<PAGE>
[Brazos Mutual Funds Logo]
BRAZOS MUTUAL FUNDS
SEMI-ANNUAL REPORT
MAY 31, 2000
BRAZOS
SMALL CAP
GROWTH PORTFOLIO
REAL ESTATE
SECURITIES PORTFOLIO
MICRO CAP
GROWTH PORTFOLIO
MULTI CAP
GROWTH PORTFOLIO
MID CAP
GROWTH PORTFOLIO
----------
INVESTMENT ADVISER
JOHN McSTAY
INVESTMENT COUNSEL
5949 SHERRY LANE
SUITE 1600
DALLAS, TEXAS 75225
www.brazosfund.com
<PAGE>
BRAZOS MUTUAL FUNDS
Report From Management
Dear Fellow Shareholders, Clients and Friends:
For the first half of 2000, your Brazos Micro Cap Growth, Brazos Multi Cap
Growth, Brazos Mid Cap Growth, and Brazos Real Estate Securities portfolios
recorded strong returns. In what shaped up as a challenging first half of the
year for the broad market, all of your funds exceeded or matched the
performance of their respective benchmarks. While the first quarter of 2000
marked a continuation of 1999's narrow market leadership in the technology
sectors, the second quarter witnessed a significant correction that enabled
your well diversified portfolios to outperform all of their benchmark indices.
The solid first half 2000 results are summarized in the table below:
<TABLE>
<CAPTION>
Quarter Year Inception
Ending To Date to
6/30/00 6/30/00 6/30/00
(unaudited) (unaudited) (unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Brazos Small Cap Growth(/1/) Class Y
Inception 12/31/96 -2.78% 3.04% 147.76%
Russell 2000 w/Inc. -3.78% 3.03% 48.98%
Brazos Micro Cap Growth(/1/) Inception
12/31/97 3.73% 17.21% 181.49%
Russell 2000 w/Inc. -3.78% 3.03% 21.75%
Brazos Multi Cap Growth(/1/) Class Y
Inception 12/31/98 0.69% 22.59% 135.43%
S&P 500 w/Inc. -2.66% -0.47% 20.45%
Brazos Mid Cap Growth(/1/) Class Y
Inception 12/31/99 3.92% 24.70% 24.70%
S&P 400 w/Inc. -3.30% 8.97% 8.97%
Brazos Real Estate Securities(/1/) Class
Y Inception 12/31/96 11.36% 13.27% 15.32%
NAREIT Equity Index 10.53% 13.18% 7.10%
</TABLE>
(1) Past performance is not indicative of future results. Investment returns
and principal values may fluctuate, so that, when redeemed, shares may be
worth more or less than their original value. Returns are higher due to the
maintenance of the portfolios' expenses by John McStay Investment Counsel. The
performance results presented may reflect periods of above average performance
attributable to a Portfolio's investment in certain securities during the ini-
tial public offering, the performance of a limited number of the securities in
the Portfolio, or other non-recurring factors. It is possible that the perfor-
mance may not be repeated in the future.
1
<PAGE>
BRAZOS MUTUAL FUNDS
Report From Management--continued
The more challenging market environment this year is very much a result of
1999's market euphoria, which drove stock prices well ahead of historic valua-
tion parameters. To temper the market enthusiasm and cool down the hot domestic
economy, Alan Greenspan and the Federal Reserve continued to apply the breaks
by raising interest rates multiple times. By the end of June, evidence of a
slowing economy appeared in consumer spending and manufacturing levels. While
the Fed attempts to orchestrate a soft economic landing, investors are more
carefully analyzing the fundamental financial condition and valuation levels of
the companies they invest in. This greater scrutiny combined with potentially
slower growth rates contributed significantly to the market decline. Important-
ly, these due diligence disciplines have always been part of our investment
process.
Despite this backdrop and the market sell-off, the Brazos funds performed
well. Your relative outperformance was a result of our selection process and
valuation/risk management tools. First, we carefully select each company that
goes into your portfolio by independently analyzing their growth opportunities
and management's ability to execute. With the purchase of a stock, the hard
work of your twelve seasoned managers is just beginning. Once in the portfolio,
a position is carefully scrutinized for any changes to fundamentals (i.e. a new
competitor or competitive product entering the market) and to shifts in Wall
Street expectations.
Just as we closely monitor stocks for changes in their growth prospects, val-
uation tools play an equally important role in determining opportunities to buy
and sell stocks in the Brazos funds. Our focus on companies with strong funda-
mentals, strong earnings growth and attractive valuations led us to many excit-
ing companies that are participating in the current technology and
telecommunications revolution. In early 2000, many of these holdings reached
what we believed were unsustainable valuation levels and we harvested some of
your gains. Just as our process let us identify good investment opportunities
in technology; it also mitigated the risks of these highflying tech stocks by
booking profits and diversifying across numerous industries and sectors. Out-
side of technology, the Brazos funds' increased weightings in the healthcare
and energy sectors contributed nicely to your good 2000 performance.
Your Brazos team always pays close attention to companies with solid, profit-
able business plans. If we cannot identify how a company expects to achieve
greater and greater profitability, then we avoid it. This process helps us
avoid the pitfalls that long-term unprofitable companies present. During the
first half of 2000, many Internet investors painfully realized that the Emperor
was not wearing any clothes. With little to no earnings to fall back on,
Internet stocks declined significantly during that period. Even large Internet
leaders, such as Amazon, declined over 60 percent through June 2000!
Investors in the Brazos Real Estate Securities portfolio can breathe a sigh
of relief as every indication is that the two-year bear market in this asset
class is finally behind us. Even if invest-
2
<PAGE>
BRAZOS MUTUAL FUNDS
Report From Management--continued
ors, including all of us on the Brazos team, only receive the high up-front
dividend yields these securities offer for the remainder of the year, returns
for 2000 would be most rewarding. However, as interest continues to build, we
expect these stocks will continue to enjoy additional appreciation, driven by a
healthy eight percent earnings growth and expansion in the earnings (FFO) mul-
tiples. Additionally, we continue to believe the companies in your portfolio,
on average, continue to sell at prices below the value of the underlying real
estate. And this value gives us confidence in the degree of downside protection
these stocks offer in today's turbulent market.
The success of the Brazos funds has been remarkable. The successful launch of
the Brazos Mid Cap Growth portfolio at the beginning of this year and the ongo-
ing performance success of the Brazos Multi Cap Growth portfolio have us ex-
tremely excited about the long-term investment opportunities these asset
classes offer. The number of good companies we can invest in and the greater
liquidity of these stocks lead us to believe that we will enjoy long-term suc-
cess and growth in these asset categories.
Since its December 1997 inception, your commitments combined with the strong
cumulative performance returns have grown the Brazos Micro Cap Growth portfolio
to $250 million! Realistically, the micro cap universe is limited in terms of
the number of investable good companies. As a result of this limitation, as the
fund approaches $300 million we will close the fund to new investors so our ex-
isting shareholder base can enjoy the undiluted returns expected from this dy-
namic asset class.
We remain excited by the companies that we continue to discover for all the
Brazos portfolios. By isolating one company at a time, we seek the rewards of
stocks with strong revenue and profit growth. This careful selection process
combined with proven risk management tools should continue to serve your in-
vestments well. We wish you all the best for a happy and successful second half
of 2000!
Sincerely,
/s/ John McStay
John McStay Investment Counsel
3
<PAGE>
BRAZOS MUTUAL FUNDS -- SMALL CAP GROWTH PORTFOLIO
Portfolio of Investments (Unaudited) May 31, 2000
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------- ------------
<S> <C> <C>
Common Stock - 87.8%
Basic Resources (Excluding Energy) - 3.4%
Millipore Corp. ....................................... 294,700 $ 21,328,912
Stillwater Mining Co.+................................. 233,900 6,563,819
------------
27,892,731
------------
Business Services - 5.8%
Iron Mountain, Inc.+................................... 302,915 11,056,397
MAXIMUS, Inc.+......................................... 255,712 5,306,024
Paychex, Inc. ......................................... 527,601 18,466,035
Profit Recovery Group International, Inc.+............. 408,182 7,398,299
Sykes Enterprises, Inc.+............................... 258,900 5,000,006
------------
47,226,761
------------
Consumer Merchandising - 3.6%
99 Cents Only Stores+.................................. 96,000 3,450,000
Ames Department Stores, Inc.+.......................... 52,630 624,981
BJ's Wholesale Club, Inc.+............................. 244,936 7,593,016
Cheesecake Factory, Inc.+.............................. 141,856 5,647,642
Linens 'n Things, Inc.+................................ 281,136 7,467,675
Pacific Sunwear of California+......................... 277,400 4,455,738
------------
29,239,052
------------
Consumer Non-Durables - 0.3%
Wild Oats Markets, Inc.+............................... 224,741 2,078,854
------------
Consumer Services - 4.0%
Bright Horizons Family Solutions, Inc.+................ 364,573 6,174,955
Education Management Corp.+............................ 108,900 1,808,761
International Speedway Corp. .......................... 216,605 9,273,402
SFX Entertainment, Inc.+............................... 346,200 15,102,975
------------
32,360,093
------------
Electronic Components - 11.4%
Anadigics, Inc.+....................................... 115,400 4,002,938
Applied Micro Circuits Corp.+.......................... 52,700 5,230,475
Burr-Brown Corp.+...................................... 217,800 12,400,987
Exar Corp.+............................................ 53,000 3,643,750
KEMET Corp.+........................................... 288,200 19,363,437
Methode Electronics, Inc. ............................. 119,100 4,272,713
S3, Inc.+.............................................. 697,000 11,152,000
TranSwitch Corp.+...................................... 149,700 9,374,962
TriQuint Semiconductor, Inc.+.......................... 150,600 14,212,875
Vitesse Semiconductor Corp.+........................... 175,700 8,894,813
------------
92,548,950
------------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
BRAZOS MUTUAL FUNDS -- SMALL CAP GROWTH PORTFOLIO
Portfolio of Investments (Unaudited) -- continued May 31, 2000
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------- ------------
<S> <C> <C>
Common Stock (continued)
Electronic Technology - 2.9%
ADTRAN, Inc.+.......................................... 85,300 $ 5,256,612
Cabletron Systems, Inc.+............................... 432,400 9,918,175
Concurrent Computer Corp.+............................. 429,400 3,649,900
NetScout Systems, Inc.+................................ 77,500 920,313
SeaChange International, Inc.+......................... 143,100 3,666,938
------------
23,411,938
------------
Energy - 8.7%
Devon Energy Corp. .................................... 339,600 20,312,325
Grey Wolf, Inc. ....................................... 750,000 3,750,000
Mitchell Energy & Development Corp. ................... 101,000 2,998,437
Nabors Industries, Inc.+............................... 551,600 23,718,800
National-Oilwell, Inc.+................................ 366,100 9,518,600
Pogo Producing Co. .................................... 432,000 10,368,000
