[EATON VANCE LOGO]
[PHOTO: Wall of Educational Institution]
Annual Report December 31, 2002
[PHOTO: Highway]
THE
MASSACHUSETTS
HEALTH &
EDUCATION
TAX-EXEMPT
TRUST
[PHOTO: Boston, MA Skyline]
IMPORTANT NOTICE REGARDING DELIVERY
OF SHAREHOLDER DOCUMENTS
The Securities and Exchange Commission (SEC) permits mutual funds to
deliver only one copy of shareholder documents, including prospectuses,
proxy statements and shareholder reports, to fund investors with
multiple accounts at the same residential or post office box address.
This practice is often called "householding" and it helps eliminate
duplicate mailings to shareholders.
Eaton Vance, or your financial adviser, may household the mailing of
your documents indefinitely unless you instruct Eaton Vance, or your
financial adviser, otherwise.
If you would prefer that your Eaton Vance documents not be householded,
please contact Eaton Vance at 1-800-262-1122, or contact your financial
adviser.
Your instructions that householding not apply to delivery of your Eaton
Vance documents will be effective within 30 days of receipt by Eaton
Vance or your financial adviser.
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
LETTER TO SHAREHOLDERS
[PHOTO WITH CAPTION "Thomas J. Fetter, President"]
Amid the dramatic interest rate decline of recent years, many bonds
issued at relatively high interest rates from 1993-1998 have been
pre-refunded by their issuers. As a result, escrowed bonds have played
an increasingly prominent role in municipal bond portfolios. However,
while these bonds are valued by professional investors, analysts and
portfolio managers, many individual investors have little knowledge of
why bonds are escrowed. As part of our continuing educational series, we
thought it might be helpful to discuss the mechanics of escrowed bonds
and the role of those bonds in the municipal market.
The process of escrowing
municipal bonds to maturity...
In the escrowing process, an issuing jurisdiction essentially refinances
original-issue debt with newer, usually lower-interest debt. The
jurisdiction issues a "refunding bond," the proceeds of which are used
to purchase specially-issued U.S. Treasury bonds - State and Local
Government Series bonds, which are held in an irrevocable escrow account
by a trustee bank. The principal and interest payments of these Treasury
bonds exactly match the future principal and interest payments of the
issuer's original bonds.
The principal and interest from these U.S. Treasuries are directed
solely to pay the interest and principal on the tax-exempt bonds for
which the escrow account was established. Thus, the original bonds are
now backed by U.S. Treasuries and are, therefore, deemed among the
highest quality of all tax-exempt issues.
Benefits for issuers: lower interest
rates and added flexibility...
When municipal bonds are escrowed, they are said to be "defeased." That
means that the bonds are no longer governed by the original covenants
and are no longer a direct obligation of the original issuer. The most
common defeasance - "high-to-low" defeasance - is based on an economic
rationale, in which an issuer seeks to take advantage of a significant
decline in interest rates - much the same way homeowners refinance their
mortgages. By refunding high-coupon bonds with lower-coupon debt,
issuers are able to reduce their interest expenses and save taxpayers
and ratepayers money.
A second, less common procedure is "low-to-high" defeasance - in which
relatively low-coupon bonds are refunded with higher-coupon bonds. This
refunding is generally based on a pressing political or structural need,
done primarily to effect a change in bond covenants. This change may
provide more flexibility for issuers by broadening a project's mandate
or redefining revenue sources.
Benefits for investors: higher quality,
shorter maturities, attractive coupons...
For investors, owning a bond that has been escrowed generally provides
an immediate upgrade in quality - and often in price - because the bond
is now backed by U.S. Treasuries. In addition, because these bonds are
typically called at their earliest call date, they will have a shorter
effective maturity and, therefore, less volatility. Finally, in most
cases, the bond continues to pay an above-average coupon. These
characteristics can represent distinct advantages for investors.
However compelling these benefits are, a portfolio manager still faces a
key decision: whether to hold the bond with its attractive coupon and no
credit risk - or - to sell the bond at its increased market value and
redeploy the increased purchasing power at current interest rates. The
portfolio manager must factor in market conditions, the interest rate
outlook, the availability of bonds in the marketplace and call
provisions. If the escrowed bond's original call provisions have been
waived, that will dramatically improve the bond's trading
characteristics.
These decisions can have a profound effect upon performance. Moreover,
the treatment of escrowed bonds is yet another area that demonstrates
the value of professional management. We believe that familiarity with
bond covenants, trading patterns and in-depth analysis can provide
investors a major advantage in municipal bond investing.
Sincerely,
/s/ THOMAS J. FETTER
Thomas J. Fetter
President
February 5, 2003
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
MANAGEMENT DISCUSSION
Having emerged from last year's recession, the U.S. economy remained
sluggish in 2002. Weak demand and the prospect of future military
conflict in Iraq weighed heavily on the financial markets and proved a
concern to individuals and businesses alike. Consumer spending held up
surprisingly well through much of the year. However, on the business
side, companies were slow to resume capital spending, a trend that took
a toll on the key telecom, computer and semiconductor areas. Finally, a
series of corporate scandals dealt a blow to investor confidence. In
sum, 2002 was a difficult year for the economy and saw increased
volatility in the financial markets.
Helped by low interest rates and sales
incentives, the auto and housing sectors kept
the weak economy afloat...
For much of the year, record-low interest rates gave a major boost to
consumer spending, which provided an underpinning for the broad economy.
Low interest rates had a pronounced effect on the auto and housing
sectors, helping to reduce inventories. However, by year-end, amid high
personal debt levels and an increasing jobless rate, there were signs
that U.S. consumers were beginning to tighten their belts, as evidenced
by a disappointing holiday retail season.
Seeking to jump-start the economy, the Federal
Reserve again lowered interest rates...
