DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Dreyfus
Massachusetts Tax Exempt Bond Fund. For its annual reporting period ended May
31, 1996, your Fund produced a total return of 3.06%.* Income dividends
exempt from Federal and Commonwealth of Massachusetts personal income taxes
of approximately $.883 per share were paid,** which is equivalent to an
annualized tax-free distribution rate per share of 5.55%.***
THE ECONOMY
Recent economic reports show that the economy continues to recover from
its year-end 1995 pause. Spurred by a surge in consumer and business
spending, the annualized gross domestic product grew at a moderate 2.3%
during the first quarter of this year. Suggesting further strength, a major
forecasting index, the Index of Leading Economic Indicators, extended its
string of increases for the third consecutive month in April, the first such
three-month advance since late 1993. Despite a sharp jump in energy prices,
inflation remained in check. For the twelve months ended May 31, consumer
prices rose 2.9%. Giving further evidence of moderating prices, a survey
released in May by the National Business Council revealed greater difficulty
for major industrial companies to raise prices now than six months ago.
Despite the relatively benign level of inflation, the economy's expansion
has sparked concerns that the Federal Reserve Board could raise short-term
interest rates. In reaction to this possibility, long-term rates have risen
since the beginning of the year. So far, the Fed has refrained from
tightening monetary policy, apparently interpreting economic data to mean
that the economy remains on a path of moderate growth unaccompanied by a
surge in inflation. However, the strong May employment data has caused some
investors to fear that the Fed will not remain inactive for long. There is
now a greater consensus that the Fed will tighten credit soon in order to
prevent unacceptable levels of price inflation from coming on the heels of
economic growth.
Consumers, who account for over two-thirds of our country's Gross
Domestic Product (GDP), are vital contributors to economic growth. So far,
they have continued to spend, setting aside concerns about job security and
stagnating real wages in favor of current consumption. New-home sales, an
important component of consumer spending, continued to post gains throughout
the reporting period, and are up 28% since April of last year. Retail sales
in general are 6% above year-ago levels. Additional encouragement to
consumers occurred when the Labor Department recently reported a continuation
of the declining trend in first-time jobless claims.
On the corporate side of the economy, capacity utilization inched higher
and is now at 83%. While still well below the peak level (85.1%) for this
economic expansion which was reached over a year ago, further growth in this
indicator may result in shortages that could produce higher prices. Following
the GM strike-induced slowdown in March, industrial production has risen,
bringing the year-over-year gain to a solid 2.6% through April.
We remain alert to early signs of growing inflationary pressures that
might cause the Federal Reserve to raise interest rates. To date, prices are
still being kept under control. However, we are especially watchful regarding
the potential buildup in wage pressures given the rising trend in both
corporate output and capacity utilization.
MARKET ENVIRONMENT
For the first seven months of your Fund's fiscal year ended May 31, 1996,
the trading of fixed-income securities was buoyed by signs that the economy's
most recent period of growth was drawing to a close. Statistical data
covering such areas as job creation, personal income and consumption and
housing starts
seemed to indicate that the slowing economy foretold a much more favorable
environment for bonds. As such, as the calendar year drew to a close in late
December, long-term interest rates were driven to their lowest levels in more
than two years. Such optimism proved short-lived, however, as subsequent data
indicated the economy had merely experienced a temporary decline in the
growth rate which was quickly reversed with the turn of the calendar into
1996. As forecasts for growth and inflation were adjusted upward, interest
rates were forced higher as well, and that at a pace rarely seen in recent
years. While Massachusetts municipal bonds were unable to avoid this rapid
adjustment, they were supported by the formidable technical dynamic they have
enjoyed for much of the past year. As such, the rise in yields of
Massachusetts exempt securities was much more muted than that of their
taxable counterparts.
THE PORTFOLIO
In managing your Fund's assets during a period of such volatility, a
decidedly conservative posture was maintained. During the Market's early
strength, portfolio duration was extended in order to capitalize on potential
price appreciation inherent in such an environment. As market perceptions
turned more tentative, emphasis was shifted toward those issues offering
generous levels of income exempt from Massachusetts taxation and bearing
lesser qualities of principal volatility. At times, higher levels of cash
reserves were established in order to further buffer the portfolio from the
consequences of a rising interest rate environment. Throughout the period,
investment decisions tended to focus on those issues bearing higher degrees
of creditworthiness and strong characteristics of protection from redemption
prior to maturity. These more defensive measures caused the Fund's total
return to lag over the fiscal period. Portfolio liquidity was further
enhanced by securing those issues enjoying broad measures of acceptance both
within the Massachusetts community as well as the national municipal market.
