[EATON VANCE LOGO]
[PHOTO: Wall of Educational Institution]
Semiannual Report June 30, 2000
[PHOTO: Highway]
THE
MASSACHUSETTS
HEALTH &
EDUCATION
TAX-EXEMPT
TRUST
[LOGO: 75th Anniversary]
[PHOTO: Boston, MA Skyline]
The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 2000
INVESTMENT UPDATE
[PHOTO WITH CAPTION "ROBERT B. MACINTOSH, PORTFOLIO MANAGER"]
Investment Environment
-----------------------------------------------------------------------------
* The Massachusetts economy has continued to advance in 2000, adding
around 70,000 new jobs in the past year. Financial services, retail trade,
health services and technology were again among the largest sources of new
jobs. The June 2000 unemployment rate was 2.6%, down from the 3.2% rate of
a year ago.
* The Massachusetts technology sector continued to benefit from an
infusion of both public and private investment. According to the
Massachusetts Technology Collaborative, the Commonwealth led the nation
in federal R&D spending in 1999, while drawing $3.7 billion in venture
capital, second only to California.
* Recent signs suggest that rising interest rates and declining wealth levels
could moderate the Massachusetts economy. Single-family home sales declined
18% in April from the same period a year ago, while consumer sentiment
weakened slightly.
The Trust
-----------------------------------------------------------------------------
Management Discussion
* In very light trading, escrowed bonds were the Trust's largest weighting
and provided some support in a difficult market. An issue for Atlanticare
Medical Center is prerefunded to 2003. Backed by U.S. Treasuries, it has
exhibited less volatility while carrying a very attractive 8.00% coupon.
* The Trust maintained a significant exposure to education bonds,
including colleges and secondary schools. In a difficult climate for
hospital bonds and "Big Dig"-related issues, education bonds were
attractive for their dependable tuition revenues.
* The Trust remained very selective with respect to its hospital
investments. Management focused on premier institutions, including an
insured* issue for world-renowned Dana Farber Cancer Institute.
Performance for the Past Six Months
* Based on share price, the Trust had a total return of 10.99% for the
six months ended June 30, 2000. That return was the result of an
increase in share price from $11.50 on December 31, 1999 to $12.375
on June 30, 2000, and the reinvestment of $0.3822 in regular monthly
dividends.
* Based on net asset value, the Trust had a total return of 4.31% for the
six months ended June 30, 2000. That return was the result of an increase
in net asset value from $12.45 on December 31, 1999 to $12.59 on June 30,
2000, and the reinvestment of all distributions.
* Based on the most recent dividend and a share price of $12.375, the
Trust had a market yield of 6.18% at June 30, 2000.1 The Trust's market
yield is equivalent to a taxable yield of 10.87%.2
* On June 30, 2000, the Trust's closing share price on the American Stock
Exchange was $12.375, representing a 1.7% discount to the Trust's net
asset value.
Rating Distribution3
-----------------------------------------------------------------------------
By total investments
[PIE CHART divided proportionally as follows: AAA - 37.1%, AA - 13.8%,
A - 10.7%, BBB - 18.9%, BB - 1.1%, Non-Rated+ - 18.4%]
-----------------------------------------------------------------------------
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.
-----------------------------------------------------------------------------
Trust Information
as of June 30, 2000
Performance4
-----------------------------------------------------------------------------
Average Annual Total Returns (by share price, American Stock Exchange)
One Year -4.44%
Five Years 6.89
Life of Fund (7/30/93) 2.93
Average Annual Total Returns (by net asset value)
-----------------------------------------------------------------------------
One Year -0.35%
Five Years 6.44
Life of Fund (7/30/93) 4.31
Trust Overview3
-----------------------------------------------------------------------------
Number of Issues 46
Average Maturity 19.4 Yrs.
Effective Maturity 12.6 Yrs.
Average Rating A+
Average Call 4.8 Yrs.
Average Dollar Price $97.26
1 The Trust's market yield is calculated by dividing the most recent
dividend per share by the share price at the end of the period and
annualizing the result.
