Registration No. 2-64233
(under the Securities Act
of 1933)
Registration No. 811-2918
(under the Investment
Company Act of 1940)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 35 ( X )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 36 ( X )
(Check appropriate box or boxes)
DUPREE MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
125 South Mill Street, Vine Center, Suite 100
Lexington, Kentucky 40507
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (606) 254-7741
THOMAS P. DUPREE, SR.
Dupree Investment Advisers, Inc.
125 South Mill Street, Vine Center, Suite 100
Lexington, Kentucky 40507
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective
(check appropriate box)
__X__ immediately upon filing pursuant to paragraph (b)
_____ on _________pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a) (1)
_____ on _________pursuant to paragraph (a) (1)
_____ 75 days after filing pursuant to paragraph (a) (2)
_____ on _________pursuant to paragraph (a) (s)
of rule 485
Dupree Mutual Funds has registered an indefinite number of securities
under the Securities Act of 1933 pursuant to Rule 24f-2 of the Investment
Company Act of 1940. On August 21, 1995, registrant filed a Rule 24f-2
Notice for the fiscal year ended June 30, 1995.
DUPREE MUTUAL FUNDS
REGISTRATION STATEMENT ON FORM N-1A
CROSS-REFERENCE SHEET
Part A
Item No. Prospectus Caption
1 Cover Page
2 Dupree Mutual Funds - Summary
3 Financial Highlights
4 Organization of the Trust
5 Management of the Trust; Trust Expenses
6 Dividends; Taxes; Organization of the Trust
7 Buying Shares
8 Selling Shares
9 Not Applicable
Part B
Item No. Statement of Additional Information
10 Cover Page
11 Table of Contents
12 General Information and History
13 Investment Objectives and Policies; Portfolio Turnovers
14 Investment Adviser; Officers and Trustees
15 Not Applicable
16 Investment Adviser
17 Portfolios Transactions
18 Shares of Beneficial Interest
19 How to Purchase Shares; How to Redeem Shares;
How We Compute Our Yields
20 Tax Information
21 Not Applicable
22 How We Compute Our Yields
23 Financial Statements
STICKER
Included inside the front cover of the November 15, 1995 Prospectus
are Financial Highlights for the North Carolina Tax-Free Income Series and
the North Carolina Tax-Free Short to Medium Series for the 137 days ended
March 31, 1996 (commencement of operations - November 15, 1995.)
Prospectus
November 15, 1995
DUPREE MUTUAL FUNDS
P.O. Box 1149
Lexington, Kentucky 40589-1149
(606) 254-7741
(800) 866-0614
MUNICIPAL BOND FUNDS
Kentucky Tax-Free Income Series
Kentucky Tax-Free Short-to-Medium Series
North Carolina Tax-Free Income Series
North Carolina Tax-Free Short-to-Medium Series
Tennessee Tax-Free Income Series
Tennessee Tax-Free Short-to-Medium Series
GOVERNMENT BOND FUNDS
Intermediate Government Bond Series
This Prospectus is a concise statement of information about Dupree Mutual
Funds (the "Trust") that you should know before investing. This Prospectus
should be kept for future reference.
A statement containing additional information about the Trust, Dated
November 15, 1995 (the "Statement of Additional Information"), has been
filed with the Securities and Exchange Commission and can be obtained,
without charge, by writing or calling us at the address or phone number
listed above. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Table of Contents
2 Dupree Mutual Funds Summary
3 Trust Expenses
5 Financial Highlights
10 Organization of the Trust
10 Investment Objectives
13 Investment Policies and Restrictions
15 Management of the Trust
17 Determining Net Asset Value
17 Buying Shares
18 Selling Shares
20 Dividends
21 Taxes
21 Performance Calculations
22 How to Reach Us
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE INCOME SERIES
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
For the 137 days ended March 31, 1996 (commencement of operations -
November 16, 1995)
Net asset value,
Beginning of period $10.00
Income From Investment Operations
Net investment income .19
Net losses on
securities (both realized
and unrealized) (.12)
Total from investment operations .07
Less Distributions
Dividends(from net
investment income) (.19)
Total distributions (.19)
Net asset value,
End of period $ 9.88
Total Return (since inception) 1.65%1
Ratios/Supplemental Data:
Net assets, end of period $537,686
Shares outstanding, end of period 54,421
Ratio of expenses to
average net assets .114%**
Ratio of net investment income to
average net assets 1.909%
Portfolio turnover rate 28.041%
** During these periods the advisor reimbursed the fund a portion of
the fees and expenses in accordance with the investment advisory
agreement.
1 Annualized
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
For the 137 days ended March 31, 1996 (commencement of operations -
November 16, 1995)
Net asset value,
Beginning of period $ 10.00
Income From Investment Operations
Net investment income .15
Net losses on
securities (both realized
and unrealized) (.01)
Total from investment operations .14
Less Distributions
Dividends (from net investment
income) (.15)
Total distributions (.15)
Net asset value,
End of period $ 9.99
Total Return (since inception) .17%1
Ratios/Supplemental Data:
Net assets, end of period $720,035
Shares outstanding, end of period 72,071
Ratio of expenses to average
net assets .076**
Ratio of net investment income to
average net assets 1.477%
Portfolio turnover rate 17.909%
** During these periods the advisor reimbursed the fund a portion of
the fees and expenses in accordance with the investment advisory
agreement.
1 Annualized
Dupree Mutual Funds Summary
SINGLE STATE MUNICIPAL BOND SERIES
Investors in our municipal bond series are investors seeking tax-free
income from portfolios of municipal securities. The Kentucky, North
Carolina and Tennessee Tax-Free Income Series seek a steady flow of income
but with greater share price fluctuation. The Kentucky, North Carolina
and Tennessee Tax-Free Short-to-Medium Series offer less principal
fluctuation, but with less yield. See "Investment Objectives"
INTERMEDIATE GOVERNMENT BOND SERIES
Investors in our Intermediate Government Bond Series are seeking income
from investment in securities of the U.S. Government and its agencies.
The Intermediate Government Bond Series should provide moderate principal
fluctuation. See "Investment Objectives."
MANAGER AND DISTRIBUTOR
Dupree Investment Advisers serves as Investment Adviser to each Series of
Dupree Mutual Funds, a Kentucky Business Trust, offering one class of
shares of beneficial interest in seven distinct Series. See "Manager and
Distributor" for more information.
PURCHASES AND REDEMPTIONS
The Trust has no sales load, no redemption fees and no exchange fees. The
minimum initial and subsequent investment amount is $100.00. See "Buying
Shares" for more information on how easy it is to invest. Shares are
redeemable by mail and wire in all series and by check in each of the
Short-to-Medium Series (Kentucky, North Carolina and Tennessee) and the
Intermediate Government Bond Series. If a shareholder elects to redeem
shares by wire transfer, the shareholder's own bank may impose a wire
charge. If the Custodian imposes a wire charge upon the Transfer Agent,
this may be passed on to the shareholder. See "Selling Shares."
FACTORS TO CONSIDER
An investment in our Trust, as with any mutual fund, includes risks that
vary depending upon the Series' investment policies. Investment in any of
the Single State Municipal Bond Series may involve greater risk than
investment in a Fund with a portfolio of municipal securities from
throughout the country. This additional risk is due to the possibility of
an economic or political development unique to a single state. There is
no assurance that the investment objective of any Series will be achieved.
A Series' return and net asset value will fluctuate.
Trust Expenses
TRUST EXPENSES
Transaction and Operating Expense Table
KY KY NC NC TN TN Intermediate
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Government
Income Short Income Short Income Short Bond Series
Series to- Series to- Series to-
Medium Medium Medium
Series Series Series
SHAREHOLDER TRANSACTION EXPENSES:
(as a percentage of offering price or redemption proceeds, where
applicable)
Maximum Sales Load
Imposed on
Purchases NONE NONE NONE NONE NONE NONE NONE
Maximum Sales Load
Imposed on
Reinvested
Dividends NONE NONE NONE NONE NONE NONE NONE
Deferred
Sales Load NONE NONE NONE NONE NONE NONE NONE
Redemption
Fees NONE NONE NONE NONE NONE NONE NONE
Exchange Fee NONE NONE NONE NONE NONE NONE NONE
ANNUAL TRUST OPERATING EXPENSES: (as a percentage of average net assets)
Management Fee
(after fee
reimbursements) .499 .500 0* 0* 0* 0* 0*
12b-1 Fees NONE NONE NONE NONE NONE NONE NONE
Other expenses
(after expense reimbursement)
Transfer Agent .123 .130 .0* .0* .0* .0* .143*
All other expenses .063 .085 .339* .280* .339* .280* .257*
Total other expenses.186 .215 .339 .280 .339 .280 .400
Total fund operating
expenses .635 .715 .339 .280 .339 .280 .400
EXAMPLE:
You would pay the following expenses on a $1,000 investment assuming (1)
5% annual return and
(2) redemption at the end of each period:
1 year $7 $8 $4 $3 $4 $3 $4
3 years $21 $24 $11 $9 $11 $9 $13
5 years $36 $41 N/A N/A $20 $16 $23
10 years $81 $91 N/A N/A $44 $36 $52
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly.
Actual expenses and returns on investment may be greater or lesser than
those shown. For further information concerning advisory fees, see the
section entitled Investment Adviser and Advisory Agreements. In addition,
more complete information on costs and expenses is found in the Statement
of Additional Information.
Trust Expenses (continued)
Annual fund operating expenses (as a percentage of average net assets) for
the Kentucky Tax-Free Income Series, the Kentucky Tax Free Short-to-Medium
Series, the Tennessee Tax-Free Income Series, the Tennessee Tax-Free
Short-to-Medium Series and the Intermediate Government Bond Series are
based on actual amounts incurred for the fiscal year ended June 30, 1995.
The annual Series' operating expenses for the North Carolina Tax-Free
Income and Short-to-Medium Series are based on estimates of expenses
expected to be incurred on an annual basis for the current fiscal year.
*The Investment Adviser for each of the Series may waive management fees
and assume and pay other operating expenses to reduce expenses which could
be passed on to the shareholders. For the year ended June 30, 1995, if
the Investment Advisor had not waived management fees and assumed or paid
other operating expenses, the following expenses would have been incurred
by the two Tennessee Series and the Intermediate Government Bond Series:
Tennessee Tennessee Intermediate
Tax-Free Tax-Free Government
Income Short-to Bond
Series Medium Series
Series
Management Fee .500 .500 .200
Other Expenses
Transfer Agent .150 .150 .150
All Other Expenses .510 1.400 .260
Total Other Expenses .660 1.550 .410
Total Fund Operating Expenses 1.160 2.050 .610
*If the Investment Advisor does not reimburse a portion of its management
fee and reimbursement other operating expenses as stated above, for the
North Carolina Tax-Free Income Series and the North Carolina Tax-Free
Short-to-Medium Series:
the Management Fee will be .500% for each series;
the Transfer Agent Fee is estimated to be .150% for each series;
All Other Expenses are estimated to be .250% for each series;
Total Other Expenses are estimated to be .400% for each series;
and the Total Fund Operating Expenses are estimated to be .900% for each
series.
The portfolio turnover rate for the North Carolina Tax-Free Income Series
and the North Carolina Tax-Free Short-to-Medium Series is estimated to be
10% for each series during their first fiscal year.
Financial Highlights
FINANCIAL HIGHLIGHTS
Kentucky Tax-Free Income Series
The financial highlights in the table below for each of the years in the
period ended June 30, 1995 have been audited by Coopers & Lybrand, L.L.P.,
independent accountants. Financial statements for the year ended June 30,
1995 and the independent accountants' report thereon are included in the
Statement of Additional Information.
For the Years Ended June 30:
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
Net Asset Value
Beginning
of year 7.21 7.60 7.16 6.87 6.77 6.76 6.52 6.59 6.62 6.38
Income From Investment
Operations
Net investment
income .40 .41 .43 .44 .45 .46 .47 .48 .50 .55
Net gains or losses on
securities (both
realized and
unrealized) .13 (.34) .44 .29 .10 .01 .24 (.07) (.03) .24
Total from investment
operations .53 .07 .87 .73 .55 .47 .71 .41 .47 .79
Less Distributions
Dividends from
capital gain) (.05) (.05) .00 .00 .00 .00 .00 .00 .00 .00
Dividends (from net
investment
income) (.40) (.41)(.43)(.44)(.45)(.46)(.47)(.48) (.50) (.55)
Total
Distributions (.45) (.46)(.43)(.44)(.45)(.46)(.47)(.48) (.50) (.55)
Net asset value
End of year $7.29 $7.21 $7.60 $7.16 $6.87 $6.77 $6.76 $6.52 $6.59 $6.62
____ ____ ____ ____ ____ ____ ____ ____ ____ ____
Total Return 6.90% .75% 12.45% 10.95% 8.43% 7.19% 11.32%6.54% 7.13% 12.86%
Ratios/Supplemental Data (in millions)
Net assets,
end of
period $269.3$257.2$237.9$169.3 $113.7 $87.6 $73.0 $60.4 $61.8 $36.3
Shares outstanding,
end of
period 36.9 35.7 31.3 23.6 16.5 12.9 10.8 9.3 9.4 5.5
Ratio of expenses to
average net
assets .63% .69% .67% .71% .75% .76% .78% .81% .79%** .78%**
Ratio of net investment
income to average
net assets 5.60% 5.82% 5.79% 6.28% 6.63% 6.82% 7.44% 7.40% 7.32% 8.39%
Portfolio turnover
rate 18.05%30.53%31.79%11.93% 18.08%35.82%43.70%87.37%54.43%28.22%
**During these periods the adviser reimbursed the fund a portion of the
fees and expenses in accordance with the investment advisory agreement.
Financial Highlights (continued)
FINANCIAL HIGHLIGHTS
Kentucky Tax-Free Short-to-Medium Series
The financial highlights in the table below for each of the years in the
period ended June 30, 1995 have been audited by Coopers & Lybrand, L.L.P.,
independent accountants. Financial statements for the year ended June 30,
1995 and the independent accountants' report thereon are included in the
Statement of Additional Information.
For the years ended June 30, 1995, 1994, 1993, 1992, 1991, 1990 and 1989,
and for the period September 15, 1987 (commencement of operations) to June
30, 1988:
1995 1994 1993 1992 1991 1990 1989 1988
Net Asset Value
Beginning of year 5.17 5.29 5.17 5.05 4.99 4.97 5.00 5.00
Income From Investment
Operations
Net investment income .21 .21 .23 .26 .28 .29 .29 .20
Net gains or losses on
securities (both realized
and unrealized) .02 (.12) .12 .12 .06 .02 (.03) .00
Total from investment
operations .23 .09 .35 .38 .34 .31 .26 .20
Less Distributions
Distributions
(from capital gains) (.01)(.00) (.00)(.00)(.00)(.00)(.00) (.00)
Dividends (from net investment
income) (.21)(.21) (.23)(.26)(.28)(.29)(.29) (.20)
Total Distributions (.22)(.21) (.23)(.26)(.28)(.29)(.29) (.20)
Net asset value
End of year $5.18 $5.17 $5.29$5.17$5.05$4.99$4.97 $5.00
____ ____ ________ ____ ____ ____ ____
Total Return 4.27% 1.71% 6.91%7.67%7.03% 6.36% 5.42% 5.53%
Ratios/Supplemental Data (in millions):
Net assets,
end of period $57.1 $69.6 $56.0 $34.2 $14.0 $6.7 $7.3 $3.1
Shares outstanding
end of period 11.0 13.5 10.6 6.6 2.8 1.3 1.5 .6
Ratio of expenses to
average net assets .72% .72% .76%**.76%**.76%**.76%**.75%**.75%**
Ratio of net investment income
to average net assets 4.00% 3.92% 4.37% 4.96% 5.58% 5.79% 5.88% 5.48%
Portfolio turnover rate 4.07% 17.62%22.89%29.35%26.41%57.61%41.31%103.35%
**During these periods the adviser reimbursed the fund a portion of the
fees and expenses in accordance with the investment advisory agreement.
For the years ended June 30, 1993, 1992, 1991, 1990 and 1989 the ratio of
expenses to average net assets without the reimbursement of expenses by
the investment adviser would have been .77%, .83%, .85, .89%, and .92%
respectively.
Financial Highlights (continued)
FINANCIAL HIGHLIGHTS
Tennessee Tax-Free Income Series
The financial highlights in the table below for each of the years in the
period ended June 30, 1995 have been audited by Coopers & Lybrand, L.L.P.,
independent accountants. Financial statements for the year ended June 30,
1995 and the independent accountants' report thereon are included in the
Statement of Additional Information.
For the year ended June 30, 1995 and the period December 20, 1993
(commencement of operations) to June 30, 1994:
1995 1994
Net Asset Value
Beginning of year 9.51 10.00
Income From Investment Operations
Net investment income .54 .28
Net gains or losses on
securities (both realized
and unrealized) .54 (.49)
Total from investment operations 1.08 (.21)
Less Distributions
Dividends (from net
investment income) (.54) (.28)
Total Distributions (.54) (.28)
Net asset value
End of year $10.05 $9.51
_____ ____
Total Return (since inception) 11.65%(4.17%)
Ratios/Supplemental Data (in millions)
Net assets, end of period $5.0 $.794
Shares outstanding, end
of period .500 .083
Ratio of expenses to
average net assets .34** .12%**1
Ratio of net investment income
to average net assets 5.59% 2.83%1
Portfolio turnover rate 6.84% 15.88%
**During these periods the adviser reimbursed the fund a portion of the
fees and expenses in accordance with the investment advisory agreement.
For the year ended June 30, 1995 and the period ended June 30, 1994, the
ratio of expenses to average net assets without the reimbursement of
expenses by the investment adviser would have been 1.16% and 4.01%,
respectively.
1Annualized
Financial Highlights (continued)
FINANCIAL HIGHLIGHTS
Tennessee Tax-Free Short-to-Medium Series
The financial highlights in the table below for each of the years in the
period ended June 30, 1995 have been audited by Coopers & Lybrand, L.L.P.,
independent accountants. Financial statements for the year ended June 30,
1995 and the independent accountants' report thereon are included in the
Statement of Additional Information.
For the period November 1, 1994 (commencement of operations) to June 30,
1995:
1995
Net Asset Value
Beginning of year $10.00
Income From Investment Operations
Net investment income .28
Net gains or losses on
securities (both
realized and unrealized) .20
Total from investment operations .48
Less Distributions
Dividends (from net
investment income) (.28)
Total Distributions (.28)
Net asset value
End of year $10.20
_____
Total Return (since inception) 7.41%
Ratios/Supplemental Data:
Net assets, end of period $1,534,644
Shares outstanding,
end of period 150,382
Ratio of expenses to
average net assets .28%**1
Ratio of net investment income
to average net assets 2.80%1
Portfolio turnover rate .71%
**During this period the adviser reimbursed the fund a portion of the fees
and expenses in accordance with the investment advisory agreement. For
the eight months ended June 30, 1995, the ratio of expenses to average net
assets without the reimbursement of expenses by the investment adviser
would have been 2.05%.
1Annualized
Financial Highlights (continued)
FINANCIAL HIGHLIGHTS
Intermediate Government Bond Series
The financial highlights in the table below for each of the years in the
period ended June 30, 1995 have been audited by Coopers & Lybrand, L.L.P.,
independent accountants. Financial statements for the year ended June 30,
1995 and the independent accountants' report thereon are included in the
Statement of Additional Information.
For the years ended June 30, 1995 and 1994, and for the period July 12,
1992 (commencement of operations) to June 30, 1993:
1995 1994 1993
Net Asset Value
Beginning of year 9.65 10.60 10.00
Income From Investment Operations
Net investment income .69 .63 .59
Net gains or losses on
securities (both realized
and unrealized) .50 (.95) .60
Total from investment
operations 1.19 (.32) 1.19
Less Distributions
Dividends (from net
investment income) (.69) (.63) (.59)
Total Distributions (.69) (.63) (.59)
Net asset value
End of year $10.15 $9.65 $10.60
_____ ____ _____
Total Return 12.78%(3.32%)12.64%
Ratios/Supplemental Data (in millions):
Net assets, end of period $7.7 $8.4 $5.9
Shares outstanding,
end of period .8 .9 .6
Ratio of expenses to
average net assets .40** .40%** .40%**1
Ratio of net investment income
to average net assets 7.06% 6.00% 6.23%1
Portfolio turnover rate 74.98%23.08% 0.00%
**During these periods the adviser reimbursed the fund a portion of the
fees and expenses in accordance with the investment advisory agreement.
For the years ended June 30, 1995, 1994 and 1993 the ratio of expenses to
average net assets without the reimbursement of expenses by the investment
adviser would have been .61%, .65% and 1.34% respectively.
1Annualized
Organization of the Trust
Investment Objectives
ORGANIZATION OF THE TRUST
Dupree Mutual Funds is a Kentucky Business Trust organized under the laws
of the Commonwealth of Kentucky on July 1, 1987. The Trust offers shares
of beneficial interest of separate Series without par value.
Shares of seven series are being offered for sale:
Kentucky Tax-Free Income Series
Kentucky Tax-Free Short-to-Medium Series
North Carolina Tax-Free Income Series
North Carolina Tax-Free Short-to-Medium Series
Tennessee Tax-Free Income Series
Tennessee Tax-Free Short-to-Medium Series
Intermediate Government Bond Series
Each share has one vote. Fractional shares have proportionate voting
rights and participate pro rata in dividends and distributions. Our
shares have cumulative voting rights for the election of Trustees. On
matters affecting an individual Series, a separate vote of the Series is
required. Shareholders of a Series are not entitled to vote on any matter
not affecting that Series but requiring a separate vote of the other
Series.
We are registered as a diversified, open-end investment company of the
management type under the Investment Company Act of 1940; however, each
Series of the Trust may or may not be diversified. Our shares, which are
offered continuously, are registered for sale under the Securities Act of
1933. The Kentucky, Tennessee, North Carolina Series and the Intermediate
Government Bond Series are qualified for sale in Kentucky, Florida,
Indiana, and North Carolina under the securities law of those states. In
Texas the two Kentucky Series and the Intermediate Government Bond Series
are qualified for sale. In Tennessee, the two Tennessee Series and the
Intermediate Government Bond Series are qualified for sale. We offer and
redeem our shares at current asset value.
Investment Objectives
Our investment objective is to seek the highest level of income without
undue risk to principal. Of course, no mutual fund offered by us or
anyone else can guarantee that the investment objective will be met.
Single State Municipal Bond Series
All of our single state series, whatever their maturity range, have an
investment objective of realizing the highest level of tax-exempt income
available without undue risk to principal by investing in state specific
municipal securities. The interest earned on these securities, in the
opinion of bond counsel for the issuer, is exempt from federal and state
taxation in the state of issuance. In conformity with Guidelines of the
Securities and Exchange Commission, each single state series has a
fundamental policy that during periods of normal market conditions either
(1) the series' assets will be invested so that at least 80% of the income
will be tax-exempt or (2) the series will have at least 80% of its net
assets invested in tax-exempt securities. In addition, under normal
market conditions, at least 65% of the value of each series assets will be
invested in municipal securities of the state identified in the series
name as described herein.
Investment Objectives (continued)
Yield on municipal securities is dependent on a variety of factors,
including the maturity and quality of the particular obligation, the size
of the total offering, conditions in the municipal securities markets and
general monetary and economic conditions. Generally, issues of shorter
maturity and/or higher quality pay lower yields than issues of longer
maturity and/or lower quality. The market values of municipal securities
vary depending upon available yields both in the municipal securities
markets and in the short-term money markets. Therefore, the net asset
values of our shares will change as interest rates fluctuate, generally
declining as interest rates rise and rising as interest rates fall. The
types of municipal securities and the general characteristics of each type
are described in the "Statement of Additional Information".
The inherent risk associated with investment in municipal securities is
the issuer might default. Payment on nearly all Kentucky municipal
securities depends upon revenue generated by the property financed by the
securities; the securities are not general obligations of the issuer.
Payment on nearly all North Carolina and Tennessee municipal securities
are general obligations of the issuer. In addition, the net asset value
of our shares may be impacted by the general economic situation in the
country and/or within the states of Kentucky, North Carolina and
Tennessee. The limitation of our investments of each Series to a single
state may involve greater risk than if we invested in municipal securities
throughout the country, due to the possibility of an economic or political
development which could uniquely affect the ability of issuers to meet the
debt obligations of the securities. The economies of Kentucky, North
Carolina and Tennessee are supported by agricultural products, coal,
manufacturing and service professions. A decline in the tobacco, equine
or coal market could affect these states in a manner different from the
effect on most other states.
The Kentucky non-agricultural economy is diversified as follows: 24%
services, 24% wholesale and retail trade, 19% manufacturing, 18%
government and 15% other. Agriculture in Kentucky is well diversified
among tobacco, corn, hogs, cattle, other grains, equine, and truck crops.
No single segment of the economy consists of as much as one fourth of the
overall State Domestic Product.
The North Carolina economy derives most of its income from three main
sectors: industry, agriculture and tourism in that order. Each of these
sectors are well diversified. Industry has a good balance between
production of goods versus services, with a slight edge to the services
side. Agriculture is diversified among tobacco, poultry, turkeys, fruits,
vegetables and other livestock. Tourism is concentrated in the far west
and the coastal region. The U.S. military bases in North Carolina
constitute a significant part of the economy as well.
The Tennessee non-agricultural economy is diversified among the following
sectors: 23% manufacturing; 23% wholesale and retail trade; 22% services;
16% government and 14% other. Agriculture in Tennessee is widely
diversified among livestock, poultry, fruit and vegetables production, as
well as nursery operations. Agriculture constitutes about one third of the
overall economy.
The economies of Kentucky, North Carolina and Tennessee are of such
diversification that an economic decline in a single segment of a state's
economy would not necessarily lead to the non-payment of debt service on
municipal bonds. A national economic decline could impact the ability of
municipalities to pay debt service, if the decline impacted each of the
various industries within each state.
Kentucky Tax-Free Income Series
This is a diversified fund of long-term maturity bonds, usually averaging
10 years or more, where a fairly level stream of income is important,
though net asset value per share can fluctuate considerably. The
portfolio had a weighted average maturity of 9.27 years as of June 30,
1995.
Investment Objectives (continued)
Kentucky Tax-Free Short-to-Medium Series
This is a non-diversified fund with a dollar weighted average maturity of
two to five years. The yield of this Series will typically be lower than
the Income Series, but with less principal fluctuation. The portfolio had
a weighted average maturity of 2.16 years as of June 30, 1995. As a non-
diversified Series, the Short-to-Medium Series may invest up to 50% of the
Series' total assets in as few as two investments, with each of those
investments comprising up to 25% of the Series' total assets. In this
case, a default by both issuers would produce a more dramatic result as
compared to a fully diversified fund.
North Carolina Tax-Free Income Series
This is a non-diversified fund with a dollar weighted average maturity
usually averaging 10 years or more, where a fairly level stream of income
is important, though net asset value per share can fluctuate considerably.
As a non-diversified Series, the Income Series may invest up to 50% of
the Series' total assets in as few as two investments, with each of those
investments comprising up to 25% of the Series total assets. In this
case, a default by both issuers would produce a more dramatic result as
compared to a fully diversified fund.
North Carolina Tax-Free Short-to-Medium Series
This is a non-diversified fund with a dollar weighted average maturity of
two to five years. The yield of this Series will typically be lower than
the Income Series, but with less principal fluctuation. As a non-
diversified Series, the Short-to-Medium Series may invest up to 50% of the
Series' total assets in as few as two investments, with each of those
investments comprising up to 25% of the Series total assets. In this
case, a default by both issuers would produce a more dramatic result as
compared to a fully diversified fund.
Tennessee Tax-Free Income Series
This is a diversified fund of long-term maturity bonds, usually averaging
10 years or more, where a fairly level stream of income is important,
though net asset value per share can fluctuate considerably. The
portfolio had a weighted average maturity of 11.08 years as of June 30,
1995.
Tennessee Tax-Free Short-to-Medium Series
This is a non-diversified fund with a dollar weighted average maturity of
two to five years. The yield of this Series will typically be lower than
the Income Series, but with less principal fluctuation. This portfolio
had a weighted average maturity of 2.98 years as of June 30, 1995. As a
non-diversified Series, the Short-to-Medium Series may invest up to 50% of
the Series' total assets in as few as two investments, with each of those
investments comprising up to 25% of the Series' total assets. In this
case, a default by both issuers would produce a more dramatic result as
compared to a fully diversified fund.
Intermediate Government Bond Series
Seeks the highest level of current income without undue risk to principal
by investing in the following securities: issues of the U.S. Government
or its agencies or instrumentalities, repurchase agreements fully
collateralized by issues of the U.S. Government or its agencies or
instrumentalities and bank accounts fully insured by the FDIC or
collateralized. The types of securities are described in the "Statement
of Additional Information" The dollar weighted maturity of the portfolio
will be 3 to 10 years to produce minimal fluctuation in principal. The
portfolio had a weighted average maturity of 5.46 years as of June 30,
1995.
Investment Policies and Restrictions
INVESTMENT POLICIES AND RESTRICTIONS
Single State Municipal Bond Series
Our six single state municipal bond series have fundamental policies of
investing at least 80% of the value of the assets in securities meeting
the following quality standards.
Bonds rated at the time of purchase within the four highest grades
assigned by Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A, Baa)
or Standard & Poor's Corporation ("S&P") (AAA, AA, A, BBB). According to
Moody's, bonds rated Baa are medium-grade and possess some speculative
characteristics. A BBB rating by S&P indicates a satisfactory degree of
safety and capacity for repayment, but more vulnerability to adverse
economic conditions or changing circumstances. These bonds have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade bonds.
Notes rated at the time of purchase within the three highest grades
assigned by Moody's (MIG 1, MIG 2, MIG 3); and bonds and notes not rated
by Moody's or S&P within the grades specified above, but secured by the
full faith and credit of the United States government (e.g., refunded or
defeased bonds secured by United States Treasury Bills or Notes).
No more than 20% of the value of our total assets in any of the municipal
bond series will be invested in securities which are not rated. The Trust
will not purchase securities which in the opinion of the Investment
Adviser would not have been rated in one of the grades specified above.
In addition, our Investment Adviser will make its own evaluation of each
security it selects for each portfolio and will continue to evaluate each
portfolio security so long as we hold it.
As an additional matter of fundamental policy, except as indicated below,
the only securities we will purchase for the municipal bond series are
those producing income exempt from both Federal and State income taxes in
the states where shares of the Series are offered, though ad valorem taxes
may be due in some states.
The investment policies may not be changed without approval of the holders
of a majority of the outstanding shares representing each Series. The
only exception to the policies previously described is that we may
temporarily invest up to 50% of the value of our total assets in certain
taxable obligations when, in the judgement of our Investment Adviser,
abnormal market conditions make it advantageous to assume a defensive
posture in taxable obligations. We also reserve the right to hold such
cash reserves as the Investment Adviser deems necessary for temporary
defensive purposes.
The taxable obligations and cash equivalents in which we may invest on a
temporary basis include obligations of the U.S. Government and its
agencies and instrumentalities; certificates of deposit, banker's
acceptances and other short-term debt obligations of United States and
Canadian banks with total assets of at least $1,000,000,000; commercial
paper rated A-2 or better by S&P or Prime-2 or better by Moody's; and
repurchase agreements relating to an underlying security in which we are
authorized to invest.
Intermediate Government Bond Series
The Intermediate Government Bond Series has an investment objective of
realizing the highest rate of current income without undue risk to
principal by investing at least 65% of the value of our total assets in a
professionally managed non-diversified portfolio of bonds: 1) issued by
the U.S. Government such as U.S. Treasury Bonds; 2) issued by agencies or
instrumentalities of the U.S. Government such as, but not limited to,
Investment Policies and Restrictions (continued)
obligations of the Federal Farm Credit Banks, the Federal National
Mortgage Association, the Government National Mortgage Association and the
Federal Home Loan Bank. The remaining assets are invested in bank
accounts fully insured by the FDIC or collateralized by 1) and 2);
repurchase agreements fully collateralized by 1) and 2); and U.S. Treasury
or Agency Notes and Bills. A bond is a debt instrument with a definite
maturity which usually pays a fixed rate of interest issued by a unit or
agency of government generally in denominations of $5,000 or larger. The
foregoing types of securities are described in the "Statement of
Additional Information." The dollar weighted average maturity of the
portfolio will be 3-10 years to produce minimal fluctuation in principal.
