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
50 KENNEDY PLAZA
SUITE 1500
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: April 30, 2007
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.
- -------------------------------------------------------------------------------
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 AND CHAIRMAN
April 30, 2007
"If it ain't broke don't fix it." The Federal Reserve may be heeding this
bit of folksy advice as they continue to leave the overnight Federal Funds rate
unchanged. Meanwhile, bond market pundits have been making credible arguments
for a need to push rates both up and down. Their arguments: Are we importing
inflation from abroad through higher energy and commodity costs or has the U.S.
housing bubble popped and our economy is faltering? These perspectives are very
divergent viewpoints. Further complicating the traditional behavior of our bond
markets is foreign monetary policy, and demand from pension funds and insurance
companies for our U.S. Treasury bonds - skewing flatter our normal yield curve.
As a result, recent speculation that the Federal Reserve was angling to
drop the Fed Fund's rate has been pushed to the backburner. Fed policy makers
seem to be content that the level and direction of inflation are in a "comfort
zone" that they deem palatable.
What does this environment mean for municipal bond investors like Ocean
State Tax Exempt Fund shareholders?
First and foremost, the tax advantage to a municipal bond fund like the
Ocean State Tax Exempt Fund for a Rhode Island resident in a high tax bracket
is compelling. For 2006, shareholders were subject to a maximum Federal tax
rate of 35% and a Rhode Island tax rate of 9.90% of Federal taxable income. The
Fund only invests in tax-exempt municipal bonds to meet the Fund's objective to
provide a high level of current net income, exempt from Rhode Island and
Federal income taxes*, as is consistent with preservation of capital.
The yield curve for municipal bonds is steeper than the Treasury curve
and subsequently investors can earn higher yields for longer maturities. Fund
management believes that Ocean State's 12 year average maturity provides an
optimal balance between risk and return.
Interest rates are cyclical. They will rise and they will fall. The Ocean
State Tax Exempt Fund has always taken a long-term approach to investing
regardless of the market environment.
Sincerely yours,
/s/ Alfred B. Van Liew /s/ John H. St. Sauveur
Alfred B. Van Liew John H. St. Sauveur
President Chairman of the Board of Trustees
* For certain investors, some dividends may be subject to Federal and State
taxes.
NOT A PART OF THE SEMI-ANNUAL REPORT
OCEAN STATE TAX EXEMPT FUND
INVESTMENT PERFORMANCE REVIEW
as of April 30, 2007
(unaudited)
Prior
November 1, 2006 Fiscal Year May 1, 2002 May 1, 1997
through Ended through through
April 30, 2007 October 31, 2006 April 30, 2007 April 30, 2007
---------------- ---------------- -------------- --------------
Total Rate of Return (b)
Based on:
Net Asset Value ....................... 1.76% 3.56% 3.17% 3.96%
Offering Price ........................ (6.25)% (0.55)% 2.32% 3.53%
As of As of
April 30, 2007 October 31, 2006
-------------- ----------------
30-day Current Yield
Based on:
Net Asset Value ....................... 3.31% 3.30%
Offering Price ........................ 3.18% 3.17%
30-day Tax-Equivalent Yield (a)
Based on:
Net Asset Value ....................... 5.66% 5.64%
Offering Price ........................ 5.44% 5.42%
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, 2007.
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 4/30/07 10/31/06
------ ------- --------
Aaa/AAA ................................. 68.66% 66.50%
Aa/AA ................................... 22.94% 25.94%
A ....................................... 2.22% 2.01%
Baa/BBB ................................. 6.18% 5.55%
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 2006, shareholders were 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
Fund Expenses Borne by Shareholders During the Period from
November 1, 2006 through April 30, 2007.
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, November 1, 2006 through April
30, 2007.
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.
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 11/1/06 4/30/07 11/1/06-4/30/07
---------- ------------- -------------- ---------------
Actual 1.60% $1,000.00 $1,017.60 $8.14
Hypothetical 1.60% $1,000.00 $1,025.00 $8.17
* 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.
