5

D.—4

(/.) The attached Statement A shows that this fund of £300,000 and the interest earned by it will be sufficient to free the Government from any likely possibility of having at any time to provide money to meet their guarantee of interest, and, in addition to this sum of £300,000 to be provided by the company, the Government will have in hand, after paying £372,500 to redeem debentures, a further value of £245,500, the balance of the £618,000 land grant, which would have to be absorbed, to meet guaranteed-interest charges before the Government would be put to any further liability than now exists under the present contract. This most unlikely contingency is worked out in Statement B attached, in which the returns from traffic are assumed to be abnormally low, and far less than any calculated returns and estimates in the past or present attempt to show , but they have been assumed for the purpose of proving that, even if the low traffic returns only are reached, the Government would be safe from any loss or increased liability through giving the guarantee asked for This will, no doubt, meet the objection raised on these grounds at our interview to-day whereas, if the company's estimates prove approximately correct, the country will actually save £245,500 of land-grant value guaranteed over and above the saving gained by raising the new capital with and without a guarantee, as shown in my letter of the 19th May, 1892. It will be seen from Statements A and B that when the net traffic returns equal the interest charges on capital (in Statement A after four years) the balance of the trust fund will annually increase by the interest earned by it, and will be available for an increased dividend, or may be reserved to redeem part of the balance of the debentures. (</.) The Government may nominate an officer, say, a Commissioner of Eailways, who shall have the power to inspect and report upon the management of working the company's railway in New Zealand from time to time, and any objection raised by him to excessive maintenance charges or maladministration to be submitted to arbitration. This would meet any objection that might be raised, or statements made by opponents to these proposals, that the company without such a provision might by mismanagement necessitate a payment by the Government under the guarantee, which would not otherwise happen. (h.) It is understood that, as the company propose to resign at once the whole of the balance of the land grant given under the present contract—viz., £984,000 —any proposals for completing the Nelson line between Eeef ton and the Motueka Valley must be the subject of separate negotiations when the Bast and West line is completed and opened for traffic. (i.) These proposals are made subject to an extension of the contract time, and that consent be given at once to the substitution of the incline line for the original tunnel line at Arthur's Pass. (j) The company's property to be free from all local taxation. It is suggested for consideration that general taxation should not affect the company until such time as the net traffic earnings cover all guaranteed payment of interest, as this would otherwise increase the liability of the Government to meet interest payments. I have, &c, Eobeet Wilson, The Hon. the Premier Engineer-in-Chief and General Manager

Enclosure 1 in No. 5.

***• ££& Keceipts 3 P er cent - from Traffic. Interest payable. Balance. 1 j I End of year 1 2 3 4 5 £ £ 300,000 12 000 256 500 10 260 211 260 8,452 164,212 6 568 115,280 4,612 77,892 I 3 116 Traffic receipts 55 ( 500 for three years gg' qqq pawned to meet Kfc'^no interest OO.OUU on £745,000. 55,500 50,000 93 000 70,000 93,000 £ 256 500 211,260 164,212 115,280 77,892 59,008 G-overnme; it to purchase half of £745,' 100 debentures = £372,500. End of year 6 7 8 9 10 11 12 13 14 15 16 17 i i I i 59,008 2,360 60,743 2,428 66,221 2,648 75,819 3,032 89,045 3,560 107,014 4,280 130,128 5 204 158,811 6,352 191,038 7,644 224,557 8,984 259,416 10,376 295,667 11,828 73,500 74,125 77,175 74,125 81 075 74,125 84,319 74,125 88,534 74 125 92,959 74,125 97 604 74,125 100,000 74,125 100,000 74,125 100,000 74,125 100,000 74,125 100,000 74,125 60 743 66,221 75,819 89 045 107,014 130,128 158,811 191,038 224,557 259,416 295 667 333,370