<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4256
----------------------------------------------
State Street Research Exchange Trust
------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
One Financial Center, Boston, MA 02111
------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Richard S. Davis, President and Chief Executive Officer
State Street Research
One Financial Center, Boston, MA 02111
------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-357-1200
------------------
Date of fiscal year end: 12/31/04
-----------------
Date of reporting period: 1/1/04 - 6/30/04
----------------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
ITEM 1: REPORT TO SHAREHOLDERS
The Semi-annual Report is attached.
[LOGO] STATE STREET RESEARCH
[GRAPHIC]
Exchange Fund
June 30, 2004
Semiannual Report to Shareholders
Table of Contents
3 Performance Discussion
4 Portfolio Holdings
5 Financial Statements
8 Financial Highlights
9 Trustees and Officers
FROM THE CHAIRMAN
State Street Research
The U.S. economy grew at a solid pace during the six-month period from January
1, 2004, to June 30, 2004. Gross Domestic Product (GDP), a common measure of
economic growth, rose 3.9% for the first quarter of 2004. Estimates for
second-quarter growth, which will not be released until well into the third
quarter, range from 2.5% to 4.0%.
Consumer confidence wavered early in the period as the number of new jobs added
to the economy fell below expectations. However, when the job picture brightened
in April and May, consumer confidence tracked higher. More than 1.2 million jobs
were added to the economy in the second half of the period, and the quality of
new jobs also improved, as reported by the U.S. Labor Department.
Although most of the news was upbeat during the period, durable goods orders
dipped in February and again in April and May--news that surprised most
analysts. And after months of strong sales, auto dealerships reported a decline
in June.
Yet, consumers continued to fuel the economy, pumping dollars into the retail
and housing markets. Sales of new and existing homes soared as homebuyers
anticipated higher mortgage rates ahead. Corporate profits staged a solid
rebound, making it easier for companies to increase spending, especially on
information technology, electronic equipment and new jobs.
As the period wore on, it became clear that the days of record-low short-term
interest rates were coming to an end. On the last day of the period, the Federal
Reserve Board raised a key short-term interest rate--the federal funds
rate--from 1.0% to 1.25%.
Stocks Edge Higher, Bonds Stumble
The stock market moved sharply higher in the first months of the year, fueled by
a substantial increase in profits for 2003 and expectations of continued profit
growth in 2004. However, a host of worries stopped the major indexes in their
tracks as the period wore on. As investors grew more cautious about interest
rates and the threat of terrorist attacks, stocks retreated. For the six months,
the S&P 500 Index gained a modest 3.44%. Small-cap stock gains were higher. The
energy sector was the stock market's strongest performer.
High-yield bonds continued to rally as the year began. However, they also
stalled along with the stock market late in the period. Mortgage bonds eked out
a small gain, but most other segments of the bond market reported negative
returns.
Looking Ahead
Any time the financial markets deliver negative returns, it can be disheartening
for investors. However, the seeds of a new market rally are often sown in
periods of weakness and decline. A diversified portfolio and a long-term
perspective on the markets can make it easier to weather periods of
volatility--and more likely that you will reap the potential benefits in better
times. We urge you to talk to your investment professional about your investment
plan.
As always, we thank you for investing with State Street Research funds. We look
forward to helping you achieve your long-term financial goals.
Sincerely,
/s/ Richard S. Davis
Richard S. Davis
Chairman
June 30, 2004
2
- ----------------
PERFORMANCE
- ----------------
Discussion as of June 30, 2004
How State Street Research Exchange Fund Performed
State Street Research Exchange Fund (Class A shares, without sales charge)
returned 3.13% for the six-month period ended June 30, 2004. That was slightly
less than the performance of the S&P 500 Index, which was 3.44% over the same
period. However, the fund outperformed the Exchange Fund Average, which was
2.77% for the period.
