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: 06/30/08
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ITEM 1. REPORTS TO STOCKHOLDERS.
SHAREHOLDER LETTER
Dear Fellow Shareholder:
It is a pleasure to bring you the Viking Mutual Funds Semi-Annual Report for
the six months ended June 30, 2008.
Economic growth slowed to a near standstill in the first three months of 2008
as the economy was hit by a series of blows including the credit crunch, a
prolonged housing slump, rising unemployment and surging energy prices. In
addition, there was a significant decline in the wealth effect; not only were
housing values going down but the stock market continued to decline. With the
combination of the declining wealth effect and slowing labor market, consumer
confidence plunged to the lowest level since 1991. The Federal Reserve slashed
the federal funds rate by 200 basis points in the first quarter to 2.25%,
moving aggressively to contain a credit crisis threatening to push the country
into recession. By March, Fed Chairman Ben Bernanke and his colleagues had cut
the funds rate six times since last September, with reductions becoming more
aggressive since January. The path of the U.S economy in the second quarter
remained the same with sub-par growth. In many respects it decelerated
further, especially after excluding the temporary boost to GDP arising from the
one-time payout of $100+ billion in tax rebates. High energy costs taxed
growth. In fact, one published estimate calculated that the rise in oil prices
offset the tax rebates. And unfortunately, unlike the fiscal stimulus, higher
energy costs do not appear to be temporary. The labor market continued to
weaken and asset values continued to decline with housing prices and the stock
market sliding further. These factors contributed to the lowest consumer
sentiment number in 30 years. The Fed again lowered rates in April, this time
by a modest quarter percentage point. The Feds action took the federal funds
rate to 2 percent, the lowest since December, 2004. In addition to rate cuts,
the Fed has taken a number of emergency steps to ease credit strains that have
threatened to make the economys ills worse, pumping billions of dollars into
markets to keep them from choking on mortgage-related bets.
Declining home prices, credit market concerns, massive write downs and concerns
about companies such as Countrywide, Fannie Mae, Ambac and Bear Stearns, among
many others, held the markets in a state of near panic for much of the first
quarter. For the quarter, the S&P ended down 9.45%, while the Russell 1000
Value declined 8.72% and the Russell 2000 Value fell 6.52%. Most major
Domestic market indices sold off sharply in June, with the blue-chip Dow Jones
Industrial Average turning in its worst June performance since 1930. Rapidly
rising oil prices, more woes for financial firms, and the ongoing fallout from
declining housing prices all weighed on investor sentiment and contributed to a
challenging second quarter for equity investors. For the quarter, the S&P lost
2.73%, the Russell 1000 Value declined 5.31% and the Russell 2000 Value Index
fell 3.55%. The first half finished with the Dow down 14.44%, the S&P off
11.91%, the Russell 1000 Value declining 13.57% and the Russell 2000 Value
losing 9.84%.
In the first quarter of 2008, for the third quarter in a row, the same trends
persisted in the municipal bond market with wider credit spreads or a
continuing flight to quality and a steepening of the yield curve with
short-term rates declining while longer rates rose. Municipal bonds have also
been affected by the spillover of the sub-prime crisis to the financial
guarantor industry. Bond insurers originally offered insurance mainly to
municipalities, but in recent years expanded their operations to insure
riskier, more profitable instruments,like bonds backed by pools of mortgages
mainly sub-prime loans given to customers with a poor credit history.
Due to the rapid deterioration and lack of transparency in the market,
the rating agencies began to review the risk in
these investments and as a result, the bond insurers AAA ratings. Thus,
despite the reductions in the fed funds rate in the first quarter due to the
economic slowdown, immediate to long-term muni prices fell with yields rising.
Many of the trends that were prevalent in the prior quarters reversed in the
second quarter. Risk appetites increased as investors unwound, at least to
some degree, the flight to quality trade and the yield curve flattened. The
financial strength ratings were cut on bond insurers MBIA and Ambac due to
their sub-prime exposure. And although there remains ongoing credit concerns
of these and other financial guarantors, the credit quality of many underlying
municipal issues tends to be strong. For the quarter, intermediate to long
term muni bond prices were mixed, but generally lower with rates rising as the
Fed cut rates one more time in what may have been the last of a series of cuts
aimed at aiding an economy hit hard by a housing slump and credit market
turmoil.
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,
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 (0.52%) (at net
asset value with distributions reinvested) for the six months ended June 30,
2008.
In the first quarter of 2008, for the third quarter in a row, the same trends
persisted in the municipal bond market with wider credit spreads or a
continuing flight to quality and a steepening of the yield curve with
short-term rates declining while longer rates rose. Municipal bonds have also
been affected by the spillover of the sub-prime crisis to the financial
guarantor industry. Bond insurers originally offered insurance mainly to
municipalities, but in recent years expanded their operations to insure
riskier, more profitable instruments, like bonds backed by pools of mortgages
mainly sub-prime loans given to customers with a poor credit history. Due to
the rapid deterioration and lack of transparency in the market, the ratings
agencies began to review the risk in these investments and as a result, the
bond insurers AAA ratings. Thus, despite the reductions in the fed funds rate
in the first quarter due to the economic slowdown, intermediate to long-term
muni prices fell with yields rising. As a result, the Funds share price fell
moderately. Many of the trends that were prevalent in the prior quarters
reversed in the second quarter. Risk appetites increased as investors unwound,
at least to some degree, the flight to quality trade and the yield curve
flattened. The financial strength ratings were cut on bond insurers MBIA and
Ambac due to their sub prime exposure. And although there remains ongoing
credit concerns of these and other financial guarantors, the credit quality of
many underlying municipal issuers tends to be strong. The Fed cut rates one
more time at the end of April in what may have been the last of a series of
cuts aimed at aiding an economy hit hard be a housing slump and credit market
turmoil. For the quarter, intermediate to long term muni bond prices were
mixed, but generally lower with rates rising, causing the Funds share price
to decline slightly.
Despite the continued scarcity of Montana municipal bonds throughout the
period, the Fund was able to obtain an adequate supply of investment grade
bonds of various maturities. Average credit quality was 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 investment grade 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 June 30, 2008 (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 31, 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
January 31, 2007 $13,307 $13,933 $15,097
February 28, 2007 $13,492 $14,126 $15,296
March 31, 2007 $13,472 $14,105 $15,258
April 30, 2007 $13,462 $14,094 $15,303
May 31, 2007 $13,413 $14,043 $15,236
June 30, 2007 $13,346 $13,973 $15,157
July 31, 2007 $13,514 $14,149 $15,273
August 31, 2007 $13,450 $14,082 $15,208
September 30, 2007 $13,653 $14,295 $15,433
October 31, 2007 $13,743 $14,389 $15,502
November 30, 2007 $13,773 $14,420 $15,602
December 31, 2007 $13,722 $14,367 $15,645
January 31, 2008 $13,946 $14,602 $15,842
February 29, 2008 $13,642 $14,283 $15,117
March 31, 2008 $13,620 $14,261 $15,549
April 30, 2008 $13,663 $14,395 $15,731
May 31, 2008 $13,749 $14,395 $15,827
June 30, 2008 $13,651 $14,293 $15,648
The chart assumes $10,000 invested on August 3, 1999 and includes the
effect of a 4.50% front-end sales charge, as applicable and the
reinvestment of all dividends and capital gains. It is intended to
give you an ideal of how your fund performed compared to the index over
the period 08/03/99-06/30/08. 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.. Past performance does not guarantee future
results.
Average Annual Total Returns Lifetime
Through June 30, 2008 One Year Three Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge 2.29% 2.28% 2.72% 4.17%
Including Sales Charge -1.50% 0.98% 1.77% 3.63%
Returns reflect reinvestment of distributions and the maximum sales
charge, as applicable. The total returns for the five year and
lifetime periods reflect a maximum sales charge of 4.50%. The current
maximum sales charge is 3.75. Therefore, the total returns,
for the 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 (0.13%)
(at net asset value with distributions reinvested) for the six months ended
June 30, 2008.
