# HERNDON PLANT OAKLEY, LTD. X-17A-5 (2019-02-19) — Broker-dealer annual report

- Company: HERNDON PLANT OAKLEY, LTD.
- Form: X-17A-5
- Filed: 2019-02-19
- Period: 2018-12-31
- Accession: 0001058485-19-000001
- CIK: 1058485
- File #: 8-50912
- Material weakness: No
- Auditor: Phillip V. George, PLLC
- Auditor location: Celeste, TX
- Contact: Russell Brent Herndon
- Phone: 361-888-7611
- Signed by: Russell Brent Herndon (Partner)

Original filing: https://www.sec.gov/Archives/edgar/data/1058485/000105848519000001/2018auditreportherndon.pdf

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UNITEDSTATES SECURITIES ANDEXCHANGE COMMISSION Washington, D.C. 20549

# ANNUAL AUDITED REPORT FORM X-17A-5 PART III

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# SEC FILE NUMBER 8-50912

FACING PAGE

Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder

| REPORT FOR THE PERIOD BEGINNING 01/01/2018                                                                           |                                                                     | AND ENDING 12/31/2018 |                                |
|----------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------|-----------------------|--------------------------------|
|                                                                                                                      | MM/DD/Y Y                                                           |                       | MM/DD/Y Y                      |
|                                                                                                                      | A. REGISTRANT IDENTIFICATION                                        |                       |                                |
| NAME OF BROKER-DEALER: Herndon Plant Oakley Ltd<br>ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) |                                                                     |                       | OFFICIAL USE ONLY              |
|                                                                                                                      |                                                                     |                       | FIRM I.D. NO.                  |
| 800 North Shoreline Blvd., STE 2200 South                                                                            |                                                                     |                       |                                |
|                                                                                                                      | (No. and Street)                                                    |                       |                                |
| Corpus Christi                                                                                                       | TX                                                                  |                       | 78401                          |
| (City)                                                                                                               | (State)                                                             |                       | (Zip Code)                     |
| NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT<br>Elizabeth Ann Ragan                       |                                                                     |                       | 361-888-7611                   |
|                                                                                                                      |                                                                     |                       | (Area Code - Telephone Number) |
|                                                                                                                      | B. ACCOUNTANT IDENTIFICATION                                        |                       |                                |
| INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Reporte<br>Phillip V. George, PLLC                  |                                                                     |                       |                                |
|                                                                                                                      | (Name - if individual, state last, first. middle name)              |                       |                                |
| 5179 CR 1026                                                                                                         | Celeste                                                             | IX                    | 75423                          |
| (Address)                                                                                                            | (City)                                                              | (State)               | (Zip Code)                     |
| CHECK ONE:<br>Certified Public Accountant<br>Public Accountant                                                       | Accountant not resident in United States or any of its possessions. |                       |                                |
|                                                                                                                      |                                                                     |                       |                                |
|                                                                                                                      | FOR OFFICIAL USE ONLY                                               |                       |                                |
|                                                                                                                      |                                                                     |                       |                                |
|                                                                                                                      |                                                                     |                       |                                |

must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See Section 240.17a-5(c)(2)

Potential persons who are to respond to the collection of
information contained in this form are not required to respond
unless the form displays a currently valid OMB contro

SEC 1410 (06-02)

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# OATH OR AFFIRMATION

| J, _R_u_s_s_ell__B_re_n_t_H_e_m_d_o_n | ______________________ | , swear (or affirm) that. to the best of                                                                         |
|---------------------------------------|------------------------|------------------------------------------------------------------------------------------------------------------|
|                                       |                        | my knowledge and belief the accompanying financial statement and supporting schedule,; pertaining to the firm of |
| Herndon Plant Oakley Ltd              |                        | , as                                                                                                             |

neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account classified solely as that of a customer, except as follows:

