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 811-09277
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VIKING MUTUAL FUNDS
-------------------
(Exact name of registrant as specified in charter)
1400 14TH AVE. SW, MINOT, ND 58701
(Address of principal executive offices) (Zip code)
DOUGLAS P. MILLER, 1400 14TH AVE. SW, MINOT, ND 58701
-----------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (701) 852-1264
--------------
Date of fiscal year end: 12/31
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Date of reporting period: 6/30/03
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ITEM 1. REPORTS TO STOCKHOLDERS.
SHAREHOLDER LETTER
Dear Fellow Shareholder:
It is a pleasure to bring you the Viking Mutual Funds Semi-Annual Report for
the six months ended June 30, 2003.
The specter of war with Iraq dominated investor psychology and media
headlines in the first quarter and contributed to near panic selling of
equities and continued buying of bonds. The end of uncertainty as to if and
when there was going to be a war lifted investors' spirits in late March.
Economic activity began to show modest signs of improvement in the second
quarter, the Bush Administration finally got a tax package approved, and the
labor market appeared to stabilize. Despite this positive news, the central
bank took out a quarter-point insurance policy against a sluggish economy by
cutting its fed funds rate for overnight loans between banks to 1 percent
or the lowest rate since 1958. Since the worlds largest economy slipped into
a mild recession at the start of 2001, the Fed has brought down its key
benchmark from 6 1/2 percent to its current 45-year low. This rate cut by the
Fed was the 13th in this economic cycle, viewing the deflationary threat,
albeit remote, to be of greater concern than an acceleration in inflation.
Had the Fed not cut rates aggressively, housing and auto sales would have
been less robust and we probably would be experiencing a significant
recession. The wealth effect of housing prices in recent years offset the
loss of stock market wealth for many, helping the economy avoid more serious
consequences when the equity bubble burst. The economy was buffeted by the
9/11 attacks, the trauma of terrorism, the wars in Afghanistan and Iraq, and
SARS. When one puts the past 3 1/2 years into perspective, the resiliency of
the U.S. economy should give investors some comfort that the worst is over.
The average investor, already awash in red ink at the start of the year,
plunged deeper into the minus column during the first quarter. However, the
equity market surprised just about everyone in the second quarter, not for
the fact that there was a rally off the mid-March bottom, but by the
magnitude of the rally. At the midyear point, the Dow Jones Industrial
Average has bulked up by 7.7 percent in 2003, while the Nasdaq Composite
Index has climbed nearly 22 percent and the Standard & Poor's 500 Index has
gained almost 11 percent. Hopefully, the bear market, which began in March
of 2000, ended in March 2003. This will depend in large part on corporate
earnings and the progress toward higher economic growth in the second half of
2003 and in 2004.
As the economy continued to struggle in the first quarter as uncertainty
about war with Iraq loomed, municipal bond rates continued to slide, sending
prices higher. Although economic activity began to show some improvement as
the second quarter progressed, fears of the risk of deflation increased
sending rates still lower and municipal bond prices higher once again.
However, rates rose and bonds gave up some of their gains near the end of the
quarter when the Fed cut rates by less than some were banking on. And while
there is more room to cut the funds rate, the tone of the Fed's accompanying
statement could be taken as saying that it's not likely to occur.
In this type of market environment, it continues to be highly important to
seek the help of a professional when investing. Making the right decisions
in these markets can be very difficult and an experienced investment
professional can address your concerns about the market and provide the
guidance needed to help you diversify your investments and stay focused on
the long term.
Fund reports containing a discussion of individual Fund performance as well
as the Funds' portfolios and financial statements are presented within for
your review.
We thank you for your confidence in Viking Mutual Funds during these
turbulent times in the market. Our interests are closely aligned with those
of our shareholders because our money is invested alongside with their own.
As always we will do our best to make sure your experience as a shareholder
is a rewarding one.
Sincerely,
Shannon D. Radke
President
Viking Mutual Funds
VIKING TAX-FREE FUND FOR MONTANA
By: Shannon D. Radke
President/Portfolio Manager
Viking Tax-Free Fund for Montana provided a total return of 3.33% (at net
asset value with distributions reinvested) for the six months ended June 30,
2003.
As the economy continued to struggle in the first quarter as uncertainty
about war with Iraq loomed, municipal bond rates continued to slide, sending
prices higher. This resulted in a slight increase in the Fund's share price.
Although economic activity began to show some improvement as the second
quarter progressed, fears of the risk of deflation increased sending rates
still lower and municipal bond prices higher once again. However, rates rose
and bonds gave up some of their gains near the end of the quarter when the
Fed cut rates by less than some were banking on. As a result, for the second
quarter as a whole, the Fund's share price rose modestly. And while there is
more room to cut the funds rate, the tone of the Fed's accompanying statement
could be taken as saying that it's not likely to occur.
Despite the continued scarcity of Montana municipal bonds throughout the
period, the Fund was able to obtain an adequate supply of high quality bonds
of various maturities. Purchases throughout the period included Montana
State Board of Housing, Montana State Health Facilities for Kalispell Medical
Center, State of Montana G.O., Forsyth MT Pollution Control Revenue for Puget
Sound Energy and many other issues. Adding the various purchases to the
portfolio resulted in a duration at June 30 of 7.12 years. Average credit
quality remained a lofty AA+.
Going forward, we remain committed to our non-interest rate anticipatory
style of investing. Rather than betting on the direction of rates, we will
continue to seek out the best value among high quality issues of varying
maturities. The highest level of current income that is exempt from federal
and Montana income taxes and is consistent with preservation of capital
remains the investment objective of the Fund.
Recent volatility in the stock market has underscored the importance of
diversifying with fixed income investments. Municipal bond funds offer high
quality, favorable after-tax yields and comparatively lower volatility than
corporate bonds. These qualities can make them an ideal component in an
asset allocation plan.
VIKING TAX-FREE FUND FOR MONTANA
Growth of a $10,000 Investment
August 3, 1999 through June 30, 2003
(Unaudited)
Comparison of Change in Value of a $10,000 Investment in Viking
Tax-Free Fund for Montana vs. the Lehman Brother Municipal Bond Index
[Comparative index graph]
Viking Tax-Free Fund Viking Tax-Free Fund Lehman Brothers
for Montana for Montana Municipal Bond
with max sales charge without max sales charge Index
---------------------------------------------------------------------
August 3, 1999 $ 9,551 $10,000 $10,000
October 31, 1999 $ 9,196 $ 9,628 $ 9,817
December 31, 1999 $ 9,125 $ 9,554 $ 9,846
February 28, 2000 $ 9,185 $ 9,617 $ 9,918
April 30, 2000 $ 9,405 $ 9,847 $10,075
June 30, 2000 $ 9,468 $ 9,913 $10,288
August 31, 2000 $ 9,748 $10,206 $10,592
October 31, 2000 $ 9,796 $10,257 $10,652
December 31, 2000 $10,058 $10,531 $10,998
February 28, 2001 $10,185 $10,664 $11,142
April 30, 2001 $10,103 $10,578 $11,121
June 30, 2001 $10,263 $10,745 $11,317
August 31, 2001 $10,672 $11,173 $11,674
October 31, 2001 $10,719 $11,223 $11,772
December 31, 2001 $10,509 $11,002 $11,563
February 28, 2002 $10,785 $11,292 $11,905
April 30, 2002 $10,821 $11,330 $11,899
June 28, 2002 $10,981 $11,498 $12,099
August 31, 2002 $11,276 $11,806 $12,402
October 31, 2002 $11,329 $11,862 $12,463
December 31, 2002 $11,549 $12,092 $12,673
February 28, 2003 $11,710 $12,260 $12,818
April 30, 2003 $11,750 $12,303 $12,910
June 30, 2003 $11,934 $12,495 $13,155
The chart assumes $10,000 invested on August 3, 1999 and includes the
effect of a 4.50% front-end sales charge, as applicable and the
reinvestment of all dividends and capital gains. It is intended to
give you an ideal of how your fund performed compared to the index over
the period 08/03/99-06/30/03. It is important to understand the
differences between your fund and an index. An index measures the
performance of a hypothetical portfolio. A market index such as the
Lehman Brothers Municipal Bond Index is not managed and incurs no sales
charges, expenses or fees. If you could buy all the securities that
make up a market index, you would incur expenses that would affect your
investment's return. Returns shown do not reflect the deduction of the
taxes that a shareholder would pay on fund distributions or redemption of
fund shares. Past performance does not guarantee future
results.
Average Annual Total Returns Lifetime
Through June 30, 2003 One-Year Three-Year (Est. 8/3/99)
- - ----------------------------------------------------------------------
Excluding Sales Charge 8.67% 8.02% 5.85%
Including Sales Charge 3.77% 6.37% 4.61%
Returns reflect reinvestment of distributions and the effect of a 4.50%
front-end sales charge, as applicable. Return and share values will
fluctuate so that shares, when redeemed, may be worth more or less than
their original cost. Returns shown do not reflect the deduction of the
taxes that a shareholder would pay on fund distributions or redemption of
fund shares. Past performance is not a guarantee of future
results.
VIKING TAX-FREE FUND FOR NORTH DAKOTA
By: Shannon D. Radke
President/Portfolio Manager
Viking Tax-Free Fund for North Dakota provided a total return of 3.62% (at
net asset value with distributions reinvested) for the six months ended June
30, 2003.
As the economy continued to struggle in the first quarter as uncertainty
about war with Iraq loomed, municipal bond rates continued to slide, sending
prices higher. This resulted in a slight increase in the Fund's share price.
Although economic activity began to show some improvement as the second
quarter progressed, fears of the risk of deflation increased sending rates
still lower and municipal bond prices higher once again. However, rates rose
and bonds gave up some of their gains near the end of the quarter when the
Fed cut rates by less than some were banking on. As a result, for the second
quarter as a whole, the Fund's share price rose modestly. And while there is
more room to cut the funds rate, the tone of the Fed's accompanying statement
could be taken as saying that it's not likely to occur.
