'News has been received from Chinese spies that the seven guns which were lying on the shore of Louisa Bay have been mounted at Nangalin. They also say that the Japanese, annoyed at their want of success in the north, have decided to seize Arthur between November 21 and 26, whatever it may cost, and that if this assault, for which they have about 40,000 men and will use their fleet, is not successful they will not attempt another.' At this time there occurred one or two episodes which seemed to be indicative that the idea of surrender was already held in certain quarters. General Smirnoff was now paying special attention to the third line of defence, already armed with naval guns, and having excellently laid out redoubts and deep trenches. On this it was intended to oppose the enemy should we have to withdraw from the second line, and Admiral Wiren was to be appointed to command it. In the middle of November the Commandant unexpectedly received a definite order to cease work, not only on the third but also on the second line (the Fortress works), and at the same time to send men from the main reserve direct to the first line of defences--the forts, and intermediate works--of the north-east front. Though General Smirnoff thoroughly appreciated the important rôle which the second and third lines must play in the future defence, he obeyed the order and also sent the Chinese coolies to the first line, but at the same time continued to carry on the works on the second and third lines energetically, so that by the middle of December they were almost finished. Stössel's definite order to cease work on the second defence line, which was most important, could only mean that he either did not understand the importance of this line, or that, under the influence of General Fock, he had an ulterior motive. The course of later events forced me to suppose that the order was founded on a previously formed conclusion that the Fortress could no longer be held, once the enemy should have established themselves on the part of the first line between Tumulus and B Batteries, from the highest point of which--Eagles' Nest--they could observe and direct the fire of their guns on to any point up to the sea. Another incident, which took place directly after the interruption of communications in April or May, possessed in conjunction with the one just described a curious significance. From the moment when the railway was cut, the majority of the inhabitants had wisely withdrawn their deposits from the Russo-Chinese Bank, and consequently scarcely any ready money remained in hand. The Defence Fund deposit could not be drawn upon, but in the treasure chest of the 3rd Corps there was £120,000. As the Chinese labourers had to be paid almost daily, cash was a necessity, and General Smirnoff asked the Officer Commanding the District, through Colonel Grigorovitch, to advance him £5,000 in order to pay them; but Stössel declined. Then the Commandant himself went to Stössel and