<PAGE>
Dreyfus
Massachusetts
Tax Exempt
Bond Fund
Semi-Annual
Report
November 30, 1996
<PAGE>
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 semi-annual reporting period ended November 30,
1996, your Fund produced a total return of 6.93%.* Income dividends exempt from
Federal and Commonwealth of Massachusetts personal income taxes of approximately
$.426 per share were paid,** which is equivalent to an annualized tax-free
distribution rate per share of 5.17%.***
THE ECONOMY
For much of the year, investors were fearful that inflation would accelerate
should tightening labor markets lead to pressure to increase wages and,
ultimately, higher prices. This was of particular concern earlier in the year
because of the robust rate of new job growth at that time. More specifically, it
was expected that signs of any potential upsurge in inflation would cause the
Federal Reserve Board's Open Market Committee (the "Fed") to tighten monetary
policy. However, during the summer, the economy's growth rate slowed by more
than half of its 4.7% growth rate in the second quarter. The pace of job
creation also slowed, reducing the likelihood that the tightening employment
market would lead to inflation-inducing wage increases. About 150,000 jobs per
month over the past three months have been added to the employment rolls
compared to an average rate of over 250,000 during the spring and early summer
months. The unemployment rate has declined all year (the rate is now at 5.2%,
near a seven-year low), yet wage increases have remained under control. The
Employment Cost Index, a broad measure of wage and benefit growth, has risen a
modest 2.8% over the past year, about the same as the year before when the Index
increased 2.7%. Inflation has remained subdued throughout the reporting period.
The Consumer Price Index continues to show an inflation level at an annual rate
of 3%, while the Producer Price Index shows scant evidence of price pressures in
the production pipeline.
With both low unemployment and low inflation, measures of consumer confidence
remain high. The Index of Leading Economic Indicators, an index compiled by the
Conference Board (a private economic research group), has reached record high
levels every month since June. Retail sales show signs of moderate expansion
after having slowed over the summer when consumers paid off more credit card
debt than they borrowed. On the production side of the economy, output from the
nation's factories has slowed somewhat from its pace earlier in the year. With a
capacity utilization rate of under 83%, there appears to be little indication of
any production bottlenecks that could lead to shortages and higher prices.
MARKET ENVIRONMENT
The trading environment for fixed income investments has been dominated
recently by a measure of volatility one would expect to find during periods of
shifting perceptions as to the course of economic growth and the ensuing level
of inflationary pressures. Early on, as attention focused on the tightening of
the labor markets while the economy continued to expand at a quickening pace,
investors became convinced of an imminent tightening of monetary policy by the
Fed. As a result, long-term interest rates were pushed to their highest levels
in more than a year. As subsequent data showed an abatement in the pace of the
economy's rate of growth and the absence of any clear signs of inflationary
pressures market perceptions quickly reversed, sending prices up and interest
rates back down to more comfortable levels. These shifts in investor perceptions
of the economy and the appropriate levels of long-term interest rates occurred
frequently during the early months of the period, establishing a broad trading
range in prices. As the period drew to a close, however, there emerged a sense
of unanimity among market participants that economic growth was continuing at a
moderate rate without significant inflationary pressures. As such, the close of
the period saw some of the best price performance of the entire six months.
<PAGE>
THE PORTFOLIO
In managing your Fund's assets during a period of such volatility a decidedly
conservative posture was maintained. During those periods when perceptions
became more tentative, emphasis was placed on those securities bearing more
muted characteristics of principal volatility and higher levels of tax-free
income. At these times, higher cash reserves were established in order to
further buffer the portfolio from the consequences of a rising interest rate
environment. As perceptions became more constructive and prices advanced,
trading activity sought to extend portfolio duration in order to capitalize on
potential price appreciation. Throughout the entire six-month period, we focused
on those issues bearing higher degrees of creditworthiness and strong
characteristics of protection from redemption prior to maturity.
We appreciate your investment in the Dreyfus Massachusetts Tax Exempt Bond
Fund, and we want to assure you that we are, at all times, working in the Fund's
best interest.
