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, 2010
Date of reporting period: July 1, 2009 through June 30, 2010
| Item 1. | Report to Stockholders |
DUPREE MUTUAL FUNDS
June 30, 2010
ANNUAL REPORT
TO SHAREHOLDERS
ABOUT DUPREE MUTUAL FUNDS
In 1941, Dupree & Company, Inc. began business in Harlan, Kentucky as a small securities brokerage firm specializing in tax-exempt municipal bonds.
Over the years the firm, which in 1963 moved its offices to Lexington, Kentucky, grew to become a regional leader in public finance, helping to structure complex and innovative municipal bond financing for some of the largest public projects in the Commonwealth of Kentucky.
In 1979, Dupree & Company began what is now Dupree Mutual Funds with the Kentucky Tax-Free Income Series and became the Fund’s investment adviser. The Fund was one of the first single-state municipal bond funds in the country, and the first mutual fund to invest solely in Kentucky municipal bonds. Since then, several new offerings have been added to the Dupree Mutual Funds family:
Kentucky Tax-Free Short-to-Medium Series in 1987;
Intermediate Government Bond Series in 1992;
Tennessee Tax-Free Income Series in 1993;
Tennessee Tax-Free Short-to-Medium Series in 1994;
North Carolina Tax-Free Income Series in 1995;
North Carolina Tax-Free Short-to-Medium Series
in 1995;
Alabama Tax-Free Income Series in 2000, and
Mississippi Tax-Free Income Series in 2000.
Today, after more than 60 years in business, Dupree continues to be a pioneer in the industry. Our Kentucky, Tennessee, and Mississippi Series are currently the ONLY 100% “no-load” municipal bond funds available in those states. No-load means simply that shares of the funds are offered directly to investors with no front or back-end sales charges, as opposed to load funds which are sold through brokerage firms or other institutions.
At Dupree Mutual Funds, our goal is a simple one: to offer investors a high-quality, low-cost way to invest in municipal and government bonds while providing superior service to our shareholders. We encourage you to let us know how we’re doing.
TABLE OF CONTENTS
UNAUDITED
Management’s Discussion of Fund Performance: Twelve Months Ended June 30, 2010 i
The investment objective of our municipal bond funds is to provide a high level of tax-free income derived from state-specific municipal bonds without incurring undue risk to principal. The investment objective of our government bond fund is to provide a high level of stable income derived from securities of the U.S. government and its agencies without incurring undue risk to principal.
This report covers the 12-month period from June 30, 2009 through June 30, 2010 (the “reporting period”). After suffering back-to-back quarterly declines in real gross domestic product (GDP) during the first and second quarters of 2009, the U.S. economy finally turned the corner and began to recover from the deep recession in the summer of 2009. Real GDP increased at a 1.6 percent annual rate during the third quarter of 2009 and the economy grew at a 5.0 percent annual rate during the fourth quarter of 2009. However, economic growth slowed somewhat during the first quarter of 2010 with real GDP increasing at a 3.7 percent annual rate. Real GDP for the second quarter of 2010 came in at 2.4 percent (advance estimate). The slowdown in real GDP growth in the first and second quarters of 2010 primarily reflected decelerations in private inventory investment and in exports and a decrease in state and local government spending.
Other indicators of economic activity such as retail sales, industrial production, and housing starts have moved higher since the summer of 2009. This data confirms that the economy at the state and national levels is continuing to recover, albeit at a gradual pace. However, most broad economic indicators have not returned to their prerecession levels. Most economists expect the economic recovery will continue at a modest pace with unemployment levels declining slowly. At its June meeting the Federal Reserve lowered its projections for real GDP growth for 2010 to a 3.0 to 3.5 percent range, slightly lower than its previous estimates.
Changes in the labor market typically lag changes in economic production. While real GDP began rising in the summer of 2009, key unemployment measures remained elevated during the reporting period. Over 8 million jobs have been lost since the recession began. The labor market started showing some signs of improvement during the first quarter of 2010. The national unemployment rate peaked at 10.1 percent in October of 2009 and ended the reporting period at 9.5 percent.
The Federal Reserve kept the target fed funds rate at 0-0.25 percent throughout the reporting period. In mid-February, the Federal Reserve raised the discount rate 25 basis points to 0.75 percent in an effort to restore the normal 1 percent spread between the fed funds rate and the discount rate. The Federal Reserve also wound down several of its liquidity facilities and discontinued its open market purchases of mortgage-backed securities and agency debt securities. Credit remained tight during the past twelve month period as financial institutions and individuals continued to deleverage. Most of the $787 billion in federal stimulus funds are expected to be spent by the end of 2010, well before most state and local economies have fully recovered.
i
UNAUDITED
Key measures of inflation remained subdued during the reporting period. The consumer price index (CPI) increased by 1.1 percent on a year-over-year basis through June. The Federal Reserve’s preferred inflation index, the personal consumption expenditure core price index (PCE), increased 1.4 percent on a year-over-year basis through June. Inflation expectations also remained well anchored during the reporting period.
State fiscal conditions mostly continued to deteriorate during the reporting period as tax revenues derived primarily from sales tax, personal income taxes, and corporate income taxes, declined substantially in nearly every reporting state. The lower-than-expected revenue collections have led to budget cuts in the majority of states and most states are facing large budget gaps for the foreseeable future. State tax revenues are still below prerecession levels, showing a decline of 9.3 percent in the first quarter of 2010 compared to the same period two years earlier. The local tax slowdown is less severe than the state tax slowdown. In the first quarter of 2010, local tax collections showed a decline of 1.1 percent. Most local governments rely on property taxes which tend to be more stable than income and sales taxes. State and local governments also face significant unfunded pension liabilities that are likely to lead to ongoing pressures on operating budgets.
Despite ongoing budgetary concerns, the municipal bond market turned in a strong performance for the past twelve months which was reflected in significantly lower yields and higher bond prices. For example, the average yield on a twenty year AAA-rated municipal bond on July 1, 2009 was 4.26 percent; the average yield on the same twenty year AAA-rated bond on June 30, 2010 was 3.75 percent. The rally in the municipal bond market was driven primarily by favorable supply and demand trends. The fact that states and municipalities managed to survive a tough 2009-2010 budget process intact also contributed to a strong performance in the municipal bond market.
A tremendous amount of money flowed out of cash or near-cash equivalents into the municipal bond market in search of higher yields. Demand for municipal bonds was strong at both the retail and institutional levels. This strong demand occurred at a time when the supply of new tax-exempt municipal bonds was very tight. The supply of new tax-exempt municipal bonds was down substantially as issuers took advantage of a new form of taxable municipal bond, Build America Bonds, beginning in April of 2009. Under the Build America Program issuers of “direct pay” Build America bonds receive a federal tax credit equal to 35 percent of the coupon interest received. Many issuers took advantage of this temporary program which resulted in tax-exempt issuance dropping by close to 20 percent during the first half of 2010. The combination of robust demand coupled with a limited supply of tax-exempt bonds led to lower yields and higher bond prices during the reporting period.
The Barclays Capital Municipal Bond Index had a total return of 9.61 percent for the twelve month period ended June 30. The short-to-intermediate area of the municipal bond yield curve underperformed longer maturity bonds as the long end of the yield
ii
UNAUDITED
curve benefited disproportionately from a scarce supply of tax-exempt bonds caused primarily by the Build America Program and steady demand from mutual funds. Likewise, lower credit quality investment grade bonds generally outperformed higher credit quality investment grade bonds during the reporting period. For example, bonds associated with the housing, pollution control, industrial development revenue, transportation, and tobacco sectors all outperformed higher credit quality bonds associated with essential service sectors such as utilities, water and sewer, and education. Each of our single state tax-exempt municipal bond funds underperformed the Barclays Capital Municipal Bond Index for these reasons.
The Kentucky Tax-Free Income Series provided shareholders a total return of 6.58 percent for the twelve months ended June 30, 2010. The Kentucky Tax-Free Short-to-Medium Series provided shareholders with a total return of 4.99 percent during the period under review.
Like most states, Kentucky’s economy has been negatively impacted by the recession with output and employment levels declining. Tax revenues have dipped below the fiscal year 2006 level due to the severe recession with an actual decline in two straight fiscal years. Legislators closed a budget gap of approximately $1.5 billion for the 2010-12 biennium with help from federal stimulus funds, budget reserves, increased taxation on cigarettes and alcohol, debt management strategies, and targeted spending reductions. The state’s annual average unemployment rate through the end of June stood at 10.0 percent compared with the national average of 9.5 percent. In 2009, Kentucky had a per capita personal income of $31,883 which ranked 46th in the nation which was 81 percent of the national average of $39,138.
Kentucky has historically relied on a large manufacturing sector. Manufacturing is the third largest sector in the Kentucky economy after government and trade, transportation, and utilities. Decreased demand for automobiles led to substantial job losses in the manufacturing sector during the economic downturn. Ongoing woes in the housing sector also led to substantial job losses in the construction industry. The information and business services sectors also contracted with the downturn in the economy. The educational and health services sector added a number of jobs during the reporting period.
Kentucky continues to be one of the largest coal exporting states. Employment in the mining sector was one of the few bright spots for the state. The state has continued to attract high-tech companies and recently has expanded its efforts to attract businesses focusing on alternative fuels and renewable energy. The Commonwealth’s appropriation supported debt was rated Aa1 by Moody’s and AA- by Standard & Poor’s as of June 30, 2010. Kentucky had net tax-supported debt per capita of $1,685 in 2009 which was substantially above the national net tax-supported debt median of $936 (Source: Moody’s Investors Services, Special Comment: “2010 State Debt Medians Report”, May 2010).
iii
UNAUDITED
The Tennessee Tax-Free Income Series provided shareholders with a total return of 6.92 percent for the twelve months ended June 30, 2010. The Tennessee Tax-Free Short-to-Medium Series had a total return of 5.39 percent for the period under review.
Tennessee’s economy suffered a significant downturn during the recession. The housing sector experienced a major downturn with the prices of existing homes declining at double-digit rates in a number of locations and new construction starts off considerably from previous years. The manufacturing sector was hard hit by the recession and, in 2009 alone, manufacturing jobs plummeted 14.2 percent. Education, health services, and government were the only sectors of the state economy to see job growth in 2009. The state’s annual unemployment rate at the end of the reporting period was 10.1 percent compared with the national average of 9.5 percent. In 2009, Tennessee had a per capita personal income of $34,089 which ranked 36th in the nation which was 87 percent of the national average of $39,189.
Tennessee relies on a combination of a state sales tax, corporate income taxes, and the Hall income tax for its revenue. According to the University of Tennessee Center for Business and Economic Research, total tax collections in Tennessee increased by $27.2 million, or a 2.2 percent nominal expansion, from April 2009 to April 2010. However, from April 2007 to April 2010 tax revenues fell by 11.2 percent. As with most states, it is anticipated that revenues will not return to prerecession levels for several more years.
Tennessee’s general obligation (G.O.) were rated AAA by Moody’s and AA+ by Standard & Poor’s as of June 30, 2010. Tennessee had net tax-supported debt per capita of $318 in 2009 which was substantially below the national net tax-supported debt median of $936 (Source: Moody’s Investors Services, Special Comment: 2010 State Debt Medians Report”, May 2010).
The North Carolina Tax-Free Income Series provided shareholders with a total return of 6.62 percent for the twelve months ended June 30, 2010. The North Carolina Tax-Free Short-to-Medium Series provided shareholders with a total return of 4.77 percent for the period under review.
North Carolina’s economy has continued to evolve toward a trade, transportation, and professional services economy. However, the manufacturing sector still represents a significant sector in the stat’s economy. The manufacturing sector almost always gets hit harder during recessions and such was the case in North Carolina during the past twelve months. Textile and apparel firms have continued to experience declines in employment as these sectors compete with cheap imported goods. The state also experienced substantial declines in employment in the motor vehicle parts industry as sales of automobiles have decreased. The state’s average unemployment rate at the end of the reporting period was 10.0 percent compared with the national average of 9.5 percent. In 2009, North Carolina had a per capita personal income of $34,453 which ranked 35th in the nation which was 88 percent of the national average.
iv
UNAUDITED
Housing prices in the state have held up relatively well during the economic downturn and are showing signs of recovery. The housing market has been supported by strong population growth in the state. With an attractive climate and a diverse geography, the state has a steady inflow of young educated people and retirees. North Carolina’s G.O. bonds were rated Aaa by Moody’s and AAA by Standard & Poor’s as of June 30, 2010. North Carolina had net tax-supported debt per capita of $765 in 2009 which was below the national net tax-supported debt median of $936 (Source: Moody’s Investors Services, Special Comment: 2010 State Debt Medians Report”, May 2010).
The Alabama Tax-Free Income Series provided shareholders with a total return of 7.40 percent for the twelve months ended June 30, 2010.
While Alabama’s economy fell into recession almost seven months later than the nation, the downturn has been more severe. Slowdowns in consumer and business spending, tightened lending conditions, and weak commercial and residential real estate markets have all acted as significant drags on the state’s economy. The automotive industry remains vital to the state’s overall economic health. Declining North American vehicle sales and production led to substantial job losses and reduced state tax revenues. However, improvement in this sector is expected as demand for automobiles stabilizes.
Like most states, Alabama’s economy is still recovering from the recession. Real GDP is forecasted to grow by 1.9 percent in 2010. State tax revenues are showing some stability with the year-over-year decline during the first three months of the current fiscal year (FY 2010) being considerably smaller than seen in recent prior quarters. The state’s annual average unemployment rate through the end of June stood at 10.3 percent compared with the national average of 9.5 percent. In 2009, Alabama had a per capita personal income of $33,096 which ranked 41st in the nation which was 85 percent of the national average of $39,189.
Tourism and aerospace also continue to be major industries in the state. Looking ahead, the state will likely face declines in sales and tourism taxes and oil royalties due to the unprecedented oil spill in the Gulf of Mexico that will make balancing next year’s budget even more difficult. Alabama’s G.O. bonds were rated Aa1 by Moody’s and AA by Standard & Poor’s as of June 30, 2010. Alabama had net tax-supported debt per capita of $796 in 2009 which was lower than the national net tax-supported debt median of $936 (Source: Moody’s Investors Services, Special Comment: 2010 State Debt Medians Report”, May 2010).
The Mississippi Tax-Free Income Series had a total return of 7.65 percent for the twelve month period ended June 30, 2010.
Mississippi’s economy is dominated by manufacturing and service industries which are sensitive to trends in those industries. Manufacturing has been hit hardest by the recession with the state suffering over a 10 percent drop in payroll employment. Recent economic indicators show that the economic recovery is underway but still in its infancy. Retail sales have been rising, job loss is slowing, gaming revenues are
v
UNAUDITED
improving, and the value of residential building permits issued has stabilized. While Mississippi did not meet its revenue projections for fiscal 2010, the shortfall was less than projected. Spending was reduced by $466 million to general fund and non-exempt special fund agencies in fiscal 2010 and reserve funds were used to maintain a balanced budget. Looking ahead, the state is facing losses in sales and tourism taxes and oil royalties due to the unprecedented oil crisis in the Gulf of Mexico which will make balancing future budgets even more difficult.
The state’s annual average unemployment rate through the end of June was 11.0 percent compared with the national average of 9.5 percent. In 2009, Mississippi had a per capita personal income of $30,103 which ranked 50th in the nation which was 77 percent of the national average of $39,189. The state’s G.O. bonds were rated Aa2 by Moody’s and AA by Standard & Poor’s as of June 30, 2010. Mississippi has net tax-supported debt per capita of $1,478 in 2009 which was substantially higher than the national net tax-supported debt median of $936 (Source: Moody’s Investors Services, Special Comment: 2010 State Debt Medians Report”, May 2010).
The Intermediate Government Bond Series had a total return of 6.38 percent for the twelve months ended June 30, 2010. The Barclays Capital U.S. Intermediate Government Bond Index had a total return of 5.68 percent for the one year period ended June 30, 2010. The fund slightly outperformed the index during the reporting period.
It should be noted that index information is provided for reference only. No index can perfectly match the investments that make up a fund’s portfolio. In making investment decisions for our portfolios we do not attempt to track indexes. The Barclays Capital Municipal Bond index is national in scope and does not necessarily reflect the performance of state-specific municipal bond funds. Indices such as the Barclays Capital Municipal Bond Index and the Barclays Capital U.S. Government Intermediate Bond Index do not take into account any operating expenses or transaction costs. An investment cannot be made directly in an index.
| i | Data are from the Bureau of Economic Analysis, the U.S. Department of Labor Bureau of Labor Statistics, and various other sources management deems to be reliable. Some of the quoted data are preliminary in nature and may be subject to revision. Any opinions expressed herein are those of the funds’ portfolio management and are current as of June 30, 2010. They are not guarantees of performance or investment results and should not be taken as investment advice. Past performance is not a guarantee of future performance and you may lose money investing in the funds. |
vi
The illustrations below provide each Fund’s sector allocation and
summarize key information about each Fund’s investments.
| | | |
| Kentucky Tax-Free Income Series | |
| |
| CREDIT QUALITY | | % of Net Assets
at Market | |
Aaa/AAA | | 30.11 | % |
Aa/AA | | 54.37 | % |
A | | 14.24 | % |
Baa/BBB | | 0.26 | % |
Not Rated | | 1.02 | % |
| | | |
| | 100.00 | % |
| | | |
| |
| COMPOSITION | | % of Net Assets | |
Prerefunded | | 6.34 | % |
General Obligation | | 0.37 | % |
Lease Revenue | | 13.13 | % |
Municipal Utility Revenue | | 2.34 | % |
Hospital and Healthcare Revenue | | 3.03 | % |
State and Local Mortgage Revenue | | 2.82 | % |
University Consolidated Education and Building Revenue | | 0.64 | % |
Public Facilities Revenue | | 1.17 | % |
Insured Municipal | | 63.75 | % |
Escrowed to Maturity | | 4.42 | % |
Other Assets Less Liabilities | | 1.99 | % |
| | | |
| | 100.00 | % |
| | | |
|
| Alabama Tax-Free Income Series | |
| |
| CREDIT QUALITY | | % of Net Assets
at Market | |
Aaa/AAA | | 36.85 | % |
Aa/AA | | 33.57 | % |
A | | 18.41 | % |
Baa/BBB | | 1.90 | % |
Not Rated | | 9.27 | % |
| | | |
| | 100.00 | % |
| | | |
| |
| COMPOSITION | | % of Net Assets | |
General Obligation | | 7.25 | % |
Prerefunded | | 1.47 | % |
Lease Revenue | | 1.99 | % |
Municipal Utility Revenue | | 4.72 | % |
Industrial Revenue | | 0.51 | % |
Hospital and Healthcare Revenue | | 0.26 | % |
University Consolidated Education and Building Revenue | | 4.66 | % |
Public Facilities Revenue | | 0.53 | % |
Insured Municipal | | 75.95 | % |
Other Assets Less Liabilities | | 2.66 | % |
| | | |
| | 100.00 | % |
| | | |
| | | |
| Kentucky Tax-Free Short-to-Medium Series | |
| |
| CREDIT QUALITY | | % of Net Assets
at Market | |
| Aaa/AAA | | 23.76 | % |
| Aa/AA | | 70.75 | % |
| A | | 5.46 | % |
| Baa/BBB | | 0.00 | % |
| Not Rated | | 0.03 | % |
| | | |
| | 100.00 | % |
| | | |
| |
| COMPOSITION | | % of Net Assets | |
| Prerefunded | | 2.63 | % |
| General Obligation | | 0.92 | % |
| Certificates of Participation | | 1.14 | % |
| Lease Revenue | | 13.58 | % |
| Municipal Utility Revenue | | 4.75 | % |
| Hospital and Healthcare Revenue | | 4.14 | % |
| State and Local Mortgage Revenue | | 3.36 | % |
| Insured Municipal | | 68.10 | % |
| Escrowed to Maturity | | 0.03 | % |
| Other Assets Less Liabilities | | 1.35 | % |
| | | |
| | 100.00 | % |
| | | |
Mississippi Tax-Free Income Series
| | | |
| CREDIT QUALITY | | % of Net Assets
at Market | |
| Aaa/AAA | | 14.82 | % |
| Aa/AA | | 49.96 | % |
| A | | 23.35 | % |
| Baa/BBB | | 3.29 | % |
| Not Rated | | 8.58 | % |
| | | |
| | 100.00 | % |
| | | |
| |
| COMPOSITION | | % of Net Assets | |
| |
| General Obligation | | 6.71 | % |
| Prerefunded | | 1.04 | % |
| Lease Revenue | | 3.67 | % |
| University Consolidated Education and Building Revenue | | 6.95 | % |
| Insured Municipal | | 78.71 | % |
| Escrowed to Maturity | | 0.70 | % |
| Other Assets Less Liabilities | | 2.22 | % |
| | | |
| | 100.00 | % |
| | | |
vii
The illustrations below provide each Fund’s sector allocation and
summarize key information about each Fund’s investments.
| | | |
| Tennessee Tax-Free Income Series | |
| CREDIT QUALITY | | % of Net Assets
at Market | |
Aaa/AAA | | 14.61 | % |
Aa/AA | | 60.27 | % |
A | | 20.68 | % |
Baa/BBB | | 1.99 | % |
Not Rated | | 2.45 | % |
| | | |
| | 100.00 | % |
| | | |
| |
| COMPOSITION | | % of Net Assets | |
Prerefunded | | 6.08 | % |
General Obligation | | 9.90 | % |
Lease Revenue | | 2.33 | % |
Municipal Utility Revenue | | 2.98 | % |
Hospital and Healthcare Revenue | | 6.78 | % |
State and Local Mortgage Revenue | | 7.22 | % |
University Consolidated Education and Building Revenue | | 7.94 | % |
Insured Municipal | | 53.33 | % |
Escrowed to Maturity | | 2.38 | % |
Other Assets Less Liabilities | | 1.06 | % |
| | | |
| | 100.00 | % |
| | | |
| | | |
| North Carolina Tax-Free Income Series | |
| |
| CREDIT QUALITY | | % of Net Assets
at Market | |
Aaa/AAA | | 21.13 | % |
Aa/AA | | 50.27 | % |
A | | 23.66 | % |
Baa/BBB | | 3.62 | % |
Not Rated | | 1.32 | % |
| | | |
| | 100.00 | % |
| | | |
| |
| COMPOSITION | | % of Net Assets | |
Prerefunded | | 3.50 | % |
General Obligation | | 2.85 | % |
Certificates of Participation | | 15.23 | % |
Lease Revenue | | 4.08 | % |
Municipal Utility Revenue | | 4.64 | % |
Hospital and Healthcare Revenue | | 6.39 | % |
State and Local Mortgage Revenue | | 0.12 | % |
University Consolidated Education and Building | | 3.77 | % |
Insured Municipal | | 57.53 | % |
Escrowed to Maturity | | 0.45 | % |
Other Assets Less Liabilities | | 1.44 | % |
| | | |
| | 100.00 | % |
| | | |
| | | |
| Tennessee Tax-Free Short-to-Medium Series | |
| |
| CREDIT QUALITY | | % of Net Assets
at Market | |
| Aaa/AAA | | 18.48 | % |
| Aa/AA | | 70.30 | % |
| A | | 8.52 | % |
| Baa/BBB | | 2.70 | % |
| | | |
| | 100.00 | % |
| | | |
| |
| COMPOSITION | | % of Net Assets | |
| Prerefunded | | 11.73 | % |
| General Obligation | | 6.55 | % |
| Lease Revenue | | 7.05 | % |
| Municipal Utility Revenue | | 2.37 | % |
| Hospital and Healthcare Revenue | | 1.03 | % |
| Public Facilities Revenue | | 2.11 | % |
| State and Local Mortgage Revenue | | 5.69 | % |
| Insured Municipal | | 60.47 | % |
| Other Assets Less Liabilities | | 3.00 | % |
| | | |
| | 100.00 | % |
| | | |
|
| North Carolina Tax-Free Short-to-Medium Series | |
| |
| CREDIT QUALITY | | % of Net Assets
at Market | |
Aaa/AAA | | 23.76 | % |
Aa/AA | | 46.73 | % |
A | | 26.16 | % |
Baa/BBB | | 0.12 | % |
Not Rated | | 3.23 | % |
| | | |
| | 100.00 | % |
| | | |
| |
| COMPOSITION | | % of Net Assets | |
General Obligation | | 2.68 | % |
Prerefunded | | 1.93 | % |
Certificates of Participation | | 15.51 | % |
Lease Revenue | | 3.42 | % |
Municipal Utility Revenue | | 5.26 | % |
Hospital and Healthcare Revenue | | 4.73 | % |
State and Local Mortgage Revenue | | 0.76 | % |
University Consolidated Education and Building | | 5.68 | % |
Public Facilities Revenue | | 2.46 | % |
Insured Municipal | | 55.95 | % |
Other Assets Less Liabilities | | 1.62 | % |
| | | |
| | 100.00 | % |
| | | |
viii
The illustrations below provide each Fund’s sector allocation and
summarize key information about each Fund’s investments.
| | | |
Intermediate Government Bond Series | |
| CREDIT QUALITY | | % of Net Assets
at Market | |
Aaa/AAA | | 100.00 | % |
| | | |
| |
| COMPOSITION | | % of Net
Assets | |
| Federal Farm Credit | | 28.02 | % |
| Federal Home Loan Bank | | 29.73 | % |
| Federal Home Loan Mortgage | | 26.79 | % |
| Federal National Mortgage Association | | 10.55 | % |
| Student Loan Marketing Association | | 2.71 | % |
Other Asset Less Liabilities | | 2.20 | % |
| | | |
| | 100.00 | % |
| | | |
ix
PERFORMANCE COMPARISON (Unaudited)
The following graphs compare the change in value of a $10,000 investment in each series of Dupree Mutual Funds with the change in value of a $10,000 investment in a comparable index. The comparisons are made over ten years or since the inception of the series, if shorter than ten years. Results are for the fiscal years ended June 30.
x
xi
xii
xiii
Notes on Graphs:
Results reflect reinvestment of all dividend and capital gain distributions. No index can perfectly match the investments that make up a fund’s portfolio. For each series, we have chosen an index that we believe gives the most accurate picture of how the series performed during the reporting period. The investor should understand that an index is a mathematical hypothesis and does not reflect a real market situation. For example, the portfolio of each index is replaced with an entirely different portfolio each year without reflecting operating expenses or transaction costs, an impossibility in reality. On the other hand, the fund’s performance reflects not only these factors but management costs as well. Past performance is not indicative of future results.
