<PAGE> 1
[LOGO]OCEAN STATE
TAX EXEMPT FUND
REPORT OF THE PRESIDENT
APRIL 30, 1997
Although movements the past six months in equity markets have garnered all
the headlines the Ocean State Tax Exempt Fund and the municipal market as a
whole continue to perform well. Stable interest rates and low inflation left
municipal market price levels little changed. The Fund's net asset value
declined modestly from $10.53 to $10.50 while the dividend distribution remained
steady at $0.28 per share. Comparatively, the Fund's six month total return on
NAV was 2.39% while the benchmark Lehman Brothers Municipal Bond Index returned
2.02% during the same period. The preservation of capital with high current
income is one of our foremost goals as manager of your investment.
What does the future hold? We remain optimistic that the chance of a
significant interest rate increase in the near future is minimal. The economic
expansion has confounded conventional wisdom as inflation remains in check
despite a growing economy, a situation which we attribute to continued
improvements in company productivity. Such an environment bodes well for an
investment in the Ocean State Tax Exempt Fund. In meeting our goals stated above
the Fund does so through an emphasis on portfolio diversity and credit quality
while balancing the risk of the Fund's maturity structure against generating
attractive returns.
During the period management has chosen to maintain significant holdings of
high coupon pre-refunded debt instruments which are subject to smaller price
swings than longer maturities. The effect of these "cushion" bonds has been a
reduction in the effective maturity of the Fund's portfolio to 12.43 years,
thus, reducing overall volatility. In addition, management has increased the
holdings of AAA rated debt instruments in the Fund's portfolio to over 58% of
the portfolio.
Are we looking to outperform equities in the short run? Certainly not. But
over the long run we're confident that the Ocean State Tax Exempt Fund will
stand up to the test of time. Many investors make the mistake of losing sight of
the long term. Though past performance cannot guarantee future results, your
investment in the Fund should be viewed as a longer term commitment and this
approach should be beneficial over time.
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
INVESTMENT PERFORMANCE REVIEW
AS OF APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRIOR SINCE INCEPTION
NOVEMBER 1, 1996 FISCAL YEAR MAY 1, 1992 DECEMBER 8, 1986
THROUGH ENDED THROUGH THROUGH
APRIL 30, 1997 OCTOBER 31, 1996 APRIL 30, 1997 APRIL 30, 1997
---------------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C>
TOTAL RATE OF RETURN(b)
Based on
Net Asset Value....... 2.39% 4.89% 6.51% 6.67%
Offering Price........ (1.72)% 0.71% 5.63% 6.25%
<CAPTION>
AS OF AS OF
APRIL 30, 1997 OCTOBER 31, 1996
---------------- -----------------
<S> <C> <C>
30-DAY CURRENT YIELD
Based on:
Net Asset Value....... 5.34% 5.13%
Offering Price........ 5.13% 4.92%
30-DAY TAX-EQUIVALENT YIELD(a)
Based on:
Net Asset Value....... 8.59% 8.25%
Offering Price........ 8.25% 7.92%
</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 12.43 years as of April 30, 1997.
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
<TABLE>
<CAPTION>
% OF TOTAL PORTFOLIO
------------------------
AS OF AS OF
RATING 4-30-97 10-31-96
------ ------- --------
<S> <C> <C>
Aaa/AAA.............................. 58.58% 57.74%
Aa/AA................................ 20.41% 19.33%
A.................................... 15.41% 17.12%
Baa/BBB.............................. 5.60% 5.81%
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 1997 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, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments at value (identified cost $39,048,736) (Note 1A).................. $41,002,082
Cash.......................................................................... 98,739
Interest receivable........................................................... 614,025
Receivable for fund shares sold............................................... 14,600
-----------
Total Assets........................................................ $41,729,446
LIABILITIES
Distribution payable to shareholders.......................................... $ 94,625
Accrued management fees....................................................... 19,997
Payable for fund shares redeemed.............................................. 37,307
Accrued expenses.............................................................. 15,570
-----------
Total Liabilities................................................... $ 167,499
-----------
Net Assets.......................................................... $41,561,947
===========
Net Assets consist of:
Shares of beneficial interest at par ($.01/share)............................. $ 39,577
Additional paid-in capital (Note 4)........................................... 39,534,303
Accumulated net realized gain on investment transactions...................... 34,721
Net unrealized appreciation of investments.................................... 1,953,346
-----------
Total -- Representing Net Assets at Value for 3,957,687 Shares Outstanding.... $41,561,947
===========
Computation of Net Asset Value & Offering Price:
Net Assets.................................................................... $41,561,947
Divided by number of shares outstanding....................................... 3,957,687
Net asset value............................................................... $ 10.50
===========
Offering price................................................................ $ 10.94
===========
</TABLE>
See Notes to Financial Statements.