Very truly yours,
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
December 20, 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.
***Distribution rate per share is based upon dividends per share paid
from net investment income during the period (annualized), divided by
the net asset valu per share at the end of the period.
<PAGE>
<TABLE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- -------------------------------------------------------------------------------
Statement of Investments November 30, 1996 (Unaudited)
Principal
Long-Term Municipal Investments--96.6% Amount Value
- ------------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Massachussetts--93.2%
Boston:
5%, 11/1/2016 (Insured; FGIC)............................................. $ 2,500,000 $ 2,389,050
Revenue, Refunding (Boston City Hospital):
5.75%, 2/15/2013 (Insured; FHA)......................................... 2,000,000 2,010,900
5.75%, 2/15/2023 (Insured; MBIA)........................................ 4,645,000 4,681,603
Boston--Mount Pleasant Housing Development Corp., MFHR, Refunding
6.75%, 8/1/2023 (Insured; FHA)............................................ 1,675,000 1,751,162
Holyoke, Municipal Purpose Loan 5.50%, 6/15/2016 (Insured; FSA).............. 1,000,000 1,014,920
Massachusetts Bay Transportation Authority:
General Transportation System:
5.25%, 3/1/2017 (Insured; AMBAC)........................................ 5,000,000 4,923,000
5.875%, 3/1/2019........................................................ 3,000,000 3,070,620
5.75%, 3/1/2025......................................................... 1,500,000 1,516,650
Refunding 6.20%, 3/1/2016................................................. 4,225,000 4,655,654
Massachusetts Commonwealth:
Consolidated Loan:
5.625%, 8/1/2013 (Insured; MBIA)........................................ 2,140,000 2,184,576
5%, 1/1/2014............................................................ 1,500,000 1,453,845
5%, 11/1/2016 (Insured; AMBAC).......................................... 2,500,000 2,389,050
Refunding 6%, 8/1/2012 (Insured; FGIC).................................... 1,755,000 1,809,861
Special Obligation Revenue:
5.50%, 6/1/2010 (Insured; AMBAC)........................................ 1,425,000 1,458,559
5.75%, 6/1/2012......................................................... 1,625,000 1,679,665
Massachusetts Education Loan Authority, Education Loan Revenue
8%, 6/1/2002 (LOC; Rabobank Nederland) (a)................................ 700,000 725,291
Massachusetts Health and Educational Facilities Authority, Revenue:
(Cape Cod Health System) 5.25%, 11/15/2021 (Insured; CONNIE LEE).......... 5,175,000 4,929,550
(Cooley Dickinson Hospital) 5.50%, 11/15/2018 (Insured; AMBAC)............ 1,800,000 1,776,240
(Massachusetts General Hospital):
6.25%, 7/1/2020 (Insured; AMBAC)........................................ 3,500,000 3,723,125
Refunding:
6%, 7/1/2015 (Insured; AMBAC)......................................... 2,000,000 2,079,400
5.25%, 7/1/2023 (Insured; AMBAC)...................................... 1,000,000 955,160
(Mclean Hospital) 6.50%, 7/1/2010 (Insured; FGIC)......................... 1,000,000 1,095,440
(Medical Academic & Scientific) 6.625%, 1/1/2015.......................... 3,000,000 3,199,830
(Mount Auburn Hospital) 6.30%, 8/15/2024 (Insured; MBIA).................. 5,000,000 5,369,350
(New England Medical Center Hospitals) 6.50%, 7/1/2012 (Insured; FGIC).... 2,000,000 2,170,360
(Newton--Wellesley Hospital) 5.875%, 7/1/2015 (Insured; MBIA)............. 2,000,000 2,070,040
(Refunding--Baystate Medical Center) 6%, 7/1/2015 (Insured; FGIC)......... 1,140,000 1,185,258
(Refunding--Boston College) 5.25%, 6/1/2023 (Insured; MBIA)............... 5,000,000 4,803,100
(Refunding--Milton Hospital) 7%, 7/1/2016 (Insured; MBIA)................. 1,000,000 1,098,470
(Refunding--Wentworth Technology Institute)
5.625%, 10/1/2013 (Insured; CONNIE LEE)................................. 1,350,000 1,357,816
(Sisters Providence Health System) 6.625%, 11/15/2022..................... 3,510,000 3,519,091
(Smith College) 5.75%, 7/1/2024........................................... 1,000,000 1,006,460
<PAGE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- -------------------------------------------------------------------------------
Statement of Investments (continued) November 30, 1996 (Unaudited)
Long-Term Municipal Investments (continued) Amount Value
- ----------------------------------------------------------------------------- ------------ -----------
Massachussetts (continued)
