Dreyfus
Massachusetts Tax
Exempt Bond Fund
ANNUAL REPORT May 31, 2000
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE FUND
--------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Fund Performance
7 Statement of Investments
11 Statement of Assets and Liabilities
12 Statement of Operations
13 Statement of Changes in Net Assets
14 Financial Highlights
15 Notes to Financial Statements
19 Report of Independent Auditors
20 Important Tax Information
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus Massachusetts
Tax Exempt Bond Fund
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Massachusetts Tax
Exempt Bond Fund, covering the 12-month period from June 1, 1999 through May 31,
2000. Inside you' ll find valuable information about how the fund was managed
during the reporting period, including a discussion with the fund's portfolio
manager, Joseph Darcy.
When the reporting period began, evidence had emerged that the U.S. economy was
growing strongly in an environment characterized by high levels of consumer
spending and low levels of unemployment. Concerns that inflationary pressures
might reemerge caused the Federal Reserve Board to raise short-term interest
rates six times during the reporting period, for a total increase of 1.75
percentage points. Despite an encouraging rally during the first quarter of
2000, higher interest rates generally led to an erosion of municipal bond
prices.
We appreciate your confidence over the past year and we look forward to your
continued participation in Dreyfus Massachusetts Tax Exempt Bond Fund.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
June 15, 2000
DISCUSSION OF FUND PERFORMANCE
Joseph Darcy, Portfolio Manager
How did Dreyfus Massachusetts Tax Exempt Bond Fund perform during the period?
For the 12-month reporting period ended May 31, 2000, Dreyfus Massachusetts Tax
Exempt Bond Fund achieved a -2.56% total return.(1) In comparison, the fund's
peer group, as measured by the Lipper Massachusetts Municipal Debt Funds
category average, achieved a -3.20% total return for the same period.(2)
We attribute the fund's negative return to a difficult investment environment.
More specifically, the fund was adversely affected by higher interest rates when
the Federal Reserve Board (the "Fed") tightened monetary policy six times during
the reporting period in an attempt to relieve inflationary pressures.
What is the fund's investment approach?
Our goal is to seek as high a level of federal and Massachusetts state
tax-exempt income as is practical from a diversified portfolio of municipal
bonds. To achieve this objective, we employ two primary strategies. First, we
attempt to add value by evaluating interest-rate trends and supply and demand
factors. Based on that assessment, we select the individual tax-exempt bonds
that we believe are most likely to provide the highest returns with the least
risk. We look at such criteria as the bond's yield, price, age, creditworthiness
of its issuer and any provisions for early redemption.
Second, we actively manage the portfolio's average duration in anticipation of
temporary supply and demand changes. If we expect the supply of newly issued
bonds to increase temporarily, we may reduce the portfolio's average duration to
make cash available for the purchase of higher yielding securities. Conversely,
if we expect demand for The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
municipal bonds to surge at a time when we anticipate little issuance, we may
increase the portfolio's average duration to maintain current yields for as long
as practical. At other times, we try to maintain a "neutral" average duration of
about seven years.
What other factors influenced the fund's performance?
As mentioned earlier, the fund was influenced by the changing market conditions
over the past year. Although the first quarter of 2000 experienced an
encouraging municipal bond market rally, the end of 1999 and the two months
following the first quarter rally of 2000 saw more difficult investment
environments.
When the reporting period began on June 1, 1999, investors had become concerned
that strong economic growth might rekindle long-dormant inflationary pressures,
especially wages in a tight job market. In an attempt to ease these pressures,
the Fed raised short-term interest rates six times during the reporting period,
causing most bond prices to fall, including the fund' s holdings. These
interest-rate hikes accounted for a total increase of 1.75 percentage points
since mid-1999.
In addition, municipal bond prices fell because of adverse supply and demand
influences. For a variety of reasons, institutional investors such as insurance
companies and mutual funds have recently participated less in the tax-exempt
bond market. Despite strong demand from individual investors, the absence of
institutional buyers helped reduce overall demand and, therefore, drove
municipal bond prices down.
During the first few months of 2000, issuance of Massachusetts municipal bonds
has declined compared to the same period one year ago. Some Massachusetts
municipalities that refinanced bond issues during the low interest-rate
environment over the past several years are expected to be absent from this
year' s municipal bond marketplace. This relative lack of supply has helped
support prices of Massachusetts municipal bonds, including those held by the
fund.
What is the fund's current strategy?
