-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qdmjy4JmzaiXxNli3OEQwQv3fBl3grezdMcONxgzmrtx+XMHnv2gtzvOrglgZ89I 2APlOTKT3Dyb/mtAhMy9aw== 0000765823-01-000001.txt : 20010130 0000765823-01-000001.hdr.sgml : 20010130 ACCESSION NUMBER: 0000765823-01-000001 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001130 FILED AS OF DATE: 20010129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DREYFUS MASSACHUSETTS TAX EXEMPT BOND FUND CENTRAL INDEX KEY: 0000765823 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NY FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04271 FILM NUMBER: 1517451 BUSINESS ADDRESS: STREET 1: 144 GLENN CURTISS BLVD CITY: UNIONDALE STATE: NY ZIP: 11556 BUSINESS PHONE: 2129226789 MAIL ADDRESS: STREET 1: C/O DREYFUS CORP STREET 2: 200 PARK AVENUE, 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10166 N-30D 1 0001.txt SEMI-ANNUAL REPORT Dreyfus Massachusetts Tax Exempt Bond Fund SEMIANNUAL REPORT November 30, 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 Statement of Investments 10 Statement of Assets and Liabilities 11 Statement of Operations 12 Statement of Changes in Net Assets 13 Financial Highlights 14 Notes to Financial Statements FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Massachusetts Tax Exempt Bond Fund LETTER FROM THE PRESIDENT Dear Shareholder: We are pleased to present this semiannual report for Dreyfus Massachusetts Tax Exempt Bond Fund, covering the six-month period from June 1, 2000 through November 30, 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. Municipal bond prices rose modestly over the six-month reporting period. Positive supply-and-demand influences helped support a municipal bond market rally, and most sectors of the municipal bond market benefited from slowing economic growth. In addition to the moderating effects of the Federal Reserve Board' s interest-rate hikes during 1999 and the first half of 2000, the U.S. economy has slowed in response to higher energy prices and a weak euro. In general, the overall investment environment that prevailed in the second half of the 1990s provided returns well above their historical averages, establishing unrealistic expectations for some investors. We believe that as the risks of the stock market have become more apparent recently, the relative stability and income potential of municipal bonds can make them an attractive investment as part of a well-balanced portfolio. For more information about the economy and financial markets, we encourage you to visit the Market Commentary section of our website at www.dreyfus.com. Or, to speak with a Dreyfus customer service representative, call us at 1-800-782-6620 Thank you for investing in Dreyfus Massachusetts Tax Exempt Bond Fund. Sincerely, /s/ Stephen E. Canter Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation December 15, 2000 DISCUSSION OF FUND PERFORMANCE Joseph Darcy, Portfolio Manager How did Dreyfus Massachusetts Tax Exempt Bond Fund perform during the period? For the six-month reporting period ended November 30, 2000, Dreyfus Massachusetts Tax Exempt Bond Fund achieved a 6.76% total return.(1) In comparison, the fund' s peer group, as measured by the Lipper Massachusetts Municipal Debt Funds category average, achieved a 6.93% total return for the same period.(2) We attribute our competitive absolute performance to a relatively strong investment environment for municipal bonds in Massachusetts. The market rally was driven primarily by signs of an economic slowdown and positive supply-and-demand factors, in which a rising number of investors have competed for a limited supply of securities. We attribute our modestly lagging relative performance to our recent defensive posture, which we believed was appropriate in a more credit-conscious investment environment. What is the fund's investment approach? The fund seeks as high a level of current income exempt from federal and Massachusetts state income tax as is consistent with the preservation of capital. 