<PAGE>
The Laidlaw Covenant Fund
100 Park Avenue - New York, NY 10017
Semi-Annual Report
June 30, 1996
Investment Advisor
Laidlaw Holdings Asset Management, Inc.
100 Park Avenue
New York, NY 10017
Sub-Advisor
Covenant Investment Management, Inc.
309 West Washington, Suite 1300
Chicago, IL 60606
Distributor
Laidlaw Equities, Inc.
100 Park Avenue
New York, NY 10017
Custodian
The Fifth Third Bank
1094F
38 Fountain Square Plaza
Cincinnati, OH 45263
Transfer Agent
Unified Advisers, Inc.
429 North Pennsylvania Street
Indianapolis, IN 46204
<PAGE>
The Laidlaw Covenant Fund
Portfolio of Investments (a)
June 30, 1996 (Unaudited)
Value
Description Shares (Note 2)
- ----------- ------ --------
COMMON STOCKS - 94.6% of total investments
Chemicals - 6.75%
Air Products & Chemicals, Inc. 2,500 144,375
Vulcan Materials Company 1,600 95,000
--------
239,375
--------
Conglomerates - 2.6%
Tenneco, Inc. 1,800 92,025
------
92,025
------
Consumer Products - 8.67%
Clorox Co. 1,400 124,075
Rubbermaid, Inc. 2,700 73,575
Warner-Lambert Co. 2,000 110,000
-------
307,625
-------
Drugs and Health Care - 9.12%
Alza, Inc. 3,000 82,125
Bergen Brunswig Corp. "Class A" 2,205 61,189
Merck & Co., Inc. 1,100 71,087
Pharmacia & Upjohn, Inc. 2,465 109,384
-------
323,785
-------
Equipment and Electronics - 5.54%
Applied Materials, Inc. 1,000 30,500
Hubbell, Inc. "Class B" 1,155 76,519
International Business Machines 900 89,100
------
196,119
-------
Financial Services - 12.50%
Allstate Corp. 1,390 63,419
Banc One Corp. 2,750 93,500
Bank of New York Co. 2,000 102,500
Cigna Corp. 600 70,725
A.G. Edwards, Inc. 2,000 54,250
Transamerica Corp. 700 57,225
------
441,619
-------
(a) Standard & Poor's Industry classifications
<PAGE>
Value
Description Shares (Note 2)
- ----------- ------ --------
Food & Beverage - 4.87%
CPC International, Inc. 700 50,400
H. J. Heinz 2,100 63,788
Hershey Foods Corp. 800 58,700
------
172,888
-------
Furniture and Home Equipment - 4.75%
Miller Herman Inc. 2,500 76,563
Maytag Corp. 4,400 91,850
------
168,413
-------
Industrial Products and Packaging - 5.78%
Avery Dennison Corp. 1,500 82,313
Bemis Co. "Class A' 1,500 52,500
Cooper Industries, Inc. 1,700 70,550
--------
205,363
-------
Manufacturing - 4.23%
Timken Co. 2,100 81,375
Worthington Industries, Inc. 3,300 68,888
------
150,263
-------
Office Equipment and Services - 6.58%
Federal Express Corp. 1,000 82,000
Kelly Services, Inc. "Class A" 2,700 78,975
Knight-Ridder, Inc. 1,000 72,500
------
233,475
-------
Oil & Gas - 6.20%
Amoco Corp. 2,000 144,750
Apache Corp. 2,300 75,613
------
220,363
-------
Retail - 2.05%
Sears Roebuck & Co. 1,500 72,938
------
Transportation - 2.20%
CSX Corp 1,600 77,200
------
<PAGE>
Value
Description Shares (Note 2)
- ----------- ------ --------
Utilities - 12.85%
American Water Works 2,600 102,375
AT&T 1,600 99,200
Public Service Company of Colorado 2,500 91,875
SBC Communications 1,600 78,800
Southern New England Telecomm 2,000 84,000
------
456,250
-------
Investment in Money Market Funds - 1.80%
63,700
Cash - 3.6% 127,688
-------
Total Common Stocks (cost $2,536,633.56) (b) $3,549,111
=========
(b) Cost also represents cost for federal income tax purposes.