Despite the continued scarcity of North Dakota municipal bonds throughout the
period, the Fund was able to obtain an adequate supply of high quality bonds
of various maturities. Purchases throughout the period included Bismarck
Refunding & Improvement G.O., Fargo G.O., Mandan G.O., North Dakota Housing
Finance Agency, West Fargo G.O. and many other issues. Adding the various
purchases to the portfolio resulted in a duration at June 30 of 6.08 years.
Average credit quality remained a lofty AA+.
Going forward, we remain committed to our non-interest rate anticipatory
style of investing. Rather than betting on the direction of rates, we will
continue to seek out the best value among high quality issues of varying
maturities. The highest level of current income that is exempt from federal
and North Dakota income taxes and is consistent with preservation of capital
remains the investment objective of the Fund.
Recent volatility in the stock market has underscored the importance of
diversifying with fixed income investments. Municipal bond funds offer high
quality, favorable after-tax yields and comparatively lower volatility than
corporate bonds. These qualities can make them an ideal component in an
asset allocation plan.
VIKING TAX-FREE FUND FOR NORTH DAKOTA
Growth of a $10,000 Investment
August 3, 1999 through June 30, 2003
(Unaudited)
Comparison of Change in Value of a $10,000 Investment in Viking
Tax-Free Fund for North Dakota vs. the Lehman Brother Municipal Bond
Index
[Comparative index graph]
Viking Tax-Free Fund Viking Tax-Free Fund Lehman Brothers
for North Dakota for North Dakota Municipal Bond
with max sales charge without max sales charge Index
---------------------------------------------------------------------
August 3, 1999 $ 9,551 $10,000 $10,000
October 31, 1999 $ 9,163 $ 9,594 $ 9,817
December 31, 1999 $ 9,211 $ 9,644 $ 9,846
February 28, 2000 $ 9,227 $ 9,660 $ 9,918
April 30, 2000 $ 9,422 $ 9,864 $10,075
June 30, 2000 $ 9,533 $ 9,981 $10,288
August 31, 2000 $ 9,833 $10,295 $10,592
October 31, 2000 $ 9,965 $10,434 $10,652
December 31, 2000 $10,252 $10,734 $10,998
February 28, 2001 $10,412 $10,901 $11,142
April 30, 2001 $10,303 $10,795 $11,121
June 30, 2001 $10,419 $10,909 $11,317
August 31, 2001 $10,809 $11,317 $11,674
October 31, 2001 $10,825 $11,334 $11,772
December 31, 2001 $10,586 $11,084 $11,563
February 28, 2002 $10,910 $11,423 $11,905
April 30, 2002 $10,934 $11,448 $11,899
June 28, 2002 $11,108 $11,630 $12,099
August 31, 2002 $11,409 $11,945 $12,402
October 31, 2002 $11,452 $11,990 $12,463
December 31, 2002 $11,652 $12,200 $12,673
February 28, 2003 $11,815 $12,369 $12,818
April 30, 2003 $11,868 $12,426 $12,910
June 30, 2003 $12,074 $12,641 $13,155
The chart assumes $10,000 invested on August 3, 1999 and includes the
effect of a 4.50% front-end sales charge, as applicable and the
reinvestment of all dividends and capital gains. It is intended to
give you an ideal of how your fund performed compared to the index over
the period 08/03/99-06/30/03. It is important to understand the
differences between your fund and an index. An index measures the
performance of a hypothetical portfolio. A market index such as the
Lehman Brothers Municipal Bond Index is not managed and incurs no sales
charges, expenses or fees. If you could buy all the securities that
make up a market index, you would incur expenses that would affect your
investment's return. Returns shown do not reflect the deduction of the
taxes that a shareholder would pay on fund distributions or redemption of
fund shares. Past performance does not guarantee future
results.
Average Annual Total Returns Lifetime
Through June 30, 2003 One-Year Three-Year (Est. 8/3/99)
- - ----------------------------------------------------------------------
Excluding Sales Charge 8.69% 8.19% 6.16%
Including Sales Charge 3.81% 6.58% 4.92%
Returns reflect reinvestment of distributions and the effect of a 4.50%
front-end sales charge, as applicable. Return and share values will
fluctuate so that shares, when redeemed, may be worth more or less than
their original cost. Returns shown do not reflect the deduction of the
taxes that a shareholder would pay on fund distributions or redemption of
fund shares. Past performance is not a guarantee of future
results.
VIKING LARGE-CAP VALUE FUND
By: J. Peter Skirkanich, Chairman of Investment Committee
Shannon D. Radke, President
Viking Large-Cap Value Fund provided a return of 8.54% (at net asset value)
for the six months ended June 30, 2003.
The specter of war with Iraq dominated investor psychology and media
headlines in the first quarter. That combined with concerns about corporate
profits and economic growth contributed to near-panic selling of equities.
It marked the eighth negative quarter for the S&P 500 in the past 12
quarters. The Fund's share price incurred some erosion along the way posting
a decline of 7.32% in quarter one. The end of uncertainty as to whether and
when there was going to be a war and a modest improvement in economic
activity lifted investors' spirits in late March and through the second
quarter. This resulted in a strong rally in stocks and a gain of over 17%
for the Fund in the second quarter.
Helped by a surprisingly strong second quarter, the Dow Jones finished the
mid-year point up 7.7 percent with the S&P 500 gaining almost 11 percent.
Returns were higher for small and mid-cap stocks versus large-cap stocks.
They were also greater for low-priced stocks and stocks of lower-quality
companies, especially those with no earnings, versus stocks of high quality
companies. Simply put, it was a rally that rewarded speculation more than
investment, but that often happens in the early stages of a rally off a
market bottom.
The performance of the portfolio was led by Citigroup, Merrill Lynch, US
Bancorp, MBIA and Hartford in the financial arena. The drug distribution
area contributed strongly, led by McKesson, AmerisourceBergen and CVS. Our
industrial holdings also contributed strongly to performance led by
Ingersoll-Rand and multi-industry companies ITT Industries and Honeywell.
The portfolio changes, which highlighted the period, were an initial position
in AmerisourceBergen and an increase in our McKesson position, both in the
drug distribution industry. HCA was purchased to replace Tenet Healthcare
because of our loss of faith in the management of the latter, both being in
the hospital management business. New positions were also taken in Public
Service Electric & Gas, an electric utility, and in reinsurer Partner Re to
replace Phoenix, another company where faith in management diminished. On
the sell side, we began reducing positions late in the quarter in several
holdings where valuations had gotten ahead of reality.
The Fund's top sector weightings at June 30 included Banks/Financial
Services, Energy/Oil, Electric Utilities, Household Products and Drugs. The
top five holdings were Sealed Air, CVS, Kimberly-Clark, ConocoPhillips and
McKesson.
Hopefully, the bear market, which began in March of 2000, ended in March
2003. The key to stock market performance going forward will be corporate
earnings. Clearly, economic growth will need to accelerate from the current
rate so more predictable growth can be realized over a broader spectrum of
industries. The economic backdrop of low interest rates, tax cuts, a weaker
dollar and deficit spending is providing powerful economic stimulus. We will
continue our focus on investments in those areas with seemingly reliable
fundamentals as well as sensible valuations. Long-term total return and
capital preservation remains the investment objective of the Fund.
VIKING LARGE-CAP VALUE FUND
Growth of a $10,000 Investment
August 3, 1999 through December 31, 2002
(Unaudited)
Comparison of Change in Value of a $10,000 Investment in Viking
Large-Cap Value Fund vs. the Russell 1000 Value Index
[Comparative index graph]
Viking Large-Cap Viking Large-Cap Russell 1000
Value Fund Value Fund Value Index
with max sales charge without max sales charge
---------------------------------------------------------------------
August 3, 1999 $ 9,479 $10,000 $10,000
October 31, 1999 $ 9,147 $ 9,650 $ 9,875
December 31, 1999 $ 9,406 $ 9,924 $ 9,845
February 28, 2000 $ 8,057 $ 8,500 $ 8,816
April 30, 2000 $ 9,292 $ 9,803 $ 9,777
June 30, 2000 $ 9,245 $ 9,753 $ 9,428
August 31, 2000 $ 9,957 $10,505 $10,078
October 31, 2000 $10,252 $10,816 $10,420
December 31, 2000 $10,598 $11,181 $10,535
February 28, 2001 $10,483 $11,059 $10,282
April 30, 2001 $11,018 $11,624 $10,405
June 30, 2001 $10,665 $11,251 $10,403
August 31, 2001 $10,368 $10,938 $ 9,965
October 31, 2001 $ 9,431 $ 9,949 $ 9,184
December 31, 2001 $10,308 $10,875 $ 9,947
February 28, 2002 $10,298 $10,865 $ 9,886
April 30, 2002 $10,471 $11,047 $ 9,998
June 28, 2002 $ 9,588 $10,115 $ 9,472
July 31, 2002 $ 8,571 $ 9,042 $ 8,591
August 31, 2002 $ 8,542 $ 9,012 $ 8,656
September 30, 2002 $ 7,486 $ 7,898 $ 7,693
October 31, 2002 $ 7,697 $ 8,121 $ 8,263
November 30, 2002 $ 8,302 $ 8,759 $ 8,784
December 31, 2002 $ 7,929 $ 8,365 $ 8,403
January 31, 2003 $ 7,668 $ 8,090 $ 8,199
February 28, 2003 $ 7,417 $ 7,825 $ 7,980
March 31, 2003 $ 7,349 $ 7,753 $ 7,994
April 30, 2003 $ 7,890 $ 8,324 $ 8,697
May 31, 2003 $ 8,413 $ 8,875 $ 9,259
June 30, 2003 $ 8,606 $ 9,079 $ 9,375
The chart assumes $10,000 invested on August 3, 1999 and includes the
effect of a 4.50% front-end sales charge, as applicable and the
reinvestment of all dividends and capital gains. It is intended to
give you an ideal of how your fund performed compared to the index over
the period 08/03/99-06/30/03. It is important to understand the
differences between your fund and an index. An index measures the
performance of a hypothetical portfolio. A market index such as the
Russell 1000 Value Index is not managed and incurs no sales
charges, expenses or fees. If you could buy all the securities that
make up a market index, you would incur expenses that would affect your
investment's return. Returns shown do not reflect the deduction of the
taxes that a shareholder would pay on fund distributions or redemption of
fund shares. Past performance does not guarantee future
results.
