As filed with the
Securities and Exchange Commission on May 19, 2009
Securities Act Registration No. 333-158643
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
[X] PRE-EFFECTIVE
AMENDMENT NO. 1
[ ] POST-EFFECTIVE AMENDMENT NO. __
(Check appropriate box or boxes)
Viking Mutual
Funds
(Exact Name of Registrant as Specified in Charter)
116 1st St. SW, Suite
C
Minot, North Dakota 58701
(Address of Principal Executive Offices)
1-701-852-1264
(Registrant's Telephone Number)
Shannon D. Radke,
President
Viking Mutual Funds
116 1st St. SW, Suite C
Minot, North Dakota 58701
(Name and Address of Agent for Service)
With copy to:
Mark J. Kneedy
Chapman and Cutler LLP
111 W. Monroe St.
Chicago, IL 60603
Approx. Date of
Proposed Public
Offering: as soon as practical after this Registration
Statement becomes effective under Securities Act of 1933.
Title of Securities being Registered: Shares of beneficial interest, (par value $0.001 per share) of Registrant
It is proposed that this filing will become effective on June 18, 2009 pursuant to Rule 488.
No filing fee is due for Registrant because of reliance on Section 24(f) of the Investment Company Act of 1940.
MONTANA TAX-FREE FUND, INC.
ND TAX-FREE FUND, INC.
1 Main Street
Minot, North Dakota 58703
1-800-601-5593 or 701-857-0230
May 20, 2009
Dear Shareholder:
On behalf of the Board of Directors of the Montana Tax-Free Fund, Inc. (the "Montana Fund") and ND Tax-Free Fund, Inc. (the "ND Fund"), we are pleased to invite you to a special meeting of shareholders (the "Meeting") of the Montana Fund and ND Fund to be held on Monday, June 29, 2009 at 10:00 a.m., Central Time, at the offices of Brady, Martz & Associates, P.C., 24 Central Avenue West, Minot, North Dakota 58701.
At the Meeting, you will be asked to approve an Agreement and Plan of Reorganization by and between the ND Fund and Montana Fund, (each an "Integrity Fund") and the Viking Mutual Funds on behalf of its series, Viking Tax-Free Fund for North Dakota (the "Viking-North Dakota Fund") and Viking Tax-Free Fund for Montana (the "Viking-Montana Fund"), respectively (each a "Viking Fund") (the "Plan"). Under the Plan, each of the ND Fund and Montana Fund will transfer its stated assets to the Viking-North Dakota Fund and Viking-Montana Fund, respectively, in exchange solely for shares of that corresponding Viking Fund and the corresponding Viking Fund's assumption of the applicable Integrity Fund's stated liabilities. The Plan further provides that each Integrity Fund will then distribute the shares received from the corresponding Viking Fund proportionately to its shareholders and then terminate.
The Board of Directors of ND Fund and the Montana Fund (the "Integrity Board") approved the Plan. In evaluating the Plan with respect to each Integrity Fund in which you invest, please note that:
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Shareholders are being asked to approve the Plan only with respect to the Integrity Fund in which they own shares. The shareholders of each Integrity Fund must separately approve the Reorganization with respect to their Integrity Fund in order for the Reorganization to be approved for that Fund. Additionally, unless certain conditions are waived, the Reorganization must be approved for both Integrity Funds and meet other conditions described in further detail under "General Overview" in the accompanying Proxy Statement/Prospectus to be effected. In the event an Integrity Fund fails to receive sufficient votes for approval of the Reorganization, management will consider appropriate options.
The Board of Directors of each Integrity Fund approved the Plan and recommends that you read the enclosed materials carefully and then vote FOR the Plan with respect to the Integrity Fund in which you invest.
The Proxy Statement/Prospectus that accompanies this letter contains detailed information on the proposals. I encourage you to read it carefully. After you have read the accompanying materials, please complete, sign and date the enclosed proxy card and return it in the enclosed postage-paid return envelope. Alternatively, you may vote by telephone, facsimile or via the Internet. This will ensure that your vote is counted, even if you cannot attend the Meeting in person. You may also vote in person at the Meeting. If you have any questions or need assistance in voting, please contact Integrity Fund Services, Inc. (shareholder services) at (800) 601-5593 or (701) 857-0230.
Your Vote Is Important. If we do not hear from you after a reasonable amount of time, you may receive a telephone call reminding you to vote your shares.
We appreciate your participation and urge you to cast your vote as soon as possible.
Sincerely,
/s/Robert E. Walstad
Robert
E. Walstad
Interim President and Chairman of
the Board
Montana
Tax-Free Fund, Inc.
ND Tax-Free Fund, Inc.
WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING, |
MONTANA TAX-FREE
FUND, INC.
ND TAX-FREE FUND, INC.
1 Main Street
North
Minot, North Dakota 58703
1-800-601-5593 or 701-857-0230
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
To be held on June 29, 2009
NOTICE IS HEREBY GIVEN that a joint special meeting of shareholders of the Montana Tax-Free Fund, Inc. (the "Montana Fund") and ND Tax-Free Fund, Inc. (the "ND Fund," and together with the Montana Fund, the "Integrity Funds" and each an "Integrity Fund") will be held on Monday, June 29, 2009, at 10:00 a.m., Central Time, at the offices of Brady, Martz & Associates, P.C., 24 Central Avenue West, Minot, North Dakota 58701, as may be adjourned from time to time (the "Meeting"). The purpose of the Meeting is to consider and act on the following proposals affecting your Integrity Fund:
For shareholders of the Montana Fund:
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For shareholders of the ND Fund:
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The enclosed materials, including a Proxy Statement/Prospectus, provide additional information about the proposed transactions. A form of the Plan is attached as Appendix A to the Proxy Statement/Prospectus. This notice and related Proxy Statement/Prospectus are first being mailed to shareholders of each Integrity Fund on or about May 22, 2009. This proxy is being solicited by the Boards of Directors of the Integrity Funds. Shareholders of record of each Integrity Fund as of the close of business on May 11, 2009 are entitled to receive notice of and to vote at the Meeting and at any adjournment(s) or postponement(s) thereof. Shareholders may vote in person or by proxy.
Under North Dakota law, a shareholder who does not wish to accept the reorganization of his or her Integrity Fund has a right to dissent and to receive fair value for his or her shares. The rights of dissenters and the procedures to assert such rights are set forth in Sections 10-19.1-87 and 10-19.1-88 of the North Dakota Business Corporation Act, copies of which have been attached as Appendix B to the enclosed Proxy Statement/Prospectus. Shareholders should note, however, that because the Integrity Funds are open-end investment companies, the Integrity Funds expect that shareholders would receive a share price based on the respective Integrity Fund's net asset value next determined after the request is received in accordance with federal law.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES. ALTERNATIVELY, YOU MAY VOTE BY TELEPHONE, FACSIMILE OR VIA THE INTERNET BY FOLLOWING THE INSTRUCTIONS THAT APPEAR ON THE PROXY CARD. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE. VOTING INSTRUCTIONS MUST BE RECEIVED NO LATER THAN 10:00 A.M., CENTRAL TIME, ON JUNE 29, 2009.
If you have any questions concerning the enclosed Proxy Statement/Prospectus, please contact Integrity Fund Services, Inc. (shareholder services) at 1-800-601-5593 or 701 857-0230.
May 20, 2009
By Order of the Board of Directors of the
Montana Tax-Free Fund, Inc. and
ND Tax-Free Fund, Inc.
Peter A. Quist
Secretary
COMBINED PROXY STATEMENT/PROSPECTUS
Dated May 20, 2009
INTRODUCTION
This combined Proxy Statement/Prospectus and enclosed proxy are being furnished in connection with the solicitation of proxies by the Board of Directors (each an "Integrity Board" or the "Directors") of the Montana Tax-Free Fund, Inc. (the "Montana Fund") and the ND Tax-Free Fund (the "ND Fund" and together with the Montana Fund, the "Integrity Funds" and each an "Integrity Fund") for use at a special joint meeting of shareholders of the Montana Fund and the ND Fund, to be held on Monday, June 29, 2009, at 10:00 a.m., Central Time, at the offices of Brady, Martz & Associates, P.C., 24 Central Avenue West, Minot, North Dakota 58701, as may be adjourned from time to time (the "Meeting"). The Integrity Board is soliciting proxies from shareholders of the respective Integrity Fund with respect to the Proposal set forth in the accompanying Notice. It is anticipated that proxies and related Proxy Statement/Prospectus will first be mailed to shareholders on or about May 22, 2009.
At meetings held on March 6, 2009 and on March 11, 2009, the Integrity Board of the Montana Fund and the ND Fund, each an open-end investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), approved the Agreement and Plan of Reorganization between the ND Fund and the Montana Fund and the Viking Mutual Funds (the "Viking Trust"), an open-end investment company registered under the 1940 Act, on behalf of its series, Viking Tax-Free Fund for North Dakota (the "Viking-North Dakota Fund") and Viking Tax-Free Fund for Montana (the "Viking-Montana Fund"), respectively, (each a "Viking Fund") (the "Plan"). Under the Plan, each of the ND Fund and Montana Fund will transfer its stated assets to the Viking-North Dakota Fund and Viking-Montana Fund, respectively, in exchange solely for shares of that corresponding Viking Fund and the Viking Fund's assumption of the applicable Integrity Fund's stated liabilities. The Plan further provides that each Integrity Fund will then distribute the shares received from the corresponding Viking Fund proportionately to its shareholders and then terminate (each a "Reorganization" and collectively, the "Reorganizations"). The address of the executive offices and the telephone number of the Viking Trust are 116 1st St SW, Suite C, Minot, North Dakota 58701, (701) 852-1264 or (800) 933-8413. The address of the executive offices and the telephone number of the Integrity Funds are 1 Main Street North, Minot, North Dakota 58703, (701) 852-5292, (701) 857-0230 or (800) 601-5593.
Please read the Proxy Statement/Prospectus carefully and retain it for future reference. This Proxy Statement/Prospectus sets forth concisely the information that you should know before investing in a Viking Fund and voting upon the Reorganization and constitutes an offering of shares of beneficial interest, par value $0.001 per share of the Viking Funds only. A Statement of Additional Information dated May 20, 2009 relating to this Proxy Statement/Prospectus and each Reorganization (the "Reorganization SAI"), has been filed with the Securities and Exchange Commission ("SEC") and contains more information about the Plan, the Viking Funds, the Integrity Funds and the proposed transactions. The Reorganization SAI is incorporated by reference in its entirety into this Proxy Statement/Prospectus and is legally part of this Proxy Statement/Prospectus.
The Prospectus of the Viking-Montana Fund and Viking-North Dakota Fund dated April 30, 2009 (the "Viking Prospectus"), which accompanies this Proxy Statement/Prospectus, is incorporated by reference, is considered a part of this Proxy Statement/Prospectus and has been filed with the SEC. The Viking Prospectus is intended to provide you with additional information about the applicable Viking Fund. A copy of the Statement of Additional Information for the Viking-Montana Fund and Viking-North Dakota Fund dated April 30, 2009 (the "Viking Statement of Additional Information"), is incorporated by reference into, is legally part of this Proxy Statement/Prospectus and has been filed with the SEC. You can request a free copy of the Proxy Statement/Prospectus, Reorganization SAI, the Viking Prospectus, the Viking Statement of Additional Information and the Viking Funds' annual report dated December 31, 2008 by calling 800-933-8413, or by writing the Viking Funds at P.O. Box 500, Minot, ND 58702 or accessing them from the Viking Funds' website at: www.vikingfunds.com.
With respect to the Integrity Funds, the following documents have been filed with the SEC:
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The Integrity Funds' Prospectus and related Integrity Funds' SAI are incorporated by reference herein and are legally part of this Proxy Statement/Prospectus. Copies of the foregoing documents, as well as the annual reports of the ND Fund and Montana Fund dated December 31, 2008 are available upon request and without charge by writing to the Integrity Funds at 1 Main Street North, Minot, North Dakota 58703, by calling toll free at 800-276-1262 or accessing them from the Integrity Funds' website at www.integrityfunds.com.
Accompanying this Proxy Statement/Prospectus as Appendix A is a copy of the Plan pertaining to the Reorganizations.
Copies of any of these documents may also be obtained without charge on the EDGAR database on the SEC's internet site at http://www.sec.gov. Copies are available for a fee by electronic request at the following e-mail address: publicinfo@sec.gov, or from the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN EACH OF THE FUNDS INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF THE PURCHASE PAYMENT OF YOUR ORIGINAL INVESTMENT.
TABLE OF CONTENTS
GENERAL OVERVIEW |
12 |
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The Acquisition by the Viking Funds |
12 |
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The Corridor Transaction |
12 |
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Covenants Regarding Certain Legal Requirements Under the 1940 Act |
14 |
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14 |
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The Proposed Agreement and Plan of Reorganization |
15 |
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Comparison of Fees |
16 |
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Comparison of Business Structures |
21 |
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Comparison of Investment Objectives and Principal Investment Strategies |
22 |
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Comparison of Investment Advisory Services and Fees |
32 |
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Comparison of Other Service Providers |
34 |
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Comparison of Sales Charges |
35 |
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Comparison of 12b-1 Fees |
38 |
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Comparison of Purchase, Redemption, Exchanges and Reinstatement Privileges |
38 |
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Comparison of Minimum Initial/Subsequent Investment Requirements |
42 |
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Comparison of Distribution Policies |
42 |
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Comparison of Net Asset Value Calculation Procedures |
42 |
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Tax Matters Relating to the Reorganizations |
44 |
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44 |
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General Risks |
44 |
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Specific Risks |
44 |
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47 |
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General Description of the Plan |
47 |
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Related Party Transactions |
48 |
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Securities to Be Issued and Shareholder rights |
48 |
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Dissenters' Rights |
55 |
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Reasons for the Reorganizations |
57 |
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60 |
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Tax Consequences of Distributions |
61 |
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Tax Consequences of the Reorganizations |
62 |
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63 |
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Performance Information for the Viking-North Dakota Fund and ND Fund |
63 |
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Performance Information for the Viking-Montana Fund and Montana Fund |
66 |
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69 |
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70 |
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Instructions for Signing Proxy Cards |
71 |
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Information Regarding Shares of each Integrity Fund and Viking Fund Outstanding |
72 |
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74 |
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Legal Matters |
74 |
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Experts |
74 |
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Interested Persons |
74 |
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Information Filed with the Securities and Exchange Commission |
75 |
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A-1 |
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B-1 |
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C-1 |
GENERAL OVERVIEW
THE ACQUISITION BY THE VIKING FUNDS
On March 6, 2009 and on March 11, 2009, the Boards of Directors of the Integrity Funds approved and adopted the Plan with respect to each Integrity Fund. If approved by shareholders, the Plan provides that (i) all of an Integrity Fund's stated assets will be transferred to the corresponding Viking Fund in exchange for shares of that Viking Fund and the corresponding Viking Fund's assumption of the applicable Integrity Fund's stated liabilities, (ii) the shares of the Viking Fund received will be distributed proportionately to shareholders of the respective classes of the corresponding Integrity Fund and (iii) the Integrity Funds will be liquidated.
Approval of the Plan by shareholders of the Viking Funds is not required. The shareholders of each Integrity Fund must separately approve the Reorganization with respect to their Integrity Fund in order for the Reorganization to be approved for that Fund. Unless the parties to the Plan waive certain conditions, the Reorganization also must be approved for both Integrity Funds for the Reorganizations to be effected. In addition, unless the parties to the Plan agree otherwise, the Reorganizations are also contingent upon the closing (either simultaneous with or preceding the Effective Time (as defined in the Plan)) of the Corridor Transaction (as defined below).
THE CORRIDOR TRANSACTION
Integrity Money Management, Inc. ("Integrity") serves as the investment adviser to the Integrity Funds as well as the other mutual funds in the Integrity family of funds, including the six series of Integrity Managed Portfolios, the three series of The Integrity Funds and the Integrity Fund of Funds, Inc. (together with the Integrity Funds, the "Integrity Family Funds"). Integrity has indicated its intention to sell its investment advisory and other mutual fund services business. Integrity, Integrity Funds Distributor, Inc. ("IFD") and Integrity Funds Services Inc. ("IFS") are each wholly-owned subsidiaries of Integrity Mutual Funds, Inc. ("Integrity Mutual Funds"). IFD and IFS are the distributor and transfer agent, respectively, of the Integrity Funds. On March 6, 2009, Integrity Mutual Funds and Integrity, among others, entered into a share purchase and change of advisor agreement (the "Corridor Agreement") with Corridor Investors, LLC ("Corridor") and Viking Fund Management, LLC ("Viking"), each a North Dakota limited liability company, pursuant to which Corridor and Viking would acquire all the stock of IFD, IFS, and certain assets of Integrity, subject to certain terms and conditions (the "Corridor Transaction").
Corridor is a recently formed North Dakota limited liability company that was organized in January 2009 by Robert E. Walstad, the chairman of the Board of Directors and interim president of the Integrity Funds and Shannon D. Radke, president of Viking, the Viking Trust and Viking Fund Distributors, LLC. Mr. Walstad and Mr. Radke comprise the initial Board of Governors of Corridor and it is anticipated that Mr. Radke will serve as president and chief executive officer of Corridor. In addition, it is anticipated that by the completion of the Corridor Transaction, Mr. Walstad and Mr. Radke will own membership interests of approximately 10% and 5%, respectively, in Corridor. They will receive their membership interests, without a cash investment, in exchange for their contributions to Corridor (including experience in the mutual fund industry and their personal guaranties of bank financing) and, in addition, with respect to Mr. Radke, in exchange for his interest in Viking (which will be converted). Other employees currently of Integrity Mutual Funds and Viking are expected to own, in the aggregate, approximately 23% of the total members interests in Corridor, with each employee individually owning an interest of approximately 1%. They will receive their membership interests in exchange for their experience and role in the operations of Corridor, and without a cash investment. Corridor is conducting a private offering in which it anticipates raising approximately $625,000 in exchange for approximately 25% of total membership interests from other private investors. The remaining membership interests (approximately 37%) are expected to be held by current holders of membership interests in Viking. It is currently not anticipated that any person will initially hold a membership interest representing more than 25% of the aggregate membership interests in Corridor.
Viking is a North Dakota limited liability company that currently acts as investment adviser to four mutual funds, including the Viking-Montana Fund and the Viking-North Dakota Fund (the "Viking Family Funds"). If the Corridor Transaction is completed, it is expected that Corridor, primarily through its subsidiaries, will provide investment advisory, distribution, and other services to the mutual funds currently in the Integrity and Viking fund families. In light of the foregoing, simultaneous with the closing of the Corridor Transaction, it is intended that Viking will become a subsidiary of Corridor (the "Viking Transaction"). The Viking Transaction is subject to approval by Viking's shareholders and Board of Governors. Viking intends to seek shareholder approval of the Viking Transaction pursuant to written consent. In addition, a joint special meeting of the Viking Family Funds has been currently scheduled for June 29, 2009 (the "Viking Shareholder Meeting"). At the Viking Shareholder Meeting, shareholders of the Viking Family Funds will be asked to approve, among other things, new advisory agreements with Viking for their respective fund effective following the Viking Transaction, new trustees for the Viking Trust effective following the Viking Transaction, and a proposed manager-of-managers structure. Subject to approval by the shareholders of the applicable series of Integrity Managed Portfolios, the series of The Integrity Funds and the Integrity Fund of Funds, Inc., Viking is intended to serve as the new investment adviser to such funds in the Integrity family.
The closing of the Corridor Agreement is subject to numerous conditions including, among other things, (i) the acquisition of Viking by Corridor simultaneously with the closing of the Corridor Agreement, (ii) the shareholders of the respective series of Integrity Managed Portfolios, the series of Integrity Funds and Integrity Fund of Funds, Inc. as well as the respective Board of Directors or Trustees (as applicable) of the foregoing approving the change of advisor from Integrity to Viking; (iii) the shareholders and Board of Directors of the ND Fund and Montana Fund approving the Reorganizations with respect to their Integrity Fund; and (iv) receipt of various necessary regulatory approvals. Subject to the terms and conditions of the Corridor Agreement, the closing date of the Corridor Agreement is expected to be on June 30, 2009 or such other date as may be agreed upon in writing by the parties (the "Corridor Closing Date"). Accordingly, in addition to shareholders of the ND Fund and Montana Fund approving the Reorganization with respect to their Integrity Fund, the closing of the Reorganizations are contingent upon the satisfaction or waiver of certain conditions, including the closing of the Corridor Agreement.
Although it is anticipated that the closing of the Reorganization will occur on or shortly after the Corridor Closing Date, to ensure continuity of investment advisory services between the Corridor Closing Date and the closing of the Reorganization, the Directors of each Integrity Fund have approved an interim investment management services agreement for the Integrity Funds with Viking, which would be effective at the termination of the investment advisory agreement with Integrity until the earlier of the closing of the respective Reorganization and 150 days following the termination of the advisory agreements with Integrity and the Integrity Fund. The terms of the interim agreements are substantially the same as the current advisory agreement with Integrity except to the extent required by law. The provisions required by law include a requirement that fees payable under the interim agreements will be paid into an escrow account and, if the Integrity Fund's stockholders approve an advisory agreement by the end of the 150-day period, the compensation (plus interest) payable under that agreement will be paid to Viking, and if such an agreement is not so approved, only the lesser of the costs incurred (plus interest) or the amount in the escrow account (including interest) will be so paid.
COVENANTS REGARDING CERTAIN LEGAL REQUIREMENTS UNDER THE 1940 ACT
Under the terms of the Plan, the Integrity Funds and Viking Funds have agreed to use their reasonable best efforts to assure compliance with the conditions of Section 15(f) of the 1940 Act as it applies to the transactions contemplated by this Plan. Section 15(f) of the 1940 Act generally provides, in substance, that when a sale of an interest in an investment adviser occurs, the investment adviser or any of its affiliated persons may receive any amount or benefit in connection with the transaction so long as two conditions are satisfied. The first condition is that 75% of the board of directors not be "interested persons" of the proposed or predecessor investment adviser for the three-year period immediately following the transaction. A second condition of Section 15(f) is that no "unfair burden" be imposed on the investment company as a result of the transactions relating to the sale of such interest or any express or implied terms, conditions or understandings applicable thereto. The term "unfair burden" as defined in the 1940 Act, includes any arrangement during the two-year period following the transaction whereby the fund's investment adviser (or any predecessor or successor investment adviser), or any interested person of such investment adviser, receives or is entitled to receive any compensation, directly or indirectly, (i) from any person in connection with the purchase or sale of securities or other property to, from or on behalf of such investment company (other than bona fide ordinary fees for principal underwriting services) or (ii) from such investment company or its security holders (other than fees for bona fide investment advisory or other services). Based on its review of the terms of the Reorganization, including the provisions of the Corridor Agreement, the Integrity Board is not aware of any express or implied term, condition, arrangement or understanding which would impose an "unfair burden" on the Integrity Funds or the Viking Funds as a result of the Reorganizations. Further, the Board of Trustees of the Viking Funds intend to satisfy such 75% requirement for the three years following the transaction.
SUMMARY
This section summarizes the important terms of the Plan among the ND Fund and the Montana Fund and the Viking Trust on behalf of each Viking Fund. This section also summarizes certain information regarding each Integrity Fund and each Viking Fund. The information set forth in this section is only a summary and is qualified in its entirety by the information contained elsewhere in this Proxy Statement/Prospectus, the Plan, or in the documents incorporated by reference herein. You should read the entire Proxy Statement/Prospectus including the Plan (attached as Appendix A), as it contains additional information regarding the Plan.
THE PROPOSED AGREEMENT AND PLAN OF REORGANIZATION
At a meeting on March 6, 2009 and on March 11, 2009, the Boards of the Integrity Funds, including the directors who are not "interested persons" as defined in Section 2(a)(19) of the 1940 Act (the "Independent Directors"), voted to approve the Plan with respect to the Integrity Funds.
Under the Plan, (1) each of the Montana Fund and ND Fund will transfer its stated assets and stated liabilities to the Viking-Montana Fund and Viking-North Dakota Fund, respectively, in exchange solely for shares of that corresponding Viking Fund and the corresponding Viking Fund's assumption of the applicable Integrity Fund's stated liabilities and (2) each Integrity Fund will then distribute the shares received from its corresponding Viking Fund proportionately to its shareholders and terminate. The Reorganization of an Integrity Fund will occur as of the Closing Date (as defined in the Plan) or at a later date as agreed upon by the Viking Board of Trustees and the Integrity Board and only after the Plan is approved by the shareholders of the respective Integrity Fund and all contingencies under the Plan are satisfied. You will receive shares of the corresponding Viking Fund equal in value to the respective class of shares of the Integrity Fund that you hold as of the Valuation Time (as defined in the Plan). In this regard, with respect to the Montana Fund, the Montana Fund offers two classes of shares, Class A shares and Class B shares, whereas the Viking-Montana Fund only offers one class of shares. Accordingly, shareholders of the Montana Fund will receive a distribution of the one class of shares of the Viking-Montana Fund, equal in value to their respective class shares (i.e., Class A shares or Class B shares) they held in the Montana Fund. No front-end sales loads or contingent deferred sales charges ("CDSC") will be imposed in connection with the Reorganizations. However, additional purchases by persons who previously owned Class B shares of the Montana Fund will be subject to the Viking-Montana Fund's normal sales charges.
For the reasons set forth in the section entitled "Information about the Plan—Reasons for the Reorganizations," each Integrity Board, including the Independent Directors, approved the Plan with respect to its Integrity Fund, and recommends that you approve the Plan with respect to the Integrity Fund in which you own shares. The Integrity Boards considered a variety of different factors prior to approving the Plan with respect to each Integrity Fund including: (1) each Integrity Fund shareholder will receive shares of the corresponding Viking Fund equal in value to its share of the net assets of the Integrity Fund held; (2) the similarities of the investment objectives and policies of each Viking Fund and the corresponding Integrity Fund; (3) the expenses of each Viking Fund are anticipated to be no more than the corresponding Integrity Fund and the applicable expense caps; (4) the expectant tax-free nature of the Reorganizations; (5) the fact that Corridor Investors, LLC and to a smaller extent Integrity Money Management, Inc. have agreed to pay the expenses incurred in connection with the implementation of the Plan; and (6) the Plan includes provisions intended to avoid dilution of the interests of the shareholders of the Integrity Funds. See "Information about the Plan—Reasons for the Reorganizations" for a more detailed discussion of the Integrity Boards' approval of the Reorganizations.
COMPARISON OF FEES
Like all mutual funds, each Viking Fund and Integrity Fund incurs certain expenses in its operations and, as a shareholder, you pay these expenses indirectly. The following tables compare the various fees and expenses that a shareholder incurred from an investment in each Viking Fund and corresponding Integrity Fund as of the most recently completed fiscal year ended December 31, 2008, as well as with the pro forma expenses of the combined fund (giving effect to the Reorganization as though it occurred on January 1, 2009). The contractual fee waiver and expense reimbursements figure and the net expense ratio for each Viking Fund, however, has been restated to reflect a new expense limitation agreement effective August 1, 2009.
