VIKING MUTUAL FUNDS
[LOGO]
VIKING TAX-FREE FUND FOR MONTANA
VIKING TAX-FREE FUND FOR NORTH DAKOTA
VIKING LARGE-CAP VALUE FUND
SEMI-ANNUAL REPORT JUNE 30, 2000
SHAREHOLDER LETTER
Dear Fellow Shareholder:
It is a pleasure to bring you the Viking Mutual Funds Semi-Annual Report for
the six months ended June 30, 2000.
The U.S. economy continued its strong advance from 1999 into the period under
review. The tightest job market in decades has been a major inspiration for
the carefree spending of Americans within this record 10-year period of
expansion. This red-hot economy resulted in additional interest rate hikes
by the Fed as preventive medicine in an attempt to diminish the risk of
inflation going forward.
Certainly, inflation appeared to be under wraps. But monetary policy-makers,
especially Fed Chief Alan Greenspan, continued to perceive risks that despite
impressive gains in productivity, a dwindling pool of available workers would
accelerate wages and foster more spending in an economy that has already had
trouble keeping production on track with demand. With labor markets
stretched taut and consumers snapping up goods with a vengeance, the Fed's
policy-makers upped the Fed funds rate by a rare half-point in one twist of
the interest-rate dial in their May meeting to a nine-year high 6.5 percent.
However, after six tightenings by the Federal Open Market Committee, a number
of more moderate economic measures began to emerge reflecting signs of a
cooling economy. As a result, at its June 28 meeting the Fund left its key
overnight lending target unchanged citing "tentative" signals that consumer
demand was waning but that they remained wary of inflationary risks.
Uncertainty regarding interest rates kept the U.S. equity markets in a
volatile mode throughout the period. All major indices including the S & P
500, Dow Jones Industrials, Russell 1000 Value and NASDAQ were down for the
period. This was the first time since the first half of 1994 that all four
indices finished down. Investors dislike uncertainty, but uncertainty may
continue to dictate the outlook for equities over the balance of the year.
Even if the Fed is done raising rates, it may continue to talk tough,
stressing inflation risks in part to keep the markets from going too far too
soon and igniting more spending and a pickup in economic growth, thus undoing
the impact of the past year's worth of tighter money.
Rising rates during most of the period under review also presented challenges
for the bond markets as bond prices fall when interest rates rise. However,
following the 50 basis point rate hike in May and signs of a cooling economy,
the bond markets rallied sending rates lower. Municipal bonds continue to
look extraordinarily attractive relative to Treasury bonds with long-term
AAA-rated Municipals paying in excess of 90% of the rate available from a
comparable maturity Treasury.
In this type of market environment, it is even more important than ever 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 fund's portfolios and financial statements are presented within for
your review.
We thank you for your patience during these turbulent times in the market and
appreciate your continued confidence in Viking Mutual Funds. 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 3.74% for the six
months ended June 30, 2000 (at net asset value with distributions
reinvested).
In an attempt to cool demand and diminish the risk of higher inflation going
forward, the Fed has raised rates six times since June 1999, but opted to let
those hikes take hold in the economy before raising rates further.
Accordingly, the Fed left its overnight lending target at 6.5 percent when it
met June 28. Anticipation of rate hikes led to higher municipal yields and a
resulting decrease in the fund's share price during the first part of the
period. However, following the May rate hike and signs of a cooling economy,
municipal yields fell and as a result lifted the fund's share price above
year-end levels.
During the period, the Fund invested in a number of high quality Montana
municipal bonds having various maturities. Purchases throughout the period
included Montana Higher Ed Student Assistance Corp., Billings Airport Revenue
and Montana Health Facilities Authority for Sidney Health Center. Adding the
various purchases to the portfolio resulted in a duration at June 30, 2000 of
9.88 years. Average credit quality at the end of the period was AA.
Going forward, the Fund will continue to invest in high quality issues
throughout the state. 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.
The recent volatility of the equity markets speaks to the merits of
disciplined asset allocation and we believe municipal bond funds can play an
important role in the asset allocation investment strategy. Additionally,
municipal bonds continue to look extraordinarily attractive relative to
Treasury bonds on a historical basis.
Viking Tax-Free Fund for North Dakota
By Shannon D. Radke
President / Portfolio Manager
Viking Tax-Free Fund for North Dakota provided a total return of 3.46% for
the six months ended June 30, 2000 (at net asset value with distributions
reinvested).
