UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-09277
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VIKING MUTUAL FUNDS
-------------------
(Exact name of registrant as specified in charter)
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: 12/31/06
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ITEM 1. REPORTS TO STOCKHOLDERS.
SHAREHOLDER LETTER
Dear Fellow Shareholder:
It is a pleasure to bring you the Viking Mutual Funds Annual Report for the
year ended December 31, 2006.
The Federal Reserve raised rates again as the first half of 2006 came to a
close, but Wall Street cheered as some saw hints of a less aggressive central
bank. Fed policy makers boosted their target for the federal funds rate to
5.25% June 29, in an effort to curb inflation. The quarter percentage point
hike was the Feds 17th straight rate increase since June 2004. The funds
rate, which was at a 46 year low of 1% at the start of the campaign, ended
the second quarter at the highest level in more than five years. Many
investors were worried that in an effort to ward off inflation, the Fed would
raise rates too much and choke off economic growth and corporate profits.
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 statement accompanying the rate hike, however,
contained some softer language which suggested that an end to the central
banks two year old rate hiking campaign was in sight. It triggered a surge
in stocks. Although the economy rebounded from its Hurricane Katrina related
pause with GDP expanding at an upwardly revised 5.6% in Q1 2006, the fastest
pace in three years, we left the second quarter with evidence of a slower
pace to economic activity and a growing consensus that the Fed was about
done. In the third quarter, the Fed did end its run of ratcheting up the
Federal Funds rate as economic growth continued to moderate from its quite
strong pace earlier in the year. The slowdown could be attributed to the
cooling housing market and the impact of previous Fed rate hikes. The
largest slowdown was in housing, which should not come as a surprise given
the Feds two year campaign of interest rate hikes and endless press
coverage. Economic growth appeared to stabilize in the fourth quarter as the
Federal Reserve continued to operate in neutral with no change in Fed Funds.
The economy achieved a balance where weakness in some sectors (notably
housing) has been offset by strength in others.
Equity markets around the world posted strong gains in the quarter ended
March 31, 2006. The economy picked up pace from the weak performance in the
Katrina depressed fourth quarter of 2005. The strength of equity prices was
surprising, however, in the face of continued Fed tightening. For the
quarter, the S&P 500 rose 4.2% while small-cap stocks outperformed their
large-cap brethren. The second quarter began with fresh evidence in the GDP
report that the economy was expanding briskly and a solemn view that the Fed
was not done tightening. In contrast, the second quarter ended with evidence
of a slower pace to economic activity and a growing consensus that the Fed
was about done. The major indexes closed out the quarter on a mixed note.
The Dow Industrials gained 0.4%, the Nasdaq lost 7.20% and the S&P 500 lost
1.4%. The NASDAQ and the S&P both broke strings of four straight quarterly
gains, while the Dow extended its winning streak to four quarters. The
equity markets performed exceedingly well in the third quarter as fears of an
overheating economy, and an accordingly active vigilant Federal Reserve,
abated. As investors perceived the Fed to be on-hold, they reacted
vigorously by buying securities. Stocks scored their biggest third quarter
advance in nine years as large-cap stocks led the way with the S&P 500
jumping 5.7%. The performance of the equity markets in the fourth quarter
was nothing short of extraordinary with the overall market rising nearly 7%.
Clearly, equity investors approved of the apparently smooth transition to a
slower, much more balanced U.S. economic environment, marked by good growth
and minimal inflation. Stocks finished the full year with all three major
market averages booking their best performance since 2003. The Dow Jones
gained 17.2% for the year, the S&P 500 index rose 15.8% and the NASDAQ
advanced 10.4%.
The fixed income markets declined in the first quarter as the U.S. economy
bounced back from Hurricane Katrina with strong growth and the Fed continued
tightening. Bonds took a further turn for the worse in the second quarter as
the bond vigilantes sold bonds and pushed rates higher as their fear of
accelerating inflation was exacerbated by the strong Q1 GDP report. In a
stark reversal of the persistent down trend seen in prior quarters, prices
for fixed income securities rallied significantly in the third quarter. The
strength was driven by increasingly visible signs of a decelerating U.S.
economy. After a number of quarters in which interest rates fluctuated
significantly, rates settled down considerably in the fourth quarter. The
U.S. central banks careful handling of the domestic economy against a
backdrop of inflation and housing industry concerns led to respectable bond
performance in 2006.
In this type of market environment, it continues to be highly important to
seek the help of a professional when investing. Making the right decisions
in these markets can be very difficult and an experienced investment
professional can address your concerns about the market and provide the
guidance needed to help you diversify your investments and stay focused on
the long term.
Fund reports containing a discussion of individual Fund performance as well
as the Funds portfolios and financial statements are presented within for
your review.
We thank you for your confidence in Viking Mutual Funds. Our interests are
closely aligned with those of our shareholders because our money is invested
alongside their own. As always we will do our best to make sure your
experience as a shareholder is a rewarding one.
Sincerely,
/s/Shannon D. Radke
Shannon D. Radke
President
Viking Mutual Funds
VIKING TAX-FREE FUND FOR MONTANA
By: Shannon D. Radke
President/Portfolio Manager
Viking Tax-Free Fund for Montana provided a total return of 4.15% (at net
asset value with distributions reinvested) for the year ended
December 31, 2006.
The fixed income markets declined in the first quarter as the U.S. economy
rebounded from its Hurricane Katrina related pause with strong growth and the
Fed continued tightening. As a result, the Funds share price declined
slightly in the first quarter. Bonds took a further turn for the worse in the
second quarter as the bond vigilantes sold bonds and pushed rates higher as
their fear of accelerating inflation was exacerbated by the strong Q1 GDP
report. This sent the Funds share price down moderately for the second
quarter. In a stark reversal of the persistent down trend seen in prior
quarters, prices for fixed income securities rallied significantly in the third
quarter as did the Funds share price. The strength was driven by
increasingly visible signs of a decelerating U.S. economy. In addition, the
Federal Reserve ended its run of ratcheting up the Federal Funds rate at every
FOMC meeting. After a number of quarters in which interest rates fluctuated
significantly, rates settled down considerably in the fourth quarter as U.S.
economic growth seems to have stabilized. The Funds share price was stable
in the final quarter as well and ended 2006 up slightly.
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 31, 2006 (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
September 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
January 31, 2006 $12,865 $13,469 $14,475
February 28, 2006 $12,889 $13,495 $14,572
March 31, 2006 $12,845 $13,449 $14,471
April 30, 2006 $12,819 $13,422 $14,467
May 31, 2006 $12,916 $13,524 $14,532
June 30, 2006 $12,802 $13,404 $14,477
July 31, 2006 $12,986 $13,596 $14,649
August 31, 2006 $13,133 $13,750 $14,866
September 30, 2006 $13,225 $13,847 $14,970
October 31, 2006 $13,245 $13,867 $15,064
November 30, 2006 $13,339 $13,966 $15,189
December 31, 2006 $13,328 $13,954 $15,136
The chart assumes $10,000 invested on August 3, 1999 and includes the
effect of a 4.50% front-end sales charge, as applicable and the
reinvestment of all dividends and capital gains. It is intended to
give you an ideal of how your fund performed compared to the index over
the period 08/03/99-12/31/06. 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 31, 2006 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge 4.15% 3.38% 4.87% 4.60%
Including Sales Charge 0.25% 1.81% 3.90% 3.95%
Returns reflect reinvestment of distributions and the effect of 4.50% front-
end sales charge, as applicable. The current
maximum sales charge is 3.75. Therefore, the total returns,
for the three year, five year and lifetime would have been higher had the
current maximum sales charge been in effect for
those 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 4.77%
(at net asset value with distributions reinvested) for the year ended
December 31, 2006.
