B.—No. 3

4

PAPERS RELATIVE TO

After much consideration on his part, Mr. Mtzherbert decided that it would be proper and desirable to place before the public of this country the whole of your intended financial operations at once, and as the rates of conversion for the old securities were based on the then comparatively high rates of the 5 per cents., issued under "The Loan Act of 1863," it became necessary to invite subscriptions at a fixed price, instead of calling for tenders upon a concealed minimum, otherwise our calculation with regard to conversion might have been all upset, to the very serious detriment of the more extended operation. The retail price of the old 5 per cents, was at that moment unprccedontly high, namely, 99, or deducting three months accrued interest, the net retail price was 97:}, and although the effect of throwing a further large amount suddenly on the market, usually produces a depression of some two or three per cent.; still, considering that this now stock possessed soino peculiarly advantageous features as compared with the old, it was determined to offer it at a rate only f per cent, below the retail price, namely, 97, at which rate the gross sum realized on the £1,114,000 was £1,080,580, making the rate of interest which the Government will have to pay for the money £5 3s. Id. per cent, per annum. Such favourable terms as these have not been obtained in. this market by any Colonial Government for many years, and although the Crown Agents are of opinion that a still higher rate might have, been obtained if the sale of the new stock could have been safely delayed until the conversion of the old had been completed, yet they are bound to admit that such delay could not have been incurred without serious risk, arising out of possible political convulsions, and they feel strongly convinced that the Government of New Zealand has good reason to congratulate itself both as to the highly favourable terms on which this new loan has been effected, and on the favourable prospects which present themselves with regard to the conversion and consolidation of old ones. I have, &c, The Hon. the Colonial Secretary, New Zealand. P. G. Jultan".

Enclosure 1 in No. 1. New Zealand Goyebumeitt Debt. Suggestions by the Crown Agents for the Colonies for the conversion of the various securities now in circulation into one common stock, which may hereafter be added to or reduced without multiplying or altering the denominations. 1. The various unguaranteed debentures of the General and Provincial Governments to be consolidated, or exchanged for securities bearing interest at one uniform rate of 5 per cent, per annum. 2. All future loans to bo contracted on securities of similar character. 3. The new 5 per cents., or consolidated securities, to be issued either in the form of registered stock or debentures, at the option of the exchanger or buyer, as the case may be. 4. The stock certificates to bo accompanied by coupons payable to holder in the same manner as debenture coupons. 5. The registered stock and debentures to be at all times exchangeable, the one for the other, on payment of a small transfer fee and stamp duty, on the debentures created in lieu of stock. (). The registered stock to be transferable from hand to hand by an ordinary deed of transfer. 7. The interest to be made payable quarterly, instead of half-yearly, as on the present securities. 8. The principal to be paid off by means of a cumulative sinking fund, into which shall bo paid quarterly a sum equal to five shillings per cent, on the total of the consolidated debt. i). This fund to be applied to periodical drawings (lottery) in the usual way. The bonds or stock certificates so drawn to be paid oft' at par. 10. The total debt will thus be paid off' in about thirty-seven years. 11. It would appear advisable that the whole of the 5 and 0 per cents, (together amounting to £4,510,000) now in circulation, should be dealt with in one operation. It is presumed that nearly all the former would be exchanged without hesitation, as the holders would, without having their interest diminished, thus participate in the contingent advantage of an early drawing at par. 12. It is roughly estimated that the results of the conversion of the whole of the 5 and 0 per cents., on terms based on the present market prices of each, would be —Ist, the increase of the nominal debt by about 7:} per cent ; 2nd, a decrease in the annual charge of about 12 per cent., or nearly £40,000 per annum, and finally the rendering available for general purposes of about £158,000 novr accumulated in the sinking funds of the various General and Provincial loans. 13. The remaining 7, 8, and 10 per cents, of the Provincial Governments, amounting in theaggregate to £499,000, might be afterwards dealt with on similar principles, and probably with greater relative advantages. 14. The consolidation ought if possible to bo far advanced, if not entirely completed, before any fresh issue of securities takes place, as any such issue must tend to lower the price of the present 5 per cents., and proportionately to deprive the Government of the advantage to be derived from the relatively high price of the jives as compared with the sixes which now exists. 15. It will also be advantageous to convert the old securities, as far as possible, into new. before the 5 per cents, are again quoted ex-dividend, as they will then have the appearance of having fallen about 2i per cent, in price. 16. If the various existing loans could all be made to disappear from the official lists and one uniform stock be substituted, it is more than probable that the sum still to bo raised under " The Public Debts Act 1867," would not cost the Government more than 5 per cent. 17. The market is now favourable for the operation, though not so much so as it was a month or six weeks ago, and it should be borne in mind that any political disquietude, or the revival of public confidence and trade, which political quiet would not fail soon to produce, must prove prejudicial. In fact, any change whatever must be a change for the worse, unless it bo possible to conceive that money will still become more abundant and cheaper than it is at present. London. 25th March, 1868. P. G. Julyan.