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
----
Date of reporting period: 12/31/04
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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 Annual Report for the
year ended December 31, 2004.
Throughout the period under review, economic reports have remained healthy,
fueled by, among other things, the combined stimulus of the government's
monetary and fiscal policies. The lowest interest rates in 46 years
punctuated the extent of monetary punch. These low rates spurred record
housing and refinancing activity and funded a plethora of other consumer
purchases. On the fiscal policy side, three tax cuts and a shortened
depreciation schedule helped invigorate the economy further. GDP growth
exceeding 6% in the second half of 2003 proved the policies worked but the
markets remained unconvinced about the sustainability of the strength as
the payroll data showed a lack of hiring. The economy remained robust in
the first quarter of this year posting an increase in GDP of 4.5%. Some
slowing occurred as we saw in the 3.3% growth in the second quarter;
Greenspan termed it "a soft patch." Despite the slowing, consumer
confidence surged and all three payroll reports showed significant
strength giving the economy signs of self-sustaining growth and sending
interest rates sharply higher. This move higher in rates was in anticipation
of the Federal Reserve boosting the Fed Funds rate, which it did by 25 basis
points on the last day of the second quarter. Worry about Iraq, the
election, terrorism and interest rates along with the slowing profit and
economic growth dominated investor emotions during the third quarter. The
most consistent aspect about the third quarter was the lack of any consistent
trend except for oil prices, which moved higher. Driving this surge in
demand for oil are the U.S. and China the world's twin powerhouses of
economic growth. As long as their growth rates continue, the demand for
oil will keep running at record levels. In addition, although the Fed
raised rates twice, in an effort to remove its "accommodation" at a measured
pace, intermediate and long rates declined despite the higher energy prices
due to diminished inflation expectations. U.S. economic growth continued
in the fourth quarter as payrolls picked up, albeit inconsistently, inflation
increased, although still well contained and the Fed continued its "measured"
pace of interest rate hikes. The major stock indexes surged on relief that
the Presidential election yielded a clear winner. In summary for 2004, the
economy skated around quite a few obstacles: Higher oil prices, a
much-weakened dollar, inconsistent job growth and the always-present threat
of terrorism. Business investment finally turned upward, growing at
double-digit rates. Consumers kept spending just about their whole paycheck,
stimulated by low prices, low interest rates, rising incomes and cash from
their home equity. Debt exploded. Real estate boomed.
The first quarter of 2004 provided mixed results for the equity market.
Equities were mostly positive with gains for the S&P 500 Index and the
Russell 1000 Value Index. However, the Dow Jones Industrial Average and
the NASDAQ Composite both had negative returns of less than 1%. Small-caps
continued to outperform large-caps. The first quarter also concluded a
strong 12-month period for stocks following a difficult three-year bear
market from March 2000 to March 2003. Productivity gains continued to fuel
earnings growth beyond what might have been expected from GDP growth alone.
Equity prices finished the second quarter slightly higher and as a result
finished the six-month period higher. Corporate earnings continued to
grow at well-above-average rates during the second quarter. As anticipated,
the growth rate of earnings slowed in the third quarter and the markets
reacted predictably, with modest losses for the broad market indices.
Stocks did rise, however, in September after declining in July and August,
seemingly following an improved showing by President Bush in the polls.
After a flat start to the fourth quarter in October, the markets surged as
investors reacted to the Presidential election with relief that a clear
winner had emerged. In fact, the strong upward move in November and December
accounted for the entire quarter's performance, and indeed the entire year's
performance. The overall advance by the major indexes was muted compared to
2003's rally as U.S. investors had to overcome rising short term interest
rates, a 34 percent jump in crude oil prices and an almost 8 percent decline
in the dollar. For the year, the Dow Jones Industrial Average rose 3.1
percent, the tech-laden Nasdaq Composite Index gained 8.6 percent and the
S&P 500 ended the year up 9 percent.
In the first quarter of 2004, the fixed income markets reversed the weak
performance seen in the second half of last year. The turnaround occurred
despite robust economic data in a variety of areas. What propelled the
fixed income market higher in price and lower in yield was the lack of
hiring that usually accompanies a heightened level of economic activity.
The logic being that without new hiring, the economic strength will
prove to be temporary. Signs of self-sustaining growth in the economy in
the second quarter, evidenced by three consecutive powerful payroll reports
sent interest rates soaring and municipal bond prices sharply lower. It
was the worst quarterly performance in the bond market since 1980. Following
the on-again, off-again pattern set in the prior few quarters, the fixed
income markets registered strong returns in the third quarter. Although
the pace of economic expansion slowed somewhat, the main reason for higher
bond prices was diminished inflation expectations. Interest rates again
reversed course and increased in the fourth quarter sending municipal bond
prices lower as the economic expansion continued at a self-sustaining pace.
In December, the Federal Open Market Committee increased overnight interest
rates by a quarter percentage point to 2.25 percent and repeated that rates
can rise further in coming months. It was the fifth hike in 2004. However,
bullish bondholders have been comforted by the Federal Reserve's rate action
in 2004, believing modestly higher short-term interest rates will muffle
inflation gains. As a result, the yield curve, which plots the range of
returns from shortest to longest maturity, is at its flattest in several
years. That is, short-term bonds have been falling in price and gaining in
yield amid expectations that the Fed will continue to lift its interest-rate
target. At the same time, longer maturities have gained in price and fallen
in yield because of expectations the Fed's rate hikes will limit economic
expansion and contain inflation.
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. Our interests
are closely aligned with those of our shareholders because our money is
invested alongside their own. As always we will do our best to make
sure your experience as a shareholder is a rewarding one.
Sincerely,
/s/Shannon D. Radke
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 4.05% (at net
asset value with distributions reinvested) for the year ended
December 31, 2004.
In the first quarter of 2004, the fixed income markets reversed the weak
performance seen in the second half of last year. The turnaround occurred
despite robust economic data in a variety of areas. What propelled the
fixed income market higher in price and lower in yield was the lack of
hiring that usually accompanies a heightened level of economic activity.
The logic being that without new hiring, the economic strength will prove
to be temporary. As a result, the Fund's share price rose modestly.
Signs of self-sustaining growth in the economy in the second quarter,
evidenced by three consecutive powerful payroll reports sent interest rates
soaring and municipal bond prices sharply lower. This resulted in a decline
in the Fund's share price. However, our emphasis on preserving capital
prevented what may have been a more severe decline. It was the worst
quarterly performance in the bond market since 1980. Following the on-again,
off-again pattern set in the prior few quarters, the fixed income markets
registered strong returns in the third quarter, sending the Fund's share
price higher. Although the pace of economic expansion slowed somewhat, the
main reason for higher bond prices was diminished inflation expectations.
Interest rates again reversed course and increased in the fourth quarter
sending bond prices slightly lower as the economic expansion continued at
a self-sustaining pace. The Fund's share price, however, finished unchanged
from its third quarter level. In December, the Federal Open Market Committee
increased overnight interest rates by a quarter percentage point to 2.25% and
repeated that rates can rise further in coming months. It was the fifth hike
in 2004. However, bullish bondholders have been comforted by the Federal
Reserve's rate action in 2004, believing modestly higher short-term interest
rates will muffle inflation gains. As a result, the yield curve, which plots
the range of returns from shortest to longest maturity, is at its flattest
in several years. That is, short-term bonds have been falling in price and
gaining in yield amid expectations that the Fed will continue to lift its
interest-rate target. At the same time, longer maturities have gained in
price and fallen in yield because of expectations the Fed's rate hikes will
limit economic expansion and contain inflation.
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. 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.
Volatility in the stock market the last few years 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 December 31,2004 (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 $ 9,550 $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
July 31, 2003 $11,490 $12,030 $12,695
August 31, 2003 $11,575 $12,119 $12,790
September 30, 2003 $11,908 $12,468 $13,166
October 31, 2003 $11,832 $12,388 $13,100
November 30, 2003 $11,950 $12,511 $13,237
December 31, 2003 $12,063 $12,630 $13,347
January 31, 2004 $12,136 $12,706 $13,423
February 29, 2004 $12,313 $12,892 $13,625
March 31, 2004 $12,274 $12,850 $13,578
April 30, 2004 $12,001 $12,565 $13,256
May 31, 2004 $11,941 $12,503 $13,208
June 30, 2004 $12,006 $12,570 $13,256
July 31, 2004 $12,165 $12,737 $13,429
August 31, 2004 $12,374 $12,956 $13,698
September 30, 2004 $12,436 $13,020 $13,771
October 31, 2004 $12,484 $13,071 $13,889
November 30, 2004 $12,414 $12,997 $13,775
December 31, 2004 $12,551 $13,141 $13,943
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 08/03/99-12/31/04. 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 December 31, 2004 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge 4.05% 6.10% 6.58% 5.17%
Including Sales Charge -0.63% 4.48% 5.62% 4.28%
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 3.76% (at
net asset value with distributions reinvested) for the year ended
December 31, 2004.
In the first quarter of 2004, the fixed income markets reversed the weak
performance seen in the second half of last year. The turnaround occurred
despite robust economic data in a variety of areas. What propelled the
fixed income market higher in price and lower in yield was the lack of
hiring that usually accompanies a heightened level of economic activity.
