Dupree Mutual Funds N-CSRS Certified semi-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, 2004

Date of reporting period: July 1, 2003 through December 31, 2003

Item 1. Report to Stockholders

DUPREE MUTUAL FUNDS

December 31, 2003

SEMI 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 state of Kentucky.

In 1979, Dupree & Company began what is now Dupree Mutual Funds with the Kentucky Tax-Free Income Series and became the fund’s investment advisor. 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 50 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

President’s letter	i
Financial Statements
Alabama Tax-Free Income Series	1
Kentucky Tax-Free Income Series	5
Kentucky Tax-Free Short-to-Medium Series	12
Mississippi Tax-Free Income Series	16
North Carolina Tax-Free Income Series	20
North Carolina Tax-Free Short-to-Medium Series	25
Tennessee Tax-Free Income Series	29
Tennessee Tax-Free Short-to-Medium Series	34
Intermediate Government Bond Series	38
Notes to Financial Statements	41

To the Shareholders of

Dupree Mutual Funds

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

July 1, 2003—December 31, 2003

Investment Performance:

This first half of the calendar year was one of fairly stable interest rates and municipal bond prices.

The Alabama Tax-Free Income Series began the period at a price of $11.80 per share with total assets of $4,615,443 At the period’s end its price per share was $11.76 and total assets were $5,144.461. There was no capital gains distribution during the period.

The Kentucky Tax-Free Income Series began the period at a price of $7.73 per share with total assets of $612,593,118. At the period’s end its price per share was $7.68 and total assets were $617,544,819. There was no capital gains distribution during the period.

The Kentucky Tax-Free Short-to-Medium Series began the period at $5.44 per share with total assets of $99,529,340. On December 31^st the price per share was $5.40 and total assets were $103,965,620. There was no capital gains distribution during the period.

The Mississippi Tax-Free Income Series began the period at a price of $10.74 per share with total assets of $2,727,895. At the period’s end its price per share was $11.67 and total assets were $2,965,321.

The North Carolina Tax-Free Income Series began the period at a price of $11.12 per share with total assets of $39,667,913. On December 31st the Income Series had assets of $39,425,706 and a price of $11.07. There was no capital gains distribution during the period.

The North Carolina Tax-Free Short-to-Medium Series began the period at $10.85 per share with total assets of $13,870,602. On December 31^st this series had assets of $15,571,371 and a price of $10.80. There was no capital gains distribution.

The Tennessee Tax-Free Income Series began the period at $11.26 with total assets of $58,815,864. On December 31^st price per share was $11.20 and total assets were $66,240,995. There was no capital gains distribution.

The Tennessee Tax-Free Short-to-Medium Series began the period at a price of $10.91 per share with total assets of $15,999,603. At year end price per share was $10.83 with total assets of $16,680,188. There was no capital gains distribution.

The Intermediate Government Bond Series began the period at $10.35 per share and ended December 31st at $10.09. Total assets at the beginning of the period were $18,757,749 and at the end of the period were $18,548,120. There was no capital gains distribution during the period.

Overview:

Interest rates have been fairly stable for the past months. The Federal Reserve has held short term interest rates steady during the period.

Our investment strategy remains unchanged. This might be best described as buying bonds at the most advantageous point on the yield curve consistent with the targeted average maturity of each series. This continues to produce above average Morningstar ratings and occasional recognition from financial writers.

The loyalty of shareholders has had much to do with our growth during this period. If you have questions or suggestions feel free to call us at (800) 866-0614 or, in Lexington, at 254-7741. In North Carolina you can also call Carolina Financial Group, Inc. at (800) 284-2562.

Yours truly,

/s/    Thomas P. Dupree, Sr.        

Thomas P. Dupree, Sr.

President

DUPREE MUTUAL FUNDS—ALABAMA TAX-FREE INCOME SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
Alabama Municipal Bonds—100%
December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
60.51% of Net Assets
AL Housing Financial Authority Single Family Mortgage	5.050	10/1/2013	Aaa/NR	$	15,000	$	15,917
Alabama Private Colleges & University Facilities Authority	5.900	9/1/2016	Aaa/AAA*		10,000		11,189
AL State Board Education Bishop State Community College	4.600	1/1/2021	Aaa/NR		100,000		101,398
Alabama State Docks Department Docks Facilities Reveue	5.500	10/1/2022	Aaa/AAA*		110,000		120,091
AL State University Revenue General Tuition & Fee—Series A	5.000	1/1/2019	Aaa/AAA*		50,000		53,011
Alabama Water Pollution Control Authority	5.500	8/15/2016	Aaa/AAA*		10,000		10,890
AL Water Pollution Control Authority Revolving Fund Loan	4.800	8/15/2018	Aaa/AAA*		50,000		52,360
Alexander City AL Warrants	4.700	5/1/2021	NR/AAA*		200,000		205,002
Birmingham AL Special Care Facilities Financing	5.000	6/1/2020	Aaa/AAA*		100,000		104,178
Birmingham AL Multifamily Housing Revenue—Beaconview	5.600	7/1/2020	Aaa/AAA*		20,000		20,161
Blount County AL Water Authority Revenue	5.750	8/1/2019	Aaa/AAA*		125,000		141,003
Central Elmore AL Water & Sewer	5.000	7/1/2021	Aaa/AAA*		100,000		104,087
Choctaw County AL Revenue School Warrants	4.700	3/1/2017	NR/A*		200,000		201,370
Colbert County Northwest AL Health Care Facility	5.750	6/1/2015	Aaa/AAA*		10,000		10,754
Colbert County-Northwest AL Healthcare Authority	5.750	6/1/2020	Aaa/AAA*		20,000		21,451
East AL Health Care Authority Facilities Revenue	5.250	9/1/2023	Aaa/AAA*		50,000		51,111
Fairhope AL Utilities Revenue Warrants	5.750	12/1/2021	Aaa/AAA*		25,000		28,016
Fort Payne Warrents	5.500	5/1/2016	Aaa/AAA*		10,000		10,917
Hoover AL Board of Education Capital Outlay Warrants	5.250	2/15/2026	Aaa/AAA*		35,000		36,583
Houston County AL Warrants	5.650	10/15/2015	Aaa/AAA*		25,000		28,443
Huntsville AL Capital Improvement Warrants—Series C	4.500	11/1/2021	Aaa/AAA*		200,000		202,528
Huntsville AL Health Care Authority Series A	5.000	6/1/2023	Aaa/AAA*		40,000		40,989
Huntsville AL Health Care Authority Series A	5.400	6/1/2022	Aaa/AAA*		50,000		54,211
Huntsville AL Public Building Authority Lease Revenue	5.125	10/1/2022	Aaa/AAA*		200,000		210,732
Huntsville AL Public Educational Building—A&M	5.600	6/1/2014	NR/A*		20,000		22,081
Huntsville AL Public Educational Building	6.050	6/1/2020	NR/A*		150,000		165,441
Jasper AL Waterworks & Sewer Board Water & Sewer Revenue	5.100	6/1/2018	Aaa/AAA*		30,000		32,363
Jasper AL Waterworks & Sewer Board Water & Sewer Revenue	5.200	6/1/2021	Aaa/AAA*		50,000		53,403
Jefferson County AL Board of Education Capital Outlay	5.800	2/15/2020	AAA/AAA*		10,000		11,119
Jefferson County AL Sewer Revenue Capital Improvement	5.000	2/1/2020	Aaa/AAA*		50,000		52,611
Lauderdale County & Florence AL Health Care Authority	5.250	7/1/2019	Aaa/AAA*		30,000		32,338
Lee County AL School Warrants	5.000	2/1/2018	Aaa/AAA*		100,000		107,156
Limestone County AL Water Authority Water Revenue	5.250	12/1/2020	Aaa/AAA*		45,000		45,900
Linden AL Warrants	5.250	6/1/2023	NR/AA*		25,000		26,336
Mobile AL Limited Obligation Tax Warrants	5.500	2/15/2023	A1/NR		35,000		37,204
Montgomery AL Waterworks & Sanitary Sewer Board	5.000	9/1/2019	Aaa/AAA*		50,000		53,102
Nortwest AL Gas District Gas System Revenue	5.900	5/1/2020	Aaa/NR		35,000		39,586
Oxford AL Public Parks & Recreation Board Revenue	6.000	12/1/2021	NR/A*		115,000		126,479
Phenix City AL School Warrants	5.450	8/1/2016	Aaa/AAA*		10,000		11,196
Roanoke AL Warrants	4.450	5/1/2020	NR/AAA*		150,000		151,868
St Clair County Board of Education School Tax Anticipation	5.500	2/1/2016	Aaa/AAA*		10,000		11,161
Southeast AL Gas District System Revenue Series A	5.500	6/1/2020	Aaa/NR		10,000		11,038
Sylacauga AL Warrants	5.500	6/1/2025	Aaa/NR		25,000		26,915
Trussville AL Warrants	4.800	10/1/2021	Aaa/NR		85,000		87,870
Tuskegee AL Utilities Board Utilities Revenue	5.500	2/1/2022	Aaa/AAA*		70,000		75,464
University of Alabama Revenue—Birmingham	6.000	10/1/2020	Aaa/AAA*		25,000		28,705
University of Alabama University Revenue-Huntsville	5.750	12/1/2016	Aaa/AAA*		10,000		11,164
University AL University Revenue Hospital-Series A	5.400	9/1/2013	Aaa/AAA*		50,000		56,253
							3,113,139
GENERAL OBLIGATION BONDS
23.21% of Net Assets
AL State—Series A	5.000	6/1/2019	Aa3/AA*		30,000		31,526
AL State—Series A	5.000	6/1/2020	Aa3/AA*		100,000		104,341
Alabama State—Series B	5.000	6/1/2021	Aa3/AA*		30,000		31,115
Alabama State—Series A	4.625	9/1/2022	Aa3/AA*		100,000		101,966
Alabama 21st Century Authority Tobacco Settlement Revenue	5.750	12/1/2020	A1/A*		50,000		48,422

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

1

DUPREE MUTUAL FUNDS—ALABAMA TAX-FREE INCOME SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
Alabama Municipal Bonds—100%
December 31, 2003

Bond Description		Coupon	Maturity Date	Rating#	Par Value		Market Value
Alabama 21st Century Authority Tobacco Settlement Revenue		5.850	12/1/2013	A1/A*	$	15,000	$	15,400
Birmingham AL Warrants		4.900	1/1/2018	Aa3/AA*		150,000		157,056
Birmingham AL Capital Improvement Warrants—Series A		5.500	8/1/2025	AA/Aa3*		100,000		108,226
Birmingham AL Referral Warrants—Series A		5.250	5/1/2018	Aa3/AA*		300,000		328,035
Madison AL Warrants—Series C		5.000	9/1/2018	Aaa/AAA*		250,000		268,013
								1,194,099
PUBLIC FACILITIES REVENUE BONDS
4.29% of Net Assets
AL State Public Schools & College Authority—Series B		5.000	12/1/2021	Aa3/AA*		190,000		198,468
Hoover AL Wts—Series A		5.650	1/1/2014	Aa3/AA*		10,000		11,288
Rockford AL Public Building Authority Building Revenue		5.750	9/1/2015	NR		10,000		10,859
								220,615
MUNICIPAL UTILITY REVENUE BONDS
2.60% of Net Assets
Birmingham AL Water & Sewer Revenue Warrants—Series A		5.125	1/1/2017	Aa3/AA-*		20,000		21,319
Birmingham AL Water & Sewer Revenue Warrants—Series A		4.750	1/1/2021	A1/AA-*		100,000		101,933
Douglas AL Water & Fire Protection Authority Water Revenue		5.600	6/1/2015	NR		10,000		10,696
								133,948
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING     REVENUE BONDS
2.51% of Net Assets
Mobile AL Spring Hill College Educational Building		5.100	9/1/2019	Aa3/NR		120,000		129,035
								129,035
HOSPITAL AND HEALTHCARE REVENUE BONDS
2.38% of Net Assets
Blount County AL Health Care Authority Tax Anticipation War		5.750	2/15/2019	BBB+		25,000		26,511
Mobile AL Second Medical Clinic Board Revenue Franklin		5.050	3/1/2018	Aa3/NR		50,000		52,581
Montgomery AL Baptist Medical Center Special Care		5.375	9/1/2022	Aaa/AAA*		30,000		31,964
Oneonta Eastern Health System Special		7.750	7/1/2021	Baa1BBB*		10,000		11,315
								122,372
INDUSTRIAL REVENUE AND POLLUTION CONTROL REVENUE BONDS
2.14% of Net Assets
Auburn AL Industrial Development Board Facilities Revenue		5.800	11/1/2011	NR/BBB*		75,000		83,397
Auburn AL Industrial Development Board Facilities Revenue		6.200	11/1/2020	NR/BBB*		25,000		26,861
								110,258
PREREFUNDED BONDS
1.76% of Net Assets
Helena AL Utilities Board Water & Sewer Revenue		5.750	9/1/2025	Aaa/AAA*		25,000		28,120
Jefferson County AL Sewer Revenue Capital Improvement		5.000	2/1/2021	Aaa/AAA*		30,000		34,025
Lee County AL Warrants		5.500	2/1/2021	Aaa/AAA*		15,000		16,863
Montevallo AL American		6.000	6/1/2013	NR		10,000		11,498
								90,506
LEASE REVENUE BONDS
.41% of Net Assets	��
Mountain Brook AL City Board Education Capital Outlay		5.200	2/15/2021	Aa2/NR		20,000		21,037
STATE AND LOCAL MORTGAGE REVENUE BONDS
.41% of Net Assets
Alabama Housing Financial Authority Single Family Housing		6.000	4/1/2016	Aaa/NR		20,000		21,004
Total Investments (cost $4,920,156)(a)—100.22% of Net Assets							$	5,156,013

* Standard and Poor's Corporation

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 appreciation of securities as follows:

Unrealized appreciation	$	241,557
Unrealized depreciation		(5,700	)
Net unrealized appreciation	$	235,857

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

2

DUPREE MUTUAL FUNDS—ALABAMA TAX-FREE INCOME SERIES UNAUDITED

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2003

ASSETS:
Investments in securities, at value (Cost: $4,920,156)
Cash			$	5,156,013
Interest receivable				4,782
Pre-paid expenses				66,650
Total assets				1,159
				5,228,604
LIABILITIES:
Payable for:
Distributions
Management fee	$	55,025
Transfer agent		1,286
Notes payable		4,832
Total liabilities		23,000
				84,143
NET ASSETS:
Capital
Net accumulated realized loss on investment transactions				4,913,886
Net unrealized appreciation in value of investments				(5,282	)
Net assets at value				235,857
			$	5,144,461
NET ASSET VALUE, offering price and redemption price per share ($5,144,461 —:—  437,371 shares outstanding)			$	11.76

STATEMENT OF OPERATIONS

For the six month period ended December 31, 2003

Net investment income:
Interest income	$	117,431
Expenses:
Management fee
Transfer agent		12,204
Custodian fees		3,661
Professional fees		2,400
Audit		955
Trustee fees		1,078
Other expenses		241
Total expenses		1,372
Expenses reimbursed by Investment Advisor		21,911
Custodian expense reductions		(9,748	)
Net investment income		(2,400	)
Realized and unrealized gain on investments		107,668
Net realized gain
Net decrease in unrealized appreciation		2,980
Net realized and unrealized loss on investments		(11,609	)
Net increase in net assets resulting from operations		(8,629	)
	$	99,039

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

3

DUPREE MUTUAL FUNDS—MISSISSIPPI TAX-FREE INCOME SERIES UNAUDITED

STATEMENT OF CHANGES IN NET ASSETS

For the six month period ended December 31, 2003 and the year ended June 30, 2003

	Six months 12/31/2003			Year ended 06/30/2003
Increase in net assets:
Operations:
Net investment income	$	107,668		$	183,177
Net realized gain/(loss) on investments		2,980			(4,252	)
Net increase/(decrease) in unrealized appreciation		(11,609	)		171,044
Net increase in net assets resulting from operations		99,039			349,969
Distributions to shareholders from net investment income		(107,668	)		(183,177	)
Net fund share transactions		537,647			2,044,615
Total increase		529,018			2,211,407
Net assets:
Beginning of year		4,615,443			2,404,036
End of period	$	5,144,461		$	4,615,443

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months 12/31/03			For the years ended June 30,									The period 1/1/2000 to 6/30/2000 (a)
				2003			2002			2001
Net asset value, beginning of year	$	11.80		$	11.22		$	10.99		$	10.31		$	10.00
Income from investment operations:
Net investment income		0.26			0.52			0.56			0.56			0.26
Net gains on securities, both realized and unrealized		(0.04	)		0.58			0.23			0.68			0.31
Total from investment operations		0.22			1.10			0.79			1.24			0.57
Less distributions:
Distributions from net investment income		(0.26	)		(0.52	)		(0.56	)		(0.56	)		(0.26	)
Net asset value, end of year	$	11.76		$	11.80		$	11.22		$	10.99		$	10.31
Total return		1.90	%		9.98	%		7.32	%		12.33	%		5.79	% (c)
Net assets, end of year (in thousands):	$	5,144		$	4,615		$	2,404		$	1,297		$	222
Ratio of expenses to average net assets (d)		0.20	%		0.33	%		0.28	%		0.21	%		0.50	% (b)
Ratio of net investment income to average net assets		2.02	%		4.46	%		4.99	%		5.27	%		5.23	% (b)
Portfolio turnover		9.91	%		6.24	%		18.15	%		15.28	%		0.00	%

(a) Commencement of Operations January 1, 2000

(b) Annualized

(c) Total return is not annualized

(d) Percentages are after expenses reimbused by Adviser and custodian expense reduction.

Expenses reimbursed by Adviser and custodian expense reduction were:

20% and .05% for the six months ended 12/31/03, .50% and .12% of 2003, .53% and .23% for 2002, .80% and .72% for 2001 and 2.76% and 1.35% for 2000 respectively.

