UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07660
Name of Fund: The Massachusetts Health & Education Tax-Exempt Trust (MHE)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Donald C. Burke, Chief Executive Officer,
The Massachusetts Health & Education Tax-Exempt Trust, 800 Scudders Mill
Road, Plainsboro, NJ 08536. Mailing address: P.O. Box 9011, Princeton,
NJ 08543-9011
Registrant's telephone number, including area code: (800) 882-0052, Option 4
Date of fiscal year end: 12/31/2007
Date of reporting period: 01/01/2007 - 12/31/2007
Item 1 - Report to Stockholders
EQUITIES FIXED INCOME REAL ESTATE
LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
The Massachusetts BLACKROCK
Health & Education
Tax-Exempt Trust (MHE)
ANNUAL REPORT | DECEMBER 31, 2007
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Table of Contents
================================================================================
Page
--------------------------------------------------------------------------------
A Letter to Shareholders ................................................. 3
Annual Report:
Fund Summary ............................................................. 4
The Benefits and Risks of Leveraging ..................................... 5
Swap Agreements .......................................................... 5
Financial Statements:
Schedule of Investments ................................................ 6
Statement of Assets and Liabilities .................................... 8
Statement of Operations ................................................ 8
Statements of Changes in Net Assets .................................... 9
Financial Highlights ..................................................... 10
Notes to Financial Statements ............................................ 11
Report of Independent Registered Public Accounting Firm .................. 14
Important Tax Information ................................................ 15
Automatic Dividend Reinvestment Plan ..................................... 16
Officers and Trustees .................................................... 17
Additional Information ................................................... 21
2 THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007
A Letter to Shareholders
Dear Shareholder
Financial markets endured heightened volatility during 2007, culminating in
mixed results for some of the major benchmark indexes:
Total Returns as of December 31, 2007 6-month 12-month
=============================================================================================================
U.S. equities (S&P 500 Index) -1.37% + 5.49%
-------------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) -7.53 - 1.57
-------------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) +0.39 +11.17
-------------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers U.S. Aggregate Bond Index) +5.93 + 6.97
-------------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) +3.22 + 3.36
-------------------------------------------------------------------------------------------------------------
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index) -0.67 + 2.27
-------------------------------------------------------------------------------------------------------------
Past performance is no guarantee of future results. Index performance shown for
illustrative purposes only. You cannot invest directly in an index.
Subprime mortgage woes dominated headlines for much of 2007, spawning a
widespread liquidity and credit crisis with ramifications across global markets.
The Federal Reserve Board (the "Fed") stepped in to inject liquidity into the
markets and bolster investor confidence, cutting the federal funds rate by 0.50%
in September, 0.25% in October and 0.25% in December, which brought the target
short-term interest rate to 4.25%. In taking action, the central bankers, who
had long deemed themselves inflation fighters, were seeking to stem the fallout
from the credit crunch and forestall a wider economic unraveling.
Amid the volatility, equity markets displayed surprising resilience. Market
fundamentals generally held firm, dividend payouts and share buybacks continued,
and valuations remained attractive. To some extent, the credit turmoil dampened
corporate merger-and-acquisition (M&A) activity, a key source of strength for
equity markets, but 2007 remained a record year for global M&A nonetheless. As
the returns indicate, the most recent six months were more trying, reflecting
the slowing U.S. economy, a troubled housing market and a more difficult
corporate earnings backdrop. Overall, large cap stocks outperformed small caps
as investors grew increasingly risk averse. International markets fared better
than their U.S. counterparts, benefiting from generally stronger economies.
In fixed income markets, mixed economic signals and subprime fallout resulted in
a flight to quality. Investors shunned bonds associated with the housing and
credit markets in favor of higher-quality Treasury issues. The yield on 10-year
Treasury issues, which touched 5.30% in June (its highest level in five years),
fell to 4.04% by year-end, while prices correspondingly rose. The tax-exempt
bond market waffled amid the economic uncertainty and concerns around the credit
worthiness of bond insurers, but set a new-issuance record in 2007. A drop in
municipal bond prices created buying opportunities, and the heightened supply
was generally well absorbed.
As you navigate the uncertainties inherent in the financial markets, we
encourage you to start the year by reviewing your investment goals with your
financial professional and making portfolio changes, as needed. For more
reflection on 2007 and our 10 predictions for 2008, please ask your financial
professional for a copy of "What's Ahead in 2008: An Investment Perspective," or
view it online at www.blackrock.com/funds. As always, we thank you for
entrusting BlackRock with your investment assets, and we look forward to
continuing to serve you in the new year and beyond.
Sincerely,
/s/ Rob Kapito
Rob Kapito
President, BlackRock Advisors, LLC
3
THIS PAGE NOT PART OF YOUR FUND REPORT
Fund Summary as of December 31, 2007
Investment Objective
The Massachusetts Health & Education Tax-Exempt Trust (MHE) seeks to provide
shareholders with as high a level of current income exempt from both regular
federal income taxes and Massachusetts personal income taxes as is consistent
with the preservation of shareholders' capital. The Trust seeks to achieve its
investment objective by investing primarily in Massachusetts tax-exempt
obligations issued on behalf of participating not-for-profit institutions. The
Trust will continue to invest primarily in investment-grade obligations. The
Trust is intended to be a long-term investment and not a short-term trading
vehicle.
Trust Information
Symbol on American Stock Exchange ................................ MHE
Initial Offering Date ............................................ July 23, 1993
Yield on Closing Market Price as of December 31, 2007 ($11.95)* .. 4.92%
Tax Equivalent Yield** ........................................... 7.57%
Current Monthly Distribution per Common Share*** ................. $ .049
Current Annualized Distribution per Common Share*** .............. $ .588
Leverage as of December 31, 2007**** ............................. 39%
--------------------------------------------------------------------------------
* Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
** Tax equivalent yield assumes the maximum federal tax rate of 35%.
*** The distribution is not constant and is subject to change.
**** As a percentage of managed assets, which is the total assets of the Trust
(including any assets attributable to Auction Market Preferred Stock that
may be outstanding) minus the sum of accrued liabilities (other than debt
representing financial leverage).
The table below summarizes the changes in the Trust's market price and net asset
value per share:
--------------------------------------------------------------------------------
12/31/07 12/31/06 Change High Low
--------------------------------------------------------------------------------
Market Price ............. $11.95 $13.10 (8.78%) $13.50 $11.25
Net Asset Value .......... $13.10 $13.90 (5.76%) $14.06 $12.78
--------------------------------------------------------------------------------
The following charts show the Trust's portfolio composition and credit quality
allocations of the Trust's long-term investments:
Portfolio Composition
Sector 12/31/07 12/31/06
--------------------------------------------------------------------------------
Education ................................................. 51% 46%
Hospital .................................................. 29 27
City, County & State ...................................... 10 12
Housing ................................................... 5 5
Industrial & Pollution Control ............................ 4 4
Transportation ............................................ 1 3
Water & Sewer ............................................. -- 2
Lease Revenue ............................................. -- 1
--------------------------------------------------------------------------------
Credit Quality Allocations*
Credit Rating 12/31/07 12/31/06
--------------------------------------------------------------------------------
AAA/Aaa ................................................... 38% 41%
AA/Aa ..................................................... 16 18
A ......................................................... 17 14
BBB/Baa ................................................... 11 13
BB/Ba ..................................................... 2 3
B/B ....................................................... 3 3
CCC/Caa ................................................... 2 --
Not Rated ................................................. 11 8
--------------------------------------------------------------------------------
* Using the higher of Standard & Poor's or Moody's Investors Service
ratings.
4 THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007
The Benefits and Risks of Leveraging
The Massachusetts Health & Education Tax-Exempt Trust utilizes leveraging to
seek to enhance the yield and net asset value of its Common Shares. However,
these objectives cannot be achieved in all interest rate environments. To
leverage, the Trust issues Auction Preferred Shares, which pay dividends at
prevailing short-term interest rates, and invests the proceeds in long-term
municipal bonds. The interest earned on these investments, net of dividends to
Auction Preferred Shares, is paid to Common Shareholders in the form of
dividends, and the value of these portfolio holdings is reflected in the per
share net asset value of the Trust's Common Shares. However, in order to benefit
Common Shareholders, the yield curve must be positively sloped; that is,
short-term interest rates must be lower than long-term interest rates. At the
same time, a period of generally declining interest rates will benefit Common
Shareholders. If either of these conditions change, then the risks of leveraging
will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Share capitalization of
$100 million and the issuance of Auction Preferred Shares for an additional $50
million, creating a total value of $150 million available for investment in
long-term municipal bonds. If prevailing short-term interest rates are
approximately 3% and long-term interest rates are approximately 6%, the yield
curve has a strongly positive slope. The fund pays dividends on the $50 million
of Auction Preferred Shares based on the lower short-term interest rates. At the
same time, the fund's total portfolio of $150 million earns the income based on
long-term interest rates. Of course, increases in short-term interest rates
would reduce (and even eliminate) the dividends on the Common Shares.
In this case, the dividends paid to Auction Preferred Shareholders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Shareholders are the beneficiaries of the incremental
yield. However, if short-term interest rates rise, narrowing the differential
between short-term and long-term interest rates, the incremental yield pickup on
the Common Shares will be reduced or eliminated completely. At the same time,
the market value of the fund's Common Shares (that is, its price as listed on
the American Stock Exchange) may, as a result, decline. Furthermore, if
long-term interest rates rise, the Common Shares' net asset value will reflect
the full decline in the price of the portfolio's investments, since the value of
the fund's Auction Preferred Shares does not fluctuate. In addition to the
decline in net asset value, the market value of the fund's Common Shares may
also decline.
As of December 31, 2007, the Trust's leverage amount, due to Auction Preferred
Shares, was 39% of total net assets, before the deduction of Auction Preferred
Shares.
