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, 2008

Date of reporting period: July 1, 2007 through December 31, 2007

Item 1. Report to Stockholders

DUPREE MUTUAL FUNDS

December 31, 2007

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 Commonwealth of Kentucky.

In 1979, Dupree & Company began what is now Dupree Mutual Funds with the Kentucky Tax-Free Income Series and became the fund’s investment adviser. The fund was one of the first single-state municipal bond funds in the country, and the first mutual fund to invest solely in Kentucky municipal bonds. Since then, several new offerings have been added to the Dupree Mutual Funds family:

Kentucky Tax-Free Short-to-Medium Series in 1987;

Intermediate Government Bond Series in 1992;

Tennessee Tax-Free Income Series in 1993;

Tennessee Tax-Free Short-to-Medium Series in 1994;

North Carolina Tax-Free Income Series in 1995;

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

Alabama Tax-Free Income Series in 2000, and

Mississippi Tax-Free Income Series in 2000.

Today, after more than 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

Management’s Discussion of Fund Performance:	i
Six Months Ended December 31, 2007
Sector Allocation of Funds	iv
Financial Statements
Alabama Tax-Free Income Series	1
Kentucky Tax-Free Income Series	5
Kentucky Tax-Free Short-to-Medium Series	11
Mississippi Tax-Free Income Series	15
North Carolina Tax-Free Income Series	19
North Carolina Tax-Free Short-to-Medium Series	23
Tennessee Tax-Free Income Series	26
Tennessee Tax-Free Short-to-Medium Series	30
Intermediate Government Bond Series	33
Notes to Financial Statements	36
Trustee & Officer Information	44
Board of Trustee Approval of Existing Advisory Agreements	46
Schedule of Shareholder Expenses	50
Shareholder Meeting	52

Management’s Discussion of Fund Performance: Six Months Ended December 31, 2007 (Unaudited)

The investment objective for our municipal bond funds is to provide a high level of tax-free income derived from state-specific municipal securities without incurring undue risk to principal. Similarly, the investment objective for our government bond fund is to provide a high level of income derived from securities of the U.S. Government and its agencies without incurring undue risk to principal. As a general rule, we do not try to anticipate market direction; instead, we attempt to buy high quality bonds at the best possible price and hold them in down markets as well as up markets.

Factors which may influence the performance of a state-specific municipal bond fund include, but are not limited to, movements in interest rates, a downgrading or upgrading of ratings assigned to bonds issued by state or local governments, downturns or upturns in the specific economies of a given state, the rate at which bonds are called, and the rate at which revenues are received by state and local governments which are used to pay debt service on issued bonds. Similarly, many factors may influence the performance of a government bond fund including, but not limited to, movements in interest rates, prevailing conditions in the U.S. Government securities markets, changes in an issuer’s financial strength, changes in the credit rating assigned to an obligation, and the rate at which bonds are called.

During the six month period ended December 31, 2007, the U.S. economy continued to grow at a respectable pace. Real gross domestic product (GDP), a measure of the output of goods and services produced by labor and property in the United States, increased at a 4.9% annualized rate in the third quarter of 2007. This compared with a 3.8% increase in real GDP during the second quarter of 2007. However, economic growth slowed considerably in the fourth quarter of 2007 with real GDP increasing at only a 0.6 % (advance estimate) annualized rate. The seasonally adjusted national unemployment rate edged up during the second half of the year and reached 5.0% in December.

Most sectors of the economy continued to expand during the second half of the year with the exception of the housing industry which continued to contract. The downturn in the housing sector resulted in substantial losses in the mortgage market, particularly in the subprime area. The housing sector turmoil contributed to financial market disruptions which led to increased volatility in financial markets during the second half of the year. In response to tightening credit conditions, the Federal Reserve lowered the fed funds target rate in September from 5.25% to 4.75%. The Federal Reserve lowered the fed funds target rate again by twenty five basis points at both its October and December meetings bringing the fed funds rate down to 4.25% by year-end.

During the period under review, the municipal yield curve steepened considerably with yields on the short end of the curve falling approximately 80 basis points. Yields on short-term treasuries also fell significantly as treasuries benefited from a flight to quality as confidence in the stock market faded during the second half of the year. We continued

i

to adhere to our longstanding strategy of managing our funds to provide a high level of tax-free income to our shareholders without incurring undue risk to principal. As part of this discipline, we continued to buy higher coupon bonds in an effort to maximize current income to shareholders. Our municipal bond funds do not hold any bonds that are subject to the Alternative Minimum Tax.

A discussion of the performance of each of our funds for the six month period ended December 31, 2007 follows:

The Kentucky Tax-Free Income Series provided shareholders with a total return of 3.51% for the period under review. This performance compared favorably with the Lehman Brothers Municipal Bond Index which had a total return of 3.22%. The Kentucky Tax-Free Short-to-Medium Series provided shareholders with a total return of 3.45% for the period under review which also compared favorably with the Lehman Brothers Municipal Bond Index which had a total return of 3.22%. The Kentucky Tax-Free Income Series held a substantial number of pre-refunded bonds which helped it outperform the index.

The Tennessee Tax-Free Income Series provided shareholders with a total return of 2.92% for the period under review. This performance lagged the Lehman Brothers Municipal Bond Index which had a total return of 3.22%. This small underperformance was the result of owning a larger amount of bonds in the 20-30 year maturity range, a portion of the yield curve which slightly underperformed other maturity ranges. The Tennessee Tax-Free Short-to-Medium Series provided shareholders with a total return of 2.61% which also lagged the Lehman Brothers Municipal Bond Index which had a total return of 3.22%. This underperformance resulted from a downward re-pricing of a defaulted bond comprising approximately 2.41% of the par value of the portfolio at year-end.

The North Carolina Tax-Free Income Series provided shareholders with a total return of 3.25% for the period under review. This performance compared favorably with the Lehman Brothers Municipal Bond Index which had a total return of 3.22%. The North Carolina Tax-Free Short-to-Medium Series provided shareholders with a total return of 3.41% for the period under review which also compared favorably with the Lehman Brothers Municipal Bond Index which had a total return of 3.22%.

The Alabama Tax-Free Income Series provided shareholders with a total return of 3.20% for the period under review. This performance closely approximated the performance of the Lehman Brothers Municipal Bond Index which had a total return of 3.22%.

The Mississippi Tax-Free Income Series provided shareholders with a total return of 3.23% for the period under review. This performance compared favorably with the Lehman Brothers Municipal Bond Index which had a total return of 3.22%.

ii

The Intermediate Government Bond Series provided shareholders with a total return of 6.65% for the period under review. This performance slightly lagged the Lehman Brothers U.S. Government Intermediate Bond Index which had a total return of 6.83%.

It should be noted that the Lehman Brothers Municipal Bond and Government Bond Indices do not take into account any operating expenses or transaction costs. An investment cannot be made directly in an index.

At the end of the review period, economic growth continued to be restrained by a weak housing sector and rising energy costs. Energy prices spiked towards the end of 2007 which contributed to an increase in inflation, as measured by the Consumer Price Index (CPI), which rose by 4.1% in December compared with a year earlier. The core CPI, which excludes food and energy, rose 2.4% in December compared with a year earlier. The economic forecast for 2008 is for economic growth to be below trend with the weak housing market continuing to act as a drag on the overall economy. Many economists believe that if the economy continues to slow inflationary pressures will ease.

Overall, we were pleased with the performance of all of our funds during the period under review. We believe that adhering to our longstanding policy of buying high quality investment grade bonds at the best prices possible helped us to achieve the desired results. We thank you for investing with Dupree Mutual Funds.

Total returns include changes in share price, reinvestment of dividends, and reinvestment of capital gains, if any. Performance data quoted represents past performance which is no guarantee of future results. The opinions expressed herein are those of the funds’ portfolio management and are current as of December 31, 2007. Management’s opinions are not guarantees of performance or investment results and should not be taken as investment advice.

iii

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

Kentucky Tax-Free Income Series

	% of Investments at market
CREDIT QUALITY
Aaa/AAA	81.84	%
Aa/AA	13.01	%
A	2.72	%
Baa/BBB	0.72	%
Not Rated	1.71	%
	100.00	%
COMPOSITION
Prerefunded	12.75	%
General Obligation	1.58	%
Certificates of Participation	0.35	%
Lease Revenue	7.83	%
Municipal Utilities	1.77	%
Hospitals/Healthcare	1.59	%
State and Local Mortgage	0.56	%
University Consolidated
Education	0.31	%
Public Facilities	0.76	%
Insured Municipals	66.31	%
Escrowed to Maturity	6.19	%
	100.00	%

Kentucky Tax-Free Short-to-Medium Series

	% of Investments at market
CREDIT QUALITY
Aaa/AAA	60.03	%
Aa/AA	33.95	%
A	3.27	%
Baa/BBB	0.94	%
Not Rated	1.81	%
	100.00	%
COMPOSITION
Variable Rate	1.67	%
Prerefunded	7.87	%
General Obligation	5.02	%
Certificates of Participation	1.39	%
Lease Revenue	17.32	%
Municipal Utilities	1.86	%
Hospitals/Healthcare	3.25	%
Insured Municipals	59.37	%
Escrowed to Maturity	2.25	%
	100.00	%

Alabama Tax-Free Income Series

	% of Investments at market
CREDIT QUALITY
Aaa/AAA	79.46	%
Aa/AA	15.67	%
A	0.87	%
Baa/BBB	0.87	%
Not Rated	3.13	%
	100.00	%
COMPOSITION
Variable Rate	6.82	%
Prerefunded	11.99	%
Municipal Utilities	1.02	%
Industrial Revenue	0.87	%
Hospitals/Healthcare	0.43	%
University Consolidated Education	1.06	%
Public Facilities	1.77	%
Insured Municipals	76.04	%
	100.00	%

Mississippi Tax-Free Income Series

	% of Investments at market
CREDIT QUALITY
Aaa/AAA	83.89	%
Aa/AA	10.78	%
A	0.22	%
Baa/BBB	3.05	%
Not Rated	2.06	%
	100.00	%
COMPOSITION
Prerefunded	5.12	%
General Obligation	15.11	%
Insured Municipals	78.62	%
Escrowed to Maturity	1.15	%
	100.00	%

iv

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

Tennessee Tax-Free Income Series

	% of Investments at market
CREDIT QUALITY
Aaa/AAA	64.58	%
Aa/AA	33.79	%
A	0.32	%
Baa/BBB	1.31	%
	100.00	%
COMPOSITION
Prerefunded	5.35	%
General Obligation	13.56	%
Lease Revenue	0.26	%
Municipal Utilities	1.99	%
Industrial Revenue	0.18	%
Hospitals/Healthcare	11.47	%
State and Local Mortgage	3.28	%
University Consolidated Education	1.72	%
Insured Municipals	60.95	%
Escrowed to Maturity	1.24	%
	100.00	%

Tennessee Tax-Free Short-to-Medium Series

	% of Investments at market
CREDIT QUALITY
Aaa/AAA	74.52	%
Aa/AA	20.79	%
Baa/BBB	3.99	%
Not Rated	0.70	%
	100.00	%
COMPOSITION
Prerefunded	4.02	%
General Obligation	10.65	%
Lease Revenue	3.99	%
Municipal Utilities	1.71	%
Hospitals/Healthcare	1.01	%
State and Local Mortgage	0.70	%
Insured Municipals	77.92	%
	100.00	%

North Carolina Tax-Free Income Series

	% of Investments at market
CREDIT QUALITY
Aaa/AAA	77.22	%
Aa/AA	18.94	%
A	3.84	%
	100.00	%
COMPOSITION
Prerefunded	5.94	%
General Obligation	1.94	%
Certificates of Participation	11.17	%
Lease Revenue	3.06	%
Municipal Utilities	0.94	%
Hospitals/Healthcare	2.14	%
State and Local Mortgage	0.41	%
Insured Municipals	73.81	%
Escrowed to Maturity	0.59	%
	100.00	%

North Carolina Tax-Free Short-to-Medium Series

	% of Investments at market
CREDIT QUALITY
Aaa/AAA	73.72	%
Aa/AA	25.24	%
Baa/BBB	1.04	%
	100.00	%
COMPOSITION
Variable Rate	4.21	%
Prerefunded	2.87	%
General Obligation	4.99	%
Certificates of Participation	14.44	%
Lease Revenue	3.72	%
Hospitals/Healthcare	2.35	%
University Consolidated Education	1.74	%
Insured Municipals	65.68	%
	100.00	%

v

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

Intermediate Government Bond Series

	% of Investments at market
CREDIT QUALITY
Aaa/AAA	100.00	%
COMPOSITION
Federal Farm Credit Banks	23.00	%
Federal Home Loan Banks	40.80	%
Federal Home Loan Mortgage	8.82	%
Federal National Mortgage	22.28	%
Student Loan Mortgage	5.10	%
	100.00	%

vi

DUPREE MUTUAL FUNDS - ALABAMA TAX-FREE INCOME SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
Alabama Municipal Bonds — 100%
December 31, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
74.67% of Net Assets
AL Agriculture & Mechanical University Revenues Refunding	5.000	%	11/01/2024	Aaa*	$	100,000	$	105,329
AL Drinking Water Finance Authority Revolving Fund Loan	4.750		08/15/2027	Aaa/AAA*/AAA@		75,000		76,195
AL Housing Financial Authority Single Family Mortgage	5.050		10/01/2013	Aaa		10,000		10,176
AL Private College & Universities Facilities Authority Revenue	4.750		09/01/2026	AAA*		500,000		509,115
AL State Board Education Bishop State Community College	4.600		01/01/2021	Aaa/AAA@		100,000		102,285
AL State Board of Education Revenue Calhoun Community	5.000		05/01/2022	Aaa/AAA@		450,000		476,276
AL State University Revenue General Tuition & Fee -Series A	5.000		01/01/2019	Aaa/AAA*/AAA@		50,000		52,580
AL State University Revenue General Tuition & Fee	5.000		08/01/2026	Aaa/AAA*/AAA@		150,000		156,371
AL Water Pollution Control Authority Revolving Fund Loan	5.500		08/15/2016	Aaa/AAA*		10,000		10,026
AL Water Pollution Control Authority Revolving Fund Loan	4.800		08/15/2018	Aaa/AAA*/AAA@		50,000		51,773
AL Water Pollution Control Authority Revolving Fund Loan	4.800		08/15/2022	Aaa/AAA*/AAA@		170,000		174,806
AL Water Pollution Control Authority Revolving Fund Loan	5.000		08/15/2026	Aaa/AAA*/AAA@		130,000		134,077
Alexander City AL Warrants	4.700		05/01/2021	Aaa/AAA*/AAA@		200,000		206,362
Auburn AL Capital Improvement School Warrants	5.000		08/01/2030	Aaa/AAA*/AAA@		260,000		270,124
Baldwin County AL Water and Sewer Series A General Obligation	5.000		01/01/2025	Aaa/AAA*		295,000		308,853
Birmingham AL General Obligation - Series A	5.125		11/01/2022	Aaa/AAA*/AAA@		100,000		107,287
Birmingham AL Warrants Parking Improvement Series C	5.000		04/01/2031	Aaa/AAA*/AAA@		90,000		94,280
Birmingham AL Special Care Facilities Financing	5.000		06/01/2020	Aaa/AAA*		100,000		103,517
Birmingham AL Waterworks & Sewer Revenue Warrants - SeriesA	5.000		01/01/2023	Aaa/AAA*		125,000		132,623
Choctaw County AL Revenue School Warrants	4.700		03/01/2017	NR		200,000		190,942
Daphne AL Warrants	5.000		04/01/2023	Aaa/AAA*		250,000		264,163
East AL Health Care Authority Health Care Facilities Revenue	5.200		09/01/2023	AAA*/AAA@		260,000		265,769
Elmore County AL Limited Obligation School Warrants	5.000		02/01/2022	AAA*/AAA@		190,000		199,340
Enterprise AL Water General Obligation	5.000		10/01/2019	Aaa/AAA*/AAA@		55,000		58,893
Enterprise AL Water General Obligation	5.000		10/01/2023	Aaa/AAA*/AAA@		450,000		471,479
Gasden AL Warrants - Series B	4.600		08/01/2022	Aaa/AAA@		100,000		102,681
Homewood AL Educational Building Authority Revenue Samford	5.000		12/01/2034	Aaa		200,000		208,614
Hoover AL Board of Education Capital Outlay Warrants	5.250		02/15/2026	Aaa/AAA*/AAA@		35,000		36,469
Huntsville AL Capital Improvement Warrants - Series C	4.500		11/01/2021	Aaa/AAA*/AAA@		200,000		203,894
Huntsville AL Health Care Authority - Series A	5.000		06/01/2023	Aaa/AAA*/AAA@		140,000		142,834
Huntsville AL Health Care Authority - Series A	5.000		06/01/2024	Aaa/AAA*		100,000		104,014
Huntsville AL Public Educational Building - A&M	5.600		06/01/2014	NR*		20,000		20,358
Huntsville AL Public Educational Building	6.050		06/01/2020	NR*		150,000		153,423
Jefferson County AL Public Building Authority Lease Revenue	5.000		04/01/2026	Aaa/AAA*		150,000		157,323
Jefferson County AL Sewer Revenue Capital Improvement	5.000		02/01/2020	Aaa/AAA*/AAA@		50,000		52,278
Lauderdale County & Florence AL Health Care Authority	5.250		07/01/2019	Aaa/AAA*/AAA@		30,000		30,934
Lee County AL School Warrants	5.000		02/01/2018	Aaa/AAA@		100,000		105,591
Lee County AL School Warrants Limited Obligation	5.000		02/01/2021	Aaa/AAA@		75,000		78,416
Limestone County AL Water & Sewer Authority Water Revenue	5.000		12/01/2029	Aaa		275,000		285,541
Linden AL Warrants	5.250		06/01/2023	AA*		25,000		25,492
Madison AL Refunding Warrants	5.000		04/01/2021	Aaa/AAA*/AAA@		350,000		375,977
Mobile AL Limited Obligation Tax Warrants	5.500		02/15/2023	A1		35,000		36,605
Montgomery AL Baptist Medical Center Special Care	5.375		09/01/2022	Aaa/AAA*		20,000		20,412
Montgomery AL Waterworks & Sanitation Sewer Board Revenue	5.000		09/01/2019	Aaa/AAA*/AAA@		50,000		52,803
Montgomery AL Waterworks & Sanitation Sewer Board Revenue	5.000		03/01/2025	Aaa/AAA*/AAA@		250,000		261,623
Morgan County AL Water and Sewer General Obligation Warrants	5.000		04/01/2028	Aaa		100,000		103,130
Muscle Shoals AL Refunded Warrants	4.600		08/01/2024	Aaa/AAA*/AAA@		250,000		255,748
Phenix City AL Schools Warrants Series B	5.000		08/01/2024	Aaa/AAA*/AAA@		150,000		158,052
Roanoke AL Warrants	4.450		05/01/2020	Aaa/AAA*/AAA@		150,000		153,252
St Clair County AL Board Education School Tax Warrants	4.400		02/01/2022	Aaa/AAA*/AAA@		50,000		50,343
Shelby County AL Board of Education Special Tax School Warrarants	5.000		02/01/2025	Aaa/AAA*		300,000		313,989
Talladega County AL Industrial Development Revenue Bond	4.700		01/01/2022	Aaa/AAA@		100,000		103,680
Trussville AL Warrants	4.800		10/01/2021	Aaa/AAA@		85,000		87,839
Tuskegee AL Utilities Board Utilities Revenue	5.500		02/01/2022	Aaa/AAA*		70,000		71,477
University of AL General Revenue - Series A	5.000		07/01/2034	Aaa/AAA*/AAA@		100,000		102,620
University of Southern AL University Revenue & Capital Improvement	5.000		03/15/2021	Aaa/AAA@		370,000		391,382
West Morgan - East Lawrence Water Authority AL Water Revenue	5.000		08/15/2025	Aaa/AAA*/AAA@		300,000		325,146
								9,104,581
GENERAL OBLIGATION BONDS
11.76% of Net Assets
AL State - Series A	5.000		06/01/2019	Aa3/AA*		30,000		30,991
AL State - Series A	5.000		06/01/2020	Aa3/AA*		100,000		103,373
AL State - Series B	5.000		06/01/2021	Aa3/AA*		30,000		30,760
AL State - Series A	4.625		09/01/2022	Aa3/AA*		100,000		103,865
AL 21st Century Authority Tobacco Settlement Revenue	5.750		12/01/2020	Baa1/A-*		50,000		51,248
AL 21st Century Authority Tobacco Settlement Revenue	5.850		12/01/2013	Baa1/A-*		15,000		15,756
Birmingham AL Warrants	4.900		01/01/2018	Aa3/AA*/AA-@		150,000		153,126
Birmingham AL Warrants	4.750		01/01/2023	Aa3/AA*/AA-@		225,000		228,429
Birmingham AL Capital Improvement Warrants - Series A	5.500		08/01/2025	Aa3/AA*/AA-@		100,000		105,912
Montgomery AL Warrants - Series C General Obligation Unlimited	5.000		01/01/2023	Aa2/AA*/AAA@		580,000		610,844
								1,434,304