Massachusetts Health and Educational Facilities Authority, Revenue (continued)
(Williams College) 5.50%, 7/1/2026........................................ $ 6,000,000 $ 5,986,620
Massachusetts Housing Finance Agency, Revenue:
Housing Projects, Refunding:
6.30%, 10/1/2013 (Insured; AMBAC)....................................... 1,000,000 1,038,620
6.375%, 4/1/2021........................................................ 4,300,000 4,398,513
Multi-Family Residential Housing 9.60%, 8/1/2022.......................... 1,765,000 1,777,567
Rental Housing:
6.50%, 7/1/2025 (Insured; AMBAC)........................................ 1,500,000 1,559,250
6.45%, 1/1/2036 (Insured; AMBAC)........................................ 2,135,000 2,216,130
6%, 7/1/2037 (Insured; AMBAC)........................................... 2,650,000 2,664,761
Refunding:
6.65%, 7/1/2019 (Insured; AMBAC)...................................... 2,475,000 2,579,841
6.75%, 7/1/2028 (Insured; AMBAC)...................................... 2,870,000 2,997,371
Single Family Housing 6.35%, 6/1/2017..................................... 2,700,000 2,814,507
Massachusetts Industrial Finance Agency, Revenue:
Electrical Utility (Nantucket Electric Co.) 8.50%, 3/1/2016............... 3,000,000 3,237,270
(Refunding--Boston Edison Co. Project) 5.75%, 2/1/2014.................... 5,000,000 4,893,900
(Refunding--College of the Holy Cross):
5.50%, 3/1/2020 (Insured; MBIA)......................................... 2,120,000 2,115,654
5.625%, 3/1/2026 (Insured; MBIA)........................................ 1,000,000 1,003,210
(Refunding--Holy Cross College):
6%, 11/1/2002........................................................... 400,000 432,492
6.375%, 11/1/2015 (Prerefunded 11/1/2002) (b)........................... 2,000,000 2,233,120
(Refunding--Milton Academy) 5.25%, 9/1/2019 (Insured; MBIA)............... 1,000,000 963,280
(Refunding--Phillips Academy) 5.375%, 9/1/2023............................ 2,280,000 2,254,282
(Refunding--Saint Mark's School) 5.375%, 1/1/2021 (Insured; MBIA)......... 1,000,000 987,970
Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue:
5%, 7/1/2014 (Insured; AMBAC)............................................. 1,000,000 955,440
Refunding:
6.40%, 7/1/2002......................................................... 400,000 433,984
6.125%, 7/1/2019 (Insured; MBIA)........................................ 1,000,000 1,046,810
Massachusetts Port Authority, Revenue
Special Project (Harborside Hyatt) 10%, 3/1/2026.......................... 8,000,000 8,995,760
Northampton (School Project Loan Act of 1948) 5.75%, 5/15/2016 (Insured; MBIA) 1,520,000 1,557,802
Quincy, Revenue, Refunding (Quincy City Hospital)
5.25%, 1/15/2016 (Insured; FSA)........................................... 2,895,000 2,828,241
South Essex Sewage District, Refunding 5.25%, 6/15/2024 (Insured; MBIA)...... 3,810,000 3,715,131
Southbridge 6.375%, 1/1/2012 (Insured; AMBAC)................................ 1,000,000 1,074,040
U.S. Related--3.4%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................. 3,000,000 3,120,210
Virgin Islands Water and Power Authority, Electric System Revenue
7.40%, 7/1/2011........................................................... 2,000,000 2,148,300
-------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $142,713,683).................... $150,083,172
=============
<PAGE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- -------------------------------------------------------------------------------
Statement of Investments (continued) November 30, 1996 (Unaudited)
Principal
Short-Term Municipal Investments--3.4% Amount Value
- ----------------------------------------------------------------------------- ------------ -----------
Massachusetts--2.6%
Massachusetts Health and Educational Facilities Authority, Revenue, VRDN
(Saint Elizabeth Hospital) 3.45% (Insured; FSA) (c)....................... $ 4,050,000 $ 4,050,000
U.S. Related--.8%
Puerto Rico Electric Power Authority, Power Revenue 3.25% (Insured; FSA) (d). 1,200,000 1,200,000
-------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $5,250,000)..................... $ 5,250,000
=============
TOTAL INVESTMENTS--100.0% (cost $147,963,683)................................ $ 155,333,172
=============
</TABLE>
Summary of Abbreviations
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
FGIC Financial Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
FHA Federal Housing Administration Insurance Corporation
FSA Financial Security Assurance MFHR Multi-Family Housing Revenue
VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
Summary of Combined Ratings
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fitch (e) or Moody's or Standard & Poor's Percentage of Value
- --------- -------- ---------------- ------------------
AAA Aaa AAA 58.3%
AA Aa AA 10.1
A A A 14.6
BBB Baa BBB 9.1
Not Rated (f) Not Rated (f) Not Rated (f) 7.9
-------
100.0%
=======
<FN>
Notes to Statement of Investments:
- --------------------------------------------------------------------------------
(a) Secured by letters of credit.
(b) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(c) 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.
(d) Inverse floater security--the interest rate is subject to change
periodically.
(e) Fitch currently provides creditworthiness information for a limited number
of investments.
(f) Securites which, while not rated by Fitch, Moody's and 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 November 30, 1996, the Fund had $40,850,044 (25.9% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from health care projects.
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities November 30, 1996 (Unaudited)
Cost Value
------------- -------------
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $147,963,683 $155,333,172
Interest receivable.............................. 2,829,642
Prepaid expenses................................. 2,951
------------
158,165,765
------------
LIABILITIES: Due to The Dreyfus Corporation and affiliates.... 73,785
Cash overdraft due to Custodian.................. 70,115
Accrued expenses................................. 27,446
------------
171,346
------------
NET ASSETS..................................................................... $157,994,419
============
REPRESENTED BY: Paid-in capital.................................. $151,662,108
Accumulated undistributed investment income--net.. 22,237
Accumulated net realized gain (loss) on investments (1,059,415)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 3.......................... 7,369,489
------------
NET ASSETS..................................................................... $157,994,419
============
SHARES OUTSTANDING
(unlimited number of $.01 par value shares of Beneficial Interest authorized).. 9,559,614
NET ASSET VALUE, offering and redemption price per share....................... $16.53
======
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- --------------------------------------------------------------------------------
Statement of Operations Six Months Ended November 30, 1996 (Unaudited)
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME Interest Income................................. $ 4,703,946
EXPENSES: Management fee--Note 2(a)......................... $ 462,297
Shareholder servicing costs--Note 2(b)............ 88,953
Professional fees................................ 22,412
Directors' fees and expenses--Note 2(c).......... 14,270
Custodian fees................................... 8,178
Registration fees................................ 8,045
Prospectus and shareholders' reports............. 5,654
Miscellaneous.................................... 7,150
----------
Total Expenses.............................. 616,959
------------
INVESTMENT INCOME--NET.......................................................... 4,086,987
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 3:
Net realized gain (loss) on investments.......... $ 495,279
Net realized appreciation (depreciation) on investments 5,760,048
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS............................. 6,255,327
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................... $10,342,314
===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
Six Months Ended
November 30, 1996 Year Ended
(Unaudited) May 30, 1996
-------------------- -------------
<S> <C> <C>
OPERATIONS:
Investment income--net............................................... $ 4,086,987 $ 8,290,611
Net realized gain (loss) on investments.............................. 495,279 3,018,145
Net unrealized appreciation (depreciation) on investments............ 5,760,048 (6,550,453)
-------------- -------------
Net Increase (Decrease) in Net Assets Resulting from Operations.. 10,342,314 4,758,303
-------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net................................................ (4,064,750) (8,290,611)
-------------- -------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold........................................ 18,540,988 37,206,238