3
OCEAN STATE TAX EXEMPT FUND
STATEMENT OF ASSETS AND LIABILITIES
as of April 30, 2007
(unaudited)
ASSETS
Investments at value (identified cost $22,631,697) (Note 1A) .............................. $23,238,767
Interest receivable ....................................................................... 295,993
Prepaid expenses .......................................................................... 1,934
-----------
Total Assets ........................................................................ $23,536,694
LIABILITIES
Overdraft ................................................................................. $ 71,743
Distribution payable to shareholders ...................................................... 32,128
Accrued management fees ................................................................... 11,349
-----------
Total Liabilities ................................................................... $ 115,220
===========
Net Assets .......................................................................... $23,421,474
===========
Net Assets consist of:
Shares of beneficial interest at par ($.01/share) ......................................... $ 23,259
Additional paid-in capital ................................................................ 22,789,003
Accumulated net realized gain on investment transactions .................................. 74,598
Distributions in excess of net investment income .......................................... (72,456)
Net unrealized appreciation of investments ................................................ 607,070
-----------
Total -- Representing Net Assets at Value for 2,325,926 Shares Outstanding ................ $23,421,474
===========
Computation of Net Asset Value & Offering Price:
Net Assets ................................................................................ $23,421,474
Divided by number of shares outstanding ................................................... 2,325,926
Net asset value ........................................................................... $ 10.07
===========
Offering price ............................................................................ $ 10.49
===========
See Notes to Financial Statements.
4
OCEAN STATE TAX EXEMPT FUND
STATEMENT OF OPERATIONS
For the period ended April 30, 2007
(unaudited)
Investment Income
Interest income (Note 1C) .................................................. $ 600,068
Expenses:
Adviser fees (Note 2) ......................................... $ 43,910
Administrator fees (Note 2) ................................... 31,364
Transfer agent fees ........................................... 38,138
Auditing fees ................................................. 21,316
Legal fees and expenses ....................................... 9,383
Trustees fees and expenses .................................... 12,500
Custody ....................................................... 9,959
Shareholder reports ........................................... 5,254
Miscellaneous expenses ........................................ 1,993
Pricing fees .................................................. 1,530
Registration fees ............................................. 988
Insurance ..................................................... 689
--------
$177,024
---------
Net Investment Income ................................................ $ 423,044
Realized and Unrealized Gain/(Loss) on Investments
Net Realized Gain/(Loss) on Investments ......................... $ 38,212
Net Change in Unrealized (Depreciation) of Investments .......... (234,260)
--------
Net Realized and Unrealized (Loss) on Investments .......................... (196,048)
---------
Net Increase in Net Assets Resulting from Operations ....................... $ 226,996
=========
See Notes to Financial Statements.
5
OCEAN STATE TAX EXEMPT FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Fiscal Year
Ended Ended
April 30, 2007 October 31, 2006
-------------- ----------------
(unaudited)
Increase (Decrease) in Net Assets Resulting from:
Operations:
Net investment income ...................................... $ 423,044 $ 881,454
Net realized gain/(loss) on investments .................... 38,212 (2,865)
Change in unrealized appreciation/(depreciation)
of investments ............................................ (234,260) 63,643
----------- -----------
Net increase in net assets resulting from operations ....... $ 226,996 $ 942,232
Dividends and distributions to shareholders from:
Net investment income ($.17 per share in 2007 and
$.33 per share in 2006) ................................... (423,043) (881,453)
Net realized gains ($.00 per share in 2007 and
$.03 per share in 2006) ................................... 0 (92,289)
----------- -----------
Total distributions to shareholders .................... (423,043) (973,742)
Net (decrease) from fund share transactions (Note 4) ....... (2,577,206) (1,942,463)
----------- -----------
Total (decrease) in net assets ......................... (2,773,253) (1,973,973)
NET ASSETS:
Beginning of period ........................................ 26,194,727 28,168,700
----------- -----------
End of period .............................................. $23,421,474 $26,194,727
=========== ===========
See Notes to Financial Statements.
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.
Fiscal Fiscal Fiscal Fiscal Fiscal
Six Months Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
4/30/07 10/31/06 10/31/05 10/31/04 10/31/03 10/31/02
----------- -------- -------- -------- -------- --------
(unaudited)
Per Share Operating Performance:
Net Asset Value, Beginning of Year ..................... $ 10.15 $ 10.16 $ 10.46 $ 10.48 $ 10.54 $ 10.55
Net investment income .................................. .17 .33 .34 .35 .42 .45
Net realized and unrealized gain (loss) on investments . (.08) .02 (.28) .01 (.03) (.01)
------- ------- ------- ------- ------- -------
Total from Investment Operations ....................... .09 .35 .06 .36 .39 .44
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment income ................... (.17) (.33) (.34) (.35) (.42) (.45)
Distribution from net realized gains ................... (.00) (.03) (.02) (.03) (.03) (.00)
------- ------- ------- ------- ------- -------
Total Distributions .................................... (.17) (.36) (.36) (.38) (.45) (.45)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ........................... $ 10.07 $ 10.15 $ 10.16 $ 10.46 $ 10.48 $ 10.54
======= ======= ======= ======= ======= =======
Total investment return at Net Asset Value (a) ......... 1.76% 3.56% 0.56% 3.55% 3.60% 4.21%
Ratios and Supplemental Data:
Net Assets, End of Year (000's omitted) ................ $23,421 $26,195 $28,169 $31,585 $33,115 $36,089
Ratio of expenses to average net assets (b) ............ 0.80% 1.49% 1.39% 1.24% 1.06% 1.04%
Ratio of net investment income to average
net assets (c) ........................................ 1.67% 3.28% 3.27% 3.40% 3.82% 4.25%
Portfolio turnover ..................................... 0% 1% 13% 15% 19% 17%
Fund expenses per share ................................ .07 .15 .14 .13 .12 .11
Net investment income per share ........................ .17 .33 .34 .35 .42 .45
(a) Total investment return does not reflect sales load. 2007 total investment
return is not annualized.