In an attempt to cool demand and diminish the risk of higher inflation going
forward, the Fed has raised rates six times since June 1999, but opted to let
those hikes take hold in the economy before raising rates further.
Accordingly, the Fed left its overnight lending target at 6.5 percent when it
met June 28. Anticipation of rate hikes led to higher municipal yields and a
resulting decrease in the fund's share price during the first part of the
period. However, following the May rate hike and signs of a cooling economy,
municipal yields fell and as a result lifted the fund's share price above
year-end levels.
During the period, the Fund invested in a number of high quality North Dakota
municipal bonds having various maturities. Purchases throughout the period
included North Dakota Student Loan Revenue, North Dakota State Housing
Finance Agency and Fargo School District. Adding the various purchases to
the portfolio resulted in a duration at June 30, 2000 of 9.04 years. Average
credit quality at the end of the period was a lofty AA+.
Going forward, the Fund will continue to invest in high quality issues
throughout the state. 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.
The recent volatility of the equity markets speaks to the merits of
disciplined asset allocation and we believe municipal bond funds can play an
important role in the asset allocation investment strategy. Additionally,
municipal bonds continue to look extraordinarily attractive relative to
Treasury bonds on a historical basis.
Viking Large-Cap Value Fund
By: J. Peter Skirkanich, Investment Committee Chairman
Shannon D. Radke, President
Viking Large-Cap Value Fund provided a slightly negative return of -1.72% for
the six months ended June 30, 2000 (at net asset value). Although this
return was negative, it compared favorably with the -4.23% return of the
Russell 1000 Value Index.
Uncertainty regarding interest rates kept the U.S. equity markets in a
volatile mode throughout the period. All major equity market indices
including the S&P 500, Dow Jones Industrials, Russell 1000 Value and NASDAQ,
were down for the period. This was the first time since the first half of
1994 that all four indices finished down. The negative results were due to a
very difficult second quarter which saw the Russell 1000 Value Index decline
4.7% and the S&P 500 decline 2.7%. The Dow dropped 4.3% and the once
almighty NASDAQ declined 13.3%. We are pleased to report that the fund
experienced positive performance for the second quarter. We were more active
than usual during the volatile second quarter, as there were more opportunities
to buy great companies at sound valuations.
We know most investors are tired of hearing about valuation comparisons that
show the market overvalued, but these analytics are important in determining
risk levels. In spite of the second quarter correction, valuations are still
very high for the overall market. Though risk levels remain high, a large
number of outstanding companies with modest valuations allows one to create
and manage a portfolio with a lower risk level. We are comfortable with the
fund's portfolio at 16x 2000 earnings estimates and are pleased with the
upgrades afforded us over the past several months of market turmoil.
The keys to our positive second quarter results were Bestfoods and Heinz in
the food area, El Paso Energy and Anadarko Petroleum in oil and gas, Abbott
Labs and Merck in the drug area, Emerson Electric in electronics, SPX Corp.
in the industrial products area and Novellus Systems in the computer related
area. Many of these were new acquisitions during the period.
On the negative side, the chemicals, auto related, banks and industrial
products holdings generally hurt performance. During the period we sold Dana
and Thomas & Betts because of a deterioration in fundamentals, Keane reached
our valuation objective and Texas Utilities was sold because of better
opportunities in other areas.
The Fund's top sector weightings at June 30 included cyclical consumer
non-durables, financial, technology and energy. The top five holdings were
Emerson Electric, El Paso Energy, TRW, Bestfoods and Kimberly-Clark.
We remain confident that valuation does matter and that our investments in
proven companies with strong profit potential will result in premium returns
over the long haul, with substantially less volatility. Long term total
return and capital preservation remains the investment objective of the fund.
