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  UNITED STATES MINT

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***Quarterly Financial Report of the United States Mint***

***Commemorative Coin Program,***

***P. L. 104-208, as of December 31, 2000***

***INTRODUCTION 1***

***MODERN COMMEMORATIVE COIN PROGRAM HISTORY* 2**

#### **PROGRAM-WIDE ISSUES 5** 

#### **FINANCIAL REPORTING 5**

## LIBRARY OF CONGRESS BICENTENNIAL . 5

***LEIF ERICSON MILLENNIUM 6***

***U.S. CAPITOL VISITOR CENTER -- FY 2001 8***

***AMERICAN BUFFALO SILVER DOLLAR -- FY 2001 8***

***2002 WINTER OLYMPIC GAMES 9***

***CONCLUSION .9***

***[INTRODUCTION]{.underline}***

Public Law 104-208, the *Commemorative Coin Reform Act of 1996*,
requires the Mint to report the quarterly status of commemorative coin
programs. In general effect, the law makes coin program beneficiaries
partners in bearing the risks and marketplace realities of commemorative
coin programs, and it assures that the U.S. Mint recovers its costs of
operating coin programs. In addition, the law requires beneficiaries to
file audited financial statements, and it requires the Mint to report
quarterly on the status of commemorative coin programs. In compliance,
this---the Mint's sixteenth quarterly commemorative coin
report---discusses programs reporting significant activity from October
1 to December 31, 2000.

***[MODERN COMMEMORATIVE COIN PROGRAM]{.underline}***

***[HISTORY]{.underline}***

This report represents the first quarterly commemorative coin program
report issued under our new Administration and submitted by the U.S.
Mint to the 107^th^ Congress. In light of this, we are providing the
following summary highlighting major milestones in the history of modern
U.S. commemorative coin programs. Modern commemorative coins authorized
by Congress and produced by the U.S. Mint date from the introduction of
the George Washington 250th Anniversary Half Dollar in 1982. Congress
authorized a total of 35 commemorative coin programs between

1982-2000. Close to \$2 billion in revenues has been raised through the
sale of U.S. Mint commemorative coins over the past 18 years, generating
\$409 million in surcharges.

***[Commemorative Coin Reform Act]{.underline}***

Public Law 104-208, the *Commemorative Coin Reform Act of 1996* was
enacted September 28, 1996, strengthening the working relationship among
Congress, the various sponsoring organizations and the Citizen's
Commemorative Coin Advisory Committee (CCCAC). The CCCAC was established
by Public Law 102-390, and its membership appointed by the Secretary of
the Treasury in November 1993. The Committee was charged with the
responsibility of designating potential commemorative coin program
themes as well as making recommendations with respect to the mintage
limits for each program.

## [Factors Necessitating Commemorative Coin Reforms]{.underline}

Demand for commemorative coins suffered a serious decline beginning in
the mid-1990's, fueled in part by the over proliferation of
commemorative coin programs authorized by Congress, and the resultant
flood of commemorative coins upon the market. Mintage limits far
exceeded secondary market demand. At a March 5, 1997 hearing on FY1998
Appropriations before the House Subcommittee on Treasury, Postal Service
and General Government, then-Mint Director Philip N. Diehl identified
the proliferation of commemorative coins as the Mint's number one
customer complaint. "...too many programs, too many coins in each
program, too many weak commemorative themes." The Mint worked with
Congress to address this issue via two means: first, through the passage
of the 1996 commemorative coin reform legislation and secondly, by
working closely with the Citizen's Commemorative Coin Advisory
Committee.

As a result of market saturation, coin collectors (who purchase ninety
percent or more of all commemorative coins) came to view the hobby of
collecting commemorative coins as very expensive, because collectors
were typically unable to recover more than a fraction of the coin's
original sales price if they chose to sell. In addition, collectors were
unhappy over their perceived lack of voice in choosing commemorative
coin program themes authorized by Congress, as well as the surcharges
Congress added to the cost of the coins which collectors viewed as a tax
on the hobby. (Surcharges are used to raise funds outside of the
congressional appropriations process for private organizations that
benefit from the coin sales). Over time, as commemorative coin program
sales fell, Congress sought to offset the effect by substantially
increasing surcharges. In its initial report to Congress, the CCCAC
indicated a drop in commemorative coin sales by 80 percent from 1986 to
1994. In 1994, the Mint posted its first financial loss in a
commemorative program with the 1994 World Cup USA Commemorative Coin
Program. This did not result in a loss to the American taxpayers as
numismatic profits from other programs more than offset this loss. U.S.
Mint commemorative coin programs generated over \$24 million in
surcharges in FY 1994.

