Howell M. Stillman, director, member of executive committee; president, Bay State Merchants National Bank of Lawrence.

Alfred S. Woodworth, director, member of executive committee; senior vice president, Second Bank-State Street Trust Co., Boston.

Mr. C. Jerome Driscoll, examiner.

STAFF

Miss Ann M. Lyons, administrative assistant.

Miss Ruth A. Quinlan, secretary.

Mrs. Julia M. Troy, secretary.

Transfer agent: The National Shawmut Bank of Boston.

Registrar: Second Bank-State Street Trust Co., Boston, Mass.

Agent: Rockland-Atlas National Bank of Boston.

Auditors: Arthur Young & Co.

Special services: Holland, Barta & Co., Boston, Mass.

Address: 201 Devonshire Street, Boston, Mass.

To the Stockholders and Members of the Massachusetts Business Development Corp.: This is the sixth annual report of the Massachusetts Business Development Corp. which once again stands as the largest development credit corporation in the country in point of financial assistance approved.

Elsewhere in this report you will find statistical and pictorial information regarding the operation and accomplishments of your corporation. Certain significant results, however, appear worthy of elaboration.

During 1958 your corporation approved, or participated in, 26 loans totaling $3,187,000 compared to 18 loans aggregating $2,687,500 in 1957. This is the largest number of approvals since 1954, the first year of active operations, and this increased activity coincides with the upturn in the economy during 1958, since most new borrowers are expanding their operations. Since January 1, 1954, your corporation has approved a total of 125 loans in the amount of $17,081,500.

While profit is a secondary motive of your corporation, profits should stem in normal years from efficient operation of a lending institution or our present size. The 1958 profit of $72,242 before provision for possible losses and Federal income taxes compares favorably with a figure of $66,739 a year ago. Of the current profit, $51,790 was transferred by your board of directors to the reserve account which now equals 32 percent of your corporation's share of outstanding loans. The operating deficit, incurred basically by 1953 and 1954 starting-up costs, has been eliminated, and the capital stock of the corporation has a book value of $10.02 as of December 31, 1958.

Average interest paid on loans from members in 1958 was 3.819 percent compared to 3.726 percent a year ago. All loans are current both as to principal and interest payments.

To date 22 loans in the original aggregate amount of $2,996,500 have been paid in full, with only one of the loans running to maturity. This is a striking example of the ability of your corporation to provide financing not otherwise available on similar terms, with conventional financial institutions taking over the loan after a few years of seasoning. This factor, to date at least, has created a revolving fund and enabled your corporation to assist many more enterprises than its present capital would normally permit. On December 31, 1958, estimated remaining loanable funds amounted to $1,441,478.

You will note that the number of loans canceled after approval is rather sizable. In many instances the cancellation resulted from the availability of bank loans subsequent to our approval or changes in the borrower's plans. A record of such loans is maintained, however, to indicate the full measure of financial assistance which your corporation has been willing to provide.

Your corporation has always worked closely with local industrial development groups and feels that local self-help programs are worthy of our serious consideration for supplemental financing. During the year we have approved such loans for a building addition in Great Barrington and a speculative building in Springfield. This, incidentally, marks our third approval for speculative buildings where the structure is erected in advance of acquiring a tenant. In conjunction with Northern Berkshire Development Corp. and two North Adams banks, we have approved financing for Pfister Aluminum Corp., Allendale, N.J., to move its four plants from New Jersey to North Adams, Mass., a surplus labor area. Almost one-half of our net approved loans have been granted to enterprises in present or former distressed areas. Over the past 5 years, our borrowers have

been responsible for over 17,000 jobs with an annual payroll of about $70 million and the indirect benefits which such industrial employment generates.

Your corporation in many instances acts as a catalyst in the industrial development field. Industrial parks are a fine example of this activity. We have financed the first building in eight such parks throughout the State, all of which are presently or will eventually be occupied by many such structures.

During the year Executive Vice President Francis P. Brennan was reelected chairman of the Northeastern Conference of Development Credit Corporations comprising the New England States and New York. On March 27 and 28, 1958, in conjunction with the Federal Reserve Bank of Boston, the organization sponsored a national conference of such corporations, and the attendance from 35 States was most gratifying.

In August we were saddened by the death of Clarence G. McDavitt, Jr., chairman of the board, Somerville National Bank, whose services to your corporation as a director and member of the executive committee since its organization had been invaluable.

On December 3, 1958, Elmer O. Cappers, president, Norfolk County Trust Co., was elected a director, and on June 30, 1958, Edward L. Clifford, president, Worcester County National Bank, was elected a member of the executive committee. Lee P. Stack, formerly vice president, John Hancock Mutual Life Insurance Co., has retired from that company, is now a partner of Paine, Webber, Jackson & Curtis, and continues as a director of your corporation and a member of the executive committee.