Performance: Class A
- ---------------------------------------------------------------------
Fund average annual total return as of 6/30/04
(does not reflect sales charge)
1 Year 5 Years 10 Years
13.28% -2.12% 12.10%
- --------------------------------------------------------------------------------
Keep in mind that the performance data quoted represents past performance and
is no guarantee of future results. Current performance may be lower or higher
than the performance data quoted herein. For the most recent month-end
performance results, visit our website at www.ssrfunds.com. The fund's share
price, yield and return will fluctuate, and you may have a gain or loss when
you sell your shares. All returns assume reinvestment of capital gains
distributions and income dividends at net asset value. The returns shown do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
The S&P 500 Index (officially the "Standard & Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The index does not take
transaction charges into consideration. It is not possible to invest directly
in the index. The Exchange Fund Average is an average created by State Street
Research using data provided by Lipper, Inc. The average consists of funds with
similar goals and shows how well the fund has done compared to competing funds.
Reasons for the Fund's Performance
The equity markets were volatile in the six-month period, as economic strength
and strong earnings battled against rising interest rates, high oil prices and
turmoil in Iraq. Investors favored financial services in the first quarter, but
sentiment turned to energy, health care and select conglomerates in the second
quarter. Thus, the portfolio's exposure to financial services, as well as
integrated oil and energy, buoyed overall portfolio returns.
Relative weakness in the technology, utilities and transportation sectors
partially offset these gains, resulting in the fund's slight underperformance
relative to the S&P 500 Index. The largest individual contributors to the
fund's return were Millipore, Exxon Mobil and Boeing. Vodafone, Wyeth and Intel
were the greatest detractors. During the period, we reduced our positions in
AstraZeneca and Johnson & Johnson, as well as in Exxon Mobil and British
Petroleum.
Looking Ahead
We expect the equity markets to remain volatile through the second half of the
year, given difficult year-over-year corporate earnings comparisons, the
upcoming presidential election and rising interest rates. With that expectation
in mind, we have positioned the portfolio with an overweight in health care,
integrated oils and consumer staples stocks. The fund's positions in consumer
discretionary, financial services and utilities, which historically have lagged
in an environment of rising interest rates, are underweight relative to its
benchmark.
A Word about Risk
The major risks of stock investing include sudden and unpredictable drops in
value and period 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, such as changes in exchange rates, and different government
regulations, economic conditions and accounting standards.
Top 10 Holdings
- -------------------------------------------------------------------------------
Issuer/Security % of Fund Net Assets
(1) American Express 5.6%
- --------------------------------------------------------------------------------
(2) Pfizer 5.3%
- --------------------------------------------------------------------------------
(3) Exxon Mobil 4.6%
- --------------------------------------------------------------------------------
(4) Procter & Gamble 4.4%
- --------------------------------------------------------------------------------
(5) Anheuser-Busch 3.9%
- --------------------------------------------------------------------------------
(6) First Data 3.8%
- --------------------------------------------------------------------------------
(7) Wal-Mart Stores 3.8%
- --------------------------------------------------------------------------------
(8) Target 3.8%
- --------------------------------------------------------------------------------
(9) Microsoft 3.7%
- --------------------------------------------------------------------------------
(10) General Electric 3.6%
- --------------------------------------------------------------------------------
Total 42.5%
Because financial markets and mutual fund strategies are constantly evolving,
it is possible that the fund's holdings, market stance, outlook for various
industries or securities and other matters discussed in this report have
changed since this information was prepared. Portfolio changes should not be
considered recommendations for action by individual investors.