3
<PAGE> 4
OCEAN STATE TAX EXEMPT FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest income (Note 1B).................................................... $1,325,681
Expenses:
Adviser Fees (Note 2)......................................... $ 73,407
Administrator fees (Note 2)................................... 52,433
Legal fees and expenses....................................... 7,021
Trustees fees and expenses.................................... 11,000
Transfer agent fees........................................... 21,028
Custodian fees................................................ 10,032
Insurance..................................................... 1,200
Auditing...................................................... 14,089
Pricing....................................................... 1,937
Shareholder reports........................................... 5,904
Distribution Expenses (Note 5)................................ 3,871
Miscellaneous expenses........................................ 768
Registration fees............................................. 980
--------
$203,670
----------
Net Investment Income.............................................. $1,122,011
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain on Investments................................... 46,767
Net Change in Unrealized Depreciation of Investments............... (147,819)
--------
Net loss on investments...................................................... (101,052)
----------
Net Increase in Net Assets Resulting from Operations......................... $1,020,959
==========
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 5
OCEAN STATE TAX EXEMPT FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FISCAL YEAR
APRIL 30, 1997 ENDED
(UNAUDITED) OCTOBER 31, 1996
-------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets Resulting from:
Operations:
Net investment income.................................... $ 1,122,011 $ 2,305,062
Net realized gain on investments......................... 46,767 16,530
Change in unrealized appreciation of net investments..... (147,819) (307,544)
----------- -----------
Net increase in net assets resulting from operation...... 1,020,959 2,014,048
Dividends and distributions to shareholders from:
Net investment income ($.28 per share in 1997 and
$.56 per share in 1996)................................ (1,122,010) (2,305,645)
Net decrease from fund share transactions (Note 4)....... (793,320) (340,314)
----------- -----------
Total increase(decrease) in net assets.............. (894,371) (631,911)
NET ASSETS:
Beginning of year........................................ 42,456,318 43,088,229
----------- -----------
End of period............................................ $41,561,947 $42,456,318
=========== ===========
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 6
OCEAN STATE TAX EXEMPT FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
The following data includes selected data and other performance information
derived from the financial statements.
<TABLE>
<CAPTION>
SIX
MONTHS FISCAL FISCAL FISCAL FISCAL FISCAL
ENDED YEAR YEAR YEAR YEAR YEAR
4/30/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 10/31/96 10/31/95 10/31/94 10/31/93 10/31/92
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance
Net Asset Value, Beginning of Year............. $ 10.53 $10.59 $10.10 $10.95 $10.32 $10.14
Net Investment income.......................... .28 .56 .58 .59 .56 .63
Net realized and unrealized
gain (loss) on securities.................... (.03) (.06) .49 (.84) .63 .18
------- ------- ------- ------- ------- -------
Total from Investment Operations............... .25 .50 1.07 (.25) 1.19 .81
------- ------- ------- ------- ------- -------
Less Distributions
Dividends from net investment income........... (.28) (.56) (.58) (.59) (.56) (.63)
Distribution from net realized gains........... (.00) (.00) (.00) (.01) (.00) (.00)
------- ------- ------- ------- ------- -------
Total Distributions............................ (.28) (.56) (.58) (.60) (.56) (.63)
------- ------- ------- ------- ------- -------
Net Asset Value End of Year.................... $ 10.50 $ 10.53 $ 10.59 $ 10.10 $ 10.95 $ 10.32
======= ======= ======= ======= ======= =======
Total investment return at Net Asset Value..... 2.39% 4.89% 10.89% (2.04)% 12.35% 8.00%
Ratios and Supplemental Data Net Assets,
End of Year (000's omitted).................. $41,562 $42,456 $43,088 $41,346 $45,043 $36,854
