BURFORD CAPITAL 2021
Annual Report
This report is for Burford’s shareholders and bondholders and
does not constitute an offer of any Burford private fund.
This report does not constitute an offer to sell or the
solicitation of an offer to buy any ordinary shares or other
securities of Burford.
The information on, or that can be accessed through, our
website is not incorporated by reference into this report.
CONTENTS
i
iii
iv
2
3
5
8
12
23
24
67
69
70
78
83
Financial summary
Chairman’s letter
Management letter
Form 20-F
Forward-looking statements
Summary of risk factors
Basis of presentation of financial information
Certain terms used in this Annual Report
Business
Unresolved staff comments
Financial and operational review
Directors’ report
Consolidated financial statements
Report of independent registered public accounting
firm
Consolidated financial statements
Notes to the consolidated financial statements
119 Governance
127 Compensation
132 Major shareholders and related party transactions
133 Risk factors
151 Memorandum and articles of incorporation
151 Material contracts
152
Exchange controls and other limitations affecting
security holders
152 Tax considerations
155
Purchases of equity securities by the issuer and
affiliated purchasers
155 Documents on display
156
Quantitative and qualitative disclosures about market
risk
159 Controls and procedures
160 Principal accountant fees and services
162 Exhibits
164 Cross reference
166
167
Further information
Equity and debt securities
Financial Summary
Generally accepted accounting principles in the United States (“US GAAP”) require 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. 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”. See “Basis of presentation of financial information” in our
annual report on Form 20-F for the year ended December 31, 2021 (the “2021 Annual Report”) for additional
information relating to the presentation of our financial information.
Reconciliations
The tables below set forth a reconciliation of Burford-only to consolidated statement of comprehensive income and to
consolidated statement of financial position at and for the year ended December 31, 2021. See “Financial and
operational review—Data reconciliations” for the reconciliation of Burford-only to consolidated statement of
comprehensive income and consolidated statement of financial position at and for the year ended December 31, 2020.
Statement of comprehensive income
($ in thousands)
Income
Capital provision income
Asset management income
Insurance income
Services income
Marketable securities income and bank interest
Unrealized gain/(loss) relating to third-party interests in capital provision assets
Total income
Operating expenses
Compensation and benefits:
Salaries and benefits
Annual incentive compensation
Equity compensation
Legacy asset recovery incentive compensation including accruals
Long-term incentive compensation including accruals
General, administrative and other
Case-related expenditures ineligible for inclusion in asset cost
Equity and listing related
Amortization of intangible asset
Total operating expenses
Consolidated
GAAP
127,549
14,396
5,143
1,177
1,865
2,028
152,158
(34,333)
(22,145)
(9,272)
(36,364)
(7,942)
(30,467)
(5,300)
-
-
(145,823)
2021
Elimination of
third-party
2020
interests Burford-only Burford-only
(27,795)
11,641
-
-
(1,091)
(2,028)
(19,273)
99,754
26,037
5,143
1,177
774
-
132,885
320,023
24,484
1,781
804
315
-
347,407
-
-
-
-
-
548
3,087
-
-
3,635
(34,333)
(22,145)
(9,272)
(36,364)
(7,942)
(29,919)
(2,213)
-
-
(142,188)
(31,483)
(22,772)
(5,281)
-
(18,125)
(20,593)
(1,757)
(7,907)
(8,703)
(116,621)
Income/(loss) from operations
6,335
(15,638)
(9,303)
230,786
Other (expense)/income
Finance costs
Loss on debt buyback
Foreign currency transactions (losses)/gains
Total other expense
(58,647)
(1,649)
(5,482)
(65,778)
-
-
-
-
(58,647)
(1,649)
(5,482)
(65,778)
(39,048)
-
10,314
(28,734)
(Loss)/income before income taxes
(59,443)
(15,638)
(75,081)
202,052
Benefit from (provision for) income taxes
Net (loss)/income
3,015
(56,428)
-
(15,638)
-
3,015
(72,066)
(36,937)
165,115
Net income attributable to non-controlling interests
15,638
(15,638)
-
Net (loss)/income attributable to ordinary shares
(72,066)
-
(72,066)
165,115
Burford Capital Annual Report 2021 i
Other comprehensive loss
Change in Foreign currency translation adjustment
Total comprehensive (loss)/income
Net (loss)/income per share:
Basic
Diluted
Statement of financial position
Assets
Cash and cash equivalents
Marketable securities
Other assets
Due from settlement of capital provision assets
Capital provision assets
Property and equipment
Goodwill & intangible asset
Deferred tax asset
Total assets
Liabilities
Debt interest payable
Other liabilities
Debt payable
Financial liabilities related to third-party interests in capital provision assets
Deferred tax liability
Total liabilities
Shareholders' equity
Ordinary shares no par value: unlimited shares authorized; 219,049,877 shares
issued and outstanding at December 31, 2021 and 2020, respectively
Additional paid-in capital
Accumulated other comprehensive income/(loss)
Retained earnings
Total shareholders' equity attributable to Burford Capital Limited
Non-controlling interest in consolidated subsidiaries
Total shareholders' equity
Total shareholders' equity attributable to Burford Capital Limited per share
Basic
Diluted
(2,443)
(74,509)
($ 0.33)
($ 0.33)
-
-
-
-
-
(2,443)
(10,206)
(74,509)
154,909
($ 0.33)
($ 0.33)
$ 0.75
$ 0.75
Consolidated
2021
Elimination of
third-party
2020
GAAP
interests Burford-only Burford-only
180,255
175,336
35,173
86,311
2,900,465
13,069
134,019
78
3,524,706
13,918
126,057
1,022,557
398,595
22,889
1,584,016
598,813
26,366
4,108
922,503
1,551,790
388,900
1,940,690
$ 7.08
$ 7.06
(40,577)
-
16,163
(22,864)
(741,012)
-
-
-
(788,290)
-
(795)
-
(398,595)
-
(399,390)
139,678
175,336
51,336
63,447
2,159,453
13,069
134,019
78
2,736,416
13,918
125,262
1,022,557
-
22,889
1,184,626
319,586
16,594
45,213
30,708
1,906,191
15,225
134,032
256
2,467,805
9,556
103,481
667,814
-
24,742
805,593
(388,900)
(388,900)
598,813
26,366
4,108
922,503
1,551,790
-
1,551,790
598,813
22,529
6,551
1,034,319
1,662,212
-
1,662,212
$ 7.08
$ 7.06
$ 7.59
$ 7.59
ii Burford Capital Annual Report 2021
Chairman’s letter
Burford turned in an
excellent 2021. This may
seem odd to say as we
report the first accounting
loss in our history, but
that loss is a matter of
timing and non-recurring
charges, not substance.
We wrote significant new
core litigation finance business in 2021, and we deployed
almost twice as much of this business on our balance
sheet as we did in 2020, setting a new record. Even in an
era of slower case progress, we generated significantly
more cash than needed to cover all of our operating
expenses and debt service costs. Burford ended the year
with substantial liquidity and strong access to capital. We
recently announced our latest private fund.
The pandemic has not been helpful to an already slow-
moving litigation system, and we have seen delays in
many of our matters, but there is no suggestion of
deterioration in our portfolio: We experienced an
exceptionally low loss rate in 2021, and indeed we may
even make more money from slower-moving matters given
our time-based returns. It is of course frustrating for us
and for you that much of the business we did in our period
of rapid growth in 2016-19 has not yet come to fruition,
but there is nothing to suggest that it will not do so as the
world reopens from the pandemic.
The Board is excited about the quality of Burford’s
portfolio and its future prospects.
Board of Directors
We are well along in the process of refreshing the Board.
Two of our four original directors, Sir Peter Middleton and
David Lowe, have retired. Charles Parkinson will retire at
our 2023 AGM, and I will retire the following year. We
appointed three new directors in 2020, Robert Gillespie,
Andrea Muller and John Sievwright. We intend to
nominate a fourth new director at our 2022 AGM, and we
are in the process of searching for a fifth.
When the new Board is fully in place, we expect to have a
broad diversity of gender, race, nationality and
experience that will take Burford forward in the next
chapter of its evolution.
While the pandemic hampered the Board’s ability to meet
in person for some time, we have resumed physical
meetings and trust that will now continue unabated.
All three of our new directors serve on the Audit
Committee, with two qualifying as Audit Committee
financial experts; the new director we expect to
nominate shortly will also join the Audit Committee and is
also expected to be an audit committee financial expert.
One of our new directors, John Sievwright, has also assumed
the chairmanship of the Compensation Committee.
Burford’s Board has always been deeply involved in the
business and its strategy and engaged in active oversight
of the management team. I am pleased with the
functioning and level of engagement shown by my fellow
directors.
Dividend
After extensive consultation with shareholders, who hold
a wide range of views about whether to pay a dividend
and in what amount, we settled on a constant 12.5 cent
annual dividend, paid semi-annually, with the intention
that the dividend will not fluctuate regardless of annual
results. We do not intend any change to that approach in
the short term and will revisit the issue down the road.
Environmental, Social & Governance (“ESG”)
ESG was a core Burford value long before the current
enthusiasm for ratings and focused attention. We strongly
believe that legal finance in general is an important force
toward improving the fairness and efficiency of the civil
justice system. Burford, in particular, through initiatives
such as the Equity Project, provides meaningful economic
incentives to increase diversity in the business of law.You
can learn more about our commitment to diversity, equity
and inclusion in our sustainability report on our website.
Our people
Burford is graced with a terrific team and great executive
leadership. One cannot succeed for very long in this
business without both. We do our best to provide a
fulfilling experience in a collegial, thoughtful and
collaborative work environment. Our low long-term
attrition rate, employee surveys and my own observations
show that our people love what they do at Burford.
The Compensation Committee (of which I am a member)
scrutinizes compensation at an individual employee level,
something we are able to do given the relatively small
size of Burford’s workforce.
The following pages contain a great deal of information
about Burford’s business. Within the unique constraints
that the confidentiality requirements of our litigation
commitments impose, we have tried hard to deliver a high
level of transparency and analysis. I hope you will find it
useful.
Hugh Steven Wilson
Chairman
Burford Capital Annual Report 2021 iii
Management letter
Christopher Bogart
Chief Executive Officer
Jonathan Molot
Chief Investment Officer
Burford had a very strong year in 2021 for new business
and a relatively quiet one for realizations, the mirror
image of 2020, when new business was slowed by the
pandemic but realizations were robust. We are well
pleased with the volume of new business we generated;
after a pandemic hiatus, we have returned to growth
mode. And while matters are taking longer to conclude
than we might wish, due at least in part to the pandemic,
those that are concluding have strong outcomes, and we
saw almost no losses. Moreover, the pandemic has simply
caused delays and has not impacted the substance of any
cases: No client has given up its claims or stopped
prosecuting a matter; indeed, our returns are frequently
time-based and may ultimately benefit from these delays.
We look forward to progress in the portfolio. The next 12
to 18 months have the potential for developments in a
number of significant matters. Our YPF cases have
finished the discovery process, and summary judgment
submissions are expected to be fully briefed to the court
by June. An increasing number of cases from our rapid
growth in 2016-19 are now moving towards adjudication,
often a catalyst for settlement.
In a world of volatile markets and rising interest rates, it
is worth remembering that our returns are driven by
judicial activity and are uncorrelated to market
conditions or economic activity. Indeed, 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.
New business
We wrote $1.1 billion in group-wide new commitments in
2021, and we deployed $841 million in cash during the
year. Those levels are significant increases over the prior
year and show strong levels of activity across the
business; moreover, setting aside the large dollar but low
return deployments into our strategic value strategy in
iv Burford Capital Annual Report 2021
2017-2019, we are seeing historically high levels of
business activity into our core business, which has
historically produced our highest returns.
Most notable in 2021 was a sharp increase in our
deployment of balance sheet capital into those core legal
finance matters, to $447 million (2020: $225m; 2019:
$269m). We believe this lays a foundation for significant
future profitability.
We have achieved this increase in historically high-return
balance sheet deployments in two ways. First, we have
simply continued to grow our business. Second, we have
made less use of “2&20”-style fund capital for our core
business. While some asset classes lend themselves to a
capital-light, fee-based model, we do not believe this
approach maximizes shareholder returns in our high-
returning core business.
In terms of balance sheet deployments to matters with the
potential for high returns, 2021 was the best year in our
history.
Court activity
As in so many other areas, the pandemic continues to
disrupt the operation of courts around the world. Last fall,
we were optimistic that those delays would largely be
eliminated in 2022; the advent of the Omicron variant
added greater uncertainty. A number of courts that had
returned to in-person function went remote again or
cancelled trials; for example, the Los Angeles federal
courts again cancelled all trials once Omicron emerged.
That disruption is elongating the duration of a number of
our matters that are wending their way through the
judicial process. As just one example, we have a case that
was originally scheduled for trial in late 2021 (following
pre-trial Covid-related delays); that trial was postponed
until February 2022, and has now been postponed again
until August 2022, with further delay possible.
In addition to delays in current matters, we have also
seen a slowdown in new litigation activity, although it
obviously did not negatively impact our ability to do new
business in 2021; indeed, the presence of pent-up demand
is likely positive for the future. It is difficult to tell how
much of that is attributable to the pandemic, but we
believe that some of it surely is. Parties often have many
years to file a case before the relevant limitations period
expires (after which cases can’t be brought) and do not
seem to be rushing to the courthouse at present.
Some recently released US data is instructive:
▪ US federal civil case filings fell to a five-year low in
2021. Cases where the parties are from different
states or countries (which tend to be larger and more
complex, and make up most of our business), fell
even further, down 41% from the prior year.
▪ There is still a lot of litigation out there: 260,913 civil
cases were filed in 2021, of which 166,848 were cases
with parties from different states or countries.
▪ US bankruptcy filings have declined sharply,
continuing a five-year trend which was doubtless
exacerbated by government stimulus and aid provided
over the last two years. Individual and corporate
bankruptcy filings declined to 434,540 in 2021 from
790,830 in 2017 with business filings declining by 28%
year-over-year.
The impact of these trends on our business is largely a
question of timing. We have not had a single matter
discontinue due to delays, and the passage of time may
operate to increase our returns. Moreover, 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.
Realizations and portfolio value
We generated $128 million in Burford-only realized gains
from our core legal finance matters in 2021 (2020: $180
million; 2019: $120 million). We did not resolve any of our
large multi-case matters in 2021 whereas in 2020 the bulk
of our realizations were due to the resolution of a
significant claim family. We had only $9 million in
realized losses in 2021, representing 0.8% of average
capital provision-direct assets at cost (2020: $20 million;
2.2%).
Period-to-period volatility and unpredictability are
characteristic of our business and reaffirm the
uncorrelated nature of our cash flows. But as our low loss
rate indicates, our portfolio is robust, regardless of the
vagaries of the litigation process generally and the
specific impacts of the pandemic on the courts and our
portfolio matters. Moreover, we structure our business to
withstand this kind of volatility: We have significant cash
on hand, we will not alter our dividend policy and we will
keep investing. This is just timing.
At our investor event in November, we unveiled the
output of our internal modeling of our core legal finance
portfolio, excluding our YPF-related assets, as it stood at
June 30, 2021. That output suggested the portfolio could
generate $3.4 billion in realizations for Burford-only giving
rise to $2 billion in realized gains and $360 million of asset
management performance fee income. At December 31,
2021, our updated internal model suggests the core ex-
YPF portfolio is capable of generating $3.8 billion in
Burford-only realizations giving rise to $2.2 billion in
realized gains and $400 million in asset management
performance fee income, an increase over the prior data
driven by the addition of new business. We plan to
disclose our internal model outputs annually. See
“Forward-looking statements” and “Risk factors—Risks
related to our business and industry—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”.
A case study—of many things
We resolved a matter late in the year from our 2013
vintage that produced a $25 million profit, a 231% ROIC
and a 23% IRR. We profile this matter as an illustration of
a number of features in our business, including the long
and winding road litigation can take, the potential for
value to come from older vintages, the year-end nature of
our business and the impact of Covid-related delay.
The matter was a relatively straightforward business
dispute. The plaintiff, a specialty finance company,
alleged that a withdrawal of financing motivated by the
defendant financial institution’s desire to seize its assets
and eliminate it as a competitor had caused material
business harm; the defendant claimed its actions were
within its rights.
The alleged misconduct occurred in 2010. The plaintiff
filed its lawsuit in 2012. We agreed to finance the case in
2013, when the plaintiff sought new, more expensive
counsel. The case proceeded through the usual pre-trial
litigation process and, in 2016, went to trial. Because the
Burford Capital Annual Report 2021 v
judge made a fundamental legal error, our client lost at
trial but an appeal followed which our client won in 2019,
and the case was sent back for a new trial.
Once the case was back in the trial court, in normal
circumstances one would have expected the second trial
to proceed fairly rapidly. The parties had already done
the pre-trial discovery, which tends to be the longest part
of the litigation process. The defendant here—as is
typical—attempted further delay, and succeeded in
getting a bit more discovery and motion practice.
Nonetheless, the case would normally have gone to trial
again within a year or so of the appellate outcome, and
we would have had a trial result in 2020, or more likely a
settlement sometime before trial.
Enter Covid. The case simply sat, waiting in the queue for
a trial date, while court throughput slowed materially and
while criminal cases were prioritized. And there were
other factors as well: Do we want a trial with the
witnesses and the lawyers masked? Do we want cross-
examination to happen virtually? Do we want the jury pool
that is prepared to show up during a pandemic (with many
jurors refusing jury service)?
Ultimately, we were fortunate in having a trial judge who
was conscientious about trying to move his docket
forward, and the case ultimately settled after a mediation
process. Had it not settled, it would still be in line
awaiting a trial date, likely not before 2023. And had the
case gone to trial and won, the defendant would
doubtless have appealed the result, adding at least
another year of delay—although had we won at trial and
on appeal, we would have made even more money than
the attractive profit we generated from the settlement.
Notably, the settlement was executed in the late
afternoon of December 31. It is not uncommon for year-
end to be a driver both of litigation resolutions and of
new business, and it is one of the reasons that our results
for any particular period can be volatile and wholly
unpredictable. Almost $100 million of our new business
this year closed on New Year’s Eve itself. And some cases
we were watching for potential resolution did not resolve,
leading to a lighter year for realizations than we would
have wished.
This example is also a demonstration of the potential
value of older matters. Yes, it took eight years, but we
achieved a handsome result. Previously, we reported a
34% ROIC and a 19% IRR for the 2013 vintage; with this
realization, the vintage now stands at a 90% ROIC and a
21% IRR, with two matters still ongoing. Not every older
matter will perform this way—some will lose—but all age
means in litigation is that the process is continuing to
unfold in its labyrinthine way. It’s simply incorrect to give
up on the value creation potential in the continuing
matters in older vintages.
Finally, this case also shows our fair value policy in
operation. This case was held at cost originally, written
up slightly when we won the initial motion to dismiss,
written down following the initial trial court dismissal,
written back to cost when reinstated following appeal,
and written up when the case survived summary
judgment. Ultimately, when the case settled, we had
recognized slightly less than 25% of the ultimate realized
gain, pointing to the reliability and conservatism of our
approach. We provide full details of the fair value
evolution in the investor presentation made available on
our website.
Our balance sheet
We closed the year with a strong balance sheet and
significant liquidity. On a Burford-only basis, our
shareholders’ equity was $1.6 billion and we had $315
million of cash and marketable securities on hand.
Our inaugural US debt market issuance was very well
received in April. We were able to upsize the offering and
lower the coupon, raising $400 million at 6.25% for 7-year
money. And unlike our UK debt, which comes with
somewhat burdensome make-whole provisions for early
repayment, our US issue has a conventional call structure,
providing greater future flexibility.
We are rated BB- by S&P and Ba2 by Moody’s; Moody’s
upgraded us during the course of the year.
We expect to continue to be opportunistic issuers of debt
as a way of funding future growth in our assets along with
recycling capital from resolutions, while maintaining a
moderate level of leverage overall.
As a reminder, we have moved to a fixed dividend of 12.5
cents per share; period-to-period volatility in the timing
of realizations would not be expected to cause us to alter
that approach.
vi Burford Capital Annual Report 2021
Our fund management business—and how we
think about capital allocation
We have spent the entirety of Burford’s life considering
the optimal capital structure for our business. Those
considerations have evolved along with our business and
have also been influenced by our growth and the
incremental capital opportunities it provided.
Some history may be useful for context. Burford actually
began life in 2009 as a fund. Public shareholders owned
shares in a managed fund that paid management and
performance fees to an external manager that employed
our team. However, we quickly realized that the
constraints of that structure would not permit either our
desired level of asset growth or the creation of the kind of
industry-leading global team we thought was necessary to
capitalize on the opportunity we saw. It was also a
structure that did not accommodate the use of moderate
leverage particularly well.
Thus, at the end of 2012, we reconstituted Burford as a
public operating business and dissolved the fund
structure. That change freed us to begin to grow more
rapidly and also to take on leverage, which we began
doing in 2014.
However, that change was not a complete solution, for a
couple of key reasons: First, we saw opportunities at
varying return levels, some of which did not fit well into
what was then a pure balance sheet structure, and,
second, we couldn’t raise enough balance sheet capital
with our structure at the time which, given a modest
track record and no credit rating, didn’t permit access to
institutional debt markets.
As a result, we wanted to add a fund management
platform to solve those two issues: To have access to fund
capital for lower-returning but still nicely profitable
opportunities, and to be able to use fund capital as a way
of expanding the core business beyond what we could
achieve on balance sheet.
Thus, to jump-start our expansion into fund management,
we acquired an existing fund manager in late 2016 and
built on top of that platform. Since that acquisition, we
have invested the bulk of a $300 million fund raised by
the prior managers as well as raised almost $2 billion of
additional AUM across a range of strategies.
We continue to innovate on that platform, as seen most
recently by the successful launch of a new pre-settlement
fund strategy to invest in lower risk, lower return legal
finance matters that we expect to produce returns in the
12-20% IRR range. Our new $360 million Burford
Advantage Fund has a structure that rewards Burford
more than traditional fund models for producing good
performance: The 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 Burford retains any excess return. Based
on Burford’s internal modeling, Burford does better with
this approach than a traditional 2&20 fee structure once
our returns exceed approximately 13%. (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.)
We intend to continue to operate a robust fund
management platform and to offer a variety of fund
alternatives to private capital investors, and are proud to
count some of the world’s largest and most sophisticated
institutional investors among our limited partners.
However, our success in the last two years in gaining
access to the US capital markets means that at every
decision point about raising incremental private fund
capital for our core legal finance business—the portion of
our business that produces the highest returns—we need
to consider all the alternatives available to us. Those
include traditional 2&20 fund capital, fund capital with
alternative economic structures (as we have seen in BOF-
C and in the new Advantage Fund) and balance sheet
investing through recycling cash from successful
investments and raising incremental debt as needed. Now
that we have sound credit ratings and good access to low-
cost, long-term debt in substantial quantities as well as a
large portfolio that we expect to produce substantial cash
flow, we tend to gravitate more towards balance sheet
investing for our core business given the comparative
costs of capital to shareholders across the various options
than, say, three or four years ago when our options were
more constrained.
US GAAP, the US public markets, disclosure and
governance
Our entry into the US capital markets—our SEC
registration, our NYSE listing and our US debt issuance—
has had significant impacts on the business in a number of
ways.
Some are obvious: We are now full participants in the
world’s largest and deepest capital market, with
immediate benefits, such as being able to raise $400
million of attractively priced debt in the space of a week
or so in late March 2021, and longer-term benefits of
continuing to educate US investors about this asset class
and bring them into the stock.
Burford Capital Annual Report 2021 vii
Other impacts are valuable but less immediately
apparent.
The process of converting to US GAAP has been time-
consuming and resource-intensive, but at the same time it
is as though we have been through a particularly thorough
physical exam. To convert to GAAP meant the
comprehensive re-examination of every single thing in the
business and its accounts. When our newly-birthed US
GAAP financials are unveiled later in this report, one can
be sure that there was no lassitude that simply carried
something over from one year to another without a fresh
and comprehensive re-examination. That led to some
capillary-level changes in the IFRS views about the
historical treatment of a couple of matters, with no
substantive impact, but even that is a healthier process
than never revisiting past decisions.
Along the way, we have also further enhanced our
internal control processes in light of the standards of the
Sarbanes-Oxley Act, which requires a level of internal
control and rigor that is unmatched globally.
It may seem self-serving for us to endorse litigation—but it
serves our business, and business generally, very well.
Although we don’t endorse frivolous litigation, we do
endorse the kind of vigorous litigation climate that exists
in the US: The risk of being sued causes companies to be
more conscious of the risks they take, and it focuses the
minds of everyone else, including service providers like
auditors. The UK’s and Europe’s opposition to any
meaningful level of public securities litigation permits a
level of softness to exist at public companies—and the
number of scandals in recent years affirms this view.
Shareholders would be well served by having more access
to the courts for corporate wrongdoing; less of it might
well arise in the first place. Thus, while we were well
governed before, we are better governed now as a US-
listed company.
The next step along this journey is our voluntary move to
quarterly reporting beginning in 2023, even if we do not
pass through the threshold of 50% ownership by US
investors that would mandate such a move. Quarterly
reporting will take some getting used to, for us and for
investors. The nature of our business is such that there
will be dry periods. For example, the first quarter of the
year should be expected to be regularly loss-making as we
have not historically seen much in the way of either
resolutions or new business in that period.
The final step in this process will be passing the 50% US
investor threshold, which will move us to full-fledged US
filings on Forms 10-K and 10-Q—although these filings
won’t look substantially different than our current
disclosures, given the evolution of our reporting over the
past couple of years.
Competition and the legal finance market
There is competition in our industry and there always has
been. Notwithstanding that competition, whether from
incumbent players, aspiring new entrants or our largest
source of competition—clients self-funding their own
matters instead of taking our capital—we did more than a
billion dollars of new business last year. That is a
remarkable accomplishment in a still nascent industry—
and in that regard, as in so many others, Burford far
outpaces our competition.
We are in no way complacent about competition. But this
isn’t a business where someone can show up with a
checkbook and buy their way into the market simply by
offering slightly lower pricing. Clients come to Burford—
and keep coming back to us—because we add value. (We
spent quite a bit of time at our investor day in November
on this topic and won’t burden readers with a repetition
of the points made there. If you haven’t watched our
investor day presentation, it remains available on our
website.)
We were delighted to return to growing our new business
activity following the pandemic hiatus of 2020, and we
are enthusiastic for realizations to follow suit. We are
grateful to all of our stakeholders for their support and
look forward to continuing to generate superior
shareholder value over time.
Christopher Bogart
Chief Executive Officer
Jonathan Molot
Chief Investment Officer
viii Burford Capital Annual Report 2021
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
Ordinary shares, no par value
Trading Symbol(s)
BUR
Name of Each Exchange on Which Registered
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
The sufficiency of our cash and cash equivalents and our ability to raise capital to meet our liquidity needs
▪
▪ Our ability to retain key employees
▪
▪ 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:
Burford Capital Annual Report 2021 5
▪ 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).
6 Burford Capital Annual Report 2021
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.
Burford Capital Annual Report 2021 7
▪
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.
8 Burford Capital Annual Report 2021
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.
Burford Capital Annual Report 2021 9
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.
10 Burford Capital Annual Report 2021
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.
Burford Capital Annual Report 2021 11
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.
12 Burford Capital Annual Report 2021
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.
Burford Capital Annual Report 2021 13
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
14 Burford Capital Annual Report 2021
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:
($ in millions)
Strategy
closed commitments7 deployments AUM
Investor
commitments
Asset
Asset
BCIM Partners II, LP2
BCIM Partners III, LP
BOF
Legal finance
Legal finance
Legal finance
BCIM Credit Opportunities LP
BAIF2
Strategic Value Fund5
Post-settlement
Post-settlement
Complex strategies
BOF-C2
Advantage Fund
Totals
Legal finance
Legal finance
260
412
300
488
327
500
766
190 8
3,243
253
446
387
699
653
1,199
788
-
4,425
181
309
246
177
463
338
695
638
1,199
442
395
41
403
—
789
190
3,671 2,835
Fee structure
(management/
Investment
performance)1 Waterfall period (end)
Class A: 2%/20%
Class B: 0%/50% European 12/15/2015
1/1/20203
2%/20% European
2%/20% European 12/31/20214
1% on undrawn/
2% on funded and
20% incentive European 9/30/20193
4/4/2022
Evergreen
1.5%/10% European
2%/20% American
Expense reimbursement
+ profit share
Hybrid 12/31/2022
Profit Split6 American 12/24/2024
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.
3.
4.
5.
6.
7.
Includes amounts related to “sidecar” funds.
Ceased commitments to new investments in the fourth quarter of 2018 due to capacity.
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.
Includes amounts related to BCIM SV SMA I, LLC which invests alongside the Strategic Value Fund.
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.
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
US
UK
Rest of the world
Total:
Number
93
44
3
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.
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
BC Holdings Limited
Ollivets Investments Limited
Burford Capital LLC
Ballard LLC*
Burford Capital Global Finance LLC
Prospect Investments LLC*
Wilburn Investments LLC*
Burford Capital Holdings (UK) Limited
Burford Capital Overseas Limited
Burford Capital PLC
Burford Capital (UK) Limited
Burford Global Investments Limited
Burford Investments Limited
Burford Ireland LP*
Justitia Ireland Investments DAC*
* Represents investment subsidiaries.
Jurisdiction of incorporation Proportion of ownership interest
100 %
Guernsey
100 %
Guernsey
100 %
US
100 %
US
100 %
US
100 %
US
100 %
US
100 %
UK
100 %
UK
100 %
UK
100 %
UK
100 %
UK
100 %
UK
100 %
100 %
Ireland
Ireland
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
New York, New York
London, UK
Chicago, Illinois
Hong Kong, China
Singapore, Singapore
Sydney, Australia
Washington, DC
* Represents shared office space.
Seasonality
Size (square footage) Main use
19,516 Office space
9,378 Office space
8,321 Office space
* Office space
* Office space
* Office space
* Office space
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”.
24 Burford Capital Annual Report 2021
Financial and operational review
continued
Uncorrelated returns
Our returns are driven by judicial activity and are uncorrelated to market conditions or economic activity. The return
of economic stress is likely good for us, as we tend to generate business when companies face increased liquidity
challenges and other forms of uncertainty.
Litigation activity
In addition to delays in current matters, we have also observed a slowdown in new litigation activity. We believe that
we will see the filing of some amount of pent-up litigation in the future, as well as a material increase in bankruptcy
filings as the effects of government stimulus wear off over time and as interest rates rise.
Sanctions
The recent events in Ukraine and the subsequent international sanctions imposed on Russian businesses and individuals
have had a wide-ranging impact on the legal industry. In particular, the recent international imposition of sanctions has
had a profound effect on the flow of capital in and out of Russia. Generally speaking, we do not do business in the
domestic courts of either Russia or Ukraine, nor do we take on matters requiring us to enforce against assets held in
those countries. We have financed litigation or arbitrations in other jurisdictions against entities that might have an
ultimate Russian parent or controller. There are only a handful of cases that fit this description and in aggregate
represent $93 million of the $2,900 million (or approximately 3.2%) of total carrying value for capital provision assets.
We are mindful of any sanctions or other issues and work regularly with specialist counsel in the sanctions area (as well
as ensuring compliance with all legal requirements, such as anti-money laundering). Where we are required to enforce
judgments or awards, even against sanctioned entities, such enforcement tends to be consistent with the goals of
international sanctions regimes rather than running afoul of them, and the US Office of Foreign Assets Control and the
UK Office of Financial Sanctions Implementation regularly grant licenses to do so. We do not anticipate any adverse
impact on our business from the current sanctions regime.
Consolidated results of operations
Set forth below is a discussion of our consolidated results of operations as reported under US GAAP. This “Financial and
operational review” also contains a discussion of certain APMs that are also used by management to review and assess
our operations. These APMs and non-GAAP financial measure set forth under “Basis of presentation of financial
information” are supplemental and should not be considered as a substitute for, or superior to, our consolidated
results of operation as reported under US GAAP. As discussed under “—Conversion to US GAAP”, because we are
reporting our results under US GAAP, historical data for the year ended December 31, 2020, and prior periods may
differ from the historical data previously prepared in accordance with IFRS.
