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 the 12-month period ended May 31, 1998. Your Fund
produced a total return, including share price changes and dividend income
generated, of 9.52%,* and an annualized tax-free distribution rate per share of
4.90%.**
ECONOMIC REVIEW
In recent months, economic developments overseas began to assert a more
vigorous influence on the U.S. economy. The first quarter of the 1998 calendar
year saw the U.S. trade deficit rising to a new high. Exports contracted due to
reduced foreign demand for U.S. products, which resulted in a marked rise in
business inventories that could create a drag on future production as stockpiles
are depleted. At the same time, imports surged. Spurred by a strong U.S. dollar
and robust consumer spending, the increase in cheaper imports helped dampen
domestic inflation since American producers had to restrain their prices in
order to remain competitive. The suppressive effect of the trade deficit on both
domestic production and prices has been fortuitously in concert with the
direction of Federal Reserve Board (the Fed) monetary policy.
The financial difficulties that began in Asia last year have now spread to
Latin America and beyond. That tenuous situation and the continued economic
instability in Russia have contributed to the Fed' s status quo policy in
monetary matters since the Fed is concerned that any increase in short-term
interest rates would further unsettle world markets. The last increase in
short-term rates came in March 1997 when the Federal Open Market Committee (the
policy-making arm of the Fed) raised the target rate for Federal Funds by one
quarter of a percent to 5.5%. (The Federal Funds rate is the rate of interest
that banks charge each other for the use of Federal Funds.)
Consumers, spurred by real wage gains and a healthy job market, continued to
spend freely in the retail sector during the reporting period, giving retailers
some of their best months in a decade. The buoyant stock market, low
unemployment rate and absence of inflation encouraged consumers to spend. The
market for so-called "big ticket" items has been strong: the housing market was
solid throughout the reporting period and continues to be, while car and truck
sales are at ten-year highs.
Unemployment (4.3% at the end of the reporting period) is at a 28-year low.
Inflation, at both consumer and producer levels, has been dormant. Workers are
benefiting from having their wages rise faster than inflation. The most recently
reported statistics on hourly wages (through April) revealed that over the
previous 12 months, wages rose 4.4% while the Consumer Price Index increased but
1.4% . The tight labor market and upward pressure on wages, because of their
potential for rekindling inflation, have been major concerns of the Fed. The
wage rate increase of 4.4% (above) , compared to 3.7% and 3.1% in the two
previous years, illustrates the upward creep of wages.
Over the past few years, gains in worker productivity (output per hour of
work) have offset any incipient price pressures from rising wages. Enhanced by
the widespread use of technology, productivity rose 1.7% last year and 1.9% in
1996, compared to an average increase of only 1% for the period 1974-1995. These
gains are a key factor in the continuation of our high-growth, low-inflation
economy. However, productivity gains slowed to 1.1% during the first quarter,
the slowest pace in over a year. So far, our economy has been in a charmed
circle where even international financial crises have proven supportive of our
economic policies. As always, we remain alert for warning signs that the
delicate balance that now prevails in the economy might be disturbed.
MARKET ENVIRONMENT
Few periods in recent memory could be viewed as more favorable for the fixed
income markets than your Fund' s most recent fiscal year. Steady, moderate
economic growth, a low level of inflation, generally declining industrial
commodity prices and a strengthening currency all contributed to create an
overall friendly climate for the bond market. Along the way, however, there were
periodic bouts of volatility arising from more uncertain themes which surfaced.