Swap Agreements
The Trust may invest in swap agreements, which are over-the-counter contracts in
which one party agrees to make periodic payments based on the change in market
value of a specified bond, basket of bonds, or index in return for periodic
payments based on a fixed or variable interest rate or the change in market
value of a different bond, basket of bonds or index. Swap agreements may be used
to obtain or reduce exposure to a bond or market without owning or taking
physical custody of securities. Swap agreements involve the risk that the party
with whom the Trust has entered into the swap will default on its obligation to
pay the Trust and the risk that the Trust will not be able to meet its
obligations to pay the other party to the agreement.
THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007 5
Schedule of Investments as of December 31, 2007
Face Amount
(in Thousands) Municipal Bonds Value
==========================================================================================
Massachusetts -- 162.0%
------------------------------------------------------------------------------------------
$1,000 Massachusetts State College Building Authority,
Project Revenue Bonds, Series A, 5%
due 5/01/2031 (b) $ 1,039,300
------------------------------------------------------------------------------------------
825 Massachusetts State College Building Authority,
Project Revenue Refunding Bonds, Series B, 5.50%
due 5/01/2039 (k) 946,028
------------------------------------------------------------------------------------------
Massachusetts State Development Finance Agency,
Education Revenue Bonds:
1,100 (Belmont Hill School), 5% due 9/01/2011 (i) 1,179,321
400 (Middlesex School Project), 5% due 9/01/2033 402,916
250 (Xaverian Brothers High School), 5.65%
due 7/01/2029 250,722
------------------------------------------------------------------------------------------
1,000 Massachusetts State Development Finance Agency,
Educational Facility Revenue Bonds (Academy of the
Pacific Rim), Series A, 5.125% due 6/01/2031 (a) 855,990
------------------------------------------------------------------------------------------
Massachusetts State Development Finance Agency,
First Mortgage Revenue Bonds:
855 (Edgecombe Project), Series A, 6.75%
due 7/01/2021 923,913
850 (Overlook Communities Inc.), Series A, 6.125%
due 7/01/2024 830,620
------------------------------------------------------------------------------------------
1,250 Massachusetts State Development Finance Agency,
First Mortgage Revenue Refunding Bonds (Symmes
Life Care, Inc. -- Brookhaven at Lexington), Series A,
5% due 3/01/2035 (j) 1,217,300
------------------------------------------------------------------------------------------
Massachusetts State Development Finance Agency
Revenue Bonds:
1,000 (Boston University), Series T-1, 5%
due 10/01/2039 (b) 1,030,360
500 (College of Pharmacy and Allied Health
Services), Series D, 5% due 7/01/2027 (c) 516,730
500 (Curry College), Series A, 5%
due 3/01/2035 (a) 426,830
400 (Franklin W. Olin College), Series B, 5.25%
due 7/01/2033 (k) 409,776
1,000 (Linden Ponds, Inc. Facility), Series A, 5.75%
due 11/15/2042 896,300
1,000 (Massachusetts College of Pharmacy and
Health Sciences), 5.75% due 7/01/2013 (i) 1,130,660
425 (Massachusetts Council of Human Service
Providers, Inc.), Series C, 6.60%
due 8/15/2029 403,440
2,000 (Smith College), 5% due 7/01/2035 2,070,780
540 (The Wheeler School), 6.50%
due 12/01/2029 554,483
495 (Volunteers of America -- Ayer Limited
Partnership), AMT, Series A, 6.20%
due 2/20/2046 (g) 524,358
1,100 (WGBH Educational Foundation), Series A,
5.75% due 1/01/2042 (b) 1,321,826
600 (Western New England College), 5.875%
due 12/01/2012 (i) 658,674
500 (Williston Northampton School Project), 5%
due 10/01/2025 (k) 519,155
1,985 (Worcester Polytechnic Institute), 5%
due 9/01/2027 (h) 2,066,722
------------------------------------------------------------------------------------------
500 Massachusetts State Development Finance
Agency, Human Service Provider Revenue Bonds
(Seven Hills Foundation & Affiliates), 5%
due 9/01/2035 (j) 468,680
------------------------------------------------------------------------------------------
695 Massachusetts State Development Finance
Agency, Resource Recovery Revenue Bonds
(Ogden Haverhill Associates), AMT, Series A,
6.70% due 12/01/2014 725,302
------------------------------------------------------------------------------------------
Massachusetts State Development Finance Agency,
Revenue Refunding Bonds:
1,500 (Boston University), Series P, 5.45%
due 5/15/2059 1,457,145
500 (Clark University), 5.125% due 10/01/2035 (k) 517,970
1,500 (Western New England College), Series A, 5%
due 9/01/2033 (c) 1,534,410
1,000 (Wheelock College), Series C, 5.25%
due 10/01/2037 934,440
------------------------------------------------------------------------------------------
1,000 Massachusetts State, HFA, Housing Revenue
Bonds, AMT, Series A, 5.25% due 12/01/2048 956,460
------------------------------------------------------------------------------------------
Massachusetts State Health and Educational
Facilities Authority, Healthcare System Revenue
Refunding Bonds (Covenant Health System):
255 6% due 7/01/2012 (i) 283,144
630 6% due 7/01/2022 664,077
315 6% due 7/01/2031 326,907
------------------------------------------------------------------------------------------
Massachusetts State Health and Educational
Facilities Authority Revenue Bonds:
1,000 (Baystate Medical Center), Series F, 5.75%
due 7/01/2033 1,022,620
350 (Berkshire Health System), Series E, 6.25%
due 10/01/2031 362,929
1,000 (Berkshire Health System), Series F, 5%
due 10/01/2019 (c) 1,055,780
1,350 (Harvard University), Series FF, 5.125%
due 7/15/2037 1,407,929
1,000 (Lahey Clinic Medical Center), Series D, 5.25%
due 8/15/2037 998,440
750 (Milford-Whitinsville Hospital), Series D, 6.35%
due 7/15/2012 (i) 849,773
625 (Partners Healthcare System), VRDN, Series P-1,
3.40% due 7/01/2027 (f)(m) 625,000
1,000 (Simmons College), Series F, 5%
due 10/01/2013 (e)(i) 1,089,420
230 (University of Massachusetts), Series C, 5.125%
due 10/01/2034 (e) 237,999
1,130 (Wheaton College), Series D, 6%
due 1/01/2018 1,149,967
------------------------------------------------------------------------------------------
Portfolio Abbreviations
To simplify the listings of The Massachusetts Health & Education Tax-Exempt
Trust's portfolio holdings in the Schedule of Investments, we have abbreviated
the names of many of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
HFA Housing Finance Agency
PCR Pollution Control Revenue Bonds
VRDN Variable Rate Demand Notes
6 THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007
Schedule of Investments (concluded)
Face Amount
(in Thousands) Municipal Bonds Value
==========================================================================================
Massachusetts (continued)
------------------------------------------------------------------------------------------
Massachusetts State Health and Educational
Facilities Authority, Revenue Refunding Bonds:
$ 780 (Bay Cove Human Services Issue), Series A,
5.90% due 4/01/2028 $ 770,843
1,000 (Berklee College of Music), Series A, 5%
due 10/01/2037 987,710
1,000 (Boston College), Series N, 5.125%
due 6/01/2037 1,030,780
490 (Christopher House), Series A, 6.875%
due 1/01/2029 490,931
495 (Learning Center For Deaf Children), Series C,
6.125% due 7/01/2029 495,233
500 (Massachusetts Institute of Technology),
Series L, 5% due 7/01/2023 553,065
480 (Partners Healthcare System), Series C, 5.75%
due 7/01/2011 (i) 525,187
20 (Partners Healthcare System), Series C, 5.75%
due 7/01/2032 21,199
395 (Valley Regional Health System), Series C,
5.75% due 7/01/2018 (d) 395,529
1,500 (Wellesley College), 5% due 7/01/2033 1,537,155
------------------------------------------------------------------------------------------
715 Massachusetts State Industrial Finance Agency,
Health Care Facility Revenue Bonds (Age Institute of
Massachusetts Project), 8.05% due 11/01/2025 722,758
1,500 Massachusetts State Industrial Finance Agency,
PCR (General Motors Corporation), 5.55%
due 4/01/2009 1,502,820
400 Massachusetts State Industrial Finance Agency
Revenue Bonds (Wentworth Institute of Technology),
5.75% due 10/01/2008 (i) 415,840
------------------------------------------------------------------------------------------
340 Massachusetts State Industrial Finance Agency,
Senior Living Facility Revenue Bonds (Forge Hill
Project), AMT, 6.75% due 4/01/2008 (i) 349,472
------------------------------------------------------------------------------------------
2,000 Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, Series A, 5%
due 8/15/2030 (f) 2,082,160
------------------------------------------------------------------------------------------
1,000 Rail Connections, Inc., Massachusetts, Capital
Appreciation Revenue Bonds (Route 128 Parking
Garage), Series B, 6.53% due 7/01/2009 (a)(i)(l) 479,600
------------------------------------------------------------------------------------------
500 University of Massachusetts Building Authority,
Project Revenue Refunding Bonds, Senior
Series 04-1, 5.125% due 11/01/2014 (b)(i) 553,140
------------------------------------------------------------------------------------------
Total Investments (Cost -- $48,870,380*) -- 162.0% 49,758,018
Other Assets Less Liabilities -- 3.2% 975,919
Preferred Shares, at
Redemption Value -- (65.2%) (20,017,155)
------------
Net Assets Applicable to Common Shares -- 100.0% $ 30,716,782
============
* The cost and unrealized appreciation (depreciation) of investments as of
December 31, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost .......................................... $ 48,730,231
============
Gross unrealized appreciation ........................... $ 1,633,565
Gross unrealized depreciation ........................... (605,778)
------------
Net unrealized appreciation ............................. $ 1,027,787
============
(a) ACA Insured.
