At 11.30 a. m. Captain Heine, volunteer topographical engineer, and a guard of 6 privates and 1 corporal, started with dispatches for Major General George B. McClellan's headquarters. About half an hour later I heard the discharge of musketry in the direction that Captain Heine had taken, and thinking that he was attacked I landed 20 men and searched the country for about 2 miles around, but could find no trace of either friend or foe. As six days has now elapsed since Captain Heine left the steamer and nothing has been heard from him, I am led to the painful conclusion that he and his men have been captured by the enemy.

At 2 p. m. June 29 I took 12 men in the cutter and sounded the river for 6 miles above Windsor Shades. I found an average of 1 1/4 fathoms of water in the channel for about 2 1/2 miles up. Above that I found many places where the channel was not more than 4 feet deep. The river is so crooked above Windsor Shades and the channel in many places so narrow that navigation with a steamer is impossible.

At 3 p. m. the same day the United States gunboat Satellite arrived at Windsor Shades and got aground on the bar.

At sunset of June 29 several negroes came down to the boats and stated that 5,000 rebels were coming down to attack us. This was rather bad news, as all our boats lay on the north side of the river fast aground and could not be got off until high water, which would be at daylight next morning. While aground we were in a dangerous position, for we could only bring a few of our guns to bear on the point of attack, and the enemy's riflemen could have picked off the guns' crews at their leisure. Finding that i could do but little in this position I immediately mounted a 12-pounder mountain howitzer on the bank, having a clear sweep of half a mile in all directions. I also took all the men i could spare from the boat and posted a picket guard, forming a half circle, for 1 1/2 miles, for the purpose of giving us timely warning of the approach of the enemy, as well as to prevent spies from coming down and ascertaining our helpless condition.

During the night the guard was attacked several times and twice after daylight next morning by small parties but my men held their ground and let no one pass their lines.

About 5 a. m. June 30 we got our boats off the bar and placed them in position for anything that might offer. I remained in this position until the morning of July 3, when, learning that the rebels were making a forced march to the bluffs, about 6 miles below, with a large quantity of artillery, to command the river and also to obstruct the channel by felling trees across narrow places, I deemed it imprudent to remain any longer at Windsor Shades. I them, in company with the gunboats Satellite and Port Royal, which latter arrived on July 1, dropped down the river about 10 miles, where I had to stop, as the engine broke down; but in about two hours we had it in working order again, and immediately started for the James River to report for orders to Major General George B. McClellan. I arrived at Harrison's Bar at 3.30 p. m. and reported at headquarters at 4 p. m. Was ordered to wait for dispatches.

At 3 p. m. on July 4 dispatches were given me for the President of the United Stated and for Major General John A. Dix, which i delivered to the proper authorities at Fort Monroe at 11.30 p. m. of July 4.

I have the honor, sir, to be, your obedient servant,

John C. Lee,

Captain, 99th Regiment N. Y. Vols., Commanding Steamer C. P. Smith.

Major General JOHN A. DIX,

Commanding Division, Fort Monroe, Va.