The accompanying footnotes 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, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
PREREFUNDED BONDS
6.68% of Net Assets
AL Agriculture & Mechanical University Revenue	5.000	%	11/01/2025	Aaa/AAA*/AAA@	$	100,000	$	102,580
AL State Docks Department Docks Facilities Revenue	5.500		10/01/2022	Aaa/AAA*/AAA@		110,000		114,036
Central Elmore AL Water & Sewer	5.000		07/01/2021	Aaa/AAA*/AAA@		100,000		103,509
Hoover AL Warrants - Series A	5.650		01/01/2014	Aa3/AA*		10,000		10,579
Huntsville AL Public Building Authority Lease Revenue	5.125		10/01/2022	Aaa/AAA*/AAA@		200,000		217,713
Jasper AL Waterworks & Sewer Board Water & Sewer Revenue	5.100		06/01/2018	Aaa/AAA*/AAA@		30,000		32,140
Montgomery AL Baptist Medical Center Special Care	5.000		11/15/2029	Aaa/AAA*		85,000		86,737
Northwest AL Gas District Gas System Revenue	5.900		05/01/2020	Aaa/AAA@		35,000		36,001
Phenix City AL School Warrants	5.450		08/01/2016	Aaa/AAA*/AAA@		10,000		10,735
St Clair County AL Board of Education School Tax Anticipation	5.500		02/01/2016	Aaa/AAA*/AAA@		10,000		10,340
Southeast AL Gas District System Revenue - Series A	5.500		06/01/2020	Aaa/AAA@		10,000		10,718
University of Alabama Revenue - Birmingham	6.000		10/01/2020	Aaa/AAA*/AAA@		25,000		26,176
University AL University Revenue Hospital - Series A	5.400		09/01/2013	Aaa/AAA*/AAA@		50,000		53,420
								814,684
PUBLIC FACILITIES REVENUE BONDS
1.74% of Net Assets
AL State Public Schools & College Authority - Series B	5.000		12/01/2021	Aa3/AA*		190,000		201,706
Rockford AL Public Building Authority Building Revenue	5.750		09/01/2015	NR		10,000		10,274
								211,980
UNIVERSITY CONSOLIDATED EDUCATION & HOUSING
1.03% of Net Assets
Mobile AL Spring Hill College Educational Building	5.100		09/01/2019	Aa3		120,000		126,179
								126,179
MUNICIPAL UTILITIES
1.00% of Net Assets
Birmingham AL Water & Sewer Revenue Warrants - Series A	5.125		01/01/2017	A2/AA-*		20,000		20,400
Birmingham AL Water & Sewer Revenue Warrants - Series A	4.750		01/01/2021	A2/AA-*		100,000		101,504
								121,904
INDUSTRIAL REVENUE BONDS
.86% of Net Assets
Auburn AL Industrial Development Board Facilities Revenue	5.800		11/01/2011	BBB*		75,000		78,209
Auburn AL Industrial Development Board Facilities Revenue	6.200		11/01/2020	BBB*		25,000		26,059
								104,268
HOSPITALS AND HEALTHCARE
.42% of Net Assets
Mobile AL Second Medical Clinic Board Revenue Franklin	5.050		03/01/2018	Aa3		50,000		51,695
								51,695
Total Investments (cost $11,814,436)(See (a) below for further explanation) 98.16% of Net Assets							$	11,969,595

* Standard and Poor’s Corporation

@ Fitch’s Investors Service

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

NR Not Rated

# Bond ratings are unaudited.

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

Unrealized appreciation	$	189,865
Unrealized depreciation		(34,706	)
Net unrealized appreciation	$	155,159

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

2

ALABAMA TAX-FREE INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007	UNAUDITED

ASSETS:
Investments in securities, at value (Cost: $11,814,436)		$	11,969,595
Cash			82,416
Interest receivable			177,989
Receivable from Adviser			480
Total assets			12,230,480
LIABILITIES:
Payable for:
Distributions to shareholders	33,241
Fund shares redeemed	3
Transfer agent fee	2,218
Trustee fee	303
Accrued expenses	2,154
Total liabilities			37,919
NET ASSETS:
Capital			12,038,226
Net accumulated realized loss on investment transactions			(824	)
Net unrealized appreciation in value of investments			155,159
Net assets at value		$	12,192,561
NET ASSET VALUE, offering price and redemption price per share ($12,192,561 -:- 1,042,324 shares outstanding; unlimited number of shares authorized; no par value)		$	11.70

STATEMENT OF OPERATIONS
For the six months ended December 31, 2007
Net investment income:
Interest income	$	266,263
Expenses:
Investment advisory fee		29,797
Transfer agent fee		8,939
Custodian expense		2,400
Pricing fees		2,466
Professional fees		1,990
Trustee fees		689
Other expenses		4,411
Total expenses		50,692
Fees waived by Adviser		(21,441	)
Custodian expense reduction		(2,400	)
Net expenses		26,851
Net investment income		239,412
Realized and unrealized gain on investments:
Net realized gain		9,130
Net increase in unrealized appreciation		126,804
Net realized and unrealized gain on investments		135,934
Net increase in net assets resulting from operations	$	375,346

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

3

ALABAMA TAX-FREE INCOME SERIES
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended December 31, 2007 and the year ended June 30, 2007	UNAUDITED

	12/31/07			2007
Increase in net assets:
Operations:
Net investment income	$	239,412		$	461,296
Net realized gain on investments		9,130			19,580
Net increase in unrealized appreciation		126,804			33,183
Net increase in net assets resulting from operations		375,346			514,059
Distributions to shareholders from net investment income		(239,412	)		(461,296	)
Distributions to shareholders from capital gains		(23,016	)		—
Net fund share transactions (Note 4)		269,314			1,003,649
Total increase		382,232			1,056,412
Net assets:
Beginning of year		11,810,329			10,753,917
End of year	$	12,192,561		$	11,810,329

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding

	Six months ended			For the years ended June 30,
	12/31/2007			2007			2006			2005			2004
Net asset value, beginning of year	$	11.59		$	11.52		$	11.91		$	11.45		$	11.80
Income from investment operations:
Net investment income		0.23			0.47			0.47			0.48			0.51
Net gains/(losses) on securities, both realized and unrealized		0.11			0.07			(0.39	)		0.46			(0.35	)
Total from investment operations		0.34			0.54			0.08			0.94			0.16
Less distributions:
Distributions from net investment income		(0.23	)		(0.47	)		(0.47	)		(0.48	)		(0.51	)
Distributions from capital gains		(0.02	)		0.00			0.00			0.00			0.00
Net asset value, end of year	$	11.70		$	11.59		$	11.52		$	11.91		$	11.45
Total return		3.20	%		4.70	%		0.65	%		8.36	%		1.36	%
Net assets, end of year (in thousands)	$	12,193		$	11,810		$	10,754		$	7,800		$	5,273
Ratio of net expenses to average net assets (a)		0.23	%		0.43	%		0.46	%		0.46	%		0.40	%
Ratio of net investment income to average net assets		2.02	%		4.00	%		3.97	%		4.08	%		4.36	%
Portfolio turnover		4.70	%		5.43	%		7.72	%		3.96	%		16.43	%

(a) Percentages are after expenses waived by Adviser and custodian/interest expense reductions.

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

.18% and .02% for the six months ended 12/31/07; .37% and .04% for 2007; .38% and .05% for 2006; .36% and .08% for 2005; and .41% and .10% for 2004, respectively.

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

4

DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds — 100%
December 31, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
65.31% of Net Assets
Ballard County KY School District Finance Corporation	5.000	%	06/01/2020	Aaa/AAA@	$	1,240,000	$	1,323,254
Bardstown KY Combined Utilities Revenue	5.000		12/01/2017	Aaa/AAA@		1,290,000		1,355,197
Bardstown KY Combined Utilities Revenue	5.000		12/01/2018	Aaa/A2*/AAA@		1,510,000		1,581,589
Barren County KY School District Finance Corporation	4.750		08/01/2022	Aaa/Aa3*/AAA@		3,085,000		3,195,258
Boone County KY Pollution Control Revenue - Dayton Power	4.700		01/01/2028	Aaa/AAA*/AAA@		9,595,000		9,625,032
Boone County KY School District Finance Corporation	5.000		05/01/2023	Aaa/AAA*		4,070,000		4,276,878
Boone County KY School District Finance Corporation	5.000		05/01/2024	Aaa/AAA*		4,265,000		4,467,246
Boone County KY Water - Florence	5.000		12/01/2015	Aaa/AAA*		1,000,000		1,065,040
Boone-Florence KY Water Supply System Revenue	5.000		12/01/2017	Aaa/AAA*		1,805,000		1,905,394
Boone-Florence KY Water Supply System Revenue	5.000		12/01/2018	Aaa/AAA*		1,900,000		2,004,975
Boone-Florence KY Water Supply System Revenue	5.000		12/01/2020	Aaa/AAA*		2,100,000		2,196,453
Boyle County KY College Improvement - Centre College	4.750		06/01/2032	Aaa/AAA*		5,330,000		5,378,130
Bullitt County KY School District Finance Corporation	4.750		07/01/2022	Aaa/AAA@		2,440,000		2,533,916
Bullitt County KY School District Finance Corporation	4.500		10/01/2024	Aaa/AAA@		2,720,000		2,767,355
Campbell & Kenton Counties Sanitation District Number 1	5.000		08/01/2017	Aaa/AAA*/AAA@		1,000,000		1,063,080
Campbell County KY School District Finance Corporation	4.500		08/01/2023	Aaa/AAA@		980,000		993,906
Carter County KY Detention Center	5.125		05/01/2029	Aaa/AAA*		960,000		1,001,750
Eastern Kentucky University Consolidated Educational Building	5.000		05/01/2021	Aaa/AAA*		1,580,000		1,679,350
Fayette County KY School District Finance Corporation	5.250		04/01/2021	Aaa/AAA*/AAA@		2,285,000		2,419,861
Fayette County KY School District Finance Corporation	5.000		04/01/2024	Aaa/AAA*/AAA@		6,985,000		7,357,440
Fayette County KY School District Finance Corporation	5.000		04/01/2025	Aaa/AAA*/AAA@		7,340,000		7,717,276
Fayette County KY School District Finance Corporation	4.500		03/01/2022	Aaa/AA-*/AAA@		4,100,000		4,169,700
Franklin County School Building Revenue	4.750		05/01/2027	Aaa/AAA@		3,570,000		3,650,861
Greater KY Housing Assistance Corporation - Chenowith Woods	6.100		01/01/2024	Aaa/AAA*/AAA@		510,000		510,102
Greater KY Housing Assistance Corporation - Northside Apts	6.200		02/01/2025	AAA*		3,340,000		3,345,878
Greater KY Housing Assistance Corporation Mortgage Revenue	5.450		05/20/2027	Aaa		1,235,000		1,281,436
Harden County School District Finance Corporation	4.750		06/01/2027	Aaa		1,250,000		1,278,538
Jefferson County KY Health Facilities - Jewish Hospital	5.650		01/01/2017	Aaa/AAA*		3,450,000		3,489,779
Jefferson County KY Health Facilities - Jewish Hospital	5.700		01/01/2021	Aaa/AAA*		4,520,000		4,573,155
Jefferson County KY Health Facilities University Medical Center	5.500		07/01/2017	Aaa/AAA*		8,675,000		8,767,215
Jefferson County KY School District Finance Corporation	4.750		12/01/2026	Aaa/AAA*		3,770,000		3,863,496
Jefferson County KY School District Finance Corporation	5.250		01/01/2016	Aaa/AAA*/AAA@		1,000,000		1,036,780
Jefferson County KY School District Finance Corporation	5.250		01/01/2019	Aaa/AAA*/AAA@		2,000,000		2,067,600
Jefferson County KY School District Finance Corporation	4.500		07/01/2023	Aaa/AAA*/AAA@		2,500,000		2,540,625
Jefferson County KY School District Finance Corporation	4.625		07/01/2025	Aaa/AAA*/AAA@		7,545,000		7,696,428
Jefferson County KY School District Finance Corporation	5.000		07/01/2026	Aaa/AAA*		5,025,000		5,218,814
Jefferson County KY Health Facilities - Alliant Health	5.125		10/01/2017	Aaa/AAA*/AAA@		2,940,000		2,970,194
Jefferson County School District Finance Corporation	4.750		06/01/2027	Aaa/AAA*		3,000,000		3,075,450
Kenton County KY School District Finance Corporation	5.000		06/01/2021	Aaa/Aa3*/AAA@		4,055,000		4,313,020
Kenton County KY School District Finance Corporation	5.000		06/01/2023	Aaa/AAA@		4,465,000		4,686,955
Kenton County KY School District Finance Corporation	5.000		06/01/2024	Aaa/AAA@		4,665,000		4,880,850
KY Asset Liability Commission General Fund	5.000		05/01/2020	Aaa/AAA*/AAA@		2,000,000		2,135,080
KY Asset Liability Commission Project Notes	5.000		05/01/2023	Aaa/AAA*/AAA@		5,600,000		5,897,976
KY Asset Liability Commission General Fund	5.000		05/01/2024	Aaa/AAA*/AAA@		5,880,000		6,177,704
KY Asset Liability Commission	5.000		05/01/2025	Aaa/AAA*/AAA@		1,000,000		1,047,410
KY Asset Liability Project Notes	5.000		09/01/2015	Aaa/AAA*/AAA@		6,000,000		6,553,860
KY Asset/Liability University of Kentucky Project Notes	5.000		10/01/2026	Aaa/AAA*/AAA@		6,090,000		6,421,235
KY Asset Liability Commission University of KY Project Notes	5.000		10/01/2023	Aaa/AAA*		8,075,000		8,563,861
KY Asset Liability Commission University of KY Project Notes	5.000		10/01/2024	Aaa/AAA*		7,405,000	��	7,807,980
KY Asset Liability Commission University of KY Project Notes	5.000		10/01/2025	Aaa/AAA*		3,700,000		3,898,838
KY Economic Development Finance Authority - Ashland Hospital	5.000		02/01/2018	Aaa/AAA*/AAA@		1,500,000		1,528,140
KY Development Finance Authority - St Claire Medical	5.875		09/01/2013	AAA*		2,000,000		2,002,200
KY Development Finance Authority - St Claire Medical	5.625		09/01/2021	AAA*		2,500,000		2,502,200
KY Development Finance Authority - Methodist Hospital	5.625		02/01/2017	AAA*		6,500,000		6,620,315
KY Development Finance Authority - Appalachian Regional	5.850		10/01/2017	NR*		1,000,000		1,004,480
KY Housing Corporation	4.750		07/01/2017	Aaa/AAA*		1,335,000		1,356,761
KY Housing Corporation	4.650		07/01/2023	Aaa/AAA*		3,595,000		3,618,188
KY Housing Corporation	4.400		01/01/2017	Aaa/AAA*		1,000,000		1,022,050
KY Housing Corporation	4.850		01/01/2024	Aaa/AAA*		2,000,000		2,030,840
KY State Property & Building #73	5.000		11/01/2021	Aaa/AAA*/AAA@		1,000,000		1,061,090
KY State Property & Building #76	5.500		08/01/2021	Aaa/AAA/AAA		500,000		577,990
KY State Property & Building #83	5.000		10/01/2013	Aaa/AAA*/AAA@		610,000		659,892
KY State Property & Building #83	5.000		10/01/2017	Aaa/AAA*/AAA@		5,000,000		5,532,000
KY State Property & Building #83	5.000		10/01/2018	Aaa/AAA*/AAA@		17,750,000		19,630,790
KY State Property & Building #83	5.250		10/01/2020	Aaa/AAA*/AAA@		24,220,000		27,322,582
KY State Property & Building #88	4.750		11/01/2027	Aaa/AAA*/AAA@		4,000,000		4,091,280
KY State Property & Building #73	5.500		11/01/2017	Aaa/AAA*/AAA@		1,000,000		1,091,890
KY State Property & Building #73	5.000		11/01/2019	Aaa/AAA*/AAA@		1,360,000		1,438,758
KY State Property & Building #73	5.000		11/01/2020	Aaa/AAA*/AAA@		3,255,000		3,453,848

The accompanying footnotes 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, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
KY State Property & Building #84	5.000	%	08/01/2019	Aaa/AAA*/AAA@	$	10,000,000	$	11,046,500
KY State Property & Building #84	5.000		08/01/2022	Aaa/AAA*/AAA@		17,500,000		19,255,775
KY State Property & Building #88	5.000		11/01/2024	Aaa/AAA*/AAA@		1,355,000		1,435,907
KY State Property & Building #80	5.250		05/01/2018	Aaa/AAA*/AAA@		2,940,000		3,298,680
KY State Property & Building #80	5.250		05/01/2020	Aaa/AAA*/AAA@		1,000,000		1,127,980
KY State Property & Building #81	5.000		11/01/2017	Aaa/AAA*/AAA@		2,060,000		2,217,157
KY State Property & Building #81	5.000		11/01/2018	Aaa/AAA*/AAA@		1,720,000		1,831,611
KY State Property & Building #81	5.000		11/01/2019	Aaa/AAA*/AAA@		2,385,000		2,532,059
KY State Property & Building #81	5.000		11/01/2020	Aaa/AAA*/AAA@		3,560,000		3,771,891
KY State Property & Building #81	5.000		11/01/2022	Aaa/AAA*/AAA@		3,930,000		4,130,351
KY State Turnpike Economic Development	5.150		07/01/2019	Aaa/AAA*/AAA@		1,000,000		1,051,890
KY State Turnpike Economic Development	5.000		07/01/2023	Aaa/AAA*/AAA@		4,325,000		4,545,618
KY State Turnpike Economic Development	5.000		07/01/2024	Aaa/AAA*/AAA@		3,770,000		3,952,430
KY State Turnpike Economic Development	5.000		07/01/2025	Aaa/AAA*/AAA@		2,000,000		2,092,840
KY State Turnpike Economic Development	5.000		07/01/2026	Aaa/AAA@/AAA*		4,720,000		4,966,856
KY State Property & Building #87	5.000		03/01/2022	Aaa/AAA*/AAA@		1,665,000		1,782,383
KY State Property & Building #87	5.000		03/01/2025	Aaa/AAA*/AAA@		4,000,000		4,231,800
Laurel County KY School District Finance Corporation	4.625		08/01/2026	Aaa/AAA@		3,150,000		3,188,840
Laurel County School District Finance Corporation	4.750		06/01/2026	Aaa		1,000,000		1,029,820
Letcher County KY School District Finance Corporation	5.000		06/01/2022	Aaa/Aa3*/AAA@		1,755,000		1,860,528
Letcher County KY School District Finance Corporation	5.000		06/01/2024	Aaa/Aa3*/AAA@		1,930,000		2,017,082
Louisville & Jefferson County KY Metropolitan Sewer	5.000		05/15/2019	Aaa/AAA*/AAA@		2,500,000		2,534,300
Louisville & Jefferson County KY Metropolitan Sewer	4.750		05/15/2028	Aaa/AAA*/AAA@		10,425,000		10,508,192
Louisville & Jefferson County KY Metropolitan Sewer	5.000		05/15/2022	Aaa/AAA*/AAA@		2,855,000		3,029,983
Louisville & Jefferson County KY Metropolitan Sewer	5.000		05/15/2023	Aaa/AAA*/AAA@		2,990,000		3,165,423
Louisville & Jefferson County KY Metropolitan Sewer	5.000		05/15/2024	Aaa/AAA*/AAA@		3,135,000		3,300,559
Louisville & Jefferson County KY Metropolitan Sewer	5.000		05/15/2025	Aaa/AAA*/AAA@		3,285,000		3,452,108
Louisville & Jefferson County KY Metropolitan Sewer	5.000		05/15/2026	Aaa/AAA*/AAA@		5,000,000		5,231,750
Louisville & Jefferson County KY Metropolitan Sewer	5.000		05/15/2025	Aaa/AAA*		3,270,000		3,450,504
Louisville & Jefferson County KY Metropolitan Sewer	5.000		05/15/2026	Aaa/AAA*		3,230,000		3,396,668
Louisville & Jefferson County KY Regional Airport Authority	5.500		07/01/2017	Aaa/AAA*/AAA@		2,655,000		2,862,010
Louisville & Jefferson County KY Visitors & Convention Center	4.500		12/01/2023	Aaa/AAA*/AAA@		2,340,000		2,382,611
Louisville & Jefferson County KY Visitors & Convention Center	4.500		12/01/2024	Aaa/AAA*/AAA@		2,250,000		2,271,915
Louisville & Jefferson County KY Visitors & Convention Center	4.600		12/01/2025	Aaa/AAA*/AAA@		1,490,000		1,523,346
Louisville & Jefferson County KY Student Housing	5.000		06/01/2025	AAA*		2,030,000		2,128,536
Louisville KY General Obligation - Series A	5.000		10/01/2020	Aaa/AAA*/AAA@		7,165,000		7,595,760
Louisville KY Health Care Facilities	6.650		12/20/2030	Aaa		4,832,000		5,302,927
Louisville KY Parking Authority - River City First Mortgage	5.000		12/01/2017	Aaa/AAA*/AAA@		1,000,000		1,014,560
Madison County KY School District Finance Corporation	4.500		04/01/2016	Aaa/AAA*/AAA@		695,000		719,089
Marshall County KY School District Finance Corporation	5.000		06/01/2022	Aaa/Aa3*/AAA@		1,400,000		1,480,920
McCracken County KY School District Finance Corporation	4.650		07/01/2019	Aaa/AAA@		1,655,000		1,704,385
McCracken County KY School District Finance Corporation	4.700		07/01/2020	Aaa/AAA@		1,725,000		1,777,130
McCracken County KY School District Finance Corportion	5.000		07/01/2022	Aaa/AAA@		4,000,000		4,193,440
McCreary County KY Courthouse & Public Square Corporation	5.400		09/01/2020	Aaa/AAA*/AAA@		1,550,000		1,632,150
Nelson County KY School District Finance Corporation	4.500		04/01/2021	Aaa/Aa3*/AAA@		1,130,000		1,152,690
Nelson County KY School District Finance Corporation	4.500		04/01/2023	Aaa/Aa3*/AAA@		2,505,000		2,542,274
Northern KY University Certificate of Participation	4.900		12/01/2021	Aaa/AAA*		2,725,000		2,824,762
Northern KY University Certificate of Participation	5.000		12/01/2024	Aaa/AAA*		2,000,000		2,080,240
Northern KY Water District	4.750		02/01/2019	Aaa/AAA*		1,000,000		1,029,100
Northern KY Water District	5.000		02/01/2020	Aaa/AAA@		3,080,000		3,224,390
Northern KY Water District	5.000		02/01/2021	Aaa/AAA@		2,635,000		2,757,528
Northern KY Water District	4.125		02/01/2021	Aaa		1,380,000		1,351,917
Northern KY Water District	4.500		02/01/2022	Aaa		1,385,000		1,409,431
Pike County KY Mortgage Revenue - Phelps Regional Health	5.350		09/20/2012	AAA*		130,000		132,600
Radcliff KY Mortgage Revenue - Lincoln Trail Care	5.650		01/20/2019	AAA*		3,015,000		3,077,622
Shelby County KY School District Finance Corporation	5.000		05/01/2022	Aaa/Aa3*/AAA@		1,815,000		1,919,726
Shelbyville KY Certificate of Participation	5.150		07/01/2018	Aaa/AAA@		4,165,000		4,277,872
Spencer County KY School District Finance Corporation	5.000		07/01/2023	Aaa/AAA@		1,000,000		1,052,640
Taylor County Detention Facility	4.750		09/01/2027	Aaa		2,110,000		2,150,407
Warren County KY Hospital Facility Revenue	4.625		04/01/2012	Aaa/AAA*/AAA@		1,500,000		1,519,110
Warren County KY Hospital Facility Revenue	5.000		04/01/2016	AAA/Aaa*/AAA@		1,000,000		1,013,150
Warren County KY Hospital Facility Revenue	5.000		04/01/2017	Aaa/AAA*/AAA@		1,000,000		1,012,520
								464,928,737
PREREFUNDED BONDS
12.56% of Net Assets
Boone County KY School District Finance Corporation	5.500		09/01/2019	Aa3		1,860,000		1,953,279
Boone County KY School District Finance Corporation	5.750		02/01/2020	Aa3		1,200,000		1,273,140
Christian County KY Public Courthouse Lease Revenue	5.125		08/01/2017	Aa3		1,090,000		1,157,842
Christian County KY Public Courthouse Lease Revenue	5.125		08/01/2018	Aa3		1,145,000		1,216,906
Covington Independent School District Finance Corporation	5.250		06/01/2019	Aa3		1,225,000		1,271,697
Georgetown College Project - Series A	6.000		11/15/2016	BBB-*		1,000,000		1,085,330
Georgetown College Project - Series A	6.250		11/15/2020	BBB-*		4,000,000		4,368,560
Jefferson County KY College Project Bellarmine College	5.250		05/01/2019	Baa2		2,000,000		2,074,040