Burford Capital Annual Report 2021 25
Financial and operational review
continued
Year ended December 31, 2021, compared to year ended December 31, 2020
The following table provides an overview of our consolidated results of operations for the years ended December 31,
2021 and 2020.
($ in thousands)
Income
Capital provision income
Asset management income
Insurance income
Services income
Marketable securities income and bank interest
Unrealized gain/(loss) relating to third-party interests in capital provision assets
Total income
Operating expenses
Compensation and benefits:
Salaries and benefits
Annual incentive compensation
Equity compensation
Legacy asset recovery incentive compensation including accruals
Long-term incentive compensation including accruals
General, administrative and other
Case-related expenditures ineligible for inclusion in asset cost
Equity and listing related
Amortization of intangible asset
Total operating expenses
Income from operations
Other income (expense)
Finance costs
Loss on debt buyback
Foreign currency transactions (losses)/gains
Total other expense
(Loss)/income before income taxes
Benefit from (provision for) income taxes
Net (loss)/income
Net income attributable to non-controlling interests
Net (loss)/income attributable to ordinary shares
Overview
2021
2020
Change
127,549
14,396
5,143
1,177
1,865
2,028
152,158
340,103
15,106
1,781
804
380
947
359,121
(212,554)
(710)
3,362
373
1,485
1,081
(206,963)
(34,333)
(22,145)
(9,272)
(36,364)
(7,942)
(30,467)
(5,300)
-
-
(145,823)
(31,483)
(22,772)
(5,281)
-
(18,125)
(21,468)
(4,841)
(7,907)
(8,703)
(120,580)
(2,850)
627
(3,991)
(36,364)
10,183
(8,999)
(459)
7,907
8,703
(25,243)
6,335
238,541
(232,206)
(58,647)
(1,649)
(5,482)
(65,778)
(39,048)
-
10,746
(28,302)
(19,599)
(1,649)
(16,228)
(37,476)
(59,443)
210,239
(269,682)
3,015
(56,428)
15,638
(72,066)
(36,937)
173,302
8,187
165,115
39,952
(229,730)
7,451
(237,181)
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
26 Burford Capital Annual Report 2021
Financial and operational review
continued
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):
Management fees
Performance fees
BOF-C income
Total Burford-only asset management income
Insurance income (consolidated)
2021
2020
11
6
9
26
12
6
6
24
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.
Burford Capital Annual Report 2021 27
Financial and operational review
continued
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.
28 Burford Capital Annual Report 2021
Financial and operational review
continued
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.
Burford Capital Annual Report 2021 29
Financial and operational review
continued
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:
In arbitration cases, where there are limited opportunities for appeal, issuance of a tribunal award
▪ 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
▪
▪ 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.
30 Burford Capital Annual Report 2021
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 $9 million in costs deployed in the
period are recoverable. Otherwise, we did not recognize any income on the YPF-related assets during 2021.
Financial and operational review
continued
Summary of components of carrying value at December 31, 2021
Burford-only
($ in millions)
Capital provision-direct:
YPF-related assets
Other assets
Total
Capital provision-indirect
Total capital provision assets
Summary of components of carrying value at December 31, 2020
Burford-only
($ in millions)
Capital provision-direct:
YPF-related assets
Other assets
Total
Capital provision-indirect
Total capital provision assets
Deployed
cost
Unrealized
gain
Carrying
value
50
1,201
1,251
18
1,269
727
160
887
3
890
777
1,361
2,138
21
2,159
Deployed
cost
Unrealized
gain
Carrying
value
41
907
945
43
991
732
183
915
—
915
773
1,090
1,863
43
1,906
Burford Capital Annual Report 2021 31
Financial and operational review
continued
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)
Income
Capital provision income
Asset management income
Insurance income
Services income
Marketable securities income and bank interest
Unrealized gain/(loss) relating to third-party interests in capital provision assets
Total income
Operating expenses
Compensation and benefits:
Salaries and benefits
Annual incentive compensation
Equity compensation
Long-term incentive compensation including accruals
General, administrative and other
Case-related expenditures ineligible for inclusion in asset cost
Equity and listing related
Amortization of intangible asset
Total operating expenses
Income from operations
Other income (expense)
Finance costs
Foreign currency transactions gains
Total other expense
Income before income taxes
Provision for income taxes
Net income/(loss)
Net income attributable to non-controlling interests
Net income attributable to ordinary shares
Statement of comprehensive income
Capital provision income (consolidated)
2020
2019
Change
340,103
15,106
1,781
804
380
947
359,121
409,156
15,160
3,545
2,133
6,676
(57,500)
379,170
(69,053)
(54)
(1,764)
(1,329)
(6,296)
58,447
(20,049)
(31,483)
(22,772)
(5,281)
(18,125)
(21,468)
(4,841)
(7,907)
(8,703)
(120,580)
(25,231)
(24,503)
(4,519)
(33,496)
(22,447)
(11,246)
(1,754)
(9,495)
(132,691)
(6,252)
1,731
(762)
15,371
979
6,405
(6,153)
792
12,111
238,541
246,479
(7,938)
(39,048)
10,746
(28,302)
(38,747)
1,956
(36,791)
(301)
8,790
8,489
210,239
209,688
551
(36,937)
173,302
8,187
165,115
(13,417)
196,271
15,309
180,962
(23,520)
(22,969)
(7,122)
(15,847)
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.
32 Burford Capital Annual Report 2021
Financial and operational review
continued
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
Burford Capital Annual Report 2021 33
Financial and operational review
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 $8 million for the year ended December 31, 2020.
Segments (consolidated)
We have two operating business segments: (i) Capital provision: Provision of capital to the legal industry or in
connection with legal matters, both directly and through investment in the Group’s managed funds; and (ii) Asset
management and other services (which includes the provision of services to the legal industry, including litigation
insurance); and one corporate segment: (iii) Other corporate. We have changed two of our segments from our
presentation in our Annual Report on Form 20 - F for the year ended December 31, 2020. The asset management and
other services segment was previously named asset management, and the other corporate segment was previously
named services and other corporate. As a result, insurance income and asset recovery fee for services income, which
previously resided in the services and other corporate segment now reside in the asset management and other services
segment.
The following table provides a breakdown of our income by operating segment for the years ended December 31, 2021,
2020 and 2019.
($ in thousands)
Capital provision
Asset management and other services
Other corporate
For the year ended December 31,
2021
2020
99,754
32,357
774
320,023
27,069
315
2019
316,823
31,808
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.
($ in thousands)
Capital provision
Third-party share of gains relating to interests in consolidated entities
Total
For the year ended December 31,
2021
2020
127,549
(27,795)
99,754
340,103
(20,080)
320,023
2019
409,156
(92,333)
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
($ in thousands)
Income
Operating expenses
Other income (expense)
Foreign currency transactions
Profit/(loss) before taxation
For the year ended December 31, 2020
($ in thousands)
Income
Operating expenses
Other income (expense)
Foreign currency transactions
Profit/(loss) before taxation
34 Burford Capital Annual Report 2021
Capital Asset management
provision and other services Other corporate
99,754
(87,420)
(54,014)
-
(41,680)
32,357
(33,280)
(1,398)
-
(2,321)
774
(21,488)
(4,884)
(5,482)
(31,080)
Capital Asset management
provision and other services Other corporate
320,023
(55,139)
(36,316)
-
228,568
27,069
(24,254)
-
-
2,815
315
(37,228)
(2,732)
10,314
(29,331)
Total
132,885
(142,188)
(60,296)
(5,482)
(75,081)
Total
347,407
(116,621)
(39,048)
10,314
202,052
For the year ended December 31, 2019
($ in thousands)
Income
Operating expenses
Other income (expense)
Foreign currency transactions
Profit/(loss) before taxation
Financial and operational review
continued
Capital Asset management
provision and other services Other corporate
316,823
(72,252)
(36,423)
-
208,148
31,808
(23,704)
-
-
8,104
6,070
(27,635)
(2,324)
2,016
(21,873)
Total
354,701
(123,591)
(38,747)
2,016
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 asset recovery incentive
compensation charge in 2021. In the asset management and other services segment, we incurred a loss before taxation
of $2 million in 2021 compared to a profit before taxation of $3 million in 2020, primarily due to higher total segment
expenses partially offset by higher income from BOF-C and other services. In the other corporate segment, loss before
taxation was relatively consistent in 2021 and 2020.
In the capital provision segment, profit before taxation increased to $229 million in 2020 from $208 million in 2019,
primarily due to lower total segment expenses in 2020. In the asset management and other services segment, profit
before taxation decreased to $3 million in 2020 from $8 million in 2019, primarily due to lower management fees in
2020. In the other corporate segment, the loss before taxation increased by $7 million in 2020 compared to 2019,
primarily due to higher segment expenses.
Cash flows (consolidated)
The following table sets forth the principal components of our cash flows for the years ended December 31, 2021, 2020
and 2019.
For the year ended December 31 ($ in thousands)
Net cash (outflow)/inflow from operating activities
Net cash (outflow) from investing activities
Net cash inflow/(outflow) from financing activities
Net (decrease)/increase in cash and cash equivalents
Net cash (outflow)/inflow from operating activities
2021
2020
(585,364)
(285)
444,829
(140,820)
53,827
(360)
(5,257)
48,210
2019
(273,555)
(3,398)
154,695
(122,258)
Net cash from operating activities was a cash outflow of $585 million for 2021, compared to a cash inflow of $54 million
for 2020, primarily due to greater new funding of capital provision assets and lower cash realized gains in 2021.
Included in net cash from operating activities are net (fundings)/proceeds from the movement between cash and
marketable securities.
Net cash from operating activities was a cash inflow of $54 million for 2020, compared to a cash outflow of $274 million
for 2019, primarily due to lower new funding of capital provision assets in 2020.
The following table sets forth the principal components of our net cash outflow from operating activities for the years
ended December 31, 2021, 2020 and 2019.
For the year ended December 31 ($ in thousands)
Net cash inflow from operating activities before funding of capital provision assets and net (funding
of)/proceeds from marketable securities
Net (funding of)/proceeds from marketable securities
New funding of capital provision assets
Net cash inflow/(outflow) from operating activities
2021
2020
2019
247,927
(160,360)
(672,931)
(585,364)
330,594
20,376
(297,143)
53,827
294,885
3,346
(571,786)
(273,555)
*
See note 3 (“Supplemental cash flow data”) to our consolidated financial statements.
Net cash (outflow) from investing activities
Net cash from investing activities was a cash outflow of less than $1 million in 2021, consistent with 2020.
Net cash from investing activities was a cash outflow of less than $1 million in 2020, compared to a cash outflow of $3
million for 2019, primarily due to lower purchases of property, plant and equipment in 2020.
Net cash inflow/(outflow) from financing activities
Net cash from financing activities was an inflow of $445 million for 2021, compared to an outflow of $5 million for
2020. The cash inflow in 2021 was primarily due to the issuance of $400 million in senior notes in April 2021.
Burford Capital Annual Report 2021 35
Financial and operational review
continued
Net cash from financing activities was an outflow of $5 million for 2020, compared to an inflow of $155 million for
2019. The cash outflow in 2020 was due to the redemption of debt, while the net inflow in 2019 was primarily due to
sales of a portion of our entitlement in the YPF-related assets held via Colorado.
We anticipate that our primary sources of funds will be available cash and cash from operations, which includes
proceeds from our capital provision assets. We may also issue additional debt from time to time. We believe that these
sources of funds will be sufficient to fund our operations, including our working capital requirements.
Capital expenditures
We do not have material capital expenditures. At December 31, 2021, we had $2 million in carrying value relating to
leasehold improvements, fixtures, fittings and equipment, computer software and hardware. We do not anticipate
incurring material capital expenditures in the year ending December 31, 2022.
Research and development, patents and licenses, etc.
We do not spend material amounts on research and development, nor do we own any patents.
Cash receipts (non-GAAP financial measure)
We consider cash receipts (proceeds from realizations of our capital provision and other assets plus asset management
and other income) to be an important metric in managing the business, since cash receipts provide the funds we have
available (before raising any external capital) to deploy into new assets and pay our operating expenses and finance
costs.
Burford generated a robust level of cash during 2021, with $532 million of cash receipts Group-wide and $281 million on
a Burford-only basis. Burford-only cash receipts were driven by realizations in our capital provision-direct assets. For
the funds, realizations in BAIF and in funds with capital provision-direct assets were the key drivers of cash proceeds.
Cash receipts
2021 ($ in millions)
Cash proceeds:
Capital provision-direct
Capital provision-indirect
Post-settlement finance
Asset management cash income
Services and other income
Total cash receipts
Burford-only
Other funds BOF-C Group-wide
231
25
-
19
6
281
89
33
108
-
-
230
21
-
-
-
-
21
341
58
108
19
6
532
Burford-only cash receipts in 2021 of $281 million represented a 46% decrease from $519 million in 2020, although the
mix of cash proceeds behind these results was different. In 2021, the majority of cash receipts were derived from
capital provision-direct assets, while in 2020, the Strategic Value Fund within the capital provision-indirect portfolio,
where capital tends to be recycled more quickly because of the short tenor of the assets, accounted for a greater
portion of cash receipts. Excluding cash receipts from capital provision-indirect assets, cash receipts in 2021 decreased
by 26% from 2020. Although recently the capital provision-indirect portfolio has made a minimal contribution to cash
receipts, as deployments are made in the Advantage Fund, we would expect realizations from those deployments to
increase the capital provision-indirect portfolio’s contribution to total cash receipts. In addition, financing costs have
increased due to the debt issuance in April 2021.
Burford has a consistent history of generating significant cash receipts and, therefore, substantial cash available for
deployment. From these cash receipts and liquidity on the balance sheet, Burford funds its operating expenses and
finance costs. During 2021, Burford’s balance sheet generated sufficient cash to cover those cash outflows.
36 Burford Capital Annual Report 2021
Cash available for redeployment—Burford-only
($ in millions)
Cash proceeds from capital provision-direct
Cash proceeds from capital provision-indirect*
Cash from asset management income
Cash from services and other income
Cash receipts from operations
General operating expense-excluding one time expenses (legacy asset recovery accruals, costs
ineligible to be capitalized and equity and listing costs)
Finance costs
Cash for redeployment
*
Includes proceeds from hedging-related assets.
Financial and operational review
continued
2021
231
25
19
6
281
(104)
(59)
118
2020
325
173
16
5
519
(98)
(39)
382
2019
210
270
20
18
518
(76)
(39)
403
For further information on how data in this section is related to data in the financial statements notes, see Cash
receipts data reconciliation on page 59 of the “—Data reconciliation” section.
Debt
Burford has issued five series of debt securities, four that are listed on the London Stock Exchange’s Order Book for
Retail Bonds and one through a private placement transaction under Rule 144A in the United States. The table below
sets forth information on our outstanding debt at December 31, 2021.
We have well-laddered debt maturities with an overall weighted average maturity well in excess of the weighted
average life of our legal finance assets. At December 31, 2021, the weighted average life of our outstanding debt at 4.6
years continues to be longer than that of our concluded capital provision-direct assets at 2.3 years, weighted by
recoveries. Our debt maturity profile mitigates any significant single-year refinancing risk.
Going forward, we expect to continue to be an opportunistic debt issuer, so we may from time to time issue new debt
to fund our growth or to refinance future debt maturities. Alternatively, depending upon our liquidity position, we may
from time to time repurchase some of our outstanding debt. During 2021, we repurchased approximately $34 million
(£28 million) face amount of our debt issue due in August 2022, our nearest maturity, that continues to be held by a
wholly owned subsidiary.
Outstanding debt issues at December 31, 2021
Principal amount
Balance sheet (at amortized cost) at
($ in thousands)
Burford Capital PLC
£90,000,000 issued at 6.50% fixed rate
£100,000,000 issued at 6.125% fixed rate
£175,000,000 issued at 5.00% fixed rate
Burford Capital Finance LLC
$180,000,000 issued at 6.125% fixed rate
Issuance
date
Maturity
date
face value at
issuance
USD
Currently
equivalent outstanding
Currently
(in local outstanding
(in USD)*
currency)
2021
2020
8/19/2014
8/19/2022
4/26/2016 10/26/2024
12/1/2026
6/1/2017
$
$
$
143,176 £
144,020 £
225,803 £
62,028
100,000
175,000
$
$
$
83,595 $
134,770 $
235,848 $
83,396
134,092
234,153
$
$
$
117,082
135,561
236,794
2/12/2018
8/12/2025
$
180,000 $
180,000
$
180,000 $
178,728
$
178,377
Burford Capital Global Finance LLC
$400,000,000 issued at 6.25% fixed rate callable notes
Total debt
4/5/2021
4/15/2028
$
400,000 $
400,000
$
400,000 $
$
392,188
1,022,557
$
$
-
667,814
*
Converted using exchange rate at 12/31/2021 of 1.3477 GBP/USD.
We manage our balance sheet with relatively low levels of leverage. Our debt issues in the UK bond market contain one
significant financial covenant, which is a leverage ratio requirement that we maintain a consolidated level of net debt
(debt less cash and marketable securities) of less than 50% of our level of tangible assets (total assets less intangibles).
At December 31, 2021, our leverage ratio on this basis was 21%. In addition, the indenture governing our 6.250% Senior
Notes due 2028 contains certain restrictive covenants that, among others, require us to have a consolidated
indebtedness to net tangible equity ratio of less than 1.50 to 1.00 or 2.00 to 1.00 to undertake specific actions, such as
make restricted payments or incur additional indebtedness. At December 31, 2021, we were in compliance with all of
the covenants under the trust deeds and indenture, as applicable. For further information, see “Additional details on
net debt to tangible equity covenant ratio and Additional details on net debt to tangible assets covenant ratio tables”
on page 65 in the “Data reconciliation” section.
Burford Capital Annual Report 2021 37
Financial and operational review
continued
Liquidity
A key part of our financial management strategy involves maintaining significant liquidity. Burford-only cash, cash
equivalents and marketable securities at year-end 2021 was $315 million on our balance sheet, a 6% decrease from
$336 million at year-end 2020. Our marketable securities consist of short-duration and generally investment-grade fixed
income assets, the bulk of which are held in separately managed accounts managed by a large asset manager who
specializes in short duration and money market investments. The decrease in cash and marketable securities during
2021 reflects strong growth in Burford-only deployments, partially offset by modest case realizations and the issuance
of $400 million in senior notes in April 2021. We believe our strong liquidity position enables us to continue to deploy
capital into the financing of attractive new legal finance assets.
Burford is a growing business that typically invests in assets with an anticipated medium tenor. By definition, if our new
deployments in a year exceed realizations from prior years’ assets, we will need incremental financing. This dynamic is
typical for growing companies. It is also generally within Burford’s control, in that we could simply slow our new
fundings to preserve cash, but we believe that would not maximize shareholder value in the long term. Burford has
instead elected a growth strategy while at the same time maintaining a strong balance sheet and making use of private
investment funds and our strategic capital arrangement with a sovereign wealth fund.
Our large liquidity balance at December 31, 2021, is not unusual, as we tend to keep relatively sizeable amounts of
cash and marketable securities on our balance sheet, as the timing of cash inflows to our business is unpredictable. We
typically have greater visibility on our deployments, especially those against potential new commitments, which we
can decide not to pursue at any point.
Liquidity
Burford-only
At December 31,
Cash and cash equivalents
Marketable securities
Total liquid assets
Off-balance sheet arrangements
2021
140
175
315
2020
320
16
336
2019
168
38
206
2018
236
41
277
2017
91
40
131
At December 31, 2021, we had off-balance sheet arrangements relating to legal finance assets with structured entities
that aggregate claims from multiple parties in the amount of $6 million. See note 17 (“Variable interest entities”) to
our consolidated financial statements.
Contractual obligations
The table below sets forth our contractual obligations at December 31, 2021. Neither our consolidated financial
statements nor the table below include our undrawn financing commitments, which we enter into during the course of
providing funding to our clients. At December 31, 2021, these undrawn financing commitments amounted to $1.5
billion, of which $703 million were definitive commitments and $88 million related to our legal risk management
activities. See note 22 (“Financial commitments and contingent liabilities”) to our consolidated financial statements.
December 31, 2021
Leases
Debt interest payable
Other liabilities
Debt issued
Third-party interests in consolidated entities
Less than
More than
1 year 1 to 3 years 3 to 5 years
$'000
$'000
$'000
5 years No maturity
$'000
$'000
Total
$'000
2,409
61,506
41,249
83,595
-
188,759
4,191
112,144
4,805
134,770
-
255,910
3,866
84,610
-
415,847
-
504,323
4,393
37,500
-
400,000
-
441,893
-
-
53,884
-
398,595
14,859
295,760
99,938
1,034,212
398,595
452,479 1,843,364
38 Burford Capital Annual Report 2021
Dividends
Total dividend
Financial and operational review
continued
2021
12.50 ¢
2020
12.50 ¢
2019
4.17 ¢
The Board has recommended that shareholders approve at the annual general meeting a final dividend for 2021 of
6.25¢ per share payable on June 17, 2022, to shareholders of record on May 27, 2022. If shareholders approve this
dividend, the total annual dividend for 2021 would be 12.5¢.
We expect to maintain this annual dividend level going forward and plan to pay one-half of this annual dividend as an
interim dividend and one-half as a final dividend for the year. Given the demand for our capital in the legal finance
marketplace and the tax inefficiency of dividend payments to US investors, we do not anticipate regular increases in
our dividend level, but rather we will review dividend levels with shareholders and the Board from time to time.
Because we are a US dollar-denominated business, dividends are declared in US dollars. For UK shareholders, those
dividends are then converted into Sterling shortly before the time of payment and paid in Sterling. Any UK shareholder
who would like to receive dividends in US dollars should contact the Registrar. US shareholders will automatically
receive their dividends in US dollars unless they request otherwise.
Current portfolio
We count each of our contractual relationships as an “asset”, although many such relationships are composed of
multiple underlying litigation matters that are often cross collateralized rather than reliant on the performance of a
single matter. At December 31, 2021, our Burford-only portfolio consisted of 184 assets held directly and two other
assets held indirectly through our investment in the Strategic Value Fund.
At December 31, 2021, our consolidated portfolio was $4.4 billion, including deployed cost, net unrealized gain and
undrawn commitments, while the Group-wide portfolio was $5.1 billion of which $3.3 billion was attributable to the
Burford-only balance sheet.
For a reconciliation of our current portfolio on a US GAAP consolidated basis to the calculation on a Group-wide basis,
see “— Data reconciliations - Portfolio data reconciliation” on page 60. The following table reconciles the calculation
of our current portfolio on a Burford-only basis to the calculation on a Group-wide basis.
At December 31, 2021 ($ in millions)
Capital provision-direct:
Deployed cost
+ Fair value adjustments
= Carrying value
+ Undrawn commitments
= Total
Capital provision-indirect:
Carrying value
+ Undrawn commitments
= Total
Post-settlement:
Deployed cost
+ Fair value adjustments
= Carrying value
+ Undrawn commitments
= Total
Burford-only
Funds BOF-C Total
Current portfolio
1,251
887
2,138
1,132
3,270
11 *
-
11
-
-
-
-
-
508
82
590
217
807
2
-
2
275
56
331
12
343
274
28
302
359
661
2,033
997
3,030
1,708
4,738
-
-
-
-
-
-
-
-
13
-
13
275
56
331
12
343
Total portfolio
*The noted $11 million carrying value for Burford-only capital provision-indirect assets does not include a further $10 million for the Burford-only
portion of due from settlement receivable on concluded assets in the Strategic Value Fund, for a total of $21 million carrying value for Burford-only
capital provision-indirect assets as noted in the capital provision asset reconciliation table in the data reconciliation section.
1,152
3,281
661
5,094
The Group-wide portfolio has grown at a compound annual growth rate of 43% over the five years ending December 31,
2021. The Group-wide portfolio grew by 14% during 2021, driven by strong deployments across the capital provision-
direct portfolio, along with relatively low realizations in the period.
Burford Capital Annual Report 2021 39
Financial and operational review
continued
Undrawn commitments
Our portfolio includes both commitments that have been funded and, therefore, have become deployments, as well as
commitments that have not been funded and, therefore, are expected to become deployments at some future date.
Although our realizations are neither controllable nor predictable, we do have significantly more visibility of and
control over our deployments. Although some portion of these deployments are on prior definitive commitments, which
we are obligated to fund, a significant portion of deployments on prior commitments is discretionary, so that we have
control over whether to fund.
At December 31, 2021, our consolidated undrawn commitments were $1.5 billion, our Burford-only undrawn
commitments were $1.1 billion, and our Group-wide total undrawn commitments were $1.7 billion. Deployments on
new potential commitments are entirely within our control since we can decline to make the commitment in the first
instance if we do not want to deploy capital at that time.
The table below sets forth our Group-wide undrawn commitments outstanding at December 31, 2021, and
December 31, 2020, on a consolidated basis, a Burford-only basis and a Group-wide basis and provides a reconciliation.
At December 31, 2021
(December 31, 2020)
Capital provision-direct:
Legal finance
Legal risk management
Capital provision-indirect:
Strategic Value fund
Post-settlement:
Post-settlement funds
Total undrawn
commitments
Consolidated
commitments
Group-wide
interests commitments commitments commitments commitments
Burford-only
BOF-C
Fund
Elimination of
third-party
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
1,405
1,161 *
88
94 *
- *
- *
-
-
(355)
(239)
(6)
(6)
-
-
-
-
1,050
922
82
88
-
-
-
-
1,493
1,255
(361)
(245)
1,132
1,010
199
265
18
21
-
-
12
27
229
313
353
234
6
6
-
-
-
-
1,602
1,421
106
115
-
-
12
27
359
240
1,720
1,563
*
*
See note 22 (“Financial commitments and contingent liabilities”) to our consolidated financial statements.
The Burford-only undrawn commitment figure for 2021 includes approximately $63 million interests in commitments that were warehoused for our funds
at December 31, 2021, including a $13 million commitment warehoused for BOF-C and a $50 million asset warehoused for the Advantage Fund, which will
be reflected as a capital provision-indirect asset post-transfer. The undrawn commitment table reflects the allocation in place at December 31, 2021, and
does not reflect the intended transfer to other funds at December 31, 2021, which occurred or will occur in early 2022. After giving effect to these
intended transfers, Burford-only undrawn commitments for capital provision-direct assets at December 31, 2021, would have been $1,069 million.
The table above shows $1.1 billion of Burford-only undrawn commitments (including $63 million in warehoused assets
that were transferred in early 2022) attributable to the capital provision-direct portfolio at December 31, 2021. Other
undrawn commitments are the responsibility of funds and other capital pools, which plan separately to be able to meet
those commitments, typically by calling capital from their investors. Of the $1.1 billion of Burford-only undrawn
commitments, $82 million is attributable to legal risk management, none of which we expect to need to fund and none
of which would be drawn on any sort of accelerated basis. The remaining $1.0 billion relates to existing legal finance
arrangements. As our funding commitments may not be deployed for a variety of reasons, they are considered
undrawn, as set forth in note 22 (“Financial commitments and contingent liabilities”) to our consolidated financial
statements.
While $1.0 billion of legal finance arrangements seems like a large number, there are three important points to bear in
mind about undrawn commitments. First, our undrawn commitments can be divided into two categories: Discretionary
and definitive. Discretionary commitments are those where we retain a considerable degree of discretion over whether
to advance capital and generally would not suffer an adverse financial consequence from failing to do so. As an
example, if we have committed to a law firm to fund future new cases for them, that commitment would be subject to
underwriting and approving those new cases; we would not be obligated to provide funding unless we have given those
approvals. 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). Of the $1.0 billion of legal finance commitments, $527 million (50%) are
40 Burford Capital Annual Report 2021
Financial and operational review
continued
discretionary and $523 million (50%) are definitive. The increase in the proportion of definitive commitments from the
prior year is largely attributable to specific subcases in portfolio matters that became definitive commitments in 2021.
Capital provision-direct undrawn commitments
Burford-only
($ in millions)
Undrawn commitments – capital provision-direct
Definitive
Discretionary
Total
December 31,
December 31,
2021 % of total
2020 % of total
523
527
1,050
50%
50%
100%
347
575
922
38%
62%
100%
*
The Burford-only undrawn commitment figure for 2021 includes approximately $63 million interests in assets that were warehoused for other funds at
December 31, 2021, including a $13 million asset warehoused for BOF-C and a $50 million asset warehoused for the Advantage Fund, which will be
reflected as a capital provision-indirect asset post transfer. The undrawn commitment table reflects the allocation in place at December 31, 2021, and
does not reflect the intended transfer to other funds at December 31, 2021, which occurred in early 2022. After giving effect to these intended transfers,
Burford-only undrawn commitments for capital provision-direct assets at December 31, 2021, would have been $987 million, of which $460 million are
definitive and $527 million are discretionary.
Second, we have good visibility into the timing of when definitive commitments will be drawn. This visibility is partly
because many of our agreements structure future draws on an explicit timetable or with reference to case events, and
partly because we have insight into the timing of individual legal actions. For example, our experience informs us that
the median time to trial in the US federal courts is regularly at least a couple of years. Thus, we expect that typically
the most significant portion of our funding that relates to a case’s trial in those courts for a new matter in 2021 will not
be drawn until 2023 at the earliest.
Because of the longer-term nature of such deployments, our aggregate deployments on undrawn commitments remain
gradual, with a median over the last four years of 17% of total deployments during the course of the year on undrawn
commitments at prior year’s end.
Capital provision-direct deployments on undrawn legal finance commitments
Burford-only
($ in millions)
Undrawn commitments at December 31
Deployed in following year (i.e., 2020 deployed in 2021)
Percent deployed
Four-year
2020 2019 2018 2017 median
615
94
15 %
829
97
12 %
922
165
503
152
18 %
30 %
17 %
Third, the incidence of settlement means that not all of our commitments will be drawn. Historically, the median
deployment in the initial year from commitment is 42%, climbing to 64% by year 3. On average, we have deployed 85%
of our commitments on concluded (fully and partially) matters, although it can take many years to reach that level.
Portfolio concentrations
The claims underlying our capital provision-direct legal finance assets are generally diverse, as are our relationships
with corporate and law firm clients. Of our Group-wide commitments at December 31, 2021, corporate clients account
for 56% of such commitments, law firms account for 40% of such commitments, and other clients account for the
remaining 4% of such commitments.
For the year ended December 31
Corporates
Law firms
Other
2021
56%
40%
4%
2020
57%
41%
2%
2019
52%
44%
4%
Our largest commitment to a corporate position was $349 million ($212 million Burford-only), which accounted for 9%
of our Group-wide commitments (9% Burford-only) and represented hundreds of underlying cases and has a structure
that would make a complete loss of our capital highly unlikely. Our largest relationship with a single law firm consisted
of (i) financing arrangements between us and the firm, where the firm seeks to monetize the risk that the firm has
taken with some of its clients, (ii) direct financing arrangements with counterparties that elect to hire the firm where
our financing funds the law firm’s legal fees and (iii) direct financing arrangements with counterparties that have hired
the firm but where our financing is used for other corporate purposes than for funding the firm’s fees. This law firm is
Burford Capital Annual Report 2021 41
Financial and operational review
continued
one of the 50 largest law firms in the United States based on revenue according to The American Lawyer, with more
than 500 lawyers and more than 20 offices around the world. At December 31, 2021, our portfolio of matters with this
law firm included over 35 different litigation matters handled by more than 65 different partners in 12 different
offices. Taken together, these arrangements accounted for approximately $367 million ($220 million Burford-only), or
9% of our Group-wide commitments (9% Burford-only), at December 31, 2021 (2020: 12% Group-wide, 11% Burford-
only).