2 Taxable-equivalent yield assumes maximum 43.13% combined federal and
state income tax rate. A lower rate would result in a lower tax-
equivalent figure.
3 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.
4 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 18.4% non-rated portion of
the Trust represents bonds that, if rated, would warrant an investment-
grade rating.
Past performance is no guarantee of future results. Investment return
and share price will fluctuate so that shares, when sold, may be worth
more or less than their original cost.
<TABLE>
<CAPTION>
The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 2000
PORTFOLIO OF INVESTMENTS (Unaudited)
Tax-Exempt Investments -- 100.0%
Ratings (Unaudited) Principal
--------------------------- Amount
Standard (000's
Moody's & Poor's Omitted) Security Value
-------------------------------------------------------------------------------------------------------
Education -- 18.9%
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR BBB- $ 750 Massachusetts DFA, Eastern Nazarene
College, 5.625%, 4/1/29 $ 623,363
Baa2 BBB 550 Massachusetts DFA, Suffolk University,
5.75%, 7/01/19 510,730
NR BBB 540 Massachusetts DFA Wheeler School,
6.50%, 12/1/29 532,645
Baa2 NR 250 Massachusetts DFA, Xaverian Brothers
High School, 5.65%, 7/01/29 222,837
NR NR 1,650 Massachusetts HEFA, Wheaton College,
6.00%,1/1/18(5) 1,521,647
A3 A- 1,500 Massachusetts IFA, Clark University,
7.00%, 7/1/12(5) 1,559,415
Baa1 BBB 2,110 Massachusetts IFA, Springfield College,
5.625%, 9/15/10 2,071,303
Baa1 NR 400 Massachusetts IFA, Wentworth Institute
of Technology, 5.75%, 10/1/28 365,600
-------------------------------------------------------------------------------------------------------
$ 7,407,540
-------------------------------------------------------------------------------------------------------
Escrowed -- 21.1%
-------------------------------------------------------------------------------------------------------
NR NR $ 2,105 Massachusetts HEFA, Atlanticare Medical
Center, 8.00%, 12/01/13,
Prerefunded to 12/1/03(5) $ 2,265,801
Aaa AAA 1,380 Massachusetts HEFA, Boston College,
(FGIC), 6.625%, 7/1/21,
Prerefunded to 7/1/01 1,436,152
Aa2 AA+ 1,500 Massachusetts HEFA, Daughters Of Charity,
6.10%, 7/1/14,
Prerefunded to 7/1/06 1,590,825
Baa3 NR 1,000 Massachusetts HEFA, Milford-Whitinsville
Hospital, 7.75%, 7/15/17,
Prerefunded to 7/15/02 1,078,000
Aaa NR 800 Massachusetts HEFA, Sisters of Providence
Hospital, 6.625%, 11/15/22,
Prerefunded to 11/15/04 847,104
A1 AA- 1,000 Massachusetts IFA, College of the Holy
Cross, 6.45%, 1/1/12,
Prerefunded to 1/1/02 1,044,720
-------------------------------------------------------------------------------------------------------
$ 8,262,602
-------------------------------------------------------------------------------------------------------
Hospitals -- 7.4%
-------------------------------------------------------------------------------------------------------
NR NR $ 500 Massachusetts DFA, MCHSP,
6.60%, 8/12/29 $ 444,030
NR BBB+ 650 Massachusetts HEFA, Cape Cod Health,
5.45%, 11/15/23 518,180
Ba2 BB 495 Massachusetts HEFA, Learning Center
for the Deaf, 6.125%, 7/1/29 419,562
NR BBB- 400 Massachusetts HEFA, North Adams
Hospital, 6.625%, 7/1/18 367,760
A2 A 200 Massachusetts HEFA, South Shore
Hospital, 5.75%, 7/01/29 175,720
Aa2 NR 1,000 Massachusetts HEFA, Youville House,
6.25%, 2/15/41 982,540
-------------------------------------------------------------------------------------------------------
$ 2,907,792
-------------------------------------------------------------------------------------------------------
Industrial Development Revenue -- 4.5%
-------------------------------------------------------------------------------------------------------
NR NR $ 250 Massachusetts IFA, American Water Co.,
6.60%, 12/1/15 $ 251,320
A3 A 1,500 Massachusetts IFA, General Motors,
5.55%, 4/1/09 1,496,265
-------------------------------------------------------------------------------------------------------
