Burford Capital Ltd [BUR] Filings

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark one)

For the fiscal year ended: December 31, 2021

Commission file number: 001-39511

BURFORD CAPITAL LIMITED

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

Bailiwick of Guernsey

(Jurisdiction of incorporation or organization)

Oak House, Hirzel Street

St. Peter Port

Guernsey GY1 2NP

(Address of principal executive offices)

Mark N. Klein

350 Madison Avenue

New York, New York 10017

Telephone: (212) 235-6820

Fax: (646) 736-1986

(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)

SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT.

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SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT. None

SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(d) OF THE ACT. None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. At December 31, 2021, there were 219,049,877 ordinary shares outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing. U.S. GAAP ☒

International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ Other☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐     Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

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Forward-looking statements

In addition to statements of historical fact, this annual report on Form 20-F (this “Annual Report”) contains “forward-looking statements” within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended (the “Exchange Act”). The disclosure and analysis set forth in this Annual Report include assumptions, expectations, projections, intentions and beliefs about future events in a number of places, particularly in relation to our operations, cash flows, financial position, plans, strategies, business prospects, changes and trends in our business and the markets in which we operate. These statements are intended as “forward-looking statements”. In some cases, predictive, future-tense or forward-looking words such as “aim”, “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “forecast”, “guidance”, “intend”, “may”, “plan”, “potential”, “predict”, “projected”, “should” or “will” or the negative of such terms or other comparable terminology are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. In addition, we and our representatives may from time to time make other oral or written statements which are forward-looking statements, including in our other periodic reports that we file with, or furnish to, the US Securities and Exchange Commission (the “SEC”), other information sent to our security holders and other written materials. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and are based on numerous assumptions, expectations, projections, intentions and beliefs and that our actual results of operations, including our financial position and liquidity, and the development of the industry in which we operate may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements contained in this Annual Report. In addition, even if our results of operations, including our financial position and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Annual Report, those results of operations or developments may not be indicative of results of operations or developments in subsequent periods.

Factors that might cause future results of operations or developments to differ include, among others, the following:

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements contained in this Annual Report and our other periodic reports that we file with, or furnish to, the SEC. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess

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the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.

The forward-looking statements speak only as of the date of this Annual Report and, except as required by law, we undertake no obligation to update or revise the forward-looking statements contained in this Annual Report, whether as a result of new information, future events or otherwise.

Summary of risk factors

Risks related to our business and industry

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Regulatory risks

Information technology, third-party service providers and cybersecurity risks

Risks related to our indebtedness

Risks related to our ordinary shares

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Risks related to our incorporation in Guernsey

Basis of presentation of financial information

We report our financial statements for the year ended December 31, 2021, and comparative periods included in this Annual Report in accordance with the generally accepted accounting principles in the United States (“US GAAP”). See “Financial and operational review—Conversion to US GAAP” for a summary of the changes in presentation from the International Financial Reporting Standards (“IFRS”) to US GAAP.

Our financial statements are presented in US dollars.

Non-GAAP financial measures relating to our business structure

US GAAP requires us to present financial statements that consolidate some of the limited partner interests in funds we manage as well as assets held on our balance sheet where we have a partner or minority investor. See note 17 (“Variable interest entities”) to our consolidated financial statements for additional information. We refer to this presentation as “consolidated”. We strive to provide a view of Burford as a stand-alone business (i.e., eliminating the impact of these funds) by furnishing information on a non-GAAP basis that eliminates the effect of this consolidation. We refer to this presentation as “Burford-only”. In addition, we strive to provide supplemental information that presents the totality of our legal finance activities by furnishing information on a non-GAAP basis that reflects the contribution of both our consolidated and unconsolidated funds. We refer to this presentation as “Group-wide”. To that end, throughout this Annual Report, we refer to our funding configuration as follows:

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We use Burford-only and Group-wide financial measures, which are calculated and presented using methodologies other than in accordance with US GAAP, to supplement analysis and discussion of our consolidated financial statements. We believe Group-wide financial measures, including Group-wide information on our capital provision assets and undrawn commitments, are useful to investors because they convey the scale of our existing (in the case of Group-wide capital provision assets) and potential future (in the case of Group-wide undrawn commitments) business and the performance of all legal finance assets originated by us. Although we do not receive all of the returns of our funds, we do receive performance fees as part of our income. Further, we believe that Group-wide portfolio metrics, including the performance of our managed funds, are important measures by which to assess our ability to attract additional capital and to grow our business, whether directly or through managed funds. These non-GAAP financial measures should not be considered as a substitute for, or superior to, financial measures calculated in accordance with US GAAP. See “Financial and Operational Review—Data reconciliations” for a reconciliation of these non-GAAP financial measures to our consolidated financial statements prepared in accordance with US GAAP.

APMs and non-GAAP financial measures relating to our operating and financial performance

APMs

This Annual Report presents certain unaudited alternative performance measures (“APMs”). The APMs are presented because (i) we use them to monitor our financial position and results of operations and/or (ii) we believe they are useful to investors, securities analysts and other interested parties. The APMs, as defined by us, may not be comparable to similarly titled measures as presented by other companies due to differences in the way the APMs are calculated. Even though the APMs are used to assess our financial position and results of operations, and these types of measures are commonly used by investors, they have important limitations as analytical tools, and you should not consider them in isolation from, or as substitutes for, our consolidated financial position or results of operations. Consistent with how management assesses Burford’s business, we also present certain of these APMs on a (i) consolidated basis, (ii) Burford-only basis and (iii) Group-wide basis.

The presentation of the APMs is for informational purposes only and does not purport to present what our actual financial position or results of operations would have been, nor does it project our financial position at any future date or our results of operations for any future period. The presentation of the APMs is based on information available at the date of this Annual Report and certain assumptions and estimates that we believe are reasonable. Several of the APMs measure certain performance of our assets to the end of the period and include concluded and partially concluded portfolios (as described below).

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In discussing cash returns and performance of our asset management business, we refer to several metrics that we have applied consistently in our financial disclosure:

In most instances, concluded assets both conclude and result in receipt of all cash proceeds associated with the assets in the same period. Sometimes, non-cash assets are received or cash will be paid over time. In those instances, “due from settlement of capital provision assets” receivable is recorded on our statement of financial position, in which event we estimate the future date we expect to receive cash for purposes of calculating returns or other metrics, such as IRR and WAL (each as defined below). When proceeds are ultimately received, we adjust our presentation of returns to reflect actual proceeds and timing.

