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[LOGO]
EATON VANCE
============
EDUCATION
[Photo of Brick Wall]
Semiannual Report June 30, 1999
[Photo of highway at night]
THE
MASSACHUSETTS
HEALTH &
EDUCATION
TAX-EXEMPT
TRUST
[Daytime photo of Boston skyline and waterfront]
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The Massachusetts Health & Education Tax-Exempt Trust as of June 30,1999
INVESTMENT UPDATE
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[Photo of Robert B. MacIntosh]
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Robert B. MacIntosh
Portfolio Manager
INVESTMENT ENVIRONMENT
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THE ECONOMY
o The Massachusetts economy continued its strong momentum in the first half of
1999. The June unemployment rate was 3.1%, below the national rate for the
52nd consecutive month. Financial services, retail trade and technology were
again among the largest sources of new jobs.
o The construction sector added significantly to employment in the Commonwealth.
Residential and commercial building has been aided by a strong housing market
and large commercial projects like Boston's Central Artery and Seaport
projects.
o Massachusetts tax revenues continued to reflect the strong state economy in
the first half of 1999, according to the Department of Revenue and Taxation.
Tax revenue growth was especially strong in calendar year 1998, rising 9.7%,
led by a 13.0% increase in individual income tax collections.
THE TRUST
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MANAGEMENT DISCUSSION
o Education bonds have played a leading role in the Trust's investment strategy.
Among the institutions benefiting from the Trust's investment were Boston
College, Northeastern University, Wheaton College, Clark University and
Springfield College.
o Insured* bonds constituted a significant portion of the Trust's holdings,
37.6% at June 30. These bonds represented high quality investments and
afforded an excellent source of liquidity, enabling the Trust to respond
quickly to changing market conditions.
o Hospital bonds were well-represented in the Trust. With recent restructurings
and mergers transforming the Massachusetts hospital sector, the Trust has
focused on financially sound institutions that are equipped to perform in a
competitive environment.
PERFORMANCE FOR THE PAST SIX MONTHS
o Based on share price, the Trust had a total return of -5.49% for the six
months ended June 30, 1999. That return was the result of a decrease in share
price from $14.875 on December 31, 1998 to $13.688 on June 30, 1999, and the
reinvestment of all distributions.
o Based on net asset value, the Trust had a total return of -1.96% for the six
months ended June 30, 1999. That return was the result of a decrease in net
asset value from $14.06 on December 31, 1998 to $13.42 on June 30, 1999, and
the reinvestment of all distributions.
o Based on the most recent dividend and a share price of $13.688 the Trust had a
current yield of 5.44% at June 30, 1999.(1)
o On June 30, 1999, the Trust's closing share price on the American Stock
Exchange was $13.688, representing a 2.0% premium to the Trust's net asset
value.
RATING DISTRIBUTION(2)
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BY TOTAL INVESTMENTS
AAA 40.1%
BBB 22.4%
Non-Rated+ 14.9%
AA 13.3%
A 9.3%
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SHARES OF THE TRUST 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. YIELD WILL
CHANGE.
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TRUST INFORMATION
AS OF JUNE 30, 1999
PERFORMANCE(3)
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AVERAGE ANNUAL TOTAL RETURNS (AT NET ASSET VALUE)
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One Year 1.38%
Five Years 7.68
Life of Trust (7/30/93) 5.11
AVERAGE ANNUAL TOTAL RETURNS (BY MARKET VALUE, AMERICAN STOCK EXCHANGE)
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One Year 4.04%
Five Years 6.90
Life of Trust (7/30/93) 4.22
TRUST OVERVIEW(2)
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Number of Issues 48
Average Maturity 20.0 Yrs.
Effective Maturity 10.5 Yrs.
Average Rating A+
Average Call 5.4 Yrs.
Average Dollar Price $104.67
(1) The Trust's current yield is calculated by dividing the last distribution
per share (annualized) by the share price.
(2) Rating Distribution is determined by dividing the total market value of the
holdings by the total investments of the Trust. Rating Distribution and
Trust Overview are subject to change.
(3) Returns are historical and are calculated by determining the percentage
change in net asset value and share price with all distributions reinvested.
* Private insurance does not remove the risk of loss of principal associated
with this investment due to changes in market conditions.
