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2024-07-31-accounts

THE MERCHANT COMPANY ENDOWMENTS TRUST Charity No: SC002002

Trustees’ Annual Report and Financial Statements

For the year ended 31 July 2024

THE MERCHANT COMPANY ENDOWMENTS TRUST

Trustees’ Annual Report and Financial Statements

Contents

Contents
Report of the Trustees to The Merchant Company Endowments Trust 1-6
Independent Auditor’s Report to the members of The Merchant Company Endowments Trust 7-9
Group and Trust Statements of Financial Activities 10
(incorporating income and expenditure account)
Group and Trust Balance Sheets 11
Group and Trust Cashflow Statement 12
Notes to the Financial Statements 13-25

Reference and administrative details

Principal Office

The Merchants’ Hall 22 Hanover Street Edinburgh EH2 2EP

Chief Executive Officer

Guy Cartwright

Auditors

Henderson Loggie LLP The Stamp Office, Level 5 10-14 Waterloo Place Edinburgh EH1 3EG

Investment Managers

Cazenove Capital Management Limited 24-25 Charlotte Square Edinburgh EH2 4ET

Bankers

The Royal Bank of Scotland plc 36 St Andrew Square Edinburgh EH2 2AD

Solicitors

Morton Fraser Quartermile Two 2 Lister Square Edinburgh EH3 9GL

THE MERCHANT COMPANY ENDOWMENTS TRUST

The Trustees’ Annual Report

For the year ended 31 July 2024

The Trustees during the period were:-

Master of the Company Until November 2023 Master of the Company From November 2023 Until November 2024 Master of the Company From November 2024 Treasurer of the Company Until November 2023 Treasurer of the Company From November 2023 Treasurer of the Company Until November 2024 Treasurer of the Company From November 2024 Until November 2024 Until November 2024 Until November 2024 Until November 2024 Until November 2023 Until November 2023 Until November 2023 Until November 2023

Until November 2024
Until November 2023
Until November 2023
Until November 2023
Until November 2023
Chair Charities
From November 2023
From November 2023
From November 2023
Chair F&A From November 2023
Chair ELC From November 2024
From November 2024
From November 2024
From November 2024
From July 2024
From July 2024
From July 2024
From July 2024
From July 2024
Until August 2024
From November 2024

1

THE MERCHANT COMPANY ENDOWMENTS TRUST

The Trustees’ Annual Report (continued)

For the year ended 31 July 2024

Structure, governance and management

Nature of governing document

The trust is a body corporate of charitable status. The constitution of the trust is contained in the Edinburgh Merchant Company Order Confirmation Act 1996 (Part IV). The constitution is available on the website www.mcoe.org.uk.

Appointment of trustees

The Endowments Trust members are as follows:

The election of the elected members of the Endowments Trust shall take place annually at any General Meeting of the Company of Merchants of the City of Edinburgh in November.

Any member of the Endowments Trust, upon the expiry of his/her term of office, shall be eligible for re-election unless otherwise disqualified under the Edinburgh Merchant Company Order Confirmation Act 1996.

The Chairman of the Endowments Trust is the Master of the Royal Company of Merchants of the City of Edinburgh or in his or her absence, the Treasurer.

There were no transactions with connected parties except in the ordinary course of business.

Policies and procedures for induction and training of Trustees

In January 2023 a training session on Scottish charity regulations and the duties of charity trustees was provided by the Company lawyers and was attended by the majority of Trustees. The Trust also offers a variety of training opportunities through a variety of professional advisors.

Decision-making structure

Policies and strategy are agreed by the Trustees at their regular meetings. The charitable work of the Trust is carried out by the Royal Company of Merchant Charities Committee, chaired by one of the Trustees. The administration of the Trust is carried out by the Secretary and Chamberlain, the Almoner and the team of the Royal Company of Merchants of the City of Edinburgh.

Risk Management

The Trustees recognise their responsibility to regularly assess main risks and aim to mitigate exposure to these risks.

Principal significant risks are major repairs and vacancies in the property portfolio and fluctuations in the value and dividends in the investment portfolio.

2

THE MERCHANT COMPANY ENDOWMENTS TRUST

The Trustees’ Annual Report (continued)

For the year ended 31 July 2024

Objectives and activities

Endowment Trust

The objective of the Trust is to provide assistance to decent, peaceable men and women aged at least 55 on 1 July in the year of their election, unless, at a younger age they are certified on medical grounds as being unable to earn their living. Beneficiaries must be persons who have lived or worked in the City of Edinburgh or the County of Midlothian. Assistance may be given by way of cash grant, pension, gift of appliances, provision of accommodation and other support. The Trust funds an Almoner to give personal contact and further finance and care to beneficiaries where needed. The Trust consists of general funds which are also applied in connection with running the Sir William Fraser Homes (The Fraser Trust). There are also two funds which are administered separately by the Trust; The Russell and Foster Endowment and The Sir John Foster Fraser Bequest. The Trust owns two groups of flats which are rented at social housing and mixed rent rates to frail and elderly people and managed by Dunedin Canmore Housing Association.

The Fraser Trust (Sir William Fraser Homes)

The Fraser Trust was wound up in 1997 but the Endowments Trust continues to maintain the homes in terms of Section 114 of the Constitution, either by providing them to poor persons resident in the City of Edinburgh or Midlothian with preference given to authors and artists, or by letting to tenants on a commercial basis with the rents received, after payment of the costs incurred in maintaining the properties, being directed towards providing accommodation for needy citizens of Edinburgh.

The Russell and Foster Endowment

The Russell and Foster Endowment was formed from the estate of the late Henry W Russell in 1954. It is required that the fund is administered by the Endowments Trust as a separate fund. The free income is applied by the Trust in payment of annual pensions to respectable indigent Protestant men and women at a rate of £600 per annum. In the year no grants were made (2023 – £nil). The fund value at 31 July 2024 was £509,055 (2023 - £471,429).

