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As filed with the Securities and Exchange Commission
on April 30, 1999
1940 Act File No. 811-4256
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 16 [x]
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STATE STREET RESEARCH EXCHANGE TRUST
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (617) 357-1200
Francis J. McNamara, III, One Financial Center, Boston, MA 02111
(Name and Address of Agent for Service)
Copy to:
Geoffrey R.T. Kenyon, Esq.
Goodwin, Procter & Hoar, LLP
Exchange Place
Boston, Massachusetts 02110
<PAGE>
STATE STREET RESEARCH EXCHANGE TRUST
PART A - INFORMATION REQUIRED IN A PROSPECTUS
May 1, 1999
All information required by this Part of Form N-1A
except Items 1, 2, and 3 which are omitted pursuant
to Instruction F(4) is included in Part B.
<PAGE>
STATE STREET RESEARCH EXCHANGE TRUST
PART B - STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999
The following Statement of Additional Information is not a Prospectus.
Registrant is not offering securities to the general public and maintains no
current prospectus. However, general information about Registrant which would
normally be included in a current prospectus, except such information as would
be applicable to an offering of Registrant's shares, has been included in this
Statement of Additional Information.
TABLE OF CONTENTS
Page
General Information and History ...............................2
Investment Policies............................................2
Trustees and Officers.........................................14
Controlling Persons and Principal Holders of Securities.......17
Investment Advisory and Other Services........................18
Portfolio Transactions........................................19
Shares of Beneficial Interest and Other Securities............21
Redemption and Pricing of Securities..........................23
Tax Status....................................................25
Financial Statements..........................................26
<PAGE>
General Information and History
Registrant's predecessor, State Street Exchange Fund, Inc., was
originally incorporated in Massachusetts on December 12, 1984 to
become the successor to State Street Exchange Fund (A Limited
Partnership) (the "Partnership") which was formed as a limited
partnership, and registered with the Securities and Exchange
Commission as an open-end, diversified management company, in 1975.
Effective May 1, 1985, in accordance with a Plan of Reorganization
and Liquidation which was approved by the partners of the
Partnership on December 11, 1984, State Street Exchange Fund, Inc.
succeeded to the business and operations of the Partnership.
Effective May 1, 1989 State Street Exchange Fund, Inc. was
reorganized as a Massachusetts business trust and carries on its
operations as State Street Research Exchange Fund (the "Fund")
(formerly known as State Street Exchange Fund), a series of State
Street Research Exchange Trust (the "Trust") (formerly known as
State Street Exchange Trust). References to Registrant here also
refer, where appropriate, to Registrant's predecessors.
Investment Policies
Investment Objective and Restrictions
The Fund's investment objective is to seek long-term growth of
capital and consequent long-term growth of income. This objective
cannot be changed without a vote of the shareholders. In order to
achieve this objective the Fund's assets normally will be invested
largely in a diversified and supervised portfolio of common stocks,
or securities convertible into common stocks, believed by management
to have growth potential over the years. However, there may be times
when, in management's judgment, the Fund's interests are best served
and the long range investment objective most likely to be achieved
by having a portion of the Fund's assets in cash or fixed income or
other defensive securities, and freedom to so administer the
portfolio is retained. Because the Fund invests primarily in stocks,
its major risks are those of stock investing, including sudden,
unpredictable drops in value and the potential for periods of
lackluster performance. The Fund may invest in companies with some
international business, and also may invest in foreign companies,
therefore, the Fund is subject to the risks associated with
international investing.
The Fund has no fundamental policy with respect to the issuance of
senior securities.
It is the Fund's policy not to purchase securities on margin or make
a short sale of any securities, or purchase or write puts, calls,
straddles or spreads except in connection with options on securities
and securities indices and options on futures with respect to
securities and securities indices.
It is the Fund's policy not to borrow money except for temporary,
emergency or extraordinary purposes and then only up to an amount
equal to 10% of its net assets.
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It is the Fund's policy not to underwrite securities of other
issuers except to the extent it may be deemed an "underwriter" when
it disposes of restricted securities. In addition, it is
Registrant's policy not to purchase or otherwise acquire securities
for its portfolio which are deemed by the Board of Trustees to be
restricted as to resale if such acquisition would cause more than
10% of the Fund's total assets (taken at market value) to be held in
such securities.
It is the Fund's policy not to make any investment which would cause
more than 25% of its total assets, taken at market value, to be
invested in any one industry.
It is the Fund's policy not to make any investment in real property.
The Fund has no fundamental policy with respect to investment in
real estate mortgage loans.
It is the Fund's policy not to invest in commodities or commodity
contracts except for futures and options on futures with respect to
securities and securities indices. (This policy is interpreted to
permit transactions in foreign currencies, including forward
contracts on foreign currencies, when used as a hedge with respect
to a specific foreign security held by the Fund.)
It is the Fund's policy not to make loans to other persons except
that Registrant may make loans of its portfolio securities
comprising not more than 10% of its total assets if such loans are
fully secured by cash when made. Registrant will lend portfolio
securities only when a determination has been made by the Board of
Trustees that the net return to the Fund in consideration of lending
the securities is reasonable and desirable, that any fee paid to the
broker placing such loan is reasonable and based solely upon
services rendered, that the lending of such securities is consistent
with the Fund's investment objective, and that no affiliate of the
Fund or of State Street Research & Management Company (the
"Management Company") is involved in such lending transaction or is
receiving any fees in connection therewith.
It is the Fund's policy not:
(a) To purchase oil, gas, or other mineral leases or
partnership interests in oil, gas, or other exploration
programs;
(b) To purchase for its portfolio, securities of any issuer
(other than the United States or its instrumentalities)
if such purchase at the time would cause more than 5% of
the total assets of Registrant (taken at market value)
to be invested in the securities of such issuer;
(c) To purchase for its portfolio, securities of any issuer
if such purchase at the time thereof would cause more
than 10% of any class of securities of such issuer to be
held by the Fund;
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(d) To make investments for the purpose of exercising
control or management of other companies;
(e) To purchase securities for its portfolio issued by any
other investment company;
(f) To purchase securities of any issuer which has a record
of less than three years' continuous operation if such
purchase would cause more than 5% of the Fund's total
assets (taken at market value) to be invested in the
securities of such issuers; provided that any such three
year period may include the operation of any predecessor
company, partnership, or individual enterprise if the
issuer whose securities are to be purchased came into
existence as a result of a merger, consolidation,
reorganization, or the purchase of substantially all the
assets of such predecessor company, partnership, or
individual enterprise; or
(g) To purchase or retain any securities of an issuer if, to
the knowledge of the Fund, those officers and Trustees
of the Management Company who individually own
beneficially more than 1/2 of 1% of the shares or
securities of such issuer together own beneficially more
than 5% of such shares or securities.
Restricted Securities
It is the Fund's policy not to make an investment in restricted
securities, including restricted securities sold in accordance with
Rule 144A under the Securities Act of 1933 ("Rule 144A Securities")
if, as a result, more than 35% of the Fund's total assets are
invested in restricted securities, provided not more than 10% of the
Fund's total assets are invested in restricted securities other than
Rule 144A Securities.
Securities may be resold pursuant to Rule 144A under certain
circumstances only to qualified institutional buyers as defined in
the rule, and the markets and trading practices for such securities
are relatively new and still developing; depending on the
development of such markets, such Rule 144A Securities may be deemed
to be liquid as determined by or in accordance with methods adopted
by the Trustees. Under such methods the following factors are
considered, among others: the frequency of trades and quotes for the
security, the number of dealers and potential purchasers in the
market, marketmaking activity, and the nature of the security and
marketplace trades. Investments in Rule 144A Securities could have
the effect of increasing the level of the Fund's illiquidity to the
extent that qualified institutional buyers become, for a time,
uninterested in purchasing such securities. Also, the Fund may be
adversely impacted by the possible illiquidity and subjective
valuation of such securities in the absence of an active market for
them. Restricted securities that are not resalable under Rule 144A
may be subject to risks of illiquidity and subjective valuations to
a greater degree than Rule 144A Securities.
Foreign Investments
The Fund reserves the right to invest without limitation in
securities of non-U.S. issuers directly, or indirectly in the form
of American Depositary Receipts ("ADRs") and
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European Depositary Receipts ("EDRs"). Under current policy,
however, the Fund limits such investments, including ADRs and EDRs,
to a maximum of 35% of its total assets.
ADRs are receipts, typically issued by a U.S. bank or trust company,
which evidence ownership of underlying securities issued by a
foreign corporation or other entity. EDRs are receipts issued in
Europe which evidence a similar ownership arrangement. Generally,
ADRs in registered form are designed for use in U.S. securities
markets and EDRs are designed for use in European securities
markets. The underlying securities are not always denominated in the
same currency as the ADRs or EDRs. Although investment in the form
of ADRs or EDRs facilitates trading in foreign securities, it does
not mitigate all the risks associated with investing in foreign
securities.
ADRs are available through facilities which may be either
"sponsored" or "unsponsored." In a sponsored arrangement, the
foreign issuer establishes the facility, pays some or all of the
depository's fees, and usually agrees to provide shareholder
communications. In an unsponsored arrangement, the foreign issuer is
not involved, and the ADR holders pay the fees of the depository.
Sponsored ADRs are generally more advantageous to the ADR holders
and the issuer than are unsponsored ADRs. More and higher fees are
generally charged in an unsponsored program compared to a sponsored
facility. Only sponsored ADRs may be listed on the New York or
American Stock Exchanges. Unsponsored ADRs may prove to be more
risky due to (a) the additional costs involved to the Fund; (b) the
relative illiquidity of the issue in U.S. markets; and (c) the
possibility of higher trading costs in the over-the-counter market
as opposed to exchange-based trading. The Fund will take these and
other risk considerations into account before making an investment
in an unsponsored ADR.
The risks associated with investments in foreign securities include
those resulting from fluctuations in currency exchange rates,
revaluation of currencies, future political and economic
developments, including the risks of nationalization or
expropriation, the possible imposition of currency exchange
blockages, higher operating expenses, foreign withholding and other
taxes which may reduce investment return, reduced availability of
public information concerning issuers and the fact that foreign
issuers are not generally subject to uniform accounting, auditing
and financial reporting standards or to other regulatory practices
and requirements comparable to those applicable to domestic issuers.
Moreover, securities of many foreign issuers may be less liquid and
their prices more volatile than those of securities of comparable
domestic issuers.
It is anticipated that most of the foreign investments of the Fund
will consist of securities of issuers in countries with developed
economies. However, the Fund may also invest
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in the securities of issuers in countries with less developed
economies as deemed appropriate by the Management Company. Such
countries include countries that have an emerging stock market that
trades a small number of securities and/or countries with economies
that are based on only a few industries. To the extent the Fund
invests in such securities, it will be subject to a variety of
additional risks, including risks associated with political
instability, economies based on relatively few industries, lesser
market liquidity, high rates of inflation, significant price
volatility of portfolio holdings and high levels of external debt in
the relevant country.
Although the Fund may invest in securities denominated in foreign
currencies, the Fund values its securities and other assets in U.S.
dollars. As a result, the net asset value of the Fund's shares may
fluctuate with U.S. dollar exchange rates as well as with price
changes of the Fund's securities in the various local markets and
currencies. Thus, an increase in the value of the U.S. dollar
compared to the currencies in which the Fund makes its investments
could reduce the effect of increases and magnify the effect of
decreases in the prices of the Fund's securities in their local
markets. Conversely, a decrease in the value of the U.S. dollar will
have the opposite effect of magnifying the effect of increases and
reducing the effect of decreases in the prices of the Fund's
securities in the local markets.
Currency Transactions
In order to protect against the effect of uncertain future exchange
rates on securities denominated in foreign currencies, the Fund may
engage in currency exchange transactions either on a spot (i.e.,
cash) basis at the rate prevailing in the currency exchange market
or by entering into forward contracts to purchase or sell
currencies. Although such contracts tend to minimize the risk of
loss resulting from a correctly predicted decline in value of hedged
currency, they tend to limit any potential gain that might result
should the value of such currency increase. In entering a forward
currency transaction, the Fund is dependent upon the
creditworthiness and good faith of the counterparty. The Fund
attempts to reduce the risks of nonperformance by the counterparty
by dealing only with established, large institutions with which the
Management Company has done substantial business in the past.