Portfolio tenor
The timing of realizations is one of the most difficult aspects of our business to forecast and is rarely a matter that we
control. The reality of litigation is that a majority of cases settle and pay proceeds in a relatively short period of time,
and a minority of our portfolio goes on to adjudication, which takes longer. Adjudication timing is subject to a myriad
of factors, including delaying tactics by litigation opponents and court dockets and schedules, and the global Covid - 19
pandemic has added to this uncertainty. The delaying of trial dates we believe also has caused a delay in settlement
timing, as an impending trial often can be a catalyst for a settlement. We do not believe there is a correlation between
asset life and asset quality, and we generally structure our asset pricing to compensate us if assets take longer to
resolve.
We provide extensive data about the WAL of our concluded portfolio; however, these data may not be predictive of the
ultimate WAL of our existing portfolio. The WAL of our concluded cases may lengthen over time if the longer-tenor
assets in our current portfolio account for a greater share of future concluded cases. Conversely, if our larger, more
recently originated cases conclude relatively quickly, the WAL of our concluded cases could decrease.
In calculating our portfolio WAL, we compute a weighted average of the individual asset WALs. On that basis, we assess
the weighted average lives (beginning at the point of average deployment) of the concluded capital provision-direct
portfolio, weighted both by deployed cost, or alternatively by recoveries. Weighting by deployed cost provides a view
on how long on average a dollar of capital is deployed while weighting by recoveries provides a view on how long on
average it takes to recover a dollar of return.
The WALs (weighted by recoveries or by deployments) of the concluded portfolio were unchanged at December 31,
2021, compared to December 31, 2020, at 2.3 years and 1.9 years, respectively.
Weighted average life of concluded (fully and partially) portfolio
Burford-only
(in years)
WAL-deployments
WAL-recoveries
2021
1.9
2.3
2020
1.9
2.3
2019
1.7
2.3
2018
1.7
2.1
2017
1.5
1.6
Portfolio returns on concluded portfolio
At December 31, 2021, concluded assets in the Burford-only balance sheet capital provision-direct portfolio had
generated, on a cumulative basis, an ROIC of 93% and an IRR of 30% since our inception.
Cumulative returns since inception from concluded (fully and partially) portfolio
Burford-only
Capital provision-direct
ROIC
IRR
Cumulative realizations
2021 2020
92%
30%
1,597
93%
30%
1,861
2019
88%
31%
1,260
2018 2017
75%
31%
784
80%
30%
1,081
We do not believe it makes sense to exclude our highest-returning assets from our return metrics in a business where
we are currently originating new assets with the potential to generate outsized returns. Nonetheless, we have in the
past provided our returns data excluding our Petersen realizations; at December 31, 2021, excluding proceeds from our
sales of Petersen participations, our capital provision-direct ROIC since inception would have been 70% and our IRR 24%
(2020: ROIC: 65% and IRR: 24%).
42 Burford Capital Annual Report 2021
Financial and operational review
continued
We do not consider cases to be concluded (and therefore part of these concluded return statistics) until there is no
longer any litigation risk remaining. Our concluded return statistics do not include fair value adjustments, either
positive or negative. As a result, these return numbers do not include the impact, positive or negative, of
developments on matters while they remain pending. Although in the past we have presented portfolio return statistics
adjusted to include fully written off but not concluded assets as concluded, at December 31, 2021, we had no such
Burford-only capital provision assets.
Summary of capital provision-direct portfolio
Set forth below is a table with a summary by vintage of every asset that we have funded in our capital provision-direct
portfolio on Burford’s balance sheet over our history.
Capital provision-direct assets
Burford-only at December 31, 2021
($ in millions)
Concluded
Partial realized - concluded
Partial realized - ongoing
Ongoing
2009 Total
Concluded
Partial realized - concluded
Partial realized - ongoing
Ongoing
2010 Total
Concluded
Partial realized - concluded
Partial realized - ongoing
Ongoing
2011 Total
Concluded
Partial realized - concluded
Partial realized - ongoing
Ongoing
2012 Total
Concluded
Partial realized - concluded
Partial realized - ongoing
Ongoing
2013 Total
Number of Commitment
assets amount(1)(2)
12
—
—
—
12
3
—
—
—
3
Deployed Recovered
costs(1) proceeds(1)
40
—
—
—
40
12
—
—
—
12
Concluded (fully and partially)
ROIC
251 %
IRR
32 %
WAL – D(3) WAL – R(4)
4.8
3.3
14
—
—
2
16
12
—
—
2
14
9
—
—
—
9
10
—
2
—
12
95
—
—
23
118
107
—
—
16
123
64
—
—
—
64
33
6
3
—
42
81
—
—
23
104
79
—
—
16
95
57
—
—
—
57
32
6
—
—
38
183
—
—
—
183
78
—
—
—
78
116
—
—
—
116
62
9
—
—
71
125 %
21 %
3.0
4.5
(2)%
— %
3.6
2.5
103 %
41 %
2.3
2.1
90 %
21 %
2.8
3.6
Concluded
Partial realized - concluded
Partial realized - ongoing
Ongoing
2014 Total
(1) Amounts in currencies other than US dollars are reported in this table at the foreign exchange rate in effect at the time of the historical transaction, i.e.,
when the commitment or deployment was made or when proceeds were recovered. Amounts related to those transactions (such as current unfunded
commitments or current deployed costs) reflected elsewhere in this “Financial and operational review” or in our consolidated financial statements may
be reported based on the current foreign exchange rate and, therefore, may differ from the amounts in this table.
98
24
—
—
122
86
12
37
30
165
63
12
29
28
132
16
—
4
3
23
62 %
31 %
1.8
1.8
(2) A portion of some ongoing assets’ unfunded commitments are no longer an obligation. This table presents an asset's gross commitments, so it does not
show a reduction in commitment for the portion that is no longer an obligation. This will result in a difference when compared to undrawn commitments
in note 22 of the consolidated financial statements.
(3) WAL of the vintage weighted by deployments and is inclusive of concluded and partially concluded assets in each vintage.
(4) WAL of the vintage weighted by recoveries and is inclusive of concluded and partially concluded assets in each vintage.
Burford Capital Annual Report 2021 43
Financial and operational review
continued
($ in millions)
Concluded
Partial realized - concluded
Partial realized - ongoing
Ongoing
2015 Total
Concluded
Partial realized - concluded
Partial realized - ongoing
Ongoing
2016 Total
Concluded
Partial realized - concluded
Partial realized - ongoing
Ongoing
2017 Total
Concluded
Partial realized - concluded
Partial realized - ongoing
Ongoing
2018 Total
Concluded
Partial realized - concluded
Partial realized - ongoing
Ongoing
2019 Total
Concluded
Partial realized - concluded
Partial realized - ongoing
Ongoing
2020 Total
Concluded
Partial realized - concluded
Partial realized - ongoing
Ongoing
2021 Total
Overall total
Concluded
Partial realization – concluded portion(6)
Total capital provision-direct
concluded portion
Partial realization – ongoing portion(6)
Ongoing
Total capital provision-direct ongoing
portion
Total capital provision-direct
(5)
Number of Commitment
assets amount(1)(2)
109
9
146
5
269
16
—
3
1
20
Deployed Recovered
cost(1) proceeds(1)
112
237
—
—
349
86
7
83
5
181
Concluded (fully and partially)
ROIC
271%
IRR WAL – D(3) WAL – R(4)
2.7
1.4
138%
12
—
8
6
26
6
—
6
13
25
7
—
13
19
39
11
—
8
28
47
3
—
3
23
29
—
—
—
40
40
119
47
166
47
137
184
303
231
11
177
64
483
73
39
182
241
535
66
41
112
203
422
80
10
119
264
473
20
29
28
174
251
—
—
—
590 (5)
590
976
157
1,133
804
1,610
2,414
3,547
199
11
62
60
332
69
38
106
124
337
58
38
81
89
266
74
9
79
89
251
2
29
28
76
135
—
—
—
282
282
812
150
962
468
792
1,260
2,222
277
12
—
—
289
110
52
—
—
162
137
58
—
—
195
199
23
—
—
222
4
30
—
—
34
—
—
—
—
—
1,416
445
1,861
-
-
-
1,861
37%
17%
1.8
2.1
51%
36%
1.2
1.6
103%
44%
1.8
1.9
167%
159%
1.0
1.1
7%
0%
0.8
0.8
—
—
—
—
93%
30%
1.9
2.3
Burford-only commitments for the 2021 vintage include approximately $63 million of interests in assets that were warehoused for our funds at
December 31, 2021, including a $13 million asset warehoused for BOF-C and a $50 million asset warehoused for the Advantage Fund, which will be
reflected as a capital provision-indirect asset post-transfer. The table reflects the allocation in place at December 31, 2021 and does not reflect the
intended transfer to other funds, which occurred or will occur in early 2022. Excluding the warehoused commitments, Burford-only commitments for the
2021 vintage for capital provision-direct were $527 million
(6) At December 31, 2021, there were 47 capital provision assets with partial realizations. We repeat the number with partial realizations in total capital
provision-direct concluded and total capital provision-direct ongoing
44 Burford Capital Annual Report 2021
Summary of capital provision-indirect portfolio
The capital provision-indirect portfolio consisted entirely of the Strategic Value Fund through December 31, 2021. The
Advantage Fund, which at December 31, 2021 had made funding commitments but had not yet deployed capital, will be
included in capital provision-indirect in future periods. A summary by vintage of the concluded performance data on
our capital provision-indirect portfolio (which is entirely comprised of Strategic Value Fund assets) appears below.
Financial and operational review
continued
Capital provision-indirect portfolio
At December 31, 2021
($ in millions) (includes hedging)
2017
Concluded - pre pandemic
Concluded - during pandemic
2017 Vintage total
2018
Concluded - pre pandemic
Concluded - during pandemic
2018 Vintage total - concluded
Ongoing**
2018 Vintage total
2019
Concluded - pre pandemic
Concluded - during pandemic
2019 Vintage total - concluded
Ongoing**
2019 Vintage total
Total concluded - pre pandemic
Total concluded - during pandemic
Total concluded
Recoveries above deployments
Total ongoing**
Ongoing assets: deployments less recoveries to date
Total
Number of
Total
assets commitments deployed recovered
Total
Total
ROIC
IRR WAL* Final life*
8%
15%
9%
14%
9%
11%
12%
16%
13%
46%
5%
8%
0.7
1.0
0.8
0.4
2.0
1.5
4%
(5)%
(1)%
44%
(9)%
(4)%
0.1
0.6
0.4
9%
6%
8%
17%
4%
9%
0.6
1.5
1.0
1.3
2.8
1.5
0.4
2.5
1.7
0.2
0.7
0.5
1.0
2.0
1.4
6
1
7
2
4
6
1
7
1
2
3
1
4
9
7
16
2
18
362
49
411
130
243
373
77
450
65
117
182
118
300
557
409
966
362
49
411
130
243
373
77
450
65
117
182
118
300
557
409
966
195
195
392
56
448
149
265
414
64
478
68
111
179
118
297
609
432
1,041
75
182
(13)
1,161
1,161
1,223
*
**
WAL and final life are weighted by recoveries. Final life represents the time to conclusion of the matter, while WAL reflects the average time to receipt
of recovered proceeds.
Capital provision-indirect ongoing investments may receive prepayments while the case in ongoing, hence generating proceeds on investments that are
classified as ongoing.
New commitments
Group-wide new commitments in 2021 totaled $1.1 billion, including $1,023 million within capital provision-direct and
$98 million related to our post-settlement fund. Capital provision-direct Group-wide commitments were up 80%
compared to $569 million in 2020. There were no new capital provision-indirect commitments in the Strategic Value
Fund in 2021 and 2020. New commitments for capital provision-direct assets in 2021 included a new matter to which
we committed and deployed $212 million on balance sheet and $137 million for the sovereign wealth fund between
BOF-C and a newly formed sidecar in the second half of 2021, managed by Burford and with the same ultimate
sovereign wealth fund investor as BOF-C. This matter revolves around a number of antitrust claims against a large,
financially strong multinational and, in addition to litigation risk, our asset structure includes some exposure to the
defendant’s equity performance, in contrast to our more usual exposure to defendants’ credit risk.
On a Burford-only basis, we made new capital provision-direct commitments on our balance sheet of $649 million, up
94% from $335 million in 2020. The 2021 amount includes $63 million of commitments warehoused for our funds;
excluding those warehoused deals, commitments were $586 million, up 75% from $335 million in 2020. The increase in
Burford Capital Annual Report 2021 45
Financial and operational review
continued
new commitments in 2021 was driven by strong levels of activity across the business and the balance sheet taking a
greater portion of originated core legal finance assets, as BOF was fully invested. The sharp increases also reflect the
fact that new commitments fell during 2020 due to the Covid - 19 pandemic and its impact on the market environment
and our conscious decision to reduce new business levels given macro uncertainty in that period.
Group-wide new commitments by type*
($ in millions)
Burford-only
Other funds
BOF-C
Total
2021
649 **
204
268
1,121
2020
361
238
159
758
2019
726
651
196
1,573
2018
761
512
53
1,326
2017
728
675
-
1,403
*
**
Includes commitments for hedging-related assets.
Burford-only new commitments for 2021 include approximately $63 million of interests in assets that were warehoused for our funds at December 31,
2021, including a $13 million asset warehoused for BOF-C and a $50 million asset warehoused for the Advantage Fund, which will be reflected as a capital
provision-indirect asset post-transfer. The table reflects the allocation in place at December 31, 2021, and does not reflect the intended transfer to other
funds, which occurred or will occur in early 2022. Excluding the warehoused commitments, Burford-only new commitments in 2021 for capital provision-
direct were $586 million. Of the $50 million new commitment warehoused for the Advantage Fund, the Burford-only portion of this capital provision-
indirect asset will be $8 million. Total Burford-only new commitments to capital provision assets in 2021, after giving effect to these intended transfers,
were $594 million.
Group-wide commitments by type entered into during the year
($ in millions)
Capital provision-direct
Capital provision-indirect*
Post-settlement
Total
2021
2020
2021
2020
2021
2020
2021
2020
Burford-only
64%
59%
0%
72%
0%
0%
58%
48%
649 **
335
-
26
-
-
649
361
Other funds
10%
13%
0%
28%
100%
100%
18%
31%
106
75
-
10
98
153
204
238
BOF-C
268
159
-
-
-
-
268
159
26%
28%
0%
0%
0%
0%
24%
21%
Group-
wide
total
1,023
569
-
36
98
153
1,121
758
*
**
Includes commitments for hedging-related assets.
Burford-only new commitments for 2021 include approximately $63 million of interests in assets that were warehoused for our funds at December 31,
2021, including a $13 million asset warehoused for BOF-C and a $50 million asset warehoused for the Advantage Fund, which will be reflected as a capital
provision-indirect asset post-transfer. The table reflects the allocation in place at December 31, 2021, and does not reflect the intended transfer to other
funds, which occurred or will occur in early 2022. Excluding the warehoused commitments, Burford-only new commitments in 2021 for capital provision-
direct were $586 million. Of the $50 million new commitment warehoused for the Advantage Fund, the Burford-only portion of this capital provision-
indirect asset will be $8 million. Total Burford-only new commitments to capital provision assets in 2021, after giving effect to these intended transfers,
were $594 million.
Deployments
Deployments also rebounded during 2021. Group-wide total deployments totaled $841 million, including $728 million
within capital provision-direct, which was up 98% compared to $368 million in 2020, and $112 million related to our
post-settlement fund.
Burford-only deployments on capital provision-direct assets during 2021 were $447 million, up 99% from $225 million in
deployments during 2020. This significant increase reflects the strong growth in Group-wide capital provision-direct
deployments and a greater portion of Group-wide capital provision-direct deployments kept on our balance sheet, as
BOF became fully invested during 2021 and as BOF-C is excluded from participation in certain categories of legal
finance assets for comity reasons.
46 Burford Capital Annual Report 2021
We continued to refrain from making new deployments in our capital provision-indirect portfolio in 2021.
Group-wide deployments by type*
Financial and operational review
continued
($ in millions)
Burford-only
Other funds
BOF-C
Total
*
Includes deployments for hedging-related assets.
2021
448
255
138
841
2020
252
273
70
595
2019
465
533
76
1,074
2018
670
442
21
1,133
2017
447
560
1,007
($ in millions)
Capital provision-direct
Capital provision-indirect
Post-settlement
Total
2021
2020
2021
2020
2021
2020
2021
2020
Burford-only
61%
447
61%
225
1 * 100%
73%
0%
0%
53%
42%
27 **
-
-
448
252
Other funds
20%
143
20%
73
0%
27%
112 100%
190 100%
30%
255
46%
273
10
BOF-C
138 19%
70 19%
- 0%
- 0%
- 0%
- 0%
138 17%
70 12%
*
**
Reflects capital calls for expenses rather than cash invested into assets.
Includes deployments for hedging-related assets.
Realizations
Group-
wide
total
728
368
1
37
112
190
841
595
We consider a legal finance asset to be concluded where there is no longer any litigation risk remaining, generally
because of an agreed settlement or a final judgment. Upon conclusion, we record the legal finance asset, including
both capital and return, as having been realized. At that point, we book the amount due to us for our capital and
return as either cash or a due from settlement receivable. Cash from realizations during the year net of any change in
due from settlement receivables comprises our cash proceeds for the period.
Realizations were modest in 2021, due in part to continuing court delays caused by the Covid - 19 pandemic impacting
the pace and progression of matters in our portfolio. Capital provision-direct realizations were $337 million Group-wide
across over 40 different assets, down 45% from $608 million in 2020. Realizations in 2021 included $102 million related
to the Akhmedov judgment enforcement matter (on a Burford-only and Group-wide basis). The primary driver of the
large realizations result in 2020 was the set of ten related assets reached favorable adjudication outcomes, resulting in
$425 million in Group-wide realizations ($267 million Burford-only) and $281 million of realized gains Group-wide ($172
million Burford-only).
Capital provision-direct realizations in our Burford-only portfolio were $264 million compared to $337 million in 2020.
Group-wide realizations by type*
At December 31, 2021
($ in millions)
($ in millions)
Burford-only
Other funds
BOF-C
Total
*
Includes realizations from hedging positions.
2021
299
208
19
526
2020
509
484
6
999
2019
461
545
21
1,027
2018
537
304
-
841
2017
304
317
-
621
Burford Capital Annual Report 2021 47
Financial and operational review
continued
($ in millions)
Capital provision-direct
Capital provision-indirect
Post-settlement
Total
2020
2020
2021
Burford-only
2021
78%
55%
43%
77%
0%
0%
57%
51%
264
337
35
172 *
-
-
299
509
2021
2021
2020
2020
54
265
46
51
Other funds
16%
44%
57%
23%
108 100%
168 100%
40%
208
48%
484
BOF-C
6%
19
6
1%
- 0%
-
0%
- 0%
0%
-
19 3%
1%
6
Group-
wide
total
337
608
81
223
108
168
526
999
*
Includes realizations from hedging positions
Since inception, we have generated $1.9 billion in realizations from concluded or partially concluded assets from our
capital provision-direct assets on our balance sheet, which had a deployed cost of $962 million, yielding $899 million in
realized gains. At December 31, 2021, we had $1.3 billion (at original exchange rates) in capital deployed in ongoing
assets.
We expect to see significant realizations over time; however, period-to-period volatility is characteristic of our
business, and we continue to caution that the timing of realizations is uncertain. We can neither predict nor control
the timing of the generation of litigation returns.
Critical accounting estimates
The preparation of our consolidated financial statements in accordance with US GAAP requires our management to
make estimates, judgments and assumptions that affect the reported amounts of (i) capital provision assets,
(ii) goodwill and (iii) deferred tax assets. Our management bases these estimates and judgments on available
information, historical experience and other assumptions that we believe are reasonable under the circumstances.
However, these estimates, judgments and assumptions are often subjective and may be impacted negatively based on
changing circumstances or changes in our analyses. We believe that our critical accounting policies could potentially
produce materially different results if we were to change underlying estimates, judgments or assumptions.
Set forth below are certain aspects of our critical accounting policies. For a full discussion of these critical accounting
policies and other significant accounting policies, see note 2 (“Summary of significant accounting policies”) to our
consolidated financial statements.
Fair value of capital provision assets
The determination of fair value for capital provision assets, due from settlement of capital provision assets and
financial liabilities relating to third-party interests in capital provision assets involves significant estimates and
judgments. While the potential range of outcomes for the assets is wide, our fair value estimation is our best
assessment of the current fair value of each asset. Such estimate is inherently subjective, being based largely on an
assessment of how individual events have changed the possible outcomes of the asset and their relative probabilities
and hence the extent to which the fair value has altered. The aggregate of the fair values selected falls within a wide
range of reasonably possible estimates. In our management’s opinion, there is no useful alternative valuation that
would better quantify the market risk inherent in the portfolio, and there are no inputs or variables to which the values
of the assets are correlated. See note 16 (“Fair value of assets and liabilities”) to our consolidated financial
statements and “—Fair value of capital provision assets” for additional information with respect to fair value.
At December 31, 2021, should the value of those instruments have been 10% higher or lower than provided for in our
fair value estimation, while all other variables remained constant, our consolidated income and net assets would have
increased and decreased respectively by $290 million. The sensitivity impact has been provided on a pre-tax basis on
both income and net assets as we consider the fluctuation in our effective tax rate from period to period could indicate
changes in sensitivity not driven by the valuation that are difficult to follow and detract from the comparability of this
information.
Impairment testing for goodwill
Our testing of goodwill for impairment requires the identification of independent reporting segments and the allocation
of goodwill to these reporting segments based on which reporting segments are expected to benefit from the
acquisition. Cash flow projections necessarily take into account changes in the market in which a business operates
48 Burford Capital Annual Report 2021
Financial and operational review
continued
including the level of growth, competitive activity and the impacts of regulatory change. Determining both the
expected cash flows and the risk-adjusted interest rate appropriate to the reporting segments requires the exercise of
judgment. The estimation of cash flows is sensitive to the periods for which the projections are made and to
assumptions regarding long-term sustainable cash flows.
We perform a quantitative test for impairment on at least an annual basis, or more frequently if impairment indicators
are present, by leveraging the internal models and data used by our management. The model output and all key
assumptions are analyzed and challenged by the finance team and subject to our management’s review and approval.
The key assumptions utilized in the quantitative test are the discount rate, terminal growth rate and the return on the
capital provision assets.
Based on these methodology and assumptions, the estimated fair value exceeds the carrying amounts including
goodwill of the reporting segments by $2,332,541,000 and $265,895,000 for the capital provision and asset
management reporting segments, respectively.
The table below sets forth the sensitivity to the key assumptions:
($ in thousands)
Discount rate
Terminal growth rate
Return on capital provision assets
Recoverability of deferred tax assets
Sensitivity
Capital provision
assets
Asset management
and other services
1%
(1)%
(1)%
(443,328)
(334,134)
(44,173)
(7,546)
—
(1,989)
There is a significant estimate required to support the recoverability of the deferred tax assets as it includes an
amount relating to carried-forward US tax losses and other deferred tax assets that can be utilized against future
taxable profits of our US business. The estimation of the future taxable profits is based on the business plans and
approved budgets for those entities that require the use of assumptions for expected returns on capital provision
assets, the level of future business activity and the structuring of capital provision assets for tax efficiency. The tax
losses can be carried forward indefinitely and have no expiration date. See note 4 (“Income taxes”) to our consolidated
financial statements for additional information on tax estimates.
Conversion to US GAAP
The table below sets forth the main differences between our consolidated financial statements at December 31, 2021
and 2020 and for the years ended December 31, 2021, 2020 and 2019 prepared in accordance with US GAAP contained
elsewhere in this Annual Report as compared to our consolidated financial statements prepared in accordance with
IFRS.
Topic
Classification
of capital
provision
assets
IFRS
Capital provision assets meet
the definition of a financial
asset that is required to be
measured at fair value
through profit or loss.
Classification
of third-party
interests
Third-party interests held in
consolidated entities meet
the definition of a financial
liability.
US GAAP
Single case, portfolio and
portfolio with equity risk capital
provision assets meet the
definition of a derivative
financial asset that is similarly
required to be measured at fair
value with changes in fair value
recorded in our consolidated
statements of comprehensive
income.
Third-party interests meet the
definition of non-controlling
interests and are presented as a
component of equity with the
exception of the third-party
interests held in Colorado
Investments, which are
Impact
Classification only.
Presentational change will
reduce liabilities and increase
total shareholders’ equity for
non-controlling interest. For
the third-party interests held
in Colorado investments, they
Burford Capital Annual Report 2021 49
Financial and operational review
continued
Lease
accounting
Recognition of a lease liability
and right-of-use asset for its
principal office locations.
Interest expense is recorded
as a finance cost on the lease
liability and a depreciation
charge with respect to the
right-of-use asset in our
consolidated statements of
comprehensive income.
Consolidated
assets of
investment
companies
BOF-C, which is a
consolidated fund, qualifies
for an investment company
exemption from the general
requirements under IFRS 10
Consolidated Financial
Statements to consolidate all
subsidiary companies.
consolidated as part of capital
provision assets and classified as
a financial liability under US
GAAP.
Lease liability and right-of-use
asset are recognized with respect
to the same leases. However, as
the property leases meet the
definition of operating leases
under US GAAP, there is no
separate recognition of a finance
cost with respect to the lease
liability and the full expense for
the operating leases is included
within general operating
expenses in our consolidated
statements of comprehensive
income.
BOF-C, which is a consolidated
fund, qualifies as an investment
company under the Accounting
Standards Codification, Topic
946—Investment Company Guide
and like IFRS is not required to
consolidate certain subsidiary
companies.
will remain as financial
liability.
Higher operating expenses;
lower finance costs.
Presentational only.
A non-investment company
parent, such as Burford
Capital Limited, is unable to
retain the specialized
accounting by a consolidated
investment company.
Unlike IFRS, specialized
investment company accounting
is required to be retained on
consolidation by a non-
investment company parent,
such as Burford Capital Limited.
The consolidated capital
provision asset portfolio
includes the individual
underlying single case and
portfolio capital provision
assets held by BOF-C’s
subsidiary companies as result
of having to consolidate those
subsidiary companies.
Foreign exchange differences
arising from non-US dollar
denominated capital provision
assets held by US dollar
functional currency entities
are recognized in foreign
exchange gains or losses in
our consolidated statements
of comprehensive income.
The consolidated capital
provision asset portfolio
therefore includes BOF-C’s
investment in its non-
consolidated subsidiary
companies instead of solely the
individual underlying single case
and portfolio capital provision
assets held by those subsidiaries.
Foreign exchange gains or losses
arising from non-US dollar
denominated capital provision
assets held by US dollar
functional currency entities are
recognized in capital provision
income as part of the overall fair
value gain or loss on the capital
provision assets.
All other exchange differences
arising from capital provision
All other exchange differences
arising from capital provision
Foreign
currency gains
and losses
50 Burford Capital Annual Report 2021
Presentational only between
capital provision income and
foreign exchange gains or
losses recognized in our
consolidated statements of
income.
Income taxes
assets held by non-US dollar
functional currency entities
are recognized in other
comprehensive income in our
consolidated statements of
comprehensive income.
Deferred tax assets are
recorded to the extent we can
support the assets as being
utilized in future periods.
assets held by non-US dollar
functional currency entities are
similarly recognized in other
comprehensive income in our
consolidated statements of
comprehensive income.
All deferred tax assets are
recorded on a gross basis and a
valuation allowance is recorded,
if appropriate, for any amounts
that we cannot support as more
likely than not of being utilized
in future periods.
Financial and operational review
continued
Disclosure only in the income
taxes footnote to our
consolidated financial
statements.
Data reconciliations
Reconciliation of consolidated US GAAP financial statements to Burford-only financial statements
The reconciliation tables below provide a full reconciliation of the consolidated statement of comprehensive income
and consolidated statement of financial position so that investors are able to relate our performance discussion in this
“Financial and operational review” (which focuses in many places on the Burford-only balance sheet so as to remove
the impact of consolidated entities) with our consolidated financial statements.
The tables start with the consolidated US GAAP figures as reported in the consolidated financial statements. These
figures include investments in a limited number of entities that are not wholly owned subsidiaries of the Burford Group
and therefore contain third-party capital, principally including Colorado, the Strategic Value Fund and BOF-C, through
which our sovereign wealth fund arrangement is conducted. The consolidated US GAAP presentation requires a line-by-
line consolidation of 100% of each non-wholly owned entity’s assets and liabilities, and components of income and
expense. The portion of the net assets and the associated profit or loss that is attributable to the third-party interests
are then presented separately as single line items within the consolidated statements of financial position and
comprehensive income, respectively. We believe it is helpful to exclude the interests of investors other than Burford in
our discussion of performance, and we have thus, as an alternative presentation, excluded from our presentation of our
financial performance the non-Burford portion of the individual assets and liabilities, and components of income and
expense, relating to such third-party capital. The reconciliation achieves this outcome by eliminating the line-by-line
consolidation of all the applicable entities’ individual assets and liabilities required by US GAAP to arrive at a simpler
presentation that just includes Burford’s investment in the non-wholly owned entity and Burford’s share of the profit or
loss earned on that investment.
The tables present the elimination adjustments required to achieve this result separately for the two main funds noted
above, Colorado and, in a fourth column, “Other”, for a small number of other entities where Burford holds some of its
capital provision assets through special purpose vehicles (“SPV”) and has minority partners in the SPV. Because Burford
controls and owns a significant portion of these SPVs, they are consolidated in the US GAAP financial statements. In
each case, the elimination adjustments are fully reversing the amounts reported as “Third-party share of gains relating
to interests in consolidated entities” and “Third-party interests in consolidated entities” against the applicable
components required in the US GAAP line-by-line consolidation to leave Burford’s gain or loss on its investment in the
entities reported in “Capital provision income” and the fair value of its investment in the entities reported in “Capital
provision assets”.
