UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-09277
--------
VIKING MUTUAL FUNDS
-------------------
(Exact name of registrant as specified in charter)
116 1st St SW Suite C, MINOT, ND 58701
(Address of principal executive offices) (Zip code)
Shannon D. Radke, 116 1st St SW Suite C, MINOT, ND 58701
-----------------------------------------------------
(Name and address of agent for service)
Registrants telephone number, including area code: (701) 852-1264
--------------
Date of fiscal year end: 12/31
----
Date of reporting period: 12/31/08
-------
ITEM 1. REPORTS TO STOCKHOLDERS.
SHAREHOLDER LETTER
Dear Fellow Shareholder:
It is a pleasure to bring you the Viking Mutual Funds Annual Report
for the year ended December 31, 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. 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. 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 took a number of emergency steps
to ease credit strains that threatened to make the economys ills
worse, pumping billions of dollars into markets to keep them from
choking on mortgage-related bets. Factors contributing to the
economic slowdown worsened in the third quarter. The labor market
contracted at a faster pace, asset values continued to decline
meaningfully with home prices dropping over 16% year-over-year and stock
prices moving lower as well. These factors obviously affected consumer
confidence and consumer spending which accounts for two-thirds of GDP.
Additionally, the credit crisis exacerbated the situation as consumer
credit became more difficult to obtain. If this were not enough, all
major economies experienced a significant slowdown, precipitated by
constrained credit availability. The beginning of the fourth quarter
brought a rare coordinated move as the Federal Reserve and other major
central banks from around the world slashed interest rates to prevent
a mushrooming financial crisis from becoming a global economic meltdown.
The Fed reduced its key rate from 2 percent to 1.5 percent as the pace of
economic activity had slowed markedly and the intensification of financial
market turmoil was likely to exert additional restraint on spending, partly
by further reducing the ability of households and businesses to obtain
credit. The Fed again cut the funds rate by a half-point in late October
stating that downside risks to growth remain. In December, the Fed pulled
out all the stops in its campaign of unprecedented actions to arrest the
worst financial crisis since the Great Depression, slashing interest rates
to a range of zero to 0.25% and promising to try an array of new economic
measures to stimulate spending. The Federal Reserve will employ all
available tools to promote the resumption of sustainable economic growth,
the central bank pledged in its policy statement. However, as 2008 drew
to a close, the economic environment remained troublesome as economic data
will continue to be negative for sometime, perhaps into the second half of
2009, and possibly longer. The massive deleveraging process that began with
the difficulties at two Bear Stearns hedge funds in the spring of 2007
continues at an accelerating pace.
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%. As the third quarter of 2008 unfolded,
the already-weak environment for global equity and credit markets worsened.
Domestic large-cap stocks as measured by the Russell 1000 Value index were down
6.11% while the S&P 500 was down 9.00%. The headlines accompanying these
results were, if anything, even more disturbing. Lehman Brothers declared
bankruptcy. Fannie Mae, Freddie Mac, AIG and Washington Mutual all failed
and/or were rescued. Merrill Lynch and Wachovia agreed to shotgun marriages
and concerned about their ability to raise capital, both Goldman Sachs and
Morgan Stanley became commercial banks. Despite all this turmoil, the small-cap
market held up relatively well. The Russell 2000 Value Index generated a
positive return of 4.96% in the quarter. This was partially due to the absence
of highly leveraged brokerage companies in the small-cap segment, a group that
did dramatically worse than most others. To call the fourth quarter of 2008
memorable is clearly an understatement. The markets started the quarter on
shaky legs and it didnt take long for those legs to give out. Fear was
decisively in charge and clearly has continued to drive the performance of
stocks. For the final three months of 2008, the S&P 500 fell 24.89% and in
October it recorded its most volatile month in its 80 year history. The Russell
1000 Value declined 22.18% while the Russell 2000 Value lost 24.89%. The
statistics for the year tell a similar tale. Large-cap value stocks declined
36.85%, and small-cap value stocks declined 28.92%, as represented by the Russell
1000 Value and 2000 Value, respectively. On a historical basis, 2008 was the worst
year for equity performance since the Great Depression as the Dow slumped nearly
34% and the S&P 500 lost more than 38%. More than $5 trillion in wealth vanished
out of the S&P alone.
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. The February collapse of the market for auction-rate
securities a type of short term debt treated by investors as a cash equivalent and
issued by municipalities looking to lower costs forced some municipal issuers to
borrow at rates of 20%. This market fell apart after the bank underwriters refused
to play their traditional roles in auctions because their books had been roiled by
subprime mortgages. 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. 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. For the quarter, intermediate to long
term muni bond prices were mixed, but generally lower. Municipals sold off
further in the third quarter with the bankruptcy of Lehman and a deteriorating
economic outlook spurring a massive flight to U.S Treasury Securities. This
resulted in wider credit spreads, a steeper yield curve, and thinner secondary
market liquidity. The fourth quarter for munis was more of the same and
brought to a close the worst year for municipal bonds in the past two decades.
The municipal bond market faced a string of problems this year, many of which
had nothing to do with the ability of the state or local governments to pay
principal and interest on their bonds. All the havoc sent yields on
municipals well above Treasurys of the same maturity. Thats highly unusual
because debt sold by municipalities is exempt from federal taxes and most
state and local taxes to make it cheaper to fund public projects.
In this type of market environment, it is highly important to seek the help
of a professional when investing. Making the right decisions in these markets
can be very difficult and an experienced investment professional can address
your concerns about the market and provide the guidance needed to help you
diversify your investments and stay focused on the long term.
Fund reports containing a discussion of individual Fund performance as well
as the Funds portfolios and financial statements are presented within for your review.
We thank you for your confidence in Viking Mutual Funds. Our interests are closely
aligned with those of our shareholders because our money is invested alongside their
own. As always we will do our best to make sure your
experience as a shareholder is a rewarding one.
Sincerely,
/s/Shannon D. Radke
Shannon D. Radke
President
Viking Mutual Funds
VIKING TAX-FREE FUND FOR MONTANA
By: Shannon D. Radke,
President/Portfolio Manager
Viking Tax-Free Fund for Montana provided a total return of -4.66%
(at net asset value with distributions reinvested) for the year ended December 31, 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. The February collapse of the market
for auction-rate securities a type of short term debt treated
by investors as a cash equivalent and issued by municipalities
looking to lower costs forced some municipal issuers to borrow
at rates of 20%. This market fell apart after the bank
underwriters refused to play their traditional roles in auctions
because their books had been roiled by subprime mortgages.
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. 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. Municipals sold off further in the third quarter with the
bankruptcy of Lehman and a deteriorating economic outlook spurring a
massive flight to U.S Treasury Securities. This resulted in wider
credit spreads, a steeper yield curve, thinner secondary market
liquidity and a significant reduction in the Funds share price.
The fourth quarter for munis and the Funds share price was more
of the same and brought to a close the worst year for municipal
bonds in the past two decades. The municipal bond market faced
a string of problems this year, many of which had nothing to do with
the ability of the state or local governments to pay principal and
interest on their bonds. All the havoc sent yields on municipals
well above Treasurys of the same maturity. Thats highly unusual
because debt sold by municipalities is exempt from federal taxes and
most state and local taxes to make it cheaper to fund public projects.
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 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 Montana income taxes and is consistent with preservation
of capital remains the investment objective of the Fund.
