E.—No. 3. SECTION I.

2. I thought it my duty to proceed up the Waikato Kiver, and ascertain the state of matters for myself. I therefore started for the Waikato on the 1st of January. The events of my journey are described in sufficient detail in the report I have the honor to enclose, which is taken from one of the local newspapers. There is, however, one omission of importance in this account. The Natives generally had at one time agreed at a meeting I held on the Waikato with them, that the so-called Maori King should be the head of a Native council, and that like the heads of the other Native councils he should send me the laws his council made, for my assent. But they subsequently withdrew from this arrangement, on the general plea that a grievous wrong had been done to them in the attempt that was made to take the land at the Waitara, that they had in vain sought for some redress for this wrong, and that they would therefore not again come under the authority of the Queen. 3. The general impression left on my mind is, that the King party are daily becoming weaker, and more reasonable, but that any untoward event may again rouse them into activity, and array a large party of the Native population against us. 4. I can only hope that the prudence of the Government, and the ability and energy evinced by the military and civil authorities, may prevent such a crisis from taking place. I can assure your Grace that all Her Majesty's servants in this country are earnestly exerting themselves to bring about a peaceful solution of the difficulties prevailing here, and I still hope their efforts will be successful. I have, &c, G. Grey. His Grace the Duke of Newcastle, K.G.

Enclosure to No. 6. EXTRACT feom "new zealandeb." On New-year's day, at 7.30 a.m., His Excellency left Auckland on a tour through, the Waikato district, arriving at Drury at 11.30, where he waited to refresh and bait the horses lj hours. During his stay here, two Native Chiefs, Wiremu Te Wheoro and Noah Tawharu —both Native Assessors —who were on their way to Auckland—joined the Governor's party, and returned to Maungatawhiri; arriving there at 5.30 p.m. all encamped for the night, the Native Chiefs sending messengers to prepare a canoe and paddles to take His Excellency up the Waikato Kiver on the following day. Accordingly by daylight next morning a large canoe, with a crew of 20 natives, most of whom were chiefs, had arrived, and amongst them more than one supporter of the King movement. After paddling the whole day, His Excellency landed at Paetai at 11.30 p.m. Several of the principal men of the place roused by the singing of the men paddling in the canoe, had assembled on the bank of the river, and gave the Governor a most genuine welcome. By the time the tents were pitched, all the people of the settlement had turned out and welcomed Sir George Grey with the most unfeigned affection—expressing their surprise at seeing " their father" so unexpectedly, and alone. By midnight the Governor retired to his tent, and at seven next morning nearly 200 of the Natives had assembled to speak to the Governor, amongst them were the old Chiefs Kanawa and Wharepu. Now these two men have been thorough Kingites, main pillars of the Maori Eing movement. At this interview the whole assembly stood up, taking off their hats, and when the Governor told them in answer to their question, that all his intentions were for their good, they welcomed His Excellency as " their Father; the countenance of their father Potatau; their friend the Governor"; —saying that had he not left the country all this King movement had never been dreamt of. They welcomed him now, they said, as " their old friend," and wished as he had come to visit them ho should go on and see the Chiefs at all the other settlements. While the meeting was going on they prepared horses to take and escort the Governor overland to Taupiri. On leaving Paetai the whole of the Natives gave His Excellency three hearty cheers. Arriving at Taupiri early in the day, the Governor pushed on, unattended, to Ngaruawahia, the central stronghold of the King movement, where Old Potatau is buried, —where the King flag was first hoisted. Having walked round the settlement, visited the grave of Potatau, and looked at the flagstaff, Sir George was at last recognised by the chiefs and people, who were so overjoyed at seeing him that they collected round him in a body, weeping for very joy, addressing him the while as their friend, father, protector of the people. After a considerable time thus spent His Excellency thanked them for the cordial and affectionate reception they had given him, and returned to Taupiri. The Chiefs of Ngaruawahia immediately posted off messengers (of their own accord) to all the principal Chiefs in the district, informing them of the Governor's presence in Waikato. Most of those living at a great distance inland, did not arrive until Wednesday evening, but in the meantime his Excellency was visited by many of the Ngaruawahia Chiefs, among whom was Matutaera's sister and his eldest son, Hori Grey, who was born shortly after the Governor left New Zealand, and named after Sir G. by Potatau, his grandfather. At one of her interviews the sister of the Maori King expressed herself thus : " Had I been the Governor, and thus taken the Kingites by surprise, I should have completed my victory by pulling the halyards from the flagstaff to the ground and oversetting the sentry box ; that in my opinion would be a final overthrow of the King movement." His Excellency having learnt that the chiefs had arrived at Ngaruawahia on Wednesday evening, sent word that they should come on to Taupiri if they wanted to see him. Accordingly on Thursday morning all the chiefs who had heard of His Excellency's visit, headed by Thompson, came on to Taupiri, where, squatting themselves down on the ground in a body, they waited the Governor's appearance. As his Excellency approached, the whole assembly stood up, took off their hats, and exclaimed, " Welcome our old friend! Welcome the Governor! Welcome our father, the friend of Potatau ! Welcome parent of the people !" When within 50 yards of the body of the people, Thompson ran out to meet and .shake hands with the Governor, bidding him welcome to Waikato to see all the people, his children. Having escorted his Excellency to the chair prepared for him, the whole sat down, and the meeting opened. During the meeting the natives expressed strong objections to the steamer being sent on their

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TO THE SECRETARY OF STATE.