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
--------
VIKING MUTUAL FUNDS
-------------------
(Exact name of registrant as specified in charter)
116 1st St SW Suite C, MINOT, ND 58701
(Address of principal executive offices) (Zip code)
SHANNON D RADKE, 116 1st St SW Suite C, MINOT, ND 58701
-----------------------------------------------------
(Name and address of agent for service)
Registrants telephone number, including area code: (701) 852-1264
--------------
Date of fiscal year end: 12/31
----
Date of reporting period: 12/30/05
-------
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, 2005.
Looking back at 2005, clearly the most dramatic events were the one-two punch
of Hurricanes Katrina and Rita. It goes without saying that the economic
consequences for the Gulf Coast region have been enormous. More than a
million people have been displaced, thousands of businesses and jobs have been
disrupted or destroyed, and the infrastructure-notably for energy-took a severe
beating. Despite elevated energy prices and hurricane-related disruptions, the
expansion in economic activity appears solid. GDP has posted increases
exceeding 3% for ten straight quarters. The labor market shows strength,
particularly in light of the aftermath of the Gulf storms. These figures
should remain robust as the fiscal stimulus from the federal government
rebuild of the Gulf region takes place. Corporations are also likely to invest
more to increase capacity as recent capacity utilization figures show factories
are operating at close to a five-year high. Core inflation has stayed
relatively low in recent months and longer-term inflation expectations remain
contained. Nevertheless, possible increases in resource utilization as well
as elevated energy prices have the potential to add to inflation pressures.
The Federal Reserve, keeping a watchful eye on the impact of surging oil
prices, dolled out 0.25 percent increases in the Fed Funds rate at each of the
FOMC meetings. Those actions left the rate at 4.25 percent, the highest level
in 4 1/2 years. The rate hike in December was the 13th quarter point move since
the Fed began raising rates in June 2004. At that time, the Funds rate was at
a 46-year low of 1 percent. The FOMC also signaled some further rate hikes
in months to come would be needed to keep inflationary pressures at bay. Put
simply, here is how Fed rate hikes directly affect consumer spending. Most
consumer credit rates and adjustable mortgage rates are tied to the Prime rate.
This rate moves in lock step with the Fed Funds rate. As Prime increases, more
money is taken from the consumer in the form of higher interest rates and
therefore is not available for the purchase of goods and services. Since
consumer spending makes up roughly two-thirds of our economy, when spending
slows, the economy slows causing the Fed to pause and eventually begin cutting
rates again to stimulate the economy lest it should fall into recession. The
Feds short-term rate increases normally produce an increase in long-term
rates. However, that hasnt occurred during this cycle of increases. Although
the Fed controls short-term borrowing rates, longer-term rates move up and down
on expectations of future economic growth and inflation concerns and are
controlled by market participants. With this flattening of rates, the yield
curve inverted with two-year yields eclipsing ten-year yields, albeit
slightly. The inverted yield curve is invigorating the debate over its
accuracy as a harbinger of economic downturn, even recession. In the past 30
years, the yield curve has inverted five out of the eight times the Fed has
been tightening monetary policy. Each of those five times an economic
recession has ensued. However, many economists say the yield curve is
different this time. Factors, including strong demand from foreigners for U.S.
debt, which drives up prices and drives down yields, reduce the usefulness of
the yield curve as a predictor of economic recession.
Following the strong rally of last years fourth quarter and the abnormally
high returns posted in 2003 and 2004, surging energy prices and rising interest
rates took a toll on investors, as equities sagged in general in the first
quarter of 2005. The Dow Jones Industrial average slid 2.6%, the
broader S&P 500 Index also lost 2.6% for the quarter, while the
tech-laden Nasdaq ended its worst first quarter performance in four years
booking a loss of 8.1%. Stocks finished a turbulent second quarter with
mixed results, as crude oil futures fluctuated widely and as concerns about
inflation and a possible economic slowdown roiled the markets. For the second
quarter, the Dow lost 2.2%, while the S&P gained 0.9% and the
Nasdaq climbed 2.9%. One must marvel at the performance of the equity markets
in the third quarter. The Dow was up 2.9%, the S&P 3.1% and the Nasdaq 4.6%.
This occurred despite significant headwinds, such as persistent rate hikes from
the Fed, even higher energy costs and, of course, the tragedy brought on by the
Gulf Storms. While the fourth quarter equity market returns lagged the third
quarter, they were enough to help offset the lackluster results of the first
six months of 2005. For all of 2005, the returns in the equity markets were
modest as the Dow lost 0.6% on the year, the S&P 500 gained 3% and the Nasdaq
eked out a 1.4% gain.
The fixed income markets, like the equity markets, took a decided turn for the
worse in the first quarter of 2005, as the Fed hiked the Fed Funds rate twice,
each by 25 basis points. The U.S. economy continued to show strong, above-trend
growth in the first quarter. The labor market was healthy, commodity prices
showed strong gains and housing data remained robust. The fixed income markets
rebounded from negative performance of the prior quarter and provided strong
returns in the second quarter. Despite the consistent measured pace of the
Fed Funds rate hikes by the Federal Reserve, longer rates declined and the
yield curve continued to flatten. Bullish bondholders were comforted by the
Feds rate actions, believing modestly higher short-term interest rates would
muffle inflation gains. The third quarter of 2005 was similar in many respects
to the first quarter. Interest rates increased meaningfully as the economy
continued to perform well and the Federal Reserve persisted in hiking the Fed
Funds rate. The fourth quarter of 2005 was a scaled-down version of the
third quarter, with continued economic expansion and persistent interest rate
hikes by the Fed. The Fed hiked the Fed Funds rate twice, each time by 25
basis points, and the yield curve continued to flatten.
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 1.96% (at net
asset value with distributions reinvested) for the year ended December 31,
2005.
The fixed income markets, like the equity markets, took a decided turn for the
worse in the first quarter of 2005, as the Fed hiked the Fed Funds rate twice,
each by 25 basis points. The U.S. economy continued to show strong,
above-trend growth in the first quarter. The labor market was healthy,
commodity prices showed strong gains and housing data remained robust. As a
result, the Funds share price declined in the first quarter. The fixed income
markets rebounded from negative performance of the prior quarter and provided
strong returns in the second quarter as the Funds share price rebounded as
well. Despite the consistent measured pace of the Fed Funds rate hikes by
the Federal Reserve, longer rates declined and the yield curve continued to
flatten. Bullish bondholders were comforted by the Feds rate actions,
believing modestly higher short-term interest rates would muffle inflation
gains. The third quarter of 2005 was similar in many respects to the first
quarter. Interest rates increased meaningfully as the economy continued to
perform well and the Fed persisted in hiking the Fed Funds rate. As rates
increased in the third quarter, the funds share price declined. Perhaps the
most significant aspect of the third quarter was the continued flattening of
the yield curve. Clearly, the Fed was concerned about a pickup of inflation,
although it would appear that longer-term bond investors were not. The fourth
quarter of 2005 was a scaled-down version of the third quarter, with
continued economic expansion and persistent interest rate hikes by the Fed.
This led to a slight decline in the Funds share price. The Fed hiked the Fed
Funds rate twice, each time by 25 basis points, and the yield curve continued
to flatten.
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.
VIKING TAX-FREE FUND FOR MONTANA
Growth of a $10,000 Investment
August 3, 1999 through December 30, 2005 (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
January 31, 2005 $12,601 $13,194 $14,074
February 28, 2005 $12,587 $13,179 $14,027
March 31, 2005 $12,443 $13,028 $13,939
April 30, 2005 $12,604 $13,196 $14,160
May 31, 2005 $12,693 $13,290 $14,260
June 30, 2005 $12,757 $13,356 $14,349
July 29, 2005 $12,682 $13,278 $14,284
August 31, 2005 $12,749 $13,348 $14,428
Septmeber 30, 2005 $12,750 $13,349 $14,332
October 31, 2005 $12,678 $13,274 $14,244
November 30, 2005 $12,718 $13,315 $14,313
December 30, 2005 $12,797 $13,398 $14,436
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 08/03/99-12/30/05. 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
investments 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 30, 2005 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge 1.96% 3.48% 4.93% 4.66%
Including Sales Charge -2.62% 1.90% 3.98% 3.92%
Returns reflect reinvestment of distributions and the effect of a 4.50%
front-end sales charge, as applicable. The current maximum sales charge is
3.75%. Therefore, the total returns would have been higher had the current
maximum sales charge been in effect for the stated periods. 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 2.24% (at net
asset value with distributions reinvested) for the year ended December 31,
2005.