The fixed income markets declined in the first quarter as the U.S. economy
rebounded from its Hurricane Katrina related pause with strong growth and the
Fed continued tightening. As a result, the Funds share price declined
slightly in the first quarter. Bonds took a further turn for the worse in
the second quarter as the bond vigilantes sold bonds and pushed rates higher
as their fear of accelerating inflation was exacerbated by the strong Q1 GDP
report. This sent the Funds share price down moderately for the second
quarter. In a stark reversal of the persistent down trend seen in prior
quarters, prices for fixed income securities rallied significantly in the
third quarter as did the Funds share price. The strength was driven by
increasingly visible signs of a decelerating U.S. economy. In addition, the
Federal Reserve ended its run of ratcheting up the Federal Funds rate at
every FOMC meeting. After a number of quarters in which interest rates
fluctuated significantly, rates settled down considerably in the fourth
quarter as U.S. economic growth seems to have stabilized. The Funds share
price was stable in the final quarter as well and ended 2006 up modestly.
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 31, 2006 (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 $13,537 $14,436
January 31, 2006 $13,009 $13,621 $14,475
February 28, 2006 $13,021 $13,633 $14,572
March 31, 2006 $12,990 $13,600 $14,471
April 30, 2006 $12,938 $13,546 $14,467
May 31, 2006 $13,036 $13,649 $14,532
June 30, 2006 $12,935 $13,543 $14,477
July 31, 2006 $13,149 $13,767 $14,649
August 31, 2006 $13,323 $13,949 $14,866
September 30, 2006 $13,429 $14,060 $14,970
October 31, 2006 $13,448 $14,080 $15,064
November 30, 2006 $13,556 $14,193 $15,189
December 31, 2006 $13,546 $14,182 $15,136
The chart assumes $10,000 invested on August 3, 1999 and includes the
effect of a 4.50% front-end sales charge, as applicable and the
reinvestment of all dividends and capital gains. It is intended to
give you an ideal of how your fund performed compared to the index over
the period 08/03/99-12/31/06. 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 31, 2006 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge 4.77% 3.49% 5.06% 4.83%
Including Sales Charge 0.81% 1.92% 4.09% 4.18%
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,
for the three year, five year, and lifetime 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 15.58% (at net asset value)
for the year ended December 31, 2006.
Equity markets around the world posted strong gains in the quarter ended
March 31, 2006. The dollar was relatively stable and the economy clearly
picked-up pace from the weak performance in the Katrina depressed fourth
quarter of 2005. The strength of equity prices was surprising in the face of
continued Fed tightening. The total return of the broad market, as measured
by the S&P 500 rose 4.2% in the quarter, the strongest since the first
quarter of 2001, and the Russell 1000 Value benchmark was even stronger,
rising 5.9%. The Fund rose 4.5% during the first quarter. Leading the list
of top performers was International Rectifier Corp, a supplier of electronic
parts. Two other technology names, Hewlett Packard and Honeywell, also rose
sharply in the quarter. Underperformers included Intel, and utility stocks,
led by Dominion Resources and American Electric Power.
The second quarter began with fresh evidence in the GDP report that the
economy was expanding briskly and a solemn view that the Fed was not done
tightening. In contrast, we left the second quarter with evidence of a
slower pace to economic activity and a growing consensus that the Fed was
just about done tightening. Although the Fund posted a positive return of
0.7%, the second quarter was generally unkind to financial assets with the
S&P 500 off 1.44%.
The equity markets performed exceedingly well in the third quarter as fears
of an overheating economy, and an accordingly active vigilant Federal Reserve
abated. As investors perceived the Fed to be on-hold, they reacted
vigorously by buying securities, sending the S&P 500 up 5.7%. The defensive
nature of our strategy and our low beta generally cause the Fund to lag
strong market advances. This was the situation in the third quarter. In
addition, we were overweight in economically sensitive stocks such as energy,
basic materials and processing, which didnt perform well as market sentiment
began to reflect a sharp downturn in economic activity.
The performance of the equity markets in the fourth quarter was nothing short
of extraordinary with the overall market and the Fund rising nearly 7%, about
what most market strategists had expected for the entire year. For all of
2006, stocks finished strong with all major stock averages booking their best
performance since 2003. The Dow Jones gained 17.2% for the year, while the
S&P 500 rose 15.8% and the NASDAQ advanced 10.4%.
As bottom up, fundamentally-driven stock pickers, we do not try to predict
broader stock market performance. That stated, we believe that a solid
economic backdrop of low unemployment, rising wages, strong corporate balance
sheets, robust profitability and reasonable equity valuations are all
supportive of a rising stock market. As always, we remain steadfast in our
commitment to finding higher quality companies, with strong balance sheets
and cash flow, selling at discount valuations. Long-term total return and
capital preservation remains the investment objective of the Fund.
VIKING LARGE-CAP VALUE FUND
Growth of a $10,000 Investment
August 3, 1999 through December 31, 2006 (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
January 31, 2006 $11,771 $12,418 $14,155
February 28, 2006 $11,810 $12,460 $14,241
March 31, 2006 $11,968 $12,626 $14,434
April 30, 2006 $12,283 $12,958 $14,801
May 31, 2006 $12,046 $12,709 $14,427
June 30, 2006 $12,046 $12,709 $14,519
July 31, 2006 $12,086 $12,750 $14,872
August 31, 2006 $12,204 $12,875 $15,121
September 30, 2006 $12,411 $13,093 $15,423
October 31, 2006 $12,775 $13,477 $15,927
November 30, 2006 $13,070 $13,789 $16,291
December 31, 2006 $13,241 $13,969 $16,657
The chart assumes $10,000 invested on August 3, 1999 and includes the
effect of a 5.25% front-end sales charge, as applicable and the
reinvestment of all dividends and capital gains. It is intended to
give you an ideal of how your fund performed compared to the index over
the period 08/03/99-12/31/06. 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. Past performance does not guarantee future
results.
Average Annual Total Returns Lifetime
Through December 31, 2006 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge 15.58% 10.60% 5.14% 4.61%
Including Sales Charge 9.56% 8.62% 4.00% 3.86%
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 total return of 14.02% (at net asset
value) for the year ended December 31, 2006.
Equity markets around the world posted strong gains in the quarter ended
March 31, 2006. Small-Cap stocks continued their impressive performance
during the quarter, with the Russell 2000 Index surging nearly 14%. The
small-cap indexs strong advance was led by lower quality stocks. Our long-
standing focus on investing in higher quality, financially sound companies
typically lags in lower quality advances. Nonetheless, the Fund advanced 9%
for the quarter. Our underweight in the underperforming financial services
sector contributed to relative performance. Stock selection in producer
durables, which continued to benefit from strong industrial demand also
contributed to performance. Detracting from performance during the quarter
included our overweight in the underperforming auto and transportation
sector, as well as stock selection in the energy-related and technology
sectors.
Small-cap stocks ended lower along with most major domestic market indices in
the second quarter of 2006, as the Russell 2000 index declined 5%, and the
Russell 2000 Value Index declined 2.7%. While small-cap stocks could not
escape the global market weakness during the period, they continued their six
plus year streak of out performance relative to their larger-cap brethren.
Our long standing strategy of investing in higher quality financially sound
companies was rewarded during the quarter as the Fund declined only 1.4%.
Our underweighting in the technology sector and overweighting in the autos
and transportation sector contributed to favorable relative performance.
Stock selection in the consumer discretionary sector, as well as our long
standing underweight (and adverse stock selection) in financials, detracted
from performance during the quarter.