The Sir John Foster Fraser Bequest

The Foster Fraser Bequest was formed from a bequest by the late Sir John Foster Fraser in 1961. It is required to be administered as a separate fund by the Endowments Trust who must have regard to applying funds towards helping people “engaged in the literary profession, scientists, artists, musicians, educationalists and other cultural Scottish people who have fallen on hard times.” In the year, no grants were made (2023- £nil) and the fund value at 31 July 2024 was £168,085 (2023 - £160,168).

Grant making policy

Grants are paid in accordance with the objectives set out in the Trust purposes above. The Almoner makes an assessment and reports to the Trustees, to enable decisions on which Grants should be made.

Following discussions among the trustees it was concluded that the current rules governing the Endowments Trust restricted the ways in which assistance could be given to deserving and qualified causes. At a meeting of the Members on 8 December 2021 the Members resolved to make an application to OSCR for a charity reorganisation scheme for variation of the Constitution so as to:-

3

THE MERCHANT COMPANY ENDOWMENTS TRUST

The Trustees’ Annual Report (continued)

For the year ended 31 July 2024

Objectives and activities (continued)

An application to change the constitution was submitted to OSCR in April 2024. The application was approved in December 2024 and the impact will principally be to :

Financial review

The group’s net expenditure after gains and losses for the year was £104,122 compared with the previous year’s net expenditure of £60,370. This was after realised and unrealised gains on listed investments of £187,494 (2023: losses of £52,763) and a loss on revaluation of investment property of £130,000 (2023: £315,000).

It is the policy of the Trustees that any realised gains on investments are re-invested within the portfolio. It is the policy of the Trustees to keep and maintain their properties.

The financial statements have been prepared in accordance with the statutory requirements of the Trust Constitution (Edinburgh Merchant Company Order Confirmation Act 1996, Part VI Sections 92 to 127).

The Trust’s income is derived mainly from heritable investments and quoted investments. The wholly owned subsidiary company MCET Ltd donates its profits to the Trust under the Gift Aid Scheme and this has enabled the Trustees to increase the level of reserves in order to fund the project outlined under “Achievements and performance.”

The Royal Company of Merchants of the City of Edinburgh provides administration and accounting services for the Trust. During the year under review the Endowments Trust group paid costs totalling £130,475 (2023: £114,133) which were recharged by the Royal Company of Merchants of the City of Edinburgh.

Investment policy

It is the Trustees’ policy to invest in such a way that both investment growth and regular investment income is available to meet the needs of the Trust. This has been achieved by keeping the portfolio of both properties and listed investments under regular review.

(a) Listed investments

The portfolio has been managed by Cazenove Capital Management Limited since October 2014. Details of the portfolio are shown in Note 10.

(b) Properties

The Trust owns a parade of shops at Drumsheugh in Edinburgh plus a private car park. The Trust has appointed Ryden, Property Consultants as the factor for these properties. The factor’s responsibility includes carrying out the scheduled rent reviews, negotiation and settlement, the collection of rents and the maintenance of the car park.

The Trust owns the entire share capital of MCET Ltd, a company which owns a domestic let property in Hillside Street, Edinburgh.

Reserves policy

It is the Trustees’ policy to maintain a level of endowed reserves that will provide sufficient income to cover the Trust’s regular commitments. Reserves in excess of this are available for disbursement.

4

THE MERCHANT COMPANY ENDOWMENTS TRUST

The Trustees’ Annual Report (continued)

For the year ended 31 July 2024

Reserves policy (continued)

The unrestricted reserves for the Endowments Trust General Fund at 31 July 2024 were £21,050,709. This generated income before investment gains and losses of £3,541, which was sufficient to cover disbursement of charitable funds and cover the finance of the expansion of the Trust’s property used for charitable purposes, thus fitting the reserves policy.

Achievements and performance

Beneficiaries

During the year, The Endowments Trust paid annuities to 399 beneficiaries. £330 each was paid on 31 December 2023 and 30 June 2024. In addition, a Christmas gift of £50 each was paid in December 2023.

A number of other beneficiaries received gift vouchers or white goods during the year.

Investment performance

The investment performance is compared with industry benchmarks regularly and the income generated was considered to be in accordance with the investment policy. Performance is kept under review with regular meetings with the investment managers.

Plans for future periods

The Trustees have considered the future strategy of the Trust, and have received approval from OSCR to widen the scope of charitable giving while remaining within the original parameters of the various Trusts to increase the amount of grants which are given each year.

Statement of Trustees’ Responsibilities

The trustees are responsible for preparing the Trustees’ Annual Report and the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

The law applicable to charities in Scotland requires the trustees to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the charity and of the incoming resources and application of resources of the charity for that period. In preparing these financial statements, the trustees are required to:

The trustees are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the charity and enable them to ensure that the financial statements comply with the Charities and Trustee Investment (Scotland) Act 2005, the Charities Accounts (Scotland) Regulations 2006 and the provisions of the charity’s constitution. They are also responsible for safeguarding the assets of the charity and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

5

The Trllsteès. Report (CODtlnuèd) For thè èDded 31 Jul> 2024 Statèment of dtsrlosui'e to AudAtoi' tn so far as the trustees are a￿are.. there is no rele￿Illt audit infonDation of ￿thIch the charity's auditors are U[￿Ware.. aad tlie I￿￿tee8 haTre tsken all steps that they ought to have taken lo the￿￿elVeS aware of any releTrant audit iirfornmtioll and to establish that the auditOT5 are awate of tlLat 1nforll￿¢1O The trustees reswnsible foi the inaiiitaiance alld Inte￿ity of the charity alld fu￿1¢la1 infonnation included on the clwity's website. Legislation in ilie Utlited Kingdom governing the preparati4)n and disseD]it￿tion of fjnancial state￿ents Inay diffet from legislatioii in othei jurL5dictions. On behalf of the Trust= ..22 Apnl 2025