The logic being that without new hiring, the economic strength will prove
to be temporary. As a result, the Fund's share price rose modestly. Signs
of self-sustaining growth in the economy in the second quarter, evidenced by
three consecutive powerful payroll reports sent interest rates soaring and
municipal bond prices sharply lower. This resulted in a decline in the
Fund's share price. However, our emphasis on preserving capital prevented
what may have been a more severe decline. It was the worst quarterly
performance in the bond market since 1980. Following the on-again, off-again
pattern set in the prior few quarters, the fixed income markets registered
strong returns in the third quarter, sending the Fund's share price higher.
Although the pace of economic expansion slowed somewhat, the main reason
for higher bond prices was diminished inflation expectations. Interest rates
again reversed course and increased in the fourth quarter sending bond prices
slightly lower as the economic expansion continued at a self-sustaining
pace. The Fund's share price, however, eked out a small gain from its third
uarter level. In December, the Federal Open Market Committee increased
overnight interest rates by a quarter percentage point to 2.25% and repeated
that rates can rise further in coming months. It was the fifth hike in
2004. However, bullish bondholders have been comforted by the Federal
Reserve's rate action in 2004, believing modestly higher short-term interest
rates will muffle inflation gains. As a result, the yield curve, which plots
the range of returns from shortest to longest maturity, is at its flattest
in several years. That is, short-term bonds have been falling in price and
gaining in yield amid expectations that the Fed will continue to lift its
interest-rate target. At the same time, longer maturities have gained in
price and fallen in yield because of expectations the Fed's rate hikes will
limit economic expansion and contain inflation.
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. 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.
Volatility in the stock market the last few years 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 December 31, 2004 (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 $ 9,550 $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
July 31, 2003 $11,652 $12,196 $12,695
August 31, 2003 $11,761 $12,314 $12,790
September 30, 2003 $12,046 $12,612 $13,166
October 31, 2003 $11,982 $12,545 $13,100
November 30, 2003 $12,087 $12,656 $13,237
December 31, 2003 $12,188 $12,761 $13,347
January 31, 2004 $12,284 $12,862 $13,423
February 29, 2004 $12,450 $13,035 $13,625
March 31, 2004 $12,386 $12,968 $13,578
April 30, 2004 $12,100 $12,668 $13,256
May 31, 2004 $12,026 $12,591 $13,208
June 30, 2004 $12,077 $12,645 $13,256
July 31, 2004 $12,214 $12,788 $13,429
August 31, 2004 $12,435 $13,019 $13,698
September 30, 2004 $12,495 $13,082 $13,771
October 31, 2004 $12,568 $13,158 $13,889
November 30, 2004 $12,497 $13,084 $13,775
December 31, 2004 $12,646 $13,240 $13,943
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 08/03/99-12/31/04. 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 December 31, 2004 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge 3.76% 6.11% 6.54% 5.32%
Including Sales Charge -0.85% 4.49% 5.56% 4.43%
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: George C. Pierides, Senior Director of Investment Committee
Shannon D. Radke, President
Viking Large-Cap Value Fund provided a return of 8.63% (at net asset value)
for the year ended December 31, 2004.
The first quarter of 2004 provided mixed results for the equity market.
Equities were mostly positive with the S&P 500 Index gaining 1.7% and the
Russell 1000 Value Index returning 3.0%. However, the Dow Jones Industrial
Average and the NASDAQ Composite both had negative returns of less than 1%.
The first quarter marked a strong 12-month period for stocks following a
difficult three-year bear market from March 2000 until March 2003. Our
main takeaway from the equity markets in the first quarter, despite
many crosscurrents, was that the equity prices consolidated their dramatic
gains of 2003 with only a modest, normal correction. In general, stronger-
than-expected earnings was the reason. For equity investors, productivity
gains continued to fuel earnings growth beyond what might have been expected
from GDP growth alone. The Fund underperformed the Russell 1000 Value
benchmark and modestly underperformed the S&P 500 posting a gain of 1% for
the first quarter. A key theme to performance in the quarter was the impact
of energy on various holdings within the Fund. Our energy producers and
providers generally delivered solid performance on the heels of high and
rising energy prices. At the same time, energy-intensive users, such as
the railroads were impacted negatively. Although we are overweight in the
energy space, this positive was not sufficient to completely compensate for
the negative energy-related effect on these other holdings. Also, the
overweight in healthcare hurt our performance during the quarter.
The second quarter of 2004 witnessed a correction in the equity markets as
investors struggled with the uncertainty of the current investment climate.
Equity prices declined in the first half of the quarter and rallied in the
second half to finish the quarter slightly higher, though individual market
sectors performed very differently than during the first quarter. The Fund
nicely outperformed both the Russell 1000 Value Index and the S&P 500
benchmark for the second quarter. The Value Index had a positive return of
0.9% and the S&P returned 1.7% while the Fund posted a gain of 2.95%. Our
positive performance for the quarter was led by our holdings in energy,
healthcare and industrials. Two areas that deteriorated were financials
and utilities.
As anticipated, the growth rate of earnings slowed in the third quarter.
The markets reacted predictably, with modest losses for the broad indices a
nd slight gains for the value indices. Defensive sectors, such as consumer
staples and healthcare, still failed to react to this slower earnings
environment. Usually, the more predictable growth these sectors typically
demonstrate is rewarded as aggregate earnings growth decelerates. In
addition, despite the increased Fed Funds rate and a much flatter yield
curve, financial services outperformed. The Fund underperformed the
Russell 1000 Value benchmark for the third quarter, driven primarily by our
overweight position in consumer staples and healthcare sectors and our
underweight in financial services.
After a flat start to the fourth quarter in October, the markets surged in
response to the election results as well as a retreat in energy prices. In
fact, the strong upward move in November and December accounted for the
entire quarter's performance, and indeed the entire year's performance. As
might be expected in such a strong market move, the Fund's conservatively
managed portfolio underperformed the Russell 1000 Value Index during the
quarter. This can be attributed, in part to our overweight positions in
energy, healthcare and consumer staples.
For the year, the Dow Jones Industrial Average rose 3.1%, the tech-laden
Nasdaq Composite Index gained 8.6%, the S&P 500 ended the year up 9% while
the Russell 1000 Value Index rose 16.5%. The Fund provided a respectable
return of 8.63%. In summary, we believe earnings will continue to grow,
but at a slower and more sustainable pace than was achieved in 2004. High
energy prices and still-rising healthcare costs continue to create headwinds
for corporate America, while consumer spending will likely slow as income
growth is partially offset by the effect of higher interest rates and a
decline in fiscal stimulus. A slowing growth environment, combined with
equity valuations that remain high by historical standards, support a more
defensive posture with an emphasis on higher quality equities. While we
admit we have been somewhat early in this regard, we continue to believe
that the market will rotate towards stronger balance sheets, lower
valuations and more sustainable earnings growth. This can serve our
shareholders well as it has over the long-run.
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, 2004 (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 $ 9,475 $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
July 31, 2003 $ 8,606 $ 9,079 $ 9,514
August 31, 2003 $ 8,828 $ 9,314 $ 9,663
September 30, 2003 $ 8,645 $ 9,120 $ 9,568
October 31, 2003 $ 9,138 $ 9,640 $10,154
November 30, 2003 $ 9,351 $ 9,865 $10,291
December 31, 2003 $ 9,786 $10,324 $10,926
January 31, 2004 $ 9,806 $10,345 $11,118
February 29, 2004 $10,049 $10,601 $11,356
March 31, 2004 $ 9,883 $10,427 $11,257
April 30, 2004 $ 9,845 $10,386 $10,982
May 31, 2004 $ 9,932 $10,478 $11,094
June 30, 2004 $10,175 $10,735 $11,356
July 31, 2004 $ 9,786 $10,324 $11,196
August 31, 2004 $ 9,757 $10,294 $11,355
September 30, 2004 $ 9,874 $10,417 $11,531
October 31, 2004 $ 9,971 $10,519 $11,723
November 30, 2004 $10,428 $11,002 $12,316
December 31, 2004 $10,631 $11,215 $12,728
The chart assumes $10,000 invested on August 3, 1999 and includes the
effect of a 5.25% 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 08/03/99-12/31/04. 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 December 31, 2004 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge 8.63% 1.03% 2.48% 2.14%
Including Sales Charge 2.71% -0.78% 1.38% 1.14%
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, Portfolio Manager
Shannon D. Radke, President
Viking Small-Cap Value Fund provided a return of 17.86% (at net asset value)
for the year ended December 31, 2004.
The first quarter of 2004 provided mixed results for the equity market.
Equities were mostly positive with the S&P 500 Index gaining 1.7% and the
Russell 1000 Value Index returning 3.0%. However, the Dow Jones Industrial
Average and the NASDAQ Composite both had negative returns of less than 1%.