Small-Cap stocks along with most major domestic market indices, ended higher
in the third quarter, with the Russell 2000 Index increasing 0.4%, and the
Russell 2000 Value Index advancing 2.6%. The Fund inched up 0.1%. Helping
performance in the third quarter was our overweight in the healthcare and
consumer staples sectors. Investors sought out the relative safety and
predictability of defensive sectors as the economy began to slow. A
combination of overweight positions and adverse stock selection in energy and
transportation sectors detracted from performance.
Small-Cap stocks, along with all the other major domestic equity market
indices, posted a strong fourth quarter, with the Russell 2000 Index
increasing 8.9%. The Fund returned just over 6% as our long standing focus
on higher quality companies hurt relative performance during the period.
Lower quality stocks, which we define as those with S&P Quality Rankings of B
or lower, often outperform higher quality stocks in a rapidly-rising market
similar to the fourth quarter. We have always favored high quality
companies, those with dominant and growing business franchises, strong
balance sheets, and predictable cash flows; unfortunately, companies with
these characteristics lagged the broader small-cap market in 2006.
We will not change our process to adapt to current investment trends, and
continue to believe that investing in undervalued and high quality companies
will outperform the market with less risk over the long term. We also
believe that the potential for decelerating earnings per share (EPS) growth
in 2007 should help refocus investors toward higher quality companies.
VIKING SMALL-CAP VALUE FUND
Growth of a $10,000 Investment
May 3, 1999 through December 31, 2006 (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
January 31, 2006 $15,516 $16,370 $19,338
February 28, 2006 $15,203 $16,039 $19,337
March 31, 2006 $15,769 $16,636 $20,274
April 30, 2006 $15,931 $16,807 $20,328
May 31, 2006 $15,213 $16,050 $19,486
June 30, 2006 $15,547 $16,402 $19,725
July 31, 2006 $15,193 $16,029 $19,452
August 31, 2006 $15,456 $16,306 $20,033
September 30, 2006 $15,557 $16,412 $20,229
October 31, 2006 $15,870 $16,743 $21,258
November 30, 2006 $16,365 $17,265 $21,865
December 31, 2006 $16,494 $17,401 $22,055
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 idea of how your fund performed compared to the index over
the period 05/03/01-12/31/06. 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. Past performance does not guarantee future
results.
Average Annual Total Returns Lifetime
Through December 31, 2006 One-Year Three-Year Five Year (Est. 5/3/01)
- --------------------------------------------------------------------------------
Excluding Sales Charge 14.02% 11.87% 11.14% 10.28%
Including Sales Charge 8.06% 9.87% 9.95% 9.24%
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 MUTUAL FUNDS
Schedule of Investments
December 31, 2006
Viking Tax-Free Fund for Montana
PRINCIPAL MARKET
AMOUNT VALUE
MUNICIPAL BONDS 99.8%
General Obligations 8.1%
Bozeman MT Ser A 4.95% 07/01/20 170,000 $179,449
Puerto Rico Mun Fin Agy Ser A (FSA) 5.50% 08/01/23 250,000 263,730
Ravalli Cnty MT Sch Dist No. 07 Victor (FSA) 4.00% 07/01/26 150,000 147,246
Ravalli Cnty MT Sch Dist No. 003 Hamilton (FSA) 4.65% 07/01/09 105,000 106,830
Yellowstone & Carbon Cntys Elem Sch Dist (MBIA) 4.25% 07/01/24 200,000 203,322
---------
900,577
---------
Continuing Care Revenue Bonds 0.6%
MT St Hlth Facs Auth Rev Hillcrest Sr Ctr 6.90% 06/01/15 30,000 33,310
MT St Hlth Facs Auth Rev Hillcrest Sr Ctr 7.25% 06/01/25 35,000 39,218
---------
72,528
---------
Higher Education Revenue Bonds 14.3%
MT St Hgher Ed Stud Assist Corp Rev Ser B 6.40% 12/01/32 415,000 436,792
MT St Brd Regents (MSU) Rev Facs Imp-E (AMBAC) 5.00% 11/15/21 80,000 81,912
MT Brd Regents (MSU) Hghr Ed Rev (AMBAC) 4.30% 11/15/19 200,000 202,362
MT Brd Regents (U of M) Hgher Ed Rev Ser F (MBIA) 5.75% 05/15/24 135,000 144,721
Puerto Rico Tour Edl Med & Env Facs Mendez Univ 5.375% 02/01/19 75,000 77,363
*Univ of MT Revs Facs Acq & Imp Ser C (MBIA) 5.00% 11/15/17 140,000 147,834
Univ of MT Revs Higher Ed Facs Imp Ser D (MBIA) 5.375% 05/15/15 75,000 80,460
Univ of MT Revs Higher Ed Facs Imp Ser D (MBIA) 5.375% 05/15/19 370,000 412,298
---------
1,583,742
---------
Hospital Revenue Bonds 19.5%
MT Fac Fin Auth Providence Svcs (MBIA) 4.60% 12/01/18 80,000 83,310
MT Fac Fin Auth Providence Svcs (MBIA) 5.00% 12/01/18 270,000 287,658
MT Fac Fin Auth Providence Svcs (MBIA) 4.80% 12/01/20 105,000 110,874
MT Fac Fin Auth Providence Svcs (MBIA) 4.60% 12/01/18 70,000 72,494
MT Fac Fin Auth Providence Svcs (MBIA) 5.00% 12/01/18 230,000 242,855
MT Fac Fin Auth Providence Svcs (MBIA) 4.80% 12/01/20 95,000 99,063
MT Hlth Fac Fin Auth Rev Mstr Ln Program Comm Med Ctr 5.20% 12/01/21 145,000 150,090
*MT Hlth Fac Auth Sisters Chrty Leavenworth (MBIA) 5.125% 12/01/18 200,000 206,236
MT Hlth Fac Auth Sisters Chrty Leavenworth (MBIA) 5.00% 12/01/24 515,000 530,368
MT St Hlth Fac Auth Rev Comm Med Ctr 6.375% 06/01/18 370,000 373,215
---------
2,156,163
---------
Housing Revenue Bonds 14.7%
*MT St Brd Hsg Sngle Fam Mtg Ser A-2 5.75% 06/01/30 70,000 70,018
*MT St Brd Hsg Sngle Fam Ser A-2 5.50% 12/01/20 80,000 79,592
*MT St Brd Hsg Sngle Fam Ser A-2 5.60% 12/01/23 65,000 64,692
MT St Brd Hsg Sngle Fam Ser A-2 5.20% 12/01/22 115,000 116,387
MT St Brd Hsg Sngle Fam Ser B-2 4.85% 12/01/15 95,000 95,767
MT St Brd Hsg Sngle Fam Mtg Ser B-2 5.55% 06/01/33 160,000 161,595
MT St Brd Hsg Sngle Fam Mtg Ser C2 4.85% 12/01/26 200,000 201,868
MT St Brd Hsg Sngle Fam Prog Ser B 4.55% 12/01/11 345,000 350,768
MT St Brd Hsg Sngle Fam Mtg Ser A 4.30% 06/01/12 240,000 242,131
MT St Brd Hsg Sngle Fam Mtg Ser A 4.30% 12/01/12 240,000 241,865
---------
1,624,683
---------
Psychiatric and Substance Abuse Hospital Bonds 16.6%
MT Fac Fin Auth Developmental Ctr Prog 4.50% 06/01/16 250,000 256,428
MT Fac Fin Auth Developmental Ctr Prog 4.75% 06/01/19 170,000 174,641
MT Fac Fin Auth Childrens Home 4.55% 01/01/17 250,000 256,560
MT Fac Fin Auth Rev Cmnty Counsl & Corectnl Svcs (CIFG) 4.50% 10/01/23 340,000 350,139
MT Fac Fin Auth Boyd Andrew Cmnty Svcs Proj (CIFG) 4.375% 10/01/20 285,000 286,596
MT St Hlth Fac Auth Hlth Care Rev State Hosp (AMBAC) 5.00% 06/01/22 500,000 518,120
---------
1,842,484
---------
Transportation Revenue Bonds 4.7%
MT St Dept Trans Rev Grant Antic Hwy 93 (MBIA) 4.00% 06/01/14 250,000 252,635
Puerto Rico Hwy & Trans Auth Rev Ser G (FGIC) 5.25% 07/01/20 250,000 268,660
---------
521,295
---------
Utility Revenue Bonds 9.6%
Forsyth MT Poll Ctl Rev Ref Puget Sound Energy (AMBAC) 5.00% 03/01/31 190,000 201,047