Average Annual Total Returns Lifetime
Through June 30, 2003 One-Year Three-Year (Est. 8/3/99)
- - ----------------------------------------------------------------------
Excluding Sales Charge -10.24% -2.36% -2.43%
Including Sales Charge -14.93% -4.10% -3.76%
Returns reflect reinvestment of distributions and the effect of a 4.50%
front-end sales charge, as applicable. Return and share values will
fluctuate so that shares, when redeemed, may be worth more or less than
their original cost. Returns shown do not reflect the deduction of the
taxes that a shareholder would pay on fund distributions or redemption of
fund shares. Past performance is not a guarantee of future
results.
VIKING SMALL-CAP VALUE FUND
By: George C. Pierides, Director of Small-Cap Equities
Shannon D. Radke, President
Viking Small-Cap Value Fund provided a total return of 10.91% (at net asset
value) for the six months ended June 30, 2003.
The specter of war with Iraq dominated investor psychology and media
headlines in the first quarter. That combined with concerns about corporate
profits and economic growth contributed to near-panic selling of equities.
It marked the eighth negative quarter for the S&P 500 in the past 12
quarters. The Fund's share price incurred slight erosion along the way
posting a decline of just 2.67% in quarter one. The end of uncertainty as to
whether and when there was going to be a war and a modest improvement in
economic activity lifted investors' spirits in late March and through the
second quarter. This resulted in a strong rally in stocks and a gain of 14%
for the Fund in the second quarter.
Helped by a surprisingly strong second quarter, the Dow Jones finished the
mid-year point up 7.7 percent with the S&P 500 gaining almost 11 percent.
Returns were higher for small and mid-cap stocks versus large-cap stocks.
They were also greater for low-priced stocks and stocks of lower-quality
companies, especially those with no earnings, versus stocks of high quality
companies. Simply put, it was a rally that rewarded speculation more than
investment, but that often happens in the early stages of a rally off a
market bottom.
Top performers of the portfolio included Footstar (retailing industry),
Polymedica (medical services/supplies), Inamed (medical services/supplies)
and Veeco Instruments (semiconductor equipment). New positions established
in the period include A.O. Smith (electric motor/water heater manufacturer),
Superior Industries (auto-related), Conmed (medical services/supplies) and
Shaw Group (construction and engineering). We added to our position in CBRL
Group (restaurant) early enough to capture the bulk of its substantial stock-
price increase. Baldor Electric (electric motors and drives) was sold
completely on a valuation basis. Other sales included Cambrex (medical
services/supplies), which was sold after management halved its 2003 profit
forecast and Excel Technology (precision instruments), which was sold on a
valuation basis following a solid early second quarter contribution. We also
trimmed our holdings in several stocks on a valuation basis, as we managed
our exposure to risk.
The Fund's top sector weightings at June 30 included Medical
Services/Supplies, Energy/Non-Oil, Retailing, Electronics and Household
Products. The top five holdings were Teleflex, Church & Dwight, Piedmont
Natural Gas, Questar and Inamed.
Hopefully, the bear market, which began in March of 2000, ended in March
2003. The key to stock market performance going forward will be corporate
earnings. Clearly, economic growth will need to accelerate from the current
rate so more predictable growth can be realized over a broader spectrum of
industries. The economic backdrop of low interest rates, tax cuts, a weaker
dollar and deficit spending is providing powerful economic stimulus. We will
continue to seek companies with good fundamentals, strong balance sheets and
relatively low valuations to augment our well-constructed portfolio. Long-
term total return and capital preservation remains the investment objective
of the Fund.
VIKING SMALL-CAP VALUE FUND
Growth of a $10,000 Investment
May 3, 1999 through June 30, 2003
(Unaudited)
Comparison of Change in Value of a $10,000 Investment in Viking
Small-Cap Value Fund vs. the Russell 2000 Value Index
[Comparative index graph]
Viking Small-Cap Viking Small-Cap Russell 2000
Value Fund Value Fund Value Index
with max sales charge without max sales charge
---------------------------------------------------------------------
May 3, 2001 $ 9,479 $10,000 $10,000
June 30, 2001 $ 9,697 $10,230 $10,665
July 31, 2001 $ 9,421 $ 9,940 $10,426
August 31, 2001 $ 9,299 $ 9,810 $10,390
September 30, 2001 $ 8,227 $ 8,680 $ 9,243
October 31, 2001 $ 8,682 $ 9,160 $ 9,484
November 30, 2001 $ 9,204 $ 9,710 $10,166
December 31, 2001 $ 9,725 $10,260 $10,788
January 31, 2002 $ 9,839 $10,380 $10,932
February 28, 2002 $ 9,754 $10,290 $10,998
March 31, 2002 $10,597 $11,180 $11,821
April 30, 2002 $10,891 $11,490 $12,238
May 31, 2002 $10,768 $11,360 $11,833
June 28, 2002 $10,332 $10,900 $11,571
July 31, 2002 $ 8,910 $ 9,400 $ 9,852
August 31, 2002 $ 8,986 $ 9,480 $ 9,808
September 30, 2002 $ 8,569 $ 9,040 $ 9,108
October 31, 2002 $ 8,682 $ 9,160 $ 9,245
November 30, 2002 $ 9,137 $ 9,640 $ 9,982
December 31, 2002 $ 8,863 $ 9,350 $ 9,556
January 31, 2003 $ 8,474 $ 8,940 $ 9,287
February 28, 2003 $ 8,483 $ 8,950 $ 8,975
March 31, 2003 $ 8,626 $ 9,100 $ 9,070
April 30, 2003 $ 9,156 $ 9,660 $ 9,932
May 31, 2003 $ 9,668 $10,200 $10,946
June 30, 2003 $ 9,829 $10,370 $11,132
The chart assumes $10,000 invested on May 3, 2001 and includes the
effect of a 4.50% front-end sales charge, as applicable and the
reinvestment of all dividends and capital gains. It is intended to
give you an ideal of how your fund performed compared to the index over
the period 05/03/01-06/30/03. It is important to understand the
differences between your fund and an index. An index measures the
performance of a hypothetical portfolio. A market index such as the
Russell 2000 Value Index is not managed and incurs no sales
charges, expenses or fees. If you could buy all the securities that
make up a market index, you would incur expenses that would affect your
investment's return. Returns shown do not reflect the deduction of the
taxes that a shareholder would pay on fund distributions or redemption of
fund shares. Past performance does not guarantee future
results.
Average Annual Total Returns Lifetime
Through June 30, 2003 One Year (Est. 5/3/01)
- - -------------------------------------------------------------------
Excluding Sales Charge -4.86% 1.69%
Including Sales Charge -9.83% -0.79%
Returns reflect reinvestment of distributions and the effect of a 4.50%
front-end sales charge, as applicable. Return and share values will
fluctuate so that shares, when redeemed, may be worth more or less than
their original cost. Returns shown do not reflect the deduction of the
taxes that a shareholder would pay on fund distributions or redemption of
fund shares. Past performance is not a guarantee of future
results.
VIKING MUTUAL FUNDS
Statement of Investments, June 30, 2003 (Unaudited)
Viking Tax-Free Fund for Montana
PRINCIPAL MARKET
AMOUNT VALUE
MUNICIPAL BONDS 93.9%
General Obligations 22.0%
Bozeman MT Ser A 4.95% 07/01/20 170,000 $183,692
Broadwater Cnty MT Sch Dist No. 1 Townsend (AMBAC) 4.95% 07/01/16 25,000 27,495
Butte Silver Bow MT City & Cnty (AMBAC) 4.75% 07/01/11 210,000 237,613
Cascade Cnty MT High Sch A Great Falls 2.85% 07/01/05 225,000 230,353
Cascade Cnty MT High Sch A Great Falls 3.15% 07/01/06 100,000 104,399
Flathead Cnty MT Sch Dist No. 6 Columbia Falls 5.65% 07/01/19 75,000 83,688
Kalispell MT (MBIA) 4.625% 07/01/05 130,000 137,930
Lake Cnty MT Elem Sch Dist No. 30 (MBIA) 4.70% 07/01/19 100,000 105,541
MT St Drinking Wtrs Revolving FD-G 5.00% 07/15/21 50,000 52,902
MT St Long Range Building Pg - Ser D 3.50% 08/01/11 150,000 155,638
MT St Water Pollution Ctl 5.60% 07/15/20 100,000 111,519
MT St Long Range Building Pg - Ser D 5.375% 08/01/11 100,000 110,484
MT St Long Range Building Pg - Ser B 5.00% 08/01/20 50,000 53,235
MT St Water Pollution Ctl Revolving D 3.75% 07/15/18 100,000 96,203
Puerto Rico Comwlth Ref (MBIA) 5.25% 07/01/18 145,000 147,184
Puerto Rico Mun Fin Agy Ser A (FSA) 5.50% 08/01/23 250,000 277,677
Ravalli Cnty MT Sch Dist No. 1 Corvallis (FSA) 3.00% 07/01/12 140,000 138,876
Ravalli Cnty MT Sch Dist No. 003 Hamilton (FSA) 4.00% 07/01/16 80,000 81,008
Ravalli Cnty MT Sch Dist No. 003 Hamilton (FSA) 4.65% 07/01/09 105,000 116,659
---------
2,452,096
---------
Continuing Care Revenue Bonds 0.6%
MT St Hlth Facs Auth Rev Hillcrest Sr Ctr 6.90% 06/01/15 30,000 31,447
MT St Hlth Facs Auth Rev Hillcrest Sr Ctr 7.25% 06/01/25 35,000 37,474
---------
67,751
---------
Higher Education Revenue Bonds 14.7%
MT Brd Regents (U of M) Hgher Ed Rev Ser G (MBIA) 3.75% 05/15/14 100,000 101,966
MT Hgher Ed Stud Assist Crp Stud Ln Rev Ser B 5.50% 12/01/31 75,000 76,516
