UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4788
VLC TRUST
(Exact name of registrant as specified in charter)
ONE REGENCY PLAZA, PROVIDENCE, RHODE ISLAND 02903
(Address of principal executive offices)
MARGARET D. FARRELL, ESQ.
SECRETARY
HINCKLEY, ALLEN & SNYDER LLP
1500 FLEET CENTER
PROVIDENCE, RHODE ISLAND 02903
(Name and address of agent for service)
Registrant's telephone number, including area code: (401) 421-1411
Date of fiscal year end: October 31
Date of reporting period: October 31, 2004
Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission
to stockholders of any report that is required to be transmitted to
stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17
CFR 270.30e-1). The Commission may use the information provided on Form N-
CSR in its regulatory, disclosure review, inspection, and policymaking
roles.
A registrant is required to disclose the information specified by
Form N-CSR, and the Commission will make this information public. A
registrant is not required to respond to the collection of information
contained in Form N-CSR unless the Form displays a currently valid Office
of Management and Budget ("OMB") control number. Please direct comments
concerning the accuracy of the information collection burden estimate and
any suggestions for reducing the burden to Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The
OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. Section 3507.
- ---------------------------------------------------------------------------
TABLE OF CONTENTS OCTOBER 31, 2004
ITEM 1
The following is a copy of the report transmitted to shareholders
pursuant to Rule 30e-1 under the Investment Company Act of 1940 (17 CFR
270.30e-1)
OCEAN STATE TAX EXEMPT FUND [LOGO]
REPORT OF THE PRESIDENT
October 31, 2004
We are pleased to report that the Ocean State Tax Exempt Fund
(the"Fund") last year achieved a positive total investment return for
shareholders on net asset value for the 5th year in a row. Although we are
optimistic that current market conditions can continue, favoring an
extension of this trend, investors should be aware that there are a variety
of issues, such as the ballooning trade and Federal deficit, that could
exert negative pressure on fixed income returns down the road.
An issue often mentioned is the effect on bond yields that will
accrue as a result of the incremental moves by the Federal Reserve to raise
short-term interest rates. Interestingly, although rate increases to date
have raised the yields on 3 month to five-year Treasury obligations, the
impacts on municipal bonds and longer term Treasury Notes have been less by
comparison. The term for this condition is known as a "flattening" of the
yield curve.
We believe this reaction is a result of bond investors interpreting
the actions of the Federal Reserve as motivated by a desire to recoup some
operating flexibility by recalling some of the rate reductions they made to
combat the effects of the dramatic slowdown in our economic past. We do not
believe, which current economic statistics seem to support, that the
increases are being promulgated by a belief that a sharp rise in inflation,
causing bond yields to rise and principal values to fall, is in the cards.
We do however keep a close watch on the direction and tone of our economy
as well as on the movements of the Federal Reserve in efforts to anticipate
the direction of interest rate changes and work to reposition the Fund
accordingly.
The Ocean State Tax Exempt Fund has been structured to be a long-term
holding in any kind of investment environment. The Fund strives to minimize
the Fund's price volatility or swings in share net asset value through a
variety of strategies. In establishing a weighted average maturity in the
intermediate range (10-13 years) the goal of the Fund's management is to
maintain a solid dividend yield while not extending the portfolio too far.
The chief risk to investors from extending to a longer average maturity
comes the increased potential fluctuation in share value. Also, the Fund's
emphasis on higher coupon bonds should help mute the effects of potentially
rising rates.
We recognize and appreciate your confidence in this Fund and we will
work diligently to maintain your trust in the Fund. We wish you all the
best in 2005.
Very truly yours,
/s/ Alfred B. Van Liew
Alfred B. Van Liew
President and Chairman of the
Board of Trustees
OCEAN STATE TAX EXEMPT FUND
INVESTMENT PERFORMANCE REVIEW
as of October 31, 2004
Prior
November 1, 2003 Fiscal Year November 1, 1999 November 1, 1994
through Ended through through
October 31, 2004 October 31, 2003 October 31, 2004 October 31, 2004
---------------- ---------------- ---------------- ----------------
<s> <c> <c> <c> <c>
Total Rate of Return (b)
Based on:
Net Asset Value 3.55% 3.60% 5.11% 5.28%
Offering Price -0.62% -0.55% 4.24% 4.84%
As of As of
October 31, 2004 October 31, 2003
---------------- ----------------
<s> <c> <c>
30-day Current Yield
Based on:
Net Asset Value 3.30% 3.38%
Offering Price 3.16% 3.25%
30-day Tax-Equivalent Yield (a)
Based on:
Net Asset Value 5.58% 5.71%
Offering Price 5.34% 5.49%
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 11.0 years as of October 31, 2004.
The average quality rating of the investments, in the following table
was Aaa/AAA (Moody's and Standard & Poor's bond rating services).
Portfolio Quality Analysis
% of Total Portfolio
--------------------
as of as of
Rating 10/31/04 10/31/03
------ -------- --------
<s> <c> <c>
Aaa/AAA 73.32% 75.13%
Aa/AA 24.94% 22.95%
A 1.74% 1.05%
Baa/BBB 0% 0.87%
Not Rated 0% 0%
The Fund will continue its policy of seeking the highest tax
advantaged yields available, consistent with maintaining quality and
diversification objectives.
(a) For 2004, shareholders subject to a maximum Federal tax rate of 35%
and a Rhode Island tax rate of 9.90% of federal taxable income. All
dividend income is exempt from local, state and Federal taxes for
Rhode Island residents. Capital gains taxes will apply to any
distributed capital gains.