For purposes of calculating returns, we must consider how to allocate the costs associated with an asset in the event of a partial conclusion. Our approach to cost allocation depends on the type of asset:

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Unlike our IRR and ROIC calculations, using the aggregate cash flows from the portfolio in making our portfolio level computations will not readily work with WAL computations because our funded assets are originated in different timeframes. Instead, in calculating a portfolio WAL, we compute a weighted average of the individual asset WALs. In doing this, we weight the individual WALs by the costs deployed on the asset and also, as a separate calculation, by the amount of realizations on the individual assets.

Non-GAAP financial measure

In addition to these measures of cash returns and performance of our asset management business, we also refer to cash receipts which is a non-GAAP financial measure:

Cash receipts is a non-GAAP financial measure and should not be considered as a substitute for, or superior to, financial measures calculated in accordance with US GAAP. The most directly comparable US GAAP measure is proceeds from capital provision assets as set forth in our consolidated statements of cash flows. We believe that cash receipts is an important measure of our operating and financial performance and is useful to management and investors when assessing the performance of our Burford-only capital provision assets. See “Financial and Operational Review—Data reconciliations—Cash receipts data reconciliation” for a reconciliation of cash receipts to proceeds from capital provision assets.

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Certain terms used in this Annual Report

In this Annual Report, references to “Burford”, “we”, “us” or “our” refer to Burford Capital Limited and its subsidiaries, unless the context requires otherwise.

Certain additional terms used in this Annual Report are set forth below:

Advantage Fund

Burford Advantage Master Fund LP, a private fund focused on pre-settlement litigation strategies where litigation risk remains, but the risk is anticipated to be lower than that of our core legal finance business.

Alternative strategies

Encompasses complex strategies, lower risk legal finance and post-settlement finance assets that provide lower but attractive risk-adjusted returns.

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Asset management

Includes our activities administering the private funds we manage for third-party investors.

Asset management income

Income from fees earned from administering the private funds we manage for third-party investors.

Asset recovery

Pursuit of enforcement of an unpaid legal judgment, which may include our financing of the cost of such pursuit and/or judgment enforcement.

BAIF

Burford Alternative Income Fund, a private fund focused on post-settlement legal finance matters.

BCIM

Burford Capital Investment Management LLC, a wholly owned indirect subsidiary of Burford Capital Limited, serves as the investment advisor of all of our managed funds and is registered under the US Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”).

BOF

Burford Opportunity Fund, a private fund focused on pre-settlement legal finance matters.

BOF-C

Burford Opportunity Fund C LP, a private fund through which a sovereign wealth fund invests in pre-settlement legal finance matters under the sovereign wealth fund arrangement.

Capital provision assets

We subdivide our capital provision assets into two categories:

Capital provision income

Income from our portfolio of capital provision assets and related positions.

Carrying value

Amount at which an asset is carried on the balance sheet, reflecting cost and any fair value adjustment.

Claimant

The party who asserts a right or title in a legal proceeding, in particular in arbitration matters.

Claim family

A group of legal finance assets with a related underlying claim shared by a number of different claimants.

Colorado

Colorado Investments Limited, a limited liability company that was created for the secondary sale of some of our entitlement in the YPF-related Petersen matter.

Complex strategies

Encompasses our activities providing capital as a principal in legal-related assets, often securities, debt and other financial assets where a significant portion of the expected return arises from the outcome of legal or regulatory activity.

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Consolidated funds

Certain of our private funds in which, because of our investment in and/or control of such private funds, we are required under US GAAP to consolidate the minority limited partner’s interests in such private funds and include the full financial results of such private funds within our consolidated financial statements. At the date of this Annual Report, BOF-C, the Strategic Value Fund and the Advantage Fund are consolidated funds.

Core legal finance

Provision of capital and expertise, to clients or as a principal, in connection with (i) the underlying asset value of litigation claims and enforcement of, settlements, judgments and awards, (ii) the amount paid to law firms as legal fees and (iii) the value of assets affected by litigation.

Defendant

The party against whom a civil action is brought, in particular in litigation matters.

Deployment

Funding provided for an asset, which adds to our invested cost in such asset.

Definitive commitments

Commitments where we are contractually obligated to fund incremental capital and failure to do so would typically result in adverse contractual consequences (such as a dilution in our returns or the loss of our funded capital in a case).

Discretionary commitments

Commitments where we are not contractually obligated to advance capital and generally would not suffer adverse financial consequences from failing to do so.

Fair value adjustment

The amount of unrealized gain or loss recognized in our profit or loss account in the relevant period and added to or subtracted from our balance sheet asset value.

Judgment debtor

A party against whom there is a final adverse court award.

Judgment enforcement

The activity of using legal and financial strategies to force a judgment debtor to pay an adverse award made by a court.

Legal finance

Our legal finance products and services comprise (i) core legal finance and (ii) alternative strategies.

Legal risk management

Matters where we provide some form of legal risk arrangement, such as an indemnity or insurance for adverse legal costs.

Litigation

We use the term litigation colloquially to refer to any type of matter involved in the litigation, arbitration or regulatory process and the costs and legal fees associated therewith.

Lower risk legal finance

Pre-settlement litigation investments with lower risk and lower expected returns than assets included in our core legal finance portfolio. At the date of this Annual Report, our lower risk legal finance activity occurs primarily in a third-party managed fund (i.e., Advantage Fund).

Management fee

The fee earned by us from administering the private funds we manage for third-party investors.

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Monetization

The acceleration of a portion of the expected value of a litigation or arbitration matter prior to resolution of such matter, which permits a client to convert an intangible claim or award into tangible cash on a non-recourse basis.

Net realized gain/loss

The sum of the realized gains and realized losses in a period.

Non-consolidated funds

Certain of our private funds that we are not required to include within our consolidated financial statements but include within Group-wide data. At the date of this Annual Report, BCIM Partners II, LP, BCIM Partners III, LP, BCIM Credit Opportunities LP, BOF, BAIF and any “sidecar” funds are non-consolidated funds.

Performance fee

The share of profits generated from funds which we manage on behalf of third-party limited partnerships. This share of profits is paid as a performance fee when the funds meet certain performance conditions.

Plaintiff

The party who institutes a legal action or claim, in particular in litigation matters.

Portfolio finance

Legal finance assets with multiple paths to realization, such as financing for a pool of litigation claims.

Post-settlement finance

Includes our financing of legal-related assets in situations where litigation has been resolved, such as financing of settlements and law firm receivables. At the date of this Annual Report, our post-settlement finance activity occurs primarily in a third-party managed fund (i.e., BAIF).

