THE PUBLIC TRUST OFFICE.

Press, Volume LX, Issue 18231, 15 November 1924, Page 14

THE PUBLIC TRUST OFFICE.

A REPLY TO CRITICISMS.

The following statement in reply to criticisms of the Public Trust Office has been issued by the Right Hon. the Prim© Jlinister. who is the Minister responsible for the office: — "The Common Fund of the' Public Trust Office has recently been the sifb- ■ ject of- criticism in certain newspapers, and it has been urged that the Public Trustee has deprived beneficiaries of -an- unduly large proportion of the interest yielded by the investment of the -funds in estates in which they are interested.. .-. ."The Common Fund was created by - Act of Parliament in 1891 to provide •that the-.capital funds of estates, like that of Savings Bank depositors should be'entitled to a fixed rate of interest by falling into a Common Fund to be invested by the Public Trustee and guaranteed by the State. "The Common Fund possesses certain special features, viz.-: (1) The safety of -money invested in it —both capital and income—is absolutely guaranteed by the State. •. "iN.o: matter what losses ar» sustained in respect, of its investments, estates "whose funds are invested in the Com•inon.Fund suffer no reduction of capital, and no diminution of income whatsoever. All through the recent depression clients received their income with the same regularity as formerly wind -were occasioned no anxiety iv> to the 'security of their capital. De-spite'-the unfavourable conditions of that-period, in these estates there was no writing off on account of depreciated. ;■. securities.- The experience of private .trustees has been such that it ••was.-.suggested to give them legislative ..powers' to- -writ© off the and interest tdrae to estates under their control. '..... "(2)-.Moneys falling into tho Com.mon Fund become interest-bearing immediately. There is no' waiting for suitable investments and thus no, consequent loss of income—interest accrues fit once. ' "(3) The Common Fund offers continuous investment for tho funds of each estate for as long as such is required. The Public Trustee may experience difficulties in the collection of the interest (a not uncommon experience of lenders during the "slump" period) but to the investors in the Common Fund their income is available whenever due. This is no small advantage to clients and especially those dependent on regular remittances of their income. ' lurthermore notwithstanding the depression a more • liberal system, of crediting interest on Commun Fund investments was introduced and charges for-administration were reduced. . "(4) Capital moneys invested in the Common. Fund are available whenever required—the money is always liquid. This special feature of the Common > Fund system confers a two-fold benefit on the estates concerned. On the one hand it provides an immediate.investment for all estate moneys, be the .period for which they are to be held ..definite" or indefinite, long or short; whilst", oil the other hand it ensures that the capital funds will at on<se be available whenever they become disi&it the interest earned exceeds the cost, of administration, whereas in these cases' it would not be a private trustee to allow interest at ;all.. • .-••-: _.-.; •■;. :"Local. Bodies—Amongst the victims of the Common Fund Father-Dowling has included the Local Bodies' Sinking Funds. Far from being so the • system % very beneficial to these Sinking Funds ixtasmuch as renders the ,instalments interest-bearing aa soon as. j."the"Ttiblio' Trustee receives them and at the same time maintains the funds "Mr liquid form available to meet the obligations of a Local Body as soon as they become due. ~. "Although in arranging for the in- ..." vestment of their sinking funds, local | bodies. have the option of special in- , vestment in pursuance of Section 5 (1) of the Local Bodies Amendment Act, .1921, °r the common fund, they invariably chose the latter, which is so admirably suitefi to their requirements. "Father Dowling and the newspaper .'.Critics contend that an unduly high percentage of the interest earned by .the Common Fund is retained by the . Office, but the figures quoted in support of the contention are misleading. These have' been extracted from portions ol the Office annual accounts, but from Want of knowledge of the surrounding facts the' conclusions drawn are erroneous.; "Father" Dowling has overlooked several points of importance. For in- ;■■ stance," no account has been taken by . him of the increase iii. the surplus . in- . terest due to the revenue derived from tHe investmnt of the Office reserve funds and the balance in the profit and ■'. loss account. - r .'"lnterest on common fund investments amounts to over £1,000,000 a •year, arid is. flowing in continually. ;sfuch ; of this is payable to clients . ' .half-yearlY or quarterly, whilst some of " it "is capitalised. "Until it is paid out '•" itvhelps' to swell the funds for investment, thus adding to the surplus . interest earned. In like manner, rents ."and other, receipts held for very short , and broken periods befor being paid out, form part of th funds available for investment, and contribute in this way to the surplus interest. ; ''fThen large sums are held by the Public Trustee as agent at rates ;. fixed-•.;by..contract-.with . the principal. Th© jdifference between this rate •is . the. surplus interest,: but \ manifestly-'-it -does• notrepresent'inter-. ' est^Offtyhfeh'estate's-,have been deprived. .••■■' moneys : held for immedi- s ate. mstributidn.are ; allowed interest at 3-,pltf : for. the Common'jFand, they; would earn nothing at •>• :alLv- .Being .payable at: short, notice, they.jnust-be ; maihtairied : ih liquid form, and: Dowling cannot expect ihii T .,tobeJ at the same time ;a.higher rate of interest to be • ore&jf&L?' •';.:. ■;•- "iißoyaT- Commission found the admi£isfatioii' of small' estates by'-.the-t English. Trusfee; to be iiiiprofit l e l ;i& a siinilar;experience in ,' New Zealand, v. Nevertheless the Publife Trustee: iis;compelled, to: administer these. estates, .many of which are rejected ,by 'private, fernsteea; because their'adminis- -.' prove unremunerative. ■'■'-•■ "'ln-his' tables,- Father Dowling has '[ failed to give credit for the bonuses ~ paid „in 1918-19-20, amounting to .-: £92,404...He stated that he was unaware whether certain funds invested in the 'Gommon Fund participated -in ;" these bonuses, but he may rest assured i that they did ? and: that all estates ;-; and funds received the shares to which they were entitled. "Estates held during life interests or • for definite periods are allowed!- a clear- ; ft per cent, per annum. When it. is rcr ■' niembered that the average rates of intedest earned bv the common fund invstments in 1920, 1921, 1922, and I&2* were £5 6s 7d, £5 7s 6d, £5 Bs, 'and £5 10s 4d respectively, it will be realised that the estates are receiving • liberal treatment. It must be remembered- : that though the Public Trustee is now . lending at 6 per cent., there are many I investments not yet matured, bearing , Crates below those-now ruling. : if Wt retained by the Public Trustee, it ,J;;*honid not be overlooked that not only 'A :: %iM : Jjfa'-- entitled to remuneration for his ~ rendered to tho estates, but (Mpf ?s»' obvious duty to create resW&:&> provide for possible losses in mmiiim of. the securities following economic conditions. past few years