After adopting a relatively defensive posture for most of the reporting period
as interest rates rose, we have recently adopted a somewhat more aggressive
strategy. This is due to the fact that we believe that current Massachusetts
municipal bond prices already reflect investors' expectations that the Fed is
likely to raise interest rates at least one more time. Accordingly, we extended
the fund' s average duration -- a measure of sensitivity to changing interest
rates -- to approximately nine years as of May 31, 2000, which is modestly
longer than most other Massachusetts tax-exempt bond funds. This duration
management strategy is designed to help us lock in prevailing yields and
participate in the potential for future capital appreciation.
In terms of our security selection strategy, we have attempted to increase the
diversity of our portfolio. We have added a number of bonds from local issuers,
complementing bonds already in the portfolio that were issued by the
commonwealth. We have focused primarily on highly rated bonds that are backed by
revenues from specific essential services projects, such as waterworks and sewer
facilities. We also favored general obligation bonds that are backed by their
issuers' general taxing authority.
June 15, 2000
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. INCOME MAY BE SUBJECT TO STATE AND LOCAL
TAXES FOR NON-MASSACHUSETTS RESIDENTS, AND SOME INCOME MAY BE SUBJECT TO THE
FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF
ANY, ARE FULLY TAXABLE.
(2) SOURCE: LIPPER ANALYTICAL SERVICES, INC.
The Fund
<TABLE>
<CAPTION>
FUND PERFORMANCE
Comparison of change in value of $10,000 investment in Dreyfus Massachusetts Tax
Exempt Bond Fund and the Lehman Brothers Municipal Bond Index
--------------------------------------------------------------------------------
Average Annual Total Returns AS OF 5/31/00
1 Year 5 Years 10 Years
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FUND (2.56)% 4.36% 6.10%
((+)) SOURCE: LIPPER ANALYTICAL SERVICES, INC.
</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 5/31/90 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
ARE REINVESTED.
THE FUND INVESTS PRIMARILY IN MASSACHUSETTS MUNICIPAL SECURITIES AND ITS
PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT FEES AND EXPENSES. THE
LEHMAN BROTHERS MUNICIPAL BOND INDEX IS NOT LIMITED TO INVESTMENTS PRINCIPALLY
IN MASSACHUSETTS MUNICIPAL OBLIGATIONS AND DOES NOT TAKE INTO ACCOUNT CHARGES,
FEES AND OTHER EXPENSES. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX, UNLIKE THE
FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM,
INVESTMENT-GRADE, GEOGRAPHICALLY UNRESTRICTED TAX-EXEMPT BOND MARKET, CALCULATED
BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE MUNICIPAL MARKET
OVERALL. THESE FACTORS CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR
UNDERPERFORMING THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE,
INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL
HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS
MAY 31, 2000
Principal
LONG-TERM MUNICIPAL INVESTMENTS--97.6% Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS--94.2%
<S> <C> <C>
Barnstable 4.75%, 3/15/2017 2,645,000 2,294,194
Boston 5.75%, 2/1/2020 3,945,000 3,865,074
Boston Water and Sewer Commission, Revenue
5%, 11/1/2028 (Insured; FGIC) 2,500,000 2,118,050
Boston - Mount Pleasant Housing Development Corp., MFHR
6.75%, 8/1/2023 (Insured; FHA) 1,590,000 1,634,981
Haverhill 5%, 6/15/2017 (Insured; FGIC) 1,500,000 1,346,430
Lynn 5%, 2/15/2017 (Insured; MBIA) 2,360,000 2,121,003
Mansfield, Municipal Purpose Loan 5.125%,
8/15/2017 (Insured; FGIC) 1,685,000 1,540,815
Massachusetts College Building Authority, Project Revenue:
Zero Coupon, 5/1/2026 (Insured; MBIA) 8,510,000 1,735,444
Zero Coupon, 5/1/2027 (Insured; MBIA) 1,510,000 289,241
Zero Coupon, 5/1/2028 (Insured; MBIA) 11,790,000 2,115,244
Massachusetts Bay Transportation Authority,
General Transportation System:
6.20%, 3/1/2016 1,725,000 1,821,617
4.50%, 3/1/2026 (Insured; MBIA) 2,500,000 1,947,275
Massachusetts Development Finance Agency, Revenue:
(Assumption College) 6%, 3/1/2030 2,605,000 2,501,920
(Boston University) 5.45%, 5/15/2059 2,500,000 2,091,050
(College of Pharmacy) 6.75%, 7/1/2030 2,000,000 1,985,840
(Regis College) 5.25%, 10/1/2018 1,240,000 1,047,639
Massachusetts Educational Financing Authority,
Education Loan Revenue
5.125%, 12/1/2014 (Insured; MBIA) 3,000,000 2,739,180
Massachusetts Health and Educational Facilities Authority,
Revenue:
