UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY

 

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: John M. Perlowski, Chief Executive Officer, The Massachusetts Health & Education Tax-Exempt Trust, 55 East 52nd Street, New York, NY 10055

 

Registrant’s telephone number, including area code: (800) 882-0052, Option 4

 

Date of fiscal year end: 08/31/2012

 

Date of reporting period: 05/31/2012

 

Item 1 – Schedule of Investments

 

 

 

 

 

Schedule of Investments May 31, 2012 (Unaudited)

The Massachusetts Health & Education Tax-Exempt Trust (MHE)

(Percentages shown are based on Net Assets)

 

 

 

 

 

 

 

 

Municipal Bonds

 

Par
(000)

 

Value

 

Massachusetts — 139.7%

 

 

 

 

 

 

 

Corporate — 0.3%

 

 

 

 

 

 

 

Massachusetts Development Finance
Agency, RB, Ogden Haverhill Project,
Series A, AMT, 6.70%, 12/01/14

 

$

95

 

$

95,926

 

Education — 80.0%

 

 

 

 

 

 

 

Massachusetts Development Finance
Agency, RB:

 

 

 

 

 

 

 

Boston University, Series T-1
(AMBAC), 5.00%, 10/01/39

 

 

1,000

 

 

1,033,390

 

College Issue, Series B (Syncora),
5.25%, 7/01/33

 

 

860

 

 

875,927

 

College of Pharmacy & Allied
Health, Series D (AGC), 5.00%,
7/01/27

 

 

500

 

 

529,605

 

Foxborough Regional Charter
School, Series A, 7.00%,
7/01/42

 

 

250

 

 

287,018

 

Mount Holyoke College,
Series B, 5.00%, 7/01/41

 

 

500

 

 

549,740

 

Smith College, 5.00%,
7/01/35

 

 

2,000

 

 

2,188,560

 

WGBH Educational Foundation,
Series A (AMBAC), 5.75%,
1/01/42

 

 

650

 

 

821,008

 

Massachusetts Development Finance
Agency, Refunding RB:

 

 

 

 

 

 

 

Boston University, Series P,
5.45%, 5/15/59

 

 

1,500

 

 

1,717,035

 

Clark University (Syncora), 5.13%,
10/01/35

 

 

500

 

 

522,925

 

Harvard University, Series B-1,
5.00%, 10/15/40

 

 

350

 

 

403,151

 

Trustees of Deerfield
Academy, 5.00%, 10/01/40

 

 

1,675

 

 

1,922,984

 

Wheelock College, Series C,
5.25%, 10/01/37

 

 

1,000

 

 

1,024,670

 

Williston Northampton School
Project (Syncora), 5.00%,
10/01/25

 

 

500

 

 

519,275

 

Worcester Polytechnic Institute
(NPFGC), 5.00%, 9/01/27

 

 

1,985

 

 

2,156,325

 

Massachusetts Health & Educational
Facilities Authority, Wheaton College,
Series D, 6.00%, 1/01/18

 

 

755

 

 

755,634

 

Massachusetts Health & Educational
Facilities Authority, RB:

 

 

 

 

 

 

 

Harvard University, 5.13%,
7/15/12 (a)

 

 

155

 

 

155,938

 

 

 

 

 

 

 

 

 

Municipal Bonds

 

Par
(000)

 

Value

 

Massachusetts (continued)

 

 

 

 

 

 

 

Education (concluded)

 

 

 

 

 

 

 

Massachusetts Health & Educational
Facilities Authority, RB (concluded):

 

 

 

 

 

 

 

Harvard University, Series B,
5.00%, 10/01/38

 

$

400

 

$

459,752

 

Harvard University, Series FF
5.13%, 7/15/37

 

 

695

 

 

698,433

 

Northeastern University, Series
R, 5.00%, 10/01/33

 

 

225

 

 

244,013

 

Northeastern University, Series
T-2, 5.00%, 10/01/32

 

 

500

 

 

570,130

 

Springfield College, 5.63%,
10/15/40

 

 

500

 

 

524,695

 

Tufts University, 5.38%,
8/15/38

 

 

1,000

 

 

1,190,920

 

University of Massachusetts, Series
C (NPFGC), 5.13%, 10/01/12 (a)

 

 

230

 

 

233,788

 

Massachusetts Health & Educational
Facilities Authority, Refunding RB:

 

 

 

 

 

 

 

Berklee College of Music,
Series A, 5.00%, 10/01/37

 

 

1,000

 

 

1,056,890

 

Boston College, Series N,
5.13%, 6/01/37

 

 

1,000

 

 

1,032,650

 

Harvard University, Series A,
5.50%, 11/15/36

 

 

100

 

 

120,224

 

