The Partnership Investment Fund Limited - Accounts to registrar (filleted) - small 18.2

REGISTERED NUMBER: 05081924 (England and Wales)

THE PARTNERSHIP INVESTMENT FUND LIMITED

AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2020

Page

Company Information

1

Chairman's Report

2

Balance Sheet

3

Notes to the Financial Statements

4

DIRECTORS:

M J Hathaway

D Horsman

J Watson

J J C Chapman

REGISTERED OFFICE:

Suite 6.1, Unit 6

Mortec Park

York Road

Leeds

LS15 4TA

REGISTERED NUMBER:

05081924 (England and Wales)

AUDITORS:

Smith Craven

Chartered Accountants

Statutory Auditors

Sidings House

Sidings Court

Lakeside

Doncaster

South Yorkshire

DN4 5NU

At 31 March 2020, despite the best efforts of the Board, the Region's LEPs and the Chambers of Commerce in PIF's region, the Legacy Funds generated from PIF's original and Interim loan and investment funds have still not been reinvested in the region.

I would like to place on record my gratitude to John Watson, who stood down as Chairman of PIF's Board on 27 February 2020 after 12 years. I am pleased to report that John agreed to remain on PIF's Board to assist the Board in reaching a successful conclusion on this long-outstanding matter.

PIF's low-cost operation means that remote working has been possible only partially. All Board Meetings since March 2020 have been held by Zoom. However, with only one part time executive operating out of standalone office facilities, all additional health and safety requirements necessitated by Covid-19 have been put into operation without any additional cost.

Minimal income continues from defaulted debts and this is not expected to increase significantly in future. Dividends are now being received from an equity investment part funded by the Interim Fund. Sale of the investment is restricted and would, in any event, realise a loss which is likely to be mitigated by future dividends with minimal intervention from PIF.

In February 2020, the Ministry for Housing, Communities and Local Government (MHCLG) wrote to PIF directing PIF to transfer its entire O2 ERDF and Single Programme legacy funds to Finance Yorkshire's new SME Investment Fund.

This created several difficulties which remain unresolved for PIF's Board.

The Covid-19 pandemic led PIF's Board to reach out to MHCLG in April 2020 to seek a solution that would provide urgent support to SMEs in PIF's region. However, after initially encouraging feedback, PIF's proposals were ultimately rejected and matters passed back to legal hands.

In July 2020, MHCLG sought a compromise to break the deadlock. This necessitated appointing external advisers which delayed the process, but on 16 November 2020, PIF's Proposal was submitted to MHCLG.

Following exchanges of requests for information and provision of the same, a definitive response is awaited from MHCLG.

As a result, PIF's Board has still been unable to move matters forward and remains frustrated by the lack of progress.

....................................................

M J Hathaway - Chairman

Date: 25 March 2021

FIXED ASSETS

Tangible assets

4

-

-

Investments

5

4

60,004

4

60,004

CURRENT ASSETS

Debtors

6

10,148

4,515

Cash at bank

4,279,078

4,285,578

4,289,226

4,290,093

CREDITORS

Amounts falling due within one year

7

63,863

31,031

NET CURRENT ASSETS

4,225,363

4,259,062

TOTAL ASSETS LESS CURRENT LIABILITIES

4,225,367

4,319,066

RESERVES

Income and expenditure account

8

4,225,367

4,319,066

4,225,367

4,319,066

The financial statements have been prepared and delivered in accordance with the provisions applicable to companies subject to the small companies regime.

In accordance with Section 444 of the Companies Act 2006, the Income Statement has not been delivered.

The financial statements were approved by the Board of Directors and authorised for issue on 25 March 2021 and were signed on its behalf by:

M J Hathaway - Director

1.	STATUTORY INFORMATION

The Partnership Investment Fund Limited is a private company, limited by guarantee , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" including the provisions of Section 1A "Small Entities" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

Going Concern

The financial statements have been prepared on a going concern basis. This is considered appropriate by the directors following the preparation and review of cash flow forecasts. From 1 April 2014, The Partnership Investment Fund Limited was not entitled to any further income from the Limited Partnerships. However, the Company has sufficient reserves to meet its likely costs for the foreseeable future and so the directors are not aware of any reason why the financial statements should not be prepared on the going concern basis.

In line with the objectives agreed by PIF's Board, discussions have continued with the region's LEPs, Chambers of Commerce, the Ministry of Housing, Communities and Local Government and with British Business Bank about the best way to maximise benefit to the region from the use of PIF's Legacies.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Fixtures and fittings

-

Straight line over 3 years

Computer equipment

-

Straight line over 3 years

Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

The Company adds to the carrying amount of an item of fixed assets the cost of replacing part of such an item when that cost is incurred, if the replacement part is expected to provide incremental future benefits to the Company. The carrying amount of the replaced part is derecognised. Repairs and maintenance are charged to profit and loss during the period in which they are incurred.