The fixed income markets, like the equity markets, took a decided turn for the
worse in the first quarter of 2005, as the Fed hiked the Fed Funds rate twice,
each by 25 basis points. The U.S. economy continued to show strong,
above-trend growth in the first quarter. The labor market was healthy,
commodity prices showed strong gains and housing data remained robust. As a
result, the Funds share price declined in the first quarter. The fixed income
markets rebounded from negative performance of the prior quarter and provided
strong returns in the second quarter as the Funds share price rebounded as
well. Despite the consistent measured pace of the Fed Funds rate hikes by
the Federal Reserve, longer rates declined and the yield curve continued to
flatten. Bullish bondholders were comforted by the Feds rate actions,
believing modestly higher short-term interest rates would muffle inflation
gains. The third quarter of 2005 was similar in many respects to the first
quarter. Interest rates increased meaningfully as the economy continued to
perform well and the Fed persisted in hiking the Fed Funds rate. As rates
increased in the third quarter, the funds share price declined. Perhaps the
most significant aspect of the third quarter was the continued flattening of
the yield curve. Clearly, the Fed was concerned about a pickup of inflation,
although it would appear that longer-term bond investors were not. The fourth
quarter of 2005 was a scaled-down version of the third quarter, with
continued economic expansion and persistent interest rate hikes by the Fed.
This led to a slight decline in the Funds share price. The Fed hiked the Fed
Funds rate twice, each time by 25 basis points, and the yield curve continued
to flatten.
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.
VIKING TAX-FREE FUND FOR NORTH DAKOTA
Growth of a $10,000 Investment
August 3, 1999 through December 30, 2005 (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
January 31, 2005 $12,721 $13,319 $14,074
February 28, 2005 $12,719 $13,316 $14,027
March 31, 2005 $12,576 $13,167 $13,939
April 30, 2005 $12,761 $13,360 $14,160
May 31, 2005 $12,864 $13,469 $14,260
June 30, 2005 $12,915 $13,522 $14,349
July 29, 2005 $12,816 $13,418 $14,284
August 31, 2005 $12,895 $13,501 $14,428
September 30, 2005 $12,884 $13,489 $14,332
October 31, 2005 $12,824 $13,427 $14,244
November 30, 2005 $12,851 $13,455 $14,313
December 30, 2005 $12,929 $13,357 $14,436
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 08/03/99-12/30/05. 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
investments 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 30, 2005 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge 2.24% 3.53% 4.75% 4.83%
Including Sales Charge -2.32% 1.96% 3.79% 4.09%
Returns reflect reinvestment of distributions and the effect of a 4.50%
front-end sales charge, as applicable. The current maximum sales charge is
3.75%. Therefore, the total returns would have been higher had the current
maximum sales charge been in effect for the stated periods. 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: William E. Dodge, President and CEO, Fox Asset Management, LLC
Shannon D. Radke, President
Viking Large-Cap Value Fund provided a return of 7.76% (at net asset value) for
the year ended December 31, 2005.
Stocks worked their way lower in the first quarter of 2005, pressured by
Surging oil prices and rising interest rates. The economy continued to
Perform satisfactorily in the face of the higher energy and capital costs.
Despite losses for the major indices during the first quarter, the Fund posted
Positive results. Our overall emphasis on high quality names served us well.
Our healthcare holdings performed well in the quarter as investors moved toward
the companies with more stable earnings prospects. Also, our consumer staples
stocks appreciated nicely. Additionally, our substantial underweight of the
financial services sector, which we have long maintained, worked well as the
Feds interest rate moves began to negatively affect shares in this sector.
Finally, the overweight energy position rebounded impressively form the
weakness seen in the fourth quarter of 2004.
Stocks finished a turbulent second quarter with mixed results, as crude oil
futures fluctuated widely and as concerns about inflation and a possible
economic slowdown roiled the markets. Signs that the economy may be cooling
from its rapid pace of recent years buoyed investor hopes that the Fed may ease
off the brakes earlier than expected, leading many investors to bid financial
shares higher. Yet, Greenspan and Co. indicated that it would continue to hike
rates to keep a lid on inflation, nudging the Fed funds rate to 3.25% on June
30th. This flattened the yield curve even further, thus squeezing banks net
interest margins, especially those of less diversified institutions that depend
more heavily on this basic source of income. For the second quarter the Dow had
a small loss. The S&P 500 and the Nasdaq posted small gains as did the Fund.
Healthcare continued to perform well, but weakness in certain of our cyclical
names and our underweight to the financial services sector proved to be a drag
on results.
One must marvel at the performance of the equity market in the third quarter as
all major domestic market indices gained ground. The Fund gained ground as
well despite significant headwinds, such as persistent rate hikes from the
Federal Reserve, even higher energy costs and, of course, the tragedy brought
on by the Gulf Storms. In general, while there was plenty to fret about, the
market was extremely resilient. However, performance within the market was
very uneven. Sector strength was very narrow (namely, energy and technology),
while the number of stocks advancing roughly equaled the number declining.
For the Fund, performance was pretty good as our sector and stock emphasis more
than participated in the rally.
Despite a strong global economy, the US stock market muddled through the fourth
quarter. And while the fourth quarter equity market returns lagged the third
quarter, they were enough to help offset the lackluster results of the first
six months of 2005. A pullback in energy stocks, to which we maintain
significant exposure, and an outperforming financial services sector, to which
we remain underweight, were primarily responsible for the Funds
underperformance in the final quarter.
For all of 2005, the returns in the equity markets were modest as most indices
posted low single digit gains. For the Fund, performance was significantly
better than the benchmarks for the year. The returns were particularly good
considering the headwinds from the Federal Reserve and higher energy costs.
While the energy sector was the top performing sector on Wall Street, the
impact on Main Street was less discretionary income. Throw in the storms that
ravaged the Gulf Region and one must concede that the market did pretty well in
the face of gale force winds.
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 30, 2005 (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
January 31, 2005 $10,523 $11,102 $12.502
February 28, 2005 $11,061 $11,669 $12,921
March 31, 2005 $11,041 $11,648 $12,739
April 30, 2005 $10,738 $11,329 $12,510
May 31, 2005 $11,031 $11,638 $12,812
June 30, 2005 $11,168 $11,782 $12,952
July 29, 2005 $11,490 $12,122 $13,327
August 31, 2005 $11,393 $12,019 $13,269
September 30, 2005 $11,490 $12,122 $13,455
October 31, 2005 $10,963 $11,566 $13,114
November 30, 2005 $11,373 $11,999 $13,543
December 30, 2005 $11,456 $12,086 $13,626
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 08/03/99-12/30/05. 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
investments 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 30, 2005 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge 7.76% 13.05% 1.57% 3.00%
Including Sales Charge 2.13% 11.05% 0.49% 2.14%
Returns reflect reinvestment of distributions and the effect of a 5.25%
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, Senior Managing Director, Fox Asset Management, LLC
Shannon D. Radke, President
Viking Small-Cap Value Fund provided a return of 4.18 % (at net asset value)
for the year ended December 31, 2005.
Stocks worked their way lower in the first quarter of 2005, pressured by
surging oil prices and rising interest rates. The economy continued to perform
satisfactorily in the face of the higher energy and capital costs. Small-cap
stocks succumbed to the same pressures that affected the major stock-market
indices in the first quarter with the Russell 2000 Value Index declining 4.0%.
Although those pressures were too much for the Fund to overcome fully, our
exposure to energy and underweight to financial services and technology stocks
aided results with the Fund posting a smaller loss.
Stocks finished a turbulent second quarter with mixed results, as crude oil
futures fluctuated widely and as concerns about inflation and a possible
economic slowdown roiled the markets. Signs that the economy may be cooling
from its rapid pace of recent year buoyed investor hopes that the Fed may ease
off the brakes earlier than expected, leading many investors to bid financial
shares higher. Yet, Greenspan and Co. indicated that it would continue to hike
rates to keep a lid on inflation, nudging the Fed funds rate to 3.25% on
June 30th. This flattened the yield curve even further, thus squeezing banks
net interest margins, especially those of less diversified institutions that
depend more heavily on this basic source of income. For the second quarter the
Dow had a small loss. The S&P 500 and the Nasdaq posted small gains. Small-
cap stocks rebounded in the second quarter with the Russell 2000 Value Index
gaining 5.1%. The Fund lagged the strong small-cap market, following its
outperformance in the down market of the first quarter. Weakness in certain of
our cyclical names and our underweight to the financial services proved to be a
drag on results.