| ,,,,,mm11,,,,,1<br>:tH RAa~:~1,,,.<br>~<br>~  ;:v,, ~<br>~ <c •• •~'< PUB(/.• •• ,<br>~<br>~ .·~~                                                                                 | Signature                                                                                                             |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------|
| s<br>'C'<br>:~<br>1<br>. -<br>~<br>~<br>--<br>i<br>!<br>~ :<br>E                                                                                                                  | Partner                                                                                                               |
| ~. .• ,.,£ o~'\~ /<br>~ :<br>:<br>~ ~ t.P~<br>~<br>~  ~<br>'···~ *<br>~<br>_____ ~<br>~#~~<br>··<br>e"fl<br>;-.;~;,,,,.<br>~}i}fi'jjfilffit~'~                                    | Title                                                                                                                 |
| This report u<br>contains (check all applicable boxes):                                                                                                                           |                                                                                                                       |
| 00 (a) facing Page.<br>00 (b) Statement of Financial Condition.                                                                                                                   |                                                                                                                       |
| 00 (c) Statement o flncome (Loss).                                                                                                                                                |                                                                                                                       |
| ml (d) Statement of Changes in Financial Condition.                                                                                                                               |                                                                                                                       |
| I]) (e) Statement of Changes in Stockholders· Equity or Partners' or Sole Proprietors' Capital.<br>D (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. |                                                                                                                       |
| I]) (g) Computation of Net Capital.                                                                                                                                               |                                                                                                                       |
| ~ (h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3.                                                                                              |                                                                                                                       |
| CB (i) Information Relating to the Possession or Control Requirements Under Rule I 5c3-3.                                                                                         |                                                                                                                       |
| C!l G)<br>Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3.                                                                               | A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule 1Sc3-I and the       |
|                                                                                                                                                                                   | D (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of |

consolidation.

ul (I} An Oath or Affirmation.

X

D (m) A copy of the SIPC Supplemental Report.

D (n) A report describing any material inadequacies found to exist or found to have existed srnce the date of the previous audit.

• • *For conditions of confidential treatment of certain portiom· of this filing. see section 2.JO. I 7a-5(e){3).* 

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| CONTE1'7S |
|-----------|
|-----------|

| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |           |
|---------------------------------------------------------|-----------|
| FINANCIAL STATEMENTS                                    |           |
| Statement of financial condition                        | 2         |
| Statement of operations                                 | 3         |
| Statement of changes in partners' capital               | 4         |
| Statement of cash flows                                 | 5         |
| Notes to financial statements                           | 6 -<br>12 |
| Supplementa I infom1ation pursuant to rule 17a-5        |           |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 14        |
| Exemption repon                                         | 15        |

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# PHILLIP V. GEORGE, PLLC CERTIFIED PUBLIC ACCOUNTANT **REPORT OF [\'l)EPENDENT REGI TEREO PUBLIC ACCOU~TJNG FIRl\l**

To the Panners Herndon Plam Oakley Ltd.

# **Opinion on the Fioaocinl Statements**

\Ve have audited the accompanying statement of financial condition of Herndon Planr Oakle~ Ltd. as of December *3* I. 2018. and the rel med statemems of operations, changes in pa11ners' capital. and cash no" s tor the year ended December 3 I. 2018. and the related notes (collectively referred to as the ··financial sc:nements".). In our opinion. the financial statements present fairly, in all material respects, the financial position of Herndon Plant Oakley Ltd. as of December 31.2018. and the results of its operations and its cash 110\\ for the )ear ended December 31. 2018 in conformit) with accounting principles general!~ accepted in the United States of America.

# Basis for Opinion

Th~:;e financial statements are the responsibilit) of Herndon Plant Oakle~ Ltd.·s ma1rngement. Out' responsibilit) is to express an opinion on Herndon Plam Oak le) Ltd. ·s financial statements ba~ed on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board ( Uni led Slates) ("PCAOB"") and are required 10 be independent "ith respect to I lerndon Pla111 Oakley Lid. in accordance wi1h the U.S. federal securities laws and the applicable rules and regulations of the Securities and E:\change Commission and the PCAOB.