Ratio of Expenses to average net assets....... .48% .98% .98% .88% .81% .85%
Ratio of net investment income to average
net assets................................... 2.61% 5.31% 5.58% 5.55% 5.70% 6.13%
Portfolio turnover............................. .59% 13.30% 11.77% 8.48% 13.27% 36.29%
Adviser/Administrator waived fees.............. .00 .00 .00 .01 .01 .01
Fund expenses without waiver................... .05 .10 .10 .10 .09 .10
Net Investment Income without waiver........... .28 .56 .58 .58 .55 .62
Ratio of Expenses to average net assets
without waiver............................... .48% .98% .98% .93% .81% .95%
Ratio of net investment income to average
net assets without waiver.................... 2.61% 5.31% 5.58% 5.50% 5.58% 6.02%
<CAPTION>
FISCAL FISCAL FISCAL FISCAL
YEAR YEAR YEAR YEAR 12/08/86
ENDED ENDED ENDED ENDED THROUGH
10/31/91 10/31/90 10/31/89 10/31/88 10/31/87
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance
Net Asset Value, Beginning of Year............. $ 9.73 $ 9.80 $ 9.74 $ 9.13 $10.18
Net Investment income.......................... .64 .67 .62 .66 .62
Net realized and unrealized
gain (loss) on securities.................... .41 (.09) .07 .62 (1.05)
------- ------- ------- ------- -------
Total from Investment Operations............... 1.05 .58 .69 1.28 (.43)
------- ------- ------- ------- -------
Less Distributions
Dividends from net investment income........... (.64) (.65) (.63) (.66) (.62)
Distribution from net realized gains........... (.00) (.00) (.00) (.01) (.00)
------- ------- ------- ------- -------
Total Distributions............................ (.64) (.65) (.63) (.67) (.62)
------- ------- ------- ------- -------
Net Asset Value End of Year.................... $ 10.14 $ 9.73 $ 9.80 $ 9.74 $ 9.13
======= ======= ======= ======= =======
Total investment return at Net Asset Value..... 10.96% 5.89% 7.10% 14.30% (4.99)%(a)
Ratios and Supplemental Data Net Assets,
End of Year (000's omitted).................. $29,750 $20,675 $12,159 $ 9,745 $ 6,149
Ratio of Expenses to average net assets....... .92% 1.27% 1.36% 1.10% 1.15%(a)
Ratio of net investment income to average
net assets................................... 6.40% 6.45% 6.34% 6.84% 6.95%(a)
Portfolio turnover............................. 21.57% 10.16% 37.90% 45.58% 96.39%(a)
Adviser/Administrator waived fees.............. .03 .02 .03 .08 .06
Fund expenses without waiver................... .12 .12 .16 .19 .16
Net Investment Income without waiver........... .61 .65 .59 .58 .56
Ratio of Expenses to average net assets
without waiver............................... 1.17% 1.51% 1.69% 1.88% 1.86%(a)
Ratio of net investment income to average
net assets without waiver.................... 6.15% 6.21% 6.02% 6.06% 6.24%(a)
</TABLE>
(a) 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.
See Notes to Financial Statements
6
<PAGE> 7
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
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 non diversified, 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, 1997 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, 1997, 94.63% 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, 1997, 53.95% 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 24.86% 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 a trade date basis (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 April 30, 1997 the Fund had approximately
$12,000 in capital loss carryforwards for federal tax purposes available to
offset future capital gains. These capital loss carryforwards expire on October
31, 2002. Dividends received by the Fund from
7
<PAGE> 8
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 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 period ended April 30, 1997, the
Fund paid no distributions from capital.
NOTE 2 ADVISORY AND ADMINSTRATIVE 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, 1997 was $2,000.
Legal fees and expenses of $7,021 were paid to a firm of which the Fund's
Secretary is a partner.
During the period November 1, 1996 through April 30, 1997 the Distributor
received $1,872 in commissions as a result of Fund share sales.
NOTE 3 INVESTMENT TRANSACTIONS
During the period ended April 30, 1997 purchases and sales of investment
securities other than short-term investments aggregated $245,396 and $1,511,668,
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, 1997, gross unrealized appreciation on investment securities was
$2,000,498 and gross unrealized depreciation on investment securities was
$47,152.