One must marvel at the performance of the equity market in the third quarter as
all major domestic market indices gained ground. Small-cap stocks ended higher
along with the major indices as the Russell 2000 Value Index advanced 3.1%.
The Fund gained ground as well despite significant headwinds, such as
Persistent rate hikes from the Federal Reserve, even higher energy costs and,
of course, the tragedy brought on by the Gulf Storms. In general, while there
was plenty to fret about, the market was extremely resilient. However,
performance within the market was very uneven. Sector strength was very narrow
(namely, energy and technology), while the number of stocks advancing roughly
equaled the number declining. For the Fund, performance was pretty good as our
sector and stock emphasis more than participated in the rally. Our overweight
to the energy sector and underweight to financials aided results as they did
in the first quarter.
Despite a strong global economy, the US stock market muddled through the fourth
quarter. And while the fourth quarter equity market returns lagged the third
quarter, they were enough to help offset the lackluster results of the first
six months of 2005. The Russell 2000 Value Index posted a very slight gain in
the final quarter, while the Fund posted a small decline. A pullback in energy
stocks, to which we maintain significant exposure, and an outperforming
financial services sector, to which we remain underweight, were primarily
responsible for the Funds underperformance in the final quarter.
For all of 2005, the returns in the equity markets were modest as most indices
posted low single digit gains. Performance for the Fund was similar. The
returns were particularly good considering the headwinds from the Federal
Reserve and higher energy costs. While the energy sector was the top
performing sector on Wall Street, the impact on Main Street was less
discretionary income. Throw in the storms that ravaged the Gulf Region and
one must concede that the market did pretty well in the face of gale force
winds.
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 30, 2005 (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
January 31, 2005 $13,394 $14,131 $16,398
February 28, 2005 $13,857 $14,619 $16,724
March 31, 2005 $13,674 $14,426 $16,380
April 30, 2005 $13,066 $13,785 $15,535
May 31, 2005 $13,799 $14,558 $16,482
June 30, 2005 $14,011 $14,782 $17,211
July 29, 2005 $14,484 $15,280 $18,190
August 31, 2005 $14,503 $15,300 $17,773
September 30, 2005 $14,551 $15,351 $17,743
October 31, 2005 $14,214 $14,995 $17,298
November 30, 2005 $14,628 $15,433 $17,999
December 30, 2005 $14,666 $15,261 $17,861
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 05/03/01-12/30/05. 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
investments 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 30, 2005 One-Year Three-Year (Est. 5/3/01)
- - ----------------------------------------------------------------------
Excluding Sales Charge 4.18% 17.74% 9.48%
Including Sales Charge -1.31% 15.64% 8.23%
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
Schedule of Investments
December 30, 2005
Viking Tax-Free Fund for Montana
PRINCIPAL MARKET
AMOUNT VALUE
MUNICIPAL BONDS 96.7%
General Obligations 16.6%
Bozeman MT Ser A 4.95% 07/01/20 170,000 $179,736
Broadwater Cnty MT Sch Dist No. 1 Townsend (AMBAC) 5.1% 07/01/18 250,000 266,217
Cascade Cnty MT High Sch A Great Falls 3.15% 07/01/06 100,000 99,960
Misoula Cnty MT Ref (XLCA) 3.75% 07/01/14 250,000 247,495
MT St Long Range Building Pg-Ser G 4.00% 08/01/13 250,000 253,843
MT St Long Range Building Pg - Ser G 4.00% 08/01/16 250,000 251,207
MT St Water Pollution Ctl 5.60% 07/15/20 100,000 110,144
Puerto Rico Mun Fin Agy Ser A (FSA) 5.50% 08/01/23 250,000 265,008
Ravalli Cnty MT Sch Dist No. 003 Hamilton (FSA) 4.00% 07/01/16 80,000 80,186
Ravalli Cnty MT Sch Dist No. 003 Hamilton (FSA) 4.65% 07/01/09 105,000 108,369
Yellowstone & Carbon Cntys Elem Sch Dist (MBIA) 4.25% 07/01/24 200,000 199,300
---------
2,061,320
---------
Continuing Care Revenue Bonds 2.0%
MT Fac Fin Auth Marias Med Ctr 3.80% 01/01/10 175,000 172,744
MT St Hlth Facs Auth Rev Hillcrest Sr Ctr 6.90% 06/01/15 30,000 34,328
MT St Hlth Facs Auth Rev Hillcrest Sr Ctr 7.25% 06/01/25 35,000 40,414
---------
247,486
---------
Higher Education Revenue Bonds 13.6%
MT Brd Regents U of M Hgher Ed Rev Ser J (MBIA) 4.00% 05/15/16 300,000 297,138
MT St Hgher Ed Stud Assist Corp Rev Ser B 6.40% 12/01/32 415,000 434,907
MT St Brd Regents (MSU) Rev Facs Imp-E (AMBAC) 5.00% 11/15/21 80,000 82,459
MT Brd Regents (U of M) Hgher Ed Rev Ser F (MBIA) 5.75% 05/15/24 150,000 165,873
Puerto Rico Tour Edl Med & Env Facs Mendez Univ 5.375% 02/01/19 75,000 77,306
*Univ of MT Revs Facs Acq & Imp Ser C (MBIA) 5.00% 11/15/17 140,000 142,526
Univ of MT Revs Higher Ed Facs Imp Ser D (MBIA) 5.375% 05/15/15 75,000 78,645
Univ of MT Revs Higher Ed Facs Imp Ser D (MBIA) 5.375% 05/15/19 370,000 411,362
---------
1,690,216
---------
Hospital Revenue Bonds 22.8%
MT Hlth Fac Fin Auth Rev Mstr Ln Program Comm Med Ctr 5.20% 12/01/21 145,000 150,855
MT Fac Fin Auth Rev Bozeman Deaconess 4.125% 06/01/18 200,000 191,354
MT Fac Fin Auth Providence Serv (MBIA) 4.60% 12/01/18 150,000 156,348
MT Fac Fin Auth Providence Serv (MBIA) 5.00% 12/01/18 500,000 532,000
MT Fac Fin Auth Providence Serv (MBIA) 4.80% 12/01/20 200,000 210,146
*MT Hlth Fac Auth Sisters Chrty Leavenworth (MBIA) 5.125% 12/01/18 200,000 210,156
MT Hlth Fac Auth Sisters Chrty Leavenworth (MBIA) 5.00% 12/01/24 515,000 532,912
MT St Hlth Fac Auth Rev Comm Med Ctr 6.375% 06/01/18 370,000 377,370
*MT St Hlth Fac Auth Rev Kalispell Med Ctr (AMBAC) 5.00% 07/01/16 450,000 474,039
---------
2,835,180
---------
Housing Revenue Bonds 14.3%
*MT St Brd Hsg Sngle Fam Mtg Ser A-2 5.75% 06/01/30 70,000 69,897
*MT St Brd Hsg Sngle Fam Ser A-2 5.50% 12/01/20 85,000 84,523
*MT St Brd Hsg Sngle Fam Ser A-2 5.60% 12/01/23 70,000 69,658
MT St Brd Hsg Sngle Fam Ser A-2 5.20% 12/01/22 120,000 121,652
MT St Brd Hsg Sngle Fam Ser B-2 4.85% 12/01/15 135,000 121,339
MT St Brd Hsg Sngle Fam Mtg Ser B-2 5.55% 06/01/33 185,000 188,530
MT St Brd Hsg Sngle Fam Prog Ser B 4.55% 12/01/11 385,000 392,427
MT St Brd Hsg Sngle Fam Mtg Ser A 4.30% 06/01/12 250,000 248,718
MT St Brd Hsg Sngle Fam Mtg Ser A 4.30% 12/01/12 480,000 478,109
---------
1,774,853
---------
Psychiatric and Substance Abuse Hospital Bonds 9.7%
MT Fac Fin Auth Developmental Ctr Prog 4.50% 06/01/16 250,000 254,392
MT Fac Fin Auth Developmental Ctr Prog 4.75% 06/01/19 170,000 173,936
MT Fac Fin Auth Childrens Home 4.55% 01/01/17 250,000 251,228
MT St Hlth Fac Auth Hlth Care Rev State Hosp (AMBAC) 5.00% 06/01/22 500,000 521,310
---------
1,200,866
---------
Transportation Revenue Bonds 5.1%
MT St Dept Trnsf Rev Grant Antic Hwy 93 (MBIA) 5.00% 06/01/20 100,000 105,940
MT St Dept Trans Rev Grant Antic Hwy 93 (MBIA) 4.00% 06/01/14 250,000 251,183
Puerto Rico Hwy & Trans Auth Rev Ser G (FGIC) 5.25% 07/01/20 250,000 271,665
---------
628,788
---------
Water Revenue Bonds 0.8%
Great Falls MT Wtr Sys Rev Ref Ser A (AMBAC) 3.85% 08/01/08 100,000 101,480
---------
101,480
---------
Other Revenue Bonds 11.7%
MT St Brd Invt Refunded 1996 Pay Tax (MBIA) 6.875% 06/01/20 105,000 112,706
MT St Brd Invt Refunded 1996 Pay Tax (MBIA) 6.875% 06/01/20 105,000 112,430
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev 6.00% 07/01/26 195,000 215,280
Puerto Rico Comwlth Aqueduct & Swr Auth Rev (MBIA) 5.00% 07/01/19 125,000 129,411
Puerto Rico Comwlth Infra Fing Auth Ser A (AMBAC) 5.00% 07/01/21 250,000 263,237
Puerto Rico Comwlth Inf Fin Auth Ser A (AMBAC) 5.25% 07/01/10 100,000 105,166
Puerto Rico Mun Fin Agy Ser A (FSA) 5.25% 08/01/21 200,000 217,048
Puerto Rico Pub Fin Corp Ser A (MBIA) 5.50% 08/01/17 275,000 301,760
---------
1,457,038
----------
Total Municipal Bonds (cost $11,887,353) 11,997,227
SHORT-TERM INVESMENTS 2.6%