We conducted our audit in accordance with the slandards of the PCAOB. Those standards require rhat "e plan and perform the audit to obtain reasonable assurance about\\ hether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures 10 assess the risk::. of material misstatement of the financial statements. whether due to error or fraud. and performing procedures thaL respond **to** those risks. Such procedures included e'\amining. on a tes! basi::.\_ e\ idencc regarding the amounts and disclosures in the financial statements. Our audit also included e, aluating the accounting principles used and significanl estimates made by managemem. as well as evaluating the overall presemation of the financial statements. \Ve believe that our audit provides a reasonable ba:.is for our opinion.

# **Supplemental Information**

rhe ::.upplememal information contained in Schedule I has been subjected to audit procedures performed in conjunction "iLh the audit of Herndon Plant Oaklc) Ltd. ·s financial statements. The supplemental infonna tion is the responsibility of Herndon Plant Oak le) Ltd. 's management. Our audit procedures included detennining \\ hether the supplememal information reconciles to the financia l statements or the under I~ ing accounting and other records. as applicable. and performing procedures to test the completeness and accurac) of the information presented in the supplemental information. In fanning our opinion on the supplemental information. \\C evaluated \\hether the upplemental inforrnmion. incll•ding its form and coment. is presented in conformity\\ ith 17 C.F.R. \* 240. I 7a-5. In our opinion, the supplemental information contained in Schedule I is fairly stated. in all material respects. in relation to the financial statements as a \\ hole.

Pl IILLIP V. GEORGE. PLLC

\\'e have sened as Herndon Plant Oakky Ltd. ·s auditor since *200* I.

Cele~te. Te~as February 11.2019

.5179 CR l026 Celeste. TX 7.5.i23 (2U) 358-5150 Fax (21 ~) 3.58-0222 phil@p"george.com

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# **HERNDON PLANT OAKLEY LTD. Statement of Financial Condition December 31, 2018**

# **ASSETS**

| Ca.5h and ca.5h equivalents                 | \$<br>1,475,106 |
|---------------------------------------------|-----------------|
| Receivable from clearing broker/dealer      | 328,583         |
| lnvesbnent advisory fees receivable         | 78,506          |
| Service fees receivable -<br>related party  | 11,026          |
| Other receivables -<br>related party        | 46,614          |
| Prepaid expenses                            | 22,550          |
| Clearing deposit                            | 100,000         |
| Furniture and equjpment, net of accumulated |                 |
| depreciation of \$294,242                   | 174,633         |
| Oeposits                                    | 27993           |
| TOT AL ASSETS                               | \$<br>2,265,011 |

#### **LIABILITIES AND PARTNERS' CAPITAL**

#### **Liabilities**

| Accounts payable                        | \$<br>.172,416  |
|-----------------------------------------|-----------------|
| Accrued expenses                        | 61 ,646         |
| Income tax payable -<br>state           | 30,088          |
| TOTAL LIABll,ITIES                      | 264,150         |
| Partners' Capital                       | 2,000,861       |
| TOTAL LIABilITIES AND PARTNERS' CAPITAL | \$<br>2,265,011 |

See M tes to financial statements.

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# **HERNDON PLA.t~T OAKLEY LTD. Statement** of **Operations For the Year Ended December 31, 2018**

#### **Revenue**

| Securities COmmJ.SSIOilS        | \$<br>3,144,433 |
|---------------------------------|-----------------|
| Mutual fund commissions         | 2,685,726       |
| Investment advisory fees        | 467,809         |
| Service fees -<br>related party | 40,809          |
| Other revenue                   | 12,303          |
| TOT AL REVENUE                  | 6,35<br>1,080   |

#### **Expenses**

| Clearing and other charges                     | 547,L 12        |
|------------------------------------------------|-----------------|
| Communications                                 | 390,32<br>1     |
| Compensation and related costs                 | 2,609,993       |
| Management fees to General Partner             | 2,232,412       |
| Occupancy and equipment costs                  | 305,633         |
| Professional fees                              | ]30,886         |
| Promotional costs                              | 53,477          |
| Regulatory fees and expenses                   | 124,750         |
| Other expenses                                 | 146,542         |
| TOT AL EXPENSES                                | 6,541,126       |
| Net loss before provision for income<br>truces | (190,046)       |
| Income taxes -<br>state                        | 30,072          |
| NET LOSS                                       | (220,118)<br>\$ |

See notes to frn.anciaJ statements.

