<PAGE>
Dreyfus
Massachusetts
Tax Exempt
Bond Fund
Semi-Annual
Report
November 30, 1997
<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 the six-month period ended November 30, 1997. Your Fund
produced a total return, including share price changes and dividend income, of
5.44%.* The Fund's tax-free annualized distribution rate per share was 5.01%.**
Economic Review
Almost everything went right for the U.S. economy over the reporting period.
In its seventh year of expansion, the economy showed no sign of an upsurge in
inflation resulting from tightening labor markets. With the unemployment rate at
its lowest level in almost a decade, investors had been concerned that wage
gains might result in higher levels of inflation and cause the Federal Reserve
Board (the "Fed") to again raise interest rates. Given the longevity of our
economic recovery, the Fed's monetary policymakers apparently were hoping that a
cyclical easing in the economic growth rate would help dampen any incipient
inflationary pressure. Recent turmoil in the financial markets of Asia and Latin
America has raised prospects for a slowdown in U.S. exports as those nations
shore up their financial systems. If this were to occur, the diminished demand
for U.S. goods overseas could be a drag on domestic economic growth. What is all
but certain is that the Fed is reluctant to further unsettle world financial
markets by raising interest rates over the near term.
Indicators of future economic conditions showed high levels of consumer
optimism and pointed toward continued growth. Consumers' spirits have been
lifted by an unemployment rate at a quarter-century low (4.7% at the end of the
reporting period), and core inflation, which excludes food and energy price
changes, at the 2% level. The Conference Board, a business-sponsored research
group, recently reported that its Consumer Confidence Index hit a new high for
this economic expansion. Since consumers account for two thirds of all economic
activity, their confidence in the economy is an important indicator of future
conditions. Another important index of future economic conditions, the Index of
Leading Economic Indicators (also a Conference Board index), implied continued
growth. Government reports of personal income and consumer spending showed
healthy rates of increase as well.
The production side of the economy continued its robust advance. Industrial
output rose consistently, and while the factory utilization rate (a potential
harbinger of production bottlenecks and price pressures) also increased, there
was little evidence of producer-generated inflation. Additional good news
regarding inflation came from the report that the productivity of U.S. workers
rose at its fastest pace in five years during the third quarter of 1997. This
increase in worker efficiency helped push down unit labor costs and eased
concerns that labor costs, despite the tight labor market, would lead to higher
inflation.
The interplay between worker productivity and worker wage increases does much
in determining the future course of inflation. We continue to monitor that
closely, along with developments in the international financial arena. The
recent international turbulence underscored the close economic relationships
that exist among all countries, particularly in this age of multinational
companies and pervasive global capitalism.
Market Environment
While early concerns over mounting inflationary pressures did send interest
rates to their highest levels of the year at the start of this period, there
quickly emerged a school of thought owing to the evolution of a "new paradigm"
of economic growth. Proponents of this concept hold to the notion that the
economy could operate at or near full capacity with low levels of unemployment
without the commensurate increase in the rate of inflation we have come to
expect from past experiences due to the combined forces of technological
advances which have significantly increased the productivity of the nation's
labor force, and global competition emanating from the world's emerging
economies. As this concept gathered a following among market participants,
prices rose and yields declined. In his July Humphrey Hawkins
<PAGE>
testimony before Congress, however, Federal Reserve Board Chairman Alan
Greenspan called to question this concept when compared to the weight of
evidence posed by recent economic history. As a result of his comments, bond
prices sold off sharply in early August as market participants returned a yield
premium to valuations in anticipation of a shift to a less accommodative stance
in monetary policy.
The subsequent rise in interest rates proved to be relatively muted, however,
as attention soon shifted from domestic economic affairs to the rolling series
of crises sweeping the emerging markets of Southeast Asia which culminated in
the formal devaluation of the currencies of Thailand, Malaysia and Indonesia.
Concerned over the potentially deflationary impact these devaluations would have
on prices around the globe, investors began to accumulate fixed income
securities as an alternative to the resulting volatility of the equity markets.