Included in this report is a series of detailed statements about your
Fund's holdings and its financial condition. We hope they are informative.
Please know that we appreciate greatly your continued confidence in the Fund
and in The Dreyfus Corporation.
Sincerely,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
June 14, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders.
*** Annualized distribution rate per share is based upon dividends per
share paid from net investment income during the period, divided by the net
asset value per share at the end of the period.
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND MAY 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS MASSACHUSETTS
TAX EXEMPT BOND FUND AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
[Exhibit A:
Dollars
$21,985
Lehman Brothers
Municipal Bond Index*
$19,306
Dreyfus Massachusetts
Tax Exempt Bond Fund
*Source: Lehman Brothers]
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR ENDED FIVE YEARS ENDED TEN YEARS ENDED
MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
________ _________ _________
<S> <C> <C>
3.06% 6.81% 6.80%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus Massachusetts
Tax Exempt Bond Fund on 5/31/86 to a $10,000 investment made in the Lehman
Brothers Municipal Bond Index on that date. All dividends and capital gain
distributions are reinvested.
The Fund invests primarily in Massachusetts municipal securities and its
performance shown in the line graph takes into account fees and expenses.
Unlike the Fund, the Lehman Brothers Municipal Bond Index is an unmanaged
total return performance benchmark for the long-term, investment-grade,
geographically unrestricted tax exempt bond market, calculated by using
municipal bonds selected to be representative of the municipal market
overall. The Index does not take into account charges, fees and other expenses
. Also, unlike the Fund which principally limits investments to Massachusetts
municipal obligations, the Index is not State specific. These factors can
contribute to the Index potentially outperforming the Fund. Further
information relating to Fund performance, including expense reimbursements,
if applicable, is contained in the Financial Highlights section of the
Prospectus and elsewhere in this report.
<TABLE>
<CAPTION>
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
STATEMENT OF INVESTMENTS MAY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-96.4% AMOUNT VALUE
_______ _______
<S> <C> <C>
MASSACHUSETTS-91.9%
Boston, Revenue, Refunding (Boston City Hospital):
5.75%, 2/15/2013 (Insured; FHA)......................................... $ 2,000,000 $ 1,948,520
5.75%, 2/15/2023 (Insured; FHA)......................................... 3,085,000 2,918,040
5.75%, 2/15/2023 (Insured; MBIA)........................................ 4,645,000 4,416,884
Boston - Mount Pleasant Housing Development Corp., MFHR, Refunding
6.75%, 8/1/2023 (Insured; FHA).......................................... 1,700,000 1,750,252
Holyoke, Municipal Purpose Loan 5.50%, 6/15/2016 (Insured; FSA) (a)......... 1,000,000 946,020
Massachusetts Bay Transportation Authority:
General Transportation System:
5.25%, 3/1/2017 (Insured; AMBAC)...................................... 5,000,000 4,605,100
5.875%, 3/1/2019...................................................... 3,000,000 2,944,350
5.75%, 3/1/2025....................................................... 1,500,000 1,437,885
Refunding 6.20%, 3/1/2016............................................... 4,225,000 4,383,776
Massachusetts Commonwealth:
Consolidated Loan 5%, 1/1/2014.......................................... 1,500,000 1,358,760
Refunding 6%, 8/1/2012 (Insured; FGIC).................................. 1,755,000 1,778,499
Special Obligation Revenue 5.75%, 6/1/2012.............................. 1,625,000 1,620,791
Massachusetts Convention Center Authority (Boston Common Parking Garage)
5.375%, 9/1/2013........................................................ 2,250,000 2,135,835
Massachusetts Education Loan Authority, Education Loan Revenue
8%, 6/1/2002 (LOC; Rabobank Nederland) (b).............................. 715,000 743,693
Massachusetts Health and Educational Facilities Authority, Revenue:
(Cape Cod Health System) 5.25%, 11/15/2021 (Insured; CONNIE LEE)........ 5,175,000 4,637,525
(Cooley Dickinson Hospital):
5.50%, 11/15/2018 (Insured; AMBAC).................................... 1,800,000 1,692,882
5.50%, 11/15/2025 (Insured; AMBAC).................................... 2,665,000 2,480,022
(Lahey Clinic Medical Center) 5.375%, 7/1/2023 (Insured; MBIA).......... 1,000,000 908,730
(Massachusetts General Hospital):
6.25%, 7/1/2020 (Insured; AMBAC)...................................... 3,500,000 3,568,950
Refunding:
6%, 7/1/2015 (Insured; AMBAC)..................................... 2,000,000 1,978,620
5.25%, 7/1/2023 (Insured; AMBAC).................................. 2,000,000 1,782,000
(Massachusetts Institute of Technology) 5%, 7/1/2023.................... 2,115,000 1,824,653
(Mclean Hospital) 6.50%, 7/1/2010 (Insured; FGIC)....................... 1,000,000 1,055,480
(Medical Academic & Scientific) 6.625%, 1/1/2015 ....................... 3,000,000 3,073,110
(Mount Auburn Hospital) 6.30%, 8/15/2024 (Insured; MBIA)................ 5,000,000 5,126,100
(New England Medical Center Hospitals) 6.50%, 7/1/2012 (Insured; FGIC).. 1,000,000 1,052,830
(Refunding - Baystate Medical Center) 6%, 7/1/2015 (Insured; FGIC)...... 1,140,000 1,127,813
(Refunding - Boston College) 5.25%, 6/1/2023 (Insured; MBIA)............ 5,000,000 4,517,050
(Refunding - Milton Hospital) 7%, 7/1/2016 (Insured; MBIA).............. 1,000,000 1,076,820
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
MASSACHUSETTS (CONTINUED)
Massachusetts Health and Educational Facilities Authority, Revenue
(continued):
(Refunding - Wentworth Technology Institute)
5.625%, 10/1/2013 (Insured; CONNIE LEE)............................... $ 1,350,000 $ 1,294,380
(Sisters Providence Health System) 6.625%, 11/15/2022................... 3,510,000 3,253,244
(Smith College) 5.75%, 7/1/2024......................................... 1,000,000 965,540
Massachusetts Housing Finance Agency, Revenue:
Housing Projects, Refunding:
6.30%, 10/1/2013 (Insured; AMBAC)..................................... 1,000,000 1,018,180
6.375%, 4/1/2021...................................................... 4,300,000 4,300,946
Multi-Family Residential Housing 9.60%, 8/1/2022........................ 1,780,000 1,791,303
Rental Housing:
6.50%, 7/1/2025 (Insured; AMBAC)...................................... 1,500,000 1,527,165
6.45%, 1/1/2036 (Insured; AMBAC)...................................... 2,135,000 2,173,750
6%, 7/1/2037 (Insured; AMBAC)......................................... 2,650,000 2,540,979
Refunding:
6.65%, 7/1/2019 (Insured; AMBAC).................................. 2,475,000 2,546,206
6.75%, 7/1/2028 (Insured; AMBAC).................................. 2,870,000 2,973,779
Single Family Housing 6.35%, 6/1/2017................................... 2,700,000 2,747,034
Massachusetts Industrial Finance Agency, Revenue:
Electrical Utility (Nantucket Electric Co.) 8.50%, 3/1/2016............. 3,000,000 3,210,180
(Refunding - Boston Edison Co. Project) 5.75%, 2/1/2014................. 5,000,000 4,658,550
(Refunding - College of the Holy Cross) 5.50%, 3/1/2020 (Insured; MBIA). 2,620,000 2,469,219
(Refunding - Holy Cross College):
6%, 11/1/2002......................................................... 400,000 424,748
6.375%, 11/1/2015..................................................... 2,000,000 2,192,860
(Refunding - Saint Mark's School) 5.375%, 1/1/2021 (Insured; MBIA)...... 1,000,000 924,350
Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue:
5%, 7/1/2014 (Insured; AMBAC)........................................... 1,000,000 900,190
Refunding:
6.40%, 7/1/2002....................................................... 400,000 426,668
6.125%, 7/1/2019 (Insured; MBIA)...................................... 1,000,000 1,008,810
Massachusetts Port Authority, Revenue:
6%, 7/1/2023............................................................ 3,000,000 2,919,630
Special Project (Harborside Hyatt) 10%, 3/1/2026........................ 8,000,000 8,964,400
Massachussetts Water Pollution Abatement Trust, Water Pollution Abatement
Revenue
(MWRA Loan Program) 5%, 8/1/2015........................................ 1,500,000 1,328,040
Massachussetts Water Resources Authority, Revenue, Refunding
5%, 3/1/2022 (Insured; MBIA)............................................ 2,615,000 2,281,744