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# **HERNDON PLAi"T OAKLEY LTD. Statement of Changes** in **Partners' Capital For the Year Ended December 31, 2018**

|                                      | General<br>Partner | Limited<br>Partners    | Total     |
|--------------------------------------|--------------------|------------------------|-----------|
| Balances at<br>December 31, 20 I 7   | \$<br>22,210       | \$<br>2,<br>198,769 \$ | 2,220,979 |
| Net loss                             | (2,201)            | (217,917)              | (220,118) |
| Balances at<br>December 31<br>, 2018 | \$<br>20,009       | \$<br>1,980,852 \$     | 2,000,861 |

See notes to financial statements.

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# **HERNDON PLAi~T OAKLEY LTD. Statement of Cash Flows For the Year Ended December 31, 2018**

{220,118)

39,614 1,955

65,330 2, 126 549,831 36,574 77,722 {87,234) (17,777) (20)

448,003

30,092

# **Cash nows from operating activities:**  Net loss Adjustments to reconcile net loss lo net cash provided by operating activities: Depreciation and amortization Loss on disposal of furniture and equipment Changes in assets and liabilities Decrease in receivable from clearing broker/dealer Decrease in investment advisory fees receivable Decrease in service fees receivable - related pan.y Decrease in other receivables - related party Decrease in prepaid expenses Decrease in accounts payable Decrease in accrued expenses Decrease in income tax payable - state Net cash provided by operating activities **Cash nows from investing activities:**  s

### Purchase of furniture and equipment Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end o f year **Supplemental Disclosures of Cash Flow Information:**  Cash paid during the ye.ar for: s (20.200) 427,803 I 047,303 1,475, 106

Income taxes - state s

See notes to financial statements.

5

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# **HER'WO~ PLANT OAKLEY LTD. ~otes to Financial Statements December 31, 2018**

# **Note 1** • **Nature of Business and Summary of Sie;,oificant Accountioe;, Policies**

Nature of Business:

Herndon Plant Oakley Ltd. (the Partnership), a Texas Limited partnership, was formed in January 1998. The Partnership is registered as a broker/dealer with lhe Securities and Exchange Commission (SEC) and is a member of the Financial Industry Regulatory Authority (FINRA) and Securities Investor Protection Corporation (SIPC). The Partnership is also registered with the SEC pursuant to Section 203 of the Investment Advisors Act of 1940. The Partnership's operations consist primarily of providing securities brokerage and investment advisory services to individuals located throughout the United States.

The Partnership operates pursuant to section (k)(2)(ii) exemptive provisions of Rule 15c3-3 of the Securities Exchange Act of 1934, and accordingly, is exempt from the remaining provisions of that Rule. The Partnership does not hold customer funds or securities, but as an introducing broker or dealer, will clear transactions on behalf of customers on a fully disclosed basis through a clearing broker/dealer. The clearing broker/dealer CAt'ries the aeeounts of the customers a\_nd mailitAins a\_nd preserves all related books and records as are customarily kept by a clearing broker/dealer.

The general partner of the Partnership is Herndon Plant Oakley I Inc. (General Partner). The General Panner has the authority to manage and control the business affairs of the Partnership.

The Partnership terminates on December 31 , 2030, unless sooner terminated or extended as provided in the partnership agreement.

Significant Accounting Policies:

Use of Estimates

The preparation of financial statements in conformity with U.S. generaJly accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and Liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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# **BERNl>Ol'i PLA:.~T OAKLEY LTD. l'iotes to Financial Statements December 31, 2018**

# **l'iote 1** - **Nature of Business and Summarv of Significant Accounting Policies <continued)**

# Fair Value of Financial [nstruments

Substantially all of I.he Partnership's financial asset and liability amounts are shortterm in nature and accordingly are reported in the statement of financial conclition at amounts I.hat approximate fair value.

#### Cash Equivalents

Money market funds are reflected as cash equivalents in the accompanying statement of financial condition.