There can be no assurance that the objectives of the Series will be
realized.
Investors should recognize that, in periods of declining interest rates,
the Series yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates, the yield of the Series
will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to the Series from the continuous sale of its
shares will likely be invested in portfolio instruments producing lower
yields than the balance of the Series' portfolio, thereby reducing the
current yield of the Series. In periods of rising interest rates, the
opposite can be true.
Borrowing of Money
Each Series permits borrowing money from banks as a temporary measure in
order to pay redeeming shareholders or to satisfy purchase commitments,
but such borrowings may not be in excess of 5% of the value of the assets
of the affected Series.
Asset Composition
The weighted average ratings of the securities held by the Trust on June
30, 1995, the ending date of the fiscal year were:
Aaa/AAA Aa/AA A/A Baa/BBB NR(total)
Municipal Bonds
Kentucky Tax-Free
Income Series 37.43 14.49 37.47 8.21 2.40
Kentucky Tax-Free
Short-to-Medium Series 19.04 23.54 55.43 1.36 .63
Tennessee Tax-Free
Income Series 30.98 35.36 28.42 5.24 0
Tennessee Tax-Free
Short-to-Medium Series 53.33 37.82 8.85 0 0
Government Bonds
Intermediate Government
Bond Series 100
The Board of Trustees of the Trust, acting upon information furnished by
the Investment Adviser, has determined that the unrated bonds held by each
Series were comparable to rated bonds in the following categories:
Comparable To: Aaa/AAA Aa/AA A/A Baa/BBB
Kentucky Tax-Free
Income Series 1.81 .59
Kentucky Tax-Free
Short-to-Medium Series .32 .31
As of June 30, 1995 the North Carolina Tax-Free Income Series and the
North Carolina Tax-Free Short-to-Medium Series were not operational.
Management of the Trust
MANAGEMENT OF THE TRUST
Trustees
The Trustees of the Trust consist of five individuals, three of whom are
not "interested persons" of the Trust as defined in the Investment Company
Act of 1940. The Trustees of the Trust are responsible for the overall
supervision of the operations of the Trust and perform the various duties
imposed upon the directors or trustees of investment companies by the
Investment Company Act of 1940. The Trustees of the Trust are:
Thomas P. Dupree, Sr., President and Chairman of the Board of Dupree &
Company, Inc. and Dupree Investment Advisers, Inc.*
Fred L. Dupree, Jr., Vice President, Secretary, Treasurer and Director of
Dupree & Company, Inc. and Dupree Investment Advisers, Inc.*
William A. Combs, Jr., Secretary, Treasurer, Director, Freedom Dodge,
Lexington, KY and Dana Motor Company, Cincinnati, Ohio, auto dealerships;
Partner, Ellerslie Realty, Inc., Forkland Development Co., and Lexland,
Lexington, KY.
Robert L. Maddox, Member, Wyatt, Tarrant & Combs, Attorneys, Louisville,
KY.
William S. Patterson, President, CEO, Cumberland Surety Insurance Co.,
Lexington, KY.
*Thomas P. Dupree, Sr. and Fred L. Dupree, Jr. are "interested persons" of
the Trust's Investment Adviser and of the Trust within the meaning of
Section 2(a)(19) of the Investment Company Act of 1940 by virtue of their
officership, directorship and/or employment with Dupree Investment
Advisers, Inc. Dupree Investment Advisers, Inc. also serves as the
Trust's Transfer Agent. The other nominees are the non-interested
Trustees of the Trust.
Except as otherwise noted, each individual has held the office indicated,
or other offices in the same company, for the last five years.
Pension or Total
Retirement Estimate Compensation
Aggregate Benefits Accrued Annual From Trust and
Name of Person, Compensation As Part of Benefits Trust Complex
Position From Trust Trust Upon Paid to
Expenses Retirement Trustees
__________ __________ ____________ __________ __________
Thomas P. Dupree, Sr. -0- None - No Pension None -0-
President, Chairman, Trustee or Retirement Plan
Fred L. Dupree, Jr. -0- None - No Pension None -0-
Vice President, Secretary, or Retirement Plan
Treasurer, Trustee
William A. Combs, Jr. $11,000 None - No Pension None $11,000
Trustee or Retirement Plan
Robert L. Maddox $11,000 None - No Pension None $11,000
Trustee or Retirement Plan
William S. Patterson $11,000 None - No Pension None $11,000
Trustee or Retirement Plan
Management of the Trust (continued)
Investment Adviser and Advisory Agreements
Our investment activities are managed by Dupree Investment Advisers, Inc.,
P.O. Box 1149 Lexington, Kentucky 40589-1149. The firm is a Kentucky
corporation formed in 1986 as a wholly owned subsidiary of Dupree &
Company, Inc., which was formed in 1962 to continue a business founded in
1941. Dupree Investment Advisers, Inc. also serves as Transfer Agent.
Dupree Investment Advisers, Inc., may at its sole cost and expense, enter
into subshareholder servicing agreements with commercial banks, investment
advisers, or other entities to provide assistance in maintaining books,
accounts and records of shareholders.
Dupree Investment Advisers, Inc. serves as Investment Adviser to each
Series under seven separate Investment Advisory Agreements. The
Agreements for the Kentucky Series are in effect until October 31, 1996
and thereafter for annual periods if renewed. The date of each of the
agreements is November 1, 1989. The Agreements for the Tennessee Tax-Free
Income Series and the Intermediate Government Bond Series are November 1,
1993 and will continue in effect until October 31, 1996 and thereafter for
annual periods if renewed. The Agreement for the Tennessee Tax-Free
Short-to-Medium Series is dated November 1, 1994 and will continue in
effect until October 31, 1996 and thereafter for annual periods if
renewed. The Agreements for the North Carolina Series are dated November
1, 1995 and will continue in effect until October 31, 1997 and thereafter
for annual periods if renewed. The Aggreements will be submitted to a
vote of the shareholders of each series at the 1996 Annual Meeting of the
Trust. Subject to the direction of the Trustees, Dupree Investment
Advisers is responsible for the actual management of the Trust's
portfolios. The compensation paid to Dupree Investment Advisers as
presented on page 3 is inclusive of certain administrative services and
provision of office space, facilities, equipment and personnel for
management of the Trust. The compensation paid to Dupree Investment
Advisers pursuant to the Investment Advisory Agreements is a percentage of
the daily net assets of each Series as follows:
Range of Total Assets 100,000,001-
(in dollars) $0-100,000,000 $150,000,000 $150,000,001+
Kentucky Tax-Free
Income Series .50 of 1% .45 of 1% .40 of 1%
Kentucky Tax-Free
Short-to-Medium Series .50 of 1% .45 of 1% .40 of 1%
North Carolina
Tax-Free Income Series .50 of 1% .45 of 1% .40 of 1%
North Carolina Tax-Free
Short-to-Medium Series .50 of 1% .45 of 1% .40 of 1%
Tennessee Tax-Free
Income Series .50 of 1% .45 of 1% .40 of 1%
Tennessee Tax-Free
Short-to-Medium Series .50 of 1% .45 of 1% .40 of 1%
Intermediate Government
Bond Series .20 of 1% .20 of 1% .20 of 1%
Dupree Investment Advisers has reserved the right to voluntarily subsidize
any Series of the Trust at its sole option.
Indiana and Texas limit annual expenses (exclusive of interest, taxes,
brokerage commissions and extraordinary expenses) as follows: 1.5% of the
first $30,000,000 in net assets and 1% of any additional net assets for
Indiana; and 2% of the first $10,000,000 of average net assets, 1.5% of
the next $20,000,000 of average net assets and 1% of the remaining average
net assets for Texas.
Fund Portfolio Manager
The person primarily responsible for the day-to-day management of all
series of the trust is
William T. Griggs II, Executive Vice President of the Investment Advisor.
Mr. Griggs has been Portfolio Manager since 1989.
Determining Net Asset Value
Buying Shares
DETERMINING NET ASSET VALUE
The price used when you buy or sell shares in a Series is the next net
asset value computed after we receive your order in proper form. The net
asset value per share of each Series is determined separately at the close
of trading on the New York Stock Exchange each day the Exchange is open
for trading by dividing the total value of the assets of a Series, minus
liabilities, by the total number of shares outstanding. The value of your
investment in any of our Series is not reduced by a sales charge or
commission.
The securities in which we invest are traded primarily in the over-the-
counter market. We value securities for which representative price
quotations are current and readily available at the mean between the
quoted bid and asked prices. If price quotations are not readily
available, or if we believe that available quotations are not current or
representative, we value securities at prices we believe will best reflect
the fair value. In such cases, and in the case of other assets, fair
value is determined in good faith in accordance with procedures approved
in advance by our Board of Trustees, consistently applied by or under the
supervision of our officers, and monitored by the Board on an ongoing
basis.
BUYING SHARES
Our goal is to make doing business with us as easy as possible. You can
buy shares at the next net asset value computed after we receive your
investment in proper form as described below. There is no sales charge or
load.
Terms of Offering
If you send us a check which does not clear, we may cancel your order and
hold you responsible for any loss which we have incurred. We may recover
our loss by redeeming shares held in your account, and we may prohibit or
restrict you from placing future orders.
We retain the right to reject any order, and to raise or lower the minimum
investment size for any persons or class of persons. An order to purchase
shares is not binding on us until confirmed in writing by the Transfer
Agent.
Initial Investment
Your initial and subsequent investments need only be $100.00 for any of
our Series.
By Wire
If this is an initial investment you must first call us to tell us the
following:
* How the account is to be registered
* Name of Series in which you wish to invest
* Your address
* Your tax identification number
* Amount being wired
* Name of wiring bank
Buying Shares (continued)
Selling Shares
Our wire instructions are directed to Star Bank, Cincinnati, Ohio as
follows:
Star Bank ABA # 0420-0001-3
Kentucky Tax-Free Income Series #483-622-098
Kentucky Tax-Free Short-to-Medium Series #483-622-106
North Carolina Tax-Free Income Series #483-622-338
North Carolina Tax-Free Short-to-Medium Series #483-622-346
Tennessee Tax-Free Income Series #483-622-122
Tennessee Tax-Free Short-to-Medium Series #483-622-130
Intermediate Government Bond Series #483-622-148
If you are adding to an existing account please call us with your name and
account number.
By Mail
Make your check payable to the series you want to invest in and send your
check to:
Dupree Mutual Funds
P.O. Box 1149
Lexington, KY 40589-1149
Along with one of the following:
*A completed new account form (if new account)
*The detachable stub which you will find at the bottom of your most
recent account statement
*A letter specifying the account number and series
Automatic Withdrawal from Your Checking Account
Once your account is open, you may make investments automatically by
authorizing Dupree Mutual Funds to draw on your bank account. Please call
us at the phone number on page 22 for more information.
Individual Retirement Accounts
Shareholders of the Intermediate Government Bond Series may establish
Individual Retirement Accounts. Please contact us at the number on page 22
for more information.
SELLING SHARES
You may sell all or part of the shares in your account at any time without
any penalties or sales commissions. To do so, simply use one of the
methods described below. We will not require a signature guarantee (but
reserve the right to do so); however, on your account application, you
will be asked to indemnify and hold harmless the Trust, the Transfer Agent
and their officers, agents and employees, from losses, claims, expenses
and liabilities based on actions taken as the result of your instructions.
The Trust will utilize reasonable procedures, such as recording a
telephone redemption request or making inquiries of information which
should only be known to the shareholder and the Trust, to confirm that
instructions communicated by telephone or in writing are genuine. If
reasonable procedures are followed by the Trust, it will not be liable for
losses due to unauthorized or fraudulent telephone instructions. The
Securities and Exchange Commission is currently considering the propriety
of the requirement of indemnification and hold harmless provisions.
Selling Shares (continued)
By Telephone
In Lexington (606) 254-7741
Toll Free National Number (800) 866-0614
In North Carolina (800) 284-2562
All accounts will automatically receive telephone redemption privileges
unless indicated otherwise on the initial application form. We will mail
or wire the money only to the address or bank account previously filed
with us. Changes to any redemption instructions must be made in writing
and signed by all owners. The telephone cannot be used to redeem shares
for which you hold certificates of beneficial interest or which were
purchased by mail within the past 30 days.
By Mail
You must send us a written request for redemption, signed by each
registered holder exactly as the shares are registered along with (if
applicable):
* Any certificates of beneficial interest
* Documents required by Corporations, Executors, Administrators,
Trustees and Guardians.
By Check
Shareholders of each of the Short-to-Medium Series, and the Intermediate
Government Bond Series may redeem shares by check. In order to arrange
for redemption by check, a check writing privilege form must be completed
or call us at the phone number on page 22. Checks may not be used to
close an account. Checks may not be presented for payment over-the-
counter at the clearing bank.
Daily
Check limits Minimum Maximum CHECKING WRITING CHARGES
KY Short-to-
Medium Series $500.00 $25,000 Share Redemption: NONE
NC Short-to-
Medium Series $500.00 $25,000 Checks: NONE
TN Short-to-
Medium Series $500.00 $25,000 Insufficient Funds: $17.00
Government
Bond Series $500.00 none Stop Payment: $9.00
Payment of Redemption Proceeds
The Transfer Agent will normally mail a check or wire redemption proceeds
the business day following the receipt of necessary documents in required
form. In order to receive proceeds by wire the redeeming amount must be
at least $500.00. If the Custodian imposes a wire charge upon the
Transfer Agent, the Transfer Agent may deduct the wire charge from the
proceeds. If charged, the current amount of the charge would be $10.00.
Your own bank may impose a wire charge on your account to which the funds
are wired.
We reserve the right on all redemptions, including redemptions by writing
a check in any of the Short-to-Medium Series or Intermediate Government
Bond Series, to delay payment five days if to do otherwise would
negatively affect existing shareholders.
Shares redeemed to close an account will earn dividends through the date
of redemption. In addition to the redemption proceeds, redeeming
shareholders will receive dividends declared but unpaid. If you redeem
only a portion of your shares, you will receive all dividends declared and
unpaid on all your shares on the next dividend payment date.
Selling Shares (continued)
Dividends
Redemption Price
The redemption price of shares redeemed will be their net asset value per
share as calculated in the first determination of net asset value after
the Trust has received all necessary documents in the form it requires.
Suspension of Redemption
We may suspend the right of redemption or postpone payment for more than
five days for any period during which the New York Stock Exchange is
closed, or the Securities and Exchange Commission determines that trading
on the Exchange is restricted, or when there is an emergency as determined
by the Commission as a result of which it is not reasonably practicable
for us to dispose of our securities, or for such other period as the
Commission may by order permit for the protection of our shareholders.
Redemption by Trust
If your account balance falls below $100 as a result of shareholder
redemption and not simply market valuation change, we may redeem your
shares and close out your account. We will give you notice no earlier
than the 15th of the month following the month in which your account falls
below $100 before we take any action.
Transfer and Exchange of Shares
You may transfer your shares to another owner. You may exchange shares
between Series offered in your state of residence without sales charge at
the next determination of net asset value; however, the Trust reserves the
right to reject any exchange in excess of $50,000 and to modify or
terminate the exchange privilege at any time only upon sixty (60) days
written notice. An exchange is treated for federal tax purposes as a
redemption and purchase of shares and may result in the realization of a
capital gain or loss, depending on the cost or other tax basis of the
shares exchanged. No representation is made as to the deductibility of
any such loss. The Transfer Agent will provide you with information about
the documents required.
Withdrawal Plan
You may withdraw fixed or variable amounts from your account at regular
intervals. Once begun, a withdrawal plan may be discontinued at any time
without penalty.
DIVIDENDS
Generally we declare dividends separately for each Series each business
day. The Kentucky, North Carolina and Tennessee Income Series pay such
dividends as of the last business day of each quarter. The Kentucky,
North Carolina and Tennessee Short-to-Medium Series and the Intermediate
Government Bond Series pays such dividends as of the last business day of
each month. If no other business day(s) intervene between a weekend or
holiday on which the New York Stock Exchange is closed, then dividends
will be paid on the second to last business day of the quarter (Income
Series), month (Short-to-Medium Series and Intermediate Government Bond
Series).
The Trustees have the authority to change dividend payment dates. Net
investment income consists of all interest income accrued on portfolio
securities less all expenses. Capital gains, if any, will be distributed
between in order to comply with federal income tax regulations. See
Statement of Additional Information. Income dividends and capital gains
distributions will be paid in additional shares by credit to the
shareholder's
Taxes
Performance Calculations
account or in cash at the shareholder's election. Any such election
remains in effect until the Transfer Agent receives written notice
terminating the election at least three days before the payment date of a
dividend or distribution. The available elections are indicated on the
new account application form.
TAXES
The Trust has qualified as a "regulated investment company" (RIC) under
the Internal Revenue Code. Accordingly, we must distribute at least 90%
of our net income earned in any year. Ordinarily, the dividend we pay our
shareholders of the Municipal Bond Series will be exempt interest
dividends' which will be excludable from gross income for federal and
state income tax purposes. Dividends and distributions paid on the
Government Bond Series generally will be subject to federal and state
income tax. Distributions of income from investments in non-municipal
securities or net short-term capital gains or net long-term capital gains
exceeding our capital loss carry forwards (if any) will be taxable as more
fully described in the "Statement of Additional Information." Ad valorem
tax may be imposed in some states.
You should consult your tax adviser about the effects of investments in
the Trust and recognize that the tax laws of the several states afford
different tax treatment to their residents.
PERFORMANCE CALCULATIONS
All yield figures are based on historical earnings and are not intended to
indicate future performance.
Average annual total returns are calculated for specified periods by
finding average annual compounded rates of return that will equate the
initial investment to the redeemable amount of the investment at the end
of each period, assuming the reinvestment of all dividends and other
distributions and taking into account all recurring and nonrecurring
expenses. Total return may be expressed either as a percentage or as a
dollar amount.
Yield quotations are based on a 30 day period in accordance with S.E.C.
computation formulas as more fully described in the Statement of
Additional Information.
Taxable equivalent yield is the yield that an investor would have to earn
in order to equal a tax-free yield after the investor had paid federal and
any applicable state income and Ad Valorem taxes.
Fund Performance
The Annual Report of Dupree Mutual Funds contains a discussion and graphs
reflecting the performance of its series during the most recently
completed fiscal year. A copy of the Annual Report may be obtained by
writing or calling us at the numbers listed on page 22.
How to Reach Us
HOW TO REACH US
DUPREE MUTUAL FUNDS
P.O. Box 1149
Lexington, KY 40589-1149
PHONE
(606) 254-7741
(800) 866-0614
INVESTMENT ADVISER
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Dupree Investment Advisers, Inc.
(d/b/a DIA Dupree Investment Advisers, Inc. in Texas)
P.O. Box 1149
Lexington, Kentucky 40589-1149
CUSTODIAN
Star Bank
425 Walnut Street, ML 6118
P.O. Box 1118
Cincinnati, Ohio 45201-118
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
201 East Main Street, Suite 1400
Lexington, Kentucky 40507
LEGAL COUNSEL
Darsie & Elste
P.O. Box 22219
Lexington, KY 40522
This prospectus omits certain information contained in the registration
statement filed with the Securities and Exchange Commission. Items of
information which are thus omitted may be obtained from the Securities and
Exchange Commission upon payment of the fee prescribed by the Rules and
Regulations of the Commission.
DUPREE MUTUAL FUNDS
A No-Load Fund
Prospectus, November 15, 1995
DUPREE MUTUAL FUNDS
P.O. Box 1149
Lexington, Kentucky 40589-1149
(606) 254 -7741
(800) 866-0614
Kentucky Tax-Free Income Series
Kentucky Tax-Free Short-to-Medium Series
North Carolina Tax-Free Income Series
North Carolina Tax-Free Short-to-Medium Series
Tennessee Tax-Free Income Series
Tennessee Tax-Free Short-to-Medium Series
Intermediate Government Bond Series
STICKER
Included inside the front cover of the November 15, 1995 Statement
of Additional Information is a Financial Report to Shareholders for the
North Carolina Tax-Free Income Series and the North Carolina Tax-Free
Short to Medium Series for the 137 days ended March 31, 1996 (commencement
of operations - November 15, 1995).
DUPREE MUTUAL FUNDS
November 15, 1995
STATEMENT OF ADDITIONAL INFORMATION
DUPREE MUTUAL FUNDS
North Carolina Tax-Free Income Series
North Carolina Tax-Free Short-to-Medium Series
FINANCIAL REPORT
TO SHAREHOLDERS
March 31, 1996
S T I C K E R
ABOUT DUPREE MUTUAL FUNDS
In 1941, Dupree & Company, Inc., began business in Harlan, Kentucky as a
small securities brokerage firm specializing in tax-exempt municipal
bonds.
Over the years the firm, which in 1963 moved its offices to Lexington,
Kentucky, grew to become a regional leader in public finance, helping to
structure complex and innovative municipal bond financing for some of the
largest public projects in the state of Kentucky.
In 1979, Dupree & Company began what is now Dupree Mutual Funds with the
Kentucky Tax-Free Income Series and became the fund's investment adviser.
The fund was one of the first single-state municipal bond funds in the
country, and the first mutual fund to invest solely in Kentucky municipal
bonds. Since then, several new offerings have been added to the Dupree
Mutual Funds family:
Kentucky Tax-Free Short-to-Medium Series in 1987;
Intermediate Government Bond Series in 1992;
Tennessee Tax-Free Income Series in 1993;
Tennessee Tax-Free Short-to-Medium Series in 1994;
North Carolina Tax-Free Income Series in 1995 and,
North Carolina Tax-Free Short-to-Medium Series in 1995.
Today, after more than 50 years in business, Dupree continues to be a
pioneer in the industry. Our Kentucky and Tennessee Series are currently
the ONLY 100% "no-load" municipal bond funds available in those states.
No-load means simply that shares of the funds are offered directly to
investors with no front or back-end sales charges, as opposed to load
funds which are sold through brokerage firms or other institutions.
At Dupree Mutual Funds, our goal is a simple one: to offer investors a
high-quality, low-cost way to invest in municipal and government bonds
while providing superior service to our shareholders. We encourage you to
let us know how we're doing.
SHAREHOLDER SERVICES
To Help You Add to Your Account:
Automatic Reinvestment of Distributions
All dividend and capital gain distributions can be automatically
reinvested in additional shares of the fund, thus providing the added
potential for growth through compounding.
Automatic Investment Plan
You may make automatic monthly investments by authorizing us, in writing,
to deduct a specified amount from your bank account.
To Help Increase Your Cash Flow:
Dividends in Cash
You have the option of taking your dividends in cash. Dividends are paid
quarterly for the three Income Series and monthly for the three Short-to-
Medium Series and the Intermediate Government Bond Series.
Automatic Withdrawal Plan
You can arrange to make automatic monthly redemptions of a specified
amount and have the proceeds sent to you.
Telephone Redemption
Unless you choose otherwise, convenient redemption by telephone privileges
are automatically available to all shareholders.
Check-Writing
Check-writing privileges are available on the three Short-to-Medium Series
(KY, NC, and TN), and the Intermediate Government Bond Series.
To Help Meet Your Changing Needs:
Exchange Privileges
Should your investment objectives or financial needs change, you may
exchange shares of your fund for shares of another Dupree fund at any time
at no charge.
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
North Carolina Municipal Bonds -- 100% (UNAUDITED)
March 31, 1996
Bond Description
Maturity Market
Coupon Date Rating Par Value
INSURED MUNICIPAL REVENUE BONDS
37.86% Percent of Total Market Value
Charlotte NC Convention Center COPS Series C
5.250 12/01/20 Aaa/AAA* $ 25,000 $ 23,021
Craven NC Regional Medical Revenue
5.625 10/01/17 Aaa/AAA* 10,000 9,895
Cumberland County NC Hospital Facility Revenue
6.000 10/01/21 Aaa/AAA* 10,000 10,159
Gaston NC - Gaston Memorial Hospital
5.400 02/15/11 AAA* 10,000 9,789
NC Housing Finance Agency - Single Family
5.850 09/01/15 Aaa/AAA* 50,000 50,157
NC Municipal Power Electric Revenue - Catawba
5.000 01/01/15 Aaa/AAA* 5,000 4,621
NC Medical Care Revenue - Memorial Mission Hospital
6.000 10/01/22 Aaa/AAA* 15,000 15,089
NC Medical Care Revenue - Scotland Memorial Hospital
5.375 10/01/11 Aaa/AAA* 20,000 19,119
NC Medical Care Revenue - St. Joseph Hospital
5.100 10/01/14 Aaa/AAA* 5,000 4,601
Onslow County NC G.O. Improvement
5.700 03/01/12 Aaa/AAA* 10,000 10,146
Rowan County NC G.O. School Improvements
5.600 05/01/10 Aaa/AAA* 15,000 15,352
Wake County NC - Hospital Revenue
5.125 10/01/13 Aaa/AAA* 10,000 9,305
Winston-Salem NC State University
5.400 06/01/12 Aaa/AAA* 10,000 9,726
HOSPITAL AND HEALTHCARE REVENUE BONDS
21.55% Percent of Total Market Value
Charlotte NC Mecklenburg Hospital Revenue
6.375 01/01/09 Aa/AA* 5,000 5,373
NC Medical Care Revenue - Medicorp Refunding
5.500 05/01/15 Aa/AA* 20,000 19,178
NC Medical Care Revenue - Baptist Hospital Refunding Proj. A
6.000 06/01/22 Aa/AA* 30,000 30,364
NC Medical Care Revenue - Presbyterian Hospital
5.500 10/01/14 Aa/AA* 35,000 34,167
Pitt County NC - Memorial Hospital Revenue
5.375 12/01/10 Aa/AA-* 20,000 19,614
PREREFUNDED BONDS & ESCROWED TO MATURITY
16.76% Percent of Total Market Value
Hickory NC Water & Sewer Revenue
5.600 06/01/11 A1/AA-* 10,000 10,040
NC Eastern Municipal Power Revenue Series D
5.875 01/01/13 A/BBB+A* 50,000 48,518
NC Eastern Municipal Power Revenue Series A
6.000 01/01/26 AAA* 15,000 15,790
NC Municipal Power Electric Revenue - Catawba
6.250 01/01/17 A/A-* 10,000 10,194
LOCAL GENERAL OBLIGATION AND SCHOOL REVENUE BONDS
8.55% Percent of Total Market Value
Durham NC G.O. Improvement - Jail Facilities COPS
6.625 05/01/14 A1/AA* 5,000 5,308
Durham NC G.O. Economic Improvement
5.100 02/01/15 A1/AAA* 20,000 18,933
Durham NC G.O. Water & Sewer Revenue
4.900 02/01/13 A1/AAA* 15,000 13,848
High Point, NC G.O. Sewer Improvements
5.600 03/01/13 Aa/AA* 5,000 5,049
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
North Carolina Municipal Bonds -- 100% (UNAUDITED)
March 31, 1996
Bond Description
Maturity Market
Coupon Date Rating Par Value
COUNTY GENERAL OBLIGATION AND SCHOOL REVENUE BONDS
7.38% Percent of Total Market Value
Buncombe County NC G.O. Refunding
5.000 04/01/11 Aa/AA* $10,000 9,533
Catawba County NC G.O. School Revenue
4.900 08/01/10 Aa/AA* 10,000 9,447
Forsythe County NC G.O. School Revenue
4.750 02/01/13 Aa1/AAA* 20,000 18,242
MUNICIPAL UTILITY REVENUE BONDS
5.91% Percent of Total Market Value
Charlotte NC G.O. Water & Sewer Revenue
5.300 04/01/14 Aaa/AAA* 15,000 14,560
Wilmington NC G.O.Water Revenue
5.600 06/01/09 A1/A+* 15,000 15,265
STATE AND LOCAL MORTGAGE REVENUE BONDS
1.99% Percent of Total Market Value
NC Housing Finance Agency - Multi Family
5.800 07/01/13 Aaa/AAA* 10,000 10,032
Total investments (cost $517,718) $515,000 $504,435
(Notes 3 and 5)
* Standard and Poor's Corporation
NR Not Rated
"All other ratings by Moody's Investors Service, Inc."
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996 (UNAUDITED)
ASSETS:
Investments in securities, as annexed, at value
(identified cost $517,718) (Note 1A) $ 504,435
Cash 28,744
Bonds sold receivable 0
Interest receivable 8,588
Total assets 541,767
LIABILITIES:
Bonds purchased payable $ 0
Dividends payable (Note 1d) 4,412
Fund shares redeemed payable 0
Accrued expenses 5,377
Investment advisory and transfer agent
fees payable (Note 2) (5,707)
Notes payable 0
Total liabilities 4,082
Net assets, at value (Note 4) $ 537,685
NET ASSETS;
Net assets consist of:
Capital $ 550,322
Net accumulated realized gain
on investment transactions 646
Net unrealized depreciation
in value of investments (13,283)
Net assets at value (Note 4) $ 537,685
NET ASSET VALUE, offering price and redemption price per share
($537,685 -:- 54,421 shares) (Note 4) $ 9.88
STATEMENT OF OPERATIONS
For the 137 days ended March 31, 1996
Investment income:
Interest income $ 6,243
Expenses:
Audit 3,748
Investment advisory fees (Note 2) 575
Insurance 3
Legal 1,502
Printing 300
Postage 300
Registration fees 191
Transfer agent (Note 2) 173
Trustees' fees 4
Miscellaneous 6
Total expenses 6,802
Reimbursement from Investment
Adviser (Note 2) (6,454)
Net investment income 5,895
Realized and unrealized loss on
investments (Notes 3 and 5)
Net realized gain 646
Net decrease in unrealized appreciation (13,283)
Net realized and unrealized
loss on investments (12,637)
Net decrease in net assets
resulting from operations $ (6,742)
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE INCOME SERIES
STATEMENT OF CHANGES IN NET ASSETS
For the 137 days ended March 31, 1996 (UNAUDITED)
Increase in net assets: 3/31/96
Operations:
Net investment income $ 5,895
Net realized gain on
investments 646
Net decrease in unrealized appreciation (13,283)
Net decrease in net assets
resulting from operations (6,742)
Dividends to shareholders
($.1914 per share) (5,895)
Net fund share transactions (Note 4) 550,322
Total increase 537,685
Net assets:
Beginning of period 0
End of period $ 537,685
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
North Carolina Municipal Bonds -- 100% (UNAUDITED)
March 31, 1996
Bond Description
Maturity Market
Coupon Date Rating Par Value
INSURED MUNICIPAL REVENUE BONDS
34.18% Percent of Total Market Value
Columbus County NC G.O. Improvement Refunding
4.500 02/01/99 Aaa/AAA* $10,000 $10,055
Gaston County NC G.O. School Revenue
5.600 03/01/99 Aaa/AAA* 45,000 46,664
Gastonia NC Public Improvement Refunding Revenue
4.800 04/01/98 Aaa/AAA* 45,000 45,653
NC Housing Finance Agency - Single Family Series A
4.300 09/01/99 Aaa/AAA* 20,000 19,943
New Hanover County NC Water & Sewer G.O.
4.600 08/01/98 Aaa/AAA* 20,000 20,291
Randolph County NC COPS
4.400 06/01/01 Aaa/AAA* 35,000 34,774
Richmond County NC COPS
4.800 06/01/99 Aaa/AAA* 20,000 20,239
Sanford NC G.O. Improvement Refunding Wtr & Swr
4.500 03/01/00 Aaa/AAA* 15,000 15,085
University of North Carolina - Charlotte Revenue S:95
5.000 06/01/99 Aaa/AAA* 20,000 20,505
Winston-Salem NC University Revenue Series 1995
5.200 06/01/99 Aaa/AAA* 10,000 10,267
COUNTY GENERAL OBLIGATION AND SCHOOL REVENUE BONDS
28.38% Percent of Total Market Value
Buncombe County NC Public Improvement Revenue
7.000 03/01/10 Aa 30,000 32,739
Buncombe County NC Public Improvement Revenue
4.750 04/01/99 Aa/AA-* 5,000 5,092
Durham County NC G.O. Improvement
5.200 03/01/00 Aaa/AAA* 20,000 20,686
Guildford County NC Water & Sewer G.O.
5.250 04/01/99 Aa1/AA+* 10,000 10,296
Lincoln County NC Water & School G.O.