Privileged information

Confidential information that is protected from disclosure due to the application of a legal privilege or other doctrine, including attorney work product, depending on the laws of the relevant jurisdiction.

Realization

A legal finance asset is realized when the asset is concluded (i.e., when litigation risk has been resolved). A realization will result in us receiving cash or, occasionally, non-cash assets or recognizing a due from settlement receivable, reflecting what we are owed on the asset.

Realized gain or loss

Reflects the total amount of gain or loss generated by a legal finance asset when it is realized, calculated simply as realized proceeds less deployed cost, without regard for any previously recognized fair value adjustment.

Respondent

The party against whom a civil action is brought, in particular in arbitration matters.

Single-case finance

Legal finance assets that are subject to binary legal risk, such as a single filed litigation or arbitration matter with one plaintiff or group of plaintiffs and one defendant or group of defendants.

Strategic Value Fund

BCIM Strategic Value Master Fund LP is a limited partnership for which BCIM serves as the investment advisor and which invests in certain complex strategies assets. Investors in the Strategic Value Fund include third-party limited partnerships as well as Burford’s balance sheet. Investments in the Strategic Value Fund comprise capital provision-indirect assets.

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Sovereign wealth fund arrangement

The agreement we have entered into with a sovereign wealth fund pursuant to which it provides funding for a portion of our legal finance assets through BOF-C.

Transfers to realizations

The amount of fair value adjustment previously recognized on an asset, which is subsequently reversed in the period when a realized gain is recognized.

Unrealized gain or loss

Represents the fair value of our assets over or under their funded cost, as determined in accordance with the requirements of the applicable US GAAP standards, for the relevant financial reporting period (statement of comprehensive income) or cumulatively (statement of financial position).

Vintage

Refers to the calendar year in which a legal finance commitment is initially made.

YPF-related assets

Refers to our Petersen and Eton Park legal finance assets, which are two claims relating to Argentina’s nationalization of YPF S.A., the Argentine energy company.

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Business

History and development

We are composed of our parent company, Burford Capital Limited, and a number of wholly owned subsidiaries in various jurisdictions through which we conduct our operations and make our investments. Burford Capital LLC is a wholly owned indirect subsidiary of Burford Capital Limited and our primary operating company in the United States, and Burford Capital (UK) Limited is a wholly owned indirect subsidiary of Burford Capital Limited and our primary operating company in the United Kingdom. These two entities provide various corporate and investment advisory services to other group companies. Our parent company, Burford Capital Limited, does not have any operations or employees.

We were incorporated in the Bailiwick of Guernsey (“Guernsey”) as a company limited by shares on September 11, 2009. Initially, we were established as a registered closed-ended collective investment scheme. In late 2012, we altered our corporate structure by deregistering as a registered closed-end collective investment scheme and reorganizing to implement a new group structure incorporating certain of our wholly owned subsidiaries. In connection with this reorganization, we acquired our investment adviser through a cashless merger. In December 2016, we acquired BCIM Holdings LLC (formerly known as GKC Holdings, LLC), a law-focused asset manager registered as an investment adviser with the SEC, which added a third-party asset management business to our structure to expand the diversity of capital offerings to investing clients and generate an asset management revenue stream.

Burford Capital Limited has a single class of ordinary shares, which commenced trading on the Alternative Investment Market of the London Stock Exchange (“AIM”) in October 2009 and on the New York Stock Exchange (the “NYSE”) in October 2020, in each case, under the symbol “BUR”. Our subsidiaries have issued bonds traded on the Main Market of the London Stock Exchange.

During 2020, we registered with the SEC as a foreign private issuer, which, among other things, allows us to issue annual consolidated financial statements on Form 20-F and semi-annual interim consolidated financial results on Form 6-K and exempts us from certain provisions applicable to US domestic public companies. See “Risk factors—Risks related to our ordinary shares—We are a foreign private issuer within the meaning of the rules under the Exchange Act and, as such, we are exempt from certain provisions applicable to US domestic public companies” and “Risk factors—Risks related to our ordinary shares—As a foreign private issuer whose shares are listed on the NYSE, we follow certain home country corporate governance practices instead of certain NYSE requirements” for additional information relating to our status as a foreign private issuer.

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We maintain our registered address at Oak House, Hirzel Street, St. Peter Port, Guernsey GY1 2NP. Our telephone number at our registered address is +44 1481 723 450.

Our industry

Despite the overall size and stability of the legal industry, certain trends have fueled the growth of legal finance. In particular, increasing numbers of corporate clients prefer to pay law firms for success rather than on an hourly fee basis. However, law firms operate as cash businesses with comparatively limited balance sheet capacity and often need the steady stream of income that hourly fees provide. Legal finance has grown rapidly over the past decade to bridge this gap. In addition, corporate legal departments are under pressure to extract value from their litigation assets, and legal finance gives them a tool to do so.

We believe our addressable market to be focused on three areas of legal activity: (i) the underlying asset value of claims, settlements, judgments and awards; (ii) the amount paid to law firms each year as legal fees; and (iii) the value of assets affected by legal and regulatory processes. We believe that each of these areas is of significant size and much greater than the supply of capital available and that we are at an early stage of market development. We continuously look for new opportunities to capitalize on investing in, or otherwise generating returns from, the legal finance sector.

Products and services

Legal finance

Our legal finance products and services comprise (i) core legal finance and (ii) alternative strategies. Information about our products and services should be read in conjunction with "Financial and operational review", including presentation of our operating segments, and our consolidated financial statements contained elsewhere in this Annual Report.

We operate in a global market and many of our clients conduct litigation around the world, although we seek to avoid either financing matters or needing to enforce judgments and awards in high-risk jurisdictions the legal systems of which we believe are susceptible to corruption or bias.

We allocate potential assets to different pools of capital according to our allocation policy based on their characteristics, risk levels and anticipated returns. See “—Asset Management” for additional information on our allocation policy.

Core legal finance

Our core legal finance business provides capital and expertise in connection with the three areas of legal activity identified above, namely (i) the underlying asset value of litigation claims, settlements, judgments and awards, (ii) the amount paid to law firms as legal fees and (iii) the value of assets affected by litigation. Our clients include a number of the world’s largest law firms and corporate clients, and our offerings enable them to, among other things, remove cost and risk associated with legal claims, accelerate the realization of cash from those pending claims, increasing capital available for other business purposes, or recover assets from judgment debtors and improve risk management while adding budgetary certainty. In addition to providing capital to clients, we sometimes act as a principal. As a general rule, our only private funds that invest in core legal finance are BOF, BOF-C and legacy Partners funds.