(b) AMBAC Insured.
(c) Assured Guaranty Insured.
(d) Connie Lee Insured.
(e) FGIC Insured.
(f) FSA Insured.
(g) GNMA Collateralized.
(h) MBIA Insured.
(i) Prerefunded.
(j) Radian Insured.
(k) XL Capital Insured.
(l) Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
(m) Security may have a maturity of more than one year at time of issuance,
but has variable rate and demand features that qualify it as a short-term
security. The rate disclosed is that currently in effect. This rate
changes periodically based upon prevailing market rates.
o Forward Interest Rate Swaps entered into as of December 31, 2007 were as
follows:
--------------------------------------------------------------------------
Notional
Amount Unrealized
Description (in Thousands) Depreciation
--------------------------------------------------------------------------
Pay a fixed rate of 3.657% and receive a
floating rate based on 1-week SIFMA
Municipal Swap Index
Broker, JPMorgan Chase
Expires March 2023 $2,500 $(6,525)
--------------------------------------------------------------------------
See Notes to Financial Statements.
THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007 7
Statement of Assets and Liabilities
As of December 31, 2007
===============================================================================
Assets
-------------------------------------------------------------------------------
Investments in unaffiliated securities, at value
(identified cost -- $48,870,380) .............................. $49,758,018
Cash ............................................................ 99,396
Receivables:
Interest receivable ........................................... 885,350
Securities sold ............................................... 90,000
Prepaid expenses ................................................ 11,460
-----------
Total assets .................................................... 50,844,224
-----------
===============================================================================
Liabilities
-------------------------------------------------------------------------------
Unrealized depreciation on forward interest rate swaps .......... 6,525
Payables:
Investment advisor ............................................ 15,592
Administration fees ........................................... 6,682
Distributions to shareholders ................................. 5,091
Other affiliates .............................................. 449
Accrued expenses ................................................ 75,948
-----------
Total liabilities ............................................... 110,287
-----------
===============================================================================
Preferred Shares
-------------------------------------------------------------------------------
Preferred Shares, at redemption value, par value $.01 per share
(200 Series A Shares and 200 Series B Shares of APS*
authorized, issued and outstanding at $50,000 per share
liquidation preference) ....................................... 20,017,155
-----------
===============================================================================
Net Assets Applicable to Common Shares
-------------------------------------------------------------------------------
Net assets applicable to Common Shares .......................... $30,716,782
===========
===============================================================================
Analysis of Net Assets Applicable to Common Shares
-------------------------------------------------------------------------------
Common Shares, par value $.01 per share (2,344,067 shares
issued and outstanding) ....................................... $ 23,441
Paid-in capital in excess of par ................................ 29,660,491
Undistributed investment income -- net .......................... 323,091
Accumulated realized capital losses -- net ...................... (171,354)
Unrealized appreciation -- net .................................. 881,113
-----------
Total -- Equivalent to $13.10 net asset value per Common Share
(market price -- $11.95) ...................................... $30,716,782
===========
* Auction Preferred Shares.
See Notes to Financial Statements.
Statement of Operations
For the Year Ended December 31, 2007
===============================================================================
Investment Income
-------------------------------------------------------------------------------
Interest ........................................................ $ 2,616,581
===============================================================================
Expenses
-------------------------------------------------------------------------------
Investment advisory fees ........................................ 180,976
Administration fees ............................................. 77,561
Commission fees ................................................. 50,230
Professional fees ............................................... 37,498
Transfer agent fees ............................................. 32,959
Printing and shareholder reports ................................ 30,234
Trustees' fees and expenses ..................................... 23,584
Pricing fees .................................................... 7,638
Custodian fees .................................................. 6,615
Listing fees .................................................... 561
Other ........................................................... 18,332
-----------
Total expenses .................................................. 466,188
-----------
Investment income -- net ........................................ 2,150,393
-----------
===============================================================================
Realized & Unrealized Loss -- Net
-------------------------------------------------------------------------------
Realized loss on:
Investments -- net ............................................ (30,307)
Forward interest rate swaps -- net ............................ (60,080)
Change in unrealized appreciation/depreciation on:
Investments -- net ............................................ (1,775,043)
Forward interest rate swaps -- net ............................ (46,476)
-----------
Total realized and unrealized loss -- net ....................... (1,911,906)
-----------
===============================================================================
Dividends to Preferred Shareholders
-------------------------------------------------------------------------------
Investment income -- net ........................................ (718,637)
-----------
Net Decrease in Net Assets Resulting from Operations ............ $ (480,150)
===========
See Notes to Financial Statements.
8 THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007
Statements of Changes in Net Assets
For the Year Ended
December 31,
-----------------------------
Increase (Decrease) in Net Assets: 2007 2006
===================================================================================================================================
Operations
-----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ......................................................................... $ 2,150,393 $ 2,108,489
Realized gain (loss) -- net ...................................................................... (90,387) 201,249
Change in unrealized appreciation/depreciation -- net ............................................ (1,821,519) 886,659
Dividends and distributions to Preferred Shareholders ............................................ (718,637) (660,520)
-----------------------------
Net increase (decrease) in net assets resulting from operations .................................. (480,150) 2,535,877
-----------------------------
===================================================================================================================================
Dividends & Distributions to Common Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ......................................................................... (1,378,312) (1,588,436)
Realized gain -- net ............................................................................. (5,635) (222,930)
-----------------------------
Net decrease in net assets resulting from dividends and distributions to Common Shareholders ..... (1,383,947) (1,811,366)
-----------------------------
===================================================================================================================================
Share Transactions
-----------------------------------------------------------------------------------------------------------------------------------
Value of shares issued to Common Shareholders in reinvestment of dividends and distributions ..... -- 64,509
-----------------------------
===================================================================================================================================
Net Assets Applicable to Common Shares
-----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to Common Shares .............................. (1,864,097) 789,020
Beginning of year ................................................................................ 32,580,879 31,791,859
-----------------------------
End of year* ..................................................................................... $ 30,716,782 $ 32,580,879
=============================
* Undistributed investment income -- net ..................................................... $ 323,091 $ 269,647
=============================
See Notes to Financial Statements.
THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007 9
Financial Highlights
For the Year Ended December 31,
The following per share data and ratios have been derived ------------------------------------------------------------
from information provided in the financial statements. 2007 2006 2005 2004+ 2003
===================================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ............................... $ 13.90 $ 13.59 $ 13.74 $ 13.91 $ 13.76
------------------------------------------------------------
Investment income -- net** ....................................... .92 .90 .83 .82 .93
Realized and unrealized gain (loss) -- net ....................... (.82) .47 .15 .08 .07
Dividends and distributions to Preferred Shareholders:
Investment income -- net ..................................... (.31) (.25) (.11) (.03) (.03)
Realized gain -- net ......................................... -- (.03) (.01) (.01) --
------------------------------------------------------------
Total from investment operations ................................. (.21) 1.09 .86 .86 .97
------------------------------------------------------------
Less dividends and distributions to Common Shareholders:
Investment income -- net ..................................... (.59) (.68) (.78) (.87) (.82)
Realized gain -- net ......................................... --++ (.10) (.13) (.16) --
------------------------------------------------------------
Total dividends and distributions to Common Shareholders ......... (.59) (.78) (.91) (1.03) (.82)
------------------------------------------------------------
Offering and underwriting costs resulting from issuance of
Preferred Shares ............................................... -- -- (.10) -- --
------------------------------------------------------------
Net asset value, end of year ..................................... $ 13.10 $ 13.90 $ 13.59 $ 13.74 $ 13.91
============================================================
Market price per share, end of year .............................. $ 11.95 $ 13.10 $ 13.60 $ 16.24 $ 15.26
============================================================
===================================================================================================================================
Total Investment Return
-----------------------------------------------------------------------------------------------------------------------------------
Based on market price per share .................................. (4.40%) 1.99% (10.71%) 14.29% 20.11%
============================================================
===================================================================================================================================
Ratios Based on Average Net Assets Applicable to Common Shares*
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement ............................. 1.47% 1.64% 1.30% 1.45% 1.16%
============================================================
Total expenses ................................................... 1.47% 1.64% 1.30% 1.45% 1.16%
============================================================
Total investment income -- net ................................... 6.78% 6.61% 6.00% 5.97% 6.74%
============================================================
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Shares, end of year (in thousands) $ 30,717 $ 32,581 $ 31,792 $ 32,076 $ 32,390
============================================================
Portfolio turnover ............................................... 18% 9% 16% 21% 26%
============================================================
* Do not reflect the effect of dividends to Preferred Shareholders.
** Based on average shares outstanding.
+ On September 1, 2004, Fund Asset Management, L.P. became the Advisor.
++ Amount is less than ($.01) per share.
See Notes to Financial Statements.
10 THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007
Notes to Financial Statements
1. Significant Accounting Policies:
The Massachusetts Health & Education Tax-Exempt Trust (the "Trust") is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a non-diversified, closed-end management investment company. The
Trust's financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America. The Trust
determines and makes available for publication the net asset value of its common
shares on a daily basis. The Trust's common shares are listed on the American
Stock Exchange under the symbol MHE.
The following is a summary of significant accounting policies followed by the
Trust.
