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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark one)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2021

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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.

Title of Each Class

    

Trading Symbol(s)

    

Name of Each Exchange on Which Registered

Ordinary shares, no par value

BUR

New York Stock Exchange

London Stock Exchange AIM

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):

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Emerging growth company 

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

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:

Adverse litigation outcomes and timing of resolution of litigation matters
Valuation uncertainty in respect of the fair value of our capital provision assets
Our ability to identify and select suitable legal finance assets and enter into contracts with new and existing clients
Changes and uncertainty in laws and regulations that could affect our industry, including those relating to privileged information
Improper use or disclosure of privileged information under our control due to cybersecurity breaches, unauthorized use or theft
Inadequacies in our due diligence process or unforeseen developments
Credit risk and concentration risk relating to our legal finance assets
Competitive factors and demand for our services and capital
Negative publicity or public perception of the legal finance industry or us
Current and future economic, political and market forces, including uncertainty surrounding the effects of the Covid-19 pandemic
Potential liability from future litigation
Our ability to retain key employees
The sufficiency of our cash and cash equivalents and our ability to raise capital to meet our liquidity needs
Other factors discussed under “Risk factors

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

2    Burford Capital Annual Report 2021    

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

Litigation outcomes are risky and difficult to predict and a loss in a litigation matter may result in the total loss of our capital associated with that matter.
Our revenues, earnings and cash flows can vary materially between periods as both the timing of resolution and the outcome of litigation matters are difficult to predict.
Our success depends on our ability to identify and select suitable legal finance assets to fund, and our failure to do so could have a material adverse effect on our ability to achieve our investment objectives.
Our business and operations could suffer if we are not able to prevent improper use or disclosure of, or access to, privileged information under our control due to cybersecurity breaches, unauthorized use or theft.
The failure of the statistical models and decision science tools we use to predict the return on our legal finance assets could have a material adverse effect on our business, financial position, results of operations and/or liquidity.
The laws relating to privileged information are complex and continue to evolve, and any adverse court rulings, changes in law or other developments could impair our ability to conduct effective due diligence on potential legal finance assets.
The due diligence process that we undertake in connection with funding legal finance assets may not reveal all facts that may be relevant in connection with such funding.
Investors will not have an opportunity to independently evaluate our legal finance assets.
We are subject to credit risk relating to our various legal finance assets which could adversely affect our business, financial position, results of operations and/or liquidity.
Our portfolio may be concentrated in cases likely to have correlated results, and we have a number of assets involving the same counterparty.
The lack of liquidity of our legal finance assets may adversely affect our business, financial position, results of operations and/or liquidity.
We have commitments that are in excess of funds raised.
Changes in the market conditions may negatively impact our ability to obtain attractive external capital or to refinance our outstanding indebtedness and may increase the cost of such financing or refinancing if it is obtained.
We face substantial competition for opportunities to finance legal assets, which could delay commitment and/or deployment of our capital, reduce returns and result in losses.
If the lawyers we rely on to prosecute and/or defend claims do not exercise due skill and care, or the interests of their clients do not align with ours, there may be a material adverse effect on the value of our legal finance assets.
If the commitments we make on behalf of our funds perform poorly, we may not earn asset management fees and/or performance fees, and our ability to raise capital for future funds may be materially and adversely affected.
A significant portion of our AUM is attributable to a fund with a single investor.
We face competition for investments in our asset management business and may not be successful in raising funds in the future.

Burford Capital Annual Report 2021    3

Negative publicity or public perception of the legal finance industry or us could adversely affect our reputation, business, financial position, results of operations and/or liquidity.
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.
We report our capital provision assets at fair value, which may result in us recognizing non-cash income that may never be realized.
There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of our consolidated financial statements.
Our past performance may not be indicative of our future results of operations.
Litigation and legal proceedings against us could adversely impact our business, financial position, results of operations and/or liquidity
Our success depends substantially on the continued retention of certain key personnel and our ability to hire and retain qualified personnel in the future to support our growth and execute our business strategies.
Our international operations subject us to increased risks.
We may face exposure to foreign currency exchange rate fluctuations and may hold unhedged securities positions.
The tax treatment of our financing agreements is subject to significant uncertainty.

Regulatory risks

The laws, regulations and rules relating to legal finance are evolving and may be uncertain, which may have negative consequences for the value or enforcement of our contractual agreements with our counterparties, our ability to do business in certain jurisdictions or our cost of doing business.
Our asset management business is highly regulated, and changes in regulation or regulatory violations could adversely affect our business.
We are subject to the risk of being deemed an investment company.

Information technology, third-party service providers and cybersecurity risks

Cybersecurity risks could result in the loss of data, interruptions in our business or damage to our reputation and subject us to regulatory actions, increased costs and financial losses, any of which could have a material adverse effect on our business, financial position, results of operations and/or liquidity.
The failure of our third-party service providers to fulfill their obligations, or misconduct by our third-party service providers, may have a material adverse effect on our business, financial position, results of operations and/or liquidity.
Our operations are dependent on the proper functioning of information technology systems.

Risks related to our indebtedness

We may not be able to generate sufficient cash to service our indebtedness and may be forced to take other actions to meet our obligations under our indebtedness, which may not be successful.
Despite our level of indebtedness, we may be able to incur substantially more debt, which could further exacerbate the risks associated with our substantial indebtedness.

Risks related to our ordinary shares

Our ordinary shares are traded on more than one market, which may result in price and volume variations.
The trading price of our ordinary shares may fluctuate significantly.

4    Burford Capital Annual Report 2021    

If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary, the price of our ordinary shares could decline.
There can be no assurance that we will pay dividends or distributions.
Future issuances or sales of our securities may cause the market price of our ordinary shares to decline.
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.
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.
Losing foreign private issuer status will increase our regulatory and compliance costs.
The requirements of being a US public company may strain our resources, divert management’s attention and affect our ability to attract and retain key personnel and qualified senior management and members of the Board.
The material weaknesses that were identified in our internal control over financial reporting, the determination that our internal control over financial reporting and disclosure controls and procedures were not effective, the restatement of our previously issued financial statements and the possibility of any future occurrences thereof could impact the reliability of our consolidated financial statements and could result in loss of investor confidence, shareholder litigation or governmental proceedings or investigations, any of which could cause the market value of our ordinary shares or debt securities to decline or impact our ability to access the capital markets.
If we are classified as a PFIC for US federal income tax purposes, such classification could result in adverse US federal income tax consequences to US investors.