The nation's Gross Domestic Product followed a relatively strong 4.0%
growth rate in the third quarter with a weak 0.7% rise in the fourth
quarter. Many companies continued to announce layoffs, pushing the
unemployment rate to a nine-year high. Businesses - which had pared
costs sharply to weather the recession - remained reticent to spend on
expansion plans, a key to a full recovery. In response, the Federal
Reserve maintained its accommodative monetary policy, lowering its
benchmark Federal Funds rate to 1.25% in November, a move that provided
further support for the bond market. Ten-year Treasury bond yields,
which had risen to 5.40% in March in response to anecdotal signs of a
recovery - fell back to 3.82% by December 31, as the Fed reaffirmed the
weakness of the economy. Against that backdrop, the Lehman Brothers
Municipal Bond Index - a broad-based, unmanaged index of municipal
bonds - registered another impressive performance, posting a solid 9.60%
total return for the year ended December 31, 2002.1
The performance of municipal bonds was especially noteworthy when
compared to other asset classes. With the stock market declining sharply
for the third consecutive year, increasingly risk-averse investors found
a measure of comfort in the fixed-income market. Municipal bonds have
been among the leading asset classes in 2002.
Amid continuing global and economic concerns,
we believe the outlook for bonds is favorable...
We continue to feel that municipal bonds merit a place in a diversified
investment portfolio. We believe they are attractive because, with the
outlook for inflation relatively tame, the likelihood of a sharp spike
in interest rates is fairly remote. Meanwhile, given the ongoing
geopolitical concerns, the quality of municipal bonds is compelling.
Finally, municipal bonds may find additional support from the fact that
many states and municipalities have been forced to raise taxes in order
to close budget deficits. The resulting higher taxes could well enhance
the attractiveness of tax-favored investments.
Trust Information
as of December 31, 2002
Performance 2
Average Annual Total Returns (by share price, American Stock Exchange)
-----------------------------------------------------------------------
One Year 5.10%
Five Years 5.18
Life of Fund (7/23/93) 4.73
Average Annual Total Returns (by net asset value)
-----------------------------------------------------------------------
One Year 10.12%
Five Years 5.67
Life of Fund (7/23/93) 5.74
Five Largest Categories 3
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Education 42.0%
Insured Hospitals* 22.1%
Escrowed 16.0%
Hospitals 11.8%
Miscellaneous 5.3%
1 It is not possible to invest directly in an Index.
2 Returns are historical and are calculated by determining the
percentage change in net asset value or share price with all
distributions reinvested.
3 Five Largest Categories account for 97.2% of the Trust's net assets
applicable to common shares, determined by dividing the total market
value of the holdings by the net assets applicable to common shares of
the Trust. Categories are subject to change.
* Private insurance does not remove the risk of loss of principal
associated with this investment due to changes in market conditions.
Past performance is no guarantee of future results. Investment return
and principal value will fluctuate so that shares, when sold, may be
worth more or less than their original cost. Yield will vary.
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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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The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
MANAGEMENT DISCUSSION
[PHOTO WITH CAPTION "Robert B. MacIntosh, Portfolio Manager"]
Management Discussion
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Management Discussion
* The Massachusetts economy suffered job losses in the manufacturing,
technology and financial services sectors in the past year. Lower
capital spending has hurt technology-related companies, while a slumping
stock market has hit the financial services sector. The December 2002
jobless rate was 5.2%, up from 4.4% a year ago.
* In accordance with recently enacted Securities and Exchange Commission
(SEC) regulations, the Trust increased its exposure to bonds with health
care and education-related purposes. Education bonds were the Trust's
largest sector weighting at December 31, 2002, with selective issuers
such as Harvard University and Boston College providing defensive
characteristics in a weak economy.
* Escrowed bonds constituted prominent holdings in the Trust. These
bonds are pre-refunded and backed by U.S. Treasury bonds, which affords
them very high quality. Because of this quality, escrowed issues are
generally prized by investors in a weak economic climate.
* The Trust continued to emphasize quality in its hospital investments.
Among the Trust's largest hospital holdings was an insured* issue for
Dana Farber Cancer Institute, one of the nation's leaders in the
treatment and research of cancer-related diseases.
* The dramatic decline in interest rates and continuing volatility in
the stock market generated increasing retail demand for bonds.
Management took advantage of that trend to adjust the Trust's coupon
structure, selling current coupons, while redeploying the proceeds in
more attractive coupons.
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The views expressed in this report are those of the portfolio manager
and are current only through the end of the period of the report as
stated on the cover. These views are subject to change at any time
based upon market or other conditions, and Eaton Vance disclaims any
responsibility to update such views. These views may not be relied on as
investment advice and, because investment decisions for an Eaton Vance
fund are based on many factors, may not be relied on as an indication of
trading intent on behalf of any Eaton Vance fund.
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The Trust
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Performance for the Past Year
* Based on share price (traded on the American Stock Exchange), the
Trust had a total return of 5.10% for the year ended December 31, 2002.
That return was the result of a decrease in share price from $13.60 on
December 31, 2001 to $13.48 on December 31, 2002, and the reinvestment
of $0.796 in regular monthly dividends.1
* Based on net asset value, the Trust had a total return of 10.12% for
the year ended December 31, 2002. That return was the result of an
increase in net asset value per share from $13.25 on December 31, 2001
to $13.76 on December 31, 2002, and the reinvestment of all
distributions.
* Based on the most recent dividend and a share price of $13.48, the
Trust had a market yield of 5.90% at December 31, 2002.2 The Trust's
market yield is equivalent to a taxable yield of 10.15%.3
* On December 31, 2002, the Trust's share price on the American Stock
Exchange traded at a 2.03% discount to its underlying net asset value.
Your Investment at Work [LOGO: Graduation Mortarboard]
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Massachusetts Development
Finance Agency
Western New England College
* The Massachusetts Development Finance Agency provides financing for a
broad range of economic initiatives. Over the past five years, the
Agency has financed $6.5 billion in state projects, helping to create
nearly 30,000 jobs.