MONTANA FUND—VIKING-MONTANA FUND
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MONTANA FUND |
VIKING-MONTANA ACTUAL EXPENSES |
PRO FORMA |
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CLASS A |
CLASS B |
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SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)(1) |
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Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price)(2) |
4.25% |
None |
3.75% |
3.75% |
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Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds)(3) |
1.00% |
4.00% |
1.50% |
1.50% |
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Maximum Sales Charge (Load) Imposed on Reinvested Dividends |
None |
None |
None |
None |
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Redemption Fees |
None |
None |
None |
None |
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Exchange Fees |
None |
None |
None |
None |
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ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) |
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Management Fees |
0.60% |
0.60% |
0.50% |
0.50% |
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Distribution (12b-1) Fees(4) |
0.25% |
0.75% |
0.25% |
0.25% |
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Acquired Fund Fees and Expenses(5) |
0.01% |
0.01% |
0.00% |
0.01% |
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Other Expenses(6) |
0.84% |
0.84% |
0.35% |
0.63% |
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Total Annual Fund Operating Expenses |
1.70% |
2.20% |
1.10% |
1.39% |
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Contractual Fee Waivers and Expense Reimbursements(7) |
(0.62)% |
(0.62)% |
(0.03)% |
(0.31)% |
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Net Annual Fund Operating Expenses (after Contractual Fee Waivers and Expense Reimbursements)(8) |
1.08% |
1.58% |
1.07% |
1.08% |
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(1) |
Authorized dealers and other firms may charge additional fees for shareholder transactions or for advisory services. Please see their materials for details. |
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(2) |
Investors may qualify for a lower sales charge. Reduced sales charges apply to Class A share purchases of the Montana Fund and to share purchases of the Viking Fund of $50,000 or more. See "Summary—Comparison of Sales Charges." Shareholders will not pay any sales load on the redemption of shares of the Integrity Funds or the purchase of shares of the corresponding Viking Fund made in connection with the Reorganization. |
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(3) |
In the case of investments in Class A shares of the Montana Fund made at or above the $1 million breakpoint (where you do not pay an initial sales charge), you may be subject to a 1% contingent deferred sales charge ("CDSC") on shares redeemed within 24 months of purchase for shares purchased on or after September 1, 2007 (excluding shares purchased with reinvested dividends and/or distributions). With respect to the Montana Fund, Class B shares redeemed within five years are subject to a CDSC of 4% during the first year, 4% during the second year, 3% during the third year, 2% during the fourth year and 1% during the fifth year. However, purchases of $1 million or more of Class B shares are subject to a reduced CDSC of 1% if shares are redeemed within 12 months of purchase. See "Summary—Comparison of Sale Charges." With respect to the Viking-Montana Fund, investments for which the initial sales charge was waived and your investment representative was paid a commission will be subject to a limited contingent deferred sales charge of 1.5% for redemption within 1 year of purchase. |
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(4) |
Because the Viking Funds and Integrity Funds pay 12b-1 fees, long-term shareholders may pay more in distribution expenses than the economic equivalent of the maximum front-end sales charges permitted by the Financial Industry Regulatory Authority ("FINRA"). |
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(5) |
To the extent that investment companies held in a fund's portfolio of investments have fees and expenses, shareholders of that fund will indirectly be paying a portion of these other funds' (referred to as "Acquired Funds") fees and expenses. |
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(6) |
Other expenses for the Montana Fund and Viking-Montana Fund reflect the actual expense levels of the respective fund during the most recent fiscal year. Other expenses for the pro forma combined fund are estimated, accounting for the effect of the Reorganization. |
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(7) |
Integrity has contractually agreed to maintain expense levels of the Montana Fund at the following annual rates through December 31, 2009: Montana Fund (Class A) 1.07%; and Montana Fund (Class B) 1.57%. The foregoing contractual agreements to pay expenses of the Montana Fund do not apply to extraordinary or non-recurring expenses or Acquired Fund fees and expenses. With respect to the Viking-Montana Fund, Viking has contractually agreed to waive its fees or reimburse the Viking-Montana 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 daily net assets on an annual basis. Viking has contractually agreed to waive fees or reimburse expenses (excluding interest, taxes, brokerage commissions, and extraordinary expenses of the Fund) from August 1, 2009 through April 29, 2010 so that the Viking-Montana Fund's total annual operating expenses do not exceed 1.07% of the average daily net assets of shares. The contractual fee waiver and expense reimbursement figure and the net expense ratio for the Viking-Montana Fund have been restated to reflect the new expense limitation agreement. |
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(8) |
In additional to the contractual commitment to maintain Montana Fund expense levels, the Integrity Funds' investment adviser may also voluntarily waive or reimburse additional fees and expenses. For fiscal year 2008, after such contractual and voluntary fee waivers and expense reimbursements, and excluding any Acquired Fund fees and expenses, the Montana Fund's net annual operating expenses were: Montana Fund (Class A): 1.07%; and Montana Fund (Class B): 1.57%. |
ND FUND—VIKING-NORTH DAKOTA FUND
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NORTH DAKOTA |
VIKING-NORTH DAKOTA ACTUAL EXPENSES |
PRO FORMA |
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SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)(1) |
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Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price)(2) |
4.25% |
3.75% |
3.75% |
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Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds)(3) |
1.00% |
1.50% |
1.50% |
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Maximum Sales Charge (Load) Imposed on Reinvested Dividends |
None |
None |
None |
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Redemption Fees |
None |
None |
None |
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Exchange Fees |
None |
None |
None |
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ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) |
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Management Fees |
0.60% |
0.50% |
0.50% |
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Distribution (12b-1) Fees(4) |
0.25% |
0.25% |
0.25% |
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Acquired Fund Fees and Expenses(5) |
0.01% |
0.00% |
0.01% |
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Other Expenses(6) |
0.89% |
0.46% |
0.73% |
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Total Annual Fund Operating Expenses |
1.75% |
1.21% |
1.49% |
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Contractual Fee Waivers and Expense Reimbursements(7) |
(0.67)% |
(0.14)% |
(0.41)% |
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Net Annual Fund Operating Expenses (after Contractual Fee Waivers and Expense Reimbursements)(8) |
1.08% |
1.07% |
1.08% |
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(1) |
Authorized dealers and other firms may charge additional fees for shareholder transactions or for advisory services. Please see their materials for details. |
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(2) |
Investors may qualify for a lower sales charge. Reduced sales charges apply to Class A Share purchases of the ND Fund and to share purchases of the Viking Fund of $50,000 or more. See "Summary—Comparison of Sales Charges." Shareholders will not pay any sales load on the redemption of shares of the Integrity Funds or the purchase of shares of the corresponding Viking Fund made in connection with the Reorganization. |
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(3) |
In the case of investments in Class A shares of the ND Fund made at or above the $1 million breakpoint (where you do not pay an initial shares charge), you may be subject to a 1% contingent deferred sales charge ("CDSC") on shares redeemed within 24 months of purchase for shares purchased on or after September 1, 2007 (excluding shares purchased with reinvested dividends and/or distributions). With respect to the Viking-North Dakota Fund, investments for which the initial sales charge was waived and your investment representative was paid a commission will be subject to a limited contingent deferred sales charge of 1.5% for redemption within 1 year of purchase. |
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(4) |
Because the Viking Funds and Integrity Funds pay 12b-1 fees, long-term shareholders may pay more in distribution expenses than the economic equivalent of the maximum front-end sales charges permitted by the Financial Industry Regulatory Authority ("FINRA"). |
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(5) |
To the extent that investment companies held in a fund's portfolio of investments have fees and expenses, shareholders of that fund will indirectly be paying a portion of these other funds' (referred to as "Acquired Funds") fees and expenses. |
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(6) |
Other expenses for the ND Fund and Viking-North Dakota Fund reflect the actual expense levels of the respective fund during the most recent fiscal year. Other expenses for the pro forma combined fund are estimated, accounting for the effect of the Reorganization. |
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(7) |
Integrity has contractually agreed to maintain expense levels of the ND Fund at the annual rate of 1.07% through December 31, 2009. The foregoing contractual agreement to pay expenses of the ND Fund does not apply to extraordinary or non-recurring expenses or Acquired Fund fees and expenses. With respect to the Viking-North Dakota Fund, Viking has contractually agreed to waive its fees or reimburse expenses through August 1, 2009 so that the Viking-North Dakota Fund's total operating expenses during this period will not exceed 0.85% of the average net assets on an annual basis. Viking has contractually agreed to waive fees or reimburse expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses of the Fund) from August 1, 2009 through April 29, 2010 so that the Viking-North Dakota Fund's total annual operating expenses do not exceed 1.07% of the average daily net assets of shares. The contractual fee waiver and expense reimbursement figure and net expense ratio for the Viking-North Dakota Fund have been restated to reflect this new expense limitation agreement. |
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(8) |
In addition to the contractual commitment to maintain ND Fund expense levels, the Integrity Funds' investment adviser may also voluntarily waive or reimburse additional fees and expenses. For fiscal year 2008, after such contractual and voluntary fee waivers and expense reimbursements, and excluding any Acquired Fund fees and expenses, the ND Fund's net annual operating expenses was 1.07%. |
HYPOTHETICAL EXAMPLE OF EFFECT ON FUND EXPENSES
The following is a hypothetical example intended to help you compare the cost of investing in each Integrity Fund, its corresponding Viking Fund, and the pro forma cost of investing in the combined fund. This example assumes that you invest $10,000 in a specified fund for the time periods indicated, you pay the maximum sales charge, and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual rate of return, that Total Annual Operating Expenses and Net Annual Operating Expenses of the specified fund remain the same as stated in the above tables and that all dividends and distributions are reinvested. Although your actual costs may be higher or lower, under these assumptions your costs would be:
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MONTANA FUND |
VIKING-MONTANA FUND |
PRO FORMA VIKING COMBINED FUND |
|
CLASS A |
CLASS B |
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1 Year |
$592 |
$626 |
$484 |
$508 |
3 Years |
$951 |
$1,011 |
$717 |
$795 |
5 Years |
$1,347 |
$1,346 |
$975 |
$1,111 |
10 Years |
$2,524 |
$2,836 |
$1,740 |
$2,050 |
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ND FUND |
VIKING-NORTH DAKOTA FUND |
PRO FORMA VIKING COMBINED FUND |
1 Year |
$597 |
$494 |
$515 |
3 Years |
$966 |
$751 |
$816 |
5 Years |
$1,374 |
$1,035 |
$1,149 |
10 Years |
$2,585 |
$1,876 |
$2,137 |
You would pay the following expenses if you did not redeem your shares:
|
MONTANA FUND |
VIKING-MONTANA FUND |
PRO FORMA VIKING COMBINED FUND |
|
CLASS A |
CLASS B |
|||
1 Year |
$592 |
$226 |
$484 |
$508 |
3 Years |
$951 |
$711 |
$717 |
$795 |
5 Years |
$1,347 |
$1,246 |
$975 |
$1,111 |
10 Years |
$2,524 |
$2,836 |
$1,740 |
$2,050 |
|
ND FUND |
VIKING-NORTH DAKOTA FUND |
PRO FORMA VIKING COMBINED FUND |
1 Year |
$597 |
$494 |
$515 |
3 Years |
$966 |
$751 |
$816 |
5 Years |
$1,374 |
$1,035 |
$1,149 |
10 Years |
$2,585 |
$1,876 |
$2,137 |
COMPARISON OF BUSINESS STRUCTURES
Each Viking Fund is a series of the Viking Trust, a Delaware business trust organized pursuant to a certificate of trust and trust instrument dated March 29, 1999. The Viking Trust is registered under the 1940 Act as an open-end, management investment company. The Viking Trust currently has four separate operating series, including the Viking Funds. The business of the Viking Trust and each of its series is managed under the direction of the Viking Board of Trustees.
Each Integrity Fund is organized as a corporation under the laws of the State of North Dakota and is authorized to issue multiple classes and one series, with a par value of $.001 per share. The ND Fund was incorporated on October 7, 1988 and the Montana Fund was incorporated on April 15, 1993. Each Integrity Fund is registered under the 1940 Act as an open-end management investment company. The ND Fund is authorized to issue a total of 100,000,000 shares and the Montana Fund is authorized to issue a total of 200,000,000 shares. Each Integrity Fund has established four classes designated Class A, Class B, Class C and Class R shares, but the Montana Fund is publicly offering only Class A and Class B shares and the ND Fund is publicly offering only Class A shares. As noted above, because the Montana Fund offers two classes of shares and the Viking-Montana Fund only offers one class of shares, shareholders of the Montana Fund will receive a distribution of the one class of shares of the Viking-Montana Fund, equal in value to their class shares held in the Montana Fund, regardless of whether they held Class A shares or Class B shares of the Montana Fund. Although no front-end sales loads or CDSC will be imposed in connection with the Reorganizations, additional purchases by persons who previously owned Class B shares of the Montana Fund will be subject to the Viking-Montana Fund's normal sales charges.
The business of each Integrity Fund is managed under the direction of its Integrity Board. Currently, the Board members and officers of the Viking Funds differ from those of the Integrity Funds. As noted above, shareholders of the Viking Family Funds, however, will be asked to approve new trustees (the "Nominees") for the Viking Trust at the Viking Shareholder Meeting. The Nominees also currently serve as directors of the Integrity Funds. See "Additional Information about the Management of the Viking Funds" in the Reorganization SAI. There can be no assurance that the shareholders of the Viking Family Funds will approve the Nominees.
The Viking Board and the Integrity Board review and approve the general policies of each Viking Fund and each Integrity Fund, respectively. The Viking Board and the Integrity Board also meet periodically to review performance, investment activities and practices, and to discuss other matters relating to each Viking Fund and each Integrity Fund, respectively.
COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
The following chart states the investment objective of each Viking Fund and the corresponding Integrity Fund. The investment objective of each Viking Fund is substantially similar to its corresponding Integrity Fund, although worded slightly differently.
VIKING FUND |
INVESTMENT OBJECTIVE OF THE VIKING FUND |
INTEGRITY FUND |
INVESTMENT OBJECTIVE OF THE INTEGRITY FUND |
Viking-Montana Fund |
The Fund's investment objective is to seek the highest level of current income that is exempt from federal and Montana personal income taxes and is consistent with preservation of capital. |
Montana Fund |
The Montana Fund's investment objective is to seek to provide its shareholders with as high a level of current income exempt from federal income tax (other than the alternative minimum tax ("AMT")) and Montana income taxes as is consistent with the preservation of capital. |
Viking-North Dakota Fund |
The Fund's investment objective is to seek the highest level of current income that is exempt from federal and North Dakota personal income taxes and is consistent with preservation of capital. |
ND Fund |
The ND Fund's investment objective is to seek to provide its shareholders with as high a level of current income exempt from federal income tax (other than the alternative minimum tax ("AMT")) and North Dakota income taxes as is consistent with the preservation of capital. |
Principal Investment Strategies—Viking-Montana Fund and the Montana Fund
The principal investment strategies of the Viking Funds are compatible with their corresponding Integrity Fund. Under normal circumstances, each Viking Fund and Integrity Fund invests primarily in municipal securities, the interest income from which is exempt from federal income tax and its applicable state tax. More specifically, to pursue its investment objective, the Viking-Montana Fund normally invests at least 80% of its net assets (including any borrowing for investment purposes) in municipal securities that pay interest free from federal income taxes, including federal AMT; and invests at least 80% of its net assets (including any borrowing for investment purposes) in municipal securities that pay interest free from Montana personal income taxes, although the Fund tries to invest all of its assets in these securities. With respect to the Montana Fund, to pursue its objective, the Montana Fund normally invests at least 80% of its assets (including any borrowings for investment purposes) in municipal securities that pay interest free from federal income taxes, including the AMT and Montana personal income taxes. Although the Montana Fund tries to invest all of its assets in tax-free securities, it is possible that up to 20% of its assets may be invested in securities that pay interest that may be subject to the AMT and, although not anticipated, in securities that pay taxable interest.
All of the municipal securities in which the Viking-Montana Fund invests are rated investment grade (BBB- or higher) at the time of purchase by a nationally recognized statistical rating service or are of comparable quality as determined by the fund's investment manager. Similarly, the Montana Fund purchases primarily Montana municipal bonds that are rated investment grade (AAA/Aaa to BBB/Baa) by independent rating agencies at the time of purchase. The Montana Fund may buy non-rated municipal bonds if its investment adviser judges them to be of comparable quality. Both the Viking-Montana Fund and the Montana Fund may invest up to 30% of its respective net assets in U.S. territorial obligations (including qualifying obligations of Puerto Rico, the U.S. Virgin Islands and Guam) the interest on which is exempt from federal and Montana personal income taxes. Both the Viking-Montana Fund and the Montana Fund may invest up to 20% of its respective net assets in private activity bonds, the interest on which is a tax preference item for purposes of the AMT. Both the Viking-Montana Fund and the Montana Fund may invest more than 25% of its net assets in municipal securities that finance similar types of projects, such as education, healthcare, housing, industrial development, transportation or pollution control. Under normal circumstances, the Viking-Montana Fund will maintain an average stated maturity at between eight and twenty-two years. The Montana Fund is expected to have an average dollar weighted maturity of between fifteen and twenty-five years.
Principal Investment Strategies—Viking-North Dakota Fund and the ND Fund
The principal investment strategies of the Viking Funds are compatible with their corresponding Integrity Fund. Under normal circumstances, each Viking Fund and Integrity Fund invests primarily in municipal securities, the interest income from which is exempt from federal income tax and its applicable state tax. More specifically, to pursue its investment objective, the Viking-North Dakota Fund normally invests at least 80% of its net assets (including any borrowing for investment purposes) in municipal securities that pay interest free from federal income taxes, including federal AMT; and invests at least 80% of its net assets (including any borrowing for investment purposes) in municipal securities that pay interest free from North Dakota personal income taxes, although the Fund tries to invest all of its assets in these securities. With respect to the ND Fund, to pursue its objective, the ND Fund normally invests at least 80% of its assets (including any borrowings for investment purposes) in municipal securities that pay interest free from federal income taxes, including the AMT and North Dakota personal income taxes. Although the ND Fund tries to invest all of its assets in tax-free securities, it is possible that up to 20% of its assets may be invested in securities that pay interest that may be subject to the AMT and, although not anticipated, in securities that pay taxable interest.
All of the municipal securities in which the Viking-North Dakota Fund invests are rated investment grade (BBB- or higher) at the time of purchase by a nationally recognized statistical rating service or are of comparable quality as determined by the fund's investment manager. Similarly, the ND Fund purchases primarily North Dakota municipal bonds that are rated investment grade (AAA/Aaa to BBB/Baa) by independent rating agencies at the time of purchase. The ND Fund may buy non-rated municipal bonds if its investment adviser judges them to be of comparable quality. Both the Viking-North Dakota Fund and the ND Fund may invest up to 30% of its respective net assets in U.S. territorial obligations (including qualifying obligations of Puerto Rico, the U.S. Virgin Islands and Guam) the interest on which is exempt from federal and North Dakota personal income taxes. Both the Viking-North Dakota Fund and the ND Fund may invest up to 20% of its respective net assets in private activity bonds, the interest on which is a tax preference item for purposes of the AMT. Both the Viking-North Dakota Fund and the ND Fund may invest more than 25% of its net assets in municipal securities that finance similar types of projects, such as education, healthcare, housing, industrial development, transportation or pollution control. Under normal circumstances, the Viking-North Dakota Fund will maintain an average stated maturity at between eight and twenty-two years. The ND Fund is expected to have an average dollar weighted maturity of between fifteen and twenty-five years.
Key Differences. The following is a summary of the primary differences in the principal investment policies of each Viking Fund and its corresponding Integrity Fund:
POLICY |
VIKING FUND |
INTEGRITY FUND |
EFFECT OF DIFFERENCE |
Ratings Requirements |
All of the municipal securities in which a Viking Fund invests are rated investment grade (BBB- or higher) at the time of purchase by a nationally recognized statistical rating service ("NRSRO") or are of comparable quality as determined by the Viking Fund's investment manager. The Viking Funds will not buy issues that are in default or that the investment manager believes involve excessive risk. |
Each Integrity Fund purchases primarily municipal securities issued by the respective states that are rated investment grade (AAA/Aaa to BBB/Baa) by independent rating agencies at the time of purchase or which are unrated but of comparable quality, as determined by the Integrity Fund's investment adviser. An Integrity Fund will promptly dispose of a bond whose rating drops below investment grade or is reduced in credit quality with respect to unrated securities. The Integrity Fund's Board may vary from this policy if it determines prompt disposal of a bond would not be in the best interests of shareholders. Each Integrity Fund will not purchase or hold more than 5% of its net assets in securities rated below investment grade. |
Each Integrity Fund seeks to dispose of portfolio securities the rating of which drops below investment grade or is reduced in credit quality with respect to unrated securities although such securities may be retained under certain circumstances. Each Integrity Fund, however, will not purchase or hold more than 5% of its net assets in securities below investment grade. The Viking Funds do not have a similar policy although the Viking Funds will not buy issues in default or that the investment manager believes involve excessive risk.
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Temporary Defensive Measures. Under unusual market or other conditions, each Viking Fund may temporarily depart from its investment objective and invest up to 100% of its assets in short-term U.S. Government obligations, cash and cash equivalents. These short-term investments may be taxable. For temporary defensive purposes and cash management purposes to keep cash on hand fully invested, each Integrity Fund may invest in money market mutual funds and/or in any of the following short-term, fixed-income obligations, the interest on which is subject to federal income taxes: obligations of the United States Government, its agencies or instrumentalities; debt securities rated within the three highest grades of Moody's or S&P; commercial paper rated in the highest two grades by either of those rating services; certificates of deposit of domestic banks, including foreign branches of domestic banks, which have capital, surplus and undivided profits that exceed $25,000,000; and municipal securities or any of the foregoing temporary investments subject to short-term repurchase agreements; provided however, the Integrity Funds will not invest more than 10% of their total assets in securities of other investment companies, except in connection with a merger, consolidation, reorganization or acquisition of assets.
Other Investment Policies. Each Viking Fund's other investment policies are summarized in the Viking Statement of Additional Information dated April 30, 2009, a copy of which is available upon request, without charge, by contacting your investment representative, calling (800) 933-8413, accessing it from the Viking Funds' website at www.vikingfunds.com or by writing to Viking Funds at P.O. Box 500, Minot, ND 58702. Each Integrity Funds' other investment policies are summarized in the Integrity Funds' Statement of Additional Information dated May 1, 2009, a copy of which is available upon request, without charge, by writing to the Funds at 1 Main Street North, Minot, North Dakota 58703 or calling (800) 276-1262.
Manager-of-Managers Structure. At the Viking Shareholder Meeting, shareholders of the funds in the Viking family, including the Viking Funds, will be asked to approve a manager-of-managers structure. Generally, under the 1940 Act, a sub-advisory agreement between the adviser and sub-adviser must be approved by the fund's board of directors and by fund shareholders. Specifically, Section 15 of the 1940 Act, in relevant part, makes it unlawful for any person to act as an investment adviser (including as a sub-adviser) to a mutual fund, except pursuant to a written contract that has been approved by shareholders. A manager-of-managers structure would generally permit Viking to enter into, and materially amend, sub-advisory agreements with any unaffiliated sub-advisers retained by Viking WITHOUT also needing to obtain further shareholder approval. Normally, the retention of a new sub-adviser, or the material amendment of an existing sub-advisory agreement would require shareholder approval. That approval would not be necessary under a manager-of-managers structure. If approved by shareholders of the Viking Funds, the structure would not be implemented until relief permitting such a structure is provided by the SEC. Unless necessary relief is provided by an exemptive rule in the future, the Viking Trust will need to apply to the SEC for exemptive relief and obtain an order.
If shareholders of a Viking Fund approve the manager-of-managers structure and the Viking Trust obtains the necessary exemptive relief from the SEC, it is anticipated that Viking would be authorized, for such Viking Fund, to (1) engage new or additional sub-advisers; (2) enter into and modify existing investment sub-advisory agreements; and (3) terminate and replace sub-advisers, in each case without obtaining further approval of the Viking Fund's shareholders, provided that (a) the sub-adviser is not an "affiliated person" of Viking or the Viking Fund, other than by reason of serving as a sub-adviser to a Viking Fund, and (b) the Board of Trustees of the Viking Trust has approved the new or amended sub-advisory agreement.
Fundamental Investment Restrictions. Each Fund has adopted certain fundamental and non-fundamental investment restrictions. The fundamental investment restrictions (i.e., those which may not be changed without shareholder approval) are discussed below. Non-fundamental investment restrictions, which may be changed by the Board of Directors without shareholder approval, are disclosed in the respective Funds' Statement of Additional Information. The following sets forth a comparison of each Viking Fund's fundamental investment restrictions and those of its corresponding Integrity Fund.
POLICY |
VIKING FUNDS |
INTEGRITY FUNDS |
Senior Securities; Pledging; Borrowing |
• Each Viking Fund may not issue any senior securities, borrow money or pledge any of the assets of the Fund, except that borrowings for temporary or emergency purposes may be made in an amount up to 5% of total assets. |
• Each Integrity Fund may not borrow money except for temporary or emergency purposes and then only in amounts not exceeding the lesser of 10% of its total assets valued at cost, or 5% of its total assets valued at market, and, in any event, only if immediately thereafter there is an asset coverage of at least 300%; or mortgage, pledge or hypothecate its assets in an amount exceeding 10% of its total assets to secure temporary or emergency borrowing. An Integrity Fund will not purchase portfolio securities when outstanding borrowings exceed 5% of its total assets.
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• Each Integrity Fund may not invest in interests in oil, gas or other mineral exploration or development programs, although it may invest in the municipal securities of issuers that invest in or sponsor such programs. • The ND Fund may not write, purchase or sell puts, calls, or combinations thereof, except in accordance with its investment objectives and policies. |
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(1) At the Viking Shareholder Meeting, shareholders of the Viking Funds are being asked to approve a new fundamental policy regarding ownership of investment companies which states that each Viking Fund may not:
Invest more than 5% of its total assets in securities of any single investment company, nor more than 10% of its total assets in securities of two or more investment companies, except as part of a merger, consolidation or acquisition of assets or invest in securities of any single investment company if as a result of such investment, the Fund owns more than 3% of the total voting stock of such investment company; except that the [Viking] Fund may invest in money market mutual funds to the extent permitted by federal law, including the 1940 Act and rules promulgated thereunder.
There can be no assurance that shareholders of the Viking Funds will approve the revised policy.
COMPARISON OF INVESTMENT ADVISORY SERVICES AND FEES
Viking Fund Management, LLC, the investment adviser for each Viking Fund, is located at 116 1st Street SW, Suite C, Minot, North Dakota 58701. Viking is a North Dakota limited liability company formed by Shannon D. Radke, the President, Governor and minority owner of Viking. Mr. Radke is also the President, Treasurer and a Trustee of the Viking Funds. Under the Investment Advisory Agreement with Viking, Viking makes the investment decisions on behalf of each Viking Fund. Mr. Radke has been primarily responsible for the day-to-day management of each Viking Fund since its inception. Mr. Radke holds a Bachelor of Business Administration degree in Banking and Finance from the University of North Dakota, He has been engaged in the securities business since 1988 as a broker and as operations manager and later as chief operating officer of an unrelated investment advisory firm. Mr. Radke was founder of Viking in September 1998.
As compensation for its services, Viking is entitled to receive an advisory fee at an annual rate of 0.50% of each Viking Fund's average daily net assets. Viking has agreed to contractually waive its fee and reimburse fund expenses through August 1, 2009 so that a Viking Fund's total operating expenses during this period will not exceed 0.85% of its average daily net assets on an annual basis. After August 1, 2009, Viking has agreed to waive its fee and reimburse expenses through April 29, 2010 so that a Viking Fund's total operating expenses during this period will not exceed 1.07% of its average daily net assets on an annual basis (excluding interest, taxes, brokerage commissions and extraordinary expenses). For the twelve months ended December 31, 2008, each Viking Fund paid Viking advisory fees as follows: Viking-Montana Fund paid 0.50% as a percentage of average net assets and Viking-North Dakota Fund paid 0.50% as a percentage of average net assets.
Integrity, the investment adviser for each Integrity Fund, is located at 1 Main Street North, Minot, North Dakota 58703. Integrity has been advising mutual funds since 1989 and as of March 31, 2009, has assets under management of approximately $237 million. Integrity is responsible for selecting and ongoing monitoring of securities in each Integrity Fund's portfolio, performing certain evaluations of the funds' portfolio securities, managing the Integrity Funds' business affairs and providing certain administrative services, office space, equipment and clerical services necessary for managing the Integrity Funds' investments and effecting their portfolio transactions. Integrity is a wholly owned subsidiary of Integrity Mutual Funds, a mutual fund services company. Mr. Monte Avery, Senior Portfolio Manager of Integrity Management, is the portfolio manager to each Integrity Fund and is primarily responsible for the day-to-day management of each Integrity Fund's portfolio, including credit analysis and the execution of portfolio transactions.
Mr. Avery started in the securities business with PaineWebber in 1981 as a retail broker, transferring to Dean Witter in 1982. In 1988, Mr. Avery joined Bremer Bank, N.A. (Minot, N.D.) to help start its Invest Center. He transferred back to Dean Witter in 1993, where he remained until he joined Integrity Mutual Funds Inc. in 1995. Since that time, Mr. Avery has been a co-manager of the Integrity Funds and, effective February 2000, the manager of these funds. From January 1996 until September 2001 and September 2002 to present, he has been the portfolio manager for the Integrity Fund of Funds, Inc. He had been co-portfolio manager of the Kansas Municipal Fund, the Kansas Insured Intermediate Fund, the Nebraska Municipal Fund, and the Oklahoma Municipal Fund since January 1996. Mr. Avery became manager of these funds in February 2000 and has been manager of the Maine Municipal Fund and the New Hampshire Municipal Fund since December 2003.
As compensation for its services, Integrity is entitled to receive an advisory fee at an annual rate of 0.60% of each Integrity Fund's average daily net assets. Integrity has contractually agreed to maintain expense levels of the Integrity Funds at the following annual rates through December 31, 2009: Montana Fund (Class A) 1.07%; Montana Fund (Class B) 1.57% and ND Fund (Class A) 1.07%. The foregoing contractual agreements to pay the expenses of the Integrity Funds do not apply to extraordinary or non-recurring expenses or Acquired Fund fees and expenses. In addition to the contractual commitment to maintain Integrity Fund expense levels, Integrity may also voluntarily waive or reimburse additional fees and expenses. For fiscal year 2008, after such contractual and voluntary fee waivers and expense reimbursements, the Montana Fund (Class A and Class B) and the ND Fund (Class A) paid no management fees to Integrity.
KEY DIFFERENCE: The gross investment advisory fee to be paid by each Integrity Fund is 0.10% higher than the investment advisory fee currently paid by each Viking Fund. Pursuant to contractual fee waivers and expense reimbursements, the net expenses of each Viking Fund will be no greater than 0.85% of that Fund's average daily net assets through August 1, 2009 whereas the net expenses of the Integrity Funds will be limited through December 31, 2009 to: Montana Fund (Class A) 1.07%; Montana Fund (Class B) 1.57%; and ND Fund (Class A) 1.07% (excluding extraordinary or non-recurring expenses or Acquired Fund fees and expenses). Following August 1, 2009, Viking has agreed to waive its fee and reimburse expenses through April 29, 2010 so that a Viking Fund's total operating expenses during this period will not exceed 1.07% of its average daily net assets on an annual basis (excluding interest, taxes, brokerage commissions and extraordinary expenses).
The Investment Adviser's Process. Viking is the investment adviser to each Viking Fund while Integrity is the investment adviser to each Integrity Fund. The investment processes utilized by Viking and Integrity are summarized below. With respect to the Viking Funds, Viking actively manages each Viking Fund's portfolio by selecting securities that it believes will provide the best balance between risk and return within the Viking Fund's range of allowable investments. When a security no longer meets the Viking Fund's investment criteria, Viking will consider selling it. With respect to the Integrity Funds, Integrity uses a value-oriented strategy and looks for higher-yielding municipal bonds that offer the potential for above-average return. To assess a bond's investment potential, Integrity considers the bond's yield, price, credit quality and future prospects. Integrity reviews municipal securities available for purchase, monitors the continued creditworthiness of each Integrity Fund's municipal investments and analyzes economic, political and demographic trends affecting the municipal markets. Based on the analysis of this research, Integrity selects those municipal obligations that it believes represent the most attractive values. In deciding to sell a portfolio security, Integrity generally considers such facts as the bond's yield, the continued creditworthiness of the issuer and prevailing market conditions. Integrity may sell a portfolio security if revised economic forecasts or interest rate outlook requires a repositioning of the portfolio; the security subsequently fails to meet Integrity's investment criteria; a more attractive security is found or portfolio assets are needed for another purpose; or Integrity believes that the security has reached its appreciation potential.