8
<PAGE> 9
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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:
<TABLE>
<CAPTION>
SHARES AMOUNT
--------- -----------
<S> <C> <C>
Balance 10/31/95........................................ 4,067,853 $40,742,050
Shares sold............................................. 382,864 4,057,522
Shares issued in reinvestment of dividends.............. 106,236 1,120,409
Shares redeemed......................................... (523,522) (5,518,244)
--------- -----------
Net decrease............................................ (34,422) (340,313)
--------- -----------
Balance 10/31/96........................................ 4,033,431 $40,401,737
========= ===========
Shares sold............................................. 91,348 $ 964,026
Shares issued in reinvestment of dividends.............. 51,464 542,631
Shares redeemed......................................... (218,556) (2,299,977)
--------- -----------
Net decrease............................................ (75,744) (793,320)
--------- -----------
Balance 4/30/97......................................... 3,957,687 $39,608,417
========= ===========
</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 $3,871 under the plan during fiscal
1997.
9
<PAGE> 10
OCEAN STATE TAX EXEMPT FUND
PORTFOLIO OF INVESTMENTS
AS OF APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/ VALUE
AMOUNT STANDARD & POOR'S (NOTE 1)
- ----------- ------------------ -----------
<S> <C> <C> <C>
MUNICIPAL SECURITIES (98.64%)
RHODE ISLAND GENERAL OBLIGATION AND REVENUE BONDS (45.03%)
$ 100,000 Bristol General Obligation 7.00%, 12/1/08........... Baa1/NR $ 108,396
120,000 Bristol General Obligation MBIA Insured 6.00%,
12/15/10.......................................... Aaa/AAA 126,001
250,000 Bristol General Obligation MBIA Insured 5.05%,
8/15/06........................................... Aaa/AAA 247,413
300,000 Burrillville General Obligation MBIA Insured 5.75%,
10/15/17.......................................... Aaa/AAA 296,896
200,000 Burrillville General Obligation FGIC Insured 5.70%,
5/1/11............................................ Aaa/AAA 203,966
75,000 Central Falls General Obligation 7.90%, 7/1/02...... Baa/NR 77,053
130,000 Coventry General Obligation FGIC Insured 7.25%,
11/1/10........................................... Aaa/AAA 141,569
460,000 Cranston General Obligation MBIA Insured 5.00%,
6/15/02........................................... Aaa/AAA 463,917
200,000 Cumberland General Obligation 6.80%, 7/15/08........ A-1/NR 209,248
165,000 Cumberland General Obligation MBIA Insured 5.70%,
10/1/11........................................... Aaa/AAA 166,197
175,000 Cumberland General Obligation MBIA Insured 5.70%,
10/1/12........................................... Aaa/AAA 175,610
300,000 East Providence General Obligation MBIA Insured
5.70%, 5/15/10.................................... Aaa/AAA 306,327
1,250,000 Foster/Glocester General Obligation AMBAC Insured
6.90%, 9/1/11..................................... Aaa/AAA 1,347,097
135,000 Jamestown General Obligation CGIC Insured 7.00%,
3/15/07........................................... Aaa/AAA 138,002
250,000 Kent County Water Auth. MBIA Insured 6.35%,
7/15/14........................................... Aaa/AAA 264,704
100,000 Lincoln General Obligation MBIA Insured 7.55%,
7/15/08........................................... Aaa/AAA 107,013
355,000 Lincoln General Obligation MBIA Insured 5.50%,
8/15/10........................................... Aaa/AAA 358,023
300,000 Lincoln General Obligation FGIC Insured 5.60%,
8/1/12............................................ Aaa/AAA 298,027
110,000 Little Compton General Obligation 7.00%, 1/15/09.... A-1/NR 117,576
100,000 Little Compton General Obligation 6.90%, 1/15/08.... A-1/NR 106,510
120,000 Middletown General Obligation 7.00%, 2/15/08........ A-1/A 126,381
100,000 Narragansett General Obligation MBIA Insured 5.30%,
9/15/09........................................... Aaa/AAA 99,468
200,000 Narragansett General Obligation Pre-refunded U.S.
Treasury AMBAC Insured 7.10%, 6/15/10............. Aaa/NR 215,032
210,000 Newport General Obligation MBIA Insured 6.50%,
8/15/06........................................... Aaa/AAA 228,161
</TABLE>
10
<PAGE> 11
OCEAN STATE TAX EXEMPT FUND
PORTFOLIO OF INVESTMENTS--(CONTINUED)
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/ VALUE
AMOUNT STANDARD & POOR'S (NOTE 1)
- ----------- ----------------- -------
<S> <C> <C> <C>
MUNICIPAL SECURITIES--CONTINUED
RHODE ISLAND GENERAL OBLIGATION AND REVENUE BONDS--CONTINUED
$ 100,000 Newport General Obligation Pre-refunded U.S.
