[LOGO] OCEAN STATE
TAX EXEMPT FUND
REPORT OF THE PRESIDENT
April 30, 1999
During the six months ended April 30, 1999 the Ocean State Tax Exempt
Fund (the "Fund") had a total return of 0.72%.(1) The positive return
occurred despite a decline in net asset value from $10.71 to $10.59 which
was caused by a rise in the general level of interest rates depressing bond
prices. Reinvestment of the $0.26 in tax-free income dividends received
during the period boosted results.(2)
Where are interest rates headed now? That seems to be the question on
everyone's mind as they watch the financial press dissect every word and
mannerism of Federal Reserve Chairman Alan Greenspan looking for some
insight into the Fed's reaction to economic change. We watch him and the
economy too, and we can only say that in our view interest rates will not
be declining again soon, although we do not believe they will rise very far
either. Our optimism is fueled by our belief that more productivity
improvements and relatively cheap prices for raw materials and imported
goods and services should keep a lid on consumer prices and inflation for
many months to come.
Your Fund is structured to combat the pressures of rising interest
rates and falling bond prices. A large number of high coupon, short-
duration municipal bonds have been purchased over the years which tend to
maintain their value in a rising rate environment. Historically, your
Fund's performance has been strong during such times.
Management has continued its objective of improving the overall
quality of the Fund. Over 69% of the bonds in the portfolio are now rated
triple-A by Moody's or S&P. In addition, the weighted average maturity of
the portfolio is around twelve years, a level we feel achieves the maximum
return for the minimum risk in the current interest rate environment. We
believe these efforts are consistent with the dual investment objectives of
the Fund which remain providing as high a level of current income, exempt
from Federal and Rhode Island tax, as is consistent with the preservation
of capital.
Very truly yours,
/s/ Alfred B. Van Liew
Alfred B. Van Liew
President and Chairman of the
Board of Trustees
[FN]
<F1> This return does not reflect the 4.00% maximum sales charge.
<F2> A portion of the Fund's income may be subject to Federal income
and/or alternative minimum tax.
</FN>
OCEAN STATE TAX EXEMPT FUND
INVESTMENT PERFORMANCE REVIEW
as of April 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Prior
November 1, 1998 Fiscal Year May 1, 1994 May 1, 1989
through Ended through through
April 30, 1999 October 31, 1998 April 30, 1999 April 30, 1999
---------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Total Rate of Return(b)
Based on:
Net Asset Value 0.72% 5.46% 5.93% 7.14%
Offering Price (1.33)% 1.20% 5.06% 6.70%
<CAPTION>
As of As of
April 30, 1999 October 31, 1998
-------------- ----------------
<S> <C> <C>
30-day Current Yield
Based on:
Net Asset Value 4.76% 4.87%
Offering Price 4.57% 4.67%
30-day Tax-Equivalent Yield (a)
Based on:
Net Asset Value 7.53% 7.70%
Offering Price 7.23% 7.39%
<FN>
<Fa> For 1998 shareholders subject to a combined Federal and State tax
rate of 36.78% (31% Federal, 27% State).
<Fb> Past performance is no guarantee of future results.
</FN>
</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 12.0 years as of April 30, 1999.
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 4/30/99 10/31/98
------ ------- --------
<S> <C> <C>
Aaa/AAA 69.29% 64.74%
Aa/AA 19.80% 20.45%
A 9.42% 13.06%
Baa/BBB 1.49% 1.75%
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.
