<PAGE>
[Logo] Investing
EATON VANCE for the
============== 21st EDUCATION
Mutual Funds Century
SEMIANNUAL REPORT JUNE 30, 1997
[Graphic Omitted]
MASSACHUSETTS
HEALTH &
EDUCATION
TAX-EXEMPT
TRUST
Eaton Vance
Global Management-Global Distribution
<PAGE>
Massachusetts Health & Education Tax-Exempt Trust as of June 30,1997
- --------------------------------------------------------------------------------
INVESTMENT UPDATE
- --------------------------------------------------------------------------------
- ------------------- Investment Environment
[Photo ------------------------------------------------------
of The Economy
Robert B. MacIntosh o The Massachusetts economy mirrored the strong growth
Portfolio Manager at the national level. Unemployment measured only
- ------------------- 3.8% in June, below that of the nation as a whole.
Technology, health care and financial services
continued to register the strongest job growth among
industry sectors.
o While inflation seemed generally in check, the Federal Reserve maintained a
vigilant policy. In February, the Fed raised its Federal Funds target rate - a
key short-term rate barometer - to 5.50%.
o Boosted by lower supply, the municipal market outperformed the Treasury
market. The Lehman Brothers Municipal Bond Index1 rose 3.2% during the
six-month period.
The Fund
- --------------------------------------------------------------------------------
Management Discussion
o Insured hospitals remained the largest sector weighting in the Fund. In the
belief that the hospital sector will grow increasingly competitive, we
continued to focus on those institutions with favorable demographics and
high-demand specialties.
o To improve the Fund's potential for capital appreciation, we improved its
average call protection by swapping out of par bonds with short call dates in
favor of discount bonds with better call characteristics. This will help
protect the Fund from untimely early bond calls and the need to reinvest at
unfavorable interest rate levels.
o The Portfolio took advantage of an increase in the issuance of Industrial
Finance Agency bonds as an oppportunity to further diversify as well as to add
attractive higher-yielding issues to the Portfolio.
Performance for the Past Six Months
o Based on net asset value, the Fund had a total return of 5.3% for the six
months ended June 30, 1997. That return was the result of a rise in net asset
value from $13.01 on December 31, 1996 to $13.30 on June 30, 1997, and the
reinvestment of all distributions.
o Based on the most recent dividend and the June 30 net asset value per share of
$13.30, the Fund had a distribution rate of 5.59%. To equal that, an investor
would need to receive 8.73% in a taxable investment.
o On June 30, 1997, the Fund's closing price on the American Stock Exchange was
$12.875, representing a 3.2% discount to the Fund's net asset value per share.
Your Investment at Work
- --------------------------------------------------------------------------------
Massachusetts Industrial Finance Agency The Park School
o These bonds were issued for The Park School, an independent, coeducational
school located in Brookline.
o With around 500 students enrolled in nursery school through ninth grade, The
Park School has gained a national reputation for excellence in academics.
o With a 5.9% coupon, these bonds provide excellent tax-free income for the
Portfolio.
o This bond represents the efforts of the Portfolio to find value in bonds of
well-regarded, smaller issuers.
- --------------------------------------------------------------------------------
1 It is not possible to invest directly in the Index.
2 Returns are calculated by determining the percentage change in net asset value
and share price with all distributions reinvested. Past performance is no
guarantee of future results.
3 Because the Fund is actively managed, sector weightings and Portfolio Overview
are subject to change. Five largest industry weightings represent 89.7% of the
Portfolio's investments.
Past performance is no guarantee of future results. The value of an investment
in the Fund will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. In addition, share price is subject to market
influences. *Private insurance does not remove the risk of loss of principal
associated with this investment due to changes in market conditions.
- --------------------------------------------------------------------------------
Mutual fund shares are not insured by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investment risks, including possible loss of principal invested.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fund Information
as of June 30, 1997
Performance 2
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
One Year 12.0%
Life of Fund (7/30/93) 8.8
Average Annual Total Returns (by market value, NYSE)
- --------------------------------------------------------------------------------
One Year 17.4%
Life of Fund (7/30/93) 2.0
5 Largest Sectors 3
- --------------------------------------------------------------------------------
By total investments
Insured Hospital* 27.9%
Hospital 22.7%
Education 15.5%
Insured Education* 15.1%
General Obligations 8.5%
Fund Overview 3
- --------------------------------------------------------------------------------
Number of Issues 37
Average Maturity 20.7 Yrs.
Effective Maturity 10.8
Average Rating AA-
Average Call 7.4 Yrs.
