UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-09134
Manor Investment Funds, Inc.
(Exact name of registrant as specified in charter)
15 Chester Commons, Malvern, PA 19355
(Address of principal executive offices)
Daniel A. Morris
15 Chester Commons, Malvern, PA 19355
(Name and address of agent for service)
Registrant's telephone number, including area code: 610-722-0900
Date of fiscal year end: December 31
Date of reporting period: December 31, 2003
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270-30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant
is not required to respond to the collection of information contained in
Form N-CSR unless the Form displays a currently valid Office of Management
and Budget ("OMB") control number. Please direct comments concerning the
accuracy of the information collection burden estimate and any suggestions
for reducing the burden to Secretary, Securities and Exchange Commission,
450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed
this collection if information under the clearance requirement of 44 U.S.C.
3507.
Item 1. Reports to Stockholders.
Manor Investment Funds, Inc.
15 Chester Commons, Malvern, PA 19355
610-722-0900
800-787-3334
Semi-Annual Report
December 31, 2003
Fund Office:
15 Chester Commons
Malvern, PA 19355
610-722-0900 800-787-3334
www.manorfunds.com
Managed by:
Morris Capital Advisors, Inc.
Manor Investment Funds, Inc.
15 Chester Commons
Malvern, PA 19355
December 31, 2003
Dear Fellow Shareholders:
The stock market finished 2003 on a positive note, capping off a strong
year. In fact, the Manor Fund registered its best calendar year performance
since the Fund was established more than 8 years ago. The stock market
rally, and inflows from shareholders boosted Fund assets over $6.9 million.
The Market Conspiracy
The financial markets seem to conspire to inflict the maximum amount of
pain on the maximum number of people. The market decline that started in
2000 was a classic example. After years of spectacular returns, investors
became so enamored by the stock market that they ignored the risk and
continued to invest. The market didn't decline until enthusiasm for stocks
was universal.
The decline was brutal by any measure. It was long and difficult,
lasting 3 years and dropping more than 50% from the top. Sharp sell offs in
July and October of 2002 brought stocks to 5-year lows. That's a lot of pain
for a lot of people.
In the Fall of 2002, the Dow set new lows at 7,286 and Bill Gross, a
prominent bond manager, wrote a widely publicized piece calling for Dow
5,000. The news was full of corporate scandals (Enron, Worldcom, Tyco, and
Adelphia), economic uncertainties, terrorism, nuclear confrontations, and
conflicts in Afghanistan and Iraq. The stock market faced high valuations,
excess capacity at many companies, and highly publicized conflicts of
interest among Wall Street analysts. Investors expected only a modest
rebound during 2003, at best.
But last year stocks rose more than 28%, recovering all of the decline
in the S&P 500 the year before, and then some. So, now what?
This year I expect that reasonable valuations and stronger economic
growth will contribute to another year of above average returns in the stock
markets.
Reasonable Valuation
It is important to get some measure of market valuation when projecting
future performance. I monitor the relationship between earnings on the S&P
500 Index and the yield of the 10-year Treasury Note. This indicator, known
as the P-Stat, is also used by Alan Greenspan at the Fed. On the first
chart the bold line charts P-Stat. The higher the line the greater the risk
of overvaluation in the market. In fact, the peak of this measure above the
year 2000 coincides with the speech when Alan Greenspan expressed his concern
about the markets when he said that there were signs of "irrational
exuberance" by investors.
At present, this measure is very close to the lower band, illustrating
that the market is reasonably valued at this point. The slight uptick at the
end of the graph demonstrates the impact on this measure assuming a rise in
interest rates this year and a modest increase in earnings.
The P-Stat will remain low if rates remain low, or if earnings increase
more than expected, demonstrating that valuations are reasonable for the
current year.
The second graph illustrates the earnings growth in the S&P 500 index
on a year-over-year basis. As illustrated on the far right of the chart, the
growth assumption used in the P-Stat measure above is not inconsistent with
the typical growth rate of earnings over the last several decades.
Economic Growth
The economy is well positioned to continue the rebound that began
during 2003. Interest rates are low and the Fed has stated its desire to
keep them low. Low interest rates, combined with a weak dollar, lean
inventories, and improved productivity will feed economic growth.
Accelerating growth will spur employment, once corporations overcome their
reluctance to expand capacity.