Risks related to our incorporation in Guernsey

Your rights and protections as our shareholder will be governed by Guernsey law, which may differ in certain material respects from the rights and protections of shareholders of US corporations.
The Royal Court of Guernsey may require a party to litigation to reimburse the prevailing party for its costs associated with the litigation, and our articles of incorporation entitle us to require shareholders to provide security against any such costs awarded to us by the Royal Court of Guernsey.
The insolvency laws of Guernsey and other jurisdictions may not be as favorable to you as the US bankruptcy laws.
It may be complex or time-consuming to effect service of US court process or enforcement of US judgments against us or certain of our directors and officers.

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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Consolidated
Refers to assets, liabilities and activities that include those third-party interests, partially-owned subsidiaries and special purpose vehicles that we are required to consolidate under US GAAP. At the date of this Annual Report, the major entities where there is also a third-party partner in, or owner of, those entities include the Strategic Value Fund, BOF-C, Colorado and several other entities in which we hold investments where there is also a third-party partner in, or owner of, those entities.
Burford-only
Refers to assets, liabilities and activities that pertain only to Burford on a proprietary basis, excluding any third-party interests and the portions of jointly-owned entities owned by others.
Group-wide
Refers to the totality of assets managed by Burford, including those portions of the funds owned by third parties and including funds that are not consolidated into Burford’s consolidated financial statements. Group-wide is therefore the sum of Burford-only and non-controlling interests in consolidated and non-consolidated funds. Group-wide does not include third-party interests in capital provision assets, the economics of which have been sold to those third parties, that do not meet the criteria to be recognized as a sale under US GAAP. This includes the third-party interests in Colorado and other capital provision asset subparticipations.

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:

Assets under management
Consistent with our status as an SEC-registered investment advisor, we report publicly on our asset management business on the basis of US regulatory assets under management (“AUM”). For the benefit of non-US investors, the SEC’s definition of AUM may differ from that used by European investment firms. AUM, as we report it, means the fair value of the capital invested in funds and individual capital vehicles plus the capital that we are entitled to call from investors in those funds and vehicles pursuant to the terms of their capital commitments to those funds and vehicles.
Concluded assets
A legal finance asset is “concluded” for our purposes when there is no longer any litigation risk remaining. We use the term to encompass (i) entirely concluded legal finance assets where we have received all proceeds to which we are entitled (net of any entirely concluded losses), (ii) the portion of legal finance assets where we have received some proceeds (for example, from a settlement with one party in a multi-party case) but where the case is continuing with the possibility of receiving additional proceeds and (iii) legal finance assets where the underlying litigation has been resolved and there is a promise to pay proceeds in the future (for example, in a settlement that is to be paid over time) and there is no longer any litigation risk involved in the asset.

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.

Deployed cost
Deployed cost is the amount of funding we have provided for an asset at the applicable point in time.

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:

-When single case assets have partial resolutions along the way without the entire case being resolved, most commonly because one party settles and the remaining party(ies) continue to litigate, we report the partial resolution when agreed as a partial realization and allocate a portion of the deployed cost to the partial resolution depending on the significance of the settling party to the overall claim.
-In portfolio assets when a case (or part of a case) resolves or generates cash, we report the partial resolution when agreed as a partial realization and allocate a portion of the deployed cost to the resolution. The allocation depends on the structure of the individual portfolio arrangement and the significance of the resolution to the overall portfolio, but it is in essence a method that mimics the way an investor would allocate cost basis across a portfolio of security purchases.
Commitment
A commitment is the amount of financing we agree to provide for a legal finance asset. Commitments can be definitive (requiring us to provide funding on a schedule or, more often, when certain expenses are incurred) or discretionary (allowing us to provide funding after reviewing and approving a future matter). Unless otherwise indicated, commitments include deployed cost and undrawn commitments.
Internal rate of return
Internal rate of return (“IRR”) is a discount rate that makes the net present value of a series of cash flows equal to zero and is expressed as a percentage figure. We compute IRR on concluded (including partially concluded) legal finance assets by treating that entire portfolio (or, when noted, a subset thereof) as one undifferentiated pool of capital and measuring actual and, if necessary, estimated inflows and outflows from that pool, allocating investment cost appropriately. IRRs do not include unrealized gains.

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Return on invested capital
Return on invested capital (“ROIC”) from a concluded asset is the absolute amount of realizations from such asset in excess of the amount of expenditure incurred in funding such asset divided by the amount of expenditure incurred, expressed as a percentage figure. ROIC is a measure of our ability to generate absolute returns on our assets. Some industry participants express returns on a multiple of invested capital (“MOIC”) instead of a ROIC basis. MOIC includes the return of capital and, therefore, is 1x higher than ROIC. In other words, 70% ROIC is the same as 1.70x MOIC.
Weighted average life
Weighted average life (“WAL”) of one of our legal finance assets represents the average length of time from deployment and/or cash outlay until we receive a cash realization (actual or, if necessary, estimated) from that asset weighted by the amount of that realization. In other words, WAL is how long our asset is outstanding on average. In the past, we have sometimes referred to “duration” of our legal finance assets to give an indication of their tenor. Duration and WAL are often used somewhat interchangeably in finance, but technically we are analyzing WAL (where time is weighted by cash flows) rather than duration (where time is weighted by the present value of those cash flows).

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
Cash receipts provide a measure of the cash that our capital provision assets generate during a given year as well as cash from certain other fees and income. In particular, cash receipts represent the cash generated from capital provision assets, including cash proceeds from realized or concluded assets and any related hedging assets, plus cash received for asset management fees, services and/or other income, before any deployments into funding existing or new assets.

