The following letter has been received by the Prime Minister here from Sir Anthony Eden. The Prime Minister will wish to discuss this with Mr. Campney upon his return to Ottawa. No discussion of the substance of the matter has taken place here as yet, although Admiral Mountbatten has spoken to Mr. Pearson about it as well, and it seems clear that the British naval authorities are attaching considerable importance to it.

2. A copy of this telegram will, of course, be available to the Canadian Joint Staff here.

3. We will be bringing along the chart referred to in Sir Anthony's letter on our return, but the chief point of significance is that it shows an area marked "Canada" on the Atlantic side north of a line drawn east to west through Bermuda, and an area marked "Canada" on the Pacific side north of a line that appears to be the 10 degree south latitude line. This Pacific area extends north to include most of the Aleutian Islands and the westerly boundaries are no doubt familiar to the naval authorities in Ottawa. Text of letter begins:

"I believe that when the First Sea Lord visited Ottawa last October, he mentioned to you what a help it would be if a Canada Naval Station could be formed within the world- wide Commonwealth framework of naval stations.

"2. At present we are reorganizing our naval command structure on the America and West Indies Station and we are proposing to create a limited West Indies Station in the Caribbean area. The southern part of the existing A. & W.I. Station will come under the Commander- in- Chief, South Atlantic, and we very much hope that you will be prepared to take over the northern part as a Canada Station. This would be bounded in the Atlantic by the boundary of the home station and a line drawn to the West through Bermuda and in the Pacific by the boundary of the Far East and New Zealand Stations and the parallel of 10 degrees south. The boundaries which we suggest are shown on the attached chart. You will see that we have excluded all the West Indies colonies from the area suggested and Bermuda, too, would remain under R.N. control, but the self- refit facilities would be fully at the disposal of the R.C.N.

"3. It would be appropriate from the Commonwealth point of view if there were a Canada Station just as there are the Australia and New Zealand Stations. We also feel that it is a logical development from the expansion of the R.C.N. and its great increase in size and importance. I hope these proposals commend themselves to you, and I should be very glad to let you have any more details you may require.

"4. Another question which I hope we might cover at the same time is the future of H.M.C.S. Magnificent. I understand that on taking over H.M.C.S. Bonaventure at the end of this year there is the possibility that you will wish to return to us H.M.C.S. Magnificent which has been on loan to the Royal Canadian Navy since 1948. We hope very much that the R.C.N. will be able to keep Magnificent in Canada, preferably, of course, in the active fleet, but alternatively in reserve if you are unable to run her operationally. If Magnificent is returned to us, we shall have neither money nor manpower to maintain her and inevitably in a few years she will rot away. This would be a sad loss to the reserve strength of Commonwealth and NATO carriers." Text ends.