+ In the opinion of management, 12% of the 14.9% non-rated portion of the
Trust represents bonds that, if rated, would warrant an investment-grade
(BBB or higher) rating.
Past performance is no guarantee of future results. Investment return and
market price will fluctuate so that shares, when sold, may be worth more or
less than their original cost.
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<TABLE>
The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 1999
PORTFOLIO OF INVESTMENTS (Unaudited)
Tax-Exempt Investments -- 100.0%
<CAPTION>
RATINGS (UNAUDITED) PRINCIPAL
- ---------------------------------- AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
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EDUCATION -- 17.8%
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<S> <C> <C> <C> <C>
NR BBB- $ 750 Massachusetts DFA, Eastern Nazarene College,
5.625, 4/1/29 $ 705,982
Baa2 BBB 650 Massachusetts DFA, Suffolk University 5.75%,
07/01/19 645,424
Baa2 NR 250 Massachusetts DFA, Xaverian Brothers High
School 5.65%, 07/01/29 244,523
NR NR 1,700 Massachusetts HEFA, Wheaton College,
6.00%, 1/1/18 1,648,337
A3 A- 1,500 Massachusetts IFA, Clark University,
7.00%, 7/1/12 1,588,245
Baa1 BBB 2,110 Massachusetts IFA, Springfield College,
5.625%, 9/15/10 2,106,329
Baa1 NR 400 Massachusetts IFA, Wentworth Inst of Tech,
5.75%, 10/1/28 388,124
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$ 7,326,964
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ESCROWED -- 13.8%
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Aaa AAA $1,380 Massachusetts HEFA, Boston College, (FGIC),
6.625%, 7/1/21 $ 1,471,936
Baa3 NR 1,000 Massachusetts HEFA, Milford-Whitinsville
Hospital, 7.75%, 7/15/17 1,115,990
Aaa NR 800 Massachusetts HEFA, Sisters of Providence
Hospital, 6.625%, 11/15/22 874,984
Aaa AAA 750 Massachusetts HEFA, University Hospital,
(MBIA), 7.25%, 7/1/19 792,083
A1 AA- 1,000 Massachusetts IFA, College of the Holy Cross,
6.45%, 1/1/12 1,070,090
Aaa NR 160 Massachusetts Turnpike Authority, 5.00%, 1/1/20 155,502
Aaa AAA 200 Massachusetts Turnpike Authority, (MBIA),
5.00%, 1/1/20 194,378
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$ 5,674,963
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GENERAL OBLIGATIONS -- 2.6%
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Aa3 AA+ $1,000 Massachusetts Water Pollution Abatement
Trust, 6.375%, 2/1/15 $ 1,085,140
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HOSPITALS -- 20.1%
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NR NR $2,145 Massachusetts HEFA, Atlanticare Medical
Center, 8.00%, 12/1/13 $ 2,438,758
NR BBB+ 750 Massachusetts HEFA, Cape Cod Health,
5.45%, 11/15/23 715,448
Baa2 BBB 750 Massachusetts HEFA, Caritos Christi Obl.