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

4

DUPREE MUTUAL FUNDS—KENTUCKY TAX-FREE INCOME SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

Kentucky Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
41.08% of Net Assets
Bardstown KY Combined Utilities Revenue	5.000	12/1/2017	Aaa/AAA*	$	1,290,000	$	1,388,375
Bardstown KY Combined Utilities Revenue	5.000	12/1/2018	Aaa/A2*		1,510,000		1,612,816
Boone County KY Water—Florence	5.000	12/1/2015	Aaa/AAA*		1,000,000		1,095,230
Boone-Florence KY Water Supply System Revenue	5.000	12/1/2017	Aaa/A2*		1,805,000		1,947,234
Boone-Florence KY Water Supply System Revenue	5.000	12/1/2018	Aaa/A2*		1,900,000		2,033,893
Boone-Florence County KY Water Supply System Revenue	5.000	12/1/2020	Aaa/AAA*		2,100,000		2,224,278
Boyle County KY Hospital Revenue-Ephraim McDowell Regional	5.800	4/1/2014	Aaa/AAA*		1,000,000		1,030,040
Cambell & Kenton Counties Sanitation District Number 1	5.000	8/1/2017	Aaa/AAA*		1,000,000		1,076,310
Carrollton & Henderson KY Public Energy Authority Gas Revenue	5.000	1/1/2007	Aaa/AAA*		1,000,000		1,089,670
Fayette County KY School District Finance Corporation	5.250	4/1/2021	Aaa/AAA*		2,285,000		2,456,306
Fayette County KY School District Finance Corporation	4.500	3/1/2022	Aaa/AA-*		4,100,000		4,133,497
Greater KY Housing Assistance Corporation	5.350	7/1/2022	Aaa/AAA*		870,000		870,000
Greater KY Housing Assistance Corporation-Chenowith Woods	6.100	1/1/2024	Aaa/AAA*		2,175,000		2,175,000
Greater Ky Housing Assistance Corporation-Northside Apartments	6.200	2/1/2025	AAA*		8,275,000		8,275,000
Greater KY Housing Assistance Corporation Mortgage Revenue	5.450	5/20/2027	Aaa		1,245,000		1,296,095
Jefferson County KY Health Facilities-Jewish Hospital	5.650	1/1/2017	Aaa/AAA*		3,450,000		3,773,507
Jefferson County KY Health Facilities Jewish Hospital	5.700	1/1/2021	Aaa/AAA*		4,520,000		4,891,770
Jefferson County KY Health Facilities University Medical Center	5.500	7/1/2017	Aaa/AAA*		8,675,000		9,486,807
Jefferson County KY School District Finance Corporation	5.125	11/1/2016	Aaa/AAA*		1,000,000		1,074,220
Jefferson County Ky School District Finance Corporation	5.250	1/1/2016	Aaa/AAA*		1,000,000		1,074,840
Jefferson County Ky School District Finance Corporation	5.250	1/1/2019	Aaa/AAA*		2,000,000		2,120,100
Jefferson County KY Health Facilities-Alliant Health System	5.125	10/1/2017	Aaa/AAA*		2,940,000		3,127,895
Jefferson County KY School District Finance Corporation	3.500	1/1/2014	Aaa/AAA*		3,565,000		3,544,145
Jefferson County KY School District Finance Corporation	3.500	7/1/2015	Aaa/AAA*		2,110,000		2,068,813
Jefferson County KY Capital Projects Corporation Revenue	5.375	6/1/2018	Aaa/AAA*		1,500,000		1,624,020
Kentucky Economic Development Finance Authority-Ashland Hospital	5.000	2/1/2018	Aaa/AAA*		1,500,000		1,590,225
Kentucky Development Finance Authority-St Clair Medical	5.875	9/1/2013	Aaa		2,000,000		2,096,820
Kentucky Development Finance Authority-St Claire Medical	5.625	9/1/2021	AAA*		2,500,000		2,601,425
Kentucky Development Finance Authority-Methodist Hospital	5.625	2/1/2017	AAA*		6,500,000		7,192,705
Kentucky Development Finance Authority-Appalachian Regional	5.850	10/1/2017	A/A*		1,000,000		1,068,160
Kentucky Development Authority-South Central Nursing	6.000	7/1/2011	Aaa/AAA*		3,075,000		3,468,508
Kentucky Development Finance Authority-Baptist Hospital	5.000	8/15/2015	Aaa/AAA*		3,250,000		3,369,535
Kentucky Housing Corporation	4.750	7/1/2017	Aaa/AAA*		1,335,000		1,384,769
Kentucky Housing Corporation	5.950	7/1/2017	Aaa/AAA*		1,500,000		1,564,395
Kentucky Housing Corporation	4.650	7/1/2023	Aaa/AAA*		3,595,000		3,558,619
Kentucky Housing Corporation	5.800	7/1/2013	Aaa/AAA*		1,000,000		1,066,710
Kentucky Housing Corporation	5.700	7/1/2017	Aaa/AAA*		500,000		521,575
Kentucky Housing Corporation	5.500	1/1/2015	Aaa/AAA*		1,000,000		1,067,110
Kentucky Housing Corporation	4.400	1/1/2017	Aaa/AAA*		1,000,000		1,020,250
Kentucky Housing Corpoartion	4.850	1/1/2024	Aaa/AAA*		2,000,000		2,039,660
KY State Property & Buildings #64	5.500	5/1/2017	Aaa/AAA*		8,000,000		8,940,000
KY State Property & Buildings #73	5.000	11/1/2021	Aaa/AAA*		1,000,000		1,050,180
KY State Property & Buildings #72	5.375	10/1/2016	Aaa/AAA*		5,000,000		5,584,500
KY State Property & Buildings #72	5.000	10/1/2020	Aaa/AAA*		11,305,000		11,882,007
KY State Property & Buildings #74	5.000	2/1/2020	Aaa/AAA*		4,000,000		4,214,440
KY State Property & Buildings #74	5.000	2/1/2022	Aaa/AAA*		3,000,000		3,125,340
KY State Property & Buildings #74	5.000	2/1/2019	Aaa/AAA*		3,000,000		3,181,950
KY State Property & Buildings #73	5.500	11/1/2017	Aaa/AAA*		1,000,000		1,131,300
KY State Property & Buildings #73	5.000	11/1/2019	Aaa/AAA*		1,360,000		1,445,707
KY State Property & Buildings #73	5.000	11/1/2020	Aaa/AAA*		3,255,000		3,435,490
KY State Property & Buildings #77	5.250	8/1/2015	Aaa/AAA*		1,140,000		1,278,510
KY State Property & Buildings #77	5.250	8/1/2016	Aaa/AAA*		1,680,000		1,888,438
KY State Property & Buildings #77	5.250	8/1/2018	Aaa/AAA*		4,325,000		4,784,358
KY State Property & Buildings #79	5.000	10/1/2021	Aaa/AAA*		5,000,000		5,267,850
KY State Property & Buildings #79	5.000	10/1/2022	Aaa/AAA*		1,500,000		1,571,835
KY State Property & Buildings #79	4.750	10/1/2023	Aaa/AAA*		3,000,000		3,065,580
KY State Property & Buildings #80	5.250	5/1/2018	Aaa/AAA*		2,940,000		3,355,069
KY State Property & Buildings #81	5.000	11/1/2020	Aaa/AAA*		2,560,000		2,714,957

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

5

DUPREE MUTUAL FUNDS—KENTUCKY TAX-FREE INCOME SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

Kentucky Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
KY State Turnpike Authority Economic Development Road Revenue	5.150	7/1/2019	Aaa/AAA*	$	1,000,000	$	1,070,530
KY Turnpike Economic Development	5.500	7/1/2010	Aaa/AAA*		5,000,000		5,771,500
Lexington Fayette Urban County Government Public Facilities	5.125	10/1/2015	Aaa/AAA*		1,770,000		1,940,345
Lexington Fayette Urban County Government Public Facilities	5.125	10/1/2017	Aaa/AAA*		1,830,000		1,980,206
Lexington Fayette Urban County Government Public Facilities	5.125	10/1/2018	Aaa/AAA*		2,135,000		2,299,950
Lexington Fayette Urban County Government Public Facilities	5.125	10/1/2019	Aaa/AAA*		2,415,000		2,591,054
Louisville & Jefferson County KY Metropolitan Sewer	5.000	5/15/2019	Aaa/AAA*		2,500,000		2,645,050
Louisville & Jefferson County KY Metropolitan Sewer	4.750	5/15/2028	Aaa/AAA*		10,000,000		10,054,100
Louisville & Jefferson County KY Regional Airport Authority	5.500	7/1/2017	Aaa/AAA*		2,655,000		2,970,839
Louisville KY G.O. Series A	5.000	10/1/2020	Aaa/AAA*		7,165,000		7,580,642
Louisville KY Parking Authority-River City First Mortgage	5.000	12/1/2017	Aaa/AAA*		1,000,000		1,066,030
Madison County School District Finance Corporation	4.500	4/1/2016	Aaa/AAA*		695,000		728,575
McCracken County KY School District Finance Corporation	4.650	7/1/2019	Aaa/AAA*		1,655,000		1,712,561
McCracken County KY School District Finance Corporation	4.700	7/1/2020	Aaa/AAA*		1,725,000		1,781,132
McCracken County KY School District Finance Corporation	5.000	7/1/2022	Aaa/AAA*		4,000,000		4,174,400
McCreary County Courthouse & Public Square Corporation Revenue	5.400	9/1/2020	AAA		1,550,000		1,696,987
Nelson County School District Finance Corporation	4.500	4/1/2021	Aaa/Aa3*		1,130,000		1,145,300
Nelson County School District Finance Corporation	4.500	4/1/2023	Aaa/Aa3*		2,505,000		2,512,365
Northern KY University Certificate of Participation	4.900	12/1/2021	Aaa		2,725,000		2,840,813
Northern KY University Certificate of Participation	5.000	12/1/2024	Aaa		2,000,000		2,066,760
Northern KY Water District Revenue Series A	5.000	2/1/2020	Aaa/A2*		3,080,000		3,240,807
Northern KY Water District Revenue	5.000	2/1/2021	Aaa/AAA*		2,635,000		2,757,870
Northern Kentucky Water District	4.000	2/1/2019	Aaa		1,275,000		1,253,669
Northern Kentucky Water District	4.125	2/1/2020	Aaa		1,325,000		1,308,835
Northern Kentucky Water District	4.125	2/1/2021	Aaa		1,380,000		1,349,309
Pike County KY Mortgage Revenue-Phelps Regional Health	5.350	9/20/2012	AAA*		220,000		242,651
Radcliff KY Mortgage Revenue-Lincoln Trail Care	5.650	1/20/2019	AAA*		3,110,000		3,338,772
Shelbyville KY Certificate of Participation	5.150	7/1/2018	Aaa		4,165,000		4,489,245
University of Kentucky Consolidated Educational Buildings	5.750	5/1/2015	Aaa/AAA*		1,850,000		2,000,757
University of Kentucky Consolidated Educational Buildings	5.000	5/1/2015	Aaa/AAA*		1,305,000		1,412,180
University of Kentucky Housing and Dining	4.400	6/1/2017	Aaa/Aa3*		2,815,000		2,913,722
Warren County Ky Hospital Facility Revenue	4.625	4/1/2012	Aaa/AAA*		1,500,000		1,587,510
Warren County KY Hospital Facility Revenue	5.000	4/1/2016	Aaa/AAA*		1,000,000		1,068,970
Warren County Ky Hospital Facility Revenue	5.000	4/1/2017	Aaa/AAA*		1,000,000		1,060,400
							253,671,670
LEASE REVENUE BONDS
19.93% of Net Assets
Boone County Ky School District Finance Corporation	5.500	9/1/2019	Aa3		1,860,000		2,060,843
Boone County KY School District Finance Corporation	5.750	2/1/2020	Aa3		1,200,000		1,345,944
Boone County KY School District Finance Corporation	5.000	8/1/2019	Aa3		1,040,000		1,101,797
Boone County KY School District Finance Corporation	5.000	2/1/2022	Aa3		3,000,000		3,133,980
Bullitt County KY School District Finance Corporation	5.000	7/1/2021	Aa3		1,000,000		1,046,490
Christian County KY Public Courthouse Lease Revenue	5.125	8/1/2017	Aa3		1,090,000		1,182,508
Christian County KY Public Courthouse Lease Revenue	5.125	8/1/2018	Aa3		1,145,000		1,235,008
Covington Independent School District Finance Corporation	5.250	6/2/2019	Aa3		1,225,000		1,329,309
Estill County KY School District Finance Corporation	5.875	8/1/2016	Aa3		1,780,000		1,978,915
Fayette County KY School District Financial Corporation	5.375	1/1/2017	AA3/AA-*		1,300,000		1,416,051
Franklin County School Districk Finance Corporation	4.200	5/1/2023	Aa3		2,195,000		2,085,930
Green County KY School District Finance Corporation	5.000	4/1/2021	Aa3		1,085,000		1,134,248
Greenup County School District Finance Corporation	4.650	3/1/2021	Aa3		1,650,000		1,688,907
Hardin County KY School District Finance Corporation	6.000	7/1/2016	Aa3		1,025,000		1,139,175
Harlan KY Independent School District Finance Corporation	6.000	5/1/2015	Aa3		275,000		295,853
Hopkins County School District Finance Corporation	5.125	6/1/2019	Aa3		4,120,000		4,426,240
Jessamine County KY School District Finance Corporation	5.375	1/1/2017	Aa3/A+*		1,500,000		1,621,080
Kenton County School District Finance Corporation	5.375	3/1/2017	A+		4,300,000		4,683,001
KY Area Development Districts Financing Trailer Lease Program	6.150	12/1/2022	AA*		1,020,000		1,168,288
KY Area Development Districts Lease City of Ewing	5.700	6/1/2015	AA*		1,500,000		1,669,875
Kentucky Area Development Districts Financing Lease-Ewing	5.600	6/1/2022	AA		1,055,000		1,155,320
KY Area Development Districts Financing Trust Lease	5.350	12/1/2022	AA*		2,560,000		2,778,291
Kentucky Area Development Districts Financing Lease Program	5.400	12/1/2021	AA		710,000		775,483

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

6

DUPREE MUTUAL FUNDS—KENTUCKY TAX-FREE INCOME SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

Kentucky Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
Kentucky Area Development Districts Financing Lease	5.400	12/1/2021	AA	$	1,095,000	$	1,190,364
KY Infrastructure Authority	5.750	8/1/2013	A-		575,000		588,317
KY Interlocal Transportation Equipment Lease Revenue	6.000	12/1/2020	A+		400,000		411,552
Kentucky Infrastructure Authority	5.750	8/1/2018	Aa3/A*		1,500,000		1,534,530
Kentucky Infrastructure Authority	6.375	8/1/2014	Aa3/A*		700,000		758,506
Kentucky Infrastructure Authority Series A	5.000	6/1/2019	Aa3/AA-*		1,000,000		1,052,440
Kentucky Infrastructure Authority	5.375	2/1/2018	Aa3/A*		2,000,000		2,026,040
Kentucky Infrasturcture Authority	5.000	6/1/2017	Aa3/A*		1,035,000		1,096,386
KY State Property & Buildings Commission Revenue #67	5.375	9/1/2019	Aa3/AA-*		3,475,000		3,779,514
Kentucky State Property & Building #68	5.250	10/1/2018	Aa3/A+*		1,500,000		1,623,765
Kentucky State Property & Building #68	5.000	10/1/2019	Aa3/AA-*		5,500,000		5,782,700
Kentucky State Property & Building #73	5.500	11/1/2013	Aa3/AA-*		1,500,000		1,714,950
Laurel County KY School District Finance Corporation	5.600	3/1/2017	Aa3		1,000,000		1,107,720
Laurel County KY School District Finance Corporation	5.750	6/1/2020	Aa3		1,250,000		1,411,050
Martin County KY School District Finance Corporation	5.375	9/1/2020	Aa3		1,100,000		1,202,883
Montgomery County School District Finance Corporation	4.375	4/1/2023	Aa3		3,105,000		3,020,078
Oldham County KY School District Finance Corporation	5.000	12/1/2021	Aa3		2,090,000		2,187,791
Pendleton County KY Multi-County Lease Revenue	6.500	3/1/2019	A*		34,500,000		36,161,175
Pendleton County KY Multi-County Lease Revenue	6.400	3/1/2019	A		3,000,000		3,606,690
Pendleton County KY School District Finance Corporation	5.125	6/1/2019	Aa3		1,140,000		1,221,989
Pike County School District Finance Corporation	5.000	9/1/2016	Aa3		1,850,000		1,991,692
Pike County KY School District Finance Corporation	5.100	9/1/2020	Aa3		1,000,000		1,059,380
Richmond KY Court Facilities Corporation Revenue	5.250	2/1/2019	AA		1,035,000		1,127,684
Scott County School District	5.000	3/1/2021	Aa3		1,240,000		1,299,185
Trigg County School District Finance Corporation	4.600	4/1/2018	Aa3		1,700,000		1,758,310
Whitley County School Finance	4.800	2/1/2021	Aa3		800,000		825,800
Woodford County School District Financing Corporation	3.625	7/1/2017	Aa3		1,250,000		1,177,738
Woodford County School District Finance Corporation	4.250	7/1/2023	Aa3		1,970,000		1,886,748
							123,057,512
PUBLIC FACILITIES REVENUE BONDS
7.94% of Net Assets
Boone County KY Public Property Corporation-AOC Judicial	5.000	9/1/2019	Aa3		1,000,000		1,063,030
Boone County KY Public Property Corporation—Judicial Facilities	5.125	9/1/2022	Aa3		1,750,000		1,856,383
Calloway County Public Property Corporation-Courthouse	5.625	3/1/2018	A		1,000,000		1,100,090
Danville Ky Multi-City Lease Revenue-Mt Sterling	5.000	9/1/2011	NR		545,000		586,698
Florence KY Public Property Corporation Revenue	5.250	3/1/2017	A3		1,060,000		1,128,338
Kenton County KY Public Property Corporation Revenue	5.700	12/1/2015	A2		1,305,000		1,435,422
Kenton County KY Public Property Corporation Revenue	5.700	12/1/2016	A2		1,380,000		1,520,374
Kentucky League of Cities-Middlesboro Series	6.200	8/1/2017	A-*		555,000		582,806
KY State Property & Buildings Community Revenues #63	5.100	11/1/2018	Aa3/AA-*		2,000,000		2,131,540
KY State Property & Buildings Community Revenues #67	5.125	9/1/2018	Aa3/AA-*		1,000,000		1,069,430
Mt. Sterling KY Lease Revenue-Kentucky League of Cities	6.100	3/1/2008	Aa		1,500,000		1,565,175
Mt. Sterling KY Lease Revenue-Kentucky League of Cities	6.150	3/1/2013	Aa		17,860,000		18,690,669
Mt. Sterling KY Lease Revenue-Kentucky League of Cities	6.200	3/1/2018	Aa		14,500,000		15,174,105
Oldham County KY Public Facilities Construction Corporation	5.250	6/1/2017	A+*		1,060,000		1,150,588
							49,054,646
ESCROWED TO MATURITY BONDS
7.07% of Net Assets
Danville KY Multi-City Lease Revenue-Hopkinsville	6.875	6/1/2012	Baa1		2,170,000		2,734,157
Jefferson County KY Health Facilities Alliant Health Services	5.125	10/1/2018	Aaa/AAA*		33,000,000		35,606,010
Jefferson County KY Health Facilities Alliant Health Services	5.125	10/1/2017	Aaa/AAA*		4,980,000		5,321,827
							43,661,994
HOSPITAL AND HEALTHCARE REVENUE BONDS
6.53% of Net Assets
Christian County KY Hospital Revenue-Jennie Stuart Medical	5.800	7/1/2011	A-*		270,000		297,510
Christian County KY Hospital Revenue-Jennie Stuart Medical	6.000	7/1/2017	A-*		5,000,000		5,310,200
Christian County KY Hospital Revenue-Jennie Stuart Medical	6.000	7/1/2013	A-*		2,870,000		3,056,550
Crittenden County Heathcare Facilities	6.300	1/1/2016	NR		2,095,000		2,186,112
Jefferson County KY Health Facilities Jewish Hospital	5.700	1/1/2011	A1/AA-*		1,200,000		1,317,156
Kentucky Development Finance Authority Green River	6.000	11/1/2010	Aa3		1,000,000		1,120,810

