EMYB Embassy Bancorp Inc (QX)

Item 1. Reports to Stockholders.

Annual Report
December 31, 2012

Fund Office:
15 Chester Commons
Malvern, PA 19355
610-722-0900     800-787-3334
www.manorfunds.com

Managed by:
Morris Capital Advisors, Inc.

December 31, 2012

Dear Fellow Shareholders:

Our funds continue to prosper by consistently applying the conservative investment approach that has been successful over so many years.

Thelma & Louise

The title above may bring back memories of the final scene from the movie with the same name, when the main characters opt to drive off the precipice as they are cornered by law enforcement officers rather than face the alternative.  Given the media and market obsession with the “fiscal cliff” debates I understand your thinking, but that is not where I am going with this.  “Thelma & Louise” are actually the monikers that we gave to my youngest daughter Kathryn and her friend Morgan when they were in high school.  They were tagged with the names after a wandering adventure in a neighboring town.  Kathryn was a somewhat new driver, and they were on their way to a community service event with their field hockey team to a location that was no more than 15 minutes away.  Unfortunately, “Kat” had an undeveloped sense of direction, probably because she listened to her iPod and paid no attention whenever we were in the car.  Apparently her friend Morgan was no better.  They wandered for more than an hour, never reaching their destination, before turning back to finally arrive back home safely.  The story became legendary and hence the link to the wandering characters from the movie above.

I’ll forgive you for asking what this has to do with investing in the market, but please let me explain.  The “fiscal cliff” may be the focal point, but the wandering journey that brought us to this point, and the wandering journey that will no-doubt happen afterwards, will have a significant impact on the markets and all of us.

Like the teenagers above, our elected representatives on both sides of the aisle have spent little time developing the skills needed to navigate the issues that confront us, but seem confident that they can get to their desired endpoint anyway (each with a different endpoint, by the way).  We have fiscal issues of spending and entitlements that are clearly unsustainable, a tax system that is inefficient and distorted by special interests, and economic policies that do little to promote much needed growth.  In addition, we are amassing debt to pay for things we want today, effectively shifting the burden of payment to future generations.

The amazing thing to me is that, despite all of this, the private sector seems to be doing ok.  Sectors of the economy show some signs of improvement.  Housing seems to have moved off the bottom, the stress in the financial sector has lessened, consumer spending has held up, and the stock market continues its upward trend.  The Eurozone hasn’t disintegrated and growth in China seems to be improving.  Some economists attribute these results solely to central bank policies around the world that have poured liquidity into the system by printing money to purchase government debt and depress interest rates, a practice known as quantitative easing.

My concern is that each of the participants in this process has distorted some aspect of the economy to offset the actions of the others, and that there is no concerted plan to unwind it.  As a consequence, any near-term recovery will be uneven at best, and it is unlikely that the economy will be able to generate consistent sustainable growth.  The markets may do better, and we may have avoided the abyss, but this will do little to generate substantial long-term growth.

The Manor Fund

The Manor Fund rose 8.20%, net of all fees and expenses, during the calendar year ending December 31, 2012, underperforming the S&P 500 index (16.00%) and comparable mutual funds as measured by the Lipper Large-Cap Core mutual fund index (15.25%).  The Fund continues to outperform the S&P 500 index for the trailing 10 years with a return of 7.30% annualized compared to an annualized return of 7.09% for the index.  The Fund also outperformed the Lipper Large-Cap Core mutual fund index for the trailing 5-year, and 10-year periods, with returns of 1.44%, and 7.30% for the Fund compared to 0.95% and 6.11% for the Lipper index.

During the calendar year 2012, the Fund was helped by strong performance from Amphenol, Corp., Walt Disney Company, Watson Pharmaceuticals (now Actavis, Inc.), JPMorgan Chase, Inc., and Franklin Resources, Inc.  Amphenol jumped early in the quarter when the company reported revenue and earnings better than expected, and then raised revenue and earnings guidance for the year.  The shares continued to trade well as the company reported revenue and earnings above the earlier guidance throughout the balance of the year.  Shares of Walt Disney Company rose steadily through most of the year as this company also produced results that were better than expectations.  The stock traded lower late in the year on concerns about slowing economic growth, and gapped lower after a disappointing earnings report in November.  Shares of Watson Pharmaceuticals (now Actavis) jumped early in the year on speculation that the company would buy Swiss based Actavis.  The stock jumped again one month later when the acquisition was formally announced.  The shares continued to trade higher throughout the balance of the year as the company announced the introduction of several generic and proprietary drugs, as well as several smaller strategic acquisitions.  JP Morgan Chase rose early in the year based on strong operating results, but then fell sharply after news surfaced regarding significant losses in their derivative-based hedging portfolio.  Shares of the company rebounded later in the year as bank management offset the losses in that portfolio with strong operations elsewhere in the company.  Franklin Resources was the beneficiary of strong cash flows into its investment funds, and   reported better-than-expected earnings throughout the year.  Shares of the company rose in response, but suffered mid-year on concerns about continued growth when the stock market declined.