(b) 2007 ratio of expenses to average net assets is not annualized.
(c) 2007 ratio of net investment income to average net assets is not annualized.
Average share method was used to calculate financial highlights.
See Notes to Financial Statements.
7
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 2007
(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. The
Declaration of Trust permits the Trustees to create additional portfolios
(funds). As of April 30, 2007 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, 2007, 93.25% of the Fund's net assets are invested in Rhode
Island municipal securities. Economic changes affecting 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, 2007, 79.36%
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 21.24% 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 at least weekly on the
basis of valuations furnished by a pricing service since such valuations are
believed to reflect the fair value of such securities, and adjusted as needed
by management based on appropriate factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, broker quotes and other local market
conditions. Valuations developed through pricing techniques may vary from the
actual amounts realized upon sale of the securitites. Securitites 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
8
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS -- (Continued)
April 30, 2007
(unaudited)
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, 2006 and 2005 were as
follows:
2006 2005
---- ----
Tax-Exempt Income .................. $878,381 $965,687
Long-Term Capital Gains ............ 92,289 62,898
Taxable Ordinary Income ............ 3,072 0
The amount and character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States. The book/tax
differences are either considered temporary or permanent in nature. Temporary
differences are generally due to differing book and tax treatments of market
discounts. Permanent differences are generally due to the treatment of market
discount upon disposition. Permanent book and tax basis differences may result
in reclassifications to undistributed (distributions in excess of) net
investment income, accumulated net realized gain (loss) and paid-in capital.
As of October 31, 2006 the components of distributable earnings on a tax
basis were as follows:
Unrealized Appreciation ........................ $862,378
Undistributed Tax-Exempt Income ................
Capital Loss Carry forward ..................... (1,300)
Capital loss carryforward expires on 10/31/14 ..
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 Administrative 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 April 30, 2007 was $2,000. The Chairman of the Board
9
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS -- (Continued)
April 30, 2007
(unaudited)
of Trustees annual retainer is $4,000. The Chairman of the Audit Committee's
annual retainer is $2,500.
Legal fees and expenses of $9,383 were paid to a firm of which the Fund's
Secretary is a partner.
Van Liew Securities, Inc., a subsidiary of the Adviser, is the
Distributor of the fund ("the Distributor"). During the period November 1, 2006
through April 30, 2007, the Distributor received $1,001 in commissions as a
result of Fund share sales.
NOTE 3 Investment Transactions
During the period ended April 30, 2007 purchases and sales of investment
securities, other than short-term investments, aggregated $ 0 and $2,354,285,
respectively. The aggregate cost of investments for Federal income tax purposes
was $22,631,697. At April 30, 2007, gross unrealized appreciation on investment
securities was $620,099 and gross unrealized depreciation on investment
securities was $13,029.
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
------ ------
Balance at 10/31/05 ............................ 2,773,653 $27,331,931
Shares sold .................................... 51,974 525,457
Shares issued in reinvestment of dividends ..... 47,149 476,296
Shares redeemed ................................ (291,446) (2,944,216)
--------- -----------
Net decrease ................................... (192,323) (1,942,463)
--------- -----------
Balance at 10/31/06 ............................ 2,581,330 $25,389,468
========= ===========
Shares sold .................................... 20,857 211,135
Shares issued in reinvestment of dividends ..... 20,566 207,943
Shares redeemed ................................ (296,827) (2,996,284)
--------- -----------
Net decrease ................................... (255,404) (2,577,206)
--------- -----------
Balance at 4/30/07 ............................. 2,325,926 $22,812,262
========= ===========
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.