Federated Municipal Obligations Fund #852 325,000 325,000
----------
Total Short-Term Investments (cost: $325,000) 325,000
---------
TOTAL MARKET VALUE OF SECURITIES OWNED 99.3% (COST $12,212,353) 12,322,227
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.7% 86,155
-----------
NET ASSETS APPLICABLE TO 1,236,208 SHARES (0.001 PAR VALUE) OUTSTANDING - 100.0% $12,408,382
===========
*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
Schedule of Investments
December 30, 2005
Viking Tax-Free Fund for North Dakota
PRINCIPAL MARKET
AMOUNT VALUE
MUNICIPAL BONDS 99.8%
General Obligations 24.2%
*Bismarck ND Ref & Imp - Ser L 4.00% 06/01/07 75,000 $74,578
Bismarck ND Ref & Imp - Ser P 2.90% 05/01/12 100,000 95,762
Bismarck ND Pub Sch Dist No 1 (FGIC) 4.50% 05/01/16 55,000 54,847
*Fargo ND Ref & Imp - Ser B (FGIC) 5.125% 05/01/17 60,000 61,949
Fargo ND Ref & Impt Ser D (MBIA) 5.00% 05/01/28 200,000 207,622
Hillsboro ND Pub Sch Dist No. 9 (FSA) 4.85% 06/01/19 50,000 52,300
*Jamestown ND Pub Sch Dist No. 011 (FGIC) 4.60% 05/01/15 50,000 50,958
*Mandan ND Ref & Imp - Ser B (MBIA) 5.00% 05/01/16 70,000 70,750
Mandan ND Ref Impt Ser C (AMBAC) 4.00% 05/01/18 150,000 147,051
Puerto Rico Commonwealth (MBIA) 5.375% 07/01/25 50,000 51,548
Wahpeton ND Pub Sch Dist No 37 (FSA) 4.10% 05/01/15 100,000 98,968
*West Fargo ND Ref & Imp 5.00% 05/01/18 250,000 260,723
West Fargo ND Ref & Impt (AMBAC) 4.00% 05/01/15 200,000 205,550
West Fargo ND Pub Sch Dist No. 006 (FGIC) 5.00% 05/01/14 50,000 53,128
---------
1,580,855
---------
Building Authority Revenue Bonds 6.9%
Fargo ND Bldg Auth Lease Rev Ser A 5.00% 05/01/20 50,000 52,336
GF Cnty ND Bldg Auth Lease Rev 4.00% 12/01/14 100,000 98,405
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.00% 12/01/17 50,000 52,041
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.00% 12/01/16 50,000 52,357
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.20% 12/01/19 90,000 94,374
ND St Bldg Auth Lease Rev Ser C (AMBAC) 4.20% 08/15/13 100,000 101,839
---------
451,352
---------
Education Revenue Bonds 6.9%
Fargo ND School District Bldg Auth Rev (MBIA) 5.50% 05/01/14 50,000 52,671
Minot Pub School District No 1 Bldg Auth 4.80% 05/01/23 290,000 296,936
West Fargo Pub School District Bldg Auth Lease Rev 4.20% 05/01/17 100,000 99,975
---------
449,582
---------
Higher Education Revenue Bonds 14.7%
Fargo ND Lease Rev NDSU Lease Oblig Ser-A (AMBAC) 3.50% 05/01/09 60,000 59,526
ND St Brd Hgher Ed Student Svcs Facs MSU 5.00% 08/01/18 175,000 174,368
ND St Brd Hgher Ed Rev Hsg & Aux Facs UND (FGIC) 5.00% 04/01/18 250,000 264,025
ND St Brd Hgher Ed Rev Hsg & Aux Facs UND (FGIC) 4.375% 04/01/26 100,000 97,504
ND St Brd Hgher Ed Rev Hsg & Aux Facs NSDU (FGIC) 4.00% 04/01/15 150,000 150,244
ND St Brd Hgher Ed Rev Hsg & Aux BSC 4.75% 05/01/19 100,000 99,723
ND St Brd Hgher Ed Rev Hsg & Aux Facs NDSU (AMBAC) 4.25% 04/01/23 100,000 98,075
Puerto Rico Tour Edl Med & Env Facs Mendez Univ 5.375% 02/01/19 25,000 25,769
---------
969,234
---------
Hospital Revenue Bonds 12.3%
Burleigh Cnty ND Hlth Care MedCenter One (MBIA) 5.25% 05/01/12 325,000 337,327
Fargo ND Hlth Sys Rev Meritcare Ser A (MBIA) 5.375% 06/01/27 100,000 104,090
Fargo ND Hlth Sys Rev Meritcare Obl (FSA) 5.375% 06/01/15 65,000 69,553
Fargo ND Hlth Sys Rev Meritcare Obl (AMBAC) 4.125% 06/01/11 150,000 152,806
Fargo ND Hlth Sys Rev Meritcare Obl (AMBAC) 5.00% 06/01/22 45,000 45,859
Grand Forks ND Hlth Care Altru Hlth Obl Group (MBIA) 5.60% 08/15/17 20,000 20,846
Grand Forks ND Hlth Care Altru Hlth Obl Group 7.125% 08/15/24 20,000 21,377
Valley City ND Rev Ref Lutheran Hlth Ser A-5 (MBIA) 4.20% 01/01/06 25,000 25,000
Ward Cnty ND Hlth Care Facs Rev Trinity Obl Group - B 6.00% 07/01/10 25,000 25,883
---------
802,709
---------
Housing Revenue Bonds 15.7%
Fargo ND Multifam Rev Ref Hsg Trollwood Village 6.90% 09/01/13 25,000 24,935
ND St Hsg Fin Agy Home Mtg Ser B 3.50% 07/01/10 295,000 291,752
ND St Hsg Fin Agy Rev Home Mtg Prog C 4.90% 07/01/15 150,000 152,669
ND St Hsg Fin Agy Rev Hsg Fin Pg 4.60% 01/01/15 200,000 198,398
ND St Hsg Fin Agy Rev Hsg Fin Home MTG Fin-C 4.45% 07/01/16 200,000 196,804
ND St Hsg Fin Agy Hsg Fin Home MTG-C-RMK 6.10% 07/01/28 10,000 9,972
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg B 5.85% 07/01/28 5,000 4,984
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg D 5.05% 01/01/06 10,000 10,000
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.25% 07/01/18 55,000 54,779
*ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.55% 07/01/22 80,000 80,335
---------
1,024,628
---------
Transportation Revenue Bonds 2.4%
Guam Intl Arpt Auth Ser C (MBIA) 5.375% 10/01/17 150,000 159,969
---------
159,969
---------
Water Revenue Bonds 5.4%
ND St Water Comm Rev Water Dev & Mgmt Prg Ser A (MBIA) 5.50% 08/01/10 50,000 53,956
ND St Water Comm Rev Ref Prog Ser A (MBIA) 4.00% 08/01/13 150,000 151,385
South Central Reg Water Dist Burleigh Cnty Rev 5.00% 10/01/23 150,000 150,831
---------
356,172
---------
Other Revenue Bonds 11.2%
*Grand Forks ND Sales Tax Rev Dike Imp (AMBAC) 4.50% 09/01/10 50,000 51,816
Grand Forks ND Sales Tax Rev Dike Imp (AMBAC) 5.00% 09/01/17 145,000 153,120
Grand Forks ND Sales Tax Rev (MBIA) 3.50% 12/15/10 150,000 149,322
Grand Forks Sales Tax Rev Alerus Project (MBIA) 5.00% 12/15/21 115,000 122,650
ND St Muni Bond Bank Cap Fing Prog 6.00% 06/01/21 25,000 25,654
ND St Muni Bond Bank St Revolv Fund Prog - Ser A 4.90% 10/01/18 50,000 50,936
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev 6.00% 07/01/26 15,000 16,560
Puerto Rico Pub Fin Corp Ser A (MBIA) 5.375% 08/01/24 150,000 163,172
---------
733,230
---------
Total Municipal Bonds (cost $6,502,679) 6,527,731
SHORT-TERM INVESMENTS 2.1%
Federated Municipal Obligations Fund #852 140,000 140,000
----------
Total Short-Term Investments (cost: $140,000) 140,000
---------
TOTAL MARKET VALUE OF SECURITIES OWNED 101.9% (COST $6,642,679) 6,667,731
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES (1.9)% (127,208)
----------
NET ASSETS APPLICABLE TO 644,755 SHARES (0.001 PAR VALUE) OUTSTANDING - 100.00% $6,540,523
==========
*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
Schedule of Investments
December 30, 2005
Viking Large-Cap Value Fund
SHARES VALUE
Common Stocks 95.7%
Basic Materials 20.5%
ALCOA 3,400 $100,538
Anadarko Petroleum 600 56,850
Apache 800 54,816
BP Amoco Plc ADR 1,000 64,220
Bunge Limited 1,400 79,254
Dow Chemical 900 39,438
Chevron Texaco 1,600 90,832
Conoco Phillips 1,600 93,088
Exxon Mobil 2,000 112,340
Rio Tinto Plc ADR 300 54,837
--------
746,213
--------
Conglomerates 3.9%
Honeywell 1,900 70,775
ITT Industries 700 71,974
--------
142,749
--------
Consumer Goods 9.2%
Dean Foods* 1,900 71,554
Johnson Controls 1,000 72,910
Kimberly-Clark 1,900 113,335
Sealed Air* 800 44,936
Whirlpool 400 33,504
--------
336,239
--------
Financial Services 24.3%
American International Group 1,100 75,053
Bank of America 2,400 110,760
BB&T 800 33,528
Citigroup 2,800 135,884
Hartford Financial Services Group 900 77,301
Marsch & Mclennan 2,500 79,400
Merrill Lynch 800 54,184
Morgan Stanley 1,100 62,414
National City 2,100 70,497
U.S. Bancorp 2,400 71,736
Wachovia 700 37,002
Washington Mutual 1,700 73,950
--------
881,709
--------
Healthcare 5.2%
Health Management Associates 2,300 50,508
Merck 2,900 92,249
Triad Hospital* 1,200 47,076
--------
189,833
--------
Industrial Goods 3.9%
Ingersoll-Rand 1,900 76,703
Masco Corporation 2,100 63,399
--------
140,102
--------
Services 14.2%
Amerisource Bergen 1,000 41,400
BJs Wholesale* 2,000 59,120
Canadian Pacific 900 37,755
CSX 1,500 76,155
CVS Corp. 2,700 71,334
Disney 2,800 67,116
Union Pacific 1,100 88,561
Wal-Mart 1,600 74,880
--------
516,321
--------
Technology 7.8%
Hewlett-Packard 3,000 85,890
Intel 1,400 34,944
International Rectifier* 1,000 31,900
Microsoft 1,300 33,995
Nokia 2,000 36,600
Verizon Communications 2,000 60,240
--------
