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propose to touch upon these details; but I will state the reasons which influenced Her Majesty's Government in determining that a portion of the cost of their construction should be borne by the Colony.

21. Four different heads of expenditure were required in 1884-5 for putting the Colony into a proper state of defence, viz. :-1. Forts. 2. Armaments. 3. Submarine defences. 4. Barracks for additional troops. It was determined in the special agreement of that year, that the Colony should provide the works, and the Imperial Government the armaments, the estimated expenditure being—

Works, Armaments,

£ ..55,625 ...37,500

22. This estimate, as I have stated above, has, however, grown into an expenditure of 325,4277., of which 209,4271., or nearly two thirds, will have been borne by the Imperial Exchequer, and if Her Majesty's Government now call upon the Colony to make a fair contribution towards the new barracks, it cannot complain of unfair treatment, especially as the additional barracks are in fact a necessary part of the defences.

23. It must be added that if, in the course of the three years, necessity for any new defence works should arise, their cost would form the subject of a separate agreement, and that it is not to be understood that the whole charge of them would be borne by the Imperial Exchequer.

24. In the confident hope that the present arrangement, which they consider equitable and reasonable, will be readily accepted by the Colony, Her Majesty's Government request that you will lose no time in laying this despatch before the Legislative Council, and in pressing forward the necessary votes by all the means in your power.

I have the honour to be,

Sir,

Your most obedient humble servant,

KNUTSFORD.

APPENDIX A.

PROPOSED ESTABLISHMENT OF THE GARRISON OF HONG KONG.*

Warrant Officers. Officers and]

Rank and File, Drummers, Sergeants. &c.

All Ranks.

29

"J

Royal Artillery, 2 batteries,

Royal Engineers, Officers and Staff,

Fortress Company, Eastern Battalion,

Infantry, 2 battalions,

General Staff,

Ordnance Artificers, -

....

Staff, &c.,

11

14

56

98

10

12

220

242

9

7

16

10

21

6

87

93

8

54

62

98

1,872

2,026

4

10

2

2

Gymnastic Instructor,

1

Army Schoolmaster,

1

1

·

Medical Staff and Corps,

19

32

Pay Department,

4

3

Commissariat and Transport Staff and Corps, Ordnance Store Department and Corps,..

4

1

2

2767

5

Total Europeans,.

114

159

2,252

2,525

Natives,

fLocal Artillery,

Engineers, Submarine Miners,

00 00

8

20

412

440

3

4

46

53

125

183

2,710

3,018

* Exclusive of 200 Volunteers and 150 Militia Engineers.