The rapidity and importance of the passing events render your frequent assembling both necessary and appropriate. Various matters demand legislative action, and will, I hope, receive your speedy consideration.

By the call of the President for all men under the age of forty-five years—beyond which none were subject to militia duty—and the exemption act of your late session the militia of the State was virtually absorbed. In lieu thereof you created a “Guard for Home Defence,” embracing all men not subject to conscription from eighteen to fifty years of age. Only very few persons were exempted, and power was given to the Governor to excuse others at his discretion. I found that by refusing to exercise this discretion, and by executing the law strictly, I would seriously interfere with many of the most vital industrial pursuits of the country; and yet it has appeared evident to me that your intention was only to give me the power to grant exemptions in particular cases of necessity or great hardship, and I not to excuse whole classes of the community. I therefore respectfully recommend that the list of exemptions be extended to such classes as may appear to be indispensable.

Doubts have arisen as to whether it was your intention to permit the Guard for Home Defence to be used for the purpose of arresting deserters from the army, and aiding in the execution of the conscript law; and one of our Judges has decided that the Executive has not the power to use them for this purpose. I would therefore recommend that the act organizing the Guard be amended, so as to invest the Governor with the same power over this recent organization as was given him over the militia, and so that there may be no doubt as to the rightful powers of the Executive.

In this connection, I also beg leave to remark that I am frequently embarrassed by cases of apparent conflict between the Executive and Judicial Departments of the State, from which nothing less than an authoritative decision of the Supreme Court can relieve me. As that body sits but once a year—time being now often of the greatest moment—it happens that many important questions, principally concerning the liability of parties to render military service, remain long undecided, the public service in consequence suffers, and the Executive is at a loss to know what is his duty and the law. I recommend, therefore, that, in such special cases, the Governor and Council, or the Chief Justice, upon the request of the Governor, be authorized to convene the Supreme Court, in extra session, in order to obtain from our highest judicial tribunal, a speedy solution of doubtful questions, and to give uniformity to the decisions of the Judges.

I also recommend, gentlemen, most earnestly, the restoration of the Spring Term of the Superior Courts. After careful observation for the past twelve months, I am fully convinced that the good of society positively demands this—that the abolition of this term has been productive of evil—and that greater evil still will result if it is not restored. When increasing crime, and a growing disregard of law are rife, and at a time when the virtuous and the wise are everywhere fearful that law and order, are. I in danger of overthrow, that we should remove the law further from the people, sounds strangely. It should not be!

But to restore the courts will involve the necessitity of increasing the salary of the Judges. It is notoriously so inadequate now, that I presume no one can object to its increase. This may be effected by taxing suitors, &c., without increasing perceptibly the burthens of the people. Your attention is also invited to so much of the legislation of Congress as provides for the disposal by sequestration, &c., of real estate in North- Carolina. Very serious doubts, are widely entertained as to the power of Congress to dispose of lands lying, within the limits of this State. It need not be denied that the power to declare war confers upon the Confederate government the right of declaring lands held by alien enemies to be vacant. It is thought, however, that upon such vacancy the right of the State, as original grantor, or representative of such grantor, necessarily intervenes—a breach of the condition annexed to such grant having occurred. Very high authorities consider that it is not competent for Congress to control the direction in which land lying within North-Carolina shall go, in case a vacancy occur, from any cause. The importance of this question cannot well be exaggerated. Considerations as to the person in whom is vested the ultimate right to the soil are of vital importance in every society. It is plain that grave contests between the states and the Confederate States will turn upon this point; and that the whole theory of the relations of the two governments is to be greatly affected by its decision. Whilst I do not suppose that any action on your part can settle directly this question, I submit whether some proceedings may not be set on foot, by which it shall reach an early solution. It is important, upon all accounts, that it shall be settled; and it will tend to the suppression of litigation, and the quieting of valuable titles, that it be settled early.

