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 fiscal year ended May 31, 1997.
Your Fund produced a total return, including bond price changes, capital gain
distributions and interest income, of 8.37%.* The Fund's tax-free annualized
distribution rate per share was 5.23%.** (Some income may be subject to the
Federal Alternative Minimum Tax for certain shareholders).
Economic Review
Plentiful jobs and low inflation spurred consumer confidence to its
highest level in 27 years by the end of the reporting period, May 31, 1997.
Economic growth surged 5.6% in the first quarter of this year, sharply higher
than the 3.8% rate in the last quarter of 1996. With unemployment at its
lowest level in 23 years, there was fear that without some preemptive
tightening in monetary policy, inflationary pressures would resume. As a
precaution, in March 1997, the Federal Open Market Committee (the "FOMC"),
the policy-making arm of the Federal Reserve Board (the "Fed"), raised the
Federal Funds rate one quarter of a percentage point to 5.50%. It was the
first hike in short-term rates in over two years. (The Federal Funds rate is
the rate of interest banks charge each other for overnight loans.) Fed
Chairman Greenspan likened the increase to "the small immediate discomfort of
a vaccination against the possibility of getting a serious disease."
Subsequent to the March rate increase, signs of inventory accumulation and
some moderation in retail sales may have helped stay the Fed from
implementing additional increases in short-term interest rates.
The great difference between the present economic recovery and previous
ones is the absence of inflation. The economy is now in its seventh year of
expansion, an expansion devoid of any appreciable resurgence in inflation.
The Producer Price Index, a measure of prices paid by manufacturers and an
indicator of so-called pipeline inflation, declined over the first four
months of this year and has risen less than 1% over the previous twelve
months. The rise in inflation on the consumer level has been similarly
subdued. The Consumer Price Index increased a modest 2.5% over the
twelve-month period ending in April.
On another front, the tight labor market has spawned fears that rising
wages would provide an inflationary stimulus to the economy. So far, this has
not occurred. The Employment Cost Index, a gauge of wage and benefit
increases, has remained below 3%. The bipartisan budget agreement recently
reached between the Clinton Administration and the Republican Congressional
leadership has also eased inflationary fears.
The economic confidence of consumers is readily understandable. The
exceptionally low unemployment rate has combined with a strong economy that
has expanded with unusual vigor. But, despite huge business investment in
technology to improve productivity, it would be folly to assume that the
economy's capacity for noninflationary growth is unlimited. Consumers
enjoying both job stability and rising personal incomes could increase their
spending to levels that would strain production and bring on inflation; or
the Fed could again tighten credit, perhaps in another precautionary move.
Market Environment
For much of the past year, the trading environment for fixed income
securities has been dominated by a measure of volatility one would expect to
find during periods of rapidly shifting perceptions as to the course of
economic growth and of inflationary pressures. Early on, as attention focused
on the tightening of the labor markets as the economy continued to expand at
a quickening pace, investors became convinced of an imminent tightening of
monetary policy by the FOMC. As such, interest rates were driven 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
rapid shifts in investors' perceptions of the economy and the appropriate
levels of long-term interest rates occurred frequently throughout the year,
establishing a broad trading range in prices. In November 1996, as investors
became convinced of a significant slowing in the rate of growth of the
economy, this range in prices was redefined to higher levels. With the turn
of the calendar into 1997, however, these higher levels proved unsustainable,
as evidence of the resilience of the economy's current expansion continued to
mount. The resulting rise in long-term interest rates foretold the move by
the FOMC to assume a more restrictive posture at its March meeting.
