ACCOUNTS - Final Accounts preparation
ACCOUNTS - Final Accounts preparation
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Company registration number: 5174962
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COMPANY INFORMATION
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CONTENTS
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GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 MARCH 2020
The principal activity of the group during the year is the management of investment portfolios for investment funds and for individual pension funds, foundations, endowment funds and charities. The two key strategies in which the firm (the company and Oldfield Partners LLP) is engaged are the management of global equity and emerging markets equity portfolios. In addition, the firm manages a global equity income fund and other funds.
The group’s financial performance during the year reflected small net inflows of assets under management, and for most of the year market levels well above the previous year’s. The final quarter of the year saw a sharp decline in markets and in the value of portfolios under the firm’s management as Coronavirus spread and lockdown commenced in most economies. Against this background, turnover rose by 1.5% to £19.97 million. Profit before tax remained at a satisfactory level, 9.7% above the level in the previous year, at £13.95 million. Investment performance was weak both in global and in emerging market portfolios, with the background for ‘value’ managers such as the firm remaining difficult. Our value style, to which we have adhered consistently, is the cornerstone of our approach. Claus Anthon retired to become a non-working member at the end of the previous year and Robert White during the current year; the members are deeply grateful for their contribution to the firm, in the case of Claus Anthon since its formation and in Robert White’s case since 2007. Staff turnover continues to be low. The company provides services to Oldfield Partners LLP. The firm adapted well to the necessity for all staff to work from home. The business continuity plan which allowed for this eventuality was tested early in the Coronavirus crisis and was implemented successfully.
The management of the business and the execution of the company's strategy are subject to a number of risks. The key business risks facing the group are poor investment performance; and loss of key people, leading in any or all of these cases to the loss of investors' assets under management.
There are limited risks in relation to Brexit, in the form of the structure of the funds which the group manages, and the group has made contingency plans in regard to these risks.
The key performance indicators the directors used to monitor performance during 2019-2020, as in previous years, are summarised below, together with the board’s assessment of the position of the group in relation to those risks.
1. The firm's surplus of income over expenditure before partners' and executives' bonuses and distributions to owners of the business. The financial surplus has continued to be at a satisfactory level, with sufficient surplus from year to year as to give no cause for concern. 2. Assets under management and changes thereto. During the year there were small net inflows. As pension funds, particularly in the UK, review their strategies for managing their exposure to liabilities, there may well continue to be a reduction in their equity exposure. While the group is exposed to this risk, the risk is mitigated by the group’s mix of business which includes a substantial proportion of North American business, and of business with foundations and endowment funds which do not face the same prospects. 3. Investment performance. The group manages highly committed portfolios, concentrated in a limited number of holdings, and with little attention to indices whose composition has no influence on the group’s investment decisions. Consequently, performance from year to year, and over a period of years, in relation to such indices may differ significantly. The group’s emphasis is on long term performance. The risk of disappointing clients in the short term is mitigated by the emphasis the group places on its long term approach when communicating to prospective investors.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2020
4. Staff retention. The group hopes to maintain both a culture and a remuneration structure which are attractive to employees and to partners in the group’s limited liability partnership. There has been low staff turnover since the group’s inception.
The group intends to continue doing what it has been doing since inception: the management of equity portfolios with a particular, highly defined, investment approach. The directors believe that the group will continue to perform satisfactorily in the future.
Policy on the payment of creditors The group makes payments to all outstanding creditors promptly. Financial risk management objectives and policies The group has a conservative approach to financial risk. Borrowings are a small part of total capital. Complexity is avoided. The group holds or issues financial instruments in order to achieve three main objectives, being: (a) to finance its operations; (b) to manage its exposure to interest and currency risks arising from its operations and from its sources of finance; and (c) for trading purposes. In addition, various items such as trade debtors, trade creditors and accruals, which may be classed as financia instruments, arise directly from the group's operations. Transactions in financial instruments result in the group assuming or transferring to another party one or more of the financial risks described below. Credit risk The group monitors credit risk closely and considers that its current policies of credit checks meet its objectives of managing exposure to credit risk. The group has no significant concentrations of credit risk. Amounts shown in the balance sheet represent the maximum credit risk exposure in the event that other parties fail to perform their obligations under financial instruments. Currency risk The group operates internationally and is exposed to foreign exchange risk arising from currency exposures as a result of investment management fees being paid in currencies other than sterling. Foreign exchange risk arises from commercial transactions, recognised assets and liabilities and net investments in foreign operations. The group manages its holding of foreign currencies. Once received, revenues arising in a foreign currency are generally converted to sterling in order to ensure that the impact of currency fluctuations on the group is reduced.