The accompanying footnotes 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, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
KY Economic Development Finance Authority - Catholic Health	5.500	%	09/01/2014	Aa2/AA*/AA@	$	1,375,000	$	1,483,034
KY Development Finance Authority - Catholic Health	5.000		12/01/2018	Aa2/AA*/AA@		2,000,000		2,034,460
KY Development Finance Authority - Catholic Health	5.750		12/01/2015	Aa2/AA*/AA@		2,000,000		2,134,700
KY Development Finance Authority - Catholic Health	5.250		09/01/2021	Aa2/AA*/AA@		2,000,000		2,139,980
KY State Property & Building #67	5.125		09/01/2018	Aa3/AAA*/AA-@		1,000,000		1,049,300
KY State Property & Building #85	5.000		08/01/2020	Aaa/AAA*/AAA@		5,760,000		6,355,123
KY State Property & Building #85	5.000		08/01/2022	Aaa/AAA*/AAA@		8,200,000		9,047,224
KY State Property & Building #85	5.000		08/01/2023	Aaa/AAA*/AAA@		12,500,000		13,791,500
KY State Property & Building #85	5.000		08/01/2024	Aaa/AAA*/AAA@		13,300,000		14,674,156
KY State Property & Building #85	5.000		08/01/2025	Aaa/AAA*/AAA@		5,000,000		5,516,600
KY State Property & Building #67	5.125		09/01/2016	Aa3/AAA*/AA-@		1,000,000		1,050,090
KY State Property & Building #77	5.250		08/01/2015	AAA/Aaa*/AAA@		1,140,000		1,253,077
KY State Property & Building #79	4.750		10/01/2023	Aaa/AAA*/AAA@		3,000,000		3,227,610
Knox County General Obligation	5.625		06/01/2036	AAA*/AAA@		2,490,000		2,866,015
Laurel County KY School District School Building Revenue	5.750		06/01/2020	Aa3		1,250,000		1,348,800
Lexington Fayette Urban County Government Public Facilities	5.125		10/01/2017	Aaa/AAA*		1,830,000		1,884,113
Lexington Fayette Urban County Government Public Facilities	5.125		10/01/2018	Aaa/AAA*		2,135,000		2,198,132
University of Kentucky Housing and Dining	4.400		06/01/2017	Aaa/AAA@		2,815,000		2,968,783
								89,423,491
LEASE REVENUE BONDS
7.71% of Net Assets
Boone County KY School District Finance Corporation	5.000		08/01/2019	Aa3		1,040,000		1,095,141
Boone County KY School District Finance Corporation	5.000		02/01/2022	Aa3		3,000,000		3,155,940
Bullitt County KY School District Finance Corporation	5.000		07/01/2021	Aa3		1,000,000		1,052,450
Danville KY Multi-City Lease Campbellsville Water & Sewer	3.500		07/01/2012	Baa1		1,950,000		1,925,996
Davies County KY School District Finance Corporation	5.000		06/01/2021	Aa3		1,155,000		1,220,419
Green County KY School District Finance Corporation	5.000		04/01/2021	Aa3		1,085,000		1,133,651
Greenup County KY School District Finance Corporation	4.650		03/01/2021	Aa3		1,650,000		1,712,123
Hopkins County KY School District Finance Corporation	5.125		06/01/2019	Aa3		4,120,000		4,351,173
KY Area Development Districts Financing Lease - Ewing ^	5.700		06/01/2015	AA*		1,500,000		1,610,625
KY Area Development Districts Financing Lease - Ewing ^	5.600		06/01/2022	AA*		1,055,000		1,092,421
KY Area Development Districts Financing Lease - Ewing ^	5.350		12/01/2022	AA*		2,560,000		2,615,322
KY Area Development Districts Financing Lease - Ewing ^	5.400		12/01/2021	AA*		710,000		734,878
KY Area Development Districts Financing Lease - Ewing ^	5.400		12/01/2021	AA*		1,095,000		1,124,445
KY Area Development Districts Financing Lease - Ewing ^	4.700		06/01/2024	AA*		2,625,000		2,607,071
KY Interlocal Transportation Equipment Lease Revenue	6.000		12/01/2020	Aa3/A+*		400,000		402,328
KY Infrastructure Authority - Series A	5.000		06/01/2019	Aa3/A+*/AA-@		1,000,000		1,040,030
KY Infrasturcture Authority - Series E	5.000		06/01/2017	Aa3/AA-*		1,035,000		1,050,453
KY State Property & Building #68	5.250		10/01/2018	Aa3/A+*/AA-@		1,500,000		1,574,235
KY State Property & Building #68	5.000		10/01/2019	Aa3/A+*/AA-@		5,500,000		5,718,405
KY State Property & Building #73	5.500		11/01/2013	Aa3/A+*/AA-@		1,500,000		1,613,910
Martin County KY School District Finance Corporation	5.375		09/01/2020	Aa3		1,100,000		1,161,754
Montgomery County KY School District Finance Corporation	4.375		04/01/2023	Aa3		3,105,000		3,119,997
Oldham County KY School District Finance Corporation	5.000		12/01/2021	Aa3		2,090,000		2,209,381
Pendleton County KY Multi-County Lease Revenue ^^	6.400		03/01/2019	A*		3,000,000		3,498,660
Pendleton County KY School District Finance Corporation	5.125		06/01/2019	Aa3		1,140,000		1,184,631
Pike County School District Finance Corporation	5.000		09/01/2016	Aa3		1,850,000		1,943,129
Pike County KY School District Finance Corporation	5.100		09/01/2020	Aa3		1,000,000		1,049,720
Scott County KY School District	5.000		03/01/2021	Aa3		1,240,000		1,310,816
Trigg County KY School District Finance Corporation	4.600		04/01/2018	Aa3		1,700,000		1,730,889
Whitley County KY School Finance	4.800		02/01/2021	Aa3		800,000		834,664
								54,874,657
ESCROWED TO MATURITY BONDS
6.09% of Net Assets
Ashland KY Pollution Control Revenue - Ashland Inc	5.700		11/01/2009	Ba1		1,000,000		1,046,670
Danville KY Multi-City Lease Revenue - Hopkinsville	6.875		06/01/2012	Baa1		1,480,000		1,585,065
Jefferson County KY Health Facilities - Alliant Health	5.125		10/01/2018	Aaa/AAA*/AAA@		33,000,000		33,762,630
Jefferson County KY Health Facilities - Alliant Health	5.125		10/01/2017	Aaa/AAA*/AAA@		4,980,000		5,031,493
KY Development Finance Authority - Norton Health	6.125		10/01/2010	A - @		1,890,000		1,954,506
								43,380,364
MUNICIPAL UTILITY REVENUE BONDS
1.75% of Net Assets
KY Rural Water Financial Corporation Public Project Revenue	5.375		02/01/2020	AA-*		1,140,000		1,211,341
Louisville & Jefferson County KY Waterworks & Water System	5.000		11/15/2031	Aa1/AA+*		10,695,000		11,233,707
								12,445,048
HOSPITAL AND HEALTHCARE REVENUE BONDS
1.57% of Net Assets
Jefferson County KY Health Facilities - Jewish Hospital	5.700		01/01/2011	A1/AA-*		1,200,000		1,213,512
KY Development Finance Authority - Green River	6.000		11/01/2010	Aaa		1,000,000		1,011,810
KY Development Finance Authority - Norton Health	6.125		10/01/2010	A - @		3,440,000		3,543,303
KY Development Finance Authority - Catholic Health	5.125		10/01/2021	A1/AA*/AA-@		1,000,000		1,030,780
Madison County KY Industrial Building Revenue - McCready Manor	5.500		06/01/2020	AA-*		1,785,000		1,862,772
Pike County KY Mortgage Revenue - Phelps Regional Health	5.650		09/20/2027	AAA*		2,435,000		2,483,700
								11,145,877

The accompanying footnotes 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, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
GENERAL OBLIGATION BONDS
1.55% of Net Assets
Bowling Green KY General Obligation	5.300	%	06/01/2018	Aa3	$	1,000,000	$	1,046,490
Bowling Green KY General Obligation	4.600		06/01/2018	Aa2		1,290,000		1,335,795
Hardin County KY General Obligation	5.125		06/01/2019	A1		2,255,000		2,329,460
Jefferson County KY - Series A	4.900		12/01/2018	Aa2/AA*		1,605,000		1,659,955
KY State Property & Building #62	4.625		09/01/2013	Aa3/A+*/AA-@		2,750,000		2,823,673
Louisville KY General Obligation	5.000		11/01/2019	Aa2/AA*		1,775,000		1,877,471
								11,072,844
PUBLIC FACILITIES REVENUE BONDS
.75% of Net Assets
Boone County KY Public Property Corporation - AOC Judicial	5.000		09/01/2019	Aa3		1,000,000		1,063,180
Boone County KY Public Property Corporation - Judicial Facilities	5.125		09/01/2022	Aa3		1,750,000		1,872,973
Calloway County KY Public Property Corporation - Courthouse	5.625		03/01/2018	A*		1,000,000		1,020,670
Danville KY Multi-City Lease Revenue - Mt Sterling	5.000		09/01/2011	NR		335,000		337,097
Florence KY Public Property Corporation Revenue	5.250		03/01/2017	A3		1,060,000		1,063,106
								5,357,026
STATE AND LOCAL MORTGAGE REVENUE BONDS
.55% of Net Assets
Florence KY Housing Facility Revenue	6.300		08/15/2019	NR*		2,615,000		2,679,774
Kentucky Housing Corporation	4.750		07/01/2032	Aaa/AAA*		1,265,000		1,250,554
								3,930,328
CERTIFICATES OF PARTICIPATION BONDS
.35% of Net Assets
Shelbyville KY Certificate of Participation	5.350		10/01/2013	NR		1,295,000		1,322,402
Shelbyville KY Certificate of Participation	5.450		10/01/2017	NR		1,130,000		1,152,114
								2,474,516
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS
.31% of Net Assets
Berea KY Educational Facilities Revenue	4.125		06/01/2022	Aaa		2,190,000		2,174,623
								2,174,623
Total Investments (cost $685,994,144) (See (a) below for further explanation) 98.50% of Net Assets							$	701,207,511

* Standard and Poor’s Corporation

@ Fitch’s Investors Service

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

NR Not Rated

# Bond ratings are unaudited.

^ Certain bonds within the same Kentucky Area Development Districts (KADD) financial pool are in default, however, the bonds held by the Fund are not in default at December 31, 2007.

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

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

Unrealized appreciation	$	17,619,347
Unrealized depreciation		(2,395,980	)
Net unrealized appreciation	$	15,223,367

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

8

KENTUCKY TAX-FREE INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007	UNAUDITED

ASSETS:
Investments in securities, at value (Cost: $685,984,144)		$	701,207,511
Cash			2,715,811
Broker receivable			83,660
Receivable from investments sold			1,906,000
Interest receivable			9,396,644
Total assets			715,309,626
LIABILITIES:
Payable for:
Distributions to shareholders	2,780,424
Fund shares redeemed	224,602
Investment advisory fee	241,508
Transfer agent fee	72,417
Trustee fee	44,374
Accrued expenses	95,223
Total liabilities			3,458,548
NET ASSETS:
Capital			696,618,301
Net accumulated realized gain on investment transactions			9,410
Net unrealized appreciation in value of investments			15,223,367
Net assets at value		$	711,851,078
NET ASSET VALUE, offering price and redemption price per share ($711,851,078 -:- 94,458,636 shares outstanding; unlimited number of shares authorized; no par value)		$	7.54

STATEMENT OF OPERATIONS

For the six months ended December 31, 2007

Net investment income:
Interest income	$	16,069,639
Expenses:
Investment advisory fee		1,426,715
Transfer agent fee		427,539
Custodian expense		17,017
Professional fees		81,281
Trustee fees		41,026
Other expenses		68,362
Total expenses		2,061,940
Custodian expense reduction		(17,017	)
Net expenses		2,044,923
Net investment income		14,024,716
Realized and unrealized gain on investments:
Net realized gain		319,619
Net increase in unrealized appreciation		9,882,137
Net realized and unrealized gain on investments		10,201,756
Net increase in net assets resulting from operations	$	24,226,472

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

9

KENTUCKY TAX-FREE INCOME SERIES
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended December 31, 2007 and the year ended June 30, 2007	UNAUDITED

	12/31/07			2007
Increase in net assets:
Operations:
Net investment income	$	14,024,716		$	27,771,550
Net realized gain on investments		319,619			596,796
Net increase in unrealized appreciation		9,882,137			2,175,301
Net increase in net assets resulting from operations		24,226,472			30,543,647
Distributions to shareholders from net investment income		(14,024,716	)		(27,771,550	)
Distributions to shareholders from capital gains		—			(649,014	)
Net fund share transactions (Note 4)		(823,469	)		13,421,142
Total increase		9,378,287			15,544,225
Net assets:
Beginning of year		702,472,791			686,928,566
End of year	$	711,851,078		$	702,472,791

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months ended 12/31/2007			For the years ended June 30,
				2007			2006			2005			2004
Net asset value, beginning of year	$	7.43		$	7.40		$	7.67		$	7.49		$	7.73
Income from investment operations:
Net investment income		0.15			0.30			0.30			0.32			0.33
Net gains/(losses) on securities, both realized and unrealized		0.11			0.04			(0.27	)		0.18			(0.24	)
Total from investment operations		0.26			0.34			0.03			0.50			0.09
Less distributions:
Distributions from net investment income		(0.15	)		(0.30	)		(0.30	)		(0.32	)		(0.33	)
Distributions from capital gains		—			(0.01	)		—			—			—
Net asset value, end of year	$	7.54		$	7.43		$	7.40		$	7.67		$	7.49
Total return		3.51	%		4.51	%		0.41	%		6.79	%		1.23	%
Net assets, end of year (in thousands)	$	711,851		$	702,473		$	686,929		$	683,296		$	614,357
Ratio of net expenses to average net assets (a)		0.29	%		0.58	%		0.58	%		0.58	%		0.58	%
Ratio of net investment income to average net assets		1.99	%		3.94	%		4.00	%		4.20	%		4.37	%
Portfolio turnover		1.93	%		6.76	%		17.60	%		19.38	%		7.89	%

(a) Percentages are after custodian/interest expense reductions.

Percentages before custodian/interest expense reductions were:

.29% for the six months ended December 31, 2007; .58% for 2007; .59% for 2006; .60% for 2005; and .60% for 2004 respectively.

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

10

DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds — 100%
December 31, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
57.67% of Net Assets
Boone-Florence Water Supply System Revenue	4.300	%	12/01/2011	Aaa/AAA@	$	505,000	$	524,150
Carrollton & Henderson Ky Public Energy Authority Gas Revenue	5.000		01/01/2009	Aaa/AAA*/AAA@		3,650,000		3,708,364
Eastern KY University Consolidated Education Building	4.300		05/01/2009	Aaa/AAA*/AAA@		500,000		506,450
Hardin County KY Hospital Revenue Refunding	3.500		10/01/2010	Aaa/AAA@		1,050,000		1,055,156
Jefferson County KY Health Facility University Medical Center	5.000		07/01/2008	Aaa/AAA*/AAA@		300,000		303,030
Jefferson County KY School District Finance Corporation	3.125		01/01/2011	Aaa/AAA*/AAA@		1,240,000		1,231,394
Kentucky Asset Liability Project Notes	5.000		09/01/2017	Aaa/AAA*/AAA@		1,000,000		1,102,220
KY Asset Liability Project Notes	5.000		09/01/2016	Aaa/AAA*/AAA@		2,000,000		2,167,500
KY Asset Liability University of Kentucky Project Notes	5.000		10/01/2016	Aaa/AAA*/AAA@		1,250,000		1,362,950
KY Economic Development Finance Authority Appalachian Hospital	5.700		10/01/2010	NR*		1,000,000		1,006,810
KY State Property & Building Project #87	5.000		03/01/2020	Aaa/AAA*/AAA@		3,000,000		3,228,150
KY State Property & Building #69	5.000		08/01/2009	Aaa/AAA*/AAA@		1,620,000		1,664,615
KY State Property & Building #65	5.750		02/01/2009	Aaa/AAA*/AAA@		750,000		770,258
KY State Property & Building #82	5.250		10/01/2015	Aaa/AAA*/AAA@		2,000,000		2,231,340
KY State Property & Building #82	5.250		10/01/2017	Aaa/AAA*/AAA@		1,000,000		1,126,710
KY State Property & Building #74	5.375		02/01/2011	Aaa/AAA*/AAA@		1,005,000		1,068,355
KY State Turnpike Authority Economic Development	5.000		07/01/2017	Aaa/AAA*/AAA@		2,570,000		2,813,713
Northern KY Water Services District Water District Revenue	4.750		02/01/2011	Aaa		1,025,000		1,041,646
Oldham County School Building Corporation	4.375		06/01/2018	Aaa		2,570,000		2,679,765
University of KY Consolidated Education Building - Series S	3.500		05/01/2010	Aaa/AAA@		1,190,000		1,198,187
Warren County KY School District Finance Corporation	4.000		02/01/2015	Aaa		785,000		805,441
Warren County KY School District Finance Corporation	4.000		02/01/2016	Aaa		1,330,000		1,361,361
								32,957,565
LEASE REVENUE BONDS
16.82% of Net Assets
KY Area Development District Financing City of Ewing ^	5.100		06/01/2010	AA*		820,000		834,686
KY Infrastructure Authority Government Agency Program S:K	4.000		08/01/2010	AA*		1,000,000		1,022,150
KY Infrastructure Authority - Series A	5.000		06/01/2010	Aa3/A+*/AA-@		2,000,000		2,081,600
KY Infrastructure Authority	5.250		08/01/2013	AA*		1,185,000		1,293,072
KY State Property & Building #71	5.500		08/01/2008	Aa3/A+*/AA-@		10,000		10,127
KY State Property & Building #60	5.500		10/01/2008	Aa3/A+*/AA-@		500,000		508,985
KY State Property & Building #73	3.700		11/01/2008	Aa3/A+*/AA-@		1,000,000		1,003,300
KY State Property & Building #73	5.250		11/01/2011	Aa3/A+*/AA-@		750,000		801,938
KY State Property & Building #73	5.250		11/01/2009	Aa3/A+*/AA-@		540,000		560,606
Laurel County KY School District Finance Corporation	4.600		03/01/2010	Aa3		1,000,000		1,022,190
Madison County KY School District Finance Corporation Revenue	3.500		05/01/2013	Aa3		470,000		472,256
								9,610,910
PREREFUNDED BONDS
7.64% of Net Assets
KY Economic Development Finance Authority - Catholic Health	5.500		12/01/2010	Aa2/AA*/AA@		2,100,000		2,231,859
KY Economic Development Finance Authority - Catholic Health	5.750		12/01/2015	Aa2/AA		2,000,000		2,134,700
								4,366,559
GENERAL OBLIGATION BONDS
4.87% of Net Assets
Jefferson County KY General Obligation	5.500		08/15/2010	Aa2/AA*		2,635,000		2,785,485
								2,785,485
HOSPITAL AND HEALTHCARE REVENUE BONDS
3.16% of Net Assets
KY Economic Development Finance Authority - Catholic Health	4.250		10/01/2009	A1/AA-*/AA-@		255,000		258,292
KY Economic Development Finance Authority - Catholic Health	4.500		10/01/2011	A1/AA-*/AA-@		1,000,000		1,031,250
KY Economic Development Finance Authority - Norton Health	6.125		10/01/2010	A - @		500,000		515,015
								1,804,557
ESCROWED TO MATURITY BONDS
2.18% of Net Assets
Ashland KY Pollution Control Revenue Ashland Inc Project	5.700		11/01/2009	Ba1		500,000		523,335
KY Economic Development Finance Authority - Norton Health	6.125		10/01/2010	A - @		270,000		279,215
KY State Property & Building #71	5.500		08/01/2008	Aaa/AAA*/AAA@		440,000		446,120
								1,248,670
MUNICIPAL UTILITY REVENUE BONDS
1.81% of Net Assets
Louisville KY Waterworks Board Water System Revenue	4.500		11/15/2010	Aa1/AA*		1,000,000		1,034,250
								1,034,250

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

11

DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds — 100%
December 31, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
VARIABLE RATE BONDS
1.62% of Net Assets
KY Asset Liability Commission General Fund	3.792	%	11/01/2027	Aaa/AAA*/AAA@	$	965,000	$	925,773
								925,773
CERTIFICATES OF PARTICIPATION BONDS
1.35% of Net Assets
KY Interlocal School Transportation Assistance Equipment	3.750		03/01/2015	Aa3		770,000		773,373
								773,373
Total Investments (cost $54,457,295)(See (a) below for further explanation) 97.12% of Net Assets							$	55,507,142

* Standard and Poor’s Corporation

@ Fitch’s Investors Service

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

NR Not Rated

# Bond ratings are unaudited.

^ Certain bonds within the same Kentucky Area Development Districts (KADD) financial pool are in default, however, the bonds held by the Fund are not in default at December 31, 2007.