The performance tables and the graphs above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
xiv
DUPREE MUTUAL FUNDS - ALABAMA TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Alabama Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | Par Value | | Fair Value |
INSURED MUNICIPAL BONDS | | | | | | | | | | | | | |
75.95% of Net Assets | | | | | | | | | | | | | |
AL Drinking Water Finance Authority Revolving Fund Loan | | 4.750 | % | | 08/15/2027 | | NR | | $ | 75,000 | | $ | 73,024 |
AL Housing Finance Authority Single Family Mortgage Revenue | | 5.375 | | | 10/01/2033 | | Aaa | | | 205,000 | | | 211,734 |
AL Private College & Universities Facilities Authority Revenue | | 4.750 | | | 09/01/2026 | | AAA* | | | 500,000 | | | 491,110 |
AL State Board Education Bishop State Community College | | 4.600 | | | 01/01/2021 | | A1 | | | 100,000 | | | 101,773 |
AL State Board of Education Revenue Calhoun Community | | 5.000 | | | 05/01/2022 | | A1 | | | 450,000 | | | 469,580 |
AL State University Revenue General Tuition & Fee -Series A | | 5.000 | | | 01/01/2019 | | A2/A* | | | 50,000 | | | 52,253 |
AL State University Revenue General Tuition & Fee | | 5.000 | | | 08/01/2026 | | A2/A* | | | 150,000 | | | 154,350 |
AL Water Pollution Control Authority Revolving Fund Loan | | 4.800 | | | 08/15/2018 | | NR | | | 50,000 | | | 50,818 |
AL Water Pollution Control Authority Revolving Fund Loan | | 4.800 | | | 08/15/2022 | | NR | | | 170,000 | | | 163,783 |
AL Water Pollution Control Authority Revolving Fund Loan | | 5.000 | | | 08/15/2026 | | NR | | | 130,000 | | | 124,037 |
Albertville AL Warrants | | 5.000 | | | 02/01/2035 | | AAA* | | | 110,000 | | | 114,672 |
Alexander City AL Warrants | | 4.700 | | | 05/01/2021 | | Baa1/A* | | | 200,000 | | | 204,624 |
Auburn AL Capital Improvement School Warrants | | 5.000 | | | 08/01/2030 | | Aa2/AA+* | | | 260,000 | | | 269,428 |
Auburn University AL General Fee Revenue Series A | | 5.000 | | | 06/01/2032 | | Aa2/AAA* | | | 45,000 | | | 46,724 |
Auburn University AL General Fee Revenue - Series A | | 5.000 | | | 06/01/2027 | | Aa2/AAA* | | | 300,000 | | | 318,153 |
Auburn University AL General Fee Revenue - Series A | | 5.000 | | | 06/01/2033 | | Aa2/AAA* | | | 150,000 | | | 156,312 |
Auburn University AL General Fee Revenue - Series A | | 5.000 | | | 06/01/2038 | | Aa2/AAA* | | | 600,000 | | | 619,440 |
Baldwin County AL Water and Sewer Series A General Obligation | | 5.000 | | | 01/01/2025 | | Aa1/AA+* | | | 295,000 | | | 312,128 |
Bessemer AL Public Educational Building Authority Revenue | | 5.000 | | | 07/01/2030 | | AAA* | | | 250,000 | | | 259,570 |
Choctaw County AL Revenue School Warrants | | 4.700 | | | 03/01/2017 | | NR | | | 200,000 | | | 185,450 |
Daphne AL Warrants | | 5.000 | | | 04/01/2023 | | Aa2/AA* | | | 250,000 | | | 263,243 |
Elmore County AL Limited Obligation School Warrants | | 5.000 | | | 02/01/2022 | | Aa3/AAA* | | | 190,000 | | | 200,735 |
Elmore County AL Public Education Cooperative | | 5.000 | | | 08/01/2032 | | Aa3 | | | 50,000 | | | 50,294 |
Enterprise AL Water General Obligation | | 5.000 | | | 10/01/2019 | | NR | | | 55,000 | | | 58,209 |
Enterprise AL Water General Obligation | | 5.000 | | | 10/01/2023 | | NR | | | 450,000 | | | 468,662 |
Gadsden AL Warrants - Series B | | 4.600 | | | 08/01/2022 | | NR | | | 100,000 | | | 102,616 |
Hoover AL Board of Education Capital Outlay Warrants | | 5.250 | | | 02/15/2026 | | Aa2/AA* | | | 35,000 | | | 35,504 |
Hoover AL Board of Education Capital Outlay Warrants | | 4.750 | | | 02/15/2024 | | Aa2/AAA* | | | 250,000 | | | 259,225 |
Huntsville AL Health Care Authority - Series A | | 5.000 | | | 06/01/2024 | | A2/A* | | | 100,000 | | | 100,733 |
Huntsville AL Public Building Authority Lease Revenue | | 5.000 | | | 10/01/2027 | | Aa1/AA+* | | | 375,000 | | | 392,681 |
Huntsville AL Public Building Authority Lease Revenue | | 5.000 | | | 10/01/2033 | | Aa1/AA+* | | | 175,000 | | | 179,932 |
Huntsville AL Water Systems Revenue | | 5.000 | | | 11/01/2033 | | Aa1/AAA* | | | 300,000 | | | 315,663 |
Jacksonville AL State University Revenue Tuition and Fee | | 5.125 | | | 12/01/2033 | | AAA* | | | 450,000 | | | 466,956 |
Lee County AL School Warrants | | 5.000 | | | 02/01/2018 | | Aa2 | | | 100,000 | | | 105,040 |
Lee County AL School Warrants Limited Obligation | | 5.000 | | | 02/01/2021 | | Aa2 | | | 75,000 | | | 78,095 |
Limestone County AL Water & Sewer Authority Water Revenue | | 5.000 | | | 12/01/2029 | | NR | | | 275,000 | | | 276,317 |
Linden AL Warrants | | 5.250 | | | 06/01/2023 | | NR | | | 25,000 | | | 25,428 |
Madison County AL Board of Education Capital Outlay Tax | | 4.950 | | | 09/01/2025 | | Aa2/AAA* | | | 100,000 | | | 106,559 |
Madison County AL Board of Education Capital Outlay Tax | | 5.100 | | | 09/01/2028 | | Aa2/AAA* | | | 285,000 | | | 302,162 |
Madison County AL Board of Education Capital Outlay Tax | | 5.125 | | | 09/01/2034 | | Aa2/AAA* | | | 480,000 | | | 499,622 |
Mobile AL Limited Obligation Tax Warrants | | 5.500 | | | 02/15/2023 | | Baa1 | | | 35,000 | | | 36,133 |
Mobile AL Public Education Building Authority | | 5.000 | | | 03/01/2033 | | Aa3/AAA*/AA-@ | | | 200,000 | | | 206,806 |
Montgomery AL Waterworks & Sanitation Sewer Board Revenue | | 5.000 | | | 03/01/2025 | | Aa2/AAA* | | | 250,000 | | | 263,150 |
Montgomery County AL Warrants | | 5.000 | | | 03/01/2028 | | Aa1/AA* | | | 175,000 | | | 184,203 |
Montgomery County AL Public Building Authority Revenue | | 5.000 | | | 03/01/2031 | | Aa2/AA-* | | | 175,000 | | | 181,363 |
Morgan County AL Water and Sewer General Obligation Warrants | | 5.000 | | | 04/01/2028 | | Aa3 | | | 100,000 | | | 102,256 |
Morgan County AL Warrants | | 5.000 | | | 04/01/2029 | | Aa3 | | | 25,000 | | | 25,634 |
Muscle Shoals AL Refunded Warrants | | 4.600 | | | 08/01/2024 | | Aa3 | | | 250,000 | | | 254,838 |
North Marshall AL Utilities Board Water Revenue | | 5.100 | | | 10/01/2030 | | AAA* | | | 375,000 | | | 387,728 |
Opelika AL Water Board Revenue | | 5.000 | | | 06/01/2037 | | Aa3/AAA* | | | 250,000 | | | 258,337 |
Phenix City AL Schools Warrants - Series B | | 5.000 | | | 08/01/2024 | | A+* | | | 200,000 | | | 211,116 |
Phenix City AL Water & Sewer Revenue | | 5.000 | | | 08/15/2034 | | Aa3/AAA*/AA-@ | | | 40,000 | | | 40,613 |
Roanoke AL Warrants | | 4.450 | | | 05/01/2020 | | NR | | | 150,000 | | | 152,640 |
St Clair County AL Board Education School Tax Warrants | | 4.400 | | | 02/01/2022 | | Aa3/AAA* | | | 50,000 | | | 50,878 |
Shelby County AL Board of Education Special Tax School Warrants | | 5.000 | | | 02/01/2025 | | Aa3/A+* | | | 300,000 | | | 310,167 |
Talladega County AL Industrial Development Revenue | | 4.700 | | | 01/01/2022 | | Baa3 | | | 100,000 | | | 91,016 |
Trussville AL Warrants | | 4.800 | | | 10/01/2021 | | Aa2 | | | 85,000 | | | 88,117 |
Tuscaloosa AL Warrants | | 5.000 | | | 01/01/2030 | | Aa1/AAA* | | | 150,000 | | | 155,187 |
Tuscaloosa AL Public Education Building Authority Student | | 6.375 | | | 07/01/2028 | | AAA* | | | 250,000 | | | 284,810 |
Tuscaloosa AL Public Education Building Authority Student | | 6.750 | | | 07/01/2033 | | AAA* | | | 475,000 | | | 542,730 |
University of AL General Revenue - Series A | | 5.000 | | | 07/01/2032 | | Aa2/AA-*/AA@ | | | 500,000 | | | 524,000 |
University of AL General Revenue - Series A | | 5.000 | | | 07/01/2034 | | Aa2/AA-*/AA@ | | | 350,000 | | | 359,698 |
University of AL General Revenue - Series A | | 5.000 | | | 07/01/2028 | | Aa2/AA-*/AA@ | | | 325,000 | | | 344,146 |
University of Southern AL University Revenue & Capital Improvement | | 5.000 | | | 03/15/2021 | | Aa3 | | | 370,000 | | | 392,300 |
University South AL University Revenues Refunding Tuition | | 5.000 | | | 12/01/2029 | | Aa1/AAA* | | | 105,000 | | | 109,740 |
University of Southern AL University Revenues Facilities | | 5.000 | | | 08/01/2029 | | Aa1/AA+* | | | 500,000 | | | 527,164 |
West Morgan - East Lawrence Water Authority AL Water Revenue | | 5.000 | | | 08/15/2025 | | Aa3/AAA* | | | 300,000 | | | 327,216 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 15,078,625 |
GENERAL OBLIGATION BONDS | | | | | | | | | | | | | |
7.25% of Net Assets | | | | | | | | | | | | | |
AL State - Series A | | 4.625 | | | 09/01/2022 | | Aa1/AA* | | | 100,000 | | | 104,567 |
AL 21st Century Authority Tobacco Settlement Revenue | | 5.750 | | | 12/01/2020 | | Baa1/A-* | | | 50,000 | | | 50,276 |
AL 21st Century Authority Tobacco Settlement Revenue | | 5.850 | | | 12/01/2013 | | Baa1/A-* | | | 15,000 | | | 15,306 |
Mobile AL Refunding Warrants - Series A | | 5.000 | | | 02/15/2027 | | Aa2/AA-* | | | 335,000 | | | 355,703 |
The accompanying footnotes are an integral part of the financial statements.
1
DUPREE MUTUAL FUNDS - ALABAMA TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Alabama Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | Par Value | | Fair Value |
Montgomery AL Warrants - Series C General Obligation Unlimited | | 5.000 | % | | 01/01/2023 | | Aa1/AA+*/AAA@ | | $ | 580,000 | | $ | 629,851 |
Sumter County AL Limited Obligation School Warrants | | 5.100 | | | 02/01/2034 | | A* | | | 100,000 | | | 102,084 |
Tuscaloosa AL Warrants - Series A | | 5.000 | | | 10/15/2034 | | Aa1/AA+* | | | 175,000 | | | 180,875 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 1,438,662 |
MUNICIPAL UTILITY REVENUE BONDS | | | | | | | | | | | | | |
4.72% of Net Assets | | | | | | | | | | | | | |
Jasper AL Water Works and Sewer Board Utility Revenue | | 5.000 | | | 06/01/2030 | | A+* | | | 455,000 | | | 469,346 |
Muscle Shoals AL Utilities Board Water & Sewer Revenue | | 5.750 | | | 12/01/2033 | | AA-* | | | 430,000 | | | 467,935 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 937,281 |
UNIVERSITY CONSOLIDATED EDUCATION AND
BUILDING REVENUE BONDS | | | | | | | | | | | | | |
4.66% of Net Assets | | | | | | | | | | | | | |
AL State Public School & College Authority Captial Improvement | | 5.000 | | | 12/01/2024 | | Aa1/AA* | | | 250,000 | | | 267,893 |
AL State Public School & College Authority Capital | | 5.000 | | | 12/01/2025 | | Aa1/AA* | | | 450,000 | | | 479,520 |
Auburn University AL General Fee Revenue | | 5.000 | | | 06/01/2022 | | Aa2/AA-* | | | 50,000 | | | 54,857 |
Mobile AL Spring Hill College Educational Building | | 5.100 | | | 09/01/2019 | | Baa1 | | | 120,000 | | | 122,737 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 925,007 |
LEASE REVENUE BONDS | | | | | | | | | | | | | |
1.99% of Net Assets | | | | | | | | | | | | | |
AL Incentives Financing Authority Special Obligation | | 5.000 | | | 09/01/2029 | | AA+* | | | 125,000 | | | 131,081 |
University of Alabama General Revenue - Series A | | 5.000 | | | 07/01/2034 | | Aa2/AA-* | | | 250,000 | | | 263,473 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 394,554 |
PREREFUNDED BONDS | | | | | | | | | | | | | |
1.47% of Net Assets | | | | | | | | | | | | | |
AL State Public School & College Authority Refunding Series | | 5.000 | | | 05/01/2029 | | Aa1/AA*/AA+@ | | | 75,000 | | | 89,191 |
Jasper AL Waterworks & Sewer Board Water & Sewer Revenue | | 5.100 | | | 06/01/2018 | | A+* | | | 30,000 | | | 31,560 |
Phenix City AL School Warrants | | 5.450 | | | 08/01/2016 | | A+* | | | 10,000 | | | 10,240 |
Tuscaloosa AL Warrants | | 5.150 | | | 07/01/2026 | | Aa1/AA+* | | | 50,000 | | | 53,376 |
Tuscaloosa AL Warrants | | 5.200 | | | 07/01/2031 | | Aa1/AA+* | | | 100,000 | | | 106,801 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 291,168 |
PUBLIC FACILITIES REVENUE BONDS | | | | | | | | | | | | | |
.53% of Net Assets | | | | | | | | | | | | | |
Rockford AL Public Building Authority Building Revenue | | 5.750 | | | 09/01/2015 | | NR | | | 10,000 | | | 10,044 |
Sumter County AL Limited Obligation School Warrants | | 5.200 | | | 02/01/2039 | | A* | | | 95,000 | | | 95,649 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 105,693 |
INDUSTRIAL REVENUE BONDS | | | | | | | | | | | | | |
.51% of Net Assets | | | | | | | | | | | | | |
Auburn AL Industrial Development Board Facilities Revenue | | 5.800 | | | 11/01/2011 | | A+* | | | 75,000 | | | 76,548 |
Auburn AL Industrial Development Board Facilities Revenue | | 6.200 | | | 11/01/2020 | | A+* | | | 25,000 | | | 25,294 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 101,842 |
HOSPITAL AND HEALTHCARE REVENUE BONDS | | | | | | | | | | | | | |
.26% of Net Assets | | | | | | | | | | | | | |
Mobile AL Second Medical Clinic Board Revenue Franklin | | 5.050 | | | 03/01/2018 | | Baa1 | | | 50,000 | | | 50,870 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 50,870 |
| | | | | | | | | | | | | |
Total Investments (cost $19,012,344)(See (a) below for further explanation) 97.34% of Net Assets | | | | | | | | | | | | $ | 19,323,702 |
| | | | | | | | | | | | | |
| * | 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 | | $ | 400,654 | |
Unrealized depreciation | | | (89,296 | ) |
| | | | |
Net unrealized appreciation | | $ | 311,358 | |
| | | | |
Other Information
The following is a summary of the inputs used, as of June 30, 2010, involving the Fund’s assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the the table below, please refer to the Security Valuation section in the accompanying Notes to Financial Statements.
| | | | | |
| | | Valuation Inputs | | Municipal Bonds |
Level 1 | | Quoted Prices | | $ | — |
Level 2 | | Other Significant Observable Inputs | | | 19,323,702 |
Level 3 | | Significant Unobservable Inputs | | | — |
| | | | | |
| | | | $ | 19,323,702 |
| | | | | |
The accompanying footnotes are an integral part of the financial statements.
2
ALABAMA TAX-FREE INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2010
| | | | | | |
ASSETS: | | | | | | |
Investments in securities, at value (Cost: $19,012,344) | | | | $ | 19,323,702 | |
Cash | | | | | 343,518 | |
Interest receivable | | | | | 282,497 | |
Prepaid expenses | | | | | 245 | |
| | | | | | |
Total assets | | | | | 19,949,962 | |
LIABILITIES: | | | | | | |
Payable for: | | | | | | |
Distributions to shareholders | | 77,873 | | | | |
Fund shares redeemed | | 596 | | | | |
Investment advisory fee | | 3,783 | | | | |
Transfer agent fee | | 1,085 | | | | |
Accrued expenses | | 13,593 | | | | |
| | | | | | |
Total liabilities | | | | | 96,930 | |
| | | | | | |
NET ASSETS: | | | | | | |
Capital | | | | | 19,607,784 | |
Net accumulated realized loss on investment transactions | | | | | (66,110 | ) |
Net unrealized appreciation in value of investments | | | | | 311,358 | |
| | | | | | |
Net assets at value | | | | $ | 19,853,032 | |
| | | | | | |
NET ASSET VALUE, offering price and redemption price per share ($19,853,032 -:- 1,686,150 shares outstanding; unlimited number of shares authorized; no par value) | | | | $ | 11.77 | |
| | | | | | |
STATEMENT OF OPERATIONS
For the year ended June 30, 2010
| | | | |
Net investment income: | | | | |
Interest income | | $ | 734,584 | |
| | | | |
Expenses: | | | | |
Investment advisory fee | | | 83,265 | |
Transfer agent fee | | | 24,979 | |
Custodian expense | | | 2,765 | |
Professional fees | | | 1,262 | |
Trustee fees | | | 1,721 | |
Other expenses | | | 19,611 | |
| | | | |
Total expenses | | | 133,603 | |
Fees waived by Adviser | | | (54,852 | ) |
Custodian expense reduction | | | (184 | ) |
| | | | |
Net expenses | | | 78,567 | |
| | | | |
Net investment income | | | 656,017 | |
| | | | |
Realized and unrealized gain on investments: | | | | |
Net realized gain | | | 20,127 | |
Net change in unrealized appreciation/depreciation | | | 470,753 | |
| | | | |
Net realized and unrealized gain on investments | | | 490,880 | |
| | | | |
Net increase in net assets resulting from operations | | $ | 1,146,897 | |
| | | | |
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 years ended June 30, 2010 and 2009
| | | | | | | | |
| | | 2010 | | | 2009 | |
Operations: | | | | | | | | |
Net investment income | | $ | 656,017 | | | $ | 564,154 | |
Net realized gain/(loss) on investments | | | 20,127 | | | | (59,553 | ) |
Net change in unrealized appreciation/depreciation | | | 470,753 | | | | (37,270 | ) |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 1,146,897 | | | | 467,331 | |
Distributions from net investment income | | | (656,017 | ) | | | (564,154 | ) |
Net fund share transactions (Note 4) | | | 5,100,485 | | | | 821,024 | |
| | | | | | | | |
Total increase | | | 5,591,365 | | | | 724,201 | |
Net assets: | | | | | | | | |
Beginning of year | | | 14,261,667 | | | | 13,537,466 | |
| | | | | | | | |
End of year | | $ | 19,853,032 | | | $ | 14,261,667 | |
| | | | | | | | |
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
| | | | | | | | | | | | | | | | | | | | |
| | | For the years ended June 30, | |
| | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
Net asset value, beginning of year | | $ | 11.40 | | | $ | 11.43 | | | $ | 11.59 | | | $ | 11.52 | | | $ | 11.91 | |
| | | | | | | | | | | | | | | | | | | | |
Income from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.46 | | | | 0.46 | | | | 0.46 | | | | 0.47 | | | | 0.47 | |
Net gains/(losses) on securities, both realized and unrealized | | | 0.37 | | | | (0.03 | ) | | | (0.14 | ) | | | 0.07 | | | | (0.39 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.83 | | | | 0.43 | | | | 0.32 | | | | 0.54 | | | | 0.08 | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Distributions from net investment income | | | (0.46 | ) | | | (0.46 | ) | | | (0.46 | ) | | | (0.47 | ) | | | (0.47 | ) |
Distributions from capital gains | | | — | | | | — | | | | (0.02 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 11.77 | | | $ | 11.40 | | | $ | 11.43 | | | $ | 11.59 | | | $ | 11.52 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 7.40 | % | | | 3.95 | % | | | 2.84 | % | | | 4.70 | % | | | 0.65 | % |
Net assets, end of year (in thousands) | | $ | 19,853 | | | $ | 14,262 | | | $ | 13,537 | | | $ | 11,810 | | | $ | 10,754 | |
Ratio of net expenses to average net assets (a) | | | 0.47 | % | | | 0.45 | % | | | 0.45 | % | | | 0.43 | % | | | 0.46 | % |
Ratio of net investment income to average net assets | | | 3.94 | % | | | 4.14 | % | | | 4.00 | % | | | 4.00 | % | | | 3.97 | % |
Portfolio turnover | | | 15.73 | % | | | 14.06 | % | | | 8.46 | % | | | 5.43 | % | | | 7.72 | % |
| (a) | Percentages are after expenses waived by Adviser and Custodian, for which no recovery of these waivers and reductions will be sought. |
Expenses waived by Adviser and Custodian were:
.33% and .0% for 2010; .37% and .03% for 2009; .35% and .04% for 2008; .37% and .04% for 2007; and .38% and .05% for 2006, respectively.
The accompanying notes are an integral part of the financial statements.
4
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | Par Value | | Fair Value |
INSURED MUNICIPAL BONDS | | | | | | | | | | | | | |
63.75% of Net Assets | | | | | | | | | | | | | |
Ballard County KY School District Finance Corporation | | 5.000 | % | | 06/01/2020 | | Aa2 | | $ | 1,240,000 | | $ | 1,323,936 |
Bardstown KY Combined Utilities Revenue | | 5.000 | | | 12/01/2017 | | Aa3 | | | 1,290,000 | | | 1,320,831 |
Barren County KY School District Finance Corporation | | 4.750 | | | 08/01/2022 | | Aa2 | | | 3,085,000 | | | 3,227,280 |
Boone County KY Pollution Control Revenue - Dayton Power | | 4.700 | | | 01/01/2028 | | Aa3/A* | | | 9,595,000 | | | 9,654,393 |
Boone County KY School District Finance Corporation | | 5.000 | | | 05/01/2023 | | Aa2 | | | 4,070,000 | | | 4,249,975 |
Boone County KY School District Finance Corporation | | 5.000 | | | 05/01/2024 | | Aa2 | | | 4,265,000 | | | 4,439,694 |
Boone County KY Water - Florence | | 5.000 | | | 12/01/2015 | | Aa3 | | | 1,000,000 | | | 1,054,090 |
Boone-Florence KY Water Supply System Revenue | | 5.000 | | | 12/01/2017 | | Aa3 | | | 1,805,000 | | | 1,891,405 |
Boone-Florence KY Water Supply System Revenue | | 5.000 | | | 12/01/2018 | | Aa3 | | | 1,900,000 | | | 1,964,125 |
Boone-Florence KY Water Supply System Revenue | | 5.000 | | | 12/01/2020 | | Aa3 | | | 2,100,000 | | | 2,154,915 |
Boyle County KY College Improvement - Centre College - A | | 4.750 | | | 06/01/2032 | | A3/A-* | | | 5,330,000 | | | 5,398,810 |
Bullitt County KY School District Finance Corporation | | 4.750 | | | 07/01/2022 | | Aa2 | | | 2,440,000 | | | 2,546,506 |
Bullitt County KY School District Finance Corporation | | 4.500 | | | 10/01/2024 | | Aa2 | | | 2,720,000 | | | 2,776,794 |
Campbell & Kenton Counties Sanitary District No. 1 | | 5.000 | | | 08/01/2025 | | Aa2/AA* | | | 2,395,000 | | | 2,588,995 |
Campbell & Kenton Counties Sanitary Sewer | | 5.000 | | | 08/01/2026 | | Aa2/AA* | | | 4,175,000 | | | 4,494,304 |
Campbell & Kenton Counties Sanitary Sewer | | 5.000 | | | 08/01/2027 | | Aa2/AA* | | | 4,385,000 | | | 4,700,588 |
Campbell & Kenton Counties Sanitary Sewer | | 5.000 | | | 08/01/2017 | | Aa2/AAA* | | | 1,000,000 | | | 1,046,050 |
Campbell County KY School District Finance Corporation | | 4.500 | | | 08/01/2023 | | Aa2 | | | 980,000 | | | 1,018,014 |
Carter County KY Detention Center | | 5.125 | | | 05/01/2029 | | Aa3 | | | 960,000 | | | 979,056 |
Eastern Kentucky University Consolidated Educational Building | | 5.000 | | | 05/01/2021 | | A1/A* | | | 1,580,000 | | | 1,682,416 |
Fayette County KY School District Finance Corporation | | 5.000 | | | 04/01/2024 | | Aa2/AAA* | | | 6,985,000 | | | 7,389,501 |
Fayette County KY School District Finance Corporation | | 5.000 | | | 04/01/2025 | | Aa2/AAA* | | | 7,340,000 | | | 7,732,323 |
Fayette County KY School District Finance Corporation | | 4.500 | | | 03/01/2022 | | Aa2/AAA* | | | 4,100,000 | | | 4,211,889 |
Franklin County School Building Revenue | | 4.750 | | | 05/01/2027 | | Aa2 | | | 3,570,000 | | | 3,724,224 |
Greater KY Housing Assistance Corporation - Chenowith Woods | | 6.100 | | | 01/01/2024 | | Baa1/A* | | | 470,000 | | | 470,371 |
Greater KY Housing Assistance Corporation - Northside Apts | | 6.200 | | | 02/01/2025 | | AAA* | | | 3,340,000 | | | 3,341,403 |
Greater KY Housing Assistance Corporation Mortgage Revenue | | 5.450 | | | 05/20/2027 | | Aaa | | | 1,135,000 | | | 1,162,388 |
Hardin County School District Finance Corporation | | 4.750 | | | 06/01/2027 | | Aa2 | | | 1,250,000 | | | 1,296,175 |
Jefferson County KY Health Facilities - Jewish Hospital | | 5.650 | | | 01/01/2017 | | A3/A* | | | 3,450,000 | | | 3,453,450 |
Jefferson County KY Health Facilities - Jewish Hospital | | 5.700 | | | 01/01/2021 | | A3/A* | | | 4,520,000 | | | 4,521,808 |
Jefferson County KY Health Facilities University Medical Center | | 5.500 | | | 07/01/2017 | | Baa1/A* | | | 8,675,000 | | | 8,676,735 |
Jefferson County KY School District Finance Corporation | | 4.750 | | | 12/01/2026 | | Aa2/AAA* | | | 3,770,000 | | | 3,919,895 |
Jefferson County KY School District Finance Corporation | | 4.500 | | | 07/01/2023 | | Aa2/AAA* | | | 2,500,000 | | | 2,599,950 |
Jefferson County KY School District Finance Corporation | | 4.625 | �� | | 07/01/2025 | | Aa2/AAA* | | | 7,545,000 | | | 7,770,067 |
Jefferson County KY School District Finance Corporation | | 5.000 | | | 07/01/2026 | | Aa2/AAA* | | | 5,025,000 | | | 5,288,059 |
Jefferson County KY Health Facilities - Alliant Health | | 5.125 | | | 10/01/2017 | | Baa1/A*/A-@ | | | 2,940,000 | | | 2,943,910 |
Jefferson County School District Finance Corporation | | 4.750 | | | 06/01/2027 | | Aa3/AA-* | | | 3,000,000 | | | 3,081,750 |
Kenton County KY School District Finance Corporation | | 5.000 | | | 06/01/2021 | | Aa2 | | | 4,055,000 | | | 4,284,959 |
Kenton County KY School District Finance Corporation | | 5.000 | | | 06/01/2023 | | Aa2 | | | 4,465,000 | | | 4,693,117 |
Kenton County KY School District Finance Corporation | | 5.000 | | | 06/01/2024 | | Aa2 | | | 4,665,000 | | | 4,885,934 |
KY Asset Liability Commission | | 5.000 | | | 05/01/2020 | | Aa2/A+*/AA-@ | | | 2,000,000 | | | 2,143,340 |
KY Asset Liability Commission | | 5.000 | | | 05/01/2023 | | Aa2/A+*/AA-@ | | | 5,600,000 | | | 5,952,464 |
KY Asset Liability Commission | | 5.000 | | | 05/01/2024 | | Aa2/A+*/AA-@ | | | 5,880,000 | | | 6,191,405 |
KY Asset Liability Commission | | 5.000 | | | 05/01/2025 | | Aa2/A+*/AA-@ | | | 1,000,000 | | | 1,052,960 |
KY Asset Liability Project Notes | | 5.000 | | | 09/01/2015 | | Aa2/AA*/AA-@ | | | 6,000,000 | | | 6,801,360 |
KY Asset Liability Commission Federal Highway | | 5.250 | | | 09/01/2019 | | Aa2/AA*/AA-@ | | | 1,765,000 | | | 2,068,862 |
Ky Asset Liability Commission University of KY | | 5.000 | | | 10/01/2024 | | Aa2/AA-* | | | 5,445,000 | | | 5,884,139 |
KY Asset Liability Commission University of KY Project Note | | 5.000 | | | 10/01/2026 | | Aa2/AA-* | | | 6,090,000 | | | 6,509,236 |
KY Asset Liability Commission University of KY Project Note | | 5.000 | | | 10/01/2023 | | Aa2/AA-* | | | 8,075,000 | | | 8,615,137 |
KY Asset Liability Commission University of KY Project Note | | 5.000 | | | 10/01/2024 | | Aa2/AA-* | | | 7,405,000 | | | 7,827,677 |
KY Asset Liability Commission University of KY Project Note | | 5.000 | | | 10/01/2025 | | Aa2/AA-* | | | 3,700,000 | | | 3,893,214 |
KY Economic Development Finance Authority - Methodist Hospital | | 5.625 | | | 02/01/2017 | | NR | | | 6,500,000 | | | 6,504,030 |
KY Economic Development Finance Authority - Christian Care | | 5.375 | | | 11/20/2035 | | AAA* | | | 1,805,000 | | | 1,879,673 |
KY Economic Development Authority - Louisville Arena | | 5.750 | | | 12/01/2028 | | Aa3/AAA* | | | 625,000 | | | 677,838 |
KY Economic Development Authority - Louisville Arena | | 6.000 | | | 12/01/2033 | | Aa3/AAA* | | | 1,000,000 | | | 1,068,050 |
KY Housing Corporation | | 4.750 | | | 07/01/2017 | | Aaa/AAA* | | | 1,335,000 | | | 1,340,781 |
KY Housing Corporation | | 4.400 | | | 01/01/2017 | | Aaa/AAA* | | | 1,000,000 | | | 1,035,250 |
KY Housing Corporation | | 5.200 | | | 01/01/2031 | | Aaa/AAA* | | | 1,000,000 | | | 1,002,040 |
KY Housing Corporation | | 4.650 | | | 07/01/2023 | | Aaa/AAA* | | | 3,595,000 | | | 3,612,723 |
KY Housing Corporation Country Place Apartments | | 4.750 | | | 04/20/2031 | | AAA* | | | 935,000 | | | 946,641 |
Ky State Property & Building #93 | | 5.250 | | | 02/01/2025 | | Aa2/AAA*/AA-@ | | | 7,250,000 | | | 7,958,108 |
KY State Property & Building #93 | | 4.875 | | | 02/01/2028 | | Aa2/AAA*/AA-@ | | | 500,000 | | | 525,570 |
KY State Property & Building #93 | | 5.000 | | | 02/01/2029 | | Aa2/AAA*/AA-@ | | | 500,000 | | | 527,825 |
KY State Property & Building #93 | | 5.250 | | | 02/01/2029 | | Aa2/AAA*/AA-@ | | | 7,485,000 | | | 8,068,680 |
KY State Property & Building #76 | | 5.500 | | | 08/01/2021 | | Aa2/A+*/AA-@ | | | 1,400,000 | | | 1,644,132 |
KY State Property & Building #73 | | 5.000 | | | 11/01/2021 | | Aa2/AAA*/AA-@ | | | 1,000,000 | | | 1,049,140 |
KY State Property & Building #87 | | 5.000 | | | 03/01/2019 | | Aa2/A+*/AA-@ | | | 3,000,000 | | | 3,312,390 |
KY State Property & Building #83 | | 5.000 | | | 10/01/2013 | | Aa2/A+*/AA-@ | | | 610,000 | | | 678,954 |
KY State Property & Building #83 | | 5.000 | | | 10/01/2017 | | Aa2/A+*/AA-@ | | | 5,000,000 | | | 5,675,100 |
KY State Property & Building #83 | | 5.000 | | | 10/01/2018 | | Aa2/A+*/AA-@ | | | 17,750,000 | | | 20,229,853 |
KY State Property & Building #83 | | 5.250 | | | 10/01/2020 | | Aa2/A+*/AA-@ | | | 24,220,000 | | | 27,933,895 |
The accompanying footnotes are an integral part of the financial statements.
