<PAGE> 1
[LOGO]
REPORT OF THE PRESIDENT
APRIL 30, 1996
The first half of fiscal year 1996 has witnessed a bumpy bond market due to
a classic tug-of-war between the forces of higher growth, high inflation and
moderate growth, low inflation. February and March employment numbers registered
well above expected levels igniting inflation fears while positive reports on
consumer and producer prices indicate investors have become too pessimistic on
inflation. In the short run, inflation fears have won out and bond prices have
fallen. Inflation is detrimental to fixed income investments as it can erode the
real value of bond returns and may increase pressure to raise current interest
rates.
The impact of the rise in rates has been muted by your Fund's defensive
posture of owning a significant amount of high coupon, pre-refunded debt
instruments. These "cushion" bonds are subject to smaller price swings in a
volatile interest rate environment. This policy is in line with the Fund's
stated objective to provide as high a level of current income as is consistent
with preservation of capital.
We continue to be optimistic that the current interest rate pressure will
prove to be a short lived phenomena. Our long term outlook on the economic
environment continues to be optimistic and focused on slow growth and low
inflation. Your investment in Ocean State Tax Exempt Fund should be viewed as a
longer term commitment and such an environment should be beneficial in the long
run.
New bond issuance this year in Rhode Island and nationally continues to lag
behind past year levels. Demand for municipals has rebounded, however, as the
relative performance of municipals has surpassed other fixed income securities
during the period. Discussion of healthcare and federal tax reform have quieted
with the approaching presidential election. However, with uncertainty clouding
these issues the Fund has taken steps that include efforts to trim back
healthcare bond exposure. In addition, management is concentrating on improving
the overall credit quality of the Fund.
Very truly yours,
/s/ Alfred B. Van Liew
Alfred B. Van Liew
President and Chairman of the
Board of Trustees
<PAGE> 2
OCEAN STATE TAX EXEMPT FUND
<TABLE>
INVESTMENT PERFORMANCE REVIEW
AS OF APRIL 30, 1996
(UNAUDITED)
<CAPTION>
PRIOR SINCE INCEPTION
NOVEMBER 1, 1995 FISCAL YEAR MAY 1, 1991 DECEMBER 8, 1986
THROUGH ENDED THROUGH THROUGH
APRIL 30, 1996 OCTOBER 31, 1995 APRIL 30, 1996 APRIL 30, 1996
---------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
TOTAL RATE OF RETURN(B)
Based on:
Net Asset Value.... 6.37% 10.89% 7.87% 8.98%
Offering Price..... 2.14% 6.46% 6.75% 8.20%
<CAPTION>
AS OF AS OF
APRIL 30, 1996 OCTOBER 31, 1995
---------------- ----------------
<S> <C> <C>
30-DAY CURRENT YIELD
Based on:
Net Asset Value.... 5.44% 5.26%
Offering Price..... 5.23% 5.05%
30-DAY TAX-EQUIVALENT(A)
YIELD
Based on:
Net Asset Value.... 8.40% 8.46%
Offering Price..... 8.06% 8.12%
</TABLE>
The Ocean State Tax Exempt Fund has placed a high priority on capital
preservation while at the same time striving for competitive after-tax
investment returns. The Fund has maintained the weighted average maturity of the
portfolio at 14.07 years as of April 30, 1996.
<TABLE>
The average quality rating of the investments, in the following table was
Aa/AA (Moody's and Standard & Poor's bond rating services).
PORTFOLIO QUALITY ANALYSIS
<CAPTION>
% OF TOTAL PORTFOLIO
---------------------
AS OF AS OF
RATING 4/30/96 10/31/95
------ ------- --------
<S> <C> <C>
Aaa/AAA.................................. 57.30 % 56.06%
Aa/AA.................................... 18.61 % 16.90%
A........................................ 17.02 % 19.19%
Baa/BBB.................................. 7.07 % 7.85%
Not Rated................................ 0 % 0%
</TABLE>
The Fund will continue its policy of seeking the highest tax advantaged
yields available, consistent with maintaining quality and diversification
objectives.
(a) For 1996 shareholders are subject to a maximum combined federal and state
tax rate of 37.84%.
(b) Past performance is no guarantee of future results.
2
<PAGE> 3
OCEAN STATE TAX EXEMPT FUND
STATEMENT OF ASSETS AND LIABILITIES
AS OF APRIL 30, 1996
ASSETS
<TABLE>
<S> <C>
Investments at value (identified cost $41,123,774) (Note 1A).................. $42,835,420
Cash.......................................................................... 194,301
Interest receivable........................................................... 646,551
Prepaid Expenses.............................................................. 7,315
-----------
Total Assets........................................................ $43,683,587
LIABILITIES
Distribution payable to shareholders.......................................... $ 103,446
Payable for securities purchased.............................................. 500,025
Accrued management fees....................................................... 20,905
-----------
Total Liabilities................................................... $ 624,376
-----------
Net Assets.......................................................... $43,059,211
===========
Net Assets consist of:
Shares of beneficial interest at par ($.01/share)............................. $ 41,238
Additional paid-in capital (Note 4)........................................... 41,307,785
Dividends in excess of net investment income.................................. (5,382)
Accumulated net realized gain on investment transactions...................... 3,924
Net unrealized appreciation of investments.................................... 1,711,646
-----------
Total -- Representing Net Assets at Value for 4,123,819 Shares Outstanding.... $43,059,211
===========
Computation of Net Asset Value & Offering Price:
Net Assets.................................................................... $43,059,211
Divided by number of shares outstanding....................................... 4,123,819
Net asset value............................................................... $ 10.44
===========
Offering price................................................................ $ 10.88
===========
</TABLE>
See Notes to Financial Statements.