Average Dollar Price $103.60
<PAGE>
Massachusetts Health & Education Tax-Exempt Trust as of June 30, 1997
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PORTFOLIO OF INVESTMENTS (Unaudited)
- -------------------------------------------------------------------------------
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------ Amount
Standard (000
Moody's & Poor's Omitted) Security Value
- ---------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C>
Assisted Living -- 2.5%
- ---------------------------------------------------------------------------------------------
Aa2 NR $1,000 Massachusetts Health & Education
Facilities Authority, Youville
House, (AMT), 6.25%, 2/15/41 $ 1,018,530
- ---------------------------------------------------------------------------------------------
Education -- 15.5%
- ---------------------------------------------------------------------------------------------
Aaa AAA $1,000 Massachusetts HEFA, Massachusetts
Institute of Technology, 5.00%, 7/1/23 $ 931,920
A3 NR 500 Massachusetts Industrial Finance Agency
(IFA), The Park School, 5.90%, 9/1/26 504,225
Baa1 BBB 2,110 Massachusetts IFA, Springfield College,
5.625%, 9/15/10 2,082,739
A3 A- 1,500 Massachusetts IFA, Clark University,
7.00%, 7/1/12 1,618,890
A1 A+ 1,000 Massachusetts IFA, Holy Cross College,
6.45%, 1/1/12 1,095,270
- ---------------------------------------------------------------------------------------------
$ 6,233,044
- ---------------------------------------------------------------------------------------------
General Obligation -- 8.5%
- ---------------------------------------------------------------------------------------------
Aa3 AA+ $1,000 Massachusetts Water Pollution Abatement
Trust, 6.375%, 2/1/15 $ 1,071,550
A1 A+ 2,000 University of Massachusetts Building
Authority, 6.875%, 5/1/14 2,317,280
- ---------------------------------------------------------------------------------------------
$ 3,388,830
- ---------------------------------------------------------------------------------------------
Hospitals -- 22.7%
- ---------------------------------------------------------------------------------------------
NR NR $2,295 Massachusetts HEFA, Atlanticare Medical
Center, 8.00%, 12/1/13 $ 2,472,358
Aa2 NR 1,500 Massachusetts HEFA, Daughters of Charity,
6.10%, 7/1/14 1,565,940
A2 A 1,150 Massachusetts HEFA, New England Deaconess
Hospital, 6.875%, 4/1/22 1,239,758
NR A- 750 Massachusetts HEFA, Jordan Hospital,
6.875%, 10/1/22 803,955
Baa2 BBB 800 Massachusetts HEFA, Sisters of Providence,
6.625%, 11/15/22 821,616
Baa3 BB 1,000 Massachusetts HEFA, Milford-Whitinsville
Hospital, 7.75%, 7/15/17 1,082,610
NR BBB- $ 400 Massachusetts HEFA, North Adams Hospital,
6.625%, 7/1/18 406,208
A1 A 750 Massachusetts HEFA, Dana Farber Cancer
Institute, 5.50%, 12/1/27 721,605
- ---------------------------------------------------------------------------------------------
$ 9,114,050
- ---------------------------------------------------------------------------------------------
Industrial Development Revenue -- 3.8%
- ---------------------------------------------------------------------------------------------
A3 A- $1,500 Massachusetts IFA, General Motors,
5.55%, 4/1/09 $ 1,514,550
- ---------------------------------------------------------------------------------------------
Insured Education -- 15.1%
- ---------------------------------------------------------------------------------------------
Aaa AAA 1,420 Massachusetts HEFA, Boston College, (FGIC),
6.625%, 7/1/21 $ 1,538,201
Aaa AAA 1,765 Massachusetts HEFA, Northeastern University,
(MBIA), 6.55%, 10/1/22 1,923,497
Baa AAA 1,000 Massachusetts HEFA, Suffolk University,
(CLEE), 6.25%, 7/1/12 1,056,470
NR AAA 515 Massachusetts IFA, Assumption College,
(CLEE), 6.00%, 7/1/26 527,710
Aaa AAA 1,000 Massachusetts HEFA, Tufts University,
(FGIC), 5.95%, 8/15/18 1,022,910
- ---------------------------------------------------------------------------------------------
$ 6,068,788
- ---------------------------------------------------------------------------------------------
Insured Hospitals -- 27.9%
- ---------------------------------------------------------------------------------------------
Aaa AAA $ 750 Massachusetts HEFA, University Hospital,
(MBIA), 7.25%, 7/1/19 $ 813,278
Aaa AAA 1,000 Massachusetts HEFA, North Shore Medical
Center, (MBIA), 5.625%, 7/1/14 1,012,670
NR AAA 500 Massachusetts HEFA, Winchester Hospital,
(CLEE), 5.80%, 7/1/09 519,020
Aaa AAA 800 Massachusetts HEFA, Baystate Center, (FSA),
6.00%, 7/1/26 821,064
Aaa AAA 1,500 Massachusetts HEFA, Baystate Center, (FGIC),
5.00%, 7/1/20 1,370,835
Aaa AAA 1,250 Massachusetts HEFA, Dana Farber Cancer
Institute, (FGIC), 6.00%, 12/1/10 1,315,250
NR AAA 595 Massachusetts HEFA, Valley Regional Health
System, (CLEE), 5.75%, 7/1/18 595,208
Aaa AAA 500 Massachusetts HEFA, Mt. Auburn Hospital,
(MBIA), 6.25%, 8/15/14 531,560
Aaa AAA 1,725 Massachusetts HEFA, Addison Gilbert
Hospital, (MBIA), 5.75%, 7/1/23 1,727,726
Aaa AAA 1,500 Massachusetts HEFA, Lowell General Hospital,
(FSA), 5.25%, 6/1/16 1,440,840