Valuation of Investments: Municipal investments (including commitments to
purchase such investments on a "when-issued" basis) are valued on the basis of
last available bid price or prices provided by dealers or pricing services
selected under the supervision of the Trust's Board of Trustees ("Trustees" or a
"Board"). In determining the value of a particular investment, pricing services
may use certain information with respect to transactions in such investments,
quotations from bond dealers, market transactions in comparable investments and
various relationships between investments. Swap agreements are valued by quoted
fair values received daily by the Trust's pricing service. Short-term securities
may be valued at amortized cost. Investments in open-end companies are valued at
net asset value each business day. In the event that application of these
methods of valuation results in a price for an investment which is deemed not to
be representative of the market value of such investment, the investment will be
valued by, under the direction of or in accordance with a method approved by the
Board as reflecting fair value ("Fair Value Assets"). When determining the price
for Fair Value Assets, the investment advisor and/or sub-advisor shall seek to
determine the price that the Trust might reasonably expect to receive from the
current sale of that asset in an arms-length transaction. Fair value
determinations shall be based upon all available factors that the investment
advisor and/or sub-advisor deems relevant. The pricing of all Fair Value Assets
shall be subsequently reported to the Board or a committee thereof.
Derivative Financial Instruments: The Trust may engage in various portfolio
investment strategies both to increase the return of the Trust and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise due to changes in the value of the contract due to an
unfavorable change in the price of the underlying security, or index, or if the
counterparty does not perform under the contract.
o Forward interest rate swaps: The Trust may enter into forward interest
rate swaps. In a forward interest rate swap, the Trust and the
counterparty agree to make periodic net payments on a specified notional
contract amount, commencing on a specified future effective date, unless
terminated earlier. Changes in the value of the forward interest rate swap
are recognized as unrealized gains and losses. When the agreement is
closed, the Trust records a realized gain or loss in an amount equal to
the value of the agreement. The Trust generally intends to close each
forward interest rate swap before the accrual date specified in the
agreement and therefore avoid entering into the interest rate swap
underlying each forward interest rate swap.
Segregation: In cases in which the 1940 Act, and the interpretive positions of
the Securities and Exchange Commission (the "SEC") require that the Trust
segregate assets in connection with certain investments (e.g., when-issued
securities or swap agreements), the Trust will, consistent with certain
interpretive letters issued by the SEC, designate on its books and records cash
or other liquid securities having a market value at least equal to the amount
that would otherwise be required to be physically segregated.
Income Taxes: It is the Trust's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
Effective June 29, 2007, the Trust implemented Financial Accounting Standards
Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income
Taxes -- an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
prescribes the minimum recognition threshold a tax position must meet in
connection with accounting for uncertainties in income tax positions taken or
expected to be taken by an entity, including investment companies, before being
measured and recognized in the financial statements. Management has evaluated
the application of FIN 48 to the Trust, and has determined that the adoption of
FIN 48 does not have a material impact on the Trust's financial statements. The
Trust files U.S. federal and various state and local tax returns. No income tax
returns are currently under examination. The statute of limitations on the
Trust's U.S. federal tax returns remains open for the years ended December 31,
2004 through December 31, 2006. The statute of limitations on the Trust's state
and local tax returns may remain open for an additional year depending upon the
jurisdiction.
Investment Transactions and Investment Income: Investment transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Trust amortizes all
premiums and discounts on debt securities.
THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007 11
Notes to Financial Statements (continued)
Dividends and Distributions: Dividends to common shareholders from net
investment income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates. Dividends and distributions to preferred
shareholders are accrued and determined as described in Note 4.
Estimates: The preparation of financial statements in conformity with accounting
principals generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates and such differences may be material.
Recent Accounting Pronouncements: In September 2006, Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), was issued
and is effective for fiscal years beginning after November 15, 2007. FAS 157
defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. The impact on the Trust's financial
statement disclosures, if any, is currently being assessed.
In addition, in February 2007, Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for fiscal years beginning after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provisions of FAS 157. FAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. FAS 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. The impact on the Trust's financial
statement disclosures, if any, is currently being assessed.
Other: Expenses that are directly related to the Trust are charged directly to
the Trust. Other operating expenses are generally pro-rated to the Trust on the
basis of relative net assets of all the BlackRock Closed-End Funds.
2. Investment Advisory Agreement and Other Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with BlackRock
Advisors, LLC (the "Advisor"), an indirect, wholly owned subsidiary of
BlackRock, Inc. Merrill Lynch & Co., Inc. and The PNC Financial Services Group,
Inc. are the principal owners of BlackRock, Inc.
The Advisor is responsible for the management of the Trust's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Trust. For such services, the Trust
pays a monthly fee at an annual rate of .35% of the Trust's average daily net
assets, including proceeds from the issuance of preferred shares.
The Trust has also entered into an Administration Agreement with Princeton
Administrators, LLC ("Princeton"). The Trust pays Princeton a monthly fee at an
annual rate of .15% of the Trust's average daily net assets, including proceeds
from the issuance of Preferred Shares, for the performance of administrative
services (other than investment advice and related portfolio activities)
necessary for the operation of the Trust.
For the year ended December 31, 2007, the Trust reimbursed the Advisor $699 for
certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or directors of
BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, other than short-term securities, for the
year ended December 31, 2007 were $9,053,259 and $9,298,973, respectively.
4. Share Transactions:
Common Shares
The Trust is authorized to issue an unlimited number of common shares, par value
$.01 per share. Shares issued and outstanding during the year ended December 31,
2007 remained constant and for the year ended December 31, 2006 increased by
4,386 as a result of reinvestment of dividends and distributions.
Preferred Shares
The Trust is authorized to issue an unlimited number of preferred shares, par
value $.01 per share. In addition, the Trust has authorized 400 shares of
auction preferred shares. Auction preferred shares are redeemable shares of
preferred shares of the Trust, with a par value of $.01 per share and a
liquidation preference of $50,000 per share, plus accrued and unpaid dividends,
that entitle their holders to receive cash dividends at an annual rate that may
vary for the successive dividend periods. The yields in effect at December 31,
2007 were: Series A, 4.30% and Series B, 4.30%.
Dividends on seven-day preferred shares are cumulative at a rate which is reset
every seven days based on the results of an auction. If the preferred shares are
unable to be remarketed on the remarketing date as part of the auction process,
the Trust would be required to pay the maximum applicable rate on the preferred
shares to holders of such shares for successive dividend periods until such time
as the shares are successfully remarketed. The maximum applicable rate on
preferred shares is the higher of 110% of the AA commercial paper rate or 110%
of 90% of the tax adjusted Kenny S&P 30-day High Grade Index rate. During the
year ended December 31, 2007, preferred shares were successfully remarketed at
each remarketing date. The dividend ranges and average on the
12 THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007
Notes to Financial Statements (concluded)
preferred shares of the Trust for the year ended December 31, 2007 were as
follows:
--------------------------------------------------------------------------------
Low High Average
--------------------------------------------------------------------------------
Series A ..................................... 3.00% 4.25% 3.54%
Series B ..................................... 3.07% 4.40% 3.59%
--------------------------------------------------------------------------------
The Trust may not declare dividends or make other distributions on common shares
or purchase any such shares if, at the time of the declaration, distribution or
purchase, asset coverage with respect to the outstanding auction preferred
shares would be less than 200%.
The auction preferred shares are redeemable at the option of the Trust, in whole
or in part, on any dividend payment date at $50,000 per share plus any
accumulated unpaid dividends whether or not declared. The auction preferred
shares are also subject to mandatory redemption at $50,000 per share plus any
accumulated or unpaid dividends, whether or not declared, if certain
requirements relating to the composition of the assets and liabilities of the
Trust, as set forth in the Trust's Declaration of Trust/Articles Supplementary,
are not satisfied.
The holders of auction preferred shares have voting rights equal to the holders
of common shares (one vote per share) and will vote together with holders of
common shares as a single class. However, holders of preferred shares, voting as
a separate class, are also entitled to elect two Trustees for the Trust. In
addition, the 1940 Act requires that, along with approval by shareholders that
might otherwise be required, the approval of the holders of a majority of any
outstanding preferred shares, voting separately as a class, would be required to
(a) adopt any plan of reorganization that would adversely affect the preferred
shares (b) change a Trust's subclassification as a closed-end investment company
or change its fundamental investment restrictions or (c) change its business so
as to cease to be an investment company.
5. Distributions to Shareholders:
No provision is made for U.S. federal income taxes as it is the Trust's
intention to continue to qualify for and elect the tax treatment applicable to
regulated investment companies under Subchapter M of the Internal Revenue Code
of 1986, as amended, and to make the requisite distributions to their respective
shareholders, which will be sufficient to relieve them from federal income and
excise taxes.
The tax character of distributions paid during the fiscal years ended December
31, 2007 and December 31, 2006 was as follows:
--------------------------------------------------------------------------------
12/31/2007 12/31/2006
--------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income .................................. $2,096,949 $2,173,352
Ordinary income .................................... 2,691 155,676
Long-term capital gain ............................. 2,944 142,858
------------------------
Total distributions ................................ $2,102,584 $2,471,886
========================
As of December 31, 2007, the components of accumulated earnings on a tax basis
were as follows:
-----------------------------------------------------------------------------
Undistributed tax-exempt income -- net ....................... $ 180,303
Undistributed long-term capital gains -- net ................. --
-----------
Total undistributed earnings -- net .......................... 180,303
Capital loss carryforward .................................... (35,869)*
Unrealized gains -- net ...................................... 888,416**
-----------
Total accumulated earnings -- net ............................ $ 1,032,850
===========
* On December 31, 2007, the Trust had a capital loss carryforward of
$35,869, all of which expires in 2015. This amount will be available to
offset like amounts of any future taxable gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable to the difference between book and tax amortization methods
for premiums and discounts on fixed income securities, the deferral of
post-October capital losses for tax purposes, the timing of recognition of
income from partnership investments and other temporary differences.
