DUPREE MUTUAL FUNDS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 27, 1998
The Annual Meeting of Shareholders of Dupree Mutual Funds, a Kentucky business
trust, (the "Trust"), will be held at the Radisson Plaza Hotel, 369 West Vine
Street, Lexington, Kentucky 40507-1636, on Tuesday, October 27, 1998 at 10:00
A. M., Lexington time, for the following purposes:
1. Election of Trustees
2. Ratification or rejection of independent certified public accountants
3. Other business
Shareholders are cordially invited to meet with the officers of the Trust prior
to the meeting, beginning at 9:30 A.M. at the Radisson Plaza Hotel.
FRED L. DUPREE, JR.
Secretary
September 17, 1998
125 South Mill Street
Lexington, Kentucky 40507
YOUR VOTE IS IMPORTANT!
Shareholders are urged to read carefully and follow the instructions on the
enclosed proxy card, indicate their choices as to each of the matters to be
acted upon, and to date, sign, and return the completed and signed proxy in
the accompanying envelope, which requires no postage if mailed in the United
States. Your prompt return of the proxy will help the Trust avoid the
additional expense of further solicitation to assure a quorum at the meeting.
DUPREE MUTUAL FUNDS
Annual Meeting of Shareholders
October 27, 1998
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies by
the Board of Trustees of Dupree Mutual Funds, a Kentucky business trust, (the
"Trust"), for use at the Annual Meeting of Shareholders of the Trust to be held
on October 27, 1998, and at any and all adjournments thereof.
If the enclosed form of proxy is properly executed and returned in time to
be voted at the meeting, the shares covered thereby will be voted in
accordance with the instructions marked thereon by the shareholders.
Executed proxies that are unmarked will be voted:
for the nominees of the Board of Trustees of the Trust in the election of
Trustees, and in favor of the ratification of the selection of independent
certified public accountants for the Trust.
Any proxy may be revoked at any time prior to its exercise by a written notice
of revocation addressed to and received by the Secretary of the Trust, by
delivering a duly executed proxy bearing a later date, or by attending the
meeting and voting in person.
As of September 17, 1998, there were _____ shares of beneficial interest of
the Trust outstanding, being comprised of:
shares of Kentucky Tax-Free Income Series
shares of Kentucky Tax-Free Short-to-Medium Series
shares of North Carolina Tax-Free Income Series
shares of North Carolina Tax-Free Short-to-Medium Series,
shares of Tennessee Tax-Free Income Series
shares of Tennessee Tax-Free Short-to-Medium Series,
shares of Intermediate Government Bond Series
all having no par value. As of that date no person was known to the Trust to
be the beneficial owner of more than five percent of the outstanding shares
of the Kentucky Tax-Free Income Series, North Carolina Tax-Free Income Series,
or the Intermediate Government Bond Series.
As of that date, the following persons were known to the Trust to be beneficial
owners of more than five percent of the outstanding shares of the following
series:
Name(s) of Share Owners
Amount of Beneficial Ownership
Percent of
Shares Held
KY Tax-Free Short-to-Medium Series
shares
%
Name(s) of Share Owners
Amount of Beneficial Ownership
Percent of
Shares Held
NC Tax-Free Short-to-Medium Series
Continued
shares
shares
shares
shares
shares
TN Tax-Free Income Series
shares
shares
TN Tax-Free Short-to-Medium Series
shares
shares
shares
shares
As of that date, the Trustees and officers of the Trust, as a group beneficially
owned, directly or indirectly shares, representing approximately
% of the outstanding shares.
A copy of the annual report of Dupree Mutual Funds for the fiscal year ended
June 30, 1998, including financial statements, has been mailed to
shareholders of record at the close of business on that date, and to persons
who became shareholders of record between that time and the close of business
on September 17, 1998, the record date for the determination of the shareholders
who are entitled to be notified of and to vote at the meeting. Copies of the
annual report may be obtained by shareholders free of charge by contacting
the Trust at P.O. Box 1149, Lexington, KY 40588-1149 or calling 800 866 0614.
Shareholders are entitled to one vote for each full share, and a proportionate
vote for each fractional share, of the Trust held as of the record date except
with respect to the election of Trustees, as to which cumulative voting shall
apply. In accordance with Kentucky law, shares owed by three or more persons
as co-fiduciaries will be voted in accordance with the will of the majority
of such fiduciaries, unless a written instrument or court order providing to
the contrary has been filed with the Secretary of the Trust.