Tufts University, Series M,
5.50%, 2/15/27

 

 

1,000

 

 

1,315,770

 

Wellesley College, 5.00%,
7/01/33

 

 

1,500

 

 

1,554,870

 

Massachusetts State College Building
Authority, RB, Series A (AMBAC),
5.00%, 5/01/16 (a)

 

 

1,000

 

 

1,168,800

 

Massachusetts State College Building
Authority, Refunding RB, Series B
(Syncora), 5.50%, 5/01/39

 

 

825

 

 

1,090,378

 

 

 

 

 

 

 

26,724,498

 

Health — 41.2%

 

 

 

 

 

 

 

Massachusetts Development Finance
Agency, RB:

 

 

 

 

 

 

 

First Mortgage, Edgecombe
Project, Series A, 6.75%,
7/01/21

 

 

795

 

 

812,299

 

First Mortgage, Overlook
Communities, Series A,
6.13%, 7/01/12 (a)

 

 

850

 

 

871,156

 

Partners Healthcare, Series L,
5.00%, 7/01/36

 

 

1,000

 

 

1,105,170

 

Seven Hills Foundation & Affiliates
(Radian), 5.00%, 9/01/35

 

 

240

 

 

225,840

 

Massachusetts Development Finance
Agency, Refunding RB, Carleton-
Willard Village, 5.63%, 12/01/30

 

 

500

 

 

539,760

 

 

 

 

 

 

 

 

 

 

THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST

MAY 31, 2012

1


 

 

 

 

Schedule of Investments (continued)

The Massachusetts Health & Education Tax-Exempt Trust (MHE)

(Percentages shown are based on Net Assets)

 

 

 

 

 

 

 

 

Municipal Bonds

 

Par
(000)

 

Value

 

Massachusetts (continued)

 

 

 

 

 

 

 

Health (concluded)

 

 

 

 

 

 

 

Massachusetts Health & Educational
Facilities Authority, RB:

 

 

 

 

 

 

 

Baystate Medical Center,
Series F, 5.75%, 7/01/33

 

$

1,000

 

$

1,001,280

 

Berkshire Health System,
Series E, 6.25%, 10/01/31

 

 

350

 

 

354,085

 

Berkshire Health System, Series F
(AGC), 5.00%, 10/01/19

 

 

1,000

 

 

1,079,450

 

Cape Cod Healthcare Obligor
(AGC), 5.00%, 11/15/31

 

 

1,000

 

 

1,076,590

 

Children’s Hospital, Series M,
5.25%, 12/01/39

 

 

600

 

 

660,426

 

Children’s Hospital, Series M,
5.50%, 12/01/39

 

 

500

 

 

559,865

 

Lahey Clinic Medical Center,
Series D, 5.25%, 8/15/37

 

 

1,000

 

 

1,050,960

 

Milford-Whitinsville Hospital,
Series D, 6.35%, 7/15/12 (a)

 

 

750

 

 

763,148

 

Southcoast Health Obligation,
Series D, 5.00%, 7/01/39

 

 

500

 

 

523,335

 

Winchester Hospital, 5.25%,
7/01/38

 

 

1,000

 

 

1,044,800

 

Massachusetts Health & Educational
Facilities Authority, Refunding RB:

 

 

 

 

 

 

 

Caregroup, Series E-1, 5.00%,
7/01/28

 

 

500

 

 

530,070

 

Healthcare System, Covenant,
6.00%, 7/01/22

 

 

630

 

 

637,440

 

Healthcare System, Covenant,
6.00%, 7/01/31

 

 

315

 

 

320,783

 

Massachusetts Industrial Finance Agency,
RB, Age Institute of Massachusetts
Project, 8.05%, 11/01/25

 

 

630

 

 

631,021

 

 

 

 

 

 

 

13,787,478

 

Housing — 9.0%

 

 

 

 

 

 

 

Massachusetts HFA, HRB, Series B,
AMT, 5.50%, 6/01/41

 

 

495

 

 

525,556

 

Massachusetts HFA, Refunding HRB,
Series F, AMT, 5.70%, 6/01/40

 

 

940

 

 

999,700

 

Massachusetts HFA, Refunding RB,
AMT:

 

 

 

 

 

 

 

Series 132, 5.38%, 12/01/27

 

 

400

 

 

425,076

 

Series C, 5.35%, 12/01/42

 

 

1,000

 

 

1,068,840

 

 

 

 

 

 

 

3,019,172

 

State — 9.2%

 

 

 

 

 

 

 

Massachusetts Bay Transportation
Authority, Refunding RB, Senior Series
A, 5.25%, 7/01/29

 

 

730

 

 

949,423

 

Massachusetts Development Finance
Agency, ERB, Middlesex School
Project, 5.00%, 9/01/33