Group, 5.625%, 7/1/20 720,990
Baa3 NR 250 Massachusetts HEFA, Central New England
Health, 6.125%, 8/1/13 252,445
Baa3 NR 175 Massachusetts HEFA, Central New England
Health, 6.30%, 8/1/18 177,811
Aa2 AA+ 1,500 Massachusetts HEFA, Daughters of Charity,
6.10%, 7/1/14 1,575,255
Baa2 BBB- 220 Massachusetts HEFA, Milford-Whitinsville,
5.375%, 7/15/28 202,607
NR BBB- 400 Massachusetts HEFA, North Adams Hospital,
6.625%, 7/1/18 422,892
A2 A 750 Massachusetts HEFA, South Shore Hospital,
5.75%, 07/01/29 747,337
Aa2 NR 1,000 Massachusetts HEFA, Youville House,
6.25%, 2/15/41 1,042,870
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$ 8,296,413
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INDUSTRIAL DEVELOPMENT REVENUE -- 3.7%
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A3 A $1,500 Massachusetts IFA, General Motors,
5.55%, 4/1/09 $ 1,513,590
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INSURED EDUCATION -- 11.1%
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Aaa AAA $ 40 Massachusetts HEFA, Boston College, (FGIC),
6.625%, 7/1/21 $ 42,461
Aaa AAA 1,765 Massachusetts HEFA, Northeastern University,
(MBIA), 6.55%, 10/1/22 1,899,563
Baa AAA 1,000 Massachusetts HEFA, Suffolk University,
(CLEE), 6.25%, 7/1/12 1,055,290
Aaa AAA 1,000 Massachusetts HEFA, Tufts University, (FGIC),
5.95%, 8/15/18 1,030,890
NR AAA 515 Massachusetts IFA, Assumption College,
(CLEE), 6.00%, 7/1/26 534,385
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$ 4,562,589
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INSURED HOSPITALS -- 18.5%
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Aaa AAA $1,725 Massachusetts HEFA, Addison Gilbert Hospital,
(MBIA), 5.75%, 7/1/23 $ 1,744,594
Aaa AAA 800 Massachusetts HEFA, Baystate Medical Center,
(FSA), 6.00%, 7/1/26 833,000
Aaa AAA 1,000 Massachusetts HEFA, Berkshire Health System,
(MBIA), 6.00%, 10/1/19 1,039,100
Aaa AAA 1,250 Massachusetts HEFA, Dana Farber Cancer
Institute, (FGIC), 6.00%, 12/1/10 1,335,513
Aaa AAA 500 Massachusetts HEFA, Mt. Auburn Hospital,
(MBIA), 6.25%, 8/15/14 535,795
Aaa AAA 1,000 Massachusetts HEFA, North Shore Medical
Center, (MBIA), 5.625%, 7/1/14 1,016,990
NR AAA 595 Massachusetts HEFA, Valley Regional Health
System, (CLEE), 5.75%, 7/1/18 605,793
NR AAA 500 Massachusetts HEFA, Winchester Hospital,
(CLEE), 5.80%, 7/1/09 525,135
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$ 7,635,920
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INSURED TRANSPORTATION -- 1.1%
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Aaa AAA $ 500 Massachusetts Turnpike Auth Rev, (AMBAC),
5.00%, 1/1/39 $ 456,520
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INSURED SPECIAL TAX -- 0.9%
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NR AAA $ 420 Puerto Rico IFA, (AMBAC), Variable Rate,
07/01/28 $ 358,071
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LIFE CARE -- 0.8%
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NR NR $ 350 Massachusetts IFA, Forge Hill,
6.75%, 04/1/30 $ 324,079
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MISCELLANEOUS -- 1.4%
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NR BBB+ $ 625 Massachusetts DFA, YMCA of Greater Boston,
5.45%, 11/1/28 $ 592,594
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NURSING HOME -- 2.0%
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NR NR $ 750 Massachusetts IFA, Age Institute of
Massachusetts, 8.05%, 11/1/25 $ 824,483
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SOLID WASTE -- 2.3%
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NR BBB $ 500 Massachusetts Development Res Recovery Ogden
Haverhill, 5.50%, 12/1/19 $ 474,145
NR BBB 500 Massachusetts IFA, Res Recovery Ogden
Haverhill, 5.60%, 12/1/19 480,015
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$ 954,160
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SPECIAL TAX -- 2.2%
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NR NR $ 1,000 Puerto Rico IFA, Variable Rate,
07/01/28 $ 901,700
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TRANSPORTATION -- 1.7%
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NR AA- $ 830 Massachusetts Bay Transportation Authority,
Variable Rate, 3/1/27 $ 707,060
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TOTAL TAX-EXEMPT INVESTMENTS -- 100%
(identified cost $39,405,318) $41,214,246
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NOTES TO PORTFOLIO:
1. Portfolio Overview (Unaudited):
Number of Issues 48
Average Maturity (Years) 20.0 Yrs.
Effective Maturity (Years) 10.5 Yrs.
Average Call (Years) 5.4 Yrs.
Duration (Years) 7.2 Yrs.