A majority of the shares of the Trust entitled to vote shall constitute a quorum
for the transaction of business. A majority of the shares voted, at a meeting
where a quorum is present, shall decide any questions, except where a
different vote is specified by the Investment Company Act of 1940, and a
plurality shall elect a Trustee. If no instruction is given on a proxy, the
proxy will be voted in favor of the nominees as trustees, in favor of
selection of Ernst & Young, LLP to serve as independent certified public
accountants. Abstentions and broker no-votes will not count toward a
quorum though they will be counted with the majority of votes cast on any
item of business if a quorum is present.
The costs of the meeting, including the solicitation of proxies, will be paid by
the Trust. Persons holding shares as nominees will be reimbursed, upon request,
for their reasonable expenses in sending soliciting material to the principals
of the accounts. In addition to the solicitation of proxies by mail, officers
and Trustees of the Trust may solicit proxies in person or by telephone.
The date of this Proxy Statement is September 17, 1998.
ELECTION OF TRUSTEES
The Trust's Board of Trustees has nominated the seven (7) persons listed below
for election as Trustees for the ensuing year, each to hold office until the
1999 Annual Meeting of Shareholders and until their successors are duly
elected and qualified. All of the nominees except Mr. Griggs are members of
the present Board of Trustees of the Trust. A shareholder using the enclosed
form of proxy can vote for all or any of the nominees of the Board of Trustees
or can withhold his or her vote from all or any of such nominees. If the proxy
card is properly executed but unmarked it will be voted for all of the
nominees. Each of the nominees has agreed to serve as a Trustee if elected;
however, should any nominee become unable or unwilling to accept nomination
or election, the persons named in the proxy will exercise their voting power
in favor of such other person or persons as the Board of Trustees of the
Trust may recommend. Two of the nominees, Thomas P. Dupree, Sr. and Fred L.
Dupree, Jr. are brothers.
In electing Trustees, shareholders are entitled to exercise cumulative voting
rights. Under cumulative voting, each shareholder has the right to cast, in
person or by proxy, an aggregate amount of votes equal to the number of shares
held by such shareholder, multiplied by the number of Trustees to be elected,
and the shareholder may cast the whole number of votes for one candidate, or
distribute such votes among two or more candidates. The accompanying form
of proxy confers cumulative voting rights on the persons named thereon as
proxies.
Name, Address and
Age of Nominee
Principal Occupations(1)
Shares Beneficially
Owned Directly or
Indirectly, as of
September 17, 1998
THOMAS P. DUPREE, SR.*
125 South Mill Street
Lexington, KY 40507
Age: 68
Chairman of the Board of Dupree &
Company, Inc. (President until 1996)
.%
FRED L. DUPREE, JR.*
125 South Mill Street
Lexington, KY 40507
Age: 71
Vice President, Secretary, Treasurer and
Director of Dupree & Company, Inc.
.%
WILLIAM T. GRIGGS II*
125 South Mill Street
Lexington, KY 40507
Age: 47
President, Dupree & Company, Inc.
(Vice President until 1996)
LUCY A. BREATHITT
1703 Fairway Drive
Lexington, KY 40502
Age: 61
Alexander Farms, farming: KY Horse Park
Foundation Board; KY Horse Park Museum
Board.
.00%
WILLIAM A. COMBS, JR.
111 Woodland Avenue, #510
Lexington, KY 40502
Age: 58
Secretary, Treasurer, Director, Dana Motor
Company, Cincinnati, OH; Secretary,
Treasurer, Director, Freedom Dodge,
Lexington, KY; Secretary, Treasurer, Director,
Ellerslie Reality, Inc., Lexington, KY; Partner,
Forkland Development Company, Lexington,
KY; Partner, Lexland, Lexington, KY;
Director, First Security Bank, Lexington, KY
.%
ROBERT L. MADDOX
2800 Citizens Plaza
Louisville, KY 40202
Age: 74
Partner (retired 1994) Wyatt, Tarrant &
Combs, Louisville, KY, Attorneys; Director,
Nugent Sand Company, Louisville, KY;
Director, Orr Safety Corp., Louisville, KY;
Director, Whip-Mix Corp., Louisville, KY.
.%
Name, Address and
Age of Nominee
Principal Occupations(1)
Shares Beneficially
Owned Directly or
Indirectly, as of
September 17, 1998
WILLIAM S. PATTERSON
367 West Short Street
Lexington, KY 40507
Age: 66
President, CEO, Cumberland Surety Co.,
Lexington, KY; President, Patterson & Co.,
Frankfort, KY (real estate development
thoroughbred horse-breeding, farming).