The Fund's dealings in forward currency exchange contracts will be
limited to hedging involving either specific transactions or
aggregate portfolio positions. A forward currency contract involves
an obligation to purchase or sell a specific currency at a future
date, which may be any fixed
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number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts
are not commodities and are entered into in the interbank market
conducted directly between currency traders (usually large
commercial banks) and their customers. Although spot and forward
contracts will be used primarily to protect the Fund from adverse
currency movements, they also involve the risk that anticipated
currency movements will not be accurately predicted, which may
result in losses to the Fund. This method of protecting the value of
the Fund's portfolio securities against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices of
the securities. It simply establishes a rate of exchange that can be
achieved at some future point in time. Although such contracts tend
to minimize the risk of loss due to a decline in the value of hedged
currency, they tend to limit any potential gain that might result
should the value of such currency increase.
Derivatives
The Fund may buy and sell certain types of derivatives such as
options, futures contracts, options on futures contracts, and swaps
under circumstances in which such instruments are expected by the
Management Company to aid in achieving the Fund's investment
objective. The Fund may also purchase instruments with
characteristics of both futures and securities (e.g., debt
instruments with
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interest and principal payments determined by reference to the value
of a commodity or a currency at a future time) and which, therefore,
possess the risks of both futures and securities investments.
Derivatives, such as options, futures contracts, options on futures
contracts, and swaps enable the Fund to take both "short" positions
(positions which anticipate a decline in the market value of a
particular asset or index) and "long" positions (positions which
anticipate an increase in the market value of a particular asset or
index). The Fund may also use strategies which involve simultaneous
short and long positions in response to specific market conditions,
such as where the Investment Manager anticipates unusually high or
low market volatility.
The Management Company may enter into derivative positions for the
Fund for either hedging or non-hedging purposes. The term hedging is
applied to defensive strategies designed to protect the Fund from an
expected decline in the market value of an asset or group of assets
that the Fund owns (in the case of a short hedge) or to protect the
Fund from an expected rise in the market value of an asset or group
of assets which it intends to acquire in the future (in the case of
a long or "anticipatory" hedge). Non-hedging strategies include
strategies designed to produce incremental income (such as the
option writing strategy described below) or "speculative" strategies
which are undertaken to profit (i) from an expected decline in the
market value of an asset or group of assets which the Fund does not
own or (ii) expected increases in the market value of an asset which
it does not plan to acquire. Information about specific types of
instruments is provided below.
Futures Contracts. Futures contracts are publicly traded contracts
to buy or sell an underlying asset or group of assets, such as a
currency, or an index of securities, at a future time at a specified
price. A contract to buy establishes a long position while a
contract to sell establishes a short position.
The purchase of a futures contract on an equity security or an index
of equity securities normally enables a buyer to participate in the
market movement of the underlying asset or index after paying a
transaction charge and posting margin in an amount equal to a small
percentage of the value of the underlying asset or index. The Fund
will initially be required to deposit with the Trust's custodian or
the futures commission merchant effecting the futures transaction an
amount of "initial margin" in cash or securities, as permitted under
applicable regulatory policies.
Initial margin in futures transactions is different from margin in
securities transactions in that the former does not involve the
borrowing of funds by the customer to finance the transaction.
Rather, the initial margin is like a performance bond or good faith
deposit on the contract. Subsequent payments (called "maintenance
margin") to and from the broker will be made on a daily basis as the
price of the underlying asset fluctuates. This process is known as
"marking to market." For example, when the Fund has taken a long
position in a futures contract and the value of the underlying asset
has risen, that position will have increased in value and the Fund
will receive from the broker a maintenance margin payment equal to
the increase in value of the underlying asset. Conversely, when the
Fund has taken a long position
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in a futures contract and the value of the underlying instrument has
declined, the position would be less valuable, and the Fund would be
required to make a maintenance margin payment to the broker.
At any time prior to expiration of the futures contract, the Fund
may elect to close the position by taking an opposite position which
will terminate the Fund's position in the futures contract. A final
determination of maintenance margin is then made, additional cash is
required to be paid by or released to the Fund, and the Fund
realizes a loss or a gain. While futures contracts with respect to
securities do provide for the delivery and acceptance of such
securities, such delivery and acceptance are seldom made.
In transactions establishing a long position in a futures contract,
assets equal to the face value of the futures contract will be
identified by the Fund to the Trust's custodian for maintenance in a
separate account to insure that the use of such futures contracts is
unleveraged. Similarly, assets having a value equal to the aggregate
face value of the futures contract will be identified with respect
to each short position. The Fund will utilize such assets and
methods of cover as appropriate under applicable exchange and
regulatory policies.
Options. The Fund may use options to implement its investment
strategy. There are two basic types of options: "puts" and "calls."
Each type of option can establish either a long or a short position,
depending upon whether the Fund is the purchaser or the writer of
the option. A call option on a security, for example, gives the
purchaser of the option the right to buy, and the writer the
obligation to sell, the underlying asset at the exercise price
during the option period. Conversely, a put option on a security
gives the purchaser the right to sell, and the writer the obligation
to buy, the underlying asset at the exercise price during the option
period.
Purchased options have defined risk, that is, the premium paid for
the option, no matter how adversely the price of the underlying
asset moves, while affording an opportunity for gain corresponding
to the increase or decrease in the value of the optioned asset. In
general, a purchased put increases in value as the value of the
underlying security falls and a purchased call increases in value as
the value of the underlying security rises.
The principal reason to write options is to generate extra income
(the premium paid by the buyer). Written options have varying
degrees of risk. An uncovered written call option theoretically
carries unlimited risk, as the market price of the underlying asset
could rise far above the exercise price before its expiration. This
risk is tempered when the call option is covered, that is, when the
option writer owns the underlying asset. In this case, the writer
runs the risk of the lost opportunity to participate in the
appreciation in value of the asset rather than the risk of an
out-of-pocket loss. A written put option has defined risk, that is,
the difference between the agreed upon price that the Fund must pay
to the buyer upon exercise of the put and the value, which could be
zero, of the asset at the time of exercise.
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The obligation of the writer of an option continues until the writer
effects a closing purchase transaction or until the option expires.
To secure its obligation to deliver the underlying asset in the case
of a call option, or to pay for the underlying asset in the case of
a put option, a covered writer is required to deposit in escrow the
underlying security or other assets in accordance with the rules of
the applicable clearing corporation and exchanges.
Among the options which the Fund may enter are options on securities
indices. In general, options on indices of securities are similar to
options on the securities themselves except that delivery
requirements are different. For example, a put option on an index of
securities does not give the holder the right to make actual
delivery of a basket of securities but instead gives the holder the
right to receive an amount of cash upon exercise of the option if
the value of the underlying index has fallen below the exercise
price. The amount of cash received will be equal to the difference
between the closing price of the index and the exercise price of the
option expressed in dollars times a specified multiple. As with
options on equity securities or futures contracts, the Fund may
offset its position in index options prior to expiration by entering
into a closing transaction on an exchange or it may let the option
expire unexercised.
A securities index assigns relative values to the securities
included in the index and the index options are based on a broad
market index. In connection with the use of such options, the Fund
may cover its position by identifying assets having a value equal to
the aggregate face value of the option position taken.
Options on Futures Contracts. An option on a futures contract gives
the purchaser the right, in return for the premium paid, to assume a
position in a futures contract (a long position if the option is a
call and a short position if the option is a put) at a specified
exercise price at any time during the period of the option.
Limitations and Risks of Options and Futures Activity. The Fund may
not establish a position in a commodity futures contract or purchase
or sell a commodity option contract for other than bona fide hedging
purposes if immediately thereafter the sum of the amount of initial
margin deposits and premiums required to establish such positions
for such nonhedging purposes would exceed 5% of the market value of
the Fund's net assets. The Fund applies a similar policy to options
that are not commodities.
As noted above, the Fund may engage in both hedging and nonhedging
strategies. Although effective hedging can generally capture the
bulk of a desired risk adjustment, no hedge is completely effective.
The Fund's ability to hedge effectively through transactions in
futures and options depends on the degree to which price movements
in its holdings correlate with price movements of the futures and
options.
Nonhedging strategies typically involve special risks. The
profitability of the Fund's non-hedging strategies will depend on
the ability of the Management Company to analyze both the applicable
derivatives market and the market for the underlying asset or group
of assets.
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Derivatives markets are often more volatile than corresponding
securities markets and a relatively small change in the price of the
underlying asset or group of assets can have a magnified effect upon
the price of a related derivative instrument.
Derivatives markets also are often less liquid than the market for
the underlying asset or group of assets. Some positions in futures
and options may be closed out only on an exchange which provides a
secondary market therefor. There can be no assurance that a liquid
secondary market will exist for any particular futures contract or
option at any specific time. Thus, it may not be possible to close
such an option or futures position prior to maturity. The inability
to close options and futures positions also could have an adverse
impact on the Fund's ability to effectively carry out their
derivative strategies and might, in some cases, require the Fund to
deposit cash to meet applicable margin requirements. The Fund will
enter into an option or futures position only if it appears to be a
liquid investment.
Swaps. The Fund may enter into various forms of swap arrangements
with counterparties with respect to interest rates, currency rates
or indices, including purchase of caps, floors and collars as
described below. In an interest rate swap the Fund could agree for a
specified period to pay a bank or investment banker the floating
rate of interest on a so-called notional principal amount (i.e., an
assumed figure selected by the parties for this purpose) in exchange
for agreement by the bank or investment banker to pay the Fund a
fixed rate of interest on the notional principal amount. In a
currency swap the Fund would agree with the other party to exchange
cash flows based on the relative differences in values of a notional
amount of two (or more) currencies; in an index swap, the Fund would
agree to exchange cash flows on a notional amount based on changes
in the values of the selected indices. Purchase of a cap entitles
the purchaser to receive payments from the seller on a notional
amount to the extent that the selected index exceeds an agreed upon
interest rate or amount whereas purchase of a floor entitles the
purchaser to receive such payments to the extent the selected index
falls below an agreed upon interest rate or amount. A collar
combines a cap and a floor.
The Fund may enter credit protection swap arrangements involving the
sale by the Fund of a put option on a debt security which is
exercisable by the buyer upon certain events, such as a default by
the referenced creditor on the underlying debt or a bankruptcy event
of the creditor.
Most swaps entered into by the Fund will be on a net basis; for
example, in an interest rate swap, amounts generated by application
of the fixed rate and the floating rate to the notional principal
amount would first offset one another, with the Fund either
receiving or paying the difference between such amounts. In order to
be in a position to meet any obligations resulting from swaps, the
Fund will set up a segregated custodial account to hold appropriate
liquid assets, including cash; for swaps entered into on a net
basis, assets will be segregated having a daily net asset value
equal to any excess of the Fund's accrued obligations over the
accrued obligations of the other party, while for swaps on other
than a net basis assets will be segregated having a value equal to
the total amount of the Fund's obligations.
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These arrangements will be made primarily for hedging purposes, to
preserve the return on an investment or on a portion of the Fund's
portfolio. However, the Fund may, as noted above, enter into such
arrangements for income purposes to the extent permitted by the
Commodities Futures Trading Commission for entities which are not
commodity pool operators, such as the Fund. In entering a swap
arrangement, the Fund is dependent upon the creditworthiness and
good faith of the counterparty. The Fund attempts to reduce the
risks of nonperformance by the counterparty by dealing only with
established, reputable institutions. The swap market is still
relatively new and emerging; positions in swap arrangements may
become illiquid to the extent that nonstandard arrangements with one
counterparty are not readily transferable to another counterparty or
if a market for the transfer of swap positions does not develop. The
use of interest rate swaps is a highly specialized activity which
involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. If the
Management Company is incorrect in its forecasts of market values,
interest rates and other applicable factors, the investment
performance of the Fund would diminish compared with what it would
have been if these investment techniques were not used. Moreover,
even if the Management Company is correct in its forecasts, there is
a risk that the swap position may correlate imperfectly with the
price of the asset or liability being hedged.
Securities Lending. The Fund may lend portfolio securities with a
value of up to 10% of its total assets. The Fund will receive cash
or cash equivalents (e.g., U.S. Government obligations) as
collateral in an amount equal to at least 100% of the current market
value of the loaned securities plus accrued interest. Collateral
received by the Fund will generally be held in the form tendered,
although cash may be invested in securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities,
irrevocable stand-by letters of credit issued by a bank, or any
combination thereof. The investing of cash collateral received from
loaning portfolio securities involves leverage which magnifies the
potential for gain or loss on monies invested and, therefore,
results in an increase in the volatility of the Fund's outstanding
securities. Such loans may be
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terminated at any time.
The Fund may receive a lending fee and will retain rights to
dividends, interest or other distributions on the loaned securities.