State Street Research Exchange Fund 3
- -----------
PORTFOLIO
- -----------
Holdings
June 30, 2004 (unaudited)
Issuer Shares Value
- -------------------------------------------------------------------------------------------------------------
Common Stocks 99.1%
Automobiles & Transportation 1.7%
Automobiles 1.7%
General Motors Corp. ................................................... 112,800 $ 5,255,352
------------
Total Automobiles & Transportation ........................................................... 5,255,352
------------
Consumer Discretionary 7.6%
Retail 7.6%
Target Corp. ........................................................... 273,222 11,603,738
Wal-Mart Stores Inc. ................................................... 223,200 11,776,032
------------
Total Consumer Discretionary ................................................................. 23,379,770
------------
Consumer Staples 14.5%
Beverages 5.4%
Anheuser-Busch Inc. .................................................... 225,200 12,160,800
Coca-Cola Co. .......................................................... 87,735 4,428,863
------------
16,589,663
------------
Foods 2.1%
General Mills Inc. ..................................................... 138,400 6,578,152
------------
Household Products 4.4%
Procter & Gamble Co. ................................................... 246,400 13,414,016
------------
Tobacco 2.6%
Altria Group Inc. ...................................................... 160,300 8,023,015
------------
Total Consumer Staples ....................................................................... 44,604,846
------------
Financial Services 18.6%
Banks & Savings & Loan 1.6%
J.P. Morgan Chase & Co. ................................................ 124,728 4,835,704
------------
Financial Data Processing Services & Systems 3.8%
First Data Corp. ....................................................... 266,480 11,863,690
------------
Insurance 2.0%
The Saint Paul Companies Inc. .......................................... 154,500 6,263,430
------------
Miscellaneous Financial 11.2%
American Express Co. ................................................... 339,531 17,445,103
Federal National Mortgage Association .................................. 110,400 7,878,144
SLM Corp. .............................................................. 233,200 9,432,940
------------
34,756,187
------------
Total Financial Services ..................................................................... 57,719,011
------------
Health Care 18.3%
Drugs & Biotechnology 17.2%
AstraZeneca plc ADR .................................................... 76,000 3,468,640
Johnson & Johnson Ltd. ................................................. 131,978 7,351,175
Merck & Company, Inc. .................................................. 83,999 3,989,952
Millipore Corp.* ....................................................... 150,000 8,455,500
Novartis AG ADR ........................................................ 185,384 8,249,588
Pfizer Inc. ............................................................ 476,342 16,329,004
Wyeth Inc. ............................................................. 145,544 5,262,871
------------
53,106,730
------------
Issuer Shares Value
- -------------------------------------------------------------------------------------------------------------
Health Care Services 0.1%
Medco Health Solutions Inc.* ........................................... 11,124 $ 417,150
------------
Hospital Supply 0.9%
Medtronic Inc. ......................................................... 60,000 2,923,200
------------
Total Health Care ............................................................................ 65,880,020
------------
Integrated Oils 7.7%
Integrated International 7.7%
British Petroleum plc ADR .............................................. 179,496 9,615,601
Exxon Mobil Corp. ...................................................... 320,838 14,248,415
------------
Total Integrated Oils ........................................................................ 23,864,016
------------
Other 7.1%
Multi-Sector 7.1%
Berkshire Hathaway Inc. Cl. B* ......................................... 3,687 10,895,085
General Electric Co. ................................................... 344,970 11,177,028
------------
Total Other .................................................................................. 22,072,113
------------
Other Energy 2.5%
Offshore Drilling 0.2%
Transocean Inc. ........................................................ 21,148 612,023
------------
Oil Well Equipment & Services 2.3%
Schlumberger Ltd. ...................................................... 109,238 6,937,705
------------
Total Other Energy .......................................................................... 7,549,728
------------
Producer Durables 5.5%
Aerospace 2.2%
Boeing Co. ............................................................. 131,800 6,733,662
------------
Industrial Products 0.3%
Agilent Technologies Inc.* ............................................. 29,749 871,051
------------
Machinery 3.0%
Caterpillar Inc. ....................................................... 116,800 9,278,592
------------
Total Producer Durables ...................................................................... 16,883,305
------------
Technology 13.4%
Computer Software 3.7%
Microsoft Corp. ........................................................ 399,890 11,420,858
------------
Computer Technology 7.0%
Dell Inc.* ............................................................. 170,500 6,107,310
Hewlett-Packard Co. .................................................... 349,270 7,369,597
IBM Corp. .............................................................. 92,371 8,142,504
------------
21,619,411
------------
Electronics 0.9%
Applera Corp. - Applied Biosystems
Group ................................................................. 126,880 2,759,640
------------
Electronics: Semiconductors/Components 1.8%
Intel Corp. ............................................................ 200,000 5,520,000
------------
Total Technology .............................................................................. 41,319,909
------------
Utilities 2.2%
Telecommunications 2.2%
Vodafone Group plc ADR ................................................. 309,500 6,839,950
------------
Total Utilities ............................................................................... 6,839,950
------------
Total Common Stocks (Cost $96,823,498) ........................................................ 305,935,080