(Baystate Medical Center) 6%, 7/1/2015 (Insured; FGIC) 1,140,000 1,144,628
(Brandeis University) 4.75%, 10/1/2028 (Insured; MBIA) 2,500,000 2,015,400
(Daughters of Charity) 6.10%, 7/1/2014
(Prerefunded; 7/1/2006) 1,100,000 (a) 1,150,138
(Harvard University) 6%, 7/1/2035 2,500,000 2,504,650
(Massachusetts General Hospital):
6.25%, 7/1/2020 (Insured; AMBAC)
(Prerefunded; 7/1/2003) 3,500,000 (a) 3,677,870
6%, 7/1/2015 (Insured; AMBAC) 2,000,000 2,008,120
(Massachusetts Institute of Technology) 5.20%, 1/1/2028 5,000,000 4,481,500
(Mclean Hospital) 6.50%, 7/1/2010 (Insured; FGIC)
(Prerefunded; 7/1/2002) 1,000,000 (a) 1,048,030
(Medical Academic & Scientific) 6.625%, 1/1/2015 3,000,000 2,997,270
(Milton Hospital) 7%, 7/1/2016 (Insured; MBIA) 1,000,000 1,021,600
(Mount Auburn Hospital) 6.30%, 8/15/2024 (Insured; MBIA) 5,000,000 5,026,150
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS (CONTINUED)
Massachusetts Health and Educational Facilities Authority,
Revenue (continued):
(New England Medical Center Hospitals)
6.50%, 7/1/2012 (Insured; FGIC) 2,000,000 2,068,820
(Newton - Wellesley Hospital)
5.875%, 7/1/2015 (Insured; MBIA) 2,000,000 1,991,960
(Sisters Providence Health System) 6.625%, 11/15/2022 3,510,000 3,692,766
Massachusetts Housing Finance Agency, Revenue:
Housing Projects:
6.30%, 10/1/2013 (Insured; AMBAC) 1,000,000 1,021,560
6.375%, 4/1/2021 4,300,000 4,334,099
Rental Housing:
6.65%, 7/1/2019 (Insured; AMBAC) 2,215,000 2,266,964
6.50%, 7/1/2025 (Insured; AMBAC) 1,500,000 1,527,105
6.45%, 1/1/2036 (Insured; AMBAC) 2,135,000 2,167,516
6%, 7/1/2037 (Insured; AMBAC) 2,650,000 2,514,532
Single-Family Housing 6.35%, 6/1/2017 2,675,000 2,697,497
Massachusetts Industrial Finance Agency, Revenue:
(Babson College):
5.375%, 10/1/2017 2,125,000 1,924,464
5.25%, 10/1/2027 2,950,000 2,501,335
Electrical Utility (Nantucket Electric Co.) 8.50%, 3/1/2016 2,750,000 2,851,228
(Holy Cross College):
6%, 11/1/2002 400,000 409,300
6.375%, 11/1/2015 (Prerefunded; 11/1/2002) 2,000,000 (a) 2,098,900
(Merrimack College) 5%, 7/1/2017 (Insured; MBIA) 1,000,000 894,480
(Ogden Haverhill Project) 5.60%, 12/1/2019 1,000,000 857,010
Parking Facility (Avon Associates LLC)
5.375%, 4/1/2020 (Insured; MBIA) 1,750,000 1,596,578
(Worcester Polytechnic Institute)
5.125%, 9/1/2017 (Insured; MBIA) 1,000,000 914,300
Massachusetts Municipal Wholesale Electric Company,
Power Supply System Revenue:
6.40%, 7/1/2002 400,000 408,968
6.125%, 7/1/2019 (Insured; MBIA) 1,000,000 1,007,100
Massachusetts Port Authority, Revenue:
5%, 7/1/2023 1,315,000 1,130,506
Special Facilities (US Air Project)
5.75%, 9/1/2016 (Insured; MBIA) 5,000,000 4,903,850
Special Project (Harborside Hyatt) 10%, 3/1/2026 8,000,000 8,337,200
Massachusetts Water Pollution Abatement Trust
(Pool Loan Program) 5.625%, 2/1/2017 5,000,000 4,909,500
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS (CONTINUED)
Middleborough:
5.60%, 1/15/2013 (Insured; FGIC) 1,210,000 1,212,481
5.60%, 1/15/2014 (Insured; FGIC) 1,450,000 1,443,475
5.60%, 1/15/2015 (Insured; FGIC) 1,025,000 1,015,150
North Attleborough 5.25%, 3/1/2017 (Insured; AMBAC) 1,680,000 1,563,794
Northampton (School Project Loan Act of 1948)
5.75%, 5/15/2016 (Insured; MBIA) 1,520,000 1,514,452
South Essex Sewerage District
5.25%, 6/15/2018 (Insured; MBIA) 2,720,000 2,504,005
Southbridge 6.375%, 1/1/2012 (Insured; AMBAC) 1,000,000 1,031,490
U.S. RELATED-3.4%
Guam Airport Authority, Revenue 6.70%, 10/1/2023 3,000,000 3,023,790
Virgin Islands Water and Power Authority,
Electric System Revenue
7.40%, 7/1/2011 (Prerefunded 7/1/2001) 1,690,000 (a) 1,756,413
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $136,889,549) 134,362,941
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SHORT-TERM MUNICIPAL INVESTMENTS--2.2%
------------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS:
Massachusetts Health and Educational Facilities Authority, Revenue
VRDN (Capital Asset Program):
4.25%, (Insured; MBIA) 1,000,000 (b) 1,000,000
4.45%, (Insured; MBIA) 2,000,000 (b) 2,000,000
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $3,000,000) 3,000,000
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TOTAL INVESTMENTS (cost $139,889,549) 99.8% 137,362,941
CASH AND RECEIVABLES (NET) .2% 223,658
NET ASSET 100.0% 137,586,599
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
</TABLE>
Summary of Abbreviations
AMBAC American Municipal Bond
Assurance Corporation
FGIC Financial Guaranty Insurance
Company
FHA Federal Housing Administration
MBIA Municipal Bond Investors