Average Rating A+
2. Massachusetts HEFA Securities - At June 30, 1999, the Trust held securities issued by health and
educational obligators with a value of $34,295,531 (representing 83.2% 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, 1999, 37.6% 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 insured securities by financial institution are as follows:
PERCENTAGE
OF TOTAL
VALUE INVESTMENTS
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Municipal Bond Insurance Association (MBIA) $ 7,222,503 17.5%
Financial Guaranty Insurance Company (FGIC) 3,880,800 9.5%
College Construction Loan Insurance Corporation
(CLEE) 2,720,603 6.6%
Financial Security Assurance Incorporated (FSA) 833,000 2.0%
AMBAC Financial Group Inc. (AMBAC) 814,591 2.0%
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Total Insured Securities $15,471,497 37.6%
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4. Summary of Ratings (Unaudited):
PERCENTAGE OF
NUMBER TOTAL
RATINGS OF ISSUES VALUE INVESTMENTS
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AAA/Aaa 20 $16,501,983 40.1%
AA/Aa 5 5,480,415 13.3%
A/A 3 3,849,172 9.3%
BBB/Baa 15 9,245,319 22.4%
NR 5 6,137,357 14.9%
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Total 48 $41,214,246 100.0%
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The ratings indicated are the most recent Moody's and Standard & Poor's ratings believed to be available
at June 30, 1999. 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, 1999.
5. Private Placement Securities - Information relating to the initial acquisition and market valuation of
private placement securities is presented below:
ACQUISITION PERCENTAGE
COST VALUE OF NET ASSETS
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Massachusetts HEFA, Atlanticare Medical Center "AMC"
(acquired 12/15/93) $2,450,000 $2,438,758 6.0%
Massachusetts HEFA, Wheaton College (acquired 1/12/98) 1,750,000 1,648,337 4.0%
Massachusetts Bay Transportation Authority, "MBTA" (acquired 2/11/99) 798,875 707,060 1.7%
Puerto Rico IFA (acquired 4/8/99) 1,010,080 901,700 2.2%
Puerto Rico IFA Residuals (AMBAC) (acquired 6/10/99) 374,364 358,071 0.9%
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Total $6,053,926 14.8%
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AMC, MBTA and Puerto Rico have no publicly offered securities of the same class as the private placement
security held by the Trust. Wheaton College has 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 securities, including costs associated with registering the
securities under the Securities Act of 1933, if necessary.
</TABLE>
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The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 1999
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of June 30, 1999
Assets
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Total Investments, at value (identified cost, $39,405,318) $41,214,246
Interest receivable 868,807
Receivable from the Administrator (Note 4) 1,907
Other assets 509
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Total assets $42,085,469
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Liabilities
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Due to Bank $ 263,373
Payable for securities purchased 744,132
Accrued expenses and other liabilities 45,749
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Total liabilities $ 1,053,254
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Net Assets $41,032,215
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Net Assets Were Comprised of:
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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, 2,313,199 shares issued and outstanding 23,132
Additional paid-in capital 32,023,962
Accumulated net realized loss from investment transactions (2,873,326)
Undistributed net investment income 49,519
Unrealized appreciation of investments 1,808,928
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Net Assets $41,032,215
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Net Assets applicable to preferred shareholders:
Auction Preferred Shares at liquidation value $10,000,000
Cumulative undeclared dividends 0
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$10,000,000
Net Assets applicable to common shareholders $31,032,215
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Total $41,032,215
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Net Asset Value Per Common Share
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($31,032,215 / 2,313,199 common shares issued and outstanding) $ 13.42
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See notes to financial statements
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Statement of Operations
For the Six Months Ended
June 30, 1999
Investment Income
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Interest income $ 1,224,980
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Expenses
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Investment advisory fee (Note 4) $ 73,079
Administration fee (Note 4) 31,320
Trustees fees (Note 4) 14,876
Custodian and transfer agent fees (Note 1) 29,845
Legal and accounting services 20,283
Preferred share remarketing agent fee 12,397
Printing and postage 10,017
Exchange membership fees 3,720
Preferred shares auction agent fees 2,628
Miscellaneous 4,512
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Total operating expenses $ 202,677
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Deduct -
Preliminary waiver of expenses by the Administrator (Note 4) $ 1,907
Reduction of custody fees (Note 1) 2,441