COMPARISON OF OTHER SERVICE PROVIDERS
The Viking Funds have also entered into an agreement with Viking to provide administrative services, portfolio accounting and transfer agent services to each Viking Fund at an annual rate of 0.15% of daily net assets, plus a per account charge and reimbursement of certain direct expenses. First Western Bank and Trust serves as custodian to the Viking Funds and Viking Fund Distributors, LLC serves as principal underwriter to the Viking Funds. If the Corridor Transaction is completed, it is expected that Wells Fargo Bank, NA and Trust & Custody Solutions will replace First Western Bank and Trust as the Viking Funds' custodian.
Wells Fargo Bank, NA and Trust & Custody Solutions serves as custodian for each Integrity Fund. The following Integrity affiliates serve as service providers to each Integrity Fund: (1) IFD serves as principal underwriter and (2) IFS serves as transfer agent, fund accountant and administrator.
As part of the consolidation of the Viking and Integrity Fund families, it is expected that IFD will replace Viking Fund Distributors, LLC as the Viking Funds' principal underwriter and IFS will replace Viking as the Viking Funds' transfer agent, accounting and administrative service provider. In this regard, at a meeting of the Viking Board of Trustees held on May 1, 2009 (the "May Meeting"), the Viking Board approved IFS to serve as the Viking Funds' transfer agent, accounting service provider and administrator effective as of a date to be set prior to the closing of the Reorganizations (the "IFS Effective Date"). Currently, Viking has contractually agreed to waive its fees or reimburse the Viking Funds for the expenses through August 1, 2009 so that the Fund's total annual operating expenses during this period will not exceed 0.85% of the average daily net assets on an annual basis. After August 1, 2009, Viking has contractually agreed to waive fees or reimburse each Viking Fund for its expenses from August 1, 2009 through April 29, 2010 so that a Viking Fund's total annual operating expenses do not exceed 1.07% of its average daily net assets (excluding interest, taxes, brokerage commissions, and extraordinary expenses of the Fund). In conjunction with the foregoing expense cap, Viking waived a substantial portion of its fees for transfer agent, accounting and administrative services. In light of the new expense limitation agreement that will take effect shortly and the fee schedule of IFS which will be replacing Viking in providing the above services, the pro forma other expenses for the combined Viking Funds after the Reorganizations were estimated to increase from the perspective of the Viking Funds as reflected in the fee table set forth under "Summary—Comparison of Fees."
COMPARISON OF SALES CHARGES
An initial up-front sales charge is assessed on purchases of shares of each Viking Fund and Class A of the corresponding Integrity Fund. Class B shares of the Montana Fund are not subject to an up-front sales charge; however, Class B shares are subject to a contingent deferred sales charge ("CDSC") as described below. The offering price of the Integrity Funds and Viking Funds includes the relevant sales charge. The differences in the sales charge schedule for the Class A shares of the Integrity Funds and the Viking Funds are summarized in the following charts.
VIKING NORTH-DAKOTA FUND/VIKING-MONTANA FUND |
||
AMOUNT OF PURCHASE |
SALES CHARGE |
SALES CHARGE |
|
||
Less than $50,000 |
3.75% |
3.90% |
|
||
$50,000 but less than $100,000 |
3.50% |
3.63% |
|
||
$100,000 but less than $250,000 |
3.25% |
3.36% |
|
||
$250,000 but less than $500,000 |
2.75% |
2.83% |
|
||
$500,000 but less than $1,000,000 |
2.00% |
2.04% |
|
||
$1,000,000 or more |
None(2) |
None(2) |
____________________
(1) |
Rounded to the nearest one-hundredth percent. |
|
|
(2) |
Certain investors that purchase Viking Fund shares without a sales charge will have to pay a limited contingent deferred sales charge of 1.50% if they redeem those shares within one year of purchase. Your investment in a Viking Fund will be subject to this contingent deferred sales charge if (i) you purchased $1 million or more of Viking Fund shares and the Viking Funds' distributor paid your investment representative a commission; or (ii) you purchased your Viking Fund shares subject to a sales charge waiver, and the Viking Funds' distributor paid your investment representative a commission. |
ND FUND/MONTANA FUND—CLASS A SHARES |
||
AMOUNT OF PURCHASE |
SALES CHARGE |
SALES CHARGE |
|
||
Less than $50,000 |
4.25% |
4.44% |
|
||
$50,000 but less than $100,000 |
3.75% |
3.90% |
|
||
$100,000 but less than $250,0000 |
3.25% |
3.36% |
|
||
$250,000 but less than $500,000 |
2.50% |
2.56% |
|
||
$500,000 but less than $750,000 |
2.00% |
2.04% |
|
||
$750,000 but less than $1,000,000 |
1.00% |
1.01% |
|
||
$1,000,000 and above(2) |
None |
None |
____________________
(1) |
Rounded to the nearest one-hundredth percent. |
|
|
(2) |
In the case of investments at or above the $1 million breakpoint (where you do not pay an initial sales charge), for shares purchased on or after September 1, 2007 (whether as a lump sum or pursuant to the letter of intent program or otherwise), a 1% CDSC may be assessed on shares redeemed within 24 months of purchase (excluding shares purchased with reinvested dividends and/or distributions). |
THE MONTANA FUND—CLASS B SHARES
You can buy Class B shares of the Montana Fund at the net asset value per share without any up-front sales charge so that the full amount of your purchase is invested in the Montana Fund. If you sell your Class B shares within five years of purchase, you will have to pay a CDSC based on either your purchase price or the price at which you sell your shares, whichever amount is lower, according to the following schedule.
Years Since Purchase |
1 |
2 |
3 |
4 |
5 |
More than 5 |
CDSC |
4% |
4% |
3% |
2% |
1% |
0% |
You do not pay a CDSC on any Class B shares you purchase by reinvesting dividends and capital gains. When you redeem shares subject to a CDSC, the Montana Fund will first redeem any shares that are not subject to a CDSC or that represent an increase in the value of your Montana Fund account due to capital appreciation, and then redeem the Class B shares you have owned in the order purchased. When you redeem shares subject to a CDSC, the CDSC is calculated on the lower of your purchase price or redemption proceeds, deducted from your redemption proceeds, and paid to the distributor.
Purchases of $1 million or more of Class B shares are subject to a reduced CDSC of 1% if shares are redeemed within 12 months of purchase. Purchases totaling $1 million or more made within 13 months of the initial purchase may qualify for the reduced CDSC. Any Class B shares purchased and sold during this 13 month period will be deducted in computing your total purchase. The 1% CDSC applies for one year after your purchases total $1 million.
Class B shares of the Montana Fund automatically convert to Class A shares approximately eight years after you buy them.
All Viking Fund shares are subject to sales charges. You may qualify for a reduced initial sales charge on purchases of a Viking Fund or Class A shares of an Integrity Fund under rights of accumulation, a letter of intent, or a group purchase program. Certain persons may also be eligible to purchase shares of a Viking Fund or an Integrity Fund without an initial sales charge. You do not pay a sales charge on the reinvestment of distributions with respect to a Viking Fund or an Integrity Fund. You will not pay any sales loads on the redemption of shares of an Integrity Fund or the purchase of shares of the corresponding Viking Fund made in connection with the Reorganizations. You will receive shares of the respective Viking Fund equal in value to the class of shares of the Integrity Fund you hold, regardless of whether you hold Class A or Class B shares of the Montana Funds.
KEY DIFFERENCES: The initial sales charges that you will pay to purchase shares of a Viking Fund are lower than the initial sales charges that you will pay to purchase Class A shares of an Integrity Fund. Although neither the Viking Funds or Class A shares of the Integrity Funds assess an initial sales charge on purchases of $1 million or more, a CDSC is assessed on redemptions of Viking Funds' shares and Class A shares of the Integrity Funds that were part of such a purchase as follows: With respect to the Viking Funds, certain investors that purchase Viking Fund shares without a sales charge will have to pay a limited CDSC of 1.50% if they redeem those shares within one year of purchase. The investment is subject to a CDSC if (i) you purchased $1 million or more of Viking Fund shares and the Viking Fund's distributor paid your investment representative a commission; and (ii) you purchased Viking Fund shares subject to a sales charge waiver, and the Viking Fund's distributor paid your investment representative a commission. The CDSC applicable to shareholders of the Integrity Funds who purchased Integrity Fund Class A shares without an initial sales charge is subject to a lower CDSC than that assessed by the Viking Funds; however, the period of time over which the CDSC may be assessed is longer for Integrity Funds. With respect to Class A shares of the Integrity Funds, in the case of investments at or above the $1 million breakpoint (where you do not pay an initial sales charge) for shares purchased on or after September 1, 2007 (whether as a lump sum or pursuant to the letter of intent program or otherwise), a 1% CDSC may be assessed on shares redeemed within 24 months of purchase (excluding shares purchased with reinvested dividends and/or distributions).
The Montana Fund also offers Class B shares and the Viking Funds do not offer a similar class. Class B shares are offered at net asset value without any up-front sales charge but are subject to the CDSC schedule described above. Class B shares of the Montana Fund convert automatically to Class A shares approximately eight years after purchase.
COMPARISON OF 12B-1 PLANS
Each Viking Fund and Integrity Fund has adopted a 12b-1 plan. With respect to the Viking Funds, each Viking Fund has a distribution plan which allows the Viking Funds to pay distribution and other fees of up to 0.25% of average daily net assets per year to those who sell and distribute shares and provide services to shareholders. With respect to the Integrity Funds, the ND Fund has adopted a 12b-1 plan with respect to its Class A shares and the Montana Fund has adopted a 12b-1 plan with respect to its Class A shares and Class B shares. Under each Integrity Fund's 12b-1 plan with respect to its Class A shares, the respective Integrity Fund may pay an annual 12b-1 fee of up to 0.25% of its average daily net assets for services performed and expenses incurred in connection with the distribution of Class A shares and for providing personal services and the maintenance of shareholder accounts. The Integrity Fund's distributor may pay a portion of the distribution and services fees to financial advisors for providing ongoing services to shareholders. With respect to the Class B shares of the Montana Fund, the Montana Fund has a adopted a 12b-1 plan that authorizes the Montana Fund to compensate the Montana Fund's distributor for services performed and expenses incurred by the distributor in connection with the distribution of Class B shares and for providing personal services and the maintenance of shareholder accounts. Under its 12b-1 plan, the Montana Fund will pay an annual distribution and service fee of 0.75% of average daily net assets of Class B shares. The annual distribution fee compensates the Integrity Fund's distributor for paying dealers who sell Class B shares an up-front sales commission of 3.75% on amounts invested (1% on sales of $1 million or more), excluding sales to investors exempt from the CDSC. The Integrity Fund's distributor may use a portion of this fee to pay an annual service fee of up to 0.25% of the average daily net assets of Class B shares to dealers for providing ongoing services to shareholders. Class B shares of the Montana Fund will automatically convert to Class A shares approximately eight years after purchase so that the distribution fees the shareholder pays over the life of their investment are limited. Shareholders of the Montana Fund will continue to pay an annual service fee on any converted Class B shares of 0.25% of the average daily net assets applicable to Class A shares of the Montana Fund. Because each Viking Fund and Integrity Fund pay 12b-1 fees, your investment cost in a Viking Fund or an Integrity Fund over time may be higher than paying other types of sales charges.
KEY DIFFERENCES. The Viking Funds and Class A shares of the Integrity Funds are assessed the same 12b-1 fees, expressed as a percentage of average daily net assets. The Viking Funds do not offer a class of shares similar to the Class B shares of the Montana Fund which are offered without an up-front sales charge, but are subject to a CDSC and a higher 12b-1 fee for approximately eight years after purchase.
COMPARISON OF PURCHASE, REDEMPTION, EXCHANGE AND REINSTATEMENT PRIVILEGES
PURCHASE PROCEDURES. Each Viking Fund and Integrity Fund continuously offers its shares through its respective distributor. You may purchase shares of a Viking Fund or an Integrity Fund on any day that the New York Stock Exchange is open.
You may purchase shares of a Viking Fund by sending a check or wire to the Viking Funds' transfer agent. When investors open an account with the Viking Funds, you will automatically receive telephone privileges allowing you or your investment representative to buy, sell or exchange your shares and make certain other changes to your account. All checks, drafts, wires and other payment mediums must be payable in U.S. dollars. The Viking Funds may either (a) reject any order to buy or sell shares denominated in any other currency or (b) honor the transaction and make adjustments to the shareholder's account for the transaction as of a date and with a foreign currency exchange factor determined by the drawee bank. You may also purchase shares of a Viking Fund by systematic investment (described below) or through certain broker-dealers or other financial institutions.
You also may purchase shares of an Integrity Fund by sending a check, ACH payment or wire to the Integrity Funds transfer agent. All checks must be payable in U.S. dollars and drawn on U.S. financial institutions. You may also buy shares of an Integrity Fund by systematic investment (described below) or through certain broker-dealers or other financial advisers. If you purchase shares through a broker-dealer or other financial adviser, with signed authorization, such dealers or agents may place a telephone order for the purchase or redemption of shares of up to $100,000.
If you purchase shares directly from a Viking Fund, you receive quarterly account statements and a confirmation of every transaction. If you purchase shares directly from an Integrity Fund, you will also receive quarterly statements and a confirmation of every transaction. If you purchase or redeem shares of a Viking Fund or an Integrity Fund through a broker-dealer or other financial adviser, the policies and fees charged by that institution may be different from those charged by the Funds.
The Viking Funds and Integrity Funds currently do not issue share certificates.
EXCHANGE PROCEDURES. You may exchange shares of a Viking Fund for shares of any other series of the Viking Trust, without paying any additional sales charges. With respect to Integrity Funds, shares of an Integrity Fund may be exchanged for shares of other funds underwritten by the Integrity Funds' distributor. No sales charge is assessed when exchanging Integrity Funds of the same share class with identical sales charge schedules. However, if you exchange from a fund with a lower initial sales charge than the one into which you are exchanging (or from a fund with no sales charge), you will be required to pay a sales charge equal to the difference between the sales charge of the higher-load fund and the sales charge originally paid with respect to the exchanged shares. If you exchange into shares that are subject to a CDSC, for purposes of calculating the CDSC, the holding period will begin on the purchase date of the shares being exchanged.
KEY DIFFERENCES. Under the exchange privileges, the Viking Funds do not assess a sales charge for exchanges with other Viking Funds whereas the Integrity Funds may assess the difference in sales charges when exchanging from an Integrity Fund with a lower sales charge than the one into which the shareholder is exchanging.
Each Viking Fund provides telephone privileges to buy or sell shares to the shareholder and his or her investment representatives. Each Integrity Fund only provides telephone privileges to authorized dealers to purchase shares, subject to a $100,000 limit.
Redemption Procedures. You may sell shares of a Viking Fund by telephone (provided the transaction is for $100,000 or less, the shares are not held in certificated form and you have not changed your address by phone within the last 15 days), or by mail to the Viking Fund's transfer agent. You may also sell shares by systematic withdrawal (as described below) or through certain broker-dealers or other financial advisers. You may sell shares of an Integrity Fund by mail or with signed authorization, your financial adviser may fax, mail or telephone (provided the telephone order is for $100,000 or less) the request to the Integrity Fund's transfer agent. You may also sell shares by systematic withdrawal (as described below) or through certain broker-dealers or other financial advisers.
You may redeem shares of each Integrity Fund and Viking Fund on any Business Day. You will receive the NAV next calculated for the shares (minus any applicable CDSC) after the Viking Fund's or Integrity Fund's transfer agent, as applicable, receives your request in proper form. If you place your order to sell shares of an Integrity Fund through your broker-dealer or other financial advisor, your order must be received by the broker by the close of trading for you to receive that day's price. With respect to the Viking Funds, if you place your order to sell shares of a Viking Fund through your securities dealer, the Viking Fund uses the NAV next calculated after your securities dealer receives your request.
Each Integrity Fund and Viking Fund has also reserved the right to make redemption payments in securities rather than cash. Further, each Integrity Fund may liquidate your account (after 60 days' notice) if the value of your account falls below $1,000. Each Viking Fund may liquidate your account (after 30 days' notice) if your account falls below $250.
Key Differences. Each Viking Fund provides telephone privileges to sell shares to the shareholder and his or her investment representative whereas the Integrity Funds provide telephone privileges to authorized dealers to sell shares. The minimum account balances also differ between the Viking Funds and Integrity Funds.
Systematic Investment/Withdrawal Plans. Each Viking Fund and Integrity Fund offer systematic investment and withdrawal plans. Under the Viking Funds' and Integrity Funds' systematic investment plan, you may make monthly investments. Minimum investments under the Viking Funds' and the Integrity Funds' systematic investment plan are $25 and $50, respectively.
Under the systematic withdrawal plan of each Viking Fund and Integrity Fund, you may redeem a specified amount of money from your account on a monthly, quarterly, semi-annual or annual basis.
Under the Viking Funds' systematic withdrawal plan, your account must be at least $5,000 and the minimum payment amount for each withdrawal must be at least $25. For retirement plans subject to mandatory distribution requirements, the $25 minimum will not apply. Payments under the plan will be made from the redemption of an equivalent amount of shares in your account on approximately the 5th or 20th day of the applicable month. Under the Integrity Funds' systematic withdrawal plan, your account must also be at least $5,000, but there is no minimum withdrawal amount. Under the Integrity Funds' plan, sufficient shares will be redeemed for the designated amount on approximately the 1st or 25th day of the applicable month. An Integrity shareholder who participates in the automatic investment plan is ineligible to participate in the Integrity systematic withdrawal plan.
Key Differences. Each Viking Fund's systematic investment plan provides for minimum systematic investments of at least $25 whereas each Integrity Fund's plan provides for a minimum systematic investment of $50. Moreover, each Viking Fund's systematic withdrawal plan provides for minimum withdrawals of $25 while each Integrity Fund's plan provides for withdrawals, without a minimum withdrawal limitation. Payments under the Viking Funds' and Integrity Funds' withdrawal plan are withdrawn from the shareholder's account at different days of the applicable month.
Reinstatement Privileges. If you sell shares of a Viking Fund, you may reinvest some or all of the proceeds within 365 days without an initial sales charge. If you redeem shares of an Integrity Fund, you may reinvest all or part of your redemption proceeds at NAV without incurring any additional charges. Integrity Fund shareholders may only reinstate into the same share class from which the shareholder redeemed. If you paid a CDSC, the Integrity Fund will refund your CDSC as additional shares in proportion to the reinstatement amount of the redemption proceeds and your holding period will also be reinstated.
Key Differences. The Viking Funds' reinstatement privilege lasts for one year whereas there is no time limit on the reinstatement privilege of the Integrity Funds (although additional documentation and proof of status will be required if the privilege is exercised a year or more after redemption).
COMPARISON OF MINIMUM INITIAL/SUBSEQUENT INVESTMENT REQUIREMENTS
The following tables summarize the minimum initial and subsequent investment requirements of each Viking Fund and Integrity Fund.
MINIMUM INITIAL AND SUBSEQUENT INVESTMENT REQUIREMENTS
BUYING SHARES |
VIKING-NORTH DAKOTA
FUND |
NORTH DAKOTA FUND |
||
MINIMUM INVESTMENTS |
INITIAL |
ADDITIONAL |
INITIAL |
ADDITIONAL |
Regular Accounts |
$500 |
$25 |
$1000 |
$50 |
UGMA/UTMA Accounts |
$250 |
$25 |
N/A |
N/A |
IRAs, Roth IRAs, SEP IRA's, Simple IRA's or IRA rollovers |
$250 |
$25 |
$250 |
$50 |
Retirement Accounts (other than IRAs, Roth IRAs, SEP IRA's, Simple IRA's or IRA rollovers) |
$25 |
$25 |
N/A |
$50 |
Automatic Investment Plan |
$25 |
$25 |
$50 |
$50 |
COMPARISON OF DISTRIBUTION POLICIES
Each Viking Fund and Integrity Fund distributes its net investment income monthly and net realized capital gains at least annually.
Normally, each Viking Fund and Integrity Fund reinvests distributions in additional shares of the respective funds unless a shareholder elects to receive distributions in cash or in the case of the Viking Funds, a shareholder may also elect to invest distributions in additional shares of another Viking mutual fund (provided the shareholder has a minimum account value of $1,000 in the fund making the distribution).
COMPARISON OF NET ASSET VALUE CALCULATION PROCEDURES
The NAV of the Viking Fund is determined by taking the total value of each fund's total assets, subtracting the fund's liabilities, and then dividing the result (net assets) by the number of outstanding shares of the fund. With respect to the Integrity Funds, the NAV is calculated for each class by taking the total value of the class' total assets, including interest and dividends accrued but not yet collected, less all liabilities and dividing by the total number of shares outstanding for the class. Generally, each Viking Fund and Integrity Fund values assets for which market quotations are readily available at their market value. If market quotations are not readily available (which is usually the case for municipal securities), invalid or unreliable or when an event occurs that materially affects asset value, each Viking Fund and Integrity Fund values securities at fair value pursuant to procedures adopted by the Viking Board or the Integrity Board, respectively. Municipal securities for the Viking Funds are valued by their investment adviser using a matrix system which estimates market values from yield data relating to securities with similar characteristics. In establishing fair value for the municipal securities held by the Integrity Funds, IFS considers factors such as yields and prices of comparable municipal bonds, the type of issue, coupon, maturity and rating, indications of value from dealers and general market conditions. IFS may also use a matrix system to compare securities to determine valuations. Each Integrity Fund may also invest in financial futures and related options for hedging purposes. Options that are traded on an exchange are valued at the last sales price or, in the absence of a sale, at the mean between the closing bid and ask prices. Financial futures are valued at their settlement prices established on the board of trade or exchange on which they are traded. Neither Viking Fund invests in financial futures or related options. The Integrity Funds value fixed income securities for which market quotations are readily available at the mean between the quoted bid and ask prices. The Viking Funds value corporate bonds, U.S. government securities and money market securities at times before the close of the New York Stock Exchange when trading in such securities is substantially completed unless an event occurs during such period that materially affects the value of these securities. In such case, the securities will be valued at their fair value determined in good faith following procedures approved by the Board.
Each Integrity Fund values short-term securities with remaining maturities of less than 60 days at amortized cost or at original cost plus accrued interest. The Viking Funds value cash and receivables at their realizable amounts, and record interest as accrued and dividends on the ex-dividend date.
At the May Meeting of the Viking Board of Trustees, the Viking Board approved the valuation procedures used by the Integrity Funds, subject to non-substantive changes unrelated to the pricing of municipal securities, to be effective when IFS takes over as the Viking Funds' transfer agent, accounting service provider and administrator on the IFS Effective Date. Accordingly, the Viking Funds and Integrity Funds believe their valuation procedures with respect to the pricing of municipal securities will be the same prior to the closing of the Reorganizations and after the Reorganizations.
Each Viking Fund and Integrity Fund calculates its NAV as of the close of the New York Stock Exchange (normally 4:00 P.M., Eastern time) on each weekday except days when the New York Stock Exchange is closed.
Key Differences. Each Integrity Fund may invest in financial futures or related options for hedging purposes. Neither Viking Fund invests in financial futures or related options. The Viking Funds' investment adviser currently uses a matrix system to value municipal securities whereas IFS considers various factors but may also use a matrix system. The Viking Board of Trustees, however, has adopted the valuation procedures of the Integrity Funds for the Viking Funds effective when IFS becomes the transfer agent, accounting service provider and administrator, scheduled to be effective as of a date prior to the closing of the Reorganizations.
TAX MATTERS RELATING TO THE REORGANIZATIONS
The Viking Trust and the Integrity Funds will receive opinions from Chapman and Cutler LLP, counsel to the Integrity Funds, to the effect that each Reorganization will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). Consequently, no gain or loss will be recognized for federal income tax purposes by a Viking Fund, an Integrity Fund or their respective shareholders as a result of a Reorganization. There is additional information about the federal income tax consequences of the Reorganization under "Taxation."
INVESTMENT RISKS
GENERAL RISKS
The investment risks applicable to each Viking Fund and its corresponding Integrity Fund are similar. An investment in a Viking Fund or an Integrity Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. There is no assurance that a Viking Fund or an Integrity Fund will meet its investment objective. The net asset value, yield and total return of each Viking Fund and Integrity Fund will fluctuate based upon changes in the value of its portfolio securities. The market value of securities in which a fund invests is based upon the market's perception of the underlying value and is not necessarily an objective measure of the securities' values. You could lose money on your investment in a Viking Fund or an Integrity Fund. An investment in a Viking Fund or an Integrity Fund is not by itself a complete or balanced investment program.
SPECIFIC RISKS
Interest Rate Risks. The value of your investment in a Viking Fund and an Integrity Fund may change in response to changes in interest rates and is therefore subject to interest rate risk. Interest rate risk is the risk that the value of a fund's portfolio will decline because of rising market interest rates (bond prices move in the opposite direction of interest rates). The longer the average maturity (duration) of a fund's portfolio, the greater its interest rate risk.
Credit Risks. The value of your investment in a Viking Fund or an Integrity Fund is subject to credit risk. Credit risk is the risk that an issuer or insurer of a bond is unable or unwilling to meet its obligation to make interest and principal payments due to changing financial or market conditions. Generally, lower rated bonds provide higher current income but are considered to carry greater credit risk than higher rated bonds. Changes in an issuer's financial strength or in a security's credit rating may affect its value. Even securities supported by credit enhancements have the credit risk of the entity providing the credit support. Changes in the credit quality of the credit provider could affect the value of the security and the fund's share price.
The ratings of a rating agency represent its opinion as to the credit quality of the debt securities it undertakes to rate and do not evaluate market risk. Ratings are not absolute standards of credit quality; consequently, debt securities with the same maturity, duration, coupon, and rating may have different yields. Rating agencies may fail to make timely changes in credit ratings and an issuer's current financial condition may be better or worse than a rating indicates.
Subprime Mortgage Risk. Recent developments relating to subprime mortgages have adversely affected credit markets in the United States and elsewhere. The values of many types of municipal securities have been reduced, including municipal securities held by the Funds that are not related to mortgage loans. These developments have reduced the willingness of some lenders to extend credit and have made it more difficult for borrowers to obtain financing on attractive terms or at all. In addition, broker-dealers and other market participants have been less willing to make a market in some types of debt instruments, which has impacted the liquidity of those instruments. These developments may also have a negative effect on the broader economy. There is a risk that the lack of liquidity or other adverse credit market conditions may hamper municipal issuers' ability to obtain loans for anticipated projects or ongoing needs, including issuers in which the Funds invest or may invest.
Municipal Insurance Risk. Although not required, some of the municipal securities held by a Viking Fund or an Integrity Fund may be covered by insurance that generally seeks to guarantee the bond's scheduled payment of interest and repayment of principal. This type of insurance may be obtained by either (i) the issuer at the time the bond is issued (primary market insurance); or (ii) another party after the bond has been issued (secondary market insurance).
Both primary and secondary market insurance generally seek to guarantee timely and scheduled repayment of principal and payment of interest on a municipal security in the event of default by the issuer, and generally cover a municipal security to its maturity.
Municipal security insurance does not insure against market fluctuations in a fund's share price. In addition, a municipal security insurance policy generally will not cover: (i) repayment of a municipal security before maturity (redemption), (ii) prepayment or payment of an acceleration premium (except for a mandatory sinking fund redemption) or any other provision of a bond indenture that advances the maturity of the bond or (iii) nonpayment of principal or interest caused by negligence or bankruptcy of the paying agent. A mandatory sinking fund redemption may be a provision of a municipal security issue whereby part of the municipal security issue may be retired before maturity.
Because a significant portion of the municipal securities issued and outstanding are insured by a small number of insurance companies, an event involving one or more of these insurance companies could have a significant adverse effect on the value of the securities insured by the insurance company and on the municipal markets as a whole.
Single State Funds. Because each Viking Fund and Integrity Fund primarily purchase municipal bonds from a specific state, each fund also bears investment risk from the economic, political or regulatory changes that could adversely affect municipal bond issuers in the state and therefore the value of the fund's investment portfolio. As a result, the value of the assets in a Viking Fund or an Integrity Fund may fluctuate more widely than the value of shares of a fund investing in securities relating to a number of different states or nationally.
Each Viking Fund and Integrity Fund may also invest over 25% of its assets in municipal securities whose revenues derive from similar types of projects including health care, housing, industrial development, pollution control, utilities, transportation, and education. Each Viking Fund and Integrity Fund therefore bears the risk that economic, political or regulatory developments that could adversely affect a project would likely affect similar projects and therefore the value of a fund's portfolio.
Non-Diversification Risk. Each Viking Fund and Integrity Fund is a non-diversified investment company and as such, may invest more than 5% of its assets in the obligations of any issuer. Because a relatively high percentage of the respective fund's assets may be invested in the municipal securities of a limited number of issuers, each fund is exposed to greater market risk as its portfolio securities may be more susceptible to any single economic, political or regulatory occurrence than the portfolio securities of a diversified fund.
In addition, because of the relatively small number of issuers of municipal securities in Montana and North Dakota, the Viking Funds and Integrity Funds are more likely to invest a higher percentage of their assets in the securities of a single issuer than an investment company that invests in a broad range of tax-exempt securities. Therefore, the funds are subject to greater risks of loss if an issuer is unable to make interest or principal payments or if the market value of such securities declines.
Each Viking Fund and Integrity Fund may also invest in the securities of issuers of municipal securities in U.S. territories and possessions. The funds are, therefore, more susceptible to economic, political or regulatory developments that could adversely affect issuers in a U.S. territory or possession and, as a result, the value of the funds' portfolios.
Income Risk. The value of your investment in the Viking Funds and Integrity Funds is subject to income risk. Income risk is the risk that the income from the fund's portfolio will decline because of falling market interest rates. This can result when the fund invests the proceeds from its new share sales or from matured or called bonds at market interest rates that are below the portfolio's current earnings rate. If a fund invests in inverse floating rate securities, whose income payments vary inversely with changes in short-term market rates, the fund's income may decrease if short-term interest rates rise.
Inflation Risk. The value of your investment in the Viking Funds or Integrity Funds is subject to inflation risk. Inflation risk is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the funds' assets can decline as can the value of the funds' distributions.