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

7

DUPREE MUTUAL FUNDS—KENTUCKY TAX-FREE INCOME SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

Kentucky Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value			Market Value
Kentucky Economic Development Finance Authority Catholic	5.500	9/1/2014	Aa3/AA-*	$	1,375,000		$	1,518,536
Kentucky Development Finance Authority Hospital-Appalachian	5.850	10/1/2017	BB		1,000,000			907,570
Kentucky Development Finance Authority-Catholic Health	5.000	12/1/2018	AA/Aa2*		6,950,000			7,129,797
Kentucky Development Finance Authority-Catholic Health	5.750	12/1/2015	AA/Aa2*		2,000,000			2,179,760
Kentucky Economic Development Finance Authority Revenue	5.250	9/1/2021	Aa2/AA*		2,000,000			2,068,680
Kentucky Economic Development Finance Authority-Norton Health	6.125	10/1/2010	BBB+		7,000,000			7,562,240
Kentucky Economic Development Finance Authority—Catholic	5.125	10/1/2021	A1/AA-*		1,000,000			1,063,050
Madison County Ky Industrial Building Revenue—McCready	5.500	6/1/2020	AA*		1,785,000			1,966,892
Pike County KY Mortgage Revenue Phelps Regional Health	5.650	9/20/2027	AAA*		2,435,000			2,630,287
								40,315,149
PREREFUNDED BONDS
3.05% of Net Assets
Bullitt County KY School District Finance Corporation	6.000	8/1/2014	Aa3		1,100,000			1,153,427
Elsmere KY Industrial Development Revenue-Courtaulds plc	6.750	4/1/2010	NR		2,000,000			2,176,660
Floyd County KY Public Property Revenue-Justice Center	6.125	9/1/2018	A+		1,240,000			1,382,650
Floyd County KY School District Finance Corporation	6.000	6/1/2014	Aa3		1,000,000			1,040,420
Greenup County KY School District Finance Corporation	6.100	9/1/2014	Aa3		1,105,000			1,163,974
Jefferson County Ky Improvement	6.000	4/1/2020	Aa2/AA*		1,985,000			2,324,733
Jefferson County KY Capital Projects Corporation Revenue	5.600	4/1/2014	AAA/Aaa*		1,000,000			1,108,260
Jessamine County KY School District Finance Corporation	6.125	6/1/2015	Aaa/AAA*		1,000,000			1,040,940
Junction City KY College Revenue-Center College Project	5.875	4/1/2017	A2		1,000,000			1,141,080
Letcher County KY School District Finance Corporation	6.700	10/1/2014	Aa3		1,490,000			1,582,365
McLean County KY School District Finance Corporation	6.000	6/1/2014	Aa3		1,405,000			1,462,043
Powell County KY School District Finance Corporation	5.900	8/1/2016	Aa3		1,185,000			1,294,340
Union County KY Public Property Corporation	6.125	9/1/2015	NR		700,000			768,453
University of Louisville Health & Education	6.000	11/1/2013	Aa3		1,180,000			1,223,448
								18,862,792
INDUSTRIAL REVENUE AND POLLUTION CONTROL REVENUE BONDS
3.05% of Net Assets
Ashland KY Pollution Control Revenue-Ashland Oil Project	6.650	8/1/2009	Baa2		8,835,000			8,972,826
Ashland KY Pollution Control Revenue—Ashland Inc	5.700	11/1/2009	Baa2		1,000,000			1,067,760
Campbellsville KY Industrial Revenue-Campbellsville College	6.950	3/1/2015	NR		1,150,000			1,178,359
Campbellsville KY Industrial Revenue-Campbellsville College	6.000	3/1/2017	NR		1,920,000			1,971,475
Jefferson County KY Pollution Control Revenue-E I DuPont	6.300	7/1/2012	Aa3/AA*		3,500,000			3,637,725
Kentucky League of Cities-Ashland Series	6.250	8/1/2017	A-		1,550,000			1,622,354
Meade County KY Pollution Control Revenue-Olin Corporation	6.000	7/1/2007	NR		360,000			372,611
						��		18,823,110
GENERAL OBLIGATION BONDS
2.79% of Net Assets
Bowling Green Ky General Obligation	5.300	6/1/2018	Aa3		1,000,000			1,087,750
Bowling Green KY General Obligation	4.600	6/1/2018	Aa2/AA-*		1,290,000			1,333,615
Hardin County KY General Obligation	5.125	6/1/2019	A1		2,255,000			2,364,097
Jefferson County Series A	4.900	12/1/2018	Aa2/AA*		1,605,000			1,693,307
Kentucky Area Development Districts Financing	4.700	6/1/2024	AA		2,625,000			2,650,778
Kentucky State Property & Buildings Commission Project #62	4.625	9/1/2013	Aa3/AA-*		2,750,000			2,924,405
Lexington Fayette Urban County Government Detention Center	4.750	5/1/2018	Aa2/AA+*		3,120,000			3,254,940
Louisville KY General Obligation	5.000	11/1/2019	Aa3/AA-*		1,775,000			1,903,031
								17,211,922
STATE AND LOCAL MORTGAGE REVENUE BONDS
2.05% of Net Assets
Florence KY Housing Facility Revenue	6.300	8/15/2019	A/A*		2,615,000			2,935,939
Kentucky Housing Corporation	3.900	7/1/2017	Aaa/AAA*		2,055,000			1,994,028
Kentucky Housing Corporation	4.550	7/1/2024	Aaa/AAA*		6,000,000			5,968,320
KY State Property & Building #67	5.125	9/1/2016	Aa3/AA-*		1,000,000			1,079,160
Louisville Housing Assistance Mortgage Corp Rivertown Project	5.100	7/1/2024	Aa2		655,000			655,000
								12,632,447
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS
1.78% of Net Assets
Berea Educational Facilities College Project	4.000	6/1/2019	Aaa		1,315,000			1,282,414
Berea Educational Facilities Revenue	4.125	6/1/2022	Aaa		2,190,000			2,095,764

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

8

DUPREE MUTUAL FUNDS—KENTUCKY TAX-FREE INCOME SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

Kentucky Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
Georgetown College Project Series A	6.000	11/15/2016	A	$	1,000,000	$	1,124,130
Georgetown College Project Series A	6.250	11/15/2020	A		4,000,000		4,429,040
Jefferson County KY College Project Bellarmine College	5.250	5/1/2019	Baa2		2,000,000		2,080,620
							11,011,969
CERTIFICATES OF PARTICIPATION BONDS
.82% of Net Assets
Jeffersontown KY Certificate of Participation	6.500	9/1/2009	A3		1,235,000		1,297,997
Jeffersontown KY Certificate of Participation	5.750	11/1/2015	A3		1,095,000		1,192,521
Shelbyville KY Certificates of Participation	5.350	10/1/2013	NR		1,295,000		1,373,840
Shelbyville KY Certificate of Participation	5.450	10/1/2017	NR		1,130,000		1,169,188
		��
							5,033,546
MUNICIPAL UTILITY REVENUE BONDS
.45% of Net Assets
Cynthiana KY Waterworks & Sewer Revenue	6.400	1/1/2007	BBB-		575,000		592,509
Danville KY Multi-City Lease Revenue-Ashland Utilities	6.750	4/1/2012	BBB+*		915,000		927,609
KY Rural Water Financial Corporation Public Project Revenue	5.375	2/1/2020	AA*		1,140,000		1,242,680
							2,762,797
Total Investments (cost $565,955,073)(a)—96.53% of Net Assets						$	596,099,554

* Standard and Poor’s Corporation

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	$	30,914,771
Unrealized depreciation		(770,291	)
Net unrealized appreciation	$	30,144,480

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

9

DUPREE MUTUAL FUNDS—KENTUCKY TAX-FREE INCOME SERIES UNAUDITED

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2003

ASSETS:
Investment in securities, at value (Cost: $565,955,073)			$	596,099,554
Cash				12,477,577
Receivable for investments sold				6,508,900
Interest receivable				9,547,006
Total assets				624,633,037
LIABILITIES:
Payable for:
Distributions	$	6,630,747
Fund shares redeemed		62,728
Management fee		214,845
Transfer agent		63,251
Other fees		116,647
Total liabilities				7,088,218
NET ASSETS:
Net assets consist of:
Capital				589,413,916
Net accumulated realized loss on investment transactions				(2,013,578	)
Net unrealized appreciation in value of investments				30,144,481
Net assets at value			$	617,544,819
NET ASSET VALUE, offering price and redemption price per share ($617,544,819 / 80,393,370 shares outstanding)			$	7.68
STATEMENT OF OPERATIONS
For the six months ended December 31, 2003
Net investment income:
Interest income			$	15,360,628
Expenses:
Management fee				1,263,976
Transfer agent				371,574
Professional fees				55,655
Trustee fees				30,171
Other expenses				108,437
Total expenses				1,829,813
Custodian expense reductions				(44,308	)
Net investment income				13,575,123
Realized and unrealized gain on investments
Net realized gain				341,201
Net decrease in unrealized appreciation				(4,598,775	)
Net realized and unrealized gain on investments				(4,257,574	)
Net increase in net assets resulting from operations			$	9,317,549

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

10

DUPREE MUTUAL FUNDS—KENTUCKY TAX-FREE INCOME SERIES UNAUDITED

STATEMENTS OF CHANGES IN NET ASSETS

For the year ended June 30, 2003 and the six months ended December 31, 2003

	Six Months 12/31/03			Year ended 2003
Increase in net assets:
Operations:
Net investment income	$	13,575,123		$	25,890,346
Net realized gain on investments		341,201			818,728
Net increase / (decrease) in unrealized appreciation		(4,598,775	)		18,537,076
Net increase in net assets resulting from operations		9,317,549			45,246,150
Distributions to shareholders from net investment income		(13,575,123	)		(25,890,346	)
Net fund share transactions		9,209,275			57,880,893
Total increase		4,951,701			77,236,697
Net assets:
Beginning of year		612,593,118			535,356,421
End of year	$	617,544,819		$	612,593,118

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months 12/31/2003			For the years ended June 30,
				2003			2002			2001			2000
Net asset value, beginning of year	$	7.73		$	7.48		$	7.41		$	7.22		$	7.47
Income from investment operations:
Net investment income		0.17			0.34			0.36			0.37			0.38
Net gains/(losses) on securities, both realized and unrealized		(0.05	)		0.25			0.07			0.19			(0.25	)
Total from investment operations		0.12			0.59			0.43			0.56			0.13
Less distributions:
Distributions from net investment income		(0.17	)		(0.34	)		(0.36	)		(0.37	)		(0.38	)
Net asset value, end of year	$	7.68		$	7.73		$	7.48		$	7.41		$	7.22
Total return		1.59	%		8.04	%		5.93	%		7.94	%		1.78	%
Net assets, end of year (in thousands)	$	617,545		$	612,593		$	535,360		$	467,236		$	416,957
Ratio of net expenses to average net assets (a)		0.29	%		0.58	%		0.59	%		0.60	%		0.61	%
Ratio of net investment income to average net assets		2.23	%		4.45	%		4.84	%		5.05	%		5.17	%
Portfolio turnover		5.39	%		10.69	%		9.99	%		9.06	%		15.74	%

(a) Percentages before custodian expense reduction were:

.30% for the 6 months ended 12/31/03, .60% for 2003, .61% for 2002, .62% for 2001, and .63% for 2000.

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

11

DUPREE MUTUAL FUNDS—KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES   SCHEDULE OF PORTFOLIO INVESTMENTS Kentucky Municipal Bonds—100% December 31, 2003 UNAUDITED

Bond Description	Coupon	Maturity Date	Rating#		Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
49.97% of Net Assets
Boone-Florence Water Supply System Revenue	4.300	12/1/2011	Aaa/AAA	*	$	505,000	$	546,870
Carrollton & Henderson KY Public Energy Authority Gas Revenue	5.000	1/1/2006	Aaa/AAA	*		1,000,000		1,065,230
Carrollton & Henderson Ky Public Energy Authority Gas Revenue	5.000	1/1/2009	Aaa/AAA	*		3,650,000		4,060,041
Carrollton & Henderson KY Public Energy Authority Gas Revenue	4.200	1/1/2006	Aaa/AAA	*		750,000		787,170
Eastern KY University Consolidated Education Building	4.300	5/1/2009	Aaa/AAA	*		500,000		541,280
Hardin County KY Hospital Revenue Refunding	3.500	10/1/2010	Aaa			1,050,000		1,084,419
Jefferson County KY Health Facility University Medical Center	5.000	7/1/2008	Aaa/AAA	*		300,000		329,856
Jefferson County KY School District Finance Corporation S:A	4.900	1/1/2008	Aaa/AAA	*		550,000		604,791
Jefferson County KY School District Finance Corporation S:A	5.000	1/1/2009	Aaa/AAA	*		750,000		834,255
Jefferson County School District Finance Corporation S:A	3.125	1/1/2011	Aaa/AAA	*		2,240,000		2,242,083
Jefferson County KY Capital Project Corporation Lease Revenue	5.500	4/1/2005	Aaa/AAA	*		365,000		384,874
KY Asset/Liability Community General Fund Revenue	3.000	7/15/2011	Aaa/AAA	*		2,000,000		1,985,300
Kentucky Asset/Liability Community General Fund Revmue	5.000	7/15/2009	Aaa/AAA	*		2,000,000		2,242,800
KY Asset/Liability Community General Fund Project Notes	5.000	7/15/2010	Aaa/AAA	*		1,000,000		1,126,790
KY Economic Development Finance Authority Baptist Health Systems	4.750	8/15/2005	Aaa/AAA	*		4,000,000		4,159,400
Kentucky Economic Development Finance Authority Ashland Hospital	5.000	2/1/2005	Aaa/AAA	*		500,000		519,165
KY Economic Development Finance Authority Appalachian Hospital	5.500	10/1/2007	A/A*			1,000,000		1,095,060
KY Economic Development Finance Authority Appalachian Hospital	5.700	10/1/2010	A*			1,000,000		1,101,700
KY Housing Corporation Housing Revenue	4.850	7/1/2004	Aaa/AAA	*		1,700,000		1,722,355
KY State Property & Building Commission Project#69 Series D	5.500	8/1/2008	Aaa/AAA	*		1,140,000		1,290,902
KY State Property & Building Commission Project#69	5.000	8/1/2008	Aaa/AAA	*		1,320,000		1,469,292
KY State Property & Building Commission Project#69 Series B	5.000	8/1/2009	Aaa/AAA	*		1,620,000		1,818,126
KY State Property & Building Community Project #65	5.750	2/1/2009	Aaa/AAA	*		750,000		862,568
KY State Property & Building Community Project #74	5.375	2/1/2011	Aaa/AAA	*		1,005,000		1,148,685
KY State Property & Building Community Project #73	5.500	8/1/2007	Aaa/AAA	*		2,000,000		2,236,440
KY State Property & Building Commission Project #81	5.000	11/1/2009	Aaa/AAA	*		1,010,000		1,135,715
KY State Property & Building Commission Project #74	5.375	2/1/2009	Aaa/AAA	*		1,000,000		1,129,280
KY Turnpike Authority Economic Development Road Revenue	5.500	7/1/2007	Aaa/AAA	*		3,000,000		3,345,690
KY State Turnpike Authority Revitaliation Projects	5.500	7/1/2009	Aaa/AAA	*		3,775,000		4,318,109
Marion County Ky Alliant Health System Revenue	4.200	10/1/2007	Aaa/AAA	*		325,000		350,087
Northern KY University Certificate of Participation Housing Facility	4.500	12/1/2004	Aaa/AAA	*		1,000,000		1,030,260
Northern KY University Certificates of Participation Student Housing	5.000	12/1/2007	Aaa/AAA	*		1,190,000		1,320,495
Northern KY Water Services District Water District Revenue	4.750	2/1/2011	Aaa			1,025,000		1,100,543
University Of Kentucky Consolidated Education Building	4.600	5/1/2011	Aaa/AAA	*		650,000		666,400
University Of KY Consolidated Education Building Series S	3.500	5/1/2010	Aaa/AAA	*		1,190,000		1,230,996
University Of KY Consolidated Education Building Series S	3.500	5/1/2011	Aaa/AAA	*		1,040,000		1,063,629
								51,950,654
LEASE REVENUE BONDS
16.80% of Net Assets
Jefferson County Ky School District Finance Corporation S:B	4.400	2/1/2008	Aa3/AA-	*		500,000		539,475
Kenton County KY School District Finance Corporation	5.200	3/1/2005	Aa3/AA-	*		500,000		522,850
Kentucky Asset/Liability Community General Fund Project Notes	5.000	2/1/2007	AA3/AA-	*		500,000		544,155
KY Area Development District Financing City of Ewing	5.100	6/1/2010	AA*			1,300,000		1,459,848
KY Infractructure Authority Series A	5.000	6/1/2010	Aa3/AA-	*		2,000,000		2,240,520
KY Infrastructure Authority Government Agency Program S:K	4.000	8/1/2010	A-*			1,000,000		1,053,810
KY Infrastructure Authority Revolving Fund Program Ser:L	5.000	6/1/2006	Aa3/AA-	*		415,000		446,872
KY Interlocal School Transportation Equipment Lease	4.900	3/1/2004	Aa3			500,000		503,130
KY State Property & Building Commission Project#71	5.500	8/1/2008	Aa3/AA-	*		10,000		11,314
KY State Property & Building Community Revenue Project#60	5.500	10/1/2008	Aa3/AA-	*		500,000		567,965
KY State Property & Building Commission Road Fund #73	3.700	11/1/2008	Aa3/AA-	*		1,000,000		1,057,090
KY State Property & Building Commission Project#73	5.250	11/1/2008	Aa3/A+	*		1,750,000		1,977,115
KY State Property & Building Commission Project#73	5.250	11/1/2009	Aa3/AA-	*		1,790,000		2,035,785
Kentucky State Property & Building Commission Project#73	5.250	11/1/2010	Aa3/A+	*		3,000,000		3,420,060
Laurel County School District Finance Corporation	4.600	3/1/2010	Aa3			1,000,000		1,083,560
								17,463,549
HOSPITAL AND HEALTHCARE REVENUE BONDS
8.63% of Net Assets
KY Economic Development Finance Authority Catholic Health	4.250	10/1/2009	A1/AA-	*		255,000		268,676
KY Economic Development Finance Authority Catholic Health	4.500	10/1/2011	A1/AA-	*		1,000,000		1,058,950

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

12

DUPREE MUTUAL FUNDS—KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES   SCHEDULE OF PORTFOLIO INVESTMENTS Kentucky Municipal Bonds—100% December 31, 2003 UNAUDITED

Bond Description	Coupon	Maturity Date	Rating#		Par Value		Market Value
KY Economic Development Finance Authority Catholic Health	5.500	12/1/2006	Aa2/AA	*	$	1,790,000	$	1,952,228
KY Economic Development Finance Authority Catholic Health	5.500	12/1/2010	Aa2/AA	*		2,100,000		2,399,166
KY Economic Development Finance Authority Catholic Health	5.750	12/1/2015	Aa2/AA	*		2,000,000		2,208,200
Kentucky Economic Development Finance Authority Norton Health	6.125	10/1/2010	BBB+			1,000,000		1,080,320
								8,967,539
ESCROWED TO MATURITY BONDS
6.55% of Net Assets
Jefferson County KY Capital Projects Corporation Revenue	6.375	12/1/2007	NR			1,500,000		1,738,020
Kentucky State Property & Building Commission Project#71	5.500	8/1/2008	Aaa/AAA	*		4,440,000		5,073,277
								6,811,297
MUNICIPAL UTILITY REVENUE BONDS
3.45% of Net Assets
Lexington-Fayette Urban County Government Ky Sewer System B	5.000	7/1/2007	Aa3/AA	*		1,290,000		1,412,860
Louisville KY Waterworks Board Water System Revenue Refunding	4.250	11/15/2007	Aa1/AA	*		1,000,000		1,077,210
Louisville KY Waterworks Board Water System Revenue	4.500	11/15/2010	Aa1/AA	*		1,000,000		1,096,400
								3,586,470
GENERAL OBLIGATION BONDS
2.92% of Net Assets
Jefferson Co General Obligation	5.500	8/15/2010	Aa2/AA	*		2,635,000		3,036,416
								3,036,416
INDUSTRIAL REVENUE AND POLLUTION CONTROL REVENUE BONDS
2.34% of Net Assets
Ashland KY Pollution Control Revenue Ashland Oil Project	6.650	8/1/2009	Baa2			1,500,000		1,527,075
Ashland KY Pollution Control Revenue Ashland Inc Project	5.700	11/1/2009	Baa2			500,000		533,880
Meade County KY Pollution Control Revenue-Olin Corporation	6.000	7/1/2007	NR			355,000		367,436
								2,428,391
PREREFUNDED BONDS
1.63% of Net Assets
Ky State Property & Building Commission Revenue Project#59	5.600	11/1/2007	Aa3/AA	*		1,550,000		1,699,095
								1,699,095
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS
.98% of Net Assets
Murray State University Revenue Series G Second Series	5.600	5/1/2006	A2/A	*		1,000,000		1,022,380
								1,022,380
CERTIFICATES OF PARTICIPATION BONDS
.64% of Net Assets
Shelbyville Certificates of Participation Refinancing	4.900	10/1/2007	NR			665,000		663,909
								663,909
Total Investments (cost $93,977,174)(a)—93.91% of Net Assets							$	97,629,699

*       Standard and Poor’s Corporation

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 appreciation of securities as follows:

Unrealized appreciation	$	3,788,010
Unrealized depreciation		(135,485	)
Net unrealized appreciation	$	3,652,525