Declining commemorative coin sales further increased the possibility
that the programs could impose an operating loss to the Mint. In an
August 1994 letter to Congress, the CCCAC cited market saturation as a
significant risk to commemorative coin program profitability. In
addition, the CCCAC stressed the significance of limiting authorized
mintages to ensure continued commemorative coin program viability. The
1993 Sense of Congress Resolution, enacted as part of Public Law
103-186, sought to limit the number of commemorative coin programs
authorized for any one year to no more than two.

## Commemorative Coin Program Reforms

These controls have proven effective. As noted by Delaware Congressman
Michael N. Castle, in support of the *Commemorative Coin Authorization
and Reform Act of 1995 (*H.R. 2614), December 5, 1995: "No longer will
the saturation of the market threaten the value of their collections,
nor will they be the sole support for beneficiary causes of uncertain
popularity... Commemorative coins are a benefit, not only to numismatic
enthusiasts and the recipient organizations but also by reaffirming our
history, to our Nation as a whole. This bill links public funding of
special projects to demonstrated private support, and discourages groups
from demanding superfluous coins. It prevents the further abuse of the
coin collecting community by groups lacking general public support."

Revenues generated through commemorative coin sales increased to \$30.3
million in FY 2000 from \$23.8 million in FY 1999\-- an increase of 27.4
percent. Working closely with the CCCAC, the U.S. Mint, and the
numismatic community, Congress has become more responsive to coin
collectors. In general, collectors are more supportive of the
commemorative events being observed for recent commemorative coin
programs. Other factors have influenced the growing interest in the
commemorative programs as well. The overwhelming response to the 50
State Quarters™ Program and to the Golden Dollar has rekindled collector
enthusiasm for the U.S. Mint commemorative coin programs as well. In
addition, U.S. Mint commemorative coin sales were launched on the
Internet in March 1999, with the Dolley Madison Commemorative Silver
Dollar. Our popular website has provided additional exposure as well,
allowing us to reach a significantly larger audience while greatly
reducing advertising expenses. With the exception of the U.S. Black
Revolutionary War Patriots Commemorative Coin Program, the commemorative
coin programs continue to maintain a profitable status.

Overall, U.S. Mint commemorative coin programs remain profitable. This
can be attributed, in part, to the Mint's development and increased use
of a variety of cost reduction measures and analytical tools aimed at
optimizing the Mint's customer database through market segmentation and
analysis. Analytical tools such as Recency-Frequency-Monetary modeling
(RFM) have enabled us to optimize the Mint's customer database, through
detailed analysis of customer product preferences. Such analysis
provides the Mint with the ability to better tailor messages and media
to each potential market segment, thus minimizing promotional costs
while maximizing program returns. Increased and innovative commemorative
coin program options provide collectors with a variety of Mint products
from which to choose, including "limited-edition" collector sets,
one-time special collector sets, and "Young Collector Sets" which have
proven especially popular with younger numismatists.

## U.S. Mint Innovations and Growth of Customer Base

As part of an effort to improve mail service, the Mint worked with the
U.S. Postal Service in 1997 to convert shipments of coins from
registered mail to Priority Mail. The Mint became the first Federal
agency to use custom-designed Priority Mail containers resulting in
reduced delivery time in addition to improved package security. The U.S.
Mint was awarded the National Postal Forum "Mailing Excellence Award" at
the Fall 1998 Awards Luncheon in recognition of its successful
partnership with the U.S. Postal Service in improving customer
satisfaction and increasing sales in commemorative and numismatic coin
programs.

The Mint E-Commerce team recently received a Hammer Award from the
National Partnership for Reinventing Government for its outstanding
efforts in winning recognition for the Mint as one of the top e-commerce
retailers. In six weeks, the E-Commerce Team transformed the Mint's
website into a state-of-the-art on-line catalog at
[www.USMINT.gov]{.underline}. We launched secure online shopping on our
Web site in April 1999, and have quickly become one of the most
successful e-retailers in the Nation. Further, our e-retail program
allows us to reduce our cost of operations and pass the savings onto our
customers, including waiving shipping and handling charges that are the
common practice of other e-retailers. The Mint's website was also the
first to host a Webcast from the White House and to provide handicap
access required by the Rehabilitation Act. Its kid's corner is ranked
39th nationally. GovExec.com of Government Executive Magazine named the
Mint among 1999's "Best Feds on the Web," joining Fast Company, the
Washington Times, and a number of publications to single out the Mint's
e-presence.