3
<PAGE> 4
OCEAN STATE TAX EXEMPT FUND
<TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1996
<S> <C> <C>
INVESTMENT INCOME
Interest income (Note 1B)......................................... $1,381,916
Expenses:
Adviser Fees (Note 2)......................................... $ 75,846
Administrator fees (Note 2)................................... 54,175
Legal fees and expenses....................................... 8,850
Trustees fees and expenses.................................... 10,250
Transfer agent fees........................................... 27,397
Custodian fees................................................ 9,499
Insurance..................................................... 1,320
Auditing...................................................... 13,414
Pricing....................................................... 2,342
Shareholder reports........................................... 3,973
Distribution Expenses (Note 5)................................ 3,552
Miscellaneous expenses........................................ 1,094
Registration fees............................................. 1,075
--------
$212,787
----------
Net Investment Income................................................. $1,169,129
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net Realized Gain on Investments................................... 61,655
Net Change in Unrealized Appreciation of Investments............... (697,063)
--------
Net loss on investments......................................................... (635,408)
----------
Net Increase in Net Assets Resulting from Operations............................ $ 533,721
==========
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 5
OCEAN STATE TAX EXEMPT FUND
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 1996 OCTOBER 31, 1995
-------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets Resulting from:
Operations:
Net investment income................................... $ 1,169,129 $ 2,341,523
Net realized gain on investments........................ 61,655 97,223
Change in unrealized appreciation of net investments.... (697,063) 1,903,481
----------- -----------
Net increase in net assets resulting from operation..... 533,721 4,342,227
Dividends and distributions to shareholders from:
Net investment income ($.29 per share in 1996 and $.58
per share in 1995).................................... (1,169,712) (2,354,085)
Capital gain
Net increase (decrease) from fund share transactions
(Note 4).............................................. 606,973 (246,199)
----------- -----------
Total increase (decrease) in net assets............ (29,018) 1,741,943
NET ASSETS:
Beginning of year....................................... 43,088,229 41,346,286
----------- -----------
End of year (including $5,382 and $4,799 of dividends in
excess of net investment income in 1996 and 1995,
respectively.......................................... $43,059,211 $43,088,229
=========== ===========
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 6
OCEAN STATE TAX EXEMPT FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
<TABLE>
The following data includes selected data and other performance information derived from the financial statements.
<CAPTION>
FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL
SIX MONTHS YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 12/08/86
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED THROUGH
4/30/96 10/31/95 10/31/94 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 10/31/88 10/31/87
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance
Net Asset Value,
Beginning of
Year.............. $10.59 $10.10 $10.95 $10.32 $10.14 $ 9.73 $ 9.80 $ 9.74 $ 9.13 $10.18
Net Investment
income............ .29 .58 .59 .56 .63 .64 .67 .62 .66 .62
Net realized and
unrealized gain
(loss) on
securities........ (.15) .49 (.84) .63 .18 .41 (.09) .07 .62 (1.05)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
Investment
Operations........ .14 1.07 (.25) 1.19 .81 1.05 .58 .69 1.28 (.43)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net
investment
income............ (.29) (.58) (.59) (.56) (.63) (.64) (.65) (.63) (.66) (.62)
Distribution from
net realized
gains............. (.00) (.00) (.01) (.00) (.00) (.00) (.00) (.00) (.01) (.00)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
Distributions..... (.29) (.58) (.60) (.56) (.63) (.64) (.65) (.63) (.67) (.62)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value End
of Year........... $10.44 $10.59 $10.10 $10.95 $10.32 $10.14 $ 9.73 $ 9.80 $ 9.74 $ 9.13
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total investment
return at Net
Asset Value....... 6.37% 10.89% (2.04)% 12.35% 8.00% 10.96% 5.89% 7.10% 14.30% (4.99)%(b)
Ratios and
Supplemental Data
Net Assets, End of
Period (000's
omitted).......... $43,059 $43,088 $41,346 $45,043 $36,854 $29,750 $20,675 $12,159 $9,745 $6,149
Ratio of Expenses to
average net assets
(a)............... .49% .98% .88% .81% .85% .92% 1.27% 1.36% 1.10% 1.15%(b)
Ratio of net
investment income
to average net
assets (a)........ 2.70% 5.58% 5.55% 5.70% 6.13% 6.40% 6.45% 6.34% 6.84% 6.95%(b)
Portfolio
turnover.......... 5.57% 11.77% 8.48% 13.27% 36.29% 21.57% 10.16% 37.90% 45.58% 96.39%(b)
Adviser/Administrator
waived fees....... .00 .00 .01 .01 .01 .03 .02 .03 .08 .06
Fund expenses
without waiver.... .05 .10 .10 .09 .10 .12 .12 .16 .19 .16
Net Investment
Income without
waiver............ .29 .58 .58 .55 .62 .61 .65 .59 .58 .56
Ratio of Expenses to
average net assets
without waiver.... .49% .98% .93% .81% .95% 1.17% 1.51% 1.69% 1.88% 1.86%(b)
Ratio of net
investment income
to average net
assets without
waiver............ 2.70% 5.58% 5.50% 5.58% 6.02% 6.15% 6.21% 6.02% 6.06% 6.24%(b)
<FN>
- ---------------
(a) Annualized for 1987.