Treasury 6.80%, 4/15/09........................... A-1/NR $109,025
100,000 Newport General Obligation Pre-refunded U.S.
Treasury 6.80%, 4/15/10........................... A-1/NR 109,025
80,000 New Shoreham General Obligation MBIA Insured 7.60%,
1/1/07............................................ Aaa/AAA 82,477
100,000 New Shoreham General Obligation MBIA Insured 7.00%,
1/15/10........................................... Aaa/AAA 107,139
75,000 North Kingstown General Obligation 6.70%,
12/15/05.......................................... A/NR 82,052
80,000 North Kingstown General Obligation 6.80%,
12/15/06.......................................... A/NR 88,427
80,000 North Kingstown General Obligation 6.30%, 7/15/07... A/NR 83,900
120,000 North Providence General Obligation MBIA Insured
6.00%, 10/01/09................................... Aaa/AAA 124,945
100,000 Pawtucket General Obligation MBIA Insured 6.75%,
9/15/08........................................... Aaa/AAA 109,151
500,000 Pawtucket General Obligation CGIC Insured 6.00%,
3/15/15........................................... Aaa/AAA 508,659
500,000 Pawtucket General Obligation CGIC Insured, 6.00%,
3/15/11........................................... Aaa/AAA 517,461
500,000 Pawtucket General Obligation CGIC Insured 6.00%,
3/15/13........................................... Aaa/AAA 509,916
500,000 Pawtucket General Obligation CGIC Insured, 6.00%,
3/15/12........................................... Aaa/AAA 514,317
200,000 Providence Public Bldg. Auth. FSA Insured 5.10%,
12/15/08.......................................... Aaa/AAA 194,912
200,000 Providence Public Bldg. Auth. 7.30%, 12/1/08........ Baa2/NR 223,583
300,000 Providence Public Bldg. Auth 7.30%, 12/1/09......... Baa2/NR 335,375
500,000 Providence Public Bldg. Auth. CGIC Insured 7.25%,
12/15/10.......................................... Aaa/AAA 545,755
150,000 Providence Public Building Auth. MBIA Insured 5.50%
12/15/13.......................................... Aaa/AAA 146,184
750,000 Providence General Obligation MBIA Insured 6.75%,
1/15/11........................................... Aaa/AAA 799,770
200,000 Smithfield General Obligation MBIA Insured 6.50%,
4/15/06........................................... Aaa/AAA 208,339
275,000 Smithfield General Obligation MBIA Insured 6.80%,
4/15/06........................................... Aaa/AAA 286,311
100,000 South Kingston General Obligation AMBAC Insured
5.00%, 11/15/08................................... Aaa/AAA 97,959
700,000 Warwick General Obligation MBIA Insured 6.60%,
11/15/06.......................................... Aaa/AAA 755,255
155,000 Warwick General Obligation FGIC Insured 7.20%,
11/15/08.......................................... Aaa/AAA 167,235
225,000 Westerly General Obligation 7.00%, 1/15/06.......... A-1/NR 238,233
100,000 Westerly General Obligation 7.00%, 1/15/09.......... A-1/NR 105,882
</TABLE>
11
<PAGE> 12
OCEAN STATE TAX EXEMPT FUND
PORTFOLIO OF INVESTMENTS--(CONTINUED)
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/ VALUE
AMOUNT STANDARD & POOR'S (NOTE 1)
- ----------- ----------------- --------
<S> <C> <C> <C>
MUNICIPAL SECURITIES--CONTINUED
RHODE ISLAND GENERAL OBLIGATION AND REVENUE BONDS--CONTINUED
$ 35,000 Westerly Dunn's Corner Fire District Unlimited Tax
Assessment 7.80%, 6/1/03.......................... A-1/NR $ 38,027
35,000 Westerly Dunn's Corner Fire District Unlimited Tax
Assessment 7.85%, 6/1/04.......................... A-1/NR 38,467
800,000 Rhode Island Clean Water MBIA Insured 6.50%,
10/1/06........................................... Aaa/AAA 866,166
150,000 Rhode Island Clean Water MBIA Insured 5.30%,
10/1/07........................................... Aaa/AAA 151,466
600,000 Rhode Island Correctional Facility MBIA Insured
7.00%, 8/1/09..................................... Aaa/AAA 645,852
650,000 Rhode Island Depositors Economic Protection Corp
MBIA Insured 6.55%, 8/1/10........................ Aaa/AAA 716,020
165,000 Rhode Island Depositors Economic Protection Corp
CAPMAC Guaranteed 6.375%, 8/1/22.................. Aaa/AAA 176,987
500,000 Rhode Island Depositors Economic Protection Corp
Escrowed to Maturity 5.75%, 8/1/21................ NR/A- 499,856
100,000 RI COPS MBIA Insured 5.375%, 10/1/16................ Aaa/AAA 94,438
200,000 Rhode Island Public Building Auth. Pre-refunded U.S.