VIKING TAX-FREE FUND FOR MONTANA
Growth of a $10,000 Investment
August 3, 1999 through December 31, 2008 (Unaudited)
Comparison of Change in Value of a $10,000 Investment in Viking
Tax-Free Fund for Montana vs. the Barclays Capital Municipal Bond Index
[Comparative index graph]
Viking Tax-Free Fund Viking Tax-Free Fund Lehman Brothers
for Montana for Montana Municipal Bond
with max sales charge without max sales charge Index
---------------------------------------------------------------------
August 3, 1999 $ 9,550 $10,000 $10,000
October 31, 1999 $ 9,196 $ 9,628 $ 9,817
December 31, 1999 $ 9,125 $ 9,554 $ 9,846
February 28, 2000 $ 9,185 $ 9,617 $ 9,918
April 30, 2000 $ 9,405 $ 9,847 $10,075
June 30, 2000 $ 9,468 $ 9,913 $10,288
August 31, 2000 $ 9,748 $10,206 $10,592
October 31, 2000 $ 9,796 $10,257 $10,652
December 31, 2000 $10,058 $10,531 $10,998
February 28, 2001 $10,185 $10,664 $11,142
April 30, 2001 $10,103 $10,578 $11,121
June 30, 2001 $10,263 $10,745 $11,317
August 31, 2001 $10,672 $11,173 $11,674
October 31, 2001 $10,719 $11,223 $11,772
December 31, 2001 $10,509 $11,002 $11,563
February 28, 2002 $10,785 $11,292 $11,905
April 30, 2002 $10,821 $11,330 $11,899
June 28, 2002 $10,981 $11,498 $12,099
August 31, 2002 $11,276 $11,806 $12,402
October 31, 2002 $11,329 $11,862 $12,463
December 31, 2002 $11,549 $12,092 $12,673
February 28, 2003 $11,710 $12,260 $12,818
April 30, 2003 $11,750 $12,303 $12,910
June 30, 2003 $11,934 $12,495 $13,155
July 31, 2003 $11,490 $12,030 $12,695
August 31, 2003 $11,575 $12,119 $12,790
September 30, 2003 $11,908 $12,468 $13,166
October 31, 2003 $11,832 $12,388 $13,100
November 30, 2003 $11,950 $12,511 $13,237
December 31, 2003 $12,063 $12,630 $13,347
January 31, 2004 $12,136 $12,706 $13,423
February 29, 2004 $12,313 $12,892 $13,625
March 31, 2004 $12,274 $12,850 $13,578
April 30, 2004 $12,001 $12,565 $13,256
May 31, 2004 $11,941 $12,503 $13,208
June 30, 2004 $12,006 $12,570 $13,256
July 31, 2004 $12,165 $12,737 $13,429
August 31, 2004 $12,374 $12,956 $13,698
September 30, 2004 $12,436 $13,020 $13,771
October 31, 2004 $12,484 $13,071 $13,889
November 30, 2004 $12,414 $12,997 $13,775
December 31, 2004 $12,551 $13,141 $13,943
January 31, 2005 $12,601 $13,194 $14,074
February 28, 2005 $12,587 $13,179 $14,027
March 31, 2005 $12,443 $13,028 $13,939
April 30, 2005 $12,604 $13,196 $14,160
May 31, 2005 $12,693 $13,290 $14,260
June 30, 2005 $12,757 $13,356 $14,349
July 29, 2005 $12,682 $13,278 $14,284
August 31, 2005 $12,749 $13,348 $14,428
September 30, 2005 $12,750 $13,349 $14,332
October 31, 2005 $12,678 $13,274 $14,244
November 30, 2005 $12,718 $13,315 $14,313
December 30, 2005 $12,797 $13,398 $14,436
January 31, 2006 $12,865 $13,469 $14,475
February 28, 2006 $12,889 $13,495 $14,572
March 31, 2006 $12,845 $13,449 $14,471
April 30, 2006 $12,819 $13,422 $14,467
May 31, 2006 $12,916 $13,524 $14,532
June 30, 2006 $12,802 $13,404 $14,477
July 31, 2006 $12,986 $13,596 $14,649
August 31, 2006 $13,133 $13,750 $14,866
September 30, 2006 $13,225 $13,847 $14,970
October 31, 2006 $13,245 $13,867 $15,064
November 30, 2006 $13,339 $13,966 $15,189
December 31, 2006 $13,328 $13,954 $15,136
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 28, 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 $13,602 $15,842
February 29, 2008 $13,642 $14,283 $15,117
March 31, 2008 $13,620 $14,261 $15,549
April 30, 2008 $13,665 $14,307 $15,731
May 31, 2008 $13,751 $14,397 $15,827
June 30, 2008 $13,653 $13,295 $15,648
July 31, 2008 $13,842 $14,493 $15,708
August 31, 2008 $13,927 $14,581 $15,891
September 30, 2008 $13,435 $14,067 $15,146
October 31, 2008 $13,185 $13,805 $14,992
November 30, 2008 $13,313 $13,939 $15,040
December 31, 2008 $13,082 $13,697 $15,259
The chart assumes $10,000 invested on August 3, 1999 and includes the
effect of a 4.50% front-end sales charge, as applicable and the
reinvestment of all dividends and capital gains. It is intended to
give you an ideal of how your fund performed compared to the index over
the period 08/03/99-12/31/08. 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
Barclays Capital Municipal Bond Index is not managed and incurs no sales
charges, expenses or fees. If you could buy all the securities that
make up a market index, you would incur expenses that would affect your
investments return. Returns shown do not reflect the deduction of the
taxes that a shareholder would pay on fund distributions or redemption of
fund shares. Past performance does not guarantee future
results.
Average Annual Total Returns Lifetime
Through December 31, 2008 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge -4.66% 0.74% 1.63% 3.40%
Including Sales Charge -8.26% -0.54% 0.70% 2.89%
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 would have
been higher had the current maximum sales charge been in effect for the
stated periods. Return and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
Returns shown do not reflect the deduction of the taxes that a shareholder
would pay on fund distributions or redemption of fund shares. Past
performance is not a guarantee of future results.
VIKING TAX-FREE FUND FOR NORTH DAKOTA
By: Shannon D. Radke,
President/Portfolio Manager
Viking Tax-Free Fund for North Dakota provided a total return of -4.89%
(at net asset value with distributions reinvested) for the year ended December 31, 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. The February collapse of the market
for auction rate securities a type of short term debt treated
by investors as a cash equivalent and issued by municipalities
looking to lower costs forced some municipal issuers to borrow
at rates of 20%. This market fell apart after the bank
underwriters refused to play their traditional roles in auctions
because their books had been roiled by subprime mortgages.
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. 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. Municipals
sold off further in the third quarter with the bankruptcy of
Lehman and a deteriorating economic outlook spurring a massive
flight to U.S Treasury Securities. This resulted in wider credit
spreads, a steeper yield curve, thinner secondary market liquidity
and a significant reduction in the Funds share price. The fourth
quarter for munis and the Funds share price was more of the same
and brought to a close the worst year for municipal bonds in the past
two decades. The municipal bond market faced a string of problems this
year, many of which had nothing to do with the ability of the state or
local governments to pay principal and interest on their bonds. All the
havoc sent yields on municipals well above Treasurys of the same maturity.
Thats highly unusual because debt sold by municipalities is exempt from
federal taxes and most state and local taxes to make it cheaper to
fund public projects.
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 December 31, 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 $13,697 $14,340 $15,273
August 31, 2007 $13,578 $14,217 $15,208
September 28, 2007 $13,836 $14,487 $15,433
October 31, 2007 $13,940 $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 $13,812 $14,461 $15,731
May 31, 2008 $13,914 $14,568 $15,827
June 30, 2008 $13,904 $14,558 $15,648
July 31, 2008 $14,093 $14,755 $15,708
August 31, 2008 $14,164 $14,830 $15,891
September 30, 2008 $13,504 $14,139 $15,146
October 31, 2008 $13,171 $13,790 $14,992
November 30, 2008 $13,386 $14,015 $15,040
December 31, 2008 $13,241 $13,863 $15,259
The chart assumes $10,000 invested on August 3, 1999 and includes the
effect of a 4.50% front-end sales charge, as applicable and the
reinvestment of all dividends and capital gains. It is intended to
give you an ideal of how your fund performed compared to the index over
the period 08/03/99-12/31/08. 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
Barclays Capital Municipal Bond Index is not managed and incurs no sales
charges, expenses or fees. If you could buy all the securities that
make up a market index, you would incur expenses that would affect your
investments return. Returns shown do not reflect the deduction of the
taxes that a shareholder would pay on fund distributions or redemption of
fund shares. Past performance does not guarantee future
results.
Average Annual Total Returns Lifetime
Through December 31, 2008 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge -4.88% 0.80% 1.68% 3.53%
Including Sales Charge -8.42% -0.49% 0.75% 3.03%
Returns reflect reinvestment of distributions and
the maximum sales charge, as applicable. The total
returns for the three year, 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 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 & CEO, Fox Asset Management, LLC
Shannon D. Radke, President
Viking Large-Cap Value Fund provided a total return of -40.41%
(at net asset value) for the year ended December 31, 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 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 the third quarter of 2008 unfolded, the already weak environment for
global equity markets worsened. Domestic large cap stocks as measured
by the Russell 1000 Value index were down 6.11% while the S&P 500 was
down 9.00% and the Fund lost 5.94%. The headlines accompanying these
results were, if anything, even more disturbing. Lehman Brothers
declared bankruptcy, Fannie Mae, Freddie Mac, AIG and Washington Mutual
all failed and/or were rescued. Merrill Lynch and Wachovia agreed to
shotgun marriages and concerned about their ability to raise capital,
both Goldman Sachs and Morgan Stanley became commercial banks. Stock
selection was a major positive led by names in the financial sector
that we owned and others we generally avoided, such as some of the poorest
performing brokerage firms. Stock selection was also positive in the
energy, materials and telecommunication services sectors. Sector selection
detracted from performance, mainly due to a slight underweight in the
outperforming financial sector.
