For high tax-free income with long-term stability of earnings...

TENNESSEE TAX-FREE INCOME SERIES

Tennessee investors seeking a steady stream of double tax-free income will find this fund an attractive investment opportunity. Its diversified portfolio of Tennessee municipal bonds allows investors to enjoy the benefits of one of the few tax-advantaged investments available today. With a weighted dollar average effective maturity of 6.42 years as of December 31, 2007, the goal of this fund is to provide a high level of tax-free income derived from state specific municipal securities without incurring undue risk to principal.

For tax-free income with an emphasis on principal preservation...

TENNESSEE TAX-FREE SHORT-TO-MEDIUM SERIES

Like the Income Series, this fund provides double tax-exempt income through investment in a portfolio of Tennessee municipal bonds. With a weighted dollar average effective maturity of 3.42 years as of December 31, 2007, the Short-to-Medium Series has been designed with both individual and corporate investors in mind. For either type of investor, the fund's competitive tax-free yield, lower share price volatility, and free checkwriting make it an attractive alternative to comparable short-term investments.

A COMPARISON OF FEATURES: Mutual Funds vs. Individual Securities.

Here's another way to look at the advantages of an investment with Dupree. Occasionally, an investor asks us, "What do I gain by investing in a Dupree fund as opposed to simply buying the individual bonds myself?" Here is our answer.

Individual Bond Dupree Mutual Funds Active Portfolio Management? NO YES Transaction Fees? YES NO Multiple Portfolio Holdings? NO YES Easy Access to Money? Not Necessarily YES Monthly or Quarterly Dividends? NO YES Dividend Reinvestment? NO YES $100 Minimum Investment? NO YES Easy Recordkeeping? NO YES Prices Published Daily? NO YES

YIELD DATA, TOTAL RETURNS, AND EXAMPLES OF TAX EQUIVALENT YIELDS.

Please click on the following links for current yield data, total returns, and examples of tax equivalent yields for the Tennessee Tax-Free Income Series and the Tennessee Tax-Free Short-to-Medium Series.

DUPREE MUTUAL FUNDS. INVEST WITH A LEADER.

In 1941, Dupree & Company began business as a small securities brokerage firm specializing in tax-free municipal bonds. Over the years, the firm grew to become a regional leader in public finance, helping to structure complex and innovative municipal bond financing for some of the largest public projects in the state of Kentucky.

In 1979, Dupree & Company began what is now Dupree Mutual Funds with the Kentucky Tax-Free Income Fund. The fund was one of the first single-state municipal bond funds in the country, and the very first mutual fund to invest solely in Kentucky municipal bonds. Since then, Dupree Mutual Funds has grown to include single-state municipal bond funds in five states: Alabama, Kentucky, Mississippi, North Carolina, and Tennessee. Additionally, Dupree offers a taxable U.S. Government bond fund: the Intermediate Government Bond Series.

Today, after more than 50 years in business, Dupree continues to be a pioneer in the industry. All of our funds are 100% "no-load." No-load means simply that shares of the funds are offered directly to investors with no front or back-end sales charges and no 12b-1 fees, unlike the "load" funds sold through brokerage firms and 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.

KEY BENEFITS OF AN INVESTMENT WITH DUPREE.

100% No-Load- No-Load means no sales charges, withdrawal penalties or 12b-1 fees. 100% of an investment with Dupree Mutual Funds goes to work for you right away.

Double Tax-Free Income- An investment in either Tennessee tax-exempt series provides dividend income that is exempt from both federal income tax and the Tennessee Hall Tax.

Experienced Professional Management- Dupree has made the municipal bond business its area of expertise for over 50 years. This gives us exceptional insight into the market and has led to a proven track record in bond fund management.

Diversification- Spreading your investment, and therefore your risk, among many securities is one of the built-in benefits of owning shares of a mutual fund. Investing in a Dupree fund makes it affordable for even small investors to participate in a large portfolio of securities.

Investment Grade Portfolios- Our tax-free funds invest in "investment grade" municipal bonds--those awarded one of the four highest ratings by a bond rating service such as Moody's or Standard and Poor's--or in non-rated bonds judged by Dupree's management to be of investment grade quality.

Easy Access to Your Money- There is no minimum time period for which your money must remain invested and no withdrawal charges whatsoever. Shares may be redeemed on any business day at the current net asset value. Redemptions are as simple as a phone call.

Dividend Payment Option- You may choose to have your dividends either sent to you or reinvested in additional shares of the fund. Dividends are paid quarterly for the Income Series, and monthly for the Short-to-Medium Series.

Low Minimum Investment- Your account may be opened with a low minimum initial investment of $100. Subsequent investments must also be at least $100.

Personal Service- Most mutual fund companies employ an outside transfer agent to handle account servicing and recordkeeping. Our transfer agent is in-house; your transactions and account inquiries are handled promptly and accurately by a representative who has full access to all fund records, thus avoiding the delays and and confusion sometimes caused by dealing with an outside company.

IMPORTANT MUTUAL FUND INFORMATION.

The funds are not a financial institution deposit or other obligation, are not backed by any financial institution guarantee, are not backed by the FDIC or other deposit insurance, and are subject to investment risks, including possible loss of the principal amount invested.

Each mutual fund is described in a prospectus that contains more complete information about the fund, including management fees and other charges and expenses. Request a prospectus and read it carefully before you invest or send money.