As it became apparent that larger, more established Asian economies like those
of South Korea and Japan were not immune to the troubles sweeping the region,
the scope of the problem expanded and the demand for the perceived "safe haven"
of U.S. fixed income securities pushed yields to their lowest levels of the
year.
While buoyed by the same factors throughout the most recent period, municipal
bonds underperformed their taxable counterparts on a relative basis. The reason
for this 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 underperformance during the period now places municipal bonds as
inexpensive versus taxable alternatives.
Portfolio Overview
In managing the Fund, cash reserve positions were drawn to levels only
necessary to fulfill portfolio liquidity requirements. Assets were directed
toward higher quality securities offering generous levels of tax-free income as
well as the potential for significant principal appreciation as yields declined.
In this way, portfolio duration was extended to make it more sensitive to a
declining interest rate environment. Throughout this process we continued to
strive to enhance the liquidity and performance characteristics of the Fund by
extending the optional redemption provisions 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,
/s/ Richard J. Moynihan
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
December 18, 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. Some income may be subject to the Federal
Alternative Minimum Tax (AMT) for certain shareholders.
<PAGE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- ------------------------------------------------------------------------------
Statement of Investments November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Long-Term Municipal Investments--93.5% Amount Value
- ------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Massachusetts--88.6%
Boston 5%, 11/1/2016 (Insured; FGIC)........................................... $ 2,500,000 $ 2,443,075
Boston -- Mount Pleasant Housing Development Corp., MFHR, Refunding
6.75%, 8/1/2023 (Insured; FHA).............................................. 1,650,000 1,746,773
Haverhill 5%, 6/15/2017 (Insured; FGIC)........................................ 1,500,000 1,465,215
Mansfield, Municipal Purpose Loan 5.125%, 8/15/2017 (Insured; FGIC)............ 1,685,000 1,669,195
Mashpee, Municipal Purpose Loan 5.50%, 2/1/2017 (Insured; MBIA) (a)............ 2,525,000 2,585,625
Massachusetts Bay Transportation Authority, General Transportation System
Refunding 6.20%, 3/1/2016................................................... 4,225,000 4,753,632
Massachusetts Commonwealth, Consolidated Loan
5.625%, 8/1/2013 (Insured; MBIA)............................................ 7,140,000 7,437,452
Massachusetts Education Loan Authority, Education Loan Revenue
8%, 6/1/2002 (LOC; Rabobank Nederland) (b).................................. 660,000 676,434
Massachusetts Health and Educational Facilities Authority, Revenue:
(Faulkner Hospital) 6%, 7/1/2013............................................ 2,000,000 2,051,280
(Massachusetts General Hospital):
6.25%, 7/1/2020 (Insured; AMBAC)......................................... 3,500,000 3,753,400
Refunding 6%, 7/1/2015 (Insured; AMBAC).................................. 2,000,000 2,096,640
(Mclean Hospital) 6.50%, 7/1/2010 (Insured; FGIC)........................... 1,000,000 1,088,370
(Medical Academic & Scientific) 6.625%, 1/1/2015 ........................... 3,000,000 3,275,520
(Mount Auburn Hospital) 6.30%, 8/15/2024 (Insured; MBIA) ................... 5,000,000 5,417,250
(New England Medical Center Hospitals) 6.50%, 7/1/2012 (Insured; FGIC)...... 2,000,000 2,176,740
(Newton - Wellesley Hospital) 5.875%, 7/1/2015 (Insured; MBIA).............. 2,000,000 2,108,560
(Refunding - Baystate Medical Center) 6%, 7/1/2015 (Insured; FGIC).......... 1,140,000 1,201,651
(Refunding - Berklee College of Music):
5%, 10/1/2018 (Insured; MBIA)............................................ 1,075,000 1,050,436
5.10%, 10/1/2027 (Insured; MBIA)......................................... 6,100,000 5,926,577
(Refunding - Daughters of Charity) 6.10%, 7/1/2014.......................... 1,100,000 1,172,545
(Refunding - Milton Hospital) 7%, 7/1/2016 (Insured; MBIA).................. 1,000,000 1,078,790
(Sisters Providence Health System) 6.625%, 11/15/2022....................... 3,510,000 3,734,605
Massachusetts Housing Finance Agency, Revenue:
Housing Projects, Refunding:
6.30%, 10/1/2013 (Insured; AMBAC)........................................ 1,000,000 1,057,590
6.375%, 4/1/2021......................................................... 4,300,000 4,529,663