Better economic growth will fuel earnings growth. Combining higher
earnings, low interest rates and improving investor psychology, will provide
the fuel to sustain the market advance.
The Manor Fund
The Manor Fund rose 12.06% during the quarter, and 31.56% for the year,
outperforming the S&P 500 during the trailing year, and the Lipper Large-Cap
Core mutual fund index during both time periods. The Fund was helped by
gains in Alcan, KB Home, General Motors, Occidental Petroleum, and Tyco
International.
Alcan rallied as the growing economy contributed to accelerated
revenues and earnings at this maker of aluminum products. KB Home continued
its strong performance as residential home sale remained strong despite
expectations of a slowdown. General Motors rallied as concerns about their
under-funded pension plan abated. The company increased funding for the plan
earlier in the year by borrowing at low interest rates to increase funding
and then investing those funds at an opportune time in the markets.
Occidental Petroleum rallied as persistently high oil prices contributed to
strong earnings. Tyco International continued to rebound as new management
refocused this company on the operating strengths of the core business
segments.
The Fund was hurt by weak performance by Citrix Systems, PepsiCo,
Johnson & Johnson, Exelon, and Anthem. Citrix declined during the quarter,
but it recorded one of the best gains in the portfolio for the year. PepsiCo
lagged on sluggish top line revenue growth, while Johnson & Johnson
languished on investor concerns about prospects a major new product. Exelon,
an electric utility company lagged the market as would be expected in a
strong market rally. Anthem also underperformed as investors shifted funds
from the defensive medical sector to invest in more growth oriented
technology companies.
During the quarter we took some gains in Best Buy, one of our top
performers, to prevent this holding from becoming too heavily weighted in the
portfolio. Later in the quarter we increased our position in Intel, for the
first time since January 1999, as the company is beginning to show signs of
improved earnings growth.
The Growth Fund
The Growth Fund rose 12.58% during the quarter and 30.23% for the year,
outperforming the S&P 500 and the Lipper Large-Cap Growth mutual fund index
for each time period since inception. The Fund was helped by gains in
Xlinix, Vishay Intertechnology, Ebay, Qualcomm, and Hospitality Properties.
Xlinix and Vishay both rallied as increased demand for communications
equipment boosted revenue. Xilinx makes communications chips that can be
programmed by the user to perform specific functions, while Vishay makes many
of the basic resistors and capacitors used in electronic devices. Demand for
Vishay products is often a good indicator of the direction computer
equipment. Ebay continues to be one of our strongest performers due to the
continued growth of the internet auction business. Qualcomm rose on
increased demand for their CDMA technology used in cellular telephones.
Hospitality Properties, a manager of real estate for the travel industry also
rose on improved profitability and several new management agreements.
The Fund was hurt by declines in Cytec, Monster Worldwide, Global
SanteFe, Mohawk, and Microsoft. Cytec declined despite reporting strong
sales and earnings growth from its proprietary cancer testing process.
Monster Worldwide declined after strong performance earlier in the year,
while Global SanteFe did not experience increased exploration demand despite
persistently high oil prices. Mohawk struggled despite a strong housing
market. Microsoft has not participated in the rebound in technology shares
because investors are concerned about the ability of the company to increase
growth and the relatively high valuation implied by the stock price.
During the quarter we sold our position in Sun Microsystems, Greenpoint
Financial, and Global SanteFe to remove some of our underperformers. We
purchased Staples, a retailer of office supplies, that should be well
positioned as economic growth continues to improve.
The Bond Fund
The Bond Fund rose 0.92% for the trailing year. The fund portfolio is
managed to preserve principal in this volatile market so as to provide
shareholders with a low risk alternative to stocks. The fund's investment
portfolio of US Treasury securities is very conservative, with an average
maturity for the entire portfolio of only 2.1 years, an average duration of
1.98 years, and an average yield to maturity of 1.86%.
Portfolio Strategy for the Beginning of 2004
I expect to make several portfolio adjustments as the new year begins
to better position the Manor and Growth Funds. I will increase existing
positions when appropriate, and add new holdings to reduce the cash held in
low-yielding money market funds. Since I anticipate a rise in interest rates
as economic growth strengthens, I will maintain the very conservative
portfolio in the Bond Fund to protect principal.