On the heels of the Fed's move to raise interest rates just prior to the start
of the fiscal year, market yields rose to the highest level of the entire period
as concerns mounted that continued subdued inflation in the face of overly tight
labor markets was unsustainable. These anxieties were quickly allayed by the
evolution of a school of thought embracing a belief in a "new paradigm" which
held that the economy could grow above consensus estimate of its capacity
without a commensurate increase in inflation, due to technological advances in
the workplace which increased worker productivity, as well as global competition
from emerging market nations which limited pricing power domestically. As these
perceptions gathered momentum among market participants, prices advanced sharply
into July 1997 when Fed Chairman Alan Greenspan sought to dampen the market's
exuberance in his semi-annual Humphrey Hawkins testimony before Congress by
calling into question this view compared to the weight of evidence posed by
recent economic history. His comments succeeded in forcing yields to adjust to
higher levels in the weeks that followed, which more adequately reflected the
capacity constraints confronting the economy. The rise was short-lived, however,
and relatively mild in nature. Attention soon shifted to a series of economic
crises rolling through several emerging market economies of Southeast Asia which
culminated with the formal devaluations of the currencies of Thailand, Malaysia
and Indonesia. Concern mounted over the potential deflationary impact these
events would have around the globe and bond prices began to rise as investors
began to accumulate fixed income securities. Toward the end of 1997, as it
became increasingly apparent that the larger, more established Asian economies
such as Japan and South Korea were not immune to these difficulties, the scope
of the problem expanded and the demand for U.S. fixed income securities pushed
yields to their lowest levels of the period in January 1998. Since then, prices
of fixed income securities have been confined to a relatively narrow range whose
extremes are determined by the vacillation of market sentiment between the poles
of this debate. On one hand, the question is raised of how long the United
States can maintain above-trend economic growth without a significant increase
in inflation, and on the other, the degree to which the deflationary impulse
emanating from Asia may subdue domestic growth. Toward the end of the Fund's
fiscal year, a more constructive view of the market gathered additional support
as it became increasingly apparent that the Government's future borrowing needs
would be significantly curtailed by higher-than-forecast tax receipts resulting
from the robust level of domestic growth.
While buoyed by the same factors throughout the fiscal year, municipal bonds
underperformed their taxable counterparts on a relative basis. A comparison of
the movements of the yield of the 30-year U.S. Treasury Bond and the Bond
Buyer's 25 Bond Revenue Bond Index illustrates this point clearly. For the year,
Treasury yields declined by 110 basis points (1.10%) to close at 5.85%, while
the Revenue Index fell by 46 basis points (0.46%) to close at 5.39%. The cause
was that during the early strength of the markets, municipals were supported by
a formidable supply/demand dynamic which pushed tax exempt yields to a level
which, when viewed as a percentage of taxable yields, were relatively expensive
by historical standards. Consequently, as taxable yields declined over the
period, tax exempt yields moved in a similar though more restrained fashion.
This relative price underperformance during the course of the year now makes
municipal bonds relatively inexpensive versus taxable alternatives. From an
after-tax point of view, the yields provided by municipal bonds exceed those
available from U.S. Treasuries for taxpayers in the upper Federal income tax
brackets.
PORTFOLIO OVERVIEW
In managing your Fund's assets in such an environment, a decidedly positive
posture was maintained. While trading activity sought to adjust portfolio
structure to the changing sentiments which drove prices, in general we strove to
create a vehicle that was more responsive to a declining interest rate
environment. During those periods when volatility increased and prices
retreated, emphasis was placed on accumulating securities bearing strong
characteristics of double tax-free income and minimal levels of principal
volatility. As prices advanced, our purchasing focus shifted to those securities
whose principal values would most closely mirror the anticipated appreciation of
the market in general. Throughout the process, we continued to work to enhance
the liquidity and performance characteristics of the Fund by extending the
optional redemption provisions of the securities held in the portfolio and
improving their underlying creditworthiness.
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 18, 1998
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
Income may be subject to state and local income taxes for non-Massachusetts
residents.
** 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, adjusted for capital gain distributions.
Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders.