Voting rights pass with the lending, although the Fund may call
loans to vote proxies if desired. Should the borrower of the
securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Loans are made
only to borrowers which are deemed by the Management Company to be
of good financial standing.
Industry Classifications. In determining how much of the portfolio
is invested in a given industry, the following industry
classifications are currently used. Securities issued or guaranteed
as to principal or interest by the U.S. Government or its agencies
or instrumentalities or mixed- ownership Government corporations or
sponsored enterprises (including repurchase agreements involving
U.S. Government securities to the extent excludable under relevant
regulatory interpretations) are excluded. Securities issued by
foreign governments are also excluded. Companies engaged in the
business of financing will be classified according to the industries
of the parent companies or industries that otherwise most affect
such financing companies. Issuers of asset-backed pools will be
classified as separate industries based on the nature of the
underlying assets, such as mortgages and credit card receivables.
"Asset-backed--Mortgages" includes private pools of nongovernment
backed mortgages.
<TABLE>
<S> <C>
Autos & Transportation Financial Data Processing
- ---------------------- Services & Systems
Air Transport Insurance
Auto Parts Miscellaneous Financial
Automobiles Real Estate Investment
Miscellaneous Trusts
Transportation Rental & Leasing Services:
Railroad Equipment Commercial
Railroads Securities Brokerage &
Recreational Vehicles & Services
Boats
Tires & Rubber
Truckers Health Care
-----------
Drugs & Biotechnology
Consumer Discretionary Health Care Facilities
- ---------------------- Health Care Services
Advertising Agencies Hospital Supply
Casino/Gambling, Service Miscellaneous
Hotel/Motel
Commercial Services
Communications, Media & Integrated Oils
Entertainment ---------------
Consumer Electronics Oil: Integrated Domestic
Consumer Products Oil: Integrated International
Consumer Services
Household Furnishings
Leisure Time Materials & Processing
Photography ----------------------
Printing & Publishing Agriculture
Restaurants Building & Construction
Retail Chemicals
Shoes Containers & Packaging
Textile Apparel Diversified Manufacturing
Manufacturers Engineering & Contracting
Toys Services
Fertilizers
Forest Products
Consumer Staples Gold & Precious Metals
- ---------------- Miscellaneous Materials &
Beverages Processing
Drug & Grocery Store Non-Ferrous Metals
Chains Office Supplies
Foods Paper and Forest Products
Household Products Real Estate & Construction
Tobacco Steel
Textile Products
Financial Services
- ------------------
Banks & Savings and Loans
</TABLE>
<TABLE>
<CAPTION>
Other Producer Durables Technology
- ---------------- ----------------- ----------
<S> <C> <C>
Trust Certificates-- Aerospace Communications Technology
Government Related Electrical Equipment & Computer Software
Lending Components Computer Technology
Asset-backed--Mortgages Electronics: Industrial Electronics
Asset-backed--Credit Card Homebuilding Electronics: Semi-
Receivables Industrial Products Conductors/Components
Miscellaneous Machine Tools Miscellaneous Technology
Multi-Sector Companies Machinery
Miscellaneous Equipment
Miscellaneous Producer Utilities
Other Energy Durables ---------
- ------------ Office Furniture & Business Miscellaneous Utilities
Gas Pipelines Equipment Utilities: Cable TV & Radio
Miscellaneous Energy Pollution Control and Utilities: Electrical
Offshore Drilling Environmental Services Utilities: Gas Distribution
Oil and Gas Producers Production Technology Utilities: Telecommunications
Oil Well Equipment & Equipment Utilities: Water
Services Telecommunications
Equipment
</TABLE>
Computer Related Risks
- ----------------------
Many mutual funds and other companies that issue securities, as well as
government entities upon whom those mutual funds and companies depend, may be
adversely affected by computer systems (whether their own systems or systems of
their service providers) that do not properly process dates beginning with
January 1, 2000 and information related to those dates.
The Investment Manager currently is in the process of reviewing its
internal computer systems as they relate to the Fund, as well as the computer
systems of those service providers upon which the Fund relies, in order to
obtain reasonable assurances that the Fund will not experience a material
adverse impact related to the problem. The Fund does not currently anticipate
that the problem will have a material adverse impact on its portfolio
investments, taken as a whole. There can be no assurances in this area, however,
including the possibility that the problem could negatively affect the
investment markets or the economy generally.
13
<PAGE>
Trustees and Officers
Under Registrant's Master Trust Agreement, subject to the terms
thereof, Registrant's Board of Trustees has general management and control of
all the property and affairs of the Fund.
The Trustees and principal officers of the Trust, their addresses,
and their principal occupations and positions with certain affiliates of the
Management Company are set forth below.
*+Peter C. Bennett, One Financial Center, Boston, MA 02111, serves
as Vice President of the Trust. He is 60. His principal occupation is currently,
and during the past five years has been, Executive Vice President of State
Street Research & Management Company. Mr. Bennett is also a Director of State
Street Research & Management Company. Mr. Bennett's other principal business
affiliation is Director, State Street Research Investment Services, Inc.
+Bruce R. Bond, 100 Minuteman Road, Andover, MA 01810, serves as
Trustee of the Trust. He is 52. His principal occupation is Chairman of the
Board, Chief Executive Officer and President of PictureTel Corporation. During
the past five years, Mr. Bond has also served as Chief Executive Officer of ANS
Communications (a communications networking company) and as managing director of
British Telecommunications PLC.
+Steve A. Garban, The Pennsylvania State University, 208 Old Main,
University Park, PA 16802, serves as Trustee of the Trust. He is 61. He is
retired and was formerly Senior Vice President Finance and Operations and
Treasurer Emeritus of The Pennsylvania State University.
+Malcolm T. Hopkins, 14 Brookside Road, Biltmore Forest, Asheville,
NC 28803, serves as Trustee of the Trust. He is 71. He is engaged principally
in private investments. Previously, he was Vice Chairman of the Board and Chief
Financial Officer of St. Regis Corp.
*+Gerard P. Maus, One Financial Center, Boston, MA 02111, serves as
Treasurer of the Trust. He is 48. His principal occupation is currently, and
during the past five years has been, Executive Vice President, Treasurer, Chief
Financial Officer, Chief Administrative Officer and Director of State Street
Research & Management Company. Mr. Maus's other principal business affiliations
include Executive Vice President, Treasurer, Chief Financial Officer, Chief
Administrative Officer and Director of State Street Research Investment
Services, Inc.
*+Francis J. McNamara, III, One Financial Center, Boston, MA 02111,
serves as Secretary and General Counsel of the Trust. He is 43. His principal
occupation is Executive Vice President, General Counsel and Secretary of State
Street Research & Management Company. During the past five years he has also
served as Senior Vice President of State Street Research & Management Company
and as Senior Vice President, General Counsel and Assistant Secretary of The
Boston Company, Inc., Boston Safe Deposit and Trust Company and The Boston
Company Advisors, Inc. Mr. McNamara's other principal business affiliations
include Executive Vice President, General Counsel and Clerk of State Street
Research Investment Services, Inc.
- ------------------------------------------------
* or + See footnotes on page 16
14
<PAGE>
+Dean O. Morton, 3200 Hillview Avenue, Palo Alto, CA 94304, serves
as Trustee of the Trust. He is 67. He is retired and was formerly Executive Vice
President, Chief Operating Officer and Director of Hewlett-Packard Company.
+Susan M. Phillips, The George Washington University, 710 21st
Street, Suite 206, Washington, DC 20052, serves as Trustee of the Trust. She is
56. Her principal occupation is currently Dean of the School of Business and
Public Management at George Washington University and Professor of Finance.
Previously, she was a member of the Board of Governors of the Federal Reserve
System and Chairman and Commissioner of the Commodity Futures Trading
Commission.
+Toby Rosenblatt, 3409 Pacific Avenue, San Francisco, CA 94118,
serves as Trustee of the Trust. He is 60. His principal occupations during the
past five years have been President of The Glen Ellen Company, a private
investment company and Vice President of Founders Investments Ltd.
+Michael S. Scott Morton, Massachusetts Institute of Technology,
77 Massachusetts Avenue, Cambridge, MA 02139, serves as Trustee of the Trust. He
is 61. His principal occupation during the past five years has been Jay W.
Forrester Professor of Management at Sloan School of Management, Massachusetts
Institute of Technology.
*+Ralph F. Verni, One Financial Center, Boston, MA 02111, serves as
Chairman of the Board, President, Chief Executive Officer and Trustee of the
Trust. He is 56. His principal occupation is currently, and during the past five
years has been, Chairman of the Board, President, Chief Executive Officer and
Director of State Street Research & Management Company. Mr. Verni's other
principal business affiliations include Chairman of the Board and Director of
State Street Research Investment Services, Inc. (until February 1996, prior
positions as President and Chief Executive Officer).
- ------------------------------------------------
* or + See footnotes on page 16
15
<PAGE>
*+James M. Weiss, One Financial Center, Boston, MA 02111, serves
as Vice President of the Trust. He is 52. His principal occupation is Senior
Vice President of State Street Research & Management Company. During the past
five years he has also served as President and Chief Investment Officer of IDS
Equity Advisors.
*+Kennard Woodworth, Jr., One Financial Center, Boston, MA 02111,
serves as Vice President of the Trust. He is 60. His principal occupation is
currently, and during the past five years has been, Senior Vice President of
State Street Research & Management Company.
- ----------------------------
* These Trustees and/or officers are or may be deemed to be
"interested persons" of the Trust under the Investment Company Act
of 1940 (the "1940 Act") because of their affiliations with the
Trust's Management Company.
+ Serves as a Trustee and/or officer of one or more of the following
investment companies, each of which has an advisory relationship
with the Management Company or its parent, Metropolitan Life
Insurance Company ("Metropolitan"): State Street Research Equity
Trust, State Street Research Financial Trust, State Street Research
Income Trust, State Street Research Money Market Trust, State Street
Research Tax-Exempt Trust, State Street Research Capital Trust,
State Street Research Exchange Trust, State Street Research Growth
Trust, State Street Research Master Investment Trust, State Street
Research Securities Trust, State Street Research Portfolios, Inc.
and Metropolitan Series Fund, Inc.
16
<PAGE>
Controlling Persons and Principal Holders of Securities
There are no persons who control Registrant.
There are no persons who own or are known by Registrant to own of
record or beneficially 5% or more of Registrant's outstanding
shares.
Registrant's Trustees and principal Officers as a group beneficially
owned, as of March 31, 1999, less than 1% of the outstanding shares
of the Registrant.
The Trustees were compensated as follows:
<TABLE>
<CAPTION>
Name of Aggregate Total Compensation Total Compensation From
Trustee Compensation From All State Street All State Street Research Funds
From Fund(a) Research Funds and Metropolitan Series Fund, Inc.
Paid to Trustees(b) Paid to Trustees(c)
<S> <C> <C> <C>
Bruce R. Bond* $ 0 $ 0 $ 0
Steve A. Garban $4,500 $81,300 $110,300
Malcolm T. Hopkins $4,000 $69,700 $ 97,200
Dean Morton $4,600 $84,700 $110,700
Susan M. Phillips $1,235 $12,145 $ 12,145
Toby Rosenblatt $4,000 $72,600 $ 72,600
Michael S. Scott Morton $4,800 $89,500 $115,500
Ralph F. Verni $ 0 $ 0 $ 0
</TABLE>
*Elected Trustee on April 6, 1999 and therefore did not earn any
fees for the fiscal year ended December 31, 1998.
(a) For the Fund's fiscal year ended December 31, 1998.
(b) Includes compensation on behalf of all series of 11 investment
companies for which the Management Company served as sole investment
adviser. "Total Compensation From All State Street Research Funds
Paid to Trustees" is for the 12 months ended December 31, 1998. The
Fund does not provide any pension or retirement benefits for the
Trustees.
(c) Includes compensation on behalf of all series of 11 investment
companies for which the Management Company served as sole investment
adviser and all series of Metropolitan Series Fund, Inc. The
primary adviser to Metropolitan Series Fund, Inc. is Metropolitan
Life Insurance Company, which as retained the Management Company a
sub-adviser to certain series of Metropolitan Series Fund, Inc. The
figure indicated in this column includes compensation relating to
series of Metropolitan Series, Inc. which are not advised by the
Management Comapny. "Total Compensation From All State Street
Research Funds and Metropolitan Series Fund, Inc." is for the 12
months ended December 31, 1998.
17
<PAGE>
Investment Advisory and Other Services
Registrant's Management Company is State Street Research &
Management Company, a Delaware corporation, with offices at One
Financial Center, Boston, Massachusetts 02111-2690. The Management
Company is an indirect wholly-owned subsidiary of Metropolitan.