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Total $ 4,348
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Net operating expenses $ 198,329
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Net investment income $ 1,026,651
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Realized and Unrealized Gain (Loss)
on Investments
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Net realized gain from investment transactions $ 250,061
Net change in unrealized appreciation of investments (1,768,561)
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Net loss on investments $(1,518,500)
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Net decrease in net assets resulting from operations $ (491,849)
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See notes to financial statements
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<TABLE>
The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 1999
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<CAPTION>
Six Months Ended
Increase (Decrease) June 30, 1999 Year Ended
in Net Assets (Unaudited) December 31, 1998
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<S> <C> <C>
From operations -
Net investment income $ 1,026,651 $ 2,026,532
Net realized gain from investment transactions 250,061 412,882
Net change in unrealized appreciation
(depreciation) of investments (1,768,561) (20,854)
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Net increase (decrease) in net assets
from operations $ (491,849) $ 2,418,560
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Dividends and Distributions -
Preferred Shareholders - From net investment income $ (141,028) $ (321,910)
Common Shareholders - From net investment income (860,212) (1,718,628)
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Total dividends and distributions to shareholders $ (1,001,240) $ (2,040,538)
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Capital Share Transactions:
Reinvestment of distributions to shareholders $ 21,410 $ 44,199
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Net increase in net assets resulting from capital
share transactions $ 21,410 $ 44,199
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Net increase (decrease) in net assets $ (1,471,679) $ 422,221
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Net Assets
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At beginning of period $ 42,503,894 $ 42,081,673
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At end of period, including undistributed net
investment income of $49,519 and $24,108,
respectively $ 41,032,215 $ 42,503,894
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See notes to financial statements
</TABLE>
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<TABLE>
The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 1999
FINANCIAL STATEMENTS CONT'D
Financial Highlights
Selected data for a common share outstanding during each period
<CAPTION>
Six Months
Ended
June 30, Year Ended December 31,
1999 ------------------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period (common shares) $ 14.06 $ 13.90 $ 13.01 $ 13.24 $ 11.32 $ 14.24
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Investment Operations
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Net investment income $ 0.44(e) $ 0.88(e) $ 0.88(e) $ 0.88(e) $ 0.84 $ 0.88
Net realized and unrealized
gain (loss) on investments (0.65) 0.16 0.89 (0.27) 1.94 (2.87)
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Total from investment operations $ (0.21) $ 1.04 $ 1.77 $ 0.61 $ 2.78 $ (1.99)
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Less Distributions
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Preferred Shareholders -
From net investment income $ (0.06) $ (0.14) $ (0.14) $ (0.13) $ (0.15)(c) $ (0.12)
Common Shareholders -
From net investment income (0.37) (0.74) (0.74) (0.71) (0.69) (0.81)
Distributions in excess of
net investment income -- -- -- -- (0.02) --
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Total distributions $ (0.43) $ (0.88) $ (0.88) $ (0.84) $ (0.86) $ (0.93)
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Net asset value, end of period
(Common shares) $ 13.42 $ 14.06 $ 13.90 $ 13.01 $ 13.24 $ 11.32
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Per share market value, end
of period (Common shares) $13.688 $14.875 $13.938 $12.125 $11.125 $10.375
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Total investment return at
Market Value (5.49%) 12.05% 21.63% 15.61% 14.12% (28.66%)
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Ratios/Supplemental Data
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Net assets, end of period
(000 omitted) $41,032 $42,504 $42,082 $40,039 $40,553 $36,125
Ratio: (as a percentage of
average total net assets)
Expenses(d) 0.96%(b)(f) 0.96%(b) 0.96%(b) 1.00% 1.17%(b) 1.02%(b)
Expenses, after custodian
fee reduction 0.95%(b)(f) 0.95%(b) 0.95%(b) 0.98% -- --
Net investment income 4.92%(b)(f) 4.79%(b) 4.95%(b) 5.12% 5.01%(b) 5.25%(b)
Ratios: (as a percentage of
average common net assets)
Expenses(a)(d) 1.26%(b)(f) 1.25%(b) 1.27%(b) 1.34% 1.58%(b) 1.37%(b)
Expenses, after custodian
fee reduction (a) 1.25%(b)(f) 1.24%(b) 1.26%(b) 1.32% -- --
Net investment income(a) 6.45%(b)(f) 6.27%(b) 6.57%(b) 6.86% 6.75%(b) 7.08%(b)
Portfolio turnover rate 21% 28% 20% 44% 28% 123%
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The Financial Highlights summarize the impact of net investment income, gains (losses) and distributions on the Trust's net asset
value per common share. Additionally, important relationships between certain financial statement items are expressed in ratio
form.