Assurance Insurance
Corporation
MFHR Multi-Family Housing Revenue
VRDN Variable Rate Demand Notes
<TABLE>
<CAPTION>
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AAA Aaa AAA 60.7
AA Aa AA 12.2
A A A 7.9
BBB Baa BBB 8.8
F1 MIG1/P1 SP1/A1 2.2
Not Rated(c) Not Rated(c) Not Rated(c) 8.2
100.0
(A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT
SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST
ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING
DATE.
(B) SECURITIES PAYABLE ON DEMAND. VARIABLE RATE INTEREST--SUBJECT TO PERIODIC
CHANGE.
(C) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED
SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2000
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 139,889,549 137,362,941
Cash 235,886
Interest receivable 2,485,989
Receivable for investment securities sold 94,588
Prepaid expenses 7,763
140,187,167
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 79,234
Payable for investment securities purchased 2,483,450
Payable for shares of Beneficial Interest redeemed 1,579
Accrued expenses 36,305
2,600,568
--------------------------------------------------------------------------------
NET ASSETS ($) 137,586,599
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 142,176,560
Accumulated net realized gain (loss) on investments (2,063,353)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (2,526,608)
--------------------------------------------------------------------------------
NET ASSETS ($) 137,586,599
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(unlimited number of $.01 par value shares of Beneficial Interest authorized)
8,922,340
NET ASSET VALUE, offering and redemption price per share--Note 3(d) ($)
15.42
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Year Ended May 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 8,947,438
EXPENSES:
Management fee--Note 3(a) 884,916
Shareholder servicing costs--Note 3(b) 228,502
Professional fees 51,300
Trustees' fees and expenses--Note 3(c) 23,032
Prospectus and shareholders' reports 17,478
Custodian fees 15,200
Registration fees 11,601
Loan commitment fees--Note 2 1,565
Miscellaneous 13,743
TOTAL EXPENSES 1,247,337
INVESTMENT INCOME--NET 7,700,101
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (2,057,801)
Net unrealized appreciation (depreciation) on investments (10,011,245)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (12,069,046)
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (4,368,945)
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended May 31,
-----------------------------------
2000 1999
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 7,700,101 7,841,732
Net realized gain (loss) on investments (2,057,801) 886,268
Net unrealized appreciation (depreciation)
on investments (10,011,245) (2,603,874)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (4,368,945) 6,124,126
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (7,765,137) (7,819,249)
Net realized gain on investments (336,473) (1,105,107)
TOTAL DIVIDENDS (8,101,610) (8,924,356)
--------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold 31,835,134 32,759,644
Dividends reinvested 5,973,090 6,642,484
Cost of shares redeemed (48,333,104) (36,238,109)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (10,524,880) 3,164,019
TOTAL INCREASE (DECREASE) IN NET ASSETS (22,995,435) 363,789
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 160,582,034 160,218,245
END OF PERIOD 137,586,599 160,582,034
Undistributed investment income-net -- 65,036
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 2,011,332 1,917,574
Shares issued for dividends reinvested 379,654 389,221
Shares redeemed (3,067,872) (2,127,071)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (676,886) 179,724
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
Year Ended May 31,
----------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 16.73 17.01 16.31 15.86 16.25
Investment Operations:
Investment income--net .83 .82 .83 .85 .88
Net realized and unrealized
gain (loss) on investments (1.27) (.17) .70 .45 (.39)
Total from Investment Operations (.44) .65 1.53 1.30 .49
Distributions:
Dividends from investment income--net (.83) (.82) (.83) (.85) (.88)
Dividends from net realized gain
on investments (.04) (.11) -- -- --
Total Distributions (.87) (.93) (.83) (.85) (.88)
Net asset value, end of period 15.42 16.73 17.01 16.31 15.86
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (2.56) 3.87 9.52 8.37 3.06