(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	$	1,212,412
Unrealized depreciation		(162,565	)
Net unrealized appreciation	$	1,049,847

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

12

KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007	UNAUDITED

ASSETS:
Investments in securities, at value (Cost: $54,457,295)		$	55,507,142
Cash			1,004,823
Interest receivable			745,891
Total assets			57,257,856
LIABILITIES:
Payable for:
Distributions to shareholders	51,140
Fund shares redeemed	2,719
Investment advisory fee	24,420
Transfer agent fee	6,367
Trustee fee	7,058
Accrued expenses	13,199
Total liabilities			104,903
NET ASSETS:
Capital			57,857,167
Net accumulated realized loss on investment transactions			(1,754,061	)
Net unrealized appreciation in value of investments			1,049,847
Net assets at value		$	57,152,953
NET ASSET VALUE, offering price and redemption price per share ($57,152,953 -:- 10,944,263 shares outstanding; unlimited number of shares authorized; no par value)		$	5.22

STATEMENT OF OPERATIONS

For the six months ended December 31, 2007

Net investment income:
Interest income	$	1,192,000
Expenses:
Investment advisory fee		148,656
Transfer agent fee		38,694
Custodian expense		2,400
Professional fees		9,426
Trustee fees		3,494
Other expenses		12,921
Total expenses		215,591
Custodian expense reduction		(2,400	)
Net expenses		213,191
Net investment income		978,809
Realized and unrealized gain/(loss) on investments:
Net realized loss		(68,752	)
Net increase in unrealized appreciation		1,131,238
Net realized and unrealized gain on investments		1,062,486
Net increase in net assets resulting from operations	$	2,041,295

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

13

KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended December 31, 2007 and the year ended June 30, 2007	UNAUDITED

	12/31/07			2007
Decrease in net assets:
Operations:
Net investment income	$	978,809		$	2,257,746
Net realized loss on investments		(68,752	)		(356,429	)
Net increase in unrealized appreciation		1,131,238			460,535
Net increase in net assets resulting from operations		2,041,295			2,361,852
Distributions to shareholders from net investment income		(978,809	)		(2,257,746	)
Net fund share transactions (Note 4)		(5,211,543	)		(22,850,206	)
Total decrease		(4,149,057	)		(22,746,100	)
Net assets:
Beginning of year		61,302,010			84,048,110
End of year	$	57,152,953		$	61,302,010

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months ended			For the years ended
	12/31/2007			2007			2006			2005			2004
Net asset value, beginning of year	$	5.13		$	5.14		$	5.28		$	5.27		$	5.44
Income from investment operations:
Net investment income		0.09			0.17			0.15			0.15			0.16
Net gains/(losses) on securities, both realized and unrealized		0.09			(0.01	)		(0.14	)		0.01			(0.17	)
Total from investment operations		0.18			0.16			0.01			0.16			(0.01	)
Less distributions:
Distributions from net investment income		(0.09	)		(0.17	)		(0.15	)		(0.15	)		(0.16	)
Net asset value, end of year	$	5.22		$	5.13		$	5.14		$	5.28		$	5.27
Total return		3.45	%		3.10	%		0.22	%		3.11	%		(0.19	%)
Net assets, end of year (in thousands)	$	57,153		$	61,302		$	84,048		$	97,941		$	97,571
Ratio of net expenses to average net assets (a)		0.36	%		0.72	%		0.71	%		0.69	%		0.68	%
Ratio of net investment income to average net assets		1.64	%		3.25	%		2.92	%		2.87	%		2.98	%
Portfolio turnover		9.06	%		4.87	%		17.86	%		9.51	%		18.63	%

(a) Percentages are after custodian/interest expense reductions.

Percentages before custodian/interest expense reductions were:

.36% for the six months ended December 31, 2007; .72% for 2007; .72% for 2006; .71% for 2005; and .72% for 2004, respectively.

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

14

DUPREE MUTUAL FUNDS - MISSISSIPPI TAX-FREE INCOME SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
Mississippi Municipal Bonds - 100%
December 31, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
77.15% of Net Assets
De Soto County MS School District	4.500	%	04/01/2016	Aaa/AAA*	$	30,000	$	31,280
Gautier MS Utility District Utility System Revenue	5.125		03/01/2018	Aaa/AAA@		75,000		79,266
Hinds County MS Revenue Refunding-MS Methodist Hospital	5.600		05/01/2012	Aaa/AAA*/AAA@		20,000		20,797
Itawamba Community College District MS Educational Facility	5.000		02/01/2020	AAA*/AAA@		100,000		104,804
Jackson MS Municipal Airport Authority	5.000		10/01/2031	Aaa/AAA*/AAA@		320,000		329,715
Medical Center Educational Building Corporation MS Revenue	5.500		12/01/2023	AAA*		120,000		136,769
MS Business Finance Corporation MS Pollution Control Revenue	4.600		04/01/2022	Aaa/AAA*		100,000		100,746
MS Development Bank Special Obligation Capital Projects	5.000		07/01/2031	Aaa/AAA*/AAA@		75,000		78,180
MS Development Bank Special Obligation Meridian Community	5.500		07/01/2016	Aaa/AAA*/AAA@		30,000		30,265
MS Development Bank Special Obligation Highway Construction	5.000		01/01/2027	Aaa/AAA*		125,000		130,809
MS Development Bank Special Obligation Multi-Purpose	5.000		07/01/2021	Aaa/AAA*		50,000		52,199
MS Development Bank Special Obligation Jackson Water/Sewer	4.750		09/01/2019	Aaa/AAA*/AAA@		100,000		104,882
MS Development Bank Special Obligation Jackson Water/Sewer	5.000		09/01/2029	Aaa/AAA*/AAA@		40,000		41,488
MS Development Bank Special Obligation Horn Lake	5.000		10/01/2020	AAA*		50,000		52,361
MS Development Bank Special Obligation Lee County School	4.500		09/01/2021	Aaa/AAA@		100,000		101,635
MS Development Bank Special Obligation Southaven Water	5.000		03/01/2025	AAA*/AAA@		325,000		343,073
MS Development Bank Special Obligation Capital Projects ^^	5.875		07/01/2024	Aaa/AAA*/AAA@		55,000		59,717
MS Development Bank Special Obligation Capital Projects ^^	5.000		07/01/2024	Aaa/AAA*/AAA@		370,000		373,733
MS Development Bank Special Obligation Combination	5.000		07/01/2018	Aaa/AAA*/AAA@		100,000		105,414
MS Development Bank Special Obligation Municipal Energy	5.000		03/01/2031	Aaa/AAA*/AAA@		100,000		101,669
MS Development Bank Special Obligation Covington Hospital	5.000		07/01/2027	AAA*		150,000		154,713
MS State Refunding Notes Projects - Series C	5.000		12/01/2022	Aaa/AAA*/AAA@		200,000		213,170
Ms Development BK Special Obligation Culkin Water District	5.800		07/01/2018	Aaa/AAA*/AAA@		25,000		25,956
MS State University Educational Building Corporate Revenue	5.500		08/01/2014	Aaa/AAA@		75,000		80,034
MS State University Educational Building Corporate Revenue	5.000		08/01/2024	Aaa/AAA*/AAA@		350,000		366,391
Olive Branch MS Public Improvement	4.125		06/01/2022	Aaa/AAA@		100,000		98,872
Olive Branch MS Water & Sewer Revenue	4.500		03/01/2014	Aaa/AAA@		30,000		31,484
Pearl River County MS Certificate of Participation	4.500		04/01/2021	Aaa/AAA@		200,000		205,062
Stone County MS School District	4.000		06/01/2016	Aaa/AAA@		50,000		50,337
University Southern MS Education Building - Series A	5.000		03/01/2022	Aaa		100,000		106,258
Winston County MS Urban Renewal Revenue	5.150		12/01/2017	AAA*/AAA@		15,000		15,002
								3,726,078
GENERAL OBLIGATION BONDS
14.83% of Net Assets
Hinds County MS School District	4.750		03/01/2015	NR		50,000		50,779
Jackson MS Redevelopment Authority Urban Renewal Revenue	5.600		11/01/2021	A2		20,000		20,996
MS Development Bank Special Obligation Public Improvement	4.750		12/01/2019	BBB+*		145,000		144,342
MS State General Obligation	5.100		11/15/2012	Aa3/AA*/AA@		10,000		10,785
Mississippi State General Obligation - Series A	5.500		12/01/2015	Aa3/AA*/AA@		100,000		112,984
MS State Refunding - Series A	5.250		11/01/2019	Aa3/AA*/AA@		325,000		365,924
Richland MS Tax Increment	5.600		06/01/2013	NR		10,000		10,486
								716,295
PREREFUNDED BONDS
5.02% of Net Assets
Biloxi MS Tax Increment - LTD Obligation - Series A	5.900		10/01/2019	NR*		35,000		36,594
MS Development Bank Special Obligation Madison County	5.250		06/01/2023	Aaa		50,000		54,669
MS Development Bank Special Obligation Southaven	6.200		03/01/2020	A*		10,000		10,326
MS Development Bank Special Obligation Adams County Juvenile	5.900		07/01/2017	A*		10,000		10,407
MS Development Bank Special Obligation Natchez Convention	5.800		07/01/2019	Aaa/AAA*/AAA@		25,000		28,342
MS Development Bank Special Obligation Gulfport Combined Water	5.500		07/01/2015	Aaa/AAA*/AAA@		10,000		11,121
MS Development Bank Special Obligation Desoto County	5.900		07/01/2021	Aaa/AAA*/AAA@		5,000		5,438
MS Development Bank Special Obligation Rankin County	5.400		07/01/2014	Aaa/AAA*/AAA@		10,000		10,527
MS Hospital Equipment and Facilities Forrest County	5.500		01/01/2024	Aaa/AAA@		45,000		48,294
Southern MS University Educational Building Corporation	5.750		03/01/2021	Aaa		10,000		10,836
Walnut Grove MS Correctional Authority Certificate of Participation	6.000		11/01/2019	Aaa/AAA*/AAA@		15,000		16,080
								242,635

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

15

DUPREE MUTUAL FUNDS - MISSISSIPPI TAX-FREE INCOME SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
Mississippi Municipal Bonds - 100%
December 31, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
ESCROWED TO MATURITY BONDS
1.13% of Net Assets
Harrison County MS Wastewater Management District	5.000	%	02/01/2015	Baa1/Aaa	$	25,000	$	27,268
MS Gulf Coast Regional Wastewater Treatment Facilities	7.000		07/01/2012	AAA*		25,000		27,243
								54,512
Total Investments (cost $4,679,888) (See (a) below for further explanation) 98.13% of Net Assets							$	4,739,519

* Standard and Poor’s Corporation

@ Fitch’s Investors Service

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

NR Not Rated

# Bond ratings are unaudited.

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

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

Unrealized appreciation	$	90,924
Unrealized depreciation		(31,292	)
Net unrealized appreciation	$	59,631

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

16

MISSISSIPPI TAX-FREE INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007	UNAUDITED

ASSETS:
Investments in securities, at value (Cost: $4,679,888)		$	4,739,519
Cash			38,639
Interest receivable			70,223
Receivable from Adviser			124
Total assets			4,848,505
LIABILITIES:
Payable for:
Distributions to shareholders	14,627
Fund shares redeemed	2
Transfer agent fee	2,317
Trustee fee	171
Accrued expenses	1,956
Total liabilities			19,073
NET ASSETS:
Capital			4,789,637
Net accumulated realized loss on investment transactions			(19,836	)
Net unrealized appreciation in value of investments			59,631
Net assets at value		$	4,829,432
NET ASSET VALUE, offering price and redemption price per share ($4,829,432 -:- 424,913 shares outstanding; unlimited number of shares authorized; no par value)		$	11.37

STATEMENT OF OPERATIONS

For the year ended December 31, 2007

Net investment income:
Interest income	$	113,828
Expenses:
Investment advisory fee		12,697
Transfer agent fee		3,809
Custodian expense		2,400
Pricing fees		2,104
Professional fees		969
Trustee fees		296
Other expenses		3,036
Total expenses		25,311
Fees waived by Adviser		(11,486	)
Custodian expense reduction		(2,400	)
Net expenses		11,425
Net investment income		102,403
Realized and unrealized gain/(loss) on investments:
Net realized loss		(10,731	)
Net increase in unrealized appreciation		66,130
Net realized and unrealized gain on investments		55,399
Net increase in net assets resulting from operations	$	157,802

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

17

MISSISSIPPI TAX-FREE INCOME SERIES

STATEMENTS OF CHANGES IN NET ASSETS

For the six months ended December 31, 2007 and the year ended June 30, 2007 UNAUDITED

	12/31/2007			2007
Increase/(decrease) in net assets:
Operations:
Net investment income	$	102,402		$	211,237
Net realized (loss) on investments		(9,517	)		(9,775	)
Net increase in unrealized appreciation		66,130			16,180
Net increase in net assets resulting from operations		159,015			217,642
Distributions to shareholders from net investment income		(102,402	)		(211,237	)
Distributions to shareholders from realized gains		(607	)		(22,573	)
Net fund share transactions (Note 4)		(329,947	)		149,254
Total increase/(decrease)		(273,941	)		133,086
Net assets:
Beginning of year		5,103,373			4,970,287
End of year	$	4,829,432		$	5,103,373

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months ended			For the years ended June 30,
	12/31/2007			2007			2006			2005			2004
Net asset value, beginning of year	$	11.24		$	11.25		$	11.84		$	11.34		$	11.74
Income from investment operations:
Net investment income		0.23			0.45			0.46			0.47			0.48
Net gains/(losses) on securities, both realized and unrealized		0.13			0.04			(0.54	)		0.50			(0.40	)
Total from investment operations		0.36			0.49			(0.08	)		0.97			0.08
Less distributions:
Distributions from net investment income		(0.23	)		(0.45	)		(0.46	)		(0.47	)		(0.48	)
Distributions from capital gains		—			(0.05	)		(0.05	)		—			—
Net asset value, end of year	$	11.37		$	11.24		$	11.25		$	11.84		$	11.34
Total return		3.23	%		4.39	%		(0.76	)%		8.66	%		0.72	%
Net assets, end of year (in thousands)	$	4,829		$	5,103		$	4,970		$	4,786		$	3,146
Ratio of net expenses to average net assets (a)		0.23	%		0.45	%		0.46	%		0.41	%		0.40	%
Ratio of net investment income to average net assets		2.03	%		3.98	%		3.95	%		3.99	%		4.16	%
Portfolio turnover		2.64	%		11.57	%		16.33	%		8.91	%		0.18	%

(a) Percentages are after expenses waived by Adviser and custodian/interest expense reductions.

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

.23% and .05% for the six months ended December 31, 2007; .43% and .09% for 2007; .44% and .10% for 2006; .45% and .12% for 2005; and .46% and .17% for 2004, respectively.

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

18

DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE INCOME SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
North Carolina Municipal Bonds — 100%
December 31, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL BONDS
72.02% of Net Assets
Asheville NC Water System Revenue	4.750	%	08/01/2027	Aaa/AAA*	$	1,000,000	$	1,026,300
Burke County NC Certificate of Participation	5.000		04/01/2023	Aaa/AAA*		1,000,000		1,054,510
Catawba County NC Catawba Memorial Hospital Revenue	5.000		10/01/2017	Aaa/AAA@		500,000		515,405
Charlotte NC Airport Revenue	5.250		07/01/2023	Aaa/AAA*/AAA@		1,000,000		1,058,600
Charlotte NC Airport Revenue Bonds Refunding Charlotte Douglas	5.000		07/01/2026	Aaa/AAA*/AAA@		1,000,000		1,050,140
Charlotte NC Airport Revenue Bonds Refunding Charlotte Douglas	5.000		07/01/2025	Aaa/AAA*/AAA@		1,000,000		1,054,120
Cumberland County NC Certificate of Participation Civic Center	5.000		12/01/2018	Aaa/AAA*/AAA@		500,000		510,260
Dare County NC Utility System Revenue	5.250		06/01/2018	Aaa/AAA*/AAA@		250,000		256,493
Dare County NC Certificate of Participation	5.125		06/01/2018	Aaa/AAA*/AAA@		500,000		531,310
Davie County NC Public School & Community College Facility	5.000		06/01/2023	Aaa/AAA*/AAA@		1,000,000		1,051,840
Davie County NC Public School & Community College Facility	5.000		06/01/2025	Aaa/AAA*/AAA@		1,690,000		1,766,658
Greenville NC Housing Development Corporation	5.800		07/01/2024	Aaa/AAA*/AAA@		35,000		35,189
Harnett County NC Certificate of Participation	5.000		12/01/2018	Aaa/AAA*/AAA@		1,475,000		1,563,854
Henderson County NC Certificates of Participation	5.000		05/01/2025	Aaa/AAA*/AAA@		1,000,000		1,039,740
Iredell County NC Certificate of Participation Public Facility	5.250		10/01/2020	Aaa/AAA@		1,000,000		1,079,020
Iredell County NC Certificate of Participation School Project	5.000		06/01/2024	Aaa/AAA*		1,000,000		1,046,800
Lee County NC Certificate of Participation	5.000		04/01/2025	Aaa/AAA*		550,000		579,519
Lenoir NC Housing Authority Mortgage Revenue	5.700		08/20/2024	AAA*		100,000		101,645
Montgomery County NC Certificate of Participation Series A	5.000		02/01/2030	Aaa/AAA*		1,680,000		1,744,529
New Hanover County NC Hospital Revenue	5.000		10/01/2019	Aaa/AAA*/AAA@		1,110,000		1,142,667
New Hanover County NC Certificate of Participation	5.000		12/01/2022	Aaa/AAA*/AAA@		1,000,000		1,045,930
NC Educational Facilities Finance Agency St Augustines	5.250		10/01/2018	AA*		600,000		609,144
NC Educational Facilities Finance Agency St Augustines	5.250		10/01/2028	AA*		630,000		630,743
NC Medical Care Community Hospital - Morehead Memorial	5.000		11/01/2026	Aaa/AAA*/AAA@		2,000,000		2,074,400
NC Eastern Municipal Power Agency Power System Revenue	5.500		01/01/2017	Aaa/AAA*/AAA@		150,000		150,138
NC Eastern Municipal Power Agency Power System Revenue	6.000		01/01/2025	Aaa/AAA*/BBB+		1,000,000		1,202,180
NC Eastern Municipal Power Agency Power System Revenue	6.000		01/01/2018	Aaa/AAA*/AAA@		1,000,000		1,177,050
NC Eastern Municipal Power Agency Power System Revenue	5.000		01/01/2021	Aaa/AAA*/AAA@		1,000,000		1,055,270
NC Municipal Power Agency Number 1 Catawba Electric Revenue	5.250		01/01/2019	Aaa/AAA*/AAA@		1,000,000		1,068,280
NC Medical Care Community Hospital Revenue - High Point	5.000		10/01/2019	Aaa/AAA*/AAA@		500,000		514,715
NC Medical Care Community Hospital Revenue - Rex Hospital	5.000		06/01/2017	Aaa/AAA*/AAA@		500,000		507,905
NC Medical Care Community Hospital Revenue - St Joseph	5.100		10/01/2014	Aaa/AAA*/AAA@		5,000		5,006
NC Medical Care Community Hospital Revenue - Stanly Hospital	5.375		10/01/2014	Aaa/AAA		50,000		50,559
NC Municipal Power Agency Number 1 Catawba Electric Revenue	5.125		01/01/2017	Aaa/AAA*/AAA@		500,000		505,750
NC Municipal Power Agency Number 1 Catawba Electric Revenue	5.125		01/01/2017	Aaa/AAA*/AAA@		700,000		714,000
Raleigh Durham NC Airport Authority	5.250		11/01/2018	Aaa/AAA@		1,000,000		1,056,980
Raleigh/Durham NC Airport Revenue	5.000		11/01/2020	Aaa/AAA@		1,000,000		1,048,570
Randolph County NC Certificate of Participation	5.000		02/01/2027	Aaa/AAA@		1,000,000		1,039,930
Sampson County NC Certificate of Participation	5.000		06/01/2022	Aaa/AAA*/AAA@		1,250,000		1,330,063
Sampson County NC Certificate of Participation	5.000		06/01/2026	Aaa/AAA*		1,000,000		1,048,170
University of NC at Chapel Hill Hospital Revenue	5.250		02/15/2017	Aaa/AAA*/AAA@		500,000		514,555
University of NC System Pool Revenue	5.000		04/01/2019	Aaa/AAA@		1,000,000		1,070,160
University of NC Wilmington Certificate of Participation	5.250		06/01/2025	AAA*/AAA@		1,000,000		1,068,250
University of NC Wilmington Student Housing Project	5.000		06/01/2025	AAA*		580,000		607,562
Wilmington NC Certificate of Participation	5.000		06/01/2032	Aaa/AAA*/AAA@		1,500,000		1,551,566
Wilmington NC Store Water Revenue	5.000		06/01/2028	Aaa/AAA*		500,000		523,690
Wilson NC Certificate of Participation Public Facilities	5.000		05/01/2021	Aa1/AAA*/AAA@		780,000		831,449
Wilson NC Certificate of Participation Public Facilities	5.000		05/01/2025	Aa1/AAA*/AAA@		750,000		787,020
Wilson County Certificate of Participation Public Facility	5.000		05/01/2029	Aaa/AAA*/AAA@		1,355,000		1,414,485
Wilson Combined Enterprise System	4.700		12/01/2022	Aaa/AAA*		500,000		513,890
								43,926,009
CERTIFICATES OF PARTICIPATION BONDS
10.87% of Net Assets
Cabarrus County NC Certificate of Participation	5.000		04/01/2021	Aa3/AA-*/AA-@		650,000		682,643
Charlotte NC Certificate of Participation Convention Facility	5.000		12/01/2024	Aa2/AA+*		1,000,000		1,049,930
Charlotte NC Certificate of Participation Government Facility	5.250		06/01/2020	Aa2/AA+*/AA@		1,000,000		1,064,800
Forsyth County NC Certificate of Participation	5.000		10/01/2018	Aa1/AA+*/AA+@		5,000		5,106
Forsyth County NC Certificate of Participation	5.000		02/01/2026	Aa1/AA+*/AA+@		550,000		573,953
Mooresville NC Certificate of Participation	5.000		09/01/2032	A+*		1,000,000		1,011,400
NC Infrastructure Finance Corporation Certificate of Participation	5.000		02/01/2025	Aa2/AA+*/AA@		1,500,000		1,567,200
Winston Salem NC Certificate of Participation Series A	4.750		06/01/2031	Aa1/AA+*/AA+@		670,000		676,921
								6,631,953
PREREFUNDED BONDS
5.78% of Net Assets
Cary NC Combined Enterprise System Revenue	5.000		12/01/2022	Aa2/AA*/AAA@		700,000		747,348
Charlotte NC Certificate of Participation Convention Facility	5.500		12/01/2020	Aa2/AA+*		700,000		752,066
Cumberland County NC Hospital Facilities Revenue	5.250		10/01/2019	A3/A-*/A-@		1,000,000		1,043,330
NC Eastern Municipal Power Agency Power System	6.000		01/01/2026	Aaa/BBB*/BBB+@		805,000		981,166
								3,523,910