# Furniture and Equipment

Furniture and equipment are recorded at cost less acc umulated depreciation. Depreciation is provided for using straight Line methods over the estimated useful lives of primarily five to seven years.

### Revenue RecugniLiun

# *Significant JudgmenJJ*

Revenue from conuacts with c~tomers includes securities commissions, mutual fWJd commissions, investment advisory fees and service fees. The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgment is required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices where multiple performance obligations are identifi ed: when to recognize revenue based on the appropriate measure of the Partnership's progress under the contract; and whether constrai\_nts on variable consideration should be applied due to un~rtain future events.

#### *Securities Commissions*

Tbe Partnership buys and sells securities on behalf of its customers. Each time a customer enters into a buy or sell transaction, the Partnership charges a commission. Commissions and related clearing expenses are recorded on the trade date (the date that the Partnership fills the rrade order by finding and contracting with a counte.rparty and confirms the trnde with tbe customer). Tbe Partnership believes that tbe performance obligation is satisfied on the trade date because that is when the underlying financiaJ inslrumenl or purchaser is identi lied, the pricing is agreed upon and the risks and rewards of ownership have been transferred to/from the customer. Securities commissions also include commission on aJternative invesanents, interest rebates on customer accounts, and other revenue related to customer accounts which is recorded on the trade date.

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# **HERNDON PLANT OAKLEY LTD. l'iotes to Financial Statements December 31, 2018**

# **.l'iote 1** - **Nature of Business and Summarv of Significant Accounting Policies <continued)**

#### *Mutual Fund Commissions*

The Partnership enters into arrangements with pooled investment vehicles (funds) to distribute shares to investors. The Partnership may receive distribution fees paid by the fund up front, over l-ime, upon the investor's exit from the fund (that is, a contingent deferred sales charge), or as a combination thereof. The Partnershlp believes that its performance obligation is the sale of securities to investors and as such I.his is fulfilled on the trade date. Any fixed amounts are recognized on the trade date and variable amounts are recognized to the extent it is probable that a significant revenue reversal wilJ not occur once the uncertainty is resolved. For variable amounts, as the uncertainty is dependent on die value of the shares at future points in time as well as the length of time the investor remains in the fund, both of which are highly susceptible lo factors outside the Partnership's influence, the Partnership does not believe that it can overcome this constraint until the market vaJue of the fund and the investor activities are known, which are usually monthly or quarterly. Distribution fees recognized in the current period are primarily related to perfonnance obligations that have been satisfied in prior periods.

#### *Investment Adviso1J' Fees*

The Partnership provides investment advisory services on a daily basis. The Partnership believes the performance obligation for providing advisory services is satisfied over time because the customer is receiving and consuming the benefits as they are provided by the Partnership. Fee arrangements are based on a percentage applied to the customer's assets under management. Fees are received quarterly in arears. Fees are recognized as revenue monthly as they relate specifically to the services provided in that period, which are dfatinct from the services provided in other periods.

#### *Sen'ice Fees Related Party*

The Partnership provides office and administrative services to a related party. The Partnership believes that the performance obligation is satisfied when individually identifiable services are provided or expenses paid on behalf of the related party. Service fees are billed and recognized quarterly as they relate specifically to the services provided in that period, which are distinct from the services provided in other periods.

#### Advenising Costs

The Partnershjp expenses advertising production costs as they are incurred and advertising communication costs the first time lhe advertising takes place. Advertising costs totaled \$53,477 dwing 2018.

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# HERNDON PLANT OAKLEY LTD. Notes to Financial Statements December 31, 2018

#### Note 1 - Nature of Business and Summarv of Significant Accounting Policies (continued)

#### Income Taxes

Taxable income or loss of the Partnership is included in the income tax returns of the partners; therefore, no provision for federal income taxes has been made in the accompanying financial statements.

As of December 31, 2018, open Federal tax years subject to examination include the tax years ended December 31, 2015 through December 31, 2017.

The Partnership is subject to state income taxes.