The first quarter marked a strong 12-month period for stocks following a
difficult three-year bear market from March 2000 until March 2003. Our main
takeaway from the equity markets in the first quarter, despite many
crosscurrents, was that the equity prices consolidated their dramatic gains
of 2003 with only a modest, normal correction. In general, stronger-than-
expected earnings was the reason. For equity investors, productivity gains
continued to fuel earnings growth beyond what might have been expected from
GDP growth alone. The leadership of small-cap stocks continued in the first
quarter of 2004, as the Russell 2000 Index outpaced all other major domestic
equity indices with an outsized 6.3% gain. This followed the volatile two-
year period of 2002-2003, when the Russell 2000 posted its worst and best
years, respectively, since its 1979 inception. As might be expected given
the continued strong performance of the financial services sector and our
significant underweight to it, our Small-Cap Fund lagged the Russell 2000
and its value subset posting a Q1 return of 2.25%, as we continued to
believe that interest rates were at artificially and unsustainably low levels.
Following a significant decline in April, which was prompted by fears of
rising interest rates, a late-quarter spurt allowed the small-cap market to
post a modest gain in the April-June period. Specifically, the Russell 2000
Index eked out a modest 0.5% increase and the Russell 2000 Value Index edged
0.8% higher. Our Fund performed significantly better in the second quarter,
returning 5% and outpacing the benchmarks by over 400 basis points. During
the second quarter, the Fund was led higher by an eclectic group, indeed,
with the top five performers including two toy companies, an electronics
manufacturer, a trucker and a commodity chemical producer.
Despite a smart rally from the mid-August lows, the Russell 2000 Index was
unable to pull out a gain for the third quarter and declined by 2.9%.
Continued concerns related to rising short-term interest rates and slowing
earnings growth kept a lid on the small-cap market, although the value
subset scratched out a meager 0.1% advance, as measured by the Russell 2000
Value Index. Our Fund outperformed both indices for the three months ended
September 30th, allowing us to extend our year-to-date gains. The Fund was
once again led higher by a diverse group of stocks, with the top five
performers including a construction company, a commodity chemicals producer,
a discount retailer, an energy company and a trucker.
Small-cap stocks were among the leaders in the broad-based, fourth-quarter
market surge, with the Russell 2000 Index gaining 14.1% and outpacing its
value subset by less than one percentage point. Our Fund underperformed the
hot fourth-quarter market, as should be expected given our more conservative
approach to investing. During the October-December quarter, the Fund was
pulled higher by an interesting group of stocks, with the top five performers
including a power management semiconductor company, a food wholesaler/
retailer, an auto parts manufacturer, a maker of electric motors and water
heaters and a trucker.
For the full year, the Russell 2000 rose 18.3%, but lagged the Russell 2000
Value Index by nearly 400 basis points. The Fund returned a strong 17.86%.
With election-related uncertainty having been put to rest, investors
scrambled to jump on the bandwagon as the second consecutive year of
abnormally strong returns came to an end. While the recent energy price
pullback is helpful to energy-consuming corporations' profits, we believe
the longer-term supply/demand equation should help keep oil and gas prices
at relatively high levels, thus keeping energy profits solid and placing a
drag on economic growth. Continued investment in the vital energy sector
still seems prudent in light of the instability in various parts of the
il-producing world. In such an environment, companies exhibiting sustainable
earnings growth could perform well, and those we can buy at a discount
valuation should provide strong relative returns. Moreover, the flatter
yield curve should put pressure on less-diversified financial services
companies, to which we are substantially underweight.
As always, we will remain vigilant for undervalued situations that offer
extraordinary returns for our shareholders. 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 December 31, 2004 (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 $ 9,475 $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
July 31, 2003 $10,218 $10,780 $11,687
August 31, 2003 $10,692 $11,280 $12,131
September 30, 2003 $10,502 $11,080 $11,991
October 31, 2003 $11,175 $11,790 $12,969
November 30, 2003 $11,555 $12,190 $13,467
December 31, 2003 $11,782 $12,430 $13,954
January 31, 2004 $11,839 $12,490 $14,437
February 29, 2004 $12,028 $12,690 $14,716
March 31, 2004 $12,047 $12,710 $14,920
April 30, 2004 $11,848 $12,500 $14,148
May 31, 2004 $11,924 $12,580 $14,319
June 30, 2004 $12,645 $13,340 $15,046
July 31, 2004 $12,237 $12,910 $14,354
August 31, 2004 $12,265 $12,940 $14,495
September 30, 2004 $12,664 $13,360 $15,069
October 31, 2004 $12,758 $13,460 $15,303
November 30, 2004 $13,602 $14,350 $16,661
December 31, 2004 $13,886 $14,649 $17,058
The chart assumes $10,000 invested on May 3, 2001 and includes the
effect of a 5.25% 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 05/03/01-12/31/04. 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 December 31, 2004 One-Year Three-Year (Est. 5/3/01)
- - ----------------------------------------------------------------------
Excluding Sales Charge 17.86% 12.61% 10.97%
Including Sales Charge 11.66% 10.59% 9.37%
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, December 31, 2004
Viking Tax-Free Fund for Montana
PRINCIPAL MARKET
AMOUNT VALUE
MUNICIPAL BONDS 98.8%
General Obligations 22.1%
Bozeman MT Ser A 4.95% 07/01/20 170,000 $180,907
Butte Silver Bow MT City & Cnty (AMBAC) 4.75% 07/01/11 210,000 231,825
Cascade Cnty MT High Sch A Great Falls 2.85% 07/01/05 225,000 225,711
Cascade Cnty MT High Sch A Great Falls 3.15% 07/01/06 100,000 101,397
Flathead Cnty MT Sch Dist No. 6 Columbia Falls 5.65% 07/01/19 75,000 83,252
Flathead Cnty MT Sch Dist No. 44 (MBIA) 3.00% 07/01/11 195,000 195,811
Kalispell MT (MBIA) 4.625% 07/01/05 130,000 131,786
Misoula MT Ser A (FSA) 3.00% 07/01/09 250,000 254,805
MT St Long Range Building Pg-Ser G 4.00% 08/01/13 250,000 263,150
MT St Long Range Building Pg - Ser G 4.00% 08/01/16 250,000 258,450
MT St Water Pollution Ctl 5.60% 07/15/20 100,000 108,994
Puerto Rico Mun Fin Agy Ser A (FSA) 5.50% 08/01/23 250,000 269,775
Ravalli Cnty MT Sch Dist No. 003 Hamilton (FSA) 4.00% 07/01/16 80,000 82,696
Ravalli Cnty MT Sch Dist No. 003 Hamilton (FSA) 4.65% 07/01/09 105,000 112,300
Yellowstone & Carbon Cntys Elem Sch Dist (MBIA) 4.25% 07/01/24 200,000 197,938
---------
2,698,797
---------
Continuing Care Revenue Bonds 0.6%
MT St Hlth Facs Auth Rev Hillcrest Sr Ctr 6.90% 06/01/15 30,000 31,420
MT St Hlth Facs Auth Rev Hillcrest Sr Ctr 7.25% 06/01/25 35,000 37,046
---------
68,466
---------
Higher Education Revenue Bonds 21.3%
MT St Brd Regents Hgher Ed Rev Rnv of MT (MBIA) 3.75% 11/15/15 200,000 202,448
MT St Brd Regents (MSU) Hghr Ed Rev 4.00% 11/15/19 250,000 250,478
MT St Hgher Ed Stud Assist Corp Rev Ser B 6.40% 12/01/32 415,000 440,182
MT Brd Regents (MSU) Ref & Imp Hghr Ed Facs-D (MBIA) 5.375% 11/15/21 375,000 395,452
MT St Brd Regents (MSU) Rev Facs Imp-E (AMBAC) 5.00% 11/15/21 80,000 85,038
MT Brd Regents (U of M) Hgher Ed Rev Ser F (MBIA) 5.75% 05/15/24 150,000 165,171
Puerto Rico Tour Edl Med & Env Facs Mendez Univ 5.375% 02/01/19 75,000 77,654
*Univ of MT Revs Facs Acq & Imp Ser C (MBIA) 5.00% 11/15/17 140,000 147,022
Univ of MT Revs Higher Ed Facs Imp Ser D (MBIA) 5.375% 05/15/15 75,000 81,273
Univ of MT Revs Higher Ed Facs Imp Ser D (MBIA) 5.375% 05/15/19 370,000 415,081
Univ Puerto Rico Revs Ser O (MBIA) 5.75% 06/01/17 300,000 340,455
---------
2,600,254
---------
Hospital Revenue Bonds 19.5%
MT Hlth Fac Fin Auth Rev Mstr Ln Program Comm Med Ctr 5.20% 12/01/21 145,000 155,270
MT Fac Fin Auth Providence Serv (MBIA) 4.60% 12/01/18 150,000 160,904
MT Fac Fin Auth Providence Serv (MBIA) 5.00% 12/01/18 500,000 533,850