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND MAY 31, 1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS MASSACHUSETTS TAX
EXEMPT BOND FUND AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
$22,429
Lehman Brothers Municipal Bond Index*
Dollars
$20,809
<TABLE>
Dreyfus Massachusetts Tax Exempt Bond Fund
*Source: Lehman Brothers
Average Annual Total Returns
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One Year Ended Five Years Ended Ten Years Ended
May 31, 1998 May 31, 1998 May 31, 1998
____________________ ____________________ __________________________
<S> <C> <C> <C>
9.52% 6.04% 7.60%
- ------------------------
</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 5/31/88 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
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STATEMENT OF INVESTMENTS MAY 31, 1998
Principal
Long-Term Municipal Investments--97.7% Amount Value
- -------------------------------------------------------
_____________ _____________
Massachusetts--94.3%
<S> <C> <C>
Boston 5%, 11/1/2016 (Insured; FGIC) $ 2,500,000 $ 2,490,950
Boston-Mount Pleasant Housing Development Corp., MFHR, Refunding
6.75%, 8/1/2023 (Insured; FHA) 1,650,000 1,751,475
Haverhill 5%, 6/15/2017 (Insured; FGIC) 1,500,000 1,489,050
Lynn 5%, 2/15/2017 (Insured; MBIA) 2,360,000 2,334,394
Mansfield, Municipal Purpose Loan 5.125%, 8/15/2017 (Insured; FGIC) 1,685,000 1,691,285
Mashpee, Municipal Purpose Loan 5.50%, 2/1/2017 (Insured; MBIA) 2,525,000 2,633,146
Massachusetts Bay Transportation Authority, General Transportation System,
Refunding:
6.20%, 3/1/2016 4,225,000 4,854,610
4.50%, 3/1/2026 (Insured; MBIA) 2,500,000 2,254,400
Massachusetts Education Loan Authority, Education Loan Revenue
8%, 6/1/2002 (LOC; Rabobank Nederland) (a) 595,000 610,042
Massachusetts Educational Financing Authority, Education Loan Revenue
5.125%, 12/1/2014 (Insured; MBIA) 3,000,000 2,985,120
Massachusetts Health and Educational Facilities Authority, Revenue:
(Bentley College) 5%, 7/1/2023 (Insured; MBIA) 3,500,000 3,411,940
(Faulkner Hospital) 6%, 7/1/2013 2,000,000 2,094,960
(Massachusetts General Hospital):
6.25%, 7/1/2020 (Insured; AMBAC) 3,500,000 3,823,085
Refunding 6%, 7/1/2015 (Insured; AMBAC) 2,000,000 2,131,060
(Massachusetts Institute of Technology) 5.20%, 1/1/2028 2,500,000 2,592,475
(Mclean Hospital) 6.50%, 7/1/2010 (Insured; FGIC) 1,000,000 1,089,780
(Medical Academic & Scientific) 6.625%, 1/1/2015 3,000,000 3,326,490
(Mount Auburn Hospital) 6.30%, 8/15/2024 (Insured; MBIA) 5,000,000 5,529,700
(New England Medical Center Hospitals) 6.50%, 7/1/2012 (Insured; FGIC) 2,000,000 2,177,200
(Newton-Wellesley Hospital) 5.875%, 7/1/2015 (Insured; MBIA) 2,000,000 2,153,720
(Refunding-Baystate Medical Center) 6%, 7/1/2015 (Insured; FGIC) 1,140,000 1,217,908
(Refunding-Berklee College of Music) 5%, 10/1/2018 (Insured; MBIA) 1,075,000 1,065,443
(Refunding-Daughters of Charity) 6.10%, 7/1/2014 1,100,000 1,187,516
(Refunding-Milton Hospital) 7%, 7/1/2016 (Insured; MBIA) 1,000,000 1,071,640
(Sisters Providence Health System) 6.625%, 11/15/2022 (Prerefunded 11/15/2004) (b) 3,510,000 3,984,026
Massachusetts Housing Finance Agency, Revenue:
Housing Projects, Refunding:
6.30%, 10/1/2013 (Insured; AMBAC) 1,000,000 1,061,160
6.375%, 4/1/2021 4,300,000 4,567,116
Multi-Family Residential Housing 9.60%, 8/1/2022 1,745,000 1,758,000
Rental Housing:
6.50%, 7/1/2025 (Insured; AMBAC) 1,500,000 1,612,740
6.45%, 1/1/2036 (Insured; AMBAC) 2,135,000 2,295,808
6%, 7/1/2037 (Insured; AMBAC) 2,650,000 2,757,590
Refunding 6.65%, 7/1/2019 (Insured; AMBAC) 2,385,000 2,578,757
Single-Family Housing 6.35%, 6/1/2017 2,700,000 2,885,004
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
