Fantastic voyage.

Black-run mutual funds cruise to outstanding performances

For several mutual funds owned and operated by African Americans, it was a very good second half of 1999 and a very good year overall.

It was especially profitable for two newcomers to the BLACK ENTERPRISE Black Mutual Funds index: the $37 million DEM Equity Investor fund, with a cumulative total return of 90.2% for the six months ending December 31, 1999; and the $10 million Thomason Capital/SRI Equity fund, up 19.3% for the same period.

The two funds have several key differences. DEM (domestic emerging markets) is a growth fund that invests in companies run by women or minorities. Thomason Capital/SRI, meanwhile, is a value fund that buys small- and mid-capitalization stocks that are cheap relative to their peers. But they do have one thing in common which explains their performance: a big stake in technology stocks.

And despite the drubbing tech shares took in the third quarter of 1999, they came roaring back in the fourth quarter. Thus, some managers are sticking with the sector. "I believe that technology will continue to be the driving force," says Bill Thomason, president of Thomason Capital Management in San Francisco and portfolio manager for the Thomason Capital/SRI Equity fund.

Thomason's devotion to the sector--at one point in 1999 he had about 60% of his portfolio in tech names--has served him well. The fund had a cumulative total return of 52.1% last year

Although Thomason is still confident in the sector, he says that given the huge run-up in certain technology stocks, there could be a correction of at least 15% to 50% later this year. As a result, he's pared down his tech exposure to about 40% of the portfolio.

The technology stocks Thomason still likes include Symantec (Nasdaq: SYMC)--headed by John Thompson, an African American CEO--and Helix Technologies (Nasdaq: HELX). He also has confidence in financial stocks, despite the beating some have taken because of rising interest rates. Thomason's favorites in finance include Allstate (NYSE: ALL) and Citigroup (NYSE: C).

Meanwhile, DEM Equity made a big bet on tech stocks such as Broadvision (Nasdaq: BVSN), which at one point comprised more than 15% of the fund and is still its largest holding. DEM's investment in technology shares helped the fund achieve a one-year cumulative total return of 120.9%. Nathan A. Chapman Jr., president of Baltimore-based Chapman Capital Management Inc., manages DEM Equity.

Other value managers actually had good total returns in the second half of 1999, matching and sometimes beating their benchmarks and even outperforming the growth funds in the index.

Take Eugene Profit, president and chief investment officer of Profit Investment Management in Silver Spring, Maryland. His fund, the $5.3 million Profit Value fund, had a six-month total return of 12.8% and a yearly return of 27.6%.

"The most surprising thing is that we performed very well in the third quarter," says Profit. "When the market sold off, we sold offless." One important key to Profit's performance: he isn't a strict value manager Some stocks that helped Profit's portfolio post higher returns include: America Online (NYSE: AOL), EMC (NYSE: EMC) and Sun Microsystems (Nasdaq: SUNW).

B.E. BLACK MUTUAL FUNDS INDEX

Fund Name (Ticker)                          6-Month
                                        Total Return(*)

STOCK FUNDS

Ariel Appreciation (CAAPX)                  -10.46
Ariel Fund (ARGFX)                           -7.34
Brown Capital Balanced (BCBIX)                1.87
Brown Capital Equity Institutional
 (BCEIX)                                      3.45
Brown Capital Small Co.(BCSIX)               30.68
DEM Equity Investor (DEMEX)                  90.19
Edgar Lomax Value (LOMAX)                    -7.77
Kenwood Growth & Income (KNWDX)              -8.63
Lou Holland Growth (LHGFX)                    4.29
MDL Large-Cap Equity Growth (MLGEX)           6.70
Profit Value (PVALX)                         12.83
Thomason Capital/SRI Equity (N/A)(**)        19.28
Unity(***)                                   -8.33
Victory Lakefront (VLKFX)                    -1.10

