-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MLe3t1PgcjO0rjgj2iEJffBjhx4jmh5wdBzt/GAnIx2k6m7Oe464LnqMaukV+7PH x5k/nX1h8DLx7LnngO60Hg== 0001047469-04-006978.txt : 20040308 0001047469-04-006978.hdr.sgml : 20040308 20040308171541 ACCESSION NUMBER: 0001047469-04-006978 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040308 EFFECTIVENESS DATE: 20040308 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STATE STREET RESEARCH EXCHANGE TRUST CENTRAL INDEX KEY: 0000766768 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04256 FILM NUMBER: 04655402 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CTR CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174823920 FORMER COMPANY: FORMER CONFORMED NAME: STATE STREET EXCHANGE TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: STATE STREET EXCHANGE FUND INC DATE OF NAME CHANGE: 19890827 N-CSR 1 a2129172zn-csr.txt N-CSR 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 811-04256 ---------------------------------------------- State Street Research Exchange Trust ------------------------------------------------------------------------ (Exact name of registrant as specified in charter) One Financial Center, Boston, MA 02111 ------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Francis J. McNamara, III, Secretary State Street Research One Financial Center, Boston, MA 02111 ------------------------------------------------------------------------ (Name and address of agent for service) Registrant's telephone number, including area code: 617-357-1200 ------------------ Date of fiscal year end: 12/31/03 ----------------- Date of reporting period: 1/01/03 - 12/31/03 ---------------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. ITEM 1: REPORT TO SHAREHOLDERS The Annual Report is attached. [LOGO] STATE STREET RESEARCH Exchange Fund December 31, 2003 Annual Report to Shareholders Table of Contents 3 Performance Discussion 4 Portfolio Holdings 5 Financial Statements 8 Financial Highlights 9 Independent Auditors' Report 10 Trustees and Officers FROM THE CHAIRMAN State Street Research Finally! An economic recovery that looks like it has staying power. The signs came from every sector of the economy, but they did not all fall into place until the year was well underway. In fact, the first four months of 2003 were marked by sluggish economic growth, rising unemployment and a general sense of uncertainty as the nation prepared for war with Iraq. However, as the year progressed, the clouds seemed to lift and consumer confidence improved. Lower mortgage payments-the result of a wave of refinancing at the lowest mortgage rates in a generation-and accelerated tax cuts raised disposable income for many American households. In June, the Federal Reserve Board stepped in to lower short-term interest rates to a 45-year low of 1.0%, making it easier for companies to borrow and refinance old debt. Corporate profits staged a solid rebound, and by the second half of 2003, even the job market may have turned the corner. Stocks, High-Yield Bonds Move Higher on Positive Economic News Investors responded to an improving economic environment with renewed enthusiasm for the stock market and an increased appetite for risk. Beginning in April, stocks staged an impressive rally that continued to the end of the year. Technology stocks were the strongest performers. Consumer stocks also gained ground as spending remained strong. In general, small- and mid-cap stocks outperformed large-caps, and value stocks outpaced growth. All stock market indexes reported solid gains for the 12-month period. Investor confidence in the economy also translated into solid gains for high-yield bonds, which, along with emerging market bonds, were the period's strongest performers. U.S. Treasury bonds eked out a positive return, but that masked a sharp decline in the second half of the period, as interest rates rose above 4.5% before settling back to 4.25% at the end of the period. When interest rates rise, bond prices decline. Mortgage bonds also encountered difficulties as the result of higher mortgage-prepayment activity in the spring. Looking Ahead A strong economy has created a favorable backdrop for investors. However, we know that the markets can be unpredictable. Long-term investment success does not depend on what happens in any one year. However, it can be achieved through regular investing that follows an asset allocation plan suited to your personal needs. If you're uncertain about your asset allocation, talk to your financial advisor. And as always, we look forward to helping you achieve your long-term financial goals with State Street Research funds. Sincerely, /s/ RICHARD S. DAVIS Richard S. Davis Chairman December 31, 2003 PERFORMANCE Discussion as of December 31, 2003 How State Street Research Exchange Fund Performed State Street Research Exchange Fund returned 20.89% for the 12-month period ended December 31, 2003. That was less than the S&P 500 Index and the Lipper Large-Cap Core Funds Average, which returned 28.67% and 25.59%, respectively, over the same period.(1) Reasons for the Fund's Performance Following three years of negative returns, the stock market enjoyed its first positive year since 1999, and the fund was the beneficiary of the investor confidence that fueled the rebound. Most of the portfolio's investments posted positive returns during the year. However, many did not keep pace with the broader market. Investors tended to favor smaller companies, and the fund tends to focus on the largest companies in the S&P 500 Index. Good stock selection across most industries helped the fund's performance. Anheuser-Busch, Exxon Mobil and Berkshire Hathaway all posted double-digit gains, even though they did not keep pace with the index. We trimmed our exposure to Exxon Mobil during the last quarter of the year. Our investments in Caterpillar, American Express and Vodafone also performed well as the business environment improved. Because these companies are in businesses that stood to benefit directly from economic recovery, they enjoyed strong absolute and relative returns. Our investments in General Mills and Johnson & Johnson declined during the year, and they detracted from the fund's return. Johnson & Johnson, like many other large-cap pharmaceutical companies, was passed over by investors in favor of smaller, faster-growing companies. We trimmed our position in the stock during the year, and we also cut back on Wyeth, another large health care company. Looking Ahead Given the rally that occurred in 2003, we expect the positive environment for stocks to continue, but we do not expect all stocks and sectors to participate in further advances. We have focused on companies on the lower end of the large-cap spectrum and companies with international exposure, which are well positioned for a global economic recovery. We continue to favor stocks in the Health Care, Integrated Oils and Consumer Staples sectors. Top 10 Holdings - -------------------------------------- Issuer/Security % of Fund Net Assets (1) Pfizer 5.4% --------------------------------- (2) Exxon Mobil 5.4% --------------------------------- (3) American Express 5.3% --------------------------------- (4) Procter & Gamble 4.0% --------------------------------- (5) Anheuser-Busch 3.8% --------------------------------- (6) Wal-Mart Stores 3.8% --------------------------------- (7) Microsoft 