THE MERCHANT COMPANY ENDOWMENTS TRUST

Independent Auditor’s Report to the Trustees

For the Year Ended 31 July 2024

Opinion

We have audited the financial statements of The Merchant Company Endowments Trust (the ‘parent charity’) and its subsidiaries (the 'group') for the year ended 31 July 2024 which comprise the group and charity Statement of Financial Activities, the group and charity Balance Sheet, the group and trust Statement of Cash Flows and the related notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent charity in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the trustees’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group and parent charity’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the trustees with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The trustees are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

7

THE MERCHANT COMPANY ENDOWMENTS TRUST

Independent Auditor’s Report to the Trustees (continued)

For the Year Ended 31 July 2024

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters in relation to which the Charities Accounts (Scotland) Regulations 2006 require us to report to you if, in our opinion:

Responsibilities of trustees

As explained more fully in the trustees’ responsibilities statement set out on page 5, the trustees are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the trustees determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the trustees are responsible for assessing the group and parent charity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the trustees either intend to liquidate the group or parent charity or to cease operations, or have no realistic alternative but to do so.

Auditor responsibilities for the audit of the financial statements

We have been appointed as auditor under section 44(1)(c) of the Charities and Trustee Investment (Scotland) Act 2005 and report in accordance with regulations made under that Act.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud, is detailed below.

As part of our planning process:

8

THE MERCHANT COMPANY ENDOWMENTS TRUST

Independent Auditor’s Report to the Trustees (continued)

For the Year Ended 31 July 2024

Owing to the inherent limitations of an audit, there is unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognise the non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. The primary responsibility for the prevention and detection of irregularities and fraud rests with the members.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the charity’s trustees, as a body, in accordance with Regulation 10 of the Charities Accounts (Scotland) Regulations 2006. Our audit work has been undertaken so that we might state to the charity’s trustees those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the charity and the charity’s trustees as a body, for our audit work, for this report, or for the opinions we have formed.

Henderson Loggie LLP

Chartered Accountants Statutory Auditor

Henderson Loggie LLP is eligible to act as auditor in terms of section 1212 of the Companies Act 2006.

The Stamp Office, Level 5 10-14 Waterloo Place Edinburgh EH1 3EG

…………………………..….. 2025

9

THE MERCHANT COMPANY ENDOWMENTS TRUST

Group and Trust Statements of Financial Activities (incorporating an Income and Expenditure Account) For the year ended 31 July 2024

Notes
Income:
Income from investments
3
Income from charitable activities
4
Total income and endowments
Expenditure on:
Raising funds
5
Charitable activities
6
Total expenditure
Net income before gains and losses
Realised (losses) on investments
9b
Unrealised (losses)/gains on investments
9b
Revaluation of investment properties
9a
Realised gain on investment properties
9a
Deferred tax on revalued assets
9c
Fair value movement in subsidiary
9c
Net (expenditure)/income
Reconciliation of funds:
Total funds brought forward
Total funds carried forward		 Unrestricted
Funds
Restricted
Funds
Trust
Group
General
Fund
Foster
Fraser
Russell &
Foster
2024
Total
2023
Total
2024
Total
2023
Total
£
£
£
£
£
£
£
673,691
2,991
8,313
684,995
591,189
566,895
756,199
328,116
-
-
328,116
314,838
328,116
314,838
1,001,807
2,991
8,313
1,013,111
906,027
895,011
1,071,037
(274,471)
(111)
(2,410)
(276,992)
(133,259)
(273,900)
(145,446)
(723,795)
-
-
(723,795)
(567,446)
(798,282)
(591,074)
(998,266)
(111)
(2,410)
(1,000,787)
(700,705)
(1,072,182)
(736,520)
3,541
2,880
5,903
12,324
205,322
(177,171)
334,517
8,313
-
2,284
10,597
(43,953)
10,597
(43,953)
142,421
5,037
29,439
176,897
(8,810)
176,897
(8,810)
(130,000)
-
-
(130,000)
(1,485,000)
(130,000)
(315,000)
-
-
-
-
-
15,555
-
-
-
-
-
-
-
(27,124)
(173,940)
-
-
(173,940)
1,272,071
-
-
(149,665)
7,917
37,626
(104,122)
(60,370)
(104,122)
(60,370)
20,523,234
160,168
471,429
21,154,831
21,215,201
21,154,831
21,215,201
20,373,569
168,085
509,055
21,050,709
21,154,831
21,050,709
21,154,831

10

THE MERCHANT COMPANY ENDOWMENTS TRUST Group and Trust Balance Sheets as at 31 July 2024