In the first quarter of 2008, for the third quarter in a row, the same trends
persisted in the municipal bond market with wider credit spreads or a
continuing flight to quality and a steepening of the yield curve with short-
term rates declining while longer rates rose. Municipal bonds have also been
affected by the spillover of the sub-prime crisis to the financial guarantor
industry. Bond insurers originally offered insurance mainly to
municipalities, but in recent years expanded their operations to insure
riskier, more profitable instruments, like bonds backed by pools of mortgages
mainly sub-prime loans given to customers with a poor credit history. Due to
the rapid deterioration and lack of transparency in the market, the ratings
agencies began to review the risk in these investments and as a result, the
bond insurers AAA ratings. Thus, despite the reductions in the fed funds
rate in the first quarter due to the economic slowdown, intermediate to long-
term muni prices fell with yields rising. As a result, the Funds share price
fell moderately. Many of the trends that were prevalent in the prior quarters
reversed in the second quarter. Risk appetites increased as investors
unwound, at least to some degree, the flight to quality trade and the yield
curve flattened. The financial strength ratings were cut on bond insurers
MBIA and Ambac due to their sub prime exposure. And although there remains
ongoing credit concerns of these and other financial guarantors, the credit
quality of many underlying municipal issuers tends to be strong. The Fed cut
rates one more time at the end of April, in what may have been the last of a
series of cuts aimed at aiding an economy hit hard by a housing slump and
credit market turmoil. For the quarter, intermediate to long term muni bond
prices were mixed, but generally lower with rates rising while the Funds
share price remained nearly unchanged.
Despite the continued scarcity of North Dakota municipal bonds throughout the
period, the Fund was able to obtain an adequate supply of investment grade
bonds of various maturities. Average credit quality was A+. 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 investment grade 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 June 30, 2008 (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
January 31, 2007 $13,499 $14,134 $15,097
February 28, 2007 $13,685 $14,328 $15,296
March 31, 2007 $13,665 $14,307 $15,258
April 30, 2007 $13,656 $14,298 $15,303
May 31, 2007 $13,607 $14,247 $15,236
June 30, 2007 $13,500 $14,135 $15,157
July 31, 2007 $13,670 $14,340 $15,273
August 31, 2007 $13,578 $14,217 $15,208
September 30, 2007 $13,836 $14,487 $15,433
October 31, 2007 $13,941 $14,596 $15,502
November 30, 2007 $13,998 $14,656 $15,602
December 31, 2007 $13,921 $14,575 $15,645
January 31, 2008 $14,132 $14,796 $15,842
February 29, 2008 $13,718 $14,363 $15,117
March 31, 2008 $13,753 $14,399 $15,549
April 30, 2008 $13,811 $14,460 $15,549
May 31, 2008 $13,912 $14,566 $15,827
June 30, 2008 $13,903 $14,556 $15,648
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 idea of how your fund performed compared to the index over
the period 08/03/99-06/30/08. 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. Past performance does not guarantee future
results.
Average Annual Total Returns Lifetime
Through June 30, 2008 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge 2.98% 2.49% 2.87% 4.31%
Including Sales Charge -0.89% 1.20% 1.92% 3.78%
Returns reflect reinvestment of distributions and the maximum sales charge,
as applicable. The total returns for the five year and lifetime
periods reflect a maximum sales charge of 4.50%. The current
maximum sales charge is 3.75%. Therefore, the total returns,
for the 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 total return of (14.56%)
(at net asset value) for the six months ended June 30, 2008.
Declining home prices, credit market concerns, massive write downs and
concerns about companies such as Countrywide, Fannie Mae, Ambac and Bear
Stearns, among many others, held the markets in a state of near panic for much
of the first quarter. For the quarter, the S&P ended down 9.45%, while the
Russell 1000 Value declined 8.72%. In the first quarter, the Fund shed 10.77%.
The top performing areas were the materials and telecommunications sectors,
both of which contributed positively to relative performance. On the flip
side, healthcare, consumer staples, and electric utilities were a notable drag
on relative performance.
Most major domestic market indices sold off sharply in June, with the blue-
chip Dow Jones Industrial Average turning in its worst June performance since
1930. Rapidly rising oil prices, more woes for financial firms, and the
ongoing fallout from declining housing prices all weighed on investor
sentiment and contributed to a challenging second quarter for equity investors.
For the second quarter, the S&P lost 2.73%, the Russell 1000 Value declined
5.31%, while the Fund slipped 4.25%. The first half finished with the Dow
down 14.44%, the S&P off 11.91%, the Russell 1000 Value declining 13.57% and
the Fund off 14.56%. The sharp rebound of agricultural product prices drove
positive results in the consumer staples sector. In addition, our underweight
in the consumer discretionary sector and industrial sector was a benefit as
well. Finally, superior stock selection in the IT segment added positively to
results. The healthcare, telecommunications, utilities and energy sectors
were generally all on the minus side.
As we move toward year-end, we see a better-than-even chance that both the
pace of global economic activity and the inflationary trend will abate
significantly. This would in turn aid the U.S dollar, unshackle the Fed to
possibly lower rates more, and further aid the credit crisis and the domestic
economy. This is why we have been reducing portfolio exposure to the energy
and materials sectors and adding slowly to the financial sector.
As always, we remain steadfast in our commitment to finding well managed,
inexpensive companies with strong balance sheets and rising cash flow. 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 June 30, 2008 (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
January 31, 2007 $13,473 $14,214 $16,870
February 28, 2007 $13,301 $14,033 $16,607
March 31, 2007 $13,655 $14,406 $16,864
April 30, 2007 $14,262 $15,047 $17,487
May 31, 2007 $14,910 $15,730 $18,118
June 30, 2007 $14,768 $15,580 $17,694
July 31, 2007 $14,454 $15,249 $16,876
August 31, 2007 $14,465 $15,260 $17,065
September 30, 2007 $14,970 $15,794 $17,651
October 31, 2007 $15,334 $16,178 $17,653
November 30, 2007 $14,687 $15,495 $16,790
December 31, 2007 $14,766 $15,578 $16,628
January 31, 2008 $14,150 $14,928 $15,962
February 29, 2008 $13,568 $14,314 $15,293
March 31, 2008 $13,176 $13,901 $15,178
April 30, 2008 $13,904 $14,669 $15,918
May 31, 2008 $13,848 $14,609 $15,893
June 30, 2008 $12,617 $13,310 $14,371
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 idea of how your fund performed compared to the index over
the period 08/03/99-06/30/08. 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 June 30, 2008 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge -14.57% 4.15% 7.95% 3.26%
Including Sales Charge -19.06% 2.30% 6.80% 2.64%
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 (5.93%) (at net asset
value) for the six months ended June 30, 2008.
Declining home prices, credit market concerns, massive write downs and
concerns about companies such as Countrywide, Fannie Mae, Ambac and Bear
Stearns, among many others, held the markets in a state of near panic for much
of the first quarter. For the quarter, the S&P ended down 9.45%, while the
Russell 2000 Value fell 6.52% and the Fund was off 7.21%. Our top contributor
to relative performance was consumer staples. Performance was helped by a
significant overweight in the sector and positive stock selection among food
producers, distributors and retailers. On the downside, performance in the
financial services sector detracted from investment results. While we have
been correct in the past to maintain an underweight in the sector, this
currently seems to be a group searching for a bottom.
Most major domestic market indices sold off sharply in June, with the blue-
chip Dow Jones Industrial Average turning in its worst June performance since
1930. Rapidly rising oil prices, more woes for financial firms, and the
ongoing fallout from declining housing prices all weighed on investor sentiment
and contributed to a challenging second quarter for equity investors. For the
quarter, the S&P lost 2.73%, and the Russell 2000 Value Index fell 3.55%,
while the Fund gained 1.38%. The first half finished with the Dow down
14.44%, the S&P off 11.91%, the Russell 2000 Value losing 9.84% and the Fund
off just 5.93%. Favorable stock selection in the industrials sector was the
single largest contributor to performance. Performance also benefited from
favorable stock selection in the information technology sector. On the
negative side, we were overweight in the underperforming consumer staples
sector and fell short of the mark in energy.