6.600 06/01/98 A/A* 20,000 20,989
Mecklenburg County NC G.O. Improvement
5.200 03/01/99 Aaa/AAA* 20,000 20,577
Orange County NC G.O. Improvement
5.400 02/01/00 Aa1/AA+* 20,000 20,741
Surry County NC G.O. Improvement
5.100 04/01/98 A1/A+* 20,000 20,346
Union County NC G.O. School Revenue
5.800 03/01/99 A1/A+* 20,000 20,820
Wake County NC G.O. Improvement Refunding
4.200 04/01/00 Aaa/AAA* 30,000 29,901
LOCAL GENERAL OBLIGATION AND SCHOOL REVENUE BONDS
16.08% Percent of Total Market Value
Charlotte NC G.O. Improvement
5.250 04/01/99 Aaa/AAA* 10,000 10,325
Concord NC G.O. Improvement Water Project
6.750 03/01/99 Aa/A+* 40,000 42,844
Greensboro NC G.O. Improvement
6.000 03/01/97 Aa1/AAA* 20,000 20,332
Raleigh NC Sanitary Sewer G.O. Improvement
5.100 05/01/93 Aaa/AAA* 20,000 20,563
Salisbury NC Water & Sewer G.O.
5.250 05/01/99 A1/A+* 20,000 20,462
PREREFUNDED BONDS & ESCROWED TO MATURITY
8.19% Percent of Total Market Value
Charlotte NC G.O. Improvement COPS Convention Fac
6.750 06/01/07 Aaa/AAA* 10,000 10,912
NC Eastern Municipal Power Agency Revenue-Catawba
5.100 01/01/98 A/A-* 20,000 20,253
NC Eastern Municipal Power Agency Revenue
8.000 01/01/01 Aaa/AAA* 25,000 27,170
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
North Carolina Municipal Bonds -- 100% (UNAUDITED)
"March 31, 1996"
Bond Description
Maturity Market
Coupon Date Rating Par Value
HOSPITAL AND HEALTHCARE REVENUE BONDS
7.09% Percent of Total Market Value
NC Medical Care Hospital Revenue 1993 - Rex Hospital
4.900 06/01/99 A1/A+* $50,000 $50,523
MUNICIPAL UTILITY REVENUE BONDS
4.56% Percent of Total Market Value
NC Eastern Municipal Power Agency Revenue
7.500 01/01/21 Aaa 25,000 27,542
Orange County NC Water & Sewer Revenue Refunding
4.250 07/01/01 Aa/AA* 5,000 4,944
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS
1.52% Percent of Total Market Value
NC State University at Raleigh Parking Systems
6.600 06/01/01 A1/AA-* 10,000 10,821
Total investments (cost $714,687) $690,000 $712,354
(Notes 3 and 5)
* Standard and Poor's Corporation
NR Not Rated
"All other ratings by Moody's Investors Service, Inc."
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996 (UNAUDITED)
ASSETS:
Investments in securities, as annexed, at value
(identified cost $714,687) (Note 1A) $ 712,398
Cash 49
Bonds sold receivable 0
Interest receivable 9,348
Total assets 721,795
LIABILITIES:
Bonds purchased payable $ 0
Dividends payable (Note 1d) 2,038
Fund shares redeemed payable 0
Accrued expenses 5,437
Investment advisory and transfer agent
fees payable (Note 2) (5,715)
Notes payable 0
Total liabilities 1,760
Net assets, at value (Note 4) $ 720,035
NET ASSETS;
Net assets consist of:
Capital $ 722,525
Net accumulated realized loss on
investment transactions (202)
Net unrealized depreciation in
value of investments (2,288)
Net assets at value (Note 4) $ 720,035
NET ASSET VALUE, offering price and redemption price per share
($720,035 -:- 72,071 shares) (Note 4) $ 9.99
STATEMENT OF OPERATIONS
For the 137 days ended March 31, 1996
Investment income:
Interest income $ 8,535
Expenses:
Audit 3,751
Investment advisory fees (Note 2) 1,029
Insurance 10
Legal 1,502
Printing 300
Postage 300
Registration fees 251
Transfer agent (Note 2) 309
Trustees' fees 13
Miscellaneous 6
Total expenses 7,471
Reimbursement from Investment
Adviser (Note 2) (7,053)
Net investment income 8,117
Realized and unrealized gain on investments (Notes 3 and 5)
Net realized loss (202)
Net decrease in unrealized
appreciation (2,288)
Net realized and unrealized
loss on investments (2,490)
Net increase in net assets
resulting from operations $ 5,627
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENT OF CHANGES IN NET ASSETS
For the 137 days ended March 31, 1996 (UNAUDITED)
Increase in net assets: 3/31/96
Operations:
Net investment income $ 8,117
Net realized loss on
investments (202)
Net decrease in
unrealized appreciation (2,288)
Net increase in net assets
resulting from operations 5,627
Dividends to shareholders
($.147 per share) (8,117)
Net fund share
transactions (Note 4) 722,525
Total increase 720,035
Net assets:
Beginning of period 0
End of period $ 720,035
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS
North Carolina Tax-Free Income Series and,
North Carolina Tax-Free Short-to-Medium Series
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
1. Significant Accounting Policies
Dupree Mutual Funds is registered under the Investment Company Act
of 1940, as amended, as a no-load, open-end investment company. The
Declaration of Trust of Dupree Mutual Funds (the "Trust") permits the
Trustees to create an unlimited number of series of investment portfolios
("Funds") and with respect to each series to issue an unlimited number of
full or fractional shares of a single class. The Trust currently offers
seven Series:
the Kentucky Tax-Free Income Series, a diversified portfolio,
the Kentucky Tax Free Short-to-Medium Series, a non-diversified portfolio,
the North Carolina Tax-Free Income Series, a diversified portfolio,
the North Carolina Tax Free Short-to-Medium Series, a non-diversified
portfolio,
the Tennessee Tax-Free Income Series, a diversified portfolio,
the Tennessee Tax Free Short-to-Medium Series, a non-diversified
portfolio, and
the Intermediate Government Bond Series, a non-diversified portfolio.
The investment strategy of both North Carolina Series (the "Fund")
is to maintain 100% of their investments in North Carolina municipal
securities. The Fund also maintains cash on deposit with principally one
financial institution at March 31, 1996.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles.
A. Security Valuation
Securities for which representative price quotations are
current and readily available are valued at the mean between the quoted
bid and ask price. If price quotations are not readily available the Fund
values securities based upon appraisals obtained from at least three
dealers in securities. Where appraisals are not available for a particular
security the Fund values the security based on price quotations or
appraisals for comparable securities. In evaluating these appraisals the
Fund takes into account pricing data derived from a matrix system which
utilizes electronic data processing techniques to rank and price
securities of the same maturity on the basis of their respective yields.
The prices derived from the matrix pricing system are periodically
reviewed and approved by the Board of Trustees.
B. Amortization
Premiums are amortized for financial and tax reporting
purposes. Market discounts are not accreted for financial reporting
purposes, whereas original issue discounts are accreted for both financial
and tax reporting purposes.
C. Federal Income Taxes
The Fund is a separate entity for federal income tax purposes.
It is the Fund's policy to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code applicable to
regulated investment companies, including the distribution of all taxable
income to their shareholders. Therefore, no federal income tax provision
is required.
D. Dividends and Distributions
All of the net investment income of the Fund is declared as a
dividend to shareholders of record as of the close of business each day.
Interest income is accrued pro-rata daily. Dividends to be paid are
payable in cash or in additional shares at the net asset value on the
payable date. Dividends are payable Quarterly for the North Carolina Tax-
Free Income Series, and Monthly for the North Carolina Tax-Free Short-to-
Medium Series.
DUPREE MUTUAL FUNDS
North Carolina Tax-Free Income Series and,
North Carolina Tax-Free Short-to-Medium Series
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
2. Investment Advisory Fee and Other Transactions with Affiliates
Subject to the direction of the Trustees, Dupree Investment Advisers
is responsible for the management of the Fund's portfolio. The
compensation paid to Dupree Investment Advisers pursuant to the Investment
Advisory Agreements is a percentage of the daily net assets of each Series
(determined separately). The advisory fees for both the North Carolina
Series are as follows:
Range of Total Assets $100,000,001-
(in dollars) $0-$100,000,000 $150,000,000 $150,000,001+
North Carolina Tax-Free
Income Series .50 of 1% .45 of 1% .40 of 1%
North Carolina Tax-Free
Short-to-Medium Series .50 of 1% .45 of 1% .40 of 1%
However, the Dupree firm may voluntarily waive or refund investment
advisory fees payable to it under the Investment Advisory Agreement with
both North Carolina Series and assume and pay other operating expenses to
the extent necessary to keep operating expenses (excluding interest, taxes
and extraordinary expenses) from exceeding the annual rate of .75 of 1%
during each fiscal year.
For the period ending March 31, 1996 investment advisory fees for:
the North Carolina Tax-Free Income Series totaled $575; however,
Dupree voluntarily refunded fees and reimbursed expenses totaling $6,454
in accordance with the investment advisory agreement, and
the North Carolina Tax-Free Short-to-Medium Series totaled $1,029;
however, Dupree voluntarily refunded fees and reimbursed expenses totaling
$7,053 in accordance with the investment advisory agreement.
In addition, the Fund has entered into a shareholder service
agreement with Dupree. The agreement provides for a fee computed on the
average daily net asset value at the annual rate of .15% on the first
$20,000,000 and .12% of all amounts in excess of $20,000,000.
3. Purchases and Sales of Securities
During the period, the cost of purchases and the proceeds from sales
for both the North Carolina Series were as follows:
Purchases Sales
North Carolina Tax-Free Income Series $ 1,128,726 $ 88,439
North Carolina Tax-Free Short-to-Medium Series $ 950,592 $102,122
4. Capital Shares
At March 31, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
DUPREE MUTUAL FUNDS
North Carolina Tax-Free Income Series and,
North Carolina Tax-Free Short-to-Medium Series
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
4. Capital Shares, continued:
NORTH CAROLINA TAX-FREE INCOME SERIES:
03/31/96
Shares Amount
Shares sold 55,160 $ 557,886
Shares issued to shareholders
for reinvestment of capital gains 0 0
Shares issued to shareholders
for reinvestment of dividends
from net investment income 130 1,335
Shares redeemed (869) (8,899)
Net increase 54,421 $ 550,322
NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES:
03/31/96
Shares Amount
Shares sold 73,380 $ 735,680
Shares issued to shareholders
for reinvestment of capital gains 0 0
Shares issued to shareholders
for reinvestment of dividends
from net investment income 511 5,144
Shares redeemed (1,820) (18,299)
Net increase 72,071 $ 722,525
5. Federal Income Taxes
For the period ending March 31, 1996 the funds had accumulated
realized gains or losses as follows:
North Carolina Tax-Free Income Series $ 646
North Carolina Tax-Free Short-to-Medium Series $ (202)
There can be no assurance that this amount will increase or decrease
during the remainder of the fiscal year.
GENERAL INFORMATION
Investment Adviser
Transfer Agent and Disbursing Agent
Dupree Investment Advisers, Inc.
(In Texas, d/b/a DIA Dupree Investment Advisers, Inc.)
P.O. Box 1149
Lexington, Kentucky 40589-1149
Custodian
Star Bank
425 Walnut Street, ML 6118
P.O. Box 1118
Cincinnati, Ohio 45201-1118
Independent Accountants
Coopers & Lybrand L.L.P.
201 East Main Street, Suite 1400
Lexington, Kentucky 40507
Legal Counsel
Darsie & Elste
P.O. Box 22219
Lexington, Kentucky 40522
Board of Trustees
Thomas P. Dupree, Sr.
Chairman
President, Dupree & Company, Inc. and
Dupree Investment Advisers, Inc.
F.L. Dupree, Jr.
Vice President, Secretary and Treasurer
Dupree & Company, Inc. and
Dupree Investment Advisers, Inc.
William A. Combs, Jr.
Secretary, Treasurer, Director
Freedom Dodge, Lexington, Kentucky
Dana Motor Company, Cincinnati, Ohio
Robert L. Maddox
Member, Wyatt, Tarrant & Combs
Louisville, Kentucky
William S. Patterson
President and CEO
Cumberland Surety Insurance Co., Inc.
Lexington, Kentucky
How to Reach Us
Dupree Mutual Funds
P.O. Box 1149
Lexington, KY 40589-1149
By Phone:
(800) 866-0614
(606) 254-7741
E-Mail:[email protected]
in North Carolina:
c/o Carolina Financial Group, Inc.
P.O. Box 1466
Brevard, NC 28712
By Phone:
(800) 284-2562
(704) 883-4400
Online:
http://www.nando.net/carolinafingrp
E-Mail: [email protected]
ABOUT DUPREE MUTUAL FUNDS
In 1941, Dupree & Company, Inc., began business in Harlan, Kentucky as a
small securities brokerage firm specializing in tax-exempt municipal
bonds.
Over the years the firm, which in 1963 moved its offices to Lexington,
Kentucky, grew to become a regional leader in public finance, helping to
structure complex and innovative municipal bond financing for some of the
largest public projects in the state of Kentucky.
In 1979, Dupree & Company began what is now Dupree Mutual Funds with the
Kentucky Tax-Free Income Series and became the fund's investment adviser.
The fund was one of the first single-state municipal bond funds in the
country, and the first mutual fund to invest solely in Kentucky municipal
bonds. Since then, several new offerings have been added to the Dupree
Mutual Funds family:
Kentucky Tax-Free Short-to-Medium Series in 1987;
Intermediate Government Bond Series in 1992;
Tennessee Tax-Free Income Series in 1993;
Tennessee Tax-Free Short-to-Medium Series in 1994;
North Carolina Tax-Free Income Series in 1995 and,
North Carolina Tax-Free Short-to-Medium Series in 1995.
Today, after more than 50 years in business, Dupree continues to be a
pioneer in the industry. Our Kentucky and Tennessee Series are currently
the ONLY 100% "no-load" municipal bond funds available in those states.
No-load means simply that shares of the funds are offered directly to
investors with no front or back-end sales charges, as opposed to load
funds which are sold through brokerage firms or other institutions.
At Dupree Mutual Funds, our goal is a simple one: to offer investors a
high-quality, low-cost way to invest in municipal and government bonds
while providing superior service to our shareholders. We encourage you to
let us know how we're doing.
SHAREHOLDER SERVICES
To Help You Add to Your Account:
Automatic Reinvestment of Distributions
All dividend and capital gain distributions can be automatically
reinvested in additional shares of the fund, thus providing the added
potential for growth through compounding.
Automatic Investment Plan
You may make automatic monthly investments by authorizing us, in writing,
to deduct a specified amount from your bank account.
To Help Increase Your Cash Flow:
Dividends in Cash
You have the option of taking your dividends in cash. Dividends are paid
quarterly for the three Income Series and monthly for the three Short-to-
Medium Series and the Intermediate Government Bond Series.
Automatic Withdrawal Plan
You can arrange to make automatic monthly redemptions of a specified
amount and have the proceeds sent to you.
Telephone Redemption
Unless you choose otherwise, convenient redemption by telephone privileges
are automatically available to all shareholders.
Check-Writing
Check-writing privileges are available on the three Short-to-Medium Series
(KY, NC, and TN), and the Intermediate Government Bond Series.
To Help Meet Your Changing Needs:
Exchange Privileges
Should your investment objectives or financial needs change, you may
exchange shares of your fund for shares of another Dupree fund at any time
at no charge.
DUPREE MUTUAL FUNDS
STATEMENT OF ADDITIONAL INFORMATION
November 15, 1995
TABLE OF CONTENTS
GENERAL AND HISTORY 1
INVESTMENT OBJECTIVES AND POLICIES 1
Portfolio Turnover 6
Investment Restrictions 7
NON-FUNDAMENTAL RESTRICTIONS 11
INVESTMENT ADVISER AND OTHER SERVICES 11
(See "Management of the Trust" in Prospectus)
OFFICERS AND TRUSTEES 14
(See "Management of the Trust" in Prospectus)
PORTFOLIO TRANSACTIONS 15
SHARES OF BENEFICIAL INTEREST 16
(See "Organization of the Trust" in Prospectus)
HOW TO PURCHASE SHARES 17
(See "Buying Shares" in Prospectus)
HOW TO REDEEM SHARES 18
(See "Selling Shares" in Prospectus)
HOW WE COMPUTE OUR YIELDS 18
TAX INFORMATION 20
(See "Dividends" and "Taxes" in Prospectus)
FINANCIAL STATEMENTS 25
NOTES TO FINANCIAL STATEMENTS 51
REPORT OF INDEPENDENT ACCOUNTANTS 57
This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the Trust's Prospectus dated November 15, 1995. A
Prospectus may be obtained, without charge, by calling or writing the
Trust at the above telephone number or address.
This Page Intentionally Left Blank
GENERAL INFORMATION AND HISTORY
Dupree Mutual Funds is a no-load mutual fund offering shares in seven
Series and organized on July 1, 1987 as the successor to Kentucky Tax-Free
Income Fund, Inc. which was organized in 1979. Our Investment Adviser is
Dupree Investment Advisers, Inc. a wholly owned subsidiary of Dupree &
Company, Inc., our original sponsor. Dupree & Company is a Lexington,
Kentucky firm with more than 50 years experience in managing, underwriting
and trading Kentucky municipal securities.
INVESTMENT OBJECTIVES AND POLICIES
Certain fundamental policies of the Trust are subject to change only upon
approval of the holders of a majority of the shares of the affected
Series. The fundamental policies of each of the Series, Kentucky Tax-Free
Income Series, Kentucky Tax-Free Short-to-Medium Series, North Carolina
Tax-Free Income Series, North Carolina Tax-Free Tax-Free Short-to-Medium
Series, Tennessee Tax-Free Income Series, Tennessee Tax-Free Short to
Medium Series, and Intermediate Government Bond Series are set forth in
"Investment Restrictions" which follows.
As used in the Prospectus and this Statement of Additional Information,
with respect to any matter requiring shareholder approval, whether it be
shareholder approval within an affected Series or the shareholders of the
Trust, the phrase "majority of our shares" means the vote at a meeting of
(i) 67% or more of the shares present or represented, if the holders of
more than 50% of the outstanding shares of the affected Series are present
in person or represented by proxy, or (ii) more than 50% of the
outstanding shares of the affected Series, whichever is less.
Kentucky Tax-Free Income Series
Kentucky Tax-Free Short-to-Medium Series
North Carolina Tax-Free Income Series
North Carolina Tax-Free Short-to-Medium Series
Tennessee Tax-Free Income Series
Tennessee Tax-Free Short-to Medium Series
As stated in our Prospectus, our investment objective is to realize the
highest level of tax-exempt income available, as determined by a
shareholder's state of residence, without undue risk to principal by
investing in professionally-managed portfolios of Kentucky, North Carolina
or Tennessee municipal securities. The Kentucky Tax-Free Income Series and
the Tennessee Tax-Free Income Series maintain diversified portfolios,
while the Kentucky Tax-Free Short-to-Medium Series, the North Carolina
Tax-Free Income Series, the North Carolina Tax-Free Short-to-Medium
Series, and the Tennessee Tax-Free Short-to-Medium Series maintain non-
diversified portfolios.
At least 80% of the Kentucky, North Carolina or Tennessee municipal
securities we purchase must be municipal bonds within the four highest
grades assigned by Moody's Investors Services, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") or municipal notes rated at the time
of purchase within the three highest grades assigned by Moody's or
Kentucky, North Carolina or Tennessee municipal bonds and notes not rated
by Moody's or S&P within the grades specified above, but secured by the
full faith and credit of the United States government. A description of
the general characteristics of the municipal securities qualifying for the
Moody's and S&P ratings specified above and in the Prospectus follows.
No more than 20% of the value of our total assets in each of the Kentucky
Series, the North Carolina Series or the Tennessee Series will be invested
in securities which are not rated, but which, in the opinion of our
Investment Adviser, would have been rated at the grades indicated above if
the issuers had sought a rating at the time of issuance. Issuers do not
always secure ratings for reasons of cost or when ratings are not needed
to effectuate the sale. No special or particular risk is associated solely
with unrated securities.
The ratings described below reflect the opinions of Moody's and S&P as to
the quality of the municipal securities they undertake to rate. As such,
the ratings represent broad guidelines rather than absolute standards of
quality. You should also bear in mind that Moody's and S&P usually rate an
issue of municipal securities at the time it is first offered to the
public, and that, once issued, a rating is seldom updated unless and until
the municipal issuer makes a further offering of its securities. Our
Investment Adviser will make its own evaluation of each security it
selects for our portfolios and will continue to evaluate each portfolio
security so long as we hold it.
Ratings of Municipal Bonds
MOODY'S INVESTORS SERVICE, INC. Aaa: the "best quality." Aa: "high
quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat larger than Aaa rated municipal
bonds. A: "upper medium grade obligations." Factors giving security to
principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the
future. Baa: "Medium grade," neither highly protected, nor poorly
secured. Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time.
STANDARD & POOR'S CORPORATION. AAA: "obligations of the highest quality,"
AA: issues with investment characteristics "only slightly less marked
than those of prime quality issues." A: "the third strongest capacity
for payment of debt service." Principal and interest payments on bonds in
this category are regarded as safe. It differs from the two higher ratings
because, with respect to general obligations bonds, there is some weakness
which, under certain adverse circumstances, might impair the ability of
the issuer to meet debt obligations at some future date. With respect to
revenue bonds, debt service coverage is good, but not exceptional, and
stability of the pledged revenues could show some variations because of
increased competition or economic influences in revenues. BBB: the lowest
"investment grade" security rating. The difference between A and BBB
ratings is that the latter shows more than one fundamental weakness, or
one very substantial fundamental weakness. With respect to revenue bonds,
debt coverage is only fair. Stability of the pledged revenues could show
substantial variations, with the revenue flow possibly being subject to
erosion over time.
Ratings of Municipal Notes
MOODY'S INVESTORS SERVICE, INC. MIG 1: the best quality. MIG 2: high
quality, with margins of protection ample although not so large as in the
preceding group. MIG 3: favorable quality, with all security elements
accounted for, but lacking the undeniable strength of the preceding
grades. Market access for refinancing, in particular, is likely to be less
well established.
Kentucky Municipal Securities
Kentucky municipal securities are obligations issued by the state of
Kentucky, its political subdivisions, and the districts, authorities,
agencies and instrumentalities of the state and its political
subdivisions, the interest on which is exempt from federal and Kentucky
income taxes.
Kentucky municipal bonds are issued for various public purposes, including
the construction of airports, highways, housing, hospitals, pollution
abatement facilities, schools, streets, water and sewer works, gas and
electric utilities and university buildings. Municipal issuers in Kentucky
can issue bonds for the purposes of refunding outstanding obligations,
obtaining funds to finance other public institutions and meeting general
operating expenses. Industrial building revenue bonds, which are
considered municipal bonds if the interest paid thereon is exempt from
federal and Kentucky income taxes, are issued by or on behalf of public
authorities to finance construction of privately operated facilities, such
as manufacturing plants, housing, sports arenas and pollution control
installations. Our investments in Kentucky industrial building revenue
bonds are subject to the restrictions set forth in Paragraph 10 of the
"Investment Restrictions."
There are five general types of Kentucky municipal bonds. General
obligation bonds are secured by the issuer's pledge of its full faith,
honor, credit and/or taxing power for the payment of principal and
interest. Apart from those issued by the state of Kentucky, general
obligation bonds are relatively rare since they must be authorized by a
two-thirds vote of the electorate of the municipal issuer. Revenue bonds
are payable from and secured by a particular revenue stream, such as lease
rentals, utility usage and connection charges, student registration or
housing fees, bridge or highway tolls, parking fees, sports event gate
receipts, etc. Although industrial building revenue bonds are issued by
municipal authorities, they are secured by revenues, derived from a lease
rental contract with a non-governmental user. Some revenue bonds,
including industrial building revenue bonds, are secured by a mortgage on
the rental property. Improvement assessment bonds are obligations secured
by a special assessment (e.g. a sewer charge) that the governmental issuer
imposes on each owner of property benefited by the improvement (e.g. a
sanitary sewer project). The assessments are similar to taxes and have a
priority which is similar to a tax lien. Refunded or defeased bonds are
secured by an escrow fund, which usually is invested in United States
government securities and occasionally in bank certificates of deposit or
similar instruments. Housing bonds, including Kentucky Housing Corporation
bonds, are usually secured by mortgages that the issuer acquires and
pledges for the payment of the bonds. Local housing authorities sometimes
issue bonds that are secured by rentals from the operation of a housing
project. Housing bonds may also have additional security in the form of
federal guarantees of the mortgages or rentals constituting the primary
security.
Because of constitutional limitations, the state of Kentucky cannot enter
into a financial obligation of more than two year's duration, and no other
municipal issuer within the state can enter into a financial obligation of
more than one year's duration. As a consequence, the payment and security
arrangements applicable to Kentucky revenue bonds differ significantly
from those generally applicable to municipal revenue bonds in other
states. Many city and county construction projects are financed through
bonds which are nominally issued in the name of public corporation which
holds title to the project and leases the project back to the city or
county on a year-to-year renewable basis. In this situation, the rent that
the nominal issuer receives from the actual user of the property financed
by the bonds is the only sourse of any security for the payment of the
bonds, so that a failure by the user to renew the lease in any year will
put the bonds into default. However, after looking into the question,
Dupree & Company, Inc. the parent of Dupree Investment Advisers, Inc., has
informed us that it can find no reported instance in which a Kentucky
school bond has gone into default.
At times, we may purchase Kentucky municipal securities when a new issue
is being offered in an underwriting, at which time the securities are
offered on a "when-issued" basis, meaning that the delivery date is
unknown. This means we would commit to purchase the securities at an
agreed price to be paid at the time of delivery, usually in 30 to 45 days.
During this period we would not receive interest on the securities, but
would not have paid for them. There is some risk that the securities will
never be delivered, although slight. It is possible, however, that by the
delivery date changing market conditions will have caused the securities
to have a market value (on that date) different than the price we have
committed to pay, either higher or lower. We do not intend to make when-
issued purchase commitments for speculative purposes, but only to
accomplish our investment objective. Therefore, when we commit to purchase
securities on a when-issued basis, we will identify designated, readily
marketable assets at least equal to the amount of the purchase to pay for
the commitment. In that event, we may find it necessary to sell other
assets that have not been so identified in order to meet the requests from
shareholders for redemption of our shares. In the unlikely event that it
becomes necessary for us to sell when-issued securities before delivery,
any resulting gain or loss would not be tax-exempt.
Unlike other types of investments, municipal securities have traditionally
not been subject to registration with, or other regulation by, the
Securities and Exchange Commission. However, there have been proposals
which could lead to future regulations of these securities by the
Commission.
North Carolina Municipal Securities
North Carolina municipal securities are obligations issued by the state of
North Carolina, its political subdivisions, and the districts,
authorities, agencies and instrumentalities of the state and its political
subdivisions, the interest on which is exempt from federal and North
Carolinal income taxes.
North Carolina municipal bonds are issued for various public purposes,
including the construction of airports, highways, housing, hospitals,
pollution abatement facilities, schools, streets, water and sewer works,
gas and electric utilities and university buildings. Municipal issuers in
North Carolina can issue bonds for the purposes of refunding outstanding
obligations, obtaining funds to finance other public institutions and
meeting general operating expenses. Industrial building revenue bonds,
which are considered municipal bonds if the interest paid thereon is
exempt from federal income and North Carolina income taxes, are issued by
or on behalf of public authorities to finance construction of privately
operated facilities, such as manufacturing plants, housing, sports arenas
and pollution control installations. Our investments in North Carolinal
building revenue bonds are subject to the restrictions set forth in
Paragraph 10 of the "Investment Restrictions."
There are five general types of North Carolina municipal bonds. General
obligation bonds are secured by the issuer's pledge of its faith and
credit (taxing power) for the payment of principal and interest. Revenue
bonds are payable from and secured by a particular revenue stream, such as
lease rentals, utility usage and connection charges, student registration
or housing fees, parking fees, sports event gate receipts, etc. Although
industrial development revenue bonds are issued by municipal authorities,
they are secured by revenues, derived from a lease rental contract or loan
agreement with a non-governmental user. Some revenue bonds, including
industrial development revenue bonds, are secured by a mortgage on the
property financed. Refunded or defeased bonds are secured by an escrow
fund, which usually is invested in United States government securities and
occasionally in bank certificates of deposit or similar instruments.
Housing bonds, including North Carolina Housing Finance Agency bonds, are
usually secured by mortgages that the issuer acquires and pledges for the
payment of the bonds. Local housing authorities sometimes issue bonds that
are secured by rentals from the operation of a housing project. Housing
bonds may also have additional security in the form of federal guarantees
of the mortgages or rentals constituting the primary security.
Certificated of participation ("COP's") are payable from a stream of
revenues generated by an installment financing contract or lease. This
contract or lease is between the North Carolina local government and the
issuer, which is usually a nonprofit corporation that is a financing
instrumentality of the local government. COP's are only secured by a lien
or mortgage on the property being acquired or leased. The local
government's taxing power is not pledged to the repayment of the COP's and
no deficiency judgement may be rendered against local government for
repayment of the COP's. Payments on COP's by the local government are
subject to the annual appropriation process of the local government. Some
COP's may also be secured with financial guarantee insurance, a letter of
credit or other credit enhancement.
At times, we may purchase North Carolina municipal securities when a new
issue is being offered in an underwriting, at which time the securities
are offered on a "when-issued" basis, meaning that the delivery date is
unknown. This means we would commit to purchase the securities at an
agreed price to be paid at the time of delivery, usually in 30 to 45 days.
During this period we would not receive interest on the securities, but
would not have paid for them. There is some risk that the securities will
never be delivered, although slight. It is possible, however, that by the
delivery date changing market conditions will have caused the securities
to have a market value (on that date) different than the price we have
committed to pay, either higher or lower. We do not intend to make when-
issued purchase commitments for speculative purposes, but only to
accomplish our investment objective. Therefore, when we commit to purchase
securities on a when-issued basis, we will identify designated, readily
marketable assets at least equal to the amount of the purchase to pay for
the commitment. In that event, we may find it necessary to sell other
assets that have not been so identified in order to meet the requests from
shareholders for redemption of our shares. In the unlikely event that it
becomes necessary for us to sell when-issued securities before delivery,
any resulting gain or loss would not be tax-exempt.
Unlike other types of investments, municipal securities have traditionally
not been subject to registration with, or other regulation by, the
Securities and Exchange Commission. However, there have been proposals
which could lead to future regulations of these securities by the
Commission.
Tennessee Municipal Securities
Tennessee municipal securities are obligations issued by the state of
Tennessee, its political subdivisions, and the districts, authorities,
agencies and instrumentalities of the state and its political
subdivisions, the interest on which is exempt from federal and Tennessee
Hall income taxes.
Tennessee municipal bonds are issued for various public purposes,
including the construction of airports, highways, housing, hospitals,
pollution abatement facilities, schools, streets, water and sewer works,
gas and electric utilities and university buildings. Municipal issuers in
Tennessee can issue bonds for the purposes of refunding outstanding
obligations, obtaining funds to finance other public institutions and
meeting general operating expenses. Industrial building revenue bonds,
which are considered municipal bonds if the interest paid thereon is
exempt from federal income and Tennessee Hall income taxes, are issued by
or on behalf of public authorities to finance construction of privately
operated facilities, such as manufacturing plants, housing, sports arenas
and pollution control installations. Our investments in Tennessee
industrial building revenue bonds are subject to the restrictions set
forth in Paragraph 10 of the "Investment Restrictions."
