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Balance - sheet. —The balance-sheet shows that the amount outstanding on mortgage was £18,113,150 3s. lid., to which must be added the instalments of principal in arrear, .£54,492 16s. yd., and the instalments of principal postponed, £3,980 16s. Bd., making a total of £18,171,629 J7s. 4d. As it is only to be expected, the Department experienced considerable difficulty in keeping arrears down to a minimum, and in a.number of cases temporary relief was given by way of postponements of instalments or interest. When it is considered that several large lending concerns, whose business is administered, by men of undoubted ability, did not foresee the extraordinary slump in prices and were caught in the tide of economic depression, the Department might well be congratulated on the handling of the soldier-settlement policy. Every effort has been made to maintain the financial position and at the same time give soldier settlers every chance to establish themselves. Arrears and Postponements. —The question as to whether arrears might be capitalized has received serious consideration, but there is little; doubt that where lands have been bought at high prices an additional increase in the capital involving increased annual charges would impost! an extra burden on each man difficult to overtake, Where lands have been bought at reasonable prices and settled at reasonable rents capitalization may be justified. Postponements of instalments of principal and interest in force amounted to £26,470 Is. Bd., while arrears totalled £385,844 12s. 6d. A careful analysis of the recommendations for postponements submitted from the various Land Boards discloses that the reasons for the inability of mortgagors to meet payments may be attributed to —(1) Low prices of farm-products ; (2) inexperience in farming ; (3) poor classes of cows owned by a number of settlers ; (4) the running-out of pasture, with inability to replenish it out of diminished income ; (5) prevalence of twitch and couch-grass, involving large expenditure in eradication of same ; (6) insufficient working capital. In regard to postponements resulting from the low price of farm-products, statements submitted show that where the land is in good heart, and stock is in good order and well cared for, there is every prospect of overtaking the postponements within a reasonable period- that is, provided prices are maintained at a remunerative figure. In many instances it has been found that notwithstanding the diminished income it would have been possible for the settlers to have paid a reasonable portion, if not the whole; of their dues to the Department, but the earnings have been expended in the direction of further improving their properties and stock. Settlers' Present Difficulties. —With regard to the men who upon examination appeared to the Land Boards to be experienced in farming, but whose subsequent farming methods proved them inexperienced, the majority have now purchased their experience largely by the unprofitable investment of capital. This, combined with the low prices of farm-produce, has placed them in the position they now find themselves ; but those men who are now proving their worth by the adoption of more improved farm methods deserve every encouragement and assistance. In their case arrears have mounted up and relief should be; afforded, but not by means of capitalization unless the land can possibly stand such. Tn many instances the poor class of cows owned by a number of the settlers is largely responsible for diminished returns, but it is pleasing to note that tiiese men realize the. fact that they must cull and sell the useless animals and replace them with better beasts. Owing to the rapid extension of the. dairying industry resulting in increased demand for good dairy stock-, it has been impossible for all settlers to begin thoroughly equipped with good milch-cows. In some cases overstocking has been the cause of failure, and Supervisors and Rangers have instructed men to get rid of the surplus stock with a view to obtaining better results. It is hoped that by paying attention to the advice given the majority of these settlers will pull through within a reasonable period— that is, provided prices return to normal. The running-out of pastures has been a source of anxiety to the Department and to the men themselves. This more particularly applies to farms financed under section 2, which the men acquired in anticipation that they were taking over going concerns that needed only stocking up. It has been found that the pastures of a number of these properties have almost run out, and that much capital must be expended to make them revenue-producing. With the limited amount that may be advanced under the regulations covering improvements, building, fencing, and stock, settlers find it difficult to obtain sufficient capital to renew the pastures. During such period of renewal properties cannot carry sufficient stock, and what stock is carried does not give satisfactory returns, and expenditure exceeds income. Most of this expenditure is of a capital nature, and while revenue is low there is no surplus, after meeting the ordinary farm expenses, that may be applied to renewal of pastures, unless with the aid of postponements of instalments, &c. Should these lands require fairly frequent manuring, it is obvious that settlers must be in a, position to reserve a certain portion of their annual income for this purpose, but before being in such a position they must first obtain income, and they cannot obtain it unless the pastures are firstput in order, enabling them to increase and maintain their herds and flocks, as they should be kept. In some districts a large number of properties which were looked upon as being in fairly good condition when the loans were recommended by valuers and the Board have turned out to be considerably affected with twitch and couch-grass, resulting in poor crops and the necessity for the expenditure of a large amount of capital in the eradication thereof. It is frequently reported that pastures have run out or did so shortly after acquisition by the Government, and it is submitted that in many parts of New Zealand grasses run out every five years, which means that a good farmer, once he is established and obtaining good results, must make provision for renewal of pastures. The proper rotation of crops requires careful attention, and the failure to give due regard to this aspect of the case results in gradually diminished returns. Generally it is considered that, with a normal market which would place settlers in a position of being able to provide for the renewal of pastures and the culling out of unprotable stock, there is every reasonable chance of the majority of those now in difficulties being able to make a success of