VIKING MUTUAL FUNDS
Statement of Investments, June 30, 2000
Viking Tax-Free Fund for Montana
<TABLE>
PRINCIPAL MARKET PRINCIPAL MARKET
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
MONTANA MUNICIPAL BONDS 92.5%
Cascade Cnty MT High Sch Dist B Bldg GO MT Hlth Fac Auth Mstr Ln Program
(FGIC) 5.40% 07/01/15 $10,000 $ 9,965 Marcus Daly Hosp A 6.00% 08/01/20 5,000 5,022
Jefferson Cnty MT Sch Dist No 27 MT St Brd Hsg Sgl Fam Mtg Ser A-2
(AMBAC) 5.60% 07/01/20 5,000 4,952 5.65% 12/01/20 5,000 4,737
Lewis & Clark Cnty High Sch Dist 1 Helena MT St Hgher Ed Stud Assist Corp
(FSA) 5.40% 07/01/12 10,000 9,921 Student Loan Rev 6.15% 12/01/06 5,000 5,131
*Montana St. Long Range Building MT St Hgher Ed Stud Assist Corp
Pg - Ser D G.O. 5.25% 08/01/16 10,000 9,580 Rev Ser B 6.40% 12/01/32 25,000 25,204
Puerto Rico Commonwealth Rev (AMBAC) *MT St. Univ Revs Ref & Impr. Hghr
5.50% 07/01/13 5,000 4,964 Educ Fac (MBIA) 5.375% 11/15/21 25,000 23,612
Forsyth MT PCR Ref Puget Snd Pwr&Lght MT St Hlth Fac Auth Rev St. Peters
(AMBAC) 6.80% 03/01/22 5,000 5,162 Hosp 5.50% 06/01/11 10,000 9,985
Forsyth MT PCR Ref Montana Power Puerto Rico Hghwy & Tran Auth Hghwy
(AMBAC) 6.125% 05/01/23 5,000 4,994 Rev Ref Ser W (FSA) 5.25% 07/01/20 5,000 4,688
*Billings MT Airport Rev Ref (MBIA) Puerto Rico Elec Pwr Auth Pwr Rev
6.20% 07/01/20 25,000 25,869 Ser AA (MBIA) 5.00% 07/01/07 5,000 5,016
MT Hlth Facs Auth Sters Chrty Leavenworth Puerto Rico Pub Fin Corp Commonwealth
(MBIA) 5.00% 12/01/24 5,000 4,441 Approp (AMBAC) 5.375% 06/01/15 10,000 9,954
MT St Hlth Facs Auth Rev Providence Serv Total Municipal Bonds (cost $254,452) 251,341
(MBIA) 5.375% 12/01/25 10,000 9,460
MT St Hlth Facs Auth Rev Hillcrest Sr Ctr SHORT-TERM INVESTMENTS 8.1%
7.375% 06/01/30 10,000 9,769 Franklin Puerto Rico Tax-Free Fund 14,053
MT Brd Reg (U of M) Hgher Ed Rev Esc C Goldman Sachs Financial Square
Tax-Free Money Market 8,100
(MBIA) 5.20% 11/15/09 5,000 5,005 Total Short-Term Investments (cost $22,100) 22,153
MT Brd Reg (U of M) Hgher Ed Rev Unref C
(MBIA) 5.20% 11/15/09 5,000 4,991 TOTAL MARKET VALUE OF SECURITIES
MT Hlth Facs Auth Master Ln Program OWNED 100.6% (COST $276,552) 273,494
Lutheran Home B 6.00% 10/01/08 5,000 5,062 RECEIVABLES AND OTHER ASSETS
MT St Hlth Fac Auth Rev State Hosp NET OF LIABILITIES (0.6)% (1,644)
(AMBAC) 5.00% 06/01/22 5,000 4,475 NET ASSETS APPLICABLE TO 28,621
MT St Hlth Facs Auth Hlth Care Rev Sidney SHARES ($0.001 PAR VALUE)
Hlth Center (ACA) 5.50% 09/01/13 5,000 4,736 OUTSTANDING 100.0% $271,850
MT St Hlth Fac Auth Rev Ref & Imp
Sidney Hlth Center (ACA) 6.25% 09/01/29 35,000 34,646
</TABLE>
Summary of Abbreviations:
ACA - Insured by the
AMBAC - Insured by the AMBAC Indemnity Corporation
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
MBIA - Insured by the Municipal Bond Insurance Association
*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.