Throughout 1996 municipal securities were hard-pressed to escape the
volatility witnessed by the fixed income markets in general. Ultimately, tax
exempt bonds were supported by a formidable technical dynamic of strong
demand and limited supply which enabled municipals to significantly
outperform comparable term U.S. Treasuries. A comparison of the decline in
yields and subsequent price appreciation experienced by the holders of
30-year U.S. Treasury bonds and Municipal bonds as represented by The Bond Buy
er 25 Bond Revenue Index (the "Revenue Index") clearly illustrates this
point. While interest rates fluctuated significantly over the course of the
year ended May 31, 1997, 30-year Treasury yields closed the period 10 basis
points lower than the start of the year (.10%) at 6.90%. Over the same time,
the Revenue Index declined by 30 basis points (.30%) to close the period at
5.91%, which represents a taxable equivalent yield of 8.20%, assuming a 28%
Federal income tax bracket. (Remember, fund yields and net asset values do
fluctuate; past performance is no guarantee of future results, and actual
results for a fund will vary from an index).
Portfolio Overview
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 levels of 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 inherent in such an
environment. Your Fund's performance during this reporting period also was
impacted by efforts to achieve a balanced posture addressing the generation
of tax-free income as well as a measure of total return reflective of the
market in general. Throughout this process, performance was further impacted
by enhancing the liquidity and performance characteristics of the portfolio
by extending the optional redemption characteristics and improving the
underlying creditworthiness of its holdings.
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 signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
June 17, 1997
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
** Distribution rate per share is based upon dividends per share paid
from net investment income during the period (annualized), divided by the net
asset value per share at the end of the period.
[Exhibit A]
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND MAY 31, 1997
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS MASSACHUSETTS
TAX EXEMPT BOND FUND AND
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
$22,345
Lehman Brothers
Municipal Bond Index*
Dollars
$20,065
Dreyfus Massachusetts
Tax Exempt Bond Fund
*Source: Lehman Brothers
[Exhibit A]
<TABLE>
Average Annual Total Returns
One Year Ended Five Years Ended Ten Years Ended
May 31, 1997 May 31, 1997 May 31, 1997
________________ ________________ ________________
<S> <C> <C> <C>
8.37% 6.37% 7.21%
</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 5/31/87 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
and is not limited to investments principally in Massachusetts municipal
obligations. 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>
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
STATEMENT OF INVESTMENTS MAY 31, 1997
Principal
Long-Term Municipal Investments_93.1% Amount Value
__________ __________
<S> <C> <C>
Massachusetts_89.6%
Boston 5%, 11/1/2016 (Insured; FGIC)........................................ $ 2,500,000 $ 2,344,775
Boston-Mount Pleasant Housing Development Corp., MFHR, Refunding
6.75%, 8/1/2023 (Insured; FHA)............................................ 1,675,000 1,737,277
Mashpee, Municipal Purpose Loan 5.50%, 2/1/2017 (Insured; MBIA)............. 2,525,000 2,496,392
Massachusetts Bay Transportation Authority
General Transportation System:
5.25%, 3/1/2017 (Insured; AMBAC)........................................ 5,000,000 4,783,400
Refunding 6.20%, 3/1/2016............................................... 4,225,000 4,580,872
Massachusetts Commonwealth:
Consolidated Loan 5.625%, 8/1/2013 (Insured; MBIA)........................ 7,140,000 7,238,746
Refunding 6%, 8/1/2012 (Insured; FGIC).................................... 1,755,000 1,795,330
Special Obligation Revenue:
5.50%, 6/1/2010 (Insured; AMBAC)........................................ 1,425,000 1,451,505
5.75%, 6/1/2012......................................................... 1,625,000 1,664,553
Massachusetts Education Loan Authority, Education Loan Revenue
8%, 6/1/2002 (LOC; Rabobank Nederland) (a)................................ 670,000 691,654
Massachusetts Health and Educational Facilities Authority, Revenue:
(Faulkner Hospital) 6%, 7/1/2013.......................................... 2,000,000 1,999,260
(Massachusetts General Hospital):
6.25%, 7/1/2020 (Insured; AMBAC)........................................ 3,500,000 3,668,140
Refunding 6%, 7/1/2015 (Insured; AMBAC)................................. 2,000,000 2,048,720
(Mclean Hospital) 6.50%, 7/1/2010 (Insured; FGIC)......................... 1,000,000 1,076,750
(Medical Academic & Scientific) 6.625%, 1/1/2015.......................... 3,000,000 3,199,170
(Mount Auburn Hospital) 6.30%, 8/15/2024 (Insured; MBIA) (b).............. 5,000,000 5,265,150
(New England Medical Center Hospitals) 6.50%, 7/1/2012 (Insured; FGIC).... 2,000,000 2,148,840
(Newton_Wellesley Hospital) 5.875%, 7/1/2015 (Insured; MBIA).............. 2,000,000 2,052,680
(Refunding_Baystate Medical Center) 6%, 7/1/2015 (Insured; FGIC).......... 1,140,000 1,167,770
(Refunding_Daughters of Charity) 6.10%, 7/1/2014.......................... 1,100,000 1,143,846
(Refunding_Milton Hospital) 7%, 7/1/2016 (Insured; MBIA).................. 1,000,000 1,074,100
(Refunding_Wentworth Technology Institute)
5.625%, 10/1/2013 (Insured; CONNIE LEE)................................. 1,350,000 1,351,215
(Sisters Providence Health System) 6.625%, 11/15/2022..................... 3,510,000 3,532,604
(Williams College) 5.50%, 7/1/2026........................................ 3,500,000 3,413,060
Massachusetts Housing Finance Agency, Revenue:
Housing Projects, Refunding:
6.30%, 10/1/2013 (Insured; AMBAC)....................................... 1,000,000 1,036,760
6.375%, 4/1/2021........................................................ 4,300,000 4,442,588
Multi-Family Residential Housing 9.60%, 8/1/2022.......................... 1,765,000 1,776,526
Rental Housing:
6.50%, 7/1/2025 (Insured; AMBAC)........................................ 1,500,000 1,543,455
6.45%, 1/1/2036 (Insured; AMBAC)........................................ 2,135,000 2,197,000
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1997
Principal
Long-Term Municipal Investments (continued) Amount Value
_______ _______
Massachusetts (continued)
Massachusetts Housing Finance Agency, Revenue (continued):
Rental Housing (continued):
6%, 7/1/2037 (Insured; AMBAC)........................................... $ 2,650,000 $ 2,618,121
Refunding:
6.65%, 7/1/2019 (Insured; AMBAC)...................................... 2,475,000 2,570,461
6.75%, 7/1/2028 (Insured; AMBAC)...................................... 2,870,000 2,978,199
Single-Family Housing 6.35%, 6/1/2017..................................... 2,700,000 2,801,142
Massachusetts Industrial Finance Agency, Revenue:
(Babson College) 5.25%, 10/1/2027......................................... 3,200,000 3,012,768
Electrical Utility (Nantucket Electric Co.) 8.50%, 3/1/2016............... 2,945,000 3,164,520