To call the fourth quarter of 2008 memorable is clearly an understatement.
The markets started the quarter on shaky legs and it didnt take long for
those legs to give out. Fear was decisively in charge and clearly has
continued to drive the performance of stocks. For the final three months
of 2008, the S&P 500 fell 24.89% and in October it recorded
its most volatile month in its 80 year history. The Russell 1000 Value
declined 22.18% while the Russell 2000 Value lost 24.89% and the Fund dropped
25.85%. In the fourth quarter, we increased our exposure to insurance stocks
and banks after they plummeted earlier in the prior quarter. We particularly
emphasized the insurance area, which had held up rather
well and had little exposure to the toxic assets that dominated the
headlines in the months earlier. But several insurance companies have
liabilities associated with guaranteed returns that are tied to the stock market,
and the short sellers went wild. Two thirds of the performance shortfall
came from this area and another third can be attributed to the weakness
in the banks. Frankly, we had misestimated the scope and scale of the
banking crisis, and it hurt performance as a result. The statistics for the
year tell a similar tale. Large-cap value stocks declined 36.85%, as
represented by the Russell 1000 Value while the Fund fell 40.41%. On a
historical basis, 2008 was the worst year for equity performance since the
Great Depression as the Dow slumped nearly 34% and the S&P 500 lost more
than 38%. More than $5 trillion in wealth vanished out of the S&P alone.
We are steadfast in our commitment to finding well managed companies with
decent balance sheets and free cash flow or the ability to dramatically
increase cash flow that are selling at discount valuations to the market.
Long-term total return and capital preservation remains the investment
objective of the Fund.
VIKING LARGE-CAP VALUE FUND
Growth of a $10,000 Investment
August 3, 1999 through December 31, 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 28, 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
July 31, 2008 $12,594 $13,287 $14,320
August 31, 2008 $12,796 $13,499 $14,563
September 30, 2008 $11,866 $12,519 $13,493
October 31, 2008 $9,639 $10,169 $11,157
November 30, 2008 $8,754 $9,236 $10,357
December 31, 2008 $8,799 $9,283 $10,501
The chart assumes $10,000 invested on August 3, 1999 and includes the
effect of a 5.25% front-end sales charge, as applicable and the
reinvestment of all dividends and capital gains. It is intended to
give you an ideal of how your fund performed compared to the index over
the period 08/03/99-12/31/08. 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 December 31, 2008 One-Year Three-Year Five Year (Est. 8/3/99)
- - ----------------------------------------------------------------------------
Excluding Sales Charge -40.41% -8.42% -2.10% -0.79%
Including Sales Charge -43.54% -10.03% -3.16% -1.35%
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: Gregory Greene, Managing Director, Fox Asset Management, LLC
Shannon D. Radke, President
Viking Small-Cap Value Fund provided a total return of -27.12%
(at net asset value) for the year ended December 31, 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.
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%. 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.
As the third quarter of 2008 unfolded, the already weak environment
for global equity markets worsened. Domestic large-cap stocks as
measured by the Russell 1000 Value index were down 6.11% while the
S&P 500 was down 9.00%. The headlines accompanying these results were,
if anything, even more disturbing. Lehman Brothers declared bankruptcy.
Fannie Mae, Freddie Mac, AIG and Washington Mutual all failed and/or
were rescued. Merrill Lynch and Wachovia agreed to shotgun marriages and
concerned about their ability to raise capital, both
Goldman Sachs and Morgan Stanley became commercial banks.
Despite all this turmoil, the small-cap market held up relatively well.
The Russell 2000 Value Index generated a positive return of 4.96% in
the quarter. This was partially due to the absence of highly
leveraged brokerage companies in the small cap segment, a group that did
dramatically worse than most others. For the third quarter,
the Fund rose 0.57%. Relative performance was hurt by an underweight
and poor stock selection in the financial services sector. Information
technology was also a source of weakness, as our picks failed to live
up to expectations in the short-term. On the positive side, the consumer
staples and healthcare sectors each benefited from a holding
that received a takeover offer.
To call the fourth quarter of 2008 memorable is clearly an
understatement. The markets started the quarter on shaky legs and
it didnt take long for those legs to give out. Fear was decisively
in charge and clearly has continued to drive the performance of stocks.
For the final three months of 2008, the S&P 500 fell 24.89% and in October
it recorded its most volatile month in its 80 year history. The Russell
2000 Value lost 24.89% and the Fund declined 22.97%. While the
Fund was not impervious to the declines in the markets, it did decline
less than its benchmark. Our best performing sector relative to the
benchmark was the consumer discretionary sector due to positive stock
selection. Consumer staples was also a source of relative strength and a
slight overweight in utilities helped as well. On the negative side,
our stock picks in the industrial sector did not perform well, due to
problems experienced by a contractor to the utility industry. Our stock
holdings in energy also contributed negatively exacerbated by the sharp
decline in the price of crude oil over the period. The
statistics for the year tell a similar tale. Small cap value stocks
declined 28.92%, as represented by the Russell 2000 Value while the Fund fell
27.12%. On a historical basis, 2008 was the worst year for equity
performance since the Great Depression as the Dow slumped nearly 34%
and the S&P 500 lost more than 38%. More than $5 trillion in wealth
vanished out of the S&P alone.
We are steadfast in our commitment to finding well managed companies with
decent balance sheets and free cash flow or the ability to dramatically
increase cash flow that are selling at discount valuations to the market.
Long-term total return and capital preservation remains the investment
objective of the Fund.
VIKING SMALL-CAP VALUE FUND
Growth of a $10,000 Investment
May 3, 1999 through December 31, 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 28, 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 $16,061 $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
July 31, 2008 $16,243 $17,136 $18,860
August 31, 2008 $16,834 $17,760 $19,756
September 30, 2008 $15,981 $16,859 $18,830
October 31, 2008 $13,319 $14,052 $15,069
November 30, 2008 $12,080 $12,744 $13,323
December 31, 2008 $12,310 $12,987 $14,143
The chart assumes $10,000 invested on May 3, 2001 and includes the
effect of a 5.25% front-end sales charge, as applicable and the
reinvestment of all dividends and capital gains. It is intended to
give you an idea of how your fund performed compared to the index over
the period 05/03/01-12/31/08. 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 December 31, 2008 One-Year Three-Year Five Year (Est. 5/3/01)
- --------------------------------------------------------------------------------
Excluding Sales Charge -27.12% -5.24% 0.88% 3.47%
Including Sales Charge -30.94% -6.92% -0.20% 2.75%
Returns reflect reinvestment of distributions and the effect of a 5.25%
front-end sales charge, as applicable. Return and share values will
fluctuate so that shares, when redeemed, may be worth more or less than
their original cost. Returns shown do not reflect the deduction of the
taxes that a shareholder would pay on fund distributions or redemption of
fund shares. Past performance is not a guarantee of future
results.