(b) Past performance is no guarantee of future results. Total return does
not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares. The offering
price reflects a maximum sales charge of 4.00%.
2
MANAGEMENT'S DISCUSSION OF INVESTMENT PERFORMANCE
October 31, 2004 marked the end of the Fund's eighteenth fiscal year.
During the prior 12 months, the Fund's net asset value (NAV) declined from
$10.48 to $10.46. Significantly impacting the Fund was the continuing bond
market rally as yields again slid during the year despite the Federal
Reserve's efforts toward moderate rate hikes in interest rates. The Fund's
dividend distribution declined from $0.42 to $0.35 per share during the
year while the Fund's total return on net asset value was 3.55%.
During the year the Fund's management slightly increased the Fund's
average maturity from 10.6 to 11.0 years while the Aaa/AAA component of the
portfolio was reduced to 73%. Fund management has worked to stabilize the
Fund's dividend distribution in the face of the portfolio's higher coupon
bonds being pre-refunded or called away. Further, management has strived to
balance the attractiveness of purchasing higher yielding, longer-term bonds
against the potential risk to preservation of principal if a rising rate
environment were to develop and be sustained.
Management has implemented swaps out of shorter maturity, lower
yielding positions into longer maturity, higher yielding investments with
minimal impact on the Fund's average maturity. Uninsured bonds, as opposed
to insured bonds, also offer investment opportunities for improving credits
and higher yield. Fund management remains focused on the Fund's investment
objective to provide as high a level of current income, exempt from Federal
and Rhode Island tax, as is consistent with the preservation of principal.
Fund Expenses Borne by Shareholders During the Period from
May 1, 2004 through October 31, 2004.
As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, including sales charges (loads) on certain purchase
payments, and (2) ongoing costs, including management fees; distribution
and service (12b-1) fees; and other Fund expenses. This example is intended
to help you understand your ongoing costs (in dollars) of investing in the
Fund and to compare these costs with the ongoing costs of investing in
other mutual funds.
The example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period, May 1, 2004 through
October 31, 2004.
Actual Expenses
The first line in the table provides information about actual account
values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply
the result by the number in the first line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your
account during this period.
3
Hypothetical Example for Comparison Purposes
The second line in the table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual
expenses ratio and an assumed rate of return of 5% per year before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use the information to
compare the ongoing costs of investing in the Fund and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples
that appear in the shareholder reports of the other funds.
Expenses Table
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any transactional
costs, such as sales charges (loads). Therefore, the second line in the
table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been
higher.
Expenses
Annualized Beginning Ending Paid During
Expense Account Value Account Value* Period**
Ratio 5/1/04 10/31/04 5/1/04-10/31/04
---------- ------------- -------------- ---------------
<s> <c> <c> <c> <c>
Actual 1.23% $1,000 $1,028 $6.27
Hypothetical 1.23% $1,000 $1,025 $6.26
<FN>
* Ending account value reflects the ending account value assuming the
actual return per year before expenses (Actual) and a hypothetical 5%
return per year before expenses (Hypothetical).
** Expenses paid is equal to the annualized expense ratio for the most
recent 6 month period, as shown above, multiplied by the average
account value over the period multiplied by the number of days in the
period divided by the number of days in the year. Expenses paid do
not include any applicable sales charges (loads) or redemption fees.
If these transaction costs had been included, your costs would have
been higher.
</FN>
4
OCEAN STATE TAX EXEMPT FUND
STATEMENT OF ASSETS AND LIABILITIES
as of October 31, 2004
ASSETS
<s> <c>
Investments at value (identified cost $29,406,716) (Note 1A) $31,115,968
Cash 153,129
Interest receivable 343,474
Prepaid expense 7,108
Receivable for Capital Stock Sold 25,000
-----------
TOTAL ASSETS $31,644,679
LIABILITIES
Distribution payable to shareholders 43,427
Accrued management fees 16,085
-----------
TOTAL LIABILITIES $ 59,512
===========
NET ASSETS $31,585,167
===========
Net Assets consist of:
Shares of beneficial interest at par ($.01/share) $ 30,208
Additional paid-in capital 29,852,744
Accumulated net realized gain on investment transactions 53,754
Distributions in excess of net investment income (60,791)
Net unrealized appreciation of investments 1,709,252
-----------
TOTAL-REPRESENTING NET ASSETS AT VALUE FOR 3,020,782 SHARES
OUTSTANDING $31,585,167
===========
COMPUTATION OF NET ASSET VALUE & OFFERING PRICE:
Net Assets $31,585,167
Divided by number of shares outstanding 3,020,782
Net asset value $ 10.46
===========
Offering price $ 10.90
===========
See Notes to Financial Statements.
5
OCEAN STATE TAX EXEMPT FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2004
<s> <c> <c>
Investment Income
Interest income (Note 1B) $1,446,360
Expenses:
Adviser fees (Note 2) $109,490
Administrator fees (Note 2) 78,207
Transfer agent fees 55,343
Auditing fees 36,275
Legal fees and expenses 30,896
Trustees fees and expenses 25,250
Distribution expenses (Note 5) 14,374
Custody 19,368
Shareholder reports 7,106
Pricing fees 3,133
Miscellaneous expenses 3,678
Insurance 1,377
Registration fees 1,950
--------
$386,447
----------
Net Investment Income $1,059,913
Realized and Unrealized Gain/(Loss) on Investments
Net Realized Gain on Investments 23,002
Net Change in Unrealized Appreciation of Investments 53,989
--------
Net Realized and Unrealized Loss on Investments 76,991
----------
Net Increase in Net Assets Resulting from Operations $1,136,904
==========
See Notes to Financial Statements.
