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the Public Trustee in his fiduciary capacity is bound to take all possible steps to protect the trust funds in his care, and if there is a reasonable prospect of minimizing ultimate loss or of obtaining more favourable terms on appeal to the Court of Review the Public Trustee is bound to take this action. During the years of the depression the system of preparing an annual budget in connection with farming operations was widely adopted with advantage to both mortgagor and mortgagee. In more recent years the continuing usefulness of the budgetary system has been demonstrated, and the records available have been of substantial assistance to all parties in negotiations for the adjustment of mortgagors' liabilities. 19. Local-body Loans. —The arrangement for the control of the Borough of Thames by a Commissioner which expired in May, 1938, has been extended for a further period of three years, while the reduction of interest by one-third on Thames Borough Council debentures has been extended for a further period of twelve months by the Thames Borough Commissioner Amendment Act, 1937. The Government has announced its intention of setting up a Commission of inquiry to investigate the whole position at Thames and to make recommendations to the Government for permanent arrangements regarding the liabilities of the borough, ft will be the duty of the Public Trustee, as representing a large number of the borough debenture-holders, to see that the facts supporting the position of the debenture-holders are placed fully before the Commission of inquiry. Very satisfactory results have been achieved in the control of the affairs of the Matakaoa County by a Commissioner during the past five years. There has been a considerable improvement in the collection of current and outstanding rates, while the county has been able to meet its commitments in full, and at the same time maintain its works in a reasonable state of efficiency. FINANCE. 20. Investment of Funds.—The investments completed during the year totalled £1,466,931. The investments held by the Office, including special investments on behalf of estates and funds, amounted, at 31st March, 1938, to £36,781,307, which represents an increase of £570,014 compared with those held at 31st March, 1937. 21. Annual Accounts. —In last year's report reference was made to the increased commission earned by the Office as a result of the improved economic conditions. During the year ended 31st March, 1937, the commission earned represented an increase of over 16 per cent, on that for the previous year, and it is consequently pleasing to record that the commission earned for the year ended 31st March, 1938, shows a further increase on that for the preceding year. The expenses of management have, however, increased during the year, principally as the result of increases in salaries arising from the general regrading of the salaries of public servants and in the cost of other services to the Office. Another item of expense which increased considerably in the past year was the amount of legal costs incurred in connection with applications by mortgagors for adjustment of their liabilities under the Mortgagors and Lessees Rehabilitation Act, 1936. During the past few years when the arrears of interest on mortgages increased considerably it has been the practice of the Office to review each case with the greatest of care in order to decide what provision should be made for losses which it was clear, in many cases, would inevitably accrue. Similarly, where a loss of the principal of an investment was anticipated a reserve was created. As the result of the provision made in former years this year's Profit and Loss Account has been relieved, to a large extent, of the burden of the substantial amounts remitted by the Adjustment Commissions during the year under review. There have, however, been additional cases where, although no provision for loss was considered to be necessary, remission of interest and writing-off of principal have been ordered by the Adjustment Commissions. Such losses have been charged to the year's Profit and Loss Account.

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