5
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | | Par Value | | Fair Value |
KY State Property & Building #73 | | 5.500 | % | | 11/01/2017 | | Aa2/AAA | */AA-@ | | $ | 1,000,000 | | $ | 1,091,220 |
KY State Property & Building #73 | | 5.000 | | | 11/01/2019 | | Aa2/AAA | */AA-@ | | | 1,360,000 | | | 1,437,588 |
KY State Property & Building #73 | | 5.000 | | | 11/01/2020 | | Aa2/AAA | */AA-@ | | | 3,255,000 | | | 3,430,803 |
KY State Property & Building #84 | | 5.000 | | | 08/01/2019 | | Aa2/A+ | */AA-@ | | | 10,000,000 | | | 11,367,000 |
KY State Property & Building #84 | | 5.000 | | | 08/01/2021 | | Aa2/A+ | */AA-@ | | | 310,000 | | | 351,500 |
KY State Property & Building #84 | | 5.000 | | | 08/01/2022 | | Aa2/A+ | */AA-@ | | | 17,500,000 | | | 19,718,475 |
KY State Property & Building #87 | | 5.000 | | | 03/01/2022 | | Aa2/A+ | */AA-@ | | | 1,665,000 | | | 1,793,838 |
KY State Property & Building #87 | | 5.000 | | | 03/01/2023 | | Aa2/A+ | */AA-@ | | | 5,175,000 | | | 5,531,247 |
KY State Property & Building #87 | | 5.000 | | | 03/01/2025 | | Aa2/A+ | */AA-@ | | | 4,000,000 | | | 4,210,360 |
KY State Property & Building #88 | | 4.750 | | | 11/01/2027 | | Aa2/A+ | */AA-@ | | | 5,800,000 | | | 5,966,054 |
KY State Property & Building #89 | | 5.000 | | | 11/01/2025 | | Aa2/AAA | */AA@ | | | 5,000,000 | | | 5,384,250 |
KY State Property & Building #89 | | 5.000 | | | 11/01/2026 | | Aa2/AAA | */AA-@ | | | 10,390,000 | | | 11,089,351 |
KY State Property & Building #89 | | 5.000 | | | 11/01/2027 | | Aa2/AAA | */AA-@ | | | 4,900,000 | | | 5,197,773 |
KY State Property & Building #80 | | 5.250 | | | 05/01/2018 | | Aa2/A+ | */AA-@ | | | 2,940,000 | | | 3,398,758 |
KY State Property & Building #80 | | 5.250 | | | 05/01/2020 | | Aa2/A+ | */AA-@ | | | 1,000,000 | | | 1,150,810 |
KY State Property & Building #81 | | 5.000 | | | 11/01/2017 | | Aa3/A+ | */AA-@ | | | 2,060,000 | | | 2,243,793 |
KY State Property & Building #81 | | 5.000 | | | 11/01/2018 | | Aa3/A+ | */AA-@ | | | 1,720,000 | | | 1,867,679 |
KY State Property & Building #81 | | 5.000 | | | 11/01/2019 | | Aa3/A+ | */AA-@ | | | 2,385,000 | | | 2,576,205 |
KY State Property & Building #81 | | 5.000 | | | 11/01/2020 | | Aa3/A+ | */AA-@ | | | 3,560,000 | | | 3,783,105 |
KY State Property & Building #81 | | 5.000 | | | 11/01/2022 | | Aa3/A+ | */AA-@ | | | 3,930,000 | | | 4,148,115 |
KY State Turnpike Economic Development | | 5.150 | | | 07/01/2019 | | Aa2/AAA | */AA-@ | | | 1,000,000 | | | 1,038,740 |
KY State Turnpike Economic Development | | 5.000 | | | 07/01/2022 | | Aa2/AA+ | */AA-@ | | | 1,625,000 | | | 1,745,234 |
KY State Turnpike Economic Development | | 5.000 | | | 07/01/2023 | | Aa2/AA+ | */AA-@ | | | 4,325,000 | | | 4,634,713 |
KY State Turnpike Economic Development | | 5.000 | | | 07/01/2024 | | Aa2/AA+ | */AA-@ | | | 3,770,000 | | | 4,018,518 |
KY State Turnpike Economic Development | | 5.000 | | | 07/01/2025 | | Aa2/AA+ | */AA-@ | | | 2,000,000 | | | 2,123,380 |
KY State Turnpike Economic Development | | 5.000 | | | 07/01/2026 | | Aa2/AA+ | */AA-@ | | | 4,720,000 | | | 5,039,733 |
Laurel County KY School District Finance Corporation | | 4.625 | | | 08/01/2026 | | Aa2 | | | | 3,150,000 | | | 3,251,871 |
Laurel County KY School District Finance Corporation | | 4.750 | | | 06/01/2026 | | Aa2 | | | | 1,000,000 | | | 1,039,390 |
Letcher County KY School District Finance Corporation | | 5.000 | | | 06/01/2022 | | Aa2 | | | | 1,755,000 | | | 1,852,560 |
Letcher County KY School District Finance Corporation | | 5.000 | | | 06/01/2024 | | Aa2 | | | | 1,930,000 | | | 2,023,566 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.000 | | | 05/15/2025 | | Aa3/AA- | */AA-@ | | | 3,270,000 | | | 3,469,437 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.000 | | | 05/15/2026 | | Aa3/AA- | */AA-@ | | | 3,230,000 | | | 3,411,332 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.000 | | | 05/15/2032 | | Aa3/AA- | */AA-@ | | | 1,060,000 | | | 1,093,666 |
Louisville & Jefferson County KY Metropolitan Sewer | | 4.750 | | | 05/15/2028 | | Aa3/AA- | */AA-@ | | | 10,425,000 | | | 10,426,877 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.000 | | | 05/15/2030 | | Aa3/AA- | */AA-@ | | | 3,790,000 | | | 3,827,332 |
Louisville & Jefferson County KY Metropolitian Sewer | | 5.000 | | | 05/15/2032 | | Aa3/AA- | */AA-@ | | | 4,000,000 | | | 4,108,560 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.500 | | | 05/15/2034 | | Aa3/AA- | */AA-@ | | | 3,645,000 | | | 3,798,163 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.000 | | | 05/15/2036 | | Aa3/AA- | */AA-@ | | | 1,330,000 | | | 1,360,696 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.000 | | | 05/15/2038 | | Aa3/AA- | */AA-@ | | | 9,500,000 | | | 9,770,560 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.000 | | | 05/15/2024 | | Aa3/AA- | * | | | 7,000,000 | | | 7,535,570 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.000 | | | 05/15/2022 | | Aa3/AAA | */AA-@ | | | 2,855,000 | | | 3,069,125 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.000 | | | 05/15/2023 | | Aa3/AAA | */AA-@ | | | 2,990,000 | | | 3,197,596 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.000 | | | 05/15/2024 | | Aa3/AAA | */AA-@ | | | 3,135,000 | | | 3,325,200 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.000 | | | 05/15/2025 | | Aa3/AAA | */AA-@ | | | 3,285,000 | | | 3,469,256 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.000 | | | 05/15/2026 | | Aa3/AAA | */AA-@ | | | 14,000,000 | | | 14,727,860 |
Louisville & Jefferson County KY Metropolitan Sewer | | 5.000 | | | 05/15/2025 | | Aa3/AAA | * | | | 5,185,000 | | | 5,623,184 |
Louisville & Jefferson County KY Regional Airport Authority | | 5.500 | | | 07/01/2017 | | Aa3/AAA | */A+@ | | | 2,655,000 | | | 2,791,361 |
Louisville & Jefferson County KY Visitors & Convention Center | | 4.500 | | | 12/01/2023 | | Aa3/AAA | * | | | 2,340,000 | | | 2,407,158 |
Louisville & Jefferson County KY Visitors & Convention Center | | 4.500 | | | 12/01/2024 | | Aa3/AAA | * | | | 2,250,000 | | | 2,305,125 |
Louisville & Jefferson County KY Visitors & Convention Center | | 4.600 | | | 12/01/2025 | | Aa3/AAA | * | | | 1,490,000 | | | 1,541,986 |
Louisville & Jefferson County KY Student Housing | | 5.000 | | | 06/01/2025 | | NR | | | | 2,030,000 | | | 2,098,695 |
Louisville KY General Obligation - Series A | | 5.000 | | | 10/01/2020 | | Aa1/AA+ | * | | | 7,165,000 | | | 7,637,603 |
Louisville KY Health Care Facilities | | 6.650 | | | 12/20/2030 | | Aaa | | | | 4,590,000 | | | 4,878,252 |
Madison County KY School District Finance Corporation | | 4.500 | | | 04/01/2016 | | Aa2 | | | | 695,000 | | | 712,361 |
Marshall County KY School District Finance Corporation | | 5.000 | | | 06/01/2022 | | Aa2 | | | | 1,400,000 | | | 1,480,458 |
McCracken County KY School District Finance Corporation | | 4.650 | | | 07/01/2019 | | Aa2 | | | | 1,655,000 | | | 1,695,034 |
McCracken County KY School District Finance Corporation | | 4.700 | | | 07/01/2020 | | Aa2 | | | | 1,725,000 | | | 1,768,056 |
McCracken County KY School District Finance Corportion | | 5.000 | | | 07/01/2022 | | Aa2 | | | | 4,000,000 | | | 4,105,680 |
Nelson County KY School District Finance Corporation | | 4.500 | | | 04/01/2021 | | Aa2 | | | | 1,130,000 | | | 1,168,657 |
Nelson County KY School District Finance Corporation | | 4.500 | | | 04/01/2023 | | Aa2 | | | | 2,505,000 | | | 2,574,714 |
Northern KY University Certificates of Participation | | 4.900 | | | 12/01/2021 | | A2 | | | | 2,725,000 | | | 2,789,147 |
Northern KY University Certificates of Participation | | 5.000 | | | 12/01/2024 | | A2 | | | | 2,000,000 | | | 2,038,200 |
Northern KY Water District | | 4.750 | | | 02/01/2019 | | Aa3 | | | | 1,000,000 | | | 1,018,620 |
Northern KY Water District | | 5.000 | | | 02/01/2020 | | Aa3 | | | | 3,080,000 | | | 3,195,007 |
Northern KY Water District | | 5.000 | | | 02/01/2021 | | Aa3 | | | | 2,635,000 | | | 2,722,587 |
Northern KY Water District | | 4.125 | | | 02/01/2021 | | Aa3 | | | | 1,380,000 | | | 1,389,301 |
Northern KY Water District | | 4.500 | | | 02/01/2022 | | Aa3 | | | | 1,385,000 | | | 1,406,634 |
Northern KY Water District | | 6.500 | | | 02/01/2033 | | Aa3 | | | | 1,585,000 | | | 1,813,969 |
Northern KY Water District | | 6.000 | | | 02/01/2028 | | Aa3 | | | | 1,010,000 | | | 1,134,988 |
Northern KY Water District | | 6.000 | | | 02/01/2031 | | Aa3 | | | | 1,000,000 | | | 1,117,200 |
Owensboro Water Revenue | | 5.000 | | | 09/15/2025 | | Aa3 | | | | 545,000 | | | 587,924 |
Pike County KY Mortgage Revenue - Phelps Regional Health | | 5.350 | | | 09/20/2012 | | AAA | * | | | 65,000 | | | 65,139 |
Shelby County KY School District Finance Corporation | | 5.000 | | | 05/01/2022 | | Aa2 | | | | 1,815,000 | | | 1,917,185 |
The accompanying footnotes are an integral part of the financial statements.
6
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | Par Value | | Fair Value |
Spencer County KY School District Finance Corporation | | 5.000 | % | | 07/01/2023 | | Aa2 | | $ | 1,000,000 | | $ | 1,061,330 |
Taylor County Detention Facility | | 4.750 | | | 09/01/2027 | | A1 | | | 2,110,000 | | | 2,136,860 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 562,849,826 |
LEASE REVENUE BONDS | | | | | | | | | | | | | |
13.13% of Net Assets | | | | | | | | | | | | | |
Boone County KY School District Finance Corporation | | 5.000 | | | 08/01/2019 | | Aa2 | | | 1,040,000 | | | 1,093,113 |
Boone County KY School District Finance Corporation | | 5.000 | | | 02/01/2022 | | Aa2 | | | 3,000,000 | | | 3,140,820 |
Bullitt County KY School District Finance Corporation | | 5.000 | | | 07/01/2021 | | Aa2 | | | 1,000,000 | | | 1,033,840 |
Danville KY Multi-City Lease Campbellsville Water & Sewer | | 3.500 | | | 07/01/2012 | | A1 | | | 1,210,000 | | | 1,225,670 |
Davies County KY School District Finance Corporation | | 5.000 | | | 06/01/2021 | | Aa2 | | | 1,155,000 | | | 1,220,939 |
Green County KY School District Finance Corporation | | 5.000 | | | 04/01/2021 | | Aa2 | | | 1,085,000 | | | 1,109,618 |
Greenup County KY School District Finance Corporation | | 4.650 | | | 03/01/2021 | | Aa2 | | | 1,650,000 | | | 1,700,969 |
Hopkins County KY School District Finance Corporation | | 5.125 | | | 06/01/2019 | | Aa2 | | | 4,120,000 | | | 4,277,878 |
Kenton County School District Finance Corporation | | 5.000 | | | 02/01/2029 | | Aa2 | | | 3,270,000 | | | 3,468,914 |
KY Area Development Districts Financing Lease - Ewing | | 5.350 | | | 12/01/2022 | | AA* | | | 2,560,000 | | | 2,611,942 |
KY Area Development Districts Financing Lease - Ewing | | 5.400 | | | 12/01/2021 | | AA* | | | 710,000 | | | 724,420 |
KY Area Development Districts Financing Lease - Ewing | | 5.400 | | | 12/01/2021 | | NR | | | 1,095,000 | | | 1,117,207 |
KY Area Development Districts Financing Lease - Ewing | | 4.700 | | | 06/01/2024 | | NR | | | 2,625,000 | | | 2,685,953 |
KY Asset Liability Commission | | 5.000 | | | 09/01/2021 | | Aa2/AA*/AA-@ | | | 1,570,000 | | | 1,788,717 |
Kentucky Asset Liability Highway Trust | | 5.000 | | | 09/01/2022 | | Aa2/AA*/AA-@ | | | 3,500,000 | | | 3,948,980 |
KY Infrastructure Authority Wastewater & Drinking Water | | 5.000 | | | 02/01/2027 | | Aaa/AAA*/AAA@ | | | 2,500,000 | | | 2,766,600 |
KY Infrastructure Authority Wastewater & Drinking Water | | 5.000 | | | 02/01/2028 | | Aaa/AAA*/AAA@ | | | 2,000,000 | | | 2,201,360 |
KY Infrastructure Authority - Series A | | 5.000 | | | 06/01/2019 | | Aa2/A+*/AA-@ | | | 1,000,000 | | | 1,024,120 |
KY State Property & Building #68 | | 5.250 | | | 10/01/2018 | | Aa2/A+*/AA-@ | | | 1,500,000 | | | 1,540,185 |
KY State Property & Building #68 | | 5.000 | | | 10/01/2019 | | Aa2/A+*/AA-@ | | | 5,500,000 | | | 5,639,205 |
KY State Property & Building #88 | | 5.000 | | | 11/01/2024 | | Aa2/A+*/AA-@ | | | 1,355,000 | | | 1,446,544 |
KY State Property & Building #90 | | 5.375 | | | 11/01/2023 | | Aa2/A+*/AA-@ | | | 1,200,000 | | | 1,330,272 |
KY State Property & Building #90 | | 5.500 | | | 11/01/2028 | | Aa2/A+*/AA-@ | | | 19,940,000 | | | 21,790,033 |
KY State Property & Building | | 5.000 | | | 11/01/2029 | | Aa2/A+*/AA-@ | | | 5,000,000 | | | 5,278,300 |
KY State Property & Building #91 | | 5.750 | | | 04/01/2029 | | Aa3/A+*/A+@ | | | 210,000 | | | 229,734 |
KY State Turnpike Economic Development | | 5.000 | | | 07/01/2025 | | Aa2/AA+*/AA-@ | | | 2,925,000 | | | 3,167,336 |
KY State Turnpike Economic Development | | 5.000 | | | 07/01/2027 | | Aa2/AA+*/AA-@ | | | 9,530,000 | | | 10,204,057 |
KY State Turnpike Economic Development | | 5.000 | | | 07/01/2028 | | Aa2/AA+*/AA-@ | | | 1,460,000 | | | 1,552,973 |
KY Turnpike Authority Economic Development | | 5.000 | | | 07/01/2026 | | Aa2/AA+*/AA-@ | | | 4,440,000 | | | 4,807,765 |
KY State Turnpike Economic Development | | 5.000 | | | 07/01/2027 | | Aa2/AA+/AA-@ | | | 1,415,000 | | | 1,525,526 |
KY Turnpike Authority Economic Development | | 5.000 | | | 07/01/2029 | | Aa2/AA+*/AA-@ | | | 8,140,000 | | | 8,686,845 |
Montgomery County KY School District Finance Corporation | | 4.375 | | | 04/01/2023 | | Aa2 | | | 3,105,000 | | | 3,147,011 |
Oldham County KY School District Finance Corporation | | 5.000 | | | 12/01/2021 | | Aa2 | | | 2,090,000 | | | 2,181,647 |
Pendleton County KY Multi-County Lease Revenue | | 6.400 | | | 03/01/2019 | | A* | | | 3,000,000 | | | 3,598,320 |
Scott County KY School District | | 5.000 | | | 03/01/2021 | | Aa2 | | | 1,240,000 | | | 1,324,853 |
Shelby County KY School District Finance Corporation | | 5.000 | | | 02/01/2028 | | Aa2 | | | 500,000 | | | 531,905 |
Whitley County KY School Finance | | 4.800 | | | 02/01/2021 | | Aa2 | | | 800,000 | | | 828,736 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 115,952,307 |
PREREFUNDED BONDS | | | | | | | | | | | | | |
6.34% of Net Assets | | | | | | | | | | | | | |
KY Development Finance Authority - Catholic Health | | 5.500 | | | 09/01/2014 | | Aa2/AA@ | | | 1,375,000 | | | 1,451,711 |
KY Development Finance Authority - Catholic Health | | 5.250 | | | 09/01/2021 | | Aa2/AA@ | | | 2,000,000 | | | 2,105,780 |
KY State Property & Building #73 | | 5.500 | | | 11/01/2013 | | Aa2/A+*/AA-@ | | | 1,500,000 | | | 1,595,145 |
KY State Property & Building #85 | | 5.000 | | | 08/01/2020 | | Aa2/AAA*/AA-@ | | | 5,760,000 | | | 6,718,982 |
KY State Property & Building #85 | | 5.000 | | | 08/01/2022 | | Aa2/AAA*/AA-@ | | | 8,200,000 | | | 9,565,218 |
KY State Property & Building #85 | | 5.000 | | | 08/01/2023 | | Aa2/AAA*/AA-@ | | | 7,500,000 | | | 8,748,675 |
KY State Property & Building #85 | | 5.000 | | | 08/01/2024 | | Aa2/AAA*/AA-@ | | | 13,300,000 | | | 15,514,317 |
KY State Property & Building #85 | | 5.000 | | | 08/01/2025 | | Aa2/AAA*/AA-@ | | | 2,500,000 | | | 2,916,225 |
KY State Property & Building #77 | | 5.250 | | | 08/01/2015 | | AAA*/AA-@ | | | 1,140,000 | | | 1,291,335 |
Knox County General Obligation | | 5.625 | | | 06/01/2036 | | NR | | | 2,490,000 | | | 2,968,279 |
University of Kentucky Housing and Dining | | 4.400 | | | 06/01/2017 | | Aa3 | | | 2,815,000 | | | 3,105,114 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 55,980,781 |
ESCROWED TO MATURITY BONDS | | | | | | | | | | | | | |
4.42% of Net Assets | | | | | | | | | | | | | |
Danville KY Multi-City Lease Revenue - Hopkinsville | | 6.875 | | | 06/01/2012 | | A2 | | | 650,000 | | | 705,582 |
Jefferson County KY Health Facilities - Alliant Health | | 5.125 | | | 10/01/2017 | | A* | | | 4,980,000 | | | 4,980,398 |
Jefferson County KY Health Facilities - Alliant Health | | 5.125 | | | 10/01/2018 | | A* | | | 33,000,000 | | | 33,199,320 |
KY Development Finance Authority - Norton Health | | 6.125 | | | 10/01/2010 | | NR | | | 110,000 | | | 111,500 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 38,996,800 |
HOSPITAL AND HEALTHCARE REVENUE BONDS | | | | | | | | | | | | | |
3.03% of Net Assets | | | | | | | | | | | | | |
Jefferson County KY Health Facilities - Jewish Hospital | | 5.700 | | | 01/01/2011 | | A3/A* | | | 535,000 | | | 535,738 |
KY Development Finance Authority - King’s Daughters | | 5.000 | | | 02/01/2030 | | A1/A+*/A+@ | | | 4,000,000 | | | 4,036,200 |
KY Development Finance Authority - Baptist Heathcare System | | 5.375 | | | 08/15/2024 | | Aa3/AA-@ | | | 1,205,000 | | | 1,299,966 |
KY Development Finance Authority - Baptist Heathcare System | | 5.625 | | | 08/15/2027 | | Aa3/AA-@ | | | 3,000,000 | | | 3,242,220 |
KY Development Finance Authority - Green River | | 6.000 | | | 11/01/2010 | | Aa3 | | | 365,000 | | | 365,193 |
KY Development Finance Authority - Catholic Health | | 5.000 | | | 05/01/2029 | | Aa2/AA*/AA@ | | | 2,500,000 | | | 2,525,875 |
KY Development Finance Authority - Catholic Health | | 5.000 | | | 05/01/2029 | | Aa2/AA*/AA@ | | | 2,410,000 | | | 2,465,141 |
The accompanying footnotes are an integral part of the financial statements.
7
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | Par Value | | Fair Value |
KY Development Finance Authority - St. Elizabeth | | 5.125 | % | | 05/01/2029 | | AA-*/AA-@ | | $ | 2,750,000 | | $ | 2,839,568 |
KY Development Finance Authority - St. Elizabeth | | 5.375 | | | 05/01/2034 | | AA-*/AA-@ | | | 2,000,000 | | | 2,068,780 |
KY Development Finance Authority - Norton Health | | 6.125 | | | 10/01/2010 | | A-@ | | | 230,000 | | | 231,860 |
KY Development Finance Authority - Catholic Health | | 5.125 | | | 10/01/2021 | | A1/AA-*/AA-@ | | | 1,000,000 | | | 1,021,080 |
Louisville & Jefferson Metropolitan Government Health | | 5.000 | | | 10/01/2026 | | A-*/A-@ | | | 600,000 | | | 597,600 |
Louisville & Jefferson County Metropolitan Health - Norton Health | | 5.250 | | | 10/01/2036 | | A-*/A-@ | | | 3,160,000 | | | 3,111,052 |
Pike County KY Mortgage Revenue - Phelps Regional Health | | 5.650 | | | 09/20/2027 | | AAA* | | | 2,435,000 | | | 2,436,218 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 26,776,491 |
STATE AND LOCAL MORTGAGE REVENUE BONDS | | | | | | | | | | | | | |
2.82% of Net Assets | | | | | | | | | | | | | |
KY Housing Corporation | | 4.850 | | | 01/01/2024 | | Aaa/AAA* | | | 7,380,000 | | | 7,480,737 |
KY Housing Corporation | | 4.950 | | | 01/01/2033 | | Aaa/AAA* | | | 5,065,000 | | | 5,077,561 |
KY Housing Corporation | | 4.750 | | | 07/01/2032 | | Aaa/AAA* | | | 1,265,000 | | | 1,263,280 |
KY Housing Corporation | | 4.875 | | | 07/01/2023 | | Aaa/AAA* | | | 1,535,000 | | | 1,603,093 |
KY Housing Corporation | | 5.375 | | | 07/01/2033 | | Aaa/AAA* | | | 2,175,000 | | | 2,265,524 |
KY Housing Corporation | | 4.900 | | | 07/01/2028 | | Aaa/AAA* | | | 2,000,000 | | | 2,034,360 |
KY Housing Corporation | | 5.000 | | | 07/01/2033 | | Aaa/AAA* | | | 1,900,000 | | | 1,924,605 |
KY Housing Corporation | | 4.850 | | | 07/01/2029 | | Aaa/AAA* | | | 3,200,000 | | | 3,262,528 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 24,911,688 |
MUNICIPAL UTILITY REVENUE BONDS | | | | | | | | | | | | | |
2.34% of Net Assets | | | | | | | | | | | | | |
KY Rural Water Financial Corporation Public Project Revenue | | 5.375 | | | 02/01/2020 | | AA-* | | | 1,140,000 | | | 1,175,135 |
Louisville & Jefferson County Metropolitan Sewer | | 5.000 | | | 05/15/2021 | | Aa3/AA-* | | | 2,865,000 | | | 3,218,025 |
Louisville & Jefferson County Metropolitan Sewer | | 5.000 | | | 05/15/2023 | | Aa3/AA-* | | | 2,500,000 | | | 2,793,175 |
Louisville & Jefferson County Waterworks | | 5.000 | | | 11/15/2027 | | Aaa/AAA* | | | 2,000,000 | | | 2,148,720 |
Louisville & Jefferson County KY Waterworks & Water System | | 5.000 | | | 11/15/2031 | | Aaa/AAA* | | | 10,695,000 | | | 11,284,936 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 20,619,991 |
PUBLIC FACILITIES REVENUE BONDS | | | | | | | | | | | | | |
1.17% of Net Assets | | | | | | | | | | | | | |
Bardstown KY Combined Utilities Revenue | | 5.000 | | | 12/01/2018 | | Aa3 | | | 1,510,000 | | | 1,547,644 |
Boone County KY Public Property Corporation - AOC Judicial | | 5.000 | | | 09/01/2019 | | Aa2 | | | 1,000,000 | | | 1,070,490 |
Boone County KY Public Property Corporation - Judicial Facility | | 5.125 | | | 09/01/2022 | | Aa2 | | | 1,750,000 | | | 1,875,265 |
Louisville & Jefferson County Metropolitan Parking | | 5.750 | | | 12/01/2034 | | Aa2/AA* | | | 2,500,000 | | | 2,788,500 |
Wolfe County Public Property | | 5.000 | | | 04/01/2030 | | Aa2 | | | 2,855,000 | | | 3,081,116 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 10,363,015 |
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS | | | | | | | | | | | | | |
.64% of Net Assets | | | | | | | | | | | | | |
Berea KY Educational Facilities Revenue | | 4.125 | | | 06/01/2022 | | Aaa | | | 2,190,000 | | | 2,244,728 |
Louisville & Jefferson County - Papa John’s Stadium | | 4.750 | | | 03/01/2028 | | Aa2/AA-* | | | 3,250,000 | | | 3,409,445 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 5,654,173 |
GENERAL OBLIGATION BONDS | | | | | | | | | | | | | |
.37% of Net Assets | | | | | | | | | | | | | |
Bowling Green KY General Obligation | | 4.600 | | | 06/01/2018 | | Aa2 | | | 1,290,000 | | | 1,359,080 |
Louisville KY General Obligation | | 5.000 | | | 11/01/2019 | | Aa1/AA+* | | | 1,775,000 | | | 1,865,330 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 3,224,410 |
Total Investments (cost $834,829,980)(See (a) below for further explanation) 98.01% of Net Assets | | | | | | | | | | | | $ | 865,329,482 |
| | | | | | | | | | | | | |
| * | 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 | | $ | 32,015,318 | |
Unrealized depreciation | | | (1,515,816 | ) |
| | | | |
Net unrealized appreciation | | $ | 30,499,502 | |
| | | | |
Other Information
The following is a summary of the inputs used, as of June 30, 2010, involving the Fund’s assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used the the table below, please refer to the Security Valuation section in the accompanying Notes to Financial Statements.
| | | | | |
| | | Valuation Inputs | | Municipal Bonds |
Level 1 | | Quoted Prices | | $ | — |
Level 2 | | Other Significant Observable Inputs | | | 865,329,482 |
Level 3 | | Significant Unobservable Inputs | | | — |
| | | | | |
| | | | $ | 865,329,482 |
| | | | | |
The accompanying footnotes are an integral part of the financial statements.
8
KENTUCKY TAX-FREE INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2010
| | | | | |
ASSETS: | | | | | |
Investments in securities, at value (Cost: $834,829,980) | | | | $ | 865,329,482 |
Cash | | | | | 10,155,010 |
Interest receivable | | | | | 11,370,481 |
| | | | | |
Total assets | | | | | 886,854,973 |
LIABILITIES: | | | | | |
Payable for: | | | | | |
Distributions to shareholders | | 3,137,837 | | | |
Fund shares redeemed | | 297,250 | | | |
Investment advisory fee | | 281,205 | | | |
Transfer agent fee | | 14,495 | | | |
Trustee fees | | 20,045 | | | |
Accrued expenses | | 207,259 | | | |
| | | | | |
Total liabilities | | | | | 3,958,091 |
| | | | | |
NET ASSETS: | | | | | |
Capital | | | | | 852,088,366 |
Net accumulated realized gain on investment transactions | | | | | 309,014 |
Net unrealized appreciation in value of investments | | | | | 30,499,502 |
| | | | | |
Net assets at value | | | | $ | 882,896,882 |
| | | | | |
NET ASSET VALUE, offering price and redemption price per share ($882,896,882 -:-115,104,812 shares outstanding; unlimited number of shares authorized; no par value) | | | | $ | 7.67 |
| | | | | |
STATEMENT OF OPERATIONS
For the year ended June 30, 2010
| | | | |
Net investment income: | | | | |
Interest income | | $ | 36,587,647 | |
| | | | |
Expenses: | | | | |
Investment advisory fee | | | 3,291,171 | |
Transfer agent fee | | | 1,005,830 | |
Custodian expense | | | 141,042 | |
Professional fees | | | 203,629 | |
Trustee fees | | | 87,885 | |
Other expenses | | | 145,186 | |
| | | | |
Total expenses | | | 4,874,743 | |
Custodian expense reduction | | | (9,214 | ) |
| | | | |
Net expenses | | | 4,865,529 | |
| | | | |
Net investment income | | | 31,722,118 | |
| | | | |
Realized and unrealized gain on investments: | | | | |
Net realized gain | | | 592,049 | |
Net change in unrealized appreciation/depreciation | | | 20,690,042 | |
| | | | |
Net realized and unrealized gain on investments | | | 21,282,091 | |
| | | | |
Net increase in net assets resulting from operations | | $ | 53,004,209 | |
| | | | |
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 years ended June 30, 2010 and 2009
| | | | | | | | |
| | | 2010 | | | 2009 | |
Operations: | | | | | | | | |
Net investment income | | $ | 31,722,118 | | | $ | 30,399,605 | |
Net realized gain on investments | | | 592,049 | | | | 1,866,394 | |
Net change in unrealized appreciation/depreciation | | | 20,690,042 | | | | 9,851,647 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 53,004,209 | | | | 42,117,646 | |
Distributions from net investment income | | | (31,722,118 | ) | | | (30,399,605 | ) |
Distributions from capital gains | | | (1,628,317 | ) | | | (1,239,797 | ) |
Net fund share transactions (Note 4) | | | 74,320,068 | | | | 43,831,411 | |
| | | | | | | | |
Total increase | | | 93,973,842 | | | | 54,309,655 | |
Net assets: | | | | | | | | |
Beginning of year | | | 788,923,040 | | | | 734,613,385 | |
| | | | | | | | |
End of year | | $ | 882,896,882 | | | $ | 788,923,040 | |
| | | | | | | | |
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
| | | | | | | | | | | | | | | | | | | | |
| | | For the years ended June 30, | |
| | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
Net asset value, beginning of year | | $ | 7.49 | | | $ | 7.39 | | | $ | 7.43 | | | $ | 7.40 | | | $ | 7.67 | |
| | | | | | | | | | | | | | | | | | | | |
Income from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.29 | | | | 0.29 | | | | 0.29 | | | | 0.30 | | | | 0.30 | |
Net gains/(losses) on securities,both realized and unrealized | | | 0.20 | | | | 0.11 | | | | (0.04 | ) | | | 0.04 | | | | (0.27 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.49 | | | | 0.40 | | | | 0.25 | | | | 0.34 | | | | 0.03 | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Distributions from net investment income | | | (0.29 | ) | | | (0.29 | ) | | | (0.29 | ) | | | (0.30 | ) | | | (0.30 | ) |
Distributions from capital gains | | | (0.02 | ) | | | (0.01 | ) | | | — | (b) | | | (0.01 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 7.67 | | | $ | 7.49 | | | $ | 7.39 | | | $ | 7.43 | | | $ | 7.40 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 6.58 | % | | | 5.65 | % | | | 3.47 | % | | | 4.51 | % | | | 0.41 | % |
Net assets, end of year (in thousands) | | $ | 882,897 | | | $ | 788,923 | | | $ | 734,613 | | | $ | 702,473 | | | $ | 686,929 | |
Ratio of net expenses to average net assets (a) | | | 0.58 | % | | | 0.58 | % | | | 0.58 | % | | | 0.58 | % | | | 0.58 | % |
Ratio of net investment income to average net assets | | | 3.81 | % | | | 3.99 | % | | | 3.94 | % | | | 3.94 | % | | | 4.00 | % |
Portfolio turnover | | | 4.76 | % | | | 6.09 | % | | | 5.69 | % | | | 6.76 | % | | | 17.60 | % |
| (a) | Percentages are after custodian reduction for which no recovery will be sought. |
Percentages before custodian reduction were:
.58% for 2010; .58% for 2009; .58% for 2008; .58% for 2007; and .59% for 2006.
| (b) | Rounds to less than $0.01. |
The accompanying notes are an integral part of the financial statements.