* These bonds financed the construction of a residence hall at Western
New England College in Springfield, which offers undergraduate and
graduate programs in arts and sciences, business, engineering and law.
* This BBB-rated credit has a 5.875% coupon and a dedicated revenue
source. As the result of efforts to upgrade facilities and add satellite
campuses, the College has seen rising student applications, more
impressive acceptance ratios and improved operating fundamentals.
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Federal income tax information on distribution. For Federal income
tax purposes, 100% of the total dividends paid by the Trust from net
investment income during the year ended December 31, 2002 was designated
as an exempt interest dividend.
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Quality Weightings 4
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By total investments
[PIE CHART divided proportionally as follows: AAA -- 38.5%, AA -- 11.9%,
A -- 15.7%, BBB -- 16.2%, BB -- 1.1%, Non-Rated -- 16.6%]
Trust Overview 4
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Number of Issues 49
Average Maturity 22.1 Years
Effective Maturity 9.9 Years
Average Rating A+
Average Call 6.0 Years
Average Dollar Price $104.17
1 A portion of the Trust's income may be subject to federal and state
income tax and/or federal alternative minimum tax.
2 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.
3 Taxable-equivalent yield assumes maximum 41.85% combined federal and
state income tax rate. A lower rate would result in a lower
tax-equivalent figure.
4 Because the Trust is actively managed, Quality Weightings and Trust
Overview are subject to change.
* Private insurance does not remove the risk of loss of principal
associated with insured investments due to changes in market conditions.
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.
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
PORTFOLIO OF INVESTMENTS
Ratings (Unaudited) Principal
--------------------------------------- Amount
Standard (000's
Moody's & Poor's Omitted) Security Value
------------------------------------------------------------------------------------------------------------------
Education-- 42.0%
------------------------------------------------------------------------------------------------------------------
NR A $ 1,100 Massachusetts DFA, Belmont Hill School,
5.00%, 9/1/31 $ 1,102,178
A3 BBB+ 1,500 Massachusetts DFA, Boston University,
5.45%, 5/15/59 1,493,895
Baa2 BBB 400 Massachusetts DFA, Suffolk University,
5.75%, 7/1/19 413,156
NR BBB 600 Massachusetts DFA, Western NE College,
5.875%, 12/1/22 598,920
NR BBB 540 Massachusetts DFA, Wheeler School,
6.50%, 12/1/29 569,468
Baa2 NR 250 Massachusetts DFA, Xaverian Brothers
High School, 5.65%, 7/1/29 245,952
Aa3 AA- 1,500 Massachusetts HEFA, Boston College,
4.75%, 6/1/31 1,480,350
Aaa AAA 2,000 Massachusetts HEFA, Harvard University,
5.125%, 7/15/37 2,056,960
NR NR 1,480 Massachusetts HEFA, Wheaton College,
6.00%, 1/1/18(5) 1,598,296
Baa1 BBB 2,110 Massachusetts IFA, Springfield College,
5.625%, 9/15/10 2,167,181
Baa1 NR 400 Massachusetts IFA, Wentworth Institute
of Technology, 5.75%, 10/1/28 400,800
NR AA- 1,265 University of Massachusetts Building
Authority Project, 5.125%, 11/1/20 1,323,936
------------------------------------------------------------------------------------------------------------------
$ 13,451,092
------------------------------------------------------------------------------------------------------------------
Escrowed-- 16.0%
------------------------------------------------------------------------------------------------------------------
NR NR $ 1,830 Massachusetts HEFA, Atlanticare
Medical Center, 8.00%, 12/01/13,
Prerefunded to 12/1/03(5) $ 1,921,189
Aaa AA+ 1,500 Massachusetts HEFA, Daughters of Charity,
6.10%, 7/1/14,
Prerefunded to 7/1/06 1,621,770
Aa2 NR 1,000 Massachusetts HEFA, Youville House,
6.25%, 2/15/41,
Prerefunded to 2/15/07 1,179,190
Aaa A 1,000 Rail Connections Inc., MA
(ACA), 0.00%, 7/1/20,
Prerefunded to 7/1/09 406,010
------------------------------------------------------------------------------------------------------------------
$ 5,128,159
------------------------------------------------------------------------------------------------------------------
Hospitals-- 11.8%
------------------------------------------------------------------------------------------------------------------
A1 A+ $ 1,000 Massachusetts HEFA, Baystate Medical Center,
5.75%, 7/1/33 $ 1,026,120
NR BBB+ 350 Massachusetts HEFA, Berkshire Healthcare,
6.25%, 10/1/31 355,848
Baa2 BBB 400 Massachusetts HEFA, Caritas Christi
Obligation Group, 6.25%, 7/1/22 399,328
NR A- 800 Massachusetts HEFA, Covenant Health,
6.00%, 7/1/22 831,016
NR A- 400 Massachusetts HEFA, Covenant Health,
6.00%, 7/1/31 411,848
Baa2 BBB- 750 Massachusetts HEFA, Milford-Whitinsville,
6.35%, 7/15/32 762,240
------------------------------------------------------------------------------------------------------------------
$ 3,786,400
------------------------------------------------------------------------------------------------------------------
Industrial Development Revenue-- 4.7%
------------------------------------------------------------------------------------------------------------------
A3 BBB $ 1,500 Massachusetts IFA, General Motors,
5.55%, 4/1/09 $ 1,501,815
------------------------------------------------------------------------------------------------------------------
Insured Education-- 2.9%
------------------------------------------------------------------------------------------------------------------
Aaa AAA $ 40 Massachusetts HEFA, Boston College, (FGIC),
6.625%, 7/1/21 $ 40,570
Aaa AAA 650 Massachusetts HEFA, Brandeis University,
(MBIA), 4.75%, 10/1/28 646,035
Aaa AAA 230 Massachusetts HEFA, University of
Massachusetts, (FGIC), 5.125%, 10/1/34 235,766
------------------------------------------------------------------------------------------------------------------
$ 922,371
------------------------------------------------------------------------------------------------------------------