MT St Hgher Ed Stud Assist Corp Rev Ser B 6.40% 12/01/32 415,000 448,295
MT Brd Regents (MSU) Ref & Imp Hghr Ed Facs-D (MBIA) 5.375% 11/15/21 260,000 278,489
MT Brd Regents (U of M) Hgher Ed Rev Ser F (MBIA) 5.75% 05/15/24 150,000 170,295
Puerto Rico Tour Edl Med & Env Facs Mendez Univ 5.375% 02/01/19 75,000 77,509
*Univ of MT Revs Facs Acq & Imp Ser C (MBIA) 5.00% 11/15/17 140,000 151,661
Univ of MT Revs Higher Ed Facs Imp Ser D (MBIA) 5.375% 05/15/15 50,000 56,957
Univ of MT Revs Higher Ed Facs Imp Ser D (MBIA) 5.375% 05/15/19 135,000 151,392
Univ Puerto Rico Revs Ser O (MBIA) 5.375% 06/01/30 115,000 123,631
---------
1,636,711
---------
Hospital Revenue Bonds 23.2%
MT Hlth Fac Fin Auth Rev Mstr Ln Program Comm Med Ctr 5.20% 12/01/21 145,000 157,538
MT Fac Fin Auth Providence Serv (MBIA) 4.60% 12/01/18 150,000 155,737
MT Fac Fin Auth Providence Serv (MBIA) 4.80% 12/01/20 200,000 208,038
*MT Fac Fin Auth Providence Serv (MBIA) 5.00% 12/01/25 500,000 522,220
*MT Hlth Fac Auth Sisters Chrty Leavenworth (MBIA) 5.125% 12/01/18 200,000 218,176
MT Hlth Fac Auth Sisters Chrty Leavenworth (MBIA) 5.00% 12/01/24 320,000 327,258
MT St Hlth Fac Auth Rev Comm Med Ctr 6.375% 06/01/18 370,000 368,357
MT St Hlth Fac Auth Rev Holy Rosary Pre-Ref (MBIA) 5.25% 07/01/20 130,000 139,827
MT St Hlth Fac Auth Rev Kalispell Med Ctr (AMBAC) 5.00% 07/01/16 450,000 489,078
---------
2,586,229
---------
Housing Revenue Bonds 10.6%
MT St Brd Hsg Sngle Fam Mtg Ser A-2 5.40% 06/01/07 15,000 15,505
*MT St Brd Hsg Sngle Fam Mtg Ser A-2 5.75% 06/01/30 155,000 161,498
*MT St Brd Hsg Sngle Fam Ser A-2 5.50% 12/01/20 90,000 93,979
*MT St Brd Hsg Sngle Fam Ser A-2 5.60% 12/01/23 110,000 114,844
MT St Brd Hsg Sngle Fam Ser A-2 5.20% 12/01/22 185,000 189,077
MT St Brd Hsg Sngle Fam Ser B-2 4.85% 12/01/15 160,000 165,144
MT St Brd Hsg Sngle Fam Ser B-2 3.05% 12/01/10 200,000 197,350
MT St Brd Hsg Sngle Fam Ser B-2 3.40% 12/01/12 250,000 246,515
---------
1,183,912
---------
Utility Revenue Bonds 4.2%
Forsyth MT PCR Ref Puget Sound Energy (AMBAC) 5.00% 03/01/31 450,000 468,517
---------
468,517
---------
Power Authority Revenue Bonds 4.1%
Puerto Rico Elec Pwr Auth Pwr Rev Ser II (FSA) 5.125% 07/01/26 250,000 262,805
Puerto Rico Elec Pwr Auth Pwr Rev Ser AA (MBIA) 5.375% 07/01/27 170,000 186,393
---------
449,198
---------
Transportation Revenue Bonds 1.2%
Puerto Rico Hwy & Trans Auth Hwy Rev Ref-X (FSA) 5.50% 07/01/19 30,000 30,882
Puerto Rico Hwy & Trans Auth Rev Ser D (XLCA) 5.375% 07/01/36 100,000 108,273
---------
138,727
---------
Water Revenue Bonds 1.4%
Great Falls MT Wtr Sys Rev Ref Ser A (AMBAC) 3.85% 08/01/08 100,000 107,208
Silver Bow Wtr Inc MT Wtr Sys Rev (FGIC) 5.10% 11/01/07 50,000 51,341
---------
158,549
---------
Other Revenue Bonds 11.9%
Great Falls MT San Sew Sys Rev Ref (AMBAC) 4.00% 08/01/09 50,000 52,853
Great Falls MT Tax Increment (MBIA) 3.00% 08/15/08 100,000 103,361
Helena MT Solid Waste Trf Fac Rev 5.50% 07/01/13 40,000 40,704
MT St Coal Severance Tax Ref 4.70% 12/01/17 100,000 104,517
MT St Brd Invt Refunded 1996 Pay Tax (MBIA) 6.875% 06/01/20 105,000 122,568
MT St Brd Invt Refunded 1996 Pay Tax (MBIA) 6.875% 06/01/20 105,000 122,568
MT St Hlth Fac Auth Prerelease Ctr Andrew Proj 6.30% 10/01/20 25,000 26,649
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev 6.00% 07/01/26 195,000 234,400
Puerto Rico Comwlth Aqueduct & Swr Auth Rev (MBIA) 5.00% 07/01/19 125,000 134,700
Puerto Rico Comwlth Infra Fing Auth Ser A (AMBAC) 5.00% 07/01/21 250,000 262,900
Puerto Rico Comwlth Inf Fin Auth Ser A (AMBAC) 5.25% 07/01/10 100,000 111,331
---------
1,320,020
---------
Total Municipal Bonds (cost $10,106,466) 10,462,880
SHORT-TERM INVESTMENTS 9.2%
Franklin Double Tax-Free Income Fund 545,509
Federated Intermediate Municipal Trust 482,574
-----------
Total Short-Term Investments (cost: $1,031,595) 1,028,083
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED 103.1% (COST $11,138,061) 11,490,963
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES (3.1)% (347,515)
-----------
NET ASSETS APPLICABLE TO 1,081,448 SHARES (0.001 PAR VALUE) OUTSTANDING - 100.0% $11,143,448
===========
*Indicates bonds are segregated by the custodian to cover when-issued or
delayed-delivery purchases.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Statement of Investments, June 30, 2003 (Unaudited)
Viking Tax-Free Fund for North Dakota
PRINCIPAL MARKET
AMOUNT VALUE
MUNICIPAL BONDS 90.8%
General Obligations 29.0%
*Bismarck ND Ref & Imp - Ser L 4.00% 06/01/07 75,000 $77,666
Bismarck ND Ref & Imp - Ser P 3.50% 05/01/16 100,000 95,564
*Fargo ND Ref & Imp - Ser B (FGIC) 5.125% 05/01/17 60,000 64,385
Fargo ND Ref & Imp - Ser A (MBIA) 5.125% 05/01/24 50,000 53,603
Fargo ND Ref & Imp - Ser A (FGIC) 4.70% 05/01/24 100,000 101,751
Hillsboro ND Pub Sch Dist No. 9 (FSA) 4.85% 06/01/19 50,000 53,050
*Jamestown ND Pub Sch Dist No. 011 (FGIC) 4.60% 05/01/15 50,000 53,634
*Mandan ND Ref & Imp - Ser B (MBIA) 5.00% 05/01/16 70,000 73,316
Mandan ND Ref & Imp - Ser A (MBIA) 3.60% 05/01/15 75,000 73,618
Puerto Rico Commonwealth Ref (MBIA) 5.00% 07/01/21 40,000 40,000
Puerto Rico Commonwealth (MBIA) 5.375% 07/01/25 50,000 56,064
UND Foundation Lease Rev (AMBAC) 5.00% 06/01/27 50,000 51,794
*West Fargo ND Ref & Imp 5.00% 05/01/08 250,000 263,653
West Fargo ND Pub Sch Dist No. 006 (FGIC) 5.00% 05/01/14 50,000 55,234
---------
1,113,332
---------
Building Authority Revenue Bonds 9.7%
Fargo ND Bldg Auth Lease Rev Ser A 5.00% 05/01/20 50,000 53,172
ND St Bldg Auth Lease Rev Ser A 5.125% 12/01/13 10,000 11,037
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.00% 12/01/17 50,000 53,713
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.00% 12/01/16 50,000 53,684
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.20% 12/01/19 90,000 96,065
ND St Bldg Auth Lease Rev Ser C (AMBAC) 4.00% 08/15/11 100,000 105,294
---------
372,965
---------
Education Revenue Bonds 1.7%
Fargo ND School District Bldg Auth Rev (MBIA) 5.50% 05/01/14 50,000 55,455
Fargo ND School District Bldg Auth Rev First Mtg Ser B (AMBAC) 5.00% 05/01/10 10,000 10,530
---------
65,985
---------
Higher Education Revenue Bonds 4.3%
Fargo ND Lease Rev NDSU Lease Oblig Ser-A (AMBAC) 3.50% 05/01/09 60,000 62,006
ND St Brd Hgher Ed Rev Hsg & Aux Facs UND (AMBAC) 4.80% 04/01/14 25,000 26,072
Puerto Rico Tour Edl Med & Env Facs Mendez Univ 5.375% 02/01/19 25,000 25,837
UND Univ Revs Hsg & Auxillary Facs Ref (FSA) 5.00% 04/01/21 50,000 52,323
---------
166,238
---------
Hospital Revenue Bonds 8.0%
Burleigh Cnty ND Hlth Care MedCenter One (MBIA) 5.25% 05/01/13 20,000 21,511
Burleigh Cnty ND Hlth Care MedCenter One (MBIA) 5.25% 05/01/12 25,000 27,412
Carrington ND Hlth Fac Rev Hlth Ctr Proj 6.25% 11/15/15 15,000 15,226
Fargo ND Hlth Sys Rev Meritcare Obl (FSA) 5.375% 06/01/15 65,000 71,180
Fargo ND Hlth Sys Rev Meritcare Obl (AMBAC) 5.00% 06/01/22 45,000 47,347
Grand Forks ND Hlth Care Facs Untd Hosp Obli Group (MBIA) 6.25% 12/01/24 25,000 26,858
Grand Forks ND Hlth Care Altru Hlth Obl Group (MBIA) 5.60% 08/15/17 20,000 21,624
Grand Forks ND Hlth Care Altru Hlth Obl Group 7.125% 08/15/24 20,000 21,602
Valley City ND Rev Ref Lutheran Hlth Ser A-5 (MBIA) 4.20% 01/01/06 25,000 26,139
Ward Cnty ND Hlth Care Facs Rev Trinity Obl Group - B 6.00% 07/01/10 25,000 26,018
---------
304,917
---------
Housing Revenue Bonds 11.6%
Fargo ND Multifam Rev Ref Hsg Trollwood Village 6.90% 09/01/13 25,000 25,157
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 3.75% 07/01/12 155,000 154,360
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 6.40% 07/01/20 50,000 53,166
ND St Hsg Fin Agy Hsg Fin Home MTG-C-RMK 6.10% 07/01/28 35,000 36,606
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg B 5.85% 07/01/28 20,000 20,885
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg D 5.05% 01/01/06 10,000 10,340
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.25% 07/01/18 25,000 25,726
*ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.55% 07/01/22 115,000 119,928
---------
446,168
---------
Utility Revenue Bonds 9.3%
Mercer Cnty Poll Ctl Rev Basin Electric Power Coop (AMBAC) 6.05% 01/01/19 85,000 90,756
Oliver Cnty PCR Ref Square Butte Elec-A (AMBAC) 5.30% 01/01/27 250,000 264,817
---------
355,573
---------
Transportation Revenue Bonds 3.5%
Minot ND Airport Revenue 5.40% 10/01/09 15,000 16,503
Puerto Rico Hwy & Trans Auth Hwy Rev (MBIA) 5.25% 07/01/21 115,000 116,736
---------
133,239
---------
Water Revenue Bonds 2.1%
Fargo ND Water Rev 5.125% 01/01/10 10,000 11,055
ND St Water Comm Rev Water Dev - SW Pipeline A (AMBAC) 5.70% 07/01/17 10,000 10,984
ND St Water Comm Rev Water Dev & Mgmt Prg Ser A (MBIA) 5.50% 08/01/10 50,000 57,962
---------
80,001
---------
Other Revenue Bonds 11.6%
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev 6.00% 07/01/26 15,000 18,031
Grand Forks ND Sales Tax Rev Aurora Project Ser A (MBIA) 5.625% 12/15/29 35,000 36,676
*Grand Forks ND Sales Tax Rev Dike Imp (AMBAC) 4.50% 09/01/10 50,000 54,333