Sincerely,
Daniel A. Morris
Manor Fund
December 31, 2003
Portfolio of Investments
Description Shares Market Value
Common & Preferred Stock
Consumer Staples 5.9%
Pepsico 1,560 72,727
Reebok 2,090 82,179
----------
154,906
Consumer Disc. 2.0%
AOL Time Warner 2,930 52,711
----------
52,711
Retail 6.1%
Best Buy 1,550 80,972
Cardinal Health 1,305 79,814
----------
160,786
Medical 11.6%
Anthem 920 69,000
Manor Care 2,590 89,536
Johnson&Johnson 1,350 69,741
Pfizer 2,130 75,253
----------
303,530
Automobile 2.4%
General Motors 1,190 63,546
----------
63,546
Basic Materials 3.5%
Alcan 1,940 91,083
----------
91,083
Industrial Products 2.3%
Tyco Intl Ltd. 2,240 59,360
----------
59,360
Construction 3.6%
KB Home 1,310 95,001
----------
95,001
Multi-Industry 2.7%
General Electric 2,270 70,325
----------
70,325
Computer 13.0%
Cisco 2,350 57,081
Citrix Systems 2,570 54,510
Hewlett-Packard 1,960 45,021
Intel 2,980 95,956
IBM 950 88,046
----------
340,614
Aerospace 2.0%
Boeing 1,230 51,832
----------
51,832
Oil 7.7%
Devon Energy 1,220 69,857
Nabors 1,310 54,365
Occidental Pet. 1,820 76,877
----------
201,099
Finance 21.0%
Allstate Ins. 1,830 78,727
Citigroup 1,769 85,867
Fed Nat Mtg Assoc 1,120 84,067
Freddie Mac 920 53,655
Shurgard Storage 2,060 77,559
Vornado Rlty Trst 1,710 93,623
MBNA Corp. 3,070 76,289
----------
549,787
Utilities 2.5%
Exelon 970 64,369
----------
64,369
Other Assets 5.8%
S&P500 SPDR 690 76,783
S&P500 Barra Val 1,340 74,142
----------
150,925
Cash and Equiv. 7.9%
1st Am. Gov't Obl. 203,526
Accrued Dividends 2,456
----------
205,982
----------
Total Portfolio 2,615,856
Manor Fund
December 31, 2003
Top Five Holdings
Company Industry % of Net Assets
Intel Computer 3.7 %
KB Home Construction 3.6 %
Vornado Rlty Trst Finance 3.6 %
Alcan Basic Materials 3.5 %
Manor Care Medical 3.4 %
Top Five Industries
Industry % of Net Assets
Finance 21.0 %
Computer 13.0 %
Medical 11.6 %
Oil 7.7 %
Retail 6.1 %
Fund Performance
Total Return
3 Months Trailing Year Annualized Since Inception
------------------------------------------------------
Manor Fund 12.06 % 31.56 % 4.48 %
Lipper LCC Index 10.85 % 24.80 % 6.06 %
S&P 500 Index 12.18 % 28.69 % 9.85 %
Growth Fund
December 31, 2003
Portfolio of Investments
Description Shares Market Value
Common & Preferred Stock
Consumer Staples 1.7%
Jones Apparel 1,270 44,742
----------
44,742
Consumer Disc. 10.6%
Barnes & Noble 1,980 65,043
Cendant Corp. 3,910 87,076
Mohawk Inc. 920 64,897
Interactive Corp. 1,570 53,270
----------
270,286
Retail 11.6%
Amerisource Berg. 1050 58,957
Bed, Bath, Beyond 1,400 60,690
Staples 2,890 78,897
Ebay 1520 98,177
----------
296,721
Medical 15.6%
Andrx Group 1,120 26,925
Cytyc Corp 3,230 44,445
Express Scripts 1230 81,709
Forest Labs 940 58,092
Ivac Corp 2,843 67,891
Quest Diagnostics 700 51,177
Universal Health 1,270 68,224
----------
398,463
Computer 25.3%
Cisco 620 15,060
Concord EFS 1,740 25,822
Dell Computer 2,130 72,335
Intel 2,500 80,500
Microsoft Corp. 2,660 73,256
Qualcomm 1,320 71,187
Tech Select SPDR 2,400 48,912
Vishay 4,170 95,493
Waters Corp. 1,510 50,072
Xilinx 2,930 113,508
----------
646,145
Oil 2.5%
Valero Energy 1,380 63,949
----------
63,949
Finance 13.7%
American Intl Grp 1,160 76,885
Chelsea Prop Tr. 1,460 80,023
Hospitality Prop. Tr.