------------
70,666,162
------------
Financial Institutions - 8.4%
AmeriCredit Corp.+..................................... 706,076 13,018,276
Metris Companies, Inc. ................................ 528,282 19,546,434
Providian Financial Corp. ............................. 167,900 14,932,606
Radian Group, Inc. .................................... 334,100 18,375,500
SierraCities.com, Inc.+................................ 507,000 2,028,000
------------
67,900,816
------------
Financial Services & Software - 3.6%
CyberSource Corp.+..................................... 203,900 2,905,575
ISS Group, Inc.+....................................... 31,500 2,331,000
NOVA Corp.+............................................ 495,067 14,542,593
The BISYS Group, Inc.+................................. 139,600 9,178,700
------------
28,957,868
------------
Healthcare Products - 7.3%
Alpharma, Inc. ........................................ 136,800 6,771,600
Biovail Corp.+......................................... 249,000 11,765,250
Jones Pharma, Inc. .................................... 132,690 4,834,892
King Pharmaceuticals, Inc.+............................ 392,400 20,993,400
Medicis Pharmaceutical Corp.+.......................... 263,367 12,312,407
Symyx Technologies+.................................... 75,000 2,175,000
------------
58,852,549
------------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
BRAZOS MUTUAL FUNDS -- SMALL CAP GROWTH PORTFOLIO
Portfolio of Investments (Unaudited) -- continued May 31, 2000
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------- ------------
<S> <C> <C>
Common Stock (continued)
Healthcare Services - 3.8%
Accredo Health, Inc.+.................................. 364,350 $ 8,744,400
Professional Detailing, Inc.+.......................... 188,200 5,034,350
Province Healthcare Co.+............................... 172,600 4,854,375
Universal Health Services, Inc. ....................... 235,300 12,500,313
------------
31,133,438
------------
Healthcare Technology - 2.7%
Invitrogen Corp.+...................................... 97,000 3,867,875
Luminex Corp.+......................................... 125,000 3,843,750
Waters Corp.+.......................................... 148,572 14,040,054
------------
21,751,679
------------
Media - 7.2%
American Tower Corp.+.................................. 283,406 10,521,448
Cinar Corp., Inc.+@.................................... 121,120 605,600
Hispanic Broadcasting Corp.+........................... 164,626 12,470,419
Radio One, Inc.+....................................... 99,400 7,107,100
SBA Communcations Corp.+............................... 136,100 5,069,725
Spectrasite Holdings, Inc.+............................ 330,700 5,601,231
TMP Worldwide, Inc.+................................... 101,742 5,621,246
Westwood One, Inc.+.................................... 351,600 11,668,725
------------
58,665,494
------------
Technology Services & Software - 9.4%
Affiliated Computer Services, Inc.+.................... 314,156 10,700,939
Business Objects SA+................................... 62,200 4,976,000
Critical Path, Inc.+................................... 43,200 1,374,300
CSG Systems International, Inc.+....................... 216,408 10,766,298
Great Plains Software, Inc.+........................... 98,500 4,087,750
Illuminet Holdings, Inc.+.............................. 107,500 4,098,437
IONA Technologies PLC+................................. 55,000 2,402,813
Mercury Interactive Corp.+............................. 171,800 14,560,050
Metasolv Software, Inc.+............................... 35,000 1,382,500
Register.com, Inc.+.................................... 50,600 1,973,400
SilverStream Software, Inc.+........................... 61,100 2,012,481
SunGard Data Systems, Inc.+............................ 394,300 13,381,556
Visual Networks, Inc.+................................. 98,800 4,902,950
------------
76,619,474
------------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
BRAZOS MUTUAL FUNDS -- SMALL CAP GROWTH PORTFOLIO
Portfolio of Investments (Unaudited) -- continued May 31, 2000
<TABLE>
<CAPTION>
Shares/
Principal Amount
Security Description (in thousands) Value
-------------------- ---------------- ------------
<S> <C> <C>
Common Stock (continued)
Telecommunications - 4.6%
ANTEC Corp.+................................ 370,800 $ 18,632,700
CommScope, Inc.+............................ 438,100 16,921,613
InterVoice-Brite, Inc.+..................... 145,900 2,079,075
------------
37,633,388
------------
Traditional Heavy Industry - 0.1%
L-3 Communications Holdings, Inc.+.......... 20,000 1,120,000
------------
Transportation - 0.6%
Atlas Air, Inc.+............................ 141,100 4,568,113
------------
Total Investment Securities (Cost $639,549,549)................ 712,627,360
------------
Repurchase Agreements - 12.2%
Agreement with State Street Bank & Trust
Co., bearing interest at 5.00%, dated
5/31/00, to be repurchased 6/01/00 in the
amount of $49,309,848 and collateralized by
$42,440,000 of U.S. Treasury Bonds, bearing
interest at 8.00%, and having an
approximate aggregate value of $50,293,140
(cost $49,303,000)......................... $49,303 49,303,000
Agreement with State Street Bank & Trust
Co., bearing interest at 5.00%, dated
5/31/00, to be repurchased 6/01/00 in the
amount of $99,316,792 and collateralized by
$45,535,000 of U.S. Treasury Bonds, bearing
interest at 7.25% due 8/15/22 and having an
approximate aggregate value of $51,000,065
(cost $50,000,000)......................... 50,000 50,000,000
------------
Total Repurchase Agreements (Cost $99,303,000)................... 99,303,000
------------
Liabilities in Excess of Other Assets - 0.0%..................... (80,381)
------------
Total Investments - 100.0% (Cost $738,852,549)................... 811,930,360
Net Assets - 100.0%.............................................. $811,849,979
============
</TABLE>
+ Non-income producing
@ Fair valued security
See Notes to Financial Statements
7
<PAGE>
BRAZOS MUTUAL FUNDS - REAL ESTATE SECURITIES PORTFOLIO
Portfolio of Investments (Unaudited) May 31, 2000
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------- ------------
<S> <C> <C>
Reit Stock - 94.6%
Apartments - 19.9%
Apartment Investment & Management Co. ................. 150,500 $ 6,029,406
Archstone Communities Trust............................ 253,957 5,698,160
Avalonbay Communities, Inc. ........................... 58,262 2,315,915
BRE Properties, Inc. .................................. 98,000 2,639,875
Camden Property Trust ................................. 113,300 3,179,481
Equity Residential Properties Trust.................... 191,800 8,559,075
Gables Residential Trust............................... 106,800 2,629,950
Home Properties of New York, Inc. ..................... 61,800 1,761,300
Post Properties, Inc. ................................. 68,000 2,983,500
------------
35,796,662
------------
Free Standing - 2.2%
Commercial Net Lease Realty............................ 17,500 188,125
Franchise Finance Corp. of America..................... 134,300 3,030,144
U.S. Restaurant Properties, Inc. ...................... 69,600 696,000
------------
3,914,269
------------
Healthcare - 0.2%
Healthcare Realty Trust, Inc. ......................... 26,700 443,888
------------
Industrial - 6.2%
AMB Property Corp. .................................... 157,400 3,541,500
CenterPoint Properties Trust........................... 12,500 458,594
ProLogis Trust......................................... 351,200 7,265,450
------------
11,265,544
------------
Lodging/Resorts - 4.0%
FelCor Lodging Trust, Inc. ............................ 35,087 721,476
Hospitality Properties Trust........................... 28,300 650,900
Host Marriott Corp. ................................... 461,600 4,442,900
Innkeepers USA Trust................................... 75,600 680,400
MeriStar Hospitality Corp. ............................ 38,900 739,100
------------
7,234,776
------------
Manufactured Homes - 2.0%
Chateau Communities, Inc. ............................. 93,200 2,528,050
Sun Communities, Inc. ................................. 31,700 1,026,287
------------
3,554,337
------------
Mixed: Office/Industrial - 9.4%
Duke-Weeks Realty Corp. ............................... 380,232 8,198,752
Liberty Property Trust................................. 101,700 2,542,500
</TABLE>
See Notes to Financial Statements
8
<PAGE>
BRAZOS MUTUAL FUNDS - REAL ESTATE SECURITIES PORTFOLIO
Portfolio of Investments (Unaudited) - continued May 31, 2000
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------- ------------
<S> <C> <C>
Reit Stock (continued)
Mixed: Office/Industrial (continued)
PS Business Parks, Inc. ............................... 51,700 $ 1,234,338
Reckson Associates Realty Corp. ....................... 222,600 4,883,287
------------
16,858,877
------------
Office - 20.3%
Arden Realty, Inc. .................................... 155,800 3,583,400
Boston Properties, Inc. ............................... 78,600 2,746,088
CarrAmerica Realty Corp. .............................. 137,300 3,432,500
Cornerstone Properties, Inc. .......................... 92,000 1,656,000
Equity Office Properties Trust......................... 324,178 8,610,978
Highwoods Properties, Inc. ............................ 157,300 3,785,031
Kilroy Realty Corp. ................................... 30,200 690,825
Mack-Cali Realty Corp. ................................ 172,800 4,665,600
Parkway Properties, Inc. .............................. 52,600 1,584,575
Spieker Properties, Inc. .............................. 64,100 2,976,644
Trizec Hahn Corp. ..................................... 195,400 2,931,000
------------
36,662,641
------------
Other - 4.5%
Catellus Development Corp. ............................ 7,200 96,750
Colonial Properties Trust.............................. 6,200 161,588
Crescent Real Estate Equities Co. ..................... 82,100 1,677,919
Vornado Realty Trust................................... 177,000 6,183,937
------------
8,120,194
------------
Regional Malls - 11.0%
CBL & Associates Properties, Inc. ..................... 28,800 698,400
General Growth Properties, Inc. ....................... 159,900 5,056,837
Simon Property Group, Inc. ............................ 273,100 6,690,950
Taubman Centers, Inc. ................................. 199,800 2,172,825
The Macerich Co. ...................................... 124,600 2,717,838
The Rouse Co. ......................................... 104,100 2,491,894
------------
19,828,744
------------
Shopping Centers - 9.2%
Bradley Real Estate, Inc. ............................. 86,100 1,851,150
Developers Diversified Realty Corp. ................... 132,500 1,912,969
Kimco Realty Corp. .................................... 164,700 6,670,350
New Plan Excel Realty Trust............................ 98,600 1,361,913
Philips International Realty Corp. .................... 51,300 872,100
</TABLE>
See Notes to Financial Statements
9
<PAGE>
BRAZOS MUTUAL FUNDS - REAL ESTATE SECURITIES PORTFOLIO
Portfolio of Investments (Unaudited) - continued May 31, 2000
<TABLE>
<CAPTION>
Shares/
Principal Amount
Security Description (in thousands) Value
-------------------- ---------------- ------------
<S> <C> <C>
Reit Stock (continued)
Shopping Centers (continued)
Regency Realty Corp. ........................ 98,000 $ 2,064,125
Weingarten Realty Investors.................. 45,800 1,863,487
------------
16,596,094
------------
Specialty - 1.1%
Pinnacle Holdings, Inc. ..................... 32,800 1,607,200
Plum Creek Timber Co., Inc. ................. 14,200 373,637
------------
1,980,837
------------
Storage - 4.6%
Public Storage, Inc. ........................ 302,636 6,752,565
Storage USA, Inc. ........................... 50,700 1,524,169
