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: BlackRock Massachusetts 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, BlackRock Massachusetts 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: 08/31/2014
Date of reporting period: 11/30/2013
Item 1 – Schedule of Investments
| Schedule of Investments November 30, 2013 (Unaudited) |
BlackRock Massachusetts Tax-Exempt Trust (MHE) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) |
Value | ||||||
| Massachusetts — 154.3% |
||||||||
| County/City/Special District/School District — 3.7% |
|
|||||||
| Town of Holyoke, GO, Refunding, 5.00%, 9/01/26 |
$ | 1,000 | $ | 1,110,090 | ||||
| Education — 76.8% |
| |||||||
| Massachusetts Development Finance Agency, RB: |
||||||||
| Boston University, Series T-1 (AMBAC), 5.00%, 10/01/39 |
1,000 | 1,008,640 | ||||||
| Foxborough Regional Charter School, Series A, 7.00%, 7/01/42 |
250 | 270,620 | ||||||
| Mount Holyoke College, Series B, 5.00%, 7/01/41 |
500 | 509,780 | ||||||
| Smith College, 5.00%, 7/01/35 |
2,000 | 2,081,360 | ||||||
| Wellesley College, Series J, 5.00%, 7/01/42 |
1,950 | 2,045,667 | ||||||
| WGBH Educational Foundation, Series A (AMBAC), 5.75%, 1/01/42 |
650 | 708,149 | ||||||
| Massachusetts Development Finance Agency, Refunding RB: |
||||||||
| Boston University, Series P, 5.45%, 5/15/59 |
1,500 | 1,555,350 | ||||||
| Clark University (Syncora), 5.13%, 10/01/35 |
500 | 508,215 | ||||||
| Emerson College, Series A, 5.00%, 1/01/40 |
200 | 194,872 | ||||||
| Harvard University, Series B-1, 5.00%, 10/15/40 |
350 | 378,259 | ||||||
| Trustees of Deerfield Academy, 5.00%, 10/01/40 |
1,675 | 1,771,196 | ||||||
| Wheelock College, Series C, 5.25%, 10/01/37 |
1,000 | 983,900 | ||||||
| Williston Northampton School Project (Syncora), 5.00%, 10/01/25 |
500 | 505,785 | ||||||
| Worcester Polytechnic Institute (NPFGC), 5.00%, 9/01/27 |
1,985 | 2,098,383 | ||||||
| Massachusetts Health & Educational Facilities Authority, RB: |
||||||||
| Northeastern University, Series R, 5.00%, 10/01/33 |
225 | 229,536 | ||||||
| Tufts University, Series O, 5.38%, 8/15/38 |
1,000 | 1,091,790 | ||||||
| Massachusetts Health & Educational Facilities Authority, Refunding RB: |
||||||||
| Berklee College of Music, Series A, 5.00%, 10/01/37 |
1,000 | 1,029,590 | ||||||
| Municipal Bonds | Par (000) |
Value | ||||||
| Massachusetts (continued) |
||||||||
| Education (concluded) |
| |||||||
| Massachusetts Health & Educational Facilities Authority, Refunding RB (concluded): |
||||||||
| Harvard University, Series A, 5.50%, 11/15/36 |
$ | 100 | $ | 111,084 | ||||
| Harvard University, Series B, 5.00%, 10/01/38 |
400 | 421,684 | ||||||
| Northeastern University, Series T-1, 5.00%, 10/01/31 |
950 | 979,374 | ||||||
| Northeastern University, Series T-2, 5.00%, 10/01/32 |
500 | 511,445 | ||||||
| Springfield College, 5.63%, 10/15/40 |
500 | 517,000 | ||||||
| Tufts University, Series M, 5.50%, 2/15/27 |
1,000 | 1,181,390 | ||||||
| Massachusetts State College Building Authority, RB, Series A (AMBAC), 5.00%, 5/01/16 (a) |
1,000 | 1,109,660 | ||||||
| Massachusetts State College Building Authority, Refunding RB, Series B (Syncora), 5.50%, 5/01/39 |
825 | 929,841 | ||||||
| University of Massachusetts Building Authority, RB, Senior-Series 2, 5.00%, 11/01/39 |