The board of directors of Oldfield & Co. (London) Limited consider that they have fulfilled their individual and collective duty under section 172(1) of the Companies Act 2006 to act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of shareholders as a whole and in doing so, have regard to a number of broader matters which are set out below.
Oldfield & Co. (London) Limited (OC) is a holding company whose main operating subsidiary is Oldfield Partners LLP (OP). OC’s success is entirely dependent on the success of OP. OP’s long-term value style of investment requires patience by clients and staff alike. Staff incentivisation is required in order to ensure the long-term viability of OP. To achieve that arrangements are being put in place so that employees participate in the profits of OP. It is also planned that existing LLP members involved in management will increase their unit holdings over time. The directors believe that both these measures will align staff and partner incentivisation with the success of OP.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2020
OC’s directors receive regular reports from the Chief Executive on staff matters and staff turnover is regarded as a key performance indicator. Annual salary reviews are supplemented by regular benchmarking exercises. The non-executive directors’ other business interests ensure that they have a very clear idea of best practice in the way that OP treats its staff.
OP engages with suppliers on terms appropriate to its size and pays supplier invoices promptly. OP’s clients are its key relationship and the principal key performance indicator for LLP members and OC’s directors alike. Reports are made to both members and directors on prospective and actual clients, and business development. The reasons for significant customer redemptions are scrutinised by both bodies. OP is authorised and regulated by the FCA and also by a number of overseas regulators. OP is conscious of its responsibility to regulators and that it is only authorised to deal with professional investors. OP’s members as well as OC’s directors receive regular reports from the Compliance Officer and also from OP’s independent compliance consultant. The compliance consultant also has the right of direct access to OP’s members and OC’s directors if required. OP’s members and OC’s directors are acutely conscious of the need to maintain the highest standard of business conduct and compliance policies were updated in accordance with the requirements of the FCA Senior Managers and Certification Regime. The Code of Ethics, including the personal account dealing policy, was also updated to remain in accordance with best practice. Community engagement by staff is encouraged and a number of staff are actively engaged with projects within their own communities. The OP charity committee has a charitable giving programme which is overseen by a charity committee drawn from staff from all parts of the firm. The charitable giving supports a wide variety of projects mostly in the UK. OP aims to minimise its own environmental impact and to become carbon neutral in the next few years. OP engages with the Environmental, Social and Governance (ESG) aspects of companies in which we invest. OP believes responsible ownership and ESG engagement are a necessary part of its fiduciary duty to its investors. OP is a Tier 1 respondent to the UK Stewardship Code, and a signatory to UN Principles for Responsible Investment (PRI) with an A rating. OC’s directors are responsible for ensuring the fair treatment of all shareholders in accordance with OC’s articles of association and the various shareholders’ agreements. One of the non-executive directors is responsible for liaison with the external A shareholders and also represents them at board meetings. The executive directors are B shareholders and similarly represent the interests of that share class.
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2020
The directors present their report and the financial statements for the year ended 31 March 2020.
The directors who served during the year were:
The directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgments and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Particulars of dividends are detailed in note 11 to the financial statements.
The Company has chosen in accordance with Section 414C(II) of the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 to set out within the Company’s Strategic Report, the information required by Schedule 7 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulation 2008. This include information that would have been included in the business review, details of the principal risks and uncertainties and the company's approach to compliance with Section 172(1) of the Companies Act 2006.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2020
Each of the persons who are directors at the time when this Directors' Report is approved has confirmed that:
There have been no significant events affecting the Group since the year end.
Under section 487(2) of the Companies Act 2006, Menzies LLP will be deemed to have been reappointed as auditors 28 days after these financial statements were sent to members or 28 days after the latest date prescribed for filing the accounts with the registrar, whichever is earlier.
This report was approved by the board and signed on its behalf.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF OLDFIELD & CO. (LONDON) LTD
We have audited the financial statements of Oldfield & Co. (London) Ltd (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 31 March 2020, which comprise the Group Statement of Comprehensive Income, the Group and Company Statements of Financial Position, the Group Statement of Cash Flows, the Group and Company Statement of Changes in Equity and the related notes, including a summary of 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:
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 Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council'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.
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
∙the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
∙the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group's or the parent Company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
The directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our Auditors' Report thereon. 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.
