3rd Quarter Report
September 30, 2000
Manor Investment Funds, Inc.
15 Chester Commons
Malvern, PA 19355
Managed by:
Morris Capital Advisors, Inc.
Dear Fellow Shareholders:
I am pleased to report that shareholder assets invested
in Manor Investment Funds,Inc. remain over $5.3 million.
I thank each of you for contributing to our success.
Stress Fractures and Dislocations
I watched the gymnastic competitors in the recent Olympic
Games with growing discomfort as these superb athletes
pushed their bodies past the breaking point. They suffered
numerous injuries: stress fractures of the feet and ankles,
dislocated shoulders and fingers, and crippling knee injuries.
In many cases their injuries were in the most critical areas
needed to perform. Driven by personal dedication, team
loyalty, or national pride, they competed anyway.
They struggled to perform up to expectations, sometimes
failing to complete the event. They continued to compete,
pushing themselves through ever-more difficult routines in
an effort to become Olympic champions. One by one they
faltered under the intense pressure and the limitations
of their injuries. It became a series of painful
disappointments dramatically evidenced by the judge's scores.
While these athletes didn't achieve their dreams, you can
be sure that they will compete again. They will work to
overcome their shortcomings, heal their injuries, and many
will return to glory in the World Championships, or future
Olympic competitions.
As I watched I was struck by the similarities between these
competitors and our investment markets.
Stocks today are acting like those Olympic gymnasts.
Driven by the need to satisfy analysts and investors,
companies push even harder to meet demanding growth
expectations and maintain lofty valuations. They face
stiff competition in a slowing economy after 6 successive
rate hikes. Investors have continuously raised the bar
of expectations by rewarding successful companies with
ever higher valuations and punishing companies that don't
deliver. In the process, investors become more short-term
oriented and react to changing conditions with swift adjustments
to market values. As the margin of error narrows, the slightest
mistake is swiftly punished by a painful fall. Recent earnings
warnings by companies resulted in price declines of 10 - 20% before
the market opened. Even companies that report favorable results
can be punished if they hint at future weakness.
Despite the setbacks well-managed companies will make the changes
necessary to get back on track. They will compete again and
succeed. For patient investors this creates an opportunity to
remain positioned and benefit from the rebound when it occurs.
The Manor Fund
The Manor Fund continued to outperform the S&P 500 Index for
the year-to-date, despite losing ground in this difficult quarter.
The Fund was helped by strong performance from Mellon Financial,
Allstate Insurance, Citigroup, and General Electric. Three of
these top four performers are financial service companies, and
General Electric derives a significant portion of its revenues
from financial services. The recent strength of these issues
indicates that the markets believe interest rate hikes by the
Fed are at an end. If these companies continue to do well it
may indicate that the next move in rates will be down.
The Manor Fund portfolio was hurt by poor performance by Intel,
Teradyne, Hewlett Packard, and Pfizer. Three of these poor
performers are technology stocks, and have been caught in the
general sell off in this sector. Intel contributed to the
problem by announcing in late September that they experienced
a lower rate of growth in revenues. Hewlett Packard declined
substantially from recent highs despite repeated statements
from company management that their business was on track.
Pfizer, the only non-tech stock in this group, declined after
a strong price increase during the previous quarter.
The Growth Fund
The Growth Fund ended unchanged year-to-date, also outperforming
the S&P 500, despite another difficult quarter. The Fund was
helped by strong performance by Sun Microsystems, Bear Stearns,
Ivax, and Bergin Brunswig. Sun continues to maintain a strong
position in computers used to power the internet. Bear Stearns
benefited from a favorable interest rate environment and potential
mergers in the brokerage industry. Ivax rallied as they gained
approval for a new anti-cancer generic drug. Bergin Bruswig rallied
from depressed levels as the environment for pharmaceutical distributors
improved.
The Growth Fund was hurt by poor performance from Intel, Dell,
CTC Communications, and BMC Software. Three of the tech companies
in this group issued profit or revenue warnings that contributed declines
in their own stock and to the general sell off of technology companies.
The declines were acerbated by the fact that each of these companies had
previously issued statements earlier in the quarter indicating that their
business was on track to meet expectations.