The Mint has participated in the American Customer Satisfaction Index
(ACSI) to survey purchasers of numismatic and commemorative coins for
the past five years. Our customers continue to express a high degree of
satisfaction and confidence in our customer service and annual products.
For the fifth straight year, the U.S. Mint has scored among the top
performers in the ASCI Survey by the National Quality Research Center
(NRQC) at the University of Michigan School of Business. However, it
should be noted that while commemorative coin programs are currently
enjoying a period of renewed health and stability, it would be imprudent
to become complacent. The health of the commemorative coin program
remains fragile. To ensure the programs continue to reap the benefits of
the 1996 reforms, continued vigilance is necessary.

***[PROGRAM-WIDE ISSUES]{.underline}***

As of December 31, 2000, revenues of nearly \$29 million were generated
through sales of the Library of Congress, and Leif Ericson Commemorative
Coin Programs. An initial surcharge payment of \$1,373,957.50 was made
November 8, 2000 to the Library of Congress Trust Fund Board. Based upon
the Ericson program's start, or drop date on June 21, 2000, an initial
surcharge payment was due to the Leifur Eiriksson Foundation in December
2000. However, as of this report, the Foundation has not met the
matching funds criterion established by the *Commemorative Coin Reform
Act of 1996.* That requirement stipulates that the Mint must withhold
surcharges until all program operating costs have been recovered, and
until the designated beneficiary has raised other monies from private
sources equal to the maximum potential program surcharges*.* To date,
the Foundation has raised approximately \$1 million out of the maximum
amount of \$5 million, which the organization may receive from the
proceeds of the surcharges.

***[FINANCIAL REPORTING]{.underline}***

The attached financial statements provide quarterly and cumulative
program data. The *Commemorative Coin Reform Act of 1996* requires us to
withhold surcharges until all program costs are recovered and
beneficiaries submit audited financial statements indicating funds
raised from private sources equal the maximum amount which the
organization may receive from the proceeds of the surcharges. As noted
earlier, the U.S. Black Revolutionary War Patriots Commemorative Coin
Program closed December 31, 1998, with a deficit. The beneficiary has
not yet submitted the required documentation to qualify to receive
surcharges.

***[LIBRARY OF CONGRESS BICENTENNIAL]{.underline}***

# ![](media/image2.png){width="2.8in" height="1.9090277777777778in"}

## Program Highlights

To commemorate the bicentennial of the Library of Congress on April 24,
2000, Congress authorized the production of 500,000 silver dollars and
100,000 \$5 gold coins. Legislation permitted the Secretary of the
Treasury to substitute 200,000 \$10 gold-and-platinum coins for the \$5
gold coins, and with the support of the sponsoring organization, he
approved of this substitution and we struck the nation's first
bimetallic commemorative coin. Designs finalized and reviewed by the
Citizens Commemorative Coin Advisory Committee (CCCAC) and the
Commission of Fine Arts depict various themes emblematic of the Library
of Congress, including the magnificent Thomas Jefferson Building.
Surcharges will be paid to the Library of Congress Trust Fund Board for
bicentennial programs, educational outreach and other activities.

## Marketing Activities 

Program sales for the Library of Congress Commemorative Coin Program
ended December 31, 2000, as required by P.L. 105-268. The Library of
Congress commemorative coins were prominently featured in the Mint's
Holiday 2000 catalog, generating approximately \$1.2 million in sales
revenue. Promotional efforts during the first quarter of FY 2001
included the placement of "last chance to purchase" full-page
advertisements in select numismatic trade publications to help stimulate
collector demand before the program ended. In addition, a "last chance
to purchase" web banner was placed on the Mint web site to alert
Internet shoppers. The coins also were featured in an e-tailing print
advertisement that ran nationally in several Tribune-owned newspapers.