Despite the weak dollar, tight supply/demand conditions, and some speculation,
we believe oil prices are more likely to decline than rise. Demand
destruction, especially in the U.S and Europe, should offset these
aforementioned drivers and lead to lower oil prices over the near to
intermediate term. We are therefore less bullish on energy and more bullish
on those sectors that may benefit from lower energy costs, mainly materials
(such as chemicals) and consumer discretionary to a lesser extent.
As always, we remain steadfast in our commitment to finding well-managed,
inexpensive companies with strong balance sheets and rising cash flow. Long-
term total return and capital preservation remains the investment objective
of the Fund.
VIKING SMALL-CAP VALUE FUND
Growth of a $10,000 Investment
May 3, 1999 through June 30, 2008 (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
January 31, 2007 $16,804 $17,728 $22,385
February 28, 2007 $16,782 $17,705 $22,110
March 31, 2007 $17,296 $18,247 $22,377
April 30, 2007 $17,702 $18,675 $22,609
May 31, 2007 $18,450 $19,465 $23,438
June 30, 2007 $18,226 $19,228 $22,892
July 31, 2007 $17,135 $18,077 $20,944
August 31, 2007 $17,296 $18,247 $21,363
September 30, 2007 $17,595 $18,562 $21,460
October 31, 2007 $17,670 $18,641 $21,694
November 30, 2007 $16,986 $17,920 $20,068
December 31, 2007 $16,891 $17,820 $19,899
January 31, 2008 $16,060 $16,944 $19,082
February 29, 2008 $15,480 $16,332 $18,324
March 31, 2008 $15,674 $16,536 $18,600
April 30, 2008 $16,208 $17,100 $19,188
May 31, 2008 $16,993 $17,928 $19,844
June 30, 2008 $15,890 $16,764 $17,940
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 05/03/01-06/30/08. 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 June 30, 2008 One-Year Three-Year Five Year (Est. 5/3/01)
- --------------------------------------------------------------------------------
Excluding Sales Charge -12.82% 4.28% 10.08% 7.48%
Including Sales Charge -17.37% 2.41% 8.91% 6.68%
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 (Unaudited)
June 30, 2008
Viking Tax-Free Fund for Montana
PRINCIPAL MARKET
AMOUNT VALUE
MUNICIPAL BONDS 97.4%
General Obligations 5.1%
Bozeman MT Ser A 4.95% 07/01/20 170,000 $174,962
Missoula Cnty Sch Dist #4 Hellgate (GTY) 4.25% 6/15/24 100,000 95,387
Puerto Rico Mun Fin Agy Ser A (FSA) 5.50% 08/01/23 250,000 259,663
---------
530,012
---------
Continuing Care Revenue Bonds 0.7%
MT St Hlth Facs Auth Rev Hillcrest Sr Ctr 6.90% 06/01/15 30,000 32,059
MT St Hlth Facs Auth Rev Hillcrest Sr Ctr 7.25% 06/01/25 35,000 37,876
---------
69,935
---------
Higher Education Revenue Bonds 11.5%
MT St Hgher Ed Stud Assist Corp Rev Ser B 6.40% 12/01/32 440,000 442,015
MT St Brd Regents (MSU) Rev Facs Imp-E (AMBAC) 5.00% 11/15/21 80,000 79,610
MT Brd Regents (U of M) Hgher Ed Rev Ser F (MBIA) 5.75% 05/15/24 135,000 143,770
*Univ of MT Revs Facs Acq & Imp Ser C (MBIA) 5.00% 11/15/17 140,000 146,087
Univ of MT Revs Higher Ed Facs Imp Ser D (MBIA) 5.375% 05/15/19 370,000 399,345
---------
1,210,827
---------
Hospital Revenue Bonds 24.4%
MT Fac Fin Auth St Luke Cmnty Hlth 5.00% 01/01/22 100,000 99,418
MT Fac Fin Auth Glendive Med Pj 4.50% 07/01/23 250,000 240,290
MT Fac Fin Auth Prov Hlth & Svce 5.00% 12/01/18 175,000 180,640
MT Fac Fin Auth Providence Svcs (MBIA) 5.00% 12/01/18 270,000 286,438
MT Fac Fin Auth Providence Svcs (MBIA) 4.80% 12/01/20 105,000 110,418
MT Fac Fin Auth Rev Benefis Hlth Sys (GTY) 4.75% 01/01/24 150,000 149,562
MT Fac Fin Auth Rev Benefis Hlth Sys (GTY) 4.75% 01/01/25 125,000 123,509
MT Hlth Fac Fin Auth Rev Mstr Ln Program Comm Med Ctr 5.20% 12/01/21 145,000 147,378
*MT Hlth Fac Auth Sisters Chrty Leavenworth (MBIA) 5.125% 12/01/18 100,000 100,871
MT Hlth Fac Auth Sisters Chrty Leavenworth (MBIA) 5.00% 12/01/24 515,000 518,265
MT Fac Fin Auth Hlth Master Ln Pg NE MT 4.50% 05/01/27 250,000 231,387
MT St Hlth Fac Auth Rev Comm Med Ctr 6.375% 06/01/18 370,000 369,045
---------
2,557,221
---------
Housing Revenue Bonds 16.2%
*MT St Brd Hsg Sngle Fam Mtg Ser A-2 5.75% 06/01/30 65,000 64,956
*MT St Brd Hsg Sngle Fam Ser A-2 5.50% 12/01/20 75,000 74,642
*MT St Brd Hsg Sngle Fam Ser A-2 5.60% 12/01/23 675,000 673,312
MT St Brd Hsg Sngle Fam Ser A-2 5.20% 12/01/22 105,000 103,475
MT St Brd Hsg Sngle Fam Ser B-2 4.85% 12/01/15 80,000 79,993
MT St Brd Hsg Sngle Fam Mtg Ser B-2 5.55% 06/01/33 135,000 132,405
MT St Brd Hsg Sngle Fam Mtg Ser C2 4.85% 12/01/26 200,000 182,968
MT St Brd Hsg Sngle Fam Mtg Ser A-1 4.50% 12/01/27 300,000 281,805
MT St Brd Hsg Sngle Fam Mtg Ser B 4.75% 12/01/27 110,000 101,461
---------
1,695,017
---------
Psychiatric and Substance Abuse Hospital Bonds 11.3%
MT Fac Fin Auth Developmental Ctr Prog 4.50% 06/01/16 250,000 252,455
MT Fac Fin Auth Developmental Ctr Prog 4.75% 06/01/19 170,000 171,290
MT Fac Fin Auth Childrens Home 4.55% 01/01/17 250,000 250,795
MT Fac Fin Auth Rev Cmnty Counsl & Corectnl Svcs (CIFG) 4.50% 10/01/23 240,000 233,642
MT Fac Fin Auth Boyd Andrew Cmnty Svcs Proj (CIFG) 4.375% 10/01/20 285,000 277,986
---------
1,186,168
---------
Utility Revenue Bonds 10.2%
Forsyth MT Poll Ctl Rev Ref Puget Sound Energy (AMBAC) 5.00% 03/01/31 355,000 352,657
*Forsyth MT Poll Ctl Rev Northwestern Corp (AMBAC) 4.65% 08/01/23 750,000 718,117
---------
1,070,774
---------
Other Revenue Bonds 18.0%
Bozeman MT Downtown Impt Dist 4.95% 07/01/28 200,000 186,750
Missoula MT Spl Assmnt Pooled Spl 4.75% 07/01/27 200,000 188,000
Missoula MT Spl Impt Dists No 540 4.60% 07/01/24 100,000 94,531
Missoula MT Spl Impt Dists No 540 4.60% 07/01/25 105,000 98,305
Missoula Tax Increment Urban Renewal (RADIAN) 5.125% 07/01/26 125,000 123,039
MT Fac Fin Auth Prerelease Ctr Rev (XLCA) 5.25% 10/01/20 300,000 311,049
MT St Dept Transn Rev Grant Antic 5.00% 06/01/22 350,000 363,566
MT St Brd Invt Refunded 1996 Pay Tax (MBIA) 6.875% 06/01/20 105,000 108,203
MT St Brd Invt Refunded 1996 Pay Tax (MBIA) 6.875% 06/01/20 105,000 108,125
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev 6.00% 07/01/26 195,000 206,577
Puerto Rico Comwlth Inf Fin Auth Ser A (AMBAC) 5.25% 07/01/10 100,000 101,012
---------
1,889,157
----------
Total Municipal Bonds (cost $10,373,563) 10,209,111
SHORT-TERM INVESMENTS 1.6%
Franklin Double TF Income Fund 14,255 163,361
Total Short-Term Investments (cost: $165,927) ----------
TOTAL MARKET VALUE OF SECURITIES OWNED 99.0% (COST $10,539,490) 10,372,472
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.0% 108,160
-----------
NET ASSETS APPLICABLE TO 1,078,771 SHARES (0.001 PAR VALUE) OUTSTANDING - 100.0% $10,480,632
===========
*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
CIFG Insured by CIFG Assurance North America, Inc.