Dividends reinvested................................................. 3,039,936 6,116,752
Cost of shares redeemed.............................................. (21,585,597) (48,818,823)
-------------- -------------
Increase (Decrease) in Net Assets from Beneficial Interest
Transactions (4,673) (5,495,833)
-------------- -------------
Total Increase (Decrease) in Net Assets........................ 6,272,891 (9,028,141)
NET ASSETS:
Beginning of Period.................................................. 151,721,528 160,749,669
-------------- -------------
End of Period........................................................ $157,994,419 $151,721,528
============== =============
Undistributed investment income--net................................... $ 22,237 --
-------------- -------------
Shares Shares
-------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.......................................................... 1,156,969 2,309,257
Shares issued for dividends reinvested............................... 187,720 377,598
Shares redeemed...................................................... (1,349,967) (3,015,387)
-------------- -------------
Net Increase (Decrease) in Shares Outstanding.................... (5,278) (328,532)
============== =============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
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 period indicated. This information
has been derived from the Fund's financial statements.
Six Months Ended
November 30, 1996 Year Ended May 31,
--------------------------------------------
PER SHARE DATA: (Unaudited) 1996 1995 1994 1993 1992
----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $15.86 $16.25 $16.03 $17.01 $16.20 $15.59
------- ------- ------- ------- ------- -------
Investment Operations:
Investment income--net...................... .43 .88 .91 .91 .97 1.01
Net realized and unrealized gain (loss)
on investments.......................... .67 (.39) .22 (.52) .81 .60
------- ------- ------- ------- ------- -------
Total from Investment Operations........... 1.10 .49 1.13 .39 1.78 1.61
------- ------- ------- ------- ------- -------
Distributions:
Dividends from investment income--net....... (.43) (.88) (.91) (.92) (.97) (1.00)
Dividends from net realized gain on investments -- -- -- (.21) -- --
Dividends in excess of net realized
gain on investments..................... -- -- -- (.24) -- --
------- ------- ------- ------- ------- -------
Total Distributions........................ (.43) (.88) (.91) (1.37) (.97) (1.00)
------- ------- ------- ------- ------- -------
Net asset value, end of period............. $16.53 $15.86 $16.25 $16.03 $17.01 $16.20
======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN....................... 13.82%(1) 3.06% 7.39% 2.07% 11.27% 10.62%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.... .80%(1) .79% .80% .80% .81% .84%
Ratio of net investment income
to average net assets................... 5.30%(1) 5.43% 5.77% 5.30% 5.83% 6.30%
Portfolio Turnover Rate.................... 15.92%(2) 60.67% 38.34% 29.73% 85.29% 68.07%
Net Assets, end of period (000's Omitted).. $157,994 $151,722 $160,750 $168,473 $183,601 $157,061
<FN>
- ----------------------
(1) Annualized.
(2) Not annualized.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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. acts as the distributor of the Fund's shares, which are sold to
the public without a sales charge.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(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 profit, if any, realized subsequent to May 31, 1996. If not applied,
the carryover expires in fiscal 2003.
<PAGE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (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.
(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 period ended November 30, 1996, the Fund was charged an aggregate of
$40,679 pursuant to the Shareholder Services Plan.
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 $35,467 during the period ended November 30, 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 period ended November 30, 1996,
amounted to $23,676,169 and $24,025,184, respectively.
At November 30, 1996, accumulated net unrealized appreciation on
investments was $7,369,489, consisting of $7,458,431 gross
unrealized appreciation and $88,942 gross unrealized depreciation.
At November 30, 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).
<PAGE>
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.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 267SA9611