Aaa AAA 1,000 Massachusetts HEFA, Berkshire Health System,
(MBIA), 6.00%, 10/1/19 1,024,900
- ---------------------------------------------------------------------------------------------
$ 11,172,351
- ---------------------------------------------------------------------------------------------
Insured Transportation -- 0.5%
- ---------------------------------------------------------------------------------------------
Aaa AAA $ 200 Massachusetts Turnpike Authority, (MBIA),
5.00%, 1/1/20 $ 186,814
- ---------------------------------------------------------------------------------------------
Insured Water & Sewer -- 0.5%
- ---------------------------------------------------------------------------------------------
Aaa AAA $ 200 Massachusetts Water Resource Authority,
(MBIA), 5.00%, 3/1/22 $ 182,424
- ---------------------------------------------------------------------------------------------
Nursing Home -- 1.9%
- ---------------------------------------------------------------------------------------------
NR NR $ 750 Massachusetts IFA, Age Institute of
Massachusetts, 8.05%, 11/1/25 $ 769,500
- ---------------------------------------------------------------------------------------------
Transportation -- 1.1%
- ---------------------------------------------------------------------------------------------
A1 A+ $ 485 Massachusetts Turnpike Authority,
5.00%, 1/1/20 $ 453,023
- ---------------------------------------------------------------------------------------------
Total Tax-Exempt Investments
(identified cost $37,753,825) $ 40,101,903
- ---------------------------------------------------------------------------------------------
</TABLE>
Notes to Portfolio:
1. Portfolio Overview:
Number of Issues 37
Average Maturity (Years) 20.70 Yrs.
Effective Maturity (Years) 10.80 Yrs.
Average Call (Years) 7.40 Yrs.
Duration (Years) 7.10 Yrs.
Average Rating AA-
Average Coupon 6.30 Yrs.
2. Massachusetts HEFA Securities - At June 30 1997, the Trust held securities
issued by the Massachusetts Health & Education Facilities Authority (HEFA)
with a value of $27,777,929 (representing 69.3% of total investments).
3. Insured Investments - The Trust invests primarily in debt securities issued
by the Commonwealth of Massachusetts and its municipalities. The ability of
the issuers of the debt securities to meet their obligations may be affected
by economic developments in a specific industry or municipality. In order to
reduce the risk associated with such economic developments, at June 30 1997,
43.9% of the securities in the portfolio of investments are backed by bond
insurance of various financial institutions and financial guaranty assurance
agencies. The Trust's investments in insured securities by financial
institution are as follows:
Percentage
of Total
Value Investments
-----------------------------------------------------------------------------
Municipal Bond Insurance Association (MBIA) $ 7,402,869 18.5%
Financial Guaranty Insurance Company (FGIC) 5,247,196 13.1%
College Construction Loan Insurance
Corporation (CLEE) 2,698,408 6.7%
Financial Security Assurance Incorporated
(FSA) 2,261,904 5.6%
-----------------------------------------------------------------------------
Total Insured Securities $17,610,377 43.9%
-----------------------------------------------------------------------------
4. Summary of Ratings:
Percentage
Number of Total
Ratings of Issues Value Investments
-----------------------------------------------------------------------------
AAA/Aaa 19 $18,542,297 46.2%
AA/Aa 3 3,656,020 9.1%
A/A 9 10,268,556 25.6%
BBB/Baa 4 4,393,173 11.1%
NR 2 3,241,857 8.0%
-----------------------------------------------------------------------------
Total 37 $40,101,903 100.0%
-----------------------------------------------------------------------------
The ratings indicated are the most recent Moody's and Standard & Poors ratings
believed to be available at June 30, 1997. NR indicates no rating is available
for the security. Ratings are generally ascribed to securities at time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no responsibility to do so, and the ratings indicated do not
necessarily represent ratings the agencies would ascribe to these securities at
June 30, 1997.
5. Private Placement Security - Information relating to the initial acquisition
and market valuation of the private placement security is presented below:
<TABLE>
<CAPTION>
Percentage
Acquisition of
Cost Current Cost Value Net Assets
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts HEFA, Atlanticare Medical
Center "AMC" (acquired 12/15/93) $2,450,000 $2,295,000 $2,472,358 6.07%
-----------------------------------------------------------------------------------------------------------
</TABLE>
AMC has no outstanding publicly offered securities of the same class as the
private placement security held by the Trust. The Trust will bear the costs, if
any, relating to the disposition of the private placement security, including
costs associated with registering the securities under the Securities Act of
1933, if necessary.