Portfolio Strategy Risk. The value of your investment in a Viking Fund or an Integrity Fund is subject to the investment manager's skill in choosing appropriate investments for the fund which will determine in part the fund's ability to achieve its investment objective.
Tax Risk. The value of your investment in Viking Fund or Integrity Fund is subject to tax risk. Tax risk is the risk that income from municipal bonds held by a Viking Fund or an Integrity Fund could be declared taxable because of, for example, unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer.
INFORMATION ABOUT THE PLAN
This section summarizes the material terms of the Plan. This section is qualified in its entirety by the terms and conditions contained in the Plan, a form of which is attached as Appendix A to this Proxy Statement/Prospectus.
GENERAL DESCRIPTION OF THE PLAN
Under the Plan, each Integrity Fund will transfer its stated assets to a corresponding Viking Fund in exchange solely for shares of the Viking Fund and the corresponding Viking Fund's assumption of the applicable Integrity Fund's stated liabilities. The Plan further provides that each Integrity Fund will then distribute the shares received from the Viking Fund proportionately to its shareholders and terminate. Each shareholder of an Integrity Fund will receive full and fractional shares of the corresponding Viking Fund equal in value to that of his or her respective class of shares of the applicable Integrity Fund held by the shareholder. In this regard, with respect to the Montana Fund, as the Montana Fund offers two classes of shares, Class A shares and Class B shares, and the Viking-Montana Fund only offers one class of shares, shareholders of Class A shares and Class B shares of the Montana Fund will receive shares of the one class of the Viking-Montana Fund equal to the value of the class of shares they held in the Montana Fund. The Plan contains representations, warranties, and conditions designed to help ensure that each Reorganization is fair to the participating Viking Fund, Integrity Fund, and their respective shareholders. The Plan provides that the consummation of each Reorganization is contingent upon, among other things, approval of the Plan by the participating Integrity Funds' shareholders. The Plan may be terminated with respect to a Reorganization if, on or before the Effective Time (as defined in the Plan) of the Reorganization, certain conditions precedent have not been satisfied or if the Integrity Board or the Viking Board determines that consummation of the Reorganization is not in the best interests of the shareholders of the participating Integrity Fund or Viking Fund, respectively. Under the Plan, Corridor is obligated to pay the expenses incurred by the Integrity Funds and Viking Funds in connection with the Reorganizations. In addition, Integrity will share equally the legal costs (up to a maximum outlay of $10,000) of the initial preparation of the first distribution draft of the documentation required for submission to the SEC and shall share equally in any proxy solicitation costs to Integrity Fund shareholders with respect to the Reorganizations.
The Closing Date (as defined in the Plan) of each Reorganization is scheduled to occur on or about June 30, 2009 or such other date as the parties may agree.
The Reorganization is subject to a number of conditions being satisfied or waived including shareholder approval. The shareholders of each Integrity Fund must separately approve the Reorganization with respect to their Integrity Fund in order for the Reorganization to be approved for that Fund. Unless the parties to the Plan waive certain conditions, the Reorganizations are also contingent upon receiving approval of the Reorganizations for both Integrity Funds. In addition, unless the parties agree otherwise, the closing of the Reorganizations is also contingent upon the closing (either simultaneous with or preceding the Effective Time (as defined in the Plan)) of the Corridor Agreement.
If the conditions for closing are satisfied, shares of each Integrity Fund will no longer be offered for sale, except through the reinvestment of dividend and capital gain distributions or through established automatic investment plans.
If shareholders of each Integrity Fund approve the Plan, the stock transfer books of that Integrity Fund will be permanently closed as of 4:00 p.m., Eastern time, on the Closing Date. Each Integrity Fund will only accept requests for redemptions received in proper form before 4:00 p.m., Eastern time, on the business day immediately preceding the Closing Date. Requests received after that time will be considered requests to redeem shares of the corresponding Viking Fund.
RELATED PARTY TRANSACTIONS
As described above, Integrity and Viking have entered into the Corridor Agreement pursuant to which Corridor and Viking will acquire, among other things, all of the shares of IFD, IFS and certain assets of Integrity. The purchase price to be paid by Corridor and Viking to Integrity Mutual Funds is: (1) 60 basis points of the aggregate net asset value of the outstanding shares of the Integrity Family Funds on the business day immediately preceding the Corridor Closing Date (the "Corridor Closing Date Shares") and (2) 10 basis points of the then aggregate net asset value of the Corridor Closing Date Shares which then remain outstanding 12 months post Corridor Closing Date, 24 months post Corridor Closing Date and 36 months post Corridor Closing Date (collectively, the "Purchase Price").
SECURITIES TO BE ISSUED AND SHAREHOLDER RIGHTS
The Viking Trust is an open-end management investment company registered under the 1940 Act and organized as a Delaware business trust. The Viking Trust may issue an unlimited number of authorized shares of beneficial interest, with a par value of $0.001 per share. The Viking Trust is a series company, meaning the Board of Trustees of the Viking Trust may establish one or more series of the Viking Trust without shareholder approval. In addition, the Board of Trustees of the Viking Trust may divide the shares of any series of the Viking Trust into classes. Currently, the Viking Trust consists of the following series: the Viking-Montana Fund, the Viking-North Dakota Fund, the Viking Large-Cap Value Fund and the Viking Small-Cap Value Fund. Each series currently offers only one class of shares. Each share of a series represents an equal beneficial interest in the net assets of such series. Each holder of shares of a series shall be entitled to receive his pro rata share of all distributions made with respect to such series. Upon redemption of his or her shares, a shareholder shall be paid solely out of the funds and property of such series. All shares issued pursuant to the certificate of trust and trust instrument of the Viking Trust shall be fully paid and nonassessable. Shareholders have no preemptive or other right to subscribe to any additional shares of other securities issued by the Viking Trust. If shares of a series are divided into classes, each class of a series shall represent interest in the assets of that class and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that expenses allocated to a class may be borne solely by such class as determined by the trustees and a class may have exclusive voting rights with respect to matters affecting only that class.
Each Integrity Fund is registered as an open-end management investment company and is organized as a corporation under the laws of the State of North Dakota. The ND Fund may issue a total of 100,000,000 authorized shares, each with par value of $0.001 per share. The ND Fund has established four classes of shares designated Class A shares, Class B shares, Class C shares and Class R shares. Subject to the North Dakota Business Corporation Act ("NDBA"), the directors may also, in their discretion, without obtaining any prior authorization or vote of the shareholders of ND Fund or the shareholders of any class, authorize the division of shares of the ND Fund into additional classes. The Directors of the ND Fund may establish the relative rights and preferences of the classes of shares. All shares of a class shall be identical with each other and with other classes except for such variations between classes as may be approved by the Integrity Fund Board of Directors and set forth in a resolution of establishment and designation and as permitted under the NDBA, the 1940 Act, or pursuant to any exemptive order issued by the SEC. Such variations include: each class bears its own class expenses; each class has exclusive voting rights with respect to matters that relate solely to that class or for which the interests of one class differ from the interests of another class; differences relating to eligible investors; the designation of each class; and any conversion or exchange features. Currently, the ND Fund only offers Class A shares. With respect to matters submitted to a vote of the shareholders, each holder of a share shall be entitled to one vote for each share he or she holds irrespective of the class thereof. All holders of shares shall vote as a single class except as may otherwise be required by law, pursuant to any applicable order, rule or interpretation issued by the SEC, or otherwise, or except with respect to any matter which affects only one or more classes of shares, in which case only the holders of shares of the class or classes affected shall be entitled to vote. A shareholder of the ND Fund will receive a pro rata share of all distributions arising from the respective class's assets and, upon redeeming shares, will receive the portion of the net assets of the respective class represented by the redeemed shares, minus any applicable CDSC.
The Montana Fund may issue a total of 200,000,000 authorized shares, each with a par value of $0.001 per share. The Montana Fund has established four classes of shares designated Class A shares, Class B shares, Class C shares and Class R shares. Subject to the NDBA, the directors may also, in their discretion, without obtaining any prior authorization or vote of the shareholders of Montana Fund or the shareholders of any class, authorize the division of shares of the Montana Fund into additional classes. The Directors of the Montana Fund may establish the relative rights and preferences of the classes of shares. All shares of a class shall be identical with each other and with other classes except for such variations between classes as may be approved by the Integrity Fund Board of Directors and set forth in a resolution of establishment and designation and as permitted under the NDBA, the 1940 Act, or pursuant to any exemptive order issued by the SEC. Such variations include: each class bears its own class expenses; each class has exclusive voting rights with respect to matters that relate solely to that class or for which the interests of one class differ from the interests of another class; differences relating to eligible investors; the designation of each class; and any conversion or exchange features. Currently, the Montana Fund only offers two classes of shares, Class A shares and Class B shares. Class B converts to Class A approximately eight years after purchase. With respect to matters submitted to a vote of the shareholders, each holder of a share shall be entitled to one vote for each share he or she holds irrespective of the class thereof. All holders of shares shall vote as a single class except as may otherwise be required by law, pursuant to any applicable order, rule or interpretation issued by the SEC, or otherwise, or except with respect to any matter which affects only one or more classes of shares, in which case only the holders of shares of the class or classes affected shall be entitled to vote. A shareholder of the Montana Fund will receive a pro rata share of all distributions arising from the respective class's assets and, upon redeeming shares, will receive the portion of the net assets of the respective class represented by the redeemed shares, minus any applicable CDSC.
Neither Delaware nor North Dakota law requires the Viking Funds or the Integrity Funds, respectively, to hold annual meetings of shareholders, and generally, the Viking Funds and the Integrity Funds will hold shareholder meetings only when specifically required by federal or state law.
There are no conversion or preemptive rights in connection with the current shares of either a Viking Fund or the Integrity Funds, except that, with respect to the Montana Fund, Class B shares automatically convert into Class A shares as described in the Integrity Funds' Prospectus.
For the Integrity Funds, cumulative voting, a form of proportional representation, is permitted in the election of directors. Under cumulative voting, a shareholder may cumulate votes either by casting for one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes represented by the shares entitled to vote or by distributing all of those votes on the same principle among any number of candidates.
The following chart provides additional information with respect to material differences in the rights of shareholders of the Viking and the Integrity Funds.
SHAREHOLDER RIGHTS |
VIKING FUNDS |
INTEGRITY FUNDS |
Division of series and classes. |
The Board may divide shares into series and shares of series into classes without a shareholder vote. |
The directors may divide the shares of an Integrity Fund into shares of one or more additional classes without a shareholder vote. |
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DISSENTERS' RIGHTS
Under the NDBA, a shareholder of the ND Fund or Montana Fund who does not desire to participate in the Reorganizations has the right to dissent and to seek to be paid the fair value for his or her shares. Fair value is generally defined under the NDBA to mean the value of the shares of a corporation immediately before the effective date of the applicable corporate action. The rights of dissenting shareholders are set forth in Section 10-19.1-87 of the NDBA and the procedures for asserting such rights are set forth in Section 10-19.1-88 of the NDBA. A copy of these sections of the NDBA have been attached hereto as Appendix B. The procedure rules are specific and must be followed precisely. Failure to comply with the procedures may cause termination or otherwise affect your rights. The following information is intended as a brief summary of the material provisions of the statutory provisions shareholders must follow to assert their dissenters rights and is qualified in its entirety by reference to Sections 10-19.1-87 and 10-19.1-88 of the NDBA. Shareholders should note, however, that because the Integrity Funds are open-end investment companies, the Integrity Funds expect that shareholders would receive a share price based on the respective Integrity Fund's net asset value next determined after the request is received under federal law.
A shareholder who is entitled to dissent under Section 10-19.1-87 of the NDBA and wishes to assert its dissenters' rights shall file with the respective Integrity Fund before the vote of the Reorganization a written notice of intent to demand the fair value of the shares owned by the shareholder and may not vote the shares in favor of the proposed Reorganization. After the Reorganization is approved by the Board of Directors and shareholders of the applicable Integrity Fund, the respective Integrity Fund shall give a written dissenters' notice to the applicable shareholders. The written dissenters' notice shall contain the address to which a demand for payment and share certificates must be sent in order to obtain payment and the date by which they must be received; a form to be used to certify the date on which the shareholder, or the beneficial owner on whose behalf the shareholder dissents, acquired the shares or an interest in them and to demand payment; and a copy of Sections 10-19.1-87 and 10-19.1-88 of the NDBA which governs dissenters' rights. In order to receive the fair value of shares, a dissenting shareholder must demand payment and deposit certificated shares within thirty days after the written dissenters' notice was given, but the dissenter retains all other rights of a shareholder until the proposed action takes effect.
After the Reorganization takes effect, or after the corporation receives a valid demand for payment, whichever is later, the respective Integrity Fund shall remit to each dissenting shareholder who has complied with the applicable sections the amount the corporation estimates to be the fair value of the shares, plus interest, accompanied by the Integrity Fund's closing balance sheet and statement of income for a fiscal year ending not more than sixteen months before the effective date of the corporate action, together with the latest interim financial statements; an estimate by the Integrity Fund of the fair value of the shares and a brief description of the method used to reach the estimate; and a copy of Sections 10-19.1-87 and 10-19.1-88 of the NDBA which governs dissenters' rights (the "Dissenters Materials"). The exercise of dissenters' rights is subject to the "forward pricing" requirements of Rule 22c-1 under the 1940 Act and supersedes contrary provisions of state law. The Integrity Funds may withhold the foregoing remittance from a person who was not a shareholder on the date the action dissented from was first announced to the public or who is dissenting on behalf of a person who was not a beneficial owner on that date. If the dissenter has complied with the applicable provisions governing the exercise of dissenters' rights, the applicable Integrity Fund shall forward to the dissenter the Dissenters Materials, a statement of the reason for withholding the remittance and an offer to pay to the dissenter the amount listed in the Dissenters Materials if the dissenter agrees to accept the amount in full satisfaction. The dissenter may decline the offer and demand payment based on the dissenter's estimate of fair value. Failure to do so entitles the dissenter only to the amount offered.
If the Integrity Fund fails to remit within sixty days of the deposit of certificates, it shall return all deposited certificates but may again give a written dissenters' notice and require deposit at a later date.
If a dissenter believes that the amount remitted by the Integrity Funds is less than the fair value of the shares plus interest, the dissenter may give written notice to the applicable Integrity Fund of the dissenter's own estimate of the fair value of the shares plus interest, within thirty days after the Integrity Fund mails the remittance and demand payment of the difference. Otherwise, a dissenter is entitled only to the amount remitted by the corporation. If the Integrity Fund receives such a demand, it shall, within sixty days after receiving the demand, either pay the amount demanded or agreed to by the dissenter after a discussion with the Integrity Funds or file in court a petition requesting that the court determine the fair value of the shares plus interest. The Integrity Funds, after filing the petition, shall serve all parties with a summons and copy of the petitions under the rules of civil procedure. The fair value of the shares as determined by the court is binding on all shareholders, wherever located.
If you elect to exercise your right to dissent, you should send the notice of election to: Integrity Fund Services, Inc. (shareholder services) at 1 Main Street North, Minot, North Dakota 58703.
REASONS FOR THE REORGANIZATIONS
Based on the considerations described below, the Integrity Boards of ND Fund and Montana Fund, including the Independent Directors, have determined that the Reorganizations would be in the best interests of the respective Integrity Fund and that the interests of each Integrity Fund's existing shareholders would not be diluted as a result of the Reorganizations. The Integrity Boards approved the Reorganizations and recommended that shareholders of the Integrity Funds approve the Reorganization of their respective Integrity Fund.
During the last year, the Integrity Boards received and considered a variety of materials relating to the Corridor Transaction, including information relating to Corridor and Viking, the rationale therefor, alternatives to the Corridor Transaction and the potential impact on the Integrity Funds. As part of the Corridor Transaction, the Integrity Boards considered the proposed Reorganizations of the ND Fund and Montana Fund into the Viking-North Dakota Fund and Viking-Montana Fund, respectively. Prior to approving the Reorganizations, the Independent Directors reviewed and considered information regarding the proposed Reorganization and the rationale therefor. The Independent Directors reviewed the foregoing information with their independent legal counsel and with management, reviewed with independent legal counsel applicable law and their duties in considering such matters, and met with independent legal counsel in a private session without management present. In considering the Plan, the Independent Directors also relied upon their knowledge of the Corridor Transaction, Corridor, Viking, the Viking Funds and the Integrity Funds resulting from their meetings and other interactions throughout the year and their own business judgment in determining the factors in considering the Plan. Each Independent Director may have accorded different weight to the various factors in reaching his conclusions with respect to the Plan. The Independent Directors did not identify any single factor as all-important or controlling. The Independent Directors' considerations were instead based on a comprehensive consideration of all the information presented. At meetings held on March 6, 2009 and on March 11, 2009, the Integrity Boards of the ND Fund and Montana Fund, including the Independent Directors, approved the Plan. The Integrity Boards considered a number of principal factors in reaching their determinations, including the following:
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Similarity of Investment Objectives and Policies: The investment objective of each Viking Fund and its corresponding Integrity Fund is substantially similar. The investment objective of the Viking-North Dakota Fund is to seek the highest level of current income that is exempt from federal and North Dakota personal income taxes and is consistent with preservation of capital. The investment objective of the ND Fund is to seek to provide its shareholders with as high a level of current income exempt from federal income tax (other than the alternative minimum tax ("AMT")) and North Dakota income taxes as is consistent with preservation of capital.
The investment objective of the Viking-Montana Fund is to seek the highest level of current income that is exempt from federal and Montana personal income taxes and is consistent with preservation of capital. The investment objective of the Montana Fund is to seek to provide its shareholders with as high a level of current income exempt from federal income tax (other than AMT) and Montana income taxes as is consistent preservation of capital. The Integrity Boards also considered the substantially similar investment policies and principal risks.
Distribution Opportunities: The Integrity Boards considered the potential for economies of scale with a larger asset size of the funds following the Reorganizations and the access to the broker-dealer network utilized by the Viking Funds thus potentially improving growth prospects.
Expenses: The Boards considered the fees and expense ratios of the Integrity Funds and Viking Funds including estimated expenses after the Reorganization and the impact of expense caps. The Boards noted that the management fees and the net expenses paid by the Viking Funds during their most recently completed fiscal year were lower than the management fees and net expenses of the corresponding Integrity Fund during such period. The management fee of each Viking Fund is 0.10% lower as a percentage of daily net assets than that of the corresponding Integrity Fund. It was anticipated that the Reorganizations would result in no greater net expenses for the combined fund than that of its corresponding Integrity Fund. The Integrity Boards considered that the expense caps on the Viking Funds are lower than those of the corresponding Integrity Fund, but have a shorter duration. In this regard, Viking has agreed to contractually waive its fee and reimburse fund expenses through August 1, 2009 so that the Viking Funds' total operating expenses during this period will not exceed 0.85% of their average daily net assets on an annual basis. In contrast, Integrity has contractually agreed to maintain expense levels of the Integrity Funds at the following annual rates through December 31, 2009: Montana Fund (Class A) 1.07%; Montana Fund (Class B) 1.57% and ND Fund (Class A) 1.07%. In light of the foregoing, Viking has agreed that after August 1, 2009, Viking will waive its fee and reimburse expenses (excluding interest, taxes, brokerage commissions, and extraordinary expenses) through April 29, 2010 so that the Viking Funds' total operating expenses during this period will not exceed 1.07% of their average daily net assets on an annual basis. Accordingly, Viking has agreed to maintain the same expense cap of the Integrity Funds through April 29, 2010.
Performance: The Integrity Boards considered the historic investment performance of each Integrity Fund and Viking Fund. In this regard, the Integrity Boards considered that the Viking Funds had a slightly stronger performance record over the longer term periods (five year and since inception periods ending December 31, 2008).
Tax-Free Nature of each Reorganization: It is anticipated that each Reorganization will be accomplished without federal tax consequences for the participating Integrity Fund, its corresponding Viking Fund, and their respective shareholders.
Transaction Costs: Corridor Investors, LLC has agreed to pay the expenses incurred by each Viking Fund and Integrity Fund in connection with the Reorganizations. In addition, Integrity has agreed to share certain legal expenses and proxy solicitation costs with Corridor. Accordingly, the Integrity Funds and their shareholders would not bear the costs of the Reorganizations.
Dilution: The Plan includes provisions intended to avoid dilution of the interests of the shareholders of each Integrity Fund. Under the Plan, each Integrity Fund's shareholder will receive shares of the corresponding Viking Fund equal in value to the shares of the respective class of the Integrity Fund held.
Nature, Extent and Quality of Services: The Boards considered the nature, extent and quality of services providing by Viking to the Viking Funds, including advisory and administrative services. The Boards considered the professional experience, qualifications and credentials of Viking's investment personnel. In light of the Corridor Agreement, the Boards also considered Corridor's business structure, including ownership and financing arrangements.
Income to Integrity Mutual Funds: The Boards recognized the terms of the Corridor Transaction and that the Reorganizations are part of the overall transactions involved in the Corridor Transaction pursuant to which Corridor will be providing, primarily through its subsidiaries, investment advisory and other mutual fund services to the Integrity and Viking family of funds. Simultaneously, Viking will become a subsidiary of Corridor. The Boards recognized that Integrity Mutual Funds will receive compensation from Corridor and Viking under the terms of the Corridor Agreement and that the interested directors and officers of the Integrity Funds and other officers and employees of Integrity Mutual Funds and Viking will own membership interests in Corridor.
Other Benefits to the Integrity Funds. The Boards recognized that certain officers and employees of Integrity Mutual Funds will become officers and employees of Corridor and/or Viking and Viking is intended to become a subsidiary of Corridor. Accordingly, the Integrity Boards considered the continuity of service as personnel familiar with the Integrity Funds will continue with Corridor. Accordingly, it is anticipated that following the Reorganizations, IFS and IFD will be the transfer agent and distributor, respectively, for the Viking Funds, subject to board approval.
Conclusion: The Integrity Boards, including the Independent Directors, approved the Reorganization of each Integrity Fund, concluding that it is in the best interests of the shareholders of the respective Integrity Fund and that the interests of the shareholders of each Integrity Fund would not be diluted as a result of the respective Reorganization.
At a meeting held on April 2, 2009, the Viking Board of Trustees also determined that the proposed Reorganization was in the best interests of each Viking Fund and approved the Reorganization of each Viking Fund.
THE BOARD, INCLUDING THE INDEPENDENT DIRECTORS, RECOMMENDS APPROVAL OF THE PLAN
TAXATION
Each Integrity Fund and its corresponding Viking Fund has similar tax treatment and each intends to continue to qualify each taxable year to be treated as a regulated investment company (a "RIC") under the Code. As a RIC, each Integrity Fund and Viking Fund generally will not be liable for federal income tax on the investment company taxable income and net capital gain it distributes to its shareholders. Each Integrity Fund and Viking Fund intends to distribute all of its respective investment company taxable income and net capital gains each year. Accordingly, neither an Integrity Fund nor the corresponding Viking Fund should be subject to federal income or excise taxes.
TAX CONSEQUENCES OF DISTRIBUTIONS
Viking-North Dakota Fund/ND Fund. Generally, because the Viking-North Dakota and ND Fund invest primarily in municipal securities that pay interest free from federal income taxes and North Dakota personal income taxes and assuming the funds provided the required information to the North Dakota tax commissioner each year, the regular monthly dividends payable from the net tax-exempt interest earned from such municipal securities that you as a taxpayer in that state receive, are generally expected to be exempt from regular federal income tax, and subject to the provisions of the state's tax law, the regular personal income tax of North Dakota. Distributions by the Viking-North Dakota Fund or ND Fund of taxable interest, other investment income and short-term capital gains, are federally taxable to shareholders as ordinary income. Distributions by the Viking North-Dakota Fund and ND Fund of net long-term capital gains are federally taxable to shareholders as long-term capital gains regardless of how long a shareholder has held the fund's shares.
Distributions by the Viking-North Dakota Fund and ND Fund of interest income on certain private activity bonds are an item of tax preference for purposes of the federal AMT applicable to individuals and corporations. Distributions of net income from tax-exempt obligations are generally included in "adjusted current earnings" of corporations for federal AMT purposes.
Viking-Montana Fund/Montana Fund. Generally, because the Viking-Montana Fund and Montana Fund invest primarily in municipal securities that pay interest free from federal income taxes and Montana personal income taxes, the regular monthly dividends payable from the net tax-exempt interest earned from such municipal securities that you, as a taxpayer in that state receive, are generally expected to be exempt from regular federal income tax and subject to the provisions of the state's tax law, the regular personal income tax of Montana. Distributions by the Viking-Montana Fund and Montana Fund of taxable interest, other net investment income and short-term capital gain, are federally taxable to you as ordinary income. Distributions by the Viking-Montana Fund or Montana Fund of net long-term capital gains are federally taxable to shareholders as long-term capital gains regardless of how long a shareholder has held the fund's shares.
Distributions by the Viking-Montana Fund and Montana Fund of interest income on certain private activity bonds are an item of tax preference for purposes of the federal AMT applicable to individuals and corporations. Distributions of net income from tax-exempt obligations are generally included in "adjusted current earnings" of corporations for federal AMT purposes.
General. If you buy shares of a Viking Fund or an Integrity Fund just before the fund makes a distribution, a portion of the distribution you receive may be taxable to you even though it represents a portion of the purchase price you paid for the shares.
The sale or exchange of shares of a Viking Fund or an Integrity Fund is a taxable transaction for federal income tax purposes. You will recognize a gain or loss on such transaction equal to the difference, if any, between the amount you receive in the transaction and your tax basis in the fund's shares. Such gain or loss will be capital gain or loss if you held your fund shares as capital assets. Any capital gain or loss will be treated as long-term capital gain or loss if you held the fund shares for more than one year at the time of the sale or exchange.
Further, if you hold your shares for six months or less, any loss incurred by you related to the disposition of such a share will be disallowed to the extent of the exempt-interest dividends you received.
TAX CONSEQUENCES OF THE REORGANIZATIONS
As a condition to the consummation of each Reorganization, the Viking Trust and the Integrity Funds will receive opinions from Chapman and Cutler LLP to the effect that, based on the facts and assumptions stated therein as well as certain representations made by the Integrity Funds and the Viking Trust on behalf of the Viking Funds, including those in the Plan, for federal income tax purposes, with respect to each Reorganization and the Integrity Fund and Viking Fund participating therein and their respective shareholders:
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Shareholders of each Integrity Fund should consult their tax advisers regarding the effect on them, if any, of the Reorganization in which that Integrity Fund is participating in light of their individual circumstances. Because the foregoing discussion only relates to the federal income tax consequences of the Reorganizations, those shareholders also should consult their tax advisers about state and local tax consequences, if any, of the Reorganizations.
PERFORMANCE
PERFORMANCE INFORMATION FOR THE VIKING-NORTH DAKOTA FUND AND ND FUND
A comparison of the total returns for the Viking-North Dakota Fund and the ND Fund for the periods ended December 31, 2008, is set forth in the charts and tables below. The following bar charts and tables present the performance of the Viking-North Dakota Fund and Class A of the ND Fund. The following bar charts and tables provide some indication of the risks of investing in the respective fund by showing changes in the fund's performance from year to year and by showing how the average annual returns over the periods indicated compare with those of a broad measure of market performance. How a fund has performed in the past (before and after taxes) is not necessarily an indication of its future performance.
The bar charts show the respective fund's annual returns (Class A of the ND Fund) on a before-tax basis and without sales charges. Returns before taxes do not reflect the effects of any income or capital gains taxes. If taxes or sales charges were included, the annual returns would be lower than those shown. The tables show the respective fund's average annual total returns for the fund on a before and after-tax basis and as compared to the returns of a broad-based securities index. Past performance, before and after taxes, is no guarantee of future results.
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ND Fund |
Viking-North Dakota |
2000 |
N/A |
11.30% |
2001 |
4.78% |
3.26% |
2002 |
0.37% |
10.07% |
2003 |
0.50% |
4.60% |
2004 |
(0.84)% |
3.76% |
2005 |
1.53% |
2.24% |
2006 |
5.48% |
4.77% |
2007 |
3.65% |
2.77% |
2008 |
(3.32)% |
(4.89)% |
During the periods shown in the Viking-North Dakota Fund bar chart, the highest and lowest quarterly returns were 4.91% and (2.86)% for the quarters ending September 30, 2002 and September 30, 2008, respectively.
During the periods shown in the ND Fund bar chart, the highest and lowest quarterly returns were 2.26% and (3.44)% for the quarters ending December 30, 2005 and September 30, 2008 respectively.
The bar charts and highest/lowest quarterly returns do not reflect the respective fund's sales charges, which would reduce returns.