10
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS -- (Continued)
April 30, 2007
(unaudited)
NOTE 6 Tax Information (unaudited)
For the year ended October 31, 2006 the amount of long-term capital gain
distributions designated by the Fund was $92,289. The amount of tax exempt
interest dividends distributed by the Fund was $878,381. The amount of ordinary
income dividends distributed by the Fund was $3,072.
NOTE 7 Disclosure in the Tax Section of the Notes
On July 13, 2006, the Financial Accounting Standards Board (FASB)
released FASB Interpretation No. 48 "Accounting for Uncertainty in Income
Taxes" (FIN 48). FIN 48 provides guidance for how uncertain tax positions
should be recognized, measured, presented and disclosed in the financial
statements. FIN 48 requires the evaluation of tax positions taken or expected
to be taken in the course of preparing the Fund's tax returns to determine
whether the tax positions will "more-likely-than-not" be sustained by the
applicable tax authority. Tax positions not deemed to meet the more-likely-
than-not threshold would be recorded as a tax benefit or expense in the
reporting period. Adoption of FIN 48 is required for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years as of the
effective date. At this time, management is evaluating the implications of FIN
48 and any impact in the financial statements has not been determined.
NOTE 8 Disclosure in Valuation Section of the Notes
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for measuring
fair value and expanded disclosures about fair value measurements. Management
is evaluating the application of the Statement to the Fund, and believes the
impact will be limited to expanded disclosures resulting from the adoption of
this Statement on the Fund's financial statements.
NOTE 9 Basis for the Board of Trustees Approving the Investment Advisory
Agreement (unaudited)
The Advisory Agreement between the Fund and the Adviser became effective
in March of 1988. The Advisory Agreement was initially approved by the holders
of a majority of the outstanding shares of the Fund and had an initial term of
one year and thereafter is renewed annually. Each annual renewal of the
Advisory Agreement must be approved by a majority of the Board of Trustees or
by a majority of the holders of the Fund's outstanding voting securities. In
addition, each annual renewal is approved by a vote of a majority of the
members of the Board of Trustees who are not parties to the agreement or
interested parties of any such party, cast in person at a meeting called for
such purpose. On November 17, 2006 the Board of Trustees, including a majority
of the disinterested trustees, approved the continuation of the Advisory
Agreement. In approving the Advisory Agreement, the Board of Trustees
considered the qualifications of the Adviser, the scope of the services to be
provided to the Fund, the prior performance of the Adviser, the services to be
provided to the Fund, and the fee and expenses ratios as compared to a peer
group of funds. As part of this approval process, the Board of Trustees
considered quarterly reports provided by the Adviser during the year regarding
the performance of the Fund and reviewed the basic future strategy of
11
OCEAN STATE TAX EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS -- (Continued)
April 30, 2007
(unaudited)
the Adviser with regard to the Fund. In addition, before the Board of Trustees'
meeting to decide on whether to renew the Advisory Agreement, the Adviser was
requested to provided the Board of Trustee with information and material about
the Adviser and its services to the Fund.
As part of its evaluation of the Adviser, the Board of Trustee considered
the nature, extent and quality of services to be provided to the Fund by the
Adviser. The Board of Trustee noted that the Adviser has significant experience
providing investment advice involving fixed-income securities and is qualified
to provide investment advisory services to the Fund. Furthermore, the Board of
Trustees took into account the absence of shareholder complaints and compliance
issues. The Board of Trustees then considered the prior performance of the
Adviser, including the investment results achieved by the Adviser for the Fund
and the investment results of other investment companies with similar
investment objectives. The Board of Trustees determined that the prior
performance of the Adviser was reasonable in comparision to the relevant
benchmarks and that of comparable investment companies, in light of general
market conditions. The Board of Trustees considered information relating to the
Fund's fees, costs and expense ratios and compared such fees, cost and expense
ratio to competitive industry fee structures and expense ratios. The board also
considered whether the Adviser would receive any fall-out benefits through its
relationship with the Fund. The Board of Trustee noted that, except for the
Distributor, none of the Fund's other service providers are affiliates of the
Adviser, and the Distributor has reallocated any load on sales of Fund Shares
to the selling group, and determined, therefore, there are no fall-out benefits
accruing to the Adviser. In addition, the Board of Trustees considered the
Adviser's cost of providing services to the Fund and noted that the Adviser's
compensation is reasonable in comparision to other advisory compensation and
that the Adviser includes in it advisory fee all expenses associated with
administrative services to the Fund. The Board of Trustees noted that every
effort is made to share economies of scale with the Fund's shareholders, but
given the size of the Fund, it economies of scale are less than that of a
larger fund family.
