RepoRt & Financial StatementS · managing partner’s review 08 a strong client focus 11 our Values 13 Developing our people 15 corporate responsibility and diversity 17 Financial

RepoRt & Financial StatementS

30 April 2009

For the year ended

Case study

Lovells LLP report and Financial Statements02

“�[In]�the�salvage�of�shipwrecked�SIVs…�no�one�has�been�more�visible�than�the�team�from�Lovells.�…Lovells’�part�in�the�story�becomes�significant�with��the�restructuring�of�Cheyne�Finance,�a�$7�billion�SIV��run�by�Cheyne�Capital�–�a�restructuring�that�became��a�template�for�other��sunken�SIVs.”

The Banker, February 2009

Structured investment vehicles

a key area of technical innovation for lovells’ Finance practice is its pioneering work on the restructuring of several prominent structured investment vehicles (SiVs). the firm has emerged as the clear market leader in this complex area.

after the onset of the credit crisis in august 2007, several SiVs saw the market value of their underlying investments deteriorate rapidly amid hostile market conditions. lovells advised the receivers on the landmark restructuring of SiV portfolio plc, formerly known as cheyne Finance, which was the first SiV to have receivers appointed.

the firm led the market in setting up processes for engaging with investors, assessing restructuring options and in the analysis of complex legal and market issues arising out of this systemic market collapse. as a result it won awards for Restructuring team of the Year and Restructuring Deal of the Year at the 2009 international Financial law Review europe awards.

the cheyne model has since been used as the basis for a number of other SiV restructurings on which lovells has advised, including Rhinebridge, Whistlejacket and mainsail ii. lovells has also advised on the SiV receivership of Sigma Finance and Golden Key.

our involvement demonstrates our capabilities in the capital markets arena’s most complex and high profile work-out situations. the mix of UK and new York law governing these transactions involved lovells’ london and new York practices working together closely to deliver cross-border solutions in a seamless manner.

Lovells LLP report and Financial Statements 03

Senior partner’s introduction 07

managing partner’s review 08

a strong client focus 11

our Values 13

Developing our people 15

corporate responsibility and diversity 17

Financial review 19

Recognising our success 22

Geographic reach and practice areas 24

Report to members 27

independent auditors’ report to themembers of lovells llp 30

Group income statement 32

Group statement of recognised incomeand expense 33

Group balance sheet 34

lovells llp balance sheet 35

Group cash flow statement 36

lovells llp cash flow statement 37

notes to the financial statements 38

and

and

to the financial

contentS

Case study


“�‘Lovells’�transactional�corporate�practice�has�become�a�bigger�and�deeper�operation,’�note�observers.�…�[Lovells]�offers�a�good�spread�of�corporate�services�from�its�Hong�Kong�office,�although�the�firm�remains�best�known�for�its�expertise�in�cross-border�transactions.”

Chambers Global, 2009

Bank Ekonomi

lovells acted as international counsel to advise the Wings Group – comprising pt lumbung artakencana, pt alas pusaka and a number of individual shareholders – on the US$614 million sale of 90% of the shares of Bank ekonomi to a wholly-owned subsidiary of the Hongkong and Shanghai Banking corporation limited (HSBc).

the sale extends HSBc’s presence in the indonesian retail banking sector, almost doubling the group’s network to over 190 outlets in 24 cities across the country.

the transaction, completed during a challenging economic period, demonstrates lovells’ expertise within the South east asia region in advising on complex cross-border acquisitions. With Bank ekonomi being listed on the indonesian stock exchange, the deal spanned several jurisdictions including indonesia, Hong Kong and Singapore.


351partners

18new partners promoted

536revenue in £ million

28offices

16new partners recruited

3,058other staff

8%increase in revenue

620+lawyers involved in pro bono work

tHe nUmBeRS

Case study


“�A�famous�name�and�a�key�player�in�the�UK�market,�the�firm’s�international�[corporate�finance]�practice�is�a�strong�performer…”

Chambers Europe, 2009

TNK-BP

in the world’s most challenging markets, lawyers from lovells can be found providing high quality, practical advice.

the firm advised alfa-access-Renova consortium (aaR) on key changes to the corporate structure of tnK-Bp, the leading Russian oil company formed by the merger of Bp’s and aaR’s Russian oil and gas assets.

Under the arrangement, tnK-Bp’s board structure was replaced with four representatives each from aaR and Bp along with three independent directors agreed by both sides. the changes, which also included amendments to tnK-Bp’s existing shareholders agreement, brought to a close several months of negotiations to finalise an agreement.

a cross-border corporate team from moscow and london advised aaR on the high profile transaction. the changes were a significant achievement for aaR in its efforts to streamline the group and to ensure equal and direct involvement of both shareholder groups in all key decision-making.


John young Senior partner

However, the lehman Brothers chapter 11 filing on 15 September 2008 heralded a seismic shock in the markets that was in a class of its own. lehman was followed within days by a succession of other failures and the effective nationalisation of much of the international banking system. For a short time it felt as if no institution was beyond risk and as if the bedrock of our financial system had turned to quicksand.

in such unpredictable conditions, businesses turn to their lawyers for a balanced and objective view, based both on knowledge and on experience. they often need it quickly. they always want it to be relevant to their own particular operations and for it to be clear and concise. i believe we rise to these challenges in ways that distinguish us from our

competitors and enable us to help our clients resolve their complex problems in markets around the world.

When we recruit we look for people who share our Values. in developing their talents, we seek to encourage high performance and shared ambition throughout the firm.

my role involves, among many other things, acting as a roving ambassador across the firm’s 28 offices. i meet with all members of lovells and the message i receive from them time and again is a strong desire to contribute to the wider success of the firm. they want to know what is going on throughout the firm, how people are working with clients and what the thinking is behind our growth and development. We are truly one firmwide team.

this international outlook and genuine enthusiasm of our people, when working across our offices on behalf of our clients, are a recognised hallmark of lovells. these are strengths that will continue to underpin our success during the current financial year and beyond.

alongside our work with our clients, we encourage active involvement by our people in the social dimension of life at lovells as well as in the wider community in which we work. We are also publishing a separate report on our goals and activities in this field.

When i meet clients and other professionals i am always proud to say that i work at lovells. When you read the rest of this report you will see why.

John young Senior partner

It is now over 30 years since I joined this firm. During that time I have lived through enormous market changes, including the deregulation and rapid growth of the City of London’s financial markets in the late 1980s, the extended global recession of the early 1990s, and the rise and fall of the dotcoms at the beginning of the noughties.

SenioR paRtneR’S intRoDUction


i am proud that lovells was able to play an active role in helping clients respond to the dramatic changes in the financial markets and the consequences of the downturn. this involved challenging and sometimes pioneering work, including advising the Government of iceland in its efforts to rebuild the country’s economy and acting on the restructuring of several prominent structured investment vehicles. Some short case studies of matters such as these are given in this report to provide a flavour of the work we have been carrying out on behalf of our clients.

Difficult conditions and rapid shifts in levels of activity in the market also put a law firm’s business model and strategy to the test. in these difficult conditions, lovells was able to draw on its strengths of a diversified client base, a balance across different areas of practice and an extensive international presence. these characteristics, together with the implementation of a clear strategy developed two years previously, enabled us to achieve a reasonably good performance in the circumstances.

particularly notable was our continued expansion in asia, where developments included new partner hires in Beijing, Hong Kong, Singapore and tokyo and the opening of a new office in Hanoi. in europe, we expanded our corporate practice in madrid and dispute resolution practice in milan. in paris, the firm’s second largest office, we added senior level capability in corporate, dispute resolution and real estate.

Strategy in actioncentral to the firm’s strategy and the first of our core Values is a focus on clients. We have a strong reputation for client service and are often told that clients see us as an extension of their team. During the year, we extended our client programme to a wider range of clients and took steps to expand best practice in relationship development across the firm.

our priority during the turbulence arising from the credit crunch has been to focus on our clients, staying close to them and helping address the effects of the downturn on their businesses. Given market conditions, clients were understandably concerned about costs and looked to their advisers to “share the pain.” more flexible pricing structures were a feature of the year, with some effect on overall profitability. However, our perspective is a long-term one and we are proud that we were able to maintain and in many cases increase our share of work for our major clients.

david harrismanaging partner

Capitalising on our well hedged international presenceat the heart of the firm is a strong ambition to serve substantial international and domestic organisations across their major business needs. this has led us to build a broad practice spread with real strengths in counter-cyclical businesses, as well as in the mainstream transactional areas. as might be expected, the major transactional areas such as corporate, private equity and real estate saw reduced levels of activity. on the counter-cyclical side of the firm, however, business restructuring and insolvency, as well as dispute resolution, saw a marked increase in work levels.

the firm is also well-hedged geographically. in recognition of the increasing globalisation of businesses and the financial markets, we have built a strong international presence across europe and asia together with a focused practice in the US. in the course of the year we continued to make selective investments in the development of our practice.

As we are all acutely aware, the 2008/09 financial year saw market upheaval of a magnitude that neither we nor our clients had ever experienced before.

manaGinG paRtneR’S ReVieW


our success, of course, depends above all on the quality and commitment of our people. the 2008/09 financial year saw 18 senior associates and of counsel promoted to the partnership across 10 offices, 82 appointments to the position of senior associate and a range of initiatives to develop our people and help them progress through their careers.

lovells’ friendly and collegiate culture is a distinctive and well-recognised characteristic of the firm; it is a reason people want to work here and why clients enjoy working with us. We place considerable emphasis on our Values, and in late 2008 undertook a benchmarking survey to test how deeply rooted the Values are across the firm and identify where we might improve.

Strong performance management was also an important feature of the year, together with an emphasis on improved financial housekeeping and cost management, including a strict review of discretionary expenditure. like other firms, we also had to consider whether some areas of the business had structural overcapacity, with work-flows unlikely to return for a long time; similarly we considered how some support services could be delivered more cost-effectively. Regrettably we had to make a limited number of redundancies where redeployment was not possible, aligning our resource more closely to client demand.

Looking forwardmarket uncertainty remains with the prospect of a gradual recovery, although the possibility of a double-dip recession cannot be ruled out in the UK. We are likely to experience continued market volatility and recognise the importance of being able to respond quickly to market developments.

our performance has been solid in a difficult market and the measures taken provide a robust base for the 2009/10 financial year. our international reach and practice breadth proved a real asset for the firm and our clients and the benefits of our strategy have been apparent.

it is because of our strong position, based on the progress we have achieved over the past four years, and the enormous significance we attach to serving our clients’ needs in the world’s major economies, providing high quality advice on a truly global basis, that we took the decision in December 2009 to merge with US law firm Hogan & Hartson with effect from 1 may 2010.

This reportthe rest of this report describes in more detail the activities undertaken last year to take forward key aspects of our strategy. throughout we highlight examples of our client work which reflect the core strengths of the firm across our practice areas and offices.

