees. Absent the fee waivers, the
Portfolios' total annual operating expenses would be 1.83% and 1.80% of
average daily net assets for the BRAZOS/JMIC Real Estate Securities and
BRAZOS/JMIC Small Cap Growth Portfolios, respectively. The Fund will
not reimburse the Adviser, Administrator, Accounting or Transfer Agent
for any fees that are waived or Portfolio expenses that they may bear
on behalf of a Portfolio. The fees set forth above for the BRAZOS/JMIC
Micro Cap Growth Portfolio are estimated amounts for its first year of
operations assuming average daily net assets of $40 million. Absent the
fee waiver, the BRAZOS/JMIC Micro Cap Growth Portfolio's total annual
operating expenses are estimated to be 1.70%.

The following example shows the expenses that a shareholder would pay
on a $1,000 investment over various time periods assuming (1) a 5% annual rate
of return and (2) redemption at the end of each time period. The Portfolios
charge a $12.00 redemption fee for wire redemptions.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>

BRAZOS/JMIC Micro Cap Growth Portfolio ........... $16 $50 N/A N/A

BRAZOS/JMIC Real Estate Securities Portfolio...... $13 $40 $69 $151

BRAZOS/JMIC Small Cap Growth Portfolio ........... $14 $43 $74 $162
</TABLE>

This example should not be considered a representation of past or
future expenses or performance. Actual expenses may be greater or lesser than
those shown.

4
<PAGE>

FINANCIAL HIGHLIGHTS

The following tables show selected per share information for a share
outstanding throughout each period presented for the BRAZOS/JMIC Small Cap
Growth Portfolio and BRAZOS/JMIC Real Estate Securities Portfolio. The tables
are part of the Portfolios' Financial Statements, which are included in the
Fund's Annual Report to Shareholders for the year ended November 30, 1997 (the
"Financial Statements"). The Financial Statements are incorporated into the
Portfolios' SAI. The Financial Statements have been audited by Coopers & Lybrand
LLP, the Fund's independent auditors. Their unqualified opinion on the November
30, 1997 Financial Statements is also incorporated into the Portfolios' SAI.
Please read the following information in conjunction with the Portfolios' 1997
Annual Report to Shareholders.

<TABLE>
<CAPTION>
Real Estate Small Cap
Securities Growth
Portfolio Portfolio
December 31,* December 31,*
1996 to 1996 to
November 30, November 30,
1997 1997
<S> <C> <C>
Net Asset Value - Beginning of Period ....................... $10.00 $10.00
------------ ------------

Investment Operations:
Net investment income (loss) .............................. 0.35 (0.03)
Net realized and unrealized gain on investments ........... 2.05 4.69
------------ ------------
Total from investment operations ................... 2.40 4.66
------------ ------------

Distributions:
From net investment income ................................ (0.23) N/A
From net realized gain .................................... (0.93) (1.17)
------------ ------------
Total distributions ................................ (1.16) (1.17)
------------ ------------

Net Asset Value - End of Period ............................. $11.24 $13.49
============ ============

Total Return *** ............................................ 24.39% 47.08%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands) ....................... $53,308 $80,898
Ratio of Expenses to Average Net Assets+ .................. 1.25%** 1.35%**
Ratio of Net Investment Income (loss) to Average Net Assets 4.61%** (0.68%)**
Portfolio turnover rate ..................................... 184.74% 147.86%
Average commission rate1 .................................... $0.0644 $0.0551
</TABLE>
* Commencement of operations.
** Annualized.
*** Unannualized.
+ The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume expenses otherwise payable by the BRAZOS/JMIC Real Estate
Securities and BRAZOS/JMIC Small Cap Growth Portfolios (if necessary) in
order to keep the annual expense ratio from exceeding 1.25% and 1.35%,
respectively, of their average daily net assets. In addition the
Administrator, Accounting Agent and Transfer Agent have agreed to waive a
portion of their fees. Without the assumption of and waivers of expenses,
the annualized ratio of expenses to average daily net assets would have
been 1.83% and 1.80% for the BRAZOS/JMIC Real Estate Securities and
BRAZOS/JMIC Small Cap Growth Portfolios for the period ended November 30,
1997.

1 Computed by dividing the total amount of brokerage commissions paid by the
total shares of investment securities purchased and sold during the period
for which commissions were charged as required by the SEC for fiscal years
beginning after September 1, 1995.

5
<PAGE>

PROSPECTUS SUMMARY

INVESTMENT ADVISER

John McStay Investment Counsel (the "Adviser"), an investment
counseling firm founded in 1983, is the investment adviser to the Portfolios.
The Adviser currently manages approximately $3 billion in assets for
institutional clients and high net worth individuals. See "INVESTMENT ADVISER."

PURCHASE OF SHARES

Shares of the Portfolios are offered through Provident Distributors,
Inc. (the "Distributor" or "Provident"). The shares are available to investors
at net asset value without a sales commission. Shares can be purchased by
sending investments directly to the Fund. The minimum initial investment is
$10,000. The minimum for subsequent investments is $1,000. Certain exceptions to
the initial or minimum investment amounts may be made by Fund officers. See
"PURCHASE OF SHARES."

DIVIDENDS AND DISTRIBUTIONS

Each Portfolio will distribute substantially all of its net investment
income and long-term capital gains at least annually and may distribute net
investment income and other capital gains during interim periods when management
of the Fund determines that it is in the interests of the respective Portfolio
and its shareholders to do so. It is not anticipated that distributions for a
Portfolio will be made more frequently than quarterly. Distributions will
automatically be reinvested in shares of the Portfolios unless an investor
elects to receive cash distributions. If a Portfolio's distribution exceeds its
investment company taxable income and net capital gain in any year, all or a
portion of those distributions may be treated as a return of capital to
shareholders for tax purposes. See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND
TAXES."

REDEMPTIONS AND EXCHANGES

Shares of the BRAZOS/JMIC Micro Cap Growth and BRAZOS/JMIC Small Cap
Growth Portfolios may be redeemed without cost at any time, at their respective
net asset values as next determined after receipt of the redemption request. The
redemption price may be more or less than the purchase price. Shares of the
BRAZOS/JMIC Real Estate Securities Portfolio may be redeemed at any time, at the
net asset value next determined after receipt of the redemption request. Shares
held 90 days or more may be redeemed without additional fees. Shares held less
than 90 days are subject to a 1% redemption fee. The redemption price may be
more or less than the purchase price. See "REDEMPTION OF SHARES."

ADMINISTRATIVE SERVICES

PFPC Inc. (the "Administrator" or "PFPC"), is responsible for
performing and overseeing administration, fund accounting, dividend disbursing
and transfer agent services for the Fund. See "ADMINISTRATIVE SERVICES."

6
<PAGE>

RISK FACTORS

Prospective investors should consider the following:

BRAZOS/JMIC Micro Cap Growth Portfolio. (1) The micro cap companies in
which the Portfolio will invest are more vulnerable to financial and other risks
than larger companies and the securities of such micro cap companies may involve
a higher degree of risk and price volatility than investments in the general
equity markets. (2) The Portfolio may invest a portion of its assets in
derivatives including futures contracts and options. (See "FUTURES CONTRACTS AND
OPTIONS.") (3) The Portfolio may invest in securities of foreign issuers, which
may be subject to additional risks. (See "FOREIGN SECURITIES.") (4) High rates
of portfolio turnover may result in additional cost and the realization of
capital gains, a portion of which may be short-term or mid-term gains. (See
"PORTFOLIO TURNOVER.") (5) The Portfolio may use various investment practices,
including investing in repurchase agreements, when issued, forward delivery and
delayed settlement securities. (See "OTHER INVESTMENT POLICIES.").

BRAZOS/JMIC Real Estate Securities Portfolio. Because the Portfolio
invests primarily in the real estate industry, it could conceivably own real
estate directly as a result of a default on debt securities it owns. If the
Portfolio has rental income or income from the disposition of real property, the
receipt of such income may adversely affect its ability to retain its tax status
as a regulated investment company. The Portfolio's investments may be subject to
certain risks associated with the direct ownership of real estate. These risks
include: declines in the value of real estate, risks related to general and
local economic conditions, overbuilding, possible geographic concentration and
increased competition, increases in property taxes and operating expenses, and
variations in rental income. Generally, increases in interest rates will
decrease the value of high yielding securities and increase the costs of
obtaining financing, which could decrease the value of the portfolio's
investments. The Portfolio's share price, yield and total returns fluctuate, and
your investment may be worth more or less than your original cost when you
redeem your shares.

In addition, equity real estate investment trusts may be affected by
changes in the value of the underlying property owned by the trusts, while
mortgage real estate investment trusts may be affected by the quality of credit
extended. Equity and mortgage real estate investment trusts are dependent upon
management skill, are not diversified and are subject to the risks of financing
projects. Such trusts are also subject to heavy cash flow dependency, defaults
by borrowers, self liquidation and the possibility of failing to qualify for
tax-free pass-through of income under the Internal Revenue Code and to maintain
exemption from the Investment Company Act of 1940. Changes in interest rates may
also affect the value of the debt securities in the Fund's portfolio. By
investing in real estate investment trusts indirectly through the Fund, a
Shareholder will bear not only his proportionate share of the expenses of the
Fund, but also, indirectly, similar expenses of the real estate investment
trusts.

BRAZOS/JMIC Small Cap Growth Portfolio. (1) The small capitalization
corporations in which the Portfolio invests are more vulnerable to financial and
other risks than larger corporations and the securities of such small
capitalization corporations may involve a higher degree of risk and price
volatility than investments in the general equity markets. (2) The Portfolio may
invest a portion of its assets in derivatives including futures contracts and
options. (See "FUTURES CONTRACTS AND OPTIONS.") (3) The Portfolio may invest in
securities of foreign issuers, which may be subject to additional risks. (See
"FOREIGN SECURITIES.") (4) High rates of portfolio turnover for the Portfolio
may result in additional

7
<PAGE>

cost and the realization of capital gains. (See "PORTFOLIO TURNOVER".) (5) The
Portfolio may use various investment practices, including investing in
repurchase agreements, when issued, forward delivery and delayed settlement
securities. (See "OTHER INVESTMENT POLICIES".)

INVESTMENT OBJECTIVES

BRAZOS/JMIC Micro Cap Growth Portfolio. The objective of the
BRAZOS/JMIC Micro Cap Growth Portfolio is to provide maximum capital
appreciation, consistent with reasonable risk to principal. The BRAZOS/JMIC
Micro Cap Growth Portfolio seeks to achieve its objective by investing primarily
in micro capitalization ("Micro Cap") companies. The BRAZOS/JMIC Micro Cap
Growth Portfolio attempts to limit the risk of decline in the value of its
securities by following a stock selection process that emphasizes the use of
traditional fundamental security analysis and valuation methods as described
under "Investment Policies".

BRAZOS/JMIC Real Estate Securities Portfolio. The objective of the
BRAZOS/JMIC Real Estate Securities Portfolio is to provide a balance of income
and appreciation (with reasonable risk to principal) by investing primarily in
equity securities of companies which are principally engaged in the real estate
industry.

BRAZOS/JMIC Small Cap Growth Portfolio. The objective of the
BRAZOS/JMIC Small Cap Growth Portfolio is to provide maximum capital
appreciation, consistent with reasonable risk to principal, by investing
primarily in small capitalization ("Small Cap") companies. The BRAZOS/JMIC Small
Cap Growth Portfolio attempts to limit the risk of decline in the value of its
securities by following a stock selection process that emphasizes the use of
traditional fundamental security analysis and valuation methods as described
under "Investment Policies".

INVESTMENT POLICIES

BRAZOS/JMIC Micro Cap Growth Portfolio. The Portfolio will invest
(under normal circumstances) at least 65% of its total assets in equity
securities of a diverse spectrum of companies which, at the time of purchase,
have market capitalizations that would place them in the smallest 10% of market
capitalizations for domestic companies as measured by the Wilshire 5000 Index
(currently approximately $600 million). The remaining 35% of the Portfolio's
total assets may be invested in equity securities of companies which have market
capitalizations at the time of purchase that are larger than the market
capitalizations of such micro cap companies. The equity securities in which the
Portfolio will invest consist of common stocks and securities convertible into
common stocks, including convertible preferred stocks and convertible bonds, and
ADRs.

The Adviser selects companies based on their potential for strong
growth in revenue, earnings and cash flow, strong management, leading products
or services and potential for improvement. The list of potential investments is
further filtered by the use of traditional fundamental security analysis and
valuation methods including, but not limited to, analysis of relative returns on
capital and equity, reward to risk ratios and earnings per share growth rates
relative to price earnings ratios. The Adviser believes that many companies with
smaller capitalizations have greater potential than their larger counterparts to
deliver above-average revenue and earnings growth rates that may not yet have
been recognized by investors.

<PAGE>

Micro cap companies may offer greater opportunities for capital
appreciation than larger companies, but investments in such companies may
involve certain special risks. Such companies may have limited product lines,
markets or financial resources and may be dependent on a limited management
group. While the markets in securities of micro cap companies have grown rapidly
in recent years, such securities may trade less frequently and in smaller volume
than more widely held securities. The values of these securities may fluctuate
more sharply than those of other securities, and the Portfolio may experience
some difficulty in establishing or closing out positions in these securities at
prevailing market prices. There may be less publicly available information about
the issuers of these securities or less market interest in such securities than
in the case of larger companies, and it may take a longer period of time for the
prices of such securities to reflect the full value of their issuer's underlying
earnings potential or assets. Additionally, some securities of micro cap
companies may be thinly traded. Consequently, the ability of the Portfolio to
dispose of such securities may be greatly limited, and it may have to continue
to hold such securities during periods when the Adviser would otherwise have
sold the security.

The Adviser expects that a majority of investments in the Portfolio
will be in U.S. based companies, however shares of foreign based companies may
be purchased if they meet the Portfolio's investment criteria. Under normal
circumstances, investments in foreign based companies will comprise no more than
25% of total portfolio assets. The Portfolio may invest up to 20% of its assets
at the time of purchase in securities of companies that have (with predecessors)
a continuous operating history of less than 3 years. Such investments may be
characterized as potentially possessing higher business risks as well as greater
stock market risks and price volatility. Such companies may face special risks
that their products or services may not prove to be commercially successful.

BRAZOS/JMIC Real Estate Securities Portfolio. Under normal
circumstances, the Portfolio will invest at least 65% of its total assets in
equity securities of companies which are principally engaged in the real estate
industry. The equity securities in which the Portfolio will invest consist of
common stocks and securities convertible into common stocks, including
convertible preferred stocks and convertible bonds. The Portfolio has adopted a
fundamental policy that its investments will be concentrated in the real estate
industry, which means that it will invest more than 25% of its assets in such
industry.

A company is "principally engaged in the real estate industry" if at
least 50% of its assets (marked- to-market), gross income, or net profits are
attributable to ownership, construction, management or sale of residential,
commercial or industrial real estate. Real estate industry companies include:
equity real estate investment trusts, which pool investors' funds for investment
primarily in commercial real estate properties; mortgage real estate investment
trusts, which invest pooled funds, principally in real estate related loans such
as construction, development and long-term mortgage loans, brokers or real
estate developers; hybrid real estate investment trusts, which hold properties
and mortgages; and issuers with substantial real estate holdings such as paper
and lumber producers and hotel and entertainment companies.

The Portfolio may invest up to 20% of its total assets at the time of
purchase in securities of companies that have (with predecessors) a continuous
operating history of less than 3 years. Such investments may be characterized as
potentially possessing higher business risks as well as greater stock market
risks and price volatility. Such companies may face special risks that their
products or services may not prove to be commercially successful. There is no
limitation on the operating history of real estate investment trusts.

9
<PAGE>

The Adviser selects companies based on their strong cash flow, strong
management, dividend yield, dividend growth potential and financial strength.
The list of potential investments is further filtered by the use of traditional
fundamental security analysis and valuation methods including, but not limited
to, analysis of relative returns on capital and equity, reward to risk ratios
and earnings and cash flow per share growth rates relative to valuation
measures.

BRAZOS/JMIC Small Cap Growth Portfolio. The Portfolio will invest
(under normal circumstances) at least 65% of its total assets in equity
securities of a diverse spectrum of companies which have market capitalizations
at the time of purchase from $40 million to $1.2 billion. The remaining 35% of
the Portfolio's total assets may be invested in equity securities of companies
which have market capitalizations at the time of purchase that are larger than
$1.2 billion. The equity securities in which the Portfolio will invest consist
of common stocks and securities convertible into common stocks, including
convertible preferred stocks and convertible bonds, and ADRs.

The Adviser expects that a majority of investments in the Portfolio
will be in U.S. based companies, however shares of foreign based companies may
be purchased if they meet the Portfolio's investment criteria. Under normal
circumstances, investments in foreign based companies will comprise no more than
15% of total portfolio assets. The Portfolio may invest up to 20% of its assets
at the time of purchase in securities of companies that have (with predecessors)
a continuous operating history of less than 3 years. Such investments may be
characterized as potentially possessing higher business risks as well as greater
stock market risks and price volatility. Such companies may face special risks
that their products or services may not prove to be commercially successful.

It is anticipated that cash reserves will represent a relatively small
percentage of each Portfolio's total assets (less than 10% under most
circumstances). In unusual circumstances, or for temporary defensive purposes
when market or economic conditions warrant, each Portfolio may invest all or a
portion of its assets in short-term investments, cash and cash equivalents. When
a Portfolio is in a defensive position, it may not be pursuing its investment
objective.

OTHER INVESTMENT POLICIES

SHORT-TERM INVESTMENTS

Occasionally, a Portfolio may invest a portion of its assets in the
following money market instruments, consistent with its investment policies.

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<PAGE>

(1) Time deposits, certificates of deposit (including marketable
variable rate certificates of deposit) and bankers'
acceptances issued by a commercial bank or savings and loan
association.

Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (not longer than seven days) at a
stated interest rate. Time deposits maturing from two business days through
seven calendar days will not exceed 10% of the total assets of a Portfolio under
most circumstances.

Certificates of deposit are negotiable short-term obligations issued by
commercial banks or savings and loan associations collateralized by funds
deposited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A bankers'
acceptance is a time draft drawn on a commercial bank by a borrower, usually in
connection with an international commercial transaction.

A Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, (ii) in the case of U.S. banks, it is a member of the
Federal Deposit Insurance Corporation, and (iii) in the case of foreign branches
of U.S. banks, the security is, in the opinion of the Adviser, of an investment
quality comparable to other debt securities which may be purchased by the
Portfolios;

(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2
by Moody's or, if not rated, issued by a corporation having an
outstanding unsecured debt issue rated A or better by Moody's
or by S&P;

(3) Short-term corporate obligations rated A or better by Moody's
or by S&P;

(4) U.S. Government obligations including bills, notes, bonds and
other debt securities issued by the U.S. Treasury. These are
direct obligations of the U.S. Treasury, supported by the full
faith and credit pledge of the U.S. Government and differ
mainly in interest rates, maturities and dates of issue;

(5) U.S. Government agency securities issued or guaranteed by U.S.
Government sponsored instrumentalities and Federal agencies;
and

(6) Repurchase agreements collateralized by securities listed
above.

