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Appendix No. 4.

DIEGO GARCIA.

lighthouse on the main island, to the Orient Steam-ship Company, and that I have granted to Mr. Lund a lease of the third, or "West," islet in the Diego Garcia Lagoon. The islands are required as coaling- stations for the steam lines of these ship-owners trading between England and Australia.

2. The terms on which those leases have been granted are specified in the annexed extract from the Minutes of the Executive Council, dated the 12th instant.

3. It will be seen that the lease to the Orient Company is for a period of fifty years, but that Mr. Lund's occupation is a monthly tenancy.

4. There are only these three islets in the Diego Garcia Lagoon, and that leased to Mr. Lund has, I believe, been officially reported as the most serviceable for a coaling-station. Diego Garcia has lately come into notice as of possible importance for Imperial naval purposes; and there has even been talk of fortifying its harbour. I therefore thought it best that Mr. Lund's tenancy should be of a temporary character.

5. Neither would I, at present, have made such permanent arrangements with the Orient Company had I known that any importance was being attached to this island by the Imperial Government, and that, before this Government was committed to any lease, an officer of the Royal Engineers stationed in Ceylon had been ordered to proceed to Diego Garcia in Her Majesty's ship "Eclipse." But this Government was not informed upon the matter, and I was naturally ready to give facilities to the Orient Company. However, the reservation of the third island under a monthly tenancy may be of use for any Imperial purposes which may hereafter transpire.

I have, &c.

(Signed)

F. NAPIER BROOME.

Inclosure 2 in No. 61.

Extract from Minutes of Proceedings of the Executive Council at a Meeting held at Government House, Port Louis, on Saturday, the 12th November, 1881.

READ letter dated the 19th October, 1881, from Messrs. Blyth Brothers and Co, agents of the Orient Steam Navigation Company, to the following purport

1. Accepting the conditions of lease of Middle Island and East Island at Diego Garcia as offered by the Government of Mauritius.

2. Accepting the conditions under which the Government of Mauritius consents to allow a portion of land as a site for a lighthouse at Diego Garcia.

3. Asking for a lease of West Island also.

Read letter dated the 19th September, 1881, from Mr. W. Lund, ship-owner, to his Excellency the Lieutenant-Governor, applying for the lease of the three islands (East, Middle, and West) for the purpose of establishing a coaling-station.

Read letter dated the 28th October, 1881, from Colonel Gordon, C.B., R.E., to the Surveyor- General (inclosing copies of Mr. Lund's applications), and recommending that application for favourable consideration.

The Council advise that, in reply to the letter of the agents of the Orient Steam Navigation Company, dated the 19th October, 1881, the agents be informed that, in accordance with the accept- ance by the Company of the conditions laid down in the letter from this Government of the 30th June, 1881, Middle Island and East Island, situated at the entrance to the harbour of Diego Garcia, are leased to the Company for a term of fifty years, from the 1st January next, at an annual rent of 250 rupees, payable in advance; furthermore, that in case the Company should desire, during their lease, to erect a lighthouse, a piece of ground sufficient for that purpose will be allotted to them on the mainland, without further rent, on condition that the lighthouse is erected and managed at the expense of the Company and in accordance with the Admiralty Regulations. It should furthermore be clearly understood that all buildings whatsoever erected by the Company on the islands or mainland shall become the property of the Colonial Government on the expiry or cancellation of the lease; that the Company are not at liberty to transfer or sublet any portion of the island or land leased to them or the buildings thereon; and that, should the Orient Company's steamers cease to touch at Diego Garcia, the Colonial Government will have the right to cancel the lease on three months' notice.

With regard to the application of the Company to be allowed a lease of West Island also, the agents should be informed that the Colonial Government cannot grant their request.

The Council advise, with regard to Mr. Lund's request for a lease of the three islands in the Diego Garcia Harbour, that that gentleman be informed that Middle Island and East Island are already leased; but that this Government are willing to allow him to occupy such portion of West Island as may hereafter be determined as a monthly tenant, charging him for the present a rent of 10 rupees a-month, payable in advance. It must be clearly understood that this Government reserves to itself the right to terminate the tenancy, or to increase the rent, at any period, on giving a month's notice.

By command of the Lieutenant-Governor in Council.

(Signed)

DONALD STUART, Acting Secretary to Executive Council.

Council Office, November 12, 1881.

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