Multi-Family Residential Housing 9.60%, 8/1/2022............................ 1,745,000 1,757,669
Rental Housing:
6.50%, 7/1/2025 (Insured; AMBAC)......................................... 1,500,000 1,607,085
6.45%, 1/1/2036 (Insured; AMBAC)......................................... 2,135,000 2,287,759
6%, 7/1/2037 (Insured; AMBAC)............................................ 2,650,000 2,724,545
Refunding 6.65%, 7/1/2019 (Insured; AMBAC)............................... 2,475,000 2,654,809
Single-Family Housing 6.35%, 6/1/2017....................................... 2,700,000 2,868,156
Massachusetts Industrial Finance Agency, Revenue:
(Babson College):
5.375%, 10/1/2017........................................................ 2,125,000 2,136,858
5.25%, 10/1/2027......................................................... 3,200,000 3,124,352
</TABLE>
<PAGE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Long-Term Municipal Investments (continued) Amount Value
- ------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Massachusetts (continued)
Massachusetts Industrial Finance Agency, Revenue (continued):
Electrical Utility (Nantucket Electric Co.) 8.50%, 3/1/2016................. $ 2,945,000 $ 3,189,258
(Refunding - College of the Holy Cross) 5.50%, 3/1/2020 (Insured; MBIA)..... 1,870,000 1,891,748
(Refunding - Holy Cross College):
6%, 11/1/2002............................................................ 400,000 429,420
6.375%, 11/1/2015 (Prerefunded 11/1/2002) (c) ........................... 2,000,000 2,209,620
(Refunding - Merrimack College):
5%, 7/1/2017 (Insured; MBIA)............................................. 1,000,000 976,760
5%, 7/1/2027 (Insured; MBIA)............................................. 4,400,000 4,222,724
(Refunding-- Phillips Academy) 5.375%, 9/1/2023............................. 4,330,000 4,335,542
(Refunding-- Worcester Polytechnic Institute) 5.125%, 9/1/2017 (Insured; MBIA) 1,000,000 988,170
Massachusetts Municipal Wholesale Electric Co.
Power Supply System Revenue, Refunding:
6.40%, 7/1/2002.......................................................... 400,000 432,136
6.125%, 7/1/2019 (Insured; MBIA)......................................... 1,000,000 1,059,420
Massachusetts Port Authority, Revenue:
5%, 7/1/2027................................................................ 2,500,000 2,395,650
Special Facilites (US Air Project) 5.75%, 9/1/2016 (Insured; MBIA).......... 5,000,000 5,194,700
Special Project (Harborside Hyatt) 10%, 3/1/2026............................ 8,000,000 8,935,760
Massachusetts Turnpike Authority, Metropolitan Highway Systems Revenue
Zero Coupon, 1/1/2028 (Insured; MBIA)....................................... 20,000,000 4,093,200
Massachusetts Water Pollution Abatement Trust
(Pool Loan Program) 5.625%, 2/1/2017........................................ 5,000,000 5,240,300
North Attleborough 5.25%, 3/1/2017 (Insured; AMBAC)............................ 1,680,000 1,688,921
Northampton (School Project Loan Act of 1948) 5.75%, 5/15/2016 (Insured; MBIA). 1,520,000 1,591,774
South Essex Sewage District, Refunding:
5.25%, 6/15/2018 (Insured; MBIA)............................................ 2,720,000 2,719,918
5.25%, 6/15/2024 (Insured; MBIA)............................................ 2,810,000 2,782,125
Southbridge 6.375%, 1/1/2012 (Insured; AMBAC) ................................. 1,000,000 1,082,850
Uxbridge, Municipal Purpose Loan 5.40%, 11/15/2016 (Insured; MBIA)............. 1,600,000 1,623,776
U.S. Related--4.9%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................... 3,000,000 3,260,460
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue
5%, 7/1/2028 (Insured; AMBAC) (d)........................................... 2,500,000 2,431,175
Virgin Islands Water and Power Authority, Electric System Revenue
7.40%, 7/1/2011............................................................. 1,915,000 2,071,992
------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $139,847,149)...................... $148,505,650
============
</TABLE>
<PAGE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Short-Term Municipal Investments--6.5% Amount Value
- ------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Massachusetts:
Massachusetts Health and Educational Facilities Authority, Revenue:
(Saint Elizabeth's Hospital) 3.61% (Insured; FSA) (f)....................... $ 3,650,000 $ 3,650,000
VRDN (Capital Assets Program):
3.75% (Insured; MBIA) (e) ............................................... 2,000,000 2,000,000
3.80% (LOC; First Chicago International) (b,e)........................... 4,700,000 4,700,000
------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $10,350,000)...................... $ 10,350,000
============