Notes
Fixed Assets
Tangible Fixed Asset
8
Investments
Property
9(a)
Listed investments
9(b)
Investment in MCET Ltd
9(c)
Total Fixed Assets
Current Assets
Debtors
10
Inter-company control account MCET
10
Cash at bank and in hand
Total Current Assets
Liabilities
Creditors: Amounts falling due within one year
12
Net current assets
Total assets less current liabilities assets
Creditors due after more than one year
13
Provisions for liabilities and charges
14
Total net assets
The funds of the charity
Non distributable investment property reserve
15
Revenue reserve
15
Endowed Reserve
15
Total charity funds
Approved and authorised for issue on behalf of the Trustees on 22nd
April 2025		 Unrestricted
Funds
Restricted
Funds
Trust
Group
General
Foster
Fraser
Russell &
Foster
2024
Total
2023
Total
2024
Total
2023
Total
£
£
£
£
£
£
£
5,628,112
-
-
5,628,112
5,775,800
5,628,112
5,775,800
5,490,001
-
-
5,490,001
5,620,001
5,730,001
5,860,001
1,999,912
95,297
421,840
2,517,049
2,344,339
2,517,049
2,344,339
5,459,450
-
-
5,459,450
5,633,389
-
-
18,577,475
95,297
421,840
19,094,612
19,373,529
13,875,162
13,980,140
162,061
-
37
162,098
141,551
169,488
240,070
100,528
-
-
100,528
100,528
-
5,000,000
2,196,287
72,788
87,178
2,356,253
2,140,035
7,712,646
2,623,324
2,458,876
72,788
87,215
2,618,879
2,382,114
7,882,134
7,863,394
(328,049)
-
-
(328,049)
(200,251)
(344,731)
(261,018)
2,130,827
72,788
87,215
2,290,830
2,181,863
7,537,403
7,602,376
20,708,302
168,085
509,055
21,385,442
21,555,392
21,412,565
21,582,516
(334,732)
-
-
(334,732)
(400,561)
(334,732)
(400,561)
-
-
-
-
-
(27,124)
(27,124)
20,373,570
168,085
509,055
21,050,710
21,154,831
21,050,709
21,154,831
5,373,412
-
-
5,373,412
5,503,412
6,186,371
6,300,816
9,002,684
55,717
65,017
9,123,418
9,285,035
8,310,460
8,487,631
5,997,473
112,368
444,038
6,553,879
6,366,384
6,553,879
6,366,384
20,373,569
168,085
509,055
21,050,709
21,154,831
21,050,709
21,154,831

- Master

11

THE MERCHANT COMPANY ENDOWMENTS TRUST Group and Trust Statement of Cash Flows At as 31 July 2024

Cash flows from operating activities
Net (expenditure)/income
Losses/(gains) on investments
FV movement in subsidiary
FV Movement in properties
Decrease/(increase) in debtors
(Decrease)/increase in creditors
Depreciation charges
Gains on sale of current asset investments
Dividends and interest
Cash provided by/(used in) operating activities
Cash flows from investing activities
Dividends and interest
Proceeds from sale of current asset investments
Payments to acquire investments
Proceeds from the sale of investments
Other movements on investments
Cash provided by /(used in) investing activities
Cash flows from financing activities
Repayment of bank loans
Cash used in financing activities
Net cash movement in the year
Cash and cash equivalents at start of the year
Cash at bank and in hand
Cash held in investment portfolio
Cash and cash equivalents at end of the year
Cash at bank and in hand
Cash held in investment portfolio		 Trust
Trust
Group
2024
2023
2024
£
£
£
(101,549)
(60,370)
(104,122)
(187,494)
52,763
(187,494)
171,367
(1,272,071)
-
130,000
1,485,000
130,000
(20,547)
(29,395)
70,582
127,802
(18,246)
83,717
147,688
148,131
147,688
-
-
(15,555)
(99,247)
(63,852)
(131,943)
_
_
_
168,020
241,960
(7,127)
99,247
63,852
131,943
-
-
5,015,555
(539,422)
(887,698)
(539,422)
512,966
-
978,794
680
512,966
-
__
_
__
72,791
155,628
5,121,042
(65,832)
(65,832)
(65,832)
__
_
__
(65,832)
(65,832)
(65,832)
__
_
__
174,979
331,756
5,048,083
2,140,035
1,883,023
2,623,324
237,067
162,323
237,067
__
_
__
2,377,102
2,045,346
2,860,391
__
_
__
2,356,253
2,140,035
7,712,646
195,828
237,067
195,828
__
__
__
2,552,081
2,377,102
7,908,474

 Group
2023
£
(60,370)
52,763
-
315,000
13,718
12,318
148,131
-
(67,724)
_
413,836
67,724
-
(887,698)
978,794
680
_
159,500
(65,832)
_
(65,832)
_
507,504
2,190,564
162,323
_
2,352,887
_
2,623,324
237,067
__
2,860,391

12

THE MERCHANT COMPANY ENDOWMENTS TRUST Notes to the Financial Statements For the year ended 31 July 2024

1 Accounting Policies

The following accounting policies have been applied consistently in dealing with the items which are considered material in relation to the charity’s financial statements.

a) Basis of preparation

The financial statements have been prepared under the historical cost accounting rules, and in accordance with applicable accounting standards, as modified by the revaluation of UK listed investments and investment properties. The charity is a Public Benefit Entity and the financial statements comply with the charity’s Constitution, the Statement of Recommended Practice (SORP) FRS 102 Accounting and Reporting by Charities, FRS 102, the Charities and Trustee Investment (Scotland) Act 2005 and the Charities Accounts (Scotland) Regulations 2006 (as amended).

The financial statements are prepared in sterling, which is the functional currency of the entity. Monetary amounts in these financial statements are rounded to the nearest £.

b) Basis of consolidation

The consolidated financial statements include the financial statements of the trust and of its subsidiary undertaking. The acquisition method of accounting has been adopted. Under this method the results of subsidiary undertakings acquired or disposed of in year are included in the consolidated statement of financial activities from the date of acquisition or up to the date of disposal.

c)

Going concern

As recommended by the Financial Reporting Council, the trustees have prepared detailed budgets setting out the charity’s expected performance over 12 months from approval of the financial statements. On the basis of these projections and having considered the charity’s reserves and cash position, the trustees believe it is appropriate to prepare the financial statements on a going concern basis.

d)

Income

Income is recognised when the charity has entitlement to the funds, when it is probable that the income will be received and the amount can be measured reliably. Donations and similar incoming resources are recognised when the charity is entitled to it, usually on receipt. Income from investments is accounted for when the charity is entitled to the income based on rental agreements in place.

e)

Expenditure

All expenditure is included on an accruals basis and is recognised when there is a legal or constructive obligation to pay for the expenditure. The charity is not registered for VAT and accordingly costs are shown gross of irrecoverable VAT. Where directly attributable, expenditure is allocated to the relevant functional category.