“�Client�feedback��was�overwhelmingly�supportive:�‘The�partners,�associates�and�trainees�all�perform�so�highly.�There�is�a�culture�of�outstanding�quality�that�infuses�the�whole�group,�and�as�a�result�you�get�simply�amazing�service.’”

Chambers UK, 2009

“�This�firm�is�praised�for�its�client-focused�approach:�‘The�[Life�Sciences]�lawyers�are�there�for�us�around�the�clock,�offering�formidable�strength.’”

Chambers UK, 2009

We also share some of the recognition we received for our work.

if you would like more information on the firm, please contact me, John Young or any of our partners.

david harris managing partner

“�We�have�a�strong�reputation�for�client�service,�and�we�are�often�told�that�clients�see�us�as�an�extension�of�their�team.”

Case study


“�Despite�the�challenging�market�conditions,�[Resorts�World�at�Sentosa]�was�successfully�syndicated…�primarily�due�to�solid�project�economics,�strong�deal�structure�and�the�commitment�from�an�experienced�investment�grade�sponsor.”�

Project Finance International, 16 December 2008

Sentosa

complex financing arrangements in asia are a strength of the firm. in 2008, the firm advised on one of the largest loan packages ever successfully undertaken in Singapore, the financing of the S$6 billion (US$4.4 billion) “Resorts World at Sentosa.”

the development went on to win four major awards including Deal of the Year and project Finance Deal of the Year at the asian legal Business South east asia law awards 2009, project Finance international’s leisure Deal of the Year 2008 and euroweek’s asia pacific project Financing of the Year 2008.

the landmark development is the first greenfield project to include a world class theme park (Universal Studios) along with a casino, six hotels, entertainment facilities and a retail outlet.

Resorts World at Sentosa successfully reached financial close on the S$4.19 billion limited recourse financing in november 2008, despite the global credit crunch having taken almost all bank liquidity out of the world’s debt markets. Financial close represented the culmination of over 13 months of intensive negotiations.

lovells advised the five original mandated lead arrangers – DBS Bank ltd, the Hongkong and Shanghai Banking corporation limited (HSBc), oversea-chinese Banking corporation limited (ocBc), the Royal Bank of Scotland plc (RBS) and Sumitomo mitsui Banking corporation (SmBc).


We won significant new places on legal panels and maintained our position on others. We won a series of competitive pitches including management of Deutsche telekom aG’s global trademark portfolio and advice on the payment Services Directive to a number of banking clients including lloyds tSB and HBoS.

to ensure we provide the best possible service to our clients, we continued to develop our client programme. We improved internal communications to ensure an understanding of our clients’ requirements is spread across the firm, we developed best practice approaches including a range of practical tools and supported this with partner workshops.

We also invested significantly in supporting major client relationships in a practical and commercial manner, including a range of added value services, lawyer secondments and innovative pricing structures.

our aim is to provide a service that is led by our partners and based on the principles of teamwork, collaboration and commitment. We take time to understand our clients’ businesses so we can work as an extension of their team.

During the course of the year we advised on a range of significant matters for major clients including:

• alStom• aXa• Barclays• Bat• Bnp paribas• exxonmobil• Honeywell• inG• lloyds Banking Group

(formerly lloyds tSB and HBoS)

• merck & co• morgan Stanley• prudential• SaBmiller• Standard chartered.

We work for some of the world’s leading corporates and financial institutions. Our goal is to support them across the many markets in which they operate and help them address a broad spectrum of legal needs.

“�The�‘responsive�and�quick’�[CEE�Competition]�lawyers�are�widely�commended�for�their�straightforward�approach:�‘They�give�you�a�clear�opinion�rather�than�qualifying�everything.’”


the strength and depth of our client work is evidenced in the chambers’ 2009 annual euro 100 survey, which reviewed the legal advisers to the FtSe eurotop 100. the results show that we have continually increased our number of clients in this grouping since the survey began in 2005.

our dispute resolution, employment and regulatory practice areas topped their respective rankings for greatest usage across the companies surveyed.

in the UK market, the chambers’ client Report (Winter 2008-09) ranked us top of “the biggest generalists” across the FtSe 100, averaging nearly three types of specialist legal services per client. the report said: “lovells’ place as the broadest-used firm by the FtSe 100 clients matches its strategy to rely as heavily on ip and dispute resolution as corporate and finance.”

a StRonG client FocUS

Case study


“�This�top-band�team�delivers�‘a�Rolls-Royce�service�–�the�lawyers�are�fantastic�and�knowledgeable�and�their�work�is�perfect,�meeting�their�clients’�expectations�on�all�matters�and�providing�extremely�high-quality��and�thorough�advice’.”


Vienna Stock Exchange

the firm’s capabilities in eastern europe were strongly illustrated when a cross-border lovells team from prague and london advised the Vienna Stock exchange (Wiener Börse aG) on the landmark acquisition of a majority stake in the prague Stock exchange.

the firm provided legal advice on the czech and english legal aspects at all stages of the tender and negotiations, including the drafting of the transaction documentation.

the transaction is unprecedented in the czech Republic, bringing the prague Stock exchange into the existing Budapest-ljubljana-Vienna stock exchange alliance established by the Vienna Stock exchange.

it provided an opportunity for the Vienna Stock exchange to continue its expansion strategy in the cee markets during one of the most difficult times for the financial and capital markets in recent history, while reinforcing the continuing development of the czech capital markets.


oUR ValUeS

Values that are truly part of an organisation withstand this test. those that are simply claims or vague aspirations will fail.

throughout the year we have used our Values to test our decisions. our priority is doing what is right for our clients, for our people and for us as a firm.

lovells is proud of its strong culture. clients describe us as a friendly and collaborative firm, with a strong emphasis on quality and commerciality. We are determined to contribute to the success of our clients and to create a vibrant and successful firm.

We have taken steps to ensure that our Values are an integral part of, and fully reflected in, our day to day business. For example, in our munich office we held a “Values Day” to help members of the firm fully understand and appreciate what they mean in practice.

Measuring our ValuesDuring the financial year we asked our staff about how much they felt our Values are embedded in our practice. We wanted to find out about levels of awareness of our Values as well as their own individual experiences. We also looked at how the firm communicates and

whether our people felt that they received enough information about the performance of the business as a whole.

Just over 2,300 members of the firm took part in the survey, which was conducted and analysed by an independent third party.

the three statements which achieved the most agreement were:

• people work hard to deliver the highest levels of client service;

• quality is one thing we would never compromise on; and

• i am proud to work for lovells.

When asked whether the Values reflected our people’s day to day experiences, we received a very encouraging response, confirming that the Values are consistent with the strong underlying culture of the firm.

the findings from the survey which relate to our internal communications revealed that the firm had improved its communications in recent years though there was still a desire for more updates on what was happening across the firm.

We are using the detailed findings of the Values survey, which include results for individual offices, practice areas and support departments, to refine how we work and communicate with each other and with our clients. initiatives already undertaken include management audio casts on major topics, including the business performance of the firm, improved firmwide weekly communications which focus on new clients, new work as well as news on our people, corporate responsibility and other initiatives.

Our Values

clients come first

Quality in all we do

one firmwide team

commitment to the firm’s success

Difficult market conditions are the strongest test of a firm’s Values.

Case study


“�[The]�recapitalisation�of�[Iceland’s]�banking�sector…�mark[s]�an�important�milestone�in�efforts�to��rebuild�Iceland’s�shattered�banks�and�reintegrate�the�north�Atlantic�island�nation�into�the�international��financial�system.”�

Financial Times, 20 July 2009

Government of Iceland

lovells’ in-depth regulatory, restructuring and banking skills and resources have played a central role in the firm’s advice to the Government of iceland in its efforts to rebuild the country’s economy.

Following the collapse of iceland’s three main commercial banks – Glitnir, Kaupthing and landsbanki – during the economic turmoil in october 2008, the firm initially worked closely with the icelandic treasury to provide support and strategic advice in their negotiations with the British treasury.

more recently, lovells acted as principal adviser to the icelandic government on a landmark €1.5 billion ($2.12 billion) recapitalisation of the icelandic banking sector. this transaction, described by one commentator as “a watershed moment for the country’s crippled banking sector”, is a core element of iceland’s ongoing recovery programme.

lovells’ ability to field a cross-disciplinary team, comprising lawyers from across the business restructuring and insolvency, corporate finance, public law and policy and dispute resolution practices, was key to its appointment on this complex, high profile and politically charged mandate. its strengths in this area also led to a simultaneous appointment to act as lead international counsel on the restructuring of icelandic based investment bank Straumur.


Developing our people is a critical element in achieving our vision to be a leading international law firm competing at the top of the market.

our people strategy focuses on attracting and retaining the best people, providing them with training and development tailored to their legal specialism, to the stage of their career and to the role that they are performing, always with the aim of ensuring that they are equipped to deliver to clients the consistent, high quality advice expected of a firm such as ours.

We aim to harness the ambition of our lawyers through achieving consistently high performance, developing the partners of the future and providing them with coaching and leadership skills to ensure the continued growth and development of our business.

this year we appointed former london regional managing partner, Ruth Grant, as the firm’s first people Development partner with a remit to expand globally our approach to people development.

intellectual property and Real estate. Six of these were in asia, five in continental europe, three in london and two in the US.

new partners attend sessions for further career development at the beginning of their first year as partners and again in the year after their promotion. the focus is on the transition to partnership and leadership skills. Bringing together partners from across the firm’s offices and practices in this way creates a cohesive group, well placed to build our international practice going forward.

During the year, we concluded our two year pilot of 360 degree review for partners. the feedback from both partners and staff was extremely positive and we have, for 2009/10, launched a programme under which all our people are invited to give feedback on partners as part of the two yearly cycle of partner review.

the training and development that we provide is a key part of what we are as a firm and our global approach is a differentiator in the legal market. our success in the people development arena is reflected in the awards that we have received over the year, as well as the feedback received from participants in our global programmes in which 95% of respondents rated the programmes ‘excellent’ or ‘Good’.

“�According�to�market�sources,�the…�[Structured�Finance�team’s]�ability�to�‘work�closely�with�the�client�to�achieve�the�client’s�commercial�objective,�whilst�mitigating�legal�risk,’�has�been�of�immense�value�especially�in�the�current�climate,��and�a�source�added:�‘The�firm�is�extremely�commercially�aware.’”