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

13

DUPREE MUTUAL FUNDS—KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES UNAUDITED

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2003

ASSETS:
Investment in securities, at value (Cost: $93,977,174)			$	97,629,699
Cash				1,692,503
Receivable for investments sold				3,509,500
Interest receivable				1,528,798
Total assets				104,360,500
LIABILITIES:
Payable for:
Distributions	$	279,952
Fund shares redeemed		49,796
Management fee		43,473
Transfer agent		11,009
Other fees		10,650
Total liabilities				394,880
NET ASSETS:
Capital				101,300,582
Net accumulated realized losses on investment transactions				(987,487	)
Net unrealized appreciation in value of investments				3,652,525
Net assets at value			$	103,965,620
NET ASSET VALUE, offering price and redemption price per share ($103,965,620 / 19,266,358 shares outstanding)			$	5.40

STATEMENT OF OPERATIONS

For the year ended December 31, 2003

Net investment income:
Interest income	$	1,886,357
Expenses:
Management fee		253,680
Transfer agent		63,978
Professional fees		10,254
Trustee fees		4,957
Other expenses		26,626
Total expenses		359,495
Custodian expense reductions		(9,476	)
Net investment income		1,536,338
Realized and unrealized gain on investments
Net realized gain		6,975
Net decrease in unrealized appreciation		(741,680	)
Net realized and unrealized gain on investments		(734,705	)
Net increase in net assets resulting from operations	$	801,633

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

14

DUPREE MUTUAL FUNDS—KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES UNAUDITED

STATEMENTS OF CHANGES IN NET ASSETS

For the year ended June 30, 2003 and the six months ended December 31, 2003

	Six Months 12/31/2003			Year ended 2003
Increase in net assets:
Operations:
Net investment income	$	1,536,338		$	3,128,791
Net realized gain on investments		6,975			112,593
Net increase / (decrease) in unrealized appreciation		(741,680	)		2,113,506
Net increase in net assets resulting from operations		801,633			5,354,890
Distributions to shareholders from net investment income		(1,536,338	)		(3,128,791	)
Net fund share transactions		5,170,986			17,221,036
Total increase		4,436,281			19,447,135
Net assets:
Beginning of year		99,529,340			80,082,205
End of year	$	103,965,621		$	99,529,340

FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
	6 months			For the years ended June 30,
	12/31/2003			2003			2002			2001			2000
Net Asset Value, beginning of year	$	5.44		$	5.30		$	5.22		$	5.09		$	5.20
Income From Investment Operations:
Net investment income		0.08			0.19			0.20			0.23			0.21
Net gains/(losses) on securities (both realized and unrealized)		(0.04	)		0.14			0.08			0.13			(0.11	)
Total from investment operations		0.04			0.33			0.28			0.36			0.10
Less distributions:
Distributions from net investment income		(0.08	)		(0.19	)		(0.20	)		(0.23	)		(0.21	)
Net asset value, end of year	$	5.40		$	5.44		$	5.30		$	5.22		$	5.09
Total return		0.79	%		6.23	%		5.50	%		7.18	%		1.95	%
Net assets, end of year (in thousands)	$	103,966		$	99,529		$	80,082		$	55,555		$	51,205
Ratio of expenses to average net assets (a)		0.35	%		0.69	%		0.69	%		0.70	%		0.69	%
Ratio of net investment income to average net assets		1.53	%		3.43	%		3.82	%		4.42	%		4.06	%
Portfolio turnover		8.14	%		22.30	%		8.04	%		22.40	%		30.57	%

(a) Percentages before custodian expense reductions were:

         .36% for the six months ended 12/31/03, .71% for 2003, .71% for 2002, .72% for 2001, and .71% for 2000.

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

15

SCHEDULE OF PORTFOLIO INVESTMENTS Mississippi Municipal Bonds—100% December 31, 2003 UNAUDITED

Bond Description	Coupon	Maturity Date	Rating#		Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
68.94% of Net Assets
De Soto County MS School District	4.500	4/4/2016	Aaa		$	30,000	$	31,409
Gautier MS Utility District Utility System Revenue	5.125	3/1/2018	Aaa			75,000		80,717
Hinds County MS Revenue Refunding-MS Methodist Hospital	5.600	5/1/2012	Aaa/AAA	*		30,000		34,073
Jackson MS Public School District Limited Tax Notes	5.375	10/1/2020	Aaa			20,000		21,784
Jackson MS Water & Sewer System Revenue	5.250	9/1/2020	Aaa/AAA	*		50,000		53,715
Madison County MS School District—Series A	5.250	9/1/2020	Aaa/AAA	*		25,000		26,858
Medical Center Educational Building Corporation MS Revenue	5.500	12/1/2023	AAA*			20,000		22,555
MS Development—Madison County Road & Bridge Project	5.250	6/1/2023	Aaa			50,000		53,127
MS Development Bank Special Obligation Madison County	5.250	6/1/2024	Aaa			50,000		52,890
MS Development BK Special Obligation Flowood Revenue Project	5.625	11/1/2019	Aaa/AAA	*		10,000		11,135
MS Development BK Special Obligation Natchez Convention Center	5.800	7/1/2019	Aaa/AAA	*		25,000		28,914
MS Development Bank Special Obligation Gulfport Water Sewer	5.625	7/1/2024	Aaa/AAA	*		105,000		116,360
MS Development BK Special Obligation Gulfport Combined Water	5.500	7/1/2015	Aaa/AAA	*		10,000		11,536
MS Development Bank Special Obligation Desoto County	5.900	7/1/2021	AAA*			5,000		5,669
MS Development Bank Special Obligation Rankin County	5.400	7/1/2014	Aaa/AAA	*		10,000		11,127
MS Development Bank Special Obligation Meridian Community	5.500	7/1/2016	AAA*			30,000		33,577
MS Development Bank Special Obligation Multi-Purpose	5.000	7/1/2021	AAA*			50,000		51,996
MS Development Bank Special Obligation Wastewater	5.375	2/1/2021	Aaa/AAA	*		100,000		108,243
MS Development Bank Special Obligation Horn Lake	5.000	10/1/2020	AAA*			50,000		52,451
MS Development Bank Special Obligation Desoto County	5.000	11/1/2022	Aaa/AAA	*		25,000		25,745
MS Development Bank Special Obligation Lee County School	4.500	9/1/2021	Aaa			100,000		100,852
MS Development Bank Special Obligation Capital Projects	5.875	7/1/2024	Aaa/AAA	*		75,000		89,274
MS Development Bank Special Obligation Combination	5.000	7/1/2018	Aaa/AAA	*		100,000		107,675
MS Hospital Equipment & Facilities Singing River Hospital	5.500	3/1/2023	Aaa/AAA	*		120,000		122,105
MS Hospital Equipment and Facilities Forrest County	5.500	1/1/2024	Aaa/AAA	*		45,000		48,230
Ms Development BK Special Obligation Culkin Water District	5.800	7/1/2018	Aaa/AAA	*		25,000		28,322
MS State University Educational Building Corporate Revenue	5.500	8/1/2014	Aaa			75,000		85,180
Natchez MS Water & Sewer System Revenue	5.700	8/1/2017	Aaa/AAA	*		150,000		165,744
Olive Branch MS Public Improvement	4.125	6/1/2022	Aaa			100,000		95,335
Olive Branch MS Water & Sewer Revenue	4.500	3/1/2014	Aaa			30,000		32,018
Southern MS Education Building Corporation Revenue	5.100	3/1/2020	Aaa/AAA	*		70,000		74,115
Southern MS University Educational Building Corporation	5.750	3/1/2021	Aaa			10,000		11,249
Stone County MS School District	4.000	6/1/2016	Aaa/AAA	*		100,000		100,621
Tupelo MS Public School District	5.375	11/1/2015	Aaa/AAA	*		20,000		22,360
University MS Educational Building—Stadium A	5.500	12/1/2017	Aaa/AAA	*		5,000		5,548
Walnut Grove Correctional Authority Certificates of Participation	6.000	11/1/2019	Aaa/AAA	*		90,000		105,382
Winston County MS Urban Renewal Revenue	5.150	12/1/2017	AAA*			15,000		16,357
								2,044,245
PREREFUNDED BONDS
10.91% of Net Assets
MS Development BK Special Obligation Adams County Juvenile	5.900	7/1/2017	A*			10,000		11,709
MS State Capital Improvements	5.000	11/1/2018	AA*			125,000		141,771
MS State Capital Improvements	5.000	11/1/2020	AA*			50,000		56,709
MS State Capital Improvements	5.000	11/1/2021	AA*			100,000		113,417
								323,606
GENERAL OBLIGATION BONDS
10.30% of Net Assets
Biloxi MS Tax Increment—LTD Obligation—Series A	5.900	10/1/2019	A*			35,000		37,879
Hinds County MS School District	4.750	3/1/2015	NR			50,000		51,752
Horn Lake Special Assessment Improvement Bonds-Desoto	5.400	4/15/2020	A-*			25,000		26,638
Jackson MS Redevelopment Authority Urban Renewal Revenue	5.600	11/1/2021	A2			20,000		21,933
MS Development Bank Special Obligation Public Improvement	4.750	12/1/2019	BBB+	*		145,000		144,833
Mississippi State	5.100	11/15/2012	Aa3/AA	*		10,000		11,292
Richland MS Tax Increment	5.600	6/1/2013	NR			10,000		11,099
								305,426

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

16

SCHEDULE OF PORTFOLIO INVESTMENTS Mississippi Municipal Bonds—100% December 31, 2003 UNAUDITED

Bond Description	Coupon	Maturity Date	Rating#		Par Value		Market Value
MUNICIPAL UTILITY REVENUE BONDS
2.17% of Net Assets
MS Development Bank Special Obligation-Bay St Louis	5.375	7/1/2014	A*		$	10,000	$	10,856
MS Development Bank Special Obligation Okolona Electric	5.350	7/1/2021	A*			50,000		53,600
								64,456
ESCROWED TO MATURITY BONDS
1.95% of Net Assets
Harrison County MS Wastewater Management District	5.000	2/1/2015	Aaa/AAA	*		25,000		27,932
MS Gulf Coast Regional Wastewater Treatment Facilities	7.000	7/1/2012	NR			25,000		30,000
								57,932
PUBLIC FACILITIES REVENUE BONDS
1.79% of Net Assets
Mississippi Development Bank Special Obligation—Southaven	6.200	3/1/2020	A*			10,000		11,372
Vicksburg Warren MS School District	4.700	2/1/2017	AA-*			40,000		41,579
								52,951
CERTIFICATES OF PARTICIPATION BONDS
1.42% of Net Assets
Monroe County MS Certificates of Participation Jail Project	5.050	4/1/2020	Aaa			40,000		42,233
								42,233
Total Investments (cost $2,711,834)(a)—97.49% of Net Assets							$	2,890,848

*       Standard and Poor’s Corporation

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 appreciation of securities as follows:

Unrealized appreciation	$	182,877
Unrealized depreciation		(3,863	)
Net unrealized appreciation	$	179,014

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

17

DUPREE MUTUAL FUNDS—MISSISSIPPI TAX-FREE INCOME SERIES UNAUDITED

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2003

ASSETS:
Investments in securities, at value (Cost: $2,711,834)		$	2,890,848
Cash			59,607
Interest receivable			45,717
Receivable from Advisor			3,448
Pre-paid expenses			1,253
Total assets			3,000,873
LIABILITIES:
Payable for:
Distributions	29,277
Transfer agent	6,275
Total liabilities			35,552
NET ASSETS:
Capital			2,786,245
Net accumulated realized gain on investment transactions			62
Net unrealized appreciation in value of investments			179,014
Net assets at value		$	2,965,321
NET ASSET VALUE, offering price and redemption price per share ($2,965,321 / 254,179 shares outstanding)		$	11.67

STATEMENT OF OPERATIONS
For the six month period ended December 31, 2003
Net investment income:
Interest income	$	63,134
Expenses:
Investment advisory fees		6,923
Transfer agent		2,077
Custodian fees		2,400
Professional fees		958
Trustee fees		135
Other expenses		1,619
Total expenses		14,112
Expenses reimbursed by Investment Advisor		(6,173	)
Custodian expense reductions		(2,400	)
Net investment income		57,595
Realized and unrealized loss on investments
Capital gain payable		(691	)
Net decrease in unrealized appreciation		(11,263	)
Net realized and unrealized loss on investments		(11,954	)
Net increase in net assets resulting from operations	$	45,641

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

18

DUPREE MUTUAL FUNDS—MISSISSIPPI TAX-FREE INCOME SERIES UNAUDITED

STATEMENTS OF CHANGES IN NET ASSETS

For the six month period ended December 31, 2003 and the year ended June 30, 2003

	Six months 12/31/03			One year 2003
Increase in net assets:
Operations:
Net investment income	$	57,596		$	103,755
Net realized gain		(691	)		753
Net increase / (decrease) in unrealized appreciation		(11,263	)		145,662
Net increase in net assets resulting from operations		45,642			250,170
Distributions to shareholders from net investment income		(57,596	)		(103,755	)
Distributions to shareholders from capital gain		(691	)		(91	)
Net fund share transactions		250,072			752,982
Total increase		237,427			899,306
Net assets:
Beginning of year		2,727,895			1,828,589
End of year	$	2,965,322		$	2,727,895

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months 12/31/2003			For the years ended June 30,									For the period 1/1/2000 to 6/30/2000 (a)
				2003			2002			2001
Net Asset Value, beginning of period	$	11.74		$	11.00		$	10.83		$	10.35		$	10.00
Income From Investment Operations:
Net investment income		0.24			0.50			0.54			0.55			0.27
Net gains (losses) on securities (both realized and unrealized)		(0.07	)		0.74			0.17			0.48			0.35
Total from investment operations		0.17			1.24			0.71			1.03			0.62
Less Distributions:
Distributions (from net investment income)		(0.24	)		(0.50	)		(0.54	)		(0.55	)		(0.27	)
Net asset value, end of period	$	11.67		$	11.00		$	11.00		$	10.83		$	10.35
Total return		1.53	%		11.53	%		6.67	%		10.19	%		6.24	% (c)
Net assets, end of period (in thousands):	$	2,966		$	2,728		$	1,829		$	816		$	238
Ratio of expenses to average net assets (d)		0.20	%		0.33	%		0.27	%		0.21	%		0.50	% (b)
Ratio of net investment income to average net assets		1.88	%		4.37	%		4.87	%		5.18	%		5.31	%
Portfolio turnover		0.19	%		2.36	%		3.40	%		0.00	%		0.00	%

(a) Commencement of operations January 1, 2000

(b) Annualized

(c) Total return is not annualized

(d) Percentages are after expenses reimbursed by Adviser and custodian expense reduction.

Expenses reimbursed by Adviser and custodian expense reduction were:

.22% and .09% for the six months ended 12/31/03, .55% and .20% for 2003, .60% and .37% for 2002, .92% and 1.02% for 2001 and 2.85% and 1.39% for 2000 respectively.

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

19

DUPREE MUTUAL FUNDS—NORTH CAROLINA TAX-FREE INCOME SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

North Carolina Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL BONDS
56.81% of Net Assets
Catawaba County NC Catawba Memorial Hospital Revenue	5.000	10/1/2017	Aaa/AAA*	$	500,000	$	532,325
Cumberland County NC Certificates of Participation Civic Center	5.000	12/1/2018	Aaa/AAA*		500,000		533,365
Cumberland County NC Hospital Facilities Revenue	5.250	10/1/2019	Aa/AA*		1,000,000		1,062,530
Dare County NC Utility System Revenue	5.250	6/1/2018	Aaa/AAA*		250,000		281,145
Dare County NC Certificates of Participation	5.125	6/1/2018	Aaa/AAA*		500,000		545,590
Elizabeth City NC Housing Development Mortgage Revenue	6.125	4/1/2023	Aa		140,000		144,665
Gaston County NC Certificates of Participation Public Facilities	5.250	12/1/2016	Aaa/AAA*		850,000		936,989
Gastonia NC Combined Utilities Systems Revenue	5.625	5/1/2019	Aaa/AAA*		500,000		559,640
Greenville NC Housing Development Corporation Series A	5.800	7/1/2024	Aaa/AAA*		35,000		35,525
Harnett County NC Certificate of Participation	5.000	12/1/2018	Aaa/AAA*		1,000,000		1,079,460
Lenoir NC Housing Authority Mortgage Revenue	5.700	8/20/2024	AAA*		100,000		105,195
New Hanover County NC Certificates of Participation	5.000	12/1/2017	Aaa/AAA*		250,000		268,353
New Hanover County NC Hospital Revenue	5.750	10/1/2026	Aaa/AAA*		100,000		108,212
New Hanover County NC Hospital Revenue	5.000	10/1/2019	Aaa/AAA*		1,110,000		1,174,103
New Hanover County NC Certificates of Participation	5.000	12/1/2022	Aaa/AAA*		1,000,000		1,054,340
NC Educational Facilities Finance Agency St Augustines	5.250	10/1/2018	AA*		600,000		637,218
NC Educational Facilities Finance Agency St Augustines	5.250	10/1/2028	AA*		630,000		650,532
NC Eastern Municipal Power Agency Power System Revenue	5.500	1/1/2017	Aaa/AAA*		150,000		151,778
NC Eastern Municipal Power Agency Power System Revenue	5.750	1/1/2019	Aaa/AAA*		100,000		100,000
NC Eastern Municipal Power Agency Power System Revenue	5.700	1/1/2015	Aaa/AAA*		345,000		385,365
NC Eastern Municipal Power Agency Power System Refunding	5.375	1/1/2024	Aaa/AAA*		1,000,000		1,063,090
NC Eastern Municipal Power Agency Power System Refunding	6.000	1/1/2018	Aaa/AAA*		1,000,000		1,197,310
NC Central University Housing System Revenue	5.800	11/1/2018	Aaa/AAA*		50,000		55,416
NC Central University Housing System Revenue	5.800	11/1/2020	Aaa/AAA*		60,000		66,359
NC Power Series A	5.250	1/1/2019	Aaa/AAA*		1,000,000		1,084,250
NC Medical Care Community Hospital Revenue-High Point	5.000	10/1/2019	Aaa/AAA*		500,000		531,525
NC Medial Care Community Hospital Northeast Medical Center	4.600	11/1/2020	Aaa/AAA*		350,000		358,922
NC Medical Care Community Hospital Revenue-Rex Hospital	5.000	6/1/2017	Aaa/AAA*		500,000		531,760
NC Medical Care Community Hospital Revenue-St Joseph	5.100	10/1/2014	Aaa/AAA*		5,000		5,468
NC Medical Care Community Hospital Revenue-Stanly Hospital	5.375	10/1/2014	Aaa/AAA*		50,000		54,142
NC Medical Care Community Hospital Revenue-Wilson Memorial	5.625	11/1/2018	Aaa/AAA*		80,000		87,214
NC Municipal Power Agency No 1 Catawba Electric Revenue	5.125	1/1/2017	Aaa/AAA*		500,000		532,845
NC Municipal Power Agency No 1 Catawba Electric Revenue	5.125	1/1/2017	Aaa/AAA*		700,000		755,118
Pitt County NC Certificates of Participation Public Facilities	5.850	4/1/2017	Aaa/AAA*		100,000		112,840
Pitt County NC Certificates of Participation Public Facilities	5.500	4/1/2020	Aaa/AAA*		500,000		552,870
Raleigh Durham NC Airport Authority	5.250	11/1/2018	Aaa		1,000,000		1,084,200
Raleigh/Durham NC Airport Revenue	5.000	11/1/2020	Aaa		1,000,000		1,049,960
Randolph County NC Certificates of Participation	5.750	6/1/2022	Aaa/AAA*		500,000		558,935
Union County NC Enterprise System	4.100	6/1/2021	Aaa/AAA*		1,185,000		1,156,110
University of NC at Chapel Hill Hospital Revenue	5.250	2/15/2017	Aaa/AAA*		500,000		557,320
University of NC at Wilmington Dorm & Dining System Revenue	5.400	1/1/2018	Aaa/AAA*		120,000		131,089
Wilson Combined Enterprise System	4.700	12/1/2022	Aaa/AAA*		500,000		513,170
University of NC at Winston-Salem Student Services Revenue	5.400	6/1/2012	Aaa/AAA*		10,000		10,711
							22,396,951
HOSPITAL AND HEALTHCARE REVENUE BONDS
12.07% of Net Assets
Charlotte/Mecklenburg NC Hospital Authority Revenue	5.750	1/15/2021	Aa3/AA*		250,000		261,785
Charlotte/Mecklenburg NC Hospital Authority Revenue	5.875	1/15/2026	Aa3/AA*		50,000		52,247
Charlotte/Mecklenburg NC Hospital Authority Revenue	5.000	1/15/2017	Aa3/AA*		750,000		776,633
Cumberland County NC Hospital Facilities Revenue	5.250	10/1/2019	A3/A-*		1,000,000		1,035,520
NC Medical Care Community Hospital Revenue-Duke Univ Hosp	5.250	6/1/2017	Aa3/AA*		900,000		944,262
NC Medical Care Community Hospital Revenue-Duke Univ Hosp	5.250	6/1/2021	Aa3/AA*		150,000		153,059
NC Medical Care Community Hospital Revenue-Gaston Memorial	5.500	2/15/2019	A1/A+*		150,000		155,942
NC Medical Care Community Hospital Revenue-Pitt County	5.250	12/1/2013	Aa3/AA*		800,000		860,808