$ 1,747,585
-------------------------------------------------------------------------------------------------------
Insured Education -- 10.1%
-------------------------------------------------------------------------------------------------------
Aaa AAA $ 40 Massachusetts HEFA, Boston College,
(FGIC), 6.625%, 7/1/21 $ 41,509
Aaa AAA 1,765 Massachusetts HEFA, Northeastern
University, (MBIA), 6.55%, 10/1/22 1,853,815
Baa AAA 1,000 Massachusetts HEFA, Suffolk University,
(CLEE), 6.25%, 7/1/12 1,033,680
Aaa AAA 1,000 Massachusetts HEFA, Tufts University,
(FGIC), 5.95%, 8/15/18 1,009,470
-------------------------------------------------------------------------------------------------------
$ 3,938,474
-------------------------------------------------------------------------------------------------------
Insured Hospitals -- 17.1%
-------------------------------------------------------------------------------------------------------
Aaa AAA $ 1,725 Massachusetts HEFA, Addison Gilbert
Hospital, (MBIA), 5.75%, 7/1/23 $ 1,676,804
Aaa AAA 800 Massachusetts HEFA, Baystate Medical
Center, (FSA), 6.00%, 7/1/26 803,272
Aaa AAA 1,000 Massachusetts HEFA, Berkshire Health
System, (MBIA), 6.00%, 10/1/19 1,009,540
Aaa AAA 1,250 Massachusetts HEFA, Dana Farber Cancer
Institute, (FGIC), 6.00%, 12/1/10 1,300,225
Aaa AAA 500 Massachusetts HEFA, Mt. Auburn Hospital,
(MBIA), 6.25%, 8/15/14 525,730
Aaa AAA 1,000 Massachusetts HEFA, North Shore Medical
Center, (MBIA), 5.625%, 7/1/14 1,004,040
NR AAA 395 Massachusetts HEFA, Valley Regional Health
System, (CLEE), 5.75%, 7/1/18 392,156
-------------------------------------------------------------------------------------------------------
$ 6,711,767
-------------------------------------------------------------------------------------------------------
Insured Special Tax -- 2.8%
-------------------------------------------------------------------------------------------------------
NR NR $ 1,000 Puerto Rico IFA, (AMBAC), Variable Rate,
7/01/28(6)(7) $ 795,790
NR AAA 420 Puerto Rico IFA, (AMBAC), Variable Rate,
7/01/28(7)(8) 291,345
-------------------------------------------------------------------------------------------------------
$ 1,087,135
-------------------------------------------------------------------------------------------------------
Insured Transportation -- 2.2%
-------------------------------------------------------------------------------------------------------
NR A $ 1,000 Rail Connections Inc MA, (ACA),
0.00%, 7/1/19 $ 297,200
NR A 2,000 Rail Connections Inc MA, (ACA),
0.00%, 7/1/20 556,380
-------------------------------------------------------------------------------------------------------
$ 853,580
-------------------------------------------------------------------------------------------------------
Insured Water & Sewer -- 2.5%
-------------------------------------------------------------------------------------------------------
Aaa AAA $ 1,000 Massachusetts Water Resources Authority,
(FGIC), 5.75%, 8/1/39 $ 985,400
-------------------------------------------------------------------------------------------------------
Life Care -- 0.7%
-------------------------------------------------------------------------------------------------------
NR NR $ 350 Massachusetts IFA, Forge Hill,
6.75%, 4/1/30 $ 290,391
-------------------------------------------------------------------------------------------------------
Miscellaneous -- 1.4%
-------------------------------------------------------------------------------------------------------
NR BBB+ $ 625 Massachusetts DFA, YMCA of Greater
Boston, 5.45%, 11/1/28 $ 533,613
-------------------------------------------------------------------------------------------------------
Nursing Home -- 3.8%
-------------------------------------------------------------------------------------------------------
NR NR $ 295 Massachusetts DFA, Odd Fellows,
6.25%, 1/1/15 $ 262,853
NR NR 500 Massachusetts HEFA, Christopher House,
6.875%, 1/1/29 454,770
NR NR 750 Massachusetts IFA, Age Institute of