In its deliberations, the Board of Trustees did not identify any single
consideration or particular piece of information that was all important or
controlling in determining whether to approve the Advisory Agreement, although
significant weight was accorded the advisory fee levels relative to industry
averages for comparable funds based on the comparative data presented at the
meeting. The board of Trustees evaluated all information presented to it and
determined that the compensation paid to the Adviser under the Advisory
Agreement was fair and reasonable in light of the services to be performed and
such other matters as the Board of Trustees considered relevant in the exercise
of its reasonable judgment. Also, the Board of Trustees concluded that was
satisfied with the Adviser's services, personnel and investment strategies and
that it was in the best interests of the Fund to continue its relationship with
the Adviser.
12
OCEAN STATE TAX EXEMPT FUND
PORTFOLIO OF INVESTMENTS
as of April 30, 2007
(unaudited)
Ratings
Principal Moody's/ Value
Amount Standard & Poor's (b) (Note 1)
- --------- --------------------- --------
MUNICIPAL SECURITIES (99.22%) (a)
Rhode Island General Obligation and Revenue (65.93%) (a)
$ 500,000 Barrington School District 5.00%, 10/1/14 .......................... Aa-2/NR $ 523,170
250,000 Cranston General Obligation FSA Insured 5.00%, 2/15/24 ............. Aaa/AAA 262,738
250,000 Cranston General Obligation FSA Insured 5.00%, 2/15/22 ............. Aaa/AAA 263,645
225,000 Middletown General Obligation 4.00%, 7/15/12 ....................... Aa-2/NR 227,412
200,000 North Kingstown General Obligation FGIC Insured 5.70%, 10/1/18 ..... Aaa/NR 211,016
250,000 North Providence General Obligation FSA Insured 4.00%, 10/15/17 .... Aaa/AAA 251,693
500,000 Providence General Obligation FSA Insured 5.00%, 7/15/14 ........... Aaa/AAA 539,090
150,000 Providence Public Bldg. Auth. MBIA Insured 5.50%, 12/15/13 ......... Aaa/AAA 153,167
500,000 Providence Public Bldg. Auth. AMBAC Insured 5.125%, 12/15/14 ....... Aaa/AAA 526,035
685,000 Providence Public Bldg. Auth. FSA Insured 5.00%, 12/15/18 .......... Aaa/AAA 708,057
250,000 Providence Public Bldg. Auth. AMBAC Insured 5.25%, 12/15/15 ........ Aaa/AAA 263,725
500,000 Providence Redevelopment Auth. AMBAC Insured, 5.30%, 4/1/12 ........ Aaa/NR 525,655
200,000 Providence Redevelopment Radian Insured 4.25%, 9/1/13 .............. NR/AA 202,426
250,000 Warwick General Obligation FSA Insured 4.00%, 7/15/11 .............. Aaa/AAA 253,075
250,000 Warwick General Obligation FSA Insured 4.125%, 7/15/13 ............. Aaa/AAA 254,500
500,000 West Warwick General Obligation 5.00%, 10/15/25 .................... A-3/NR 515,355
225,000 Rhode Island Clean Water MBIA Insured 5.00%, 10/1/18 ............... Aaa/AAA 233,483
500,000 Rhode Island Clean Water MBIA Insured 4.40%, 10/1/25 ............... Aaa/AAA 502,780
650,000 Rhode Island Depositors Economic Protection Corp. MBIA Insured
Escrowed to Maturity 6.55%, 8/1/10 ................................ Aaa/AAA 687,172
215,000 Rhode Island Depositors Economic Protection Corp. CAPMAC Guaranteed
Escrowed to Maturity 6.375%, 8/1/22 ............................... Aaa/AAA 273,411
250,000 Rhode Island Depositors Economic Protection Corp. Escrowed to
Maturity 5.75%, 8/1/21 ............................................ Aaa/NR 295,940
500,000 Rhode Island Economic Department of Transportation AMBAC Insured
3.75%, 6/15/13 .................................................... Aaa/AAA 500,800
500,000 Rhode Island Economic Development Corp. Airport Revenue FSA Insured
5.25%, 7/1/12 ..................................................... Aaa/AAA 513,610
395,000 Rhode Island Economic Development Corp. Airport Revenue FSA Insured
5.25%, 7/1/13 ..................................................... Aaa/AAA 405,570
545,000 Rhode Island Economic Development Corp. Airport Revenue FSA Insured
5.25%, 7/1/14 ..................................................... Aaa/AAA 559,519
450,000 Rhode Island Economic Development Corp. Airport Revenue FSA Insured
5.00%, 7/1/18 ..................................................... Aaa/AAA 460,206
13
OCEAN STATE TAX EXEMPT FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
(unaudited)
Ratings
Principal Moody's/ Value
Amount Standard & Poor's (b) (Note 1)
- --------- --------------------- --------