283,569
--------
Utilities 6.6%
American Electric Power 2,700 100,143
Dominion resources 900 69,480
Public Service Enterprise Group 1,100 71,467
--------
241,090
--------
Total Common Stocks (Cost $2,852,803) 3,477,825
SHORT-TERM INVESTMENTS 4.9%
Federated Prime Value Obligations #853 150,000 150,000
Federated Treasury Cash Reserves #125 28,000 28,000
----------
Total Short-Term Investments (cost: $178,000) 178,000
----------
TOTAL MARKET VALUE OF SECURITIES OWNED 100.6% (COST $3,030,803) 3,655,825
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES (0.6)% (20,183)
----------
NET ASSETS APPLICABLE TO 312,251 SHARES ($0.001 PAR VALUE)
OUTSTANDING 100.0% $3,635,642
==========
*Non-income producing investments.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Schedule of Investments
December 30, 2005
Viking Small-Cap Value Fund
SHARES VALUE
Common Stocks 93.6%
Basic Materials 11.0%
Grey Wolf, Inc.* 6,400 $49,472
Maverick Tube* 2,600 103,636
Newfield Exploration 1,200 60,084
Remington Oil & Gas* 1,000 36,500
Cinmarex Energy* 600 25,806
Albany International 2,000 64,220
--------
275,498
--------
Conglomerates 2.6%
Telefex 1,000 64,980
--------
64,980
--------
Consumer Goods 20.0%
AO Smith 2,400 84,240
AptarGroup 1,800 93,960
Borg Warner Automotive 1,300 78,819
Church & Dwight 2,450 80,924
Clarcor 400 11,884
Libbey 1,300 13,286
TC 2 Corp* 1,600 56,832
Tupperware 1,600 35,840
West Pharmaceutical Services 1,800 45,054
--------
500,839
--------
Financial 6.4%
Protective Life 1,900 83,163
Scottish Re Group 2,200 54,010
IPC Holdings 900 24,642
--------
161,815
--------
Healthcare 7.4%
Chattem* 700 25,473
Conmed* 1,900 44,954
PolyMedica 1,800 60,246
Prestige Brands Holdings* 4,400 55,000
--------
185,673
--------
Industrial Groups 12.4%
Albany International 2,000 72,320
Belden CDT 3,900 95,277
Granite Construction 700 25,137
Lafarge 800 44,016
RPM 4,300 74,691
--------
311,441
--------
Services 21.5%
Arkansas Best 2,300 100,464
Applebees 1,500 33,885
BJs Wholesale* 2,300 67,988
CBRL 1,300 45,695
Claires Stores 1,300 37,986
Landrys Seafood Restaurants 1,000 26,710
Nash Finch 1,300 33,124
Offshore Logistics* 1,400 40,880
Owens & Minor 1,400 25,410
OMI Corp 2,300 63,319
Performance Food Group* 700 19,859
Supervalue 500 16,240
YRC Worldwide* 600 26,766
--------
538,326
--------
Technology 6.5%
Bel Fuse, Inc. 1,600 50,880
InPhonic* 3,900 33,891
International Rectifier* 1,100 35,090
Technitrol 2,600 44,460
--------
164,321
--------
Utilities 5.8%
Piedmont Natural Gas 3,500 84,560
Questar 800 60,560
--------
145,120
--------
Total Common Stocks (Cost $1,924,210) 2,348,013
SHORT-TERM INVESTMENTS 10.7%
Federated Prime Value Obligations Fund #853 120,000 120,000
Federated Treasury Cash Reserves #125 120,000 120,000
First Western Collective Asset 28,000 28,000
----------
Total Short-Term Investments (Cost $268,000) 268,000
TOTAL MARKET VALUE OF SECURITIES OWNED 104.3% (COST $2,192,210) 2,616,013
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES (4.3)% (106,946)
----------
NET ASSETS APPLICABLE TO 175,241 SHARES ($0.001 PAR VALUE)
OUTSTANDING 100.0% $2,509,067
==========
*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 30, 2005
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
ASSETS:
Investments in securities:
Cost $12,212,353 $6,642,679 $3,030,803 $2,192,210
------------------------------------------------------------------------------------
Value 12,322,227 6,667,734 3,655,825 2,616,013
Cash 1,514 3,055 262 3,199
Receivable for fund shares sold 124 0 5,775 1,910
Receivable from manager 51,588 0 0 0
Prepaid assets 2,672 0 0 12,539
Security sales receivable 0 0 34,517 0
Interest & dividends receivable 135,598 71,219 7,909 3,088
------------------------------------------------------------------------------------
Total assets 12,513,723 6,743,047 3,670,989 2,637,482
------------------------------------------------------------------------------------
LIABILITIES:
Security purchases payable 0 174,185 0 0
Payable for shares redeemed 55,392 0 0 0
Distributions payable 39,362 20,592 26,376 119,341
Other accounts payable and
accrued expenses 10,587 7,744 8,971 9,074
------------------------------------------------------------------------------------
Total liabilities 105,341 202,521 35,347 128,415
------------------------------------------------------------------------------------
NET ASSETS 12,408,382 6,540,526 3,635,642 2,509,067
------------------------------------------------------------------------------------
COMPONENTS OF NET ASSETS AT December 30, 2005
Capital shares, $0.001 par value,
unlimited shares authorized 12,392,370 6,559,970 3,147,980 2,089,729
Net unrealized appreciation
(depreciation) 109,874 25,055 625,022 423,803
Accumulated net realized gain
(loss) on investments (93,862) (44,499) (137,360) 0
Undistributed net investment
income (loss) 0 0 0 (2,381)
------------------------------------------------------------------------------------
NET ASSETS $12,408,382 $6,540,526 $3,635,642 $2,509,067
------------------------------------------------------------------------------------
NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets, at value $12,408,382 $6,540,526 $3,635,642 $2,509,067
Shares outstanding 1,236,208 644,755 312,251 175,241
Net asset value per share $10.04 $10.14 $11.64 $14.32
Maximum offering price per share
(net asset value per share divided
by 96.25%, 96.25%, 94.75% and
94.75%, respectively) $10.43 $10.54 $12.28 $15.11
------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Operations
For the six months ended December 30, 2005
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
-------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $525,904 $265,544 $ 0 $ 0
Dividends 9,780 3,302 69,819 30,320
-------------------------------------------------------------------------------------
Total investment income 535,684 268,846 69,819 30,320
-------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 62,751 31,895 22,526 21,082
Administrative fees 12,550 6,379 3,218 2,108
Distribution fees 31,299 15,947 12,872 8,433
Transfer agent fees 3,502 1,859 3,812 3,259
Accounting fees 6,275 3,190 1,614 1,096
Professional fees 8,394 8,490 8,417 8,362
Insurance 3,204 1,498 782 450
Trustee fees 1,349 1,346 1,353 1,360
Registration fees 1,005 126 637 681
Custodian fees 3,468 3,469 3,415 3,420
Other 112 80 372 195
-------------------------------------------------------------------------------------
Total expenses 133,909 74,279 59,018 50,446
-------------------------------------------------------------------------------------
Less expenses waived or
reimbursed (65,270) (41,214) (15,575) (15,661)
------------------------------------------------------------------------------------
Net expenses 68,639 33,065 43,443 34,785
-------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 467,045 235,781 26,376 (4,465)
-------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss)
on investments (50,681) (16,197) 208,512 117,983
Net change in unrealized
appreciation (depreciation)
of investments (176,258) (75,800) (12,615) (23,903)
-------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (226,939) (91,997) 195,897 94,080
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $240,106 $143,784 $220,273 $89,615
-------------------------------------------------------------------------------------
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 30, 2005
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) $467,045 $235,781 $26,376 $(4,465)
Net realized gain (loss)
on investments (50,681) (16,197) 208,512 117,983
Net change in unrealized
appreciation (depreciation)
of investments (176,258) (75,800) (12,615) (23,903)
-------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations 240,106 143,784 222,273 89,615
-------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (467,045) (235,781) (26,376) 0
Net realized gains 0 0 0 (119,340)