The Bond Fund
The Bond Fund rose 1.86% during the quarter, and 5.25% for the year-to-date,
slightly below the Lehman Intermediate Treasury Index. The Fund's portfolio
of US Treasury Notes continues to be somewhat conservative with an average
yield to maturity of 6.1% and an average maturity of 3.9 years.
Preparing for the Next Event
The stock market is at a crossroads as we begin the final quarter of the year.
The election, corporate earnings, and the economy will largely
determine the outcome.
I am most concerned about the upcoming election. The markets are comfortable
with the current balance of power between the White House and Congress. If
the election results in either party gaining control of each of these branches
of government, the markets will react negatively. If voters maintain some type
of split the markets should not be adversely affected.
The recent declines in the market were primarily driven by earnings warnings
from prominent companies, and the market may have priced in the
worst possible news.
As we enter the time when companies actually report earnings I anticipate
that the news will be better than expected, giving stocks a boost.
The interest rate outlook may also be favorable. The Fed seems to be finished
with this round of interest rated hikes. Economic growth is moderating and oil
prices have declined from their recent highs. If the Fed indicates
they are not considering future rate increases, the markets could do better.
In this current environment I am looking to reduce the overall risk of
the funds by selling companies with relatively high valuations
and buying good companieswhose shares have been discounted to bargain
levels. Just like the Olympic gymnasts, it is often those
who uffer the greatest disappointments that rebound to win
the gold medal the next time.
Sincerely,
Daniel A. Morris
Manor Fund
Portfolio of Investments
September 30, 2000
COMMON AND PREFERRED STOCK 95.3 %
Consumer Staples 5.3 %
Pepsico 1,560 $71,760
Tribune Co. 1,710 74,599
146,359
Retail 5.6 %
McDonalds 3,030 91,468
RadioShack Corp 1,000 64,625
156,093
Medical 9.1 %
Merck 1,600 119,100
Pfizer 2,970 133,464
252,564
Automobile 4.0 %
General Motors 1,690 109,850
109,850
Basic Materials 3.1 %
DuPont 2,050 84,947
84,947
Industrial Products 4.2 %
Tyco Intl Ltd. 2,240 116,200
116,200
Multi-Industry 13.0 %
General Electric 4,650 268,247
Honeywell Corporation 2,610 92,981
361,228
Computer 27.5 %
America Online 1,660 89,225
Cisco Systems 2,350 129,838
Hewlett-Packard 980 95,060
Intel 4,320 179,550
Intl. Bus. Machines 1,980 222,750
Teradyne, Inc 1,420 49,700
766,123
Oils 3.1 %
Chevron 1,000 85,250
85,250
Finance 18.4 %
Allstate Insurance 2,720 94,520
Citigroup 2,799 151,321
Mellon Bank 3,560 165,095
Providian Financial 810 102,870
513,806
Transportation 2.0 %
Delta Airlines 1,260 55,912
55,912
___________
$ 2,648,332
Cash and Cash Equivalents 4.7 %
FNB CC Demand Deposit 20
FNB CC Investor Choice 130,749
130,769
___________
Total Portfolio 100 % $ 2,779,101
Manor Fund
Top Five Holdings September 30, 2000
General Electric MultiIndustry 9.7 %
IBM Computer 8.0 %
Intel Computer 6.5 %
Mellon Financial Finance 5.9 %
Citigroup Finance 5.4 %
Top Five Industries September 30, 2000
Computer 27.5 %
Finance 18.4 %
MultiIndustry 13.0 %
Medical 9.1 %