------------
8,276,734
------------
Total Investment Securities (cost
$162,159,936)................................ 170,533,597
------------
Repurchase Agreement - 6.0%
Agreement with State Street Bank & Trust Co.,
bearing interest at 5.00%, dated 5/31/00, to
be repurchased 6/01/00 in the amount of
$10,756,000 and collateralized by $9,175,000
of U.S. Treasury Bonds, bearing interest at
8.13%, due 5/15/21 and having an approximate
aggregate value of $10,973,603 (cost
$10,756,000)................................ $10,756 10,756,000
------------
Total Investments - 100.6% (cost $172,915,936).................... 181,289,597
Liabilities in Excess of Other Assets - (0.6)%.................... (1,092,703)
------------
Net Assets - 100.0%............................................... $180,196,894
============
</TABLE>
See Notes to Financial Statements
10
<PAGE>
BRAZOS MUTUAL FUNDS - MICRO CAP GROWTH PORTFOLIO
Portfolio of Investments (Unaudited) May 31, 2000
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------- ------------
<S> <C> <C>
Common Stock - 91.9%
Business Services - 4.2%
MAXIMUS, Inc.+......................................... 56,900 $ 1,180,675
Merix Corp.+........................................... 140,500 3,758,375
Miami Computer Supply Corp.+........................... 64,600 1,332,375
------------
6,271,425
------------
Consumer Durables - 1.0%
Genesco, Inc.+......................................... 93,600 1,444,950
------------
Consumer Merchandising - 11.4%
Ames Department Stores, Inc.+.......................... 15,100 179,313
Braun's Fashions Corp.+................................ 147,150 3,292,481
Buca, Inc.+............................................ 132,500 1,846,719
Cheesecake Factory, Inc.+.............................. 36,500 1,453,156
Chico's FAS, Inc.+..................................... 204,800 3,699,200
Dress Barn, Inc.+...................................... 100,100 2,139,638
InterTAN, Inc.+........................................ 255,750 2,701,359
O'Charley's, Inc.+..................................... 112,400 1,566,575
------------
16,878,441
------------
Consumer Non-Durables - 0.3%
Wild Oats Markets, Inc.+............................... 47,300 437,525
------------
Consumer Services - 6.7%
Bright Horizons Family Solutions, Inc.+................ 232,010 3,929,670
Education Management Corp.+............................ 159,600 2,650,856
Scientific Learning Corp.+............................. 194,000 3,334,375
------------
9,914,901
------------
Electronic Components - 1.3%
Metalink Ltd.+......................................... 76,000 1,900,000
------------
Electronic Technology - 7.8%
AstroPower, Inc.+...................................... 218,500 2,990,719
Concurrent Computer Corp.+............................. 78,700 668,950
Integrated Silicon Solution, Inc.+..................... 130,400 3,871,250
Metron Technology N.V.+................................ 130,200 1,448,475
NetScout Systems, Inc.+................................ 220,000 2,612,500
------------
11,591,894
------------
Energy - 16.2%
Horizon Offshore, Inc.+................................ 160,000 1,800,000
</TABLE>
See Notes to Financial Statements
11
<PAGE>
BRAZOS MUTUAL FUNDS - MICRO CAP GROWTH PORTFOLIO
Portfolio of Investments (Unaudited) - continued May 31, 2000
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------- ------------
<S> <C> <C>
Common Stock (continued)
Energy (continued)
Key Energy Services, Inc.+............................. 150,000 $ 1,631,250
Midcoast Energy Resources, Inc. ....................... 121,300 1,940,800
Spinnaker Exploration Co. ............................. 164,500 4,194,750
Superior Energy Services, Inc.+........................ 391,000 3,958,875
Tom Brown, Inc.+....................................... 160,000 3,500,000
TransMontaigne, Inc.+.................................. 20,100 135,675
Unit Corp.+............................................ 400,000 5,275,000
Universal Compression Holdings, Inc.+.................. 65,800 1,566,862
------------
24,003,212
------------
Financial Institutions - 7.8%
Financial Federal Corp. ............................... 110,700 1,964,925
Mobile Mini, Inc.+..................................... 250,400 5,289,700
SierraCities.com, Inc.+................................ 166,100 664,400
Triad Guaranty, Inc. .................................. 193,700 3,583,450
------------
11,502,475
------------
Healthcare Products - 4.3%
ILEX Oncology, Inc.+................................... 194,000 4,837,875
OraPharma, Inc.+....................................... 197,000 1,440,562
------------
6,278,437
------------
Healthcare Services - 8.6%
Accredo Health, Inc.+.................................. 189,400 4,545,600
eBenX, Inc.+........................................... 40,000 647,500
Professional Detailing, Inc.+.......................... 163,600 4,376,300
Province Healthcare Co.+............................... 110,800 3,116,250
------------
12,685,650
------------
Healthcare Technology - 6.6%
Biosite Diagnostics, Inc.+............................. 192,600 4,333,500
CryoLife, Inc.+........................................ 243,300 4,181,719
ORATEC Interventions, Inc.+............................ 15,000 566,250
Virologic, Inc.+....................................... 100,000 675,000
------------
9,756,469
------------
Media - 2.0%
Cinar Corp., Inc.+@.................................... 28,300 141,500
SBA Communications Corp.+.............................. 74,200 2,763,950
------------
2,905,450
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE>
BRAZOS MUTUAL FUNDS - MICRO CAP GROWTH PORTFOLIO
Portfolio of Investments (Unaudited) - continued May 31, 2000
<TABLE>
<CAPTION>
Shares/
Principal Amount
Security Description (in thousands) Value
-------------------- ---------------- ------------
<S> <C> <C>
Common Stock (continued)
Technology Services & Software - 5.6%
Apropos Technology, Inc.+.................... 45,000 $ 483,750
Caminus Corp.+............................... 91,500 1,098,000
ePresence, Inc.+............................. 182,700 1,507,275
Great Plains Software, Inc.+................. 13,000 539,500
NetSolve, Inc.+.............................. 129,000 3,233,062
The viaLink Co.+............................. 136,000 1,479,000
------------
8,340,587
------------
Telecommunications - 3.3%
Tollgrade Communications, Inc.+.............. 72,900 4,834,181
------------
Traditional Heavy Industry -1.2%
Ionics, Inc.+................................ 61,100 1,756,625
------------
Transportation - 1.5%
Kirby Corp................................... 99,400 2,199,225
------------
Utilities - 2.1%
General Communication, Inc.+................. 625,600 3,049,800
------------
Total Investment Securities (cost
$134,906,917)................................ 135,751,247
------------
Repurchase Agreement - 8.8%
Agreement with State Street Bank & Trust Co.,
bearing interest at 5.00%, dated 5/31/00, to
be repurchased 6/01/00 in the amount of
$13,021,808 and collateralized by
$10,625,000 of U.S. Treasury Bonds, bearing
interest at 8.50%, due 2/15/20 and having an
approximate aggregate value of $13,283,598
(cost $13,020,000).......................... $13,020 13,020,000
------------
Total Investments - 100.7% (cost $147,926,917) ................... 148,771,247
Liabilities in Excess of Other Assets - (0.7)%.................... (1,060,260)
------------
Net Assets - 100.0%............................................... $147,710,987
============
</TABLE>
+ Non-income producing
@ Fair valued security
See Notes to Financial Statements
13
<PAGE>
BRAZOS MUTUAL FUNDS -- MULTI CAP GROWTH PORTFOLIO
Portfolio of Investments (Unaudited) May 31, 2000
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------ -----------
<S> <C> <C>
Common Stock -- 82.0%
Basic Resources (Excluding Energy) -- 2.5%
Millipore Corp. ......................................... 18,400 $ 1,331,700
-----------
Business Services -- 5.8%
Iron Mountain, Inc.+..................................... 31,700 1,157,050
Miami Computer Supply Corp.+............................. 25,000 515,625
ONI System Corp.+........................................ 1,000 25,000
Paychex, Inc. ........................................... 21,000 735,000
West TeleServices Corp.+................................. 27,500 723,594
-----------
3,156,269
-----------
Consumer Durables -- 1.7%
Gentex Corp.+............................................ 24,200 750,200
Herman Miller, Inc. ..................................... 7,200 194,400
-----------
944,600
-----------
Consumer Merchandising -- 8.0%
Bed Bath & Beyond, Inc.+................................. 13,400 493,288
BJ's Wholesale Club, Inc.+............................... 22,400 694,400
Dollar Tree Stores, Inc.+................................ 9,000 535,500
Home Depot, Inc. ........................................ 12,500 610,156
InterTAN, Inc.+.......................................... 39,100 412,994
Michaels Stores, Inc.+................................... 22,500 963,281
Tandy Corp.+............................................. 14,300 606,856
-----------
4,316,475
-----------
Electronic Components -- 6.6%
Amphenol Corp.+.......................................... 15,000 690,000
AVX Corp. ............................................... 10,900 624,706
Concurrent Computer Corp.+............................... 27,800 236,300
KEMET Corp. ............................................. 18,600 1,249,688
Vitesse Semiconductor Corp.+............................. 15,400 779,625
-----------
3,580,319
-----------
Energy -- 14.0%
Devon Energy Corp. ...................................... 22,300 1,333,819
Nabors Industries, Inc.+................................. 28,000 1,204,000
Ocean Energy, Inc.+...................................... 79,100 1,186,500
Pogo Producing Co. ...................................... 42,000 1,008,000
Santa Fe International Corp. ............................ 33,900 1,315,744
Schlumberger Ltd. ....................................... 21,000 1,544,812
-----------
7,592,875
-----------
</TABLE>
See Notes to Financial Statements
14
<PAGE>
BRAZOS MUTUAL FUNDS -- MULTI CAP GROWTH PORTFOLIO
Portfolio of Investments (Unaudited) -- continued May 31, 2000
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------ -----------
<S> <C> <C>
Common Stock (continued)
Financial -- 10.0%
AmeriCredit Corp.+....................................... 50,700 $ 934,781
Concord EFS, Inc.+....................................... 67,100 1,627,175
Metris Cos., Inc. ....................................... 36,000 1,332,000
MGIC Investment Corp. ................................... 7,100 351,894
Providian Financial Corp. ............................... 13,700 1,218,444
-----------
5,464,294
-----------
Healthcare Products -- 12.2%
Biovail Corp.+........................................... 20,700 978,075
ILEX Oncology, Inc.+..................................... 38,000 947,625
Jones Pharma, Inc. ...................................... 18,000 655,875
King Pharmaceuticals, Inc.+.............................. 25,100 1,342,850
PerkinElmer, Inc. ....................................... 13,400 703,500
QLT PhotoTherapeutics, Inc.+............................. 15,700 768,319
Waters Corp.+............................................ 12,400 1,171,800
-----------
6,568,044
-----------
Healthcare Services -- 3.1%
Health Management Associates, Inc.+...................... 74,500 880,031
Tenet Healthcare Corp.+.................................. 30,900 791,813
-----------
1,671,844
-----------
Media -- 5.3%
Clear Channel Communications, Inc.+...................... 8,700 651,413
Hispanic Broadcasting Corp.+............................. 5,600 424,200
Infinity Broadcasting Corp.+............................. 15,775 498,884
Viacom, Inc.+............................................ 20,615 1,278,130