3.6% --------------------------------- (8) First Data 3.5% --------------------------------- (9) General Electric 3.5% --------------------------------- (10) Johnson & Johnson 3.4% --------------------------------- Total 41.7% Because financial markets and mutual fund strategies are constantly evolving, it is possible that the fund's holdings, market stance, outlook for various industries or securities and other matters discussed in this report have changed since this information was prepared. Portfolio changes should not be considered recommendations for action by individual investors. Performance - -------------------------------------------------------------------------------- Fund average annual total return as of 12/31/03(2) 1 Year 5 Years 10 Years 20.89% 0.02% 11.46% S&P 500 Index as of 12/31/031 1 Year 5 Years 10 Years 28.67% -0.57% 11.06% $10,000 over 10 years (2, 3) [DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT] SSR Exchange Fund S&P 500 Index '93 10,000 10,000 '94 10,344 10,131 '95 13,907 13,933 '96 17,531 17,131 '97 23,089 22,844 '98 29,576 29,377 '99 35,074 35,555 '00 33,626 32,320 '01 30,144 28,480 '02 24,484 22,189 '03 29,598 28,551 (1) The S&P 500 Index (officially the "Standard & Poor's 500 Composite Stock Price Index") is an unmanaged index of 500 U.S. stocks. The index does not take transaction charges into consideration. It is not possible to invest directly in the index. The Lipper Large-Cap Core Funds Average shows the performance of a category of mutual funds with similar goals. The Lipper average shows you how well the fund has done compared to competing funds. (2) Keep in mind that past performance is no guarantee of future results. The fund's share price, yield and return will fluctuate, and you may have a gain or loss when you sell your shares. All returns assume reinvestment of capital gains distributions and income dividends at net asset value. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. (3) Average annual return represents the rate one would have to earn each year of a given time period in order to end up with the fund's actual cumulative return for those years. $10,000 Over 10 Years measures the growth of a lump sum invested (less applicable maximum sales charge, if any) over a ten year period, and compares the performance to an index. State Street Research Exchange Fund 3 PORTFOLIO Holdings December 31, 2003
Issuer Shares Value - -------------------------------------------------------------------------------------- Common Stocks 99.1% Automobiles & Transportation 2.0% Automobiles 2.0% General Motors Corp. ............................ 112,800 $ 6,023,520 ------------ Total Automobiles & Transportation .................................... 6,023,520 ------------ Consumer Discretionary 7.2% Retail 7.2% Target Corp. .................................... 273,222 10,491,725 Wal-Mart Stores Inc. ............................ 223,200 11,840,760 ------------ Total Consumer Discretionary .......................................... 22,332,485 ------------ Consumer Staples 14.1% Beverages 5.3% Anheuser-Busch Inc. ............................. 225,200 11,863,536 Coca-Cola Co. ................................... 87,735 4,452,551 ------------ 16,316,087 ------------ Foods 2.0% General Mills Inc. .............................. 138,400 6,269,520 ------------ Household Products 4.0% Procter & Gamble Co. ............................ 123,200 12,305,216 ------------ Tobacco 2.8% Altria Group Inc. ............................... 160,300 8,723,526 ------------ Total Consumer Staples ................................................ 43,614,349 ------------ Financial Services 15.0% Banks & Savings & Loan 1.5% J.P. Morgan Chase & Co. ......................... 124,728 4,581,260 ------------ Financial Data Processing Services & Systems 3.5% First Data Corp. ................................ 266,480 10,949,663 ------------ Insurance 2.0% The Saint Paul Companies Inc. ................... 154,500 6,125,925 ------------ Miscellaneous Financial 8.0% American Express Co. ............................ 339,531 16,375,580 Federal National Mortgage Association............ 110,400 8,286,624 ------------ 24,662,204 ------------ Total Financial Services .............................................. 46,319,052 ------------ Health Care 22.1% Drugs & Biotechnology 18.2% AstraZeneca plc ADR ............................. 76,000 3,676,880 Johnson & Johnson Ltd. .......................... 203,922 10,534,610 Merck & Company Inc. ............................ 92,244 4,261,673 Millipore Corp.* ................................ 150,000 6,457,500 Novartis AG ADR ................................. 185,384 8,507,271 Pfizer Inc. ..................................... 476,342 16,829,163 Wyeth Inc. ...................................... 145,544 6,178,343 ------------ 56,445,440 ------------
Issuer Shares Value - -------------------------------------------------------------------------------------- Health Care Services 3.0% Medco Health Solutions Inc.* .................... 11,124 $ 378,105 SLM Corp. ....................................... 233,200 8,786,976 ------------ 9,165,081 ------------ Hospital Supply 0.9% Medtronic Inc. .................................. 60,000 2,916,600 ------------ Total Health Care ..................................................... 68,527,121 ------------ Integrated Oils 8.4% Integrated International 8.4% BP plc ADR ...................................... 187,702 9,263,094 Exxon Mobil Corp. ............................... 409,184 16,776,544 ------------ Total Integrated Oils ................................................. 26,039,638 ------------ Other 6.8% Multi-Sector 6.8% Berkshire Hathaway Inc. Cl. B* .................. 3,687 10,378,905 General Electric Co. ............................ 344,970 10,687,171 ------------ Total Other ........................................................... 21,066,076 ------------ Other Energy 2.1% Offshore Drilling 0.2% Transocean Inc. ................................. 21,148 507,764 ------------ Oil Well Equipment & Services 1.9% Schlumberger Ltd. ............................... 109,238 5,977,503 ------------ Total Other Energy .................................................... 6,485,267 ------------ Producer Durables 5.2% Aerospace 1.8% Boeing Co. ...................................... 131,800 5,554,052 ------------ Industrial Products 0.3% Agilent Technologies Inc.* ...................... 29,749 869,861 ------------ Machinery 3.1% Caterpillar Inc. ................................ 116,800 9,696,736 ------------ Total Producer Durables ............................................... 16,120,649 ------------ Technology 13.7% Computer Software 3.6% Microsoft Corp. ................................. 399,890 11,012,970 ------------ Computer Technology 7.2% Dell Inc.* ...................................... 170,500 5,790,180 Hewlett-Packard Co. ............................. 349,270 8,022,732 IBM Corp. ....................................... 92,371 8,560,944 ------------ 22,373,856 ------------ Electronics 0.8% Applera Corp. - Celera Genomics Group 126,880 2,627,685 ------------ Electronics: Semiconductors/Components 2.1% Intel Corp. ..................................... 200,000 6,440,000 ------------ Total Technology ...................................................... 42,454,511 ------------ Utilities 2.5% Telecommunications 2.5% Vodafone Group plc ADR .......................... 309,500 7,749,880 ------------ Total Utilities ....................................................... 7,749,880 ------------ Total Common Stocks (Cost $97,448,000) ................................ 306,732,548 ------------