Chambers UK, 2009

“�Clients�return�to�this�firm�time�and�again�for�its�‘highly�proficient�but�also�refreshingly�informal�approach’�to�[Banking�and�Finance]�work�[in�Italy].”


in line with the lawyer career model we introduced in 2007, we promoted 82 of our lawyers to senior associate, 47 in continental europe, 24 in london, six in asia and the middle east and five in the US. We also made 46 promotions to counsel, of counsel or consultant (depending on jurisdiction). During the course of the year, we ran senior associate and of counsel conferences in continental europe, london, the US and asia focusing on leadership skills, developing client relationships and financial management. more than 200 of our people attended these events.

at the start of 2008/09 we promoted 18 of our lawyers to the partnership. the jurisdictional spread of these promotions reflects the international nature of our practice, covering 10 offices across each of our four regions. at the end of the year, we promoted a further 19 lawyers to the partnership with effect from the beginning of the year 2009/10. During the year we recruited 16 lateral hire partners across a range of practice areas including Banking, corporate, Dispute Resolution, energy, projects,

Our clients say that when they work with us they are engaging with lawyers who genuinely understand their issues and help develop commercial solutions.

DeVelopinG oUR people

Case study


“�The�Lovells�Pro�Bono�team�have�supported�us�with��expert�advice�across�a�number�of�areas�of�our�business�from�commercial�agreements�with�sponsors��to�the�intense�period�of�the�Beijing�Games�where�they�helped�us�with�the�Team�Agreement.�In�all�cases��their�expertise�has�been�invaluable�and�their�commitment�laudable.��They�even�gave�up�their�weekend�to�attend�our�pre-Games�camp�to�give�advice�to�the�athletes.�They�have�become�an��integral�and�invaluable�member�of�our�team.”

ParalympicsGB

ParalympicsGB

as a firm, lovells recognises that we can all make a meaningful contribution in creating a society where everyone has the chance to achieve their potential, whatever their circumstances.

We provide pro bono support to paralympicsGB, which is passionate about achieving excellence.

paralympicsGB is a registered charity, responsible for selecting, preparing, entering, funding and managing Britain’s teams at the paralympic Games and the Winter paralympic Games. the paralympic Games are an elite multi-sport event for athletes with a disability and are a direct ‘parallel’ to the olympic Games. paralympicsGB’s goal is to send the best trained and prepared Great Britain team to each paralympic Games. the recent Games in Beijing were incredibly successful for team GB, beaten only by china in the medals table. team GB won a phenomenal total of 42 gold, 29 silver and 31 bronze medals; a feat that they hope to achieve again in the london 2012 Games.

lovells are proud to be the pro bono legal advisers to paralympicsGB. our partnership is an example of the creative way in which we apply our commercial legal expertise for the benefit of charities worldwide. lovells’ commercial law group has been advising paralympicsGB on a variety of matters including team and training facility agreements and other commercial arrangements. We also fielded a team of lawyers from our offices in london, Hong Kong and Beijing to advise paralympicsGB during the Games.

lovells also hopes to raise the profile of paralympicsGB through events; for example, Dame tanni Grey-thompson, 11 times gold medal winner, naomi Riches and Dervis Konuralp, both bronze medallists, have visited our london office to talk about their experiences and the challenges they face as athletes and living with a disability.

lovells is looking forward to supporting paralympicsGB throughout the buildup to, during and after the london 2012 paralympic Games.


our cR programmes cover environment, diversity, pro bono and community affairs, matched global giving and management of our own supply chain.

this is a brief overview of those activities. this year we are publishing a detailed separate report on the firm’s cR activities.

in the past year, more than 620 lawyers across the firm participated in pro bono work, providing more than 28,000 hours of their time and advising over 220 charities.

in 2008, we also launched our international pro bono fellowships programme. the programme offers charities, not-for-profit and non-governmental organisations the opportunity to have a qualified lawyer work with them locally in the developing world. Fellows from our london, Hong Kong, new York, chicago and Rome offices have advised in areas ranging from voter registration law in Ghana to anti-trafficking cases in Belize.

the lovells pro bono team’s success continued this year with the firm being named pro Bono team of the Year at both the 2009 iFlR asian awards and the 2009 iFlR europe awards.

the panel also continues to champion our other aspects of cR. over the last year we adopted a global environmental policy and played an active role as a founder member of the UK’s legal Sector alliance on climate change. in various offices we took steps to benefit the environment, with our chicago office recently winning an award for setting up its commuter shuttle bus service.

We also made efforts to attract a more diverse range of talented people to join the firm at all levels and, where permitted by law, we monitor and publish our diversity statistics to clients on request. networks and communications groups created within the firm – including in london a women’s group, a working families network, and a lesbian, gay, bisexual and transgender network – meet regularly and provide a conduit for the exchange of ideas and consultation across the firm.

We now have a programme in a number of offices for women clients including in new York, Hong Kong and london.

in london, new marketplace and community volunteering programmes were successfully launched this year.

We were also a finalist for pro Bono team of the Year at the lawyer awards 2009 and for three awards at the 2008 Junior lawyers Division pro Bono awards.

our community volunteering programme provides non-legal volunteer opportunities to all permanent staff.

our global fundraising campaign, known as ‘touch’, supports the Un millennium Development Goals. in three years, we have raised more than £300,000 for opportunity international, Save the children and pump aid. in 2008/09, touch focused on raising funds to help disabled people achieve their extraordinary potential. in particular, the firm supported oRBiS, an international charity dealing with preventable blindness.

With the 2012 olympic and paralympic Games approaching, many of lovells’ offices have elected to direct their local charitable support to their national paralympic athletes. a cross-border team of lawyers from london, Hong Kong and Beijing provided legal support to athletes and paralympicsGB in the lead-up to and during the 2008 paralympic Games in Beijing.

coRpoRate ReSponSiBilitY anD DiVeRSitYThe firm’s Corporate Responsibility (CR) Panel leads our wide-ranging activities in this area.

Case study


“�‘First-class�knowledge’�is��a�key�attribute�of�[the�real�estate]�team:�‘The�partners�really�know�their�stuff.�They�offer�thoughtful�leadership�in�the�field�and�know�how�to�apply�this�in�a�practical�way.’�‘The�lawyers�work�extremely�well�as�a�team�and�have�fantastic�interpersonal�skills,��which�results�in�strong�client�relationships.’”

ChambersUK,2009

Gale International

the strength of lovells’ real estate practice lies in its ability to capitalise on the internationalisation of the commercial property market through its cross-border network.

Few firms can match lovells’ quality, coverage and breadth of property work across its offices.

one of the firm’s most significant real estate transactions in 2009 was the advice to Gale international llc on the framework agreement for meixi lake District, a new state-of-the-art ecological city in changsha, the capital city of Hunan province in the people’s Republic of china.

meixi lake District will include various sub-projects comprising energy-efficient residential developments, schools, healthcare facilities, retail shopping complexes, high-tech office space, a five-star hotel and a world-class convention center, set within an integrated lake environment.

this project was one of two significant deals on which our china real estate practice advised within the space of a month. the team also acted for china merchants property Development company limited on its RmB1.6 billion (US$234 million) disposal of nanjing international Finance center to aRa asia Dragon Fund.

lovells is now advising Gale on another potential eco-city project in china after the developer was approached by a local government in Jiangsu province.


� �According�to�one�client�‘they�were�simply�outstanding�in�their�knowledge�of�every�matter�they�dealt�with.’

Legal 500 EMEA, 2009

Financial ReVieW

amounts billed to clients, excluding disbursements and accrued income, increased from £479 million to £531 million, representing a year on year increase of 11%. Revenue increased 8% from £495 million to £536 million. our international reach and the breadth of our practice provide a balance to the firm, enabling us to perform well in difficult market conditions. the impact that currency exchange rate movements have on the firm’s performance has also become increasingly clear, increasing our revenue and our costs when measured in sterling.

Billings across the regions reflect the impact the credit crunch has had on different markets around the world. We experienced the downturn first and most immediately in the US and UK markets, with continental europe following more slowly behind. asia & middle east experienced continued growth from the previous year. the result is that the firm’s asia & middle east practice has now grown to 10% of the firm’s billings, while continental europe represents 43%, london 42% and the US 5% of billings. the longer term trend towards

as before, the quieter insurance/Reinsurance market has affected our performance in this region.

average profit per equity partner is £586k compared to the final average profit per equity partner figure of £661k for 2007/08.

across the firm’s practice streams, corporate accounted for 29% of billings; commerce 28%; Finance 20%; and Dispute Resolution 23%. overall dispute resolution activity increased during the course of the year and, including disputes activity in areas such as tax, real estate, intellectual property and employment, represents approximately a third of total billings.

our business restructuring and insolvency, dispute resolution and capital markets practices saw a marked increase in work levels as a result of the downturn.

While corporate, private equity and real estate saw reduced activity, they were involved in some excellent quality work. ip work remains less directly affected by the downturn with us winning a number of major ip management projects, as well as new and ongoing disputes work.

our broad practice and our extensive geographic reach provided us with an effective hedge although we experienced an increase in costs ahead of the increase in revenue.

more of the firm’s revenue being generated outside london has continued, reflecting our strategic focus on international growth.

asia & middle east continued to perform particularly well with nearly all our offices in the region reporting double digit growth and the region as a whole experiencing approximately 30% growth in real terms, a figure comparable to the previous year.

in continental europe, the picture was more varied. We saw strong growth in markets such as moscow and madrid where the combination of our local capability and international reach gives us real traction with clients. in some other offices we have remained broadly level or experienced some decline as a result of market events.

in london, we saw a small decrease in billings, which is not surprising given the overall reduction in corporate activity in the UK.

in the US, our performance was slightly better than last year and we are anticipating some additional pick up.

In the context of the most challenging market conditions most of us have ever seen, our financial performance in 2008/09 was encouraging.

“�Clients�commend�the�[Public�Law�and�Policy]�lawyers�here�for�their�‘terrific�bedside�manner’�and�value-added�service�that�combines�their�extensive�legal�knowledge�and�litigation�expertise:�‘The�team�goes�out�of�its�way�to�give�advice�above�and�beyond�what�it�charges�for,’�explained�one�happy�client.”

Chambers UK, 2009


We addressed this promptly, by staying very close to our clients, re-aligning some lawyers to practice areas with greater demand, reducing discretionary expenditure, postponing some capital expenditure, offshoring certain word processing functions and focusing on pricing and the fundamentals of billing and cash collection.

as a result of our strong focus on cash management, we managed to avoid large scale redundancy programmes although, regrettably, we had some job losses.

By avoiding shorter term measures, the firm is better prepared to serve our clients and take advantage of market opportunities as and when they arise.

£m Billing growth by practice stream 2005–09

Billing by practice stream 2008–09

■ corporate£159m, 29%

■ commerce£148m, 28%

■ Dispute Resolution£120m, 23%

■ Finance£104m, 20%

■ corporate

■ commerce

■ Dispute Resolution

■ Finance


£m Billing growth by region 2005–09

Billing by region 2008–09

“�Our�international�reach�and�breadth�of�our�practice�provide�a�balance�to�the�firm,�enabling�us�to�perform�well�in�difficult�market�conditions.”