The scope of our core legal finance business is broad and encompasses a wide variety of structures, risk levels and anticipated returns. We provide capital against the underlying value of commercial high-value single or multiple litigation matters at any stage of the litigation process, from before filing to after a final judgment has been entered. In some instances, we provide capital to a law firm that has agreed to take a case on a contingent fee or alternative fee basis. In other instances, we provide capital directly to the corporate client. Our provision of capital may be limited to funding the costs of the fees and expenses needed to take the matter forward or may also monetize some of the potential future value of a claim by offering a client an upfront cash payment. In return, we receive our contractually agreed entitlement from the ultimate settlement or judgment on the claim and, if the claim does not produce any cash proceeds, we generally lose our capital. When we provide capital for multiple cases for the same client, we often do so on a cross-collateralized portfolio basis on terms that tend to recognize the lower risk of loss generally associated with multi-case portfolios. We underwrite each case in these portfolios. Portfolios allow us to originate larger volumes of assets with greater efficiency, as well as to provide clients financing for cases that could be difficult to finance otherwise. We also deploy capital in other ways to express a view about litigation outcomes, such as by purchasing securities whose future value may be affected by litigation outcomes or by acquiring assets that are, or can be the basis for, legal claims.

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For law firm clients, legal finance allows them to obtain cash to operate their businesses and pay the salaries of their lawyers even when they have taken a case on a contingent fee or alternative fee basis. It also allows law firms that prefer to operate on an hourly basis to compete for contingency or alternative fee work. We have worked with 94 of the 100 largest US law firms by revenue according to the 2021 rankings by The American Lawyer and 89 of the 100 largest global law firms by revenue according to the 2021 rankings by The American Lawyer, as well as numerous litigation boutiques.

For corporate clients, legal finance allows them to hire law firms that generally work on an hourly fee basis. Further, legal finance may enable corporate clients to avoid incurring legal fees as an operating expense, thereby improving their net income metrics, and to boost corporate liquidity by obtaining value and cash for an asset through monetizations that otherwise would not be reflected in their financial statements. As legal finance has become more widely known and as we have developed more direct relationships with corporate clients, we are sourcing an increasing share of our corporate business directly.

We also provide legal risk management services to help protect clients against certain adverse litigation outcomes, including the risk of being held liable for adverse costs. In many legal jurisdictions (although generally not in the US), the loser in a litigation must pay the winner’s legal expenses, creating adverse legal cost risk. Adverse legal cost risk is a key issue, especially in the kind of larger complex litigation that is the focus of our core legal finance business. Burford Worldwide Insurance Limited, our wholly owned Guernsey insurer, offers adverse legal cost insurance globally in litigation and arbitration cases that we are financing as part of our core legal finance business, providing a further impetus for clients to work with Burford.

Alternative strategies

Our alternative strategies business is focused on assets that have attractive but lower risk and lower returns than core legal finance, consisting of (i) complex strategies, (ii) lower risk legal finance and (iii) post-settlement finance.

Complex strategies

In our complex strategies business, we act as a principal and acquire assets that we believe are mispriced and for which value can be realized through recourse to legal or regulatory proceedings which we launch. Accordingly, we are typically the owner of the asset associated with the claim and assert the claim ourselves and manage the claim actively. In most cases, there is underlying asset value to support our position, in addition to potential value from legal or regulatory proceedings. An example of our complex strategies business is in merger appraisal situations, where we typically take largely offsetting long and short equity securities positions in conjunction with merger transactions while we pursue judicial appraisal of the fair value of the acquired company’s stock price to determine whether an adequate control premium was offered.

Our complex strategies business has historically been undertaken largely through the Strategic Value Fund, in which we have made a substantial general partner investment alongside the capital provided by the limited partners. With the onset of the Covid-19 pandemic in early 2020, we made a strategic choice during the first half of 2020 to accelerate realizations from the portfolio in the Strategic Value Fund to de-risk in light of global financial uncertainty, turbulent market conditions and uncertain judicial speed and engagement. We did not deploy capital into any new assets in this portfolio during the years ended December 31, 2020, and 2021, and would not expect to do so in the near term, although we continue to explore potential opportunities.

Lower risk legal finance

Our lower risk legal finance business focuses on pre-settlement litigation matters with lower risk and lower expected returns than the assets we include in our core legal finance portfolio. This strategy includes assets originated in the Advantage Fund, which provides capital where litigation risk remains but where the risk is anticipated to be lower than core legal finance matters for structural or other reasons. Burford is an investor in the Advantage Fund and, as a result, the Advantage Fund is consolidated on our consolidated financial statements.

Post-settlement finance

In addition to our core legal finance business, we offer clients the ability to monetize post-settlement and other legal receivables. There can be significant delays between the point at which parties to a litigation matter agree upon a settlement and the finalization of and payment under the settlement. Often, those delays are due to the operation of the judicial process, which may require notice periods and fairness hearings before approval of settlements. In the

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interim period, both law firms awaiting payment of their fees and clients eager for cash to flow may well find it attractive to secure funding against those expected receipts.

In addition, law firms are often looking for funding at various points, particularly towards their fiscal year end when cash is needed to pay partners and employees. In those situations, we offer the ability to monetize or purchase a law firm’s receivables, which typically are high quality.

In both types of situations, as well as certain other situations where a lower risk but legal-related financing opportunity arises, pricing levels for our capital are generally lower than core legal finance. We provide post-settlement finance through one of our managed funds, BAIF, which is a private fund focused on post-settlement legal finance matters. Although we manage BAIF and receive asset management and performance fees, we are not an investor in it and, as a result, BAIF is not consolidated on our consolidated financial statements.

Asset management

We operate eight private funds and three “sidecar” funds as an investment adviser registered with, and regulated by, the SEC. At December 31, 2021, our total AUM was $2.8 billion (2020: $2.7 billion). We believe that we are the largest investment manager focused on the legal finance sector by a considerable margin. We view our asset management business as an important addition to our balance sheet business. Having access to private fund capital has improved our ability to pursue financing opportunities and has also permitted us to engage in larger transactions without seeking external partners.

Between an initial close in late 2021 and a final close in March 2022, we have launched our newest fund, the Advantage Fund, with $300 million in external investor commitments plus an additional investment of $60 million from our balance sheet. The Advantage Fund’s strategy is to finance core legal finance assets where the litigation risk is anticipated to be lower than that of many of our historic core legal finance assets. At December 31, 2021, the Advantage Fund had not yet deployed any capital to assets, and initial deployments by the Advantage Fund began in early 2022.

