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Dear Shareholder:
This letter accompanies the annual Prospectus which we are required to send you each year. We are aware that this may be one of the last things you have on your "to read" list.
In the event you don't get around to reading it, be advised that there is one small change incorporated in this new Prospectus that may never affect you, but, nevertheless, is one of which you should be aware. We are now pricing all series at 3:00 PM instead of 4:00 PM. This means that if you buy shares on a given day, your money to purchase those shares must arrive before 3:00 PM. This time limit results from an SEC rule that prevents any buyer (or seller) from choosing the price he/she likes best on a given day. So be advised. 3:00 PM is closing time for purchase money to arrive or sell orders to be received, otherwise the transaction takes place at "tomorrow's price" (the one we figure at 3:00 PM today.)
An Obvious Waste? As proxies were returned there were several comments asking why we did not include all proxies in one envelope when mailing to multiple accounts at the same address. It seemed apparent to these shareholders that postage was being wasted.
Postage is only one element of total mailing cost. Postage rises as more material is stuffed into letters. Putting three proxies in one envelope, for example, does not reduce postage by two thirds. Three envelopes with one proxy would cost $1.71 for postage. One envelope with three proxies costs $1.26 for postage, a saving of 45 cents. To do the combined mailing would then require sorting electronically by address, something we can do for nothing. But having sorted addresses electronically, we then have to sort the statements or proxies physically and stuff envelopes manually. Suddenly you have added a couple of dollars to the cost of each of these special envelopes.
I know the shareholders who make these comments are concerned with costs and trying to be helpful. I just want you to know that we are equally concerned about all costs and have analyzed the mailing situation many times. We can do the combined mailings, but total mailing costs will rise if we do.
The ladies in shareholder services have offered to do the sorting, stuffing, licking and sticking free, providing the work can be done on a beach in Bermuda. I have thanked them nicely on behalf of all of us shareholders, and told them "maybe next year".
Are the Assets of Dupree Mutual Funds Safe? We are getting this question from new investors who are investing with us for the first time.
Yes, bonds as a class of investment are generally viewed as safe. Most of our funds are in bonds with an average rating between AA and AAA, the next to highest and highest safety rating. The bonds are held at the Deposit Transfer Corporation (DTC) as an electronic credit, not in paper form. The bonds are held at DTC for the account of FIRSTAR Trust Corporation, the Fund's custodian. Neither Dupree & Company, Inc. nor Dupree Mutual Funds holds any of the Fund's cash or securities, a requirement of the SEC.
Both FIRSTAR and Dupree are covered by Insurance Bonds for theft, and FIRSTAR is fully liable to Dupree Mutual Funds for any loss of the Fund's securities for whatever reason. Dupree Mutual Funds has been in business since 1979 and has never had such a loss and Dupree & Company, Inc., the funds Investment Advisor and Manager, has been in business for sixty years and has never incurred such a loss.
The Price of Fear: A prominent counter-terrorist says "Fear does either one of two things. It either mobilizes your resolve, or it sends you into a withdrawal state." Winston Churchill dealt with withdrawal in his famous speech at Harrow School; "Never, never, never give in….." In this day of over exposure to TV it is easy to become very frightened. Someone noted there have been four anthrax deaths and, last year, 10,000 deaths from flu. Laura Bush observed that the best antidote to anthrax was to turn off your TV.
I personally do not believe the economy will go in the tank. I do believe we may have a year or more of adjustment, but a lot of stimulus is being injected which will eventually have a positive effect. Finally, I believe most Americans are finding a new resolve to survive terrorism. If that resolve is really there, and if we don't falter in the months to come, the economy will be alright too.
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