Dupree Mutual Funds NCSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-2918

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)

Thomas P. Dupree

125 South Mill Street, Vine Center, Suite 100

Lexington, Kentucky 40507

(Name and address of agent for service)

Registrant's Telephone Number, including Area Code (859) 254-7741

Date of fiscal year end: June 30, 2008

Date of reporting period: July 1, 2007 through June 30, 2008

Item 1. Report to Stockholders

DUPREE MUTUAL FUNDS

June 30, 2008

ANNUAL REPORT

TO SHAREHOLDERS

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 Commonwealth 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;

North Carolina Tax-Free Short-to-Medium Series in 1995;

Alabama Tax-Free Income Series in 2000, and

Mississippi Tax-Free Income Series in 2000.

Today, after more than 60 years in business, Dupree continues to be a pioneer in the industry. Our Kentucky, Tennessee, and Mississippi 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.

TABLE OF CONTENTS

Management’s Discussion of Fund Performance	i
Sector Allocation of Funds	vi
Performance Comparison/Performance Graphs	ix

Financial Statements
Alabama Tax-Free Income Series	1
Kentucky Tax-Free Income Series	5
Kentucky Tax-Free Short-to-Medium Series	11
Mississippi Tax-Free Income Series	15
North Carolina Tax-Free Income Series	18
North Carolina Tax-Free Short-to-Medium Series	22
Tennessee Tax-Free Income Series	25
Tennessee Tax-Free Short-to-Medium Series	29
Intermediate Government Bond Series	32
Notes to Financial Statements	35
Report of Independent Registered Public Accounting Firm	44
Other Unaudited Information	45
Schedule of Shareholder Expenses	47

Management’s Discussion of Fund Performance: Twelve Months Ended June 30, 2008¹

The investment objective of our municipal bond funds is to provide a high level of tax-free income derived from state-specific municipal bonds without incurring undue risk to principal. The investment objective of our government bond fund is to provide a high level of stable income derived from securities of the U.S. government and its agencies without incurring undue risk to principal.

This report covers the 12-month period from June 30, 2007 through June 30, 2008 (the “reporting period”). During the third quarter of 2007, real gross domestic product (GDP), the output of goods and services produced by labor and property in the United States, increased at an annual rate of 4.9%. However, the economy slowed dramatically towards the end of the year with real GDP increasing at a meager 0.6% pace in the fourth quarter of 2007. The slow down in growth continued into 2008 with real GDP growing at a 0.9% annual rate in the first quarter of 2008 and a 1.9% annual rate (advance estimate) in the second quarter of 2008. Most economists are predicting that economic growth will continue to be weak for the remainder of 2008 and into 2009.

During the twelve months under review, the national unemployment rate gradually increased and ended the reporting period at 5.5%. Key measures of inflation have remained elevated, driven primarily by higher prices for energy, food, and industrial commodities. The consumer price index increased at an annual rate of 5.0% through the end of June with core inflation, which excludes energy and food costs, increasing at a 2.4% annual rate.

During the reporting period, the Federal Reserve lowered its target for the federal funds rate a total of 325 basis points to its current level of 2.0%. The easing in monetary policy has been in response to a severe correction in the housing sector, a slowing in the pace of economic expansion, softening in consumer demand, and a significant deterioration in financial market conditions sparked by subprime loan losses. In addition to monetary easing, the Federal Reserve also expanded several of its credit facilities to address severe liquidity pressures in funding markets. Congress also passed a fiscal stimulus package consisting primarily of tax rebate checks that were mailed to taxpayers beginning in May.

The turmoil in credit markets first manifested in August of 2007 and persisted throughout the reporting period. The credit crunch and liquidity crisis has affected virtually every asset class including municipal and government bonds. Volatility in the municipal bond market peaked at the end of February with yields on AAA-rated thirty year municipal bonds reaching a high of around 5.15% before retreating to 4.74% at the end of the reporting period. Government bonds benefited from a flight to safety which pushed yields on the 10-year Treasury note down from a high of around 5.18% in July of 2007 to a level of around 3.97% at the end of the reporting period.

Notwithstanding the volatility in financial markets, our eight single-state municipal bond funds and our government bond fund performed relatively well during the reporting period. Our strategy of buying only high quality investment grade bonds and holding on to them served us well during this extremely volatile period. Generally, our Short-to-Medium Series performed better than our Income Series as prices on shorter-term bonds fell less than the prices of bonds with longer maturities during the reporting period. All eight of our municipal bond funds held a significant percentage of insured bonds which were negatively impacted by the downgrading of the credit ratings of a number of the bond insurers. A brief discussion of the performance of each of our funds is provided below.

The Kentucky Tax-Free Income Series provided shareholders a total return of 3.47% for the one year period ending June 30, 2008. This performance compared with the fund’s comparative index, the Lehman Brothers Municipal Bond Index, which had a total return of 3.23% for the same period. The performance of the Kentucky Tax-Free Income Series benefited from the fact that approximately 10.34% of the portfolio as of June 30 consisted of pre-refunded bonds which performed very well during the reporting period. The Kentucky Tax-Free Short-to-Medium Series provided shareholders with a total return of 3.94% during the period under review compared with a total return of

3.23% for the Lehman Brothers Municipal Bond Index.

Like most states, Kentucky’s economic growth slowed during the reporting period. The state’s GDP for 2007 grew at an annual rate of 2.3% compared with the national average of 2.0%. The state’s annual average unemployment rate through the end of June stood at 6.3% compared with the national average of 5.5%. The preliminary estimate of 2007 per capita income in Kentucky is $31,111 compared with the national average of $38,611, ranking 46^th in the nation.

The service sector has continued to expand in Kentucky and now accounts for close to 40% of statewide employment. Manufacturing accounts for approximately 19% of Kentucky’s GDP with auto-related manufacturing and parts suppliers accounting for a significant portion of this. Manufacturing employment accounts for about 15% of all nonagricultural employment in Kentucky compared to 11% nationally.

Kentucky continues to be one of the largest coal exporting states, and with energy prices at record levels, employment in that sector has increased dramatically. The state has continued to attract high-tech companies and recently has expanded its efforts to attract businesses focusing on alternative fuels and renewable energy. The state’s appropriation supported debt was rated AA- by Standard & Poor’s as of June 30, 2008.

The Tennessee Tax-Free Income Series provided shareholders with a total return of 2.87% for the twelve month period ending June 30, 2008. This performance compared with the fund’s comparative index, the Lehman Brothers Municipal Bond Index, which had a total return of 3.23% for the same period. The Tennessee Short-to-Medium Series had a total return of 2.90% for the period under review versus a total return of 3.23% for the Lehman Brothers Municipal Bond Index. The performance of the Tennessee Tax-Free Short-to-Medium Series was negatively impacted by a single non-income paying bond in default.

Tennessee’s economy has experienced its own setbacks in the face of slower national growth. The state’s real GDP for 2007 grew at an annual rate of 0.9% well below the national average of 2.0%. The state’s annual unemployment rate through the end of June was 6.5% which was well above the national average of 5.5%. The preliminary estimate of 2007 per capita income in Tennessee is $33,280 compared with the national average of $38,611, ranking 39^th in the nation.

Slower job growth at the national level translated into slower job growth in Tennessee. The state saw job growth of only 0.5% in 2007, substantially below the 1.5% rate of growth recorded in 2006. Job losses in manufacturing accelerated sharply in 2007 with a decline of 4.7% compared to a decrease of 2.3% in 2006. The housing market in Tennessee has fared only slightly better than the nation as a whole with single-family starts down almost 45% in the twelve months ending in February. Taxable sales have declined significantly as the economy has slowed. The state’s budget outlook for next year has worsened with cutbacks in spending potentially exceeding the one-half billion dollar mark. Tennessee’s general obligation (G.O.) bonds carried a AA+ rating by Standard & Poor’s as of June 30, 2008.

The North Carolina Tax-Free Income Series provided shareholders with a total return of 2.69% for the twelve month period ending June 30, 2008. This performance compared with the fund’s comparative index, the Lehman Brothers Municipal Bond Index, which had a total return of 3.23% for the same period. The performance of the North Carolina Tax-Free Income Series was negatively impacted by the fact that it held a significant number of Certificates of Participation that did not perform as well as general obligation or revenue bonds with similar maturities. The North Carolina Short-to-Medium Series provided shareholders with a total return of 3.78% for the period under review versus a total return of 3.23% for the Lehman Brothers Municipal Bond Index.

North Carolina’s economy also slowed in response to the slowdown in the national economy. The state’s real GDP for 2007 grew at an annual pace of 2.2% which was slightly higher than the national average of 2.0%. The state’s annual average unemployment rate though the end of June was 6.0% compared with the national average of 5.5%. The preliminary estimate of 2007 per capita income in North Carolina is $33,636 compared with the national average of $38,611, ranking 36^th in the nation.

Professional, business, and healthcare services continue to be the main drivers of North Carolina’s economy. The state’s Research Triangle Park hub is home to the nation’s third largest biotechnology industry. Although manufacturing has declined in relative importance in recent years, the state still has a strong manufacturing base with manufacturing industries such as chemicals and plastics, motor vehicle parts, ship and boat building, and aerospace products and parts. North Carolina’s G.O. bonds carried a AAA rating by Standard & Poor’s as of June 30, 2008.

iii

The Alabama Tax-Free Income Series provided shareholders with a total return of 2.84% for the twelve month period ending June 30, 2008. This performance compared with the fund’s comparative index, the Lehman Brothers Municipal Bond Index, which returned 3.23% for the same period.

Alabama’s economy has also experienced a slowdown over the last year. The state’s real GDP for 2007 grew at an annual rate of 1.8% compared with the national average of 2.0%. The state’s annual average unemployment rate through the end of June stood at 4.7% which was well below the national average of 5.5%. The preliminary estimate of 2007 per capita income in Alabama is $32,404 compared with the national average of $38,611, ranking 42^nd in the nation.

Alabama’s location in the center of the fastest growing region in the country has served it well. Employment growth in the state continues to be led by auto-related manufacturing and parts suppliers, transportation, and the aerospace industry. Tourism continues to be a major industry in the state. Alabama’s G.O. bonds carried a AA rating by Standard & Poor’s as of June 30, 2008.

The Mississippi Tax-Free Income Series had a total return of 2.64% for the twelve month period ending June 30, 2008 versus a total return of 3.23% for the Lehman Brothers Municipal Bond Index.

Like the other states mentioned above, Mississippi’s economy has also been negatively impacted by the slowing national economy. The state’s real GDP for 2007 grew at an annual rate of 1.7% compared with the national average of 2.0%. The state’s annual average unemployment rate through the end of June was 6.9% compared with the national average of 5.5%. The preliminary estimate of 2007 per capita income in Mississippi is $28,845 compared with the national average of $38,611, ranking last in the nation.

The state’s manufacturing sector has continued to contract and by November of 2007 manufacturing accounted for approximately 14.6% of total nonfarm employment in the state. The state’s construction sector received a strong stimulus from the impact of Hurricane Katrina. However, the pace of reconstruction has slowed as the national housing crisis continues. About $8.3 billion of federal aid to the state remains to be disbursed. The state’s casinos have been successfully rebuilt and employment in the leisure and hospitality sector as of November 2007 had returned to pre-Katrina levels. The state’s G.O. bonds carried a AA rating by Standard & Poor’s as of June 30, 2008.

The Intermediate Government Bond Series had a total return of 7.88% for the twelve month period ending June 30, 2008 versus a total return of 9.17% for the Lehman Brothers U.S. Government Intermediate Bond Index.

During this reporting period, our eight single-state municipal bond funds utilized the Lehman Brothers Municipal Bond Index as their stated benchmark rather than the 5, 7, and10-year Lehman Brothers Municipal Bond Indices previously utilized. No index can perfectly match the investments that make up a fund’s portfolio. However, we believe that utilizing a broader-based index for our municipal bond funds gives a more accurate picture of how they actually performed during this reporting period. It should be noted that index information is provided for reference only. In making investment decisions for our portfolios we do not attempt to track indexes.

The Lehman Brothers Municipal Bond index is national in scope and does not necessarily reflect the performance of state-specific municipal bond funds. Indices such as the Lehman Brothers Municipal Bond Index and the Lehman Brothers U.S. Government Intermediate Bond Index do not take into account any operating expenses or transaction costs. An investment cannot be made directly in an index.

¹^{Data are from the U.S. Department of Commerce Bureau of Economic Analysis, the U.S. Department of Labor Bureau of Labor Statistics, and various other sources management deems to be reliable. Any opinions expressed herein are those of the funds’ portfolio management and are current as of June 30, 2008. They are not guarantees of performance or investment results and should not be taken as investment advice.}

The illustrations below provide each Fund’s sector allocation. We hope it will be useful to shareholders as it summarizes key information about each Fund’s investments.

Kentucky Tax-Free Income Series		Kentucky Tax-Free Short-to-Medium Series
CREDIT QUALITY	% of Investments at market	CREDIT QUALITY	% of Investments at market

Aaa/AAA	31.45%	Aaa/AAA	28.95%
Aa/AA	57.93%	Aa/AA	62.80%
A	8.31%	A	4.87%
Baa/BBB	1.29%	Baa/BBB	0.00%
Not Rated	1.02%	Not Rated	3.38%
	100.00%		100.00%
COMPOSITION		COMPOSITION
Prerefunded	10.33%	Prerefunded	8.23%
General Obligation	1.52%	General Obligation	5.25%
Certificates of Participation	0.34%	Certificates of Participation	1.45%
Lease Revenue	7.34%	Lease Revenue	15.69%
Municipal Utility Revenue	1.67%	Municipal Utility Revenue	1.96%
Hospital and Healthcare Revenue	1.54%	Hospital and Healthcare Revenue	3.42%
State and Local Mortgage Revenue	2.94%	State and Local Mortgage Revenue	1.42%
University Consolidated Education		Insured Municipal	60.26%
and Building Revenue	0.29%	Escrowed to Maturity	2.32%
Public Facilities Revenue	0.58%		100.00%
Insured Municipal	67.55%
Escrowed to Maturity	5.90%
	100.00%

Alabama Tax-Free Income Series		Mississippi Tax-Free Income Series
CREDIT QUALITY	% of Investments at market	CREDIT QUALITY	% of Investments at market

Aaa/AAA	19.21%	Aaa/AAA	11.39%
Aa/AA	62.43%	Aa/AA	66.10%
A	14.42%	A	13.16%
Baa/BBB	1.23%	Baa/BBB	7.10%
Not Rated	2.71%	Not Rated	2.25%
	100.00%		100.00%
COMPOSITION		COMPOSITION
General Obligation	10.71%	Prerefunded	6.15%
Prerefunded	5.09%	General Obligation	16.13%
Municipal Utility Revenue	0.91%	Insured Municipal	76.48%
Industrial Revenue	0.78%	Escrowed to Maturity	1.24%
Hospital and Healthcare Revenue	0.38%		100.00%
University Consolidated Education and Building Revenue	2.11%
Public Facilities Revenue	1.55%
Insured Municipal	78.47%
	100.00%

The illustrations below provide each Fund’s sector allocation. We hope it will be useful to shareholders as it summarizes key information about each Fund’s investments.

Tennessee Tax-Free Income Series		Tennessee Tax-Free Short-to-Medium Series
CREDIT QUALITY	% of Investments at market	CREDIT QUALITY	% of Investments at market

Aaa/AAA	14.58%	Aaa/AAA	22.82%
Aa/AA	60.33%	Aa/AA	52.65%
A	18.51%	A	12.35%
Baa/BBB	6.58%	Baa/BBB	7.73%
	100.00%	Not Rated	4.45%
			100.00%
COMPOSITION		COMPOSITION
Prerefunded	2.38%	Prerefunded	3.20%
General Obligation	14.51%	General Obligation	11.19%
Lease Revenue	3.06%	Lease Revenue	8.50%
Municipal Utility Revenue	2.06%	Municipal Utility Revenue	1.80%
Hospital and Healthcare Revenue	9.97%	Hospital and Healthcare Revenue	1.05%
State and Local Mortgage Revenue	3.59%	State and Local Mortgage Revenue	3.93%
University Consolidated Education		Insured Municipal	70.33%
and Building Revenue	1.91%		100.00%
Insured Municipal	61.14%
Escrowed to Maturity	1.38%
	100.00%

North Carolina Tax-Free Income Series		North Carolina Tax-Free Short-to-Medium Series
CREDIT QUALITY	% of Investments at market	CREDIT QUALITY	% of Investments at market

Aaa/AAA	24.96%	Aaa/AAA	31.26%
Aa/AA	68.96%	Aa/AA	61.84%
A	4.16%	A	2.13%
Baa/BBB	1.92%	Baa/BBB	4.77%
	100.00%		100.00%
COMPOSITION		COMPOSITION
Prerefunded	3.81%	Prerefunded	2.20%
General Obligation	2.53%	General Obligation	5.40%
Certificates of Participation	15.32%	Certificates of Participation	12.65%
Lease Revenue	2.77%	Lease Revenue	4.05%
Municipal Utility Revenue	2.41%	Hospital and Healthcare Revenue	5.83%
Hospital and Healthcare Revenue	1.73%	University Consolidated Education
State and Local Mortgage Revenue	0.32%	and Building Revenue	1.88%
Insured Municipal	70.58%	Insured Municipal	67.99%
Escrowed to Maturity	0.53%		100.00%
	100.00%

vii

The illustrations below provide each Fund’s sector allocation. We hope it will be useful to shareholders as it summarizes key information about each Fund’s investments.

Intermediate Government Bond Series
CREDIT QUALITY	% of Investments at market	COMPOSITION	% of Investments at market

Aaa/AAA	100.00%	Federal Farm Credit	22.31%
		Federal Home Loan Bank	27.64%
		Federal Home Loan Mortgage	21.29%
		Federal National Mortgage Association	21.71%
		Student Loan Marketing Association	4.94%
		Investment Fund	2.11%
			100.00%

viii

PERFORMANCE COMPARISON (Unaudited)

The following graphs compare the change in value of a $10,000 investment in each series of Dupree Mutual Funds with the change in value of a $10,000 investment in a comparable index. The comparisons are made over ten years or since the inception of the series, if shorter than ten years. Results are for the fiscal years ended June 30.

Notes on Graphs:

Results reflect reinvestment of all dividend and capital gain distributions. No index can perfectly match the investments that make up a fund's portfolio. For each series, we have chosen an index that we believe gives the most accurate picture of how the series performed during the reporting period. The investor should understand that an index is a mathematical hypothesis and does not reflect a real market situation. For example, the portfolio of each index is replaced with an entirely different portfolio each year without reflecting operating expenses or transaction costs, an impossibility in reality. On the other hand, the fund’s performance reflects not only these factors but management costs as well. Past performance is not indicative of future results.

The performance tables and the graphs above do not reflect the deduction of taxes that a shareholder would pay on fund distribution or the redemption of fund shares.