500 | 522,300 | ||||||
|
|
|
|||||||
| 23,254,870 | ||||||||
| Health — 25.4% |
| |||||||
| Massachusetts Development Finance Agency, RB, First Mortgage, Edgecombe Project, Series A, 6.75%, 7/01/21 |
730 | 731,270 | ||||||
| Massachusetts Development Finance Agency, Refunding RB: |
||||||||
| Carleton-Willard Village, 5.63%, 12/01/30 |
500 | 515,515 | ||||||
| Partners Healthcare System, Series L, 5.00%, 7/01/36 |
1,000 | 1,020,840 | ||||||
| Seven Hills Foundation & Affiliates (Radian), 5.00%, 9/01/35 |
240 | 207,115 | ||||||
| Massachusetts Health & Educational Facilities Authority, RB: |
||||||||
| Cape Cod Healthcare Obligated Group, Series D (AGC), 5.00%, 11/15/31 |
1,000 | 1,017,500 | ||||||
| Caregroup, Series E-1, 5.00%, 7/01/28 |
500 | 508,790 | ||||||
| Children’s Hospital, Series M, 5.25%, 12/01/39 |
600 | 610,812 | ||||||
| BLACKROCK MASSACHUSETTS TAX-EXEMPT TRUST | NOVEMBER 30, 2013 | 1 |
| Schedule of Investments (continued) |
BlackRock Massachusetts 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 (concluded): |
||||||||
| Children’s Hospital, Series M, 5.50%, 12/01/39 |
$ | 500 | $ | 536,155 | ||||
| Lahey Clinic Medical Center, Series D, 5.25%, 8/15/37 |
1,000 | 1,022,560 | ||||||
| Southcoast Health Obligation Group, Series D, 5.00%, 7/01/39 |
500 | 497,830 | ||||||
| Massachusetts Health & Educational Facilities Authority, Refunding RB, Winchester Hospital, Series H, 5.25%, 7/01/38 |
1,000 | 1,013,840 | ||||||
|
|
|
|||||||
| 7,682,227 | ||||||||
| Housing — 11.9% |
| |||||||
| Massachusetts HFA, RB, M/F Housing, Series A (FHA), 5.25%, 12/01/35 |
185 | 190,855 | ||||||
| Massachusetts HFA, Refunding RB, AMT: |
||||||||
| Series C, 5.00%, 12/01/30 |
490 | 492,700 | ||||||
| Series C, 5.35%, 12/01/42 |
2,000 | 1,982,520 | ||||||
| Series F, 5.70%, 6/01/40 |
915 | 933,721 | ||||||
|
|
|
|||||||
| 3,599,796 | ||||||||
| State — 17.0% |
| |||||||
| Massachusetts Bay Transportation Authority, Refunding RB, Senior Series A, 5.25%, 7/01/29 |
730 | 842,427 | ||||||
| Massachusetts School Building Authority, RB: |
||||||||
| Dedicated Sales Tax, Senior Series A, 5.00%, 5/15/43 |
500 | 524,185 | ||||||
| Senior Series B, 5.00%, 10/15/41 |
1,000 | 1,042,240 | ||||||
| Massachusetts State College Building Authority, RB, Series A, 5.50%, 5/01/39 |
2,500 | 2,735,850 | ||||||
|
|
|
|||||||
| 5,144,702 | ||||||||
| Transportation — 19.5% |
| |||||||
| Commonwealth of Massachusetts, RB, Series A, 5.00%, 6/15/27 |
1,000 | 1,125,020 | ||||||
| Commonwealth of Massachusetts, Refunding RB, Series A, 5.00%, 6/01/38 |
500 | 531,475 | ||||||
| Municipal Bonds | Par (000) |
Value | ||||||
| Massachusetts (concluded) |
||||||||
| Transportation (concluded) |
||||||||
| Massachusetts Department of Transportation, Refunding RB, Senior Series B: |
||||||||
| 5.00%, 1/01/32 |
$ | 1,120 | $ | 1,155,515 | ||||
| 5.00%, 1/01/37 |
1,000 | 1,022,060 | ||||||
| Massachusetts Port Authority, RB, Series A, AMT, 5.00%, 7/01/42 |
1,000 | 1,004,110 | ||||||
| Metropolitan Boston Transit Parking Corp., Refunding RB, 5.25%, 7/01/36 |
1,000 | 1,058,930 | ||||||
|
|
|
|||||||
| 5,897,110 | ||||||||
| Total Municipal Bonds — 154.3% | 46,688,795 | |||||||
| Municipal Bonds Transferred to Tender Option Bond (TOB) Trusts (b) |
||||||||
| Massachusetts — 6.9% |
||||||||