MT Fac Fin Auth Providence Serv (MBIA) 4.80% 12/01/20 200,000 214,888
*MT Hlth Fac Auth Sisters Chrty Leavenworth (MBIA) 5.125% 12/01/18 200,000 215,636
MT Hlth Fac Auth Sisters Chrty Leavenworth (MBIA) 5.00% 12/01/24 110,000 115,735
MT St Hlth Fac Auth Rev Comm Med Ctr 6.375% 06/01/18 370,000 374,033
MT St Hlth Fac Auth Rev Holy Rosary Pre-Ref (MBIA) 5.25% 07/01/20 130,000 132,032
*MT St Hlth Fac Auth Rev Kalispell Med Ctr (AMBAC) 5.00% 07/01/16 450,000 480,213
---------
2,382,561
---------
Housing Revenue Bonds 14.4%
*MT St Brd Hsg Sngle Fam Mtg Ser A-2 5.75% 06/01/30 85,000 85,857
*MT St Brd Hsg Sngle Fam Ser A-2 5.50% 12/01/20 100,000 101,463
*MT St Brd Hsg Sngle Fam Ser A-2 5.60% 12/01/23 80,000 81,190
MT St Brd Hsg Sngle Fam Ser A-2 5.20% 12/01/22 135,000 139,442
MT St Brd Hsg Sngle Fam Ser B-2 4.85% 12/01/15 140,000 144,542
MT St Brd Hsg Sngle Fam Ser B-2 3.40% 12/01/12 205,000 204,939
MT St Brd Hsg Sngle Fam Prog Ser C 3.95% 06/01/11 200,000 204,720
MT St Brd Hsg Sngle Fam Prog Ser B 4.55% 12/01/11 400,000 415,700
MT St Brd Hsg Sngle Fam Prog Ser C 3.60% 12/01/11 230,000 231,030
---------
1,608,883
---------
Transportation Revenue Bonds 4.3%
Missoula Cnty MT Arpt Auth Arpt Rec Ser C 3.30% 07/01/10 250,000 250,768
Puerto Rico Hwy & Trans Auth Rev Ser G (FGIC) 5.25% 07/01/20 250,000 277,460
---------
528,228
---------
Water Revenue Bonds 3.8%
Butte Silver Bow MT Wtr Sys Rev 3.40% 11/01/12 350,000 356,958
Great Falls MT Wtr Sys Rev Ref Ser A (AMBAC) 3.85% 08/01/08 100,000 104,336
---------
461,294
---------
Other Revenue Bonds 14.0%
MT Fac Fin Auth Developmental Ctr Prog 4.50% 06/01/16 250,000 253,630
MT Fac Fin Auth Developmental Ctr Prog 4.75% 06/01/19 170,000 174,568
MT St Brd Invt Refunded 1996 Pay Tax (MBIA) 6.875% 06/01/20 105,000 117,414
MT St Brd Invt Refunded 1996 Pay Tax (MBIA) 6.875% 06/01/20 105,000 117,369
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev 6.00% 07/01/26 195,000 224,823
Puerto Rico Comwlth Aqueduct & Swr Auth Rev (MBIA) 5.00% 07/01/19 125,000 131,491
Puerto Rico Comwlth Infra Fing Auth Ser A (AMBAC) 5.00% 07/01/21 250,000 265,745
Puerto Rico Comwlth Inf Fin Auth Ser A (AMBAC) 5.25% 07/01/10 100,000 109,659
Puerto Rico Pub Fin Corp Ser A (MBIA) 5.50% 08/01/17 275,000 314,218
---------
1,708,917
---------
Total Municipal Bonds (cost $11,771,268) 12,057,400
TOTAL MARKET VALUE OF SECURITIES OWNED 98.8% (COST $11,771,268) 12,057,400
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.2% 148,504
-----------
NET ASSETS APPLICABLE TO 1,194,677 SHARES (0.001 PAR VALUE) OUTSTANDING - 100.0% $12,205,904
===========
*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.
Summary of Abbreviations:
AMBAC Insured by the AMBAC Indemnity Corporation
FGIC Insured by the Financial Guaranty Insurance Company
FSA Insured by Financial Security Assurance
MBIA Insured by the Municipal Bond Insurance Association
VIKING MUTUAL FUNDS
Statement of Investments, December 31, 2004
Viking Tax-Free Fund for North Dakota
PRINCIPAL MARKET
AMOUNT VALUE
MUNICIPAL BONDS 98.3%
General Obligations 20.4%
*Bismarck ND Ref & Imp - Ser L 4.00% 06/01/07 75,000 $75,424
Bismarck ND Ref & Imp - Ser P 2.90% 05/01/12 100,000 97,245
Bismarck ND Ref & Imp - Ser P 3.50% 05/01/16 100,000 97,819
*Fargo ND Ref & Imp - Ser B (FGIC) 5.125% 05/01/17 60,000 63,033
Fargo ND Ref & Impt Ser D (MBIA) 5.00% 05/01/28 200,000 206,482
Hillsboro ND Pub Sch Dist No. 9 (FSA) 4.85% 06/01/19 50,000 52,013
*Jamestown ND Pub Sch Dist No. 011 (FGIC) 4.60% 05/01/15 50,000 52,294
*Mandan ND Ref & Imp - Ser B (MBIA) 5.00% 05/01/16 70,000 72,788
Mandan ND Ref Impt Ser C (AMBAC) 4.00% 05/01/18 150,000 149,724
Puerto Rico Commonwealth (MBIA) 5.375% 07/01/25 50,000 54,595
*West Fargo ND Ref & Imp 5.00% 05/01/08 250,000 265,895
West Fargo ND Pub Sch Dist No. 006 (FGIC) 5.00% 05/01/14 50,000 54,133
---------
1,240,445
---------
Building Authority Revenue Bonds 7.6%
Fargo ND Bldg Auth Lease Rev Ser A 5.00% 05/01/20 50,000 52,679
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.00% 12/01/17 50,000 53,683
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.00% 12/01/16 50,000 53,117
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.20% 12/01/19 90,000 97,379
ND St Bldg Auth Lease Rev Ser C (AMBAC) 4.00% 08/15/11 100,000 104,527
ND St Bldg Auth Lease Rev Ser C (AMBAC) 4.20% 08/15/13 100,000 104,167
---------
465,552
---------
Education Revenue Bonds 6.7%
Fargo ND School District Bldg Auth Rev (MBIA) 5.50% 05/01/14 50,000 53,562
Minot Pub School District No 1 Bldg Auth 4.80% 05/01/23 250,000 252,685
West Fargo Pub School District Bldg Auth Lease Rev 4.20% 05/01/17 100,000 99,454
---------
405,701
---------
Higher Education Revenue Bonds 12.1%
Fargo ND Lease Rev NDSU Lease Oblig Ser-A (AMBAC) 3.50% 05/01/09 60,000 61,005
ND St Brd Hgher Ed Rev Hsg & Aux Facs UND (FGIC) 5.00% 04/01/18 250,000 266,007
ND St Brd Hgher Ed Rev Hsg & Aux Facs NSDU (FGIC) 4.00% 04/01/15 150,000 154,462
Puerto Rico Tour Edl Med & Env Facs Mendez Univ 5.375% 02/01/19 25,000 25,885
Univ Puerto Rico Revs Ser O (MBIA) 5.75% 06/01/17 200,000 226,970
---------
734,329
---------
Hospital Revenue Bonds 16.0%
Bismarck ND Hlth Care Facs Rev St. Alexius (FSA) 4.30% 07/01/08 150,000 156,431
Burleigh Cnty ND Hlth Care MedCenter One (MBIA) 5.25% 05/01/12 325,000 348,979
Fargo ND Hlth Sys Rev Meritcare Ser A (MBIA) 5.375% 06/01/27 100,000 102,716
Fargo ND Hlth Sys Rev Meritcare Obl (FSA) 5.375% 06/01/15 65,000 70,695
Fargo ND Hlth Sys Rev Meritcare Obl (AMBAC) 4.125% 06/01/11 150,000 156,858
Fargo ND Hlth Sys Rev Meritcare Obl (AMBAC) 5.00% 06/01/22 45,000 46,679
Grand Forks ND Hlth Care Altru Hlth Obl Group (MBIA) 5.60% 08/15/17 20,000 21,477
Grand Forks ND Hlth Care Altru Hlth Obl Group 7.125% 08/15/24 20,000 21,675
Valley City ND Rev Ref Lutheran Hlth Ser A-5 (MBIA) 4.20% 01/01/06 25,000 25,363
Ward Cnty ND Hlth Care Facs Rev Trinity Obl Group - B 6.00% 07/01/10 25,000 26,137
---------
977,010
---------
Housing Revenue Bonds 11.2%
Fargo ND Multifam Rev Ref Hsg Trollwood Village 6.90% 09/01/13 25,000 24,017
ND St Hsg Fin Agy Home Mtg Ser B 3.50% 07/01/10 300,000 303,024
ND St Hsg Fin Agy Rev Home Mtg Prog C 4.90% 07/01/15 150,000 155,629
ND St Hsg Fin Agy Hsg Fin Home MTG-C-RMK 6.10% 07/01/28 10,000 10,057
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg B 5.85% 07/01/28 5,000 4,980
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg D 5.05% 01/01/06 10,000 10,087
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.25% 07/01/18 70,000 70,755
*ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.55% 07/01/22 100,000 101,509
---------
681,058
---------
Utility Revenue Bonds 3.8%
Mercer Cnty Poll Ctl Rev Basin Electric Power Coop (AMBAC) 6.05% 01/01/19 85,000 86,488
Puerto Rico Elec Pwr Auth Rev Ser DD (FSA) 5.125% 07/01/13 135,000 145,338
---------
231,826
---------
Transportation Revenue Bonds 5.1%
Guam Intl Arpt Auth Ser C (MBIA) 5.375% 10/01/17 150,000 163,830
South Central Reg Water Dist Burleigh Cnty Rev 5.00% 10/01/23 150,000 147,906
---------
311,736
---------
Water Revenue Bonds 0.9%
ND St Water Comm Rev Water Dev & Mgmt Prg Ser A (MBIA) 5.50% 08/01/10 50,000 56,229
---------
56,229
---------
Other Revenue Bonds 14.5%
Bismarck ND Lodging & Restaurant Tax Rev 4.00% 12/01/12 100,000 101,572
Grand Forks ND Sales Tax Rev Aurora Project Ser A (MBIA) 5.625% 12/15/29 185,000 196,335
*Grand Forks ND Sales Tax Rev Dike Imp (AMBAC) 4.50% 09/01/10 50,000 53,286
Grand Forks ND Sales Tax Rev Dike Imp (AMBAC) 5.00% 09/01/13 100,000 109,910
Grand Forks ND Sales Tax Rev Dike Imp (AMBAC) 5.00% 09/01/17 145,000 155,460
ND St Muni Bond Bank Cap Fing Prog 6.00% 06/01/21 25,000 25,878
ND St Muni Bond Bank St Revolv Fund Prog - Ser A 4.90% 10/01/18 50,000 52,260
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev 6.00% 07/01/26 15,000 17,294
Puerto Rico Pub Fin Corp Ser A (MBIA) 5.375% 08/01/24 150,000 169,506
---------
881,501
---------
Total Municipal Bonds (cost $5,884,532) 5,985,387
TOTAL MARKET VALUE OF SECURITIES OWNED 98.3% (COST $5,884,532) 5,985,387
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.7% 100,883
----------
NET ASSETS APPLICABLE TO 591,484 SHARES (0.001 PAR VALUE) OUTSTANDING - 100.00% $6,086,270
==========
*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.