REPURCHASE AGREEMENTS

Each Portfolio may invest in repurchase agreements collateralized by
U.S. Government securities. In addition, each Portfolio may invest in repurchase
agreements collateralized by certificates of deposit, and certain bankers'
acceptances and other securities outlined above under "Short-Term Investments."
In a repurchase agreement, a Portfolio buys a security and simultaneously
commits to sell that security back at an agreed upon price plus an agreed upon
market rate of interest. Under a repurchase agreement, the seller will be
required to maintain the value of the securities subject to the agreement at not
less than the

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<PAGE>

repurchase price if such securities mature in one year or less, or 101% of the
repurchase price if such securities mature in more than one year.

The use of repurchase agreements involves certain risks. While the
Fund's management acknowledges these risks, it is expected that they can be
controlled through stringent security selection criteria and careful monitoring
procedures.

LENDING OF SECURITIES

Each Portfolio may lend their investment securities to qualified
institutional investors as a means of earning income. A Portfolio will not loan
securities to the extent that greater than one-third of its assets at fair
market value would be committed to loans. During the term of a loan, a Portfolio
is subject to a gain or loss depending on any increase or decrease in the market
price of the securities loaned. Lending of securities is subject to review by
the Fund's Board of Trustees. All relevant facts and circumstances, including
the creditworthiness of the broker, dealer or institution, will be considered in
making decisions about securities lending.

An investment company may pay reasonable negotiated fees in connection
with loaned securities so long as such fees are set forth in a written contract
and approved by its Board of Trustees. A Portfolio will continue to retain any
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on a loan, the loan must be called and the securities
voted.

WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES

Each Portfolio may purchase and sell securities on a "when-issued,"
"delayed settlement" or "forward delivery" basis. "When-issued" or "forward
delivery" refers to securities whose terms and indenture are available, and for
which a market exists, but which are not available for immediate delivery.
When-issued and forward delivery transactions may be expected to occur a month
or more before delivery is due. Delayed settlement is a term used to describe
settlement of a securities transaction in the secondary market which will occur
sometime in the future. No payment or delivery is made by a Portfolio until it
receives payment or delivery from the other party to any of the above
transactions. A Portfolio will maintain a separate account of cash, U.S.
Government securities, other high grade debt obligations or other liquid
securities at least equal to the value of purchase commitments until payment is
made. Such segregated securities will either mature or, if necessary, be sold on
or before the settlement date. Typically, no income accrues on securities
purchased on a delayed delivery basis prior to the time delivery is made,
although a Portfolio may earn income on securities it has deposited in a
segregated account.

Each Portfolio may engage in when-issued transactions to obtain what is
considered to be an advantageous price and yield at the time of the transaction.
When a Portfolio engages in when-issued or forward delivery transactions, it
does so to acquire securities consistent with its investment objective and
policies and not for the purpose of investment leverage.

PORTFOLIO TURNOVER

It is expected that the annual portfolio turnover rate for the
BRAZOS/JMIC Micro Cap Growth Portfolio will not exceed 300%. In addition to
Portfolio trading costs, higher rates (100% or more) of

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<PAGE>
portfolio turnover may result in the realization of capital gains, a portion of
which may be short-term or mid-term gains. See "DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES" for information on taxation. The Portfolios will not
normally engage in short-term trading, but each reserves the right to do so. The
tables set forth in "Financial Highlights" present the historical turnover rates
for the BRAZOS/JMIC Real Estate Securities Portfolio and the BRAZOS/JMIC Small
Cap Growth Portfolio.

INVESTMENT COMPANIES

Each Portfolio reserves the right to invest up to 10% of its total
assets, calculated at the time of investment, in securities of other open-end or
closed-end investment companies. No more than 5% of an investing Portfolio's
total assets may be invested in securities of any one investment company nor may
it acquire more than 3% of the voting securities of any investment company. A
Portfolio will indirectly bear its proportionate share of any management fees
paid by an investment company in which it invests in addition to its advisory
fee.

FUTURES CONTRACTS AND OPTIONS

In order to remain fully invested and to reduce transaction costs, each
Portfolio may invest in appropriate futures contracts and options (also known as
derivatives). Because transaction costs associated with futures and options may
be lower than the costs of investing in stocks and bonds directly, it is
expected that use of index futures and options to facilitate cash flows may
reduce a Portfolio's overall transaction costs. A Portfolio may enter into
futures contracts provided that not more than 5% of the Portfolio's assets are
required as margin deposit to secure obligations under such contracts.

Futures and options can be volatile and involve various degrees and
types of risk. If a Portfolio judges market conditions incorrectly or employs a
strategy that does not correlate well with its investments, use of futures and
options contracts could result in a loss. A Portfolio could also suffer losses
if it is unable to liquidate its position due to an illiquid secondary market.
In the opinion of the Trustees of the Fund, the risk that a Portfolio will be
unable to close out a futures position or options contract will be minimized by
only entering into futures contracts or options transactions traded on national
exchanges and for which there appears to be a liquid secondary market.

RESTRICTED SECURITIES

Each Portfolio may purchase restricted securities that are not
registered for sale to the general public but which are eligible for resale to
qualified institutional investors under Rule 144A of the Securities Act of 1933.
Under the supervision of the Fund's Board of Trustees, the Adviser determines
the liquidity of such investments by considering all relevant factors. Provided
that a dealer or institutional trading market in such securities exists, these
restricted securities are not treated as illiquid securities for purposes of a
Portfolio's investment limitations. A Portfolio will invest no more than 15% of
its net assets in illiquid securities. The prices realized from the sales of
these securities could be less than those originally paid by a Portfolio or less
than what would be considered the fair value of such securities.

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<PAGE>

OTHER INVESTMENT POLICIES

FOREIGN INVESTMENTS

The BRAZOS/JMIC Micro Cap Growth Portfolio and the BRAZOS/JMIC Small
Cap Growth Portfolio may invest in common stocks of companies listed on foreign
stock exchanges, and may also invest in stocks traded in the over-the-counter
market. Common stocks for this purpose also include securities having common
stock characteristics such as rights and warrants to purchase common stocks. The
BRAZOS/JMIC Micro Cap Growth Portfolio and the BRAZOS/JMIC Small Cap Growth
Portfolio may also invest in foreign equity securities in the form of American
Depositary Receipts (ADRs) and other similar global instruments. ADRs (sponsored
or unsponsored) are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying foreign securities. Most ADRs are traded
on a U.S. stock exchange. Issuers of unsponsored ADRs are not contractually
obligated to disclose material information in the U.S. and, therefore, there may
not be a correlation between such information and the market value of the
unsponsored ADR.

Investing in foreign companies may involve additional risks and
considerations which are not typically associated with investing in U.S.
companies. Since stocks of foreign companies are normally denominated in foreign
currencies, the BRAZOS/JMIC Micro Cap Growth Portfolio and the BRAZOS/JMIC Small
Cap Growth Portfolio may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations, and may incur costs in
connection with conversions between various currencies. Some countries may
withhold portions of dividends and interest at the source. Under the Internal
Revenue Code, foreign exchange gains and losses are treated as ordinary gain or
loss.

As non-U.S. companies are not generally subject to uniform accounting,
auditing and financial reporting standards and practices comparable to those
applicable to U.S. companies, comparable information may not be readily
available about certain foreign companies. Securities of some non-U.S. companies
may be less liquid and more volatile than securities of comparable U.S.
companies. In addition, in certain foreign countries, there is the possibility
of expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in those countries.

SHORT SALES

Each Portfolio may engage in short sales of securities. In a short
sale, a Portfolio sells stock which it does not own, making delivery with
securities "borrowed" from a broker. The Portfolio is then obligated to replace
the security borrowed by purchasing it at the market price at the time of
replacement. This price may or may not be less than the price at which the
security was sold by the Portfolio. Until the security is replaced, the
Portfolio is required to pay to the lender any dividends or interest which
accrue during the period of the loan. In order to borrow the security, the
Portfolio may also have to pay a premium which would increase the cost of the
security sold. The proceeds of the short sale will be retained by the broker, to
the extent necessary to meet margin requirements, until the short position is
closed out.

A Portfolio also must deposit in a segregated account an amount of cash
or liquid assets equal to the difference between (a) the market value of the
securities short at the time they were sold short and (b) the value of the
collateral deposited with the broker in connection with the short sale (not
including the proceeds from the short sale). While the short position is open,
the Portfolio must maintain daily the

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<PAGE>
segregated account at such a level that (1) the amount deposited in it plus the
amount deposited with the broker as collateral equals the current market value
of the securities sold short and (2) the amount deposited in it plus the amount
deposited with the broker as collateral is not less than the market value of the
securities at the time they were sold short.

A Portfolio will incur a loss as a result of the short sale if the
price of the security increases between the date of the short sale and date on
which the Portfolio replaces the borrowed security. A Portfolio will realize a
gain if the security declines in price between those dates. The amount of any
gain will be decreased and the amount of any loss will be increased by any
interest the Portfolio may be required to pay in connection with the short sale.
The dollar amount of short sales at any one time (not including short sales
against the box) may not exceed 25% of the net assets of a Portfolio.

A short sale is "against-the-box" if at all times when the short
position is open the Portfolio owns an equal amount of the securities or
securities convertible into, or exchangeable without further consideration for,
securities of the same issue as the securities sold short. A short sale may
result in the recognition of gain with respect to a security for Federal income
tax purposes under certain rules which treat certain short sales of the same or
substantially identical positions with respect to such a security as a
constructive sale at the time a short position is entered into by a Portfolio.
See, "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES."

COMPANIES WITH LIMITED OPERATING HISTORIES

The BRAZOS/JMIC Real Estate Securities Portfolio may invest in
securities of companies which have limited operating histories and may not yet
be profitable. The investments in such companies offer opportunities for capital
gains, but entail significant risks including, but not limited to, the
volatility of the stock price and the viability of the firm's operations. The
Fund will not invest in companies which together with predecessors have
operating histories of less than three years if immediately thereafter and as a
result of such investment the value of the Fund's holdings of such securities
(other than securities of companies principally engaged in the real estate
industry) exceeds 20% of the value of the Fund's total assets. Although not an
investment policy of the Fund, it is anticipated that under normal
circumstances, approximately 10% to 15% of the companies principally engaged in
the real estate industry in which the Fund invests will have operating histories
of less than three years.

Except as specified above and as described under "INVESTMENT
LIMITATIONS," the foregoing investment policies are not fundamental and the
Trustees may change such policies without an affirmative vote of a majority of
the outstanding voting securities of a Portfolio, as defined in the 1940 Act.

INVESTMENT LIMITATIONS

A Portfolio will not:

(a) with respect to 75% of its assets, invest more than
5% of its total assets at the time of purchase in the
securities of any single issuer (other than
obligations issued or guaranteed as to principal and
interest by the government of the U.S. or any agency
or instrumentality thereof);

15
<PAGE>

(b) with respect to 75% of its assets, purchase more than
10% of any class of the outstanding voting securities
of any issuer;

(c) make loans except (i) by purchasing bonds, debentures
or similar obligations which are publicly
distributed, and (ii) by lending its portfolio
securities to banks, brokers, dealers and other
financial institutions so long as such loans are not
inconsistent with the 1940 Act or the rules and
regulations or interpretations of the SEC thereunder;

(d) borrow, except from banks and as a temporary measure
for extraordinary or emergency purposes and then, in
no event, in excess of 331/3% of the Portfolio's
gross assets valued at the lower of market or cost,
and the Portfolio may not purchase additional
securities when borrowings exceed 5% of total gross
assets; or

(e) pledge, mortgage or hypothecate any of its assets to
an extent greater than 331/3% of its total assets at
fair market value.

In addition, the BRAZOS/JMIC Micro Cap Growth and BRAZOS/JMIC Small Cap
Growth Portfolios will not acquire any securities of companies within one
industry if, as a result of such acquisition, more than 25% of the value of each
Portfolio's total assets would be invested in securities of companies within
such industry; provided, however, that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, or instruments issued by U.S. banks when each
Portfolio adopts a temporary defensive position.

The investment limitations described here and certain of the investment
limitations described in the SAI are fundamental policies and may be changed
only with the approval of the holders of a majority of the outstanding shares of
a Portfolio of the Fund. If a percentage limitation on investment or utilization
of assets as set forth above is adhered to at the time an investment is made, a
later change in percentage resulting from changes in the value or total cost of
a Portfolio's assets will not be considered a violation of the restriction.

PURCHASE OF SHARES

Shares of the Portfolios may be purchased without sales commission, at
the net asset value per share next determined after an order, including payment
in the manner described herein, is received by the Fund. (See "VALUATION OF
SHARES.") The minimum initial investment required is $10,000. The minimum
initial investment amount for IRA accounts is $2,000. Certain exceptions may be
made by the officers of the Fund.

INITIAL INVESTMENTS

BY MAIL

o Complete and sign an Account Registration Form and
mail it together with a check, drawn on a U.S. bank,
made payable to Brazos Mutual Funds, to:

Brazos Mutual Funds

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<PAGE>

c/o PFPC Inc.
P.O. Box 8987
Wilmington, DE 19899

A purchase order sent by overnight mail should be sent to:

PFPC Inc.
Suite 108
400 Bellevue Parkway
Wilmington, DE 19809*

*Effective as of March 30, 1998. Before March 30, 1998,
purchase orders sent by overnight mail should be sent to PFPC
Inc., 1105 North Market Street, 3rd Floor, Wilmington, DE
19801.

o Payment for the purchase of shares received by mail will be
credited to your account at the net asset value per share of a
Portfolio next determined after receipt. Payment does not need
to be converted into Federal Funds (moneys credited to the
Fund's Custodian Bank by a Federal Reserve Bank) before the
Fund will accept it for investment. Make certain that you
specify the Portfolio in which you wish to invest on the
Account Registration Form.

BY WIRE

o First, telephone PFPC between the hours of 9:00 a.m. and 4:00
p.m. Eastern time at 1-800- 426-9157 and provide the account
name, address, telephone number, social security or taxpayer
identification number, Portfolio selected, amount being wired
and the name of the bank wiring the funds. An account number
will then be provided to you. Next,

o instruct your bank to wire the specified amount to:

PFPC INC.*
C/O PNC BANK, N.A.
Philadelphia, PA
ABA #031-0000-53
ATTENTION: Brazos Mutual Funds
REF: PORTFOLIO NAME ________________
DDA Acct. #86-0179-1182
FURTHER CREDIT [SHAREHOLDER NAME AND ACCOUNT NUMBER]

*Effective as of March 30, 1998. Before March 30, 1998, contact
PFPC customer service for wiring instructions.

o Forward a completed Account Registration Form to the Fund at
the address shown on the form. Federal Funds purchases will be
accepted only on a day on which both the New York Stock
Exchange and the Custodian Bank are open for business.

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<PAGE>

ADDITIONAL INVESTMENTS

Additional investments can be made at any time. The minimum additional
investment is $100 for retirement accounts and $1,000 for all other accounts.
Shares can be purchased at net asset value by mailing a check (payable to
"Brazos Mutual Funds") to the Fund c/o PFPC Inc., P.O. Box 8987, Wilmington DE,
19899, or by wiring money to the Fund using the instructions outlined above.
When making additional investments, be sure that: the account name and number is
identified on the check or wire and the Portfolio to be purchased is specified.

Prior to wiring additional investments, notify the Fund by calling the
number on the cover of this prospectus. Mail orders should include the "Invest
by Mail" stub which accompanies any Fund confirmation statement.

AUTOMATIC INVESTMENT PLAN

Shareholders may also purchase additional Portfolio shares through an
Automatic Investment Plan. Under the Plan, PFPC, at regular intervals, will
automatically debit a shareholder's bank checking account in an amount of $50 or
more (subsequent to the minimum initial investment), as specified by the
shareholder. A shareholder may elect to invest the specified amount monthly,
bimonthly, quarterly, semiannually or annually. The purchase of Portfolio shares
will be effected at their offering price at 12 noon, Eastern time, on or about
the 20th day of the month. For an Application for the Automatic Investment Plan,
check the appropriate box of the Application at the end of this Prospectus, or
call PFPC at (800) 426-9157. This service may also not be available for Service
Agent clients who are provided similar services by those organizations.

OTHER PURCHASE INFORMATION

Investments received by 4 p.m. ET (the close of the New York Stock
Exchange ("NYSE")) will be invested at the price calculated after the NYSE
closes that day. Orders received after 4 p.m. ET will receive the price
calculated on the next business day. The Fund reserves the right, in its sole
discretion, to suspend the offering of shares of the Portfolios or reject
purchase orders when, in the judgment of management, such suspension or
rejection is in the best interest of the Fund. Purchases of shares will be made
in full and fractional shares of the Portfolios calculated to three decimal
places. Certificates for fractional shares will not be issued. Certificates for
whole shares will not be issued except at the written request of the
shareholder.

Shares of the Portfolios may be purchased by customers of
broker-dealers or other financial intermediaries ("Service Agents") which deal
with the Fund on behalf of their customers. Service Agents may impose additional
or different conditions on the purchase or redemption of shares of the
Portfolios and may charge transaction or other account fees. Each Service Agent
is responsible for transmitting to its customers a schedule of any such fees and
information regarding any additional or different purchase and redemption
conditions. Shareholders who are customers of Service Agents should consult
their Service Agent for information regarding these fees and conditions. Amounts
paid to Service Agents may include transaction fees and/or service fees paid by
the Fund from the Fund assets attributable to the Service Agent, and which would
not be imposed if shares of the Portfolios were purchased directly from the Fund
or the Distributor. The Service Agents may provide shareholder services to their
customers that are not available to a shareholder dealing directly with the
Fund. A salesperson and any other person entitled to receive

18
<PAGE>
compensation for selling or servicing shares of the Portfolios may receive
different compensation with respect to one particular class of shares over
another in the Fund.

Service Agents, or if applicable, their designees, that have entered
into agreements with the Fund or its agent, may enter confirmed purchase or
redemption orders on behalf of clients and customers, with payment to follow no
later than the Portfolios' pricing on the following business day. If payment is
not received by the Fund's Transfer Agent by such time, the Service Agent could
be held liable for resulting fees or losses. A Portfolio may be deemed to have
received a purchase or redemption order when a Service Agent, or, if applicable,
its authorized designee, accepts the order. Orders received by the Fund in
proper form will be priced at each Portfolio's net asset value next computed
after they are accepted by the Service Agent or its authorized designee. Service
Agents are responsible to their customers and the Fund for timely transmission
of all subscription and redemption requests, investment information,
documentation and money.

IN-KIND PURCHASES

If accepted by the Fund, shares of a Portfolio may be purchased in
exchange for securities which are eligible for acquisition by the Portfolio, as
described in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as set forth under "VALUATION OF SHARES" at the time of
the next determination of net asset value after such acceptance. Shares issued
by a Portfolio in exchange for securities will be issued at net asset value
determined as of the same time. All dividends, interest, subscription, or other
rights pertaining to such securities shall become the property of that Portfolio
and must be delivered to the Fund by the investor upon receipt from the issuer.
Securities acquired through an in-kind purchase will be acquired for investment
and not for immediate resale.

The Fund will not accept securities in exchange for shares of a
Portfolio unless:

o at the time of the exchange, such securities are eligible to
be included in that Portfolio and current market quotations
are readily available for such securities;

o the investor represents and agrees that all securities offered
to be exchanged are not subject to any restrictions upon their
sale by that Portfolio under the Securities Act of 1933, or
otherwise; and

o the value of any such securities (except U.S. Government
securities) being exchanged together with other securities of
the same issuer owned by that Portfolio will not exceed 5% of
the net assets of that Portfolio immediately after the
transaction.