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

20

DUPREE MUTUAL FUNDS—NORTH CAROLINA TAX-FREE INCOME SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

North Carolina Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
NC Medical Care Community Hospital Revenue-Pitt County	5.000	12/1/2018	Aa3/AA-*	$	500,000	$	516,480
							4,756,735
PREREFUNDED BONDS
9.30% of Net Assets
Fayetteville NC Public Works Community Revenue	5.100	3/1/2015	Aaa/AAA*		400,000		442,261
Greensboro NC Coliseum Complex Improvement	5.700	12/1/2010	A1/AA*		55,000		62,246
Greenville NC Enterprise System Revenue	6.000	9/1/2010	A1/A+*		100,000		105,257
NC Eastern Municipal Power Agency Power System	6.000	1/1/2026	AAA/BBB*		15,000		18,046
North Carolina Public Improvement	5.250	3/1/2016	Aaa/AAA*		1,000,000		1,151,120
Pitt County NC Memorial Hospital Revenue	5.500	12/1/2015	Aaa/AAA*		325,000		351,696
Union County NC Enterprise System	5.500	6/1/2021	Aaa/AAA*		245,000		272,396
University of NC at Chapel Hill Hospital Revenue	5.250	2/15/2019	A1/AA*		105,000		114,970
Winston-Salem NC Water & Sewer System Revenue	5.125	6/1/2020	Aa2/AAA*		1,000,000		1,146,910
							3,664,901
CERTIFICATES OF PARTICIPATION BONDS
8.91% of Net Assets
Cabarrus County NC Certificates of Participation	5.000	4/1/2021	Aa3/AA-*		650,000		685,900
Charlotte NC Certificates of Participation Convention Facilities	5.500	12/1/2020	Aa2/AA+*		700,000		771,316
Charlotte NC Certificates of Participation	5.250	6/1/2020	Aa2/AA+*		1,000,000		1,082,550
Forsyth County NC Certificates of Participation	5.000	10/1/2018	Aa1/AA+*		400,000		426,340
Forsyth County NC Certificates of Participation	5.125	10/1/2017	Aa1/AA+*		500,000		546,405
							3,512,511
GENERAL OBLIGATION BONDS
5.30% of Net Assets
Cary NC General Obligation Bond	5.000	3/1/2019	Aaa/AAA*		1,000,000		1,074,180
Charlotte NC Series A	4.500	7/1/2021	Aaa/AAA*		1,000,000		1,016,240
							2,090,420
LEASE REVENUE BONDS
2.66% of Net Assets
NC Infrastructure Finance Corporation Lease	5.000	10/1/2021	Aa2/AA+*		1,000,000		1,049,510
							1,049,510
PUBLIC FACILITIES REVENUE BONDS
2.01% of Net Assets
Cary NC Combined Enterprise System Revenue	5.000	12/1/2022	Aa/AA*		700,000		727,790
Shelby NC Combined Enterprise System Revenue	5.625	5/1/2014	Baa1/A-*		20,000		21,286
Shelby NC Combined Enterprise System Revenue	5.625	5/1/2014	Baa1/A-*		40,000		42,571
							791,647
MUNICIPAL UTILITY REVENUE BONDS
1.44% of Net Assets
Charlotte NC Storm Water Revenue Refunding	5.250	6/1/2019	Aa1/AA+*		520,000		568,599
							568,599
STATE AND LOCAL MORTGAGE REVENUE BONDS
1.05% of Net Assets
NC Housing Finance Agency Single Family Revenue Series Y	6.300	9/1/2015	Aa/AA*		85,000		87,957
NC Housing Finance Agency Single Family Revenue Series II	6.200	3/1/2016	Aa2/AA*		50,000		52,640
NC Housing Finance Agency Single Family Revenue Series KK	5.875	9/1/2017	Aa2/AA+*		65,000		68,043
NC Housing Finance Agency Home Ownership Revenue	5.125	7/1/2013	Aa2/AA*		100,000		106,533
Vance County NC Housing Mortgage Revenue Henderson Project	6.150	3/1/2022	Aa2		100,000		100,043
							415,216
Total Investments (cost $36,869,388)(a)—99.55% of Net Assets						$	39,246,488

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

21

DUPREE MUTUAL FUNDS—NORTH CAROLINA TAX-FREE INCOME SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

North Carolina Municipal Bonds—100%

December 31, 2003

Bond Description Coupon Maturity
Date Rating# Par Value Market Value

* Standard and Poor’s Corporation

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	$	2,398,493
Unrealized depreciation		(21,393	)
Net unrealized appreciation	$	2,377,100

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

22

DUPREE MUTUAL FUNDS—NORTH CAROLINA TAX-FREE INCOME SERIES UNAUDITED

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2003

ASSETS:
Investments in securities, at value (Cost $36,869,388)		$	39,246,488
Cash			158,039
Receivable for instruments sold			15,305
Interest receivable			453,476
Prepaid expenses			1,864
Total assets			39,875,172
LIABILITIES:
Payable for:
Distributions	393,039
Fund shares redeemed	32,993
Management fee	18,473
Transfer agent	4,960
Total liabilities			449,465
NET ASSETS:
Net assets consist of:
Capital		$	38,107,494
Net accumulated realized losses on investment transactions			(1,058,888	)
Net unrealized appreciation in value of investments			2,377,100
Net assets at value		$	39,425,706
NET ASSET VALUE, offering price and redemption price per share ($39,425,706 / 3,562,727 shares outstanding)		$	11.07

STATEMENT OF OPERATIONS

For the six months ended December 31, 2003

Net investment income:
Interest income	$	928,292
Expenses:
Management fees		96,961
Transfer agent		26,295
Professional fees		3,098
Trustee fees		1,907
Other expenses		10,528
Total expenses		138,789
Custodian expense reductions		(4,966	)
Net investment income		794,469
Realized and unrealized gain / (loss) on investments
Net realized loss		(51,441	)
Net decrease in unrealized appreciation		(111,934	)
Net realized and unrealized loss on investments		(163,375	)
Net increase in net assets resulting from operations	$	631,094

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

23

DUPREE MUTUAL FUNDS—NORTH CAROLINA TAX-FREE INCOME SERIES UNAUDITED

STATEMENTS OF CHANGES IN NET ASSETS

For the year ended June 30, 2003 and the six months ended December 31, 2003

	Six Months 12/31/2003			One Year 2003
Increase in net assets:
Operations:
Net investment income	$	794,469		$	1,550,959
Net realized loss on investments		(51,441	)		(863,370	)
Net increase / (decrease) in unrealized appreciation		(111,934	)		2,292,076
Net increase in net assets resulting from operations		631,094			2,979,665
Distributions to shareholders from:
Net investment income		(794,469	)		(1,550,959	)
Net fund share transactions		(78,832	)		5,654,610
Total increase / (decrease)		(242,207	)		7,083,316
Net assets:
Beginning of year		39,667,913			32,584,597
End of year	$	39,425,706		$	39,667,913

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months			For the years ended June 30,
	12/31/2003			2003			2002			2001			2000
Net asset value, beginning of year	$	11.12		$	10.68		$	10.63		$	10.21		$	10.61
Income from investment operations:
Net investment income		0.23			0.47			0.49			0.50			0.51
Net gains/(losses) on securities, both realized and unrealized		(0.05	)		0.44			0.05			0.42			(0.40	)
Total from investment operations		0.18			0.91			0.54			0.92			0.11
Less distributions:
Distributions from capital gains		0.00			0.00			0.00			0.00			(0.01	)
Distributions from net investment income		(0.23	)		(0.47	)		(0.49	)		(0.50	)		(0.51	)
Net asset value, end of period	$	11.07		$	11.12		$	10.68		$	10.63		$	10.21
Total return		1.63	%		8.70	%		5.19	%		9.09	%		1.07	%
Net assets, end of period (in thousands)	$	39,426		$	39,668		$	32,585		$	25,945		$	21,660
Ratio of expenses to average net assets (a)		0.35	%		0.68	%		0.57	%		0.55	%		0.55	%
Ratio of net investment income to
average net assets		2.07	%		4.29	%		4.60	%		4.71	%		4.92	%
Portfolio turnover		7.37	%		7.99	%		6.60	%		19.71	%		16.14	%

(a) Percentages are after expenses reimbursed by Adviser and custodian expense reduction.

Expenses reimbursed by Adviser and custodian expense reduction were:

.02% and .03% for 2003, .14% and .03% for 2002, .16% and .03% for 2001, .03% for 2001, and .17% and .03% for 2000 respectively.

For the six months ended 12/31/03 the percentage before custodian expense reduction was .36%

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

24

DUPREE MUTUAL FUNDS—NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

North Carolina Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
48.13% of Net Assets
Asheville NC Certificates of Participation Series:A	4.600	6/1/2005	Aaa/AAA*	$	50,000	$	52,315
Carteret County NC General Obligation	5.400	5/1/2009	Aaa/AAA*		100,000		109,577
Centennial Authority NC Hotel Tax Revenue Bond Arena Project	5.000	9/1/2012	Aaa/AAA*		100,000		109,898
Charlotee NC Certificates of Participation Series A	5.000	8/1/2012	Aaa/AAA*		1,000,000		1,126,940
Coastal Regulation Solid Waste Management Authority NC	4.250	6/1/2005	Aaa/AAA*		125,000		130,176
Cumberland County NC Hospital Facility Revenue	5.000	10/1/2006	A3/AA*		150,000		158,343
Greenville NC Certificates of Participation Public Facilities	4.600	6/1/2011	Aaa/AAA*		100,000		107,232
Harnett County Nc Certificates Of Participation	5.250	12/1/2009	Aaa/AAA*		240,000		275,374
Harnett County NC Certificates of Participation	4.250	12/1/2011	Aaa/AAA*		150,000		161,915
Haywood County NC Certificates of Participation	4.000	10/1/2009	Aaa/AAA*		400,000		430,824
Johnston County NC Certificates of Participation Judical Annex	5.200	9/1/2007	Aaa/AAA*		100,000		110,163
Johnston County NC Finance Corporation School & Museum Project	4.650	8/1/2008	Aaa/AAA*		200,000		220,238
New Hanover County NC Regional Medical Center Hospital	4.250	10/1/2009	Aaa/AAA*		100,000		108,477
North Carolina Medical Care Community Hospital Chatham Memo	3.625	10/1/2010	AA*		100,000		102,435
NC Capital Facility Finance Agency Johnson & Wales University	5.000	4/1/2009	Aaa/AAA*		200,000		224,972
North Carolina Eastern Municipal Power Agency Power System Revenue	6.125	1/1/2009	A/A*		120,000		135,922
NC Municipal Power Agency Number 1-Catawba Electric	6.000	1/1/2008	Aaa/AAA*		250,000		285,053
North Carolina Municipal Power Agency No.1 Catawba Electric	6.000	1/1/2010	Aaa/AAA*		200,000		234,760
NC Municipal Power Agency No.1 Catawba Electric Revenue	5.250	1/1/2009	Aaa/AAA*		500,000		565,250
North Carolina Medical Care Community Hospital-Scotland Memorial	5.375	10/1/2011	AA*		60,000		62,647
NC Medical Care Community Hospital Wilson Memorial Hospital	4.900	11/1/2007	Aaa/AAA*		75,000		82,548
North Carolina Medical Care Community Hospital Wayne Memoral	4.250	10/1/2006	Aaa		100,000		106,625
North Carolina Medical Care Community Hospital Wayne Memoral	4.750	10/1/2011	Aaa		350,000		377,045
North Carolina Medical Care Community Hospital Rex Healthcare	5.250	6/1/2008	Aaa/AAA*		450,000		504,635
NC Municipal Power Agency No 1 Catawba Electric	5.100	1/1/2007	Aaa/AAA*		125,000		135,505
North Carolina Municipal Power Agency Catawba Electric	6.000	1/1/2007	Aaa/AAA*		200,000		223,304
Piedmont Triad NC Airport Authority Revenue Bonds Series A	5.250	7/1/2011	Aaa/AAA*		200,000		225,442
Pitt County NC Certificates of Participation School Facilities	4.750	4/1/2010	Aaa/AAA*		100,000		111,226
Randolph County NC Certificates of Participation	5.200	6/1/2008	Aaa/AAA*		145,000		162,625
Union County NC Enterprise System	2.700	6/1/2010	Aaa/AAA*		350,000		347,340
University NC System Pool Revenue Series B	5.000	10/1/2009	Aaa/AAA*		200,000		223,460
Wilson County NC General Obligation	5.000	6/1/2010	Aaa/AAA*		250,000		282,405
							7,494,668
GENERAL OBLIGATION BONDS
15.18% of Net Assets
Caldwell County NC General Obligation	6.000	2/1/2005	A1/A*		50,000		50,450
Cary NC General Obligation	4.250	3/1/2008	Aaa/AAA*		400,000		431,304
Durham NC Certificates of Participation	5.100	6/1/2005	Aa1/AA+*		100,000		105,170
Forsyth County Nc Public Improvement General Obligation S:A	4.500	3/1/2009	Aaa/AAA*		250,000		273,323
Hickory Nc General Obligation	4.300	5/1/2006	Aa3/AA-*		80,000		84,680
New Hanover County NC General Obligation	5.300	11/1/2006	Aa2/AA-*		150,000		164,741
NC State General Obligation Series A	4.750	4/1/2006	Aaa/AAA*		200,000		214,000
North Carolina State General Obligation Series A	4.750	4/1/2008	Aa1/AAA*		100,000		109,480
North Carolina State General Obligation Series A	4.750	4/1/2010	Aaa/AAA*		100,000		108,814
North Carolina State Public Improvement General Obligation	4.500	3/1/2010	Aaa/AAA*		150,000		164,166
North Carolina State Public School Building General Obligation	4.600	4/1/2010	Aaa/AAA*		50,000		54,529
North Carolina Public School Building General Obligation	4.600	4/1/2011	Aaa/AAA*		115,000		124,680
Wake County NC General Obligation Unlimited	4.500	3/1/2009	Aaa/AAA*		250,000		264,955
Wake County NC General Obligation	4.600	3/1/2011	Aaa/AAA*		200,000		213,600
							2,363,890
HOSPITAL AND HEALTHCARE REVENUE BONDS
12.04% of Net Assets
Charlotte-Mecklenburg Hospital Authority NC Health Care System	5.400	1/15/2007	Aa3/AA*		200,000		214,426
Cumberland County NC Hospital Facility Revenue	4.500	10/1/2007	A3/A-*		200,000		212,308
NC Community Health Care Facility Duke Hospital	4.100	6/1/2005	Aa3/AA*		100,000		103,701
NC Medical Care Community Health Care Facility Duke University	4.500	6/1/2007	Aa3/AA*		200,000		213,558
North Carolina Medical Care Community Hospital Novant Health	5.000	11/1/2008	Aa3/AA-*		300,000		329,772
North Carolina Medical Care Community Hospital Pitt Memorial	4.400	12/1/2011	Aa3/AA-*		275,000		291,217

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

25

DUPREE MUTUAL FUNDS—NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

North Carolina Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
NC Medical Care Community Hospital Gaston Memorial	5.250	2/15/2007	A1/A+*	$	325,000	$	350,857
North Carolina Medical Care Community Hospital St Joseph	4.300	10/1/2007	Aa3/AA*		150,000		159,326
							1,875,164
CERTIFICATES OF PARTICIPATION BONDS
9.91% of Net Assets
Cabarrus County NC Certificates of Participation	4.250	4/1/2007	Aa3/AA-*		55,000		58,802
Cabarrus County NC Certificates of Participation	4.500	4/1/2009	Aa3/AA-*		100,000		109,264
Charlotte NC Certificates of Participation Series D	5.750	6/1/2006	Aa1/AA+*		100,000		109,323
Charlotte NC Certificates of Participation Series D	5.750	6/1/2007	Aa1/AA+*		100,000		111,866
Charlotte NC Certificates of Participation Series D	5.750	6/1/2008	Aa1/AA+*		100,000		113,777
Charlotte NC Certificates of Participation Series B	5.000	6/1/2009	Aa1/AA+*		100,000		111,515
Durham County Nc Certificates of Participation	4.750	5/1/2009	Aa1/AA+*		210,000		231,773
Durham County NC Certificates of Participation Series B	4.950	12/1/2005	Aa1/AA+*		130,000		138,542
Durham NC Certificates of Participation Series B	5.000	6/1/2008	Aa1/AA+*		100,000		109,503
Durham NC Certificates Of Participation	5.000	4/1/2010	Aa1/AA+*		300,000		336,126
Forsyth County NC Certificates of Participation	5.000	10/1/2009	Aa1/AA+*		100,000		112,226
							1,542,717
LEASE REVENUE BONDS
6.91% of Net Assets
Greensboro Nc Enterprise System Revenue Combination Ser-A	4.800	6/1/2012	Aa3/AA-*		75,000		80,813
Greensboro NC Enterprise System Revenue Series A	5.000	6/1/2011	Aa3/AA+*		500,000		560,390
Raleigh NC Combination Enterprise System Revenue	5.000	3/1/2009	Aa1/AAA*		150,000		165,038
Winston Salem NC Certificates of Participation Series A	3.950	6/1/2009	Aa1/AA+*		100,000		106,517
Winston-Salem NC Water & Sewer System Revenue	4.500	6/1/2011	Aa/AAA*		150,000		163,712
							1,076,469
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS
5.25% of Net Assets
North Carolina Raleigh State University Revenue	5.000	10/1/2011	Aa3/AA*		530,000		596,155
University Of North Carolina Revenue Refunding Series B	5.000	12/1/2010	Aa1/AA+*		195,000		220,621
							816,776
ESCROWED TO MATURITY BONDS
1.32% of Net Assets
North Carolina Municipal Power Agency No 1 Catawba Electric	10.500	1/1/2010	Aaa/AAA*		160,000		204,968
							204,968
MUNICIPAL UTILITY REVENUE BONDS
.70% of Net Assets
Orange County Water & Sewer Authority Revenue	4.350	7/1/2010	Aa1/AA*		100,000		108,282
							108,282
Total Investments (cost $14,933,128)(a)—99.43% of Net Assets						$	15,482,934

* Standard and Poor's Corporation

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	$	583,988
Unrealized depreciation		(34,182	)
Net unrealized appreciation	$	549,806

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

26

DUPREE MUTUAL FUNDS—NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES UNAUDITED