10
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Date | | Rating# | | Par Value | | Fair Value |
INSURED MUNICIPAL BONDS | | | | | | | | | | | | | |
68.10% of Net Assets | | | | | | | | | | | | | |
Boone-Florence Water Supply System Revenue | | 4.300 | % | | 12/01/2011 | | Aa3 | | $ | 505,000 | | $ | 525,720 |
Bowling Green General Obligation - Series A | | 4.000 | | | 06/01/2016 | | Aa2 | | | 375,000 | | | 401,373 |
Bullitt County KY School District Finance Corporation | | 4.000 | | | 10/01/2014 | | Aa2 | | | 150,000 | | | 165,260 |
Hardin County KY Hospital Revenue Refunding | | 3.500 | | | 10/01/2010 | | A2 | | | 1,050,000 | | | 1,053,686 |
Kenton County KY School District Finance Corporation | | 5.000 | | | 06/01/2016 | | Aa2 | | | 250,000 | | | 274,368 |
KY Asset Liability Commission | | 5.000 | | | 05/01/2016 | | Aa2/A+*/AA-@ | | | 1,000,000 | | | 1,113,660 |
KY Asset Liability Project Notes | | 5.000 | | | 09/01/2013 | | Aa2/AA*/AA-@ | | | 865,000 | | | 968,912 |
KY Asset Liability Project Notes | | 5.000 | | | 09/01/2016 | | Aa2/AA*/AA-@ | | | 2,000,000 | | | 2,226,460 |
KY Asset Liability Project Notes | | 5.000 | | | 09/01/2015 | | Aa2/AA*/AA-@ | | | 275,000 | | | 315,026 |
KY Asset Liability Project Notes | | 4.500 | | | 09/01/2016 | | Aa2/AA*/AA-@ | | | 175,000 | | | 195,207 |
KY Asset Liability Project Notes | | 5.000 | | | 09/01/2017 | | Aa2/AA*/AA-@ | | | 1,500,000 | | | 1,724,505 |
KY Asset Liability University of Kentucky Project Notes | | 5.000 | | | 10/01/2016 | | Aa2/AA-* | | | 1,250,000 | | | 1,401,575 |
KY Rural Water Finance Corporation | | 4.000 | | | 02/01/2014 | | Baa1/AA-* | | | 300,000 | | | 321,042 |
KY State Property & Building #84 | | 5.000 | | | 08/01/2019 | | Aa2/A+*/AA-@ | | | 1,000,000 | | | 1,136,700 |
KY State Property & Building #87 | | 5.000 | | | 03/01/2020 | | Aa2/A+*/AA-@ | | | 3,000,000 | | | 3,278,490 |
KY State Property & Building #88 | | 5.000 | | | 11/01/2012 | | Aa3/AAA*/AA-@ | | | 1,000,000 | | | 1,093,090 |
KY State Property & Building #82 | | 5.250 | | | 10/01/2013 | | Aa2/AAA*/AA-@ | | | 1,400,000 | | | 1,573,137 |
KY State Property & Building #82 | | 5.250 | | | 10/01/2015 | | Aa2/AAA*/AA-@ | | | 2,525,000 | | | 2,911,729 |
KY State Property & Building #82 | | 5.250 | | | 10/01/2017 | | Aa2/AAA*/AA-@ | | | 1,000,000 | | | 1,160,470 |
KY State Property & Building #74 | | 5.375 | | | 02/01/2011 | | Aa2/AAA*/AA-@ | | | 1,005,000 | | | 1,030,979 |
Ky State Property & Building #85 | | 5.000 | | | 08/01/2016 | | Aa2/AAA*/AA-@ | | | 585,000 | | | 650,292 |
KY State Property & Building #88 | | 5.000 | | | 11/01/2014 | | Aa2/A+*/AA-@ | | | 1,000,000 | | | 1,132,430 |
KY State Property & Building #88 | | 5.000 | | | 11/01/2015 | | Aa2/A+*/AA-@ | | | 955,000 | | | 1,083,247 |
KY State Property & Building #83 | | 5.000 | | | 10/01/2016 | | Aa2/A+*/AA-@ | | | 775,000 | | | 878,796 |
KY State Property & Building #83 | | 5.000 | | | 10/01/2019 | | Aa2/A+*/AA-@ | | | 1,750,000 | | | 1,988,455 |
KY State Property & Building #89 | | 5.000 | | | 11/01/2014 | | Aa2/AAA*/AA-@ | | | 2,000,000 | | | 2,271,120 |
KY State Property & Building #89 | | 5.000 | | | 11/01/2015 | | Aa2/AAA*/AA-@ | | | 2,230,000 | | | 2,543,894 |
KY State Turnpike Authority Economic Development | | 5.250 | | | 07/01/2014 | | Aa2/AAA*/AA-@ | | | 500,000 | | | 574,255 |
KY State Turnpike Authority Economic Development | | 5.000 | | | 07/01/2017 | | Aa2/AA+*/AA-@ | | | 2,570,000 | | | 2,907,698 |
Lexington Fayette Urban County Government Public Property | | 4.000 | | | 05/01/2017 | | Aa1/AA+* | | | 180,000 | | | 192,348 |
Louisville & Jefferson County Metropolitian Sewer | | 5.000 | | | 05/15/2018 | | Aa3/AA-*/AA-@ | | | 1,220,000 | | | 1,358,836 |
Louisville & Jefferson County Metropolitian Sewer | | 5.000 | | | 05/15/2016 | | Aa3/AAA*/AA-@ | | | 500,000 | | | 559,460 |
Louisville & Jefferson County Metropolitian Sewer | | 5.000 | | | 05/15/2016 | | Aa3/AA-* | | | 100,000 | | | 114,106 |
Northern KY Water Services District Water District Revenue | | 4.750 | | | 02/01/2011 | | Aa3 | | | 1,025,000 | | | 1,027,542 |
Oldham County School Building Corporation | | 4.375 | | | 06/01/2018 | | Aa2 | | | 2,570,000 | | | 2,821,269 |
Paducah Electric Plant | | 3.000 | | | 10/01/2014 | | Aa3/A@ | | | 750,000 | | | 786,983 |
Warren County KY School District Finance Corporation | | 4.000 | | | 02/01/2015 | | Aa2 | | | 785,000 | | | 852,023 |
Warren County KY School District Finance Corporation | | 4.000 | | | 02/01/2016 | | Aa2 | | | 1,330,000 | | | 1,438,435 |
Western KY University | | 3.000 | | | 09/01/2014 | | Aa2/AAA* | | | 1,000,000 | | | 1,047,560 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 47,100,138 |
LEASE REVENUE BONDS | | | | | | | | | | | | | |
13.58% of Net Assets | | | | | | | | | | | | | |
Gallatin County School District Finance Corporation | | 4.000 | | | 05/01/2016 | | Aa2 | | | 175,000 | | | 190,556 |
Hazard KY Independent School District Finance Corporation | | 3.850 | | | 09/01/2017 | | Aa2 | | | 200,000 | | | 212,412 |
KY Infrastructure Authority - Series A | | 5.250 | | | 06/01/2014 | | Aa2/A+*/AA-@ | | | 1,240,000 | | | 1,277,659 |
KY Infrastructure Authority | | 5.250 | | | 08/01/2013 | | AA* | | | 1,185,000 | | | 1,328,812 |
KY State Property & Building #94 | | 5.000 | | | 05/01/2014 | | Aa2/A+*/AA-@ | | | 1,000,000 | | | 1,118,460 |
KY State Property & Building #94 | | 5.000 | | | 05/01/2015 | | Aa2/A+*/AA-@ | | | 1,245,000 | | | 1,402,840 |
KY State Property & Building | | 5.000 | | | 11/01/2015 | | Aa2/A+*/AA-@ | | | 250,000 | | | 283,840 |
KY State Property & Building | | 5.000 | | | 11/01/2014 | | Aa2/A+*/AA-@ | | | 750,000 | | | 849,323 |
KY Turnpike Authority Economic Development Road Revenue | | 5.000 | | | 07/01/2014 | | Aa2/AA+*/AA-@ | | | 750,000 | | | 850,673 |
KY Turnpike Economic Development | | 5.000 | | | 07/01/2016 | | Aa2/AA+*/AA-@ | | | 750,000 | | | 857,055 |
Madison County KY School District Finance Corporation Revenue | | 3.500 | | | 05/01/2013 | | Aa2 | | | 470,000 | | | 501,401 |
Pulaski County KY Public Property | | 3.750 | | | 12/01/2014 | | Aa2 | | | 480,000 | | | 523,214 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 9,396,245 |
MUNICIPAL UTILITY REVENUE BONDS | | | | | | | | | | | | | |
4.75% of Net Assets | | | | | | | | | | | | | |
Louisville & Jefferson County Metropolitan Sewer | | 5.000 | | | 05/15/2015 | | AA3/AA-* | | | 1,000,000 | | | 1,134,190 |
Louisville & Jefferson County Metropolitan Sewer | | 5.000 | | | 05/15/2015 | | Aa3/AA-* | | | 1,000,000 | | | 1,138,660 |
Louisville KY Waterworks Board Water System Revenue | | 4.500 | | | 11/15/2010 | | AaA/AAA* | | | 1,000,000 | | | 1,013,780 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 3,286,630 |
HOSPITAL AND HEALTHCARE REVENUE BONDS | | | | | | | | | | | | | |
4.14% of Net Assets | | | | | | | | | | | | | |
KY Development Finance Authority - King’s Daughters | | 5.000 | | | 02/01/2016 | | A1/A+*/A+@ | | | 1,000,000 | | | 1,084,990 |
KY Economic Development Finance Authority - Catholic Health | | 4.500 | | | 10/01/2011 | | A1/AA-*/AA-@ | | | 1,000,000 | | | 1,041,270 |
KY Development Finance Authority - St. Elizabeth | | 5.000 | | | 05/01/2015 | | AA-*/AA-@ | | | 400,000 | | | 436,124 |
KY Economic Development Finance Authority - Catholic Health | | 4.000 | | | 05/01/2015 | | Aa2/AA*/AA@ | | | 250,000 | | | 263,068 |
KY Economic Development Finance Authority - Norton Health | | 6.125 | | | 10/01/2010 | | A-@ | | | 35,000 | | | 35,283 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 2,860,735 |
The accompanying footnotes are an integral part of line financial statements.
11
DUPREE MUTUAL FUNDS - KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Kentucky Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Date | | Rating# | | Par Value | | Fair Value |
STATE AND LOCAL MORTGAGE REVENUE BONDS | | | | | | | | | | | | | |
3.36% of Net Assets | | | | | | | | | | | | | |
KY Housing Corporation | | 4.875 | % | | 07/01/2023 | | Aaa/AAA* | | $ | 1,500,000 | | $ | 1,566,540 |
KY Housing Corporation | | 4.850 | | | 01/01/2024 | | Aaa/AAA* | | | 750,000 | | | 760,238 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 2,326,778 |
PREREFUNDED BONDS | | | | | | | | | | | | | |
2.63% of Net Assets | | | | | | | | | | | | | |
KY Development Finance Authority - Norton Health | | 5.850 | | | 10/01/2015 | | A* | | | 885,000 | | | 1,023,768 |
KY State Property & Building #73 | | 5.250 | | | 11/01/2011 | | Aa2/A+*/
AA-@ | | | 750,000 | | | 793,530 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 1,817,298 |
CERTIFICATES OF PARTICIPATION BONDS | | | | | | | | | | | | | |
1.14% of Net Assets | | | | | | | | | | | | | |
KY Interlocal School Transportation Assistance Equipment | | 3.750 | | | 03/01/2015 | | Aa2 | | | 770,000 | | | 785,485 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 785,485 |
GENERAL OBLIGATION BONDS | | | | | | | | | | | | | |
.92% of Net Assets | | 5.500 | | | 08/15/2010 | | Aa1/AA+* | | | 635,000 | | | 638,937 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 638,937 |
ESCROWED TO MATURITY BONDS | | | | | | | | | | | | | |
.03% of Net Assets | | | | | | | | | | | | | |
KY Economic Development Finance Authority - Norton Health | | 6.125 | | | 10/01/2010 | | NR | | | 20,000 | | | 20,273 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 20,273 |
| | | | | | | | | | | | | |
Total Investments (cost $65,475,496)(See (a) below for further explanation) 98.65% of Net Assets | | | | | | | | | | | | $ | 68,232,519 |
| | | | | | | | | | | | | |
| * | 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 | | $ | 2,881,829 | |
Unrealized depreciation | | | (124,806 | ) |
| | | | |
Net unrealized appreciation | | $ | 2,757,023 | |
| | | | |
Other Information
The following is a summary of the inputs used, as of June 30, 2010, involving the Fund’s assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregationinto the levels used the table below, please refer to the Security Valuation section in the accompanying Notes to Financial Statements.
| | | | | |
| | | Valuation Inputs | | Municipal Bonds |
Level 1 | | Quoted Prices | | $ | — |
Level 2 | | Other Significant Observable Inputs | | | 68,232,519 |
Level 3 | | Significant Unobservable Inputs | | | — |
| | | | | |
| | | | $ | 68,232,519 |
| | | | | |
The accompanying footnotes are an integral part of the financial statements.
12
KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2010
| | | | | | |
ASSETS: | | | | | | |
Investments in securities, at value (Cost: $65,475,496) | | | | $ | 68,232,519 | |
Cash | | | | | 469,974 | |
Interest receivable | | | | | 777,900 | |
| | | | | | |
Total assets | | | | | 69,480,393 | |
LIABILITIES: | | | | | | |
Payable for: | | | | | | |
Investments purchased | | 195,925 | | | | |
Distributions to shareholders | | 46,195 | | | | |
Fund shares redeemed | | 17,262 | | | | |
Investment advisory fee | | 28,259 | | | | |
Transfer agent fee | | 2,069 | | | | |
Trustee fees | | 5,285 | | | | |
Accrued expenses | | 19,047 | | | | |
| | | | | | |
Total liabilities | | | | | 314,042 | |
| | | | | | |
NET ASSETS: | | | | | | |
Capital | | | | | 67,639,823 | |
Net accumulated realized loss on investment transactions | | | | | (1,230,495 | ) |
Net unrealized appreciation in value of investments | | | | | 2,757,023 | |
| | | | | | |
Net assets at value | | | | $ | 69,166,351 | |
| | | | | | |
NET ASSET VALUE, offering price and redemption price per share ($69,166,351 -:- 12,906,144 shares outstanding; unlimited number of shares authorized; no par value) | | | | $ | 5.36 | |
| | | | | | |
STATEMENT OF OPERATIONS
For the year ended June 30, 2010
| | | | |
Net investment income: | | | | |
Interest income | | $ | 2,278,373 | |
| | | | |
Expenses: | | | | |
Investment advisory fee | | | 323,591 | |
Transfer agent fee | | | 83,662 | |
Custodian expense | | | 10,933 | |
Professional fees | | | 21,079 | |
Trustee fees | | | 6,812 | |
Other expenses | | | 23,068 | |
| | | | |
Total expenses | | | 469,145 | |
Custodian expense reduction | | | (714 | ) |
| | | | |
Net expenses | | | 468,431 | |
| | | | |
Net investment income | | | 1,809,942 | |
| | | | |
Realized and unrealized gain on investments: | | | | |
Net realized gain | | | 150,390 | |
Net change in unrealized appreciation/depreciation | | | 1,168,163 | |
| | | | |
Net realized and unrealized gain on investments | | | 1,318,553 | |
| | | | |
Net increase in net assets resulting from operations | | $ | 3,128,495 | |
| | | | |
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 years ended June 30, 2010 and 2009
| | | | | | | | |
| | | 2010 | | | 2009 | |
Operations: | | | | | | | | |
Net investment income | | $ | 1,809,942 | | | $ | 1,797,615 | |
Net realized gain/(loss) on investments | | | 150,390 | | | | (45,876 | ) |
Net change in unrealized appreciation/depreciation | | | 1,168,163 | | | | 1,008,397 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 3,128,495 | | | | 2,760,136 | |
Distributions from net investment income | | | (1,809,942 | ) | | | (1,797,615 | ) |
Net fund share transactions (Note 4) | | | 7,277,772 | | | | 5,652,736 | |
| | | | | | | | |
Total increase | | | 8,596,325 | | | | 6,615,257 | |
Net assets: | | | | | | | | |
Beginning of year | | | 60,570,026 | | | | 53,954,769 | |
| | | | | | | | |
End of year | | $ | 69,166,351 | | | $ | 60,570,026 | |
| | | | | | | | |
Selected data for a share outstanding:
| | | | | | | | | | | | | | | | | | | | |
| | | For the years ended June 30, | |
| | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
Net asset value, beginning of year | | $ | 5.25 | | | $ | 5.16 | | | $ | 5.13 | | | $ | 5.14 | | | $ | 5.28 | |
| | | | | | | | | | | | | | | | | | | | |
Income from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.15 | | | | 0.17 | | | | 0.17 | | | | 0.17 | | | | 0.15 | |
Net gains/(losses) on securities, both realized and unrealized | | | 0.11 | | | | 0.09 | | | | 0.03 | | | | (0.01 | ) | | | (0.14 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.26 | | | | 0.26 | | | | 0.20 | | | | 0.16 | | | | 0.01 | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Distributions from net investment income | | | (0.15 | ) | | | (0.17 | ) | | | (0.17 | ) | | | (0.17 | ) | | | (0.15 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 5.36 | | | $ | 5.25 | | | $ | 5.16 | | | $ | 5.13 | | | $ | 5.14 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 4.99 | % | | | 5.02 | % | | | 3.94 | % | | | 3.10 | % | | | 0.22 | % |
Net assets, end of year (in thousands) | | $ | 69,166 | | | $ | 60,570 | | | $ | 53,955 | | | $ | 61,302 | | | $ | 84,048 | |
Ratio of net expenses to average net assets (a) | | | 0.72 | % | | | 0.72 | % | | | 0.72 | % | | | 0.72 | % | | | 0.71 | % |
Ratio of net investment income to average net assets | | | 2.80 | % | | | 3.16 | % | | | 3.28 | % | | | 3.25 | % | | | 2.92 | % |
Portfolio turnover | | | 20.26 | % | | | 15.64 | % | | | 14.17 | % | | | 4.87 | % | | | 17.86 | % |
| (a) | Percentages are after custodian reduction for which no recovery will be sought. |
Percentages before custodian reduction were:
.72% for 2010; .72% for 2009; .73% for 2008; .72% for 2007; and .72% for 2006.
The accompanying notes are an integral part of the financial statements.
14
DUPREE MUTUAL FUNDS - MISSISSIPPI TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Mississippi Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | | | |
Bond Description | | | | Coupon | | | Maturity
Date | | Rating# | | Par Value | | Fair Value |
INSURED MUNICIPAL BONDS | | | | | | | | | | | | | | | |
78.71% of Net Assets | | | | | | | | | | | | | | | |
De Soto County MS School District | | | | 4.500 | % | | 04/01/2016 | | Aa2 | | $ | 30,000 | | $ | 31,626 |
Hinds County MS Revenue Refunding - MS Methodist Hospital | | | | 5.600 | | | 05/01/2012 | | NR | | | 10,000 | | | 10,201 |
Jackson MS Municipal Airport Authority | | | | 5.000 | | | 10/01/2031 | | A3/A-@ | | | 170,000 | | | 173,288 |
Medical Center Educational Building Corporation MS Revenue | | | | 5.500 | | | 12/01/2023 | | Aa3 | | | 120,000 | | | 133,138 |
MS Business Finance Corporation MS Pollution Control Revenue | | | | 4.600 | | | 04/01/2022 | | Baa1/A-* | | | 100,000 | | | 100,004 |
MS Development Bank Special Obligation Capital Project | | ^^ | | 5.000 | | | 07/01/2031 | | NR | | | 75,000 | | | 70,719 |
MS Development Bank Special Obligation Southaven Water | | | | 5.000 | | | 03/01/2025 | | A+* | | | 325,000 | | | 341,123 |
MS Development Bank Special Obligation Highway Construction | | | | 5.000 | | | 01/01/2027 | | Aa3/AA-* | | | 125,000 | | | 131,131 |
MS Development Bank Special Obligation Highway - Desoto | | | | 4.750 | | | 01/01/2035 | | Aa3/AA-* | | | 125,000 | | | 127,050 |
MS Development Bank Special Obligation Multi-Purpose | | | | 5.000 | | | 07/01/2021 | | Aa3/AAA* | | | 50,000 | | | 51,060 |
MS Development Bank Special Obligation Jackson Water/Sewer | | | | 5.000 | | | 09/01/2025 | | Aa2/AAA* | | | 100,000 | | | 104,581 |
MS Development Bank Special Obligation Jackson Water/Sewer | | | | 5.000 | | | 09/01/2029 | | Aa2/AAA* | | | 60,000 | | | 61,745 |
MS Development Bank Special Obligation Horn Lake | | | | 5.000 | | | 10/01/2020 | | A* | | | 50,000 | | | 51,418 |
MS Development Bank Special Obligation Capital Improvement | | | | 5.250 | | | 07/01/2026 | | Aa3/AAA* | | | 125,000 | | | 131,883 |
MS Development Bank Special Obligation Lee County School | | | | 4.500 | | | 09/01/2021 | | A1 | | | 100,000 | | | 101,023 |
MD Development Bank Special Obligation Jackson Public | | | | 5.375 | | | 04/01/2028 | | Aa2 | | | 70,000 | | | 76,455 |
MS Development Bank Special Obligation Hinds Community | | | | 5.000 | �� | | 10/01/2026 | | Aa2 | | | 85,000 | | | 91,650 |
MS Development Bank Special Obligation Hinds College | | | | 5.125 | | | 10/01/2028 | | Aa2 | | | 100,000 | | | 107,980 |
MS Development Bank Special Obligation Hinds College | | | | 5.375 | | | 10/01/2033 | | Aa2 | | | 60,000 | | | 64,497 |
MS Development Bank Special Obligation Capital Projects | | ^^ | | 5.875 | | | 07/01/2024 | | NR | | | 55,000 | | | 57,323 |
MS Development Bank Special Obligation Capital Projects | | | | 5.000 | | | 07/01/2024 | | NR | | | 370,000 | | | 355,585 |
MS Development Bank Special Obligation Jackson Water & Sewer | | | | 5.000 | | | 09/01/2032 | | Aa2/A+* | | | 150,000 | | | 151,865 |
MS Development Bank Special Obligation Combination | | | | 5.000 | | | 07/01/2018 | | Aa3/AAA* | | | 100,000 | | | 104,319 |
MS Home Corporation Single Family Mortgage - Series E-1 | | | | 5.050 | | | 12/01/2028 | | Aaa | | | 65,000 | | | 67,181 |
MS Development Bank Special Obligation Lowndes County | | | | 5.000 | | | 07/01/2022 | | Aa3/AAA* | | | 80,000 | | | 85,498 |
MS Development Bank Special Obligation Covington Hospital | | | | 5.000 | | | 07/01/2027 | | A* | | | 150,000 | | | 144,185 |
MS Development Special Obligation Madison County Highway | | | | 5.000 | | | 01/01/2027 | | Aa3/AA-* | | | 295,000 | | | 309,959 |
MS Development Bank Special Obligation City of Jackson | | | | 5.000 | | | 03/01/2022 | | Aa2/AA-* | | | 200,000 | | | 214,338 |
MS Development Bank Special Obligation Highway Construction | | | | 5.000 | | | 01/01/2027 | | Aa3/AA-* | | | 175,000 | | | 183,584 |
MS Development Bank Special Obligation Jones County College | | | | 5.100 | | | 03/01/2028 | | AAA* | | | 55,000 | | | 57,868 |
MS Development Bank Special Obligation Jones County Junior | | | | 5.000 | | | 03/01/2033 | | AAA* | | | 150,000 | | | 156,090 |
MS Development Bank Special Obligation Jones County Junior | | | | 5.125 | | | 03/01/2039 | | AAA* | | | 45,000 | | | 46,443 |
MS State Refunding Notes Projects - Series C | | | | 5.000 | | | 12/01/2022 | | Aa2/AA*/AA+@ | | | 200,000 | | | 217,981 |
MS State University Educational Building Corporate Revenue | | | | 5.000 | | | 08/01/2024 | | Aa2/A+*/AA@ | | | 350,000 | | | 368,750 |
Olive Branch MS Public Improvement | | | | 4.125 | | | 06/01/2022 | | A1 | | | 100,000 | | | 100,612 |
Olive Branch MS Water & Sewer Revenue | | | | 4.500 | | | 03/01/2014 | | Aa3 | | | 30,000 | | | 31,016 |
Pearl River County MS Certificate of Participation | | | | 4.500 | | | 04/01/2021 | | Baa1 | | | 200,000 | | | 203,406 |
University Southern MS Education Building - Series A | | | | 5.000 | | | 03/01/2022 | | Aa2 | | | 100,000 | | | 107,275 |
University Southern MS Educational Building Corporation | | | | 5.000 | | | 03/01/2032 | | Aa2 | | | 50,000 | | | 51,589 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 4,975,439 |
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS | | | | | | | | | | | | | | | |
6.95% of Net Assets | | | | | | | | | | | | | | | |
Alcorn State University Educational Building MS Revenue | | | | 5.125 | | | 09/01/2034 | | Aa2 | | | 95,000 | | | 98,546 |
Jackson State University Education Building | | | | 5.000 | | | 03/01/2034 | | Aa2/AA-* | | | 175,000 | | | 179,989 |
MS State University Educational Building Corporate Revenue | | | | 5.250 | | | 08/01/2033 | | Aa2/AA@ | | | 50,000 | | | 53,501 |
University Southern MS Educational Building Corporation | | | | 5.125 | | | 09/01/2029 | | Aa2/A+* | | | 100,000 | | | 107,288 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 439,324 |
GENERAL OBLIGATION BONDS | | | | | | | | | | | | | | | |
6.71% of Net Assets | | | | | | | | | | | | | | | |
Jackson MS Redevelopment Authority Urban Renewal Revenue | | | | 5.600 | | | 11/01/2021 | | Aa3 | | | 20,000 | | | 20,182 |
MS Development Bank Special Obligation Public Improvement | | | | 4.750 | | | 12/01/2019 | | A- * | | | 145,000 | | | 145,020 |
MS State General Obligation | | | | 5.100 | | | 11/15/2012 | | Aa2/AA*/AA+@ | | | 10,000 | | | 10,997 |
MS State Refunding - Series A | | | | 5.250 | | | 11/01/2019 | | Aa2/AA*/AA+@ | | | 200,000 | | | 237,472 |
Richland MS Tax Increment | | | | 5.600 | | | 06/01/2013 | | NR | | | 10,000 | | | 10,376 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 424,047 |
LEASE REVENUE BONDS | | | | | | | | | | | | | | | |
3.67% of Net Assets | | | | | | | | | | | | | | | |
MS Development Bank Special Obligation Desoto County | | | | 5.250 | | | 07/01/2031 | | A* | | | 225,000 | | | 232,236 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 232,236 |
PREREFUNDED BONDS | | | | | | | | | | | | | | | |
1.04% of Net Assets | | | | | | | | | | | | | | | |
MS Development Bank Special Obligation Natchez Convention | | | | 5.800 | | | 07/01/2019 | | A* | | | 25,000 | | | 28,848 |
MS Development Bank Special Obligation Gulfport Combined Water | | | | 5.500 | | | 07/01/2015 | | Aa3/AAA* | | | 10,000 | | | 11,152 |
MS Development Bank Special Obligation Desoto County | | | | 5.900 | | | 07/01/2021 | | A* | | | 5,000 | | | 5,264 |
MS Development Bank Special Obligation Rankin County | | | | 5.400 | | | 07/01/2014 | | Aa3/AAA* | | | 10,000 | | | 10,001 |
Southern MS University Educational Building Corporation | | | | 5.750 | | | 03/01/2021 | | NR | | | 10,000 | | | 10,444 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 65,709 |
The accompanying footnotes are an integral part of the financial statements.
15
DUPREE MUTUAL FUNDS - MISSISSIPPI TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Mississippi Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | | Par Value | | Fair Value |
ESCROWED TO MATURITY BONDS | | | | | | | | | | | | | | |
.70% of Net Assets | | | | | | | | | | | | | | |
Harrison County MS Wastewater Management District | | 5.000 | % | | 02/01/2015 | | Baa1/AAA | * | | $ | 25,000 | | $ | 28,061 |
MS Gulf Coast Regional Wastewater Treatment Facilities | | 7.000 | | | 07/01/2012 | | NR | | | | 15,000 | | | 15,890 |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | 43,951 |
| | | | | | | | | | | | | | |
Total Investments (cost $6,074,818) (See (a) below for further explanation) 97.78% of Net Assets | | | | | | | | | | | | | $ | 6,180,706 |
| | | | | | | | | | | | | | |
| * | Standard and Poor’s Corporation |
| @ | Fitch’s Investors Service |
All other ratings by Moody’s Investors Service, Inc.
| # | 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 | | $ | 167,287 | |
Unrealized depreciation | | | (61,399 | ) |
| | | | |
Net unrealized appreciation | | $ | 105,888 | |
| | | | |
Other Information
The following is a summary of the inputs used, as of June 30, 2010, involving the Fund’s assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used the table below, please refer to the Security Valuation section in the accompanying Notes to Financial Statements.
| | | | | |
| | | Valuation Inputs | | Municipal Bonds |
Level 1 | | Quoted Prices | | $ | — |
Level 2 | | Other Significant Observable Inputs | | | 6,180,706 |
Level 3 | | Significant Unobservable Inputs | | | — |
| | | | | |
| | | | $ | 6,180,706 |
| | | | | |
The accompanying footnotes are an integral part of the financial statements.
16
MISSISSIPPI TAX-FREE INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2010
| | | | | | |
ASSETS: | | | | | | |
Investments in securities, at value (Cost: $6,074,818) | | | | | $ | 6,180,706 |
Cash | | | | | | 68,851 |
Interest receivable | | | | | | 101,264 |
| | | | | | |
Total assets | | | | | | 6,350,821 |
LIABILITIES: | | | | | | |
Payable for: | | | | | | |
Distributions to shareholders | | 17,438 | | | | |
Fund shares redeemed | | 215 | | | | |
Investment advisory fee | | 314 | | | | |
Transfer agent fee | | 1,788 | | | | |
Trustee fees | | 29 | | | | |
Accrued expenses | | 9,754 | | | | |
| | | | | | |
Total liabilities | | | | | | 29,538 |
| | | | | | |
NET ASSETS: | | | | | | |
Capital | | | | | | 6,248,685 |
Net accumulated realized loss on investment transactions | | (33,290 | ) | | | |
Net unrealized appreciation in value of investments | | | | | | 105,888 |
| | | | | | |
Net assets at value | | | | | $ | 6,321,283 |
| | | | | | |
NET ASSET VALUE, offering price and redemption price per share ($6,321,283 -:- 554,240 shares outstanding; unlimited number of shares authorized; no par value) | | | | | $ | 11.41 |
| | | | | | |
STATEMENT OF OPERATIONS
For the year ended June 30, 2010
| | | | |
Net investment income: | | | | |
Interest income | | $ | 242,792 | |
| | | | |
Expenses: | | | | |
Investment advisory fee | | | 27,370 | |
Transfer agent fee | | | 8,211 | |
Custodian expense | | | 917 | |
Pricing fees | | | 5,000 | |
Professional fees | | | 2,481 | |
Trustee fees | | | 572 | |
Registration fees | | | 2,661 | |
Other expenses | | | 2,800 | |
| | | | |
Total expenses | | | 50,012 | |
Fees waived by Adviser | | | (25,288 | ) |
Custodian expense reduction | | | (60 | ) |
| | | | |
Net expenses | | | 24,664 | |
| | | | |
Net investment income | | | 218,128 | |
| | | | |
Realized and unrealized gain/(loss) on investments: | | | | |
Net realized loss | | | (9,789 | ) |
Net change in unrealized appreciation/depreciation | | | 184,498 | |
| | | | |
Net realized and unrealized gain on investments | | | 174,709 | |
| | | | |
Net increase in net assets resulting from operations | | $ | 392,837 | |
| | | | |
The accompanying notes are an intergral part of the financial statements.