OCEAN STATE TAX EXEMPT FUND
STATEMENT OF ASSETS AND LIABILITIES
as of April 30, 1999
(unaudited)
<TABLE>
<S> <C>
ASSETS
Investments at value (identified cost $39,812,929) (Note 1A) $42,111,775
Cash 186,823
Interest receivable 619,039
Receivable for fund shares sold 34,610
-----------
Total Assets $42,952,247
LIABILITIES
Distribution payable to shareholders $ 71,385
Accrued management fees 20,608
Accrued expenses 13,159
Payable for fund shares redeemed 10,269
-----------
Total Liabilities 115,421
-----------
Net Assets $42,836,826
===========
Net Assets consist of:
Shares of beneficial interest at par ($.01/share) $ 40,432
Additional paid-in capital (Note 4) 40,442,512
Undistributed net investment income 12,511
Accumulated net realized gain on investment transactions 42,525
Net unrealized appreciation of investments 2,298,846
-----------
Total-Representing Net Assets at Value for 4,043,214 Shares Outstanding $42,836,826
===========
Computation of Net Asset Value & Offering Price:
Net Assets $42,836,826
Divided by number of shares outstanding 4,043,214
Net asset value $ 10.59
===========
Offering price $ 11.03
===========
</TABLE>
See Notes to Financial Statements.
OCEAN STATE TAX EXEMPT FUND
STATEMENT OF OPERATIONS
For the six-month period ended April 30, 1999
(unaudited)
<TABLE>
<S> <C> <C>
Investment Income
Interest income (Note 1B) $1,248,753
Expenses:
Adviser fees (Note 2) 74,772
Administrator fees (Note 2) 53,409
Transfer agent fees 12,940
Auditing fees 14,450
Trustees fees and expenses 9,250
Legal fees and expenses 4,249
Shareholder reports 6,236
Distribution expenses (Note 5) 10,003
Insurance 750
Pricing fees 1,772
Miscellaneous expenses 1,500
Registration fees 825
--------
190,156
----------
Net Investment Income $1,058,597
Realized and Unrealized Gain on Investments
Net Realized Gain on Investments 42,525
Net Change in Unrealized Depreciation of Investments (469,189)
--------
Net Realized and Unrealized Loss on Investments (426,664)
----------
Net Increase in Net Assets Resulting from Operations $ 631,933
==========
</TABLE>
See Notes to Financial Statements.
OCEAN STATE TAX EXEMPT FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Fiscal Year
Ended Ended
April 30, 1999 October 31, 1998
-------------- ----------------
(unaudited)
<S> <C> <C>
Increase (Decrease) in Net Assets Resulting from:
Operations:
Net investment income $ 1,058,597 $ 2,140,593
Net realized gain on investments 42,525 41,822
Change in unrealized appreciation (depreciation) of investments (469,189) 56,057
-------------------------------
Net increase in net assets resulting from operations $ 631,933 $ 2,238,472
Dividends and distributions to shareholders from:
Net investment income ($.26 per share in 1999 and $.56 per
share in 1998) (1,058,597) (2,140,593)
Capital Gain ($.01 per share in 1999 and $.01 per share in
1998) (41,828) (30,119)
Net increase from fund share transactions (Note 4) 57,659 1,554,210
-------------------------------
Total increase (decrease) in net assets (410,833) 1,621,970
NET ASSETS:
Beginning of period 43,247,659 41,625,689
-------------------------------
End of period(1) $42,836,826 $43,247,659
===============================
(1) Including undistributed net investment income $ 12,511 $ 12,511
===============================
</TABLE>
See Notes to Financial Statements.
