Childers to Rogers (Permanent Under-Secretary)

I am desired by the Lords Commissioners of Her Majesty's
Treasury to state, for the information of Mr Secretary
Cardwell, that Their Lordships have had under consideration
your letter of the 21st Ulto enclosing a communication
from the Crown Agents for the Colonies on the subject of the
appointment of Trustees for the Management of the Sinking
Fund of the Loan of £100,000 raised by British Columbia,
under the authority of the Ordinance No 7 of 1864.

My Lords concur in Mr Cardwells proposal to appoint
Mr Julyan and Mr Gairdner to be Trustees for the Sinking
Fund of this Loan.

With regard to the suggestion of the Crown Agents that the
money to be set aside for the formation of the Sinking Fund,
should be invested in the repurchase of Debentures, Their
Lordships are of opinion that such a course would be the most
natural, and would tend to improve the value of the securities
in the Market; but that the language of sec 12 in the Act—No
7 of 1864—and the corresponding secs in the previous
Acts—No 5 of 1862 and No 5 of 1863—is so doubtful as
to render such a repurchase inexpedient without further
reference to the Colony.

Secs 10 and 11 of the Act No 7 of 1864—provide that
two and a quarter per cent, per annum, on the amount of
Debentures outstanding, should be invested in any Government
Securities (named by the Secretary of State) whether
Imperial or Colonial; and the dividends on such Securities
are also to be invested "so that the same may accumulate by
way of compound interest."

These sections would appear to authorize the Sinking
Fund to be so invested in the Debentures issued under the
Act (if approved by the Secretary of State) but the following
sec 12—though apparently relating to the repurchase of
Debentures by additional monies voted for that purpose by
the Legislature, or applied by the Governor from surplus
revenues, adds that the Trustees of the Sinking Fund may
make use "thereof" for the purpose of withdrawing
from the Market, by purchase, debentures issued under the
Act; and such debentures are to be cancelled.

If the word "thereof" relates, not to monies in
addition to the Sinking Fund appropriated by the Legislature
or issued by the Governor; but to the accumulations of the
Sinking Fund itself; it would be imprudent to invest the
latter in these debentures, as the cancellation of the
Bonds would deprive the Fund of the accumulation of the
dividends at compound interest, and this, considering also
the reduction of the amount outstanding on which the
percentage of 2 1/4 is to be calculated, would render
the extinction of the Loan, within the specified time, impossible.

My Lords cannot, therefore, authorize the investment
of the Sinking Funds established by these Acts in debentures
of British Columbia until the Colonial Government shall have
expressed their views on the question and, if necessary,
obtained Legislative amendment of the 12th section of this,
and the corresponding sections of the other Acts.

But it appears to My Lords that the investment of these
Sinking Funds may with propriety be made in the debentures
of the more important British dependencies, which are
readily negotiable on the Stock Exchange, and I am to
suggest that the Crown Agents should submit the titles of
such Securities for Their Lordships approval.