6
OCEAN STATE TAX EXEMPT FUND
STATEMENTS OF CHANGES IN NET ASSETS
Fiscal Year Fiscal Year
Ended Ended
October 31, 2004 October 31, 2003
---------------- ----------------
<s> <c> <c>
Increase (Decrease) in Net Assets Resulting from:
Operations:
Net investment income $ 1,059,913 $ 1,317,767
Net realized gain on investments 23,002 90,977
Change in unrealized appreciation/depreciation
of investments 53,989 (161,791)
----------- -----------
Net increase in net assets resulting from operations $ 1,136,904 $ 1,246,953
Dividends and distributions to shareholders from:
Net investment income ($.35 per share in 2004 and
$.42 per share in 2003) (1,059,913) (1,317,766)
Net realized gains ($.03 per share in 2004 and
$.03 per share in 2003) (92,412) (105,799)
Net increase/decrease from fund share transactions
(Note 4) (1,514,293) (2,797,165)
----------- -----------
Total decrease in net assets (1,529,714) (2,973,777)
NET ASSETS:
Beginning of year 33,114,881 36,088,658
----------- -----------
End of year $31,585,167 $33,114,881
=========== ===========
See Notes to Financial Statements.
7
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.
Fiscal Fiscal Fiscal Fiscal Fiscal
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
-------- -------- -------- -------- --------
<s> <c> <c> <c> <c> <c>
Per Share Operating Performance:
Net Asset Value, Beginning of Year $ 10.48 $ 10.54 $ 10.55 $ 10.25 $ 10.12
Net investment income .35 .42 .45 .47 .49
Net realized and unrealized gain (loss)
on securities .01 (.03) (.01) .30 .13
------- ------- ------- ------- -------
Total from Investment Operations .36 .39 .44 .77 .62
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment income (.35) (.42) (.45) (.47) (.49)
Distribution from net realized gains (.03) (.03) (.00) (.00) (.00)
------- ------- ------- ------- -------
Total Distributions (.38) (.45) (.45) (.47) (.49)
------- ------- ------- ------- -------
Net Asset Value, End of Year $ 10.46 $ 10.48 $ 10.54 $ 10.55 $ 10.25
======= ======= ======= ======= =======
Total investment return at Net Asset
Value (a) 3.55% 3.60% 4.21% 7.63% 6.22%
Ratios and Supplemental Data:
Net Assets , End of Year (000's
omitted) $31,585 $33,115 $36,089 $36,303 $37,526
Ratio of expenses to average
net assets 1.24% 1.06% 1.04% 1.19% 1.12%
Ratio of net investment income to
average net assets 3.40% 3.82% 4.25% 4.52% 4.76%
Portfolio turnover 15% 19% 17% 4% 5%
Fund expenses per share .13 .12 .11 .13 .12
Net investment income per share .35 .42 .45 .47 .49
<FN>
(a) Total investment return does not reflect sales load.
</FN>
See Notes to Financial Statements.
8
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
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. The
Declaration of Trust permits the Trustees to create additional portfolios
(funds). As of October 31, 2004 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 October 31, 2004, 93.14% 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 October 31, 2004, 80.98% 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 21.38% of the portfolio.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 are frequently 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, trading charactaristics, broker quotes and other
local market conditions. Valuations developed through pricing techniques
may vary from the actual amounts realized upon sale of the securities, and
the potential variation may be greater for those securities valued using
fundamental analysis. 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.
9
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS-(Continued)
NOTE 1 Significant Accounting Policies (continued)
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.
The tax character of distributions as reported on the Statements of
Changes in Net Assets for the years ended October 31, 2004 and 2003 were as
follows:
2004 2003
---- ----
<s> <c> <c>
Tax-Exempt Income $1,059,913 $1,317,766
Long-Term Capital Gains 92,412 105,799
As of October 31, 2004, the components of distributable earnings on a
tax basis were as follows:
<s> <c>
Undistributed Long-Term Capital Gains $ 27,984
Unrealized Appreciation 1,735,058
Undistributed Tax-Exempt Income 27,582
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.
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 pays 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 October 31, 2004 was $2,000.
Legal fees and expenses of $30,896 were paid to a firm of which the
Fund's Secretary is a partner.
During the period November 1, 2003 through October 31, 2004, the
Distributor received $7,537 in commissions as a result of Fund share sales.
10
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS-(Continued)
NOTE 3 INVESTMENT TRANSACTIONS
During the period ended October 31, 2004 purchases and sales of
investment securities, other than short-term investments, aggregated
$4,514,556 and $6,189,385, respectively. The aggregate cost of investments
for Federal income tax purposes is substantially the same as the aggregate
cost for financial statement purposes. At October 31, 2004, gross
unrealized appreciation on investment securities was $1,714,684 and gross
unrealized depreciation on investment securities was $5,432.
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:
Shares Amount
------ ------
<s> <c> <c>
Balance at 10/31/02 3,425,514 $34,194,410
Shares sold 224,010 2,360,385
Shares issued in reinvestment of dividends 77,128 812,802
Shares redeemed (567,847) (5,970,352)
--------- -----------
Net decrease (266,709) (2,797,165)
--------- -----------
Balance at 10/31/03 3,158,805 $31,397,245
========= ===========
Shares sold 312,218 3,209,753
Shares issued in reinvestment of dividends 57,598 601,754
Shares redeemed (507,839) (5,325,800)
--------- -----------
Net decrease (138,023) (1,514,293)
--------- -----------
Balance at 10/31/04 3,020,782 $29,882,952
========= ===========
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 $14,374 under the Plan during fiscal 2004.
