December 31, 1999
Dear Shareholder:

     We believe the median age of our shareholders is about 65. If we are correct, then 
half of you are 65 or older. To that group I want to say "congratulations"." I am in 
that group too, and there were times, years ago, when I thought living to see January 1st, 
2000 would be quite a feat. I wondered if I would make it. Well, I did, and I feel 
blessed to have gotten this far, to have my health and a head full of ideas for the 
next century. There are going to be a lot of opportunities in the next century, indeed, 
even in just the next few years. As for the next millennium, that is a little longer 
forecast than I feel qualified to make. 

     Dupree & Company, Inc. has been around for 58 years of this century. I have been 
here since 1955, about 44 years. This company was founded as a sole proprietorship by 
F. L. Dupree, my father, when our family moved to Harlan, Kentucky. Before that, Dad 
had managed various offices for Blyth & Co. in Kentucky and Ohio. Blyth was sort of an 
institutional Merrill Lynch of its day; that is, one of the biggest firms selling 
securities primarily to banks, trust companies, insurance companies, and other 
institutions.

     But Dad had invested a large amount of his savings in a new coal mine in Harlan, 
and, when the capital was gone and the mine was still not producing coal, he had to 
borrow more and go to Harlan to oversee his investment. Charley Blyth, the head of 
Blyth & Co., asked Dad to open his own firm in Harlan, just to "keep up to date", with an 
eye to coming back to Blyth when the coal mine got on its feet. Well, the mine never 
quite got there!

     When I was discharged from the U. S. Navy in 1955 I hoped to go to work for 
Blyth & Co. My father suggested that I come back to Harlan for a couple of years so that 
he could teach me a few things I might not have the chance to learn as a "new kid" in 
a New York training program. My wife, Clara, a Mississippi girl, and I were married 
that summer. In spite of the fact that Clara had worked in New York and I had gone to 
college near there, Harlan looked like an easier transition than straight to New York, 
so that’s where we started.

     I never made it to Blyth. When two years had passed I was beginning to develop a 
list of clients of my own in Southeastern Kentucky, and the thought of leaving them was 
a lot like leaving your best friends. Our business consisted of doing two or three primary 
things in those early days. We sold municipal bonds to banks and some wealthy individuals. 
We also acted as advisors to counties, cities and school districts that needed help in 
issuing municipal bonds. If you do that kind of work you are referred to as the local 
government unit’s "fiscal agent". Once in awhile a local official might refer to us as 
their "physical agent". (Maybe a little like Milk of Magnesia?) And, on occasion, we 
acted as a stock broker, but this was never a big part of our business.

     About every ten to fifteen years our business seemed to change. Part of the reason 
for this was that we were always interested in new ways to do things, part was the result 
of new opportunities not previously available, and part was the need to survive. I am 
sure this is the story of any ongoing entrepreneurship that makes it for very long.



     One of the first things that changed was our fiscal agency work. We began to do 
increasingly complex municipal bond deals. We did the first advance refunding bond 
issue in Kentucky, and I think it may have been the first of exactly its kind done in 
the United States. Chip Grafton and Jo Ferguson practiced the case before the Kentucky 
Court of Appeals, and they got a decision so broad in its permissiveness that it is 
still used today. Hundreds of millions of dollars have subsequently been saved by the 
state and its political subdivisions using this method to refinance bond issues. I 
remember Chip saying, "Gosh, Tom, this is awfully complex. You have money running in a 
half dozen directions, all at the same time. I am afraid the Court will never 
understand." But Chip and Jo did make them understand.

     By the mid 1960’s we were doing some of the biggest bond deals in the state, and 
had opened a "branch office" in Lexington. Most of the buildings the University of 
Kentucky built between 1965 and 1978 were financed by bond issues we put together. 
That includes the University football stadium. The Lexington Center/Rupp Arena complex 
was another major project. My guess is that Rupp Arena would not have been there all 
these years had it not been for Foster Pettit, then Mayor of the new Urban Government. 
Foster put a very diverse board of people together to manage the birth of Lexington 
Center/Rupp Arena, and kept them together! A masterpiece of political management! 

     All in all, during those years we acted as fiscal agent for almost $3 billion of 
public projects encompassing many of the most visible public projects in the state. 
All of this gave us a thorough understanding of the credit quality found in different 
bond issues. 

     At about this same time we began to manage municipal bond portfolios for country 
banks. We developed a computer program which was able to price the entire portfolio of 
the bank’s bonds, as well as sort them by maturity dates and etcetera. At the time, and 
for several years, this was a computer program that could not be found elsewhere. Later, 
the big correspondent banks developed the program. But during that time we began to 
understand the investor’s side of the market, as opposed to a bond dealer or "seller’s" 
approach. These experiences had us ready to take advantage of the opportunity to manage 
a municipal bond mutual fund when Congress made that possible in 1977.

     Our first fund did not make its appearance until 1979. Part of the delay was caused 
by one of the big New York funds who told our attorneys there was nobody west of the 
Hudson River who had a computer that could price a portfolio of municipal bonds. They 
were amazed when we proved we had been doing it for ten years.

     Well, now we are managing seven (soon to be eleven) bond funds in three (soon to be 
five) states. If, somehow, I sound like I think we have been smart all these years, 
please know that I am acutely aware that luck, or maybe help from Heaven, or both, have 
a big part in all of this. Meanwhile, I’ll make only one new millennium prediction: 
One of these days there is going to be a stock market that teaches us, again, 
the value of owning bonds! Until then:



                                                              Happy New Year!,
                                                              DUPREE MUTUAL FUNDS




                                                              Thomas P. Dupree, President
                                                              President