(b) Commencing in fiscal year 1990, data included the combined operations of the Fund and the Rhode Island Tax-Free Bond Fund
(the "RI Fund") for the period from the date of the acquisition of the assets of the RI Fund by the Fund (November 1, 1989).
The data shown above for the periods prior thereto are the historical results of the Fund.
(c) Total investment return does not reflect sales load.
</TABLE>
See Notes to Financial Statements.
6
<PAGE> 7
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
VLC Trust (the Trust) is a Massachusetts business trust organized on August
1, 1986 and registered under the Investment Company Act of 1940, as amended, as
a nondiversified, open-end management investment company. There is authorized an
unlimited number of shares with a par value of one cent per share. Declaration
of the Trust permits the Trustees to create additional portfolios (funds). As of
April 30, 1996 there is only one fund, Ocean State Tax Exempt Fund (the Fund).
The objective of the Fund is to seek to provide as high level of current income,
exempt from Rhode Island and Federal income taxes, as is consistent with
preservation of capital. The Fund invests primarily in obligations which pay
interest exempt from Rhode Island and Federal income taxes. The Fund commenced
operations on December 8, 1986.
At April 30, 1996, 93.45% of the Fund's net assets are invested in Rhode
Island municipal securities. Economic changes effecting the state in certain of
its public bodies and municipalities may affect the ability of the issuer to pay
the required principal and interest payments of the municipal securities. In
order to reduce risk associated with such factors on April 30, 1996, 54.98% of
the portfolio of investments have credit enhancements backing them which the
Fund relies on, such as: letters of credit, insurance, or guarantees. MBIA
provides the largest total enhancements for the Fund, representing 23.94% of the
portfolio.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
(A) SECURITY VALUATION: Debt securities are valued on the basis of
valuations furnished by a pricing service since such valuations are believed to
reflect the fair value of such securities. Valuations used by the Fund may be
determined without exclusive reliance on quoted prices and take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue and other local
market conditions. Securities having an original maturity of less than sixty
days are valued at cost adjusted for amortization of premiums and accretion of
discounts. Other securities are appraised in good faith at fair value using
methods determined by the Trustees and applied on a consistent basis. The
Trustees monitor the valuation of the Fund's municipal bonds through receipt of
periodic reports from the Adviser.
(B) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security
transactions are accounted for on the trade date (date the order to buy or sell
is executed). Interest income is recorded on the accrual basis. The specific
identification method is used for determining net realized gains and losses for
both financial statement and Federal income tax purposes.
(C) FEDERAL INCOME TAXES: The Fund's policy is to comply with the
provisions of the Internal Revenue Code available to regulated investment
companies and distribute to shareholders all of its net income, including any
net realized gain on investments. Accordingly, no provision for Federal income
tax or excise tax is necessary. At October 31, 1995 the Fund had approximately
$28,000 in capital loss carryforwards for federal tax purposes available to
offset future capital gains. Dividends received by the Fund from net interest on
tax-exempt municipal bonds are not includable by shareholders as gross income
for Federal income tax purposes, because the Fund intends to meet certain
requirements of the Internal Revenue Code applicable to regulated investment
companies
7
<PAGE> 8
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
which will enable the Fund to pay exempt-interest dividends. The portion of such
interest, if any, earned on private activity bonds issued after August 7, 1986
may be considered a tax preference item to shareholders.
(D) DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment income are
declared daily and distributed monthly. Capital gains distributions, if any, are
declared and distributed annually. For the year ended October 31, 1995, the Fund
paid no distributions from capital.
NOTE 2 ADVISORY AND ADMINISTRATIVE SERVICES AND OTHER AFFILIATED TRANSACTIONS
Van Liew Capital Inc. is the Adviser and the Administrator to the Fund. The
Fund will pay Van Liew Capital Inc. at the following annual rates for the
adviser and administrator services, respectively:
.35 and .25 of 1% of the first $200 million of average daily net assets.
.30 and .20 of 1% of average daily net assets over $200 million.
The Fund does not pay fees to Trustees affiliated with the Adviser or to
any of its officers. The Fund pays Trustees who are not interested persons of
the Fund an annual retainer plus $250 per meeting attended. The annual retainer
at April 30, 1996 was $2,000.
Legal fees and expenses of $8,850 were paid to a firm of which the Fund's
Secretary is a partner.
During the period November 1, 1995 through April 30, 1996 the Distributor
received $2,273 in commissions as a result of Fund share sales.