<PAGE>
The Laidlaw Covenant Fund
Statement of Assets and Liabilities
June 30, 1996 (Unaudited)
Assets
Investments, at value (cost $2,536,634) $3,357,723
Cash 125,250
Investment in Money Market Funds 63,700
Receivable from Laidlaw Holdings, Inc. (5,431)
Receivable for Investments sold 0
Receivable for Fund shares sold 0
Dividends and interest receivable 6,481
Deferred organization costs and prepaid expenses 27,784
---------
Total Assets 3,575,597
===========
Liabilities
Administration fee payable (299)
Dividends payable to shareholders 0
Payable for capital shares redeemed 0
12b-1 expenses payable 3,031
Accrued expenses 23,754
------
Total Liabilities 26,486
======
Net Assets $ 3,549,111
=========
Shares outstanding (without par value,
unlimited share authorized) 232,153
Calculation of Maximum Offering Price:
Net asset value per share 15.29
Sales charge - 4.5% of public offering price 0.72
---------
Maximum Offering Price $ 16.01
=====
Composition of Net Assets
Shares of beneficial interest, at par 228
Additional shares of beneficial interest 2,520,316
Accumulated undistributed net realized gains 207,477
Net unrealized appreciation of investments 821,090
-------
Net Assets, June 30, 1996 $ 3,549,111
=========
<PAGE>
The Laidlaw Covenant Fund
Statement of Operations
For the six months ended June 30, 1996 (Unaudited)
Investment Income
Dividends $ 47,922
Interest 8,692
Other 7
Expenses
Advisory fees 20,647
Administration fees 2,176
12b-1 expenses 7,227
Custodian fees and expenses 1,244
Transfer Agent fees and expenses 7,462
Legal fees 7,462
Amortization of organization costs 5,735
Reports to shareholders 3,731
Registration fees 5,217
Audit fees 9,751
Trustee's fees 4,975
Other expenses 16,916
------
92,542
======
Less:
Fees waived and expenses to be reimbursed (41,566)
-------
Adviser and Sub-Adviser 51,076
------
Net Investment Income 5,545
=====
Realized and Unrealized Gain on Investments
Net realized gains on securities transactions 44,421
Net change in unrealized appreciation of investments 71,405
Net Realized/Unrealized Gain on Investments 115,825
=======
Increase in Net Assets Resulting from Operations $ 121,370
=======
<PAGE>
The Laidlaw Covenant Fund
Statement of Changes in Net Assets
For the six months ended June 30, 1996 (Unaudited)
Period Ended
June 30, 199 Year Ended
(Unaudited) December 31, 1995
--------- -----------------
Increase (Decrease) in Net Assets
Operations
Net investment income 5,545 820
Net realized gain on securities
transactions 44,421 690,467
Net change in unrealized
appreciation of investments 71,405 511,590
--------- ---------
Net increase in net assets resulting
from operations 121,370 1,202,877
--------- ---------
Dividends to shareholders from
investment income 0 0
- -
Distributions to shareholders from
net realized gains 0 (533,277)
- -------
Portfolio share transactions (Note 5)
Net proceeds from shares subscribed 569,734 815,009
Net asset value of shares issued
to shareholders in reinvestment
of dividends and distributions 0 0
Cost of shares redeemed 1,634,383 (1,368,123)
--------- -----------
Net (decrease) increase in net assets
from capital share tranactions (1,066,649) (553,114)
--------- ----------
Total (Decrease) Increase in Net Assets (948,344) 116,485
Net Assets
Beginning of period 4,497,455 4,380,970
--------- -----------
End of period $ 3,549,111 $ 4,497,455
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
The Laidlaw Covenant Fund
Notes to Financial Statements (Unaudited)
Note 1 - General
The Laidlaw Covenant Fund (the "Fund") was organized as a business trust under
the laws of the State of Indiana on August 26, 1993, and is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company, commonly known as a "mutual fund."
As a result of a shareholder's meeting of The Infinity Mutual Funds, Inc.
Covenant Portfolio (the "Portfolio") on September 23, 1992, the fund acquired
the assets of the Portfolio. The acquisition consisted of the transfer of all of
the assets and liabilities of the Portfolio of the Fund in exchange for shares
to Portfolio shareholders in liquidation of the Portfolio.