Investors who are subject to Federal taxation upon exchange may realize
a gain or loss for Federal income tax purposes depending upon the cost of
securities or local currency exchanged. Investors interested in such exchanges
should contact the Adviser.

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<PAGE>

REDEMPTION OF SHARES

Any redemption may be more or less than the purchase price of your
shares depending on the market value of the investment securities held by your
Portfolio(s).

BRAZOS/JMIC Micro Cap Growth and BRAZOS/JMIC Small Cap Growth
Portfolios. Shares may be redeemed by mail or telephone, at any time, without
cost, at their net asset value as next determined after receipt of the
redemption request. Shareholders are charged a $12.00 fee for redemptions by
wire. Otherwise, there is no charge for redemptions.

BRAZOS/JMIC Real Estate Securities Portfolio. Shares of the BRAZOS/JMIC
Real Estate Securities Portfolio may be redeemed by mail or telephone, at any
time, at the net asset value as next determined after receipt of the redemption
request. Shares held 90 days or more may be redeemed without cost except for a
$12.00 fee charged to shareholders for wire redemptions. Shares held less than
90 days will be subject to a 1% redemption fee which is retained by the Fund for
the benefit of the remaining shareholders and is intended to encourage long-term
investment in the BRAZOS/JMIC Real Estate Securities Portfolio, to avoid
transaction and other expenses caused by early redemption and to facilitate
portfolio management.

BY MAIL

The Portfolios will redeem their shares at the net asset value next
determined on the date the request is received in "good order." Address requests
for redemption to the Fund c/o PFPC Inc, P.O. Box 8987, Wilmington, DE 19899. A
request to redeem shares must include:

o share certificates, if issued;

o a letter of instruction or a stock assignment specifying the
number of shares or dollar amount to be redeemed, signed by
all registered owners of the shares in the exact names in
which they are registered;

o any required signature guarantees (see "SIGNATURE
GUARANTEES"); and

o any other necessary legal documents, if required, in the case
of estates, trusts, guardianships, custodianships,
corporations, pension and profit sharing plans and other
organizations.

Shareholders who are uncertain of requirements for redemption should
contact PFPC at 1-800-426-9157.

BY TELEPHONE

In order to make a redemption request by telephone, you must:

o establish the telephone redemption privilege (and if desired,
the wire redemption privilege) by completing appropriate
sections of the Account Registration Form; and

20
<PAGE>

o call the Fund and instruct that the redemption proceeds be
mailed to you or wired to your bank.

The following tasks cannot be accomplished by telephone:

o changing the name of the commercial bank or the account
designated to receive redemption proceeds (this can be
accomplished only by a written request signed by each
shareholder, with each signature guaranteed);

o redemption of certificated shares by telephone.

The Fund and the Fund's Transfer Agent will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
and they may be liable for any losses if they fail to do so. These procedures
include requiring the investor to provide certain personal identification at the
time an account is opened, as well as prior to effecting each transaction
requested by telephone. In addition, all telephone transaction requests will be
recorded and investors may be required to provide additional telecopied written
instructions of such transaction requests. The Fund or Transfer Agent may be
liable for any losses due to unauthorized or fraudulent telephone instructions
if the Fund or Transfer Agent does not employ the procedures described above.
Neither the Fund nor the Transfer Agent will be responsible for any loss,
liability, cost or expense for following instructions received by telephone that
it reasonably believes to be genuine.

Please contact PFPC at 1-800-426-9157 for further details.

SIGNATURE GUARANTEES

Signature guarantees are required for the following redemptions:

o redemptions where the proceeds are to be sent to someone other
than the registered shareowner(s);

o redemptions where the proceeds are to be sent to someplace
other than the registered address; or

o share transfer requests.

The purpose of signature guarantees is to verify the identity of the
party who has authorized a redemption. Signature guarantees will be accepted
from any eligible guarantor institution which participates in a signature
guarantee program. Eligible guarantor institutions include banks, brokers,
dealers, credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Broker-dealers
guaranteeing signatures must be a member of a clearing corporation or maintain
net capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees.

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<PAGE>
OTHER REDEMPTION INFORMATION

Normally, the Fund will make payment for all shares redeemed under
proper procedures within one business day of and no more than seven days after
receipt of the request. The Fund may suspend the right of redemption or postpone
the date, as permitted by the SEC, including under emergency circumstances and
at times when the NYSE is closed.

If the Fund's Board of Trustees determines that it would be detrimental
to the best interests of remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by a Portfolio in
lieu of cash in conformity with applicable rules of the SEC. Investors may incur
brokerage charges on the sale of portfolio securities so received in payment of
redemptions.

SHAREHOLDER SERVICES

EXCHANGE PRIVILEGE

Shares of each Portfolio may be exchanged for shares of any other
Portfolio included in the Brazos Mutual Funds. Exchange requests should be made
by writing to the Fund c/o PFPC Inc., P.O. Box 8987, Wilmington, DE 19899 or
calling 1-800-426-9157 between the hours of 9:00 a.m. and 4:00 p.m. Eastern
time.

Any exchange will be based on the net asset value of the shares
involved. There is no sales commission or charge of any kind for an exchange.
Before making an exchange into a Portfolio, a shareholder should read the
Prospectus and consider the investment objectives of the Portfolio to be
purchased. Contact PFPC at 1-800-426-9157 for additional copies of the
Prospectus. Exchanges can only be made with Portfolios that are qualified for
sale in a shareholder's state of residence. Exchange requests may be made either
by mail or telephone. Telephone exchanges will be accepted only if the
certificates for the shares to be exchanged have not been issued to the
shareholder and if the registration of the two accounts will be identical.
Requests for exchanges with other Portfolios received prior to 4 p.m. (ET) will
be processed as of the close of business on the same day. Requests received
after that time will be processed on the next business day. The Board of
Trustees may limit frequency and amount of exchanges permitted. For additional
information regarding responsibility for the authenticity of telephoned
instructions, see "REDEMPTION OF SHARES BY TELEPHONE" above. An exchange into
another Portfolio of the Fund is a sale of shares and may result in a capital
gain or loss for income tax purposes. The Fund may modify or terminate the
exchange privilege at any time.

TRANSFER OF REGISTRATION

You may transfer the registration of any of your Fund shares to another
person by writing to the Fund at the above address. As in the case of
redemptions, the written request must be received in good order before any
transfer can be made. (See "REDEMPTION OF SHARES" for a definition of "good
order.")

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<PAGE>

RETIREMENT PLANS

Shares of the Fund are available for use in certain tax-deferred plans
(such as Individual Retirement Accounts ("IRAs"), defined contribution, 401(k)
and 403(b)(7) plans).

Individual Retirement Accounts

Application forms and brochures for IRAs can be obtained from PFPC by
calling 1-800-426-9157.

PNC Bank, N.A. ("PNC") makes available its services as an IRA custodian
for each shareholder account that is established as an IRA. For these services,
PNC receives an annual fee of $10.00 per account, which fee is paid directly to
PNC by the IRA shareholder. If the fee is not paid by the date due, shares of
the Fund owned by the IRA will be redeemed automatically for purposes of making
the payment. In addition, a $10 fee is charged to shareholders transferring out
of a Fund IRA.

VALUATION OF SHARES

The net asset value of each Portfolio is determined by dividing the sum
of the total market value of a Portfolio's investments and other assets, less
any liabilities, by the total number of shares outstanding. Net asset value per
share for each Portfolio is determined as of the close of the NYSE on each day
that the NYSE is open for business.

Each Portfolio uses the last quoted trading price as the market value
for equity securities. For listed securities, the Fund uses the price quoted by
the exchange on which the security is primarily traded. Unlisted securities and
listed securities which have not been traded on the valuation date or for which
market quotations are not readily available are valued at the average between
the last price asked and the last price bid. For valuation purposes, quotations
of foreign securities in a foreign currency are converted to U.S. dollar
equivalents based upon the latest available bid price of such currencies against
U.S. dollars quoted by any major bank or by a broker.

Bonds and other fixed income securities are valued according to the
broadest and most representative market which will ordinarily be the
over-the-counter market. Net asset value includes interest on fixed income
securities, which is accrued daily. Bonds and other fixed income securities may
be valued on the basis of prices provided by a pricing service when such prices
are believed to reflect the fair market value of such securities. Securities
purchased with remaining maturities of 60 days or less are valued at amortized
cost when the Board of Trustees determines that amortized cost reflects fair
value.

The value of other assets and securities for which no quotations are
readily available (including restricted securities) is determined in good faith
at fair value using methods determined by the Trustees.

PERFORMANCE CALCULATIONS

Each Portfolio may advertise or quote total return data. Total return
is calculated on an average annual total return basis, and may also be
calculated on an aggregate total return basis, for various periods. Average
annual total return reflects the average annual percentage change in value of an
investment in a

23
<PAGE>
Portfolio over a period. Aggregate total return reflects the total percentage
change in value over a period. Both methods assume dividends and capital gains
distributions are reinvested in shares of the Portfolios.

A Portfolio's performance may be compared to data prepared by
independent services which monitor the performance of investment companies, data
reported in financial and industry publications, and various indices, all as
further described in the Portfolio's SAI.

The Fund will provide information about past performance together with
a comparison to an appropriate index in its Annual Report to Shareholders.
Following the end of the Portfolios' fiscal year, a free copy of the Annual
Report to Shareholders will be available upon request by writing or calling the
Fund at the address or phone number on the cover of this Prospectus.

DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

Each Portfolio will distribute annually to shareholders substantially
all of its net investment income and any net realized long-term capital gains.
The Portfolios may distribute net investment income and other capital gains
during interim periods when the Fund's management determines that it is in the
best interests of a Portfolio and its shareholders to do so. It is not
anticipated that distributions of net investment income and other capital gains
will be made more frequently than quarterly. It is possible, however, as a
result of this policy that total distributions in a year could exceed the total
of a Portfolio's current year net investment income and capital gains. If this
should occur, a portion of the distributions received by shareholders of such
Portfolio could be a nontaxable "return of capital" for federal income tax
purposes and thereby reduce the shareholder's cost basis in shares of the
Portfolio. In general, a shareholder's total cost basis in the Fund will reflect
the cost of the shareholder's original investment plus the amount of any
reinvestment. Dividends paid shortly after the purchase of shares by an
investor, although in effect a return of capital, are taxable to shareholders. A
Portfolio's dividends and capital gains distributions will be reinvested
automatically in additional shares of that Portfolio unless the Fund is notified
in writing that the shareholder elects to receive distributions in cash.

If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, such shareholder's
distribution option will automatically be converted to having all dividend and
other distributions reinvested in additional shares. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.

FEDERAL TAXES

Each Portfolio has qualified, and intends to continue to qualify, as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). As such, the Portfolios will not be subject to federal income tax,
or any excise tax, to the extent its earnings are distributed as provided by the
Code. Each Portfolio intends to distribute substantially all of its net
investment income.

Each Portfolio may engage in certain transactions, such as short sales,
and may invest in certain instruments, such as futures contracts, which may
result in constructive sales of appreciated positions in

24
<PAGE>

securities for Federal income tax purposes. A constructive sale generally occurs
when a Portfolio has entered into a short sale of the same or substantially
identical securities or if it enters into a futures or forward contract to
deliver the same or substantially identical securities and in certain other
circumstances. If a constructive sale occurs, a Portfolio will recognize either
ordinary income or capital gain depending on the length of time which it held
the security which was constructively sold.

Dividends paid by the Portfolios from net investment income and
short-term capital gains, either in cash or reinvested in shares, will be
taxable to shareholders as ordinary income. Dividends paid from the Portfolios
will generally qualify in part for the 70% dividends-received deductions for
corporations, but the portion of the dividends so qualified depends on the
aggregate qualifying dividend income received by the Portfolios from domestic
(U.S.) sources.

Distributions paid by the Portfolios from long-term capital gains,
either in cash or additional shares of a Portfolio, are taxable to shareholders
subject to income tax as long-term capital gains regardless of the length of
time the shareholder has owned shares in a Portfolio. Also, for those
shareholders subject to tax, if purchases of shares in a Portfolio are made
shortly before the record date for a capital gains distribution or a dividend, a
portion of the investment will be returned as a taxable distribution.
Shareholders are notified annually by the Fund as to the Federal Income tax
status of dividends and distributions paid by the Portfolios. Dividends and
distributions may also be subject to state and local taxes. Dividends declared
in October, November, or December to shareholders of record in such month and
paid in January of the following year will be deemed to have been paid by a
Portfolio and received by the shareholders on December 31.

Redemptions of shares in the Portfolios are taxable events for Federal
income tax purposes.

The Portfolios are required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on the account registration form your
proper Taxpayer Identification Number and by certifying that you are not subject
to backup withholding.

STATE AND LOCAL TAXES

Shareholders may also be subject to state and local taxes on
distributions and redemptions. Shareholders should consult with their tax
advisers regarding the tax status of distributions in their state and locality.

INVESTMENT ADVISER

John McStay Investment Counsel is a limited partnership formed in 1983
and located at 5949 Sherry Lane, Suite 1560, Dallas, Texas 75225. The Adviser
provides investment management services to institutions and individuals. The
Adviser currently has approximately $3 billion in assets under management. John
D. McStay may be deemed to control the Adviser as a result of ownership of a
majority interest in John McStay & Associates ("JMA"), the general partner of
the Adviser. JMA owns a majority interest in the Adviser.

25
<PAGE>

An investment policy committee is responsible for the day-to-day
management of the Portfolios' investments.

Under Investment Advisory Agreements with the Fund, dated as of
November 25, 1996 and November 14, 1997, the Adviser manages the investment and
reinvestment of the assets of the Portfolios. The Adviser must adhere to the
stated investment objectives and policies of the Portfolios, and is subject to
the control and supervision of the Fund's Board of Trustees.

As compensation for its services as an Adviser, BRAZOS/JMIC Micro Cap
Growth, BRAZOS/JMIC Real Estate Securities and BRAZOS/JMIC Small Cap Growth
Portfolios pay the Adviser an annual fee, in monthly installments, of 1.20%,
.90% and .90% respectively, of each Portfolio's average daily net assets for the
month.

The Adviser has voluntarily agreed to keep operating expenses of the
BRAZOS/JMIC Micro Cap Growth, BRAZOS/JMIC Real Estate Securities and BRAZOS/JMIC
Small Cap Growth Portfolios from exceeding 1.60%, 1.25% and 1.35%, respectively,
of average daily net assets. The Fund will not reimburse the Adviser for any
advisory fees that are waived or Portfolio expenses that the Adviser may bear on
behalf of a Portfolio.

The Adviser may compensate its affiliated companies for referring
investors to the Portfolios. The Adviser, or any of its affiliates, may, at its
own expense, compensate a Service Agent or other person for marketing,
shareholder servicing, record-keeping and/or other services performed with
respect to the Fund or a Portfolio. Payments made for any of these purposes may
be made from the paying entity's revenues, its profits or any other source
available to it. When such service arrangements are in effect, they are made
generally available to all qualified service providers.

ADVISER'S HISTORICAL PERFORMANCE

Set forth below are performance data provided by the Adviser pertaining
to the composite of all separately managed accounts of the Adviser that are
managed with substantially similar (although not necessarily identical)
objectives, policies and strategies as those of the BRAZOS/JMIC Real Estate
Securities Portfolio. Also set forth is the performance of the Portfolio from
inception (12/31/96) through the December 31, 1997 calendar year end. The
performance data for the managed accounts is net of all fees and expenses. The
investment returns of the BRAZOS/JMIC Real Estate Securities Portfolio may
differ from those of the separately managed accounts because such separately
managed accounts may have fees and expenses that differ from those of the
BRAZOS/JMIC Real Estate Securities Portfolio. Further, the separately managed
accounts are not subject to investment limitations, diversification requirements
and other restrictions imposed by the Investment Company Act of 1940 and
Internal Revenue Code; such conditions, if applicable, may have lowered the
returns for the separately managed accounts. The Adviser's separate managed
account performance results set forth below under "Institutional Equity
Accounts" are not intended to predict or suggest the return of the BRAZOS/JMIC
Real Estate Securities Portfolio or the return an investor might achieve by
investing in the BRAZOS/JMIC Real Estate Securities Portfolio.

26
<PAGE>

John McStay Investment Counsel Real Estate Securities Portfolios
(Percentage Returns Net of Average Management Fees)
<TABLE>
<CAPTION>

Adviser's
Calendar Year Mutual Fund Institutional
Portfolio Equity NAREIT Wilshire
Performance Accounts Equity Index REIT Index
<S> <C> <C> <C> <C>
1994 .................................... - 14.6% 3.2% 2.7%

1995 .................................... - 20.5% 15.3% 12.2%

1996 .................................... - 42.1% 35.3% 37.0%

1997 .................................... 29.2% 26.5% 20.3% 19.7%

Cumulative .............................. 29.2% 148.2% 93.7% 88.9%

Annualized .............................. 29.2% 25.5% 18.0% 17.2%

Three Year Annualized Return............. - 29.4% 23.3% 22.5%

(Four)-Year Mean ........................ - 25.9% 18.5% 17.9%

Value of $1 invested during 4 years
(1/1/94-12/31/97) ....................... - $2.48 $1.94 $1.89
</TABLE>

Notes:

1. The annualized return of the Adviser's Institutional Equity Accounts is
calculated from monthly data, allowing for compounding. The formula used is
in accordance with the methods set forth by the Association for Investment
Management Research, The Bank Administration Institute, and the Investment
Counsel Association of America. Market Value of the account was the sum of
the account's total assets, including cash, cash equivalents, short term
investment, and securities valued at current market prices.

2. The cumulative return means that $1 invested in the composite account on
January 1, 1994 had grown to $2.48 by 12/31/97.

3. The four-year mean is the arithmetic average of the annual returns for the
years listed.

4. The NAREIT Equity Index and the Wilshire REIT Index are unmanaged indices
which assume reinvestment of dividends on securities in the index and are
generally considered representative of securities similar to those invested
in by the Adviser for the purpose of the composite performance numbers set
forth above. NAREIT Equity Index is a compilation of market-weighted
securities data collected from all tax-qualified equity real estate
investment trusts listed on the New York and American Stock Exchanges and
the NASDAQ. Wilshire REIT Index is a market capitalization- weighted index
of publicly traded real estate securities. The comparative indices are not
adjusted to reflect expenses or other fees reflected in the performance of
a mutual fund as required by the SEC.

27
<PAGE>

5. The Adviser's average annual management fee over the four-year period
(1994-1997) was .85% or 85 basis points. During the period, fees on the
Adviser's individual accounts ranged from .80% to 1% (80 basis points to
100 basis points). Net returns to investors vary depending on the
management fee.

6. The average annual total return of the BRAZOS/JMIC Real Estate Securities
Portfolio set forth above under "Mutual Fund Portfolio Performance" is
calculated according to a standardized formula required by SEC regulations.
The calculation assumes that all dividends and distributions are reinvested
when paid. Past performance of the Portfolio is not indicative of future
results. The Portfolio's total return is higher due to the maintenance of
the Portfolio's expenses by the Adviser. Investment returns and principal
values may fluctuate, so that, when redeemed, shares may be worth more or
less than their original investment.