FSA Insured by Financial Security Assurance
GTY Insured by Assured Guaranty
MBIA Insured by the Municipal Bond Insurance Association
RADIAN Insured by Radian Group Inc.
XLCA Insured by XL Capital Assurance
VIKING MUTUAL FUNDS
Schedule of Investments (Unaudited)
June 30, 2008
Viking Tax-Free Fund for North Dakota
PRINCIPAL MARKET
AMOUNT VALUE
MUNICIPAL BONDS 98.4%
General Obligations 21.5%
Bismarck ND Ref & Impt Ser T 4.45% 05/01/21 100,000 $99,997
*Fargo ND Ref & Imp - Ser B (FGIC) 5.125% 05/01/17 60,000 61,111
*Fargo ND Ref & Impt Ser D (MBIA) 5.00% 05/01/28 200,000 202,608
Fargo ND Pub Sch Dist No. 1 Ltd Tax 5.00% 05/01/23 200,000 203,472
Grand Forks ND Pub Bldg Ser A (FSA) 4.625% 12/01/26 100,000 99,595
Hillsboro ND Pub Sch Dist No. 9 (FSA) 4.85% 06/01/19 50,000 51,724
Minot ND Ref Impt Ser A 4.50% 10/01/22 195,000 192,075
West Fargo ND Ref & Impt G.O. (GTY) 4.50% 05/01/23 175,000 171,085
West Fargo ND Pub Sch Dist No. 006 (FGIC) 5.00% 05/01/14 50,000 51,880
---------
1,133,547
---------
Building Authority Revenue Bonds 7.6%
Fargo ND Bldg Auth Lease Rev Ser A 5.00% 05/01/20 50,000 51,674
GF Cnty ND Bldg Auth Rev 5.00% 12/01/20 200,000 201,598
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.00% 12/01/17 50,000 52,353
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.20% 12/01/19 90,000 93,733
---------
399,358
---------
Continuing Care Revenue Bonds 4.0%
Burleigh Cnty Indl Dev Rev MO Slope Luth Care Ctr 5.05% 11/01/18 125,000 116,410
Grand Forks ND Sr Hsg Rev Ref 4000 Valley Square Proj 5.00% 12/01/16 100,000 94,701
---------
211,111
---------
Education Revenue Bonds 5.0%
Fargo ND School District Bldg Auth Rev (MBIA) 5.50% 05/01/14 50,000 51,187
Minot Pub School District No 1 Bldg Auth 4.80% 05/01/23 210,000 211,518
---------
262,705
---------
Higher Education Revenue Bonds 11.5%
ND St Brd Hgher Ed Student Svcs Facs Rev MSU 5.50% 08/01/23 125,000 118,083
ND St Brd Hgher Ed Student Svcs Facs MSU 5.00% 08/01/18 175,000 165,760
ND St Brd Hgher Ed Rev Hsg & Aux BSC 4.75% 05/01/19 100,000 96,481
ND St Brd Hgher Ed Rev Hsg & Aux Facs UND (FSA) 5.00% 04/01/21 150,000 156,342
NDSU Rev Ser 2006A (AMBAC) 4.75% 04/01/29 75,000 72,593
---------
609,259
---------
Hospital Revenue Bonds 9.6%
Fargo ND Hlth Sys Rev Meritcare Obl (AMBAC) 5.125% 06/01/27 75,000 74,807
Fargo ND Hlth Sys Rev Meritcare Ser A (MBIA) 5.375% 06/01/27 100,000 100,371
Fargo ND Hlth Sys Rev Meritcare Obl (FSA) 5.375% 06/01/15 65,000 68,145
Fargo ND Hlth Sys Rev Meritcare Obl (AMBAC) 5.00% 06/01/22 45,000 45,450
Grand Forks ND Hlth Care Altru Hlth Obl Group 7.125% 08/15/24 20,000 21,757
Ward Cnty ND Hlth Care Facs Rev Trinity Obl Group B 6.00% 07/01/10 25,000 25,253
Ward Cnty ND Hlth Care Facs Rev Trinity Obl Group 5.125% 07/01/29 200,000 174,502
---------
510,285
---------
Housing Revenue Bonds 12.9%
Fargo ND Multifam Rev Ref Hsg Trollwood Village 6.90% 09/01/13 25,000 25,186
ND St Hsg Fin Agy Rev Home Mtg Prog C 4.90% 07/01/15 150,000 151,866
ND St Hsg Fin Agy Rev Hsg Fin Home MTG Fin-C 4.45% 07/01/16 100,000 99,040
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg D 5.20% 07/01/22 200,000 198,826
ND St Hsg Fin Agy Hsg Fin Home MTG-C-RMK 6.10% 07/01/28 5,000 4,915
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg B 5.85% 07/01/28 5,000 5,001
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.25% 07/01/18 35,000 35,003
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.80% 07/01/10 55,000 55,534
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.70% 07/01/09 50,000 50,486
*ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.55% 07/01/22 55,000 55,004
---------
680,861
---------
Water Revenue Bonds 6.0%
ND St Water Comm Rev Water Dev & Mgmt Prg Ser A (MBIA) 5.50% 08/01/10 50,000 52,582
ND St Water Comm Rev Water dev & Mgmt Prog (MBIA) 5.00% 08/01/25 125,000 127,609
South Central Reg Water Dist Burleigh Cnty Rev 5.00% 10/01/23 150,000 138,967
---------
319,158
---------
Other Revenue Bonds 20.3%
Grand Forks ND Mosquito Control Rev 4.75% 09/01/24 100,000 99,130
Mercer Cnty ND PCR Otter Tail Corp (AMBAC) 4.85% 09/01/22 115,000 115,472
ND Pub Fin Auth Cap Fin Prog Ser A 5.00% 06/01/31 100,000 99,118
ND Pub Fin Auth Indl Dev Prog Ser A 5.00% 06/01/20 150,000 148,270
ND St Muni Bond Bank Cap Fing Prog 6.00% 06/01/21 25,000 26,101
ND St Muni Bond Bank St Revolv Fund Prog Ser A 4.90% 10/01/18 50,000 52,202
ND St Muni Bond Bank Cap Fin Prog 5.30% 12/01/17 120,000 124,086
ND St Muni Bond Bank St Revolv Fund Prog Ser A 4.625% 10/01/19 135,000 134,777
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev 6.00% 07/01/26 15,000 15,891
Puerto Rico Pub Fin Corp Ser A (MBIA) 5.375% 08/01/24 150,000 160,123
Williams Cnty ND Sales Tax Rev 5.00% 11/01/21 100,000 96,155
---------
1,071,325
---------
Total Municipal Bonds (cost $5,273,432) 5,197,609
SHORT-TERM INVESMENTS 0.5%
Federated Muni Oblig Fund #852 25,000 25,000
----------
Total Short-Term Investments (cost: $25,000) 25,000
---------
TOTAL MARKET VALUE OF SECURITIES OWNED 98.9% (COST $5,298,432) 5,222,609
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.1% 60,046
----------
NET ASSETS APPLICABLE TO 534,052 SHARES (0.001 PAR VALUE) OUTSTANDING - 100.00% $5,282,655
==========
*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
GTY Insured by Assured Guaranty
MBIA Insured by the Municipal Bond Insurance Association
XLCA Insured by XL Capital Assurance
VIKING MUTUAL FUNDS
Schedule of Investments (Unaudited)
June 30, 2008
Viking Large-Cap Value Fund
SHARES VALUE
Common Stocks 91.2%
Basic Materials 26.2%
ALCOA 1,500 $53,430
Anadarko Petroleum 1,300 97,292
Apache 800 111,200
BP Amoco Plc ADR 1,800 125,226
Bunge Limited 900 96,921
Chevron Texaco 2,200 218,086
Conoco Phillips 2,100 198,219
Exxon Mobil 2,400 211,512
Freeport-McMoran Copper & Gold 600 70,314
Rio Tinto Plc ADS 151 74,745
--------
1,256,945
--------
Conglomerates 4.2%
General Electrics 3,400 90,746
Honeywell 2,200 110,616
--------
201,362
--------
Consumer Goods 7.2%
Dean Foods* 3,700 72,594
Johnson Controls 2,200 63,096
Kimberly-Clark 2,000 119,560
Sealed Air 4,800 91,248
--------
346,498
--------
Financial Services 17.6%
American International Group 2,800 74,088
BB&T 2,200 50,094
Bank of America 1,400 33,418
Hartford Financial Services Group 1,600 103,312
J.P. Morgan Chase & Co. 3,300 113,223
Legg Mason 1,200 52,284
Lincoln National 1,400 63,448
Morgan Stanley 2,600 93,782
PNC Financial Services Group 1,700 97,070
Sun Trust Bank 1,800 65,196
U.S. Bancorp 3,400 94,826
---------
840,741
---------
Healthcare 5.1%
Merck 3,300 124,377
Pfizer 6,700 117,049
--------
241,426
--------
Industrial Goods 2.3%
Boeing Company 1,700 111,724
--------
111,724
--------
Services 16.4%
Amerisource Bergen 1,100 43,989
AT&T 5,500 185,295
Canadian Pacific 800 52,912
CVS Corp. 3,000 118,710
Disney 4,300 134,160
Target 2,400 111,576
Time Warner Cable* 5,300 140,344
--------
786,986
--------
Technology 6.9%
Dell* 3,400 74,392
Microsoft 4,400 121,044
Verizon Communications 2,800 134,520
--------
329,956
--------
Utilities 6.3%
American Electric Power 1,900 76,437
Dominion Resources 1,900 90,231
Public Service Enterprise Group 1,900 87,267
--------
253,935