Investments in subsidiaries

Investments in subsidiary undertakings are recognised at cost less any provision for impairment.

Financial instruments

The Company only enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other accounts receivable and payable, loans from banks and other third parties, loans to related parties and investments in non-puttable ordinary shares.

Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade payables or receivables, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration, expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in case of an out-right short term loan not at market rate, the financial asset or liability is measured, initially, at present value of the future cash flow discounted at a market rate of interest for similar debt instruments and subsequently at amortised cost.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period to which they relate.

3.	EMPLOYEES AND DIRECTORS

The average number of employees during the year was 1 (2019 - 1 ) .

4.	TANGIBLE FIXED ASSETS

Fixtures

and

Computer

fittings

equipment

Totals

£

£

£

COST

At 1 April 2019

5,380

1,954

7,334

Disposals

-

(1,954

)

(1,954

)

At 31 March 2020

5,380

-

5,380

DEPRECIATION

At 1 April 2019

5,380

1,954

7,334

Eliminated on disposal

-

(1,954

)

(1,954

)

At 31 March 2020

5,380

-

5,380

NET BOOK VALUE

At 31 March 2020

-

-

-

At 31 March 2019

-

-

-

5.	FIXED ASSET INVESTMENTS

Interim

Shares in

Fund

PIF (non

group

shares &

legacy

undertakings

loans

shares)

Totals

£

£

£

£

COST

At 1 April 2019

4

250,000

60,000

310,004

Disposals

-

(157,650

)

(37,836

)

(195,486

)

At 31 March 2020

4

92,350

22,164

114,518

PROVISIONS

At 1 April 2019

-

220,000

30,000

250,000

Eliminated on disposal

-

(127,650

)

(7,836

)

(135,486

)

At 31 March 2020

-

92,350

22,164

114,514

NET BOOK VALUE

At 31 March 2020

4

-

-

4

At 31 March 2019

4

30,000

30,000

60,004

The company's investments at the Balance Sheet date in the share capital of companies include the following:

The Partnership Investment Equity Fund Limited

Registered office: Suite 6.1 Unit 6, Mortec Park, York Road, Leeds, West Yorkshire, LS15 4TA

Nature of business: Dormant

%

Class of shares:

holding

Ordinary

100.00

2020

2019

£

£

Aggregate capital and reserves

(5,029,788

)

(5,029,788

)

The Partnership Investment Mezzanine Fund Limited

Registered office: Suite 6.1 Unit 6, Mortec Park, York Road, Leeds, West Yorkshire, LS15 4TA

Nature of business: Dormant

%

Class of shares:

holding

Ordinary

100.00

2020

2019

£

£

Aggregate capital and reserves

(4,181,443

)

(4,181,443

)

The Partnership Investment Small Loans Fund Limited

Registered office: Suite 6.1 Unit 6, Mortec Park, York Road, Leeds, West Yorkshire, LS15 4TA

Nature of business: Dormant

%

Class of shares:

holding

Ordinary

100.00

2020

2019

£

£

Aggregate capital and reserves

(4,569,317

)

(4,569,317

)

The Partnership Investment Micro Loans Fund Limited

Registered office: Suite 6.1 Unit 6, Mortec Park, York Road, Leeds, West Yorkshire, LS15 4TA

Nature of business: Dormant

%

Class of shares:

holding

Ordinary

100.00

2020

2019

£

£

Aggregate capital and reserves

(2,224,982

)

(2,224,982

)

Equity Investments

After the year end, long anticipated dividends from PIF's remaining equity investment were declared and paid in May and December 2020. Having supported the company for many years, PIF is hopeful that dividends will continue annually for the immediate future.

6.

DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2020

2019

£

£

Other debtors

8,614

2,999

Prepayments

1,534

1,516

10,148

4,515

7.

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2020

2019

£

£

Trade creditors

2,146

2,129

Other creditors

8,072

974

Accruals and deferred income

53,645

27,928

63,863

31,031

8.

RESERVES

Income

and

expenditure

account

£

At 1 April 2019

4,319,066

Deficit for the year

(93,699

)

At 31 March 2020

4,225,367

9.	DISCLOSURE UNDER SECTION 444(5B) OF THE COMPANIES ACT 2006

The Report of the Auditors was unqualified.

Andrew Cribb (Senior Statutory Auditor)

for and on behalf of Smith Craven

10.	CONTINGENT LIABILITIES

O2 European Regional Development Fund (ERDF)

ERDF grant funding provided to the Company in 2004 to support the O2 Fund was subject to a number of conditions. None of these conditions remains outstanding with the exception of those relating to the Legacy Fund created from the original funds.