------------
4 The notes are an integral part of the financial statements.
- -----------
FINANCIAL
- -----------
Statements
Maturity Principal
Issuer Date Amount Value
- -------------------------------------------------------------------------------
Commercial Paper 1.0%
Citicorp, 1.05% ......... 7/02/2004 $1,260,000 $ 1,259,963
General Electric Capital
Corp., 1.15% .......... 7/07/2004 1,414,000 1,413,729
Goldman Sachs Group
LP, 1.27% ............. 7/07/2004 390,000 389,918
-----------
Total Commercial Paper (Cost $3,063,610) ........ 3,063,610
-----------
% of
Net Assets
- --------------------------------------------------------------------------------
Summary of Portfolio Assets
Investments (Cost $99,887,108) .................. 100.1% 308,998,690
Cash and Other Assets, Less Liabilities ......... (0.1)% (248,097)
----- -----------
Net Assets ...................................... 100.0% $308,750,593
===== ============
KEY TO SYMBOLS
* Denotes a security which has not paid a dividend during the last year.
ADR Stands for American Depositary Receipt.
Federal Income Tax Information
At June 30, 2004, the net unrealized appreciation of
investments based on cost for federal income tax
purposes of $91,624,979 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost $217,519,208
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (145,497)
------------
$217,373,711
============
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
June 30, 2004 (unaudited)
Assets
Investments, at value (Cost $99,887,108) (Note 1) ............. $308,998,690
Cash .......................................................... 14,793
Dividends receivable .......................................... 396,228
Other assets .................................................. 3,579
------------
309,413,290
------------
Liabilities
Dividends payable ............................................. 496,698
Accrued management fee ........................................ 121,597
Accrued transfer agent and shareholder services ............... 8,888
Accrued trustees' fees ........................................ 6,055
Payable for fund shares redeemed .............................. 1,500
Accrued administration fee .................................... 47
Other accrued expenses ........................................ 27,912
------------
662,697
------------
Net Assets .................................................... $308,750,593
============
Net Assets consist of:
Undistributed net investment income ......................... $ 777,807
Unrealized appreciation of investments ...................... 209,111,582
Accumulated net realized loss ............................... (4,906,843)
Paid-in capital ............................................. 103,768,047
------------
$308,750,593
============
Net Asset Value per share
($308,750,593 [divided by] 611,881 shares) .................. $ 504.59
============
The notes are an integral part of the financial statements.
State Street Research Exchange Fund 5
- ---------
FINANCIAL
- ---------
Statements
Statement of Operations
- --------------------------------------------------------------------------------
For the six months ended June 30, 2004
Investment Income
Dividends, net of foreign taxes of $49,442 (Note 1) ............. $2,741,571
Interest (Note 1) ............................................... 17,417
----------
2,758,988
----------
Expenses
Management fee (Note 2) ......................................... 767,326
Administration fee (Note 2) ..................................... 46,550
Custodian fee ................................................... 46,500
Trustees' fees (Note 2) ......................................... 14,672
Audit fee ....................................................... 12,152
Transfer agent and shareholder services (Note 2) ................ 9,075
Legal fees ...................................................... 1,992
Miscellaneous ................................................... 5,000
----------
903,267
Fees paid indirectly (Note 2) ................................... (65)
----------
903,202
----------
Net investment income ........................................... 1,855,786
----------
Realized and Unrealized Gain (Loss) on
Investments
Net realized gain on investments (Notes 1 and 3) ................ 7,955,712
Change in unrealized depreciation of investments ................ (172,966)
----------
Net gain on investments ......................................... 7,782,746
----------
Net increase in net assets resulting from operations ............ $9,638,532
==========
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Six months ended
June 30, 2004 Year ended
(unaudited) December 31, 2003
----------------- ------------------
Increase (Decrease) In Net Assets
Operations:
Net investment income ............... $ 1,855,786 $ 3,407,737
Net realized gain on
investments ....................... 7,955,712 12,250,545
Change in unrealized
appreciation (depreciation)
of investments .................... (172,966) 39,112,155
------------ ------------
Net increase resulting
from operations ................... 9,638,532 54,770,437
------------ ------------
Dividends from net investment
income ............................ (1,077,979) (3,497,110)
------------ ------------
Share transactions:
Net asset value of shares
issued in payment of
dividends ......................... 200,102 627,059
Cost of shares repurchased .......... (9,708,822) (10,704,806)
------------ ------------
Net decrease from fund share
transactions (Note 4) ............. (9,508,720) (10,077,747)
------------ ------------
Total increase (decrease)
in net assets ..................... (948,167) 41,195,580
Net Assets
Beginning of period ................. 309,698,760 268,503,180
------------ ------------
End of period (including
undistributed net investment
income of $777,807 and
$0, respectively) ................. $308,750,593 $309,698,760
============ ============
Number of shares:
Issued upon reinvestment
of dividends ...................... 398 1,360
Repurchased ......................... (19,278) (23,879)
------------ ------------
Net decrease in fund shares ......... (18,880) (22,519)
