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the public, or on delivery of the coins by the mint to the company. In the Caymans and Turks and Caicos contracts, the latter arrangement is supported by the provision for an irrevocable letter of credit to be
deposited at the time the order is placed. The Turks and Caicos agreement with Paramount not only allows for a minimum guaranteed royalty see Section 8.4 (2) above - but also provides for an advance payment of $100,000 (paid on completion of contract) to be repaid at a rate of $15,000 per annum together with any additional revenue over and above the guaranteed minimum of $70,000. Due to the size of the initial programme, the total sum was repaid from the first year's royalties.
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8.4(5) Whereas the US companies base royalties on the face value of the coin, the practice of Spinks and the Royal Mint is to use the sales price as a yardstick. Royalties are calculated either as a fixed percentage of the sales price of individual coins or as a
proportion of the net profit from the whole issue. For the Falkland
Islands gold and base metal issues from 1973 to 1976 and the recent Tuvalu issue payment is made at a rate of 25% of sales price, although the Tuvalu Government receives no royalties on the first 2,000 (out of a total 15,000) base metal sets. For the Gibraltar programme dating from 1968 and the Falkland Islands Silver Jubilee issue the governments take a share (70%-90%) of the net profits. Because the usual policy of the UK companies is to market the coins at a price that includes a considerable premium above face value (up to 5,000% in the case of the Falkland Islands gold issue and the Gibraltar silver Crown), the territory, as a rule, receives a better percentage return from the UK than from the US companies. However, as is shown later, the absolute return is almost invariably poorer. Why Spinks and the Royal Mint
are able to sell with such large premia is discussed in Section 8.5. Territories are not usually required to meet any of the costs of production, etc., although in those examples where royalties are based
upon profit figures any substantial change in minting overheads would
be reflected in the profits available for distribution.
Specifications (weight, fineness, type, etc.)
8.5(1) The specifications of precious metal coins are significant not only because they have a bearing on the appearance and general attractiveness of a particular issue to the collector/investor, but also because, ultimately, should there be large-scale redemptions of coins the intrinsic value will be of importance to the issuing
authority.