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>
Fiscal Fiscal Fiscal Fiscal
Six Months Year Year Year Year
Ended Ended Ended Ended Ended
4/30/99 10/31/98 10/31/97 10/31/96 10/31/95
----------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Year $ 10.71 $ 10.69 $ 10.53 $ 10.59 $ 10.10
Net investment income .26 .56 .57 .56 .58
Net realized and unrealized gain (loss) on securities (.11) .03 .16 (.06) .49
---------------------------------------------------------
Total from Investment Operations .15 .59 .73 .50 1.07
---------------------------------------------------------
Less Distributions:
Dividends from net investment income (.26) (.56) (.57) (.56) (.58)
Distribution from net realized gains (.01) (.01) (.00) (.00) (.00)
---------------------------------------------------------
Total Distributions (.27) (.57) (.57) (.56) (.58)
---------------------------------------------------------
Net Asset Value, End of Year $ 10.59 $ 10.71 $ 10.69 $ 10.53 $ 10.59
=========================================================
Total investment return at Net Asset Value(b) .72 5.46% 6.97% 4.89% 10.89%
Ratios and Supplemental Data:
Net Assets, End of Year (000's omitted) $42,837 $43,248 $41,626 $42,456 $43,088
Ratio of expenses to average net assets .44% .94% .99% .98% .98%
Ratio of net investment income to average net assets 2.44% 5.07% 5.25% 5.31% 5.58%
Portfolio turnover 6.56% 10.30% 2.27% 13.30% 11.77%
Adviser/Administrator waived fees per share .00 .00 .00 .00 .00
Fund expenses without waiver per share .05 .10 .11 .10 .10
Net investment income without waiver per share .26 .56 .57 .56 .58
Ratio of expenses to average net assets without
waiver .44% .94% .99% .98% .98%
Ratio of net investment income to average net assets
without waiver 2.44% 5.07% 5.25% 5.31% 5.58%
<CAPTION>
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
10/31/94 10/31/93 10/31/92 10/31/91 10/31/90(a) 10/31/89
-------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Year $ 10.95 $ 10.32 $ 10.14 $ 9.73 $ 9.80 $ 9.74
Net investment income .59 .56 .63 .64 .67 .62
Net realized and unrealized gain (loss) on securities (.84) .63 .18 .41 (.09) .07
----------------------------------------------------------------------
Total from Investment Operations (.25) 1.19 .81 1.05 .58 .69
----------------------------------------------------------------------
Less Distributions:
Dividends from net investment income (.59) (.56) (.63) (.64) (.65) (.63)
Distribution from net realized gains (.01) (.00) (.00) (.00) (.00) (.00)
----------------------------------------------------------------------
Total Distributions (.60) (.56) (.63) (.64) (.65) (.63)
----------------------------------------------------------------------
Net Asset Value, End of Year $ 10.10 $ 10.95 $ 10.32 $ 10.14 $ 9.73 $ 9.80
======================================================================
Total investment return at Net Asset Value(b) (2.04)% 12.35% 8.00% 10.96% 5.89% 7.10%
Ratios and Supplemental Data:
Net Assets, End of Year (000's omitted) $41,346 $45,043 $36,854 $29,750 $20,675 $12,159
Ratio of expenses to average net assets .88% .81% .85% .92% 1.27% 1.36%
Ratio of net investment income to average net assets 5.55% 5.70% 6.13% 6.40% 6.45% 6.34%
Portfolio turnover 8.48% 13.27% 36.29% 21.57% 10.16% 37.90%
Adviser/Administrator waived fees per share .01 .01 .01 .03 .02 .03
Fund expenses without waiver per share .10 .09 .10 .12 .12 .16
Net investment income without waiver per share .58 .55 .62 .61 .65 .59
Ratio of expenses to average net assets without
waiver .93% .81% .95% 1.17% 1.51% 1.69%
Ratio of net investment income to average net assets
without waiver 5.50% 5.58% 6.02% 6.15% 6.21% 6.02%
<FN>
<Fa> 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.
<Fb> Total investment return does not reflect sales load.
</FN>
</TABLE>
See Notes to Financial Statements.
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1999
(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, 1999 there is only one fund,
Ocean State Tax Exempt Fund (the Fund). The objective of the Fund is to
seek to provide as high a 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, 1999, 97.75% 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, 1999, 63.97% 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 24.69% of the portfolio.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
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 subchapter M 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. Dividends paid
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 which will enable
the Fund to pay tax-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, 1999, the Fund paid $41,828 from long-term capital
gains. 100% of the income dividends paid by the Fund are exempt from
Federal and Rhode Island income taxes.
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, 1999 was $2,000.
Legal fees and expenses of $4,249 were paid to a firm of which the
Fund's Secretary is a partner.
During the period November 1, 1998 through April 30, 1999 the
Distributor received $4,577 in commissions as a result of Fund share sales.
Note 3 Investment Transactions
During the period ended April 30, 1999 purchases and sales of
investment securities other than short-term investments aggregated
$2,781,529 and $2,924,825, respectively. The aggregate cost of investments
for Federal income tax purposes is substantially the same as the aggregate
cost for financial statement purposes. At April 30, 1999, gross unrealized
appreciation on investment securities was $2,359,157 and gross unrealized
depreciation on investment securities was $60,311.