============ ============
6 The notes are an integral part of the financial statements.
Notes to Unaudited Financial Statements
- --------------------------------------------------------------------------------
June 30, 2004
Note 1
State Street Research Exchange Fund is a series of State Street Research
Exchange Trust (the "Trust"), which is organized as a Massachusetts business
trust, and is registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company. The fund is presently the only
series of the Trust.
The investment objective of the fund is to provide long-term growth of capital
and consequent long-term growth of income. In seeking to achieve its investment
objective, the fund invests primarily in common stocks, or securities
convertible into common stocks, that have long-term growth potential.
The following significant accounting policies are consistently followed by the
fund in preparing its financial statements, and such policies are in conformity
with accounting principles generally accepted in the United States of America.
A. Investment Valuation
Values for listed equity securities reflect final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange.
Over-the-counter securities quoted on the National Association of Securities
Dealers Automated Quotation ("Nasdaq") system are valued at closing prices
supplied through such system. If not quoted on the Nasdaq system, such
securities are valued at prices obtained from independent brokers. In the
absence of recorded sales, valuations are at the mean of the closing bid and
asked quotations. Short-term securities maturing within sixty days are valued
at amortized cost. Other securities, if any, are valued at their fair value as
determined in good faith under consistently applied procedures established by
and under the supervision of the Trustees. If trading or events occurring in
other markets after the close of the principal market in which foreign
securities are traded, and before the close of business of the fund, are
expected to materially affect the value of these securities, then they are
valued at their fair value taking this trading or these events into account.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis of
identified cost of securities delivered.
C. Net Investment Income
Net investment income is determined daily and consists of interest and
dividends accrued and discount earned, less the estimated daily expenses of the
fund. Interest income is accrued daily as earned. Dividend income is accrued on
the ex-dividend date.
D. Dividends
Dividends from net investment income are declared and paid or reinvested
quarterly. Net realized short-term capital gains, if any, are distributed
annually.
Income dividends and capital gains distributions are determined in accordance
with federal income tax regulations which may differ from accounting principles
generally accepted in the United States of America. The difference is primarily
due to differing treatments for non-taxable redemptions in kind and the
disposition of securities that have different bases for financial reporting and
tax purposes.
The fund hereby designates the maximum amount allowable of its net taxable
income as qualified dividend income as provided in the Jobs and Growth Tax
Relief Reconciliation Act of 2003. This amount has been reflected on Form 1099
for the calendar year 2003.
E. Federal Income Taxes
No provision for federal income taxes is necessary with respect to net
investment income because the fund has elected to qualify under Subchapter M of
the Internal Revenue Code and its policy is to distribute substantially all of
such income within the prescribed time periods. The fund retains and designates
as undistributed gains all of its taxable net long-term capital gains and pays
federal income taxes thereon on behalf of the shareholders.
At December 31, 2003, the fund had a capital loss carryforward of $12,862,555
available, to the extent provided in regulations, to offset future capital
gains, if any, of which $5,749,972 and $7,112,583 expire on December 31, 2009
and 2010, respectively.
F. Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from these
estimates.
G. Securities Lending
The fund may seek additional income by lending portfolio securities to
qualified institutions. The fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the fund will bear the
loss. At June 30, 2004, there were no loaned securities. During the six months
ended June 30, 2004, income from securities lending amounted to $2,665 and is
included in interest income.
Note 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.50% of the fund's average net
assets. In consideration of these fees, the Adviser furnishes the fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the six months ended June 30, 2004, the fees pursuant to
such agreement amounted to $767,326.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), provides certain shareholder services to the fund such as
responding to inquiries and instructions from investors with respect to
redemption of shares of the fund. Total shareholder service costs are allocated
to each fund in the same ratios as the transfer agent costs. During the six
months ended June 30, 2004, the amount of such expenses allocated to the fund
was $459.