VIKING MUTUAL FUNDS
Statement of Investments, June 30, 2000
Viking Tax-Free Fund for North Dakota
<TABLE>
PRINCIPAL MARKET PRINCIPAL MARKET
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
NORTH DAKOTA MUNICIPAL BONDS 89.4%
Fargo ND Ref & Impt - Ser A ND St Muni Bond Bank St Revolv Fund
4.80% 05/01/08 $ 5,000 $ 4,841 Prog - Ser A 5.75% 10/01/16 10,000 9,906
Grand Forks ND G.O. Tax Increment *ND State Student Loan Rev Ser A
Ser B 5.80% 12/01/14 5,000 5,014 (AMBAC) 7.00% 07/01/05 25,000 25,384
Grand Forks ND Park District Ref Impt NDSU Ag & Applied Science Univ Rev
(AMBAC) 5.50% 05/01/24 5,000 4,714 Ref Hsg & Aux Facs 6.40% 04/01/10 5,000 5,120
West Fargo ND G.O. Ref & Impt ND St Water Comm Rev Water Dev - SW
(FSA) 4.60% 05/01/10 10,000 9,354 Pipeline A (AMBAC) 5.70% 07/01/17 10,000 10,006
Mercer Cnty Poll Ctl Rev Basin Electric Oliver Cnty ND Solid Waste Square
Power Coop (AMBAC) 6.05% 01/01/19 10,000 10,101 Butte Elec(AMBAC) 5.45% 01/01/24 5,000 4,609
ND St HFA Rev Ref Housing Finance Program Puerto Rico Electric Power Auth Rev
Home Mortgage Ser D 5.80% 07/01/14 5,000 4,857 (MBIA) 6.00% 07/01/11 10,000 10,611
Ward County ND Health Care Facilities Rev Puerto Rico Mun Fin Agy Ser A
Trinity Olbig. Grp - B 7.50% 07/01/21 20,000 20,057 (FSA) 5.50% 07/01/21 10,000 9,806
Fargo ND School District Bldg Auth Rev First
Mtg Ser B (AMBAC) 5.00% 05/01/10 10,000 9,708 Total Municipal Bonds (cost $203,855) 202,698
Grand Forks ND Hlth Care Facs Untd Hosp
Oblig Group (MBIA) 6.25% 12/01/24 25,000 25,262 TOTAL MARKET VALUE OF SECURITIES
*Grand Forks ND Sales Tax Rev Aurora OWNED 89.4% (COST $203,855) 202,698
Project Ser A (MBIA) 5.625% 12/15/29 25,000 23,620 RECEIVABLES AND OTHER ASSETS
ND St Hsg Fin Agy Rev Hsg Fin Home Mtg NET OF LIABILITIES 10.6% 23,959
6.10% 07/01/28 10,000 9,728 NET ASSETS APPLICABLE TO 23,810
SHARES ($0.001 PAR VALUE)
OUTSTANDING - 100.00% $226,657
</TABLE>
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
MBIA - Insured by the Municipal Bond Insurance Association
*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.
VIKING MUTUAL FUNDS
Statement of Investments, June 30, 2000
<TABLE>
Viking Large-Cap Value Fund
SHARES VALUE SHARES VALUE
<C> <C> <C> <C> <C> <C>
Common Stocks 99.5%
Consumer Non-Durables 21.5% Health 7.0%
Air Products & Chemicals 800 $ 24,800 Abbott Laboratories 600 26,625
Albertson's Inc. 1,000 33,250 Elan Corp. ADR 200 9,687
Bestfoods 500 34,625 Merck & Co. 200 15,225
ConAgra 1,000 19,062 Tenet Healthcare 700 18,900
Crown Cork & Seal 1,500 22,500 70,437
General Mills 500 19,125 Technology 12.9%
Genuine Parts 500 10,000 Computer Assoc. Intl. 600 30,712
Heinz 500 21,875 Intel 200 26,738
Hercules 1,500 21,094 Novellus Systems 500 28,281
Universal Foods 600 11,100 Parker-Hannifin 800 27,400
217,431 Vishay Intertechnology 450 17,072
Cyclical 22.4% 130,203
Akzo Nobel NV ADR 500 21,031 Transportation 7.6%
Alcoa, Inc. 600 17,400 CNF Transportation 1,000 22,750
DuPont (El) DeNemours 400 17,581 Delphi Automotive Systems 1,000 14,562
Emerson Electric 700 42,979 TRW 900 39,037
Ingersoll-Rand 700 28,175 76,349
Kennametel 500 10,719 Utilities 4.7%
Kimberly-Clark 600 33,900 SBC Communications 500 21,625
Rio Tinto ADR 200 13,050 US West Inc. 300 25,500
Rohm & Haas 500 17,250 47,125
SPX Corp. 200 24,188 Total Common Stocks (Cost $994,254) 1,005,763
226,273
Energy 10.2% SHORT-TERM INVESTMENTS 4.8%
Anadarko Petroleum 500 24,656 Financial Square Prime Obligation Fund 48,900
Conoco Inc. Cl. A 800 17,600 Total Short-Term Investments
El Paso Energy 800 40,750 (Cost $48,900) 48,900
Phillips Petroleum 400 20,275
103,281 TOTAL MARKET VALUE OF
Financial 13.3% SECURITIES OWNED 104.4%
Everest Reinsurance Holdings 600 19,725 (COST: $1,043,154) 1,054,663
Fleet Financial Group 600 20,400 RECEIVABLES AND OTHER ASSETS
Hartford Financial Services Group 600 33,563 NET OF LIABILITIES (4.4%) (44,222)
Lincoln National 300 10,838
National City 800 13,600 NET ASSETS APPLICABLE TO 103,797
U.S. Bancorp 1,000 19,250 SHARES ($0.001 PAR VALUE)
Washington Mutual 600 17,288 OUTSTANDING 100.0% $1,010,441
134,664
</TABLE>