Burford Capital Annual Report 2021 51
Financial and operational review
continued
Reconciliation of consolidated statement of comprehensive income to Burford-only results
Elimination of third-party interests
Consolidated
GAAP
Strategic
Value fund
127,549
14,396
5,143
1,177
1,865
2,028
152,158
(34,333)
(22,145)
(9,272)
(36,364)
(7,942)
(30,467)
(5,300)
6,335
(58,647)
(1,649)
(5,482)
(59,443)
3,015
(56,428)
15,638
(72,066)
(2,443)
(74,509)
(6,263)
1,843
-
-
(1,091)
-
(5,511)
-
-
-
-
-
616
3,087
(1,808)
-
-
-
(1,808)
-
(1,808)
-
-
-
-
-
(111)
-
(9,721)
-
-
-
(9,721)
-
(9,721)
(1,808)
(9,721)
-
-
-
-
BOF-C
Colorado
Other Burford-only
(19,408)
9,798
-
-
-
3,307
-
-
-
-
(5,431)
-
-
-
-
99,754
26,037
5,143
1,177
774
-
(9,610)
(3,331)
(24)
1,303
(4,128)
-
132,885
-
-
-
-
-
24
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19
-
(4,109)
-
-
-
(4,109)
-
(4,109)
-
(34,333)
(22,145)
(9,272)
(36,364)
(7,942)
(29,919)
(2,213)
(9,303)
(58,647)
(1,649)
(5,482)
(75,081)
3,015
(72,066)
(4,109)
-
(72,066)
-
-
(2,443)
(74,509)
December 31, 2021 ($ in thousands)
Income
Capital provision income
Asset management income
Insurance income
Services income
Marketable securities income and bank interest
Unrealized gain/(loss) relating to third-party
interests in capital provision assets
Total income
Operating expenses
Compensation and benefits:
Salaries and benefits
Annual incentive compensation
Equity compensation
Legacy asset recovery incentive compensation
including accruals
Long-term incentive compensation including
accruals
General, administrative and other
Case-related expenditures ineligible for inclusion
in asset cost
Income/(loss) from operations
Other expense
Finance costs
Loss on debt buyback
Foreign currency transactions (losses)
Loss before income tax
Benefit from income taxes
Net loss
Net income attributable to non-controlling
interests
Net loss attributable to ordinary shares
Other comprehensive loss
Change in foreign currency translation adjustment
Total comprehensive loss
52 Burford Capital Annual Report 2021
December 31, 2020 ($ in thousands)
Income
Capital provision income
Asset management income
Insurance income
Services income
Marketable securities income and bank interest
Unrealized gain/(loss) relating to third-party
interests in capital provision assets
Total income
Operating expenses
Compensation and benefits:
Salaries and benefits
Annual incentive compensation
Equity compensation
Long-term incentive compensation including
accruals
General, administrative and other
Case-related expenditures ineligible for inclusion
in asset cost
Equity and listing related
Amortization of intangible asset
Income from operations
Other income/(expense)
Finance costs
Foreign currency transactions gains/(losses)
Income before income tax
Provision for income tax
Net income
Net income attributable to non-controlling
interests
Net income attributable to ordinary shares
Other comprehensive loss
Change in foreign currency translation adjustment
Total comprehensive income
Financial and operational review
continued
Consolidated
GAAP
Strategic
Value fund
BOF-C Colorado
Other Burford-only
Elimination of third-party interests
340,103
15,106
1,781
804
380
(4,665)
2,748
-
-
(57)
(10,293)
6,630
-
-
(8)
947
-
-
-
-
(6,069)
-
-
-
-
320,023
24,484
1,781
804
315
947
359,121
-
(1,974)
-
(3,671)
(947)
-
-
(6,069)
-
347,407
(31,483)
(22,772)
(5,281)
(18,125)
(21,468)
(4,841)
(7,907)
(8,703)
238,541
(39,048)
10,746
210,239
(36,937)
173,302
8,187
165,115
(10,206)
154,909
-
-
-
-
688
3,007
-
-
1,721
-
-
1,721
-
1,721
-
-
-
-
149
-
-
-
(3,522)
-
1
(3,521)
-
(3,521)
1,721
-
(3,521)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
38
77
-
-
(5,954)
-
(433)
(6,387)
-
(6,387)
(6,387)
-
-
-
-
(31,483)
(22,772)
(5,281)
(18,125)
(20,593)
(1,757)
(7,907)
(8,703)
230,786
(39,048)
10,314
202,052
(36,937)
165,115
-
165,115
-
(10,206)
154,909
Burford Capital Annual Report 2021 53
Consolidated
GAAP
Strategic
Value fund
Elimination of third-party interests
BOF-C Colorado
Other Burford-only
(13,191)
7,137
-
-
(35)
(57,500)
-
-
-
-
(5,606)
-
-
-
-
316,823
26,130
3,545
2,133
6,070
-
(6,089)
57,500
-
-
(5,606)
-
354,701
409,156
15,160
3,545
2,133
6,676
(57,500)
379,170
(25,231)
(24,503)
(4,519)
(33,496)
(22,447)
(11,246)
(1,754)
(9,495)
246,479
(38,747)
1,956
209,688
(13,417)
196,271
15,309
180,962
(17,525)
163,437
(16,036)
3,833
-
-
(571)
-
(12,774)
-
-
-
-
968
8,343
-
-
(3,463)
-
-
(3,463)
-
(3,463)
-
-
-
-
(213)
-
-
-
(6,302)
-
-
(6,302)
-
(6,302)
(3,463)
-
(6,302)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
-
-
-
(5,604)
-
60
(5,544)
-
(5,544)
(5,544)
-
-
-
(25,231)
(24,503)
(4,519)
(33,496)
(21,690)
(2,903)
(1,754)
(9,495)
231,110
(38,747)
2,016
194,379
(13,417)
180,962
-
-
180,962
-
(17,525)
163,437
Financial and operational review
continued
December 31, 2019 ($ in thousands)
Income
Capital provision income
Asset management income
Insurance income
Services income
Marketable securities income and bank interest
Unrealized gain/(loss) relating to third-party
interests in capital provision assets
Total income
Operating expenses
Compensation and benefits:
Salaries and benefits
Annual incentive compensation
Equity compensation
Long-term incentive compensation including
accruals
General, administrative and other
Case-related expenditures ineligible for inclusion
in asset cost
Equity and listing related
Amortization of intangible asset
Income from operations
Other income/(expense)
Finance costs
Foreign currency transactions gains
Income before income tax
Provision for income tax
Net income
Net income attributable to non-controlling
interests
Net income attributable to ordinary shares
Other comprehensive loss
Change in foreign currency translation adjustment
Total comprehensive income
54 Burford Capital Annual Report 2021
Financial and operational review
continued
Reconciliation of consolidated statement of financial position to Burford-only results
December 31, 2021 ($ in thousands)
Assets
Cash and cash equivalents
Marketable securities
Other assets
Due from settlement of capital provision assets
Capital provision assets
Property and equipment
Goodwill & intangible asset
Deferred tax asset
Total assets
Liabilities
Debt interest payable
Other liabilities
Debt payable
Financial liabilities related to third-party interests in
capital provision assets
Deferred tax liability
Total liabilities
Total shareholders' equity
December 31, 2020 ($ in thousands)
Assets
Cash and cash equivalents
Marketable securities
Other assets
Due from settlement of capital provision assets
Capital provision assets
Property and equipment
Goodwill & intangible asset
Deferred tax asset
Total assets
Liabilities
Debt interest payable
Other liabilities
Debt payable
Financial liabilities related to third-party interests in
capital provision assets
Deferred tax liability
Total liabilities
Total shareholders' equity
Consolidated
Strategic
GAAP value fund
BOF-C
Colorado
Other Burford-only
Elimination of third-party interests
180,255
175,336
35,173
86,311
2,900,465
13,069
134,019
78
3,524,706
13,918
126,057
1,022,557
(1,561)
-
(266)
(22,864)
8,706
-
-
-
(15,985)
(38,983)
-
16,322
-
(306,479)
-
-
-
(329,140)
-
-
81
-
(383,246)
-
-
-
(383,165)
(33)
-
26
-
(59,993)
-
-
-
(60,000)
139,678
175,336
51,336
63,447
2,159,453
13,069
134,019
78
2,736,416
-
(769)
-
-
-
-
-
(21)
-
-
(5)
-
13,918
125,262
1,022,557
398,595
22,889
1,584,016
1,940,690
-
-
(769)
(15,216)
(4,001)
-
(4,001)
(325,139)
(383,144)
-
(383,165)
-
(11,450)
-
(11,455)
(48,545)
-
22,889
1,184,626
1,551,790
Consolidated
Strategic
GAAP Value fund
BOF-C
Colorado
Other Burford-only
Elimination of third-party interests
322,085
16,594
34,371
30,708
2,564,742
15,225
134,032
256
3,118,013
9,556
109,747
667,814
400,660
24,742
1,212,519
1,905,494
(2,080)
-
470
-
(41,952)
-
-
-
(43,562)
-
(489)
-
(1)
-
10,358
-
(168,427)
-
-
-
(158,070)
-
(201)
-
-
-
-
-
(386,553)
-
-
-
(386,553)
(418)
-
14
-
(61,619)
-
-
-
(62,023)
319,586
16,594
45,213
30,708
1,906,191
15,225
134,032
256
2,467,805
-
-
-
-
(5,576)
-
9,556
103,481
667,814
-
-
(489)
(43,073)
(3,566)
-
(3,767)
(154,303)
(386,553)
-
(386,553)
-
(10,541)
-
(16,117)
(45,906)
-
24,742
805,593
1,662,212
The tables below set forth the line-by-line impact of eliminating the interests of third parties in the entities that the
Group consolidates from the capital provision assets balance reported in the consolidated statements of financial
position to arrive at the Burford-only capital provision assets at December 31, 2021, and 2020:
Burford-only
($ in thousands)
At January 1, 2021
Additions
Realizations
Income for the period
Transfer from investment subparticipation
Foreign exchange gains/(losses)
At December 31, 2021
Unrealized fair value at December 31, 2021
Elimination of
Consolidated
total
2,564,742
673,965
(455,148)
131,819
-
(14,913)
2,900,465
1,306,380
third-party Burford-only
total
1,906,191
449,205
(290,362)
103,809
5,156
(14,546)
2,159,453
890,916
interests
(658,551)
(224,760)
164,786
(28,010)
5,156
367
(741,012)
(415,464)
Capital
Capital
provision- provision-
indirect
43,215
914
(25,176)
2,608
-
-
21,561
3,569
direct
1,862,976
448,291
(265,186)
101,201
5,156
(14,546)
2,137,892
887,347
Burford Capital Annual Report 2021 55
Financial and operational review
continued
($ in thousands)
At January 1, 2020
Additions
Realizations
Income for the period
Transfer to investment subparticipation
Foreign exchange gains/(losses)
At December 31, 2020
Unrealized fair value at December 31, 2020
Elimination of
Consolidated
total
2,447,266
297,143
(540,294)
343,393
-
17,234
2,564,742
1,329,313
third-party Burford-only
total
1,825,954
275,684
(526,302)
318,727
(4,675)
16,803
1,906,191
914,747
interests
(621,312)
(21,459)
13,992
(24,666)
(4,675)
(431)
(658,551)
(414,566)
Burford-only
Capital
Capital
provision- provision-
indirect
184,601
50,547
(189,658)
(2,275)
-
-
43,215
(173)
direct
1,641,353
225,137
(336,644)
321,002
(4,675)
16,803
1,862,976
914,920
The tables below set forth the line-by-line impact of eliminating the income of third parties in the entities that the
Group consolidates from the capital provision income reported in the consolidated statements of comprehensive
income to arrive at Burford-only total capital provision income at December 31, 2021, 2020 and 2019:
Burford-only
Elimination of
Consolidated
total
153,607
third-party Burford-only
total
127,296
interests
(26,311)
Capital
Capital
provision- provision-
indirect
(1,133)
direct
128,429
(54,017)
32,229
-
131,819
160
(500)
(3,930)
-
127,549
12,956
(14,655)
-
(28,010)
(160)
-
375
-
(27,795)
(41,061)
17,574
-
103,809
-
(500)
(3,555)
-
99,754
(43,106)
15,878
-
101,201
-
(500)
(3,555)
-
97,146
2,045
1,696
-
2,608
-
-
-
-
2,608
Burford-only
Elimination of
Consolidated
total
208,157
third-party Burford-only
total
181,599
interests
(26,558)
Capital
Capital
provision- provision-
indirect
1,915
direct
179,684
(15,263)
148,102
2,397
343,393
199
(4,779)
(22)
1,312
340,103
23,425
(19,136)
(2,397)
(24,666)
(199)
4,779
-
6
(20,080)
8,162
128,966
-
318,727
-
-
(22)
1,318
320,023
13,644
127,674
-
321,002
-
-
(22)
1,318
322,298
(5,482)
1,292
-
(2,275)
-
-
-
-
(2,275)
($ in thousands)
December 31, 2021
Realized gains/(losses) relative to cost
Previous unrealized (gains)/losses transferred to realized
gains/(losses)
Fair value adjustment in the period
Interest income on certain capital provision-indirect assets
Income on capital provision assets
Interest and other income
Impairment of other asset
Foreign exchange gains/(losses)
Loss on investment subparticipation
Total capital provision income
($ in thousands)
December 31, 2020
Realized gains/(losses) relative to cost
Previous unrealized (gains)/losses transferred to realized
gains/(losses)
Fair value adjustment in the period
Interest income on certain capital provision-indirect assets
Income on capital provision assets
Interest and other income
Loss on financial liabilities at fair value through profit or loss
Loss on equity securities
Foreign exchange gains
Total capital provision income
56 Burford Capital Annual Report 2021
Financial and operational review
continued
Burford-only
($ in thousands)
December 31, 2019
Realized gains/(losses) relative to cost
Previous unrealized (gains)/losses transferred to realized
gains/(losses)
Fair value adjustment in the period
Interest income on certain capital provision-indirect assets
Income on capital provision assets
Interest and other income/loss
Impairment of other asset
Realized gain on derivative financial instruments
Loss on financial liabilities at fair value through profit or loss
Loss on equity securities
Foreign exchange gains
Total capital provision income
Elimination of
Consolidated
total
146,922
third-party Burford-only
total
128,424
interests
(18,498)
Capital
Capital
provision- provision-
indirect
7,902
direct
120,522
(85,536)
351,800
15,006
428,192
(1,213)
(1,000)
2,846
(20,872)
1,169
34
409,156
6,251
(86,239)
(15,006)
(113,492)
(1,742)
-
4,154
20,467
(1,722)
2
(92,333)
(79,285)
265,561
-
314,700
(2,955)
(1,000)
7,000
(405)
(553)
36
316,823
(79,424)
260,977
-
302,075
(2,955)
(1,000)
7,000
(405)
(553)
36
304,198
139
4,584
-
12,625
-
-
-
-
-
-
12,625
The tables below set forth the line-by-line impact of eliminating the interests of third parties in the entities that the
Group consolidates from the due from settlement of capital provision assets balance reported in the consolidated
statements of financial position to arrive at Burford-only capital provision assets at December 31, 2021, 2020, and
2019:
Burford-only
($ in thousands)
At January 1, 2021
Transfer of realizations from capital provision assets
Interest and other income
Proceeds received
Asset received-in-kind
At December 31, 2021
Consolidated
total
30,708
455,148
160
(396,415)
(3,290)
86,311
Elimination of
Capital
Capital
third-party Burford-only provision- provision-
indirect
-
25,176
-
(25,176)
-
-
interests
-
(164,786)
(160)
139,826
2,256
(22,864)
direct
30,708
265,186
-
(231,413)
(1,034)
63,447
total
30,708
290,362
-
(256,589)
(1,034)
63,447
($ in thousands)
At January 1, 2020
Transfer of realizations from capital provision assets
Interest and other income
Proceeds received
At December 31, 2020
Consolidated
total
48,128
540,294
199
(557,913)
30,708
Elimination of
Capital
Capital
third-party Burford-only provision- provision-
indirect
-
189,658
-
(189,658)
-
interests
(29,139)
(13,992)
(199)
43,330
-
direct
18,989
336,644
-
(324,925)
30,708
total
18,989
526,302
-
(514,583)
30,708
Burford-only
Burford-only
($ in thousands)
At January 1, 2019
Transfer of realizations from capital provision assets
Interest and other income/(loss)
Proceeds received
Asset received-in-kind
At December 31, 2019
Consolidated
total
37,109
434,483
(1,213)
(392,606)
(29,645)
48,128
Elimination of
Capital
Capital
third-party Burford-only provision- provision-
indirect
-
176,873
-
(176,873)
-
-
interests
-
(38,803)
(1,742)
(18,239)
29,645
(29,139)
direct
37,109
218,807
(2,955)
(233,972)
-
18,989
total
37,109
395,680
(2,955)
(410,845)
-
18,989
Burford Capital Annual Report 2021 57
Financial and operational review
continued
The table below sets forth the components of the asset management income for the years ended December 31, 2021,
2020 and 2019:
($ in thousands)
For the period ended December 31, 2021
Management fee income
Performance fee income
Income from BOF-C
Total asset management income
($ in thousands)
For the period ended December 31, 2020
Management fee income
Performance fee income
Income from BOF-C
Total asset management income
($ in thousands)
For the period ended December 31, 2019
Management fee income
Performance fee income
Income from BOF-C
Total asset management income
Elimination of
Consolidated
total
8,667
5,729
-
14,396
third-party
interests Burford-only
10,510
5,729
9,798
26,037
1,843
-
9,798
11,641
Elimination of
Consolidated
total
8,706
6,400
-
15,106
third-party
interests Burford-only
11,454
6,400
6,630
24,484
2,748
-
6,630
9,378
Elimination of
Consolidated
total
15,160
-
-
15,160
third-party
interests Burford-only
18,399
594
7,137
26,130
3,239
594
7,137
10,970
The tables below set forth the line-by-line impact of eliminating the third-party interests in the entities that the Group
consolidates from the definitive and discretionary commitment balances to arrive at Burford-only commitments at
December 31, 2021 and 2020:
($ in thousands)
December 31, 2021
Definitive
Discretionary
Total
Legal risk (definitive)
Elimination of
Consolidated
total
703,417
701,107
1,404,524
88,260
third-party
interests
(180,591)
(173,684)
(354,275)
(6,233)
Burford-only
522,826
527,423
1,050,249
82,027
*
The Burford-only undrawn commitment figure for 2021 includes approximately $63 million interests in assets that were warehoused for other funds at
December 31, 2021, including a $13 million asset warehoused for BOF-C and a $50 million asset warehoused for the Advantage Fund, which will be
reflected as a capital provision-indirect asset post transfer. The undrawn commitment table reflects the allocation in place at December 31, 2021, and
does not reflect the intended transfer to other funds at December 31, 2021, which occurred in early 2022. After giving effect to these intended transfers,
Burford-only undrawn commitments for capital provision-direct assets at December 31, 2021, would have been $987 million, of which $460 million are
definitive and $527 million are discretionary as well as $8 million of undrawn commitments in capital provision-indirect assets and $82 million undrawn
commitments in legal risk assets.
($ in thousands)
December 31, 2020
Definitive
Discretionary
Total
Legal risk (definitive)
Elimination of
Consolidated
total
477,921
682,721
1,160,642
93,970
third-party
interests
(130,694)
(107,958)
(238,652)
(6,233)
Burford-only
347,227
574,763
921,990
87,737
58 Burford Capital Annual Report 2021
Cash receipts data reconciliation
Cash receipts is a non-GAAP financial measure. The tables below set forth a reconciliation of cash receipts to proceeds
from capital provision assets, the most comparable measure calculated in accordance with US GAAP.
Reconciliation between capital provision assets-proceeds received and cash receipts
Financial and operational review
continued
2021
Item
Consolidated cash flow:
Proceeds from capital provision assets
less: Elimination of third-party interests
Burford-only total
Proceeds received:
Capital provision-direct
Adjusted capital provision-direct proceeds:
Capital provision-indirect
Adjusted capital provision-indirect proceeds:
Asset management income
plus: Eliminated income from funds
less: Increase in receivable
Asset management cash income
Cash from services and other
Insurance income
Marketable securities and bank interest
Service and other cash income
Cash receipts
2020
Item
Consolidated cash flow:
Capital provision assets—proceeds received
less: Elimination of third-party interests
Burford-only total
Proceeds received:
Capital provision-direct
Adjusted capital provision-direct proceeds:
Capital provision-indirect
less: Proceeds held at fund level in 2019
less: Return of amounts pre-funded in 2019
plus: Hedging proceeds
Adjusted capital provision-indirect proceeds:
Asset management income
plus: Eliminated income from funds
less: Increase in receivable
Asset Management cash income
Cash from services and other
Insurance income
Marketable securities and bank interest
Services and other cash income
Cash receipts
$’000 Source/Comment
396,415 From consolidated statement of cash flows
(139,826) From data reconciliations - due from settlement
256,589 From data reconciliations – due from settlement
231,413 From data reconciliations - due from settlement
231,413 Table on page 36: $231 million of capital provision-direct on balance sheet
25,176 From data reconciliations - due from settlement
25,176
Table on page 36: $25 million of capital provision-indirect proceeds on
balance sheet
14,396 From FS note 8
11,641 From data reconciliations asset management income
(7,538) Non-cash portion
18,499 Table on page 36: $19 million of asset management income
2,386 From consolidated statement of cash flows
1,367 From Burford-only income statement, adjusted by the decrease in receivable
2,625 From Burford-only income statement adjusted by the change in receivables
6,378 Table on page 36 : $6 million of services and other cash income
281,466 Table on page 36: $281 million of total cash receipts on the balance sheet
$’000 Source/Comment
557,913 From consolidated statement of cash flows
(43,330) From data reconciliation - due from settlement
514,583 From data reconciliation – due from settlement
324,925 From data reconciliation - due from settlements
324,925 Table on page 37: $325 million of capital provision-direct on balance sheet
189,658 From data reconciliation - due from settlement
(36,621) 2019 Annual Report page 34– cash receipts reconciliation
(8,801) Proceeds related to pre-funded LP commitments
28,265 Proceeds from hedging/margin
172,501
Table on page 37: $173 million of capital provision-indirect proceeds on
balance sheet
15,106 From FS note 8
9,378 From data reconciliations – asset management income
(8,137) Non-cash portion
16,347 Table on page 37: $16 million of asset management income
1,582 From consolidated statement of cash flows
1,973 From Burford-only income statement, adjusted by the decrease in receivable
1,418 From Burford-only income statement adjusted for FV movement
4,973 Table on page 37: $5 million of services and other cash income
518,746 Table on page 37: $519 million of total cash receipts on the balance sheet
Burford Capital Annual Report 2021 59
Financial and operational review
continued
2019
Item
Consolidated cash flow:
Capital provision assets—proceeds received
plus: Elimination of third-party interests
Burford-only total
Proceeds received:
Capital provision-direct
less: Warehousing proceeds
plus: Refinancing proceeds
Adjusted capital provision-direct proceeds:
Capital provision-indirect
plus: Cash from margin/hedging
plus: Proceeds held at fund level
Adjusted capital provision-indirect proceeds:
Asset management income
less: Increase in receivable
Asset management cash income
Cash from services and other
Insurance income
Marketable securities and bank interest
Services and other cash income
Cash receipts
Portfolio data reconciliation
$’000 Source/Comment
392,606 From consolidated statement of cash flows
18,239 From data reconciliation - due from settlement
410,845 From data reconciliation - due from settlement
233,972 From data reconciliation - due from settlement
(33,078) Proceeds from assets held by Burford pending transfer to a managed fund
9,221 Proceeds from re-financed asset treated as a restructuring
210,115 Table on page 37: $210 million of capital provision-direct on balance sheet
176,873 From data reconciliation - due from settlement
56,194 Proceeds related to hedging/margin transactions
36,621 Proceeds related to pre-funded LP commitments
269,688
Table on page 37: $270 million of capital provision-indirect proceeds on
balance sheet
26,130 From FS note 8
(5,609) Non-cash portion
20,521 Table on page 37: $20 million of asset management income
1,123 From consolidated statement of cash flows
10,311 From Burford-only income statement, adjusted by the decrease in receivable
6,070 From Burford-only income statement adjusted for FV movement
17,504 Table on page 37: $18 million of services and other cash income
517,828 Table on page37x: $518 million of total cash receipts on the balance sheet
The first table below reconciles the calculation of our current portfolio on a consolidated basis to the calculation on a
Group-wide basis as presented in the “—Current Portfolio” on page 39. The second table below provides additional
details on the reconciliation.
Reconciliation of current portfolio-consolidated GAAP financials to Group-wide
At December 31, 2021 ($ in millions)
Deployed cost
+ Fair value adjustments
= Carrying value
+ Undrawn commitments
Total
Capital
provision-
direct
Non-
consolidated
Post-
settlement
Non-
consolidated
funds(d)
480
73
553
215
768 (d)
funds(d)
268 (c)
52 (c)
320 (c)
12 (c)
332 (c)
Consolidated
GAAP total
1,594 (b)
1,306 (a)
2,900 (a)
1,493 (e)
4,393 (f)
Third-party
interests
(21)
(378)
(399)
—
(399)
Group-wide
total
2,321
1,053
3,374
1,720
5,094 (c)
(a) From note 6 (“Capital provision assets”) to our consolidated financial statements.
(b) Derived by subtracting fair value adjustments from period end carrying value.
(c) From “Current Portfolio—Group-wide” table on page 39.
(d) These amounts represent the funds that are not consolidated under US GAAP within the Group financial statements.
(e) From note 22 (“Financial commitments and contingent liabilities”) to our consolidated financial statements. The amounts in this table represent the sum
of total undrawn commitments for capital provision and legal risk set forth in note 22 (“Financial commitments and contingent liabilities”) to our
consolidated financial statements. Commitments are off-balance sheet under US GAAP.
(f) This amount represents a non-GAAP figure.
60 Burford Capital Annual Report 2021
Financial and operational review
continued
Capital
provision-
direct
Non-
consolidated
Post-
settlement
Non-
consolidated
funds(d)
379
83
462
281
743 (d)
funds(d)
249 (c)
30 (c)
279 (c)
27 (c)
306 (c)
Consolidated
GAAP total
1,235 (b)
1,329 (a)
2,564 (a)
1,255 (e)
3,819 (f)
Third-party
interests
(20)
(381)
(401)
—
(401)
Group-wide
total
1,843
1,061
2,904
1,563
4,467 (c)
At December 31, 2020 ($ in millions)
Deployed cost
+ Fair value adjustments
= Carrying value
+ Undrawn commitments
Total
(a) From note 6 (“Capital provision assets”) to our consolidated financial statements.
(b) Derived by subtracting fair value adjustments from period end carrying value.
(c) From “Current Portfolio—Group-wide” table on page 39.
(d) These amounts represent the funds that are not consolidated under US GAAP within the Group financial statements.
(e) From note 22 (“Financial commitments and contingent liabilities”) to our consolidated financial statements. The amounts in this table represent the sum
of total undrawn commitments for capital provision and legal risk set forth in note 22 (“Financial commitments and contingent liabilities”) to our
consolidated financial statements. Commitments are off-balance sheet under US GAAP.
(f) This amount represents a non-GAAP figure.
Additional details on reconciliation
Capital provision-direct
Capital provision-
indirect
Consolidated
GAAP
Burford-
Consolidated
funds(d)
BOF-C
Third-party
Interests
Total
Strategic
Value fund
Total
At December 31, 2021
($ in millions)
Deployed cost
+ Fair value adjustments
= Carrying value
+ Undrawn commitments
Total
1,594 (b)
1,306 (a)
2,900 (a)
1,493 (e)
4,393 (f)
only
1,251 (c)
887 (c)
2,138 (c)
1,132 (c)
3,270 (c)
37
11
48
2
50
274 (c)
28 (c)
302 (c)
359 (c)
661 (c)
21
378
399
-
399
1,583
1,304
2,887
1,493 (e)
4,380
11
2
13 (c)
-
13 (c)
11
2
13
-
13
(a) From note 6 (“Capital provision assets”) to our consolidated financial statements.
(b) Derived by subtracting fair value adjustments from period end carrying value.
(c) From “Current Portfolio-Group-wide” table on page 39.
(d) The sum of the amounts in the “Capital Provision-Direct—Consolidated Funds” column in the “Additional details on the reconciliation” table and “Capital
Provision-Direct—Non-consolidated Funds” column in the “Reconciliation of current portfolio-consolidated GAAP to Group-wide” table is equal to the
amounts in the “Funds” column of the “Capital Provision-Direct” section of the “Current Portfolio—Group-wide” table on page 39.
(e) From note 22 (“Financial commitments and contingent liabilities”) to our consolidated financial statements. The amounts in this table represent the sum
of total undrawn commitments for capital provision and legal risk set forth in note 22 (“Financial commitments and contingent liabilities”) to our
consolidated financial statements. Commitments are off-balance sheet under US GAAP.
(f) This amount represents a non-GAAP figure.
Burford Capital Annual Report 2021 61
Financial and operational review
continued
At December 31, 2020 ($ in
millions)
Deployed cost
+ Fair value adjustments
= Carrying value
+ Undrawn commitments
Total
Capital provision-direct
Capital provision-indirect
Consolidated
GAAP
Burford-only
Consolidated
funds(d)
Third-party
interests
BOF-C
Total
Strategic
Value fund
Total
1,235 (b)
1,329 (a)
2,564 (a)
1,255 (e)
3,819 (f)
948 (c)
915 (c)
1,863 (c)
1,010 (c)
2,873 (c)
39
10
49
5
54
152 (c)
14 (c)
166 (c)
240 (c)
406 (c)
20
381
401
-
1,159
1,320
2,479
1,255 (e)
401 3,734
76
9
85 (c)
-
85 (c)
76
9
85
-
85
(a) From note 6 (“Capital provision assets”) to our consolidated financial statements.
(b) Derived by subtracting fair value adjustments from period end carrying value.
(c) From “Current Portfolio—Group-wide” table on page 39.
(d) The sum of the amounts in the “Capital Provision-Direct-Consolidated Funds” column in the “Additional details on the reconciliation” table and “Capital
Provision-Direct-Non-consolidated Funds” column in the “Reconciliation of current portfolio-consolidated GAAP to Group-wide” table is equal to the
amounts in the “Funds” column of the “Capital Provision-Direct” section of the “Current Portfolio—Group-wide” table on page 39
(e) From note 22 (“Financial commitments and contingent liabilities”) to our consolidated financial statements. The amounts in this table represent the sum
of total undrawn commitments for capital provision and legal risk set forth in note 22 (“Financial commitments and contingent liabilities”) to our
consolidated financial statements. Commitments are off-balance sheet under US GAAP.
(f) This amount represents a non-GAAP figure.
In the “Current Portfolio-Group-wide” table on page 39, the “Funds” column includes some funds that are consolidated
into our US GAAP financial statements and some funds that are not; these funds are presented in separate columns in
the “Reconciliation of Current Portfolio-GAAP Financials to Group-wide” table above. When the consolidated funds are
added to the “Burford-only” and “BOF-C” columns in the “Current Portfolio—Group-wide” table on page 39, the sum
corresponds to the amounts presented in note 6 (“Capital provision assets”) to our consolidated financial statements.
When the amount of our non-consolidated funds is added to this sum, the total represents our Group-wide portfolio
amounts, including both consolidated and non-consolidated funds.
The undrawn commitment amounts in the “Current Portfolio—Group-wide” table on page 39 correspond to the amounts
included in note 22 (“Financial commitments and contingent liabilities”) to our consolidated financial statements, as
indicated above.
Deployments data reconciliation
The following table provides further information on how data from the Deployments section is related to data in the US
GAAP financial statements and notes and website tables.
Reconciliation between financial statements and deployments table
2021
Item
Consolidated cash flow:
$’000 Source/Comment
New funding of capital provision assets
plus: Elimination of third-party interests
673,965 From FS note 6 - additions
(224,760) From data reconciliations - Burford-only capital provision assets
Burford-only total additions
Additions:
Capital provision-direct
less: Distributed in-kind asset, which was contributed in-
kind as a capital provision asset
Capital provision-direct additions:
Capital provision-indirect
Adjusted capital provision-indirect additions:
Total balance sheet additions:
449,205 From data reconciliations – Burford-only capital provision assets
448,291 From data reconciliations – Burford-only capital provision assets
From consolidated statement of cash flows
(1,034)
447,257 Table on page 47: $447 million of capital provision-direct balance sheet deployments
914 From data reconciliations – Burford-only capital provision assets
914 Table on page 47: $1 million of capital provision-indirect balance sheet deployments
448,171 Table on page 47: $448 million of total balance sheet deployments
62 Burford Capital Annual Report 2021
2020
Item
Consolidated cash flow:
$’000 Source/Comment
Capital provision assets – funding
plus: Elimination of third-party interests
297,143 From consolidated statement of cash flows
(21,459) From data reconciliations – Burford-only capital provision assets
Financial and operational review
continued
Burford-only total additions
Additions:
Capital provision-direct
Capital provision-direct additions:
Capital provision-indirect
plus: Cash for margin/hedging
275,684 From data reconciliations – Burford-only capital provision assets
225,137 From data reconciliations – Burford-only capital provision assets
225,137 Table on page 47: $225 million of capital provision-direct balance sheet deployments
50,547 From data reconciliations – Burford-only capital provision assets
16,733
Deployments for hedging/margin transactions of $26 million less loss of $9 million in the
due from/to brokers lines of the balance sheet
Balance sheet portion of deployments made at fund level but not yet allocated to LPs by
period end
less: Reported deployments held at fund level in 2019
(25,000)
less: Additional LP deployments held at fund level in 2019
Adjusted capital provision-indirect additions:
Total balance sheet additions:
(15,483) Adjustment for actual LP allocation of deployments
26,797 Table on page 47: $27 million of capital provision-indirect balance sheet deployments
251,934 Table on page 47: $252 million of total balance sheet deployments
Reconciliation of deployments to change in deployed costs in the asset data tables:
2021
Item
From the asset data tables:
Deployed cost:
Capital provision-direct at YE 2021
less: Capital provision-direct at YE 2020
Change in deployed cost during 2020 on capital
provision-direct assets
2020
Item
From the asset data tables:
Deployed cost:
Capital provision-direct at YE 2020
less: Capital provision-direct at YE 2019
Change in deployed cost during 2020 on capital
provision-direct assets
$ millions Source/Comment
2,222
(1,775)
447
Total deployed cost from capital provision-direct asset performance table on
page 44
Total deployed cost from capital provision-direct asset performance table on
2020 Annual Report page 46
Table on page 47: $447 million of total balance sheet deployments
$ millions Source/Comment
1,775
(1,549)
226
Total deployed cost from capital provision-direct asset performance table on
2020 Annual Report page 46
Total deployed cost from capital provision-direct asset performance table on
2019 Annual Report page 44
Table above: $225,447 thousand of total balance sheet deployments rounded
upwards to $226 million
Burford Capital Annual Report 2021 63
Financial and operational review
continued
Realizations data reconciliation
The following tables provide further information on how data from the tables in the “Realizations” section on page 47
relate to data presented in the Financial Statement notes and the tables available on our website.