The fund has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the fund's expense. During the six months ended June 30, 2004, the
fund's transfer agent fees were reduced by $65 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$14,672 during the six months ended June 30, 2004.
The fund has agreed to pay the Adviser for certain administrative costs
incurred in providing other assistance and services to the fund. The fee was
based on a fixed amount that has been allocated equally among the State Street
Research funds. During the six months ended June 30, 2004, the amount of such
expenses was $46,550.
Note 3
For the six months ended June 30, 2004, exclusive of short-term investments and
U.S. government obligations, purchases and sales of securities, including
$8,580,214 representing redemptions in kinds, aggregated $0 and $8,580,214,
respectively.
Note 4
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest at $0.001 par value per share. At June 30, 2004, the
Adviser held 13,766 shares of the fund.
State Street Research Exchange Fund 7
- -----------
FINANCIAL
- -----------
Highlights
For a share outstanding throughout each period:
Six months ended Years ended December 31
June 30, 2004 ------------------------------------------------------------------
(unaudited) 2003 2002(c) 2001(c) 2000(c) 1999(c)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ($) 490.99 411.01 511.71 575.76 616.80 524.22
---------- ---------- ---------- ---------- ---------- ----------
Net investment income ($) 3.03 5.40 4.74 4.22 4.75 4.54
Net realized and unrealized gain (loss)
on investments ($)* 12.32 80.08 (100.64) (64.02) (41.19) 92.69
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ($) 15.35 85.48 (95.90) (59.80) (36.44) 97.23
---------- ---------- ---------- ---------- ---------- ----------
Dividends from net investment income ($) (1.75) (5.50) (4.80) (4.25) (4.60) (4.65)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ($) (1.75) (5.50) (4.80) (4.25) (4.60) (4.65)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ($) 504.59 490.99 411.01 511.71 575.76 616.80
========== ========== ========== ========== ========== ==========
Total return (%) 3.13(a) 20.89 (18.78) (10.35) (4.13) 18.59
Ratios/Supplemental Data:
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 308,751 309,699 268,503 367,640 437,804 485,161
Expense ratio (%) 0.59(b) 0.59 0.60 0.57 0.55 0.55
Expense ratio after expense reductions (%) 0.59(b) 0.59 0.60 0.57 0.55 0.55
Ratio of net investment income to
average net assets (%) 1.21(b) 1.20 1.00 0.81 0.78 0.78
Portfolio turnover rate (%) 0.00 5.47 3.32 1.44 10.51 1.04
*After provision for federal tax on
retained capital gains at end of period -- -- -- -- 11.01 --
(a) Not annualized
(b) Annualized
(c) Audited by other auditors
8
- -----------------------
TRUSTEES AND OFFICERS
- -----------------------
State Street Research Exchange Trust
Number
of Funds
in Fund
Complex Other
Overseen Directorships
Name, Position(s) Term of Office by Held by
Address Held with and Length of Principal Occupations Trustee/ Trustee/
and Age(a) Fund Time Served(b) During Past 5 Years Officer(c) Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Independent Trustees
Bruce R. Bond Trustee Since Retired; formerly Chairman of the Board, 19 Avaya Inc.
(58) 1999 Chief Executive Officer and President,
PictureTel Corporation (video
conferencing systems)
- ------------------------------------------------------------------------------------------------------------------------------------
Peter S. Drotch Trustee Since Retired; formerly Partner, 19 First Marblehead Corp.
(62) 2004 PricewaterhouseCoopers LLP
- ------------------------------------------------------------------------------------------------------------------------------------
Steve A. Garban Trustee Since Retired; formerly Senior Vice President 53 Metropolitan Series
(66) 1997 for Finance and Operations and Fund, Inc.; and
Treasurer, The Pennsylvania State Metropolitan Series
University Fund II
- ------------------------------------------------------------------------------------------------------------------------------------
Susan M. Phillips Trustee Since Dean, School of Business and Public 19 The Kroger Co.