Notable laggards during calendar year 2012 were Endo Health Solutions, Inc., Newmont Mining Corp., Norfolk Southern Corp., Occidental Petroleum, and Exelon Corp.  Shares of Endo Pharmaceuticals were weak on investor concern about slowing growth and the impact of recent strategic initiatives by management.  Those concerns were heightened by the potential impact of generic competition for its flagship product, Lidoderm, and again later in the year after a weak quarterly earnings report.  Shares of Newmont Mining slid throughout the early portion of the year after a weak earnings report raised concerns about production growth and weak metals pricing.  The shares rebounded but then declined again after a weak 3 ^rd quarter earnings report.  Norfolk Southern declined early in the year when its initial earnings report raised concerns about slowing traffic volume, especially in the coal shipping segment.  Shares rebounded after successive earnings reports were better than expected, but sold off again when the company lowered earnings expectations due to declines in coal and merchandise shipments, and lower revenue from fuel surcharges.  Occidental Petroleum declined early in the year despite reporting revenue and earnings above expectations, record production levels, and a dividend increase.  The decline accelerated after a subsequent earnings report missed expectations.  The shares rebounded somewhat, but then declined late in the year despite reporting earnings above expectations, and a continued increase in production levels.  The shares of Exelon Corp. were weak through much of the year on concerns about high operating costs compared to other energy producers and weak energy pricing.  The shares fell further as concerns surfaced regarding a potential dividend cut to preserve cash and the current credit rating of the company.  

During the year we took gains in Goodrich Corporation after they received a buyout offer, and realigned our holdings in the energy sector by selling Nabors Industries and Weatherford International.  In their place we added BE Aerospace, Quanta Services, and Valero Energy.  BE Aerospace provides cabin interior components and maintenance for aerospace manufacturers and the airlines.  Quanta Services provides construction and maintenance services for energy transmission, especially in the electrical grid, and Valero Energy is a refiner of oil related products located in south-central United States.

The Growth Fund

The Manor Growth Fund rose 13.36%, net of all fees and expenses, during the calendar year ending December 31, 2012, underperforming the S&P 500 index (16.00%) and comparable mutual funds as measured by the Lipper Large-Cap Growth mutual fund index (15.62%).  The Fund continues to outperform the S&P 500 index for the trailing 5-years, and since inception, with returns of 1.71%, and 2.32% for the Fund, and 1.65%, and 2.16% for the index.  The Fund also outperformed comparable mutual funds as measured by the Lipper Large-Cap Growth mutual fund index during the trailing 3-years, 5-years, 10-years, and since inception, with returns of 9.94%, 1.71%, 6.77% and 2.32% for the Fund, compared to 8.89%, 0.95%, 6.36%, and –0.57% for the Lipper index.

During the calendar year 2012 the Fund was helped by gains in Apple, Inc., Constellation Brands, Inc., MasterCard, Inc., Gilead Sciences, Inc., and Thermo Fisher Scientific, Inc.  Apple rose sharply throughout the early part of the year as earnings growth continued to accelerate with the introduction of new product upgrades and global expansion.  The shares declined later in the year due to profit taking and concerns about continued growth.  Shares of Constellation Brands jumped mid-year, and continued to rise, when the company had the opportunity to buy the full distribution rights to Corona brands at an attractive valuation as a result of the InBev merger with Modello.  The company also continued to report strong operating results in its existing brand segments.  Shares of MasterCard performed well throughout the year as the company reported successive quarterly per share earnings above expectations.  The company also announced a settlement, together with Visa, that resolved ongoing litigation with their merchant partners, removing an uncertainty that weighed on the stock.  The shares of Gilead Sciences rose throughout the year, driven by strong operating results and positive clinical trial results.  The biotech pharmaceutical manufacturer of treatments for HIV and other infectious diseases also received critical marketing approvals from the FDA and the European Medicines Agency.  Shares of Thermo Fisher were strong throughout the year as the company reported a string of earnings results that exceeded expectations.  The company also instituted a regular quarterly dividend early in the year and then raised the dividend payment later in the year.