Insured Hospitals-- 22.1%
------------------------------------------------------------------------------------------------------------------
Aaa AAA $ 1,225 Massachusetts HEFA, Addison Gilbert
Hospital, (MBIA), 5.75%, 7/1/23 $ 1,264,335
Aaa AAA 800 Massachusetts HEFA, Baystate Medical
Center, (FSA), 6.00%, 7/1/26 868,856
Aaa AAA 1,000 Massachusetts HEFA, Berkshire Health
System, (MBIA), 6.00%, 10/1/19 1,082,430
Aaa AAA 1,250 Massachusetts HEFA, Dana Farber Cancer
Institute, (FGIC), 6.00%, 12/1/10 1,325,837
Aaa AAA 500 Massachusetts HEFA, Mt. Auburn Hospital,
(MBIA), 6.25%, 8/15/14 544,565
Aaa AAA 500 Massachusetts HEFA, New England Medical
Center, (FGIC), 5.00%, 5/15/22 508,770
Aaa AAA 1,000 Massachusetts HEFA, North Shore Medical
Center, (MBIA), 5.625%, 7/1/14 1,052,870
NR AAA 395 Massachusetts HEFA, Valley Regional Health
System, (CLEE), 5.75%, 7/1/18 420,635
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$ 7,068,298
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Insured Public Power-- 2.3%
------------------------------------------------------------------------------------------------------------------
Aaa NR $ 500 Puerto Rico Electric Power Authority, (MBIA),
Variable Rate, 12.66%, 7/1/16(7)(8) $ 742,330
------------------------------------------------------------------------------------------------------------------
Insured Special Tax-- 4.7%
------------------------------------------------------------------------------------------------------------------
NR NR $ 1,000 Puerto Rico IFA, (AMBAC), Variable Rate,
8.04%, 7/1/28(6)(7) $ 1,042,620
NR AAA 420 Puerto Rico IFA, (AMBAC), Variable Rate,
10.53%, 7/1/28(8) 446,851
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$ 1,489,471
------------------------------------------------------------------------------------------------------------------
Insured Transportation-- 1.0%
------------------------------------------------------------------------------------------------------------------
Aaa AAA $ 300 Massachusetts Port Authority, US Airways,
(MBIA), 6.00%, 9/1/21 $ 311,247
------------------------------------------------------------------------------------------------------------------
Insured Water & Sewer-- 3.4%
------------------------------------------------------------------------------------------------------------------
Aaa AAA $ 1,000 Massachusetts Water Resources Authority,
(FGIC), 5.75%, 8/1/39 $ 1,084,310
------------------------------------------------------------------------------------------------------------------
Life Care-- 3.1%
------------------------------------------------------------------------------------------------------------------
NR BBB- $ 655 Massachusetts DFA, Edgecombe Project,
6.75%, 7/1/21 $ 670,026
NR NR 340 Massachusetts IFA, Forge Hill,
6.75%, 4/1/30 313,463
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$ 983,489
------------------------------------------------------------------------------------------------------------------
Miscellaneous-- 5.3%
------------------------------------------------------------------------------------------------------------------
NR NR $ 425 Massachusetts DFA, MCHSP,
6.60%, 8/15/29 $ 387,473
Ba2 BB 495 Massachusetts HEFA, Learning Center
for the Deaf, 6.125%, 7/1/29 449,782
NR AAA 700 Puerto Rico IFA, Variable Rate,
10.76%, 10/1/34(7)(8) 871,612
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$ 1,708,867
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Nursing Home-- 4.6%
------------------------------------------------------------------------------------------------------------------
NR NR $ 255 Massachusetts DFA, Odd Fellows,
6.25%, 1/1/15 $ 237,298
NR NR 500 Massachusetts HEFA, Christopher House,
6.875%, 1/1/29 474,845
NR NR 750 Massachusetts IFA, Age Institute of
Massachusetts, 8.05%, 11/1/25 754,650
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$ 1,466,793
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Transportation-- 2.6%
------------------------------------------------------------------------------------------------------------------
NR AA- $ 830 Massachusetts Bay Transportation Authority,
Variable Rate, 8.20%, 3/1/27(6)(7) $ 845,928
------------------------------------------------------------------------------------------------------------------
Water & Sewer-- 0.3%
Aaa AA+ $ 80 Massachusetts Water Pollution
Abatement Trust, 6.375%, 2/1/15 $ 85,664
------------------------------------------------------------------------------------------------------------------
Total Tax-Exempt Investments-- 126.8%
(identified cost identified cost $38,295,339) $ 40,576,234
------------------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities-- 4.5% $ 1,420,221
------------------------------------------------------------------------------------------------------------------
Auction Preferred Shares-- (31.3%) $ (10,000,000)
------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to
Common Shares-- 100% $ 31,996,455
------------------------------------------------------------------------------------------------------------------
Notes to Portfolio:
(1) Portfolio Overview (Unaudited):
Number of Issues 49
Average Maturity (Years) 22.1 yrs
Effective Maturity (Years) 9.9 yrs
Average Call (Years) 6 yrs
Duration (Years) 6.9 yrs
Average Rating A+
(2) Health and Educational Obligors-- At December 31, 2002, the Trust
held securities issued by health and educational obligors with a value
of $33,237,847 (representing 81.9% 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 December 31, 2002, 29.6% of total investments is 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) $5,643,812 13.90%
Financial Guaranty Insurance Company (FGIC) 3,195,253 7.90%
AMBAC Financial Group Inc. (AMBAC) 1,489,471 3.70%
Financial Security Assurance Incorporated (FSA) 868,856 2.10%
College Construction Loan Insurance
Corporation (CLEE) 420,635 1.00%
American Capital Access (ACA) 406,010 1.00%
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Total Insured Securities $12,024,037 29.60%
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The accompanying notes are an integral part of these financial statements.
