TNAG-0717-FCO40-914-Banking-and-monetary-matters-in-the-Dependent-Territories-is-1978 — Page 110

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8.2(3)

The case of Bermuda has the particular interest that,

although the latest contracts have been with US companies, they have

been for one year only, with no further commitment beyond an undertaking

to invite Franklin to submit new proposals should the Monetary Authority

decide to issue further coins within three years from the termination

of the 1975 contract.

Repurchase of redemptions

8.3

There is only one example of a formal contractual guarantee

by a promotional company to repurchase from the issuing authority any

coins which may be handed in for redemption by holders. In Bermuda's

agreement with Italcambio "THE COMPANY commits itself to promptly

refund at face value any coin previously sold by THE COMPANY and

presented to THE AUTHORITY for redemption". As sales within Bermuda

are handled exclusively by the Monetary Authority this undertaking

does not, presumably, apply to local sales. In the Cayman Islands,

World Coin has undertaken to repurchase, at face value, any of the

1977 and 1978 coins that may be redeemed although the Currency Board

reports that the offer is limited to coins still in their presentation

cases. It is understood that a similar arrangement was under

discussion between the Turks and Caicos Government and Paramount.

With the exception of the Italcambio commitment, these arrangements are

informal and probably rely upon the companies' being able to re-use the coins in their "after-market" sales programmes. Their undertakings

would be of little or no value if the secondary market should substantially weaken or dry up.

Royalties

8.4(1) The value of royalty payments to individual territories is

discussed in a later section. In this section the concern is with

the contractual arrangements. Here again it is possible to draw a

clear distinction between the practices of the US and UK promotional

companies.

This

8.4(2) The system preferred by the US companies is to pay royalties as a fixed percentage of the face value of the coins sold.

percentage varies according to the quality and type of coin. In

recent contracts of which we are aware the figure for individual coins

has consistently been in the region of 15% for proof gold and 7% for

specimen gold. For silver and base metal coins (the latter being limited almost entirely to inclusion in proof sets) the figure is more

varied and tends to be in inverse proportion to the face value.

The