There are six general types of Tennessee municipal bonds. General
obligation bonds are secured by the issuer's pledge of its full faith,
honor, credit and/or taxing power for the payment of principal and
interest. Revenue bonds are payable from and secured by a particular
revenue stream, such as lease rentals, utility usage and connection
charges, student registration or housing fees, bridge tolls, parking fees,
sports event gate receipts, etc. Although industrial building revenue
bonds are issued by municipal authorities, they are secured by revenues,
derived from a lease rental contract with a non-governmental user. Some
revenue bonds, including industrial building revenue bonds, are secured by
a mortgage on the rental property. Refunded or defeased bonds are secured
by an escrow fund, which usually is invested in United States government
securities and occasionally in bank certificates of deposit or similar
instruments. Housing bonds, including Tennessee Housing Development Agency
bonds, are usually secured by mortgages that the issuer acquires and
pledges for the payment of the bonds. Local housing authorities sometimes
issue bonds that are secured by rentals from the operation of a housing
project. Housing bonds may also have additional security in the form of
federal guarantees of the mortgages or rentals constituting the primary
security. "Double Barrel Bonds" are primarily water and sewer issues for
which the revenues are the primary source of debt service, but with taxes
as the unlimited secondary source. Improvement Assessment bonds are
obligations secured by a special assessment (e.g. a sewer charge) that the
government issuer imposes on each owner of property benefitted by the
improvement (e.g. a sanitary sewer project). The assessments are similar
to taxes and have a priority which is similar to a tax lien.
At times, we may purchase Tennessee municipal securities when a new issue
is being offered in an underwriting, at which time the securities are
offered on a "when-issued" basis, meaning that the delivery date is
unknown. This means we would commit to purchase the securities at an
agreed price to be paid at the time of delivery, usually in 30 to 45 days.
During this period we would not receive interest on the securities, but
would not have paid for them. There is some risk that the securities will
never be delivered, although slight. It is possible, however, that by the
delivery date changing market conditions will have caused the securities
to have a market value (on that date) different than the price we have
committed to pay, either higher or lower. We do not intend to make when-
issued purchase commitments for speculative purposes, but only to
accomplish our investment objective. Therefore, when we commit to purchase
securities on a when-issued basis, we will identify designated, readily
marketable assets at least equal to the amount of the purchase to pay for
the commitment. In that event, we may find it necessary to sell other
assets that have not been so identified in order to meet the requests from
shareholders for redemption of our shares. In the unlikely event that it
becomes necessary for us to sell when-issued securities before delivery,
any resulting gain or loss would not be tax-exempt.
Unlike other types of investments, municipal securities have traditionally
not been subject to registration with, or other regulation by, the
Securities and Exchange Commission. However, there have been proposals
which could lead to future regulations of these securities by the
Commission.
Intermediate Government Bond Series
As stated in our Prospectus, our investment objective is to realize the
highest level of income available without undue risk to principal by
investing in professionally-managed portfolios of securities. The
Intermediate Government Bond Series will maintain a non-diversified
portfolio consisting of securities: 1) issued by the U.S. Government such
as U.S. Treasury Notes and Bills; 2) issued by agencies or
instrumentalities of the U.S. Government such as, but not limited to,
obligations of the Federal Farm Credit Banks, the Federal National
Mortgage Association, the Government National Mortgage Association and the
Federal Home Loan Bank; 3) bank accounts fully insured by the FDIC or
collateralized; and 4) repurchase agreements fully collateralized by
issues of the U.S. Government or its agencies.
Portfolio Turnover
Portfolio turnover rate is the ratio of the lesser of sales and purchases
of portfolio securities to the average monthly value of the entire
portfolio, excluding from both the numerator and denominator short term
investments.
Kentucky Tax-Free Income Series
Kentucky Tax-Free Short-to-Medium Series
North Carolina Tax-Free Income Series
North Carolina Tax-Free Short-to-Medium Series
Tennessee Tax-Free Income Series
Tennessee Tax-Free Short-to-Medium Series
We do not intend to purchase Kentucky, North Carolina or Tennessee
municipal securities for short-term profits. Securities will be purchased
and sold in response to our management's evaluation of the issuer's
ability to meet its debt obligations in the future. However, a security
purchased at any earlier date may be sold in anticipation of a market
decline (a rise in interest rates), and a security purchased in
anticipation of a market rise (a decline in interest rates) may be sold at
any later date. In addition, a security may be sold and another purchased
when, in the opinion of our management, a favorable yield spread exists
between those particular issuers or in different market sectors. Finally,
in order to obtain an immediate yield on the cash proceeds from the sale
of our shares pending the selection and availability of a more permanent
investment, we may temporarily acquire Kentucky, North Carolina or
Tennessee municipal securities under informal repurchase arrangements with
a bank. Typically, under these arrangements, we would resell such
securities to the bank, and the bank would repurchase them from us, within
a short period of time, usually not more than seven days.
For the fiscal year ended June 30, 1995 our portfolio turnover rate for
the Kentucky Tax-Free Income Series was approximately 18.05%, as compared
with our rate of approximately 30.53% for the fiscal year ended June 30,
1994. Fiscal 1994-95 was a year which experienced growth of one new net
account. On the assumption that fiscal 1995-96 will be a year of
stability, the portfolio turnover should remain about the same.
For the fiscal year ended June 30, 1995, our portfolio turnover rate for
the Kentucky Tax-Free Short-to-Medium Series was approximately 4.07%, as
compared with our rate of approximately 17.62% for the fiscal year ended
June 30, 1994. Fiscal 1994-954 was a year with a slight decline in new net
account. On the assumption that fiscal 1995-96 will be a year of
stability, the portfolio turnover should remain about the same.
For the fiscal year ended June 30, 1995, our portfolio turnover rate for
the Tennessee Tax-Free Income Series was approximately 6.84% as compared
with our rate of approximately 15.88% for the fiscal year ended June 30,
1994. Fiscal 1994-95 was a year of growth in net new accounts. On the
assumption that fiscal 1995-96 will be a year of stability, the portfolio
turnover should remain about the same.
For the fiscal year ended June 30, 1995, our portfolio turnover rate for
the Tennessee Tax-Free Short-to-Medium Series was approximately .71% with
new net accounts during the first partial year of operations. On the
assumption that fiscal 1995-96 will be a year of steady growth, the
portfolio turnover rate for the Tennessee Tax-Free Short-to-Medium Series
is expected to be moderate.
As a new series with a weighted average maturity, usually averaging 10
years or more, the portfolio turnover rate for the North Carolina Tax-Free
Income Series is expected to be moderate, approximately 20%, assuming
steady, even growth.
As a new series with a weighted average maturity of two to five years, the
portfolio turnover rate for the north Carolina Tax-Free Short-to-Medium
Series is expected to be moderate, approximately 20%, assuming steady,
even growth.
Portfolio turnover, is defined to be the lesser of purchases or sales
divided by the average value of the portfolio.
Intermediate Government Bond Series
For the fiscal year ended June 30, 1995 our portfolio turnover rate was
approximately 74.98% as compared with our rate of approximately 23.08% for
the fiscal year ended June 30, 1994. Fiscal 1994-95 was a year with a
modest decline in new net accounts. On the assumption that fiscal 1995-96
will be a year of stability, the portfolio turnover rate should decline.
In periods of declining interest rates, the Series' yield will tend to be
somewhat higher than prevailing market rates, and in periods of rising
interest rates, the yield of the Series will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to the
Series from the continuous sale of its shares will likely be invested in
portfolio instruments producing lower yields than the balance of the
Series' portfolio, thereby reducing the current yield of the Series. In
periods of rising interest rates, the opposite can be true.
Investment Restrictions
We have adopted certain investment restrictions which may not be changed
without the approval of the holders of a majority of the shares
representing only the affected Series. Under these restrictions, we may
not take any of the following actions with respect to each Series:
Kentucky and Tennessee Tax-Free Income Series
1. With respect to 75% of the value of our total assets, purchase the
securities of any single issuer (except the United States government, its
agencies and instrumentalities), if, as a result, more than 5% of the
value of our total assets would be invested in securities of such issuer
(including repurchase agreements with any one bank). For this purpose, the
states of Kentucky and Tennessee, each political subdivision of each
state, and each district, authority, agency or instrumentality of each
state or any of either states' political subdivisions will be deemed to be
a separate issuer.
2. Borrow money, except from banks as a temporary measure for purposes
of meeting redemption requests and/or bond purchase commitments and then
only in an amount not exceeding 5% of the value of our total assets.
3. Pledge or hypothecate any of our assets, except as security for a
permissible temporary bank borrowing (see Restriction 2), and then only in
an amount not exceeding 15% of the value of our total assets.
4. Make loans, except through the purchase of portions of issues or
publicly distributed debt securities and entry into repurchase agreements.
We will not enter into a repurchase agreement maturing in more than seven
business days, if, as a result more than 10% of the value of our net
assets would be so invested.
5. Purchase securities subject to legal or contractual restrictions on
resale (except those imposed by repurchase agreements).
6. Underwrite the securities of other issuers, except to the extent
that our purchase of Kentucky and Tennessee municipal securities directly
from the issuer (either alone or as one of a group of bidders) may be
deemed to be an underwriting of such securities.
7. Purchase or sell real estate or real estate mortgage loans, but this
limitation will not prevent us from purchasing Kentucky and Tennessee
municipal securities or other securities secured by real estate or
interest in real estate.
8. Purchase or sell commodities or commodity contracts.
9. Purchase equity securities or securities convertible into equity
securities.
10. Purchase any security, if, as a result, more than 25% of the value
of our total assets would be invested in the securities of issuers having
their principal business activities in the same industry. This limitation
would preclude us from investing more than 25% of the value of our total
assets in industrial building revenue bonds issued to finance facilities
for non-govern-mental issuers in any one industry. However, the limitation
does not apply to any other tax exempt municipal securities, to securities
issued or guaranteed by the United States government or any of its
agencies or instrumentalities.
11. Invest in companies for the purpose of exercising management or
control.
12. Invest in securities of other investment companies, except where
such investment results from a merger or consolidation with, or an
acquisition of assets of, another investment company.
13. Make short sales of securities.
14. Purchase securities on margin, except that we may obtain such short
term credit as may be necessary for the clearance of securities purchases.
15. Write or invest in put or call options, or any combination thereof.
16. Issue senior securities.
Kentucky, North Carolina and Tennessee Tax-Free Short-to-Medium Series,
and North Carolina Tax-Free Income Series
1. With respect to 50% of the value of our total assets as of the close
of each fiscal quarter, purchase the securities of any single issuer
(except the United States government, its agencies and instrumentalities),
if, as a result, more than 5% of the value of our total assets would be
invested in securities of such issuer (including repurchase agreements
with any one bank). For this purpose, the states of Kentucky, North
Carolina and Tennessee, each political subdivision of the state, and each
district, authority, agency or instrumentality of the state or any of its
political subdivisions will be deemed to be a separate issuer.
2. Borrow money, except from banks as a temporary measure for purposes
of meeting redemption requests and/or bond purchase commitments and then
only in an amount not exceeding 5% of the value of our total assets.
3. Pledge or hypothecate any of our assets, except as security for a
permissible temporary bank borrowing (see Restriction 2), and then only in
an amount not exceeding 15% of the value of our total assets.
4. Make loans, except through the purchase of portions of issues or
publicly distributed debt securities and entry into repurchase agreements.
We will not enter into a repurchase agreement maturing in more than seven
days, if, as a result, more than 10% of the value of our total assets
would be so invested.
5. Purchase securities subject to legal or contractual restrictions on
resale (except those imposed by repurchase agreements).
6. Underwrite the securities of other issuers, except to the extent
that our purchase of Kentucky, North Carolina and Tennessee municipal
securities directly from the issuer (either alone or as one of a group of
bidders) may be deemed to be an underwriting of such securities.
7. Purchase or sell real estate or real estate mortgage loans, but this
limitation will not prevent us from purchasing Kentucky, North Carolina
and Tennessee municipal securities or other securities secured by real
estate or interest in real estate.
8. Purchase or sell commodities or commodity contracts.
9. Purchase equity securities or securities convertible into equity
securities.
10. Purchase any security, if, as a result as of the close of each fiscal
quarter more than 25% of the value of our total assets would be invested
in the securities of issuers having their principal business activities in
the same industry. This limitation would preclude us from investing more
than 25% of the value of our total assets industrial building revenue
bonds issued to finance facilities for non-governmental issuers in any one
industry.
However, the limitation does not apply to any other municipal securities,
to securities issued or guaranteed by the United States government or any
of its agencies or instrumentalities.
11. Invest in companies for the purpose of exercising management or
control
12. Invest in securities of other investment companies, except where
such investment results from a merger or consolidation with, or an
acquisition of assets of, another investment company.
13. Make short sales of securities.
14. Purchase securities on margin, except that we may obtain such short
term credit as may be necessary for the clearance of securities purchases.
15. Write or invest in put or call options, or any combination thereof.
16. Issue senior securities.
Intermediate Government Bond Series
1. With respect to 50% of the value of our total assets as of the close
of each fiscal quarter, purchase the securities of any single issuer
(except the United States government, its agencies and instrumentalities),
if, as a result, more than 5% of the value of our total assets would be
invested in securities of such issuer (including repurchase agreements
with any one bank or brokerage firm).
2. Borrow money, except from banks as a temporary measure for purposes
of meeting redemption requests and/or bond purchase commitments and then
only in an amount not exceeding 5% of the value of our total assets.
3. Pledge or hypothecate any of our assets, except as security for a
permissible temporary bank borrowing (see Restriction 2), and then only in
an amount not exceeding 15% of the value of our total assets.
4. Make loans, except through the purchase of portions of issues or
publicly distributed debt securities and entry into repurchase agreements.
We will not enter into a repurchase agreement maturing in more than seven
days, if, as a result, more than 10% of the value of our total assets
would be so invested.
5. Purchase securities subject to legal or contractual restrictions on
resale (except those imposed by repurchase agreements).
6. Underwrite the securities of other issuers, except to the extent
that our purchase of U.S. Government securities directly from the issuer
(either alone or as one of a group of bidders) may be deemed to be an
underwriting of such securities.
7. Purchase or sell real estate or real estate mortgage loans, but this
limitation will not prevent us from purchasing securities or other
securities secured by real estate or interest in real estate.
8. Purchase or sell commodities or commodity contracts.
9. Purchase equity securities or securities convertible into equity
securities.
10. Purchase any security, if, as a result as of the close of each
fiscal quarter more than 25% of the value of our total assets would be
invested in the securities of issuers having their principal business
activities in the same industry. The limitation does not apply to
securities issued or guaranteed by the United States government or any of
its agencies or instrumentalities.
11. Invest in companies for the purpose of exercising management or
control.
12. Invest in securities of other investment companies, except where
such investment results from a merger or consolidation with, or an
acquisition of assets of, another investment company.
13. Make short sales of securities.
14. Purchase securities on margin, except that we may obtain such short
term credit as may be necessary for the clearance of securities purchases.
15. Write or invest in put or call options, or any combination thereof.
16. Issue senior securities.
NON-FUNDAMENTAL RESTRICTIONS
None of the single state Series will invest in certificates of deposit or
banker's acceptances.
In accord with the requirements of the Texas securities laws, the Trust
will not invest in real estate limited partnerships, or in oil, gas and
other mineral leases, or invest more than 15% of average net assets of any
series in investments which are not readily marketable as described in
Texas securities regulations.
INVESTMENT ADVISER AND OTHER SERVICES
As stated in the Prospectus, our investment activities are managed by
Dupree Investment Advisers, Inc., a wholly owned subsidiary of Dupree &
Company, Inc. Thomas P. Dupree, Sr., is President and Chairman of the
Board of both Dupree firms, and together with his wife, Clara, are the
sole owners of the stock of Dupree & Company, Inc. He also serves as our
chief executive officer and as a member of our Board of Directors. Fred L.
Dupree, Jr., is Vice President, Secretary, Treasurer and a director of
both Dupree firms, and also holds the same offices with us. William T.
Griggs II is a Vice President with us, and Alison L. Arnold and Michelle
M. Dragoo are both Assistant Vice Presidents with us.
Investment Advisory Agreements
Dupree Investment Advisers, Inc. serves as the Investment Adviser to the
Income Series and the Short-to Medium Series pursuant to Investment
Advisory Agreements, dated November 1, 1989 (the "Agreements"). The
Agreements will continue in effect until October 31, 1996. Dupree
Investment Advisers, Inc. also serves as the Investment Adviser to the
Intermediate Government Bond Series, pursuant to an Agreement dated
November 1, 1993 which Agreement will continue in effect until October 31,
1996. Dupree Investment Advisors, Inc. also serves as the investment
adviser to the Tennessee Tax-Free Income Series pursuant to an Agreement
dated November 1, 1993, and in effect until October 31, 1996. Dupree
Investment Advisers, Inc. also serves as the investment adviser to the
Tennessee Tax Free Short-to-Medium Series pursuant to an Agreement dated
November 1, 1994, and in effect until October 31, 1996. Dupree Investment
Advisers, Inc. also serves as the investment adviser to both the North
Carolina Tax-Free Income Series and the North Carolina Tax-Free Short-to-
Medium Series pursuant to Agreements dated November 1, 1995, which
agreements will be submitted to a vote of the shareholders of each series
at the 1996 annual meeting. Said Agreements may be continued until
October 31, 1997. Each of the Advisory Agreements may be continued from
year to year after their defined ending dates if such continuation is
specifically approved at least annually by our Board of Trustees at a
meeting called for that purpose, or by a separate vote of the holders of a
majority of each Series' shares, and, in either case, also by vote of a
majority of our Trustees who are not "interested persons" of the Dupree
firm or us within the meaning of the Investment Company Act of 1940. The
Agreements are subject to termination by either party without penalty on
60 days written notice to the other and terminate automatically in the
event of assignment. Dupree & Company, Inc. had served as the Investment
Adviser to Kentucky Tax-Free Income Fund, Inc. from our inception through
October 31, 1986, when Dupree Investment Advisers, Inc. began serving as
the Investment Adviser.
Pursuant to the Agreements, Dupree Investment Advisers, Inc. provides us
with investment supervisory services, office space and facilities and
corporate administration. Specifically, the Dupree firm has undertaken to
obtain and evaluate relevant information regarding the economy,
industries, businesses, municipal issuers, securities markets and
securities; to formulate a continuing program for the management of our
assets in a manner consistent with our investment objectives; and to
implement this program by selecting the securities to be purchased or sold
by us and placing orders for such purchases and sales. In addition, the
Dupree firm provides for our office needs, maintains our books and
records, assumes and pays all sales and promotional expenses incurred in
the distribution of our shares out of its own resources without
reimbursement from the Trust, staffs us with persons competent to
perform all of our executive and administrative functions, supervises and
coordinates the activities of our institutional and other agents (e.g.,
custodian, transfer agent, independent accountants, outside legal
counsel), and permits its officers and employees to serve us as trustees
and officers, all without additional cost to us. The Dupree firm may
contract with commercial banks to assist in the provision of shareholder
services, though it has not done so to date.
Under the Agreements for each of the Series, neither Dupree Investment
Advisers, Inc. nor any of its directors, officers or employees performing
executive or administrative functions for us will be liable to us for any
error of judgment, mistake of law or other act or omission in connection
with a matter to which the Agreements relate, unless such error, mistake,
act or omission involves willful misfeasance, bad faith, gross negligence
or reckless disregard of duty or otherwise constitutes a breach of
fiduciary duty involving personal misconduct.
Under the terms of the Agreements for the Kentucky, North Carolina and
Tennessee Series, we have agreed to pay to Dupree Investment Advisers,
Inc. as compensation for all services rendered, facilities furnished and
expenses paid or assumed by it under the Agreements, a fee at the annual
rate of .50 of 1% of the first $100,000,000 average daily net assets of
each Series determined separately, .45 of 1% of the average daily net
assets between $100,000,001 and $150,000,000 of each Series determined
separately, and .40 of 1% of the average daily net assets in excess of
$150,000,000 of each Series determined separately. For the Government Bond
Series, we have agreed to pay to Dupree Investment Advisers, Inc. as
compensation for all services rendered, facilities furnished and expenses
paid or assumed by it under the Agreement, a fee at the annual rate of .2
of 1%. The fees are payable to the Dupree firm in monthly installments.
The Dupree firm has reserved the right to voluntarily subsidize any Series
of the Trust at its sole option. Prior to November 1, 1986, by the then
existing agreement, the then Investment Adviser, Dupree & Company, Inc.
was required to reimburse the Kentucky Tax-Free Income Fund, Inc. amounts
sufficient to keep operating expenses (excluding interest, taxes and
extraordinary expenses) from exceeding the annual rate of .75 of 1% of
average daily net asset value. During the past three fiscal years the
following fees have been paid the Investment Adviser:
Year Ended Year Ended Year Ended
6/30/95 6/30/94 6/30/93
Kentucky Income Series
fees $1,164,516 $1,175,795 $ 932,798
reimbursement $ -0- $ - 0- $ -0-
Kentucky
Short-to-Medium Series
fees $ 309,977 $ 334,294 $ 221,608
reimbursement $ -0- $ -0- $ 6,833
Tennessee Income Series
fees $ 11,633 $ 1,256
reimbursement $ 19,037 $ 18,535
Tennessee
Short-to-Medium Series
fees $ 2,067
reimbursement $ 11,008
Intermediate
Government Bond Series
fees $ 15,235 $ 20,266 $ 12,702
reimbursement $ 15,743 $ 19,475 $ 29,934
Indiana and Texas limit annual expenses (exclusive of interest, taxes,
brokerage commissions and extraordinary expenses) as follows: 1.5% of the
first $30,000,000 in net assets and 1% of any additional net assets for
Indiana; and 2% of the first $10,000,000 of average net assets, 1.5% of
the next $20,000,000 of average net assets and 1% of the remaining average
net assets for Texas.
Other Services
Star Bank, 425 Walnut Street, ML 6118, P.O. Box 1118, Cincinnati, Ohio
45201-1118 serves as Custodian for the Trust. Star Bank is responsible for
the safekeeping of the assets of each Series of the Trust. Star Bank
presents for payment the coupons of the municipal bonds held by it or its
sub-custodians and deposits payment to the Trust accounts.
Bank of the Bluegrass, 101 East High Street, Lexington, Kentucky 40507
assists the Transfer Agent in the clearing of redemption checks of
shareholders of the Kentucky Tax-Free Short-to-Medium Series, Intermediate
Government Bond Series and the Tennessee Tax-Free Short-to-Medium Series.
Coopers & Lybrand L.L.P., 201 East Main Street, Suite 1400, Lexington,
Kentucky 40507 serves as the independent auditors of the Trust, providing
expertise in accounting and taxation, including tax return preparation.
Dupree Investment Advisers, Inc., serves as the Transfer Agent and
Dividend Paying Agent of the Trust, collecting monies from new
shareholders and paying dividends and redemption proceeds to shareholders,
in addition to maintaining books and accounts of shareholder transactions.
Each Series of the Trust has an agreement with Dupree Investment Advisers,
Inc., as Transfer Agent, by the terms of which a fee is paid computed on
the average daily net asset value at the annual rate of .15% on the first
$20,000,000 and .12% on all amounts in excess of $20,000,000.
OFFICERS AND TRUSTEES
The following table sets forth information as to our officers and
trustees:
Principal Occupation
Name and Address Office(s) With Us During the Past Five Years
THOMAS P. DUPREE, SR.* President and Trustee President and Chairman of
125 South Mill Street the Board of Dupree
Vine Center, Suite 100 & Company, Inc. and
Lexington, KY 40507 Dupree Investment
Advisers, Inc.
Director, Studio
Plus Hotels, Inc.
FRED L. DUPREE, JR.* Vice President, Vice President, Secretary,
125 South Mill Street Secretary, Treasurer Treasurer and Director of
Vine Center, Suite 100 and Trustee Dupree & Company, Inc. and
Lexington, KY 40507 Dupree Investment
Advisers, Inc.
WILLIAM A. COMBS, JR. Trustee Secretary,Treasurer,Director,
111 Woodland Ave., #510 Dana Motor Company, Cincinnati
Lexington, KY 40502 Ohio; Secretary-Treasurer,
Director Freedom Dodge,
Lexington, KY.; Secretary,
Treasurer, Director, Ellerslie
Realty, Inc., Lexington, KY.;
Partner, Forkland Development
Co., Lexington, KY; Partner,
Lexland, Lexington, KY.
ROBERT L. MADDOX Trustee Partner, Wyatt, Tarrant &
2800 Citizens Plaza Combs, Louisville, KY.;
Louisville, KY 40202 Attorneys; Director,
Nugent Sand Company, Louisville,
KY.; Director, Orr Safety Corp-
oration, Louisville, KY,;
Director Whip-Mix Corporation,
Louisville, KY.
WILLIAM S. PATTERSON Trustee President, CEO,
367 West Short Street Cumberland Surety Co.,
Lexington, KY 40507 Lexington, KY.; President,
Patterson & Co., Frankfort,
KY.,(real estate development,
thoroughbred breeding, farming);
1994, President of land Surety
Insurance Co., Inc.
WILLIAM T. GRIGGS, II Vice President Executive Vice President of
125 South Mill Street Assistant Dupree & Company, Inc.
Vine Center, Suite 100 Secretary
Lexington, KY 40507
ALISON L. ARNOLD Assistant Vice Assistant Vice President of
125 South Mill Street President Dupree & Company, Inc.
Vine Center, Suite 100
Lexington, KY 40507
MICHELLE M. DRAGOO Assistant Vice Vice President of
125 South Mill Street President Dupree & Company, Inc.
Vine Center, Suite 100
Lexington, KY 40507
* Thomas P. Dupree, Sr. and Fred L. Dupree, Jr. are "interested persons"
of our Investment Adviser and of us within the meaning of the Investment
Company Act of 1940.
As of August 15, 1995 shares of the Trust were owned by our officers and
trustees as shown below.
Thomas P. Fred L. All Trust and
Dupree Sr. Dupree, Jr. Officers as a
group
Kentucky Income Series
Number of Shares Outstanding 184,977.482 23,806.419 296,284.220
Percentage of Shares Outstanding 4.946% .636% 7.921%
Kentucky Short-to-Medium Series
Number of Shares Outstanding 50,084.489 0.000 140,657.643
Percentage of Shares Outstanding .456% 0.000% 1.282%
Intermediate Government Bond Series 3,723.909 3,022.924 335.986
Number of Shares Outstanding .483% .393% .044%
Percentage of Shares Outstanding
Thomas P. Dupree, Sr. and Fred L. Dupree, Jr. are brothers. Neither
receives any remuneration from us.
Each noninterested Trustee, received compensation in the amount of $11,000
for their services to us for the fiscal year ended June 30, 1995. For the
current fiscal year the three noninterested Trustees will be entitled to
fees of $12,000 each.
PORTFOLIOS TRANSACTIONS
Ordinarily, portfolio securities for each Series are purchased from
underwriters at prices that include underwriting fees or from primary
market makers acting as principals and selling to us at net prices. In
either case, we would not pay any brokerage commission. Transactions
placed with dealers serving as primary market makers are executed at
prices within the spread between the bid and asked prices for the
securities.
Decisions with respect to the purchase and sale of our portfolio
securities, including the allocation of principal business and portfolio
brokerage, are made by our Investment Adviser, Dupree Investment Advisers,
Inc. The Dupree firm has discretionary authority to implement these
decisions by placing orders for the purchase or sale of securities for our
account with underwriters, dealers or brokers selected by it for that
purpose. However, the Dupree firm will not deal with us as principal, or
as our agent, in purchasing and selling securities for our accounts.
Purchases and sales of securities for the Trust's portfolios, as well as
allocation of brokerage, are reviewed quarterly by the Trust's Board of
Trustees.
Dupree Investment Advisers, Inc. has advised us that, in placing orders
for the purchase and sale of our portfolios transactions, it will seek
execution at the most favorable prices through responsible brokers, in
agency transactions, at competitive commission rates. The Dupree firm has
also advised us that, in selecting brokers to execute our portfolio
transactions, it will give consideration to such factors as the price of
the security, the rate of commission, if any, the size and difficulty of
the order, the reliability, integrity, financial conditions and general
execution and operating capabilities of competing brokers, and the
brokerage and research services which they provide to the Dupree firm or
to us.
Dupree Investment Advisers, Inc. has further advised us that it does not
presently intend to award brokerage on our portfolios to brokers who
charge higher commissions because of research services they provide.
However, under our Investment Advisory Agreements with it, we have
authorized the Dupree firm to adopt a brokerage allocation policy
embodying the concepts of Section 28(e) of the Securities Exchange Act of
1934. Under such a policy, a broker furnishing research services could be
paid a higher commission than the commission that would be paid to another
broker which either does not furnish research services or furnishes
research services deemed to be of lesser value, if such higher commission
is deemed to be reasonable in relation to the value of the brokerage and
research services provided by the broker charging it, either in terms of
that particular transaction or in terms of the overall responsibilities of
the Dupree firm with respect to the accounts as to which it exercises
investment discretion. Research services furnished by a broker can include
evaluation of the market prices of securities in the Trust's portfolios,
evaluation of potential additions to the Trust's portfolios and credit
analysis of particular issuers of securities.
Whether and to what extent net prices or commissions charged by brokers
selected by Dupree Investment Advisers, Inc. reflect an element of value
for research services cannot presently be determined. To the extent that
research services of value are provided by brokers with or through which
the Dupree firm places our portfolio transactions, the Dupree firm may be
relieved of expenses it might otherwise bear. Research services furnished
by brokers could be useful and of value to the Dupree firm in serving its
other clients as well as us; but, on the other hand, research services
obtained by the Dupree firm as a result of placing portfolio brokerage of
other clients could be useful and of value to it in serving us.
Since our shares are not sold through intermediary brokers, it is not the
practice of Dupree Investment Advisers, Inc. to allocate principal
business or portfolio brokerage on the basis of such sales. However,
brokers effecting purchases of our shares for their customers may
participate in principal transactions of brokerage allocated as described
in the preceding paragraphs. The Dupree firm has advised us that, when it
purchases Kentucky municipal securities for our portfolios in
underwritings, it will seek to negotiate a purchase price reflecting a
reduction from the initial public offering price by an amount equal to
some or all of the applicable selling group concessions.
No brokerage commissions have been paid by the Trust during the three most
recent fiscal years.
SHARES OF BENEFICIAL INTEREST
Dupree Mutual Funds is a Kentucky Business Trust organized under the laws
of the Commonwealth of Kentucky on July 1, 1987. The Business Trust is the
successor of Kentucky Tax-Free Income Fund, Inc. The Trust offers shares
of beneficial interest of separate Series without par value. Shares of
seven Series have been authorized, though only shares which constitute the
interests in Kentucky Tax-Free Income Series, Kentucky Tax-Free Short-to-
Medium Series, North Carolina Tax-Free Income Series, North Carolina Tax-
Free Short-to-Medium Series, Tennessee Tax-Free Income Series, Tennessee
Tax-Free Short-to-Medium Series, and Intermediate Government Bond Series
as described in the Prospectus are being offered.
Each share has one vote. Fractional shares have proportionate voting
rights and participate pro rata in dividends and distributions. Our
shareholders have cumulative voting rights for the election of Trustees.
This means that, in each election of Trustees, each shareholder has the
right to cast a number of votes equal to the number of Trustees to be
elected and to cast all of such votes for one candidate or distribute such
votes among two or more candidates, as the shareholder sees fit. When
issued, our shares are fully paid and nonassessable.
As of August 1, 1995, no person was known to beneficially own 5% or more
of our outstanding shares of Kentucky Tax-Free Income Series or the
Intermediate Government Bond Series. As of that date Cebantco owned 5.05%
of the outstanding shares of the Kentucky Tax-Free Short-to-Medium Series.
As of that date Patricia Hurlocker owned 5.39%, Gail Mays owned 15.79%,
Terrell Mays owned 11.34%, and Don Walker owned 5.65% of the outstanding
shares of the Tennessee Tax-Free Income Series. As of that date Thomas
Buchanan, Jr. owned 6.16%, Gail Mays owned 23.63%, Harry Samuels Trust
owned 10.44% and Arthur Woods owned 12.26% of the Tennessee Tax-Free
Short-to-Medium Series.
As of October 1, 1995, shares of neither of the North Carolina Series were
being offered.
HOW TO PURCHASE SHARES
Shares of our Trust which are offered for sale are offered directly by the
Trust. Since we do not charge any sales commissions, every dollar you
invest in us is applied to the purchase of our shares.
The price of your shares will be their net asset value per share, as
calculated in the first determination of net asset value after your order
has become effective. Your order will be priced and executed at the net
asset value next determined after the order is received. There is no sales
charge or load.
The Prospectus describes the procedures to be utilized by an investor
desiring to purchase our shares.