(a) 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.
(b) 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 months ended June 30, 1999, the year ended December 31, 1998, and the year ended December 31,
1997, net investment income per common share would have decreased by less than $0.01 during each period. If the Trust had
borne all expenses for the year ended December 31, 1995, and the year ended December 31, 1994, net investment income per
common share would have decreased by $0.05, and $0.04, respectively.
(c) Includes distributions in excess of net investment income of $0.003 per common share.
(d) The annualized expense ratios for the year ended December 31, 1996 and periods thereafter 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 two years in the period ended
December 31, 1995 have not been adjusted to reflect this change.
(e) Computed using average shares outstanding throughout the period.
(f) Annualized.
</TABLE>
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The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 1999
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 General Information and Significant Accounting Policies
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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
Massachusetts "investment grade" tax-exempt obligations issued on behalf of
not-for-profit health and education 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.
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.
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.
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.
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, 1998, the Trust for federal income tax purposes had a
capital loss carryover of $3,006,142, 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 ($1,840,489) and December
31, 2003 ($1,165,653).
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.
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.
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,
1999, 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, 1999 was 3.00%. For the six months ended June
30, 1999, the Trust paid dividends to Auction Preferred shareholders
amounting to $141,028, representing an average APS dividend rate for such
period of 2.84% (annualized).
4 Investment Advisory Fees and Other 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,
1999, the fee paid for such services amounted to $73,079 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, 1999, the fee paid for such services amounted to $31,320 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. During the six months ended June 30, 1999, Eaton Vance also
made a preliminary reduction of the Administration fee of $1,907.
Trustees who are not affiliates of Eaton Vance 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, 1999, aggregated $9,790,071 and $8,846,377
respectively. There were no purchases and sales of short-term municipal
securities during the six months ended
June 30, 1999.
The identified cost and unrealized appreciation (depreciation) in value of
the investments owned by the Trust at June 30, 1999, as computed for federal
income tax purposes, were as follows:
Identified cost $39,405,318
---------------------------------------------------------
Gross unrealized appreciation $ 2,321,672
Gross unrealized depreciation 512,744
---------------------------------------------------------
Net unrealized appreciation $ 1,808,928
---------------------------------------------------------
6 Capital Transactions
- --------------------------------------------------------------------------------
The Declaration of Trust allows the Trustees to issue an unlimited number of
$0.01 par value shares of common stock. Transactions in common shares were
as follows:
Six Months Year Ended
Ended June 30, December
1999 (Unaudited) 31, 1998
----------------------------------------------------------------------------
Beginning shares 2,311,664 2,308,508
Shares issues pursuant to the Trust's
dividend reinvestment plan 1,535 3,156
----------------------------------------------------------------------------
Ending shares 2,313,199 2,311,664
----------------------------------------------------------------------------
7 Annual Meeting of Shareholders
- --------------------------------------------------------------------------------
The Trust held its annual meeting of Shareholders on May 19,
1999. 2,312,228 common shares and 200 Auction Preferred Shares (APS) were
outstanding on March 22, 1999, the record date for shares eligible to vote
at the meeting. 2,109,397 (91.23% 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:
Number of
Nominees for Trustee Shares
Elected by APS Shareholders Affirmative Withheld
-------------------------------------------------------------------
James F. Carlin 200 none
Thomas H. Green, III 200 none
-------------------------------------------------------------------
Number of
Nominees for Trustee Shares
Elected by All Shareholders Affirmative Withheld
-------------------------------------------------------------------
Walter B. Prince 2,061,144 48,453
Edward M. Murphy 2,091,544 18,053
James M. Storey 2,090,654 18,943
-------------------------------------------------------------------
ITEM 2: The ratification of the selection of PricewaterhouseCoopers LLP as
independent accountants to the Trust for the fiscal year ending December 31,
1999.