4 The notes are an integral part of the financial statements. FINANCIAL Statements Maturity Principal Issuer Date Amount Value - ---------------------------------------------------------------- Commercial Paper 0.9% General Electric Capital Corp., 1.05% ......... 1/06/2004 $2,831,000 $2,830,587 ---------- Total Commercial Paper (Cost $2,830,587) .......... 2,830,587 ---------- % of Net Assets - ------------------------------------------------------------------------------- Summary of Portfolio Assets Investments (Cost $100,278,587) ................. 100.0% 309,563,135 Cash and Other Assets, Less Liabilities ......... 0.0% 135,625 ----- ----------- Net Assets ...................................... 100.0% $309,698,760 ===== ============ KEY TO SYMBOLS * Denotes a security which has not paid a dividend during the last year. ADR Stands for American Depositary Receipt. Federal Income Tax Information At December 31, 2003, the net unrealized appreciation of investments based on cost for federal income tax purposes of $91,488,852 was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $218,598,067 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (523,784) ------------ $218,074,283 ============ Statement of Assets and Liabilities - -------------------------------------------------------------------------------- December 31, 2003 Assets Investments, at value (Cost $100,278,587) (Note 1) ......... $309,563,135 Cash ....................................................... 167,538 Dividends receivable ....................................... 325,842 Other assets ............................................... 1,543 ------------- 310,058,058 ------------- Liabilities Payable for fund shares repurchased ........................ 151,537 Accrued management fee ..................................... 124,126 Accrued transfer agent and shareholder services ............ 7,409 Accrued administration fee ................................. 6,730 Accrued trustees' fees ..................................... 4,523 Other accrued expenses ..................................... 64,973 ------------- 359,298 ------------- Net Assets ................................................. $309,698,760 ============= Net Assets consist of: Unrealized appreciation of investments ................... $209,284,548 Accumulated net realized loss ............................ (12,862,555) Paid-in capital .......................................... 113,276,767 ------------- $309,698,760 ============= Net Asset Value per share ($309,698,760 [divided by] 630,761 shares) ............... $ 490.99 ============= The notes are an integral part of the financial statements. State Street Research Exchange Fund 5 FINANCIAL Statements Statement of Operations - -------------------------------------------------------------------------------- For the year ended December 31, 2003 Investment Income Dividends, net of foreign taxes of $63,647 (Note 1) .......... $ 5,006,781 Interest (Note 1) ............................................ 77,214 ----------- 5,083,995 ----------- Expenses Management fee (Note 2) ...................................... 1,419,580 Custodian fee ................................................ 94,800 Administration fee (Note 2) .................................. 92,027 Transfer agent and shareholder services (Note 2) ............. 27,424 Audit fee .................................................... 23,250 Trustees' fees (Note 2) ...................................... 16,382 Legal fees ................................................... 1,161 Reports to shareholders ...................................... 1,039 Miscellaneous ................................................ 725 ----------- 1,676,388 Fees paid indirectly (Note 2) ................................ (130) ----------- 1,676,258 ----------- Net investment income ........................................ 3,407,737 ----------- Realized and Unrealized Gain on Investments Net realized gain on investments (Notes 1 and 3) ............. 12,250,545 Change in unrealized appreciation of investments ............. 39,112,155 ----------- Net gain on investments ...................................... 51,362,700 ----------- Net increase in net assets resulting from operations ......... $54,770,437 =========== Statement of Changes in Net Assets - -------------------------------------------------------------------------------- Years ended December 31 ---------------------------- 2003 2002* ------------ ------------ Increase (Decrease) In Net Assets Operations: Net investment income .................... $ 3,407,737 $ 3,148,853 Net realized gain on investments ......... 12,250,545 18,801,652 Change in unrealized appreciation (depreciation) of investments .......... 39,112,155 (87,422,804) ------------ ------------ Net increase (decrease) resulting from operations ........................ 54,770,437 (65,472,299) ------------ ------------ Dividends from net investment income ................................. (3,497,110) (3,193,325) ------------ ------------ Share transactions: Net asset value of shares issued in payment of dividends ................ 627,059 497,555 Cost of shares repurchased ............... (10,704,806) (30,968,588) ------------ ------------ Net decrease from fund share transactions ........................... (10,077,747) (30,471,033) ------------ ------------ Total increase (decrease) in net assets .......................... 41,195,580 (99,136,657) Net Assets Beginning of year ........................ 268,503,180 367,639,837 ------------ ------------ End of year (including undistributed net investment income of $0 and $48,399, respectively) ................. $309,698,760 $268,503,180 ============ ============ Number of shares: Issued upon reinvestment of dividends 1,360 1,164 Repurchased .............................. (23,879) (66,335) ------- ------- Net decrease in fund shares .............. (22,519) (65,171) ======= ======= *Audited by other auditors. 6 The notes are an integral part of the financial statements. Notes to Financial Statements - -------------------------------------------------------------------------------- December 31, 2003 Note 1 State Street Research Exchange Fund is a series of State Street Research Exchange Trust (the "Trust"), which is organized as a Massachusetts business trust, and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The fund is presently the only series of the Trust. The investment objective of the fund is to provide long-term growth of capital and consequent long-term growth of income. In seeking to achieve its investment objective, the fund invests primarily in common stocks, or securities convertible into common stocks, that have long-term growth potential. The following significant accounting policies are consistently followed by the fund in preparing its financial statements, and such policies are in conformity with accounting principles generally accepted in the United States of America. A. Investment Valuation Values for listed equity securities reflect final sales on national securities exchanges quoted prior to the close of the New York