17
MISSISSIPPI TAX-FREE INCOME SERIES
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2010 and 2009
| | | | | | | | |
| | | 2010 | | | 2009 | |
Operations: | | | | | | | | |
Net investment income | | $ | 218,128 | | | $ | 193,916 | |
Net realized loss on investments | | | (9,789 | ) | | | (8,356 | ) |
Net change in unrealized appreciation/depreciation | | | 184,498 | | | | (21,357 | ) |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 392,837 | | | | 164,203 | |
Distributions from net investment income | | | (218,128 | ) | | | (193,916 | ) |
Net fund share transactions (Note 4) | | | 1,145,823 | | | | 583,694 | |
| | | | | | | | |
Total increase | | | 1,320,532 | | | | 553,981 | |
Net assets: | | | | | | | | |
Beginning of year | | | 5,000,751 | | | | 4,446,770 | |
| | | | | | | | |
End of year | | $ | 6,321,283 | | | $ | 5,000,751 | |
| | | | | | | | |
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
| | | | | | | | | | | | | | | | | | | | |
| | | For the years ended June 30, | |
| | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
Net asset value, beginning of year | | $ | 11.03 | | | $ | 11.08 | | | $ | 11.24 | | | $ | 11.25 | | | $ | 11.84 | |
| | | | | | | | | | | | | | | | | | | | |
Income from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.45 | | | | 0.45 | | | | 0.45 | | | | 0.45 | | | | 0.46 | |
Net gains/(losses) on securities,both realized and unrealized | | | 0.38 | | | | (0.05 | ) | | | (0.16 | ) | | | 0.04 | | | | (0.54 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.83 | | | | 0.40 | | | | 0.29 | | | | 0.49 | | | | (0.08 | ) |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Distributions from net investment income | | | (0.45 | ) | | | (0.45 | ) | | | (0.45 | ) | | | (0.45 | ) | | | (0.46 | ) |
Distributions from capital gains | | | — | | | | — | (b) | | | — | (b) | | | (0.05 | ) | | | (0.05 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 11.41 | | | $ | 11.03 | | | $ | 11.08 | | | $ | 11.24 | | | $ | 11.25 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 7.65 | % | | | 3.72 | % | | | 2.64 | % | | | 4.39 | % | | | (0.76 | )% |
Net assets, end of year (in thousands) | | $ | 6,321 | | | $ | 5,001 | | | $ | 4,447 | | | $ | 5,103 | | | $ | 4,970 | |
Ratio of net expenses to average net assets (a) | | | 0.45 | % | | | 0.44 | % | | | 0.45 | % | | | 0.45 | % | | | 0.46 | % |
Ratio of net investment income to average net assets | | | 3.99 | % | | | 4.11 | % | | | 4.02 | % | | | 3.98 | % | | | 3.95 | % |
Portfolio turnover | | | 10.04 | % | | | 9.30 | % | | | 2.79 | % | | | 11.57 | % | | | 16.33 | % |
| (a) | Percentages are after expenses waived by Adviser and Custodian reduction, for which no recovery of these waivers and reductions will be sought. |
Expenses waived by Adviser and Custodian reduction were:
.46% and .0% for 2010; .53% and .08% for 2009; .46% and .10% for 2008; .43% and .09% for 2007; and .44% and .10% for 2006, respectively.
| (b) | Rounds to less than $0.01. |
The accompanying notes are an integral part of the financial statements.
18
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
North Carolina Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | Par Value | | Fair Value |
INSURED MUNICIPAL BONDS | | | | | | | | | | | | | |
57.53% of Net Assets | | | | | | | | | | | | | |
Asheville NC Water System Revenue | | 4.750 | % | | 08/01/2027 | | Aa2/AA* | | $ | 1,000,000 | | $ | 1,031,510 |
Burke County NC Certificates of Participation | | 5.000 | | | 04/01/2023 | | A1/A-* | | | 1,000,000 | | | 1,049,300 |
Cabarrus County NC Certificates of Participation Installment | | 5.000 | | | 06/01/2025 | | Aa2/AAA*/AA@ | | | 1,000,000 | | | 1,072,180 |
Catawba County NC Catawba Memorial Hospital Revenue | | 5.000 | | | 10/01/2017 | | NR | | | 500,000 | | | 500,560 |
Charlotte NC Airport Revenue | | 5.250 | | | 07/01/2023 | | A1/A+*/A+@ | | | 1,000,000 | | | 1,058,320 |
Charlotte NC Airport Revenue Bonds Refunding Charlotte Douglas | | 5.000 | | | 07/01/2025 | | A1/A+*/A+@ | | | 1,000,000 | | | 1,043,160 |
Dare County NC Certificates of Participation | | 5.125 | | | 06/01/2018 | | Aa3/AA-*/AA-@ | | | 500,000 | | | 522,135 |
Davie County NC Public School & Community College Facility | | 5.000 | | | 06/01/2023 | | Aa3/A+* | | | 1,000,000 | | | 1,050,590 |
Davie County NC Public School & Community College Facility | | 5.000 | | | 06/01/2025 | | Aa3/A+* | | | 1,690,000 | | | 1,752,969 |
Franklin County NC Certificates of Participation | | 5.000 | | | 09/01/2027 | | Aa3/A+* | | | 750,000 | | | 779,700 |
Henderson County NC Certificates of Participation | | 5.000 | | | 05/01/2025 | | Aa3/AA-*/AA-@ | | | 1,000,000 | | | 1,031,530 |
Iredell County NC Certificates of Participation Public Facility | | 5.250 | | | 10/01/2020 | | Aa3/AA@ | | | 1,000,000 | | | 1,072,070 |
Iredell County NC Certificates of Participation School Project | | 5.000 | | | 06/01/2024 | | Aa3/AA-* | | | 1,000,000 | | | 1,058,700 |
Johnston NC Memorial Hospital Authority | | 5.250 | | | 10/01/2028 | | Aa3/AAA* | | | 500,000 | | | 519,300 |
Lee County NC Certificates of Participation | | 5.000 | | | 04/01/2025 | | Aa3/AAA* | | | 550,000 | | | 583,902 |
Lenoir NC Housing Authority Mortgage Revenue | | 5.700 | | | 08/20/2024 | | AAA* | | | 100,000 | | | 100,021 |
Montgomery County NC Certificates of Participation - Series A | | 5.000 | | | 02/01/2030 | | A-* | | | 1,680,000 | | | 1,716,775 |
Nash County NC Limited Obligation | | 5.000 | | | 10/01/2030 | | Aa3/AAA* | | | 890,000 | | | 934,367 |
New Hanover County NC Hospital Revenue | | 5.000 | | | 10/01/2019 | | A1/A+* | | | 1,175,000 | | | 1,184,130 |
NC Medical Care Community Hospital Morehead Memorial Hospital | | 5.000 | | | 11/01/2026 | | Aa3/AAA* | | | 2,500,000 | | | 2,579,950 |
NC Eastern Municipal Power Agency Power System Revenue | | 5.500 | | | 01/01/2017 | | Baa1 | | | 150,000 | | | 150,015 |
NC Eastern Municipal Power Agency Power System Revenue | | 6.000 | | | 01/01/2025 | | Baa1/A* | | | 1,000,000 | | | 1,176,090 |
NC Eastern Municipal Power Agency Power System Revenue | | 5.000 | | | 01/01/2021 | | A-*/BBB+@ | | | 1,000,000 | | | 1,054,000 |
NC Eastern Municipal Power Agency Power System Revenue | | 6.000 | | | 01/01/2018 | | Baa1 | | | 1,000,000 | | | 1,166,580 |
NC Eastern Municipal Power Agency - Series B | | 6.000 | | | 01/01/2022 | | Aa3/AAA*/AA-@ | | | 750,000 | | | 880,395 |
NC Municipal Power Agency Number 1 Catawba Electric Revenue | | 5.250 | | | 01/01/2019 | | A2/A*/A@ | | | 1,000,000 | | | 1,074,380 |
NC Infrastructure Finance Corporation Certificates of Participation | | 5.000 | | | 02/01/2024 | | Aa1/AAA*/AA+@ | | | 1,000,000 | | | 1,079,580 |
NC Medical Care Community Hospital Revenue - High Point | | 5.000 | | | 10/01/2019 | | NR | | | 500,000 | | | 499,225 |
NC Medical Care Community Hospital Revenue - Rex Hospital | | 5.000 | | | 06/01/2017 | | A1/A+*/A+@ | | | 500,000 | | | 500,040 |
NC Medical Care Community Hospital Revenue - Stanly Hospital | | 5.375 | | | 10/01/2014 | | BBB+@ | | | 35,000 | | | 35,046 |
Raleigh Durham NC Airport Authority | | 5.250 | | | 11/01/2018 | | Aa3/AA-@ | | | 1,000,000 | | | 1,025,290 |
Raleigh Durham NC Airport Revenue | | 5.000 | | | 11/01/2020 | | Aa3/AA-@ | | | 1,000,000 | | | 1,022,420 |
Randolph County NC Certificates of Participation | | 5.000 | | | 02/01/2027 | | Aa3 | | | 1,000,000 | | | 1,028,180 |
Rockingham County NC Certificates of Participation | | 5.000 | | | 04/01/2032 | | Aa3/AAA* | | | 750,000 | | | 780,735 |
Sampson County NC Certificates of Participation | | 5.000 | | | 06/01/2022 | | Aa3/AAA* | | | 1,250,000 | | | 1,351,525 |
Sampson County NC Certificates of Participation | | 5.000 | | | 06/01/2026 | | Aa3/AAA* | | | 1,000,000 | | | 1,056,790 |
University of NC System Pool Revenue - Series C | | 5.000 | | | 04/01/2019 | | Aa3 | | | 480,000 | | | 513,984 |
University of NC Wilmington Certificates of Participation | | 5.250 | | | 06/01/2025 | | A* | | | 1,000,000 | | | 1,046,190 |
University of NC Wilmington Student Housing Project | | 5.000 | | | 06/01/2025 | | A* | | | 580,000 | | | 600,387 |
University of NC System Pool Revenue - Series A | | 5.000 | | | 10/01/2026 | | Aa3 | | | 1,000,000 | | | 1,072,540 |
University of NC System Pool Revenue - Series A | | 5.000 | | | 10/01/2033 | | Aa3 | | | 950,000 | | | 994,375 |
Wilmington NC Certificates of Participation | | 5.000 | | | 06/01/2032 | | Aa2/AA*/AA@ | | | 1,500,000 | | | 1,542,045 |
Wilmington NC Store Water Revenue | | 5.000 | | | 06/01/2028 | | Aa2/AA* | | | 500,000 | | | 525,315 |
Wilson NC Certificates of Participation Public Facilities | | 5.000 | | | 05/01/2021 | | Aa3/AAA*/AA-@ | | | 780,000 | | | 839,249 |
Wilson NC Certificates of Participation Public Facilities | | 5.000 | | | 05/01/2025 | | Aa3/AAA*/AA-@ | | | 750,000 | | | 788,475 |
Wilson County Certificates of Participation Public Facility | | 5.000 | | | 05/01/2029 | | Aa3/AAA*/AA-@ | | | 1,355,000 | | | 1,405,704 |
Wilson Combined Enterprise System | | 4.700 | | | 12/01/2022 | | Aa3/AA@ | | | 500,000 | | | 514,140 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 44,363,864 |
|
CERTIFICATES OF PARTICIPATION BONDS
(UNINSURED) |
15.23% of Net Assets | | | | | | | | | | | | | |
Cabarrus County NC Certificates of Participation | | 5.000 | | | 04/01/2021 | | Aa2/AA*/AA@ | | | 650,000 | | | 670,254 |
Cabarrus County NC Certificates of Participation | | 5.000 | | | 01/01/2029 | | Aa2/AA*/AA@ | | | 750,000 | | | 790,875 |
Charlotte NC Certificates of Participation Convention Facility | | 5.000 | | | 12/01/2024 | | Aa2/AA+*/AA@ | | | 1,000,000 | | | 1,067,830 |
Charlotte NC Certificates of Participation | | 5.000 | | | 06/01/2026 | | Aa2/AA+*/AA@ | | | 1,455,000 | | | 1,568,228 |
Charlotte NC Certificates of Participation | | 5.000 | | | 06/01/2027 | | Aa2/AA+*/AA@ | | | 775,000 | | | 832,025 |
Charlotte NC Certificates of Participation Convention Facility | | 5.000 | | | 06/01/2034 | | Aa2/AA+*/AA@ | | | 750,000 | | | 792,510 |
Forsyth County NC Certificates of Participation | | 5.000 | | | 10/01/2018 | | Aa1/AA+*/AA+@ | | | 5,000 | | | 5,036 |
Forsyth County NC Certificates of Participation | | 5.000 | | | 02/01/2026 | | Aa1/AA+*/AA+@ | | | 550,000 | | | 572,116 |
Mecklenburg County NC Certificates of Participation - Series B | | 5.000 | | | 02/01/2026 | | Aa1/AA+*/AA+@ | | | 1,000,000 | | | 1,066,190 |
Mecklenburg County NC Certificates of Participation - Series A | | 5.000 | | | 02/01/2028 | | Aa1/AA+*/AA+@ | | | 415,000 | | | 441,481 |
Mooresville NC Certificates of Participation | | 5.000 | | | 09/01/2032 | | AA-* | | | 1,640,000 | | | 1,670,553 |
NC Infrastructure Finance Corporation Certificates of Participation | | 5.000 | | | 02/01/2025 | | Aa1/AA+*/AA+@ | | | 1,500,000 | | | 1,580,865 |
Winston Salem NC Certificates of Participation - Series A | | 4.750 | | | 06/01/2031 | | Aa1/AA+*/AA+@ | | | 670,000 | | | 684,177 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 11,742,140 |
|
HOSPITAL AND HEALTHCARE REVENUE BONDS |
6.39% of Net Assets | | | | | | | | | | | | | |
Charlotte Mecklenburg Hospital Authority NC Health Care | | 5.000 | | | 01/15/2027 | | Aa3/AA-* | | | 1,090,000 | | | 1,125,916 |
NC Medical Care Health Care Facilities Revenue Novant Health | | 5.000 | | | 11/01/2017 | | A1/A+*/AA-@ | | | 1,000,000 | | | 1,048,400 |
NC Medical Care Community Hospital Revenue NC Baptist Hospital | | 5.000 | | | 06/01/2034 | | Aa3/AA-* | | | 1,000,000 | | | 1,010,870 |
NC Medical Care Community Health Care Facilities Revenue | | 5.000 | | | 06/01/2034 | | Aa2/AA*/AA@ | | | 1,620,000 | | | 1,674,092 |
NC Medical Care Community Hospital Revenue Unrefunded Balance | | 5.250 | | | 12/01/2013 | | A1/A+*/AA-@ | | | 45,000 | | | 45,250 |
NC Medical Care Community Hospital Revenue Unrefunded Balance | | 5.000 | | | 12/01/2018 | | A1/A+*/AA-@ | | | 25,000 | | | 25,141 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 4,929,669 |
The accompanying footnotes are an integral part of the financial statements.
19
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
North Carolina Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | Par Value | | Fair Value |
MUNICIPAL UTILITY REVENUE BONDS | | | | | | | | | | | | | |
4.64% of Net Assets | | | | | | | | | | | | | |
NC Municipal Power Agency Number 1 Catawba Eleclic Revenue | | 5.000 | % | | 01/01/2030 | | A2/A*/A@ | | $ | 1,445,000 | | $ | 1,489,390 |
Raleigh NC Combined Enterprise System | | 5.000 | | | 03/01/2031 | | Aa1/AAA*/AAA@ | | | 980,000 | | | 1,034,655 |
Raleigh NC Combined Enterprise System Revenue | | 5.000 | | | 03/01/2031 | | Aa1/AAA*/AAA@ | | | 1,000,000 | | | 1,055,930 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 3,579,975 |
LEASE REVENUE BONDS | | | | | | | | | | | | | |
4.08% of Net Assets | | | | | | | | | | | | | |
Charlotte NC Water and Sewer Systems Revenue | | 4.500 | | | 07/01/2028 | | Aaa/AAA*/AAA@ | | | 750,000 | | | 775,088 |
NC Infrastructure Financial Corporation Lease Purchase | | 5.000 | | | 10/01/2021 | | Aa1/AA+*/AA+@ | | | 1,000,000 | | | 1,077,910 |
University NC University Revenues UNC Chapel Hill | | 5.000 | | | 12/01/2031 | | Aaa/AA+*/AA+@ | | | 1,215,000 | | | 1,295,506 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 3,148,504 |
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS | | | | | | | | | | | | | |
3.77% of Net Assets | | | | | | | | | | | | | |
NC Capital Facilites Financial Agency Education Wake Forest | | 5.000 | | | 01/01/2031 | | Aa3/AA* | | | 500,000 | | | 535,735 |
NC Capital Facilities Finance Agency Wake Forest University | | 5.000 | | | 01/01/2038 | | Aa3/AA* | | | 1,250,000 | | | 1,322,700 |
NC Capital Facilities Financial Agency Revenue Duke University | | 5.000 | | | 10/01/2038 | | Aa1/AA+* | | | 500,000 | | | 527,510 |
University of NC System Pool Revenue General Trust Indenture | | 5.000 | | | 10/01/2034 | | Aa2 | | | 500,000 | | | 521,790 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 2,907,735 |
PREREFUNDED BONDS | | | | | | | | | | | | | |
3.50% of Net Assets | | | | | | | | | | | | | |
New Hanover County NC Certificates of Participation | | 5.000 | | | 12/01/2022 | | Aa1/AA* | | | 1,000,000 | | | 1,073,940 |
NC Eastern Municipal Power Agency Power System - Series A | | 6.000 | | | 01/01/2026 | | A-*/BBB+@ | | | 805,000 | | | 1,033,032 |
University of NC System Pool Revenue - Series C | | 5.000 | | | 04/01/2019 | | Aa3 | | | 520,000 | | | 592,285 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 2,699,257 |
GENERAL OBLIGATION BONDS | | | | | | | | | | | | | |
2.85% of Net Assets | | | | | | | | | | | | | |
Iredell County NC Community College | | 5.000 | | | 04/01/2026 | | Aa2/AA*/AA+@ | | | 225,000 | | | 246,132 |
Iredell County NC Community College | | 5.000 | | | 04/01/2027 | | Aa2/AA*/AA+@ | | | 325,000 | | | 353,233 |
Wake County NC Limited Obligation - Series 209 | | 5.000 | | | 06/01/2032 | | Aa1/AA+*/AA+@ | | | 1,500,000 | | | 1,597,631 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 2,196,996 |
ESCROWED TO MATURITY BONDS | | | | | | | | | | | | | |
.45% of Net Assets | | | | | | | | | | | | | |
Pitt County NC Memorial Hospital Revenue | | 5.500 | | | 12/01/2015 | | NR | | | 325,000 | | | 344,809 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 344,809 |
STATE AND LOCAL MORTGAGE REVENUE BONDS | | | | | | | | | | | | | |
.12% of Net Assets | | | | | | | | | | | | | |
NC Housing Finance Agency Single Family Revenue - Series II | | 6.200 | | | 03/01/2016 | | Aa2/AA* | | | 25,000 | | | 25,004 |
NC Housing Finance Agency Single Family Revenue - Series KK | | 5.875 | | | 09/01/2017 | | Aa2/AA* | | | 40,000 | | | 40,007 |
NC Housing Finance Agency Home Ownership Revenue | | 5.125 | | | 07/01/2013 | | Aa2/AA* | | | 30,000 | | | 30,001 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 95,012 |
| | | | | | | | | | | | | |
Total Investments (cost $74,290,208) (See (a) below for further
explanation) 98.56% of Net Assets | | | | | $ | 76,007,961 |
| | | | | | | | | | | | | |
| * | 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 | | $ | 1,939,732 | |
Unrealized depreciation | | | (221,979 | ) |
| | | | |
Net unrealized appreciation | | $ | 1,717,753 | |
| | | | |
Other Information
The following is a summary of the inputs used, as of June 30, 2010, involving the Fund’s assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used the the table below, please refer to the Security Valuation section in the accompanying Notes to Financial Statements.
| | | | | |
| | | Valuation Inputs | | Municipal Bonds |
Level 1 | | Quoted Prices | | $ | — |
Level 2 | | Other Significant Observable Inputs | | | 76,007,961 |
Level 3 | | Significant Unobservable Inputs | | | — |
| | | | | |
| | | | $ | 76,007,961 |
| | | | | |
The accompanying footnotes are an integral part of the financial statements.
20
NORTH CAROLINA TAX-FREE INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2010
| | | | | | |
ASSETS: | | | | | | |
Investments in securities, at value (Cost: $74,290,208) | | | | $ | 76,007,961 | |
Cash | | | | | 494,607 | |
Interest receivable | | | | | 932,886 | |
Prepaid expenses | | | | | 1,426 | |
| | | | | | |
Total assets | | | | | 77,436,880 | |
LIABILITIES: | | | | | | |
Payable for: | | | | | | |
Distributions to shareholders | | 206,436 | | | | |
Fund shares redeemed | | 48,152 | | | | |
Investment advisory fee | | 33,050 | | | | |
Transfer agent fee | | 1,753 | | | | |
Accrued expenses | | 31,735 | | | | |
| | | | | | |
Total liabilities | | | | | 321,126 | |
| | | | | | |
NET ASSETS: | | | | | | |
Capital | | | | | 75,862,747 | |
Net accumulated realized loss on investment transactions | | | | | (464,746 | ) |
Net unrealized appreciation in value of investments | | | | | 1,717,753 | |
| | | | | | |
Net assets at value | | | | $ | 77,115,754 | |
| | | | | | |
NET ASSET VALUE, offering price and redemption price per share ($77,115,754 -:- 7,003,841 shares outstanding; unlimited number of shares authorized; no par value) | | | | $ | 11.01 | |
| | |
| | | | | | |
STATEMENT OF OPERATIONS
For the year ended June 30, 2010
| | | | |
Net investment income: | | | | |
Interest income | | $ | 3,168,343 | |
| | | | |
Expenses: | | | | |
Investment advisory fee | | | 362,360 | |
Transfer agent fee | | | 92,966 | |
Custodian expense | | | 12,222 | |
Professional fees | | | 15,735 | |
Trustee fees | | | 7,614 | |
Other expenses | | | 29,413 | |
| | | | |
Total expenses | | | 520,310 | |
Custodian expense reduction | | | (801 | ) |
| | | | |
Net expenses | | | 519,509 | |
| | | | |
Net investment income | | | 2,648,834 | |
| | | | |
Realized and unrealized gain/(loss) on investments: | | | | |
Net realized loss | | | (117,110 | ) |
Net change in unrealized appreciation/depreciation | | | 2,027,701 | |
| | | | |
Net realized and unrealized gain on investments | | | 1,910,591 | |
| | | | |
Net increase in net assets resulting from operations | | $ | 4,559,425 | |
| | | | |
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 years ended June 30, 2010 and 2009
| | | | | | | | |
| | | 2010 | | | 2009 | |
Operations: | | | | | | | | |
Net investment income | | $ | 2,648,834 | | | $ | 2,450,110 | |
Net realized gain/(loss) on investments | | | (117,110 | ) | | | 114,445 | |
Net change in unrealized appreciation/depreciation | | | 2,027,701 | | | | 241,950 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 4,559,425 | | | | 2,806,505 | |
Distributions from net investment income | | | (2,648,834 | ) | | | (2,450,110 | ) |
Net fund share transactions (Note 4) | | | 8,314,549 | | | | 1,234,276 | |
| | | | | | | | |
Total increase | | | 10,225,140 | | | | 1,590,671 | |
Net assets: | | | | | | | | |
Beginning of year | | | 66,890,614 | | | | 65,299,943 | |
| | | | | | | | |
End of year | | $ | 77,115,754 | | | $ | 66,890,614 | |
| | | | | | | | |
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
| | | | | | | | | | | | | | | | | | | | |
| | | For the years ended June 30, | |
| | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
Net asset value, beginning of year | | $ | 10.71 | | | $ | 10.62 | | | $ | 10.74 | | | $ | 10.74 | | | $ | 11.10 | |
| | | | | | | | | | | | | | | | | | | | |
Income from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.40 | | | | 0.41 | | | | 0.41 | | | | 0.41 | | | | 0.42 | |
Net gains/(losses) on securities,both realized and unrealized | | | 0.30 | | | | 0.09 | | | | (0.12 | ) | | | — | (b) | | | (0.36 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.70 | | | | 0.50 | | | | 0.29 | | | | 0.41 | | | | 0.06 | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Distributions from net investment income | | | (0.40 | ) | | | (0.41 | ) | | | (0.41 | ) | | | (0.41 | ) | | | (0.42 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 11.01 | | | $ | 10.71 | | | $ | 10.62 | | | $ | 10.74 | | | $ | 10.74 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 6.62 | % | | | 4.83 | % | | | 2.69 | % | | | 3.85 | % | | | 0.59 | % |
Net assets, end of year (in thousands) | | $ | 77,116 | | | $ | 66,891 | | | $ | 65,300 | | | $ | 54,994 | | | $ | 48,770 | |
Ratio of net expenses to average net assets (a) | | | 0.72 | % | | | 0.72 | % | | | 0.71 | % | | | 0.73 | % | | | 0.72 | % |
Ratio of net investment income to average net assets | | | 3.66 | % | | | 3.89 | % | | | 3.76 | % | | | 3.79 | % | | | 3.89 | % |
Portfolio turnover | | | 5.92 | % | | | 7.82 | % | | | 11.03 | % | | | 5.20 | % | | | 12.73 | % |
| (a) | Percentages are after Custodian reduction for which no recovery will be sought. |
Percentages before Custodian reduction were:
.72% for 2010; .72% for 2009; .72% for 2008; .74% for 2007; and.74% for 2006.
| (b) | Rounds to less than $0.01. |
The accompanying notes are an integral part of the financial statements.
22
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
North Carolina Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | Par Value | | Fair Value |
INSURED MUNICIPAL BONDS | | | | | | | | | | | | | |
55.95% of Net Assets | | | | | | | | | | | | | |
Asheville NC Water System Revenue Refunding | | 5.000 | % | | 08/01/2017 | | Aa2/AAA* | | $ | 140,000 | | $ | 159,051 |
Buncombe County NC Certificates of Participation | | 4.000 | | | 04/01/2016 | | Aa2/AA* | | | 125,000 | | | 135,334 |
Cabarrus County NC Certificates of Participation | | 5.625 | | | 02/01/2016 | | Aa2/AA*/AA@ | | | 125,000 | | | 144,961 |
Catawba County NC Certificates of Participation Public School | | 5.250 | | | 06/01/2016 | | Aa2 | | | 125,000 | | | 137,656 |
Catawba County NC Certificates of Participation Public School | | 5.250 | | | 06/01/2018 | | Aa2 | | | 125,000 | | | 136,923 |
Catawba County NC Certificates of Participation | | 5.250 | | | 06/01/2019 | | Aa2/A* | | | 200,000 | | | 217,192 |
Charlotte NC Certificates of Participation | | 5.000 | | | 08/01/2012 | | Aa2/AA+*/AA@ | | | 250,000 | | | 270,430 |
Dare County NC Certificates of Participation | | 5.250 | | | 06/01/2014 | | Aa3/AA-*/AA-@ | | | 150,000 | | | 168,528 |
Davie County NC Community College | | 4.000 | | | 06/01/2013 | | Aa3/A+* | | | 250,000 | | | 268,825 |
Edgecombe County NC Schools | | 4.000 | | | 02/01/2015 | | A1/A+* | | | 235,000 | | | 254,634 |
Harnett County NC Certificates of Participation - Series A | | 5.000 | | | 12/01/2015 | | Aa3/AAA* | | | 125,000 | | | 142,444 |
Haywood NC Certificates of Participation Refunding | | 5.000 | | | 10/01/2016 | | A1/A* | | | 635,000 | | | 693,890 |
Henderson County NC Certificates of Participation - Series A | | 5.250 | | | 05/01/2020 | | Aa3/AA-*/AA-@ | | | 300,000 | | | 319,581 |
Henderson County NC Certificates of Participation | | 5.000 | | | 06/01/2014 | | Aa3/AA-*/AA-@ | | | 50,000 | | | 54,619 |
Iredell County NC Certificates of Participation School Project | | 5.000 | | | 06/01/2018 | | Aa3/AA-* | | | 425,000 | | | 471,019 |
Johnston NC Memorial Hospital Authority | | 4.000 | | | 10/01/2012 | | Aa3/AAA* | | | 200,000 | | | 209,938 |
Johnston NC Memorial Hospital Authority | | 4.000 | | | 04/01/2015 | | Aa3/AAA* | | | 100,000 | | | 104,938 |
Lee County NC Certificates of Participation | | 5.000 | | | 04/01/2016 | | Aa3/AAA* | | | 215,000 | | | 235,182 |
Lincolnton NC Enterprise System Revenue | | 5.000 | | | 05/01/2016 | | NR | | | 385,000 | | | 405,736 |
Nash County NC Limited Obligation | | 3.000 | | | 10/01/2015 | | Aa3/AAA* | | | 400,000 | | | 414,976 |
Nash County NC Limited Obligation | | 5.000 | | | 10/01/2018 | | Aa3/AAA* | | | 150,000 | | | 170,489 |
New Hanover County NC Certificates of Participation | | 5.000 | | | 03/01/2017 | | Aa1/AA* | | | 250,000 | | | 271,013 |
NC Medical Care Community Hospital Rowan Medical | | 5.250 | | | 09/01/2016 | | Aa3/AAA* | | | 1,100,000 | | | 1,181,532 |
North Carolina Medical Care Community Hospital Chatham Memorial | | 3.625 | | | 10/01/2010 | | NR | | | 100,000 | | | 100,408 |
NC Eastern Municipal Power Agency | | 5.250 | | | 01/01/2019 | | Aa3/AAA*/BBB+@ | | | 250,000 | | | 276,390 |
NC Municipal Power Agency Number 1 Catawba Electric Revenue | | 5.250 | | | 01/01/2019 | | A2/A*/A@ | | | 200,000 | | | 214,876 |
NC Medical Care Community Hospital - Scotland Memorial | | 5.375 | | | 10/01/2011 | | BBB* | | | 20,000 | | | 20,017 |
NC Medical Community Hospital - Wayne Memorial | | 4.750 | | | 10/01/2011 | | A2 | | | 350,000 | | | 351,771 |
Pitt County NC Certificates of Participation School Facility | | 4.000 | | | 04/01/2015 | | Aa3/AA-*/AA@ | | | 100,000 | | | 107,236 |
Randolph County NC Certificates of Participation | | 5.000 | | | 06/01/2016 | | Aa3/AAA* | | | 170,000 | | | 188,853 |
Rockingham NC Certificates of Participation | | 5.250 | | | 04/01/2013 | | Aa3/A+* | | | 125,000 | | | 134,565 |
Sampson County NC Certificates of Participation | | 5.000 | | | 06/01/2014 | | Aa3/AAA* | | | 50,000 | | | 56,008 |
Sampson Area Development Corporation NC Refunding | | 4.000 | | | 06/01/2015 | | AAA* | | | 150,000 | | | 162,011 |
Union County NC Certificates of Participation | | 5.000 | | | 06/01/2012 | | Aa2/AA-*/AA@ | | | 100,000 | | | 107,883 |
Union County NC Certificates of Participation | | 5.000 | | | 06/01/2020 | | Aa2/AA-*/AA@ | | | 250,000 | | | 271,975 |
University NC Wilmington Certificates of Participation | | 5.000 | | | 06/01/2014 | | A* | | | 40,000 | | | 44,565 |
University NC Wilmington Certificates of Participation | | 4.250 | | | 06/01/2017 | | A* | | | 300,000 | | | 318,855 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 8,924,304 |
| | |
CERTIFICATES OF PARTICIPATION BONDS
(UNINSURED) | | | | | | |
15.51% of Net Assets | | | | | | | | | | | | | |
Cabarrus County NC Certificates of Participation | | 5.000 | | | 06/01/2014 | | Aa3/AA*/AA@ | | | 135,000 | | | 152,258 |
Cabarrus County NC Certificates of Participation | | 4.000 | | | 01/01/2015 | | Aa2/AA*/AA@ | | | 225,000 | | | 245,399 |
Cabarrus County NC Certificates of Participation | | 5.000 | | | 01/01/2017 | | Aa3/AA*/AA-@ | | | 150,000 | | | 168,546 |
Chapel Hill NC Certificates of Participation Operations Center | | 5.250 | | | 06/01/2019 | | Aa1/AA+* | | | 260,000 | | | 285,191 |
Charlotte NC Certificates of Participation | | 4.000 | | | 06/01/2012 | | Aa2/AA+*/AA@ | | | 50,000 | | | 52,973 |
Charlotte NC Certificates of Participation | | 4.375 | | | 12/01/2014 | | Aa2/AA+* | | | 50,000 | | | 52,580 |
Cumberland County NC Certificates of Participation | | 5.000 | | | 12/01/2015 | | Aa2/AA* | | | 75,000 | | | 85,837 |
Forsyth County NC Certificates of Participation | | 5.000 | | | 10/01/2019 | | Aa1/AA+*/AA+@ | | | 600,000 | | | 664,116 |
NC Infrastructure Finance Corporation Certificates of Participation | | 5.000 | | | 02/01/2016 | | Aa1/AA+*/AA+@ | | | 200,000 | | | 223,556 |
NC State Certificates of Participation Wildlife Resources | | 5.250 | | | 06/01/2018 | | Aa1/AA+*/AA+@ | | | 500,000 | | | 543,325 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 2,473,781 |
|
UNIVERSITY CONSOLIDATED EDUCATION AND
BUILDING REVENUE BONDS |
5.68% of Net Assets | | | | | | | | | | | | | |
University of NC Ashville Revenue | | 5.000 | | | 06/01/2014 | | A1 | | | 20,000 | | | 21,292 |
University of NC Revenue Refunding | | 5.000 | | | 12/01/2010 | | Aaa/AA+*/AA+@ | | | 195,000 | | | 198,764 |
University NC System Pool Revenue | | 5.000 | | | 10/01/2016 | | Aa2 | | | 250,000 | | | 289,253 |
University NC System Pool Revenue | | 5.000 | | | 10/01/2015 | | Aa3 | | | 350,000 | | | 395,938 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 905,247 |
| | | | | |
MUNICIPAL UTILITY REVENUE BONDS | | | | | | | | | | | | | |
5.26% of Net Assets | | | | | | | | | | | | | |
NC Eastern Municipal Power Agency | | 5.375 | | | 01/01/2017 | | Baa1/A-*/BBB+@ | | | 200,000 | | | 213,362 |
NC Eastern Municipal Power Agency - Series B | | 3.250 | | | 01/01/2015 | | Baa1/A-*/BBB+@ | | | 250,000 | | | 258,800 |
NC Municipal Power Agency Number 1 Catawba Electric | | 5.250 | | | 01/01/2017 | | A2/A*/A@ | | | 200,000 | | | 227,164 |
NC Municipal Power Agency Number 1 Catawba Electric | | 5.000 | | | 01/01/2016 | | A2/A*/A@ | | | 125,000 | | | 139,881 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 839,207 |
The accompanying footnotes are an integral part of the financial statements.