The table below provides a reconciliation of our total realizations in 2021 on a Consolidated basis to a Group-wide
basis.
At December 31,
($ in millions)
Consolidated GAAP realizations*
Warehousing transfer
Cash from margin/hedging/other
Capital provision non-consolidated funds
Post settlement non-consolidated funds
Group-wide realizations
2021
455
(98)
-
61
108
526
2020
540
-
19
272
168
999
*
See note 6 (“Capital provision assets”) to our consolidated financial statements
Reconciliation between financial statements and realizations/recoveries
2021
Item
Consolidated realizations:
Capital provision assets
plus: Elimination of third-party interests
Burford-only total realizations
Realizations:
Capital provision-direct
less: Distributed in-kind asset, which was contributed in-
kind as a capital provision asset
Capital provision-direct realizations:
Capital provision-indirect
plus: 2021 reported realizations held at fund level and
not yet distributed
$ '000 Source/Comment
455,148 From FS note 6 - realizations
(164,786) From data reconciliations – Burford-only capital provision assets
290,362 From data reconciliations – Burford-only capital provision assets
265,186 From data reconciliations – Burford-only capital provision assets
(1,034)
From consolidated statement of cash flows
264,152 Table on page 48: $264 million capital provision-direct realizations on balance sheet
25,176 From data reconciliations – Burford-only capital provision assets
9,856
Proceeds held at the fund level pending deployment
Adjusted capital provision-indirect realizations:
35,032 Table on page 48: $35 million capital provision-indirect realizations on balance sheet
Total balance sheet realizations:
299,184 Table on page 48: $299 million total realizations on balance sheet
2020
Item
Consolidated realizations:
Capital provision assets
less: Elimination of third-party interests
Burford-only total realizations
Realizations:
Capital provision-direct
Capital provision-direct realizations:
Capital provision-indirect
less: 2019 reported realizations held at fund level
less: Return of amounts pre-funded in 2019
plus: Cash from margin/hedging
$ 000 Source/Comment
540,294 From FS note 6 - realizations
(13,992) From data reconciliations – Burford-only capital provision assets
526,302 From data reconciliations – Burford-only capital provision assets
336,644 From data reconciliations – Burford-only capital provision assets
336,644 Table on page 48: $337 million capital provision-direct realizations on balance sheet
189,658 From data reconciliations- Burford-only capital provision assets
(36,621) Proceeds recognized in 2019, but held at the fund level pending deployment
(8,801) Proceeds related to pre-funded LP commitments
28,265
Proceeds from hedging/margin transactions in the due from/to brokers lines of the
balance sheet
Adjusted capital provision-indirect realizations:
Total balance sheet realizations:
172,501 Table on page 48: $172 million capital provision-indirect realizations on balance sheet
509,145 Table on page 48: $509 million total realizations on balance sheet
64 Burford Capital Annual Report 2021
Financial and operational review
continued
Reconciliation of realizations to change in recoveries in the asset data tables:
2021
Item
From the asset data tables:
Recoveries:
Capital provision-direct at YE 2021
$ millions Source/Comment
1,861
Total recoveries from capital provision-direct asset performance table
on page 44
Less: Capital provision-direct at YE 2020
(1,597)
Total recoveries from capital provision-direct asset performance table
on page 46 of 2020 Annual Report
Change in recoveries during 2021 on capital provision-
direct assets
264
Foots to capital provision-direct realizations from above table
2020
Item
From the asset data tables:
Recoveries:
Capital provision-direct at YE 2020
$ millions Source/Comment
1,597
Total recoveries from capital provision-direct asset performance table
on page 46
Less: Capital provision-direct at YE 2019
(1,260)
Total recoveries from capital provision-direct asset performance table
on page 44 of 2019 Annual Report
Change in recoveries during 2020 on capital provision-
direct assets
337
Foots to capital provision-direct realizations from above table
Additional details on net debt to tangible equity covenant ratio:
2021
Item
From the consolidated statement of financial position
Debt issued
plus: Debt interest payable
Consolidated net debt
From the consolidated statement of financial position
Total shareholders' equity attributable to Burford Capital,
Limited
less: Goodwill
Tangible equity
Net debt to tangible equity
2020
Item
From the consolidated statement of financial position
Debt issued
plus: Debt interest payable
Consolidated net debt
From the consolidated statement of financial position
Total shareholders' equity attributable to Burford Capital,
Limited
less: Goodwill
Tangible equity
Net debt to tangible equity
$ '000 Source/Comment
1,071,911 Face value of debt issued
13,918 From consolidated statement of financial position
1,085,829
1,551,790
From consolidated statement of financial position
(134,019) From consolidated statement of financial position
1,417,771
0.77x
$ '000 Source/Comment
678,189 Face value of debt issued
9,556 From consolidated statement of financial position
687,745
1,662,212
From consolidated statement of financial position
(134,032) From consolidated statement of financial position
1,528,180
0.45x
Burford Capital Annual Report 2021 65
Financial and operational review
continued
Additional details on net debt to tangible assets covenant ratio
2021
Item
From the consolidated statement of financial position
Debt issued
less: Cash and cash equivalents
less: Marketable securities investments
Consolidated net debt
From the consolidated statement of financial position
Total assets
less: Goodwill
Tangible assets
Leverage ratio
2020
Item
From the consolidated statement of financial position
Debt issued
less: Cash and cash equivalents
less: Marketable securities investments
Consolidated net debt
From the consolidated statement of financial position
Total assets
less: Goodwill
Tangible assets
Leverage ratio
$ '000 Source/Comment
1,071,911 Face value of debt issued
(180,255) From consolidated statement of financial position
(175,336) From consolidated statement of financial position
716,320
3,524,706 From consolidated statement of financial position
(134,019) From consolidated statement of financial position
3,390,687
21 %
$ '000 Source/Comment
678,189 Face value of debt issued
(322,085) From consolidated statement of financial position
(16,594) From consolidated statement of financial position
339,510
3,118,013 From consolidated statement of financial position
(134,032) From consolidated statement of financial position
2,983,981
11 %
66 Burford Capital Annual Report 2021
Directors’ report
To our shareholders:
The Directors present their annual report and the audited consolidated financial statements of Burford Capital Limited
and its subsidiaries (collectively, “Burford”) for the year ended December 31, 2021.
Business activities
Burford provides legal finance, complex strategies, post-settlement finance and asset management products and
services with a focus on the legal sector. Burford Capital Limited is incorporated under the Companies (Guernsey) Law,
2008, as amended (the “Guernsey Companies Law”). Burford Capital Limited’s ordinary shares were admitted to
trading on the Alternative Investment Market, a market operated by the London Stock Exchange, on October 21, 2009,
and on the New York Stock Exchange on October 19, 2020.
Corporate governance
The Directors recognize the high standards of corporate governance demanded of listed companies. Burford Capital
Limited has adopted and complied with the Finance Sector Code of Corporate Governance issued by the Guernsey
Financial Services Commission.
Results of operations and dividends
Burford’s results of operations for the year ended December 31, 2021, are set forth in the consolidated statements of
comprehensive income on page 78 of this annual report on Form 20 - F (this “Annual Report”).
Burford Capital Limited paid a final dividend for the year ended December 31, 2020, of 12.5 US cents per ordinary
share on June 18, 2021, and paid an interim dividend for the year ended December 31, 2021, of 6.25 US cents per
ordinary share on December 2, 2021.
The Directors are proposing a final dividend for the year ended December 31, 2021, of 6.25 US cents per ordinary share
to be paid on June 17, 2022, to the shareholders on the register at the close of business on May 27, 2022, with an ex-
dividend date of May 26, 2022.
Because Burford is a US dollar-denominated business, dividends are declared in US dollars. For shareholders electing to
receive their dividends in pounds sterling, dividends are subsequently converted into pounds sterling based on the
exchange rate determined on or about the record date and are paid in pounds sterling. UK shareholders who would like
to receive dividends in US dollars instead of pounds sterling should contact the registrar. US shareholders will
automatically receive dividends in US dollars unless they request otherwise.
Directors
The Directors of Burford Capital Limited who served during the year ended December 31, 2021, and to the date of this
Annual Report are set forth under “Governance—Directors and senior management—Directors”.
Interests of the directors
The interests of the Directors are set forth under “Compensation—Director compensation” and “Compensation—
Holdings and commitments to managed funds of directors and senior management—Directors”.
Statement of the Directors’ responsibilities in relation to the consolidated financial statements
The Directors are responsible for preparing this Annual Report and the consolidated financial statements in accordance
with applicable Guernsey law and generally accepted accounting principles in the United States (“US GAAP”).
Under the Guernsey Companies Law, the Directors must not approve the consolidated financial statements unless they
are satisfied that they give a true and fair view of the financial position, results of operations and cash flows of Burford
at and for the year ended December 31, 2021. In preparing the consolidated financial statements, the Directors are
required to:
▪ Select suitable accounting policies and apply such accounting policies consistently
Burford Capital Annual Report 2021 67
Directors’ report
continued
▪ Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information
Make judgments and estimates that are reasonable and prudent
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain Burford’s
transactions and disclose with reasonable accuracy at any time its financial position and enable them to ensure that
the consolidated financial statements comply with the Guernsey Companies Law. They are also responsible for
safeguarding Burford’s assets and, therefore, for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
Disclosure of information to auditors
So far as each of the Directors is aware, there is no relevant audit information of which Burford’s independent
registered public accounting firm is unaware, and each of the Directors has taken all the steps he ought to have taken
as a director to make himself aware of any relevant audit information and to establish that Burford’s independent
registered public accounting firm is aware of such information.
Independent registered public accounting firm
Ernst & Young LLP has expressed its willingness to continue in office and a resolution to re-appoint it will be proposed
at the annual general meeting of shareholders to be held in 2022.
Charles Parkinson
Director
on behalf of the Board of Directors
March 29, 2022
68 Burford Capital Annual Report 2021
Consolidated financial
statements
Contents
70
78
79
80
82
Report of independent registered public accounting firm
(PCAOB ID: 01438)
Consolidated statements of comprehensive income for the
years ended December 31, 2021, 2020 and 2019
Consolidated statements of financial position at
December 31, 2021 and 2020
Consolidated statements of cash flows for the years ended
December 31, 2021, 2020 and 2019
Consolidated statements of changes in equity for the years
ended December 31, 2021, 2020 and 2019
83
Notes to the consolidated financial statements
Burford Capital Annual Report 2021 69
Report of independent registered public accounting firm
To the Board of Directors and Shareholders of Burford Capital Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Burford Capital Limited (the
Company) as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income, changes
in equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and
2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31,
2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework), and our report dated March 29, 2022 expressed an adverse opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of capital provision assets
Description of the Matter
At December 31, 2021, the Company’s reported capital provision assets
totaled $2,900 million. For the year ended December 31, 2021, the Company
recognized net fair value movements on capital provision assets of $32
million. As discussed in Notes 2 and 6 to the consolidated financial
statements, capital provision assets are held at fair value, with changes in fair
value recorded through profit or loss. Fair value movements are recognized in
accordance with the Company’s valuation policy, which relies on objective
events in the litigation process to drive changes in the capital provision asset
valuations.
70 Burford Capital Annual Report 2021
How We Addressed the Matter in
Our Audit
Goodwill impairment assessment
Description of the Matter
Report of independent registered public accounting firm
continued
Auditing the valuation of the capital provision assets was judgmental and
complex as there is uncertainty in the assessment of fair valuation of these
illiquid assets. The uncertainty of the fair value for each asset was due to the
application of the fixed valuation ranges for the occurrence of objective
events as set out in the Company’s valuation policy. The Company’s valuation
policy assigned valuation changes in fixed ranges based on the nature of the
objective event and estimated remaining litigation risk. Judgment was
applied in ensuring the appropriate valuation ranges were applied to each
case and in selecting where in the range any single asset valuation change
should be determined, and whether those ranges remain appropriate based on
the Company’s capital provision asset realization history.
To test the fair value of capital provision assets, we performed audit
procedures that included, among others, involvement of our valuation
specialists to assist in evaluating the valuation methodology applied,
independent research of information in the public domain to evaluate the
completeness of objective events considered in the valuation process,
involvement of our internal law specialists to assist in inspection of an
independent legal counsel report covering a review of the status of a capital
provision asset selected by us, assessment of the application of the valuation
policy to a sample of capital provision assets and consideration of any
relevant secondary market trading.
To assess the continued appropriateness of the valuation ranges in the
Company’s valuation policy on a portfolio basis, among other procedures, we,
with the support of our valuation and modelling specialists, compiled a
statistical analysis of historical realizations. We also compared actual
proceeds received by the Company from realizations with the carrying amount
of the capital provision asset immediately prior to conclusion to assess the
appropriateness of fair value adjustments within the specific categories of the
Company’s valuation policy.
At December 31, 2021, the Company’s reported goodwill was $134 million. As
discussed in Notes 2 and 15 of the consolidated financial statements, goodwill
is tested for impairment at least annually at the reporting unit level.
Auditing management’s annual goodwill impairment assessment was complex
and judgmental due to the significant estimates of future cash flows from the
Company’s capital provision asset portfolio in a value-in-use scenario. The
models used by management in their assessment require the use of
assumptions over subjective inputs which could be affected by future
economic and market conditions, including the returns from the realization
proceeds from concluded capital provision assets, timing of realizations, the
timing and level of future commitments and deployment of funds into new
capital provision assets, and the application of an appropriate discount rate.
Burford Capital Annual Report 2021 71
Report of independent registered public accounting firm
continued
How We Addressed the Matter in
Our Audit
To test the estimated value-in-use of the Company’s reporting units, we
performed audit procedures that included, among others, assessing the
methodologies, testing the significant assumptions discussed above and
testing the accuracy and completeness of the underlying data used by the
Company in its assessment. For example, we assessed the mathematical
accuracy of the model and evaluated the cash flow projections and inputs
used in management’s value-in use model by comparing to the Company’s
historical data over realizations, commitments and deployment rates, and
management’s forecasts used in other areas of the business, for example,
their going concern assessment.
We also involved our valuation and modelling specialists to assess subjective
inputs such as the discount rates used in the models, perform sensitivity
analyses of the model outputs to changes in inputs, and to assess the logical
integrity of the models.
We have served as the Company’s auditor since 2010.
/s/ Ernst & Young LLP
Guernsey, Channel Islands
March 29, 2022
72 Burford Capital Annual Report 2021
Report of independent registered public accounting firm
To the Board of Directors and Shareholders of Burford Capital Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Burford Capital Limited (the
Company) as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income, changes
in equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and
2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31,
2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework), and our report dated March 29, 2022 expressed an adverse opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of capital provision assets
Description of the Matter
At December 31, 2021, the Company’s reported capital provision assets totaled
$2,900 million. For the year ended December 31, 2021, the Company recognized
net fair value movements on capital provision assets of $32 million. As
discussed in Notes 2 and 6 to the consolidated financial statements, capital
provision assets are held at fair value, with changes in fair value recorded
through profit or loss. Fair value movements are recognized in accordance with
the Company’s valuation policy, which relies on objective events in the
litigation process to drive changes in the capital provision asset valuations.
Auditing the valuation of the capital provision assets was judgmental and
complex as there is uncertainty in the assessment of fair valuation of these
illiquid assets. The uncertainty of the fair value for each asset was due to the
application of the fixed valuation ranges for the occurrence of objective events
as set out in the Company’s valuation policy. The Company’s valuation policy
Burford Capital Annual Report 2021 73
assigned valuation changes in fixed ranges based on the nature of the objective
event and estimated remaining litigation risk. Judgment was applied in
ensuring the appropriate valuation ranges were applied to each case and in
selecting where in the range any single asset valuation change should be
determined, and whether those ranges remain appropriate based on the
Company’s capital provision asset realization history.
To test the fair value of capital provision assets, we performed audit
procedures that included, among others, involvement of our valuation
specialists to assist in evaluating the valuation methodology applied,
independent research of information in the public domain to evaluate the
completeness of objective events considered in the valuation process,
involvement of our internal law specialists to assist in inspection of an
independent legal counsel report covering a review of the status of a capital
provision asset selected by us, assessment of the application of the valuation
policy to a sample of capital provision assets and consideration of any relevant
secondary market trading.
To assess the continued appropriateness of the valuation ranges in the
Company’s valuation policy on a portfolio basis, among other procedures, we,
with the support of our valuation and modelling specialists, compiled a
statistical analysis of historical realizations. We also compared actual proceeds
received by the Company from realizations with the carrying amount of the
capital provision asset immediately prior to conclusion to assess the
appropriateness of fair value adjustments within the specific categories of the
Company’s valuation policy.
At December 31, 2021, the Company’s reported goodwill was $134 million. As
discussed in Notes 2 and 15 of the consolidated financial statements, goodwill
is tested for impairment at least annually at the reporting unit level.
Auditing management’s annual goodwill impairment assessment was complex
and judgmental due to the significant estimates of future cash flows from the
Company’s capital provision asset portfolio in a value-in-use scenario. The
models used by management in their assessment require the use of
assumptions over subjective inputs which could be affected by future economic
and market conditions, including the returns from the realization proceeds
from concluded capital provision assets, timing of realizations, the timing and
level of future commitments and deployment of funds into new capital
provision assets, and the application of an appropriate discount rate.
To test the estimated value-in-use of the Company’s reporting units, we
performed audit procedures that included, among others, assessing the
methodologies, testing the significant assumptions discussed above and testing
the accuracy and completeness of the underlying data used by the Company in
its assessment. For example, we assessed the mathematical accuracy of the
model and evaluated the cash flow projections and inputs used in management’s
value-in use model by comparing to the Company’s historical data over
realizations, commitments and deployment rates, and management’s forecasts
used in other areas of the business, for example, their going concern assessment.
We also involved our valuation and modelling specialists to assess subjective
inputs such as the discount rates used in the models, perform sensitivity
analyses of the model outputs to changes in inputs, and to assess the logical
integrity of the models.
How We Addressed the Matter in
Our Audit
Goodwill impairment assessment
Description of the Matter
How We Addressed the Matter in
Our Audit
74 Burford Capital Annual Report 2021
Reporting Required Under Guernsey Law
In accordance with the applicable company law of the Bailiwick of Guernsey, the place of incorporation of the
Company, in our opinion, the consolidated financial statements also give a true and fair view of the state of the
Company’s affairs as at December 31, 2021 and of the Company’s result for the year then ended, and have been
properly prepared in accordance with the requirements of the Companies (Guernsey) Law 2008.
We have served as the Company’s auditor since 2010.
/s/ Ernst & Young LLP
Guernsey, Channel Islands
March 29, 2022
Burford Capital Annual Report 2021 75
Report of independent registered public accounting firm
To the Board of Directors and Shareholders of Burford Capital Limited
Opinion on Internal Control over Financial Reporting
We have audited Burford Capital Limited’s internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the effect of the material
weaknesses described below on the achievement of the objectives of the control criteria, Burford Capital Limited (the
Company) has not maintained effective internal control over financial reporting as of December 31, 2021, based on the
COSO criteria.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis. The following material weaknesses have been
identified and included in management’s assessment. Management has identified material weaknesses in controls
related to the completeness and accuracy of the information produced by the Company and the level of precision and
documentation around its management review controls.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated statements of financial position of the Company as of December 31, 2021 and 2020, and the
related consolidated statements of comprehensive income, changes in equity and cash flows for each of the three years
in the period ended December 31, 2021, and the related notes. These material weaknesses were considered in
determining the nature, timing and extent of audit tests applied in our audit of the 2021 consolidated financial
statements, and this report does not affect our report dated March 29, 2022 which expressed an unqualified opinion
thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting, and for
its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the US federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal
control over financial reporting includes the policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company’s assets that could have a material effect on the financial statements.
76 Burford Capital Annual Report 2021
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Report of independent registered public accounting firm
continued
/s/ Ernst & Young LLP
Guernsey, Channel Islands
March 29, 2022
Burford Capital Annual Report 2021 77
Consolidated statements of comprehensive income
for the years ended December 31, 2021, 2020 and 2019
(Dollars in Thousands, Except Share Data)
Income
Capital provision income
Asset management income
Insurance income
Services income
Marketable securities income and bank interest
Unrealized gain/(loss) relating to third-party interests in capital provision assets
Total income
Operating expenses
Compensation and benefits:
Salaries and benefits
Annual incentive compensation
Equity compensation
Legacy asset recovery incentive compensation including accruals
Long-term incentive compensation including accruals
General, administrative and other
Case-related expenditures ineligible for inclusion in asset cost
Equity and listing related
Amortization of intangible asset
Total operating expenses
Income from operations
Other (expense)/income
Finance costs
Loss on debt buyback
Foreign currency transactions (losses)/gains
Total other expense
(Loss)/income before income taxes
Benefit from (provision for) income taxes
Net (loss)/income
Net income attributable to non-controlling interests
Net (loss)/income attributable to ordinary shares
Net (loss)/income per share:
Basic
Diluted
Weighted-average shares outstanding:
Basic
Diluted
Net (loss)/income
Other comprehensive loss
Change in Foreign currency translation adjustment
Notes
2021
2020
2019
6
8
9
11
14
4
127,549
14,396
5,143
1,177
1,865
2,028
152,158
(34,333)
(22,145)
(9,272)
(36,364)
(7,942)
(30,467)
(5,300)
-
-
(145,823)
340,103
15,106
1,781
804
380
947
359,121
(31,483)
(22,772)
(5,281)
-
(18,125)
(21,468)
(4,841)
(7,907)
(8,703)
(120,580)
409,156
15,160
3,545
2,133
6,676
(57,500)
379,170
(25,231)
(24,503)
(4,519)
-
(33,496)
(22,447)
(11,246)
(1,754)
(9,495)
(132,691)
6,335
238,541
246,479
(58,647)
(1,649)
(5,482)
(65,778)
(39,048)
-
10,746
(28,302)
(38,747)
-
1,956
(36,791)
(59,443)
210,239
209,688
3,015
(56,428)
15,638
(72,066)
(36,937)
173,302
8,187
165,115
(13,417)
196,271
15,309
180,962
21 $
21 $
(0.33) $
(0.33) $
0.75 $
0.75 $
0.83
0.83
21
21
219,049,877
219,699,459
218,919,822
218,919,822
218,649,877
219,061,999
(72,066)
165,115
180,962
(2,443)
(10,206)
(17,525)
Total comprehensive (loss)/income
(74,509)
154,909
163,437
See accompanying notes to consolidated financial statements.
78 Burford Capital Annual Report 2021
Consolidated statements of financial position
at December 31, 2021 and 2020
(Dollars in Thousands, Except Share Data)
Assets
Cash and cash equivalents
Marketable securities
Other assets
Due from settlement of capital provision assets
Capital provision assets
Property and equipment
Goodwill & intangible asset
Deferred tax asset
Total assets
Liabilities
Debt interest payable
Other liabilities
Debt payable
Financial liabilities related to third-party interests in capital provision assets
Deferred tax liability
Total liabilities
Commitments and contingencies (see note 22)
Shareholders' equity
Ordinary shares no par value: unlimited shares authorized and 219,049,877 shares issued and
outstanding at December 31, 2021 and 2020, respectively
Additional paid-in capital
Accumulated other comprehensive income
Retained earnings
Total shareholders' equity attributable to Burford Capital Limited
Non-controlling interest in consolidated subsidiaries
Total shareholders' equity
Total liabilities and shareholders' equity
For the year ended December 31,
2020
2021
11
12
7
6
10
15
4
14
13
14
4
19
180,255
175,336
35,173
86,311
2,900,465
13,069
134,019
78
3,524,706
13,918
126,057
1,022,557
398,595
22,889
1,584,016
322,085
16,594
34,371
30,708
2,564,742
15,225
134,032
256
3,118,013
9,556
109,747
667,814
400,660
24,742
1,212,519
598,813
26,366
4,108
922,503
1,551,790
388,900
1,940,690
3,524,706
598,813
22,529
6,551
1,034,319
1,662,212
243,282
1,905,494
3,118,013
See accompanying notes to consolidated financial statements.
The financial statements on pages 78 to 82 were approved by the Board of Directors on March 29, 2022, and were signed on its behalf by:
Charles Parkinson
Director
March 29, 2022
Burford Capital Annual Report 2021 79
Consolidated statements of cash flows
for the years ended December 31, 2021, 2020 and 2019
(Dollars in Thousands, Except Share Data)
Cash flows from operating activities:
(Loss)/profit for the year after taxation
Adjustments to reconcile profit for the year after taxation to net cash provided by/(used
in) operating activities:
Changes in working capital and non-cash items:
Income on capital provision assets
Interest and other income from capital provision assets
Loss/(income) on equity securities
Asset recovery fee for services income
Net realized gains on derivative financial assets and liabilities
Loss/(income) on marketable securities
Loss on financial liabilities at fair value through profit or loss
Decrease/(increase) in other assets
Increase/(decrease) in other liabilities
Increase in payable for capital provision assets
Amortization and depreciation of debt issuance costs, intangible assets and property, plant
and equipment
Impairment
Right-of-use assets and associated lease liability
Deferred tax expense/(benefit)
Stock-based compensation
Other non-cash including exchange rate movement
Proceeds from capital provision assets
Net (funding)/proceeds from financial liabilities at fair value through profit or loss
Net proceeds from/(paid) to due from/to broker for financial liabilities at fair value
through profit or loss
Proceeds from equity security
Proceeds from asset recovery fee for services
Net decrease/(increase) on investment subparticipations
Net decrease/(increase) on financial liability to third-party investment
Net cash provided by/(used in) operating activities before funding of capital provision
assets and net (funding of)/proceeds from marketable securities
Funding of capital provision assets and net (funding of)/proceeds from marketable
securities:
Net proceeds/(funding) of marketable securities
New funding of capital provision assets
Net cash provided by/(used in) operating activities
Cash flows from investing activities:
Purchases of property and equipment
Net cash provided by/(used in) investing activities
Cash flows from financing activities:
Acquisition of shares to meet share-based payment obligations
Issue of debt
Issue expenses - debt issued
Redemption of debt
Dividends paid on ordinary shares
Net proceeds from financial liabilities related to third party interests in capital provision
assets
Third-party net capital contribution
Net cash provided by/(used in) financing activities
Notes
2021
2020
2019
(56,428)
173,302
196,271
6
6
6
(131,819)
(160)
-
(1,177)
-
1,567
-
(2,330)
22,598
(256)
3,193
500
(193)
(1,129)
8,823
8,002
396,415
-
-
-
2,386
-
(2,065)
(343,393)
(199)
22
(804)
-
1,106
4,779
(9,846)
21,664
220
10,689
-
(1,647)
34,502
5,328
(7,540)
557,913
(96,272)
(51,401)
31,374
1,581
-
(784)
(428,192)
1,213
(1,169)
(2,133)
(2,846)
137
20,872
3,777
32,418
36
12,602
1,000
(463)
9,405
4,519
(325)
392,606
(42,200)
38,734
-
1,123
-
57,500
247,927
330,594
294,885
11
6
(160,360)
(672,931)
(585,364)
20,376
(297,143)
53,827
3,346
(571,786)
(273,555)
(285)
(285)
(360)
(360)
(3,398)
(3,398)
14
(3,686)
400,000
(8,742)
(33,929)
(41,050)
-
132,236
444,829
-
-
-
(4,964)
-
-
(293)
(5,257)
-
-
-
-
(28,424)
100,000
83,119
154,695
Net increase/(decrease) in cash and cash equivalents and restricted cash
(140,820)
48,210
(122,258)
80 Burford Capital Annual Report 2021
Consolidated statements of cash flows
continued
Reconciliation of net cash flow to movements in cash and
cash equivalents and restricted cash
Cash and cash equivalents and restricted cash at beginning of year (1)
Increase/(decrease) in cash and cash equivalents and restricted cash (1)
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents and restricted cash at end of year (1)
2021
2020
322,085
(140,820)
(1,010)
180,255
273,403
48,210
472
322,085
2019
395,462
(122,258)
199
273,403
(1)
(1)
Inclusive of restricted cash previously disclosed as Due from broker in 2019. This change is only respective to 2019.
Reconciliation of cash and cash equivalents and restricted
cash to the consolidated statements of financial position
Cash and cash equivalents
Restricted cash
Total cash and cash equivalents and restricted cash
Supplemental disclosure
Cash received from interest and dividend income
Cash paid for debt interest
Cash paid for income taxes
Assets received in kind(2)
Contributions paid in kind (additions)(2)
Initial recognition of ASC 842 operating leases ROU asset
Initial recognition of ASC 842 operating leases ROU obligation
2021
180,255
-
180,255
2020
322,085
-
322,085
2019
178,177
95,226
273,403
2021
3,706
(51,270)
(1,305)
3,290
1,034
-
-
2020
1,489
(37,890)
(10,979)
-
-
-
-
2019
6,849
(37,568)
(694)
29,645
-
5,675
6,780
(2)
A consolidated entity, in which Burford had a limited partner interest, liquidated during the period, and distributed in-kind a capital
provision asset ($3,290,000), which is held directly by Burford ($1,034,000) and other limited partners ($2,256,000) of the liquidated
entity.
See accompanying notes to consolidated financial statements.
Burford Capital Annual Report 2021 81
Consolidated statements of changes in equity
for the years ended December 31, 2021, 2020 and 2019
(Dollars in Thousands, Except Share Data)
Ordinary
shares -
Number Ordinary
of shares
shares
219,049,877 598,813
-
-
Accumulated
other
Additional
paid-in
capital earnings
22,529
-
Total
Retained comprehensive Capital Limited Non-controlling shareholders’
equity
1,905,494
(56,428)
interests
243,282
15,638
1,662,212
(72,066)
1,034,319
(72,066)
income (loss)
6,551
-
Total Burford
Equity
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,686)
1,103
(2,852)
-
-
(1,552)
2,852
9,272
-
-
(41,050)
-
-
(2,443)
-
-
-
-
-
-
(2,443)
(3,686)
(449)
-
9,272
(41,050)
-
-
-
-
-
-
(2,443)
(3,686)
(449)
-
9,272
(41,050)
-
129,980
129,980
219,049,877 598,813
26,366
922,503
4,108
1,551,790
388,900
1,940,690
Ordinary
shares -
Number Ordinary
of shares
shares
218,649,877 596,454
-
-
Additional
paid-in
capital
20,857
-
Accumulated
other
Total
Retained comprehensive Capital Limited Non-controlling shareholders’
earnings
equity
1,737,362
867,907
173,302
165,115
interests
235,387
8,187
1,501,975
165,115
16,757
-
income (loss)
Total Burford
Equity
-
400,000
-
2,359
-
-
-
-
-
-
-
-
-
-
-
-
(2,359)
2,265
(3,516)
5,282
-
-
-
-
(2,219)
3,516
-
(10,206)
-
-
-
-
-
-
(10,206)
2,359
(2,359)
46
-
5,282
-
-
-
-
-
-
-
(292)
(10,206)
2,359
(2,359)
46
-
5,282
(292)
219,049,877 598,813
22,529
1,034,319
6,551
1,662,212
243,282
1,905,494
At January 1, 2021
Net loss
Foreign currency
translation adjustment
Shares purchased by the
trust
Shares distributed by the
trust
Transfer LTIP on vesting
Share-based compensation
(note 20)
Dividends paid
Net contributions from
third parties
Balance at December 31,
2021
At January 1, 2020
Net income
Foreign currency
translation adjustment
Issuance of ordinary shares
Shares purchased by the
trust
Shares distributed by the
trust
Transfer LTIP on vesting
Share-based compensation
(note 20)
Net distributions to third
parties
Balance at December 31,
2020
Ordinary
shares -
Number Ordinary
of shares
shares
218,649,877 596,454
Accumulated
other
Additional
Total
paid-in Retained comprehensive Capital Limited Non-controlling shareholders’
capital earnings
equity
1,500,113
16,338
interests
136,959
income (loss)
Total Burford
1,363,154
716,080
Equity
34,282
-
-
218,649,877 596,454
-
-
-
16,338
-
(711)
715,369
180,962
-
34,282
-
(711)
1,362,443
180,962
-
136,959
15,309
(711)
1,499,402
196,271
-
-
-
-
-
-
-
-
-
-
(17,525)
(17,525)
4,519
-
-
(28,424)
-
-
-
-
-
4,519
(28,424)
-
-
-
(17,525)
4,519
(28,424)
-
83,119
83,119
218,649,877 596,454
20,857
867,907
16,757
1,501,975
235,387
1,737,362
At January 1, 2019
Cumulative-effect
adjustment upon adoption of
ASU 2016 - 02
Restated at January 1, 2019
Net income
Foreign currency translation
adjustment
Share-based compensation
(note 20)
Dividends paid
Net contributions from third
parties
Balance at December 31,
2019
See accompanying note to consolidated financial statements.