-----------
2,852,627
-----------
Telecommunications -- 7.7%
ADC Telecommunications, Inc.+............................ 21,400 1,437,812
ANTEC Corp.+............................................. 22,300 1,120,575
Scientific-Atlanta, Inc. ................................ 16,800 947,100
Tollgrade Communications, Inc.+.......................... 10,000 663,125
-----------
4,168,612
-----------
Utilities -- 5.1%
Enron Corp............................................... 20,000 1,457,500
Kinder Morgan, Inc. ..................................... 39,300 1,282,162
-----------
2,739,662
-----------
Total Common Stock (Cost $37,753,171)............................. 44,387,321
-----------
</TABLE>
See Notes to Financial Statements
15
<PAGE>
BRAZOS MUTUAL FUNDS -- MULTI CAP GROWTH PORTFOLIO
Portfolio of Investments (Unaudited) -- continued May 31, 2000
<TABLE>
<CAPTION>
Principal Amount
Security Description (in thousands) Value
-------------------- ---------------- -----------
<S> <C> <C>
Corporate Bonds -- 0.6%
Lamar Advertising Co. convertible 5.25% 2006
(cost $333,886).............................. $ 310 $ 328,600
-----------
Total Investment Securities (cost $38,087,058)................... 44,715,921
-----------
Repurchase Agreement -- 17.5%
Agreement with State Street Bank & Trust Co.,
bearing interest at 5.00%, dated 5/31/00, to
be repurchased 6/01/00 in the amount of
$9,458,000 and collateralized by $8,615,000
of U.S. Treasury Bonds, bearing interest at
7.25%, due 8/15/22 and having an approximate
aggregate value of $9,648,964 (cost
$9,458,000).................................. $9,458 9,458,000
-----------
Total Investments -- 100.1% (Cost $47,545,058)..................... 54,173,921
Liabilities in Excess of Other Assets -- (0.1)%.................... (39,826)
-----------
Net Assets -- 100.0%............................................... $54,134,095
===========
</TABLE>
+ Non-income producing
See Notes to Financial Statements
16
<PAGE>
BRAZOS MUTUAL FUNDS - MID CAP GROWTH PORTFOLIO
Portfolio of Investments (Unaudited) May 31, 2000
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------ -----------
<S> <C> <C>
Common Stock - 87.6%
Basic Resources (Excluding Energy) - 1.3%
Millipore Corp. ......................................... 9,100 $ 658,613
-----------
Business Services - 5.6%
Iron Mountain, Inc.+..................................... 25,100 916,150
MAXIMUS, Inc.+........................................... 18,600 385,950
Paychex, Inc. ........................................... 25,950 908,250
West TeleServices Corp.+................................. 26,500 697,281
-----------
2,907,631
-----------
Consumer Durables - 1.6%
Gentex Corp.+............................................ 20,400 632,400
Herman Miller, Inc. ..................................... 6,900 186,300
-----------
818,700
-----------
Consumer Merchandising - 7.1%
99 Cents Only Stores+.................................... 15,666 562,997
Bed Bath & Beyond, Inc.+................................. 11,200 412,300
BJ's Wholesale Club, Inc.+............................... 21,600 669,600
Brinker International, Inc.+............................. 9,600 271,800
Dollar Tree Stores, Inc.+................................ 8,600 511,700
InterTAN, Inc.+.......................................... 37,200 392,925
Michaels Stores, Inc. ................................... 20,700 886,219
-----------
3,707,541
-----------
Consumer Services - 2.2%
International Speedway Corp. ............................ 5,500 235,469
SFX Entertainment, Inc.+................................. 21,200 924,850
-----------
1,160,319
-----------
Electronic Components - 7.1%
AVX Corp. ............................................... 9,300 533,006
Burr-Brown Corp.+........................................ 12,800 728,800
Kent Electronics Corp.+.................................. 19,100 530,025
S3, Inc.+................................................ 32,700 523,200
ST Assembly Test Services Ltd.+.......................... 18,300 565,013
Vitesse Semiconductor Corp.+............................. 15,500 784,687
-----------
3,664,731
-----------
Electronic Technology - 2.0%
Cabletron Systems, Inc.+................................. 26,600 610,137
Concurrent Computer Corp.+............................... 26,600 226,100
SeaChange International, Inc.+........................... 8,900 228,063
-----------
1,064,300
-----------
</TABLE>
See Notes to Financial Statements
17
<PAGE>
BRAZOS MUTUAL FUNDS - MID CAP GROWTH PORTFOLIO
Portfolio of Investments (Unaudited) - continued May 31, 2000
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------ -----------
<S> <C> <C>
Common Stock (continued)
Energy - 12.6%
Apache Corp. ............................................ 12,700 $ 773,113
Devon Energy Corp. ...................................... 21,600 1,291,950
Nabors Industries, Inc.+................................. 35,000 1,505,000
Ocean Energy, Inc.+...................................... 76,300 1,144,500
Pogo Producing Co. ...................................... 31,200 748,800
Santa Fe International Corp. ............................ 27,400 1,063,462
-----------
6,526,825
-----------
Financial Institutions - 6.1%
AmeriCredit Corp.+....................................... 37,200 685,875
Charter One Financial, Inc. ............................. 28,900 657,475
Knight Trading Group, Inc.+.............................. 600 17,438
Metris Companies., Inc. ................................. 19,300 714,100
MGIC Investment Corp. ................................... 10,600 525,362
Providian Financial Corp. ............................... 6,400 569,200
-----------
3,169,450
-----------
Financial Services & Software -- 3.1%
Concord EFS, Inc.+....................................... 43,000 1,042,750
ISS Group, Inc.+......................................... 700 51,800
NOVA Corp.+.............................................. 17,700 519,937
-----------
1,614,487
-----------
Healthcare Products -- 9.5%
Biovail Corp.+........................................... 24,400 1,152,900
Jones Pharma, Inc. ...................................... 12,150 442,716
King Pharmaceuticals, Inc.+.............................. 24,600 1,316,100
Medicis Pharmaceutical Corp.+............................ 16,000 748,000
PerkinElmer, Inc. ....................................... 10,700 561,750
QLT PhotoTherapeutics, Inc.+............................. 15,100 738,956
-----------
4,960,422
-----------
Healthcare Services -- 3.0%
Health Management Associates, Inc.+...................... 63,700 752,456
Tenet Healthcare Corp.+.................................. 30,600 784,125
-----------
1,536,581
-----------
Healthcare Technology -- 1.8%
Invitrogen Corp.+........................................ 9,600 382,800
Waters Corp.+............................................ 6,100 576,450
-----------
959,250
-----------
</TABLE>
See Notes to Financial Statements
18
<PAGE>
BRAZOS MUTUAL FUNDS - MID CAP GROWTH PORTFOLIO
Portfolio of Investments (Unaudited) - continued May 31, 2000
<TABLE>
<CAPTION>
Shares/
Principal Amount
Security Description (in thousands) Value
-------------------- ---------------- -----------
<S> <C> <C>
Common Stock (continued)
Media -- 2.7%
American Tower Corp............................ 11,000 $ 408,375
Hispanic Broadcasting Corp.+................... 4,100 310,575
Infinity Broadcasting Corp.+................... 13,300 420,613
Westwood One, Inc. ............................ 7,600 252,225
-----------
1,391,788
-----------
Technology Services & Software -- 6.9%
Affiliated Computer Services, Inc.+............ 12,900 439,406
CSG Systems International, Inc.+............... 20,000 995,000
Fiserv, Inc.+.................................. 16,300 762,025
Great Plains Software, Inc.+................... 7,300 302,950
Mercury Interactive Corp.+..................... 4,900 415,275
SunGard Data Systems, Inc.+.................... 19,300 654,994
-----------
3,569,650
-----------
Telecommunications -- 9.3%
ADC Telecommunications, Inc.+.................. 18,300 1,229,531
ADTRAN, Inc. .................................. 4,400 271,150
ANTEC Corp.+................................... 18,900 949,725
Scientific-Atlanta, Inc. ...................... 14,300 806,163
Tollgrade Communications, Inc.+................ 23,400 1,551,712
-----------
4,808,281
-----------
Traditional Heavy Industry -- 2.3%
KEMET Corp.+................................... 17,900 1,202,656
-----------
Utilities -- 3.4%
Enron Corp. ................................... 10,600 772,475
Kinder Morgan, Inc. ........................... 31,000 1,011,375
-----------
1,783,850
-----------
Total Investment Securities (Cost $41,920,861).. 45,505,075
-----------
Repurchase Agreement -- 11.3%
Agreement with State Street Bank & Trust Co.,
bearing interest at 5.00%, dated 5/31/00, to
be repurchased 6/01/00 in the amount of
$5,880,817 and collateralized by $5,690,000 of
U.S. Treasury Bonds, bearing interest at
7.50%, due 2/15/05 and having an approximate
aggregate value of $5,999,200 (cost
$5,880,000)................................... $5,880 5,880,000
-----------
Total Investments -- 98.9% (Cost $47,800,861)....................... 51,385,075
Other Assets Less Liabilities -- 1.1%............................... 591,694
-----------
Net Assets -- 100.0%................................................ $51,976,769
===========
</TABLE>
-------
+Non-income producing
See Notes to Financial Statements
19
<PAGE>
BRAZOS MUTUAL FUNDS
Statement of Assets and Liabilities (Unaudited) May 31, 2000
<TABLE>
<CAPTION>
Small Cap Real Estate Micro Cap Multi Cap Mid Cap
Growth Securities Growth Growth Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
assets:
Investments
securities, at
value*................ $712,627,360 $170,533,597 $135,751,247 $44,715,921 $45,505,075
Repurchase agreements
(cost equals market).. 99,303,000 10,756,000 13,020,000 9,458,000 5,880,000
Cash................... 506 328 867 755 161
Receivable for
investments sold...... 1,892,403 432,897 216,451 -- 655,668
Interest and dividends
receivable............ 45,206 190,089 10,558 8,541 3,450
Receivable for shares
of beneficial
interest sold......... 786,026 684,862 546,928 89,845 12,134
Prepaid registration... 20,657 8,675 122,046 14,603 --
Deferred
organizational
expenses.............. 15,667 15,667 -- -- --
Receivable from
investment adviser/
administrator......... 12,457 10,965 -- 2,457 4,345
Prepaid expenses....... 15,910 2,961 3,286 910 709
------------ ------------ ------------ ----------- -----------
Total assets......... 814,719,192 182,636,041 149,671,383 54,291,032 52,061,542
------------ ------------ ------------ ----------- -----------
liabilities:
Payable for
investments
purchased............. 1,211,831 2,205,821 1,169,354 28,493 15,720
Payable for shares of
beneficial interest
redeemed.............. 919,082 15,932 578,316 -- --
Investment advisory
and management fees
payable............... 626,635 141,256 159,224 41,296 39,821
Accrued expenses....... 108,868 75,122 53,502 71,920 29,204
Distribution and
service maintenance
fees payable.......... 2,797 1,016 -- 28 28
Due to Adviser......... -- -- -- 15,200 --
------------ ------------ ------------ ----------- -----------
Total liabilities.... 2,869,213 2,439,147 1,960,396 156,937 84,773
------------ ------------ ------------ ----------- -----------
Net assets.......... $811,849,979 $180,196,894 $147,710,987 $54,134,095 $51,976,769
============ ============ ============ =========== ===========
net assets were composed
of:
Shares of beneficial
interest, $.001 par
value................. $ 38,912 $ 20,166 $ 7,554 $ 3,040 $ 4,536
Paid-in capital........ 601,958,434 196,103,518 106,545,901 40,180,641 47,411,786
------------ ------------ ------------ ----------- -----------
601,997,346 196,123,684 106,553,455 40,183,681 47,416,322
Accumulated
undistributed net
investment income