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 The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) of higher yielding securities. Conversely, if we expect demand for 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? Favorable economic and market conditions positively influenced the fund over the past six months. When the reporting period began, the U.S. economy was growing strongly, raising concerns that long-dormant inflationary pressures might reemerge. The Federal Reserve Board (the "Fed") had already raised short-term interest rates several times in 1999 and early 2000, with the latest and largest rate hike coming in May, just before the reporting period began. However, tax-exempt yields declined modestly -- and prices rose -- during the reporting period when the Fed did not change interest rates at its meetings in June, August, October and November. The Fed held monetary policy steady because of signs that its previous rate hikes were having the desired effect of slowing the economy. In addition, the strength of the Massachusetts economy helped keep municipal bond yields relatively low compared to taxable bonds. While the official new-issue volume statistics for Massachusetts posted an increase when compared to the same period of the prior year, a large part of this debt was related to the cost overruns of the second tunnel being constructed underneath the harbor and its adjoining roadways, also known as the Central Artery project. At the same time that the supply of new bonds unrelated to this project was falling, demand was strong from individuals seeking tax-exempt income, thus providing strong support for bond prices. In this environment, we generally maintained an average maturity that was in line with the average for other Massachusetts tax-exempt bond funds. This posture was designed to give us the flexibility we needed to capture competitive yields for as long as practical while making funds available for new opportunities as they arose. What is the fund's current strategy? After the market' s substantial rally and in light of evidence of a continuing economic slowdown, we have recently adopted a relatively defensive posture with regard to our security selection strategy. In our view, a more defensive strategy is especially appropriate during an economic slowdown in a state that has a large concentration of high technology businesses. Accordingly, we have recently intensified our focus on broad diversification in a more credit-conscious environment. We have recently been purchasing locally issued essential-service bonds that are backed by the revenues of basic infrastructures such as water and sewer facilities. We also have found attractive opportunities in general obligation bonds from local issuers, which are backed by their general taxing authority. These bonds from counties, cities, educational institutions and other local issuers are intended to complement our existing holdings of debt securities from the Commonwealth of Massachusetts. December 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 INC. The Fund STATEMENT OF INVESTMENTS
STATEMENT OF INVESTMENTS November 30, 2000 (Unaudited) Principal LONG-TERM MUNICIPAL INVESTMENTS--93.1% Amount ($) Value ($) - ----------------------------------------------------------------------------------------------------------------------------------- MASSACHUSETTS--89.8% Boston 5.75%, 2/1/2020 3,945,000 4,065,046 Boston--Mount Pleasant Housing Development Corp., MFHR 6.75%, 8/1/2023 (Insured; FHA) 1,560,000 1,612,868 Hopkinton: 5%, 9/1/2017 1,735,000 1,674,726 5%, 9/1/2018 1,735,000 1,664,854 5%, 9/1/2019 1,735,000 1,646,793 5%, 9/12020 1,735,000 1,636,122 Lynn 5%, 2/15/2017 (Insured; MBIA) 2,360,000 2,279,217 Massachusetts Bay Transportation Authority, General Transportation System: 6.20%, 3/1/2016 1,725,000 1,915,561 4.50%, 3/1/2026 (Insured; MBIA) 2,500,000 2,109,925 Massachusetts College Building Authority, Project Revenue: Zero Coupon, 5/1/2026 (Insured; MBIA) 8,510,000 2,064,611 Zero Coupon, 5/1/2027 (Insured; MBIA) 1,510,000 346,319 Zero Coupon, 5/1/2028 (Insured; MBIA) 