Summary of Abbreviations:
AMBAC Insured by the AMBAC Indemnity Corporation
FGIC Insured by the Financial Guaranty Insurance Company
FSA Insured by Financial Security Assurance
MBIA Insured by the Municipal Bond Insurance Association
VIKING MUTUAL FUNDS
Statement of Investments, December 31, 2004
Viking Large-Cap Value Fund
SHARES VALUE
Common Stocks 97.5%
Appliance & Tool 2.0%
Whirlpool 900 $62,289
--------
62,289
--------
Banks/Financial Services 12.8%
Bank of America 1,400 65,786
Citigroup 2,200 105,996
JP Morgan Chase 800 31,208
Merrill Lynch 600 35,862
Morgan Stanley 600 33,312
National City 1,000 37,550
U.S. Bancorp 1,265 39,620
Washington Mutual 1,100 46,508
--------
395,842
--------
Building Materials 3.4%
Masco Corporation 2,900 105,937
--------
105,937
--------
Computer/Communications Related 4.9%
Hewlett-Packard 3,000 62,910
International Rectifier* 2,000 89,140
--------
152,050
--------
Drug 4.5%
Merck 1,100 35,354
Phizer 3,800 102,182
--------
137,536
--------
Drug Distribution 8.6%
Amerisource Bergen 1,200 70,416
CVS Corp. 2,700 121,689
Mckesson 2,300 7,2358
--------
264,463
--------
Energy 13.7%
Anadarko Petroleum 1,500 97,215
Apache 2,300 116,311
ChevronTexaco 2,000 105,020
ConocoPhillips 1,200 104,196
--------
422,742
--------
Entertainment 2.3%
Disney 2,500 69,500
--------
69,500
--------
Food 3.6%
Dean Foods* 2,500 82,375
Sara Lee 1,200 28,968
--------
111,343
--------
Household Products 2.8%
Kimberly-Clark 1,300 85,553
--------
85,553
--------
Industrial Products 3.4%
Ingersoll-Rand 1,300 104,390
--------
104,390
--------
Insurance 5.6%
Hartford Financial Services Group 800 55,448
MBIA, Inc. 700 44,296
Partnerre Ltd. 1,200 74,328
--------
174,072
--------
Medical Services / Supplies 3.4%
Health Management Associates 2,700 61,344
Triad Hospital* 1,200 44,652
--------
105,996
--------
Metals 4.4%
ALCOA 2,800 87,976
Rio Tinto Plc ADR 400 47,684
--------
135,660
--------
Multi-Industry 2.8%
Honeywell 800 28,328
ITT Industries 700 59,115
--------
87,443
--------
Packaging 3.4%
Sealed Air* 2,000 106,540
--------
106,540
--------
Retail 1.9%
BJ's Wholesale* 2,000 58,260
--------
58,260
--------
Telecommunications 2.1%
Verizon Communications 1,600 64,816
--------
64,816
--------
Transportation 4.7%
Canadian Pacific 1,300 44,733
Union Pacific 1,500 100,875
--------
145,608
--------
Utilities 7.2%
American Electric Power 1,600 54,944
Dominion Resources 1,400 94,836
Public Service Enterprise Group 1,400 72,478
--------
222,258
--------
Total Common Stocks (Cost $2,374,661) 3,012,298
SHORT-TERM INVESTMENTS 2.7%
Federated Prime Value Obligations #853 83,000 83,000
----------
Total Short-Term Investments (cost: $83,000) 83,000
----------
TOTAL MARKET VALUE OF SECURITIES OWNED 100.2% (COST $2,457,661) 3,095,298
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES (0.2)% (1,161)
----------
NET ASSETS APPLICABLE TO 283,947 SHARES ($0.001 PAR VALUE)
OUTSTANDING 100.0% $3,088,137
==========
*Non-income producing investments.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Statement of Investments, December 31, 2004
Viking Small-Cap Value Fund
SHARES VALUE
Common Stocks 91.4%
Auto Related 3.2%
Borg Warner 1,000 $54,170
--------
54,170
--------
Basic Materials 2.1%
Albany International 1,000 35,160
--------
35,160
--------
Cement 3.0%
Lafarge 1,000 51,320
--------
51,320
--------
Chemical 3.3%
RPM 2,900 57,014
--------
57,014
--------
Computer/Communications Related 2.3%
International Rectifier* 900 40,113
--------
40,113
--------
Construction/Engineering 3.6%
Granite Construction 1,200 31,920
Insituform Technologies 1,300 29,471
--------
61,391
--------
Drug Distribution 1.9%
Par Pharmaceutical Companies* 800 33,104
--------
33,104
--------
Electrical Equipment 2.7%
Belden CDT 2,000 46,400
--------
46,400
--------
Electronics 2.8%
Bel Fuse Cl. B 900 30,411
Technitrol 1,000 18,200
--------
48,611
--------
Energy 11.8%
Newfield Exploration* 800 47,240
Piedmont Natural Gas 2,000 46,480
Questar 1,300 66,248
Spinnaker Explorations* 1,200 42,084
--------
202,052
--------
Food Processing 0.9%
Performance Food Group* 600 16,146
--------
16,146
--------
Food Wholesalers/Retailers 1.0%
SuperValue 500 17,260
--------
17,260
--------
Household Products 5.8%
Church & Dwight 1,950 65,559
Libbey 1,500 33,315
--------
98,874
--------
Industrial Products 6.7%
AO Smith 1,400 41,916
CLARCOR 200 10,954
Teleflex 1,200 62,328
--------
115,198
--------
Insurance 5.7%
Protective Life 1,300 55,497
Scottish RE Group Ltd 1,600 41,440
--------
96,937
--------
Medical Services/Supplies 9.5%
Conmed* 1,300 36,946
Mentor 900 30,366
MIM Corp.* 1,500 9,540
Owens & Minor 900 25,353
Polymedica 1,100 41,019
West Pharm. Services 800 20,024
--------
163,248
--------
Packaging 3.4%
Aptar Group 1,100 58,058
--------
58,058
--------
Real Estate Investment Trusts 0.8%
Mack-Cali Realty 300 13,809
--------
13,809
--------
Restaurant 6.9%
Applebee's International 750 19,838
CBRL Group 1,100 54,405
Landry's Seafood Restaurants 900 26,154
Outback Steakhouse 400 18,312
--------
118,709
--------
Retail 5.0%
BJ's Wholesale* 1,300 37,869
Claire's Stores 1,400 29,750
ShopKo Stores* 1,000 18,680
--------
86,299
--------
Toy 1.9%
RC2 Corp.* 1,000 32,600
--------
32,600
--------
Transportation 7.1%
Arkansas Best 1,700 76,313
Yellow Roadway* 798 44,456
--------
120,769
--------
Total Common Stocks (Cost $1,119,536) 1,567,242
SHORT-TERM INVESTMENTS 10.2%
Federated Prime Value Obligations Fund #853 76,000 76,000
Federated Treasury Cash Reserves #125 76,000 76,000
First Western Collective Asset 23,000 23,000
----------
Total Short-Term Investments (Cost $175,000) 175,000
TOTAL MARKET VALUE OF SECURITIES OWNED 101.6% (COST $1,304,536) 1,742,242
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES (1.6)% (27,691)
----------
NET ASSETS APPLICABLE TO 119,079 SHARES ($0.001 PAR VALUE)
OUTSTANDING 100.0% $1,714,551
==========
*Non-income producing investments.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Assets and Liabilities
December 31, 2004
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
ASSETS:
Investments in securities:
Cost $11,771,268 $5,884,532 $2,457,661 $1,294,536
------------------------------------------------------------------------------------
Value 12,057,400 5,985,387 3,095,298 1,742,242
Cash 259,161 208,040 3,103 1,618
Receivable for fund shares sold 152 - 7,000 7,000
Prepaid assets 2,760 1,003 769 489
Interest & dividends receivable 133,642 69,161 4,570 863
------------------------------------------------------------------------------------
Total assets 12,453,115 6,263,591 3,110,740 1,752,212
------------------------------------------------------------------------------------
LIABILITIES:
Security purchases payable 199,113 150,083 - -
Distributions payable 38,479 18,904 13,634 29,579
Other accounts payable and
accrued expenses 9,619 8,334 8,969 8,082
------------------------------------------------------------------------------------
Total liabilities 247,211 177,321 22,603 37,661
------------------------------------------------------------------------------------
NET ASSETS 12,205,904 6,086,270 3,088,137 1,714,551
------------------------------------------------------------------------------------
COMPONENTS OF NET ASSETS AT DECEMBER 31, 2004
Capital shares, $0.001 par value,
unlimited shares authorized 11,962,953 6,013,717 2,796,372 1,265,488
Net unrealized appreciation
(depreciation) 286,132 100,855 637,637 447,706
Accumulated net realized gain
(loss) on investments (43,181) (28,302) (345,872) 1,357
Undistributed net investment
income (loss) - - - -
------------------------------------------------------------------------------------
NET ASSETS $12,205,904 $6,086,270 $3,088,137 $1,714,551
------------------------------------------------------------------------------------
NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets, at value $12,205,904 $6,086,270 $3,088,137 $1,714,551
Shares outstanding 1,194,677 591,484 283,947 119,079
Net asset value per share $10.22 $10.29 $10.88 $14.40
Maximum offering price per share
(net asset value per share divided
by 95.50%, 95.50%, 94.75% and
94.75%, respectively) $10.70 $10.77 $11.48 $15.20
------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Operations