See notes to financial statements
<PAGE>
Massachusetts Health & Education Tax-Exempt Trust as of June 30, 1997
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS (Unaudited)
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities
As of June 30, 1997
Assets
- -------------------------------------------------------------------------------
Total Investments, at value
(identified cost, $37,753,825) $40,101,903
Interest receivable 811,826
Receivable from the Administrator (Note 4) 4,900
Deferred organization expenses 3,915
- -------------------------------------------------------------------------------
Total assets $40,922,544
- -------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------
Due to Bank $ 199,489
Accrued Trustees' fees (Note 4) 7,500
Accrued expenses and other liabilities 28,940
- -------------------------------------------------------------------------------
Total liabilities $ 235,929
- -------------------------------------------------------------------------------
Net Assets $40,686,615
- -------------------------------------------------------------------------------
Net Assets Were Comprised of
- -------------------------------------------------------------------------------
Auction Preferred Shares, $0.01 par value; 400 shares
authorized, 200 shares issued and outstanding
at $50,000 per share liquidation preference (Note 2) $10,000,000
Common Shares, $0.01 par value;
unlimited number of shares authorized, 2,307,763 shares
issued and outstanding 23,078
Additional paid-in capital 31,948,258
Accumulated net realized loss from investment transactions (3,683,912)
Undistributed net investment income 51,113
Unrealized appreciation of investments 2,348,078
- -------------------------------------------------------------------------------
Net Assets $40,686,615
- -------------------------------------------------------------------------------
Net assets applicable to preferred shareholders -
Auction preferred shares, at liquidation value $10,000,000
Cumulative undeclared dividends 3,000
- -------------------------------------------------------------------------------
$10,003,000
Net assets applicable to common shareholders $30,683,615
- -------------------------------------------------------------------------------
Total $40,686,615
- -------------------------------------------------------------------------------
Net Asset Value Per Common Share
- -------------------------------------------------------------------------------
($30,683,615 / 2,307,763 common shares issued and outstanding) $ 13.30
- -------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended
June 30, 1997
Investment Income
- -------------------------------------------------------------------------------
Interest income $1,201,681
- -------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------
Investment advisory fee (Note 4) $ 69,629
Administration fee (Note 4) 29,842
Trustees' fees (Note 4) 15,000
Custodian and transfer agent fees (Note 1F) 28,401
Legal and accounting services 20,718
Preferred share remarketing agent fee 12,396
Printing and postage 7,000
Exchange membership fees 3,725
Preferred shares auction agent fees 2,520
Amortization of organization expenses 1,784
Miscellaneous 4,567
- -------------------------------------------------------------------------------
Total operating expenses $ 195,582
- -------------------------------------------------------------------------------
Deduct -
Preliminary waiver of expenses by the Administrator (Note 4) $ 4,900
Reduction of custody fees (Note 1F) 1,621
- -------------------------------------------------------------------------------
Total $ 6,521
- -------------------------------------------------------------------------------
Net operating expenses $ 189,061
- -------------------------------------------------------------------------------
Net investment income $1,012,620
- -------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments
- -------------------------------------------------------------------------------
Net realized loss from investment transactions $ (35,123)
Net change in unrealized appreciation of investments 677,724
- -------------------------------------------------------------------------------
Net gain on investments $ 642,601
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,655,221
- -------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
Massachusetts Health & Education Tax-Exempt Trust as of June 30, 1997
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS CONT'D
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended
Increase (Decrease) June 30, 1997 Year Ended
in Net Assets (Unaudited) December 31, 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
From operations --
Net investment income $ 1,012,620 $ 2,019,437
Net realized loss from investment transactions (35,123) (3,793)
Net change in unrealized appreciation of
investments 677,724 (593,126)
- ---------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 1,655,221 $ 1,422,518
- ---------------------------------------------------------------------------------------------
Dividends and Distributions -
Preferred Shareholders -
From net investment income $ (155,796) $ (307,103)
Common Shareholders -
From net investment income (851,565) (1,629,252)
- ---------------------------------------------------------------------------------------------
Total dividends and distributions to shareholders $ (1,007,361) $ (1,936,355)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 647,860 $ (513,837)
- ---------------------------------------------------------------------------------------------
Net Assets
- ---------------------------------------------------------------------------------------------
At beginning of period $40,038,755 $40,552,592
- ---------------------------------------------------------------------------------------------
