CO129-625-5 Hong Kong University- establishment fund 1-3-1950 - 31-1-1951 — Page 4

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the reasons for this recommendation are given in paragraph 9(c) of the report and at 'X' of Mr. Adams' minute of 18/10/50 above. If it is assumed therefore that £250,000 given by H.M.G. would be invested at 31% we should have a yield of £8,750 p.a.

This would leave about £36,000 to be raised

otherwise and if it were agreed that money for the endowment fund, other than any given by HI.M.G., could be invested in local utilities (at 12) a further sum of £300,000 would suffice to produce the requisite recurrent income. If of this the Hong Kong Government contributed £250, 00 the very modest sum of only £50,000 would be left to be collected under 3(iii) and (iv) above. A further possible compromise between security and high yield would be for both Government grants (i.e.£500,000) to be invested at 3 outside the Colony- yielding £17,500 p.a. and for attempts to be made to raise under 3(iii) and (iv) above the £230,000 needed, if invested at 12%, to produce the remaining £27,500 p.â.

5. The above discussion is of necessity somewhat hypothetical at the present stage as we still do not know whether the endowment fund can rely on two contributions of £250,000 each under 3(i) and (ii). Moreover we cannot make much further progress towards definiteness until we do kmayas these Governmental contributions will provide the backbone of and initial stimulus for any endowment fund. In the savingram at (3) opposite we asked Hong Kong for their views on the sugestion that they should signify their willingness to contribute £250,000 to the endowment fund before we approached the Treasury asking for like assistance. In (4) opposite, whilst hoping that it would prove possible to make such a contribution the Governor preferred to wait until later in the financial year before finally deciding. We are not therefore yet in a good position to go to the Treasury asking for £250,000 for the endowment fund and shall not be until we have Hong Kong's views on their part in the fund.

6. Meanwhile we have the question put to us in paragraph 2 of (4) opposite to reply to. Hong Kong have no doubt come to the conclusion that £1.3 million is far too much for them to raise even with help from H..G. (and it seems to me that this is probably true). They have therefore looked around for higher yields than 3 and appear to have decided that there is no sense in trying to raise £1.3 million when £500,000 would meet their needs admirably at the 12% yield offered by the local utilities. Particularly must it seem unnecessary to raise £1.3 million when the only apparent advantage offered by this course over investing £500,000 in local utilities is the rather doubtful one of having some income for University purposes when, if catastrophe should hit the Colony, there would be no University to apply the money to. In other words if the University and the utilities sink or swim together then there seems no sense in refraining from accepting the utilities 12.

7. Mr. Adams has, however, argued against this view in his minute above. We cannot plan for the University on the assumption that a catastrophe for the Colony and University means an end of the Colony and University. Patently if these were our views it would be insane to sink money in the University for capital development. We must therefore ensure as far as possible that the University is able to weather any storm and from the financial point of view, as the I.U.C. report suggests and Mr. Adams re-emphasises in his minute above, in order to achieve this it is essential that the University should be able to count onun income whatever the circumstances. To achieve this it is necessary for some further money to be invested outside Hong Kong. The question is how

much.

/8. ly