--------
Total Common Stocks (Cost $4,112,993) 4,369,573
SHORT-TERM INVESTMENTS 8.6%
First Western Bank Collective Asset Account 187,000 187,000
Federated Prime Value Obligations #853 225,000 225,000
----------
Total Short-Term Investments (cost: $412,000) 412,000
----------
TOTAL MARKET VALUE OF SECURITIES OWNED 99.8% (COST $4,524,993) 4,781,573
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.2% 9,122
----------
NET ASSETS APPLICABLE TO 424,914 SHARES ($0.001 PAR VALUE)
OUTSTANDING 100.0% $4,790,695
==========
*Non-income producing investments.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Schedule of Investments (Unaudited)
June 30, 2008
Viking Small-Cap Value Fund
SHARES VALUE
Common Stocks 94.3%
Basic Materials 9.6%
Oil States Intl Inc.* 1,400 $88,816
Cimarex Energy 800 55,736
Rosetta Resources* 2,700 76,950
Walter Industries 2,000 163,155
--------
384,657
--------
Conglomerates 1.9%
Teleflex 1,400 77,826
--------
77,826
--------
Consumer Goods 17.3%
AO Smith 2,450 80,433
AptarGroup 3,000 125,850
Borg Warner Automotive 1,300 57,694
Carters Inc.* 5,800 80,156
Chiquita Brands Intl* 4,300 65,231
Church & Dwight 1,500 84,525
Clarcor 1,000 35,100
Cooper Tire and Rubber 2,500 19,600
RC 2 Corp* 3,500 64,960
Tupperware 2,400 82,128
--------
695,677
--------
Financial 20.4%
First Midwest Bancorp 4,100 76,465
First Niagara Financial Group Inc. 6,200 79,732
Hanmi Financial 5,300 27,613
National Penn Bancshares 1,500 19,920
Protective Life 2,300 87,515
OptionXpress Holdings 3,300 73,722
Prosperity Bancshares 800 21,384
Senior Housing Properties Trust 4,100 80,073
Sterling Bancshares Inc. 9,100 82,719
Strategic Hotels & Resorts 3,600 33,732
Trustmark 4,400 77,660
Zenith National Insurance Corp. 1,800 63,288
IPC Holdings* 3,600 95,580
--------
819,403
--------
Healthcare 6.3%
Chattem* 1,200 78,060
Sciele Pharma Inc.* 4,500 87,075
West Pharmaceutical Services 2,000 86,560
--------
251,695
--------
Industrial Groups 6.0%
Albany International 1,000 29,000
Barnes Group 800 18,472
Nordson Corp 1,400 102,046
RPM 4,500 92,700
--------
242,218
--------
Services 14.6%
BJs Wholesale* 3,200 123,840
Bristow Group* 1,100 54,439
Jack In The Box* 3,300 73,953
Longs Drugs Stores 2,100 88,431
Owens & Minor 1,800 82,242
School Specialty* 1,800 53,514
Wabtec 2,300 111,826
--------
588,245
--------
Technology 9.3%
Brocade Comm* 11,500 94,760
Diodes Inc.* 2,650 73,246
Ness Technologies* 4,500 45,540
ON Semiconductor* 10,900 99,953
THQ* 1,000 20,260
Technitrol 2,300 39,077
--------
372,836
--------
Utilities 8.9%
Cleco Corpoartion 3,600 83,988
Piedmont Natural Gas 4,400 115,104
Pike Electric Corp* 4,400 73,084
Westar Energy Inc. 4,000 86,040
--------
358,216
--------
Total Common Stocks (Cost $3,426,021) 3,790,773
SHORT-TERM INVESTMENTS 5.5%
Federated Prime Value Obligations Fund #853 190,000 190,000
First Western Bank Collective Asset Account 30,000 30,000
----------
Total Short-Term Investments (Cost $220,000) 220,000
TOTAL MARKET VALUE OF SECURITIES OWNED 99.8 % (COST $3,646,021) 4,010,773
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.2% 6,381
----------
NET ASSETS APPLICABLE TO 287,650 SHARES ($0.001 PAR VALUE)
OUTSTANDING 100.0% $4,017,154
==========
*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 (Unaudited)
June 30, 2008
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
ASSETS:
Investments in securities:
Cost $10,539,490 $5,298,432 $4,524,993 $3,646,021
------------------------------------------------------------------------------------
Value 10,372,472 5,222,609 4,781,573 4,010,773
Cash 147,697 16,227 5,556 5,243
Receivable for fund shares sold 0 0 0 0
Prepaid assets 435 278 1,049 1,136
Security sales receivable 132,000 0 0 0
Interest & dividends receivable 114,810 66,617 8,552 6,270
Other Receivables 153 25 81 81
------------------------------------------------------------------------------------
Total assets 10,767,567 5,305,756 4,796,811 4,023,503
------------------------------------------------------------------------------------
LIABILITIES:
Security purchases payable 242,565 0 0 0
Payable for shares redeemed 2,590 0 0 0
Distributions payable 32,555 17,565 0 0
Other accounts payable and
accrued expenses 9,225 5,536 6,116 6,349
------------------------------------------------------------------------------------
Total liabilities 286,935 23,101 6,116 6,349
------------------------------------------------------------------------------------
NET ASSETS 10,480,632 5,282,655 4,790,695 4,017,154
------------------------------------------------------------------------------------
COMPONENTS OF NET ASSETS AT June 30, 2008
Capital shares, $0.001 par value,
unlimited shares authorized 10,794,449 5,438,817 4,625,077 3,795,808
Net unrealized appreciation
(depreciation) (167,018) (75,823) 256,580 364,752
Accumulated net realized gain
(loss) on investments (146,799) (80,339) (130,580) (149,481)
Undistributed net investment
income (loss) 0 0 39,618 6,075
------------------------------------------------------------------------------------
NET ASSETS $10,480,632 $5,282,655 $4,790,695 $4,017,154
------------------------------------------------------------------------------------
NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets, at value $10,480,632 $5,282,655 $4,790,695 $4,017,154
Shares outstanding 1,078,771 534,052 424,914 287,650
Net asset value per share $9.72 $9.89 $11.27 $13.97
Maximum offering price per share
(net asset value per share divided
by 96.25%, 96.25%, 94.75% and
94.75%, respectively) $10.10 $10.28 $11.89 $14.74
------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Operations (Unaudited)
For the six months ended June 30, 2008
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
-------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $235,173 $129,705 $ 0 $ 0
Dividends 3,684 939 70,168 35,810
-------------------------------------------------------------------------------------
Total investment income 238,857 130,644 70,168 35,810
-------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 25,841 13,635 17,821 19,823
Administrative fees 5,091 2,727 2,546 1,971
Distribution fees 12,732 6,818 6,365 4,956
Transfer agent fees 1,581 827 2,994 3,345
Accounting fees 2,588 1,356 1,273 991
Professional fees 4,292 4,296 3,901 3,902
Insurance 1,202 701 616 474
Trustee fees 472 472 473 473
Registration fees 575 63 598 559
Custodian fees 1,725 1,725 1,725 1,725
-------------------------------------------------------------------------------------
Total expenses 55,739 32,620 38,312 38,219
-------------------------------------------------------------------------------------
Less expenses waived or
reimbursed (12,751) (9,558) (7,762) (8,484)
------------------------------------------------------------------------------------
Net expenses 42,988 23,062 30,550 29,735
-------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 195,869 107,582 39,618 6,075
-------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss)
on investments (82) 528 (130,580) (149,481)
Net change in unrealized
appreciation (depreciation)
of investments (255,110) (107,089) (698,469) (95,666)
