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works specially referred to, there are others equally required and as yet not com- menced, which will in the next few years necessitate an expenditure on permanent improvements at least equal to, if not greater than, that of recent years. For- tunately, as remarked elsewhere, there is every prospect of a sufficient supply of funds to meet the necessary cost without increase of taxation.

MILITARY EXPENDITURE.

15. "Military Expenditure" (apart from "Defence Works"), which is included in the above total of expenditure, was $134,594 in 1888 as against $128,815 in 1887, the increase being almost altogether due to the depreciation of silver, and the consequently increased number of dollars required to make up the annual contribu- tion of £20,000 towards the support of the Troops,

16. With reference, however, to the contemplated increase of this contribution, it is to be remembered that the above expenditure by no means fairly represents the burthen which is really borne by the Colony. The War Department and the Admiralty occupy land in various localities which in its aggregate area is of great extent, and much of which being in the centre of the Town of Victoria is of very great value. Unlike the other land of the Colony this pays no rent, and what is of more importance contributes nothing to the rates from the expenditure of which the Departments in question receive the benefit. When this is taken into account, and there is also added the interest of the cost of the Defence Works and other lesser items, I estimate that the real contribution of the Colony to its Defence, exceeds $300,000 per annum, a sum equal to nearly 4th of the Revenue.

17. Judging from the information at my command, I question whether there is paid towards this object by any other Colony so large a proportion of its receipts, or anything like it; and it is moreover to be borne in mind that the defence of Hongkong practically includes to considerable extent that of all the British Mercantile Communities in the many Treaty. Ports of China and Japan which contribute nothing to its Revenue. All things considered therefore, it seems open to question not only whether Hongkong can be fairly called upon to increase its Military contribution, but also whether additional areas of land (such as are con- tinually being requisitioned for the Military and Naval Departments) should not contribute to the Colonial Revenue in the shape of either rent or rates or both.

FINANCIAL POSITION.

18. The only debt of the Colony is one of £200,000 raised in 1887 for Defen- sive and other Works. The sinking fund of £7,072 per annum is expected to discharge this debt in 1907. Though the total expenditure in 1888, $1,992,329, exceeded the total receipts (Ordinary Revenue and Land Premiums) $1,718,188, by $274,141, there was at the close of the year a Treasury balance to credit of $360,649.76.

LEGISLATION.

19. Of the 29 Ordinances passed in 1888, only the following deserve notice :— (I.) "The Vaccination Ordinance, 1888" constitutes the first effort made in this Colony to render general a protection which is especially required in conse- quence of (1) the frequency with which Small-pox is introduced by steamers coming from all parts of the world; (2) the impracticability of its exclusion by effective quarantine and (3) its fatal prevalence when it has once obtained a footing, owing to the density of the population and the unfavourable Sanitary conditions in which a large portion of it habitually lives.

20. We have happily in the Colony none of those-or at least none have made themselves known,-who look to the few cases in which evil has been caused, and who ignore the comparatively enormous good which vaccination has achieved for humanity. The Chinese are thorough believers in the advantage of this protection, and accept it readily a fact which is the more remarkable inasmuch as they, for the most part, reject altogether other applications of Western Medical Science.

21. (II.) "The Vagrancy Ordinance, 1888" was an attempt to meet an evil of growing magnitude, by rendering those having the management or control of vessels liable for the cost incurred by the Colony in respect of destitute persons introduced.