Stock Exchange. Over-the-counter securities quoted on the National Association of Securities Dealers Automated Quotation ("Nasdaq") system are valued at closing prices supplied through such system. If not quoted on the Nasdaq system, such securities are valued at prices obtained from independent brokers. In the absence of recorded sales, valuations are at the mean of the closing bid and asked quotations. Short-term securities maturing within sixty days are valued at amortized cost. Other securities, if any, are valued at their fair value as determined in good faith under consistently applied procedures established by and under the supervision of the Trustees. If trading or events occurring in other markets after the close of the principal market in which foreign securities are traded, and before the close of business of the fund, are expected to materially affect the value of these securities, then they are valued at their fair value taking this trading or these events into account. B. Security Transactions Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains or losses are reported on the basis of identified cost of securities delivered. C. Net Investment Income Net investment income is determined daily and consists of interest and dividends accrued and discount earned, less the estimated daily expenses of the fund. Interest income is accrued daily as earned. Dividend income is accrued on the ex-dividend date. D. Dividends Dividends from net investment income are declared and paid or reinvested quarterly. Net realized short-term capital gains, if any, are distributed annually. Income dividends and capital gains distributions are determined in accordance with federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. The difference is primarily due to differing treatments for non-taxable redemptions in kind and the disposition of securities that have different bases for financial reporting and tax purposes. The permanent book and tax basis difference relating to shareholder distributions will result in reclassifications to paid-in-capital. The fund has designated $3,497,110 as ordinary income dividends. The fund hereby designates the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003. This amount has been reflected on Form 1099 for the calendar year 2003. E. Federal Income Taxes No provision for federal income taxes is necessary with respect to net investment income because the fund has elected to qualify under Subchapter M of the Internal Revenue Code and its policy is to distribute substantially all of such income within the prescribed time periods. The fund retains and designates as undistributed gains all of its taxable net long-term capital gains and pays federal income taxes thereon on behalf of the shareholders. At December 31, 2003, the fund had a capital loss carryforward of $12,862,555 available, to the extent provided in regulations, to offset future capital gains, if any, of which $5,749,972 and $7,112,583 expire on December 31, 2009 and 2010, respectively. To the extent book/tax differences are permanent in nature, such amounts are reclassified within the capital accounts based on federal tax basis treatment. The fund reclassified for book purposes amounts arising from permanent book/tax differences primarily relating to differing treatments for non-taxable redemptions in kind and the disposition of securities that have different bases for financial reporting and tax purposes. At December 31, 2003, the components of distributable earnings on a tax basis differ from the amounts reflected in the Statement of Assets and Liabilities by temporary book/tax differences largely arising from capital loss carryforwards. At December 31, 2003, the tax basis distributable earnings were $0 in undistributed ordinary income, $0 in undistributed short-term capital gains and $0 in undistributed long-term gains. F. Estimates The preparation of financial statements in conformity with accounting principles 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 income and expenses during the reporting period. Actual results could differ from these estimates. G. Securities Lending The fund may seek additional income by lending portfolio securities to qualified institutions. The fund will receive cash or securities as collateral in an amount equal to at least 100% of the current market value of any loaned securities plus accrued interest. By reinvesting any cash collateral it receives in these transactions, the fund could realize additional gains and losses. If the borrower fails to return the securities and the value of the collateral has declined during the term of the loan, the fund will bear the loss. At December 31, 2003, there were no loaned securities. During the year ended December 31, 2003, income from securities lending amounted to $129 and is included in interest income. Note 2 The Trust and the Adviser have entered into an agreement under which the Adviser earns monthly fees at an annual rate of 0.50% of the fund's average net assets. In consideration of these fees, the Adviser furnishes the fund with management, investment advisory, statistical and research facilities and services. The Adviser also pays all salaries, rent and certain other expenses of management. During the year ended December 31, 2003, the fees pursuant to such agreement amounted to $1,419,580. State Street Research Service Center, a division of State Street Research Investment Services, Inc., the Trust's principal underwriter (the "Distributor"), provides certain shareholder services to the fund such as responding to inquiries and instructions from investors with respect to redemption of shares of the fund. Total shareholder service costs are allocated to each fund in the same ratios as the transfer agent costs. During the year ended December 31, 2003, the amount of such expenses allocated to the fund was $6,879. The fund has entered into an arrangement with its transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's expense. During the year ended December 31, 2003, the fund's transfer agent fees were reduced by $130 under this arrangement. The notes are an integral part of the financial statements. State Street Research Exchange Fund 7 Notes (continued) - -------------------------------------------------------------------------------- The fees of the Trustees not currently affiliated with the Adviser amounted to $16,382 during the year ended December 31, 2003. The fund has agreed to pay the Adviser for certain administrative costs incurred in providing other assistance and services to the fund. The fee was based on a fixed amount that has been allocated equally among the State Street Research funds. During the year ended December 31, 2003, the amount of such expenses was $92,027. Note 3 For the year ended December 31, 2003, exclusive of short-term investments and U.S. government obligations, purchases and sales of securities, including $10,692,634 representing redemptions in kinds, aggregated $15,100,940 and $20,508,600, respectively. Note 4 PricewaterhouseCoopers LLP resigned as the fund's independent accountants as of April 25, 2003. The Trustees voted to appoint Deloitte & Touche LLP as the fund's independent accountants for the fund's fiscal year ended December 31, 2003. During the previous two years, PricewaterhouseCoopers LLP's audit reports contained no adverse opinion or disclaimer of opinion; nor were its reports qualified or modified as to uncertainty, audit scope or accounting principle. Further, in connection with its audits for the two previous fiscal years and through April 25, 2003, there were no disagreements between the fund and PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which if not resolved to the satisfaction of PricewaterhouseCoopers LLP would have caused it to make reference to the disagreements in its report on the financial statements for such years. Note 5 The Trustees have the authority to issue an unlimited number of shares of beneficial interest at $0.001 par value per share. At December 31, 2003, the Adviser held 13,766 shares of the fund. FINANCIAL Highlights - -------------------------------------------------------------------------------- For a share outstanding throughout each year:
Years ended December 31 - ---------------------------------------------------------------- 2003 2002(a) 2001(a) 2000(a) 1999(a) - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ($) 411.01 511.71 575.76 616.80 524.22 ------ ------- ------ ------ ------ Net investment income ($) 5.40 4.74 4.22 4.75 4.54 Net realized and unrealized gain (loss) on investments ($)* 80.08 (100.64) (64.02) (41.19) 92.69 ------ ------- ------ ------ ------ Total from investment operations ($) 85.48 (95.90) (59.80) (36.44) 97.23 ------ ------- ------ ------ ------ Dividends from net investment income ($) (5.50) (4.80) (4.25) (4.60) (4.65) ------ ------- ------ ------ ------ Total distributions ($) (5.50) (4.80) (4.25) (4.60) (4.65) ------ ------- ------ ------ ------ Net asset value, end of year ($) 490.99 411.01 511.71 575.76 616.80 ====== ======= ====== ====== ====== Total return (%) 20.89 (18.78) (10.35) (4.13) 18.59 Ratios/Supplemental Data: - -------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year ($ thousands) 309,699 268,503 367,640 437,804 485,161 Expense ratio (%) 0.59 0.60 0.57 0.55 0.55 Expense ratio after expense reductions (%) 0.59 0.60 0.57 0.55 0.55 Ratio of net investment income to average net assets (%) 1.20 1.00 0.81 0.78 0.78 Portfolio turnover rate (%) 5.47 3.32 1.44 10.51 1.04 *After provision for federal tax on retained capital gains at end of year -- -- -- 11.01 --
(a) Audited by other auditors. 8 INDEPENDENT AUDITORS' Report To the Board of Trustees and Shareholders of State Street Research Exchange Fund: We have audited the accompanying statement of assets and liabilities, including the portfolio holdings, of State Street Research Exchange Fund (the "Fund"), a series of State Street Research Exchange Trust, as of December 31, 2003, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year ended December 31, 2003. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended December 31, 2002, and the financial highlights for each of the years in the four-year period ended December 31, 2002, were audited by other auditors whose report dated February 12, 2003, expressed an unqualified opinion on such statement and financial highlights. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 Fund as of December 31, 2003, the results of its operations, the changes in its net assets, and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Boston, Massachusetts February 20, 2004 State Street Research Exchange Fund 9 TRUSTEES AND OFFICERS State Street Research Exchange Trust
Number of Funds Name, Position(s) Term of Office in Fund Complex Other Address Held with and Length of Principal Occupations Overseen by Directorships Held and Age(a) Fund Time Served(b) During Past 5 Years Trustee/Officer(c) by Trustee/Officer - ------------------------------------------------------------------------------------------------------------------------------------ Independent Trustees Bruce R. Bond Trustee Since Retired; formerly Chairman of the Board, 19 Avaya Corp. (57) 1999 Chief Executive Officer and President, PictureTel Corporation (video conferencing systems) - ------------------------------------------------------------------------------------------------------------------------------------ Peter S. Drotch Trustee Since Retired; formerly Partner, 19 First Marblehead GRP (62) 2004 PricewaterhouseCoopers LLP - ------------------------------------------------------------------------------------------------------------------------------------ Steve A. Garban Trustee Since Retired; formerly Senior Vice President 56 Metropolitan Series (66) 1997 for Finance and Operations and Fund, Inc.; and Treasurer, The Pennsylvania State Metropolitan Series University Fund II - ------------------------------------------------------------------------------------------------------------------------------------ Dean O. Morton Trustee Since Retired; formerly Executive Vice 56 BEA Systems, Inc.; (71) 1984 President, Chief Operating Officer and Cepheid; Pharsight Director, Hewlett-Packard Company Corporation; (computer manufacturer) Metropolitan Series Fund, Inc.; and Metropolitan Series Fund II - ------------------------------------------------------------------------------------------------------------------------------------ Susan M. Phillips Trustee Since Dean, School of Business and Public 19 The Kroger Co. (59) 1998 Management, George Washington University; formerly a member of the Board of Governors of the Federal Reserve System; and Chairman and Commissioner of the Commodity Futures Trading Commission - ------------------------------------------------------------------------------------------------------------------------------------ Toby Rosenblatt Trustee Since President, Founders Investments Ltd. 56 A.P. Pharma, Inc.; (65) 1994 (investments); President, Pacific Four Metropolitan Series Investments (investments); formerly Fund, Inc.; and President, The Glen Ellen Company Metropolitan Series (private investment firm) Fund II - ------------------------------------------------------------------------------------------------------------------------------------ Michael S. Trustee Since Jay W. Forrester Professor of 56 Metropolitan Series Scott Morton (66) 1989 Management, Sloan School of Management, Fund, Inc.; and Massachusetts Institute of Technology Metropolitan Series Fund II - ------------------------------------------------------------------------------------------------------------------------------------ James M. Storey Trustee Since Attorney; formerly Partner, Dechert (law 19 SEI Investments Funds (72) 2002 firm) (consisting of 104 portfolios); and The Massachusetts Health & Education Tax-Exempt Trust - ------------------------------------------------------------------------------------------------------------------------------------ Interested Trustees Richard S. Davis(+) Trustee Since Chairman of the Board, President and 19 None (58) 2000 Chief Executive Officer of State Street Research & Management Company; formerly Senior Vice President, Fixed Income Investments, Metropolitan Life Insurance Company - ------------------------------------------------------------------------------------------------------------------------------------ Officers Edward Dowd Vice Since Vice President of State Street Research 7 None (36) President 2003 & Management Company; formerly Vice President, Independence Investment LLC and equity research associate, Donaldson, Lufkin and Jenrette - ------------------------------------------------------------------------------------------------------------------------------------ C. Kim