 

 

400

 

 

406,664

 

Massachusetts Development Finance
Agency, RB, Wellesley College,
Series J, 5.00%, 7/01/42

 

 

1,000

 

 

1,147,560

 

 

 

 

 

 

 

 

 

Municipal Bonds

 

Par
(000)

 

Value

 

Massachusetts (concluded)

 

 

 

 

 

 

 

State (concluded)

 

 

 

 

 

 

 

Massachusetts State College Building
Authority, RB, Series A, 5.50%,
5/01/39

 

$

500

 

$

562,251

 

 

 

 

 

 

 

3,065,898

 

Total Municipal Bonds in Massachusetts

 

 

 

 

 

46,692,972

 

 

Puerto Rico — 5.8%

 

 

 

 

 

 

 

State — 5.0%

 

 

 

 

 

 

 

Puerto Rico Sales Tax Financing Corp.,
RB, First Sub-Series A, 5.75%,
8/01/37

 

 

1,000

 

 

1,109,360

 

Puerto Rico Sales Tax Financing Corp.,
Refunding RB, 6.00%, 8/01/39

 

 

510

 

 

581,961

 

 

 

 

 

 

 

1,691,321

 

Utilities — 0.8%

 

 

 

 

 

 

 

Puerto Rico Electric Power Authority, RB,
Series WW, 5.50%, 7/01/38

 

 

250

 

 

263,030

 

Total Municipal Bonds in Puerto Rico

 

 

 

 

 

1,954,351

 

 

 

 

 

 

 

 

 

Total Municipal Bonds – 145.5%

 

 

 

 

 

48,647,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Municipal Bonds Transferred to Tender Option Bond (TOB) Trusts (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Massachusetts — 10.1%

 

 

 

 

 

 

 

State — 10.1%

 

 

 

 

 

 

 

Massachusetts School Building
Authority, RB, Senior, Series B, 5.00%,
10/15/41

 

 

1,000

 

 

1,135,190

 

Massachusetts School Building
Authority, Sales Tax RB, Series A
(AGM), 5.00%, 8/15/30

 

 

2,010

 

 

2,222,252

 

 

 

 

 

 

 

3,357,442

 

 

 

 

 

 

 

 

 

Puerto Rico — 1.1%

 

 

 

 

 

 

 

State — 1.1%

 

 

 

 

 

 

 

Puerto Rico Sales Tax Financing Corp.,
Sales Tax Refunding RB, Series C,
5.25%, 8/01/40

 

 

340

 

 

376,176

 

Total Municipal Bonds Transferred to Tender Option
Bond (TOB) Trusts – 11.2%

 

 

 

 

 

3,733,618

 

Total Long-Term Investments
(Cost – $48,367,041) – 156.7%

 

 

 

 

 

52,380,941

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST

MAY 31, 2012

2


 

 

 

 

Schedule of Investments (continued)

The Massachusetts Health & Education Tax-Exempt Trust (MHE)

(Percentages shown are based on Net Assets)

 

 

 

 

 

 

 

 

Short-Term Securities

 

Par
(000)

 

Value

 

Massachusetts — 2.7%

 

 

 

 

 

 

 

Massachusetts Health & Educational
Facilities Authority, Refunding RB,
VRDN, Baystate Medical Center,
Series J-2 (JPMorgan Chase Bank
LOC), 0.17%, 6/01/12 (c)

 

$

300

 

$

300,000

 

Massachusetts Health & Educational
Facilities Authority, RB, VRDN,
Partners Healthcare System, Series D,
0.14%, 6/01/12 (c)

 

 

600

 

 

600,000

 

 

 

 

 

 

 

900,000

 

 

 


Shares

 

 

 

 

Money Market Fund — 0.0%

  

 

 

 

 

 

 

BIF Massachusetts Municipal
Money Fund, 0.00% (d)(e)

 

 

18,688

 

 

18,688

 

Total Short-Term Securities
(Cost – $918,688) – 2.7%

 

 

 

 

 

918,688

 

Total Investments (Cost - $49,285,729*) – 159.4%

 

 

 

 

 

53,299,629

 

Other Assets Less Liabilities – 1.9%

 

 

 

 

 

636,673

 

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable – (6.0)%

 

 

 

 

 

(2,010,606

)

VRDP Shares, at Liquidation Value – (55.3)%

 

 

 

 

 

(18,500,000

)

Net Assets Applicable to Common Shares – 100.0%

 

 

 

 

$

33,425,696

 

 

 

*

As of May 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

 

 

 

 

 

 

 

 

Tax cost

 

 

 

 

$

47,260,749

 

 

 

 

 

 

 

 

 

Gross unrealized appreciation

 

 

 

 

$

4,046,804

 

Gross unrealized depreciation

 

 

 

 

 

(17,519

)

Net unrealized appreciation

 

 

 

 

$

4,029,285

 

 

 

(a)

US government securities, held in escrow, are used to pay interest on this security, as well as to retire the bond in full at the date indicated, typically at a premium to par.