For the twelve months ended December 31, 2004
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
-------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $509,751 $222,243 $ - $ -
Dividends 8,192 3,886 52,386 17,211
-------------------------------------------------------------------------------------
Total investment income 517,943 226,129 52,386 17,211
-------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 61,944 27,405 20,094 14,537
Administrative fees 12,389 5,431 2,871 1,454
Distribution fees 30,972 13,702 11,482 5,815
Transfer agent fees 3,090 1,681 3,378 2,505
Accounting fees 6,194 2,740 1,431 727
Professional fees 7,089 7,220 7,196 7,204
Insurance 3,511 1,289 764 329
Trustee fees 1,457 1,461 1,445 1,443
Registration fees 1,004 125 639 683
Custodian fees 3,412 3,412 3,497 3,432
Other 144 86 327 172
-------------------------------------------------------------------------------------
Total expenses 131,206 64,552 53,124 38,301
-------------------------------------------------------------------------------------
Less expenses waived or
reimbursed (80,645) (40,375) (14,372) (14,316)
------------------------------------------------------------------------------------
Net expenses 50,561 24,177 38,752 23,985
-------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 467,382 201,952 13,634 (6,774)
-------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss)
on investments 354 (10,980) (5,153) 38,977
Net change in unrealized
appreciation (depreciation)
of investments 10,976 8,266 234,632 222,381
-------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 11,330 (2,714) 229,479 261,358
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $478,712 $199,238 $243,113 $254,584
-------------------------------------------------------------------------------------
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, 2004
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) $467,382 $201,952 $13,634 $(6,774)
Net realized gain (loss)
on investments 354 (10,980) (5,153) 38,977
Net change in unrealized
appreciation (depreciation)
of investments 10,976 8,266 234,632 222,381
-------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations 478,712 199,238 243,113 254,584
-------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (467,382) (201,952) (13,634) -
Net realized gains - - - (29,579)
-------------------------------------------------------------------------------------
Total distributions to
shareholders (467,382) (201,952) (13,634) (29,579)
-------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 1,832,422 1,980,510 340,357 403,263
Proceeds from reinvestment
of distributions 328,201 129,141 16,147 -
Cost of shares repurchased (2,600,299) (802,095) (242,465) (163,353)
-------------------------------------------------------------------------------------
Increase in net assets
derived from capital share
transactions (439,676) 1,307,556 114,039 239,910
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS $(428,346) $1,304,842 $343,518 $464,915
-------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period $12,634,250 $4,781,428 $2,744,619 $1,249,636
-------------------------------------------------------------------------------------
End of period $12,205,904 $6,086,270 $3,088,137 $1,714,551
-------------------------------------------------------------------------------------
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, 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) $433,864 $139,584 $16,486 $(3,198)
Net realized gain (loss)
on investments (43,535) (16,696) (325,216) 982
Net change in unrealized
appreciation (depreciation)
of investments 39,263 23,916 829,366 271,714
-------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations 429,592 146,804 520,636 269,498
-------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (433,864) (139,584) (16,486) -
Net realized gains - - - -
-------------------------------------------------------------------------------------
Total distributions to
shareholders (433,864) (139,584) (16,486) -
-------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 4,623,768 2,928,544 377,617 406,681
Proceeds from reinvestment
of distributions 307,041 83,423 14,516 -
Cost of shares repurchased (805,083) (296,608) (113,695) (30,356)
-------------------------------------------------------------------------------------
Increase in net assets
derived from capital share
transactions 4,125,726 2,715,359 278,438 376,325
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS $4,121,454 $2,722,579 $782,588 $645,828
-------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period $8,512,796 $2,058,849 $1,962,031 $603,813
-------------------------------------------------------------------------------------
End of period $12,634,250 $4,781,428 $2,744,619 $1,249,636
-------------------------------------------------------------------------------------
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
01/01/04- 01/01/03- 01/01/02- 01/01/01- 01/01/00-
12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
------------------------------------------------------------
Net asset value, beginning of period $10.20 $10.18 $9.74 $9.82 $9.41
------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.38 0.42 0.46 0.51 0.52
Net realized and unrealized gain
(loss) on investments 0.02 0.02 0.48 (0.08) 0.41
------------------------------------------------------------
Total from investment operations 0.40 0.44 0.94 0.43 0.93
------------------------------------------------------------
Less distributions from:
Net investment income (0.38) (0.42) (0.46) (0.51) (0.52)
Net realized gains - - (0.04) - -
------------------------------------------------------------
Total distributions (0.38) (0.42) (0.50) (0.51) (0.52)
------------------------------------------------------------
Net asset value, end of period $10.22 $10.20 $10.18 $9.74 $9.82
------------------------------------------------------------
Total return1 4.05% 4.45% 9.90% 4.48% 10.23%
------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000's) $12,206 $12,634 $8,513 $3,549 $1,131
Ratio of net expenses to average net assets 0.41%2 0.31%2 0.15%2 0.06%2 0.01%2
Ratio of net investment income to
average net assets 3.78% 4.13% 4.58% 5.06% 5.13%
Portfolio turnover rate 26.55% 24.72% 40.09% 6.14% 21.12%
1Total return assumes reinvestment of distributions at net asset value, does
not reflect the impact of a sales charge and is not annualized.
2Viking 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 $42,624 $114,564, $67,712, $30,300 and $17,505
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
1.05%, 1.09%, 1.30%, 1.60% and 4.79% respectively.
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
01/01/04- 01/01/03- 01/01/02- 01/01/01- 01/01/00-
12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
-------------------------------------------------------------
Net asset value, beginning of period $10.29 $10.25 $9.76 $9.95 $9.47
-------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.38 0.42 0.47 0.51 0.55
Net realized and unrealized gain
(loss) on investments - 0.04 0.49 (0.19) 0.48
-------------------------------------------------------------
Total from investment operations 0.38 0.46 0.96 (0.32) 1.03
-------------------------------------------------------------
Less distributions from:
Net investment income (0.38) (0.42) (0.47) (0.51) (0.55)
Net realized gains - - - - -
-------------------------------------------------------------
Total distributions (0.38) (0.42) (0.47) (0.51) (0.55)
-------------------------------------------------------------
Net asset value, end of period $10.29 $10.29 $10.25 $9.76 $9.95
-------------------------------------------------------------
Total return1 3.76% 4.60% 10.07% 3.26% 11.30%
Ratios/supplemental data:
Net assets, end of period (000's) $6,086 $4,781 $2,059 $1,614 $327
Ratio of net expenses to average net assets 0.44%2 0.36%2 0.22%2 0.11%2 0.05%2
Ratio of net investment income to
average net assets 3.68% 4.06% 4.73% 4.85% 5.73%
Portfolio turnover rate 22.36% 7.49% 27.95% 3.83% 16.16%
1Total return assumes reinvestment of distributions at net asset value,
does not reflect the impact of a sales charge and is not annualized.