At end of period (including undistributed net
investment income of $51,113 and $45,854,
respectively) $40,686,615 $40,038,755
- ---------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
<PAGE>
Massachusetts Health & Education Tax-Exempt Trust as of June 30, 1997
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS CONT'D
- -------------------------------------------------------------------------------
Financial Highlights
Selected data for a common share outstanding during each period
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1997 ----------------------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period (common shares) $ 13.01 $ 13.24 $ 11.32 $ 14.24 $ 13.98(b)
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.44(i) $ 0.88(i) $ 0.84 $ 0.88 $ 0.26
Net realized and unrealized gain
(loss) on investments 0.29 (0.27) 1.94 (2.87) 0.39
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $ 0.73 $ 0.61 $ 2.78 $ (1.99) $ 0.65
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions
- -----------------------------------------------------------------------------------------------------------------------------------
Preferred Shareholders -
From net investment income $ (0.07) $ (0.13) $ (0.15)(g) $ (0.12) $ --
Common Shareholders -
From net investment income (0.37) (0.71) (0.69) (0.81) (0.21)
Distributions in excess of net
investment income -- -- (0.02) -- --
From net realized gains on
investments -- -- -- -- (0.02)
Distributions required for
excise tax purposes in
excess net realized gains -- -- -- -- (0.03)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.44) $ (0.84) $ (0.86) $ (0.93) $ (0.26)
- -----------------------------------------------------------------------------------------------------------------------------------
Preferred share offering costs $ -- $ -- $ -- $ -- $ (0.13)(c)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
(Common shares) $ 13.30 $ 13.01 $ 13.24 $ 11.32 $ 14.24
- -----------------------------------------------------------------------------------------------------------------------------------
Per share market value, end of
period (Common shares) $12.875 $12.125 $11.125 $10.375 $15.500
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return at
Market Value 9.33% 15.61% 14.12% (28.66%) 5.04%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000
omitted) $40,687 $40,039 $40,553 $36,125 $42,850
Ratios (as a percentage of averag
total net assets):
Expenses(h) 0.96%(e)(f) 1.00% 1.17%(f) 1.02%(f) 1.16%(e)(f)
Expenses, after custodian fee
reduction 0.95%(e)(f) 0.98% -- -- --
Net investment income 5.09%(e)(f) 5.12% 5.01%(f) 5.25%(f) 4.19%(e)(f)
Ratios (as a percentage of average
common net assets):
Expenses(d)(h) 1.28%(e)(f) 1.34% 1.58%(f) 1.37%(f) 1.21%(e)(f)
Expenses, after custodian fee
reduction(d) 1.27%(e)(f) 1.32% -- -- --
Net investment income(d) 6.78%(e)(f) 6.86% 6.75%(f) 7.08%(f) 4.36%(e)(f)
Portfolio turnover rate 13% 44% 28% 123% 63%
- -----------------------------------------------------------------------------------------------------------------------------------
The Financial Highlights summarize the impact of net investment income, gains (losses) and distributions on the Trust's net asset
value per common share since the commencement of operations. Additionally, important relationships between certain financial
statement items are expressed into ratio form.
(a) The Trust commenced operations on July 30, 1993.
(b) Net of common share offering cost of $0.07.
(c) Auction Preferred Shares were issued on December 13, 1993.
(d) Ratios do not reflect the effect of dividend payments to preferred shareholders. Ratios to average common net assets
reflects the Trust's leveraged capital structure.
(e) Annualized.
(f) Reflects expense waivers by the Advisor, Administrator, and/or Shareholder Servicing Agent during the period. If the Trust
had borne all expenses for the six month period ended June 30, 1997, net investment income per common share would have
decreased by less than $0.01. If the Trust had borne all expenses for the year ended December 31, 1995, the year ended
December 31, 1994 and the period ended December 31, 1993, net investment income per common share would have decreased by
$0.05, $0.04 and $0.01, respectively.
(g) Includes distributions in excess of net investment income of $0.003 per common share.
(h) The annualized expense ratios for the six months ended June 30, 1997 and the year ended December 31, 1996 have been adjusted
to reflect a change in reporting requirements. The new reporting guidelines require the Trust to increase its expense ratio
by the effect of any expense offset arrangements with its service providers. The expense ratios for the three years in the
period ended December 31, 1995 have not not been adjusted to reflect this change.
(i) Computed using average shares outstanding throughout the period.
</TABLE>
See notes to financial statements
<PAGE>
Massachusetts Health & Education Tax-Exempt Trust as of June 30, 1997
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- -------------------------------------------------------------------------------
1 General Information and Significant
Accounting Policies
- -------------------------------------------------------------------------------
The Massachusetts Health & Education Tax-Exempt Trust (the "Trust") is an
entity commonly known as a Massachusetts business trust and is registered
under the Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. The Trust's investment objective is to earn a
high level of current income exempt from regular Federal income taxes and
Massachusetts personal income taxes consistent with preservation of capital.
The Trust seeks to achieve its objective by investing primarily in "investment
grade" tax-exempt obligations issued by the Massachusetts Health and Education
Facilities Authority on behalf of participating not-for-profit institutions.