VIKING-NORTH DAKOTA
FUND |
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1 Year |
5 Years |
Since Inception(1) |
Return Before Taxes(2) |
(8.42)% |
0.75% |
3.03% |
Return After Taxes on Distributions(2) |
(8.42)% |
0.75% |
3.03% |
Return After Taxes on Distributions and Sale of Fund Shares(2) |
(6.53)% |
1.23% |
3.23% |
Barclays Capital Municipal Bond Index(3) |
(2.47)% |
2.71% |
4.59% |
(1) |
The inception date for the Viking-North Dakota Fund is August 3, 1999. |
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(2) |
Figures reflect maximum sales charges. The total returns for the 5 year period and since inception reflect a maximum sales charge of 4.50%. The current maximum sales charge is 3.75%. Therefore, the total returns shown would have been higher had the current maximum sales charge been in effect for the stated periods. All Fund performance assumes reinvestment of dividends and capital gains. After-tax returns are calculated using the historical highest federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. |
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(3) |
The Barclays Capital Municipal Bond Index is not managed and incurs no sales charges, expenses, fees or taxes. The Index is comprised of a broad range of investment grade municipal bonds. If you could buy all the securities that make up the Index, you would incur expenses that would affect your investment's return. |
ND FUND |
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ND FUND (CLASS A SHARES) |
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1 Year |
5 Years |
Since Inception(1) |
Return Before Taxes(2) |
(7.38)% |
0.38% |
1.77% |
Return After Taxes on Distributions(2) |
(7.38)% |
0.38% |
1.77% |
Return After Taxes on Distributions and Sale of Fund Shares(2) |
(3.55)% |
0.88% |
2.12% |
Barclays Capital Municipal Bond Index(3) |
(2.47)% |
2.71% |
4.99% |
(1) |
The inception date for Class A shares of the ND Fund is January 7, 2000. |
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(2) |
The average annual total returns table above reflect the maximum sales charge of 4.25%. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of any state or local tax. Returns after taxes on distributions reflect the taxed return on the payment of dividends and capital gains. Returns after taxes on distributions and sale of shares assume you sold your shares at period end, and, therefore, are also adjusted for any capital gains or losses incurred. Returns for market indices do not include expenses, which are deducted from Fund returns, or taxes. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here. After-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. |
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(3) |
The unmanaged Barclays Capital Municipal Bond Index includes investment grade bonds issued within the last fifteen years as part of an offering of over $50 million and with a maturity of at least two years. It includes reinvested interest, but reflects no deduction for fees, expenses or taxes. One cannot invest directly in an index, nor is an index representative of the Fund's portfolio. Index return in the table is shown from January 7, 2000. |
PERFORMANCE INFORMATION FOR THE VIKING-MONTANA AND MONTANA FUND
A comparison of the total returns for the Viking-Montana Fund and the Montana Fund for the periods ended December 31, 2008, is set forth in the charts and tables below. The following bar charts and tables present the performance of the Viking-Montana Fund and for the class shares of the Montana Fund as indicated. The following bar charts and tables provide some indication of the risks of investing in the respective fund by showing changes in the fund's performance from year to year and by showing how the average annual returns over the periods indicated compare with those of a broad measure of market performance. How a fund has performed in the past (before and after taxes) is not necessarily an indication of its future performance.
The bar charts show the respective fund's annual returns (Class B for the Montana Fund) on a before-tax basis and without sales charges. Returns before taxes do not reflect the effects of any income or capital gains taxes. If taxes or sales charges were included, the annual returns would be lower than those shown. The tables show the respective fund's average annual total returns for the fund on a before and after-tax basis and as compared to the returns of a broad-based securities index. Past performance, before and after taxes, is no guarantee of future results.
Annual Total Returns
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Montana Fund B Shares |
Viking-Montana |
1999 |
(2.32)% |
N/A |
2000 |
8.97% |
10.23% |
2001 |
4.62% |
4.48% |
2002 |
(1.44)% |
9.90% |
2003 |
0.66% |
4.45% |
2004 |
0.22% |
4.05% |
2005 |
0.68% |
1.96% |
2006 |
5.69% |
4.15% |
2007 |
2.45% |
2.96% |
2008 |
(5.38)% |
(4.66)% |
During the periods shown in the Viking-Montana Fund bar chart, the highest and lowest quarterly returns were 4.89% and (2.62)% for the quarters ending September 30, 2002 and December 31, 2008, respectively.
During the periods shown in the Montana Fund bar chart, the highest and lowest quarterly returns were 4.53% and (2.68)% for the quarters ending December 29, 2000 and December 31, 2008, respectively.
The bar charts and highest/lowest quarterly returns do not reflect the respective fund's sales charges, which would reduce returns.
VIKING-MONTANA FUND |
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1 Year |
5 Years |
Since Inception(1) |
Return Before Taxes(2) |
(8.26)% |
0.70% |
2.89% |
Return After Taxes on Distributions(2) |
(8.26)% |
0.70% |
2.89% |
Return After Taxes on Distributions and Sale of Fund Shares(2) |
(6.40)% |
1.19% |
3.10% |
Barclays Capital Municipal Bond Index(3) |
(2.47)% |
2.71% |
4.59% |
(1) |
The inception date for the Viking-Montana Fund is August 3, 1999. |
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(2) |
Figures reflect maximum sales charges. The total returns for the 5 year period and since inception reflect a maximum sales charge of 4.50%. The current maximum sales charge is 3.75%. Therefore, the total returns shown would have been higher had the current maximum sales charge been in effect for the stated periods. All Fund performance assumes reinvestment of dividends and capital gains. After-tax returns are calculated using the historical highest federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. |
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(3) |
The Barclays Capital Municipal Bond Index is not managed and incurs no sales charges, expenses, fees or taxes. The Index is comprised of a broad range of investment grade municipal bonds. If you could buy all the securities that make up the Index, you would incur expenses that would affect your investment's return. |
MONTANA FUND |
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1 Year |
5 Years |
10 Years |
Since Inception(1) |
Montana Fund (Class B Shares)(2) |
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Return Before Taxes(3) |
(9.03)% |
0.50% |
N/A(2) |
2.70% |
Return After Taxes on Distributions(3) |
(9.04)% |
0.50% |
N/A(2) |
2.70% |
Return After Taxes on Distributions and Sale of Fund Shares(3) |
(4.64)% |
0.97% |
N/A(2) |
2.93% |
Montana Fund (Class A Shares) |
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Return Before Taxes |
(8.96)% |
0.27% |
N/A |
1.78% |
Barclays Capital Municipal Bond Index(4) |
(2.47)% |
2.71% |
N/A |
5.03% |
(1) |
The inception date for Class B shares of the Fund is August 12, 1993; for the Class A shares, the inception date is January 7, 2000. |
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(2) |
Class B shares will automatically convert to Class A shares approximately eight years after purchase. |
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(3) |
The average annual total returns table above reflect the maximum sales charge of 4.25% for Class A shares and the maximum deferred sales charge of 4.00% for Class B shares. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of any state or local tax. After-tax returns are shown for Class B shares only; after-tax returns for Class A shares will vary. Returns after taxes on distributions and sale of shares assume you sold your shares at period end, and, therefore, are also adjusted for any capital gains or losses incurred. Returns for market indices do not include expenses, which are deducted from Fund returns, or taxes. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here. After-tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. |
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(4) |
The unmanaged Barclays Capital Municipal Bond Index includes investment grade bonds issued within the last fifteen years as part of an offering of over $50 million and with a maturity of at least two years. It includes reinvested interest, but reflects no deduction for fees, expenses or taxes. One cannot invest directly in an index, nor is an index representative of the Fund's portfolio. Index return in the table is shown from August 12, 1993. Index return from January 7, 2000 is 4.99%. |
CAPITALIZATION
The following tables set forth the capitalization of each Viking Fund and Integrity Fund as of May 11, 2009 and assuming that the Plan is approved.
VIKING-NORTH DAKOTA FUND—ND FUND
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VIKING-NORTH |
ND FUND |
PRO FORMA |
Net Assets |
$5,758,939 |
$12,568,725 |
$18,327,664 |
Net Asset Value Per Share |
$9.71 |
$7.36 |
$9.71 |
Shares Outstanding |
593,311 |
1,700,688 |
1,887,504 |
VIKING-MONTANA FUND—MONTANA FUND
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VIKING-MONTANA FUND |
MONTANA FUND |
PRO FORMA |
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CLASS A |
CLASS B |
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Net Assets |
$12,154,064 |
$15,096,033 |
$3,977,403 |
$31,227,500 |
Net Asset Value Per Share |
$9.53 |
$8.17 |
$8.14 |
$9.53 |
Shares Outstanding |
1,275,077 |
1,852,468 |
488,741 |
3,276,758 |
Each Viking Fund will be treated as the accounting survivor. The determination of the accounting survivor is based on numerous factors including, the surviving management structure; portfolio composition; investment objectives, policies and restrictions; expense structure and expense ratios; and asset size. In determining the accounting survivor, the primary consideration is the surviving management structure. In this regard, the investment adviser and portfolio manager of the Viking Funds will continue in the same capacities following the Reorganizations. As the portfolios of the Viking Funds following the Reorganizations will continue to be managed pursuant to the same investment strategies, the portfolio composition of the combined funds will likely resemble the historic portfolio composition of the Viking Funds as securities maturities and sales occurring in the normal course of business are replaced with purchases that more resemble the management style of the respective Viking Funds. The Viking Funds will continue to apply their respective investment objectives, policies and restrictions following the Reorganizations. Finally, the combined funds will continue to apply the sales load structure, investment advisory fees and expense caps of the Viking Funds following the Reorganizations. Although the asset size of each Viking Fund is smaller than its corresponding Integrity Fund, based on the foregoing, the Viking Funds will be treated as the accounting survivor.
VOTING INFORMATION
This Proxy Statement/Prospectus is being furnished by the Integrity Board in connection with the solicitation of proxies for the Meeting of Integrity Fund shareholders. Integrity has retained Broadridge Financial Solutions, Inc. (the "Proxy Solicitor") to assist in the solicitation of proxies at an estimated cost of $4,000. Solicitation of proxies will be primarily by mail. The representatives of the Proxy Solicitor, Integrity, Integrity Mutual Funds or dealers may also solicit proxies by telephone, facsimile, internet or in person. The costs of solicitation will be borne by Corridor Investors, LLC and Integrity Money Management, Inc.
Each share of each Integrity Fund is entitled to one vote. Approval of the Plan by each Integrity Fund requires the affirmative vote of the holders of a majority of the voting power entitled to vote (with Class A and Class B Shareholders of the Montana Fund voting together as a single class). Shareholders holding one third of the outstanding shares of the respective Integrity Fund entitled to vote present in person or by proxy at the Meeting will constitute a quorum for the transaction of business at the Meeting for the respective Fund.
For purposes of determining the presence of a quorum and counting votes on the matters presented, shares represented by abstentions and "broker non-votes" will be counted as present, but not votes cast at the Meeting and therefore will have the effect of voting "AGAINST" the proposal. Broker non-votes are shares held in street name for which the broker indicates that instructions have not been received from the beneficial owners and other persons entitled to vote for which the broker lacks discretionary voting authority.
You may vote on the Plan on behalf of the Integrity Fund in which you invest by utilizing one of the following options:
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If you plan to vote by mail, you should complete the Proxy Card by:
Indicating whether you vote "For", "Against", or "Abstain" from voting on the Plan by checking the appropriate box on the Proxy Card;
Signing and dating the Proxy Card; and
Returning it to Integrity Fund Services, Inc. 1 North Main Street, Minot, ND 58703 in the enclosed postage-paid envelope.
Any shareholder may revoke his or her proxy at any time before it is voted by giving written notice of revocation or by executing and delivering a later dated proxy to Integrity Fund Services, Inc. (shareholder services) at 1 North Main Street North, Minot, North Dakota 58703, or by personally casting a vote at the Meeting.
If you do not specify a choice on a Proxy Card that is properly executed and returned in time to be voted at the Meeting, it will be voted "For" the approval of the Plan.
If you do not plan to attend the Meeting of Shareholders of the Integrity Funds in which you invest on June 29, 2009, Integrity Fund Services, Inc. (shareholder services) or Broadridge Financial Solutions, Inc. must receive your vote by mail, telephone, facsimile or internet no later than 10:00 A.M. Central time on June 29, 2009. If your Proxy Card indicates you are abstaining from voting, you will be treated as having voted "Against" the Plan.
It is not anticipated that any matters other than the approval of the Plan will be brought before the Meeting. Should other business be brought before the Meeting, it is intended that all proxies will be voted in accordance with the judgment of the persons named as proxies. If sufficient votes in favor of approving the Plan are not received by the time scheduled for the Meeting, the persons named as proxies may propose and vote in favor of one or more adjournments of the Meeting to permit further solicitation of proxies. The costs of any additional solicitation and of any adjourned session will be paid by Corridor Investors, LLC and Integrity Money Management, Inc.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing Proxy Cards may be of assistance to you and avoid the time and expense to the Integrity Funds involved in validating your vote if you fail to sign your Proxy Card properly.
Individual Accounts: Sign your name exactly as it appears in the registration on the proxy card.
Joint Accounts: Each party should sign.
All Other Accounts: The capacity of the individual signing the Proxy Card should be indicated unless it is reflected in the form of registration. For example:
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REGISTRATION |
VALID SIGNATURE |
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(1) |
ABC Corp. |
ABC Corp. |
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John Doe, Treasurer |
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(2) |
ABC Corp. |
John Doe, Treasurer |
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(3) |
ABC Corp. c/o John Doe, Treasurer |
John Doe |
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(4) |
ABC Corp. Profit Sharing Plan |
John Doe, Director |
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(1) |
The XYZ Partnership |
Jane B. Smith, Partner |
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(2) |
Smith and Jones, Limited Partnership |
Jane B. Smith, General Partner |
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(1) |
Jane B. Doe, Director u/t/d 12/28/78 |
Jane B. Doe |
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(1) |
John B. Smith, Cust. f/b/o John. B. Smith, Jr. UGM/UTMA |
John B. Smith |
INFORMATION REGARDING SHARES OF EACH INTEGRITY FUND AND VIKING FUND OUTSTANDING
Only shareholders of an Integrity Fund on May 11, 2009 ("Record Date") are entitled to notice of and to vote at the Meeting. As of May 11, 2009, there were 1,700,688.487 Class A shares outstanding of ND Fund; and 1,852,467.791 Class A shares and 488,741.370 Class B Shares outstanding of the Montana Fund. As of May 11, 2009, there were 593,310.504 shares outstanding of the Viking-North Dakota Fund and 1,275,077.322 shares outstanding of the Viking-Montana Fund.
As of May 11, 2009, the officers and directors of ND Fund and Montana Fund each as a group owned less than 1% of the ND Fund and Montana Fund, respectively. The following table sets forth the name, address and share ownership of the persons or entities known to the Integrity Funds to have ownership of a controlling interest (ownership of greater than 25%) or of record or beneficially 5% or more of any class of the outstanding shares of an Integrity Fund as of May 11, 2009. The table also sets forth the estimated percentage of shares of the combined fund that would have been owned by such parties if the Reorganizations had occurred on May 11, 2009. These amounts may differ at Closing Date. Shareholders with a controlling interest in an Integrity Fund could affect the outcome of proxy voting or the direction of management of the applicable Integrity Fund.
FUND |
NAME |
NUMBER OF |
PERCENTAGE OF |
ESTIMATED PRO FORMA PERCENTAGE OWNERSHIP OF COMBINED VIKING FUND AFTER THE REORGANIZATION |
ND Fund |
None |
None |
None |
None |
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Montana Fund |
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Class A |
Clarice M. Susag |
115,386.239 |
6.23% |
3.02% |
Class B |
None |
None |
None |
None |
As of May 11, 2009, the officers and directors of the Viking-North Dakota Fund and Viking-Montana Fund, each as a group owned less than 1% of the Viking-North Dakota Fund and Viking-Montana Fund, respectively. The following table sets forth the name, address and share ownership of the persons or entities known to the Viking Funds to have ownership of a controlling interest (ownership of greater than 25%) or of record or beneficially 5% or more of any class of the outstanding shares of a Viking Fund as of May 11, 2009. The table also sets forth the estimated percentage of shares of the combined fund that would have been owned by such parties if the Reorganizations had occurred on May 11, 2009. These amounts may differ at Closing Date. Shareholders with a controlling interest in a Viking Fund could affect the outcome of a proxy voting or the direction of management of the applicable Viking Fund.
FUND |
NAME |
NUMBER OF |
PERCENTAGE OF |
ESTIMATED PRO FORMA PERCENTAGE OWNERSHIP OF COMBINED VIKING FUND AFTER THE REORGANIZATION |
Viking Fund-North Dakota |
Jerry A. Olson &
Linda S. Olson |
73,853.56 |
12.45% |
3.91% |
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50,187.401 |
8.45% |
2.66% |
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None |
None |
None |
None |
ADDITIONAL INFORMATION
LEGAL MATTERS
K&L Gates LLP serves as counsel for each Viking Fund and Viking regarding the Plan or any related transaction.
Chapman and Cutler LLP serves as counsel for each Integrity Fund with respect to the Reorganizations. Edward O'Keefe serves as counsel to the Integrity Funds' Independent Directors. Gordon Dihle of Dihle & Co., P.C. serves as legal counsel to Integrity regarding the Plan and any related transaction.
EXPERTS
Brady, Martz & Associates, P.C. ("Brady, Martz") are the independent accountants for each Integrity Fund and each Viking Fund. Brady, Martz is considered to be an expert due to its experience in auditing and accounting.
Please refer to Appendix C for financial highlights of the Viking Funds and Integrity Funds.
INTERESTED PERSONS
Pursuant to the Corridor Agreement, Corridor and Viking will acquire all the shares of IFD, IFS, and certain assets of Integrity, subject to certain terms and conditions and will pay Integrity Mutual Funds the Purchase Price in return therefor. As a shareholder of Integrity Mutual Funds, Mr. Robert E. Walstad, chairman of the Board of Directors and interim President of the Integrity Funds, may indirectly benefit from Integrity Mutual Funds' receipt of the Purchase Price. In addition, as described under the section "General Overview," if the Corridor Transaction is completed, it is expected that Corridor, primarily through its subsidiaries, will provide investment advisory, distribution, and other services to the mutual funds currently in the Integrity and Viking fund families. Simultaneous with the closing of the Corridor Transaction, it is intended that Viking will become a subsidiary of Corridor. Mr. Walstad, Mr. Shannon D. Radke, president of Viking, the Viking Trust and Viking Funds Distributors, Mr. Peter Quist, Director, Vice President and Secretary of the Integrity Funds as well as other officers and employees of Integrity Mutual Funds and Viking will own membership interests in Corridor and as such, may benefit from the Reorganizations as Viking is anticipated to become a subsidiary of Corridor, and may indirectly benefit from the advisory fees earned by Viking on the larger asset size of the Viking Funds following the Reorganizations.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of Additional Information does not contain all of the information set forth in the registration statements and exhibits of each Viking Fund or Integrity Fund filed with the SEC under the Securities Act of 1933, as amended, and the 1940 Act.
Viking Trust, on behalf of each Viking Fund, the ND Fund and the Montana Fund, file proxy materials, reports and other information with the SEC in accordance with the informational requirements of the Securities Exchange Act of 1934, as amended, and the 1940 Act. These materials can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, and at the following regional offices of the SEC: Northeast Regional Officer, 3 World Financial Center, Suite 400, New York, New York 10281; Southeast Region Office, 801 Brickell Avenue, Suite 1800, Miami, Florida 33131; Midwest Regional Office, 175 West Jackson Boulevard, Suite 900, Chicago, IL 60604; Central Regional Office, 1801 California Street, Suite 1500, Denver, Colorado 80202; and Pacific Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036. Also, copies of such materials can be obtained from the Public Reference Branch, Office of Consumer Affairs and Information Services, SEC, Washington, DC, 20549, at prescribed rates or from the SEC's Website at www.sec.gov. To request information regarding the Funds, you may also send an e-mail to the SEC at publicinfo@sec.gov.
APPENDIX A
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Plan") is made as of this _______ day of _____________________ 2009, by and between ND Tax-Free Fund, Inc. and Montana-Tax Free Fund, Inc., each a North Dakota corporation, respectively on behalf of itself as listed in the Target Funds column below (each a "Target Fund" and collectively, the "Target Funds"), and Viking Mutual Funds, a Delaware statutory trust ("Viking"), on behalf of its respective series listed in the Acquiring Funds column below (each an "Acquiring Fund" and collectively, the "Acquiring Funds").
Acquiring Funds |
Target Funds |
Viking Tax-Free Fund for North Dakota |
ND Tax-Free Fund, Inc. |
Viking Tax-Free Fund for Montana |
Montana-Tax Free Fund, Inc. |
WHEREAS, the Target Funds and Viking are open-end management investment companies registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the parties desire that each Acquiring Fund acquire the assets and assume the stated liabilities of the Target Fund listed opposite the Acquiring Fund in the above table (each a "Corresponding Target Fund") in exchange for shares of equal value of the Acquiring Fund (each a "Corresponding Acquiring Fund") and the distribution of the shares of the Acquiring Fund to the shareholders of the Corresponding Target Fund in connection with the complete liquidation and dissolution of the Corresponding Target Fund (each series of such transactions between an Acquiring Fund and its corresponding Target Fund, a "Reorganization");
WHEREAS, the parties intend that all agreements, representations, actions and obligations described herein made or undertaken by the Acquiring Funds are made and shall be taken or undertaken by Viking on behalf of each Acquiring Fund as appropriate. Similarly, the parties intend, if context requires, that all agreements, representations, actions and obligations described herein made or undertaken by Viking are made and shall be taken by Viking on behalf of the appropriate Acquiring Fund, as appropriate;
WHEREAS, the parties intend that each Reorganization qualify as a "reorganization," within the meaning of section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that the Acquiring Fund and the Corresponding Target Fund each be a "party to a reorganization," within the meaning of section 368(b) of the Code, with respect to the Reorganization;
WHEREAS, the parties, for convenience, have structured this Plan so that it generally refers to a single Reorganization between a single Acquiring Fund and a single Target Fund, but intend for this Plan and its terms and conditions to apply to each Reorganization, and that this Plan be adopted as a "plan of reorganization" within the meaning of the regulations under the Code (the "Regulations"); and
WHEREAS, the parties intend that the consummation of both Reorganizations shall be required for consummation of any single Reorganization.
NOW, THEREFORE, in accordance with the mutual promises described herein, the parties agree as follows:
|
1. |
Definitions. |
The following terms shall have the following meanings: |
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1933 Act |
The Securities Act of 1933, as amended. |
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1934 Act |
The Securities Exchange Act of 1934, as amended. |
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Assets |
All property and assets of any kind and all interests, rights, privileges and powers of or attributable to the Target Fund whether or not determinable at the Effective Time and wherever located. Assets include all cash, cash equivalents, securities, claims (whether absolute or contingent, Known or unknown, accrued or unaccrued or conditional or unmatured), contract rights and receivables (including dividend and interest receivables) owned by or attributed to the Target Fund and any deferred or prepaid expense shown as an asset on the Target Fund's books. |
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Assets List |
A list of securities and other Assets and Liabilities of or attributable to the Target Fund as of the date provided to Viking. |
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Business Day |
Each weekday that the New York Stock Exchange is open. |
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Closing Date |
June 30, 2009, or such other date as the parties may agree to in writing. |
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Effective Time |
9:00 a.m. Eastern time on the Business Day following the Closing Date, or such other time as the parties may agree to in writing. |
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Fund |
The Acquiring Fund or the Target Fund as the context may require. |
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Know, Known, or Knowledge |
Known after reasonable inquiry. |
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Liabilities |
All liabilities of, allocated or attributable to the Target Fund as set forth on the Assets List and as included in the calculation of net asset value (as defined below) on the Closing Date of the Reorganization, excluding liabilities for expenses incurred by the Funds in connection with the Reorganization. |
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N-14 Registration Statement |
Viking's registration statement on Form N-14 under the 1940 Act that will register the shares of the Acquiring Fund to be issued in the Reorganization and will include the proxy materials necessary for shareholders of the Target Fund to approve the Reorganization. |
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Material Agreements |
The agreements set forth in Schedule A. |
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Net Value of Assets |
Value of Assets, determined in accordance with Section 3(d) hereof, net of Liabilities. |
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Reorganization Documents |
Such bills of sale, assignments, assumptions, and other instruments as desirable for the Target Fund to transfer to the Corresponding Acquiring Fund all right and title to and interest in the Assets and for the Corresponding Acquiring Fund to assume the Liabilities. |
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Schedule A |
Schedule A to this Plan. |
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Schedule B |
Schedule B to this Plan. |
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Target Financial Statements |
The audited financial statements of the Target Fund for its most recently completed fiscal year and, if applicable, the unaudited financial statements of the Target Fund for its most recently completed semi-annual period. |
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Valuation Time |
The time on the Closing Date, the Business Day immediately preceding the Closing Date if the Closing Date is not a Business Day, or such other date as the parties may agree to in writing, that Viking determines the Net Value of Assets per share of the Acquiring Fund and the Target Fund determines the Net Value of Assets of or attributable to the Class A shares and Class B shares, if applicable, of the Target Fund. Unless otherwise agreed to in writing, the Valuation Time shall be at the time of day then set forth in the Acquiring Fund's registration statement on Form N-1A as the time of day at which net asset value is calculated. |
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|||||
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers designated below to execute this Plan as of the date first written above.
|
|
|
ND TAX-FREE FUND, INC (A TARGET FUND) |
|||
ATTEST: |
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Name: |
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Name: |
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Title: |
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Title: |
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MONTANA TAX-FREE FUND, INC (A TARGET FUND) |
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ATTEST: |
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Name: |
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Name: |
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Title: |
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Title: |
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VIKING MUTUAL FUNDS for itself and on behalf of VIKING TAX-FREE FUND FOR NORTH DAKOTA and VIKING TAX-FREE FUND FOR MONTANA (EACH AN ACQUIRING FUND) |
|||
ATTEST: |
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Name: |
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Name: |
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Title: |
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Title: |
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SCHEDULE A
MATERIAL AGREEMENTS
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SCHEDULE B
Claims, actions, suits, investigations or proceedings pending or threatened against the Target Funds, or the Assets or its businesses:
None
Orders, decrees or judgments to which the Target Fund is a party that adversely affect, or are reasonably likely to adversely affect, the Target Fund's financial condition, results of operations, business, properties or the Assets or ability to consummate the transactions contemplated by the Plan.
None
APPENDIX B
DISSENTERS' RIGHTS
10-19.1-87 RIGHTS OF DISSENTING SHAREHOLDERS. |
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APPENDIX C
FINANCIAL HIGHLIGHTS
These financial highlights tables are intended to help you understand the Funds' financial performance for the past five years. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Brady, Martz & Associates, P.C., whose reports, along with the Fund's financial statements, are included in the Fund's respective annual reports, which are available upon request. Further information about a Fund's performance is also contained in such Fund's latest annual or semi-annual shareholder reports. You may obtain a free copy of a Fund's latest annual or semi-annual shareholder report upon request from the respective Fund.
Financial Highlights December 31, 2008
Selected per share data and ratios for the periods indicated
Montana Tax-Free Fund Class A Shares
|
|
For The Year Ended December 31, 2008 |
|
For The Year Ended December 31, 2007 |
|
For The Year Ended December 29, 2006 |
|
For The Year Ended December 30, 2005 |
|
For The Year Ended December 31, 2004 |
|||
NET ASSET VALUE, BEGINNING OF PERIOD |
$ |
8.50 |
$ |
8.60 |
$ |
8.42 |
$ |
8.68 |
$ |
8.98 |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|||
|
Net investment income (loss) |
$ |
.34 |
$ |
.34 |
$ |
.34 |
$ |
.35 |
$ |
.36 |
||
|
Net realized and unrealized gain (loss) on investment transactions |
|
(0.74) |
|
(.10) |
|
.18 |
|
(.26) |
|
(.30) |
||
|
|
Total Income (Loss) From Investment Operations |
$ |
(0.40) |
$ |
.24 |
$ |
.52 |
$ |
.09 |
$ |
.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|||
|
Dividends from net investment income |
$ |
(.34) |
$ |
(.34) |
$ |
(.34) |
$ |
(.35) |
$ |
(.36) |
||
|
Distributions from net realized gains |
|
.00 |
|
.00 |
|
.00 |
|
.00 |
|
.00 |
||
|
|
Total Distributions |
$ |
(.34) |
$ |
(.34) |
$ |
(.34) |
$ |
(.35) |
$ |
(.36) |
|
|
|
|
|
|
|
|
|
|
|
|
|||
NET ASSET VALUE, END OF PERIOD |
$ |
7.76 |
$ |
8.50 |
$ |
8.60 |
$ |
8.42 |
$ |
8.68 |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Total Return |
|
(4.89%)(A) |
|
2.85%(A) |
|
6.32%(A) |
|
1.07%(A) |
|
0.73%(A) |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
RATIOS/SUPPLEMENTAL DATA: |
|
|
|
|
|
|
|
|
|
|
|||
|
Net assets, end of period (in thousands) |
$ |
14,198 |
$ |
14,696 |
$ |
15,652 |
$ |
14,247 |
$ |
14,297 |
||
|
Ratio of net expenses (after expense assumption) to average net assets |
|
1.07%(B) |
|
1.07%(B) |
|
1.05%(B) |
|
1.00%(B) |
|
0.95%(B) |
||
|
Ratio of net investment income to average net assets |
|
4.08% |
|
3.97% |
|
4.03% |
|
4.11% |
|
4.12% |
||
|
Portfolio turnover rate |
|
1.63% |
|
8.92% |
|
27.72% |
|
0.92% |
|
0.00% |
||
(A) |
Excludes maximum sales charge of 4.25%. |
|
|
(B) |
During the periods indicated above, Integrity Mutual Funds assumed and/or waived expenses of $91,772, $78,188, $54,990, $40,760, and $34,905, respectively. If the expenses had not been assumed and/or waived, the annualized ratio of total expenses to average net assets would have been 1.69%, 1.58%, 1.43%, 1.29%, and 1.21%, respectively. |
Total return represents the rate that an investor would have earned or lost on an investment in the Fund assuming reinvestment of all dividends and distributions.