DUPREE MUTUAL FUNDS - ALABAMA TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Alabama Municipal Bonds -- 100%
June 30, 2008
				Maturity						Market
Bond Description	Coupon			Date		Rating#		Par Value		Value
INSURED MUNICIPAL BONDS
76.70% of Net Assets
AL Agriculture & Mechanical University Revenues Refunding		5.000	%		11/01/2024		Aaa/AA@	$	150,000	$	152,888
AL Drinking Water Finance Authority Revolving Fund Loan		4.750			08/15/2027		Aa3/AA*/AA@		75,000		73,884
AL Private College & Universities Facilities Authority Revenue		4.750			09/01/2026		AAA*		500,000		494,570
AL State Board Education Bishop State Community College		4.600			01/01/2021		Aa3/AA@		100,000		100,201
AL State Board of Education Revenue Calhoun Community		5.000			05/01/2022		Aa3/AA@		450,000		460,161
AL State University Revenue General Tuition & Fee -Series A		5.000			01/01/2019		A2/AA*/AA@		50,000		51,709
AL State University Revenue General Tuition & Fee		5.000			08/01/2026		A2/A*		150,000		149,993
AL Water Pollution Control Authority Revolving Fund Loan		4.800			08/15/2018		Aa3/AA*/AA@		50,000		51,014
AL Water Pollution Control Authority Revolving Fund Loan		4.800			08/15/2022		Aa3/AA*/AA@		170,000		171,533
AL Water Pollution Control Authority Revolving Fund Loan		5.000			08/15/2026		Aa3/AA*/AA@		130,000		131,221
Alexander City AL Warrants		4.700			05/01/2021		A2/AA*/AA@		200,000		197,710
Auburn AL Capital Improvement School Warrants		5.000			08/01/2030		Aa3/AA*/AA@		260,000		262,304
Auburn University AL General Fee Revenue - Series A		5.000			06/01/2027		Aaa/AAA*/AAA		300,000		307,803
Baldwin County AL Water and Sewer Series A General Obligation		5.000			01/01/2025		Aa2/AA+*		295,000		303,735
Birmingham AL General Obligation - Series A		5.125			11/01/2022		Aa3/AA*/AA@		100,000		104,306
Birmingham AL Warrants Parking Improvement - Series C		5.000			04/01/2031		Aa3/AA*/AA@		140,000		140,930
Birmingham AL Special Care Facilities Financing		5.000			06/01/2020		Aa3/AA*/AA@		100,000		101,380
Birmingham AL Waterworks & Sewer Revenue Warrants - Series A		5.000			01/01/2023		Aa3/AA*/AA@		125,000		128,485
Choctaw County AL Revenue School Warrants		4.700			03/01/2017		NR		200,000		186,322
Daphne AL Warrants		5.000			04/01/2023		Aa3/AA*/AA@		250,000		258,253
East AL Health Care Authority Health Care Facilities Revenue		5.200			09/01/2023		A2/AA*/AA@		260,000		265,265
Elmore County AL Limited Obligation School Warrants		5.000			02/01/2022		AAA*/AAA@		190,000		195,573
Enterprise AL Water General Obligation		5.000			10/01/2019		Aa3/AA*/AA@		55,000		57,641
Enterprise AL Water General Obligation		5.000			10/01/2023		Aa3/AA*/AA@		450,000		460,633
Gadsden AL Warrants - Series B		4.600			08/01/2022		Aa3/AA@		100,000		100,576
Homewood AL Educational Building Authority Revenue Samford		5.000			12/01/2034		A2/AA@		200,000		200,536
Hoover AL Board of Education Capital Outlay Warrants		5.250			02/15/2026		A1/AA*/AA@		35,000		35,824
Hoover AL Board of Education Capital Outlay Warrants		4.750			02/15/2024		Aaa/AAA*/AAA		250,000		252,678
Huntsville AL Capital Improvement Warrants - Series C		4.500			11/01/2021		Aa1/AA+*/AA@		200,000		200,930
Huntsville AL Health Care Authority - Series A		5.000			06/01/2024		A2/AAA*		100,000		102,106
Huntsville AL Public Building Authority Lease Revenue		5.000			10/01/2027		Aa2/AA*/AA@		375,000		382,698
Huntsville AL Public Educational Building - A&M		5.600			06/01/2014		NR		20,000		19,929
Huntsville AL Public Educational Building		6.050			06/01/2020		NR		150,000		146,880
Huntsville AL Water Systems Revenue		5.000			11/01/2033		Aaa/AAA*		300,000		303,465
Lauderdale County & Florence AL Health Care Authority		5.250			07/01/2019		A2/AA*/AA@		30,000		30,620
Lee County AL School Warrants		5.000			02/01/2018		A2/AA@		100,000		103,766
Lee County AL School Warrants Limited Obligation		5.000			02/01/2021		A2/AA@		75,000		76,878
Limestone County AL Water & Sewer Authority Water Revenue		5.000			12/01/2029		Aa3/AA@		275,000		275,847
Linden AL Warrants		5.250			06/01/2023		A*		25,000		25,352
Madison AL Refunding Warrants		5.000			04/01/2021		Aaa/AAA*/AAA		350,000		366,645
Mobile AL Limited Obligation Tax Warrants		5.500			02/15/2023		A1		35,000		35,795
Montgomery AL Baptist Medical Center Special Care		5.375			09/01/2022		Aaa/AAA*		20,000		20,419
Montgomery AL Waterworks & Sanitation Sewer Board Revenue		5.000			09/01/2019		Aa3/AA*/AA@		50,000		51,436
Montgomery AL Waterworks & Sanitation Sewer Board Revenue		5.000			03/01/2025		Aaa/AAA*/AAA		250,000		256,248
Montgomery County AL Public Building Authority Revenue		5.000			03/01/2031		Aa3/AA*/AA@		150,000		150,653
Morgan County AL Water and Sewer General Obligation Warrants		5.000			04/01/2028		Aa3/AA@		100,000		100,987
Muscle Shoals AL Refunded Warrants		4.600			08/01/2024		Aa3/AA*/AA@		250,000		247,468
Phenix City AL Schools Warrants - Series B		5.000			08/01/2024		A*		200,000		205,900
Roanoke AL Warrants		4.450			05/01/2020		Aa3/AA*/AA@		150,000		152,157
St Clair County AL Board Education School Tax Warrants		4.400			02/01/2022		Aaa/AAA*/AAA		50,000		49,294
Shelby County AL Board of Education Special Tax School Warrants		5.000			02/01/2025		A2/A+*		300,000		304,142
Talladega County AL Industrial Development Revenue		4.700			01/01/2022		Aa3/AA@		100,000		98,526
Trussville AL Warrants		4.800			10/01/2021		Aa3/AA@		85,000		86,255
Tuskegee AL Utilities Board Utilities Revenue		5.500			02/01/2022		Aa3/AA*/AA@		70,000		70,475
University of AL General Revenue - Series A		5.000			07/01/2034		Aa3/AA*/AA@		100,000		100,411
University of AL General Revenue - Series A		5.000			07/01/2028		Aa3/AA-*/AA-		325,000		328,197
University of Southern AL University Revenue & Capital Improvement		5.000			03/15/2021		A2/BBB@		370,000		378,262
West Morgan - East Lawrence Water Authority AL Water Revenue		5.000			08/15/2025		Aaa/AAA*/AAA		300,000		313,734
											10,382,603

The accompanying notes are an integral part of the financial statements.

DUPREE MUTUAL FUNDS - ALABAMA TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Alabama Municipal Bonds -- 100%
June 30, 2008
				Maturity						Market
Bond Description	Coupon			Date		Rating#		Par Value		Value
GENERAL OBLIGATION BONDS
10.46% of Net Assets
AL State - Series A		5.000	%		06/01/2019		Aa3/AA*	$	30,000	$	30,738
AL State - Series A		5.000			06/01/2020		Aa3/AA*		100,000		102,197
AL State - Series B		5.000			06/01/2021		Aa3/AA*		30,000		30,537
AL State - Series A		4.625			09/01/2022		Aa3/AA*		100,000		102,075
AL 21st Century Authority Tobacco Settlement Revenue		5.750			12/01/2020		Baa1/A-*		50,000		50,067
AL 21st Century Authority Tobacco Settlement Revenue		5.850			12/01/2013		Baa1/A-*		15,000		15,410
Birmingham AL Warrants		4.900			01/01/2018		Aa3/AA*/AA-@		150,000		152,805
Birmingham AL Warrants		4.750			01/01/2023		Aa3/AA*/AA-@		225,000		228,092
Birmingham AL Capital Improvement Warrants - Series A		5.500			08/01/2025		Aa3/AA*/AA-@		100,000		104,032
Montgomery AL Warrants - Series C General Obligation Unlimited		5.000			01/01/2023		Aa2/AA*/AAA@		580,000		600,532
											1,416,485
PREREFUNDED BONDS
4.98% of Net Assets
AL State Docks Department Docks Facilities Revenue		5.500			10/01/2022		A2/AA*/AA@		110,000		113,154
Central Elmore AL Water & Sewer		5.000			07/01/2021		A2/AA*/AA@		100,000		104,148
Hoover AL Warrants - Series A		5.650			01/01/2014		Aa3/AA*		10,000		10,519
Huntsville AL Public Building Authority Lease Revenue		5.125			10/01/2022		Aa2/AA*/AA@		200,000		216,100
Jasper AL Waterworks & Sewer Board Water & Sewer Revenue		5.100			06/01/2018		Aa3/AA*/AA@		30,000		31,892
Montgomery AL Baptist Medical Center Special Care		5.000			11/15/2029		A2/AAA*		85,000		86,608
Phenix City AL School Warrants		5.450			08/01/2016		Aa3/AA*/AA@		10,000		10,741
St Clair County AL Board of Education School Tax Anticipation		5.500			02/01/2016		Aaa/AAA*/AAA		10,000		10,300
Southeast AL Gas District System Revenue - Series A		5.500			06/01/2020		Aa3/AA@		10,000		10,716
University of Alabama Revenue - Birmingham		6.000			10/01/2020		Aa3/AA-*		25,000		26,138
University AL University Revenue Hospital - Series A		5.400			09/01/2013		A2/AA*/AA@		50,000		53,208
											673,524
UNIVERSITY CONSOLIDATED EDUCATION & BUILDING
2.06% of Net Assets
AL State Public School & College Authority Capital		5.000			12/01/2025		Aa2/AA		150,000		154,886
Mobile AL Spring Hill College Educational Building		5.100			09/01/2019		Aa3		120,000		123,991
											278,877
PUBLIC FACILITIES REVENUE BONDS
1.51% of Net Assets
AL State Public Schools & College Authority - Series B		5.000			12/01/2021		Aa3/AA*		190,000		194,910
Rockford AL Public Building Authority Building Revenue		5.750			09/01/2015		NR		10,000		10,132
											205,042
MUNICIPAL UTILITY REVENUE BONDS
.89% of Net Assets
Birmingham AL Water & Sewer Revenue Warrants - Series A		5.125			01/01/2017		A2/AA-*		20,000		20,414
Birmingham AL Water & Sewer Revenue Warrants - Series A		4.750			01/01/2021		A2/AA-*		100,000		100,575
											120,989
INDUSTRIAL REVENUE BONDS
.76% of Net Assets
Auburn AL Industrial Development Board Facilities Revenue		5.800			11/01/2011		BBB*		75,000		77,728
Auburn AL Industrial Development Board Facilities Revenue		6.200			11/01/2020		BBB*		25,000		25,692
											103,420
HOSPITAL AND HEALTHCARE REVENUE BONDS
.38% of Net Assets
Mobile AL Second Medical Clinic Board Revenue Franklin		5.050			03/01/2018		Aa3		50,000		50,913
											50,913

Total Investments (cost $13,353,978)(See (a) below for further explanation) 97.74% of Net Assets										$	13,231,853

* Standard and Poor's Corporation

@ Fitch's Investors Service

All other ratings by Moody's Investors Service, Inc.

NR Not Rated

# Bond ratings are unaudited.

(a)	Represents cost for financial reporting and federal income tax purposes and differs from market value by net unrealized depreciation of securities as follows:

Unrealized appreciation	$	86,623
Unrealized depreciation		(208,748	)
Net unrealized depreciation	$	(122,125	)

The accompanying notes are an integral part of the financial statements.

ALABAMA TAX-FREE INCOME SERIES

STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008

ASSETS:
Investments in securities, at value (Cost: $13,353,978)		$	13,231,853
Cash			352,383
Interest receivable			197,624
Prepaid expenses			513
Total assets			13,782,373
LIABILITIES:
Payable for:
Investments purchased	154,470
Distributions to shareholders	42,096
Fund shares redeemed	42,257
Investment advisory fee	1,726
Transfer agent fee	2,342
Accrued expenses	2,016
Total liabilities			244,907
NET ASSETS:
Capital			13,686,275
Net accumulated realized loss on investment transactions			(26,684	)
Net unrealized depreciation in value of investments			(122,125	)
Net assets at value		$	13,537,466
NET ASSET VALUE,offering price and redemption price per share
($13,537,466 -:- 1,184,478 shares outstanding; unlimited number
of shares authorized; no par value)		$	11.43

STATEMENT OF OPERATIONS
For the year ended June 30, 2008

Net investment income:
Interest income	$	550,066
Expenses:
Investment advisory fee		61,870
Transfer agent fee		18,561
Custodian expense		4,800
Pricing fees		4,916
Professional fees		4,053
Trustee fees		1,411
Other expenses		8,794
Total expenses		104,405
Fees waived by Adviser		(43,902	)
Custodian expense reduction		(4,800	)
Net expenses		55,703
Net investment income		494,363
Realized and unrealized loss on investments:
Net realized loss		(16,730	)
Net change in unrealized appreciation/depreciation		(150,480	)
Net realized and unrealized loss on investments		(167,210	)
Net increase in net assets resulting from operations	$	327,153

The accompanying notes are an integral part of the financial statements.

ALABAMA TAX-FREE INCOME SERIES

STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2008 and 2007

	2008			2007
Increase in net assets:
Operations:
Net investment income	$	494,363		$	461,296
Net realized (loss)/gain on investments		(16,730	)		19,580
Net change in unrealized appreciation /depreciation		(150,480	)		33,183
Net increase in net assets resulting from operations		327,153			514,059
Distributions from capital gains		(23,016	)		-
Distributions from net investment income		(494,363	)		(461,296	)
Net fund share transactions (Note 4)		1,917,363			1,003,649
Total increase		1,727,137			1,056,412
Net assets:
Beginning of year		11,810,329			10,753,917
End of year	$	13,537,466		$	11,810,329

FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:	For the years ended June 30,
	2008			2007			2006			2005			2004

Net asset value, beginning of year	$	11.59		$	11.52		$	11.91		$	11.45		$	11.80
Income from investment operations:
Net investment income		0.46			0.47			0.47			0.48			0.51
Net gains/(losses) on securities,
both realized and unrealized		(0.14	)		0.07			(0.39	)		0.46			(0.35	)
Total from investment operations		0.32			0.54			0.08			0.94			0.16
Less distributions:
Distributions from capital gains		(0.02	)		-			-			-			-
Distributions from net investment income		(0.46	)		(0.47	)		(0.47	)		(0.48	)		(0.51	)
Net asset value, end of year	$	11.43		$	11.59		$	11.52		$	11.91		$	11.45
Total return		2.84	%		4.70	%		0.65	%		8.36	%		1.36	%
Net assets, end of year (in thousands)	$	13,537		$	11,810		$	10,754		$	7,800		$	5,273
Ratio of net expenses to average net assets (a)		0.45	%		0.43	%		0.46	%		0.46	%		0.40	%
Ratio of net investment income to average net assets		4.00	%		4.00	%		3.97	%		4.08	%		4.36	%
Portfolio turnover		8.46	%		5.43	%		7.72	%		3.96	%		16.43	%

(a)	Percentages are after expenses waived by Adviser and custodian/interest expense reductions, for which no recovery of these waivers and reductions will be sought.
	Expenses waived by Adviser and custodian/interest expense reductions were:
	.35% and .04% for 2008; .37% and .04% for 2007; .38% and .05% for 2006; .36% and .08% for 2005; and .41% and .10% for 2004, respectively.

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, 2008
				Maturity						Market
Bond Description	Coupon			Date		Rating#		Par Value		Value
INSURED MUNICIPAL BONDS
66.58% of Net Assets
Ballard County KY School District Finance Corporation		5.000	%		06/01/2020		Aa3/AA@	$	1,240,000	$	1,283,586
Bardstown KY Combined Utilities Revenue		5.000			12/01/2017		A2/AA@		1,290,000		1,343,587
Bardstown KY Combined Utilities Revenue		5.000			12/01/2018		A2/AA@		1,510,000		1,562,759
Barren County KY School District Finance Corporation		4.750			08/01/2022		Aaa/Aa3*/AAA@		3,085,000		3,139,018
Boone County KY Pollution Control Revenue - Dayton Power		4.700			01/01/2028		A2/A-*/A+@		9,595,000		8,944,459
Boone County KY School District Finance Corporation		5.000			05/01/2023		Aaa/AAA*		4,070,000		4,181,559
Boone County KY School District Finance Corporation		5.000			05/01/2024		Aaa/AAA*		4,265,000		4,370,900
Boone County KY Water - Florence		5.000			12/01/2015		A2/BBB@		1,000,000		1,041,340
Boone-Florence KY Water Supply System Revenue		5.000			12/01/2017		A2/BBB		1,805,000		1,874,330
Boone-Florence KY Water Supply System Revenue		5.000			12/01/2018		A2/BBB@		1,900,000		1,963,745
Boone-Florence KY Water Supply System Revenue		5.000			12/01/2020		A2/BBB@		2,100,000		2,150,925
Boyle County KY College Improvement - Centre College - A		4.750			06/01/2032		A3/A-		5,330,000		4,955,408
Bullitt County KY School District Finance Corporation		4.750			07/01/2022		Aaa/AAA@		2,440,000		2,482,041
Bullitt County KY School District Finance Corporation		4.500			10/01/2024		Aa3/AA@		2,720,000		2,722,747
Campbell & Kenton Counties Sanitary District No. 1		5.000			08/01/2025		Aa3/AA*/AA@		2,395,000		2,467,185
Campbell & Kenton Counties Sanitary Sewer		5.000			08/01/2026		Aa3/AA*/AA@		4,175,000		4,294,572
Campbell & Kenton Counties Sanitary Sewer		5.000			08/01/2027		Aaa/AA*/AA@		4,385,000		4,504,053
Campbell & Kenton Counties Sanitary Sewer		5.000			08/01/2017		Aaa/AAA*/AAA@		1,000,000		1,049,170
Campbell County KY School District Finance Corporation		4.500			08/01/2023		Aaa/AAA@		980,000		977,834
Carter County KY Detention Center		5.125			05/01/2029		Aaa/AAA*		960,000		988,349
Eastern Kentucky University Consolidated Educational Building		5.000			05/01/2021		A2/AA*/AA@		1,580,000		1,640,593
Fayette County KY School District Finance Corporation		5.250			04/01/2021		Aa3/AA*/AA@		2,285,000		2,366,369
Fayette County KY School District Finance Corporation		5.000			04/01/2024		Aaa/AAA*/AAA@		6,985,000		7,214,667
Fayette County KY School District Finance Corporation		5.000			04/01/2025		Aaa/AAA*/AAA@		7,340,000		7,533,923
Fayette County KY School District Finance Corporation		4.500			03/01/2022		Aaa/AA-*/AAA@		4,100,000		4,115,170
Franklin County School Building Revenue		4.750			05/01/2027		Aaa/AAA@		3,570,000		3,577,426
Greater KY Housing Assistance Corporation-Chenowith Woods		6.100			01/01/2024		A2/AA*/AA@		510,000		510,107
Greater KY Housing Assistance Corporation-Northside Apts		6.200			02/01/2025		AAA*		3,340,000		3,343,140
Greater KY Housing Assistance Corporation Mortgage Revenue		5.450			05/20/2027		Aaa		1,215,000		1,227,332
Hardin County School District Finance Corporation		4.750			06/01/2027		Aa3/AA@		1,250,000		1,245,313
Jefferson County KY Health Facilities - Jewish Hospital		5.650			01/01/2017		Aa3/AA*/AA@		3,450,000		3,481,464
Jefferson County KY Health Facilities - Jewish Hospital		5.700			01/01/2021		Aa3/AA*/AA@		4,520,000		4,565,697
Jefferson County KY Health Facilities University Medical Center		5.500			07/01/2017		A2/AA*/AA@		8,675,000		8,761,750
Jefferson County KY School District Finance Corporation		4.750			12/01/2026		Aaa/AAA*		3,770,000		3,803,704
Jefferson County KY School District Finance Corporation		5.250			01/01/2016		Aaa/AAA*/AAA@		1,000,000		1,028,750
Jefferson County KY School District Finance Corporation		5.250			01/01/2019		Aaa/AAA*/AAA@		2,000,000		2,054,500
Jefferson County KY School District Finance Corporation		4.500			07/01/2023		Aaa/AAA*/AAA@		2,500,000		2,483,825
Jefferson County KY School District Finance Corporation		4.625			07/01/2025		Aaa/AAA*/AAA@		7,545,000		7,531,721
Jefferson County KY School District Finance Corporation		5.000			07/01/2026		Aaa/AAA*		5,025,000		5,161,680
Jefferson County KY Health Facilities - Alliant Health		5.125			10/01/2017		A2/AA*/AAA@		2,940,000		2,971,311
Jefferson County School District Finance Corporation		4.750			06/01/2027		Aaa/AA*/AA@		3,000,000		2,981,370
Kenton County KY School District Finance Corporation		5.000			06/01/2021		Aa3/AA@		4,055,000		4,182,530
Kenton County KY School District Finance Corporation		5.000			06/01/2023		Aa3/AA@		4,465,000		4,582,028
Kenton County KY School District Finance Corporation		5.000			06/01/2024		Aa3/AA@		4,665,000		4,775,094
KY Asset Liability Commission General Fund		5.000			05/01/2020		Aa3/AA*/AA@		2,000,000		2,077,220
KY Asset Liability Commission Project Notes		5.000			05/01/2023		Aa3/AA*/AA@		5,600,000		5,752,880
KY Asset Liability Commission General Fund		5.000			05/01/2024		Aa3/AA*/AA@		5,880,000		6,023,178
KY Asset Liability Commission		5.000			05/01/2025		Aa3/AA*/AA@		1,000,000		1,020,230
KY Asset Liability Project Notes		5.000			09/01/2015		Aa3/AA*/AA@		6,000,000		6,424,020
KY Asset Liability Commission University of KY		5.000			10/01/2024		Aa3/AA*/AA@		5,445,000		5,590,708
KY Asset Liability Commission University of KY Project Note		5.000			10/01/2026		Aa3/AA*/AA@		6,090,000		6,207,050
KY Asset Liability Commission University of KY Project Note		5.000			10/01/2023		Aa3/AA-*/BBB@		8,075,000		8,306,833
KY Asset Liability Commission University of KY Project Note		5.000			10/01/2024		Aa3/AA-*/BBB@		7,405,000		7,608,341
KY Asset Liability Commission University of KY Project Note		5.000			10/01/2025		Aa3/AA-*/BBB		3,700,000		3,785,544
KY Economic Development Finance Authority-Ashland Hospital		5.000			02/01/2018		Aaa/AAA*/AAA@		1,500,000		1,524,630
KY Development Finance Authority-St Claire Medical		5.875			09/01/2013		AAA*/AA@		2,000,000		2,000,000
KY Development Finance Authority-St Claire Medical		5.625			09/01/2021		AAA*/AA@		2,500,000		2,500,000
KY Development Finance Authority-Methodist Hospital		5.625			02/01/2017		AAA*		6,500,000		6,554,665
KY Development Finance Authority-Appalachian Regional		5.850			10/01/2017		BB-*		1,000,000		963,940
KY Housing Corporation		4.750			07/01/2017		Aaa/AAA*		1,335,000		1,347,522
KY Housing Corporation		4.400			01/01/2017		Aaa/AAA*		1,000,000		1,000,440
KY Housing Corporation		4.650			07/01/2023		Aaa/AAA*		3,595,000		3,481,722
KY State Property & Building #73		5.000			11/01/2021		Aaa/AAA*/AAA@		1,000,000		1,035,360
KY State Property & Building #76		5.500			08/01/2021		Aa3/AA*/AA@		1,400,000		1,535,800
KY State Property & Building #83		5.000			10/01/2013		Aa3/AA*/AA@		610,000		647,802
KY State Property & Building #83		5.000			10/01/2017		Aa3/AA*/AA@		5,000,000		5,315,550
KY State Property & Building #83		5.000			10/01/2018		Aa3/AA*/AA@		17,750,000		18,800,445
KY State Property & Building #83		5.250			10/01/2020		Aa3/AA*/AA@		24,220,000		26,009,374
KY State Property & Building #88		4.750			11/01/2027		Aa3/A+*/AA-@		4,000,000		3,949,920
KY State Property & Building #73		5.500			11/01/2017		Aaa/AAA*/AAA@		1,000,000		1,077,680
KY State Property & Building #73		5.000			11/01/2019		Aaa/AAA*/AAA@		1,360,000		1,410,823
KY State Property & Building #73		5.000			11/01/2020		Aaa/AAA*/AAA@		3,255,000		3,374,035
KY State Property & Building #84		5.000			08/01/2019		Aa3/AA*/AA@		10,000,000		10,611,700
KY State Property & Building #84		5.000			08/01/2022		Aa3/AA*/AA@		17,500,000		18,386,200
KY State Property & Building #88		5.000			11/01/2024		Aa3/A+*/AA-@		1,355,000		1,392,574
KY State Property & Building #89		5.000			11/01/2027		Aaa/AAA*/AAA@		4,900,000		5,022,990
KY State Property & Building #80		5.250			05/01/2018		Aa3/AA*/AA@		2,940,000		3,183,991
KY State Property & Building #80		5.250			05/01/2020		Aa3/AA*/AA@		1,000,000		1,076,740
KY State Property & Building #81		5.000			11/01/2017		Aa3/AA*/AA@		2,060,000		2,154,966