MUNICIPAL SECURITIES (a) -- (CONTINUED)
Rhode Island General Obligation and Revenue (Continued)
$ 900,000 Rhode Island Economic Development Corp. Providence Place Radian
Insured 6.125%, 7/1/20 ............................................ NR/AA $ 984,384
100,000 RI COPS MBIA Insured 5.375%, 10/1/16 ............................... Aaa/AAA 101,640
250,000 RI COPS Kent County Courthouse MBIA Insured 5.00%, 10/1/22 ......... Aaa/AAA 263,755
300,000 Rhode Island Lease Participation Certificate Shepard Bldg. AMBAC
Insured 5.125%, 6/1/12 ............................................ Aaa/AAA 303,288
500,000 Rhode Island Refunding Bond Authority AMBAC Insured 5.25%, 2/1/10 .. Aaa/AAA $510,475
500,000 Rhode Island General Obligation MBIA Insured 5.00%, 9/1/18 ......... Aaa/AAA 527,755
1,000,000 Rhode Island General Obligation FGIC Insured 5.50%, 9/1/16 ......... Aaa/AAA 1,049,610
250,000 Rhode Island Cons. Cap. Dev. FGIC Insured 5.00%, 9/1/16 ............ Aaa/AAA 256,740
250,000 Rhode Island Cons. Cap. Dev. FGIC Insured 5.00%, 9/1/15 ............ Aaa/AAA 256,740
1,000,000 Tobacco Settlement Financing Corp. 6.25%, 6/1/42 ................... Baa-3/BBB- 1,073,600
-----------
Total Rhode Island General Obligation and Revenue .................. $15,441,237
-----------
Rhode Island Health & Education Building Corporation (22.28%)(a)
$ 100,000 University of Rhode Island AMBAC Insured 5.20%, 9/15/15 ............ Aaa/AAA $ 105,652
300,000 University of Rhode Island AMBAC Insured 5.20%, 9/15/16 ............ Aaa/AAA 316,956
100,000 Bryant College AMBAC Insured 4.60%, 6/1/12 ......................... Aaa/AAA 104,129
400,000 Brown University 5.00%, 9/1/19 ..................................... Aa-1/AA+ 405,528
500,000 Brown University 5.00%, 9/1/23 ..................................... Aa-1/AA+ 506,780
250,000 Salve Regina College Radian Insured 5.25%, 3/15/18 ................. NR/AA 263,815
750,000 Johnson & Wales College MBIA Insured 5.00%, 4/1/29 ................. Aaa/AAA 769,477
500,000 Johnson & Wales College XL Capital 5.25%, 4/1/14 ................... Aaa/AAA 538,865
250,000 Rhode Island School of Design MBIA Insured 4.40%, 6/1/15 ........... Aaa/AAA 257,927
585,000 Rhode Island School of Design MBIA Insured 4.60%, 6/1/17 ........... Aaa/AAA 607,593
500,000 St. Antoine Residence LOC-Allied Irish Bank 6.125%, 11/15/18 ....... Aa-2/NR 521,630
300,000 Lifespan MBIA Insured 5.75%, 5/15/23 ............................... Aaa/AAA 306,224
500,000 Times 2 Academy LOC-Citizens Bank 5.00%, 12/15/24 .................. Aa2/NR 514,000
-----------
Total Rhode Island Health & Education Building Corporation ......... $ 5,218,576
-----------
Rhode Island Housing & Mortgage Finance Corporation (5.04%)(a)
$ 200,000 3.95%, 10/1/15 ..................................................... Aa-2/AA+ $ 200,762
10,000 6.50%, 10/1/22 ..................................................... Aa-2/AA+ 10,034
950,000 4.30%, 10/1/17 ..................................................... Aa-2/AA+ 964,877
5,000 6.50%, 4/1/27 ...................................................... Aa-2/AA+ 5,039
-----------
Total Rhode Island Housing & Mortgage Finance Corporation .......... $ 1,180,712
-----------
TOTAL RHODE ISLAND BONDS (93.25%) (a) .............................. $21,840,525
-----------
14
OCEAN STATE TAX EXEMPT FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
(unaudited)
Ratings
Principal Moody's/ Value
Amount Standard & Poor's (b) (Note 1)
- --------- --------------------- --------
Puerto Rico Bonds (5.97%) (A)
$ 350,000 Puerto Rico Commonwealth 5.00%, 7/1/29 ............................. Baa3/BBB- $ 363,632
500,000 Puerto Rico Electric Power Authority MBIA Insured 5.125%, 7/1/29 ... Aaa/AAA 525,680
500,000 Puerto Rico Municipal Finance Auth. FSA Insured 5.50%, 7/1/17 ...... Aaa/AAA 508,930
-----------
TOTAL PUERTO RICO BONDS (5.97%) (a) ................................ $ 1,398,242
-----------
TOTAL INVESTMENTS (Cost $22,631,697)(96.62%)(a) .................... $23,238,767
-----------
OTHER ASSETS AND LIABILITIES (0.78%) ............................... $ 182,707
-----------
TOTAL NET ASSETS (100%) ............................................ $23,421,474
===========
(a) Percentages indicated are based on net assets of $23,421,474 at April 30,
2007 (total investments plus cash and receivables less liabilities) which
corresponds to a net asset value per share of $10.07.