### Note 2 - Transactions with Clearing Broker/Dealer

The Partnership has a clearing agreement with a national clearing broker/dealer to provide clearing, execution and other related services, with a monthly minimum charge of S10,000. The agreement also requires the Partnership to maintain a minimum of \$100,000 as a deposit in an account with the clearing broker/dealer. There are annual decreasing termination fees to the Partnership if the agreement is terminated by the Partnership before the end of a five year period ending September 30, 2020. As of December 31, 2018 the termination fee is \$300,000.

# Note 3 - Net Capital Requirements

The Partnership is subject to the SEC Uniform Net Capital Rule (SEC Rule 15c3-1), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. Rule 15c3-1 also provides that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. At December 31, 2018, the Partnership had net capital of \$1,619,085 which was \$1,369,085 in excess of its net capital requirement \$250,000. The Partnership's net capital ratio was .16 to 1.

# Note 4 - Furniture and Equipment

Furniture and equipment is carried at cost less accumulated depreciation and consists of the following:

| Furniture, fixtures and equipment<br>Leasehold improvements | A<br>233.582<br>235,293 |
|-------------------------------------------------------------|-------------------------|
| Accumulated depreciation                                    | 468,875<br>(294,242)    |
|                                                             | S 174.633               |

Depreciation expense for the year was \$39,614 and is reflected in the accompanying statement of operations as occupancy and equipment costs.

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# **HERNDON PLANT OAKLEY LTD. l'iotes to Financial Statements December 31, 2018**

# **.l'iote S** - **Off-Balance-Sheet Risk and Concentration of Credit Risk**

As discussed in Note I, the Partnership's customers' securities transactions are introduced on a fulJy-disclosed basis with its clearing broker/dealer. Tbe clearing broker/dealer carries the accounts of the customers of the Partnership and is responsible for execution, collection of and payment of fonds and, receipt and delivery of securities relative lo customer transactions. Off-balance-sheet risk exists with respect to these transactions due to the possibility that customers may be unable to fulfill their contractual committnents wherein the clearing broker/dealer may charge any losses it incurs to the Partnership. The Partnership seeks to minimize this risk through procedures designed to monitor the credit worthiness of its customers and that customer transactions are executed properly by the clearing broker/dealer.

At December 31 , 2018, the Partnership bas cash held at one Texas bank totaling \$25 l,3 l 2 , or l l % of its total assets. The balance is insured by the Federal Deposit Insurance Corporation up to \$250,000. At December 3 1, 2018, the Partnership's uninsured cash balance totals \$1,312. Cash balances Ouctuate on a daily basis.

At December 3 1, 2018, the Partnership has \$1 ,652,107, or approximately 73% of its total llSSets, in money market funds, conunissions recehitlble, ttnd a clearing deposit held by or due from its clearing broker/deaJer.

#### **Note 6** - **Lease Commitments**

The Partnership has obligations under operating leases with initial noncancelable tenns in excess of one year. Aggregate annual rentals for office space as of December 3 1, 2018, are approximately as follows:

| 2019       | 530,376<br>\$ |
|------------|---------------|
| 2020       | 535.503       |
| 2021       | 42l ,30J      |
| 2022       | 324,314       |
| Thereafter | 616 907       |
|            | \$2 428 401   |

The Company expects certain of the above Jease commitments to be paid directly by Oxbow Advisors, LLC (Oxbow) a relate party. Estimated amount to be paid by Oxbow total S2,012,079 over the tem1 of the leases.

TotaJ rent expense for the year under operating leases was \$ 198,490 (which includes additional rental and proportionate share of operating expenses payable under the lease agreements), and is reflected in the accompanying statement of operations as occupancy and equipment costs.

{13}------------------------------------------------

# **HERNDON PLANT OAKLEY LTD. Notes to Financial Statements December 31, 2018**

## Note 7 - **Related Partv Transactions/Economic Dependencv/Concentrations**

The Partnership is economically dependent on and under the controJ of the Genera] Partner and the existence of that dependency and control creates a financial position and operating resuJts significantly different than if the companies were autonomous.