Financial Highlights December 31, 2008
Selected per share data and ratios for the periods indicated
Montana Tax-Free Fund Class B Shares
|
|
For The Year Ended December 31, 2008 |
|
For The Year Ended December 31, 2007 |
|
For The Year Ended December 29, 2006 |
|
For The Year Ended December 30, 2005 |
|
For The Year Ended December 31, 2004 |
|||
NET ASSET VALUE, BEGINNING OF PERIOD |
$ |
8.48 |
$ |
8.57 |
$ |
8.40 |
$ |
8.65 |
$ |
8.95 |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|||
|
Net investment income (loss) |
$ |
.29 |
$ |
.30 |
$ |
.30 |
$ |
.31 |
$ |
.32 |
||
|
Net realized and unrealized gain (loss) on investment transactions |
|
(0.74) |
|
(.09) |
|
.17 |
|
(.25) |
|
(.30) |
||
|
|
Total Income (Loss) From Investment Operations |
$ |
(0.45) |
$ |
.21 |
$ |
.47 |
$ |
.06 |
$ |
.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|||
|
Dividends from net investment income |
$ |
(.29) |
$ |
(.30) |
$ |
(.30) |
$ |
(.31) |
$ |
(.32) |
||
|
Distributions from net realized gains |
|
.00 |
|
.00 |
|
.00 |
|
.00 |
|
.00 |
||
|
|
Total Distributions |
$ |
(.29) |
$ |
(.30) |
$ |
(.30) |
$ |
(.31) |
$ |
(.32) |
|
|
|
|
|
|
|
|
|
|
|
|
|||
NET ASSET VALUE, END OF PERIOD |
$ |
7.74 |
$ |
8.48 |
$ |
8.57 |
$ |
8.40 |
$ |
8.65 |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Total Return |
|
(5.38%)(A) |
|
2.45%(A) |
|
5.69%(A) |
|
0.68%(A) |
|
0.22%(A) |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
RATIOS/SUPPLEMENTAL DATA: |
|
|
|
|
|
|
|
|
|
|
|||
|
Net assets, end of period (in thousands) |
$ |
4,072 |
$ |
4,873 |
$ |
8,041 |
$ |
12,481 |
$ |
23,217 |
||
|
Ratio of net expenses (after expense assumption) to average net assets |
|
1.57%(B) |
|
1.57%(B) |
|
1.54%(B) |
|
1.50%(B) |
|
1.45%(B) |
||
|
Ratio of net investment income to average net assets |
|
3.58% |
|
3.47% |
|
3.56% |
|
3.60% |
|
3.63% |
||
|
Portfolio turnover rate |
|
1.63% |
|
8.92% |
|
27.72% |
|
0.92% |
|
0.00% |
||
(A) |
Excludes contingent deferred sales charge of 4.00%. |
|
|
(B) |
During the periods indicated above, Integrity Mutual Funds assumed and/or waived expenses of $27,910, $32,103, $36,608, $49,461, and $72,241, respectively. If the expenses had not been assumed and/or waived, the annualized ratio of total expenses to average net assets would have been 2.19%, 2.08%, 1.90%, 1.78%, and 1.70%, respectively. |
Total return represents the rate that an investor would have earned or lost on an investment in the Fund assuming reinvestment of all dividends and distributions.
Financial Highlights December 31, 2008
Selected per share data and ratios for the periods indicated
ND Tax-Free Fund, Inc. Class A Shares
|
|
For The Year Ended December 31, 2008 |
|
For The Year Ended December 31, 2007 |
|
For The Year Ended December 29, 2006 |
|
For The Year Ended December 30, 2005 |
|
For The Year Ended December 31, 2004 |
|||
NET ASSET VALUE, BEGINNING OF PERIOD |
$ |
7.52 |
$ |
7.53 |
$ |
7.40 |
$ |
7.56 |
$ |
7.94 |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|||
|
Net investment income (loss) |
$ |
.28 |
$ |
.28 |
$ |
.27 |
$ |
.27 |
$ |
.31 |
||
|
Net realized and unrealized gain (loss) on investment transactions |
|
(.52) |
|
(.01) |
|
.13 |
|
(.16) |
|
(.38) |
||
|
|
Total Income (Loss) From Investment Operations |
$ |
(.24) |
$ |
.27 |
$ |
.40 |
$ |
.11 |
$ |
(.07) |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|||
|
Dividends from net investment income |
$ |
(.28) |
$ |
(.28) |
$ |
(.27) |
$ |
(.27) |
$ |
(.31) |
||
|
Distributions from net realized gains |
|
.00 |
|
.00 |
|
.00 |
|
.00 |
|
.00 |
||
|
|
Total Distributions |
$ |
(.28) |
$ |
(.28) |
$ |
(.27) |
$ |
(.27) |
$ |
(.31) |
|
|
|
|
|
|
|
|
|
|
|
|
|||
NET ASSET VALUE, END OF PERIOD |
$ |
7.00 |
$ |
7.52 |
$ |
7.53 |
$ |
7.40 |
$ |
7.56 |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Total Return |
|
(3.32%)(A) |
|
3.65%(A) |
|
5.48%(A) |
|
1.53%(A) |
|
(0.84%)(A) |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
RATIOS/SUPPLEMENTAL DATA: |
|
|
|
|
|
|
|
|
|
|
|||
|
Net assets, end of period (in thousands) |
$ |
12,246 |
$ |
12,968 |
$ |
14,271 |
$ |
15,692 |
$ |
24,626 |
||
|
Ratio of net expenses (after expense assumption) to average net assets |
|
1.07%(B) |
|
1.07%(B) |
|
1.06%(B) |
|
1.00%(B) |
|
0.93%(B) |
||
|
Ratio of net investment income to average net assets |
|
3.78% |
|
3.72% |
|
3.61% |
|
3.66% |
|
4.05% |
||
|
Portfolio turnover rate |
|
11.83% |
|
20.96% |
|
0.00% |
|
37.02% |
|
10.31% |
||
(A) |
Excludes maximum sales charge of 4.25%. |
|
|
(B) |
During the periods indicated above, Integrity Mutual Funds assumed and/or waived expenses of $87,783, $90,053 $67,901, $67,076, and $76,391, respectively. If the expenses had not been assumed and/or waived, the annualized ratio of total expenses to average net assets would have been 1.74%, 1.73%, 1.51%, 1.36%, and 1.22%, respectively. |
Total return represents the rate that an investor would have earned or lost on an investment in the Fund assuming reinvestment of all dividends and distributions.
VIKING MUTUAL FUNDS
Financial Highlights
Viking Tax-Free Fund for Montana
The financial highlights table is intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions).
|
For the Period |
||||||||||||
|
|
01/01/08-12/31/08 |
|
01/01/07-12/31/07 |
|
01/01/06-12/31/06 |
|
01/01/05-12/31/05 |
|
01/01/04-12/31/04 |
|||
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 (000's) |
$ |
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% |
||
1 |
Total return assumes reinvestment of distributions at net asset value and does not reflect the impact of a sales charge. |
|
|
2 |
Viking 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 $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. |
VIKING MUTUAL FUNDS
Financial Highlights
Viking Tax-Free Fund for North Dakota
The financial highlights table is intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions).
|
For the Period |
||||||||||||
|
|
01/01/08-12/31/08 |
|
01/01/07-12/31/07 |
|
01/01/06-12/31/06 |
|
01/01/05-12/31/05 |
|
01/01/04-12/31/04 |
|||
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 (000's) |
$ |
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% |
||
1 |
Total return assumes reinvestment of distributions at net asset value and does not reflect the impact of a sales charge. |
|
|
2 |
Viking 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 $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. |
PART B
VIKING
MUTUAL FUNDS
Viking Tax-Free Fund for Montana
Viking Tax-Free Fund for North Dakota
Statement
of Additional Information
May 20, 2009
Acquisition of all of the assets and liabilities of: |
|
By and in exchange for shares of: |
Integrity Funds |
|
Viking Funds |
ND Tax-Free Fund, Inc.
|
|
Viking Tax-Free Fund for North Dakota
|
Montana Tax-Free Fund, Inc.
|
|
Viking Tax-Free Fund for Montana
|
This Statement of Additional Information ("SAI"), which is not a prospectus, supplements and should be read in conjunction with the Combined Proxy Statement/Prospectus dated May 20, 2009 (the "Proxy Statement/Prospectus") relating specifically to the Special Joint Meeting of Shareholders of the ND Tax-Free Fund, Inc. and the Montana Tax-Free Fund, Inc. (each an "Integrity Fund" and collectively, the "Integrity Funds") that will be held on June 29, 2009. A copy of the Proxy Statement/Prospectus may be obtained upon request and without charge by calling Viking Funds toll free at 800-933-8413.
Unless otherwise indicated, capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Proxy Statement/Prospectus.
Table of Contents
|
Page |
General Information |
1 |
Incorporation by Reference of Documents into the SAI |
1 |
Additional Information About Management of the Viking Funds |
2 |
Pro Forma Financial Statements |
8 |
General Information
This SAI and the Proxy Statement/Prospectus are related to a proposal to approve an agreement and plan of reorganization between the ND Fund and the Montana Fund and the Viking Mutual Funds, on behalf of its series, Viking Tax-Free Fund for North Dakota ("Viking-North Dakota Fund") and Viking Tax-Free Fund for Montana ("Viking-Montana Fund") (each a "Viking Fund") (the "Plan"). Under the Plan, the ND Fund and Montana Fund will transfer their respective assets to the Viking-North Dakota Fund and Viking-Montana Fund, respectively, in exchange solely for shares of that corresponding Viking Fund and the Viking Fund's assumption of the applicable Integrity Fund's liabilities. The Plan further provides that each Integrity Fund will then distribute the shares received from the corresponding Viking Fund proportionately to its shareholders and then terminate (each a "Reorganization" and collectively, the "Reorganizations").
Incorporation by Reference of Documents into the SAI
Further information about the Viking Funds is contained in the Statement of Additional Information of the Viking Funds dated April 30, 2009, as supplemented from time to time, which is incorporated herein by reference only insofar as it relates to the Viking Funds. No other parts are incorporated by reference herein.
Further information about the Integrity Funds is contained in the Statement of Additional Information of the Integrity Funds dated May 1, 2009, as supplemented from time to time, which is incorporated herein by reference only insofar as it relates to the Integrity Funds. No other parts are incorporated by reference herein.
The audited financial statements and related independent registered public accounting firm's report for the Viking Funds are contained in the Viking Funds' Annual Report for the fiscal year ended December 31, 2008 and are incorporated herein by reference only insofar as they relate to the Viking Funds. No other parts of the Annual Report are incorporated by reference herein.
The audited financial statements and related independent registered public accounting firm's report for the ND Fund are contained in the ND Fund's Annual Report for the fiscal year ended December 31, 2008 and are incorporated herein by reference only insofar as they relate to the ND Fund. No other parts of the Annual Report are incorporated by reference herein.
The audited financial statements and related independent registered public accounting firm's report for the Montana Fund are contained in the Montana Fund's Annual Report for the fiscal year ended December 31, 2008 and are incorporated herein by reference only insofar as they relate to the Montana Fund. No other parts of the Annual Report are incorporated by reference herein.
Additional Information about Management of the Viking Funds
As described in further detail in the Proxy Statement/Prospectus, on March 6, 2009, Integrity Mutual Funds and Integrity Money Management, Inc. ("Integrity"), among others, have entered into a share purchase and change of advisor agreement (the "Corridor Agreement") with Corridor Investors, LLC ("Corridor") and Viking Fund Management, LLC ("Viking"), pursuant to which Corridor and Viking will acquire all the stock of Integrity Funds Distributor, Inc. ("IFD"), Integrity Funds Services, Inc. ("IFS"), and certain assets of Integrity, subject to certain terms and conditions (the "Corridor Transaction"). Corridor is a recently formed North Dakota limited liability company that was organized in January 2009 by Robert E. Walstad, the chairman of the Board of Directors of the Integrity Funds and interim president of the Integrity Funds and Shannon D. Radke, president of Viking, the Viking Trust, and Viking Distributors, LLC. If the Corridor Transaction is completed, it is expected that Corridor, primarily through its subsidiaries, will provide investment advisory, distribution, and other services to the mutual funds currently in the Integrity and Viking fund families. Integrity currently serves as investment adviser to the Integrity Funds, the Integrity Funds of Funds, Inc., the series of The Integrity Funds and the respective series of the Integrity Managed Portfolios (collectively, the "Integrity Family Funds"). Viking currently serves as investment adviser to the series of the Viking Trust, including the Viking Funds, the Viking Large-Cap Value Fund and the Viking Small-Cap Value Fund (collectively, the "Viking Family Funds").
If the Corridor Transaction is completed, it is intended that Viking will become a subsidiary of Corridor (the "Viking Transaction"). The Viking Transaction is subject to shareholder approval by Viking's shareholders and its Board of Governors. Viking intends to seek shareholder approval of the Viking Transaction pursuant to written consent. In addition, a joint shareholder meeting of the Viking Family Funds has been scheduled for June 29, 2009 (the "Viking Shareholder Meeting"). At the Viking Shareholder Meeting, shareholders of the Viking Family Funds will be asked to approve, among other things, new advisory agreements with Viking for their respective fund effective following the Viking Transaction, new trustees for the Viking Trust effective following the Viking Transaction and a manager-of-managers structure. Subject to approval by the shareholders of the applicable series of Integrity Managed Portfolios, the series of The Integrity Funds and Integrity Fund of Funds, Inc., it is intended that Viking also will serve as the new investment adviser to such funds in the Integrity family.
As part of the consolidation of the Integrity and Viking family of funds, shareholders of the Viking Family Funds are being asked at the Viking Shareholder Meeting to elect four new trustees to the Board of Trustees of the Viking Trust, none of which are currently trustees. Currently, the Board consists of three trustees, two of which are not "interested persons" of the Viking Trust as such term is defined in the Investment Company Act of 1940 (the "1940 Act") (the "Independent Trustees"). Shannon Radke, the third trustee is also the president and treasurer of the Viking Funds and is therefore an interested trustee. There can be no assurance that the shareholders of the Viking Family Funds will approve the Nominees. Nevertheless, information regarding the Nominees has been set forth below.
The Nominees currently serve as directors of the Integrity Funds, as well as directors or trustees (as applicable) of the Integrity Managed Portfolios, The Integrity Funds and as directors of the Integrity Fund of Funds, Inc. None of the Nominees for election as Independent Trustees are also officers, employees or directors of, or owners of an interest in, Viking or its parents or subsidiaries. None of the Nominees for election as Independent Trustees have had any material interest, direct or indirect, in any material transactions since the beginning of the most recently completed fiscal year of the Viking Funds, or in any material proposed transactions, to which Viking or any of its parents or subsidiaries (other than a fund), or any parents or subsidiaries of the foregoing were or are to be a party. Since the beginning of the most recently completed fiscal year of the Viking Funds, no Nominee for election as an Independent Trustee has purchased or sold any interest in Viking or in any of its parents, or in subsidiaries of either. None of the Nominees for election as Independent Trustees currently owns or intends to acquire any membership interest in Corridor.
The following table includes certain important information regarding the Nominees:
Independent Trustees/Nominees
NAME, ADDRESS, AND AGE |
POSITION(S) PROPOSED TO BE HELD WITH VIKING TRUST |
PROPOSED TERM AND LENGTH SERVED |
NUMBER OF PORTFOLIOS OVERSEEN IN THE VIKING FUND COMPLEX |
PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS |
OTHER DIRECTOR-SHIPS HELD OUTSIDE THE VIKING FUND COMPLEX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interested Trustee/Nominee
NAME, ADDRESS, AND AGE |
POSITION(S) PROPOSED TO BE HELD WITH VIKING TRUST |
PROPOSED TERM AND LENGTH SERVED |
NUMBER OF PORTFOLIOS OVERSEEN IN THE VIKING FUND COMPLEX |
PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS |
OTHER DIRECTOR-SHIPS HELD OUTSIDE THE VIKING FUND COMPLEX |
Robert E. Walstad(2) |
Trustee and Chairman |
Indefinite |
None |
Director (Sept. 1987 to Feb. 2007), CEO (Sept. 2001 to Feb. 2007), Integrity Mutual Funds, Inc.; Director, President and Treasurer, (Aug. 1988 to Feb. 2007), Integrity Money Management, Inc.; Director, President and Treasurer (Aug. 1988 to Sept. 2004), ND Capital, Inc.; Director, President and Treasurer (May 1989 to Feb. 2007), Integrity Fund Services, Inc.; Director, President, CEO, and Treasurer, (Jan. 1996 to Aug. 2003), Integrity Funds Distributor, Inc.; Director, CEO, Chairman, (Jan. 2002 to Feb. 2007) and President (Sept. 2002 to Dec. 2004), Capital Financial Services, Inc.; Director and President, (April 1994 to June 2004) South Dakota Tax-Free Fund, Inc.; President (Jan. 1996 to July 2007) and (since March 2008) Integrity Managed Portfolios, (May 2003 to July 2007) and (since March 2008) The Integrity Funds, (Jan. 1995 to July 2007) and (since March 2008) Integrity Fund of Funds, Inc., (Jan. 1989 to July 2007) and (since March 2008) ND Tax-Free Fund, Inc., (Aug. 1993 to July 2007) and (since March 2008) Montana Tax-Free Fund, Inc.; Director and Chairman Montana Tax-Free Fund, Inc. (since May 1993), Integrity Fund of Funds, Inc. (since Aug. 1994), and ND Tax Free Fund, Inc. (since Oct. 1988); Trustee, Chairman, (since January 1996) and Treasurer (January 1996 to May 2004), Integrity Managed Portfolios; and Trustee and Chairman (since June 2003), The Integrity Funds. |
Minot Park Board; ND Tax-Free Fund, Inc.; Montana Tax-Free Fund, Inc.; Integrity Managed Portfolios; The Integrity Funds; and Integrity Fund of Funds, Inc.(1) |
(1) |
The Nominees serve as directors of the three incorporated funds in the Integrity family of funds, and as trustees of the Integrity Managed Portfolios which is comprised of six series, and The Integrity Funds which is comprised of three series. |
|
|
(2) |
Mr. Walstad will be an interested person by virtue of his being an owner of membership interests in Corridor. |
SHARE OWNERSHIP IN THE VIKING FUNDS HELD BY NOMINEES AND OFFICERS
For each Nominee, the dollar range and number of equity securities beneficially owned by the Nominee in each Viking Fund and in all registered funds in the Viking family of investment companies are shown below for the calendar year ended December 31, 2008:
|
Independent Trustees/Nominees |
Interested Trustee/Nominee |
|
||
Dollar Range of Equity Securities in |
Orlin W. Backes |
R. James Maxson |
Jerry M. Stai |
Robert E. Walstad |
|
Viking-North Dakota Fund |
None |
None |
None |
None |
|
Viking-Montana Fund |
None |
None |
None |
None |
|
All Registered Funds in Viking Family of Investment Companies (Aggregate) |
None |
None |
None |
None |
As of the date of this SAI, none of the Nominees for Independent Trustees or any of their respective immediate family members owned beneficially or of record securities in Viking, Integrity, IFD, Viking Fund Distributors, LLC or a person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with any of such persons.
OTHER SERVICE PROVIDERS
In addition to the above, as part of the consolidation of the Viking and Integrity fund families, if the Corridor Transaction is completed, it is expected that the service providers of the Integrity Funds will become the service providers to the Viking Funds. More specifically, it is anticipated that if the Corridor Transaction is completed, IFD will replace Viking Fund Distributors, LLC as the Viking Funds' principal underwriter; IFS will replace Viking as the Viking Funds' transfer agent and accounting and administrative service provider; and Wells Fargo Bank, N.A., Trust & Custody Solutions will replace First Western Bank and Trust as the Viking Funds' custodian. In this regard, at a meeting of the Viking Board of Trustees held on May 1, 2009, the Viking Board approved IFS to serve as the Viking Funds' transfer agent, accounting service provider and administrator effective as of a date to be set prior to the closing of the Reorganizations. The address of IFD is 1 Main Street North, Minot, ND 58703, IFS is P.O. Box 759, Minot, ND 58702 and Wells Fargo Bank is 801 Nicollet Mall, Suite 700, Minneapolis, MN 55479.
ADDITIONAL INFORMATION ON THE CORRIDOR TRANSACTION
The closing of the Corridor Transaction is subject to numerous conditions including, among other things, (i) the acquisition of Viking by Corridor simultaneously with the closing of the Corridor Agreement; (ii) the shareholders of the respective series of Integrity Managed Portfolios, the series of The Integrity Funds and Integrity Fund of Funds, Inc. as well as the respective Board of Directors or Trustees (as applicable) of the foregoing approving the change of advisor from Integrity to Viking; (iii) the shareholders and Board of Directors of the ND Fund and Montana Fund approving the Reorganizations with respect to their Integrity Fund; and (iv) receipt of various necessary regulatory approvals. Similarly, the closing of the Reorganizations are subject to numerous conditions including shareholder approval of the Reorganizations of both the ND Fund and Montana Fund and the closing of the Corridor Transaction. Accordingly, while the parties to these agreements may waive conditions therein, there can be no assurance that the Corridor Transaction or the Reorganizations will close.
Pro Forma Financial Statements
The unaudited pro forma financial statements, attached hereto as Appendix A, are intended to present the financial condition and related results of operations of the Viking-North Dakota Fund and Viking-Montana Fund, respectively, as if the Reorganization had been consummated on December 31, 2008. This unaudited pro forma financial information should be read in conjunction with, and is qualified in its entirety by, the historical financial statements of the Integrity Funds and Viking Funds that have been incorporated by reference into this SAI. These unaudited financial statements are intended for information purposes only, and are not necessarily indicative of the future financial position or future results of the Viking Funds.
Appendix A
SCHEDULE
OF INVESTMENTS
PRO FORMA
ND TAX-FREE FUND, INC. and VIKING TAX-FREE FUND FOR NORTH DAKOTA
December 31, 2008 (unaudited)
|
Target Fund |
Acquiring Fund |
Pro Forma Combined Viking Fund |
|||
|
Quantity |
Market Value |
Quantity |
Market Value |
Quantity |
Market Value |
Municipal Bonds (96.2%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bond Bank (0.4%) |
|
|
|
|
|
|
ND St Mun Bd Bk Cap Fing Prog 6.000% 6/1/21 |
|
|
25,000 |
$26,077 |
25,000 |
$26,077 |
ND St Muni Bond Bank St Revolv. Fd 4.900% 10/1/18 |
|
|
50,000 |
51,699 |
50,000 |
51,699 |
|
|
|
|
77,776 |
|
77,776 |
Development (1.4%) |
|
|
|
|
|
|
Burleigh Cnty Indl Dev Rev MO Slope 5.050% 11/1/18 |
|
|
125,000 |
108,265 |
125,000 |
108,265 |
ND Pub Fin Auth Indl Dev Prog Ser A 5.000% 6/1/20 |
|
|
150,000 |
140,330 |
150,000 |
140,330 |
|
|
|
|
248,595 |
|
248,595 |
Education (4.4%) |
|
|
|
|
|
|
Fargo ND Sch Dist Bldg Auth Rev 5.500% 5/1/14 |
|
|
50,000 |
50,573 |
50,000 |
50,573 |
Fargo, ND School District Bldg. Auth. Lease Rev. 5.750% 5/1/18 |
500,000 |
500,925 |
|
|
500,000 |
500,925 |
Minot Pub Schl Dist No 1 Bldg Auth 4.800% 5/1/23 |
|
|
210,000 |
215,095 |
210,000 |
215,095 |
|
|
500,925 |
|
265,668 |
|
766,593 |
Facilities (8.0%) |
|
|
|
|
|
|
Fargo ND Bldg Auth Lease Rev Ser A 5.000% 5/1/20 |
|
|
50,000 |
51,288 |
50,000 |
51,288 |
Grand Forks Cnty Bldg Auth Rev 5.000% 12/1/20 |
|
|
200,000 |
199,298 |
200,000 |
199,298 |
North Dakota St Bldg Auth Lease Rev 5.200% 12/1/19 |
|
|
90,000 |
91,553 |
90,000 |
91,553 |
ND Blding. Auth. Lease Rev. MBIA 5.000% 12/1/22 |
1,020,000 |
1,033,790 |
|
|
1,020,000 |
1,033,790 |
|
|
1,033,790 |
|
342,139 |
|
1,375,929 |
General Obligation (9.1%) |
|
|
|
|
|
|
Bismarck, ND General Obligation 4.000% 5/1/15 |
100,000 |
104,411 |
|
|
100,000 |
104,411 |
Fargo ND Ref & Impt - Ser B G.O. 5.125% 5/1/17 |
|
|
60,000 |
60,377 |
60,000 |
60,377 |
Fargo ND Ref & Impt Ser D 5.000% 5/1/28 |
|
|
200,000 |
195,978 |
200,000 |
195,978 |
Grand Forks, ND Ref Impt 5.000% 12/1/24 |
115,000 |
116,678 |
|
|
115,000 |
116,678 |
Grand Forks, ND Ref Impt 5.000% 12/1/26 |
100,000 |
100,662 |
|
|
100,000 |
100,662 |
Grand Forks, ND Ref Impt AMBAC 5.000% 12/1/24 |
100,000 |
100,551 |
|
|
100,000 |
100,551 |
Grand Forks, ND GO Pub Bldg FSA 4.625% 12/1/26 |
250,000 |
241,150 |
100,000 |
95,591 |
350,000 |
336,741 |
City of Minot (Highway Bonds) G.O. MBIA 5.000% 10/1/23 |
555,000 |
560,522 |
|
|
555,000 |
560,522 |
|
|
1,223,974 |
|
351,946 |
|
1,575,920 |
Higher Education (24.7%) |
|
|
|
|
|
|
Burleigh Cty., ND (Univ. of Mary) Facs. Rev. 5.750% 12/1/11 |
495,000 |
487,669 |
|
|
495,000 |
487,669 |
Burleigh Cty., ND (Univ. of Mary) Facs. Rev. 5.875% 12/1/15 |
750,000 |
728,063 |
|
|
750,000 |
728,063 |
ND St Brd Hghr Ed Student Svcs Facs 5.000% 8/1/18 |
|
|
175,000 |
154,705 |
175,000 |
154,705 |
ND St Brd Hghr Ed Student Svcs Facs 5.500% 8/1/23 |
|
|
125,000 |
102,070 |
125,000 |
102,070 |
ND State Board of Hgr. Educ. (ND St. Univ. Hsg. & Aux. Facs.) 5.600% 4/1/29 |
1,035,000 |
1,042,752 |
|
|
1,035,000 |
1,042,752 |
ND State Board of Hgr. Educ. (ND St. Univ. Facs.) AMBAC 5.100% 4/1/32 |
500,000 |
467,825 |
|
|
500,000 |
467,825 |
ND State Board of Hgr. Educ. (Univ. of ND Hsg. & Aux. Facs.) Rev. FGIC 5.000% 4/1/32 |
1,000,000 |
893,790 |
|
|
1,000,000 |
893,790 |
ND St Brd Higher Ed Rev Hsg & Aux 4.750% 5/1/19 |
|
|
100,000 |
88,213 |
100,000 |
88,213 |
ND State Board of Hgr. Educ. (ND State Univ. Hsg. & Aux. Facs.) AMBAC 5.000% 4/1/27 |
250,000 |
237,208 |
|
|
250,000 |
237,208 |
NDSU Rev Ser 2006A 4.750% 4/1/29 |
|
|
75,000 |
66,818 |
75,000 |
66,818 |
|
|
3,857,307 |
|
411,806 |
|
4,269,113 |
Housing (4.8%) |
|
|
|
|
|
|
Grand Forks ND Sr Hsg Rev Ref-4000 5.000% 12/1/16 |
|
|
100,000 |
89,573 |
100,000 |
89,573 |
North Dakota Housing Fin. Agency Rev. 5.650% 7/1/28 |
100,000 |
84,675 |
|
|
100,000 |
84,675 |
ND St Hsg Fin Agy Rev Home Mtg 4.900% 7/1/15 |
|
|
150,000 |
142,103 |
150,000 |
142,103 |
ND St Hsg Fin Agy Rev Hsg Fin Pg 5.150% 7/1/23 |
100,000 |
90,225 |
300,000 |
292,545 |
400,000 |
382,770 |
North Dakota Housing Finance Agy 5.400% 7/1/28 |
100,000 |
87,486 |
|
|
100,000 |
87,486 |
ND St Hsg Fin Agy Rev Hsg Fin Prog 5.550% 7/1/22 |
|
|
55,000 |
48,923 |
55,000 |
48,923 |
|
|
262,386 |
|
573,144 |
|
835,530 |
Medical (9.2%) |
|
|
|
|
|
|
Fargo ND Hlth Sys Rev Meritcare 5.375% 6/1/27 |
|
|
200,000 |
184,418 |
200,000 |
184,418 |
Fargo ND Hlth Sys Rev Meritcare obl 5.375% 6/1/15 |
|
|
65,000 |
65,473 |
65,000 |
65,473 |
Fargo, ND Heath Sys. (Meritcare) FSA 5.625% 6/1/31 |
250,000 |
247,730 |
|
|
250,000 |
247,730 |
Fargo ND Hlth Sys Rev Meritcare Obl 5.000% 6/1/22 |
|
|
45,000 |
44,826 |
45,000 |
44,826 |
Fargo ND Hlth Sys Rev Meritcare Obl 5.125% 6/1/27 |
|
|
75,000 |
71,515 |
75,000 |
71,515 |
GF ND Hlth Care Facs Rev United Hos 6.250% 12/1/24 |
|
|
150,000 |
126,240 |
150,000 |
126,240 |
GF ND Hlth Care Sys Rev Altru Hlth 5.625% 8/15/27 |
300,000 |
241,575 |
200,000 |
168,482 |
500,000 |
410,057 |
GF ND Hlth Care Sys Rev Altru Hlth 7.125% 8/15/10 |
|
|
20,000 |
21,484 |
20,000 |
21,484 |
Ward Cnty Hlth Care Fac Rev Trinity 6.000% 7/1/10 |
|
|
20,000 |
20,085 |
20,000 |
20,085 |
Ward Cnty Hlth Care Fac Rev Trinity 5.125% 7/1/25 |
|
|
100,000 |
70,528 |
100,000 |
70,528 |
Ward Cnty ND Hlth Care Fac Rev 5.125% 7/1/29 |
300,000 |
200,349 |
200,000 |
128,556 |
500,000 |
328,905 |
|
|
689,654 |
|
901,607 |
|
1,591,261 |
Multifamily Hsg (0.1%) |
|
|
|
|
|
|
Fargo ND Multifam Rev Ref Hsg 6.900% 9/1/13 |
|
|
25,000 |
15,000 |
25,000 |
15,000 |
|
|
|
|
|
|
|
Other (6.0%) |
|
|
|
|
|
|
Puerto Rico Childrens Tr Fd Tob 6.000% 7/1/10 |
|
|
15,000 |
15,908 |
15,000 |
15,908 |
Grand Forks ND Mosquito Ctl Resv 4.750% 9/1/24 |
|
|
100,000 |
95,336 |
100,000 |