Set forth below are performance data provided by the Adviser pertaining
to the composite of all separately managed accounts of the Adviser that are
managed with substantially similar (although not necessarily identical)
objectives, policies and strategies as those of the BRAZOS/JMIC Small Cap Growth
Portfolio. Also set forth is the performance of the Portfolio from inception
(12/31/96) through the December 31, 1997 calendar year end. The performance data
for the managed accounts is net of all fees and expenses. The investment returns
of the BRAZOS/JMIC Small Cap Growth Portfolio may differ from those of the
separately managed accounts because such separately managed accounts may have
fees and expenses that differ from those of the BRAZOS/JMIC Small Cap Growth
Portfolio. Further, the separately managed accounts are not subject to
investment limitations, diversification requirements and other restrictions
imposed by the Investment Company Act of 1940 and Internal Revenue Code; such
conditions, if applicable, may have lowered the returns for the separately
managed accounts. The Adviser's separately managed account performance results
set forth below under "Institutional Equity Accounts" are not intended to
predict or suggest the return of the BRAZOS/JMIC Small Cap Growth Portfolio or
the return an investor might achieve by investing in the BRAZOS/JMIC Small Cap
Growth Portfolio.

28
<PAGE>
John McStay Investment Counsel Small Capitalization Growth Portfolios
(Percentage Returns Net of Average Management Fees)

<TABLE>
<CAPTION>
Mutual Fund Adviser's
Calendar Years Portfolio Institutional S&P MidCap
Performance Equity Accounts 400 Index Russell 2000
<S> <C> <C> <C> <C>
1987* ............................. - 25.6% -2.0% -8.8%
1988* ............................. - 24.5% 20.9% 24.9%
1989* ............................. - 31.9% 35.6% 16.2%
1990* ............................. - -4.0% -5.1% -19.5%
1991* ............................. - 68.9% 50.1% 46.1%
1992* ............................. - 8.7% 11.9% 18.4%
1993 .............................. - 15.3% 14.0% 18.9%
1994 .............................. - -0.1% -3.6% -1.8%
1995 .............................. - 30.1% 30.9% 28.4%
1996 .............................. - 32.9% 19.2% 16.5%
1997 ..............................54.5% 23.4% 32.3% 22.4%
Cumulative ........................54.5% 793.4% 480.1% 294.2%
Annualized ........................54.5% 22.0% 17.3% 13.3%
Three Year Annualized Return....... - 28.7% 27.3% 22.4%
Five Year Annualized Return........ - 19.7% 17.8% 16.4%
Ten Year Annualized Return......... - 21.7% 19.5% 15.8%
Eleven-Year Mean .................. - 23.4% 18.6% 14.7%
Value of $1 invested
during 11 years
(1/1/87-12/31/97) ................ - $8.93 $5.80 $3.94

</TABLE>
- ---------------
* Numbers are AIMR compliant from 1/1/93 forward; prior to that time all
accounts,without regard to dollar value were equally weighted in
determining composite performance. (See note 6 below)

Notes:

1. The annualized return of the Adviser's Institutional Equity Accounts is
calculated from monthly data, allowing for compounding. The formula used is
in accordance with the acceptable methods set forth by the Association for
Investment Management Research, The Bank Administration Institute, and the
Investment Counsel Association of America. Market value of the account was
the sum of the account's total assets, including cash, cash equivalents,
short term investments, and securities valued at current market prices.

2. The cumulative return means that $1 invested in the composite account on
January 1, 1987 had grown to $8.93 by 12/31/97.

3. The eleven-year mean is the arithmetic average of the annual returns for
the years listed.

4. The S&P MidCap 400 and Russell 2000 are unmanaged indices which assume
reinvestment of dividends on securities in the index and are generally
considered representative of securities similar to those invested in by the
Adviser for the purpose of the composite performance numbers set forth

29
<PAGE>
above. The S&P MidCap 400 Index is an unmanaged capitalization-weighted
index that measures the performance of the mid-range of the U.S. stock
market. The Russell 2000 is composed of the 2000 smallest stocks in the
Russell 3000, a market value weighted index of the 3,000 largest U.S.
publicly traded companies. The comparative indices are not adjusted to
reflect expenses or other fees reflected in the performance of a mutual
fund as required by the SEC.

5. The Adviser's average annual management fee over the eleven-year period
(1987-1997) was 1% or 100 basis points. On January 1, 1987, the Adviser
began managing the separate accounts using objectives, policies and
strategies substantially similar to those of the BRAZOS/JMIC Small Cap
Growth Portfolio. During the period, fees on the Adviser's individual
accounts ranged from 1% to 1- 1/2% (100 basis points to 150 basis points).
Net returns to investors vary depending on the management fee.

6. Small Capitalization Growth Portfolios ("Composite") performance data is
AIMR compliant from 1/1/93 forward. Prior to that time, the only difference
in the calculation is that all portfolios were equally weighted without
regard to dollar value in determining Composite performance. The Composite
includes every account managed in JMIC's small capitalization style,
consistent with AIMR guidelines. This equal weighting method follows the
standards promulgated by the Investment Management Consultants' Association
which predates standards established by AIMR. In 1990, the Composite
results reflected portfolios ranging in number from 3 to 8 and in size from
$3 million to $30 million,with a median size of $13 million. In 1991, the
Composite reflected portfolios ranging in number from 8 to 18 and in size
from $1 million to $46 million, with a median size of $15 million. In 1992,
the Composite reflected portfolios ranging in number from 20 to 27 and in
size from $4 million to $50 million, with a median size of $17 million.
And, from 1987 through 1989, the Composite consisted of only one portfolio
which for many years served as the model for all accounts managed in this
style.

7. The average annual total return of the BRAZOS/JMIC Small Cap Growth
Portfolio set forth above under "Mutual Fund Portfolio Performance" is
calculated according to a standardized formula required by SEC regulations.
The calculation assumes that all dividends and distributions are reinvested
when paid. Past performance of the Portfolio is not indicative of future
results. The Portfolio's total return is higher due to the maintenance of
the Portfolio's expenses by the Adviser. Investment returns and principal
values may fluctuate, so that, when redeemed, shares may be worth more or
less than their original investment.

ADMINISTRATIVE SERVICES

PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809, serves as
Administrator, Transfer Agent and Dividend Paying Agent of the Fund and also
provides accounting services to the Fund. PFPC is an indirect wholly-owned
subsidiary of PNC Bank Corp., a multi-bank holding company.

As Administrator, PFPC supplies office facilities, non-investment
related statistical and research data, stationery and office supplies, executive
and administrative services, internal auditing and regulatory compliance
services. PFPC also assists in the preparation of reports to shareholders,
prepares proxy statements, updates prospectuses and makes filings with the
Securities and Exchange Commission and state

30
<PAGE>

securities authorities. PFPC performs certain budgeting and financial reporting
and compliance monitoring activities. For the services provided as
Administrator, PFPC receives an annual fee from the Fund equal to the greater
of: (1) a minimum annual fee of $32,500 for each of the first two single-class
Portfolios plus $15,000 for any additional Portfolio, or second or additional
class of a Portfolio; or (2) an asset-based fee, equal to a percentage of the
average daily net assets of the Fund, on a Fund-wide basis, according to the
following schedule:

0.15% of the first $50 million in assets; plus
0.10% of assets between $50 million and $200 million; plus
0.07% of assets in excess of $200 million.

The Administrator's fee shall be payable monthly, as soon as practicable after
the last day of each month, based on the Fund's average daily net assets as
determined at the close of business on each business day throughout the month.
PFPC also serves as Transfer Agent and Dividend Paying Agent of the Fund.

PFPC also serves as an Accounting Agent to the Fund. As Accounting
Agent, PFPC determines the Fund's net asset value per share and provides
accounting services to the Fund pursuant to an Accounting Services Agreement
with the Fund.

DISTRIBUTOR

Provident Distributors, Inc. Four Falls Corporate Center, 6th Floor,
West Conshohocken, PA 19428- 2961, has been engaged pursuant to a distribution
agreement dated February 13, 1998, to assist in securing purchasers for shares
of the Fund. Provident will receive no compensation for distribution of shares
of the Fund, except for reimbursement of out-of-pocket expenses.

PORTFOLIO TRANSACTIONS

The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolios. The Agreement directs the Adviser to use its best
efforts to obtain the best available price and most favorable execution for all
transactions of the Portfolios. The Adviser may buy and sell securities for the
account of a portfolio through the Adviser's affiliated broker-dealer. In such
instances, the affiliated broker-dealer will complete transactions pursuant to
procedures designed to ensure that charges for the transactions do not exceed
usual and customary levels obtainable from other, unaffiliated broker-dealers.
Such transactions and the procedures are supervised by the Fund's Board of
Trustees. It is understood that the affiliated broker-dealer will not be
utilized in situations where, in the Adviser's judgment, the brokerage services
of another security firm would be in the best interest of a Portfolio. If
consistent with the interests of the Portfolios, the Adviser may select brokers
on the basis of research, statistical and pricing services these brokers provide
to the Portfolios. Information and research received from such brokers will be
in addition to, and not in lieu of, the services required to be performed by the
Adviser under the Investment Advisory Agreement. Such brokers may be paid a
higher commission than that which another qualified broker would have charged
for effecting the same transaction, provided that such commissions are paid in
compliance with the Securities Exchange Act of 1934, as amended, and that the
Adviser determines in good faith that the commission is reasonable in terms
either of the transaction or the overall responsibility of the Adviser to the
Portfolios and the Adviser's other clients. Although not a typical practice, the
Adviser may place

31
<PAGE>
portfolio orders with qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities is consistent with the investment policies
of a Portfolio and one or more other clients served by the Adviser is considered
at or about the same time, transactions in such securities will be allocated
among the Portfolios and clients in a manner deemed fair and reasonable by the
Adviser. Although there is no specified formula for allocating such
transactions, the allocations are subject to periodic review by the Fund's
Trustees.

GENERAL INFORMATION

DESCRIPTION OF SHARES AND VOTING RIGHTS

The Fund was organized as a Delaware Business Trust on October 24,
1996. The Trustees have the power to designate one or more series of shares of
beneficial interest and to classify or reclassify any unissued shares without
further action by shareholders. At its discretion, The Board of Trustees may
create additional Portfolios and classes of shares.

The shares of each Portfolio are fully paid and nonassessable, have no
preference as to conversion, exchange, dividends, retirement or other features
and have no pre-emptive rights. They have noncumulative voting rights, which
means that the holders of more than 50% of the shares voting for the election of
Trustees can elect 100% of the Trustees. A shareholder is entitled to one vote
for each full share held (and a fractional vote for each fractional share held),
then standing in his name on the books of the Fund.

Annual meetings will not be held except as required by the 1940 Act and
other applicable laws. The Fund has undertaken that its Trustees will call a
meeting of shareholders if such a meeting is requested in writing by the holders
of not less than 10% of the outstanding shares of the Fund. The Fund will assist
shareholder communications in such matters.

CUSTODIAN

PNC Bank, N.A., 1600 Market Street, Philadelphia, PA 19103, serves as
Custodian of the Fund's assets.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P., 2400 Eleven Penn Center, Philadelphia, PA
19103, are the independent accountants for the Fund.

REPORTS

Shareholders receive unaudited semi-annual financial statements and
annual financial statements audited by Coopers & Lybrand L.L.P.

32
<PAGE>

SHAREHOLDER INQUIRIES

Shareholder inquiries may be made by contacting the Fund c/o PFPC Inc.,
P.O. Box 8987, Wilmington, DE 19899, or by calling the telephone number listed
on the cover of this Prospectus.

<PAGE>

PROSPECTUS
February 17, 1998

TRUSTEES

JOHN H. MASSEY
DAVID M. REICHERT
DAN L. HOCKENBROUGH

OFFICERS

DAN L. HOCKENBROUGH
Chairman of the Board,
President and Chief Financial Officer

TRICIA A. HUNDLEY
Vice President, Secretary and
Compliance Officer

LOREN J. SOETENGA
Vice President and Treasurer

CUSTODIAN

PNC BANK, N.A.
1600 Market Street
Philadelphia, Pennsylvania 19103

COUNSEL

DRINKER BIDDLE & REATH LLP
1345 Chestnut Street
Philadelphia, Pennsylvania 19107

AUDITORS

COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103

BRAZOS MUTUAL FUNDS

BRAZOS
JMIC MICRO CAP
GROWTH PORTFOLIO

BRAZOS
JMIC REAL ESTATE
SECURITIES PORTFOLIO

BRAZOS
JMIC SMALL CAP
GROWTH PORTFOLIO

A NO LOAD FUND

INVESTMENT ADVISER

JOHN McSTAY
INVESTMENT COUNSEL
5949 Sherry Lane
Suite 1560
Dallas, Texas 75225

34
<PAGE>

PART B

BRAZOS MUTUAL FUNDS

BRAZOS/JMIC MICRO CAP GROWTH PORTFOLIO
BRAZOS/JMIC REAL ESTATE SECURITIES PORTFOLIO
BRAZOS/JMIC SMALL CAP GROWTH PORTFOLIO

STATEMENT OF ADDITIONAL INFORMATION

February 17, 1998

This Statement is not a Prospectus but should be read in conjunction with the
Prospectus of the Brazos Mutual Funds (the "Fund") for Shares of the BRAZOS/JMIC
Micro Cap Growth, BRAZOS/JMIC Real Estate Securities and BRAZOS/JMIC Small Cap
Growth Portfolios dated February 17, 1998. To obtain the Prospectus, please call
PFPC Inc. at 1-800-426-9157.

TABLE OF CONTENTS

Page

INVESTMENT OBJECTIVES AND POLICIES....................................... 2
PURCHASE OF SHARES....................................................... 7
REDEMPTION OF SHARES..................................................... 7
SHAREHOLDER SERVICES..................................................... 9
INVESTMENT LIMITATIONS................................................... 10
MANAGEMENT OF THE FUND................................................... 11
INVESTMENT ADVISER....................................................... 14
PORTFOLIO TRANSACTIONS................................................... 15
PERFORMANCE CALCULATIONS................................................. 16
GENERAL INFORMATION...................................................... 20
FINANCIAL STATEMENTS..................................................... 23

1
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the investment policies of the
BRAZOS/JMIC Micro Cap Growth, BRAZOS/JMIC Real Estate Securities and BRAZOS/JMIC
Small Cap Growth Portfolios ("The Portfolios") as set forth in the Prospectus
for the Portfolios:

SECURITIES LENDING
Each Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending investment securities,
a Portfolio attempts to increase its income through the receipt of interest on
the loan. Any gain or loss in the market price of the securities loaned that
might occur during the term of the loan would be for the Portfolio's accounts. A
Portfolio may lend its investment securities to qualified brokers, dealers,
domestic and foreign banks or other financial institutions, so long as the
terms, the structure and the aggregate amount of such loans are not inconsistent
with the Investment Company Act of 1940, as amended, (the "1940 Act") or the
Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "Commission") thereunder, which currently require that (a) the
borrower pledge and maintain with a Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities issued
or guaranteed by the United States Government having a value at all times not
less than 100% of the value of the securities loaned, (b) the borrower add to
such collateral whenever the price of the securities loaned rises (i.e., the
borrower "marks to the market" on a daily basis), (c) the loan be made subject
to termination by a Portfolio at any time, and (d) a Portfolio receives
reasonable interest on the loan (which may include a Portfolio investing any
cash collateral in interest bearing short-term investments). All relevant facts
and circumstances, including the creditworthiness of the broker, dealer or
institution, will be considered in making decisions with respect to the lending
of securities, subject to review by the Board of Trustees.

At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities so long as such fees are set forth in a written contract and approved
by the investment company's Board of Trustees. A Portfolio will continue to
retain any voting rights with respect to the loaned securities. If a material
event occurs affecting an investment on a loan, the loan must be called and the
securities voted.

HEDGING STRATEGIES
Each Portfolio may engage in various portfolio strategies to hedge
against adverse movements in the equity markets. Each Portfolio may write (i.e.,
sell) covered call options on their portfolio securities, purchase put and call
options on securities and engage in transactions in related options on futures.
Each of these portfolio strategies is described below.

FUTURES CONTRACTS
Each Portfolio may enter into futures contracts. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission ("CFTC"), a U.S.
Government agency.

2
<PAGE>

Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by trading an opposite position ("buying" a
contract which has previously been "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.

Futures traders are required to make a good faith margin deposit in
cash or acceptable securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
security) if it is not terminated prior to the specified delivery date. Minimal
initial margin requirements are established by the futures exchange and may be
changed. Brokers may establish deposit requirements which are higher than the
exchange minimums. Futures contracts are customarily purchased and sold on
margin that may range upward from less than 5% of the value of the contract
being traded. After a futures contract position is opened, the value of the
contract is marked to market daily. If the futures contract price changes to the
extent that the margin on deposit does not satisfy margin requirements, payment
of additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. Each Portfolio
expects to earn interest income on their margin deposits.

Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators". Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade and use
futures contracts with the expectation of realizing profits from a fluctuation
in interest rates.

Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide straddles positions or that the Fund's
commodity futures and option positions be for other purposes, to the extent that
the aggregate initial margins and premiums required to establish such non-
hedging positions do not exceed five percent of the liquidation value of a
Portfolio. A Portfolio will only sell futures contracts to protect securities it
owns against price declines or purchase contracts to protect against an increase
in the price of securities it intends to purchase. As evidence of this hedging
interest, the Portfolios expect that approximately 75% of their futures
contracts purchases will be "completed", that is, equivalent amounts of related
securities will have been purchased or will be purchased by the Portfolios on
the settlement date of the futures contracts.

Although techniques other than the sale and purchase of futures
contracts could be used to control a Portfolio's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While a Portfolio will incur commission expenses in both
opening and closing out futures positions, these costs are lower than
transaction costs incurred in the purchase and sale of the underlying
securities.

3
<PAGE>

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
A Portfolio will not enter into futures contract transactions to the
extent that, immediately thereafter, the sum of its initial margin deposits on
open contracts exceeds 5% of the market value of its total assets. In addition,
a Portfolio will not enter into futures contracts to the extent that its
outstanding obligations to purchase securities under these contracts would
exceed 20% of its total assets.

RISK FACTORS IN FUTURES TRANSACTIONS
Portfolio will minimize the risk that it will be unable to close out
a futures position by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist for
a particular futures contract at any given time. Thus, it may not be possible to
close a futures position. In the event of adverse price movements, a Portfolio
would continue to be required to make daily cash payments to maintain its
required margin. In such situations, if a Portfolio has insufficient cash, it
may have to sell securities to meet daily margin requirements at a time when it
may be disadvantageous to do so. In addition, a Portfolio may be required to
make delivery of the instruments underlying futures contracts it holds. The
inability to close futures positions also could have an adverse impact on a
Portfolio's ability to effectively hedge.

The risk of loss in trading futures contracts in some strategies can be
substantial due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss (as well as gain) to the investor. For example, if at the time of purchase,
10% of the value of the futures contract is deposited as margin, a subsequent
10% decrease in the value of the futures contract would result in a total loss
of the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in excess of the amount
invested in the contract. However, because the futures strategies of a Portfolio
is engaged in only for hedging purposes, the Adviser does not believe that a
Portfolio is subject to the risks of loss frequently associated with futures
transactions. A Portfolio would presumably have sustained comparable losses if,
instead of futures contracts, they had invested in the underlying financial
instrument and sold them after the decline.

Utilization of futures transactions by a Portfolio does involve the
risk of imperfect or no correlation where the securities underlying the futures
contracts have different maturities than the portfolio securities being hedged.
It is also possible that a Portfolio could lose money on futures contracts and
also experience a decline in value of portfolio securities. There is also the
risk of loss by a Portfolio of margin deposits in the event of bankruptcy of a
broker with whom a Portfolio has an open position in a futures contract or
related option.

Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and, therefore, does
not limit potential losses because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading

4
<PAGE>
days with little or no trading thereby preventing prompt liquidation of futures
positions and subjecting some futures traders to substantial losses.

Futures contracts may be traded on foreign exchanges. Such transactions
are subject to the risks of governmental actions affecting trading in or the
prices of the securities. The value of such positions also could be adversely
affected by (i) other complex foreign political and economic factors, (ii)
lesser availability than in the United States of data on which to make trading
decisions, (iii) delays in a Portfolio's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States,
(iv) the imposition of different exercise and settlement terms and procedures
and margin requirements than in the United States, and (v) lesser trading
volume.

The investment by a Portfolio in futures contracts and options on
futures contracts is subject to many complex and special tax rules. The
treatment by a Portfolio of certain futures and forward contracts is generally
governed by Section 1256 of the Internal Revenue Code of 1986, as amended (the
"Code"). These "Section 1256" positions generally include listed options on
futures contracts, regulated futures contracts and certain foreign currency
contracts and options thereon.

Absent a tax election to the contrary, each such Section 1256 position
held by a Portfolio will be marked-to-market (i.e., treated as if it were sold
for fair market value) on the last business day of the Portfolio's fiscal year,
and all gain or loss associated with fiscal year transactions and
marked-to-market positions at fiscal year end (except certain currency gain or
loss covered by Section 988 of the Code) will generally be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. The
effect of Section 1256 mark-to-market rules may be to accelerate income or to
convert what otherwise would have been long-term capital gains into short-term
capital gains or short-term capital losses into long-term capital losses within
a Portfolio. The acceleration of income on Section 1256 positions may require a
Portfolio to accrue taxable income without the corresponding receipt of cash. In
order to generate cash to satisfy the distribution requirements of the Code, a
Portfolio may be required to dispose of portfolio securities that they otherwise
would have continued to hold or to use cash flows from other sources such as the
sale of a Portfolio's shares. In these ways, any or all of these rules may
affect both the amount, character and timing of income distributed to
shareholders by the Portfolios.

OPTIONS
Each Portfolio may purchase and sell put and call options on securities
and futures contracts for hedging purposes. Investments in options involve some
of the same considerations that are involved in connection with investments in
futures contracts (e.g., the existence of a liquid secondary market). In
addition, the purchase of an option also entails the risk that changes in the
value of the underlying security or contract will not be fully reflected in the
value of the option purchased. Depending on the pricing of the option compared
to either the futures contract on which it is based or the price of the
securities being hedged, an option may or may not be less risky than ownership
of the futures contract or such securities. In general, the market prices of
options can be expected to be more volatile than the market prices on the
underlying futures contract or securities.

WRITING COVERED CALL OPTIONS
The principal reason for writing call options is to attempt to realize,
through the receipt of premiums, a greater return than would be realized on
securities alone. By writing covered call options, a Portfolio gives up the
opportunity, while the option is in effect, to profit from any price increase in
the

5
<PAGE>
underlying security above the option exercise price. In addition, a Portfolio's
ability to sell the underlying security will be limited while the option is in
effect unless it effects a closing purchase transaction. A closing purchase
transaction cancels out the Portfolio's position as the writer of an option by
means of an offsetting purchase of an identical option prior to the expiration
of the option it has written. Covered call options serve as a partial hedge
against the price of the underlying security declining. Each Portfolio writes
only covered options, which means that so long as a Portfolio is obligated as
the writer of the option it will, in a segregated account with its custodian,
maintain cash, U.S. government securities, other high grade liquid debt
securities or other liquid securities denominated in U.S. dollars with a value
equal to or greater than the exercise price of the underlying securities.

PURCHASING OPTIONS
The amount of any appreciation in the value of the underlying security
subject to a put will be partially offset by the amount of the premium paid for
the put option and any related transaction costs. Prior to its expiration, a put
option may be sold in a closing sale transaction and profit or loss from a sale
will depend on whether the amount received is more or less than the premium paid
for the put option plus the related transaction costs. A closing sale
transaction cancels out a Portfolio's position as purchaser of an option by
means of an offsetting sale of an identical option prior to the expiration of
the option it has purchased. In certain circumstances, a Portfolio may purchase
call options on securities held in their investment portfolios on which they
have written call options or on securities which they intend to purchase.

SHORT SALES
Each Portfolio may seek to hedge investments or realize additional
gains through short sales. A Portfolio may make short sales, which are
transactions in which a Portfolio sells a security it does not own, in
anticipation of a decline in the market value of the security. To complete such
a transaction, a Portfolio must borrow the security to make delivery to the
buyer. A Portfolio then is obligated to replace the security borrowed by
purchasing it at the market price at or prior to the time of replacement. The
price at such time may be more or less than the price at which the security was
sold. Until the security is replaced, a Portfolio is required to repay the
lender any dividends or interest that accrue during the period of the loan. To
borrow the security, a Portfolio also may be required to pay a premium, which
would increase the cost of the security sold. The net proceeds of the short sale
will be retained by the broker, to the extent necessary to meet margin
requirements, until the short position is closed out. A Portfolio also will
incur transaction costs in effecting short sales.

A Portfolio will incur a loss as a result of the short sale if the
price of the security increases between the date of the short sale and the date
on which a Portfolio replaces the borrowed security. A Portfolio will realize a
gain if the security declines in price between those dates. The amount of any
gain will be decreased, and the amount of any loss increased by the amount of
the premium, dividends, interest, or expenses a Portfolio may be required to pay
in connection with a short sale.

No securities will be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed 25%
of the value of the Portfolio's net equity. Each Portfolio similarly will limit
its short sales of the securities of any single issuer if the market value of
the securities that have been sold short would exceed two percent (2%) of the
value of a Portfolio's net equity or if such securities would constitute more
than two percent (2%) of any class of the issuer's securities.

6
<PAGE>

Whenever a Portfolio engages in short sales, its custodian segregates
an amount of cash or U.S. Government securities or other high-grade liquid debt
securities equal to the difference between (a) the market value of the
securities sold short at the time they were sold short and (b) any cash or U.S.
Government securities required to be deposited with the broker in connection
with the short sale (not including the proceeds from the short sale). The
segregated assets are marked to market daily, provided that at no time will the
amount deposited in it plus the amount deposited with the broker be less than
the market value of the securities at the time they were sold short.

In addition, a Portfolio may make short sales "against the box," i.e.
when a security identical to one owned by a Portfolio is borrowed and sold
short. If a Portfolio enters into a short sale against the box, it is required
to segregate securities equivalent in kind and amount to the securities sold
short (or securities convertible or exchangeable into such securities) and is
required to hold such securities while the short sale is outstanding. A
Portfolio will incur transaction costs, in connection with opening, maintaining,
and closing short sales against the box. A short sale may result in the
recognition of gain with respect to a security for Federal income tax purposes
under certain rules which treat certain short sales of the same or substantially
identical positions with respect to such a security as a constructive sale at
the time a short position is entered into by a Portfolio. See, "DIVIDENDS,
CAPITAL GAINS DISTRIBUTIONS AND TAXES."

PURCHASE OF SHARES

Shares of the Portfolios may be purchased without sales commission at
the net asset value per share next determined after an order is received in
proper form by the Fund. The minimum initial investment required for each
Portfolio is $10,000 with certain exceptions as may be determined from time to
time by the officers of the Fund. An order received in proper form prior to the
4:00 p.m. close of the New York Stock Exchange (the "NYSE") will be executed at
the price computed on the date of receipt; and an order received not in proper
form or after the 4:00 p.m. close of the NYSE will be executed at the price
computed on the next day the NYSE is open after proper receipt. The NYSE will be
closed on the following days: New Year's Day; Martin Luther King, Jr.'s
Birthday; Presidents' Day; Good Friday; Memorial Day; Independence Day; Labor
Day; Thanksgiving Day and Christmas Day.

The Portfolios reserve the right in their sole discretion (1) to
suspend the offering of their shares, (2) to reject purchase orders when in the
judgment of management such rejection is in the best interests of the Fund, and
(3) to reduce or waive the minimum for initial and subsequent investment for
certain fiduciary accounts such as employee benefit plans or under circumstances
where certain economies can be achieved in sales of the Portfolios' shares.

REDEMPTION OF SHARES

The Portfolios may suspend redemption privileges or postpone the date
of payment (1) during any period that the Exchange is closed or trading on the
Exchange is restricted as determined by the Commission, (2) during any period
when an emergency exists as defined by the rules of the Commission as a result
of which it is not reasonably practicable for the Portfolios to dispose of
securities owned by it or to fairly determine the value of its assets, and (3)
for such other periods as the Commission may permit. The Fund has made an
election with the Commission to pay in cash all redemptions requested by any
shareholder of record limited in amount during any 90-day period to the lesser
of $250,000 or 1% of the

7
<PAGE>
net assets of the Fund at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Commission. Redemptions in excess
of the above limits may be paid, in whole or in part, in investment securities
or in cash as the Board of Trustees may deem advisable; however, payment will be
made wholly in cash unless the Board of Trustees believe that economic or market
conditions exist which would make such a practice detrimental to the best
interests of the Fund. If redemptions are paid in investment securities, such
securities will be valued as set forth in the Prospectus under "How Share Prices
are Determined," and a redeeming shareholder would normally incur brokerage
expenses if those securities were converted to cash.

Any redemption may be more or less than the shareholder's initial cost
depending on the market value of the securities held by a Portfolio.

BRAZOS/JMIC Micro Cap Growth and BRAZOS/JMIC Small Cap Growth
Portfolios. No charge is made by these Portfolios for redemptions.

BRAZOS/JMIC Real Estate Securities Portfolio. No charge is made by the
BRAZOS/JMIC Real Estate Securities Portfolio for redemptions if shares are held
for at least 90 days. Shares held for less than 90 days will be subject to a 1%
redemption fee which is retained by the Fund for the benefit of the remaining
shareholders and is intended to encourage long-term investment in the
BRAZOS/JMIC Real Estate Securities Portfolio, to avoid transaction and other
expenses caused by early redemption and to facilitate portfolio management.

SIGNATURE GUARANTEES
To protect your account, the Fund and PFPC Inc. (the "Administrator" or
"PFPC") from fraud, signature guarantees are required for certain redemptions.
Signature guarantees are required for (1) redemptions where the proceeds are to
be sent to someone other than the registered shareowner(s) or the registered
address or (2) share transfer requests. The purpose of signature guarantees is
to verify the identity of the party who has authorized a redemption.

Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institution is
available from the Administrator. Broker-dealers guaranteeing signatures must be
a member of a clearing corporation or maintain net capital of at least $100,000.
Credit unions must be authorized to issue signature guarantees. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program.

The signature guarantee must appear either: (1) on the written request
for redemption; (2) on a separate instrument for assignment ("stock power")
which should specify the total number of shares to be redeemed; or (3) on all
stock certificates tendered for redemption and, if shares held by the Fund are
also being redeemed, on the letter or stock power.

8
<PAGE>
SHAREHOLDER SERVICES

The following supplements the shareholder services information set
forth in the Prospectus:

EXCHANGE PRIVILEGE
Shares of a Portfolio may be exchanged for shares of any other
Portfolio included within the Brazos Mutual Funds. Exchange requests should be
made by calling 1-800- 426-9157 or by writing to Brazos Mutual Funds, c/o PFPC,
P.O. Box 8987, Wilmington, DE 19899. The exchange privilege is only available
with respect to Portfolios that are registered for sale in the shareholder's
state of residence.

Any such exchange will be based on the respective net asset values of
the shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read the Prospectus
and consider the investment objectives of the Portfolio to be purchased. You may
obtain a Prospectus for the Portfolio(s) you are interested in by calling the
Administrator at 1-800-426- 9157.

Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. (Eastern Time) will be processed as of the close of
business on the same day. Requests received after 4:00 p.m. will be processed on
the next business day. Neither the Fund nor the Administrator will be
responsible for the authenticity of the exchange instructions received by
telephone. Exchanges may also be subject to limitations as to amounts or
frequency, and to other restrictions established by the Board of Trustees to
assure that such exchanges do not disadvantage the Fund and its shareholders.

For Federal income tax purposes an exchange between Portfolios is a
taxable event, and, accordingly, a capital gain or loss may be realized. In a
revenue ruling relating to circumstances similar to the Fund's, an exchange
between series of a Fund was also deemed to be a taxable event. It is likely,
therefore, that a capital gain or loss would be realized on an exchange between
Portfolios; you may want to consult your tax adviser for further information in
this regard. The exchange privilege may be modified or terminated at any time.

TRANSFER OF SHARES
Shareholders may transfer shares of the Portfolios to another person by
making a written request to the Fund. The request should clearly identify the
account and number of shares to be transferred, and include the signature of all
registered owners and all stock certificates, if any, which are subject to the
transfer. The signature on the letter of request, the stock certificate or any
stock power must be guaranteed in the same manner as described under "Redemption
of Shares." As in the case of redemptions, the written request must be received
in good order before any transfer can be made.

9
<PAGE>

INVESTMENT LIMITATIONS

The following limitations supplement those set forth in the Prospectus.
Whenever an investment limitation sets forth a percentage limitation on
investment or utilization of assets, such limitation shall be determined
immediately after and as a result of a Portfolio's acquisition of such security
or other asset. Accordingly, any later increase or decrease resulting from a
change in values, net assets or other circumstances will not be considered when
determining whether the investment complies with a Portfolio's investment
limitations. Investment limitations (1), (2), (3) and (4) are classified as
fundamental. A Portfolio's fundamental investment limitations cannot be changed
without approval by a "majority of the outstanding shares" (as defined in the
1940 Act) of a Portfolio. A Portfolio will not:

(1) invest in physical commodities or contracts on physical commodities;

(2) purchase or sell real estate or real estate limited partnerships,
although it may purchase and sell securities of companies which deal
in real estate and may purchase and sell securities which are secured
by interests in real estate; additionally, the BRAZOS/JMIC Real Estate
Securities Portfolio may purchase and sell mortgage-related securities
and liquidate real estate acquired as a result of default on a
mortgage and may invest in marketable securities issued by companies
such as real estate investment trusts which deal in real estate or
interests therein and participation interests in pools of real estate
mortgage loans;

(3) make loans except (i) by purchasing debt securities in accordance with
its investment objectives and (ii) by lending its portfolio securities
to banks, brokers, dealers and other financial institutions so long as
such loans are not inconsistent with the 1940 Act or the rules and
regulations or interpretations of the Commission thereunder;

(4) underwrite the securities of other issuers;

(5) invest in futures and/or options on futures unless (i) not more than
5% of the Portfolio's assets are required as deposit to secure
obligations under such futures and/or options on futures contracts,
provided, however, that in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount may be excluded in
computing such 5%; and (ii) not more than 20% of a Portfolio's assets
are invested in futures and options;

(6) purchase on margin except as specified in (5) above;

(7) invest more than an aggregate of 15% of the net assets of a Portfolio,
determined at the time of investment, in securities subject to legal
or contractual restrictions on resale or securities for which there
are no readily available markets;

(8) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Portfolio from (i)
making any permitted borrowings, mortgages or pledges, or (ii)
entering into options, futures or repurchase transactions.

10
<PAGE>

MANAGEMENT OF THE FUND

TRUSTEES AND OFFICERS
The Officers of the Fund manage its day-to-day operations and are
responsible to the Fund's Board of Trustees. The Trustees set broad policies for
the Fund and elect its Officers. The following is a list of the Trustees and
Officers of the Fund and a brief statement of their present positions and
principal occupations during the past five years:
<TABLE>
<CAPTION>
<S> <C>

*Dan L. Hockenbrough Trustee, President and Chief Financial Officer of
5949 Sherry Lane, Suite 1560 the Fund; Since August 1996, Business Manager of
Dallas, Texas 75225 John McStay Investment Counsel. Formerly,
Age 38 Chief Financial Officer of Waugh Enterprises, Inc.
from November 1995 until August 1996;
Assistant Controller of Hicks, Muse,
Tate & Furst Incorporated from December
1992 to November 1995; and Senior
Associate at Coopers & Lybrand prior to
December 1992.

John H. Massey Trustee of the Fund; Private Investor and a
4004 Windsor Avenue Director of The Paragon Group, Inc., Chancellor
Dallas, Texas 75205 Broadcasting, Inc., Bank of the Southwest,
Age 58 Columbine JDS Systems, Inc. and FSW Holdings,
Inc. Until 1996, Chairman of the Board and Chief
Executive Officer of Life Partners Group, Inc.

David M. Reichert Trustee of the Fund; Private Investor; formerly
7415 Stonecrest Drive Senior Vice President of Moffet Capital
Dallas, Texas 75240 Management, an investment counseling firm, from
Age 58 January 1995 until June 1996 and Senior Vice
President and Portfolio Manager of
American Capital Asset Management, a
mutual fund management company, from
April 1989 to July 1994.

*Tricia A. Hundley Vice President, Secretary and Compliance Officer
5949 Sherry Lane, Suite 1560 of the Fund; Partner of John McStay Investment
Dallas, Texas 75225 Counsel since 1987.
Age 47

*Loren J. Soetenga Vice President and Treasurer of the Fund;
5949 Sherry Lane, Suite 1560 Principal of John McStay Investment Counsel.
Dallas, Texas 75225 Formerly, Partner of Chronos Management, Inc.
Age 30 until 1996.
</TABLE>
*This person is deemed to be an "interested person" of the Fund as that term is
defined in the 1940 Act.

11
<PAGE>

REMUNERATION OF TRUSTEES AND OFFICERS
The Fund pays each Trustee, who is not also an officer or affiliated
person, a $500 quarterly retainer fee per active Portfolio which currently
amounts to $1,500 per quarter. In addition, each unaffiliated Trustee receives a
$500 meeting fee which is aggregated for all the Trustees and allocated
proportionately among the Portfolios of the Fund, and reimbursement for travel
and other expenses incurred while attending Board meetings. Trustees who are
also officers or affiliated persons receive no remuneration for their service as
Trustees. The Fund's officers and employees are paid by either the Adviser or
the Administrator and receive no compensation from the Fund. The following table
shows aggregate compensation paid to each of the Fund's Trustees for the fiscal
year ended November 30, 1997.