(Refunding_College of the Holy Cross) 5.50%, 3/1/2020 (Insured; MBIA)..... 1,870,000 1,830,637
(Refunding_Holy Cross College):
6%, 11/1/2002........................................................... 400,000 425,884
6.375%, 11/1/2015 (Prerefunded; 11/1/2002) (c).......................... 2,000,000 2,193,180
(Refunding_Milton Academy) 5.25%, 9/1/2019 (Insured; MBIA)................ 1,000,000 939,370
(Refunding_Phillips Academy) 5.375%, 9/1/2023............................. 4,330,000 4,228,418
(Refunding_Saint Mark's School) 5.375%, 1/1/2021 (Insured; MBIA).......... 1,000,000 967,510
(Refunding_Worcester Polytechnic Institute) 5.125%, 9/1/2017 (Insured; MBIA) 1,000,000 950,350
Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue
Refunding:
6.40%, 7/1/2002......................................................... 400,000 426,888
6.125%, 7/1/2019 (Insured; MBIA)........................................ 1,000,000 1,031,190
Massachusetts Port Authority, Revenue:
Special Facilites (US Air Project) 5.75%, 9/1/2016 (Insured; MBIA)........ 5,000,000 5,009,750
Special Project (Harborside Hyatt) 10%, 3/1/2026.......................... 8,000,000 8,913,600
Massachusetts Water Pollution Abatement Trust
(Pool Loan Program) 5.625%, 2/1/2017...................................... 5,000,000 5,042,150
North Attleborough 5.25%, 3/1/2017 (Insured; AMBAC)......................... 1,680,000 1,632,590
Northampton (School Project Loan Act of 1948) 5.75%, 5/15/2016 (Insured; MBIA) 1,520,000 1,536,583
South Essex Sewage District, Refunding:
5.25%, 6/15/2018 (Insured; MBIA).......................................... 2,720,000 2,611,227
5.25%, 6/15/2024 (Insured; MBIA).......................................... 2,810,000 2,671,860
Southbridge 6.375%, 1/1/2012 (Insured; AMBAC)............................... 1,000,000 1,065,890
Uxbridge, Municipal Purpose Loan 5.40%, 11/15/2016 (Insured; MBIA).......... 1,600,000 1,576,288
U.S. Related_3.5%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 3,000,000 3,122,880
Virgin Islands Water and Power Authority, Electric System Revenue
7.40%, 7/1/2011........................................................... 2,000,000 2,128,780
_____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $133,059,564)................... $138,372,374
==============
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1997
Principal
Short-Term Municipal Investments_6.9% Amount Value
__________ __________
Massachusetts:
Massachusetts Health and Educational Facilities Authority, Revenue, VRDN:
(Capital Assets Program) 4% (Insured; MBIA) (d)........................... $ 1,000,000 $ 1,000,000
(Saint Elizabeth's Hospital) 3.83% (Insured; FSA) (d)..................... 9,300,000 9,300,000
_____________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $10,300,000)................... $ 10,300,000
==============
TOTAL INVESTMENTS_100.0% (cost $143,359,564)................................ $148,672,374
==============
</TABLE>
<TABLE>
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
Summary of Combined Ratings (Unaudited)
Fitch (e) or Moody's or Standard & Poor's Percentage of Value
____ ________ _________________ ______________________
AAA Aaa AAA 61.6%
AA Aa AA 8.9
A A A 13.2
BBB Baa BBB 7.5
F-1+ & F-1 MIG1, VMIG1 & P1 SP1 & A1 .7
Not Rated(f) Not Rated(f) Not Rated(f) 8.1
_______
100.0%
Notes to Statement of Investments:
(a) Secured by letters of credit.
(b) Wholly held by the custodian in a segregated account as collateral
for open Financial Futures positions.
(c) 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.
(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 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.