The accompanying footnotes are an integral 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, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
LEASE REVENUE BONDS
2.98% of Net Assets
Charlotte NC Water and Sewer Systems Revenue	4.500	%	07/01/2028	Aa1/AAA*/AAA@	$	750,000	$	752,625
NC Infrastructure Financial Corporation Lease Purchase	5.000		10/01/2021	Aa2/AA+*/AA@		1,000,000		1,064,050
								1,816,675
HOSPITAL AND HEALTHCARE REVENUE BONDS
2.08% of Net Assets
NC Medical Care Health Care Facilities Revenue—Novant Healt	5.000		11/01/2017	Aa3/AA-*/AA-@		1,000,000		1,046,740
NC Medical Care Community Hospital Revenue—Gaston Memorial	5.500		02/15/2019	A1/A+*		150,000		150,308
NC Medical Care Community Hospital Revenue Unrefunded Balance	5.250		12/01/2013	A1		45,000		46,085
NC Medical Care Community Hospital Revenue Unrefunded Balance	5.000		12/01/2018	A1		25,000		25,454
								1,268,587
GENERAL OBLIGATION BONDS
1.74% of Net Assets
Cary NC General Obligation	5.000		03/01/2019	Aaa/AAA*/AAA@		1,000,000		1,058,430
								1,058,430
MUNICIPAL UTILITY REVENUE BONDS
.91% of Net Assets
Charlotte NC Storm Water Revenue Refunding	5.250		06/01/2019	Aa2/AA+*		520,000		557,627
								557,627
ESCROWED TO MATURITY BONDS
.58% of Net Assets
Pitt County NC Memorial Hospital Revenue	5.500		12/01/2015	Aaa/AA-@		325,000		353,194
								353,194
STATE AND LOCAL MORTGAGE REVENUE BONDS
.39% of Net Assets
NC Housing Finance Agency Single Family Revenue Series Y	6.300		09/01/2015	Aa2/AA*		30,000		30,067
NC Housing Finance Agency Single Family Revenue Series II	6.200		03/01/2016	Aa2/AA*		30,000		30,350
NC Housing Finance Agency Single Family Revenue Series KK	5.875		09/01/2017	Aa2/AA*		40,000		40,116
NC Housing Finance Agency Home Ownership Revenue	5.125		07/01/2013	Aa2/AA*		45,000		45,644
Vance County NC Housing Mortgage Revenue Henderson Project	6.150		03/01/2022	Aa2		95,000		95,066
								241,243
Total Investments (cost $58,321,729) (See (a) below for further explanation) 97.35% of Net Assets							$	59,377,628

* Standard and Poor’s Corporation

@ Fitch’s Investors Service

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

# Bond ratings are unaudited.

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

Unrealized appreciation	$	1,238,422
Unrealized depreciation		(182,523	)
Net unrealized appreciation	$	1,055,899

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

20

NORTH CAROLINA TAX-FREE INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007	UNAUDITED

ASSETS:
Investments in securities, at value (Cost: $53,321,729)		$	59,377,628
Cash			99,453
Receivable from investments sold			1,010,000
Interest receivable			710,777
Total assets			61,197,858
LIABILITIES:
Payable for:
Distributions to shareholders	152,588
Fund shares redeemed	7,643
Investment advisory fee	27,333
Transfer agent fee	7,085
Trustee fee	810
Accrued expenses	8,516
Total liabilities			203,975
NET ASSETS:
Capital			60,472,093
Net accumulated realized loss on investment transactions			(534,109	)
Net unrealized appreciation in value of investments			1,055,899
Net assets at value		$	60,993,883
NET ASSET VALUE, offering price and redemption price per share ($60,993,883 -:- 5,608,227 shares outstanding; unlimited number of shares authorized; no par value)		$	10.88

STATEMENT OF OPERATIONS

For the six months ended December 31, 2007

Net investment income:
Interest income	$	1,313,795
Expenses:
Investment advisory fee		145,726
Transfer agent fee		37,991
Custodian expense		2,400
Professional fees		6,334
Trustee fees		3,326
Other expenses		15,973
Total expenses		211,750
Custodian expense reduction		(2,400	)
Net expenses		209,350
Net investment income		1,104,445
Realized and unrealized gain on investments:
Net realized gain		153,513
Net increase in unrealized appreciation		568,395
Net realized and unrealized gain on investments		721,908
Net increase in net assets resulting from operations	$	1,826,353

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

21

NORTH CAROLINA TAX-FREE INCOME SERIES
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended December 31, 2007 and the year ended June 30, 2007	UNAUDITED

	12/31/07			2007
Increase in net assets:
Operations:
Net investment income	$	1,104,445		$	1,980,016
Net realized gain on investments		153,513			86,767
Net increase/(decrease) in unrealized appreciation		568,395			(161,744	)
Net increase in net assets resulting from operations		1,826,353			1,905,039
Distributions to shareholders from net investment income		(1,104,445	)		(1,980,016	)
Net fund share transactions (Note 4)		5,277,711			6,298,775
Total increase		5,999,619			6,223,798
Net assets:
Beginning of year		54,994,265			48,770,467
End of year	$	60,993,884		$	54,994,265

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months ended 12/31/2007			2007			2006			2005			2004
Net asset value, beginning of year	$	10.74		$	10.74		$	11.10		$	10.78		$	11.12
Income from investment operations:
Net investment income		0.21			0.41			0.42			0.44			0.44
Net gains/(losses) on securities, both realized and unrealized		0.14			0.00			(0.36	)		0.32			(0.34	)
Total from investment operations		0.35			0.41			0.06			0.76			0.10
Less distributions:
Distributions from net investment income		(0.21	)		(0.41	)		(0.42	)		(0.44	)		(0.44	)
Net asset value, end of year	$	10.88		$	10.74		$	10.74		$	11.10		$	10.78
Total return		3.25	%		3.85	%		0.59	%		7.13	%		0.95	%
Net assets, end of year (in thousands)	$	61,002		$	54,994		$	48,770		$	44,739		$	38,791
Ratio of net expenses to average net assets (a)		0.36	%		0.73	%		0.72	%		0.69	%		0.69	%
Ratio of net investment income to average net assets		1.91	%		3.79	%		3.89	%		3.97	%		4.05	%
Portfolio turnover		7.15	%		5.20	%		12.73	%		7.96	%		10.51	%

(a) Percentages are after custodian/interest expense reductions.

Percentages before custodian/interest expense reductions were:

.36% for the six months ended December 31, 2007; .74% for 2007; .74% for 2006; .72% for 2005; .72% for 2004, respectively.

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

22

DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
North Carolina Municipal Bonds — 100%
December 31, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
65.43% of Net Assets
Catawba County Certificate of Participation Public School	5.250	%	06/01/2016	Aaa/NR*/AAA@	$	125,000	$	136,345
Catawba County NC Certificate of Participation Public School	5.250		06/01/2018	Aaa/AAA@		125,000		134,420
Catawba County NC Certificate of Participation	5.250		06/01/2019	Aaa/AAA*/AAA@		200,000		216,300
Centennial Authority NC Hotel Tax Revenue Bond Arena Project	5.000		09/01/2012	Aaa/AAA*/AAA@		100,000		102,038
Charlotte NC Certificate of Participation	5.000		08/01/2012	Aaa/AAA*/AAA@		1,000,000		1,070,410
Davie County NC Community College	4.000		06/01/2013	Aaa/AAA*		250,000		257,230
Forsyth County NC Public Improvement General Obligation	4.500		03/01/2009	Aaa/AAA*/AAA@		250,000		254,113
Greenville NC Certificate of Participation Public Facility	4.600		06/01/2011	Aaa/AAA*/AAA@		100,000		101,467
Harnett County NC Certificate of Participation	5.250		12/01/2009	Aaa/AAA*/AAA@		240,000		249,706
Haywood NC Certificate of Participation Refunding	5.000		10/01/2016	Aaa/AAA*/AAA@		635,000		687,661
Iredell County NC Certificate of Participation School Project	5.000		06/01/2018	Aaa/AAA*/AAA@		425,000		459,837
Johnston County NC Finance Corporation School & Museum Project	4.650		08/01/2008	Aaa/AAA*/AAA@		200,000		201,738
Lee County NC Certificate of Participation	5.000		04/01/2016	Aaa/AAA*/AAA@		215,000		231,574
Lincolnton NC Enterprise System Revenue	5.000		05/01/2016	Aaa/AAA*/AAA@		385,000		419,450
New Hanover County NC Regional Medical Center Hospital Revenue	4.250		10/01/2009	Aaa/AAA*/AAA@		100,000		101,444
NC Medical Care Community Hospital - Rowan Medical	5.250		09/01/2016	Aaa/AAA*/AAA@		1,100,000		1,200,540
North Carolina Medical Care Community Hospital - Chatham Memorial	3.625		10/01/2010	AA*/AA@		100,000		99,207
NC Eastern Municipal Power Agency Power System Revenue	6.125		01/01/2009	Baa1/CCC*/BBB+		120,000		122,914
NC Municipal Power Agency Number 1 Catawba Electric	6.000		01/01/2010	Aaa/AAA*/AAA@		200,000		210,844
NC Medical Care Community Hospital - Scotland Memorial	5.375		10/01/2011	AA*		35,000		35,046
NC Medical Community Hospital - Wayne Memorial	4.750		10/01/2011	Aaa/AAA@		350,000		356,496
NC Medical Care Community Hospital - Rex Healthcare	5.250		06/01/2008	Aaa/AAA*/AAA@		450,000		454,167
Pitt County NC Certificate of Participation School Facility	4.750		04/01/2010	Aaa/AAA*/AAA@		100,000		103,444
Randolph County NC Certificate of Participation	5.200		06/01/2008	Aaa/AAA*/AAA@		145,000		146,228
Union County NC Certificate of Participation	5.000		06/01/2020	Aaa/AAA*/AAA@		250,000		266,970
University NC System Pool Revenue	5.000		10/01/2009	Aaa/AAA*/AAA@		170,000		173,990
								7,793,579
CERTIFICATES OF PARTICIPATION BONDS
14.39% of Net Assets
Cabarrus County NC Certificate of Participation	4.500		04/01/2009	Aa3/AA-*/AA-@		100,000		101,760
Cary County NC Certificate of Participation	5.000		12/01/2017	Aa1/AA+*/AA+@		250,000		266,563
Chapel Hill NC Certificate of Participation Operations Center	5.250		06/01/2019	Aa1/AA*		260,000		284,684
Charlotte NC Certificate of Participation	5.750		06/01/2008	Aa1/AA+*		100,000		101,102
Durham County NC Certificate of Participation	4.750		05/01/2009	Aa1/AA+*		110,000		112,145
Durham NC Certificate Of Participation	5.000		04/01/2010	Aa1/AA+*/AA+@		300,000		311,352
NC State Certificates of Participation Wildlife Resources	5.250		06/01/2018	Aa1/AA*/AA@		500,000		536,185
								1,713,791
GENERAL OBLIGATION BONDS
4.97% of Net Assets
NC State Public Improvement General Obligation	4.500		03/01/2010	Aa1/AAA*/AAA@		150,000		154,488
NC State Public School Building General Obligation	4.600		04/01/2010	Aa1/AAA*/AAA@		50,000		51,009
NC Public School Building General Obligation	4.600		04/01/2011	Aa1/AAA*/AAA@		115,000		118,028
NC State Public Improvement - Series A	5.000		03/01/2019	Aaa/AAA*/AAA@		250,000		268,328
								591,853
VARIABLE RATE BONDS
4.20% of Net Assets
NC Educational Facilities Davidson College	3.480		12/01/2020	AA*		500,000		500,000
								500,000
LEASE REVENUE BONDS
3.71% of Net Assets
Greensboro NC Enterprise System Revenue Combination	4.800		06/01/2012	Aa3/AA+*/AA+@		75,000		76,215
Greensboro NC Enterprise System Revenue	5.000		06/01/2011	Aa3/AA+*/AA+@		250,000		264,530
Winston-Salem NC Certificate of Participation	3.950		06/01/2009	Aa1/AA+*/AA+@		100,000		100,973
								441,718
PREREFUNDED BONDS
2.86% of Net Assets
NC State General Obligation	4.750		04/01/2010	Aa1/AAA*/AAA@		100,000		101,393
Piedmont Triad NC Airport Authority Revenue	5.250		07/01/2011	Aaa/AAA*/AAA@		200,000		208,554
University NC System Pool Revenue - Series B	5.000		10/01/2009	Aaa/AAA*/AAA@		30,000		30,684
								340,631
HOSPITAL AND HEALTHCARE REVENUE BONDS
2.34% of Net Assets
NC Medical Care Community Hospital - Pitt Memorial	4.400		12/01/2011	Aa3/AA-*/AA-@		275,000		279,320
								279,320
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS
1.72% of Net Assets
University of NC Revenue Refunding	5.000		12/01/2010	Aa1/AA+*/AA+@		195,000		205,251
								205,251
Total Investments (cost $11,701,573) (See (a) below for further explanation) 99.62% of Net Assets							$	11,866,143

* Standard and Poor’s Corporation

@ Fitch’s Investors Service

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

# Bond ratings are unaudited.

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

Unrealized appreciation	$	140,778
Unrealized depreciation		(23,792	)
Net unrealized appreciation	$	116,986

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

23

NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007	UNAUDITED

ASSETS:
Investments in securities, at value (Cost: $11,701,573)		$	11,866,143
Cash			39,684
Interest receivable			127,222
Total assets			12,033,049
LIABILITIES:
Payable for:
Distributions to shareholders	9,396
Fund shares redeemed	95,204
Investment advisory fee	4,939
Transfer agent fee	1,494
Trustee fee	628
Accrued expenses	10,008
Total liabilities			121,669
NET ASSETS:
Capital			11,920,778
Net accumulated realized loss on investment transactions			(173,968	)
Net unrealized appreciation in value of investments			164,570
Net assets at value		$	11,911,380
NET ASSET VALUE, offering price and redemption price per share ($11,911,380 -:- 1,135,040 shares outstanding; unlimited number of shares authorized; no par value)		$	10.49

STATEMENT OF OPERATIONS

For the six months ended December 31, 2007

Net investment income:
Interest income	$	221,454
Expenses:
Investment advisory fee		28,594
Transfer agent fee		8,578
Custodian expense		2,400
Professional fees		3,153
Trustee fees		659
Other expenses		6,065
Total expenses		49,449
Custodian expense reduction		(2,400	)
Net expenses		47,049
Net investment income		174,405
Realized and unrealized gain/(loss) on investments:
Net realized loss		(6,922	)
Net increase in unrealized appreciation		223,996
Net realized and unrealized gain on investments		217,074
Net increase in net assets resulting from operations	$	391,479

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

24

NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended December 31, 2007 and the year ended June 30, 2007	UNAUDITED

	12/31/07			2007
Increase/(decrease) in net assets:
Operations:
Net investment income	$	174,403		$	369,700
Net realized loss on investments		(6,922	)		(49,085	)
Net increase in unrealized appreciation		223,996			54,347
Net increase in net assets resulting from operations		391,477			374,962
Distributions to shareholders from net investment income		(174,403	)		(369,700	)
Distributions to shareholders from realized gains		—			(2,550	)
Net fund share transactions (Note 4)		412,843			(1,907,965	)
Total increase/(decrease)		629,917			(1,905,253	)
Net assets:
Beginning of year		11,281,463			13,186,716
End of year	$	11,911,380		$	11,281,463

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months ended			For the years ended June 30,
	12/31/2007			2007			2006			2005			2004
Net asset value, beginning of year	$	10.30		$	10.31		$	10.60		$	10.57		$	10.85
Income from investment operations:
Net investment income		0.16			0.32			0.30			0.30			0.32
Net gains/(losses) on securities, both realized and unrealized		0.19			(0.01	)		(0.29	)		0.03			(0.28	)
Total from investment operations		0.35			0.31			0.01			0.33			0.04
Less distributions:
Distributions from net investment income		(0.16	)		(0.32	)		(0.30	)		(0.30	)		(0.32	)
Net asset value, end of year	$	10.49		$	10.30		$	10.31		$	10.60		$	10.57
Total return		3.41	%		2.97	%		0.06	%		3.14	%		0.33	%
Net assets, end of year (in thousands)	$	11,911		$	11,281		$	13,187		$	16,829		$	15,695
Ratio of net expenses to average net assets (a)		0.21	%		0.81	%		0.74	%		0.56	%		0.51	%
Ratio of net investment income to average net assets		0.77	%		3.01	%		2.83	%		2.81	%		2.94	%
Portfolio turnover		5.94	%		13.33	%		19.07	%		5.93	%		8.37	%

(a) Percentages are after expenses waived by Adviser and custodian/interest expense reductions.

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

0% and .02% for the six months ended December 31, 2007; 0% and .04% for 2007; .05% and .03% for 2006; .21% and .03% for 2005; and .25% and .05% for 2004, respectively.