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 and in dollars were as
follows:
<TABLE>
<CAPTION>
Shares Amount
------ ------
<S> <C> <C>
Balance at 10/31/97 3,892,789 $38,918,118
Shares sold 524,456 5,603,144
Shares issued in reinvestment of dividends 108,162 1,157,248
Shares redeemed (487,599) (5,206,182)
-------------------------
Net increase 145,019 1,554,210
-------------------------
Balance at 10/31/98 4,037,808 $40,472,328
=========================
Shares sold 234,428 $ 2,499,424
Shares issued in reinvestment of dividends 58,563 624,267
Shares redeemed (287,585) (3,066,032)
-------------------------
Net increase 5,406 57,659
-------------------------
Balance at 4/30/99 4,043,214 $40,529,987
=========================
</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 $10,003 under the Plan during fiscal 1999.
Note 6 Year 2000 Problem
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers do
not properly process and calculate date-related information and data from
and after January 1, 2000. This is commonly known as the "Year 2000
Problem". The Fund's Adviser and Administrator are taking measures that it
believes are reasonably designed to address the Year 2000 Problem with
respect to computer systems that it uses and to obtain reasonable
assurances that comparable steps are being taken by each of the Fund's
other service providers. At this time, however, there can no assurance that
these steps will be sufficient to avoid any adverse impact on the Fund as a
result of the Year 2000 Problem.
OCEAN STATE TAX EXEMPT FUND
PORTFOLIO OF INVESTMENTS
as of April 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Ratings
Principal Moody's/ Value
Amount Standard & Poor's(b) (Note 1)
--------- -------------------- --------
<C> <S> <C> <C>
MUNICIPAL SECURITIES (98.31%)(a)
Rhode Island General Obligation and Revenue (52.38%)(a)
$ 100,000 Bristol General Obligation 7.00%, 12/1/08 A3/NR $ 107,321
120,000 Bristol General Obligation MBIA Insured 6.00%, 12/15/10 Aaa/AAA 127,886
250,000 Bristol General Obligation MBIA Insured 5.05%, 8/15/06 Aaa/AAA 260,807
300,000 Burrillville General Obligation MBIA Insured 5.75%, 10/15/17 Aaa/AAA 319,340
200,000 Burrillville General Obligation FGIC Insured 5.70%, 5/1/11 Aaa/AAA 215,392
75,000 Central Falls General Obligation 7.90%, 7/1/02 Baa3/NR 76,555
200,000 Coventry General Obligation FSA Insured 4.00%, 11/07/07 Aaa/NR 196,651
130,000 Coventry General Obligation Pre-refunded U.S. T FGIC Insured
7.25%, 11/1/10 Aaa/AAA 139,843
460,000 Cranston General Obligation MBIA Insured 5.00%, 6/15/02 Aaa/AAA 478,161
50,000 Cumberland General Obligation 5.25%, 9/1/04 A-3/NR 53,598
165,000 Cumberland General Obligation MBIA Insured 5.70%, 10/1/11 Aaa/AAA 173,163
175,000 Cumberland General Obligation MBIA Insured 5.70%, 10/1/12 Aaa/AAA 183,877
300,000 East Providence General Obligation MBIA Insured 5.70%,
5/15/10 Aaa/AAA 324,213
750,000 Foster/Glocester General Obligation Pre-refunded U.S. T
AMBAC Insured 6.90%, 9/1/11 Aaa/AAA 798,351
135,000 Jamestown General Obligation CGIC Insured 7.00%, 3/15/07 Aaa/AAA 136,572