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STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1998
Principal
Long-Term Municipal Investments (continued) Amount Value
- -------------------------------------------------------
_____________ _____________
Massachusetts (continued)
Massachusetts Industrial Finance Agency, Revenue:
(Babson College):
5.375%, 10/1/2017 $ 2,125,000 $ 2,176,531
5.25%, 10/1/2027 3,200,000 3,224,256
Electrical Utility (Nantucket Electric Co.) 8.50%, 3/1/2016 2,885,000 3,116,377
(Groton School) 5%, 3/1/2028 3,440,000 3,366,728
Parking Facility (Avon Associates LLC) 5.375%, 4/1/2020 (Insured; MBIA) 2,000,000 2,016,340
(Refunding-Holy Cross College):
6%, 11/1/2002 400,000 430,188
6.375%, 11/1/2015 (Prerefunded 11/1/2002) (b) 2,000,000 2,211,800
(Refunding-Merrimack College):
5%, 7/1/2017 (Insured; MBIA) 1,000,000 992,660
5%, 7/1/2027 (Insured; MBIA) 4,400,000 4,300,824
(Refunding-Phillips Academy) 5.375%, 9/1/2023 4,330,000 4,397,678
(Refunding-Worcester Polytechnic Institute) 5.125%, 9/1/2017 (Insured; MBIA) 1,000,000 1,003,740
(WGBH Educational Foundation) 5%, 3/1/2028 (Insured; AMBAC) 1,750,000 1,694,595
Massachusetts Municipal Wholesale Electric Co.,
Power Supply System Revenue, Refunding:
6.40%, 7/1/2002 400,000 430,844
6.125%, 7/1/2019 (Insured; MBIA) 1,000,000 1,080,600
Massachusetts Port Authority, Revenue:
5%, 7/1/2027 5,000,000 4,857,950
Special Facilites (US Air Project) 5.75%, 9/1/2016 (Insured; MBIA) 5,000,000 5,293,500
Special Project (Harborside Hyatt) 10%, 3/1/2026 8,000,000 8,964,400
Massachusetts Turnpike Authority, Metropolitan Highway Systems Revenue
Zero Coupon, 1/1/2028 (Insured; MBIA) 24,000,000 5,222,880
Massachusetts Water Pollution Abatement Trust
(Pool Loan Program) 5.625%, 2/1/2017 5,000,000 5,267,950
North Attleborough 5.25%, 3/1/2017 (Insured; AMBAC) 1,680,000 1,704,914
Northampton (School Project Loan Act of 1948) 5.75%, 5/15/2016 (Insured; MBIA) 1,520,000 1,623,314
South Essex Sewage District, Refunding:
5.25%, 6/15/2018 (Insured; MBIA) 2,720,000 2,751,688
5.25%, 6/15/2024 (Insured; MBIA) 2,810,000 2,818,627
Southbridge 6.375%, 1/1/2012 (Insured; AMBAC) 1,000,000 1,081,100
U.S. Related--3.4%
Guam Airport Authority, Revenue 6.70%, 10/1/2023 3,000,000 3,291,120
Virgin Islands Water and Power Authority, Electric System Revenue
7.40%, 7/1/2011 1,915,000 2,089,897
_____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $144,789,580) $154,878,091
=============
</TABLE>
<TABLE>
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
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STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1998
Principal
Short-Term Municipal Investments--2.3% Amount Value
- -------------------------------------------------------
_____________ _____________
<S> <C> <C>
Massachusetts;
Massachusetts Health and Educational Facilities Authority, Revenue
(Saint Elizabeth's Hospital) 3.60% (Insured; FSA) (c) (cost $3,700,000) $ 3,700,000 $ 3,700,000
=============
TOTAL INVESTMENTS--100.0% (cost $148,489,580) $158,578,091
=============
</TABLE>
<TABLE>
Summary of Abbreviations
- -----------------------------------------------------------------------------
<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
Summary of Combined Ratings (Unaudited)
- -----------------------------------------------------------------------------
Fitch (d) or Moody's or Standard & Poor's Percentage of Value
_______ ________ _________________ ___________________
AAA Aaa AAA 62.7%
AA Aa AA 10.5
A A A 14.2
BBB Baa BBB 5.0
Not Rated (e) Not Rated (e) Not Rated (e) 7.6
_______
100.0%
======
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)Inverse floater security-the interest rate is subject to change
periodically.