(59) 1998 Management, George Washington
University; formerly a member of the
Board of Governors of the Federal
Reserve System; and Chairman and
Commissioner of the Commodity Futures
Trading Commission
- ------------------------------------------------------------------------------------------------------------------------------------
Toby Rosenblatt Trustee Since President, Founders Investments Ltd. 53 A.P. Pharma, Inc.;
(66) 1994 (investments); President, Pacific Four Metropolitan Series
Investments (investments); formerly Fund, Inc.; and
President, The Glen Ellen Company Metropolitan Series
(private investment firm) Fund II
- ------------------------------------------------------------------------------------------------------------------------------------
Michael S. Trustee Since J. W. Forrester Professor of Management, 53 Metropolitan Series
Scott Morton (67) 1989 Sloan School of Management, Massachusetts Fund, Inc.; and
Institute of Technology Metropolitan Series
Fund II
- ------------------------------------------------------------------------------------------------------------------------------------
Interested Trustees
Richard S. Davis(+) Trustee Since Chairman of the Board, President and 19 None
(58) 2000 Chief Executive Officer of State Street
Research & Management Company; formerly
Senior Vice President, Fixed Income
Investments, Metropolitan Life Insurance
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Officers
Edward Dowd Vice Since Vice President of State Street Research 7 None
(37) President 2003 & Management Company; formerly Vice
President, Independence Investment LLC
and equity research associate,
Donaldson, Lufkin and Jenrette
- ------------------------------------------------------------------------------------------------------------------------------------
C. Kim Goodwin Vice Since Managing Director and Chief Investment 18 None
(45) President 2002 Officer - Equities of State Street
Research & Management Company; formerly
Chief Investment Officer - U.S. Growth
Equities, American Century
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey Lindsey Vice Since Managing Director of State Street 7 None
(42) President 2003 Research & Management Company; formerly
Managing Director and Senior Vice
President, Putnam Investments
- ------------------------------------------------------------------------------------------------------------------------------------
John S. Lombardo Vice Since Managing Director, Chief Financial 19 None
(49) President 2001 Officer and Director of State Street
Research & Management Company; formerly
Executive Vice President, State Street
Research & Management Company; and
Senior Vice President, Product and
Financial Management, MetLife Auto &
Home
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas A. Romich Treasurer Since Senior Vice President and Treasurer of 19 None
(47) 2001 State Street Research & Management
Company; formerly Vice President and
Assistant Treasurer, State Street
Research & Management Company
- ------------------------------------------------------------------------------------------------------------------------------------
The fund's Statement of Additional Information includes additional information
about the fund's trustees, and is available without charge, by contacting State
Street Research, One Financial Center, Boston, Massachusetts 02111-2690, or by
calling toll-free 1-87-SSR-FUNDS (1-877-773-8637).
(a) The address of each person is c/o State Street Research & Management
Company, One Financial Center, Boston, MA 02111-2690.
(b) A Trustee serves until he or she retires, resigns or is removed as provided
in the master trust agreement of the respective Trust. Each Trust has
adopted a mandatory retirement age of 72. Each officer holds office until he
or she resigns, is removed or a successor is elected.
(c) Includes all series of 9 investment companies for which State Street
Research & Management Company serves as sole investment advisor and all
series of Metropolitan Series Fund, Inc. and Metropolitan Series Fund II.
The primary advisor to Metropolitan Series Fund, Inc. and Metropolitan
Series Fund II is MetLife Advisers, LLC, which has retained State Street
Research & Management Company as sub-advisor to certain series of
Metropolitan Series Fund, Inc.
(+) Mr. Davis is an "interested person" of the Trust under the Investment
Company Act of 1940 by reason of his affiliation with the Trust's Investment
Manager, State Street Research & Management Company, as noted.
State Street Research Exchange Fund 9
[Logo] ------------
STATE STREET RESEARCH PRSRT STD
One Financial Center U.S. POSTAGE
Boston, MA 02111-2690 PAID
PERMIT #6
HUDSON, MA
------------
New accounts, mutual fund purchases,
exchanges and account information
Internet www.ssrfunds.com
E-mail info@ssrfunds.com
Phone 1-87-SSR-FUNDS (1-877-773-8637),
toll-free, 7 days a week, 24 hours a day
Hearing-impaired: 1-800-676-7876
Chinese- and Spanish-speaking: 1-888-638-3193
Fax 1-617-737-9722 (request confirmation number
first from the Service Center by calling 1-877-773-8637)
Mail State Street Research Service Center
P.O. Box 8408, Boston, MA 02266-8408
- -------------------------------------------------------------------------------
Did You Know?