NOTE 3 INVESTMENT TRANSACTIONS
During the period ending April 30, 1996 purchases and sales of investment
securities other than short-term investments aggregated $3,185,700 and
$2,391,804, respectively.
The aggregate cost of investments for Federal income tax purposes is
substantially the same as aggregate cost for financial statement purposes. At
April 30, 1996, gross unrealized appreciation on investment securities was
$1,920,282 and gross unrealized depreciation on investment securities was
$208,636.
8
<PAGE> 9
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
NOTE 4 SHARES OF BENEFICIAL INTEREST
The authorized capital of the Fund consists of unlimited number of shares
of beneficial interest with par value of one cent per share. Transactions in
shares of beneficial interest were as follows:
<CAPTION>
SHARES AMOUNT
--------- -----------
<S> <C> <C>
Balance 10/31/94........................................ 4,093,109 $40,988,249
Shares sold............................................. 259,900 2,697,652
Shares issued in reinvestment of dividends.............. 108,243 1,119,239
Shares redeemed......................................... (393,399) (4,063,088)
--------- -----------
Net decrease............................................ (25,256) (246,199)
--------- -----------
Balance 10/31/95........................................ 4,067,853 $40,742,050
========= ===========
Shares sold............................................. 265,578 $ 2,828,934
Shares issued in reinvestment of dividends.............. 54,017 573,448
Shares redeemed......................................... (263,629) (2,795,409)
--------- -----------
Net increase............................................ 55,966 606,973
--------- -----------
Balance 4/30/96....................................... 4,123,819 $41,349,023
========= ===========
</TABLE>
NOTE 5 DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the Plan) pursuant to Rule 12b-1
(the "Rule") of the Investment Company Act of 1940 (the Act). The Rule provides
in substance that the Fund may not engage directly or indirectly in financing
any activity which is primarily intended to result in the sale of its shares
except pursuant to a plan adopted under the Rule. Under the Plan, the Fund is
authorized to pay for the printing of all prospectuses, statements of additional
information and reports and notices to shareholders, even those which are not
sent to existing shareholders. The Fund paid $3,552 under the plan during fiscal
1996.
9
<PAGE> 10
OCEAN STATE TAX EXEMPT FUND
<TABLE>
PORTFOLIO OF INVESTMENTS
AS OF APRIL 30, 1995
<CAPTION>
RATINGS(B)
PRINCIPAL MOODY'S/ VALUE
AMOUNT STANDARD & POOR'S (NOTE 1)
- ---------- ----------------- ------------
MUNICIPAL SECURITIES (99.48%)
RHODE ISLAND GENERAL OBLIGATION AND REVENUE BONDS (41.27%)
<S> <C> <C> <C>
$100,000 Bristol General Obligation 7.00%, 12/1/08........... Baa1/NR $108,625
120,000 Bristol General Obligation MBIA Insured 6.00%,
12/15/10.......................................... Aaa/AAA 125,550
250,000 Bristol General Obligation MBIA Insured 5.05%,
8/15/06........................................... Aaa/AAA 245,937
170,000 Burrillville General Obligation 7.40%, 1/15/04...... A/NR 182,325
185,000 Burrillville General Obligation 7.40%, 1/15/05...... A/NR 198,412
125,000 Burrillville General Obligation 7.60%, 1/15/08...... A/NR 134,375
300,000 Burrillville General Obligation MBIA Insured 5.75%,
10/15/17.......................................... Aaa/AAA 290,625
200,000 Burriville General Obligation FGIC Insured 5.70%,
5/1/11............................................ Aaa/AAA 202,500
75,000 Central Falls General Obligation 7.90%, 7/1/02...... Baa/NR 76,500
130,000 Coventry General Obligation FGIC Insured 7.25%,
11/1/10........................................... Aaa/AAA 142,025
40,000 Coventry General Obligation FGIC Insured 7.00%,
11/1/04........................................... Aaa/AAA 43,900
200,000 Cumberland General Obligation 6.80%, 7/15/08........ A-1/NR 210,750
165,000 Cumberland General Obligation MBIA Insured 5.70%,
10/1/11........................................... Aaa/AAA 163,969
175,000 Cumberland General Obligation MBIA Insured 5.70%,
10/1/12........................................... Aaa/AAA 172,156
300,000 East Providence General Obligation MBIA Insured
5.70%, 5/15/10.................................... Aaa/AAA 303,750
750,000 Foster/Glocester General Obligation AMBAC Insured
6.90%, 9/1/11..................................... Aaa/AAA 808,125
135,000 Jamestown General Obligation CGIC Insured 7.00%,
3/15/07........................................... Aaa/AAA 139,387
250,000 Kent County Water Auth. MBIA Insured 6.35%,
7/15/14........................................... Aaa/AAA 260,312
100,000 Lincoln General Obligation MBIA Insured 7.55%,
7/15/08........................................... Aaa/AAA 109,250
355,000 Lincoln General Obligation MBIA Insured 5.50%,
8/15/10........................................... Aaa/AAA 355,000
110,000 Little Compton General Obligation 7.00%, 1/15/09.... A-1/NR 117,975
100,000 Little Compton General Obligation 6.90%, 1/15/08.... A-1/NR 106,750
120,000 Middletown General Obligation 7.00%, 2/15/08........ A-1/A 128,700
100,000 Narragansett General Obligation MBIA Insured 5.30%,
9/15/09........................................... Aaa/AAA 98,000
200,000 Narragansett General Obligation Pre-refunded U.S.