Forsyth MT Poll Ctl Rev Northwestern Corp (AMBAC) 4.65% 08/01/23 850,000 863,098
---------
1,064,145
---------
Water Revenue Bonds 0.9%
Great Falls MT Wtr Sys Rev Ref Ser A (AMBAC) 3.85% 08/01/08 100,000 100,544
---------
100,544
---------
Other Revenue Bonds 10.8%
Missoula MT Spl Impt Dists No 540 4.60% 07/01/24 100,000 100,099
Missoula MT Spl Impt Dists No 540 4.60% 07/01/25 105,000 105,107
Missoula Tax Increment Urban Renewal (RADIAN) 5.125% 07/01/26 125,000 131,236
MT Fac Fin Auth Prerelease Ctr Rev (XLCA) 5.25% 10/01/20 300,000 326,700
MT St Brd Invt Refunded 1996 Pay Tax (MBIA) 6.875% 06/01/20 105,000 109,980
MT St Brd Invt Refunded 1996 Pay Tax (MBIA) 6.875% 06/01/20 105,000 109,784
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev 6.00% 07/01/26 195,000 210,122
Puerto Rico Comwlth Inf Fin Auth Ser A (AMBAC) 5.25% 07/01/10 100,000 103,226
---------
1,196,254
----------
Total Municipal Bonds (cost $10,885,140) 11,062,415
SHORT-TERM INVESMENTS 0.0%
Total Short-Term Investments (cost: $0) 0
---------
TOTAL MARKET VALUE OF SECURITIES OWNED 99.8% (COST $10,885,140) 11,062,415
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.2% 21,625
-----------
NET ASSETS APPLICABLE TO 1,102,311 SHARES (0.001 PAR VALUE) OUTSTANDING - 100.0% $11,084,040
===========
*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
XLCA Insured by XL Capital Assurance
RADIAN Insured by Radian Group Inc.
VIKING MUTUAL FUNDS
Schedule of Investments
December 31, 2006
Viking Tax-Free Fund for North Dakota
PRINCIPAL MARKET
AMOUNT VALUE
MUNICIPAL BONDS 99.5%
General Obligations 23.1%
*Bismarck ND Ref & Imp - Ser L 4.00% 06/01/07 75,000 $74,775
Bismarck ND Ref & Imp - Ser P 2.90% 05/01/12 100,000 94,751
Bismarck ND Ref & Impt Ser T 4.45% 05/01/21 100,000 101,119
*Fargo ND Ref & Imp - Ser B (FGIC) 5.125% 05/01/17 60,000 61,096
Fargo ND Ref & Impt Ser D (MBIA) 5.00% 05/01/28 200,000 210,672
Hillsboro ND Pub Sch Dist No. 9 (FSA) 4.85% 06/01/19 50,000 52,016
*Jamestown ND Pub Sch Dist No. 011 (FGIC) 4.60% 05/01/15 50,000 51,000
*Mandan ND Ref & Imp - Ser B (MBIA) 5.00% 05/01/16 70,000 70,106
Mandan ND Ref Impt Ser C (AMBAC) 4.50% 05/01/18 200,000 204,724
Puerto Rico Commonwealth (MBIA) 5.375% 07/01/25 50,000 50,488
Valley City ND (CIFG) 4.50% 06/01/24 80,000 82,391
West Fargo ND Ref & Impt Ser D (MBIA) 4.25% 05/01/20 150,000 149,463
West Fargo ND Ref & Impt (MBIA) 4.10% 05/01/17 100,000 101,131
West Fargo ND Pub Sch Dist No. 006 (FGIC) 5.00% 05/01/14 50,000 52,499
---------
1,356,231
---------
Building Authority Revenue Bonds 7.8%
Fargo ND Bldg Auth Lease Rev Ser A 5.00% 05/01/20 50,000 52,326
GF Cnty ND Bldg Auth Rev 5.00% 12/01/20 200,000 207,608
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.00% 12/01/17 50,000 51,531
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.00% 12/01/16 50,000 52,224
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.20% 12/01/19 90,000 95,030
---------
458,719
---------
Continuing Care Revenue Bonds 3.9%
Burleigh Cnty Indl Dev Rev MO Slope Luth Care Ctr 5.05% 11/01/18 125,000 126,662
Grand Forks ND Sr Hsg Rev Ref 4000 Valley Square Proj 5.00% 12/01/16 100,000 101,535
---------
228,197
---------
Education Revenue Bonds 7.7%
Fargo ND School District Bldg Auth Rev (MBIA) 5.50% 05/01/14 50,000 51,744
Minot Pub School District No 1 Bldg Auth 4.80% 05/01/23 290,000 299,150
West Fargo Pub School District Bldg Auth Lease Rev 4.20% 05/01/17 100,000 100,161
---------
451,055
---------
Higher Education Revenue Bonds 17.5%
ND St Brd Hgher Ed Student Svcs Facs Rev MSU 5.50% 08/01/23 125,000 129,474
ND St Brd Hgher Ed Student Svcs Facs MSU 5.00% 08/01/18 175,000 178,210
ND St Brd Hgher Ed Rev Hsg & Aux Facs UND (FGIC) 4.375% 04/01/26 105,000 105,152
ND St Brd Hgher Ed Rev Hsg & Aux Facs NDSU (FGIC) 4.00% 04/01/15 150,000 151,535
ND St Brd Hgher Ed Rev Hsg & Aux BSC 4.75% 05/01/19 100,000 102,064
ND St Brd Hgher Ed Rev Hsg & Aux Facs NDSU (AMBAC) 4.25% 04/01/23 100,000 99,839
ND St Brd Hgher Ed Rev Hsg & Aux Facs UND (FSA) 5.00% 04/01/21 150,000 157,782
NDSU Rev Ser 2006A (AMBAC) 4.75% 04/01/29 75,000 77,491
Puerto Rico Tour Edl Med & Env Facs Mendez Univ 5.375% 02/01/19 25,000 25,788
---------
1,027,335
---------
Hospital Revenue Bonds 6.2%
Fargo ND Hlth Sys Rev Meritcare Obl (AMBAC) 5.125% 06/01/27 75,000 79,051
Fargo ND Hlth Sys Rev Meritcare Ser A (MBIA) 5.375% 06/01/27 100,000 102,657
Fargo ND Hlth Sys Rev Meritcare Obl (FSA) 5.375% 06/01/15 65,000 68,447
Fargo ND Hlth Sys Rev Meritcare Obl (AMBAC) 5.00% 06/01/22 45,000 46,741
Grand Forks ND Hlth Care Altru Hlth Obl Group (MBIA) 5.60% 08/15/17 20,000 20,491
Grand Forks ND Hlth Care Altru Hlth Obl Group 7.125% 08/15/24 20,000 21,815
Ward Cnty ND Hlth Care Facs Rev Trinity Obl Group - B 6.00% 07/01/10 25,000 25,551
---------
364,753
---------
Housing Revenue Bonds 10.3%
Fargo ND Multifam Rev Ref Hsg Trollwood Village 6.90% 09/01/13 25,000 25,552
ND St Hsg Fin Agy Rev Home Mtg Prog C 4.90% 07/01/15 150,000 152,898
ND St Hsg Fin Agy Rev Hsg Fin Home MTG Fin-C 4.45% 07/01/16 200,000 199,544
ND St Hsg Fin Agy Hsg Fin Home MTG-C-RMK 6.10% 07/01/28 5,000 5,005
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg B 5.85% 07/01/28 5,000 4,999
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.25% 07/01/18 45,000 44,998
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.80% 07/01/10 55,000 55,851
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.70% 07/01/09 50,000 50,754
*ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.55% 07/01/22 65,000 65,023
---------
604,624
---------
Transportation Revenue Bonds 2.7%
Guam Intl Arpt Auth Ser C (MBIA) 5.375% 10/01/17 150,000 159,473
---------
159,473
---------
Water Revenue Bonds 6.1%
Minot ND Wtr & Swr Util Resv Rev Ser A (XLCA) 4.20% 10/01/21 50,000 49,616
ND St Water Comm Rev Water Dev & Mgmt Prg Ser A (MBIA) 5.50% 08/01/10 50,000 53,049
ND St Water Comm Rev Water dev & Mgmt Prog (MBIA) 5.00% 08/01/25 100,000 105,272
South Central Reg Water Dist Burleigh Cnty Rev 5.00% 10/01/23 150,000 152,435
---------
360,372
---------
Other Revenue Bonds 14.2%
*Grand Forks ND Sales Tax Rev Dike Imp (AMBAC) 4.50% 09/01/10 50,000 51,293
Mercer Cnty ND PCR Otter Tail Corp (AMBAC) 4.85% 09/01/22 65,000 65,942
ND Pub Fin Auth Cap Fin Prog Ser A 5.00% 06/01/31 100,000 105,055
ND Pub Fin Auth Indl Dev Prog Ser A 5.00% 06/01/20 150,000 152,740
ND St Muni Bond Bank Cap Fing Prog 6.00% 06/01/21 25,000 26,397
ND St Muni Bond Bank St Revolv Fund Prog Ser A 4.90% 10/01/18 50,000 51,958
ND St Muni Bond Bank St Revolv Fund Prog Ser A 4.625% 10/01/19 100,000 102,810