TOTAL INVESTMENTS--100.0% (cost $150,197,149)................................... $158,855,650
============
</TABLE>
<PAGE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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
VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
Summary of Combined Ratings (Unaudited)
- ----------------------------------------------------------------------------------------------------------------
Fitch (g) or Moody's or Standard & Poor's Percentage of Value
- ------ ------- ---------------- -----------------
<S> <C> <C> <C>
AAA Aaa AAA 60.1%
AA Aa AA 6.8
A A A 14.0
BBB Baa BBB 7.3
F-1+ & F-1 MIG1, VMIG1 & P1 SP1 & A1 4.2
Not Rated (h) Not Rated (h) Not Rated (h) 7.6
------
100.0%
======
</TABLE>
Notes to Statement of Investments:
- ----------------------------------------------------------------------------
(a) Wholly held by the custodian in a segregated account as collateral for a
delayed-delivery security.
(b) Secured by letters of credit.
(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) Purchased on a delayed-delivery basis.
(e) 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.
(f) Inverse floater security - the interest rate is subject to change
periodically.
(g) Fitch currently provides creditworthiness information for a limited number
of investments.
(h) 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.
(i) At November 30, 1997, 32.6% of the Fund's net assets are insured by MBIA.
See notes to financial statements.
<PAGE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- ------------------------------------------------------------------------------
Statement of Assets and Liabilities November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Cost Value
------------ ------------
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $150,197,149 $158,855,650
Cash............................................. 594,924
Interest receivable.............................. 2,546,358
Prepaid expenses ................................ 4,514
------------
162,001,446
------------
LIABILITIES: Due to The Dreyfus Corporation and affiliates.... 62,457
Payable for investment securities purchased...... 7,877,938
Payable for shares of Beneficial Interest redeemed 9,676
Accrued expenses................................. 19,881
------------
7,969,952
------------
NET ASSETS..................................................................... $154,031,494
============
REPRESENTED BY: Paid-in capital.................................. $145,526,318
Accumulated undistributed investment income--net. 41,848
Accumulated net realized gain (loss) on investments (195,173)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4(b)...................... 8,658,501
------------
NET ASSETS..................................................................... $154,031,494
============
SHARES OUTSTANDING
(unlimited number of $.01 par value shares of Beneficial Interest authorized).. 9,182,101
NET ASSET VALUE, offering and redemption price per share--Note 3(d)............ $16.78
======
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- ------------------------------------------------------------------------------
Statement of Operations Six Months Ended November 30, 1997 (Unaudited)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME Interest Income............................ $4,474,334
EXPENSES: Management fee--Note 3(a).................. $458,600
Shareholder servicing costs--Note 3(b)..... 70,391
Professional fees.......................... 24,478
Trustee's fees and expenses--Note 3(c)..... 12,345
Registration fees.......................... 10,121
Custodian fees............................. 7,920
Prospectus and shareholders' reports....... 4,664
Loan commitment fees--Note 2............... 858
Miscellaneous.............................. 6,586
--------
Total Expenses........................... 595,963
----------
INVESTMENT INCOME--NET................................................... 3,878,371
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments.... $997,384
Net realized gain (loss) on financial futures (144,813)
--------
Net Realized Gain (Loss)................. 852,571
Net unrealized appreciation (depreciation) on
investments (including $81,250 net unrealized
appreciation on financial futures)....... 3,426,941
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................... 4,279,512
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $8,157,883
==========
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- --------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended
November 30, 1997 Year Ended
(Unaudited) May 31, 1997
------------------ -------------
<S> <C> <C>
OPERATIONS:
Investment income--net................................................. $ 3,878,371 $ 8,034,509