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
PORTFOLIO OF INVESTMENTS cont'd
(4) Summary of Ratings (Unaudited):
Percentage
Number of Total
Ratings of Issues Value Investments
-----------------------------------------------------------------------------
AAA/Aaa 20 $15,617,423 38.50%
AA/Aa 4 4,829,404 11.90%
A/A 6 6,366,872 15.70%
BBB/Baa 10 6,582,919 16.20%
BB/Ba 1 449,782 1.10%
NR 8 6,729,834 16.60%
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Total 49 $40,576,234 100.00%
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The ratings indicated are the most recent Moody's and Standard & Poor's
ratings believed to be available at December 31, 2002. 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 December 31, 2002.
(5) Private Placement Securities-- Information relating to the initial
acquisition and market valuation of private placement securities is
presented below:
Percentage
of Net Assets
Acquisition Applicable to
Cost Value Common Shares
------------------------------------------------------------------------------
Massachusetts HEFA,
Atlanticare Medical Center "AMC"
(acquired 12/15/93) $1,831,509 $1,921,189 6.00%
Massachusetts HEFA, Wheaton College
(acquired 1/12/98) 1,480,000 1,598,296 5.00%
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Total $3,519,485 11.00%
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AMC has 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.
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of December 31, 2002
Assets
------------------------------------------------------------------------------------------
Total Investments, at value (identified cost, $38,295,339) $40,576,234
Interest receivable 878,511
Receivable for securities sold 2,416,439
Other assets 17,497
------------------------------------------------------------------------------------------
Total assets $43,888,681
------------------------------------------------------------------------------------------
Liabilities
------------------------------------------------------------------------------------------
Due to bank $777,041
Payable for securities purchased 1,047,693
Accrued expenses and other liabilities 67,492
------------------------------------------------------------------------------------------
Total liabilities 1,892,226
------------------------------------------------------------------------------------------
Net assets applicable to Auction Preferred Shares, $0.01 par value;
400 shares authorized, 200 shares issued and outstanding at $50,000
per share liquidation preference plus cumulative unpaid dividends $10,000,000
------------------------------------------------------------------------------------------
Net assets applicable to common shares $31,996,455
Sources of Net Assets:
------------------------------------------------------------------------------------------
Common Shares, $0.01 par value; unlimited number of shares
authorized, 2,324,569 shares issued and outstanding $23,246
Additional paid-in capital 30,540,543
Accumulated net realized loss from investment transactions (1,404,528)
Undistributed net investment income 556,299
Unrealized appreciation of investments 2,280,895
------------------------------------------------------------------------------------------
Net Assets applicable to common shares $31,996,455
------------------------------------------------------------------------------------------
Net Asset Value Per Common Share
------------------------------------------------------------------------------------------
($31,996,455 divided by 2,324,569
common shares issued and outstanding) $ 13.76
------------------------------------------------------------------------------------------
Statement of Operations
For the Year Ended
December 31, 2002
Investment Income
------------------------------------------------------------------------------------------
Interest income $2,563,423
Expenses
------------------------------------------------------------------------------------------
Investment advisory fee $ 144,525
Administration fee 61,947
Trustees' fees 25,000
Custodian and transfer agent fees 50,843
Legal and accounting services 36,850
Preferred share remarketing agent fee 25,000
Printing and postage 15,002
Preferred shares auction agent fees 5,000
Miscellaneous 10,963
------------------------------------------------------------------------------------------
Total operating expenses $ 375,130
------------------------------------------------------------------------------------------
Deduct--
Reduction of custody fees 3,850
------------------------------------------------------------------------------------------
Total $ 3,850
------------------------------------------------------------------------------------------
Net operating expenses $ 371,280
------------------------------------------------------------------------------------------
Net investment income 2,192,143
------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments
------------------------------------------------------------------------------------------
Net realized gain from investment transactions $ 63,983
Net change in unrealized appreciation of investments 910,312
------------------------------------------------------------------------------------------
Net gain on investments $ 974,295
------------------------------------------------------------------------------------------
Distributions to preferred shareholders $ (119,521)
------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations
applicable to common shares $3,046,917
------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
FINANCIAL STATEMENTS (cont'd)
Statement of Changes in Net Assets
--------------------------------------------------------------------------------------------------------------
Increase (Decrease) Year Ended Year Ended
in Net Assets December 31, 2002 December 31, 2001
--------------------------------------------------------------------------------------------------------------
From operations:
Net investment income $ 2,192,143 $ 2,172,642
Net realized gain (loss) 63,983 (48,474)
Net change in unrealized appreciation 910,312 93,478
Distributions to preferred shareholders (119,521) (247,148)
--------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations applicable to common shares $ 3,046,917 $ 1,970,498
--------------------------------------------------------------------------------------------------------------
Distributions to Common Shareholders:
From net investment income ($1,847,879) ($1,798,383)
--------------------------------------------------------------------------------------------------------------
Total distributions to common
shareholders ($1,847,879) ($1,798,383)
--------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Reinvestment of distributions to
common shareholders $ 70,402 $ 54,769
--------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
capital share transactions $ 70,402 $ 54,769
--------------------------------------------------------------------------------------------------------------
Net increase in net assets $ 1,269,440 $ 226,884
--------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares:
At beginning of period $30,727,015 $30,500,131
--------------------------------------------------------------------------------------------------------------
At end of period, including undistributed
net investment income of $556,299
and $331,556, respectively $31,996,455 $30,727,015
--------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
FINANCIAL STATEMENTS cont'd
Financial Highlights
Selected data for a common share outstanding during each period
Year Ended December 31,