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2003

ASSETS:
Investments in securities, at value (Cost: $14,933,128)			$	15,482,934
Cash				92,031
Dealer receivable				29,476
Receivable from investments sold				35,000
Interest receivable				186,775
Total assets				15,826,216
LIABILITIES:
Payable for:
Distributions	$	42,285
Management fee		2,959
Transfer agent		1,958
Notes payable		203,000
Other fees		4,642
Total liabilities				254,844
NET ASSETS:
Capital				15,065,368
Net accumulated realized losses on investment transactions				(43,803	)
Net unrealized appreciation in value of investments				549,806
Net assets at value			$	15,571,371
NET ASSET VALUE, offering price and redemption price per share ($15,571,371 / 1,442,008 shares outstanding)			$	10.80
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
Net investment income:
Interest income			$	259,655
Expenses:
Management fees				37,192
Transfer agent				11,158
Professional fees				3,518
Trustee fees				715
Other expenses				6,481
Total expenses				59,064
Expenses reimbursed by Investment Advisor				(19,250	)
Custodian expense reductions				(2,622	)
Net investment income				222,463
Realized and unrealized loss on investments
Net realized loss				(15,661	)
Net decrease in unrealized appreciation				(24,749	)
Net realized and unrealized loss on investments				(40,410	)
Net increase in net assets resulting from operations			$	182,053

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

27

DUPREE MUTUAL FUNDS—NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES UNAUDITED

STATEMENT OF CHANGES IN NET ASSETS

For the year ended June 30, 2003 and the six months ended December 31, 2003

	Six Months 12/31/03			One Year 2003
Increase in net assets:
Operations:
Net investment income	$	222,464		$	348,919
Net realized gain / (loss) on investments		(15,661	)		2,510
Net increase / (decrease) in unrealized appreciation		(24,749	)		347,088
Net increase in net assets resulting from operations		182,054			698,517
Distributions to shareholders from net investment income		(222,464	)		(348,919	)
Net fund share transactions		1,741,179			4,261,235
Total increase		1,700,769			4,610,833
Net assets:
Beginning of year		13,870,602			9,259,769
End of year	$	15,571,371		$	13,870,602

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	6 months			For the years ended June 30,
	12/31/2003			2003			2002			2001			2000
Net Asset Value, beginning of year	$	10.85		$	10.47		$	10.25		$	9.94		$	10.09
Income From Investment Operations:
Net investment income		0.16			0.35			0.38			0.40			0.39
Net gains / (losses) on securities both realized and unrealized		(0.05	)		0.38			0.22			0.31			(0.15	)
Total from investment operations		0.11			0.73			0.60			0.71			0.24
Less distributions:
Distributions (from net investment income)		(0.16	)		(0.35	)		(0.38	)		(0.40	)		(0.39	)
Net asset value, end of year	$	10.80		$	10.85		$	10.47		$	10.25		$	9.94
Total return		1.05	%		7.10	%		5.99	%		7.27	%		2.47	%
Net assets, end of year (in thousands)	$	15,571		$	13,871		$	9,260		$	4,875		$	4,246
Ratio of expenses to average net assets (a)		0.25	%		0.50	%		0.48	%		0.48	%		0.48	%
Ratio of net investment income to
average net assets		1.51	%		3.28	%		3.69	%		3.93	%		3.94	%
Portfolio turnover		6.33	%		19.12	%		13.65	%		7.29	%		25.85	%

(a) Percentages are after expenses reimbursed by Adviser and custodian expense reduction.

Expenses reimbursed by Adviser and custodian expense reduction were:

.13% and .02% for the six months ended 12/31/03, .26% and .04% for 2003, .31% and .07% for 2002, .30% and .11% for 2001, and .32% and .11% for 2000

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

28

DUPREE MUTUAL FUNDS—TENNESEE TAX-FREE INCOME SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

Tennesee Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
32.83% of Net Assets
Chattanooga/Hamilton County TN Hospital Revenue Erlanger	5.625	10/1/2018	Aaa/AAA*	$	30,000	$	30,610
Clarksville TN Water Sewer & Gas Revenue	5.650	2/1/2017	Aaa		200,000		223,364
Coffee County TN Public Building Authority Revenue	4.125	6/1/2020	Aaa/NR		990,000		982,387
Franklin TN Industrial Development Board Landings Apartment	5.550	10/1/2008	Aaa/AAA*		50,000		54,637
Franklin TN Industrial Development Board Landings Apartment	5.900	10/1/2016	Aaa/AAA*		800,000		851,120
Giles County TN	4.500	2/1/2018	Aaa/A2		1,000,000		1,040,740
Greater Tennessee Housing Assistance Refunding	7.250	7/1/2024	Aaa/AAA*		5,000		5,010
Hawkins County TN Refunding General Obligation Bond	4.750	5/1/2017	NR/AAA*		200,000		211,256
Jackson TN Hospital Revenue Refunding & Improvement	5.625	4/1/2015	Aaa/AAA*		310,000		329,921
Johnson City TN Health & Educational Facilities	6.500	7/1/2014	Aaa/AAA*		1,000,000		1,238,840
Kingsport TN Water & Sewer System	4.350	6/1/2017	Aaa/NR		710,000		725,528
Kingsport TN Industrial Development Board Multifamily	5.400	4/20/2021	NR/AAA*		500,000		532,185
Knox County TN Health Educational & Housing Facilities Baptist	5.500	4/15/2017	NR/AAA*		1,315,000		1,418,714
Knox County TN Health Educational & Housing Facilities Ft Sanders	6.250	1/1/2013	Aaa/AAA*		10,000		12,013
Knox County TN Health Educational & Housing Facilities	5.000	1/1/2022	NR/AAA*		1,000,000		1,035,920
Knox County TN Utility District Water & Sewer	5.625	12/1/2019	Aaa		400,000		444,428
Metropolitan Nashville & Davidson County TN Adventist System	5.750	11/15/2025	Aaa/AAA*		1,150,000		1,239,194
Metropolitan Nashville & Davidson County TN Stadium Project	5.750	7/1/2014	Aaa/AAA*		100,000		110,284
Metropolitan Nashville & Davidson County TN Stadium Project	5.875	7/1/2021	Aaa/AAA*		350,000		384,885
Metropolitan Nashville & Davidson County TN Water & Sewer	5.000	1/1/2017	Aaa/AAA*		1,000,000		1,068,490
North Anderson TN Utility District Waterworks Revenue	5.600	1/1/2015	Aaa/AAA*		100,000		106,107
Oak Ridge TN Industrial Development Board Refunding Revenue	5.250	8/20/2018	Aaa/NR		265,000		280,953
Sevier County TN Public Buildings Auth Solid Waste Facility	5.600	9/1/2015	Aaa/AAA*		100,000		105,632
Shelby County TN Health Educational & Housing Heritage Place	6.900	7/1/2014	Aaa/AAA*		150,000		153,755
Shelby County TN Health Educational & Housing Methodist	5.300	8/1/2015	Aaa/AAA*		650,000		704,906
Shelby County TN Health Educational & Housing Methodist	5.375	4/1/2013	Aaa/AAA*		690,000		762,140
Shelby County TN Health Educational & Housing Methodist	5.000	4/1/2018	Aaa/AAA*		500,000		532,440
Sullivan County TN Health Educational & Housing Facilities	5.000	9/1/2016	NR/AA*		1,000,000		1,064,600
Sullivan County TN Health Educational & Housing Wellmont	5.000	9/1/2017	NR/AA*		2,500,000		2,633,025
Sullivan County TN Health Educational & Housing Facilities	4.500	9/1/2019	NR/AA*		1,000,000		973,610
TN Housing Development Agency Homeownership Program	5.900	7/1/2017	Aaa/AAA*		30,000		30,604
TN Housing Development Agency Mortgage Finance Program	6.200	7/1/2018	Aaa/AAA*		345,000		358,897
Wilson County TN Referendum	5.000	4/1/2018	Aaa/NR		1,000,000		1,084,800
Wilson County TN Public Improvement	4.400	5/1/2021	Aaa/Aa3*		1,010,000		1,015,323
							21,746,314
HOSPITAL AND HEALTHCARE REVENUE BONDS
15.47% of Net Assets
Chattanooga TN Health Educational & Housing Revenue	5.000	12/1/2018	Aa3/AA-*		1,000,000		1,026,440
Knox County TN Health—Fort Sanders Alliance	5.250	1/1/2015	Aaa/AAA*		2,175,000		2,435,587
Knox County TN Health Educational & Housing Facilities University	5.750	4/1/2019	Baa1/NR		1,000,000		1,044,710
Metropolitan Nashville & Davidson County TN Adventist System	6.250	11/15/2015	A3/A*		1,100,000		1,194,237
Metropolitan Nashville & Davidson County TN Modal	5.500	5/1/2023	NR/AA*		1,595,000		1,693,348
Metropolitan Nashville & Davidson County TN Open Arms	5.100	8/1/2016	NR/AA*		1,000,000		1,050,740
Metropolitan Nashville & Davidson County TN Open Arms	5.100	8/1/2019	NR/AA*		1,660,000		1,723,744
Sumner County TN Health Educational & Housing Sumner Health	7.500	11/1/2014	A-		75,000		78,754
							10,247,559
GENERAL OBLIGATION BONDS
14.88% of Net Assets
Franklin TN School District Limited Tax Refunding Bond	4.625	6/1/2018	Aa2		1,000,000		1,050,170
Johnson City TN General Obligation	5.500	5/1/2020	Aaa/AAA*		300,000		330,216
Memphis TN General Obligation Bond	5.250	4/1/2016	Aa2/AA*		610,000		664,113
Memphis TN Referendum—General Improvement	5.000	11/1/2015	Aa2/AA*		1,250,000		1,400,688
Memphis TN General Improvement	5.000	11/1/2021	Aa2/AA*		1,500,000		1,576,365
Memphis TN General Improvement	5.000	5/1/2020	Aa2/AA*		2,000,000		2,114,720
Metropolitan Nashville & Davidson County TN General Obligation	5.125	11/15/2019	Aa2/AA*		500,000		526,805
Metropolitan Nashville & Davidson County TN General Obligation	5.875	5/15/2026	Aa/AA*		100,000		108,424
Shelby County TN General Obligation	5.625	4/1/2014	Aa3/AA+*		60,000		63,594
Shelby County TN—Series A	4.600	11/1/2022	Aa2/AA+*		500,000		502,130

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

29

DUPREE MUTUAL FUNDS—TENNESEE TAX-FREE INCOME SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

Tennesee Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
Williamson County TN Refunding General Obligation	5.000	3/1/2020	Aa1/NR	$	645,000	$	695,774
Wilson County TN General Obligation Refunding	5.100	5/1/2016	AAA/NR		745,000		822,115
							9,855,114
STATE AND LOCAL MORTGAGE REVENUE BONDS
12.37% of Net Assets
Hamilton County TN Multifamily Housing Revenue	6.700	3/1/2021	NR/A*		450,000		430,952
Memphis TN Health Education & Housing Board River Trace II	6.250	10/1/2013	Aaa		50,000		51,912
Metropolitan Nashville & Davidson County TN Hermitage Apartments	5.900	2/1/2019	A*		645,000		658,416
Murfreesboro TN Housing Authority Westbrooks Towers Project	5.875	1/15/2010	NR/A*		310,000		313,314
Shelby County TN Health Educational & Housing Cameron Kirby	5.900	7/1/2018	NR/BBB- *		800,000		785,496
Shelby County TN Health Educational & Housing Cameron Kirby	6.000	7/1/2028	NR/BBB- *		500,000		483,815
Shelby County TN Health Educational & Housing Harbour Apartments	6.000	4/15/2018	A*		125,000		125,465
Shelby County TN Health Educational & Housing Harbour Apartments	6.000	4/15/2024	A*		50,000		50,121
Shelby County TN Health Educational & Housing Harbour Apartments	5.750	4/15/2011	A*		100,000		100,471
TN Housing Development Agency Homeownership Program	5.850	1/1/2011	Aa2/AA*		200,000		211,260
TN Housing Development Agency Homeownership Program	5.500	7/1/2020	Aa2/AA*		1,115,000		1,175,946
TN Housing Development Agency Series 2001—3B	5.250	1/1/2020	Aa2/AA*		650,000		674,453
TN Housing Development Agency Mortgage Financing Series A	5.200	7/1/2023	Aa2/AA*		3,000,000		3,130,230
							8,191,849
MUNICIPAL UTILITY REVENUE BONDS
9.03% of Net Assets
Chattanooga TN Electric System Revenue	5.250	9/1/2021	NR/AA*		1,500,000		1,602,345
Clarksville TN Water Sewer & Gas Revenue	5.250	2/1/2018	Aaa/NR		1,000,000		1,076,300
Knoxville TN Gas System Revenue Bond Series J	5.000	3/1/2017	Aa3/AA*		700,000		749,329
Knoxville TN Waste Water System Revenue	5.100	4/1/2018	Aa3/AA*		435,000		461,309
Metropoliton Nashville & Davidson County TN Electric System	5.125	5/15/2016	Aa3/AA*		700,000		762,517
Metropolitan Nashville & Davidson County TN Electric System	5.125	5/15/2021	Aa/AA*		1,085,000		1,144,491
Metropolitan Nashville & Davidson County TN Water & Sewer	5.500	1/1/2016	Aa3/A+*		185,000		185,568
							5,981,858
PREREFUNDED BONDS
7.68% of Net Assets
Collierville TN General Obligation Improvement	5.900	5/1/2012	Aa2		30,000		31,073
Cookeville TN Industrial Development Board General Hospital	5.625	10/1/2016	NR/A-*		200,000		224,872
Franklin TN Industrial Development Board Sussex Downs LTD	6.250	6/1/2007	NR		30,000		31,543
Jackson TN Water & Sewer Revenue	7.200	7/1/2012	Aaa/AAA*		5,000		5,951
Johnson City TN Health & Educational Facilities	5.125	7/1/2025	AAA		2,000,000		2,152,300
Knoxville TN Gas System Revenue	5.400	3/1/2015	Aa3/AA*		100,000		101,703
Marion County TN General Obligation	6.000	4/1/2018	Aaa/NR		950,000		1,112,593
Metropolitan Nashville & Davidson County TN Water & Sewer	6.500	12/1/2014	Aaa/ AAA*		60,000		75,901
Milan TN Special School District	6.750	4/1/2013	Aaa/AAA*		60,000		62,033
Shelby County TN General Obligation	5.625	4/1/2014	NR/AA+*		20,000		21,315
TN Local Development Auth Cmnty Provider Pooled Loan Program	6.250	10/1/2009	NR/A-*		30,000		31,748
TN Local Development Auth Cmnty Provider Pooled Loan Program	6.450	10/1/2014	NR/A-*		40,000		42,405
Williamson County TN General Obligation	5.375	3/1/2019	Aa1/NR		1,000,000		1,146,690
Williamson County TN General Obligation	5.600	9/1/2010	Aa		45,000		47,237
							5,087,362
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS
2.70% of Net Assets
Metropolitan Nashville & Davidson County TN Belmont University	6.300	12/1/2014	Baa3		10,000		10,417
Metropolitan Nashville & Davidson County TN McKendree	5.125	1/1/2020	NR/AA*		1,700,000		1,777,197
							1,787,614
ESCROWED TO MATURITY BONDS
1.97% of Net Assets
Johnson City TN Health & Educational Revenue	5.000	7/1/2018	NR/AAA*		1,000,000		1,085,770
Metropolitan Nashville & Davidson County TN Dandridge Tower	6.375	1/1/2011	A*		200,000		221,544
							1,307,314
INDUSTRIAL REVENUE AND POLLUTION CONTROL REVENUE BONDS
0.47% of Net Assets
Chattanooga TN Industrial Development Board F L Haney Co	7.200	8/15/2010	AAA*		20,000		25,051
Chattanooga TN Industrial Development Board F L Haney Co	7.200	2/15/2009	AAA*		25,000		30,374

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

30

DUPREE MUTUAL FUNDS—TENNESEE TAX-FREE INCOME SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

Tennesee Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
Chattanooga TN Industrial Development Board F L Haney Co	7.200	8/15/2009	AAA*	$	25,000	$	30,801
Chattanooga TN Industrial Development Board F L Haney Co	7.200	2/15/2010	AAA*		100,000		124,148
Maury County TN Pollution Control Revenue Saturn Corp Project	6.500	9/1/2024	Baa1/BBB*		100,000		103,246
							313,620
LEASE REVENUE BONDS
0.41% of Net Assets
Memphis/Shelby County TN Special Facilities Revenue FedEx	5.050	9/1/2012	Baa/BBB*		250,000		268,673
							268,673
Total Investments (cost $61,675,258)(a)—97.81% of Net Assets							64,787,277

* Standard and Poor's Corporation

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 appreciation of securities as follows:

Unrealized appreciation	$	3,230,494
Unrealized depreciation		(118,474	)
Net unrealized appreciation	$	3,112,020

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

31

DUPREE MUTUAL FUNDS—TENNESEE TAX-FREE INCOME SERIES UNAUDITED

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2003

ASSETS:
Investments in securities, at value (Cost: $61,675,258)			$	64,787,277
Cash				329,862
Receivable for investments sold				736,400
Interest receivable				1,031,885
Prepaid expenses				2,427
Total assets				66,887,851
LIABILITIES:
Payable for:
Distributions	$	611,736
Management fee		27,913
Transfer agent		7,207
Total liabilities				646,856
NET ASSETS:
Net assets consist of:
Capital				64,195,096
Net accumulated realized losses on investment transactions				(1,066,121	)
Net unrealized appreciation in value of investments				3,112,020
Net assets at value			$	66,240,995
NET ASSET VALUE, offering price and redemption price per share ($66,240,995/ 5,912,940 shares outstanding)			$	11.20
STATEMENT OF OPERATIONS
For the six months ended December 31, 2003
Net investment income:
Interest income			$	1,498,397
Expenses:
Management fee				155,452
Transfer agent				40,325
Professional fees				4,493
Trustee fees				3,007
Other expenses				12,984
Total expenses				216,261
Custodian expense reduction				(6,929	)
Net investment income				1,289,065
Realized and unrealized gain on investments
Net realized loss				(152,661	)
Net decrease in unrealized appreciation				(22,096	)
Net realized and unrealized loss on investments				(174,757	)
Net increase in net assets resulting from operations			$	1,114,308

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

32

DUPREE MUTUAL FUNDS—TENNESSEE TAX-FREE INCOME SERIES UNAUDITED

STATEMENTS OF CHANGES IN NET ASSETS

For the year ended June 30, 2003 and the six months ended December 31, 2003

	Six Months 12/31/03			One Year 2003
Increase in net assets:
Operations:
Net investment income	$	1,289,065		$	2,359,370
Net realized loss on investments		(152,661	)		(22,866	)
Net increase / (decrease) in unrealized appreciation		(22,096	)		2,154,371
Net increase in net assets resulting from operations		1,114,308			4,490,875
Distributions to shareholders from:
Net investment income		(1,289,065	)		(2,359,370	)
Net fund share transactions		7,599,888			8,157,141
Total increase		7,425,131			10,288,646
Net assets:
Beginning of year		58,815,864			48,527,218
End of year	$	66,240,995		$	58,815,864

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months			For the years ended June 30,
	12/31/2003			2003			2002			2001			2000
Net asset value, beginning of year	$	11.26		$	10.82		$	10.72		$	10.32		$	10.77
Income from investment operations:
Net investment income		0.23			0.48			0.52			0.52			0.53
Net gains/(losses) on securities, both realized and unrealized		(0.06	)		0.44			0.10			0.40			(0.45	)
Total from investment operations		0.17			0.92			0.62			0.92			0.08
Less distributions:
Distributions from net investment income		(0.23	)		(0.48	)		(0.52	)		(0.52	)		(0.53	)
Net asset value, end of year	$	11.20		$	11.26		$	10.82		$	10.72		$	10.32
Total return		1.56	%		8.65	%		5.85	%		9.08	%		0.84	%
Net assets, end of year (in thousands)	$	66,241		$	58,816		$	48,527		$	45,035		$	40,524
Ratio of expenses to average net assets (a)		0.34	%		0.65	%		0.54	%		0.54	%		0.54	%
Ratio of net investment income to
average net assets		2.08	%		4.32	%		4.77	%		4.90	%		5.09	%
Portfolio turnover		11.47	%		8.36	%		11.85	%		22.31	%		8.80	%