Under our internal policy in effect at the date of this Annual Report, we allocate certain portions of every new commitment to our own balance sheet and our various private funds as follows:

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The table below sets forth key statistics for each of our private funds at December 31, 2021:

We generally conduct the sponsorship and management of our private funds through limited partnerships. Each private fund that is a limited partnership has a Burford-owned general partner that is responsible for the management and operation of the private fund’s affairs and makes all policy and asset selection decisions relating to the conduct of the private fund’s business. Except as required by law, the limited partners of the private funds take no part in the conduct or control of the business of the private funds, have no right or authority to act for or bind the private funds and have no influence over the voting or disposition of the securities or other assets held by the private funds. Each private fund engages an investment adviser. BCIM serves as the investment adviser for all our private funds and is registered under the Investment Advisers Act of 1940, as amended.

In addition, we operate certain “sidecar” funds pertaining to specific assets and had three active “sidecar” funds at December 31, 2021. A “sidecar” fund is a pooled investment vehicle through which certain investors co-invest directly in specific assets alongside our private funds. Our interest in such “sidecar” funds is generally limited to incentive fees, if any. The discussion of our funds ignores “sidecar” funds unless specifically included, and we collapse fund structures into overall strategies, ignoring, for example, onshore and offshore separations and parallel funds.

Operating processes

Origination and underwriting

Our origination and underwriting teams focus on generating new opportunities to commit capital against litigation and arbitration assets, which in turn is expected to be deployed over a period of time and/or up front against those assets, both from our private funds and our balance sheet.

We engage in extensive marketing and operate a dedicated origination team that targets both law firms and corporate clients. Upon receipt of inbound inquiries generated from our marketing and origination team, we undertake an initial screening process that is intended to filter potential opportunities into our pipeline. Once a potential opportunity progresses into our pipeline, it is assigned to individual underwriters with input from our global team. Underwriters conduct extensive in-house due diligence on potential opportunities in our pipeline, including comprehensive legal and

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factual analysis. In addition, we undertake quantitative modeling using proprietary analytical tools that rely on third-party data as well as a significant proprietary data set we have developed over 12 years of operation.

Assuming the satisfactory completion of the in-house due diligence, the opportunity is presented to our dedicated commitments committee (the “Commitments Committee”) for review. All commitments must be approved by the Commitments Committee, which considers legal and factual merits and risks, reasonably recoverable damages, proposed budget, proposed terms, collection issues and enforceability. If the Commitments Committee approves the opportunity, our underwriters proceed to negotiate the terms of the commitment with a counterparty with the goal of closing the commitment against the asset.

The manner in which we provide funding on a commitment varies widely. Some financing agreements require us to provide funding over a period of time, whereas other financing agreements require us to fund the total commitment up front. In addition, our undrawn commitments are either discretionary or definitive. Discretionary commitments are those commitments where we are not contractually obligated to advance capital and generally would not suffer adverse financial consequences from failing to do so. Definitive commitments are those commitments where we are contractually obligated to fund incremental capital and failure to do so would typically result in adverse contractual consequences (such as a dilution in our returns or the loss of our funded capital in a case).

Pricing and returns

We use a wide range of economic structures for our assets, and our returns can have several components. In a basic single-case funding transaction, we pay some or all of the costs of a claimant bringing a litigation matter. In such transactions, we typically use an economic structure that provides that, upon conclusion of a successful claim, we would receive the return of our funded capital, plus one or more or a combination of the following: (i) a time-based return, such as an interest rate, (ii) a multiple of our funded capital that may increase over time and (iii) an entitlement to some percentage of the net realization that may increase or decrease over time or depending on the size of the total resolution amount. For example, in the case of a multiple only structure, if the claim is successfully resolved (x) within one year after closing the asset, our entitlement could be the return of our funded capital plus one times our cost, (y) more than one and less than two years after closing the asset, our entitlement could be the return of our funded capital plus two times our cost and (z) more than two years after closing the asset, our entitlement could be the return of our funded capital plus three times our cost. The terms of each asset are bespoke, the foregoing examples are hypothetical, and not every asset will have all of these components. Further, some assets will have entirely different economic structures. Moreover, the larger or more complex a matter, the more likely it is that we will use an individually designed transactional structure to fit the needs of the matter, to accommodate what are often multiple parties with different economic interests and to align interests and incentivize rational economic behavior.

We also engage in transactions in which we seek to reduce the risk of loss, typically by using a portfolio or multi-case structure, but occasionally through a variety of other structures, such as interest-bearing recourse debt (sometimes with a premium based on net realizations) or the purchase of equity or debt assets that underlie the relevant litigation or arbitration claims.

We price our assets commensurate with the risks we identify and quantify as part of our in-house due diligence process. We use our bespoke asset return model to calculate the likelihood of loss and probability-weighted risk-adjusted returns for each potential asset considered by the Commitments Committee. In general, as we underwrite new assets, we target risk-adjusted returns consistent with the historic performance of our concluded portfolio, although returns vary widely across different types of investments.

Asset monitoring and realizations

We have an internal portfolio management process to optimize our assets. Each of our matters has a dedicated in-house professional assigned to monitor developments in the underlying case. We generally seek to schedule regular calls with clients to discuss developments in the underlying case, which are then reported monthly to senior management. We also conduct a quarterly risk review and provide quarterly reporting on the portfolio and its risk profile to senior management and our board of directors (the “Board”). Further, we conduct an extensive review of every asset for valuation purposes in connection with preparing our consolidated financial statements. In addition to receiving reports from counsel, we proactively keep ourselves informed of case developments, including receiving docket alerts and reviewing court documents filed.

The matters underlying our assets resolve in various ways consistent with the outcomes in the litigation process generally. A number of the matters reach a negotiated resolution (i.e., a settlement) between the litigants, either

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before or after going to trial. Others do not resolve amicably and go all the way through the formal dispute resolution process, including trial and appeal(s). The duration of those outcomes varies widely and depends on the complexity of the matter and the schedule of the relevant tribunal. In a small number of matters, we have made a secondary sale of all or a portion of an asset prior to the conclusion of the matter underlying such asset.

In many instances, our clients receive full cash payment at resolution of the legal dispute against which we have deployed our capital. However, in other instances, payments are delayed by agreement (i.e., when a settlement is paid in installments over time) or because the parties agree on an entitlement that includes non-cash value that must be monetized over time. Because our clients give up valuable leverage through the pendency of the litigation process by agreeing to a resolution, clients tend not to do so unless payment is reasonably certain and, in our experience, it is not common for there to be a default in connection with such payments. However, there are some instances where the adverse party loses and refuses to pay, in which case enforcement efforts may be needed.