Mr. Wiley, the energetic and faithful Superintendent of Common Schools again comes forward, through the Literary Board, with all important recommendation for the establishment of a system of graded schools: one or more in each county, of which one-half the expenses are to be defrayed from the Literary Fund, the other by the county. The plan is set forth in a bill submitted to and approved by the Literary Board, and sent in to the Committee on Education. The idea meets my hearty approbation; and in urging it upon your favorable notice, I hope you will consider me neither impracticable nor untimely. It is in fact, a favorable time to act in this matter. It is exceedingly important to make every possible arrangement for the future support and comfort of our mutilated and disabled soldiers, and their children. By qualifying them for teachers, which cannot be done in schools of no higher grade than our Common Schools, many can be provided for. In the great plenteousness of money, the counties and individuals will now give liberally for such a noble object.

Lastly, it is not immodest for us to claim that North-Carolina occupies a high position among her sisters in regard to public education; and by exerting ourselves now, that position may be so improved and raised as to enable our educated men and industrious publishers to exercise no little influence in the formation, in happier times, of Southern sentiment—a means of power at once enduring and glorious. By the judicious management of the Fund, in consequence of the greatly increased value of its securities, the Board hopes to so add to it, that no decrease in the semi-annual distributions shall occur.

Some action is also required on your part to protect the Fund against the course now pursued by the holders of drafts upon it in the various counties in refusing to present them for payment—the intention of course being to demand a different currency from that which the Treasurer now receives and pays out. The duties and responsibilities of the Treasurer of the Fund should also be defined, and set forth with greater particularity.

The very important subject of feeding the poor, whose supporters and protectors are in the army, again demands our attention. The results the past year's operations are most encouraging, and should serve to give our people confidence in the resources of their State. Great anxiety. was felt last Fall, as you know, on the subject of food, and fears were entertained that suffering, if not actual starvation, would be witnessed in many quarters. Under the authority conferred upon me by your body, I purchased and stored away about 50,000 bushels of corn, 250,000 pounds of bacon, a quantity of rice, &c., which I expected would go but little way in supplying the general wants. When the season closed and the new crop came in, however, to my surprise and gratification, I found that Major Hogg, Commissary of Subsistence, had only issued to the County Commissioners about one-third of the bacon, less than one-half the corn, and but very little of the rice. He reports still on hand some 70,000 pounds of bacon, having fed a number of negroes engaged in the public works, and sold to the army 100,000 pounds, with 20,000 bushels of corn. I have reason to believe that, from various causes, the crops this year have not been so abundant as usual, and that the public will be called on to do more than last season. But still I see no cause for alarm, and my last year's experience has encouraged me to believe that all can be fed from our own resources by proper prudence and economy. I respectfully recommend a liberal appropriation among the several counties, according to population, for this purpose, at least double that of last year, and that I be allowed to buy and store away corn, flour and bacon as heretofore.

The earnings of the steamer Advance, which has been employed in running the blockade, may be applied to this purpose, as they cannot be made to meet our debt abroad. They will be amply sufficient without taxing the people a dollar. The method, of distributing these articles of food, the duties of the sub-agents and the proper recipients should be more definitely set forth; and provision should he made for those families of soldiers who, according to present arrangements forfeit their claim to assistance by removing from one county to another, which is frequently almost unavoidable.

