Kelly's Island, and Sandusky, to investigate the seizure of the steamer Philo Parsons and the steamer Island Queen, and the attempted destruction of both, by a rebel force organized in Canada, and I have now the honor to make the following report:

On Saturday, the 17th of September, instant, Lieutenant Colonel B. H. Hill, acting assistant provost-marshal-general of Michigan, was advised by a person from Canada that a party was to be sent form Windsor, on the Canadian side of the Detroit River, opposite Detroit, by Jacob Thompson, who was Secretary of the Interior under President Buchanna, to capture the armed steamer Michigan at Sandusky. Reports of projected enterprises by rebel refugees in Canada to commit depredations on the lake coasts of the United States have been rife for more than a year, and the information thus communicated was not fully credited, though the provost marshal immediately sent a message by telegraph to Captain J. C. Carter, the commander of the Michigan, putting him on his guard. On receiving more full and detailed information the following day, Captain Carter was again advised of the intention to capture his vessel, and was also warned that his crew had been tampered with by a rebel agent in Sandusky named Cole, who was promptly arrested. The provost-marshal thought it advisable to let the enterprise proceed in order that the party might be captured and punished, instead of arming the steamer Parsons, which the same parties intended to seize, and thus giving them notice that the plot was discovered. All these facts are more particularly disclosed in the report of Lieutenant-Colonel Hill, and the accompanying papers marked A 1 to A 5.

On Sunday morning, 18th of September, a man came on board the Philo Parsons, while lying at the dock in Detroit, and requested the clerk, Mr. Walte O. Ashley, who is part owner of the Parsons, to call at Sandwich, on the Canada shore, three miles below Detroit, to receive him and a party of friends who wished to go to Kelly's Island, about eleven miles from Sandusky, alleging that one of them was lame and could not well cross the ferry. This man is described by several witnesses as being thick-set, about medium height, and apparently an Englishman or Scotchman, and had been frequently seen by the clerk of the steamer. He left Detroit the next morning (Monday, 19th of September) at 8 o'clock, with about forty passengers. The person referred to appeared immediately afterward, and at his request the steamer called at Sandwich, where his friends, four in number, came on board. At Malden, on the Canada side, where the steamer also stopped, about twenty miles below Detroit and near the point where the Detroit River empties into the lake, about twenty more men came on board. The number, not being unusual, excited no suspicion. The only baggage of the party was an old-fashioned trunk tied with rope, afterward ascertained to contain revolvers and large hatchets, or hand axes. The steamer continued on her course and made her usual landings at North Bass, Middle Bass, and South Bass Islands, the latter being better known as Put-in-Bay Island. These islands are nearly north of Sandusky and about twenty-eight miles distant. They all belong to the United States, are a part of the State of Ohio, and contain about 500 inhabitants. The largest has an area of about 1,400 acres, or a little more than two square miles. Captain Atwood, the captain of the steamer, left her at Middle Bass, where his family resides. Having made these landings the steamer went on her course to Kelly's Island, about seven miles farther on, and made her usual landing there. Here four men got on board, all apparently belonging to the same party, and it has been ascertained that one who was seen among them