Determination of Net Asset Value
We compute the net asset value of the shares of each Series separately at
the close of trading on the New York Stock Exchange each day the Exchange
is open for trading, by dividing the value of the assets of each Series,
minus its liabilities, by the total number of shares of each Series which
are outstanding. The New York Stock Exchange is closed on the following
Holidays: New Year's Day (January 1), Washington's Birthday (third Monday
in February), Good Friday (varies annually), Memorial Day (last Monday in
May), Independence Day (July 4), Labor Day (first Monday in September),
Thanksgiving Day (fourth Thursday in November), and Christmas Day
(December 25).
The securities in which we invest are traded primarily in the over-the-
counter market. We value securities for which representative price
quotations are current and readily available at the mean between the
quoted bid and asked prices. If price quotations are not readily
available, or if we believe that available quotations are not current or
representative, we value securities at prices we believe will best reflect
their fair value. In such cases, and in the case of other assets, fair
value is determined in good faith in accordance with procedures approved
in advance by our Board of Trustees, consistently applied by or under the
supervision of our officers, and monitored by the Board on an ongoing
basis.
Under procedures currently in effect, all series securities for which
representative price quotations are not readily available are valued on
the basis of appraisals obtained from at least three dealers. The dealers
furnishing such appraisals may, but need not, be market makers with
respect to the particular issues to which their appraisals relate. Where
appraisals are not available for particular Kentucky, North Carolina or
Tennessee municipal securities in our portfolios, we value such securities
on the basis of price quotations or appraisals for comparable municipal
securities. In evaluating appraisals, as well as available price
quotations, our officers will take into account pricing data derived from
a matrix system developed and used for many years by our Investment
Adviser's parent, Dupree & Company, Inc. This matrix system utilizes
electronic data processing techniques to rank and price municipal
securities of the same maturity on the basis of their respective yields.
HOW TO REDEEM SHARES
The Prospectus describes the procedures to be utilized by a shareholder
desiring to redeem our shares.
Redemption by Trust
If transactions in your account at any time reduce its value to less than
$100, we may notify you that, unless you bring the account up to at least
$100, we will redeem all of your shares and close out your account by
paying you the redemption price and dividends declared but unpaid at the
date of redemption. We will give you this notice no earlier than the 15th
of the month following the month in which your account falls below $100,
and you will have 30 days to bring the account up to $100 before we take
any action. The Trust reserves the right to raise or lower minimum account
size.
HOW WE COMPUTE OUR YIELDS
The yield for each Series is determined separately.
We compute the yields, the average annual total return, and tax equivalent
yields on our shares in each portfolio separately in accord with SEC
guidelines. Our tax equivalent yield for the 30-day (or one month) period
ended on June 30, 1995 is computed by dividing that portion which is tax-
exempt by one minus a stated income tax rate and adding the product to
that portion, if any, of the yield which is not tax-exempt. Thereafter any
applicable ad valorem tax rate is added. Thus, the tax equivalent
distribution rate for the Kentucky Tax-Free Income Series was 8.67% in
Kentucky, 7.97% in Indiana, 7.60% in Texas, and 7.88% in Florida. The tax
equivalent distribution rate for the Kentucky Tax-Free Short-to-Medium
Series was 6.52% in Kentucky, 5.90% in Indiana, 5.62% in Texas, and 5.90%
in Florida. The tax equivalent distribution rate for the Tennessee Tax-
Free Income Series was 8.48% in Tennessee. The tax equivalent distribution
rate for the Tennessee Tax-Free Short-to-Medium Series was 6.21% in
Tennessee. Neither of the North Carolina Series were available for sale as
of June 30, 1995.
The average annual total return for the 1, 5 and 10 year periods ended on
June 30, 1994 is computed by finding the average annual compounded rates
of return over the 1, 5 and 10 year periods that would equate the initial
amount invested to the ending redeemable value, according to the following
formula: P(1+T)n = ERV, where: P equals a hypothetical initial payment
of $1,000, T equals average annual total return, n equals number of years,
and ERV equals ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the one, five, or ten year periods at the end of
the one, five, or ten year periods (or fractional portion thereof).
Set forth below is average annual total return information for the Income
Series and the Short-to-Medium Series and the Intermediate Government Bond
Series for the periods indicated. Neither of the North Carolina Series
were operational during the periods.
Expressed as a Percentage Redeemable Value
Based on a Hypothetical of a Hypothetical $1,000
$1,000 Investment Investment at the end of
the period
KY TN KY TN
KY Short- Gov't. TN Short- KY Short- Gov't. TN Short-
Income to- Bond Income to- Income to- Bond Income to-
SeriesMedium Series SeriesMedium Series Medium Series Series Medium
SeriesSeries Series Series
Period Average Annual Total Return
One year ended
June 30, 1995
6.9% 4.27% 12.78% 11.65% 7.41%4 $1,069 $1,043 $1,128 $1,117 $1,0494
Five years ended
June 30, 1995
7.97% 5.54% 7.10%2 5.68%3 $1,457 $1,307 $1,2202 $1,0913
Ten years ended
June 30, 1995
8.47% 5.63%1 $2,240 $1,5251
1 since inception 9/15/87
2 since inception 7/14/92
3 since inception 12/20/93
4 since inception 11/1/94
The Series' average annual total return may be expressed either as a
percentage or as a dollar amount in order to illustrate such total return
on a hypothetical investment in the Series at the beginning of each
specified period.
For the Kentucky, North Carolina and Tennessee Income Series, Kentucky,
North Carolina and Tennessee Short-to-Medium Series and Intermediate
Government Bond Series, if yield is computed for a period of less than one
year it is annualized on a 360 day basis. The yields we quote in response
to telephone inquiries represent such an annualization of our yields for
the preceding 30 calendar days.
Our yields for any given period in the past should not be considered a
representation as to our yields for any future period. Since the dividends
we declare are based on income earned on portfolio securities net of
expenses, any changes in our income or expenses will directly affect our
yields. The income we earn on our portfolio securities can be expected to
fluctuate as we make changes in or additions to our portfolios. Our yields
will be affected if we experience a net inflow of new money which is
invested at interest rates different from those being earned on our then-
current portfolio securities. A change in our net asset values due to
fluctuations in values of our portfolio securities will, of course, also
affect our yields.
Yield information may be useful in reviewing our performance and comparing
an investment in our shares with other investment alternatives. In
addition, when comparing the yields of mutual funds, you should consider
the investment objectives, policies and programs of each fund, including
the types of investments permitted and the quality and maturity of the
portfolio securities, as well as the method used by each fund to compute
yield, which may differ from fund to fund. Finally, in evaluating our
yields, you should be aware that prior to November 1, 1986 our Investment
Adviser had been bearing a portion of our operating expenses for our
Kentucky Income Series. Our Investment Adviser has been bearing a portion
of our operating expenses for our Kentucky Short-to-Medium Series prior to
July 1, 1993 and has been bearing a portion of our operating expenses for
the Government Bond Series since its inception July 14, 1992, for the
Tennessee Tax-Free Income Series since its inception, December 21, 1993
and for the Tennessee Tax-Free Short-to-Medium Series since its inception,
November 1, 1994.
In order to keep shareholders and prospective investors informed about our
historic and current yields, the make-up of our portfolios, and other
meaningful investment information, we (i) send reports to our shareholders
on a semi-annual and annual basis, (ii) provide such information in our
sales literature, and (iii) maintain a toll-free telephone through which
such information may be obtained.
Yield quotations will be computed based on a 30-day period by dividing (a)
the net income based on the yield of each security earned during the
period by (b) the average daily number of shares outstanding during the
period that were entitled to receive dividends multiplied by the maximum
offering price per share on the last day of the period. Tax equivalent
yield quotations will be computed by dividing (a) the part of the Series'
yield that is tax-exempt by (b) one minus a stated tax rate and adding the
result to that part, if any, of the Series' yield that is not tax-exempt.
The yield for the 30-day period ending June 30, 1995 for the Kentucky Tax-
Free Income Series was 4.62% and for the Kentucky Short-to-Medium Series
was 2.88%. The tax-equivalent yield for Kentucky residents for the same
period (based on a tax rate of 28%) for the Kentucky Income Series was
6.41% and for the Kentucky Short-to-Medium Series was 4.00% The yield for
the 30-day period ending June 30, 1995 for the Tennessee Tax-Free Income
Series was 5.13%. The Tax-equivalent yield for Tennessee residents for the
same period (based on a tax rate of 28%) for the Tennessee Income Series
was 7.12% and for the Tennessee Tax-Free Short-to-Medium Series was 4.47%.
Total return, yield and tax equivalent yield figures are based on the
Series' historical performance and are not intended to indicate future
performance. The Series' total return, yield and tax equivalent yield will
vary depending on market conditions, the securities comprising the Series'
portfolio, the Series' operating expenses and the amount of realized and
unrealized net capital gains or losses during the period. The value of an
investment in the Trust may fluctuate and an investors' shares, when
redeemed, may be worth more or less than their original cost.
TAX INFORMATION
Federal Tax Information
We have qualified as a "regulated investment company" under the Internal
Revenue Code and intend to continue to do so. By qualifying as a regulated
investment company we are relieved of federal and Kentucky income taxes on
all net income and all net realized capital gains, if any, that we
distribute to shareholders. In order to qualify for this treatment, we
must (i) derive at least 90% of our gross income from dividends, interest
and gains from the sale or other disposition of securities, (ii) derive
less than 30% of our gross income from the sale or other disposition of
securities held less than three months, (iii) meet certain diversification
tests as to our investments in securities, and (iv) distribute to
shareholders at least 90% of our net tax exempt and net taxable income
earned in any year.
Distribution of net short-term capital gains we may realize from the sale
of municipal or other securities will be taxable to the shareholders as
ordinary income. Distribution of net long-term capital gains, if any, will
be taxable to shareholders as long-term capital gains, regardless of how
long the shareholder has held the shares in respect of which the
distributions are paid. The tax effect of dividends (whether taxable or
exempt) on our shareholders is the same whether such dividends are in the
form of cash or additional shares.
The net asset value at which our shares are purchased may include
undistributed income or capital gains or unrealized appreciation in the
value of securities held in our investment portfolio. To the extent that
such income or gains, or any capital gains realized from such
appreciation, are subsequently distributed to the holder of such shares,
the distributed amounts, although a return of his investment, may be
taxable to him as set forth above.
The Internal Revenue Code prohibits investors from deducting for federal
income tax purposes interest paid on loans made or continued for the
purpose of purchasing or carrying shares of a mutual fund, such as the
Kentucky or Tennessee Income or Short-to-Medium Series, that distributes
exempt interest dividends. Under rules of the Internal Revenue Service,
there are circumstances in which purchases of our shares may be considered
to have been made with borrowed funds, even though the borrowed funds are
not directly traceable to the share purchases. However, these rules
generally permit the deduction of interest paid on mortgage borrowings to
purchase or improve a personal residence and on business borrowings
directly related to business needs or purposes.
If in any fiscal year we have taxable income, we will use the actual
earned method of allocating taxable and nontaxable income. We will also
allocate expenses between taxable and non-taxable income. In any such
year, the percentage of quarterly dividends that are exempt will vary from
quarter to quarter.
The following summary discusses some of the more important tax issues
affecting the Trust and its shareholders.
Excise Tax
The Internal Revenue Code contains a provision which discourages
shareholders from deferring tax on dividend income received from a
regulated investment company. Under the provision, a 4% non-deductible
federal excise tax is levied on undistributed fund income unless the fund
distributes at least a) 98% of calendar year ordinary income during the
calendar year; b) 98% of capital gain net income earned in the year ending
October 31 by December 31; and c) 100% of any undistributed capital gain
net income from the prior October 31 measurement period and 100% of any
undistributed ordinary income from the prior December 31 measurement
period.
Capital Gains
Long term capital gain distributions to a corporation will be taxed at the
regular corporate tax rate. Net long term capital gain distributions to
individuals will be taxed at the applicable individual tax rate; however
the maximum federal tax rate imposed on net long term capital gains cannot
exceed 28%.
For the 1994-95 fiscal year, a capital gains distribution was paid March
31, 1995 for the Kentucky Tax-Free Income and Short-to-Medium Series
following a recharacterization of dividends paid from February through
March 15, 1995. This recharacterization was made by the Trusts's Board of
Trustees on August 28, 1995 and a spill back tax-exempt dividend was
declared and paid in amounts equal to the recharacterized capital gains
dividend.
Exempt Interest Dividends
Under the present tax law, if the stock of a regulated investment company
acquired after March 28, 1985 is held for six months or less, any loss on
the sale or exchange of that stock would be disallowed to the extent the
taxpayer received exempt interest dividends with respect to that stock.
Further, the six month requirement would be shortened under Treasury
Department regulation to a period not less than the greater of 31 days or
the period between regular dividend distributions, if the regulated
investment company regularly distributes at least 90% of its net tax-
exempt interest.
Tax Exempt Bonds
Under laws in effect as of the date of this Prospectus, interest on
obligations of states, territories, possessions of the U.S., the District
of Columbia and political subsidiaries of these governmental entities is
generally exempt from state taxation. Interest on non-governmental purpose
bonds, such as industrial development bonds, issued by qualified
government units may be taxable unless the bonds are issued to finance
certain specified exempt activities, are used for development of
industrial park sites, or are exempt small issues. Furthermore, bonds
issued for activities for non-governmental persons are referred to
collectively as "non-essential" bonds. Interest on non-essential bonds may
be taxable unless a specific exception is provided. For example, interest
on exempt facility bonds, small issue bonds, mortgage subsidy bonds and
qualified student loan bonds, is non-taxable. Stricter volume limitations
will apply to certain issuers and aggregate volume limitations would apply
to all non-essential bonds issued in each state. Tax exempt interest on
non-essential function bonds will be treated as an alternative minimum tax
preference item for corporate and individual taxpayers. The Trust does not
intend to purchase "non-essential purpose" bonds for the Income Series or
the Short-to-Medium Series.
Income Series and Short-to-Medium Series
As a regulated investment company, we are qualified to pay "exempt
interest dividends", provided that at least 50% of our total assets are
invested in municipal securities at the close of each quarter of our
taxable year. Ordinarily, the dividends we pay from net income earned on
our investments in Kentucky, North Carolina or Tennessee municipal
securities will be exempt interest dividends. Shareholders receiving
exempt interest dividends may exclude them from gross income for federal
income tax purposes. However, dividends to our shareholders from net
income we may earn from investments in non-municipal securities will be
fully taxable as interest income.
Intermediate Government Bond Series
Ordinarily, the dividends we pay from net income earned on our investments
will not be exempt interest dividends. Accordingly, shareholders will
include these dividends in gross income for Federal income tax purposes.
The above analysis is not all-inclusive and is subject to federal
regulations.
Kentucky Tax Information
Insofar as the dividends we pay from the Kentucky Series qualify as
"exempt interest dividends" for federal income tax purposes, they will
also be excludable from the shareholder's gross income for Kentucky income
tax purposes. For Kentucky residents who own shares of the Government Bond
Series, a portion of dividends and distributions paid by the Trust may be
exempt from Kentucky income taxes. All other dividends and distributions,
as well as any earnings we receive from taxable investments and any
capital gains we realize from any investments, will have the same general
consequences to shareholders for Kentucky income tax purposes as they have
for federal income tax purposes. This means that dividends paid by the
Income Series and the Short-to-Medium Series will ordinarily be excludable
from gross income for Kentucky income tax purposes.
Shareholders of the Income Series, and the Short-to-Medium Series are not
subject to Kentucky ad valorem taxes on their shares. For individual
Kentucky residents who own shares of the Intermediate Government Bond
Series, a portion of the shares of that series are subject to Kentucky ad
valorem tax. The Kentucky municipal securities in our portfolios are also
exempt from Kentucky ad valorem taxes and from the Kentucky Corporation
License Tax.
Indiana Tax Information
Insofar as the dividends it pays qualify as "exempt interest dividends"
for federal income tax purposes, they will also be excludable from the
shareholder's gross income for Indiana income tax purposes. For Indiana
residents who own shares of the Government Bond Series, a portion of the
dividends paid by the Trust are exempt from Indiana income tax. All other
dividends and distributions, as well as any earnings we receive from
taxable investments and any capital gains we realize from any investments,
will have the same general consequences to shareholders for Indiana income
tax purposes as they have for federal income tax purposes. This means that
dividends paid by the Income Series and the Short-to-Medium Series will
ordinarily be excludable from gross income for Indiana individual income
tax purposes.
The state of Indiana does not impose intangible tax on resident
individuals. Accordingly, individual Indiana resident shareholders of the
Income Series, the Short-to-Medium Series and the Government Bond Series
are not subject to Indiana ad valorem taxes on their shares.
No representation is made as to the tax implications of an Indiana
corporation or other entity.
Texas Tax Information
The state of Texas does not impose an individual income tax or personal
intangible property tax upon resident individuals. Accordingly, Texas
resident shareholders of the Income Series, the Short-to-Medium Series or
the Government Bond Series are not subject to individual income tax or
personal intangible property tax on the dividends and distributions they
receive from us.
No representation is made as to the tax implications of a Texas
corporation or other entity.
Florida Tax Information
The state of Florida does not impose an individual income tax upon
resident individuals. Accordingly, individual Florida resident
shareholders of the Income Series, Short-to-Medium Series or Government
Bond Series are not subject to individual income tax.
Individual Florida resident shareholders of the Income Series or the
Short-to-Medium Series will be subject to an annual intangible property
tax of 1.0 mill (.10%) per dollar of intangible property value. An
additional 1.0 mill (.10%) tax is levied against intangible property
valued greater than $100,000 ($200,000 for taxpayers filing jointly). Each
Florida resident is entitled to apply a $20 tax exemption ($40 for
taxpayers filing jointly) against property subject to the first mill of
tax. An additional tax exemption of $100 ($200 for taxpayers filing
jointly) is available for property subject to the additional 1.0 mill tax.
For individual Florida residents who own shares of the Government Bond
Series, a portion of the shares of that Series are exempt from Florida ad
valorem tax.
No representation is made as to the tax implications of a Florida
corporation or other entity.
Tennessee Tax Information
Insofar as the dividends we pay from the Tennessee Series qualify as
"exempt interest dividends" for federal income tax purposes, they will
also be excludable from the shareholder's gross income for Tennessee Hall
income tax purposes. All other dividends and distributions, as well as any
earnings we receive from taxable investments and any capital gains we
realize from any investments, will have the same general consequences to
shareholders for Tennessee Hall income tax purposes as they have for
federal income tax purposes. This means that dividends
paid by the Tennessee Series will ordinarily be excludable from gross
income for Tennessee Hall individual income tax purposes.
Individual shareholders of the Tennessee Series are not subject to
Tennessee ad valorem taxes on their shares or on the dividends and
distributions they receive from us.
For Tennessee residents who own shares of the Intermediate Government Bond
Series, a portion of the dividends paid by the Trust is exempt from
Tennessee Hall income tax.
No representation is made as to the tax implications of a Tennessee
corporation or other entity.
North Carolina Tax Information
Insofar as the dividends we pay from the North Carolina Series qualify as
"exempt interest dividends" for federal income tax purposes, they will
also be excludable from the shareholder's gross income for North Carolina
income tax purposes. For North Carolina residents who own shares of the
Government Bond Series, a portion of dividends and distributions paid by
the Trust are exempt from North Carolina income taxes. All other dividends
and distributions, as well as any earnings we receive from taxable
investments and any capital gains we realize from any investments, will
have the same general consequences to shareholders for North Carolina
income tax purposes as they have for federal income tax purposes. This
means that dividends paid by the Income Series and the Short-to-Medium
Series will ordinarily be excludable from gross income for North Carolina
income tax purposes.
Shareholders of the Income Series and the Short-to-Medium Series are not
subject to North Carolina ad valorem taxes on their shares. For individual
North Carolina residents who own shares of the Intermediate Government
Bond Series, a portion of the shares of that series are subject to North
Carolina ad valorem tax.
No representation is made as to the tax implications of a North Carolina
corporation or other entity.
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
HOSPITAL AND HEALTHCARE REVENUE BONDS
9.24% Percent of Total Market Value
Jefferson County KY Hospital - Jewish Hospital
7.200 01/01/14 A/A+* $ 500,000 $ 529,060
Jefferson County KY - Medical Center Refunding
7.300 05/01/09 A/A+* 400,000 431,956
KY Development Finance Authority-St.Lukes Hospital
7.500 10/01/12 A/A* 2,000,000 2,224,860
KY Development Finance Authority-Sisters of Charity
7.375 11/01/16 A1/A-* 2,500,000 2,783,525
KY Development Finance Authority-Sisters of Charity
6.500 11/01/07 A1/A+* 2,000,000 2,143,960
KY Development Finance Authority-Sisters of Charity
6.750 11/01/12 A1/A+* 16,160,000 17,041,690
INDUSTRIAL REVENUE AND POLLUTION CONTROL REVENUE BONDS
8.46% Percent of Total Market Value
Ashland KY PCR - Ashland Oil
7.375 07/01/09 Baa1 300,000 320,646
Ashland KY PCR - Ashland Oil
6.650 08/01/09 Baa 8,835,000 9,132,209
Campbellsville KY IBR
6.950 03/01/15 NR 1,150,000 1,210,950
City of Elsmere KY IBR - Courtaulds
6.750 04/01/10 NR 2,000,000 2,077,860
Jefferson County KY PCR - Dupont
6.300 07/01/12 Aa2/AA* 3,500,000 3,709,720
Jefferson County KY PCR - LG&E
7.450 06/15/15 Aa2/AA* 1,750,000 1,962,765
Mercer County KY PCR - Kentucky Utilities
6.250 02/01/18 Aa2/AA-* 2,500,000 2,573,375
Middlesboro KY IBR
6.200 12/01/02 NR 990,000 1,031,402
Muhlenberg County KY PCR - Kentucky Utilities
6.250 02/01/18 Aa2/AA* 1,000,000 1,029,350
INSURED MUNICIPAL REVENUE BONDS
31.63% Percent of Total Market Value
Boyle County KY Hospital Revenue/Ephraim McDowell
5.800 04/01/14 Aaa/AAA* 1,000,000 993,120
Danville - Radcliffe Sewer Revenue
6.875 12/01/10 AAA* 400,000 444,544
Danville - Shelbyville Water & Sewer Revenue
6.700 07/01/11 AAA* 2,500,000 2,712,675
Danville - Shelbyville Water & Sewer Revenue
6.550 07/01/06 AAA* 495,000 548,109
Daviess County KY Hospital
6.250 08/01/12 Aaa/AAA* 3,000,000 3,091,980
Floyd County KY Hospital Refunding
7.500 08/01/10 AAA* 1,745,000 1,944,593
Hopkins County KY Hospital - Trover Clinic
6.625 11/15/11 Aaa/AAA* 2,000,000 2,146,640
Jefferson County KY Hospital - Alliant Health
6.436 10/23/14 Aaa/AAA* 4,000,000 4,176,800
Jefferson County KY Hospital - Jewish Hospital
6.500 05/01/15 Aaa/AAA* 6,380,000 6,657,849
KY Counties Single Family Mortgage Series:B
8.625 09/01/15 AAA* 70,000 77,538
KY Development Finance Authority-Kings Daughter
6.125 02/01/12 AAA* 5,200,000 5,318,716
KY Development Finance Authority-Baptist Hospital SE.
7.625 09/01/11 AAA* 6,930,000 7,669,708
KY Development Finance Authority-Pooled Loan
7.450 12/01/15 AAA* 2,000,000 2,205,760
KY Development Finance Authority-Pooled Loan
7.375 12/01/09 AAA* 2,765,000 3,010,809
KY Development Finance Authority - St. Claire
5.875 09/01/13 Aaa 2,000,000 2,010,040
KY Development Finance Authority-St. Elizabeth Hosp
5.900 12/01/15 Aaa/AAA* 2,500,000 2,496,900
KY Development Finance Authority-St. Lukes Hospital
7.000 10/01/11 AAA* 500,000 553,020
KY Housing Corporation 1992
6.600 01/01/11 Aa1/AAA* 1,640,000 1,764,574
KY Housing Corporation 1992 Series:A
6.625 07/01/14 Aa1/AAA* 1,000,000 1,056,500
KY Housing Corporation 1992 Series:B
6.600 07/01/11 Aa1/AAA* 4,500,000 4,795,155
KY Housing Corporation 1993
5.800 01/01/19 Aa/AAA* 5,755,000 5,603,874
KY Housing Corporation 1994 Series:A
6.500 07/01/17 Aaa/AAA* 7,710,000 8,010,844
KY Housing Corporation Series:92A
6.600 07/01/11 Aaa/AAA* 395,000 423,788
KY Housing Corporation - FHA/VA
7.125 01/01/10 Aa1/AAA* 3,935,000 4,398,582
KY Housing Corporation - FHA/VA
7.250 01/01/17 Aa1/AAA* 2,450,000 2,767,888
KY Housing Corporation - Multi-Family Series:85A
8.875 07/01/19 AAA* 25,000 25,005
KY Housing Corporation - Multi-Family Series:85A
8.625 07/01/05 AAA* 65,000 65,012
KY Housing Corporation - Multi-Family
5.600 07/01/13 Aaa/AAA* 1,000,000 965,930
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
KY Turnpike Authority Resource Recovery Revenue
6.000 07/01/09 Aaa/AAA* 150,000 150,002
Lexington-Fayette Urban County Govt Sewer Revenue
6.375 07/01/12 Aaa/AAA* 2,500,000 2,628,550
Lexington-Fayette Urban County Govt Sewer Revenue
6.375 07/01/10 Aaa/AAA* 2,900,000 3,083,744
Lexington-Fayette Urban County Govt Sewer Revenue
6.350 07/01/07 Aaa/AAA* 400,000 433,276
Lexington-Fayette Urban County Govt - Res. Facility
7.700 05/15/06 AAA* 625,000 690,931
Lexington-Fayette Urban County Govt - Res. Facility
7.750 05/15/15 Aaa/AAA* 100,000 110,254
Lexington-Fayette Urban County Govt - Res. Facility
7.700 05/15/06 AAA* 535,000 590,672
Northern KY University COP - Student Housing
7.250 01/01/12 AAA* 1,500,000 1,675,020
Owensboro KY Water Revenue
6.250 09/15/09 Aaa/AAA* 800,000 839,592
KY TURNPIKE AUTHORITY REVENUE BONDS
0.51% Percent of Total Market Value
KY Turnpike Authority - Toll Road Series:89
8.500 07/01/04 A/A* 540,000 572,319
KY Turnpike Authority Resource Recovery Ref 1987A
8.000 07/01/03 A/A+* 750,000 814,815
MUNICIPAL UTILITY REVENUE BONDS
4.22% Percent of Total Market Value
Campbell County KY Water Revenue
6.600 12/01/11 A* 1,000,000 1,079,200
Campbell County KY Water Revenue
6.125 12/01/14 A* 1,525,000 1,568,066
Campbell & Kenton Counties KY Sanitation Dist Rev
7.750 08/15/05 Aa/A+* 300,000 325,560
Cynthiana KY Water & Sewer Revenue
6.400 01/01/07 BBB- 575,000 626,739
Danville-Ashland KY Utilities
6.750 04/01/12 A- 915,000 985,757
Danville-Hopkinsville KY Flood Control
6.875 06/01/12 Aaa/AAA* 2,170,000 2,441,793
Franklin County KY Water & Sewer
6.200 12/01/11 Baa 1,045,000 1,095,379
Grayson County KY Utility
7.375 02/01/10 NR 320,000 353,696
Hardin County KY Water District #1
7.400 09/01/07 A 90,000 104,010
Hardin County KY Water District #1
7.400 09/01/09 A 105,000 121,081
Hardin County KY Water District #1
7.400 09/01/08 A 100,000 115,567
Hardin County KY Water District #1
7.400 09/01/06 A 85,000 98,232
Jeffersontown KY Public Property
6.500 09/01/09 Baa1 1,400,000 1,437,744
Lexington-Fayette Urban County Govt-Third YR Sewer
10.250 02/01/01 A1 75,000 77,631
Lexington-Fayette Urban County Govt-Imp. Lien
8.500 12/01/07 A1 55,000 62,548
Lexington-Fayette Urban County Govt-Imp. Lien
8.500 12/01/06 A1 50,000 56,862
Lexington-Fayette Urban County Govt-Imp. Lien
8.500 12/01/05 A1 45,000 51,176
Lexington-Fayette Urban County Govt-Imp. Lien
8.500 12/01/08 A1 55,000 62,548
Lexington-Fayette Urban County Govt-Imp. Lien
8.500 12/01/04 A1 40,000 45,490
Lexington-Fayette Urban County Govt-Imp. Lien
8.500 12/01/03 A1 40,000 45,490
Pendleton County KY - Multi-County(Louisville/Jefferson)
7.450 03/01/04 AA 245,000 280,625
Trimble County KY PCR
7.250 12/01/16 AA2/AA-* 200,000 211,196
Wurtland KY Sewer System Revenue
7.700 10/01/04 AA+* 200,000 234,786
PREREFUNDED BONDS AND ESCROWED TO MATURITY
0.10% Percent of Total Market Value
KY Infrastructure Authority
7.750 08/01/02 Aaa/AAA* 165,000 187,486
KY Infrastructure Authority
7.625 08/01/04 Aaa/AAA* 70,000 79,217
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
PUBLIC CORPORATION REVENUE BONDS
18.99% Percent of Total Market Value
Ashland KY League of Cities COPS
6.250 08/01/17 A- 1,550,000 1,594,206
Boone County KY COPS - Golf Course
7.000 11/15/14 A 5,000,000 5,481,100
Boone County KY Public Property
6.250 12/15/12 A1 960,000 993,907
Campbell County KY Public Property
6.250 12/01/15 A 810,000 834,770
Covington KY Municipal Property Corporation
7.375 08/01/11 Baa1 875,000 954,651
Covington KY Municipal Property Corporation
7.950 08/01/04 Baa1 230,000 254,670
Covington KY Municipal Property Corporation
7.900 08/01/03 Baa1 500,000 552,925
Covington KY Municipal Property Corporation
7.850 08/01/02 Baa1 330,000 364,465
Covington KY Municipal Property Corporation
7.375 08/01/12 Baa1 550,000 600,067
Danville - Mt Sterling Public Property
7.375 06/01/07 NR 240,000 270,156
Danville - Paducah Public Property
7.200 06/01/11 A 500,000 560,185
Danville - Campbellsville Public Property
7.000 04/01/02 NR 475,000 505,809
Danville - Mt Sterling Public Property
7.500 09/01/11 NR 400,000 451,948
Danville - Mt Sterling Public Property
7.500 06/01/11 NR 205,000 232,046
Danville - Owensboro Public Property - Museum
7.050 08/01/11 A 440,000 486,508
Danville - Owensboro Public Property - Riverpark
5.550 07/01/11 A 800,000 774,464
Danville - Owensboro Public Property - Riverpark
5.450 07/01/08 A 675,000 668,189
Danville Multi Housing-Jefferson County Admin Building
6.500 02/01/12 A1 1,170,000 1,247,630
Florence KY Public Property 1st Mortgage
7.000 03/01/13 A 300,000 330,417
Graves County KY Building 1st Mortgage
7.250 01/01/06 Baa-1 70,000 77,521
Jefferson County KY Economic Development
7.750 07/01/16 A1 500,000 526,285
Jefferson County KY Economic Development
7.625 07/01/08 A1 100,000 105,135
Middlesboro KY League of Cities COPS
6.200 08/01/17 A- 555,000 573,687
Lexington Fayette Urban County Govt Pub Facility Corp
6.750 12/01/09 A1 470,000 510,876
Lexington Fayette Urban County Govt Pub Parking Corp
6.875 02/01/08 A1 300,000 330,684
Lexington Fayette Urban CountyGovt Pub Facility Corp
6.750 07/01/09 A1 275,000 295,171
Louisville KY Public Parking Corporation
6.875 12/01/11 A/A* 490,000 534,022
Louisville KY Public Parking Corporation
6.875 12/01/20 A/A* 1,000,000 1,090,950
Louisville KY Public Property Refunding 92
6.700 12/01/14 A/A-* 1,945,000 2,104,082
Martin County KY Public Property 1st Mortgage
7.250 09/01/11 NR 160,000 179,899
Martin County KY Public Property 1st Mortgage
7.250 09/01/10 NR 150,000 168,656
Mt. Sterling League of Cities
6.200 03/01/18 Aa 5,500,000 5,615,610
Mt. Sterling League of Cities
6.100 03/01/08 Aa 1,500,000 1,582,770
Mt. Sterling League of Cities
6.150 03/01/13 Aa 12,000,000 12,297,360
Pendleton County Ky Multi-County Lease Series:A
6.500 03/01/19 A* 5,000,000 5,158,650
Richmond KY Public Recreation Corporation 1st Mortgage
7.250 10/01/11 NR 290,000 321,833
Richmond KY Public Recreation Corporation
6.750 08/01/13 NR 575,000 608,839
Shelbyville KY Public Recreation Corporation-Golf Course
6.900 10/01/12 NR 400,000 434,460
Somerset KY Municipal Project
7.500 05/01/00 NR 140,000 141,840
Somerset KY Municipal Project - Community College
7.500 05/01/99 NR 130,000 131,775
Union County KY Public Property
6.125 09/01/15 NR 765,000 761,848
Woodford County KY Public PropertyCorporation Ref
5.600 11/01/17 A 1,065,000 1,011,601
SCHOOL BUILDING REVENUE BONDS
13.55% Percent of Total Market Value
Adair County KY Schools
6.375 03/01/12 A 315,000 335,195
Barren County KY Schools
7.000 06/01/11 BBB+ 215,000 242,834
Bath County KY Schools
7.200 10/01/09 A/A-* 295,000 334,987
Bell County KY School District Finance Corporation
6.875 09/01/10 A- 675,000 752,895
Bell County KY Schools
6.850 09/01/09 A/A- 450,000 502,614
Boone County KY Schools
6.000 02/01/18 A 1,000,000 992,600
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
Boone County KY Schools
5.700 05/01/18 A 2,500,000 2,404,150
Boone County KY Schools Series:C
7.000 09/01/12 A 2,400,000 2,636,136
Boone County KY Schools Series:C
6.750 09/01/10 A 1,500,000 1,628,190
Bracken County KY Schools
7.600 12/01/06 A- 45,000 50,748
Bracken County KY Schools
7.700 12/01/08 A- 40,000 45,098
Bracken County KY Schools
7.700 12/01/07 A- 40,000 45,235
Breathitt County KY School FacilitiesConstruction Com
6.500 03/01/12 A 450,000 482,621
Breathitt County KY School FacilitiesConstruction Com
6.500 03/01/11 A 420,000 451,672
Bullitt County KY Schools
6.000 08/01/14 A 1,100,000 1,113,508
Caldwell County KY Schools
7.000 06/01/10 A- 335,000 374,426
Caldwell County KY Schools
7.000 06/01/11 A- 360,000 399,427
Carroll County Ky Schools
7.000 07/01/10 A- 270,000 303,577
Clark County KY Schools
6.000 05/01/12 A 320,000 325,232
Elliott County KY Schools
7.250 11/01/07 A- 115,000 131,599
Elliott County KY Schools
7.250 11/01/08 A- 100,000 112,906
Floyd County KY Schools
6.000 06/01/14 A 1,000,000 1,008,780
Gallatin County KY Schools
7.875 06/01/06 A/A- 90,000 98,420
Gallatin County KY Schools
7.875 06/01/07 A/A- 100,000 109,356
Greenup County KY Schools
6.100 09/01/14 A/A* 1,105,000 1,119,210
Harlan County Schools
7.500 06/01/08 NR 240,000 277,111
Harlan County Schools
7.500 12/01/08 NR 250,000 288,658
Harlan County Schools
7.500 06/01/09 NR 260,000 299,577
Harlan County Schools
6.000 05/01/15 A 275,000 276,045
Hopkins County KY Schools
6.200 06/01/15 A 2,500,000 2,549,025
Jessamine County KY Schools
6.125 06/01/15 A 1,000,000 1,031,090
Johnson County KY Schools
6.750 03/01/10 A- 300,000 333,927
Johnson County KY Schools
6.750 03/01/11 A- 325,000 360,900
Kenton County KY Schools
6.800 12/01/09 A 100,000 112,643
Larue County KY Schools
6.500 10/01/10 A 290,000 312,809
Lee County KY Schools
7.100 06/01/10 NR 200,000 225,098
Leslie County KY Schools
6.600 05/01/11 A- 820,000 878,802
Letcher County KY Schools
6.700 10/01/14 A 1,490,000 1,618,036
Livingston County KY Schools
6.750 03/01/06 A- 200,000 219,714
Ludlow KY Schools
6.875 12/01/11 NR 125,000 139,664
Marion County KY Schools
7.100 06/01/09 NR 100,000 113,456
Marion County KY Schools
7.100 06/01/10 NR 110,000 124,193
Marion County KY Schools
7.100 06/01/11 NR 115,000 129,838
Martin County KY Schools
5.500 06/01/15 A 1,650,000 1,552,931
Martin County KY School Facilities Construction Com
7.200 09/01/09 A- 380,000 425,186
McCreary County KY Schools
6.600 10/01/10 A 400,000 435,752
McLean County Schools
6.000 06/01/14 A 1,405,000 1,417,336
Monroe County KY School Facilities Construction Com
7.000 02/01/11 A- 300,000 332,469
Perry County KY Schools
6.250 07/01/12 A 1,305,000 1,345,833
Perry County KY Schools
6.250 07/01/10 A 1,155,000 1,213,004
Pike County KY Schools
6.200 08/01/11 A 325,000 339,992
Pike County KY Schools
6.200 08/01/10 A 305,000 320,686
Pike County KY School Facilities Construction Com
6.875 12/01/08 A- 140,000 154,403
Pike County KY School Facilities Construction Com
7.250 06/01/10 A 135,000 145,912
Scott County KY Schools
5.900 06/01/16 A 3,450,000 3,404,943
Simpson County KY Schools
6.700 01/01/11 A- 175,000 188,228
Wolfe County KY School Facilities Construction Com
7.000 03/01/11 A- 290,000 320,259
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
STATE AND LOCAL MORTGAGE REVENUE BONDS
8.13% Percent of Total Market Value
Erlanger KY Public Property 1st Mortgage
7.400 11/01/09 BBB+ 100,000 112,108
Erlanger KY Public Property 1st Mortgage
7.400 11/01/08 BBB+ 75,000 84,268
Jefferson Oldham & Bullitt KY Residential Mortgage
10.750 11/01/14 A1 35,000 35,969
Jefferson County KY Home Mortgage
9.625 05/01/14 A1 20,000 20,479
Jefferson County KY Home Mortgage - Single Family
9.100 11/01/96 A/A1 5,000 5,075
KY Housing Authority - 1994 Series C
6.400 01/01/17 Aaa/AAA* 15,000,000 15,526,950
KY Housing Authority - 1988
7.625 01/01/09 Aa/AA* 330,000 371,474
KY Housing Authority - 1990 Series A
7.550 01/01/16 AA 2,910,000 3,299,707
KY Housing Authority - 1990 Series A
7.400 01/01/10 Aa/AA* 2,355,000 2,677,400
STATE AND LOCAL REVENUE BONDS
2.21% Percent of Total Market Value
KY Higher Education Student Loans
9.250 06/01/01 A/A* 180,000 218,666
KY Infrastructure Authority
6.000 06/01/11 A/A* 1,000,000 1,009,340
KY Infrastructure Authority / Government Securities
7.625 08/01/04 A 20,000 22,197
KY Infrastructure Authority / Government Securities
6.375 08/01/14 A* 700,000 733,957
KY Infrastructure Authority / Government Securities
7.750 08/01/02 A 40,000 46,182
KY Infrastructure Authority Series:93E
5.750 08/01/13 A* 900,000 884,079
KY Infrastructure Authority Series:93E
5.750 08/01/18 A* 500,000 480,835
KY Infrastructure Authority Series:92G
6.300 06/01/12 A/A* 1,500,000 1,545,240
KY Infrastructure Authority Water & Sewer
6.000 08/01/11 A* 400,000 402,804
KY Infrastructure Authority - Wastewater
5.600 06/01/13 A/A* 750,000 724,470
KY STATE PROPERTY AND BUILDING COMMISSION REVENUE BONDS
1.44% Percent of Total Market Value
KY Property & Building Commission Project #27
7.100 05/01/06 A/A* 300,000 316,395
KY Property & Building Commission Project #40-2
6.875 11/01/07 A/A* 3,250,000 3,594,724
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDINGS REVENUE BONDS
0.63% Percent of Total Market Value
University of Louisville Housing & Education
6.000 11/01/13 A1/A* 1,180,000 1,188,277
University of Kentucky Consolidated Education Bldgs S:J
6.100 05/01/07 A/AA-* 500,000 522,200
VARIABLE RATE BONDS
0.89% Percent of Total Market Value
KY Development Finance Authority-AppalachianHealth
4.100 09/01/06 AA-/VM1 1,200,000 1,200,000
KY Development Finance Authority-Presbyterian Mtg
4.250 11/01/18 Aa 215,000 215,000
Perry County KY Healthcare System Revenue
4.100 08/01/14 Aa2/VM1 1,000,000 1,000,000
Total investments (cost $259,838,918) $ 258,420,000 $272,324,738
(Notes 3 and 5)
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds -- 100%
June 30, 1995
* Standard and Poor's Corporation
NR Not Rated
All other ratings by Moody's Investors Service, Inc.