(d)Fitch currently provides creditworthiness information for a limited number
of investments.
(e)Securities 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.
(f) At May 31, 1998, 31.5% of the Fund's net assets are insured by MBIA.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1998
Cost Value
_____________ _____________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $148,489,580 $158,578,091
Cash 85,597
Interest receivable 2,610,893
Receivable for shares of Beneficial Interest subscribed 11,000
Prepaid expenses 51,919
_____________
161,337,500
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 86,020
Payable for investment securities purchased 976,267
Payable for shares of Beneficial Interest redeemed 23,000
Accrued expenses 33,968
_____________
1,119,255
_____________
NET ASSETS $160,218,245
=============
REPRESENTED BY: Paid-in capital $149,537,421
Accumulated undistributed investment income--net 42,553
Accumulated net realized gain (loss) on investments 549,760
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4(b) 10,088,511
_____________
NET ASSETS $160,218,245
=============
SHARES OUTSTANDING
(unlimited number of $.01 par value shares of Beneficial Interest authorized) 9,419,502
NET ASSET VALUE, offering and redemption price per share--Note 3(d) $17.01
========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED MAY 31, 1998
INVESTMENT INCOME
<S> <C> <C>
INCOME Interest Income $ 8,948,106
EXPENSES: Management fee--Note 3(a) $ 928,443
Shareholder servicing costs--Note 3(b) 201,392
Professional fees 42,864
Trustees' fees and expenses--Note 3(c) 21,152
Registration fees 16,334
Custodian fees 16,193
Prospectus and shareholders' reports 10,994
Loan commitment fees--Note 2 1,833
Miscellaneous 12,625
____________
Total Expenses 1,251,830
____________
INVESTMENT INCOME--NET 7,696,276
____________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments $ 1,757,937
Net realized gain (loss) on financial futures (144,812)
____________
Net Realized Gain (Loss) 1,613,125
Net unrealized appreciation (depreciation) on investments
(including $81,250 net unrealized appreciation on
financial futures) 4,856,951
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 6,470,076
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $14,166,352
============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
May 31, 1998 May 31, 1997
_____________ _____________
<S> <C> <C>
OPERATIONS:
Investment income--net $ 7,696,276 $ 8,034,509
Net realized gain (loss) on investments 1,613,125 506,950
Net unrealized appreciation (depreciation) on investments 4,856,951 3,622,119
_____________ _____________
Net Increase (Decrease) in Net Assets Resulting from Operations 14,166,352 12,163,578
_____________ _____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net (7,675,059) (8,013,173)
Net realized gain on investments (15,621) --
_____________ _____________
Total Dividends (7,690,680) (8,013,173)
_____________ _____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold 29,221,354 32,801,752
Dividends reinvested 5,583,861 5,947,192
Cost of shares redeemed (32,442,095) (43,241,424)
_____________ _____________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions 2,363,120 (4,492,480)
_____________ _____________
Total Increase (Decrease) in Net Assets 8,838,792 (342,075)
NET ASSETS:
Beginning of Period 151,379,453 151,721,528
_____________ _____________
End of Period $160,218,245 $151,379,453
============= =============
Undistributed investment income--net $ 42,553 $ 21,336
_____________ _____________
CAPITAL SHARE TRANSACTIONS: Shares Shares
_____________ _____________
Shares sold 1,734,657 2,034,296
Shares issued for dividends reinvested 332,552 366,496
Shares redeemed (1,930,393) (2,682,998)
_____________ _____________
Net Increase (Decrease) in Shares Outstanding 136,816 (282,206)
============= =============
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: 1998 1997 1996 1995 1994