6. Concentration Risk:
The Trust concentrates its investments in securities issued by state agencies
and other governmental entities. The Trust is more susceptible to adverse
financial, social, environmental, economic, regulatory and political factors
that may affect these state agencies and other governmental entities, which
could seriously affect the ability of the state and its municipal subdivisions
to meet continuing obligations for principal and interest payments and therefore
could impact the value of the Trust's investments and net asset value per share,
than if the Trust was not concentrated in securities issued by state agencies
and other governmental entities.
Many municipalities insure repayment of their obligations. Although bond
insurance reduces the risk of loss due to default by an issuer, such bonds
remain subject to the risk that market value may fluctuate for other reasons and
there is no assurance that the insurance company will meet its obligations.
These securities have been identified in the Schedule of Investments.
7. Subsequent Event:
During the period February 13, 2008 to February 22, 2008, the auction preferred
shares of the Trust were not successfully remarketed. As a result, the auction
preferred share dividend rates were reset to the maximum applicable rate which
ranged from 3.30% to 3.41% for the Trust during the period. Unsuccessful
remarketing during the auction process is not an event of default or credit but
rather a liquidity event for the holders of the auction preferred shares.
The Trust paid a tax-exempt income dividend to holders of common shares in the
amount of $.049000 per share on February 1, 2008 to shareholders of record on
January 15, 2008. The dividends declared on auction preferred shares for the
period January 1, 2008 to January 31, 2008 were as follows:
--------------------------------------------------------------------------------
Series A ........................................................ $27,835
Series B ........................................................ $28,143
--------------------------------------------------------------------------------
THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007 13
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of The Massachusetts Health &
Education Tax-Exempt Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Massachusetts Health & Education Tax-Exempt
Trust (the "Trust") as of December 31, 2007, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Trust
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
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, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2007, by correspondence with the
custodian. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Massachusetts Health & Education Tax-Exempt Trust as of December 31, 2007, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and its financial highlights
for each of the five years in the period then ended, in conformity with
accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
February 27, 2008
14 THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007
Important Tax Information
All of the net investment income distributions paid by The Massachusetts Health
& Education Tax-Exempt Trust during the taxable year ended December 31, 2007
qualify as tax-exempt interest dividends for federal income tax purposes.
Additionally, the Trust paid a taxable distribution to Common Shareholders of
record on April 16, 2007 consisting of ordinary income of $.001148 per share and
long-term capital gains of $.001256 per share.
THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007 15
Automatic 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, The Bank of New York Mellon, as your
Plan Agent, will automatically invest your dividends and capital gains
distributions in Common Shares of the Trust in your account.
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 The Bank of New York, 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.
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.
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.
Plan participants may withdraw from the Plan at any time by writing to the Plan
Agent at the address noted below. 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.
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 correspondence concerning the Plan should be directed to the Plan Agent at
The Bank of New York Mellon, One Wall Street, New York, NY 10286, Telephone:
800-432-8224.
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.
16 THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007
Officers and Trustees
Number of
BlackRock-
Position(s) Length of Advised Funds
Name, Address Held with Time Portfolios Public
and Year of Birth Trust Served Principal Occupation(s) During Past 5 Years Overseen Directorships
====================================================================================================================================
Non-Interested Trustees*
------------------------------------------------------------------------------------------------------------------------------------
G. Nicholas Beckwith, III Trustee 2007 to Chairman and Chief Executive Officer, Arch 111 Funds None
40 East 52nd Street present Street Management, LLC since 2005; Chairman 108 Portfolios
New York, NY 10022 and CEO, Beckwith Blawnox Property LLC since
1945 2005; Chairman and CEO, Beckwith Clearfield
Property LLC since 2005; Chairman and CEO,
Beckwith Delmont Property LLC since 2005;
Chairman and CEO, Beckwith Erie Property LLC
since 2005; Chairman, Penn West Industrial
Trucks LLC since 2005; Chairman, President
and Chief Executive Officer, Beckwith
Machinery Company from 1969 to 2005;
Chairman of the Board of Directors,
University of Pittsburgh Medical Center
since 2002; Board of Directors, Shady Side
Hospital Foundation since 1977; Beckwith
Institute for Innovation In Patient Care
since 1991; Member, Advisory Council on
Biology and Medicine, Brown University since
2002; Trustee, Claude Worthington Benedum
Foundation since 1977; Board of Trustees,
Chatham College, University of Pittsburgh
since 2003; Emeritus Trustee, Shady Side
Academy since 1977.
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Cavanagh Trustee and 2007 to Trustee, Aircraft Finance Trust (AFT) since 112 Funds Arch Chemical
40 East 52nd Street Chairman of present 1999; Director, The Guardian Life Insurance 109 Portfolios (chemicals and
New York, NY 10022 the Board Company of America since 1998; Chairman and allied products)
1946 of Trustees Trustee, Educational Testing Service (ETS)
since 1997; Director, the Fremont Group
since 1996; President and Chief Executive
Officer of The Conferences Board, Inc.
(global business research) from 1995 to
2007.
------------------------------------------------------------------------------------------------------------------------------------
Kent Dixon Trustee and 2007 to Consultant/Investor since 1988. 112 Funds None
40 East 52nd Street Member of present 109 Portfolios
New York, NY 10022 the Audit
1937 Committee
------------------------------------------------------------------------------------------------------------------------------------
Frank J. Fabozzi Trustee and 2007 to Consultant/Editor of The Journal of 112 Funds None
40 East 52nd Street Member of present Portfolio Management; Yale University, 109 Portfolios
New York, NY 10022 the Audit School of Management, Professor in the
1948 Committee Practice of Finance and Becton Fellow since
2006; Adjunct Professor of Finance and
Becton Fellow from 2005 to 2006; Professor
in the practice of Finance from 2003 to
2005; Adjunct Professor of Finance from 1994
to 2003; Author and Editor.
------------------------------------------------------------------------------------------------------------------------------------
Kathleen F. Feldstein Trustee 2007 to President of Economic Studies, Inc. (a 112 Funds The McClatchy
40 East 52nd Street present Belmont MA-based private economic consulting 109 Portfolios Company
New York, NY 10022 firm) since 1987; Chair, Board of Trustees,
1941 McLean Hospital since 2000. Member of the
Board of Partners Community Healthcare, Inc.
since 2005; Member of the Board of Part-
ners HealthCare and Sherrill House since
1990; Trustee, Museum of Fine Arts, Boston
since 1992 and a Member of the Visiting
Committee to the Harvard University Art
Museum since 2003; Trustee, The Committee
for Economic Development (research
organization of business leaders and
educators) since 1990; Member of the
Advisory Board to the International School
of Business, Brandeis University since 2002.
------------------------------------------------------------------------------------------------------------------------------------
James T. Flynn Trustee and 2007 to Chief Financial Officer of JPMorgan & Co., 111 Funds None
40 East 52nd Street Member of present Inc. from 1990 to 1995 and an employee of 108 Portfolios
New York, NY 10022 the Audit JPMorgan in various capacities from 1967 to
1939 Committee 1995.
---------------------------------------------------------------------------------------------------------
* Trustees serve until their resignation, removal or death, or until December 31 of the year in
which they turn 72.
------------------------------------------------------------------------------------------------------------------------------------
THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007 17
Officers and Trustees (continued)
Number of
BlackRock-
Position(s) Length of Advised Funds
Name, Address Held with Time Portfolios Public
and Year of Birth Trust Served Principal Occupation(s) During Past 5 Years Overseen Directorships
====================================================================================================================================
Non-Interested Trustees* (concluded)
------------------------------------------------------------------------------------------------------------------------------------
Jerrold B. Harris Trustee 2007 to President and Chief Executive Officer, VWR 111 Funds BlackRock-Kelso
40 East 52nd Street present Scientific Products Corporation from 1989 to 108 Portfolios Capital Corp.
New York, NY 10022 1999; Trustee, Ursinus College (education)
1942 since 2000; Director, Troemner LLC
(scientific equipment) since 2000.
------------------------------------------------------------------------------------------------------------------------------------
R. Glenn Hubbard Trustee 2007 to Dean of Columbia Business School since 2004; 112 Funds ADP (data and
40 East 52nd Street present Columbia faculty member since 1988; 109 Portfolios information
New York, NY 10022 Co-director of Columbia Business School's services);
1958 Entrepreneurship Program 1997 to 2004; KKR Financial
Visiting Professor at the John F. Kennedy Corporation; Duke
School of Government at Harvard University Realty;
and the Harvard Business School since 1985, Metropolitan Life
as well as the University of Chicago since Insurance Company
1994; Deputy Assistant Secretary of the U.S.
Treasury Department for Tax Policy from 1991
to 1993; Chairman of the U.S. Council of
Economic Advisers under the President of the
United States from 2001 to 2003.
------------------------------------------------------------------------------------------------------------------------------------
W. Carl Kester Trustee 2007 to Deputy Dean for Academic Affairs, Harvard 111 Funds None
40 East 52nd Street and Member present Business School since 2006; Mizuho Financial 108 Portfolios
New York, NY 10022 of the Audit Group, Professor of Finance, Harvard
1951 Committee Business School; Unit Head, Finance from
2005 to 2006; Senior Associate Dean and
Chairman of the MBA Program of Harvard
Business School from 1999 to 2005, Member of
the faculty of Harvard Business School since
1981. Independent Consultant since 1978.
------------------------------------------------------------------------------------------------------------------------------------
Karen P. Robards Trustee and 2007 to Partner of Robards & Company, LLC (financial 111 Funds AtriCure, Inc.
40 East 52nd Street Chairperson present advisory firm) since 1987; Formerly an 108 Portfolios (medical devices);
New York, NY 10022 of the Audit investment banker with Morgan Stanley for Care Investment
1950 Committee more than ten years; Director of Enable Trust, Inc.
Medical Corp. from 1996 to 2005; Director of (healthcare REIT)
AtriCure, Inc. (medical devices) since 2000;
Director of Care Investment Trust, Inc.