VIKING MUTUAL FUNDS
Schedule of Investments
December 31, 2008
Viking Tax-Free Fund for Montana
PRINCIPAL MARKET
AMOUNT VALUE
MUNICIPAL BONDS 95.7%
General Obligations 10.3%
Bozeman MT Ser A 4.95% 07/01/20 170,000 $179,719
Missoula Cnty Sch Dist #4 Hellgate (ASSGTY) 4.25% 06/15/24 235,000 216,588
Puerto Rico Commonwealth GO (MBIA) 6.00% 07/01/27 500,000 433,530
Puerto Rico Mun Fin Agy Ser A (FSA) 5.50% 08/01/23 250,000 257,730
1,087,567
Continuing Care Revenue Bonds 0.6%
MT St Hlth Facs Auth Rev Hillcrest Sr Ctr 6.90% 06/01/15 30,000 32,213
MT St Hlth Facs Auth Rev Hillcrest Sr Ctr 7.25% 06/01/25 35,000 37,315
69,528
Higher Education Revenue Bonds 14.1%
MT St Hgher Ed Stud Assist Corp Rev Ser B 6.40% 12/01/32 575,000 521,657
MT St Brd Regents Hghr Ed Rev MSU (AMBAC) 5.00% 11/15/18 260,000 278,788
MT Brd Regents (U of M) Hgher Ed Rev Ser F (MBIA) 5.75% 05/15/24 135,000 139,686
*Univ of MT Revs Facs Acq & Imp Ser C (MBIA) 5.00% 11/15/17 140,000 150,415
Univ of MT Revs Higher Ed Facs Imp Ser D (MBIA) 5.375% 05/15/19 370,000 408,769
1,499,315
Hospital Revenue Bonds 23.6%
MT Fac Fin Auth St Luke Cmnty Hlth 5.00% 01/01/22 100,000 98,168
MT Fac FIn Auth Glendive Med Pj 4.50% 07/01/23 250,000 228,327
MT Fac Fin Auth Prov Hlth & Svce 5.00% 10/01/19 175,000 182,310
MT Fac Fin Auth Providence Svcs (MBIA) 5.00% 12/01/18 270,000 292,027
MT Fac Fin Auth Providence Svcs (MBIA) 4.80% 12/01/20 105,000 113,010
MT Fac Fin Auth Benefits Hlth Sys (ASSGTY) 4.75% 01/01/24 150,000 139,347
MT Fac Fin Auth Benefits Hlth Sys (ASSGTY) 4.75% 01/01/25 125,000 115,115
MT Hlth Fac Fin Auth Rev Mstr Ln Program Comm Med Ctr 5.20% 12/01/21 145,000 143,592
*MT Hlth Fac Auth Sisters Chrty Leavenworth (MBIA) 5.125% 12/01/18 100,000 101,384
MT Hlth Fac Auth Sisters Chrty Leavenworth (MBIA) 5.00% 12/01/24 515,000 510,525
MT Fac Fin Auth NE Health Services 4.50% 05/01/27 250,000 219,370
MT St Hlth Fac Auth Rev Comm Med Ctr 6.375% 06/01/18 370,000 351,389
2,494,564
Housing Revenue Bonds 15.9%
*MT St Brd Hsg Sngle Fam Mtg Ser A-2 5.75% 06/01/30 55,000 47,891
*MT St Brd Hsg Sngle Fam Ser A-2 5.50% 12/01/20 75,000 70,078
*MT St Brd Hsg Sngle Fam Ser A-2 5.60% 12/01/23 660,000 601,062
MT St Brd Hsg Sngle Fam Ser A-2 5.20% 12/01/22 105,000 93,581
MT St Brd Hsg Sngle Fam Ser B-2 4.85% 12/01/15 70,000 69,087
MT St Brd Hsg Sngle Fam Mtg Ser B-2 5.55% 06/01/33 125,000 104,155
MT St Brd Hsg Sngle Fam Prog Ser A Non-AMT 5.30% 12/01/29 500,000 461,775
MT St Brd Hsg Sngle Fam Mtg Ser C2 4.85% 12/01/26 190,000 152,534
MT St Brd Hsg Sngle Fam Mtg Ser A-2 4.75% 12/01/27 105,000 81,984
1,682,147
Psychiatric and Substance Abuse Hospital Bonds 9.1%
MT Fac Fin Auth Developmental Ctr Prog 4.50% 06/01/16 250,000 $257,355
MT Fac Fin Auth Developmental Ctr Proj 4.75% 06/01/19 170,000 170,076
MT Fac Fin Auth Childrens Home 4.55% 01/01/17 250,000 256,425
MT Fac Fin Auth Boyd Andrew Cmnty Svcs Proj (CIFG) 4.375% 10/01/20 285,000 275,153
959,009
Utility Revenue Bonds 8.1%
Forsyth MT Poll Ctl Rev Ref Puget Sound Energy (AMBAC) 5.00% 03/01/31 355,000 241,567
*Forsyth MT Poll Ctl Rev Northwestern Corp (AMBAC) 4.65% 08/01/23 750,000 613,980
855,547
Other Revenue Bonds 14.0%
Billings MT Spl Impt Dist no 1385 7.00% 07/01/17 2,55000 253,753
Bozeman MT Downtown Impt Dist 4.95% 07/01/28 200,000 136,744
Missoula MT Spl Assmnt Sidewalk Curb 4.75% 07/01/27 200,000 150,186
Missoula MT Spl Impt Dists No 540 4.60% 07/01/24 100,000 77,843
Missoula MT Spl Impt Dists No 540 4.60% 07/01/25 105,000 80,495
Missoula Tax Increment Urban Renewal (RADIAN) 5.125% 07/01/26 125,000 108,367
MT St Dept Transn Rev Grant Antic 5.00% 06/11/22 350,000 366,135
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev 6.00% 07/01/26 195,000 206,809
Puerto Rico Comwlth Inf Fin Auth Ser A (AMBAC) 5.25% 07/01/10 100,000 100,928
1,481,260
Total Municipal Bonds (cost $10,897,713) 10,128,937
SHORT-TERM INVESTMENTS 2.5%
Federated Municipal Obligations Fund #852 (1.65%) 270,000 270,000
Total Short-Term Investments (cost: $270,000) 270,000
TOTAL MARKET VALUE OF SECURITIES OWNED 98.2% (COST $11,167,713) 10,398,937
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.8% 186,581
NET ASSETS APPLICABLE TO 1,160,502 SHARES (0.001 PAR VALUE) OUTSTANDING - 100.0% $10,585,518
*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
ASSGTY Insured by Assured Guaranty Ltd
CIFG Insured by CIFG Guaranty
FSA Insured by Financial Security Assurance
MBIA Insured by the Municipal Bond Insurance Association
RADIAN Insured by Radian Group Inc.
VIKING MUTUAL FUNDS
Schedule of Investments
December 31, 2008
Viking Tax-Free Fund for North Dakota
PRINCIPAL MARKET
AMOUNT VALUE
MUNICIPAL BONDS 95.9%
General Obligations 12.9%
Fargo, ND Pub Sch Dist 5.00% 05/01/23 200,000 $197,200
*Fargo ND Ref & Imp - Ser B (FGIC) 5.125% 05/01/17 60,000 60,377
*Fargo ND Ref & Impt Ser D (MBIA) 5.00% 05/01/28 200,000 195,978
Grand Forks, ND Pub Bldg Ser A 4.625% 12/01/26 100,000 95,591
Hillsboro ND Pub Sch Dist No. 9 (FSA) 4.85% 06/01/19 50,000 51,429
West Fargo ND Pub Sch Dist No. 006 (FGIC) 5.00% 05/01/14 50,000 51,862
652,437
Building Authority Revenue Bonds 6.8%
Fargo ND Bldg Auth Lease Rev Ser A 5.00% 05/01/20 50,000 51,288
GF Cnty ND Bldg Auth Lease Rev 5.00% 12/01/20 200,000 199,298
ND St Bldg Auth Lease Rev Ser A (MBIA) 5.20% 12/01/19 90,000 91,552
342,138
Continuing Care Revenue Bonds 3.9%
Burleigh Cnty Indl Dev Rev MO Slope Luth Care Ctr 5.05% 11/01/18 125,000 108,265
Grand Forks ND Sr Hsg Rev Ref 4000 Valley Square Proj 5.00% 12/01/16 100,000 89,573
197,838
Education Revenue Bonds 5.3%
Fargo ND School District Bldg Auth Rev (MBIA) 5.50% 05/01/14 50,000 50,573
Minot Pub School District No 1 Bldg Auth 4.80% 05/01/23 210,000 215,095
265,668
Higher Education Revenue Bonds 8.2%
ND St Brd Hgher Ed Student Svcs Facs Rev MSU 5.50% 08/01/23 125,000 102,070
ND St Brd Hgher Ed Student Svcs Facs MSU 5.00% 08/01/18 175,000 154,705
ND St Brd Hgher Ed Rev Hsg & Aux BSC 4.75% 05/01/19 100,000 88,213
NDSU Rev Ser 2006A (AMBAC) 4.75% 04/01/29 75,000 66,818
411,806
Hospital Revenue Bonds 17.8%
Fargo ND Hlth Sys Rev Meritcare Obl (AMBAC) 5.125% 06/01/27 75,000 71,515
Fargo ND Hlth Sys Rev Meritcare Ser A (MBIA) 5.375% 06/01/27 200,000 184,418
Fargo ND Hlth Sys Rev Meritcare Obl (FSA) 5.375% 06/01/15 65,000 65,473
Fargo ND Hlth Sys Rev Meritcare Obl (AMBAC) 5.00% 06/01/22 45,000 44,826
GF ND Hlth Care Facs Rev United Hos Obl Grp (MBIA) 6.25% 12/01/24 150,000 126,240
GF ND Hlth Care Sys Rev Altru Hlth Obl Group 5.125% 08/15/27 200,000 168,482
Grand Forks ND Hlth Care Altru Hlth Obl Group 7.125% 08/15/24 20,000 21,484
Ward Cnty ND Hlth Care Fac Rev Trinity Old Group 5.125% 07/01/29 200,000 128,556
Ward Cnty ND Hlth Care Fac Rev Trinity Obl 5.125% 07/01/25 100,000 70,528
Ward Cnty ND Hlth Care Facs Rev Trinity Obl Group - B 6.00% 07/01/10 20,000 20,085
901,607
Housing Revenue Bonds 15.3%
Fargo ND Multifam Rev Ref Hsg Trollwood Village 6.90% 09/01/13 25,000 15,000
ND St Hsg Fin Agy Rev Home Mtg Prog C 4.90% 07/01/15 150,000 142,103
ND St Hsg Fin Agy Rev Hsg Fin Pg Home MTG D 5.20% 07/01/22 200,000 169,544
ND St Hsg Fin Agy Rev Hsg Fin Pg Non-AMT 5.15% 07/01/23 300,000 292,545
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.80% 07/01/10 55,000 55,000
ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.70% 07/01/09 50,000 50,000
*ND St Hsg Fin Agy Rev Hsg Fin Pg Home Mtg A 5.55% 07/01/22 55,000 48,923
773,115
Utility Revenue Bonds 4.2%
Oliver Cnty PCR Ref Squre Butte Elec-A (AMBAC) 5.30% 01/01/27 115,000 107,281
Mercer County ND PCR Otter Tail Corp (AMBAC) 4.85% 09/01/22 115,000 106,255
213,536
Water Revenue Bonds 9.8%
Minot ND Wtr & Swr Util Rev Ser D 5.25% 10/01/22 200,000 200,182
ND St Water Comm Rev Water Dev & Mgmt Prg Ser A (MBIA) 5.50% 08/01/10 50,000 52,432
ND St Water Comm Rev Water Dev & Mgmt Prog (MBIA) 5.00% 08/01/25 125,000 122,030
South Central Reg Water Dist Burleigh Cnty Rev 5.00% 10/01/23 150,000 121,743
496,387
Other Revenue Bonds 11.7%
Grand Forks ND Mosquito Control Rev 4.75% 09/01/24 100,000 95,336