2,020 83,385
T. Rowe Price 790 37,454
Washington Mutual 1,800 72,216
----------
349,963
Transportation 1.0%
Tidewater 830 24,800
----------
24,800
Business Services 0.9%
Monster Wrldwide 1,000 21,960
----------
21,960
Other Assets 5.5%
S&P500 Barra Growth
2,220 67,832
S&P500 SPDR 660 73,445
----------
141,277
Cash and Equiv. 11.7%
1st Am. Gov't Obl. 297,071
Accrued Dividends 1,944
----------
299,015
----------
Total Portfolio 2,557,321
Growth Fund
December 31, 2003
Top Five Holdings
Company Industry % of Net Assets
Xilinx Computer 4.4 %
Ebay Retail 3.8 %
Vishay Intertec Computer 3.7 %
Cendant Corp. Consumer Disc. 3.4 %
Hospitality Prop Finance 3.3 %
Top Five Industries
Industry % of Net Assets
Computer 25.3 %
Medical 15.6 %
Finance 13.7 %
Retail 11.6 %
Consumer Disc. 10.6 %
Fund Performance
Total Return
3 Months Trailing Year Annualized Since Inception
------------------------------------------------------
Growth Fund 12.58 % 30.23 % -1.79 %
Lipper LCGrthIdx 10.09 % 26.96 % -9.61 %
S&P 500 Index 12.18 % 28.69 % -3.15 %
Bond Fund
December 31, 2003
Portfolio of Investments
Description Par Val. Market Val.
Government Bonds 94.0 %
Less than 1 year to maturity
U.S. Treasury 5.250% Due 05-15-04 80,000 81,250
U.S. Treasury 6.000% Due 08-15-04 100,000 103,000
U.S. Treasury 2.000% Due 11-30-04 300,000 301,875
1 to 3 years to maturity
U.S. Treasury 1.500% Due 02-28-05 200,000 200,438
U.S. Treasury 5.875% Due 11-15-05 50,000 53,797
U.S. Treasury 1.875% Due 11-30-05 300,000 300,562
U.S. Treasury 5.625% Due 02-15-06 100,000 107,750
3 to 5 years to maturity
U.S. Treasury 3.250% Due 08-15-07 200,000 204,000
U.S. Treasury 3.125% Due 10-15-08 300,000 299,437
Accrued Interest 11,796
---------
1,663,905
Cash and Equiv. 6.0 %
1st American Treasury Obligations 105,521
---------
105,521
---------
Total Portfolio 1,769,426
Bond Fund
December 31, 2003
Top Five Holdings
Security % of Net Assets
US Treasury 2.000% due 11/30/04 17.1 %
US Treasury 1.875% due 11/30/05 17.0 %
US Treasury 3.125% due 10/15/08 16.9 %
US Treasury 3.250% due 8/15/07 11.5 %
US Treasury 1.500% due 2/28/05 11.3 %
Fund Performance
Total Return
3 Months Trailing Year Annualized Since Inception
------------------------------------------------------
Bond Fund -0.18 % 0.92 % 4.85 %
Lipper US Govt. -0.11 % 1.73 % 6.70 %
Lehman Inter. Gov't Index
-0.24 % 2.21 % 6.76 %
Manor Investment Funds, Inc.