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, 2008
				Maturity						Market
Bond Description	Coupon			Date		Rating#		Par Value		Value
KY State Property & Building #81		5.000	%		11/01/2018		Aa3/AA*/AA@	$	1,720,000	$	1,784,242
KY State Property & Building #81		5.000			11/01/2019		Aa3/AA*/AA@		2,385,000		2,469,453
KY State Property & Building #81		5.000			11/01/2020		Aa3/AA*/AA@		3,560,000		3,660,356
KY State Property & Building #81		5.000			11/01/2022		Aaa/AAA*/AAA@		3,930,000		4,008,954
KY State Turnpike Economic Development		5.150			07/01/2019		Aaa/AAA*/AAA@		1,000,000		1,036,240
KY State Turnpike Economic Development		5.000			07/01/2022		Aa3/AA+*/AA@		1,625,000		1,674,319
KY State Turnpike Economic Development		5.000			07/01/2023		Aa3/AA+*/AA@		4,325,000		4,456,264
KY State Turnpike Economic Development		5.000			07/01/2024		Aa3/AA+*/AA@		3,770,000		3,863,948
KY State Turnpike Economic Development		5.000			07/01/2025		Aa3/AA+*/AA@		2,000,000		2,041,420
KY State Turnpike Economic Development		5.000			07/01/2026		Aa3/AA+@/AA*		4,720,000		4,813,503
KY State Property & Building #87		5.000			03/01/2022		Aa3/A+*/AA-@		1,665,000		1,715,666
KY State Property & Building #87		5.000			03/01/2023		Aa3/A+*/AA-@		5,175,000		5,313,845
KY State Property & Building #87		5.000			03/01/2025		Aa3/A+*/AA-@		4,000,000		4,064,400
Laurel County KY School District Finance Corporation		4.625			08/01/2026		Aa3/AA@		3,150,000		3,065,171
Laurel County KY School District Finance Corporation		4.750			06/01/2026		Aaa		1,000,000		1,004,290
Letcher County KY School District Finance Corporation		5.000			06/01/2022		Aaa/Aa3*/AAA@		1,755,000		1,819,461
Letcher County KY School District Finance Corporation		5.000			06/01/2024		Aaa/Aa3*/AAA@		1,930,000		1,983,615
Louisville & Jefferson County KY Metropolitan Sewer		5.000			05/15/2025		Aa3/AA*/AA@		3,270,000		3,359,762
Louisville & Jefferson County KY Metropolitan Sewer		5.000			05/15/2026		Aa3/AA*/AA@		3,230,000		3,314,368
Louisville & Jefferson County KY Metropolitan Sewer		5.000			05/15/2019		AA-*/A+		2,500,000		2,525,800
Louisville & Jefferson County KY Metropolitan Sewer		4.750			05/15/2028		AA-*/A+@		10,425,000		10,201,384
Louisville & Jefferson County KY Metropolitan Sewer		5.000			05/15/2022		Aaa/AAA*/AAA@		2,855,000		2,969,257
Louisville & Jefferson County KY Metropolitan Sewer		5.000			05/15/2023		Aaa/AAA*/AAA@		2,990,000		3,086,338
Louisville & Jefferson County KY Metropolitan Sewer		5.000			05/15/2024		Aaa/AAA*/AAA@		3,135,000		3,237,891
Louisville & Jefferson County KY Metropolitan Sewer		5.000			05/15/2025		Aaa/AAA*/AAA@		3,285,000		3,369,325
Louisville & Jefferson County KY Metropolitan Sewer		5.000			05/15/2026		Aaa/AAA*/AAA@		5,000,000		5,134,250
Louisville & Jefferson County KY Metropolitan Sewer		5.000			05/15/2024		A2/AA*/AA@		7,000,000		7,232,470
Louisville & Jefferson County KY Metropolitan Sewer		5.000			05/15/2025		Aaa/AAA*		5,185,000		5,347,861
Louisville & Jefferson County KY Regional Airport Authority		5.500			07/01/2017		Aaa/AAA*/AAA@		2,655,000		2,828,239
Louisville & Jefferson County KY Visitors & Convention Center		4.500			12/01/2023		Aaa/AAA*/AAA@		2,340,000		2,332,184
Louisville & Jefferson County KY Visitors & Convention Center		4.500			12/01/2024		Aaa/AAA*/AAA@		2,250,000		2,224,170
Louisville & Jefferson County KY Visitors & Convention Center		4.600			12/01/2025		Aaa/AAA*/AAA@		1,490,000		1,499,774
Louisville & Jefferson County KY Student Housing		5.000			06/01/2025		Aa3/AA*/AA		2,030,000		2,064,348
Louisville KY General Obligation - Series A		5.000			10/01/2020		Aa2/AA+*/BBB@		7,165,000		7,360,390
Louisville KY Health Care Facilities		6.650			12/20/2030		Aaa		4,787,000		5,147,940
Louisville KY Parking Authority-River City First Mortgage		5.000			12/01/2017		A1/AA*/AA@		1,000,000		1,005,490
Madison County KY School District Finance Corporation		4.500			04/01/2016		Aaa/AAA*/AAA@		695,000		711,624
Marshall County KY School District Finance Corporation		5.000			06/01/2022		Aa3/Aa3*/AA@		1,400,000		1,439,620
McCracken County KY School District Finance Corporation		4.650			07/01/2019		Aa3/AA@		1,655,000		1,679,130
McCracken County KY School District Finance Corporation		4.700			07/01/2020		Aa3/AA@		1,725,000		1,747,580
McCracken County KY School District Finance Corporation		5.000			07/01/2022		Aa3/AA@		4,000,000		4,082,760
McCreary County KY Courthouse & Public Square Corporation		5.400			09/01/2020		Aa3/AA*/AA@		1,550,000		1,615,874
Nelson County KY School District Finance Corporation		4.500			04/01/2021		Aaa/Aa3*/AAA@		1,130,000		1,138,091
Nelson County KY School District Finance Corporation		4.500			04/01/2023		Aaa/Aa3*/AAA@		2,505,000		2,510,135
Northern KY University Certificate of Participation		4.900			12/01/2021		Aaa/AAA*		2,725,000		2,751,814
Northern KY University Certificate of Participation		5.000			12/01/2024		Aa3/AA@		2,000,000		2,023,620
Northern KY Water District		4.750			02/01/2019		A2/BBB@		1,000,000		1,020,090
Northern KY Water District		5.000			02/01/2020		A2/BBB@		3,080,000		3,150,840
Northern KY Water District		5.000			02/01/2021		A2/BBB@		2,635,000		2,688,543
Northern KY Water District		4.125			02/01/2021		A2/BBB@		1,380,000		1,280,363
Northern KY Water District		4.500			02/01/2022		A2		1,385,000		1,371,067
Pike County KY Mortgage Revenue-Phelps Regional Health		5.350			09/20/2012		AAA*		115,000		116,978
Radcliff KY Mortgage Revenue-Lincoln Trail Care		5.650			01/20/2019		AAA*		3,015,000		3,066,134
Shelby County KY School District Finance Corporation		5.000			05/01/2022		Aa3/AA@		1,815,000		1,864,749
Shelbyville KY Certificate of Participation		5.150			07/01/2018		A2/AA@		4,165,000		4,248,425
Spencer County KY School District Finance Corporation		5.000			07/01/2023		Aaa/AAA@		1,000,000		1,028,690
Taylor County Detention Facility		4.750			09/01/2027		Baa1		2,110,000		1,988,169
											489,132,588
PREREFUNDED BONDS
10.18% of Net Assets
Boone County KY School District Finance Corporation		5.750			02/01/2020		Aa3		1,200,000		1,264,452
Florence KY Public Property Corporation Revenue		5.250			03/01/2017		A3		1,060,000		1,069,487
Georgetown College Project - Series A		6.000			11/15/2016		BBB-*		1,000,000		1,079,710
Georgetown College Project - Series A		6.250			11/15/2020		BBB-*		4,000,000		4,341,600
KY Economic Development Finance Authority - Catholic Health		5.500			09/01/2014		Aa2/AA*/AA@		1,375,000		1,469,531
KY Development Finance Authority - Catholic Health		5.750			12/01/2015		Aa2/AA*/AA@		2,000,000		2,131,520
KY Development Finance Authority -Catholic Health		5.250			09/01/2021		Aa2/AA*/AA@		2,000,000		2,122,540
KY State Property & Building #85		5.000			08/01/2020		Aaa/AAA*/AAA@		5,760,000		6,256,454
KY State Property & Building #85		5.000			08/01/2022		Aaa/AAA*/AAA@		8,200,000		8,906,758
KY State Property & Building #85		5.000			08/01/2023		Aaa/AAA*/AAA@		12,500,000		13,577,375
KY State Property & Building #85		5.000			08/01/2024		Aaa/AAA*/AAA@		13,300,000		14,446,327
KY State Property & Building #85		5.000			08/01/2025		Aaa/AAA*/AAA@		5,000,000		5,430,950
KY State Property & Building #77		5.250			08/01/2015		Aa3/AAA*/AA@		1,140,000		1,239,921
KY State Property & Building #79		4.750			10/01/2023		Aa3/AA*/AA@		3,000,000		3,199,110
Knox County General Obligation		5.625			06/01/2036		A3/A-*/BB		2,490,000		2,795,000
Laurel County KY School District School Building Revenue		5.750			06/01/2020		Aa3		1,250,000		1,342,850
Pendleton County KY School District Finance Corporation		5.125			06/01/2019		Aa3		1,140,000		1,197,889
University of Kentucky Housing and Dining		4.400			06/01/2017		Aaa/AAA@		2,815,000		2,946,658
											74,818,132

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, 2008
					Maturity						Market
Bond Description		Coupon			Date		Rating#		Par Value		Value
LEASE REVENUE BONDS
7.24% of Net Assets
Boone County KY School District Finance Corporation			5.000	%		08/01/2019		Aa3	$	1,040,000	$	1,081,850
Boone County KY School District Finance Corporation			5.000			02/01/2022		Aa3		3,000,000		3,095,760
Bullitt County KY School District Finance Corporation			5.000			07/01/2021		Aa3		1,000,000		1,032,600
Danville KY Multi-City Lease Campbellsville Water & Sewer			3.500			07/01/2012		Baa1		1,950,000		1,955,772
Davies County KY School District Finance Corporation			5.000			06/01/2021		Aa3		1,155,000		1,194,374
Green County KY School District Finance Corporation			5.000			04/01/2021		Aa3		1,085,000		1,123,246
Greenup County KY School District Finance Corporation			4.650			03/01/2021		Aa3		1,650,000		1,712,469
Hopkins County KY School District Finance Corporation			5.125			06/01/2019		Aa3		4,120,000		4,296,954
KY Area Development Districts Financing Lease-Ewing	^		5.700			06/01/2015		AA*		1,500,000		1,614,135
KY Area Development Districts Financing Lease-Ewing	^		5.600			06/01/2022		AA*		1,055,000		1,103,604
KY Area Development Districts Financing Lease-Ewing	^		5.350			12/01/2022		AA*		2,560,000		2,613,325
KY Area Development Districts Financing Lease-Ewing	^		5.400			12/01/2021		AA*		710,000		733,835
KY Area Development Districts Financing Lease-Ewing	^		5.400			12/01/2021		AA*		1,095,000		1,125,857
KY Area Development Districts Financing Lease-Ewing	^		4.700			06/01/2024		AA*		2,625,000		2,564,494
KY Interlocal Transportation Equipment Lease Revenue			6.000			12/01/2020		Aa3/A+*		400,000		400,068
KY Infrastructure Authority - Series A			5.000			06/01/2019		Aa3/A+*/AA-@		1,000,000		1,028,370
KY Infrasturcture Authority - Series E			5.000			06/01/2017		Aa3/AA-*		1,035,000		1,045,433
KY State Property & Building #68			5.250			10/01/2018		Aa3/A+*/AA-@		1,500,000		1,557,840
KY State Property & Building #68			5.000			10/01/2019		Aa3/A+*/AA-@		5,500,000		5,646,025
KY State Property & Building #73			5.500			11/01/2013		Aa3/A+*/AA-@		1,500,000		1,605,330
Martin County KY School District Finance Corporation			5.375			09/01/2020		Aa3		1,100,000		1,150,985
Montgomery County KY School District Finance Corporation			4.375			04/01/2023		Aa3		3,105,000		3,076,496
Oldham County KY School District Finance Corporation			5.000			12/01/2021		Aa3		2,090,000		2,168,918
Pendleton County KY Multi-County Lease Revenue	^^		6.400			03/01/2019		A*		3,000,000		3,421,140
Pike County School District Finance Corporation			5.000			09/01/2016		Aa3		1,850,000		1,934,045
Pike County KY School District Finance Corporation			5.100			09/01/2020		Aa3		1,000,000		1,038,100
Scott County KY School District			5.000			03/01/2021		Aa3		1,240,000		1,289,129
Trigg County KY School District Finance Corporation			4.600			04/01/2018		Aa3		1,700,000		1,720,043
Whitley County KY School Finance			4.800			02/01/2021		Aa3		800,000		828,096
												53,158,293
ESCROWED TO MATURITY BONDS
5.82% of Net Assets
Ashland KY Pollution Control Revenue - Ashland Inc			5.700			11/01/2009		Ba1		1,000,000		1,045,520
Danville KY Multi-City Lease Revenue-Hopkinsville			6.875			06/01/2012		Baa1		1,220,000		1,315,319
Jefferson County KY Health Facilities - Alliant Health			5.125			10/01/2018		A2/AA*/AA@		33,000,000		33,523,050
Jefferson County KY Health Facilities - Alliant Health			5.125			10/01/2017		A2/AA*		4,980,000		5,018,744
KY Development Finance Authority-Norton Health			6.125			10/01/2010		A-@		1,775,000		1,833,167
												42,735,800
STATE AND LOCAL MORTGAGE REVENUE BONDS
2.9% of Net Assets
Florence KY Housing Facility Revenue			6.300			08/15/2019		NR		2,615,000		2,628,729
KY Housing Corporation			4.750			07/01/2032		Aaa/AAA*		1,265,000		1,192,414
KY Housing Corporation			4.850			01/01/2024		Aaa/AAA*		7,380,000		7,392,915
KY Housing Corporation			4.950			01/01/2033		Aaa/AAA*		6,280,000		6,183,602
KY Housing Corporation	**		4.900			07/01/2028		Aaa/AAA*		2,000,000		1,994,940
KY Housing Corporation	**		5.000			07/01/2033		Aaa/AAA*		1,900,000		1,891,925
												21,284,525
MUNICIPAL UTILITY REVENUE BONDS
1.65% of Net Assets
KY Rural Water Financial Corporation Public Project Revenue			5.375			02/01/2020		AA-*		1,140,000		1,194,082
Louisville & Jefferson County KY Waterworks & Water System			5.000			11/15/2031		Aa1/AA+*		10,695,000		10,906,975
												12,101,057
HOSPITAL AND HEALTHCARE REVENUE BONDS
1.52% of Net Assets
Jefferson County KY Health Facilities - Jewish Hospital			5.700			01/01/2011		A1/AA-*		1,200,000		1,213,128
KY Development Finance Authority - Green River			6.000			11/01/2010		Aaa		1,000,000		1,008,720
KY Development Finance Authority-Norton Health			6.125			10/01/2010		A-@		3,550,000		3,632,254
KY Development Finance Authority-Catholic Health			5.125			10/01/2021		A1/AA*/AA-@		1,000,000		1,013,930
Madison County KY Industrial Building Revenue - McCready Manor			5.500			06/01/2020		AA-*		1,785,000		1,800,208
Pike County KY Mortgage Revenue-Phelps Regional Health			5.650			09/20/2027		AAA*		2,435,000		2,468,335
												11,136,575
GENERAL OBLIGATION BONDS
1.49% of Net Assets
Bowling Green KY General Obligation			5.300			06/01/2018		Aa3		1,000,000		1,038,850
Bowling Green KY General Obligation			4.600			06/01/2018		Aa2		1,290,000		1,318,715
Hardin County KY General Obligation			5.125			06/01/2019		A1		2,255,000		2,304,700
Jefferson County KY - Series A			4.900			12/01/2018		Aa2/AA*		1,605,000		1,651,175
KY State Property & Building #62			4.625			09/01/2013		Aa3/A+*/AA-@		2,750,000		2,806,320
Louisville KY General Obligation			5.000			11/01/2019		Aa2/AA*		1,775,000		1,857,431
												10,977,191

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, 2008
				Maturity				Par		Market
Bond Description	Coupon			Date		Rating#		Value		Value
PUBLIC FACILITIES REVENUE BONDS
.57% of Net Assets
Boone County KY Public Property Corporation - AOC Judicial		5.000	%		09/01/2019		Aa3	$	1,000,000	$	1,044,120
Boone County KY Public Property Corporation - Judicial Facilities		5.125			09/01/2022		Aa3		1,750,000		1,822,520
Calloway County KY Public Property Corporation-Courthouse		5.625			03/01/2018		A*		1,000,000		1,020,170
Danville KY Multi-City Lease Revenue-Mt Sterling		5.000			09/01/2011		NR		335,000		335,285
											4,222,095
CERTIFICATES OF PARTICIPATION BONDS
.33% of Net Assets
Shelbyville KY Certificate of Participation		5.350			10/01/2013		NR		1,295,000		1,316,018
Shelbyville KY Certificate of Participation		5.450			10/01/2017		NR		1,130,000		1,140,848
											2,456,866
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS
.29% of Net Assets
Berea KY Educational Facilities Revenue		4.125			06/01/2022		Aaa		2,190,000		2,127,738
											2,127,738

Total Investments (cost $724,193,047)(See (a) below for further explanation) 98.57% of Net Assets										$	724,150,860

When-Issued security or extended settlement - see footnote 1(D)

Standard and Poor's Corporation

Fitch's Investors Service

All other ratings by Moody's Investors Service, Inc.

Not Rated

Bond ratings are unaudited.

Certain bonds within the same Kentucky Area Development Districts (KADD) financial pool are in default, however, the bonds held by the Fund are not in default at June 30, 2008.

On May 9, 2006, the Issuer received a proposed adverse determination from the IRS which asserts that the interest paid to holders of the subject bonds is not excludable from gross income under section 103 of the Internal Revenue Code. The issuer is pursuing an appeal of the proposed adverse determination.

(a)	Represents cost for financial reporting and federal income tax purposes and differs from market value by net unrealized depreciation of securities as follows:

Unrealized appreciation	$	10,013,952
Unrealized depreciation		(10,056,139	)
Net unrealized depreciation	$	(42,187	)

The accompanying notes are an integral part of the financial statements.

KENTUCKY TAX-FREE INCOME SERIES

STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008

ASSETS:
Investments in securities, at value (Cost: $724,193,047)		$	724,150,860
Cash			7,515,939
Receivable for fund shares purchased			150,000
Interest receivable			9,890,322
Total assets			741,707,121
LIABILITIES:
Payable for:
Investments purchased	3,900,000
Distributions to shareholders	2,727,124
Fund shares redeemed	73,181
Investment advisory fee	240,258
Transfer agent fee	72,324
Trustee fee	1,693
Accrued expenses	79,156
Total liabilities			7,093,736
NET ASSETS:
Capital			733,936,887
Net accumulated realized gain on investment transactions			718,685
Net unrealized depreciation in value of investments			(42,187	)
Net assets at value		$	734,613,385
NET ASSET VALUE, offering price and redemption price per share
($734,613,385 -:- 99,464,256 shares outstanding; unlimited number
of shares authorized; no par value)		$	7.39

STATEMENT OF OPERATIONS
For the year ended June 30, 2008

Net investment income:
Interest income	$	32,191,309
Expenses:
Investment advisory fee		2,867,522
Transfer agent fee		860,579
Custodian expense		34,392
Professional fees		164,041
Trustee fees		81,871
Postage expense		35,000
Printing expense		55,000
Other expenses		45,641
Total expenses		4,144,046
Custodian expense reduction		(34,392	)
Net expenses		4,109,654
Net investment income		28,081,655
Realized and unrealized gain on investments:
Net realized gain		1,038,498
Net change in unrealized appreciation/depreciation		(5,383,417	)
Net realized and unrealized loss on investments		(4,344,919	)
Net increase in net assets resulting from operations	$	23,736,736

The accompanying notes are an integral part of the financial statements.

