How to express appreciation for an offer of science research funding
I received your offer for research funding. While I am honored and
  greatly appreciate your offer, I must regrettably decline as I have
  accepted another source of funding.
  
  Thank you for your kind consideration.
  
  [salutation, like Sincerely]
  
  [signed]


Keep it simple, short, polite, and professional. If you are in a country where overstatement is important, throw in a "very" and/or a "deeply" to conform to your norms.

You might want something more personal only if someone was literally offering to write you a personal check to pay for your research out of their own account. Otherwise accepting/declining an offer (and applying to multiple programs which all have the same deadlines) is the norm - so don't worry about it. 

Simple, short, polite, and professional.