82 Burford Capital Annual Report 2021
Notes to the consolidated financial statements
1. Organization
Burford Capital Limited (the “Company”) and its consolidated subsidiaries (collectively, the “Group”) provide legal
finance products and services, comprising (i) core legal finance, (ii) complex strategies and (iii) post-settlement
finance, and are engaged in asset management business.
The Company was incorporated as a company limited by shares under the Guernsey Companies Law on September 11,
2009. The Company has a single class of ordinary shares, which commenced trading on AIM in October 2009 and on the
NYSE in October 2020, in each case, under the symbol “BUR”. The Company’s subsidiaries have issued bonds traded on
the Main Market of the London Stock Exchange.
2. Summary of significant accounting policies
Basis of presentation
The consolidated financial statements have been prepared in accordance with US GAAP. The consolidated financial
statements include the accounts of (i) the Company, (ii) its wholly owned or majority-owned subsidiaries, (iii) the
consolidated entities that are considered to be variable interest entities (VIEs) and for which the Company is
considered the primary beneficiary and (iv) certain entities which are not considered VIEs but which the Company
controls through a majority voting interest.
Use of estimates
The preparation of the consolidated financial statements requires management to make estimates that affect the
reported amounts of assets and liabilities at the date of the consolidated financial statements, the disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of
revenues and expenses during the reporting periods. Such estimates include, among other things, the valuation of
capital provision assets and other financial instruments, the measurement of deferred tax balances (including valuation
allowances) and the accounting for goodwill. Actual results could differ from those estimates, and such differences
could be material.
Consolidation
In connection with investment funds and other related entities where the Group does not own 100% of the relevant
entity, the Group makes judgments about whether it is required to consolidate such entities by applying the factors set
forth in US GAAP for VIEs or voting interest entities under ASC 810 Consolidation.
VIEs are entities that, by design, either (i) lack sufficient equity to permit the entity to finance its activities without
additional subordinated financial support from other parties or (ii) have equity investors that (A) do not have the ability
to make significant decisions relating to the entity’s operations through voting rights, (B) do not have the obligation to
absorb the expected losses or (C) do not have the right to receive the residual returns of the entity, or (iii) have equity
investors’ voting rights that are not proportional to the economics, and substantially all of the activities of the entity
either involve or are conducted on behalf of an investor that has disproportionately few voting rights. An entity is
deemed to be the primary beneficiary of the VIE if such entity has both (i) the power to direct the activities that most
significantly impact the VIE’s economic performance and (ii) the right to receive benefits from the VIE or the obligation
to absorb losses of the VIE that could be significant to the VIE.
In determining whether the Group is the primary beneficiary of a VIE, the Group considers both qualitative and
quantitative factors regarding the nature, size and form of its involvement with the VIE, such as its role establishing
the VIE and its ongoing rights and responsibilities, the design of the VIE, its economic interests, servicing fees and
servicing responsibilities and certain other factors. The Group performs ongoing reassessments to evaluate whether
changes in the entity’s capital structure or changes in the nature of its involvement with the entity result in a change
to the VIE designation or a change to its consolidation conclusion.
The most significant judgments relate to the assessment of the Group’s exposure or rights to variable returns in the
BOF-C, the Strategic Value Fund and Colorado. The Group has assessed that its economic interest in the income
generated from BOF-C and its investment as a limited partner in the Strategic Value Fund, coupled with its power over
the relevant activities as the fund manager, require the consolidation of BOF-C and the Strategic Value Fund in the
consolidated financial statements. Similarly, the Group has assessed that its shareholding in Colorado, coupled with its
Burford Capital Annual Report 2021 83
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
power over the relevant activities of Colorado through contractual agreements, requires the consolidation of Colorado
in the consolidated financial statements.
The Group is deemed to have a controlling financial interest in VIEs in which it is the primary beneficiary and in other
entities in which it owns more than 50% of the outstanding voting shares and other shareholders do not have
substantive rights to participate in management.
For entities the Group controls but does not wholly own, the Group generally records a non-controlling interest within
shareholders’ equity for the portion of the entity’s equity attributed to the non-controlling ownership interests.
Accordingly, third-party share of net income or losses relating to non-controlling interests in consolidated entities is
treated as a reduction or increase, respectively, of net income in the consolidated statements of comprehensive
income. With respect to Colorado, an entity the Group controls but does not wholly own, the Group records a financial
liability within financial liabilities related to third-party interests in capital provision assets for the portion of the
entity’s equity held by third parties. The third-party share of income or losses is included in income/(expense) relating
to third-party interests in capital provision assets in the consolidated statements of comprehensive income. All
significant intercompany balances, transactions and unrealized gains and losses on such transactions are eliminated in
consolidation.
COVID - 19 and global economic market conditions
The Covid - 19 pandemic and restrictions on certain non-essential businesses have caused disruption in the United States
and global economies. Although an economic recovery is partially underway, it continues to be gradual, uneven and
characterized by meaningful dispersion across sectors and regions. The estimates and assumptions underlying the
consolidated financial statements are based on the information available at December 31, 2021, including judgments
about the financial market and economic conditions which may change over time.
Cash and cash equivalents
The Group considers all highly liquid short-term investments with original maturities of three months or less when
purchased to be cash equivalents. Cash and cash equivalents include funds held by depository institutions, money
market funds and US Treasury securities with original maturities of three months or less when purchased. Interest
income from cash and cash equivalents is recorded in marketable securities income in the consolidated statements of
comprehensive income. The carrying values of the money market funds and US Treasury securities were $21 million and
$5 million at December 31, 2021 and 2020, respectively, which represent their fair values due to their short-term
nature and are categorized as Level 1 within the fair value hierarchy. Substantially all of the Group’s cash on deposit is
in interest bearing accounts with major financial institutions that exceed insured limits.
Marketable securities, at fair value
Marketable securities include US Treasury bills with original maturities greater than three months when purchased and
corporate bonds, mutual funds and asset-backed securities. Marketable securities are recorded at fair value. Interest
income on marketable securities is included in the overall change in fair value which is recognized in marketable
securities income in the consolidated statements of comprehensive income.
Fair value of financial instruments
The Group’s capital provision assets meet the definition of a financial instrument under ASC 825 Financial Instruments.
Single case, portfolio, portfolio with equity risk, and legal risk management capital provision assets meet the definition
of a derivative instrument under ASC 815 Derivatives and hedging and are accounted for at fair value.
The Group has elected the fair value option for the Group’s equity method investments, marketable securities, due
from settlement of capital provision assets and capital provision asset subparticipations. Such election is irrevocable
and is applied to financial instruments on an individual basis at initial recognition.
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date under current market conditions.
Except for the Group’s debt obligations, financial instruments are generally recorded at fair value or at amounts, the
carrying values of which approximate fair value.
84 Burford Capital Annual Report 2021
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
Fair value hierarchy
US GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price
observability used in measuring financial instruments at fair value. Market price observability is affected by a number
of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the
state of the marketplace, including the existence and transparency of transactions between market participants.
Financial instruments with readily available quoted prices in active markets generally will have a higher degree of
market price observability and a lesser degree of judgment used in measuring fair value.
Financial instruments measured and reported at fair value are classified and disclosed based on the observability of
inputs used in the determination of fair values as follows:
▪ Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can
access at the measurement date
▪ Level 2—inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly
▪ Level 3—unobservable inputs for the asset or liability
All transfers into and out of these levels are recognized as if they have taken place at the beginning of each reporting
period.
Valuation processes
The Group’s senior professionals are responsible for developing the policies and procedures for fair value measurement
of assets and liabilities. Following origination and at each reporting date, the movements in the values of assets and
liabilities are required to be reassessed in accordance with the Group’s accounting policies. For this analysis, the
reasonableness of material estimates and assumptions underlying the valuation is discussed and the major inputs
applied are verified by comparing the information in the valuation computation to contracts, asset status and progress
information and other relevant documents.
Valuation methodology for Level 1 investments
Level 1 assets and liabilities are comprised of listed instruments, including equities, fixed income securities,
investment funds and financial liabilities at fair value through profit or loss. All Level 1 assets and liabilities are valued
at the quoted market price at the reporting date.
Valuation methodology for Level 2 investments
Level 2 assets are comprised of debt and equity securities that are not actively traded and are valued at the last
quoted or traded price at the reporting date, provided there is evidence that the price is not assessed as significantly
stale so as to warrant a Level 3 classification.
Valuation methodology for Level 3 investments
Fair value represents the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an
orderly transaction between market participants at the measurement date.
The methods and procedures to determine fair value of assets and liabilities may include, among others, (i) obtaining
information provided by third parties when available, (ii) obtaining valuation-related information from the issuers or
counterparties (or their advisors), (iii) performing comparisons of comparable or similar assets, (iv) calculating the
present value of future cash flows, (v) assessing other analytical data and information relating to the asset that is an
indication of value, (vi) reviewing the amounts funded in the assets, (vii) evaluating financial information provided by
the asset counterparties and (viii) entering into a market transaction with an arm’s-length counterparty.
The material estimates and assumptions used in the analyses of fair value include the status and risk profile of the risks
underlying the asset, the timing and expected amount of cash flows based on the asset structure and agreement, the
appropriateness of any discount rates used and, in some cases, the timing of, and estimated minimum proceeds from, a
favorable outcome. Significant judgment and estimation go into the assumptions which underlie the analyses, and the
Burford Capital Annual Report 2021 85
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
actual values realized with respect to assets could be materially different from values obtained based on the use of
those estimates.
The Group operates under a valuation policy that relies on objective events to drive valuation changes. For the vast
majority of the Group’s capital provision assets, the objective events considered under the valuation policy relate to
the litigation process. When the objective event in question is a court ruling, the Group discounts the potential impact
of that ruling, commensurate with the remaining litigation risk. The policy assigns valuation changes in fixed ranges
based on, among other things:
▪ A significant positive ruling or other objective event but where there is not yet a trial court judgment
▪ A favorable trial court judgment
▪ A favorable judgment on the first appeal
▪ The exhaustion of as-of-right appeals
▪
▪ An objective negative event at various stages in a litigation
In a small number of instances, the Group has the benefit of a secondary sale of a portion of an asset. When that
occurs, the market evidence is factored into the valuation process and, the more robust the market testing of value is,
the more weight is accorded to the market price.
In arbitration cases, where there are limited opportunities for appeal, issuance of a tribunal award
Third-party interests in capital provision assets
Third-party interests in capital provision assets include the financial liability relating to the third-party interests in
Colorado as well as financial liabilities relating to third-party interests resulting from capital provision asset
subparticipations recognized at fair value. Colorado holds a single financial asset and has no broader business activity.
Accordingly, it does not meet the definition of a business and the third-party interest in the entity is accounted for as a
collateralized borrowing rather than a non-controlling interest in shareholders’ equity.
Amounts included in the consolidated statements of financial position represent the fair value of the third-parties’
interests in the related capital provision assets, and the amounts included in the consolidated statements of
comprehensive income represent the third parties’ share of any gain and losses for the reporting period.
Non-controlling interests
For entities that are consolidated, but not wholly owned, a portion of the income or loss and corresponding equity is
allocated to owners other than the Company. The aggregate of the income or loss and corresponding equity that is not
owned by the Company is included in non-controlling interests in the consolidated financial statements. Non-controlling
interests also include ownership interests in certain consolidated funds and VIEs. Non-controlling interests are
presented as a separate component of shareholders’ equity in the consolidated statements of financial position.
The primary components of non-controlling interests are separately presented in the consolidated statements of
changes in equity to clearly distinguish the interest in the Group and other ownership interests in the consolidated
entities. Net income includes the net income attributable to the holders of non-controlling interests in the consolidated
statements of comprehensive income. Profits and losses are allocated to non-controlling interests in proportion to their
relative ownership interests regardless of their basis. Non-controlling interests exclude the third-party interests in
Colorado as it represents a consolidated entity that holds a single financial asset and no broader business activity.
Asset management income
Asset management income is derived from the governing agreements in place with various funds under management.
The rate or amount at which fees are charged, the basis on which such fees are calculated, and the timing of payment
vary across funds and, as to a particular fund, may also vary across investment options available to underlying investors
in, or members of, the fund. Management fees are generally based on an agreed percentage of a fund’s commitments
and amounts committed or deployed depending on the fund agreements. Management fees are recognized over time as
the services are provided. Performance fees are earned when contractually agreed performance levels are exceeded
within specified performance measurement periods. Performance fees are recognized when a reliable estimate of the
86 Burford Capital Annual Report 2021
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
performance fee can be made, and it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur.
Insurance activities
The Group (i) acts as an administrator in the sale of legal expenses insurance policies issued in the name of Great Lakes
Reinsurance (UK) plc, a subsidiary of MunichRe, under a binding authority agreement, and (ii) underwrites legal
expenses insurance policies through its wholly owned Guernsey insurer, Burford Worldwide Insurance Limited.
Insurance administration
Income earned from acting as an insurance administrator represents commissions receivable, which are calculated
based on the premium earned, net of reinsurance and insurance premium tax, less an allowance for claims, sales
commissions, fees and the other direct insurance related costs, such as Financial Services Compensation Scheme Levy.
The payment of premiums is often contingent on a case being won or settled, and the Group recognizes the associated
income only at this point, while a deduction is made for claims estimated to be paid on all policies in force. This
income is separately identified as “Insurance administrator commission” in note 9 (“Liabilities and income from
insurance contracts”).
Insurance underwriting
Insurance policies written by Burford Worldwide Insurance Limited are subject to contractual reinsurance arrangements
that transfer a significant portion of the insurance risk to the reinsurers with Burford Worldwide Insurance Limited
retaining a portion of the insurance risk of each contract. Contracts are typically written with an upfront premium
payable and may also include a conditional premium. The payment of conditional premiums is often contingent on a
case being won or settled, and the Group recognizes the associated conditional premium amount only at this point.
Premiums written relate to insurance business incepted during the reporting period. Full account is taken of premiums
receivable and reinsurance premiums payable during the reporting period. Unearned premiums represent the
proportion of premiums written during the reporting period that relate to unexpired terms of policies in force at the
reporting date, calculated on a time apportionment basis.
Provision is made for all outstanding loss reserves as notified by the insured. The level of the provision is determined
on the basis of the information available, including potential loss claims which have been intimated to the Group,
experience of the development of similar claims and case law. While the Group considers that the provision for these
claims is fairly stated on the basis of the information currently available, the ultimate liability may vary as a result of
subsequent information and events and may result in adjustments to the amounts provided. Adjustments to the
amounts provided are reflected in the consolidated financial statements for the reporting period in which the
adjustments are made.
Claims are recorded in the reporting period in which they are incurred.
Leases
At the inception of any arrangement, the Group determines whether the arrangement is or contains a lease based on
the unique facts and circumstances present in the arrangement. Leases are recognized as a right-of-use asset and a
corresponding liability at the date at which the leased asset is available for use by the Group. The Group recognizes
lease liabilities measured at the present value of lease payments to be made over the lease term. In calculating the
present value, the Group uses its incremental borrowing rate at the lease commencement date as the interest rate
implicit in the lease is not readily determinable.
The lease agreements generally contain lease and non-lease components. Non-lease components primarily include
payments for maintenance and utilities. The Group combines fixed payments for non-lease components with its lease
payments and accounts for them together as a single lease component which increases the amount of its lease assets
and liabilities. Payments under the lease arrangements are primarily fixed. Variable rents, if any, are expensed as
incurred.
Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the consolidated
statements of comprehensive income over the period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s
Burford Capital Annual Report 2021 87
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
useful life and the lease term on a straight-line basis. The right-of-use asset and associated lease liability are
derecognized on the termination of a lease agreement.
The Group has elected to not recognize leases with an original term of one year or less on the consolidated statements
of financial position. The Group typically only includes an initial lease term in its assessment of a lease arrangement,
whereas options to renew a lease are not included in this assessment unless there is a reasonable certainty that the
lease will be renewed.
Right-of-use assets are included within property and equipment in the consolidated statements of financial position.
Shares held in employee benefit trust
The Company’s ordinary shares held by the Burford Capital Limited Employee Benefit Trust are held for the purposes of
employee equity-based compensation schemes. Such ordinary shares are deducted from shareholders’ equity. No gain
or loss is recognized on the purchase, sale, cancellation or issue of such ordinary shares and any consideration paid or
received is recognized directly in shareholders’ equity.
Compensation and benefits
Salaries and benefits
Salaries and benefits include base salaries and employee benefits.
Incentive compensation
Incentive compensation includes discretionary and non-discretionary annual bonuses that are generally accrued over
the related service period. Under certain non-discretionary arrangements, the Company may require that a portion of
the incentive compensation to be distributed to its employees be allocated as restricted stock units under the
Company’s equity compensation plan. Such equity-based awards are recorded as equity-based compensation expense
over the relevant service period once granted.
Equity compensation
Share-based compensation primarily consists of restricted stock units with service and market or performance
conditions. The fair value of these awards is estimated using the Monte-Carlo model at the grant date. The Group
recognizes stock compensation expense ratably over the relevant service period and accounts for forfeitures based on
its estimates. Forfeiture estimates are trued-up at the end of the vesting period in order to ensure that compensation
expense is recognized only for those awards that ultimately vest. In order to satisfy the vesting requirements, ordinary
shares (which are either repurchased on the open market or newly issued) are released to employees net of applicable
income tax withholding.
Legacy asset recovery incentive compensation including accruals and long-term incentive compensation including
accruals
Incentive compensation expenses and incentive compensation payables primarily consist of a portion of gains on capital
provision assets or performance fees earned from certain funds that are allocated to employees. Incentive
compensation amounts are generally not paid until the related gains on capital provision assets or performance fees has
been realized in cash by the Group. Incentive compensation amounts are recognized as the related fair value gains or
losses on capital provision assets or performance fees are recognized. Accordingly, incentive compensation amounts
can be reversed during periods when there is a decline in fair value or performance revenues that were previously
recognized.
Segment reporting
Management considers that there are two operating business segments and a corporate segment: (i) capital provision,
which comprises provision of capital to the legal industry or in connection with legal matters, both directly and through
investment in the Group’s managed funds; (ii) asset management and other services, which includes the provision of
services to the legal industry, including litigation insurance; and (iii) other corporate.
88 Burford Capital Annual Report 2021
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, which is measured at fair value on the acquisition date. Acquisition-related
costs are expensed as incurred and included in the consolidated statements of comprehensive income. When the Group
acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation
in accordance with the contractual terms, economic circumstances and pertinent conditions at the acquisition date.
Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date.
Subsequent changes in the fair value of contingent consideration classified as an asset or liability are reflected in the
consolidated statements of comprehensive income. Contingent consideration classified as equity is not remeasured and
its subsequent settlement is accounted for within equity.
Goodwill
Goodwill arises as a result of the acquisition of subsidiaries and represents the excess of the purchase consideration
over the fair value of the Group’s share of the assets acquired and the liabilities assumed on the acquisition date. After
initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purposes of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the
Group’s reporting units that are expected to benefit from the combination, irrespective of whether other assets or
liabilities of the acquiree are assigned to those units. The Group tests goodwill acquired in a business combination
annually for impairment.
Intangible asset
Intangible assets arise as a result of a business combination and are recognized at fair value on the acquisition date.
The Group had one intangible asset, which represented an assessment of the value of the acquiree’s future asset
management income and was fully amortized at December 31, 2020. See note 15 (“Goodwill and intangible asset”) for
additional information with respect to the Group’s intangible asset. The intangible asset was amortized to the
consolidated statements of comprehensive income on a straight-line basis over the period revenue was expected to be
earned.
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (the “functional currency”). The functional currency of
the Company, as determined in accordance with US GAAP, is the US dollar, because this is the currency that best
reflects the economic substance of the underlying events and circumstances of the Company. The consolidated
financial statements are presented in US dollars (the “presentation currency”).
Certain subsidiaries operate and prepare financial statements denominated in pounds sterling and euros. For the
purposes of preparing consolidated financial statements, those subsidiaries’ assets and liabilities are translated at
exchange rates prevailing at each applicable reporting date. Income and expense items are translated at average
exchange rates for the reporting period. Non-monetary items are measured using the exchange rate at the date of the
initial transaction.
Any exchange rate-related differences are recognized in other comprehensive income.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date
of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies, including
intragroup balances, are recognized in the consolidated statements of comprehensive income as part of the profit or
loss for the period. See note 6 (“Capital provision assets”) for additional information relating to the treatment of
capital provision assets.
Burford Capital Annual Report 2021 89
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
Since April 2016, certain intragroup balances have been considered as part of a net investment in a foreign operation.
Gains and losses on such balances are recognized in other comprehensive income, with a gain of $432,000 recognized
for the year ended December 31, 2021 (2020: gain of $1,120,000; 2019: gain of $1,125,000).
Bank interest income
Bank interest income is recognized on an accruals basis and included in marketable securities income and bank
interest.
Expenses
All expenses are accounted for on an accruals basis.
Finance costs
Finance costs represent interest and issue expenses of outstanding indebtedness calculated using the effective interest
rate method recognized in the consolidated statements of comprehensive income.
Loss on debt repurchases
Repurchases of debt issued by the Group are accounted for as an extinguishment of the debt issued. Loss on debt
repurchases represents a gain or loss arising from the difference between the amortized cost, and cost of repurchasing
the debt on the repurchase date is recognized in the consolidated statements of comprehensive income.
Income taxes
The Group computes income taxes using the asset and liability method, under which deferred income taxes are
recognized based on the differences between the carrying amounts and the respective tax bases of the Group’s assets
and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the periods in which the Group expects the temporary differences to reverse. The effect of a change in tax
rates on deferred taxes is recognized in income in the period that includes the enactment date.
The Group routinely evaluates the likelihood of realizing the benefit of its deferred tax assets and may record a
valuation allowance if, based on all available evidence, it determines that some portion of the tax benefit will not be
realized. In evaluating the Group’s ability to recover its deferred tax assets within the jurisdictions from which they
arise, the Group considers all available positive and negative evidence, including scheduled reversals of deferred tax
liabilities, projected future taxable income, tax-planning strategies and results of recent operations. If the Group
determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount,
the Group would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision
for income taxes.
The Group evaluates its exposures associated with its various tax filing positions and recognizes a tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the
relevant taxing authorities, including resolutions of any related appeals or litigation processes, based on the technical
merits of the Group’s tax filing position. The tax benefits recognized in the consolidated financial statements from a
tax filing position are measured based on the largest benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement. The Group adjusts its unrecognized tax benefit liability and income tax expense in the
period in which the uncertain tax position is effectively settled, the statute of limitations expires for the relevant
taxing authority to examine the tax position or when new information becomes available.
Interest and penalties related to income tax matters are recorded in other expenses in the consolidated statements of
comprehensive income. Accrued interest and penalties are included within the related tax balances on the
consolidated statements of financial position.
Dividends
Dividends paid during the period are recorded as a reduction to retained earnings in the consolidated statements of
changes in equity.
90 Burford Capital Annual Report 2021
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
Property and equipment
Property and equipment are recorded at cost less accumulated depreciation and provision for impairment. Depreciation
is provided to write off the cost less estimated residual value in equal instalments over the estimated useful lives of
the assets.
The table below sets forth the expected useful lives of the various assets:
Property and equipment
Right-of-use assets
Leasehold improvements
Fixtures, fitting and equipment
Computer hardware and software
Useful life
Life of lease
Life of lease
5 years
3 years
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the net sales
proceeds and the carrying amount of the asset and is recognized in income in the consolidated statements of
comprehensive income.
Prepayments and other payables
Prepayments and other payables are recognized at nominal value and are non-interest-bearing and are recorded within
other assets and other liabilities on the consolidated statement of financial position.
Shareholders’ equity
Ordinary shares are classified as equity in shareholders’ equity. Contingent shares are classified as equity in
shareholders’ equity, where contingent shares will be issued and converted to ordinary shares only after the specified
conditions have been satisfied. Additional paid-in capital includes the obligation for the issuance of ordinary shares to
the Group’s employees under the long-term incentive plan (“LTIP”). Incremental costs directly attributable to the
issuance of new ordinary shares are deducted from equity in shareholders’ equity.
Net income per ordinary share
The Group presents basic and diluted net income or loss per share for ordinary shares. Basic net income or loss per
ordinary share excludes potential dilution and is computed by dividing net income attributable to ordinary shares by
the weighted-average number of ordinary shares outstanding for the period. Diluted income or loss per ordinary share
reflects the potential dilution that could occur if ordinary shares were issued pursuant to the Group’s share-based
compensation awards. The potential dilution from awards of ordinary shares is computed using the treasury stock
method based on the average market value of ordinary shares during the period.
Recently issued or adopted accounting standards
There have been no recently issued or adopted accounting pronouncements that had a material impact on the
consolidated financial statements and related disclosures.
3. Supplemental cash flow data
The following tables set forth supplemental information with respect to the cash inflows and outflows for capital
provision-direct assets and capital provision-indirect assets for the years ended December 31, 2021, 2020 and 2019:
$ in thousands
For the year ended December 31, 2021
Proceeds
Decrease in payable for capital provision assets
New funding
Capital provision- Capital provision-
direct assets
338,098
(256)
(672,931)
indirect assets
58,317
-
-
Total
396,415
(256)
(672,931)
Burford Capital Annual Report 2021 91
Notes to the consolidated financial statements
continued
3. Supplemental cash flow data continued
$ in thousands
For the year ended December 31, 2020
Proceeds
Increase in payable for capital provision assets
New funding
$ in thousands
For the year ended December 31, 2019
Proceeds
Increase in payable for capital provision assets
New funding
Capital provision- Capital provision-
direct assets
354,884
220
(297,143)
indirect assets
203,029
-
-
Total
557,913
220
(297,143)
Capital provision- Capital provision-
direct assets
108,521
36
(347,630)
indirect assets
284,085
-
(224,156)
Total
392,606
36
(571,786)
Capital provision-direct assets represent those assets in which the Group has provided financing directly to a client or
to fund a principal position in a legal finance asset. BOF-C is included in capital provision-direct assets because the
Group does not invest any capital in BOF-C.
Capital provision-indirect assets represent those assets in which the Group’s capital is provided through a fund as a
limited partner contribution. At December 31, 2021 and 2020, capital provision-indirect assets consisted entirely of
assets held through the Strategic Value Fund.
4. Income taxes
The Company is incorporated in Guernsey and qualifies for exemption from income tax in Guernsey under the Income
Tax (Exempt Bodies) (Guernsey) Ordinance, 1989, as amended. This exemption is applied for annually and has been
granted for the year ended December 31, 2021.
In certain cases, a subsidiary of the Company may elect to make use of transaction structures that are subject to
income tax in a jurisdiction related to the capital provision asset. The Company’s subsidiaries in Ireland, Singapore, the
United Kingdom and the United States are subject to taxation in such jurisdictions as determined in accordance with
relevant tax legislation.
The table below sets forth domestic and foreign income (loss) before income taxes for the years ended December 31,
2021, 2020 and 2019:
($ in thousands)
Domestic
Foreign
Income (loss) before income taxes
2021
2020
15,035
(74,478)
(59,443)
22,711
187,528
210,239
2019
39,158
170,530
209,688
92 Burford Capital Annual Report 2021
4. Income taxes continued
The table below sets forth a reconciliation of the tax charge based on the domestic Guernsey statutory rate to the
effective income tax expense (benefit) on pre-tax income (loss) for the years ended December 31, 2021, 2020 and
2019:
Notes to the consolidated financial statements
continued
($ in thousands)
Statutory rate
Foreign rate differential
Compensation
Valuation allowance
Non-deductible interest
Withholding tax
Non-deductible taxes
Prior period adjustments
Impairment
Non-taxable Income
Other, net
(Benefit from)/provision for income taxes
2021
-
(9,433)
5,554
14,971
-
49
-
1,763
(39)
(15,541)
(339)
(3,015)
2020
-
41,362
1,451
(7,810)
-
238
415
(670)
955
-
996
36,937
2019
-
(3,604)
-
12,979
-
534
78
2,334
693
-
403
13,417
The table below sets forth an analysis for the foreign tax differential for the years ended December 31, 2021, 2020 and
2019:
($ in thousands)
US subsidiaries at statutory tax rate
Singapore subsidiaries at statutory tax rate
Irish subsidiaries at statutory tax rate
UK Subsidiaries at statutory tax rate
Other
Total
2021
2020
(23,703)
140
584
13,535
11
(9,433)
45,700
8
(936)
(3,410)
-
41,362
2019
(4,051)
(335)
2,588
(1,806)
-
(3,604)
The tables below set forth the (benefit from)/provision for income taxes for the years ended December 31, 2021, 2020
and 2019:
(S in thousands)
2021
2020
2019
Current
Domestic (Guernsey)
Foreign - US federal & state
Foreign - other
Total current (benefit from)/provision for income taxes
Deferred
Domestic (Guernsey)
Foreign - US federal & state
Foreign - other
Total deferred income tax (benefit from)/provision for
50
(984)
(952)
(1,886)
-
(2,753)
1,624
(1,129)
239
2,151
45
2,435
-
34,499
3
34,502
424
(83)
3,671
4,012
-
9,476
(71)
9,405
(Benefit from)/provision for income taxes
(3,015)
36,937
13,417
Burford Capital Annual Report 2021 93
Notes to the consolidated financial statements
continued
4. Income taxes continued
The tables below set forth the tax effect of temporary differences and carryforwards that comprise significant portions
of deferred tax assets and liabilities for the years ended December 31, 2021 and 2020:
($ in thousands)
Deferred tax assets:
Compensation and benefit accruals not currently deductible
Net operating loss carryforwards
Non-deductible and excess interest
Unrealized loss
Acquisition costs
Capital lease
Other
Total deferred tax assets
Deferred tax liabilities:
Compensation and benefit accruals not currently deductible
Depreciation and amortization
Goodwill
Unrealized gain
Total deferred tax liabilities
Net deferred tax position
Valuation allowance
Net deferred tax liabilities
2021
2020
8,602
3,177
17,237
6,530
515
164
1,003
37,228
40
(405)
(7,952)
(31,005)
(39,322)
(2,094)
(20,717)
(22,811)
6,945
1,164
4,605
1,469
567
836
948
16,534
-
(541)
(5,493)
(27,805)
(33,839)
(17,305)
(7,181)
(24,486)
The valuation allowances at December 31, 2021 and 2020, were primarily related to net operating losses and other
deferred tax assets of consolidated foreign subsidiaries.
At December 31, 2021, the Group had US federal net operating loss carryforwards of $21 million, which had an
indefinite carryforward period, US state net operating loss carryforwards of $31 million which will begin to expire in
fiscal 2038 and foreign net operating loss carryforwards of $8 million which have indefinite carryforward periods. Cash
taxes paid for the year were $1 million.
