This security to the bondholders shall be effected as follows:

The Imperial Ottoman Government will, by an Imperial Firman, direct the Khedive of Egypt to remit the necessary portion of the tribute for such a number of years as would be sufficient to extinguish the loans to whomsoever the bondholders may direct, free of all control and interference by the Imperial Ottoman Government, and the Khedive of Egypt on his part will acknowledge such directions, and will bind himself so to remit the tribute.

The Imperial Ottoman Government will officially notify this its irrevocabably act to the British Government, and the Khedive of Egypt will, at the instance of the Imperial Ottoman Government, undertake to remit through the Financial Commission lately established in Egypt the necessary amount of the tribute, which, as you are aware, is the first charge on the entire revenues of Egypt.

4. That the existing bonds of the 1854 and 1871 Loans shall be exchanged for substituted bonds, in which all these acts will be fully set forth.

We need scarcely point out that the bondholders would by this arrangement secure an absolute an inalienable security for their bonds which cannot fail greatly to enhance their value, and we hope that you will feel yourselves justified in recommending the proposal to your constituents.

Meanwhile we should feel obliged by an acknowledgement of this letter.

Messrs Palmer and Bouverie to Zuhdy Effendi and Mr. Foster.

Gentlemen, Bank of England, June 28, 1877. WE beg leave to acknowledge your letter of yesterday's date, containing proposed terms for an arrangement between the Imperial Ottoman Government and the holders of the bonds of the Loans of 1854 and 1871.

We waived, in the first instance, our request for the production of your power to complete an arrangement, in the sincere hope that a scheme would be offered to our consideration which would be acceptable both to the Imperial Government and the bondholders. We regret to inform you that, after giving your proposal full consideration, it does not appear to be one which we can submit to the bondholders with a prospect of commanding their assent:

1. The rate of interest offered is insufficient.

2. The security as proposed is not satisfactory, it being, in our opinion, not equal to that which exists at present, having regard to the nature of the interest of the Allied Governments.

3. We have no reason to believe that Her Majesty's Government will give their concurrence to your proposal, without which concurrence it will be impossible to modify the existing contracts.

We shall be prepared to recommend the bondholders to make some considerable concessions if the following points are assured :

(1.) That the Ottoman Government abandons any control over the distribution of the tribute during the existence of the present loans.

(2.) That the distribution of the tribute shall be vested exclusively in Her Majesty's Government for the time being.

If these points are assured we think the bondholders will agree to an arrangement by which a material portion of the tribute will be available for the exigencies of the Imperial Government.

In any circumstances, the money now in the Bank of England must be distributed to those to whom it belongs, a large proportion of whom have no interest whatever in the bonds.

We are, &c.

(Signed) EDWD. HOWLEY PALMER. E. BOUVERIE.

Sir,

No. 14.

The Earl of Derby to Mr. Layard.

Foreign Office, July 17, 1877.

I HAVE to inform your Excellency that the Turkish Ambassador mentioned to me to-day that he had been made acquainted with the proposals for an adjustment of these loans received by the Turkish financial agent in London from Messrs. Palmer and Bouverie, and that although not officially and formally authorized to say so, he thought that he could state with confidence that he would be enabled to come to an arrangement with the bondholders on the basis of their proposals.

I said that I was glad to learn that he felt prepared to come to a settlement satisfactory to the bondholders, and that I would at once communicate with the Board of Treasury, with whom I was in correspondence upon the subject.

No. 15.

I am, &c.

Sir,

Lord Tenterden to Mr. W. H. Smith, M.P.

Foreign Office, July 17, 1877.

WITH reference to my letter of the 13th instant, I am directed by the Earl of Derby to transmit to you, to be laid before the Lords Commissioners of Her Majesty's Treasury, the accompanying copy of a despatch to Mr. Layard, informing his Excellency of a conversation with the Turkish Ambassador respecting the Egyptian Tribute Loan,*

My Lord,

Mr. Barrett to the Earl of Derby.-(Received July 18.)

44, Hammersmith Road, W., July 16, 1877. NOW that the case of the bondholders of this loan is under the consideration of the Government, I think it right to inform your Lordship that the self constituted Association known as the "Egyptian Tribute Bondholders' League" have no right whatever to compromise the claims of the bondholders of this loan.

I and several members of my family are holders of the bonds to a large amount, and we protest against any compromise whatever.

And we trust that your Lordship will insist upon the Turkish Government carrying out the Firman of the Sultan, and the terms of the general bond of this loan, pure and simple.