It, and its predecessor, a Massachusetts partnership having the same
name, have been providing investment advice and management to
clients since 1927. As of March 31, 1999, the Management Company had
assets of approximately $54.4 billion under direct or indirect
management.
Kennard Woodworth, Jr. has been responsible for the Fund's
day-to-day portfolio management since February 1993. He is a Senior
Vice President of the Management Company. He joined the Management
Company in 1986 and has worked as an investment professional since
1961.
The advisory fee payable quarterly by Registrant to the Management
Company is computed as a percentage of the average of the values of
the net assets of Registrant as determined at the close of each
business day during the quarter at the annual rate of 1/2 of 1% of
the value of such net assets.
The total investment management fees paid by Registrant to the
Management Company for the fiscal years ended December 31, 1998,
1997 and 1996 were $1,951,523, $1,630,111 and $1,281,051,
respectively.
Registrant's investment advisory contract with the Management
Company provides that the Management Company shall furnish
Registrant with suitable office space and facilities and such
management, investment advisory, statistical and research facilities
and services as may be required from time to time by Registrant.
Although under such contract Registrant is responsible for all of
its other expenses and services, the Management Company currently
follows, and expects to continue to follow, the practice of keeping
Registrant's general books and accounts relative to the net asset
value of Registrant's shares and of calculating such net asset
value, both at no additional charge.
Under the Code of Ethics of the Management Company, personnel are
only permitted to engage in personal securities transactions in
accordance with certain conditions relating to such person's
position, the identity of the security, the timing of the
transaction, and similar factors. Such personnel must report their
personal securities transactions quarterly and supply broker
confirmations of such transactions to the Management Company.
18
<PAGE>
State Street Bank and Trust Company (the "Bank") is the registrant's
custodian with main offices at 225 Franklin Street, Boston, MA
02110. As custodian the Bank maintains custody over all portfolio
securities and cash of Registrant. The Bank also acts as
Registrant's Dividend Disbursing Agent and as Transfer Agent (the
"Transfer Agent") with respect to shares of Registrant and in each
capacity maintains appropriate records relating to, and forwards
appropriate statements to, Registrant's shareholders.
Under a Shareholders' Administrative Services Agreement with the
Trust, State Street Research Investment Services, Inc. provides
shareholders' administrative services, such as responding to
inquiries and instructions from investors respecting shareholder
records and the redemption of shares of the Fund, and is entitled to
a fee for providing such services.
Registrant's independent accountants are PricewaterhouseCoopers LLP,
160 Federal Street, Boston, MA 02110. This firm is responsible for
all required audit functions with respect to Registrant's financial
statements and reviews Registrant's semi-annual and annual reports
to Registrant's shareholders as well as Registrant's filings with
the Securities and Exchange Commission on Form N-1A.
PORTFOLIO TRANSACTIONS
Portfolio Turnover
The Fund's portfolio turnover rate is determined by dividing the
lesser of securities purchases or sales for a year by the monthly
average value of securities held by the Fund (excluding, for
purposes of this determination, securities the maturities of which
as of the time of their acquisition were one year or less). The
portfolio turnover rates for the fiscal years ended December 31,
1997 and 1998 were 2.26% and 4.52%, respectively.
Brokerage Allocation
The Management Company's policy is to seek for its clients,
including the Fund, what in the Management Company's judgment will
be the best overall execution of purchase or sale orders and the
most favorable net prices in securities transactions consistent with
its judgment as to the business qualifications of the various broker
or dealer firms with whom the Management Company may do business,
and the Management Company may not necessarily choose the broker
offering the lowest available commission rate. Decisions with
respect to the market where the transaction is to be completed, to
the form of transaction (whether principal or agency), and to the
allocation of orders among brokers or dealers are made in accordance
with this policy. In selecting brokers or dealers to effect
portfolio transactions, consideration is given to their proven
integrity and financial responsibility, their demonstrated execution
experience and capabilities both generally and with respect to
particular markets or securities, the competitiveness of their
commission rates in agency transactions (and their net prices in
principal transactions), their willingness to commit capital, and
their clearance and settlement capability. The Management Company
makes every effort to keep informed of commission rate structures
and prevalent bid/ask spread characteristics of the markets and
securities in which transactions for the Fund occur. Against this
background, the Management Company evaluates the reasonableness of a
commission or a net price with respect to a particular transaction
by considering such factors as difficulty of execution or security
positioning by the executing firm. The Management Company may or may
not solicit competitive bids based on its judgment of the expected
benefit or harm to the execution process for that transaction.
When it appears that a number of firms could satisfy the required
standards in respect of a particular transaction, consideration may
also be given by the Management Company to services other than
execution services which certain of such firms have provided in the
past or may provide in the future. Negotiated commission rates and
prices, however, are based upon the Management Company's judgment of
the rate which reflects the execution requirements of the
transaction without regard to whether the broker provides services
in addition to execution. Among such other services are the
supplying of supplemental investment research; general economic,
political and business information; analytical and statistical data;
relevant market information, quotation equipment and services;
reports and information about specific companies, industries and
securities; purchase and sale recommendations for stocks and bonds;
portfolio strategy services; historical statistical information;
market data services providing information on specific issues and
prices; financial publications; proxy voting data and analysis
services; technical analysis of various aspects of the securities
markets, including technical charts; computer hardware used for
brokerage and research purposes; computer
19
<PAGE>
software and databases (including those contained in certain trading
systems and used for portfolio analysis and modeling in conjunction
with certain trading systems and including software providing
investment personnel with efficient access to current and historical
data from a variety of internal and external sources); portfolio
evaluation services; and data relating to the relative performance
of accounts. Certain of the nonexecution services provided by
broker-dealers may in turn be obtained by the broker-dealers from
third parties who are paid for such services by the broker-dealers.
In the case of the Fund and other registered investment companies
advised by the Management Company or its affiliates, the above
services may include data relating to performance, expenses and fees
of those investment companies and other investment companies. This
information is used by the Trustees or Directors of the investment
companies to fulfill their responsibility to oversee the quality of
the Management Company's advisory services and to review the fees
and other provisions contained in the advisory contracts between the
investment companies and the Management Company. The Management
Company considers these investment company services only in
connection with the execution of transactions on behalf of its
investment company clients and not its other clients.
The Management Company regularly reviews and evaluates the services
furnished by broker-dealers. The Management Company's investment
management personnel seek to evaluate the quality of the research
and other services provided by various broker-dealer firms, and the
results of these efforts are made available to the equity trading
department which uses this information as a consideration to the
extent described above in the selection of brokers to execute
portfolio transactions.
Some services furnished by broker-dealers may be used for research
and investment decision-making purposes, and also for marketing or
administrative purposes. Under these circumstances, the Management
Company allocates the cost of the services to determine the
proportion which is allocable to research or investment
decision-making and the proportion allocable to other purposes. The
Management Company pays directly from its own funds for that portion
allocable to uses other than research or investment decision-making.
Some research and execution services may benefit the Management
Company's clients as a whole, while others may benefit a specific
segment of clients. Not all such services will necessarily be used
exclusively in connection with the accounts which pay the
commissions to the broker-dealer providing the services.
The Management Company has no fixed agreements or understandings
with any broker-dealer as to the amount of brokerage business which
that firm may expect to receive for services supplied to the
Management Company or otherwise. There may be, however,
understandings with certain firms that in order for such firms to be
able to continuously supply certain services, they need to receive
an allocation of a specified amount of brokerage business. These
understandings are honored to the extent possible in accordance with
the policies set forth above.
It is not the Management Company's policy to intentionally pay a
firm a brokerage commission higher than that which another firm
would charge for handling the same transaction in recognition of
services (other than execution services) provided. However, the
Management Company is aware that this is an area where differences
of opinion as to fact and circumstances may exist, and in such
circumstances, if any, relies on the provisions of Section 28(e) of
the Securities Exchange Act of 1934. Brokerage commissions paid by
Registrant during the fiscal years ended December 31, 1998, 1997 and
1996 were $37,410, $22,650 and $37,358, respectively. During and at
the end of its most recent fiscal year, the Fund held in its
portfolio no securities of any
20
<PAGE>
entity that might be deemed to be a regular broker-dealer of the
Fund as defined under the 1940 Act.
In the case of the purchase of fixed income securities in
underwriting transactions, the Management Company follows any
instructions received from its clients as to the allocation of new
issue discounts, selling concessions and designations to brokers or
dealers which provide the client with research, performance
evaluation, master trustee and other services. In the absence of
instructions from the client, the Management Company may make such
allocations to broker-dealers which have provided the Management
Company with research and brokerage services.
In some instances, certain clients of the Management Company request
it to place all or part of the orders for their account with certain
brokers or dealers, which in some cases provide services to those
clients. The Management Company generally agrees to honor these
requests to the exact practicable. Clients may request that the
Management Company only effect transactions with the specified
broker-dealers if the broker-dealers are competitive as to price and
execution. When the request is not so conditioned, the Management
Company may be unable to negotiate commissions or obtain volume
discounts or best execution. In other cases, the Management Company
may be unable to negotiate commissions or obtain volume discounts or
best execution. In cases where the Investment Manager is requested
to use a particular broker-dealer, different commission may be
charged to clients making the requests. A client who requests the
use of a particular broker-dealer should understand that it may lose
the possible advantage which non-requesting clients derive from
aggregation of orders for several clients as a single transaction
for the purchase or sale of a particular security. Among other
reasons why best execution may not be achieved with directed
brokerage is that, in an effort to achieve orderly execution of
transactions, execution of orders that have designated particular
brokers may, at the discretion of the trading desk, be delayed until
execution of other non-designated orders has been completed.
When more than one client of the Management Company is seeking to
buy or sell the same security, the sale or purchase is carried out
in a manner which is considered fair and equitable to all accounts.
In allocating investments among various clients (including in what
sequence orders for trades are placed), the Management Company will
use its best business judgment and will take into account such
factors as the investment objectives of the clients, the amount of
investment funds available to each, the size of the order, the
amount already committed for each client to a specific investment
and the relative risks of the investments, all in order to provide
on balance a fair and equitable result to each client over time.
Although sharing in large transactions may sometimes affect price or
volume of shares acquired or sold, overall it is believed there may
be an advantage in execution. The Management Company may follow the
practice of grouping orders of various clients for execution to get
the benefit of lower prices or commission rates. In certain cases
where the aggregate order may be executed in a series of
transactions at various prices, the transactions are allocated as to
amount and price in a manner considered equitable to each so that
each receives, to the extent practicable, the average price of such
transactions. Exceptions may be made based on such factors as the
size of the account and the size of the trade. For example, the
Management Company may not aggregate trades where it believes that
it is in the best interests of clients not to do so, including
situations where aggregation might result in a large number of small
transactions with consequent increased custodial and other
transactional costs which may disproportionately impact smaller
accounts. Such disaggregation, depending on the circumstances, may
or may not result in such accounts receiving more or less favorable
execution relative to other clients.
Shares of Beneficial Interest and Other Securities
The Fund's only authorized and outstanding securities are shares of
beneficial interest ("Shares"). The following provisions are
applicable to the Shares.
(i) Distribution Rights
The Board of Trustees determines the amounts
of ordinary income and/or capital gains to
be distributed to the holders of Shares and
the time or times when such distributions
will be made. Distributions of net income,
exclusive of capital gains, to the extent
practicable will be made quarterly. Such
dividends are declared in additional Shares
with the option to each shareholder to elect
to receive the distribution in cash. The
Fund's current practice is to retain
long-term capital gains and to pay the
Federal
21
<PAGE>
taxes thereon at corporate capital gains tax
rates on behalf of the shareholders.
(ii) Voting Rights
Shareholders are entitled to one vote or
fraction thereof for each Share, or fraction
thereof, held. The Shares do not possess
cumulative voting rights.
(iii) Liquidation Rights
All Shares will participate on a pro rata
basis in net assets in the event of
liquidation.
(iv) Preemptive Rights
Shares and fractions thereof have no
Preemptive rights.
(v) Conversion Rights
Shares and fractions thereof have no
conversion rights.
(vi) Redemption Provisions
A Shareholder has the right to redeem his
Shares by delivering to the Fund either his
certificates, or an instrument of transfer
if no certificates have been issued, in good
order for transfer, with a separate written
request for redemption. Redemption is made
at the net asset value next computed after
such delivery. Good order means that
certificates or instruments of transfer must
be endorsed by the record owner(s) exactly
as the Shares are registered and the
signature(s) must be guaranteed by a bank, a
member firm of a national stock exchange, or
other eligible guarantor institution. The
Transfer Agent will not accept guarantees
(or notarizations) from notaries public. The
above requirements may be waived by the Fund
in certain instances.