(a) Percentages are after expenses reimbursed by Adviser and custodian expense reduction. Expenses reimbursed by Adviser and custodian expense reduction were:

.01% and .02% for 2003, .16% and .02% for 2002, .15% and .02% for 2001, and .13% and .02% for 2000 For the six months ended 12/31/03 the percentage before custodian expense reduction was .35%

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

33

DUPREE MUTUAL FUNDS—TENNESEE TAX-FREE SHORT-TO-MEDIUM SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

Tennesee Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
61.00% of Net Assets
Chattanooga-Hamilton County TN Hospital Authority Erlanger	5.625	10/1/2009	Aaa/AAA*	$	715,000	$	823,194
Chattanooga-Hamilton County TN Hospital Authority Erlanger	4.250	10/1/2006	Aaa/AAA*		50,000		53,174
Columbia Tn Waterworks Revenue	5.000	12/1/2008	Aaa/AAA*		100,000		111,791
Gatlinburg TN General Obligation	5.000	5/1/2008	Aaa/AAA*		100,000		109,302
Hardeman County TN Corrctional Facility Revenue	7.000	8/1/2005	A/A*		240,000		258,370
Hawkins County TN General Obligation	4.500	5/1/2008	Aaa/AAA*		315,000		342,194
Johnson City TN General Obligation	5.250	6/1/2008	Aaa/AAA*		125,000		139,953
Knox County TN Health Education & Housing Facilities Board	5.500	4/15/2011	Baa/AAA*		300,000		330,630
Knox County TN Health Education & Housing Baptist Health System	5.000	4/15/2006	Aaa/AAA*		100,000		107,374
Knox County Utility District Water & Sewer Revenue	5.250	12/1/2006	Aaa/AAA*		220,000		225,293
Marshall County TN General Obligation	4.450	12/1/2010	Aaa/AAA*		270,000		293,990
Memphis-Shelby County TN Sports Arena Project Series A	3.800	11/1/2008	Aaa/AAA*		250,000		265,523
Memphis-Shelby Tn Sports Authority Memphis Arena Project	5.500	11/1/2012	Aaa/AAA*		500,000		582,000
Memphis-Shelby County TN Sports Authority Memphis Arena	5.000	11/1/2008	Aaa/AAA*		150,000		167,475
Metropolitan Government of Nashville & Davidson County Housing	5.500	1/1/2007	Aaa/AAA*		400,000		429,080
Montgomery County TN General Obligation	5.250	5/1/2007	Aaa		400,000		441,024
Municipal Energy Acquisition Corporation TN Gas Revenue	4.125	3/1/2008	Aaa/AAA*		250,000		266,790
Municipal Energy Acquisition Corporation TN Gas Revenue	4.125	3/1/2009	Aaa/AAA*		200,000		213,452
Oak Ridge TN General Obligation Unlimited	4.500	4/1/2007	Aaa/AAA*		220,000		236,856
Shelby County Tn Methodist Hospital Healthcare Revenue	5.500	4/1/2008	Aaa/AAA*		250,000		280,373
Shelby County TN Health Education & Housing Facility Rhodes College	4.500	8/1/2008	Aaa/AAA*		100,000		108,970
Shelby County TN Health Education & Housing Facility Rhodes College	4.500	8/1/2009	Aaa/AAA*		100,000		108,593
Shelby County TN Health Education & Housing Facility Rhodes College	4.350	8/1/2006	Aaa/AAA*		100,000		106,485
Sullivan County TN Wellmont Hospital Health System Project	3.000	9/1/2009	Aa/AA*		475,000		473,024
Sullivan County TN Health Educational & Housing Facility Board	5.000	9/1/2011	AA*		335,000		366,631
Tennergy Corporation TN Gas Revenue	5.000	6/1/2008	Aaa/AAA*		500,000		552,610
Tennergy Corporation TN Gas Revenue	5.000	6/1/2009	Aaa/AAA*		650,000		723,808
Tennergy Corporation TN Gas Revenue	4.128	6/1/2009	Aaa/AAA*		100,000		106,993
Tennessee Energy Acquisition Corporation Gas Revenue	4.400	9/1/2006	Aaa/AAA*		100,000		106,576
TN Energy Acquisition Corporation Gas Revenue Series A	5.000	9/1/2007	Aaa/AAA*		210,000		230,519
Tennessee Energy Acquisition Corporation Gas Revenue	5.000	9/1/2007	Aaa/AAA*		300,000		328,980
TN Energy Acquisition Corporation Gas Revenue	4.500	9/1/2008	Aaa/AAA*		295,000		320,553
TN State General Obligation Series A	5.250	2/1/2008	Aaa/AAA*		140,000		156,121
Wilson County TN General Obligation	5.000	4/1/2013	Aaa/AAA*		720,000		807,091
							10,174,789
GENERAL OBLIGATION BONDS
22.21% of Net Assets
Chattanooga TN General Obligation Inlimited	5.500	9/1/2010	Aa2/AA*		500,000		576,630
Hamilton County TN General Obligation Series A	4.550	8/1/2009	Aa1		100,000		107,362
Knox County TN Public Improvement General Obligation	5.100	5/1/2008	Aa2/AA*		90,000		99,941
Madison County TN General Obligation	4.000	4/1/2014	Aa3		700,000		715,778
Metropolitan Government Nashville & Davidson County TN General Obligation	4.250	11/15/2007	Aa2/AA*		100,000		107,721
Metropolitan Government Nashville & Davidson County TN General Obligation	5.125	11/15/2013	Aa2/AA*		300,000		331,911
Metropolitan Government Nashville & Davidson County TN General Obligation	5.250	10/15/2009	Aa2/AA*		500,000		569,030
Rutherford County TN Public Improvement General Obligation	5.000	4/1/2009	Aa2/AA*		250,000		278,478
Rutherford County TN Public Improvement General Obligation	4.250	4/1/2009	Aa2/AA*		200,000		215,580
Shelby County Tn Public Improvement General Obligation	5.625	6/1/2004	Aa3/AA+*		250,000		254,613
Shelby County TN Public Improvement General Obligation S:A	5.500	4/1/2009	Aa3/AA+*		100,000		113,825
Tennessee State General Obligation Series B	5.000	5/1/2009	Aa2/AA*		300,000		334,521
							3,705,389
HOSPITAL AND HEALTHCARE REVENUE BONDS
5.83% of Net Assets
Chattanooga TN Catholic Health Initiatives Series A	5.500	12/1/2006	Aa2/AA*		700,000		763,861
Knox County TN Hospital Facility Revenue Catholic Healthcare	4.500	10/1/2011	A1/AA-*		100,000		106,591
Metropolitan Government Nashville & Davidson Counties TN	4.300	8/1/2004	AA*		100,000		101,707
							972,159
PREREFUNDED BONDS
3.39% of Net Assets
Lenoir City TN Electric System Refunding & Improvement	4.800	6/1/2011	Aaa		100,000		110,839
Marion County TN General Obligation	6.000	4/1/2024	Aaa/AAA*		200,000		233,908

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

34

DUPREE MUTUAL FUNDS—TENNESEE TAX-FREE SHORT-TO-MEDIUM SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

Tennesee Municipal Bonds—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value		Market Value
Unicoi County TN General Obligation Unlimited	5.400	4/1/2010	Aaa/AAA*	$	200,000	$	220,724
							565,471
LEASE REVENUE BONDS
3.24% of Net Assets
Memphis-Shelby County Airport Special Facilities-Federal Ex	5.000	9/1/2009	Baa2/BBB*		250,000		270,313
Memphis-Shelby County TN Sports Authority Arena Project	4.000	11/1/2006	Aa3/AA-*		255,000		270,132
							540,444
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS
2.33% of Net Assets
Metropolitan Government Of Nashville & Davidson County Vanderbuilt	5.750	1/1/2008	Aa3/AA*		250,000		282,370
Tennessee State School Board Authority Higher Education Facilities	4.800	5/1/2014	Aa2/AA*		100,000		106,338
							388,708
MUNICIPAL UTILITY REVENUE BONDS
1.77% of Net Assets
Knoxville Tn Gas Revenue System Series J	4.750	3/1/2010	Aa3/AA*		170,000		187,534
Memphis TN Electric System Revenue Refunding Jr Lien	4.000	12/1/2009	Aa3/AA*		100,000		106,893
							294,427
STATE AND LOCAL MORTGAGE REVENUE BONDS
.88% of Net Assets
Shelby County TN Multi-Family Housing Memphis Series A	0.000	1/1/2009	NR		240,000		146,400
							146,400
ESCROWED TO MATURITY BONDS
0.22% of Net Assets
Metro Government Nashville/Davidson County TN Meharry Medical	7.875	12/1/2004	AAA*		35,000		36,584
							36,584
Total Investments (cost $16,315,764)(a)—100.86% of Net Assets						$	16,824,371

* Standard and Poor's Corporation

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

NR Not Rated

# Bond ratings are unaudited.

^ Security in default and therefore non-income producing

(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		$	613,112
Unrealized depreciation			(104,505	)
	��
Net unrealized appreciation		$	508,607

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

35

DUPREE MUTUAL FUNDS—TENNESEE TAX-FREE SHORT-TO-MEDIUM SERIES UNAUDITED

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2003

ASSETS:
Investments in securities, at value (Cost: $16,315,764)			$	16,824,371
Cash				35,915
Interest receivable				178,481
Total assets				17,038,767
LIABILITIES:
Payable for:
Distributions	$	48,016
Fund shares redeemed		15,389
Notes payable		287,000
Management fee		3,710
Transfer agent		2,158
Other fees		2,307
Total liabilities				358,580
NET ASSETS:
Capital				16,215,249
Net accumulated realized loss on investment transactions				(43,668	)
Net unrealized appreciation in value of investments				508,607
Net assets at value			$	16,680,188
NET ASSET VALUE, offering price and redemption price per share ($16,680,188 / 1,540,594 shares outstanding)			$	10.83
STATEMENT OF OPERATIONS For the six months ended December 31, 2003
Net investment income:
Interest income			$	302,196
Expenses:
Management fee				41,945
Transfer agent				12,583
Professional fees				3,015
Trustee fees				802
Other expenses				6,058
Total expenses				64,403
Expenses reimbursed by Investment Advisor				(19,716	)
Custodian expense reductions				(2,742	)
Net investment income				260,251
Realized and unrealized gain / (loss) on investments
Net realized gain				9,893
Net decrease in unrealized appreciation				(129,511	)
Net realized and unrealized loss on investments				(119,618	)
Net increase in net assets resulting from operations			$	140,633

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

36

DUPREE MUTUAL FUNDS—TENNESEE TAX-FREE SHORT-TO-MEDIUM SERIES UNAUDITED

STATEMENTS OF CHANGES IN NET ASSETS

For the year ended June 30, 2003 and the six months ended December 31, 2003

	Six Months 12/31/03			One Year 2003
Increase in net assets:
Operations:
Net investment income	$	260,252		$	442,050
Net realized gain on investments		9,893			7,935
Net increase/(decrease) in unrealized appreciation		(129,511	)		468,165
Net increase in net assets resulting from operations		140,634			918,150
Dividends to shareholders from net investment income		(260,252	)		(442,050	)
Net fund share transactions		800,202			4,157,746
Total increase		680,584			4,633,846
Net assets:
Beginning of year		15,999,603			11,365,757
End of year	$	16,680,187		$	15,999,603

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding

	6 months			For the years ended June 30,
	12/31/2003			2003			2002			2001			2000
Net Asset Value, beginning of year	$	10.91		$	10.50		$	10.35		$	10.18		$	10.33
Income from investment operations:
Net investment income		0.17			0.35			0.40			0.42			0.41
Net gain/(losses) on securities both realized and unrealized		(0.08	)		0.41			0.15			0.17			(0.15	)
Total from investment operations		0.09			0.76			0.55			0.59			0.26
Less distributions:
Distributions from net investment income		(0.17	)		(0.35	)		(0.40	)		(0.42	)		(0.41	)
Net Asset Value, end of year	$	10.83		$	10.91		$	10.50		$	10.35		$	10.18
Total return		0.83	%		7.37	%		5.43	%		5.85	%		2.53	%
Net assets, end of year (in thousands)	$	16,680		$	16,000		$	11,366		$	7,216		$	6,415
Ratio of expenses to average net assets (a)		0.25	%		0.50	%		0.41	%		0.59	%		0.60	%
Ratio of net investment income to average net assets		1.56	%		3.29	%		3.84	%		4.03	%		3.96	%
Portfolio turnover		3.32	%		20.27	%		22.10	%		48.90	%		28.67	%

(a) Percentages are after expenses reimbursed by Adviser and custodian expense reduction.

Expenses reimbursed by Adviser and custodian expense reduction were:

.12% and .02% for the six months ending 12/31/03, .23% and .04% for 2003, .35% and .06% for 2002, .17% and .07% for 2001, .18% and .07% for 2000 and .17% for 2000 respectively.

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

37

DUPREE MUTUAL FUNDS—INTERMEDIATE GOVERNMENT BOND SERIES UNAUDITED

SCHEDULE OF PORTFOLIO INVESTMENTS

Government Securities and Agencies—100%

December 31, 2003

Bond Description	Coupon	Maturity Date	Rating#	Par Value of Shares		Market Value
FEDERAL HOME LOAN BANK
58.96% of Net Assets
Medium Term Note	7.000	8/15/2014	Aaa/AAA*	$	500,000	$	596,249
Medium Term Note	5.625	2/12/2018	Aaa/AAA*		1,500,000		1,492,750
Medium Term Note	5.620	8/6/2018	Aaa/AAA*		3,000,000		2,994,960
Medium Term Note	7.560	9/1/2004	Aaa/AAA*		150,000		156,223
Medium Term Note	8.170	12/16/2004	Aaa/AAA*		2,000,000		2,129,065
Medium Term Note	6.050	3/12/2012	Aaa/AAA*		1,400,000		1,412,232
Medium Term Note	5.875	9/19/2017	Aaa/AAA*		1,175,000		1,173,370
Medium Term Note	5.250	5/21/2018	Aaa/AAA*		1,000,000		981,298
							10,936,147
FEDERAL NATIONAL MORTGAGE ASSOCIATION
18.46% of Net Assets
Medium Term Note	5.750	11/7/2017	Aaa/AAA*		400,000		407,705
Medium Term Note	5.300	8/15/2013	AAA/Aaa		2,000,000		2,059,949
Medium Term Note	5.580	7/21/2023	Aaa/AAA*		1,000,000		955,905
							3,423,559
FEDERAL HOME LOAN MORTGAGE
13.47% of Net Assets
Medium Term Note	4.875	3/15/2007	Aaa/AAA*		1,400,000		1,485,546
Medium Term Note	5.125	11/7/2013	Aaa/AAA*		1,000,000		1,013,411
							2,498,957
STUDENT LOAN MARKETING ASSOCIATION
6.45% of Net Assets
Medium Term Note	7.300	8/1/2012	Aaa/AAA*		1,000,000		1,195,835
							1,195,835
CASH EQUIVALENTS
1.44% of Net Assets
US Bank U.S. Treasury Money Market Fund					266,315		266,315
							266,315
Total Investments (cost $17,715,628)(a)—98.77% of Net Assets						$	18,320,813

* Standard and Poor's Corporation

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	$	670,420
Unrealized depreciation		(65,235	)
Net unrealized appreciation	$	605,185

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

38

DUPREE MUTUAL FUNDS—INTERMEDIATE GOVERNMENT BOND SERIES UNAUDITED

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2003

ASSETS:
Investments in securities, at value (Cost: $17,715,628)			$	18,054,498
Cash				275,193
Interest receivable				306,682
Prepaid expenses				3,593
Total assets				18,639,966
LIABILITIES:
Payable for:
Distributions	$	86,298
Management fee		3,170
Transfer agent		2,377
Total liabilities				91,845
NET ASSETS:
Net assets consist of:
Capital				19,059,487
Net accumulated realized loss on investment transactions				(1,116,552	)
Net unrealized appreciation in value of investments				605,185
Net assets at value			$	18,548,120
NET ASSET VALUE, offering price and redemption price per share ($18,548,120 / 1,838,299 shares outstanding)			$	10.09

STATEMENT OF OPERATIONS

For the six months ended December 31, 2003

Net investment income:
Interest income	$	522,278
Expenses:
Management fee		18,624
Transfer agent		13,968
Professional fees		1,578
Trustee fees		914
Other expenses		9,350
Total expenses		44,434
Custodian expense reductions		(2,868	)
Net investment income		480,712
Realized and unrealized loss on investments
Net realized loss		(118,093	)
Net decrease in unrealized appreciation		(374,126	)
Net realized and unrealized loss on investments		(492,219	)
Net decrease in net assets resulting from operations	$	(11,507	)

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

39

DUPREE MUTUAL FUNDS—INTERMEDIATE GOVERNMENT BOND SERIES UNAUDITED

STATEMENTS OF CHANGES IN NET ASSETS

For the year ended June 30, 2003 and the six months ended December 31, 2003

	Six Months 12/31/03			One Year 2003
Increase in net assets:
Operations:
Net investment income	$	480,711		$	830,938
Net realized gain/(loss) on investments		(118,093	)		24,189
Net increase / (decrease) in unrealized appreciation		(374,126	)		414,578
Net increase in net assets resulting from operations		(11,508	)		1,269,705
Distributions to shareholders		(480,711	)		(830,938	)
Net fund share transactions		282,590			4,907,337
Total increase		(209,629	)		5,346,104
Net assets:
Beginning of year		18,757,749			13,411,645
End of year	$	18,548,120		$	18,757,749

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months 12/31/03			For the years ended June 30,
				2003			2002			2001			2000
Net asset value, beginning of year	$	10.35		$	10.07		$	9.83		$	9.43		$	9.73
Income from investment operations:
Net investment income		0.26			0.53			0.58			0.64			0.65
Net gains/(losses) on securities, both realized and unrealized		(0.26	)		0.28			0.24			0.40			(0.30	)
Total from investment operations		0.00			0.81			0.82			1.04			0.35
Less distributions:
Distributions from net investment income		(0.26	)		(0.53	)		(0.58	)		(0.64	)		(0.65	)
Net asset value, end of year	$	10.09		$	10.35		$	10.07		$	9.83		$	9.43
Total return		0.06	%		8.23	%		8.54	%		11.29	%		3.76	%
Net assets, end of year (in thousands)	$	18,548		$	18,758		$	13,412		$	11,057		$	10,167
Ratio of expenses to average net assets (a)		0.23	%		0.45	%		0.48	%		0.42	%		0.41	%
Ratio of net investment income to average net assets		2.60	%		5.19	%		5.81	%		6.56	%		6.83	%
Portfolio turnover		32.45	%		53.62	%		75.15	%		24.94	%		33.35	%

(a) Percentages before custodian expense reduction were:

.24% for the six months ending 12/31/03, .48% for 2003, .52% for 2002, .46% for 2001 and .45% for 2000

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

40

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2003

1. Significant Accounting Policies

Dupree Mutual Funds is registered under the Investment Company Act of 1940, as amended, as a no-load, open-end investment company. The Declaration of Trust of Dupree Mutual Funds (the “Trust”) permits the Trustees to create an unlimited number of series of investment portfolios (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:

the Alabama Tax-Free Income Series

the Kentucky Tax-Free Income Series

the Kentucky Tax-Free Short-to-Medium Series

the Mississippi Tax-Free Income Series

the North Carolina Tax-Free Income Series

the North Carolina Tax-Free Short-to-Medium Series

the Tennessee Tax-Free Income Series

the Tennessee Tax-Free Short-to-Medium Series, and

the Intermediate Government Bond Series

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.

A. 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. In the event that market quotations are not readily available or are determined by the advisor to not be reflective of fair market value due to market events or developments, securities are valued at fair value as determined in good faith in accordance with procedures adopted by the Board of Trustees.