In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF OLDFIELD & CO. (LONDON) LTD (CONTINUED)
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Group Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Directors' Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
As explained more fully in the Directors' Responsibilities Statement on page 4, the directors 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 directors 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 directors are responsible for assessing the Group's and the parent Company'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 directors either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.
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 Auditors' 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.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF OLDFIELD & CO. (LONDON) LTD (CONTINUED)
This report is made solely to the Company's members in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' 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 Company and the Company's members for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditor
Lynton House
7-12 Tavistock Square
London
WC1H 9LT
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2020
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2020
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 16 to 28 form part of these financial statements.
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COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2020
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 16 to 28 form part of these financial statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2020
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2020
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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2020
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CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 MARCH 2020
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
Oldfield & Co. (London) Limited is a private limited liability company incorporated in England and Wales and domiciled in the United Kingdom. The address of its registered office and principal place of business is disclosed on the company information page. The nature of the company's operations and its principal activities are set out in the strategic report.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
The following principal accounting policies have been applied:
The parent company, which is included in the consolidation, satisfies the criteria of being a qualifying entity as defined in FRS 102. As such, advantage has been taken of the following reduced disclosures available under FRS 102:
(a) Disclosures in respect of each class of share capital have not been presented. (b) No cash flow statement has been presented for the company. (c) Disclosures in respect of financial instruments have not been presented. (d) No disclosure has been given for the aggregate remuneration of key management personnel.
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the group’s equity. These interests consist of the amount of those interests at the date of investment and the share of changes in equity since the date of the combination. The profits attributable to the non-controlling interests represent the share of profits of individual partners of Oldfield Partners LLP.
Turnover represents amounts receivable for managing investment portfolios and advisory fees. Fees are charged as a percentage of the portfolios under management or advice. Fees are invoiced in arrears on a monthly or quarterly basis and are included in the statement of comprehensive income as the service is provided.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
2.Accounting policies (continued)
Functional and presentation currency
The Company's functional and presentational currency is GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income except when deferred in other comprehensive income as qualifying cash flow hedges.
On consolidation, the results of overseas operations are translated into Sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income.
Rentals paid under operating leases are charged to the Consolidated Statement of Comprehensive Income on a straight line basis over the lease term.
Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset.
Defined contribution pension plan
The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations.
The contributions are recognised as an expense in the Consolidated Statement of Comprehensive Income when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of Financial Position. The assets of the plan are held separately from the Group in independently administered funds.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
2.Accounting policies (continued)
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Statement of Financial Position date, except that:
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the Consolidated Statement of Comprehensive Income.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
2.Accounting policies (continued)
Investments in subsidiaries are measured at cost less accumulated impairment.
Investments in unlisted shares are remeasured to market value at each Statement of Financial Position date. Gains and losses on remeasurement are recognised in the Statement of Comprehensive Income for the period.
A financial asset or a financial liability is recognised only when the entity becomes a party to the contractual provisions of the instrument.
Basic financial instruments are initially recognised at the transaction price, unless the arrangement constitutes a financing transaction, where it is recognised at the present value of the future payments discounted at a market rate of interest for a similar debt instrument. Debt instruments are subsequently measured at amortised cost. Financial assets that are measured at cost or amortised cost are reviewed for objective evidence of impairment at the end of each reporting date. If there is objective evidence of impairment, an impairment loss is recognised in profit or loss immediately. Any reversals of impairment are recognised in profit or loss immediately, to the extent that the reversal does not result in a carrying amount of the financial asset that exceeds what the carrying amount would have been had the impairment not previously been recognised.
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the amounts reported. These estimates and judgments are continually reviewed and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
In the opinion of the management there are no significant judgments or estimates that would have a significant effect on the amounts recognised in the financial statements.
Page 19
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
The whole of the turnover is attributable to the rendering of services as the sole business activity as disclosed in the Strategic Report.
Analysis of turnover by country of destination:
Page 20
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
Page 21
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
Page 22
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
10.Taxation (continued)
There were no factors that may affect future tax charges.
Page 23
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
Page 24
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
Page 25
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
During the previous year the Group entered into a hedging contract to mitigate the impact of foreign exchange fluctuations. The fair value of the financial instruments at 31 March 2020 was £nil (2019: £1,543,198) included within other debtors measured at fair value through profit or loss, and £nil (2019: £1,538,185) included with other creditors measured at fair value through profit or loss
Page 26
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
19.Deferred taxation (continued)
Profit and loss account
Page 27
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
Page 28
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