Payment for Shares surrendered for
redemption is made within seven days. The
Fund may suspend the right of redemption or
postpone the date of payment of a redemption
or redemptions during any period when
trading on the New York Stock Exchange (the
"NYSE") is restricted or such Exchange is
closed (other than weekends or holidays), or
the Securities and Exchange Commission has
by order permitted such suspension, or the
Board of Trustees has determined an
emergency exists making disposal of
securities, or determination of the net
asset value of the Fund, not reasonably
practicable. The Fund, in the sole
discretion of
22
<PAGE>
the Board of Trustees, may pay, and
ordinarily will pay, the redemption price in
whole or in part by a distribution in kind
of securities from the portfolio of the Fund
in lieu of cash.
(vii) Sinking Fund Provisions
There are no sinking fund provisions.
(viii) Liability to Further Calls or to Assessment
There is no liability to further calls or to
assessment by the Registrant.
The rights of Registrant's shareholders set
forth in Registrant's Master Trust Agreement
may be modified by lawful amendment thereof
at any time, so long as such amendment does
not have a material adverse effect on the
rights of any shareholder with respect to
which such amendment is or purports to be
applicable by an instrument in writing
signed by a majority of Trustees (or by an
officer pursuant to a vote of a majority of
Trustees). Any such amendment that does have
a material adverse effect on the rights of
shareholders may be adopted as above
provided when authorized by vote of a
majority of shares then outstanding and
entitled to vote.
Under Massachusetts law, the shareholders of
the Trust could, under certain
circumstances, be held personally liable for
the obligations of the Trust. However, the
Master Trust Agreement of the Trust
disclaims shareholder liability for acts or
obligations of the Trust and provides for
indemnification for all losses and expenses
of any shareholder of the Fund held
personally liable for the obligations of the
Trust. Thus, the risk of a shareholder
incurring financial loss on account of
shareholder liability is limited to
circumstances in which the Fund would be
unable to meet its obligations. The
Management Company believes that, in view of
the above, the risk of personal liability to
shareholders is remote.
Shareholder inquiries should be made to
State Street Research Shareholder Services,
P.O. Box 8408, Boston, MA 02266-8408 or, if
by telephone, to 1-800-562-0032.
Redemption and Pricing of Securities
The Fund is not offering its Shares to the general public and
consequently has no offering price. Registrant has no principal
underwriter.
23
<PAGE>
As set forth above, redemptions of the Fund's Shares are made at
their net asset value next computed after delivery of such shares to
the Fund in good order for transfer under the conditions and in
accordance with the policies and procedures there stated.
The Fund reserves the right to pay redemptions in kind with
portfolio securities in lieu of cash. In accordance with its
election pursuant to Rule 18f-1 under the 1940 Act, the Fund may
limit the amount of redemption proceeds paid in cash. The Fund may
limit redemptions in cash with respect to each shareholder during
any ninety-day period to the lesser of (i) $250,000 or (ii) 1% of
the net asset value of the Fund at the beginning of such period. In
connection with any redemptions paid in kind with portfolio
securities, brokerage and other costs may be incurred by the
redeeming shareholder in the sale of the securities received.
The net asset value of the shares of the Fund is determined once
daily as of the close of the NYSE, ordinarily 4 P.M. New York
City time, Monday through Friday, on each day during which the NYSE
is open for unrestricted trading. The NYSE is currently closed for
Martin Luther King, Jr. Day, New Year's Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
The net asset value per share of the Fund is computed by dividing
the sum of the market value of the securities held by the Fund plus
any cash or other assets minus all liabilities by the total number
of outstanding shares of the Fund at such time. Any expenses, except
for extraordinary or nonrecurring expenses, borne by the Fund,
including the investment management fee payable to the Management
Company, are accrued daily.
In determining the values of the portfolio assets, the Trustees
utilize one or more pricing services to value, certain securities
for which market quotations are not readily available on a daily
basis. The pricing services may provide prices determined as of
times prior to the close of the NYSE.
In general, securities are valued as follows. Securities which are
listed or traded on the New York or American Stock Exchange are
valued at the price of the last quoted sale on the respective
exchange for that day. Securities which are listed or traded on a
national securities exchange or exchanges, but not on the New York
or American Stock Exchange, are valued at the price of the last
quoted sale on the exchange for that day prior to the close of the
NYSE. Securities not listed on any national securities exchange
which are traded "over the counter" and for which quotations are
available on the National Association of Securities Dealers' NASDAQ
System, or other system, are valued at the closing price supplied
through such system for that day at
24
<PAGE>
the close of the NYSE. Other securities are, in general, valued at
the mean of the bid and asked quotations last quoted prior to the
close of the NYSE if there are market quotations readily available,
or in the absence of such market quotations, then at the fair value
thereof as determined by or under authority of the Trustees of the
Trust with the use of such pricing services as may be deemed
appropriate or methodologies approved by the Trustees. The Trustees
also reserve the right to adopt other valuations based on fair value
in pricing in unusual circumstances where use of other methods as
discussed in part above, could otherwise have a material adverse
effect on the Fund as a whole.
Short-term debt instruments issued with a maturity of one year or
less which have a remaining maturity of 60 days or less are valued
using the amortized cost method, provided that during any period in
which more than 25% of the Fund's total assets is invested in
short-term debt securities the current market value of such
securities will be used in calculating net asset value per share in
lieu of the amortized cost method. The amortized cost method is used
when the value obtained is fair value. Under the amortized cost
method of valuation, the security is initially valued at cost on the
date of purchase (or in the case of short-term debt instruments
purchased with more than 60 days remaining to maturity, the market
value on the 61st day prior to maturity), and thereafter a constant
amortization to maturity of any discount or premium is assumed
regardless of the impact of fluctuating interest rates on the market
value of the security.
Tax Status
Registrant intends to qualify under those sections of the Internal
Revenue Code which provide that Registrant, so long as it so
qualifies, will pay no federal income taxes on investment income or
on capital gains to the extent they are distributed to Registrant's
shareholders.
Dividends paid out of investment income are taxable to Registrant's
shareholders at ordinary income tax rates whether they are taken by
Registrant's shareholders in additional shares of Registrant or in
cash. In general, such dividends are eligible for the dividends
received deduction for corporations. The percentage of Registrant's
dividends eligible for such tax treatment may be less than 100% to
the extent that less than 100% of the Registrant's gross income may
be from qualifying dividends of domestic corporations. Distributions
of capital gains, if made, will ordinarily be taxable to
Registrant's shareholders at federal capital gain rates regardless
of how long the underlying shares of Registrant have been held and
regardless of whether they are taken by the shareholder in
additional shares of Registrant or in cash.
Registrant currently follows a policy of distributing substantially
all of its net investment income (ordinarily
25
<PAGE>
no less than 98% to avoid imposition of an excise tax under the
Internal Revenue Code) to its shareholders and of retaining net
realized capital gains and paying the Federal tax thereon on behalf
of its shareholders. Retention by Registrant of its net realized
long-term capital gains and payment of the tax thereon on behalf of
shareholders results in each shareholder including in his income tax
return his proportionate share of such gains and taking a credit for
the payment of the corporate tax thereon and of increasing the tax
basis of his shares in Registrant by an amount equal to the
difference between his proportionate share of such gains and the
amount of the tax paid on his behalf by Registrant.
Financial Statements
Each of the Investment Portfolio, the Statement of Assets and
Liabilities, the Statement of Operations, the Notes to Financial
Statements (including Financial Highlights), the Report of
Independent Accountants and Management's Discussion of Fund
Performance, which are included in the Annual Report to Shareholders
of State Street Research Exchange Fund, for the fiscal year ended
December 31, 1998, and the Statement of Changes in Net Assets for
the year ended December 31, 1998 and for the year ended December 31,
1997, also included in said Annual Report, are hereby incorporated
by reference from the Fund's Annual Report, filed with the
Securities and Exchange Commission (EDGAR accession number
0000950146-99-000354). Shareholder reports are available without
charge upon request. For more information call the State Street
Research Service Center at (800) 562-0032.
26
<PAGE>
Part C
STATE STREET RESEARCH EXCHANGE TRUST
PART C
OTHER INFORMATION
Item 23. Exhibits
Exhibits
(1) Master Trust Agreement and
Amendment No. 1 to the
Master Trust Agreement (v)
(2)(a) By-Laws (i)*
(2)(b) No. 1 to By-Laws effective
September 30, 1992 (iv)*
(5) Investment Advisory Contract (iii)**
(8)(a) Custodian Contract (ii)**
(8)(b) Data Access Services Addendum to Custodian
Contract
(11) Consent of PricewaterhouseCoopers LLP
(12) Not applicable
(17) First Amended and Restated Multiple Class
Expense Allocation Plan (vi)
(18)(a) Power of Attorney (vii)
(18)(b) Certificate of Board Resolution Respecting
Power of Attorney (vii)
(27) Financial Data Schedule
- ----------------------
Filed as part of the Registration Statement as noted below and incorporated
herein by reference:
Footnote Investment Company Act of 1940
Reference Registration/Amendment Date Filed
i Amendment No. 5 to April 26, 1989
Registration Statement
ii Amendment No. 6 to April 27, 1990
Registration Statement
iii Amendment No. 8 to April 30, 1991
Registration Statement
iv Amendment No. 10 to April 30, 1993
Registration Statement
v Amendment No. 13 to
Registration Statement April 29, 1996
vi Amendment No. 14 to
Registration Statement April 30, 1997
vii Amendment No. 15 to
Registration Statement April 30, 1998
* Filed electronically April 24, 1996
**Filed electronically April 30, 1998
C-1
<PAGE>
Item 24. Persons Controlled by or under Common Control with
Registrant
Inapplicable.
Item 25. Indemnification
Article VI of Registrant's Master Trust Agreement provides: The
Trust shall indemnify (from the assets of the Sub-Trust or
Sub-Trusts in question) each of its Trustees and officers (including
persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest
as a shareholder, creditor or otherwise (hereinafter referred to as
a "Covered Person")) against all liabilities, including but not
limited to amounts paid in satisfaction of judgments, in compromise
or as fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may
be or may have been involved as a party or otherwise or with which
such person may be or may have been threatened, while in office or
thereafter, by reason of being or having been such a Trustee or
officer, director or trustee, except with respect to any matter as
to which it has been determined that such Covered Person had acted
with willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered
Person's office (such conduct referred to hereafter as "Disabling
Conduct"). A determination that the Covered Person is entitled to
indemnification may be made by (i) a final decision on the merits by
a court or other body before whom the proceeding was brought that
the person to be indemnified was not liable by reason of Disabling
Conduct, (ii) dismissal of a court action or an administrative
proceeding against a Covered Person for insufficiency of evidence of
Disabling Conduct, or (iii) a reasonable determination, based upon a
review of the facts, that the indemnitee was not liable by reason of
Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as
defined in section 2(a)(19) of the 1940 Act nor parties to the
proceeding, or (b) an independent legal counsel in a written
opinion.
C-2
<PAGE>
Item 26. Business and Other Connections of Investment Adviser
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment adviser of the Registrant, and each
director, officer or partner of any such investment adviser, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
State Street Research & Investment Adviser Various investment advisory Boston, MA
Management Company clients
Arpiarian, Tanya None
Vice President
Bangs, Linda L. None
Vice President
Barnwell, Amy F.
Vice President
Beaudry, Matthew F.
Vice President
Bennett, Peter C. Vice President State Street Research Capital Trust Boston, MA
Director and Vice President State Street Research Exchange Trust Boston, MA
Executive Vice Vice President State Street Research Financial Trust Boston, MA
President Vice President State Street Research Growth Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Vice President State Street Research Equity Trust Boston, MA
Director State Street Research Investment Services, Inc. Boston, MA
Director and Chairman Boston Private Bank & Trust Co. Boston, MA
of Exec. Comm.
Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
Vice President State Street Research Securities Trust Boston, MA
President and Director Christian Camps & Conferences, Inc. Boston, MA
Chairman and Trustee Gordon College Wenham, MA
Bochman, Kathleen None
Vice President
Borzilleri, John Vice President Montgomery Securities San Francisco, CA
Senior Vice President (until 6/97)
(Vice President
until 4/98)
Bray, Michael J. None
Senior Vice President
(Vice President
until 4/98)
Brezinski, Karen None
Vice President
Brown, Susan H. None
Vice President
Buffum, Andrea L. None
Burbank, John F. None
Senior Vice President
Cabrera, Jesus A. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President
(Vice President
until 4/98)
C-3
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Calame, Mara D. Vice President and State Street Research Energy, Inc. Boston, MA
Vice President and Assistant Counsel
Assistant Secretary
Canavan, Joseph W. Assistant Treasurer State Street Research Equity Trust Boston, MA
Senior Vice President Assistant Treasurer State Street Research Financial Trust Boston, MA
(Vice President Assistant Treasurer State Street Research Income Trust Boston, MA
until 4/98) Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust Boston, MA
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Treasurer State Street Research Portfolios, Inc. Boston, MA
Carstens, Linda C. Vice President State Street Research Investment Boston, MA
Vice President Services, Inc.
Clifford, Jr., Paul J. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President
Coleman, Thomas J. None
Vice President
Cullen, Terrence J. Vice President Keystone-Evergreen Boston, MA
Vice President and Counsel
and Counsel, and (until 2/98)
Assistant Secretary
D'Vari, Ronald None
Vice President
Depp, Maureen G. Vice President Wellington Management Company Boston, MA
Vice President (until 9/97)
DeVeuve, Donald None
Vice President
DiFazio, Susan M.W. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Dillman, Thomas J. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President
Drake, Susan W. None
Vice President
Dudley, Catherine Senior Portfolio Manager Chancellor Capital Management Boston, MA
Senior Vice President (until 2/98)
Duggan, Peter J. None
Senior Vice President
Even, Karen K. None
Vice President
Federoff, Alex G. None
Vice President
Fee, Richard E. Vice President CIGNA Retirement and Investment Services Hartford, CT
Vice President (until 3/97)
Vice President State Street Research Investment Services, Inc. Boston, MA
Feliciano, Rosalina None
Vice President
Ficco, Bonnie A. None
Vice President
Fochtman, Jr., Leo None
Vice President
C-4
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
Fromm, Stuart Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Gardner, Michael D. None
Senior Vice President
Geer, Bartlett R. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Giroux, June M. None
Vice President
Govoni, Electra None
Vice President
Grace, Evan None
Vice President
Granger, Allison None
Vice President
Haggerty, Bryan D. None
Vice President
Hamilton, Jr., William A. Treasurer and Director Ellis Memorial and Eldredge House Boston, MA
Senior Vice President Treasurer and Director Nautical and Aviation Publishing Company, Inc. Baltimore, MD
Treasurer and Director North Conway Institute Boston, MA
Hanson, Phyllis None
Vice President
Haverty, Jr., Lawrence J. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President
Healy, Laura J. None
Vice President
Heineke, George R. None
Vice President
Hickman, Joanne Managing Director Zurich Investment Management Chicago, IL
Senior Vice President (until 1/98)
Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Huang, Jesse C. None
Vice President
Jackson, Jr., Vice President State Street Research Equity Trust Boston, MA
F. Gardner Trustee Certain trusts of related and
Senior Vice President non-related individuals
Trustee and Chairman of the Vincent Memorial Hospital Boston, MA
Board
Jamieson, Frederick H. Vice President and
Senior Vice President Asst. Treasurer State Street Research Investment Services, Inc. Boston, MA
Vice President and Asst.
Treasurer SSRM Holdings, Inc. Boston, MA
Vice President and MetLife Securities, Inc. New York, NY
Controller (until 1/97)
Jodka, Richard Portfolio Manager Frontier Capital Management Boston, MA
Senior Vice President (until 1/98)
Vice President State Street Research Capital Trust Boston, MA
C-5
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
Kallis, John H. Vice President State Street Research Financial Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Money Market Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Trustee 705 Realty Trust Washington, D.C.
Kasper, M. Katherine Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Kern, Stephen None
Vice President
Kiessling, Dyann H. Vice President State Street Research Money Market Trust Boston, MA
Vice President
King, Stephen Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Kluiber, Rudolph K. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President
(Vice President
until 4/98)
Kuhn, Stephen P. None
Vice President
Langholm, Knut Director State Street Research Luxembourg
Vice President
Leary, Eileen M. None
Vice President
Levanson, David E. None
Vice President
Lomasney, Mary T. Business Analyst Fidelity Investments Boston, MA
Vice President (until 6/97)
Marinella, Mark A. Portfolio Manager STW Fixed Income Management, Ltd. Boston, MA
Senior Vice President (Until 8/98)
Maurer, Jacqueline J. None
Vice President
C-6
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
McNamara, III, Francis J. Executive Vice President, State Street Research Investment Services, Inc. Boston, MA
Executive Vice Clerk and General Counsel
President, Secretary Secretary and General Counsel State Street Research Master Investment Trust Boston, MA
and General Counsel Secretary and General Counsel State Street Research Capital Trust Boston, MA
Secretary and General Counsel State Street Research Exchange Trust Boston, MA
Secretary and General Counsel State Street Research Growth Trust Boston, MA
Secretary and General Counsel State Street Research Securities Trust Boston, MA
Secretary and General Counsel State Street Research Equity Trust Boston, MA
Secretary and General Counsel State Street Research Financial Trust Boston, MA
Secretary and General Counsel State Street Research Income Trust Boston, MA
Secretary and General Counsel State Street Research Money Market Trust Boston, MA
Secretary and General Counsel State Street Research Tax-Exempt Trust Boston, MA
Secretary and General Counsel State Street Research Portfolios, Inc. Boston, MA
Secretary and General Counsel SSRM Holdings, Inc. Boston, MA
Maus, Gerard P. Treasurer State Street Research Equity Trust Boston, MA
Director, Executive Treasurer State Street Research Financial Trust Boston, MA
Vice President Treasurer State Street Research Income Trust Boston, MA
Treasurer, Chief Treasurer State Street Research Money Market Trust Boston, MA
Financial Officer and Treasurer State Street Research Tax-Exempt Trust Boston, MA
Chief Administrative Treasurer State Street Research Capital Trust Boston, MA
Officer Treasurer State Street Research Exchange Trust Boston, MA
Treasurer State Street Research Growth Trust Boston, MA
Treasurer State Street Research Master Investment Trust Boston, MA
Treasurer State Street Research Portfolios, Inc. Boston, MA
Treasurer State Street Research Securities Trust Boston, MA
Director, Executive Vice State Street Research Investment Services, Inc. Boston, MA
President, Treasurer and
Chief Financial Officer
Director Metric Holdings, Inc. San Francisco, CA
Director Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Treasurer and Chief SSRM Holdings, Inc. Boston, MA
Financial Officer
Treasurer (until 1/97) MetLife Securities, Inc. New York, NY
Director State Street Research Luxembourg
Milder, Judith J. None
Senior Vice President
Miller, Joan D. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Senior Vice President
C-7
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
Moore, Jr., Thomas P.
Senior Vice Vice President State Street Research Capital Trust Boston, MA
President (until 11/96)
Vice President State Street Research Exchange Trust Boston, MA
(until 2/97)
Vice President State Street Research Growth Trust Boston, MA
(until 2/97)
Vice President State Street Research Master Investment Trust Boston, MA
(until 2/97)
Vice President State Street Research Equity Trust Boston, MA
Director Hibernia Savings Bank Quincy, MA
Governor on the Board Association for Investment Management Charlottesville, VA
of Governors and Research
Morey, Andrew None
Vice President
Mulligan, JoAnne C. None
Senior Vice President
Orr, Stephen C. Member Technology Analysts of Boston Boston, MA
Vice President Member Electro-Science Analysts (of NYC) New York, NY
Paddon, Steven W. None
Vice President
Pannell, James C. None
Senior Vice President
(Vice President
until 4/97)
Peters, Kim M. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President
Pierce, James D. None
Vice President
Poritzky, Dean E. Portfolio Manager Fidelity Management Boston, MA
Vice President (until 4/97)
Pyle, David J. Analyst Oak Value Capital Management Durham, NC
Vice President (until 4/97)
Ragsdale, E.K. Easton Vice President State Street Research Financial Trust Boston, MA
Senior Vice President
Ransom, Clifford Director of NatWest Markets
Vice President Special Situations
Rawlins, Jeffrey A. None
Senior Vice President
Rice III, Daniel Joseph Vice President State Street Research Equity Trust Boston, MA
Senior Vice President
Richards, Scott None
Vice President
C-8
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
Romich, Douglas A. Assistant Treasurer State Street Research Equity Trust Boston, MA
Senior Vice President Assistant Treasurer State Street Research Financial Trust Boston, MA
(Vice President Assistant Treasurer State Street Research Income Trust Boston, MA
until 4/98) Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust Boston, MA
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Treasurer State Street Research Portfolios, Inc. Boston, MA
Ryan, Michael J. Vice President Delaware Management Philadelphia, PA
Senior Vice President (until 1/98)
Sanderson, Derek Senior Vice President Freedom Capital Management Boston, MA
Senior Vice President (until 10/97)
Saperstone, Paul None
Vice President
Schrage, Michael None
Vice President
Schultz, David C. Director and Treasurer Mafraq Hospital Association Mafraq, Jordan
Executive Vice President Member Association of Investment
Management Sales Executives Atlanta, GA
Member, Investment Committee Lexington Christian Academy Lexington, MA
Shaver, Jr. C. Troy President, Chief State Street Research Investment Services, Inc. Boston, MA
Executive Vice Executive Officer and
President Executive Vice President
Shean, William G. None
Vice President
Shively, Thomas A. Vice President State Street Research Financial Trust Boston, MA
Director and Vice President State Street Research Money Market Trust Boston, MA
Executive Vice Vice President State Street Research Tax-Exempt Trust Boston, MA
President Director State Street Research Investment Services, Inc Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
Shoemaker, Richard D. None
Senior Vice President
Stambaugh, Kenneth None
Vice President
(Assistant Vice
President until 9/97)
Strelow, Dan R. None
Senior Vice President
C-9
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
Stolberg, Thomas None
Vice President
Swanson, Amy McDermott None
Senior Vice President
Trebino, Anne M. Vice President SSRM Holdings, Inc. Boston, MA
Senior Vice President
Verni, Ralph F. Chairman, President, Chief State Street Research Capital Trust Boston, MA
Chairman, President, Executive Officer and Trustee
Chief Executive Chairman, President, Chief State Street Research Exchange Trust Boston, MA
Officer and Executive Officer and Trustee
Director Chairman, President, Chief State Street Research Growth Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Master Investment Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Securities Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Equity Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Financial Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Income Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Money Market Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Portfolios, Inc. Boston, MA
Executive Officer and Director
Chairman, President, Chief State Street Research Tax-Exempt Trust Boston, MA
Executive Officer and Trustee
Chairman and Director State Street Research Investment Services, Inc. Boston, MA
(President and Chief Executive
Officer until 2/96)
Chairman and Director Metric Holdings, Inc. San Francisco, CA
Director and Officer Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Chairman of the Board MetLife Securities, Inc. New York, NY
and Director (until 1/97)
President, Chief Executive SSRM Holdings, Inc. Boston, MA
Officer and Director
Director Colgate University Hamilton, NY
Director State Street Research Luxembourg
Chairman and Director SSR Realty Advisors, Inc. San Francisco, CA
C-10
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
Wade, Dudley Vice President State Street Research Growth Trust Boston, MA
Freeman Vice President State Street Research Master Investment Trust Boston, MA
Senior Vice
President
Wallace, Julie K. None
Vice President
Walsh, Tucker None
Vice President
Watts, Evan D., Jr. Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Weiss, James M. Vice President State Street Research Exchange Trust Boston, MA
Executive Vice President Vice President State Street Research Financial Trust Boston, MA
(Senior Vice President) Vice President State Street Research Growth Trust Boston, MA
until 6/98) Vice President State Street Research Securities Trust Boston, MA
Vice President State Street Research Capital Trust Boston, MA
Vice President State Street Research Equity Trust Boston, MA
Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Welch, Timothy None
Vice President
Westvold, Vice President State Street Research Securities Trust Boston, MA
Elizabeth McCombs
Senior Vice President
Wilkins, Kevin Senior Vice President State Street Research Investment Boston, MA
Senior Vice President (Vice President until 9/98) Services, Inc.