+ Bond ratings were obtained from sources believed to be reliable but
were not verified by Coopers & Lybrand L.L.P.
Federal Income Tax Information
At June 30, 1995, the net unrealized appreciation based on cost for
Federal income tax purposes of $259,838,918 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
is an excess of value over tax cost $ 13,051,321
Aggregate gross unrealized depreciation for all investments in which there
is an excess of tax cost over value (565,501)
Net unrealized appreciation $ 12,485,820
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
ASSETS:
Investments in securities, as annexed, at value
(identified cost $259,838,918) (Note 1a) $ 272,324,738
Cash 29,561
Bonds sold receivable 255,000
Interest receivable 5,586,509
Total assets 278,195,808
LIABILITIES:
Bonds purchased payable $ 3,448,794
Dividends payable (Note 1d) 5,168,120
Fund shares redeemed payable 158,166
Investment advisory and transfer agent
fees payable (Note 2) 127,903
Accrued expenses 3,491
Total liabilities 8,906,474
Net assets, at value (Note 4) $ 269,289,334
NET ASSETS:
Net assets consist of:
Capital $ 261,128,219
Net accumulated realized losses
on investment transactions (4,324,705)
Net unrealized appreciation in
value of investments 12,485,820
Net assets, at value (Note 4) $ 269,289,334
NET ASSET VALUE, offering price and
redemption price per share
($269,289,334 , 36,914,955 shares) (Note 4) $ 7.29
STATEMENT OF OPERATIONS
For the year ended June 30, 1995
Investment income:
Interest income $ 16,163,932
Expenses:
Audit 28,775
Investment advisory fees (Note 2) 1,164,516
Insurance 29,646
Legal 23,000
Printing 30,000
Postage 21,100
Registration fees 4,779
Transfer agent (Note 2) 317,855
Trustees' fees 25,739
Interest 709
Miscellaneous 210
Total expenses 1,646,329
Net investment income 14,517,603
Realized and unrealized gain/(loss) on investments (Notes 3 and 5)
Net realized loss (4,324,705)
Net increase in unrealized appreciation 9,007,708
Net realized and unrealized gain on investments 4,683,003
Net increase in net assets resulting
from operations $ 19,200,606
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES
STATEMENT OF CHANGES IN NET ASSETS
For the years ended June 30, 1995 and 1994
Increase in net assets: 1995 1994
Operations:
Net investment income $ 14,517,603 $ 14,174,940
Net realized gain/(loss) on
investments (4,324,705) 2,277,225
Net increase/(decrease)
in unrealized appreciation 9,007,708 (15,218,503)
Net increase in net assets
resulting from operations 19,200,606 1,233,662
Capital gains distributed to shareholders
($.046 and $.048 per share,
respectively) (1,677,266) (1,674,049)
Dividends to shareholders
($.403 and $.409 per share,
respectively) (14,517,603) (14,174,940)
Net fund share transactions (Note 4) 9,097,571 33,939,426
Total increase 12,103,308 19,324,099
Net assets:
Beginning of year 257,186,026 237,861,927
End of year $ 269,289,334 $ 257,186,026
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - KENTUCKY SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
HOSPITAL AND HEALTHCARE REVENUE BONDS
1.52% Percent of Total Market Value
Jefferson County KY - Jewish Hospital
6.450 01/01/97 A/A+* 85,000 87,531
Jefferson County KY - Medical Center Hospital
5.750 05/01/97 A 60,000 61,271
KY Development Finance Authority- St.Clair Med Ctr
6.000 09/01/97 A-* 310,000 318,646
KY Development Finance Authority- St.Clair Med Ctr
6.150 09/01/98 A-* 325,000 338,894
KY Development Finance Authority - St.Luke Hospital
7.000 10/01/95 A/A-* 50,000 50,321
INDUSTRIAL REVENUE AND POLLUTION CONTROL REVENUE BONDS
2.81% Percent of Total Market Value
Trimble County KY PCR
7.250 12/01/16 Aa2/AA* 1,500,000 1,582,275
INSURED MUNICIPAL REVENUE BONDS
9.84% Percent of Total Market Value
Danville Multi - Shelbyville Water & Sewer
5.750 07/01/98 AAA* 300,000 311,019
Danville Multi - Shelbyville Water & Sewer
5.600 07/01/97 AAA* 260,000 266,269
Daviess County KY Hospital Revenue
4.150 09/01/96 Aaa/AAA* 200,000 199,810
Daviess County KY Hospital Revenue
4.400 09/01/97 Aaa/AAA* 130,000 130,046
Jefferson County KY - Alliant Hospital
4.600 10/01/95 Aaa/AAA* 500,000 500,615
Jefferson County KY - Norton Kosair Hospital
6.800 10/01/96 AAA* 250,000 257,738
KY Development Finance Authority-St.Elizabeth Hosp
6.100 11/01/97 AAA* 500,000 518,860
Kenton County KY Airport Corporation
4.450 03/01/98 Aaa/AAA* 1,000,000 1,001,690
KY Housing Corporation
4.450 07/01/00 Aaa/AAA* 500,000 490,555
KY Turnpike Authority Economic Development
7.600 01/01/99 Aaa 200,000 210,384
Lexington-Fayette Urban County Govt-Residential Mtg
6.800 05/15/96 AA* 135,000 137,940
Louisville-Jefferson County Metro Sewer
6.250 06/01/96 Aaa/AAA* 1,255,000 1,279,272
Somerset KY Water & Sewer Revenue
6.100 12/01/97 AAA* 230,000 239,246
KY STATE PROPERTY AND BUILDING COMMISSION REVENUE BONDS
17.80% Percent of Total Market Value
Project #48-53
6.000 08/01/97 A/A* 585,000 603,667
Project #48-53
5.900 10/01/99 A/A* 170,000 178,568
Project #48-53
5.500 08/01/96 A/A+* 50,000 50,612
Project #48-53
5.750 08/01/95 A/A* 625,000 625,806
Project #26
7.000 06/01/96 A/A* 500,000 511,880
Project #27
6.600 05/01/97 A/A* 375,000 389,839
Project #27
6.500 05/01/96 A/A* 200,000 203,510
Project #30-5
7.000 12/01/96 A/A* 50,000 51,816
Project #30-5
8.750 12/01/95 A/A* 500,000 509,375
Project #30-5
6.900 12/01/95 A/A* 125,000 126,263
Project #32,36
6.200 06/01/96 A 400,000 406,652
Project #34
6.900 06/01/96 A 50,000 51,144
Project #40
7.900 11/01/97 A/A* 1,000,000 1,077,260
Project #48-53
5.600 10/01/96 A/A* 1,000,000 1,015,240
Project #48-53
5.700 08/01/97 A 100,000 102,599
Project #48-53
5.700 10/01/97 A/A* 1,030,000 1,058,778
Project #53
5.800 10/01/98 A/A* 500,000 519,730
Project #54
4.300 09/01/96 A/A* 100,000 99,961
Project #55 4.100
09/01/98 A/A* 1,000,000 981,600
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
Project #34
7.000 12/01/98 A/A* 500,000 539,510
Project #55
4.150 09/01/99 A/A* 945,000 929,682
KY TURNPIKE AUTHORITY REVENUE BONDS
14.12% Percent of Total Market Value
KY Turnpike Authority Economic Development
6.900 05/15/97 A/A* 300,000 313,446
KY Turnpike Authority Economic Development
7.000 05/15/99 A/A* 1,750,000 1,898,680
KY Turnpike Authority Economic Development
5.000 01/01/98 A/A+* 2,000,000 2,026,700
KY Turnpike Authority Economic Development
4.600 07/01/98 A/A* 730,000 733,446
KY Turnpike Authority Economic Development
7.400 01/01/97 A/A* 550,000 574,310
KY Turnpike Authority Economic Development
7.200 07/01/96 A/A* 100,000 102,786
KY Turnpike Authority Economic Development
4.500 01/01/96 A/A* 400,000 400,332
KY Turnpike Authority Resource Recovery
7.100 07/01/96 A/A+* 520,000 533,983
KY Turnpike Authority Toll Roads
8.125 07/01/98 A/A* 1,300,000 1,371,487
MUNICIPAL UTILITY REVENUE BONDS
0.92% Percent of Total Market Value
Ashland KY Utility Revenue
5.700 04/01/96 A- 25,000 25,268
Campbell County KY Water District
7.400 12/01/96 A 25,000 25,827
Cynthiana KY Water & Sewer
4.500 01/01/96 BBB-* 200,000 200,018
Cynthiana KY Water & Sewer
5.250 01/01/98 BBB-* 265,000 267,594
PREREFUNDED BONDS AND ESCROWED TO MATURITY
9.42% Percent of Total Market Value
Ashland KY Utility Revenue
7.000 04/01/99 A- 50,000 53,329
Danville Multi - Hopkinsville Flood Control - ETM
6.200 06/01/01 Baa1 165,000 178,715
Danville Multi - Hopkinsville Flood Control - ETM
5.800 06/01/98 Baa1 130,000 134,820
Danville Multi - Hopkinsville Flood Control - ETM
6.100 06/01/00 Baa1 140,000 149,272
KY Development Finance Authority - St. Joseph Hosp
12.250 05/01/11 AAA* 750,000 854,370
KY State Property & Building - Project #32-2
8.000 12/01/96 Aaa/AAA* 70,000 72,562
KY State Property & Building - Project #40-1 Toyota
8.200 11/01/99 A 400,000 441,244
KY State Property & Building - Project #39
8.000 12/01/04 A/AAA* 1,000,000 1,105,070
KY Turnpike Authority Economic Development
7.875 01/01/04 AAA* 1,000,000 1,055,610
KY Turnpike Authority Resource Recovery
6.500 07/01/10 Aaa/AAA* 480,000 500,270
KY Turnpike Authority Resource Recovery
9.100 01/01/04 Aaa/AAA* 40,000 41,205
KY Turnpike Authority Resource Recovery
9.200 07/01/08 Aaa/AAA* 40,000 41,205
KY Turnpike Authority Toll Roads
6.200 07/01/11 A 660,000 682,823
PUBLIC CORPORATION REVENUE BONDS
2.04% Percent of Total Market Value
Boone County Ky COPS (Golf Course)
5.200 11/15/95 A 100,000 100,389
Corbin KY City Hall Public Corporation
7.100 10/01/97 NR 75,000 75,462
Danville Multi - Jefferson County Administration
5.750 02/01/00 A 150,000 156,234
Danville Multi - Mt.Sterling
6.800 09/01/99 NR 75,000 79,930
Danville Multi - Riverpark
4.650 07/01/00 A 340,000 339,548
Erlanger KY Public Property 1st Mortgage
6.300 11/01/95 BBB* 35,000 35,219
Louisville KY Public Property Corporation
5.500 04/01/99 A/A* 350,000 360,350
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - KENTUCKY SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
SCHOOL BUILDING REVENUE BONDS
11.08% Percent of Total Market Value
Barren County KY Schools
5.950 06/01/96 A- 90,000 91,337
Bell County KY Schools
5.850 10/01/96 A- 250,000 254,718
Floyd County KY Schools
6.000 04/01/98 A- 130,000 135,053
Floyd County KY Schools
6.000 04/01/96 A- 155,000 156,942
Floyd County KY Schools
6.000 04/01/97 A- 170,000 174,583
Jefferson County KY Schools
6.000 05/01/98 A1/A+* 900,000 935,991
Jefferson County KY Schools
5.750 03/01/96 Aaa/A+* 1,000,000 1,010,520
Jefferson County KY Schools Series:C
5.900 05/01/97 A1/A+* 700,000 719,145
Jefferson County KY Schools Series:C
5.700 05/01/96 A1/A+* 1,000,000 1,012,700
KISTA Equipment Lease Revenue
5.900 03/01/99 A 200,000 208,124
KISTA Equipment Lease Revenue
6.000 03/01/00 A 500,000 527,355
KISTA Equipment Lease Revenue
5.250 03/01/96 A/A-* 500,000 502,805
KISTA Equipment Lease Revenue
4.500 03/01/97 A 245,000 245,064
Muhlenberg County KY Schools
4.900 08/01/98 A 130,000 131,739
Muhlenberg County KY Schools
4.700 08/01/97 A 135,000 135,981
STATE GENERAL OBLIGATION REVENUE BONDS
0.63% Percent of Total Market Value
Louisville KY Municipal Improvement G.O.
5.200 09/01/96 A1/AA-* 350,000 354,438
STATE AND LOCAL MORTGAGE REVENUE BONDS
3.08% Percent of Total Market Value
Jefferson County KY Home Mortgage-Single Family
9.100 05/01/96 A/A1* 10,000 10,378
KY Housing Corporation
5.250 07/01/97 Aaa/AAA* 500,000 506,820
Lexington Center Corporation Mortgage Revenue
4.300 10/01/98 A 1,000,000 993,050
Louisville KY Multi Family Housing LOC
7.100 07/15/96 AA2 220,000 226,475
STATE AND LOCAL REVENUE BONDS
13.03% Percent of Total Market Value
KY Higher Education Student Loan Revenue
8.200 12/01/97 A 5,000 5,080
KY Higher Education Student Loan Revenue
4.700 06/01/00 A1/AA-* 2,500,000 2,480,425
KY Higher Education Student Loan Revenue
4.550 06/01/99 A1/AA-* 1,000,000 993,590
KY Higher Education Student Loan Revenue
4.400 12/01/98 A1/AA-* 2,000,000 1,982,400
KY Higher Education Student Loan Revenue
Series:C 5.950 06/01/97 A 880,000 901,877
KY Higher Education Student Loan Revenue Series:C
6.050 12/01/98 A 150,000 156,900
KY Infrastructure Authority Series: D
5.800 08/01/95 A 90,000 90,123
KY Infrastructure Authority Series: E
5.900 06/01/99 A/A* 215,000 225,066
KY State Bureau Vocational Education KSCB
7.800 11/01/95 A* 500,000 505,935
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS
8.13% Percent of Total Market Value
Murray State University Consolidated Education
3.800 05/01/97 A/A* 605,000 599,367
Murray State University Consolidated Education
4.000 05/01/98 A 1,000,000 987,300
University of Kentucky Community College
6.600 05/01/98 A/AA-* 285,000 300,513
University of Kentucky Community College
6.250 05/01/98 A/AA-* 225,000 235,172
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - KENTUCKY SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
University of Kentucky Community College Series:H
6.600 05/01/96 A/AA-* 500,000 509,180
University of Kentucky Community College Series:H
6.600 05/01/97 A/AA-* 500,000 519,340
University of Kentucky Consolidated Education
6.600 05/01/99 A1/AA-* 100,000 105,441
University of Louisville Consolidated Education
5.100 05/01/97 A/AA-* 815,000 825,196
University of Louisville Consolidated Education Series:G
6.000 05/01/97 A/A+* 485,000 498,678
VARIABLE RATE BONDS
5.58% Percent of Total Market Value
Louisville KY Zeochem Project
4.150 09/01/01 Aa3 3,150,000 3,150,000
Total investments (cost $56,006,262) $ 55,000,000 $ 56,352,179
(Notes 3 and 5)
* Standard and Poor's Corporation
NR Not Rated
All other ratings by Moody's Investors Service, Inc.
+ Bond ratings were obtained from sources believed to be reliable but
were not verified by Coopers & Lybrand L.L.P.
Federal Income Tax Information
At June 30, 1995, the net unrealized appreciation based on cost for
Federal income tax purposes of $56,006,262 was as follows:
Aggregate gross unrealized appreciation for all investments which there is
an excess of value over tax cost $ 1,410,374
Aggregate gross unrealized depreciation for all investments in which there
is an excess of tax cost over value (1,064,457)
Net unrealized appreciation $ 345,917
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
ASSETS:
Investments in securities, as annexed, at value
(identified cost $56,006,262) (Note 1a) $ 56,352,179
Cash 155,953
Bonds sold receivable 70,000
Interest receivable 769,275
Total assets 57,347,407
LIABILITIES:
Dividends payable (Note 1d) $ 242,389
Fund shares redeemed payable 187
Investment advisory and transfer agent
fees payable (Note 2) 29,836
Accrued expenses 18,072
Total liabilities 290,484
Net assets, at value (Note 4) $ 57,056,923
NET ASSETS:
Net assets consist of:
Capital $ 57,125,184
Net accumulated realized losses on
investment transactions (414,178)
Net unrealized appreciation in
value of investments 345,917
Net assets, at value (Note 4) $ 57,056,923
NET ASSET VALUE, offering price and
redemption price per share
($57,056,923 , 11,012,547 shares) (Note 4) $ 5.18
STATEMENT OF OPERATIONS
For the year ended June 30, 1995
Investment income:
Interest income $ 2,921,812
Expenses:
Audit 20,275
Investment advisory fees (Note 2) 309,977
Insurance 6,078
Legal 7,500
Printing 6,317
Postage 6,316
Transfer agent (Note 2) 80,395
Trustees' fees 6,271
Interest 18
Total expenses 443,147
Net investment income 2,478,665
Realized and unrealized gain/(loss) on investments (Notes 3 and 5)
Net realized loss (414,178)
Net increase in unrealized appreciation 550,829
Net realized and unrealized gain on investments 136,651
Net increase in net assets resulting
from operations $ 2,615,316
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENT OF CHANGES IN NET ASSETS
For the years ended June 30, 1995 and 1994
Increase in net assets: 1995 1994
Operations:
Net investment income $ 2,478,665 $ 2,619,983
Net realized gain/(loss) on
investments (414,178) 114,065
Net increase/(decrease)
in unrealized appreciation 550,829 (1,726,714)
Net increase in net assets
resulting from operations 2,615,316 1,007,334
Capital gains distributed to shareholders
($.01 and $.00356 per share,
respectively) (61,242) (45,271)
Dividends to shareholders
($.206 and $.207 per share,
respectively) (2,478,665) (2,619,983)
Net fund share transactions (Note 4) (12,569,519) 15,194,200
Total increase/(decrease) (12,494,110) 13,536,280
Net assets:
Beginning of year 69,551,033 56,014,753
End of year 57,056,923 $ 69,551,033
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Tennessee Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
HOSPITAL AND HEALTHCARE REVENUE BONDS
5.24% Percent of Total Market Value
Anderson County TN Health & Education-Methodist Med
5.650 07/01/07 A1 155,000 156,189
Signal Mountain TN Health & Education - Alexian Village
7.500 01/01/19 A 15,000 16,556
Sumner County TN Health & Education Revenue
7.500 11/01/14 A-* 75,000 86,555
INDUSTRIAL REVENUE AND POLLUTION CONTROL REVENUE BONDS
5.07% Percent of Total Market Value
Chattanooga TN IDB Revenue - F.L. Haney
7.200 02/15/10 AAA* 100,000 115,497
Chattanooga TN IDB Revenue - F.L. Haney
7.200 08/15/10 AAA* 20,000 23,391
Franklin County TN IDB Multi-Family - Sussex Downs
6.250 06/01/07 AAA* 30,000 32,411
TN Local Development Authority-Community Prov.Pool
6.250 10/01/09 A/A-* 30,000 31,788
TN Local Development Authority-Community Prov.Pool
6.450 10/01/14 A1/A* 40,000 42,190
TN Local Development Authority-Community Prov.Pool
7.000 10/01/11 A-* 5,000 5,501
INSURED MUNICIPAL REVENUE BONDS
24.88% Percent of Total Market Value
Chattanooga-Hamilton TN Hospital Rev-Erlanger Med
5.625 10/01/18 Aaa/AAA* 30,000 29,406
Chattanooga-Hamilton TN Hospital Rev-Erlanger Med
5.500 10/01/13 AAA/AAA* 5,000 4,870
Clarksville TN Water & Sewer Revenue
6.250 02/01/18 Aaa/AAA* 200,000 204,244
Gatlinburg TN Public Building Revenue
6.900 12/01/12 Aaa/AAA* 90,000 97,850
Greater TN Housing Assistance Multi-Family
7.250 07/01/24 Aaa/AAA* 5,000 5,791
Knox County TN Hospital - Ft. Sanders
5.650 01/01/08 Aaa/AAA* 20,000 20,433
Knox County TN Hospital - Ft. Sanders
6.250 01/01/13 Aaa/AAA* 10,000 10,570
Knox County TN Health & Education - Mercy Health
5.875 09/01/15 Aaa/AAA* 15,000 15,385
Knox County TN Health & Education - Mercy Health
6.000 09/01/19 Aaa/AAA* 5,000 5,083
Knox-Chapman TN Utility District Water & Sewer
6.000 01/01/14 Aaa/AAA* 40,000 40,372
Lauderdale County TN G.O. - Correction Facility
6.000 04/01/13 Aaa/AAA* 20,000 20,570
Lawrence County TN Public Improvements
6.300 03/01/08 Aaa/AAA* 50,000 53,150
Memphis-Shelby County TN Airport Revenue
5.650 09/01/15 Aaa/AAA* 55,000 53,512
Metro Nashville TN Airport Revenue
6.600 07/01/15 Aaa/AAA* 130,000 136,752
Metro Nashville TN Health & Education-Meharry Hospital
7.000 12/01/11 Aaa/AAA* 100,000 111,478
Metro Nashville TN Airport Revenue
6.600 07/01/15 Aaa/AAA* 20,000 21,039
Milan TN Schools
6.750 04/01/13 Aaa/AAA* 60,000 65,543
Milan TN Hospital Revenue
5.100 03/01/14 Aaa/AAA* 5,000 4,588
Putnam County TN Schools
5.125 04/01/12 Aaa/AAA* 10,000 9,353
Shelby County TN Health & Education-Lebohnhuer
5.500 08/15/19 Aaa/AAA* 20,000 19,320
Shelby County TN Health & Education - Heritage Place
6.900 07/01/14 Aaa/AAA* 150,000 163,007
Sullivan County TN Health & Education-Holston Valley
5.750 02/15/13 Aaa/AAA* 30,000 29,910
Tipton County TN Schools
6.650 04/01/14 Aaa/AAA* 30,000 32,110
TN Housing Development Agency
5.900 07/01/17 Aaa/AAA* 35,000 34,660
West Knox TN Water & Sewer Utility
6.500 12/01/13 Aaa/AAA* 40,000 41,604
MUNICIPAL UTILITY REVENUE BONDS
16.17% Percent of Total Market Value
Atoka TN Water & Sewer Revenue
7.000 02/01/11 NR 50,000 51,027
Knoxville TN Gas Utility Revenue
5.900 03/01/12 A1/AA* 25,000 24,788
Memphis TN Sewer Revenue
5.750 10/01/14 Aa/AA* 100,000 99,759
Memphis TN Water Revenue
6.000 01/01/12 Aa/AA* 140,000 143,556
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Tennessee Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
Metro Nashville/Davidson TN Water & Sewer Revenue
7.000 01/01/14 A1/A* 50,000 51,461
Metro Nashville/Davidson TN Electric Revenue
6.000 05/15/12 Aa/AA* 30,000 31,104
Metro Nashville/Davidson TN Electric Revenue
6.000 05/15/17 Aa/AA* 345,000 350,423
Metro Nashville/Davidson TN Water & Sewer Refunding
5.500 01/01/16 A1/A* 5,000 4,747
Mt Juliet TN Utility District
7.550 02/01/14 A3 25,000 27,678
Scott County TN Public Improvement Utility
5.500 09/01/07 Baa 15,000 15,117
PREREFUNDED BONDS AND ESCROWED TO MATURITY
1.60% Percent of Total Market Value
Jackson TN Water & Sewer Revenue
7.200 07/01/12 Aaa/AAA* 10,000 11,643
Metro Nashville/Davidson TN Water & Sewer Revenue
6.500 12/01/14 Aaa/AAA* 60,000 67,255
MUNICIPAL LEASE AND RENTAL REVENUE BONDS
0.45% Percent of Total Market Value
Memphis-Shelby County TN Airport - Federal Express
7.875 09/01/09 Baa3/BB* 20,000 22,490
COUNTY GENERAL OBLIGATION AND SCHOOL REVENUE BONDS
11.13% Percent of Total Market Value
Marshall County TN Schools
5.600 06/01/14 A 5,000 4,836
Marshall County TN Schools
5.700 06/01/09 A 25,000 25,261
Metro Nashville/Davidson TN Correctional Facilities
7.000 09/01/11 A1/A* 180,000 194,260
Shelby County TN Schools Series:A
5.900 03/01/12 Aa/AA* 10,000 10,278
Shelby County TN G.O. Public Improvements
5.875 03/01/07 Aa/AA* 50,000 51,566
Shelby County TN G.O. Public Improvements Series:A
6.000 03/01/13 Aa/AA* 30,000 30,856
Shelby County TN Schools
6.000 03/01/13 Aa/AA+* 35,000 36,068
Shelby County TN Schools
5.900 03/01/16 Aa/AA+* 50,000 49,877
Williamson County TN G.O. Public Works
5.600 09/01/10 Aa 45,000 45,668
Wilson County TN COPS
6.125 06/30/10 A 100,000 101,559
LOCAL GENERAL OBLIGATION AND SCHOOL REVENUE BONDS
5.33% Percent of Total Market Value
Chattanooga TN G.O. Refunding
5.500 11/01/09 A1/A+* 5,000 4,912
Collierville TN G.O. Improvements
5.900 05/01/12 A1 30,000 30,260
Lebanon TN G.O. Public Improvements
5.500 03/01/11 A 25,000 24,510
Memphis TN General Improvement
5.500 10/01/10 Aa/AA* 20,000 20,045
Memphis TN General Improvement
5.250 03/01/13 Aa/AA* 20,000 19,285
Metro Nashville/Davidson TN G.O. Multi-Purpose
6.125 05/15/19 Aa/AA* 90,000 92,188
Metro Nashville/Davidson TN G.O. Multi-Purpose
6.125 05/15/13 Aa/AA* 70,000 72,439
STATE AND LOCAL MORTGAGE REVENUE BONDS
23.62% Percent of Total Market Value
Knoxville TN Community Development Multi-Family (Clinton Towers)
6.650 10/15/10 A* 35,000 38,123
Knoxville TN Community Development Multi-Family
5.350 04/15/07 A* 5,000 4,965
Memphis TN Health & Education/Multi Hsg (Hunter's Trace)
6.250 10/01/13 Aaa 50,000 51,710
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Tennessee Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
Memphis TN Health & Education/Multi Housing (Hunter's Trace)
6.250 06/01/13 AA* 55,000 56,201
Metro Nashville/Davidson TN Multi-Family-(Hermitage)
5.900 02/01/19 A* 250,000 239,858
Murfreesboro TN Multi-Family (Westbrook Towers)
5.875 01/15/10 A* 150,000 147,054
Shelby County TN Health & Education/Multi Hsg (Windsor Apts)
6.750 10/01/17 AA* 355,000 371,596
TN Housing Development Agency
6.700 07/01/12 Aa/A+* 85,000 91,664
TN Housing Development Agency
5.900 07/01/18 A1/A+* 145,000 141,965
TN Housing Development Agency
5.850 07/01/13 A1/A+* 25,000 25,056
STATE GENERAL OBLIGATION & AGENCY REVENUE BONDS
3.98% Percent of Total Market Value
Memphis-Shelby County TN Airport - Federal Express
6.750 09/01/12 Baa/BBB* 155,000 160,329
TN State Schools
6.250 05/01/17 A1/AA* 35,000 36,492
UNIVERSITY CONSOLIDATED EDUCATION BUILDINGS AND HOUSING REVENUE
2.53% Percent of Total Market Value
Metro Nashville/Davidson TN Health &
Education - Vanderbilt
6.500 05/01/16 Aa/AA* 80,000 83,884
Metro Nashville/Davidson TN Health & Education - Vanderbilt
6.000 10/01/16 Aa/AA* 30,000 30,811
Metro Nashville/Davidson TN Health & Education - Belmont Univ.
