1.—7.

The late Secretary to the Treasury (Mr. Gavin) wrote on this subject in 1885, as follows : — " With regard to the Interest and Sinking Fund payable by the colony in respect of the Consolidated Loan of 1867, a curious effect has been produced by the recent conversion. The amount converted was £3,651,700, and debentures for that amount, bearing the same rate of interest, were issued in exchange. Now, as the annual charge in respect of the original loan of £7,283,100 is constant until the whole of the loan is paid off, it would appear at first sight that the conversion of a portion of the loan into debentures bearing precisely the same rate of interest would not at all affect the annual charge ; but this, curiously enough, is not so. Whenever the drawings encroach upon the converted bonds—as happened at the last drawing—the bonds given in exchange for the converted bonds drawn assume a new character, and may be said to represent a new loan, taking the place of the loan paid off by the drawings. At the last drawing, £72,400 of converted debentures were drawn; the charge for interest became therefore increased by £3,620 per annum, or 5 per cent, on £72,400, and such charge must go on increasing year by year, measured by the encroachment of the drawings upon the converted bonds, until it reaches £182,585 per annum, or 5 per cent, on £3,651,700. This increase of the annual charge on the Consolidated Fund for interest is, however, to a certain extent nominal, because the Sinking Fund set free from year to year by the drawing of converted bonds will increase exactly in the same proportion as the increase of interest. The additional interest, in short, follows the additional amount set free." The " Sinking Fund set free" referred to by Mr. Gavin is paid into the Public Account, and is used to redeem an equal amount of debentures created to meet the yearly accretions of the Sinking Funds as a whole. 19th July, 1892. J as. B. Heywood, Secretary, to the Treasury.

Accretions of Sinking Fund.—Estimate for 1892-93.

Debentures or Scrip issued for Increases of Sinking Fund, and Amounts redeemed.

STATEMENT AND TABLES SUPPLIED BY ME. J. C. GAVIN, ASSISTANT CONTBOLLEB AND AUDITOE. (Memorandum.) Audit Office, 20th July, 1892. One of the objects of the provisions of "The Consolidated Stock Act, 1884," was: That to the extent to which the sinking funds increased year by year after the 31st March, 1884, so should money be borrowed in aid of revenue, thereby causing the net debt in respect of loans with sinking funds to remain stationary. By " net debt "is meant the debt represented by debentures outstanding, less the sinking funds. No interference with the obligations then existing to maintain the sinking funds was contemplated, and none has since taken place. They were to go on growing in

3

Estimate for 1892-93. Adjustment to 31st March, 1891. Net Estimate for 1892-93. sew Zealand Loan, 1863 (1914) (1915) STew Zealand Consols, 1867 immigration and Public Works Loan, 1870 .. Auckland Loan, 1863 jyttelton and Christchurch Railway Loan, 1860 Janterbury Loan, 1862 )tago Loan, 1862 £ s. d. 8,100 0 0 .. I 9,450 0 0 .. ; 218,202 0 0 .. ; 35,073 17 8 .. i 1,863 4 6 .. I 5,331 1 6 498 17 10 4,775 8 11 £ s. d. 413 0 0 Dr. 5,153 17 8 291 15 6 468 18 6 61 2 2 864 11 1 £ s. d. 8,160 0 0 9,450 0 0 218,015 0 0 29,920 0 0 2,155 0 0 5,800 0 0 560 0 0 5,640 0 0 Total .. 283,354 10 5 I Dr. 3,054 10 5 280,300 0 0

Issued. i I Redeemed. .884-85 .. .885-86 .. .886-87 .. .887-88 .. .888-89 .. .889-90 .. .890-91 .. .891-92 .. .. £247,700 .. 252,200 .. 251,000 .. 258,184 .. 263,200 .. 275,200 .. 288,000 .. 282,300 Out of Sinking Funds set free by annual "drawings" of New Zealand consols and other releases, — 1884-85 .. .. .. .. £72,400 1885-86 .. .. .. ..106,900 1886-87 .. .. .. .. 164,100 1888-89 .. .. .. .. 131,600 1889-90 .. .. .. .. 133,400 1890-91 .. .. .. .. 144,000 1891-92 .. .. .. .. 350,671 1,103,071 ■ ■ ■ 2,117,784 £2,117,784 Balance outstanding .. 1,014,713 £2,117,784