</TABLE>
<TABLE>
STATEMENT OF FINANCIAL FUTURES MAY 31, 1997
Market Value Unrealized
Covered (Depreciation)
Financial Futures Sold Contracts by Contracts Expiration at 5/31/97
___________ _________ ____________ __________ __________________
<S> <C> <C> <C> <C>
U.S. Treasury Bond Futures........... 100 $10,962,500 September `97 $(81,250)
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1997
Cost Value
______________ ______________
<S> <C> <C>
ASSETS: Investments in securities_See Statement of Investments $143,359,564 $148,672,374
Cash....................................... 276,552
Interest receivable........................ 2,602,600
Prepaid expenses........................... 8,689
_____________
151,560,215
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 76,950
Payable for futures variation margin_Note 4(a) 68,750
Accrued expenses........................... 35,062
_____________
180,762
_____________
NET ASSETS.................................................................. $151,379,453
==============
REPRESENTED BY: Paid-in capital............................ $147,174,301
Accumulated undistributed investment income_net21,336
Accumulated net realized gain (loss) on investments (1,047,744)
Accumulated net unrealized appreciation (depreciation)
on investments [including ($81,250) net unrealized
(depreciation) on financial futures]_Note 4(b) 5,231,560
_____________
NET ASSETS.................................................................. $151,379,453
==============
SHARES OUTSTANDING
(unlimited number of $.01 par value shares of Beneficial Interest authorized) 9,282,686
NET ASSET VALUE, offering and redemption price per share_Note 3(d).......... $16.31
========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
STATEMENT OF OPERATIONS YEAR ENDED MAY 31, 1997
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME Interest Income............................ $ 9,240,611
EXPENSES: Management fee_Note 3(a)................... $ 914,511
Shareholder servicing costs_Note 3(b)...... 159,997
Professional fees.......................... 42,001
Trustees' fees and expenses_Note 3(c)...... 29,454
Custodian fees............................. 16,388
Registration fees.......................... 15,575
Prospectus and shareholders' reports....... 12,874
Loan commitment fees_Note 2................ 837
Miscellaneous.............................. 14,465
__________
Net Expenses......................... 1,206,102
_____________
INVESTMENT INCOME_NET....................................................... 8,034,509
_____________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS_Note 4:
Net realized gain (loss) on investments.... $ 511,575
Net realized gain (loss) on financial futures (4,625)
__________
Net Realized Gain (Loss)............... 506,950
Net unrealized appreciation (depreciation) on investments
[including ($81,250) net unrealized (depreciation) on
financial futures]..................... 3,622,119
_____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 4,129,069
_____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $12,163,578
==============
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
</TABLE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
May 31, 1997 May 31, 1996
________________ ________________
<S> <C> <C>
OPERATIONS:
Investment income_net............................................... $ 8,034,509 $ 8,290,611
Net realized gain (loss) on investments............................. 506,950 3,018,145
Net unrealized appreciation (depreciation) on investments........... 3,622,119 (6,550,453)
________________ ________________
Net Increase (Decrease) in Net Assets Resulting from Operations. 12,163,578 4,758,303
________________ ________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net............................................... (8,013,173) (8,290,611)
________________ ________________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold....................................... 32,801,752 37,206,238
Dividends reinvested................................................ 5,947,192 6,116,752
Cost of shares redeemed............................................. (43,241,424) (48,818,823)
________________ ________________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions (4,492,480) (5,495,833)
________________ ________________
Total Increase (Decrease) in Net Assets....................... (342,075) (9,028,141)
NET ASSETS:
Beginning of Period................................................. 151,721,528 160,749,669
________________ ________________
End of Period....................................................... $151,379,453 $151,721,528
================ ===============
Undistributed investment income_net................................... $ 21,336 __
________________ ________________
Shares Shares
________________ ________________
CAPITAL SHARE TRANSACTIONS:
Shares sold......................................................... 2,034,296 2,309,257
Shares issued for dividends reinvested.............................. 366,496 377,598
Shares redeemed..................................................... (2,682,998) (3,015,387)
________________ ________________
Net Increase (Decrease) in Shares Outstanding................... (282,206) (328,532)
================ ===============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<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.
Year Ended May 31,
___________________________________________________________________________
PER SHARE DATA: 1997 1996 1995 1994 1993
_______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $15.86 $16.25 $16.03 $17.01 $16.20
_______ _______ _______ _______ _______
Investment Operations:
Investment income_net....................... .85 .88 .91 .91 .97
Net realized and unrealized gain (loss)
on investments........................ .45 (.39) .22 (.52) .81
_______ _______ _______ _______ _______
Total from Investment Operations....... 1.30 .49 1.13 .39 1.78
_______ _______ _______ _______ _______
Distributions:
Dividends from investment income_net....... (.85) (.88) (.91) (.92) (.97)
Dividends from net realized gain on investments __ __ __ (.21) __
Dividends in excess of net realized gain
on investments....................... __ __ __ (.24) __
_______ _______ _______ _______ _______
Total Distributions.................... (.85) (.88) (.91) (1.37) (.97)
_______ _______ _______ _______ _______
Net asset value, end of period............ $16.31 $15.86 $16.25 $16.03 $17.01
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN................... 8.37% 3.06% 7.39% 2.07% 11.27%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.... .79% .79% .80% .80% .81%
Ratio of net investment income
to average net assets.............. 5.27% 5.43% 5.77% 5.30% 5.83%
Portfolio Turnover Rate................. 38.29% 60.67% 38.34% 29.73% 85.29%
Net Assets, end of period (000's Omitted) $151,379 $151,722 $160,750 $168,473 $183,601
</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. is 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: Investments in securities 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 $1,145,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to May 31, 1997. If not
applied, the carryover expires in fiscal 2003.