KENTUCKY TAX-FREE INCOME SERIES

STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2008 and 2007

	2008			2007
Increase in net assets:
Operations:
Net investment income	$	28,081,655		$	27,771,550
Net realized gain on investments		1,038,498			596,796
Net change in unrealized appreciation/depreciation		(5,383,417	)		2,175,301
Net increase in net assets resulting from operations		23,736,736			30,543,647
Distributions from net investment income		(28,081,655	)		(27,771,550	)
Distributions from capital gains		(9,603	)		(649,014	)
Net fund share transactions (Note 4)		36,495,116			13,421,142
Total increase		32,140,594			15,544,225
Net assets:
Beginning of year		702,472,791			686,928,566
End of year	$	734,613,385		$	702,472,791

FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:	For the years ended June 30,
	2008				2007			2006			2005			2004

Net asset value, beginning of year	$	7.43			$	7.40		$	7.67		$	7.49		$	7.73
Income from investment operations:
Net investment income		0.29				0.30			0.30			0.32			0.33
Net gains/(losses) on securities,
both realized and unrealized		(0.04	)			0.04			(0.27	)		0.18			(0.24	)
Total from investment operations		0.25				0.34			0.03			0.50			0.09
Less distributions:
Distributions from net investment income		(0.29	)			(0.30	)		(0.30	)		(0.32	)		(0.33	)
Distributions from capital gains		-		(b)		(0.01	)		-			-			-
Net asset value, end of year	$	7.39			$	7.43		$	7.40		$	7.67		$	7.49
Total return		3.47	%			4.51	%		0.41	%		6.79	%		1.23	%
Net assets, end of year (in thousands)	$	734,613			$	702,473		$	686,929		$	683,296		$	614,357
Ratio of net expenses to average net assets (a)		0.58	%			0.58	%		0.58	%		0.58	%		0.58	%
Ratio of net investment income to average net assets		3.94	%			3.94	%		4.00	%		4.20	%		4.37	%
Portfolio turnover		5.69	%			6.76	%		17.60	%		19.38	%		7.89	%

(a)	Percentages are after custodian/interest expense reductions, for which no recovery of these waivers and reductions will be sought.
	Percentages before custodian/interest expense reductions were:
	.58% for 2008; .58% for 2007; .59% for 2006; .60% for 2005; and .60% for 2004.
(b)	Rounds to less than $0.01.

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, 2008
					Maturity						Market
Bond Description		Coupon			Date		Rating#		Par Value		Value
INSURED MUNICIPAL BONDS
59.07% of Net Assets
Boone-Florence Water Supply System Revenue			4.300	%		12/01/2011		A2/BBB@	$	505,000	$	518,226
Carrollton & Henderson Ky Public Energy Authority Gas			5.000			01/01/2009		Aaa/AAA*/AAA@		3,650,000		3,700,991
Eastern KY University Consolidated Education Building			4.300			05/01/2009		A2/A*/BBB@		500,000		508,930
Hardin County KY Hospital Revenue Refunding			3.500			10/01/2010		Aa3/AA@		1,050,000		1,060,856
Jefferson County KY Health Facility University Medical Center			5.000			07/01/2008		A2/AA*/AA@		300,000		300,027
Kentucky Asset Liability Project Notes			5.000			09/01/2017		Aa3/AA*/AA@		1,000,000		1,076,070
KY Asset Liability Project Notes			5.000			09/01/2016		Aa3/AA*/AA@		2,000,000		2,124,360
KY Asset Liability University of Kentucky Project Notes			5.000			10/01/2016		Aa3/AA-*/BBB@		1,250,000		1,331,988
KY Economic Development Finance Authority Appalachian Hospital			5.700			10/01/2010		BB-*		1,000,000		999,480
KY State Property & Building #87			5.000			03/01/2020		Aa3/A+*/AA-@		3,000,000		3,117,420
KY State Property & Building #69			5.000			08/01/2009		Aaa/AAA*/AAA@		1,620,000		1,668,923
KY State Property & Building #65			5.750			02/01/2009		Aaa/AAA*/AAA@		750,000		766,200
KY State Property & Building #82			5.250			10/01/2015		Aaa/AAA*/AAA@		2,000,000		2,182,200
KY State Property & Building #82			5.250			10/01/2017		Aaa/AAA*/AAA@		1,000,000		1,094,190
KY State Property & Building #74			5.375			02/01/2011		Aaa/AAA*/AAA@		1,005,000		1,058,798
KY State Property & Building #83			5.000			10/01/2019		Aa3/AA*/AA@		1,750,000		1,851,850
KY State Turnpike Authority Economic Development			5.000			07/01/2017		Aa3/AA+*/AA@		2,570,000		2,735,456
Northern KY Water Services District Water District Revenue			4.750			02/01/2011		Aaa		1,025,000		1,036,265
Oldham County School Building Corporation			4.375			06/01/2018		Aaa/AAA@		2,570,000		2,614,591
Warren County KY School District Finance Corporation			4.000			02/01/2015		Aa3/AA@		785,000		792,222
Warren County KY School District Finance Corporation			4.000			02/01/2016		Aa3/AA@		1,330,000		1,334,283
												31,873,326
LEASE REVENUE BONDS
15.39% of Net Assets
KY Area Development District Financing City of Ewing	^		5.100			06/01/2010		AA*		560,000		572,382
KY Infrastructure Authority Government Agency Program S:K			4.000			08/01/2010		AA*		1,000,000		1,025,350
KY Infractructure Authority - Series A			5.000			06/01/2010		Aa3/A+*/AA-@		2,000,000		2,078,960
KY Infrastructure Authority			5.250			08/01/2013		AA*		1,185,000		1,283,106
KY State Property & Building #71			5.500			08/01/2008		Aa3/A+*/AA-@		10,000		10,029
KY State Property & Building #60			5.500			10/01/2008		Aa3/A+*/AA-@		500,000		504,590
KY State Property & Building #73			3.700			11/01/2008		Aa3/A+*/AA-@		1,000,000		1,005,410
KY State Property & Building #73			5.250			11/01/2011		Aa3/A+*/AA-@		750,000		795,075
KY State Property & Building #73			5.250			11/01/2009		Aa3/A+*/AA-@		540,000		558,430
Madison County KY School District Finance Corporation Revenue			3.500			05/01/2013		Aa3		470,000		469,568
												8,302,900
PREREFUNDED BONDS
8.07% of Net Assets
KY Economic Development Finance Authority Catholic Health			5.500			12/01/2010		Aa2/AA*/AA@		2,100,000		2,221,443
KY Economic Development Finance Authority Catholic Health			5.750			12/01/2015		Aa2/AA		2,000,000		2,131,520
												4,352,963
GENERAL OBLIGATION BONDS
5.15% of Net Assets
Jefferson County KY General Obligation			5.500			08/15/2010		Aa2/AA*		2,635,000		2,777,896
												2,777,896
HOSPITAL AND HEALTHCARE REVENUE BONDS
3.35% of Net Assets
KY Economic Development Finance Authority-Catholic Health			4.250			10/01/2009		A1/AA-*/AA-@		255,000		259,730
KY Economic Development Finance Authority-Catholic Health			4.500			10/01/2011		A1/AA-*/AA-@		1,000,000		1,025,480
KY Economic Development Finance Authority Norton Health			6.125			10/01/2010		A-@		510,000		521,817
												1,807,027
ESCROWED TO MATURITY BONDS
2.28% of Net Assets
Ashland KY Pollution Control Revenue Ashland Inc Project			5.700			11/01/2009		Ba1		500,000		522,760
KY Economic Development Finance Authority Norton Health			6.125			10/01/2010		NR		255,000		263,357
KY State Property & Building #71			5.500			08/01/2008		Aa3/AAA*		440,000		441,346
												1,227,463
MUNICIPAL UTILITY REVENUE BONDS
1.92% of Net Assets
Louisville KY Waterworks Board Water System Revenue			4.500			11/15/2010		Aa1/AA*		1,000,000		1,036,900
												1,036,900

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, 2008

Maturity

Market

Bond Description

Coupon

Date

Rating#

Par Value

Value

CERTIFICATES OF PARTICIPATION BONDS

1.42% of Net Assets

KY Interlocal School Transportation Assistance Equipment

3.750

03/01/2015

Aa3

770,000

767,266

STATE AND LOCAL MORTGAGE REVENUE BONDS

1.39% of Net Assets

KY Housing Corporation

4.850

01/01/2024

Aaa/AAA*

750,000

751,312

Total Investments (cost $52,316,590)(See (a) below for further explanation) 98.04% of Net Assets

52,897,053

Standard and Poor’s Corporation

Fitch’s Investors Service

All other ratings by Moody’s Investors Service, Inc.

Not Rated

Bond ratings are unaudited.

Certain bonds within the same Kentucky Area Development Districts (KADD) financial pool are in default, however, the bonds held by the Fund are not in default at June 30, 2008.

(a)	Represents cost for financial reporting and federal income tax purposes and differs from market value by net unrealized appreciation of securities as follows:

Unrealized appreciation	$	582,429
Unrealized depreciation		(1,966	)
Net unrealized appreciation	$	580,463

The accompanying notes are an integral part of the financial statements.

KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES

STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008

ASSETS:
Investments in securities, at value (Cost: $52,316,590)		$	52,897,053
Cash			417,706
Interest receivable			731,479
Total assets			54,046,238
LIABILITIES:
Payable for:
Distributions to shareholders	46,967
Fund shares redeemed	1,835
Investment advisory fee	22,136
Transfer agent fee	4,942
Trustee fee	3,941
Accrued expenses	11,648
Total liabilities			91,469
NET ASSETS:
Capital			55,021,987
Net accumulated realized loss on investment transactions			(1,647,681	)
Net unrealized appreciation in value of investments			580,463
Net assets at value		$	53,954,769
NET ASSET VALUE, offering price and redemption price per share
($53,954,769 -:- 10,459,379 shares outstanding; unlimited number
of shares authorized; no par value)		$	5.16

STATEMENT OF OPERATIONS
For the year ended June 30, 2008

Net investment income:
Interest income	$	2,286,897
Expenses:
Investment advisory fee		285,798
Transfer agent fee		74,592
Custodian expense		4,800
Professional fees		18,645
Trustee fees		6,672
Postage expense		10,000
Printing expense		10,000
Other expenses		5,711
Total expenses		416,218
Custodian expense reduction		(4,800	)
Net expenses		411,418
Net investment income		1,875,479
Realized and unrealized gain/(loss) on investments:
Net realized loss		(243,913	)
Net change in unrealized appreciation/depreciation		661,855
Net realized and unrealized gain on investments		417,942
Net increase in net assets resulting from operations	$	2,293,421

The accompanying notes are an integral part of the financial statements.

KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES

STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2008 and 2007

	2008			2007
Decrease in net assets:
Operations:
Net investment income	$	1,875,479		$	2,257,746
Net realized loss on investments		(243,913	)		(356,429	)
Net change in unrealized appreciation/depreciation		661,855			460,535
Net increase in net assets resulting from operations		2,293,421			2,361,852
Distributions from net investment income		(1,875,479	)		(2,257,746	)
Net fund share transactions (Note 4)		(7,765,183	)		(22,850,206	)
Total decrease		(7,347,241	)		(22,746,100	)
Net assets:
Beginning of year		61,302,010			84,048,110
End of year	$	53,954,769		$	61,302,010

FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:	For the years ended June 30,
	2008			2007			2006			2005			2004

Net asset value, beginning of year	$	5.13		$	5.14		$	5.28		$	5.27		$	5.44
Income from investment operations:
Net investment income		0.17			0.17			0.15			0.15			0.16
Net gains/(losses) on securities,
both realized and unrealized		0.03			(0.01	)		(0.14	)		0.01			(0.17	)
Total from investment operations		0.20			0.16			0.01			0.16			(0.01	)
Less distributions:
Distributions from net investment income		(0.17	)		(0.17	)		(0.15	)		(0.15	)		(0.16	)
Net asset value, end of year	$	5.16		$	5.13		$	5.14		$	5.28		$	5.27
Total return		3.94	%		3.10	%		0.22	%		3.11	%		(0.19	%)
Net assets, end of year (in thousands)	$	53,955		$	61,302		$	84,048		$	97,941		$	97,571
Ratio of net expenses to average net assets (a)		0.72	%		0.72	%		0.71	%		0.69	%		0.68	%
Ratio of net investment income to average net assets		3.28	%		3.25	%		2.92	%		2.87	%		2.98	%
Portfolio turnover		14.17	%		4.87	%		17.86	%		9.51	%		18.63	%

(a)	Percentages are after custodian/interest expense reductions, for which no recovery of these waivers and reductions will be sought.
	Percentages before custodian/interest expense reductions were:
	.73% for 2008; .72% for 2007; .72% for 2006; .71% for 2005; and .72% for 2004.

The accompanying notes are an integral part of the financial statements.

DUPREE MUTUAL FUNDS - MISSISSIPPI TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Mississippi Municipal Bonds -- 100%
June 30, 2008
					Maturity						Market
Bond Description		Coupon			Date		Rating#		Par Value		Value
INSURED MUNICIPAL BONDS
74.72% of Net Assets
De Soto County MS School District			4.500	%		04/01/2016		Aaa/AAA*/AAA@	$	30,000	$	30,812
Gautier MS Utility District Utility System Revenue			5.125			03/01/2018		BBB@		75,000		76,692
Hinds County MS Revenue Refunding-MS Methodist Hospital			5.600			05/01/2012		Aa3/AA*/AA@		20,000		20,841
Jackson MS Municipal Airport Authority			5.000			10/01/2031		Aa3/AA@		320,000		312,662
Medical Center Educational Building Corporation MS Revenue			5.500			12/01/2023		Aa3/AA*/AA@		120,000		131,132
MS Business Finance Corporation MS Pollution Control Revenue			4.600			04/01/2022		Aa3/AA*/AA@		100,000		100,029
MS Development Bank Special Obligation Capital Project			5.000			07/01/2031		Aa3/AA*/AA@		75,000		74,796
MS Development Bank Special Obligation Meridian Community			5.500			07/01/2016		Aa3/AA*/AA@		30,000		30,001
MS Development Bank Special Obligation Highway Construction			5.000			01/01/2027		Aa3/AA*/AA@		125,000		127,846
MS Development Bank Special Obligation Multi-Purpose			5.000			07/01/2021		Aaa/AAA*/AAA@		50,000		51,033
MS Development Bank Special Obligation Jackson Water/Sewer			5.000			09/01/2029		Aaa/AAA*/AAA@		40,000		40,526
MS Development Bank Special Obligation Horn Lake			5.000			10/01/2020		Aa3/AA*/AA@		50,000		51,415
MS Development Bank Special Obligation Lee County School			4.500			09/01/2021		Aa3/AA@		100,000		100,145
MS Development Bank Special Obligation Southaven Water			5.000			03/01/2025		Aa3/AA*/AA@		325,000		333,018
MS Development Bank Special Obligation Capital Projects	^^		5.875			07/01/2024		Aa3/AA*/AA@		55,000		57,176
MS Development Bank Special Obligation Capital Projects	^^		5.000			07/01/2024		Aa3/AA*/AA@		370,000		361,242
MS Development Bank Special Obligation Combination			5.000			07/01/2018		Aaa/AAA*/AAA@		100,000		103,758
MS Development Bank Special Obligation Municipal Energy			5.000			03/01/2031		Baa2/BBB-*		100,000		90,088
MS Development Bank Special Obligation Covington Hospital			5.000			07/01/2027		Aa3/AA*/AA@		150,000		152,073
MS State Refunding Notes Projects - Series C			5.000			12/01/2022		Aa3/AA*/AA@		200,000		207,390
MS State University Educational Building Corporate Revenue			5.500			08/01/2014		Aa3/AA@		75,000		79,237
MS State University Educational Building Corporate Revenue			5.000			08/01/2024		A1/AA*		350,000		357,522
Olive Branch MS Public Improvement			4.125			06/01/2022		Aa3/AA@		100,000		94,758
Olive Branch MS Water & Sewer Revenue			4.500			03/01/2014		Aaa/AAA*/AAA@		30,000		31,045
Pearl River County MS Certificate of Participation			4.500			04/01/2021		A2		200,000		203,498
University Southern MS Education Building - Series A			5.000			03/01/2022		Aaa/AAA*/AAA@		100,000		103,797
												3,322,532
GENERAL OBLIGATION BONDS
15.76% of Net Assets
Hinds County MS School District			4.750			03/01/2015		NR		50,000		50,678
Jackson MS Redevelopment Authority Urban Renewal Revenue			5.600			11/01/2021		A2		20,000		20,710
MS Development Bank Special Obligation Public Improvement			4.750			12/01/2019		BBB+*		145,000		141,746
MS State General Obligation			5.100			11/15/2012		Aa3/AA*/AA@		10,000		10,685
Mississippi State General Obligation - Series A			5.500			12/01/2015		Aa3/AA*/AA@		100,000		111,034
MS State Refunding - Series A			5.250			11/01/2019		Aa3/AA*/AA@		325,000		355,508
Richland MS Tax Increment			5.600			06/01/2013		NR		10,000		10,490
												700,851
PREREFUNDED BONDS
6.00% of Net Assets
Biloxi MS Tax Increment - LTD Obligation - Series A			5.900			10/01/2019		NR*/NR@		35,000		36,608
MS Development Bank Special Obligation Madison County			5.250			06/01/2023		Aa3		50,000		54,086
MS Development Bank Special Obligation Southaven			6.200			03/01/2020		A*		10,000		10,288
MS Development Bank Special Obligation Adams County Juvenile			5.900			07/01/2017		A*		10,000		10,391
MS Development Bank Special Obligation Natchez Convention			5.800			07/01/2019		Aa3/AA*/AA@		25,000		27,999
MS Development Bank Special Obligation Gulfport Combined Water			5.500			07/01/2015		Aaa/AAA*/AAA@		10,000		11,022
MS Development Bank Special Obligation Desoto County			5.900			07/01/2021		Aa3/AA*/AA@		5,000		5,410
MS Development Bank Special Obligation Rankin County			5.400			07/01/2014		Aaa/AAA*/AAA@		10,000		10,529
MS Hospital Equipment and Facilities Forrest County			5.500			01/01/2024		Aaa/AAA*/AAA@		45,000		47,853
Ms Development BK Special Obligation Culkin Water District			5.800			07/01/2018		Aa3/AA*/AA@		25,000		25,989
Southern MS University Educational Building Corporation			5.750			03/01/2021		Aa3/AA@		10,000		10,784
Walnut Grove MS Correctional Authority Certificate of Participation			6.000			11/01/2019		Aa3/AA*/AA@		15,000		16,043
												267,002
ESCROWED TO MATURITY BONDS
1.21% of Net Assets
Harrison County MS Wastewater Management District			5.000			02/01/2015		Baa1/Aaa		25,000		26,914
MS Gulf Coast Regional Wastewater Treatment Facilities			7.000			07/01/2012		AAA*		25,000		26,962
												53,876

Total Investments (cost $4,401,514) (See (a) below for further explanation) 97.69% of Net Assets											$	4,344,261

Standard and Poor’s Corporation

Fitch’s Investors Service

All other ratings by Moody’s Investors Service, Inc.

Not Rated

Bond ratings are unaudited.

On May 30, 2006, the Issuer received a proposed adverse determination from the IRS which asserts that the interest paid to holders of the subject bonds is not excludable from gross income under section 103 of the Internal Revenue Code. The issuer is pursuing an appeal of the proposed adverse determination.

(a)	Represents cost for financial reporting and federal income tax purposes and differs from market value by net unrealized depreciation of securities as follows:

Unrealized appreciation	$	51,866
Unrealized depreciation		(109,119	)
Net unrealized depreciation	$	(57,253	)

The accompanying notes are an integral part of the financial statements.

MISSISSIPPI TAX-FREE INCOME SERIES

STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008

ASSETS:
Investments in securities, at value (Cost: $4,401,514)		$	4,344,261
Cash			58,849
Interest receivable			68,420
Prepaid expenses			80
Total assets			4,471,610
LIABILITIES:
Payable for:
Distributions to shareholders	10,784
Fund shares redeemed	10,209
Investment advisory fee	87
Transfer agent fee	2,224
Accrued expenses	1,536
Total liabilities			24,840
NET ASSETS:
Capital			4,519,168
Net accumulated realized loss on investment transactions			(15,145	)
Net unrealized depreciation in value of investments			(57,253	)
Net assets at value		$	4,446,770
NET ASSET VALUE, offering price and redemption price per share
($4,446,770 -:- 401,510 shares outstanding; unlimited number
of shares authorized; no par value)		$	11.08

STATEMENT OF OPERATIONS
For the year ended June 30, 2008

Net investment income:
Interest income	$	214,141
Expenses:
Investment advisory fee		23,963
Transfer agent fee		7,189
Custodian expense		4,800
Pricing fees		4,205
Professional fees		1,898
Trustee fees		563
Registration fees		2,763
Other expenses		3,131
Total expenses		48,512
Fees waived by Adviser		(22,142	)
Custodian expense reduction		(4,800	)
Net expenses		21,570
Net investment income		192,571
Realized and unrealized loss on investments:
Net realized loss		(4,826	)
Net change in unrealized appreciation/depreciation		(50,753	)
Net realized and unrealized loss on investments		(55,579	)
Net increase in net assets resulting from operations	$	136,992

The accompanying notes are an integral part of the financial statements.