NOTE 6 TAX INFORMATION (Unaudited)
Of the distributions paid by the Fund from investment income, 100% is
tax-exempt for Federal income tax purposes.
For the year ended October 31, 2004, the amount of long-term capital
gain distributions designated by the Fund was $27,984.
11
OCEAN STATE TAX EXEMPT FUND
PORTFOLIO OF INVESTMENTS
as of October 31, 2004
Ratings
Principal Moody's/ Value
Amount Standard & Poor's (b) (Note 1)
- --------- --------------------- --------
<s> <c> <c> <c>
MUNICIPAL SECURITIES (98.51%) (a)
Rhode Island General Obligation and Revenue (65.47%) (a)
$ 500,000 Barrington School District 5.00%, 10/1/14 Aa-2/NR $ 546,875
200,000 Burrillville General Obligation FGIC Insured 5.70%, 5/1/11 Aaa/AAA 207,786
300,000 East Providence General Obligation MBIA Insured 5.70%,
5/15/10 Aaa/AAA 311,958
300,000 Lincoln General Obligation FGIC Insured 5.60%, 8/1/12 Aaa/NR 314,373
225,000 Middletown General Obligation 4.00%, 7/15/12 Aa-3/NR 236,531
210,000 Newport General Obligation MBIA Insured 6.50%, 8/15/06 Aaa/AAA 213,494
75,000 North Kingstown General Obligation 6.70%, 12/15/05 Aa-3/NR 78,937
80,000 North Kingstown General Obligation 6.80%, 12/15/06 Aa-3/NR 87,400
200,000 North Kingstown General Obligation FGIC Insured 5.70%,
10/1/18 Aaa/NR 223,000
120,000 North Providence General Obligation MBIA Insured 6.00%,
10/01/09 Aaa/AAA 120,355
500,000 North Providence General Obligation FSA Insured 4.00%,
10/15/17 Aaa/AAA 508,750
250,000 North Smithfield General Obligation FGIC Insured 4.00%,
10/15/12 Aaa/NR 263,437
500,000 Pawtucket General Obligation AMBAC Insured 5.00%, 4/15/09 Aaa/NR 551,250
500,000 Pawtucket General Obligation CGIC Insured 6.00%, 3/15/15 Aaa/AAA 517,750
500,000 Pawtucket General Obligation CGIC Insured 6.00%, 3/15/11 Aaa/AAA 517,750
500,000 Pawtucket General Obligation CGIC Insured 6.00%, 3/15/13 Aaa/AAA 517,750
500,000 Pawtucket General Obligation CGIC Insured 6.00%, 3/15/12 Aaa/AAA 517,750
500,000 Providence General Obligation FSA Insured 5.00%, 7/15/14 Aaa/AAA 563,125
200,000 Providence Public Bldg. Auth. FSA Insured 5.10%, 12/15/08 Aaa/AAA 218,000
150,000 Providence Public Bldg. Auth. MBIA Insured 5.50%, 12/15/13 Aaa/AAA 162,937
500,000 Providence Public Bldg. Auth. AMBAC Insured 5.125%,
12/15/14 Aaa/AAA 550,625
185,000 Providence Public Bldg. Auth. FSA Insured 5.00%, 12/15/18 Aaa/AAA 195,638
250,000 Providence Public Bldg. Auth. AMBAC Insured 5.25%,
12/15/15 Aaa/AAA 277,187
500,000 Providence Redevelopment Auth. AMBAC Insured, 5.30%,
4/1/12 Aaa/NR 557,500
200,000 Providence Redevelopment Radian Insured 4.25%, 9/1/13 NR/AA 209,250
24,000 Warwick General Obligation MBIA Insured 6.60%, 11/15/06 Aaa/AAA 24,063
250,000 Warwick General Obligation FSA Insured 4.00%, 7/15/11 Aaa/AAA 263,750
250,000 Warwick General Obligation FSA Insured 4.125%, 7/15/13 Aaa/AAA 263,125
145,000 Rhode Island Clean Water Pre-refunded U.S. T MBIA Insured
6.50%, 10/1/06 Aaa/AAA 147,745
150,000 Rhode Island Clean Water MBIA Insured 5.30%, 10/1/07 Aaa/AAA 163,125
100,000 Rhode Island Clean Water AMBAC Insured 4.75%, 10/1/18 Aaa/AAA 104,625
225,000 Rhode Island Clean Water MBIA Insured 5.00%, 10/1/18 Aaa/AAA 239,906
500,000 Rhode Island Clean Water MBIA Insured 5.00%, 10/1/19 Aaa/AAA 548,750
650,000 Rhode Island Depositors Economic Protection Corp.
MBIA Insured Escrowed to Maturity 6.55%, 8/1/10 Aaa/AAA 754,094
215,000 Rhode Island Depositors Economic Protection Corp.