11,790,000 2,554,068 Massachusetts (Consolidated Loan) 5.25%, 8/1/2017 2,500,000 2,517,800 Massachusetts Development Finance Agency, Revenue: (Assumption College) 6%, 3/1/2030 1,905,000 1,958,969 (Boston University) 5.45%, 5/15/2059 2,035,000 1,896,478 (College of Pharmacy) 6.75%, 7/1/2030 2,000,000 2,043,680 (Regis College) 5.25%, 10/1/2018 1,240,000 1,054,930 Massachusetts Educational Financing Authority, Education Loan Revenue 5.125%, 12/1/2014 (Insured; MBIA) 1,000,000 967,980 Massachusetts Health and Educational Facilities Authority, Revenue: (Baystate Medical Center) 6%, 7/1/2015 (Insured; FGIC) 1,140,000 1,172,752 (Brandeis University) 4.75%, 10/1/2028 (Insured; MBIA) 2,500,000 2,194,900 (Daughters of Charity) 6.10%, 7/1/2014 1,100,000 1,176,956 (Harvard University) 6%, 7/1/2035 2,500,000 2,673,300 (Massachusetts General Hospital): 6%, 7/1/2015 (Insured; AMBAC) 2,000,000 2,057,460 6.25%, 7/1/2020 (Insured; AMBAC) (Prerefunded 7/1/2003) 3,500,000 (a) 3,718,575 (Massachusetts Institute of Technology) 5.20%, 1/1/2028 5,000,000 4,870,100 (Mclean Hospital) 6.50%, 7/1/2010 (Insured; FGIC) (Prerefunded 7/1/2002) 1,000,000 (a) 1,051,320 (Medical Academic & Scientific) 6.625%, 1/1/2015 3,000,000 3,025,260 (Milton Hospital) 7%, 7/1/2016 (Insured; MBIA) 1,000,000 1,021,740 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) - ----------------------------------------------------------------------------------------------------------------------------------- MASSACHUSETTS (CONTINUED) Massachusetts Health and Educational Facilities Authority, Revenue (continued): (Mount Auburn Hospital) 6.30%, 8/15/2024 (Insured; MBIA) 5,000,000 5,178,100 (New England Medical Center Hospitals) 6.50%, 7/1/2012 (Insured; FGIC) 2,000,000 2,086,760 (Newton--Wellesley Hospital) 5.875%, 7/1/2015 (Insured; MBIA) 2,000,000 2,063,680 (Sisters Providence Health System) 6.625%, 11/15/2022 3,510,000 3,717,687 (Wellesley College) 5.125%, 7/1/2039 7,000,000 6,424,950 Massachusetts Housing Finance Agency, Revenue: Housing Projects: 6.30%, 10/1/2013 (Insured; AMBAC) 1,000,000 1,048,330 6.375%, 4/1/2021 4,300,000 4,409,693 Rental Housing: 6.65%, 7/1/2019 (Insured; AMBAC) 2,215,000 2,299,325 6.50%, 7/1/2025 (Insured; AMBAC) 1,500,000 1,549,260 6.45%, 1/1/2036 (Insured; AMBAC) 2,135,000 2,199,349 6%, 7/1/2037 (Insured; AMBAC) 2,650,000 2,658,930 Single-Family Housing 6.35%, 6/1/2017 2,675,000 2,733,449 Massachusetts Industrial Finance Agency, Revenue: (Babson College): 5.375%, 10/1/2017 2,125,000 2,087,897 5.25%, 10/1/2027 2,950,000 2,729,576 Electrical Utility (Nantucket Electric Co.) 8.50%, 3/1/2016 2,750,000 2,838,907 (Holy Cross College): 6%, 11/1/2002 400,000 412,048 6.375%, 11/1/2015 (Prerefunded 11/1/2002) 2,000,000 (a) 2,110,740 (Ogden Haverhill Project) 5.60%, 12/1/2019 1,000,000 856,900 Massachusetts Municipal Wholesale Electric Company, Power Supply System Revenue: 6.40%, 7/1/2002 400,000 409,336 6.125%, 7/1/2019 (Insured; MBIA) 1,000,000 1,026,400 Massachusetts Port Authority, Revenue: 5%, 7/1/2023 1,315,000 1,220,070 Special Facilities (US Air Project) 5.75%, 9/1/2016 (Insured; MBIA) 5,000,000 5,107,600 Special Project (Harborside Hyatt) 10%, 3/1/2026 8,000,000 8,223,520 Massachusetts Water Pollution Abatement Trust (Pool Loan Program) 5.625%, 2/1/2017 5,000,000 5,131,200 The Fund STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ MASSACHUSETTS (CONTINUED) Northampton (School Project Loan Act of 1948) 5.75%, 5/15/2016 (Insured; MBIA) 1,520,000 1,577,274 Plymouth 5.25%, 10/15/2020 (Insured; MBIA) 1,000,000 984,780 Southbridge 6.375%, 1/1/2012 (Insured; AMBAC) 1,000,000 1,036,770 U.S. RELATED-3.3% Guam Airport Authority, Revenue 6.70%, 10/1/2023 3,000,000 3,111,750 Virgin Islands Water and Power Authority, Electric System Revenue 7.40%, 7/1/2011 (Prerefunded 7/1/2001) 1,560,000 (a) 1,605,552 TOTAL LONG-TERM MUNICIPAL LNVESTMENTS (cost $130,759,244) 133,812,143 - ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM MUNICIPAL INVESTMENTS--2.4% - ------------------------------------------------------------------------------------------------------------------------------------ Massachusetts Health and Educational Facilities Authority, Revenue VRDN (Capital Asset Program): 4.20% (Insured; MBIA) 1,400,000 (b) 1,400,000 4.15%, Series D (Insured; MBIA) 1,700,000 (b) 1,700,000 4.20%, Series E (LOC; Bank One Corp.) 300,000 (b) 300,000 TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $3,400,000) 3,400,000 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (cost $134,159,244) 95.5% 137,212,143 CASH AND RECEIVABLES (NET) 4.5% 6,534,050 NET ASSETS 100.0% 143,746,193
