D.—4

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(a.) A guarantee of interest on capital already expended is required, because, without such a guarantee, it would be difficult, if not impossible, to raise fresh capital, as the land grant earned, and to be earned, has been partly used for interest during construction, and on works. The balance has been allocated, in the proposals under consideration, to meet the interest charges on debenrures, during the period of construction on the East and West line. (b.) It is an error to suppose that a guarantee is asked for on the cost of works on the tunnel route. The amount of £1,600,000 is the capital required to be guaranteed on the assumption that the incline is assented to. This figure is made up as follows; — Estimated cost to complete line from Springfield to Jackson's with incline £1,070,500 Extra cost for increasing section of tunnels, and making ventilating shafts and headings on the incline section, as suggested by the Commission, say 20,000 Extending the line from Belgrove into the Motueka Valley 30,000 Expenses of raising capital, calculated on the basis of the present prices of the New Zealand Government Stock 229,500 Present ordinary share capital to be included in guarantee 250,000 £1,600,000 (c.) Ordinary share capital fully paid, £250,000. Debenture capital, £745,000. (d.) Amount expended on construction, less cost of finance and interest, during construction, to the 31st December, 1891, is £673,838. (c.) Total value of works completed to the 31st December, 1891, £965,105. (/) Liabilities on contracts let, about £150,000, for which money is provided partly out of landgrant proceeds. I have, &c, Eobeet Wilson, Engineer-in-Chief and General Manager, The Hon. the Premier New Zealand Midland Eailway Company

No. 4. From the Seceetaby to the Cabinet to the Geneeal Manages, Midland Eailway Company Sir,— Wellington, 27th May, 1892. I am directed by the Premier to inform you that the Cabinet has again considered the matter submitted by you in connection with the Midland Eailway, together with your reply to my letter of yesterday's date, and it has decided that it is unable to entertain the proposals contained in your letter of the 19th in their present form. I have, &c, A. Willis, E. Wilson, Esq., C.E., Secretary to Cabinet. General Manager, Midland Eailway Company, Wellington.

No. 5. The General Manageb, Midland Eailway Company, to the Hon. the Pbemieb. Sic,— Wellington, 6th June, 1892. I have now the honour to submit a modification of the proposals made by me, on behalf of the New Zealand Midland Eailway Company (Limited) on the 19th May, 1892, which were to the effect that the Government should substitute a guarantee of interest for the guaranteed land grant, as contained in the present contract between the Queen and the company The modified proposals are as follows :—■ (a.) The company to relinquish their right to all further land grants for the railway to be made, but are to retain the lands already earned, and those lands to be earned by the completion of the sections of line now let by contract, and at present under construction. The area reserved for selection by the company is to be thrown open at once and dealt with by the Government. (b. The value of the balance of land grant to be earned by the company on completing the line from the end of the Springfield section to the end of Jackson's section is guaranteed by Government to yield £618,000. (c. The Government to guarantee 3 per cent, interest on £1,600,000 new share capital. This capital to be used to complete the East and West Coast Eailway, and extend the Belgrove section, now under construction, into the Motueka Valley The Government is, at the end of five years, to redeem £372,500 of the present debenture issue of £745,000 by means of the land grant given up by the company and valued at £618,000. (d.) As soon as the company raises £1,600,000 it is to deposit out of this the sum of £300,000 in trust, at current deposit rates, say 4 per cent, or more. The interest derived from this trust fund, and a portion of the capital of this fund, will be annually used to make up any deficiency between the guaranteed interest payable on capital and the net earnings of the line available for interest. (c.) The company has funds available to meet interest on the present debentures for a period of three years (the estimated time required to finish the East and West line) without drawing on the trust for this purpose. The money in hand is the balance of past land-grant earnings and traffic receipts from the opened line to Eeefton.