Massachusetts, 8.05%, 11/1/25 776,670
-------------------------------------------------------------------------------------------------------
$ 1,494,293
-------------------------------------------------------------------------------------------------------
Solid Waste -- 1.1%
-------------------------------------------------------------------------------------------------------
NR BBB $ 500 Massachusetts DFA, Res Recovery Ogden
Haverhill, 5.50%, 12/1/19 $ 422,860
-------------------------------------------------------------------------------------------------------
Transportation -- 1.6%
-------------------------------------------------------------------------------------------------------
NR AA- $ 830 Massachusetts Bay Transportation Authority,
Variable Rate, 3/1/27(6)(7) $ 632,983
-------------------------------------------------------------------------------------------------------
Water & Sewer -- 2.7%
-------------------------------------------------------------------------------------------------------
Aa3 AA+ $ 1,000 Massachusetts Water Pollution Abatement
Trust, 6.375%, 2/1/15 $ 1,058,110
-------------------------------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 97.9%
(identified cost $38,280,983) $38,334,125
-------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 2.1% $ 813,218
-------------------------------------------------------------------------------------------------------
Net Assets -- 100% $39,147,343
-------------------------------------------------------------------------------------------------------
Notes to Portfolio:
(1) Portfolio Overview (Unaudited):
Number of Issues 46
Average Maturity (Years) 19.4 yrs
Effective Maturity (Years) 12.6 yrs
Average Call (Years) 4.8 yrs
Duration (Years) 7.6 yrs
Average Rating A+
(2) Health and Educational Obligors -- At June 30, 2000, the Trust held
securities issued by health and educational obligors with a value of
$31,012,859 (representing 80.9% 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, 2000, 39.1% 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
-------------------------------------------------------------------------------
Municipal Bond Insurance Association (MBIA) $ 6,069,929 15.8%
Financial Guaranty Insurance Company (FGIC) 4,772,756 12.5%
College Construction Loan Insurance Corporation (CLEE) 1,425,836 3.7%
AMBAC Financial Group Inc. (AMBAC) 1,087,135 2.8%
American Capital Access (ACA) 853,580 2.2%
Financial Security Assurance Incorporated (FSA) 803,272 2.1%
-------------------------------------------------------------------------------
Total Insured Securities $15,012,508 39.1%
-------------------------------------------------------------------------------
(4) Summary of Ratings:
Percentage
Number of Total
Ratings of Issues Value Investments
-------------------------------------------------------------------------------
AAA/Aaa 15 $14,210,242 37.10%
AA/Aa 5 5,309,178 13.80%
A/A 5 4,084,980 10.70%
BBB/Baa 11 7,246,891 18.90%
BB/Ba 1 419,562 1.10%
NR 9 7,063,272 18.40%
-------------------------------------------------------------------------------
Total 46 $38,334,125 100.00%
-------------------------------------------------------------------------------
The ratings indicated are the most recent Moody's and Standard & Poor's
ratings believed to be available at June 30, 2000. 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, 2000.
(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
------------------------------------------------------------------------------
Massachusetts HEFA,
Atlanticare Medical Center (AMC)
(acquired 12/15/93) $2,450,000 $2,265,801 5.80%
Massachusetts HEFA, Wheaton College
(acquired 1/12/98) 1,750,000 1,521,647 3.90%
Massachusetts IFA, Clark University
(acquired 12/15/94) 1,519,125 1,559,415 4.00%
------------------------------------------------------------------------------
Total $5,346,863 13.70%
------------------------------------------------------------------------------
AMC and Clark 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.