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev 6.00% 07/01/26 15,000 16,163
Puerto Rico Pub Fin Corp Ser A (MBIA) 5.375% 08/01/24 150,000 161,145
Williams Cnty ND Sales Tax Rev 5.00% 11/01/21 100,000 103,925
---------
837,428
---------
Total Municipal Bonds (cost $5,748,928) 5,848,187
SHORT-TERM INVESMENTS 0.1%
Federated Municipal Obligations Fund #852 7,000 7,000
----------
Total Short-Term Investments (cost: $7,000) 7,000
---------
TOTAL MARKET VALUE OF SECURITIES OWNED 99.6% (COST $5,755,928) 5,855,187
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.4% 20,640
----------
NET ASSETS APPLICABLE TO 575,169 SHARES (0.001 PAR VALUE) OUTSTANDING - 100.00% $5,875,827
==========
*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
CIFG Insured by CIFG Company
XLCA Insured by XL Capital Assurance
VIKING MUTUAL FUNDS
Schedule of Investments
December 31, 2006
Viking Large-Cap Value Fund
SHARES VALUE
Common Stocks 100.1%
Basic Materials 25.9%
ALCOA 2,500 $75,025
Anadarko Petroleum 2,200 95,744
Apache 1,600 106,416
BP Amoco Plc ADR 1,600 107,360
Bunge Limited 1,400 101,514
Chevron Texaco 1,900 139,707
Conoco Phillips 2,100 151,095
Exxon Mobil 2,700 206,901
Freeport-McMoran Copper & Gold 400 22,292
Questar 500 41,525
Rio Tinto Plc ADS 300 63,747
--------
1,111,326
--------
Conglomerates 2.3%
Honeywell 2,200 99,528
--------
99,528
--------
Consumer Goods 8.7%
Dean Foods* 1,900 80,332
Johnson Controls 1,300 111,696
Kimberly-Clark 1,900 129,105
Sealed Air 800 51,936
--------
373,069
--------
Financial Services 28.0%
American International Group 1,400 100,324
Bank of America 2,600 138,814
BB&T 800 35,144
Citigroup 2,800 155,960
Hartford Financial Services Group 1,100 102,641
Legg Mason 600 57,030
Marsh & McLennan 2,200 67,452
Morgan Stanley 1,100 89,573
National City 2,100 76,776
Sun Trust Bank 1,100 92,895
U.S. Bancorp 3,100 112,189
Wachovia 1,900 108,205
Washington Mutual 1,400 63,686
---------
1,200,689
---------
Healthcare 6.9%
Health Management Associates 2,300 48,553
Merck 2,900 126,440
Pfizer, Inc 4,700 121,730
--------
296,723
--------
Industrial Goods 2.0%
Ingersoll-Rand 2,200 86,086
--------
86,086
--------
Services 11.8%
Amerisource Bergen 1,000 44,960
AT&T 2,500 89,375
Canadian Pacific 700 36,932
CSX 1,600 55,088
CVS Corp. 2,400 74,184
Disney 2,800 95,956
Idearc Inc.* 1,510 43,262
Union Pacific 700 64,414
--------
504,171
--------
Technology 7.3%
Hewlett-Packard 1,100 45,309
Intel 2,900 58,725
Microsoft 1,700 50,762
Nokia 3,700 75,184
Verizon Communications 2,200 81,928
--------
311,908
--------
Utilities 7.2%
American Electric Power 2,700 114,966
Dominion resources 1,100 92,224
Public Service Enterprise Group 1,500 99,570
--------
306,760
--------
Total Common Stocks (Cost $3,336,919) 4,290,260
SHORT-TERM INVESTMENTS 2.5%
Federated Prime Value Obligations #853 108,000 108,000
----------
Total Short-Term Investments (cost: $108,000) 108,000
----------
TOTAL MARKET VALUE OF SECURITIES OWNED 102.6% (COST $3,444,919) 4,398,260
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES (2.6%) (112,721)
----------
NET ASSETS APPLICABLE TO 327,328 SHARES ($0.001 PAR VALUE)
OUTSTANDING 100.0% $4,285,539
==========
*Non-income producing investments.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Schedule of Investments
December 31, 2006
Viking Small-Cap Value Fund
SHARES VALUE
Common Stocks 99.2%
Basic Materials 7.8%
LoneStar Technologies* 1,400 $32,412
Newfield Exploration* 900 41,355
Oil States Intl Inc.* 1,000 32 230
Pioneer Drilling* 5,200 69,056
Cimarex Energy 1,200 43,800
--------
254,215
--------
Conglomerates 2.2%
Telefex 1,100 71,016
--------
71,016
--------
Consumer Goods 17.3%
AO Smith 1,550 58,218
AptarGroup 1,300 76,752
Borg Warner Automotive 600 35,412
Carters Inc.* 600 15,300
Chiquita Brands Intl 4,600 73,462
Church & Dwight 2,050 87,433
Clarcor 1,600 54,096
RC 2 Corp* 1,600 70,400
Tupperware 3,900 88,179
--------
559,252
--------
Financial 21.5%
Boston Private Financial Holdings 1,100 31,031
First Midwest Bancorp 1,300 50,284
Hanmi Financial 2,500 56,325
Highland Hospitality 4,700 66,975
Provident Bankshares 1,200 42,720
Senior Housing Properties Trust 2,500 61,200
Strategic Hotels & Resorts 3,100 67,549
Sunstone Hotel Investors 1,600 42,768
UCBH Holdings 2,800 49,168
Umpqua Holdings 1,800 52,974
Protective Life 1,900 90,250
IPC Holdings 2,700 84,915
--------
696,159
--------
Healthcare 9.4%
Chattem* 1,000 50,080
Conmed* 2,500 57,800
PolyMedica 1,400 56,574
Prestige Brands Holdings* 4,900 63,798
West Pharmaceutical Services 1,500 76,845
--------
305,097
--------
Industrial Groups 11.1%
Albany International 2,300 75,693
Belden CDT 2,700 105,543
Granite Construction 600 30,192
K&F Industries Holdings* 3,400 77,214
RPM 3,400 71,026
--------
359,668
--------
Services 18.3%
Arkansas Best 1,400 50,400
Applebees 1,900 46,873
BJs Wholesale* 2,300 71,553
CBRL Group 700 31,332
Claires Stores 1,500 49,710
Bristow Group* 1,400 50,526
Owens & Minor 2,600 81,302
OMI Corp 1,800 38,106
Performance Food Group* 1,200 33,168
Stage Stores 3,000 91,170
YRC Worldwide* 1,300 49,049
--------
593,189
--------
Technology 5.7%
Aeroflex Inc.* 2,800 32,816
ON Semiconductor* 10,800 81,756
Technitrol 2,950 70,475
--------
185,047
--------
Utilities 5.9%
Piedmont Natural Gas 3,500 93,625
Pike Electric Corp* 2,000 32,660
Questar 800 66,440
--------
192,725
--------
Total Common Stocks (Cost $2,576,540) 3,216,368
SHORT-TERM INVESTMENTS 6.5%
Federated Prime Value Obligations Fund #853 163,000 163,000
Federated Treasury Cash Reserves #125 48,000 48,000
----------
Total Short-Term Investments (Cost $211,000) 211,000
TOTAL MARKET VALUE OF SECURITIES OWNED 105.7% (COST $2,787,540) 3,427,368
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES (5.7)% (184,608)
----------
NET ASSETS APPLICABLE TO 210,132 SHARES ($0.001 PAR VALUE)
OUTSTANDING 100.0% $3,242,760
==========
*Non-income producing investments.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Assets and Liabilities
December 31, 2006
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
ASSETS:
Investments in securities:
Cost $10,885,140 $5,755,928 $3,444,919 $2,787,540
------------------------------------------------------------------------------------
Value 11,062,415 5,855,187 4,398,260 3,427,368
Cash 1,480 2,295 4,080 4,486
Receivable for fund shares sold 0 0 0 0
Prepaid assets 2,501 951 1,021 818
Security sales receivable 0 175,000 0 0
Interest & dividends receivable 111,325 73,397 8,708 7,451
Other Receivables 155 0 81 79
------------------------------------------------------------------------------------
Total assets 11,177,876 6,106,830 4,412,150 3,440,202
------------------------------------------------------------------------------------
