Diana Fund could close by 2012

The Diana, Princess of Wales Memorial Fund is now facing a choice between reducing its annual grant-giving or closing the fund three years early by 2012, in the wake of the out-of-court settlement with Franklin Mint.

Both sides ended six years of legal dispute last week by agreeing a settlement on the eve of their court battle.

The charity will pay about £13.5m into a five-year grants programme for charitable projects chosen jointly by the warring pair.

The fund was facing devastation from the firm's countersuit for 'malicious prosecution' after it had lost its 1998 bid to prevent Franklin Mint from making Princess Diana memorabilia.

The fund spent £2m defending the countersuit and the settlement has reduced its reserves from £48m to £34.5m. This means that if it maintains its grants budget at previous levels, its funding will run out three years earlier than planned.

Andrew Purkis, chief executive of the fund, told Third Sector: "On the premise that the trustees decide that the fund continues to spend between £4m-£5m - our yearly spending policy before the freeze in July 2003 - this settlement will reduce the amount of time the fund can remain open. The trustees will have to decide what timescale will leave the best lasting legacy."

Purkis refused to say exactly how beneficiaries of the settlement fund would be chosen, citing the confidentiality of the deal, but he said money would go to causes associated with the late Princess, such as HIV/Aids, landmines and care for the terminally ill.

Purkis said the settlement was about "burying the hatchet" and, therefore, involved a compromise, but he had no doubt that it beat any alternative.

He said: "There is a risk that the case could have gone wrong and the paralysis would have affected the fund indefinitely.

"Even if we had won, we would have risked paralysis through drawn-out appeals procedures."

While the fund itself is out of the courts, the US legal firm it hired in 1998, Manatt, Phelps & Phillips, is not. Franklin Mint will sue the company for $25m (£13.5m) next month for its part in the 'malicious prosecution', and Purkis is likely to be called to give evidence on the fund's decision to initiate legal action.

Early next year, the fund will open up its first competitive grants round for almost two years. This will follow last week's release of £525,000 to five projects that were all caught out by the grants freeze in July 2003.

Next spring, the fund will launch a consultation with the voluntary sector to review its grant guidelines. It anticipates the changes will be minimal.

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