Privileged information

In order to make our underwriting decisions and conduct our ongoing asset monitoring, we receive privileged information from our clients. Such privileged information can lose its protection and become accessible to a litigation opponent if it is disclosed (a concept called “waiver” in the United States), which could have detrimental consequences for the litigant. We are entitled to receive such privileged information but are under a strict obligation to protect it to minimize the risk of waiver. Among other things, this obligation requires us to tightly restrict access to the privileged information itself and conclusions drawn from it. As a result, we do not release asset valuations of ongoing matters underlying our assets, including partially concluded matters, and are similarly unable to provide other asset-specific information about our portfolio unless such information becomes publicly available through other means.

Risk management and compliance

Framework

We have a risk management framework and internal control systems. In conjunction with determining our strategy, we form the risk appetite, determine the type and tolerance levels of significant risks and ensure that judgments and decisions are taken that promote the success of our business. We have also developed policies, procedures and controls for identifying, evaluating and managing all significant risks that we face. In addition, we monitor actual or potential conflicts of interest while avoiding unnecessary risks and maintaining adequate capital and liquidity. Our risk management culture is critical to the effectiveness of our risk management framework.

Our risk appetite policy is founded on a set of robust and comprehensive financing and asset management procedures as well as a conservative approach to capital and liquidity management. Our review of key risks focuses on identifying those risks that could threaten the business model or the future performance, capital or liquidity of our business. The key risks are identified through consideration of our strategy, external developments, legal and regulatory expectations, the operating environment for our businesses and an analysis of individual processes and procedures.

See “Quantitative and qualitative disclosures about market risk” for information relating to the various risks that we face in our business and operations.

Enterprise

We regularly consider business and systemic risks in our operating segments and overall. We have long been focused on operational risk and have a system of internal controls designed to protect and enhance the integrity of our internal processes and data. Moreover, we are fundamentally a business run by experienced lawyers, including some who have functioned in senior legal roles in major global corporations. The challenge in many businesses is reining in individuals who take on unacceptable or ill-considered risks, and it is the function of the lawyers to hold those reins. At Burford, we have a business run by people accustomed to that role. Our culture is a disciplined, risk-focused one, augmented by an in-house legal and compliance team.

Legal finance assets

As applied to our portfolio of legal finance assets, we manage risk by employing a disciplined, comprehensive, multi-stage process to evaluate potential legal finance assets and engage in substantial portfolio management activities applying a risk-based approach, in which we benefit from the judgment and experience of our qualified team of experienced lawyers and finance professionals. See “—Operating processes—Origination and underwriting” and “—

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Operating processes—Asset monitoring and realizations” for information relating to our due diligence process and asset monitoring for the legal finance assets.

Financial controls

Our finance team, which includes a number of individuals with public accounting qualifications, is integrated into our business and is present in all three of our large offices. By having the finance team integrated into our business and privy to asset-financing activity, we gain considerable control benefits in addition to a more effective operation. We make a relatively small number of investments each year, closing only a couple of new legal finance assets per week on average, which limits the number of processes and transactions required. We also have controls around access to payment systems and the release of payments such as requiring approvals from multiple individuals within the organization before a payment is released.

Compliance program

We have policies and procedures for reporting misconduct or other workplace issues. Our employees are directed to escalate any known or suspected compliance policy violations or misconduct to our Chief Compliance Officer. Alternatively, our employees have the option to call or email a hotline (which is administered by a third party) on an anonymous basis. We also maintain a global anti-retaliation and whistleblower policy, under which retaliation of any type against an individual who reports any suspected compliance policy violations or misconduct or assists in the investigation of compliance policy violations or misconduct is strictly prohibited. Our employees may also report potential violations of law or regulation directly to a government agency.

Technology

We are alert to the risks associated with the dissemination of our privileged information publicly, especially as such information contains highly sensitive client litigation information. We have also focused on the risk associated with attacks on our financial systems. From our inception, we have been sensitive to these issues and have operated on an entirely cloud-based platform. Our data is not stored on our own servers, but rather on the servers of world-class technology companies. The use of the cloud-based platforms also comes with built-in disaster recovery protection. At the date of this Annual Report, we have not had a widespread data breach, but we have protocols in place should one occur.

We also engage in a variety of training and testing and introduce restrictions on technology use designed to minimize those risks. We regularly review best practices from both the legal and financial services industries and are engaged in a program of continuous improvement. We have an internal cybersecurity committee, composed of senior representatives from all of our offices, and we regularly review, benchmark and audit our cybersecurity controls against peer norms, including those promulgated by the SEC and best practices identified in the legal and financial services industries. Moreover, we maintain a set of cybersecurity and information security policies, which, among others, provide specific guidelines for the use of various devices, electronic communications and the use of social media. The policies also specify escalation points for reporting potential breaches to our Chief Information Officer and our Chief Compliance Officer. Our Chief Information Officer and information technology team maintain a protocol for responding to a potential breach. We strive to create a pervasive culture of information technology security, focusing particularly on the tone set by our senior management, and all of our employees are required to complete a cybersecurity training at regular intervals throughout the year.

In addition to data security, we are focused on privacy and are sensitive to the various obligations we face in that regard. However, given that we do not deal with consumers and are purely a corporate business, the burdens on us are less extensive than on businesses amassing considerable personal data. Finally, we have procedures in place to address actual or potential conflicts of interest.

Regulation

Our operations are subject to regulation and supervision in a number of jurisdictions. The level of regulation and supervision to which we are subject varies from jurisdiction to jurisdiction and is based on the type of activity involved. We, in conjunction with our outside advisors and counsel, seek to manage our operations in compliance with such regulation and supervision.

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United States

BCIM, a wholly owned indirect subsidiary of Burford, serves as the investment advisor of all of our managed funds and is registered as an investment advisor with the SEC under the Investment Advisers Act. BCIM, as an investment advisor, is subject to the anti-fraud provisions of the Investment Advisers Act and to fiduciary duties derived from these provisions, which apply to our relationships with our advisory clients globally, including funds that we manage. These provisions and duties impose restrictions and obligations on us with respect to our dealings with our fund investors and our investments, including for example restrictions on agency cross and principal transactions. BCIM is subject to periodic examinations by the SEC and other requirements under the Investment Advisers Act and related regulations primarily intended to benefit advisory clients. These additional requirements relate, among other things, to maintaining an effective and comprehensive compliance program, record-keeping and reporting requirements and disclosure requirements. The Investment Advisers Act generally grants the SEC broad administrative powers, including the power to limit or restrict an investment adviser from conducting advisory activities in the event it fails to comply with federal securities laws. Additional sanctions that may be imposed for failure to comply with applicable requirements include the prohibition of individuals from associating with an investment adviser, the revocation of registrations and other censures and fines.

