B.—ll.

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to sacrifice \ or f per cent, per annum for the sake of holding stock, when, though relatively of somewhat greater market value, he had bought that security to hold, and not to sell. Let us suppose an exchange offered at 110 of stock, having forty-eight years to run—which is far above your estimate—for £100 consols of twenty-four years currency. By this process £2,000 of the latter would become £2,200 of the former. In twenty-four years the 5-per-cent. consols would yield £2,400, and the 4-per-cent. stock, in the same period, £2,112, leaving a difference at the end of the twenty-four years of £288 (plus compound interest on the difference between the two rates throughout the whole period) in favour of consols. It is true that, at the end of fortyeight years the stockholders' capital will have increased by £200, and he would be secure of an investment paying £4 Bs. per cent, during the last half of that period ; but who can say that money may not be worth more twenty-four years hence than it is now ? If so, his £110 of stock will perhaps not realize £100 in cash. At any rate, these remote contingencies are commonly discounted for very little, and will not generally be recognized by bond fide investors as outweighing the certain advantage of additional income to be derived from holding consols, the risk of being drawn and paid off notwithstanding. Having regard, however, to the great importance you attach to being relieved from further contributions to the sinking fund, your Government may perhaps consider it worth while to offer more liberal terms. In that case we shall be glad to have a limit fixed, beyond which we shall not be at liberty to convert. There is another mode of proceeding by which you might possibly attain your object without converting the consols into stock at all, and that is, to offer a five- per-cent. security of a fixed but shorter currency, at par, in exchange for consols, thus doing away with the drawing element, and being content to recompense yourselves by abbreviating the period for which you would be liable to pay interest at 5 per cent., and by getting rid of the sinking fund obligations altogether. Or an alternative offer might be made to the consol-holders, to give them in exchange either 4-per-cent. stock, at a rate to be named, or, at their option, 5-per-cent. debentures at par, redeemable at a fixed date. We suggest this alternative with some reluctance, because it is a departure from the principle which the Government has laid down, and which is in itself so advantageous, of bringing all New Zealand securities as far as possible into one line of stock bearing interest at a reduced if not uniform rate; and from a desire to abstain from doing anything calculated to arouse the susceptibilities of the market with regard to the financial capabilities of the colony. We think it right, however, to invite your attention to this point, assuming that your first and greatest object is the extinction of the sinking fund, which may possibly be accomplished in this manner if it should not be found more advantageous to do it in the other. To purchase consols at present by way of assisting conversion hereafter, either through the medium of the bank or of a syndicate, would in our opinion be premature, seeing that the large new issues to be made in January are calculated to lower prices all round, and that then, if advisable, purchases may be made more favourably. We need scarcely add that the employment of syndicates, though sometimes a necessity, is always an expensive mode of operating. After careful consultation over your letter, it seemed to us essential that you should know as soon as possible the general impression it had produced upon us; and we therefore sent you the telegram of which a copy is annexed. We also annex a copy of your message in reply, which we were glad to receive. We have, &c, P. G. Julyan, F. D. Bell, The Hon. the Colonial Treasurer, Wellington. Loan and Stock Agents.

Copies of Telegrams referred to in No. 71. The Loan Agents to the Colonial Teeasueee. (Beceived 27th November, 1884.) Aftee carefully studying despatch 11th October, we think necessary represent our views without delay. Firstly, having regard to extent new loan January, cannot hold out any hope conversion Consolidated Loan, 1867, possible before March, nor probably long afterwards. Inscribed stock now about par, but fall upon approach new loan. Secondly, must not think conversion possible at figures given or anything like them unless market vastly alters. Thirdly, profitable present purchases, Consolidated Loan, 1867, not possible any appreciable extent. London, 26th.

The Colonial Teeasueee to the Loan Agents. Wellington, 29th November, 1884. New loan primary importance. Necessary documents on way Home " Buapehu." You must judge suitable time conversion.

No. 72. The Agent-General to the Colonial Teeasueee. Sic, — 7, Westminster Chambers, London, S.W., Ist December, 1884. In accordance with the instructions conveyed by your telegram of the 21st ultimo, I have