2Viking 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 $19,541, $45,235,
$30,993, $16,352 and $15,441. 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 1.16%, 1.32%, 1.90%, 2.57%
and 7.10% respectively.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Highlights
Viking Large-Cap Value Fund
Selected data for each share of the Fund outstanding throughout each period
were as follows:
For the Period
01/01/04- 01/01/03- 01/01/02- 01/01/01- 01/01/00-
06/30/04 12/31/03 12/31/02 12/31/01 12/31/00
------------------------------------------------------------
Net asset value, beginning of period $10.06 $8.20 $10.74 $11.08 $9.90
------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.05 0.06 0.06 0.04 0.07
Net realized and unrealized gain
(loss) on investments 0.82 1.86 (2.60) (0.34) 1.18
------------------------------------------------------------
Total from investment operations 0.87 1.92 (2.54) (0.30) 1.25
------------------------------------------------------------
Less distributions from:
Net investment income (0.05) (0.06) (0.06) (0.04) (0.07)
Net realized gains - - - - -
------------------------------------------------------------
Total distributions (0.05) (0.06) (0.06) (0.04) (0.07)
------------------------------------------------------------
Net asset value, end of period $10.88 $10.06 $8.20 $10.74 $11.08
------------------------------------------------------------
Total return1 8.63% 23.42% (23.08)% (2.73)% 12.67%
Ratios/supplemental data:
Net assets, end of period (000's) $3,088 $2,745 $1,962 $2,143 $1,367
Ratio of net expenses to average net assets 1.34%2 1.35%2 1.35%2 1.35%2 1.35%2
Ratio of net investment income to
average net assets 0.47% 0.73% 0.71% 0.37% 0.90%
Portfolio turnover rate 25.70% 26.75% 36.52% 27.59% 48.97%
1Total return assumes reinvestment of distributions at net asset value, does
not reflect the impact of a sales charge and is not annualized.
2Viking 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 $6,586, $15,021, $20,422, $15,184 and $17,512.
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
1.80%, 2.02%, 2.34%, 2.10% and 3.07% respectively.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Highlights
Viking Small-Cap Value Fund
Selected data for each share of the Fund outstanding throughout the period
was as follows:
For the Period
01/01/04- 01/01/03- 01/01/02- 05/03/011-
12/31/04 12/31/03 12/31/02 12/31/01
--------------------------------------------------
Net asset value, beginning of period $12.43 $9.35 $10.26 $10.00
--------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (0.06) (0.03) (0.03) -
Net realized and unrealized gain
(loss) on investments 2.22 3.11 (0.88) 0.26
--------------------------------------------------
Total from investment operations 2.16 3.08 (0.91) 0.26
--------------------------------------------------
Less distributions from:
Net investment income - - - -
Net realized gains (0.25) - - -
--------------------------------------------------
Total distributions (0.25) - - -
--------------------------------------------------
Net asset value, end of period $14.40 $12.43 $9.35 $10.26
--------------------------------------------------
Total return2 17.86% 32.94% (8.87)% 2.60%
Ratios/supplemental data:
Net assets, end of period (000's) $1,715 $1,250 $604 $321
Ratio of net expenses to average net assets 1.65%3, 1.65%3 1.65%3 1.59%3,4
Ratio of net investment income to average
net assets (0.46)% (0.37)%4 (0.41)% (0.28)%4
Portfolio turnover rate 15.39% 14.77% 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 $6,501, $12,883, $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
2.59%, 3.16%, 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
December 31, 2004
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 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 years ended
December 31, 2004 and the year ended December 31, 2003 were as follows:
Tax-Free Fund for Tax-Free Fund for Large-Cap Small-Cap
Montana North Dakota Value Fund Value Fund
------------------------------------------------------------------------------
2004 2003 2004 2003 2004 2003 2004 2003
------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $240,060 $433,864 $95,886 $139,584 $0 $16,486 $0 $0
Long-term capital gain $0 $0 $0 $0 $0 $0 $0 $0
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 01/01/04 from 01/01/04 from 01/01/04 from 01/01/04
through 12/31/04 through 12/31/04 through 12/31/04 through 12/31/04
--------------------------------------------------------------------------
Shares sold 180,095 193,200 33,036 30,546
Shares issued in reinvestment
of distributions 32,312 12,639 1,605 0
Shares redeemed (256,535) (78,878) (23,638) (12,025)
--------------------------------------------------------------------------
Net Increase (Decrease) (44,128) 126,961 11,003 18,521
--------------------------------------------------------------------------
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 Tax-Free Fund
for Montana recognized $33,944 of investment advisory fees after a partial
waiver for the twelve months ended December 31, 2004. On December 31, 2004,
the Tax-Free Fund for Montana had a payable to VFM for investment advisory
fees of $3,780. The Tax-Free Fund for North Dakota recognized $10,584 of
investment advisory fees after a partial waiver for the twelve months ended
December 31, 2004. On December 31, 2004, the Tax-Free Fund for North Dakota
had a payable to VFM for investment advisory fees of $1,370. The Large-Cap
Fund recognized $20,094 of investment advisory fees after a partial waiver
for the twelve months ended December 31, 2004. On December 31, 2004, the
Large-Cap Fund had a payable to VFM for investment advisory fees of $1,806.
The Small-Cap Fund recognized $10,698 of investment advisory fees after a
partial waiver for the twelve months ended December 31, 2004. On December
31, 2004, the Small-Cap Fund had a payable to VFM for investment advisory fees
of $1,156. 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 December 31, 2004, 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
$9, $7, $27 and $12, 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 twelve months ended December 31, 2004, Large-Cap Value Fund recognized
$4,780 and Small-Cap Value Fund recognized $24 of 12b-1 fees after a partial
waiver. On June 30, 2004, the Large-Cap Fund had a payable to VFD for 12b-1
fees of $427.Tax-Free Fund for Montana and Tax-Free Fund for North Dakota
recognized no 12b-1 fees after the fee waiver.
For the twelve months ending December 31, 2004, the net amounts of sales charges
deducted from the proceeds of sale of capital shares which were retained
by VFD as principal underwriter were $7,274, $6,826, $1,273 and $1,970
for the Tax-Free Fund for Montana, Tax-Free Fund for North Dakota, Large-Cap
Fund and Small-Cap Fund, respectively. On December 31, 2004 the Large-Cap Fund
and Small-Cap Fund had payables to VFD for underwriting fees of $115 and $109,
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.
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 December
31, 2004, the Funds' most recently completed year end, Tax-Free Fund for
Montana, Tax-Free Fund for North Dakota and Large-Cap Value Fund had
capital losses of $43,181, $28,302 and $345,872 respectively,
which may be carried over to offset future capital gains. Such losses start
to expire in 2008.
At December 31, 2004, 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 $11,771,268 $5,884,532 $2,457,661 $1,294,536
------------------------------------------------------------------------------------
Unrealized appreciation 303,012 117,810 657,465 461,465
Unrealized depreciation (16,880) (16,955) (19,828) (13,759)
------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) $286,132 $100,855 $637,637 $447,706
------------------------------------------------------------------------------------
7. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
twelve months ended December 31, 2004 were as follows:
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
-----------------------------------------------------------------------------------
Purchases $3,354,035 $2,827,745 $793,814 $368,730
Sales $3,285,860 $1,225,579 $741,514 $224,213
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.
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Trustees
Viking Mutual Funds
Minot, North Dakota
We have audited the accompanying statements of assets and liabilities of Viking
Mutual Funds (the trust), including the schedules of investments, as of
December 31, 2004, the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years
in the period then ended and the financial highlights for each periods
presented. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of December 31, 2004, by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present farily, in all material respects, the financial position of the
Viking Mutual Funds as of December 31, 2004, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods presented, in conformity with accounting principles generally accepted
in the United States of Ameica.
BRADY, MARTZ & ASSOCIATES
Bismarck, North Dakota, USA
February 4, 2005
VIKING MUTUAL FUNDS
Miscellaneous Information (Unaudited)
December 31, 2004
Your Fund's Expenses
As a Fund shareholder, you can incur two types of costs:
? Transaction costs, including sales charges (loads) on Fund purchases; and
? Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in each Fund and can help
you understand these costs and compare them with those of other mutual
funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each Fund listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived
from each Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. Of course, your account value and expenses will differ from those
in this illustration:
1. Divide your account value by $1,000.
If an account had an $8,600 value, then $8,600 ? $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period" for the Fund(s) you own shares in.
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each Fund in the table can
help you compare ongoing costs of investing in the Fund(s) you own with those
of other mutual funds. This information may not be used to estimate the
actual ending account balance or expenses you paid during the period. The
hypothetical "Ending Account Value" is based on the actual expense ratio for
each Fund and an assumed 5% annual rate of return before expenses, which
does not represent each Fund's actual return. The figure under the heading
"Expenses Paid During Period" shows the hypothetical expenses your account
would have incurred under this scenario. You can compare this figure with
the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing
costs and do not reflect any transaction costs, such as sales charges.