The Fund issues shares of beneficial interest relating to an investment
portfolio consisting principally of common stocks, or securities convertible
into or exchangeable for common stocks of companies which, in the opinion of the
Fund's investment advisor, meet certain standards of corporate responsibility
and ethical business behavior, as well as traditional investment standards.
Laidlaw Holdings Asset management, Inc. ("Laidlaw") serves as the Fund's
investment adviser. Covenant Investment Management, Inc. ("Covenant")
serves as the Fund's sub-adviser.
Unified Advisers, Inc. ("Unified") serves as the Fund's administrator.
Laidlaw Equities, Inc. ("Distributor") serves as the distributor of
the Fund's shares.
Note 2 - Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of it's financial statements.
A) Security Valuations
Securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
NASDAQ National Market System. Securities not listed on an exchange or the
National Market System, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is used
when no asked price is available.
<PAGE>
B) Securities Transactions and Investment Income
Securities transactions are recorded on a trade date plus one basis. Realized
gains and losses from securities transactions are recorded on the identified
cost basis. Dividend income is recognized on the ex-dividend date and interest
income on investments is accrued daily.
C) Dividends and Distributions to Shareholders
The Fund declares and pays dividends from net investment income and distributes
net capital gains, if any, once a year. However, to the extent that net realized
gains of the Fund can be reduced by any capital loss carry-overs from the Fund,
such gains will not distributed. Dividends and distributions are recorded on the
ex-dividend date.
D) Federal Income Taxes
It is the policy of the Fund to meet the requirements of the Internal Revenue
Code applicable to regulate investment companies including the requirement that
it distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
E) Expenses
Organization costs totaling $57,500 have been deferred and are being amortized
by the Fund on a straight-line basis through 1997.
Note 3 - Agreements and Other Transactions with Affiliates
The Fund has entered into an Investment Advisory Agreement with Laidlaw. In
Turn, Laidlaw has entered into an Investment Sub-Advisory Agreement with
Covenant. The Fund has entered into a Distribution Agreement with the
Distributor.
As Investment Adviser, Laidlaw supervises and assists in the management of the
Fund. Pursuant to the terms of the Investment Advisory Agreement, Laidlaw is
entitled to annual fees, accrued daily and payable monthly, at the following
rates:
Annual Rate Average Daily Net Assets
----------- ------------------------
1.00% Less than $250 million
0.80% $250-$499 million
0.70% $500 million and over
For the six months ended June 30, 1996, Laidlaw waived its advisory fee.
The amount of this waiver totaled $20,647.
<PAGE>
As Investment Adviser, Laidlaw provides day to day management of the Fund's
investments. Pursuant to a agreement with Covenant, Laidlaw has agreed to pay
Covenant 30% of the net amount of its investment advisory fee paid by the Fund.
Since Laidlaw waived its entire advisory fee, Covenant was not entitled to any
sub-advisory fee for the six months ended June 30, 1996.
The Fund has agreed to pay Unified the following for services:
Transfer Agent - Monthly fee equal to $1.15 per active stockholder account with
a minimum monthly fee of $1,250.
Fund Accounting Agent - Annual fee equal to .05% of the Fund's average net
assets, subject to a minimum annual fee of $20,000, plus reimbursement for
certain expenses and optional services.
The agreements further provide that if, in any fiscal year, the aggregate
expenses of the Fund (generally including fees payable to Laidlaw and Unified
but excluding interest, taxes, brokerage commissions and extraordinary expenses)
exceed the most restrictive expense limitation of any state having jurisdiction
over the Fund, Laidlaw will reimburse the Fund for any such expenses. At June
30, 1996, the most restrictive limitation limits expenses to 2.50% of the first
$30 million of the Fund's average daily net assets, plus 2.00% of the next $70
million of such assets plus 1.50% of such assets in excess of $100 million. At
June 30, 1996, Laidlaw owed the Fund $5,431 pursuant to this limitation, net of
advisory and other fees due to Laidlaw.