Weak holdings during calendar year 2012 include MetroPCS Communications, Inc., Bed, Bath and Beyond, Inc., Verifone Systems, Inc., FLIR Systems, Inc., and Alpha Natural Resources, Inc.  The shares of MetroPCS declined early in the year after a series of disappointing earnings reports, mainly due to high capital costs to build capacity for their wireless network.  The company also experienced weaker demand for its low-cost phone offerings as larger carriers introduced products at lower price points.  The shares of Bed, Bath and Beyond were volatile through the latter portion of the year.  Investors reacted to a series of inconsistent earnings reports.  The company seemed to report earnings below expectations, or reduced earnings guidance during quarterly reports when they beat earnings expectations.  Verifone rallied early in the year after reporting revenue and earnings above expectations, but the shares reversed course when concerns surfaced regarding the historical and expected growth assumptions for revenue and earnings.  The shares declined again after the company reported revenue and earnings above expectations but provided guidance that did not show that management expected growth to reaccelerate.  FLIR Systems declined after the company reported earnings above expectations, but revenue that declined year over year.  The shares were hurt again when the company reported revenue and earnings that missed expectations in a subsequent report.  Alpha Natural Resources declined as the company faced reduced demand for coal exports, especially to China.  The lower production rates added additional complications as the company continued to address issues from their acquisition of Massey Energy during the previous year.  

In recognition of some of the operating concerns, and the deterioration of several of the above names in our analytical ranking, we removed MetroPCS, FLIR Systems, and Alpha Natural Resources from the portfolio.  In their place we added Edwards Lifesciences, Trimble Navigation, and LKQ Corporation.  Edwards Lifesciences manufactures and distribute artificial heart valves in the United States and Europe, Trimble Navigation provides GPS based management systems for agriculture equipment and large transportation fleets, and LKQ Corporation provides management systems that link insurance based automobile repair centers with high quality used and remanufactured parts suppliers.

The Bond Fund

 The Manor Bond Fund generated a return of 0.19%, net of all fees and expenses, for the calendar year ending December 31, 2012, underperforming the Barclays Intermediate Government index return (1.52%) and the Lipper US Government mutual fund index (3.06%).  Performance reflects the relatively conservative position of the Fund’s investment portfolio of US Treasury securities.  At year-end the portfolio had an average yield to maturity of 0.56%, an average maturity of approximately 3.49 years, and an average duration of 0.99 years.  The duration of a bond portfolio is a measure of risk, with a lower duration indicating a lower level of risk.  The Fund is managed to provide a low-risk alternative for conservative investors.

The GPS Solution

The solution for my daughter was simple with the aid of modern technology: make sure she has a GPS device to guide her.  That option is not readily available for our politicians, especially considering that they can’t even agree on where they are going, let alone how to get there.  But as dysfunctional as the political process can be, our economy adapts.  And the one thing that we have learned over the last several years is that the markets are resilient, as well.  Stocks have weathered a number of setbacks but corporate earnings have grown.  Corporations have taken advantage of historically low interest rates to strengthen their balance sheets and lower their cost of capital.  These balance sheet improvements have also contributed to improved operating results.  The stock market has reacted to these improved results, stronger balance sheets, and liquidity injections from the Fed by pushing to new highs.  Stocks are expressing the belief that corporate management can continue to produce results and that the Fed will be able to successfully unwind their intervention activity without a problem.  

While we have our concerns, financial history has taught us that the adaptability of our market economy is our strongest asset.  We cannot predict every outcome, but we know that ultimately sound investment fundamentals will prevail.  Markets may react emotionally to events, or focus on the current “hot” investment theme, but we will continue to focus on the primary business fundamentals that we believe are essential for sound investing.  Our GPS is a process that we use to identify companies that are priced attractively, with strong revenue and earnings growth, solid balance sheets with quality assets and reasonable debt levels, and strong free cash flow.  We strongly believe that an investment process based on the consistent application of these sound principals has the best chance to successfully guide us to our investing destination.

Sincerely,

Daniel A. Morris

(a)  The total returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

* Initial public offering of shares was September 26, 1995.

** The Indices are unmanaged benchmarks that assume reinvestment of all distributions and exclude the effect of taxes and fees.  They are widely recognized unmanaged indices representative of broader markets and ranges of securities than are found in the Fund’s portfolio.  Individuals cannot invest directly in an index.