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.

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:

Direct, which includes all of our legal finance assets that we have originated directly (i.e., not through participation in a fund) from our balance sheet. We also include direct (i.e., not through participation in a fund) complex strategies assets in this category. See note 3 (“Supplemental cash flow data”) to our consolidated financial statements for additional information.
Indirect, which includes our balance sheet’s participations in one of our funds.

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.

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:

Core legal finance: Since the end of 2018, we have been allocating 25% of each new matter to BOF, our flagship fund focused on pre-settlement legal finance matters; 50% to our sovereign wealth fund arrangement; and 25% to our balance sheet. The structure of our sovereign wealth fund arrangement is such that the sovereign wealth fund contributes two-thirds of the capital and we contribute one-third of the capital, with the result that the balance sheet was effectively providing 42% of all new advances. BOF-C is the private fund through which the sovereign wealth fund contributes its portion of the capital. Therefore, in presenting BOF-C data throughout this Annual Report, we present data on just the sovereign wealth fund’s portion of the arrangement, whereas our portion is included in our balance sheet. In that context, BOF-C was allocated 33% of each new eligible asset. In addition, BOF-C does not, by pre-agreement, participate in certain specified types of legal finance assets, in which case BOF-C’s allocation is divided between BOF and our balance sheet. Late in 2020, BOF became fully committed, and BOF’s investment period also expired in December 2021. After we were no longer making new investments in BOF, BOF-C’s share of eligible commitments increased from 33% (two-thirds of 50%) to 50% while the balance sheet’s share of eligible commitments increased from 42% to 50%.
Asset recovery: We allocate 100% of our asset recovery matters to our balance sheet.
Lower risk legal finance: Beginning in 2022, we will allocate 100% of our lower risk legal finance assets to the Advantage Fund (in which our balance sheet is an investor). Lower risk legal finance assets are investment commitments where the expected return contains a lower risk of substantial capital impairment than core legal finance assets due to factors analyzed by us at the time of making such commitment. Prior to 2022 we did not generally make lower risk legal finance investments.
Post-settlement: We allocate 100% of our post-settlement assets to BAIF.
Complex strategies: We allocate 100% of certain specified assets to the Strategic Value Fund (in which our balance sheet is an investor). Other complex strategies assets that do not meet the mandate of the Strategic Value fund but fall outside the scope of core legal finance are allocated to our balance sheet.

Burford Capital Annual Report 2021    15

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

Investor

Fee structure

    

commitments

Asset

Asset

(management/

Investment

($ in millions)

  

Strategy

  

closed

  

commitments7

  

deployments

  

AUM

  

performance)1

  

Waterfall

  

period (end)

  

Class A: 2%/20%

  

 

  

BCIM Partners II, LP2

Legal finance

260

253

181

177

Class B: 0%/50%

European

 

12/15/2015

BCIM Partners III, LP

Legal finance

412

446

309

463

2%/20%

European

 

1/1/20203

BOF

Legal finance

300

387

246

338

2%/20%

European

 

12/31/20214

BCIM Credit Opportunities LP

Post-settlement

488

699

695

442

1% on undrawn/

2% on funded and

20% incentive

European

 

9/30/20193

BAIF2

Post-settlement

327

653

638

395

1.5%/10%

European

 

4/4/2022

Strategic Value Fund5

Complex strategies

500

1,199

1,199

41

2%/20%

American

 

Evergreen

BOF-C2

Legal finance

766

788

403

789

Expense reimbursement + profit share

 

Hybrid

 

12/31/2022

Advantage Fund

Legal finance

190

8

-

190

Profit Split6

American

12/24/2024

Totals

  

3,243

4,425

3,671

2,835

  

 

  

 

  

1.Management fees are paid to BCIM for investment management and advisory services provided to our private funds. The management fee rates set forth in the table above are annualized and applied to an asset or commitment base which typically varies between a fund’s investment period and any subsequent periods in the fund term. At December 31, 2021, BCIM Partners II, LP, BCIM Partners III, LP and BCIM Credit Opportunities LP are no longer earning management fees. Performance fees represent carried interest applied to distributions to a private fund’s limited partners after the return of capital contributions and preferred returns.
2.Includes amounts related to “sidecar” funds.
3.Ceased commitments to new investments in the fourth quarter of 2018 due to capacity.
4.Ceased commitments to new investments in the fourth quarter of 2020 due to capacity. The increase in commitments during the year ended December 31, 2021, was due to increases in existing commitments.
5.Includes amounts related to BCIM SV SMA I, LLC which invests alongside the Strategic Value Fund.
6.The Advantage Fund does not have a traditional management and performance fee structure, but instead provides the first 10% of annual simple returns to the fund investors while we retain any excess return. However, if the fund produces super-normal returns for this level of risk, a level of sharing with fund investors would kick in, but we do not expect that to occur.
7.Asset commitments do not include an asset of $13 million warehoused for BOF-C and an asset of $50 million warehoused for the Advantage Fund by the Burford-only balance sheet at December 31, 2021.
8.An additional $170 million of investor commitments in the Advantage Fund closed in the first quarter of 2022.

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

16    Burford Capital Annual Report 2021    

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

Burford Capital Annual Report 2021    17

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 “—

18    Burford Capital Annual Report 2021    

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.

Burford Capital Annual Report 2021    19

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

20    Burford Capital Annual Report 2021    

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:

Office location

Number

US

 

93

UK

 

44

Rest of the world

 

3

Total:

 

140

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.

Burford Capital Annual Report 2021    21

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.

Graphic

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:

Name of subsidiary

    

Jurisdiction of incorporation

    

Proportion of ownership interest

BC Holdings Limited

Guernsey

100

%

Ollivets Investments Limited

Guernsey

100

%

Burford Capital LLC

 

US

 

100

%

Ballard LLC*

US

100

%

Burford Capital Global Finance LLC

US

100

%

Prospect Investments LLC*

 

US

 

100

%

Wilburn Investments LLC*

US

100

%

Burford Capital Holdings (UK) Limited

 

UK

 

100

%

Burford Capital Overseas Limited

UK

100

%

Burford Capital PLC

 

UK

 

100

%

Burford Capital (UK) Limited

UK

100

%

Burford Global Investments Limited

UK

100

%

Burford Investments Limited

UK

100

%

Burford Ireland LP*

Ireland

100

%

Justitia Ireland Investments DAC*

Ireland

100

%

* Represents investment subsidiaries.