ND Pub Fin Auth Cap Fin Prog Ser A 5.00% 06/01/31 100,000 91,540
ND Pub Fin Auth Indl Dev Prog Ser A 5.00% 06/01/20 150,000 140,330
ND St Muni Bond Bank Cap Fing Prog 6.00% 06/01/21 25,000 26,077
ND St Muni Bond Bank St Revolv Fund Prog Ser A 4.90% 10/01/18 50,000 51,699
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev 6.00% 07/01/26 15,000 15,908
Williams Cnty ND Sales Tax Rev 5.00% 11/01/21 100,000 80,682
Williams Cnty ND Sales Tax Rev 5.00% 11/01/26 125,000 91,131
592,703
Total Municipal Bonds (cost $5,245,924) 4,847,235
SHORT-TERM INVESTMENTS 3.2%
Federated Municipal Obligations Fund#852 (1.65%) 160,000 160,000
Total Short-Term Investments (cost: $160,000) 160,000
TOTAL MARKET VALUE OF SECURITIES OWNED 99.1% (COST $5,405,924) 5,007,235
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.9% 47,083
NET ASSETS APPLICABLE TO 548,258 SHARES (0.001 PAR VALUE) OUTSTANDING - 100.00% $5,054,318
*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 Guaranty
FSA Insured by Financial Security Assurance
MBIA Insured by the Municipal Bond Insurance Association
VIKING MUTUAL FUNDS
Schedule of Investments
December 31, 2008
Viking Large-Cap Value Fund
SHARES VALUE
Common Stocks 95.4%
Basic Materials 20.8%
Anadarko Petroleum 2,100 $80,955
Apache 900 67,077
Bunge Limited 900 46,593
ChevronTexaco 1,600 118,352
ConocoPhillips 1,200 62,160
Ensco International 1,400 39,746
Exxon Mobil 2,400 191,592
Freeport-McMoran Copper and Gold 1,400 34,216
Hess Corp 600 32,184
672,875
Conglomerates 6.7%
General Electrics 5,000 81,000
Honeywell 2,200 72,226
PPG Industries 1,500 63,645
216,871
Consumer Goods 9.5%
Kimberly-Clark 2,000 105,480
Mattel 2,500 40,000
Sealed Air 6,200 92,628
Tupperware 3,100 70,370
308,478
Financial Services 18.6%
Bank of America 2,400 33,792
BB&T 1,300 35,698
Chubb 1,300 66,300
JP Morgan Chase & Co. 3,300 104,049
PNC Financial Services 1,700 83,300
Prudential Financial 1,200 36,312
Sun Trust Bank 2,300 67,942
U.S. Bancorp 3,400 85,034
Wells Fargo & Co 3,000 88,440
600,867
Healthcare 6.8%
Merck 3,300 100,320
Pfizer 6,700 118,657
218,977
Services 17.8%
Amerisource Bergen 2,200 78,452
AT&T 2,800 79,800
CVS Corp. 3,000 86,220
Disney 4,300 97,567
J.C. Penney Company 2,600 51,220
Target 1,500 51,795
TJX Companies 3,200 65,824
Time Warner Cable* 3,100 66,495
577,373
Technology 7.7%
Intel 2,400 35,184
Microsoft 4,400 85,536
Verizon Communications 3,800 128,820
249,540
Utilities 7.5%
American Electric Power 3,000 99,840
Dominion Resources 1,900 68,096
Public Service Enterprise Group 2,600 75,842
243,778
Total Common Stocks (Cost $3,323,015) 3,088,759
SHORT-TERM INVESTMENTS 7.1%
Federated Prime Value Obligations #853 (2.06%) 150,000 150,000
Federated Treasury Cash Reserves #125 (0.40%) 80,000 80,000
Total Short-Term Investments (cost: $230,000) 230,000
TOTAL MARKET VALUE OF SECURITIES OWNED 102.5% (COST $3,553,015) 3,318,759
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES (2.5)% (81,707)
NET ASSETS APPLICABLE TO 422,499 SHARES ($0.001 PAR VALUE)
OUTSTANDING 100.0% $3,237,052
*Non-income producing investments.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Schedule of Investments
December 31, 2008
Viking Small-Cap Value Fund
SHARES VALUE
Common Stocks 97.8%
Basic Materials 3.5%
Oil States Intl Inc.* 3,000 56,070
Stone Energy Corp* 3,700 40,774
Walter Industries 700 12,257
109,101
Conglomerates 2.9%
Crane 600 10,344
Teleflex 1,600 80,160
90,504
Consumer Goods 21.6%
AO Smith 2,450 72,324
AptarGroup 2,400 84,576
Borg Warner Automotive 2,200 47,894
Carters Inc.* 4,600 88,596
Chiquita Brands Intl* 6,100 90,158
Church & Dwight 1,500 84,180
Hanesbrands* 3,100 39,525
Tupperware 3,600 81,720
588,973
Financial 26.5%
Astoria Financial 3,500 57,680
First Midwest Bancorp 3,700 73,889
First Niagara Financial Group Inc 6,400 103,488
Glacier 3,400 64,668
IPC Holdings 3,600 107,640
National Penn Bancshares* 6,500 94,315
Prosperity Bancshares 2,700 79,893
Senior Housing Properties Trust 1,900 34,048
Sterling Bankshares Inc. 4,900 29,792
Tanger Factory Outlet Centers 1,700 63,954
Trustmark Corp. 4,800 103,632
Washington Federal 900 13,464
826,463
Healthcare 5.2%
Chattem* 1,200 85,836
West Pharmaceutical Services 2,000 75,540
161,376
Industrial Goods 9.9%
Barnes Group 6,100 88,450
Gardner Denver Inc* 2,400 56,016
Lincoln Electric Holdings Inc 1,000 50,930
Nordson Corp 800 25,832
RPM 5,600 74,424
Timken 600 11,778
307,430
Services 16.5%
BJs Wholesale* 2,400 82,224
Bristow Group* 1,200 32,148
Dicks Sporting Goods* 6,000 84,660
Jack in the Box* 2,000 44,180
Maximus Inc 1,900 66,709
Owens & Minor 2,000 75,300
Trinity Industries 600 9,456
Wabtec 1,800 71,550
Watson Wyatt Worldwide Inc 1,000 47,820
514,047
Technology 2.9%
Brocade Communications* 4,400 12,452
Mettler-Toledo Intl* 600 40,440
Netgear Inc* 3,300 37,653
90,545
Utilities 9.3%
Cleco Corporation 3,600 82,188
Piedmont Natural Gas 3,500 110,845
Portland Gen Elect Co 800 15,576
Westar Energy Inc. 4,000 82,040
290,649
Exchange Traded Funds 2.2%
iShares Russell 2000 Index 1,400 68,838
68,838
Total Common Stocks (Cost $2,937,784) 3,047,926
SHORT-TERM INVESTMENTS 2.6%
Federated Prime Value Obligations Fund #853 (2.06%) 82,000 82,000
Total Short-Term Investments (Cost $82,000) 82,000
TOTAL MARKET VALUE OF SECURITIES OWNED 100.4% (COST $3,019,784) 3,129,926
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES (0.4)% (11,250)
NET ASSETS APPLICABLE TO 289,789 SHARES ($0.001 PAR VALUE)
OUTSTANDING 100.0% $3,118,676
*Non-income producing investments.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Assets and Liabilities
December 31, 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 $11,167,713 $5,405,924 $3,553,015 $3,019,784
Value 10,398,937 5,007,235 3,318,759 3,129,926
Cash 14,235 5,103 6,601 7,765
Receivable for fund shares sold 97,350 0 0 0
Prepaid assets 2,246 841 1,203 1,061
Security Sales Receivable 0 0 288,424 0
Interest & dividends receivable 132,021 69,364 9,508 5,950
Other receivables 0 116 33 27
Total assets 10,644,789 5,082,659 3,624,528 3,144,729
LIABILITIES:
Security purchases payable 0 0 295,807 0
Payable for shares redeemed 0 0 0 0
Distributions payable 44,057 21,016 84,399 18,088
Other accounts payable and
accrued expenses 15,214 7,325 7,270 7,965
Total liabilities 59,271 28,341 387,476 26,053
NET ASSETS 10,585,518 5,054,318 3,237,052 3,118,676
COMPONENTS OF NET ASSETS AT December 31, 2008
Capital shares, $0.001 par value,
unlimited shares authorized 11,573,836 5,578,869 4,596,860 3,825,643
Net unrealized appreciation (depreciation) (768,776) (398,689) (234,256) 110,142
Accumulated net realized gain
(loss) on investments (219,542) (125,862) (1,125,552) (817,109)
Undistributed net investment income (loss) 0 0 0 0
NET ASSETS $10,585,518 $5,054,318 $3,237,052 $3,118,676
NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets, at value $10,585,518 $5,054,318 $3,237,052 $3,118,676
Shares outstanding 1,160,502 548,258 422,499 289,789
Net asset value per share $9.12 $9.22 $7.66 $10.76
Maximum offering price per share
(net asset value per share divided
by 96.25%, 96.25%, 94.75% and
94.75%, respectively) $9.48 $9.58 $8.08 $11.36
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Operations
For the year ended December 31, 2008
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
-------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $500,615 $262,211 $ 0 $ 0
Dividends 6,293 1,856 139,489 75,288
-------------------------------------------------------------------------------------
Total investment income 506,908 264,067 139,489 75,228
-------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 52,090 26,753 32,136 38,133
Administrative fees 10,413 5,351 4,591 3,792
Distribution fees 26,019 13,377 11,477 9,512
Transfer agent fees 3,269 1,688 5,971 6,685
Accounting fees 5,249 2,668 2,295 1,907
Professional fees 9,025 9,028 8,612 8,613
Insurance 2,482 1,372 1,203 964
Trustee fees 991 991 990 990
Registration fees 1,091 126 1,181 1,128
Custodian fees 3,450 3,450 3,450 3,450