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements, in accordance with
generally accepted accounting principles.
A Securities Valuation -- Municipal securities are normally valued at the mean
between the quoted bid and asked prices obtained from a pricing service.
Municipal securities which are not valued by a pricing service will be valued
on the basis of three dealer quotes or, if such quotes are unavailable, such
other available market information. Short-term obligations, maturing in sixty
days or less, are valued at amortized cost, which approximates value. Futures
and options on futures contracts traded on an exchange will be valued at last
settlement price. In the event of unusual market disruptions affecting
valuation, the Pricing Committee of the Trustees will be consulted.
B Securities Transactions -- Securities transactions are recorded on a trade
date basis. Realized gains and losses from such transactions are determined
using the specific identification method. Securities purchased or sold on a
when-issued or delayed delivery basis may be settled a month or more after the
transaction date. The securities so purchased are subject to market
fluctuations during this period. To the extent that when-issued or delayed
delivery purchases are outstanding, the Trust instructs the custodian to
segregate assets in a separate account, with a current value at least equal to
the amount of its purchase commitments.
C Interest Income -- Interest income is determined on the basis of interest
accrued and discount earned, adjusted for amortization of premium or discounts
on long term debt securities when required for federal income tax purposes.
D Federal Income Taxes -- The Trust has complied and intends to comply with
the requirements of the Internal Revenue Code (the "Code") applicable to
regulated investment companies by distributing all of its income, including
any net realized gains from investments, to shareholders. Therefore, no
federal income tax provision is required. In addition, the Trust intends to
satisfy conditions which will enable it to designate distributions from the
interest income generated by its investments in municipal securities, which
are exempt from regular federal and Massachusetts income taxes when received
by the Trust, as exempt interest dividends.
At December 31, 1996, the Trust for federal income tax purposes had a capital
loss carryover of $3,531,544, which will reduce taxable income arising from
future net realized gain on investments, if any, to the extent permitted by
the Internal Revenue Code, and thus will reduce the amount of distributions to
shareholders which would otherwise be necessary to relieve the Trust of any
liability for federal income or excise tax. Such capital loss carryovers will
expire on December 31, 2002 ($2,365,891) and December 31, 2003 ($1,165,653).
E Organization and Offering Costs -- Costs incurred by the Trust in connection
with its organization have been capitalized and are being charged to
operations ratably over a period of 60 months. Costs incurred by the Trust in
connection with the offerings of the common shares and Auction Preferred
Shares were recorded as a reduction of capital paid in excess of par
applicable to common shares.
F Expense Reductions -- Investors Bank & Trust Company (IBT) serves the Trust
as its Custodian and Transfer Agent. Pursuant to its service agreements, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balance the Trust maintains with IBT. All significant credits used
to reduce IBT's fee are reported as a reduction of expenses on the statement
of operations.
G Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results
could differ from those estimates.
H Interim Financial Information -- The interim financial statements relating
to June 30, 1997 and the six month period then ended have not been audited by
independent certified public accountants, but in the opinion of the Trust's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 Auction Preferred Shares
- --------------------------------------------------------------------------------
The Trust currently has 200 Auction Preferred Shares outstanding. The Auction
Preferred Shares are redeemable at the option of the Trust on any dividend
payment date at the redemption price of $50,000 per share, plus an amount
equal to any dividends accumulated on a daily basis unpaid through the
redemption date (whether or not such dividends have been declared).
Under the Investment Company Act of 1940, the Trust is required to maintain
asset coverage of at least 200% with respect to the Auction Preferred Shares
as of the last business day of each month in which any Auction Preferred
Shares are outstanding. Additionally, the Trust is required to meet more
stringent asset coverage requirements under the terms of the Auction Preferred
Shares and in accordance with the guidelines prescribed by the rating agency.
Should these requirements not be met, or should dividends accrued on the
Auction Preferred Shares not be paid, the Trust may be restricted in its
ability to declare dividends to common shareholders or may be required to
redeem certain of the Auction Preferred Shares. At June 30, 1997, there were
no such restrictions on the Trust.
3 Distributions to Shareholders
- --------------------------------------------------------------------------------
Distributions to common shareholders are recorded on the ex-dividend date and
are paid on the last business day of each month. Distributions to preferred
shareholders are recorded daily and are payable at the end of each dividend
period. Each dividend payment period for the Auction Preferred Shares is
generally seven days. The applicable dividend rate for the Auction Preferred
Shares on June 30, 1997 was 3.65%. For the six months ended June 30, 1997, the
Trust paid dividends to Auction Preferred shareholders amounting to $155,796,
representing an average APS dividend rate for such period of 3.14%.