In addition, we are subject to the rules and regulations of the NYSE and the SEC as a public company in the United States.

There is no federal regulation of litigation finance in the US. Individual states or individual judicial districts may promulgate rules concerning matters such as disclosure but there is no widespread or national trend in connection therewith.

United Kingdom

The UK Financial Conduct Authority (the “FCA”) regulates our legacy UK insurance business and our UK insurance intermediation business with respect to Burford Worldwide Insurance Limited. The FCA and the London Stock Exchange regulate the trading of our ordinary shares on AIM in the United Kingdom, and Numis Securities Limited is our nominated adviser under the AIM rules. The FCA also reviews debt prospectuses for our retail bonds traded on the Main Market of the London Stock Exchange.

Burford Law is subject to separate regulations, principally, the Standards and Regulations and the Code of Conduct of the Solicitors Regulation Authority of England and Wales.

In addition, the United Kingdom engages in some regulation of legal finance conduct, as expressed in the Code of Conduct promulgated by the Association of Litigation Funders, a self-regulatory body that operates under the auspices of the Ministry of Justice and of which we were a founder.

Guernsey

The Guernsey Financial Services Commission regulates our insurance business conducted through Burford Worldwide Insurance Limited. Burford Worldwide Insurance Limited is licensed to carry on international, domestic and general insurance business under the Insurance Business (Bailiwick of Guernsey) Law, 2002 (as amended).

Other jurisdictions

In Australia, group actions involving multiple plaintiffs are regulated by a licensing and managed investment scheme regime and other consumer protection rules. In addition, there are conflict of interest rules that apply to litigation funders.

Certain newer entrants to the market, such as Singapore and Hong Kong, have also enacted regulatory regimes largely focused on capital adequacy and constraining abusive behavior.

Industry

We engage in a constant level of activity around monitoring and engagement on regulatory initiatives relating to the legal finance industry. At the date of this Annual Report, we have not seen any indication that there is any groundswell of support for regulation of the legal finance industry, and ongoing discussion tends to focus on subsidiary issues, such as disclosure and capital adequacy. For example, in the US, legislation has been introduced in the US Congress in multiple sessions that would require litigants to “produce for inspection and copying” any legal funding agreements creating contingent rights to payment in class actions and multidistrict litigations. Such legislation has not received consideration beyond introduction, but we expect that the same or similar legislation will be introduced again in the

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future. Similar legislation is introduced in various US state legislatures from time to time. In the US, state and federal legislatures as well as the federal courts have generally declined to impose new regulations on the commercial legal finance industry. However, even if there were support for additional regulation of the legal finance industry, we believe that such regulation would create a barrier to entry for others and thus protect our market position.

We are also subject to various other laws, rules and regulations, ranging from the UK Bribery Act 2010, as amended, and the Foreign Corrupt Practices Act of 1977, as amended, to anti-money laundering and know-your-customer regulations in a number of jurisdictions.

There are a number of legislative and regulatory initiatives in the US, the UK and the other jurisdictions in which we operate. See "Risk factors—Regulatory risks” for a discussion of risk factors relating to laws, rules and regulations applicable to our business and operations.

Employees

At December 31, 2021, we had a total of 140 full-time employees across our offices in the US, the UK, Singapore, Australia and Hong Kong and in other jurisdictions around the world where we do not have formal offices. Our staff includes 56 lawyers qualified to practice in the US, UK, Australia, Hong Kong, South Africa, Switzerland or Israel, as applicable.

The table below sets forth our full-time employees by office location based on the respective office affiliation of such full-time employees at December 31, 2021:

We consider our relationship with our employees to be good and have never experienced an organized labor dispute, strike or work stoppage.

Environmental, Social and Governance

We recognize that every business has a responsibility to account for its impact on environmental, social and governance (“ESG”) factors. In so doing, we have relied on guidance relating to the integration of ESG into investor reporting and communication from a number of sources, including the Principles for Responsible Investment supported by the United Nations, to which many of our investors are signatories and the influence of which was evidenced in the amendments to the UK Stewardship Code.

As a specialty legal finance provider, we have a limited environmental footprint, but we nonetheless work to minimize our carbon and energy footprints by, among other things, increasing use of videoconferencing to minimize physical travel, encouraging employees to use ridesharing and public transit services over higher carbon footprint activities such as driving, discouraging the creation of potentially polluting materials, operating a robust recycling program in each of our offices and being sensitive to and monitoring environmental issues across our office locations.

Our Equity Project earmarks legal finance capital to promote diversity by giving historically underrepresented lawyers an edge as they pursue leadership positions in significant commercial litigations and arbitrations. It also augments companies’ ESG and diversity, equity and inclusion initiatives by providing incentives for the firms that represent them to appoint historically underrepresented lawyers and to award them origination credit.

Executive accountability for our ESG impact resides with an ESG committee, headed by our Co-Chief Operating Officer, General Counsel and Chief Administrative Officer, and Chief Financial Officer. The Board regularly scrutinizes our corporate responsibility, and oversight of ESG is specifically vested in the nominating and governance committee of the Board (the “Nominating and Governance Committee”).

We are committed to advancing transparency of our ESG reporting practices and intend to periodically publish ESG-related reports, including our annual sustainability report, which will be made available on our website. The information on, or that can be accessed through, our website is not incorporated by reference into, and does not form a part of, this Annual Report.

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Organizational structure and significant subsidiaries

The chart below sets forth our organizational structure at December 31, 2021. The chart below does not depict all of our subsidiaries, including intermediate holding companies through which certain of the subsidiaries depicted are held.

The table below sets forth our “significant subsidiaries”, as defined in Rule 1-02(w) of Regulation S-X under the US securities law, at December 31, 2021:

^* Represents investment subsidiaries.

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Geographic activity

At December 31, 2021, we had (i) three offices in the US: New York, New York; Chicago, Illinois; and Washington, DC, and (ii) four offices outside the US: London, United Kingdom; Singapore, Singapore; Hong Kong, China; and Sydney, Australia. In addition, we had individual employees located in various other jurisdictions around the world where we do not have formal offices. We have a diverse group of lawyers qualified to practice in the US, UK, Australia, Hong Kong, South Africa, Switzerland or Israel, as applicable. See “—Employees” for a breakdown of our employees by geographic location.