6.300 12/01/14 Baa 10,000 10,040
Total investments (cost $4,799,063) $ 4,775,000$ 4,945,342
(Notes 3 and 5)
* Standard and Poor's Corporation
NR Not Rated
All other ratings by Moody's Investors Service, Inc.
+ Bond ratings were obtained from sources believed to be reliable but
were not verified by Coopers & Lybrand L.L.P.
Federal Income Tax Information
At June 30, 1995, the net unrealized appreciation based on cost for
Federal income tax purposes of $4,799,063 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
is an excess of value over tax cost $ 158,186
Aggregate gross unrealized deprecation for all investments in which there
is an excess of tax cost over value (11,907)
Net unrealized appreciation $ 146,279
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
ASSETS:
Investments in securities, as annexed, at value
(identified cost $ 4,799,063) (Note 1a) $ 4,945,342
Cash 54,348
Interest receivable 106,184
Total assets 5,105,874
LIABILITIES:
Bonds purchased payable $ 10,518
Dividends payable (Note 1d) 59,689
Fund shares redeemed payable 1,065
Total liabilities 71,272
Net assets, at value (Note 4) $ 5,034,602
NET ASSETS:
Net assets consist of:
Capital $ 4,906,806
Net accumulated realized losses on
investment transactions (18,483)
Net unrealized appreciation in
value of investments 146,279
Net assets, at value (Note 4) $ 5,034,602
NET ASSET VALUE, offering price and
redemption price per share
($5,034,602 , 500,745 shares) (Note 4) $ 10.05
STATEMENT OF OPERATIONS
For the year ended June 30, 1995
Investment income:
Interest income $ 137,917
Expenses:
Audit 6,700
Investment advisory fees (Note 2) 11,633
Insurance 241
Legal 1,000
Printing 1,000
Postage 1,000
Registration fees 1,413
Transfer agent (Note 2) 3,490
Trustees' fees 197
Miscellaneous 250
Total expenses 26,924
Reimbursement from Investment Adviser (Note 2) (19,037)
Net investment income 130,030
Realized and unrealized gain/(loss) on investments (Notes 3 and 5)
Net realized loss (10,904)
Net increase in unrealized appreciation 174,077
Net realized and unrealized gain on investment 163,173
Net increase in net assets resulting from
operations $ 293,203
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE INCOME SERIES
STATEMENT OF CHANGES IN NET ASSETS
For the year ended June 30, 1995 and
the period December 20, 1993 (commencement of operations) to June 30, 1994
Increase in net assets: 1995 1994
Operations:
Net investment income $ 130,030 $ 13,450
Net realized loss on
investments (10,904) (7,579)
Net increase/(decrease)
in unrealized appreciation 174,077 (27,798)
Net increase/(decrease) in net assets
resulting from operations 293,203 (21,927)
Dividends to shareholders
($.535 and $.275 per share) (130,030) (13,450)
Net fund share transactions (Note 4) 4,077,244 829,562
Total increase 4,240,417 794,185
Net assets:
Beginning of period 794,185 0
End of period $ 5,034,602 $ 794,185
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Tennessee Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
INSURED MUNICIPAL REVENUE BONDS
15.38% Percent of Total Market Value
Chattanooga-Hamilton TN (Erlanger Medical)
5.125 10/01/02 Aaa/AAA* 50,000 50,768
Chattanooga TN G.O. Water & Sewer Revenue
5.000 06/01/98 Aaa/AAA* 50,000 50,716
Hamilton County TN IDB Lease Revenue
4.875 09/01/97 Aaa/AAA* 10,000 10,113
Johnson City TN Hospital Revenue
6.200 07/01/99 Aaa/AAA* 10,000 10,590
Milan TN Hospitals
7.050 03/01/99 Aaa/AAA* 80,000 86,345
Metro Government Nashville/Davidson TN Energy
6.500 07/01/99 Aaa/AAA* 10,000 10,418
Metro Government Nashville/Davidson TN HEA Advent
6.400 11/15/95 Aaa/AAA* 10,000 10,085
Shelby County TN Health & Education
6.500 06/01/97 Aaa/AAA* 5,000 5,194
MUNICIPAL UTILITY REVENUE BONDS
4.41% Percent of Total Market Value
City of Loudon TN Electric Revenue
4.400 07/01/97 A1 10,000 10,015
City of Memphis TN Sanitary Sewer System Revenue
5.500 10/01/99 Aa/AA* 25,000 25,839
City of Memphis TN Sanitary Sewer System Revenue
4.600 10/01/97 Aa/AA* 10,000 10,091
Sevier County TN Utility Revenue
6.300 05/01/99 Aaa/AAA* 20,000 21,167
PREREFUNDED BONDS & ESCROWED TO MATURITY
41.51% Percent of Total Market Value
Chattanooga TN G.O.
7.500 04/01/05 Aaa/AAA* 20,000 21,099
Chattanooga-Hamilton TN (Erlanger Medical)
7.500 10/01/13 Aaa/AAA* 10,000 10,598
Chattanooga-Hamilton TN (Erlanger Medical)
7.500 10/01/13 Aaa/AAA* 15,000 15,897
Clarksville TN Water/Sewer/Gas Revenue
7.400 02/01/05 Aaa/AAA* 10,000 10,925
Fairview TN G.O. Water Improvement
6.900 06/01/01 Aaa/AAA* 25,000 26,731
Harpeth Valley TN Utility Revenue
7.000 09/01/08 Aaa/AAA* 10,000 10,521
Harpeth Valley TN Utility Revenue
7.250 09/01/11 Aaa/AAA* 10,000 10,550
Jackson TN Water/Sewer Revenue
7.600 01/01/12 Aaa/AAA* 10,000 10,690
Jackson TN Water/Sewer Revenue
10.375 07/01/12 Aaa/AAA* 10,000 12,289
Knox County TN Health & Education
7.000 01/01/08 Aaa/AA* 10,000 11,120
Knox County TN Health & Education
7.000 01/01/15 Aaa/AAA* 30,000 33,361
Knoxville TN Gas Revenue
6.500 04/01/11 Aa/AA* 10,000 10,635
Knoxville TN Gas Revenue
6.700 03/01/05 A1 50,000 53,859
Memphis TN G.O. Improvement
6.800 07/01/11 Aaa/AAA* 40,000 43,410
Metro Nashville/Davidson TN Airport Improvement
7.750 07/01/06 Aaa/AAA* 100,000 117,478
Metro Nashville/Davidson TN Water/Sewer Revenue
10.625 12/01/07 Aaa/AAA* 20,000 22,866
Metro Nashville/Davidson TN Health &
Education - Vanderbilt
6.875 07/01/18 Aaa/AAA* 50,000 53,444
Metro Nashville/Davidson TN Water/Sewer Revenue
6.600 04/01/98 Aaa/AAA* 15,000 15,837
Metro Nashville/Davidson TN Water/Sewer Revenue
7.250 01/01/16 Aaa/AAA* 5,000 5,301
Metro Nashville/Davidson TN Water/Sewer Revenue
7.200 01/01/11 Aaa/AAA* 45,000 47,690
Oak Ridge TN Public Improvement G.O.
6.600 04/01/09 Aa 10,000 10,736
Scott/Morgan Counties TN Citizen Gas Utility District
7.500 01/01/09 Aaa/AAA* 10,000 11,144
Shelby County TN Health & Education
7.600 08/15/19 Aaa/AAA* 50,000 55,540
Williamson County TN School G.O.
6.500 04/01/05 Aa/AA* 10,000 10,372
PUBLIC CORPORATION REVENUE BONDS
5.19% Percent of Total Market Value
Clarksville TN Public Building - Pooled Loan
4.750 12/01/00 AA* 80,000 78,983
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Tennessee Municipal Bonds -- 100%
June 30, 1995
Bond Description
Maturity Market
Coupon Date Rating+ Par Value
COUNTY GENERAL OBLIGATION AND SCHOOL REVENUE BONDS
10.30% Percent of Total Market Value
Gibson County TN School Revenue
5.400 08/01/96 BAA1 10,000 10,076
Hamilton County TN G.O. Revenue
4.600 10/01/98 Aa 10,000 10,053
Knox County TN School G.O. Revenue
4.250 03/01/96 Aa/AA* 10,000 10,002
Metro Government Nashville/Davidson
TN G.O. Improvement
5.250 05/15/97 Aa/AA* 10,000 10,174
Shelby County TN G.O. Revenue
6.600 08/01/96 Aa/AA+* 15,000 15,064
Shelby County TN G.O. Schools
4.500 03/01/96 Aa/AA+* 70,000 70,216
Sumner County TN Schools
7.000 02/01/98 Aa 20,000 21,272
Williamson County TN Capital Outlay G.O.
4.400 08/01/97 Aa 10,000 10,025
LOCAL GENERAL OBLIGATION AND SCHOOL REVENUE BONDS
22.54% Percent of Total Market Value
Chattanooga TN G.O. Public Improvement
4.900 02/01/99 A1/A* 40,000 40,365
Chattanooga TN G.O. Public Improvement
5.000 11/01/00 A1/A+* 30,000 30,461
City of Oak Ridge TN Schools
4.500 07/01/97 AA* 20,000 20,068
City of Oak Ridge TN Schools
4.600 07/01/98 AA* 15,000 15,033
Metro Government Nashville/Davidson TN G.O. Imp
4.500 05/15/99 Aa/AA* 70,000 69,948
Metro Government Nashville/Davidson TN G.O. Imp
7.000 06/15/97 Aa/AA* 150,000 156,825
Murfeesboro TN G.O. Revenue
5.700 09/01/99 A1 10,000 10,347
STATE GENERAL OBLIGATION & AGENCY REVENUE BONDS
0.67% Percent of Total Market Value
Tennessee State School Revenue
5.800 05/01/97 A1/AA* 10,000 10,252
Total investments (cost $ 1,508,725) $ 1,445,000$ 1,522,598
(Notes 3 and 5)
* Standard and Poor's Corporation
NR Not Rated
All other ratings by Moody's Investors Service, Inc.
+ Bond ratings were obtained from sources believed to be reliable but
were not verified by Coopers & Lybrand L.L.P.
Federal Income Tax Information
At June 30, 1995, the net unrealized appreciation based on cost for
Federal income tax purposes of $1,508,725 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
is an excess of value over tax cost $ 15,280
Aggregate gross unrealized deprecation for all investments in which there
is an excess of tax cost over value (1,407)
Net unrealized appreciation $ 13,873
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
ASSETS:
Investments in securities, as annexed, at value
(identified cost $ 1,508,725) (Note 1a) $ 1,522,598
Cash 41,133
Interest receivable 27,945
Total assets 1,591,676
LIABILITIES:
Bonds purchased payable $ 51,161
Dividends payable (Note 1d) 4,468
Accrued expenses 1,403
Total liabilities 57,032
Net assets, at value (Note 4) $ 1,534,644
NET ASSETS:
Net assets consist of:
Capital $ 1,520,771
Net unrealized appreciation in
value of investments 13,873
Net assets, at value (Note 4) $ 1,534,644
NET ASSET VALUE, offering price and
redemption price per share
($1,534,644 , 150,382 shares) (Note 4) $ 10.20
STATEMENT OF OPERATIONS
For the period November 1, 1994 (commencement of operations) to June 30,
1995
Investment income:
Interest income $ 19,278
Expenses:
Audit 5,628
Investment advisory fees (Note 2) 2,067
Insurance 38
Legal 2,100
Printing 1,200
Postage 500
Registration fees 526
Transfer agent (Note 2) 620
Trustees' fees 30
Miscellaneous 50
Total expenses 12,759
Reimbursement from Investment Adviser (Note 2)(11,008)
Net investment income 17,527
Realized and unrealized gain on investments (Notes 3 and 5)
Net unrealized appreciation 13,873
Net realized and unrealized gain on investments 13,873
Net increase in net assets resulting
from operations $ 31,400
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENT OF CHANGES IN NET ASSETS
For the period November 1, 1994 (commencement of operations) to June 30,
1995
Increase in net assets: 1995
Operations:
Net investment income $ 17,527
Net unrealized appreciation 13,873
et increase in net assets
resulting from operations 31,400
Dividends to shareholders
($.283 per share) (17,527)
Net fund share transactions (Note 4) 1,520,771
Total increase 1,534,644
Net assets:
Beginning of period 0
End of period $ 1,534,644
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - INTERMEDIATE GOVERNMENT BOND SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Government Municipal Bonds -- 100%
June 30, 1995
Maturity Market
Bond Description Coupon Date Par Value
FEDERAL HOME LOAN MORTGAGE CORPORATION
34.03% Percent of Total Market Value
Capital Debenture 8.740 12/08/04 2,500,000 2,621,206
FEDERAL HOME LOAN BANK
31.08% Percent of Total Market Value
Medium Term Note 8.170 12/16/04 2,000,000 2,232,706
Medium Term Note 7.560 09/01/04 150,000 160,794
FEDERAL NATIONAL MORTGAGE ASSOCIATION
26.43% Percent of Total Market Value
Fannie Mae - Medium Term Note 7.700 08/10/04 250,000 256,465
Fannie Mae - Medium Term Note 7.600 04/14/04 1,500,000 1,528,104
Fannie Mae - Medium Term Note 7.550 06/10/04 100,000 101,586
Fannie Mae - Medium Term Note 7.090 04/01/04 150,000 149,689
STUDENT LOAN MARKETING ASSOCIATION
8.46% Percent of Total Market Value
Sallie Mae - Medium Term Note 8.440 12/03/12 300,000 354,882
Sallie Mae - Medium Term Note 9.250 06/01/04 250,000 295,897
Total investments (cost $7,303,587) $ 7,200,000 $ 7,701,329
(Notes 3 and 5)
Federal Income Tax Information
At June 30, 1995, the net unrealized appreciation based on cost for
Federal income tax purposes of $7,303,587 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
is an excess of value over tax cost $ 410,805
Aggregate gross unrealized depreciation for all investments in which there
is an excess of tax cost over value (13,063)
Net unrealized appreciation $ 397,742
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - INTERMEDIATE GOVERNMENT BOND SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
ASSETS:
Investments in securities, as annexed, at value
(identified cost $7,303,587) (Note 1a) $ 7,701,329
Cash 21,877
Interest receivable 66,710
Total assets 7,789,916
LIABILITIES:
Dividends payable (Note 1d) $ 45,052
Investment advisory and transfer agent
fees payable (Note 2) 18,246
Accrued expenses 13,935
Total liabilities 77,233
Net assets, at value (Note 4) $ 7,712,683
NET ASSETS:
Net assets consist of:
Capital $ 8,055,524
Net accumulated realized
losses on investment transactions (740,583)
Net unrealized appreciation in
value of investments 397,742
Net assets, at value (Note 4) $ 7,712,683
NET ASSET VALUE, offering price and
redemption price per share
($7,712,683 , 759,735 shares) (Note 4) $ 10.15
STATEMENT OF OPERATIONS
For the year ended June 30, 1995
Investment income:
Interest income $ 568,322
Expenses:
Audit 6,818
Investment advisory fees (Note 2) 15,235
Insurance 873
Legal 3,500
Printing 3,314
Postage 4,314
Transfer agent (Note 2) 11,395
Trustees' fees 764
Total expenses 46,213
Reimbursement from Investment Adviser (Note 2) (15,743)
Net investment income 537,852
Realized and unrealized gain/(loss) on investments (Notes 3 and 5)
Net realized loss (702,001)
Net increase in unrealized appreciation 1,056,099
Net realized and unrealized gain on investments 354,098
Net increase in net assets resulting
from operations $ 891,950
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS - INTERMEDIATE GOVERNMENT BOND SERIES
STATEMENT OF CHANGES IN NET ASSETS
For the years ended June 30, 1995 and 1994
Increase in net assets: 1995 1994
Operations:
Net investment income $ 537,852 $ 470,349
Net realized loss on
investments (702,001) (37,893)
Net increase/(decrease)
in unrealized appreciation 1,056,099 (799,544)
Net increase/(decrease) in net assets
resulting from operations 891,950 (367,088)
Capital gains distributed to shareholders
($.000 and $.00089 per share,
respectively) 0 (689)
Dividends to shareholders
($.685 and $.628 per share,
respectively) (537,852) (470,349)
Net fund share
transactions (Note 4) (1,013,037) 3,307,397
Total increase/(decrease) (658,939) 2,469,271
Net assets:
Beginning of year 8,371,622 5,902,351
End of year $ 7,712,683 $ 8,371,622
The accompanying notes are an integral part of the financial statements.
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1995
1. Significant Accounting Policies
Dupree Mutual Funds is registered under the Investment Company Act of
1940, as amended, as a no-load, open-end investment company. The
Declaration of Trust of Dupree Mutual Funds (the "Trust") permits the
Trustees to create an unlimited number of series of investment portfolios
("Funds") and with respect to each series to issue an unlimited number of
full or fractional shares of a single class. The Trust currently offers
five Series:
the Kentucky Tax-Free Income Series, a diversified portfolio,
the Kentucky Tax Free Short-to-Medium Series, a non-diversified portfolio,
the Tennessee Tax-Free Income Series, a diversified portfolio,
the Tennessee Tax Free Short-to-Medium Series, a non-diversified
portfolio, and
the Intermediate Government Bond Series, a non-diversified portfolio.
The five tax-free funds' investment strategy is to maintain 100% of their
investments in Kentucky or Tennessee municipal securities. Regarding the
Kentucky Series, unlike many states, payment on nearly all Kentucky
municipal securities depends upon revenue generated by the property
financed by the securities, and the securities are not general obligations
of the issuer.
The Intermediate Government Bond Series' investment strategy is to invest
only in obligations of the U.S. Treasury and Agencies of the U.S.
Government. Investment in U.S. Agency mortgage-backed securities is
prohibited by the prospectus. The Intermediate Government Bond Series
will buy bonds and notes that will maintain an average maturity of no more
than ten years.
Each Series also maintains cash on deposit with principally one financial
institution at June 30, 1995.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements.
The policies are in conformity with generally accepted accounting
principles.
A. Security Valuation
Securities for which representative price quotations are current and
readily available are valued at the mean between the quoted bid and ask
price. If price quotations are not readily available the Funds value
securities based upon appraisals obtained from at least three dealers in
securities. Where appraisals are not available for a particular security
the Funds value the security based on price quotations or appraisals for
comparable securities. In evaluating these appraisals the Funds take into
account pricing data derived from a matrix system which utilizes
electronic data processing techniques to rank and price securities of the
same maturity on the basis of their respective yields. The prices derived
from the matrix pricing system are periodically reviewed and approved by
the Board of Trustees.
B. Amortization
Premiums are amortized for financial and tax reporting purposes.
Market discounts are not accreted for financial reporting purposes,
whereas original issue discounts are accreted for both financial and tax
reporting purposes.
C. Federal Income Taxes
Each of the Funds is a separate entity for federal income tax
purposes. It is each Fund's policy to qualify as a regulated investment
company by complying with the requirements of the Internal Revenue Code
applicable to regulated investment companies, including the distribution
of all taxable income to their shareholders. Therefore, no federal income
tax provision is required.
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1995
1. Significant Accounting Policies, continued:
D. Dividends and Distributions
All of the net investment income of the Funds is declared as a
dividend to shareholders of record as of the close of business each day.
Interest income is accrued pro-rata daily. Dividends to be paid are
payable in cash or in additional shares at the net asset value on the
payable date. Dividends are payable:
Monthly for: the Kentucky Tax-Free Short-to-Medium Series, and
the Tennessee Tax-Free Short-to-Medium Series, and
the Intermediate Government Bond Series, and
Quarterly for: the Kentucky Tax-Free Income Series, and
the Tennessee Tax-Free Income Series
The Fund may periodically make reclassifications among certain of its
capital accounts as a result of the timing and characterization of certain
income and capital gains distributions determined annually in accordance
with federal tax regulations which may differ from generally accepted
accounting principles. For the year ended June 30, 1995, $ 626,476 of
expired capital loss carryforwards from prior years was reclassified to
capital for the Kentucky Tax-Free Income Series.
2. Investment Advisory Fee and Other Transactions with Affiliates
Subject to the direction of the Trustees, Dupree Investment Advisers is
responsible for the management of the Funds' portfolios. The compensation
paid to Dupree Investment Advisers pursuant to the Investment Advisory
Agreements is a percentage of the daily net assets of each Series
(determined separately) as follows:
Range of Net Assets $100,000,001-
(in dollars) $0-$100,000,000 $150,000,000 $150,000,001+
Intermediate Government
Bond Series .20 of 1% .20 of 1% .20 of 1%
KY Tax-Free Income Series .50 of 1% .45 of 1% .40 of 1%
KY Tax-Free Short-to-
Medium Series .50 of 1% .45 of 1% .40 of 1%
TN Tax-Free Income Series .50 of 1% .45 of 1% .40 of 1%
TN Tax-Free Short-to-
Medium Series .50 of 1% .45 of 1% .40 of 1%
However, the Dupree firm may voluntarily waive or refund investment
advisory fees payable to it under the Investment Advisory Agreement with
the Intermediate Government Bond Series, and both Tennessee Series and
assume and pay other operating expenses to the extent necessary to keep
operating expenses (excluding interest, taxes and extraordinary expenses)
from exceeding the annual rate of .40 of 1% of average daily net asset
value for the Intermediate Government Bond Series, and .75 of 1% for both
Tennessee Series during each fiscal year.
For the period ending June 30, 1995 investment advisory fees for:
the Tennessee Tax-Free Income Series totalled $11,633; however, Dupree
voluntarily refunded fees and reimbursed expenses totalling $19,037 in
accordance with the investment advisory agreement,
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1995
2. Investment Advisory Fee and Other Transactions with Affiliates,
continued:
the Tennessee Tax-Free Short-to-Medium Series totalled $2,067; however,
Dupree voluntarily refunded fees and reimbursed expenses totalling $11,008
in accordance with the investment advisory agreement, and
the Intermediate Government Bond Series totalled $15,235; however, Dupree
voluntarily refunded fees totalling $15,743 in accordance with the
investment advisory agreement.
In addition, each Fund has entered into a shareholder service agreement
with Dupree. The agreement provides for a fee computed on the average
daily net asset value at the annual rate of .15% on the first $20,000,000
and .12% of all amounts in excess of $20,000,000.
3. Purchases and Sales of Securities
During the period, the cost of purchases and the proceeds from sales for
each Series were as follows:
Purchases Sales
Kentucky Tax-Free Income Series $ 58,214,639 $ 46,355,751
Kentucky Tax-Free Short-to-Medium Series $ 2,371,575 $ 14,856,446
Tennessee Tax-Free Income Series $ 4,165,597 $ 172,620
Tennessee Tax-Free Short-to-Medium Series $ 1,550,507 $ 5,100
Intermediate Government Bond Series $ 5,643,969 $ 6,461,571
Certain short term securities were purchased and sold between the Kentucky
Tax-Free Income Series and Kentucky Tax-Free Short-to-Medium Series. Sales
from the Income Series to the Short-to-Medium Series totalled $1,615,000
and sales from the Short-to-Medium Series to the Income Series totalled
$515,000.
4. Capital Shares
At June 30, 1995, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
KENTUCKY TAX-FREE INCOME SERIES:
1995 1994
Shares Amount Shares Amount
Shares sold 5,959,668 $ 42,855,288 8,398,952 $ 63,940,027
Shares issued to shareholders
for reinvestment of
capital gains 130,155 948,829 142,308 1,087,232
Shares issued to shareholders
for reinvestment of dividends
from net investment
income 944,055 6,780,036 991,719 7,538,901
Shares redeemed (5,797,256) (41,486,582)(5,132,338) (38,626,734)
Net increase 1,236,622 $ 9,097,571 4,400,641 $ 33,939,426
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1995
4. Capital Shares, continued:
KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES:
1995 1994
Shares Amount Shares Amount
Shares sold 4,072,398 $ 21,016,123 9,491,250 $ 50,134,162
Shares issued to shareholders
for reinvestment of
capital gains 8,881 45,650 6,902 36,511
Shares issued to shareholders
for reinvestment of dividends
from net investment
income 344,866 1,780,065 368,456 1,942,994
Shares redeemed (6,864,468) (35,411,357)(7,009,953) (36,919,467)
Net Increase/(decrease)(2,438,323) $(12,569,519) 2,856,655 $ 15,194,200
TENNESSEE TAX-FREE INCOME SERIES:
1995 1994
Shares Amount Shares Amount
Shares sold 490,607 $ 4,783,331 114,411 $ 1,134,736
Shares issued to shareholders
for reinvestment of dividends
from net investment
income 4,498 43,388 333 3,263
Shares redeemed (77,859) (749,475) (31,245) (308,437)
Net increase 417,246 $ 4,077,244 83,499 $ 829,562
TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES:
1995
Shares Amount
Shares sold 191,227 $ 1,933,670
Shares issued to shareholders
for reinvestment of dividends
from net investment
income 1,233 12,483
Shares redeemed (42,078) (425,382)
Net increase 150,382 $ 1,520,771
INTERMEDIATE GOVERNMENT BOND SERIES:
1995 1994
Shares Amount Shares Amount
Shares sold 133,833 $ 1,305,268 423,580 $ 4,487,439
Shares issued to shareholders
for reinvestment of
capital gains 0 0 51 547
Shares issued to shareholders
for reinvestment of dividends
from net investment
income 34,337 331,930 29,285 306,043
Shares redeemed (275,673) (2,650,235) (142,554) (1,486,632)
Net increase/(decrease) (107,503) $(1,013,037) 310,362 $ 3,307,397
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1995
5. Federal Income Taxes
At June 30, 1995, the Kentucky Tax-Free Income Series, the Kentucky
Tax-Free Short-to-Medium Series, the Tennessee Tax-Free Income Series and
the Intermediate Government Bond Series have capital loss carryforwards
which are available to offset future capital gains, if any. The capital
loss carryforwards expire as follows:
Kentucky Kentucky Tax- Tennessee Intermediate
Tax-Free Free Short-to- Tax-Free Government
Income Series Medium Series Income Series Bond Series
2002 $ 7,579 $ 38,582
2003 $ 4,324,705 $ 414,178 10,904 702,001
$ 4,324,705 $ 414,178 $ 18,483 $ 740,583
6. Revolving Credit Agreement
Under the terms of individual revolving credit agreements, the
Series may borrow up to $1,000,000. The principal amounts borrowed are due
on demand. Interest will be payable based on one percent above the prime
rate of the bank (9.00% at June 30, 1995). Securities with a minimum value
of $3,000,000 will be assigned as collateral until the balance of the note
and unpaid interest is paid in full and terminated. Debt covenants, among
others, require the Series to:
* Provide the lender with the Funds' annual report
* Comply with all agreements with the lender and with applicable laws and
regulations
* Maintain appropriate insurance coverage
The Tennessee Tax-Free Income Series, the Tennessee Tax-Free Short-
to-Medium Series and the Intermediate Government Bond Series had no
borrowings during the year ended and period ended June 30, 1995,
respectively. At June 30, 1995, none of the Funds had amounts outstanding
under the revolving credit agreement. The maximum and average amounts
outstanding during the year ended June 30, 1995, as well as the weighted
average interest rate for each Series, where applicable, were as follows:
KENTUCKY TAX-FREE INCOME SERIES:
Maximum amount outstanding at any month end $ 0
Daily average amount outstanding $ 6,849
Weighted average interest rate 9.78%
KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES:
Maximum amount outstanding at any month end $ 0
Daily average amount outstanding $ 173
Weighted average interest rate 10.00%
This Page Intentionally Left Blank
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the
Board of Trustees of
Dupree Mutual Funds
We have audited the accompanying statements of assets and liabilities of
the Dupree Mutual Funds (comprised of the Kentucky Tax-Free Income Series,
the Kentucky Tax-Free Short-to-Medium Series, the Intermediate Government
Bond Series, the Tennessee Tax-Free Income Series, and the Tennessee Tax-
Free Short-to-Medium Series), including the schedules of portfolio
investments, as of June 30, 1995, and the related statements of operations
for the year ended June 30, 1995 for the Kentucky Tax-Free Income Series,
the Kentucky Tax-Free Short-to-Medium Series, the Intermediate Government
Bond Series, and the Tennessee Tax-Free Income Series, and for the period
November 1, 1994 (commencement of operations) to June 30, 1995 for the
Tennessee Tax-Free Short-to-Medium Series; the statements of changes in
net assets for each of the two years ended June 30, 1995 and 1994 for the
Kentucky Tax-Free Income Series, the Kentucky Tax-Free Short-to-Medium
Series, and the Intermediate Government Bond Series, for the year ended
June 30, 1995 and for the period December 20, 1993 (commencement of
operations) to June 30, 1994 for the Tennessee Tax-Free Income Series, and
for the period November 1, 1994 (commencement of operations) to June 30,
1995 for the Tennessee Tax-Free Short-to-Medium Series; and the financial
highlights for each of the ten years in the period ended June 30, 1995 for
the Kentucky Tax-Free Income Series, for each of the seven years in the
period ended June 30, 1995 and the period September 15, 1987 (commencement
of operations) to June 30, 1988 for the Kentucky Tax-Free Short-to-Medium
Series, for each of the two years in the period ended June 30, 1995 and
for the period July 14, 1992 (commencement of operations) to June 30, 1993
for the Intermediate Government Bond Series, for the year ended June 30,
1995 and for the period December 20, 1993 (commencement of operations) to
June 30, 1994 for the Tennessee Tax-Free Income Series, and for the period
November 1, 1994 (commencement of operations) to June 30, 1995 for the
Tennessee Tax-Free Short-to-Medium Series. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of June 30, 1995, by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the Series constituting Dupree Mutual Funds as of June
30, 1995, the results of their operations, the changes in their net assets
and financial highlights for each of the periods referred to above, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
s/ Coopers & Lybrand L.L.P.