-------------------------------------------------------------------------------------
Total expenses 114,079 64,804 71,906 75,174
-------------------------------------------------------------------------------------
Less expenses waived or
reimbursed (25,855) (19,442) (16,816) (17,974)
------------------------------------------------------------------------------------
Net expenses 88,224 45,362 55,090 57,200
-------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 418,684 218,705 84,399 18,088
-------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss)
on investments (72,824) (44,995) (1,125,552) (817,109)
Net change in unrealized
appreciation (depreciation)
of investments (856,868) (429,956) (1,189,305) (350,276)
-------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (929,692) (474,951) (2,314,857) (1,167,385)
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $(511,008) $(256,246) $(2,230,458) $(1,149,297)
-------------------------------------------------------------------------------------
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, 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) $418,684 $218,705 $84,399 $18,088
Net realized gain (loss)
on investments (72,824) (44,995) (1,125,552) (817,109)
Net change in unrealized
appreciation (depreciation)
of investments (856,868) (429,956) (1,189,305) (350,276)
-------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations (511,008) (256,246) (2,230,458) (1,149,297)
-------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (418,684) (218,705) (84,399) (18,088)
Net realized gains 0 0 0 0
-------------------------------------------------------------------------------------
Total distributions to
shareholders (418,684) (218,705) (84,399) (18,088)
-------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 2,490,950 658,839 681,669 669,000
Proceeds from reinvestment
of distributions 305,835 159,937 510,952 242,191
Cost of shares repurchased (1,180,766) (941,248) (480,631) (443,604)
-------------------------------------------------------------------------------------
Increase in net assets
derived from capital share
transactions 1,616,019 (122,472) 711,990 467,587
-------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS $686,327 $(597,423) $(1,602,867) $(699,798)
-------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period $9,899,191 $5,651,741 $4,839,919 $3,818,474
-------------------------------------------------------------------------------------
End of period $ 10,585,518 $5,054,318 $3,237,052 $3,118,676
-------------------------------------------------------------------------------------
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-
12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
-------------------------------------------------------------
Net asset value, beginning of period $9.96 $10.06 $10.04 $10.22 $10.20
-------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.39 0.39 0.39 0.38 0.38
Net realized and unrealized gain
(loss) on investments (0.84) (0.10) 0.02 (0.18) 0.02
-------------------------------------------------------------
Total from investment operations ( 0.45) 0.29 0.41 0.20 0.40
-------------------------------------------------------------
Less distributions from:
Net investment income (0.39) (0.39) (0.39) (0.38) (0.38)
Net realized gains 0.00 0.00 0.00 0.00 0.00
--------------------------------------------------------------
Total distributions (0.39) (0.39) (0.39) (0.38) (0.38)
--------------------------------------------------------------
Net asset value, end of period $9.12 $9.96 $10.06 $10.04 $10.22
--------------------------------------------------------------
Total return1 (4.66)% 2.96% 4.15% 1.96% 4.05%
--------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $10,586 $9,899 $11,084 $12,408 $12,206
Ratio of net expenses to average net assets 0.85%2 0.76%2 0.63%2 0.55%2 0.41%2
Ratio of net investment income to
average net assets 4.03% 3.91% 3.87% 3.71% 3.78%
Portfolio turnover rate 14.34% 26.57% 24.39% 24.59% 26.55%
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
$25,855, $35,778, $53,771, $65,270, and $80,645.
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 1.10%, 1.11%, 1.08%, 1.06%, and 1.06% respectively.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Highlights
Viking Tax-Free Fund for North Dakota
Selected data for each share of the Fund outstanding throughout each period
were as follows:
For the Period
01/01/08- 01/01/07- 01/01/06- 01/01/05- 01/01/04-
12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
---------------------------------------------------------------
Net asset value, beginning of period $10.10 $10.22 $10.14 $10.29 $10.29
---------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.40 0.40 0.39 0.38 0.38
Net realized and unrealized gain
(loss) on investments (0.88) (0.12) 0.08 (0.15) 0.00
---------------------------------------------------------------
Total from investment operations (0.48) 0.28 0.47 0.23 0.38
---------------------------------------------------------------
Less distributions from:
Net investment income (0.40) (0.40) (0.39) (0.38) (0.38)
Net realized gains 0.00 0.00 0.00 0.00 0.00
---------------------------------------------------------------
Total distributions (0.40) (0.40) (0.39) (0.38) (0.38)
---------------------------------------------------------------
Net asset value, end of period $9.22 $10.10 $10.22 $10.14 $10.29
---------------------------------------------------------------
Total return1 (4.89)% 2.77% 4.77% 2.24% 3.76%
Ratios/supplemental data:
Net assets, end of period (000s) $5,054 $5,652 $5,876 $6,541 $6,086
Ratio of net expenses to average net assets 0.85%2 0.77%2 0.62%2 0.52%2 0.44%2
Ratio of net investment income to
average net assets 4.10% 3.92% 3.86% 3.70% 3.68%
Portfolio turnover rate 30.91% 28.12% 35.84% 17.61% 22.36%
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 $19,442, $25,374, $34,667, $41,214, and $40,375. 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 1.21%, 1.20%, 1.18%,
1.16%, and 1.18% respectively.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Highlights
Viking Large-Cap Value Fund
Selected data for each share of the Fund outstanding throughout each period
were as follows:
For the Period
01/01/08- 01/01/07- 01/01/06- 01/01/05- 01/01/04-
12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
---------------------------------------------------------------
Net asset value, beginning of period $13.19 $13.09 $11.64 $10.88 $10.06
---------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.20 0.27 0.14 0.08 0.05
Net realized and unrealized gain
(loss) on investments (5.53) 1.24 1.67 0.76 0.82
---------------------------------------------------------------
Total from investment operations (5.33) 1.51 1.81 0.84 0.87
---------------------------------------------------------------
Less distributions from:
Net investment income (0.20) (0.27) (0.14) (0.08) (0.05)
Net realized gains 0 (1.14) (0.22) 0.00 0.00
---------------------------------------------------------------
Total distributions (0.20) (1.41) (0.36) (0.08) (0.05)
---------------------------------------------------------------
Net asset value, end of period $7.66 $13.19 $13.09 $11.64 $10.88
---------------------------------------------------------------
Total return1 (40.41)% 11.52% 15.58% 7.76% 8.63%
Ratios/supplemental data:
Net assets, end of period (000s) $3,237 $4,840 $4,286 $3,636 $3,088
Ratio of net expenses to average net assets 1.20%2 1.35%2 1.35%2 1.34%2 1.34%2
Ratio of net investment income to
average net assets 1.84% 2.01% 1.18% 0.81% 0.47%
Portfolio turnover rate 61.86% 35.23% 22.53% 37.51% 25.70%
1Total return assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
2Viking Fund Management, LLC, the Funds investment manager,
has contractually agreed to waive its fees or reimburse the Fund for
its expenses through August 1, 2009 so that the Funds total
operating expenses during this period will not exceed 1.35% of its
average net assets on an annual basis.