The General Partner manages and controls the business affairs of the Partnership and is entitled to receive a management fee for such services. The management fee is determined by the affirmative vole or a majority in interest of the limited partners and is not consummated on terms equivalent Lo anus length transactions. The management fee for the year ended December 31, 2018 was \$2,232,412.

The three limited partners of the Partnership, who are also registered securities representatives and officers of the General Partner, generated substantially all of the Partnership's revenue for the year ended December 31 , 2018. The Partnership is economically dependent upon the limited partners due to the concentration of services provided by them

The Partnership has an Office and Administrative Services Agreement (Agreement) with Oxbow. Under the Agreement, the Partnership assists Oxbow with the day to day operations and administration of its business: furnishes Oxbow with offi.ce space, equipment and supplies; assists Oxbow with compliance; provides marketing and sales services; arranges for and monitors professional services; and provides any other services required i.n Oxbow's admtnistration as agreed lo by the Partnership and Oxbow. The Partnership also pays overhead expenses of Oxbow. Oxbow reimburses U1e Partnership for its proponionate use of or benefit from these services provided and expenses paid by the Partnership. The Agreement was not consummated on terms equivalent to arms length transactions. Service fees earned for the year ended December 31, 2018 were \$40,809 . The Partnership has \$ <sup>11</sup> ,026 receivable under the Agreement and other receivables from Oxbow totaling \$46,614 at December 3 I. 2018.

Oxbow paid rents on operating leases for which the Partnership has obligation totaling \$342,178 for the year ended December 31, 2018.

### **Note 8** - **401(k) Profit Sharing Plan**

The Partnership adopted the 1Ierndo11 Plant Oakley Ltd. 40 I (k) Profit Sharrng Plan (the Plan) effective June l , 1999.

The Partnership did not contribute any matching amounts for 2018.

The Plan also provides a profit sharing component where the Partnership can make a discretionary contribution to the Plan, which *is* allocated based on the compensation of eligible employees. Discretionary profit sharing contributions for the year totaled \$54,515 and are reflected in the accompanying statement of operations as compensation and related costs.

{14}------------------------------------------------

# **HERNDON PLANT OAKLEY LTD. Notes to Financial Statements December 31, 2018**

### **Note 9** - **Contin2,encies**

There are currently no asserted claims or legal proceedings against the Partnership, however, the nature of the Partnership's business subjects it to various claims, regulatory examinations, and other proceedings in the ordinary course of business. The ultimate outcome of any such future action against the Partnership could have an adverse impact on the financial condition. resuJts of operations, or cash flows of the Partnership.

### **Note 10** - **Subsequent Events**

Management has evaluated the Partnership's events and transactions that occurred subsequent to December 31 , 2018, through February 11 . 2019, the date which the financial statements were available to be issued.

{15}------------------------------------------------

#### Schedule I

## HERNDON PLANT OAKLEY LTD. Supplemental Information Pursuant to Rule 17a-5 December 31, 2018

#### Computation of Net Capital

| Total partners' capital qualified for net capital     | ટે<br>2.000.861 |
|-------------------------------------------------------|-----------------|
| Deductions and/or charges                             |                 |
| Non-allowable assets:                                 |                 |
| Petty cash                                            | 270             |
| Investment advisory fees receivable                   | 78,506          |
| Service fees receivable - related party               | 11,020          |
| Other receivables - related party                     | 46,614          |
| Prepaid expenses                                      | 22,550          |
| Furniture and equipment, net                          | 174,633         |
| Deposits                                              | 27,993          |
| Total deductions and/or charges                       | 361,592         |
| Net capital before haircuits                          | 1.639.269       |
| Haircuts on securities                                |                 |
| Cash equivalents                                      | 20.184          |
| Net Capital                                           | S<br>1,619,085  |
| Aggregate indebtedness                                |                 |
| Accounts payable                                      | 2<br>172,416    |
| Accrued expenses                                      | 61,646          |
| Income tax payable - state                            | 30,088          |
| Total aggregate indebtedness                          | 5<br>264,150    |
| Computation of basic net capital requirement          |                 |
| Minimum net capital required (greater of \$250,000 or |                 |
| 6 2/3% of aggregate indebtedness)                     | 250,000<br>ನ    |
| Net capital in excess of minimum requirement          | 1,369,085<br>2  |
| Ratio of aggregate indebtedness to net capital        | 16 to 1         |

#### Reconciliation of Computation of Net Capital

The above computation does not differ from the computation of net capital under Rule 1503-1 as of December 31, 2018 as filed by Hemdon Plant Oakley, Ltd. on Form X-17A-5. Accordingly, no reconciliation is deemed necessary.