MISSISSIPPI TAX-FREE INCOME SERIES

STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2008 and 2007

	2008			2007
Decrease/Increase in net assets:
Operations:
Net investment income	$	192,571		$	211,237
Net realized loss on investments		(4,826	)		(9,775	)
Net change in unrealized appreciation/depreciation		(50,753	)		16,180
Net increase in net assets resulting from operations		136,992			217,642
Distributions from net investment income		(192,571	)		(211,237	)
Distributions from ordinary income/capital gains		(607	)		(22,573	)
Net fund share transactions (Note 4)		(600,417	)		149,254
Total (decrease)/increase		(656,603	)		133,086
Net assets:
Beginning of year		5,103,373			4,970,287
End of year	$	4,446,770		$	5,103,373

FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:	For the years ended June 30,
	2008				2007			2006			2005			2004

Net asset value, beginning of year	$	11.24			$	11.25		$	11.84		$	11.34		$	11.74
Income from investment operations:
Net investment income		0.45				0.45			0.46			0.47			0.48
Net gains/(losses) on securities,
both realized and unrealized		(0.16	)			0.04			(0.54	)		0.50			(0.40	)
Total from investment operations		0.29				0.49			(0.08	)		0.97			0.08
Less distributions:
Distributions from net investment income		(0.45	)			(0.45	)		(0.46	)		(0.47	)		(0.48	)
Distributions from capital gains		-		(b)		(0.05	)		(0.05	)		-			-
Net asset value, end of year	$	11.08			$	11.24		$	11.25		$	11.84		$	11.34
Total return		2.64	%			4.39	%		(0.76	)%		8.66	%		0.72	%
Net assets, end of year (in thousands)	$	4,447			$	5,103		$	4,970		$	4,786		$	3,146
Ratio of net expenses to average net assets (a)		0.45	%			0.45	%		0.46	%		0.41	%		0.40	%
Ratio of net investment income to average net assets		4.02	%			3.98	%		3.95	%		3.99	%		4.16	%
Portfolio turnover		2.79	%			11.57	%		16.33	%		8.91	%		0.18	%

(a)

Percentages are after expenses waived by Adviser and custodian/interest expense reductions, for which no recovery of these waivers and reductions will be sought.

Expenses waived by Adviser and custodian/interest expense reductions were:

.46% and .10% for 2008; .43% and .09% for 2007; .44% and .10% for 2006; .45% and .12% for 2005; and .46% and .17% for 2004, respectively.

(b)

Rounds to less than $0.01.

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%
June 30, 2008
				Maturity						Market
Bond Description	Coupon			Date		Rating#		Par Value		Value
INSURED MUNICIPAL BONDS
69.05% of Net Assets
Asheville NC Water System Revenue		4.750	%		08/01/2027		Aa3/AA*	$	1,000,000	$	998,710
Burke County NC Certificate of Participation		5.000			04/01/2023		Aa3/AA*/AA@		1,000,000		1,019,230
Cabarrus County NC Certificates of Participation		5.000			06/01/2025		Aaa/AAA*/AAA@		1,000,000		1,035,560
Catawba County NC Catawba Memorial Hospital Revenue		5.000			10/01/2017		Aa3/AA@		500,000		509,360
Charlotte NC Airport Revenue		5.250			07/01/2023		A1/AA*/AA@		1,000,000		1,039,590
Charlotte NC Airport Revenue		5.000			07/01/2026		Aa3/AA*/AA@		1,000,000		1,004,310
Charlotte NC Airport Revenue		5.000			07/01/2025		Aa3/AA*/AA@		1,000,000		1,010,100
Cumberland County NC Certificate of Participation Civic Center		5.000			12/01/2018		Aa3/AA*/AA@		500,000		506,765
Dare County NC Utility System Revenue		5.250			06/01/2018		A1/AA*/AA@		250,000		255,023
Dare County NC Certificate of Participation		5.125			06/01/2018		Aa3/AA*/AA@		500,000		521,695
Davie County NC Public School & Community College Facility		5.000			06/01/2023		Aa3/AA*/AA@		1,000,000		1,023,590
Davie County NC Public School & Community College Facility		5.000			06/01/2025		Aa3/AA*/AA@		1,690,000		1,715,316
Harnett County NC Certificate of Participation		5.000			12/01/2018		Aaa/AAA*/AAA@		1,475,000		1,540,328
Henderson County NC Certificates of Participation		5.000			05/01/2025		Aa3/AA*/AA@		1,000,000		1,015,550
Iredell County NC Certificate of Participation Public Facilities		5.250			10/01/2020		Aa3/AA@		1,000,000		1,053,300
Iredell County NC Certificates of Participation School Project		5.000			06/01/2024		Aa3/AA*/AA@		1,000,000		1,025,590
Johnston NC Memorial Hospital Authority		5.250			10/01/2028		Aaa/AAA*		500,000		513,790
Lee County NC Certificate of Participation		5.000			04/01/2025		Aaa/AAA*		550,000		566,066
Lenoir NC Housing Authority Mortgage Revenue		5.700			08/20/2024		AAA*		100,000		100,747
Montgomery County NC Certificates of Participation Series A		5.000			02/01/2030		Aa3/AA*/AA@		1,680,000		1,688,064
New Hanover County NC Hospital Revenue		5.000			10/01/2019		A1/AA*/AA@		1,175,000		1,199,017
New Hanover County NC Certificate of Participation		5.000			12/01/2022		Aa2/AA*/AA@		1,000,000		1,029,360
NC Educational Facilities Finance Agency St Augustines		5.250			10/01/2018		AA*		600,000		604,254
NC Educational Facilities Finance Agency St Augustines		5.250			10/01/2028		AA*		630,000		620,676
NC Medical Care Community Hospital Morehead Memorial Hospital		5.000			11/01/2026		Aaa/AAA*/AAA@		2,000,000		2,036,940
NC Eastern Municipal Power Agency Power System Revenue		5.500			01/01/2017		Baa1/BBB@		150,000		150,069
NC Eastern Municipal Power Agency Power System Revenue		6.000			01/01/2025		Baa1/BBB@		1,000,000		1,077,510
NC Eastern Municipal Power Agency Power System Revenue		6.000			01/01/2018		Aa3/AA*/AA@		1,000,000		1,093,900
NC Eastern Municipal Power Agency Power System Revenue		5.000			01/01/2021		Aa3/AA*/AA@		1,000,000		982,680
NC Municipal Power Agency Number 1 Catawba Electric Revenue		5.250			01/01/2019		A2/AA*/AA@		1,000,000		1,029,020
NC Infrastructure Finance Corporation Certificates of Participation		5.000			02/01/2024		Aaa/AAA*/AAA@		1,000,000		1,032,370
NC Medical Care Community Hospital Revenue-High Point		5.000			10/01/2019		Aa3/AA*/AA@		500,000		511,330
NC Medical Care Community Hospital Revenue-Rex Hospital		5.000			06/01/2017		Aa3/AA*/AA@		500,000		505,050
NC Medical Care Community Hospital Revenue-St Joseph		5.100			10/01/2014		Aa3/AA*/AA@		5,000		5,002
NC Medical Care Community Hospital Revenue-Stanly Hospital		5.375			10/01/2014		Aa3/AA*/AA@		50,000		50,158
Raleigh Durham NC Airport Authority		5.250			11/01/2018		Aa3/AA-@		1,000,000		1,037,170
Raleigh/Durham NC Airport Revenue		5.000			11/01/2020		Aa3/AA-@		1,000,000		1,023,030
Randolph County NC Certificates of Participation		5.000			02/01/2027		Aa3/AA@		1,000,000		1,000,640
Sampson County NC Certificate of Participation		5.000			06/01/2022		Aaa/AAA*/AAA@		1,250,000		1,296,375
Sampson County NC Certificate of Participation		5.000			06/01/2026		Aaa/AAA*		1,000,000		1,025,280
University of NC at Chapel Hill Hospital Revenue		5.250			02/15/2017		Aa3/AA*/AA@		500,000		511,805
University of NC System Pool Revenue		5.000			04/01/2019		Aa3/AA@		1,000,000		1,041,480
University of NC Wilmington Certificate of Participation		5.250			06/01/2025		A-*/BBB@		1,000,000		1,014,430
University of NC Wilmington Student Housing Project		5.000			06/01/2025		A-*/BBB@		580,000		583,741
University of NC System Pool Revenue Series A		5.000			10/01/2026		Aaa		1,000,000		1,029,860
Wilmington NC Certificate of Participation		5.000			06/01/2032		Aa3/AA*/AA@		1,500,000		1,504,275
Wilmington NC Store Water Revenue		5.000			06/01/2028		Aa3/AA*/AA@		500,000		507,164
Wilson NC Certificate of Participation Public Facilities		5.000			05/01/2021		Aaa/AAA*/AAA@		780,000		806,403
Wilson NC Certificate of Participation Public Facilities		5.000			05/01/2025		Aaa/AAA*/AAA@		750,000		764,985
Wilson County Certificates of Participation Public Facility		5.000			05/01/2029		Aaa/AAA*/AAA@		1,355,000		1,366,463
Wilson Combined Enterprise System		4.700			12/01/2022		Aaa/AAA*		500,000		506,550
											45,089,671
CERTIFICATES OF PARTICIPATION BONDS
14.99% of Net Assets
Cabarrus County NC Certificate of Participation		5.000			04/01/2021		Aa3/AA-*/AA-@		650,000		670,176
Charlotte NC Certificate of Participation Convention Facility		5.000			12/01/2024		Aa2/AA+*		1,000,000		1,027,390
Charlotte NC Certificates of Participation		5.000			06/01/2026		Aa2/AA+*/AA@		1,455,000		1,488,494
Charlotte NC Certificates of Participation		5.000			06/01/2027		Aa2/AA+*/AA@		775,000		790,151
Charlotte NC Certificate of Participation Government Facility		5.250			06/01/2020		Aa2/AA+*/AA@		1,000,000		1,043,930
Forsyth County NC Certificates of Participation		5.000			10/01/2018		Aa1/AA+*/AA+@		5,000		5,065
Forsyth County NC Certificate of Participation		5.000			02/01/2026		Aa1/AA+*/AA+@		550,000		562,667
Mecklenburg County NC Certificates of Participation SeriesB		5.000			02/01/2026		Aa1/AA+*/AA+@		1,000,000		1,019,790
Mooresville NC Certificates of Participation		5.000			09/01/2032		A+*		1,000,000		992,990
NC Infrastructure Finance Corporation Certificates of Participation		5.000			02/01/2025		Aa2/AA+*/AA@		1,500,000		1,534,545
Winston Salem NC Certificates of Participation Series A		4.750			06/01/2031		Aa1/AA+*/AA+@		670,000		653,518
											9,788,716
PREREFUNDED BONDS
3.73% of Net Assets
Cary NC Combined Enterprise System Revenue		5.000			12/01/2022		Aa2/AA*/AAA@		700,000		743,519
Charlotte NC Certificate of Participation Convention Facility		5.500			12/01/2020		Aa2/AA+*		700,000		750,778
NC Eastern Municipal Power Agency Power System Series A		6.000			01/01/2026		Aaa/BBB*/BBB+@		805,000		940,457
											2,434,754
LEASE REVENUE BONDS
2.71% of Net Assets
Charlotte NC Water and Sewer Systems Revenue		4.500			07/01/2028		Aa1/AAA*/AAA@		750,000		738,330
NC Infrastructure Financial Corporation Lease Purchase		5.000			10/01/2021		Aa2/AA+*/AA@		1,000,000		1,031,110
											1,769,440

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%
June 30, 2008
				Maturity						Market
Bond Description	Coupon			Date		Rating#		Par Value		Value
GENERAL OBLIGATION BONDS
2.48% of Net Assets
Cary NC General Obligation		5.000	%		03/01/2019		Aaa/AAA*/AAA@	$	1,000,000	$	1,047,440
Iredell County NC Community College		5.000			04/01/2026		Aa3/AA*/AA@		225,000		233,066
Iredell County NC Community College		5.000			04/01/2027		Aa3/AA*/AA@		325,000		335,875
											1,616,381
MUNICIPAL UTILITY REVENUE BONDS
2.36% of Net Assets
Charlotte NC Storm Water Revenue Refunding		5.250			06/01/2019		Aa2/AA+*		520,000		549,734
Raleigh NC Combined Enterprise System		5.000			03/01/2031		Aa1/AAA*/AAA@		980,000		991,495
											1,541,229
HOSPITAL AND HEALTHCARE REVENUE BONDS
1.69% of Net Assets
NC Medical Care Health Care Facilities Revenue Novant Health		5.000			11/01/2017		Aa3/AA-*/AA-@		1,000,000		1,029,630
NC Medical Care Community Hospital Revenue Unrefunded Balance		5.250			12/01/2013		A1		45,000		45,839
NC Medical Care Community Hospital Revenue Unrefunded Balance		5.000			12/01/2018		A1		25,000		25,340
											1,100,809
ESCROWED TO MATURITY BONDS
.52% of Net Assets
Pitt County NC Memorial Hospital Revenue		5.500			12/01/2015		Aaa/AA-@		325,000		339,498
											339,498
STATE AND LOCAL MORTGAGE REVENUE BONDS
.31% of Net Assets
NC Housing Finance Agency Single Family Revenue Series II		6.200			03/01/2016		Aa2/AA*		30,000		30,017
NC Housing Finance Agency Single Family Revenue Series KK		5.875			09/01/2017		Aa2/AA*		40,000		40,031
NC Housing Finance Agency Home Ownership Revenue		5.125			07/01/2013		Aa2/AA*		40,000		40,402
Vance County NC Housing Mortgage Revenue Henderson Project		6.150			03/01/2022		Aa2		95,000		95,015
											205,465

Total Investments (cost $64,437,861) (See (a) below for further explanation) 97.84% of Net Assets										$	63,885,963

Standard and Poor's Corporation

Fitch's Investors Service

All other ratings by Moody's Investors Service, Inc.

Bond ratings are unaudited.

(a)	Represents cost for financial reporting and federal income tax purposes and differs from market value by net unrealized depreciation of securities as follows:

Unrealized appreciation	$	670,789
Unrealized depreciation		(1,222,687	)
Net unrealized depreciation	$	(551,898	)

The accompanying notes are an integral part of the financial statements.

NORTH CAROLINA TAX-FREE INCOME SERIES

STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008

ASSETS:
Investments in securities, at value (Cost: $64,437,861)		$	63,885,963
Cash			922,297
Interest receivable			759,940
Prepaid expenses			3,074
Total assets			65,571,274
LIABILITIES:
Payable for:
Distributions to shareholders	151,485
Fund shares redeemed	74,310
Investment advisory fee	28,310
Transfer agent fee	7,303
Accrued expenses	9,923
Total liabilities			271,331
NET ASSETS:
Capital			66,313,922
Net accumulated realized loss on investment transactions			(462,081	)
Net unrealized depreciation in value of investments			(551,898	)
Net assets at value		$	65,299,943
NET ASSET VALUE, offering price and redemption price per share
($65,299,943 -:- 6,150,246 shares outstanding; unlimited number
of shares authorized; no par value)		$	10.62

STATEMENT OF OPERATIONS
For the year ended June 30, 2008

Net investment income:
Interest income	$	2,715,517
Expenses:
Investment advisory fee		303,230
Transfer agent fee		78,775
Custodian expense		4,800
Professional fees		13,103
Trustee fees		6,893
Other expenses		31,001
Total expenses		437,802
Custodian expense reduction		(4,800	)
Net expenses		433,002
Net investment income		2,282,515
Realized and unrealized gain/(loss) on investments:
Net realized gain		225,541
Net decrease in unrealized appreciation		(1,039,402	)
Net realized and unrealized loss on investments		(813,861	)
Net increase in net assets resulting from operations	$	1,468,654

The accompanying notes are an integral part of the financial statements.

NORTH CAROLINA TAX-FREE INCOME SERIES

STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2008 and 2007

	2008			2007
Increase in net assets:
Operations:
Net investment income	$	2,282,515		$	1,980,016
Net realized gain on investments		225,541			86,767
Net change in unrealized appreciation/depreciation		(1,039,402	)		(161,744	)
Net increase in net assets resulting from operations		1,468,654			1,905,039
Distributions from net investment income		(2,282,515	)		(1,980,016	)
Net fund share transactions (Note 4)		11,119,539			6,298,775
Total increase		10,305,678			6,223,798
Net assets:
Beginning of year		54,994,265			48,770,467
End of year	$	65,299,943		$	54,994,265

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:	For the years ended June 30,
	2008			2007			2006			2005			2004

Net asset value, beginning of year	$	10.74		$	10.74		$	11.10		$	10.78		$	11.12
Income from investment operations:
Net investment income		0.41			0.41			0.42			0.44			0.44
Net gains/(losses) on securities,
both realized and unrealized		(0.12	)		-	(b)		(0.36	)		0.32			(0.34	)
Total from investment operations		0.29			0.41			0.06			0.76			0.10
Less distributions:
Distributions from net investment income		(0.41	)		(0.41	)		(0.42	)		(0.44	)		(0.44	)
Net asset value, end of year	$	10.62		$	10.74		$	10.74		$	11.10		$	10.78
Total return		2.69	%		3.85	%		0.59	%		7.13	%		0.95	%
Net assets, end of year (in thousands)	$	65,300		$	54,994		$	48,770		$	44,739		$	38,791
Ratio of net expenses to average net assets (a)		0.71	%		0.73	%		0.72	%		0.69	%		0.69	%
Ratio of net investment income to average net assets		3.76	%		3.79	%		3.89	%		3.97	%		4.05	%
Portfolio turnover		11.03	%		5.20	%		12.73	%		7.96	%		10.51	%

(a)	Percentages are after custodian/interest expense reductions, for which no recovery of these waivers and reductions will be sought.
	Percentages before custodian/interest expense reductions were:
	.72% for 2008; .74% for 2007; .74% for 2006; .72% for 2005; and .72% for 2004.
(b)	Rounds to less than $0.01.

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%
June 30, 2008
				Maturity						Market
Bond Description	Coupon			Date		Rating#		Par Value		Value
INSURED MUNICIPAL BONDS
66.46% of Net Assets
Catawba County NC Certificate of Participation		5.250	%		06/01/2016		Aa3	$	125,000	$	133,159
Catawba County NC Certificate of Participation		5.250			06/01/2018		Aa3		125,000		131,676
Catawba County NC Certificate of Participation		5.250			06/01/2019		Aa3/AA*		200,000		210,404
Centennial Authority NC Hotel Tax Revenue Bond Arena Project		5.000			09/01/2012		Aaa/AAA*/AAA@		100,000		102,086
Charlotte NC Certificate of Participation		5.000			08/01/2012		Aa2/AA+*/AA@		1,000,000		1,058,180
Davie County NC Community College		4.000			06/01/2013		Aaa/AA*/AA@		250,000		254,013
Greenville NC Certificate of Participation Public Facilities		4.600			06/01/2011		A1/AA*		100,000		101,009
Harnett County NC Certificate of Participation		5.250			12/01/2009		Aaa/AAA*/AAA@		240,000		249,005
Haywood NC Certificate of Participation Refunding		5.000			10/01/2016		Aa3/AA*/AA@		635,000		670,858
Henderson County NC Certificates of Participation-Series A		5.250			05/01/2020		Aa3/AA*/AA@		300,000		312,378
Iredell County NC Certificate of Participation School Project		5.000			06/01/2018		Aa3/AA*/AA@		425,000		448,571
Johnston County NC Finance Corporation School & Museum Project		4.650			08/01/2008		Aaa/AAA*/AAA@		200,000		200,455
Lee County NC Certificate of Participation		5.000			04/01/2016		Aaa/AAA*/AAA@		215,000		227,296
Lincolnton NC Enterprise System Revenue		5.000			05/01/2016		BBB-*		385,000		397,339
New Hanover County NC Regional Medical Center Hospital Revenue		4.250			10/01/2009		A1/AA*/AA@		100,000		102,229
NC Medical Care Community Hospital Rowan Medical		5.250			09/01/2016		Aaa/AAA*/AAA@		1,100,000		1,180,663
North Carolina Medical Care Community Hospital Chatham Memorial		3.625			10/01/2010		A*		100,000		100,199
NC Eastern Municipal Power Agency Power System Revenue		6.125			01/01/2009		Baa1/BBB*/BBB+@		120,000		121,997
NC Eastern Municipal Power Agency		5.250			01/01/2019		Aaa/AAA*/AAA@		250,000		264,368
NC Municipal Power Agency Number 1 Catawba Electric		6.000			01/01/2010		A2/AA*/AA@		200,000		209,082
NC Medical Care Community Hospital-Scotland Memorial		5.375			10/01/2011		AA*		35,000		35,018
NC Medical Community Hospital Wayne Memorial		4.750			10/01/2011		Aa3/AA@		350,000		354,516
Pitt County NC Certificate of Participation School Facilities		4.750			04/01/2010		Aaa/AAA*/AAA@		100,000		103,200
Union County NC Certificate of Participation		5.000			06/01/2020		Aa3/AA*/AA@		250,000		259,591
University NC System Pool Revenue		5.000			10/01/2009		A2/AA*/AA@		170,000		172,982
											7,400,274
CERTIFICATES OF PARTICIPATION BONDS
12.37% of Net Assets
Cary County NC Certificate of Participation		5.000			12/01/2017		Aa1/AA+*/AA+@		250,000		261,678
Chapel Hill NC Certificate of Participation Operations Center		5.250			06/01/2019		Aa1/AA*		260,000		278,495
Durham NC Certificate of Participation		5.000			04/01/2010		Aa1/AA+*/AA+@		300,000		310,782
NC State Certificates of Participation Wildlife Resources		5.250			06/01/2018		Aa1/AA*/AA@		500,000		525,820
											1,376,775
HOSPITAL AND HEALTHCARE REVENUE BONDS
5.70% of Net Assets
Charlotte-Mecklenburg Hospital		5.000			01/15/2019		Aa3/AA-*		200,000		208,464
Charlotte-Mecklenburg Hospital		4.375			01/15/2019		Aa3/AA-*		150,000		147,449
NC Medical Care Community Hospital Pitt Memorial		4.400			12/01/2011		Aa3/AA-*/AA-@		275,000		278,550
											634,463
GENERAL OBLIGATION BONDS
5.28% of Net Assets
NC State Public Improvement General Obligation		4.500			03/01/2010		Aa1/AAA*/AAA@		150,000		154,398
NC State Public School Building General Obligation		4.600			04/01/2010		Aa1/AAA*/AAA@		50,000		50,847
NC Public School Building General Obligation		4.600			04/01/2011		Aa1/AAA*/AAA@		115,000		117,417
NC State Public Improvement - Series A		5.000			03/01/2019		Aaa/AAA*/AAA@		250,000		264,943
											587,605
LEASE REVENUE BONDS
3.96% of Net Assets
Greensboro NC Enterprise System Revenue Combination		4.800			06/01/2012		Aa3/AA+*/AA+@		75,000		75,759
Greensboro NC Enterprise System Revenue		5.000			06/01/2011		Aa3/AA+*/AA+@		250,000		263,010
Winston-Salem NC Certificate of Participation		3.950			06/01/2009		Aa1/AA+*/AA+@		100,000		101,747
											440,516
PREREFUNDED BONDS
2.15% of Net Assets
Piedmont Triad NC Airport Authority Revenue		5.250			07/01/2011		Aaa/AAA*/AAA@		200,000		208,790
University NC System Pool Revenue - Series B		5.000			10/01/2009		A2/AA*		30,000		30,519
											239,309
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS
1.84% of Net Assets
University of NC Revenue Refunding		5.000			12/01/2010		Aa1/AA+*/AA+@		195,000		205,243
											205,243

Total Investments (cost $10,848,888) (See (a) below for further explanation) 97.76% of Net Assets										$	10,884,185

Standard and Poor's Corporation

Fitch's Investors Service

All other ratings by Moody's Investors Service, Inc.