95,336 |
Grand Forks, ND (Alerus Project) Sales Tax Rev. MBIA 4.500% 12/15/29 |
250,000 |
206,695 |
|
|
250,000 |
206,695 |
ND Pub Fin Auth Cap Fin Prog Ser A 5.000% 6/1/31 |
|
|
100,000 |
91,540 |
100,000 |
91,540 |
North Dakota Pub. Fin. Auth State Revolving Fund 5.500% 10/1/27 |
250,000 |
258,895 |
|
|
250,000 |
258,895 |
Williams Cnty ND Sales Tax Rev 5.000% 11/1/21 |
|
|
100,000 |
80,682 |
100,000 |
80,682 |
Williams Cnty ND Sales Tax Rev 5.000% 11/1/26 |
|
|
125,000 |
91,131 |
125,000 |
91,131 |
Williams Cty., ND (Sales Tax Rev.) Radian-IBCC 5.000% 11/1/31 |
250,000 |
203,508 |
|
|
250,000 |
203,508 |
|
|
669,098 |
|
374,597 |
|
1,043,695 |
Pollution (12.5%) |
|
|
|
|
|
|
Mercer Cnty PCR Otter Tail Corp 4.850% 9/1/22 |
|
|
115,000 |
106,255 |
115,000 |
106,255 |
Oliver Cnty PCR Ref Square Butte 5.300% 1/1/27 |
2,095,000 |
1,943,552 |
115,000 |
107,281 |
2,210,000 |
2,050,833 |
|
|
1,943,552 |
|
213,536 |
|
2,157,088 |
School District (3.7%) |
|
|
|
|
|
|
Fargo Public School District #1 4.500% 5/1/21 |
250,000 |
228,430 |
|
|
250,000 |
228,430 |
Fargo ND Pub Sch Dist No. 1 Ltd Tax 5.000% 5/1/23 |
|
|
200,000 |
197,200 |
200,000 |
197,200 |
Hillsboro ND Pub Sch Dist No. 9 4.850% 6/1/19 |
|
|
50,000 |
51,429 |
50,000 |
51,429 |
Mandan Public Schools District # 1 FSA 4.250% 5/1/18 |
100,000 |
103,034 |
|
|
100,000 |
103,034 |
West Fargo ND Pub Sch Dist No. 006 5.000% 5/1/14 |
|
|
50,000 |
51,862 |
50,000 |
51,862 |
|
|
331,464 |
|
300,491 |
|
631,955 |
Single Family Hsg (4.6%) |
|
|
|
|
|
|
ND St Hsg Fin Agy Rev Ser D 5.200% 7/1/22 |
500,000 |
430,455 |
200,000 |
169,544 |
700,000 |
599,999 |
ND (HFA) Hsg. Finance Rev. 5.150% 7/1/18 |
95,000 |
90,468 |
|
|
95,000 |
90,468 |
ND St Hsg Fin Agy Rev Hsg Fin Pg 5.700% 7/1/09 |
|
|
50,000 |
50,000 |
50,000 |
50,000 |
ND St Hsg Fin Agy Rev Hsg Fin Pg 5.800% 7/1/10 |
|
|
55,000 |
55,000 |
55,000 |
55,000 |
|
|
520,923 |
|
274,544 |
|
795,467 |
Utilities (3.3%) |
|
|
|
|
|
|
Minot, ND Wtr & Swr Util Rev Ser D 5.250% 10/1/22 |
|
|
200,000 |
200,182 |
200,000 |
200,182 |
Minot, ND Water & Sewer Util. Rev 5.375% 10/1/23 |
250,000 |
255,043 |
|
|
250,000 |
255,043 |
South Centrl Reg Wtr Dist Burleigh 5.000% 10/1/23 |
|
|
150,000 |
121,743 |
150,000 |
121,743 |
|
|
255,043 |
|
321,925 |
|
576,968 |
Water (3.9%) |
|
|
|
|
|
|
ND St Wtr Commn Rev Wtr Dev & Mgmt 5.500% 8/1/10 |
|
|
50,000 |
52,431 |
50,000 |
52,431 |
ND St Wtr Commn Rev Wtr Dev & Mgmt 5.000% 8/1/25 |
500,000 |
503,294 |
125,000 |
122,030 |
625,000 |
625,324 |
|
|
503,294 |
|
174,461 |
|
677,755 |
|
|
|
|
|
|
|
Total Municipal Bonds (Cost $12,501,917, $5,245,924, and $17,747,841 respectively) |
|
11,791,410 |
|
4,847,235 |
|
16,638,645 |
|
|
|
|
|
|
|
Short-Term Securities (3.5%) |
|
|
|
|
|
|
Federated Municipal Obligations Fund #852 |
|
|
160,000 |
160,000 |
160,000 |
160,000 |
Wells Fargo Advantage National Tax-Free Money Market |
445,043 |
445,043 |
|
|
445,043 |
445,043 |
Total Short-Term Securities (Cost $445,043, $160,000, and $605,043 respectively) |
|
445,043 |
|
160,000 |
|
605,043 |
|
|
|
|
|
|
|
Total Investment in Securities (Cost $12,946,960, $5,405,924, and $18,352,884) |
|
$12,236,453 |
|
$5,007,235 |
|
$17,243,688 |
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels:
|
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 risks, etc.) |
|
Level 3— |
significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) |
The following is a summary of the inputs used to value the Fund's investments as of December 31, 2008:
|
|
Investment in Securities |
||
|
Valuation Inputs |
ND Tax-Free Fund |
Viking Tax-Free Fund for North Dakota |
Combined Viking
Fund |
|
Level 1—Quoted prices |
$445,043 |
$160,000 |
$605,043 |
|
Level 2—Other significant observable inputs |
11,791,410 |
4,847,235 |
16,638,645 |
|
Level 3—Significant unobservable inputs |
0 |
0 |
0 |
|
Total |
$12,236,453 |
$5,007,235 |
$17,243,688 |
FINANCIAL
STATEMENTS
PRO FORMA
ND TAX-FREE FUND, INC. and VIKING TAX-FREE FUND FOR NORTH DAKOTA
December 31, 2008 (unaudited)
Statement of Assets and Liabilities December 31, 2008
|
|
|
|
ND Tax-Free Fund (Actual) |
|
Viking Tax-Free Fund of North Dakota (Actual) |
|
Pro Forma Adjustments |
|
Combined Viking
Fund |
ASSETS |
|
|
|
|
|
|
|
|
||
|
Investments in securities, at value (cost: $12,946,960, $5,405,924, and $18,352,884, respectively) |
$ |
12,236,453 |
$ |
5,007,235 |
$ |
0 |
$ |
17,243,688 |
|
|
Cash |
|
175 |
|
5,103 |
|
0 |
|
5,278 |
|
|
Interest & dividends receivable |
|
170,396 |
|
69,364 |
|
0 |
|
239,760 |
|
|
Receivable due from manager |
|
2,426 |
|
0 |
|
0 |
|
2,426 |
|
|
Prepaid expenses |
|
259 |
|
841 |
|
0 |
|
1,100 |
|
|
Other receivables |
|
0 |
|
116 |
|
0 |
|
116 |
|
|
|
Total assets |
$ |
12,409,709 |
$ |
5,082,659 |
$ |
0 |
$ |
17,492,368 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
||
|
Security purchases payable |
$ |
102,021 |
$ |
0 |
$ |
0 |
$ |
102,021 |
|
|
Dividends payable |
|
42,118 |
|
21,016 |
|
0 |
|
63,134 |
|
|
Payable to affiliates |
|
9,853 |
|
0 |
|
0 |
|
9,853 |
|
|
Other accounts payable and accrued expenses |
|
10,164 |
|
7,325 |
|
0 |
|
17,489 |
|
|
|
Total liabilities |
$ |
164,156 |
$ |
28,341 |
$ |
0 |
$ |
192,497 |
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS |
$ |
12,245,553 |
$ |
5,054,318 |
$ |
0 |
$ |
17,299,871 |
||
|
|
|
|
|
|
|
|
|
|
|
Net assets are represented by: |
|
|
|
|
|
|
|
|
||
|
Capital stock outstanding, at par |
$ |
1,750 |
$ |
0 |
$ |
(1,750) |
$ |
0 |
|
|
Additional paid-in capital |
|
18,126,981 |
|
5,578,869 |
|
1,750 |
|
23,707,600 |
|
|
Accumulated undistributed net realized gain (loss) on investments and futures |
|
(5,173,199) |
|
(125,862) |
|
0 |
|
(5,299,061) |
|
|
Accumulated undistributed net investment income (loss) |
|
528 |
|
0 |
|
0 |
|
528 |
|
|
Unrealized appreciation (depreciation) on investments |
|
(710,507) |
|
(398,689) |
|
0 |
|
(1,109,196) |
|
NET ASSETS |
$ |
12,245,553 |
$ |
5,054,318 |
$ |
0 |
$ |
17,299,871 |
||
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding |
|
1,749,523 |
|
548,258 |
|
(421,439)1 |
|
1,876,342 |
||
|
|
|
|
|
|
|
|
|
|
|
Net asset value per share |
$ |
7.00 |
$ |
9.22 |
|
|
$ |
9.22 |
||
|
|
|
|
|
|
|
|
|
|
|
Public offering price (based on sales charge of 4.25%, 5.25%, and 5.25% respectively) |
$ |
7.31 |
$ |
9.58 |
|
|
$ |
9.58 |
1 The pro forma statements presume the issuance by the Viking Tax-Free Fund of North Dakota of approximately 1,328,084 shares in exchange for the assets and liabilities of the ND Tax-Free Fund.
Statement of Operations For the year ended December 31, 2008
|
|
|
|
ND Tax-Free Fund (Actual) |
|
Viking Tax-Free Fund of North Dakota (Actual) |
|
Pro Forma Adjustments |
|
Combined Viking Fund (Pro Forma) |
INVESTMENT INCOME |
|
|
|
|
|
|
|
|
||
|
Interest |
$ |
623,631 |
$ |
262,211 |
$ |
0 |
$ |
885,842 |
|
|
Dividends |
|
14,920 |
|
1,856 |
|
0 |
|
16,776 |
|
|
|
Total investment income |
$ |
638,551 |
$ |
264,067 |
$ |
0 |
$ |
902,618 |
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
||
|
Investment advisory fees |
$ |
78,921 |
$ |
26,753 |
$ |
(13,086) (a)(b) |
$ |
92,588 |
|
|
Distribution (12b-1) fees |
|
32,884 |
|
13,377 |
|
0 |
|
46,261 |
|
|
Administrative service fees |
|
24,034 |
|
5,351 |
|
(5,384) (c) |
|
24,001 |
|
|
Transfer agent fees |
|
26,351 |
|
1,688 |
|
8,998(c) |
|
37,037 |
|
|
Accounting service fees |
|
30,610 |
|
2,668 |
|
(18) (c) |
|
33,260 |
|
|
Legal fees |
|
7,875 |
|
3,115 |
|
(4,690) (d) |
|
6,300 |
|
|
Custodian fees |
|
2,375 |
|
3,450 |
|
(1,764) (c) |
|
4,061 |
|
|
Reports to shareholders |
|
1,759 |
|
0 |
|
(259) (d) |
|
1,500 |
|
|
Directors/Trustee fees |
|
2,897 |
|
991 |
|
(612) (d) |
|
3,276 |
|
|
Transfer agent out-of-pockets |
|
2,071 |
|
0 |
|
629 (c) |
|
2,700 |
|
|
Professional fees |
|
11,464 |
|
902 |
|
5,173 (c) |
|
17,539 |
|
|
License, fees, and registrations |
|
135 |
|
126 |
|
(126) (d) |
|
135 |
|
|
Insurance expense |
|
450 |
|
1,372 |
|
(1,232) (d) |
|
590 |
|
|
Audit fees |
|
6,700 |
|
5,011 |
|
(4,611) (c) |
|
7,100 |
|
|
|
Total expenses |
$ |
228,526 |
$ |
64,804 |
$ |
(16,982) |
$ |
276,348 |
|
Less expenses waived or absorbed by the Fund's manager |
|
(87,783) |
|
(19,442) |
|
29,019 |
|
(78,206) |
|
|
|
Total net expenses |
$ |
140,743 |
$ |
45,362 |
$ |
12,037 |
$ |
198,142 |
|
|
|
|
|
|
|
|
|
|
|
NET INVESTMENT INCOME (LOSS) |
$ |
497,808 |
$ |
218,705 |
$ |
(12,037) |
$ |
704,476 |
||
|
|
|
|
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS |
|
|
|
|
|
|
|
|
||
|
Net realized gain (loss) from investment transactions |
$ |
921 |
$ |
(44,995) |
$ |
0 |
$ |
(44,074) |
|
|
Net change in unrealized appreciation (depreciation) of investments |
|
(939,728) |
|
(429,956) |
|
0 |
|
(1,369,684) |
|
|
|
Net realized and unrealized gain (loss) on investments |
$ |
(938,807) |
$ |
(474,951) |
$ |
0 |
$ |
(1,413,758) |
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
$ |
(440,999) |
$ |
(256,246) |
$ |
(12,037) |
$ |
(709,282) |
Pro Forma Adjustments
The pro forma adjustments to the foregoing pro forma combining financial statements consist of:
|
|
(a) |
Reflects the adjustments made to pro forma net expenses as shown on the Pro Forma Combining Statement of Operations and described in notes(c) and (d) below. |
|
|
(b) |
Advisory fee based on an annual rate of .50% of the Combined Fund's average daily net assets. |
|
|
(c) |
The adjustments to the investment advisory fee and distribution fee reflect the increase (decrease) in expenses assuming the Combined Fund operated under the Viking Fund's fee structure for the entire year ended December 31, 2008. The transfer agent fee, accounting service fee and administration fee reflect the anticipation of new service fee schedules of Integrity Fund Services, Inc., which is expected to replace Viking in providing these services. The new schedules for the Combined Fund include a per month base fee of $2,000 and further charges based on asset levels of the Fund whereas the fee schedules of Viking, the current service provider, did not include a base fee and the charges based on asset levels were substantially less. The audit fee was adjusted down at a combined level to reflect the elimination of duplicative costs, but such fee increased in relation to each individual Fund to reflect the quoted fee estimate for 2009 audit work from Brady Martz, the Fund auditor. The custodian fee was adjusted down at a combined level to reflect the elimination of duplicative costs, but such fee increased in relation to each individual Fund to reflect the service fee schedule of Wells Fargo, the custodian bank after the combination. Transfer agent out-of-pocket fees were adjusted up to reflect the schedule of Integrity Fund Services, Inc. as Viking, the current Viking Fund service provider, did not include these in its fee schedule. Professional fees were adjusted up to reflect an increase in more Fund resource expenses being utilized under Corridor Investors, LLC. |
|
|
(d) |
Reductions in the Combined Fund's reports to shareholders expenses, trustees' fees, license and registration fees, insurance expense, and legal fees reflect the elimination of duplicative costs. In addition, there were higher than normal legal fees for the Integrity Fund due to the increased use of legal counsel in 2008. The Combined Fund column reflects an anticipation that these fees will normalize after the combination. Further, there will be more funds under management after the transaction takes place; therefore legal costs may be spread across more funds. |
NOTES
TO PRO FORMA COMBINING FINANCIAL STATEMENTS
ND TAX-FREE FUND, INC. and VIKING TAX-FREE FUND FOR NORTH DAKOTA
Year Ended December 31, 2008 (unaudited)
Description of the Fund
The Viking Tax-Free Fund for North Dakota ("Viking Fund"), a series of Viking Mutual Funds, a Delaware statutory trust, is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified investment company.
Basis of Combination
The Reorganization to which the forgoing pro forma financial statements relate involves the transfer of all assets and liabilities of the ND Tax-Free Fund, Inc. ("ND Fund") to the Viking Fund, in exchange for shares of the Viking Fund, and the pro rata distribution, on the closing date, of such shares of the Viking Fund to the shareholders of the ND Fund as provided in the plan. The Funds will not be responsible for any of the expenses associated with the Reorganization. Such expenses will be borne by Corridor Investors, LLC and Integrity Mutual Funds, Inc.
The foregoing unaudited pro forma financial statements consist of: (i) Pro Forma Combining Statements of Assets and Liabilities as of December 31, 2008, assuming the Reorganization had been consummated on that date; (ii) Pro Forma Combining Statement of Operations for the year ended December 31, 1998, giving effect to the Reorganization as if it had been consummated on January 1, 2008; and (iii) Pro Forma Combining Schedule of Investments as of December 31, 2008 assuming the Reorganization had been consummated on that date.
Portfolio Valuation
Because of the similarities in the investment objectives and policies of the ND Fund and the Viking Fund, and the fact that all of the portfolio securities of the ND Fund are eligible for investment by the Viking Fund, it is not anticipated that any securities held by either Fund will be sold before or after the Reorganization, other than in the ordinary course of business.
Accordingly, the presentation of the Pro Forma Combining Schedule of Investments assumes that the investment manager will not sell any of the securities in connection with the Reorganization. Therefore, no adjustment column is presented.
Capital Shares
The pro forma combining net asset value per share assumes the issuance of Viking Fund shares to ND Fund shareholders in connection with the proposed Reorganization. The number of shares assumed to be issued is equal to the net asset value per share of the ND Fund divided by the net asset value per share of the Viking Fund as of December 31, 2008. The pro forma number of shares outstanding for the combined entity consists of the following at December 31, 2008.
Class of Shares |
Shares of Viking
Fund |
Additional Shares Assumed Issued with Merger |
Total Shares Outstanding Post-Combination |
Class A |
548,258 |
1,328,084 |
1,876,342 |
The share reconciliation represents a decrease in the number of outstanding shares of the Combined Fund because the net asset value per share of the Viking Fund is higher than that of the ND Fund.
Federal Income Taxes
Each Fund has elected to be taxed as a "regulated investment company" under the Internal Revenue Code. After the acquisition, the Viking Fund intends to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of taxable income sufficient to relieve it from all, or substantially all, Federal income taxes.
The identified cost of investments for the funds is substantially the same for both financial accounting and Federal income tax purposes. The tax cost of investments will remain unchanged for the combined Fund.
SCHEDULE
OF INVESTMENTS
PRO FORMA
MONTANA TAX-FREE FUND, INC. and VIKING TAX-FREE FUND FOR MONTANA
December 31, 2008 (unaudited)
|
Target Fund |
Acquiring Fund |
Pro Forma Combined Viking Fund |
|||
|
Quantity |
Market Value |
Quantity |
Market Value |
Quantity |
Market Value |
Municipal Bonds (94.4%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Development (0.4%) |
|
|
|
|
|
|
Missoula Tax Increment Urban Renwal 5.125% 7/1/26 |
|
|
125,000 |
$108,367 |
125,000 |
$108,367 |
|
|
|
|
|
|
|
Facilities (3.4%) |
|
|
|
|
|
|
MT Fac. Fin. Auth. Series A (Cmty, Counseling & Correctional Svcs.) CIFG 4.500% 10/1/22 |
470,000 |
$415,767 |
|
|
470,000 |
415,767 |
MT Fac Fin Auth Boyd Andrew Cmnty 4.375% 10/1/20 |
|
|
285,000 |
275,153 |
285,000 |
275,153 |
MT Fac. Fin. Auth. Series B (Boyd Andrew Prj.) CIFG 4.500% 10/1/22 |
215,000 |
190,191 |
|
|
215,000 |
190,191 |
Puerto Rico Comwlth Infra Fing Auth 5.250% 7/1/10 |
|
|
100,000 |
100,928 |
100,000 |
100,928 |
|
|
605,958 |
|
376,081 |
|
982,039 |
General Obligation (4.5%) |
|
|
|
|
|
|
Billings MT Spl Impt Dist No 1385 7.000% 7/1/17 |
|
|
255,000 |
253,753 |
255,000 |
253,753 |
Bozeman MT Ser A 4.950% 7/1/20 |
|
|
170,000 |
179,719 |
170,000 |
179,719 |
MT State (Water Pollution Control) Revolving Fund Program G.O. 5.600% 7/15/20 |
170,000 |
176,516 |
|
|
170,000 |
176,516 |
MT State (Water Pollution Control) Revolving Fund Program G.O. 5.600% 7/15/20 |
240,000 |
249,199 |
|
|
240,000 |
249,199 |
Puerto Rico Commonwealth G.O. 6.000% 7/1/27 |
|
|
500,000 |
433,530 |
500,000 |
433,530 |
|
|
425,715 |
|
867,002 |
|
1,292,717 |
Higher Education (10.2%) |
|
|
|
|
|
|
MT State Board of Regents Higher Educ. (MT St. Univ.) Rev. Ref. AMBAC 5.000% 11/15/21 |
750,000 |
755,460 |
|
|
750,000 |
755,460 |
MT St Brd Regents Hghr Ed Rev MSU 5.000% 11/15/18 |
|
|
260,000 |
278,788 |
260,000 |
278,788 |
MT State Board of Regents (University of MT) MBIA 6.000% 5/15/19 |
230,000 |
243,936 |
|
|
230,000 |
243,936 |
MT State Board of Regents (University of MT) MBIA 5.750% 5/15/24 |
275,000 |
279,064 |
135,000 |
139,686 |
410,000 |
418,750 |
MT State Board of Regents Higher Educ. (MT. St. Univ.) Fac. Rev. AMBAC 4.500% 11/15/25 |
770,000 |
701,616 |
|
|
770,000 |
701,616 |
Univ of MT Univ Revs Facs Acq & Imp 5.000% 11/15/17 |
|
|
140,000 |
150,415 |
140,000 |
150,415 |
Univ of MT Univ Revs Higher Ed Facs 5.375% 5/15/19 |
|
|
370,000 |
408,769 |
370,000 |
408,769 |
|
|
1,980,076 |
|
977,658 |
|
2,957,734 |
Housing (2.8%) |
|
|
|
|
|
|
MT St Brd Hsg AMT Sngl Fam Mtg 4.750% 12/1/27 |
|
|
105,000 |
81,984 |
105,000 |
81,984 |
MT Board of Hsg., Single Family Program 5.050% 12/1/24 |
150,000 |
132,614 |
|
|
150,000 |
132,614 |
MT Board of Hsg., Single Family Program 5.300% 12/1/29 |
150,000 |
128,340 |
500,000 |
461,775 |
650,000 |
590,115 |
|
|
260,954 |
|
543,759 |
|
804,713 |
Medical (39.9%) |
|
|
|
|
|
|
MT Fin. Auth. Hlth. Care Rev. Master Loan Proj. - Cmnty. Med. Ctr. 5.100% 12/1/18 |
250,000 |
254,860 |
|
|
250,000 |
254,860 |
MT Fin. Auth. Hlth. Care Rev. Master Loan Proj. - Cmnty. Med. Ctr. 5.125% 12/1/19 |
250,000 |
253,940 |
|
|
250,000 |
253,940 |
MT Fin. Auth. Hlth. Care Rev. Master Loan Proj. - Cmnty. Med. Ctr. 5.150% 12/1/20 |
250,000 |
252,215 |
|
|
250,000 |
252,215 |
MT Fin. Auth. Hlth. Care Rev. Master Loan Proj. - Cmnty. Med. Ctr. 5.200% 12/1/21 |
250,000 |
252,085 |
145,000 |
143,592 |
395,000 |
395,677 |
MT Fac Fin Auth Developmental Ctr 4.500% 6/1/16 |
|
|
250,000 |
257,355 |
250,000 |
257,355 |
MT Fac Fin Auth Developmental Ctr 4.750% 6/1/19 |
|
|
170,000 |
170,076 |
170,000 |
170,076 |
MT Fac Fin Auth Rev Childrens Home 4.550% 1/1/17 |
|
|
250,000 |
256,425 |
250,000 |
256,425 |
MT Fac Fin Auth Hlth Master Ln Pg 4.500% 5/1/27 |
|
|
250,000 |
219,370 |
250,000 |
219,370 |
MT Fac. Fin. Auth. (St. Luke Health) 4.500% 1/1/17 |
120,000 |
121,524 |
|
|
120,000 |
121,524 |
MT Fac. Fin. Auth. (St. Luke Health) 5.000% 1/1/22 |
500,000 |
477,425 |
100,000 |
98,168 |
600,000 |
575,593 |
MT Fac Fin Auth Glendive Med Pj 4.500% 7/1/23 |
|
|
250,000 |
228,327 |
250,000 |
228,327 |
MT Facs. Fin. Auth. (St. Peters Hospital) 5.000% 6/1/28 |
250,000 |
211,370 |
|
|
250,000 |
211,370 |
MT Fac Fin Auth Prov Hlth & Svce 5.000% 10/1/19 |
|
|
175,000 |
182,310 |
175,000 |
182,310 |
MT Fin. Auth. Rev. (Providence Health) 5.000% 10/1/22 |
1,500,000 |
1,468,800 |
|
|
1,500,000 |
1,468,800 |
MT Fac Fin Auth Rev Benefis 4.750% 1/1/24 |
|
|
150,000 |
139,347 |
150,000 |
139,347 |
MT Fac Fin Auth Rev Benefis Hlth 4.750% 1/1/25 |
150,000 |
132,861 |
125,000 |
115,115 |
275,000 |
247,976 |
MT Hlth Facs Auth Sist. of Charity 5.125% 12/1/18 |
|
|
100,000 |
101,384 |
100,000 |
101,384 |
MT Hlth Facs Auth Rev Sist. Charity 5.000% 12/1/24 |
|
|
515,000 |
510,525 |
515,000 |
510,525 |
MT St Hlth Facs Auth Rev Hillcrest 6.900% 6/1/10 |
|
|
30,000 |
32,213 |
30,000 |
32,213 |
MT St Hlth Facs Auth Rev Hillcrest 7.250% 6/1/10 |
|
|
35,000 |
37,315 |
35,000 |
37,315 |
MT St Hlth Facs Auth Rev Cmnty Med 6.375% 6/1/18 |
|
|
370,000 |
351,389 |
370,000 |
351,389 |
MT Hlth. Facs. Auth. (State Hospital) Hlth. Care Rev. AMBAC 5.000% 6/1/22 |
600,000 |
494,580 |
|
|
600,000 |
494,580 |
MT Hlth. Facs. Auth. (Big Horn Hosp. - Hardin) Rev. 5.100% 2/1/18 |
300,000 |
296,985 |
|
|
300,000 |
296,985 |
MT Hlth. Facs. Auth. (Lewis & Clark Nursing Home) Rev. 5.100% 2/1/18 |
350,000 |
346,482 |
|
|
350,000 |
346,482 |
MT Hlth. Facs. Auth. (Lewis & Clark Office Proj.) Rev. 5.100% 2/1/18 |
150,000 |
148,493 |
|
|
150,000 |
148,493 |
MT Hlth. Facs. Auth. (Marcus Daly Memorial) Rev. 6.000% 8/1/20 |
1,400,000 |
1,423,744 |
|
|
1,400,000 |
1,423,744 |
MT Hlth. Facs. Auth. (Bozeman Deaconess) Rev. Ref. 5.000% 6/1/18 |
1,000,000 |
979,640 |
|
|
1,000,000 |
979,640 |
MT Hlth. Facs. Auth. (Alternatives Inc.) Prerelease Ctr. Rev. 5.600% 10/1/17 |
750,000 |
750,038 |
|
|
750,000 |
750,038 |
MT Hlth. Facs. Auth. (Boyd Andrew Prj.) Pre Release Center 6.300% 10/1/20 |
795,000 |
812,967 |
|
|
795,000 |
812,967 |
|
|
8,678,009 |
|
2,842,911 |
|
11,520,920 |
Multifamily Hsg (8.2%) |
|
|
|
|
|
|
Billings, MT (West Park Village) Multifamily Hsg. Devl. Ref. Rev. GNMA 5.550% 12/1/32 |
2,500,000 |
2,180,125 |
|
|
2,500,000 |
2,180,125 |
MT Board of Hsg. Multifamily Mrtge. FHA 6.150% 8/1/26 |
200,000 |
191,220 |
|
|
200,000 |
191,220 |
|
|
2,371,345 |
|
|
|
2,371,345 |
Other (4.6%) |
|
|
|
|
|
|
Bozeman MT Downtown Impt Dist 4.950% 7/1/28 |
|
|
200,000 |
136,744 |
200,000 |
136,744 |
Puerto Rico Childrens Tr Fd Tob 6.000% 7/1/10 |
|
|
195,000 |
206,809 |
195,000 |
206,809 |
Missoula MT Spl Assmnt Pooled Spl 4.750% 7/1/27 |
|
|
200,000 |
150,186 |
200,000 |
150,186 |
Missoula MT Spl Impt Dists No 540 4.600% 7/1/24 |
|
|
100,000 |
77,843 |
100,000 |
77,843 |
Missoula MT Spl Impt Dists No 540 4.600% 7/1/25 |
|
|
105,000 |
80,495 |
105,000 |
80,495 |
MT Fac Fin Auth Prov Svcs 5.000% 12/1/12 |
|
|
270,000 |
292,027 |
270,000 |
292,027 |
MT Fac Fin Auth Rev Prov Svcs 4.800% 12/1/12 |
|
|
105,000 |
113,010 |
105,000 |
113,010 |
Puerto Rico Mun Fin Agy Ser A 5.500% 8/1/09 |
|
|
250,000 |
257,730 |
250,000 |
257,730 |
|
|
|
|
1,314,844 |
|
1,314,844 |
Pollution (4.7%) |
|
|
|
|
|
|
Forsyth MT Poll Ctl Rev Ref Puget 5.000% 3/1/31 |
|
|
355,000 |
241,567 |
355,000 |
241,567 |
Forsyth MT Poll Ctl Rev Nothwestern 4.650% 8/1/23 |
650,000 |
490,639 |
750,000 |
613,980 |
1,400,000 |
1,104,619 |
|
|
490,639 |
|
855,547 |
|
1,346,186 |
School District (0.8%) |
|
|
|
|
|
|
Missoula Cnty Sch Dist # 4 Hellgate 4.250% 5/15/24 |
|
|
235,000 |
216,588 |
235,000 |
216,588 |
|
|
|
|
|
|
|
Single Family Hsg (3.9%) |
|
|
|
|
|
|
MT St Brd Hsg Singl Fam Mtg Ser A-2 5.750% 6/1/30 |
|
|
55,000 |
47,891 |
55,000 |
47,891 |
MT St Brd Hsg Sngle Fam Ser A-2 5.500% 12/1/20 |
|
|
75,000 |
70,078 |
75,000 |
70,078 |
MT St Brd Hsg Sngle Fam Ser A-2 5.600% 12/1/23 |
|
|
660,000 |
601,062 |
660,000 |
601,062 |
MT St Brd Hsg Singl Fam Mtg Ser A-2 5.200% 12/1/22 |
|
|
105,000 |
93,581 |
105,000 |
93,581 |
MT St Brd Hsg Singl Fam Mtg Ser B-2 4.850% 12/1/15 |
|
|
70,000 |
69,087 |
70,000 |
69,087 |
MT St Brd Hsg Singl Fam Mtg Ser B-2 5.550% 6/1/33 |
|
|
125,000 |
104,155 |
125,000 |
104,155 |
MT St Brd Hsg Single Fam Mtg Ser C2 4.850% 12/1/26 |
|
|
190,000 |
152,534 |
190,000 |
152,534 |
|
|
|
|
1,138,388 |
|
1,138,388 |
Student Loan (9.8%) |
|
|
|
|
|
|
MT Hgr. Educ. Student Assistance Corp. Rev. 5.500% 12/1/31 |
1,685,000 |
1,380,672 |
|
|
1,685,000 |
1,380,672 |
MT Hgr. Educ. Student Assistance Corp. Rev. 6.400% 12/1/32 |
1,000,000 |
919,100 |
575,000 |
521,657 |
1,575,000 |
1,440,757 |
|
|
2,299,772 |
|
521,657 |
|
2,821,429 |
Transportation (1.3%) |
|
|
|
|
|
|
MT St Dept Transn Rev Grant Antic 5.000% 6/1/22 |
|
|
350,000 |
366,135 |
350,000 |
366,135 |
|
|
|
|
|
|
|
Total Municipal Bonds (Cost $18,408,024, $10,897,713, and $29,305,737 respectively) |
|
17,112,468 |
|
10,128,937 |
|
27,241,405 |
|
|
|
|
|
|
|
Short-Term Securities (4.5%) |
|
|
|
|
|
|
Federated Municipal Obligations Fund #852 |
|
|
270,000 |
270,000 |
270,000 |
270,000 |
Wells Fargo Advantage National Tax-Free Money Market |
1,040,417 |
1,040,417 |
|
|
1,040,417 |
1,040,417 |
Total Short-Term Securities (Cost $1,040,417, $270,000, and $1,310,417 respectively) |
|
1,040,417 |
|
270,000 |
|
1,310,417 |
|
|
|
|
|
|
|
Total Investment in Securities (Cost $19,448,441, $11,167,713, and $30,616,154) |
|
$18,152,885 |
|
$10,398,937 |
|
$28,551,822 |
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels:
|
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 risks, etc.) |
|
Level 3— |
significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) |
The following is a summary of the inputs used to value the Fund's investments as of December 31, 2008:
|
|
Investment in Securities |
||
|
Valuation Inputs |
Montana Tax-Free Fund |
Viking Tax-Free Fund of Montana |
Combined Viking
Fund |
|
Level 1—Quoted prices |
$1,040,417 |
$270,000 |
$1,310,417 |
|
Level 2—Other significant observable inputs |
17,112,468 |
10,128,937 |
27,241,405 |
|
Level 3—Significant unobservable inputs |
0 |
0 |
0 |
|
Total |
$18,152,885 |
$10,398,937 |
$28,551,822 |
FINANCIAL
STATEMENTS
PRO FORMA
MONTANA TAX-FREE FUND, INC. and VIKING TAX-FREE FUND FOR MONTANA
December 31, 2008 (unaudited)
Statement of Assets and Liabilities December 31, 2008
|
|
|
|
Montana Tax-Free Fund (Actual) |
|
Viking Tax-Free Fund of Montana (Actual) |
|
Pro Forma Adjustments |
|
Combined Viking
Fund |
ASSETS |
|
|
|
|
|
|
|
|
||
|
Investments in securities, at value (cost: $19,448,441, $11,167,713, and $30,616,154, respectively) |
$ |
18,152,885 |
$ |
10,398,937 |
$ |
0 |
$ |
28,551,822 |
|
|
Cash |
|
4 |
|
14,235 |
|
0 |
|
14,239 |
|
|
Interest & dividends receivable |
|
200,521 |
|
132,021 |
|
0 |
|
332,542 |
|
|
Receivable due from manager |
|
2,697 |
|
0 |
|
0 |
|
2,697 |
|
|
Prepaid expenses |
|
772 |
|
2,246 |
|
0 |
|
3,018 |
|
|
Other receivables |
|
8,000 |
|
97,350 |
|
0 |
|
105,350 |
|
|
|
Total assets |
$ |
18,364,879 |
$ |
10,644,789 |
$ |
0 |
$ |
29,009,668 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
||
|
Security purchases payable |
$ |
0 |
$ |
0 |
$ |
0 |
$ |
0 |
|
|
Dividends payable |
|
0 |
|
44,057 |
|
0 |
|
44,057 |
|
|
Payable to affiliates |
|
15,965 |
|
0 |
|
0 |
|
15,965 |
|
|
Other accounts payable and accrued expenses |
|
78,379 |
|
15,214 |
|
0 |
|
93,593 |
|
|
|
Total liabilities |
$ |
94,344 |
$ |
59,271 |
$ |
0 |
$ |
153,615 |
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS |
$ |
18,270,535 |
$ |
10,585,518 |
$ |
0 |
$ |
28,856,053 |
||
|
|
|
|
|
|
|
|
|
|
|
Net assets are represented by: |
|
|
|
|
|
|
|
|
||
|
Capital stock outstanding, at par |
$ |
2,356 |
$ |
0 |
$ |
(2,356) |
$ |
0 |
|
|
Additional paid-in capital |
|
27,264,751 |
|
11,573,836 |
|
2,356 |
|
38,840,943 |
|
|
Accumulated undistributed net realized gain (loss) on investments and futures |
|
(7,701,280) |
|
0 |
|
0 |
|
(7,701,280) |
|
|
Accumulated undistributed net investment income (loss) |
|
264 |
|
(219,542) |
|
0 |
|
(219,278) |
|
|
Unrealized appreciation (depreciation) on investments |
|
(1,295,556) |
|
(768,776) |
|
0 |
|
(2,064,332) |
|
NET ASSETS |
$ |
18,270,535 |
$ |
10,585,518 |
$ |
0 |
$ |
28,856,053 |
||
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding A shares |
|
1,829,402 |
|
1,160,502 |
|
53,9831 |
|
3,043,887 |
||
Shares outstanding B shares |
|
526,431 |
|
0 |
|
(526,431)1 |
|
0 |
||
|
|
|
|
|
|
|
|
|
|
|
Net asset value per share A shares |
$ |
7.76 |
$ |
9.48 |
|
0 |
$ |
9.48 |
||
Net asset value per share B shares |
$ |
7.74 |
$ |
N/A |
|
N/A |
$ |
N/A |
||
|
|
|
|
|
|
|
|
|
|
|
Public offering price (based on sales charge of 4.25%, 3.75%, and 3.75% respectively) |
$ |
8.10 |
$ |
9.85 |
|
0 |
$ |
9.85 |
1 The pro forma statements presume the issuance by the Viking Tax-Free Fund of Montana of approximately 1,883,385 shares in exchange for the assets and liabilities of the Montana Tax-Free Fund.