#### Statement Regarding Changes in Liabilities Subordinated to Claims of General Creditors

No statement is required as no subordinated liabilities existed at any time during the year.

#### Statement Regarding the Reserve Requirements and Possession or Control Requirements

The Company operates pursuant to section (k)(2)(u) exemptive provisions of Rule 15e3-3 of the Securities Exchange Act of 1934, in which all customer transactions are cleared on a fully disclosed basis through a clearing broker/dealer. Under these exemptive provisions, the Computation of Determination of the Reserve Requirements and Information Relating to the Possession or Control Requirements are not required.

See accompanying report of independent registered public accounting firm.

{16}------------------------------------------------

# PHILLIP V. GEORGE, PLLC CERTIFIED PUBLIC **ACCOUNTANT**

# **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTI~G FIRM**

To the Partners Herndon Plant Oakley Ltd.

\\"e have re\'ie\\·ed management's statements. included in the accompanying Exemption Report. in \\'hich (1) Herndon Plant Oakley Ltd. identified the following pro\'isions of 17 C.F.R. ~15c3-J(kl under which Herndon Plant Oakley Ltd. claimed an exemption from 17 C.F.R. §240. l5c3-3:(2)(ii) (exemption provisions) and (2) Herndon Plant Oakley Ltd. stated that Herndon Plant Oakley Ltd. met the identified exemption provisions throughout the most recent fiscal year \\ ithout exception. Herndon Plant Oakley Ltd. ·s management is responsible for compliance with the exemption pro\ isions and its statements.

Our n::vie\\ \\'as conducted in accordance with the standards of the Public Company Accounting O\'ersighl Board (United States) and. accordingly. included inquiries and other required procedures to obta in e\·i<lence about Herndon Plant Oakley Ltd.'s compliance with the exemption pro\'isions. A review is substantially less in scope than an examination. the objective of which is th~ expression of an opinion on management's statements. Accordingly, we do not express s uch an opinion.

Based on our review. we are 1101 aw·are of any material modifications that should be made to management's statements referred to above for them lo be fairly stated. in all material respecb. bas.:d on the pro\'isions set forth in paragraph (k)(2)(ii) of Rule l 5c3-3 under the Securities Exchange Act of 1934.

*{)4V.~Puc* 

Pl IILLIP V. GEORGE. PLLC

Celeste. Texas February 11. 2019

{17}------------------------------------------------

#### HERNDON PLANT <sup>O</sup> AKLEY L1'1)

# Herndon Plant Oakley Ltd's, Exemption Report

Herndon Plant Oakley Ltd (the 11Partnership11) is a registered broker-dealer subject to RuJe l 7a-5 promulgated by the Securiti~ and Exchange Commission (17 C.F.R. §240, l 7a-5, "Rep01ts to be made by certain brokers and dealers"). This Exemption Report was prepared as required by 17 C.F.R § 240. l 7a-5(d)(l) and (4). To the best of its knowledge and belief, the Partnership states the folJowing:

- (1) The Partnership claimed an exemption from 17 C.F.R. § 240.15c3-3 under the following provisions of 17 C.F.R. § 240.15c3-3(k): (2) (ii).
- (2) The Partnership met the identified exemption provisions in 17 C.F.R. § 240. l 5c3-3(k.)(2) (ii) throughout the most recent fiscal year without exception.

# **Herndon Plant Oakley Ltd**

I, Brent Herndo~ swear ( or affirm) that, to my best knowledge and belief, this Exemption Report is true and correct.

January 5, 2019


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