Bond ratings are unaudited.

(a)	Represents cost for financial reporting and federal income tax purposes and differs from market value by net unrealized appreciation of securities as follows:

Unrealized appreciation	$	35,297
Unrealized depreciation		0
Net unrealized appreciation	$	35,297

The accompanying notes are an integral part of the financial statements.

NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES

STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008

ASSETS:
Investments in securities, at value (Cost: $10,848,888)		$	10,884,185
Cash			151,222
Interest receivable			123,200
Total assets			11,158,607
LIABILITIES:
Payable for:
Distributions to shareholders	9,085
Fund shares redeemed	206
Investment advisory fee	4,471
Transfer agent fee	1,354
Trustee fee	13
Accrued expenses	9,213
Total liabilities			24,342
NET ASSETS:
Capital			11,263,305
Net accumulated realized loss on investment transactions			(164,337	)
Net unrealized appreciation in value of investments			35,297
Net assets at value		$	11,134,265
NET ASSET VALUE, offering price and redemption price per share
($11,134,265 -:- 1,073,705 shares outstanding; unlimited number
of shares authorized; no par value)		$	10.37

STATEMENT OF OPERATIONS
For the year ended June 30, 2008

Net investment income:
Interest income	$	440,136
Expenses:
Investment advisory fee		57,099
Transfer agent fee		17,130
Custodian expense		4,800
Professional fees		6,330
Trustee fees		1,319
Postage expense		3,600
Printing expense		4,300
Other expenses		4,202
Total expenses		98,780
Custodian expense reduction		(4,800	)
Net expenses		93,980
Net investment income		346,156
Realized and unrealized gain/(loss) on investments:
Net realized loss		(3,206	)
Net change in unrealized appreciation/depreciation		94,723
Net realized and unrealized gain on investments		91,517
Net increase in net assets resulting from operations	$	437,673

The accompanying notes are an integral part of the financial statements.

NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES

STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2008 and 2007

	2008			2007
Decrease in net assets:
Operations:
Net investment income	$	346,156		$	369,700
Net realized loss on investments		(3,206	)		(49,085	)
Net change in unrealized appreciatio/depreciation		94,723			54,347
Net increase in net assets resulting from operations		437,673			374,962
Distributions from net investment income		(346,156	)		(369,700	)
Distributions from realized gains		-			(2,550	)
Net fund share transactions (Note 4)		(238,715	)		(1,907,965	)
Total decrease		(147,198	)		(1,905,253	)
Net assets:
Beginning of year		11,281,463			13,186,716
End of year	$	11,134,265		$	11,281,463

FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:	For the years ended June 30,
	2008			2007			2006			2005			2004

Net asset value, beginning of year	$	10.30		$	10.31		$	10.60		$	10.57		$	10.85
Income from investment operations:
Net investment income		0.32			0.32			0.30			0.30			0.32
Net gains/(losses) on securities,
both realized and unrealized		0.07			(0.01	)		(0.29	)		0.03			(0.28	)
Total from investment operations		0.39			0.31			0.01			0.33			0.04
Less distributions:
Distributions from capital gains		-			-	(b)		-			-			-
Distributions from net investment income		(0.32	)		(0.32	)		(0.30	)		(0.30	)		(0.32	)
Net asset value, end of year	$	10.37		$	10.30		$	10.31		$	10.60		$	10.57
Total return		3.78	%		2.97	%		0.06	%		3.14	%		0.33	%
Net assets, end of year (in thousands)	$	11,134		$	11,281		$	13,187		$	16,829		$	15,695
Ratio of net expenses to average net assets (a)		0.82	%		0.81	%		0.74	%		0.56	%		0.51	%
Ratio of net investment income to average net assets		3.03	%		3.01	%		2.83	%		2.81	%		2.94	%
Portfolio turnover		23.91	%		13.33	%		19.07	%		5.93	%		8.37	%

(a)	Percentages are after expenses waived by Adviser and custodian/interest expense reductions, for which no recovery of these waivers and reductions will be sought.
	Expenses waived by Adviser and custodian/interest expense reductions were:
	0% and .04% for 2008; 0% and .04% for 2007; .05% and.03% for 2006; .21% and .03% for 2005; and .25% and .05% for 2004, respectively.
(b)	Rounds to less than $0.01.

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, 2008
				Maturity						Market
Bond Description	Coupon			Date		Rating#		Par Value		Value
INSURED MUNICIPAL BONDS
60.25% of Net Assets
Blount County TN Public Building Authority Local Government		5.000	%		06/01/2027		Aa3/AA-@	$	1,500,000	$	1,483,650
Blount County TN Public Building Authority Local Government		4.750			06/01/2031		Aa3/AA-*		750,000		691,868
Blount County TN Public Building Authority General Obligation		5.250			06/01/2019		BBB@		1,050,000		1,083,863
Blount County TN Building Authority Local Government		5.000			06/01/2032		Aa3/AA*		750,000		751,568
Chattanooga TN Industrial Development Board Lease Rent Revenue		5.000			10/01/2027		AAA*/AAA@		1,000,000		1,022,980
Clarksville TN Electric System Revenue		5.000			09/01/2022		A1		1,065,000		1,083,733
Clarksville TN Electric System Revenue		5.000			09/01/2032		A1		1,250,000		1,220,775
Cleveland TN General Obligation - Series A		5.000			06/01/2027		A2		680,000		680,408
Columbia TN Broadband Network Revenue & Tax		5.000			03/01/2025		Aaa		1,000,000		1,020,960
Columbia TN Refunded - Sewer System		5.000			12/01/2024		Aa3/AA@		1,235,000		1,267,271
Franklin County TN Health & Educational Facilities Board		5.000			09/01/2025		Aa3/AA*/AA@		1,000,000		1,020,460
Giles County TN		4.500			02/01/2018		A2/BBB@		1,000,000		1,015,350
Greene County TN General Obligation - Series B		5.000			06/01/2024		Aaa/AAA@		505,000		514,565
Hallsdale-Powell Utility District Knox County TN Water and Sewer Revenue		5.000			04/01/2026		A+*/BBB@		1,000,000		1,011,220
Hallsdale-Powell Utility District Knox County TN Water and Sewer Revenue		5.000			04/01/2031		A+*/BBB@		740,000		738,942
Harpeth Valley Utilities TN Davidson and Williamson Counties		5.000			09/01/2029		Aa3/AA@		1,410,000		1,424,805
Harpeth Valley Utilities TN Davidson & Williamson Counties		5.000			09/01/2032		Aa3/BBB@		1,420,000		1,402,236
Hawkins County TN Refunding General Obligation		4.750			05/01/2017		Aa3/AA*/AA@		200,000		204,774
Jackson TN Energy Authority Gas System Revenue		5.000			10/01/2028		A1		1,000,000		998,650
Johnson City TN Health & Educational Facilities		6.500			07/01/2014		Aaa/AAA*/AAA@		1,000,000		1,161,750
Kingsport TN Water & Sewer System		4.350			06/01/2017		A1/BBB@		710,000		714,658
Kingsport TN Industrial Development Board Multifamily		5.400			04/20/2021		AAA*		435,000		447,680
Kingsport TN Industrial Development Board Multifamily		5.700			04/20/2038		AAA*		1,000,000		1,020,800
Knox County TN Health Educational & Housing Facilities Ft Sanders		6.250			01/01/2013		A2/AA*/AA@		10,000		10,828
Knox County TN Health Educational & Housing - Covenant Health		5.000			01/01/2022		Aaa/AAA*/AAA@		450,000		460,917
Knox County TN Utility District Water & Sewer		5.625			12/01/2019		A2/AA*/AA@		220,000		222,385
Knoxville TN Gas Revenue Refunded System - Series K		4.750			03/01/2022		Aa3/AA*/AA@		1,550,000		1,570,197
Knoxville TN Wastewater System Revenue - Series A		4.750			04/01/2021		Aa3/AA*/AA@		1,150,000		1,159,752
Marion County TN Schools		5.000			06/01/2025		A2/AA@		1,050,000		1,068,501
Metro Nashville & Davidson County TN General Obligation		5.000			01/01/2023		Aa2/AA*/AA@		1,000,000		1,029,050
Metro Nashville & Davidson County TN General Obligation		5.000			01/01/2024		Aa2/AA*/AA@		1,000,000		1,026,780
Metro Nashville & Davidson County TN Multi Family		4.600			11/01/2026		AAA*		1,000,000		1,000,000
Metro Government Nashville & Davidson County TN Sports Authority		5.000			07/01/2021		Aaa/AAA*/AAA@		1,000,000		1,036,680
Metropolitan Government Nashville and Davidson County TN		5.000			05/15/2027		Aa2/AA*/AA@		1,400,000		1,432,158
Montgomery County TN General Obligation		4.750			05/01/2020		Aa3/BBB@		1,000,000		1,019,640
Oak Ridge TN Industrial Development Board Refunding Revenue		5.250			08/20/2018		Aaa		255,000		258,417
Overton County TN Refunding - Schools General Obligation		5.000			04/01/2018		A2/AA@		1,000,000		1,049,710
Pigeon Forge TN Refunding Series A		4.900			06/01/2028		Aaa/AAA*		1,000,000		1,010,920
Rutherford County TN Construction Utility District Waterworks		5.000			02/01/2031		Aaa/AAA@		1,435,000		1,453,913
Shelby County TN Health Educational & Housing Methodist		5.300			08/01/2015		A2/AA*/AA@		505,000		512,080
Shelby County TN Health Educational & Housing Facilities		5.250			09/01/2027		Aaa/AAA*		1,000,000		1,015,840
Smith County TN General Obligation		5.000			04/01/2021		Aa3/AA@		720,000		754,243
Sullivan County TN Health Educational & Housing Facilities		5.000			09/01/2016		A*/BBB+@		1,000,000		1,023,690
Sullivan County TN Health Educational & Housing Wellmont		5.000			09/01/2017		A*/BBB+@		2,500,000		2,540,775
Sullivan County TN Health Educational & Housing Facilities		4.500			09/01/2019		A*/BBB+@		1,000,000		966,670
TN Housing Development Agency Homeownership Program Series		5.150			07/01/2022		Aaa/AAA*/AAA@		675,000		680,028
TN State School Board Authority Refunding Higher Education		5.000			05/01/2024		Aa2/AA*/AA@		1,395,000		1,441,370
TN State School Board Authority Refunding Higher Education		5.000			05/01/2025		Aa2/AA*/AA@		1,440,000		1,483,574
West Wilson Utility District TN Waterworks Revenue		4.750			06/01/2028		A2		2,460,000		2,413,309
White House Utility District TN Water & Sewer		5.000			01/01/2028		A2/AA@		1,235,000		1,255,512
White House Utility District TN Water & Sewer		5.000			01/01/2030		A2/AA@		2,505,000		2,530,902
Wilson County TN Referendum General Obligation		5.000			04/01/2018		Aa3		1,000,000		1,054,930
											54,465,737
GENERAL OBLIGATION BONDS
14.30% of Net Assets
Franklin TN School District Limited Tax Refunding		4.625			06/01/2018		Aa2		1,000,000		1,034,220
Franklin TN Water & Sewer Revenue & Tax		5.000			04/01/2024		Aaa		750,000		801,577
Knoxville TN General Obligation - Series A		5.000			05/01/2020		Aa2/AA*/AA+@		1,430,000		1,535,749
Memphis TN General Improvement		5.000			05/01/2020		Aa2/AA*/AA-@		2,000,000		2,060,560
Metro Government Nashville & Davidson County TN -Series B		5.000			08/01/2024		Aa2/AA*/AA+@		1,500,000		1,558,545
Metropolitan Government Nashville & Davidson County TN		5.000			01/01/2025		Aa2/AA*/AA@		1,000,000		1,041,450
Shelby County TN - Series A		4.600			11/01/2022		Aa2/AA+*/AA@		500,000		507,230
Williamson County TN Refunding General Obligation		5.000			03/01/2020		Aa1		645,000		680,927
Williamson County TN Series A General Obligation		4.750			04/01/2021		Aa1		750,000		783,908
Williamson County TN Series B General Obligation		5.000			05/01/2023		Aa1		1,400,000		1,458,282
Williamson County TN General Obligation		5.000			05/01/2022		Aa1		1,400,000		1,462,495
											12,924,943
HOSPITAL AND HEALTHCARE REVENUE BONDS
9.82% of Net Assets
Metro Nashville & Davidson County TN Open Arms		5.100			08/01/2016		AA*		2,500,000		2,502,000
Metro Nashville & Davidson County TN Open Arms		5.100			08/01/2019		AA*		1,660,000		1,660,697
Shelby County TN Health Education & Housing Facilities		5.000			07/01/2031		Aa2/AA+@		4,750,000		4,717,890
											8,880,587

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, 2008
				Maturity						Market
Bond Description	Coupon			Date		Rating#		Par Value		Value
STATE AND LOCAL MORTGAGE REVENUE
3.54% of Net Assets
TN Housing Development Agency Homeownership Program		5.500	%		07/01/2020		Aa2/AA*	$	335,000	$	337,268
TN Housing Development Agency Series 2001 - 3B		5.250			01/01/2020		Aa2/AA*		230,000		233,181
TN Housing Development Agency Mortgage Financing Series A		5.200			07/01/2023		Aa2/AA*		2,600,000		2,628,470
											3,198,919
LEASE REVENUE BONDS
3.02% of Net Assets
Memphis/Shelby County TN Special Facilities Revenue FedEx		5.050			09/01/2012		Baa2/BBB*		250,000		252,508
TN Housing Development Agency Series 1B		5.000			07/01/2029		Aa2/AA*		1,000,000		989,740
TN State School Board Authority Higher Education Facilities		4.750			05/01/2030		Aa2/AA*/AA@		1,500,000		1,485,810
											2,728,058
PREREFUNDED BONDS
2.34% of Net Assets
Johnson City TN Health & Educational Facilities		5.125			07/01/2025		A2/AA*/AA@		2,000,000		2,049,260
Metro Nashville & Davidson County TN Water & Sewer		6.500			12/01/2014		Aaa/AA*/BBB@		60,000		70,004
											2,119,264
MUNICIPAL UTILITY REVENUE BONDS
2.03% of Net Assets
Metro Nashville & Davidson County TN Electric System		5.125			05/15/2016		Aa3/AA*/AA@		700,000		714,210
Metro Nashville & Davidson County TN Electric System		5.125			05/15/2021		Aa3/AA*/AA@		1,085,000		1,123,452
											1,837,662
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS
1.88% of Net Assets
Metro Nashville & Davidson County TN McKendree		5.125			01/01/2020		AA*		1,700,000		1,700,629
											1,700,629
ESCROWED TO MATURITY BONDS
1.36% of Net Assets
Jackson TN Water & Sewer Revenue		7.200			07/01/2012		Aaa/AAA*		5,000		5,357
Johnson City TN Health & Educational Revenue		5.000			07/01/2018		A2/AA*/AA@		1,000,000		1,020,360
Metro Nashville & Davidson County TN Dandridge Tower		6.375			01/01/2011		A2		200,000		200,336
											1,226,053

Total Investments (cost $90,244,588) (See (a) below for further explanation) 98.54% of Net Assets										$	89,081,852

Standard and Poor’s Corporation

Fitch’s Investors Service

All other ratings by Moody’s Investors Service, Inc.

Bond ratings are unaudited.

(a)	Represents cost for financial reporting and federal income tax purposes and differs from market value by net unrealized depreciation of securities as follows:

Unrealized appreciation	$	516,081
Unrealized depreciation		(1,678,817	)
Net unrealized depreciation	$	(1,162,736	)

The accompanying notes are an integral part of the financial statements.

TENNESSEE TAX-FREE INCOME SERIES

STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008

ASSETS:
Investments in securities, at value (Cost: $90,244,588)		$	89,081,852
Cash			520,733
Prepaid expenses			3,677
Interest receivable			1,310,493
Total assets			90,916,755
LIABILITIES:
Payable for:
Distributions to shareholders	418,947
Fund shares redeemed	6,561
Investment advisory fee	37,066
Transfer agent fee	9,388
Accrued expenses	47,444
Total liabilities			519,406
NET ASSETS:
Capital			92,163,442
Net accumulated realized loss on investment transactions			(603,357	)
Net unrealized depreciation in value of investments			(1,162,736	)
Net assets at value		$	90,397,349
NET ASSET VALUE, offering price and redemption price per share
($90,397,349 -:- 8,395,708 shares outstanding; unlimited number
of shares authorized; no par value)		$	10.77

STATEMENT OF OPERATIONS
For the year ended June 30, 2008

Net investment income:
Interest income	$	4,365,597
Expenses:
Investment advisory fee		490,223
Transfer agent fee		123,762
Custodian expense		5,033
Professional fees		21,708
Trustee fees		11,408
Postage expense		15,000
Printing expense		11,000
Other expenses		20,696
Total expenses		698,830
Custodian expense reduction		(5,033	)
Net expenses		693,797
Net investment income		3,671,800
Realized and unrealized gain/(loss) on investments:
Net realized gain		158,100
Net change in unrealized appreciation/depreciation		(1,100,265	)
Net realized and unrealized loss on investments		(942,165	)
Net increase in net assets resulting from operations	$	2,729,635

The accompanying notes are an integral part of the financial statements.

TENNESSEE TAX-FREE INCOME SERIES

STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2008 and 2007

	2008			2007
Decrease/Increase in net assets:
Operations:
Net investment income	$	3,671,800		$	3,537,827
Net realized gain on investments		158,100			160,245
Net change in unrealized appreciation/depreciation		(1,100,265	)		(134,883	)
Net increase in net assets resulting from operations		2,729,635			3,563,189
Distributions from net investment income		(3,671,800	)		(3,537,827	)
Net fund share transactions (Note 4)		(8,357,547	)		11,404,073
Total (decrease)/increase		(9,299,712	)		11,429,435
Net assets:
Beginning of year		99,697,061			88,267,626
End of year	$	90,397,349		$	99,697,061

FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:	For the years ended June 30,
	2008			2007			2006			2005			2004

Net asset value, beginning of year	$	10.87		$	10.84		$	11.21		$	10.87		$	11.26
Income from investment operations:
Net investment income		0.41			0.41			0.42			0.43			0.45
Net gains/(losses) on securities,
both realized and unrealized		(0.10	)		0.03			(0.37	)		0.34			(0.39	)
Total from investment operations		0.31			0.44			0.05			0.77			0.06
Less distributions:
Distributions from net investment income		(0.41	)		(0.41	)		(0.42	)		(0.43	)		(0.45	)
Net asset value, end of year	$	10.77		$	10.87		$	10.84		$	11.21		$	10.87
Total return		2.87	%		4.05	%		0.45	%		7.21	%		0.55	%
Net assets, end of year (in thousands)	$	90,397		$	99,697		$	88,268		$	82,640		$	70,499
Ratio of net expenses to average net assets (a)		0.71	%		0.72	%		0.71	%		0.67	%		0.67	%
Ratio of net investment income to average net assets		3.74	%		3.70	%		3.82	%		3.89	%		4.05	%
Portfolio turnover		15.71	%		8.55	%		6.14	%		9.49	%		16.11	%

(a)	Percentages are after custodian/interest expense reductions, for which no recovery of these waivers and reductions will be sought.
	Percentages before custodian/interest expense reductions were:
	.72% for 2008; .73% for 2007; .72% for 2006; .69% for 2005; and .70% for 2004.