Goodwin Vice Since Managing Director and Chief Investment 18 None (44) President 2002 Officer - Equities of State Street Research & Management Company; formerly Chief Investment Officer - U.S. Growth Equities, American Century - ------------------------------------------------------------------------------------------------------------------------------------ Jeffrey Lindsey Vice Since Managing Director of State Street 7 None (41) President 2003 Research & Management Company; formerly Managing Director and Senior Vice President, Putnam Investments - ------------------------------------------------------------------------------------------------------------------------------------ John S. Lombardo Vice Since Managing Director, Chief Financial 19 None (49) President 2001 Officer and Director of State Street Research & Management Company; formerly Executive Vice President, State Street Research & Management Company; and Senior Vice President, Product and Financial Management, MetLife Auto & Home - ------------------------------------------------------------------------------------------------------------------------------------ Douglas A. Romich Treasurer Since Senior Vice President and Treasurer of 19 None (47) 2001 State Street Research & Management Company; formerly Vice President and Assistant Treasurer, State Street Research & Management Company - ------------------------------------------------------------------------------------------------------------------------------------ Francis J. Secretary Since Managing Director, General Counsel and 19 None McNamara, III (48) 1995 Secretary of State Street Research & Management Company; formerly Executive Vice President, State Street Research & Management Company - ------------------------------------------------------------------------------------------------------------------------------------
The fund's Statement of Additional Information includes additional information about the fund's trustees, and is available without charge, by contacting State Street Research, One Financial Center, Boston, Massachusetts 02111-2690, or by calling toll-free 1-87-SSR-FUNDS (1-877-773-8637). (a) The address of each person is c/o State Street Research & Management Company, One Financial Center, Boston, MA 02111-2690. (b) A Trustee serves until he or she retires, resigns or is removed as provided in the master trust agreement of the respective Trust. Each Trust has adopted a mandatory retirement age of 72. Each officer holds office until he or she resigns, is removed or a successor is elected. (c) Includes all series of 9 investment companies for which State Street Research & Management Company serves as sole investment adviser and all series of Metropolitan Series Fund, Inc. and Metropolitan Series Fund II. The primary adviser to Metropolitan Series Fund, Inc. and Metropolitan Series Fund II is MetLife Advisers, LLC, which has retained State Street Research & Management Company as sub-adviser to certain series of Metropolitan Series Fund, Inc. (+) Mr. Davis is an "interested person" of the Trust under the Investment Company Act of 1940 by reason of his affiliation with the Trust's Investment Manager, State Street Research & Management Company, as noted. 10
---------------- [LOGO] STATE STREET RESEARCH | FIRST STD | One Financial Center | U.S. POSTAGE | Boston, MA 02111-2690 | PAID | | PERMIT #6 | | HUDSON, MA | ---------------- - ------------------------------------------------------------------------------------------------------------------------------ New accounts, mutual fund purchases, ------------------------------------------------ exchanges and account information Did You Know? Internet www.ssrfunds.com State Street Research offers electronic delivery E-mail info@ssrfunds.com of quarterly statements, shareholder reports and fund prospectuses. If you elect this Phone 1-87-SSR-FUNDS (1-877-773-8637), option, we will send these materials to you toll-free, 7 days a week, 24 hours a day via e-mail. To learn more, visit us on the Web Hearing-impaired: 1-800-676-7876 at www.ssrfunds.com and click on "Go to Chinese- and Spanish-speaking: 1-888-638-3193 Your Account" or call us at 1-87-SSR-FUNDS (1-877-773-8637). Fax 1-617-737-9722 (request confirmation number first from the Service Center by calling 1-877-773-8637) Did you know that you can give a State Street Research mutual fund as a gift? Mail State Street Research Service Center Call a service center representative at P.O. Box 8408, Boston, MA 02266-8408 1-87-SSR-FUNDS (1-877-773-8637), Monday through Friday, 8am-6pm OverView eastern time, to lear more. For more information on the products and services we offer, refer to OverView, our quarterly shareholder newsletter. ------------------------------------------------ Webcasts For a professional perspective on the markets, the economy and timely [LOGO] investment topics, tune in to a State Street Research webcast by visiting for Excellence in our website at www.ssrfunds.com. Shareholder Communications Complete Fund Listing [LOGO] For a list of our funds, visit our website at www.ssrfunds.com under For Excellence in Service Research Our Funds. This report must be accompanied or preceded by a current prospectus. When used as sales material after March 31, 2004, this report must be accompanied by a current Quarterly Performance Update. To obtain a prospectus for any State Street Research fund call 1-87-SSR-FUNDS (1-877-773-8637) or by visiting our website at www.ssrfunds.com. The prospectus contains more complete information, including investment objectives, risks, charges and expenses. Please read and consider the prospectus carefully before investing or sending money. The DALBAR awards recognize quality shareholder service and quality shareholder communications, and should not be considered a rating of fund performance. The survey included mutual fund complexes that volunteered or were otherwise selected to participate and was not industrywide. Member NASD, SIPC (C)2004 State Street Research Investment Services, Inc. One Financial Center Boston, MA 02111-2690 www.ssrfunds.com CONTROL NUMBER:(exp0205)SSR-LD EX-1225-0204
FORM N-CSR(2 OF 3) ITEM 2: CODE OF ETHICS (a) The Registrant has, as of the end of the period covered by this report, adopted a code of ethics pursuant to Section 406 of the Sarbanes-Oxley Act and as defined in the instructions to Form N-CSR that applies to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Registrant or a third party. (b) During the period covered by this report, there were not any amendments to the provisions of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT The Registrant's Board of Directors has determined that Steve A. Garban, a member of the Registrant's Board of Directors and Audit Committee, qualifies as the "audit committee financial expert" as such term is defined in the instructions to Form N-CSR. Mr. Garban is "independent", as defined in the instructions to Form N-CSR. ITEM 4: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees Registrant Investment Adviser Fiscal year ended December 31, 2002* $28,000 $133,000 Fiscal year ended December 31, 2003 $22,000 $158,760 Audit-Related Fees Fiscal year ended December 31, 2002* $0 $0 Fiscal year ended December 31, 2003 $0 $0 Tax Fees Fiscal year ended December 31, 2002* $3,500 $15,000 Fiscal year ended December 31, 2003 $2,600 $0 All Other Fees Fiscal year ended December 31, 2002* $0 $0 Fiscal year ended December 31, 2003 $15,800 $60,000