---------------------------------------------------------------------
2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period (common shares) $ 13.25 $ 13.17 $ 12.45 $ 14.06 $ 13.90
---------------------------------------------------------------------------------------------------------------------
Investment Operations
---------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.94(d) $ 0.94(a)(d) $ 0.90(d) $ 0.89(d) $ 0.88(d)
Net realized and unrealized gain (loss)
on investments 0.42 0.03 0.73 (1.63) 0.16
Distributions to preferred shareholders (0.05) (0.11) (0.15) (0.12) (0.14)
---------------------------------------------------------------------------------------------------------------------
Total from investment operations applicable
to common shares $ 1.31 $ 0.86 $ 1.48 $ (0.86) $ 0.90
---------------------------------------------------------------------------------------------------------------------
Less Distributions to Common Shareholders
---------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.80) $ (0.78) $ (0.76) $ (0.75) $ (0.74)
---------------------------------------------------------------------------------------------------------------------
Total distributions to Common Shareholders $ (0.80) $ (0.78) $ (0.76) $ (0.75) $ (0.74)
---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
(Common shares) $ 13.76 $ 13.25 $ 13.17 $ 12.45 $ 14.06
---------------------------------------------------------------------------------------------------------------------
Per share market value, end of period
(Common shares) $13.48 $ 13.60 $ 12.75 $ 11.50 $ 14.88
---------------------------------------------------------------------------------------------------------------------
Total investment return at Market Value 5.10% 13.01% 17.78% (18.23%) 12.05%
---------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
---------------------------------------------------------------------------------------------------------------------
Net assets applicable to common shares,
end of period (000 omitted) $31,996 $30,727 $30,500 $28,830 $32,503
Ratios: (as a percentage of average total
net assets)
Expenses 0.91% 0.91% 0.97% 0.97% 0.96%(c)
Expenses, after custodian fee reduction 0.90% 0.90% 0.96% 0.96% 0.95%(c)
Net investment income 5.31% 5.31%(a) 5.33% 5.05% 4.79%(c)
Ratios: (as a percentage of average common
net assets)
Expenses (b) 1.20% 1.20% 1.30% 1.28% 1.25%(c)
Expenses, after custodian fee reduction (b) 1.19% 1.18% 1.29% 1.27% 1.24%(c)
Net investment income (b) 7.00% 7.02%(a) 7.16% 6.68% 6.27%(c)
Portfolio turnover rate 36% 13% 8% 32% 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. Additionally, important relationships
between certain financial statement items are expressed in ratio form.
The accompanying notes are an integral part of these financial statements.
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
FINANCIAL STATEMENTS cont'd
Financial Highlights
(a) The Trust has adopted the provisions of the AICPA Audit and
Accounting Guide for Investment Companies, as revised, and began
accreting market discounts on debt securities. The effect of this change
for the year ended December 31, 2001 was an increase in net investment
income per common share of $0.01, a decrease in net realized and
unrealized gains per common share of $0.01, an increase in the ratio of
net investment income to average total net assets from 5.24% to 5.31%
and an increase in the ratio of net investment income to average common
assets from 6.93% to 7.02%. Per share data and ratios for the periods
prior to January 1, 2001 have not been restated to reflect this change
in presentation.
(b) Ratios do not reflect the effect of dividend payments to preferred
shareholders. Ratios to average common net assets reflect the Trust's
leveraged capital structure.
(c) Reflects expense waivers by the Administrator during the period. If
the Trust had borne all expenses for the year ended December 31, 1998,
net investment income per common share would have decreased by less than
$0.01.
(d) Computed using average shares outstanding throughout the period.
The accompanying notes are an integral part of these financial statements.
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
NOTES TO FINANCIAL STATEMENTS
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 amended, 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, adjusted for amortization of premium or accretion of discounts
on long term debt securities.
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, 2002, the Trust for federal income tax purposes had a
capital loss carryover of $1,321,267, 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,
2003 ($1,165,653), December 31, 2008 ($116,670) and December 31, 2009
($38,944).
At December 31, 2002, the undistributed net tax-exempt income on a tax
basis was $369,956 and differed from undistributed net investment income
due primarily to the difference in method for recognizing market
discounts.
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.
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 December 31, 2002, there were no such
restrictions on the Trust.
In accordance with the provisions of EITF D-98, "Classification and
Measurement of Redeemable Securities", effective for the current period,
the Trust has reclassified its Auction Preferred Shares outside of
permanent equity in the net assets section of the statement of assets
and liabilities. In addition, distributions to Auction Preferred
shareholders are now classified as a component of the "Net increase in
net assets resulting from operations applicable to common shareholders"
on the statement of operations and statement of changes in net assets,
and as a component of the "Total from investment operations applicable
to common shareholders" in the financial highlights. Prior year amounts
presented have been restated to conform to this period's presentation.
This change has no impact on the net assets applicable to common shares
of 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 December 31, 2002 was 1.40%. For the
year ended December 31, 2002, the Trust paid dividends to Auction
Preferred shareholders amounting to $119,521, representing an average
APS dividend rate for such period of 1.20%.
The Trust distinguishes between distributions on a tax basis and a
financial reporting basis. Accounting principles generally accepted in
the United States of America require that only distributions in excess
of tax basis earnings and profits be reported in the financial
statements as a return of capital. Permanent differences between book
and tax accounting relating to distributions are reclassified to
paid-in-capital. These differences primarily relate to expired capital
loss carryforwards.
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 year ended
December 31, 2002, the fee paid for such services amounted to $144,525
and was equivalent to 0.35% 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 year ended December 31, 2002, the fee paid for such services
amounted to $61,947 and was equivalent to 0.15% of the average daily net
assets of the Trust, including net assets attributable to any Auction
Preferred Shares outstanding.
Trustees who are not affiliates of Eaton Vance are eligible to receive
an annual fee of $5,000 each.
5 Securities Transactions
------------------------------------------------------------------------
Purchases and sales (including maturities) of portfolio securities
during the year ended December 31, 2002, aggregated $14,584,276 and
$14,243,705 respectively. There were no purchases and sales of
short-term municipal securities during the year ended December 31, 2002.