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

25

DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE INCOME SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
Tennessee Municipal Bonds — 100%
December 31, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
59.72% of Net Assets
Blount County TN Public Building Authority Local Government	5.000	%	06/01/2027	Aaa	$	1,500,000	$	1,591,110
Blount County TN Public Building Authority Local Government	4.750		06/01/2031	Aaa		750,000		762,540
Blount County TN Public Building Authority General Obligation	5.250		06/01/2019	Aaa		1,050,000		1,139,051
Blount County TN Building Authority Local Government Public	5.000		06/01/2032	Aaa		750,000		784,943
Chattanooga TN Industrial Development Board Lease Rent Revenue	5.000		10/01/2027	AAA*/AAA@		1,000,000		1,054,390
Clarksville TN Electric System Revenue Bonds	5.000		09/01/2032	Aaa		1,250,000		1,302,450
Cleveland TN General Obligation - Series A	5.000		06/01/2027	Aaa		680,000		707,928
Columbia TN Broadband Network Revenue & Tax	5.000		03/01/2025	Aaa		1,000,000		1,045,230
Columbia TN Refunded - Sewer System	5.000		12/01/2024	Aaa		1,235,000		1,300,060
Franklin County TN Health & Educational Facilities Board	5.000		09/01/2025	AAA*		1,000,000		1,048,570
Giles County TN	4.500		02/01/2018	Aaa/AAA@		1,000,000		1,043,710
Greene County TN General Obligation - Series B	5.000		06/01/2024	Aaa/AAA@		505,000		533,376
Hallsdale-Powell Utility District Knox County TN Water and Sewer Revenue	5.000		04/01/2031	AAA*		740,000		773,959
Harpeth Valley Utilities TN Davidson and Williamson Counties	5.000		09/01/2029	Aaa/AAA@		1,410,000		1,458,335
Harpeth Valley Utilities TN Davidson and Williamson Counties	5.000		09/01/2032	Aaa		1,420,000		1,479,583
Hawkins County TN Refunding General Obligation	4.750		05/01/2017	Aaa/AAA*/AAA@		200,000		207,676
Jackson TN Energy Authority Gas System Revenue	5.000		10/01/2028	Aaa		1,000,000		1,052,760
Johnson City TN Health & Educational Facilities	6.500		07/01/2014	Aaa/AAA*/AAA@		1,000,000		1,157,950
Kingsport TN Water & Sewer System	4.350		06/01/2017	Aaa/AAA@		710,000		720,551
Kingsport TN Industrial Development Board Multifamily	5.400		04/20/2021	AAA*		445,000		472,505
Kingsport TN Industrial Development Board Multifamily	5.700		04/20/2038	AAA*		1,000,000		1,052,830
Knox County TN Health Educational & Housing Facilities - Baptist	5.500		04/15/2017	Baa3/AAA*		1,315,000		1,328,150
Knox County TN Health Educational & Housing Facilities - Ft Sanders	6.250		01/01/2013	Aaa/AAA*/AAA@		10,000		11,237
Knox County TN Health Educational & Housing - Covenant Health	5.000		01/01/2022	Aaa/AAA*/AAA@		450,000		466,902
Knox County TN Utility District Water & Sewer	5.625		12/01/2019	Aaa/AAA*/AAA@		220,000		222,226
Knoxville TN Gas Revenue - Series K	4.750		03/01/2020	Aaa/AAA*/AAA@		1,500,000		1,543,275
Knoxville TN Gas Revenue Refunded System - Series K	4.750		03/01/2022	Aaa/AAA*/AAA@		1,550,000		1,578,024
Knoxville TN Wastewater System Revenue - Series A	4.750		04/01/2021	Aaa/AAA*/AAA@		1,150,000		1,178,359
Marion County TN Schools	5.000		06/01/2025	Aaa		1,050,000		1,108,233
Metro Nashville & Davidson County TN General Obligation	5.000		01/01/2023	Aaa/AAA*/AAA@		1,000,000		1,059,270
Metro Nashville & Davidson County TN General Obligation	5.000		01/01/2024	Aaa/AAA*/AAA@		1,000,000		1,054,280
Metro Nashville & Davidson County TN Multi Family	4.600		11/01/2026	AAA*		1,000,000		1,000,000
Metro Nashville & Davidson County TN Water & Sewer	5.000		01/01/2017	Aaa/AAA*/AAA@		1,000,000		1,011,120
Metro Government Nashville & Davidson County TN Water & Sewer	4.750		01/01/2022	Aaa/AAA*/AAA@		1,000,000		1,010,000
Metro Government Nashville & Davidson County TN Sports Authority	5.000		07/01/2021	Aaa/AAA*/AAA@		1,000,000		1,059,080
Montgomery County TN General Obligation	4.750		05/01/2016	Aaa/AAA@		1,000,000		1,080,510
Montgomery County TN General Obligation	4.750		05/01/2020	Aaa/AAA@		1,000,000		1,060,580
Oak Ridge TN Industrial Development Board Refunding Revenue	5.250		08/20/2018	Aaa		255,000		260,401
Overton County TN Refunding - Schools	5.000		04/01/2018	Aaa		1,000,000		1,080,780
Robertson County TN General Obligation	4.500		06/01/2015	Aaa/AAA@		300,000		313,614
Robertson County TN General Obligation	5.000		04/01/2018	Aaa/AAA@		760,000		816,772
Rutherford County TN Construction Utility District Waterworks	5.000		02/01/2031	Aaa/AAA@		1,435,000		1,496,949
Shelby County TN Health Educational & Housing Methodist	5.300		08/01/2015	Aaa/AAA*/AAA@		505,000		515,474
Shelby County TN Health Educational & Housing Methodist	5.375		04/01/2013	Aaa/AAA*/AAA@		690,000		699,639
Shelby County TN Health Educational & Housing Methodist	5.000		04/01/2018	Aaa/AAA*/AAA@		500,000		506,335
Smith County TN General Obligation	5.000		04/01/2021	Aaa/AAA@		720,000		772,286
Sullivan County TN Health Educational & Housing Facilities	5.000		09/01/2016	AA*/AA@		1,000,000		1,025,700
Sullivan County TN Health Educational & Housing - Wellmont	5.000		09/01/2017	AA*/AA@		2,500,000		2,552,973
Sullivan County TN Health Educational & Housing Facilities	4.500		09/01/2019	AA*/AA@		1,000,000		982,130
TN Housing Development Agency Homeownership Program Series	5.150		07/01/2022	Aaa/AAA*/AAA@		675,000		689,276
TN State School Board Authority Refunding Higher Education	5.000		05/01/2024	Aaa/AAA*/AAA@		1,395,000		1,463,829
TN State School Board Authority Refunding Higher Education	5.000		05/01/2025	Aaa/AAA*/AAA@		1,440,000		1,507,349
Washington County TN General Obligation School and Public	5.000		04/01/2016	Aaa/AAA@		1,120,000		1,226,904
West Wilson Utility District TN Waterworks Revenue	4.750		06/01/2028	Aaa		2,460,000		2,510,479
White House Utility District TN Water & Sewer	5.000		01/01/2028	Aaa		1,235,000		1,298,948
White House Utility District TN Water & Sewer	5.000		01/01/2030	Aaa/AAA@		2,505,000		2,613,792
Wilson County TN General Obligation Refunding	5.100		05/01/2016	Aaa/AAA@		745,000		749,269
Wilson County TN Referendum	5.000		04/01/2018	Aaa/AAA@		1,000,000		1,068,530
								60,612,182
GENERAL OBLIGATION BONDS
13.29% of Net Assets
Franklin TN School District Limited Tax Refunding	4.625		06/01/2018	Aa2		1,000,000		1,051,790
Franklin TN Water & Sewer Revenue & Tax	5.000		04/01/2024	Aaa		750,000		825,690
Knoxville TN General Obligation - Series A	5.000		05/01/2020	Aa2/AA*/AA+@		1,430,000		1,575,388
Memphis TN Referendum - General Improvement	5.000		11/01/2015	Aa2/AA*/AA-@		1,250,000		1,367,563
Memphis TN General Improvement	5.000		05/01/2020	Aa2/AA*/AA-@		2,000,000		2,095,860
Metro Government Nashville & Davidson County TN - Series B	5.000		08/01/2024	Aa2/AA*/AA+@		1,500,000		1,597,920
Shelby County TN - Series A	4.600		11/01/2022	Aa2/AA+*/AA@		500,000		513,480
Williamson County TN Refunding General Obligation	5.000		03/01/2020	Aa1		645,000		693,794
Williamson County TN Series A General Obligation	4.750		04/01/2021	Aa1		750,000		800,123
Williamson County TN Series B General Obligation	5.000		05/01/2023	Aa1		1,400,000		1,482,656
Williamson County TN General Obligation	5.000		05/01/2022	Aa1		1,400,000		1,483,580
								13,487,844

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

26

DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE INCOME SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
Tennessee Municipal Bonds — 100%
December 31, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
HOSPITAL AND HEALTHCARE REVENUE BONDS
11.23% of Net Assets
Knox County TN Health - Fort Sanders Alliance	5.250	%	01/01/2015	Aaa/AAA*/AAA@	$	2,175,000	$	2,378,428
Metro Nashville & Davidson County TN - Open Arms	5.100		08/01/2016	AA*		2,500,000		2,516,900
Metro Nashville & Davidson County TN - Open Arms	5.100		08/01/2019	AA*		1,660,000		1,667,885
Shelby County TN Health Education & Housing Facilities	5.000		07/01/2031	Aa2/AA+@		4,750,000		4,832,223
								11,395,436
PREREFUNDED BONDS
5.22% of Net Assets
Chattanooga TN Health Educational & Housing Revenue	5.000		12/01/2018	Aa2/AA*/AA@		1,000,000		1,017,230
Johnson City TN Health & Educational Facilities	5.125		07/01/2025	AAA*/AAA@		2,000,000		2,048,380
Knox County TN Health Educational & Housing Facilities University	5.750		04/01/2019	Baa1/A-@		1,000,000		1,039,800
Knox County TN Health Educational & Housing - Covenant Health	5.000		01/01/2022	Aaa/AAA*/AAA@		550,000		593,032
Memphis TN General Improvement	5.000		11/01/2021	Aa2/AA*/AA-@		500,000		529,020
Metro Nashville & Davidson County TN Water & Sewer	6.500		12/01/2014	Aaa/AAA*		60,000		71,417
								5,298,879
STATE AND LOCAL MORTGAGE REVENUE
3.21% of Net Assets
TN Housing Development Agency Homeownership Program	5.500		07/01/2020	Aa2/AA*		335,000		338,186
TN Housing Development Agency Series 2001 - 3B	5.250		01/01/2020	Aa2/AA*		230,000		236,127
TN Housing Development Agency Mortgage Financing Series A	5.200		07/01/2023	Aa2/AA*		2,600,000		2,686,528
								3,260,841
MUNICIPAL UTILITY REVENUE BONDS
1.94% of Net Assets
Metro Nashville & Davidson County TN Electric System	5.125		05/15/2016	Aa3/AA*/AA@		700,000		718,088
Metro Nashville & Davidson County TN Electric System	5.125		05/15/2021	Aa3/AA*/AA@		1,085,000		1,133,196
Metro Nashville & Davidson County TN Water & Sewer	5.500		01/01/2016	Aa3/A+*		120,000		120,103
								1,971,387
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS
1.68% of Net Assets
Metro Nashville & Davidson County TN - McKendree	5.125		01/01/2020	AA*		1,700,000		1,700,000
								1,700,000
ESCROWED TO MATURITY BONDS
1.21% of Net Assets
Jackson TN Water & Sewer Revenue	7.200		07/01/2012	Aaa/AAA*		5,000		5,415
Johnson City TN Health & Educational Revenue	5.000		07/01/2018	Aaa/AAA*/AAA@		1,000,000		1,026,060
Metro Nashville & Davidson County TN - Dandridge Tower	6.375		01/01/2011	A2		200,000		200,000
								1,231,475
LEASE REVENUE BONDS
.25% of Net Assets
Memphis/Shelby County TN Special Facilities Revenue - FedEx	5.050		09/01/2012	Baa2/BBB*		250,000		256,030
								256,030
INDUSTRIAL REVENUE AND POLLUTION CONTROL REVENUE BONDS
.18% of Net Assets
Chattanooga TN Industrial Development Board F L Haney Co	7.200		08/15/2010	AAA*		20,000		21,964
Chattanooga TN Industrial Development Board F L Haney Co	7.200		02/15/2009	AAA*		25,000		26,033
Chattanooga TN Industrial Development Board F L Haney Co	7.200		08/15/2009	AAA*		25,000		26,641
Chattanooga TN Industrial Development Board F L Haney Co	7.200		02/15/2010	AAA*		100,000		107,839
								182,477
Total Investments (cost $98,432,174) (See (a) below for further explanation) 97.93% of Net Assets							$	99,396,551

* Standard and Poor’s Corporation

@ Fitch’s Investors Service

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

# Bond ratings are unaudited.

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

Unrealized appreciation	$	1,419,744
Unrealized depreciation		(455,367	)
Net unrealized appreciation	$	964,377

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

27

TENNESSEE TAX-FREE INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007	UNAUDITED

ASSETS:
Investments in securities, at value (Cost: $98,432,174)		$	99,396,551
Cash			1,160,405
Receivable from investments sold			270,000
Interest receivable			1,497,135
Total assets			102,324,091
LIABILITIES:
Payable for:
Distributions to shareholders	562,661
Fund shares redeemed	178,009
Investment advisory fee	42,793
Transfer agent fee	10,790
Trustee fee	1,222
Accrued expenses	39,372
Total liabilities			834,847
NET ASSETS:
Capital			101,300,050
Net accumulated realized loss on investment transactions			(775,184	)
Net unrealized appreciation in value of investments			964,377
Net assets at value		$	101,489,243
NET ASSET VALUE, offering price and redemption price per share ($101,489,243 -:- 9,241,495 shares outstanding; unlimited number of shares authorized; no par value)		$	10.98

STATEMENT OF OPERATIONS

For the six months ended December 31, 2007

Net investment income:
Interest income	$	2,250,488
Expenses:
Investment advisory fee		252,852
Transfer agent fee		63,756
Custodian expense		2,460
Professional fees		10,989
Trustee fees		5,860
Other expenses		23,130
Total expenses		359,047
Custodian expense reduction		(2,460	)
Net expenses		356,587
Net investment income		1,893,901
Realized and unrealized gain/(loss) on investments:
Net realized loss		(13,726	)
Net increase in unrealized appreciation		1,026,848
Net realized and unrealized gain on investments		1,013,122
Net increase in net assets resulting from operations	$	2,907,023

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

28

TENNESSEE TAX-FREE INCOME SERIES
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended December 31, 2007 and the year ended June 30, 2007	UNAUDITED

	12/31/07			2007
Increase in net assets:
Operations:
Net investment income	$	1,893,901		$	3,537,827
Net realized gain/(loss) on investments		(13,726	)		160,245
Net increase/(decrease) in unrealized appreciation		1,026,848			(134,883	)
Net increase in net assets resulting from operations		2,907,023			3,563,189
Distributions to shareholders from net investment income		(1,893,901	)		(3,537,827	)
Net fund share transactions (Note 4)		779,061			11,404,073
Total increase		1,792,183			11,429,435
Net assets:
Beginning of year		99,697,061			88,267,626
End of year	$	101,489,244		$	99,697,061

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months ended			For the year ended June 30,
	12/31/2007			2007			2006			2005			2004
Net asset value, beginning of year	$	10.87		$	10.84		$	11.21		$	10.87		$	11.26
Income from investment operations:
Net investment income		0.21			0.41			0.42			0.43			0.45
Net gains/(losses) on securities, both realized and unrealized		0.11			0.03			(0.37	)		0.34			(0.39	)
Total from investment operations		0.32			0.44			0.05			0.77			0.06
Less distributions:
Distributions from net investment income		(0.21	)		(0.41	)		(0.42	)		(0.43	)		(0.45	)
Net asset value, end of year	$	10.98		$	10.87		$	10.84		$	11.21		$	10.87
Total return		2.92	%		4.05	%		0.45	%		7.21	%		0.55	%
Net assets, end of year (in thousands)	$	101,489		$	99,697		$	88,268		$	82,640		$	70,499
Ratio of net expenses to average net assets (a)		0.35	%		0.72	%		0.71	%		0.67	%		0.67	%
Ratio of net investment income to average net assets		1.88	%		3.70	%		3.82	%		3.89	%		4.05	%
Portfolio turnover		4.19	%		8.55	%		6.14	%		9.49	%		16.11	%

(a) Percentages are after custodian/interest expense redumtions.

Percentages before custodian/interest expense reductions were:

.35% for the six months ended December 31, 2007; .74% for 2007; .73% for 2006; .69% for 2005; and .70% for 2004, respectively.

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

29

DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
Tennessee Municipal Bonds — 100%
December 31, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value		Market Value
INSURED MUNICIPAL REVENUE BONDS
76.00% of Net Assets
Chattanooga-Hamilton County TN Hospital Authority Erlanger	5.625	%	10/01/2009	Aaa/AAA*/AAA@	$	715,000	$	742,997
Dickson County TN Refunding	5.000		06/01/2015	Aaa/AAA@		140,000		150,133
Hawkins County TN General Obligation	4.500		05/01/2008	Aaa/AAA*/AAA@		315,000		316,531
Johnson City TN General Obligation	5.250		06/01/2008	Aaa/AAA*/AAA@		125,000		126,023
Johnson City TN Refunding	4.000		06/01/2015	Aaa		400,000		411,372
Knox County TN Health Education & Housing Facilities Board	5.500		04/15/2011	Baa/AAA*		300,000		303,285
Knoxville TN Electric Revenue - Series V	4.750		07/01/2021	Aaa/AAA*/AAA@		275,000		285,021
Marshall County TN General Obligation	4.450		12/01/2010	Aaa/AAA@		270,000		277,914
Maury County TN School & Public Improvement	5.000		04/01/2016	Aaa/AAA@		1,000,000		1,082,330
Memphis-Shelby TN Sports Authority Memphis Arena Project	5.500		11/01/2012	Aaa/AAA*/AAA@		500,000		547,810
Memphis-Shelby County TN Sports Authority Memphis Arena	5.000		11/01/2017	Aaa/AAA*/AAA@		275,000		301,378
Memphis TN General Obligation General Improvement	5.000		10/01/2016	Aaa/AAA*/AAA@		450,000		487,427
Memphis TN Electric System Revenue - Series A	5.000		12/01/2015	Aaa/AAA*/AAA@		1,200,000		1,288,764
Municipal Energy Acquisition Corporation TN Gas Revenue	4.125		03/01/2008	Aaa/AAA*/AAA@		250,000		250,468
Municipal Energy Acquisition Gas Corporation Revenue	4.125		03/01/2009	Aaa/AAA*/AAA@		200,000		202,116
Shelby County TN Methodist Hospital Healthcare Revenue	5.500		04/01/2008	Aaa/AAA*/AAA@		250,000		251,388
Shelby County TN Health Education & Housing Facility Rhodes	4.500		08/01/2009	Aaa/AAA*/AAA@		100,000		101,730
Sullivan County TN Health Educational & Housing Facility	5.000		09/01/2011	AA*/AA@		335,000		347,110
Tennergy Corporation TN Gas Revenue	5.000		06/01/2008	Aaa/AAA*/AAA@		500,000		504,095
								7,977,892
GENERAL OBLIGATION BONDS
10.39% of Net Assets
Chattanooga TN General Obligation Unlimited	5.500		09/01/2010	Aa2/AA*/AA@		500,000		529,800
Rutherford County TN General Obligation	5.000		04/01/2009	Aa2/AA*		250,000		255,643
Rutherford County TN Public Improvement General Obligation	4.250		04/01/2009	Aa2/AA*		200,000		202,692
Shelby County TN Public Improvement General Obligation S:A	5.500		04/01/2009	Aa2/AA+*/AA@		100,000		102,840
								1,090,975
PREREFUNDED BONDS
3.92% of Net Assets
Metro Government Nashville & Davidson County TN General Obligation	5.125		11/15/2013	Aa2/AA*		300,000		311,376
TN State School Board Authority Higher Education Facility	4.800		05/01/2014	Aa2/AA-*		100,000		100,422
								411,798
LEASE REVENUE BONDS
3.89% of Net Assets
Memphis-Shelby County Airport Special Facilities-Federal Ex	5.000		09/01/2009	Baa2/BBB*		400,000		408,372
								408,372
MUNICIPAL UTILITY REVENUE BONDS
1.67% of Net Assets
Knoxville TN Gas Revenue System - Series J	4.750		03/01/2010	Aa3/AA*		170,000		175,394
								175,394
HOSPITAL AND HEALTHCARE REVENUE BONDS
.98% of Net Assets
Knox County TN Hospital Facility Revenue Catholic Healthcare	4.500		10/01/2011	A1/AA-*/AA-@		100,000		103,161
								103,161
STATE AND LOCAL MORTGAGE REVENUE BONDS
.69% of Net Assets
Shelby County TN Multi-Family Housing Memphis - Series A ^	5.250		01/01/2009	NR		240,000		72,000
								72,000
Total Investments (cost $10,309,255) (See (a) below for further explanation) 97.54% of Net Assets							$	10,239,592

* Standard and Poor’s Corporation

@ Fitch’s Investors Service

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

NR Not Rated

# Bond ratings are unaudited.

^ Security in default and therefore is non-income producing.

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

Unrealized appreciation	$	58,306
Unrealized depreciation		(127,969	)
Net unrealized depreciation	$	(69,663	)

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

30

TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007	UNAUDITED

ASSETS:
Investments in securities, at value (Cost: $10,309,255)		$	10,239,592
Cash			19,613
Receivable from investments sold			250,000
Interest receivable			113,084
Total assets			10,622,289
LIABILITIES:
Payable for:
Distributions to shareholders	6,586
Borrowings under line of credit	107,022
Investment advisory fee	4,449
Transfer agent fee	1,343
Trustee fee	967
Accrued expenses	5,121
Total liabilities			125,488
NET ASSETS:
Capital			10,787,345
Net accumulated realized loss on investment transactions			(220,881	)
Net unrealized depreciation in value of investments			(69,663	)
Net assets at value		$	10,496,801
NET ASSET VALUE, offering price and redemption price per share ($10,496,801 -:- 1,006,190 shares outstanding; unlimited number of shares authorized; no par value)		$	10.43

STATEMENT OF OPERATIONS

For the six months ended December 31, 2007

Net investment income:
Interest income	$	204,393
Expenses:
Investment advisory fee		26,622
Transfer agent fee		7,987
Custodian expense		2,400
Professional fees		3,251
Trustee fees		621
Other expenses		4,833
Total expenses		45,714
Custodian expense reduction		(2,400	)
Net expenses		43,314
Net investment income		161,079
Realized and unrealized loss on investments:
Net realized loss		(1,923	)
Net increase in unrealized appreciation		120,268
Net realized and unrealized gain on investments		118,345
Net increase in net assets resulting from operations	$	279,424

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

31

TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended December 31, 2007 and the year ended June 30, 2007	UNAUDITED

	12/31/07			2007
Decrease in net assets:
Operations:
Net investment income	$	161,079		$	381,294
Net realized loss on investments		(1,923	)		(41,349	)
Net increase/(decrease) in unrealized appreciation		120,268			126,752
Net increase/(decrease) in net assets resulting from operations		279,424			466,697
Distributions to shareholders from net investment income		(161,079	)		(381,296	)
Net fund share transactions (Note 4)		(501,147	)		(4,262,014	)
Total decrease		(382,802	)		(4,176,613	)
Net assets:
Beginning of year		10,879,603			15,056,216
End of year	$	10,496,801		$	10,879,603

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months ended			For the year ended June 30,
	12/31/2007			2007			2006			2005			2004
Net asset value, beginning of year	$	10.32		$	10.29		$	10.60		$	10.58		$	10.91
Income from investment operations:
Net investment income		0.16			0.31			0.30			0.30			0.32
Net gains/(losses) on securities, both realized and unrealized		0.11			0.03			(0.31	)		0.02			(0.33	)
Total from investment operations		0.27			0.34			(0.01	)		0.32			(0.01	)
Less distributions:
Distributions from net investment income		(0.16	)		(0.31	)		(0.30	)		(0.30	)		(0.32	)
Net asset value, end of year	$	10.43		$	10.32		$	10.29		$	10.60		$	10.58
Total return		2.61	%		3.34	%		(0.10	)%		3.05	%		(0.07	)%
Net assets, end of year (in thousands)	$	10,497		$	10,880		$	15,056		$	19,323		$	20,311
Ratio of net expenses to average net assets (a)		0.41	%		0.79	%		0.71	%		0.56	%		0.51	%
Ratio of net investment income to average net assets		1.52	%		3.00	%		2.86	%		2.81	%		2.99	%
Portfolio turnover		7.10	%		0.00	%		23.21	%		13.91	%		5.92	%

(a) Percentages are after expenses waived by Adviser and custodian/interest expense reductions.