At December 31, 2021 and 2020, gross deferred tax assets were $37 million and $17 million, respectively. The Group
has recorded valuation allowances of $21 million and $7 million at December 31, 2021 and 2020, respectively, primarily
related to foreign and state net operating loss carryforwards and other deferred tax assets. The Group has performed
an assessment of positive and negative evidence, including the nature, frequency and severity of cumulative financial
reporting losses in recent years, the future reversal of existing temporary differences, predictability of future taxable
income exclusive of reversing temporary differences of the character necessary to realize the asset, relevant
carryforward periods, taxable income in carry-back years if carry-back is permitted under tax law, and prudent and
feasible tax planning strategies that would be implemented, if necessary, to protect against the loss of deferred tax
assets that would otherwise expire. Although realization is not assured, based on the Group’s assessment, the Group
has concluded that it is more likely than not that the remaining gross deferred tax assets will be realized and,
accordingly, no additional valuation allowance has been provided.
5. Segment reporting
Management considers that there are two operating business segments and a corporate segment: (i) capital provision,
which comprises provision of capital to the legal industry or in connection with legal matters, both directly and through
investment in the Group’s managed funds; (ii) asset management and other services, which includes the provision of
services to the legal industry, including litigation insurance; and (iii) other corporate.
The tables on the following pages set forth financial data for the Group’s reportable business segments for the years
ended December 31, 2021, 2020 and 2019:
94 Burford Capital Annual Report 2021
Notes to the consolidated financial statements
continued
5. Segment reporting continued
($ in thousands)
December 31, 2021
Capital provision income
Management fee income
Performance fee income
Income from BOF-C
Other services income
Income/(expense) relating to third-party interests in
capital provision assets
Total segment income*
Asset
Capital management and
provision
99,754
-
-
-
-
other services corporate
-
-
-
-
774
-
10,510
5,729
9,798
6,320
Other Burford-only
segments
99,754
10,510
5,729
9,798
7,094
Total Adjustment for
third-party
Total
interests(1) consolidated
127,549
8,667
5,729
-
8,185
27,795
(1,843)
-
(9,798)
1,091
-
99,754
-
32,357
-
774
-
132,885
2,028
19,273
2,028
152,158
Operating expenses
Total segment expenses
(87,420)
(87,420)
(33,280)
(33,280)
(21,488)
(21,488)
(142,188)
(142,188)
(3,635)
(3,635)
(145,823)
(145,823)
Income/(loss) from operations
12,334
(923)
(20,714)
(9,303)
15,638
6,335
Other expense
Finance costs
Loss on debt buyback
Foreign currency transactions gains/(losses), net
Loss before taxation
Benefit from (provision for) income taxes
Net loss after taxation
Net income attributable to non-controlling interests
Net loss
Change in foreign currency translation adjustments
Comprehensive loss per segment
*Includes the following revenue from contracts with
customers for Services transferred over time
(1)
(52,537)
(1,477)
-
(41,680)
11,060
(30,620)
-
(30,620)
-
(30,620)
(4,750)
(134)
(5,482)
(31,080)
(11,134)
(42,214)
-
(42,214)
(2,443)
(44,657)
(1,360)
(38)
-
(2,321)
3,089
768
-
768
-
768
32,357
(58,647)
(1,649)
(5,482)
(75,081)
3,015
(72,066)
-
(72,066)
(2,443)
(74,509)
32,357
-
-
-
15,638
-
15,638
(15,638)
-
-
-
(58,647)
(1,649)
(5,482)
(59,443)
3,015
(56,428)
(15,638)
(72,066)
(2,443)
(74,509)
32,357
(1) Adjusts for third-party interests in non-wholly owned consolidated entities which include BOF-C and the Strategic Value Fund, Colorado and several other
entities in which Burford holds investments and there is a third-party partner in or owner of those entities.
($ in thousands)
December 31, 2020
Capital provision income
Management fee income
Performance fee income
Income from BOF-C
Other services income
Unrealized gain/(loss) relating to third-party interests in
capital provision assets
Total segment income*
Operating expenses
Total segment expenses
Asset
Capital management and
provision
320,023
-
-
-
-
other services corporate
-
-
-
-
315
-
11,454
6,400
6,630
2,585
Other Burford-only
segments
320,023
11,454
6,400
6,630
2,900
Total Adjustment for
Total
third-party
interests(1) consolidated
340,103
8,706
6,400
-
2,965
20,080
(2,748)
-
(6,630)
65
-
320,023
(55,139)
(55,139)
-
27,069
-
315
-
347,407
(24,254)
(24,254)
(37,228)
(37,228)
(116,621)
(116,621)
947
11,714
(3,959)
(3,959)
947
359,121
-
(120,580)
(120,580)
Income/(loss) from operations
264,884
2,815
(36,913)
230,786
7,755
238,541
Other income (expense)
Finance costs
Foreign currency transactions gains/(losses), net
Income/(loss) before taxation
Income tax expense
Net income/(loss) after taxation
Net income attributable to non-controlling interests
Net income/(loss)
Change in foreign currency translation adjustments
Comprehensive income/(loss) per segment
*Includes the following revenue from contracts with
customers for Services transferred over time
(36,316)
-
228,568
(35,080)
193,488
-
193,488
-
193,488
-
-
2,815
(2,647)
168
-
168
-
168
(2,732)
10,314
(29,331)
790
(28,541)
-
(28,541)
(10,206)
(38,747)
(39,048)
10,314
202,052
(36,937)
165,115
-
165,115
(10,206)
154,909
-
432
8,187
-
8,187
(8,187)
-
-
-
(39,048)
10,746
210,239
(36,937)
173,302
(8,187)
165,115
(10,206)
154,909
-
27,069
-
27,069
-
27,069
(1) Adjusts for third-party interests in non-wholly owned consolidated entities which include BOF-C and the Strategic Value Fund, Colorado and several other
entities in which Burford holds investments and there is a third-party partner in or owner of those entities.
Burford Capital Annual Report 2021 95
Notes to the consolidated financial statements
continued
5. Segment reporting continued
($ in thousands)
December 31, 2019
Capital provision income
Management fee income
Performance fee income
Income from BOF-C
Other services income
Unrealized gain/(loss) relating to third-party interests in
capital provision assets
Total segment income**
Operating expenses
Total segment expenses
Asset
Capital management and
provision
316,823
-
-
-
-
other services corporate
-
-
-
-
6,070
-
18,399
594
7,137
5,678
Other Burford-only
segments
316,823
18,399
594
7,137
11,748
Total Adjustment for
third-party
Total
interests(1) consolidated
409,156
15,160
-
-
12,354
92,333
(3,239)
(594)
(7,137)
606
-
316,823
(72,252)
(72,252)
-
31,808
-
6,070
-
354,701
(57,500)
24,469
(57,500)
379,170
(23,704)
(23,704)
(27,635)
(27,635)
(123,591)
(123,591)
(9,100)
(9,100)
(132,691)
(132,691)
Income/(loss) from operations
244,571
8,104
(21,565)
231,110
15,369
246,479
Other income/(expense)
Finance costs
Foreign currency transactions gains (losses), net
Income/(loss) before taxation
Income tax expense
Net income/(loss) after taxation
Net income attributable to non-controlling interests
Net income/(loss)
Change in foreign currency translation adjustments
Comprehensive income/(loss) per segment
*Includes the following revenue from contracts with
customers for Services transferred over time
(36,423)
-
208,148
(10,826)
197,322
-
197,322
-
197,322
-
-
8,104
89
8,193
-
8,193
-
8,193
(2,324)
2,016
(21,873)
(2,680)
(24,553)
-
(24,553)
(17,525)
(42,078)
(38,747)
2,016
194,379
(13,417)
180,962
-
180,962
(17,525)
163,437
-
(60)
15,309
-
15,309
(15,309)
-
-
-
(38,747)
1,956
209,688
(13,417)
196,271
(15,309)
180,962
(17,525)
163,437
-
31,808
-
31,808
-
31,808
(1) Adjusts for third-party interests in non-wholly owned consolidated entities which includes BOF-C and the Strategic Value Fund, Colorado and several other
entities in which Burford holds investments and there is a third-party partner in or owner of those entities
The table below sets forth a reconciliation of total consolidated income to the total segment income and expenses for
the years ended December 31, 2021, 2020 and 2019:
($ in thousands)
For the year ended December 31, 2021
Reconciliation: Income
Total consolidated income
Adjustment for third-party interests
Total segment income
Reconciliation: Expense
Total consolidated expenses
Adjustment for third-party interests
Total segment expenses
For the year ended December 31, 2020
Reconciliation: Income
Total consolidated income
Adjustment for third-party interests
Total segment income
Reconciliation: Expense
Total consolidated expenses
Adjustment for third-party interests
Total segment expenses
For the year ended December 31, 2019
Reconciliation: Income
Total consolidated income
Adjustment for third-party interests
Total segment income
Reconciliation: Expense
Total consolidated expenses
Adjustment for third-party interests
Total segment expenses
96 Burford Capital Annual Report 2021
Capital
provision
129,577
(29,823)
99,754
(91,055)
3,635
(87,420)
341,050
(21,027)
320,023
(59,098)
3,959
(55,139)
351,656
(34,833)
316,823
(81,352)
9,100
(72,252)
Asset
management and
other services
20,716
11,641
32,357
(33,280)
-
(33,280)
17,691
9,378
27,069
(24,254)
-
(24,254)
20,838
10,970
31,808
(23,704)
-
(23,704)
Other
corporate
1,865
(1,091)
774
(21,488)
-
(21,488)
380
(65)
315
(37,228)
-
(37,228)
6,676
(606)
6,070
(27,635)
-
(27,635)
Total
segments
152,158
(19,273)
132,885
(145,823)
3,635
(142,188)
359,121
(11,714)
347,407
(120,580)
3,959
(116,621)
379,170
(24,469)
354,701
(132,691)
9,100
(123,591)
5. Segment reporting continued
The tables below set forth the Group’s assets and liabilities by reporting segment at December 31, 2021 and 2020:
Notes to the consolidated financial statements
continued
Asset
Capital management and
segments
other services corporate (Burford-only)
Other
Total
interests consolidated
Total Adjustment for
third-party
($ in thousands)
For the year ended December 31, 2021
Assets
Cash and cash equivalents
Marketable securities
Other assets
Due from settlement of capital provision assets
Capital provision assets
Property and equipment
Goodwill & intangible asset
Deferred tax asset
Total assets
Liabilities
Debt interest payable
Other liabilities
Bonds Payable
Capital provision asset subparticipations
Financial liabilities related to third-party interests in
capital provision assets
Deferred tax liability
Total liabilities
($ in thousands)
For the year ended December 31, 2020
Assets
Cash and cash equivalents
Marketable securities
Other assets
Due from settlement of capital provision assets
Capital provision assets
Property and equipment
Goodwill & intangible asset
Deferred tax asset
Total assets
Liabilities
Debt interest payable
Other liabilities
Debt issued
Capital provision asset subparticipations
Financial liabilities related to third-party interests in
capital provision assets
Deferred tax liability
Total liabilities
provision
90,497
-
20,749
63,447
2,159,453
9,173
107,991
-
2,451,310
12,468
83,521
916,017
-
-
17,101
1,029,107
9,446
-
25,081
-
-
3,896
25,020
-
63,443
39,735
175,336
5,506
-
-
-
1,008
78
221,663
323
26,719
23,708
-
1,127
15,022
82,832
-
-
-
50,750
-
5,788
104,769
139,678
175,336
51,336
63,447
2,159,453
13,069
134,019
78
2,736,416
13,918
125,262
1,022,557
-
-
22,889
1,184,626
40,577
-
(16,163)
22,864
741,012
-
-
-
788,290
180,255
175,336
35,173
86,311
2,900,465
13,069
134,019
78
3,524,706
-
795
-
-
13,918
126,057
1,022,557
-
398,595
-
399,390
398,595
22,889
1,584,016
Asset
Capital management and
provision
segments
other services corporate (Burford-only)
Other
Total Adjustment for
third-party
Total
interests consolidated
170,573
-
23,194
30,708
1,906,191
13,041
107,991
-
2,251,698
8,887
38,474
621,067
-
-
17,695
686,123
6,926
-
16,994
-
-
-
25,020
-
48,940
142,087
16,594
5,025
-
-
2,184
1,021
256
167,167
-
577
-
-
-
-
577
669
64,430
46,747
-
-
7,047
118,893
319,586
16,594
45,213
30,708
1,906,191
15,225
134,032
256
2,467,805
9,556
103,481
667,814
-
-
24,742
805,593
2,499
-
(10,842)
-
658,551
-
-
-
650,208
322,085
16,594
34,371
30,708
2,564,742
15,225
134,032
256
3,118,013
-
6,266
-
-
9,556
109,747
667,814
-
400,660
-
406,926
400,660
24,742
1,212,519
Burford Capital Annual Report 2021 97
Notes to the consolidated financial statements
continued
5. Segment reporting continued
The table below sets forth a reconciliation of total consolidated assets to the total segment assets and liabilities at
December 31, 2021 and 2020:
($ in thousands)
For the year ended December 31, 2021
Reconciliation: Assets
Total consolidated assets
Adjustment for third-party interests
Total segment assets
Reconciliation: Liabilities
Total consolidated liabilities
Adjustment for third-party interests
Total segment liabilities
For the year ended December 31, 2020
Reconciliation: Assets
Total consolidated assets
Adjustment for third-party interests
Total segment assets
Reconciliation: Liabilities
Total consolidated liabilities
Adjustment for third-party interests
Total segment liabilities
6. Capital provision assets
Capital
provision
3,255,763
(804,453)
2,451,310
1,428,497
(399,390)
1,029,107
2,912,748
(661,050)
2,251,698
1,093,049
(406,926)
686,123
Asset
management and
other services
47,280
16,163
63,443
50,750
-
50,750
38,098
10,842
48,940
577
-
577
Other
corporate
221,663
-
221,663
Total
segments
3,524,706
(788,290)
2,736,416
104,769
-
104,769
1,584,016
(399,390)
1,184,626
167,167
-
167,167
118,893
-
118,893
3,118,013
(650,208)
2,467,805
1,212,519
(406,926)
805,593
Capital provision assets are financial assets held at fair value through profit or loss that relate to the provision of
capital in connection with legal finance. Capital provision-direct assets represent those assets in which the Group has
provided financing directly to a client or to fund a principal position in a legal finance asset. BOF-C is included in
capital provision-direct assets because the Group does not invest any capital in BOF-C. Capital provision-indirect assets
represent those assets in which the Group’s capital is provided through a fund as a limited partner contribution. At
December 31, 2021 and 2020, capital provision-indirect assets consisted entirely of assets held through the Strategic
Value Fund as no deployments had been made to the Advantage Fund at December 31, 2021.
The table below sets forth the changes in capital provision assets for the years ended December 31, 2021 and 2020:
($ in thousands)
At January 1
Additions
Realizations
Income for the period
Foreign exchange gains/(losses)
At December 31
Unrealized fair value at December 31,
2021
2,564,742
673,965
(455,148)
131,819
(14,913)
2,900,465
1,306,380
2020
2,447,266
297,143
(540,294)
343,393
17,234
2,564,742
1,329,313
The table below sets forth the breakdown of the capital provision-direct assets and capital provision-indirect assets at
December 31, 2021 and 2020:
($ in thousands)
Capital provision assets are comprised of:
Capital provision-direct assets
Capital provision-indirect assets
Total capital provision assets
98 Burford Capital Annual Report 2021
2021
2020
2,887,610
12,855
2,900,465
2,479,576
85,166
2,564,742
Notes to the consolidated financial statements
continued
6. Capital provision assets continued
The table below sets forth the components of the capital provision income for the years ended December 31, 2021,
2020 and 2019:
($ in thousands)
Realized gains relative to cost
Previous unrealized gains transferred to realized gains
Fair value adjustment in the period
Interest income on certain capital provision-indirect assets
Income on capital provision assets
Interest and other income/(loss)
Impairment of other asset
Foreign exchange gains/(losses)
Loss on investment subparticipation
Net gain on derivative financial instruments
Loss on financial liabilities at fair value through profit or loss
Gain/(loss) on equity securities
Total capital provision income as reported on the consolidated statement of comprehensive
income
2021
2020
153,607
(54,017)
32,229
-
131,819
160
(500)
(3,930)
-
-
-
-
208,157
(15,263)
148,102
2,397
343,393
199
-
1,312
-
-
(4,779)
(22)
2019
146,922
(85,536)
351,800
15,006
428,192
(1,213)
(1,000)
34
-
2,846
(20,872)
1,169
127,549
340,103
409,156
Foreign exchange (losses)/gains on capital provision assets are reported in either capital provision income or foreign
currency transactions (losses)/gains in the consolidated statements of comprehensive income. Exchange differences
arising from non-US dollar denominated capital provision assets held by US dollar functional currency entities are
recognized in capital provision income in the consolidated statements of comprehensive income. All other foreign
exchange translation differences arising from capital provision assets held by non-US dollar functional currency entities
are recognized in other comprehensive income in the consolidated statements of comprehensive income.
The Group generally relies on privileged information to determine its asset valuations and, as a result, is precluded
from disclosing individual asset valuations publicly. However, the Group’s sale during the year ended December 31,
2019 of a part of its entitlement to proceeds in the YPF-related Petersen matter was uniquely of such a size and
breadth (including third-party sales organized by the Group’s financial adviser as part of the same transaction,
resulting in the total sale of 15% of the entitlement to proceeds) that it was appropriate to use the sale price alone,
without consideration of privileged information, to set the Group’s valuation of its YPF-related assets during the year
ended December 31, 2019, which remained the same during the years ended December 31, 2020 and 2021. The carrying
value of the YPF-related assets (both Petersen and Eton Park combined) on our consolidated balance sheet was $1,160
million with $1,103 million of unrealized gains at December 31, 2021. There have been no transfers of unrealized to
realized gains, so the fair value adjustment remains $1,103 million.
Loss on financial liabilities at fair value through profit or loss reflects losses on assets and liabilities used to hedge
certain capital provision-indirect assets. Gains that would correspond to the hedge losses are included in income on
capital provision assets.
On a consolidated basis, the capital provision-indirect assets represent solely the equity securities and related claims in
the Strategic Value Fund.
7. Due from settlement of capital provision assets
Amounts due from settlement of assets relate to the recovery of capital provision assets that have successfully
concluded and where there is no longer any litigation risk remaining. The settlement terms and duration vary by capital
provision asset. The majority of settlement balances are received shortly after the period end, and all of settlement
balances are generally expected to be received within 12 months.
The table below sets forth the changes in due from settlement of capital provision assets and the breakdown between
current and non-current due from settlement of capital provision assets for the years ended December 31, 2021 and
2020:
Burford Capital Annual Report 2021 99
Notes to the consolidated financial statements
continued
7. Due from settlement of capital provision assets continued
($ in thousands)
At January 1,
Transfer of realizations from capital provision assets
Interest and other income
Proceeds received
Asset received in kind
At December 31,
Split
Current assets
Non-current assets
Total due from settlement of capital provision assets
8. Asset management income
2021
30,708
455,148
160
(396,415)
(3,290)
86,311
82,561
3,750
86,311
2020
48,128
540,294
199
(557,913)
-
30,708
26,958
3,750
30,708
The Group receives regular management fees on its managed funds, calculated as a percentage of capital committed
by the fund investors or as a percentage of capital committed by the fund, depending upon the status of the fund. In
addition, the Group receives performance fees from the funds. The Group’s managed funds (other than the Strategic
Value Fund and BOF-C) use a so-called “European” structure for the payment of performance fees, whereby the
manager is not paid any performance fees until fund investors have had their entire capital investment repaid. This
contrasts with a so-called “American” structure for the payment of performance fees, whereby the performance fees
are paid on profitable resolutions as they occur. The impact of the “European” structure is to delay the receipt of the
performance fees. As a result, while many fund assets have already successfully and profitably concluded, few of the
related performance fees have been paid. Performance fees are recognized when a reliable estimate of the
performance fee can be made, and it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur.
The table below sets forth the components of the asset management income for the years ended December 31, 2021,
2020 and 2019:
($ in thousands)
Management fee income
Performance fee income
Total asset management income
2021
8,667
5,729
14,396
2020
8,706
6,400
15,106
2019
15,160
-
15,160
9. Liabilities and income from insurance contracts
The tables below set forth the balances related to the Group’s insurance activity at December 31, 2021 and 2020:
Gross
10,138
4,292
14,430
Gross
10,903
1,693
12,596
2021
Reinsurance
(8,315)
(3,410)
(11,725)
2020
Reinsurance
(8,723)
(1,354)
(10,077)
Net
1,823
882
2,705
Net
2,180
339
2,519
($ in thousands)
Unearned premiums
Claims incurred but not reported reserve
Total
($ in thousands)
Unearned premiums
Claims incurred but not reported reserve
Total
100 Burford Capital Annual Report 2021
9. Liabilities arising from insurance contracts continued
The table below sets forth the components of total insurance income for the years ended December 31, 2021, 2020 and
2019:
Notes to the consolidated financial statements
continued
($ in thousands)
Income statement
Gross premiums written
Gross ceded reinsurance premiums
Movement in net unearned premium
Net premium earned
Change in insurance claims reserves
Net income on insurance contracts
Insurance underwriting commission
Insurance administrator commission
Total insurance income
2021
2,384
(1,874)
337
847
(558)
289
381
4,473
5,143
2020
7,203
(5,762)
(1,195)
246
(241)
5
172
1,604
1,781
2019
4,707
(3,766)
(862)
79
(79)
-
56
3,489
3,545
There were no claims reported during the year ended December 31, 2021, or outstanding loss reserve relating to
reported claims at December 31, 2021 and 2020.
10. Property and equipment
The table below sets forth the components of property and equipment at December 31, 2021 and 2020:
($ in thousands)
Leasehold improvements
Fixtures, fittings and equipment
Computer, hardware and software
Right of use asset (property leases)
Property and equipment
Accumulated depreciation
Property and equipment, net
11. Marketable securities
2021
2,620
3,024
287
15,163
21,094
(8,025)
13,069
2020
2,600
2,787
287
15,209
20,883
(5,658)
15,225
The table below sets forth the changes in marketable securities for the years ended December 31, 2021 and 2020:
($ in thousands)
At January 1
Purchase
Proceeds on disposal
Net realized gains/(losses) on disposal
Fair value movement
Change in accrued interest
Foreign exchange gain/(losses)
Balance at December 31
2021
16,594
569,885
(409,525)
(3,760)
1,919
274
(51)
175,336
2020
69,362
3,172
(54,923)
(1,898)
795
(3)
89
16,594
The table below sets forth the components of the total marketable securities income and bank interest for the years
ended December 31, 2021, 2020 and 2019:
($ in thousands)
Realized gains/(losses) (see above)
Fair value movement (see above)
Interest and dividend income
Bank interest income
Total marketable securities income and bank interest
2021
2020
(3,760)
1,919
2,615
1,091
1,865
(1,898)
795
1,096
387
380
2019
65
(211)
1,987
4,835
6,676
Burford Capital Annual Report 2021 101
Notes to the consolidated financial statements
continued
12. Other assets
The table below sets forth the components of total other assets at December 31, 2021 and 2020:
($ in thousands)
Reinsurance assets
Prepayments
Tax receivable
Other receivables
Total other assets
13. Other liabilities
2021
11,726
1,192
2,161
20,094
35,173
2020
10,077
1,954
10,100
12,240
34,371
The table below sets forth the components of total other liabilities at December 31, 2021 and 2020:
($ in thousands)
Audit fees payable
General expenses payable
Payable for capital provision assets
Lease liabilities
Insurance liabilities
Long-term incentive compensation including accruals
Legacy asset recovery incentive compensation including accruals
Total other liabilities
2021
3,372
42,474
-
11,896
14,430
41,270
12,615
126,057
2020
2,333
42,810
256
13,520
12,596
38,232
-
109,747
The table below sets forth the changes in lease liabilities for the years ended December 31, 2021 and 2020:
($ in thousands)
At January 1
Disposals
Lease liabilities interest expense
Payments of lease liabilities during the year
Exchange differences
At December 31
14. Debt issued
2021
13,520
-
864
(2,456)
(32)
11,896
2020
19,389
(4,282)
1,252
(2,943)
104
13,520
The table below sets forth certain information with respect to the Group’s indebtedness outstanding at December 31,
2021 and 2020:
($ in thousands)
Burford Capital PLC
£90,000,000 issued at 6.50% fixed rate
£100,000,000 issued at 6.125% fixed rate
£175,000,000 issued at 5.00% fixed rate
Burford Capital Finance LLC
$180,000,000 issued at 6.125% fixed rate
Burford Capital Global Finance LLC
$400,000,000 issued at 6.25% fixed rate callable
notes
Total debt
Issuance
date
Maturity
date
USD
equivalent
face value at
issuance
Currently
outstanding
(in local
currency)
Currently
outstanding
(in USD)*
2021
2020
Principal amount
Balance sheet (at amortized cost) at
8/19/2014
8/19/2022
4/26/2016 10/26/2024
12/1/2026
6/1/2017
$
$
$
143,176 £
144,020 £
225,803 £
62,028
100,000
175,000
$
$
$
83,595 $
134,770 $
235,848 $
83,396
134,092
234,153
$
$
$
117,082
135,561
236,794
2/12/2018
8/12/2025
$
180,000
$
180,000
$
180,000 $
178,728
$
178,377
4/5/2021
4/15/2028
$
400,000
$
400,000
$
400,000 $
$
392,188
1,022,557
$
$
-
667,814
*
Converted using exchange rate at December 31, 2021 of 1.3477 USD/GBP.
102 Burford Capital Annual Report 2021
Notes to the consolidated financial statements
continued
14. Debt issued continued
The following is a summary of the agreements governing the Group’s indebtedness outstanding at December 31, 2021
and 2020:
Trust Deed, dated as of August 19, 2014, by and among Burford Capital PLC, as issuer, Burford Capital Limited,
Burford Capital Finance LLC and Burford Capital Global Finance LLC, as guarantor, and U.S. Bank Trustees Limited,
as trustee
On August 19, 2014, Burford Capital PLC issued £90 million aggregate principal amount of 6.500% notes due 2022 (the
“2022 Notes”) under a trust deed among Burford Capital PLC, as issuer, Burford Capital Limited, Burford Capital
Finance LLC and Burford Capital Global Finance LLC, as guarantors, and U.S. Bank Trustees Limited, as trustee. The
2022 Notes (i) are unsecured, unsubordinated obligations of Burford Capital PLC, (ii) rank equally in right of payment
with all other existing and future unsecured, unsubordinated indebtedness of Burford Capital PLC and (iii) are
unconditionally guaranteed by Burford Capital Limited, Burford Capital Finance LLC and Burford Capital Global Finance
LLC. If any subsidiary, other than certain excluded subsidiaries, of Burford Capital Limited has certain indebtedness
which amounts to more than £2 million, such subsidiary shall provide a guarantee in respect of the 2022 Notes.
The 2022 Notes bear interest at a rate of 6.500% per annum, payable semiannually in arrears on February 19 and
August 19 of each year. Burford Capital PLC may redeem the 2022 Notes, in whole, but not in part, at any time at the
greater of (x) the principal amount and (y) an amount calculated by reference to the then-current yield of the UK
4.00% Treasury Gilt 2022 plus 1.0%, in each case, plus accrued and unpaid interest. Burford Capital PLC may redeem
the 2022 Notes for certain tax reasons, in whole, but not in part, at any time at the principal amount, plus accrued and
unpaid interest.
The trust deed relating to the 2022 Notes contains certain covenants, including (i) a restriction on the creation of any
security interest by Burford Capital PLC, Burford Capital Limited, Burford Capital Finance LLC or Burford Capital Global
Finance LLC with respect to their respective businesses, undertakings, assets or revenues to secure certain financial
indebtedness unless the 2022 Notes are secured equally, subject to certain exemptions, and (ii) a requirement that
Burford Capital Limited maintains a level of consolidated net debt that is less than 50% of the level of its tangible
assets. The 2022 Notes are governed by English law.
At December 31, 2021, the Group was in compliance with the covenants set forth in the trust deed relating to the 2022
Notes.
Trust Deed, dated as of April 26, 2016, by and among Burford Capital PLC, as issuer, Burford Capital Limited,
Burford Capital Finance LLC and Burford Capital Global Finance LLC, as guarantor, and U.S. Bank Trustees Limited,
as trustee
On April 26, 2016, Burford Capital PLC issued £100 million aggregate principal amount of 6.125% notes due 2024 (the
“2024 Notes”) under a trust deed among Burford Capital PLC, as issuer, Burford Capital Limited, Burford Capital
Finance LLC and Burford Capital Global Finance LLC, as guarantors, and U.S. Bank Trustees Limited, as trustee. The
2024 Notes (i) are unsecured, unsubordinated obligations of Burford Capital PLC, (ii) rank equally in right of payment
with all other existing and future unsecured, unsubordinated indebtedness of Burford Capital PLC and (iii) are
unconditionally guaranteed by Burford Capital Limited, Burford Capital Finance LLC and Burford Capital Global Finance
LLC. If any subsidiary, other than certain excluded subsidiaries, of Burford Capital Limited has certain indebtedness
which amounts to more than £2 million, such subsidiary shall provide a guarantee in respect of the 2024 Notes.
The 2024 Notes bear interest at a rate of 6.125% per annum, payable semiannually in arrears on April 26 and
October 26 of each year. Burford Capital PLC may redeem the 2024 Notes, in whole, but not in part, at any time at the
greater of (x) the principal amount and (y) an amount calculated by reference to the then-current yield of the UK
2.75% Treasury Gilt 2024 plus 1.0%, in each case, plus accrued and unpaid interest. Burford Capital PLC may redeem
the 2024 Notes for certain tax reasons, in whole, but not in part, at any time at the principal amount, plus accrued and
unpaid interest.
The trust deed relating to the 2024 Notes contains certain covenants, including (i) a restriction on the creation of any
security interest by Burford Capital PLC, Burford Capital Limited, Burford Capital Finance LLC, or Burford Capital
Global Finance LLC with respect to their respective businesses, undertakings, assets or revenues to secure certain
financial indebtedness unless the 2024 Notes are secured equally, subject to certain exemptions, and (ii) a requirement
Burford Capital Annual Report 2021 103
Notes to the consolidated financial statements
continued
14. Debt issued continued
that Burford Capital Limited maintains a level of consolidated net debt that is less than 50% of the level of its tangible
assets. The 2024 Notes are governed by English law.
At December 31, 2021, the Group was in compliance with the covenants set forth in the trust deed relating to the 2024
Notes.
Trust Deed, dated as of June 1, 2017, by and among Burford Capital PLC, as issuer, Burford Capital Limited,
Burford Capital Finance LLC and Burford Capital Global Finance LLC, as guarantor, and U.S. Bank Trustees Limited,
as trustee
On June 1, 2017, Burford Capital PLC issued £175 million aggregate principal amount of 5.000% notes due 2026 (the
“2026 Notes”) under a trust deed among Burford Capital PLC, as issuer, Burford Capital Limited, Burford Capital
Finance LLC and Burford Capital Global Finance LLC, as guarantors, and U.S. Bank Trustees Limited, as trustee. The
2026 Notes (i) are unsecured, unsubordinated obligations of Burford Capital PLC, (ii) rank equally in right of payment
with all other existing and future unsecured, unsubordinated indebtedness of Burford Capital PLC and (iii) are
unconditionally guaranteed by Burford Capital Limited, Burford Capital Finance LLC and Burford Capital Global Finance
LLC. If any subsidiary, other than certain excluded subsidiaries, of Burford Capital Limited has certain indebtedness
which amounts to more than £2 million, such subsidiary shall provide a guarantee in respect of the 2026 Notes.
The 2026 Notes bear interest at a rate of 5.000% per annum, payable semiannually in arrears on December 1 and June 1
of each year. Burford Capital PLC may redeem the 2026 Notes, in whole, but not in part, at any time at the greater of
(x) the principal amount and (y) an amount calculated by reference to the then-current yield of the UK 1.5% Treasury
Gilt 2026 plus 1.0%, in each case, plus accrued and unpaid interest. Burford Capital PLC may redeem the 2026 Notes for
certain tax reasons, in whole, but not in part, at any time at the principal amount, plus accrued and unpaid interest.
