8.—14.

16

supported by any tangible security. It has not been the practice of the Board to attach substantial value for security purposes to guarantees not supported by adequate and satisfactory security ; and the Board has not found it possible to depart from this attitude, except in cases where the amount involved has been small and there has been substantially the margin of security in the other assets available as security. In most of the cases where the unsupported guarantees constituted a main part of or even the principal security offered the guarantees submitted were those of private individuals reported to be of good standing, and some disappointment was expressed when the Board's requirements regarding security were made known. It is, however, generally difficult to assess the exact value of a private guarantee at the time when the application is made, and there is always the possibility of a rapid change afterwards in the position of the guarantor which would render the guarantee valueless. For these reasons, and in view of the need for adequately safeguarding the funds entrusted to the Board by the Government and the debenture-holders, it is felt that the Board would not be justified in taking guarantees into account for lending purposes unless supported by tangible and satisfactory security. 29. Pedigree and Stud Stock.—Applications have frequently been made for loans representing approximately the maximum sums which coulcl be advanced on the usual margins on pedigree dairy cattle or stud sheep stock if the stock were taken into consideration at the special values, often much in excess of the values of grade animals of a similar class, assigned to the stock. During the year the Board gave consideration to the principle involved, and while recognizing that stud and pedigree stock and the progeny thereof command in favourable circumstances prices in excess of grade stock and in the case of dairy cows the animals may be of a higher-producing strain, it came to the conclusion that it would be inadvisable to take such stock into account for lending purposes at values much in excess of those placed upon grade animals, in view of the circumstances under which the Board is operating, and the difficulties which would be associated with the valuation of the stock and the supervision of the securities. The handling of pedigree and stud stock requires special skill, knowledge, and experience, and. the number of farmers possessing the requisite qualifications is limited. It would be unsafe for the Board to lend moneys upon the basis of high valuations of stock of pedigree or stud quality to farmers without the necessary qualifications. The valuation of these classes of stock is highly specialized, and as the valuers appointed by the Board, while fully competent to value ordinary stock, are not, generally speaking, experienced in valuing pedigree and stud stock, it would be necessary to utilize in each case the services of recognized valuers with expert knowledge in the particular class of stock concerned not only at the time of the original application, but throughout the currency of the loan when questions such as the maintenance of the herd or flock to the required standard, the purchase of foundation or other stock, and the regulation of sales of stock came up for consideration. In view of the scale of charges which would apply it is probable that the cost to the individual borrowers, both at the time of the original loan application and later for supervision purposes, would be heavy. Moreover, the total volume of business which might be forthcoming in any one district would not justify the setting-up of special facilities, with necessary safeguards, for breeders of such stock. To a limited extent, however, the Board has agreed to take pedigree and stud stock into account for lending purposes at valuations somewhat in excess of those assigned to grade stock. In these cases a limit of valuation of £15 has been fixed in respect of pedigree dairy cows and bulls and £2 2s. for stud sheep stock, with proportionate valuations for young stock and provision for pedigree bulls and stud rams of exceptional value being taken into account at higher valuations if covered by a live-stock insurance policy. The Board is at present giving consideration to suggestions which have been made for the acceptance of higher valuations of pedigree dairy bulls in cases where the borrower is aiming at a progressive improvement of his dairy herd.