I have the honour to report that, in pursuance of your instructions, I have paid the Natives of the Wairarapa the balances of 5-per-cents due to them on the 30th September last. These payments, relating to accounts that have been running from fifteen to twenty years, render it, perhaps, necessary to recall the circumstances (well known, however, to you) under which the liability arose. I may premise, then, that previous to the year 1853 large tracts of land In the Wairarapa had been rented by the settlers as runs direct from the Natives. This practice was in contravcution of the provisions of the Land Purchase Ordinance. It was desirable that settlement should be on a more page 6regular basis, and many of the tenants felt the inconvenience of their precarious tenures. Accordingly, in 1853 a vigorous effort was made by the Government to obtain land at the Wairarapa. Many large blocks were purchased, the payment being made to extend over a period of several years. In 1860 the Commissioner was thus able to report the completion of the purchase of 957,864 acres, the area including most of the rental holdings; but as the extinction of the Native title involved the sacrifice of the rents that the Natives had previously enjoyed, it was agreed between the Chief Land Purchase Commissioner (with the sanction of the Government) and the Natives that in addition to the purchase-money paid down, 5 per cent. of the net proceeds of land sales within certain of the blocks should revert to them or be expended in their benefit. The blocks bought under this agreement were the following: Turakirae, comprising 66,760 acres; Turanganui, 30,253 acres; Tuhitarata, 20,900 acres; Wharekaka and Puhangina, 28,398 acres; Moroa and Tauherenikau, 61,400 acres; Makoura, 2,291 acres; Whareama (No. 1), 11,583 acres; Whareama (No. 2), 12,931 acres; Pahaua, 107,000 acres; Manawatu, 45,550 acres: in all, 387,066 acres. In fulfilment of the agreement an account was entered at the Treasury, by which 5 percent. of the net proceeds (the expense of surveys having previously been deducted) was carried to the credit of a separate trust fund for the benefit of the Native sellers.

In 1869 the liability of the Province of Wellington, existent and prospective, for the payment of the 5-per-cents from its land revenue; was commuted by the payment of the sum of £1,200 to the General Government. In the first instance certain expenses of schools and the gratuities given to chiefs were, in virtue of agreement, charged against this fund; but, for reasons that it is beyond the scope of this report to specify, it was found roper to place these charges against other funds. The Natives had freely given up a considerable income in rents; and, as it was not desirable that they should have cause to regret their act, as few deductions as possible were consequently made from the amount that had accumulated. It must not be considered from this that the Natives were underpaid for their land: such does not appear to have been the case, and in a document attached to this report it will be seen that they now admit having received "a high relative price" for their lands. From time to time sums of money were drawn by different chiefs, and flour-mills were given or built for them. Unfortunately, in one instance, where the Natives were given the purchase-money for a mill, the intention was not advantageously carried out by them.

In 1870 Mr. Commissioner Kemp paid the Natives the sum of £2,000 on account. He did not, they state, furnish them with any accounts, or inform them of the balances which remained. Two other sums have been paid since that date.

On receiving your instructions to pay the Natives what was owing, I found that; up to the 30th September, 1873, the amount at credit of the account in the Treasury was £596 3s. 9d. I left Wellington with that amount on the 26th November, and, after transacting some Trust-Commission business at Masterton, met the Natives at Greytown, on the 5th December where the chief Manihera te Rangitakaiwaho, who had been directed to assist me, had collected the various chiefs of the sellers. Mr. Wardell, R.M., kindly presided. I found that certain Europeans had been exercising a pernicious influence with the Natives, in misrepresenting the object and extent of the deductions that had been made from the gross proceeds. The Natives found that the amount I had with me (£596 3s. 9d.) was very small in comparison with the sum of £2,000 paid to them in 1870; and, as land had risen in value, population was coming in, and the place prospering, they could not understand how the amount could be so small. Their counsellors had pointed out these things, but had not told how the income must necessarily be a decreasing one, as the balance of unsold land became annually less, or how the high prices ruling were on private, not Government, land sales. Mistrusting, then, to some extent the accounts, a committee had been organized to scrutinize my figures in regard to areas sold and moneys paid. The committee consisted chiefly of members of the old Hauhau party, and had, as their spokesman, a man who had been active a short time since with Henare Matua at Hawke's Bay and elsewhere. I was not sorry at their determination to attack the accounts vigorously, as I felt assured that the eventual result would be a better acquaintance with the subject than the younger Natives at present had, and a clearing-away of some causes of dissatisfaction. I found it convenient to prepare a debtor and creditor account, block by block, treating each purchase as a separate transaction. The Natives did not at first understand this method; several of the chiefs being interested in a plurality of blocks, and desiring to be paid upon them collectively. The inferior Natives, who were only interested in one block, however, saw the advantage of distinct accounts, and now all desire that the accounts may be rendered to them in such manner in the future.