Treasury AMBAC Insured 7.10%, 6/15/10............. Aaa/NR 218,500
210,000 Newport General Obligation MBIA Insured 6.50%,
8/15/06........................................... Aaa/AAA 229,162
</TABLE>
10
<PAGE> 11
OCEAN STATE TAX EXEMPT FUND
<TABLE>
PORTFOLIO OF INVESTMENTS--(CONTINUED)
<CAPTION>
RATINGS(B)
PRINCIPAL MOODY'S/ VALUE
AMOUNT STANDARD & POOR'S (NOTE 1)
- ---------- ----------------- ------------
MUNICIPAL SECURITIES--CONTINUED
RHODE ISLAND GENERAL OBLIGATION AND REVENUE BONDS--CONTINUED
<S> <C> <C> <C>
$100,000 Newport General Obligation 6.80%, 4/15/09........... A-1/NR $110,500
100,000 Newport General Obligation Pre-refunded U.S.
Treasury 6.80%, 4/15/10........................... A-1/NR 110,500
150,000 Newport General Obligation FGIC Insured 5.125%,
11/15/10.......................................... Aaa/AAA 142,312
80,000 New Shoreham General Obligation MBIA Insured 7.60%,
1/1/07............................................ Aaa/AAA 83,085
100,000 New Shoreham General Obligation MBIA Insured 7.00%,
1/15/10........................................... Aaa/AAA 107,750
75,000 North Kingstown General Obligation 6.70%,
12/15/05.......................................... A/NR 82,031
80,000 North Kingstown General Obligation 6.80%,
12/15/06.......................................... A/NR 89,000
80,000 North Kingstown General Obligation 6.30%, 7/15/07... A/NR 83,800
120,000 North Providence General Obligation MBIA Insured
6.00%, 10/01/09................................... Aaa/AAA 123,600
75,000 North Smithfield General Obligation 7.00%, 9/1/08... A-1/NR 79,500
100,000 Pawtucket General Obligation MBIA Insured 6.75%,
9/15/08........................................... Aaa/AAA 109,125
500,000 Pawtucket General Obligation CGIC Insured 6.0%,
3/15/15........................................... Aaa/AAA 500,625
500,000 Pawtucket General Obligation CGIC Insured 6.0%,
3/15/11........................................... Aaa/AAA 503,125
500,000 Pawtucket General Obligation CGIC Insured 6.0%,
3/15/13........................................... Aaa/AAA 502,500
500,000 Pawtucket General Obligation CGIC Insured 6.0%,
3/15/12........................................... Aaa/AAA 505,000
30,000 Pawtucket General Obligation 7.90%, 7/1/03.......... A/NR 34,612
300,000 Providence Public Bldg. Auth. FSA Insured 5.10%,
12/15/08.......................................... Aaa/AAA 288,000
200,000 Providence Public Bldg. Auth. 7.30%, 12/1/08........ Baa1/NR 227,250
300,000 Providence Public Bldg. Auth. 7.30%, 12/1/09........ Baa1/NR 340,875
500,000 Providence Public Bldg. Auth. CGIC Insured 7.25%,
12/15/10.......................................... Aaa/AAA 549,250
750,000 Providence General Obligation MBIA Insured 6.75%,
1/15/11........................................... Aaa/AAA 800,625
200,000 Smithfield General Obligation MBIA Insured 6.50%,
4/15/02........................................... Aaa/AAA 210,500
275,000 Smithfield General Obligation MBIA Insured 6.80%,
4/15/06........................................... Aaa/AAA 288,406
100,000 South Kingston General Obligation AMBAC Insured
5.00%, 11/15/08................................... Aaa/AAA 97,625
700,000 Warwick General Obligation MBIA Insured 6.60%,
11/15/06.......................................... Aaa/AAA 755,125
155,000 Warwick General Obligation FGIC Insured 7.20%,
11/15/08.......................................... Aaa/AAA 168,562
</TABLE>
11
<PAGE> 12
OCEAN STATE TAX EXEMPT FUND
<TABLE>
PORTFOLIO OF INVESTMENTS--(CONTINUED)
<CAPTION>
RATINGS(B)
PRINCIPAL MOODY'S/ VALUE
AMOUNT STANDARD & POOR'S (NOTE 1)
- ---------- ----------------- ------------
MUNICIPAL SECURITIES--CONTINUED
RHODE ISLAND GENERAL OBLIGATION AND REVENUE BONDS--CONTINUED
<S> <C> <C> <C>
$225,000 Westerly General Obligation 7.00%, 1/15/06.......... A-1/NR $ 239,906
100,000 Westerly General Obligation 7.00%, 1/15/09.......... A-1/NR 106,500
35,000 Westerly Dunn's Corner Fire District Unlimited Tax
Assessment 7.80%, 6/1/03.......................... A-1/NR 38,500
35,000 Westerly Dunn's Corner Fire District Unlimited Tax
Assessment 7.85%, 6/1/04.......................... A-1/NR 38,806
800,000 Rhode Island Clean Water MBIA Insured 6.50%,
10/1/06........................................... Aaa/AAA 865,000
150,000 Rhode Island Clean Water MBIA Insured 5.30%,
10/1/07........................................... Aaa/AAA 151,500
600,000 Rhode Island Correctional Facility.................. Aaa/AAA 636,000
650,000 Rhode Island Depositors Economic Protection Corp.