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Assets and Liabilities
June 30, 2000
<TABLE>
Tax-Free Fund Tax-Free Fund Large-Cap
for Montana for North Dakota Value Fund
<S> <C> <C> <C>
ASSETS:
Investments in securities:
Cost $ 276,552 $ 203,855 $ 1,043,154
--------------------------------------------------------------
Value 273,494 202,698 1,054,663
Cash 32 722 10,310
Receivable fund shares sold 9,000 20,000 -
Prepaid assets 186 260 1,162
Interest & dividends receivable 3,277 4,218 1,859
Other assets 5,247 5,117 4,005
--------------------------------------------------------------
Total assets 291,236 233,015 1,071,999
--------------------------------------------------------------
LIABILITIES:
Security purchases payable 10,007 - 55,415
Distributions payable 782 975 -
Other accounts payable and accrued expenses 8,597 5,383 6,143
--------------------------------------------------------------
Total liabilities 19,386 6,358 61,558
--------------------------------------------------------------
NET ASSETS 271,850 226,657 1,010,441
--------------------------------------------------------------
COMPONENTS OF NET ASSETS
AT JUNE 30, 2000
Capital shares, $0.001 par value,
unlimited shares authorized 277,723 229,476 1,000,524
Net unrealized appreciation (depreciation) (3,058) (1,157) 11,509
Accumulated net realized gain
(loss) on investments (2,815) (1,662) (6,897)
Undistributed net investment income - - 5,305
--------------------------------------------------------------
NET ASSETS $ 271,850 $ 226,657 $ 1,010,441
--------------------------------------------------------------
NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets, at value $ 271,850 $ 226,657 $ 1,010,441
--------------------------------------------------------------
Shares outstanding 28,621 23,810 103,797
--------------------------------------------------------------
Net asset value per share $ 9.50 $ 9.52 $ 9.73
--------------------------------------------------------------
Maximum offering price per share
(net asset value per share divided by
95.50%, 95.50%, and 94.75%, respectively) $ 9.95 $ 9.97 $ 10.27
--------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Operations
For the six months ending June 30, 2000
<TABLE>
Tax-Free Fund Tax-Free Fund Large-Cap
for Montana for North Dakota Value Fund
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 3,204 $ 5,514 $ -
Dividends 122 83 11,009
----------------------------------------------------------
Total investment income 3,326 5,597 11,009
----------------------------------------------------------
EXPENSES:
Investment advisory fees 301 478 2,981
Administrative fees 60 95 423
Distribution fees 150 239 1,690
Transfer agent fees 21 86 580
Accounting fees 30 48 211
Professional fees 5,660 5,583 5,660
Insurance 2,451 2,518 2,622
Trustee fees 593 593 593
Registration fees 519 242 934
Custodian fees 290 290 290
Other 9 32 298
----------------------------------------------------------
Total expenses 10,084 10,204 16,282
Less expenses waived or reimbursed (10,084) (10,204) (10,578)
----------------------------------------------------------
Net expenses - - 5,704
----------------------------------------------------------
NET INVESTMENT INCOME 3,326 5,597 5,305
----------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on investments (2,100) (1,629) (6,897)
Net change in unrealized appreciation
(depreciation) of investments 2,898 3,066 11,812
----------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 798 1,437 4,915
----------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 4,124 $ 7,034 $ 10,220
----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Financial Statements
Statements of Changes in Net Assets
For the six months ending June 30, 2000
<TABLE>
Tax-Free Fund Tax-Free Fund Large-Cap
for Montana for North Dakota Value Fund
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 3,326 $ 5,597 $ 5,305
Net realized gain (loss) on investments (2,100) (1,629) (6,897)
Net change in unrealized appreciation
(depreciation) of investments 2,898 3,066 11,812
----------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 4,124 7,034 10,220