The identified cost and unrealized appreciation (depreciation) in value
of the investments owned by the Trust at December 31, 2002, as computed
for federal income tax purposes, were as follows:
Identified cost $38,252,582
------------------------------------------------------------------------
Gross unrealized appreciation $ 2,477,532
------------------------------------------------------------------------
Gross unrealized depreciation (153,880)
------------------------------------------------------------------------
Net unrealized appreciation $ 2,323,652
------------------------------------------------------------------------
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:
Year Ended Year Ended
December 31, 2002 December 31, 2001
------------------------------------------------------------------------
Beginning shares 2,319,394 2,315,302
Shares issued pursuant to the Trust's
dividend reinvestment plan 5,175 4,092
Ending shares 2,324,569 2,319,394
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
INDEPENDENT ACCOUNTANTS' REPORT
To the Trustees and Shareholders of
The Massachusetts Health & Education
Tax-Exempt Trust
------------------------------------------------------------------------
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments (except for bond ratings), and
the related statements of operations and of changes in net assets and
the financial highlights present fairly, in all material respects, the
financial position of The Massachusetts Health & Education Tax-Exempt
Trust (the "Trust") at December 31, 2002, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31,
2002 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 24, 2003
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
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 December 31, 2002
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to
which common shareholders may elect to have dividends and capital gains
distributions reinvested in common shares of the Trust. The Trust
declares dividends out of net investment income, and will distribute
annually net realized capital gains, if any. Common shareholders may
join or withdraw from the Plan at any time.
If you decide to participate in the Plan, Investors Bank & Trust
Company, as your Plan Agent, will automatically invest your dividends
and capital gains distributions in common shares of the Trust in your
account.
How the Plan Works
Under the Plan, participants in the Plan will have their dividends
reinvested in common shares of the Trust on valuation date. If the
market price per common share on valuation date equals or exceeds net
asset value per common share on that date, the Trust will issue new
common shares to participants at the higher of net asset value or 95% of
the market price. If net asset value per common share on valuation date
exceeds the market price per common share on that date, or if the Board
of Trustees should declare a dividend or capital gains distribution
payable to the common shareholders only in cash, the agent will buy
common shares in the open market on the American Stock Exchange, or
elsewhere. If, before the Plan Agent has completed its purchases, the
market price exceeds the net asset value per common share, the average
per share purchase price paid by the Plan Agent may exceed the net asset
value of the Trust's common shares, resulting in the acquisition of
fewer common shares than if the dividend or distribution had been paid
in common shares by the Trust.
The Plan Agent maintains all shareholder accounts in the Plan and
furnishes written confirmation of all transactions in the accounts,
including information needed by shareholders for tax records. Common
shares in the account of each Plan participant will be held by the Plan
Agent in noncertificated form in the name of the participant, and each
shareholder's proxy will include those shares received pursuant to the
Plan. Holders of common shares who do not elect to participate in the
Plan will receive all such amounts in cash paid by check mailed directly
to the record shareholder by Investors Bank & Trust Company, as dividend
paying agent.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the
Plan.
Costs of the Plan
The Plan Agent's fees for the handling of the reinvestment of dividends
and distributions will be paid by the Trust. Each participant will pay a
pro rata share of brokerage commissions incurred with respect to the
Plan Agent's open market purchases in connection with the reinvestment
of dividends or capital gains distributions.
Tax Implications
Plan participants will receive tax information annually for personal
records and to help prepare federal income tax returns. The automatic
reinvestment of dividends and capital gains distributions does not
relieve plan participants of any income tax which may be payable on
dividends or distributions.
Right to Withdraw
Plan participants may withdraw from the Plan at any time by writing to
the Plan Agent at the address noted on the following page. If you
withdraw, you will receive a share certificate in your name for all full
common shares credited to your account under the Plan and a cash payment
for any fraction of a share credited to your account. If you desire, the
Plan Agent will sell your shares in the Plan and send you the proceeds
of the sale, less brokerage commissions and a $2.50 service fee.
How to Participate
If you wish to participate in the Plan and your shares are held in your
own name, you may complete the form on the following page and deliver it
to the Plan Agent.
If your shares are held in the name of a brokerage firm, bank, or other
nominee, you should contact your nominee to see if it will participate
in the Plan on your behalf. If you wish to participate in the Plan, but
your brokerage firm, bank or nominee is unable to participate on your
behalf, you should request that your shares be re-registered in your own
name which will enable your participation in the Plan.
Any inquiries regarding the Plan can be directed to Investors Bank &
Trust Company at 1-800-553-1916.
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
APPLICATION FOR PARTICIPATION IN
DIVIDEND REINVESTMENT PLAN
------------------------------------------------------------------------
This form is for shareholders who hold their common shares in their own
names. If your common shares are held in the name of a brokerage firm,
bank, or other nominee, you should contact your nominee to see if it
will participate in the Plan on your behalf. If you wish to participate
in the Plan, but your brokerage firm, bank or nominee is unable to
participate on your behalf, you should request that your common shares
be re-registered in your own name which will enable your participation
in the Plan.
------------------------------------------------------------------------
The following authorization and appointment is given with the
understanding that I may terminate it at any time by terminating my
participation in the Plan as provided in the terms and conditions of the
Plan provided above.
-------------------------------------
Please print exact name on account:
-------------------------------------
Shareholder signature Date
-------------------------------------
Shareholder signature Date
Please sign exactly as your common shares
are registered. All persons whose names
appear on the share certificate must sign.
YOU SHOULD NOT RETURN THIS FORM IF YOU WISH TO RECEIVE YOUR DIVIDENDS AND
DISTRIBUTIONS IN CASH. THIS IS NOT A PROXY.
The authorization form, when signed, should be mailed to the following address:
Investors Bank & Trust Company
P.O. Box 9130
Attention OPS22
Boston, MA 02117
------------------------------------------------------------------------
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
MANAGEMENT AND ORGANIZATION
Trust Management
The Trustees of The Massachusetts Health & Education Tax-Exempt Trust
(the Trust) are responsible for the overall management and supervision
of the Trust's affairs. The Trustees and officers of the Trust are
listed below. Except as indicated, each individual has held the office
shown or other offices in the same company for the last five years. The
business address of each Trustee and officer is The Eaton Vance
Building, 255 State Street, Boston, Massachusetts, 02109.