Statement of Assets and Liabilities
December 31, 2003
Year Ending December 31, 2003
ASSETS Manor Fund Growth Fund Bond Fund
- ------ ---------- ----------- ----------
Investments in Securities $2,409,874 $ 2,258,306 $1,652,109
Cash 203,526 297,071 105,521
Dividends & Interest Receivable 2,619 2,196 11,860
---------- ----------- ----------
Total Assets 2,616,019 2,557,573 1,769,490
LIABILITIES
- -----------
Expenses Payable (1,527) (2,229) (219)
---------- ----------- ----------
Total Liabilities (1,527) (2,229) (219)
---------- ----------- ----------
NET ASSETS $2,614,492 $ 2,555,344 $1,769,271
NET ASSETS CONSIST OF:
Capital Stock (par value
and paid-in capital) $2,485,211 $2,741,043 $1,744,690
Accumulated net investment
income(loss) (11,283) (39,077) 4,369
Accumulated net
realized (loss) (123,914) (306,552) 841
Net unrealized
appreciation (depreciation) 264,478 159,930 19,371
---------- ----------- ----------
NET ASSETS $2,614,492 $2,555,344 $1,769,271
---------- ----------- ----------
CAPITAL SHARES OUTSTANDING 188,920 277,247 167,122
(10,000,000 authorized shares;
$.001 par value)
NET ASSET VALUE PER SHARE $ 13.84 $ 9.22 $ 10.59
---------- ----------- ----------
Manor Investment Funds, Inc.
Statement of Operations
December 31, 2003
Year Ending December 31, 2003
Investment Income Manor Fund Growth Fund Bond Fund
- ----------------- ---------- ----------- ----------
Dividends $ 29,611 $ 13,170 $ - 0 -
Interest 2,361 3,491 59,932
---------- ----------- ----------
Total Investment Income $ 31,972 $ 16,661 $ 59,932
Expenses
- --------
Management Fees 19,885 18,884 7,260
Professional Fees 6,169 5,058 6,217
Trustee Fees 3,044 3,085 3,460
Registration Fees 405 100 375
Taxes 281 150 378
Miscellaneous Fees 1,470 2,641 379
---------- ----------- ----------
Total Expenses 31,254 29,918 18,069
---------- ----------- ----------
Net Investment Income (Loss) 718 (13,257) 41,863
Realized & Unrealized Gain (Loss) on Investments
- ------------------------------------------------
Net Realized gain (loss)
on Investments 3,292 (58,098) 37,918
Net Change in Unrealized
Appreciation/Depreciation
on Investments 579,502 607,361 (63,072)
Net realized and Unrealized Gain (Loss)
on Investments 582,794 549,263 (25,154)
---------- ----------- ----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations $ 583,512 $ 536,006 $ 16,709
---------- ----------- ----------
Manor Investment Funds, Inc.
Statement of Changes in Net Assets
December 31, 2003
Year Ending December 31, 2003
Increase (Decrease) in
Net Assets from Operations Manor Fund Growth Fund Bond Fund
- -------------------------- ---------- ----------- ----------
Net Investment (Loss) Income 718 (13,257) 41,863
Net realized gain (Loss)
on investments 3,292 (58,098) 37,918
Net Change in Unrealized
Appreciation/Depreciation
on Investments 579,502 607,361 (63,072)
---------- ----------- ----------
Net increase/decrease in net
assets resulting
from operations 583,512 536,006 16,709
Distributions to Shareholders from
Net Investment Income - 0 - - 0 - (40,658)
Net Realized Gain - 0 - - 0 - (37,777)
---------- ----------- ----------
Total Distributions - 0 - - 0 - (78,435)
Capital Share Transactions
Proceeds from shares sold 384,826 458,284 161,856
Proceeds From Reinvestment
of Distributions - 0 - - 0 - 78,435
Payments for shares
Redeemed (103,389) (75,630) (371,299)
---------- ----------- ----------
Net Increase in Net Assets
From Capital Share Transactions 281,437 382,654 (131,008)
---------- ----------- ----------
Total Increase in Net Assets 864,949 918,660 (192,734)
Net Assets:
Beginning of Year 1,749,542 1,636,684 1,962,005
---------- ----------- ----------
End of Year 2,614,491 2,555,344 1,769,271
---------- ----------- ----------
Transactions in Shares of Fund
Sold 31,318 55,777 14,687
Issued in reinvestment
of distributions - 0 - - 0 - 7,413
Redeemed (8,732) (9,606) (33,746)
---------- ----------- ----------
Net increase/decrease in
outstanding-shares of the Fund 22,586 46,171 (11,646)
---------- ----------- ----------
Manor Investment Funds, Inc.