(Signed)

I have, &c.

EDWARD ALFRED BARRETT.

No. 17.

My Lord,

to

Mr. W. H. Smith, M.P., to Lord Tenterden.-(Received July 19.)

Treasury Chambers, July 19, 1877.

I AM directed by the Lords Commissioners of Her Majesty's Treasury to transmit you herewith, for the information of the Secretary of State, a copy of a letter dated the 17th instant, which my Lords have caused to be addressed to Messrs. Palmer and Bouverie, relative to certain proposals by the bondholders of the Turkish Loans of 1854 and 1871.

Inclosure in No. 17.

Mr. W. H. Smith, M.P., to Messrs. Palmer and Bouverie.

Treasury Chambers, July 17, 1877.

Gentlemen, I AM directed by the Lords Commissioners of Her Majesty's Treasury to inform you that my Lords have given their best consideration to your letters of 5th, 23rd, and 29th ultimo, on the subject of the Turkish Loans of 1854 and 1871, and have communicated with the Earl of Derby upon the same.

Your proposals, as well as those of Zuhdy Effendi and Mr. M. H. Foster, are intended to affect a rearrangement of the claims of three different classes of creditors of the Ottoman Government who stand upon distinct grounds, but who have a common interest in a particular branch of the revenue of the Porte, viz., the tribute now paid by the Khedive of Egypt.

This tribute is at present regularly paid by the Khedive into the Bank of England, and, when received there, is held by the Directors to be applicable to the service of the three Loans of 1854-1855 (in part) and 1871 respectively, and to no other purpose. But the direct authority of the Turkish Ambassador is required on the occasion of every separate payment; and without that authority the Bank are unable to pay any money whatever to the bondholders for whom they hold it; so that when, as has lately been the case, the Porte directs that only half the stipulated interest be paid to any of its tribute creditors, the residue of the tribute, after making the half payment, remains in the Bank and is not touched by any one.

You desire to put an end to this inconvenient state of things by making a new arrangement, under which the bondholders of 1854 and 1871 respectively should submit to some reduction in the rate of interest and sinking fund to which they are, under the terms of their bargains with the Porte, entitled; while the Porte in return should abandon all right of controlling in detail the application of the tribute after it has once been paid over by the Khedive, and should leave its distribution among the creditors, under the new scheme which is to be agreed on, to be conducted by an independent authority.

You ask the opinion of Her Majesty's Government on the general features of this proposal.

In reply to this request, I am in the first place to remark that Her Majesty's Government have no privity with the Loan of 1871, and can offer no advice to those who are interested in it. They have, however, consented, under the special circumstances of the case, to use their good offices on behalf of the bondholders of 1854; and they have instructed their Ambassador at Constantinople to support proposals which they understand to have been submitted to the Porte by or on behalf of those gentlemen. They are equally prepared now to recommend the Porte to come to terms with this class of bondholders, on the basis proposed by you in your letter addressed to the Turkish financial agents on the 5th instant, with the understanding, however, that the distribution of the tribute shall be undertaken by some independent authority, such as the Bank of England, and not by Her Majesty's Government, there being, in their opinion, grave objections to the latter course.

İ am, &c.

(Signed) W. H. SMITH.

No. 18.

Lord Tenterden to Mr. Barrett.

Foreign Office, July 19, 1877.

Sir, I AM directed by the Earl of Derby to acknowledge the receipt of your letter of the 16th instant, protesting against the Egyptian Tribute Bondholders' League in any way compromising the claims of the bondholders of the Turkish Loan of 1854.

I am, &c.

(Signed) TENTERDEN.

Sir,

No. 19.

The Earl of Derby to Mr. Layard.

Foreign Office, July 24, 1877. WITH reference to my despatch of the 17th instant, I transmit to your Excellency herewith, for your information, a copy of a letter from the Treasury, forwarding copy of a letter which the Lords of the Treasury have addressed to Messrs. Palmer and Bouverie relative to certain proposals made by the bondholders of the Turkish Loans of 1854 and 1871.*

I am, &c. (Signed) DERBY.

No. 20.

The President of the Ottoman Syndicate to the Earl of Derby.-(Received July 27.)

Excellence,

Paris, le 26 Juillet, 1877. NOUS avons eu l'honneur d'adresser à votre Excellence, en date du 2 Octobre dernier, notre projet de la conversion et de l'unification de la dette Turque.