Expenditure on raising funds includes the cost of investment management services and letting agency fees. Expenditure on charitable activities includes costs incurred by the charity in the letting of operational assets to the charity’s beneficiaries. It includes both direct costs and the indirect costs necessary to support these activities.

Support costs are allocated between governance costs and other support costs. Governance costs comprise those costs involving the public accountability of the charity and its compliance with regulations and best practice. They therefore include the costs of statutory audit. Other support costs relate to the administrative costs of running the charity and are allocated to charitable activities accordingly.

f)

Taxation

The Trust is a recognised charity and has no liability to taxation. Deferred taxation (arising within the subsidiary) is provided in full in respect of taxation deferred by timing differences between the treatment of certain items for taxation and accounting purposes. The deferred tax balance has not been discounted.

g)

Fixed assets

Properties classified as investment properties are not depreciated. Properties used as social housing for public benefit are not classified as investment properties but as fixed assets and are depreciated.

Depreciation is provided on all fixed assets on book cost at rates and bases calculated to write off the cost of each asset over its expected useful life as follows:

Heritable Property 2% Fixtures and Fittings 10%

IT Equipment 33%

13

THE MERCHANT COMPANY ENDOWMENTS TRUST Notes to the Financial Statements (continued) For the year ended 31 July 2024

1 Accounting Policies (continued)

h) Investment properties

Investment property is carried at fair value determined annually and derived from the current market rents and investment property yields for comparable properties, adjusted if necessary for any difference in the nature, location or condition of the specific asset. No depreciation is provided. Changes in fair value are recognised in the income and expenditure account.

i) Investments

Investments are a form of basic financial instrument and are initially recognised at their transaction value and subsequently measured at their fair value at the balance sheet date by reference to the Stock Exchange mid prices. Realised and unrealised gains and losses are charged or credited in the statement of financial activities. The charity has no complex financial instruments. The main form of financial risk faced by the charity is that of volatility in the investment markets due to wider economic conditions. Investment income is recognised when receipt is probable.

j) Debtors

Other debtors are recognised at the settlement amount due.

k) Cash

Cash comprises cash at bank and in hand and short term liquid investments with a short term maturity date.

l) Creditors and provisions

Creditors and provisions are recognised where the charity has a present obligation resulting from a past event that will probably result in a transfer of funds to a third party and the amount due to settle the obligation can be measured or estimated reliably. Creditors and provisions are normally recognised at their settlement amount.

m) Pension

The Trust contributes to a defined benefit pension scheme, details of which are held in note 16 to the financial statements.

n) Reserves

General reserve - The general reserve is held for meeting the objectives of the Trust. Any year end surplus or deficit is applied to the general reserve.

Endowment reserve - Investments are held within an endowment reserve, income from which is used in furtherance of the Trust’s activities. Unrealised gains and losses on investments are applied to each fund within the endowment reserves on the same proportion of investments held.

2 Purpose of the Trust Fund

In terms of the Merchant Company Order Act 1996 (Part VI) the free income of the Trust shall, after expenses of management and pensions of employees, be applied to the payment of annual ex gratia pensions or gifts of money and in providing lodging, clothing, food, fuel, furnishings and other benefits to qualifying persons.

14

THE MERCHANT COMPANY ENDOWMENTS TRUST Notes to the Financial Statements (continued)

For the year ended 31 July 2024

3 Income from investments

Trust Trust Group Group
2024 2023 2024 2023
£ £ £ £
Dividends 43,176 37,413 43,176 37,413
Distribution from subsidiary 338,520 194,075 - -
Interest 56,071 26,439 88,767 30,311
Commercial letting income 247,228 333,262 434,953 688,475
__ __ __ __
684,995 591,189 566,895 756,199
======== ======== ======== ========
4 Income from charitable activities
Trust Trust Group Group
2024 2023 2024 2023
£ £ £ £
Domestic letting income 328,116 314,838 328,116 314,838
======= ======== ======= ======
5 Expenditure on raising funds
Trust Trust Group Group
2024 2023 2024 2023
£ £ £ £
Professional fees for letting 36,746 28,863 36,746 29,827
Other costs of letting 169,124 44,738 171,276 45,177
_ _ _ _
Total direct costs 205,870 73,601 208,022 75,004
Support costs (note 7) 57,121 45,930 51,877 56,714
_ _ _ _
Total letting costs 262,991 119,531 259,899 131,718
Investment management fee 14,001 13,728 14,001 13,728
_ _ _ _
276,992 133,259 273,900 145,446
======= ======= ======= ======
6 Expenditure on charitable activities
Trust Trust Group Group
2024 2023 2024 2023
£ £ £ £
Professional fees – Cyrenians 47,341 44,959 47,341 44,959
Other professional fees 23,212 21,355 71,863 37,330
Direct support costs – JMH & Little Road 43,197 66,473 43,351 66,473
Depreciation 147,688 148,131 147,688 148,131
Grants to beneficiaries 359,717 195,883 359,717 195,883
__ __ __ __
Total direct costs 621,155 476,801 669,960 492,776
Support costs (note 7) 90,190 80,221 106,342 80,221
Governance costs – audit fee 9,450 10,424 16,785 18,077
Governance costs – non-audit fees 3,000 - 5,195 -
__ __ __ __
723,795 567,446 798,282 591,074
======= ======== ======= =======

15

THE MERCHANT COMPANY ENDOWMENTS TRUST Notes to the Financial Statements (continued) For the year ended 31 July 2024

