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370 plan is graphically shown in the ac- companying illustration. The three outstanding recommenda- tions of the report urge the absorp- tion of the abnormal cost of the ships as war waste; the maintenance of stable prices and terms over an ex- tended period, and the financing of the purchases by the government, by means of 10 per cent cash payment with installments covering a period ot 15 years. The report makes specific recommendations, also, regarding the whole subject of ship sales, empha- sizing the need for extreme care on the part of the shipping board to sell ships only to responsible persons, who plan to go into the shipping business on a 'substantial and permanent basis. The report which is expected to form the basis of the shipping board's future policy in selling the ships, fol- lows: ree "In connection with the terms, which have been arrived at with a view to making it possible under present finan- cial conditions for buyers to arrange the necessary financing, your commit- tee recommends that purchasers be required to render carefully supervised and 'audited accounts of operations and -earnings on these ships, in such a way as seems well to your board. Urge Adequate Return "Out of the earnings, after provid- ing' for the interest, taxes, and cur- . rent installment payments on account of principal, an adequate return on the actual capital invested should be al- _lowed the purchasers; after such ade- quate return on the investment at a rate to be fixed by your board, sur- plus net earnings should be applied to additional payments 'of the install- ments of principal. The committee would consider it preferable to have the anticipation of such installments, . if any, applicable to the last install- ments duc, but; feels 'that a certain amount of discretion should be ex- ercised upon this point by your board, and it may be advisable to have this clause contain some elements of elas- ticity so that anticipated installments may be in whole or in part applied to installments falling due in a period of possible business depression. "Interest should be charged at the rate of six (6) per cent per annum, and the shipping board should have full protection by insurance on all marine risks and fire. "A discount of five (5) per cent for cash payment in full on the deliv- ery of the ship should be allowed. In cases where cash is not paid in full on delivery of the ship, the committee suggests the buyer be given the right of a cash discount of two and THE MARINE REVIEW one-half (2%) per cent in case of full payment for the ship at any time with- in five years from the date of delivery. "Parties making purchase contracts Terms For Ship Sales N APRIL 15, an _ «wnportant conference of leading busi- ness men and bankers was held in the office of Admiral Benson. A committee was appointed headed by Eugene Meyer Jr., formerly man- aging director of the War Finance corporation, to frame forma! rec- ommendations to guide the ship- ping board in devising a policy for selling tis ships. This committee submitted its report on May 8 and its principles have been accepted by the board. The outstanding recommendations were: Z First: As the ships were bul! as a@ war measure and in a period of abnormal and excessive cost due to war conditions and to the fact that the mdustry had to be butt up as a substantially new industry in this country, the abnormal cost should be absorbed as war waste, and the prices should be fixed upon the basis of present prices for reproduction, considering both for- eign and domestic production costs; SeconD: The prices should be determined in a@ manner to assure stability, either by fixing prices for ships of given types and tonnagces which could be maintained over a period sufficiently long to give buy- ers the assurance that after thev have contracted for purchases of ships they. wili not be placed at: a disadvantage by subsequcr.t re- duction in prices, or by fixing prices with definite protection to buyers over a definite period, such protection to consist of an arrance- ment under careful safeguards for price readjustment should it su- sequently prove necessary or de- sirable for the shipping. boerd to - reduce prices, Terms: Ten (10) per cent cash payable on delivery of the shid, with payments at the rate of 5 per cent senuannually for three vears, making a total of 40 per cert to be paid in' by the end of the third year; the balance or 60 per cent,.to be payable in 12 yearly in- stallmerts. of 5 per cent each. should be protected against unequal competition from operating contracts upon unduly easy terms in connection with ships still unsold. "It would seem proper, in view of t'e fact that the ship; constitu'e a July, 1929 capital asset of the United States go ernment, that the funds received : account of repayment of piiieingt should be applied to the redemption at market prices; of Liberty loan bonds or Victory loan notes. Should your board have occasion to recommend legislation to congress, your commit- tee suggests that you include a rec. ommendation to this effect." Bankers who have devoted much thought to the matter of marine se- curities believe that if. the government will carry the obligations of pur- chasers of ships over an intervening period, time will be allowed for 4 country-wide educational campaign to acquaint investors in this country, as in England, with the merits of such issues. In addition, ships will have established an earning record which if favorable will be a material aid in selling marine bonds. The Great Lakes region is the only section of the coun- try where ship mortgages have been popularized as investments. In the last two decades, more than $100. 000,000 of marine securities have been floated in that district without. a single recorded loss. One investment banker, E. G. Tillotson, of Tillotson & Wolcott, Cleveland, who has had wide experience in ship security flota- tions, predicts that the Great Lakes investment market soon will be in a position to absorb a large amount of marine mortgages. Investors Are Ready "Due to the large earnings of the war "period," says Mr. Tillotson, "the $20,000,000 of shipping bonds outstand- ing in 1914 have been reduced to about $3,000,000. Investors educated to this form of security, therefore, will be in a receptive mood when general credit conditions improve. At the present time marine, as well as other issues, can be floated only at almost pro- hibitive rates, the prevailing return for recent marine mortgages_ being 814 per cent as compared with 7% per cent in January. I believe that the entire country is gradually awakening to the desirability of marine invest ments as well as their importance if we are to develop a great merchant marine." Inclusion in the new law of a pro- vision giving preferred mortgage liens priority over liens created by contract including repairs, etc., but excepting wages, towage and salvage, and giv- ing jurisdiction to the United States court to foreclose such a mortgage, is approved by investment bankers. On the Great Lakes where ships 40 not get far away, the old law estab- lishing the priority of repair liens has (Concluded on page 388)