(6) Security has been issued as an inverse floater bond.
(7) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(8) Security has been issued as a leveraged inverse floater.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 2000
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of June 30, 2000 (Unaudited)
Assets
------------------------------------------------------------------------------
<S> <C>
Total Investments, at value (identified cost, $38,280,983) $38,334,125
Cash 618
Interest receivable 846,697
Other assets 517
------------------------------------------------------------------------------
Total assets $39,181,957
------------------------------------------------------------------------------
Liabilities
------------------------------------------------------------------------------
Accrued expenses and other liabilities $ 34,614
------------------------------------------------------------------------------
Total liabilities 34,614
------------------------------------------------------------------------------
Net Assets $39,147,343
------------------------------------------------------------------------------
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 $10,000,000
Common Shares, $0.01 par value; unlimited number of shares
authorized, 2,314,859 shares issued and outstanding 23,149
Additional paid-in capital 32,045,795
Accumulated net realized loss from investment transactions (3,044,474)
Undistributed net investment income 69,731
Unrealized appreciation of investments 53,142
------------------------------------------------------------------------------
Net Assets $39,147,343
------------------------------------------------------------------------------
Net Assets applicable to preferred shareholders:
Auction Preferred Shares at liquidation value $10,000,000
Cumulative undeclared dividends 1,968
------------------------------------------------------------------------------
$10,001,968
------------------------------------------------------------------------------
Net Assets applicable to common shareholders 29,145,375
------------------------------------------------------------------------------
Total $39,147,343
------------------------------------------------------------------------------
Net asset value per common share
------------------------------------------------------------------------------
($29,145,375 divided by 2,314,859
common shares issued and outstanding) $ 12.59
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended
June 30, 2000 (Unaudited)
Investment Income
------------------------------------------------------------------------------
<S> <C>
Interest income $1,234,274
Expenses
------------------------------------------------------------------------------
Investment advisory fee $ 67,374
Administration fee 28,870
Trustees fees 14,877
Custodian and transfer agent fees 28,532
Legal and accounting services 16,563
Preferred share remarketing agent fee 12,397
Printing and postage 9,581
Exchange membership fees 3,719
Preferred shares auction agent fees 2,582
Miscellaneous 4,166
------------------------------------------------------------------------------
Total operating expenses $ 188,661
------------------------------------------------------------------------------
Deduct -
Reduction of custody fees 2,107
------------------------------------------------------------------------------
Total $ 2,107
------------------------------------------------------------------------------
Net operating expenses $ 186,554
------------------------------------------------------------------------------
Net investment income $1,047,720
------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments
------------------------------------------------------------------------------
Net realized loss from investment transactions $ (104,780)
Net change in unrealized appreciation of investments 426,075
------------------------------------------------------------------------------
Net gain on investments $ 321,295
------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,369,015
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 2000
FINANCIAL STATEMENTS (cont'd)
Statement of Changes in Net Assets
Six Months Ended
Increase (Decrease) June 30, 2000 Year Ended
in Net Assets (Unaudited) December 31, 1999
----------------------------------------------------------------------------------------
<S> <C> <C>
From Operations:
Net investment income $ 1,047,720 $ 2,069,685
Net realized gain (loss) (104,780) 183,693
Net change in unrealized appreciation
(depreciation) 426,075 (3,950,422)
----------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $ 1,369,015 (1,697,044)
----------------------------------------------------------------------------------------
Dividends and Distributions:
Preferred Shareholders -
From net investment income $ (169,150) $ (284,906)