4 Investment Advisory Fees and Transactions
with Affiliates
- --------------------------------------------------------------------------------
The Trust has entered into an Advisory Agreement with Eaton Vance Management
("Eaton Vance"), under which Eaton Vance will furnish the Trust with
investment research and advisory services. For the six months ended June 30,
1997, the fee paid for such services amounted to $69,629 and was equivalent to
0.35% (annualized) of the average daily net assets of the Trust, including net
assets attributable to any Auction Preferred Shares outstanding.
In addition, the Trust also entered into an Administration Agreement with
Eaton Vance, under which Eaton Vance will manage and administer the Trust's
business affairs and, in connection therewith, furnish for use of the Trust,
office space and all necessary office facilities, equipment, and personnel for
administering the affairs of the Trust. For the six months ended June 30,
1997, the fee paid for such services amounted to $29,842 and was equivalent to
0.15% (annualized) of the average daily net assets of the Trust, including net
assets attributable to any Auction Preferred Shares outstanding. Eaton Vance
is obligated to waive all or a portion of its Administration fee if the normal
operating expenses of the Trust exceed 0.95% of average daily net assets.
During the six months ended June 30, 1997, the fee waiver amounted to $4,900.
Trustees who are not affiliates of Eaton Vance, the Commonwealth of
Massachusetts Attorney General's office or Massachusetts Health and
Educational Facilities Authority (the "Authority") are eligible to receive
an annual fee of $7,500.
5 Securities Transactions
- --------------------------------------------------------------------------------
Purchases and sales (including maturities) of portfolio securities during the
six months ended June 30, 1997, aggregated $5,087,739 and $5,012,477,
respectively. There were no purchases and sales of short-term municipal
securities during the six months ended June 30, 1997.
The identified cost and unrealized appreciation (depreciation) in value of the
investments owned by the Trust at June 30, 1997, as computed for federal
income tax purposes, were as follows:
Identified cost $ 37,902,235
------------------------------------------------------------------------------
Gross unrealized appreciation $ 2,201,107
Gross unrealized depreciation (1,438)
------------------------------------------------------------------------------
Net unrealized appreciation $ 2,199,669
------------------------------------------------------------------------------
6 Capital Transactions
- --------------------------------------------------------------------------------
The Declaration of Trust allows the Trustees to issue an unlimited number of
$0.01 par value shares of common stock. At June 30, 1997, the Trust had
2,307,763 common shares issued and outstanding. There were no capital
transactions during the six months ended June 30, 1997 and the year ended
December 31, 1996.
7 Annual Meeting of Shareholders
- --------------------------------------------------------------------------------
The Trust held its annual meeting of Shareholders on May 20, 1997. 2,307,763
common shares and 200 Auction Preferred Shares (APS) were outstanding on March
31, 1997, the record date for shares eligible to vote at the meeting.
2,143,597 (92.89% of the record date common shares) and 200 APS shares (100%
of the record date APS shares) were represented at the meeting. The following
actions were taken by the shareholders:
ITEM 1: The election of James F. Carlin, Thomas H. Green, III, Walter B.
Prince, Edward M. Murphy and James M. Storey as Trustees of the Trust.
Messrs. Carlin and Green were designated the Nominees that will represent
the APS shareholders:
Nominees for Trustee Number of Shares
Representing APS Shareholders Affirmative Withheld
-----------------------------------------------------------------------
James F. Carlin 200 --
Thomas H. Green, III 200 --
Nominess for Trustee Number of Shares
Representing All Shareholders Affirmative Withheld
-----------------------------------------------------------------------
Walter B Price 2,131,723 11,874
Edward M. Murphy 2,133,123 10,474
James M. Storey 2,104,923 38,674
ITEM 2: The ratification of the selection of Price Waterhouse LLP as
independent certified public accountants to the Trust for the fiscal year
ended December 31, 1997.