22    Burford Capital Annual Report 2021    

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:

Location

    

Size (square footage)

    

Main use

New York, New York

 

19,516

 

Office space

London, UK

 

9,378

 

Office space

Chicago, Illinois

 

8,321

 

Office space

Hong Kong, China

*

 

Office space

Singapore, Singapore

 

*

 

Office space

Sydney, Australia

 

*

 

Office space

Washington, DC

 

*

 

Office space

* 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.

Burford Capital Annual Report 2021    23

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.

In jurisdictions with court backlogs because of the pandemic, the impetus to file new litigation is diminished unless there is an approaching limitation period, given that the litigation will not be able to move forward swiftly and spending money on the early phases of litigation could thus be postponed.
On the other hand, clients are more attuned to their liquidity positions, and some see legal finance (and especially monetizations) as a way to bolster liquidity.

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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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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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.

($ in thousands)

    

2021

    

2020

    

Change

Income

Capital provision income

127,549

340,103

(212,554)

Asset management income

14,396

15,106

(710)

Insurance income

5,143

1,781

3,362

Services income

1,177

804

373

Marketable securities income and bank interest

1,865

380

1,485

Unrealized gain/(loss) relating to third-party interests in capital provision assets

2,028

947

1,081

Total income

152,158

359,121

(206,963)

Operating expenses

Compensation and benefits:

Salaries and benefits

(34,333)

(31,483)

(2,850)

Annual incentive compensation

(22,145)

(22,772)

627

Equity compensation

(9,272)

(5,281)

(3,991)

Legacy asset recovery incentive compensation including accruals

(36,364)

-

(36,364)

Long-term incentive compensation including accruals

(7,942)

(18,125)

10,183

General, administrative and other

(30,467)

(21,468)

(8,999)

Case-related expenditures ineligible for inclusion in asset cost

(5,300)

(4,841)

(459)

Equity and listing related

-

(7,907)

7,907

Amortization of intangible asset

-

(8,703)

8,703

Total operating expenses

(145,823)

(120,580)

(25,243)

Income from operations

6,335

238,541

(232,206)

Other income (expense)

Finance costs

(58,647)

(39,048)

(19,599)

Loss on debt buyback

(1,649)

-

(1,649)

Foreign currency transactions (losses)/gains

(5,482)

10,746

(16,228)

Total other expense

(65,778)

(28,302)

(37,476)

(Loss)/income before income taxes

(59,443)

210,239

(269,682)

Benefit from (provision for) income taxes

3,015

(36,937)

39,952

Net (loss)/income

(56,428)

173,302

(229,730)

Net income attributable to non-controlling interests

15,638

8,187

7,451

Net (loss)/income attributable to ordinary shares

(72,066)

165,115

(237,181)

Overview

Burford had a strong year for new business with significant growth in new commitments and deployments, driven by growth in our core capital provision-direct business, which represents assets capable of generating our highest potential returns and profits. Case realizations in 2021, however, remained modest due in part to continuing delays caused by the Covid-19 pandemic impacting the pace and progression of matters in the portfolio. Slow case progress in 2021 limited the incidence of case milestones that would trigger both realized and unrealized gains and losses. As a result, we recorded a net loss attributable to ordinary shares for the year of $72 million, compared to net income of $165 million attributable to ordinary shares in 2020. The net loss in 2021 was primarily driven by a 62% decline in capital provision income, while total operating expenses (including legacy accruals including non-cash portions) and finance costs increased. Given the unpredictability of the timing of case resolutions, period-to-period volatility is a characteristic of our business. We believe our portfolio remains robust and that the timing of resolutions remains subject to the idiosyncrasies of our specific cases and the vagaries of the litigation process.

Statement of comprehensive income

Capital provision income (consolidated)

On a consolidated basis, capital provision income decreased 62% to $128 million for the year ended December 31, 2021, compared to $340 million in the prior year. This decline in 2021 reflected a 26% decrease in realized gains due to lower realizations in 2021. In addition, fair value adjustments (net of previous unrealized gains transferred to realized) on

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capital provision assets in 2021 represented a decline of $22 million compared to positive net fair value adjustments of $133 million in 2020. While fair value adjustments in 2021 for assets reflected a net gain of $32 million, that gain was more than offset by $54 million of previously recognized unrealized gains that were transferred to realized. Realized gains on capital provision assets included a significant contribution from the Akhmedov judgment enforcement matter, while realized gains in 2020 included a significant contribution from a set of ten related assets consisting of 18 cases in which Burford on a consolidated basis had realized gains of $172 million. The lower level of net fair value increases (excluding previous unrealized gains transferred to realized) on capital provision assets in 2021 compared to 2020 was driven by comparatively slower litigation activity, rather than negative developments in our underlying assets.

For Burford-only results, see “—Data reconciliations — Burford-only reconciliation of consolidated statement of comprehensive income to Burford-only results”.

Realized gains and losses from capital provision-direct portfolio (Burford-only)

Burford-only realized gains on the capital provision-direct portfolio of $128 million declined 29% from $180 million in 2020 and represented the vast majority of total Burford-only realized gains. Burford posted only $9 million in realized losses on cases concluded in 2021 compared to $20 million in 2020. As a percentage of average capital provision-direct assets at cost during the year, this represented 0.8% in 2021 compared to 2.2% in 2020.

Unrealized gains from capital provision-direct portfolio (Burford-only)

Burford-only capital provision-direct unrealized gains in 2021 were $16 million, a relatively modest level due in part to continuing delays caused by the Covid-19 pandemic impacting the pace and progression of matters in the portfolio. These unrealized gains were offset by $43 million in Burford-only capital provision-direct unrealized gains from prior periods that were transferred to realized gains in 2021, compared to net unrealized gains in 2020 of $141 million.