LIABILITIES:
Security purchases payable 0 206,359 0 0
Payable for shares redeemed 50,261 0 0 1,300
Distributions payable 34,705 18,436 118,972 188,621
Other accounts payable and
accrued expenses 8,870 6,208 7,639 7,521
------------------------------------------------------------------------------------
Total liabilities 93,836 231,003 126,611 197,442
------------------------------------------------------------------------------------
NET ASSETS 11,084,040 5,875,827 4,285,539 3,242,760
------------------------------------------------------------------------------------
COMPONENTS OF NET ASSETS AT December 31, 2006
Capital shares, $0.001 par value,
unlimited shares authorized 11,051,689 5,859,494 3,332,198 2,602,932
Net unrealized appreciation
(depreciation) 177,274 99,258 953,341 639,828
Accumulated net realized gain
(loss) on investments (144,923) (82,925) 0 0
Undistributed net investment
income (loss) 0 0 0 0
------------------------------------------------------------------------------------
NET ASSETS $11,084,040 $5,875,827 $4,285,539 $3,242,760
------------------------------------------------------------------------------------
NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets, at value $11,084,040 $5,875,827 $4,285,539 $3,242,760
Shares outstanding 1,102,311 575,169 327,328 210,132
Net asset value per share $10.06 $10.22 $13.09 $15.43
Maximum offering price per share
(net asset value per share divided
by 96.25%, 96.25%, 94.75% and
94.75%, respectively) $10.45 $10.62 $13.82 $16.28
------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Operations
For the year ended December 31, 2006
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
-------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $524,751 $269,942 $ 0 $ 0
Dividends 6,881 4,370 100,832 53,510
-------------------------------------------------------------------------------------
Total investment income 531,632 274,312 100,832 53,510
-------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 58,936 30,369 27,845 30,925
Administrative fees 11,787 6,090 3,978 3,092
Distribution fees 29,468 15,179 15,912 12,370
Transfer agent fees 3,724 2,055 5,175 5,443
Accounting fees 5,877 3,045 1,989 1,546
Professional fees 9,468 9,312 9,254 9,052
Insurance 3,068 1,506 888 620
Trustee fees 1,344 1,343 1,353 1,345
Registration fees 1,001 126 1,151 913
Custodian fees 3,443 3,443 3,448 3,442
Other 60 42 221 124
-------------------------------------------------------------------------------------
Total expenses 128,176 72,510 71,214 68,872
-------------------------------------------------------------------------------------
Less expenses waived or
reimbursed (53,771) (34,667) (17,512) (17,847)
------------------------------------------------------------------------------------
Net expenses 74,405 37,843 53,702 51,025
-------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 457,227 236,469 47,130 2,485
-------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss)
on investments (51,061) (38,426) 209,203 186,137
Net change in unrealized
appreciation (depreciation)
of investments 67,400 74,203 328,319 216,025
-------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 16,339 35,777 537,522 402,162
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $473,566 $272,246 $584,652 $404,647
-------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Changes in Net Assets
For the year ended December 31, 2006
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) $457,227 $236,469 $47,130 $2,485
Net realized gain (loss)
on investments (51,061) (38,426) 209,203 186,137
Net change in unrealized
appreciation (depreciation)
of investments 67,400 74,203 328,319 216,025
-------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations 473,566 272,246 584,652 404,647
-------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (457,227) (236,469) (47,130) (2,485)
Net realized gains 0 0 (71,842) (186,137)
-------------------------------------------------------------------------------------
Total distributions to
shareholders (457,227) (236,469) (118,972) (188,622)
-------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 1,727,487 431,577 470,724 598,354
Proceeds from reinvestment
of distributions 339,997 146,177 26,175 119,026
Cost of shares repurchased (3,408,165) (1,278,230) (312,682) (199,712)
-------------------------------------------------------------------------------------
Increase in net assets
derived from capital share
transactions (1,340,681) (700,476) 184,217 517,668
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS $(1,324,342) $(664,699) $649,897 $733,693
-------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period $12,408,382 $6,540,526 $3,635,642 $2,509,067
-------------------------------------------------------------------------------------
End of period $11,084,040 $5,875,827 $4,285,539 $3,242,760
-------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Changes in Net Assets
For the year ended December 31, 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 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
01/01/06- 01/01/05- 01/01/04- 01/01/03- 01/01/02-
12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
-------------------------------------------------------------
Net asset value, beginning of period $10.04 $10.22 $10.20 $10.18 $9.74
-------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.39 0.38 0.38 0.42 0.46
Net realized and unrealized gain
(loss) on investments 0.02 (0.18) 0.02 0.02 0.48
-------------------------------------------------------------
Total from investment operations 0.41 0.20 0.40 0.44 0.94
-------------------------------------------------------------
Less distributions from:
Net investment income (0.39) (0.38) (0.38) (0.42) (0.46)
Net realized gains 0.00 0.00 0.00 0.00 (0.04)
--------------------------------------------------------------
Total distributions (0.39) (0.38) (0.38) (0.42) (0.50)
--------------------------------------------------------------
Net asset value, end of period $10.06 $10.04 $10.22 $10.20 $10.18
--------------------------------------------------------------
Total return1 4.15% 1.96% 4.05% 4.45% 9.90%
--------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $11,084 $12,408 $12,206 $12,634 $8,513
Ratio of net expenses to average net assets 0.63%2 0.55%2 0.41%2 0.31%2 0.15%2
Ratio of net investment income to
average net assets 3.87% 3.71% 3.78% 4.13% 4.58%
Portfolio turnover rate 24.39% 24.59% 26.55% 24.72% 40.09%
1Total return assumes reinvestment of distributions at net asset value and
does not reflect the impact of a sales charge.