| State — 6.9% |
| |||||||
| Massachusetts School Building Authority, RB, Dedicated Sales Tax, Series A (AGM): |
||||||||
| 5.00%, 8/15/30 (a) |
259 | 271,081 | ||||||
| 5.00%, 8/15/30 |
1,751 | 1,832,501 | ||||||
| Total Municipal Bonds Transferred to Tender Option Bond (TOB) Trusts — 6.9% |
2,103,582 | |||||||
| Total Long-Term Investments (Cost — $47,808,036) — 161.2% |
48,792,377 | |||||||
| Short-Term Securities | ||||||||
| Municipal Bonds — 2.0% |
||||||||
| Massachusetts Health & Educational Facilities Authority, Refunding RB, VRDN, 0.05%, 12/13/13 (c) |
600 | 600,000 | ||||||
| Money Market Fund — 0.0% | Shares | |||||||
| BIF Massachusetts Municipal Money Fund, 0.00% (d)(e) |
5 | 5 | ||||||
| Total Short-Term Securities (Cost — $600,005) — 2.0% |
600,005 | |||||||
| 2 | BLACKROCK MASSACHUSETTS TAX-EXEMPT TRUST | NOVEMBER 30, 2013 |
| Schedule of Investments (continued) |
BlackRock Massachusetts Tax-Exempt Trust (MHE) (Percentages shown are based on Net Assets) |
| Value | ||||
| Total Investments (Cost — $48,408,041*) — 163.2% |
$ | 49,392,382 | ||
| Other Assets Less Liabilities — 2.3% | 706,375 | |||
| Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (4.4%) |
(1,339,955 | ) | ||
| VRDP Shares, at Liquidation Value — (61.1%) | (18,500,000 | ) | ||
|
|
|
|||
| Net Assets Applicable to Common Shares — 100.0% | $ | 30,258,802 | ||
|
|
|
|||
| * | As of November 30, 2013, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows: |
| Tax cost |
$ | 47,053,386 | ||
|
|
|
|||
| Gross unrealized appreciation |
$ | 1,451,236 | ||
| Gross unrealized depreciation |
(451,835 | ) | ||
|
|
|
|||
| Net unrealized appreciation |
$ | 999,401 | ||
|
|
|
| Notes to Schedule of Investments |
| (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) | Represent bonds transferred to a TOB. In exchange the Trust acquired residual interest certificates. These bonds 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 issuers considered to be an affiliate of the Trust during the period ended November 30, 2013, 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, 2013 |
Net Activity |
Shares Held at November 30, 2013 |
Income | ||||||||||||
| BIF Massachusetts Municipal Money Fund |
5 | — | 5 | — | ||||||||||||
| (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 Guarantee Corp. | ||
| AGM | Assured Guaranty Municipal Corp. | |||
| AMBAC | American Municipal Bond Assurance Corp. | |||
| AMT | Alternative Minimum Tax (subject to) | |||
| FHA | Federal Housing Administration | |||
| GO | General Obligation Bonds | |||
| HFA | Housing Finance Agency | |||
| M/F | Multi-Family | |||
| NPFGC | National Public Finance Guarantee Corp. | |||
| Radian | Radian Guaranty, Inc. | |||
| RB | Revenue Bonds | |||
| Syncora | Syncora Guarantee | |||
| VRDN | Variable Rate Demand Notes |
| Ÿ | Financial futures contracts as of November 30, 2013 were as follows: |
| Contracts Sold |
Issue | Exchange | Expiration | Notional Value | Unrealized Appreciation |
|||||||||||
| (19 | ) | 10-Year US Treasury Note | Chicago Board of Trade | December 2013 | $ | 2,406,172 | $ | 12,151 | ||||||||
| BLACKROCK MASSACHUSETTS TAX-EXEMPT TRUST | NOVEMBER 30, 2013 | 3 |
| Schedule of Investments (continued) |
BlackRock Massachusetts Tax-Exempt Trust (MHE) |