Treasury 8.20%, 2/1/08............................ A/A 211,135
645,000 Rhode Island Public Building Auth. Pre-refunded U.S.
Treasury 7.60%, 2/1/09............................ A/A 693,480
125,000 Rhode Island Public Building Auth. AMBAC Insured
5.20%, 2/1/06..................................... Aaa/AAA 125,436
150,000 Rhode Island Public Building Auth. AMBAC Insured
5.25%, 2/1/10..................................... Aaa/AAA 146,373
150,000 Rhode Island Port Authority AMBAC Insured 6.5%,
6/1/08............................................ Aaa/AAA 163,349
250,000 Rhode Island Student Loan Auth. 6.20%, 12/1/09...... Aaa/NR 250,243
250,000 Rhode Island General Obligation FGIC Insured 7.00%,
7/15/04........................................... Aaa/AAA 280,422
5,000 Rhode Island General Obligation 7.50%, 6/15/05...... A-1/AA- 5,186
500,000 Rhode Island General Obligation MBIA Insured 5.75%,
8/1/15............................................ Aaa/AAA 499,856
125,000 Rhode Island Water Resources Fruit Hill Reservoir
MBIA Insured 7.05%, 9/15/07....................... Aaa/AAA 134,081
-----------
$18,716,714
RHODE ISLAND HEALTH & EDUCATION BUILDING CORPORATION (29.91%)
$ 150,000 Board of Governors CGIC Insured 6.125%, 9/15/10..... Aaa/AAA $ 161,463
195,000 Board of Governors CGIC Insured 6.15%, 9/15/11...... Aaa/AAA 210,147
120,000 Brown University 6.75%, 9/1/16...................... Aa-1/AA 124,794
200,000 Brown University 5.40%, 9/1/18...................... Aa-1/AA 189,631
375,000 Brown University 6.00%, 9/1/10...................... Aa-1/AA 388,568
200,000 Brown University 5.90%, 9/1/14...................... Aa-1/AA 202,709
400,000 Bryant College MBIA Insured 6.50%, 6/1/05........... Aaa/AAA 431,071
100,000 Bryant College MBIA Insured 5.95%, 6/1/07........... Aaa/AAA 104,247
</TABLE>
12
<PAGE> 13
OCEAN STATE TAX EXEMPT FUND
PORTFOLIO OF INVESTMENTS--(CONTINUED)
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/ VALUE
AMOUNT STANDARD & POOR'S (NOTE 1)
- ----------- ----------------- --------
<S> <C> <C> <C>
MUNICIPAL SECURITIES--CONTINUED
RHODE ISLAND HEALTH & EDUCATION BUILDING CORPORATION--CONTINUED
$ 100,000 Bryant College MBIA Insured 6.20%, 6/1/13........... Aaa/AAA $ 103,115
100,000 Higher Education Authority CGIC Insured 7.375%,
9/15/09........................................... Aaa/AAA 108,774
150,000 Providence College Pre-refunded U.S Treasury 7.45%,
11/1/03........................................... Aaa/NR 163,727
125,000 Providence College Pre-refunded U.S. Treasury 7.50%,
11/1/04........................................... Aaa/NR 136,596
120,000 Providence College Pre-refunded U.S. Treasury 7.75%,
11/1/09........................................... Aaa/NR 131,736
550,000 Roger Williams College Connie Lee Insured 6.50%,
11/15/08.......................................... NR/AAA 583,040
550,000 Roger Williams College Connie Lee Insured 6.625%,
11/15/11.......................................... NR/AAA 583,732
320,000 Roger Williams College LOC-Fleet National Pre-
refunded U.S. Treasury 7.75%, 10/1/18............. A-1/NR 343,247
1,290,000 South County Hospital Pre-refunded U.S. Treasury
7.25%, 11/1/11.................................... NR/BBB+ 1,427,514
345,000 Roger Williams Realty Corp. Collateral U.S.