 

 

(b)

Securities represent bonds transferred to a TOB in exchange for which the Trust acquired residual interest certificates. These securities serve as collateral in a financing transaction.

 

 

(c)

Variable rate security. Rate shown is as of report date and maturity shown is the date the principal owed can be recovered through demand.

 

 

(d)

Investments in companies considered to be an affiliate of the Trust during the period, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliate

 

Shares
Held at
August 31,
2011

 

Net
Activity

 

Shares
Held at
May 31,
2012

 

Income

 

 

 

BIF Massachusetts Municipal Money Fund

 

 

818,003

 

 

(799,315

)

 

18,688

 

$

4

 

 

 

(e)

Represents the current yield as of report date.

 

Portfolio Abbreviations

 

To simplify the listings of portfolio holdings in the Schedule of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:

 

 

AGC

Assured Guaranty Corp.

AGM

Assured Guaranty Municipal Corp.

AMBAC

American Municipal Bond Assurance Corp.

AMT

Alternative Minimum Tax (subject to)

ERB

Education Revenue Bonds

HFA

Housing Finance Agency

HRB

Housing Revenue Bonds

LOC

Letter of Credit

NPFGC

National Public Finance Guarantee Corp.

Radian

Radian Financial Guaranty

RB

Revenue Bonds

Syncora

Syncora Guarantee

VRDN

Variable Rate Demand Notes

 

 

 

 

 

 

 

 

 

THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST

MAY 31, 2012

3


 

 

 

 

Schedule of Investments (concluded)

The Massachusetts Health & Education Tax-Exempt Trust (MHE)

 

 

•

For Trust compliance purposes, the Trust’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by Trust management. These definitions may not apply for purposes of this report, which may combine sector sub-classifications for reporting ease.

 

 

•

Fair Value Measurements - Various inputs are used in determining the fair value of investments. These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes as follows:


 

 

 

 

•

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities

 

 

 

 

•

Level 2 — other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

 

 

 

•

Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Trust’s own assumptions used in determining the fair value of investments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Trust’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Trust’s policy regarding valuation of investments and other significant accounting policies, please refer to the Trust’s most recent financial statements as contained in its semi-annual report.

The following table summarizes the inputs used as of May 31, 2012 in determining the fair valuation of the Trust’s investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Valuation Inputs

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term Investments1

 

 

—

 

$

52,380,941

 

 

—

 

$

52,380,941

 

Short-Term Securities

 

$

18,688

 

 

900,000

 

 

—

 

 

918,688

 

Total

 

$

18,688

 

$

53,280,941

 

 

—

 

$

53,299,629

 

 

 

 

 

1

See above Schedule of Investments for values in each sector.

Certain of the Trust’s assets and liabilities are held at carrying amount, which approximates fair value for financial reporting purposes. As of May 31, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Valuation Inputs

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash pledged as collateral for financial futures contracts

 

$

44,000

 

 

—

 

 

—

 

$

44,000

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank Overdraft

 

 

(1,676

)

 

—

 

 

—

 

 

(1,676

)

TOB trust certificates

 

 

—

 

$

(2,009,595

)

 

—

 

 

(2,009,595

)

VRDP shares

 

 

—

 

 

(18,500,000

)

 

—

 

 

(18,500,000

)

Total

 

$

42,324

 

$

(20,509,595

)

 

—

 

$

(20,467,271

)

There were no transfers between levels during the period ended May 31, 2012.


 

 

 

 

 

 

 

 

 

THE MASSACHUSETTS HEALTH & EDUCATION TAX-EXEMPT TRUST

MAY 31, 2012

4

Item 2 –

Controls and Procedures

 

 

2(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.

 

 

2(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 registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

 

Item 3 –

Exhibits

 

 

 

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/ John M. Perlowski  
    John M. Perlowski
    Chief Executive Officer (principal executive officer) of
    The Massachusetts Health & Education Tax-Exempt Trust
   
  Date: July 25, 2012
   
  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/ John M. Perlowski  
    John M. Perlowski
    Chief Executive Officer (principal executive officer) of
    The Massachusetts Health & Education Tax-Exempt Trust
   
  Date: July 25, 2012
   
  By: /s/ Neal J. Andrews  
    Neal J. Andrews
    Chief Financial Officer (principal financial officer) of
    The Massachusetts Health & Education Tax-Exempt Trust
     
  Date: July 25, 2012