(loss)................ (1,477,229) 1,380,433 (467,754) (186,624) (66,451)
Accumulated
undistributed net
realized gain (loss)
on investments,
foreign currency and
other assets and
liabilities........... 138,252,051 (25,680,884) 40,780,956 7,508,175 1,042,684
Net unrealized
appreciation of
investments........... 73,077,811 8,373,661 844,330 6,628,863 3,584,214
------------ ------------ ------------ ----------- -----------
Net assets.......... $811,849,979 $180,196,894 $147,710,987 $54,134,095 $51,976,769
============ ============ ============ =========== ===========
*Identified cost
Investment securities.. $639,549,549 $162,159,936 $134,906,917 $38,087,058 $41,920,861
============ ============ ============ =========== ===========
</TABLE>
See Notes to Financial Statements
20
<PAGE>
BRAZOS MUTUAL FUNDS
Statement of Assets and Liabilities (Unaudited) -- continued May 31, 2000
<TABLE>
<CAPTION>
Small Cap Real Estate Micro Cap Multi Cap Mid Cap
Growth Securities Growth Growth Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Class Y (unlimited
shares authorized):
Net assets............. $806,909,704 $178,190,125 $147,710,987 $54,039,821 $51,881,112
Shares of beneficial
interest issued and
outstanding........... 38,673,634 19,940,800 7,554,284 3,034,658 4,527,174
Net asset value,
offering and
redemption price per
share................. $ 20.86 $ 8.94 $ 19.55 $ 17.81 $ 11.46
============ ============ ============ =========== ===========
Class A (unlimited
shares authorized):
Net assets............. $ 2,504,530 $ 1,165,938 -- $ 94,274 $ 95,657
Shares of beneficial
interest issued and
outstanding........... 120,670 130,645 -- 5,298 8,353
Net asset value and
redemption price per
share................. $ 20.76 $ 8.92 -- $ 17.79 $ 11.45
Maximum sales charge
(5.75% of offering
price)................ 1.27 0.54 -- 1.09 0.70
------------ ------------ ------------ ----------- -----------
Maximum offering price
to public............. $ 22.03 $ 9.46 -- $ 18.88 $ 12.15
============ ============ ============ =========== ===========
Class B (unlimited
shares authorized):
Net assets............. $ 1,483,803 $ 588,313 -- -- --
Shares of beneficial
interest issued and
outstanding........... 71,772 66,004 -- -- --
Net asset value,
offering and
redemption price per
share (excluding any
applicable contingent
deferred sales
charge)............... $ 20.67 $ 8.91 -- -- --
============ ============ ============ =========== ===========
Class II (unlimited
shares authorized):
Net assets............. $ 951,942 $ 252,518 -- -- --
Shares of beneficial
interest issued and
outstanding........... 46,059 28,324 -- -- --
Net asset value and
redemption price per
share (excluding any
applicable contingent
deferred sales
charge)............... $ 20.67 $ 8.92 -- -- --
Maximum sales charge
(1.00% of offering
price)................ 0.21 0.09 -- -- --
------------ ------------ ------------ ----------- -----------
Maximum offering price
to public............. $ 20.88 $ 9.01 -- -- --
============ ============ ============ =========== ===========
</TABLE>
See Notes to Financial Statements
21
<PAGE>
BRAZOS MUTUAL FUNDS
Statement of Operations -- For the six months ended May 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Small Cap Real Estate Micro Cap Multi Cap Mid Cap
Growth Securities Growth Growth Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest................ $ 2,331,128 $ 291,939 $ 700,834 $ 98,634 $ 152,279
Dividends (net of
withholding taxes of
$3,785 on the Real
Estate Securities
Portfolio)............. 267,317 4,428,838 23,680 31,602 22,007
------------ ----------- ------------ ----------- ----------
Total investment
income................ 2,598,445 4,720,777 724,514 130,236 174,286
------------ ----------- ------------ ----------- ----------
Expenses:
Investment advisory and
management fees........ 3,625,366 716,297 965,551 219,053 160,456
Administration fees..... 240,900 55,654 56,324 17,037 12,480
Distribution and service
maintenance fees-Class
A...................... 3,553 812 -- 55 56
Distribution and service
maintenance fees-Class
B...................... 6,285 1,832 -- -- --
Distribution and service
maintenance fees-Class
II..................... 3,865 953 -- -- --
Transfer agent fees and
expenses-Class Y....... 9,748 8,866 9,354 5,626 7,496
Transfer agent fees and
expenses-Class A....... 3,370 893 -- 316 316
Transfer agent fees and
expenses-Class B....... 2,150 746 -- -- --
Transfer agent fees and
expenses-Class II...... 1,297 529 -- -- --
Registration fees-Class
Y...................... 10,200 26,550 92,400 17,600 16,165
Registration fees-Class
A...................... 9,086 8,406 -- 3,285 3,285
Registration fees-Class
B...................... 8,969 8,416 -- -- --
Registration fees-Class
II..................... 8,869 8,391 -- -- --
Custodian fees and
expenses............... 105,700 40,938 33,452 25,690 26,918
Legal fees and expenses. 24,600 9,008 8,530 5,050 12,690
Printing expense........ 18,230 14,580 6,160 4,989 4,680
Trustees' fees and
expenses............... 13,203 10,598 10,232 9,220 6,960
Audit and tax consulting
fees................... 11,615 11,755 11,685 11,685 9,050
Insurance expense....... 1,898 341 426 116 98
Amortization of
organizational
expenses............... 844 844 -- -- --
Miscellaneous expenses.. 4,701 1,836 1,726 1,911 1,186
------------ ----------- ------------ ----------- ----------
Total expenses......... 4,114,449 928,245 1,195,840 321,633 261,836
Less: Expenses
waived/reimbursed..... (37,770) (36,035) -- (4,118) (19,226)
Less: Custody credits
earned on cash
balances (1,005) (828) (3,572) (655) (1,873)
Net expenses........... 4,075,674 891,382 1,192,268 316,860 240,737
------------ ----------- ------------ ----------- ----------
Net investment income
(loss).................. (1,477,229) 3,829,395 (467,754) (186,624) (66,451)
------------ ----------- ------------ ----------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss)
on investments.......... 138,356,935 (5,704,367) 40,789,201 7,515,644 1,042,684
Net change in unrealized
appreciation/depreciation
on investments.......... (59,552,509) 21,523,120 (25,494,145) 2,775,933 3,584,214
------------ ----------- ------------ ----------- ----------
Net realized and
unrealized gain on
investments, foreign
currency and other
assets and liabilities.. 78,804,426 15,818,753 15,295,056 10,291,577 4,626,898
------------ ----------- ------------ ----------- ----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS: $ 77,327,197 $19,648,148 $ 14,827,302 $10,104,953 $4,560,447
============ =========== ============ =========== ==========
</TABLE>
See Notes to Financial Statements
22
<PAGE>
BRAZOS MUTUAL FUNDS
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Small Cap Real Estate
Growth Portfolio Securities Portfolio
-------------------------- --------------------------
For the six For the year For the six For the year
months ended ended months ended ended
May 31, 2000 November 30, May 31, 2000 November 30,
(unaudited) 1999 (unaudited) 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
Operations:
Net investment income
(loss).................. $ (1,477,229) $ (3,890,174) $ 3,829,395 $ 6,258,987
Net realized gain (loss)
on investments.......... 138,356,935 25,362,554 (5,704,367) (12,384,265)
Net change in unrealized
appreciation/depreciation
of investments.......... (59,552,509) 107,534,782 21,523,120 (4,486,508)
------------ ------------ ------------ ------------
Net increase (decrease)
in net assets resulting
from operations......... 77,327,197 129,007,162 19,648,148 (10,611,786)
------------ ------------ ------------ ------------
Dividends and
distributions to
shareholders:
From net investment
income (Class Y)........ -- -- (3,288,919) (5,836,341)
From net investment
income (Class A)........ -- -- (3,071) (2,095)
From net investment
income (Class B)........ -- -- (5,089) (2,047)
From net investment
income (Class II)....... -- -- (2,924) (2,046)
From net realized gains
on investments (Class
Y)...................... (5,487,832) -- -- --
From net realized gains
on investments (Class
A)...................... (6,034) -- -- --
From net realized gains
on investments (Class
B)...................... (7,250) -- -- --
From net realized gains
on investments (Class
II)..................... (3,724) -- -- --
------------ ------------ ------------ ------------
Total dividends and
distributions to
shareholders............. (5,504,840) -- (3,300,003) (5,842,529)
------------ ------------ ------------ ------------
Net increase in net assets
resulting from capital
share transactions (Note
5)....................... 110,696,849 187,116,304 34,404,140 61,109,901
------------ ------------ ------------ ------------
Total increase in net
assets................... 182,519,206 316,123,466 50,752,285 44,655,586
NET ASSETS:
Beginning of period....... 629,330,773 313,207,307 129,444,609 84,789,023
------------ ------------ ------------ ------------
End of period [including
undistributed net
investment income (loss)
for March 31, 2000 and
November 30, 1999 of
($1,477,229), $0;
$1,380,433 and $851,041,
respectively]............ $811,849,979 $629,330,773 $180,196,894 $129,444,609
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
23
<PAGE>
BRAZOS MUTUAL FUNDS
Statement of Changes in Net Assets-- continued
<TABLE>
<CAPTION>
Micro Cap Mid Cap Growth
Growth Portfolio Multi Cap Growth Portfolio Portfolio
-------------------------- ---------------------------- --------------
For the six For the period For the period
For the six For the year months ended December 31, December 31,
months ended ended May 31, 1998 through 1999 through
May 31, 2000 November 30, 2000 November 30, May 31, 2000
(unaudited) 1999 (unaudited) 1999 (unaudited)
------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
Operations:
Net investment loss...... $ (467,754) $ (767,897) $ (186,624) $ (59,691) $ (66,451)
Net realized gain on
investments............. 40,789,201 17,495,994 7,515,644 4,217,316 1,042,684
Net change in unrealized
appreciation/depreciation
of investments.......... (25,494,145) 23,601,585 2,775,933 3,852,930 3,584,214
------------ ------------ ----------- ----------- -----------
Net increase in net
assets resulting from
operations.............. 14,827,302 40,329,682 10,104,953 8,010,555 4,560,447
------------ ------------ ----------- ----------- -----------
Dividends and
distributions to
shareholders:
From net investment
income (Class Y)........ -- -- -- -- --
From net investment
income (Class A)........ -- -- -- -- --
From net investment
income (Class B)........ -- -- -- -- --
From net investment
income (Class II)....... -- -- -- -- --
From net realized gains
on investments (Class
Y)...................... (8,285,024) (7,883,383) (2,265,007) (1,900,087) --
From net realized gains
on investments (Class
A)...................... -- -- -- -- --
From net realized gains
on investments (Class
B)...................... -- -- -- -- --
From net realized gains
on investments (Class
II)..................... -- -- -- -- --
------------ ------------ ----------- ----------- -----------
Total dividends and
distributions to
shareholders............. (8,285,024) (7,883,383) (2,265,007) (1,900,087) --
------------ ------------ ----------- ----------- -----------
Net increase in net assets
resulting from capital
share transactions (Note
5)....................... 19,254,476 41,693,949 10,349,989 29,833,692 47,416,322
------------ ------------ ----------- ----------- -----------
Total increase in net
assets................... 25,796,754 74,140,248 18,189,935 35,944,160 51,976,769
NET ASSETS:
Beginning of period....... 121,914,233 47,773,985 35,944,160 -- --
------------ ------------ ----------- ----------- -----------
End of period [including
undistributed net
investment income (loss)
for March 31, 2000 and
November 30, 1999 of
($467,754), $0;
($186,624), $0 and