Retail 5.6 %
Total Return Total Return Annualized
3 Months Trailing Year Total Return
Since Inception
Manor Fund -0.76 % 6.30 % 11.86 %
Lipper Large-Cap
Core Index 0.24 % 10.04 % 14.79 %
S&P 500 Index -0.97 % 13.30 % 21.29 %
Growth Fund
Portfolio of Investments
September 30, 2000
COMMON AND PREFERRED STOCK 78.6 %
Consumer Staples 1.2 %
Jones New York 780 $ 20,670
20,670
Consumer Discretionary 0.8 %
Cablevision 220 14,589
14,589
Retail 1.4 %
Bergen Brunswig 1900 22,206
Homeseekers.com 770 1,877
24,083
Medical 13.6 %
Biogen 980 59,780
Ivax Corp 3,985 183,310
243,090
Automobile 0.9 %
Lear Corp 740 15,216
15,216
Industrial Products 3.3 %
Sensormatic Electronics 3,940 59,100
59,100
Computer 35.2 %
BMC Software 1,500 28,687
Cisco Systems 620 34,255
Dell Computer 1,570 48,376
Intel 1,980 82,294
Microsoft Corp. 960 57,900
Oracle 860 67,725
Sun Microsystems 1,040 121,420
Vishay Intertec 1,630 50,122
Xilinx 1,600 137,000
627,779
Oils 5.1 %
Global Marine 2,500 77,188
Ultramar Dia. Shamrock 550 13,956
91,144
Finance 8.6 %
Bear Stearns 950 59,850
DimeBankcorp 2,600 56,062
T. Rowe Price 790 37,081
152,993
Utilities 7.2 %
CTC Communications 1,860 37,665
Globalrossing Ltd 1,890 58,590
Worldcom, Inc. 1,040 31,590
127,845
Transportation 1.3 %
Tidewater 500 22,750
22,750
Government Bonds 5.7%
US Treasury Note 5.750% Due 11-15-00
100,000 99,907
Accrued Interest 2,156
102,063
Other 9.2 %
Mid Cap SPDR Trust 640 62,880
Nasdaq 100 Dep. Trust 520 46,117
S&P 500 SPYDER 380 54,578
163,575
__________
$ 1,664,897
Cash and Cash Equivalents 6.5 %
FNB CC Investor Choice 116,114
__________
Total Portfolio 100 %
$ 1,781,011
Growth Fund
Top Five Holdings September 30, 2000
Company Industry % of Net Assets
Ivax Medical 10.3 %
Xilinx Computer 7.7 %
Sun Microsystems Computer 6.8 %
Intel Computer 4.6 %
Global Marine Oils 4.3 %
Top Five Industries September 30, 2000
Industry % of Net Assets
Computer 35.2 %
Medical 13.6 %
Finance 8.6 %
Utilities 7.2 %
Oils 5.1 %
Total Return Total Return Annualized
3 Months Trailing Year Total Return
Since Inception
Growth Fund -4.33 % 21.20 % 13.54 %
Lipper Multi-Cap
Growth 1.63 % 29.80 % 18.03 %
S&P Mid Cap
Index 12.81 % 44.07 % 24.84 %
Bond Fund
Bond Fund
Portfolio of Investments
September 30, 2000
Government Bonds 96.9%
US Treasury Notes
5.750 % Due 11/15/2000 100,000 $ 99,906
5.250 % Due 5/31/2001 130,000 129,066
5.500 % Due 7/31/2001 100,000 99,312
5.250 % Due 5/15/2004 30,000 29,334
6.0 % Due 8/15/2004 100,000 100,250
5.875 % Due 11/15/2005 100,000 99,969
5.500 % Due 5/15/2009 100,000 97,187
6.0 % Due 8/15/2009 100,000 100,469
Accrued Interest 11,699
Total Bonds $ 767,192
__________
Cash and Cash Equivalents 3.1%
FNB WC Investor Choice 24,643
Total Portfolio 100% $ 791,835
Top Holdings September 30, 2000
Security % of Net Assets
US Treasury Note 5.25% due 5/01 16.3 %
US Treasury Note 6% due 8/09 12.7 %
US Treasury Note 6% due 8/04 12.7 %
US Treasury Note 5.875% due 11/05 12.6 %
US Treasury Note 5.750% due 11/00 12.6 %
Total Return
Total Return Total Return Annualized
3 Months Trailing Year Total Return
Since Inception
Bond Fund 1.86 % 5.07 % 4.37 %
Lipper US Government 3.83 % 7.86 % 6.56 %
Lehman Intermediate Government 2.57 % 6.13 % 5. 80 %
Manor Investment Funds, Inc.
15 Chester Commons, Malvern, PA 19355
610-722-0900 800-787-3334