■ london£225m, 42%

■ continental europe£227.5m, 43%

■ asia & middle east£53m, 10%

■ US£25.5m, 5%

■ london

■ continental europe

■ asia & middle east

■ US


CommerceWon european trade mark Firm of the Year at the 2009 Managing Intellectual Property Global awards, and shortlisted in eight other categories.

awarded excellence in Domain name policy implementation and litigation at the 2008 WorLdleaders International IP awards.

Hong Kong office awarded tmt Firm of the Year 2008 by asian-Counsel magazine.

Shortlisted for employment team of the Year at the Lawyer awards 2008.

Shortlisted for law Firm of the Year at the 2008 european Pensions awards.

Shortlisted for property team of the Year at the 2008 British Legal awards.

michael Gallimore tops Planning magazine rankings for planning solicitors for third consecutive year, with claire Dutch and claire Fallows ranked in the top 30.

Shortlisted for intellectual property Firm of the Year at the 2008 asian Legal Business hong Kong Law awards.

Shortlisted for intellectual property Firm of the Year at the 2008 China Law & Practice Magazine awards.

Won JUVe ip law Firm of the Year.

Shortlisted for corporate team of the Year, team of the Year and assistant Solicitor of the Year award (charles Brasted) at the Lawyer awards 2008.

Dispute ResolutionGlobal insurance & Reinsurance law Firm of the Year in the 2009 Who’s Who Legal awards for the fifth consecutive year.

crispin Rapinet named in asian Legal Business’s 2008 Hot 100 lawyers ranking.

Shortlisted for construction Firm of the Year at the 2008 asian Legal Business hong Kong Law awards.

FinanceWon Restructuring team of the Year and Restructuring Deal of the Year at the 2009 International Finance Law review europe awards.

Shortlisted for Banking and Restructuring team of the Year in the 2009 Legal Business awards.

Shortlisted for Banking & Finance team of the Year at the Lawyer awards 2009.

Shortlisted for Restructuring of the Year and Restructuring team of the Year at the 2009 International Finance Law review asian awards.

Shortlisted for Debt and credit team of the Year at the 2008 Financial news Legal awards.

Won JUVe patent law Firm of the Year.

Won JUVe insurance law Firm of the Year.

CorporateWon Best tax team in a law Firm at the 2008 Lexisnexis taxation awards, and shortlisted for the Best Vat team award.

Shortlisted for Fund management team of the Year and Hedge Funds team of the Year at the 2008 Financial news Legal awards.

Shortlisted for tax Firm of the Year in France, italy, Spain and the UK at the 2009 International tax review european tax awards.

Shortlisted for energy & Resources law Firm of the Year and m&a Deal of the Year at the 2009 asian Legal Business South east asia Law awards.

Shortlisted for private equity legal advisor of the Year at the Financial times and Mergermarket M&a awards.

Shortlisted for private equity Deal of the Year and private equity team of the Year at the 2009 International Finance Law review asian awards.

Shortlisted for private equity Deal of the Year and m&a Deal of the Year at the 2008 China Law & Practice Magazine awards.

“�Alongside�its�well-documented�corporate�expertise,�this�firm�‘knows�a�phenomenal�amount�about�broadcasting�and�the�media�sector’�and�enjoys�‘unparalleled�experience�of�complex,�multifaceted�deals’.”

� Chambers UK, 2009

RecoGniSinG oUR SUcceSS


Shortlisted for Banking Firm of the Year at the 2008 asian Legal Business hong Kong Law awards.

Won leisure Deal of the Year by Project Finance International magazine at the 2008 asia Pacific awards.

Shortlisted for project Finance Deal of the Year at the 2009 asian Legal Business South east asia Law awards.

Sharon lewis ranked in the Financial news 100 most influential women in european finance.

Shortlisted for Securitisation and Structured Finance team of the Year and Structured Finance Deal of the Year at the 2009 International Finance Law review europe awards.

Silver award for Securitisation team of the Year (paris capital markets) at the 2008 International Legal alliance Summit.

Silver award for equity linked and Debt capital markets team of the Year (paris capital markets) at the 2008 International Legal alliance Summit.

FirmWon JUVe law Firm of the Year 2008.

Won JUVe law Firm of the Year Western Region (Germany).

Won international law Firm of the Year at the 2008 asian Legal Business China Law awards.

Won pro Bono team of the Year at the 2009 International Finance Law review europe awards.

Won pro Bono team of the Year at the 2009 International Financial Law review asian awards.

Shortlisted for pro Bono team of the Year at the Lawyer awards 2009.

Ranked in 61st place – up 12 places from 73 in 2008 – in the times top 100 Graduate employers list for 2009.

Won the award for innovation in talent management & Retention at the Lawyer hr awards and shortlisted for eight other awards.

Ranked fourth in JUVe career magazine azur’s annual rankings of the most attractive employers for young lawyers.

Shortlisted for Best Graduate Recruitment Website in the times Graduate recruitment awards 2009.

Shortlisted for most popular Graduate Recruiter: law at the 2009 tarGetjobs national Graduate recruitment awards.

Ranked tenth, with three highly commended and two commended entries, in the 2008 Financial times Innovative Lawyers report.

Shortlisted for Young Solicitor of the Year (emma Higgs for pro bono work) at the 2008 British Legal awards run by Legal Week.

Shortlisted for three awards at the 2008 Junior Lawyers division Pro Bono awards.

Won Best management of Knowledge category at the 2008 Managing Partners Forum Legal awards.

Shortlisted in five categories, more than any other firm, at the 2008 Law Society excellence awards.

partos & noblet – lovells won the International Law office (ILo) Client Choice award for Hungary.

“�Lovells�LLP’s�excellence�in�IP�matters�across�a�pan-European�presence�leads�to�the�[Germany�Patents�Dispute�Resolution]�practice�being�‘constantly�involved�in�everything’.”

� Legal 500 EMEA, 2009


GeoGRapHic ReacH anD pRactice aReaS

across the firm’s regions we have expanded and strengthened our services. in asia, we made six new partner hires during the financial year, with three in tokyo and one each in Beijing, Hong Kong and Singapore, strengthening our capabilities in banking, capital markets, corporate, energy and projects. We also opened an office in Hanoi.

in Dubai, we added real estate capability to take advantage of restructuring opportunities in the region.

Within continental europe, we have continued with our planned programme of development, most notably the expansion of our corporate practice in madrid and our dispute resolution practice in milan. in France, where our paris office is the largest outside london, we added senior level capability in corporate, dispute resolution and real estate.

in the UK, the market conditions are highly competitive but we have invested further in our areas of international strength including corporate, intellectual property and insurance and financial services.

in the US market, we have a business which is focused on providing clients with advice in

“�Clients�appreciate�the�‘full�European�reach’�of�this�60-strong�employment�group.�Its�lawyers�are�praised�for�their�‘flexibility,�pragmatism�and�responsiveness,’�as�well�as�their�consistent�provision�of�‘up-to-date�knowledge,�sensible�risk�evaluation�and�reliable�answers�that�are�easily�understood�by�all�parties’.”


certain key areas that reflect the wider international strengths of the firm. During the course of the year, we have strengthened our US dispute resolution and ip practices.

Practice areas:Commerceemployment intellectual property, media and technology pensions Real estate

Corporatecompetition, public and eU law corporate commercial corporate Finance energy, power, Utilities and infrastructure Financial institutions private equity Share incentives and executive compensation tax

FinanceBanking Business Restructuring and insolvency capital markets project Finance

dispute resolutioninsurance and Reinsurance litigation and arbitration professional indemnity product liability international arbitration projects, engineering and construction investment Banking and Funds commercial Retail Banking

Lovells’ strength lies in its breadth of practice and its genuine cross-border reach.


* associated offices ** as of 5 September 2009

Case study


“�The�team�has�a�prominent�presence�in�debt�capital�markets�and�is�recognised�for�its�securitisation�and�structured�finance�expertise,�as�well�as�being�active�in�equity�capital�markets.”

Legal500EMEA,2009

Electricité de France / Delta Sparkin 2008, lovells’ capital markets team in paris advised electricité de France (eDF), the world’s largest nuclear plant operator, on its £12.4 billion financing for the acquisition of the UK’s biggest power generator, British energy Group (the largest deal by value our paris office). in addition, the firm’s corporate and banking practices in london advised eDF’s financial advisors, merrill lynch international and Bnp paribas.

a cross-border team from lovells’ capital markets and energy practices in paris, madrid and london also advised Dexia Bank Belgium Sa and DepFa BanK plc in relation to the €1.3 billion repackaging of Delta Spark, the first Spanish ex ante electricity tariff deficit repackaging.

lovells’ award winning capital markets practice has dedicated lawyers in all of the major financial centres and provides a full service to clients by combining the skills of english and US lawyers with local expertise across the firm’s international network.

our precedent-setting, complex deals reflect lovells’ strategic focus on advising the banking and corporate communities on high-end capital markets transactions, and our ability to provide clients with top quality legal advice across legal disciplines and jurisdictions.


the international executive presents its report and the audited financial statements of lovells llp for the year ended 30 april 2009.

Basis of preparationthese financial statements are the statutory accounts for lovells llp and reflect the results for the year to 30 april 2009. the financial statements consolidate the accounts of lovells llp and all its subsidiary undertakings (the “group”), drawn up to 30 april each year.

Principal activitythe principal activity of lovells llp is the provision of legal services from offices in 19 countries. all results derive from continuing activities.

Management teamoverall responsibility for the management of lovells llp rests with the management team. During the year, David Harris was re-elected as lovells’ managing partner for a further four-year term. christoph Küppers became continental europe regional managing partner, while in london andrew Gamble became regional managing partner and Ruth Grant moved to the newly created role of people development partner. patrick Sherrington and andreas von Falck were re-elected as practice stream leaders in Dispute Resolution and commerce, respectively, while crispin Rapinet was re-elected regional managing partner for asia & middle east. Since 1 may 2008, the following have been members of the management team:

John young, Senior partner*david harris, managing partner*nick Cray, chief operating officerandreas von Falckandrew Gamble (From 16 march 2009)Marc Gottridgeruth Grant (Until 16 march 2009)david hudd*Christoph Küppers* (From 23 January 2009)richard olver, chief Financial officer (From 2 June 2008)Crispin rapinetharald Seisler (Until 18 november 2008)aram Shishmanian, non-executivePatrick Sherrington*andrew Skipper*

* = designated member

Finance and capital structurelovells llp is financed by a combination of members’ capital, undistributed profits (including tax retentions) and borrowing facilities arranged with a number of banks. members’ capital decreased during the year by £1.7 million to £33.7 million.

the group had £1.9 million of net cash at 30 april 2009. Further details of the financial position of the group, its cash flows, liquidity position and borrowing facilities are described in the notes to the accounts.

RepoRt to memBeRS


the effect of the credit crunch on the firm has to a considerable extent been mitigated by our broad practice and extensive geographic reach. While there remains an increased risk of the economic environment having an adverse impact on some of our clients, taking into account our recently renewed £60 million (2008: £60 million) bank facilities and the flexibility we have to vary the timing of payments to our partners, and having considered the group’s forecasts and projections, the international executive is satisfied that it is appropriate for these accounts to be prepared on a going concern basis.