Grand Forks ND Sales Tax Rev Dike Imp (AMBAC) 5.00% 09/01/17 50,000 53,826
ND St Industrial Comm Lignite Prog Ser A 5.00% 11/15/03 10,000 10,121
ND St Muni Bond Bank Cap Fing Prog 6.00% 06/01/21 25,000 26,426
ND St Muni Bond Bank St Revolv Fund Prog - Ser A 4.90% 10/01/18 50,000 53,052
ND St Muni Bond Bank Cap Fing Prog - Ser A 5.20% 06/01/21 50,000 51,793
ND St Muni Bond Bank Cap Fing Prog - Ser A 5.40% 06/01/28 40,000 41,407
ND St Muni Bond Bank St Revolv Fund Prog - Ser A 5.125% 12/01/13 100,000 98,294
---------
443,959
---------
Total Municipal Bonds (cost $3,365,819) 3,482,377
SHORT-TERM INVESTMENTS 8.8%
Franklin Double Tax-Free Income Fund 176,880
Federated Intermediate Municipal Fund 159,232
----------
Total Short-Term Investments (cost:$335,623) 336,112
----------
TOTAL MARKET VALUE OF SECURITIES OWNED 99.6% (COST $3,701,442) 3,818,489
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.4% 15,514
----------
NET ASSETS APPLICABLE TO 368,776 SHARES (0.001 PAR VALUE) OUTSTANDING - 100.00% $3,834,003
==========
*Indicates bonds are segregated by the custodian to cover when-issued or
delayed-delivery purchases.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Statement of Investments, June 30, 2003 (Unaudited)
Viking Large-Cap Value Fund
SHARES VALUE
Common Stocks 91.9%
Banks/Financial Services 13.3%
Citigroup 1,700 $72,760
Hartford Financial Services Group 800 40,288
Merrill Lynch 500 23,340
Morgan Stanley Dean Witter 500 21,375
National City 700 22,897
Partnerre Ltd. 900 45,999
U.S. Bancorp 1,265 30,995
Washington Mutual 1,200 49,560
--------
307,212
--------
Building Materials 2.5%
Masco Corporation 2,500 59,625
--------
59,625
--------
Computer/Communications Related 2.1%
Veeco Instruments 2,800 47,684
--------
47,684
--------
Drug 7.3%
Amerisource Bergen 400 27,740
Bristol-Myers Squibb 2,500 67,875
Merck & Co. 1,200 72,660
--------
168,275
--------
Drugstore 3.9%
CVS Corp. 3,200 89,696
--------
89,696
--------
Electric Utilities 7.7%
Dominion Resources 1,100 70,697
Duke Energy Corp. 3,000 59,850
Public Service Enterprise Group 1,100 46,475
--------
177,022
--------
Electronics 2.0%
Emerson Electric 900 45,990
--------
45,990
--------
Energy/Oil 9.9%
Anadarko Petroleum 1,500 66,705
Apache 1,155 75,144
ConocoPhillips 1,561 85,543
--------
227,392
--------
Entertainment 2.1%
Disney 2,500 49,375
--------
49,375
--------
Food Processing 4.2%
Dean Foods 1,350 42,525
Unilever NV ADR 1,000 54,000
--------
96,525
--------
Food Wholesalers/Retailers 3.6%
Kroger 5,000 83,400
--------
83,400
--------
Healthcare 1.0%
HCA Healthcare 700 22,428
--------
22,428
--------
Household Products 7.4%
Kimberly-Clark 1,700 88,638
McKesson Corporation 2,300 82,202
--------
170,840
--------
Industrial Products 5.6%
Ingersoll-Rand 1,000 47,320
Parker-Hannifin 500 20,995
SPX 1,400 61,684
--------
129,999
--------
Insurance 3.0%
MBIA, Inc. 1,400 68,250
--------
68,250
--------
Metals 2.4%
ALCOA 1,000 25,500
Rio Tinto Plc ADR 400 30,620
--------
56,120
--------
Multi-Industry 3.9%
Honeywell 1,600 42,960
ITT Industries 700 45,822
--------
88,782
--------
Packaging 4.1%
Sealed Air 2,000 95,320
--------
95,320
--------
Retail 1.1%
Office Depot 1,700 24,667
--------
24,667
--------
Telecommunications 4.8%
SBC Communications 1,700 43,435
Verizon Communications 1,700 67,065
--------
110,500
--------
Total Common Stocks (Cost $2,113,882) 2,119,102
SHORT-TERM INVESTMENTS 5.4%
Federated Prime Value Obligations #853 110,000
Federated Treasury Cash Reserves #125 13,500
----------
Total Short-Term Investments (cost: $123,500) 123,500
----------
TOTAL MARKET VALUE OF SECURITIES OWNED 97.3% (COST $2,237,382) 2,242,602
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 2.7% 63,352
----------
NET ASSETS APPLICABLE TO 259,119 SHARES ($0.001 PAR VALUE)
OUTSTANDING 100.0% $2,305,954
==========
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Statement of Investments, June 30, 2003 (Unaudited)
Viking Small-Cap Value Fund
SHARES VALUE
Common Stocks 91.1%
Auto Related 5.0%
Borg Warner 400 $25,760
Superior Industrial International 400 16,680
--------
42,440
--------
Basic Materials 4.0%
AptarGroup 700 25,200
Shaw Group 700 8,435
--------
33,635
--------
Cement 2.9%
Lafarge 800 24,720
--------
24,720
--------
Chemical 2.9%
RPM 1,800 24,750
--------
24,750
--------
Computer/Communications Related 5.4%
Actel 600 12,348
International Rectifier 800 21,456
Veeco Instruments 700 11,921
--------
45,725
--------
Construction/Engineering 3.7%
Granite Construction 900 17,244
Insituform Technologies 800 14,104
--------
31,348
--------
Electrical Equipment 2.5%
Belden 800 12,712
Cable Design Tech. 1,200 8,580
--------
21,292
--------
Electronics 5.7%
AO Smith 700 19,705
Bel Fuse Cl. B 900 20,394
Technitrol 500 7,525
--------
47,624
--------
Energy/Oil 1.7%
XTO Energy 700 14,077
--------
14,077
--------
Energy/Non-Oil 10.0%
NUI 500 7,760
Newfield Exploration 600 22,530
Piedmont Natural Gas 700 27,167
Questar 800 26,776
--------
84,233
--------
Food Wholesalers/Retailers 2.3%
SuperValu 900 19,188
--------
19,188
--------
Healthcare 0.8%
MIM Corp. 1,100 7,172
--------
7,172
--------
Household Products 5.7%
Church & Dwight 900 29,457
Libbey 800 18,160
--------
47,617
--------
Industrial Products 4.5%
CLARCOR 200 $7,710
Teleflex 700 29,785
--------
37,495
--------
Insurance 2.9%
Protective Life 900 24,075
--------
24,075
--------
Medical Services/Supplies 10.5%
Conmed 700 12,873
Dentsply International 500 20,480
Inamed 500 26,685
Polymedica 400 18,344
West Pharm. Services 400 9,800
--------
88,182
--------
Real Estate Investment Trusts 0.9%
Mack-Cali Realty 200 7,276
--------
7,276
--------
Recreational Products 3.9%
Jakks Pacific 1,300 17,251
RC2 Corp. 900 15,417
--------
32,668
--------
Restaurant 5.6%
Applebee's International 500 15,715
CBRL Group 600 23,310
Outback Steakhouse 200 7,800
--------
46,825
--------
Retailing 6.4%
BJ's Wholesale 1,000 15,060
Claire's Stores 300 7,608
Footstar 1,100 14,300
ShopKo Stores 1,300 16,900
--------
53,868
--------
Transportation 3.8%
Arkansas Best 1,000 23,610
Roadway Corporation 300 8,562
--------
32,172
--------
Total Common Stocks (Cost $719,948) 766,382
SHORT-TERM INVESTMENTS 8.6%
Federated Prime Value Obligations Fund #853 38,000
Federated Treasury Cash Reserves #125 34,800
--------
Total Short-Term Investments (Cost $72,800) 72,800
TOTAL MARKET VALUE OF SECURITIES OWNED 99.7% COST ($792,748) 839,182
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.3% 2,272
--------
NET ASSETS APPLICABLE TO 81,133 SHARES ($0.001 PAR VALUE)
OUTSTANDING 100.0% $841,454
========
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements (Unaudited)
Statements of Assets and Liabilities
June 30, 2003
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
ASSETS:
Investments in securities:
Cost $11,138,061 $3,701,442 $2,237,382 $792,748
------------------------------------------------------------------------------------
Value 11,490,963 3,818,489 2,242,602 839,182
Cash 442 14,508 69,717 356
Receivable for fund shares sold 9,741 74,401 - -
Prepaid assets 710 268 684 645
Interest & dividends receivable 128,719 48,324 3,348 490
Other assets 3,793 8,930 3,003 5,484
------------------------------------------------------------------------------------
Total assets 11,634,368 3,964,920 2,319,354 846,157
------------------------------------------------------------------------------------
LIABILITIES:
Security purchases payable 450,000 115,141 - -
Payable for fund shares redeemed - - 7,767 -
Distributions payable 34,548 11,070 - -
Other accounts payable and
accrued expenses 6,372 4,706 5,633 4,703
------------------------------------------------------------------------------------
Total liabilities 490,920 130,917 13,400 4,703
------------------------------------------------------------------------------------
NET ASSETS 11,143,448 3,834,003 2,305,954 841,454
------------------------------------------------------------------------------------
COMPONENTS OF NET ASSETS AT JUNE 30, 2003
Capital shares, $0.001 par value,
unlimited shares authorized 10,812,571 3,732,739 2,555,753 810,029
Net unrealized appreciation
(depreciation) 352,902 117,047 5,220 46,434
Accumulated net realized gain
(loss) on investments (22,025) (15,783) (263,806) (13,992)
Undistributed net investment
income (loss) - - 8,787 (1,017)
------------------------------------------------------------------------------------
NET ASSETS $11,143,448 $3,834,003 $2,305,954 $841,454
------------------------------------------------------------------------------------
NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets, at value $11,143,448 $3,834,003 $2,305,954 $841,454
Shares outstanding 1,081,599 368,776 259,119 81,133
Net asset value per share $10.30 $10.40 $8.90 $10.37
Maximum offering price per share
(net asset value per share divided
by 95.50%, 95.50%, 94.75% and
94.75%, respectively) $10.79 $10.89 $9.39 $10.94
------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements (Unaudited)
Statements of Operations