-------------------------------------------------------------------------------------
Total distributions to
shareholders (467,045) (235,781) (26,376) (119,340)
-------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 2,390,572 712,016 880,163 982,915
Proceeds from reinvestment
of distributions 307,649 141,849 13,522 29,579
Cost of shares repurchased (2,268,804) (307,612) (542,077) (188,253)
-------------------------------------------------------------------------------------
Increase in net assets
derived from capital share
transactions 429,417 546,253 351,608 824,241
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS $202,478 $454,256 $547,505 $794,516
-------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period $12,205,904 $6,086,270 $3,088,137 $1,714,551
-------------------------------------------------------------------------------------
End of period $12,408,382 $6,540,526 $3,635,642 $2,509,067
-------------------------------------------------------------------------------------
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 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
01/01/05- 01/01/04- 01/01/03- 01/01/02- 01/01/01-
12/30/05 12/31/04 12/31/03 12/31/02 12/31/01
---------------------------------------------------------------
Net asset value, beginning of period $10.22 $10.20 $10.18 $9.74 $9.82
---------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.38 0.38 0.42 0.46 0.51
Net realized and unrealized gain
(loss) on investments (0.18) 0.02 0.02 0.48 (0.08)
---------------------------------------------------------------
Total from investment operations 0.20 0.40 0.44 0.94 0.43
---------------------------------------------------------------
Less distributions from:
Net investment income (0.38) (0.38) (0.42) (0.46) (0.51)
Net realized gains 0.00 0.00 0.00 (0.04) 0.00
---------------------------------------------------------------
Total distributions (0.38) (0.38) (0.42) (0.50) (0.51)
---------------------------------------------------------------
Net asset value, end of period $10.04 $10.22 $10.20 $10.18 $9.74
---------------------------------------------------------------
Total return1 1.96% 4.05% 4.45% 9.90% 4.48%
----------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $12,408 $12,206 $12,634 $8,513 $3,549
Ratio of net expenses to average net assets 0.55%2, 0.41%2 0.31%2 0.15%2 0.06%2
Ratio of net investment income to
average net assets 3.71% 3.78% 4.13% 4.58% 5.06%
Portfolio turnover rate 24.59% 26.55% 24.72% 40.09% 6.14%
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 Funds investment manager, has contractually
agreed to waive its fees or reimburse the Fund for its expenses through August
1, 2009 so that the Funds 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 $65270, $80,645, $81,954, $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 1.06%, 1.06%, 1.09%,
1.30%, and 1.60% 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
01/01/05- 01/01/04- 01/01/03- 01/01/02- 01/01/01-
12/30/05 12/31/04 12/31/03 12/31/02 12/31/01
----------------------------------------------------------------
Net asset value, beginning of period $10.29 $10.29 $10.25 $9.76 $9.95
----------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.38 0.38 0.42 0.47 0.51
Net realized and unrealized gain
(loss) on investments (0.15) 0.00 0.04 0.49 (0.19)
----------------------------------------------------------------
Total from investment operations 0.23 0.38 0.46 0.96 0.32
----------------------------------------------------------------
Less distributions from:
Net investment income (0.38) (0.38) (0.42) (0.47) (0.51)
Net realized gains 0.00 0.00 0.00 0.00 0.00
----------------------------------------------------------------
Total distributions (0.38) (0.38) (0.42) (0.47) (0.51)
----------------------------------------------------------------
Net asset value, end of period $10.14 $10.29 $10.29 $10.25 $9.76
----------------------------------------------------------------
Total return1 2.24% 3.76% 4.60% 10.07% 3.26%
Ratios/supplemental data:
Net assets, end of period (000s) $6,541 $6,086 $4,781 $2,059 $1,614
Ratio of net expenses to average net assets 0.52%2, 0.44%2 0.36%2 0.22%2 0.11%2
Ratio of net investment income to
average net assets 3.70% 3.68% 4.06% 4.73% 4.85%
Portfolio turnover rate 17.61% 22.36% 7.49% 27.95% 3.83%
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 Funds investment manager, has contractually
agreed to waive its fees or reimburse the Fund for its expenses through August
1, 2009 so that the Funds 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 $41,214, $40,375, $32,710, $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%, 1.18%, 1.32%, 1.90% and 2.57% 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
01/01/05- 01/01/04- 01/01/03- 01/01/02- 01/01/01-
12/30/05 12/31/04 12/31/03 12/31/02 12/31/01
----------------------------------------------------------------
Net asset value, beginning of period $10.88 $10.06 $8.20 $10.74 $11.08
----------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.08 0.05 0.06 0.06 0.04
Net realized and unrealized gain
(loss) on investments 0.76 0.82 1.86 (2.54) (0.34)
----------------------------------------------------------------
Total from investment operations 0.84 0.87 1.92 (2.48) (0.30)
----------------------------------------------------------------
Less distributions from:
Net investment income (0.08) (0.05) (0.06) (0.06) (0.04)
Net realized gains 0.00 0.00 0.00 0.00 0.00
----------------------------------------------------------------
Total distributions (0.08) (0.05) (0.06) (0.06) (0.04)
----------------------------------------------------------------
Net asset value, end of period $11.64 $10.88 $10.06 $8.20 $10.74
----------------------------------------------------------------
Total return1 7.76% 8.63% 23.42% (23.08)% (2.73)%
Ratios/supplemental data:
Net assets, end of period (000s) $3,636 $3,088 $2,745 $1,962 $2,143
Ratio of net expenses to average net assets 1.34%2 1.34%2 1.35%2 1.35%2 1.35%2
Ratio of net investment income to
average net assets 0.81% 0.47% 0.73% 0.71% 0.37%
Portfolio turnover rate 37.51% 25.70% 26.75% 36.52% 27.59%
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 Funds investment manager, has contractually
agreed to waive its fees or reimburse the Fund for its expenses through August
1, 2009 so that the Funds 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 $15,575, $14,372, $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
1.82%, 1.84%, 2.02%, 2.34% and 2.10% 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
01/01/05- 01/01/04- 01/01/03- 01/01/02- 05/03/011-
12/30/05 12/31/04 12/31/03 12/31/02 12/31/01
---------------------------------------------------------------
Net asset value, beginning of period $14.40 $12.43 $9.35 $10.26 $10.00
--------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (0.03) (0.06) (0.03) (0.03) 0.00
Net realized and unrealized gain
(loss) on investments 0.63 2.22 3.11 (0.88) 0.26
--------------------------------------------------
Total from investment operations 0.60 2.16 3.08 (0.91) 0.26
--------------------------------------------------
Less distributions from:
Net investment income 0.00 0.00 0.00 0.00 0.00
Net realized gains (0.68) (0.25) 0.00 0.00 0.00
--------------------------------------------------
Total distributions (0.68) (0.25) 0.00 0.00 0.00
--------------------------------------------------
Net asset value, end of period $14.32 $14.40 $12.43 $9.35 $10.26
--------------------------------------------------
Total return2 4.18% 17.86% 32.94% (8.87)% 2.60%
Ratios/supplemental data:
Net assets, end of period (000s) $2,509 $1,715 $1,250 $604 $321
Ratio of net expenses to average net assets 1.65%3 1.65%3 1.65%3 1.65%3 1.59%3,4
Ratio of net investment income to average
net assets (0.21)% (0.46)% (0.37)%4 (0.41)% (0.28)%4
Portfolio turnover rate 21.93% 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 Funds investment manager, has contractually