(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.
See Notes to Financial Statements.
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 files its complete
schedule of portfolio holdings with the Commission for the first and third
quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is available on
the Commissions website at www.sec.gov. The Fund's Form N-Q may be reviewed and
copied at the Commission's Public Reference Room in Washington, DC, and that
information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330. The Fund's Statement of Additional Information includes
additional information about Trustees and is available along with Form N-Q,
without charge and upon request, by calling 401-421-1411.
Name, Address and Age Position(s) Held with Fund Principal Occupation(s) During Past Five Years
- --------------------- -------------------------- ----------------------------------------------
Alfred B. Van Liew (71) President (since 1987) and Managing Partner of the Adviser since 1984;
One Regency Plaza Trustee (since 1986) Director of the Distributor since May 1990;
Suite One Chairman and Chief Executive Officer of Van
Providence, Rhode Island 02903 Liew Trust Company, a Rhode Island chartered
trust company; 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 Seamen's Institute, Newport,
Rhode Island since 1994
John St. Sauveur (72) Chairman (since 2006) and Director of the Adviser until 2005; President
219 Great Road Trustee (since 1992) and CEO, WestBank Realty Corporation;
North Smithfield Director, Community College of Rhode Island
Rhode Island 02896 Foundation; Director of Van Liew Trust
Company, 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 Coordination Council; Finance
Chairman,Landmark Health System; Trustee,
Landmark Medical Center; Commissioner of the
Rhode Island Resource Recovery Corporation
(1992-present); 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
- --------------------- -------------------------- ----------------------------------------------
Mary Ann Altrui (64) Trustee (since 2001) Executive Director of St. Antoine Residence
75 Meridian Street and Villa at St. Antoine (1988-present);
Providence, Rhode Island 02908 Director of Diocesan Elder Care Services
(1997-present); oversight responsibility for
St. Clare Home (a 44-bed nursing facility in
Newport, RI); founding member with St.
Elizabeth Community, Scandinavian Home, and
Steere House of "CareLink" (a management
service organization incorporated in 1977);
member of American College of Health Care
Administrators; Board member of Visiting
Nursing Services of Greater Rhode Island;
advisory committee member 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. (75) Trustee (since 1987) Private investor since 1989; Director
147 Beavertail Road (Chairman 1999-2002) of AAA Southern New
Jamestown, Rhode Island 02835 England; Director, AAA Southern New England
Bank (1999-2005); Trustee, National Traffic
Safety Foundation (1999-2000).
Meredith A. Curren (46) Trustee (since 2001) Chief Executive Officer, Pease & Curren, Inc.
75 Pennsylvania Avenue (refiners of precious metals) since 1990;
Warwick, Rhode Island 02888 Director, 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.; Board Member,
Research Engineering & Manufacturing, Inc.
Michael E. Hogue (64) 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 Emeritus, Trinity Repertory Company
(1997-present); President, Jewelry District
Association (1999-present).
17
Name, Address and Age Position(s) Held with Fund Principal Occupation(s) During Past Five Years
- --------------------- -------------------------- ----------------------------------------------
Arthur H. Lathrop (51) Trustee (since 2001) In practice as a Certified Public Accountant
3 Orleans Court (sole proprietor) in Westerly, RI (1991-
Westerly, Rhode Island 02891 present); Director and Audit Committee
member, Newport Federal Savings Bank and
Newport Bancorp, Inc. (2005-present);
Trustee, Westerly Savings Bank (1993-2005);
Trustee and Treasurer, River Bend Cemetery
Company (1990-present); Incorporator,
Community Health Company of Westerly, Inc.