Therefore, the second line for each Fund is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds.
In addition, if transactions costs were included, your total costs would
have been higher. Please refer to the Fund prospectus for additional
information on operating expenses.
Beginning Account Ending Account Expenses Paid During
Value 7/01/04 Value 12/31/04 Period1 7/01/04-12/31/04
Viking Tax-Free Fund for Montana
Actual $1,000.00 $1,045.39 $2.312
Hypothetical (5% return before expenses) $1,000.00 $1,022.87 $2.292
Viking Tax-Free Fund for North Dakota
Actual $1,000.00 $1,047.11 $2.423
Hypothetical (5% return before expenses) $1,000.00 $1,022.77 $2.393
Viking Large-Cap Value Fund
Actual $1,000.00 $1,044.75 $6.94
Hypothetical (5% return before expenses) $1,000.00 $1,018.35 $6.85
Viking Small-Cap Value Fund
Actual $1,000.00 $1,098.16 $8.70
Hypothetical (5% return before expenses) $1,000.00 $1,016.84 $8.36
1Expenses are equal to the annualized expense ratio for each Fund (Viking
Tax-Free Fund for Montana: 0.45%; Viking Tax-Free Fund for North Dakota:
0.47%; Viking Large-Cap Value Fund: 1.35%; and Viking Small-Cap Value Fund:
1.65%), multiplied by the average account value over the period, multiplied
by 184/366 to reflect the one-half year period.
2Expenses for the Viking Tax-Free Fund for Montana have increased since the
Fund's most recent fiscal half-year. Had the current expense ratio of the
Fund, 0.52%, been in place throughout the entire most recent fiscal half-year,
the Actual "Expenses Paid During Period" would have been $2.67 and the
Hypothetical "Expenses Paid During Period" would have been $2.64.
3Expenses for the Viking Tax-Free Fund for North Dakota have increased since
the Fund's most recent fiscal half-year. Had the current expense ratio of
the Fund, 0.52%, been in place throughout the entire most recent fiscal
half-year, the Actual "Expenses Paid During Period" would have been $2.68
and the Hypothetical "Expenses Paid During Period" would have been $2.64.
Proxy Voting on Fund Portfolio Securities
A description of the policies and procedures that the Funds use to determine
how to vote proxies relating to securities held in the Funds' portfolios is
available, without charge and upon request, by calling 1-800-933-8413. A
report on "Form N-PX" of how the Funds voted any such proxies during the
most recent 12-month period ended June 30 is available from the
EDGAR database on the SEC's Internet site at http://www.sec.gov.
Quarterly Portfolio Schedule
The Funds provide a complete schedule of portfolio holdings in its semi-
annual and annual reports within 60 days of the end of the Funds' second and
fourth fiscal quarters on the Form N-CSR(S). The semi-annual and annual
reports are filed electronically with the SEC and are delivered to the
shareholders of the Funds. The Funds also file their complete schedule of
portfolio holdings with the SEC for the first and third quarters of each
fiscal year on Form N-Q. The Funds' Forms N-Q and N-CSR(S) are available on
the SEC's website at http://www.sec.gov. The Funds' Form N-Q and N-CSR(S)
may be reviewed and copied at the SEC's Public Reference Room in Washington,
DC and the information on the operation of the Public Reference Room in may
be obtained by calling 1-800-SEC-0330.
VIKING MUTUAL FUNDS
Trustee Information (Unaudited)
December 31, 2004
NAME AND PRINCIPAL OCCUPATION(S)
ADDRESS AGE POSITION(S) HELD DURING PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------------------------
Shirley R. Martz 80 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 31 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.
Shannon D. Radke 38 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.).
Mike Timm 67 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).
Peter C. Zimmerman 38 Trustee General Manager, Holiday Inn Riverside
1400 14th Ave. SW (1995-pres.); Trustee, Viking Mutual
Minot, ND 58701 Funds (2004-pres.)
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
Shirley R. Martz
Douglas P. Miller
Shannon D. Radke
Mike Timm
Peter C. Zimmerman
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.
Viking Mutual Funds has adopted a code of ethics, as defined in Item 2 of
Form N-CSR, that applies to the President and Treasurer. A copy of this
code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Viking Mutual Fund's board of trustees has determined that there
is one audit committee financial expert serving on its audit committee.
Shirley Martz is the audit committee financial expert and is considered
"independent." In order to be considered "independent", a member of an audit
committee may not, other than in his or her capacity as a member of the audit
committee, the board of trustees, or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or other
compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as defined in
Section 2(a)(19) of the Act (15 U.S.C. 80a-2(a)(19)).
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) Audit Fees
The aggregate fees billed by registrant's independent public accountants,
Brady Martz & Associates ("BMA") for each of the last two fiscal years for
professional services rendered in connection with the audit of registrant's
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
were $4,700 for each Fund for the year ended December 31, 2004, and $4,500
for each Fund for the year ended December 31, 2003.
(b) Audit-Related Fees
The aggregate fees BMA billed to registrant for each of the last two fiscal
years for assurance and other services which are reasonably related to the
performance of registrant's audit and are not reported under Item 4(a) were $345
and $375 for the years ended December 31, 2004 and December 31, 2003,
respectively. The aggregate fees BMA billed to registrant's investment adviser
and any entity controlling, controlled by, or under common control with
registrant's investment adviser for assurance and other services directly
related to the operations and financial reporting of registrant were $0 for the
year ended December 31, 2004, and $0 for the year ended December 31, 2003.
(c) Tax Fees
The aggregate tax fees BMA billed to registrant for each of the last two
fiscal years for tax compliance, tax advice, and tax planning services were $500
for each Fund for the year ended December 31, 2004, and $500 for each Fund
for the year ended December 31, 2003. The aggregate tax fees BMA billed
to registrant's investment adviser and any entity controlling, controlled
by, or under common control with registrant's investment adviser for services
directly related to the operations and financial reporting of registrant were
$800 for the year ended December 31, 2004, and $800 for the year ended
December 31, 2003.
(d) All Other Fees
For the fiscal years ended December 31, 2004 and 2003, registrant paid
BMA no other fees. The aggregate fees BMA billed to registrant's investment
Adviser and any entity controlling, controlled by, or under common
control with registrant's investment adviser for any other services
directly related to the operations and financial reporting of registrant
were $0 for the year ended December 31, 2004, and $0 for the year ended
December 31, 2003.
(e) Registrant's Audit Committee (comprised of the full Board of
Trustees ("Board") of the registrant) is responsible for the
pre-approval of all auditing services performed for the registrant. A
majority of the Board (including the members of the Board who are
Independent Trustees) must approve the audit engagement and proposed fees
at an in-person meeting. The Audit Committee also is responsible for
pre-approval (subject to the de minimus exception for non-audit services
described in the Securities Exchange Act of 1934, as amended, and applicable
rule thereunder) of all non-auditing services performed for the registrant
or for any service affiliate of registrant. Registrant's Audit
Committee pre-approved all fees described above which BMA billed to registrant.
(f) Less than 50% of the hours billed by BMA for auditing services to
registrant for the fiscal year ended December 31, 2004, were for work performed
by persons other than full-time, permanent employees of BMA.
(g) The aggregate non-audit fees billed by BMA to registrant and to
registrant's investment adviser and any entity controlling, controlled by, or
under common control with registrant's investment adviser for the fiscal years
ending December 31, 2004 and December 31, 2003 were $0 and $0.
(h) Registrant's Audit Committee has not considered the non-audit services
provided to the registrant and registrant's investment adviser and any entity
controlling, controlled by, or under common control with registrant's investment
adviser as described above because no non-audit services were performed by the
accountant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable
ITEM 6. SCHEDULE OF INVESTMENTS
Included as part of report to shareholders under Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 11. CONTROLS AND PROCEDURES
(a) The Principal Executive Officer and Treasurer of Viking Mutual Funds
have determined that the previous N-CSR filed on March 1, 2005 lacked
certain disclosure due to an inadvertent error. The lacking disclosure
consisted of information required by new disclosure requirements.
Accordingly, Viking Mutual Fund's disclosure controls and procedures have
been amended to address a review of all current instructions, rules and
regulations in conjunction with the review of Form N-CSR prior to filing.
As a result, the Principal Executive Officer and Treasurer of Viking Mutual
Funds have concluded that such disclosure controls and procedures are
effective as of March 8, 2005.
(b) There was no change in the internal controls over financial reporting
(as defined in Rule 30a-3(d) under the Act) of Viking Mutual Funds that
occurred during the second fiscal quarter of the period covered by this
report that has materially affected or is reasonably likely to materially
affect, its internal controls over financial reporting.
ITEM 12. EXHIBITS
(a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and
attached.
(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 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: 03/10/2005
By: /s/ DOUGLAS P. MILLER
------------------------------
Douglas P. Miller
Principal Financial Officer
Date: 03/10/2005