Cancer Research for it to invest the capital and enjoy only the annual interest earned the remaining two thirds should be used to support the new Hong Kong/UK Joint Funding Scholarship scheme (folio W (4) of HKD 286/7 of 1987: Morris's minute of 15 December 1987 to
Hum).
15. British Council subsequently informed FCO that they had revised their ideas. They suggested that FCO give the £1 million to the Council for use as a conditional donation : that the sum should be remitted to UK and the Council invest the conditional donation under a trust fund arrangement in the UK; that only scholarships for Hong Kong and possibly the Cancer Research Institute should benefit from the funds and finally that the Council would nominate its Hong Kong representative as Fund Manager which he would do in collaboration with the Hong Kong Government and FCO (folio (5) of X HKD 286/4 of 1988: Dr G Howell's (Council) letter of 9 May 1988 to
Morris).
16. FCO sought clarification of certain points in the Council's response of 9 May 1988 but meanwhile obtained the Legal Advisers' reactions. The Legal Adviser suggested that it was important (a) to make clear whether British Council had a discretion to use the capital as well as the income and (b) to consider whether HMG should retain a residual power to authorise use of the capital for the purposes envisaged in the letter and also a power to authorise the application of the capital and income for other purposes. also emphasised the importance of seeking the Charity Commissioners' Y comments on what was proposed (folio (8) of HKD 286/4 of 1988 :
Fifoot's minute of 13 May 1988).
17. The British Council later replied on the points where clarification had been requested. Interest earned on the gift would not be liable to tax under the terms of the British Council's charitable status in UK. The Council would not expect to levy a management charge if the donation were made under the terms of that letter of 9 May (see para 15 above). However the Council would not be able to administer any donation to the Cancer Research Institute as this fell outside the terms of the Council's charter. The Council also queried whether Sir S K Tang's gift could be divided in two, with that for the Cancer Research Institute being given direct Z to them (folio (9) of HKD 286/4 of 1988: Davidson's (British
Council) letter of 3 June 1988 to Footman (FCO/HKD)).
18. On 3 June 1988, FCO, having taken all the above views into account, sent a draft letter of intent to British Council setting out arrangements which FCO believed applied to the gift which would be administered by the Council. Subject to any commments which the Council might have it was proposed to issue the letter of intent to AA them formally (folio (24) of HKD 286/4 of 1988: Footman's (FCO/CRD)
letter of 6 September 1988 to Davidson (British Council).
19. Six months later the British Council came up with yet another alternative proposal for handling the S K Tang gift. They had decided that for a sum of this size a 'letter of intent' would be inappropriate and a "declaration of trust" would be essential.
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