Financial Highlights
Manor Fund
December 31, 2003
2003 2002 2001 2000 1999
------ ------ ------ ------ ------
PER SHARE DATA (1)
Net asset value,
beginning of year $ 10.52 $ 13.20 $ 15.76 $ 17.08 $ 15.46
------ ------ ------ ------ ------
Investment Operations
Net investment (loss)
Income - 0 - (0.01) (0.02) (0.06) 0.07
Net realized and
unrealized(loss)
gain on investments 3.32 (2.67) (2.54) (1.26) 1.62
------ ------ ------ ------ ------
Total from investment
operations 3.32 (2.67) (2.56) (1.26) 1.69
------ ------ ------ ------ ------
Distributions
Dividends from net
investment income - 0 - - 0 - - 0 - - 0 - (0.07)
Distributions from
realized capital
gains - 0 - - 0 - - 0 - - 0 - - 0 -
------ ------ ------ ------ ------
Total Distributions - 0 - - 0 - - 0 - - 0 - (0.07)
------ ------ ------ ------ ------
Net (decrease) increase in
net asset value 3.32 (2.68) (2.56) (1.32) 1.62
------ ------ ------ ------ ------
Net asset value,
end of year $ 13.84 $ 10.52 $ 13.20 $ 15.76 $ 17.08
------ ------ ------ ------ ------
(1) Selected data based on a share outstanding throughout the year.
Total Investment
Return 31.56% -20.30% -16.24% -7.73% 10.95%
------ ------ ------ ------ ------
RATIOS (to Average Net Assets)
Investment income-net 0.03% -0.08% -0.11% -0.32% 0.44%
------ ------ ------ ------ ------
Expenses 1.50% 1.50% 1.50% 1.50% 1.50%
------ ------ ------ ------ ------
Portfolio Turnover Rate 3.7% 26% 28% 16% 19%
------ ------ ------ ------ ------
The accompanying notes are an integral part of these financial statements.
Manor Investment Funds, Inc.
Financial Highlights
Growth Fund
December 31, 2003
2003 2002 2001 2000 1999
------ ------ ------ ------ ------
PER SHARE DATA (1)
Net asset value,
beginning of year $ 7.08 $ 8.95 $ 9.54 $ 11.72 $ 10.00
------ ------ ------ ------ ------
Investment Operations
Net investment (loss)
income (0.05) (0.06) (0.05) (0.05) - 0 -
Net realized and
Unrealized(loss)
gain on investments 2.19 (1.81) (0.54) (2.13) 1.72
------ ------ ------ ------ ------
Total from investment
operations 2.14 (1.87) (0.59) (2.18) 1.72
------ ------ ------ ------ ------
Distributions
Dividends from net
investment income - 0 - - 0 - - 0 - - 0 - - 0 -
Distributions from
realized capital
gains - 0 - - 0 - - 0 - - 0 - - 0 -
------ ------ ------ ------ ------
Total Distributions - 0 - - 0 - - 0 - - 0 - - 0 -
------ ------ ------ ------ ------
Net (decrease) increase
In net asset value 2.14 (1.87) (0.59) (2.18) 1.72
------ ------ ------ ------ ------
Net asset value,
end of year $ 9.22 $ 7.08 $ 8.95 $ 9.54 $ 11.72
------ ------ ------ ------ ------
(1) Selected data based on a share outstanding throughout the year.
Total Investment
Return 30.23% -20.89% -6.18% -18.60% 17.20%
------ ------ ------ ------ ------
RATIOS (to Average Net Assets) (2)
Investment income-net -0.54% -0.70% -0.53% -0.44% 0.01%
------ ------ ------ ------ ------
Expenses 1.50% 1.50% 1.50% 1.52% 1.49%
------ ------ ------ ------ ------
Portfolio Turnover Rate 5.2% 13.2% 33.6% 16.0% 4.0%
------ ------ ------ ------ ------
(2) Annualized
* For the period 6/30 - 12/31/99
The accompanying notes are an integral part of these financial statements.
Manor Investment Funds, Inc.