Asset management fees

On a consolidated basis, asset management fees for the year ended December 31, 2021, were $14 million compared to $15 million in 2020. Asset management fees in 2021 were comprised of $8 million in management fees and $6 million in performance fees, both essentially unchanged from 2020.

On a Burford-only basis, asset management fees in 2021 of $26 million were up modestly compared to $24 million in 2020, primarily reflecting an increase in income from BOF-C, as assets related to BOF-C continue to season. Management fees were $11 million, essentially unchanged from 2020. We earned management fees in 2021 from BOF, BAIF and the Strategic Value Fund, and not our earlier funds since we typically only earn management fees during a fund’s investment period. BOF’s investment period ended at the end of 2021, so we do not expect to earn management fees from that fund in 2022. Performance fees were $6 million in 2021, also essentially unchanged from 2020. We recognized performance fees in 2021 from BAIF, while performance fees in 2020 were related to BCIM Partners I, LP, which was wound down in 1H 2021, as its last investment was realized in the period.

We did not recognize performance fees from any of the other “European-style” litigation finance funds (BCIM Partners II, LP, BCIM Partners III, LP and BOF) during the period; however, as we continue to realize assets in those funds, we get closer to the point in time when those performance fees will also crystallize.

Asset management income

Burford-only asset management income ($ in millions):

    

2021

2020

Management fees

11

12

Performance fees

6

6

BOF-C income

9

6

Total Burford-only asset management income

26

24

Insurance income (consolidated)

Insurance income of $5 million increased from $2 million in 2020. The increase was primarily driven by our after the event (“ATE”) business and included a release of loss reserves. Our ATE business provides insurance for legal cost shifting incurred in pursuing or defending legal proceedings.

Services income (consolidated)

Services income remained essentially unchanged at $1 million. We continue to migrate our asset recovery business from fee-for-service activity to focus on generating capital provision assets as we transition to a contingent risk model.

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Marketable securities income and bank interest (consolidated)

Marketable securities (our cash management investments) income and bank interest increased from less than $1 million in 2020, to $2 million in 2021. The increase was primarily driven by increased interest income on marketable securities over the course of 2021 (compared to 2020) earned from higher balances invested.

Income related to third-party interests in capital provision assets (consolidated)

Income related to third-party interests in capital provision assets represents the share of realized and unrealized gains and losses on capital provision assets that are owned by third parties. Income related to third-party interests in capital provision assets was $2 million in 2021 compared to $1 million in 2020. Both amounts were primarily driven by third-party interests in our Colorado Investments subsidiary.

Operating expenses - compensation and benefits expenses (consolidated)

Compensation and benefits expenses of $110 million increased from $78 million in the prior year including the impact of legacy expenses and accruals. Salaries and benefits increased 9% to $34 million in 2021, compared to $31 million in 2020, primarily driven by a commensurate increase in average headcount in 2021. Annual incentive compensation was relatively unchanged, decreasing slightly to $22 million in 2021 from $23 million the prior year. Equity compensation of $9 million increased from $5 million in the prior year, driven by an increase in the number of awards, primarily due to a one-time expansion of grants throughout Burford. As previously announced, we incurred legacy asset recovery incentive compensation expenses of $36 million in 2021 as detailed further in our Form 6-K filed with the SEC on August 23, 2021. Long-term incentive compensation expense, including accruals, of $8 million declined 56% from $18 million for the year ended 2020, primarily due to lower realized and unrealized gains in the current period.

During 2021, compensation and benefit expenses increased as we grew our business and staff and represented 75% of our total operating expenses (67% excluding the $36 million legacy asset recovery incentive compensation accruals), up from 64% in 2020. Salaries and benefits and annual incentive compensation combined increased by 4% in 2021 compared to 2020, as we continue to balance the desirability of investing in the growth of the business and maintaining prudent levels of spending. Equity compensation and long-term incentive compensation including accruals decreased by 26% in 2021 compared to 2020.

Other operating expenses (consolidated)

General, administrative and other expenses increased 42% to $30 million from $21 million in 2020, primarily due to a number of one-time increases in professional fees related to investment in accounting and control systems and our conversion to US GAAP, as we continued to invest in people and infrastructure to support our growth.

Case-related operating expenses ineligible for inclusion in asset cost of $5 million in 2021 were essentially unchanged from 2020.

Equity and listing related operating expenses of $8 million in 2020 were due in significant part to one-time costs associated with SEC registration and our NYSE listing as well as certain other equity-related activity expenses in that year that did not recur in 2021.

Burford expenses its operating costs as they are incurred. We do not capitalize them as part of our capital provision portfolio. Moreover, we perform virtually all of our asset origination activities internally, with our own staff, as opposed to outsourcing diligence or legal work. As a result, the operating expenses shown on our accounts are largely what we are actually spending in cash each year to operate the business.

Finance costs (consolidated)

Finance costs increased to $59 million from $39 million in 2020. The increase reflects the increase in debt outstanding that resulted from the issuance in April of $400 million in 6.25% senior notes due 2028, partially offset by the repurchase of $34 million of 6.50% debt due in August 2022 at a premium, which generated a loss of $2 million.

Foreign exchange gains/(losses) (consolidated)

We incurred a foreign exchange loss of $5 million during 2021 compared to a gain of $11 million in 2020. The loss in 2021 reflects the impact of the change in the US Dollar to UK Sterling exchange rates over the course of the year related to intercompany account balances between subsidiaries with different functional currencies.

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Benefit from/(provision for) income taxes (consolidated)

We recognized a benefit from income taxes in 2021 of $3 million due to the $59 million loss before income taxes for the year. The main component of the provision is the recognition of a deferred tax asset for net operating losses in the United States. We also have a deferred tax asset related to interest expense deductions for which we are providing a full valuation allowance. Cash taxes paid for the year were $1 million. During 2020, significant realized gains in the US were largely offset by net operating loss and interest deduction carryforwards, although only the use of net operating loss carryforwards reduced our net deferred tax asset. As a result, we recognized $37 million of book taxes in 2020, while paying only $11 million in cash taxes.