(1989-Present); Incorporator, Memorial &
Library Association of Westerly (2004-
present).
Lawrence B. Sadwin (62) Trustee (since 2001) President/CEO, Landmark Healthcare Foundation
18 Oyster Point (2005-2007); President, Lifestyle Security,
Warren, Rhode Island 02885 LLC (since August 2002), Division Marketing
Leader for General 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), MGS Holding Corporation;
Member-At-Large, National Board of Directors,
American Heart Association; Member, National
Leadership Council, Research America;
Chairman, Landmark Medical Center; Member and
counsel to public representatives, National
Institution of Health; Chairman, American
Heart Association (2001-2002).
Samuel H. Hallowell, Jr. (58) Vice President (since 1989) Partner of the Adviser and Vice President,
One Regency Plaza Van Liew Trust Company (1984-present);
Suite One Secretary and past Secretary, Audubon Society
Providence, Rhode Island 02903 of Rhode Island.
Joseph J. Healy (39) Vice President (since 1996) Vice President of the Adviser (1992-2000);
One Regency Plaza Vice President, Van Liew Trust Company (1996-
Suite One present); President and General Securities
Providence, Rhode Island 02903 Principal of the Distributor (1993-present).
Kevin M. Oates (47) Vice President, Treasurer Partner of the Adviser (1996-present); Chief
One Regency Plaza and Chief Compliance Operating Officer of the Adviser and Van Liew
Suite One Officer (since 1991) Trust Company (April 2000-present), Vice
Providence, Rhode Island 02903 President and Treasurer of the Distributor
(1991-present); Vice President-Administration
of the Adviser (1991-2000).
18
Name, Address and Age Position(s) Held with Fund Principal Occupation(s) During Past Five Years
- --------------------- -------------------------- ----------------------------------------------
Margaret D. Farrell (56) Secretary (since 1986) Partner, Hinckley, Allen & Snyder LLP,
1500 Fleet Center general legal counsel to the Fund (1981-
Providence, Rhode Island 02903 present); Secretary, Bancorp Rhode Island,
Inc. and Bank Rhode Island; Director, Care New
England Health System; Director, Women &
Infants Corporation; Trustee, 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
committed 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.
o Only such information received from you, through application forms or
otherwise, and information about your transactions will be collected.
o 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.
o Policies and procedures (including physical, electronic and procedural
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 [LOGO] OCEAN STATE
Providence, Rhode Island 02903 TAX EXEMPT FUND
(The Portfolio of VLC Trust)
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
Ocean State Tax Exempt Fund
c/o PFPC, Inc. Semi-Annual Report
P.O. Box 9839 April 30, 2007
Providence, Rhode Island 02903 (unaudited)
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
John H. St. Sauveur, Chairman
Alfred B. Van Liew
Mary Ann Altrui
Milton C. Bickford, Jr.
Meredith A. Curren Interest income exempt
Michael E. Hogue from Federal and Rhode
Arthur H. Lathrop Island income taxes
Lawrence B. Sadwin from quality municipal
bonds.
Officers
Alfred B. Van Liew, President
Samuel H. Hallowell, Vice President
Joseph J. Healy, Vice President
Kevin M. Oates, Chief Compliance Officer and Treasurer
Margaret D. Farrell, Secretary
ITEM 2. CODE OF ETHICS. Not applicable to semi-annual report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable to semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable to semi-annual
report.
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. SCHEDULE OF INVESTMENTS. 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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not
applicable. Registrant is an open-end management investment company.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFLIATED PURCHASER. Not applicable. Registrant is an open-end
management investment company.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable.
ITEM 11. 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 12. EXHIBITS.
(a)(1) 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.
(a)(2) 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).
(b) Certifications of principal executive and principal financial
officers required by Rule 30a-2(b) under the Investment Company Act of 1940.
(i) EX-99.906(a) CERT - Certification of President pursuant to
Section 906 of the Sarbanes - Oxley Act of 2002 (filed herewith).
(ii) 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: July 6, 2007 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: July 6, 2007 By: /s/ Alfred B. Van Liew
------------------------------------
Alfred B. Van Liew
President
Date: July 6, 2007 By: /s/ Kevin M. Oates
------------------------------------
Kevin M. Oates
Vice President & Treasurer