MBIA Insured 6.55%, 8/1/10........................ Aaa/AAA 707,687
165,000 Rhode Island Depositors Economic Protection Corp.
CAPMAC Guaranteed 6.375%, 8/1/22.................. Aaa/AAA 173,250
200,000 Rhode Island Public Building Auth. 8.20%, 2/1/08.... A/A 217,250
645,000 Rhode Island Public Building Auth. 7.60%, 2/1/09.... A/A 708,694
150,000 Rhode Island Public Building Auth. AMBAC Insured
5.25%, 2/1/10..................................... Aaa/AAA 143,250
150,000 Rhode Island Port Authority AMBAC Insured 6.5%,
6/1/08............................................ Aaa/AAA 162,000
250,000 Rhode Island Student Loan Auth. 6.20%, 12/1/09...... Aaa/NR 248,750
250,000 Rhode Island General Obligation FGIC Insured 7.00%,
7/15/04........................................... Aaa/AAA 280,313
50,000 Rhode Island General Obligation 7.50%, 6/15/05...... A-1/AA- 51,226
330,000 Rhode Island Participation Certificate MBIA Insured
5.40%, 10/1/14.................................... Aaa/AAA 306,487
500,000 Rhode Island General Obligation MBIA Insured 5.75%,
8/1/15............................................ Aaa/AAA 494,375
125,000 Rhode Island Water Resources Fruit Hill Reservoir
MBIA Insured 7.05%, 9/15/07....................... Aaa/AAA 135,000
-----------
$17,770,337
RHODE ISLAND HEALTH & EDUCATION BUILDING CORPORATION (32.99%)
$ 150,000 Board of Governors CGIC Insured 6.125%, 9/15/10..... Aaa/AAA $ 162,938
195,000 Board of Governors CGIC Insured 6.15%, 9/15/11...... Aaa/AAA 212,063
120,000 Brown University 6.75%, 9/1/16...................... Aa-1/AA 123,600
200,000 Brown University 5.40%, 9/1/18...................... Aa-1/AA 187,000
375,000 Brown University 6.00%, 9/1/10...................... Aa-1/AA 386,250
200,000 Brown University 5.90%, 9/1/14...................... Aa-1/AA 200,250
400,000 Bryant College MBIA Insured 6.50%, 6/1/05........... Aaa/AAA 431,500
100,000 Bryant College MBIA Insured 5.95%, 6/1/07........... Aaa/AAA 103,500
100,000 Bryant College MBIA Insured 6.20%, 6/1/13........... Aaa/AAA 101,875
100,000 Higher Education Authority CGIC Insured 7.375%,
9/15/09........................................... Aaa/AAA 110,750
</TABLE>
12
<PAGE> 13
OCEAN STATE TAX EXEMPT FUND
<TABLE>
PORTFOLIO OF INVESTMENTS--(CONTINUED)
<CAPTION>
RATINGS(B)
PRINCIPAL MOODY'S/ VALUE
AMOUNT STANDARD & POOR'S (NOTE 1)
- ---------- ----------------- ------------
MUNICIPAL SECURITIES--CONTINUED
RHODE ISLAND HEALTH & EDUCATION BUILDING CORPORATION--CONTINUED
<S> <C> <C> <C>
$ 150,000 Providence College 7.45%, 11/1/03................... Aaa/NR $ 166,688
125,000 Providence College 7.50%, 11/1/04................... Aaa/NR 139,063
120,000 Providence College 7.75%, 11/1/09................... Aaa/NR 134,550
250,000 Providence College MBIA Insured 5.60%, 11/1/22...... Aaa/AAA 235,938
550,000 Rogers Williams College Connie Lee Insured 6.50%,
11/15/08.......................................... NR/AAA 578,188
550,000 Roger Williams College Connie Lee Insured 6.625%,
11/15/11.......................................... NR/AAA 572,688
320,000 Roger Williams College LOC-Fleet National 7.75%,
10/1/18........................................... A-1/NR 350,800
45,000 Roger Williams Hospital 9.375%, 7/1/04.............. NR/BBB 45,710
1,290,000 South County Hospital 7.25%, 11/1/11................ NR/BBB+ 1,335,150
40,000 Roger Williams Hospital 7.75%, 7/1/16............... NR/BBB 41,250
350,000 Roger Williams Realty Corp. Collateral U.S.