($66,451), respectively]
......................... $147,710,987 $121,914,233 $54,134,095 $35,944,160 $51,976,769
============ ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements
24
<PAGE>
BRAZOS MUTUAL FUNDS
Financial Highlights
<TABLE>
<CAPTION>
SMALL CAP GROWTH PORTFOLIO
--------------------------
Net gain
on invest-
Net ments
Asset Net (both Total Dividends Distri- Net Net
Value, invest- realized from from net butions Asset Assets Ratio of
begin- ment and invest- invest- from Total Value, end of expenses to
Period ning of income unreal- ment ment capital distri- end of Total period average
Ended of period (loss)(1) ized) operations income gains butions period Return(2) (000's) net assets
---------------- --------- --------- ---------- ---------- --------- ------- ------- ------ --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class Y
-------
12/31/96-
11/30/97(3) $10.00 $(0.03) $4.69 $4.66 $-- $(1.17) $(1.17) $13.49 47.08% $80,898 1.35%(4)(5)
11/30/98........ 13.49 (0.11) 0.79 0.68 -- (0.10) (0.10) 14.07 5.06 313,207 1.21
11/30/99........ 14.07 (0.13) 4.60 4.47 -- -- -- 18.54 31.77 627,978 1.08
5/31/00(6)...... 18.54 (0.04) 2.52 2.48 -- (0.16) (0.16) 20.86 13.36 806,910 1.01 (4)
Class A
-------
9/08/99-
11/30/99(3) $16.90 $(0.05) $1.65 $1.60 $-- $ -- $ -- $18.50 9.47% $ 394 1.65%(4)(5)
5/31/00(6)...... 18.50 (0.11) 2.53 2.42 -- (0.16) (0.16) 20.76 13.07 2,504 1.65 (4)(5)
Class B
-------
9/08/99-
11/30/99(3) $16.90 $(0.09) $1.68 $1.59 $-- $ -- $ -- $18.49 9.41% $ 562 2.30%(4)(5)
5/31/00(6)...... 18.49 (0.18) 2.52 2.34 -- (0.16) (0.16) 20.67 12.64 1,484 2.30 (4)(5)
Class II
--------
9/08/99-
11/30/99(3) $16.90 $(0.08) $1.68 $1.60 $-- $ -- $ -- $18.50 9.47% $ 397 2.30%(4)(5)
5/31/00(6)...... 18.50 (0.18) 2.51 2.33 -- (0.16) (0.16) 20.67 12.58 952 2.30 (4)(5)
<CAPTION>
SMALL CAP GROWTH PORTFOLIO
--------------------------
Ratio
of net
investment
income
(loss) to
Period average Portfolio
Ended net assets turnover
---------------- ---------------- ---------
<S> <C> <C>
Class Y
-------
12/31/96-
11/30/97(3) (0.68)%(4)(5) 148%
11/30/98........ (0.71) 104
11/30/99........ (0.78) 105
5/31/00(6)...... (0.36) (4) 75
Class A
-------
9/08/99-
11/30/99(3) (1.46)%(4)(5) 105%
5/31/00(6)...... (0.97) (4)(5) 75
Class B
-------
9/08/99-
11/30/99(3) (2.12)%(4)(5) 105%
5/31/00(6)...... (1.63) (4)(5) 75
Class II
--------
9/08/99-
11/30/99(3) (2.11)%(4)(5) 105%
5/31/00(6)...... (1.63) (4)(5) 75
</TABLE>
----------
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Commencement of sale of respective class of shares
(4) Annualized
(5) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
11/30/97 11/30/98 11/30/99 5/31/00
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Small Cap Growth Class Y...... 0.45% -- -- --
Small Cap Growth Class A...... -- -- 0.14% 1.26%
Small Cap Growth Class B...... -- -- 0.14 2.01
Small Cap Growth Class II..... -- -- 0.14 3.20
</TABLE>
(6) Unaudited
See Notes to Financial Statements
25
<PAGE>
BRAZOS MUTUAL FUNDS
Financial Highlights -- continued
REAL ESTATE SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss)
on invest-
Net ments
Asset (both Total Dividends Distri- Net Net
Value, Net realized from from net butions Asset Assets Ratio of
begin- invest- and invest- invest- from Total Value, end of expenses to
Period ning of ment unreal- ment ment capital distri- end of Total period average
Ended period income(1) ized) operations income gains butions period Return(2) (000's) net assets
---------------- ------- --------- ---------- ---------- --------- ------- ------- ------ --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class Y
-------
12/31/96-
11/30/97(3)..... $10.00 $0.35 $ 2.05 $ 2.40 $(0.23) $(0.93) $(1.16) $11.24 24.39 % $53,308 1.25%(4)(5)
11/30/98........ 11.24 0.44 (1.90) (1.46) (0.43) (0.14) (0.57) 9.21 (13.64) 84,789 1.25 (5)
11/30/99........ 9.21 0.47 (1.17) (0.70) (0.44) -- (0.44) 8.07 (7.86) 128,997 1.19
5/31/00(6)...... 8.07 0.20 0.85 1.05 (0.18) -- -- 8.94 13.23 178,190 1.12 (4)
<CAPTION>
Ratio
of net
investment
income to
Period average Portfolio
Ended net assets turnover
------------------ --------------- ---------
<S> <C> <C>
Class Y
-------
12/31/96-
11/30/97(3)..... 4.61%(4)(5) 185%
11/30/98........ 4.19 (5) 157
11/30/99........ 5.23 100
5/31/00(6)...... 4.83 (4) 37
Class A
-------
9/08/99-
11/30/99(3)..... $ 8.80 $0.12 $(0.74) $(0.62) $(0.12) $ -- $(0.12) $8.06 (7.06)% $ 143 1.65%(4)(5)
5/31/00(6)...... 8.06 0.14 0.86 1.00 (0.14) -- -- 8.92 12.63 1,166 1.65 (4)(5)
Class B
-------
9/08/99-
11/30/99(3)..... $ 8.80 $0.10 $(0.73) $(0.63) $(0.12) $ -- $(0.12) $8.05 (7.20)% $ 162 2.30%(4)(5)
5/31/00(6)...... 8.05 0.15 0.84 0.99 (0.13) -- -- 8.91 12.46 588 2.30 (4)(5)
Class II
--------
9/08/99-
11/30/99(3)..... $ 8.80 $0.11 $(0.74) $(0.63) $(0.12) $ -- $(0.12) $8.05 (7.20)% $ 143 2.30%(4)(5)
5/31/00(6)...... 8.05 0.16 0.84 1.00 (0.13) -- -- 8.92 12.59 253 2.30 (4)(5)
Class A
-------
9/08/99-
11/30/99(3)..... 6.13%(4)(5) 100%
5/31/00(6)...... 2.94 (4)(5) 37
Class B
-------
9/08/99-
11/30/99(3)..... 5.48%(4)(5) 100%
5/31/00(6)...... 3.83 (4)(5) 37
Class II
--------
9/08/99-
11/30/99(3)..... 5.61%(4)(5) 100%
5/31/00(6)...... 3.92 (4)(5) 37
</TABLE>
----------
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Commencement of sale of respective class of shares
(4) Annualized
(5) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
11/30/97 11/30/98 11/30/99 5/31/00
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Real Estate
Securities Class
Y............... 0.58% 0.06% -- --
Real Estate
Securities Class
A............... -- -- 0.18% 5.19%
Real Estate
Securities Class
B............... -- -- 0.18 6.56
Real Estate
Securities Class
II.............. -- -- 0.18 12.58
</TABLE>
(6) Unaudited
See Notes to Financial Statements
26
<PAGE>
BRAZOS MUTUAL FUNDS
Financial Highlights -- continued
<TABLE>
<CAPTION>
MICRO CAP GROWTH PORTFOLIO
--------------------------
Net gain
on
on invest-
Net ments Ratio of
Asset Net (both Total Dividends Distri- Net Net expenses
Value, invest- realized from from net butions Asset Assets to
begin- ment and invest- invest- from Total Value, end of average
Period ning of income unreal- ment ment capital distri- end of Total period net
Ended period (loss)(1) ized) operations income gains butions period Return(2) (000's) assets
---------------- ------- --------- ---------- ---------- --------- ------- ------- ------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class Y
-------
12/31/97-
11/30/98(3)..... $10.00 $(0.05) $2.08 $2.03 $-- $ -- $ -- $12.03 20.30% $ 47,774 1.60%(4)(5)
11/30/99........ 12.03 (0.14) 7.91 7.77 -- (1.47) (1.47) 18.33 65.67 121,914 1.54
5/31/00(6)...... 18.33 (0.06) 2.52 2.46 -- (1.24) (1.24) 19.55 12.93 147,711 1.48 (4)
<CAPTION>
MICRO CAP GROWTH PORTFOLIO
--------------------------
Ratio
of net
investment
income
(loss) to
Period average Portfolio
Ended net assets turnover
---------------- ---------------- ---------
<S> <C> <C>
Class Y
-------
12/31/97-
11/30/98(3)..... (0.46)%(4)(5) 121%
11/30/99........ (0.95) 150
5/31/00(6)...... (0.58) (4) 89
</TABLE>
----------
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized
(3) Commencement of sale of respective class of shares
(4) Annualized
(5) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
11/30/98
--------
<S> <C>
Micro Cap Growth................... 0.30%
</TABLE>
(6) Unaudited
See Notes to Financial Statements
27
<PAGE>
BRAZOS MUTUAL FUNDS
Financial Highlights -- continued
<TABLE>
<CAPTION>
MULTI CAP GROWTH PORTFOLIO
--------------------------
Net gain
(loss)
on invest-
Net ments
Asset Net (both Total Dividends Distri- Net Net
Value, invest- realized from from net butions Asset Assets Ratio of
begin- ment and invest- invest- from Total Value, end of expenses
Period ning of income unreal- ment ment capital distri- end of Total period to average
Ended period (loss)(1) ized) operations income gains butions period Return(2) (000's) net assets
---------------- ------- --------- ---------- ---------- --------- ------- ------- ------ --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class Y
-------
12/31/98-
11/30/99(3).... $10.00 $(0.05) $ 6.96 $ 6.91 $ -- $ (2.13) $ (2.13) $14.78 72.39% $35,944 1.35%(4)(5)
5/31/00(6)...... 14.78 (0.07) 4.02 3.95 -- (0.92) (0.92) 17.81 27.67 54,040 1.30 (4)
Class A
-------
3/31/00-
5/31/00(3)(6).. $18.92 $(0.03) $(1.10) $(1.13) $ -- $ -- $ -- $17.79 (5.97)% $ 94 1.70%(4)(5)
<CAPTION>
MULTI CAP GROWTH PORTFOLIO
--------------------------
Ratio
of net
investment
income
(loss) to
Period average Portfolio
Ended net assets turnover
---------------- --------------- ---------
<S> <C> <C>
Class Y
-------
12/31/98-
11/30/99(3).... (0.42)%(4)(5) 154%
5/31/00(6)...... (0.77) (4) 123
Class A
-------
3/31/00-
5/31/00(3)(6).. (0.95)%(4)(5) 123%
</TABLE>
----------
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized
(3) Commencement of sale of respective class of shares
(4) Annualized
(5) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
11/30/99 5/31/00
-------- -------
<S> <C> <C>
Multi Cap Growth Portfolio
Class Y..................... 0.64% --
Multi Cap Growth Portfolio
Class A..................... -- 24.81%
</TABLE>
(6) Unaudited
See Notes to Financial Statements
28
<PAGE>
BRAZOS MUTUAL FUNDS
Financial Highlights -- continued
<TABLE>
<CAPTION>
MID CAP GROWTH PORTFOLIO
------------------------
Net gain
(loss)
Net on invest-
Asset ments
Value, Net (both Total Dividends Distri- Net Net
begin- invest- realized from from net butions Asset Assets Ratio of
ning ment and invest- invest- from Total Value, end of expenses to
Period of income unreal- ment ment capital distri- end of Total period average
Ended period (loss)(1) ized) operations income gains butions period Return(2) (000's) net assets
---------------- ------ --------- ---------- ---------- --------- ------- ------- ------ --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class Y
-------
12/31/99-
5/31/00(3)(6)... $10.00 $(0.02) $ 1.48 $ 1.46 $ -- $-- $-- $11.46 14.60% $51,881 1.35%(4)(5)
Class A
-------
3/31/00-
5/31/00(3)(6)... $12.00 $(0.02) $(0.53) $(0.55) $ -- $-- $-- $11.45 (4.58)% $ 96 1.70%(4)(5)
<CAPTION>
MID CAP GROWTH PORTFOLIO
------------------------
Ratio of net
investment
income
(loss) to
Period average Portfolio
Ended net assets turnover
---------------- ------------- ---------
<S> <C> <C>
Class Y
-------
12/31/99-
5/31/00(3)(6)... (0.37)%(4)(5) 60%
Class A
-------
3/31/00-
5/31/00(3)(6)... (0.95)%(4)(5) 60%
</TABLE>
----------
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized
(3) Commencement of sale of respective class of shares
(4) Annualized
(5) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
5/31/00
-------
<S> <C>
Mid Cap Growth Portfolio Class Y....... 0.09%
Mid Cap Growth Portfolio Class A....... 24.48
</TABLE>
(6) Unaudited
See Notes to Financial Statements
29
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements (Unaudited) May 31, 2000
1. Description of the Fund. Brazos Mutual Funds (the "Fund") is registered un-
der the Investment Company Act of 1940, as amended (the "1940 Act"), as a di-
versified, 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 five Portfolios, the BRAZOS Small Cap Growth
Portfolio ("Small Cap Growth Portfolio"), the BRAZOS Real Estate Securities
Portfolio ("Real Estate Securities Portfolio"), the BRAZOS Micro Cap Growth
Portfolio ("Micro Cap Growth Portfolio"), the BRAZOS Multi Cap Growth Portfo-
lio, formerly BRAZOS Growth Portfolio ("Multi Cap Growth Portfolio") and the
BRAZOS Mid Cap Growth Portfolio ("Mid Cap Growth Portfolio") (each, a "Portfo-
lio" and collectively, the "Portfolios"). The investment objective for each
portfolio are as follows:
Small Cap Growth Portfolio seeks to provide maximum capital appreciation, con-
sistent with reasonable risk to principal, by investing primarily in small cap-
italization companies.