Northampton (School Project Loan Act of 1948) 5.75%, 5/15/2016 (Insured; MBIA) 1,520,000 1,492,549
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
MASSACHUSETTS (CONTINUED)
Quincy, Revenue, Refunding (Quincy City Hospital):
5%, 1/15/2005 (Insured; FSA)............................................ $ 2,000,000 $ 1,952,020
5.25%, 1/15/2016 (Insured; FSA)......................................... 2,000,000 1,829,300
South Essex Sewage District, Refunding 5.25%, 6/15/2024 (Insured; MBIA)..... 3,810,000 3,441,078
Southbridge 6.375%, 1/1/2012 (Insured; AMBAC) (c)........................... 1,000,000 1,045,720
U.S. RELATED-4.5%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 3,000,000 3,015,120
Virgin Islands Water and Power Authority, Electric System Revenue
7.40%, 7/1/2011......................................................... 3,450,000 3,646,788
______
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $142,546,019)................... $144,155,460
=======
SHORT-TERM MUNICIPAL INVESTMENTS- 3.6%
MASSACHUSETTS:
Massachusetts Health and Educational Facilities Authority, Revenue, VRDN
(Saint Elizabeth Hospital) 3.58% (Insured; FSA) (d)..................... $ 3,000,000 $ 3,000,000
Massachusetts Port Authority, Revenue, Refunding, VRDN
3.75% (LOC; Landesbank-Hessen-Thuringen) (b,d).......................... 2,400,000 2,400,000
______
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $5,400,000).................... $ 5,400,000
=======
TOTAL INVESTMENTS-100.0%
(cost $147,946,019)..................................................... $149,555,460
=======
</TABLE>
<TABLE>
<CAPTION>
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration MFHR Multi-Family Housing Revenue
FSA Financial Security Assurance VRDN Variable Rate Demand Notes
LOC Letter of Credit
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (E) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- -------- -------- ----------------- --------------------
<S> <C> <C> <C>
AAA Aaa AAA 54.5%
AA Aa AA 9.7
A A A 16.4
BBB Baa BBB 9.7
F1+ & F1 MIG1, VMIG1 & P1 SP1 & A1 1.6
Not Rated(f) Not Rated(f) Not Rated(f) 8.1
____
100.0%
====
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Purchased on a delayed-delivery basis.
(b) Secured by letters of credit.
(c) Wholly held by the custodian in a segregated account as collateral
for a delayed-delivery security.
(d) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(e) Fitch currently provides creditworthiness information for a limited
number of investments.
(f) Securites which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Fund may invest.
(g) At May 31, 1996, the Fund had $44,100,159 (29.1% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from health care projects.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $147,946,019)-see statement..................................... $149,555,460
Cash.................................................................... 467,011
Interest receivable..................................................... 2,775,483
Receivable for shares of Beneficial Interest subscribed................. 1,000
Prepaid expenses........................................................ 3,112
______
152,802,066
LIABILITIES:
Due to The Dreyfus Corporation and subsidiaries......................... $ 65,998
Payable for investment securities purchased............................. 963,155
Accrued expenses........................................................ 51,385 1,080,538
______ ____
NET ASSETS.................................................................. $151,721,528
=======
REPRESENTED BY:
Paid-in capital......................................................... $151,666,781
Accumulated net realized (loss) on investments.......................... (1,554,694)
Accumulated net unrealized appreciation on investments-Note 3........... 1,609,441
______
NET ASSETS at value applicable to 9,564,892 shares outstanding
(unlimited number of $.01 par value shares of Beneficial
Interest authorized).................................................... $151,721,528
=======
NET ASSET VALUE, offering and redemption price per share
($151,721,528 / 9,564,892 shares)....................................... $15.86
=======
See notes to financial statements.