Treasury, 7.50%, 8/1/29........................... NR/AA- 365,750
500,000 Salve Regina College Connie Lee Insured 6.25%,
3/15/13........................................... NR/AAA 508,125
400,000 Salve Regina College LOC Fleet National Bank 7.70%,
1/1/20............................................ NR/A 447,500
300,000 Salve Regina College Pre-refunded U.S. Treasury
Connie Lee Insured 6.30%, 3/15/20................. NR/AAA 302,625
1,025,000 Johnson & Wales College Connie Lee Insured 5.75%,
4/1/12............................................ NR/AAA 1,008,344
800,000 Johnson & Wales College Connie Lee Insured 5.875%,
4/1/20............................................ NR/AAA 772,000
500,000 St. Antoine Residence LOC Allied Irish 6.75%,
11/15/18.......................................... A-1/NR 523,750
285,000 Landmark Medical Center 7.625%, 7/1/99.............. NR/BBB+ 303,881
500,000 Landmark Medical Center 8.375%, 7/1/09.............. NR/AAA 565,000
575,000 Kent County Hospital MBIA Insured 7.00%, 7/1/10..... Aaa/AAA 617,406
200,000 Memorial Hospital MBIA Insured 6.50%, 7/1/04........ Aaa/AAA 216,250
140,000 Miriam Hospital 7.00%, 4/1/06....................... NR/A 146,650
400,000 Miriam Hospital 6.35%, 4/1/08....................... NR/A 408,000
900,000 Miriam Hospital 7.25%, 4/1/11....................... NR/A 933,750
300,000 Rhode Island Hospital FGIC Insured 6.70%, 8/15/04... Aaa/AAA 325,125
600,000 Women & Infants Hospital CGIC Insured 6.55%,
9/1/13............................................ Aaa/AAA 638,250
100,000 United Methodist Elder Care 7.50%, 11/1/14.......... NR/A 107,500
305,000 Westerly Hospital 6.00%, 7/1/19..................... Baa/BBB+ 272,594
125,000 New England Tech Inst. Connie Lee Insured 6.00%,
3/1/15............................................ NR/AAA 123,438
-----------
$14,205,689
</TABLE>
13
<PAGE> 14
OCEAN STATE TAX EXEMPT FUND
<TABLE>
PORTFOLIO OF INVESTMENTS--(CONTINUED)
<CAPTION>
RATINGS(B)
PRINCIPAL MOODY'S/ VALUE
AMOUNT STANDARD & POOR'S (NOTE 1)
- ---------- ----------------- ------------
MUNICIPAL SECURITIES--CONTINUED
RHODE ISLAND HOUSING & MORTGAGE FINANCE CORPORATION (17.91%)
<S> <C> <C> <C>
$ 5,000 9.30%, 7/1/04 FGIC Insured.......................... Aaa/AAA $ 5,061
45,000 7.625%, 10/1/04..................................... AA/A+ 46,294
100,000 8.25%, 10/1/07...................................... A-1/A+ 103,375
200,000 8.10%, 10/1/07...................................... A-1/A+ 206,000
200,000 5.65%, 10/1/07...................................... NR/A 197,500
300,000 8.00%, 10/1/08...................................... Aa/AA+ 310,125
500,000 7.80%, 10/1/10, Series A............................ Aa/AA+ 520,625
50,000 7.50%, 7/1/10....................................... A-1/A+ 50,438
300,000 7.60%, 10/1/20...................................... NR/A 311,625
160,000 8.30%, 10/1/11...................................... Aa/A+ 168,000
100,000 7.80%, 10/1/11...................................... Aa/A+ 103,000
400,000 7.50%, 10/1/11...................................... Aa/AA+ 422,000
210,000 7.80%, 10/1/11...................................... Aa/AA+ 216,300
200,000 5.70%, 4/1/15....................................... Aa/AA+ 193,750
35,000 7.75%, 10/1/16...................................... A-1/A+ 35,744
335,000 5.45%, 4/1/17....................................... Aa/AA 314,481
500,000 5.75%, 4/1/17....................................... Aa/AA+ 483,750
200,000 6.25%, 4/1/17....................................... Aa/AA+ 200,250
110,000 7.95%, 10/1/20...................................... NR/A 114,675
140,000 7.25%, 10/1/21...................................... Aa/Aa+ 146,300
380,000 7.875%, 10/1/21, MBIA Insured....................... Aaa/AAA 387,600
640,000 7.875%, 10/1/22..................................... Aa/AA+ 660,800
50,000 7.75%, 4/1/22....................................... Aa/AA+ 52,188
345,000 7.55%, 10/1/22...................................... Aa/AA+ 365,269
300,000 6.50%, 10/1/22...................................... Aa/AA+ 307,125
1,250,000 6.70%, 10/1/15...................................... Aa/AA+ 1,290,625
85,000 5.875%, 4/1/25...................................... Aa/AA+ 83,088
300,000 6.50%, 4/1/27....................................... Aa/AA+ 307,125
105,000 6.85%, 4/1/27....................................... Aa/AA+ 108,806
-----------
$ 7,711,919
<CAPTION>