23
DUPREE MUTUAL FUNDS - NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
North Carolina Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | Par Value | | Fair Value |
HOSPITAL AND HEALTHCARE REVENUE BONDS | | | | | | | | | | | | | |
4.73% of Net Assets | | | | | | | | | | | | | |
Charlotte-Mecklenburg Hospital | | 5.000 | % | | 01/15/2019 | | Aa3/AA-* | | $ | 200,000 | | $ | 214,740 |
Charlotte-Mecklenburg Hospital | | 4.375 | | | 01/15/2019 | | Aa3/AA-* | | | 150,000 | | | 156,407 |
NC Medical Care Community Hospital Pitt Memorial | | 4.400 | | | 12/01/2011 | | A1/A+*/AA-@ | | | 275,000 | | | 275,715 |
NC Medical Care Mission Health Combined Group | | 4.000 | | | 10/01/2014 | | Aa3/AA*/AA@ | | | 100,000 | | | 107,520 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 754,382 |
| | | | | |
LEASE REVENUE BONDS | | | | | | | | | | | | | |
3.42% of Net Assets | | | | | | | | | | | | | |
NC Municipal Power Agency Number 1 Catawba Electric | | 5.250 | | | 01/01/2018 | | A2/A*/A@ | | | 125,000 | | | 141,083 |
NC Infrastructure Finance Corporation - Correctional Facility | | 5.000 | | | 10/01/2017 | | Aa1/AA+*/AA+@ | | | 150,000 | | | 164,247 |
NC Infrastructure Correctional Facilities Projects | | 5.000 | | | 10/01/2019 | | Aa1/AA+*/AA+@ | | | 100,000 | | | 108,870 |
Wake County NC | | 3.000 | | | 01/01/2015 | | Aa1/AA+*/AA+@ | | | 125,000 | | | 131,681 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 545,881 |
| | | | | |
GENERAL OBLIGATION BONDS | | | | | | | | | | | | | |
2.68% of Net Assets | | | | | | | | | | | | | |
Mecklenburg County NC Refunding -Series A | | 5.000 | | | 08/01/2014 | | Aaa/AAA*/AAA@ | | | 125,000 | | | 143,506 |
NC State Public Improvement - Series A | | 5.000 | | | 03/01/2019 | | Aaa/AAA*/AAA@ | | | 250,000 | | | 283,390 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 426,896 |
| | | | | |
PUBLIC FACILITIES REVENUE BONDS | | | | | | | | | | | | | |
2.46% of Net Assets | | | | | | | | | | | | | |
Charlotte NC Airport Revenue Refunding | | 5.000 | | | 07/01/2015 | | A1/A+*/A+@ | | | 350,000 | | | 392,130 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 392,130 |
| | | | | |
PREREFUNDED BONDS | | | | | | | | | | | | | |
1.93% of Net Assets | | | | | | | | | | | | | |
Cary County NC Certificates of Participation | | 5.000 | | | 12/01/2017 | | Aa1/AA+*/AA+@ | | | 250,000 | | | 275,490 |
University of NC Ashville Revenue | | 5.000 | | | 06/01/2014 | | A1 | | | 30,000 | | | 32,425 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 307,915 |
| | | | | |
STATE AND LOCAL MORTGAGE REVENUE BONDS | | | | | | | | | | | | | |
.76% of Net Assets | | | | | | | | | | | | | |
NC Housing Financial Agency Home Ownership - Series 16B | | 4.125 | | | 07/01/2012 | | Aa2/AA* | | | 115,000 | | | 120,864 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 120,864 |
| | | | | | | | | | | | | |
Total Investments (cost $15,259,501) (See (a) below for further explanation) 98.38% of Net Assets | | | | | | | | | | | | $ | 15,690,601 |
| | | | | | | | | | | | | |
| * | 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 | | $ | 431,682 | |
Unrealized depreciation | | | (582 | ) |
| | | | |
Net unrealized appreciation | | $ | 431,100 | |
| | | | |
Other Information
The following is a summary of the inputs used, as of June 30, 2010, involving the Fund’s assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used the the table below, please refer to the Security Valuation section in the accompanying Notes to Financial Statements.
| | | | | |
| | | Valuation Inputs | | Municipal Bonds |
Level 1 | | Quoted Prices | | $ | — |
Level 2 | | Other Significant Observable Inputs | | | 15,690,601 |
Level 3 | | Significant Unobservable Inputs | | | — |
| | | | | |
| | | | $ | 15,690,601 |
| | | | | |
The accompanying footnotes are an integral part of the financial statements.
24
NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2010
| | | | | | |
ASSETS: | | | | | | |
Investments in securities, at value (Cost: $15,259,501) | | | | $ | 15,690,601 | |
Cash | | | | | 113,738 | |
Interest receivable | | | | | 181,193 | |
| | | | | | |
Total assets | | | | | 15,985,532 | |
LIABILITIES: | | | | | | |
Payable for: | | | | | | |
Distributions to shareholders | | 8,217 | | | | |
Fund shares redeemed | | 1,534 | | | | |
Investment advisory fee | | 6,399 | | | | |
Transfer agent fee | | 310 | | | | |
Trustee fee | | 312 | | | | |
Accrued expenses | | 17,752 | | | | |
| | | | | | |
Total liabilities | | | | | 34,524 | |
| | | | | | |
NET ASSETS: | | | | | | |
Capital | | | | | 15,599,430 | |
Net accumulated realized loss on investment transactions | | | | | (79,522 | ) |
Net unrealized appreciation in value of investments | | | | | 431,100 | |
| | | | | | |
Net assets at value | | | | $ | 15,951,008 | |
| | | | | | |
NET ASSET VALUE, offering price and redemption price per share ($15,951,008 -:- 1,479,165 shares outstanding; unlimited number of shares authorized; no par value) | | | | $ | 10.78 | |
| | | | | | |
STATEMENT OF OPERATIONS
For the year ended June 30, 2010
| | | | |
Net investment income: | | | | |
Interest income | | $ | 485,916 | |
| | | | |
Expenses: | | | | |
Investment advisory fee | | | 69,364 | |
Transfer agent fee | | | 20,809 | |
Custodian expense | | | 2,307 | |
Professional fees | | | 8,466 | |
Trustee fees | | | 1,435 | |
Other expenses | | | 11,259 | |
| | | | |
Total expenses | | | 113,640 | |
Custodian expense reduction | | | (154 | ) |
| | | | |
Net expenses | | | 113,486 | |
| | | | |
Net investment income | | | 372,430 | |
| | | | |
Realized and unrealized gain on investments: | | | | |
Net realized gain | | | 60,038 | |
Net change in unrealized appreciation/depreciation | | | 188,565 | |
| | | | |
Net realized and unrealized gain on investments | | | 248,603 | |
| | | | |
Net increase in net assets resulting from operations | | $ | 621,033 | |
| | | | |
The accompanying notes are an integral part of the financial statements.
25
NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2010 and 2009
| | | | | | | | |
| | | 2010 | | | 2009 | |
Operations: | | | | | | | | |
Net investment income | | $ | 372,430 | | | $ | 345,549 | |
Net realized gain on investments | | | 60,038 | | | | 13,645 | |
Net change in unrealized appreciation/depreciation | | | 188,565 | | | | 207,238 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 621,033 | | | | 566,432 | |
Distributions from net investment income | | | (372,430 | ) | | | (345,549 | ) |
Net fund share transactions (Note 4) | | | 4,040,525 | | | | 306,732 | |
| | | | | | | | |
Total increase | | | 4,289,128 | | | | 527,615 | |
Net assets: | | | | | | | | |
Beginning of year | | | 11,661,880 | | | | 11,134,265 | |
| | | | | | | | |
End of year | | $ | 15,951,008 | | | $ | 11,661,880 | |
| | | | | | | | |
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
| | | | | | | | | | | | | | | | | | | | |
| | | For the years ended June 30, | |
| | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
Net asset value, beginning of year | | $ | 10.57 | | | $ | 10.37 | | | $ | 10.30 | | | $ | 10.31 | | | $ | 10.60 | |
| | | | | | | | | | | | | | | | | | | | |
Income from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.29 | | | | 0.32 | | | | 0.32 | | | | 0.32 | | | | 0.30 | |
Net gains/(losses) on securities,both realized and unrealized | | | 0.21 | | | | 0.20 | | | | 0.07 | | | | (0.01 | ) | | | (0.29 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.50 | | | | 0.52 | | | | 0.39 | | | | 0.31 | | | | 0.01 | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Distributions from capital gains | | | — | | | | — | | | | — | | | | — | (b) | | | — | |
Distributions from net investment income | | | (0.29 | ) | | | (0.32 | ) | | | (0.32 | ) | | | (0.32 | ) | | | (0.30 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 10.78 | | | $ | 10.57 | | | $ | 10.37 | | | $ | 10.30 | | | $ | 10.31 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 4.77 | % | | | 5.07 | % | | | 3.78 | % | | | 2.97 | % | | | 0.06 | % |
Net assets, end of year (in thousands) | | $ | 15,951 | | | $ | 11,662 | | | $ | 11,134 | | | $ | 11,281 | | | $ | 13,187 | |
Ratio of net expenses to average net assets (a) | | | 0.82 | % | | | 0.81 | % | | | 0.82 | % | | | 0.81 | % | | | 0.74 | % |
Ratio of net investment income to average net assets | | | 2.69 | % | | | 3.04 | % | | | 3.03 | % | | | 3.01 | % | | | 2.83 | % |
Portfolio turnover | | | 17.94 | % | | | 10.14 | % | | | 23.91 | % | | | 13.33 | % | | | 19.07 | % |
| (a) | Percentages are after expenses waived by Adviser and Custodian reduction, for which no recovery of these waivers and reductions will be sought. |
Expenses waived by Adviser and Custodian reduction were:
0% and 0% for 2010; .02% and .03% for 2009; 0% and .04% for 2008; 0% and .04% for 2007; and .05% and .03% for 2006, respectively.
| (b) | Rounds to less than $0.01. |
The accompanying notes are an integral part of the financial statements.
26
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Tennessee Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | Par Value | | Fair Value |
INSURED MUNICIPAL BONDS | | | | | | | | | | | | | |
53.33% of Net Assets | | | | | | | | | | | | | |
Blount County TN Public Building Authority Local Government | | 5.000 | % | | 06/01/2025 | | Aa2/AA-* | | $ | 100,000 | | $ | 108,215 |
Blount County TN Public Building Authority Local Government | | 5.000 | | | 06/01/2027 | | Aa2/AA-* | | | 1,500,000 | | | 1,604,580 |
Blount County TN Public Building Authority Local Government | | 4.750 | | | 06/01/2031 | | Aa2/AA-* | | | 750,000 | | | 774,758 |
Blount County TN Public Building Authority General Obligation | | 5.250 | | | 06/01/2019 | | NR | | | 1,050,000 | | | 1,085,196 |
Blount County TN Building Authority Local Government Public | | 5.000 | | | 06/01/2032 | | Aa3 | | | 750,000 | | | 770,258 |
Chattanooga TN Industrial Development Board Lease Rent Revenue | | 5.000 | | | 10/01/2027 | | Aa3/AAA*/AA@ | | | 1,000,000 | | | 1,059,770 |
Clarksville TN Electric System Revenue | | 5.000 | | | 09/01/2032 | | Aa2 | | | 1,250,000 | | | 1,270,238 |
Cleveland TN General Obligation - Series A | | 5.000 | | | 06/01/2027 | | Aa3/A+* | | | 680,000 | | | 703,181 |
Columbia TN Refunded - Sewer System | | 5.000 | | | 12/01/2024 | | Aa2 | | | 1,235,000 | | | 1,298,269 |
Columbia TN Broadband Network Revenue & Tax | | 5.000 | | | 03/01/2025 | | Aa2 | | | 1,000,000 | | | 1,041,280 |
Franklin County TN Health & Educational Facilities Board | | 5.000 | | | 09/01/2025 | | A+* | | | 1,000,000 | | | 1,049,080 |
Gallatin TN Water & Sewer Revenue | | 5.000 | | | 01/01/2028 | | Aa3 | | | 2,540,000 | | | 2,694,787 |
Giles County TN ^ | | 4.500 | | | 02/01/2018 | | Aa3 | | | 1,000,000 | | | 1,050,920 |
Greene County TN General Obligation - Series B | | 5.000 | | | 06/01/2024 | | Baa1 | | | 505,000 | | | 527,038 |
Hallsdale-Powell Utility District Knox County TN Water and Sewer Revenue | | 5.000 | | | 04/01/2026 | | AA* | | | 1,000,000 | | | 1,056,180 |
Hallsdale-Powell Utility District Knox County TN Water and Sewer Revenue | | 5.000 | | | 04/01/2031 | | AA* | | | 740,000 | | | 768,705 |
Harpeth Valley Utilities TN Davidson and Williamson Counties | | 5.000 | | | 09/01/2029 | | Aa2 | | | 1,410,000 | | | 1,458,095 |
Harpeth Valley Utilities TN Davidson and Williamson Counties | | 5.000 | | | 09/01/2032 | | Aa2 | | | 1,420,000 | | | 1,471,802 |
Hawkins County TN Refunding General Obligation | | 4.750 | | | 05/01/2017 | | Aa3 | | | 200,000 | | | 207,106 |
Jackson TN Energy Authority Gas System Revenue | | 5.000 | | | 10/01/2028 | | Aa2 | | | 1,000,000 | | | 1,031,200 |
Knox County TN Health Educational & Housing Facilities Ft. Sanders | | 6.250 | | | 01/01/2013 | | Baa1/A* | | | 10,000 | | | 10,859 |
Knox County TN Health Educational & Housing - Covenant Health | | 5.000 | | | 01/01/2022 | | Aa3/AAA*/AA@ | | | 450,000 | | | 454,739 |
Knoxville TN Gas Revenue Refunded System - Series K | | 4.750 | | | 03/01/2022 | | Aa2/AA* | | | 1,550,000 | | | 1,581,326 |
Knoxville TN Wastewater System Revenue - Series A | | 4.750 | | | 04/01/2021 | | Aa2/AA+* | | | 1,150,000 | | | 1,177,922 |
Knoxville TN Waste Water System Revenue Improvement - Series A | | 5.000 | | | 04/01/2037 | | Aa2/AA+* | | | 370,000 | | | 379,878 |
Manchester TN Refunding General Obligation | | 5.000 | | | 06/01/2038 | | AAA* | | | 100,000 | | | 104,368 |
Marion County TN Schools | | 5.000 | | | 06/01/2025 | | A1 | | | 1,050,000 | | | 1,095,255 |
Memphis Shelby County Airport Authority - Series A | | 5.000 | | | 07/01/2035 | | Aa3/AAA*/A+@ | | | 1,000,000 | | | 1,025,320 |
Metro Nashville & Davidson County TN General Obligation | | 5.000 | | | 01/01/2023 | | Aa1/AA*/AA@ | | | 1,000,000 | | | 1,069,290 |
Metro Nashville & Davidson County TN General Obligation | | 5.000 | | | 01/01/2024 | | Aa1/AA*/AA@ | | | 1,000,000 | | | 1,062,410 |
Metro Nashville & Davidson County TN Multi-family | | 4.600 | | | 11/01/2026 | | AAA* | | | 885,000 | | | 889,514 |
Metro Government Nashville & Davidson County TN Sports Authority | | 5.000 | | | 07/01/2021 | | Aa2/AAA* | | | 1,000,000 | | | 1,073,340 |
Metropolitan Government Nashville and Davidson County TN | | 5.000 | | | 05/15/2027 | | Aa1/AA*/AA@ | | | 1,400,000 | | | 1,508,652 |
Metropolitan Government Nashville and Davidson County | | 5.000 | | | 05/15/2028 | | Aa1/AA*/AA@ | | | 240,000 | | | 257,422 |
Montgomery County TN General Obligation | | 4.750 | | | 05/01/2020 | | Aa2/AA+* | | | 1,000,000 | | | 1,066,070 |
Oak Ridge TN Industrial Development Board Refunding Revenue | | 5.250 | | | 08/20/2018 | | Aaa | | | 255,000 | | | 255,018 |
Overton County TN Refunding - Schools General Obligation | | 5.000 | | | 04/01/2018 | | Baa1 | | | 1,000,000 | | | 1,078,650 |
Pigeon Forge TN Refunding - Series A | | 4.900 | | | 06/01/2028 | | Aa3/AAA* | | | 1,000,000 | | | 1,046,710 |
Rutherford County TN Construction Utility District Waterworks | | 5.000 | | | 02/01/2031 | | Aa2/AAA* | | | 1,435,000 | | | 1,490,133 |
Shelby County TN Health Educational & Housing Facilities | | 5.250 | | | 09/01/2027 | | Aa3/AAA* | | | 1,000,000 | | | 1,043,501 |
Smith County TN General Obligation | | 5.000 | | | 04/01/2021 | | NR | | | 720,000 | | | 772,179 |
South Blount County TN Utility District Waterworks Revenue | | 5.000 | | | 12/01/2028 | | Aa3/AAA* | | | 1,125,000 | | | 1,186,312 |
TN Housing Development Agency Homeownership Program Series | | 5.150 | | | 07/01/2022 | | Aa1/AAA* | | | 625,000 | | | 629,788 |
TN State School Board Authority Refunding Higher Education | | 5.000 | | | 05/01/2024 | | Aa1/AA*/AA+@ | | | 1,395,000 | | | 1,480,904 |
TN State School Board Authority Refunding Higher Education | | 5.000 | | | 05/01/2025 | | Aa1/AA*/AA+@ | | | 1,440,000 | | | 1,527,350 |
West Wilson Utility District TN Waterworks Revenue | | 4.750 | | | 06/01/2028 | | Aa3 | | | 2,460,000 | | | 2,506,371 |
White House Utility District TN Water & Sewer | | 5.000 | | | 01/01/2028 | | Aa3 | | | 1,235,000 | | | 1,272,284 |
White House Utility District TN Water & Sewer | | 5.000 | | | 01/01/2030 | | Aa3 | | | 2,505,000 | | | 2,569,253 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 50,645,476 |
| | | | | |
GENERAL OBLIGATION BONDS | | | | | | | | | | | | | |
9.90% of Net Assets | | | | | | | | | | | | | |
Franklin TN Water & Sewer Revenue & Tax | | 5.000 | | | 04/01/2024 | | Aaa | | | 750,000 | | | 885,443 |
Knoxville TN General Obligation - Series A | | 5.000 | | | 05/01/2020 | | Aa1/AA+*/AAA@ | | | 1,000,000 | | | 1,167,360 |
Memphis TN General Improvement | | 5.000 | | | 05/01/2020 | | Aa2/AA*/AA-@ | | | 1,000,000 | | | 1,040,020 |
Metro Government Nashville & Davidson County TN - Series B | | 5.000 | | | 08/01/2024 | | Aa1/AA*/AA@ | | | 500,000 | | | 541,915 |
Metropolitan Government Nashville and Davidson County TN | | 5.000 | | | 01/01/2025 | | Aa1/AA*/AA@ | | | 4,025,000 | | | 4,420,336 |
Shelby County TN - Series A | | 4.600 | | | 11/01/2022 | | Aa1/AA+*/AA+@ | | | 500,000 | | | 514,814 |
Williamson County TN Series A General Obligation | | 4.750 | | | 04/01/2021 | | Aaa | | | 750,000 | | | 831,900 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 9,401,788 |
| | | | | |
UNIVERSITY CONSOLIDATED EDUCATION AND BUILDING REVENUE BONDS | | | | | | | | | | | | | |
7.94% of Net Assets | | | | | | | | | | | | | |
Metro Nashville & Davidson County TN McKendree | | 5.125 | | | 01/01/2020 | | AA* | | | 1,700,000 | | | 1,700,153 |
TN State School Board Authority Higher Education Facilities | | 5.000 | | | 05/01/2028 | | Aa1/AA*/AA@ | | | 1,000,000 | | | 1,077,800 |
TN State School Board Authority Higher Educational Facilities | | 5.125 | | | 05/01/2033 | | Aa1/AA*/AA@ | | | 1,300,000 | | | 1,386,658 |
TN State School Board Authority Higher Educational Facilities | | 5.000 | | | 05/01/2034 | | Aa1/AA*/AA+@ | | | 500,000 | | | 529,625 |
TN State School Board Authority Higher Education Facilities | | 4.750 | | | 05/01/2030 | | Aa1/AA*/AA+@ | | | 2,750,000 | | | 2,843,253 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 7,537,489 |
The accompanying footnotes are an integral part of the financial statements.
27
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE INCOME SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Tennessee Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | Par Value | | Fair Value |
STATE AND LOCAL MORTGAGE REVENUE | | | | | | | | | | | | | |
7.22% of Net Assets | | | | | | | | | | | | | |
TN Housing Development Agency Homeownership Program | | 5.500 | % | | 07/01/2020 | | Aa1/AA+* | | $ | 335,000 | | $ | 335,012 |
TN Housing Development Agency | | 5.000 | | | 07/01/2028 | | Aa1/AA+* | | | 1,000,000 | | | 1,022,490 |
TN Housing Development Agency | | 5.400 | | | 07/01/2035 | | Aa1/AA+* | | | 750,000 | | | 776,588 |
TN Housing Development Agency | | 5.000 | | | 07/01/2029 | | Aa1/AA+* | | | 825,000 | | | 841,896 |
TN Housing Development Agency | | 4.700 | | | 07/01/2027 | | Aa1/AA+* | | | 1,500,000 | | | 1,515,705 |
TN Housing Development Agency Series 2001 - 3B | | 5.250 | | | 01/01/2020 | | Aa1/AA+* | | | 230,000 | | | 232,236 |
TN Housing Development Agency Mortgage Financing Series A | | 5.200 | | | 07/01/2023 | | Aa2/AA* | | | 2,075,000 | | | 2,133,536 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 6,857,463 |
HOSPITAL AND HEALTHCARE REVENUE BONDS | | | | | | | | | | | | | |
6.78% of Net Assets | | | | | | | | | | | | | |
Rutherford County TN Health & Education Facilities Board | | 5.000 | | | 11/15/2040 | | Aa1/AA*/AA+@ | | | 1,500,000 | | | 1,520,085 |
Shelby County TN Health Education & Housing Facilities | | 5.000 | | | 07/01/2031 | | Aa2/AA+@ | | | 4,750,000 | | | 4,916,630 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 6,436,715 |
PREREFUNDED BONDS | | | | | | | | | | | | | |
6.08% of Net Assets | | | | | | | | | | | | | |
Johnson City TN Health & Educational Facilities | | 5.125 | | | 07/01/2025 | | A* | | | 2,000,000 | | | 2,014,880 |
Kingsport TN Industrial Development Board Multi-family | | 5.400 | | | 04/20/2021 | | NR | | | 390,000 | | | 443,410 |
Metro Nashville & Davidson County TN Water & Sewer | | 6.500 | | | 12/01/2014 | | A* | | | 60,000 | | | 73,328 |
Williamson County TN Series B General Obligation | | 5.000 | | | 05/01/2023 | | Aaa | | | 1,400,000 | | | 1,622,754 |
Williamson County TN General Obligation | | 5.000 | | | 05/01/2022 | | Aaa | | | 1,400,000 | | | 1,623,468 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 5,777,840 |
MUNICIPAL UTILITY REVENUE BONDS | | | | | | | | | | | | | |
2.98% of Net Assets | | | | | | | | | | | | | |
Citizens Gas Utility District TN Gas Revenue Refunding | | 5.000 | | | 05/01/2029 | | A* | | | 250,000 | | | 254,090 |
Clarksville TN Electric System Revenue - Series A | | 5.000 | | | 09/01/2033 | | Aa2/AA-* | | | 2,000,000 | | | 2,100,760 |
Metropolitan Government Nashville & Davidson County TN | | 4.750 | | | 05/15/2028 | | AA+*/AA+@ | | | 460,000 | | | 478,989 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 2,833,839 |
ESCROWED TO MATURITY BONDS | | | | | | | | | | | | | |
2.38% of Net Assets | | | | | | | | | | | | | |
Johnson City TN Health & Educational Revenue | | 5.000 | | | 07/01/2018 | | A* | | | 1,000,000 | | | 1,007,420 |
Johnson City TN Health & Educational Facilities | | 6.500 | | | 07/01/2014 | | Baa1/A*/BBB@ | | | 1,000,000 | | | 1,139,180 |
Metro Nashville & Davidson County TN Dandridge Tower | | 6.375 | | | 01/01/2011 | | A2 | | | 115,000 | | | 115,038 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 2,261,638 |
LEASE REVENUE BONDS | | | | | | | | | | | | | |
2.33% of Net Assets | | | | | | | | | | | | | |
Chattanooga TN Electric Revenue - Series A | | 5.000 | | | 09/01/2026 | | AA* | | | 250,000 | | | 271,342 |
Memphis/Shelby County TN Special Facilities Revenue FedEx | | 5.050 | | | 09/01/2012 | | Baa2/BBB* | | | 250,000 | | | 264,512 |
Memphis-Shelby County Sports Authority | | 5.250 | | | 11/01/2027 | | A1/AA-*/A+@ | | | 750,000 | | | 768,863 |
TN Housing Development Agency - Series 1B | | 5.000 | | | 07/01/2029 | | Aa1/AA+*/NR@ | | | 895,000 | | | 910,108 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 2,214,825 |
| | | | | | | | | | | | | |
Total Investments (cost $91,873,754) (See (a) below for further explanation) 98.94% of Net Assets | | | | | | | | | | | | $ | 93,967,073 |
| | | | | | | | | | | | | |
| * | Standard and Poor’s Corporation |
| @ | Fitch’s Investors Service |
All other ratings by Moody’s Investors Service, Inc.
| # | Bond ratings are unaudited. |
| ^ | A portion of this security is pledged as collateral |
| (a) | Represents cost for financial reporting and federal income tax purposes and differs from market value by net unrealized appreciation of securities as follows: |
| | | | |
Unrealized appreciation | | $ | 2,408,302 | |
Unrealized depreciation | | | (314,983 | ) |
| | | | |
Net unrealized appreciation | | $ | 2,093,319 | |
| | | | |
Other Information
The following is a summary of the inputs used, as of June 30, 2010, involving the Fund’s assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used the the table below, please refer to the Security Valuation section in the accompanying Notes to Financial Statements.
| | | | | |
| | | Valuation Inputs | | Municipal Bonds |
Level 1 | | Quoted Prices | | $ | — |
Level 2 | | Other Significant Observable Inputs | | | 93,967,073 |
Level 3 | | Significant Unobservable Inputs | | | — |
| | | | | |
| | | | $ | 93,967,073 |
| | | | | |
The accompanying footnotes are an integral part of the financial statements.
28
TENNESSEE TAX-FREE INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2010
| | | | | | |
ASSETS: | | | | | | |
Investments in securities, at value (Cost: $91,873,754) | | | | $ | 93,967,073 | |
Cash | | | | | 635 | |
Receivable for Fund Shares Sold | | | | | 86,830 | |
Interest receivable | | | | | 1,419,712 | |
Prepaid expenses | | | | | 1,491 | |
| | | | | | |
Total assets | | | | | 95,475,741 | |
LIABILITIES: | | | | | | |
Payable for: | | | | | | |
Distributions to shareholders | | 386,211 | | | | |
Fund shares redeemed | | 21,228 | | | | |
Investment advisory fee | | 38,754 | | | | |
Transfer agent fee | | 1,629 | | | | |
Notes payable | | 3,000 | | | | |
Accrued expenses | | 65,218 | | | | |
| | | | | | |
Total liabilities | | | | | 516,040 | |
| | | | | | |
NET ASSETS: | | | | | | |
Capital | | | | | 94,097,537 | |
Net accumulated realized loss on investment transactions | | | | | (1,231,155 | ) |
Net unrealized appreciation in value of investments | | | | | 2,093,319 | |
| | | | | | |
Net assets at value | | | | $ | 94,959,701 | |
| | | | | | |
NET ASSET VALUE, offering price and redemption price per share ($94,959,701 -:- 8,599,592 shares outstanding; unlimited number of shares authorized; no par value) | | | | $ | 11.04 | |
| | | | | | |
STATEMENT OF OPERATIONS
For the year ended June 30, 2010
| | | | |
Net investment income: | | | | |
Interest income | | $ | 4,062,881 | |
| | | | |
Expenses: | | | | |
Investment advisory fee | | | 465,519 | |
Transfer agent fee | | | 117,723 | |
Custodian expense | | | 15,864 | |
Professional fees | | | 20,439 | |
Trustee fees | | | 9,890 | |
Other expenses | | | 18,478 | |
| | | | |
Total expenses | | | 647,913 | |
Custodian expense reduction | | | (1,029 | ) |
| | | | |
Net expenses | | | 646,884 | |
| | | | |
Net investment income | | | 3,415,997 | |
| | | | |
Realized and unrealized gain/(loss) on investments: | | | | |
Net realized loss | | | (992,378 | ) |
Net change in unrealized appreciation/depreciation | | | 3,849,827 | |
| | | | |
Net realized and unrealized gain on investments | | | 2,857,449 | |
| | | | |
Net increase in net assets resulting from operations | | $ | 6,273,446 | |
| | | | |
The accompanying notes are an integral part of the financial statements.