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
STATEMENT OF OPERATIONS YEAR ENDED MAY 31, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 9,496,561
EXPENSES:
Management fee-Note 2(a).............................................. $ 913,291
Shareholder servicing costs-Note 2(b)................................. 168,443
Professional fees..................................................... 53,025
Trustees' fees and expenses-Note 2(c)................................. 22,507
Custodian fees........................................................ 15,433
Registration fees..................................................... 12,138
Prospectus and shareholders' reports.................................. 2,627
Miscellaneous......................................................... 18,486
_____
TOTAL EXPENSES.................................................. 1,205,950
_____
INVESTMENT INCOME-NET........................................... 8,290,611
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 3,018,145
Net unrealized (depreciation) on investments............................ (6,550,453)
_____
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (3,532,308)
_____
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 4,758,303
======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED MAY 31,
------------------------------------
1995 1996
_______ _______
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 9,079,650 $ 8,290,611
Net realized gain (loss) on investments................................. (1,987,488) 3,018,145
Net unrealized appreciation (depreciation) on investments for the year.. 4,202,720 (6,550,453)
_______ _______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 11,294,882 4,758,303
_______ _______
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................... (9,079,650) (8,290,611)
Net realized gain on investments........................................ (1,973) --
_______ _______
TOTAL DIVIDENDS....................................................... (9,081,623) (8,290,611)
_______ _______
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold........................................... 57,695,559 37,206,238
Dividends reinvested.................................................... 6,757,358 6,116,752
Cost of shares redeemed................................................. (74,389,458) (48,818,823)
_______ _______
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS........ (9,936,541) (5,495,833)
_______ _______
TOTAL (DECREASE) IN NET ASSETS.................................... (7,723,282) (9,028,141)
NET ASSETS:
Beginning of year....................................................... 168,472,951 160,749,669
_______ _______
End of year............................................................. $160,749,669 $151,721,528
======= =======
SHARES SHARES
_______ _______
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 3,687,475 2,309,257
Shares issued for dividends reinvested.................................. 430,673 377,598
Shares redeemed......................................................... (4,733,211) (3,015,387)
_______ _______
NET (DECREASE) IN SHARES OUTSTANDING.................................. (615,063) (328,532)
======= =======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from the Fund's financial statements.
YEAR ENDED MAY 31,
____________________________________________________________
PER SHARE DATA: 1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $15.59 $16.20 $17.01 $16.03 $16.25
---- ---- ---- ---- ----
INVESTMENT OPERATIONS:
Investment income-net........................ 1.01 .97 .91 .91 .88
Net realized and unrealized gain (loss)
on investments............................. .60 .81 (.52) .22 (.39)
---- ---- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS....... 1.61 1.78 .39 1.13 .49
---- ---- ---- ---- ----
DISTRIBUTIONS:
Dividends from investment income-net......... (1.00) (.97) (.92) (.91) (.88)
Dividends from net realized gain on investments -- -- (.21) -- --
Dividends in excess of net realized
gain on investments........................ -- -- (.24) -- --
---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS.................... (1.00) (.97) (1.37) (.91) (.88)
---- ---- ---- ---- ----
Net asset value, end of year................. $16.20 $17.01 $16.03 $16.25 $15.86
==== ==== ==== ==== ====
TOTAL INVESTMENT RETURN.......................... 10.62% 11.27% 2.07% 7.39% 3.06%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .84% .81% .80% .80% .79%
Ratio of net investment income to average net assets 6.30% 5.83% 5.30% 5.77% 5.43%
Portfolio Turnover Rate...................... 68.07% 85.29% 29.73% 38.34% 60.67%
Net Assets, end of year (000's Omitted)...... $157,061 $183,601 $168,473 $160,750 $151,722
</TABLE>
See notes to financial statements.