Number of
Shares
-------------------------------------------------------------------
Affirmative 2,093,573
Against 8,825
Abstain 7,199
-------------------------------------------------------------------
<TABLE>
8 Quarterly Results from Operations (Unaudited)
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Net Realized Net Increase
Gross Net and Unrealized (Decrease) in
Investment Investment Gain (Loss) on Net Assets from Market Price
Income Income Investments Operations on AMEX
------------------ ------------------- -------------------- ------------------- ----------------
Quarter Total Per Total Per Total Per Total Per
Ended (000's) Share (000's) Share (000's) Share (000's) Share High Low
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1995 $ 605 $0.26 $ 511 $0.22 $1,939 $0.84 $2,450 $1.06 $11.875 $10.500
June 30, 1995 593 0.26 493 0.21 265 0.12 758 0.33 11.750 10.375
September 30, 1995 595 0.26 495 0.21 650 0.28 1,145 0.49 11.750 10.875
December 31, 1995 592 0.25 434 0.20 1,618 0.70 2,052 0.90 11.500 10.875
----------------------------------------------------------------------------------------------------------------------------------
$2,385 $1.03 $1,933 $0.84 $4,472 $1.94 $6,405 $2.78
----------------------------------------------------------------------------------------------------------------------------------
March 31, 1996 $ 600 $0.26 $ 507 $0.22 ($1,533) ($0.66) ($1,026) ($0.44) $12.000 $11.125
June 30, 1996 602 0.26 508 0.22 (9) (0.01) 499 0.21 11.750 10.875
September 30, 1996 604 0.26 514 0.22 449 0.20 963 0.42 11.875 11.375
December 31, 1996 602 0.26 490 0.22 496 0.20 986 0.42 12.500 11.875
----------------------------------------------------------------------------------------------------------------------------------
$2,408 $1.04 $2,019 $0.88 ($ 597) ($0.27) $1,422 $0.61
----------------------------------------------------------------------------------------------------------------------------------
March 31, 1997 $ 603 $0.26 $ 509 $0.22 ($ 451) ($0.19) $ 58 $0.03 $12.500 $12.125
June 30, 1997 599 0.26 504 0.22 1,094 0.48 1,598 0.70 12.875 12.125
September 30, 1997 603 0.26 503 0.22 685 0.28 1,189 0.50 13.875 12.750
December 31, 1997 601 0.26 503 0.22 712 0.32 1,215 0.54 14.000 13.250
----------------------------------------------------------------------------------------------------------------------------------
$2,406 $1.04 $2,019 $0.88 $2,040 $0.89 $4,060 $1.77
----------------------------------------------------------------------------------------------------------------------------------
March 31, 1998 $ 607 $0.26 $ 508 $0.22 $ 68 $0.03 $ 576 $0.25 $14.875 $13.875
June 30, 1998 605 0.26 505 0.22 83 0.03 588 0.25 14.875 13.750
September 30, 1998 609 0.26 508 0.22 563 0.25 1,071 0.47 14.938 13.750
December 31, 1998 608 0.26 506 0.22 (322) (0.15) 184 0.07 15.375 13.750
----------------------------------------------------------------------------------------------------------------------------------
$2,429 $1.04 $2,027 $0.88 $ 392 $0.16 $2,419 $1.04
----------------------------------------------------------------------------------------------------------------------------------
March 31, 1999 $ 612 $0.26 $ 513 $0.22 ($ 356) ($0.15) $ 157 $0.07 $15.000 $13.938
June 30, 1999 613 0.26 514 0.22 (1,163) (0.50) (649) (0.28) 14.625 13.563
</TABLE>
<PAGE>
The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 1999
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 generally effect such redemptions and/or
repurchases to the extent necessary to maintain applicable asset coverage
requirements.
<PAGE>
The Massachusetts Health & Education Tax-Exempt Trust
INVESTMENT MANAGEMENT
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.
Director of Salomon Smith Barney, Public
ERIC G. WOODBURY, ESQ. Finance Department
Secretary
EDWARD M. MURPHY
KRISTIN S. ANAGNOST Alliance Health, Inc., and Former Executive
Assistant Treasurer and Director of the Massachusetts Health &
Assistant Secretary Education Facilities Authority
JAMES M. STOREY, ESQ.
Trustee, various investment companies
<PAGE>
INVESTMENT ADVISOR AND ADMINISTRATOR
Eaton Vance Management
The Eaton Vance Building
255 State Street
Boston, MA 02109
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
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
1-800-225-6265
1-619-8/99 MHEFASRC
