(Enclosure in No. 2.)

Memorandum.

I. It is proposed that a Commissioner be appointed by Her Majesty to be a Commissioner for the New Zealand Company.

That the name of the person selected by Her Majesty be submitted to the Directors of the New Zealand Company, and the appointment take place on their signifying their approval.

That this Commissioner attend all Meetings of the Directors, and have access to all books, papers, and accounts of the Company, and that the Company shall agree that no Resolution shall ever be adopted at any Meeting of the Directors without the assent of the Commissioner.

That the Commissioner be paid a salary of Fifteen Hundred Pounds a year out of the funds of the Company.

II. That during the period for which the present arrangement shall last, the Government shall give up to the Company the entire and exclusive disposal of all Crown Lands, and the exercise of the Crown's right of pre-emption of lands belonging to the Natives, in the Southern Government of New Zealand; and undertake during such period to execute any grants, leases, or mortgages, for which the Court of Directors and Commissioner shall engage.

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III. That during three years commencing the 6th of April ultimo, the Government shall engage to place at the disposal of the Company,—during the first year such sum of not more than Twenty-eight Thousand Pounds over and above any sum now payable to the Company under any former loan,—during the second year such sum not exceeding Seventy-two Thousand Pounds,—and during the third year such sum not exceeding Thirty-six Thousand Pounds,—as shall be required by the Company and the Commissioner from time to time, for the purpose of discharging the existing liabilities of the Company to an extent not exceeding Seventy-nine Thousand Pounds, and of conducting its colonising operations.

That all sums accruing to the Company in each year, beyond those which it is bound to expend for the benefit of the purchasers of its lands, shall be expended in furtherance of the general objects of the Company, with the view of diminishing the amount of advances which may be required from Her Majesty's Government.

That during that period no interest shall accrue from any debt to the Government, nor for any claim to compensation on the part of the Company.

That during the first year no dividend shall be paid to the proprietors of the Company's stock; nor any in either of the two following years, without the express sanction of Her Majesty's Government.

That the Company shall at once give up all claim to lands in the neighbourhood of Auckland, and take the whole amount awarded to it elsewhere.

IV. That if the Company shall be in a condition, at the end of the three years, to continue its operations, the present arrangement with respect to Heads I and II shall continue, and be made permanent either by a new Charter or by Act of Parliament, upon the Company agreeing to such restriction on its disposal of land, dividends, and application of funds, as shall then be agreed upon between the Company and Her Majesty's Government.

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That the Company shall, in that case, abandon all claim to compensation from the Government.

That all advances already made, or within the period of three years to be made to the Company by the Government shall, in that ease, be constituted as the Company's debt, the principal of which the Company shall be bound to repay by an annual payment of not less than one-fourth of its clear profits after payment of all expenses.

V. That if, at the end of the three years, the Company shall be unable to continue its operations, Her Majesty's Government shall take the Company's assets, together with the liabilities contracted by it to third parties during that period with the assent of the Commissioner, and any debt which may still be due from it to the Nelson Settlers.

That all debts due from the Company to the Government shall be remitted, in consideration of the Company's admitted claim on the Government.

That the lands now belonging to the Company, consisting of 1,048991 ½ acres awarded to it and as yet unsold, together with 24,491 ½ acres held by it in virtue of purchase within its Settlements, shall be taken by the Government at the rate of five shillings an acre.

That the Company shall be entitled to payment of the sum so due to it, together with interest at the rate of three-and-a-half per cent, thereon, out of the proceeds of all returns over and above the outlay for surveys and emigration, accruing from the sale of Crown Lands in New Zealand, but not from any other source.

That the New Zealand Company shall thereupon be forthwith dissolved, except for the purpose of receiving such annual payment.

VI. That neither the Crown nor the New Zealand Company shall, in any part of New Zealand, sell any lands not previously sold by them, for any sum less than twenty shillings an acre, nor expend less than ten shillings an acre of the proceeds of such sale in carrying out emigrants.