COMPENSATION TABLE
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Person Aggregate Pension or Estimated Annual Total Compensation
Position Compensation Retirement Benefits Benefits Upon from Registrant and
From Registrant Accrued as Part of Retirement Fund Complex Paid
Fund Expenses to Trustees
=================================================================================================================================
<S> <C> <C> <C> <C>
Dan L. Hockenbrough -0- -0- -0- -0-
Director

John H. Massey $6,000 -0- -0- $6,000
Director

David M. Reichert $6,000 -0- -0- $6,000
Director
</TABLE>

PRINCIPAL HOLDERS OF SECURITIES

As of February 1, 1998, the following persons or organizations held of
record 5% or more of the shares of each Portfolio:

Micro Cap Growth Portfolio

John McStay and Ellen McStay
JT Ten Comm
5949 Sherry Lane, Suite 1560
Dallas, TX 75225 5.62%

Real Estate Securities Portfolio

Suntrust Bank Atlanta Cust. for
University of Georgia Foundation
DTD 03/19/97
P.O. Box 105870
Atlanta, GA 30348-5870 13.76%

12
<PAGE>

California Province of the Society of Jesus
Attn: Robert L. St. Clair, SJ
P.O. Box 519
Los Gatos, CA 95031-0519 12.60%

Lafayette College
Rosemary Bader, Asst. Treasurer
234 Markle Hall
Easton, PA 18042-1779 8.92%

R.D. & Joan Dale Hubbard Foundation Inc.
73-405 El Paseo 32-D
Palm Desert, CA 92260 6.25%

The Valley Foundation
16450 Los Gatos Boulevard, Suite 210
Los Gatos, CA 95032 6.18%

Boys & Girls Clubs of America
1230 W. Peachtree Street, NW
Atlanta, GA 30309 6.02%

Small Cap Growth Portfolio

MAC & Co.
A/C XCFF4101182
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198 9.32%

Mercantile-Safe Deposit & Trust Co. Trste
for Blue Cross Blue Shield of
Maryland Retirement Plan & Trust DTD 2/10/97
766 Old Hammonds Ferry Road
Linthicum, MD 21090 8.32%

R.D. & Joan Dale Hubbard Foundation Inc.
73-405 El Paseo 32-D
Palm Desert, CA 92260 6.66%

Strafe & Co. Trste for Owensboro
Mercy Health System Inc.
John McStay A/C3402817000 DTD 12/5/97
P.O. Box 0160
Westerville, OH 43086-0160 5.77%

13
<PAGE>

Charles Schwab & Co., Inc.
Special Custody for Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104 5.25%

INVESTMENT ADVISER

ADVISORY FEES
As compensation for services rendered by John McStay Investment Counsel
(the "Adviser") under the Investment Advisory Agreement, the Portfolios pay the
Adviser an annual fee in monthly installments, calculated by applying the
following annual percentage rates to the Portfolios' average daily net assets
for the month:

BRAZOS/JMIC Micro Cap Growth Portfolio..................... 1.20%
BRAZOS/JMIC Real Estate Securities Portfolio............... 0.90%
BRAZOS/JMIC Small Cap Growth Portfolio..................... 0.90%

For the fiscal year ended November 30, 1997 the Portfolios paid the
Adviser fees and the Adviser waived fees and/or reimbursed expenses of the
Portfolios as follows:

Fees paid
Portfolio (After Waivers) Waivers

BRAZOS/JMIC Micro Cap Growth Portfolio* $0 $0
BRAZOS/JMIC Real Estate Securities Portfolio $ 98,687 $139,015
BRAZOS/JMIC Small Cap Growth Portfolio $131,736 $107,342

ADMINISTRATION FEES
In addition to the fees received for its services as Administrator to
the Fund, as set forth in the Prospectus under "ADMINISTRATIVE SERVICES," PFPC
receives fees from the Fund for providing transfer agency, accounting and
dividend disbursing services. Such fees are included in the calculation of
"Other Expenses" which appears under the caption heading "FUND EXPENSES" in the
Prospectus.

For the fiscal year ended November 30, 1997 the Fund paid Rodney
Square** administration fees and Rodney Square waived fees and/or reimbursed
expenses of the Portfolios as follows:

Fees paid
Portfolio (After Waivers) Waivers

BRAZOS/JMIC Micro Cap Growth Portfolio* $0 $0
BRAZOS/JMIC Real Estate Securities Portfolio $37,775 $4,051
BRAZOS/JMIC Small Cap Growth Portfolio $38,935 $4,051

14
<PAGE>

For the fiscal year ended November 30, 1997 the Fund paid Rodney
Square** accounting services fees and Rodney Square waived fees and/or
reimbursed expenses of the Portfolios as follows:

Fees paid
Portfolio (After Waivers) Waivers
BRAZOS/JMIC Micro Cap Growth Portfolio* $0 $0
BRAZOS/JMIC Real Estate Securities Portfolio $35,742 $5,610
BRAZOS/JMIC Small Cap Growth Portfolio $36,198 $5,610

* The Micro Cap Growth Portfolio commenced operations on 12/31/97.
** PFPC entered into an agreement with Rodney Square Management Corporation
("Rodney Square") to provide services that were provided by Rodney Square up
until January 5, 1998.

CUSTODIAN
PNC Bank, N.A. ("PNC") serves as the Fund's Custodian. As Custodian,
PNC has agreed to (a) maintain a separate account or accounts in the name of the
Fund, (b) hold and transfer portfolio securities on account of the Fund, (c)
accept receipts and make disbursements of money on behalf of the Fund, (d)
collect and receive all income and other payments and distributions on account
of the Fund's portfolio securities, and (e) make periodic reports to the Fund's
Trustees concerning the Fund's operations. PNC is authorized to select one or
more banks or trust companies to serve as sub-custodian on behalf of the
Company, provided that PNC remains responsible for the performance of all its
duties under the Custodian Agreement and holds the Fund harmless from the
negligent acts and omissions of any sub-custodian. For its services to the Fund
under the Custodian Agreement, PNC receives a fee in addition to transaction
charges and out-of-pocket expenses.

PORTFOLIO TRANSACTIONS

The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolios and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolios.
The Adviser may, however, consistent with the interests of the Portfolios,
select brokers on the basis of the research, statistical and pricing services
they provide to the Portfolios. Information and research received from such
brokers will be in addition to, and not in lieu of, the services required to be
performed by the Adviser under the Investment Advisory Agreement. A commission
paid to such brokers may be higher than that which another qualified broker
would have charged for effecting the same transaction, provided that such
commissions are paid in compliance with the Securities Exchange Act of 1934, as
amended, and that the Adviser determines in good faith that such commission is
reasonable in terms either of the transaction or the overall responsibility of
the Adviser to the Portfolios and the Adviser's other clients.

It is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of shares which may be made through broker-dealer
firms. However, the Adviser may place portfolio orders

15
<PAGE>
with qualified broker-dealers who recommend the Portfolios or who act as agents
in the purchase of shares of the Portfolios for their clients.

Some securities considered for investment by the Portfolios may also be
appropriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of the Portfolios and one or
more of these other clients served by the Adviser is considered at or about the
same time, transactions in such securities will be allocated among the
Portfolios and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such
allocations, are subject to periodic review by the Fund's Board of Trustees.

For the fiscal year ended November 30, 1997, the Portfolios paid
brokerage commissions as follows:

Fund Brokerage Commission

BRAZOS/JMIC Micro Cap Growth Portfolio $0
BRAZOS/JMIC Real Estate Securities Portfolio $316,900
BRAZOS/JMIC Small Cap Growth Portfolio $132,283

PERFORMANCE CALCULATIONS

PERFORMANCE

The Portfolios may from time to time quote various performance figures
to illustrate past performance. Performance quotations by investment companies
are subject to rules adopted by the Commission, which require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the
Commission. Current yield and average annual compounded total return quotations
used by the Fund are based on the standardized methods of computing performance
mandated by the Commission. An explanation of those and other methods used to
compute or express performance follows.

YIELD
Current yield reflects the income per share earned by a Portfolio's
investment. The current yield of a Portfolio is determined by dividing the net
investment income per share earned during a 30-day base period by the maximum
offering price per share on the last day of the period and annualizing the
result. Expenses accrued for the period include any fees charged to all
shareholders during the base period.

This figure is obtained using the following formula:

Yield=2[(a-b+1)6 - 1]
---
cd

where:

16
<PAGE>

a= dividends and interest earned during the period
b= expenses accrued for the period (net of reimbursements)
c= the average daily number of shares outstanding during the period that
were entitled to receive income distributions
d= the maximum offering price per share on the last day of the period.

TOTAL RETURN
The average annual total return of a Portfolio is determined by finding
the average annual compounded rates of return over 1, 5 and 10 year periods that
would equate an initial hypothetical $1,000 investment to its ending redeemable
value. The calculation assumes that all dividends and distributions are
reinvested when paid. The quotation assumes the amount was completely redeemed
at the end of each 1, 5 and 10 year period and the deduction of all applicable
Fund expenses on an annual basis.

These figures will be calculated according to the following formula:

P(1+T)n=ERV

where:
P= a hypothetical initial payment of $ 1,000
T= average annual total return
n= number of years
ERV= ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5 or 10 year periods at the end of
the 1, 5 or 10 year periods (or fractional portion thereof).

Total return for the Portfolios for the period ended November 30, 1997 was:

12/31/96
through
11/30/97

BRAZOS/JMIC Real Estate Securities Portfolio 24.39%

BRAZOS/JMIC Small Cap Growth Portfolio 47.08%

COMPARISONS
To help investors better evaluate how an investment in a Portfolio
might satisfy their investment objective, advertisements regarding the Fund may
discuss various measures of Fund performance as reported by various financial
publications. Advertisements may also compare performance (as calculated above)
to performance as reported by other investments, indices and averages. The
following publications, indices and averages may be used:

(1) Dow Jones Composite Average or its component averages - an
unmanaged index composed of 30 blue-chip industrial
corporation stocks (Dow Jones Industrial Average), 15
utilities company stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.

17
<PAGE>

(2) Standard & Poor's 500 Stock Index or its component indices -
an unmanaged index composed of 400 industrial stocks, 40
financial stocks, 40 utilities stocks and 20 transportation
stocks. Comparisons of performance assume reinvestment of
dividend.

(3) Standard & Poor's MidCap 400 Index - an unmanaged index
measuring the performance of non-S&P 500 stocks in the
mid-range sector of the U.S. stock market.

(4) The New York Stock Exchange composite or component indices -
unmanaged indices of all industrial, utilities, transportation
and finance stocks listed on the New York Stock Exchange.

(5) Wilshire 5000 Equity Index or its component indices -
represents the return on the market value of all common equity
securities for which daily pricing is available. Comparisons
of performance assume reinvestment of dividends.

(6) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed
Income Fund Performance Analysis - measure total return and
average current yield for the mutual fund industry. Rank
individual mutual fund performance over specified time
periods, assuming reinvestment of all distributions, exclusive
of any applicable sales charges.

(7) Morgan Stanley Capital International EAFE Index and World
Index - respectively, arithmetic, market value-weighted
averages of the performance of over 900 securities listed on
the stock exchanges of countries in Europe, Australia and the
Far East, and over 1,400 securities listed on the stock
exchanges of these continents, including North America.

(8) Goldman Sachs 100 Convertible Bond Index - currently includes
67 bonds and 33 preferred. The original list of names was
generated by screening for convertible issues of 100 million
or greater in market capitalization. The index is priced
monthly.

(9) Salomon Brothers GNMA Index - includes pools of mortgages
originated by private lenders and guaranteed by the mortgage
pools of the Government National Mortgage Association.

(10) Salomon Brothers High Grade Corporate Bond Index - consists of
publicly issued, non-convertible corporate bonds rated AA or
AAA. It is a value-weighted, total return index, including
approximately 800 issues with maturities of 12 years or
greater.

(11) Salomon Brothers Broad Investment Grade Bond - is a
market-weighted index that contains approximately 4,700
individually priced investment grade corporate bonds rated BBB
or better, U.S. Treasury/agency issues and mortgage pass
through securities.

(12) Lehman Brothers Long-Term Treasury Bond - is composed of all
bonds covered by the Lehman Brothers Treasury Bond Index with
maturities of 10 years or greater.

(13) NASDAQ Industrial Index - is composed of more than 3,000
industrial issues. It is a value- weighted index calculated on
price change only and does not include income.

18
<PAGE>
(14) Value Line - composed of over 1,600 stocks in the Value Line
Investment Survey.

(15) Russell 2000 - composed of the 2,000 smallest stocks in the
Russell 3000, a market value- weighted index of the 3,000
largest U.S. publicly-traded companies.

(16) Russell 2000 Growth - measures the performance of those
Russell 2000 companies with higher price-to-book ratios and
higher forecasted growth values.

(17) Russell 2000 Value - measures the performance of those Russell
2000 companies with lower price-to-book ratios and lower
forecasted growth values.

(18) Russell 2500 - composed of the 2,500 smallest stocks in the
Russell 3000, a market value- weighted index of the 3,000
largest U.S. publicly-traded companies.

(19) Composite Indices - 60% Standard & Poor's 500 Stock Index, 30%
Lehman Brothers Long- Term Treasury Bond and 10% U.S. Treasury
Bills; 70% Standard & Poor's 500 Stock Index and 30% NASDAQ
Industrial Index; 35% Standard & Poor's 500 Stock Index and
65% Salomon Brothers High Grade Bond Index; all stocks on the
NASDAQ system exclusive of those traded on an exchange, and
65% Standard & Poor's 500 Stock Index and 35% Salomon Brothers
High Grade Bond Index.

(20) CDA Mutual Fund Report published by CDA Investment
Technologies, Inc. - analyzes price, current yield, risk,
total return and average rate of return (average compounded
growth rate) over specified time periods for the mutual fund
industry.

(21) Mutual Fund Source Book published by Morningstar, Inc. -
analyzes price, yield, risk and total return for equity funds.

(22) Financial publications: Business Week, Changing Times,
Financial World, Forbes, Fortune, Money, Barron's, Consumer's
Digest, Financial Times, Global Investor, Wall Street Journal
and Weisenberger Investment Companies Service - publications
that rate fund performance over specified time periods.

(23) Consumer Price Index (or Cost of Living Index), published by
the U.S. Bureau of Labor Statistics - a statistical measure of
change over time in the price of goods and services in major
expenditure groups.

(24) Stocks, Bonds, Bills and Inflation, published by Ibbotson
Associates - historical measure of yield, price and total
return for common and small company stock, long-term
government bonds, U.S. Treasury bills and inflation.

(25) Savings and Loan Historical Interest Rates - as published by
the U.S. Savings & Loan League Fact Book.

(26) Lehman Brothers Government/Corporate Index - a combination of
the Government and Corporate Bond Indices. The Government
Index includes public obligations of the U.S.

19
<PAGE>
Treasury, issues of Government agencies, and corporate debt
backed by the U.S. Government. The Corporate Bond Index
includes fixed-rate nonconvertible corporate debt. Also
included are Yankee Bonds and nonconvertible debt issued by or
guaranteed by foreign or international governments and
agencies. All issues are investment grade (BBB) or higher,
with maturities of at least one year and an outstanding par
value of at least $100 million for U.S. Government issues and
$25 million for others. Any security downgraded during the
month is held in the index until month-end and then removed.
All returns are market value weighted inclusive of accrued
income.

(27) Lehman Brothers Intermediate Government/Corporate Index - an
unmanaged index composed of a combination of the Government
and Corporate Bond Indiyces. All issues are investment grade
(BBB) or higher, with maturities of one to ten years and an
outstanding par value of at least $100 million for U.S.
Government issues and $25 million for others. The Government
Index includes public obligations of the U.S. Treasury, issues
of Government agencies, and corporate debt backed by the U.S.
Government. The Corporate Bond Index includes fixed-rate
nonconvertible corporate debt. Also included are Yankee Bonds
and nonconvertible debt issued by or guaranteed by foreign or
international governments and agencies. Any security
downgraded during the month is held in the index until
month-end and then removed. All returns are market value
weighted inclusive of accrued income.

(28) Historical data supplied by the research departments of First
Boston Corporation; the J.P. Morgan companies; WP Brothers;
Merrill Lynch, Pierce, Fenner & Smith; Lehman
Brothers, Inc.; and Bloomberg L.P.

(29) NAREIT Equity Index - a compilation of market-weighted
securities data collected from all tax-qualified equity real
estate investment trusts listed on the New York and American
Stock Exchanges and the NASDAQ. The index tracks performance,
as well as REIT assets, by property type and geographic
region.

(30) Wilshire Real Estate Securities Index, published by Wilshire
Associates - a market capitalization-weighted index of
publicly traded real estate securities, such as real estate
investment trusts, real estate operating companies and
partnerships.

In assessing such comparisons of performance, an investor should keep
in mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in a Portfolio, that
the averages are generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the formula used by a
Portfolio to calculate its performance. In addition, there can be no assurance
that a Portfolio will continue this performance as compared to such other
averages.

GENERAL INFORMATION

DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Delaware business trust on October 24,
1996. The Fund's principal office is located at 5949 Sherry Lane, Dallas, Texas
75225; however, all investor correspondence should be

20
<PAGE>

directed to the Fund c/o PFPC, P.O. Box 8987, Wilmington, DE 19899. The Fund's
Agreement and Declaration of Trust permits the Fund to issue an unlimited number
of shares of beneficial interest, without par value. The Trustees have the power
to designate one or more series ("Portfolios") or classes of shares of
beneficial interest without further action by shareholders.

On each matter submitted to a vote of the shareholders, each holder of
a share shall be entitled to one vote for each whole share and a fractional vote
for each fractional share standing in his or her name on the books of the Fund.

In the event of liquidation of the Fund, the holders of the shares of
each Portfolio or any class thereof that has been established and designated
shall be entitled to receive, when and as declared by the Trustees, the excess
of the assets belonging to that Portfolio, or in the case of a class, belonging
to that Portfolio and allocable to that class, over the liabilities belonging to
that Portfolio or class. The assets so distributable to the holders of shares of
any particular Portfolio or class thereof shall be distributed to the holders in
proportion to the number of shares of that Portfolio or class thereof held by
them and recorded on the books of the Fund. The liquidation of any Portfolio or
class thereof may be authorized at any time by vote of a majority of the
Trustees then in office.

Shareholders have no pre-emptive or other rights to subscribe to any
additional shares or other securities issued by the Fund or any Portfolio,
except as the Trustees in their sole discretion shall have determined by
resolution.

DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES

The Fund's policy is to distribute at least annually, substantially all
of a Portfolio's net investment income, if any, together with any net realized
capital gains in the amount and at the times that will avoid both income
(including capital gains) taxes incurred and the imposition of the Federal
excise tax on undistributed income and capital gains. The Fund may distribute a
Portfolio's net investment income at interim periods. The amounts of any income
dividends or capital gains distributions cannot be predicted. See discussion
under "Dividends, Capital Gains Distributions and Taxes" in the Prospectus.

Any dividend or distribution paid shortly after the purchase of shares
of a Portfolio by an investor may have the effect of reducing the per share net
asset value of a Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect a
return of capital, are subject to income taxes as set forth in the Prospectus.

As set forth in the Prospectus, unless the shareholder elects otherwise
in writing, all dividend and capital gains distributions are automatically
received in additional shares of the respective Portfolio of the Fund at net
asset value (as of the business day following the record date). This will remain
in effect until the Fund is notified by the shareholder in writing at least
three days prior to the record date that either the Income Option (income
dividends in cash and capital gains distributions in additional shares at net
asset value) or the Cash Option (both income dividends and capital gains
distributions in cash) has been elected. An account statement is sent to
shareholders whenever an income dividend or capital gains distribution is paid.

21
<PAGE>
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, such shareholder's
distribution option will automatically be converted to having all dividend and
other distributions reinvested in additional shares. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.

Each Portfolio of the Fund will be treated as a separate entity (and
hence as a separate "regulated investment company") for Federal tax purposes.
Any net capital gains recognized by a Portfolio will be distributed to its
investors without need to offset (for Federal income tax purposes) such gains
against any net capital losses of another Portfolio.

In order for a Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of a Portfolio's gross income for a
taxable year must be derived from certain qualifying income, i.e., dividends,
interest, income derived from loans of securities and gains from the sale or
other disposition of stock, securities or foreign currencies, or other related
income, including gains from options, futures and forward contracts, derived
with respect to its business investing in stock, securities or currencies. Any
net gain realized from the closing out of futures contracts will, therefore,
generally be qualifying income for purposes of the 90% requirement.