Financial Highlights
Bond Fund
December 31, 2003
2003 2002 2001 2000 1999
------ ------ ------ ------ ------
PER SHARE DATA (1)
Net asset value,
beginning of year $ 10.98 $ 10.63 $ 10.39 $ 9.90 $ 10.00
------ ------ ------ ------ ------
Investment Operations
Net investment (loss)
Income 0.25 0.32 0.43 0.46 0.18
Net realized and
Unrealized(loss)
gain on investments (0.15) 0.33 0.17 0.45 (0.16)
------- ------ ------ ------ ------
Total from investment
operations 0.10 0.65 0.60 0.91 0.02
------ ------ ------ ------ ------
Distributions
Dividends from net
investment income (0.25) (0.27) (0.36) (0.42) (0.12)
Distributions from
realized capital
gains (0.24) (0.03) - 0 - - 0 - - 0 -
------ ------ ------ ------ ------
Total Distributions (0.49) (0.30) (0.36) (0.42) (0.12)
------ ------ ------ ------ ------
Net (decrease) increase in
net asset value (0.39) 0.35 0.24 0.49 (0.10)
------ ------ ------ ------ ------
Net asset value,
end of year $ 10.59 $ 10.98 $ 10.63 $ 10.39 $ 9.90
------ ------ ------ ------ ------
(1) Selected data based on a share outstanding throughout the year.
Total Investment
Return 0.92% 6.11% 5.77% 9.19% 0.23%
------ ------ ------ ------ ------
RATIOS (to Average Net Assets) (2)
Investment income-net 2.26% 2.96% 4.01% 4.45% 3.58%
------ ------ ------ ------ ------
Expenses 1.00% 1.00% 1.00% 1.00% 1.00%
------ ------ ------ ------ ------
Portfolio Turnover Rate 44.1% 26.3% 0.0% 0.0% 0.0%
------ ------ ------ ------ ------
(2) Annualized
* For the period 6/30 - 12/31/99
The accompanying notes are an integral part of these financial statements.
Manor Investment Funds, Inc.
Notes to Financial Statements
December 31, 2003
Note 1-Organization
Incorporated in Pennsylvania on September 13, 1995, Manor Investment Funds,
Inc. (the Company) was in the initial stages of development until January 27,
1996 when it began to sell shares of its stock to the public. The Company is
an open-end, non-diversified management investment company, registered under
the Investment Company Act of 1940. Manor Fund, Growth Fund, and Bond Fund
(collectively referred to as the Funds) presently constitute Manor Investment
Funds, Inc. The primary investment objectives of each of these Funds follow:
Manor Fund:
Conservative capital appreciation and current income, investing primarily in
common stock of large corporations in the United States.
Growth Fund:
Long-term capital appreciation, investing primarily in common stock of U.S.
corporations.
Bond Fund:
Intermediate-term fixed income, investing primarily in U. S. Government
obligations.
Note 2-Significant Accounting Policies
Following is a summary of the Funds' significant accounting policies which
are in conformity with generally accepted accounting principles for
investment companies:
Security Valuation and Accounting:
Investments in securities traded on a national securities exchange (or
reported on the NASDAQ national market) are stated at the last reported sales
price on the day of valuation.
The Funds follow industry practice and record security transactions on the
trade date.
Cash:
Cash consists of checking and money market accounts with the custodian. As
financial instruments, such accounts potentially subject the Funds to
concentration of credit risk. The carrying value of these accounts
approximates market value due to their short-term nature.
Federal Income Taxes:
The Funds intend to continue to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of their taxable income. Accordingly, no provision for
federal income tax or excise tax is required in these financial statements.
Distributions:
Each Fund generally pays, or intends to pay dividends from net investment
income and to distribute net capital gains that it realizes. Distributions to
shareholders are recorded on the ex-dividend date.
Realized Gains and Losses on Investment Transactions:
Gains or losses realized on investment transactions are determined by
comparing the identified cost of the security lot sold with the net sales
proceeds.
Accounting Estimates:
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Other:
Interest income is recognized on the accrual basis. When applicable, premiums
and discounts on purchased U. S. government obligations are amortized or
accreted to interest income over the life of the obligation.
As mutual funds, the Funds' investments are subject to stock market risk,
bond market risk and inflation risk. Manor Fund and Growth Fund will have
higher exposure to stock market risk because of their significant investments
in stocks. Bond Fund will have higher exposure to bond market risk and
inflation risk because of its significant investments in U.S. Treasury Notes.
Note 3-Related Party Transactions
Daniel A. Morris, President of Manor Investment Funds, Inc., is also the sole
shareholder, officer and director of Morris Capital Advisors, Inc. (Morris).
Mr. Morris (and his wife) and other directors, own shares in the Funds. Each
of the Funds has an investment management and advisory services agreement
(the Agreements) with Morris.