0.000 %
* Thomas P. Dupree, Sr., Fred L. Dupree, Jr., and William T. Griggs II 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 & Company, Inc. Dupree & Company, Inc. also serves as the Trust's
Transfer Agent. The other nominees are the non-interested Trustees of
the Trust. For the fiscal year ended June 30, 1998 the Trust paid to Dupree
& Company, Inc. investment advisory fees and transfer agent fees totaling
$2,489,608.
(1) 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
Name of Person,
Aggregate
Retirement
Estimated Annual
Total Compensation
Position
Compensation
Benefits Accrued
Benefits Upon
From Trust and
From Trust
As Part of Trust
Retirement
Trust Complex
Expenses
Paid to Trustees
Thomas P. Dupree, Sr.
- -0-
None - No Pension
None
- -0-
President, Chairman
or Retirement Plan
Trustee
Fred L. Dupree, Jr.
- -0-
None - No Pension
None
- -0-
Vice President,
or Retirement Plan
Secretary, Treasurer
Trustee
William T. Griggs II*
- -0-
None - No Pension
None
- -0-
Vice President, Assistant
Secretary, Trustee
or Retirement Plan
Lucy A. Breathitt
$14,000
None - No Pension
None
$14,000
Trustee
or Retirement Plan
William A. Combs, Jr.
$14,000
None - No Pension
None
$14,000
Trustee
or Retirement Plan
Robert L. Maddox
$14,000
None - No Pension
None
$14,000
Trustee
or Retirement Plan
William S. Patterson
$14,000
None - No Pension
None
$14,000
Trustee
or Retirement Plan
*William T. Griggs is the nominee for a newly established trustee position and
did not participate as a trustee during the fiscal year ending June 30, 1998.
The Board of Trustees has authorized the payment of a fee of $13,000 to each of
the non-interested Trustees for the fiscal year ending June 30, 1999, plus a
fee of $1,000 to each of the non-interested Trustees for each audit committee
meeting attended. Two audit committee meetings are anticipated to be held
during the fiscal year ending June 30, 1999.
The Board of Trustees has an audit committee comprised of the four non-
interested trustees, but does not have an executive committee or a nominating
committee. The audit committee met twice during the fiscal year ended June 30,
1998, with all members in attendance. All nominees attended at least 75% of the
four meetings of the Board of Trustees during the fiscal year ended June 30,
1998. William T. Griggs II is the nominee for a newly established trustee
position and did not participate as a trustee during the fiscal year ending
June 30, 1998.
At the October 29, 1997 Annual Meeting of Shareholders 57,872,746.801 Dupree
Mutual Funds shares were outstanding and entitled to vote. Of the shares
outstanding and entitled to vote 34,809,620.793 shares were present and
voting in person or by proxy, for a percentage of 60.15%.
RATIFICATION OR REJECTION OF SELECTION
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The selection by the Board of Trustees of the firm of Ernst & Young, LLP,
certified public accountants, as the independent certified public accountants
for the fiscal year ending June 30, 1999 will be submitted for ratification or
rejection by the shareholders at the annual meeting. If approved, Ernst &
Young, LLP will perform audit, tax preparation and other accounting services
for the Trust for the fiscal year ending June 30, 1999.
The affirmative vote of a majority of the Trust's outstanding voting securities
is required for ratification of the selection of Ernst & Young, LLP As defined
in the Investment Company Act of 1940, the phrase "vote of a majority of the
outstanding voting securities" means the vote of the holders of the lesser of
(a) 67% of the shares present in person or represented by proxy and entitled
to vote at the meeting, if the holders of more than 50% of the outstanding
shares are so present or represented, and (b) more than 50% of the
outstanding shares. Representatives of Ernst & Young LLP are expected to be
available at the annual meeting to respond to appropriate questions.
INVESTMENT ADVISORY AGREEMENTS - ALL SERIES
Dupree & Company, Inc. was the original Investment Advisor from 1979-1986 of the
original series of the Trust, the former Kentucky Tax-Free Income Fund, Inc. At
the time that the shareholders of the former Kentucky Tax-Free Income Fund,
Inc. voted to change its form of business to a business trust, Dupree &
Company, Inc. created its subsidiary corporation, Dupree Investment Advisers,
Inc. to become the investment advisor for the several series of the Trust
which were later created. The creation of Dupree Investment Advisers, Inc.
was undertaken at that time by Dupree & Company, Inc. for business and tax
reasons associated with that company. In 1997 Dupree Investment Advisers,
Inc. was absorbed by its parent company, Dupree & Company, Inc. Thomas P.