Lexington, Kentucky
August 28, 1995
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
For the Years Ended June 30:
1995 1994 1993 1992 1991 1990 1989 1988 1987
Net asset value,
Beginning of year
7.21 7.60 7.16 6.87 6.77 6.76 6.52 6.59 6.62
Income From Investment Operations
Net investment
income .40 .41 .43 .44 .45 .46 .47 .48 .50
Net gains or losses on
securities (both realizedand
unrealized) .13 (.34) .44 .29 .10 .01 .24 (.07) (.03)
Total from investment
perations .53 .07 .87 .73 .55 .47 .71 .41 .47
Less Distributions
Distributions (from capital
gains) (.05)(.05)(.00) (.00) (.00) (.00) (.00) (.00) (.00)
Dividends (from net
investment
income) (.40)(.41)(.43) (.44) (.45) (.46) (.47) (.48) (.50)
Totaldistri-
butions (.45)(.46)(.43) (.44) (.45) (.46) (.47) (.48) (.50)
Net asset value,
End of year $7.29 $7.21$7.60 $7.16 $6.87$6.77 $6.76 $6.52 $6.59
Total Return 6.90% .75%12.45%10.95% 8.43%7.19%11.32% 6.54% 7.13%
Ratios/Supplemental Data (in millions):
Net assets,end of
period $269.3$257.2$237.9$169.3$113.7$87.6$73.0 $60.4 $61.8
Shares outstanding, end
of period 36.9 35.7 31.3 23.6 16.5 12.9 10.8 9.3 9.4
Ratio of expenses to average
net assets .63% .69% .67% .71% .75% .76% .78% .81% .79%**
Ratio of net investment
income to average
net assets 5.60% 5.82% 5.79% 6.28% 6.63%6.82%7.44% 7.40% 7.32%
Portfolio turnover
rate 18.05%30.53%31.79%11.93%18.08%35.82%43.70%87.37%54.43%
** During these periods the advisor reimbursed the fund a portion of the
fees and expenses in accordance with the investment advisory agreement.
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
For the years ended June 30, 1995, 1994, 1993, 1992, 1991, 1990, and 1989,
and for the period September 15, 1987 (commencement of operations) to June
30, 1988:
1995 1994 1993 1992 1991 1990 1989 1988
Net asset value,
Beginning of year 5.17 5.29 5.17 5.05 4.99 4.97 5.00 5.00
Income From Investment Operations
Net investment income .21 .21 .23 .26 .28 .29 .29 .20
Net gains or losses on
securities (both realized
and unrealized) .02 (.12) .12 .12 .06 .02 (.03) .00
Total from investment
operations .23 .09 .35 .38 .34 .31 .26 .20
Less Distributions
Distributions (from
capital gains) (.01)(.00) (.00) (.00) (.00) (.00) (.00) (.00)
Dividends (from net investment
income) (.21)(.21) (.23) (.26) (.28) (.29) (.29) (.20)
Total distributions (.22)(.21) (.23) (.26) (.28) (.29) (.29) (.20)
Net asset value,
End of year $5.18$5.17 $5.29 $5.17 $5.05 $4.99 $4.97 $5.00
Total Return 4.27%1.71% 6.91% 7.67% 7.03% 6.36% 5.42% 5.53%
Ratios/Supplemental Data (in millions):
Net assets, end of
period $57.1 $69.6 $56.0 $34.2 $14.0 $6.7 $7.3 $3.1
Shares outstanding,
end of period 11.0 13.5 10.6 6.6 2.8 1.3 1.5 .6
Ratio of expenses to
average net assets .72% .72% .76%**.76%**.76%**.76%**.75%**.75%**
Ratio of net investment income to
average net assets 4.00% 3.92% 4.37% 4.96% 5.58% 5.79% 5.88% 5.48%
Portfolio turnover rate 4.07%17.62%22.89%29.35%26.41%57.61%41.31%103.35%
** During these periods the advisor reimbursed the fund a portion of the
fees and expenses in accordance with the investment advisory agreement.
For the years ended June 30, 1993, 1992, 1991, 1990 , and 1989 the ratio
of expenses to average net assets without the reimbursement of expenses by
the investment advisor would have been .77%, .83%, .85%, .89%, and .92%,
respectively.
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE INCOME SERIES
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
For the year ended June 30, 1995 and the period December 20, 1993
(commencement of operations) to June 30, 1994:
1995 1994
Net asset value,
Beginning of period 9.51 10.00
Income From Investment Operations
Net investment income .54 .28
Net gains or losses on
securities (both realized
and unrealized) .54 (.49)
Total from investment operations 1.08 (.21)
Less Distributions
Dividends (from net investment
income) (.54)(.28)
Total distributions (.54)(.28)
Net asset value,
End of year $10.05 $9.51
Total Return 11.65%(4.17)%
Ratios/Supplemental Data (in millions):
Net assets, end of period $5.0 $.794
Shares outstanding, end of period .500 .083
Ratio of expenses to average net assets .34** .12%**1
Ratio of net investment income to
average net assets 5.59% 2.83%1
Portfolio turnover rate 6.84% 15.88%
** During this period the advisor reimbursed the fund a portion of the
fees and expenses in accordance with the investment advisory agreement.
For the year ended June 30, 1995 and the period ended June 30, 1994 the
ratio of expenses to average net assets without the reimbursement of
expenses by the investment advisor would have been 1.16% and 4.01%,
respectively.
1 Annualized
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
For the period November 1, 1994 (commencement of operations) to June 30,
1995
1995
Net asset value,
Beginning of period 10.00
Income From Investment Operations
Net investment income .28
Net gains on
securities (both realized
and unrealized) .20
Total from investment operations .48
Less Distributions
Dividends (from net investment
income) (.28)
Total distributions (.28)
Net asset value,
End of year $10.20
Total Return 7.41%
Ratios/Supplemental Data (in millions):
Net assets, end of period $1.5
Shares outstanding, end of period .150
Ratio of expenses to average
net assets .28%**1
Ratio of net investment income to
average net assets 2.80%1
Portfolio turnover rate 0.71%
** During these periods the advisor reimbursed the fund a portion of the
fees and expenses in accordance with the investment advisory agreement.
For the eight months ended June 30, 1995, the ratio of expenses to average
net assets without the reimbursement of expenses by the investment advisor
would have been 2.05%.
1 Annualized
DUPREE MUTUAL FUNDS - INTERMEDIATE GOVERNMENT BOND SERIES
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
For the years ended June 30, 1995 and 1994, and the period July 12, 1992
(commencement of operations) to June 30, 1993:
1995 1994 1993
Net asset value,
Beginning of year 9.65 10.60 10.00
Income From Investment Operations
Net investment income .69 .63 .59
Net gains or losses on
securities (both realized
and unrealized) .50 (.95) .60
Total from investment
operations 1.19 (.32) 1.19
Less Distributions
Dividends (from net investment
income) (.69) (.63) (.59)
Total distributions (.69) (.63) (.59)
Net asset value,
End of year $ 10.15$ 9.65 $10.60
Total Return 12.78%(3.32)%12.64%
Ratios/Supplemental Data (in millions):
Net assets, end of period $7.7 $8.4 $5.9
Shares outstanding,
end of period .8 .9 .6
Ratio of expenses to average
net assets .40%**.40%** .40%**1
Ratio of net investment income to
average net assets 7.06% 6.00% 6.23%1
Portfolio turnover rate 74.98%23.08% 0.00%
** During these periods the advisor reimbursed the fund a portion of
the fees and expenses in accordance with the investment advisory
agreement. For the years ended June 30, 1995, 1994 and 1993 the ratio of
expenses to average net assets without the reimbursement of expenses by
the investment advisor would have been .61%, .65% and 1.34%, respectively.
1 Annualized
GENERAL INFORMATION
Investment Adviser
Transfer Agent and Disbursing Agent
Dupree Investment Advisers, Inc.
(In Texas, d/b/a DIA Dupree Investment Advisers, Inc.)
P.O. Box 1149
Lexington, Kentucky 40589-1149
Custodian
Star Bank
425 Walnut Street, ML 6118
P.O. Box 1118
Cincinnati, Ohio 45201-1118
Independent Accountants
Coopers & Lybrand L.L.P.
201 East Main Street, Suite 1400
Lexington, Kentucky 40507
Legal Counsel
Darsie & Elste
P.O. Box 22219
Lexington, Kentucky 40522
Board of Trustees
Thomas P. Dupree, Sr.
Chairman
President, Dupree & Company, Inc. and
Dupree Investment Advisers, Inc.
F.L. Dupree, Jr.
Vice President, Secretary and Treasurer
Dupree & Company, Inc. and
Dupree Investment Advisers, Inc.
William A. Combs, Jr.
Secretary, Treasurer, Director
Freedom Dodge, Lexington, Kentucky
Dana Motor Company, Cincinnati, Ohio
Robert L. Maddox
Member, Wyatt, Tarrant & Combs
Louisville, Kentucky
William S. Patterson
President and CEO
Cumberland Surety Insurance Co., Inc.
Lexington, Kentucky
How to Reach Us
Dupree Mutual Funds
P.O. Box 1149
Lexington, KY 40589-1149
By Phone:
(800) 866-0614
(606) 254-7741
in North Carolina:
c/o Carolina Financial Group, Inc.
P.O. Box 1466
Brevard, NC 28712
By Phone:
(800) 284-2562
(704) 883-4400
DUPREE MUTUAL FUNDS
POST-EFFECTIVE AMENDMENT NO. 35
PART C of Form N-1A OTHER INFORMATION
Page
Item 24. Financial Statementsand Exhibits
KYIncome KYSh/Med TNIncome TNSh/Med Govt NCIncome NCSh/Med
(a) Financial Statements
Included in the Registration Statement, Part B,
Statement of Additional Information:
Portfolio of Investment of June 30, 1995
25 33 39 44 48
Statement of Assets and Liabilities
at June 30, 1995
31 37 42 46 49
Statement of Operation for the Year
at June 30, 1995
31 37 42 46 49
Statements of Changes in Net Assets
for the Years Ended June 30, 1994
and 1995 32 38 43 47 50
Notes to Financial Statements 51
Report of Independent Accountants 57
Unaudited Portfolio of Investments
of March 31, 1996 Sticker 2 Sticker 6
Unaudited Statement of Assets and
Liabilities of March 31, 1996 Sticker 4 Sticker 8
Unaudited Statement of Operations for
137 days ended March 31, 1996 Sticker 4 Sticker 8
Unaudited Statement of Changes in Net
Assets for 137 days ended March 31, 1996 Sticker 5 Sticker 9
Notes to Financial Statements Sticker 10
Included in the Registration Statement Part C, Other
Information
(11) Consent of Independent Accountants
(16) Schedule for computation of each performance quotation shown at
"How to Compute Our Yields" in Statement of Additional Information
Item 25. Persons Controlled by or under Common Control with Registrant
Inapplicable
Item 26. Number of Holders of Securities
On May 31, 1996 there were 8,409 record holders of Registrant's
Shares of Beneficial Interest as follows:
Title of Series Number of Record Holders
Kentucky Tax-Free Income Series 5,615
Kentucky Tax-Free Short to Medium Series 1,488
Tennessee Tax-Free Income Series 323
Tennessee Tax-Free Short to Medium Series 104
North Carolina Tax-Free Income Series 39
North Carolina Tax-Free Short to Medium Series 30
Intermediate Government Bond Series 810
Item 27. Indemnification
Inapplicable
Item 28. Business and Other Connections of Investment Adviser
The Registrant's Investment Adviser, Dupree Investment Advisers,
Inc., is a wholly owned subsidiary of Dupree & Company, Inc., the former
investment adviser. Dupree Investment Advisers, Inc. is a Kentucky
corporation located at 125 South Mill Street, Suite 100, Lexington,
Kentucky 40507, and it serves as the Transfer Agent for Registrant.
Thomas P. Dupree, Sr., is President of Dupree Investment Advisers, Inc.,
Dupree & Co.., Inc. and the Registrant. Fred L. Dupree, Jr., is Vice-
President, Secretary and Treasurer of Dupree Investment Advisers, Inc.,
Dupree & Co., Inc. and the Registrant.
Item 29. Principal Underwriters
Inapplicable
Item 30. Location of Accounts and Records
Registrant's Transfer Agent and Dividend Disbursing Agent is Dupree
Investment Advisers, Inc., 125 South Mill Street, Vine Center, Suite 100,
Lexington, Kentucky 40507.
Item 31. Management Services
Inapplicable at this time.
Item 32. Undertakings
None
DUPREE MUTUAL FUNDS
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 35
TO
FORM N-1A REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
AND
INVESTMENT COMPANY ACT OF 1940
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
DUPREE MUTUAL FUNDS
We consent to the inclusion included in the Post-Effective Amendment No.
35 to the Registration Statement of Dupree Mutual Funds (comprised of the
Kentucky Tax-Free Income Series, the Kentucky Tax-Free Short-to-Medium
Series, the Intermediate Government Bond Series, the Tennessee Tax-Free
Income Series, the Tennessee Tax-Free Short-to-Medium Series, the North
Carolina Tax-Free Income Series, and the North Carolina Tax-Free Short-to-
Medium Series) on Form N-1A of our report dated August 28, 1995 on our
audit of the financial statements and financial highlights of the Funds,
which report is included in the Annual Report to Shareholders for the year
ended June 30, 1995 which is also included in the Registration Statement.
We also consent to the reference to our Firm under the caption "Other
Services."
s/ COOPERS & LYBRAND L.L.P.
Lexington, Kentucky
June 25, 1996
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Fund refers to interest
earned during a thirty-day period less expenses accrued for the period and
is based on the average number of shares outstanding for the period and on
the maximum offering price per share on the last day of the period. The
results are compounded on a bond equivalent (semi-annual) basis and then
annualized.
Interest earned is determined by computing yield to maturity on each
obligation held by the fund during the period and is based on the market
value of the obligation plus accrued interest at the close of business on
each day during the thirty-day period. Daily interest income for premium
obligations is calculated using the daily yield to maturity rate applied
to market value plus accrued interest of the obligations. For discount
bonds, other than original issue discounts, the coupon rate is used
instead of the yield to maturity rate and the par value of the obligation
plus accrued interest is used instead of market value.
At June 30, 1995, the yield for the Kentucky Tax Free Income Series was
4.620% and was calculated as follows:
YIELD=
2[ ((a-b ( bc) +1)6 - 1 ]
Where: a = Interest earned during the period. Interest
earned during the 30-day period ended was
$1,167,126.06
b = Expenses accrued for the period: 142,489.08
c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends: 36,857,057.388
d = The maximum offering price per share on the
last day of the period, June 30, 1995: 7.29.
EXHIBIT 16
The average annual total return for the Kentucky Tax Free Income Series
for the one-year period ended June 30, 1995, was 6.898% and was calculated
as follows:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years - 1
ERV = The redeemable value of the initial
hypothetical $1,000 payment made at the beginning of the one-
year period: $1,068.98
The average annual total return for the Kentucky Tax Free Income Series
for the period July 1, 1990 to June 30, 1995, was 7.82% and for the period
July 1, 1985 to June 30, 1995, was 8.40%. The average annual total return
for each of these periods was calculated in a manner similar to that
described above.
The ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one-year period was calculated as follows:
Step 1 - Initial investment ($1,000) divided by beginning Net Asset
Value per share ($7.21) equals initial number of shares (138.696 shares).
Step 2 - Convert initial shares to ending shares assuming timely
reinvested distributions. Initial shares of 138.696 plus incremental
number of shares of 7.940 equals 146.636 ending shares.
Step 3 - Determine value of ending shares. Number of ending shares
times ending Net Asset Value per share equals ending value. (146.636
shares x $7.29 = $1,068.98)
The above calculation assumes that all distributions are reinvested on the
payment date at the then current net asset value per share. The resulting
calculation of reinvested shares for the one-year period ending June 30,
1995 was as follows:
Payable Total Cumulative
Reinvestment Quarterly Reinvestment Incremental
Date Dividend Price Shares
6/30/94 7.21
9/30/94 .101724 7.19 1.962
12/31/94 .102201 7.09 3.990
3/31/95 .099254 7.24 5.946
6/30/95 .100493 7.29 7.940
COMPUTATION OF TAX EQUIVALENT YIELD
The tax equivalent yield is computed by dividing (a) the part of the
series yield that is tax-exempt by (b) one minus a stated tax rate and
adding the result to that part, if any, of the series yield that is not
tax-exempt.
At June 30, 1995, the tax equivalent yield for the Kentucky Tax Free
Income Series was 6.412% (based on a tax rate of 28%) and was calculated
as follows:
Tax Equivalent Yield =
[A ( (1 - B) ] + C
Where: A = The part of the series yield that is tax-exempt: 4.620%
B = Stated tax rate: 28%
C = That part of the series yield that is not tax-exempt: 0.
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Fund refers to interest
earned during a thirty-day period less expenses accrued for the period and
is based on the average number of shares outstanding for the period and on
the maximum offering price per share on the last day of the period. The
results are compounded on a bond equivalent (semi-annual) basis and then
annualized.
Interest earned is determined by computing yield to maturity on each
obligation held by the fund during the period and is based on the market
value of the obligation plus accrued interest at the close of business on
each day during the thirty-day period. Daily interest income for premium
obligations is calculated using the daily yield to maturity rate applied
to market value plus accrued interest of the obligations. For discount
bonds, other than original issue discounts, the coupon rate is used
instead of the yield to maturity rate and the par value of the obligation
plus accrued interest is used instead of market value.
At June 30, 1995, the yield for the Kentucky Tax Free Short-to-Medium
Series was 2.878% and was calculated as follows:
YIELD =
2[ ((a-b ( bc) +1)6 - 1 ]
Where: a = Interest earned during the period. Interest earned
during the 30-day period ended was $170,296.09
b = Expenses accrued for the period: $33,499.81
c = The average daily numer of shares outstanding
during the period that were entitled to receive dividends:
11,076,302.852
d = The maximum offering price per share on the
last day of the period, June 30, 1995: $5.18
EXHIBIT 16
The average annual total return for the Kentucky Tax Free Short-to-Medium
Series for the one-year period ended June 30, 1995, was 4.27% and was
calculated as follows:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years - 1
ERV = The redeemable value of the initial
hypothetical $1,000 payment made at the
beginning of the one-year period: $1,042.65
The average annual total return for the Kentucky Tax Free Short-to-Medium
Series for the period July 1, 1990 to June 30, 1995, was 5.50% and was
calculated in a similar manner.
The ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one-year period was calculated as follows:
Step 1 - Initial investment ($1,000) divided by beginning Net Asset
Value per share ($5.17) equals initial number of shares (193.424 shares).
Step 2 - Convert initial shares to ending shares assuming timely
reinvested distributions. Initial shares of 193.424 plus incremental
number of shares of 7.860 equals 201.284 ending shares.
Step 3 - Determine value of ending shares. Number of ending shares
times ending Net Asset Value per share equals ending value. (201.284
shares x $5.18 = $1,042.65)
The above calculation assumes that all distributions are reinvested on the
payment date at the then current net asset value per share. The resulting
calculation of reinvested shares of the one-year period ending June 30,
1995 was as follows:
Payable Total Cumulative
Reinvestment Quarterly Reinvestment Incremental
Date Dividend Price Shares
6/30/94 5.17
9/30/94 .051966 5.16 1.948
12/31/94 .051340 5.15 3.860
3/31/95 .051015 5.13 5.858
6/30/95 .052044 5.18 7.860
COMPUTATION OF TAX EQUIVALENT YIELD
The tax equivalent yield is computed by dividing (a) the part of the
series yield that is tax-exempt by (b) one minus a stated tax rate and
adding the result to that part, if any, of the series yield that is not
tax-exempt.
At June 30, 1995, the tax equivalent yield for the Kentucky Tax Free
Short-to-Medium Series was 4.00% (based on a tax rate of 28%) and was
calculated as follows:
Tax Equivalent Yield =
[A ( (1 - B) ] + C
Where: A = The part of the series yield that is tax-
exempt: 2.878%
B = Stated tax rate: 28%
C = That part of the series yield that is not tax-exempt: 0.
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Fund refers to interest
earned during a thirty-day period less expenses accrued for the period and
is based on the average number of shares outstanding for the period and on
the maximum offering price per share on the last day of the period. The
results are compounded on a bond equivalent (semi-annual) basis and then
annualized.
Interest earned is determined by computing yield to maturity on each
obligation held by the fund during the period and is based on the market
value of the obligation plus accrued interest at the close of business on
each day during the thirty-day period. Daily interest income for premium
obligations is calculated using the daily yield to maturity rate applied
to market value plus accrued interest of the obligations. For discount
bonds, other than original issue discounts, the coupon rate is used
instead of the yield to maturity rate and the par value of the obligation
plus accrued interest is used instead of market value.
At June 30, 1995, the yield for the Tennessee Tax Free Income Series was
5.128% and was calculated as follows:
YIELD =
2[ ((a-b ( bc) +1)6 - 1 ]
Where: a = Interest earned during the period. Interest
earned during the 30-day period ended was $22,034.00
b = Expenses accrued for the period: $1,603.16
c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends: 480,742.727
d = The maximum offering price per share on the
last day of the period, June 30, 1995: $10.05.
EXHIBIT 16
The average annual total return for the Tennessee Tax Free Income Series
for the on year period ended June 30, 1995, was 11.65% and was calculated
as follows:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years - 1
ERV = The redeemable value of the initial
hypothetical $1,000 payment made at the
beginning of the one-year period: $1,116.54
The average annualized total return for the Tennessee Tax Free Income
Series for the period July 1, 1994 to June 30, 1995, was 11.65% and was
calculated in a manner similar to that described above.
The ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period was calculated as follows:
Step 1 - Initial investment ($1,000) divided by beginning Net Asset
Value per share ($9.51) equals initial number of shares (105.152 shares).
Step 2 - Convert initial shares to ending shares assuming timely
reinvested distributions. Initial shares of 105.152 plus incremental
number of shares of 5.947 equals 111.099 ending shares.
Step 3 - Determine value of ending shares. Number of ending shares
times ending Net Asset Value per share equals ending value. (111.099
shares x $10.05 = $1,116.54)
The above calculation assumes that all distributions are reinvested on the
payment date at the then current net asset value per share. The resulting
calculation of reinvested shares for the one-year period ending June 30,
1995 was as follows:
Payable Total Cumulative
Reinvestment Quarterly Reinvestment Incremental
Date Dividend Price Shares
06/30/94 9.51
09/30/94 .130530 9.50 1.445
12/31/94 .134958 9.38 2.979
03/31/95 .133530 9.93 4.433
06/30/95 .138885 10.05 5.947
COMPUTATION OF TAX EQUIVALENT YIELD
The tax equivalent yield is computed by dividing (a) the part of the
series yield that is tax-exempt by (b) one minus a stated tax rate and
adding the result to that part, if any, of the series yield that is not
tax-exempt.
At June 30, 1995, the tax equivalent yield for the Tennessee Tax Free
Income Series was 7.122% (based on a tax rate of 28%) and was calculated
as follows:
Tax Equivalent Yield =
[A ( (1 - B) ] + C
Where: A = The part of the series yield that is tax-exempt: 5.128%
B = Stated tax rate: 28%
C = That part of the series yield that is not
tax-exempt: 0.
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Fund refers to interest
earned during a thirty-day period less expenses accrued for the period and
is based on the average number of shares outstanding for the period and on
the maximum offering price per share on the last day of the period. The
results are compounded on a bond equivalent (semi-annual) basis and then
annualized.
Interest earned is determined by computing yield to maturity on each
obligation held by the fund during the period and is based on the market
value of the obligation plus accrued interest at the close of business on
each day during the thirty-day period. Daily interest income for premium
obligations is calculated using the daily yield to maturity rate applied
to market value plus accrued interest of the obligations. For discount
bonds, other than original issue discounts, the coupon rate is used
instead of the yield to maturity rate and the par value of the obligation
plus accrued interest is used instead of market value.
At June 30, 1995, the yield for the Tennessee Tax Free Short-to-Medium
Series was 3.218% and was calculated as follows:
YIELD:
2[ ((a-b ( bc) +1)6 - 1 ]
Where: a = Interest earned during the period. Interest
earned during the 30-day period ended was $3,588.47
b = Expenses accrued for the period: $414.40
c = The average daily number of shares
outstanding during the period that
were entitled to receive dividends:
$ 116,818.118
d = The maximum offering price per share on the
last day of the period, June 30, 1995: $10.20.
EXHIBIT 16
The average annual total return for the Tennessee Tax Free Short-to-Medium
Series for the period ended November 1, 1994 (commencement of operations)
to June 30, 1995, was 7.41% and was calculated as follows:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years - 1
ERV = The redeemable value of the initial
hypothetical $1,000 payment made at the
beginning of the one-year period: $1,049.14
The average annualized total return for the Tennessee Tax-Free Short-to-
Medium Series for the period November 1, 1994 (commencement of operations)
to June 30, 1995, was 7.41% and was calculated in a manner similar to that
described above.
The ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period was calculated as follows:
Step 1 - Initial investment ($1,000) divided by beginning Net Asset
Value per share ($10.00) equals initial number of shares (100.000 shares).
Step 2 - Convert initial shares to ending shares assuming timely
reinvested distributions. Initial shares of 100.000 plus incremental
number of shares of 2.857 equals 102.857 ending shares.
Step 3 - Determine value of ending shares. Number of ending shares
times ending Net Asset Value per share equals ending value. (102.857
shares x $10.20 = $1,049.14)
The above calculation assumes that all distributions are reinvested on the
payment date at the then current net asset value per share. The resulting
calculation of reinvested shares for the period November 1, 1994
(commencement of operations) to June 30, 1995 was as follows:
Payable Total Cumulative
Reinvestment Quarterly Reinvestment Incremental
Date Dividend Price Shares
11/01/94 10.00
12/31/94 .073126 10.07 .729
3/31/95 .104300 10.10 1.776
6/30/95 .107636 10.20 2.857
COMPUTATION OF TAX EQUIVALENT YIELD
The tax equivalent yield is computed by dividing (a) the part of the
series yield that is tax-exempt by (b) one minus a stated tax rate and
adding the result to that part, if any, of the series yield that is not
tax-exempt.
At June 30, 1995, the tax equivalent yield for the Tennessee Tax-Free
Short-to-Medium Series was 4.469% (based on a tax rate of 28%) and was
calculated as follows:
Tax Equivalent Yield =
[A ( (1 - B) ] + C
Where: A = The part of the series yield that is tax-
exempt: 3.218%
B = Stated tax rate: 28%
C = That part of the series yield that is not tax-exempt: 0.
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Fund refers to interest
earned during a thirty-day period less expenses accrued for the period and
is based on the average number of shares outstanding for the period and on
the maximum offering price per share on the last day of the period. The
results are compounded on a bond equivalent (semi-annual) basis and then
annualized.
Interest earned is determined by computing yield to maturity on each
obligation held by the fund during the period and is based on the market
value of the obligation plus accrued interest at the close of business on
each day during the thirty-day period. Daily interest income for premium
obligations is calculated using the daily yield to maturity rate applied
to market value plus accrued interest of the obligations. For discount
bonds, other than original issue discounts, the coupon rate is used
instead of the yield to maturity rate and the par value of the obligation
plus accrued interest is used instead of market value.
At June 30, 1995, the yield for the Intermediate Government Bond Series
was 5.701% and was calculated as follows:
YIELD =
2[ ((a-b ( bc) +1)6 - 1 ]
Where: a = Interest earned during the period.
Interest earned during the 30-day
period ended was $38,514.94
b = Expenses accrued for the period: $2,529.86
c = The average daily numer of shares
outstanding during the period that
were entitled to receive dividends: $ 55,007.394
d = The maximum offering price per share on the
last day of the period, June 30, 1995: $ 10.15
EXHIBIT 16
The average annual total return for the Intermediate Government Bond
Series for the one-year period ended June 30, 1995, was 12.78% and was
calculated as follows:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years - 1
ERV = The redeemable value of the initial
hypothetical $1,000 payment made at
the beginning of the one-year period: $1,127.82.
The average annual total return for the Intermediate Government Bond
Series for the period July 1, 1994 to June 30, 1995, was 12.78% and was
calculated in a similar manner.
The ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one-year period was calculated as follows:
Step 1 - Initial investment ($1,000) divided by beginning Net Asset
Value per share ($9.65) equals initial number of shares (103.627 shares).
Step 2 - Convert initial shares to ending shares assuming timely
reinvested distributions. Initial shares of 103.627 plus incremental
number of shares of 7.488 equals 111.115 ending shares.
Step 3 - Determine value of ending shares. Number of ending shares
times ending Net Asset Value per share equals ending value. (111.115
shares x $10.15 = $1,127.82)
The above calculation assumes that all distributions are reinvested on the
payment date at the then current net asset value per share. The resulting
calculation of reinvested shares of the one-year period ending June 30,
1995 was as follows:
Payable Total Cumulative
Reinvestment Quarterly Reinvestment Incremental
Date Dividend Price Shares
6/30/94 9.65
9/30/94 .159115 9.54 1.705
12/31/94 .164083 9.45 3.549
3/31/95 .177458 9.74 5.527
6/30/95 .179065 10.15 7.488
COMPUTATION OF TAX EQUIVALENT YIELD
The tax equivalent yield is computed by dividing (a) the part of the
series yield that is tax-exempt by (b) one minus a stated tax rate and
adding the result to that part, if any, of the series yield that is not
tax-exempt.
At June 30, 1995, the tax equivalent yield for the Intermediate Government
Bond Series was 7.918% (based on a tax rate of 28%) and was calculated as
follows:
Tax Equivalent Yield =
[A ( (1 - B) ] + C
Where: A = The part of the series yield that is tax-exempt: 5.701%
B = Stated tax rate: 28%
C = That part of the series yield that is not tax-exempt: 0.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of
Fayette and State of Kentucky on the 21st day of June, 1996.
DUPREE MUTUAL FUNDS
By s/ Thomas P. Dupree, Sr.
Thomas P. Dupree, Sr.
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 35 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
Signatures Title Date
s/ Thomas P. Dupree, Sr. President (Principal 06/13/96
Executive Officer)
and Trustee
s/ Fred L. Dupree, Jr. Vice President, Secretary, 06/13/96
and Treasurer (Principal
Financial and Accounting Officer)
and Trustee
s/ William A. Combs, Jr. Trustee 6/13/96
_____________________ Trustee
Robert L. Maddox
s/ William S. Patterson Trustee 6/14/96