CAPMAC Guaranteed Escrowed to Maturity 6.375%, 8/1/22 Aaa/AAA 276,006
250,000 Rhode Island Depositors Economic Protection Corp. Escrowed
to Maturity 5.75%, 8/1/21 Aaa/NR 295,938
12
OCEAN STATE TAX EXEMPT FUND
PORTFOLIO OF INVESTMENTS-(Continued)
Ratings
Principal Moody's/ Value
Amount Standard & Poor's (b) (Note 1)
- --------- --------------------- --------
<s> <c> <c> <c>
MUNICIPAL SECURITIES (98.51%) (a)-(Continued)
Rhode Island General Obligation and Revenue (65.47%) (a)-(Continued)
$ 250,000 Rhode Island Economic Department of Transportation FSA
Insured 5.25%, 6/15/10 Aaa/AAA $ 280,625
500,000 Rhode Island Economic Department of Transportation AMBAC
Insured 3.75%, 6/15/13 Aaa/AAA 515,000
500,000 Rhode Island Economic Development Corp. Airport Revenue
FSA Insured 5.25%, 7/1/12 Aaa/AAA 545,000
395,000 Rhode Island Economic Development Corp. Airport Revenue
FSA Insured 5.25%, 7/1/13 Aaa/AAA 429,069
545,000 Rhode Island Economic Development Corp. Airport Revenue
FSA Insured 5.25%, 7/1/14 Aaa/AAA 590,644
450,000 Rhode Island Economic Development Corp. Airport Revenue
FSA Insured 5.00%, 7/1/18 Aaa/AAA 478,688
1,100,000 Rhode Island Economic Development Corp. Providence Place
Radian Insured 6.125%, 7/1/20 NR/AA 1,270,500
100,000 RI COPS MBIA Insured 5.375%, 10/1/16 Aaa/AAA 109,000
300,000 Rhode Island Lease Participation Certificate Shepard Bldg.
AMBAC Insured 5.125%, 6/1/12 Aaa/AAA 326,625
500,000 Rhode Island Refunding Bond Authority AMBAC Insured
5.25%, 2/1/10 Aaa/AAA 551,875
500,000 Rhode Island General Obligation MBIA Insured 5.00%, 9/1/18 Aaa/AAA 539,375
300,000 Rhode Island General Obligation FGIC Insured 5.125%, 7/15/14 Aaa/AAA 324,000
480,000 Rhode Island General Obligation FGIC Insured 5.00%, 8/1/14 Aaa/AAA 525,600
500,000 Rhode Island General Obligation MBIA Insured 5.75%, 8/1/15 Aaa/AAA 537,500
1,000,000 Rhode Island General Obligation FGIC Insured 5.50%, 9/1/16 Aaa/AAA 1,116,250
400,000 Rhode Island Cons. Cap. Dev. FGIC Insured 5.40%, 9/1/14 Aaa/AAA 455,000
250,000 Rhode Island Cons. Cap. Dev. FGIC Insured 5.00%, 9/1/16 Aaa/AAA 266,563
250,000 Rhode Island Cons. Cap. Dev. FGIC Insured 5.00%, 9/1/15 Aaa/AAA 267,500
-----------
Total Rhode Island General Obligation and Revenue $20,679,349
-----------
Rhode Island Health & Education Building Corporation (19.76%) (a)
$ 100,000 University of Rhode Island AMBAC Insured 5.20%, 9/15/15 Aaa/AAA $ 109,000
300,000 University of Rhode Island AMBAC Insured 5.20%, 9/15/16 Aaa/AAA 326,250
100,000 Bryant College AMBAC Insured 4.60%, 6/1/12 Aaa/AAA 109,375
100,000 Brown University 4.75%, 9/1/12 Aa-1/AA+ 105,875
200,000 Brown University 5.90%, 9/1/14 Aa-1/AA+ 210,694
780,000 Brown University 5.25%, 9/1/16 Aa-1/AA+ 858,975
400,000 Brown University 5.00%, 9/1/19 Aa-1/AA+ 420,000
500,000 Brown University 5.00%, 9/1/23 Aa-1/AA+ 518,125
250,000 Salve Regina College Radian Insured 5.25%, 3/15/18 NR/AA 270,000
750,000 Johnson & Wales College MBIA Insured 5.00%, 4/1/29 Aaa/AAA 771,563
500,000 Johnson & Wales College XL Capital 5.25%, 4/1/14 Aaa/AAA 565,000
250,000 Rhode Island School of Design MBIA Insured 4.40%, 6/1/15 Aaa/AAA 265,000
585,000 Rhode Island School of Design MBIA Insured 4.60%, 6/1/17 Aaa/AAA 620,831
500,000 St. Antoine Residence LOC-Allied Irish Bank 6.125%, 11/15/18 Aa-3/NR 532,500
300,000 Lifespan MBIA Insured 5.75%, 5/15/23 Aaa/AAA 328,125
100,000 United Methodist Elder Care LOC-Fleet Bank 7.50%, 11/1/14 NR/AA- 102,500
125,000 New England Tech Inst. Connie Lee Insured 6.00%, 3/1/15 NR/AAA 127,988
-----------
Total Rhode Island Health & Education Building Corporation $ 6,241,801
-----------
13
OCEAN STATE TAX EXEMPT FUND
PORTFOLIO OF INVESTMENTS-(Continued)
Ratings
Principal Moody's/ Value
Amount Standard & Poor's (b) (Note 1)
- --------- --------------------- --------
<s> <c> <c> <c>
MUNICIPAL SECURITIES (98.51%) (a)-(Continued)
Rhode Island Housing & Mortgage Finance Corporation (7.90%)(a)
$ 180,000 5.65%, 10/1/07 NR/A $ 184,912
250,000 4.00%, 4/1/13 Aa-2/AA+ 251,875
400,000 5.00%, 10/1/16 Aa-2/AA+ 409,000
10,000 6.50%, 10/1/22 Aa-2/AA+ 10,019
250,000 5.40%, 10/1/16 Aa-2/AA+ 257,812
950,000 4.30%, 10/1/17 Aa-2/AA+ 963,062
400,000 5.40%, 10/1/17 Aa-2/AA+ 414,500
5,000 6.50%, 4/1/27 Aa-2/AA+ 5,012
-----------
Total Rhode Island Housing & Mortgage Finance Corporation $ 2,496,192
-----------
TOTAL RHODE ISLAND BONDS (93.14%) (a) $29,417,342
===========
Puerto Rico Bonds (5.38%) (a)
$ 350,000 Puerto Rico Commonwealth 5.00%, 7/1/29 Baa1/A- $ 358,313
250,000 Puerto Rico Electric Power Authority MBIA Insured 5.00%,
7/1/10 Aaa/AAA 274,063
500,000 Puerto Rico Electric Power Authority MBIA Insured 5.125%,
7/1/29 Aaa/AAA 519,375
500,000 Puerto Rico Municipal Finance Auth. FSA Insured 5.50%,
7/1/17 Aaa/AAA 546,875
-----------
TOTAL PUERTO RICO BONDS (5.38%) (a) $ 1,698,626
-----------
TOTAL INVESTMENTS (Cost $29,406,716)(93.10%) (a) $31,115,968
===========
<FN>
(a) Percentages indicated are based on net assets of $31,585,167 at
October 31, 2004 (total investments plus cash and receivables less
liabilities) which corresponds to a net asset value per share of
$10.46.