29
TENNESSEE TAX-FREE INCOME SERIES
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2010 and 2009
| | | | | | | | |
| | | 2010 | | | 2009 | |
Operations: | | | | | | | | |
Net investment income | | $ | 3,415,997 | | | $ | 3,453,113 | |
Net realized loss on investments | | | (992,378 | ) | | | (16,360 | ) |
Net change in unrealized appreciation/depreciation | | | 3,849,827 | | | | (593,772 | ) |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 6,273,446 | | | | 2,842,981 | |
Distributions from net investment income | | | (3,415,997 | ) | | | (3,453,113 | ) |
Net fund share transactions (Note 4) | | | (119,960 | ) | | | 2,434,995 | |
| | | | | | | | |
Total increase | | | 2,737,489 | | | | 1,824,863 | |
Net assets: | | | | | | | | |
Beginning of year | | | 92,222,212 | | | | 90,397,349 | |
| | | | | | | | |
End of year | | $ | 94,959,701 | | | $ | 92,222,212 | |
| | | | | | | | |
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
| | | | | | | | | | | | | | | | | | | | |
| | | For the years ended June 30, | |
| | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | $ | 10.71 | | | $ | 10.77 | | | $ | 10.87 | | | $ | 10.84 | | | $ | 11.21 | |
| | | | | | | | | | | | | | | | | | | | |
Income from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.40 | | | | 0.41 | | | | 0.41 | | | | 0.41 | | | | 0.42 | |
Net gains/(losses) on securities, both realized and unrealized | | | 0.33 | | | | (0.06 | ) | | | (0.10 | ) | | | 0.03 | | | | (0.37 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.73 | | | | 0.35 | | | | 0.31 | | | | 0.44 | | | | 0.05 | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Distributions from net investment income | | | (0.40 | ) | | | (0.41 | ) | | | (0.41 | ) | | | (0.41 | ) | | | (0.42 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 11.04 | | | $ | 10.71 | | | $ | 10.77 | | | $ | 10.87 | | | $ | 10.84 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 6.92 | % | | | 3.40 | % | | | 2.87 | % | | | 4.05 | % | | | 0.45 | % |
Net assets, end of year (in thousands) | | $ | 94,960 | | | $ | 92,222 | | | $ | 90,397 | | | $ | 99,697 | | | $ | 88,268 | |
Ratio of net expenses to average net assets (a) | | | 0.70 | % | | | 0.70 | % | | | 0.71 | % | | | 0.72 | % | | | 0.71 | % |
Ratio of net investment income to average net assets | | | 3.67 | % | | | 3.90 | % | | | 3.74 | % | | | 3.70 | % | | | 3.82 | % |
Portfolio turnover | | | 14.51 | % | | | 7.62 | % | | | 15.71 | % | | | 8.55 | % | | | 6.14 | % |
| (a) | Percentages are after Custodian reduction for which no recovery will be sought. |
Percentages before Custodian reduction were:
.70% for 2010; .71% for 2009; .72% for 2008; .73% for 2007; and .72% for 2006.
The accompanying notes are an integral part of the financial statements.
30
DUPREE MUTUAL FUNDS - TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Tennessee Municipal Bonds — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Date | | Rating# | | Par Value | | Fair Value |
INSURED MUNICIPAL BONDS | | | | | | | | | | | | | |
60.47% of Net Assets | | | | | | | | | | | | | |
Cross Anchor TN Utility District | | 4.250 | % | | 12/01/2015 | | AAA* | | $ | 65,000 | | $ | 71,702 |
Cross Anchor TN Utility District | | 4.250 | | | 12/01/2016 | | AAA* | | | 65,000 | | | 70,981 |
Dickson County TN Refunding | | 5.000 | | | 03/01/2014 | | A1/A+* | | | 250,000 | | | 275,588 |
Dickson County TN Refunding | | 5.000 | | | 06/01/2015 | | A1/A+* | | | 140,000 | | | 151,354 |
Fayetteville TN Electric System Revenue | | 3.000 | | | 06/01/2015 | | AAA* | | | 105,000 | | | 108,696 |
Johnson City TN Refunding | | 4.000 | | | 06/01/2015 | | AA@ | | | 400,000 | | | 435,536 |
Johnson City TN Electric Revenue | | 4.500 | | | 05/01/2021 | | Aa2/AAA* | | | 50,000 | | | 53,222 |
Johnson City TN Public Building Authority Revenue | | 4.250 | | | 09/01/2014 | | AA@ | | | 50,000 | | | 54,793 |
Kingsport TN Series B Water & Sewer | | 5.000 | | | 03/01/2013 | | Aa2 | | | 100,000 | | | 110,314 |
Knoxville TN Electric Revenue - Series V | | 4.750 | | | 07/01/2021 | | Aa2/AAA* | | | 150,000 | | | 156,941 |
Lawrenceburg TN Refunding Water & Sewer | | 5.000 | | | 07/01/2015 | | Aa3 | | | 125,000 | | | 142,448 |
Madison County TN Refunding - School and Public Improvement | | 5.000 | | | 04/01/2018 | | Aa2/AAA* | | | 175,000 | | | 195,288 |
Maury County TN School & Public Improvement | | 5.000 | | | 04/01/2016 | | Aa2 | | | 1,000,000 | | | 1,100,670 |
Memphis-Shelby TN Sports Authority Memphis Arena Project | | 5.500 | | | 11/01/2012 | | A1/AA-*/A+@ | | | 500,000 | | | 543,080 |
Memphis-Shelby County TN Sports Authority Memphis Arena | | 5.000 | | | 11/01/2017 | | A1/AA-*/A+@ | | | 275,000 | | | 299,060 |
Memphis TN General Obligation General Improvement | | 5.000 | | | 10/01/2016 | | Aa2/AA*/AA-@ | | | 450,000 | | | 500,098 |
Memphis TN Series A | | 5.000 | | | 04/01/2024 | | Aa2/AAA*/AA-@ | | | 200,000 | | | 215,770 |
Metro Nashville Davidson County Water and Sewer | | 5.200 | | | 01/01/2013 | | Aa2/A* | | | 270,000 | | | 290,438 |
Metropolitan Nashville Airport Authority - Series A | | 4.500 | | | 07/01/2014 | | Aa3/AAA* | | | 250,000 | | | 273,723 |
Robertson County Tennesee Refunding | | 4.000 | | | 12/01/2012 | | Aa3 | | | 150,000 | | | 160,133 |
Sevier County TN Public Building Authority | | 4.000 | | | 03/01/2014 | | AAA* | | | 100,000 | | | 107,813 |
Shelby County Health Education | | 5.250 | | | 09/01/2020 | | Aa3/AAA* | | | 400,000 | | | 432,995 |
Washington County TN Refunding School and Public Improvement | | 5.000 | | | 04/01/2015 | | Aa2 | | | 200,000 | | | 226,074 |
Washington County TN Refunding-School and Public Improvement | | 5.000 | | | 04/01/2016 | | Aa2 | | | 125,000 | | | 139,166 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 6,115,883 |
PREREFUNDED BONDS | | | | | | | | | | | | | |
11.73% of Net Assets | | | | | | | | | | | | | |
Memphis TN Electric System Revenue - Series A | | 5.000 | | | 12/01/2015 | | Aa2/AA+*/AAA@ | | | 1,050,000 | | | 1,186,658 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 1,186,658 |
LEASE REVENUE BONDS | | | | | | | | | | | | | |
7.05% of Net Assets | | | | | | | | | | | | | |
Chattanooga TN Electric Revenue - Series A | | 5.000 | | | 09/01/2021 | | AA* | | | 400,000 | | | 448,891 |
Memphis-Shelby County TN Airport - Federal Express Corporation | | 5.050 | | | 09/01/2012 | | Baa2/BBB* | | | 250,000 | | | 264,513 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 713,404 |
GENERAL OBLIGATION BONDS | | | | | | | | | | | | | |
6.55% of Net Assets | | | | | | | | | | | | | |
Chattanooga TN General Obligation Unlimited | | 5.500 | | | 09/01/2010 | | Aa1/AA+*/AA@ | | | 325,000 | | | 327,613 |
Memphis TN Refunding General Improvement | | 5.000 | | | 10/01/2017 | | Aa2/AA*/AA-@ | | | 100,000 | | | 115,552 |
Sevier County TN Public Building Authority | | 4.000 | | | 06/01/2014 | | AA* | | | 200,000 | | | 219,282 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 662,447 |
STATE AND LOCAL MORTGAGE REVENUE BONDS | | | | | | | | | | | | | |
5.69% of Net Assets | | | | | | | | | | | | | |
TN Housing Development Agency Homeownership Program | | 4.200 | | | 01/01/2016 | | Aa1/AA+* | | | 150,000 | | | 157,095 |
TN Housing Development Agency - Series 1B | | 4.800 | | | 07/01/2024 | | Aa1/AA+* | | | 305,000 | | | 315,876 |
TN Housing Development Agency Homeownership Program - 2 | | 2.950 | | | 01/01/2015 | | Aa1/AA+* | | | 100,000 | | | 102,247 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 575,218 |
MUNICIPAL UTILITY REVENUE BONDS | | | | | | | | | | | | | |
2.37% of Net Assets | | | | | | | | | | | | | |
Murfreesboro TN Refunding Water and Sewer | | 5.000 | | | 06/01/2014 | | Aa2/AA-* | | | 100,000 | | | 113,517 |
Sevier County TN Utility District Gas System Revenue | | 2.650 | | | 06/01/2015 | | AAA* | | | 125,000 | | | 126,034 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 239,551 |
PUBLIC FACILITIES REVENUE BONDS | | | | | | | | | | | | | |
2.11% of Net Assets | | | | | | | | | | | | | |
Blount County TN Public Building Authority Series B-19 | | 3.500 | | | 06/01/2015 | | AA+* | | | 200,000 | | | 213,212 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 213,212 |
HOSPITAL AND HEALTHCARE REVENUE BONDS | | | | | | | | | | | | | |
1.03% of Net Assets | | | | | | | | | | | | | |
Knox County TN Hospital Facility Revenue Catholic Healthcare | | 4.500 | | | 10/01/2011 | | A1/AA-*/AA-@ | | | 100,000 | | | 104,178 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 104,178 |
| | | | | | | | | | | | | |
Total Investments (cost $9,383,696) (See (a) below for further explanation) 97.00% of Net Assets | | | | | | | | | | | | $ | 9,810,551 |
| | | | | | | | | | | | | |
The accompanying footnotes are an integral part of the financial statements.
31
DUPREE MUTUAL FUNDS - TENNESSEE SHORT-TO-MEDIUM SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
Tennessee Municipal Bonds —100%
June 30,2010
| * | Standard and Poor’s Corporation |
| @ | Fitch’s Investors Service |
All other ratings by Moody’s Investors Service, Inc.
| # | Bond ratings are unaudited. |
| (a) | For federal income tax purposes, cost is $9,600,296 and differs from market value by net unrealized appreciation of securities as follows: |
| | | | |
Unrealized appreciation | | $ | 231,579 | |
Unrealized depreciation | | | (20,724 | ) |
| | | | |
Net unrealized appreciation | | $ | 210,855 | |
| | | | |
Other Information
The following is a summary of the inputs used, as of June 30, 2010, involving the Fund’s assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used the table below, please refer to the Security Valuation section in the accompanying Notes to Financial Statements.
| | | | | |
| | | Valuation Inputs | | Municipal Bonds |
Level 1 | | Quoted Prices | | $ | — |
Level 2 | | Other Significant Observable Inputs | | | 9,810,551 |
Level 3 | | Significant Unobservable Inputs | | | — |
| | | | | |
| | | | $ | 9,810,551 |
| | | | | |
The accompanying footnotes are an integral part of the financial statements.
32
TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2010
| | | | | | |
ASSETS: | | | | | | |
Investments in securities, at value (Cost: $9,383,696) | | | | $ | 9,810,551 | |
Cash | | | | | 187,605 | |
Defaulted securities receivable | | | | | 24,000 | |
Interest receivable | | | | | 110,492 | |
| | | | | | |
Total assets | | | | | 10,132,648 | |
LIABILITIES: | | | | | | |
Payable for: | | | | | | |
Distributions to shareholders | | 5,114 | | | | |
Fund shares redeemed | | 4 | | | | |
Investment advisory fee | | 3,566 | | | | |
Transfer agent fee | | 198 | | | | |
Trustee fees | | 660 | | | | |
Accrued expenses | | 9,932 | | | | |
| | | | | | |
Total liabilities | | | | | 19,474 | |
| | | | | | |
NET ASSETS: | | | | | | |
Capital | | | | | 10,063,179 | |
Net accumulated realized loss on investment transactions | | | | | (376,860 | ) |
Net unrealized appreciation in value of investments | | | | | 426,855 | |
| | | | | | |
Net assets at value | | | | $ | 10,113,174 | |
| | | | | | |
NET ASSET VALUE, offering price and redemption price per share ($10,113,174 -:- 935,061 shares outstanding; unlimited number of shares authorized; no par value) | | | | $ | 10.82 | |
| | | | | | |
STATEMENT OF OPERATIONS
For the year ended June 30, 2010
| | | | |
Net investment income: | | | | |
Interest income | | $ | 334,557 | |
| | | | |
Expenses: | | | | |
Investment advisory fee | | | 48,573 | |
Transfer agent fee | | | 14,572 | |
Custodian expense | | | 1,645 | |
Professional fees | | | 7,119 | |
Pricing fees | | | 5,000 | |
Trustee fees | | | 1,025 | |
Other expenses | | | 2,552 | |
| | | | |
Total expenses | | | 80,486 | |
Fees waived by Adviser | | | (1,532 | ) |
Custodian expense reduction | | | (107 | ) |
| | | | |
Net expenses | | | 78,847 | |
| | | | |
Net investment income | | | 255,710 | |
| | | | |
Realized and unrealized gain on investments: | | | | |
Net realized gain | | | 7,938 | |
Net change in unrealized appreciation/depreciation | | | 238,347 | |
| | | | |
Net realized and unrealized gain on investments | | | 246,285 | |
| | | | |
Net increase in net assets resulting from operations | | $ | 501,995 | |
| | | | |
The accompanying notes are an integral part of the financial statements.
33
TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES
STATEMENT OF CHANGES IN NET ASSETS
For the years ended June 30, 2010 and 2009
| | | | | | | | |
| | | 2010 | | | 2009 | |
Operations: | | | | | | | | |
Net investment income | | $ | 255,710 | | | $ | 283,471 | |
Net realized gain/(loss) on investments | | | 7,938 | | | | (193,826 | ) |
Net change in unrealized appreciation/depreciation | | | 238,347 | | | | 367,258 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 501,995 | | | | 456,903 | |
Distributions from net investment income | | | (255,710 | ) | | | (283,471 | ) |
Net fund share transactions (Note 4) | | | 792,348 | | | | (1,433,415 | ) |
| | | | | | | | |
Total increase/(decrease) | | | 1,038,633 | | | | (1,259,983 | ) |
Net assets: | | | | | | | | |
Beginning of year | | | 9,074,541 | | | | 10,334,524 | |
| | | | | | | | |
End of year | | $ | 10,113,174 | | | $ | 9,074,541 | |
| | | | | | | | |
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
| | | | | | | | | | | | | | | | | | | | |
| | | For the years ended June 30, | |
| | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
Net asset value, beginning of year | | $ | 10.54 | | | $ | 10.31 | | | $ | 10.32 | | | $ | 10.29 | | | $ | 10.60 | |
| | | | | | | | | | | | | | | | | | | | |
Income from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.28 | | | | 0.31 | | | | 0.31 | | | | 0.31 | | | | 0.30 | |
Net gains/(losses) on securities, both realized and unrealized | | | 0.28 | | | | 0.23 | | | | (0.01 | ) | | | 0.03 | | | | (0.31 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.56 | | | | 0.54 | | | | 0.30 | | | | 0.34 | | | | (0.01 | ) |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Distributions from net investment income | | | (0.28 | ) | | | (0.31 | ) | | | (0.31 | ) | | | (0.31 | ) | | | (0.30 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 10.82 | | | $ | 10.54 | | | $ | 10.31 | | | $ | 10.32 | | | $ | 10.29 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 5.39 | % | | | 5.31 | % | | | 2.90 | % | | | 3.34 | % | | | (0.10 | )% |
Net assets, end of year (in thousands) | | $ | 10,113 | | | $ | 9,075 | | | $ | 10,335 | | | $ | 10,880 | | | $ | 15,056 | |
Ratio of net expenses to average net assets (a) | | | 0.81 | % | | | 0.82 | % | | | 0.81 | % | | | 0.79 | % | | | 0.71 | % |
Ratio of net investment income to average net assets | | | 2.63 | % | | | 2.97 | % | | | 2.96 | % | | | 3.00 | % | | | 2.86 | % |
Portfolio turnover | | | 16.16 | % | | | 15.00 | % | | | 22.22 | % | | | 0.00 | % | | | 23.21 | % |
| (a) | Percentages are after expenses waived by Adviser and Custodian reduction, for which no recovery of these waivers and reductions will be sought. |
Expenses waived by Adviser and custodian were:
.02% and .0% for 2010; .0% and .04% for 2009; 0% and .05% for 2008; 0% and .04% for 2007; and .04% and .03% for 2006, respectively.
The accompanying notes are an integral part of the financial statements.
34
DUPREE MUTUAL FUNDS - INTERMEDIATE GOVERNMENT BOND SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
U.S. Government Securities and Agencies — 100%
June 30, 2010
| | | | | | | | | | | | | |
Bond Description | | Coupon | | | Maturity
Date | | Rating# | | Par Value | | Fair Value |
| | | | | |
FEDERAL HOME LOAN BANK | | | | | | | | | | | | | |
29.73% of Net Assets | | | | | | | | | | | | | |
Federal Home Loan Banks Medium Term Note | | 5.550 | % | | 08/20/2018 | | Aaa/AAA* | | $ | 2,000,000 | | $ | 2,012,530 |
Federal Home Loan Banks Medium Term Note | | 3.850 | | | 07/13/2020 | | AAA* | | | 1,000,000 | | | 1,005,021 |
Federal Home Loan Banks Medium Term Note | | 7.000 | | | 08/15/2014 | | Aaa/AAA* | | | 500,000 | | | 604,365 |
Federal Home Loan Bank Medium Term Note | | 5.550 | | | 06/19/2023 | | Aaa/AAA* | | | 500,000 | | | 542,465 |
Federal Home Loan Banks Medium Term Note | | 4.500 | | | 03/26/2021 | | Aaa/AAA*AAA@ | | | 1,500,000 | | | 1,503,203 |
Federal Home Loan Banks Medium Term Note | | 4.250 | | | 04/09/2019 | | Aaa/AAA*/AAA@ | | | 500,000 | | | 500,972 |
Federal Home Loan Banks Medium Term Note | | 4.400 | | | 03/03/2020 | | Aaa/AAA* | | | 750,000 | | | 754,406 |
Federal Home Loan Banks Medium Term Note | | 4.375 | | | 04/13/2020 | | Aaa/AAA*/AAA@ | | | 1,250,000 | | | 1,263,253 |
Federal Home Loan Banks Medium Term Note | | 4.375 | | | 04/16/2020 | | AAA* | | | 1,500,000 | | | 1,567,740 |
Federal Home Loan Banks Medium Term Note | | 4.250 | | | 05/04/2020 | | Aaa/AAA*/AAA@ | | | 1,000,000 | | | 1,017,413 |
Federal Home Loan Banks Medium Term Note | | 4.200 | | | 06/03/2020 | | Aaa/AAA@ | | | 1,700,000 | | | 1,732,387 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 12,503,755 |
FEDERAL FARM CREDIT | | | | | | | | | | | | | |
28.02% of Net Assets | | | | | | | | | | | | | |
Federal Farm Credit Bank | | 4.250 | | | 03/30/2020 | | Aaa/AAA*/AAA@ | | | 3,500,000 | | | 3,579,083 |
Federal Farm Credit Bank | | 4.250 | | | 05/19/2020 | | Aaa/AAA*/AAA@ | | | 750,000 | | | 753,096 |
Federal Farm Credit Bank | | 4.125 | | | 06/08/2020 | | Aaa/AAA*/AAA@ | | | 2,000,000 | | | 2,011,101 |
Federal Farm Credit Bank | | 3.940 | | | 06/29/2020 | | Aaa/AAA* | | | 1,000,000 | | | 1,009,327 |
Federal Farm Credit Bank | | 5.300 | | | 06/24/2014 | | Aaa/AAA*/AAA@ | | | 1,550,000 | | | 1,768,840 |
Federal Farm Credit Bank | | 5.875 | | | 08/16/2021 | | Aaa/AAA*/AAA@ | | | 1,900,000 | | | 2,119,677 |
Federal Farm Credit Bank | | 6.200 | | | 07/26/2022 | | Aaa/AAA*/AAA@ | | | 500,000 | | | 544,016 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 11,785,140 |
FEDERAL HOME LOAN MORTGAGE | | | | | | | | | | | | | |
26.79% of Net Assets | | | | | | | | | | | | | |
Federal Home Loan Mortgage Corporation | | 4.500 | | | 02/26/2020 | | Aaa/AAA*/AAA@ | | | 4,500,000 | | | 4,525,787 |
Federal Home Loan Mortgage Corporation | | 4.500 | | | 02/25/2020 | | Aaa/AAA*/AAA@ | | | 1,500,000 | | | 1,528,250 |
Federal Home Loan Mortgage Corporation | | 4.500 | | | 05/19/2020 | | Aaa/AAA* | | | 1,700,000 | | | 1,707,500 |
Federal Home Loan Mortgage Corporation | | 4.500 | | | 04/15/2020 | | Aaa/AAA*/AAA@ | | | 750,000 | | | 750,787 |
Federal Home Loan Mortgage Corporation | | 4.500 | | | 10/01/2019 | | Aaa/AAA*/AAA@ | | | 1,000,000 | | | 999,374 |
Federal Home Loan Mortgage Corporation | | 4.500 | | | 02/05/2020 | | Aaa/AAA*/AAA@ | | | 1,250,000 | | | 1,254,090 |
Federal Home Loan Mortgage Corporation | | 4.500 | | | 02/18/2020 | | Aaa/AAA*/AAA@ | | | 500,000 | | | 502,216 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 11,268,004 |
FEDERAL NATIONAL MORTGAGE ASSOCIATION | | | | | | | | | | | | | |
10.55% of Net Assets | | | | | | | | | | | | | |
Federal National Mortgage Association | | 5.000 | | | 02/08/2023 | | Aaa/AAA*/AAA@ | | | 500,000 | | | 507,358 |
Federal National Mortgage Association | | 5.050 | | | 02/14/2023 | | Aaa/AAA*/AAA@ | | | 500,000 | | | 510,596 |
Federal National Mortgage Association | | 5.150 | | | 10/15/2024 | | Aaa/AAA*/AAA@ | | | 625,000 | | | 631,983 |
Federal National Mortgage Association | | 5.250 | | | 01/14/2025 | | Aaa/AAA*/AAA@ | | | 500,000 | | | 500,437 |
Federal National Mortgage Association | | 5.000 | | | 10/23/2024 | | Aaa/AAA*/AAA@ | | | 650,000 | | | 651,313 |
Federal National Mortgage Association | | 4.500 | | | 10/28/2019 | | Aaa/AAA*/AAA@ | | | 500,000 | | | 501,228 |
Federal National Mortgage Association | | 5.250 | | | 11/19/2024 | | Aaa/AAA*/AAA@ | | | 625,000 | | | 625,098 |
Federal National Mortgage Association | | 4.625 | | | 11/12/2019 | | Aaa/AAA*/AAA@ | | | 500,000 | | | 507,173 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 4,435,186 |
STUDENT LOAN MARKETING ASSOCIATION | | | | | | | | | | | | | |
2.71% of Net Assets | | | | | | | | | | | | | |
Student Loan Marketing Association | | 7.300 | | | 08/01/2012 | | AAA | | | 1,000,000 | | | 1,138,821 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | 1,138,821 |
Total Investments (cost $40,044,923) (See (a) below for further explanation) 97.80% of Net Assets | | | | | $ | 41,130,906 |
| | | | | | | | | | | | | |
| * | Standard and Poor’s Corporation |
| @ | Fitch’s Investors Service |
All other ratings by Moody’s Investors Service, Inc.
| # | Bond ratings are unaudited. |
The accompanying footnotes are an integral part of the financial statements.
35
DUPREE MUTUAL FUNDS - INTERMEDIATE GOVERNMENT BOND SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
U.S. Government Securities and Agencies — 100%
June 30, 2010
| (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 | | $ | 1,088,681 | |
Unrealized depreciation | | | (2,698 | ) |
| | | | |
Net unrealized appreciation | | $ | 1,085,983 | |
| | | | |
Other Information
The following is a summary of the inputs used, as of June 30, 2010, involving the Fund’s assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used the the table below, please refer to the Security Valuation section in the accompanying Notes to Financial Statements.
| | | | | |
| | | Valuation Inputs | | Government Agencies |
Level 1 | | Quoted Prices | | $ | — |
Level 2 | | Other Significant Observable Inputs | | | 41,130,906 |
Level 3 | | Significant Unobservable Inputs | | | — |
| | | | | |
| | | | $ | 41,130,906 |
| | | | | |
The accompanying footnotes are an integral part of the financial statements.
36
INTERMEDIATE GOVERNMENT BOND SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2010
| | | | | | |
ASSETS: | | | | | | |
Investments in securities, at value (Cost: $40,044,923) | | | | $ | 41,130,906 | |
Cash | | | | | 1,542,665 | |
Interest receivable | | | | | 469,930 | |
Prepaid expenses | | | | | 596 | |
| | | | | | |
Total assets | | | | | 43,144,097 | |
LIABILITIES: | | | | | | |
Payable for: | | | | | | |
Investments purchased | | 1,000,000 | | | | |
Distributions to shareholders | | 71,826 | | | | |
Fund shares redeemed | | 2,382 | | | | |
Investment advisory fee | | 6,665 | | | | |
Transfer agent fee | | 852 | | | | |
Accrued expenses | | 9,101 | | | | |
| | | | | | |
Total liabilities | | | | | 1,090,826 | |
| | | | | | |
NET ASSETS: | | | | | | |
Capital | | | | | 41,101,437 | |
Net accumulated realized loss on investment transactions | | | | | (134,149 | ) |
Net unrealized appreciation in value of investments | | | | | 1,085,983 | |
| | | | | | |
Net assets at value | | | | $ | 42,053,271 | |
| | | | | | |
NET ASSET VALUE, offering price and redemption price per share ($42,053,271 -:- 4,108,171 shares outstanding; unlimited number of shares authorized; no par value) | | | | $ | 10.24 | |
| | | | | | |
STATEMENT OF OPERATIONS
For the year ended June 30, 2010
| | | | |
Net investment income: | | | | |
Interest income | | $ | 1,427,952 | |
| | | | |
Expenses: | | | | |
Investment advisory fee | | | 59,935 | |
Transfer agent fee | | | 41,961 | |
Custodian expense | | | 4,900 | |
Professional fees | | | 6,295 | |
Printing | | | 10,000 | |
Trustee fees | | | 3,046 | |
Other expenses | | | 14,698 | |
| | | | |
Total expenses | | | 140,835 | |
Custodian expense reduction | | | (331 | ) |
| | | | |
Net expenses | | | 140,504 | |
| | | | |
Net investment income | | | 1,287,448 | |
| | | | |
Realized and unrealized gain on investments: | | | | |
Net realized gain | | | 69,152 | |
Net change in unrealized appreciation/depreciation | | | 559,656 | |
| | | | |
Net realized and unrealized gain on investments | | | 628,808 | |
| | | | |
Net increase in net assets resulting from operations | | $ | 1,916,256 | |
| | | | |
The accompanying notes are an integral part of the financial statements.
37
INTERMEDIATE GOVERNMENT BOND SERIES
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended June 30, 2010 and 2009
| | | | | | | | |
| | | 2010 | | | 2009 | |
Operations: | | | | | | | | |
Net investment income | | $ | 1,287,448 | | | $ | 1,121,342 | |
Net realized gain on investments | | | 69,152 | | | | 25,813 | |
Net change in unrealized appreciation/depreciation | | | 559,656 | | | | 258,569 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 1,916,256 | | | | 1,405,724 | |
Distributions from net investment income | | | (1,287,448 | ) | | | (1,121,342 | ) |
Net fund share transactions (Note 4) | | | 15,993,839 | | | | 2,014,141 | |
| | | | | | | | |
Total increase | | | 16,622,647 | | | | 2,298,523 | |
Net assets: | | | | | | | | |
Beginning of year | | | 25,430,624 | | | | 23,132,101 | |
| | | | | | | | |
End of year | | $ | 42,053,271 | | | $ | 25,430,624 | |
| | | | | | | | |
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding:
| | | | | | | | | | | | | | | | | | | | |
| | | For the years ended June 30, | |
| | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
Net asset value, beginning of year | | $ | 10.05 | | | $ | 9.93 | | | $ | 9.66 | | | $ | 9.58 | | | $ | 10.07 | |
| | | | | | | | | | | | | | | | | | | | |
Income from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.44 | | | | 0.46 | | | | 0.48 | | | | 0.49 | | | | 0.48 | |
Net gains/(losses) on securities, both realized and unrealized | | | 0.19 | | | | 0.12 | | | | 0.27 | | | | 0.08 | | | | (0.49 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.63 | | | | 0.58 | | | | 0.75 | | | | 0.57 | | | | (0.01 | ) |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Distributions from net investment income | | | (0.44 | ) | | | (0.46 | ) | | | (0.48 | ) | | | (0.49 | ) | | | (0.48 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 10.24 | | | $ | 10.05 | | | $ | 9.93 | | | $ | 9.66 | | | $ | 9.58 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 6.38 | % | | | 5.99 | % | | | 7.88 | % | | | 6.04 | % | | | (0.14 | )% |
Net assets, end of year (in thousands) | | $ | 42,053 | | | $ | 25,431 | | | $ | 23,132 | | | $ | 22,553 | | | $ | 21,487 | |
Ratio of net expenses to average net assets (a) | | | 0.47 | % | | | 0.47 | % | | | 0.49 | % | | | 0.51 | % | | | 0.45 | % |
Ratio of net investment income to average net assets | | | 4.30 | % | | | 4.62 | % | | | 4.85 | % | | | 5.05 | % | | | 4.97 | % |
Portfolio turnover | | | 56.38 | % | | | 30.35 | % | | | 33.21 | % | | | 6.40 | % | | | 17.67 | % |
| (a) | Percentages are after custodian reduction for which no recovery will be sought. |
Percentages before custodian reduction were:
.47% for 2010; .49% for 2009, .51% for 2008; .53% for 2007; and .47% for 2006.
The accompanying notes are an integral part of the financial statements.
38
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2010
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.
The Funds have adopted the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, “Fair Value Measurements and Disclosures”. ASC 820 establishes a hierarchy that prioritizes the inputs to valuation techniques giving the highest priority to readily available unadjusted quoted prices in active markets for identical assets (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) when market prices are not readily available or reliable. The three levels of the hierarchy under ASC 820 are described as follows:
39
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS—(Continued)
June 30, 2010
1. Organization and Significant Accounting Policies, continued:
| | |
| |
Level 1: | | Quoted prices in active markets for identical securities. |
| |
Level 2: | | Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others. |
| |
Level 3: | | Price determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, where there is little or not market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. |
The aggregate value by input level, as of June 30, 2010, for the Funds’ investments is included at the end of the Funds’ Schedule of Portfolio Investments.