agreed to waive its fees or reimburse the Fund for its expenses through August
1, 2009 so that the Funds 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 $15,661, $7,623, $14,316,$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 2.39%, 2.63%, 3.16%,
5.24% and 5.67% respectively.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Notes to Financial Statements
December 30, 2005
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. The matrix
system gives consideration to the following: yields or prices of municipal
bonds of comparable quality, type of issue, coupon, maturity, rating, and
indications as to value from dealers and general market conditions.
Because the market value of municipal securities can only be established by
Agreement between parties in a sales transaction, and because of uncertainty
inherent in the valuation process, the fair values as determined may differ
from the value that would have been used had a ready market for the
securities existed.
Federal Income Taxes The Funds intend to qualify for treatment as a regulated
investment company under Subchapter M of the Internal Revenue Code, and the
funds intend to distribute investment company net taxable income and net
capital gains to shareholders. Therefore, no federal tax provision is
recorded.
Premiums and Discounts Premiums and discounts on municipal securities are
amortized for financial reporting purposes.
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 30, 2005 and December 31, 2004 were as follows:
Tax-Free Fund for Tax-Free Fund for Large-Cap Small-Cap
Montana North Dakota Value Fund Value Fund
---------------------------------------------------------------------------------
2005 2004 2005 2004 2005 2004 2005 2004
---------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income $467,045 $467,382 $235,781 $201,952 $0 $0 $0 $0
Ordinary income $0 $0 $0 $0 $26,376 $13,634 $0 $0
Long-term capital gain $0 $0 $0 $0 $0 $0 $119,340 $29,579
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 01/01/05 from 01/01/05 from 01/01/05 from 01/01/05
through 12/30/05 through 12/30/05 through 12/30/05 through 12/30/05
--------------------------------------------------------------------------
Shares sold 235,903 69,583 76,598 67,446
Shares issued in reinvestment
of distributions 30,381 13,863 1,243 2,054
Shares redeemed (224,752) (30,175) (49,537) (13,339)
--------------------------------------------------------------------------
Net Increase (Decrease) 41,532 53,271 28,304 56,161
--------------------------------------------------------------------------
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 Funds daily net
assets and 1.00% to the Small-Cap Funds daily net assets. The Tax-Free Fund
for Montana recognized $50,892 of investment advisory fees after a partial
waiver for the year ended December 30, 2005. On December 30, 2005,
the Tax-Free Fund for Montana had a payable to VFM for investment advisory
fees of $4,328. The Tax-Free Fund for North Dakota recognized $18,055 of
investment advisory fees after a partial waiver for the year ended
December 30, 2005. On December 30, 2005, the Tax-Free Fund for North Dakota
had a payable to VFM for investment advisory fees of $1,520. The Large-Cap
Fund recognized $22,526 of investment advisory fees after a partial waiver
for the year ended December 30, 2005. On December 30, 2005, the
Large-Cap Fund had a payable to VFM for investment advisory fees of $2,114.
The Small-Cap Fund recognized $19,589 of investment advisory fees after a
partial waiver for the year ended December 30, 2005. On December
30, 2005, the Small-Cap Fund had a payable to VFM for investment advisory fees
of $2,172. 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 Funds
daily net assets of up to $100 million and 0.35% to the Large-Cap Funds
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 Funds daily net assets until the net assets reach $5 million and
0.60% to the Small-Cap Funds 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. For the year ended December 30, 2005 the
Large-Cap Fund recognized $34 for transfer-agent services. After the
Fee waivers, no other fees for administrative services, portfolio accounting
And transfer agent services were recognized by the Funds. On December 30,
2005 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 $30, $21, $105 and $61, 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 Funds shares and for servicing shareholder accounts.
For the year ended December 30, 2005, the Tax-Free Fund for Montana recognized
$214, Large-Cap Value Fund recognized $5,907 and Small-Cap Fund recognized
$676 of 12b-1 fees after a partial waiver. On December 30, 2005, the Large-Cap
Fund and Small-Cap Fund had payables to VFD for 12b-1 fees of $517 and $129,
respectively. Tax-Free Fund for North Dakota recognized no 12b-1 fees after
the waiver.
For the year ending December 30, 2005, the net amounts of sales charges
deducted from the proceeds of sale of capital shares which were retained
by VFD as principal underwriter were $10,777, $1,757, $4,367 and $5,647
for the Tax-Free Fund for Montana, Tax-Free Fund for North Dakota, Large-Cap
Fund and Small-Cap Fund, respectively. On December 30, 2005 the Tax-Free Fund
for Montana, Tax-Free for North Dakota, Large-Cap Fund and Small-Cap Fund had
payables to VFD for underwriting fees of $540, $278, $92 and $245,
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 Funds
total operating expenses during this period will not exceed 0.85% of
average net assets on an annual basis, the Large-Cap Funds total operating
expenses during this period will not exceed 1.35% of average net assets on
an annual basis and the Small-Cap Funds total operating expenses during this
period will not exceed 1.65% of average net assets on an annual basis.
As of December 30, 2005, Tax-Free Fund for Montana had a receivable from VFM
For $51,588.
Certain officers and trustees of the Funds are also officers and governors
of VFM and VFD.
6. INCOME TAXES
No provision has been made for income taxes because each Funds 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
30, 2005, 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 $93,862, $44,499 and $137,360 respectively,
which may be carried over to offset future capital gains. Such losses start
to expire in 2008.
At December 30, 2005, 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 $12,212,353 $6,642,679 $3,030,803 $2,192,210
------------------------------------------------------------------------------------
Unrealized appreciation 165,590 68,165 671,653 479,796
Unrealized depreciation (55,716) (43,110) (46,631) (55,993)
------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) $109,874 $25,055 $625,022 $423,803
------------------------------------------------------------------------------------
7. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
six months ended June 30, 2005 were as follows:
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
-----------------------------------------------------------------------------------
Purchases $3,956,886 $1,064,189 $1,484,995 $1,149,925
Sales $3,094,176 $1,123,246 $1,215,536 $463,235
8. CREDIT AND MARKET RISK
The Tax-Free Funds concentrate their investments in securities mainly issued
by each specific states municipalities. The value of these investments may
be adversely affected by new legislation within the state, regional or local
economic conditions, and differing levels of supply and demand for municipal
bonds. Many municipalities insure repayment for their obligations. Although
bond insurance reduces the risk of loss due to default by an issuer, such
bonds remain subject to the risk that market value may fluctuate for other
reasons and there is no assurance that the insurance company will meet its
obligations. These securities have been identified in the Statement of
Investments.