(b) 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 and are unaudited.
The ratings indicated are the most current available and are
unaudited. 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. 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)
(c) 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
CAPMAC -Capital Markets Assurance Corp.
Radian -Radian Insurance Co.
</FN>
See Notes to Financial Statements.
14
OCEAN STATE TAX EXEMPT FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of VLC Trust and
Shareholders of Ocean State Tax Exempt Fund
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Ocean State Tax Exempt Fund (the
"Fund") (a portfolio of the VLC Trust), as of October 31, 2004, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements
and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 2004, by correspondence with the
custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Ocean State Tax Exempt Fund at October 31, 2004, the results of its
operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended, in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
December 10, 2004
15
Trustees and Officers
The Trustees of the Fund are responsible for the management and
direction of the business and affairs of the Fund. The Trustees and
officers of the Fund, their affiliations, if any, with the Adviser, and
their principal occupations during at least the past five years are set
forth below. Trustees who are "interested persons" of the Fund as that term
is defined in the 1940 Act are designated with an (*) asterisk. Age of the
Trustee is in parentheses ( ). The VLC Trust consists of one investment
portfolio. The Fund's Statement of Additional Information includes
additional information about Trustees and is available, without charge and
upon request, by calling 401-421-1411.
Trustees Background
Name, Address and Age Position(s) Held with Fund Principal Occupation(s) During Past Five Years
- --------------------- -------------------------- ----------------------------------------------
<s> <c> <c>
Alfred B. Van Liew *(69) President (since 1987) Managing Partner of the Adviser, since 1984;
One Regency Plaza and Trustee (since Director of the Distributor since May 1990;
Suite One 1986) Chairman and Chief Executive Officer of Van
Providence, Rhode Island 02903 Liew Trust Company, a Rhode Island chartered
trust company, since 1984; Trustee of Preserve
Rhode Island since 1971; Adviser to the
National Trust for Historic Preservation since
1983; Trustee of St. Andrew's School since
1984; Trustee of the Museum of Yachting since
1988; and Trustee of the Seamen's Institute,
Newport, Rhode Island since 1994.
John St. Sauveur * (70) Trustee (since 1992) Director of the Advisor; President and CEO,
219 Great Road WestBank Realty Corporation; Director of the
North Smithfield Community College of Rhode Island Foundation;
Rhode Island 02896 Chairman, Woonsocket Industrial Development
Corporation; Chairman, Greater Woonsocket
Industrial Development Foundation; Vice
Chairman, North Smithfield Industrial
Development Commission; a vice president and
director, Rhode Island Chamber of Commerce
Federation; Member, Rhode Island State
Job Training Coordinating Council; Finance
Chairman, Landmark Medical System and
Trustee, Landmark Medical Center; Commis-
sioner of the Rhode Island Resource Recovery
Corporation since 1992; Chairman, The
Rehabilitation Hospital of Rhode Island; Director
and Corporate Secretary, Gooding Realty
Corporation.
16
Name, Address and Age Position(s) Held with Fund Principal Occupation(s) During Past Five Years
- --------------------- -------------------------- ----------------------------------------------
<s> <c> <c>
Mary Ann Altrui (61) Trustee (since 2001) Administrator of St. Antoine Residence (a
10 Rhodes Avenue nursing facility) (1988-Present); Director of
North Smithfield, Rhode Island Diocesan Elder Care Services (1997-Present);
02896 Oversight responsibility for St. Clare Home;
Founding member with St. Elizabeth
Community, Scandinavian Home and Steere
House of "CareLink", a Management service
organization incorporated in 1997; Member of
the American College of Health Care Administra-
tors, the Diocesan Biomedical Ethics Commis-
sion of the North Smithfield Advisory Council;
Director of Woonsocket Industrial Development
Corporation and WIDC Realty Corporation, and
serves on advisory committees for the Diocese
of Providence, the State of Rhode Island, and
the Nonprofit Association of Facilities and
Services for the Aging.
Milton C. Bickford, Jr. (72) Trustee (since 1987) Private investor since 1989; Director (Chairman
147 Beavertail Road 1999-2002) of AAA Southern New England;
Jamestown, Rhode Island 02835 CEO National Bickford Foremost, Inc. (national
color printing firm) (1980-1989); Trustee,
National Traffic Safety Foundation
(1999-2002).
Meredith A. Curren (44) Trustee Since 1990, Chief Financial Officer, Pease &
75 Pennsylvania Avenue (since 2001) Curren, Inc. (refiners of precious metals).
Warwick, Rhode Island 02888 Director of Bancorp Rhode Island, Inc.
and Bank Rhode Island; Board Member,
Providence Jewelers Club; Board Member,
Providence Chamber of Commerce; Partner,
SVP RI Social Venture Partners of RI.