## 

## Analysis of Financial Position

As of December 31, 2000, more than 283,000 coins were sold generating
revenues of over \$20.3 million, including surcharges of nearly \$3
million. Estimated profits of \$3.6 million exceed potential unrecovered
expenses of slightly more than \$200,000. Cost of goods sold totaled
\$9,479,943. Selling, general and administrative expenses equaled
slightly over \$4.3 million. Close to \$1.4 million in surcharges have
been distributed to the recipient organization to date.

## Manufacturing/Packaging Operations

No bimetallic coins were produced during the quarter ending December 31,
2000. A total of 11,584 acceptable silver proof coins and 2,296
acceptable silver uncirculated coins were produced during the quarter
ending September 30, 2000, representing reject rates of less than one
percent for both the proof and uncirculated coins.

![](media/image3.png){width="3.1in" height="2.325in"}***[LEIF ERICSON
MILLENNIUM]{.underline}***

## 

## Program Highlights

The Leif Ericson Commemorative Coin Program was formally launched on
June 21, 2000, at the Smithsonian\'s National Museum for Natural History
at its popular Viking Exhibit. Approximately 842,000 customers, all
selected based on their expected propensity to purchase, were mailed the
Leif Ericson direct mail package. This was supported with direct
response print advertisements in numismatic trade publications.

The second and final U.S. commemorative coin program of 2000, the Leif
Ericson Millennium Commemorative Coin Program commemorates the 1000-year
anniversary of Leif Ericson's voyage to the New World. Public Law
106-126 authorized the issuance of up to 500,000 U.S. silver dollars in
conjunction with the issuance of an Icelandic 1000 krónur silver coin.
Qualifying surcharges will be paid to the Leifur Eiriksson Foundation
for the purpose of funding student exchanges between students of the
United States and students of Iceland.

This program represents an historic "first of its kind" for the U.S.
Mint commemorative coin program -- providing collectors with the
opportunity to purchase jointly issued domestic and foreign
commemorative coins. The silver dollar and 1000 krónur silver coin,
designed by the U.S. Mint and the Republic of Iceland respectively, each
portray a heroic representation of Leif Ericson on the obverse. The
reverse of the U.S. coin depicts his Viking ship under full sail. The
reverse of the Icelandic 1000 krónur portrays the eagle, dragon, bull,
and giant from the Icelandic Coat of Arms. By request, the U.S. Mint
will produce and market the Icelandic 1000 krónur silver coin on behalf
of the Governors of the Central Bank of Iceland. A mintage limit of
500,000 was established for the U.S. coin, which is available in both
proof and uncirculated condition. A mintage limit of 150,000 coins was
established for the Icelandic krónur, available in proof silver only.

## Marketing Activities

## 

The Leif Ericson Millenium Coins were prominently featured in the Mint's
Holiday 2000 catalog generating approximately \$900,000 in revenues.
Part of the coins' launch involved the Mint's participation in the
welcoming of the Viking Ship *Icelander* in New York Harbor on October
5, 2000. A two-coin set, featuring proof versions of both the U.S. and
Icelandic silver coins, was presented by the Mint to the captain of the
*Icelander* during the ship's stopover in New York City. In addition to
appearing in our catalog, the coins were featured in a multi-product
e-tailing print advertisement that ran nationally in several
Tribune-owned newspapers. In accordance with the authorizing
legislation, coin production for this commemorative program ended
December 31, 2000. However, the Mint will continue to sell the remaining
inventory of Leif Ericson commemorative coins through February 2001.

## 

## Analysis of Financial Position

As of December 31, 2000, sales of over 265,000 coins were realized
generating revenues of nearly \$8.6 million. Estimated profits of
\$1,089,651 million exceed potential unrecovered expenses of
approximately \$124,000. Cost of goods sold totaled \$2,555,560.
Selling, general and administrative expenses were slightly in excess of
\$2.2 million. As of this report, the Foundation has not met the
matching funds criterion established by the *Commemorative Coin Reform
Act of 1996.* That requirement stipulates that the Mint must withhold
surcharges until all program operating costs have been recovered, and
until the designated beneficiary has raised other monies from private
sources equal to the maximum potential program surcharges*.* To date,
the Foundation has raised approximately \$1 million out of the maximum
amount of \$5 million, which the organization may receive from the
proceeds of the surcharges.

## Manufacturing/Packaging Operations

A total of 1,198 acceptable uncirculated silver dollars were produced
during the quarter ending September 30, 2000, representing a reject rate
of less than one half of one percent. No additional proof silver or
Icelandic proof 1000 krónur coins were produced during the first quarter
of FY 2001.