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, 2008
					Maturity
Bond Description		Coupon			Date		Rating#		Par Value		Market Value
INSURED MUNICIPAL BONDS
66.32% of Net Assets
Chattanooga-Hamilton County TN Hospital Authority Erlanger			5.625	%		10/01/2009		Aaa/AAA*/AAA@	$	715,000	$	743,979
Dickson County TN Refunding			5.000			06/01/2015		A3		140,000		146,765
Johnson City TN Refunding			4.000			06/01/2015		NR*		400,000		400,228
Johnson City TN Electric Revenue			4.500			05/01/2021		Aaa/AAA*		300,000		300,219
Knoxville TN Electric Revenue - Series V			4.750			07/01/2021		Aaa/AAA*/AAA@		275,000		281,025
Marshall County TN General Obligation			4.450			12/01/2010		Aaa/AAA*/AAA@		270,000		276,888
Maury County TN School & Public Improvement			5.000			04/01/2016		A1/AA@		1,000,000		1,056,660
Memphis-Shelby TN Sports Authority Memphis Arena Project			5.500			11/01/2012		Aa3/AA*/AA@		500,000		539,465
Memphis-Shelby County TN Sports Authority Memphis Arena			5.000			11/01/2017		A1/AA*/AA@		275,000		294,465
Memphis TN General Obligation General Improvement			5.000			10/01/2016		A1/AA*/AA@		450,000		478,746
Memphis TN Electric System Revenue - Series A			5.000			12/01/2015		Aa2/AA+*/AA@		1,200,000		1,266,287
Municipal Energy Acquisition Gas Corporation Revenue			4.125			03/01/2009		Aaa/AAA*/AAA@		200,000		202,780
Shelby County TN Health Education & Housing Facility Rhodes			4.500			08/01/2009		A2/AA*/AA@		100,000		101,209
Shelby County Health Education			5.250			09/01/2020		Aaa/AAA*		400,000		419,128
Sullivan County TN Health Educational & Housing Facility Board			5.000			09/01/2011		A*/BBB+@		335,000		345,666
												6,853,510
GENERAL OBLIGATION BONDS
10.55% of Net Assets
Chattanooga TN General Obligation Unlimited			5.500			09/01/2010		Aa2/AA*/AA@		500,000		528,310
Rutherford County TN General Obligation			5.000			04/01/2009		Aa2/AA*		250,000		255,718
Rutherford County TN Public Improvement General Obligation			4.250			04/01/2009		Aa2/AA*		200,000		203,460
Shelby County TN Public Improvement General Obligation - Series A			5.500			04/01/2009		Aa2/AA+*/AA@		100,000		102,644
												1,090,132
LEASE REVENUE BONDS
8.02% of Net Assets
Chattanooga TN Electric Revenue - Series A			5.000			09/01/2021		AA*/AA@		400,000		421,612
Memphis-Shelby County Airport Special Facilities-Federal Ex			5.000			09/01/2009		Baa2/BBB*		400,000		407,300
												828,912
STATE AND LOCAL MORTGAGE REVENUE BONDS
3.70% of Net Assets
Shelby County TN Multi-Family Housing Memphis - Series A	^		5.000			01/01/2009		NR		240,000		33,600
TN Housing Development Agency - Series 1B			4.800			07/01/2024		Aa2/AA*		350,000		349,223
												382,823
PREREFUNDED BONDS
3.01% of Net Assets
Metro Government Nashville & Davidson County TN			5.125			11/15/2013		Aa2/AA*		300,000		311,514
												311,514
MUNICIPAL UTILITY REVENUE BONDS
1.70% of Net Assets
Knoxville TN Gas Revenue System - Series J			4.750			03/01/2010		Aa3/AA*		170,000		175,195
												175,195
HOSPITAL AND HEALTHCARE REVENUE BONDS
.99% of Net Assets
Knox County TN Hospital Facility Revenue Catholic Healthcare			4.500			10/01/2011		A1/AA-*/AA-@		100,000		102,394
												102,394

Total Investments (cost $9,923,230) (See (a) below for further explanation) 94.29% of Net Assets											$	9,744,480

Standard and Poor's Corporation

Fitch's Investors Service

All other ratings by Moody's Investors Service, Inc.

Not Rated

Bond ratings are unaudited.

Security in default and therefore is non-income producing.

(a)	Represents cost for financial reporting and federal income tax purposes and differs from market value by net unrealized depreciation of securities as follows:

Unrealized appreciation	$	24,965
Unrealized depreciation		(203,715	)
Net unrealized depreciation	$	(178,750	)

The accompanying notes are an integral part of the financial statements.

TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES

STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008

ASSETS:
Investments in securities, at value (Cost: $9,923,230)		$	9,744,480
Cash			511,477
Interest receivable			94,570
Total assets			10,350,527
LIABILITIES:
Payable for:
Distributions to shareholders	5,721
Fund shares redeemed	67
Investment advisory fee	4,117
Transfer agent fee	1,243
Trustee fee	412
Accrued expenses	4,443
Total liabilities			16,003
NET ASSETS:
Capital			10,730,745
Net accumulated realized loss on investment transactions			(217,471	)
Net unrealized depreciation in value of investments			(178,750	)
Net assets at value		$	10,334,524
NET ASSET VALUE, offering price and redemption price per share
($10,334,524 -:- 1,002,200 shares outstanding; unlimited number
of shares authorized; no par value)		$	10.31

STATEMENT OF OPERATIONS
For the year ended June 30, 2008

Net investment income:
Interest income	$	389,664
Expenses:
Investment advisory fee		51,645
Transfer agent fee		15,494
Custodian expense		4,800
Professional fees		6,458
Trustee fees		1,205
Postage expense		2,000
Printing expense		2,500
Other expenses		4,561
Total expenses		88,663
Custodian expense reduction		(4,800	)
Net expenses		83,863
Net investment income		305,801
Realized and unrealized loss on investments:
Net realized loss		(4,503	)
Net change in unrealized appreciation/depreciation		11,181
Net realized and unrealized gain on investments		6,678
Net increase in net assets resulting from operations	$	312,479

The accompanying notes are an integral part of the financial statements.

TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES

STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2008 and 2007

	2008			2007
Decrease in net assets:
Operations:
Net investment income	$	305,801		$	381,294
Net realized loss on investments		(4,503	)		(41,349	)
Net change in unrealized appreciation/depreciation		11,181			126,752
Net increase in net assets resulting from operations		312,479			466,697
Distributions from net investment income		(305,801	)		(381,296	)
Net fund share transactions (Note 4)		(551,757	)		(4,262,014	)
Total decrease		(545,079	)		(4,176,613	)
Net assets:
Beginning of year		10,879,603			15,056,216
End of year	$	10,334,524		$	10,879,603

FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:	For the years ended June 30,
	2008			2007			2006			2005			2004

Net asset value, beginning of year	$	10.32		$	10.29		$	10.60		$	10.58		$	10.91
Income from investment operations:
Net investment income		0.31			0.31			0.30			0.30			0.32
Net gains/(losses) on securities,
both realized and unrealized		(0.01	)		0.03			(0.31	)		0.02			(0.33	)
Total from investment operations		0.30			0.34			(0.01	)		0.32			(0.01	)
Less distributions:
Distributions from net investment income		(0.31	)		(0.31	)		(0.30	)		(0.30	)		(0.32	)
Net asset value, end of year	$	10.31		$	10.32		$	10.29		$	10.60		$	10.58
Total return		2.90	%		3.34	%		(0.10	)%		3.05	%		(0.07	)%
Net assets, end of year (in thousands)	$	10,335		$	10,880		$	15,056		$	19,323		$	20,311
Ratio of net expenses to average net assets (a)		0.81	%		0.79	%		0.71	%		0.56	%		0.51	%
Ratio of net investment income to average net assets		2.96	%		3.00	%		2.86	%		2.81	%		2.99	%
Portfolio turnover		22.22	%		0.00	%		23.21	%		13.91	%		5.92	%

(a)	Percentages are after expenses waived by Adviser and custodian/interest expense reductions, for which no recovery of these waivers and reductions will be sought.
	Expenses waived by Adviser and custodian/interest expense reductions were:
	0% and .05% for 2008; 0% and .04% for 2007; .04% and .03% for 2006; .19% and .04% for 2005; and .22% and .04% for 2004, respectively.

The accompanying notes are an integral part of the financial statements.

DUPREE MUTUAL FUNDS - INTERMEDIATE GOVERNMENT BOND SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
U.S. Government Securities and Agencies -- 100%
June 30, 2008
				Maturity				Par Value		Market
Bond Description	Coupon			Date		Rating#		of Shares		Value
FEDERAL HOME LOAN BANK
27.42% of Net Assets
Federal Home Loan Banks Medium Term Note		7.000	%		08/15/2014		Aaa/AAA*	$	500,000	$	570,803
Federal Home Loan Banks Medium Term Note		5.375			04/22/2015		Aaa/AAA*		3,025,000		3,084,267
Federal Home Loan Banks Medium Term Note		5.000			01/22/2018		Aaa/AAA*		1,250,000		1,228,680
Federal Home Loan Banks Medium Term Note		5.250			02/22/2023		Aaa/AAA*		1,500,000		1,458,630
											6,342,380
FEDERAL FARM CREDIT
22.13% of Net Assets
Federal Farm Credit Bank		5.300			06/24/2014		Aaa/AAA*/AAA@		1,550,000		1,630,859
Federal Farm Credit Bank		5.625			10/20/2015		Aaa/AAA*/AAA@		1,000,000		1,006,328
Federal Farm Credit Bank		5.875			08/16/2021		Aaa/AAA*/AAA@		1,900,000		1,959,202
Federal Farm Credit Bank		6.200			07/26/2022		Aaa/AAA*/AAA@		500,000		523,772
											5,120,161
FEDERAL NATIONAL MORTGAGE ASSOCIATION
21.53% of Net Assets
Federal National Mortgage Association		5.300			08/15/2013		AAA/Aaa*/AAA@		2,000,000		2,004,610
Federal National Mortgage Association		5.250			12/30/2015		Aaa/AAA*/AAA@		1,000,000		999,375
Federal National Mortgage Association		5.210			06/30/2015		Aaa/AAA*/AAA@		1,000,000		999,375
Federal National Mortgage Association		5.100			08/20/2020		Aaa/AAA*/AAA@		1,000,000		977,192
											4,980,552
FEDERAL HOME LOAN MORTGAGE
21.12% of Net Assets
Federal Home Loan Mortgage Corporation		5.000			03/27/2018		Aaa/AAA*/AAA@		500,000		494,332
Federal Home Loan Mortgage Corporation		5.000			06/11/2021		AAA/AAA*/AAA@		500,000		482,566
Federal Home Loan Mortgage Corporation		5.125			06/08/2015		Aaa/AAA*/AAA@		1,000,000		1,004,018
Federal Home Loan Mortgage Corporation		5.000			04/15/2021		Aaa/AAA*/AAA@		3,000,000		2,904,210
											4,885,126
STUDENT LOAN MARKETING ASSOCIATION
4.90% of Net Assets
Student Loan Marketing Association		7.300			08/01/2012		Aaa		1,000,000		1,133,468
											1,133,468
INVESTMENT FUND
2.09% of Net Assets
US Bank U.S. Treasury Money Market Fund									484,036		484,036
											484,036

Total Investments (cost $22,677,965) (See (a) below for further explanation) 99.19% of Net Assets										$	22,945,723

Standard and Poor's Corporation

Fitch's Investors Service

All other ratings by Moody's Investors Service, Inc.

Bond ratings are unaudited.

(a)	Represents cost for financial reporting and federal income tax purposes and differs from market value by net unrealized appreciation of securities as follows:

Unrealized appreciation	$	410,270
Unrealized depreciation		(142,512	)
Net unrealized appreciation	$	267,758

The accompanying notes are an integral part of the financial statements.

INTERMEDIATE GOVERNMENT BOND SERIES

STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008

ASSETS:
Investments in securities, at value (Cost: $22,677,965)		$	22,945,723
Cash			16,549
Interest receivable			304,160
Prepaid expenses			981
Total assets			23,267,413
LIABILITIES:
Payable for:
Distributions to shareholders	21,959
Fund shares redeemed	105,172
Investment advisory fee	3,784
Transfer agent fee	2,855
Accrued expenses	1,542
Total liabilities			135,312
NET ASSETS:
Capital			23,114,516
Net accumulated realized loss on investment transactions			(250,173	)
Net unrealized appreciation in value of investments			267,758
Net assets at value		$	23,132,101
NET ASSET VALUE, offering price and redemption price per share
($23,132,101 -:- 2,330,674 shares outstanding; unlimited number
of shares authorized; no par value)		$	9.93

STATEMENT OF OPERATIONS
For the year ended June 30, 2008

Net investment income:
Interest income	$	1,235,676
Expenses:
Investment advisory fee		46,320
Transfer agent fee		33,792
Custodian expense		4,800
Professional fees		5,258
Trustee fees		2,667
Postage expense		7,000
Printing expense		10,000
Other expenses		8,306
Total expenses		118,143
Custodian expense reduction		(4,800	)
Net expenses		113,343
Net investment income		1,122,333
Realized and unrealized gain on investments:
Net realized gain		71,617
Net change in unrealized appreciation/depreciation		553,034
Net realized and unrealized gain on investments		624,651
Net increase in net assets resulting from operations	$	1,746,984

The accompanying notes are an integral part of the financial statements.

INTERMEDIATE GOVERNMENT BOND SERIES

STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2008 and 2007

	2008			2007
Increase in net assets:
Operations:
Net investment income	$	1,122,333		$	1,138,528
Net realized gain/(loss) on investments		71,617			(4,983	)
Net change in unrealized appreciation/depreciation		553,034			203,062
Net increase in net assets resulting from operations		1,746,984			1,336,607
Distributions from net investment income		(1,122,333	)		(1,161,912	)
Net fund share transactions (Note 4)		(45,637	)		890,949
Total increase		579,014			1,065,644
Net assets:
Beginning of year		22,553,087			21,487,443
End of year	$	23,132,101		$	22,553,087

FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:	For the years ended June 30,
	2008			2007			2006			2005			2004

Net asset value, beginning of year	$	9.66		$	9.58		$	10.07		$	9.94		$	10.35
Income from investment operations:
Net investment income		0.48			0.49			0.48			0.47			0.52
Net gains/(losses) on securities,
both realized and unrealized		0.27			0.08			(0.49	)		0.13			(0.41	)
Total from investment operations		0.75			0.57			(0.01	)		0.60			0.11
Less distributions:
Distributions from net investment income		(0.48	)		(0.49	)		(0.48	)		(0.47	)		(0.52	)
Net asset value, end of year	$	9.93		$	9.66		$	9.58		$	10.07		$	9.94
Total return		7.88	%		6.04	%		(0.14	)%		6.17	%		1.09	%
Net assets, end of year (in thousands)	$	23,132		$	22,553		$	21,487		$	22,369		$	18,075
Ratio of net expenses to average net assets (a)		0.49	%		0.51	%		0.45	%		0.44	%		0.45	%
Ratio of net investment income to average net assets		4.85	%		5.05	%		4.97	%		4.68	%		5.12	%
Portfolio turnover		33.21	%		6.40	%		17.67	%		28.88	%		42.35	%

(a)	Percentages are after custodian/interest expense reductions, for which no recovery of these waivers and reductions will be sought.
	Percentages before custodian/interest expense reductions were:
	.51% for 2008; .53% for 2007; .47% for 2006; .48% for 2005; and .48% for 2004.

The accompanying notes are an integral part of the financial statements.

DUPREE MUTUAL FUNDS

NOTES TO FINANCIAL STATEMENTS

June 30, 2008

1.	Organization and 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 (each a “Fund" and collectively the “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 nine series:

Alabama Tax-Free Income Series

Kentucky Tax-Free Income Series

Kentucky Tax-Free Short-to-Medium Series

Mississippi Tax-Free Income 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

The investment strategy of the eight state tax-free funds is to maintain 100% of their investments in Alabama, Kentucky, Mississippi, North Carolina, or Tennessee municipal securities.

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. The Intermediate Government Bond Series will buy bonds and notes that will maintain an average maturity of no more than ten years.

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 accounting principles generally accepted in the United States.

Security Valuation

Securities held by the Intermediate Government Bond Series are valued using market quotations as provided by an independent pricing service. Securities held by the eight state tax-free funds are valued as determined in good faith in accordance with consistently applied procedures established by and under the general supervision of the Board of Trustees. These procedures involve the use of a matrix pricing model which takes into consideration price quotations or appraisals for these securities, yield, stability, risk, quality, coupon rate, maturity, type of issue, trading characteristics, special circumstances of a security or trading market, and any other factors or market data considered relevant in determining the value. The procedures also include weekly verification of market quotations provided by two independent pricing services. A bond valuation that is not supported by a valuation source requires management to fair value the security in consultation with the Board’s Valuation committee. Shares of open-end mutual funds in which the Funds invest are valued at their respective net asset values as reported by the underlying funds.

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No.157 is

DUPREE MUTUAL FUNDS

NOTES TO FINANCIAL STATEMENTS

June 30, 2008

1.	Significant Accounting Policies, continued:

effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of June 30, 2008, the Funds do not believe the adoption of SFAS No. 157 will impact the amounts reported in the financial statements, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements reported on the statement of changes in net assets for a fiscal period.

Security Transactions

Security transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis.

Security Income

Interest income, which includes the amortization of premiums and the accretion of discounts, is recorded on an accrual basis.

When-Issued and Extended Settlement Securities

The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The value of the security may vary with market fluctuations. No interest accrues to the Funds until the security is delivered and payment takes place. At the time the Funds enter into this type of transaction, they are required to segregate cash or other liquid assets equal to the value of the securities purchased.

Federal Income Taxes

It is each Fund's policy to qualify as a regulated investment company by complying with the requirements of the Internal Revenue Code (the "code") applicable to regulated investment companies, including the distribution of all or substantially all taxable and tax-exempt income to their shareholders. The Funds have met the requirements of the code applicable to regulated investment companies for the year ended June 30, 2008. Therefore, no federal income tax provision is required.

The Funds have adopted Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes", which is effective for fiscal periods beginning after December 15, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than-not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns for the last three years.

Distributions

Substantially 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. Distributions are payable in cash or in additional shares at the net asset value on the payable date. Distributions are determined in accordance with income tax regulations.

DUPREE MUTUAL FUNDS

NOTES TO FINANCIAL STATEMENTS

June 30, 2008

1.	Significant Accounting Policies, continued:

Distributions are payable:

Monthly for:	Kentucky Tax-Free Short-to-Medium Series
	North Carolina Tax-Free Short-to-Medium Series
	Tennessee Tax-Free Short-to-Medium Series
	Intermediate Government Bond Series

Quarterly for:	Alabama Tax-Free Income Series
	Kentucky Tax-Free Income Series
	Mississippi Tax-Free Income Series
	North Carolina Tax-Free Income Series
	Tennessee Tax-Free Income Series

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual amounts could differ from those estimates.

2.	Investment Advisory Fee and Other Transactions with Affiliates

Subject to the direction of the Trustees, Dupree & Company, Inc. (the Adviser) is responsible for the management of the Funds' portfolios. Under the terms of the Investment Advisory Agreements for the Alabama, Kentucky, Mississippi, North Carolina, and Tennessee Series, the Funds have agreed to pay to the Adviser 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 Fund determined separately; .45 of 1% of the average daily net assets between $100,000,001 and $150,000,000 of each Fund determined separately; .40 of 1% of the average daily net assets between $150,000,001 and $500,000,000 of each Fund determined separately; and .35 of 1% of the average daily net assets in excess of $500,000,000. For the Intermediate Government Bond Series, the Fund has agreed to pay to the Adviser, 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 .20 of 1% of average daily net assets.

The Adviser may voluntarily waive investment advisory fees payable to it under the Investment Advisory Agreement with each Fund, and assume and pay other operating expenses. The Adviser will not seek to recoup any waived fees or other operating expenses it has assumed.

For the year ended June 30, 2008, investment advisory fees and waived amounts were as follows:

	Investment Advisory fees		Waived Investment Advisory fees
Alabama Tax-Free Income Series	$	61,870	$	43,902
Kentucky Tax-Free Income Series		2,867,522		-
Kentucky Tax-Free Short-to-Medium Series		285,798		-
Mississippi Tax-Free Income Series		23,963		22,142
North Carolina Tax-Free Income Series		303,230		-
North Carolina Tax-Free Short-to-Medium Series		57,099		-
Tennessee Tax-Free Income Series		490,223		-
Tennessee Tax-Free Short-to-Medium Series		51,645		-
Intermediate Government Bond Series		46,320		-

DUPREE MUTUAL FUNDS

NOTES TO FINANCIAL STATEMENTS

June 30, 2008

2. Investment Advisory Fee and Other Transactions with Affiliates, continued:

In addition, each Fund has entered into a Shareholder Service Agreement with Dupree & Company, Inc, the Funds’ transfer agent. The agreement provides for a fee computed on the average daily net asset value at the annual rate of .15 of 1% on the first $20,000,000 of average net assets and .12 of 1% of all amounts in excess of $20,000,000 of average net assets for each Fund.