Members’ profit share, drawings and the subscription and repayment of Members’ capitalin the year ended 30 april 2009, all members were partners and shared in the profits of lovells llp. Where a member receives his or her remuneration as an employee or consultant, this is presented under the heading “members’ remuneration charged as an expense” in the consolidated income statement.

equity members subscribe the entire capital of lovells llp. each member’s capital subscription is linked to his or her share of profit and is repaid in full on ceasing to be a member. the rate of capital subscription is determined by the international executive depending upon the financing requirements of the business.

members draw a proportion of their profit share in 12 monthly on account instalments together with interim distributions during the year in which the profit is generated. the balance of their profits, net of a tax retention, is paid in instalments in June and September in the subsequent year. all payments are made subject to the cash requirements of the business. tax retentions are paid to the relevant tax authority as required with any excess being released to members, as appropriate.

as members draw a proportion of their expected profit share during the year before the profits for the year have been determined and allocated to them, by the year end their personal current accounts with lovells llp are in deficit. the total of these current accounts is shown in the Group Balance Sheet within “amounts due from members.” once the profit for the year has been allocated, the members’ current accounts are in surplus by the amounts retained to settle their tax liabilities and the amount of their share of the year’s profit above that already drawn.

Statement of Members’ responsibilities in respect of the financial statementsthe members are responsible for preparing the annual Report and the financial statements in accordance with applicable law and regulations.

the limited liability partnership Regulations 2001 made under the limited liability partnerships act 2000 require the members to prepare financial statements for each financial year. Under that law the members have elected to prepare the financial statements in accordance with iFRS as adopted by the european Union. the financial statements are also required by law to be properly prepared in accordance with the companies act 1985, as applicable to limited liability partnerships.

international accounting Standard 1 requires that financial statements present fairly for each financial year the firm’s financial position, financial performance and cash flows. this requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the international accounting Standards Board’s ‘Framework for the preparation and presentation of financial statements.’ in virtually all circumstances, a fair presentation will be achieved by compliance with all applicable iFRS. However, members are also required to:


• properly select and apply accounting policies;• present information, including accounting policies, in a manner that provides relevant, reliable,

comparable and understandable information; and • provide additional disclosures when compliance with the specific requirements in iFRS are

insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.

the members are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the firm and enable them to ensure that the financial statements comply with the companies act 1985, as applicable to limited liability partnerships. they are also responsible for safeguarding the assets of the firm and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

these responsibilities are exercised by the audit committee on behalf of the members.

AuditorsDeloitte llp will be proposed for reappointment.

Signed on behalf of the international executive

david harris managing partner


inDepenDent aUDitoRS’ RepoRt to tHe memBeRS oF loVellS llp

We have audited the financial statements of lovells llp (“the llp”) for the year ended 30 april 2009 which comprise the group income statement, the group statement of recognised income and expense, the group and lovells llp balance sheets, the group and lovells llp cash flow statements and the related notes 1 to 25. these financial statements have been prepared under the accounting policies set out therein.

this report is made solely to the llp’s members, as a body, in accordance with section 235 of the companies act 1985 as applicable to limited liability partnerships. our audit work has been undertaken so that we might state to the llp’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 llp and the llp’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Members and auditorsthe members’ responsibilities for preparing the financial statements in accordance with applicable law and international Financial Reporting Standards (“iFRS”) as adopted by the european Union are set out in the Statement of members’ Responsibilities.

our responsibility is to audit the financial statements in accordance with relevant United Kingdom legal and regulatory requirements and international Standards on auditing (UK and ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the companies act 1985, as applicable to limited liability partnerships. We also report to you if, in our opinion, the llp has not kept proper accounting records, or if we have not received all the information and explanations we require for our audit.

We read the other information contained in the annual Report as described in the contents section. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. our responsibilities do not extend to any information outside the annual Report.

Basis of audit opinionWe conducted our audit in accordance with international Standards on auditing (UK and ireland) issued by the auditing practices Board. an audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. it also includes an assessment of the significant estimates and judgements made by the members in the preparation of the financial statements and of whether the accounting policies are appropriate to the group’s and the llp’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. in forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements.


Opinionin our opinion the financial statements give a true and fair view, in accordance with iFRS as adopted by the european Union, of the state of the group’s and the llp’s affairs as at 30 april 2009 and of the group’s profit for the year then ended; and the financial statements have been properly prepared in accordance with the companies act 1985, as applicable to limited liability partnerships.

Deloitte llp chartered accountants and Registered auditors, london, UK Date: 19 January 2010


note 2009£’000

2008£’000

Revenue 536,416 495,470

other operating income 1,141 1,134

Operating expensesStaff costs 5 (254,641) (225,512)

Depreciation and amortisation (12,129) (10,382)

other operating expenses (123,919) (108,090)

Profit from operations 146,868 152,620

investment income 6 973 1,615

Finance expense 6 (1,438) (519)

Profit before tax 146,403 153,716

tax expense 7 (5,624) (5,418)

Profit before Members’ remuneration and profit shares 140,779 148,298

members’ remuneration charged as an expense 8 (16,411) –

Profit for the year for division amongst Members 124,368 148,298

GRoUp income Statement


note 2009£’000

2008£’000

actuarial gains on defined benefit pension scheme 17 1,000 2,300

exchange differences on translation of foreign operations 15,770 10,609

Net income recognised directly in equity 16,770 12,909

profit for the financial year 124,368 148,298

Total recognised income and expense for the period attributable to Members

141,138 161,207

GRoUp Statement oF RecoGniSeD income anD eXpenSe


note 2009£’000

2008£’000

AssetsNon-current assetsintangible assets 9 1,185 480

property, plant and equipment 10 27,831 25,810

Current assetsclient and other receivables 13 276,692 272,978

cash and cash equivalents 18,911 17,509

295,603 290,487

Total assets 324,619 316,777

LiabilitiesCurrent liabilitiestrade and other payables 14 70,517 72,091

current tax liabilities 823 1,525

obligations under finance leases 15 341 619

members’ capital 18 33,685 35,364

provisions 16 1,211 714

Bank overdraft 16,982 3,055

123,559 113,368

Non-current liabilitiestrade and other payables 14 10,173 10,809

Retirement benefit scheme deficit 17 1,800 6,800


provisions 16 6,994 7,576

19,676 25,940

Equitymembers’ other reserves 18 181,384 177,469

Total liabilities and equity 324,619 316,777

Members’ interestscurrent assets – amounts due from members 18 (51,378) (53,650)

current liabilities – members’ capital 18 33,685 35,364

equity – other reserves 18 181,384 177,469

Total Members’ interests 163,691 159,183

GRoUp Balance SHeet


note 2009£’000

2008£’000

AssetsNon-current assetsintangible assets 9 1,077 432

property, plant and equipment 11 18,638 19,220

Current assetsclient and other receivables 13 248,423 242,186

cash and cash equivalents 7,003 6,967

255,426 249,153

Total assets 275,141 268,805

LiabilitiesCurrent liabilitiestrade and other payables 14 43,379 41,020

current tax liabilities 120 542


members’ capital 19 33,685 35,364

provisions 16 1,211 714

Bank overdraft 16,982 3,055

95,718 81,314

Non-current liabilitiestrade and other payables 14 10,173 10,809

Retirement benefit scheme deficit 17 1,800 6,800


provisions 16 6,994 7,576

19,676 25,940

Equitymembers’ other reserves 19 159,747 161,551

Total liabilities and equity 275,141 268,805

Members’ interestscurrent assets – amounts due from members 19 (51,378) (53,650)

current liabilities – members’ capital 19 33,685 35,364

equity – other reserves 19 159,747 161,551

Total Members’ interests 142,054 143,265

loVellS llp Balance SHeet

these financial statements of lovells llp, registered number oc 323639, including the consolidated financial statements, were approved by the audit committee on behalf of the members and signed on behalf of the members on 19 January 2010 by:

John young, Senior partner david harris, managing partner richard olver, chief Financial officer


note 2009£’000

2008£’000

Net cash from operations 20 154,951 128,544

Investing activitiespurchase of intangible assets (1,204) (265)

purchase of property, plant and equipment (12,565) (14,380)

interest received 373 915

proceeds on disposal of property, plant and equipment 23 136

Net cash used in investing activities (13,373) (13,594)

Financing activitiesmembers’ capital introduced 2,876 3,259

capital repayments to members (4,555) (2,111)

payments to and on behalf of members (155,508) (127,050)

interest paid (864) (428)

increase in bank overdrafts 13,927 2,937

Net cash used in financing activities (144,124) (123,393)

net decrease in cash and cash equivalents (2,546) (8,443)

cash and cash equivalents at beginning of year 17,509 24,230

effects of foreign exchange rate changes 3,948 1,722

Cash and cash equivalents at end of year 18,911 17,509

GRoUp caSH FloW Statement


note 2009£’000

2008£’000

Net cash from operations 20 144,867 121,387

Investing activitiespurchase of intangible assets (1,085) (286)

purchase of property, plant and equipment (8,389) (7,988)

interest received 297 791

proceeds on disposal of property, plant and equipment 23 136

Net cash used in investing activities (9,154) (7,347)

Financing activitiesmembers’ capital introduced 2,876 3,259

capital repayments to members (4,555) (2,111)

payments to and on behalf of members (148,269) (125,397)

interest paid (858) (428)

increase in bank overdrafts 13,927 2,937

Net cash used in financing activities (136,879) (121,740)

net decrease in cash and cash equivalents (1,166) (7,700)

cash and cash equivalents at beginning of year 6,967 14,364

effects of foreign exchange rate changes 1,202 303

Cash and cash equivalents at end of year 7,003 6,967

loVellS llp caSH FloW Statement


lovells llp is a limited liability partnership incorporated and domiciled in england and Wales.

the principal activity of lovells llp is the provision of legal services.

the group’s principal operations are in the United Kingdom and these financial statements are presented in pounds sterling. operations outside of the United Kingdom are included in accordance with the policies set out below.

the principal accounting policies are summarised below. they have all been applied consistently throughout the current year and the previous year.

Accounting conventionthe financial statements have been prepared in accordance with iFRS as adopted by the european Union on the historical cost basis.

Basis of preparationthe group financial statements incorporate the financial statements of lovells llp and entities controlled by lovells llp (its subsidiary undertakings) made up to 30 april each year. control is achieved where lovells llp has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group. all intra-group transactions, balances, income and expenses are eliminated on consolidation.

as discussed in more detail in the members Report, the accounts have been prepared on a going concern basis.

no individual profit and loss account is presented for lovells llp as permitted by section 230 of the companies act 1985.