Our first borrowing from members dated February 1, 1954, in the amount of $1 million was paid in full on December 31, 1958.

This report contains two exhibits classifying loans by amount and employment size, and it is readily apparent that most financial assistance has gone to small business within governmental definitions. In this connection your directors have voted to apply to the Small Business Administration for a license to operate a small business investment company under the Small Business Investment Company Act of 1958, and thereby take advantage of every avenue for the financing of small business concerns. It should be noted, however, that your corporation also engages in other activities beyond this scope such as loans to private industrial developers, community industrial development groups, speculative buildings, as well as the financing of medium-sized companies.

Economists are predicting sharp increases in business plant and equipment investment in 1959. As in the past, your corporation looks forward to furnishing a portion of these requirements to expedite the growth of these expanding companies and contribute substantially to the economic development of the Commonwealth.

At the completion of five active and successful years of operation, I would like to express my sincere appreciation of our stockholders and member financial institutions. The former have provided $813,210 in capital and the latter have made available over $10,500,000 in loans This is ample demonstration of confidence in the continuing economic growth potential of the Commonwealth of Massachusetts, and in the case of members, is a means of collectively doing for the Commonwealth what they cannot do individually. The Massachusetts Business Development Corp. is a tribute to the willingness of the business and financial community to accept its share of responsibility for the economic and industrial development of the Commonwealth.

Finally, may I take this opportunity to express my appreciation of the unselfish and devoted service of your directors and the loyal and efficient work of your executive vice president, Mr. Brennan, and your entire staff. Respectfully submitted.

CARL F. WOODS, President.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

BOSTON.

The Members and Stockholders, Massachusetts Business Development Corp.: We have examined the accompanying balance sheet of Massachusetts Business Development Corp., at December 31, 1958, and the related statements of income and surplus for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

The purposes for which the company was formed include the making of business loans of a nature not customarily undertaken by financial institutions. Officials of the company have advised us that in their opinion there are no substantial losses pending with respect to the loans outstanding and, based on information available at this time, we have no reason to believe otherwise. However, the adequacy of the reserve which may be ultimately required for possible losses on loans receivable is dependent on future developments in the affairs of the borrowers and the value of collateral securing the payment of such loans.

In our opinion, the statements mentioned above present fairly the financial position of Massachusetts Business Development Corp. at December 31, 1958, and the results of its operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year.

FEBRUARY 17, 1959.

ARTHUR YOUNG & Co.,
Accountants and Auditors.

Balance at beginning of year.

Excess of amounts received on sale of common stock at $10 per share over par value, $1 per share...

Years ended Dec. 31

1958

1957

$709, 074

$673, 794

NOTES TO FINANCIAL STATEMENTS

NOTE 1.-The company obtains funds from the sale of its stock and from loans from financial institutions such as banks and insurance companies which, by becoming members of the corporation, agree to lend money to it upon call, under conditions and limits as set forth in the corporation charter.

The charter provides, among other things, that the company may borrow money only from its members and that no loan may be made to the company if immediately thereafter its aggregate obligations would exceed the lesser of $32,000,000 or eight times the amount then paid in on its outstanding capital stock. The company's borrowings from its members outstanding at Dec. 31, 1958, were as follows:

Holders of the common stock are entitled to dividends as declared by the board of directors, provided that each year not less than 10 percent of the company's net income for the preceding year must be retained for use in the business whenever the earned surplus account is less than one-half the amount paid in on the capital stock then outstanding. The stockholders are entitled in liquidation to share pro rata in the assets available for distribution after the payment of all sums due the members as creditors of the company. The voting rights of the shareholders and the members respectively and certain other provisions applicable to the capital stock are described in the charter (ch. 671 of The Act of 1953 of The Massachusetts Legislature). NOTE 2.-Loans receivable are stated at the net amounts due the company, excluding amounts due participating banks, as to which the company has no financial obligation. The purposes for which the company was formed include the making of business loans not customarily undertaken by financial institutions. As of Dec. 31, 1958, the loans were primarily of a long-term character, with maturities ranging to 10 years, and were collateralized, in most cases, by one or more of the following: First or second real estate or chattel mortgages (not usually including inventories), assignments of life insurance policies and guarantees. Installment payments on all loans are up to date, including one loan previously in default on which the repayment schedule has been amended.

Officials of the company are of the opinion that, based on information presently available and on the collateral securing most of the loans, the loans outstanding are collectible at least in the net amount at which carried in the balance sheet.

As at Dec. 31, 1958, the company bad agreed to loan additional amounts totaling $623,278 under then outstanding loan agreements, of which $151,088 represented participation by others.