(healthcare REIT) since 2007; Co-founder and
Director of the Cooke Center for Learning
and Development (not-for-profit
organization) since 1987.
------------------------------------------------------------------------------------------------------------------------------------
Robert S. Salomon, Jr. Trustee 2007 to Principal of STI Management (investment 111 Funds None
40 East 52nd Street and Member present adviser) from 1994 to 2005; Chairman and CEO 108 Portfolios
New York, NY 10022 of the Audit of Salomon Brothers Asset Management Inc.
1936 Committee from 1992 to 1995; Chairman of Salomon
Brothers Equity Mutual Funds from 1992 to
1995; regular columnist with Forbes Magazine
from 1992 to 2002; Director of Stock
Research and U.S. Equity Strategist at
Salomon Brothers Inc. from 1975 to 1991;
Trustee, Commonfund from 1980 to 2001.
---------------------------------------------------------------------------------------------------------
* Trustees serve until their resignation, removal or death, or until December 31 of the year in
which they turn 72.
------------------------------------------------------------------------------------------------------------------------------------
18 THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007
Officers and Trustees (continued)
Number of
BlackRock-
Position(s) Length of Advised Funds
Name, Address Held with Time Portfolios Public
and Year of Birth Trust Served Principal Occupation(s) During Past 5 Years Overseen Directorships
====================================================================================================================================
Interested Trustees*
------------------------------------------------------------------------------------------------------------------------------------
Richard S. Davis Trustee 2007 to Managing Director, BlackRock, Inc. since 184 Funds None
40 East 52nd Street present 2005; Chief Executive Officer, State Street 289 Portfolios
New York, NY 10022 Research & Management Company from 2000 to
1945 2005; Chairman of the Board of Trustees,
State Street Research mutual funds ("SSR
Funds") from 2000 to 2005; Senior Vice
President, Metropolitan Life Insurance
Company from 1999 to 2000; Chairman SSR
Realty from 2000 to 2004.
------------------------------------------------------------------------------------------------------------------------------------
Henry Gabbay Trustee 2007 to Consultant, BlackRock since 2007; Managing 183 Funds None
40 East 52nd Street present Director, BlackRock, Inc. from 1989 to 2007; 288 Portfolios
New York, NY 10022 Chief Administrative Officer, BlackRock
1947 Advisors, LLC from 1998 to 2007; President
of BlackRock Funds and BlackRock Bond
Allocation Target Shares from 2005 to 2007;
Treasurer of certain closed-end funds in the
Fund complex from 1989 to 2006.
---------------------------------------------------------------------------------------------------------
* Messrs. Davis and Gabbay are both "interested persons," as defined in the Investment Company
Act of 1940, of the Trust based on their positions with BlackRock, Inc. and its affiliates.
Trustees serve until their resignation, removal or death, or until December 31 of the year in
which they turn 72.
====================================================================================================================================
Advisory Board Member
------------------------------------------------------------------------------------------------------------------------------------
Roscoe S. Suddarth* Member 2007 President, Middle East Institute from 1995 111 Funds None
40 East 52nd Street of the to 2001; Foreign Service Officer, United 108 Portfolios
New York, NY 10022 Advisory States Foreign Service from 1961 to 1995 and
1935 Board Career Minister from 1989 to 1995; Deputy
Inspector General, U.S. Department of State
from 1991 to 1994; U.S. Ambassador to the
Hashemite Kingdom of Jordan from 1987 to
1990.
---------------------------------------------------------------------------------------------------------
* Roscoe Suddarth resigned from the Advisory Board of the Trust, effective December 31, 2007.
------------------------------------------------------------------------------------------------------------------------------------
THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007 19
Officers and Trustees (concluded)
Position(s) Length of
Name, Address Held with Time
and Year of Birth Trust Served Principal Occupation(s) During Past Five Years
====================================================================================================================================
Trust Officers*
------------------------------------------------------------------------------------------------------------------------------------
Donald C. Burke Trust 2007 to Managing Director of BlackRock, Inc. since 2006; Formerly Managing Director of
40 East 52nd Street President present Merrill Lynch Investment ("MLIM") and Fund Asset Management, L.P. ("FAM") in
New York, NY 10022 and Chief 2006; First Vice President thereof from 1997 to 2005; Treasurer thereof from
1960 Executive 1999 to 2006 and Vice President thereof from 1990 to 1997.
Officer
------------------------------------------------------------------------------------------------------------------------------------
Anne F. Ackerley Vice 2007 to Managing Director of BlackRock, Inc. since 2000 and First Vice President and
40 East 52nd Street President present Chief Operating Officer of Mergers and Acquisitions Group from 1997 to 2000;
New York, NY 10022 First Vice President and Chief Operating Officer of Public Finance Group thereof
1962 from 1995 to 1997; Formerly First Vice President of Emerging Markets Fixed
Income Research of Merrill Lynch & Co., Inc. from 1994 to 1995.
------------------------------------------------------------------------------------------------------------------------------------
Neal J. Andrews Chief 2007 to Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice President
40 East 52nd Street Financial present and Line of Business Head of Fund Accounting and Administration at PFPC Inc.
New York, NY 10022 Officer from 1992 to 2006.
1966
------------------------------------------------------------------------------------------------------------------------------------
Jay M. Fife Treasurer 2007 to Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Formerly
40 East 52nd Street present Assistant Treasurer of the MLIM/FAM advised funds from 2005 to 2006; Director of
New York, NY 10022 MLIM Fund Services Group from 2001 to 2006.
1970
------------------------------------------------------------------------------------------------------------------------------------
Brian P. Kindelan Chief 2007 to Chief Compliance Officer of the Funds since 2007; Managing Director and Senior
40 East 52nd Street Compliance present Counsel thereof since January 2005; Director and Senior Counsel of BlackRock
New York, NY 10022 Officer Advisors, Inc. from 2001 to 2004 and Vice President and Senior thereof from 1998
1959 to 2000; Senior Counsel of The PNC Bank Corp. from 1995 to 1998.
------------------------------------------------------------------------------------------------------------------------------------
Howard Surloff Secretary 2007 to Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at
40 East 52nd Street present BlackRock, Inc. since 2006; Formerly General Counsel (U.S.) of Goldman Sachs
New York, NY 10022 Asset Management, L.P. from 1993 to 2006.
1965
---------------------------------------------------------------------------------------------------------
* Officers of the Trust serve at the pleasure of the Board of Trustees.
------------------------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and
Trust Company
Boston, MA 02101
Transfer Agents
Common Shares:
The Bank of New York Mellon
New York, NY 10286
Auction Preferred Shares:
Deutsche Bank Trust Company
New York, NY 10018
Accounting Agent
State Street Bank and
Trust Company
Princeton, NJ 08540
Independent Registered Public
Accounting Firm
Deloitte & Touche LLP
Princeton, NJ 08540
Legal Counsel
Skadden, Arps, Slate,
Meagher & Flom LLP
New York, NY 10036
20 THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007
Additional Information
Proxy Results
During the six-month period ended December 31, 2007, the Common Shareholders and
Auction Preferred Shareholders of The Massachusetts Health & Education
Tax-Exempt Trust voted on the following proposal, which was approved at an
annual shareholders' meeting on August 16, 2007. This proposal was part of the
reorganization of the Trust's Board of Trustees that took effect on November 1,
2007. A description of the proposal and number of shares voted are as follows:
------------------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
------------------------------------------------------------------------------------------------------------------------------------
To elect the Trust's Trustees: G. Nicholas Beckwith, III, Richard E. Cavanagh,
Richard S. Davis, Kent Dixon, Kathleen F. Feldstein,
James T. Flynn, Henry Gabbay, Jerrold B. Harris,
R. Glenn Hubbard, Karen P. Robards and Robert S. Salomon, Jr. 1,993,034 131,826
------------------------------------------------------------------------------------------------------------------------------------
During the six-month period ended December 31, 2007, the Auction Preferred
Shareholders of The Massachusetts Health & Education Tax-Exempt Trust voted on
the following proposal, which was approved at an annual shareholders' meeting on
August 16, 2007. This proposal was part of the reorganization of the Trust's
Board of Trustees that took effect on November 1, 2007. A description of the
proposal and number of shares voted are as follows:
------------------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
------------------------------------------------------------------------------------------------------------------------------------
To elect the Trust's Trustees: Frank J. Fabozzi and W. Carl Kester 368 27
------------------------------------------------------------------------------------------------------------------------------------
Availability of Quarterly Schedule of Investments
The Trust files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Trust's Forms N-Q are available on the SEC's website at
http://www.sec.gov. The Trust's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling (800) SEC-0330. The Trust's
Forms N-Q may also be obtained upon request and without charge by calling (800)
441-7762.
Electronic Delivery
Electronic copies of most financial reports are available on the Trust's
website. Shareholders can sign up for e-mail notifications of quarterly
statements and annual and semi-annual reports by enrolling in the Trust's
electronic delivery program.
Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:
Please contact your financial advisor to enroll. Please note that not all
investment advisors, banks or brokerages may offer this service.
THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007 21
Additional Information (concluded)
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their non-public personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect
that information and why in certain cases we share such information with select
parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you
from different sources, including the following: (i) information we receive from
you or, if applicable, your financial intermediary, on applications, forms or
other documents; (ii) information about your transactions with us, our
affiliates, or others; (iii) information we receive from a consumer reporting
agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any
non-public personal information about its Clients, except as permitted by law or
as is necessary to respond to regulatory requests or to service Client accounts.
These non-affiliated third parties are required to protect the confidentiality
and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to non-public
personal information about its Clients to those BlackRock employees with a
legitimate business need for the information. BlackRock maintains physical,
electronic and procedural safeguards that are designed to protect the non-public
personal information of its Clients, including procedures relating to the proper
storage and disposal of such information.