Property and equipment

We do not own any real property, and we lease our principal office spaces from third parties. The table below sets forth the location, square footage and main use of our leased offices at December 31, 2021:

* Represents shared office space.

Seasonality

Historically, we have closed and funded a disproportionate amount of our new business in the second and fourth quarters, and particularly in June and December, primarily driven by the business cycle of our clients. However, our revenues and realizations have not been subject to seasonality.

Legal proceedings

From time to time, we may be involved in various legal or administrative proceedings, lawsuits and claims incidental to the conduct of our business. Some of these proceedings, lawsuits or claims may be material and involve highly complex issues that are subject to substantial uncertainties and could result in damages, fines, penalties, non-monetary sanctions or relief. At the date of this Annual Report, we are not a party to any material pending legal or administrative proceedings, lawsuits or claims that we believe may have a significant adverse effect on our business, financial position, results of operations or liquidity. Our business and operations are also subject to extensive regulation, which may result in regulatory proceedings against us.

Unresolved staff comments

None.

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Financial and operational review

The following discussion should be read in conjunction with Burford’s consolidated financial statements and the related notes contained elsewhere in this Annual Report.

Economic and market conditions

Covid-19

Existing assets: The Covid-19 pandemic has had uneven impacts on dispute resolution systems around the world. Some, like international arbitration, are functioning well and without material delay from the pandemic; and may have experienced increased efficiency by moving to virtual hearings. Others have shown uneven and often adjudicator-specific impacts, with some judges staying on schedule and moving cases forward and others slowing and permitting delays. Some have seen systemic delays, such as the general unavailability of jury trials in the United States and the consequent creation of a trial backlog. Moreover, delays in the adjudicative process also lead to delays in case settlements, as parties do not feel pressure to resolve matters. Inevitably, some of Burford’s matters (and thus our cash realizations from them) have been and will be slowed by these dynamics, while others will proceed apace. Delay in matters, however, is often profitable for Burford, as many of our assets have time-based terms which will increase Burford’s returns as time passes, so we consider these delays to be the deferral of income rather than its permanent diminution. We have not seen the discontinuance of any matters.

New business: The pandemic is affecting new business in a variety of ways.

Party insolvency: While economic stimulus and activity have lessened this risk, there remains a risk that parties may become insolvent, which could impact the timing and quantum of litigation recoveries. The ultimate payor in much of our litigation is either (i) a government or a state-owned entity, (ii) an insurer or (iii) a large company in an industry less likely to be rendered insolvent by pandemic-related economic disruption. As a result, we do not presently believe that our existing portfolio is likely to be materially negatively affected by party insolvency.

To the extent that parties in our matters do become insolvent, the impact of a party’s insolvency on pending litigation is very difficult to predict and is not only case specific, but also dependent on the insolvency process in the country in issue. For example, in the United States, entry into a corporate restructuring via Chapter 11 of the Bankruptcy Code does not eliminate litigation claims but is likely to delay them, whereas in countries that proceed directly to liquidation, a pending claim is more likely to be settled at a lower value than might have been the case had the party remained solvent. In general, however, other than in insolvencies where there is no recovery for anyone but secured creditors, Burford would still expect to see a recovery, but that recovery is likely to be delayed and could well be reduced in size during the restructuring or liquidation process.

As our portfolio has evolved, a much larger portion of our assets are related to large companies or law firms with low insolvency risk or in asset purchases where counterparty risk is not a factor. In a significant number of our assets, we are a secured creditor with respect to the litigation we are financing, and the litigation is a valuable contingent asset the recovery of which is in the best interest of the counterparty’s stakeholders. As a result, it is unlikely that the financial distress or insolvency of one of our counterparties would interfere with the continued progress of the litigation matter.

See “Risk factors—Risks related to our business and industry—Legal, political and economic uncertainty surrounding the effects of the Covid 19 pandemic could adversely affect our business, financial position, results of operations and/or liquidity”.

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Financial and operational review

continued

Uncorrelated returns

Our returns are driven by judicial activity and are uncorrelated to market conditions or economic activity. The return of economic stress is likely good for us, as we tend to generate business when companies face increased liquidity challenges and other forms of uncertainty.

Litigation activity

In addition to delays in current matters, we have also observed a slowdown in new litigation activity. We believe that we will see the filing of some amount of pent-up litigation in the future, as well as a material increase in bankruptcy filings as the effects of government stimulus wear off over time and as interest rates rise.

Sanctions

The recent events in Ukraine and the subsequent international sanctions imposed on Russian businesses and individuals have had a wide-ranging impact on the legal industry. In particular, the recent international imposition of sanctions has had a profound effect on the flow of capital in and out of Russia. Generally speaking, we do not do business in the domestic courts of either Russia or Ukraine, nor do we take on matters requiring us to enforce against assets held in those countries. We have financed litigation or arbitrations in other jurisdictions against entities that might have an ultimate Russian parent or controller. There are only a handful of cases that fit this description and in aggregate represent $93 million of the $2,900 million (or approximately 3.2%) of total carrying value for capital provision assets. We are mindful of any sanctions or other issues and work regularly with specialist counsel in the sanctions area (as well as ensuring compliance with all legal requirements, such as anti-money laundering). Where we are required to enforce judgments or awards, even against sanctioned entities, such enforcement tends to be consistent with the goals of international sanctions regimes rather than running afoul of them, and the US Office of Foreign Assets Control and the UK Office of Financial Sanctions Implementation regularly grant licenses to do so. We do not anticipate any adverse impact on our business from the current sanctions regime.

Consolidated results of operations

Set forth below is a discussion of our consolidated results of operations as reported under US GAAP. This “Financial and operational review” also contains a discussion of certain APMs that are also used by management to review and assess our operations. These APMs and non-GAAP financial measure set forth under “Basis of presentation of financial information” are supplemental and should not be considered as a substitute for, or superior to, our consolidated results of operation as reported under US GAAP. As discussed under “—Conversion to US GAAP”, because we are reporting our results under US GAAP, historical data for the year ended December 31, 2020, and prior periods may differ from the historical data previously prepared in accordance with IFRS.

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Financial and operational review

continued

Year ended December 31, 2021, compared to year ended December 31, 2020

The following table provides an overview of our consolidated results of operations for the years ended December 31, 2021 and 2020.