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .85 .82 .81 .79 .79
Ratio of net investment income
to average net assets 5.22 4.82 4.97 5.27 5.43
Portfolio Turnover Rate 19.45 19.47 28.53 38.29 60.67
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 137,587 160,582 160,218 151,379 151,722
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
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, as amended (the "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 (the "Manager") serves as the fund's investment adviser.
The Manager is a direct subsidiary of Mellon Bank, N.A., which is a wholly-owned
subsidiary of Mellon Financial Corporation. Effective March 22, 2000, Dreyfus
Service Corporation (" DSC"), a wholly-owned subsidiary of the Manager, became
the distributor of the fund's shares, which are sold to the public without a
sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was
the distributor.
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.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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 custody
agreement, the fund received net earnings of $9,420 during the period ended May
31, 2000 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 of 1986, as amended (the
" 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 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 $639,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to May 31, 2000. This amoun
is calculated based on Federal income tax regulations which may differ from
financial reporting in accordance with generally accepted accounting principles.
If not applied, the carryover expires in fiscal 2008.
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $500 million
redemption credit facility (the "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. During the period ended May
31, 2000, 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 DSC, 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, 2000, the fund was charged $133,480 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, 2000, the fund was charged $71,897 pursuant to the transfer agency
agreement.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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 shares redeemed
within fifteen days following the date of issuance, including redemptions made
through the use of the fund's exchange privilege. During the period ended May
31, 2000, redemption fees charged and retained by the fund amounted to $23.
Effective June 1, 2000, this fee will be chargeable within thirty days following
the date of issuance of such shares.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended May 31, 2000, amounted to
$27,956,831 and $40,121,248, respectively.
At May 31, 2000, accumulated net unrealized depreciation on investments was
$2,526,608, consisting of $2,172,784 gross unrealized appreciation and
$4,699,392 gross unrealized depreciation.
At May 31, 2000, 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).
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors 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, 2000, 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 auditing standards generally accepted
in the United States. 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, 2000 by correspondence with the
custodian and the 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, 2000, 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 accounting principles generally accepted
in the United States.
New York, New York
July 5, 2000
The Fund
IMPORTANT TAX INFORMATION (Unaudited)
In accordance with Federal tax law, the fund hereby makes the following
designations regarding its fiscal year ended May 31, 2000:
--all the dividends paid from investment income--net are "exempt-interest
dividends" (not subject to regular Federal and, for individuals who are
Massachusetts residents, Massachusetts personal income taxes).
--the fund hereby designates $.0117 per share as a long-term capital gain
distribution of the $.0361 per share paid on December 9, 1999. In
addition, 26.91% of the long-term capital gain distribution is not subject
to 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 2000 calendar year on Form 1099-DIV which
will be mailed by January 31, 2001.
For More Information
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
100 Church Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Information can be viewed online or downloaded from:
http://www.dreyfus.com
(c) 2000 Dreyfus Service Corporation 267AR005