General Information
The Trust does not make available copies of its Statements of Additional
Information because the Trust's shares are not continuously offered, which means
that the Statement of Additional Information of the Trust has not been updated
after completion of the Trust's offering and the information contained in the
Trust's Statement of Additional Information may have become outdated.
During the period, there were no material changes in the Trust's investment
objective or policies or to the Trust's character or by-laws that were not
approved by the shareholders or in the principal risk factors associated with
investment in the Trust. There have been no changes in the persons who are
primarily responsible for the day-to-day management of the Trust's portfolio.
22 THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST DECEMBER 31, 2007
This report, including the financial information herein, is transmitted to
shareholders of The Massachusetts Health & Education Tax-Exempt Trust for their
information. It is not a prospectus. Past performance results shown in this
report should not be considered a representation of future performance. The
Trust has leveraged its Common Shares and intends to remain leveraged by issuing
Auction Preferred Shares to provide the Common Shareholders with a potentially
higher rate of return. Leverage creates risks for Common Shareholders, including
the likelihood of greater volatility of net asset value and market price of the
Common Shares, and the risk that fluctuations in the short-term dividend rates
of the Auction Preferred Shares may affect the yield to Common Shareholders.
Statements and other information herein are as dated and are subject to change.
A description of the policies and procedures that the Trust uses to determine
how to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free (800) 441-7762; (2) at
www.blackrock.com; and (3) on the Securities and Exchange Commission's website
at http://www.sec.gov. Information about how the Trust voted proxies relating to
securities held in the Trust's portfolio during the most recent 12-month period
ended June 30 is available upon request and without charge (1) at
www.blackrock.com or by calling (800) 441-7762 and (2) on the Securities and
Exchange Commission's website at http://www.sec.gov.
The Massachusetts Health & Education Tax-Exempt Trust
100 Bellevue Parkway
Wilmington, DE 19809
BLACKROCK
#MHET-12/07
Item 2 - Code of Ethics - The registrant (or the "Fund") has adopted a code
of ethics, as of the end of the period covered by this report,
applicable to the registrant's principal executive officer,
principal financial officer and principal accounting officer, or
persons performing similar functions. During the period covered by
this report, there have been no amendments to or waivers granted
under the code of ethics. A copy of the code of ethics is available
without charge at www.blackrock.com.
Item 3 - Audit Committee Financial Expert - The registrant's board of
directors or trustees, as applicable (the "board of directors") has
determined that (i) the registrant has the following audit committee
financial experts serving on its audit committee and (ii) each audit
committee financial expert is independent:
Kent Dixon (term began effective November 1, 2007)
Frank J. Fabozzi (term began effective November 1, 2007)
Frank Nesvet (term ended effective November 1, 2007)
Robert S. Salomon, Jr. (term began effective November 1, 2007)
W. Carl Kester (term began effective November 1, 2007)
James T. Flynn (term began effective November 1, 2007)
Karen P. Robards (term began effective November 1, 2007)
The registrant's board of directors has determined that W. Carl
Kester and Karen P. Robards qualify as financial experts pursuant to
Item 3(c)(4) of Form N-CSR.
Prof. Kester has a thorough understanding of generally accepted
accounting principles, financial statements and internal control
over financial reporting as well as audit committee functions. Prof.
Kester has been involved in providing valuation and other financial
consulting services to corporate clients since 1978. Prof. Kester's
financial consulting services present a breadth and level of
complexity of accounting issues that are generally comparable to the
breadth and complexity of issues that can reasonably be expected to
be raised by the registrant's financial statements.
Ms. Robards has a thorough understanding of generally accepted
accounting principles, financial statements and internal control
over financial reporting as well as audit committee functions. Ms.
Robards has been President of Robards & Company, a financial
advisory firm, since 1987. Ms. Robards was formerly an investment
banker for more than 10 years where she was responsible for
evaluating and assessing the performance of companies based on their
financial results. Ms. Robards has over 30 years of experience
analyzing financial statements. She also is a member of the audit
committee of one publicly held company and a non-profit
organization.
Under applicable securities laws, a person determined to be an audit
committee financial expert will not be deemed an "expert" for any
purpose, including without limitation for the purposes of Section 11
of the Securities Act of 1933, as a result of being designated or
identified as an audit committee financial expert. The designation
or identification as an audit committee financial expert does not
impose on such person any duties, obligations, or liabilities
greater than the duties, obligations, and liabilities imposed on
such person as a member of the audit committee and board of
directors in the absence of such designation or identification.
Item 4 - Principal Accountant Fees and Services
----------------------------------------------------------------------------------------------------------------------------------
(a) Audit Fees (b) Audit-Related Fees(1) (c) Tax Fees(2) (d) All Other Fees(3)
----------------------------------------------------------------------------------------------------------------------------------
Current Previous Current Previous Current Previous Current Previous
Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal
Entity Name End Year End End Year End End Year End End Year End
----------------------------------------------------------------------------------------------------------------------------------
The Massachusetts
Health & Education
Tax-Exempt Trust $23,000 $22,500 $3,500 $3,500 $6,100 $6,000 $1,042 $0
----------------------------------------------------------------------------------------------------------------------------------
1 The nature of the services include assurance and related services
reasonably related to the performance of the audit of financial statements
not included in Audit Fees.
2 The nature of the services include tax compliance, tax advice and tax
planning.
3 The nature of the services include a review of compliance procedures and
attestation thereto.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to
the registrant's affiliated service providers that relate directly
to the operations and the financial reporting of the registrant.
Certain of these non-audit services that the Committee believes are
a) consistent with the SEC's auditor independence rules and b)
routine and recurring services that will not impair the independence
of the independent accountants may be approved by the Committee
without consideration on a specific case-by-case basis ("general
pre-approval"). However, such services will only be deemed
pre-approved provided that any individual project does not exceed
$5,000 attributable to the registrant or $50,000 for all of the
registrants the Committee oversees. Any proposed services exceeding
the pre-approved cost levels will require specific pre-approval by
the Committee, as will any other services not subject to general
pre-approval (e.g., unanticipated but permissible services). The
Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board
meeting.
(e)(2) None of the services described in each of Items 4(b) through
(d) were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) Affiliates' Aggregate Non-Audit Fees:
--------------------------------------------------------------------
Current Fiscal Previous Fiscal
Entity Name Year End Year End
--------------------------------------------------------------------
The Massachusetts Health &
Education Tax-Exempt Trust $295,142 $3,080,950
--------------------------------------------------------------------
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any non-affiliated
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by the registrant's investment
adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services
to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $284,500, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals
are members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Exchange Act (15 U.S.C. 78c(a)(58)(A)):
James F. Carlin, III (term ended effective November 1, 2007)
Thomas H. Green, III (term ended effective November 1, 2007)
Walter B. Prince (term ended effective November 1, 2007)
Edward M. Murphy (term ended effective November 1, 2007)
James M. Storey (term ended effective November 1, 2007)
Frank Nesvet (term ended effective November 1, 2007)
Kent Dixon (term began effective November 1, 2007)
Frank J. Fabozzi (term began effective November 1, 2007)
Robert S. Salomon, Jr. (term began effective November 1, 2007)
W. Carl Kester (term began effective November 1, 2007)
James T. Flynn (term began effective November 1, 2007)
Karen P. Robards (term began effective November 1, 2007)
Item 6 - Schedule of Investments - The registrant's Schedule of Investments
is included as part of the Report to Stockholders filed under Item 1
of this form.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - The registrant has delegated the
voting of proxies relating to Fund portfolio securities to its
investment adviser, BlackRock Advisors, LLC and its sub-adviser, as
applicable. The Proxy Voting Policies and Procedures of the adviser
and sub-adviser are attached hereto as Exhibit 99.PROXYPOL.
Information about how the Fund voted proxies relating to securities
held in the Fund's portfolio during the most recent 12 month period
ended June 30 is available without charge (1) at www.blackrock.com
and (2) on the Commission's web site at http://www.sec.gov.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
as of December 31, 2007.
(a)(1) The Massachusetts Health & Education Tax-Exempt Trust is
managed by a team of investment professionals comprised of Robert D.
Sneeden, Director at BlackRock, Theodore R. Jaeckel, Jr., CFA,
Managing Director at BlackRock, and Walter O'Connor, Managing
Director at BlackRock. Each is a member of BlackRock's municipal
tax-exempt management group. Mr. Jaeckel and Mr. O'Connor are
responsible for setting the Fund's overall investment strategy and
overseeing the management of the Fund. Mr. Sneeden is the Fund's
lead portfolio manager and is responsible for the day-to-day
management of the Fund's portfolio and the selection of its
investments. Messrs. Jaeckel and O'Connor have been members of the
Fund's management team since 2006 and Mr. Sneeden has been the
Fund's portfolio manager since 2005.
Mr. Jaeckel joined BlackRock in 2006. Prior to joining BlackRock, he
was a Managing Director (Municipal Tax-Exempt Fund Management) of
Merrill Lynch Investment Managers, L.P. ("MLIM") from 2005 to 2006
and a Director of MLIM from 1997 to 2005. He has been a portfolio
manager with BlackRock or MLIM since 1991.
Mr. O'Connor joined BlackRock in 2006. Prior to joining BlackRock,
he was a Managing Director (Municipal Tax-Exempt Fund Management) of
MLIM from 2003 to 2006 and was a Director of MLIM from 1997 to 2002.
He has been a portfolio manager with BlackRock or MLIM since 1991.
Mr. Sneeden joined BlackRock in 2006. Prior to joining BlackRock, he
was a Director (Municipal Tax-Exempt Fund Management) of MLIM since
2006 and was a Vice President of MLIM from 1998 to 2006. Mr. Sneeden
has been a portfolio manager with BlackRock or MLIM since 1994.