For the six months ended June 30, 1996, the Distributor advised the Fund that it
retained $11.02 from commissions earned on the sales of the Fund's shares. For
the same period various affiliates of Laidlaw advised the Fund that they
retained $4,673.25 from commissions earned on sales of the Fund's shares. In
addition, Laidlaw retained $360 in commissions from the sales of investment
securities to the Fund.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Pursuant to the Plan, the Fund is authorized to incur
distribution and shareholder servicing expenses at an aggregate rate of up to
0.35% of the Fund's average daily net assets. Pursuant to the Plan, up to 0.10%
of the Fund's average daily net assets may be retained by the Distributor and
the remainder may be used to reimburse the Distributor for payments made for
distribution and servicing provided to Fund shareholders. For the six months
ended June 30, 1996, the Fund incurred $7,215.35 pursuant to the Plan. Of that
amount, $1,687.79 was earned by the distributor while $4,217.16 was earned by
Laidlaw as Broker/Dealer and non-affiliated Broker/Dealers earned $1,310.40.
Certain Trustees and officers of the Fund are "affiliated persons" (as defined
in the Act) of Laidlaw. Each "non-affiliated" Trustee is entitled to receive a
meeting fee of $625 per meeting for services relating to the Fund.
<PAGE>
Note 4- Securities Transactions
For the six months ended June 30, 1996, the cost of purchases and proceeds from
sales of the Fund's investment securities (excluding short-term investments)
amounted to $934,848 and $0, respectively.
At June 30, 1996, the cost of the Fund's investment securities for federal
income tax purposes was substantially the same as for financial reporting
purposes. Accordingly, net unrealized appreciation of investments amounted to
$821,090, consisting of gross unrealized appreciation of $803,420 and gross
unrealized depreciation of $17,670.
<PAGE>
Note 5 - Capital Share Transactions
Transactions in shares of the Fund are summarized below (rounded to the nearest
thousand):
Six Months Year Ended
Ended June 30, 1996 December 31, 1995
Shares Sold 38,000 55,000
Shares issued to shareholders in
reinvestment of dividends and distributions 0 0
Share redeemed 107,000 (94,000)
------- ---------
Net Increase (Decrease) (71,000) (39,000)
======== =========
<PAGE>
The Laidlaw Covenant Fund
Financial Highlights
Six Months Ended
June 30, 1996 Year Ended
(Unaudited) December 31, 1995
----------- -----------------
Selected Per Share Data
Net Asset Value
Beginning of Period $ 14.96 $ 12.91
----- -----
Investment Activities
Net Investment income (loss) 0.02 0.00
Net realized and unrealized gains
on investments 0.31 3.82
---- ----
Total from Investment Activities 0.33 3.82
Distributions
Net investment income 0.00 0.00
Net realized gains 0.00 (1.77)
---- ------
Total Distributions 0.00 (1.77)
Net asset Value, End of Period $ 15.29 $ 14.96
Total Return (excluding sales charges) 2.21% 29.59%
Ratios/Supplementary Data
Net Assets at end of period (000) 3,549 4,497
Ratio of expenses to average net assets 2.50% 2.50%
Ratio of net investment income to average
net assets 0.13%(a) 0.02%
Ratio of expenses to average net assets* 4.45%(a) 4.57%
Ratio of net investment income to average
net assets* (1.73%)(a) (2.10%)
Portfolio turnover 45.3%(a) 49.7%
* During the period the investment advisory and administration fees were waived
and reimbursed. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated.
(a) Annualized
<TABLE> <S> <C>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 2,536,634
<INVESTMENTS-AT-VALUE> 3,357,723
<RECEIVABLES> 5,431
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,575,597
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 26,486
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 232,153
<SHARES-COMMON-PRIOR> 300,641
<ACCUMULATED-NII-CURRENT> 12,532
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 207,477
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 821,090
<NET-ASSETS> 3,549,111
<DIVIDEND-INCOME> 47,922
<INTEREST-INCOME> 8,692
<OTHER-INCOME> 0
<EXPENSES-NET> 51,076
<NET-INVESTMENT-INCOME> 5,545
<REALIZED-GAINS-CURRENT> 44,421
<APPREC-INCREASE-CURRENT> 71,405
<NET-CHANGE-FROM-OPS> 121,370
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<NUMBER-OF-SHARES-SOLD> 38,000
<NUMBER-OF-SHARES-REDEEMED> 107,000
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 948,344
<ACCUMULATED-NII-PRIOR> 820
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<GROSS-EXPENSE> 92,542
<AVERAGE-NET-ASSETS> 4,152,014
<PER-SHARE-NAV-BEGIN> 14.96
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