3. Purchases and Sales of Securities

During the year ended June 30, 2008, the cost of purchases and the proceeds from sales and maturities of securities (excluding short-term securities and U.S. government obligations, except for the Intermediate Government Bond Series which are all U.S. government obligations) for each of the Funds were as follows:

	Purchases		Sales/Calls
Alabama Tax-Free Income Series	$	2,751,710	$	1,029,369
Kentucky Tax-Free Income Series		77,129,440		40,022,203
Kentucky Tax-Free Short-to-Medium Series		7,924,723		13,395,135
Mississippi Tax-Free Income Series		130,450		444,602
North Carolina Tax-Free Income Series		17,837,896		6,551,593
North Carolina Tax-Free Short-to-Medium Series		2,663,493		2,923,373
Tennessee Tax-Free Income Series		15,080,786		21,251,223
Tennessee Tax-Free Short-to-Medium Series		2,237,736		3,198,859
Intermediate Government Bond Series		7,691,900		7,502,230

4. Capital Shares

At June 30, 2008 and 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:


ALABAMA TAX-FREE INCOME SERIES	Year Ended June 30, 2008						Year Ended June 30, 2007
	SHARES			AMOUNT			SHARES			AMOUNT
Shares sold		239,173		$	2,773,958			217,192		$	2,549,134
Shares issued for reinvestment of distributions and capital gain		31,477			363,810			26,093			306,525
Shares redeemed		(105,583	)		(1,220,405	)		(157,732	)		(1,852,010	)
Net increase		165,067		$	1,917,363			85,553		$	1,003,649

KENTUCKY TAX-FREE INCOME SERIES	Year Ended June 30, 2008						Year Ended June 30, 2007
	SHARES			AMOUNT			SHARES			AMOUNT
Shares sold		11,797,352		$	88,090,018			9,650,442		$	72,716,213
Shares issued for reinvestment of distributions and capital gain		2,237,440			16,690,222			2,219,370			16,712,266
Shares redeemed		(9,141,820	)		(68,285,124	)		(10,077,019	)		(76,007,337	)
Net increase		4,892,972		$	36,495,116			1,792,792		$	13,421,142

KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES	Year Ended June 30, 2008						Year ended June 30, 2007
	SHARES			AMOUNT			SHARES			AMOUNT
Shares sold		1,752,927		$	9,137,624			2,426,071		$	12,578,488
Shares issued for reinvestment of distributions		244,350			1,269,365			293,040			1,518,346
Shares redeemed		(3,490,558	)		(18,172,172	)		(7,131,122	)		(36,947,040	)
Net decrease		(1,493,281	)	$	(7,765,183	)		(4,412,011	)	$	(22,850,206	)

DUPREE MUTUAL FUNDS

NOTES TO FINANCIAL STATEMENTS

June 30, 2008

4. Capital Shares, continued:

MISSISSIPPI TAX-FREE INCOME SERIES	Year Ended June 30, 2008						Year ended June 30, 2007
	SHARES			AMOUNT			SHARES			AMOUNT
Shares sold		57,281		$	643,985			146,878		$	1,685,190
Shares issued for reinvestment of distributions and capital gain		12,070			135,418			13,380			152,943
Shares redeemed		(122,028	)		(1,379,820	)		(147,742	)		(1,688,878	)
Net increase/(decrease)		(52,677	)	$	(600,417	)		12,517		$	149,254

NORTH CAROLINA TAX-FREE INCOME SERIES	Year Ended June 30, 2008						Year ended June 30, 2007
	SHARES			AMOUNT			SHARES			AMOUNT
Shares sold		1,655,177		$	17,843,888			1,009,262		$	11,001,946
Shares issued for reinvestment of distributions		154,124			1,652,936			125,366			1,366,179
Shares redeemed		(778,018	)		(8,377,286	)		(556,875	)		(6,069,350	)
Net increase		1,031,283		$	11,119,539			577,752		$	6,298,775

NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES	Year Ended June 30, 2008						Year Ended June 30, 2007
	SHARES			AMOUNT			SHARES			AMOUNT
Shares sold		268,903		$	2,813,699			217,217		$	2,258,131
Shares issued for reinvestment of distributions and ordinary income		22,953			239,638			25,624			266,880
Shares redeemed		(313,729	)		(3,292,052	)		(426,003	)		(4,432,976	)
Net decrease		(21,873	)	$	(238,715	)		(186,163	)	$	(1,907,965	)

TENNESSEE TAX-FREE INCOME SERIES	Year Ended June 30, 2008						Year ended June 30, 2007
	SHARES			AMOUNT			SHARES			AMOUNT
Shares sold		1,965,096		$	21,403,092			2,146,643		$	23,718,638
Shares issued for reinvestment of distributions		147,017			1,596,693			137,737			1,518,224
Shares redeemed		(2,886,948	)		(31,357,332	)		(1,255,779	)		(13,832,789	)
Net increase/(decrease)		(774,835	)	$	(8,357,547	)		1,028,600		$	11,404,073

TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES	Year Ended June 30, 2008						Year ended June 30, 2007
	SHARES			AMOUNT			SHARES			AMOUNT
Shares sold		142,006		$	1,476,833			85,707		$	892,357
Shares issued for reinvestment of distributions		22,250			231,384			27,954			290,963
Shares redeemed		(216,755	)		(2,259,974	)		(522,310	)		(5,445,334	)
Net decrease		(52,499	)	$	(551,757	)		(408,649	)	$	(4,262,014	)

DUPREE MUTUAL FUNDS

NOTES TO FINANCIAL STATEMENTS

June 30, 2008

4. Capital Shares, continued:

INTERMEDIATE GOVERNMENT BOND SERIES	Year Ended June 30, 2008						Year ended June 30, 2007
	SHARES			AMOUNT			SHARES			AMOUNT
Shares sold		326,993		$	3,266,770			249,741		$	2,434,050
Shares issued for reinvestment of distributions		84,868			847,031			87,142			851,183
Shares redeemed		(416,116	)		(4,159,438	)		(245,018	)		(2,394,284	)
Net increase/(decrease)		(4,255	)	$	(45,637	)		91,865		$	890,949

5.	Concentration of credit risk

The Alabama Tax-Free Income Series, Kentucky Tax-Free Income Series, Kentucky Tax-Free Short-to-Medium Series, Mississippi Tax-Free Income Series, North Carolina Tax-Free Income Series, North Carolina Tax-Free Short-to-Medium Series, Tennessee Tax-Free Income Series, and Tennessee Tax-Free Short-to-Medium Series each invest solely in debt obligations issued by the states of Alabama, Kentucky, Mississippi, North Carolina, and Tennessee, respectively, and their respective political subdivisions, agencies and public authorities to obtain funds for various public purposes. Each of these state-specific Funds is more susceptible to economic and political factors adversely affecting issuers of their states’ respective municipal securities than a fund that is not concentrated in these issuers to the same extent.

6.	Federal Income Taxes

As of June 30, 2008, the Kentucky Tax-Free Short-to-Medium Series, Mississippi Tax-Free Income 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 have capital loss carryforwards which are available to offset future capital gains, if any. As of June 30, 2008 the Alabama Tax-Free Income Series and the Kentucky Tax-Free Income Series do not have any capital loss carryforwards.

The capital loss carryforwards expire as follows:

	2009		2010		2011		2012		2013		2014		2015		2016		Total
Kentucky Tax-Free Short-to-Medium Series	$	312,672	$	34,064	$	-	$	44,500	$	329,431	$	74,336	$	446,645	$	227,932	$	1,469,580
Mississippi Tax-Free Income Series		-		-		-		-		-		-		-		6,458		6,458
North Carolina Tax-Free Income Series		-		-		-		462,081				-		-		-		462,081
North Carolina Tax-Free Short-to-Medium Series		22,226		-		-		10,514		4,659		43,905		50,449		30,033		161,786
Tennessee Tax-Free Income Series		311,135		69,806		18,314		175,434		28,670		-		-		-		603,359
Tennessee Tax-Free Short-to-Medium Series		37,349		-		-		-		797		61,617		92,566		23,418		215,747
Intermediate Government Bond Series		46,873		-		-		117,848		2		64,307		21,143		-		250,173

DUPREE MUTUAL FUNDS

NOTES TO FINANCIAL STATEMENTS

June 30, 2008

6.	Federal Income Taxes, continued:

During the year ended June 30, 2008, the following Funds utilized capital loss carryforwards as follows:

	Amount
North Carolina Tax-Free Income Series	$	225,542
Tennessee Tax-Free Income Series		158,100
Intermediate Government Bond Series		71,617

Capital losses incurred after October 31 (“Post-October” losses) within the taxable year are deemed to arise on the first business day of the Funds’ next taxable year. The following Funds incurred and will elect to defer net capital losses during the fiscal year 2008 as follows:

	Post October Losses
Alabama Tax Free Income Series	$	(25,428	)
Kentucky Tax-Free Short-to-Medium Series		(178,100	)
Mississippi Tax-Free Income Series		(8,142	)
Tennessee Tax-Free Short-to-Medium Series		(1,725	)

At June 30, 2008, the effect of permanent book to tax differences (expiration of capital loss carryforwards) resulted in increases and decreases to the components of net assets as follows:

	Accumulated Net Realized Losses		Capital
Kentucky Tax-Free Short-to-Medium Series	$	135,232	$	(135,232	)
North Carolina Tax-Free Short-to-Medium Series		5,915		(5,915	)
Tennessee Tax-Free Short-to-Medium Series		5,991		(5,991	)
Intermediate Government Bond Series		138,236		(138,236	)

The tax character of distributions paid for the years ended June 30, 2008 and 2007 were as follows:


	2008						2007
	Tax Exempt Income		Ordinary Income		Long-Term Capital Gain		Tax Exempt Income		Ordinary Income		Long-Term Capital Gain
Alabama Tax-Free Income Series	$	494,363	$	-	$	23,016	$	461,296	$	-	$	-
Kentucky Tax-Free Income Series		28,081,655		-		9,603		27,771,550		-		649,014
Kentucky Tax-Free Short-to-Medium Series		1,875,479		-		-		2,257,746		-		-
Mississippi Tax-Free Income Series		192,571		607		-		211,237		-		22,573
North Carolina Tax-Free Income Series		2,282,515		-		-		1,980,016		-		-
North Carolina Tax-Free Short-to-Medium Series		346,156		-		-		369,700		2,550		-
Tennessee Tax-Free Income Series		3,671,801		-		-		3,537,827		-		-
Tennessee Tax-Free Short-to-Medium Series		305,801		-		-		381,296		-		-
Intermediate Government Bond Series		-		1,122,333		-		-		1,161,912		-

DUPREE MUTUAL FUNDS

NOTES TO FINANCIAL STATEMENTS

June 30, 2008

6.	Federal Income Taxes, continued:

At June 30, 2008, the Fund's components of distributable earnings (accumulated losses) on a tax basis were as follows:


Dupree Mutual Funds	Undistributed Ordinary Income*		Undistributed Tax-Exempt Income		Undistributed Net Long-Term Capital Gains		Net Unrealized Appreciation (Depreciation) on Investments
Alabama Tax-Free Income Series	$	-	$	42,096	$	-	$	(123,378	)
Kentucky Tax-Free Income Series		-		2,727,124		718,685		(42,187	)
Kentucky Tax-Free Short-to-Medium Series		-		46,967		-		580,463
Mississippi Tax-Free Income Series		-		10,239		-		(57,253	)
North Carolina Tax-Free Income Series		-		151,485		-		(551,898	)
North Carolina Tax-Free Short-to-Medium Series		-		6,535		-		35,297
Tennessee Tax-Free Income Series		-		418,947		-		(1,162,736	)
Tennessee Tax-Free Short-to-Medium Series		-		5,721		-		(178,750	)
Intermediate Government Bond Series		21,957		-		-		267,758

*For tax purposes short-term capital gain distributions are considered ordinary income distributions.

7.	Contingencies and Commitments

The Funds indemnify the Trust’s officers and Trustees for certain liabilities that might arise from their performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which may provide for indemnification. The Funds’ maximum exposure under these arrangements is unknown, as this would involve predicting future claims that may be made against the Funds, if any, that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.

8.	Line of Credit Agreement and Custodian Agreement

Under the terms of an agreement with the Funds’ custodian, principal amounts up to 5% of a Fund’s net assets are available on an uncommitted line of credit. The principal amounts borrowed are due on demand. The agreement expires on September 30, 2008, but may be renewed annually. Interest is payable based on the published prime rate of the bank. Securities with a minimum value of three times the loan proceeds will be assigned as collateral until the balance of the note and unpaid interest is paid in full and terminated.

DUPREE MUTUAL FUNDS

NOTES TO FINANCIAL STATEMENTS

June 30, 2008

8.	Line of Credit Agreement and Custodian Agreement, continued:

During the year ended June 30, 2008, the daily weighted average borrowings for each Fund were as follows:

	Weighted average borrowings
Alabama Tax-Free Income Series	$ 445
Kentucky Tax Free Income Series	24,175
Kentucky Tax-Free Short-to-Medium Series	5,954
Mississippi Tax-Free Income Series	79
North Carolina Tax-Free Income Series	11,473
North Carolina Tax-Free Short-to-Medium Series	8,180
Tennessee Tax-Free Income Series	20,530
Tennessee Tax-Free Short-to-Medium Series	3,352
Intermediate Government Bond Series	2,661

The Funds have a contractual agreement with the custodian whereby the bank will provide custodial services for $1.00 per year. Through arrangements with the Funds’ custodian, credits realized as a result of unninvested cash balances were used to reduce each Fund’s expenses. During the year, these credits reduced each of the Funds’ expenses by the amount shown on the Statements of Operation as “Custodian expense reduction.”

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees of

Dupree Mutual Funds

We have audited the accompanying statements of assets and liabilities, including the schedules of portfolio investments, of Dupree Mutual Funds, comprised of Alabama Tax-Free Income Series, Kentucky Tax-Free Income Series, Kentucky Tax-Free Short-to-Medium Series, Mississippi Tax-Free Income 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 (collectively, the Funds), as of June 30, 2008, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of June 30, 2008, by correspondence with the custodian and brokers. 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 respective Funds comprising the Dupree Mutual Funds at June 30, 2008, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Cincinnati, Ohio

August 13, 2008

DUPREE MUTUAL FUNDS

OTHER UNAUDITED INFORMATION

June 30, 2008

Trustee and officer information

The following table sets forth information as to the Trustees and officers:

Name, Address and Age	Position(s) Held with Funds	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Director-ships Held by Trustee
Officers:
Thomas P. Dupree Sr. 125 South Mill Street Lexington, KY 40507 Age: 77	President	Annual Term; 29 years of service	Chairman of the Board of Dupree & Company, Inc.	N/A	N/A
Gay M. Elste P.O. Box 28 Versailles, KY 40383 Age: 57	Compliance Officer	Annual Term; 4 years of service	Attorney at Law, Darsie & Elste. Anstruther Farm, beef cattle farming	N/A	N/A
Allen E. Grimes, III 125 South Mill Street Lexington, KY 40507 Age: 45	Executive Vice President	Annual Term; 3 years of service	President, Dupree & Company, Inc. Attorney, Dinsmore & Shohl LLP (2001-2004)	N/A	N/A
Michelle M. Dragoo 125 South Mill Street Lexington, KY 40507 Age: 47	Vice President, Secretary, Treasurer	Annual Term; 10 years of service as Vice President, 8 years of service as Secretary, Treasurer	Vice President, Secretary, Treasurer of Dupree & Company, Inc.	N/A	N/A
Alison L. Arnold 125 South Mill Street Lexington, KY 40507 Age: 48	Assistant Secretary	Annual Term; 15 years of service	Dupree & Company, Inc.	N/A	N/A
Trustees:
William A. Combs, Jr. 111 Woodland Ave., #510 Lexington, KY 40502 Age: 68	Chairman, Trustee	Annual Term; 7 years of service as Chairman; 19 years of service as Trustee	Officer, Director: Mercedes-Benz of Cincinnati, Ohio; Mercedes-Benz of West Chester, Ohio and Freedom Dodge, Lexington, KY	9	N/A
James C. Baughman, Jr. 1999 Richmond Road Suite 4 Lexington, KY 40502 Age: 45	Trustee	One Year Term; 1 Year of Service	President, Secretary, Treasurer, Director Office Suites Plus (executive office space rental)	9	N/A
Lucy A. Breathitt 1703 Fairway Drive Lexington, KY 40502 Age: 71	Trustee	Annual Term; 12 years of service	Alexander Farms, farming	9	KY Historical Society Foundation, KY Natural Lands Trust, Bluegrass Conservancy

DUPREE MUTUAL FUNDS

OTHER UNAUDITED INFORMATION

June 30, 2008

Trustee and officer information, continued:

Name, Address and Age	Position(s) Held with Funds	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Director-ships Held by Trustee
C. Timothy Cone 201 West Short Street Lexington, KY 40507 Age: 64	Trustee	Annual Term; 6 years of service	President, Gess, Mattingly & Atchison, P.S.C. (law firm)	9	N/A
J. William Howerton 3954 Primrose Place Paducah, KY 42001 Age: 76	Trustee	Annual Term; 8 years of service	Judge (retired November 1996) KY Court of Appeals; Self-Employed Mediator (through 2006), Arbitrator and Special Judge.	9	KY Lottery Corporation
William S. Patterson 367 West Short Street Lexington, KY 40507 Age: 75	Trustee	Annual Term; 29 years of service	President, CEO, Cumberland Surety Co., Lexington, KY, President, Patterson & Co., Frankfort, KY, (real estate development, thoroughbred horse breeding and farming)	9	N/A

As of June 30, 2008, none of the Trustees nor members of their immediate family held any beneficial interest in the Trust’s Investment Adviser. Further, the Trust does not have an underwriter.

The Statement of Additional Information (“SAI”) includes additional information about Trustees and officers and is available upon request without charge. Please call (800) 866-0614 to request the SAI.

Proxy Voting Information

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge upon request by calling (800) 866-0614, or on the Securities and Exchange Commission’s website at http://www.sec.gov. For the year ending June 30, 2008, the Funds exercised no proxy votes due to the fact that the debt instruments in which the Funds invest carry no voting rights.

Quarterly Portfolio Disclosure

The Trust files with the Securities and Exchange Commission a complete listing of portfolio holdings for each Fund as of the end of the first and third quarters of each fiscal year on Form N-Q. The complete listing (i) is available on the commission’s website and (ii) will be made available to shareholders upon request by calling (800) 866-0614. Information on the operation of the S.E.C.’s Public Reference Room may be obtained by calling 1-800-SEC-0300.

DUPREE MUTUAL FUNDS

OTHER UNAUDITED INFORMATION

June 30, 2008

Schedule of Shareholder Expenses

As a shareholder of the Funds, you incur transaction costs including investment advisory fees and other Fund expenses. The following examples are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Six Months Ended June 30, 2008” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses which is not the Funds’ actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

	Net Expense Ratio Annualized June 30, 2008	Beginning Account Value January 1, 2008*	Ending Account Value June 30, 2008**	Expenses Paid During the Six Months Ended June 30, 2008
Alabama Tax-Free Income Series
Actual	.45%	$1,000.00	$996.60	$2.23
Hypothetical	.45	1,000.00	1,024.86	2.27
Kentucky Tax-Free Income Series
Actual	.57	1,000.00	999.50	2.83
Hypothetical	.57	1,000.00	1,024.86	2.87
Kentucky Tax-Free Short-to-Medium Series
Actual	.72	1,000.00	1,004.80	3.59
Hypothetical	.72	1,000.00	1,024.86	3.62
Mississippi Tax-Free Income Series
Actual	.45	1,000.00	994.30	2.23
Hypothetical	.45	1,000.00	1,024.86	2.27
North Carolina Tax-Free Income Series
Actual	.71	1,000.00	994.60	3.52
Hypothetical	.71	1,000.00	1,024.86	3.57

DUPREE MUTUAL FUNDS

OTHER UNAUDITED INFORMATION

June 30, 2008

Schedule of Shareholder Expenses, continued:

	Net Expense Ratio Annualized June 30, 2008	Beginning Account Value January 1, 2008*	Ending Account Value June 30, 2008**	Expenses Paid During the Six Months Ended June 30, 2008
North Carolina Tax-Free Short-to-Medium Series
Actual	.81%	$1,000.00	$1,003.50	$4.03
Hypothetical	.81	1,000.00	1,024.86	4.08
Tennessee Tax-Free Income Series
Actual	.70	1,000.00	999.40	3.48
Hypothetical	.70	1,000.00	1,024.86	3.52
Tennessee Tax-Free Short-to-Medium Series
Actual	.80	1,000.00	1,002.90	3.98
Hypothetical	.80	1,000.00	1,024.86	4.03
Intermediate Government Bond Series
Actual	.49	1,000.00	1,011.50	2.45
Hypothetical	.49	1,000.00	1,024.86	2.47

*	The example is based on an investment of $1,000 invested at the beginning of the period.

**	Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period multiplied by [182/366] (to reflect one-half year period).

Item 2. Code of Ethics: The registrant has adopted a code of ethics that applies to the principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. The full text of the Code of Ethics is attached hereto as Exhibit 12(a)(1). The Code of Ethics was amended at a meeting of May 6, 2008 of the Board of Trustees of the Registrant. There have been no waivers from the Code of Ethics during the reporting period. The Registrant’s Code of Ethics is posted on its web site. A copy of the Code of Ethics will be provided to any person free of charge upon request by telephoning or writing the Registrant.

Item 3. Audit Committee Financial Expert: Audit Committee Financial Expert: The board does not have a financial expert serving on the audit committee. The registrant’s audit committee is comprised of all Trustees all of who are non-interested and independent. The audit committee believes that the collective experience and expertise of the members in assessing the performance of companies and the evaluation of financial statements is sufficient to assess the issues which can reasonably be expected to be raised by the Trust’s financial statements.

Item 4. Principal Accountant Fees and Services: This information is incorporated by reference in the registrant’s definitive proxy statement to be filed within 120 days after June 30, 2008.

Item 5. Not applicable.

Item 6. Included as part of item 1.

Item 7. Not applicable

Item 8. Not applicable.

Item 9. Not applicable

Item 10. There have been no changes to the procedures by which shareholders may recommend nominees to the board of trustees nominating committee.

Item 11. Controls and Procedures:

On August 20, 2008 the Registrant’s President and Treasurer assessed the disclosure controls and procedures to evaluate the effectiveness of the Registrant’s disclosure controls and procedures designed to ensure that information required to be disclosed by the investment company on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an investment company in the reports that it files on Form N-CSR is accumulated and communicated to the investment company’s management, including its principal executive and principal financial officers or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Further, on August 20, 2008 the Registrant’s President and Treasurer assessed the internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the investment company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the investment company are being made only in accordance with authorizations of management and trustees of the investment company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the investment company’s assets that could have a material effect on the financial statements.

The Registrant’s President and Treasurer have deemed the disclosure controls and procedures and the internal control over financial reporting effective. There were no changes in the Registrant’s disclosure controls and procedures or internal control over financial reporting that occurred during the fourth quarter of the fiscal year that materially affected or is reasonably likely to materially affect the Registrant’s financial statements.

Item 12. Exhibits

(a) (1) Code of Ethics

(b) (2) Certifications

(a) (3) Not applicable

Dupree Mutual Funds N-CSRCertified annual shareholder report (management investment company)