7 Support costs

Support costs
Trust Trust Group Group
2024 2023 2024 2023
£ £ £ £
Costs recharged by the Merchant Company 119,765 103,423 130,475 114,133
Bank charges 404 453 602 527
Ex gratia pensions - 97 - 97
Past service cost - -
Loan interest 27,142 22,178 27,142 22,178
__ __ __ __
Total support costs 147,311 126,151 158,219 136,935
======== ======== ======== =======
Allocated on a pro rata basis as follows;
Raising funds 57,121 45,930 51,877 56,714
Charitable activities 90,190 80,221 106,342 80,221
__ __ __ __
147,311 126,151 158,219 136,935
======== ======== ======== =======

8 Fixed assets

Fixed assets
JMH JMH Little Road,
Heritable Furniture Liberton, Trust Group
Property and Phase 1&2 2024 2024
Fittings Heritable Computer
Property Equipment
£ £ £ £ £
Cost £
At 31 July 2023 3,499,038 5,748 3,885,349 1,331 7,391,466 7,391,466
Additions - - - - - -
__ __ __ __ __ ___
At 31 July 2024 3,499,038 5,748 3,885,349 1,331 7,391,466 7,391,466
__ __ __ __ __ __
Depreciation
At 31 July 2023 909,751 5,748 698,836 1,331 1,615,666 1,615,666
Charge for the year 69,981 - 77,707 - 147,688 147,688
__ __ __ __ __ __
At 31 July 2024 979,732 5,748 776,543 1,331 1,763,354 1,763,354
__ __ __ __ __ __
Net book value
At 31 July 2024 2,519,306 - 3,108,806 - 5,628,112 5,628,112
======== ======= ======== ======= ======= =======
At 31 July 2023 2,589,287 - 3,186,513 - 5,775,800 5,775,800
======== ======= ======= ======= ======= =======

16

THE MERCHANT COMPANY ENDOWMENTS TRUST Notes to the Financial Statements (continued) For the year ended 31 July 2024

9 Investments

Investment properties Trust Trust Group Group
2024 2023 2024 2023
£ £ £ £
Fair value
Sir William Fraser Homes 2,940,000 3,020,000 2,940,000 3,020,000
Drumsheugh shops and car park 2,550,000 2,600,000 2,550,000 2,600,000
Feu 1 1 1 1
Hillside Street - - 240,000 240,000
___ ___ ___ ___
5,490,001 5,620,001 5,730,001 5,860,001
======== ======== ======== ========
Costs
Sir William Fraser Homes 74,283 74,283 74,283 74,283
Drumsheugh shops and car park 188,155 188,155 188,155 188,155
Feu 1 1 1 1
Hillside Street - - 82,500 82,500
__ __ ___ ___
262,439 262,439 344,939 344,939
======== ======== ======== =========

The market value is determined by the Master’s Court on the advice of property professionals.

Group & Group &
Investments held on recognised Trust Trust
Stock Exchange – held in the UK Investments Cash 2024 2023
£ £ £ £
Value of portfolio at 31 July 2023 2,107,273 237,066 2,344,339 2,413,134
Purchases 539,422 (539,422) - -
Disposal proceeds (512,966) 512,966 - -
Realised gains/(losses) 10,597 - 10,597 (43,953)
Unrealised gains/(losses) 176,897 - 176,897 (8,810)
Management fee - (14,001) (14,001) (13,728)
Dividend movement - 50,760 50,760 39,235
Cash movement - (51,541) (51,541) (42,539)
___ ___ ___ ___
Value of portfolio at 31 July 2024 2,321,223 195,828 2,517,049 2,344,339
========= ========= ========= =========

The portfolio has been managed by Cazenove Capital Management Limited and they are invested in accordance with the objectives agreed by the Trustees. All investments are carried at their fair value. Investments in equities and bonds are traded in quoted public markets. Holdings in multi-asset funds are at bid price. The basis of fair value for quoted investments is equivalent to market value, using the bid price. Asset sales and purchases are recognised at the date of trade at their transaction value.

17

THE MERCHANT COMPANY ENDOWMENTS TRUST

Notes to the Financial Statements (continued) For the year ended 31 July 2024

9 Investments (continued)

The main risk to the trust from financial instruments lies in the combination of uncertain investment markets and volatility to growth and incomes. The Trust’s investment strategy is to maximise income and ensure capital growth of funds in excess of inflation each year and as such the portfolio is invested in medium to high risk stocks. Liquidity risk is anticipated to be low as all assets are traded in markets with good liquidity and high trading volumes and this is expected to continue. The Trust manages these investment risks by retaining expert advisors to manage its investment portfolio. The investment policy is reviewed annually to ensure the protection of the real value of the portfolio in the longer term.

2024 2023
The portfolio is invested in:
Equities and bonds 93.4% 89.9%
Cash 6.6% 10.1%
_ _
100.00% 100.00%
======= ======

(c) Investment in subsidiary

MCET Ltd (SC215839) is a wholly owned subsidiary which owns property at Hillside Street, Edinburgh. The profit generated by the company from the let of property, will be used in accordance with the policy of the Endowments Trust. The results of MCET Limited included within the group results for the year are summarised below:

2024 2023
£ £
Turnover 187,725 355,215
======= ========
Profit/(loss) for the year 164,581 1,466,146
Donation to parent company (338,520) (194,075)
__ __
(173,939) 1,272,071
__ __
Net assets 5,459,450 5,633,389
======== ========
2024 2023
£ £
Investment properties 240,000 240,000
Net current assets 5,246,574 5,420,513
Provisions for liabilities (27,124) (27,124)
__ __
Net assets 5,459,450 5,633,389
======== =======
Represented by:
Share capital 4,129,207 4,129,207
Non-distributable property reserve - 1,310,376
Distributable reserve 1,330,243 193,806
___ __
Total shareholders’ funds 5,459,450 5,633,389
============ =======