Dupree, Sr., who is Chairman of the Board of Dupree & Company, Inc. and owner
of 51% of the stock of Dupree & Company, Inc. (Claire Dupree, Mr. Dupree's
wife is the owner of the remaining 49% of the stock of Dupree & Company,
Inc.) also serves as President and a member of the Trust's Board of Trustees.
William T. Griggs II is President of Dupree & Company, Inc., Mr. Griggs also
serves as a Vice President of the Trust. Fred L. Dupree, Jr. is Vice
President, Secretary, Treasurer and a Director of Dupree & Company, Inc.,
Michelle M. Dragoo and Dorine D. Kelly are Vice Presidents of Dupree &
Company, Inc. Alison L. Arnold is Assistant Vice President of Dupree &
Company, Inc.
Each series is currently served by Dupree & Company, Inc., pursuant to
agreements previously approved by shareholders of each series. The
affirmative vote of a majority of the series' outstanding voting securities
is required for ratification of the Investment Advisory Agreement. As
defined in the Investment Company Act of 1940, the phrase "vote a majority
of the outstanding voting securities" means the vote of the holders of the
lesser of (a) 67% of the shares present in person or represented by proxy
and entitled to vote at the meeting, if the holders of more than 50%
of the outstanding shares are so present or represented, and (b) more than
50% of the outstanding shares. The Investment Advisory Agreement for each
series commenced November 1, 1997 and will continue in effect until
October 31, 1998, and thereafter from year to year, if such continuation is
specifically approved. At least annually the proposed agreement must be
specifically approved by the Trust's Board of Trustees at a meeting called for
that purpose or by a vote of the holders of a majority of the series' shares,
and in either case, also by a vote of a majority of the Trust's Trustees who
are not "interested persons" of Dupree & Company, Inc. or the Trust within
the meaning of the Investment Company Act of 1940. The proposed agreement
is subject to termination by either party without penalty on 60 days written
notice to the other, and it terminates automatically in the event of assignment.
Pursuant to each agreement, the Investment Adviser provides investment
supervisory services, office space and facilities and corporate
administration. Specifically, the Investment Adviser obtains and evaluates
relevant information regarding the economy, industries, businesses, municipal
issuers, securities markets and securities to formulate a continuing program
for the management of each series' assets in a manner consistent with the
series' investment objectives; and to implement this program by selecting
the securities to be purchased or sold by the series and placing orders for
such purchases and sales. In addition, the Investment Adviser provides for
the series' office needs, maintains each series' books and records, assumes
and pays all sales and promotional expenses incurred in the distribution of
each series' shares, staffs the series with persons competent to perform all
of its executive and administrative functions, supervises and coordinates the
activities of the Trust's institutional and other agents (e.g. custodian,
transfer agent, independent accountants, outside legal counsel), and permits
its officers and employees to serve as Trustees and officers of the Trust,
all without additional cost to the Trust.
Under each agreement, neither the Investment Adviser nor any of its directors,
officers or employees performing executive or administrative functions for each
series will be liable to the Trust for any error of judgment, mistake of law
or other act or omission in connection with a matter to which the agreement
relates, 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.
Each agreement permits the Investment Adviser to voluntarily reimburse any
series. The Trust currently sells to Kentucky, Indiana, Florida, Tennessee,
Texas and North Carolina residents. Kentucky, Florida, Tennessee and North
Carolina do not currently impose a limitation upon investment advisory fees
charged to mutual funds, but both Indiana and Texas do 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 BUSINESS
The management of the Trust knows of no other business which may come before the
meeting. However, if any additional matters are properly presented at the
meeting, it is intended that the persons named in the enclosed proxy, or
their substitutes, will vote such proxy in accordance with their judgment on
such matters.
SHAREHOLDERS' PROPOSALS
If a shareholder wishes to present a proposal at the 1999 Annual Meeting of
Shareholders, scheduled for that year, such proposal must be received by the
Secretary of the Trust at the Trust's Lexington office prior to June 29, 1999.
The Trustees and officers of the Trust welcome the opportunity to discuss
proposals or suggestions any shareholder may have.
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