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 $53,771, $65,270, $80,645, $81,954 and $67,712.
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 1.08%, 1.06%, 1.06%,
1.09% and
1.30% 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
01/01/06- 01/01/05- 01/01/04- 01/01/03- 01/01/02-
12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
---------------------------------------------------------------
Net asset value, beginning of period $10.14 $10.29 $10.29 $10.25 $9.76
---------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.39 0.38 0.38 0.42 0.47
Net realized and unrealized gain
(loss) on investments 0.08 (0.15) 0.00 0.04 0.49
---------------------------------------------------------------
Total from investment operations 0.47 0.23 0.38 0.46 0.96
---------------------------------------------------------------
Less distributions from:
Net investment income (0.39) (0.38) (0.38) (0.42) (0.47)
Net realized gains 0.00 0.00 0.00 0.00 0.00
---------------------------------------------------------------
Total distributions (0.39) (0.38) (0.38) (0.42) (0.47)
---------------------------------------------------------------
Net asset value, end of period $10.22 $10.14 $10.29 $10.29 $10.25
---------------------------------------------------------------
Total return1 4.77% 2.24% 3.76% 4.60% 10.07%
Ratios/supplemental data:
Net assets, end of period (000s) $5,876 $6,541 $6,086 $4,781 $2,059
Ratio of net expenses to average net assets 0.62%2 0.52%2 0.44%2 0.36%2 0.22%2
Ratio of net investment income to
average net assets 3.86% 3.70% 3.68% 4.06% 4.73%
Portfolio turnover rate 35.84% 17.61% 22.36% 7.49% 27.95%
1Total return assumes reinvestment of distributions at net asset value and does
not reflect the impact of a sales charge.
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 $34,667, $41,214, $40,375, $32,710 and $30,993.
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
1.18%, 1.16%, 1.18%, 1.32% and 1.90% 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
01/01/06- 01/01/05- 01/01/04- 01/01/03- 01/01/02-
12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
---------------------------------------------------------------
Net asset value, beginning of period $11.64 $10.88 $10.06 $8.20 $10.74
---------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.14 0.08 0.05 0.06 0.06
Net realized and unrealized gain
(loss) on investments 1.67 0.76 0.82 1.86 (2.54)
---------------------------------------------------------------
Total from investment operations 1.81 0.84 0.87 1.92 (2.48)
---------------------------------------------------------------
Less distributions from:
Net investment income (0.14) (0.08) (0.05) (0.06) (0.06)
Net realized gains (0.22) 0.00 0.00 0.00 0.00
---------------------------------------------------------------
Total distributions (0.36) (0.08) (0.05) (0.06) (0.06)
---------------------------------------------------------------
Net asset value, end of period $13.09 $11.64 $10.88 $10.06 $8.20
---------------------------------------------------------------
Total return1 15.58% 7.76% 8.63% 23.42% (23.08)%
Ratios/supplemental data:
Net assets, end of period (000s) $4,286 $3,636 $3,088 $2,745 $1,962
Ratio of net expenses to average net assets 1.35%2 1.34%2 1.34%2 1.35%2 1.35%2
Ratio of net investment income to
average net assets 1.18% 0.81% 0.47% 0.73% 0.71%
Portfolio turnover rate 22.53% 37.51% 25.70% 26.75% 36.52%
1Total return assumes reinvestment of distributions at net asset value and does
not reflect the impact of a sales charge.
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 $17,512, $15,575, $14,372, $15,021 and $20,422.
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
1.78%, 1.82%, 1.84%, 2.02% and 2.34% 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
01/01/06- 01/01/05- 01/01/04- 01/01/03- 01/01/02-
12/31/06 12/30/05 12/31/04 12/31/03 12/31/02
---------------------------------------------------------------
Net asset value, beginning of period $14.32 $14.40 $12.43 $9.35 $10.26
---------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.01 (0.03) (0.06) (0.03) (0.03)
Net realized and unrealized gain
(loss) on investments 2.00 0.63 2.22 3.11 (0.88)
--------------------------------------------------------------
Total from investment operations 2.01 0.60 2.16 3.08 (0.91)
--------------------------------------------------------------
Less distributions from:
Net investment income (0.01) 0.00 0.00 0.00 0.00
Net realized gains (0.89) (0.68) (0.25) 0.00 0.00
--------------------------------------------------------------
Total distributions (0.90) (0.68) (0.25) 0.00 0.00
--------------------------------------------------------------
Net asset value, end of period $15.43 $14.32 $14.40 $12.43 $9.35
--------------------------------------------------------------
Total return1 14.02% 4.18% 17.86% 32.94% (8.87)%
Ratios/supplemental data:
Net assets, end of period (000s) $3,243 $2,509 $1,715 $1,250 $604
Ratio of net expenses to average net assets 1.65%2 1.65%2 1.65%2 1.65%2 1.65%2
Ratio of net investment income to average
net assets 0.08% (0.21)% (0.46)% (0.37)% (0.41)%
Portfolio turnover rate 36.96% 21.93% 15.39% 14.77% 16.24%
1Total return assumes reinvestment of distributions at net asset value
and does not reflect the impact of a sales charge.
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 1.65% of its average net assets on an annual basis. For the periods
indicated above, Viking Fund Management, LLC waived fees and reimbursed
expenses
totaling $17,847, $15,661, $14,316, $12,883 and $17,392. 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 2.23%, 2.39%, 2.63%,
3.16% and
5.24% respectively.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Notes to Financial Statements
December 31, 2006
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 year ended
December 31, 2006 and year ended December 31, 2005 were as follows:
Tax-Free Fund for Tax-Free Fund for Large-Cap Small-Cap
Montana North Dakota Value Fund Value Fund
-----------------------------------------------------------------------------------
2006 2005 2006 2005 2006 2005 2006 2005
-----------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income $457,227 $467,045 $236,469 $235,781 $0 $0 $0 $0
Ordinary income $0 $0 $0 $0 $47,130 $26,376 $2,485 $0
Long-term capital gain $0 $0 $0 $0 $71,842 $0 $186,137 $119,340
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 01/01/06 from 01/01/06 from 01/01/06 from 01/01/06
through 12/31/06 through 12/31/06 through 12/31/06 through 12/31/06
----------------------------------------------------------------------------
Shares sold 172,719 42,747 38,108 39,550
Shares issued in reinvestment
of distributions 34,007 14,435 2,249 8,312
Shares redeemed (340,623) (126,768) (25,280) (12,971)
----------------------------------------------------------------------------
Net Increase (Decrease) (133,897) (69,586) 15,077 34,891
----------------------------------------------------------------------------
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 $55,187 of investment advisory fees after a partial
waiver for the year ended December 31, 2006. On December 31, 2006,
the Tax-Free Fund for Montana had a payable to VFM for investment advisory
fees of $4,505. The Tax-Free Fund for North Dakota recognized $21,949 of
investment advisory fees after a partial waiver for the year ended
December 31, 2006. On December 31, 2006, the Tax-Free Fund for North Dakota
had a payable to VFM for investment advisory fees of $1,885. The Large-Cap
Fund recognized $27,845 of investment advisory fees
for the year ended December 31, 2006. On December 31, 2006, the
Large-Cap Fund had a payable to VFM for investment advisory fees of $2,431.