At December 31, 2021, Burford maintained a net deferred tax liability of $23 million on its balance sheet, which decreased from a net deferred tax liability of $24 million at December 31, 2020.

Burford’s gradual progression from a tax-free fund prior to 2012 to a multinational taxpayer was altered somewhat by the acquisition of BCIM Holdings LLC in 2016. Under US tax law, given that BCIM Holdings LLC had very few tangible assets, the bulk of the acquisition price of $160 million was characterized as goodwill and other intangible assets for US tax purposes, and those assets are amortized for tax purposes, significantly reducing future US taxable income for some years while the tax benefit of that amortization is used over time. The value of that tax offset was impacted by the US Tax Cuts and Jobs Act of 2017, as amended (the “TCJA”), which lowered US corporate tax rates substantially.

We continue to expect our tax rate to settle in the low teens over time, as we have noted previously.

Net income attributable to non-controlling interests

We consolidate certain entities that have other shareholders, including the Strategic Value Fund and BOF-C. In relation to the Strategic Value Fund, Burford earns management and performance fees as the appointed investment advisor and has an investment in the fund. In relation to BOF-C, under the co-investing arrangement with the sovereign wealth fund, Burford as the appointed investment advisor receives reimbursement of expenses from BOF-C up to a certain level before Burford or the sovereign wealth fund receives a return of capital. After the repayment of capital, Burford then receives a portion of the return generated from the assets held by BOF-C. This line item does not include Colorado for the reasons set forth in note 2 (“Summary of significant accounting policies”) to our consolidated financial statements.

Net income attributable to non-controlling interests increased from $8 million in 2020, to $16 million in 2021. The increase was largely due to higher net income in the consolidated entities.

Statement of financial position

Cash and equivalents and marketable securities

On a consolidated basis, we ended 2021 with cash and equivalents of $180 million and $175 million in marketable securities (cash management investments). As a result, our liquidity position at year end 2021 was $355 million (2020: $339 million, consisting of $322 million in cash and equivalents and $17 million in marketable securities).

On a Burford-only basis, we ended 2021 with cash and equivalents of $140 million and $175 million in marketable securities. As a result, our Burford-only liquidity position at year end 2021 was $315 million (2020: $336 million, consisting of $320 million in cash and equivalents and $16 million in marketable securities).

Due from settlement of capital provision assets (consolidated)

When an underlying case has concluded and a legal finance asset has been realized, we book the amount due to us for our capital and return as a due-from-settlement receivable. In a substantial majority of situations, we are due cash, and our receivable is typically paid within the same reporting period. In a small number of cases (typically where our client does not receive cash for the settlement or judgment), we receive non-cash consideration, such as stock or some form of debt such as a mortgage or a loan.

Notably, only 1% of our cash receivables have taken longer than one year to pay, and less than 1% of our cash receivables and non-cash consideration have ever needed to be written off.

Due from settlement receivables were $86 million at December 31, 2021. This balance at year-end 2021 included $23 million related to a single case that concluded in 2020 and is expected to be paid in 2022. Due from settlement receivables at year end 2020 were $31 million.

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Capital provision assets

On a consolidated basis, capital provision assets at December 31, 2021, totaled $2.9 billion, an increase of 13% from $2.6 billion at December 31, 2020.

On a Burford-only basis, capital provision assets at December 31, 2021, totaled $2.2 billion, an increase of 13% from $1.9 billion at December 31, 2020. The increase in capital provision assets was primarily driven by strong deployments during the period while Burford-only realizations were modest due in part to continuing court delays caused by the Covid-19 pandemic impacting the pace and progression of matters in our portfolio. For more information, see “—Data reconciliations – Burford-only reconciliation of consolidated statement of financial position to Burford-only results”.

Fair value of capital provision assets

We record legal finance assets at initial fair value, which is equivalent to deployed funded cost, until there is some objective event in the underlying litigation that would cause a change in value, whereupon we reflect the impact (up or down) of that objective event through a fair value adjustment. For the vast majority of our legal finance assets, the objective events considered under our fair value policy relate to the litigation process. When the objective event in question is a court ruling, Burford discounts the potential impact of that ruling commensurate with the remaining litigation risk. Our policy assigns valuation changes in fixed ranges based on, among other things:

A significant positive ruling or other objective event prior to any trial court judgment
A favorable trial court judgment
A favorable judgment on the first appeal
The exhaustion of as-of-right appeals
In arbitration cases, where there are limited opportunities for appeal, issuance of a tribunal award
An objective negative event at various stages in a litigation

We estimate fair values based on the specifics of each asset, and fair values typically change upon an asset having a return entitlement or progressing in a manner that, in our judgment, would result in a third-party being prepared to pay an amount different from the original sum invested for our rights in connection with the asset. Positive, material progression of an asset would give rise to an increase in fair value while an adverse outcome would give rise to a reduction. The quantum of change depends upon the potential future stages of asset progression. The consequent effect when an adjustment is made is that the fair value of an asset with few remaining stages is adjusted closer to its predicted final outcome than one with many remaining stages. In litigation matters, before a judgment is entered following trial or other adjudication, the key stages of any matter and their impact on fair value are substantially case specific but may include the motion to dismiss and the summary judgment stages. Following adjudication, appeals proceedings provide further opportunities to re-assess the fair value of an asset.

The aggregate carrying value of our capital provision assets on a consolidated basis totaled $2.9 billion at December 31, 2021. Of those assets, 29% were held at cost, 40% were valued based on market transactions and 31% were valued based on case milestones. The portion valued based on market transactions consists entirely of the YPF-related assets, of which 95% of the carrying value is fair-value adjustments. Of the carrying value of assets valued based on case milestones, 80% represents the cost basis of those assets and 20% represents the net fair value adjustment for those assets. At December 31, 2021, the aggregate fair value adjustments on our Burford-only capital provision-direct portfolio, excluding the YPF-related assets, stood at $160 million, or 12% of ex-YPF carrying value, compared to $183 million at December 31, 2020, or 17% of ex-YPF carrying value.