NOTE 2_BANK LINE OF CREDIT:
The Fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility ("Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Fund has agreed to pay commitment fees on its pro rata portion of the
Facility. Interest is charged to the Fund at rates based on prevailing market
rates in effect at the time of borrowings. For the period ended May 31, 1997,
the Fund did not borrow under the Facility.
NOTE 3_MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(a) Pursuant to a management 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) Under the 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 May 31, 1997, the Fund was charged an aggregate of
$64,395 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 $70,840 during the period ended May 31, 1997.
(c) Each director 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.
(d) Effective November 4, 1996, a 1% redemption fee is charged on certain
redemptions of Fund shares (including redemptions through use of the Fund
Exchanges service) where the shares being redeemed were issued subsequent to
a specified effective date and the redemption or exchange occurs less than
fifteen days following the date of issuance. During the period ended May 31,
1997, redemption fees amounted to $393.
NOTE 4_SECURITIES TRANSACTIONS:
(a) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities and financial futures, during the period
ended May 31, 1997, amounted to $55,705,205 and $65,743,259, respectively.
The Fund may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The Fund is exposed to
market risk as a result of changes in the value of the underlying financial
instruments (see the Statement of Financial Futures). Investments in
financial futures require the Fund to "mark to market" on a daily basis,
which reflects the change in market value of the contracts at the close of
each day's trading. Accordingly, variation margin payments are received or
made to reflect daily unrealized gains or losses. When the contracts are
closed, the Fund recognizes a realized gain or loss. These investments
require initial margin deposits with a custodian, which consist of cash or
cash equivalents, up to approximately 10% of the contract amount. The amount
of these deposits is determined by the exchange or Board of Trade on which
the contract is traded and is subject to change. Contracts open at May 31,
1997 and their related unrealized depreciation are set forth in the Statement
of Financial Futures.
(b) At May 31, 1997, accumulated net unrealized appreciation on
investments and financial futures was $5,231,560 consisting of $5,428,372
gross unrealized appreciation and $196,812 gross unrealized depreciation.
At May 31, 1997, 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 statements of
investments and financial futures, as of May 31, 1997, 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 and financial highlights. Our procedures included
confirmation of securities owned as of May 31, 1997 by correspondence with
the custodian. 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, 1997, 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 & Young LLP signature logo]
New York, New York
June 30, 1997
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, 1997 as "exempt-interest dividends" (not generally 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 1997 calendar year
on Form 1099-DIV which will be mailed by January 31, 1998.
[Dreyfus lion "d" logo]
Registration Mark
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. 267AR975
[Dreyfus logo]
Registration Mark
Massachusetts
Tax Exempt
Bond Fund
Annual Report
May 31, 1997
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
5/31/87 10,000 10,000
5/31/88 10,898 10,561
5/31/89 12,152 11,658
5/31/90 13,041 12,309
5/31/91 14,355 13,318
5/31/92 15,765 14,733
5/31/93 17,651 16,393
5/31/94 18,087 16,732
5/31/95 19,735 17,968
5/31/96 20,636 18,517
5/31/97 22,345 20,065
*Source: Lehman Brothers