18

THE MERCHANT COMPANY ENDOWMENTS TRUST Notes to the Financial Statements (continued) For the year ended 31 July 2024

10 Debtors

10 Debtors
Trust Trust Group Group
2024 2023 2024 2023
£ £ £ £
Sundry debtors 162,098 141,551 169,488 240,070
Amounts due from subsidiary 100,528 100,528 - -
__ __ _ __
262,626 242,079 169,488 240,070
======== ======== ======== ========
11 Current asset investments
Trust Trust Group Group
2024 2023 2024 2023
£ £ £ £
Property held for resale - - - 5,000,000
======= ======= ======== ========

Property held for resale represents the investment property at Albany Street that was previously held as a fixed asset investment and subsequently sold in the current final year.

12 Creditors: amounts falling due within one year

Trust Trust Group Group
2024 2023 2024 2023
£ £ £ £
Vat payable - - - 16,837
Deferred income 62,325 57,708 62,325 90,764
Audit fee accrual 9,450 10,200 18,645 17,400
Committed grants (unrestricted) - 20,000 - 20,000
Sundry creditors 190,445 46,511 197,932 50,185
Loan due to Royal Bank of Scotland 65,829 65,832 65,829 65,832
_ __ _ __
328,049 200,251 344,731 261,018
======= ======== ====== ========
Trust Trust Group Group
2024 2023 2024 2023
Deferred income £ £ £ £
Deferred income at 1 August 2023 57,708 4,830 57,708 35,407
Resources deferred during the year 62,325 57,708 62,325 90,764
Amounts released from previous year (57,708) (4,830) (57,708) (35,407)
__ __ __ __
62,325 57,708 62,325 90,764
======== ======== ======= ========

19

THE MERCHANT COMPANY ENDOWMENTS TRUST Notes to the Financial Statements (continued) For the year ended 31 July 2024

13 Creditors: due after more than one year

RBS -Bank loan

Group & Trust Group & Trust
2024 2023
£ £
334,732 400,561
========= ========

In the financial year to 31 July 2009 the Endowments Trust borrowed £1.3m from the Royal Bank of Scotland, to assist with the development of sheltered housing flats (Jack Martin House) for the Frail and Elderly at Brandfield Street, Edinburgh. The loan is repayable in 240 monthly instalments starting September 2010, the last of which is in August 2030.

Analysis of debt Group & Trust Group & Trust
2024 2023
£ £
Due within 1 year 65,829 65,832
Due between 1 and 2 years 65,832 65,832
Due between 2 and 5 years 197,496 197,496
Due after 5 years 71,404 137,233
__ __
400,561 466,393
======== ========
14 Provision for liabilities and charges
Trust Trust Group Group
2024 2023 2024 2023
Movement on deferred tax provision
At 1 August 2023 - - 27,124 -
Movement in year - - - 27,124
__ __ __ __
At 31 July 2024 - - 27,124 27,124
======== ======== ======== ========

THE MERCHANT COMPANY ENDOWMENTS TRUST

20

Notes to the Financial Statements (continued) For the year ended 31 July 2024

15
Funds
 Unrestricted Unrestricted Restricted Restricted
General Foster Russell Endowments Group
Fund Fraser & Foster Trust Total Total
2024 2024 2024 2024 2024
£ £ £ £ £
Non-distributable property reserve
At beginning of year 5,503,412 - - 5,503,512 6,300,816
Revaluation of properties in year (130,000) - - (130,000) (130,000)
Net gains/(losses) on investment properties - - - - 15,555
__ __ __ __ __
At end of year 5,373,412 - - 5,373,412 6,186,371
======= ====== ====== ====== ======
Revenue Reserve
At beginning of year 9,173,084 52,837 59,114 9,285,035 8,487,631
Incoming resources 1,001,807 2,991 8,313 1,013,111 895,011
Outgoing resources (998,267) (111) (2,410) (1,000,788) (1,072,182)
Profit/(loss) on investment in subsidiary (173,940) - - (173,940) -
__ __ __ __ __
At end of year 9,002,684 55,717 65,017 9,123,418 8,310,460
====== ====== ====== ====== ======
Endowed reserve
At beginning of year 5,846,738 107,331 412,315 6,366,384 6,366,384
Movement in year 150,734 5,037 31,723 187,494 187,494
__ __ __ __ _
At end of year 5,997,472 112,368 444,038 6,553,878 6,553,878
====== ====== ====== ====== ======
Total funds at end of year 2024 20,373,569 168,085 509,055 21,050,709 21,050,709
======== ====== ====== ======== ======

21

THE MERCHANT COMPANY ENDOWMENTS TRUST Notes to the Financial Statements (continued) For the year ended 31 July 2024

15
Funds(continued)
General Fund Foster Russell & Endowments Group
Fraser Foster Trust Total Total
2023 2023 2023 2023 2023
Non-distributable property reserve
At beginning of year 6,988,412 -
-		 6,988,412 6,642,940
Revaluation of properties in year - -
-		 - -
Deferred tax on revalued assets (1,485,000) -
-		 (1,485,000) (315,000)
__ __
__		 __ __
At end of year 5,503,412 -
-		 5,503,412 6,327,940
======= ======
======		 ====== ======
Revenue Reserve
At beginning of year 7,704,260 48,979
54,403		 7,807,642 8,153,114
Incoming resources 893,995 4,969
7,063		 906,027 1,071,037
Outgoing resources (697,242) (1,111)
(2,352)		 (700,705) (736,520)
Profit on investment in subsidiary 1,272,071 -
-		 1,272,071 -
__ __
__		 __ __
At end of year 9,173,084 52,837
59,114		 9,285,035 8,487,631
====== ======
======		 ====== ======
Endowed reserve
At beginning of year 5,889,495 111,183
418,469		 6,419,147 6,419,147
Revaluation in year (42,757) (3,852)
(6,154)		 (52,763) (52,763)
__ __
__		 __ _
At end of year 5,846,738 107,331
412,315		 6,366,384 6,366,384
====== ======
======		 ====== ======
Total funds at end of year 2023 20,523,234 160,168
471,429		 21,154,831 21,154,831
====== ======
======		 ====== ======