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

0% and .02% for the six months ended December 31, 2007; 0% and .04% for 2007; .04% and .03% for 2006; .19% and .04% for 2005; and .22% and .04% for 2004, respectively.

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

32

D UPREE MUTUAL FUNDS - INTERMEDIATE GOVERNMENT BOND SERIES	UNAUDITED
SCHEDULE OF PORTFOLIO INVESTMENTS
U.S. Government Securities and Agencies — 100%
December 31, 2007

Bond Description	Coupon		Maturity Date	Rating#	Par Value of Shares		Market Value
FEDERAL HOME LOAN BANK
39.64% of Net Assets
Federal Home Loan Banks Medium Term Note	7.000	%	08/15/2014	Aaa/AAA	$	500,000	$	581,741
Federal Home Loan Banks Medium Term Note	5.625		02/12/2018	Aaa/AAA		1,500,000		1,499,063
Federal Home Loan Banks Medium Term Note	5.620		08/06/2018	AAA/Aaa		3,000,000		2,998,125
Federal Home Loan Banks Medium Term Note	5.220		12/15/2014	Aaa/AAA		1,000,000		999,375
Federal Home Loan Banks Medium Term Note	5.375		04/22/2015	Aaa/AAA*/AAA@		3,025,000		3,112,410
								9,190,714
FEDERAL FARM CREDIT
22.39% of Net Assets
Federal Farm Credit Bank	5.300		06/24/2014	Aaa/AAA		1,550,000		1,651,204
Federal Farm Credit Bank	5.625		10/20/2015	Aaa/AAA*/AAA@		1,000,000		1,010,201
Federal Farm Credit Bank	5.875		08/16/2021	AAA*/AAA@		1,900,000		2,001,194
Federal Farm Credit Bank	6.200		07/26/2022	Aaa/AAA*/AAA@		500,000		528,080
								5,190,679
FEDERAL NATIONAL MORTGAGE ASSOCIATION
21.63% of Net Assets
Federal National Mortgage Association	5.300		08/15/2013	AAA/Aaa		2,000,000		2,013,486
Federal National Mortgage Association	5.500		12/09/2014	Aaa/AAA		1,000,000		999,450
Federal National Mortgage Association	5.250		12/30/2015	Aaa/AAA		1,000,000		1,001,609
Federal National Mortgage Association	5.210		06/30/2015	Aaa/AAA*/AAA@		1,000,000		1,001,471
								5,016,016
FEDERAL HOME LOAN MORTGAGE
8.58% of Net Assets
Federal Home Loan Mortgage Corporation	5.000		03/27/2018	Aaa/AAA		500,000		496,876
Federal Home Loan Mortgage Corporation	5.125		06/08/2015	Aaa/AAA*/AAA@		1,000,000		1,002,524
Federal Home Loan Mortgage Corporation	5.000		06/11/2021	AAA/AAA*/AAA@		500,000		490,083
								1,989,483
STUDENT LOAN MARKETING ASSOCIATION
4.96% of Net Assets
Student Loan Marketing Association	7.300		08/01/2012	Aaa/AAA		1,000,000		1,150,275
								1,150,275
CASH EQUIVALENTS
1.53% of Net Assets
US Bank U.S. Treasury Money Market Fund								354,151
								354,151
Total Investments (cost $22,247,758) (See (a) below for further explanation) 98.73% of Net Assets							$	22,891,318

* Standard and Poor’s Corporation

@ Fitch’s Investors Service

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

# Bond ratings are unaudited.

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

Unrealized appreciation	$	646,357
Unrealized depreciation		(2,797	)
Net unrealized appreciation	$	643,560

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

33

INTERMEDIATE GOVERNMENT BOND SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007	UNAUDITED

ASSETS:
Investments in securities, at value (Cost: $22,247,758)		$	22,891,318
Cash			19,718
Interest receivable			307,378
Total assets			23,218,414
LIABILITIES:
Payable for:
Distributions to shareholders	23,269
Fund shares redeemed	547
Investment advisory fee	3,892
Transfer agent fee	2,937
Trustee fee	356
Accrued expenses	171
Total liabilities			31,172
NET ASSETS:
Capital			23,010,752
Net accumulated realized loss on investment transactions			(467,070	)
Net unrealized appreciation in value of investments			643,560
Net assets at value		$	23,187,242
NET ASSET VALUE, offering price and redemption price per share ($23,187,242 -:- 2,306,270 shares outstanding; unlimited number of shares authorized; no par value)		$	10.05

STATEMENT OF OPERATIONS

For the six months ended December 31, 2007

Net investment income:
Interest income	$	631,205
Expenses:
Investment advisory fee		23,133
Transfer agent fee		16,896
Custodian expense		2,400
Professional fees		2,613
Trustee fees		1,340
Postage expense		5,027
Printing expense		3,520
Other expenses		4,129
Total expenses		59,058
Custodian expense reduction		(2,400	)
Net expenses		56,658
Net investment income		574,547
Realized and unrealized gain/(loss) on investments:
Net realized loss		(7,044	)
Net increase in unrealized appreciation		928,836
Net realized and unrealized gain on investments		921,792
Net increase in net assets resulting from operations	$	1,496,339

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

34

INTERMEDIATE GOVERNMENT BOND SERIES
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended December 31, 2007 and the year ended June 30, 2007	UNAUDITED

	12/31/07			2007
Increase in net assets:
Operations:
Net investment income	$	574,547		$	1,138,528
Net realized loss on investments		(7,044	)		(4,983	)
Net increase in unrealized appreciation		928,836			203,062
Net increase in net assets resulting from operations		1,496,339			1,336,607
Distributions to shareholders from net investment income		(574,547	)		(1,161,912	)
Net fund share transactions (Note 4)		(287,637	)		890,949
Total increase		634,155			1,065,644
Net assets:
Beginning of year		22,553,087			21,487,443
End of year	$	23,187,242		$	22,553,087

FINANCIAL HIGHLIGHTS

Selected data for a share outstanding:

	Six months ended 12/31/2007			2007			2006			2005			2004
Net asset value, beginning of year	$	9.66		$	9.58		$	10.07		$	9.94		$	10.35
Income from investment operations:
Net investment income		0.25			0.49			0.48			0.47			0.52
Net gains/(losses) on securities, both realized and unrealized		0.39			0.08			(0.49	)		0.13			(0.41	)
Total from investment operations		0.64			0.57			(0.01	)		0.60			0.11
Less distributions:
Distributions from net investment income		(0.25	)		(0.49	)		(0.48	)		(0.47	)		(0.52	)
Net asset value, end of year	$	10.05		$	9.66		$	9.58		$	10.07		$	9.94
Total return		6.65	%		6.04	%		(0.14	)%		6.17	%		1.09	%
Net assets, end of year (in thousands)	$	23,187		$	22,553		$	21,487		$	22,369		$	18,075
Ratio of net expenses to average net assets (a)		0.25	%		0.51	%		0.45	%		0.44	%		0.45	%
Ratio of net investment income to average net assets		2.50	%		5.05	%		4.97	%		4.68	%		5.12	%
Portfolio turnover		4.32	%		6.40	%		17.67	%		28.88	%		42.35	%

(a) Percentages are after custodian/interest expense reductions.

Percentages before custodian/interest expense reductions were:

.26% for the six months ended December 31, 2007; .53% for 2007; .47% for 2006; .48% for 2005; and .48% for 2004 respectively.

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

35

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2007

1. Organization and Significant Accounting Policies

Dupree Mutual Funds is registered under the Investment Company Act of 1940, as amended, as a no-load, open-end investment company. The Declaration of Trust of Dupree Mutual Funds (the "Trust") permits the Trustees to create an unlimited number of series of investment portfolios (each a “Fund" and collectively the “Funds”) and with respect to each series to issue an unlimited number of full or fractional shares of a single class. The Trust currently offers nine series:

Alabama Tax-Free Income Series

Kentucky Tax-Free Income Series

Kentucky Tax-Free Short-to-Medium Series

Mississippi Tax-Free Income Series

North Carolina Tax-Free Income Series

North Carolina Tax-Free Short-to-Medium Series

Tennessee Tax-Free Income Series

Tennessee Tax-Free Short-to-Medium Series

Intermediate Government Bond Series

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

The Intermediate Government Bond Series' investment strategy is to invest only in obligations of the U.S. Treasury and Agencies of the U.S. Government. The Intermediate Government Bond Series will buy bonds and notes that will maintain an average maturity of no more than ten years.

The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The policies are in conformity with accounting principles generally accepted in the United States.

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. The procedures also include weekly verification of market quotations provided by two independent pricing services. A bond valuation that is not supported by a valuation source requires management to fair value the security in consultation with the Board’s Valuation committee. Shares of open-end mutual funds in which the Funds invest are valued at their respective net asset values as reported by the underlying funds.

36

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2007

1. Significant Accounting Policies, continued:

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No.157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of December 31, 2007 the Funds do not believe the adoption of SFAS No. 157 will impact the amounts reported in the financial statements, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements reported on the statement of changes in net assets for a fiscal period.

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.

C. Security Income

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

D. When-Issued and Delayed Settlement Securities

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

E. Federal Income Taxes

Each of the Funds is a separate entity for federal income tax purposes. It is each Funds’ 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, 2007. Therefore, no federal income tax provision is required.

On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management is evaluating the implications of FIN 48 and its impact on the Funds’ financial statements when adopted, has not yet been determined.

37

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2007

1. Significant Accounting Policies, continued:

F. Distributions

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

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

Permanent book and tax basis differences relating to shareholder distributions have been reclassified to capital.

G. Estimates

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

2. Investment Advisory Fee and Other Transactions with Affiliates

Subject to the direction of the Trustees, Dupree & Company, Inc. (the Adviser) is responsible for the management of the Funds' portfolios. Under the terms of the Investment Advisory Agreements for the Alabama, Kentucky, Mississippi, North Carolina, and Tennessee Series, the Funds have agreed to pay to the Adviser as compensation for all services rendered, facilities furnished and expenses paid or assumed by it under the Agreements, a fee at the annual rate of .50 of 1% of the first $100,000,000 average daily net assets of each Fund determined separately; .45 of 1% of the average daily net assets between $100,000,001 and $150,000,000 of each Fund determined separately; .40 of 1% of the average daily net assets between $150,000,001 and $500,000,000 of each Fund determined separately; and .35 of 1% of the average daily net assets in excess of $500,000,000. For the Intermediate Government Bond Series, the Fund has agreed to pay to the Adviser, as compensation for all services rendered, facilities furnished and expenses paid or assumed by it under the Agreement, a fee at the annual rate of .20 of 1% of average daily net assets.

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

38

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2007

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

For the six months ended December 31, 2007, investment advisory fees and waived amounts were as follows:

	Investment Advisory fees		Waived Investment Advisory fees
Alabama Tax-Free Income Series	$	29,797	$	21,441
Kentucky Tax-Free Income Series	$	1,426,715		—
Kentucky Tax-Free Short-to-Medium Series	$	148,656		—
Mississippi Tax-Free Income Series	$	12,697	$	11,486
North Carolina Tax-Free Income Series	$	145,726		—
North Carolina Tax-Free Short-to-Medium Series	$	28,594		—
Tennessee Tax-Free Income Series	$	252,852		—
Tennessee Tax-Free Short-to-Medium Series	$	26,622		—
Intermediate Government Bond Series	$	23,133		—

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

3. Purchases and Sales of Securities

During the six months ended December 31, 2007, the cost of purchases and the proceeds from sales and maturities of securities (excluding short-term securities) for each of the Funds were as follows:

	Purchases		Sales/Calls
Alabama Tax-Free Income Series	$	689,260	$	550,830
Kentucky Tax-Free Income Series		18,811,288		20,231,432
Kentucky Tax-Free Short-to-Medium Series		5,225,340		8,887,296
Mississippi Tax-Free Income Series		130,450		444,602
North Carolina Tax-Free Income Series		9,206,356		4,060,818
North Carolina Tax-Free Short-to-Medium Series		1,710,306		1,157,528
Tennessee Tax-Free Income Series		4,146,173		6,302,591
Tennessee Tax-Free Short-to-Medium Series		736,169		1,355,015
Intermediate Government Bond Series		968,300		1,002,230

4. Capital Shares

At December 31, 2007, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:

	Six Months Ended December 31, 2007					Year Ended June 30, 2007
ALABAMA TAX-FREE INCOME SERIES	SHARES		AMOUNT			SHARES		AMOUNT
Shares sold	79,829		$	928,243		217,192		$	2,549,134
Shares issued for reinvestment of distributions and capital gains	16,489			192,576		26,093			306,525
Shares redeemed	(73,405	)		(851,505	)	(157,732	)		(1,852,010	)
Net increase	22,913		$	269,314		85,553		$	1,003,649

39

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2007

4. Capital Shares, continued:

	Six Months Ended December 31, 2007				Year Ended June 30, 2007
KENTUCKY TAX-FREE INCOME SERIES	SHARES		AMOUNT		SHARES		AMOUNT
Shares sold	4,417,476		$32,934,360		9,650,442		$72,716,213
Shares issued for reinvestment of distributions and capital gains	1,108,138		8,327,955		2,219,370		16,712,266
Shares redeemed	(5,638,262	)	(42,085,784	)	(10,077,019	)	(76,007,337	)
Net increase	(112,648	)	($823,469	)	1,792,792		$13,421,142
	Six Months Ended December 31, 2007				Year Ended June 30, 2007
KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES	SHARES		AMOUNT		SHARES		AMOUNT
Shares sold	712,243		$3,685,454		2,426,071		$12,578,488
Shares issued for reinvestment of distributions	128,199		664,183		293,040		1,518,346
Shares redeemed	(1,848,840	)	(9,561,180	)	(7,131,122	)	(36,947,040	)
Net increase	(1,008,398	)	($5,211,543	)	(4,412,011	)	($22,850,206	)
	Six Months Ended December 31, 2007				Year Ended June 30, 2007
MISSISSIPPI TAX-FREE INCOME SERIES	SHARES		AMOUNT		SHARES		AMOUNT
Shares sold	25,590		$288,672		146,878		$1,685,190
Shares issued for reinvestment of distributions and capital gains	5,974		67,809		13,380		152,943
Shares redeemed	(60,837	)	(686,428	)	(147,742	)	(1,688,878	)
Net increase	(29,273	)	($329,947	)	12,517		$149,254
	Six Months Ended December 31, 2007				Year Ended June 30, 2007
NORTH CAROLINA TAX-FREE INCOME SERIES	SHARES		AMOUNT		SHARES		AMOUNT
Shares sold	812,259		$8,762,664		1,009,262		$11,001,946
Shares issued for reinvestment of distributions	72,727		788,496		125,366		1,366,179
Shares redeemed	(395,722	)	(4,273,449	)	(556,875	)	(6,069,350	)
Net increase	489,264		$5,277,711		577,752		$6,298,775
	Six Months Ended December 31, 2007				Year Ended June 30, 2007
NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES	SHARES		AMOUNT		SHARES		AMOUNT
Shares sold	151,243		$1,574,893		217,217		$2,258,131
Shares issued for reinvestment of distributions and capital gains	11,800		122,759		25,624		266,880
Shares redeemed	(123,581	)	(1,284,809	)	(426,003	)	(4,432,976	)
Net increase	39,462		$412,843		(186,163	)	($1,907,965	)

40

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2007

4. Capital Shares, continued:

	Six Months Ended December 31, 2007				Year Ended June 30, 2007
TENNESSEE TAX-FREE INCOME SERIES	SHARES		AMOUNT		SHARES		AMOUNT
Shares sold	782,862		$8,542,526		2,146,643		$23,718,638
Shares issued for reinvestment of distributions	71,845		787,087		137,737		1,518,224
Shares redeemed	(783,755	)	(8,550,552	)	(1,255,779	)	(13,832,789	)
Net increase	70,952		$779,061		1,028,600		$11,404,073
	Six Months Ended December 31, 2007				Year ended June 30, 2007
TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES	SHARES		AMOUNT		SHARES		AMOUNT
Shares sold	54,364		$563,661		85,707		$892,357
Shares issued for reinvestment of distributions	11,822		122,756		27,954		290,963
Shares redeemed	(114,695	)	(1,187,564	)	(522,310	)	(5,445,334	)
Net decrease	(48,509	)	($501,147	)	(408,649	)	($4,262,014	)
	Six Months Ended December 31, 2007				Year Ended June 30, 2007
INTERMEDIATE GOVERNMENT BOND SERIES	SHARES		AMOUNT		SHARES		AMOUNT
Shares sold	134,979		$1,329,203		249,741		$2,434,050
Shares issued for reinvestment of distributions	43,854		434,066		87,142		851,183
Shares redeemed	(207,492	)	(2,050,907	)	(245,018	)	(2,394,284	)
Net increase	(28,659	)	($287,637	)	91,865		$890,949

5. Concentration of credit risk

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

6. Federal Income Taxes

As of June 30, 2007, the Kentucky Tax-Free Short-to-Medium Series, North Carolina Tax-Free Income Series, North Carolina Tax-Free Short-to-Medium Series, Tennessee Tax-Free Income Series, Tennessee Tax-Free Short-to-Medium Series, and Intermediate Government Bond Series have capital loss carryforwards which are available to offset future capital gains, if any. As of June 30, 2007 the Alabama Tax-Free Income Series and the Kentucky Tax-Free Income Series do not have any capital loss carryforwards.