Adoption of new and revised Standardsat the date of approval of these financial statements, the following Standards and interpretations which have not been applied in these financial statements were in issue but not yet effective:

iaS 23 ‘Borrowing costs’ is effective for accounting periods beginning on or after 1 January 2009.

iFRS 3 ‘Business combinations (2008)’ is effective for business combinations on or after 1 July 2009.

iaS 32 ‘Financial instruments: presentation’ was amended to require certain “puttable Financial instruments and obligations arising on liquidation” to be reclassified from financial liabilities to equity and is effective for annual periods beginning on or after 1 January 2009.

iaS 1 ‘presentation of Financial Statements’ was amended concurrently to require additional disclosure for puttable financial instruments that are classified as equity following the iaS 32 amendment. the amendment to iaS 1 is also effective for annual periods beginning on or after 1 January 2009.

1. General information

2. accounting policies

noteS to tHe Financial StatementS


the amendment to iaS 32 may result in the reclassification of partner capital from current liabilities to equity. the impact of a reclassification will not be material to the income statement.

Foreign currenciesthe individual financial statements of each of the group’s operations are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the group financial statements, the results and financial position of each operation are expressed in sterling, which is the functional currency of lovells llp, and the presentation currency for the group financial statements.

transactions denominated in currencies other than the functional currency of the entity concerned are recorded at the rates of exchange prevailing on the dates of the transactions. monetary assets and liabilities which are not denominated in the functional currency of the entity concerned are translated at the rates ruling at the balance sheet date. these translation differences are dealt with in the income statement.

exchange differences are recognised in profit or loss in the period in which they arise except for differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the net investment.

the results of the group’s operations where the functional currency is not sterling are translated at the average rates of exchange for the period, and their balance sheets at the rates of exchange ruling at the balance sheet date. Differences arising on the translation of the opening net assets and the results of these operations are accounted for in the group statement of recognised income and expense.

RevenueRevenue represents amounts chargeable to clients for professional services provided during the year including certain recharged expenses on client assignments but excluding Value added tax.

Services provided to clients which at the balance sheet date have not been billed, have been recognised as revenue. Revenue recognised in this manner is based on an assessment of the fair value of the services provided at the balance sheet date as a proportion of the total value of the engagement. Revenue is only recognised where the group has a contractual right to receive consideration for work undertaken.

Intangible assets – computer softwareWhere computer software is not an integral part of a related item of computer hardware, the software is treated as an intangible asset, held at cost less accumulated depreciation and any impairment loss. amortisation is provided to write off the cost less the estimated residual value of intangible assets on a straight line basis over their estimated useful economic lives of three years.

Property, plant and equipmentproperty, plant and equipment is stated at cost less accumulated depreciation and any impairment loss. the gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in income. assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.

Depreciation is provided to write off the cost less the estimated residual value of property, plant and equipment by equal instalments over the estimated useful economic lives as follows:

leasehold improvements 5–8 yearsFixtures and fittings 4–5 yearscomputer equipment 3 yearsmotor vehicles 4 years

2. accounting policies (continued)


Impairment of tangible and intangible assetsat each balance sheet date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. if any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. When the asset does not generate cash flows that are independent from other assets, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

if the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. an impairment loss is recognised as an expense immediately.

Taxationthe taxation payable on profits of the limited liability partnership is the personal liability of the members. a retention from profit distributions is made to fund the taxation payments on behalf of members.

the tax expense represents the sum of the current tax relating to the corporate subsidiaries and certain branches where the tax payable on profits is the liability of lovells llp and not the individual members.

the current tax expense is based on taxable profits of the corporate subsidiaries and branches consolidated within these financial statements. taxable profit excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. the group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Financial instrumentsFinancial assets and financial liabilities are recognised on the group’s balance sheet when the group becomes a party to the contractual provisions of the instrument.

Investmentsinvestments are initially recognised and subsequently measured at cost. loans are accounted for at cost less provision for any impairment.

Client receivablesclient receivables are initially recognised at fair value, and are subsequently reduced for estimated irrecoverable amounts.

Cash and cash equivalentscash and cash equivalents comprise cash in hand, on demand deposits and other short-term highly liquid investments.

Trade payablestrade payables are initially measured at fair value, and are subsequently reduced for discounts given by suppliers.

Leasesassets held under finance leases are recognised as assets of the group at their fair value at the inception of the lease. the corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. all other leases are classified as operating leases.

Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease.



Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the lease term.

Members’ interests and current and non-current debts due to and from Membersmembers subscribe capital to the firm in proportion to their equity interest in the firm. members’ capital may only be withdrawn when a member retires from lovells llp or if their share of the partnership decreases. as members may retire from lovells llp with one year’s notice, members’ capital has been classified as a current liability. Drawings by members on account of profits have been classified as members’ current assets within members’ interests.

Provisionsprovisions are recognised when the group has a present obligation as a result of a past event, and it is probable that the group will be required to settle that obligation. provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material. the increase during the period in the discounted amount arising from the passage of time and the effect of any change in the discount rate is charged to the income statement as a finance cost.

the group maintains an appropriate level of professional indemnity insurance cover which is reviewed annually. provision or disclosure as appropriate is made for material costs that may arise from any claims against the group, net of the related insurance receivable.

Bank borrowingsinterest-bearing bank loans and overdrafts are recorded at the value of proceeds on initial recognition. interest is included in finance cost and is determined using the effective interest rate method.

Retirement benefit obligationscontributions to the defined contribution schemes are charged to the income statement when they become payable. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.

Defined benefit pension scheme liabilities are measured on an actuarial basis using the projected unit credit method and discounted at a rate determined by reference to the current estimated rate of return on a high quality sterling corporate bond of equivalent term to the scheme liabilities. Defined benefit pension scheme assets are measured at fair value. actuarial valuations are performed as at each balance sheet date based on full valuations obtained at least triennially and updated for subsequent changes in material assumptions. the resulting net defined benefit asset or liability is presented separately on the face of the balance sheet.

the interest cost arising from the unwinding of the discount net of the expected return on scheme assets is recognised as a finance cost.

actuarial gains and losses are recognised in full in the period in which they occur in the statement of recognised income and expense.

the preparation of group financial statements under iFRS requires management to make assumptions and estimations that affect the reported values of revenue, expenses, assets and liabilities. these judgements are based on historical experiences and other factors including expectations of future events that are believed to be reasonable and constitute management’s best judgement at the date of the financial statements. in the future, actual outcomes could differ materially from those estimates.

the key estimates and assumptions relate to the actuarial assumptions used in calculating the retirement benefit obligations, in particular the discount rate and mortality. other estimates are required for provisions in respect of client claims, onerous property costs, and the fair value of amounts billed and to be billed to clients. Further details are set out in each of the relevant accounting policies and the notes to the financial statements. the international executive will continue to review the key estimates and assumptions used, against both actual experience and market data, and adjustments will be made in future periods where appropriate.

3. critical accounting judgements and key sources of estimation



4. profit on ordinary activities before taxation

2009£’000

2008£’000

profit before tax has been arrived at after charging/(crediting)

operating lease payments

– land and buildings 40,522 30,568

– other 521 386

amortisation of intangible assets 499 390

Depreciation of property, plant and equipment 11,630 9,992

loss on sale of property, plant and equipment 65 261

net foreign exchange loss/(gain) 258 (333)

Fees payable to llp auditor Deloitte llp 989 894

a detailed breakdown of fees payable to Deloitte llp is provided below:

Fees payable to lovells llp’s auditor for the audit of lovells llp accounts 103 60

audit of llp’s subsidiaries and overseas branches pursuant to legislation 135 87

Services relating to taxation 640 638

other services pursuant to legislation 104 92

all other services 7 17

989 894

5. Staff costs

the average number of people employed during the year (excluding members) was:

Group Lovells LLP2009

No.2008

no.2009

No.2008

no.

Fee earners 1,591 1,524 683 618

Support staff 1,550 1,664 589 627

3,141 3,188 1,272 1,245

Staff costs incurred during the year in respect of these employees were:


£’0002008

£’0002009

£’0002008£’000

Salaries 223,986 195,644 106,426 87,493

Social security costs 19,923 17,995 10,039 8,737

pension costs 4,774 5,639 1,992 3,125

other costs 5,958 6,234 947 1,612

254,641 225,512 119,404 100,967


6. investment income/(Finance expense)

2009£’000

2008£’000

Investment incomeinterest receivable 373 915

net investment income on retirement benefit scheme 600 700

973 1,615

Finance expenseinterest payable on bank loans and overdrafts (810) (339)

other interest payable (127) (89)

Unwinding of discount on provisions (501) (91)

(1,438) (519)

7. taxation

2009£’000

2008£’000

current tax 5,624 5,418

in most locations, including the UK, income tax payable on the allocation of profits to members is the personal liability of the members and hence is not shown in these financial statements.

the standard rate of UK corporation tax was 28% at 30 april 2009 (2008: 30%):

2009£’000

2008£’000

profit before tax 146,403 153,716

less: amounts subject to personal taxation (127,898) (132,651)

Profits subject to taxation 18,505 21,065

2009£’000

2008£’000

tax at the effective UK corporation tax rate of 28% (2008: 29.83%) 5,181 6,284

Different tax rates and bases in other jurisdictions 884 (866)

adjustments in respect of prior years (441) –

Current year tax charge 5,624 5,418


8. members’ share of profits

profits are shared among the equity members after the end of the year in accordance with agreed profit sharing arrangements. profit per equity partner is calculated using an adjusted profit and includes some equity partners who are not members.

the average profit per equity member is calculated by dividing the profit for the year, after non equity members’ profit shares, by the average number of equity members.

Group2009

No.2008

no.

average number of members 266 206

average number of equity members 206 206

2009£’000

2008£’000

profit before members’ remuneration and profit shares 140,779 148,298

members’ remuneration charged as an expense (16,411) –

profit available for division among equity members 124,368 148,298

Average profit per Equity Member 604 720

there were no non-equity members in the year ended 30 april 2008. the remuneration of salaried partners who are not members is included within staff costs under operating expenses in both years.

9. intangible assets

Group£’000

lovells llp£’000

cost

at 1 may 2008 1,916 1,824

additions 1,204 1,085

at 30 april 2009 3,120 2,909

amortisation

at 1 may 2008 1,436 1,392

charge for the year 499 440

at 30 april 2009 1,935 1,832

carrying amount

At 30 April 2009 1,185 1,077at 30 april 2008 480 432

in the current year, computer software has been included within intangible assets; assets with a net book value of £480,000 have been reclassified so that the comparative figures are on a consistent basis.