General Funds

These funds are used to provide assistance by way of cash grant, pension, gift of appliances, provision of accommodation and other support to qualifying persons who have lived or worked in the City of Edinburgh or the County of Midlothian. These include running the Sir William Fraser Homes (The Fraser Trust), Spylaw Street Cottages and Jack Martin House

The Russell and Foster Endowment

The Russell and Foster Endowment was formed from the estate of the late Henry W Russell in 1954. It is required that the fund is administered by the Endowments Trust as a separate fund. The free income is applied by the Trust in payment of annual pensions to respectable indigent Protestant men and women.

The Sir John Foster Fraser Bequest

The Foster Fraser Bequest is required to be administered as a separate fund by the Endowments Trust. No payments were made during the year. The free income is applied in helping people “engaged in the literary profession, scientists, artists, musicians, educationalists and other cultural Scottish people who have fallen on hard times.”

22

THE MERCHANT COMPANY ENDOWMENTS TRUST Notes to the Financial Statements (continued)

For the year ended 31 July 2024

16 Pensions

The Endowments Trust has no active members of the Merchant Company Retirement Benefits Scheme, a defined benefits scheme. The assets of the scheme are held separately from those of the Royal Company of Merchants of the City of Edinburgh in an independent administered fund. The scheme is funded and at the last FRS 102 valuation by Mercer, as at 31 July 2024 shows a surplus. At the triennial valuation, as at 31 July 2021, a funding level of 99% was confirmed. During the year, the Trust made no contribution towards the past service deficit (2023 £15,411). On the 31 October 2011, the scheme was closed to future accrual.

The following information is based on the FRS 102 valuation of the fund at 31 July 2024:-

following information is based on the FRS 102 valuation of the fund at 31 July 2024:-
2024 2023
% p.a % p.a
Price Inflation rate (RPI) 3.10 3.10
Price Inflation rate (CPI) 2.85 2.80
Salay increase rate 4.10 4.10
Discount rate 4.90 5.20

Life expectancy is based on the CMI Mortality Projections Model 2021 converging to 1.25% p.a. Based on these assumptions, the average future life expectancies at age 65 are summarised below:

Current pensioners
Future pensioners
The net pension (deficit)/asset was:
Estimated employer assets
Present value of scheme liabilities
Effect of asset ceiling
Net pension (deficit)/asset		 Males
20.7
22.0
2024
£000
1,206
(738)
(468)
-
=========		 Females
22.6
24.1
2023
£000
1,153
(738)
(415)
-
========

An asset ceiling adjustment has been made to prevent the Company recognising a pension asset as any surplus in the scheme belongs to the members.

23

THE MERCHANT COMPANY ENDOWMENTS TRUST Notes to the Financial Statements (continued) For the year ended 31 July 2024

16 Pensions (continued)

Reconciliation of fair value of scheme assets:

Opening fair value of scheme assets
Expected return on assets
Contributions by employer
Actuarial gains/(losses)
Estimated benefits paid
Administration expenses paid from assets
Reconciliationof defined benefit obligation:
Opening defined fair value obligation
Interest cost
Actuarial gains/(losses)
Estimated benefits paid		 2024
£000
1,153
58
-
54
(48)
(10)
1,206
=========
2024
£000
738
37
12
(48)
738
=========		 2023
£000
1,251
43
13
(97)
(57)
-
1,153
========
2023
£000
939
32
(176)
(57)
738
========

17 Financial instruments

inancial instruments
Trust Trust Group Group
2024 2023 2024 2023
Carrying amount of financial assets
Assets measured at fair value through profit and loss 8,007,050 7,964,340 8,247,050 13,204,340
======== ======== ======== ========

Financial assets measured at fair value through profit and loss represent listed investments and investment properties

18 Related party transactions .

Some staff and overhead expenses of the Trust are met by the Royal Company of Merchants of the City of Edinburgh and are recharged. The value of the recharge during the year was £103,423 (2023: £92,644). At the year end the balance due to the Royal Company of Merchants of the City of Edinburgh was £720 (2023: £3,672).

The Trust’s subsidiary, MCET Limited, donated funds of £338,520 (2023: £194,075) during the year. The amount due to the Trust at the year end and included within debtors was £100,528 (2023: £100,528).

During the year no trustees received any remuneration (2023: £nil) or any reimbursement of expenses (2023: £nil).

19 Ultimate controlling party

The charity is constituted under the Edinburgh Merchant Company Order Confirmation Act 1996 (Part IV) and is controlled by its elected trustees.

24

THE MERCHANT COMPANY ENDOWMENTS TRUST Notes to the Financial Statements (continued) For the year ended 31 July 2024

20 Commitments

Operating lease - rental income

Future minimum rents receivable under non-cancellable operating leases are as follows

Trust Trust Group Group
2024 2023 2024 2023
Within 1 year 462,010 494,218 462,705 887,313
Within 2-5 years 1,894,619 2,082,921 1,894,619 2,508,021
Later that 5 years 3,381,417 3,651,769 3,381,417 3,651,769
___ ___ ___ ___
5,738,045 6,228,908 5,738,740 7,047,103
======== ======== ======== ========

25