Reports are submitted herewith of the operations of the Ordnance, Subsistence, and Quartermaster's Departments, which I trust you will find satisfactory. The enterprise of running the blockade and importing army supplies from abroad has proven a most complete success. You will see from the report that large quantities, of clothing, leather and shoes, lubricating oils, factory findings, sheet-iron and tin, arms and ammunition, medicines, dye-stuffs, blankets, cotton-bagging and rope, spirits, coffee, &c., have been safely brought in, besides considerable freight for the Confederacy. Two thousand and ten bales of cotton have been sent to Liverpool, the proceeds of which are deposited to the credit of the State, less the amount of expenses of the vessel. With what we have imported and the purchases in our home markets, I think I can safely say that the North-Carolina troops will be comfortably clothed to January, 1865, should God, in His Providence, so long see fit to afflict us with a continuance of the war, except as to shoes and blankets. Neither the Ordnance nor Quartermaster's Department placed too much reliance on foreign importations, but every effort has been made to stimulate home production. Both the quality and quantity of arms and munitions manufactured have been improved in the past twelve months. After the fall of Vicksburg cut us off from the wool of Texas, every exertion has been made to secure for the State the small lots in the hands of our farmers, and with such success as to keep our mills all running, and here I would beg your assistance in the protection and growth of sheep, by such enactments as will best tend to promote the object. Certainly there is no branch of farming industry of greater importance now, nor one to which a more beneficial stimulus can be applied by judicious legislation. Our midland and western hills are admirably adapted to sheep culture, and could we once get it started under such auspices as are now, presented, it would grow into an important element of wealth and national strength. I am unable, at present, to furnish you with a statement of our indebtedness, purchases, &c., in Europe, not having received as yet the necessary information from our agent.

I herewith send you a communication from a committee of the Legislature, of Virginia, in relation to the currency. This important subject, upon which so greatly depends the prosecution of the war for our independence, I commend to Your wisest deliberations. Although the remedy for its great depreciation lies with the Confederate Congress, rather than with your body, yet there might be much done by the State in aid of the efforts of Congress. I confess my inability to suggest any remedy for redundant paper issues, other than to take them up by loans and taxation and by the exhibition of the most rigid good faith in regard to their redemption. With nations as with individuals, this often constitutes capital. The poor should be especially cautious to preserve it.

I have to thank you, gentlemen, for the cordial and confiding support which I have heretofore received at your hands, and to earnestly ask its continuance. Surely no Executive can boast of more zealous and warmer co-operation of a co-ordinate branch of government than I have experienced from your body. I shall need your sustaining arm still more in the future. The most dangerous crisis of the war is upon us, that crisis which is incident to all revolutions, and which is most difficult for public officers to surmount. The novelty, confusion and enthusiasm which filled our armies and exhilarated our people, having long since passed away, the winnoning-fan of want and privation and suffering begins to separate the particles. The noisy are silent—the faint of heart begin to despair, and the disloyal, though few, to grow bold in the presence of national ills. The restless and the discontented strive of course to imbue all others with their own gloomy forebodings. The great mass, thank God, continue hopeful and earnest. Let us all labor with one accord to sustain the nation's hope, I and to show that we are worthy of independence, by being willing to pay for it the price which every people has had to pay since Liberty was known among the sons of men—suffering and sacrifice. The hope, which animated many of our people, that our enemy was coming to the sober second thought, and that many of them were favorable to pacific overtures, has been dashed, to the ground, and the originators of that hope at the North are trampled under the feet of reckless and blood-thirsty majorities.—So far from treating with us on the basis of our independence, .or even of reconstruction, the arrogant people of the North are tauntingly proclaiming on the hustings that no peace can be made with us—no peace talked of till the last rebel has laid down his arms! An insulted and outraged people will yet make them regret this haughty language which wrongs humanity and outrages civilization. The lion which has crouched in their path to Southern conquest for near three years, is still there, and though driven back a little, he has, grown more watchful, and will fight more fiercely as he approaches his lair. We know at last precisely what we would get by submission, and therein has our enemy done us good service—abolition of slavery, confiscation of property and territorial vassalage! These are the terms to win us back. Now, when our brothers bleed and mothers and little ones cry for bread, we can point them back to the brick-kilns of Egypt—thanks to- Mr. Seward!—plainly, and show them, the beautiful clusters of Eschol, which grow in the land of Independence, whither we go to possess them. And we can remind them, too, how the pillar of fire and the cloud, the vouchsafed guidon of Jehovah, went ever before the hungering multitude, leading away, with apparent cruelty, from the fullness of servitude. With such a prospect before them, our people will, as heretofore, come firmly up to the full measure of their duty, if their trusted servants do not fail them; they will not crucify afresh their own so I us slain in their behalf, or put their gallant shades to open shame, by stopping short of full and complete national independence.