250,000 Kent County Water Auth. MBIA Insured 6.35%, 7/15/14 Aaa/AAA 279,547
355,000 Lincoln General Obligation MBIA Insured 5.50%, 8/15/10 Aaa/AAA 373,007
300,000 Lincoln General Obligation FGIC Insured 5.60%, 8/1/12 Aaa/NR 321,214
110,000 Little Compton General Obligation Pre-refunded U.S. T 7.00%,
1/15/09 A-1/NR 114,908
100,000 Little Compton General Obligation Pre-refunded U.S. T 6.90%,
1/15/08 A-1/NR 104,392
100,000 Narragansett General Obligation MBIA Insured 5.30%,
9/15/09 Aaa/AAA 104,573
200,000 Narragansett General Obligation Pre-refunded U.S. T AMBAC
Insured 7.10%, 6/15/10 Aaa/NR 204,837
210,000 Newport General Obligation MBIA Insured 6.50%, 8/15/06 Aaa/AAA 225,375
100,000 Newport General Obligation Pre-refunded U.S. T 6.80%,
4/15/09 A-1/NR 107,696
100,000 Newport General Obligation Pre-refunded U.S. T 6.80%,
4/15/10 A-1/NR 107,696
75,000 North Kingstown General Obligation 6.70%, 12/15/05 A-1/NR 86,113
80,000 North Kingstown General Obligation 6.80%, 12/15/06 A-1/NR 93,253
80,000 North Kingstown General Obligation Pre-refunded U.S. T
6.30%, 7/15/07 A-1/NR 85,857
120,000 North Providence General Obligation MBIA Insured
6.00%, 10/01/09 Aaa/AAA $ 128,936
100,000 Pawtucket General Obligation Pre-refunded U.S. T MBIA
Insured 6.75%, 9/15/08 Aaa/AAA 108,946
500,000 Pawtucket General Obligation CGIC Insured 6.00%, 3/15/15 Aaa/AAA 545,977
500,000 Pawtucket General Obligation CGIC Insured 6.00%, 3/15/11 Aaa/AAA 546,602
500,000 Pawtucket General Obligation CGIC Insured 6.00%, 3/15/13 Aaa/AAA 548,476
500,000 Pawtucket General Obligation CGIC Insured 6.00%, 3/15/12 Aaa/AAA 549,725
200,000 Providence Public Bldg. Auth. FSA Insured 5.10%, 12/15/08 Aaa/AAA 211,644
200,000 Providence Public Bldg. Auth. Pre-refunded U.S. T 7.30%,
12/1/08 Baa2/NR 221,139
300,000 Providence Public Bldg. Auth. Pre-refunded U.S. T 7.30%,
12/1/09 Baa2/NR 331,709
500,000 Providence Public Bldg. Auth. CGIC Insured 7.25%,
12/15/10 Aaa/AAA 534,108
150,000 Providence Public Bldg. Auth. MBIA Insured 5.50%,
12/15/13 Aaa/AAA 160,232
185,000 Providence Public Bldg. Auth. FSA Insured 5.00%, 12/15/18 Aaa/AAA 182,596
750,000 Providence General Obligation Pre-refunded U.S. T MBIA
Insured 6.75%, 1/15/11 Aaa/AAA 782,594
100,000 South Kingston General Obligation AMBAC Insured 5.00%,
11/15/08 Aaa/AAA 104,073
700,000 Warwick General Obligation MBIA Insured 6.60%, 11/15/06 Aaa/AAA 770,490
155,000 Warwick General Obligation Pre-refunded U.S. T FGIC
Insured 7.20%, 11/15/08 Aaa/AAA 161,256
250,000 Warwick General Obligation FGIC Insured 4.85%, 3/1/12 Aaa/AAA 252,998
35,000 Westerly Dunn's Corner Fire District Unlimited Tax
Assessment 7.80%, 6/1/03 A-1/NR 38,612
35,000 Westerly Dunn's Corner Fire District Unlimited Tax
Assessment 7.85%, 6/1/04 A-1/NR 39,224
800,000 Rhode Island Clean Water Pre-refunded U.S. T MBIA Insured
6.50%, 10/1/06 NR/AAA 883,383
150,000 Rhode Island Clean Water MBIA Insured 5.30%, 10/1/07 Aaa/AAA 160,607
500,000 Rhode Island Clean Water AMBAC Insured 5.25%, 10/1/16 Aaa/AAA 512,244
600,000 Rhode Island Correctional Facility Pre-refunded U.S. T
MBIA Insured 7.00%, 8/1/09 Aaa/AAA 617,271
650,000 Rhode Island Depositors Economic Protection Corp.