For the six months ended June 30, 2003
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
-------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $202,645 $59,211 $ - $ -
Dividends 6,827 4,023 22,458 4,656
-------------------------------------------------------------------------------------
Total investment income 209,472 63,234 22,458 4,656
-------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 23,276 7,028 7,089 3,437
Administrative fees 4,655 1,397 1,013 344
Distribution fees 11,638 3,514 4,051 1,375
Transfer agent fees 1,097 482 1,421 796
Accounting fees 2,238 703 504 172
Professional fees 3,953 3,803 3,933 3,180
Insurance 2,860 861 976 244
Trustee fees 506 512 521 500
Registration fees 524 63 441 312
Custodian fees 1,715 1,715 1,678 1,734
Other 119 84 282 158
-------------------------------------------------------------------------------------
Total expenses 52,671 20,162 21,909 12,252
-------------------------------------------------------------------------------------
Less expenses waived or
reimbursed (39,123) (15,558) (8,238) (6,580)
-------------------------------------------------------------------------------------
Net expenses 13,548 4,604 13,671 5,672
-------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 195,924 58,630 8,787 (1,016)
-------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss)
on investments (22,025) (15,158) (248,303) (4,969)
Net change in unrealized
appreciation (depreciation)
of investments 117,009 48,374 431,581 92,823
-------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 94,984 33,216 183,278 87,854
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $290,908 $91,846 $192,065 $86,838
-------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements (Unaudited)
Statements of Changes in Net Assets
For the six months ended June 30, 2003
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
-------------------------------------------------------------------------------------
INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS:
Net investment income (loss) $195,924 $58,630 $8,787 $(1,016)
Net realized gain (loss)
on investments (22,025) (15,158) (248,303) (4,969)
Net change in unrealized
appreciation (depreciation)
of investments 117,009 48,374 431,581 92,283
-------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations 290,908 91,846 192,065 86,838
-------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (195,924) (58,630) - -
Net realized gains - - - -
-------------------------------------------------------------------------------------
Total distributions to
shareholders (195,924) (58,630) - -
-------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 2,561,522 1,737,580 193,521 154,744
Proceeds from reinvestment
of distributions 157,309 34,176 14,516 -
Cost of shares repurchased (183,163) (29,818) (56,179) (3,941)
-------------------------------------------------------------------------------------
Increase in net assets
derived from capital share
transactions 2,535,668 1,741,938 151,858 150,803
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS $2,630,652 $1,775,154 $343,923 $237,641
-------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period $8,512,796 $2,058,849 $1,962,031 $603,813
-------------------------------------------------------------------------------------
End of period $11,143,448 $3,834,003 $2,305,954 $841,454
-------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Changes in Net Assets
For the twelve months ended December 31, 2002
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
-------------------------------------------------------------------------
INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS:
Net investment income (loss) $271,365 $87,297 $14,718 $(1,989)
Net realized gain (loss)
on investments 35,731 1,108 2,514 (2,977)
Net change in unrealized
appreciation (depreciation)
of investments 258,153 90,134 (540,267) (60,744)
-------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
operations 565,249 178,539 (523,035) (65,710)
-------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (271,365) (87,297) (14,718) -
Net realized gains (34,626) - - -
-------------------------------------------------------------------------
Total distributions to
shareholders (305,991) (87,297) (14,718) -
-------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 4,937,815 447,893 428,130 380,932
Proceeds from reinvestment
of distributions 170,963 45,423 7,377 -
Cost of shares repurchased (404,531) (140.136) (79,164) (32,411)
-------------------------------------------------------------------------
Increase in net assets derived
from capital share
transactions 4,704,247 353,180 356,343 348,521
-------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS $4,963,505 $444,422 $(181,410) $282,811
-------------------------------------------------------------------------
NET ASSETS:
Beginning of period $3,549,291 $1,614,427 $2,143,441 $321,002
End of period $8,512,796 $2,058,849 $1,962,031 $603,813
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Highlights
Viking Tax-Free Fund for Montana
Selected data for each share of the Fund outstanding throughout each period
were as follows:
For the Period
01/01/03- 01/01/02- 01/01/01- 01/01/00- 08/03/991-
06/30/03 12/31/02 12/31/01 12/31/00 12/31/99
-------------------------------------------------------------
Net asset value, beginning of period $10.18 $9.74 $9.82 $9.41 $10.00
-------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.22 0.46 0.51 0.52 0.15
Net realized and unrealized gain
(loss) on investments 0.12 0.48 (0.08) 0.41 (0.59)
-------------------------------------------------------------
Total from investment operations 0.34 0.94 0.43 0.93 (0.44)
-------------------------------------------------------------
Less distributions from:
Net investment income (0.22) (0.46) (0.51) (0.52) (0.15)
Net realized gains - (0.04) - - -
-------------------------------------------------------------
Total distributions (0.22) (0.50) (0.51) (0.52) (0.15)
-------------------------------------------------------------
Net asset value, end of period $10.30 $10.18 $9.74 $9.82 $9.41
-------------------------------------------------------------
Total return2 3.33% 9.90% 4.48% 10.23% (4.47)%
-------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000's) $11,143 $8,513 $3,549 $1,131 $145
Ratio of net expenses to average net assets 0.29%3,4 0.15%3 0.06%3 0.01%3 0.00%3,4
Ratio of net investment income to
average net assets 4.16%4 4.58% 5.06% 5.13% 4.15%4
Portfolio turnover rate 11.45% 40.09% 6.14% 21.12% 4.36%
1Commencement of operations.
2Total return assumes reinvestment of distributions at net asset value, does
not reflect the impact of a sales charge and is not annualized.
3Viking Fund Management, LLC, the Fund's investment manager, has contractually
agreed to waive its fees or reimburse the Fund for its expenses through
August 1, 2009 so that the Fund's total operating expenses during this period
will not exceed 0.85% of its average net assets on an annual basis. For the
periods indicated above, Viking Fund Management, LLC waived fees and
reimbursed expenses totaling $39,123, $67,712, $30,300, $17,505 and $9,972.
If the fees had not been waived or expenses had not been reimbursed, the
annualized ratio of total expenses to average net assets would have been
1.12%, 1.30%, 1.60%, 4.79% and 24.90% respectively.
4Annualized.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Highlights
Viking Tax-Free Fund for North Dakota
Selected data for each share of the Fund outstanding throughout each period
were as follows:
For the Period
01/01/03- 01/01/02- 01/01/01- 01/01/00- 08/03/991-
06/30/03 12/31/02 12/31/01 12/31/00 12/31/99
-------------------------------------------------------------
Net asset value, beginning of period $10.25 $9.76 $9.95 $9.47 $10.00
-------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.22 0.47 0.51 0.55 0.18
Net realized and unrealized gain
(loss) on investments 0.15 0.49 (0.19) 0.48 (0.53)
-------------------------------------------------------------
Total from investment operations 0.37 0.96 (0.32) 1.03 (0.35)
-------------------------------------------------------------
Less distributions from:
Net investment income (0.22) (0.47) (0.51) (0.55) (0.18)
Net realized gains - - - - -
-------------------------------------------------------------
Total distributions (0.22) (0.47) (0.51) (0.55) (0.18)
-------------------------------------------------------------
Net asset value, end of period $10.40 $10.25 $9.76 $9.95 $9.47
-------------------------------------------------------------
Total return2 3.62% 10.07% 3.26% 11.30% (3.56)%
Ratios/supplemental data:
Net assets, end of period (000's) $3,834 $2,059 $1,614 $327 $128
Ratio of net expenses to average net assets 0.32%3,4 0.22%3 0.11%3 0.05%3 0.00%3,4
Ratio of net investment income to
average net assets 4.13%4 4.73% 4.85% 5.73% 4.28%4
Portfolio turnover rate 3.40% 27.95% 3.83% 16.16% 0.00%
1Commencement of operations.