----------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,326) (5,597) -
Net realized gains - - -
----------------------------------------------------------
Total distibutions to shareholders (3,326) (5,597) -
----------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 219,488 144,337 425,572
Proceeds from reinvestment of distributions 2,985 4,883 1,386
Cost of shares repurchased (96,380) (51,531) (18,020)
----------------------------------------------------------
Increase in net assets derived from
capital share transactions 126,093 97,689 408,938
----------------------------------------------------------
NET INCREASE IN NET ASSETS 126,891 99,126 419,158
----------------------------------------------------------
NET ASSETS:
Beginning of period $ 144,959 $ 127,531 $ 591,283
----------------------------------------------------------
End of period $ 271,850 $ 226,657 $ 1,010,441
----------------------------------------------------------
</TABLE>
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 the
periods were as follows:
<TABLE>
For the Six For the Period
Months Ended from 8/3/991
06/30/00 through 12/31/99
-----------------------------------------
<S> <C> <C>
Net asset value, beginning of period $9.41 $10.00
-----------------------------------------
Income (loss) from investment operations:
Net investment income 0.26 0.15
Net realized and unrealized gain (loss) on investments 0.09 (0.59)
-----------------------------------------
Total from investment operations 0.35 (0.44)
-----------------------------------------
Less distributions from:
Net investment income (0.26) (0.15)
Net realized gains - -
-----------------------------------------
Total distributions (0.26) (0.15)
-----------------------------------------
Net asset value, end of period $9.50 $9.41
=========================================
Total return2 3.74% (4.47)%
Ratios/supplemental data:
Net assets, end of period (000's) $272 $145
Ratio of net expenses to average net assets 0.00%3,4 0.00%3,4
Ratio of net investment income to average net assets 4.86%3 4.15%3
Portfolio turnover rate 16.44% 4.36%
</TABLE>
1Commencement of operations.
2Total return assumes reinvestment of distributions at net asset value, does
not reflect the impact of a sales charge and is not annualized.
3Annualized.
4Viking Fund Management, LLC, the Fund's investment manager, has contractually
agreed to waive its fees or reimburse the Fund for its expenses through
August 1, 2009 so that the Fund's total operating expenses during this period
will not exceed 0.85% of its average net assets on an annual basis. For the
periods indicated above, Viking Fund Management, LLC waived fees and
reimbursed expenses totaling $10,084 and $9,972. 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 14.74% and 24.90%
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 the
periods were as follows:
<TABLE>
For the Six For the Period
Months Ended from 8/3/991
06/30/00 through 12/31/99
----------------------------------------
<S> <C> <C>
Net asset value, beginning of period $9.47 $10.00
----------------------------------------
Income (loss) from investment operations:
Net investment income 0.27 0.18
Net realized and unrealized gain (loss) on investments 0.05 (0.53)
----------------------------------------
Total from investment operations 0.32 (0.35)
----------------------------------------
Less distributions from:
Net investment income (0.27) (0.18)
Net realized gains - -
----------------------------------------
Total distributions (0.27) (0.18)
----------------------------------------
Net asset value, end of period $9.52 $9.47
========================================
Total return2 3.46% (3.56)%
Ratios/supplemental data:
Net assets, end of period (000's) $227 $128
Ratio of net expenses to average net assets 0.00%3,4 0.00%3,4
Ratio of net investment income to average net assets 5.79%3 4.28%3
Portfolio turnover rate 10.53% 0.00%
</TABLE>
1Commencement of operations.
2Total return assumes reinvestment of distributions at net asset value, does
not reflect the impact of a sales charge and is not annualized.
3Annualized.
