March 16th. 1871. at Wellington. may be classified under three heads:- The Native difficulty, relative to the Maoris outside the boundary of Waikato, and the defence of the District. The state of the roads, etc., and the regulations under which their repairs are effected, with a view to the employment of the Armed Constabulary. The progress made in the settlements, the feelings and views of the settlers with regard to the affairs of the district, and the Maori question; and their own political views. the market at a lower price than has hither to been put upon them. The recent parries have had a very bad effect in lowering prices of land; and in deterring several intending purchasers from investing for residence in the district. But on the whole, the Waikato is making good progress. A large number of acres are under grass, and pay well. Wheat and barley thrive, and settlers look forward to supplying, in the course of time, the whole of the North, with flour. Hops grow luxuriantly; but the cost of picking is too great for any benefit to be derived. Flax Mills, with the ex- -ception of the one at Ngaruawahia, are at a standstill. An enterprising firm has undertaken the drainage of a huge swamp; and bu cutting 100 miles of drains, have already reclaimed a part of it; and the settlers have every confidence in its future prospects, this home of their adoption. Amongst them there exists a wonderful unanimity on two subjects, - the necessity there is for a policy of participation, and a reluctance to the enforcement of the Militia Act. Among them, a large number have signed a petition to His Excellency, the Governor, praying for the establishment of an "Aukati". Their grounds for this application have some justice in them; as it is no doubt a source of irritation to see natives avowedly hostile, within the boundaries; in two cases, coming into actual conflict with Europeans; and in most, returning to their own country laden with property and information. It appears, however, that the majority of the petitioners repudiate the idea of "shooting" trespassers across the frontier, as originally proposed; and contemplate restricting to imprisonment, the penalty to be incurred. Even this would be impracticable. The Native Rights Act, would, in the first place, put a bar in the way of any such action; and the enforcement of a measure of the kind would necessitate the employment along the frontier of a very much larger body of troops than the country can afford. Besides, there is no doubt that as long as any trade is to be had with the natives, some individuals will take advantage of it; and Europeans would, in all probality, be the first to break an "Aukati" proclaimed at their instance. The above suggestions were made during a time of considerable excitement; and I believe that what the settlers now really desire is to place a restriction upon commercial intercourse, more in the manner contemplated by the proposed native offenders Act than by any such very stringent enactments. A slight feeling of unpleasantness seems to have existed as to the non-employment of the Armed Constabulary in Waikato on Public roads. This is now remedied. The greatest confidence appears to be reposed in Col. Lyon, and it is the opinion of the leading settlers that the step he took in not calling out the Alexandra Militia on the occasion of the last panic, has done much towards putting a stop to causeless rumours. The general feeling seems in favour of the Gov- -ernment Policy. (Signed) Donald McLean. March 4th. 1871. It is difficult to analyse the present aspect of Native affairs. The grounds upon which correct data might have been formed in past times, have been completely removed, by the introduction of Hau Hau fanaticism. Many of the natives, while subject to the influences of this superstition, appear to behave as if distracted and unaccountable for their actions. The name of Porerawewa (madman) given by themselves to a phase of this belief, pretty well defines the mental state of the persons affected by it. The interval of peace which has lately passed, has done much towards the decline of the Hau Hau religion; but its prefessors still regard it as a bond of union, and as a means of upholding the National party, of which Pawhiao and Manuhiri are looked upon as the heads; and there is but little doubt that a would rekindle the spirit of fanaticism now gradually expiring. A large population of the Friendly and neutral tribes regard the murder of the late Mr. Todd as a violation during peace time, of the relations subsisting between the Government and the Waikatos; and consider that at noetime has there been a better "casus belli", should the Government feel disposed to take up the matter. Justice, in this case, is so clearly on our side, that some tribes who have hitherto remained neutral, would, in case of a conflict, co-operate with us The most intelligent amongst the Friendly Na- tives are however of opinion that efforts should be made to obtain the murderers by negotiations before resorting to hostilities. It must be borne in mind that the King is still a power. Although disunion exists among some of his adherents, previously the staunchest to him, yet the advent of hostilities would induce numbers of young men, free from the old restraints of Chieftain-ship, to flock to his standard. Unfortunately it happens that even among the best disposed tribes, the Chiefs have lost the authority their fathers held; and are now without means to restrain their followers. War, in such a case, would seem to tend to strengthen the King Party, by enlisting on its side, the fanaticism of the Hau Hau religion, and attracting to its recruits, those eager for distinction or booty. By careful combinations, however, a successful blow might be struck against the Waikatos; which would break up this party; but such a step would be followed by the ruin of the frontier settlers in Waikato and elsewhere; would very much injure the colonrising projects inaugurated by the Government; and would entail, even under favourable circumstances, a very heavy outlay. It is a question whether judicious management and care during a period of peace will not hasten the decay of the King Party, more than open hostilities; which would gratify among the natives, those wilder spirits, who look forward to the chances afforded by a war to win honour or plunder. Still, I should not omit to observe that passing over the murder of Mr. Todd, without obtaining such reparation as the law demands, is likely to be ascribed by many of the natives, as well as by a section of the Europeans, to weakness and inability to enforce the laws. Others will be on the watch for an opportunity to get the Government committed by some act of agression, which would deprive it of the vantage ground it now holds; and make it incur, in the opinion of the Maoris, the odium which, caused by Todd's murder, at present rests on the Waikatos for a deed looked upon during peace, by the natives, as a dangerous transgression of their old customs. In any case it is well to be prepared for any contingency which may arise; and I place the matter in its different aspects as they suggest themselves to me, before my colleagues, to aid in forming any decision which the Cabinet may arrive at on the subject. It is with a view to ensure the safetu of the Waikato District, that I have increased the force under Lieut. Col. Lyon, to 200 Armed Constabulary; and have sanctioned the establishment of a system of patrols alog the frntier, to be carried out by a Volunteer Cavalry coro, incoonjunction with Mourbed Constabulary. In the Waikato District, there exists an anomaly, with respect to these; for while the lands are still in the hands of the General Government, the district has been divided into Road Boards under the Provinoial Government. The amounts received, however, from the Province, by the Boards, has, till the distribution of the awarded £12, 400, been very small; and each district being large, thinly inhabited, and intersected by numerous creeks, the rates have not been sufficient to cover the expense of repairs. I have received several proposals on the subject of the roads and bridges, emanating from the different Boards. Considering that the lands in Waikato are still the property of the General Government; and that its lengthy frontier is devoid of proper communication between the different posts, I have given orders to Lieut Col. Lyon, to employ one half of his force, viz. 100 men, in the formation of roads in this district. A large extent of country still lies unoccupied; Of this 10, 000 acres, is the property of the Government. The remainder has passed from military settlers, into the hands of non-residents. One whole district, Whata Whata, has hardly a resident in it. The settlers are very anxious to see the waste lands brought into