The contractual agreement was amended on December 5, 2007 so that the
Funds total operating expenses during this period will not exceed 1.20%
of average net assets
on an annual basis. For the periods indicated above, Viking Fund Management,
LLC waived fees and reimbursed expenses
totaling $16,816, $17,059, $17,512, $15,575, and $14,372. 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
1.56%, 1.70%, 1.78%, 1.82%, and 1.84% respectively.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Highlights
Viking Small-Cap Value Fund
Selected data for each share of the Fund outstanding throughout the period
was as follows:
For the Period
01/01/08- 01/01/07- 01/01/06- 01/01/05- 01/01/04-
12/31/08 12/30/07 12/31/06 12/31/05 12/31/04
---------------------------------------------------------------
Net asset value, beginning of period $14.85 $15.43 $14.32 $14.40 $12.43
---------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) 0.06 0.02 0.01 (0.03) (0.06)
Net realized and unrealized gain
(loss) on investments (4.09) 0.35 2.00 0.63 2.28
--------------------------------------------------------------
Total from investment operations (4.03) 0.37 2.01 0.60 2.22
--------------------------------------------------------------
Less distributions from:
Net investment income (0.06) (0.02) (0.01) 0.00 0.00
Net realized gains 0.00 (0.93) (0.89) (0.68) (0.25)
--------------------------------------------------------------
Total distributions (0.06) (0.95) (0.90) (0.68) (0.25)
--------------------------------------------------------------
Net asset value, end of period $10.76 $14.85 $15.43 $14.32 $14.40
--------------------------------------------------------------
Total return1 (27.12)% 2.41% 14.02% 4.18% 17.86%
Ratios/supplemental data:
Net assets, end of period (000s) $3,119 $3,818 $3,243 $2,509 $1,715
Ratio of net expenses to average net assets 1.50%2 1.65%2 1.65%2 1.65%2 1.65%2
Ratio of net investment income to average
net assets 0.47% 0.16% 0.08% (0.21)% (0.46)%
Portfolio turnover rate 71.46% 46.19% 36.96% 21.93% 15.39%
1Total return assumes reinvestment of distributions at net asset value
and does not reflect the impact of a sales charge.
2Viking Fund Management, LLC, the Funds investment manager, has
contractually agreed to waive its fees or reimburse the Fund for
its expenses through August 1, 2009 so that the Funds total operating
expenses during this period will not exceed 1.65% of its average net
assets on an annual basis. The contractual agreement was amended on
December 5, 2007 so that the Funds total operating expenses during
this period will not exceed 1.50% of average net assets on an annual
basis For the periods indicated above, Viking Fund Management, LLC
waived fees and reimbursed expenses totaling $17,974 $18,509, $17,847,
$15,661, and $14,316. If the fees had not been waived or expenses
had not been reimbursed, the annualized ratio of total expenses to
average net assetswould have been 1.96%, 2.15%, 2.23%, 2.39%, and
2.63% respectively.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Notes to Financial Statements
December 31, 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.
In June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes,
(FIN 48)). FIN 48 establishes the minimum threshold for recognizing, and a system
for measuring, the benefits of tax-return positions in financial statements.
Management has analyzed the Funds tax positions on federal income tax
returns for all open tax years for the purposes of implementing FIN 48, and has
concluded that no provision for income tax is required in the Funds financial
statements. Interest and penalties related to uncertain tax positions, if any, are
classified in the Funds financial statements as Other Expense.
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 and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reportin period. Actual results
could differ from those estimates.
3. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid during the year ended
December 31, 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 $418,684 $402,239 $218,705 $228,446 $0 $0 $0 $0
Ordinary income $0 $0 $0 $0 $84,399 $136,817 $18,088 $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 12/31/08 through 12/31/08 through 12/31/08 through 12/31/08
----------------------------------------------------------------------------
Shares sold 257,609 67,322 59,650 49,049
Shares issued in reinvestment
of distributions 31,476 16,264 38,738 16,309
Shares redeemed (122,496) (95,134) (42,804) (32,787)
----------------------------------------------------------------------------
Net Increase (Decrease) 166,589 (11,548) 55,584 32,571
----------------------------------------------------------------------------
<CAPTION
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 $52,090 of
investment advisory fees for the year ended December 31, 2008. On
December 31, 2008, the Tax-Free Fund for Montana had a payable to VFM for
investment advisory fees of $4,755. The Tax-Free Fund for North Dakota
recognized $26,753 of investment advisory fees after a partial waiver
for the year ended December 31, 2008. On December 31, 2008, the Tax-Free
Fund for North Dakota had a payable to VFM for investment advisory fees
of $2,301. The Large-Cap Fund recognized $32,108 of investment advisory
fees after a partial waiver for the year ended December 31, 2008. On December 31,
2008, the Large-Cap Fund had a payable to VFM for investment advisory fees of
$2,022. The Small-Cap Fund recognized $38,007 of investment advisory fees after
a partial waiver for the year ended December 31, 2008. On December 31, 2008, the
Small-Cap Fund had a payable to VFM for investment advisory fees of $2,635.
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 andportfolio 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 up to $5 million, 0.45%
from $5 million to $15 million, 0.50% from $15 million to $25 million, 0.55% from
$25 million to $35 million and 0.60% 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. For the year ended December 31, 2008 the Tax-Free Fund
for North Dakota recognized $5 transfer-agent services and the Large-Cap Fund
recognized $11 for accounting services. After fee waivers, no other fees for
administrative services, portfolio accounting and transfer agent services were
recognized by the Funds.
The Funds have a distribution plan, sometimes known as a Rule 12b-1 plan,
that allows each Fund 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. On For the
year ended December 31, 2008 the Tax-Free Fund for Montana recognized $19,113, the
Tax-Free Fund for North Dakota recognized $3,637, Large-Cap Fund recognized $7,535
and Small-Cap Fund recognized $4,086 of 12b-1 fees each after a partial waiver. On
December 31, 2008, the Tax-Free Fund for Montana, Tax-Free Fund for North Dakota,
and Large-Cap Fund had payables to VFD for 12b-1 fees of $1,772, $255, and $139
respectively.
For the year ending December 31, 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 $17,434, $764, $1,687 and $1,578 for the Tax-Free Fund for Montana,
Tax-Free Fund for North Dakota, Large-Cap Fund and Small-Cap Fund, respectively.
On December 31, 2008 the Tax-Free Fund for Montana, Large-Cap Fund and Small-Cap Fund
had payables to VFD for underwriting fees of $3,844, $116, and $144, respectively.
VFM has contractually agreed to waive its fees or reimburse the Funds for their
expenses through August 1, 2009 so that the Tax-Free Funds total operating expenses
during this period will not exceed 0.85% of average net assets on an annual basis,
the Large-Cap Funds total operating expenses during this period will not exceed
1.35% of average net assets on an annual basis and the Small-Cap Funds total operating
expenses during this period will not exceed 1.65% of average net assets on an annual
basis. The contractual agreement was amended on December 5, 2007 so that 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. An officer and
trustee of the Funds is also an officer and governor 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, 2008, the Funds most
recently completed year end, Tax-Free Fund for Montana and Tax-Free Fund for North
Dakota had capital losses of $219,541 and $125,862 respectively, which may be carried
over to offset future capital gains. Such losses start to expire in 2009. The Large-Cap
Fund and Small-Cap Fund had capital losses of $1,125,552 and $786,503 respectively,
which may be carried over to offset future capital gains. Such losses start to expire in
2016.