-------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (255,192) (106,561) (829,049) (245,147)
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $(59,323) $1,021 $(789,431) $(239,072)
-------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Changes in Net Assets (Unaudited)
For the six months ended June 30, 2008
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
-------------------------------------------------------------------------------------
INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS:
Net investment income (loss) $195,869 $107,582 $39,618 $6,075
Net realized gain (loss)
on investments (82) 528 (130,580) (149,481)
Net change in unrealized
appreciation (depreciation)
of investments (255,110) (107,089) (698,469) (95,666)
-------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations (59,323) 1,021 (789,431) (239,072)
-------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (195,869) (107,582) 0 0
Net realized gains 0 0 0 0
-------------------------------------------------------------------------------------
Total distributions to
shareholders (195,869) (107,582) 0 0
-------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 1,085,493 410,106 532,974 473,958
Proceeds from reinvestment
of distributions 149,295 81,288 510,951 242,191
Cost of shares repurchased (398,155) (753,919) (303,718) (278,397)
-------------------------------------------------------------------------------------
Increase in net assets
derived from capital share
transactions 836,633 (262,525) 740,207 437,752
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS $581,441 $(369,086) $(49,224) $198,680
-------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period $9,899,191 $5,651,741 $4,839,919 $3,818,474
-------------------------------------------------------------------------------------
End of period $10,480,632 $5,282,655 $4,790,695 $4,017,154
-------------------------------------------------------------------------------------
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, 2007
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) $402,239 $228,446 $99,426 $6,208
Net realized gain (loss)
on investments (1,794) 2,058 417,137 238,500
Net change in unrealized
appreciation (depreciation)
of investments (89,182) (67,991) 1,708 (179,410)
-------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations 311,263 162,513 518,271 65,298
-------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (402,239) (228,446) (99,426) (6,208)
Net realized gains 0 0 (417,137) (238,500)
-------------------------------------------------------------------------------------
Total distributions to
shareholders (402,239) (228,446) (516,563) (244,708)
-------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 1,176,641 628,427 837,540 876,705
Proceeds from reinvestment
of distributions 302,091 150,189 117,676 188,207
Cost of shares repurchased (2,572,605) (936,769) (402,544) (309,788)
-------------------------------------------------------------------------------------
Increase in net assets
derived from capital share
transactions (1,093,873) (158,153) 552,672 755,124
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS $(1,184,849) $(224,086) $554,380 $575,714
-------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period $11,084,040 $5,875,827 $4,285,539 $3,242,760
-------------------------------------------------------------------------------------
End of period $ 9,899,191 $5,651,741 $4,839,919 $3,818,474
-------------------------------------------------------------------------------------
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
01/01/08- 01/01/07- 01/01/06- 01/01/05- 01/01/04- 01/01/03-
06/30/08 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
(Unaudited)
--------------------------------------------------------------------------
Net asset value, beginning of period $9.96 $10.06 $10.04 $10.22 $10.20 $10.18
--------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.19 0.39 0.39 0.38 0.38 0.42
Net realized and unrealized gain
(loss) on investments (0.24) (0.10) 0.02 (0.18) 0.02 0.02
--------------------------------------------------------------------------
Total from investment operations (0.05) 0.29 0.41 0.20 0.40 0.44
--------------------------------------------------------------------------
Less distributions from:
Net investment income (0.19) (0.39) (0.39) (0.38) (0.38) (0.42)
Net realized gains 0.00 0.00 0.00 0.00 0.00 0.00
---------------------------------------------------------------------------
Total distributions (0.19) (0.39) (0.39) (0.38) (0.38) (0.42)
---------------------------------------------------------------------------
Net asset value, end of period $9.72 $9.96 $10.06 $10.04 $10.22 $10.20
---------------------------------------------------------------------------
Total return1 (0.52)% 2.96% 4.15% 1.96% 4.05% 4.45%
---------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $10,481 $9,899 $11,084 $12,408 $12,206 $12,634
Ratio of net expenses to average net assets 0.84%2,3 0.76%2 0.63%2 0.55%2 0.41%2 0.31%2
Ratio of net investment income to
average net assets 3.84%3 3.91% 3.87% 3.71% 3.78% 4.13%
Portfolio turnover rate 3.12% 26.57% 24.39% 24.59% 26.55% 24.72%
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 $12,751, $35,778, $53,771, $65,270, $80,645, and $81,954.
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
1.09%, 1.11%, 1.08%, 1.06%, 1.06% and 1.09% respectively.
3Annualized
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
01/01/08- 01/01/07- 01/01/06- 01/01/05- 01/01/04- 01/01/03-
06/30/08 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
(Unaudited)
----------------------------------------------------------------------------
Net asset value, beginning of period $10.10 $10.22 $10.14 $10.29 $10.29 $10.25
----------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.20 0.40 0.39 0.38 0.38 0.42
Net realized and unrealized gain
(loss) on investments (0.21) (0.12) 0.08 (0.15) 0.00 0.04
----------------------------------------------------------------------------
Total from investment operations (0.01) 0.28 0.47 0.23 0.38 0.46
----------------------------------------------------------------------------
Less distributions from:
Net investment income (0.20) (0.40) (0.39) (0.38) (0.38) (0.42)
Net realized gains 0.00 0.00 0.00 0.00 0.00 0.00
----------------------------------------------------------------------------
Total distributions (0.20) (0.40) (0.39) (0.38) (0.38) (0.42)
----------------------------------------------------------------------------
Net asset value, end of period $9.89 $10.10 $10.22 $10.14 $10.29 $10.29
----------------------------------------------------------------------------
Total return1 (0.13)% 2.77% 4.77% 2.24% 3.76% 4.60%
Ratios/supplemental data:
Net assets, end of period (000s) $5,283 $5,652 $5,876 $6,541 $6,086 $4,781
Ratio of net expenses to average net assets 0.85%2,3 0.77%2 0.62%2 0.52%2 0.44%2 0.36%2
Ratio of net investment income to
average net assets 3.95%3 3.92% 3.86% 3.70% 3.68% 4.06%
Portfolio turnover rate 3.25% 28.12% 35.84% 17.61% 22.36% 7.49%
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 $9,558, $25,374, $34,667, $41,214, $40,375, and $32,710.