Except for transactions a Portfolio has identified as hedging
transactions, a Portfolio is required for Federal income tax purposes to
recognize as income for the taxable year its net unrealized gains and losses on
forward currency and futures contracts as of the end of the taxable year as well
as those actually realized during the year. In most cases, any such gain or loss
recognized with respect to a regulated futures contract is considered to be 60%
long-term capital gain or loss and 40% short-term capital gain or loss without
regard to the holding period of the contract. Recognized gain or loss
attributable to a foreign currency forward contract is treated as 100% ordinary
income. Furthermore, foreign currency futures contracts which are intended to
hedge against a change in the value of securities held by a Portfolio may affect
the holding period of such securities and, consequently, the nature of the gain
or loss on such securities upon disposition.

A Portfolio may be subject to foreign withholding taxes on income or
gains recognized with respect to its investment in certain foreign securities.
If a Portfolio purchases shares in certain foreign investment entities, called
"passive foreign investment companies" ("PFIC"), a Portfolio may be subject to
U.S. Federal income tax and a related interest charge on a portion of any
"excess distribution" or gain from the disposition of such shares, even if such
income is distributed as a taxable dividend by a Portfolio to its shareholders.
If more than 50% of the total assets of a Portfolio are invested in securities
of foreign corporations, a Portfolio may elect to pass-through to its
shareholders their pro rata share of foreign income taxes paid by a Portfolio.
If this election is made, shareholders will be required to include in their
gross income their pro rata share of the foreign taxes paid by a Portfolio.
However, shareholders will be entitled to deduct (as an itemized deduction in
the case of individuals) their share of such foreign taxes in computing their
taxable income or to claim a credit for such taxes against their U.S. Federal
income tax, subject to certain limitation under the Code. Finally, a Portfolio
may recognize gain or loss on transactions in foreign currencies as a by-product
of its investment in foreign securities.

22
<PAGE>
A Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized gains at the end of a Portfolio's taxable year) on futures
transactions. Such distribution will be combined with distributions of capital
gains realized on a Portfolio's other investments, and shareholders will be
advised on the nature of the payment.

CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts, to a certain
extent, personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.

FINANCIAL STATEMENTS

The Financial Statements for the BRAZOS/JMIC Small Cap Growth Portfolio
and BRAZOS/JMIC Real Estate Securities Portfolio and selected per share data and
ratios and notes to the Financial Statements relating to corresponding periods
are contained in this Statement of Additional Information.

23
<PAGE>

BRAZOS/JMIC SMALL CAP GROWTH PORTFOLIO
Statement of Net Assets November 30, 1997
<TABLE>
<CAPTION>
Market Value
Shares (Note 2)+
<S> <C> <C>
COMMON STOCK -- 96.7%
BASIC RESOURCES (NON-ENERGY) -- 1.5%
Cable Design Technologies*.................................... 15,700 $ 635,850
Millenium Chemicals Inc....................................... 24,700 568,100
-------------
TOTAL BASIC RESOURCES (NON-ENERGY) ............................................. 1,203,950
-------------
BUSINESS SERVICES -- 9.4%
Abacus Direct Corp.*.......................................... 25,600 1,068,800
Administaff, Inc.............................................. 31,200 694,200
Airnet Systems, Inc. *........................................ 33,100 670,275
CBT Group plc*................................................ 28,500 2,012,813
Harte-Hanks Communications, Inc............................... 11,000 379,500
Mac-Gray Corp.*............................................... 41,000 604,750
Paychex, Inc.................................................. 27,000 1,107,000
Pierce Leahy Corp.*........................................... 15,000 365,625
Romac International, Inc.*.................................... 34,400 670,800
-------------
TOTAL BUSINESS SERVICES ........................................................ 7,573,763
-------------
CONSUMER DURABLES -- 2.1%
Herman Miller, Inc............................................ 15,000 761,250
Varlen Corp................................................... 34,650 948,544
-------------
TOTAL CONSUMER DURABLES ........................................................ 1,709,794
-------------
CONSUMER MERCHANDISING -- 6.7%
Central Garden and Pet Co.*................................... 18,400 522,100
Cort Business Services Corp.*................................. 9,600 319,800
Cost Plus, Inc.*.............................................. 12,900 427,312
General Nutrition Companies, Inc.*............................ 30,900 1,054,462
Landry's Seafood Restaurants, Inc.*........................... 24,100 677,813
Michaels Stores, Inc.*........................................ 43,800 1,418,025
Renters Choice, Inc.*......................................... 24,800 558,000
The Cheesecake Factory*....................................... 14,000 430,500
-------------
TOTAL CONSUMER MERCHANDISING ................................................... 5,408,012
-------------
CONSUMER NON-DURABLES -- 0.8%
Whole Foods Market, Inc.*..................................... 14,900 683,537
-------------
CONSUMER SERVICES -- 6.4%
Bright Horizons, Inc.*........................................ 40,900 649,287
CHS Electronics, Inc.*........................................ 11,600 218,950
Devry, Inc.*.................................................. 41,100 1,099,425
Felcor Suite Hotels, Inc...................................... 22,600 820,663
Interstate Hotels Co.*........................................ 9,200 340,400
</TABLE>

24 See accompanying Notes to Financial Statements
<PAGE>
BRAZOS/JMIC SMALL CAP GROWTH PORTFOLIO
Statement of Net Assets--continued November 30, 1997
<TABLE>
<CAPTION>
Market Value
Shares (Note 2)
<S> <C> <C>
Rent-Way, Inc.*............................................... 23,600 $ 407,100
Sylvan Learning Systems, Inc.*................................ 41,100 1,674,825
-------------
TOTAL CONSUMER SERVICES ........................................................ 5,210,650
-------------
ELECTRONIC TECHNOLOGY -- 8.2%
ADC Telecommunications, Inc.*................................. 21,900 814,406
Comverse Technology, Inc.*.................................... 24,900 838,819
FEI Company *................................................. 28,600 471,900
Innova Corp.*................................................. 17,800 311,500
Nice-Systems Ltd.*............................................ 11,600 506,050
Peak International Ltd.*...................................... 45,000 995,625
Radisys Corp.*................................................ 24,600 1,100,850
Sanmina Corp.*................................................ 13,900 945,200
Sequent Computer Systems, Inc.*............................... 29,200 678,900
-------------
TOTAL ELECTRONIC TECHNOLOGY .................................................... 6,663,250
-------------
ENERGY -- 8.0%
Basin Exploration, Inc.*...................................... 67,300 1,245,050
BJ Services Co.*.............................................. 8,100 581,681
Dawson Geophysical Co.*....................................... 52,500 997,500
Dril-Quip, Inc.*.............................................. 20,900 625,694
Transmontaigne Oil Co.*....................................... 80,300 1,204,500
Veritas DGC, Inc.*............................................ 20,100 804,000
Vintage Petroleum, Inc........................................ 51,600 999,750
-------------
TOTAL ENERGY ................................................................... 6,458,175
-------------
FINANCIAL -- 4.9%
E*trade Group, Inc.*.......................................... 38,400 962,400
Firstmerit Corp............................................... 21,700 575,050
Franchise Mortgage Acceptance Co.*............................ 10,700 187,250
Peoples Heritage Financial Group, Inc......................... 9,500 404,938
Security Capital Group, Inc.- (B Shares)...................... 19,900 639,288
The Finova Group, Inc. (B Shares)............................. 13,800 650,325
Westamerica Bancorporation.................................... 5,900 539,113
-------------
TOTAL FINANCIAL ................................................................ 3,958,364
-------------
HEALTHCARE PRODUCTS -- 5.4%
Arqule, Inc.*................................................. 24,800 511,500
Jones Medical Industries, Inc................................. 31,200 1,029,600
Ocular Sciences, Inc.*........................................ 17,400 439,350
Safeskin Corp................................................. 10,700 509,587
Steris Corp.*................................................. 11,600 545,200
Waters Corp.*................................................. 31,100 1,331,469
-------------
TOTAL HEALTHCARE PRODUCTS ...................................................... 4,366,706
-------------
</TABLE>
See accompanying Notes to Financial Statements 25
<PAGE>
BRAZOS/JMIC SMALL CAP GROWTH PORTFOLIO
Statement of Net Assets--continued November 30, 1997
<TABLE>
<CAPTION>
Market Value
Shares (Note 2)+
<S> <C> <C>
HEALTHCARE SERVICES -- 8.2%
Ameripath, Inc.*.............................................. 43,300 $ 725,275
Concentra Managed Care, Inc.*................................. 42,186 1,429,051
Diagnostic Health Services, Inc.*............................. 43,200 507,600
Maximus, Inc.*................................................ 20,300 489,737
Monarch Dental Corp.*......................................... 30,000 414,375
National Research Corp.*...................................... 20,500 401,031
Orthodontic Centers of America, Inc.*......................... 56,000 1,015,000
Parexel International Corp.*.................................. 19,400 669,300
Serologicals Corp.*........................................... 44,800 996,800
-------------
TOTAL HEALTHCARE SERVICES ...................................................... 6,648,169
-------------

MEDIA -- 10.3%
Cinar Films, Inc.*............................................ 35,800 1,476,750
Clear Channel Communications, Inc.*........................... 20,300 1,375,325
Heftel Broadcasting Corp. (A Shares)*......................... 26,800 1,979,850
Outdoor Systems, Inc.*........................................ 55,700 1,719,737
TMP Worldwide, Inc............................................ 37,900 691,675
Universal Outdoor Holdings, Inc.*............................. 24,600 1,097,775
-------------
TOTAL MEDIA .................................................................... 8,341,112
-------------

TECHNOLOGY SERVICES/ SOFTWARE -- 19.3%
Affiliated Computer Services, Inc.* .......................... 17,400 406,725
Ciber, Inc.*.................................................. 24,900 1,095,600
Complete Business Solutions, Inc.*............................ 54,900 1,866,600
Computer Horizons Corp.*...................................... 52,700 1,739,100
Great Plains Software, Inc.*.................................. 28,500 641,250
Harbinger Corp.*.............................................. 29,400 882,000
Inspire Insurance Solutions, Inc.*............................ 29,100 552,900
Keane, Inc.*.................................................. 25,400 804,862
Level One Communications, Inc.*............................... 21,800 910,150
Mastech Corp.*................................................ 36,500 1,067,625
Metro Information Services, Inc............................... 29,700 764,775
National Instruments Corp.*................................... 16,800 451,500
Network Solutions, Inc. (A Shares)*........................... 33,700 547,625
Realnetworks, Inc.*........................................... 25,000 384,375
Software AG Systems, Inc.*.................................... 114,200 1,163,412
Sungard Data Systems, Inc.*................................... 67,100 1,736,213
Transaction Systems Architects, Inc.*......................... 15,600 604,987
-------------
TOTAL TECHNOLOGY SERVICES/ SOFTWARE ............................................ 15,619,699
-------------
</TABLE>
26 See accompanying Notes to Financial Statements
<PAGE>
BRAZOS/JMIC SMALL CAP GROWTH PORTFOLIO
Statement of Net Assets--continued November 30, 1997
<TABLE>
<CAPTION>
Market Value
Shares (Note 2)
<S> <C> <C>
TRADITIONAL HEAVY INDUSTRY -- 3.6%
Federal-Mogul Corp............................................ 16,600 $ 682,675
Halter Marine Group, Inc.*.................................... 17,100 476,663
Oregon Steel Mills, Inc....................................... 47,300 928,263
Tetra Tech, Inc.*............................................. 32,300 825,669
-------------
TOTAL TRADITIONAL HEAVY INDUSTRY ............................................... 2,913,270
-------------
TRANSPORTATION -- 1.9%
Jevic Transportation, Inc.*................................... 40,000 660,000
Swift Transportation Co., Inc.*............................... 15,300 424,575
US Xpress Enterprises, Inc.*.................................. 19,800 438,075
-------------
TOTAL TRANSPORTATION ........................................................... 1,522,650
-------------
TOTAL COMMON STOCK (COST $75,377,758)............................................ 78,281,101
-------------

MUTUAL FUNDS -- 2.3%
Scudder Managed Cash Fund, (Cost $1,842,140).................. 1,842,140 1,842,140
-------------

Total Investments (Cost $77,219,898)+-- 99.0%........................................... $ 80,123,241

Other Assets and Liabilities, Net-- 1.0%................................................ 774,741
-------------

Net Assets-- 100.0%..................................................................... $ 80,897,982
=============

Net Asset Value, offering and redemption price per share ($80,897,982/ 5,998,382
outstanding shares of beneficial interest, no par value)........................... $13.49
=============

Amount

At November 30,1997, Net Assets consisted of:

Capital Paid-In......................................................................... $ 77,407,343
Accumulated net realized gain........................................................... 587,296
Net unrealized appreciation of investments.............................................. 2,903,343
-------------

Net Assets, for 5,998,382 shares outstanding............................................ $ 80,897,982
=============
<FN>
* Non-income producing security.
+ The cost for Federal income tax purposes was $77,282,753. At November 30,
1997, net unrealized appreciation was $2,840,488. This consisted of
aggregate gross unrealized appreciation in which there was an excess of
market value over tax cost of $6,700,691, and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $3,860,203.
</FN>
</TABLE>

See accompanying Notes to Financial Statements 27
<PAGE>
BRAZOS/JMIC REAL ESTATE SECURITIES PORTFOLIO
Statement of Net Assets November 30, 1997
<TABLE>
<CAPTION>
Market Value
Shares (Note 2)
<S> <C> <C>
COMMON STOCK -- 99.8%
APARTMENTS -- 19.7%
Apartment Investment & Management Co.......................... 10,800 $ 382,050
Avalon Properties, Inc........................................ 27,800 854,850
Bay Apartment Communities, Inc................................ 19,100 762,806
Equity Residential Property Trust............................. 41,300 2,065,000
Irvine Apartment Communities.................................. 8,900 276,456
Oasis Residential, Inc........................................ 12,500 272,656
Post Properties, Inc.......................................... 41,600 1,606,800
Security Capital Atlantic, Inc................................ 63,737 1,378,313
Security Capital Pacific Trust................................ 79,457 1,931,798
Summit Properties, Inc........................................ 46,600 966,950
-------------
TOTAL APARTMENTS................................................................ 10,497,679
-------------
DIVERSIFIED/OTHER -- 7.8%
Glenborough Realty Trust, Inc................................. 37,800 1,020,600
Golf Trust of America, Inc.*.................................. 27,700 747,900
National Golf Properties, Inc................................. 44,000 1,397,000
Pacific Gulf Properties, Inc.................................. 18,800 420,650
Trammell Crow Co.............................................. 25,900 569,800
-------------
TOTAL DIVERSIFIED/OTHER......................................................... 4,155,950
-------------
HEALTHCARE -- 2.0%
Healthcare Realty Trust, Inc.................................. 35,800 1,047,150
-------------

HOTELS -- 9.0%
Candlewood Hotel Company, Inc.*............................... 45,400 397,250
Extended Stay America, Inc.*.................................. 62,100 714,150
Felcor Suite Hotels, Inc...................................... 61,600 2,236,850
Innkeepers USA Trust.......................................... 26,800 430,475
Patriot American Hospitality, Inc............................. 10,099 315,594
Starwood Hotels & Resorts Trust............................... 13,500 723,938
-------------
TOTAL HOTRLS.................................................................... 4,818,257
-------------
INDUSTRIAL -- 7.1%
AMB Property Corp............................................. 23,900 549,700
Centerpoint Properties Corp................................... 15,600 516,750
Meridian Industrial Trust..................................... 31,000 720,750
Weeks Corp.................................................... 62,200 1,990,400
-------------
TOTAL INDUSTRIAL................................................................ 3,777,600
-------------
MANUFACTURED HOMES -- 1.2%
Sun Communities, Inc.......................................... 17,700 644,944
-------------

MIXED: OFFICE/INDUSTRIAL -- 3.0%
Bedford Property Investors, Inc............................... 43,300 884,944
</TABLE>
28 See accompanying Notes to Financial Statements
<PAGE>
BRAZOS/JMIC REAL ESTATE SECURITIES PORTFOLIO
Statement of Net Assets--continued November 30, 1997
<TABLE>
<CAPTION>
Market Value
Shares (Note 2)
<S> <C> <C>
Liberty Property Trust ....................................... 25,200 $ 704,025
-------------
TOTAL MIXED..................................................................... 1,588,969
-------------
NET LEASE -- 2.8%
Captec Net Lease Realty, Inc.*................................ 69,800 1,186,600
Franchise Finance Corporation of America...................... 12,400 328,600
-------------
TOTAL NET LEASE................................................................. 1,515,200
-------------
OFFICE -- 12.3%
Beacon Properties Corp........................................ 11,700 526,500
Carramerica Realty Corp....................................... 13,200 397,650
Cousins Properties Inc........................................ 10,300 311,575
Highwoods Properties, Inc. ................................... 15,200 546,250
Kilroy Realty Corp............................................ 58,900 1,546,125
Mgi Properties, Inc........................................... 12,200 282,888
Prentiss Properties Trust..................................... 55,000 1,423,125
SL Green Realty Corp.......................................... 25,300 657,800
Tower Realty Trust, Inc....................................... 36,000 877,500
-------------
TOTAL OFFICE.................................................................... 6,569,413
-------------
OUTLET -- 0.9%
Chelsea GCA Realty, Inc....................................... 12,000 456,000
-------------

REGIONAL MALLS -- 12.0%
CBL & Associates Properties, Inc.............................. 37,400 899,938
General Growth Properties..................................... 21,400 789,125
JP Realty, Inc................................................ 63,500 1,587,500
Simon Debartolo Group, Inc.................................... 36,500 1,193,094
The Macerich Co............................................... 46,600 1,264,025
Urban Shopping Centers, Inc................................... 19,800 659,588
-------------
TOTAL REGIONAL MALLS............................................................ 6,393,270
-------------
STORAGE -- 10.9%
Public Storage, Inc........................................... 59,100 1,632,637
Sovran Self Storage, Inc...................................... 53,500 1,631,750
Storage Trust Realty.......................................... 58,500 1,455,187
Storage USA, Inc.............................................. 27,700 1,082,031
-------------
TOTAL STORAGE................................................................... 5,801,605
-------------
STRIP CENTERS -- 11.1%
Bradley Real Estate, Inc...................................... 27,500 556,875
Developers Diversified Realty Corp............................ 33,700 1,312,194
IRT Property Co............................................... 68,300 823,869
JDN Realty Corp............................................... 29,300 910,131
Kimco Realty Corp............................................. 32,100 1,103,437
Pan Pacific Retail Properties, Inc............................ 8,700 178,350
</TABLE>
See accompanying Notes to Financial Statements 29
<PAGE>
BRAZOS/JMIC REAL ESTATE SECURITIES PORTFOLIO
Statement of Net Assets--continued November 30, 1997
<TABLE>
<CAPTION>
Market Value
Shares (Note 2)
<S> <C> <C>
Regency Realty Corp........................................... 39,800 $ 1,057,187
-------------
TOTAL STRIP CENTERS............................................................. 5,942,043
-------------
TOTAL COMMON STOCK (COST $52,322,616)............................................ 53,208,080
-------------

WARRANTS -- 0.1%
Security Capital Group (Cost $44,187) ........................ 5,612 30,164
-------------

MUTUAL FUNDS -- 3.8%
Scudder Managed Cash Fund (Cost $2,032,861)................... 2,032,861 2,032,861
-------------

U.S. TREASURY OBLIGATIONS -- 0.9%
Par

U.S. Treasury Bill, 4.67%, 12/04/97 (Cost $499,806)........... $500,000 499,806
-------------

Total Investments (Cost $54,899,470)+-- 104.6%.......................................... 55,770,911

Other Assets and Liabilities, Net-- (4.6)%.............................................. (2,462,658)
-------------

Net Assets-- 100.0%..................................................................... $ 53,308,253
=============

Net Asset Value, offering and redemption per share ($53,308,253/4,742,801
outstanding shares of beneficial interest, no par value) ............................... $ 11.24
============

Amount
At November 30, 1997, Net Assets consisted of:

Capital Paid-In ........................................................................ $ 51,355,007
Undistributed net investment income .................................................... 575,203
Accumulated net realized gain .......................................................... 506,602
Net unrealized appreciation of investments ............................................. 871,441
------------

Net Assets, for 4,742,801 shares outstanding ........................................... $ 53,308,253
============
<FN>
* Non-income producing security.