10. property, plant and equipment – Group

leasehold improvements

£’000

computer equipment

£’000

Fixtures and fittings

£’000

motor vehicles

£’000

total

£’000

cost

at 1 may 2008 43,032 43,582 42,021 697 129,332

currency translation adjustments 1,501 2,108 5,510 96 9,215

additions 2,608 4,054 4,750 85 11,497

Disposals – (74) (927) (70) (1,071)

at 30 april 2009 47,141 49,670 51,354 808 148,973

Depreciation

at 1 may 2008 31,594 39,399 32,138 391 103,522


charge for the year 4,581 2,709 4,275 65 11,630

Disposals – (72) (847) (64) (983)

at 30 april 2009 38,066 43,866 38,755 455 121,142

carrying amount

At 30 April 2009 9,075 5,804 12,599 353 27,831at 30 april 2008 11,438 4,183 9,883 306 25,810

included in fixtures and fittings are assets held under finance leases with a net book value of £819,000 (2008: £1,151,000).

11. property, plant and equipment – lovells llp

leasehold improvements

£’000

computer equipment

£’000

Fixtures and fittings

£’000

motor vehicles

£’000

total

£’000

cost

at 1 may 2008 40,216 40,437 35,563 580 116,796

transfer from group undertakings – 382 725 – 1,107


additions 363 3,460 3,415 82 7,320

Disposals – (57) (887) (70) (1,014)

at 30 april 2009 41,692 45,723 42,947 659 131,021

Depreciation

at 1 may 2008 31,493 36,943 28,867 273 97,576

transfer from group undertakings – 303 481 – 784


charge for the year 3,909 2,290 3,047 64 9,310

Disposals – (55) (808) (64) (927)

at 30 april 2009 37,313 40,371 33,943 306 112,383

carrying amount

At 30 April 2009 4,449 4,902 8,934 353 18,638at 30 april 2008 8,723 3,494 6,696 307 19,220

included in fixtures and fittings are assets held under finance leases with a net book value of £819,000 (2008: £1,151,000).


12. investments – Group and lovells llp

lovells llp has investments in the following principal entities:

Country of incorporation/ registration and operation

Activity Proportion of ordinary shares or ownership

65 Holborn Viaduct ltd england & Wales Dormant 100%

lovell White ltd england & Wales Dormant 100%

lovell & co ltd england & Wales Dormant 100%

lovells ltd england & Wales Dormant 100%

lovell White Durrant ltd england & Wales Dormant 100%

lovells (moscow) ltd england & Wales Dormant 100%

lovells pension trustees ltd england & Wales Dormant 100%

Serjeants’ inn nominees ltd england & Wales Dormant 100%

SiSec ltd england & Wales Dormant 100%

lovells trustees england & Wales Dormant 100%

lovells ciS england & Wales legal services 100%

lovells property trustees (no 1) ltd england & Wales Dormant 100%

lovells property trustees (no 2) ltd england & Wales Dormant 100%

lovells Services england & Wales Service company 100%

loviting ltd england & Wales Dormant 100%

lovells (alicante) ltd england & Wales Holding company 100%

lovells Real estate ltd england & Wales Dormant 100%

lovells (Holdings) no 1 ltd england & Wales Dormant 100%

lovells (Holdings) no 2 ltd england & Wales Dormant 100%

lovells llp also has the power to exercise, or actually exercises, dominant influence or control over the following entities:

Country of incorporation/ registration and operation

Activity

lovells (prague) llp england & Wales legal services

lovells (middle east) llp england & Wales legal services

lovells (Warszawa) llp england & Wales Dormant

lll (thailand) ltd thailand legal services

lovells H Seisler Spolka Komandytowa poland legal services

lovells Sp. z.o.o poland Service company

lovells Studio legale italy legal services

lovells england & Wales legal services in Hong Kong

lovells Horitsu Jimusho Gaikokuho Kyodo Jigyo Japan legal services

lovells (alicante) ltd Spain legal services

lovells Boesebeck Droste Sl Spain Holding company


13. client and other receivables


£’0002008

£’0002009

£’0002008£’000

amounts to be billed to clients 50,053 49,297 41,278 41,025

client receivables 133,673 137,668 107,041 113,601

amounts due from members 51,378 53,650 51,378 53,650

other debtors 2,351 1,995 2,316 1,565

amounts due from group undertakings – – 26,964 15,980

prepayments 39,237 30,368 19,446 16,365

276,692 272,978 248,423 242,186

client receivables are shown after impairment provisions for bad and doubtful debts of £14.6 million (2008: £9.2 million), movements on which are shown below:

Group2009

£’0002008£’000

at start of year 9,164 7,158

new and additional provisions 12,032 6,193

Recoveries (5,265) (2,212)

Write offs (1,337) (1,975)

At end of year 14,594 9,164

client receivables are presumed to be impaired at any point where full recoverability of the debt is considered doubtful. Reasons for impairment could include the client being unable to pay or a dispute over either the services provided or the fees incurred.

the group has a policy of providing for all debts to the extent that they are not considered recoverable. the provision is also determined by reference to past default experience. in determining the recoverability of the client receivable the group considers any change in the credit quality of the client.

the group’s client acceptance procedures include a detailed review of the creditworthiness of each and every client before an engagement commences and the concentration of credit risk is limited due to the client base being large and unrelated. accordingly, the group believes that there is no further credit provision required in excess of the provision for doubtful debts.

clients are required to settle invoices on presentation or on such other date that is agreed in the engagement terms for that client. terms do vary but invoices are considered past due after 14 days have elapsed following the invoice date. no client receivables are held as collateral for liabilities. the ageing of client receivables at the reporting date was:

Group2009

£’0002008£’000

not past due 57,605 63,778

past due by 0 – 30 days 30,647 29,859

past due by 31 – 120 days 30,504 33,868

past due by greater than 120 days 14,917 10,163

133,673 137,668


the carrying amount of financial assets including cash recorded in the financial statements, which is net of any impairment losses, represents the group’s maximum exposure to credit risk. the group’s maximum exposure to credit risk comprises:

Group2009

£’0002008£’000

Financial assets 206,313 210,822

amounts to be billed to clients 50,053 49,297

Maximum credit risk 256,366 260,119

Further analysis of financial assets and other risks facing the group is provided in note 23.

14. trade and other payables


£’0002008

£’0002009

£’0002008£’000

trade payables 31,346 31,244 20,525 17,542

Social security and other taxes 10,094 10,532 2,839 2,942

accruals and deferred income 39,250 41,124 30,188 31,345

80,690 82,900 53,552 51,829


£’0002008

£’0002009

£’0002008£’000

included in current liabilities 70,517 72,091 43,379 41,020

included in non-current liabilities 10,173 10,809 10,173 10,809

80,690 82,900 53,552 51,829

15. obligations under finance leases – Group and lovells llp

Minimum leasepayments

Present value ofminimum lease

payments2009

£’0002008

£’0002009

£’0002008£’000

Within one year 395 504 341 619

Within two to five years 771 1,120 709 755

1,166 1,624 1,050 1,374

less future finance charges (116) (250)

Present value of lease obligations 1,050 1,374

the group has leased certain of its fixtures and fittings under finance leases. the average lease term is five years. For the year ended 30 april 2009, the average effective borrowing rate was 4% (2008: 4%). interest rates are fixed at the contract date. all leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

all finance lease obligations are translated into sterling at the rate ruling at the balance sheet date. the fair value of the group’s lease obligations approximates their carrying value.

the group’s obligations under finance leases are secured by the lessors’ rights over the leased assets.

13. client and other receivables (continued)


16. provisions – Group and lovells llp

Provision for annuitieslovells llp has conditional commitments to pay annuities to certain individuals who are either former partners of lovells or dependants of those partners. an actuarial valuation of the net present value of the best estimate of the expected liability for the future payments to these individuals is obtained at each year-end and any change to the provision necessary is recorded in the income statement.

the provision for annuities is subject to actuarial adjustments and, in most cases, is payable over the life of the annuitants.

the assumptions used by the actuaries in the calculation of the provision are the same as those used in the valuation of the defined benefit pension scheme, as set out in note 17.

Provision for onerous leasesFor leases on properties that have been vacated or are considered surplus, a provision has been recognised to the extent that the continuing rental obligations are not expected to be recovered through sub-letting. the leases to which this provision relates expire in 2013 and in 2016.

Provision for onerous

leases£’000

Provision for annuities

£’000

Total2009

£’000

total2008

£’000

at start of year – 8,290 8,290 8,123

currency translation – 420 420 484

Utilisation of provision – (704) (704) (726)

actuarial adjustment – (1,402) (1,402) 318

Unwinding of discount – 501 501 91

charged/(released) to the income statement 1,100 – 1,100 –

net movement in provision 1,100 (1,185) (85) 167

at end of year 1,100 7,105 8,205 8,290

provisions are analysed as follows:

2009£’000

2009£’000

2009£’000

2008£’000

current liabilities 553 658 1,211 714

non-current liabilities 547 6,447 6,994 7,576

1,100 7,105 8,205 8,290

major assumptions used in valuation:

2009% p.a.

2008% p.a.

Discount rate 7.0 6.5

price inflation 2.9 3.8


17. Retirement benefit schemes – Group and lovells llp

Defined contribution schemeemployer contributions to defined contribution retirement benefit schemes totalled £3,020,000 (2008: £2,686,000).

Defined benefit schemethe defined benefit scheme of lovells llp is closed to new members. Under the scheme, employees are entitled to retirement benefits of up to 58% of final salary on attainment of a retirement age of 65. no other post-retirement benefits are provided. the scheme is a funded scheme.

the scheme’s assets are stated at their market value as at 30 april 2009. the scheme liabilities as at 30 april 2009 have been updated from the most recent completed actuarial valuation by an independent qualified actuary. the present value of the defined benefit obligation, the related current service cost and past service cost was measured using the projected unit credit method.

Key assumptions used:

30 April 2009%

30 april 2008%

Discount rate 7.00 6.50

inflation 2.90 3.80

expected rate of salary increases 3.90 5.55

Future pension increases 2.20 – 3.50 2.50 – 3.90

the post retirement mortality assumptions used are based on the standard published tables pa92. these were then adjusted to allow for future improvements in life expectancy including the published medium cohort improvement factors. on this basis the life expectancy assumed for a male pensioner aged 65 as at 30 april 2009 was 20 years and for a female was 23 years.

amounts recognised in the balance sheet are as follows:

2009£’000

2008£’000

Fair value of scheme assets 57,900 65,600

present value of defined benefit obligations (59,700) (72,400)

Retirement benefit deficit (1,800) (6,800)

amounts recognised in the income statement in respect of these defined benefit schemes are as follows:

2009£’000

2008£’000

current service cost 2,100 2,700

interest cost 4,700 4,300

expected return on scheme assets (5,300) (5,000)

1,500 2,000

of the charge for the year, £2,100,000 (2008: £2,700,000) has been included in operating costs and a credit of £600,000 (2008: £700,000) has been included in finance costs. actuarial gains and losses have been reported in the statement of recognised income and expense.


movements in the fair value of scheme assets were as follows:

2009£’000

2008£’000


expected return on scheme assets 5,300 5,000

actuarial losses (16,800) (7,600)

contributions from sponsoring employer 5,500 5,800

Benefits paid (1,700) (1,200)

At end of year 57,900 65,600

the actual return on scheme assets was as follows:

2009£’000

2008£’000

expected return on scheme assets 5,300 5,000

actuarial losses on scheme assets (16,800) (7,600)

(11,500) (2,600)

the analysis of the scheme assets and the expected rate of return at the balance sheet date were as follows:

Expected return Fair value of assets2009

%2008

%2009

%2008

%

equity instruments 8.20 8.50 41,200 47,800

long-term gilts and bonds 4.10 – 7.00 4.80 – 6.70 11,300 11,400

property 6.00 6.80 5,100 6,100

other 3.00 3.80 300 300

Overall 7.50 7.85 57,900 65,600

the overall expected rate of return on scheme assets is a weighted average of the individual expected rates of return on each asset class. the expected return on assets is determined using current and projected economic and market factors and after taking actuarial advice.