2Total return assumes reinvestment of distributions at net asset value,
does not reflect the impact of a sales charge and is not annualized
3Viking Fund Management, LLC, the Fund's investment manager, has
contractually agreed to waive its fees or reimburse the Fund for its
expenses through August 1, 2009 so that the Fund's total operating expenses
during this period will not exceed 0.85% of its average net
assets on an annual basis. For the periods indicated above, Viking Fund
Management, LLC waived fees and reimbursed expenses totaling $20,162,
$30,993, $16,352, $15,441 and $9,786. If the fees had not been waived
or expenses had not been reimbursed, the annualized ratio of total
expenses to average net assets would have been 1.42%, 1.90%, 2.57%,
7.10% and 29.72% respectively.
4Annualized.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Highlights (Unaudited)
Viking Large-Cap Value Fund
Selected data for each share of the Fund outstanding throughout each period
were as follows:
For the Period
01/01/03- 01/01/02- 01/01/01- 01/01/00- 08/03/991-
06/30/03 12/31/02 12/31/01 12/31/00 12/31/99
-------------------------------------------------------------
Net asset value, beginning of period $8.20 $10.74 $11.08 $9.90 $10.00
-------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.03 0.06 0.04 0.07 0.02
Net realized and unrealized gain
(loss) on investments 0.67 (2.60) (0.34) 1.18 (0.10)
-------------------------------------------------------------
Total from investment operations 0.70 (2.54) (0.30) 1.25 (0.08)
-------------------------------------------------------------
Less distributions from:
Net investment income - (0.06) (0.04) (0.07) (0.02)
Net realized gains - - - - -
-------------------------------------------------------------
Total distributions - (0.06) (0.04) (0.07) (0.02)
-------------------------------------------------------------
Net asset value, end of period $8.90 $8.20 $10.74 $11.08 $9.90
-------------------------------------------------------------
Total return2 8.54% (23.08)% (2.73)% 12.67% (0.77)%
Ratios/supplemental data:
Net assets, end of period (000's) $2,306 $1,962 $2,143 $1,367 $591
Ratio of net expenses to average net assets 1.35%3,4 1.35%3 1.35%3 1.35%3 1.35%3,4
Ratio of net investment income to
average net assets 0.86%4 0.71% 0.37% 0.90% 0.83%4
Portfolio turnover rate 18.75% 36.52% 27.59% 48.97% 6.30%
1Commencement of operations.
2Total return assumes reinvestment of distributions at net asset value, does
not reflect the impact of a sales charge and is not annualized.
3Viking Fund Management, LLC, the Fund's investment manager, has contractually
agreed to waive its fees or reimburse the Fund for its expenses through
August 1, 2009 so that the Fund's total operating expenses during this period
will not exceed 1.35% of its average net assets on an annual basis. For the
periods indicated above, Viking Fund Management, LLC waived fees and
reimbursed expenses totaling $$8,238, $20,422, $15,184, $17,512 and $11,025.
If the fees had not been waived or expenses had not been reimbursed, the
annualized ratio of total expenses to average net assets would have been
2.15%, 2.34%, 2.10%, 3.07% and 8.58% respectively.
4Annualized.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Highlights (Unaudited)
Viking Small-Cap Value Fund
Selected data for each share of the Fund outstanding throughout the period
was as follows:
For the Period
01/01/03- 01/01/02- 05/03/011 -
06/30/03 12/31/02 12/31/01
------------------------------------
Net asset value, beginning of period $9.35 $10.26 $10.00
------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (0.01) (0.03) -
Net realized and unrealized gain
(loss) on investments 1.03 (0.88) 0.26
------------------------------------
Total from investment operations 1.02 (0.91) 0.26
------------------------------------
Less distributions from:
Net investment income - - -
Net realized gains - - -
------------------------------------
Total distributions - - -
------------------------------------
Net asset value, end of period $10.37 $9.35 $10.26
------------------------------------
Total return2 10.91% (8.87)% 2.60%
Ratios/supplemental data:
Net assets, end of period (000's) $841 $604 $321
Ratio of net expenses to average net assets 1.64%3,4 1.65%3 1.59%3,4
Ratio of net investment income to average
net assets (0.29)%4 (0.41)% (0.28)%4
Portfolio turnover rate 8.62% 16.24% 1.81%
1Commencement of operations.
2Total return assumes reinvestment of distributions at net asset value,
does not reflect the impact of a sales charge and is not annualized.
3Viking Fund Management, LLC, the Fund's investment manager, has
contractually agreed to waive its fees or reimburse the Fund for
its expenses through August 1, 2009 so that the Fund's total operating
expenses during this period will not exceed 1.65% of its average net assets
on an annual basis. For the periods indicated above, Viking Fund Management,
LLC waived fees and reimbursed expenses totaling $6,580, $17,392 and $6,593.
If the fees had not been waived or expenses had not been reimbursed, the
annualized ratio of total expenses to average net assets would have been
3.54%, 5.24% and 5.67% respectively.
4Annualized.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Notes to Financial Statements (Unaudited)
June 30, 2003
1. ORGANIZATION
Viking Mutual Funds (the "Company") is registered under the Investment Company
Act of 1940 as a non-diversified, open-end management investment company,
consisting of four series (the "Funds").
The Viking Tax-Free Fund for Montana and Viking Tax-Free Fund for North Dakota
(each a "Tax-Free Fund"), each a non-diversified Fund, seek the highest level
of current income that is exempt from both federal and state income taxes and
is consistent with preservation of capital. The Viking Large-Cap Value Fund
("Large-Cap") and Viking Small-Cap Value Fund ("Small-Cap"), each a
diversified Fund, seek long-term total return and capital preservation.
2. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with accounting
principles generally accepted in the United States of America and are
consistently followed by the Funds.
Security Valuation Securities listed or traded on a recognized national
exchange or NASDAQ are valued at the last reported sales price. Securities
for which market quotations are not readily available (which will constitute
a majority of the securities held by the Tax-Free Funds) are valued using a
matrix system at fair value as determined by management in
accordance with procedures established by the Board of Trustees.
Premiums and Discounts Premiums and discounts on municipal securities are
amortized for financial reporting purposes. On January 1, 2001, the Tax-Free
Funds adopted the provisions of the American Institute of Certified Public
Accountants' revised Audit and Accounting Guide Audits of Investment
Companies (the guide). The guide requires all premiums and discounts on debt
securities to be amortized. Prior to January 1, 2001, the Tax-Free Funds
recognized market discount at time of disposition as gain or loss. Upon
adoption, the Tax-Free Funds reviewed their investment portfolios and
determined the impact of this accounting change to be insignificant. The
Tax-Free Funds have therefore not made a cumulative effect adjustment to its
financial statements. This accounting change had no effect on the Fund's
net assets or total returns. Bonds acquired at a market discount after
January 1, 2001 are being amortized in accordance with provisions of the
audit guide.
Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains
and losses on security transactions are determined on the identified cost
basis. Interest income and estimated expenses are accrued daily. Dividend
income is recognized on the ex-dividend date. Premiums and discounts on
municipal securities are amortized to interest income using the constant
yield method over the estimated lives of the respective securities. The
Tax-Free Funds declare dividends from net investment income daily and pay
such dividends monthly. The Large-Cap Fund and the Small-Cap Fund will
declare and pay dividends from net investment income at least annually.
Capital gains, if any, are distributed annually. Income and capital gain
distributions are determined in accordance with federal income tax
regulations and may differ from net investment income and realized gains
determined in accordance with accounting principles generally accepted in
the United States of America. These differences are primarily due to
differing treatment for market discount, capital loss carryforwards and
losses due to wash sales and futures transactions.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid-in
capital. Temporary book and tax basis differences will reverse in a
subsequent period. Common expenses incurred by the Company are
allocated among the Funds based on the ratio of net assets of each Fund
to the combined net assets. Other expenses are charged to each Fund on
a specific identification basis.
Use of Estimates The preparation of financial statements in accordance
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of 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.
3. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid during the six months ended
June 30, 2003 and the year ended December 31, 2002 were as follows:
Tax-Free Fund for Tax-Free Fund for Large-Cap Small-Cap
Montana North Dakota Value Fund Value Fund
------------------------------------------------------------------------------
2003 2002 2003 2002 2003 2002 2003 2002
------------------------------------------------------------------------------
Distributions paid from:
Ordinary income 195,924 $284,916 $58,630 $87,297 $0 $14,718 $0 $0
Long-term capital gain $0 $21,075 $0 $0 $0 $0 $0 $0
All the ordinary income distributions described above were exempt from federal
income taxes.
4. CAPITAL STOCK
Transactions in capital shares were as follows:
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
-------------------------------------------------------------------------
For the Period For the Period For the Period For the Period
from 01/01/03 from 01/01/03 from 01/01/03 from 01/01/03
through 06/30/03 through 06/30/03 through 06/30/03 through 06/30/03
--------------------------------------------------------------------------
Shares sold 270,594 179,194 24,829 16,960
Shares issued in reinvestment
of distributions 15,388 3,313 1,770 0
Shares redeemed (40,594) (14,624) (6,790) (413)
--------------------------------------------------------------------------
Net Increase 45,388 167,883 19,809 16,547
--------------------------------------------------------------------------
5. INVESTMENT MANAGEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds have retained Viking Fund Management, LLC ("VFM") to provide the
Funds with investment advice and portfolio management. As compensation for
the advisory services furnished to the Funds, the Funds pay VFM monthly
compensation calculated daily by applying the annual rates of 0.50% to the
Tax-Free Funds daily net assets, 0.70% to the Large-Cap Fund's daily net
assets and 1.00% to the Small-Cap Fund's daily net assets. The Large-Cap
Fund recognized $5,790 of investment advisory fees after a partial waiver
for the six months ended June 30, 2003. On June 30, 2003, the Large-Cap
Fund had a payable to VFM for investment advisory fees of $1,310. The
Small-Cap Fund recognized $205 of investment advisory fees after a partial
waiver for the six months ended June 30, 2003. On June 30, 2003, the
Small-Cap Fund had a payable to VFM for investment advisory fees of $77.