Aujourd'hui nous avons l'avantage, M. le Ministre, de vous transmettre ci-inclus un autre exemplaire de notre projet, où des modifications importantes ont été introduites, et que notre délégué spécial, M. le Comte de Kératry, actuellement à Constantinople, est chargé par nous de faire prévaloir auprès de la Sublime Porte.

Etant honorés de la protection bienveillante du Gouvernement Français, nous osons espérer que votre Excellence voudra bien nous prêter son appui puissant dans une œuvre si patriotique par l'entremise de M. l'Ambassadeur d'Angleterre à Constantinople. Nous avons, &c.

Président représentant des Porteurs de la Dette Turque,
J. DE NAS-BEY.

(Signé)

No. 21.

Lord Tenterden to Mr. W. H. Smith, M.P.

Foreign Office, July 30, 1877.

Sir, I AM directed by the Earl of Derby to transmit to you herewith, to be laid before the Lords Commissioners of Her Majesty's Treasury, for any observations they may wish to make thereon, a copy of a letter from a French Committee of Turkish Bondholders, styling themselves the Ottoman Syndicate, inclosing a copy of their project for the conversion and unification of the Turkish Debt, and soliciting the support of Her Majesty's Government.t

I am, &c.

(Signed)

TENTERDEN.

No. 22.

My Lord,

Mr. Layard to the Earl of Derby.-(Received August 17.)

Therapia, August 10, 1877. WITH reference to my despatch of the 12th June last, I have the honour to inclose copy of the Porte's reply to the representations which I made, by your Lordship's instructions, with regard to the Loans of 1854 and 1871.

No. 17

I have, &c.

M. l'Ambassadeur,

Inclosure in No. 22.

Server Pasha to Mr. Layard.

Sublime Porte, le 9 Août, 1877. LE Ministère Impérial a reçu en son temps la note que votre Excellence a bien voulu lui adresser le 11 Juin, relativement à l'Emprunt Ottoman de 1854.

J'ai l'honneur de porter à la connaissance de votre Excellence qu'un arrangement est sur le point d'être conclu à Londres entre Zuhdy Effendi, Délégué du Gouvernement Impérial, et les détenteurs des deux Emprunts de 1854 et 1871. Cet arrangement donnera satisfaction aux intérêts recommandés à la Sublime Porte par le Gouvernement de Sa Majesté Britannique.

Veuillez, &c.

M. l'Ambassadeur,

(Translation.)

Sublime Porte, August 9, 1877.

THE Imperial Ministry have duly received the note which your Excellency was good enough to address to them on the 11th of June relative to the Ottoman Loan of 1854. I have the honour to acquaint your Excellency that an arrangement is about to be concluded in London between Zuhdy Effendi, Delegate of the Imperial Government, and the bondholders of the two Loans of 1854 and 1871. This arrangement will satisfy the interests which have been recommended to the Sublime Porte by Her Britannic Majesty's Government.

No. 23.

Accept, &c.

(Signed)

SERVER.

Mr. Law to Lord Tenterden.-(Received August 29.)

My Lord, Treasury Chambers, August 28, 1877. I AM directed by the Lords Commissioners of Her Majesty's Treasury to send you herewith, for the information of the Secretary of State for Foreign Affairs, a copy of a letter from Mr. E. A. Barrett, dated the 17th instant, and addressed to the Chancellor of the Exchequer, and likewise copies of the inclosures which accompanied it, relating to the subject of the Turkish Tribute Loan of 1854.

I have, &c.

Mr. Barrett to Sir S. Northcote.

44, Hammersmith Road, W., August 17, 1877.

Sir, I BEG to call your attention to the Terms of Arrangement lately proposed by the Special Financial Commissioners of the Turkish Government to the bondholders of this loan (see No. 1), and I also beg to call your attention to a Memorandum showing what would be the result of the proposed surrender of part of the interest and sinking fund of same loan (see No. 2).

Mr. Palmer, the Governor of the Bank of England, and the Special Financial Commissioners of the Turkish Government now in London, are, I believe, now engaged in carrying out these terms of arrangement, which terms, I submit, are inadmissible and illegal for the following reasons.

The bondholders of the 1854 Loan have no power to surrender to the Turkish Government any portion of their interest or sinking fund without the consent of the English and French Legislatures, because such concession would seriously trespass upon the Convention of 1855 between England, France, and Turkey, and the Act of Parliament 18 and 19 Vict. cap. 99, and I will, as briefly as I can, explain.

The 1854 Loan is the fisrt mortgage upon the Egyptian tribute of 282,000l. per annum. The annual sum taken from this tribute to pay the interest and sinking fund of