8.—9

fresh finance has had to be obtained. Under the long-term system as now adopted by the Public Trustee, once the initial expense of valuation and the cost of the mortgage have been met the only further expense is the small fee charged for the periodical inspection of the security at five-yearly intervals. Apart from these considerations, the farmer has recognized that the scheme is a very valuable form of compulsory saving in which there is a constant incentive to him to improve his position. Another advantage of the system is that, once a loan has been definitely granted, the mortgagor is no longer embarrassed by disturbing fluctuations in the valuation of the security from time to time. As is well known, in recent years there have been alternating periods of inflation and depression in the values of land, and although as a general rule the valuations of properties on which the Public Trustee has lent funds have not varied to the same marked extent as the sale prices of land, they have nevertheless not been entirely unaffected by the rise and fall in the price of land. The consequence is that in the case of flat mortgages granted for a period of five years from the year 1920 onwards, which have matured within the last year or two, although the properties have not declined in productivity and have been maintained in good heart and condition by the holders, revaluations of the land have often shown a decline in value, so that the statutory three-fifths margin is not available and a formal renewal of the mortgage cannot be granted until the amount of the loan has been reduced. As this has often been impracticable owing to the fact that the mortgagor has no ready funds available for the reduction of the mortgage, an embarrassing position has been created, and it has in many cases been necessary to allow the mortgage to run on overdue pending reduction to within the statutory limit. This is an unsatisfactory position both for the mortgagor and the Public Trustee as mortgagee, but all such difficulties are avoided in the case of the long-term system. There are also certain advantages in the system from the point of view of the Public Trustee as lender, in that the margin of security for the loan is constantly increasing by the amounts periodically paid off the principal sum. Moreover, the periodical repayments provide additional sums which are at once made available to meet the needs of other borrowers. The table most availed of by rural borrowers is the twenty-five year table, on which the periodical repayments amount to £7 15s. 6d. per centum per annum, of which 6 per cent, represents interest and £l 15s. 6d. sinking fund. In the case of house properties the usual table is the twenty-year table, in which the repayments are £8 13s. per cent, per annum, of which 6 per cent, is interest and £2 13s. sinking fund. Only such a permanent financial institution as the Public Trust Office can adopt such a system, as the usual lender or private trustee cannot tie up his funds for such long periods, and, moreover, possesses no means of satisfactorily investing the small instalments of principal which are repaid from time to time. Supervision of Securities. 91. Not only is increased care becoming necessary in the selection of investments for new funds, but there is also an increasing necessity on the part of the Public Trustee to exercise close supervision and control over the large volume of existing investments. The fact that the total investments of the Office now amount to £28,465,963 is an indication of the magnitude of the work of supervision and oversight. It must be recognized that in recent years the position of a mortgagee has become a much more onerous one than in times past. Prior to the unsettlement created by the Great War a mortgage of land was regarded as one of the most permanent and gilt-edged forms of investment, and in those days it was customary for an institution which had invested money on the security of good land to regard itself as free from anxiety or likelihood of loss. In the post-war years this position has entirely changed. The economic fluctuations which have been so marked a feature of post-war reconstruction have had a most disturbing effect on the position of the whole community, but particularly those engaged in the primary industries, the consequence being that mortgagees have had to exercise close care and supervision over the funds invested in rural securities. In common with other mortgagees, the

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