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 Extended Settlement Securities
The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The value of the security may vary with market fluctuations. No interest accrues to the Funds until the security is delivered and payment takes place. At the time the Funds enter 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
It is each Fund’s policy to qualify as a regulated investment company by complying with the requirements of the Internal Revenue Code (the “code”) applicable to regulated investment companies, including the distribution of all or substantially all taxable and tax-exempt income to their shareholders. The Funds have met the requirements of the code applicable to regulated investment companies for the year ended June 30, 2010. Therefore, no federal income tax provision is required. Management of the Funds has concluded that there are no uncertain tax provisions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns for the last three years.
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 |
40
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS—(Continued)
June 30, 2010
F. Distributions, continued:
| | | | | | |
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 | | |
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.
H. Subsequent Events
Subsequent events occurring after the date of this report have been evaluated for potential impact to this report through the date the financial statements were issued. There were no subsequent events to report that would have a material impact on the Funds’ financial statements.
I. New Accounting Pronouncement
In January 2010, the FASB issued new guidance as an amendment to fair value measurements and disclosures. The new guidance adds new requirements for disclosure about transfers into and out of level 1 and level 2 fair value measurements and separate disclosures about purchases, sales, issuances, and settlements relating to level 3 measurements. The guidance also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques in level 2 and level 3 fair value measurements. The amendment is effective for interim and annual reporting periods beginning after December 15, 2009, except for level 3 reconciliation disclosures which are effective for interim and annual periods beginning after December 15, 2010. The Funds do not expect the implications of this guidance to have a material impact of its financial statements.
2. Investment Advisory Fee and Other Transactions with Affiliates
Subject to the direction of the Trustees, Dupree & Company, Inc. (the Adviser) is responsible for the management of the Funds’ portfolios. Under the terms of the Investment Advisory Agreements for the Alabama, Kentucky, Mississippi, North Carolina, and Tennessee Series, the Funds have agreed to pay to the Adviser as compensation for all services rendered, facilities furnished and expenses paid or assumed by it under the Agreements, a fee at the annual rate of .50 of 1% of the first $100,000,000 average daily net assets of each Fund determined separately; .45 of 1% of the average daily net assets between $100,000,001 and $150,000,000 of each Fund determined separately; .40 of 1% of the average daily net assets between $150,000,001 and $500,000,000 of each Fund determined separately; and .35 of 1% of the average daily net assets in excess of $500,000,000. For the Intermediate Government Bond Series, the Fund has agreed to pay to the Adviser, as compensation for all services rendered, facilities furnished and expenses paid or assumed by it under the Agreement, a fee at the annual rate of ..20 of 1% of average daily net assets.
The Adviser may voluntarily waive investment advisory fees payable to it under the Investment Advisory Agreement with each Fund, and assume and pay other operating expenses. The Adviser will not seek to recoup any waived fees or other operating expenses it has assumed.
For the year ended June 30, 2010, fees voluntarily waived by the Adviser were as follows:
| | | |
| | | Fees waived by Adviser |
Alabama Tax-Free Income Series | | $ | 54,852 |
Mississippi Tax-Free Income Series | | | 25,288 |
Tennessee Tax-Free Short-to-Medium Series | | | 1,532 |
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
41
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS—(Continued)
June 30, 2010
2. Investment Advisory Fee and Other Transactions with Affiliates, continued:
annual rate of .15 of 1% on the first $20,000,000 of average net assets and .12 of 1% of all amounts in excess of $20,000,000 of average net assets for each Fund.
3. Purchases and Sales of Securities
During the year ended June 30, 2010, the cost of purchases and the proceeds from sales and maturities of securities (excluding short-term securities and U.S. government obligations, except for the Intermediate Government Bond Series which are all U.S. government obligations) for each of the Funds were as follows:
| | | | | | |
| | | Purchases | | Sales/Calls |
Alabama Tax-Free Income Series | | $ | 7,467,211 | | $ | 2,563,484 |
Kentucky Tax-Free Income Series | | | 105,746,819 | | | 39,127,444 |
Kentucky Tax-Free Short-to-Medium Series | | | 21,167,596 | | | 12,905,359 |
Mississippi Tax-Free Income Series | | | 1,670,832 | | | 536,188 |
North Carolina Tax-Free Income Series | | | 12,893,245 | | | 4,219,614 |
North Carolina Tax-Free Short-to-Medium Series | | | 6,466,544 | | | 2,451,584 |
Tennessee Tax-Free Income Series | | | 14,012,028 | | | 13,374,871 |
Tennessee Tax-Free Short-to-Medium Series | | | 2,293,151 | | | 1,536,399 |
Intermediate Government Bond Series | | | 32,576,113 | | | 16,772,900 |
4. Capital Shares
At June 30, 2010 and 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
| | | | | | | | | | | | | | |
ALABAMA TAX-FREE INCOME SERIES | | Year Ended June 30, 2010 | | | Year Ended June 30, 2009 | |
| | | SHARES | | | AMOUNT | | | SHARES | | | AMOUNT | |
Shares sold | | 632,945 | | | $ | 7,421,145 | | | 177,602 | | | $ | 2,010,089 | |
Shares reinvested | | 34,019 | | | | 400,255 | | | 34,467 | | | | 384,144 | |
Shares redeemed | | (232,055 | ) | | | (2,720,915 | ) | | (145,306 | ) | | | (1,573,209 | ) |
Net increase | | 434,909 | | | $ | 5,100,485 | | | 66,763 | | | $ | 821,024 | |
| | |
KENTUCKY TAX-FREE INCOME SERIES | | Year Ended June 30, 2010 | | | Year Ended June 30, 2009 | |
| | | SHARES | | | AMOUNT | | | SHARES | | | AMOUNT | |
Shares sold | | 18,393,656 | | | $ | 140,727,307 | | | 13,477,495 | | | $ | 99,262,162 | |
Shares reinvested | | 2,574,104 | | | | 19,772,340 | | | 2,567,459 | | | | 18,846,331 | |
Shares redeemed | | (11,258,407 | ) | | | (86,179,579 | ) | | (10,113,751 | ) | | | (74,277,082 | ) |
Net increase | | 9,709,353 | | | $ | 74,320,068 | | | 5,931,203 | | | $ | 43,831,411 | |
| | |
KENTUCKY TAX-FREE SHORT-TO-MEDIUM SERIES | | Year Ended June 30, 2010 | | | Year ended June 30, 2009 | |
| | | SHARES | | | AMOUNT | | | SHARES | | | AMOUNT | |
Shares sold | | 3,750,824 | | | $ | 20,000,950 | | | 2,567,385 | | | $ | 13,382,534 | |
Shares reinvested | | 237,977 | | | | 1,268,895 | | | 237,891 | | | | 1,241,332 | |
Shares redeemed | | (2,624,421 | ) | | | (13,992,073 | ) | | (1,722,891 | ) | | | (8,971,130 | ) |
Net increase | | 1,364,380 | | | $ | 7,277,772 | | | 1,082,385 | | | $ | 5,652,736 | |
42
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS—(Continued)
June 30, 2010
4. Capital Shares, continued:
| | | | | | | | | | | | | | |
MISSISSIPPI TAX-FREE INCOME SERIES | | Year Ended June 30, 2010 | | | Year ended June 30, 2009 | |
| | | SHARES | | | AMOUNT | | | SHARES | | | AMOUNT | |
Shares sold | | 145,044 | | | $ | 1,645,363 | | | 106,747 | | | $ | 1,159,494 | |
Shares reinvested | | 13,324 | | | | 151,816 | | | 12,194 | | | | 132,041 | |
Shares redeemed | | (57,518 | ) | | | (651,356 | ) | | (67,061 | ) | | | (707,841 | ) |
Net increase | | 100,850 | | | $ | 1,145,823 | | | 51,880 | | | $ | 583,694 | |
| | |
NORTH CAROLINA TAX-FREE INCOME SERIES | | Year Ended June 30, 2010 | | | Year ended June 30, 2009 | |
| | | SHARES | | | AMOUNT | | | SHARES | | | AMOUNT | |
Shares sold | | 1,247,273 | | | $ | 13,686,149 | | | 1,015,568 | | | $ | 10,744,015 | |
Shares reinvested | | 165,572 | | | | 1,826,597 | | | 165,404 | | | | 1,724,580 | |
Shares redeemed | | (655,126 | ) | | | (7,198,197 | ) | | (1,085,096 | ) | | | (11,234,319 | ) |
Net increase | | 757,719 | | | $ | 8,314,549 | | | 95,876 | | | $ | 1,234,276 | |
| | |
NORTH CAROLINA TAX-FREE SHORT-TO-MEDIUM SERIES | | Year Ended June 30, 2010 | | | Year Ended June 30, 2009 | |
| | | SHARES | | | AMOUNT | | | SHARES | | | AMOUNT | |
Shares sold | | 532,609 | | | $ | 5,719,346 | | | 173,841 | | | $ | 1,827,995 | |
Shares reinvested | | 25,104 | | | | 269,407 | | | 22,164 | | | | 232,306 | |
Shares redeemed | | (181,532 | ) | | | (1,948,228 | ) | | (166,726 | ) | | | (1,753,569 | ) |
Net increase | | 376,181 | | | $ | 4,040,525 | | | 29,279 | | | $ | 306,732 | |
| | |
TENNESSEE TAX-FREE INCOME SERIES | | Year Ended June 30, 2010 | | | Year ended June 30, 2009 | |
| | | SHARES | | | AMOUNT | | | SHARES | | | AMOUNT | |
Shares sold | | 1,194,144 | | | $ | 13,126,856 | | | 1,386,642 | | | $ | 14,670,407 | |
Shares reinvested | | 163,206 | | | | 1,804,520 | | | 165,171 | | | | 1,726,537 | |
Shares redeemed | | (1,371,602 | ) | | | (15,051,336 | ) | | (1,333,677 | ) | | | (13,961,949 | ) |
Net increase/(decrease) | | (14,252 | ) | | $ | (119,960 | ) | | 218,136 | | | $ | 2,434,995 | |
| | |
TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES | | Year Ended June 30, 2010 | | | Year ended June 30, 2009 | |
| | | SHARES | | | AMOUNT | | | SHARES | | | AMOUNT | |
Shares sold | | 169,926 | | | $ | 1,824,768 | | | 89,757 | | | $ | 935,688 | |
Shares reinvested | | 18,227 | | | | 195,876 | | | 20,621 | | | | 215,191 | |
Shares redeemed | | (114,208 | ) | | | (1,228,296 | ) | | (251,462 | ) | | | (2,584,294 | ) |
Net increase/(decrease) | | 73,945 | | | $ | 792,348 | | | (141,084 | ) | | $ | (1,433,415 | ) |
| | |
INTERMEDIATE GOVERNMENT BOND SERIES | | Year Ended June 30, 2010 | | | Year ended June 30, 2009 | |
| | | SHARES | | | AMOUNT | | | SHARES | | | AMOUNT | |
Shares sold | | 1,900,840 | | | $ | 19,267,112 | | | 363,540 | | | $ | 3,662,434 | |
Shares reinvested | | 81,074 | | | | 821,663 | | | 81,708 | | | | 817,623 | |
Shares redeemed | | (404,161 | ) | | | (4,094,936 | ) | | (245,504 | ) | | | (2,465,916 | ) |
Net increase | | 1,577,753 | | | $ | 15,993,839 | | | 199,744 | | | $ | 2,014,141 | |
43
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS—(Continued)
June 30, 2010
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, 2010, the Alabama Tax-Free Income Series, Kentucky Tax-Free Short-to-Medium Series, Mississippi Tax-Free Income Series, North Carolina Tax-Free Income Series, North Carolina Tax-Free Short-to-Medium Series, Tennessee Tax-Free Income Series, Tennessee Tax-Free Short-to-Medium Series, and Intermediate Government Bond Series have capital loss carryforwards which are available to offset future capital gains, if any. As of June 30, 2010 the Kentucky Tax-Free Income Series does not have any capital loss carryforwards.
The capital loss carryforwards expire as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2011 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | 2018 | | Total |
Alabama Tax-Free Income Series | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 18,298 | | $ | 25,322 | | $ | 43,620 |
| | | | | | | | | |
Kentucky Tax-Free Short-to-Medium Series | | | — | | | — | | | 257,605 | | | 74,336 | | | 446,645 | | | 227,932 | | | 223,977 | | | — | | | 1,230,495 |
| | | | | | | | | |
Mississippi Tax-Free Income Series | | | — | | | — | | | — | | | — | | | — | | | 6,458 | | | 3,910 | | | 16,204 | | | 26,572 |
| | | | | | | | | |
North Carolina Tax-Free Income Series | | | — | | | 347,636 | | | — | | | — | | | — | | | — | | | — | | | 117,110 | | | 464,746 |
| | | | | | | | | |
North Carolina Tax-Free Short-to-Medium Series | | | — | | | — | | | — | | | — | | | 49,489 | | | 30,033 | | | — | | | — | | | 79,522 |
| | | | | | | | | |
Tennessee Tax-Free Income Series | | | 18,314 | | | 175,434 | | | 28,670 | | | — | | | — | | | — | | | 16,360 | | | 992,377 | | | 1,231,155 |
| | | | | | | | | |
Tennessee Tax-Free Short-to -Medium Series | | | — | | | — | | | — | | | 44,876 | | | 92,566 | | | 23,418 | | | — | | | — | | | 160,860 |
| | | | | | | | | |
Intermediate Government Bond Series | | | — | | | 48,696 | | | 2 | | | 64,307 | | | 21,144 | | | — | | | — | | | — | | | 134,149 |
During the year ended June 30, 2010, the following Funds utilized capital loss carryforwards as follows:
| | |
| | | Amount |
Kentucky Tax - Free Short-to-Medium Series | | 150,390 |
North Carolina Tax-Free Short-to-Medium Series | | 60,039 |
Tennessee Tax-Free Short-to-Medium Series | | 17,538 |
Intermediate Government Bond Series | | 69,152 |
44
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS—(Continued)
June 30, 2010
6. Federal Income Taxes, continued:
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 2010 as follows:
| | | |
| | | Post October Losses | |
Alabama Tax-Free Income Series | | (22,487 | ) |
Mississippi Tax-Free Income Series | | (6,718 | ) |
At June 30, 2010, the effect of permanent book to tax differences (expiration of capital loss carryforwards) resulted in increases and decreases to the components of net assets as follows:
| | | | | | |
| | | Accumulated Net
Realized Losses | | | Capital | |
Tennessee Tax-Free Income Series | | 69,805 | | | (69,805 | ) |
Tennessee Tax-Free Short-to-Medium Series | | (4,003 | ) | | 4,003 | |
The tax character of distributions paid for the years ended June 30, 2010 and 2009 were as follows:
| | | | | | | | | | | | | | | | | | |
| | | 2010 | | 2009 |
| | | Tax
Exempt
Income | | Ordinary
Income | | Long-Term
Capital
Gain | | Tax
Exempt
Income | | Ordinary
Income | | Long-Term
Capital
Gain |
Alabama Tax-Free Income Series | | $ | 656,017 | | $ | — | | $ | — | | $ | 564,154 | | $ | — | | $ | — |
Kentucky Tax-Free Income Series | | | 31,722,118 | | | — | | | 1,628,317 | | | 30,399,605 | | | — | | | 1,239,797 |
Kentucky Tax-Free Short-to-Medium Series | | | 1,809,942 | | | — | | | — | | | 1,797,615 | | | — | | | — |
Mississippi Tax-Free Income Series | | | 218,128 | | | — | | | — | | | 193,916 | | | — | | | — |
North Carolina Tax-Free Income Series | | | 2,648,834 | | | — | | | — | | | 2,450,110 | | | — | | | — |
North Carolina Tax-Free Short-to-Medium Series | | | 372,430 | | | — | | | — | | | 345,549 | | | — | | | — |
Tennessee Tax-Free Income Series | | | 3,415,997 | | | — | | | — | | | 3,453,113 | | | — | | | — |
Tennessee Tax-Free Short-to-Medium Series | | | 255,710 | | | — | | | — | | | 283,471 | | | — | | | — |
Intermediate Government Bond Series | | | — | | | 1,287,448 | | | — | | | — | | | 1,121,342 | | | — |
45
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS—(Continued)
June 30, 2010
6. Federal Income Taxes, continued:
At June 30, 2010, the Fund’s components of distributable earnings (accumulated losses) on a tax basis were as follows:
| | | | | | | | |
| | | Undistributed
Ordinary
Income | | Undistributed
Tax Exempt
Income | | Undistributed
Net Long
term Capital
Gain | | Net Unrealized
Appreciation/Depreciation
Investments |
Alabama Tax-Free Income | | — | | 77,874 | | — | | 311,358 |
Kentucky Tax-Free Income | | 3,723 | | 3,137,837 | | 305,291 | | 30,499,502 |
Kentucky Tax-Free Short-to-Medium | | — | | 46,195 | | — | | 2,757,023 |
Mississippi Tax-Free Income | | — | | 17,438 | | — | | 105,888 |
North Carolina Tax-Free Income | | — | | 206,436 | | — | | 1,717,753 |
North Carolina Tax-Free Short-to-Medium | | — | | 8,217 | | — | | 431,100 |
Tennessee Tax-Free Income | | — | | 386,211 | | — | | 2,093,319 |
Tennessee Tax-Free Short-to-Medium | | — | | 5,114 | | — | | 210,855 |
Intermediate Government Bond | | 71,826 | | — | | — | | 1,085,983 |
| | | | | | | | |
| | | Accumulated
Capital and
Other Losses | | | Other
Temporary
Differences | | | Total Accumulated
Earnings |
Alabama Tax-Free Income | | (66,107 | ) | | (77,873 | ) | | 245,248 |
Kentucky Tax-Free Income | | — | | | (3,137,837 | ) | | 30,808,516 |
Kentucky Tax-Free Short-to-Medium | | (1,230,495 | ) | | (46,195 | ) | | 1,526,528 |
Mississippi Tax-Free Income | | (33,290 | ) | | (17,438 | ) | | 72,598 |
North Carolina Tax-Free Income | | (464,746 | ) | | (206,436 | ) | | 1,253,007 |
North Carolina Tax-Free Short-to-Medium | | (79,522 | ) | | (8,217 | ) | | 351,578 |
Tennessee Tax-Free Income | | (1,231,155 | ) | | (386,211 | ) | | 862,164 |
Tennessee Tax-Free Short-to-Medium | | (160,860 | ) | | (5,114 | ) | | 49,995 |
Intermediate Government Bond | | (134,149 | ) | | (71,826 | ) | | 951,834 |
7. Contingencies and Commitments
The Funds indemnify the Trust’s officers and Trustees for certain liabilities that might arise from their performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which may provide for indemnification. The Funds’ maximum exposure under these arrangements is unknown, as this would involve predicting future claims that may be made against the Funds, if any, that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be immaterial.
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, 2010, 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.
46
DUPREE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS—(Continued)
June 30, 2010
8. Line of Credit Agreement and Custodian Agreement, continued:
At June 30, 2010 the Funds had an unused line of credit amount of $37,992,000. During the year ended June 30, 2010, the average interest rate on borrowings was 3.25% and the daily weighted average borrowings for each Fund were as follows:
| | | |
| | | Weighted average borrowings |
Alabama Tax-Free Income Series | | $ | 8,066 |
Kentucky Tax Free Income Series | | | 5,381 |
Kentucky Tax-Free Short-to-Medium Series | | | 1,641 |
Mississippi Tax-Free Income Series | | | 945 |
North Carolina Tax-Free Income Series | | | 6,838 |
North Carolina Tax-Free Short-to-Medium Series | | | 2,227 |
Tennessee Tax-Free Income Series | | | 293 |
Tennessee Tax-Free Short-to-Medium Series | | | — |
Intermediate Government Bond Series | | | 115 |
The Funds have a contractual agreement with the custodian whereby the Funds compensate the custodian for custodial services incurred exceeding the credits realized as a result of uninvested cash balances. Credits realized as a result of uninvested cash balances are used to reduce each Fund’s expenses. During the year, these credits reduced each of Funds’ expenses by the amount shown on the Statement of Operation as “Custodian expense reduction.”
47
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
Dupree Mutual Funds
We have audited the accompanying statements of assets and liabilities, including the schedule of portfolio investments, of Dupree Mutual Funds, comprised of Alabama Tax-Free Income Series, Kentucky Tax-Free Income Series, Kentucky Tax-Free Short-to-Medium Series, Mississippi Tax-Free Income Series, North Carolina Tax-Free Income Series, North Carolina Tax-Free Short-to-Medium Series, Tennessee Tax-Free Income Series, Tennessee Tax-Free Short-to-Medium Series, and Intermediate Government Bond Series (collectively, the Funds), as of June 30, 2010, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of June 30, 2010, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective Funds comprising the Dupree Mutual Funds at June 30, 2010, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
August 13, 2010
48
DUPREE MUTUAL FUNDS
OTHER UNAUDITED INFORMATION
June 30, 2010
Trustee and officer information
The following table sets forth information as to the Trustees and officers:
| | | | | | | | | | |
Name, Address and Age | | Position(s) Held with Funds | | Term of Office and Length of Time Served | | Principal Occupation(s) During Past 5 Years | | Number
of
Portfolios
in Fund
Complex
Overseen
by
Trustee | | Other
Director-
ships Held
by Trustee |
Officers: | | | | | | | | | | |
| | | | | |
Thomas P. Dupree Sr. 125 South Mill Street Lexington, KY 40507 Age: 79 | | President | | Annual Term; 31 years of service | | Chairman of the Board of Dupree & Company, Inc. | | N/A | | N/A |
| | | | | |
Gay M. Elste P.O. Box 28 Versailles, KY 40383 Age: 59 | | Compliance Officer | | Annual Term; 6 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: 47 | | Executive Vice President | | Annual Term; 5 years of service | | President, Dupree & Company, Inc. | | N/A | | N/A |
| | | | | |
Michelle M. Dragoo 125 South Mill Street Lexington, KY 40507 Age: 49 | | Vice President, Secretary, Treasurer | | Annual Term; 12 years of service as Vice President, 10 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: 50 | | Assistant Secretary | | Annual Term; 17 years of service | | Dupree & Company, Inc. | | N/A | | N/A |
| | | | | |
Trustees: | | | | | | | | | | |
| | | | | |
William A. Combs, Jr. 111 Woodland Ave., #510 Lexington, KY 40502 Age: 70 | | Chairman, Trustee | | Annual Term; 9 years of service as Chairman; 21 years of service as Trustee | | Officer, Director: Mercedes-Benz of Cincinnati, Ohio; Mercedes-Benz of West Chester, Ohio and Freedom Dodge, Lexington, KY | | 9 | | N/A |
| | | | | |
James C. Baughman, Jr. 1999 Richmond Road Suite 4 Lexington, KY 40502 Age: 47 | | Trustee | | One Year Term; 3 Years of Service | | President, Secretary, Treasurer, Director Office Suites Plus (executive office space rental) | | 9 | | N/A |
| | | | | |
Lucy A. Breathitt 1703 Fairway Drive Lexington, KY 40502 Age: 73 | | Trustee | | Annual Term; 14 years of service | | Alexander Farms, farming | | 9 | | KY Historical
Society
Foundation,
KY Natural
Lands Trust,
Bluegrass
Conservancy |
49
DUPREE MUTUAL FUNDS
OTHER UNAUDITED INFORMATION
June 30, 2010
Trustee and officer information, continued:
| | | | | | | | | | |
Name, Address and Age | | Position(s)
Held with
Funds | | Term of Office
and Length of
Time Served | | Principal Occupation(s) During Past 5 Years | | Number
of
Portfolios
in Fund
Complex
Overseen
by
Trustee | | Other
Director-
ships Held by Trustee |
C. Timothy Cone 201 West Short Street Lexington, KY 40507 Age: 66 | | Trustee | | Annual Term; 8 years of service | | President, Gess, Mattingly & Atchison, P.S.C. (law firm) | | 9 | | N/A |
| | | | | |
J. William Howerton 3954 Primrose Place Paducah, KY 42001 Age: 78 | | Trustee | | Annual Term; 10 years of service | | Judge (retired November 1996) KY Court of Appeals; Self-Employed Mediator (through 2006), Arbitrator and Special Judge; Trustee for charitable organization and individuals. | | 9 | | KY Lottery Corporation (through 2008) |
| | | | | |
William S. Patterson 367 West Short Street Lexington, KY 40507 Age: 77 | | Trustee | | Annual Term; 31 years of service | | President, CEO, Cumberland Surety Co., Lexington, KY, President, Patterson & Co., Frankfort, KY, (real estate development, thoroughbred horse breeding and farming) | | 9 | | N/A |
As of June 30, 2010, none of the Trustees nor members of their immediate family held any beneficial interest in the Trust’s Investment Adviser. Further, the Trust does not have an underwriter.
The Statement of Additional Information (“SAI”) includes additional information about Trustees and officers and is available upon request without charge. Please call (800) 866-0614 to request the SAI.
Proxy Voting Information
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge upon request by calling (800) 866-0614, or on the Securities and Exchange Commission’s website at http://www.sec.gov. For the year ending June 30, 2009, the Funds exercised no proxy votes due to the fact that the debt instruments in which the Funds invest carry no voting rights.
Quarterly Portfolio Disclosure
The Trust files with the Securities and Exchange Commission a complete listing of portfolio holdings for each Fund as of the end of the first and third quarters of each fiscal year on Form N-Q. The complete listing (i) is available on the commission’s website and (ii) will be made available to shareholders upon request by calling (800) 866-0614. Information on the operation of the S.E.C.’s Public Reference Room may be obtained by calling 1-800-SEC-0300.
50
DUPREE MUTUAL FUNDS
OTHER UNAUDITED INFORMATION
June 30, 2010
Schedule of Shareholder Expenses
As a shareholder of the Funds, you incur transaction costs including investment advisory fees and other Fund expenses. The following examples are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Six Months Ended June 30, 2009” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses which is not the Funds’ actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
| | | | | | | | | | | | |
| | | Net Expense
Ratio
Annualized
June 30, 2010 | | | Beginning
Account Value
January 1,
2010* | | Ending
Account Value
June 30,
2010** | | Expenses Paid During
the Six Months Ended
June 30, 2010 |
Alabama Tax-Free Income Series | | | | | | | | | | | | |
Actual | | .49 | % | | $ | 1,000.00 | | $ | 1,013.08 | | $ | 2.43 |
Hypothetical | | .49 | | | | 1,000.00 | | | 1,024.86 | | | 2.44 |
Kentucky Tax-Free Income Series | | | | | | | | | | | | |
Actual | | .58 | | | | 1,000.00 | | | 1,011.39 | | | 2.90 |
Hypothetical | | .58 | | | | 1,000.00 | | | 1,024.86 | | | 2.92 |
Kentucky Tax-Free Short-to-Medium Series | | | | | | | | | | | | |
Actual | | .72 | | | | 1,000.00 | | | 1,010.49 | | | 3.60 |
Hypothetical | | .72 | | | | 1,000.00 | | | 1,024.86 | | | 3.62 |
Mississippi Tax-Free Income Series | | | | | | | | | | | | |
Actual | | .45 | | | | 1,000.00 | | | 1,012.03 | | | 2.24 |
Hypothetical | | .45 | | | | 1,000.00 | | | 1,024.86 | | | 2.26 |
North Carolina Tax-Free Income Series | | | | | | | | | | | | |
Actual | | .71 | | | | 1,000.00 | | | 1,010.94 | | | 3.56 |
Hypothetical | | .71 | | | | 1,000.00 | | | 1,024.86 | | | 3.59 |
51
DUPREE MUTUAL FUNDS
OTHER UNAUDITED INFORMATION
June 30, 2010
Schedule of Shareholder Expenses, continued:
| | | | | | | | | | | | |
| | | Net Expense
Ratio
Annualized
June 30, 2010 | | | Beginning
Account Value
January 1,
2010* | | Ending
Account Value
June 30,
2010** | | Expenses Paid
During the Six
Months Ended
June 30, 2010 |
North Carolina Tax-Free Short-to-Medium Series | | | | | | | | | | | | |
Actual | | .80 | % | | $ | 1,000.00 | | $ | 1,010.64 | | $ | 4.02 |
Hypothetical | | .80 | | | | 1,000.00 | | | 1,024.86 | | | 4.05 |
Tennessee Tax-Free Income Series | | | | | | | | | | | | |
Actual | | .69 | | | | 1,000.00 | | | 1,011.34 | | | 3.46 |
Hypothetical | | .69 | | | | 1,000.00 | | | 1,024.86 | | | 3.48 |
Tennessee Tax-Free Short-to-Medium Series | | | | | | | | | | | | |
Actual | | .79 | | | | 1,000.00 | | | 1,011.59 | | | 3.95 |
Hypothetical | | .79 | | | | 1,000.00 | | | 1,024.86 | | | 3.97 |
Intermediate Government Bond Series | | | | | | | | | | | | |
Actual | | .46 | | | | 1,000.00 | | | 1,021.98 | | | 2.30 |
Hypothetical | | .46 | | | | 1,000.00 | | | 1,024.86 | | | 2.30 |
| * | The example is based on an investment of $1,000 invested at the beginning of the period. |
| ** | Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period multiplied by [182/365] (to reflect one-half year period). |
52
Item 2. Code of Ethics: The registrant has adopted a code of ethics that applies to the principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. The full text of the Code of Ethics is attached hereto as Exhibit 12(a)(1). The Code of Ethics was amended at a meeting of October 22, 2008 and May 5, 2009 of the Board of Trustees of the Registrant. There have been no waivers from the Code of Ethics during the reporting period. The Registrant’s Code of Ethics is posted on its web site. A copy of the Code of Ethics will be provided to any person free of charge upon request by telephoning or writing the Registrant.
Item 3. Audit Committee Financial Expert: Audit Committee Financial Expert: The board does not have a financial expert serving on the audit committee. The registrant’s audit committee is comprised of all Trustees all of who are non-interested and independent. The audit committee believes that the collective experience and expertise of the members in assessing the performance of companies and the evaluation of financial statements is sufficient to assess the issues which can reasonably be expected to be raised by the Trust’s financial statements.
Item 4. Principal Accountant Fees and Services: This information is incorporated by reference in the registrant’s definitive proxy statement to be filed within 120 days after June 30, 2010.
Item 5. Not applicable.
Item 6. Included as part of item 1.
Item 7. Not applicable
Item 8. Not applicable.
Item 9. Not applicable
Item 10. There have been no changes to the procedures by which shareholders may recommend nominees to the board of trustees nominating committee.
Item 11. Controls and Procedures:
On August 11, 2010 the Registrant’s President and Treasurer assessed the disclosure controls and procedures to evaluate the effectiveness of the Registrant’s disclosure controls and procedures designed to ensure that information required to be disclosed by the investment company on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an investment company in the reports that it files on Form N-CSR is accumulated and communicated to the investment company’s management, including its principal executive and principal financial officers or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Further, on August 11, 2010 the Registrant’s President and Treasurer assessed the internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the investment company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the investment company are being made only in accordance with authorizations of management and trustees of the investment company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the investment company’s assets that could have a material effect on the financial statements.
The Registrant’s President and Treasurer have deemed the disclosure controls and procedures and the internal control over financial reporting effective. There were no changes in the Registrant’s disclosure controls and procedures or internal control over financial reporting that occurred during the fourth quarter of the fiscal year that materially affected or is reasonably likely to materially affect the Registrant’s financial statements.
Item 12. Exhibits
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, Sr, President |
Date: 08/11/2010
| | |
| By: | | /S/ MICHELLE M. DRAGOO |
| | Michelle M. Dragoo, Vice President, Secretary, Treasurer |
Date: 8/11/2010