At December 31, 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 $11,167,713 $5,405,924 $3,553,015 $3,019,784
------------------------------------------------------------------------------------
Unrealized appreciation 106,641 21,241 260,047 376,044
Unrealized depreciation (875,417) (419,930) (494,303) (265,902)
------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) $(768,776) $(398,689) $(234,256) $110,142
------------------------------------------------------------------------------------
7. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
year ended December 31, 2008 were as follows:
Tax-Free Fund Tax-Free Fund Large-Cap Small-Cap
for Montana for North Dakota Value Fund Value Fund
------------------------------------------------------------------------------------
Purchases $2,771,905 $1,625,139 $3,155,949 $2,995,105
Sales $1,450,951 $2,071,855 $2,661,162 $2,548,096
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 additional disclosure isrequired 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 December 31, 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 $270,000 $160,000 $3,318,759 $3,129,926
Level 2 Other Significant
Observable Inputs 10,128,937 4,847,235 - -
Level 3 Significant
Unobservable Inputs - - - -
------------------------------------------------------------------------------------
Total $10,398,937 $5,007,235 $3,318,759 $3,129,926
In March of 2008, FASB issued Statement of Financial Acounting Standards No.
161, Disclosures about Derivative Instruements and Hedging Actvities
(SFAS 161). SFAS 161 requires enhanced disclosures to provide information
about the reasons the Fund invests in derivative instruments, the accounting
treatment and the effect of derivatives have on financial performance. SFAS
161 is effective for fiscal years beginning after November 15, 2008 and interim
periods within those fiscal years.
VIKING MUTUAL FUNDS
Miscellaneous Information (Unaudited)
December 31, 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 is intended to help you understand your ongoing costs
(in dollars) of investing in a Viking Fund and to compare these costs with
the ongoing costs of investing in other mutual funds. The table is based
on an investment of $1,000 at the beginning of the period and held for the
six months indicated.
<C
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate
the expense that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the
result by the number in the first line under the heading entitled
Expenses Paid During Period to estimate the expenses you
paid on your account during this period.
Hypothetical Example for Comparison with Other Funds
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Funds actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Funds actual return. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or expenses you
paid for the period. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing
costs only and do not reflect any transactional costs such as sales charges (loads).
Therefore, the second line of the table for each Fund is useful in comparing ongoing
costs only, and will not help you determine the relative total costs of owning different funds.
In addition, if these transactional costs were included, your costs would have been higher
Beginning Account Ending Account Expenses Paid During
Value 07/01/08 Value 12/31/08 Period1 07/01/08-12/31/08
Viking Tax-Free Fund for Montana
Actual $1,000.00 $ 958.22 $4.18
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 $4.32
Viking Tax-Free Fund for North Dakota
Actual $1,000.00 $ 952.29 $4.17
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 $4.32
Viking Large-Cap Value Fund
Actual $1,000.00 $ 689.97 $5.10
Hypothetical (5% return before expenses) $1,000.00 $1,019.10 $6.09
Viking Small-Cap Value Fund
Actual $1,000.00 $ 773.46 $6.69
Hypothetical (5% return before expenses) $1,000.00 $1,017.60 $7.61
<C
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 184/366 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 are available on the SECs website
at http://www.sec.gov. The Funds Form N-Q may be
reviewed and copied at the SECs Public Reference Room in Washington,
DC and information on the operation of the
Public Reference Room may be obtained by calling 1-800-SEC-0330.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of
Viking Mutual Funds
We have audited the accompanying statements of
assets and liabilitiesof Viking Mutual Funds (the trust),
including the schedules of investments, as of December 31,
2008, the related statements of operations for the
year then ended, the statements of changes in net assets
for each of the two years in the period then ended and
the financial highlights for each of the five years
in the period then ended. These financial statements
and financial highlights are the responsibility of the
Trusts management. Our responsibility is to express
an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with standards of
the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our procedures included
confirmation of securities owned as of December 31, 2008,
by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above presentfairly, in all material
respects, the financial position of the Viking Mutual Funds
as of December 31, 2008, the results of its operations for
the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended,
in conformity with accounting principles
generally accepted in the United States of America.
BRADY, MARTZ & ASSOCIATES, P.C.
Bismarck, North Dakota, USA
February 20, 2009
VIKING MUTUAL FUNDS
Trustee Information (Unaudited)
December 31, 2008
NAME AND PRINCIPAL OCCUPATION(S)
ADDRESS AGE POSITION(S) HELD DURING PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------------------------
Shannon D. Radke 42 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
900 South Broadway
Minot, ND 58701
TRANSFER AGENT
Viking Fund Management, LLC
P.O. Box 500
Minot, ND 58702
INDEPENDENT AUDITORS
Brady, Martz & Associates, P.C.
201 East Broadway, Suite 200
Bismarck, ND 58501
Shareholder Services
1-800-933-8413
When used with prospective investors, this report must be preceded by
a current Viking Mutual Funds prospectus. The prospectus sets forth details
about charges, expenses, investment objectives and operating policies of each
of the Funds. You should read the prospectus carefully before you invest.
To obtain a prospectus, contact your investment professional or Viking Mutual
Funds.
ITEM 2. CODE OF ETHICS.
Viking Mutual Funds has adopted a code of ethics, as defined in Item 2 of
Form N-CSR, that applies to the President and Treasurer. A copy of this
code of ethics is filed as an exhibit to this Form N-CSR, and is available
without charge, upon request by calling (800)933-8413.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of Viking Mutual Funds has determined that it does not
have a member who qualifies as an audit committee financial expert, as defined
in Item 3 of Form N-CSR, serving on its audit committee. However, the Board of
Trustees determined that, although none of its members meet the technical
definition of an audit committee financial expert, the Audit Committee members
have sufficient financial expertise to address any issues that are likely to
come before the Committee, including the evaluation of the Companys financial
statements, supervision of the Companys preparation of its financial
statements, and oversight of the work of the Companys independent auditors.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed by registrants independent public accountants,
Brady Martz & Associates(BMA) for each of the last two fiscal years for
professional services rendered in connection with the audit of registrants
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
were $20,900 for the year ended December 31, 2008, and $20,020 for the year
ended December 31, 2007.
(b) Audit-Related Fees
Not Applicable
(c) Tax Fees
The aggregate tax fees BMA billed to registrant for each of the last two
fiscal years for tax compliance, tax advice, and tax planning services were
$2,360 for the year ended December 31, 2008, and $2,300 for the year ended
December 31, 2007. The aggregate tax fees BMA billed to registrants investment
adviser and any entity controlling, controlled by, or under common control
with registrants investment adviser for tax compliance, tax advice, and tax
planning services were $1,200 for the year ended December 31, 2008, and
$900 for the year ended December 31, 2007.
(d) All Other Fees
Not Applicable
(e) (1) Not Applicable
(2) 100% of the applicable services for the registrant described in
paragraph (c) of this item were approved by the audit committee.
(f) Not Applicable
(g) The aggregate non-audit fees billed by BMA to registrant and to
registrants investment adviser and any entity controlling, controlled by, or
under common control with registrants investment adviser for the fiscal years
ending December 31, 2008, and December 31, 2007, were $4,760 and $4,575.
(h) The registrants audit committee considered and determined that the
provision of nonaudit services that were rendered to the registrants investment
advisor and any entity controlling, controlled by, or under common control with
the investment advisor that provides ongoing services to the registrant that
were not preapproved pursuant to paragraph (c)(7)(ii) of rule 2-01 of
regulation S X were not incompatible with maintaining the principal accountants
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable
ITEM 6. SCHEDULE OF INVESTMENTS
Included as part of report to shareholders under Item 1
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Disclosure Controls and Procedures. The Principal Executive and
Financial Officers concluded that the Registrants Disclosure Controls
and Procedures are effective based on their evaluation of the Disclosure
Controls and Procedures as of a date within 90 days of the filing date of this
report.
(b) Internal Controls. There was no change in the internal controls
over financial reporting (as defined in Rule 30a-3(d) under the Act)
of the registrant that occurred during the second half of its fiscal
year that has materially affected or is reasonably likely to
materially affect, its internal control over financial reporting.
ITEM 12 EXHIBITS.
(a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and
Attached as an exhibit.
(a)(2) The certifications required by Rule 30a-2(a) under the Investment
Company Act of 1940 is filed and attached as an exhibit.
(b)(1) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the Investment Company Act of
1940. Certification of principal executive officer and principal
financial officer as required by Section 906 of the Sarbanes-Oxley
Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
VIKING MUTUAL FUNDS
Date: March 6, 2009
/s/Shannon D. Radke
--------------------------------
Shannon D. Radke
President
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date: March 6, 2009
/s/ Shannon D. Radke
--------------------------------
Shannon D. Radke
President
Date: March 6, 2009
/s/ Shannon D. Radke
--------------------------------
Shannon D. Radke
Treasurer