Summary of Abbreviations AMBAC American Municipal Bond Assurance Corporation FGIC Financial Guaranty Insurance Company FHA Federal Housing Administration LOC Letter of Credit MBIA Municipal Bond Investors Assurance Insurance Corporation MFHR Multi-Family Housing Revenue VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited) Fitch or Moody's or Standard & Poor's Value (%) - ------------------------------------------------------------------------------------------------------------------------------------ AAA Aaa AAA 50.7 AA Aa AA 21.8 A A A 8.1 BBB Baa BBB 8.8 F1 MIGI/PI SP1/A1 2.5 Not Rated (c) Not Rated( c) Not Rated( c) 8.1 100.0 (A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING DATE. (B) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE. (C) SECURITES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST. SEE NOTES TO FINANCIAL STATEMENTS.
The Fund STATEMENT OF ASSETS AND LIABILITIES November 30, 2000 (Unaudited) Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 134,159,244 137,212,143 Cash 237,597 Receivable for investment securities sold 4,018,556 Interest receivable 2,376,625 Receivable for shares of Beneficial Interest subscribed 5,000 Prepaid expenses 5,841 143,855,762 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 80,654 Accrued expenses 28,915 109,569 - -------------------------------------------------------------------------------- NET ASSETS ($) 143,746,193 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 142,815,458 Accumulated net realized gain (loss) on investments (2,122,164) Accumulated net unrealized appreciation (depreciation) on investments--Note 4 3,052,899 - -------------------------------------------------------------------------------- NET ASSETS ($) 143,746,193 - -------------------------------------------------------------------------------- SHARES OUTSTANDING (unlimited number of $.01 par value shares of Beneficial Interest authorized) 8,960,849 NET ASSET VALUE, offering and redemption price per share-Note 3(d) ($) 16.04 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended November 30, 2000 (Unaudited) - ------------------------------------------------------------------------------- INVESTMENT INCOME ($): INTEREST INCOME 4,267,302 EXPENSES: Management fee--Note 3(a) 424,470 Shareholder servicing costs--Note 3(b) 98,070 Professional fees 23,416 Trustees' fees and expenses--Note 3(c) 9,208 Prospectus and shareholders' reports 8,981 Custodian fees 7,547 Registration fees 5,986 Loan commitment fees--Note 2 567 Miscellaneous 3,066 TOTAL EXPENSES 581,311 INVESTMENT INCOME--NET 3,685,991 - ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (58,811) Net unrealized appreciation (depreciation) on investments 5,579,507 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 5,520,696 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 9,206,687 SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF CHANGES IN NET ASSETS Six Months Ended November 30, 2000 Year Ended (Unaudited) May 31, 2000 - ------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 3,685,991 7,700,101 Net realized gain (loss) on investments (58,811) (2,057,801) Net unrealized appreciation (depreciation) on investments 5,579,507 (10,011,245) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 9,206,687 (4,368,945) - ------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net (3,685,991) (7,765,137) Net realized gain on investments -- (336,473) TOTAL DIVIDENDS (3,685,991) (8,101,610) - ------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold 9,471,489 31,835,134 Dividends reinvested 2,695,059 5,973,090 Cost of shares redeemed (11,527,650) (48,333,104) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 638,898 (10,524,880) TOTAL INCREASE (DECREASE) IN NET ASSETS 6,159,594 (22,995,435) - ------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 137,586,599 160,582,034 END OF PERIOD 143,746,193 137,586,599 - ------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): Shares sold 596,023 2,011,332 Shares issued for dividends reinvested 169,318 379,654 Shares redeemed (726,832) (3,067,872) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 38,509 (676,886) SEE NOTES TO FINANCIAL STATEMENTS. 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.
Six Months Ended November 30, 2000 Year Ended May 31, ---------------------------------------------------------------- (Unaudited) 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 15.42 16.73 17.01 16.31 15.86 16.25 Investment Operations: Investment income--net .41 .83 .82 .83 .85 .88 Net realized and unrealized gain (loss) on investments .62 (1.27) (.17) .70 .45 (.39) Total from Investment Operations 1.03 (.44) .65 1.53 1.30 .49 Distributions: Dividends from investment income--net (.41) (.83) (.82) (.83) (.85) (.88) Dividends from net realized gain on investments -- (.04) (.11) -- -- -- Total Distributions (.41) (.87) (.93) (.83) (.85) (.88) Net asset value, end of period 16.04 15.42 16.73 17.01 16.31 15.86 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 13.48(a) (2.56) 3.87 9.52 8.37 3.06 - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .82(a) .85 .82 .81 .79 .79 Ratio of net investment income to average net assets 5.21(a) 5.22 4.82 4.97 5.27 5.43 Portfolio Turnover Rate 12.04(b) 19.45 19.47 28.53 38.29 60.67 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 143,746 137,587 160,582 160,218 151,379 151,722 (A) ANNUALIZED. (B) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
The 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, 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. Dreyfus Service Corporation (the " Distributor"), a wholly-owned subsidiary of the Manager, 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 accounting principles generally accepted in the United States, 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 custody agreement, the fund received net earnings of $5,456 during the period ended November 30, 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, if any, 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 amount is calculated based on Federal income tax reg The Fund NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) ulations which may differ from financial reporting in accordance with accounting principals generally accepted in the United States. 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 November 30, 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 the Distributor 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, 2000, the fund was charged $60,944 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, 2000, the fund was charged $23,907 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 shares redeemed within thirty days following the date of issuance, including redemptions made through the use of the fund' s exchange privilege. During the period ended November 30, 2000, redemption fees retained by the fund amounted to $425. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended November 30, 2000, amounted to $16,398,829 and $22,617,605, respectively. At November 30, 2000, accumulated net unrealized appreciation on investments was $3,052,899, consisting of $4,326,220 gross unrealized appreciation and $1,273,321 gross unrealized depreciation. At November 30, 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). The Fund 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 info@dreyfus.com ON THE INTERNET Information can be viewed online or downloaded from: http://www.dreyfus.com (c) 2001 Dreyfus Service Corporation 267SA0011 -----END PRIVACY-ENHANCED MESSAGE-----