Real Estate Securities Portfolio seeks to provide a balance of income and ap-
preciation, consistent with reasonable risk to principal, by investing primar-
ily in equity securities of companies which are principally engaged in the real
estate industry.
Micro Cap Growth Portfolio seeks to provide maximum capital appreciation, con-
sistent with reasonable risk to principal, by investing primarily in micro cap-
italization companies.
Multi Cap Growth Portfolio seeks to provide maximum capital growth. Effective
December 31, 1999, the Growth Portfolio changed its name to the Multi Cap
Growth Portfolio. The Portfolio's investment objective remains unchanged.
Mid Cap Growth Portfolio seeks to provide maximum capital appreciation, consis-
tent with reasonable risk to principal.
The Small Cap Growth Portfolio, Real Estate Securities Portfolio, Multi Cap
Growth Portfolio and Mid Cap Growth Portfolio offer multiple classes of shares.
The classes within each Portfolio are presented in the Statement of Assets and
Liabilities. The cost structure for each class is as follows:
Class A shares-- Offered at net asset value per share plus an initial sales
charge. Any purchases of Class A shares in excess of
$1,000,000 will be subject to a contingent deferred sales
charge on redemptions made within two years of purchase.
Class B shares-- Offered at net asset value per share without an initial
sales charge, although a declining contingent deferred sales
charge may be imposed on redemptions made within six years
of purchase. Class B shares will
30
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements (Unaudited) -- continued May 31, 2000
convert automatically to Class A shares on the first business
day of the month after seven years from the issuance of such
shares and at such time will be subject to the lower
distribution fee applicable to Class A shares.
Class II shares-- Offered at net asset value per share plus an initial sales
charge. Certain redemptions made within the first 18 months
of the date of purchase are subject to a contingent
deferred sales charge.
Class Y shares-- Offer at net asset value per share exclusively for
institutional investors.
Each class of shares bears the same voting, dividend, liquidation and other
rights and conditions. Class A, Class B and Class II shares each make distri-
bution and account maintenance and service fee payments under the distribution
plans pursuant to Rule 12b-1 under the Investment Company Act of 1940, except
that Class B and Class II shares are subject to higher distribution fee rates.
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, there-
fore, subject to risks inherent in financing a limited number of projects.
REITs depend generally on their ability to generate cash flow to make distri-
butions 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 af-
fected by its failure to qualify for tax-free, pass-through of income under
the Internal Revenue Code of 1986, as amended (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 signifi-
cant 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 se-
curities 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.
31
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements (Unaudited) -- continued May 31, 2000
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, 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. Each Portfolio will distribute annually to
shareholders substantially all of its net investment income and any net real-
ized capital gains. The character of distributions made during the year from
net investment income or net realized gains may differ from the characteriza-
tion for federal income tax purposes due to differences in the recognition of
income and expense items for financial statement and tax purposes. Where appro-
priate, reclassifications between net asset accounts are made for such differ-
ences that are permanent in nature.
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 capi-
tal 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 ("SOP") 93-2, Determination, Disclosure and Financial
Statement Presentation of Income, Capital Gain and Return of Capital Distribu-
tions by Investment Companies, distributions representing a return of capital
for tax purposes are charged to capital paid in.
Deferred Organization Costs. Organizational costs on the Small Cap Growth Port-
folio and the Real Estate Securities Portfolio have been capitalized and are
being amortized over sixty months from the commencement of 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 redemp-
tion 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.
Use of Estimates in the Preparation of Financial Statements. The preparation of
financial statements in conformity will generally accepted accounting princi-
ples requires management to make estimates and assumptions that affect the re-
ported 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.
32
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements (Unaudited) -- continued May 31, 2000
Other. Investment security transactions are accounted for on a trade date ba-
sis. Each Portfolio uses the specific identification method for determining re-
alized gain and loss on investments for both financial and federal income tax
reporting purposes. Dividend income and distributions to shareholders are re-
corded on the ex-dividend date. Interest income is recorded on the accrual ba-
sis.
3. Investment Securities. The aggregate purchases and sales of long-term secu-
rities for the six months ended May 31, 2000 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Small Cap Growth Portfolio........................ $554,826,167 $518,269,281
Real Estate Securities Portfolio.................. 87,118,217 54,331,758
Micro Cap Growth Portfolio........................ 118,559,450 115,319,572
Multi Cap Growth Portfolio........................ 55,342,199 53,648,278
Mid Cap Growth Portfolio.......................... 60,737,740 19,203,894
</TABLE>
4. Advisory Fees and Other transactions with Affiliates. The Fund, on behalf of
each Portfolio, employs John McStay Investment Counsel (the "Adviser"), an in-
vestment counseling firm founded in 1983, to furnish investment advisory and
other services to the Fund. On April 19, 1999 the Adviser became an indirect
majority owned subsidiary of American International Group. Under Investment Ad-
visory Agreements with the Fund, the Adviser manages the investment and rein-
vestment 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 Portfolios' pay the Adviser a monthly fee at the
annual rate of 0.90%, 0.90%, 1.20%, 0.90% and 0.90% of the average daily net
assets of the Small Cap Growth Portfolio, Real Estate Securities Portfolio, Mi-
cro Cap Growth Portfolio, Multi Cap Growth Portfolio and Mid Cap Growth Portfo-
lio, respectively. The Adviser has voluntarily agreed to keep operating
expenses for the Small Cap Growth Portfolio, Real Estate Securities Portfolio,
Micro Cap Growth Portfolio, Multi Cap Growth Portfolio and Mid Cap Growth Port-
folio Class Y shares (excluding extraordinary expenses) from exceeding an an-
nual rate of 1.35%, 1.25%, 1.60%, 1.35% and 1.35%, respectively, of each
Portfolio's average daily net assets.
For the six months ended May 31, 2000 the Adviser reimbursed expenses in the
amount of $15,291 on the Mid Cap Growth Portfolio.
Effective August 1, 1999 the Fund, on behalf of each Portfolio, has entered
into an Administration Agreement with SunAmerica Asset Management Corp.
("SAAMCo") an indirect wholly owned subsidiary of American International Group.
SAAMCo receives an annual fee based upon average daily net asset for each Port-
folio as follows:
.07% on the first $200 million
.06% on the next $500 million
33
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements (Unaudited) -- continued May 31, 2000
.04% on the balance
Minimum annual fee: $35,000/first portfolio; $25,000/portfolio for the next
three portfolios; $20,000/portfolio for any additional portfolios.
For the six months ended May 31, 2000, SAAMCo received fees from each portfolio
and reimbursed expenses on Classes A, B and II as follows:
<TABLE>
<CAPTION>
Expenses
Reimbursed by
Administration fee Administrator
------------------ -------------
<S> <C> <C>
Small Cap Growth Portfolio.................. $240,894 $37,770
Real Estate Securities Portfolio............ 55,653 36,035
Micro Cap Growth Portfolio.................. 56,323 --
Multi Cap Growth Portfolio.................. 17,037 4,118
Mid Cap Growth Portfolio.................... 12,480 3,935
</TABLE>
Effective September 8, 1999 the Fund, on behalf of each Portfolio, has a Dis-
tribution Agreement with SunAmerica Capital Services, Inc. ("SACS"), an affili-
ate of the Administrator. Each Portfolio has adopted a Distribution Plan (the
"Plan") in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Rule 12b-1 permits an investment company directly or indirectly to pay expenses
associated with the distribution of its shares ("distribution expenses") in ac-
cordance with a plan adopted by the investment company's board of trustees and
approved by its shareholders. Pursuant to such rule, the Trustees and the
shareholders of Class A, Class B and Class II have adopted Distribution Plans
hereinafter referred to as the "Class A Plan", "Class B Plan" and "Class II
Plan". In adopting the Distribution Plans, the Trustees determined that there
was a reasonable likelihood that each such Plan would benefit the Portfolio and
the shareholders of the respective class. The sales charge and distribution
fees of a particular class will not be used to subsidize the sale of shares of
any other class.
Under the Class A Plan, Class B Plan and Class II Plan, the Distributor re-
ceives payments from a Portfolio at an annual rate of up to 0.10%, 0.75% and
0.75%, respectively, of average daily net assets of such Portfolio's Class to
compensate the Distributor and certain securities firms for providing sales and
promotional activities for distributing that class of shares. The distribution
costs for which the Distributor may be reimbursed out of such distribution fees
include fees paid to broker-dealers that have sold Portfolio shares, commis-
sions and other expenses such as those incurred for sales literature, prospec-
tus printing and distribution and compensation to wholesalers. It is possible
that in any given year the amount paid to the Distributor under each Class'
Plan may exceed the Distributor's distribution costs as described above. The
Distribution Plans provide that each class of shares of each Portfolio may also
pay the Distributor an account maintenance and
34
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements (Unaudited) -- continued May 31, 2000
service fee up to an annual rate of 0.25% of the aggregate average daily net
assets of such class of shares for payments to broker-dealers for providing
continuing account maintenance. Accordingly, for the six months ended May 31,
2000, SACS received fees (see Statement of Operations) based upon the aforemen-
tioned rates.
SACS receives sales charges on each Portfolio's Class A and Class II shares,
portions of which are reallowed to affiliated broker-dealers and non-affiliated
broker-dealers. SACS also receives the proceeds of contingent deferred sales
charges paid by investors in connection with certain redemptions of each Port-
folio's Class B and Class II shares. SACS has advised the Fund that for the six
months ended May 31, 2000 the proceeds received from sales (and paid out to af-
filiated and non-affiliated broker-dealers) and redemptions are as follows:
<TABLE>
<CAPTION>
Class A Class B
------------------------------------- -------------
Contingent
Sales Affiliated Non-affiliated Deferred
Charges Broker-dealers Broker-dealers Sales Charges
------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Small Cap Growth Portfolio. $19,434 $12,567 $5,404 $ 479
Real Estate Securities
Portfolio................. 7,583 1,787 4,761 1,661
Multi Cap Growth Portfolio. -- -- -- --
Mid Cap Growth Portfolio... -- -- -- --
<CAPTION>
Class II Class II
------------------------------------- -------------
Contingent
Sales Affiliated Non-affiliated Deferred
Charges Broker-dealers Broker-dealers Sales Charges
------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Small Cap Growth Portfolio. $ 3,802 $ 3,802 $ -- $ --
Real Estate Securities
Portfolio................. 2,644 385 2,259 1,078
Multi Cap Growth Portfolio. -- -- -- --
Mid Cap Growth Portfolio... -- -- -- --
</TABLE>
Effective August 15, 1999 the Fund has entered into a Service Agreement with
SunAmerica Fund Services, Inc. ("SAFS"), an affiliate of the Administrator. Un-
der the Service Agreement, SAFS performs certain shareholder account functions
by assisting the Portfolios' transfer agent in connection with the services
that it offers to the shareholders of the Portfolios. The Service Agreement,
which is approved annually by the Trustees, permits the Portfolios to compen-
sate SAFS for services rendered based upon the following rates:
Class A, Class B, Class II--0.22% of average daily net assets
Class Y--transaction fee based, minimum annual fee of $25,000 for the first
fund, $10,000 for each additional fund. Any transaction fees earned are
remitted to State Street Bank & Trust Co.