RHODE ISLAND INDUSTRIAL FACILITIES CORPORATION (1.28%)
$ 75,000 Smith Trucking Corp. LOC-Fleet National 9.00%,
8/1/96............................................ Baa/NR $ 75,538
100,000 Inge Corporation SBA GTD 9.125%, 10/1/00............ Aaa/NR 102,034
250,000 Mobil Oil 6.00%, 11/1/14............................ Aa-2/AA 250,312
60,000 Blazing Graphics LOC-Fleet National 8.20%, 5/1/13... Baa/NR 61,575
60,000 Blazing Graphics LOC-Fleet National 8.25%, 5/1/14... Baa/NR 61,575
-----------
$ 551,034
-----------
TOTAL RHODE ISLAND BONDS (93.45%)................... $40,238,979
</TABLE>
14
<PAGE> 15
OCEAN STATE TAX EXEMPT FUND
<TABLE>
PORTFOLIO OF INVESTMENTS--(CONTINUED)
<CAPTION>
RATINGS(B)
PRINCIPAL MOODY'S/ VALUE
AMOUNT STANDARD & POOR'S (NOTE 1)
- ---------- ----------------- ------------
MUNICIPAL SECURITIES--CONTINUED
PUERTO RICO BONDS (6.03%)
<S> <C> <C> <C>
$ 30,000 Puerto Rico Commonwealth MBIA Insured 7.125%,
7/1/02............................................ Aaa/AAA $ 31,537
500,000 Puerto Rico Commonwealth 7.75%, 7/1/06.............. NR/AAA 546,875
200,000 Puerto Rico Commonwealth 7.75%, 7/1/13.............. NR/AAA 218,750
300,000 Puerto Rico Electric Power Auth. 8.00%, 7/1/08...... NR/AAA 329,250
100,000 Puerto Rico Highway 8.00%, 7/1/03................... NR/AAA 109,750
200,000 Puerto Rico Highway 8.00%, 7/1/05................... NR/AAA 219,500
225,000 Puerto Rico Highway 7.70%, 7/1/03................... Baa1/AAA 256,219
285,000 Puerto Rico HFA LOC-Fugi Dev. Bk 7.50%, 10/1/15..... NR/AA 298,537
110,000 Puerto Rico Public Bldg. Auth. 7.875%, 7/1/07....... Aaa/AAA 117,287
200,000 Puerto Rico Public Improvement 7.90%, 7/1/04........ NR/AAA 207,430
200,000 Puerto Rico Public Improvement 8.00%, 7/1/07........ Baa1/A 218,656
40,000 Puerto Rico Public Building Auth. 7.875%, 7/1/07.... Aaa/AAA 42,650
-----------
TOTAL PUERTO RICO BONDS (6.03%)..................... $ 2,596,441
-----------
TOTAL INVESTMENTS (Cost $41,123,774)(95.51%)(a)..... $42,835,420
===========
<FN>
(a) Percentages indicated are based on net assets of $43,059,211 at April 30,
1996 (total investments plus cash and receivables less liabilities) which
corresponds to a net asset value per share of $10.44.
(b) The ratings indicates are the most current available. When bonds are rated
differently by Moody's and S&P, the higher rating has been reported. The
rating NR means it is not rated by Moody's or S&P.
(c) These municipal securities meet the four highest ratings assigned by
Moody's Investors Service, Inc. or Standard & Poor's Corp. or where not
rated, are determined by the Fund to be of comparable quality within the
guidelines approved by directors. Certain securities have credit
enhancement features backing them. Without these enhancement features the
securities may or may not meet the quality standards of other securities
purchased by the Fund. (See Note 1)
(d) Abbreviations used:
AMBAC -- American Municipal Bond Assurance Corp.
CGIC -- Capital Guaranty Insurance Co.
FGIC -- Financial Guaranty Insurance Co.
MBIA -- Municipal Bond Investors Assurance
LOC -- Letter of Credit
BIG -- Bond Investors Guaranty (subsidiary of MBIA)
SBA -- Small Business Administration
CAPMAC -- Capital Markets Assurance Corp.
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 16
INVESTMENT ADVISER &
ADMINISTRATOR
Van Liew Capital Inc.
One Regency Plaza, Suite One
Providence, Rhode Island 02903
DISTRIBUTOR
Van Liew Securities, Inc.
One Regency Plaza, Suite One
Providence, Rhode Island 02903
CUSTODIAN
PNC Institutional Custody Services
Airport Business Center
200 Stevens Drive, Suite 440
Lester, Pennsylvania 19113
TRANSFER AGENT
PFPC, Inc.
P.O. Box 8950
Wilmington, Delaware 19899
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Claredon Street
Boston, MA 02116-5072
COUNSEL
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, Rhode Island 02903
TRUSTEES
Alfred B. Van Liew, Chairman
Milton C. Bickford, Jr.
Michael E. Hogue
Alice M. Macintosh
Richard A. Plotkin
John H. St. Sauveur
Thomas R. Weschler,
Vice Admiral, US Navy, Retired
OFFICERS
Alfred B. Van Liew, President
Samuel H. Hallowell, Vice President
Joseph J. Healy, Vice President
Kevin M. Oates, Treasurer
Margaret D. Farrell, Secretary
[LOGO]
(THE PORTFOLIO OF VLC TRUST)
SEMI-ANNUAL REPORT
APRIL 30, 1996
(UNAUDITED)
INTEREST INCOME EXEMPT
FROM FEDERAL AND RHODE
ISLAND INCOME TAXES
FROM QUALITY MUNICIPAL
BONDS.