______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.31 $15.86 $16.25 $16.03 $17.01
______ ______ ______ ______ ______
Investment Operations:
Investment income--net .83 .85 .88 .91 .91
Net realized and unrealized gain (loss)
on investments .70 .45 (.39) .22 (.52)
______ ______ ______ ______ ______
Total from Investment Operations 1.53 1.30 .49 1.13 .39
______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net (.83) (.85) (.88) (.91) (.92)
Dividends from net realized gain on investments -- -- -- -- (.21)
Dividends in excess of net realized gain
on investments -- -- -- -- (.24)
______ ______ ______ ______ ______
Total Distributions (.83) (.85) (.88) (.91) (1.37)
______ ______ ______ ______ ______
Net asset value, end of period $17.01 $16.31 $15.86 $16.25 $16.03
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN 9.52% 8.37% 3.06% 7.39% 2.07%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .81% .79% .79% .80% .80%
Ratio of net investment income
to average net assets 4.97% 5.27% 5.43% 5.77% 5.30%
Portfolio Turnover Rate 28.53% 38.29% 60.67% 38.34% 29.73%
Net assets, end of period (000's Omitted) $160,218 $151,379 $151,722 $160,750 $168,473
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
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. Under the terms of the custodian
agreement, the Fund received net earnings credits of $8,347 during the period
ended May 31, 1998 based on available cash balances left on deposit. Income
earned under this arrangement is included in interest income.
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, if any,
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.
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
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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. During the period ended May 31, 1998, 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, 1998, the Fund was charged $107,112 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. During the period
ended May 31, 1998, the Fund was charged $68,530 pursuant to the transfer agency
agreement.
(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.
(D) A 1% redemption fee is charged and retained by the Fund 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, 1998,
redemption fees amounted to $70.
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, 1998, amounted to $51,900,347 and $42,097,489, 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.
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. At May 31, 1998, there were no financial futures contracts
outstanding.
(B) At May 31, 1998, accumulated net unrealized appreciation on investments
was $10,088,511 consisting of $10,219,619 gross unrealized appreciation and
$131,108 gross unrealized depreciation.
At May 31, 1998, 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
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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, 1998, 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, 1998 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, 1998, 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, 1998
DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND
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IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Fund hereby designates all the
dividends paid from investment-income net during its fiscal year ended May 31,
1998 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 1998 calendar year on Form 1099-DIV
which will be mailed by January 31, 1999.
[Dreyfus lion "d" logo] (reg.tm)
[Dreyfus logo] (reg.tm)
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. 267AR985
Massachusetts
Tax Exempt
Bond Fund
Annual Report
May 31, 1998
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
5/31/88 10,000 10,000
5/31/89 11,151 11,039
5/31/90 11,967 11,655
5/31/91 13,173 12,611
5/31/92 14,466 13,950
5/31/93 16,197 15,522
5/31/94 16,597 15,843
5/31/95 18,109 17,013
5/31/96 18,937 17,533
5/31/97 20,505 18,999
5/31/98 22,429 20,809
*Source: Lehman Brothers