Statement of Operations For the year ended December 31, 2008
|
|
|
|
Montana Tax-Free Fund (Actual) |
|
Viking Tax-Free Fund of Montana (Actual) |
|
Pro Forma Adjustments |
|
Combined Viking
Fund |
INVESTMENT INCOME |
|
|
|
|
|
|
|
|
||
|
Interest |
$ |
978,350 |
$ |
500,615 |
$ |
0 |
$ |
1,478,965 |
|
|
Dividends |
|
12,124 |
|
6,293 |
|
0 |
|
18,417 |
|
|
|
Total investment income |
$ |
990,474 |
$ |
506,908 |
$ |
0 |
$ |
1,497,382 |
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
||
|
Investment advisory fees |
$ |
115,418 |
$ |
52,090 |
$ |
(19,133)(a)(b) |
$ |
148,375 |
|
|
Distribution (12b-1) fees A Shares |
|
36,812 |
|
26,019 |
|
11,358(c) |
|
74,189 |
|
|
Distribution (12b-1) fees B Shares |
|
33,705 |
|
0 |
|
(33,705) (c) |
|
0 |
|
|
Administrative service fees |
|
30,347 |
|
10,413 |
|
(3,667)(d) |
|
37,093 |
|
|
Transfer agent fees |
|
44,473 |
|
3,269 |
|
11,608(d) |
|
59,350 |
|
|
Accounting service fees |
|
39,618 |
|
5,249 |
|
(6,030)(d) |
|
38,837 |
|
|
Legal fees |
|
11,587 |
|
3,115 |
|
(5,857)(e) |
|
8,845 |
|
|
Custodian fees |
|
3,820 |
|
3,450 |
|
(2,928)(d) |
|
4,342 |
|
|
Reports to shareholders |
|
2,351 |
|
0 |
|
(2,099)(e) |
|
252 |
|
|
Directors/Trustee fees |
|
3,531 |
|
991 |
|
(375)(e) |
|
4,147 |
|
|
Transfer agent out-of-pockets |
|
1,310 |
|
0 |
|
1,051(d) |
|
2,361 |
|
|
Professional fees |
|
16,449 |
|
902 |
|
8,310(d) |
|
25,661 |
|
|
License, fees, and registrations |
|
1,018 |
|
1,091 |
|
(1,089)(e) |
|
1,020 |
|
|
Insurance expense |
|
655 |
|
2,482 |
|
(2,287)(e) |
|
850 |
|
|
Audit fees |
|
6,700 |
|
5,008 |
|
(4,608)(d) |
|
7,100 |
|
|
|
Total expenses |
$ |
347,794 |
$ |
114,079 |
$ |
(49,451) |
$ |
412,422 |
|
Less expenses waived or absorbed by the Fund's manager |
|
(119,682) |
|
(25,855) |
|
50,637 |
|
(94,900) |
|
|
|
Total net expenses |
$ |
228,112 |
$ |
88,224 |
$ |
1,186 |
$ |
317,522 |
|
|
|
|
|
|
|
|
|
|
|
NET INVESTMENT INCOME (LOSS) |
$ |
762,362 |
$ |
418,684 |
$ |
(1,186) |
$ |
1,179,860 |
||
|
|
|
|
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS |
|
|
|
|
|
|
|
|
||
|
Net realized gain (loss) from investment transactions |
$ |
(55,104) |
$ |
(72,824) |
$ |
0 |
$ |
(127,928) |
|
|
Net change in unrealized appreciation (depreciation) of investments |
|
(1,694,361) |
|
(856,868) |
|
0 |
|
(2,551,229) |
|
|
|
Net realized and unrealized gain (loss) on investments |
$ |
(1,749,465) |
$ |
(929,692) |
$ |
0 |
$ |
(2,679,157) |
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
$ |
(987,103) |
$ |
(511,008) |
$ |
(1,186) |
$ |
(1,499,297) |
Pro Forma Adjustments
The pro forma adjustments to the foregoing pro forma combining financial statements consist of:
|
|
(a) |
Reflects the adjustments made to pro forma net expenses as shown on the Pro Forma Combining Statement of Operations and described in notes (d) and (e) below. |
|
|
(b) |
Advisory fee based on an annual rate of .50% of the Combined Fund's average daily net assets. |
|
|
(c) |
Distribution fee based on an annual rate of .25 of 1% of the Integrity Fund's average daily net assets attributable to Class A shares. B shares will no longer be offered after the transaction. |
|
|
(d) |
The adjustments to the investment advisory fee, and distribution fee reflect the increase (decrease) in expenses assuming the Combined Fund operated under the Viking Fund's fee structure for the entire year ended December 31, 2008. The transfer agent fee, accounting service fee and administration fee reflect the anticipated new service fee schedules of Integrity Fund Services, Inc., which is expected to replace Viking in providing these services. The new schedules for the Combined Fund include a per month base fee of $2,000 and further charges based on asset levels of the Fund whereas the fee schedules of Viking, the current service provider, did not include a base fee and the charges based on asset levels were substantially less. The audit fee was adjusted down at a combined level to reflect the elimination of duplicative costs, but such fee increased in relation to each individual Fund to reflect the quoted fee estimate for 2009 audit work from Brady Martz, the Fund auditor. The custodian fee was adjusted down at a combined level to reflect the elimination of duplicative costs, but such fee increased in relation to each individual Fund to reflect the service fee schedule of Wells Fargo, the custodian bank after the combination. Transfer agent out-of-pocket fees were adjusted up to reflect the schedule of Integrity Fund Services, Inc. as Viking, the current Viking Fund service provider, did not include these in its fee schedule. Professional fees were adjusted up to reflect an increase in more Fund resource expenses being utilized under Corridor Investors, LLC. |
|
|
(e) |
Reductions in the Combined Fund's reports to shareholders expenses, trustees' fees, license and registration fees, insurance expense, and legal fees reflect the elimination of duplicative costs. The reports to shareholders Combined Fund column reflects an adjustment for an over accrual in 2008 by the Integrity Fund. In addition, there were higher than normal legal fees for the Integrity Fund due to the increased use of legal counsel in 2008. The Combined Fund column reflects an anticipation that these fees will normalize after the combination. Further, there will be more funds under management after the transaction takes place; therefore legal costs may be spread across more funds. |
NOTES
TO PRO FORMA COMBINING FINANCIAL STATEMENTS
MONTANA TAX-FREE FUND, INC. and VIKING TAX-FREE FUND FOR MONTANA
Year Ended December 31, 2008 (unaudited)
Summary of Pro Forma Financial Statements and Assumptions
Description of the Fund
The Viking Tax-Free Fund for Montana ("Viking Fund"), a series of Viking Mutual Funds, a Delaware statutory trust, is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified investment company.
Basis of Combination
The Reorganization to which the forgoing pro forma financial statements relate involves the transfer of all assets and liabilities of the Montana Tax-Free Fund, Inc. ("Montana Fund") to the Viking Fund, in exchange for shares of the Viking Fund, and the pro rata distribution, on the closing date, of such shares of the Viking Fund to the shareholders of the Montana Fund as provided in the plan. The Funds will not be responsible for any of the expenses associated with the Reorganization. Such expenses will be borne by Corridor Investors, LLC and Integrity Mutual Funds, Inc.
The foregoing unaudited pro forma financial statements consist of: (i) Pro Forma Combining Statements of Assets and Liabilities as of December 31, 2008, assuming the Reorganization had been consummated on that date; (ii) Pro Forma Combining Statement of Operations for the year ended December 31, 1998, giving effect to the Reorganization as if it had been consummated on January 1, 2008; and (iii) Pro Forma Combining Schedule of Investments as of December 31, 2008 assuming the Reorganization had been consummated on that date.
Portfolio Valuation
Because of the similarities in the investment objectives and policies of the Montana Fund and the Viking Fund, and the fact that all of the portfolio securities of the Montana Fund are eligible for investment by the Viking Fund, it is not anticipated that any securities held by either Fund will be sold before or after the Reorganization, other than in the ordinary course of business.
Accordingly, the presentation of the Pro Forma Combining Schedule of Investments assumes that the investment manager will not sell any of the securities in connection with the Reorganization. Therefore, no adjustment column is presented.
Capital Shares
The pro forma combining net asset value per share assumes the issuance of Viking Fund shares to Montana Fund shareholders in connection with the proposed Reorganization. The number of shares assumed to be issued is equal to the net asset value per share of the Montana Fund divided by the net asset value per share of the Viking Fund as of December 31, 2008. The pro forma number of shares outstanding for the combined entity consists of the following at December 31, 2008.
Class of Shares |
Shares of Viking
Fund |
Additional Shares Assumed Issued with Merger |
Total Shares
Outstanding |
Class A |
1,160,502 |
1,883,385 |
3,043,887 |
The share reconciliation represents a decrease in the number of outstanding shares of the Combined Fund because the net asset value per share of the Viking Fund is higher than that of the Montana Fund.
Federal Income Taxes
Each Fund has elected to be taxed as a "regulated investment company" under the Internal Revenue Code. After the acquisition, the Viking Fund intends to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of taxable income sufficient to relieve it from all, or substantially all, Federal income taxes.
The identified cost of investments for the funds is substantially the same for both financial accounting and Federal income tax purposes. The tax cost of investments will remain unchanged for the combined Fund.
PART C
Item 15. |
Indemnification |
|||||
The response to this item is incorporated by reference to Item 25 of Part C of Post-Effective Amendment No. 13 to the Registrant's Registration Statement on Form N-1A filed with the Commission on April 30, 2008. |
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(c) |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed on behalf of the registrant, in the City of Minot, and the State of North Dakota on the 18th day of May 2009.
VIKING MUTUAL FUNDS
By |
/s/ Shannon D. Radke |
Shannon D. Radke |
|
President, Treasurer, Trustee |
As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the date indicated.
Signature |
Title |
Date |
|
|
|
/s/ Mike Timm* |
Trustee |
May 18, 2009 |
|
|
|
/s/ Peter C.
Zimmerman* |
Trustee
|
May 18, 2009 |
|
|
|
/s/Shannon D. Radke |
President, Treasurer, Trustee |
May 18, 2009 |
*Signed pursuant to powers of attorney dated April 2, 2009.
EXHIBIT LIST
|
|
|
Consent of Brady Martz |
EX-99.14. |
"Consent of Independent Registered Public Accounting Firm"
We hereby consent to the incorporation by reference in the Combined Proxy Statement/Prospectus and Statement of Additional Information constituting part of this registration statement on Form N-14A (the "Registration Statement") of our reports dated February 11, 2009, relating to the financial statements and financial highlights of Montana Tax-Free Fund, Inc. and ND Tax-Free Fund, Inc., which appear in the respective annual reports to shareholders for the year ended December 31, 2008 which constitute part of the Registration Statement. We also consent to the reference to us under the heading "Experts" in the Combined Proxy Statement/Prospectus, which is part of the Registration Statement.
BRADY, MARTZ &
ASSOCIATES, P.C.
Minot, North Dakota USA
May 15, 2009
"Consent of Independent Registered Public Accounting Firm"
We hereby consent to the incorporation by reference in the Combined Proxy Statement/Prospectus and Statement of Additional Information constituting part of this registration statement on Form N-14A (the "Registration Statement") of our report dated February 20, 2009, relating to the financial statements and financial highlights of Viking Tax-Free Fund for Montana and Viking Tax-Free Fund for North Dakota, each a series of Viking Mutual Funds, which appear in the annual report to shareholders for the year ended December 31, 2008 which constitutes part of the Registration Statement. We also consent to the reference to us under the heading "Experts" in the Combined Proxy Statement/Prospectus, which is part of the Registration Statement.
BRADY, MARTZ &
ASSOCIATES, P.C.
Bismarck, North Dakota USA
May 15, 2009
[CHAPMAN AND CUTLER LLP LETTERHEAD]
May 19, 2009
Mr. Kevin Rupert
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington DC 20549
Re: |
Form N-14 of Viking Mutual Funds |
|
Dear Mr. Rupert:
We received your oral comments on May 1, 2009 and May 13, 2009 regarding the Form N-14 of the Viking Mutual Funds (the "Trust"). Please find below our responses to your oral comments. For convenience, we have set forth below each of your comments followed by our response.
Comment 1: Please include the TANDY information in the response letter.
Response: TANDY ACKNOWLEDGEMENT
In connection with the Trust's registration statement on Form N-14, the Trust acknowledges that:
|
|
|
|
• |
the Trust is responsible for the adequacy and accuracy of the disclosure in the filing; |
|
|
|
|
• |
staff comments or changes to disclosure in response to staff comments in the filings reviewed by the staff do not foreclose the Commission from taking any action with respect to the filing; and |
|
|
|
|
• |
the Trust may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. |
Comment 2: Please include an undertaking that the Trust will file the final tax opinion regarding the reorganization following its closing.
Response: The Trust has advised us that it agrees to file in a post-effective amendment to this Form N-14 registration statement a final tax opinion upon the closing of the transaction. Such undertaking has been included in Part C of the pre-effective amendment.
Comment 3: With respect to the dissenters' rights, please include information that dissenters will only receive net asset value.
Response: In the notice to shareholders and in the section entitled "Dissenters' Rights" in the prospectus, the following disclosure has been added: Shareholders should note, however, that because the Integrity Funds are open-end investment companies, the Integrity Funds expect that shareholders would receive a share price based on the respective Integrity Fund's net asset value next determined after the request is received in accordance with federal law.
Comment 4: In the fee tables in the Edgar submission, the fees for the maximum deferred sales charge reflect none. Please correct.
Response: The lines for the fees were inadvertently placed on the wrong line. The table has been corrected to reflect the appropriate CDSC.
Comment 5: Please confirm that the fair value procedures for the acquiring and acquired funds match up. Differences in the manner in which the acquiring fund and acquired fund fair value securities could impact shareholders at the time of the transfer of assets (for instance if the acquiring fund uses the mean between bid and ask prices but the acquired fund uses only the bid prices).
Response: At a meeting of the Viking Board of Trustees held on May 1, 2009, the Viking Board approved Integrity Fund Services, Inc. to serve as the Viking Funds' transfer agent, accounting service provider and administrator effective as of a date to be set prior to the closing of the Reorganization (the "Effective Date"). At the May meeting, the Viking Board of Trustees also approved the valuation procedures used by the Integrity Funds, subject to minor modifications, to be effective when Integrity Funds Services takes over as the Viking Funds' transfer agent, accounting service provider and administrator on the Effective Date. Accordingly, the Viking Funds and Integrity Funds believe their valuation procedures with respect to the pricing of municipal securities will be the same prior to the closing of the Reorganizations and after the Reorganizations. Disclosure has been added regarding the foregoing under "Comparison of Net Asset Valuation Calculation Procedures" and "Comparison of Other Service Providers." In addition, the valuation procedures with the revisions adopted by the Viking Board will be presented to the Integrity Funds' Board for its approval at its next regularly scheduled meeting.
Comment 6: Please indicate that the Viking Board of Trustees also determined that the reorganization is in the best interests of the applicable Viking Funds.
Response: The following disclosure has been added under the section "Reasons for the Reorganizations." At a meeting held on April 2, 2009, the Viking Board of Trustees also determined that the proposed Reorganization was in the best interests of each Viking Fund and approved the Reorganization for each Viking Fund.
Comment 7: Please file the expense limitation agreement of Viking.
Response: The expense limitation agreement has been incorporated by reference from Registrant's post-effective amendment no. 15 to its Registration Statement on Form N-1A filed on April 30, 2009.
Comment 8: Please add disclosure regarding Viking seeking shareholder approval of the manager-of-managers structure.
Response: Disclosure regarding the manager-of-managers structure has been added under "Comparison of Business Structures—Manager-of-Managers Structure."
Accounting Comments:
Comment 1: Please explain supplementally why the acquiring funds' expenses increase as reflected in the pro forma fees of the combined fund in the fee table when the acquiring funds will have more assets following the Reorganization?
Response: We have been advised that currently, the Viking Funds' investment adviser, Viking Fund Management LLC ("Viking") has contractually agreed to waive its fees or reimburse the Viking Funds for its expenses through August 1, 2009 so that the Fund's total annual operating expenses during this period will not exceed 0.85% of the average daily net assets on an annual basis. After August 1, 2009, Viking has contractually agreed to waive fees or reimburse each Viking Fund for its expenses from August 1, 2009 through April 29, 2010 so that the Fund's total annual operating expenses do not exceed 1.07% of its average daily net assets. Viking also provides the administrative services, portfolio accounting and transfer agent services to the Viking Fund. In conjunction with the foregoing expense cap, Viking waived a substantial portion of its fees for transfer agent, accounting and administrative services. In light of the new expense cap that will take effect shortly and the fee schedule of Integrity Fund Services which will be replacing Viking in providing these services, the pro forma other expenses for the combined fund were estimated to increase from the perspective of the Viking Funds as reflected in the fee table. Disclosure has been added reflecting the foregoing under "Comparison of Other Service Providers."
Comment 2: Under the capitalization table, please explain the basis for the Registrant's determination that the Viking Funds will be the accounting survivor following the Reorganization.
Response: The following disclosure will be added under the capitalization table as requested. Each Viking Fund will be treated as the accounting survivor. The determination of the accounting survivor is based on numerous factors including, the surviving management structure; portfolio composition; investment objectives, policies and restrictions; expense structure and expense ratios; and asset size. In determining the accounting survivor, the primary consideration is the surviving management structure. In this regard, the investment adviser and portfolio manager of the Viking Funds will continue in the same capacities following the Reorganization. As the portfolios of the Viking Funds following the Reorganization will continue to be managed pursuant to the same investment strategies, the portfolio composition of the combined funds will likely resemble the historic portfolio composition of the Viking Funds as securities maturities and sales occurring in the normal course of business are replaced with purchases that more resemble the management style of the respective Viking Funds. The Viking Funds will continue to apply their respective investment objectives, policies and restrictions following the Reorganizations. Finally, the combined funds will continue to apply the sales load structure, investment advisory fees and expense caps of the Viking Funds following the Reorganization. Although the asset size of each Viking Fund is smaller than its corresponding Integrity Fund, based on the foregoing, the Viking Funds will be treated as the accounting survivor.
Comment 3: With respect to the combined fund column in the pro forma financial statements and the pro forma column in the fee table, please add a reference to "Viking" as the combined fund.
Response: The heading has been modified as requested.
Comment 4: Please delete the pro forma adjustments in the statement of assets and liabilities regarding dividends payable and other accounts payable and accrued ($16,982 with respect to the ND Fund and $27,104 for the Montana Fund).
Response: The information has been deleted as requested.
Comment 5: With respect to the statement of operations for the Montana Fund/Viking Montana Tax Free Fund, is the adjustment of zero for distribution (12b-1 fees) accurate in light of the fact that Class B shares have higher 12b-1 fees?
Response: The Montana Fund is the only fund currently offering two classes. Accordingly, the expenses in the Statement of Operations for the Montana Fund has been revised to reflect the 12b-1 fees of each class along with an explanatory footnote that Class B will no longer be offered after the transaction.
Comment 6(a): Please confirm that the adjustments to expenses in the pro forma financial statements are consistent with the pro forma combined fund estimated expenses in the fee tables, particularly in light of the fact that other expenses went up in pro forma fee table but adjustments generally show reductions.
Response: We have been advised that upon review, certain figures in the pro forma financials have been modified, including the deletions requested in comment 4, the addition of 12b-1 fees per class in the Montana Fund's Statement of Operations, the addition of FASB 157 disclosure, and an adjustment for the fee waivers in the Statements of Operations. The total net expenses for the applicable combined fund in the respective Statement of Operations are consistent with the net operating expense ratio for the applicable pro forma combined fund in the respective fee table based on average net assets of the acquiring and acquired funds during the last fiscal year. In addition, the pro forma adjustments in the Statements of Operations generally reflect reductions from the viewpoint of the Integrity Funds because of the increase in assets of the combined fund. However, as described in response to comment 1 of the Accounting Comments, as the Viking Funds increased their expense cap to match that provided to the Integrity Funds and the Viking Funds will be utilizing the same transfer agent, administrator and accounting service provider as the Integrity Funds under the same fee schedule, it is anticipated that such expenses will rise from the viewpoint of the Viking Funds.
Comment 6(b): Please modify the footnotes in the Statements of Operations to reflect the increase in certain fees (such as transfer agent fees) is due to the new fee schedule of Integrity Fund Services and the decrease in certain fees is due to economies of scale or other relevant factors.
Response: Footnotes (c) and (d) in the Statement of Operations of the ND Fund and Viking Tax-Free Fund of North Dakota and footnotes (d) and (e) in the Statement of Operations of the Montana Fund and Viking Tax-Free Fund of Montana have been revised as requested.
Comment 7: In the statements of operations, is the zero adjustment to the expense waiver line accurate?
Response: An adjustment for expense waiver has been added. In light of the increase of assets, the pro forma adjustments reflect a reduction in the amount of expenses waived or absorbed by the investment adviser.
Comment 8: Please include a footnote in the pro forma financials to include FASB 157 information.
Response: A footnote regarding the FASB 157 information has been added after the Schedule of Investments for each Fund.
Please call me at (312) 845-3864 if you have any questions or issues you would like to discuss regarding these matters.
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Very truly yours, |
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Felice R. Foundos |
Viking Mutual Funds
116 1st St. SW, Suite C
Minot, North Dakota 58701
Viking Funds
Distributors, LLC
116th 1st St. SW, Suite C
Minot, North Dakota 58701
May 19, 2009
Securities and Exchange
Commission
100 F Street, N.E.
Washington, DC 20549
Re: |
Viking Mutual Funds |
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(Registration No. 333-158643) |
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Ladies and Gentlemen:
The undersigned, Viking Mutual Funds (the "Registrant") and Viking Funds Distributor, LLC (the "Principal Underwriter"), pursuant to the provisions of Rule 461 of the General Rules and Regulations of the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, hereby respectfully requests that the Commission grant acceleration of the effectiveness of Pre-Effective Amendment No. 1 to the Registrant's Registration Statement on Form N-14 (the "Pre-Effective Amendment") so that the same may become effective on May 20, 2009, or as soon thereafter as practicable.
The Pre-Effective Amendment was filed in light of comments received from SEC staff that are described in the related transmittal letter dated May 18, 2009 from Chapman and Cutler LLP and reflected in the Pre-Effective Amendment. We appreciate your consideration of this request.
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Very truly yours, |
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Shannon D. Radke |
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President |
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Shannon D. Radke |
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President |