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
1.20%, 1.20%, 1.18%, 1.16%, 1.18% and 1.32% respectively.
3Annualized
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
01/01/08- 01/01/07- 01/01/06- 01/01/05- 01/01/04- 01/01/03-
06/30/08 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
(unaudited)
----------------------------------------------------------------------------
Net asset value, beginning of period $13.19 $13.09 $11.64 $10.88 $10.06 $8.20
----------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.09 0.27 0.14 0.08 0.05 0.06
Net realized and unrealized gain
(loss) on investments (2.01) 1.24 1.67 0.76 0.82 1.86
----------------------------------------------------------------------------
Total from investment operations (1.92) 1.51 1.81 0.84 0.87 1.92
----------------------------------------------------------------------------
Less distributions from:
Net investment income 0.00 (0.27) (0.14) (0.08) (0.05) (0.06)
Net realized gains 0.00 (1.14) (0.22) 0.00 0.00 0.00
----------------------------------------------------------------------------
Total distributions 0.00 (1.41) (0.36) (0.08) (0.05) (0.06)
----------------------------------------------------------------------------
Net asset value, end of period $11.27 $13.19 $13.09 $11.64 $10.88 $10.06
----------------------------------------------------------------------------
Total return1 (14.56)% 11.52% 15.58% 7.76% 8.63% 23.42%
Ratios/supplemental data:
Net assets, end of period (000s) $4,791 $4,840 $4,286 $3,636 $3,088 $2,745
Ratio of net expenses to average net assets 1.20%2,3 1.35%2 1.35%2 1.34%2 1.34%2 1.35%2
Ratio of net investment income to
average net assets 1.56%3 2.01% 1.18% 0.81% 0.47% 0.73%
Portfolio turnover rate 17.65% 35.23% 22.53% 37.51% 25.70% 26.75%
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 1.20% of its average net assets on an annual basis. For the periods
indicated above, Viking Fund Management, LLC waived fees and reimbursed
expenses totaling $7,762, $17,059, $17,512, $15,575, $14,372, and $15,021.
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
1.51%, 1.70%, 1.78%, 1.82%, 1.84% and 2.02% respectively.
3Annualized
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
01/01/08- 01/01/07- 01/01/06- 01/01/05- 01/01/04- 01/01/03-
06/30/08 12/31/07 12/30/06 12/31/05 12/31/04 12/31/03
(unaudited)
----------------------------------------------------------------------------
Net asset value, beginning of period $14.85 $15.43 $14.32 $14.40 $12.43 $9.35
----------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.02 0.02 0.01 (0.03) (0.06) (0.03)
Net realized and unrealized gain
(loss) on investments (0.90) 0.35 2.00 0.63 2.28 3.11
----------------------------------------------------------------------------
Total from investment operations (0.88) 0.37 2.01 0.60 2.22 3.08
----------------------------------------------------------------------------
Less distributions from:
Net investment income 0.00 (0.02) (0.01) 0.00 0.00 0.00
Net realized gains 0.00 (0.93) (0.89) (0.68) (0.25) 0.00
----------------------------------------------------------------------------
Total distributions 0.00 (0.95) (0.90) (0.68) (0.25) 0.00
----------------------------------------------------------------------------
Net asset value, end of period $13.97 $14.85 $15.43 $14.32 $14.40 $12.43
----------------------------------------------------------------------------
Total return1 (5.93)% 2.41% 14.02% 4.18% 17.86% 32.94%
Ratios/supplemental data:
Net assets, end of period (000s) $4,017 $3,818 $3,243 $2,509 $1,715 $1,250
Ratio of net expenses to average net assets 1.49%2,3 1.65%2 1.65%2 1.65%2 1.65%2 1.65%2
Ratio of net investment income to average
net assets 0.30%3 0.16% 0.08% (0.21)% (0.46)% (0.37)%
Portfolio turnover rate 26.09% 46.19% 36.96% 21.93% 15.39% 14.77%
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 1.50% of its average net assets on an
annual basis. For the periods indicated above, Viking Fund Management,
LLC waived fees and reimbursed expenses totaling $8,484, $18,509, $17,847,
$15,661, $14,316, and $12,883. 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 1.91%, 2.15%, 2.23%, 2.39%, 2.63%,
and 3.16% respectively.
3Annualized
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Notes to Financial Statements (Unaudited)
June 30, 2008
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 six months ended
June 30, 2008 and year ended December 31, 2007 were as follows:
Tax-Free Fund for Tax-Free Fund for Large-Cap Small-Cap
Montana North Dakota Value Fund Value Fund
-----------------------------------------------------------------------------------
2008 2007 2008 2007 2008 2007 2008 2007
-----------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income $195,869 $402,239 $107,582 $228,446 $0 $0 $0 $0
Ordinary income $0 $0 $0 $0 $0 $136,817 $0 $6,208
Long-term capital gain $0 $0 $0 $0 $0 $379,746 $0 $238,500
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 01/01/08 from 01/01/08 from 01/01/08 from 01/01/08
through 06/30/08 through 06/30/08 through 06/30/08 through 06/30/08
----------------------------------------------------------------------------
Shares sold 109,943 40,991 43,868 33,611
Shares issued in reinvestment
of distributions 15,111 8,144 38,738 16,309
Shares redeemed (40,195) (74,889) (24,607) (19,488)
----------------------------------------------------------------------------
Net Increase (Decrease) 84,859 (25,754) 57,999 30,432
----------------------------------------------------------------------------
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 $25,481 of investment advisory fees for the
six months ended June 30, 2008. On June 30, 2008, the Tax-Free Fund for
Montana had a payable to VFM for investment advisory fees of $4,385. The
Tax-Free Fund for North Dakota recognized $13,635 of investment advisory
fees for the six months ended June 30, 2008. On
June 30, 2008, the Tax-Free Fund for North Dakota had a payable to VFM for
investment advisory fees of $2,193. The Large-Cap Fund recognized $17,821
of investment advisory fees for the six months ended June 30, 2008. On
June 30, 2008, the Large-Cap Fund had a payable to VFM for investment
advisory fees of $2,939. The Small-Cap Fund recognized $19,823 of
investment advisory fees for the six months ended June 30, 2008. On June
30, 2008, the Small-Cap Fund had a payable to VFM for investment advisory
fees of $3,480. 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 $25 million and 0.35% to
the Large-Cap Funds daily net assets in excess of $25 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 of up to $5 million,
0.45% to the Funds daily net assets on the next $10 million, 0.50% to the
Funds daily net assets on the next $10 million, 0.55% to the Funds daily
net assets on the next $10 million and 0.60% to the Funds daily net assets
in excess of $35 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. After the Fee waivers, no fees for
administrative services, portfolio accounting or transfer agent services
were recognized by the Funds, for the six months ended June 30, 2008.
The Funds have a distribution plan, sometimes known as a Rule 12b-1 plan,
that allows the Funds to pay distribution and service fees of up
to 0.25% 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 six months ended June 30, 2008, the Tax-Free Fund for
Montana recognized $9,259, the Tax-Free Fund for North Dakota recognized
$2,171, Large-Cap Value Fund recognized $5,405 and Small-Cap Value Fund
recognized $2,835 of 12b-1 fees after a partial waiver. On June 30, 2008,
the Tax Free Fund for Montana, Tax Free Fund for North Dakota, the Large
Cap Fund and Small-Cap Fund had payables to VFD for 12b-1 fees of $1,573,
$235, $706, and $373, respectively.
