I am glad to be able to state that the Estimates of Receipts for the current year laid before you in December last, have been generally verified up to the present time in respect of Ordinary Revenue. But the land sales have not reached the average amount for the past four months, having amounted to only £6077. During the past few weeks there has been a gradual increase of the amounts received, but I can scarcely hope that the receipts for the year will come up to the estimate. On the other hand, the receipts of Ordinary Revenue will probably exceed the estimate.

The probable decrease in the Land Revenue and the uncertainty which still overhangs the adjustment of the debt between Westland and Canterbury will render the utmost caution necessary in incurring any farther liabilities. The provincial moiety of the Consolidated Revenue during the first three months of the year is more than £500 in excess of the estimate, and the provincial charges are more than £800 less for the same period; and taking into account the fluctuations of the revenue over the whole year, it is probable that the estimate under this head will be somewhat more than realised. The other estimates of Ordinary Revenue may also be expected to be realised, with the exception of £500 for the Timaru Landing Service, and the amount of £500 for sheep fines. With regard to the former item I have, in accordance with a resolution passed by you in the month of July last year, made an arrangement subject to your approval by which the receipts and management of the landing service will be handed over to the Timaru and Gladstone Board of Works from the beginning of this year. Correspondence on the subject will be laid before you.

The absence of a return from sheep fines, and the almost total extinction of disease among sheep in the Province, is a matter of congratulation.

The returns from the Railway have up to the present time been in excess of the amount they were estimated to yield. The gross income of the year was estimated at £39,350, and the actual income for the past four months has amounted to £17,280, or £4164 more than one-third part of the estimate for the year. But this period includes the greater part of the wool season and an important part of the grain season; and the present income will not be maintained during the winter months. It is reasonable, however, forming a calculation upon the relative income for the different months of last year, to anticipate an excess of the estimated amount of receipts over the whole year; but on the other hand there will be expenditure necessary in the Tunnel which was not previously contemplated, and which will more than absorb any such excess. The stores paid for in last year and consumed during the present year, and a per centage for depreciation are not taken into account in the above observations.

You will learn from papers which will be laid before you that the Provincial Debentures converted into Colonial 5 per cents, on the 31st December last were:—Of the Emigration Loan £19,100 out of £30,000; of the Railway Loan, £162,900 out of £250,000; of the Canterbury Loan, £476,300 out of £500,000. The unconverted Debentures being respectively—Emigration Loan, £10,900, bearing 8 per cent. interest; Railway Loan, £87,100, bearing 6 per cent. interest; Canterbury Loan, £23,700, bearing 6 per cent. interest. The effect of these conversions is to increase the principal debt by £35,539 10s., and to diminish the annual charges for interest and sinking fund by £7034 16s. 7d. The annual charges to be borne by the Province for interest and sinking fund on Loans stand at present time:—Loan of 1856, payable to Colonial Treasury, £4440 per annum; Provincial Debentures converted, payable to Colonial Treasury, £41,630 3s 5d; unconverted Debentures, payable to holders—interest £7520, sinking fund £2415—£9935; or a total of £56,005 3s. 5d.

Under Schedule B to the Appropriation Ordinance of last session payment of 25 per cent. of the amount of the votes has been made to the several Road Boards. Further payments