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Massachusetts Tax Exempt Bond Fund ("the Fund") is registered
under the Investment Company Act of 1940 ("Act") as a non-diversified
open-end management investment company. The Fund's investment objective is to
provide investors with as high a level of current income exempt from Federal
and Massachusetts income taxes as is consistent with the preservation of
capital. The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A. Premier
Mutual Fund Services, Inc. (the "Distributor") acts as the distributor of the
Fund's shares, which are sold to the public without a sales charge.
(A) PORTFOLIO VALUATION: The Fund's investments are valued each business
day by an independent pricing service ("Service") approved by the Board of
Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the
Service are valued at the mean between the quoted bid prices (as obtained by
the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities)
are carried at fair value as determined by the Service, based on methods
which include consideration of: yields or prices of municipal securities of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations
held by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $1,384,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to May 31, 1996. If not
applied, the carryover expires in fiscal 2003.
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 of 1% of the value
of the Fund's average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Fund's
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund for any full fiscal year. The most stringent state
expense limitation applicable to the Fund presently requires reimbursement of
expenses in any full fiscal year that such expenses (exclusive of certain
expenses as described above) exceed 21\2% of the first $30 million, 2% of the
next $70 million and 11\2% of the excess over $100 million of the average
value of the Fund's net assets in accordance with California "blue sky"
regulations. There was no expense reimbursement for the year ended May 31,
1996.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, an
amount not to exceed an annual rate of .25 of 1% of the value of the Fund's
average daily net assets for certain allocated expenses of providing personal
services and/or maintaining shareholder accounts. The services provided may
include personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder accounts.
During the year ended May 31, 1996, the Fund was charged an aggregate of
$56,729 pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement
for providing personnel and facilities to perform transfer agency services
for the Fund. Such compensation amounted to $36,345 for the period from
December 1, 1995 through May 31, 1996.
(C) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended May 31, 1996, amounted
to $89,506,575 and $95,282,639, respectively.
At May 31, 1996, accumulated net unrealized appreciation on investments
was $1,609,441, consisting of $3,745,720 gross unrealized appreciation and
$2,136,279 gross unrealized depreciation.
At May 31, 1996, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see
the Statement of Investments).
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
We have audited the accompanying statement of assets and liabilities of
Dreyfus Massachusetts Tax Exempt Bond Fund, including the statement of
investments, as of May 31, 1996, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and financial highlights for each of the
years indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of May 31, 1996 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. 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 Dreyfus Massachusetts Tax Exempt Bond Fund at May 31, 1996, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
[Ernst and Young LLP signature logo]
New York, New York
July 1, 1996
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Fund hereby designates all the
dividends paid from investment income-net during the fiscal year ended May
31, 1996 as "exempt-interest dividends" (not subject to regular Federal and,
for individuals who are Massachusetts residents, Massachusetts personal
income taxes).
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Fund's taxable ordinary dividends (if
any) and capital gain distributions (if any) paid for the 1996 calendar year
on Form 1099-DIV which will be mailed by January 31, 1997.
[Dreyfus lion "d" logo]
DREYFUS MASSACHUSETTS
TAX EXEMPT BOND FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, RI 02903
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 267AR965
[Dreyfus logo]
Massachusetts
Tax Exempt
Bond Fund
Annual Report
May 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND AND
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
EXHIBIT A:
______________________________________________
| | | DREYFUS |
| | LEHMAN BROTHERS | MASSACHUSETTS |
| PERIOD | MUNICIPAL | TAX EXEMPT |
| | BOND INDEX * | BOND FUND |
|-----------|-----------------|---------------|
| 5/31/86 | 10,000 | 10,000 |
| 5/31/87 | 10,653 | 10,426 |
| 5/31/88 | 11,610 | 11,011 |
| 5/31/89 | 12,946 | 12,155 |
| 5/31/90 | 13,893 | 12,834 |
| 5/31/91 | 15,293 | 13,886 |
| 5/31/92 | 16,795 | 15,361 |
| 5/31/93 | 18,805 | 17,092 |
| 5/31/94 | 19,269 | 17,445 |
| 5/31/95 | 21,024 | 18,734 |
| 5/31/96 | 21,985 | 19,306 |
|---------------------------------------------|
*Source: Lehman Brothers