* The fees reported for the fiscal year ended December 31, 2002 were attributable to services provided by other accountants. ITEM 5: AUDIT COMMITTEE OF LISTED REGISTRANTS Not applicable. ITEM 6: (RESERVED) ITEM 7: DISCLOSURE OF PROXY VOTING POLICIES & PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES Not applicable. ITEM 8: (RESERVED) ITEM 9: SUBMISSION OF MATTERS TO A VOTE OF SECURITIY HOLDERS The Governance Committee will consider nominees recommended by shareholders. Shareholders may submit recommendations to the attention of the Secretary of the Trust, State Street Research & Management Company, One Financial Center, 30th Floor, Boston MA 02111. ITEM 10: CONTROLS AND PROCEDURES SUB-ITEM 10a - The Principal Executive Officer and the Principal Financial Officer have concluded that the State Street Research Exchange Trust disclosure controls and procedures (as defined in Rule 30-a2(c) under the Investment Company Act) provide reasonable assurances that material information relating to the State Street Research Exchange Trust is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. SUB-ITEM 10b - There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation referenced in (a)(i) above. ITEM 11: EXHIBITS (a)(1) Code of Ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as Exhibit 99.CODE ETH (a)(2) Certification for each principal executive and principal financial officer of the Registrant required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.302CERT (b) Certification required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT 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. State Street Research Exchange Trust By: /s/ Richard S. Davis ------------------------------------------------------ Richard S. Davis, President, Chairman and Chief Executive Officer Principal Executive Officer Date February 27, 2004 ------------------------------------------------------ FORM N-CSR(3 OF 3) 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/ Richard S. Davis ------------------------------------------------------ Richard S. Davis, President, Chairman and Chief Executive Officer Principal Executive Officer Date February 27, 2004 ------------------------ By: /s/ Douglas A. Romich ------------------------------------------------------ Douglas A. Romich, Treasurer Principal Financial Officer Date February 27, 2004 ------------------------ EX-99.CODE 3 a2129172zex-99_code.txt EXHIBIT 99.CODE ETH Exhibit 99.CODE ETH STATE STREET RESEARCH FUNDS FINANCIAL OFFICER CODE OF PROFESSIONAL CONDUCT INTRODUCTION The reputation and integrity of the State Street Research Funds (the "Funds") are valuable assets that are vital to the Funds' success. Each Fund's senior financial officers ("SFOs") are responsible for conducting the Fund's business in a manner that demonstrates a commitment to the highest standards of integrity. A Fund's SFOs include the principal executive officer, the principal financial officer, comptroller or principal accounting officer, and any person who performs a similar function. The Sarbanes-Oxley Act of 2002 (the "Act") effected sweeping corporate disclosure and financial reporting reform on public companies, including mutual funds, to address corporate malfeasance and assure investors that the companies in which they invest are accurately and completely disclosing financial information. Under the Act, all public companies (including the Funds) must either have a code of ethics for their SFOs, or disclose why they do not. The Act was intended to foster corporate environments that encourage employees to question unethical and potentially illegal business practices. Each Fund has chosen to adopt a financial officer code of ethics to encourage its SFOs to act ethically and to question potentially unethical or illegal practices, and to strive to ensure that the Fund's financial disclosures are complete, accurate, and understandable. This Code of Ethics should be read in conjunction with the Fund's other policy statements, including the Code of Ethics adopted pursuant to Rule 17j-1 under the Investment Company Act of 1940. PURPOSES OF THE CODE The purposes of this Code are: - To promote honest and ethical conduct among the Fund's SFOs, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; - To assist SFOs to recognize and avoid conflicts of interest, including disclosure to an appropriate person of any material transaction or relationship that reasonably could be expected to give rise to such a conflict; - To promote full, fair, accurate, timely, and understandable disclosure in reports and documents that the Fund files with, or submits to, the SEC and in other public communications the Fund makes; - To promote compliance with applicable laws, rules and regulations; - To encourage the prompt internal reporting to an appropriate person of violations of the Code; and - To establish accountability for adherence to the Code. QUESTIONS ABOUT THIS CODE The Board of Trustees of each Fund has designated the Secretary of the Fund to be the Compliance Officer for the implementation and administration of the Code. You should direct your questions about this Code to the Compliance Officer. CONDUCT GUIDELINES Each Fund has adopted the following guidelines under which its SFOs must perform their duties and conduct the business affairs of the Funds. Persons subject to this requirement include the principal executive officer, the principal financial officer, comptroller or principal accounting officer, and any person who performs a similar function. However, the Fund expects that ALL persons who participate in the preparation of any part of the Fund's financial statements follow these guidelines: - ETHICAL AND HONEST CONDUCT IS OF PARAMOUNT IMPORTANCE. The Fund's SFOs must act with honesty and integrity and avoid violations of this Code, including actual or apparent conflicts of interest with the Fund in personal and professional relationships. - SFOS MUST DISCLOSE MATERIAL TRANSACTIONS OR RELATIONSHIPS. The Fund's SFOs must disclose to the Fund's Compliance Officer any material transaction or relationship that reasonably could be expected to give rise to any violations of the Code, including actual or apparent conflicts of interest with the Fund. You should disclose these transactions or relationships whether you are involved or have only observed the transaction or relationship. If it is not possible to disclose the matter to the Compliance Officer, it should be disclosed to the Fund's Chief Financial Officer or Chief Executive Officer. - STANDARDS FOR QUALITY OF INFORMATION SHARED WITH FUND SERVICE PROVIDERS. The Fund's SFOs must at all times seek to provide information to the Fund's other employees and service providers (adviser, administrator, outside auditor, outside counsel, custodian, ETC.) that is accurate, complete, objective, relevant, timely, and understandable. - STANDARDS FOR QUALITY OF INFORMATION INCLUDED IN PERIODIC REPORTS. The Fund's SFOs must at all times endeavor to ensure full, fair, timely, accurate, and understandable disclosure in the Fund's periodic reports. 