***The Standard & Poor’s 500 Index (“S&P 500”) is a market value-weighted index, representing the aggregate market value of the common equity of 500 stocks primarily traded on the New York Stock Exchange.  The S&P 500 is a widely recognized, unmanaged index of common stock prices.  The figures for the S&P 500 reflect all dividends reinvested but do not reflect any deductions for fees, expenses or taxes.

This chart assumes an initial investment of $10,000 made on September 26, 1995. Past performance doesn't guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, maybe worth more or less then their original cost.  All returns reflect reinvested dividends but do not reflect the impact of taxes.

Current performance may be higher or lower than the performance quoted.  Performance information current to the most recent month-end may be obtained by calling 1-800-787-3334.

(a)  The total returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

* Initial public offering of shares was June 30, 1999.

** The Indices are unmanaged benchmarks that assume reinvestment of all distributions and exclude the effect of taxes and fees.  They are widely recognized unmanaged indices representative of broader markets and ranges of securities than are found in the Fund’s portfolio.  Individuals cannot invest directly in an index.

***The Standard & Poor’s 500 Index (“S&P 500”) is a market value-weighted index, representing the aggregate market value of the common equity of 500 stocks primarily traded on the New York Stock Exchange.  The S&P 500 is a widely recognized, unmanaged index of common stock prices.  The figures for the S&P 500 reflect all dividends reinvested but do not reflect any deductions for fees, expenses or taxes.

This chart assumes an initial investment of $10,000 made on June 30, 1999. Past performance doesn't guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, maybe worth more or less then their original cost.  All returns reflect reinvested dividends but do not reflect the impact of taxes.

Current performance may be higher or lower than the performance quoted.  Performance information current to the most recent month-end may be obtained by calling 1-800-787-3334.

(a)  The total returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

* Initial public offering of shares was June 30, 1999.

** The Indices are unmanaged benchmarks that assume reinvestment of all distributions and exclude the effect of taxes and fees.  They are widely recognized unmanaged indices representative of broader markets and ranges of securities than are found in the Fund’s portfolio.  Individuals cannot invest directly in an index.

***The Barclays Intermediate Treasury Index includes all publicly issued, U.S. Treasury securities that have a remaining maturity of greater than or equal to 1 year and less than 10 years, are rated investment grade, and have $250 million or more of outstanding face value.

This chart assumes an initial investment of $10,000 made on June 30, 1999. Past performance doesn't guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, maybe worth more or less then their original cost.  All returns reflect reinvested dividends but do not reflect the impact of taxes.

Current performance may be higher or lower than the performance quoted.  Performance information current to the most recent month-end may be obtained by calling 1-800-787-3334.

MANOR FUND

GRAPHICAL ILLUSTRATION

DECEMBER 31, 2012 (UNAUDITED)

The following chart gives a visual breakdown of the Fund by the industry sectors the underlying securities represent as a percentage of the portfolio of investments.

MANOR GROWTH FUND

GRAPHICAL ILLUSTRATION

DECEMBER 31, 2012 (UNAUDITED)

  The following chart gives a visual breakdown of the Fund by the industry sectors the underlying securities represent as a percentage of the portfolio of investments.

MANOR BOND FUND

GRAPHICAL ILLUSTRATION

DECEMBER 31, 2012 (UNAUDITED)

The following chart gives a visual breakdown of the Fund by the industry sectors the underlying securities represent as a percentage of the portfolio of investments.

The Fund did not hold any Level 3 assets during the year ended December 31, 2012. The Fund did not hold any derivative instruments at any time during the year ended December 31, 2012. There were no significant transfers into or out of Level 1 or Level 2 during the period. It is the Fund’s policy to recognize transfers into and out of Level 1 and Level 2 at the end of the reporting period.

The accompanying notes are an integral part of these financial statements.

The Fund did not hold any Level 3 assets during the year ended December 31, 2012. The Fund did not hold any derivative instruments at any time during the year ended December 31, 2012. There were no significant transfers into or out of Level 1 or Level 2 during the period. It is the Fund’s policy to recognize transfers into and out of Level 1 and Level 2 at the end of the reporting period.

The accompanying notes are an integral part of these financial statements.

The Fund did not hold any Level 3 assets during the year ended December 31, 2012. The Fund did not hold any derivative instruments at any time during the year ended December 31, 2012. There were no significant transfers into or out of Level 1 or Level 2 during the period. It is the Fund’s policy to recognize transfers into and out of Level 1 and Level 2 at the end of the reporting period.

The accompanying notes are an integral part of these financial statements.