Treasury, 7.50%, 8/1/29........................... NR/AA- 360,519
500,000 Salve Regina College Connie Lee Insured 6.25%,
3/15/13........................................... NR/AAA 514,946
400,000 Salve Regina College LOC Fleet National Bank Pre-
refunded U.S. Treasury 7.70%, 1/1/20.............. A2/NR 439,119
300,000 Salve Regina College Pre-refunded U.S. Treasury
Connie Lee Insured 6.30%, 3/15/20................. NR/AAA 305,573
525,000 Johnson & Wales College Connie Lee Insured 5.75%,
4/1/12............................................ NR/AAA 524,189
500,000 St. Antoine Residence LOC Allied Irish 6.75%,
11/15/18.......................................... Aa-3/NR 525,006
220,000 Landmark Medical Center Escrowed to Maturity 7.625%,
7/1/99............................................ NR/AAA 229,896
500,000 Landmark Medical Center Pre-refunded U.S. Treasury
8.375%, 7/1/09.................................... NR/AAA 550,785
575,000 Kent County Hospital MBIA Insured 7.00%, 7/1/10..... Aaa/AAA 620,388
200,000 Memorial Hospital MBIA Insured 6.50%, 7/1/04........ Aaa/AAA 216,039
140,000 Miriam Hospital Pre-refunded U.S. Treasury 7.00%,
4/1/06............................................ NR/A 149,643
400,000 Miriam Hospital Pre-refunded U.S. Treasury 6.35%,
4/1/08............................................ NR/A 435,095
900,000 Miriam Hospital Pre-refunded U.S. Treasury 7.25%,
4/1/11............................................ NR/A 965,383
300,000 Rhode Island Hospital FGIC Insured 6.70%, 8/15/04... Aaa/AAA 328,208
600,000 Women & Infants Hospital CGIC Insured 6.55%, 9/1/13
.................................................. Aaa/AAA 639,062
100,000 United Methodist Elder Care 7.50%, 11/1/14.......... A/A 108,900
</TABLE>
13
<PAGE> 14
OCEAN STATE TAX EXEMPT FUND
PORTFOLIO OF INVESTMENTS--(CONTINUED)
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/ VALUE
AMOUNT STANDARD & POOR'S (NOTE 1)
- ----------- ----------------- --------
<S> <C> <C> <C>
MUNICIPAL SECURITIES--CONTINUED
RHODE ISLAND HEALTH & EDUCATION BUILDING CORPORATION--CONTINUED
$ 125,000 New England Tech Inst. Connie Lee Insured 6.00%,
3/1/15............................................ NR/AAA $ 125,907
-----------
$12,432,769
RHODE ISLAND HOUSING & MORTGAGE FINANCE CORPORATION (18.57%)
$ 5,000 9.30%, 7/1/04 FGIC Insured.......................... Aaa/AAA $ 5,043
40,000 7.625%, 10/1/04..................................... AA/A+ 41,397
95,000 8.25%, 10/1/07...................................... A-1/A+ 97,907
200,000 8.10%, 10/1/07...................................... A-1/A+ 205,999
200,000 5.65%, 10/1/07...................................... NR/A 200,445
300,000 8.00%, 10/1/08...................................... Aa/AA+ 313,872
500,000 7.80%, 10/1/10, Series A............................ Aa/AA+ 523,749
50,000 7.50%, 7/1/10....................................... A-1/A+ 50,614
300,000 7.60%, 10/1/20...................................... NR/A 313,495
95,000 7.80%, 10/1/11...................................... Aa/A+ 98,318
390,000 7.50%, 10/1/11...................................... Aa/AA+ 413,919
205,000 7.80%, 10/1/11...................................... Aa/AA+ 214,737
200,000 5.70%, 4/1/15....................................... Aa/AA+ 198,685
35,000 7.75%, 10/1/16...................................... A-1/A+ 35,826
500,000 5.75%, 4/1/17....................................... Aa/AA+ 497,341
200,000 6.25%, 4/1/17....................................... Aa/AA+ 201,256
110,000 7.95%, 10/1/20...................................... NR/A 115,086