2 - COMPLIANCE WITH LAWS. The Fund's SFOs must comply with the federal securities laws and other applicable laws and rules, such as the Internal Revenue Code. - STANDARD OF CARE. The Fund's SFOs must at all times act in good faith, responsibly, and with due care, competence and diligence, without misrepresenting material facts or allowing your independent judgment to be subordinated. - CONFIDENTIALITY OF INFORMATION. The Fund's SFOs must at all times respect the confidentiality of information acquired in the course of their professional duties, except when authorized by the Fund to disclose it or where disclosure is otherwise legally mandated. You may not use confidential information acquired in the course of your work for personal advantage. - SHARING OF INFORMATION AND ETHICAL STANDARDS. The Fund's SFOs should share information with relevant parties to keep them informed of the business affairs of the Fund, as appropriate, and maintain skills important and relevant to the Fund's needs. - PROMOTE ETHICAL CONDUCT. The Fund's SFOs should at all times proactively promote ethical behavior among peers in the work environment. - STANDARDS FOR RECORDKEEPING. The Fund's SFOs must at all times endeavor to ensure that the Fund's books and records are thoroughly and accurately maintained to the best of their knowledge in a manner consistent with applicable laws and this Code. WAIVERS OF THIS CODE You may request a waiver of a provision of this Code by submitting your request in writing to the Compliance Officer for appropriate review. For example, if a family member works for a service provider that prepares the Fund's financial statements, you may have a potential conflict of interest in reviewing those statements and should seek a waiver of this Code to review the work. An executive officer of the Fund or the Audit Committee will decide whether to grant a waiver. All waivers of this Code must be disclosed to the Fund's shareholders to the extent required by SEC rules. ANNUAL CERTIFICATION To the extent necessary, the Fund's Compliance Officer will provide guidance on the conduct required by this Code and the manner in which violations must be reported and waivers must be requested. Each SFO will be asked to certify on an annual basis that he/she is in full compliance with this Code. 3 REPORTING SUSPECTED VIOLATIONS SFOs who observe, learn of, or, in good faith, suspect a violation of the Code MUST immediately report the violation to the Compliance Officer, another member of the Fund's senior management, or to the Audit Committee of the Board. An example of a possible Code violation is the preparation and filing of financial disclosure that omits material facts, or that is accurate but is written in a way that obscures its meaning. Because service providers such as the adviser, outside accounting firm, and custodian provide much of the work relating to the Fund's financial statements, the Fund's SFOs should be alert for actions by service providers that may be illegal, or that could be viewed as dishonest or unethical conduct. A SFO should report these actions to the Compliance Officer even if you know, or think, that the service provider has its own code of ethics for its SFOs or employees. SFOs who report violations or suspected violations in good faith will not be subject to retaliation of any kind. Reported violations will be investigated and addressed promptly and will be treated confidentially to the extent possible. VIOLATIONS OF THE CODE Dishonest or unethical conduct or conduct that is illegal will constitute a violation of this Code, regardless of whether this Code refers to that particular conduct. A violation of this Code may result in disciplinary action, up to and including termination of employment. A variety of laws apply to the Fund and its operations, including the Securities Act of 1933, the Investment Company Act of 1940, state laws relating to duties owed by Fund directors/trustees and officers, and criminal laws. The federal securities laws generally prohibit the Fund from making material misstatements in its prospectus and other documents filed with the SEC, or from omitting to state a material fact. These material misstatements and omissions include financial statements that are misleading or omit material facts. The Fund must and will report all suspected criminal violations to the appropriate authorities for possible prosecution, and will investigate, address and report, as appropriate, non-criminal violations. ADOPTED MAY 7, 2003 4 EX-99.302 4 a2129172zex-99_302.txt EXHIBIT 99.302 CERT Exhibit 99.302 CERT State Street Research Exchange Trust Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Douglas A. Romich, certify that: 1. I have reviewed this report on Form N-CSR of State State Street Research Exchange Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and changes in net assets of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2 (c) under the Investment Company Act) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of the date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 27, 2004 /s/ Douglas A. Romich Douglas A. Romich Treasurer State Street Research Exchange Trust Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Richard S. Davis, certify that: 1. I have reviewed this report on Form N-CSR of State Street Research Exchange Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and changes in net assets of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2 (c) under the Investment Company Act) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of the date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 27, 2004 /s/ Richard S. Davis Richard S. Davis President, Chairman and Chief Executive Officer EX-99.906 5 a2129172zex-99_906.txt EXHIBIT 99.906 CERT Exhibit 99.906 CERT State Street Research Exchange Trust Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of the State Street Research Exchange Trust, a Massachusetts business trust, (the "Trust"), does hereby certify that the Trust's report on Form N-CSR for the period ended December 31, 2003 (the "N-CSR") fully complies with the requirements of Section 13 (a) or 15 (d), as applicable, of the Securities Exchange Act of 1934, as amended, and information contained in the N-CSR fairly presents, in all material respects, the financial condition and the results of operations of the Trust. This certification is provided solely pursuant to 18 U.S.C. 1350 and shall not be deemed a part of the N-CSR, the financial statements filed with the N-CSR or otherwise "filed" for any purpose. Date: February 27, 2004 /s/ Douglas A. Romich Douglas A. Romich Treasurer State Street Research Exchange Trust Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of the State Street Research Exchange Trust, a Massachusetts business trust, (the "Trust"), does hereby certify that the Trust's report on Form N-CSR for the period ended December 31, 2003 (the "N-CSR") fully complies with the requirements of Section 13 (a) or 15 (d), as applicable, of the Securities Exchange Act of 1934, as amended, and information contained in the N-CSR fairly presents, in all material respects, the financial condition and the results of operations of the Trust. This certification is provided solely pursuant to 18 U.S.C. 1350 and shall not be deemed a part of the N-CSR, the financial statements filed with the N-CSR or otherwise "filed" for any purpose. Date: February 27, 2004 /s/ Richard S. Davis Richard S. Davis President, Chairman and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----