Fair value of YPF-related assets

The fair value of our YPF-related assets—our financing of the Petersen and Eton Park claims—is reflective of a robust secondary sale of a portion of the Petersen claim in June 2019. This sale was part of a $148 million placement to a number of institutional investors, of which we sold $100 million and other third-party holders sold the remaining portion. Given the size of this sale and the participation of a meaningful number of third-party institutional investors, we concluded that this market evidence should be factored into our valuation process of the YPF-related assets. Less robust trading of portions of the Petersen claim have not and in the future may not be factored into our valuation process of the YPF-related assets.

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At December 31, 2021, the carrying value of the YPF-related assets (both Petersen and Eton Park combined) on a Burford-only basis increased to $777 million from $773 million at December 31, 2020, due solely to ongoing legal expense spending in the matters. Our cost basis increased by $9 million, and our unrealized gain decreased by $5 million to $50 million and $727 million, respectively, because $5 million of the $9 million in costs deployed in the period are recoverable. Otherwise, we did not recognize any income on the YPF-related assets during 2021.

Summary of components of carrying value at December 31, 2021

    

Burford-only

Deployed

Unrealized

Carrying

($ in millions)

    

cost

gain

value

Capital provision-direct:

YPF-related assets

50

727

777

Other assets

1,201

160

1,361

Total

1,251

887

2,138

Capital provision-indirect

18

3

21

Total capital provision assets

1,269

890

2,159

Summary of components of carrying value at December 31, 2020

Burford-only

    

Deployed

Unrealized

Carrying

($ in millions)

    

cost

gain

value

Capital provision-direct:

YPF-related assets

41

732

773

Other assets

907

183

1,090

Total

945

915

1,863

Capital provision-indirect

43

43

Total capital provision assets

991

915

1,906

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Year ended December 31, 2020, compared to year ended December 31, 2019

The following table provides an overview of our consolidated results of operations for the years ended December 31, 2020 and 2019.

($ in thousands)

    

2020

    

2019

    

Change

    

Income

Capital provision income

340,103

409,156

(69,053)

Asset management income

15,106

15,160

(54)

Insurance income

1,781

3,545

(1,764)

Services income

804

2,133

(1,329)

Marketable securities income and bank interest

380

6,676

(6,296)

Unrealized gain/(loss) relating to third-party interests in capital provision assets

947

(57,500)

58,447

Total income

359,121

379,170

(20,049)

Operating expenses

Compensation and benefits:

Salaries and benefits

(31,483)

(25,231)

(6,252)

Annual incentive compensation

(22,772)

(24,503)

1,731

Equity compensation

(5,281)

(4,519)

(762)

Long-term incentive compensation including accruals

(18,125)

(33,496)

15,371

General, administrative and other

(21,468)

(22,447)

979

Case-related expenditures ineligible for inclusion in asset cost

(4,841)

(11,246)

6,405

Equity and listing related

(7,907)

(1,754)

(6,153)

Amortization of intangible asset

(8,703)

(9,495)

792

Total operating expenses

(120,580)

(132,691)

12,111

Income from operations

238,541

246,479

(7,938)

Other income (expense)

Finance costs

(39,048)

(38,747)

(301)

Foreign currency transactions gains

10,746

1,956

8,790

Total other expense

(28,302)

(36,791)

8,489

Income before income taxes

210,239

209,688

551

Provision for income taxes

(36,937)

(13,417)

(23,520)

Net income/(loss)

173,302

196,271

(22,969)

Net income attributable to non-controlling interests

8,187

15,309

(7,122)

Net income attributable to ordinary shares

165,115

180,962

(15,847)

Statement of comprehensive income

Capital provision income (consolidated)

Capital provision income decreased by 17% from $409 million to $340 million for 2020. While Burford saw sharply higher realized gains on capital provision assets ($205 million for the year ended December 31, 2020, up 35% from $152 million for the year ended December 31, 2019), increases in gains were more than offset by decreases in fair value adjustments (net of previous unrealized gains transferred to realized) on capital provision assets (down 48% from $262 million for the year ended December 31, 2019, to $135 million for the year ended December 31, 2020) because, while a number of assets recorded unrealized gains due to positive case progress, the $90 million of unrealized gain on our YPF-related assets in 2019 did not recur in 2020. A key driver of our capital provision-direct income during 2020 was a set of ten related assets consisting of 18 cases in which Burford on a consolidated basis had invested $94 million and had realizations of $267 million for realized gains of $173 million.

Asset management income (consolidated)

Asset management fees remained consistent at $15 million. The receipt of performance fees offset lower management fees. Management fees declined 43% from $15 million to $9 million in 2020, as we no longer collected base management fees on some older funds (BCIM Partners II, LP, BCIM Partners III, LP and BCIM Credit Opportunities LP) that are past their investment periods. We recorded no performance fees in 2019, but recorded $6 million in 2020, as we received performance fees from BCIM Partners I, LP.

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Insurance income (consolidated)

Insurance income decreased by 50% from $4 million for the year ended December 31, 2019, to $2 million for the year ended December 31, 2020. The decrease was primarily due to ATE business, which provides insurance for legal cost shifting incurred in pursuing or defending legal proceedings, being in run-off since 2016.

Services income (consolidated)

Services income decreased from $2 million to $1 million in 2020. Our fee-for-service income from our asset recovery business declined as we have continued to migrate this business to focus on generating capital provision assets as we transition to a contingent risk model.

Marketable securities income and bank interest (consolidated)

Marketable securities and bank interest decreased from $7 million to nothing in 2020. The decrease was primarily due to lower interest received on cash due to lower market rates, with bank interest income decreasing from $5 million to essentially zero in 2020. During 2020, we also incurred $2 million of realized losses on disposal of marketable securities; there were no such losses in 2019.