| Ÿ | 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 such sector sub-classifications for reporting ease. |
| Ÿ | Fair Value Measurements—Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes as follows: |
| Ÿ | Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Trust has the ability to access |
| Ÿ | 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) |
| Ÿ | 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 and derivative financial instruments) |
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
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 and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument 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 derivative financial instruments, please refer to the Trust’s most recent financial statements as contained in its annual report.
The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy as of November 30, 2013:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
||||||||||||||||
| Investments: | ||||||||||||||||
| Long-Term Investments1 |
— | $ | 48,792,377 | — | $ | 48,792,377 | ||||||||||
| Short-Term Securities |
$ | 5 | 600,000 | — | 600,005 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 5 | $ | 49,392,377 | — | $ | 49,392,382 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
1 See above Schedule of Investments for values in each sector. |
|
|||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Derivative Financial Instruments2 | ||||||||||||||||
| Assets: |
||||||||||||||||
| Interest rate contracts |
$ | 12,151 | — | — | $ | 12,151 | ||||||||||
|
2 Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
|
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| 4 | BLACKROCK MASSACHUSETTS TAX-EXEMPT TRUST | NOVEMBER 30, 2013 |
| Schedule of Investments (concluded) |
BlackRock Massachusetts Tax-Exempt Trust (MHE) |
Certain of the Trust’s assets and/or liabilities are held at carrying amount, which approximates fair value for financial reporting purposes. As of November 30, 2013, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
||||||||||||||||
| Cash |
$ | 84,312 | — | — | $ | 84,312 | ||||||||||
| Cash pledged for financial futures contracts |
34,000 | — | — | 34,000 | ||||||||||||
| Liabilities: |
||||||||||||||||
| TOB trust certificates |
— | $ | (1,339,595 | ) | — | (1,339,595 | ) | |||||||||
| VRDP Shares |
— | (18,500,000 | ) | — | (18,500,000 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 118,312 | $ | (19,839,595 | ) | — | $ | (19,721,283 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
There were no transfers between levels during the period ended November 30, 2013.
| BLACKROCK MASSACHUSETTS TAX-EXEMPT TRUST | NOVEMBER 30, 2013 | 5 |
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.
BlackRock Massachusetts Tax-Exempt Trust
| By: | /s/ John M. Perlowski | |
| John M. Perlowski | ||
| Chief Executive Officer (principal executive officer) of | ||
| BlackRock Massachusetts Tax-Exempt Trust | ||
| Date: | January 24, 2014 | |
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 | ||
| BlackRock Massachusetts Tax-Exempt Trust | ||
| Date: | January 24, 2014 | |
| By: | /s/ Neal J. Andrews | |
| Neal J. Andrews | ||
| Chief Financial Officer (principal financial officer) of | ||
| BlackRock Massachusetts Tax-Exempt Trust | ||
| Date: | January 24, 2014 | |