35
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements (Unaudited) -- continued May 31, 2000
For the six months ended May 31, 2000, the Portfolios incurred the following
expenses which are included in transfer agent fees in the Statement of Opera-
tions to compensate SAFS pursuant to the terms of the Service Agreement.
<TABLE>
<CAPTION>
Payable at
Expense March 31, 2000
------------------------ ------------------------
Class A Class B Class II Class A Class B Class II
------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Growth Portfolio... $2,234 $1,383 $850 $468 $277 $174
Real Estate Securities
Portfolio................... 511 403 210 209 105 45
Multi Cap Growth Portfolio... 35 -- -- 18 -- --
Mid Cap Growth Portfolio..... 35 -- -- 18 -- --
</TABLE>
Pembrook Securities ("Pembrook"), a brokerage firm directly owned by the Ad-
viser of the Portfolios, directly effects purchases and sales of securities for
the Portfolios. In connection therewith, brokerage commissions paid to Pembrook
by the Small Cap Growth Portfolio, Real Estate Securities Portfolio, Micro Cap
Growth Portfolio, Multi Cap Growth Portfolio and Mid Cap Growth Portfolio for
the six months ended May 31, 2000 totaled $161,304, $37,680, $32,352, $40,125
and $43,640, respectively.
Rafferty Capital Markets, Inc., 550 Mamaroneck Avenue, Harrison, NY 10528, has
been engaged to assist in securing purchasers for shares of the Portfolios.
Rafferty will receive no compensation from the Fund for distribution of shares
of the Portfolios, although it will receive reimbursement by the Adviser of
out-of-pocket expenses.
5. Fund Shares. At May 31, 2000, there were an unlimited number of shares of
beneficial interest authorized. The following table summarizes the activity in
shares of each Portfolio:
<TABLE>
<CAPTION>
Small Cap Growth Portfolio
-----------------------------------------------------------------------------------------------
Class Y Class A
----------------------------------------------------- ----------------------------------------
For the For the For the period
six months ended For the six months ended September 8, 1999*
May 31, 2000 year ended May 31, 2000 through
(unaudited) November 30, 1999 (unaudited) November 30, 1999
------------------------- -------------------------- ------------------- -------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------- ----------- ------------- ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............. 10,154,878 $ 225,535,952 21,881,783 $ 354,179,466 110,768 $2,464,388 21,287 $ 376,710
Reinvested dividends ... 252,345 5,407,753 -- -- 278 5,940 -- --
Shares redeemed......... (5,611,444) (123,911,701) (10,267,250) (168,346,125) (11,662) (254,918) -- --
---------- ------------- ----------- ------------- ------- ---------- -------- ----------
Net increase (decrease). 4,795,779 $ 107,032,004 11,614,533 $ 185,833,341 99,384 $2,215,410 21,287 $ 376,710
========== ============= =========== ============= ======= ========== ======== ==========
</TABLE>
* Inception of the class
36
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements (Unaudited) -- continued May 31, 2000
<TABLE>
<CAPTION>
Small Cap Growth Portfolio
--------------------------------------------------------------------------------------------
Class B Class II
-------------------------------------------------- ----------------------------------------
For the For the period For the For the period
six months ended September 8, 1999* six months ended September 8, 1999*
May 31, 2000 through May 31, 2000 through
(unaudited) November 30, 1999 (unaudited) November 30, 1999
------------------------ ------------------------ ------------------- -------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............. 43,453 $ 955,654 30,424 $ 531,359 24,903 $ 549,928 21,452 $ 374,894
Reinvested dividends ... 307 6,560 -- -- 172 3,663 -- --
Shares redeemed......... (2,502) (57,078) -- -- (468) (9,292) -- --
---------- ------------ ---------- ------------ ------- ---------- -------- ----------
Net increase (decrease). 41,248 $ 905,136 30,424 $ 531,359 24,607 $ 544,299 21,452 $ 374,894
========== ============ ========== ============ ======= ========== ======== ==========
<CAPTION>
Real Estate Securities Portfolio
--------------------------------------------------------------------------------------------
Class Y Class A
-------------------------------------------------- ----------------------------------------
For the For the For the period
six months ended For the six months ended September 8, 1999*
May 31, 2000 year ended May 31, 2000 through
(unaudited) November 30, 1999 (unaudited) November 30, 1999
------------------------ ------------------------ ------------------- -------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............. 8,068,917 $ 67,012,925 10,276,203 $ 92,129,473 138,010 $1,171,588 17,458 $ 153,431
Reinvested dividends ... 305,997 2,505,463 495,029 4,327,366 373 3,056 252 2,094
Shares redeemed......... (4,416,294) (37,152,422) (3,996,289) (35,833,646) (25,448) (206,577) -- --
---------- ------------ ---------- ------------ ------- ---------- -------- ----------
Net increase (decrease). 3,958,620 $ 32,365,966 6,774,943 $ 60,623,193 112,935 $ 968,067 17,710 $ 155,525
========== ============ ========== ============ ======= ========== ======== ==========
<CAPTION>
Real Estate Securities Portfolio
--------------------------------------------------------------------------------------------
Class B Class II
-------------------------------------------------- ----------------------------------------
For the For the period For the For the period
six months ended September 8, 1999* six months ended September 8, 1999*
May 31, 2000 through May 31, 2000 through
(unaudited) November 30, 1999 (unaudited) November 30, 1999
------------------------ ------------------------ ------------------- -------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............. 61,747 $ 513,845 20,751 $ 180,060 33,191 270,100 17,509 $ 153,746
Reinvested dividends ... 335 2,741 246 2,047 337 2,761 246 2,046
Shares redeemed......... (16,251) (130,795) (824) (6,716) (22,959) (186,076) -- --
---------- ------------ ---------- ------------ ------- ---------- -------- ----------
Net increase (decrease). 45,831 $ 385,791 20,173 $ 175,391 10,569 $ 86,785 17,755 $ 155,792
========== ============ ========== ============ ======= ========== ======== ==========
</TABLE>
* Inception of the class
37
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements (Unaudited) -- continued May 31, 2000
<TABLE>
<CAPTION>
Micro Cap Growth Portfolio
--------------------------------------------------
Class Y
--------------------------------------------------
For the
six months ended For the
May 31, 2000 year ended
(unaudited) November 30, 1999
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............. 3,472,475 $ 75,733,958 4,272,442 $ 65,162,561
Reinvested dividends ... 377,500 7,870,880 437,475 7,415,212
Shares redeemed......... (2,945,080) (64,350,362) (2,032,966) (30,883,824)
---------- ------------ ---------- ------------
Net increase (decrease). 904,895 $ 19,254,476 2,676,951 $ 41,693,949
========== ============ ========== ============
<CAPTION>
Multi Cap Growth Portfolio
---------------------------------------------------------------------------
Class Y Class A
-------------------------------------------------- -----------------------
For the For the period For the period
six months ended December 31, 1998* March 31, 2000*
May 31, 2000 through through May 31, 2000
(unaudited) November 30, 1999 (unaudited)
------------------------ ------------------------ -----------------------
Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............. 654,304 $ 11,305,306 2,405,047 $ 29,483,729 5,298 $ 100,225
Reinvested dividends.... 138,850 2,145,238 133,689 1,711,221 -- --
Shares redeemed......... (191,014) (3,200,780) (106,219) (1,361,258) -- --
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease). 602,140 $ 10,249,764 2,432,517 $ 29,833,692 5,298 $ 100,225
========== ============ ========== ============ ========== ============
<CAPTION>
Mid Cap Growth Portfolio
--------------------------------------------------
Class Y Class A
------------------------ ------------------------
For the period For the period
December 31, 1999* March 31, 2000*
through May 31, 2000 through May 31, 2000
(unaudited) (unaudited)
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............. 4,833,507 $ 50,887,780 8,353 $ 100,225
Reinvested dividends ... -- -- -- --
Shares redeemed......... (306,333) (3,571,683) -- --
---------- ------------ ---------- ------------
Net increase (decrease). 4,527,174 $ 47,316,097 8,353 $ 100,225
========== ============ ========== ============
</TABLE>
* Inception of the class
38
<PAGE>
BRAZOS MUTUAL FUNDS
Notes to Financial Statements (Unaudited) -- continued May 31, 2000
6. Income Tax Information. At May 31, 2000, the investment cost and gross
unrealized appreciation and depreciation on investments for book purposes were
as follows:
<TABLE>
<CAPTION>
Net
Unrealized Unrealized Appreciation/
Cost Appreciation Depreciation (Depreciation)
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Small Cap Growth
Portfolio................ 738,852,549 138,481,785 (65,403,974) 73,077,811
Real Estate Securities
Portfolio................ 172,915,936 11,680,266 (3,306,605) 8,373,661
Micro Cap Growth
Portfolio................ 147,926,917 19,744,317 (18,899,987) 844,330
Multi Cap Growth
Portfolio................ 47,545,058 7,739,074 (1,110,211) 6,628,863
Mid Cap Growth Portfolio.. 47,800,861 6,612,676 (3,028,462) 3,584,214
</TABLE>
At November 30, 1999, the Real Estate Securities Portfolio had capital loss
carryovers (which may be carried over to offset future capital gains) totaling
$2,392,969 and $14,950,012 to expire in the years 2006 and 2007, respectively.
For the year ended November 30, 1999 the Small Cap Growth and Micro Cap Growth
Portfolios utilized capital loss carryovers from the prior year in the amount
of $19,665,161 and $451,347, respectively.
39
<PAGE>
PRSRT
STD
U.S.
POSTAGE
[LOGO of Brazos Mutual Funds] PAID
SunAmerica
www.brazosfund.com
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
TRUSTEES
ADMINISTRATOR
GEORGE W. GAU SUNAMERICA ASSET MANAGEMENT CORP
JOHN H. MASSEY 733 THIRD AVENUE
DAVID M. REICHERT NEW YORK, NEW YORK 10017
DAN L. HOCKENBROUGH
CUSTODIAN & TRANSFER AGENT
OFFICERS
DAN L. HOCKENBROUGH STATE STREET BANK AND TRUST CO.
Chairman of the Board, P.O. BOX 419572
KANSAS CITY, MO 64141-6572
President, Treasurer and
Chief Financial Officer
COUNSEL
LOREN J. SOETENGA DRINKER, BIDDLE & REATH LLP
Vice President
ONE LOGAN SQUARE
TRICIA A. HUNDLEY 18TH AND CHERRY STREETS
Secretary
PHILADELPHIA, PENNSYLVANIA 19103-6996
PETER C. SUTTON AUDITORS
Vice President and
Assistant Treasurer
PRICEWATERHOUSECOOPERS LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
BYRAP