MBIA Insured 6.55%, 8/1/10 Aaa/AAA 769,053
215,000 Rhode Island Depositors Economic Protection Corp.
CAPMAC Guaranteed 6.375%, 8/1/22 Aaa/AAA 253,305
250,000 Rhode Island Depositors Economic Protection Corp.
Escrowed to Maturity 5.75%, 8/1/21 NR/A- 274,550
500,000 Rhode Island Economic Development Corp. Airport
Revenue FSA Insured 5.25%, 7/1/12 Aaa/AAA $ 523,488
395,000 Rhode Island Economic Development Corp. Airport
Revenue FSA Insured 5.25%, 7/1/13 Aaa/AAA 411,582
545,000 Rhode Island Economic Development Corp. Airport
Revenue FSA Insured 5.25%, 7/1/14 Aaa/AAA 567,878
250,000 Rhode Island Economic Development Corp. Airport
Revenue FSA Insured 5.00%, 7/1/18 Aaa/AAA 246,752
100,000 RI COPS MBIA Insured 5.375%, 10/1/16 Aaa/AAA 103,448
300,000 Rhode Island Lease Participation Certificate Shepard Bldg.
AMBAC Insured 5.125%, 6/1/12 Aaa/AAA 308,846
500,000 Rhode Island Lease Participation Certificate Shepard Bldg.
AMBAC Insured 5.00%, 6/1/17 Aaa/AAA 497,251
750,000 Rhode Island Turnpike Authority 5.35%, 12/1/17 NR/A 755,247
125,000 Rhode Island Public Building Auth. AMBAC Insured 5.20%,
2/1/06 Aaa/AAA 131,341
150,000 Rhode Island Public Building Auth. AMBAC Insured 5.25%,
2/1/10 Aaa/AAA 155,547
150,000 Rhode Island Port Auth. Pre-refunded U.S. T AMBAC
Insured 6.50%, 6/1/08 Aaa/AAA 170,165
500,000 Rhode Island Refunding Bond Authority AMBAC Insured
5.00%, 2/1/07 Aaa/AAA 524,738
500,000 Rhode Island Refunding Bond Authority AMBAC Insured
5.25%, 2/1/10 Aaa/AAA 528,486
250,000 Rhode Island Student Loan Auth. Gtd. Std. Lns. 6.20%,
12/1/09 Aaa/NR 257,059
250,000 Rhode Island General Obligation FGIC Insured 7.00%,
7/15/04 Aaa/AAA 285,482
5,000 Rhode Island General Obligation 7.50%, 6/15/05 A-1/AA- 5,062
300,000 Rhode Island General Obligation FGIC Insured 5.125%,
7/15/14 Aaa/AAA 308,846
500,000 Rhode Island General Obligation MBIA Insured 5.75%,
8/1/15 Aaa/AAA 533,483
250,000 Rhode Island Cons. Cap. Dev. FGIC Insured 5.00%, 9/1/16 Aaa/AAA 251,437
250,000 Rhode Island Cons. Cap. Dev. FGIC Insured 5.00%, 9/1/15 Aaa/AAA 252,998
125,000 Rhode Island Water Resources Pre-refunded U.S. T MBIA
Insured 7.05%, 9/15/07 Aaa/AAA 129,178
-----------
Total Rhode Island General Obligation and Revenue $22,438,262
Rhode Island Health & Education Building Corporation (29.26%)(a)
$ 150,000 Board of Governors CGIC Insured 6.125%, 9/15/10 Aaa/AAA $ 164,168
195,000 Board of Governors CGIC Insured 6.15%, 9/15/11 Aaa/AAA 213,418
120,000 Brown University 6.75%, 9/1/16 Aa-1/AA+ 123,683
220,000 Brown University 5.40%, 9/1/18 Aa-1/AA+ 222,089
375,000 Brown University 6.00%, 9/1/10 Aa-1/AA+ 384,580
100,000 Brown University 4.75%, 9/1/12 Aa-1/AA+ 100,075
200,000 Brown University 5.90%, 9/1/14 Aa-1/AA+ 220,640