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
with the Length of Principal Occupation(s) Overseen Directorships
Name and Age Trust Time Served During Past Five Years By Trustee Held By Trustee
-------------------------------------------------------------------------------------------------------------------------------
Interested Trustee
-------------------------------------------------------------------------------------------------------------------------------
Thomas H. Green, III Trustee One Year Managing Director, Salomon One None
Age 43 Trustee Since Smith Barney ("SSB"), since
1993 2002. Formerly, Director in
SSB, Public Finance
Department (1998-2001).
Formerly, First Assistant
Attorney General for
The Commonwealth of
Massachusetts (1992-1998).
Previously, Vice President,
Public Finance, First Boston
Corporation. Mr. Green is an
interested person of the Trust
because of his affiliation with
a brokerage firm.
-------------------------------------------------------------------------------------------------------------------------------
Noninterested Trustees
-------------------------------------------------------------------------------------------------------------------------------
James F. Carlin Trustee One Year Chairman and CEO, Carlin One Trustee of the
Age 62 Trustee Since Consolidated, Inc. (management John Hancock
1993 company), since 1968. CEO Funds
and Treasurer, Alpha Analytical, (consisting of
Inc. (analytical laboratory), 36 portfolios)
since 1985. Formerly, Director
of Carlin Insurance Agency, Inc.
(1967-1999), Uno Restaurant
Corp. (1996-2001), Arbella
Mutual Insurance Co.
(1988-2000); Director and
Treasurer, Rizzo Associates
(engineering) (1985-2000);
and Chairman of the
Massachusetts Board of
Higher Education
(1995-1999).
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
MANAGEMENT AND ORGANIZATION cont'd
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
with the Length of Principal Occupation(s) Overseen Directorships
Name and Age Trust Time Served During Past Five Years By Trustee Held By Trustee
-------------------------------------------------------------------------------------------------------------------------------
Noninterested Trustees (continued)
-------------------------------------------------------------------------------------------------------------------------------
Walter B. Prince Chairman One Year Partner of the law firm of One None
Age 54 and Trustee Trustee Since Prince, Lobel, Glovsky & Tye
1993 LLP, since 1988.
Edward M. Murphy Trustee One Year President and Chief Executive One None
Age 55 Trustee Since Officer of Alliance Health
1993 Incorporated, since March 1999.
Formerly, President and Chief
Operating Officer of Olympus
Healthcare Group, Inc.; Senior
Vice President of Tucker
Anthony Inc. (1995-1997); and
the Executive Director of the
Massachusetts Health and
Educational Facilities Authority
(1989 to 1995). Previously,
Commissioner of the
Massachusetts Department of
Mental Health.
James M. Storey Trustee One Year Corporate Trustee/Director of One Trustee of the
Age 71 Trustee Since various organizations and State Street
1993 corporations, including The Research Funds
U.S. Charitable Gift Trust (consisting of
(a charitable organization 30 portfolios)
sponsored by Eaton Vance), and the SEI
and a practicing attorney. Investments
Formerly, a Partner of the Funds (consisting
law firm of Dechert, Price of 104 portfolios).
& Rhoads (1987-1993).
The Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2002
MANAGEMENT AND ORGANIZATION cont'd
Term of
Position(s) Office and
with the Length of Principal Occupation(s)
Name and Age Trust Time Served During Past Five Years
-----------------------------------------------------------------------------------------------
Principal Officers Who Are Not Trustees
-----------------------------------------------------------------------------------------------
Thomas J. Fetter President Since 1996 Vice President of Eaton Vance
Age 59 and Boston Management and
Research ("BMR"). Officer of
126 registered investment
companies managed by Eaton Vance
or BMR.(1)
Robert B. MacIntosh Vice President Since 1996 Vice President of Eaton Vance
Age 46 and and BMR. Officer of 125
Portfolio registered investment companies
Manager managed by Eaton Vance or BMR.(1)
James M. Wall Secretary Since 2001 Vice President of Eaton Vance
Age 40 and BMR since 2001. Formerly,
Senior Vice President and Deputy
General Counsel, CDC IXIS
Asset Management (1999-2001),
and Senior Legal Counsel,
Fidelity Investments (1997-1999).
Officer of 1 registered investment
company managed by Eaton Vance
or BMR.
Kristin S. Anagnost Treasurer Since 2001(2) Assistant Vice President of
Age 37 Eaton Vance and BMR. Officer
of 109 registered investment
companies managed by Eaton Vance
or BMR.(1)
(1) Includes both master and feeder funds in a master feeder structure.
(2) Prior to 2001, Ms. Anagnost served as Assistant Treasurer since 1998.
THIS PAGE INTENTIONALLY LEFT BLANK.
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
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
EATON VANCE FUNDS
EATON VANCE MANAGEMENT
BOSTON MANAGEMENT AND RESEARCH
EATON VANCE DISTRIBUTORS, INC.
PRIVACY NOTICE
The Eaton Vance organization is committed to ensuring your financial
privacy. This notice is being sent to comply with privacy regulations of
the Securities and Exchange Commission. Each of the above financial
institutions has in effect the following policy with respect to
nonpublic personal information about its customers:
* Only such information received from you, through application forms or
otherwise, and information about your Eaton Vance fund transactions will
be collected.
* None of such information about you (or former customers) will be
disclosed to anyone, except as permitted by law (which includes
disclosure to employees necessary to service your account).
* Policies and procedures (including physical, electronic and procedural
safeguards) are in place that are designed to protect the
confidentiality of such information.
For more information about Eaton Vance's privacy policies, call:
1-800-262-1122
The Massachusetts Health & Education Tax-Exempt Trust
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
278-2/03 MHEFASRC