Michael E. Hogue (61) Trustee (since 1989) Managing Partner, eTime (insurance services)
116 Chestnut Street (February 2002-present); President, VIAcorp.
Providence, Rhode Island 02903 (financial services) (June 1994-present);
Assistant Professor of Insurance at the Wharton
School, University of Pennsylvania; Trustee of
Trinity Repertory Company (1997-present);
President of the Jewelry District
Association (1999-present).
17
Name, Address and Age Position(s) Held with Fund Principal Occupation(s) During Past Five Years
- --------------------- -------------------------- ----------------------------------------------
<s> <c> <c>
Arthur H. Lathrop (49) Trustee (since 2001) In practice as a Certified Public Accountant (sole
28 Spruce Street proprietor) in Westerly, RI (1991-present);
Westerly, Rhode Island 02891 Member of American Institute of Certified Public
Accountants. Trustee (1998-present) and
Chairman of the Audit Committee of Westerly
Savings Bank; Trustee and Assistant Treasurer
(1990-present) of River Bend Cemetery
Company; Corporator (1989-present) of
Community Health of Westerly, Inc.;
Professional Advisory Council Member
(1995-2000) of The Rhode Island Foundation;
Incorporator of Memorial & Library Association
of Westerly (2004-present).
Alice M. Macintosh (82) Trustee (since 1986) Marketing consultant since 1991; Chief Supervi-
861 Stratford Lane sory Clerk of the State's Superior Court (1986-
Warwick, Rhode Island 02886 1991); previously a Marketing Consultant and
Vice-President of Marketing at Hospital Trust
National Bank.
Lawrence B. Sadwin (60) Trustee (since 2001) President , Lifestyle Security, LLC (since August
18 Oyster Point 2002), Division Marketing Leader for General
Warren, Rhode Island 02885 Electric (2000-2002); Chief Operating Officer
(1999-2000), Regional Manager (1998-1999),
Recruiter (1997-1998) and Long Term Care
Specialist (1997) for Travelers/NET Plus, Inc.;
Consultant (1994-1997) for MGS Holding
Corporation; Member-At-Large National Board of
Directors, American Heart Association; Member,
National Leadership Council, Research America;
Vice-Chairman, Landmark Medical Center;
Member and counsel to public representatives,
National Institution of Health; Chairman of the
Board, American Heart Association
(2001-2002).
Samuel H. Hallowell, Jr. (56) Vice President (since Partner of the Adviser and Vice President, Van
One Regency Plaza 1989) Liew Trust Company (1984-present);
Suite One Secretary and Past President of the Audubon
Providence, Rhode Island 02903 Society of Rhode Island; Member Providence
Society of Security Analysts.
Joseph J. Healy (36) Vice President (since Investment Officer, Fund Controller and primary
One Regency Plaza 1996) trader of the Adviser (1992-present); Vice
Suite One President, Van Liew Trust Company; President
Providence, Rhode Island 02903 and General Securities Principal of the
Distributor (1993-present); Member Providence
Society of Security Analysts and CFA Institute.
18
Name, Address and Age Position(s) Held with Fund Principal Occupation(s) During Past Five Years
- --------------------- -------------------------- ----------------------------------------------
<s> <c> <c>
Kevin M. Oates (44) Vice President and Partner of the Adviser (1996-present); Chief
One Regency Plaza Treasurer (since 1991) Operating Officer of the Adviser (April 2000-
Suite One present) and Van Liew Trust Company, and Vice
Providence, Rhode Island 02903 President and Treasurer of the Distributor, since
1991; Vice President-Administration of the
Adviser (1991-2000).
Margaret D. Farrell (54) Secretary (since 1986) Partner, Hinckley, Allen & Snyder LLP, general
1500 Fleet Center legal counsel to the Fund, (1981-present);
Providence, Rhode Island, 02903 Director and Secretary of Bancorp Rhode
Island, Inc. and Bank Rhode Island; Director,
Care New England Health System; Director and
Chairman, Women & Infants Corporation;
Trustee and Chairman, Women and Infants
Hospital of Rhode Island; Secretary, Astro-Med,
Inc. (manufacturer of graphic recording and
printing systems).
PRIVACY POLICY
The Van Liew Companies and Ocean State Tax Exempt Fund have always
been committeed to ensuring your financial privacy. We do not sell personal
information to anyone. We recognize and respect the privacy of our
customers. This notice is being sent to comply with the privacy regulations
of the Securities and Exchange Commission. Each of the above financial
institutions has in effect the following policy with respect to nonpublic
personal information about its customers.
* Only such information received from you, through application forms
or otherwise, and information about your transactions will be
collected.
* None of such information about you (or former customers) will be
disclosed to anyone, except as permitted by law (which includes
disclosure to employees necessary to service your account). We do
not disclose nonpublic personal information about you to non-
affiliated third parties.
* Policies and procedures (including physical, electronic and
priocedural safeguards) are in place that are designed to protect
the confidentiality of such information.
19
Investment Adviser & Administrator
Van Liew Capital Inc.