4Viking Fund Management, LLC, the Fund's investment manager, has
contractually agreed to waive its fees or reimburse the Fund for its expenses
through August 1, 2009 so that the Fund's total operating expenses during
this period will not exceed 0.85% of its average net assets on an annual
basis. For the periods indicated above, Viking Fund Management, LLC waived
fees and reimbursed expenses totaling $10,204 and $9,786 respectively. If
the fees had not been waived or expenses had not been reimbursed, the
annualized ratios of total expenses to average net assets would have been
10.56% and 29.72% 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 the
periods were as follows:
<TABLE>
For the Six For the Period
Months Ended from 8/3/991
06/30/00 through 12/31/99
----------------------------------------
<S> <C> <C>
Net asset value, beginning of period $9.90 $10.00
----------------------------------------
Income (loss) from investment operations:
Net investment income 0.05 0.02
Net realized and unrealized gain (loss) on investments (0.22) (0.10)
----------------------------------------
Total from investment operations (0.17) (0.08)
----------------------------------------
Less distributions from:
Net investment income - (0.02)
Net realized gains - -
----------------------------------------
Total distributions - (0.02)
----------------------------------------
Net asset value, end of period $9.73 $9.90
========================================
Total return2 (1.72)% (0.77)%
Ratios/supplemental data:
Net assets, end of period (000's) $1,010 $591
Ratio of net expenses to average net assets 1.35%3,4 1.35%3,4
Ratio of net investment income to average net assets 1.27%3 0.83%3
Portfolio turnover rate 23.43% 6.30%
</TABLE>
1Commencement of operations.
2Total return assumes reinvestment of distributions at net asset value, does
not reflect the impact of a sales charge and is not annualized.
3Annualized.
4Viking Fund Management, LLC, the Fund's investment manager, has
contractually agreed to waive its fees or reimburse the Fund for its expenses
through August 1, 2009 so that the Fund's total operating expenses during
this period will not exceed 1.35% of its average net assets on an annual
basis. For the periods indicated above, Viking Fund Management, LLC waived
fees and reimbursed expenses totaling $10,578 and $11,025. 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 3.91% and 8.58%
respectively.
The accompanying notes are an integral part of these financial statements.
VIKING MUTUAL FUNDS
Notes to Financial Statements
June 30, 2000
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 three 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"), a diversified Fund, seeks long-term
total return and capital preservation.
2. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with generally
accepted accounting principles 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 constitue
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.
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 a specific identification
basis. Interest income and estimated expenses are accrued daily. Dividend
income is recognized on the ex-dividend date. Original issue discounts and
market premium are amortized to interest income 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
will declare and pay dividends from net investment income at least annually.
Capital gains, if any, are distributed annually.
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
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
3. CAPITAL STOCK
Transactions in capital shares were as follows:
<TABLE>
Tax-Free Fund Tax-Free Fund Large-Cap
for Montana for North Dakota Value Fund
--------------------------------------------------------------
<S> <C> <C> <C>
For the Six For the Six For the Six
Months Ended Months Ended Months Ended
06/30/00 06/30/00 06/30/00
--------------------------------------------------------------
Shares sold 23,123 15,302 45,769
Shares issued on reinvestment of distributions 317 518 140
Shares redeemed (10,229) (5,482) (1,853)
--------------------------------------------------------------
Net Increase 13,211 10,338 44,056
--------------------------------------------------------------
</TABLE>
4. 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 and 0.70% to the Large-Cap Fund's daily net
assets. Under a sub-advisory agreement between Fox Asset Management (the
"sub-adviser") and VFM, the sub-adviser provides the Large-Cap Fund with
investment advice and portfolio management subject to the overall
supervision of VFM. As compensation for its services provided to the
Large-Cap Fund, VFM pays the sub-adviser monthly compensation calculated daily
by applying the annual rate of 0.40% to the Large-Cap Fund's daily net assets
of up to $100 million and 0.35% to the Large-Cap Fund's daily net assets in
excess of $100 million.
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.
The Funds have a distribution plan, sometimes known as a Rule 12b-1 plan, that
allows the Tax-Free Funds to pay distribution and service fees of up to 0.25%
of average daily net assets per year and the Large-Cap Fund to pay
distribution and service fees of up to 0.40% of average daily net assets
per year to Viking Fund Distributors, LLC ("VFD") for distributing each
Fund's shares and for servicing shareholder accounts.