BOND FUNDS

Ariel Premier Bonds Institutional
 (APBFX)                                      0.55
MDL Broad Market Fixed Income (MBMFX)        -0.04

Fund Name (Ticker)                        1-Month        3-Month
                                        Total Return   Total Return

STOCK FUNDS

Ariel Appreciation (CAAPX)                   -3.79         16.63
Ariel Fund (ARGFX)                           -5.76         12.21
Brown Capital Balanced (BCBIX)                5.21         18.57
Brown Capital Equity Institutional
 (BCEIX)                                      7.82         22.76
Brown Capital Small Co.(BCSIX)               43.98         25.44
DEM Equity Investor (DEMEX)                 113.81           N/A
Edgar Lomax Value (LOMAX)                     5.47           N/A
Kenwood Growth & Income (KNWDX)               3.04          9.70
Lou Holland Growth (LHGFX)                    9.01         23.71
MDL Large-Cap Equity Growth (MLGEX)          20.77           N/A
Profit Value (PVALX)                         27.82         27.88
Thomason Capital/SRI Equity (N/A)(**)        52.11         30.24
Unity(***)                                    4.19           N/A
Victory Lakefront (VLKFX)                    13.87           N/A

BOND FUNDS

Ariel Premier Bonds Institutional
 (APBFX)                                     -0.55          5.33
MDL Broad Market Fixed Income (MBMFX)        -2.40           N/A

Fund Name (Ticker)                        5-Month       Toll-Free
                                        Total Return   Total Return

STOCK FUNDS

Ariel Appreciation (CAAPX)                  19.50      800-292-7435
Ariel Fund (ARGFX)                          15.64      800-292-7435
Brown Capital Balanced (BCBIX)              18.54      800-525-3863
Brown Capital Equity Institutional
 (BCEIX)                                    21.82      800-525-3883
Brown Capital Small Co.(BCSIX)              25.35      800-525-3863
DEM Equity Investor (DEMEX)                   N/A      800-752-1013
Edgar Lomax Value (LOMAX)                     N/A      888-263-8438
Kenwood Growth & Income (KNWDX)               N/A      888-536-3863
Lou Holland Growth (LHGFX)                    N/A      800-295-9779
MDL Large-Cap Equity Growth (MLGEX)           N/A      877-835-3883
Profit Value (PVALX)                          N/A      888-335-6829
Thomason Capital/SRI Equity (N/A)(**)       27.53      877-211-6300
Unity(***)                                    N/A      800-645-1704
Victory Lakefront (VLKFX)                     N/A      800-539-3883

BOND FUNDS

Ariel Premier Bonds Institutional
 (APBFX)                                      N/A      800-292-7435
MDL Broad Market Fixed Income (MBMFX)         N/A      877-635-3883

Fund Name (Ticker)                        Minimum
                                        Total Return

STOCK FUNDS

Ariel Appreciation (CAAPX)                 $1,000
Ariel Fund (ARGFX)                          1,000
Brown Capital Balanced (BCBIX)             10,000
Brown Capital Equity Institutional
 (BCEIX)                                   10,000
Brown Capital Small Co.(BCSIX)             10,000
DEM Equity Investor (DEMEX)                    25
Edgar Lomax Value (LOMAX)                   2,500
Kenwood Growth & Income (KNWDX)             2,000
Lou Holland Growth (LHGFX)                  2,000
MDL Large-Cap Equity Growth (MLGEX)           500
Profit Value (PVALX)                        2,500
Thomason Capital/SRI Equity (N/A)(**)       1,000
Unity(***)                                  1,000
Victory Lakefront (VLKFX)                     500

BOND FUNDS

Ariel Premier Bonds Institutional
 (APBFX)                                   $1,000
MDL Broad Market Fixed Income (MBMFX)         500

(*) As of Dec. 31,1599;

(**) No ticker; fund is ineligible for listing on an exchange.

(***) Formerly the Liberty Freedom Fund:

Source: Morningstar Inc.; Company officials