(a)(2) As of December 31, 2007:
-----------------------------------------------------------------------------------------------------------------------
(iii) Number of Other Accounts and
(ii) Number of Other Accounts Managed Assets for Which Advisory Fee is
and Assets by Account Type Performance-Based
-----------------------------------------------------------------------------------------------------------------------
Other Other Other Other
(i) Name of Registered Pooled Registered Pooled
Portfolio Investment Investment Other Investment Investment Other
Manager Companies Vehicles Accounts Companies Vehicles Accounts
-----------------------------------------------------------------------------------------------------------------------
Theodore R.
Jaeckel, Jr. 80 1 0 0 1 0
-----------------------------------------------------------------------------------------------------------------------
$28,661,619,548 $23,370,230 $0 $0 $23,370,230 $0
-----------------------------------------------------------------------------------------------------------------------
Walter
O'Connor 80 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------------------
$28,661,619,548 $0 $0 $0 $0 $0
-----------------------------------------------------------------------------------------------------------------------
Robert D.
Sneeden 10 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------------------
$2,783,010,686 $0 $0 $0 $0 $0
-----------------------------------------------------------------------------------------------------------------------
(iv) Potential Material Conflicts of Interest
BlackRock, Inc. and its affiliates (collectively, herein
"BlackRock") has built a professional working environment, firm-wide
compliance culture and compliance procedures and systems designed to
protect against potential incentives that may favor one account over
another. BlackRock has adopted policies and procedures that address
the allocation of investment opportunities, execution of portfolio
transactions, personal trading by employees and other potential
conflicts of interest that are designed to ensure that all client
accounts are treated equitably over time. Nevertheless, BlackRock
furnishes investment management and advisory services to numerous
clients in addition to the Fund, and BlackRock may, consistent with
applicable law, make investment recommendations to other clients or
accounts (including accounts which are hedge funds or have
performance or higher fees paid to BlackRock, or in which portfolio
managers have a personal interest in the receipt of such fees),
which may be the same as or different from those made to the Fund.
In addition, BlackRock, its affiliates and any officer, director,
stockholder or employee may or may not have an interest in the
securities whose purchase and sale BlackRock recommends to the Fund.
BlackRock, or any of its affiliates, or any officer, director,
stockholder, employee or any member of their families may take
different actions than those recommended to the Fund by BlackRock
with respect to the same securities. Moreover, BlackRock may refrain
from rendering any advice or services concerning securities of
companies of which any of BlackRock's (or its affiliates') officers,
directors or employees are directors or officers, or companies as to
which BlackRock or any of its affiliates or the officers, directors
and employees of any of them has any substantial economic interest
or possesses material non-public information. Each portfolio manager
also may manage accounts whose investment strategies may at times be
opposed to the strategy utilized for the Fund. In this connection,
it should be noted that certain portfolio managers, including Mr.
Jaeckel, currently manage certain accounts that are subject to
performance fees. In addition, certain portfolio managers assist in
managing certain hedge funds and may be entitled to receive a
portion of any incentive fees earned on such funds and a portion of
such incentive fees may be voluntarily or involuntarily deferred.
Additional portfolio managers may in the future manage other such
accounts or funds and may be entitled to receive incentive fees.
As a fiduciary, BlackRock owes a duty of loyalty to its clients and
must treat each client fairly. When BlackRock purchases or sells
securities for more than one account, the trades must be allocated
in a manner consistent with its fiduciary duties. BlackRock attempts
to allocate investments in a fair and equitable manner among client
accounts, with no account receiving preferential treatment. To this
end, BlackRock has adopted a policy that is intended to ensure that
investment opportunities are allocated fairly and equitably among
client accounts over time. This policy also seeks to achieve
reasonable efficiency in client transactions and provide BlackRock
with sufficient flexibility to allocate investments in a manner that
is consistent with the particular investment discipline and client
base.
(a)(3) As of December 31, 2007:
Portfolio Manager Compensation Overview
BlackRock's financial arrangements with its portfolio managers, its
competitive compensation and its career path emphasis at all levels
reflect the value senior management places on key resources.
Compensation may include a variety of components and may vary from
year to year based on a number of factors. The principal components
of compensation include a base salary, a discretionary bonus,
participation in various benefits programs and one or more of the
incentive compensation programs established by BlackRock such as its
Long-Term Retention and Incentive Program.
Base compensation. Generally, portfolio managers receive base
compensation based on their seniority and/or their position with the
firm. Senior portfolio managers who perform additional management
functions within the portfolio management group or within BlackRock
may receive additional compensation for serving in these other
capacities.
Discretionary Incentive Compensation Discretionary incentive
compensation is a function of several components: the performance of
BlackRock, Inc., the performance of the portfolio manager's group
within BlackRock, the investment performance, including
risk-adjusted returns, of the firm's assets under management or
supervision by that portfolio manager relative to predetermined
benchmarks, and the individual's seniority, role within the
portfolio management team, teamwork and contribution to the overall
performance of these portfolios and BlackRock. In most cases,
including for the portfolio managers of the Fund, these benchmarks
are the same as the benchmark or benchmarks against which the
performance of the Fund or other accounts managed by the portfolio
managers are measured. BlackRock's Chief Investment Officers
determine the benchmarks against which to compare the performance of
funds and other accounts managed by each portfolio manager and the
period of time over which performance is evaluated. With respect to
the portfolio managers, such benchmarks include a combination of
market-based indices (e.g. Lehman Brothers Municipal Bond Index),
certain customized indices and certain fund industry peer groups.
BlackRock's Chief Investment Officers make a subjective
determination with respect to the portfolio manager's compensation
based on the performance of the funds and other accounts managed by
each portfolio manager relative to the various benchmarks noted
above. Performance is measured on both a pre-tax and after-tax basis
over various time periods including 1, 3, 5 and 10-year periods, as
applicable.
Distribution of Discretionary Incentive Compensation Discretionary
incentive compensation is distributed to portfolio managers in a
combination of cash and BlackRock, Inc. restricted stock units which
vest ratably over a number of years. The BlackRock, Inc. restricted
stock units, if properly vested, will be settled in BlackRock, Inc.
common stock. Typically, the cash bonus, when combined with base
salary, represents more than 60% of total compensation for the
portfolio managers. Paying a portion of annual bonuses in stock puts
compensation earned by a portfolio manager for a given year "at
risk" based on the Company's ability to sustain and improve its
performance over future periods.
Other compensation benefits. In addition to base compensation and
discretionary incentive compensation, portfolio managers may be
eligible to receive or participate in one or more of the following:
Long-Term Retention and Incentive Plan ("LTIP") --The LTIP is
a long-term incentive plan that seeks to reward certain key
employees. Beginning in 2006, awards are granted under the LTIP in
the form of BlackRock, Inc. restricted stock units that, if properly
vested and subject to the attainment of certain performance goals,
will be settled in BlackRock, Inc. common stock. Messrs. Jaeckel and
O'Connor have received awards under the LTIP.
Deferred Compensation Program --A portion of the compensation
paid to each portfolio manager may be voluntarily deferred by the
portfolio manager into an account that tracks the performance of
certain of the firm's investment products. Each portfolio manager is
permitted to allocate his deferred amounts among various options,
including to certain of the firm's hedge funds and other
unregistered products. Every portfolio manager is eligible to
participate in the deferred compensation program.
Incentive Savings Plans -- BlackRock, Inc. has created a
variety of incentive savings plans in which BlackRock employees are
eligible to participate, including a 401(k) plan, the BlackRock
Retirement Savings Plan (RSP) and the BlackRock Employee Stock
Purchase Plan (ESPP). The employer contribution components of the
RSP include a company match equal to 50% of the first 6% of eligible
pay contributed to the plan capped at $4,000 per year, and a company
retirement contribution equal to 3% of eligible compensation, plus
an additional contribution of 2% for any year in which BlackRock has
positive net operating income. The RSP offers a range of investment
options, including registered investment companies managed by the
firm. Company contributions follow the investment direction set by
participants for their own contributions or absent, employee
investment direction, are invested into a balanced portfolio. The
ESPP allows for investment in BlackRock common stock at a 5%
discount on the fair market value of the stock on the purchase date.
Annual participation in the ESPP is limited to the purchase of 1,000
shares or a dollar value of $25,000. Each portfolio manager is
eligible to participate in these plans.
(a)(4) Beneficial Ownership of Securities. As of December 31, 2007,
none of Messrs. Sneeden, Jaeckel or O'Connor beneficially
owned any stock issued by the Fund.
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable due to no such
purchases during the period covered by this report.
Item 10 - Submission of Matters to a Vote of Security Holders - The
registrant's Nominating and Governance Committee will consider
nominees to the Board recommended by shareholders when a vacancy
becomes available. Shareholders who wish to recommend a nominee
should send nominations which include biographical information and
set forth the qualifications of the proposed nominee to the
registrant's Secretary. There have been no material changes to these
procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's principal executive and principal financial
officers or persons performing similar functions have concluded that
the registrant's disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended
(the "1940 Act")) are effective as of a date within 90 days of the
filing of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
13a-15(b) under the Securities Exchange Act of 1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
The Massachusetts Health & Education Tax-Exempt Trust
By: /s/ Donald C. Burke
-------------------
Donald C. Burke
Chief Executive Officer of
The Massachusetts Health & Education Tax-Exempt Trust
Date: February 21, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Donald C. Burke
-------------------
Donald C. Burke
Chief Executive Officer (principal executive officer) of
The Massachusetts Health & Education Tax-Exempt Trust
Date: February 21, 2008
By: /s/ Neal J. Andrews
-------------------
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
The Massachusetts Health & Education Tax-Exempt Trust
Date: February 21, 2008