(Vice President Vice President Fidelity Investments Boston, MA
until 9/98) (until 7/97)
Wilson, John T. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Master Investment Trust Boston, MA
(Vice President
until 4/98)
C-11
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
Wing, Darman A. Senior Vice President and State Street Research Investment Services, Inc. Boston, MA
Senior Vice President, Asst. Clerk
Assistant Secretary Assistant Secretary and State Street Research Capital Trust Boston, MA
and Assistant Assistant General Counsel
General Counsel Assistant Secretary and State Street Research Exchange Trust Boston, MA
(Vice President Assistant General Counsel
until 4/98) Assistant Secretary and State Street Research Growth Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Master Investment Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Securities Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Equity Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Financial Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Income Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Money Market Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Tax-Exempt Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Portfolios, Inc. Boston, MA
Assistant General Counsel
Assistant Secretary and SSRM Holdings, Inc. Boston, MA
Assistant General Counsel
Woodbury, Robert S. None
Vice President
Woodworth, Jr., Kennard Vice President State Street Research Exchange Trust Boston, MA
Senior Vice Vice President State Street Research Growth Trust Boston, MA
President Vice President State Street Research Securities Trust Boston, MA
Wu, Norman N. Partner Atlantic-Acton Realty Framingham, MA
Senior Vice President Director Bond Analysts Society of Boston Boston, MA
Zuger, Peter A. Vice President State Street Research Equity Trust Boston, MA
Senior Vice Portfolio Manager American Century
President (until 9/98) Investment Management
</TABLE>
C-12
<PAGE>
Item 27. Principal Underwriters
Inapplicable.
Item 28. Location of Accounts and Records
Gerard P. Maus
State Street Research & Management Company
One Financial Center
Boston, MA 02111
Item 29. Management Services
Under a Shareholders' Administrative Services Agreement between the
Registrant and State Street Research Investment Services, Inc.
("SSRISI"), SSRISI provides shareholders' administrative services,
such as responding to inquiries and instructions from investors
respecting the redemption of shares of the Registrant and received
the amounts set forth below:
Year-end Year-end Year-end
12/31/96 12/31/97 12/31/98
-------- -------- --------
$3,680 $3,863 $5,666
Item 31. Undertakings
(a) Inapplicable
(b) Inapplicable
(c) Deleted
C-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston, and
Commonwealth of Massachusetts, on the 29th day of April, 1999.
STATE STREET RESEARCH EXCHANGE TRUST
Registrant
By /s/Francis J. McNamara, III
------------------------------
Francis J. McNamara, III
Secretary
Exhibit(8)(b)
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
----------------------------------------------------
AGREEMENT between each fund listed on Appendix A, (individually a "Fund"
and collectively, the "Funds") as amended from time to time, and State Street
Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets
of each Fund pursuant to a certain Custodian Agreement (the "Custodian
Agreement") for each of the respective Funds;
WHEREAS, State Street has developed and utilizes proprietary accounting
and other systems, including State Street's proprietary Multicurrency HORIZON(R)
Accounting System, in its role as custodian of each Fund, and maintains certain
Fund-related data ("Fund Data") in databases under the control and ownership of
State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to each Fund certain Data Access
Services solely for the benefit of the Fund, and intends to provide additional
services, consistent with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this Agreement, State
Street hereby agrees to provide each Fund with access to State Street's
Multicurrency HORIZON(R) Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports, solely on computer hardware, system software
and telecommunication links, as listed in Attachment B (the "Designated
Configuration") of the Fund, or certain third parties approved by State Street
that serve as investment advisors or investment managers (the "Investment
Advisor") or independent auditors (the "Independent Auditors") of a Fund and
solely with respect to the Fund or on any designated substitute or back-up
equipment configuration with State Street's written consent, such consent not to
be unreasonably withheld.
b. Data Access Services. State Street agrees to make available to each
Fund the Data Access Services subject to the terms and conditions of this
Agreement and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of each Fund to originate electronic
instructions to State Street on behalf of each Fund in order to (i) effect the
transfer or movement of cash or securities held under custody by State Street or
(ii) transmit accounting or other information (such transactions are referred to
herein as "Client
<PAGE>
Originated Electronic Financial Instructions"), and (iii) access data for the
purpose of reporting and analysis, shall be deemed to be Data Access Services
for purposes of this Agreement.
c. Additional Services. State Street may from time to time agree to make
available to a Fund additional Systems that are not described in the attachments
to this Agreement. In the absence of any other written agreement concerning such
additional systems, the term "System" shall include, and this Agreement shall
govern, a Fund's access to and use of any additional System made available by
State Street and/or accessed by the Fund.
2. NO USE OF THIRD PARTY SOFTWARE
State Street and each Fund acknowledge that in connection with the Data
Access Services provided under this Agreement, each Fund will have access,
through the Data Access Services, to Fund Data and to functions of State
Street's proprietary systems; provided, however that in no event will the Fund
have direct access to any third party systems-level software that retrieves data
for, stores data from, or otherwise supports the System.
3 . LIMITATION ON SCOPE OF USE
a. Designated Equipment: Designated Location. The System and the
Data Access Services shall be used and accessed solely on and through
the Designated Configuration at the offices of a Fund or the Investment
Advisor or Independent Auditor located in Boston, Massachusetts
("Designated Location").
b. Designated Configuration: Trained Personnel. State Street shall be
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and each Fund agree that
each will engage or retain the services of trained personnel to enable both
State Street and the Fund to perform their respective obligations under this
Agreement. State Street agrees to use commercially reasonable efforts to
maintain the System so that it remains serviceable, provided, however, that
State Street does not guarantee or assure uninterrupted remote access use of the
System.
c. Scope of Use. Each Fund will use the System and the Data Access
Services only for the processing of securities transactions, the keeping of
books of account for the Fund and accessing data for purposes of reporting and
analysis. Each Fund shall not, and shall cause its employees and agents not to
(i) permit any third party to use the System or the Data Access Services, (ii)
sell, rent, license or otherwise use the System or the Data Access Services in
the operation of a service bureau or for any purpose other than as expressly
authorized under this Agreement, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle without the prior
written consent of State Street, (iv) allow access to the System or the Data
Access Services through terminals or any other computer or telecommunications
facilities located outside the Designated Locations, (v) allow or cause any
information (other than portfolio holdings, valuations of portfolio holdings,
and other information reasonably necessary for the management or distribution of
the assets of the Fund) transmitted from State Street's databases, including
data from third party sources, available through use of the
2
<PAGE>
System or the Data Access Services to be redistributed or retransmitted to
another computer, terminal or other device for other than use for or on behalf
of the Fund or (vi) modify the System in any way, including without limitation,
developing any software for or attaching any devices or computer programs to any
equipment, system, software or database which forms a part of or is resident on
the Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a planned
System shutdown, each Fund's access to services performed by the System or to
Data Access Services at the Designated Location may be transferred to a
different location only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, each Fund may use any back-up site
included in the Designated Configuration or any other back-up site agreed to by
State Street, which agreement will not be unreasonably withheld. Each Fund may
secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.
e. Title. Title and all ownership and proprietary rights to the System,
including any enhancements or modifications thereto, whether or not made by
State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State Street, a
Fund shall not modify, enhance or otherwise create derivative works based upon
the System, nor shall the Fund reverse engineer, decompile or otherwise attempt
to secure the source code for all or any part of the System.
g. Security Procedures. Each Fund shall comply with data access operating
standards and procedures and with user identification or other password control
requirements and other security procedures as may be issued from time to time by
State Street for use of the System on a remote basis and to access the Data
Access Services. Each Fund shall have access only to the Fund Data and
authorized transactions agreed upon from time to time by State Street and, upon
notice from State Street, the Fund shall discontinue remote use of the System
and access to Data Access Services for any security reasons cited by State
Street; provided, that, in such event, State Street shall, for a period not less
than 180 days (or such other shorter period specified by the Fund) after such
discontinuance, assume responsibility to provide accounting services under the
terms of the Custodian Agreement.
h. Inspections. State Street shall have the right to inspect the use of
the System and the Data Access Services by the Fund and the Investment Advisor
to ensure compliance with this Agreement. The on-site inspections shall be upon
prior written notice to Fund and the Investment Advisor and at reasonably
convenient times and frequencies so as not to result in an unreasonable
disruption of the Fund's or the Investment Advisor's business.
3
<PAGE>
4. PROPRIETARY INFORMATION
a. Proprietary Information. Each Fund acknowledges and State Street
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
information made available to the Fund by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to each Fund shall be
deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). Each Fund agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder. Each Fund further acknowledges that State Street shall not be
required to provide the Investment Advisor or the Investment Auditor with access
to the System unless it has first received from the Investment Advisor of the
Investment Auditor an undertaking with respect to State Street's Proprietary
Information in the form of Attachment C and/or Attachment C-1 to this Agreement.
Each Fund shall use all commercially reasonable efforts to assist State Street
in identifying and preventing any unauthorized use, copying or disclosure of the
Proprietary Information or any portions thereof or any of the logic, formats or
designs contained therein.
b. Cooperation. Without limitation of the foregoing, each Fund shall
advise State Street immediately in the event the Fund learns or has reason to
believe that any person to whom the Fund has given access to the Proprietary
Information, or any portion thereof, has violated or intends to violate the
terms of this Agreement, and each Fund will, at its expense, co-operate with
State Street in seeking injunctive or other equitable relief in the name of the
Fund or State Street against any such person.
c. Injunctive Relief. Each Fund acknowledges that the disclosure of any
Proprietary Information, or of any information which at law or equity ought to
remain confidential, will immediately give rise to continuing irreparable injury
to State Street inadequately, compensable in damages at law. In addition, State
Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
d. Survival. The provisions of this Section 4 shall survive the
termination of this Agreement.
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. Each Fund agrees
any liability of State Street to the Fund or any third party arising out of
State Street's provision of Data Access Services or the System under this
Agreement shall be limited to the amount paid by the Fund for the preceding 24
months for such services. In no event shall State Street be liable to the Fund
or any other party for any special, indirect, punitive or consequential damages
even if
4
<PAGE>
advised of the possibility of such damages. No action, regardless of form,
arising out of this Agreement may be brought by the Fund more than two years
after the Fund has knowledge that the cause of action has arisen.
b. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ARE MADE BY STATE STREET. IN NO EVENT WILL STATE STREET BE
LIABLE TO THE FUND OR ANY OTHER PARTY FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES WHICH MAY ARISE FROM THE FUND'S ACCESS TO THE SYSTEM OR USE OF
INFORMATION OBTAINED THEREBY.
c. Third-Party Data. Organizations from which State Street may obtain
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and each Fund, the
Fund shall be solely responsible for the accuracy of any accounting statements
or reports produced using the Data Access Services and the System and the
conformity thereof with any requirements of law.
e. Force Majeure. Neither State Street or a Fund shall be liable for any
costs or damages due to delay or nonperformance under this Agreement arising out
of any cause or event beyond such party's control, including without limitation,
cessation of services hereunder or any damages resulting therefrom to the other
party, or the Fund as a result of work stoppage, power or other mechanical
failure, computer virus, natural disaster, governmental action, or communication
disruption.
6. INDEMNIFICATION
Each Fund agrees to indemnify and hold State Street harmless from any
loss, damage or expense including reasonable attorney's fees, (a "loss")
suffered by State Street arising from (i) the negligence or willful misconduct
in the use by the Fund of the Data Access Services or the System, including any
loss incurred by State Street resulting from a security breach at the Designated
Location or committed by the Fund's employees or agents or the Investment
Advisor or the Independent Auditor of the Fund and (ii) any loss resulting from
incorrect Client Originated Electronic Financial Instructions. State Street
shall be entitled to rely on the validity and authenticity of Client Originated
Electronic Financial Instructions without undertaking any further inquiry as
long as such instruction is undertaken in conformity with security procedures
established by State Street from time to time.
7. FEES
Fees and charges for the use of the System and the Data Access Services
and related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time
5
<PAGE>
between the parties (the "Fee Schedule"). Any tariffs, duties or taxes imposed
or levied by any government or governmental agency by reason of the transactions
contemplated by this Agreement, including, without limitation, federal, state
and local taxes, use, value added and personal property taxes (other than
income, franchise or similar taxes which may be imposed or assessed against
State Street) shall be borne by each Fund. Any claimed exemption from such
tariffs, duties or taxes shall be supported by proper documentary evidence
delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a designated
State Street training facility or at the Designated Location, to the Fund's
personnel in connection with the use of the System on the Designated
Configuration. Each Fund agrees that it will set aside, during regular business
hours or at other times agreed upon by both parties, sufficient time to enable
all operators of the System and the Data Access Services, designated by the
Fund, to receive the training offered by State Street pursuant to this
Agreement.
b. Installation and Conversion. State Street shall be responsible for the
technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. Each Fund shall have the following responsibilities in
connection with Installation and Conversion of the System:
(i) The Fund shall be solely responsible for the timely acquisition and
maintenance of the hardware and software that attach to the
Designated Configuration in order to use the Data Access Services
at the Designated Location.