VIKING MUTUAL FUNDS
ADVISORY CONTRACT APPROVAL DISCUSSION
(Unaudited)
In connection with each annual approval, the Board of Trustees is provided
with information to assist it in evaluating whether to approve the
continuance of the Agreements.
In considering whether to approve the Investment Management Agreement, the
Board, including the Independent Trustees, considered a number of factors
they believed to be relevant. These factors included the following: (1) the
resources, experience and expertise of the adviser; (2) the performance of
the Funds and the adviser; (3) the financial capability of the adviser; (4)
the compliance history of the adviser; (5) the performance of the funds in
comparison to similarly managed funds; (6) the amount of the contractual
advisory fee in comparison to similarly managed funds; (7) the profitability
of the adviser; (8) the extent of any economies of scale; and (9) the e
existence of any collateral benefits realized by the adviser and by the Funds.
On the basis of the information provided to the Trustees for their review,
the following conclusions were reached: (1) a comparison of the net operating
expenses for the Viking Tax-Free Fund for Montana and for the Viking Tax-Free
Fund for North Dakota to other funds of similar objective and size reflected
that the Viking Tax-Free Funds have similar expense structures to the other
funds; (2) a comparison of the net operating expense for the Viking Large-Cap
Value Fund to other funds of similar objective and size reflect that the
Large-Cap Value Fund has a similar expense structure to the other funds; (3)
a comparison of the net operating expense for the Viking Small-Cap Value Fund
to other funds of similar objective and size reflect that the Small-Cap
Value Fund has a similar expense structure to the other funds; (4) a
comparison of the management fees charged by the Adviser seemed reasonable
to the Trustees when compared to similar funds in objective and size; (5)
upon a review of the total return history and category rankings of each
Fund, the Trustees deemed the performance of each Fund to be satisfactory;
(6) the overall nature and quality of the services provided by the Adviser
had historically been, and continued to be, satisfactory to the Trustees;
(7) the Trustees discussed the fact that the Adviser does not benefit from
economies of scale due to its relationship to the Funds as the Viking Funds
are relatively small and are its only clients; (8) the Trustees discussed
the profitability issues regarding the Adviser and felt comfortable with
the direction of the Adviser and its prospects for future profitability.
In reviewing the Sub-Advisory Agreements, the Trustees considered the
proposed sub-advisory fees compared to the level of sub-advisory fees
paid by other similar funds, past performance and the nature and quality
of the services provided. On the basis of the information provided for
their review, the Trustees reached the following conclusions: (1) the
Trustees felt the overall nature and quality of services of Fox Asset
Management, LLC (Fox) are satisfactory; (2) Fox has a good long-term
track record in managing value accounts; (3) the sub-advisory fees paid to
Fox are fair and reasonable in light of the sub-advisory services expected
to be provided and the comparability of the sub-advisory fees paid by
comparable mutual funds and separately managed accounts; (4) the investment
performance of Fox has lagged the last couple of years but appears to be
improving during the last year and year-to-date; (5) the Trustees are
atisfied with Fox regarding its staffing and capabilities to manage the
Value funds, including the retention of personnel with significant
portfolio management experience.
VIKING MUTUAL FUNDS
Miscellaneous Information (Unaudited)
December 30, 2005
Your Funds 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 Funds 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 Funds 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 07/01/05 Value 12/30/05 Period1 07/01/05-12/30/05
Viking Tax-Free Fund for Montana
Actual $1,000.00 $1,003.14 $2.762
Hypothetical (5% return before expenses) $1,000.00 $1,022.31 $2.792
Viking Tax-Free Fund for North Dakota
Actual $1,000.00 $1,001.11 $2.613
Hypothetical (5% return before expenses) $1,000.00 $1,022.45 $2.643
Viking Large-Cap Value Fund
Actual $1,000.00 $1,028.07 $6.86
Hypothetical (5% return before expenses) $1,000.00 $1,018.30 $6.83
Viking Small-Cap Value Fund
Actual $1,000.00 $1,032.34 $8.41
Hypothetical (5% return before expenses) $1,000.00 $1,016.80 $8.34
1Expenses are equal to the annualized expense ratio for each Fund (Viking
Tax-Free Fund for Montana: 0.52%; Viking Tax-Free Fund for North Dakota:
0.52%; 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 181/365 to reflect the one-half year period.
2Expenses for the Viking Tax-Free Fund for Montana have increased since the
Funds most recent fiscal half-year. Had the current expense ratio of the
Fund, 0.55%, been in place throughout the entire most recent fiscal half-year,
the Actual Expenses Paid During Period would have been $2.75 and the
Hypothetical Expenses Paid During Period would have been $2.76.
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 SECs 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 SECs website at http://www.sec.gov. The Funds Form N-Q and N-CSR(S)
may be reviewed and copied at the SECs 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 30, 2005
NAME AND PRINCIPAL OCCUPATION(S)
ADDRESS AGE POSITION(S) HELD DURING PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------------------------
Shirley R. Martz 81 Trustee Retired CPA (1989-pres.); Trustee, Viking
116 1st St SW Suite C Mutual Funds (1999-pres.); Principal
Minot, ND 58701 shareholder and employee of Brady, Martz
& Associates and its predecessor (1948-
1989).
Shannon D. Radke 39 Trustee President, Viking Fund Management, LLC
116 1st St SW Suite C 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 68 Trustee Retired; Trustee, Viking Mutual Funds
116 1st St SW Suite C (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 39 Trustee General Manager, Holiday Inn Riverside
116 1st St SW Suite C (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
116 1st St SW Suite C
Minot, ND 58701
BOARD OF TRUSTEES
Shirley R. Martz
Shannon D. Radke
Mike Timm
Peter C. Zimmerman
INVESTMENT MANAGER
Viking Fund Management, LLC
116 1st St SW Suite C
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
116 1st St SW Suite C
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-NCSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Viking Mutual Funds 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 registrants 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 registrants
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
were $41,600 for the year ended December 30, 2005, and $18,800 for the year
ended December 31, 2004.
(b) Audit-Related Fees
Not Applicable
(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
$2000 for the year ended December 30, 2005, and $2000 for the year ended
December 31 2004. The aggregate tax fees BMA billed to registrants investment
adviser and any entity controlling, controlled by, or under common control
with registrants investment adviser for tax compliance, tax advice, and tax
planning services were $0 for the year ended December 30, 2005, and
$860 for the year ended December 31 2004.
(d) All Other Fees
Not Applicable
(e) (1) Not Applicable
(2) 100% of the applicable services for the registrant described in
paragraph (c) of this item were approved by the audit committee.
(f) Not Applicable
(g) The aggregate non-audit fees billed by BMA to registrant and to
registrants investment adviser and any entity controlling, controlled by, or
under common control with registrants investment adviser for the fiscal years
ending December 30, 2005, and December 31, 2004, were $2000 and $2860.
(h) The registrants audit committee considered and determined that the
provision of nonaudit services that were rendered to the registrants investment
advisor and any entity controlling, controlled by, or under common control with
the investment advisor that provides ongoing services to the registrant that
were not preapproved pursuant to paragraph (c)(7)(ii) of rule 2 01 of
regulation S X were not incompatible with maintaining the principal accountants
independence.
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) Disclosure Controls and Procedures. The Principal Executive and
Financial Officers concluded that the Registrants Disclosure Controls
and Procedures are effective based on their evaluation of the Disclosure
Controls and Procedures as of a date within 90 days of the filing date of this
report.
(b) Internal Controls. The registrant has modified its internal
controls over financial reporting, including additional separation of
responsibilities between accounting and reconciliation and between
accounting and authorized signatory functions.
ITEM 12 EXHIBITS.
(a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and
Attached as an exhibit.
(a)(2) The certifications required by rule 30(a)2(a) under the Investment
Company Act of 1940 is filed and attached as an exhibit.
(b)(1) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of
1940. Certification of principal executive officer and principal
financial officer as required by Section 906 of the Sarbanes-Oxley
Act of 2002.
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
By: /s/ SHANNON D. RADKE
-------------------------------
Shannon D. Radke
Principal Financial Officer
Date: March 10, 2006