***[U.S. CAPITOL VISITOR CENTER -- FY 2001]{.underline}***

***Program Highlights***

##  

![](media/image4.png){width="1.4402777777777778in"
height="1.4402777777777778in"}Authorized by Public Law 106-126, the U.S.
Capitol Visitor Center Commemorative Coin Program commemorates the first
convening of Congress in the Capitol building. Mintages of 100,000 gold;
500,000 silver dollar coins; and 750,000 clad half-dollar coins have
been established. Design

concepts for the U.S. Capitol Visitor Center Commemorative Coins were
selected by the Secretary of the Treasury and were reviewed by the
Citizens Commemorative Coin Advisory Committee (CCCAC), the Commission
of Fine Arts, and the U.S. Capitol Preservation Commission. Final
designs, representative of the convening of Congress in the Capitol in
1800, have been selected. Program promotional artwork will feature
William Russell Birch's 1803 watercolor depicting the first Capitol's
completed north wing. The Birch watercolor is one of the few remaining
pieces of artwork that depicts what the Capitol looked like when
Congress first convened there. The Senate and House of Representatives
of the second session of the Sixth Congress met on November 22, 1800,
for a joint session addressed by President John Adams. Surcharges from
the sale of the coins will go toward the construction, maintenance and
preservation of a Capitol Visitor Center. The program will launch in
March 2001.

## 

***[AMERICAN BUFFALO COMMEMORATIVE COIN - FY 2001]{.underline}***

![](media/image7.bmp)

## ![](media/image8.png){width="1.1298611111111112in" height="1.1395833333333334in"}Program Highlights

Authorized by Public Law 106-375, the American Buffalo Coin
Commemorative Coin Act of 2000 commemorates the opening of the National
Museum of the American Indian of the Smithsonian Institution. A mintage
limit of 500,000 silver dollar coins has been established. The second
commemorative coin program of 2001, the American Buffalo Silver Dollar
will feature a reproduction of one of the most famous and beloved
designs among coin collectors -- the James Earle Fraser Buffalo nickel.

Surcharges will be paid to the National Museum of the American Indian to
commemorate the opening of the museum and to supplement the museum's
endowment and educational outreach funds. U.S. Mint marketing officials
recently met for the first time with program sponsors to discuss program
parameters and potential promotional plans. In addition, a panel of
numismatists and buffalo nickel experts was convened to discuss the
importance of maintaining the integrity of the original James Earle
Fraser Buffalo nickel design. The proposed coin designs were reviewed
and endorsed by the Citizens Commemorative Coin Advisory Committee
(CCCAC) and the Commission of Fine Arts. The initial program mailing is
scheduled for June 2001.

***[2002 WINTER OLYMPIC GAMES]{.underline}***

The 2002 Winter Olympic Commemorative Coin Act, P.L. 106-435, authorizes
the production of 400,000 silver dollar coins and 80,000 gold
five-dollar coins. In the spirit of the 1996 commemorative coin reform
legislation to curb proliferation, the 2002 Games will feature a single
coin design for the obverse and reverse of each denomination \-- in
contrast to the 1996 Olympic Games in Atlanta, which included a total of
16 designs. The final design selection will be made by the Secretary of
the Treasury in consultation with the Commission of Fine Arts, the
United States Olympic Committee, and the Olympic Properties of the
United States---Salt Lake 2002, L.L.C. Surcharges from the sale of the
coins will be divided equally between the Salt Lake Organizing Committee
for the Olympic Winter Games of 2002 and the U. S. Olympic Committee.
U.S. Mint marketing officials recently met for the first time with
program sponsors to discuss program parameters and potential promotional
plans. Issuance of the coin is targeted for January 1, 2002.

***[CONCLUSION]{.underline}***

Two commemorative coin programs were active during the first quarter of
FY 2001. Both the Library of Congress and the Leif Ericson Millenium
programs reported a profit this quarter, and together have generated
close to \$29 million in revenues to date. The commemorative coin
programs are currently experiencing a modest comeback with program sales
increasing. While these signs are encouraging, they also underscore the
necessity of continuing to abide by the 1996 program reforms.

Preparations are currently underway for the FY 2001 commemorative coin
programs. Collector excitement is building within the numismatic
community in anticipation of the reintroduction of a treasured coin
design - James Earle Fraser's Buffalo nickel. This program is scheduled
to launch in June 2001.