The average investor has not had the opportunity to familiarize himself with this class of investments, owing to the somewhat infrequency of these issues appearing upon the market. One very notable example is that of the International Mercantile Marine Co.

To safeguard an issue of bonds on vessel property, it is better that the ships should be comparatively new; otherwise a careful appraisement of their value should be obtained, and, in any event, if the mortgage is to cover the vessels only, without other property or guaranty, the bonded debt should not much exceed 50% of the valuation. Owing to the rapid depreciation of steamships, the mortgage should provide for some method of reducing the debt - either by a well-protected sinking fund or direct redemption of the bonds - at a rate of, say, one tenth of the total issue annually, beginning one or two years from its date. The trustee of the mortgage should be required to cause the property at all times during the life of the bonds to be properly insured in good companies, against all risks on vessel property ordinarily covered by such insurance, to the full insurable value of the ships; such insurance to be made with loss payable to the trustee, and the policies deposited with it. It should further provide that any money received by the trustee on account of destruction of the property mortgaged should either be used to replace the property destroyed, in proportion to the insured value of the same - the steamship company paying the difference - or if not so used or arranged to be used, at the end of a given time - say six months - to be divided in some equitable way among the bondholders; perhaps added to the sinking fund, if any.

It is a point in favour of "steamship company bonds" that the steamship line is not usually confined to any given territory or section. If a certain line of sailing or business proves unprofitable, the boats may be changed to another line of ports, or another class of business, or nearly always be sold at a fair valuation. You cannot economically remove railway, manufacturing, or other similar properties from one section of the country to another, if they prove unprofitable where located, whereas, of course, the sailing of a line of boats may usually be changed at will.

"The liability of the owner of a vessel for loss or damage to another vessel or to the cargo of either vessel, happening through errors in navigation or management, or from perils of the sea, but without his knowledge or privity, is limited to the value of his vessel, and the freight then earned, in the condition in which it is after the happening of the loss or accident.

"The owner is also not liable for loss or damage by fire to the cargo carried in his own vessel unless caused by his own neglect.

"If an owner exercises due diligence to make his vessel seaworthy and to see that she is properly manned and equipped, neither he nor his vessel is liable for loss or damage to the cargo carried, from errors of navigation or management, or from dangers of the sea.

"The owner may relieve himself of all liability by transferring all his interest in the vessel and the freight then pending to a trustee for all claimants.

"It follows that the owner is not personally liable if his vessel becomes a total wreck.

"Insurance on the vessel, recovered by the owner, is no part of the owner's interest in the vessel, and is not liable to be taken to pay for the loss or damage.

"The owner of a vessel is of course personally liable, without limitation, if the loss is attributal to his own fault or negligence.

"In case of a corporation, the 'knowledge and privity' which would make it liable must be the knowledge and privity of its officers or managers, and not of the masters of its vessels."