17. Retirement benefit schemes – Group and lovells llp (continued)


movements in defined benefit obligations were as follows:

2009£’000

2008£’000


current service cost 2,100 2,700

interest cost 4,700 4,300

actuarial gains on scheme liabilities (17,800) (9,900)

Benefits paid (1,700) (1,200)

At end of year 59,700 72,400

the analysis of the amounts recognised in the statement of recognised income and expense are as follows:

2009£’000

2008£’000

actuarial losses on scheme assets (16,800) (7,600)

actuarial gains on scheme liabilities 17,800 9,900

Total actuarial gains 1,000 2,300

cumulative amount of gains recognised in the statement of recognised income and expense

9,400 8,400

the history of experience adjustments is as follows:

2009£’000

2008£’000

2007£’000

present value of defined benefit obligations (59,700) (72,400) (76,500)

Fair value of scheme assets 57,900 65,600 63,600

Deficit in the scheme (1,800) (6,800) (12,900)

experience (losses)/gains on assets (16,800) (7,600) 1,000

experience (losses)/gains on liabilities 1,500 400 5,100

contributions of £5.4m are currently expected to be paid to the scheme during the current financial year, of which £2.2m is ongoing funding and £3.2m represents deficit repair payments to which the firm is committed. the deficit repair payments could alter as a result of discussions with trustees following completion of this year’s triennial valuation.

17. Retirement benefit schemes – Group and lovells llp (continued)


18. members’ interests – Group

members’ capital

– current liability£’000

amounts due from members

£’000

members’ equity

– other reserves

£’000

total

£’000

members’ interests at 1 may 2008 35,364 (53,650) 177,469 159,183

allocated profits – 137,223 (137,223) –

Drawings and distributions – (134,951) – (134,951)

capital introduced 2,876 – – 2,876

capital repaid (4,555) – – (4,555)

Differences on translation – – 15,770 15,770

pension scheme actuarial gain – – 1,000 1,000

profit for the financial year – – 124,368 124,368

Members’ interests at 30 April 2009 33,685 (51,378) 181,384 163,691

members’ other reserves rank after unsecured creditors in the event of a winding-up. the amount of capital that each member is required to subscribe is determined by the international executive and under the members’ agreement of lovells llp a member can only withdraw capital when he or she ceases to be a member or if their share of the partnership decreases.

19. members’ interests – lovells llp

members’ capital

– current liability£’000

amounts due from members

£’000

members’ equity

– other reserves

£’000

total

£’000

members’ interest at 1 may 2008 35,364 (53,650) 161,551 143,265

allocated profits – 130,614 (130,614) –

Drawings and distributions – (128,342) – (128,342)

capital introduced 2,876 – – 2,876

capital repaid (4,555) – – (4,555)

Differences on translation – – 14,282 14,282

pension scheme actuarial gain – – 1,000 1,000

profit for the financial year – – 113,528 113,528

Members’ interests at 30 April 2009 33,685 (51,378) 159,747 142,054


20. notes to the cash flow statements


£’0002008

£’0002009

£’0002008£’000

Profit from operations 146,868 152,620 131,048 139,679

adjustments for:

amortisation of intangible assets 499 390 440 377

Depreciation of property, plant and equipment 11,630 9,992 9,310 8,623

loss on disposal of property, plant and equipment 65 261 64 150

(Decrease)/increase in provisions (85) 167 (85) 167

operating cash flows before movements in working capital

158,977 163,430 140,777 148,996

Decrease/(increase) in receivables 9,122 (44,964) 4,542 (39,554)

(Decrease)/increase in payables (8,563) 15,986 1,081 14,687

cash generated by operations 159,536 134,452 146,400 124,129

corporation taxes paid (4,585) (5,908) (1,533) (2,742)

Net cash from operating activities 154,951 128,544 144,867 121,387

2009£’000

2008£’000

2009£’000

2008£’000

cash and cash equivalents comprise:

cash at bank 18,911 17,509 7,003 6,967

21. capital commitments

at the year-end neither the group nor the llp had any material capital commitments that were contracted but not provided for in the financial statements (2008: none).

22. operating lease commitments

at 30 april 2009, the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

GroupLand and buildings

2009£’000

Other

2009£’000

land and buildings

2008£’000

other

2008£’000

Within one year 40,482 687 35,891 627

Within two to five years 121,827 819 123,714 978

in more than five years 185,118 – 210,614 –

347,427 1,506 370,219 1,605


23. Financial instruments – Group

Financial instruments comprise loans, short-term borrowings, cash and deposits, client receivables and trade payables, member’s capital and amounts due from members. Financial instruments result in the group being exposed to liquidity, credit, interest rate and foreign currency risks. information about credit risk is contained in note 13 and the remaining risks are covered below.

the carrying amounts of financial instruments are as follows:

Group2009

£’0002008£’000

Financial assetsclient receivables 133,673 137,668

amounts due from members 51,378 53,650

other receivables 2,351 1,995

cash and deposits 18,911 17,509

Loans and receivables 206,313 210,822

Financial liabilitiesmembers capital (33,685) (35,364)

trade payables (31,346) (31,244)

Bank overdraft (16,982) (3,055)

Liabilities at amortised cost (82,013) (69,663)

Net financial instruments 124,300 141,159

Liquidity riskthe group has in place facilities to cover short-term working capital requirements but follows a policy of active management and targeting of client receivables and amounts due to be billed to clients, to minimise the level of short-term borrowings. all borrowing facilities are arranged through lovells llp.

at 30 april 2009, lovells llp had committed bank facilities for periods up to a year totalling £60 million (2008: £60 million). at the balance sheet date the group had utilised £17 million of these facilities which are repayable on demand. these facilities have been renewed since the year end and are due to expire between 29 may 2010 and 20 July 2010 when they are expected to be renewed.

trade payables of £31.3 million (2008: £31.2 million) are payable within 12 months of the balance sheet date. members’ capital is repayable when a member retires or if a member’s share of the partnership decreases. as one year’s notice of retirement is required, members’ capital has been presented as a current liability.

the amount of undiscounted cash outflows for financial liabilities is equal to their carrying amount as both trade payables and partner capital are non-interest bearing. these undiscounted cash outflows are potentially due for repayment immediately, subject to member retirement, or within a two month time frame. in practice the majority of the member capital balance is viewed as being of a long-term nature and in most cases capital introduced by new members is expected to replace that of retiring members.

Interest rate riskcash and cash deposits of £18.9 million (2008: £17.5 million) earned interest predominantly at a variable rate linked to liBoR. interest on a maximum of £45 million of the short-term facilities is payable at a floating rate linked to the Bank of england base rate. interest on the remainder of the £60 million short-term facilities is linked to liBoR. the weighted average interest rate on short-term borrowings was 4.24% (2008: 6.53%). management recognises that interest rates are liable to fluctuate and the group accepts this risk and does not consider it likely to be material.


Interest rate sensitivity analysisthe sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the balance sheet date was outstanding for the whole year.

if interest rates were 1% higher/lower and all other variables were held constant, the group’s profit for the year ended 30 april 2009 and equity would have increased/decreased by £19,000 (2008: £145,000).

Foreign currency riskthe group’s income and expenditure is primarily in sterling and euros. However some fees and costs are denominated in other currencies, as are certain of the transactions with lovells llp’s subsidiary undertakings.

the group does not hedge or enter into forward or derivative transactions and is exposed to translation and transaction foreign currency exchange risk.

the group had the following net foreign exchange denominated monetary assets and liabilities:

Group2009

£’0002008£’000

US Dollar 7,656 6,152

euro 58,349 58,390

Japanese Yen 40 1,560

Singapore Dollar 2,026 1,573

chinese Renminbi 3,281 2,917

Hong Kong Dollar 12,661 7,208

84,013 77,800

the fair value of all financial instruments measured at amortised cost, estimated by reference to the net present value of future cash flows, is materially the same as their carrying amount.

Foreign currency sensitivity analysisthe following table details the group’s sensitivity to a 10% increase and decrease sterling against the relevant currencies. the sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 10% change in exchange rates. a positive number below indicates an increase in profit and equity where sterling strengthens 10% against the relevant currency. For a 10% weakening of sterling against the relevant currency, there would be an equal and opposite impact on profit and equity.

Eurocurrency impact

US dollarcurrency impact

Othercurrency impact

2009£’000

2008£’000

2009£’000

2008£’000

2009£’000

2008£’000

Increase/(decrease) in profit

495 419 1,802 1,660 614 238

23. Financial instruments – Group (continued)


25. Related party transactions – Group and lovells llp

transactions between lovells llp and its subsidiary undertakings, which are related parties, have been eliminated on consolidation.

the share of the profit and the salaries of the key management team for the year ended 30 april 2009 amounted to £7.1 million (2008: £8.4 million).

24. Subsequent event

in December 2009 the partners of lovells llp and those of US based law firm Hogan & Hartson llp decided to combine their practices under the single brand of Hogan lovells with effect from 1 may 2010. Subject to regulatory clearances, Hogan lovells will operate through the two existing principal llps, which will be renamed. the existing businesses will be rearranged such that services in north and South america will principally be performed by Hogan lovells US llp while those elsewhere in the world will principally be performed by Hogan lovells international llp. Given that the transaction will not be effective until 1 may 2010, at the time of approving these financial statements, it is not possible to determine the estimated financial effect of this rearrangement.

Lovells (the “firm”) is an international legal practice comprising Lovells LLP and its affiliated businesses. Lovells LLP is a limited liability partnership registered in england and Wales with registered number oC323639. registered office and principal place of business: atlantic house, holborn Viaduct, London eC1a 2FG. the word “partner” is used to refer to a member of Lovells LLP, or an employee or consultant with equivalent standing and qualifications, and to a partner, member, employee or consultant in any of its affiliated businesses who has equivalent standing. new york State notice: attorney advertising.

© Lovells LLP 2010. all rights reserved. 6590_Bd_0110

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Lovells LLP and its affiliated businesses have offices in:

www.lovells.com

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