Number of Shares
-----------------------------------------------------------------------
Affirmative 2,128,108
Against 5,150
Abstain 10,339
<PAGE>
Massachusetts Health & Education Tax-Exempt Trust as of June 30, 1997
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
8 Quarterly Results from Operations (Unaudited)
- ------------------------------------------------------------------------------------------------
Net Realized
Gross Net and Unrealized
Investment Investment Gain (Loss) on
Income Income Investments
-------------------- --------------------- ----------------------
Total Per Total Per Total Per
Quarter Ended (000's) Share (000's) Share (000's) Share
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1994 $ 610 $0.26 $ 510 $0.22 ($4,118) ($1.79)
June 30, 1994 615 0.27 524 0.23 (48) (0.02)
September 30, 1994 605 0.26 488 0.21 (1,231) (0.53)
December 31, 1994 603 0.26 516 0.22 (1,237) (0.53)
---------------------------------------------------------------------------------------------
$2,433 $1.05 $2,038 $0.88 ($6,634) ($2.87)
---------------------------------------------------------------------------------------------
March 31, 1995 $ 605 $0.26 $ 511 $0.22 $1,939 $0.84
June 30, 1995 593 0.26 493 0.21 265 0.12
September 30, 1995 595 0.26 495 0.21 650 0.28
December 31, 1995 592 0.25 434 0.20 1,618 0.70
---------------------------------------------------------------------------------------------
$2,385 $1.03 $1,933 $0.84 $4,472 $1.94
---------------------------------------------------------------------------------------------
March 31, 1996 $ 600 $0.26 $ 507 $0.22 ($1,533) ($0.66)
June 30, 1996 602 0.26 508 0.22 (9) (0.01)
September 30, 1996 604 0.26 514 0.22 449 0.20
December 31, 1996 602 0.26 490 0.22 496 0.20
---------------------------------------------------------------------------------------------
$2,408 $1.04 $2,019 $0.88 ($ 597) ($0.27)
---------------------------------------------------------------------------------------------
March 31, 1997 $ 603 $0.26 $ 509 $0.22 ($ 451) ($0.19)
June 30, 1997 599 0.26 504 0.22 1,094 0.48
---------------------------------------------------------------------------------------------
$1,202 $0.52 $1,013 $0.44 $ 643 $0.29
---------------------------------------------------------------------------------------------
<CAPTION>
Net Increase
(Decrease) in
Net Assets from Market Price
Operations on AMEX
---------------------- ----------------------
Total Per
Quarter Ended (000's) Share High Low
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 31, 1994 ($3,608) ($1.57) $15.625 $13.625
June 30, 1994 476 0.21 13.875 12.875
September 30, 1994 (743) (0.32) 13.250 11.625
December 31, 1994 (721) (0.31) 11.500 9.625
-------------------------------------------------------------------------
($4,596) ($1.99)
-------------------------------------------------------------------------
March 31, 1995 $2,450 $1.06 $11.875 $10.500
June 30, 1995 758 0.33 11.750 10.375
September 30, 1995 1,145 0.49 11.750 10.875
December 31, 1995 2,052 0.90 11.500 10.875
-------------------------------------------------------------------------
$6,405 $2.78
-------------------------------------------------------------------------
March 31, 1996 ($1,026) ($0.44) $12.000 $11.125
June 30, 1996 499 0.21 11.750 10.875
September 30, 1996 963 0.42 11.875 11.375
December 31, 1996 986 0.42 12.500 11.875
-------------------------------------------------------------------------
$1,422 $0.61
-------------------------------------------------------------------------
March 31, 1997 $ 58 $0.03 $12.500 $12.125
June 30, 1997 1,598 0.70 12.875 12.125
-------------------------------------------------------------------------
$1,656 $0.73
-------------------------------------------------------------------------
</TABLE>
<PAGE>
Massachusetts Health & Education Tax-Exempt Trust
- -------------------------------------------------------------------------------
OTHER INFORMATION
- -------------------------------------------------------------------------------
From time to time in the future, the Trust may effect redemptions and/or
repurchases of its Auction Preferred Shares as provided in the applicable
constituent instruments or as agreed upon by the Trust and holders of Auction
Preferred Shares. The Trust would effect such redemptions and/or repurchases to
the extent necessary to maintain applicable asset coverage requirements.
<PAGE>
Massachusetts Health & Education Tax-Exempt Trust as of June 30, 1997
- -------------------------------------------------------------------------------
INVESTMENT MANAGEMENT
- -------------------------------------------------------------------------------
The Massachusetts Health & Education Tax-Exempt Trust
Officers Board of Trustees
THOMAS J. FETTER, CFA WALTER B. PRINCE, ESQ., CHAIRMAN
President Partner, Peckham, Lobel, Casey, Prince & Tye
ROBERT B. MACINTOSH, CFA JAMES F. CARLIN
Vice President and Chairman of the Massachusetts Board of Higher
Portfolio Manager Education and Chairman & CEO of Carlin
Consolidated, Inc.
JAMES L. O'CONNOR
Treasurer THOMAS H. GREEN III, ESQ.
First Assistant Attorney General for the
Commonwealth of Massachusetts
ERIC G. WOODBURY, ESQ.
Secretary
EDWARD M. MURPHY
Senior Vice President, Tucker Anthony, Inc.,
MICHELLE A. ALEXANDER and Former Executive Director of the
Assistant Treasurer and Massachusetts Health & Education Facilities
Assistant Secretary Authority
JAMES M. STOREY, ESQ.
Trustee, various investment companies
<PAGE>
The Massachusetts Health & Education Tax-Exempt Trust
24 Federal Street
Boston, MA 02110
INVESTMENT ADVISOR AND ADMINISTRATOR
Eaton Vance Management
24 Federal Street
Boston, MA 02110
CUSTODIAN, TRANSFER AGENT,
DIVIDEND DISBURSING AGENT AND REGISTRAR
Investors Bank & Trust Company
200 Clarendon Street, 16th Floor
Boston, MA 02116
THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
- --------------------------------------------------------------------------------
2-644-8/97