State Street Research offers electronic delivery of quarterly statements,
shareholder reports and fund prospectuses. If you elect this option, we will
send these materials to you via e-mail. To learn more, visit us on the Web at
www.ssrfunds.com and click on "Go to Your Account" or call us at 1-87-SSR-FUNDS
(1-877-773-8637).
Did you know that you can give a State Street Research mutual fund as a gift?
Call a service center representative at 1-87-SSR-FUNDS (1-877-773-8637), Monday
through Friday, 8am-6pm eastern time, to learn more.
- -------------------------------------------------------------------------------
Webcasts
For a professional perspective on the markets, the economy and timely investment
topics, tune in to a State Street Research webcast by visiting our website at
www.ssrfunds.com.
Complete Fund Listing
For a list of our funds, visit our website at www.ssrfunds.com under Research
Our Funds.
[logo] [logo]
for Excellence in for Excellence in Service
Shareholder Communications
"State Street Research Proxy Voting Policies and Procedures"--which describes
how we vote proxies relating to portfolio securities--is available upon request,
free of charge, by calling the State Street Research Service Center toll-free at
1-87-SSR-FUNDS (1-877-773-8637) or by accessing the U.S. Securities and Exchange
Commission website at www.sec.gov.
The DALBAR awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industrywide.
Member NASD, SIPC
(C)2004 State Street Research Investment Services, Inc.
One Financial Center
Boston, MA 02111-2690
www.ssrfunds.com
CONTROL NUMBER:(exp0805)SSR-LD EX-2191-0804
<Page>
FORM N-CSR(2 OF 3)
ITEM 2: CODE OF ETHICS
Not applicable for the reporting period.
ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT
Not applicable for the reporting period.
ITEM 4: (PRINCIPAL ACCOUNTANT FEES AND SERVICES)
Not applicable for the reporting period.
ITEM 5: AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6: SCHEDULE OF INVESTMENTS
Not applicable.
ITEM 7: DISCLOSURE OF PROXY VOTING POLICIES & PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES:
Not applicable.
ITEM 8: PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 9: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Governance Committee will consider nominees recommended by
shareholders. Shareholders may submit recommendations to the attention
of the Secretary of the Trust, State Street Research & Management
Company, One Financial Center, 30th Floor, Boston, MA 02111.
ITEM 10: CONTROLS AND PROCEDURES
(a) The Registrant's principal executive and principal financial officers
have concluded, based on their evaluation of the Registrant's disclosure
controls and procedures as of a date within 90 days of the filing date
of this report, that the Registrant's disclosure controls and procedures
are reasonably designed to ensure that information required to be
disclosed by the Registrant on Form N-CSR is recorded, processed,
summarized and reported within the required time periods and that
information required to be disclosed by the Registrant in the reports
that it files or submits on Form N-CSR is accumulated and communicated
to the Registrant's management, including its principal executive and
principal financial officers, as appropriate to allow timely decisions
regarding required disclosure.
(b) There were no changes in the Registrant's internal control over financial
reporting during the Registrant's second fiscal half-year that have
materially affected, or are reasonably likely to materially affect, the
internal control over financial reporting.
ITEM 11: EXHIBITS
(a)(1) Code of Ethics required to be disclosed under Item 2 of Form
N-CSR attached hereto as Exhibit 99.CODE ETH
(a)(2) Certification for each principal executive and principal
financial officer of the Registrant required by Rule 30a-2(a)
under the Investment Company Act of 1940, as amended
(17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.302CERT
(b) Certification required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) attached
hereto as Exhibit 99.906CERT
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
State Street Research Exchange Trust
By: /s/ Richard S. Davis
------------------------------------------------------
Richard S. Davis, President, Chairman and
Chief Executive Officer
Principal Executive Officer
Date August 27, 2004
------------------------------------------------------
<Page>
FORM N-CSR(3 OF 3)
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities, and on the
dates indicated.
By: /s/ Richard S. Davis
------------------------------------------------------
Richard S. Davis, President, Chairman and
Chief Executive Officer
Principal Executive Officer
Date August 27, 2004
------------------------
By: /s/ Douglas A. Romich
------------------------------------------------------
Douglas A. Romich, Treasurer
Principal Financial Officer
Date August 27, 2004
------------------------