For the period ending June 30, 2000, the net amounts of sales charges
deducted from the proceeds of sale of capital shares which were retained
by VFD as principal underwriter were $1,374, $154 and $1,556 for the Tax-Free
Fund for Montana, Tax-Free Fund for North Dakota and Large-Cap Fund,
respectively.
VFM has contractually agreed to waive its fees or reimburse the Funds for
their expenses through August 1, 2009 so that the Tax-Free Fund's total
operating expenses during this period will not exceed 0.85% of average net
assets on an annual basis and the Large-Cap Fund's total operating expenses
during this period will not exceed 1.35% of average net assets on an annual
basis.
On June 30, 2000, the Tax-Free Fund for Montana, Tax-Free Fund for North
Dakota and Large-Cap Fund had receivables from VFM for reimbursement of
certain expenses of $5,247, $5,124 and $4,005, respectively. The Tax-Free
Fund for Montana had a payable to VFM of $19 for transfer agent out-of-pocket
expenses on June 30, 2000. The Tax-Free Fund for North Dakota had a payable
to VFM of $46 for transfer agent out-of-pocket expenses on June 30, 2000.
The Large-Cap Fund had payables to VFM of $109 and $108 for investment
advisory fees and transfer agent out-of-pocket expenses, respectively, on
June 30, 2000. Certain officers and trustees of the Funds are also officers
and governors of VFM and VFD.
5. INCOME TAXES No provision has been made for income taxes because each
Fund's policy is to qualify as a regulated investment company under the
Internal Revenue Code and to distribute substantially all of its taxable
income. At June 30, 2000, the Tax-Free Fund for Montana and Tax-Free Fund
for North Dakota had capital losses of $2,815 and $1,662, respectively,
which may be carried over to offset future capital gains. Such losses expire
in 2008.
At June 30, 2000, the net unrealized appreciation (depreciation) based on the
cost of investments for federal income tax purposes was as follows:
<TABLE>
Tax-Free Fund Tax-Free Fund Large-Cap
for Montana for North Dakota Value Fund
----------------------------------------------------------
<S> <C> <C> <C>
Investments at cost $ 276,552 $ 203,855 $ 1,043,154
----------------------------------------------------------
Unrealized appreciation 387 1,436 106,027
Unrealized depreciation (3,445) (2,593) (94,518)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $ (3,058) $ (1,157) $ 11,509
----------------------------------------------------------
</TABLE>
6. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
six months ended June 30, 2000 were as follows:
<TABLE>
Tax-Free Fund Tax-Free Fund Large-Cap
for Montana for North Dakota Value Fund
----------------------------------------------------------
<S> <C> <C> <C>
Purchases $ 171,119 $ 124,561 $ 611,449
Sales $ 22,484 $ 20,359 $ 195,326
</TABLE>
7. CREDIT AND MARKET RISK
The Tax-Free Funds concentrate their investments in securities mainly issued
by each specific state's municipalities. The value of these investments may
be adversely affected by new legislation within the state, regional or local
economic conditions, and differing levels of supply and demand for municipal
bonds. Many municipalities insure repayment for their obligations. Although
bond insurance reduces the risk of loss due to default by an issuer, such bonds
remain subject to the risk that market value may fluctuate for other reasons
and there is no assurance that the insurance company will meet its
obligations. These securities have been identified in the Statement of
Investments.
TRUSTEES
Bruce C. Adams
Shirley R. Martz
Mike Timm
Shannon D. Radke
Douglas P. Miller
INVESTMENT MANAGER
Viking Fund Management, LLC
1400 14th Ave. SW
Minot, ND 58701
SUB-ADVISOR
(For Viking Large-Cap Value Fund)
Fox Asset Management, LLC
44 Sycamore Avenue
Little Silver, NJ 07739-1220
DISTRIBUTOR
Viking Fund Distributors, LLC
1400 14th Ave. SW
Minot, ND 58701
CUSTODIAN
First International Bank & Trust
3001 25th Street South
Fargo, ND 58103
TRANSFER AGENT
Viking Fund Management, LLC
1400 14th Ave. SW
Minot, ND 58701
INDEPENDENT AUDITORS
Brady, Martz & Associates, P.C.
207 East Broadway, Suite 200
Bismarck, ND 58501
