Gaspar de Ayala, royal fiscal in the islands, makes his report to the king (July 15). He advises that ships for the royal service be built in the islands; also that the gold used as currency there be exchanged in Nueva España for Spanish coin--both of which measures will be of profit to the royal treasury. He renders account of the recent sale of offices in the islands, and gives advice regarding this method of aiding the royal exchequer. Certain encomiendas becoming vacant, Ayala, as fiscal, undertakes to secure them for the crown; in this he has difficulties with the governor, who also is trying to make trouble for Ayala with the soldiers. The latter asks to be relieved from his post in the Philippines, and sent to some other. The Chinese trade is meager this year, owing to war and pestilence in China; and there are rumors that it is being diverted to Peru or Nueva España. If this be true, the Philippine colony will be ruined. A second plot against the Spaniards has been revealed, this time in Cebú; but the leaders have been captured. The Indians of Cagayán have also revolted, and troops have been sent against them. Ayala adds, "I am ready to certify that there are few places in these islands where the natives are not disaffected." The Spanish colony is in great danger, and imperatively needs reenforcements to save it from destruction. The galleys at Manila, now useless, should be replaced by light sailing-vessels. A further levy of tribute has been made on the Indians for the new fortress at Manila: this is an oppressive burden for them. Ayala relates at length the dissensions between the bishop and the secular authorities; the king is implored to settle the question at issue. The bishop has also offended the Augustinians, by sending Dominican friars into their field among the Chinese residents: The king is asked to send more friars, to instruct the natives. The Manila hospital for Indians has no income save of alms: Ayala recommends that the Franciscans in charge be allowed to sell a certain amount of pepper in Nueva España. The members of the Audiencia, and the magistrates and officials appointed during the current year are enumerated by name. A fierce tempest has occurred at Manila, causing great damage, and destroying all the vessels in the harbor except one small one. The expedition sent to Cagayán has returned without accomplishing anything except the destruction of the crops belonging to the hostile Indians, which will only irritate them and incite them to revenge.