One Regency Plaza, Suite One
Providence, Rhode Island 02903
Distributor
Van Liew Securities, Inc. [LOGO] OCEAN STATE TAX EXEMPT FUND
One Regency Plaza, Suite One
Providence, Rhode Island 02903 (The Portfolio of VLC Trust)
Custodian
PFPC Trust Company
Airport Business Center
200 Stevens Drive, Suite 440
Lester, Pennsylvania 19113
Transfer Agent
Ocean State Tax Exempt Fund Annual Report
C/O PFPC, Inc. October 31, 2004
P.O. Box 9839
Providence, Rhode Island 02903
Independent Registered Public
Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
Counsel
Hinckley, Allen & Snyder LLP
1500 Fleet Center
Providence, Rhode Island 02903
Trustees
Alfred B. Van Liew, Chairman
Mary Ann Altrui
Milton C. Bickford, Jr. Interest income exempt
Meredith A. Curren from Federal and Rhode
Michael E. Hogue Island income taxes
Arthur H. Lathrop from quality municipal
Alice M. Macintosh bonds.
Lawrence B. Sadwin
John H. St. Sauveur
Officers
Alfred B. Van Liew, President
Samuel H. Hallowell, Vice President
Joseph J. Healy, Vice President
Kevin M. Oates, Treasurer
Margaret D. Farrell, Secretary
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics applicable to its
President (as the registrant's principal executive officer), the Treasurer
(as the registrant's principal financial and accounting officer) and any
other person or persons performing the functions of these offices or the
functions of a controller. The registrant undertakes to provide a copy of
such code of ethics to any person upon request, without charge, by calling
1-800-330-1116.
(b) During the period covered by this report, no amendments were adopted
to the registrant's code of ethics applicable to its President, Treasurer
or other persons performing the functions of those offices or the functions
of a controller.
(c) During the period covered by this report, no implicit or explicit
waivers to the provisions of the code of ethics adopted in 2(a) above were
granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's board has
designated Arthur H. Lathrop, an independent trustee, as its audit
committee financial expert. Mr. Lathrop is a practicing certified public
accountant and sole proprietor in Westerly, Rhode Island. Previously, Mr.
Lathrop served as Tax Manager of Sansiveri, Ryan, Sullivan & Co. of
Providence and Westerly, Rhode Island.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (d) The following table sets forth the aggregate fees billed for the
past two fiscal years by the independent auditor Ernst & Young LLP, for
professional services rendered for: (i) the audit of the Fund's annual
financial statements included in the Fund's annual report to shareholders;
and (ii) tax compliance, tax advice and tax return preparation. No fees
were paid for audit related or other services.
Fiscal Year Ended Audit Audit Related Tax All Other
- ----------------- ----- ------------- --- ---------
October 31, 2003 $32,000 $0 $3,500 $0
October 31, 2004 $33,500 $0 $4,000 $0
(e) (1) The Fund's Audit Committee Charter requires the pre-approval of all
audit and non-audit services provided to the Fund by the Fund's independent
auditors. The Fund's Audit Committee Charter also requires pre-approval of
all audit and non-audit services provided to the Adviser and service
affiliates to the extent that these services are directly related to the
operations or financial reporting of the Fund.
(e) (2) All of the amounts for Audit Fees and Tax Fees in the table above
are for services pre-approved by the Fund's Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services for the
past two fiscal years provided to the Fund, the Fund's Adviser and entities
that control, are controlled by or under common control with
the Adviser that provide ongoing services to the Fund, which include
conducting an annual internal control report pursuant to Statement on
Auditing Standards No. 70 ("Service Affiliates"):
All Fees for Non-Audit Total Amount of
Services Provided to the Foregoing Column
Fund, the Adviser and Pre-Approved by
Service Affiliates the Audit Committee
October 31, 2003 $0 $0
October 31, 2004 $0 $0
(h) Not applicable. No non-audit services were provided to the Fund, the
Adviser or any Service Affiliates during the past two fiscal years.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. Registrant
is not a listed issuer as defined in Rule 10A-3 of the Securities Exchange
Act of 1934.
ITEM 6. Please see Schedule of Investments contained in the Report to
Shareholders included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. Not applicable. Registrant is an open-end
management investment company.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure
controls and procedures conducted within 90 days of the filing date of this
report, the President and Treasurer have concluded that those controls and
procedures (as defined in rule 30a-2(c) under the Investment Company Act of
1940) provide reasonable assurance that material information required to be
disclosed by the registrant in this Form N-CSR has been recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms.
(b) There were no significant changes in the registrant's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation described above,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
ITEM 10. EXHIBITS.
(a) Any Code of Ethics, or amendment thereto, that is subject
to the disclosure required by Item 2, to the extent that the registrant
intends to satisfy the Item 2 requirements through filing of an exhibit.
See Item 2.
(b) A separate certification for each principal executive
officer and principal financial officer of the registrant as required by
Rule 30a-2(a) under the Investment Company Act of 1940.
(i) EX-99.(a) CERT - Certification of President pursuant
to Section 302 of the Sarbanes - Oxley Act of 2002 (filed herewith).
(ii) EX-99.(b) CERT - Certification of Vice President and
Treasurer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002
(filed herewith).
(iii) EX-99.906(a) CERT - Certification of President
pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 (filed
herewith).
(iv) EX-99.906(b) CERT - Certification of Vice President
and Treasurer pursuant to Section 906 of the Sarbanes - Oxley Act of 2002
(filed herewith).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
(Registrant) VLC Trust
ON BEHALF OF
OCEAN STATE TAX EMEMPT FUND
Date: January 6, 2005 By: /s/ Alfred B. Van Liew
----------------------
Alfred B. Van Liew
President
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed below
by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
Date: January 6, 2005 By: /s/ Alfred B. Van Liew
----------------------
Alfred B. Van Liew
President
Date: January 6, 2005 By: /s/ Kevin M. Oates
------------------
Kevin M. Oates
Vice President & Treasurer