Common Shareholders -
From net investment income (884,739) (1,732,987)
----------------------------------------------------------------------------------------
Total dividends and distributions to
shareholders $(1,053,889) $(2,017,893)
----------------------------------------------------------------------------------------
Capital Share Transactions:
Reinvestment of distributions to shareholders $ -- $ 43,260
----------------------------------------------------------------------------------------
Net increase in net assets resulting from
capital share transactions $ -- $ 43,260
----------------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 315,126 (3,671,677)
----------------------------------------------------------------------------------------
Net Assets:
----------------------------------------------------------------------------------------
At beginning of period $38,832,217 $42,503,894
----------------------------------------------------------------------------------------
At end of period, including undistributed
net investment income of $69,731
and $75,900, respectively $39,147,343 $38,832,217
----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 2000
FINANCIAL STATEMENTS (cont'd)
Financial Highlights
Selected data for a common share outstanding during each period
Six Months
Ended
June 30, Year Ended December 31,
2000 -----------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period (common shares) $ 12.45 $ 14.06 $ 13.90 $ 13.01 $ 13.24 $ 11.32
----------------------------------------------------------------------------------------------------------------------------------
Investment Operations
----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.45(e) $ 0.89(e) $ 0.88(e) $ 0.88(e) $ 0.88(e) $ 0.84
Net realized and unrealized gain(loss) on investments 0.14 (1.63) 0.16 0.89 (0.27) 1.94
----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $ 0.59 $ (0.74) $ 1.04 $ 1.77 $ 0.61 $ 2.78
----------------------------------------------------------------------------------------------------------------------------------
Less Distributions
----------------------------------------------------------------------------------------------------------------------------------
Preferred Shareholders:-
From net investment income $ (0.07) $ (0.12) $ (0.14) $ (0.14) $ (0.13) $ (0.15)(c)
Common Shareholders-
From net investment income (0.38 (0.75) (0.74) (0.74) (0.71) (0.69)
Distributions in excess of net investment income -- -- -- -- -- (0.02)
----------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.45) $ (0.87) $ (0.88) $ (0.88) $ (0.84) $ (0.86)
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period (Common shares) $ 12.59 $ 12.45 $ 14.06 $ 13.90 $ 13.01 $ 13.24
----------------------------------------------------------------------------------------------------------------------------------
Per share market value, end of period (Common shares) $12.375 $11.500 $14.875 $13.938 $12.125 $11.125
----------------------------------------------------------------------------------------------------------------------------------
Total investment return at Market Value 10.99% (18.23%) 12.05% 21.63% 15.61% 14.12%
----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $39,147 $38,832 $42,504 $42,082 $40,039 $40,553
Ratios: (as a percentage of average total net assets)
Expenses (d) 0.98%(f) 0.97% 0.96%(b) 0.96%(b) 1.00% 1.17%(b)
Expenses, after custodian fee reduction 0.97%(f) 0.96% 0.95%(b) 0.95%(b) 0.98% --
Net investment income 5.45%(f) 5.05% 4.79%(b) 4.95%(b) 5.12% 5.01%(b)
Ratios: (as a percentage of average common net assets)
Expenses (a)(d) 1.32%(f) 1.28% 1.25%(b) 1.27%(b) 1.34% 1.58%(b)
Expenses, after custodian fee reduction (a) 1.31%(f) 1.27% 1.24%(b) 1.26%(b) 1.32% --
Net investment income (a) 7.35%(f) 6.68% 6.27%(b) 6.57%(b) 6.86% 6.75%(b)
Portfolio turnover rate 3% 32% 28% 20% 44% 28%
----------------------------------------------------------------------------------------------------------------------------------
The Financial Highlights summarize the impact of net investment income,
gains (losses) and distributions on the Trust's net asset value per common
share for the last 5 years.
The accompanying notes are an integral part of these financial statements.
</TABLE>
The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 2000
FINANCIAL STATEMENTS (cont'd)
Financial Highlights
(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 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, net investment income
per common share would have decreased by $0.05.
(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
period ended December 31, 1995 have not been adjusted to reflect this
change.
(e) Computed using average shares outstanding throughout the period.
(f) Annualized
The accompanying notes are an integral part of these financial statements.