400,000 Brown University 5.00%, 9/1/19 Aa-1/AA+ 393,303
400,000 Bryant College MBIA Insured 6.50%, 6/1/05 Aaa/AAA 434,783
100,000 Bryant College MBIA Insured 5.95%, 6/1/07 Aaa/AAA 106,322
100,000 Bryant College MBIA Insured 6.20%, 6/1/13 Aaa/AAA 107,321
100,000 Higher Education Auth. Pre-refunded U.S. T CGIC
Insured 7.375%, 9/15/09 Aaa/AAA 103,463
150,000 Providence College Pre-refunded U.S. T 7.45%, 11/1/03 Aaa/NR 156,024
125,000 Providence College Pre-refunded U.S. T 7.50%, 11/1/04 Aaa/NR 130,051
120,000 Providence College Pre-refunded U.S. T 7.75%, 11/1/09 Aaa/NR 124,999
355,000 Roger Williams College Connie Lee Insured Pre-refunded
U.S. T 6.50%, 11/15/08 NR/AAA 393,853
195,000 Roger Williams College Connie Lee Insured 6.50%, 11/15/08 Aaa/AAA 211,469
355,000 Roger Williams College Connie Lee Insured Pre-refunded
U.S. T 6.625%, 11/15/11 NR/AAA 395,627
195,000 Roger Williams College Connie Lee Insured 6.625%,
11/15/11 Aaa/AAA 215,367
1,290,000 South County Hospital Pre-refunded U.S. T 7.25%, 11/1/11 NR/AAA 1,413,455
335,000 Roger Williams Realty Corp. Collateral U.S. T, 7.50%, 8/1/29 NR/AA- 343,243
500,000 Salve Regina College Connie Lee Insured 6.25%, 3/15/13 NR/AAA 542,853
400,000 Salve Regina College LOC-Fleet Bank Pre-refunded U.S. T
7.70%, 1/1/20 A-2/NR 419,158
300,000 Salve Regina College Pre-refunded U.S. T Connie Lee
Insured 6.30%, 3/15/20 NR/AAA 324,213
525,000 Johnson & Wales College Connie Lee Insured 5.75%, 4/1/12 NR/AAA 558,190
750,000 Johnson & Wales College MBIA Insured 5.00%, 4/1/29 Aaa/AAA 720,577
500,000 St. Antoine Residence 6.75%, 11/15/18 Aa-3/NR 522,239
80,000 Landmark Medical Center Escrowed to Maturity 7.625%,
7/1/99 NR/AAA 80,298
500,000 Landmark Medical Center Pre-refunded U.S. T 8.375%,
7/1/09 NR/AAA 514,068
575,000 Kent County Hospital MBIA Insured 7.00%, 7/1/10 Aaa/AAA 618,534
200,000 Memorial Hospital MBIA Insured 6.50%, 7/1/04 Aaa/AAA 218,141
400,000 Miriam Hospital Pre-refunded U.S. T 6.35%, 4/1/08 NR/A 442,779
400,000 Newport Hospital 5.25%, 7/1/19 NR/A 389,805
300,000 Rhode Island Hospital FGIC Insured 6.70%, 8/15/04 Aaa/AAA 324,588
600,000 Women & Infants Hospital CGIC Insured 6.55%, 9/1/13 Aaa/AAA $ 653,673
100,000 United Methodist Elder Care LOC-Fleet Bank 7.50%, 11/1/14 A/A 111,694
125,000 New England Tech Inst. Connie Lee Insured 6.00%, 3/1/15 NR/AAA 134,620
-----------
Total Rhode Island Health & Education Building Corporation $12,533,363
Rhode Island Housing & Mortgage Finance Corporation (15.37%)(a)
$ 5,000 9.30%, 7/1/04, FGIC Insured Aaa/AAA $ 5,000
35,000 7.625%, 10/1/04 Aa-2/AA 35,972
200,000 5.65%, 10/1/07 NR/A 208,396
300,000 7.80%, 10/1/10, Series A Aa-2/AA+ 313,718
300,000 7.60%, 10/1/20 NR/A 311,844
90,000 7.80%, 10/1/11 Aa-2/AA+ 92,163
