REPORT OF AMERICAN MERCHANT MARINE COMMISSION, 5%
the first cost, indicated horsepower, and annual subsidy required to maintain commercially
 fast British ocean steamers as follows:

Average
speed.

Tm

First cost.

£350, 000
400,000
470, 000
575, 000
850, 000
, 000, 000
1. 250. 000

Engine
DOWET.

Fd. P.
19,000
22,000
25, 500
30, 000
40, 000
52,000
(HR O00

' Annual
qubsidv.

£8, 000
19, 500
40, 500
67,500
110, 500
149, 000
204 (100

The speed basis is not for a measured ile, or a short distance but for the vovage
of 3,000 miles across the Atlantic. The annual subsidy to make good commercial
losses is based on a ten-year contract.
By the article just quoted the British Government agrees to advance the first cost,
£1,300,000, of each of the two fastest steamers which can be built. This amount is
to be repaid by the company in twenty annual installments of £65,000 each, begin-Ning
 with the end of the first year after the second of the two steamers has made her
first voyage. Beginning with the first voyage of each steamer .the British Government
 is to pay the company an annual admiralty subvention of £75,000 for each of
the two steamers, or £150,000 a year when both are in full operation. This £150,000,
however, includes the present admiralty subvention for Cuwmpania, Lucania, and
other existing steamers of the feet under the agreement of October, 1902 (see article
9), amounting to about £20,000. The new admiralty subvention for the two new
steamers is thus virtually £130,000, or £65,000 apiece—a sun just sufficient to equal
the annual installment of the company’s repayment of the Government's advance.
By paragraph 9 (e) of the contract, interest shall be at the rate of 24 per cent per
annum.- At this rate the average annual interest on the principal of £1,300,000 payable
 in twenty years will be £17,875. Besides the Admiralty subvention of £150,000
already mentioned, the Cunard Company is also to receive £68,000 (see contract,
Pare 17, paragraphs 13, 14, and 26) for carrying the mails once a week from Queenstown
 to New York. This service will require four steamers, and the postal subsidy
1s accordingly at the rate of £17,000 a steamer. As the two. new steamers will presumably
 carry more than the average amount of mail, in effect the mail subsidy is
calculated to pay interest on first cost, as the Admiralty subvention was calculated to
repay the principal of first cost advanced by the Government.
By this agreement in effect the British Governinent agrees to build and give to the
Cunard Company the two best steamships Great Britain can produce, and the company
 agrees to operate them at its own cost. The Government supplies the capital,
the company meets operating expenses. The company’s chance for profits depends
on passenger receipts exceeding operating expenses {excluding first cost of the
steamers). The (Government's return for its investment is:
“1. British transportation of British mails.
“2, The employment of naval reserves on the Cunard steamers.
“3. The possession of &amp; fleet of auxiliary cruisers and transports without the cost
of maintenance, including insurance, wages, repairs, ete.
“4, The reassertion of British preeminence on the North Atlantic. threatened by
the rapid development of the two great German lines.”
By the third schedule of the contract the British Government has the right to purchage
 outright any Cunarder for a sum equal to the value of the vessel at the time of
her purchase, plus 10 per cent as a bonus to the company. The present value of
each steamer of the fleet, it will be noted, has been fixed in the contract. the Tacania
and Cumpania, built in 1893, for example, each being valued in September, 1902, at
£356,839. Depreciation is to be allowed at the rate of 8 per cent annually, but the
value of a steamer may be appreciated by the installation of new boilers and engines.
Although the British Government, as shown, pays the first cost of the new steamers,
it can purchase them from the company only by a payment of 10 per cent bonus
above their value, as an insurance to the company aeainst Insa consequent unon
interrninted traffic.