Under a sub-advisory agreement between Fox Asset Management, LLC (the
"sub-adviser") and VFM, the sub-adviser provides the Large-Cap Fund and
the Small-Cap Fund with investment advice and portfolio management subject
to the overall supervision of VFM. As compensation for its services
provided to the Large-Cap Fund, VFM pays the sub-adviser monthly compensation
calculated daily by applying the annual rate of 0.40% to the Large-Cap Fund's
daily net assets of up to $100 million and 0.35% to the Large-Cap Fund's
daily net assets in excess of $100 million. As compensation for its
services provided to the Small-Cap fund, VFM pays the sub-adviser monthly
compensation calculated daily by applying the annual rate of 0.40% to the
Small-Cap Fund's daily net assets until the net assets reach $5 million and
0.60% to the Small-Cap Fund's daily net assets when the net assets surpass
$5 million.
The Funds have also entered into an agreement with VFM to provide
administrative services, portfolio accounting and transfer agent
services to each of the Funds for a fee at an annual rate of 0.15%
of daily net assets, plus a per account charge and reimbursement of
certain direct expenses. On June 30, 2003, the Tax-Free Fund for
Montana, Tax-Free Fund for North Dakota, Large-Cap Fund and Small-Cap
Fund had payables to VFM for transfer agent out-of-pocket expenses of
$119, $324, $282 and $16, respectively.
The Funds have a distribution plan, sometimes known as a Rule 12b-1 plan,
that allows the Tax-Free Funds to pay distribution and service fees of up
to 0.25% of average daily net assets per year and the Large-Cap Fund and
the Small-Cap Fund to pay distribution and service fees of up to 0.40% of
average daily net assets per year to Viking Fund Distributors, LLC ("VFD")
for distributing each Fund's shares and for servicing shareholder accounts.
For the period ending June 30, 2003, the net amounts of sales charges
deducted from the proceeds of sale of capital shares which were retained
by VFD as principal underwriter were $47,167, $48,270, $2,052 and $1,631
for the Tax-Free Fund for Montana, Tax-Free Fund for North Dakota, Large-Cap
Fund and Small-Cap Fund, respectively. On June 30, 2003 the Tax-Free Fund
for Montana, Tax-Free Fund for North Dakota, Large-Cap Fund and Small-Cap
Fund had payables to VFD for underwriting fees of $308, $434, $0 and $0,
respectively.
VFM has contractually agreed to waive its fees or reimburse the Funds
for their expenses through August 1, 2009 so that the Tax-Free Fund's
total operating expenses during this period will not exceed 0.85% of
average net assets on an annual basis, the Large-Cap Fund's total operating
expenses during this period will not exceed 1.35% of average net assets on
an annual basis and the Small-Cap Fund's total operating expenses during this
period will not exceed 1.65% of average net assets on an annual basis.
On June 30, 2003, the Tax-Free Fund for Montana, Tax-Free Fund for North
Dakota, Large-Cap Fund and Small-Cap Fund had receivables from VFM for
reimbursement of certain expenses of $3,600, $8,932, $2,977 and $5,484,
respectively. Certain officers and trustees of the Funds are also officers
and governors of VFM and VFD.
6. INCOME TAXES
No provision has been made for income taxes because each Fund's policy is
to qualify as a regulated investment company under the Internal Revenue
Code and to distribute substantially all of its taxable income. At June
30, 2003, Tax-Free Fund for North Dakota, Large-Cap Value Fund and Small-Cap
fund had capital losses of $22,026, $626, $263,807 and $13,992
respectively, which may be carried over to offset future capital gains.
Such losses expire start to expire in 2008.
At June 30, 2003, the net unrealized appreciation based on the cost of
investments for federal income tax purposes was as follows:
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
------------------------------------------------------------------------------------
Investments at cost $11,138,061 $3,701,442 $2,237,382 $792,748
------------------------------------------------------------------------------------
Unrealized appreciation 370,969 127,133 198,663 98,115
Unrealized depreciation (18,067) (10,086) (193,444) (51,681)
------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) $352,902 $117,047 $5,219 $46,434
------------------------------------------------------------------------------------
7. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2003 were as follows:
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
-----------------------------------------------------------------------------------
Purchases $3,335,226 $1,564,914 $482,611 $194,270
Sales $1,078,696 $96,741 $382,567 $59,582
8. CREDIT AND MARKET RISK
The Tax-Free Funds concentrate their investments in securities mainly issued
by each specific state's municipalities. The value of these investments may
be adversely affected by new legislation within the state, regional or local
economic conditions, and differing levels of supply and demand for municipal
bonds. Many municipalities insure repayment for their obligations. Although
bond insurance reduces the risk of loss due to default by an issuer, such
bonds remain subject to the risk that market value may fluctuate for other
reasons and there is no assurance that the insurance company will meet its
obligations. These securities have been identified in the Statement of
Investments.
VIKING MUTUAL FUNDS
Trustee Information (Unaudited)
June 30, 2003
NAME AND PRINCIPAL OCCUPATION(S)
ADDRESS AGE POSITION(S) HELD DURING PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------------------------
Bruce C. Adams 57 Trustee Retired farmer (1997-pres.); Trustee,
1400 14th Ave. SW Viking Mutual Funds (1999-pres.);Trustee,
Minot, ND 58701 ND Natural Resources Trust (2002-
pres.)Director, Garrison Diversion
Conservancy District (1994-2002); Small
grain farmer (1971-1997); Director,
Federal Reserve Bank of Minneapolis
(1988-1992); Chairman, Advisory Council
to Federal Reserve Bank of Minneapolis
Board of Directors (1988-1992).
Shirley R. Martz 78 Trustee Retired CPA (1989-pres.); Trustee, Viking
1400 14th Ave. SW Mutual Funds (1999-pres.); Principal
Minot, ND 58701 shareholder and employee of Brady, Martz
& Associates and its predecessor (1948-
1989).
Douglas P. Miller 29 Trustee Secretary and Treasurer, Viking Fund
1400 14th Ave. SW Vice-President Management, LLC (1998-pres.); Secretary
Minot, ND 58701 Secretary and Treasurer, Viking Fund Distributors,
LLC (1999-pres.); Trustee, Vice-President
and Secretary, Viking Mutual Funds (1999
-pres.); Controller, ND Holdings, Inc.
(1998); Fund Accountant, ND Holdings,
Inc. (1996-1998).
Shannon D. Radke 36 Trustee President, Viking Fund Management, LLC
1400 14th Ave. SW President (1998- pres.); President, Viking Fund
Minot, ND 58701 Treasurer Distributors, LLC (1999-pres.); Trustee,
President and Treasurer, Viking Mutual
Funds (1999-pres.); Chief Operating
Officer, ND Holdings, Inc. (1997-1998);
Operations Manager, ND Holdings, Inc.
(1993-1997).
Mike Timm 66 Trustee Retired; Trustee, Viking Mutual Funds
1400 14th Ave. SW (1999-pres.); President and General
Minot, ND 58701 Manager, Timm Moving and Storage (1959-
2000); State Representative, North Dakota
House of Representatives (1973-pres.);
Speaker of the North Dakota House of
Representatives (1997).
The SAI has additional information about the Trustees and is available
at (800) 933-8413 without charge upon request.
VIKING MUTUAL FUNDS
1400 14th Avenue SW
Minot, ND 58701
BOARD OF TRUSTEES
Bruce C. Adams
Shirley R. Martz
Douglas P. Miller
Shannon D. Radke
Mike Timm
INVESTMENT MANAGER
Viking Fund Management, LLC
1400 14th Avenue SW
Minot, ND 58701
SUB-ADVISOR
(For Viking Large-Cap Value Fund)
(For Viking Small-Cap Value Fund)
Fox Asset Management, LLC
44 Sycamore Avenue
Little Silver, NJ 07739
DISTRIBUTOR
Viking Fund Distributors, LLC
1400 14th Avenue SW
Minot, ND 58701
CUSTODIAN
First Western Bank & Trust
900 South Broadway
Minot, ND 58701
TRANSFER AGENT
Viking Fund Management, LLC
P.O. Box 500
Minot, ND 58702
INDEPENDENT AUDITORS
Brady, Martz & Associates, P.C.
201 East Broadway, Suite 200
Bismarck, ND 58501
Shareholder Services
1-800-933-8413
When used with prospective investors, this report must be preceded by
a current Viking Mutual Funds prospectus. The prospectus sets forth details
about charges, expenses, investment objectives and operating policies of each
of the Funds. You should read the prospectus carefully before you invest.
To obtain a prospectus, contact your investment professional or Viking Mutual
Funds.
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. [RESERVED]
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Disclosure Controls and Procedures. The Principal Executive and
Financial Officers concluded that the Registrant's Disclosure Controls
and Procedures are effective based on their evaluation of the Disclosure
Controls and Procedures as of a date within 90 days of the filing date of this
report.
(b) Internal Controls. There were no significant changes in
Registrant's internal controls or in other factors that could
significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
(a) Not applicable.
(b)(1) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of
1940. Certification of principal executive officer and principal
financial officer as required by Section 906 of the Sarbanes-Oxley
Act of 2002.
SIGNATURES
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.
By: /s/ SHANNON D. RADKE
-------------------------------
Shannon D. Radke
Principal Executive Officer
Date: August 29, 2003
By: /s/ DOUGLAS P. MILLER
------------------------------
Douglas P. Miller
Principal Financial Officer
Date: August 29, 2003
EXHIBIT INDEX
(b)(1) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of
1940. Certification of principal executive officer and principal
financial officer as required by Section 906 of the Sarbanes-Oxley
Act of 2002.