The business plan for the O2 Fund anticipated PIF being an 'evergreen fund', using legacy cash to continue to support SMEs within the ERDF Objective 2 Programme area in Yorkshire and the Humber.

PIF's Board has been working to agree proposals for the future use of this legacy cash for many years. However, on 17 February 2020, the Government Office responsible for monitoring the original contract wrote to PIF, rejecting the Board's proposals for future use of the funds, claiming control over all of the ERDF legacy including that funded by Single Pot Grant funding plus the Single Pot Grant funded Interim Fund legacy and 'directing' PIF to transfer all the funds to the new Finance Yorkshire (FY) company.

The O2 ERDF contract obliges PIF to 'give effect to and observe all instructions given by the Government Office (now the Ministry of Housing, Communities and Local Government (MHCLG)) regarding the application of monies held in the Legacy Fund, arrangements for the administration of the fund, and the ultimate destination of the fund'.

PIF's Board had been optimistic that its proposals would ultimately gain the support of MHCLG especially given the lack of Stakeholder support for Finance Yorkshire's plan, so the letter of direction was a surprise.

PIF requested proof of MHCLG's legal claim over the Single Pot legacy funds but this was not provided. In addition, PIF's Board challenged the 'direction' of the O2 ERDF legacy funds on the basis that no new FY company actually existed. Its creation required approval from one of FY's controlling Members and they are one of the Stakeholders who do not support the scheme.

Attempts by PIF's Board in April 2020 to release the PIF legacy funds to support SMEs during the Covid19 pandemic were unsuccessful and it seemed likely that court proceedings would result. However, in July 2020, MHCLG sought a compromise and requested a proposal from PIF on future use of all its legacy funds.

In order to overcome any external perception of bias, and despite the resulting delay, consultants were appointed to make recommendations to PIF's Board about the most appropriate recipients of PIF's legacy funds for onward micro loan lending.

PIF's proposal was submitted to MHCLG on 16 November 2020.

MHCLG's capacity to respond has been constrained by staff working reduced hours and new policy priorities impacting on capacity to respond at pace.

PIF continues to press for an early agreement to its proposal. Further delay means an ever reducing value of the legacy funds available to support SMEs in the region.

PIF's Board considers the likelihood of being legally required to transfer the legacy cash to a third party, not of the Board's choosing, as being negligible. However, the matter is uncertain and, in order for PIF's accounts to be true and fair, the situation needs to be disclosed.

As at 31st March 2020, the value of the legacy created from ERDF grant funds was £1,603,271.

Yorkshire Forward Single Pot Grant Funding

Yorkshire Forward provided Single Pot grant funding to the Company in 2004 to support lending in the O2 Fund and also in 2008 to enable PIF's Interim Fund to be established.

The contracts were subject to a number of conditions, and were for a specific term, which has come to an end in both cases. No conditions remain outstanding and the contracts give neither Yorkshire Forward nor any successor the right to claim legacy cash created from either the O2 or the Interim Fund.

Despite this, British Business Bank (BBB) acting as agent for the Department for Business, Energy and Industrial Strategy, issued a letter on 19 July 2017 seeking a transfer of £2.1m resulting from these Single Pot grants, with a payment date of 30 September 2017.

PIF's lawyers advise that PIF is not contractually obliged to transfer the funds, and this has been communicated to BBB in terms that no credible justification for their request has been made. BBB have taken no action as a result of PIF's rejection of the 'Harvest' Letter. During year ended 31 March 2019, PIF sought Counsel's opinion on the BBB letter. Counsel endorsed the advice previously provided by PIF's lawyers.

After MHCLG issued its letter of 17 February 2020, PIF was left with two Government Departments with competing claims over the same funds created from Yorkshire Forward Single Pot Grant funding. PIF's lawyers advise that the MHCLG claim has even less credible justification than the earlier BBB claim over the monies.

At PIF's request, on 9 March 2020, BBB unequivocally withdrew its letter of 19 July 2017. This is helpful but not definitive as the withdrawal is stated as being necessary to remove barriers from PIF following MHCLG's 'direction'. Given MHCLG's failure to provide legal proof of ownership of these funds, PIF's Board does not intend to follow that 'direction'.

It is possible that BBB will seek to reinstate a claim over the Single Pot legacy funds. However, PIF's lawyers confirm that this would be difficult to sustain.

As at the date of these accounts, no payment has been made to BBB or to MHCLG and PIF's Board is of the opinion that the possibility of an outflow of resources is negligible.

As at 31 March 2020, the value of the legacy created from O2 and Interim Single Pot loan grant funds was £1,993,055.