B. 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.

41

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2003

1. Significant Accounting Policies, continued:

C. Security Income

Interest income, which includes the amortization of premiums and the accretion of original issue discounts for financial and tax reporting purposes, is recorded on the accrual basis.

D. Federal Income Taxes

Each of the Funds is a separate entity for federal income tax purposes. It is each Fund’s policy to qualify as a regulated investment company by complying with the requirements of the Internal Revenue Code (the “code”) applicable to regulated investment companies, including the distribution of all taxable income to their shareholders. The Funds have met the requirements of the code applicable to regulated investment companies for the year ended June 30, 2003. Therefore, no federal income tax provision is required.

E. Distributions

All of the net investment income of the Funds is declared as a dividend to shareholders of record as of the close of business each day. Distributions are payable in cash or in additional shares at the net asset value on the payable date. Distributions are payable:

Monthly for:	the Kentucky Tax-Free Short-to-Medium Series, and
	the North Carolina Tax-Free Short-to-Medium Series, and
	the Tennessee Tax-Free Short-to-Medium Series, and
	the Intermediate Government Bond Series, and
Quarterly for:	the Alabama Tax-Free Income Series, and
	the Kentucky Tax-Free Income Series, and
	the Mississippi Tax-Free Income Series, and
	the North Carolina Tax-Free Income Series, and
	the Tennessee Tax-Free Income Series

Timing differences relating to shareholder distributions are reflected in the components of net assets and permanent book and tax basis differences relating to shareholder distributions have been reclassified to capital.

F. 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.

42

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2003

2. Investment Advisory Fee and Other Transactions with Affiliates:

Subject to the direction of the Trustees, Dupree & Company, Inc. is responsible for the management of the Funds’ portfolios. The compensation paid to Dupree & Company, Inc. pursuant to the Investment Advisory Agreements is a percentage of the daily net assets of each series (determined separately) as follows:

	Range of Net Assets $0-$100,000,000	$100,000,001- $150,000,000	$150,000,001- $500,000,000	$500,000,001+
Alabama Tax-Free Income Series	.50 of 1%	.45 of 1%	.40 of 1%	.35 of 1%
Kentucky Tax-Free Income Series	.50 of 1%	.45 of 1%	.40 of 1%	.35 of 1%
Kentucky Tax-Free Short-to-Medium Series	.50 of 1%	.45 of 1%	.40 of 1%	.35 of 1%
Mississippi Tax-Free Income Series	.50 of 1%	.45 of 1%	.40 of 1%	.35 of 1%
North Carolina Tax-Free Income Series	.50 of 1%	.45 of 1%	.40 of 1%	.35 of 1%
North Carolina Tax-Free Short-to-Medium Series	.50 of 1%	.45 of 1%	.40 of 1%	.35 of 1%
Tennessee Tax-Free Income Series	.50 of 1%	.45 of 1%	.40 of 1%	.35 of 1%
Tennessee Tax-Free Short-to-Medium Series	.50 of 1%	.45 of 1%	.40 of 1%	.35 of 1%
Intermediate Government Bond Series	.20 of 1%	.20 of 1%	.20 of 1%	.20 of 1%

However, the advisor may voluntarily waive or refund investment advisory fees payable to it under the Investment Advisory Agreement with each Fund, and assume and pay other operating expenses.

For the period ended December 31, 2003 investment advisory fees and refunded amount were as follows:

	Investment advisory fee		Amount refunded
Alabama Tax-Free Income Series	$	12,204	$	9,748
Mississippi Tax-Free Income Series	$	6,923	$	6,173
North Carolina Tax-Free Short-to-Medium Series	$	37,192	$	19,250
Tennessee Tax-Free Short-to-Medium Series	$	41,945	$	19,716

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% on the first $20,000,000 of average net assets and .12% of all amounts in excess of $20,000,000 of average net assets.

43

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2003

3. Purchases and Sales of Securities

During the period, the cost of purchases and the proceeds from sales of securities for each Series were as follows:

	Purchases		Sales/Calls
Alabama Tax-Free Income Series	$	483,651	$	624,031
Kentucky Tax-Free Income Series		32,177,024		33,386,748
Kentucky Tax-Free Short-to-Medium Series		9,879,412		7,975,100
Mississippi Tax-Free Income Series		225,986		5,000
North Carolina Tax-Free Income Series		4,311,340		3,273,765
North Carolina Tax-Free Short-to-Medium Series		3,444,433		909,175
Tennessee Tax-Free Income Series		14,132,783		6,854,860
Tennessee Tax-Free Short-to-Medium Series		3,810,866		530,502
Intermediate Government Bond Series		6,893,932		5,779,870

4. Capital Shares

At December 31, 2003, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:

ALABAMA TAX-FREE INCOME SERIES	Six months Ended December 31, 2003					Year Ended June 30, 2003
	SHARES		AMOUNT			SHARES		AMOUNT
Shares sold	56,726		$	658,660		328,581		$	3,807,346
Shares issued for reinvestment from net investment income	6,103			71,720		11,571			133,865
Shares redeemed	(16,572	)		(192,733	)	(163,273	)		(1,896,596	)
Net increase	46,257		$	537,647		176,879		$	2,044,615
KENTUCKY TAX-FREE INCOME SERIES	Six months Ended December 31, 2003					Year Ended June 30, 2003
	SHARES		AMOUNT			SHARES		AMOUNT
Shares sold	4,341,527		$	33,084,687		11,720,210		$	89,295,422
Shares issued for reinvestment from net investment income	1,007,795			7,764,587		1,964,425			14,938,320
Shares redeemed	(4,165,857	)		(31,639,999	)	(6,079,468	)		(46,352,849	)
Net increase	1,183,465		$	9,209,275		7,605,167		$	57,880,893
KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES	Six months Ended December 31, 2003					Year Ended June 30, 2003
	SHARES		AMOUNT			SHARES		AMOUNT
Shares sold	3,478,836		$	18,660,709		7,411,589		$	39,899,771
Shares issued for reinvestment from net investment income	202,780			1,090,106		424,021			2,279,873
Shares redeemed	(2,721,202	)		(14,579,829	)	(4,634,309	)		(24,958,608	)
Net increase	960,413		$	5,170,986		3,201,301		$	17,221,036

44

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2003

3. Capital Shares, continued:

MISSISSIPPI TAX-FREE INCOME SERIES	Six months Ended December 31, 2003					Year ended June 30, 2003
	SHARES		AMOUNT			SHARES		AMOUNT
Shares sold	37,787		$	433,858		93,314		$	1,058,641
Shares issued for reinvestment from net investment income and capital gain	3,575			41,755		7,251			82,288
Shares redeemed	(19,582	)		(225,541	)	(34,432	)		(387,947	)
Net increase	21,780		$	250,072		66,133		$	752,982
NORTH CAROLINA TAX-FREE INCOME SERIES	Six months Ended December 31, 2003					Year ended June 30, 2003
	SHARES		AMOUNT			SHARES		AMOUNT
Shares sold	306,083		$	3,338,575		876,078		$	9,586,984
Shares issued for reinvestment from net investment income	51,868			574,705		100,608			1,099,913
Shares redeemed	(363,728	)		(3,992,112	)	(460,582	)		(5,032,287	)
Net increase/(decrease)	(5,777	)	($	78,832	)	516,104		$	5,654,610
NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES	Six months Ended December 31, 2003					Year Ended June 30, 2003
	SHARES		AMOUNT			SHARES		AMOUNT
Shares sold	453,256		$	4,844,872		789,310		$	8,466,380
Shares issued for reinvestment from net investment income	14,115			151,319		28,451			303,768
Shares redeemed	(303,826	)		(3,255,012	)	(423,309	)		(4,508,913	)
Net increase	163,546		$	1,741,179		394,452		$	4,261,235
TENNESSEE TAX-FREE INCOME SERIES	Six months Ended December 31, 2003					Year ended June 30, 2003
	SHARES		AMOUNT			SHARES		AMOUNT
Shares sold	828,664		$	9,135,518		1,173,551		$	13,021,792
Shares issued for reinvestment from net investment income	55,590			623,192		109,212			1,208,525
Shares redeemed	(195,059	)		(2,158,822	)	(545,699	)		(6,073,176	)
Net increase	689,195		$	7,599,888		737,064		$	8,157,141
TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES	Six months Ended December 31, 2003					Year ended June 30, 2003
	SHARES		AMOUNT			SHARES		AMOUNT
Shares sold	294,310		$	3,168,619		871,531		$	9,390,997
Shares issued for reinvestment from net investment income	14,764			159,025		26,035			279,910
Shares redeemed	(234,950	)		(2,527,441	)	(513,265	)		(5,513,161	)
Net increase	74,124		$	800,202		384,301		$	4,157,746

45

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2003

4. Capital Shares, continued:

INTERMEDIATE GOVERNMENT BOND SERIES	Six months Ended December 31, 2003					Year ended June 30, 2003
	SHARES		AMOUNT			SHARES		AMOUNT
Shares sold	157,348		$	1,591,076		600,753		$	6,153,416
Shares issued for reinvestment from Net investment income	30,953			312,103		51,871			531,263
Shares redeemed	(161,486	)		(1,620,589	)	(173,397	)		(1,777,342	)
Net increase	26,814		$	282,590		479,227		$	4,907,337

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 its respective political subdivision, agencies and public authorities to obtain funds for various public purposes. Each of these funds is more susceptible to economic and political factors adversely affecting issuers of their states respective municipal securities than in a fund that is not concentrated in these issuers to the same extent.

6. Federal Income Taxes

At June 30, 2003 the Alabama Tax-Free Income Series, the Kentucky Tax-Free Income Series, the Kentucky Tax-Free Short-to-Medium Series, the North Carolina Tax-Free Income Series, the North Carolina Tax-Free Short-to-Medium Series, the Tennessee Tax-Free Income Series, the Tennessee Tax-Free Short-to-Medium Series, and the Intermediate Government Bond Series have capital loss carry forwards which are available to offset future capital gains, if any.

The capital loss carry forwards expire as follows:

	2003		2004		2005		2006		2007	2008		2009		2010		2011
Alabama Tax-Free Income Series		—		—		—		—	—		—		—	$	63	$	1,444
Kentucky Tax-Free Income Series		—		—		—		—	—		—	$	2,354,779		—		—
Kentucky Tax-Free Short-to-Medium Series	$	240,996	$	10,144	$	188,198	$	73,155	—	$	135,232		312,672		34,064		—
North Carolina Tax-Free Income Series		—		—		—		—	—		76,257		—		17,738		—
North Carolina Tax-Free Short-to-Medium Series		—		—		—		—	—		5,915		22,226		—		—
Tennessee Tax-Free Income Series		—		—		—		—	—		276,976		523,414		69,806		18,314
Tennessee Tax-Free Short-to-Medium Series		—		—		—		—	—		16,212		37,349		—		—
Intermediate Government Bond Series		654,352		87,381		—		—	—		209,853		46,873		—		—

During the current fiscal year the Kentucky Tax-Free Income Series, the Kentucky Tax-Free Short-to-Medium, the North Carolina Tax-Free Income Series, the North Carolina Tax-Free Short-to-Medium Series, the Tennessee Tax-Free Short-to-Medium Series and the Intermediate Government Bond Series utilized $651,052; $103,199; $36,287; $2,510; $7,400, and $5,055 of capital loss carryforwards respectively.

46

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2003

6. Federal Income Taxes, continued:

The tax basis components of distributable earnings for each of the funds is not materially different than the book basis.

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 2003 as follows:

	Post October Losses
Alabama Tax-Free Income Series	$	(5,502	)
North Carolina Tax-Free Income Series		(913,452	)
Tennessee Tax-Free Income Series		(24,950	)

The tax character of distributions paid for the years ended June 30, 2003 and 2002 were as follows:

	6/30/2003				6/30/2002
	Tax Exempt Income		Ordinary Income		Tax Exempt Income		Ordinary Income
Alabama Tax-Free Income Series	$	183,177		—	$	87,850		—
Kentucky Tax-Free Income Series		25,809,346		—		23,705,376		—
Kentucky Tax-Free Short-to-Medium Series		3,128,791		—		2,713,182		—
Mississippi Tax-Free Income Series		103,693		—		51,945		—
North Carolina Tax-Free Income Series		1,550,959		—		1,283,603		—
North Carolina Tax-Free Short-to-Medium Series		348,919		—		236,031		—
Tennessee Tax-Free Income Series		2,359,370		—		2,182,682		—
Tennessee Tax-Free Short-to-Medium Series		442,050		—		289,969		—
Intermediate Government Bond Series		—	$	830,938		—	$	701,639

Total distributions paid differ from the Statement of Changes in Net Assets because for tax purposes dividends are recognized when actually paid.

47

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2003

7. 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. Interest will be payable based on the 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. Debt covenants, among others, require the Funds to:

• Provide the lender with the Funds’ annual report

• Comply with all agreements with the lender and with applicable laws and regulations

• Maintain appropriate insurance coverage

No borrowings were outstanding during the fiscal year 2003.

The Funds have a contractual agreement with the custodian whereby the bank will provide certain custodial services for $1.00 per year. Through arrangements with the Fund’s custodian, credits realized as a result of uninvested cash balances were used to reduce each Fund’s expenses. During the period, these credits reduced each of the Fund’s expenses by the amount shown on the statement of operation.

8. Trustee and officer information (unaudited):

The Trustees of the Trust consist of seven individuals, four of whom are not “interested persons” of the Trust as defined in the Investment Company Act of 1940. Two of the Trust’s trustees are “interested persons” of the Trust’s Investment Advisor and of the Trust within the meaning of Section 2(a)(19) of the Investment Company Act of 1940 by virtue of their officership, directorship and/or employment with Dupree & Company, Inc.

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

Interested Persons:

Name, Address and Age	Position(s) held with Fund	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 Director
THOMAS P. DUPREE SR. 125 South Mill Street Lexington, KY 40507 Age: 73	President and Trustee	Annual Term 24 years service as President and Trustee (Director)	Chairman of the Board of Dupree & Company, Inc., President of Dupree Investment Advisers, Inc. Director, Office Suites Plus, Inc.	9	Office Suites Plus
WILLIAM T. GRIGGS, II 125 South Mill Street Lexington, KY 40507 Age: 52	Vice President Assistant Secretary and Trustee	Annual Term 5 years of Service as Director; 11 years of Service as Vice President, Assistant Secretary	President of Dupree & Company, Inc. and Dupree Investment Advisers, Inc.	9

48

DUPREE MUTUAL FUNDS

NOTES TO FINANCIAL STATEMENTS

December 31, 2003

8. Trustee Information (unaudited), continued:

Officers:
Michelle M. Dragoo 125 South Mill Street Lexington, KY 40507 Age: 42	Vice President, Secretary, Treasurer	Annual Term; 6 years of Service as Vice President, 4 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: 43	Assistant Vice President	Annual Term: 11 years of Service	Assistant Vice President of Dupree & Company, Inc.	N/A	N/A
Non Interested Persons
WILLIAM A. COMBS, JR. 111 Woodland Ave., #510 Lexington, KY 40502 Age: 63	Chairman, Trustee	Annual Term 3 years of Service Chairman; 15 years of Service Trustee	Secretary, Treasurer, Director, Dana Motor Cincinnati, Ohio; Secretary-Treasurer, Director Freedom Dodge, Lexington, KY; Secretary, Treasurer, Director Ellerslie Realty Inc., Lexington, KY; Partner, Forkland Development Co., Lexington, KY; Partner, Lexland, Lexington, KY.; Director, First Security Bank, Lexington, KY	9	First Security Bank, Lexington, KY
LUCY A. BREATHITT 1703 Fairway Drive Lexington, KY 40502 Age: 66	Trustee	Annual Term 7 years of Service Trustee	Alexander Farms, farming; Kentucky Horse Park Foundation Board; Kentucky Horse Park Museum Board, Kentucky State Nature Preserves Commission	9
C. TIMOTHY CONE 201 West Short Street Lexington, KY 40507 Age: 58	Trustee	Annual Term 1 year of service	President, Gess, Mattingly & Atchison, P.S.C. (law firm)	9	Advisory Director of PNC Bank, Kentucky
J. WILLIAM HOWERTON 3954 Primrose Place Paducah, KY 42001 Age: 71	Trustee	Annual Term 3 years of Service Trustee	Judge (retired November 1996) KY Court of Appeals; Lifetime Trustee Paducah Junior College; Self-Employed Mediator, Arbitrator and Special Judge.	9
WILLIAM S. PATTERSON 367 West Short Street Lexington, KY 40507 Age: 71	Trustee	24 Years of Service Trustee	President, CEO, Cumberland Surety Co., Lexington, KY, President, Patterson & Co., Frankfort, KY, (real estate development, thoroughbred horse breeding, farming)	9

As of June 30, 2003 none of the non-interested Trustees nor members of their immediate family held any beneficial interest in the Trust’s investment adviser, nor were the non-interested Trustees under direct or indirect or common control with the investment adviser. Further, the Trust does not have an underwriter.

49

DUPREE MUTUAL FUNDS

NOTES TO FINANCIAL STATEMENTS

December 31, 2003

9. Shareholder Meeting

A meeting of Shareholders was held on October 29, 2003. The purpose of the meeting was (I) to elect Messrs. Thomas P. Dupree Sr., William T. Griggs II, William Combs, C. Timothy Cone, J. William Howerton, William Patterson and Ms. Lucy A. Breathitt as Trustees; (ii) to ratify the selection of Ernst & Young LLP as the Trust’s independent auditors for the fiscal year ending June 30, 2004

The results of all matters voted on by shareholders at the Shareholder Meeting held October 29, 2003 were as follows:

A. Election of Trustees:

	FOR	AGAINST	ABSTAIN	WITHHELD	TOTAL
Thomas P. Dupree, Sr.	70,240,790.029	3,384.297	442,632.294	0.00	70,686,806.620
William T. Griggs II	70,243,181.656	3,384.297	442,632.294	0.00	70,689,198.247
Lucy A. Breathitt	63,313,507.718	3,384.297	442,632.294	0.00	70,469,237.500
William A. Combs	63,514,942.522	3,384.297	442,632.294	0.00	70,677,713.164
C. Timothy Cone	63,268,368.964	3,384.297	442,632.294	0.00	70,621,155.803
J. William Howerton	63,200,000.651	3,384.297	442,632.294	0.00	70,354,980.199
William S. Patterson	63,288,885.481	3,384.297	442,632.294	0.00	70,418,300.488

Cumulative voting rights were exercised in the election of Trustees. The total proxy votes are distributed among those individuals selected.

B. Ratification of Ernst & Young LLP for the fiscal year 2004:

	FOR	AGAINST	ABSTAIN	TOTAL
Ernst & Young LLP	69,325,580.521	366,105.237	860,981.372	70,552,667.130

C. Other business:

	FOR	AGAINST	ABSTAIN	TOTAL
Other business	60,186,216.958	1,683,279.135	8,683,171.037	70,552,667.130

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

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Item 2. Code of Ethics

(a) 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 code of Ethics is incorporated by reference in the registrant’s most recent Post Effective Amendment No. 44

Item 3. 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 of the non-interested, independent Trustees, who also are a majority of the Board of Trustees. 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 of June 30, 2003.

Item 5. Not applicable

Item 7. Not applicable

Item 9. Controls and Procedures:

(a) Within 90 days of filing this report the registrant’s principal executive officers have deemed the controls and procedures effective.

(b) There were no significant changes in the registrant’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Item 10. Exhibits

(a) Certifications

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DUPREE MUTUAL FUNDS

(Registrant)

By:	/s/    THOMAS P. DUPREE, SR.
	Thomas P. Dupree, President

Date February 27, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/    THOMAS P. DUPREE, SR.
	Thomas P. Dupree, Sr., President

Date February 27, 2004

By:	/s/    MICHELLE M DRAGOO
	Michelle M. Dragoo, Treasurer

Date February 27, 2004