Manor
Investment Funds, Inc.
3rd Quarter Report
1996
Fund Office:
113 West Chestnut Street
West Chester, PA 19380
610-431-0630 800-787-3334
Managed By:
Morris Investment
Management Services, Inc.
Manor Investment Funds, Inc.
113 West Chestnut Street
West Chester, PA 19380
September 30, 1996
Dear Fellow Shareholders:
As I write this letter the stock market is at all-time
highs, the Dow Jones Industrial Average is within striking
distance of a close above 6,000 and small company stocks are
up even more. This latest rally only serves to increase
investors appetite for stocks. But in July, just two months
ago stocks declined almost 4.5%, after earnings warnings and
concern over higher interest rates. The Dow experienced
intra-day price swings of more than 150 points and stocks
declined substantially from their highs within weeks.
The July market decline, followed by the September
rally to new highs reinforces the belief among many
individual investors that "the stock market always comes
back". While this has been true historically, it rarely
happens so quickly. In fact, sharp declines followed by
rallies to new highs, are often the sign of major market
tops. This, combined with the dramatic rebound of
speculative issues, should give investors reason to be
cautious.
Bull markets don't end unless some outside event acts
as a trigger. These events are generally a surprise, or at
least beyond our control. The near term risks that I see
are the possibility of a Democratic sweep in November and
unrest in the Middle East.
If the Democrats gain control of Congress and the
Presidency the markets will react negatively, based on the
expectation of increased government spending. The Fed will
be forced to increase interest rates to offset growth and
the potential for increased inflation. Higher interest
rates will reduce the value of stocks.
Unrest in the Middle East could effect the stability of
major oil suppliers such as Saudi Arabia. If a change in
government reduces the supply of oil from this critical
producer, the effects will be felt worldwide. The major
bear market of 1973-74 was triggered by a rise in oil
prices, resulting in a loss of more than 37% over the two
year period.
Even with these risks, I think that the stock market
provides the best long-term investment return after
inflation. Your fund is invested in companies that I feel
have the potential to outperform the market, given the
current environment. The portfolio combines a core group of
holdings such as General Electric and McDonalds, with
companies that have special opportunities. These special
opportunities include companies that will benefit from
restructuring such as Masco and Sunbeam, companies that
benefit from improving earnings such as Travelers and US
F&G, and companies with hidden assets and strong cash flow
such as General Motors.
Sincerely,
Daniel A. Morris
Portfolio of Investments
Manor Investment Funds, Inc.
September 30, 1996
Market
Value
Common 80.29%
Stock
Consumer Staples
3.87%
150 Coca Cola $
7,631
7,631
Consumer
Discretionary
3.64%
310 Sunbeam 7,169
7,169
Retail
11.87%
110 Kmart Preferred 5,376
Class T
210 McDonalds 9,949
180 Sears, Roebuck & 8,055
Co.
23,380
Medical
2.56%
760 Integra Life 5,035
Sciences
5,035
Automobile
11.57%
300 Chrysler 8,588
200 General Motors 9,600
100 Goodyear Tire 4,613
22,801
Basic Materials
3.93%
360 Cyprus Amax 7,740
Minerals
7,740
Construction
3.20%
210 Masco 6,300
6,300
Multi-Industry
7.96%
100 Allied Signal 6,588
100 General Electric 9,100
15,688
Computer 9.79%
200 Hewlett-Packard 9,750
600 Scientific Atlanta 9,525
19,275
Oils
3.18%
100 Chevron 6,263
6,263
Finance 15.07%
120 Allstate Insurance 5,910
190 MBNA Corp. 6,603
150 Travelers, Inc. 7,369
530 US F&G Corp. 9,805
29,687
Transportation
3.66%
100 Delta Airlines 7,200
7,200
Total Common Stock 158,16
9
Cash and Cash 19.71%
Equivalents
FNB West Chester 38,816
Money Market
38,816
Total Portfolio $
196,98
5
Top Five Holdings September 30, 1996
Company Industry % of Net
Assets
McDonalds Retail 5.1%
US F&G Corp. Finance 5.0%
Hewlett Packard Computer 4.9%
General Motors Automobile 4.9%
Scientific Computer 4.8%
Atlanta
Top Five Industries September 30, 1996
Industry % of Net
Assets
Finance 15.07%
Retail 11.87%
Automobile 11.57%
Computer 9.79%
Multi-Industry 7.96%
Total Total Total
Return Return Return
3 6 Months Since
Months Inception
Manor 0.96% 4.94% 5.05%
Investment
Funds
S&P 500 Index 3.09% 13.49% 20.87%