41

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2007

6. Federal Income Taxes, continued:

The capital loss carryforwards expire as follows:

	2008		2009		2010		2011		2012		2013		2014		2015		Total
Kentucky Tax-Free Short-to-Medium Series	$	135,232	$	312,672	$	34,064	$	—	$	44,500	$	329,431	$	74,336	$	608,765	$	1,539,000
North Carolina Tax-Free Income Series		—		—		—		—		687,622		—		—		—		687,622
North Carolina Tax-Free Short-to-Medium Series		5,915		22,226		—		—		10,514		4,659		43,905		50,449		137,668
Tennessee Tax-Free Income Series		—		469,234		69,806		18,314		175,434		28,669		—		—		761,457
Tennessee Tax-Free Short-to-Medium Series		5,991		37,349		—		—		—		797		61,617		92,566		198,320
Intermediate Government Bond Series		209,853		46,873		—		—		117,848		2		64,307		21,143		460,026

During the year ended June 30, 2007 the following Funds utilized capital loss carryforwards as follows:

	Amount
Alabama Tax-Free Income Series	$	1,043
Kentucky Tax-Free Income Series		257,992
North Carolina Tax-Free Income Series		86,767
Tennessee Tax-Free Income Series		160,246

Capital losses incurred after October 31 (“Post-October” losses) within the taxable year are deemed to arise on the first business day of the Funds’ next taxable year. The following Funds incurred and will elect to defer net capital losses during the fiscal year 2007 as follows:

	Post October Losses
Kentucky Tax-Free Income Series	$	(319,813	)
Kentucky Tax-Free Short-to-Medium Series		(162,119	)
Mississippi Tax-Free Income Series		(9,775	)
North Carolina Tax-Free Short-to-Medium Series		(26,827	)
Tennessee Tax-Free Short-to-Medium Series		(20,637	)

42

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2007

6. Federal Income Taxes, continued:

The tax character of distributions paid for the years ended June 30, 2007 and 2006 were as follows:

	2007						2006
	Tax Exempt Income		Ordinary Income		Long-term Capital Gain		Tax Exempt Income		Ordinary Income		Long-term Capital Gain
Alabama Tax-Free Income Series	$	461,296	$	—	$	—	$	368,623	$	—	$	—
Kentucky Tax-Free Income Series		27,771,550		—		649,014		27,614,512		—		—
Kentucky Tax-Free Short-to-Medium Series		2,257,746		—		—		2,644,939		—		—
Mississippi Tax-Free Income Series		211,237		—		22,573		186,687		—		17,756
North Carolina Tax-Free Income Series		1,980,016		—		—		1,797,666		—		—
North Carolina Tax-Free Short-to-Medium Series		369,700		2,550		—		415,263		—		—
Tennessee Tax-Free Income Series		3,537,827		—		—		3,246,995		—		—
Tennessee Tax-Free Short-to-Medium Series		381,296		—		—		492,563		—		—
Intermediate Government Bond Series		—		1,161,912		—		—		1,086,481		—

7. Contingencies and Commitments

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

8. Line of Credit Agreement and Custodian Agreement

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

During the six months ended December 31, 2007, the weighted average borrowings for each Fund were as follows:

	Weighted average borrowings
Alabama Tax-Free Income Series	$	2,332
Kentucky Tax Free Income Series		44,527
Kentucky Tax-Free Short-to-Medium Series		6,668
Mississippi Tax-Free Income Series		—
North Carolina Tax-Free Income Series		11,504
North Carolina Tax-Free Short-to-Medium Series		5,951
Tennessee Tax-Free Income Series		—
Tennessee Tax-Free Short-to-Medium Series		1,880
Intermediate Government Bond Series		225

43

DUPREE MUTUAL FUNDS	UNAUDITED
NOTES TO FINANCIAL STATEMENTS
December 31, 2007

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

Trustee and Officer information

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

Name, Address and Age	Position(s) held with Funds	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Directorships Held by Trustee
Officers:
Thomas P. Dupree Sr. 125 South Mill Street Lexington, KY 40507 Age: 77	President	Annual Term; 28 years service as President	Chairman of the Board of Dupree & Company, Inc.	N/A	N/A
Gay M. Elste P.O. Box 28 Versailles, KY 40383 Age: 56	Compliance Officer	Annual Term; 3 years of service	Attorney at Law, Darsie & Elste. Anstruther Farm, beef cattle farming	N/A	N/A
Allen E. Grimes, III 125 South Mill Street Lexington, KY 40507 Age: 45	Executive Vice President	Annual Term; 2 year of service	President, Dupree & Company, Inc. Attorney, Dinsmore & Shohl LLP (2001-2004)	N/A	N/A
Michelle M. Dragoo 125 South Mill Street Lexington, KY 40507 Age: 46	Vice President, Secretary, Treasurer	Annual Term; 9 years of service as Vice President, 7 years of service as Secretary, Treasurer	Vice President, Secretary, Treasurer of Dupree & Company, Inc.	N/A	N/A
Alison L. Arnold 125 South Mill Street Lexington, KY 40507 Age: 48	Assistant Secretary	Annual Term; 14 years of service	Dupree & Company, Inc.	N/A	N/A
Trustees:
William A. Combs, Jr. 111 Woodland Ave., #510 Lexington, KY 40502 Age: 67	Chairman, Trustee	Annual Term 6 years of service as Chairman; 18 years of service as Trustee	Officer, Director: Mercedes-Benz of Cincinnati, Ohio; Mercedes-Benz of West Chester, Ohio and Freedom Dodge, Lexington, KY	9	N/A

44

DUPREE MUTUAL FUNDS	UNAUDITED
OTHER UNAUDITED INFORMATION
December 31, 2007

Trustee and Officer information, continued:

Name, Address and Age (continued)	Position(s) held with Funds	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Directorships Held by Director
Lucy A. Breathitt 1703 Fairway Drive Lexington, KY 40502 Age: 70	Trustee	Annual Term 11 years of service as Trustee	Alexander Farms, farming	9	KY Historical Society Foundation, KY Natural Lands Trust, Bluegrass Conservancy
James C. Baughman, Jr. 1999 Richmond Road Suite 4 Lexington, KY 40502 Age: 44	Trustee	Annual Term; 0 Years of Service	President, Secretary, Treasurer, Director Office Suites Plus (executive office space rental)	9	N/A
C. Timothy Cone 201 West Short Street Lexington, KY 40507 Age: 63	Trustee	Annual Term 5 years of service as Trustee	President, Gess, Mattingly & Atchison, P.S.C. (law firm)	9	N/A
J. William Howerton 3954 Primrose Place Paducah, KY 42001 Age: 75	Trustee	Annual Term 7 years of service as Trustee	Judge (retired November 1996) KY Court of Appeals; Self-Employed Mediator (through 2006), Arbitrator and Special Judge. Trustee 4 accounts; Co-trustee 2 accounts.	9	KY Lottery Corporation; Carson Four Rivers Center for the Performing Arts
William S. Patterson 367 West Short Street Lexington, KY 40507 Age: 74	Trustee	Annual Term 28 years of service as Trustee	President, CEO, Cumberland Surety Co., Lexington, KY, President, Patterson & Co., Frankfort, KY, (real estate development, thoroughbred horse breeding and farming)	9	N/A

As of December 31, 2007, none of the Trustees nor members of their immediate family held any beneficial interest in the Trust’s Investment Adviser. Further, the Trust does not have an underwriter.

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

Proxy Voting Information

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge upon request by calling (800) 866-0614, or on the Securities and Exchange Commission’s website at http://www.sec.gov. For the six months ending December 31, 2007 the Funds exercised no proxy votes due to the fact that the debt instruments in which the Funds invest carry no voting rights.

45

DUPREE MUTUAL FUNDS	UNAUDITED
OTHER UNAUDITED INFORMATION
December 31, 2007

Quarterly Portfolio Disclosure

The Trust files with the Securities and Exchange Commission a complete listing of portfolio holdings for each Fund as of the end of the first and third quarters of each fiscal year on Form N-Q beginning with the September 2004 quarter. The complete listing (i) is available on the commission’s website and (ii) will be made available to shareholders upon request by calling 800-866-0614. Information on the operation of the S.E.C.’s Public Reference Room may be obtained by calling 1-800-SEC-0300.

Board of Trustees Approval of Existing Advisory Agreements

Dupree Mutual Fund’s Board of Trustees is responsible for overseeing the Trust’s corporate policies and adhering to fiduciary standards under the Investment Company Act of 1940 (“1940 Act”). The Trustees are responsible for the annual renewal of the Trust’s investment advisory agreements with each Series of the Trust. Under the Investment Advisory Agreements, Dupree & Company, Inc. assumes responsibility for providing investment advisory and other services.

In considering whether to renew the Investment Advisory Agreements, the Trustees, at their meeting on October 29, 2007, reviewed the following factors with respect to each Series: (1) the nature, extent and quality of services provided by Dupree & Company to each Series; (2) the investment performance of each Series; (3) the costs of the services provided to each Series and the profits realized or to be realized by Dupree & Company from its relationship with the Trust; (4) the extent to which economies of scale have been realized as each Series grows; (5) whether the level of fees reflects those economies of scale for the benefit of Series investors; (6) comparisons of services and fees with contracts entered into by Dupree & Company with other clients; and (7) other benefits derived or anticipated to be derived by Dupree & Company from its relationship with the Trust.

The Trustees reviewed the following written materials in advance of the October 29, 2007 meeting: (1) The Annual Report for the Fund for the year ended June 30, 2007; (2) a report and memorandum dated October 19, 2007 prepared by the Investment Adviser containing data about the respective performance of each Series of the Fund, fees, expenses, purchases and redemptions for each Series, together with comparisons of data with other comparable funds; and (3) audited (year ended December 31, 2006) and unaudited financial statements (nine months ended September 30, 2007) of the Investment Adviser.

Set forth below are the general factors the Trustees considered for all of the Series, followed by an outline of the selected specific factors the Trustees considered for each particular Series.

Nature, Extent and Quality of Services

Pursuant to each agreement, the Investment Adviser provides investment supervisory services, office space and facilities and corporate administration. Specifically, the Investment Adviser obtains and evaluates relevant information regarding the economy, industries, businesses, municipal issuers, securities markets and securities to formulate a continuing program for the management of each Series’ assets in a manner consistent with the Series’ investment objectives’ and to implement this program by selecting the securities to be purchased or sold by the Series and placing orders for such purchases and sales. In addition, the Investment Adviser provides for the Series’ office needs, maintains each Series’ books and records, assumes and pays all sales and promotional expenses incurred in the distribution of each Series’ shares, staffs the Series with persons competent to perform all of its executive and administrative functions, supervises and coordinates the activities of the Trust’s institutional and other agents (e.g. custodian, transfer agent, independent accounts, independent legal counsel), and permits its officers and employees to serve as officers of the Trust, all without additional cost to the Trust.

The Trustees considered that the Investment Adviser is an experienced investment adviser whose investment professionals have managed the several series of the Trust since their inception. The Investment Adviser’s personnel provide active and extensive monitoring of the investment portfolios daily and report on the investment performance of the Series to the Trustees at their scheduled quarterly meetings. The Trustees considered that the Investment Adviser has carried out these responsibilities in a professional manner over the years.

46

DUPREE MUTUAL FUNDS	UNAUDITED
OTHER UNAUDITED INFORMATION
December 31, 2007

The Trustees considered, among other things, the performance of each of the Series, as discussed below.

Performance

The Trustees considered the performance of each Series during historical and recent periods and compared to (i) standardized industry performance data, (ii) the performance of comparable mutual funds and (iii) the performance of recognized indices.

The Trustees considered the comparative performance and expense data for each Series prepared by an independent third party, Morningstar, Inc., for 1, 3 and 12 months and annualized for 3, 5 and 10 years as compared with other single state funds or government bond funds.

Cost and Profitability

The Trustees reviewed the audited (year ended December 31, 2006) and unaudited financial statements (nine months ended September 30, 2007) of Dupree & Company, Inc; statements of Dupree & Company Inc.’s revenues and costs of and profits from furnishing services to each Series (twelve months ended June 30, 2007). The Investment Adviser’s revenues and costs of and profits from furnishing services to each Series are allocated to each Series according to each Series’ identifiable costs and according to the size of the Series in relation to the total size of the Trust. The Trustees considered the Investment advisory fees paid to the Investment Adviser, expressed in dollar terms and as a percentage of assets under management. The Trustees also considered expenses waived or reimbursed by the Investment Adviser.

Fees Charged by Other Advisers

The Trustees considered information regarding fees paid to other advisers for managing similar investment portfolios. The Trustees received comparative information for comparable peer group funds prepared by Morningstar. The Trustees considered that the proposed advisory fees to be paid to the Investment Adviser for its services to each Series are comparable to the advisory fees charged to other similar portfolios.

Economies of Scale

The Trustees considered the comparable expenses incurred by other similar portfolios and considered the integration of economies of scale into the expense formulation. The Investment Adviser reported that no “economies of scale” have been identified, stating that larger portfolio size will require more personnel to oversee the growth of the portfolios. The Investment Adviser also reported that additional compliance requirements can be expected to consume more personnel time and may preclude the realization of economies of scale. The Investment Adviser noted that pursuant to the terms of the Investment Advisory Agreements, shareholders of each Series may benefit as total net assets under management increase, since the Investment Adviser’s fees decrease on a percentage basis at certain threshold levels.

Fee Comparison with Other Clients

The Trustees considered the other 2 clients served by the Investment Adviser, there being no other Investment Company served by the Investment Adviser, and the other clients being institutional clients, for which Dupree & Company purchases fixed income investments (no municipal bonds) for these clients.

Other Benefits

The Trustees considered that the Investment Adviser derives a financial benefit from its advisory relationship with the Trust. The sole benefit reported is an increase in total fees received as each Series increases in net asset size. Dupree & Company, Inc. reported no other indirect benefits attributable to management of the Series, including, but not limited to, soft dollar arrangements.

47

DUPREE MUTUAL FUNDS	UNAUDITED
OTHER UNAUDITED INFORMATION
December 31, 2007

Investment Adviser’s fees decrease on a percentage basis as total net assets under management increase. Dupree & Company, Inc. reported no other indirect benefits attributable to management of the Series, including, but not limited to, soft dollar arrangements.

Series-by-Series Factors

• Alabama Tax-Free Income Series

• For the Fiscal Year ending June 30, 2007, the Investment Adviser processed 11 portfolio purchase transactions and 11 portfolio sale transactions

• As of June 30, 2007 the five year growth of $10,000 (since inception 1/3/00) invested in the Series was $16,531 as compared to $14,358 for the 7 Year Lehman Brothers Municipal Bond Index

• As of August 31, 2007 the Series received an overall Morningstar rating of five stars. The Series has maintained an overall Morningstar rating of five stars since its inception on January 3, 2000

• As of August 31, 2007 the Series Expense Ratio was 0.43% (after waiver of fees), the lowest of 7 funds compared by Morningstar.

• Kentucky Tax-Free Income Series

• For the Fiscal Year ending June 30, 2007, the Investment Adviser processed 23 portfolio purchase transactions and 34 portfolio sale transactions

• As of June 30, 2007 the ten year growth of $10,000 invested in the Series was $15,732 as compared to $15,831 for the 7 Year Lehman Brothers Municipal Bond Index

• As of August 31, 2007 the Series received an overall Morningstar rating of five stars

• As of August 31, 2007 the Series Expense Ratio was 0.58%, the lowest of 19 funds compared by Morningstar.

• Kentucky Tax-Free Short-to-Medium Series

• For the Fiscal Year ending June 30, 2007, the Investment Adviser processed 2 portfolio purchase transactions and 26 portfolio sale transactions

• As of June 30, 2007 the ten year growth of $10,000 invested in the Series was $14,042 as compared to $14,810 for the 3 Year Lehman Brothers Municipal Bond Index

• As of August 31, 2007 the Series received an overall Morningstar rating of three stars

• As of August 31, 2007 the Series Expense Ratio was 0.72%. Out of 19 funds compared by Morningstar, only four had lower expense ratios than this Series. Of these four funds, two only accept institutional clients, one only accepts retirement money and the other has a one million dollar minimum investment.

• Mississippi Tax-Free Income Series

• For the Fiscal Year ending June 30, 2007, the Investment Adviser processed 7 portfolio purchase transactions and 7 portfolio sale transactions

• As of June 30, 2007 the five year growth of $10,000 (since inception 1/3/00) invested in the Series was $16,224 as compared to $14,815 for the 10 Year Lehman Brothers Municipal Bond Index

48

DUPREE MUTUAL FUNDS	UNAUDITED
OTHER UNAUDITED INFORMATION
December 31, 2007

• As of August 31, 2007 the Series received an overall Morningstar rating of four stars

• As of August 31, 2007 the Series Expense Ratio was 0.45% (after waiver of fees) and was the lowest of 4 funds compared by Morningstar.

• North Carolina Tax-Free Income Series

• For the Fiscal Year ending June 30, 2007, the Investment Adviser processed 9 portfolio purchase transactions and 17 portfolio sale transactions

• As of June 30, 2007 the ten year growth of $10,000 invested in the Series was $16,057 as compared to $15,831 for the 7 Year Lehman Brothers Municipal Bond Index

• As of August 31, 2007 the Series received an overall Morningstar rating of four stars

• As of August 31, 2007 the Series Expense Ratio was 0.73%, the fifth lowest of 27 funds compared by Morningstar. Of the other four funds one was open to employees of the funds only, one had a one million dollar minimum investment, one had a front end load and a 12b-1 fee, and the other fund accepted only retirement accounts.

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

• For the Fiscal Year ending June 30, 2007, the Investment Adviser processed 5 portfolio purchase transactions and 21 portfolio sale transactions

• As of June 30, 2007 the ten year growth of $10,000 invested in the Series was $14,318 as compared to $14,810 for the 3 Year Lehman Brothers Municipal Bond Index

• As of August 31, 2007 the Series received an overall Morningstar rating of three stars

• As of August 31, 2007 the Series Expense Ratio was 0.81%, the fifth lowest of 27 funds compared by Morningstar. Of the other funds three charge a sales load, one is open only to employees of the fund, one is only open to institutional clients and one has a one million dollar minimum investment.

• Tennessee Tax-Free Income Series

• For the Fiscal Year ending June 30, 2007, the Investment Adviser processed 18 portfolio purchase transactions and 27 portfolio sale transactions

• As of June 30, 2007 the ten year growth of $10,000 invested in the Series was $16,575 as compared to $15,831 for the 7 Year Lehman Brothers Municipal Bond Index

• As of August 31, 2007 the Series received an overall Morningstar rating of four stars

• As of August 31, 2007 the Series Expense Ratio was 0.72%, the fourth lowest of 11 funds compared by Morningstar. Two of the funds have a load and the fund with the lowest expense ratio is open to retirement accounts only.

• Tennessee Tax-Free Short-to-Medium Series

• For the Fiscal Year ending June 30, 2007, the Investment Adviser processed 0 portfolio purchase transactions and 15 portfolio sale transactions

• As of June 30, 2007 the ten year growth of $10,000 invested in the Series was $14,113 as compared to $14,810 for the 3 Year Lehman Brothers Municipal Bond Index

49

DUPREE MUTUAL FUNDS	UNAUDITED
OTHER UNAUDITED INFORMATION
December 31, 2007

• As of August 31, 2007 the Series received an overall Morningstar rating of three stars

• As of August 31, 2007 the Series Expense Ratio was 0.79%, the fifth lowest of 11 funds compared by Morningstar.

• Intermediate Government Bond Series

• For the Fiscal Year ending June 30, 2007, the Investment Adviser processed 1 portfolio purchase transactions and 1 portfolio sale transactions

• As of June 30, 2007 the ten year growth of $10,000 invested in the Series was $17,249 as compared to $16,847 for the Lehman Brothers U.S. Government Bond Intermediate Index

• As of August 31, 2007 the Series received an overall Morningstar rating of five stars

• As of August 31, 2007 the Series Expense Ratio was 0.51%, the fifth lowest of 30 funds compared by Morningstar.

Schedule of Shareholder Expenses

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

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Six Months Ended December 31, 2007” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

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

	Net Expense Ratio Annualized December 31, 2007		Beginning Account Value July 1, 2007*		Ending Account Value December 31, 2007**		Expenses Paid During the Six Months Ended December 31, 2007
Alabama Tax-Free Income Series
Actual	.45	%	$	1,000.00	$	1,032.00	$	2.32
Hypothetical	.45			1,000.00		1,025.20		2.31

50

DUPREE MUTUAL FUNDS	UNAUDITED
OTHER UNAUDITED INFORMATION
December 31, 2007

Schedule of Shareholder Expenses, continued:

	Net Expense Ratio Annualized December 31, 2007		Beginning Account Value July 1, 2007*		Ending Account Value December 31, 2007**		Expenses Paid During the Six Months Ended December 31, 2007
Kentucky Tax-Free Income Series
Actual	.58	%		1,000.00		1,035.10		2.98
Hypothetical	.58			1,000.00		1,025.20		2.96
Kentucky Tax-Free Short-to-Medium Series
Actual	.72			1,000.00		1,034.50		3.69
Hypothetical	.72			1,000.00		1,025.20		3.68
Mississippi Tax-Free Income Series
Actual	.45			1,000.00		1,032.30		2.32
Hypothetical	.45			1,000.00		1,025.20		2.31
North Carolina Tax-Free Income Series
Actual	.72			1,000.00		1,032.50		3.68
Hypothetical	.72			1,000.00		1,025.20		3.67
North Carolina Tax-Free Short-to-Medium Series
Actual	.82		$	1,000.00	$	1,034.10	$	4.22
Hypothetical	.82			1,000.00		1,025.20		4.20
Tennessee Tax-Free Income Series
Actual	.71			1,000.00		1,029.20		3.62
Hypothetical	.71			1,000.00		1,025.20		3.62
Tennessee Tax-Free Short-to-Medium Series
Actual	.81			1,000.00		1,026.10		4.16
Hypothetical	.81			1,000.00		1,025.20		4.15
Intermediate Government Bond Series
Actual	.49			1,000.00		1,066.50		2.56
Hypothetical	.49			1,000.00		1,025.20		2.51

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

** Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period multiplied by [number of days in most recent fiscal half-year/365] (to reflect one-half year period).

51

DUPREE MUTUAL FUNDS	UNAUDITED
OTHER UNAUDITED INFORMATION
December 31, 2007

Shareholder Meeting

A meeting of Shareholders was held on October 29, 2007. The purpose of the meeting was (i) to elect Messrs. William Combs, C. Timothy Cone, J. William Howerton, William Patterson, James C. Baughman, Jr., and Ms. Lucy A. Breathitt as Trustees and (ii) to ratify the selection of Ernst & Young LLP as the Trust’s independent auditors for the fiscal year ending June 30, 2008. The results of all matters voted on by shareholders at the Shareholder Meeting held October 29, 2007 were as follows:

A. Election of Trustees:

	FOR	AGAINST	ABSTAIN	WITHHELD	TOTAL
James C. Baughman, Jr.	73,442,690.181	7,974.292	794,885.810	0.00	74,245,550.283
Lucy A. Breathitt	73,246,179.509	7,974.292	794,885.810	0.00	74,049,039.611
William A. Combs	73,464,364.950	7,974.292	794,885.810	0.00	74,267,225.052
C. Timothy Cone	73,416,097.174	7,974.292	794,885.810	0.00	74,218,957.276
J. William Howerton	73,219,949.902	7,974.292	794,885.810	0.00	74,022,810.004
William S. Patterson	73,100,684.355	7,974.292	794,885.810	0.00	73,903,544.457

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 2008:

	FOR	AGAINST	ABSTAIN	TOTAL
Ernst & Young LLP	72,916,814.627	309,950.970	891,088.850	74,117,854.447

C. Other business:

	FOR	AGAINST	ABSTAIN	TOTAL
Other business	64,782,175.628	1,056,427.567	8,279,251.252	74,117,854.447

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.

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge upon request by calling (800) 866-0614, or on the Securities and Exchange Commission’s website at http://www.sec.gov.

52

Item 2. Code of Ethics: Not applicable for semi-annual report.

Item 3. Audit Committee Financial Expert: Not applicable for semi-annual report.

Item 4. Principal Accountant Fees and Services: Not applicable for semi-annual report.

Item 5. Not applicable for semi-annual report.

Item 6. Included as part of item 1.

Item 7. Not applicable

Item 8. Not applicable.

Item 9. Not applicable

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

Item 11. Controls and Procedures:

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

(b) There were no changes in the registrant’s internal controls over financial reporting that occurred during the second fiscal quarter of the period covered by this report that materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits

(a)(1) Incorporated by reference from Post Effective Amendment No. 45

(a)(2) Certifications

(a)(3) Not applicable

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	5th March 2008

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/ Michelle M. Dragoo
	Michelle M. Dragoo, Treasurer
Date	5th March 2008