+ The cost for Federal income tax purposes was $54,925,543. At November 30,
1997, net unrealized appreciation was $845,368. This consisted of aggregate
gross unrealized appreciation in which there was an excess of market value
over tax cost of $1,556,868, and aggregate gross unrealized depreciation
for all securities in which there was an excess of tax cost over market
value of $711,500.
</FN>
</TABLE>
30 See accompanying Notes to Financial Statements
<PAGE>
BRAZOS MUTUAL FUNDS
Statements of Operations for the Period December 31, 1996+ through November 30,
1997
<TABLE>
<CAPTION>
Small Cap Real Estate
Growth Securities
Portfolio Portfolio
<S> <C> <C>
Investment Income:
Dividends ..................................................... $ 56,496 $ 1,432,388
Interest ....................................................... 120,947 116,561
-----------------------------

Total investment income.................................... 177,443 1,548,949
-----------------------------

Expenses:
Advisory fee (Note 4) ....................................... 239,078 237,702
Administration fee (Note 4) ................................. 42,986 41,826
Accounting fee (Note 4) ..................................... 41,808 41,352
Custodian fee (Note 4) ...................................... 26,145 25,891
Transfer Agent fee (Note 4).................................. 31,695 31,642
Trustees' fees and expenses (Note 4) ........................ 6,000 6,000
Amortization of organization and offering expenses
(Note 2) .............................................. 30,061 30,061
Registration fees ........................................... 14,858 16,477
Reports to shareholders ..................................... 12,801 14,198
Legal ....................................................... 12,905 16,504
Audit ....................................................... 14,000 14,000
Other ....................................................... 7,035 6,918
-----------------------------
Total expenses before fee waivers ......................... 479,372 482,571
Advisory fee waived (Note 4) .............................. (107,342) (139,015)
Administration fee waived (Note 4)......................... (4,051) (4,051)
Accounting fee waived (Note 4)............................. (5,610) (5,610)
Transfer agent fee waived (Note 4)......................... (3,750) (3,750)
-----------------------------
Total expenses, net ....................................... 358,619 330,145
-----------------------------
Net investment income (loss) ................................ (181,176) 1,218,804
-----------------------------
Realized and unrealized gain on investments:
Net realized gain on investment transactions ................ 4,388,209 4,485,233
Net unrealized appreciation of investments during
the period............................................. 2,903,343 871,441
-----------------------------
Net gain on investments ................................... 7,291,552 5,356,674
-----------------------------
Net increase in net assets resulting from operations .......... $ 7,110,376 $ 6,575,478
=============================
</TABLE>
+ Commencement of Operations.

See accompanying Notes to Financial Statements 31
<PAGE>
BRAZOS MUTUAL FUNDS
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Small Cap Real Estate
Growth Securities
Portfolio Portfolio
<S> <C> <C>
For the Period December 31, 1996+
through November 30, 1997

Increase (Decrease) in Net Assets:
Operations:
Net investment income (loss)................................. $ (181,176) $ 1,218,804
Net realized gain on investment transactions ................ 4,388,209 4,485,233
Net unrealized appreciation of investments during
the period ................................................ 2,903,343 871,441
------------------------------
Net increase in net assets resulting from operations ........ 7,110,376 6,575,478
------------------------------
Distributions to shareholders from:
Net investment income ($0.00 and $0.23 per share,
respectively) ......................................... -- (643,601)
Net realized gain on investments ($1.17 and $0.93 per
share, respectively)..................................... (3,619,737) (3,978,631)
------------------------------
Total distributions.......................................... (3,619,737) (4,622,232)
------------------------------

Increase in net assets from Fund share transactions (Note 5) ... 77,357,343 51,305,007
------------------------------

Total increase in net assets ................................ 80,847,982 53,258,253

Net Assets:
Beginning of period ....................................... 50,000 50,000
------------------------------
End of period.............................................. $80,897,982 $ 53,308,253
==============================
</TABLE>
+ Commencement of operations.

32 See accompanying Notes to Financial Statements
<PAGE>
BRAZOS MUTUAL FUNDS
Financial Highlights

The following tables include selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. They should be read in conjunction with the financial statements and
notes thereto.

For the Period December 31, 1996*
through November 30, 1997

Small Cap Growth Portfolio
Net Asset Value-- Beginning of Period .............. $ 10.00
-------

Investment Operations:
Net investment loss.............................. (0.03)
Net realized and unrealized gain on
investments ............................... 4.69
-------

Total from investment operations.............. 4.66
-------

Distributions:
From net realized gain........................... (1.17)
-------

Net Asset Value-- End of Period ................... $13.49
=======

Total Return*** .................................... 47.08%
Ratios (to average net assets)/Supplemental Data
Expenses + ...................................... 1.35%**
Net investment loss.............................. (0.68)%**
Portfolio turnover rate ............................ 147.86%
Average commission rate paid 1 ..................... $0.0551
Net assets at end of period (000 omitted) .......... $80,898

See accompanying Notes to Financial Statements 33
<PAGE>
BRAZOS MUTUAL FUNDS
Financial Highlights

For the Period December 31, 1996*
through November 30, 1997

Real Estate Securities Portfolio
Net Asset Value-- Beginning of Period ............. $ 10.00
-------

Investment Operations:
Net investment income............................ 0.35
Net realized and unrealized gain on
investments ............................... 2.05
-------

Total from investment operations ............. 2.40
-------

Distributions:
From net investment income....................... (0.23)
From net realized gain........................... (0.93)
-------

Total distributions........................... (1.16)
-------

Net Asset Value-- End of Period .................... $ 11.24
=======

Total Return*** .................................... 24.39%
Ratios (to average net assets)/Supplemental Data:
Expenses++........................................ 1.25%**
Net investment income............................ 4.61%**
Portfolio turnover rate ............................ 184.74%
Average commission rate paid 1 ..................... $0.0644
Net assets at end of period (000 omitted)........... $53,308

* Commencement of operations.
** Annualized.
*** Unannualized.
+ The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume expenses otherwise payable by the Portfolio (if necessary) in
order to keep the annual expense ratio from exceeding 1.35% of its average
daily net assets. In addition the Administrator, Accounting Agent and
Transfer Agent have agreed to waive a portion of their fees. Without the
assumption of and waivers of expenses, the annualized ratio of expenses to
average daily net assets would have been 1.80% for the period ended
November 30, 1997.
++ The Adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume expenses otherwise payable by the Portfolio (if necessary) in
order to keep the annual expense ratio from exceeding 1.25% of its average
daily net assets. In addition the Administrator, Accounting Agent and
Transfer Agent have agreed to waive a portion of their fees. Without the
assumption of and waivers of expenses, the annualized ratio of expenses to
average daily net assets would have been 1.83% for the period ended
November 30, 1997.
1 Computed by dividing the total amount of brokerage commissions paid by the
total shares of investment securities purchased and sold during the period
for which commissions were charged.

34 See accompanying Notes to Financial Statements
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements November 30, 1997

1. Description of the Fund. The Brazos Mutual Funds (the "Fund" ) is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as a
diversified, open-end management investment company established as a Delaware
business trust. The Declaration of Trust, dated October 28, 1996, permits the
Trustees to establish separate series or "Portfolios," each of which may issue
separate classes of shares. The authorized shares of beneficial interest of the
Fund are currently divided into two Portfolios, the BRAZOS/JMIC Small Cap Growth
Portfolio ("Small Cap Growth Portfolio") and the BRAZOS/JMIC Real Estate
Securities Portfolio ("Real Estate Securities Portfolio")(each, a "Portfolio"
and collectively, the "Portfolios"). Each Portfolio currently consists of a
single class of shares. The investment objective of the Small Cap Growth
Portfolio is to provide maximum capital appreciation, consistent with reasonable
risk to principal, by investing primarily in small capitalization companies. The
investment objective of the Real Estate Securities Portfolio is to provide a
balance of income and appreciation (with reasonable risk to principal) by
investing primarily in equity securities of companies which are principally
engaged in the real estate industry.

Because the Real Estate Securities Portfolio may invest a substantial portion of
its assets in Real Estate Investment Trusts ("REITs"), the Portfolio may also be
subject to certain risks associated with direct investments in REITs. REITs may
be affected by changes in the value of their underlying properties and by
defaults by borrowers or tenants. Furthermore, REITs are dependent upon
specialized management skills, have limited diversification and are, therefore,
subject to risks inherent in financing a limited number of projects. REITs
depend generally on their ability to generate cash flow to make distributions to
shareholders and certain REITs have self-liquidation provisions by which
mortgages held may be paid in full and distributions of capital returns may be
made at any time. In addition, the performance of a REIT may be affected by its
failure to qualify for tax-free, pass-through of income under the Internal
Revenue Code or its failure to maintain exemption from registration under the
1940 Act.

2. Significant Accounting Policies. The following is a summary of the
significant accounting policies of the Fund:

Security Valuation. Each Portfolio's securities, except short-term investments
with remaining maturities of 60 days or less, use the last quoted trading price
as the market value. For listed securities, the Portfolios use the price quoted
by the exchange on which the security is primarily traded. Unlisted securities
and listed securities, including REITs, which have not been traded on the
valuation date or for which market quotations are not readily available are
valued at the average between the last price asked and the last price bid.
Short-term investments with remaining maturities of 60 days or less are valued
at amortized cost, which approximates market value, unless the Fund's Board of
Trustees determines that this does not represent fair value. The value of all
other securities is determined in good faith under the direction of the Board of
Trustees. As of November 30, 1997, no securities were valued by the Board of
Trustees.

35
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements - continued November 30, 1997

Federal Income Taxes. Each Portfolio is treated as a separate entity and intends
to qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986 and to distribute all of its taxable income to its
shareholders. Therefore, no provision for federal income tax is required.

The Portfolios may be subject to a nondeductible 4% excise tax calculated as a
percentage of certain undistributed amounts of net investment income and net
capital gains. The Portfolios intend to distribute their net investment income
and capital gains as necessary to avoid this excise tax.

Distributions to Shareholders. The Small Cap Growth Portfolio will normally
distribute substantially all of its net investment income in an annual dividend.
The Real Estate Securities Portfolio will normally distribute substantially all
of its net investment income in quarterly dividends. Both Portfolios will
distribute any realized net capital gains annually.

The Real Estate Securities Portfolio receives a majority of its dividend income
from REITs. For tax purposes, a portion of these dividends may consist of
capital gains and returns of capital. Accordingly, the Portfolio's distributions
to shareholders may include a portion that may be a return of capital received
from the REITs, as well as a return of capital attributed to distributions of
other income for financial reporting purposes. Distributions determined to be
returns of capital are not subject to current taxation. In accordance with
Statement of Position 93-2, Determination, Disclosure and Financial Statement
Presentation of Income, Capital Gain and Return of Capital Distributions by
Investment Companies ("SOP"), distributions representing a return of capital for
tax purposes are charged to capital paid in.

Deferred Organization and Offering Costs. Organizational costs have been
capitalized by the Fund and are being amortized over sixty months commencing
with operations. In the event any of the initial shares of the Fund are redeemed
by any holder thereof during the period that the Fund is amortizing
organizational costs, the redemption proceeds payable to the holder thereof by
the Fund will be reduced by the unamortized organizational costs in the same
ratio as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption. Offering costs, including
initial registration costs, have been deferred and will be charged to expense
during the Fund's first year of operation.

Use of Estimates in the Preparation of Financial Statements. 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
revenue and expenses during the reporting period. Actual results could differ
from those estimates.

Other. Investment security transactions are accounted for on a trade date basis.
Each Portfolio uses the specific identification method for determining realized
gain and loss on investments for both financial and federal income tax reporting
purposes. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.

36
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements - continued November 30, 1997

3. Investment Securities. During the period ended November 30, 1997, purchases
and sales of investment securities (excluding short-term investments) aggregated
as follows:

Small Cap Growth Real Estate Securities
Portfolio Portfolio

Purchases.......................... $111,525,646 $ 97,544,991
Sales.............................. 40,535,804 49,663,741

4. Advisory Fee and Other Transactions with Affiliates. The Fund, on behalf of
each Portfolio, employs John McStay Investment Counsel (the "Adviser"), an
investment counseling firm founded in 1983, to furnish investment advisory and
other services to the Fund. Under an Investment Advisory Agreement with the
Fund, dated November 25, 1996, the Adviser manages the investment and
reinvestment of the assets of the Portfolios. The Adviser must adhere to the
stated investment objectives and policies of the Portfolios, and is subject to
the control and supervision of the Fund's Board of Trustees. For its services
under the Advisory Agreement, the Fund pays the Adviser a monthly fee at the
annual rate of 0.90% of the average daily net assets of each Portfolio. The
Adviser has voluntarily agreed to keep operating expenses for the Small Cap
Growth Portfolio and Real Estate Securities Portfolio (excluding taxes,
extraordinary expenses, brokerage commissions and interest) from exceeding an
annual rate of 1.35% and 1.25%, respectively, of each Portfolio's average daily
net assets. The Fund will not reimburse the Adviser for any advisory fees that
are waived or Portfolio expenses that the Adviser may bear on behalf of a
Portfolio.

The following table summarizes the advisory fees for the period ended November
30, 1997:

Gross Adviser Adviser
Fee Fee Waived

Small Cap Growth Portfolio.................... $239,078 $ (107,342)
Real Estate Securities Portfolio.............. 237,702 (139,015)

Rodney Square Management Corporation ("RSMC"), a wholly owned subsidiary of
Wilmington Trust Company ("WTC"), which is wholly owned by Wilmington Trust
Corporation, a publicly held bank holding company, provides administration
services to the Fund. For administration services provided, RSMC receives an
annual administration fee from the Fund equal to the greater of: (1) a minimum
annual fee of $32,500 for each of the first two single-class Portfolios plus
$15,000 for any additional Portfolio, or second or additional class of a
Portfolio; or (2) an asset-based fee, equal to a percentage of the average daily
net assets of the Fund, on a Fund-wide basis, according to the following
schedule: 0.15% of the first $50 million in assets; plus 0.10% of assets between
$50 million and $200 million; plus 0.07%

<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements - continued November 30, 1997

of assets in excess of $200 million. Each Portfolio shares in its pro-rata
portion of the Fund's fee. For the period ended November 30, 1997, RSMC fees for
administration services for the Small Cap Growth Portfolio and Real Estate
Securities Portfolio were $42,986 and $41,826, respectively, of which $4,051 per
portfolio was waived.

RSMC determines the net asset value per share of the Portfolios and provides
accounting services to the Portfolios. For accounting services provided RSMC
receives an annual fee of $45,000 per Portfolio, plus an asset-based fee, equal
to a percentage of the average daily net assets of each Portfolio, according to
the following schedule: 0.03% of assets between $50 million and $100 million;
plus 0.02% of assets in excess of $100 million. For the period ended November
30, 1997, RSMC fees for accounting services for the Small Cap Growth Portfolio
and Real Estate Securities Portfolio were $41,808 and $41,352, respectively, of
which $5,610 per Portfolio was waived.

RSMC also serves as Transfer and Dividend Paying Agent for the Fund pursuant to
a Transfer Agent Agreement with the Fund, dated December 31, 1996. For the
period ended November 30, 1997, RSMC fees for transfer agent services for the
Small Cap Growth Portfolio and Real Estate Securities Portfolio were $31,695 and
$31,642, respectively, of which $3,750 per portfolio was waived. WTC serves as
Custodian of the assets of the Fund. For the period ended November 30, 1997, WTC
fees for custody services for the Small Cap Growth Portfolio and Real Estate
Securities Portfolio were $26,145 and $25,891, respectively.

Pursuant to a Distribution Agreement with the Fund dated December 31, 1996,
Rodney Square Distributors, Inc. ("RSD"), a wholly-owned subsidiary of WTC,
assists in securing purchasers for shares of the Fund. RSD also directly, or
through its affiliates, provides investor support services. RSD receives no
compensation for distribution of shares of the Fund, except for reimbursement of
out-of-pocket expenses.

Certain trustees and officers of the Fund are also officers of the Fund's
Investment Adviser. Such trustees and officers are paid no fees by the Fund for
serving as trustees or officers of the Fund.

38
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements - continued November 30, 1997

5. Fund Shares. At November 30, 1997, there were an unlimited number of shares
of beneficial interest, no par value, authorized. The following table summarizes
the activity in shares of each Portfolio:

For the Period December 31, 1996+
through November 30, 1997
<TABLE>
<CAPTION>
Small Cap Real Estate
Growth Portfolio Securities Portfolio

Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold.............................. 5,958,892 $76,803,151 4,528,484 $48,887,308
Shares issued to shareholders in
reinvestment of distributions....... 256,842 3,494,269 381,700 4,223,787
Shares redeemed.......................... (222,352) (2,940,077) (172,383) (1,806,088)
--------- ----------- --------- -----------

Net increase............................. 5,993,382 $77,357,343 4,737,801 $51,305,007
=========== ===========

Shares outstanding:
Beginning of period...................... 5,000 5,000
--------- ---------

End of period............................ 5,998,382 4,742,801
========= =========

<FN>
+ Commencement of Operations.
</FN>
</TABLE>

6. Subsequent Event. RSMC has entered into an agreement with PFPC, Inc. ("PFPC")
pursuant to which PFPC will acquire the fund accounting, administration and
transfer agent business of RSMC. Effective January 5, 1998, the services
previously provided to the Fund by RSMC will be provided by PFPC.

39
<PAGE>
BRAZOS MUTUAL FUNDS
Report of Independent Accountants November 30, 1997

To the Shareholders and Board of Trustees
of Brazos Mutual Funds:

We have audited the accompanying statements of net assets of the Brazos/JMIC
Small Cap Growth Portfolio and the Brazos/JMIC Real Estate Securities Portfolio,
each a series of Brazos Mutual Funds, as of November 30, 1997, and the related
statements of operations, changes in net assets and financial highlights for the
period from December 31, 1996 (commencement of operations) through November 30,
1997. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of November 30, 1997, by
correspondence with custodians and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Brazos/JMIC Small Cap Growth Portfolio and the Brazos/JMIC Real Estate
Securities Portfolio as of November 30, 1997, the results of their operations,
changes in net assets, and their financial highlights for the period from
December 31, 1996 (commencement of operations) through November 30, 1997, in
conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 16, 1998

40
<PAGE>
BRAZOS MUTUAL FUNDS
Tax Information (Unaudited) November 30, 1997

For the fiscal year ended November 30, 1997, the Small Cap Growth Portfolio and
Real Estate Securities Portfolio paid distributions of $1.17 and $0.93 per
share, respectively, from net short-term capital gains.