115,000 7.25%, 10/1/21...................................... Aa/Aa+ 120,896
370,000 7.875%, 10/1/21, MBIA Insured....................... Aaa/AAA 380,130
640,000 7.875%, 10/1/22..................................... Aa/AA+ 669,594
50,000 7.75%, 4/1/22....................................... Aa/AA+ 52,438
345,000 7.55%, 10/1/22...................................... Aa/AA+ 366,593
300,000 6.50%, 10/1/22...................................... Aa/AA+ 310,099
1,250,000 6.70%, 10/1/15...................................... Aa/AA+ 1,304,656
500,000 6.15%, 4/1/17....................................... Aa/AA+ 499,856
80,000 5.875%, 4/1/25...................................... Aa/AA+ 78,569
300,000 6.50%, 4/1/27....................................... Aa/AA+ 309,345
95,000 6.85%, 4/1/27....................................... Aa/AA+ 99,512
-----------
$ 7,719,377
RHODE ISLAND INDUSTRIAL FACILITIES CORPORATION (1.11%)
$ 80,000 Inge Corporation SBA GTD 9.125%, 10/1/00............ Aaa/NR $ 82,216
250,000 Mobil Oil 6.00%, 11/1/14............................ Aa-2/AA 255,901
60,000 Blazing Graphics LOC-Fleet National 8.20%, 5/1/13... Baa/NR 62,032
60,000 Blazing Graphics LOC-Fleet National 8.25%, 5/1/14... Baa/NR 62,032
-----------
$ 462,181
-----------
TOTAL RHODE ISLAND BONDS (94.62%)................... $39,331,041
</TABLE>
14
<PAGE> 15
OCEAN STATE TAX EXEMPT FUND
PORTFOLIO OF INVESTMENTS--(CONTINUED)
<TABLE>
<CAPTION>
RATINGS
PRINCIPAL MOODY'S/ VALUE
AMOUNT STANDARD & POOR'S (NOTE 1)
- ----------- ----------------- --------
<S> <C> <C> <C>
MUNICIPAL SECURITIES--CONTINUED
PUERTO RICO BONDS (4.02%)
$ 30,000 Puerto Rico Commonwealth MBIA Insured 7.125%,
7/1/02............................................ Aaa/AAA $ 30,947
500,000 Puerto Rico Commonwealth Pre-refunded U.S. Treasury
7.75%, 7/1/06..................................... NR/AAA 533,809
200,000 Puerto Rico Commonwealth Pre-refunded U.S. Treasury
7.75%, 7/1/13..................................... NR/AAA 213,523
300,000 Puerto Rico Electric Power Auth Pre-refunded U.S.
Treasury 8.00%, 7/1/08............................ NR/AAA 321,040
100,000 Puerto Rico Highway Pre-refunded U.S. Treasury
8.00%, 7/1/03..................................... NR/AAA 107,013
200,000 Puerto Rico Highway Pre-refunded U.S. Treasury
8.00%, 7/1/05..................................... NR/AAA 214,026
225,000 Puerto Rico Highway Pre-refunded U.S. Treasury
7.70%, 7/1/03..................................... Baa1/AAA 250,683
-----------
TOTAL PUERTO RICO BONDS (4.02%)..................... $ 1,671,041
-----------
TOTAL INVESTMENTS (Cost $39,048,736)(93.95%)(a)..... $41,002,082
============
</TABLE>
(a) Percentages indicated are based on net assets of $41,561,947 at April 30,
1997 (total investments plus cash and receivables less liabilities) which
corresponds to a net asset value per share of $10.50.
(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.
See Notes to Financial Statements.
15
<PAGE> 16
INVESTMENT ADVISER &
ADMINISTRATOR
Van Liew Capital Inc.
One Regency Plaza, Suite One
Providence, Rhode Island 02903 [LOGO]OCEAN STATE
TAX EXEMPT FUND
DISTRIBUTOR (THE PORTFOLIO OF VLC TRUST)
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 8871
Wilmington, Delaware 19899-8871 SEMI-ANNUAL REPORT
APRIL 30, 1997
INDEPENDENT AUDITORS (UNAUDITED)
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 INTEREST INCOME EXEMPT
FROM FEDERAL AND RHODE
OFFICERS ISLAND INCOME TAXES
Alfred B. Van Liew, President FROM QUALITY MUNICIPAL
Samuel H. Hallowell, Vice President BONDS.
Joseph J. Healy, Vice President
Kevin M. Oates, Treasurer
Margaret D. Farrell, Secretary
