[Inclosure.]

HEADQUARTERS THIRD SUB-DISTRICT,
Vicksburg, Miss., September 15, 1862.

SIR: In compliance with your dispatch directing a report upon the loss of arms on the steamer Fair Play, the following, embodying all the circumstances that connect the occurrence with this district, is respectfully stated:

About the time General Holmes passed this place on this way to Little Rock arms and ammunition directed to Major J. L. Brent began to arrive and were stored until some one should be sent to claim them. Shortly after the last of the enemy's fleet had disappeared an agent of General Holmes by the name of Kennard arrived, claimed the property, and asked for transportation for it to Milliken's Bend, where, he stated, arrangements had been made to transport it into the interior.

The steamer Fair Play, just ordered out of the Yazoo, was loaded, the property safely delivered, and the boat sent on up the Mississippi after corn, with which she safely returned. In the mean time more stores had accumulated for the same department, and as soon as discharged the boat was a second time loaded, on application of the Agent Kennard, and on this same statement that transportation was ready for the other side, and again sent to the Bend, a point distant some 25 miles from here, on the opposite bank of the river, within General Holmes' department, and occupied by a detachment of troops under the command of General Blanchard.

The boat arrived, according to report, at about 1 o'clock at night and was surprised and captured between 3 and 4 o'clock in the morning, and all on board captured, except the captain, Agent Kennard, Major Govan, quartermaster, attached to General Holmes' command, and two or three others who had gone on shore to sleep. It is further stated that every one on board the boat was asleep, no watch kept, and that the command on shore were equally careless. Regarding the correctness of this statement as to the carelessness of the troops I have no means of knowing, they being in no way connected with my command. I am satisfied the statement is correct regarding those on the boat. The boat was commanded by a Captain White, a citizen of the Bend, well known and highly recommended by all here; in fact, it was represented that the Government was fortunate in being able to secure his services. The foregoing are the facts of the case as far as known.

I will now state what precautions had been taken on this side to prevent a surprise by the enemy such as occurred:

Immediately after the bombardment of Vicksburg ceased a detachment of cavalry was sent up the river to a point nearly opposite Helena, with the double object of giving protection to the planters and watching the movements of the enemy. Communication with this detachment was kept up by a line of couriers, which it was supposed would always be able to convey information in advance of any of the enemy's boats that might be seen passing down, a picket guard being stationed on the river bank with this in view. The commanding officer was also directed to send across to the Jackson Railroad, if that was found the better route, and communicate thence by telegraph. In addition, lookouts were placed on the highest hills in this vicinity overlooking the valley of the Mississippi to watch for the appearance of any smoke.

These three methods of obtaining and transmitting information comprise all that are possible, I believe, in this section, and are the same that are relied on at this present time. The boats that descended were