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SIGNATURE MARY JANE MALONEY
TITLE MANAGER
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<CIK> 0000019780
<NAME> CHESTNUT STREET EXCHANGE FUND
<S> <C>
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</TABLE>
EXHIBIT INDEX
Exhibit A: Attachment to item 77B:
Accountant's report on internal control.
- --------------------------------------------------------------
Exhibit A:
REPORT OF INDEPENDENT ACCOUNTANTS
To The Partners of the
Chestnut Street Exchange Fund:
In planning and performing our audit of the financial
statements and financial highlights of Chestnut Street
Exchange Fund, for the year ended December 31, 1998, we
considered its internal control, including control
activities for safeguarding securities, in order to
determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and
financial highlights and to comply with the requirements of
Form N-SAR, not to provide assurance on internal control.
The management of Chestnut Street Exchange Fund, is
responsible for establishing and maintaining internal
control. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected
benefits and related costs of controls. Generally,
controls that are relevant to an audit pertain to the
entity's objective of preparing financial statements and
financial highlights for external purposes that are fairly
presented in conformity with generally accepted accounting
principles. Those controls include the safeguarding of
assets against unauthorized acquisition, use or
disposition.
Because of inherent limitations in internal controls,
errors or fraud may occur and not be detected. Also,
projection of any evaluation of internal control to future
periods is subject to the risk that it may become
inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of internal control would not necessarily
disclose all matters in internal control that might be
material weaknesses under standards established by the
American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or
operation of one or more of the internal control components
does not reduce to a relatively low level the risk that
misstatements caused by errors or fraud in amounts that
would be material in relation to the financial statements
and financial highlights being audited may occur and not be
detected within a timely period by employees in the normal
course of performing their assigned functions. However, we
noted no matters involving internal control and its
operation, including control activities for safeguarding
securities, that we consider to be material weaknesses as
defined above as of December 31, 1998.
This report is intended solely for the information and use
of management, the Partners of the Chestnut Street Exchange
Fund, and the Securities and Exchange Commission.
PricewaterhouseCoopers LLP
January 29, 1999
