B.—No. 4,

PAPERS RELATIVE TO

4

taken in the Treasury Department, the Secretary of State for the Colonies hesitated to declare Her Majesty's assent to that Act. The urgency of a prompt and favourable decision had been pressed upon the attention of the Secretary of State from the first moment of my arrival in this country; and when at length the objections of the Treasury assumed a more definite shape, the probable result was considerately intimated to me, in order that I might exercise my discretion whether, under the circumstances, I would at once return to the Colony. It will be recollected that, with the concurrence of my colleagues, I had, before leaving the Colony, authorized the advance of certain funds, to the extent of several hundred thousand pounds, for the use of the Provinces and also that of the General Government, in anticipation of the proceeds of the loan, and that I had given a written undertaking, as Colonial Treasurer, to replace these funds in London by the end of March last. A little consideration showed me that I could not turn my back on these difficulties, and allow the Colony to become a defaulter to its creditors for want of any representations which I might still be able to make, and thus I had no alternative but to face the difficulty as firmly as I could. I need not say that this was a period of anxious solicitude, and I cannot sufficiently express the gratitude which I consider the Colony owes to the then Secretary of State for yielding to the earnest appeal finally made to him, and thus rescuing it from imminent danger. These obstacles being removed, I had, before determining the best mode of converting the old stock and of placing the new loan upon the market, to decide upon the particular agency which I should employ for the purpose. The alternatives which presented themselves were, to intrust the business either to one or more Banks, or to some eminent financial house of business, or to the Crown Agents for the Colonies. There were advantages peculiar to each of these agencies, and I did not decide until after careful consideration and inquiry. In resolving to adopt the last alternative, I was in some measure influenced by the fact that the Crown Agents had for twelve months previously bestowed much time and attention, and employed the services of eminent professional men, in maturing a scheme for consolidation. The result has abundantly justified my decision. I cannot speak too highly of the zeal, industry, fidelity, and skill with which the Crown Agents have transacted the business thus intrusted to them. Whilst I cannot omit this opportunity of officially acknowledging the valuable advice and co-operation which I have received as Agent for the Colony from many influential persons in this country, yet the fact remains that the success which has marked the entire operation is chiefly attributable to the agency employed. I annex a copy of the final Beport which the Crown Agents have made to me, together with its several enclosures. These are so voluminous and abundant, that but little additional explanation is requisite from me. The most advantageous form for the new loan appeared to be that of debentures bearing 5 per cent, interest, with an accumulated sinking fund of I per cent., applicable to the liquidation of the debt by a plan of annual drawings. Securities with interest at 5 per cent, bear a more favourable proportionate value than those of higher rates. The annual application of the sinking fund towards paying off debentures obviates many difficulties which exist under other arrangements with regard to the safe, profitable, and close investment of funds, and by thus removing the doubts of investors affords a preferable guarantee to the public creditor. The feature of lottery introduced into the new stock added just sufficient piquancy to render it fashionable with speculative investors. Nor should it be forgotten, in appreciating the favour with which the new stock was evidently regarded, that whilst the quarterly payment of interest imposed no additional burthen on the Colony, it formed just sufficient inducement to the permanent investor who looked to income, and on whom the proposals otherwise pressed somewhat, to incline him towards acceding to the terms offered. The terms of conversion and exchange offered to the old debenture holders were settled after careful calculation of their respective value, having regard to the rates of interest chargeable upon them, and the periods for which they had to run. A differential value of 4-| per cent, was fixed as marking the estimated distinction in value between General and Provincial 6 per cent, bonds. Had more than this been exacted, Provincial bondholders would not have come in. But at the time it was not easy to determine this point of relative value; for the quotations at the moment, had they been implicity relied on, might have induced the belief that Provincial stocks were of equal value. Before advertisements could be issued inviting subscriptions to the new loan of £1,114,000, it was necessary to determine whether the conversion scheme should be published before or simultaneously with the advertisement for the loan. Many reasons were urged in favour of the former course, but I hesitated to run the risk of postponing the issue of the new loan, and therefore determined on putting forward the proposals as a whole, with the exception of that part which would deal with debentures bearing high rates of interest, which obviously would best be treated separately. The result has, I think, proved that the decision to publish the proposals as a whole was a wise one. It next became necessary to fix the rate at which subscriptions to the new loan should be invited. This was an extremely delicate and difficult point; if too high a figure were fixed, and subscriptions to the requisite extent had not consequently been sent in, a fatal mistake would have been committed. If, on the other hand, a rate below that which the market would bear were published, a proportionate loss would have been inflicted on the Colony. And here I cannot omit mentioning that it is entirely due to the sagacity and confidence which the Crown Agents and the brokers displayed at the final interview which I held with them on this subject, in the presence of my legal adviser (Mr. Sewell), that the rate was ultimately fixed at 97. I am bound to admit that I should have sanctioned a much lower rate had it been proposed, and that up to the last moment I entertained doubts whether too great a risk of failure had not been incurred. This anxiety on my part will readily be understood when it is remembered that I had entered into engagements to provide nearly half a million, at a comparatively short date, independently of the liabilities for the redemption of Southland Certificates and the other requirements for the General Government and the Provinces, which I knew would mature in the course of a few months. A less clear perception on the part of the Crown Agents and the brokers would easily have entailed a loss

Enclosure No. 13,