Monthly, the Funds pay Morris Capital Advisors a fee equivalent to one
percent per annum of the daily average net assets of the Manor and Growth
Funds and one half of one percent per annum of the daily average net assets
of the Bond Fund. Each of the Funds bears expenses necessary and incidental
to the conduct of its business.
The Agreements must be approved annually by a majority vote of the Funds'
non-interested Board of Directors.
Note 4-Investment Transactions
Purchases of investment securities for Manor, Growth and Bond aggregated
$480,530, $757,811 and $799,375, respectively in 2003; sales aggregated
$77,705, $103,375, and $832,281 for Manor, Growth, and Bond, respectively.
For income tax purposes, Manor Fund has capital loss carryovers of $123,915
and Growth Fund capital losses total $306,552. Such losses were generally
realized from 1999 through 2003 and will be carried forward to offset future
realized capital gains. If not used, they will expire in 2007 through 2011.
Each Fund portfolio consists of securities that have risen in value since
their purchase (called unrealized gain), or securities that have fallen in
value (unrealized loss) since their purchase. At December 31, 2003, net
unrealized appreciation and depreciation of investment securities for
financial reporting and federal income tax reporting were as follows:
Manor Fund:
Net unrealized appreciation of $264,478 consisted of unrealized gains of
$434,301 and unrealized losses of $169,823.
Growth Fund:
Net unrealized appreciation of $159,930 consisted of unrealized gains of
$356,214 and unrealized losses of $196,284.
Bond Fund:
Net unrealized appreciation of $19,370 consisted of unrealized gains of
$19,979 and unrealized losses of $609 on U.S. Government obligations.
Note 5-Custody Agreement
Under an agreement, U.S Bank acts as the custodian for each of the Funds. U.S
Bank charges fees in accordance with its standard rates for such services,
payable monthly.
Manor Investment Funds, Inc.
Fund Office:
15 Chester County Commons
Malvern, PA 19355
610-722-0900 800-787-3334
www.manorfunds.com
ITEM 2. CODE OF ETHICS.
The Registrant has adopted a code of ethics that applies to all
Officers and Directors of the Fund. The Registrant has not granted
any waivers form any provisions of the code of ethics during the
covered period. A copy of the registrant's code of ethics is filed
herewith.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Audit Committee is comprised of James McFadden, Fred Myers and
John McGinn. James McFadden is a former FDIC Auditor and Fred Myers
is a CPA with audit experience. Both are considered financial
experts by the Board of Directors.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The Registrant has engaged its principal accountant to perform audit
services. "Audit Services" refer to performing an audit of the
registrant's annual financial statements or services that are normally
provided by the accountant in connection with statutory and
regulatory filing or engagements for those fiscal years.
"Audit-related services" refer to the assurance and related services
by the principal accountant that are reasonably related to the
performance of the audit. "Tax services" refer to professional
services rendered by the principal accountant for tax compliance,
tax advice, and tax planning. The following table details the
aggregate fees gilled for each of the last two fiscal years for
audit fees, audit-related fees, tax fees and other fees by the
principal accountant.
12/31/2003 12/31/2002
Audit Fees $ 17,598 $ 13,810
Audit-Related Fees 0 0
Tax Fees 0 0
All Other Fees 0 0
Each year, the Registrant's Board of Directors recommend a principal
accountant to perform audit service for the registrant. At the
registrant's Annual Meeting, the shareholders vote to approve or
disapprove the principal accountant recommended by the Board.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTAS.
Not applicable to open-end investment companies.
ITEM 6. [RESERVED.]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end investment companies.
ITEM 8. PURCHASES OF EQUITY SECURITEIS BY CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
Not applicable to open-end investment companies.
ITEM 9. CONTROLS AND PROCEDURES.
a) The Registrant's president has concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940, as amended (the "1940
Act")) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this
paragraph, based on their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act and Rules 13a-15(b) or
15d-15(b) under the Securities Exchange Act of 1934.
b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
that occurred during the registrant's second fiscal half-year that
has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) (1) Code of Ethics - referred to in Item 2 is attached hereto.
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 are attached hereto.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Manor Investment Funds, Inc.
By /s/ Daniel A. Morris
President
Date 2/9/2004
Pursuant to the requirements of the securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Daniel A. Morris
Daniel A. Morris
President
Date 2/9/2004