Net realized gain (loss) on investments................................ 852,571 506,950
Net unrealized appreciation (depreciation) on investments.............. 3,426,941 3,622,119
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations..... 8,157,883 12,163,578
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net................................................. (3,857,859) (8,013,173)
------------ ------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold.......................................... 8,016,130 32,801,752
Dividends reinvested................................................... 2,798,867 5,947,192
Cost of shares redeemed................................................ (12,462,980) (43,241,424)
------------ ------------
Increase (Decrease) in Net Assets from Beneficial Interest Transactions (1,647,983) (4,492,480)
------------ ------------
Total Increase (Decrease) in Net Assets.......................... 2,652,041 (342,075)
NET ASSETS:
Beginning of Period.................................................... 151,379,453 151,721,528
------------ ------------
End of Period.......................................................... $154,031,494 $151,379,453
============ ============
Undistributed investment income--net...................................... $ 41,848 $ 21,336
------------ ------------
Shares Shares
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................ 483,081 2,034,296
Shares issued for dividends reinvested................................. 168,338 366,496
Shares redeemed........................................................ (752,004) (2,682,998)
------------ ------------
Net Increase (Decrease) in Shares Outstanding....................... (100,585) (282,206)
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
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.
<TABLE>
<CAPTION>
Six Months Ended Year Ended May 31,
November 30, 1997 --------------------------------------------------
PER SHARE DATA: (Unaudited) 1997 1996 1995 1994 1993
------------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period. $16.31 $15.86 $16.25 $16.03 $17.01 $16.20
------ ------ ------ ------ ------ ------
Investment Operations:
Investment income--net................ .42 .85 .88 .91 .91 .97
Net realized and unrealized gain (loss)
on investments.................... .47 .45 (.39) .22 (.52) .81
------ ------ ------ ------ ------ ------
Total from Investment Operations..... .89 1.30 .49 1.13 .39 1.78
------ ------ ------ ------ ------ ------
Distributions:
Dividends from investment income--net. (.42) (.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.................. (.42) (.85) (.88) (.91) (1.37) (.97)
------ ------ ------ ------ ------ ------
Net asset value, end of period....... $16.78 $16.31 $15.86 $16.25 $16.03 $17.01
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN................. 10.85%(1) 8.37% 3.06% 7.39% 2.07% 11.27%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .78%(1) .79% .79% .80% .80% .81%
Ratio of net investment income
to average net assets............. 5.07%(1) 5.27% 5.43% 5.77% 5.30% 5.83%
Portfolio Turnover Rate.............. 13.81%(2) 38.29% 60.67% 38.34% 29.73% 85.29%
Net Assets, end of period (000's Omitted) $154,031 $151,379 $151,722 $160,750 $168,473 $183,601
<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. 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.
<PAGE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 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 November
30, 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
November 30, 1997, the Fund was charged $23,638 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 November 30, 1997, the Fund was charged $34,653 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
Exchange 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 November 30, 1997,
redemption fees amounted to $54.
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
November 30, 1997, amounted to $25,720,696 and $19,979,148, 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,
<PAGE>
Dreyfus Massachusetts Tax Exempt Bond Fund
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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
November 30, 1997, there were no financial futures contracts outstanding.
(b) At November 30, 1997, accumulated net unrealized appreciation on
investments was $8,658,501 consisting of $8,699,064 gross unrealized
appreciation and $40,563 gross unrealized depreciation.
At November 30, 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).
<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 WashingtonStreet
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 267SA9711