The Small-Cap Fund recognized $30,925 of investment advisory fees for the
year
ended December 31, 2006. On December 31, 2006, the
Small-Cap Fund had a payable to VFM for investment advisory fees
of $2,720. 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 31, 2006 the
Tax-Free Fund for North Dakota recognized $82 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.
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 31, 2006, the Tax-Free Fund for Montana
recognized
$934, the Tax-Free Fund for North Dakota recognized $41, Large-Cap Value
Fund recognized $9,542 and Small-Cap Value Fund
recognized $4,604 of 12b-1 fees after a partial waiver. On December 31, 2006,
the Tax Free Fund for Montana, the Large-Cap
Fund and Small-Cap Fund had payables to VFD for 12b-1 fees of $93, $873 and
$438, respectively.
For the year ending December 31, 2006, the net amounts of sales charges
deducted from the proceeds of sale of capital shares which were retained
by VFD as principal underwriter were $11,654, $435, $2,673 and $2,809
for the Tax-Free Fund for Montana, Tax-Free Fund for North Dakota, Large-Cap
Fund and Small-Cap Fund, respectively. On December 31, 2006 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 $47, $53, $101, and $109,
respectively.
VFM has contractually agreed to waive its fees or reimburse the Funds
for their expenses through August 1, 2009 so that the Tax-Free 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.
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
31, 2006, the Funds most recently completed year end, Tax-Free Fund for
Montana and Tax-Free Fund for North Dakota had
capital losses of $144,923 and $82,925 respectively,
which may be carried over to offset future capital gains. Such losses start
to expire in 2008.
At December 31, 2006, 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 $10,885,140 $5,755,928 $3,444,919 $2,787,540
------------------------------------------------------------------------------------
Unrealized appreciation 199,746 104,989 990,050 678,746
Unrealized depreciation (22,472) (5,721) (36,709) (38,918)
------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) $177,274 $99,268 $953,341 $639,828
------------------------------------------------------------------------------------
7. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
year ended December 31, 2006 were as follows:
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
------------------------------------------------------------------------------------
Purchases $2,882,291 $2,194,090 $1,176,549 $1,622,704
Sales $3,805,657 $2,899,573 $899,541 $1,140,475
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.
9. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value
Measurements. This standard defines fair value, establishes a framework for
measuring fair value in accordance with generally accepted accounting
principles and expands disclosures about fair value measurements. SFAS 157
is effective for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. The Fund is presently evaluating the impact
of adopting SFAS 157.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of
Viking Mutual Funds
We have audited the accompanying statements of assets and liabilities of Viking
Mutual Funds (the trust), including the schedules of investments, as of
December 31, 2006, the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trusts management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 2006,
by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Viking Mutual Funds as of December 31, 2006, the results of its operations for
the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
BRADY, MARTZ & ASSOCIATES, P.C.
Bismarck, North Dakota, USA
February 23, 2007
VIKING MUTUAL FUNDS
Miscellaneous Information (Unaudited)
December 31, 2006
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 transaction 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 07/01/06 Value 12/31/06 Period1 07/01/06-12/31/06
Viking Tax-Free Fund for Montana
Actual $1,000.00 $1,041.10 $3.45 2
Hypothetical (5% return before expenses) $1,000.00 $1,021.83 $3.41 2
Viking Tax-Free Fund for North Dakota
Actual $1,000.00 $1,047.20 $3.46 2
Hypothetical (5% return before expenses) $1,000.00 $1,021.83 $3.41 2
Viking Large-Cap Value Fund
Actual $1,000.00 $1,099.14 $7.14
Hypothetical (5% return before expenses) $1,000.00 $1,018.40 $6.87
Viking Small-Cap Value Fund
Actual $1,000.00 $1,060.92 $8.57
Hypothetical (5% return before expenses) $1,000.00 $1,016.89 $8.39
1Expenses are equal to the annualized expense ratio for each Fund (Viking
Tax-Free Fund for Montana: 0.67%; Viking Tax-Free Fund for North Dakota:
0.67%; Viking Large-Cap Value Fund: 1.35%; and Viking Small-Cap Value Fund:
1.65%), multiplied by the average account value over the period, multiplied
by 184/365 to reflect the one-half year period.
2Expenses for the Viking Tax-Free Fund for North Dakota and Viking Tax Free
Fund for Montana have increased since the
Funds most recent fiscal half-year. Had the current expense ratio of the
Fund, 0.71%, been in place throughout the entire most recent fiscal half-year,
the Actual "Expenses Paid During Period" would have been $3.65 and $3.66,
respectively, and the
Hypothetical "Expenses Paid During Period" would have been $3.62 for each of
the Funds.
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, without charge, and
upon request, by calling 1-800-933-8413 and on the SECs website at
http://www.sec.gov.
Quarterly Portfolio Schedule
The Funds 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 are available on the SECs website at http://www.sec.gov.
The Funds Form N-Q may be reviewed and copied at the SECs Public Reference
Room in Washington, DC and information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
VIKING MUTUAL FUNDS
Trustee Information (Unaudited)
December 31, 2006
NAME AND PRINCIPAL OCCUPATION(S)
ADDRESS AGE POSITION(S) HELD DURING PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------------------------
Shannon D. Radke 40 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 69 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 40 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
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
331 Newman Springs Road Suite 122
Red Bank, NJ 07701
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-CSR, and is available
without charge, upon request by calling (800)933-8413.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of Viking Mutual Funds has determined that it does not
have a member who qualifies as an audit committee financial expert, as defined
in Item 3 of Form N-CSR, serving on its audit committee. However, the Board of
Trustees determined that, although none of its members meet the technical
definition of an audit committee financial expert, the Audit Committee members
have sufficient financial expertise to address any issues that are likely to
come before the Committee, including the evaluation of the Companys financial
statements, supervision of the Companys preparation of its financial
statements, and oversight of the work of the Companys independent auditors.
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 $19,200 for the year ended December 31, 2006, and $41,600 for the year
ended December 31, 2005.
(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
$2200 for the year ended December 31, 2006, and $2000 for the year ended
December 31 2005. 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 $890 for the year ended December 31, 2006, and
$860 for the year ended December 31 2005.
(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 31, 2006, and December 31, 2005, were $3090 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. There was no change in the internal controls
over financial reporting (as defined in Rule 30a-3(d) under the Act)
of the registrant that occurred during the second half of its fiscal
year that has materially affected or is reasonably likely to
materially affect, its internal control over financial reporting.
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 30a-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(b) under the Investment Company Act of
1940. Certification of principal executive officer and principal
financial officer as required by Section 906 of the Sarbanes-Oxley
Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
VIKING MUTUAL FUNDS
Date: March 8, 2007
/s/Shannon D. Radke
--------------------------------
Shannon D. Radke
President
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date: March 8, 2007
/s/ Shannon D. Radke
--------------------------------
Shannon D. Radke
President
Date: March 8, 2007
/s/ Shannon D. Radke
--------------------------------
Shannon D. Radke
Treasurer