The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 2000
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 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, 1999, the Trust for federal income tax purposes had a
capital loss carryover of $2,822,449, 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 ($1,656,796) 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.
Interim Financial Statements. The interim financial statements relating
to June 30, 2000 and for the six months 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, 2000, 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, 2000 was 3.592%. For the
six months ended June 30, 2000, the Trust paid dividends to Auction
Preferred shareholders amounting to $169,150, representing an average
APS dividend rate for such period of 3.40% (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, 2000, the fee paid for such services amounted to $67,374
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, 2000, the fee paid for such services
amounted to $28,870 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.
Trustees who are not interested persons under the Investment Company Act
of 1940 are eligible to receive an annual fee of $7,500 each.
5 Securities Transactions
------------------------------------------------------------------------
Purchases and sales (including maturities) of portfolio securities
during the six months ended June 30, 2000, aggregated $1,194,400 and
$1,343,120 respectively. There were no purchases and sales of short-term
municipal securities during the six months ended June 30, 2000.
The identified cost and unrealized appreciation (depreciation) in value
of the investments owned by the Trust at June 30, 2000, as computed for
federal income tax purposes, were as follows:
Identified cost $38,280,983
-----------------------------------------------------------------------
Gross unrealized appreciation $ 1,493,734
Gross unrealized depreciation (1,440,592)
-----------------------------------------------------------------------
Net unrealized appreciation $ 53,142
-----------------------------------------------------------------------
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 Ended
June 30, 2000 Year Ended
(Unaudited) December 31, 1999
------------------------------------------------------------------------
Beginning shares 2,314,859 2,311,664
Shares issued pursuant to the Trust's
dividend reinvestment plan -- 3,195
------------------------------------------------------------------------
Ending shares 2,314,859 2,314,859
------------------------------------------------------------------------
7 Annual Meeting of Shareholders
------------------------------------------------------------------------
The Trust held its annual meeting of Shareholders on May 16, 2000.
2,314,859 common shares and 200 Auction Preferred Shares (APS)
were outstanding on March 27, 2000, the record date for shares
eligible to vote at the meeting. 2,048,069 (88.47% of the record date
common shares) and 197 APS shares (98.50% 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 194 3
Thomas H. Green, III 196 1
Number of
Nominees for Trustee Shares
Elected by All Shareholders Affirmative Withheld
------------------------------------------------------------------------
Walter B. Prince 1,991,497 56,769
Edward M. Murphy 2,020,897 27,369
James M. Storey 2,020,597 27,669
Item 2: The ratification of the selection of PricewaterhouseCoopers LLP
as independent accountants to the Trust for the fiscal year ending
December 31, 2000.
Number of
Shares
------------------------------------------------------------------------
Affirmative 2,016,616
Against 14,030
Abstain 17,620
The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 2000
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.
The Massachusetts Health & Education Tax-Exempt Trust as of June 30, 2000
INVESTMENT MANAGEMENT
The Massachusetts Health & Education Tax-Exempt Trust
Officers
Thomas J. Fetter, CFA
President
Robert B. MacIntosh, CFA
Vice President and
Portfolio Manager
James L. O'Connor
Treasurer
Eric G. Woodbury, Esq.
Secretary
Kristin S. Anagnost
Assistant Treasurer and
Assistant Secretary
Board of Trustees
Walter B. Prince, Esq., Chairman
Partner, Prince, Lobel, & Tye
James F. Carlin
Chairman of the Massachusetts Board of Higher
Education and Chairman & CEO of
Carlin Consolidated, Inc.
Thomas H. Green III, Esq.
Director of Salomon Smith Barney,
Public Finance Department
Edward M. Murphy
CEO, Alliance Health Incorporated, and
Former Executive Director of the
Massachusetts Health & Education Facilities Authority
James M. Storey, Esq.
Trustee, various investment companies
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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
Boston, MA 02116
The Massachusetts Health & Education Tax-Exempt Trust
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
278-8/00 MHEFASRC
