CO129-625-5 Hong Kong University- establishment fund 1-3-1950 - 31-1-1951 — Page 3

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1. In paragraph 9 of the I.U.C. visitors report (copy registered at (1) opposite) it was pointed out that it was necessary, alongside capital development of the University, to press ahead with increasing the recurrent income of the University so that the University could function more effectively and efficiently. The I.U.C. visitors recommended that the necessary increased recurrent income should not be found by temporary expedients but that a secure income should be sought

by

(i) an increase in local grants

(ii) increased fees

(iii) endowment.

The additional recurrent income necessary by 1953 was estimated by the I.U.3. visitors at £96,000 p.a. Of this £31,000 p.a. will be covered under (i) above by an increase in the Hong Kong Government's grant to the University and £20,000 p.a. will be covered under (ii) above. This leaves £45,000 p.a. to be taken care of by the endowment fund which it is proposed to create.

2.

Consideration of the numerous points which have arisen in connection with this proposed endowment fund has been delayed on the main file 54147/50 by the discussion that has been proceeding on matters connected with the capital development of the University. I have now however, at Mr. Hall's suggestion, extracted copies of all relevant papers from 54147/50 and had them registered opposite so that the question of the endowment fund can now be considered separately.

3. In the discussion on the University with the Governor of Hong Kong held in June (record at (2) opposite) four sources were visualised as possible in helping to build up an endowment fund viz:

-

(i) grants by H.M.G.

(ii) grants by Hong Kong Government

(iii) public subscription locally following an intense

appeal campaign in Hong Kong

(iv) grants by Commonwealth Governments notably Australia.

The size of the endowment fund needed is a question which immediately presents itself and in the discussion the Governor, basing himself on investment in stocks yielding 3, quoted £1.3 million as the necessary size of the fund this would yield £45,500 p.a. The amounts of grants named in discussion under(i) and (ii) above were £250,000 each; this would therefore leave £800,000 to be found under (iii) and (iv) above and any other schemes which may come to mind.

4. 31 is the minimum likely yield (e.g. on certain gilt-edged stocks) and therefore involves the largest endowment fund. If we now look to the other end of the scale and see what is the minimum fund with which the University could get by we find (see (5) opposite) that the public utility companies in Hong Kong (and they are probably the safest local investment) are paying about 12% and that therefore a fund of £375,000 would be sufficient to yield £45,000 p.a. and £500,000 (from 3(i) and (ii) above) would be more than necessary. The I.U.C. visitors in their report, however, recommended that grants under 3(i) above should be invested in securities outside Hong Kong (paragraph 9(c)(i) of (1) opposite);

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