For the six months ending June 30, 2008, the net amounts of sales charges
deducted from the proceeds of sale of capital shares which were retained
by VFD as principal underwriter were $7,779, $564, $1,085 and $631 for the
Tax-Free Fund for Montana, Tax-Free Fund for North Dakota, Large-
Cap Fund and Small-Cap Fund, respectively. On June 30, 2008, 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 $850, $142, $21, and
$27, 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 1.20% of average net
assets on an annual basis and the Small-Cap Funds total operating
expenses during this period will not exceed 1.50% 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, 2007, the Funds most recently completed year end, Tax-Free
Fund for Montana and Tax-Free Fund for North Dakota had capital losses of
$146,717 and $80,867 respectively, which may be carried over to offset
future capital gains. Such losses start to expire in 2009.
At June 30, 2008, 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 $10,539,490 $5,298,432 $4,524,993 $3,426,021
------------------------------------------------------------------------------------
Unrealized appreciation 71,079 35,753 872,948 743,172
Unrealized depreciation (238,097) (111,576) (616,368) (378,419)
------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) ($167,018) ($75,823) $256,580 $364,753
------------------------------------------------------------------------------------
7. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
six months ended June 30, 2008 were as follows:
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
------------------------------------------------------------------------------------
Purchases $1,025,128 $175,000 $1,132,280 $1,220,539
Sales $308,201 $641,793 $842,548 $953,400
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. In accordance with the provisions of SFAS
No. 157, the Funds adopted this standard effective January 1, 2008. The
implementation of the standard did not impact the amounts reported in the
financial statements, however, the following additional disclosure is required
about the inputs used to develop the measurements of fair value.
Various inputs are used in determining the value of the Funds investments.
These inputs are summarized in the three broad levels listed below:
* Level 1 - quoted prices in active markets for identical securities
* Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk, etc.)
* Level 3 - significant unobservable inputs (including the Funds own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in these securities.
The following is a summary of the inputs used to value the Funds net assets as
of June 30, 2008:
Investments in Securities
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
Valuation Inputs for Montana for North Dakota Value Fund Value Fund
------------------ -------------------------------------------------------------------------------------
Level 1 Quoted Prices $163,361 $25,000 $4,781,573 $4,010,773
Level 2 Other Significant
Observable Inputs 10,209,111 5,197,609 - -
Level 3 Significant
Unobservable Inputs - - - -
------------------------------------------------------------------------------------
Total $10,372,472 $5,222,609 $4,781,573 $4,010,773
VIKING MUTUAL FUNDS
Miscellaneous Information (Unaudited)
June 30, 2008
Board Approval of Investment Advisory Agreement
In connection with each annual approval, the Board of Trustees is provided
with information to assist it in evaluating whether to approve the
continuance of the Agreement.
In considering whether to approve the Investment Advisory and Sub-Advisory
Agreements, the Board, including the Independent Trustees, considered a
number of factors they believed to be relevant. These factors included
the following: (1) the nature, extent and quality of the services provided
by the advisor; (2) the resources, experience and expertise of the
advisor; (3) the performance of the Funds and the advisor; (4) the
financial capability of the advisor; (5) the compliance history of the
advisor; (6) the performance of the Funds in comparison to similarly
managed funds; (7) the amount of the contractual advisory fee in
comparison to similarly managed funds; (8) the profitability of the
advisor; (9) the extent of any economies of scale; and (10) the existence
of any collateral benefits realized by the advisor and by the Funds.
On the basis of the information provided for their review, the Trustees
reached the following conclusions with respect to the Advisory Agreement:
(1) a comparison of the net operating expenses for the Viking Tax-Free
Fund for Montana and for the Viking Tax-Free Fund for North Dakota to
other funds of similar objective and size reflected that the Viking Tax-
Free Funds have lower expense structures than most of the other funds;
(2) a comparison of the net operating expense for the Viking Large-Cap
Value Fund to other funds of similar objective and size reflect that the
Large-Cap Value Fund has a lower expense structure than most of the other
funds; (3) a comparison of the net operating expense for the Viking Small-
Cap Value Fund to other funds of similar objective and size reflect that
the Small-Cap Value Fund has an expense structure similar to the average
of the other funds; (4) a comparison of the management fees charged by the
Advisor seemed reasonable to the Trustees when compared to similar funds
in objective and size; (5) upon a review of the total return history and
category rankings of each Fund, the Trustees deemed the performance of
each Fund to be satisfactory; (6) the overall nature and quality of the
services provided by the Advisor had historically been, and continued to
be, satisfactory to the Trustees; (7) the Trustees discussed the fact that
the advisor does not benefit from economies of scale due to its
relationship to the Funds as the Viking Funds are relatively small and are
its only advisory clients; (8) the Trustees discussed the profitability
issues regarding the Advisor and felt comfortable with the direction of
the Advisor and its prospects for becoming more profitable.
On the basis of the information provided for their review, the Trustees
reached the following conclusions with respect to the Sub-Advisory
Agreement: (1) the Trustees felt the overall nature and quality of
services of Fox Asset Management, LLC (Fox) are satisfactory; (2) the
sub-advisory fees paid to Fox are fair and reasonable in light of the sub-
advisory services expected to be provided and the comparability of the
sub-advisory fees paid by other funds and separately managed accounts; (3)
upon a review of the total return history and category rankings of each
Value Fund, the Trustees deemed the performance of each Value Fund to be
satisfactory; (4) the Trustees are satisfied with Fox regarding its
staffing and capabilities to manage the Value Funds, including the
retention of personnel with significant portfolio management experience.
VIKING MUTUAL FUNDS
Miscellaneous Information (Unaudited)
June 30, 2008
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 01/01/08 Value 06/30/08 Period1 01/01/08-06/30/08
Viking Tax-Free Fund for Montana
Actual $1,000.00 $975.91 $4.18
Hypothetical (5% return before expenses) $1,000.00 $1,020,64 $4.27
Viking Tax-Free Fund for North Dakota
Actual $1,000.00 $979.12 $4.18
Hypothetical (5% return before expenses) $1,000.00 $1,020.64 $4.27
Viking Large-Cap Value Fund
Actual $1,000.00 $854.44 $5.53
Hypothetical (5% return before expenses) $1,000.00 $1,018.90 $6.02
Viking Small-Cap Value Fund
Actual $1,000.00 $940.74 $7.24
Hypothetical (5% return before expenses) $1,000.00 $1,017.40 $7.52
1Expenses are equal to the annualized expense ratio for each Fund (Viking
Tax-Free Fund for Montana: 0.85%; Viking Tax-Free Fund for North Dakota:
0.85%; Viking Large-Cap Value Fund: 1.20%; and Viking Small-Cap Value
Fund: 1.50%), multiplied by the average account value over the period,
multiplied by 182/366 to reflect the one-half year period.
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 is available on the SECs website at http://www.sec.gov or
upon request by calling 1-800-933-8413. 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)
June 30, 2008
NAME AND PRINCIPAL OCCUPATION(S)
ADDRESS AGE POSITION(S) HELD DURING PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------------------------
Shannon D. Radke 41 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 71 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 (1973-2006.);
Speaker of the North Dakota House of
Representatives (1997).
Peter C. Zimmerman 42 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
2200 15th St. SW
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
701-852-1264
When used with prospective investors, this report must be preceded by
a current Viking Mutual Funds prospectus. The prospectus sets forth details
about charges, expenses, investment objectives and operating policies of each
of the Funds. You should read the prospectus carefully before you invest.
To obtain a prospectus, contact your investment professional or Viking Mutual
Funds.
ITEM 2. CODE OF ETHICS.
Not applicable to semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to semi-annual reports.
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 fiscal quarter of the
period covered by this report that has materially affected or is reasonably
likely to materially affect, its internal control over financial reporting.
ITEM 12 EXHIBITS.
(a)(1) Not applicable to semi-annual reports.
(a)(2) The certifications required by Rule 30a-2(a) under the Investment
Company Act of 1940 are filed and attached as exhibits.
(a)(3) Not applicable.
(b) 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: September 5, 2008
/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: September 5, 2008
/s/ Shannon D. Radke
--------------------------------
Shannon D. Radke
President
Date: September 5, 2008
/s/ Shannon D. Radke
--------------------------------
Shannon D. Radke
Treasurer