(ii) State Street and the Fund each agree that they will assign
qualified personnel to actively participate during the Installation
and Conversion phase of the System implementation to enable both
parties to perform their respective obligations under this
Agreement.
9. SUPPORT
During the term of this Agreement, State Street agrees to provide the
support services set out in Attachment D to this Agreement.
6
<PAGE>
10. TERM OF AGREEMENT
a. Term of Agreement. This Agreement shall become effective on the date
of its execution by State Street and shall remain in full force and effect until
terminated as herein provided.
b. Termination of Agreement. Any party may terminate this Agreement (i)
for any reason by giving the other parties at least one-hundred and eighty days'
prior written notice in the case of notice of termination by State Street to the
Fund or thirty days' notice in the case of notice from the Fund to State Street
of termination; or (ii) immediately for failure of the other party to comply
with any material term and condition of the Agreement by giving the other party
written notice of termination. In the event the Fund shall cease doing business,
shall become subject to proceedings under the bankruptcy laws (other than a
petition for reorganization or similar proceeding) or shall be adjudicated
bankrupt, this Agreement and the rights granted hereunder shall, at the option
of State Street, immediately terminate with notice to the Fund. Termination of
this Agreement with respect to any given Fund shall in no way affect the
continued validity of this Agreement with respect to any other Fund. This
Agreement shall in any event terminate as to any Fund within 90 days after the
termination of the Custodian Agreement applicable to such Fund.
c. Termination of the Right to Use. Upon termination of this Agreement
for any reason, any right to use the System and access to the Data Access
Services shall terminate and the Fund shall immediately cease use of the System
and the Data Access Services. Immediately upon termination of this Agreement for
any reason, the Fund shall return to State Street all copies of documentation
and other Proprietary Information in its possession; provided, however, that in
the event that either State Street or the Fund terminates this Agreement or the
Custodian Agreement for any reason other than the Fund's breach, State Street
shall provide the Data Access Services for a period of time and at a price to be
agreed upon by State Street and the Fund.
11. MISCELLANEOUS
a. Assignment; Successors. This Agreement and the rights and obligations
of each Fund and State Street hereunder shall not be assigned by any party
without the prior written consent of the other parties, except that State Street
may assign this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under common control with
State Street.
b. Survival. All provisions regarding indemnification, warranty,
liability and limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination of this
Agreement.
c. Entire Agreement. This Agreement and the attachments hereto constitute
the entire understanding of the parties hereto with respect to the Data Access
Services and the use of the System and supersedes any and all prior or
contemporaneous representations or agreements, whether oral or written, between
the parties as such may relate to the Data Access Services or the System, and
cannot be modified or altered except in a writing duly executed by the parties.
This
7
<PAGE>
Agreement is not intended to supersede or modify the duties and liabilities of
the parties hereto under the Custodian Agreement or any other agreement between
the parties hereto except to the extent that any such agreement specifically
refers to the Data Access Services or the System. No single waiver or any right
hereunder shall be deemed to be a continuing waiver.
d. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
e. Governing Law. This Agreement shall be interpreted and construed in
accordance with the internal laws of The Commonwealth of Massachusetts without
regard to the conflict of laws provisions thereof.
8
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Funds severally has
caused this Agreement to be duly executed in its name and through its duly
authorized officer as of the date hereof.
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Ronald E. Logue
------------------------------------
Title: Executive Vice President
------------------------------------
Date:
------------------------------------
EACH FUND LISTED ON APPENDIX A
By: /s/ Joseph W. Canavan
-----------------------------------
Title: Senior Vice President
-----------------------------------
Date: June 5, 1998
-----------------------------------
<PAGE>
APPENDIX A
Funds (each a series of investment company named in bold)
- -----
State Street Research Capital Trust
State Street Research Capital Fund
State Street Research Emerging Growth Fund
(formerly: State Street Research Small Capitalization Growth
Fund)
State Street Research Aurora Fund
(formerly: State Street Research Small Capitalization Value Fund)
State Street Research Equity Trust
State Street Research Equity Investment Fund
State Street Research Alpha Fund
(formerly: State Street Research Equity Income Fund)
State Street Research Global Resources Fund
State Street Research Athletes Fund
State Street Research Exchange Trust
State Street Research Exchange Fund
State Street Research Financial Trust
State Street Research Government Income Fund
State Street Research Strategic Portfolios: Aggressive
State Street Research Strategic Portfolios: Conservative
State Street Research Strategic Portfolios: Moderate
State Street Research Growth Trust
State Street Research Growth Fund
State Street Research Income Trust
State Street Research High Income Fund
State Street Research Managed Assets
State Street Research Master Investment Trust
State Street Research Investment Trust
State Street Research Money Market Trust
State Street Research Money Market Fund
State Street Research Tax-Exempt Trust
State Street Research Tax-Exempt Fund
State Street Research New York Tax-Free Fund
State Street Research Securities Trust
State Street Research Intermediate Bond Fund
State Street Research Strategic Income Fund
State Street Research Legacy Fund
State Street Research Galileo Fund
State Street Research Portfolios, Inc.
State Street Research International Equity Fund
Ap. A-1
<PAGE>
Status of Funds Covered By This Agreement
- -----------------------------------------
(a) Each Fund shall be regarded for all purposes as separate from any of the
other Funds. Each Fund shall be responsible for only its own transactions.
No Fund shall participate in, or effect any transaction in connection with,
any joint enterprise or other joint arrangement or profit-sharing plan.
(b) The use of this single document to memorialize the separate arrangements
under the Agreement for each of the Funds is understood to be for clerical
convenience only and shall not constitute any basis for joining the Funds
in any respect.
(c) Each trust listed above is a Massachusetts business trust. The Master Trust
Agreement of each Massachusetts business trust of which a Fund is a series,
as the same may be amended from time to time, is on file with the Secretary
of State for the Commonwealth of Massachusetts. It is expressly agreed that
the execution and delivery of this Agreement and the obligations of each
trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the relevant
trust as individuals, or personally, but shall bind only the trust property
of the trust. The Master Trust Agreement of each trust provides, and it is
expressly agreed, that each Fund of the trust shall be solely and
exclusively responsible for the payment of its debts, liabilities and
obligations, and that no other Funds shall be responsible for same.
Ap. A-2
<PAGE>
ATTACHMENT A
Multicurrency HORIZON(R) Accounting System
System Product Description
I. The Multicurrency HORIZON(R) Accounting System is designed to provide lot
level portfolio and general ledger accounting for SEC and ERISA type
requirements and includes the following services: 1) recording of general ledger
entries; 2) calculation of daily income and expense; 3) reconciliation of daily
activity with the trial balance, and 4) appropriate automated feeding mechanisms
to (i) domestic and international settlement systems, (ii) daily, weekly and
monthly evaluation services, (iii) portfolio performance and analytic services,
(iv) Fund's internal computing systems and (v) various State Street provided
information services products.
II. GlobalQuest(R) GlobalQuest(R) is designed to provide Fund access to the
following information maintained on The Multicurrency HORIZON(R)
Accounting System: 1) cash transactions and balances; 2) purchases and
sales; 3) income receivables; 4) tax refund receivables; 5) daily
priced positions; 6) open trades; 7) settlement status; 8) foreign
exchange transactions; 9) trade history; and 10) daily, weekly and
monthly evaluation services.
III. HORIZON(R) Gateway. HORIZON(R) Gateway provides customers with the ability
to (i) generate reports using information maintained on the Multicurrency
HORIZON(R) Accounting System which may be viewed or printed at the customer's
location; (ii) extract and download data from the Multicurrency HORIZON(R)
Accounting System; and (iii) access previous day and historical data. The
following information which may be accessed for these purposes: 1) holdings; 2)
holdings pricing; 3) transactions, 4) open trades; 5) income; 6) general ledger
and 7) cash.
IV. SaFiRe(SM). SaFiRe(SM) is designed to provide the customer with the ability
to prepare its own financial reports by permitting the customer to access
customer information maintained on the Multicurrency HORIZON(R) Accounting
System, to organize such information in a flexible reporting format and to have
such reports printed on the customer's desktop or by its printing provider.
V. State Street Interchange. State Street Interchange is an open information
delivery architecture wherein proprietary communication products, data formats
and workstation tools are replaced by industry standards and is designed to
enable the connection of State Street's network to customer networks, thereby
facilitating the sharing of information.
<PAGE>
ATTACHMENT B
Designated Configuration
[Designated Configuration Graphic]
<PAGE>
ATTACHMENT C
Undertaking
The undersigned understands that in the course of its employment as
Investment Advisor to each fund listed on Appendix A (individually a, "Fund",
collectively, the "Funds") it will have access to State Street Bank and Trust
Company's ("State Street") Multicurrency HORIZON Accounting System and other
information systems (collectively, the "System").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Fund and through the
use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data
in transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Darman A. Wing
---------------------------------------
Title: Senior Vice President
---------------------------------------
Date: June 4, 1998
---------------------------------------
<PAGE>
ATTACHMENT D
Support
During the term of this Agreement, State Street agrees to provide the
following on-going support services:
a. Telephone Support. The Fund Designated Persons may contact State
Street's HORIZON(R) Help Desk and Fund Assistance Center between the hours of 8
a.m. and 6 p.m. (Eastern time) on all business days for the purpose of obtaining
answers to questions about the use of the System, or to report apparent problems
with the System. From time to time, the Fund shall provide to State Street a
list of persons, not to exceed five in number, who shall be permitted to contact
State Street for assistance (such persons being referred to as "the Fund
Designated Persons").
b. Technical Support. State Street will provide technical support to
assist the Fund in using the System and the Data Access Services. The total
amount of technical support provided by State Street shall not exceed 10
resource days per year. State Street shall provide such additional technical
support as is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical support, including
during installation and testing, is subject to the fees and other terms set
forth in the Fee Schedule.
c. Maintenance Support. State Street shall use commercially reasonable
efforts to correct system functions that do not work according to the System
Product Description as set forth on Attachment A in priority order in the next
scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the Fund any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Fund and shall offer the Fund reasonable training
on the enhancement. Charges for system enhancements shall be as provided in the
Fee Schedule. State Street retains the right to charge for related systems or
products that may be developed and separately made available for use other than
through the System.
e. Custom Modifications. In the event the Fund desires custom
modifications in connection with its use of the System, the Fund shall make a
written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation to
support the Fund's use of the System: (1) for use on any computer equipment or
telecommunication facilities which does not conform to the Designated
Configuration or (ii) in the event the Fund has modified the System in breach of
this Agreement.
Exhibit (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
State Street Research Exchange Trust
We consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Amendment No. 16 to the
Registration Statement of the State Street Research Exchange Trust on Form N-1A
(1940 Act File No. 811-4256) of our report dated February 12, 1999 on our audit
of the financial statements and the financial highlights of State Street
Research Exchange Fund, which report is included in the Annual Report to
Shareholders for the year ended December 31, 1998. We also consent to the
reference to our Firm under the caption "Investment Advisory and Other Services"
in the Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 30, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000766768
<NAME> STATE STREET RESEARCH EXCHANGE TRUST
<SERIES>
<NUMBER> 01
<NAME> STATE STREET RESEARCH EXCHANGE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 123,421,831
<INVESTMENTS-AT-VALUE> 439,394,972
<RECEIVABLES> 423,640
<ASSETS-OTHER> 7,074
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 439,825,686
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,631,390
<TOTAL-LIABILITIES> 8,631,390
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115,119,603
<SHARES-COMMON-STOCK> 822,538
<SHARES-COMMON-PRIOR> 827,110
<ACCUMULATED-NII-CURRENT> 101,552
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 315,973,141
<NET-ASSETS> 431,194,296
<DIVIDEND-INCOME> 5,222,445
<INTEREST-INCOME> 1,063,192
<OTHER-INCOME> 0
<EXPENSES-NET> 2,171,803
<NET-INVESTMENT-INCOME> 4,113,834
<REALIZED-GAINS-CURRENT> 15,968,062
<APPREC-INCREASE-CURRENT> 69,036,313
<NET-CHANGE-FROM-OPS> 89,118,209
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,113,379)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (5,833)
<SHARES-REINVESTED> 1,261
<NET-CHANGE-IN-ASSETS> (2,100,498)
<ACCUMULATED-NII-PRIOR> 101,097
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,951,523
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,174,374
<AVERAGE-NET-ASSETS> 390,304,600
<PER-SHARE-NAV-BEGIN> 421.09
<PER-SHARE-NII> 5.00
<PER-SHARE-GAIN-APPREC> 103.13
<PER-SHARE-DIVIDEND> (5.00)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 524.22
<EXPENSE-RATIO> 0.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
