B.—a.

of interest frequently granted under the latter. As it is well known that mortgage investments provided in recent years the principal outlet for the investment of trust funds, and were generally selected by private trustees for the investment of trust funds under their control on account of the higher rates of interest offered, it is in point to refer here to the factors operating at present to reduce the return from such investments. Apart from the definite reductions of interest imposed by the National Expenditure Adjustment Act, 1932, and subsequent Acts, there are the following :- — (a) The inability of many mortgagors to meet even the reduced interest payments, with the result that the income of the individual trusts may be greatly depleted for the time being, or even stopped. (b) The substantial remissions or postponements of interest granted by the Courts and Adjustment Commissions under the mortgagors relief legislation, resulting either in loss of revenue or deprivation of income for longer or shorter periods. (c) The expenses attendant upon defending applications for relief, as must often be done in the interests of the funds invested. These are, in the case of investment in separate securities for each estate, a direct charge on and further deplete the estate income, and as the same mortgage may be the subject of more than one application for relief, considered and adjudicated upon by two tribunals, they may in the aggregate be substantial. (d) The direct charges for, and undoubted increase at present in the cost of, managing and supervising the investments and collecting the interest. Moreover, apart from the reduction of interest due to these causes, there may be the possibility or certainty of loss of part of the capital invested to be taken into consideration, apart from any inconvenience to those beneficially interested caused by the practical inability to get in capital sums for purposes of distribution, or to meet estate requirements, however urgent and necessary. All these factors must be recognized and assigned their due measure of importance in any comparison between the results achieved by the Office in the management and control of the Common Fund system, for the beneficiaries and clients participating in it with those obtainable from the alternative of investment in separate securities. I feel that the most complete answer to any criticism based on this aspect of the system lies in the fact that those directly concerned have for the most part fully appreciated the need for the revisions of interest rates which have recently been necessary, and have fully recognized that under the existing conditions the return provided is a favourable one, and that they have been sheltered to a large extent by the system from the adverse results of the existing financial stringency. 34. A notable exception was that of certain local bodies which, following upon the reduction of the Common Fund interest rates as from the Ist April, 1932, which was rendered necessary mainly by the passing of the National Expenditure Adjustment Act, 1932, and the operation of the mortgagors relief legislation, endeavoured to have their sinking funds withdrawn from the Common Fund either for reinvestment by the Public Trustee as their Commissioner in separate securities outside the Common Fund, then available and immune from the effects of that legislation, or for transfer to new Commissioners appointed in lieu of the Public Trustee, when the same advantage would have been gained. The local bodies which initiated such action were not numerous in comparison with the total number for which the Public Trustee acted as Sinking Fund Commissioner, but there was the possibility that, an advantage having been gained by some of them, the same course might be desired by the remainder. As the total amount involved was in excess of £4,700,000 the difficulties of meeting a concerted demand of this nature under present conditions will be evident. It is to be explained that these sinking funds had been accepted by the Public Trustee for investment in the Common Fund on the understanding that repayment would not be required until the maturity dates of the related loans, and his investments had been made on this basis, so that, apart from the special conditions resulting

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