365,000 7.50%, 10/1/11 Aa-2/AA+ 383,970
195,000 7.80%, 10/1/11 Aa-2/AA+ 200,527
200,000 5.70%, 4/1/15 Aa-2/AA+ 205,897
400,000 5.00%, 10/1/16 Aa-2/AA+ 400,300
500,000 5.75%, 4/1/17 Aa-2/AA+ 519,740
200,000 6.25%, 4/1/17 Aa-2/AA+ 209,645
110,000 7.95%, 10/1/20 NR/A 112,909
55,000 7.25%, 10/1/21 Aa-2/AA+ 57,652
190,000 7.875%, 10/1/21, MBIA Insured Aaa/AAA 194,410
335,000 7.875%, 10/1/22 Aa-2/AA+ 343,391
40,000 7.75%, 4/1/22 Aa-2/AA+ 41,366
345,000 7.55%, 10/1/22 Aa-2/AA+ 362,931
300,000 6.50%, 10/1/22 Aa-2/AA+ 315,967
1,250,000 6.70%, 10/1/15 Aa-2/AA+ 1,333,708
500,000 6.15%, 4/1/17 Aa-2/AA+ 522,863
35,000 5.875%, 4/1/25 Aa-2/AA+ 35,988
300,000 6.50%, 4/1/27 Aa-2/AA+ 315,217
55,000 6.85%, 4/1/27 Aa-2/AA+ 58,752
-----------
Total Rhode Island Housing & Mortgage Finance Corporation $ 6,582,326
Rhode Island Industrial Facilities Corporation (0.74%)(a)
$ 45,000 Inge Corporation SBA GTD 9.125%, 10/1/00 Aaa/NR $ 45,174
250,000 Mobil Oil 6.00%, 11/1/14 Aa-2/AA 271,739
-----------
Total Rhode Island Industrial Facilities Corporation $ 316,913
-----------
TOTAL RHODE ISLAND BONDS (97.75%)(a) $41,870,864
Puerto Rico Bonds (0.56%)(a)
225,000 Puerto Rico Highway Pre-refunded U.S. T 7.70%, 7/1/03 Baa1/AAA 240,911
-----------
TOTAL PUERTO RICO BONDS (0.56%)(a) $ 240,911
-----------
TOTAL INVESTMENTS (Cost $39,812,929)(92.94%)(a) $42,111,775
<FN>
<Fa> Percentages indicated are based on net assets of $42,836,826 at April
30, 1999 (total investments plus cash and receivables less
liabilities) which corresponds to a net asset value per share of
$10.59.
<Fb> The ratings indicated 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.
<Fc> 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 the 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)
<Fd> Abbreviations used:
AMBAC -American Municipal Bond Assurance Corp.
CGIC -Capital Guaranty Insurance Co.
FGIC -Financial Guaranty Insurance Co.
FSA -Financial Security Assurance Inc.
MBIA -Municipal Bond Investors Assurance Corp.
LOC -Letter of Credit
BIG -Bond Investors Guaranty (subsidiary of MBIA)
SBA -Small Business Administration
CAPMAC -Capital Markets Assurance Corp.
</FN>
</TABLE>
See Notes to Financial Statements.
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
PFPC Trust Company
Airport Business Center
200 Stevens Drive, Suite 440
Lester, Pennsylvania 19113
Transfer Agent
PFPC, Inc.
P.O. Box 8871
Wilmington, Delaware 19899-8871
Independent Auditors
Ernst & Young LLP
200 Clarendon 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] OCEAN STATE
TAX EXEMPT FUND
(The Portfolio of VLC Trust)
Semi-Annual Report
April 30, 1999
(unaudited)
Interest income exempt
from Federal and Rhode
Island income taxes
from quality municipal
bonds.