Income related to third-party interests in capital provision assets (consolidated)

Income related to third-party interests in capital provision assets represents the share of realized and unrealized gains and losses on capital provision assets that are owned by third parties. Income related to third-party interests in capital provision assets was $1 million in 2020 compared to $58 million in 2019. Both amounts were primarily driven by third-party interests in our Colorado Investments subsidiary.

Operating expenses – compensation and benefits expenses (consolidated)

Salaries and benefits increased 25% to $31 million in 2020 from $25 million in 2019. Although we had essentially flat headcount during 2020, our average employee headcount during 2020 was 11% higher than for 2019 because of the headcount growth we experienced in 2019. The long-term incentive compensation decreased to $18 million in 2020 from $33 million in 2019, as the 2019 figure included a one-time catch-up charge for “carry” accruals related to prior periods.

Other operating expenses (consolidated)

General, administrative and other expenses decreased slightly to $21 million in 2020, from $22 million in 2019, due to lower travel and marketing expense reflecting the impact of the Covid-19 pandemic. Case-related operating expenses ineligible for inclusion in asset cost decreased from $11 million in 2019, to $5 million in 2020, as lower activity in the Strategic Value Fund gave rise to a decreased number of situations (including situations where Burford is acting as principal rather than funding a client) where legal fees and other expenditures are incurred that cannot be included in the cost of the capital provision asset. Equity and listing-related operating expenses increased 351% from $2 million in 2019, to $8 million in 2020, due in significant part to one-time costs associated with SEC registration and NYSE listing during 2020 as well as certain other equity-related activity expenses.

Finance costs (consolidated)

Finance costs remained consistent at $39 million for the years ended 2020 and 2019, as the amount of debt outstanding was unchanged.

Foreign exchange gains/(losses) (consolidated)

Foreign exchange gains increased from $2 million in 2019, to $11 million in 2020. The increase was due to increased impact of foreign-exchange movements on the values of our non-US-dollar-denominated assets held by subsidiaries with USD functional currency.

Provision for income taxes (consolidated)

Taxation expense increased from $13 million for 2019, to $37 million for 2020. The increase was largely driven by significantly higher realized gains in the US during 2020.

At December 31, 2019, Burford maintained a significant net deferred tax asset on its balance sheet, which arose primarily from future benefits from net operating losses and compensation and benefits expenses, net of BCIM Holdings LLC’s intangibles amortization and net unrealized gains/losses. The TCJA also enacted significant limitations on

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continued

interest deductibility, such that the Group had not recognized a deferred tax asset for its then unused interest deductions at December 31, 2019.

During 2020, significant realized gains in the US were largely offset by these net operating loss and interest deduction carryforwards, although only the use of net operating loss carryforwards reduced our net deferred tax asset. As a result, we recognized $37 million of book taxes in 2020, while paying only $11 million in cash taxes.

Net income attributable to non-controlling interests (consolidated)

Income/(expense) related to third-party interests in capital provision assets decreased from $15 million for the year ended December 31, 2019, to $8 million for the year ended December 31, 2020.

Segments (consolidated)

We have two operating business segments: (i) Capital provision: Provision of capital to the legal industry or in connection with legal matters, both directly and through investment in the Group’s managed funds; and (ii) Asset management and other services (which includes the provision of services to the legal industry, including litigation insurance); and one corporate segment: (iii) Other corporate. We have changed two of our segments from our presentation in our Annual Report on Form 20-F for the year ended December 31, 2020. The asset management and other services segment was previously named asset management, and the other corporate segment was previously named services and other corporate. As a result, insurance income and asset recovery fee for services income, which previously resided in the services and other corporate segment now reside in the asset management and other services segment.

The following table provides a breakdown of our income by operating segment for the years ended December 31, 2021, 2020 and 2019.

For the year ended December 31, 

($ in thousands)

    

2021

    

2020

    

2019

Capital provision

99,754

320,023

316,823

Asset management and other services

32,357

27,069

31,808

Other corporate

774

315

6,070

The following table sets forth our income in the capital provision operating segment net of the third-party interest amounts for the years ended December 31, 2021, 2020 and 2019.

For the year ended December 31, 

($ in thousands)

    

2021

    

2020

    

2019

Capital provision

127,549

340,103

409,156

Third-party share of gains relating to interests in consolidated entities

(27,795)

(20,080)

(92,333)

Total

99,754

320,023

316,823

The following tables provide a breakdown of our profit/(loss) before taxation by operating segment for the years ended December 31, 2021, 2020 and 2019.

For the year ended December 31, 2021

Capital

Asset management

($ in thousands)

    

provision

and other services

Other corporate

    

Total

Income

99,754

32,357

774

132,885

Operating expenses

(87,420)

(33,280)

(21,488)

(142,188)

Other income (expense)

(54,014)

(1,398)

(4,884)

(60,296)

Foreign currency transactions

-

-

(5,482)

(5,482)

Profit/(loss) before taxation

(41,680)

(2,321)

(31,080)

(75,081)

For the year ended December 31, 2020

Capital

Asset management

($ in thousands)

    

provision

and other services

Other corporate

    

Total

Income

320,023

27,069

315

347,407

Operating expenses

(55,139)

(24,254)

(37,228)

(116,621)

Other income (expense)

(36,316)

-

(2,732)

(39,048)

Foreign currency transactions

-

-

10,314

10,314

Profit/(loss) before taxation

228,568

2,815

(29,331)

202,052

34    Burford Capital Annual Report 2021    

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Financial and operational review

continued

For the year ended December 31, 2019

Capital

Asset management

($ in thousands)

    

provision

and other services

Other corporate

    

Total

Income

316,823

31,808

6,070

354,701

Operating expenses

(72,252)

(23,704)

(27,635)

(123,591)

Other income (expense)

(36,423)

-

(2,324)

(38,747)

Foreign currency transactions

-

-

2,016

2,016

Profit/(loss) before taxation

208,148

8,104

(21,873)

194,379

In the capital provision segment, we incurred a loss before taxation of $42 million in 2021 compared to a profit before taxation of $229 million in 2020, primarily due to lower realized gains and the legacy