The trust deed relating to the 2026 Notes contains certain covenants, including (i) a restriction on the creation of any
security interest by Burford Capital PLC, Burford Capital Limited, Burford Capital Finance LLC or Burford Capital
Global Finance LLC with respect to their respective businesses, undertakings, assets or revenues to secure certain
financial indebtedness unless the 2026 Notes are secured equally, subject to certain exemptions, and (ii) a requirement
that Burford Capital Limited maintains a level of consolidated net debt that is less than 50% of the level of its tangible
assets. The 2026 Notes are governed by English law.
At December 31, 2021, the Group was in compliance with the covenants set forth in the trust deed relating to the 2026
Notes.
Trust Deed, dated as of February 12, 2018, by and among Burford Capital Finance LLC, as issuer, Burford Capital
Limited, Burford Capital PLC and Burford Capital Global Finance LLC, as guarantors, and U.S. Bank Trustees
Limited, as trustee
On February 12, 2018, Burford Capital Finance LLC issued $180 million aggregate principal amount of 6.125% notes due
2025 (the “2025 Notes”) under a trust deed among Burford Capital Finance LLC, as issuer, Burford Capital Limited,
Burford Capital PLC and Burford Capital Global Finance LLC, as guarantors, and U.S. Bank Trustees Limited, as trustee.
The 2025 Notes (i) are unsecured, unsubordinated obligations of Burford Capital Finance LLC, (ii) rank equally in right
of payment with all other existing and future unsecured, unsubordinated indebtedness of Burford Capital Finance LLC
and (iii) are unconditionally guaranteed by Burford Capital Limited, Burford Capital PLC and Burford Capital Global
Finance LLC. If any subsidiary, other than certain excluded subsidiaries, of Burford Capital Limited has certain
indebtedness which amounts to more than £2 million, such subsidiary shall provide a guarantee in respect of the 2025
Notes.
The 2025 Notes bear interest at a rate of 6.125% per annum, payable semiannually in arrears on February 12 and
August 12 of each year. Burford Capital Finance LLC may redeem the 2025 Notes for certain tax reasons, in whole, but
not in part, at any time at the principal amount, plus accrued and unpaid interest.
The trust deed relating to the 2025 Notes contains certain covenants, including (i) a restriction on the creation of any
security interest by Burford Capital Finance LLC, Burford Capital Limited, Burford Capital PLC or Burford Capital Global
Finance LLC with respect to their respective businesses, undertakings, assets or revenues to secure certain financial
indebtedness unless the 2025 Notes are secured equally, subject to certain exemptions, and (ii) a requirement that
104 Burford Capital Annual Report 2021
Notes to the consolidated financial statements
continued
14. Debt issued continued
Burford Capital Limited maintains a level of consolidated net debt that is less than 50% of the level of its tangible
assets. The 2025 Notes are governed by English law.
At December 31, 2021, the Group was in compliance with the covenants set forth in the trust deed relating to the 2025
Notes.
Indenture, dated as of April 5, 2021, by and among Burford Capital Global Finance LLC, as issuer, Burford Capital
Limited, as parent guarantor, the other guarantors party thereto from time to time and U.S. Bank Trust Company,
National Association, as trustee
On April 5, 2021, Burford Capital Global Finance LLC issued $400 million aggregate principal amount of 6.250% senior
notes due 2028 (the “2028 Notes”) under an indenture among Burford Capital Global Finance LLC, as issuer, Burford
Capital Limited, as parent guarantor, the other guarantors party thereto from time to time and U.S. Bank Trust
Company, National Association, as successor to U.S. Bank National Association, as trustee. The 2028 Notes (i) are senior
unsecured obligations of Burford Capital Global Finance LLC, (ii) rank equal in right of payment with all existing and
future unsecured indebtedness of Burford Capital Global Finance LLC that is not expressly subordinated in right of
payment to the 2028 Notes and are senior in right of payment to all existing and future indebtedness of Burford Capital
Global Finance LLC expressly subordinated in right of payment to the 2028 Notes and (iii) are fully and unconditionally
guaranteed by Burford Capital Limited, as parent guarantor, and Burford Capital Finance LLC and Burford Capital PLC.
Each restricted subsidiary of Burford Capital Limited (other than Burford Capital Global Finance LLC) that (i) incurs or
guarantees any indebtedness under the notes outstanding at the issue date of the 2028 Notes or (ii) incurs other
indebtedness for borrowed money or guarantees other indebtedness for borrowed money of Burford Capital Global
Finance LLC or any guarantor in an aggregate principal amount in excess of $5 million, is required to guarantee the
2028 Notes.
The 2028 Notes bear interest at a rate of 6.250% per annum, payable semiannually in arrears on April 15 and
October 15 of each year. Burford Capital Global Finance LLC may redeem some or all of the 2028 Notes on or after
April 15, 2024, at the redemption prices set forth in the indenture relating to the 2028 Notes, plus accrued and unpaid
interest. Burford Capital Global Finance LLC may redeem some or all of the 2028 Notes at any time before April 15,
2024, at a redemption price equal to 100% of the aggregate principal amount of the 2028 Notes redeemed, plus a
make-whole premium and accrued and unpaid interest. In addition, prior to April 15, 2024, Burford Capital Global
Finance LLC may redeem at its option up to 40% of the aggregate principal amount of the 2028 Notes with the proceeds
of certain equity offerings at the redemption price set forth in the indenture relating to the 2028 Notes, provided that
at least 50% of the aggregate principal amount of the 2028 Notes remains outstanding. Furthermore, Burford Capital
Global Finance LLC will be required to make an offer to repurchase all of the 2028 Notes upon the occurrence of
certain events constituting a change of control at a price equal to 101% of the principal amount of the 2028 Notes, plus
accrued and unpaid interest. If Burford Capital Global Finance LLC sells certain assets and the net cash proceeds are
not applied as permitted under the indenture relating to the 2028 Notes, Burford Capital Global Finance LLC may be
required to use such proceeds to offer to purchase some of the 2028 Notes at 100% of the aggregate principal amount
of the 2028 Notes repurchased, plus accrued and unpaid interest.
The indenture relating to the 2028 Notes contains certain customary covenants, including restrictions on the ability of
Burford Capital Limited and its restricted subsidiaries to (i) incur or guarantee additional indebtedness, (ii) pay cash
dividends or make other cash distributions in respect of, or repurchase or redeem, capital stock or make other
restricted payments (including restricted investments), (iii) create or incur certain liens, (iv) merge or consolidate with
Burford Capital Annual Report 2021 105
Notes to the consolidated financial statements
continued
14. Debt issued continued
another company or sell all or substantially all of their assets and (v) enter into transactions with affiliates. The 2028
Notes are governed by the laws of the State of New York.
At December 31, 2021, the Group was in compliance with the covenants set forth in the indenture relating to the 2028
Notes.
The table below sets forth a summary of the changes in the outstanding indebtedness due to cash flows and non-cash
changes for the years ended December 31, 2021 and 2020:
($ in thousands)
Debt issued
At January 1
Debt issued
Amortized debt issue costs
Interest expense
Interest paid
Foreign exchange (loss)/gain
Debt buyback
At period end
Split:
Debt issued
Debt interest payable
Total debt issued
2021
677,370
400,000
(8,742)
58,647
(51,270)
(5,601)
(33,929)
1,036,475
1,022,557
13,918
1,036,475
2020
665,342
-
-
39,048
(37,890)
15,834
(4,964)
677,370
667,814
9,556
677,370
The table below sets forth unamortized issuance costs of the outstanding indebtedness at December 31, 2021 and 2020:
($ in thousands)
6.5% due Aug 2022
6.125% due Oct 2024
6.125% due Aug 2025
5.0% due Dec 2026
6.25% due Apr 2028
2021
199
678
1,272
1,695
7,812
2020
515
929
1,623
2,063
-
The table below sets forth the components of total finance costs of the outstanding indebtedness for the years ended
December 31, 2021, 2020 and 2019:
(S in thousands)
Debt interest expense
Debt issue costs incurred as finance costs
Total finance costs
15. Goodwill and intangible asset
2021
56,454
2,193
58,647
2020
37,814
1,234
39,048
2019
37,528
1,219
38,747
Goodwill arises on the acquisition of subsidiaries and represents the excess of the purchase consideration over the fair
value of the Group’s share of the assets acquired and the liabilities assumed on the acquisition date. The Group’s
goodwill primarily relates to the acquisition of BCIM Holdings LLC on December 14, 2016.
The tables below set forth the allocation of the carrying value of goodwill to each of the Group’s operating business
segments at December 31, 2021 and 2020:
($ in thousands)
At January 1, 2021
Foreign exchange (losses)
At December 31, 2021
106 Burford Capital Annual Report 2021
Asset
management
and other
services
25,020
-
25,020
Capital
provision
107,991
-
107,991
Other
Corporate
1,021
(13)
1,008
Total
134,032
(13)
134,019
15. Goodwill and Intangible assets continued
($ in thousands)
At January 1, 2020
Foreign exchange gains
At December 31, 2020
Notes to the consolidated financial statements
continued
Asset
management
and other
services
25,020
-
25,020
Capital
provision
107,991
-
107,991
Other
Corporate
988
33
1,021
Total
133,999
33
134,032
At December 31, 2021 and 2020, management has determined there was no evidence of goodwill impairment.
In connection with the acquisition of BCIM Holdings LLC, the Group recorded an intangible asset of $39,666,000
representing an assessment, for accounting purposes, of the value of BCIM Holdings LLC’s future asset management
income at the acquisition date. The intangible asset became fully amortized in 2020 and was being amortized in
accordance with revenue generated from asset management income, therefore there is no amortization expense in
2021 (2020: $8,703,000; 2019: $9,495,000). There were no impairments of the intangible asset during the years ended
December 31, 2021, 2020 and 2019.
16. Fair value of assets and liabilities
Valuation methodology
The table below sets forth the fair value of financial instruments grouped by the fair value level of hierarchy and
techniques described in note 2 (Summary of significant accounting policies) at December 31, 2021:
($ in thousands)
Assets
Capital provision assets
Derivative financial instrument
Single case
Portfolio
Portfolio with equity risk
Legal risk management
Non-derivative/financial asset
Joint ventures and equity method investments
Other
Assets of consolidated investment companies
Complex strategies
Litigation finance (BOF-C)
Due from settlement
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
617,088
1,618,963
200,484
2,550
617,088
1,618,963
200,484
2,550
139,964
2,083
139,964
2,083
12,855
306,478
12,855
306,478
86,311
86,311
Marketable securities
Asset backed securities
Corporate bonds
Mutual funds
US treasuries & commercial paper
Total assets
Liabilities
Debt issued, at fair value*
Financial liabilities related to third-party interests in capital provision assets
Total liabilities
Net total
-
-
10,636
15,500
26,136
56,285
84,003
8,912
-
149,200
-
-
-
-
2,986,776
-
56,285
84,003
19,548
15,500
3,162,112
648,754
-
648,754
(622,618)
422,872
-
422,872
(273,672)
-
398,595
398,595
2,588,181
1,071,626
398,595
1,470,221
1,691,891
*
Debt issued is held at amortized cost in the consolidated financial statements, and the figures disclosed in the above tables represent the fair
value equivalent amounts.
The Group has elected the fair value option for certain equity method investments, due from settlements of capital
provision assets and financial liabilities relating to third-party interests in capital provision assets. Interest and
dividend income on these assets are recognized as income when they are earned. There were no gains or losses
recognized in other comprehensive income with respect to these assets and liabilities.
Burford Capital Annual Report 2021 107
Notes to the consolidated financial statements
continued
16. Fair value of assets and liabilities continued
The key risk and sensitivity across all of the capital provision assets relates to the underlying litigation associated with
each case that is underwritten and financed. The sensitivity to this Level 3 input is therefore considered to be similar
across the different types of capital provision assets and is expressed as a portfolio-wide stress.
The table below sets forth the components of the total assets and liabilities at each fair value level at December 31,
2020:
($ in thousands)
Assets
Capital provision assets
Derivative financial instrument
Single case
Portfolio
Legal risk management
Non-derivative/Financial asset
Joint ventures and equity method investments
Other
Assets of consolidated investment companies
Complex strategies
Litigation finance (BOF-C)
Due from settlement
Marketable securities
Corporate bonds
Mutual funds
Total assets
Liabilities
Debt issued, at fair value*
Financial liabilities for third-party interests in capital provision assets
Total liabilities
Net total
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
594,502
1,581,794
2,213
594,502
1,581,794
2,213
130,557
2,083
130,557
2,083
85,166
168,427
85,166
168,427
30,708
30,708
-
11,457
11,457
5,137
-
5,137
-
-
2,595,450
5,137
11,457
2,612,044
646,083
-
646,083
(634,626)
-
-
- -
5,137
-
400,660
400,660
2,194,790
646,083
400,660
1,046,743
1,565,301
*
Debt issued is held at amortized cost in the consolidated financial statements, and the figures disclosed in the above tables represent the fair value
equivalent amounts.
Movements in Level 3 fair value assets and liabilities
The table below sets forth the analysis of the movements in the level 3 financial assets and liabilities for the year
ended December 31, 2021:
($ in thousands)
Single case
Portfolio
Legal risk management
Portfolio with equity risk
Joint ventures and equity method
investments
Other
Complex strategies
Litigation finance (BOF-C)
Total capital provision assets
Due from settlement
Total level 3 assets
Financial liabilities for third-party
interests in capital provision assets
Total level 3 liabilities
Transfers
At January 1, Transfers between
2021 into level 3
-
-
-
-
594,502
1,581,794
2,213
-
Income for
types Additions Realizations the period gains/(losses)
(2,727)
(591)
2,727
(3,265)
(194)
-
-
-
(206,573)
(59,070)
-
-
133,131
84,074
156
212,384
99,346
12,703
375
(11,900)
exchange At December 31,
2021
617,088
1,618,963
2,550
200,484
Foreign
130,557
2,083
85,166
168,427
2,564,742
30,708
2,595,450
400,660
400,660
-
-
-
-
-
-
-
-
-
19,327
-
-
-
-
-
224,893
-
673,965
-
455,148
-
- 1,129,113
(1,799)
-
(81,022)
(106,684)
(455,148)
(399,705)
(854,853)
2,742
-
8,711
19,842
131,819
160
131,979
(10,863)
-
-
-
(14,913)
(14,913)
139,964
2,083
12,855
306,478
2,900,465
86,311
2,986,776
-
-
-
-
(37)
(37)
(2,028)
(2,028)
-
-
398,595
398,595
108 Burford Capital Annual Report 2021
16. Fair value of assets and liabilities continued
The table below sets forth the analysis of the movements in the level 3 financial assets and liabilities for the year
ended December 31, 2020:
Notes to the consolidated financial statements
continued
($ in thousands)
Single case
Portfolio
Legal risk management
Asset recovery
Joint ventures and equity method
investments
Other
Complex strategies
Litigation finance (BOF-C)
Total capital provision assets
Due from settlement
Total level 3 assets
Financial liabilities for third-party
interests in capital provision
assets
Total level 3 liabilities
Transfers
At January 1, Transfers between
2020 into level 3
-
-
-
-
412,167
1,469,926
1,619
86,128
Income for
types Additions Realizations the period gains/(losses)
3,331
3,009
180
-
47,597 125,463
89,119
38,531
-
-
-
(86,128)
(166,461)
(172,925)
-
-
172,405
154,134
414
-
exchange At December 31,
2020
594,502
1,581,794
2,213
-
Foreign
110,608
2,083
192,356
106,599
2,381,486
52,514
2,434,000
-
-
49,950
-
49,950
-
49,950
(1,314)
11,373
-
-
-
-
(173,049)
-
-
(19,663)
-
71,188
(533,412)
- 297,143
- 526,588
(548,593)
- 823,731 (1,082,005)
(824)
-
15,909
10,303
352,341
199
352,540
10,714
-
-
-
17,234
-
17,234
130,557
2,083
85,166
168,427
2,564,742
30,708
2,595,450
401,444
401,444
-
-
-
-
224
224
-
-
(1,008)
(1,008)
-
-
400,660
400,660
There were no gains or losses recognized in other comprehensive income with respect to these assets and liabilities.
All transfers into and out of Level 3 are recognized as if they have taken place at the beginning of each reporting
period. There were no transfers into Level 3 during the year ended December 31, 2021, and transfers into Level 3
during the year ended December 31, 2020, of $49,950,000 related to assets where the underlying asset no longer has a
quoted price and becomes subject to the Group’s valuation methodology for Level 3 financial instruments as set forth
in the accounting policies in note 2 (Summary of significant accounting policies).
Sensitivity of Level 3 valuations
For the vast majority of the Group’s legal finance assets, valuation relates to objective events in the litigation process.
If there have been no objective events, the Group typically assesses the fair value of its legal finance assets to be
equivalent to the cost of the assets in line with its valuation policy and the absence of an objective event impacting
valuation assessment. The valuation policy assigns valuation changes in fixed ranges based on these objective events.
The valuation policy discounts the impact of the objective events commensurate with the remaining litigation risk,
including both the likelihood of a positive outcome and the time required to reach that outcome. Because the Group’s
legal finance assets are typically relatively short in tenor (two to three years), no additional discounting explicitly for
the time value of money is usually applied. Instead, the potential impact of timing is encompassed in the applicable
value range. In a small number of instances, the Group has the benefit of a secondary sale of a portion of an asset.
When that occurs, the market evidence is factored into the valuation process, and results on portfolios with multiple
fair value factors are presented based on whether the portfolios are in an overall positive or negative fair value
position. The more robust the market testing of value is, the more weight that is accorded to the market price.
Burford Capital Annual Report 2021 109
Notes to the consolidated financial statements
continued
16. Fair value of assets and liabilities continued
The tables below set forth a stratification of the Group’s capital provision direct and indirect Level 3 assets into
different categories of fair valuation factors (reflecting the objective litigation events) that underlie the valuation of
those assets at December 31, 2021 and 2020:
At December 31, 2021
($ in thousands)
Asset fair valuation factors
Market transactions(4)
Positive fair value adjustments
Negative fair value adjustments
Unobservable
inputs
Total
carrying
value
Aggregate
FV
Weighted
average (2)
FV
Cost
adjustment
Range
adjustment % (1)
Total
carrying
value
Aggregate
FV
Cost adjustment
Range
Litigation risk
1,160,354
57,128
1,103,225
NA (3)
NA (3)
-
-
-
NA (3)
Ruling or other objective pre-trial event
Litigation risk
161,718
103,059
58,659
30% to 50%
Trial court judgment or tribunal award
Litigation risk
78,938
41,879
37,059
50% to 60%
Litigation risk
24,776
16,620
8,156
17% to 80%
Litigation risk
95,788
63,148
32,640
10% to 100%
31%
47%
20%
43%
6,742
10,783
(4,041)
- 32% to 60%
669
1,505
(836)
- 80% to - 80%
-
-
-
- 100% to - 100%
9,653
23,898
(14,245)
- 9% to - 170%
Appeal judgment
Settlements
Held at cost
Portfolios with multiple FV factors(6)
Priced at cost plus accrued interest
Discounted cash flow
Discounted cash flow
Discounted cash flow
Other
Total capital provision assets
Due from settlement:
Held at cost
Total level 3 assets
Litigation risk
818,805
795,988
22,818
0%
NA***
1,018
5,954
(4,936)
0
Litigation risk
283,643
194,608
89,035
- 100% to 80%
(53)%
7,248
14,282
(7,034)
- 60% to - 60%
Litigation risk
Discount rate
Resolution timing
Conversion ratio
-
-
-
-
Litigation risk
2,551
-
-
-
-
-
-
-
-
-
0%
0%
0%
0%
0%
12,855
11,156
1,699
0
0%
235,212
250,797
(15,585)
12.9%
0%
0%
-
-
-
-
-
9 to 69 months
-
5.4
2,551
- 100% to 80%
100%
495
3,280
(2,785)
- 100% to - 100%
2,626,573
1,272,430
1,354,143
273,892
321,655
(47,763)
86,311
-
86,311
2,712,884
1,272,430
1,440,454
273,892
321,655
(47,763)
Weighted
average
FV
adjustment % (5)
NA (3)
(33)%
0%
0%
0%
NA (3)
0%
NA (3)
12.9%
38 months
5.4
0%
As percentage of expected recovery above cost.
(1)
(2) Weighted by fair value of asset.
(3)
(4)
Not valued based on a percentage of expected recovery.
Although market transactions are a significant input into the valuation of these assets, the nature of these market transactions and the influence of other
factors on valuation causes these assets to be characterized as Level 3 rather than Levels 1 or 2.
(5)
(6)
As percentage of cost.
Portfolios where the underlying cases have multiple FV factors: If a portfolio’s cases have only one FV factor, the portfolio is categorized with that factor.
FV adjustment statistics for portfolios represent the weighted average, maximum and minimum adjustments for the underlying cases in those portfolios.
(7) Weighted by cost of asset.
($ in thousands)
Total capital provision level 3 assets
Capital provision-direct
Capital provision-indirect
Total capital provision
Carrying value
2,887,610
12,855
2,900,465
Cost Unrealized gain
1,304,681
1,699
1,306,380
1,582,929
11,156
1,594,085
110 Burford Capital Annual Report 2021
16. Fair value of assets and liabilities continued
At December 31, 2020
Positive fair value adjustments
Negative fair value adjustments
Weighted
Notes to the consolidated financial statements
continued
Total
carrying
value
1,159,533
227,252
67,252
32,148
88,827
580,190
296,405
72,038
2,213
Aggregate
FV
Cost adjustment
average (2)
Total
FV carrying
value
47,988
148,840
35,910
21,242
64,091
580,190
202,832
60,991
-
1,111,545
78,412
31,342
10,906
24,736
-
NA (3)
0% - 50% %
35% - 60% %
20% - 80% %
11% - 80% %
NA (3)
93,573 - 100% - 60% %
NA (3)
11,047
2,213 100% - 100% %
Range adjustment % (1)
NA*** (3)
-
6,413
33 %
196
50 %
37 %
500
40 % 12,000
NA (3)
-
36 %
6,152
NA (3) 13,128
495
100 %
2,525,858 $ 1,162,084 $ 1,363,774
$
38,884
Aggregate
FV
Cost adjustment
-
Weighted
average (7)
FV
NA (3)
Range adjustment % (5)
NA (3)
(37)%
(80)%
(50)%
(62)%
NA (3)
(60)%
NA (3)
(85)%
NA (3)
NA (3)
(60)%
(85)%
(3,785) - 32% to - 60%
(784) - 80% to - 80%
(50)%
(500)
(17,875) - 9% to - 70%
-
(7,034)
(1,698)
(2,785)
(34,461)
-
10,198
980
1,000
29,875
-
13,186
14,826
3,280
73,345
Unobservable
inputs
($ in thousands)
Asset fair valuation factors
Market transactions(4)
Litigation risk
Ruling or other objective pre-trial event Litigation risk
Trial court judgment or tribunal award Litigation risk
Appeal judgment
Litigation risk
Settlements
Litigation risk
Held at cost
Litigation risk
Portfolios with multiple FV factors(6)
Litigation risk
Priced at cost plus accrued interest
Litigation risk
Other
Litigation risk
Total capital provision assets
Due from settlement:
Held at cost
Total level 3 assets
$
$
30,708
-
30,708
2,556,566 $ 1,162,084 $ 1,394,482
-
38,884
-
-
73,345
(34,461)
(1) As percentage of expected recovery above cost.
(2) Weighted by fair value of asset.
(3) Not valued based on a percentage of expected recovery.
(4) Although market transactions are a significant input into the valuation of these assets, the nature of these market transactions and the influence of
other factors on valuation causes these assets to be characterized as Level 3 rather than Levels 1 or 2.
(5) As percentage of cost.
(6) Portfolios where the underlying cases have multiple FV factors: If a portfolio’s cases have only one FV factor, the portfolio is categorized with that
factor. FV adjustment statistics for portfolios represent the weighted average, maximum and minimum adjustments for the underlying cases in those
portfolios.
(7) Weighted by cost of asset.
($ in thousands)
Total capital provision level 3 assets
Capital provision-direct
Capital provision-indirect
Total capital provision
Carrying value
2,479,576
85,166
2,564,742
Cost Unrealized gain
1,319,964
9,349
1,329,313
1,159,612
75,817
1,235,429
Following origination, the Group engages in a review of each capital provision asset’s fair value in connection with the
preparation of the consolidated financial statements. At December 31, 2021, should the value of those instruments
have been 10% higher or lower than provided for in the Group’s fair value estimation, while all other variables
remained constant, the Group’s income and net assets would have increased and decreased respectively by
$258,818,000 (2020: $219,479,000). The sensitivity impact has been provided on a pre-tax basis on both income and net
assets as the Group considers the fluctuation in the Group’s effective tax rate from period to period could indicate
changes in sensitivity not driven by the valuation that are difficult to follow and detract from the comparability of this
information.
Reasonably possible alternative assumptions
The determination of fair value for capital provision assets, derivative financial liabilities and asset subparticipations
involves significant judgments and estimates. While the potential range of outcomes for the assets is wide, the Group’s
fair value estimation is its best assessment of the current fair value of each asset. Such estimate is inherently
subjective, being based largely on an assessment of how individual events have changed the possible outcomes of the
asset and their relative probabilities and hence the extent to which the fair value has altered. The aggregate of the
fair values selected falls within a wide range of reasonably possible estimates. In the Group’s opinion, there is no
useful alternative valuation that would better quantify the market risk inherent in the portfolio and there are no inputs
or variables to which the values of the assets are correlated.
17. Variable interest entities
Consolidated VIEs
Pursuant to US GAAP consolidation guidance, the Group consolidates certain VIEs for which it is considered the primary
beneficiary, either directly or indirectly, through a consolidated entity or affiliate. See note 2 (“Summary of significant
accounting policies—Consolidation”) for additional information with respect to the Group’s consolidation.
Burford Capital Annual Report 2021 111
Notes to the consolidated financial statements
continued
17. Variable interest entities continued
Consolidated VIEs include entities relating to the Group’s investment funds (BOF-C, Strategic Value and the Burford
Advantage Fund), investment vehicles for sale and resale of the participation interests (Colorado) and acquisition of
interests in secured promissory notes (Forest Hills Investments LLC).
The purpose of the investment funds is to provide strategy specific investment opportunities for investors in exchange
for management and performance-based fees. The investment strategies of the funds differ by product, but the
fundamental risks are similar, including loss of invested capital and loss of management and performance-based fees.
Colorado is an exempted company established to receive a portion of the Group’s interest in the YPF-related Petersen
claims and provide a vehicle for the sale and resale of the participation interests.
The Group, together with BCIM Partners III, LP and BCIM Credit Opportunities LP acquired interest in certain secured
promissory notes through Forest Hills Investments LLC. The secured promissory notes are legal finance investments with
proceeds payable out of two underlying litigation matters. This structure provides for the sharing of the economics,
interest payments and settlement cash flows among the Group, BCIM Partners III, LP and BCIM Credit Opportunities LP.
In prior periods, consolidated VIEs also included certain “carry pools” entities that were governed by a partnership
agreement between the Company as the general partner and certain employees of the Group as limited partners.
Limited partners were invited to join the partnership to acquire an interest in a portion of potential realized profits
from qualifying capital provision assets held by the Group. The “carry pools” program was terminated during the year
ended December 31, 2021, and replaced with the “phantom carry pool” program that no longer requires the use of a
separate legal entity.
The Group provides revolving credit facilities to certain managed funds for capital calls as required. These revolving
credit facilities are entirely discretionary insofar as the Group is not obligated to provide funding under the revolving
credit facilities. There was no amount outstanding under the revolving credit facilities at December 31, 2021 and 2020,
respectively.
The table below sets forth assets and liabilities of the consolidated VIEs at December 31, 2021 and 2020:
($ in thousands)
Total assets
Total liabilities
2021
887,719
(5,199)
2020
776,289
(16,971)
The table below sets forth the income, proceeds, funding and cash balances of the consolidated VIEs at December 31,
2021, 2020 and 2019:
($ in thousands)
Total income
Cash flows:
Proceeds
Funding
Cash balance
Restricted cash
2021
13,167
(139,825)
224,893
40,547
-
2020
609
(32,943)
20,557
2,101
-
2019
123,859
9,220
165,864
10,008
95,226
The Group provides revolving credit facilities to certain managed funds for capital calls as required. These revolving
credit facilities are entirely discretionary insofar as the Group is not obligated to provide funding under the revolving
credit facilities. There was no amount outstanding under the revolving credit facilities at December 31, 2021 and 2020,
respectively.
Unconsolidated VIEs
The Group’s maximum exposure to loss from the unconsolidated VIEs is the sum of capital provision assets, fee
receivables, accrued income and loans to the unconsolidated VIEs and was $22,733,000 at December 31, 2021 (2020:
$23,845,000).
112 Burford Capital Annual Report 2021
Notes to the consolidated financial statements
continued
17. Variable interest entities continued
The table below sets forth the Group’s maximum exposure to loss due to its involvement with the unconsolidated VIEs
at December 31, 2021 and 2020:
($ in thousands)
Total on balance sheet exposure
Off-balance sheet - undrawn commitments
Maximum exposure to loss
2021
16,355
6,378
22,733
2020
14,910
8,935
23,845
18. Joint ventures and associate investments
The Group holds certain of its capital provision assets through joint ventures that are accounted for at fair value
through profit or loss. See note 16 (“Fair value of assets and liabilities”) for additional information with respect to the
Group’s valuation of its capital provision assets. The total fair value of the Group’s interest in such joint ventures was
$137,583,000 at December 31, 2021 (2020: $127,397,000) and was included in capital provision assets in the
consolidated statement of financial position. The total fair value of the Group’s interest in companies with associate
investments was $2,380,000 at December 31, 2021 (2020: $3,160,000) and was included in capital provision assets in
the consolidated statement of financial position. None of these joint ventures or equity method investments is
individually material to the Group, and there are no significant restrictions on the ability of the joint ventures to make
cash distributions or repayment of advances to the Group.
At December 31, 2021, the Group’s share of commitments for these joint ventures and associate investments was
$84,590,000 and $16,402,000, respectively (2020: $116,029,000 and $16,242,000, respectively), and was included in
the commitment amounts relating to asset agreements. See note 22 (“Financial commitments and contingent
liabilities”) for additional information with respect to the Group’s commitments and contingencies.
19. Shareholders’ equity
Shareholder rights and dividends
All of the Company’s issued and outstanding ordinary shares are fully paid. Holders of the Company’s ordinary shares do
not have conversion or redemption rights. There are no provisions in the Company’s memorandum of incorporation or
articles of incorporation discriminating against a shareholder as a result of such shareholder’s ownership of a particular
number of the Company’s ordinary shares.
Each holder of the Company’s ordinary shares who is present in person (including any corporation by its duly authorized
representative) or by proxy at a general meeting will have one vote on a show of hands and, on a poll, if present in
person or by proxy, will have one vote for every ordinary share held by such holder. Ordinary resolutions require
approval by a simple majority of the votes at a general meeting at which a quorum is present.
The Board may provide for classes of shares other than ordinary shares, including series of preferred shares. If any
preferred shares are issued, the rights, preferences and privileges of the Company’s ordinary shares will be subject to,
and may be adversely affected by, the rights of holders of the Company’s preferred shares.
The rights attached to any class of shares may be varied only with the consent in writing of the holders of a majority of
the issued shares of such class or with the sanction of an ordinary resolution passed by a majority of the votes cast at a
separate meeting of the holders of the shares of such class.
If the Company is liquidated, the liquidator may, with the authority of a special resolution, divide among the
shareholders, in the form specified, the whole or any part of the Company’s assets. For such purpose, the liquidator
may set the value of any assets and determine how the division will be carried out between the shareholders or
different classes of shareholders.
The Company's memorandum of incorporation and articles of incorporation do not impose limitations on the rights of
persons to own the Company's securities, including rights of non-resident or foreign shareholders to hold or exercise
voting rights with respect to the Company’s securities.
Burford Capital Annual Report 2021 113
Notes to the consolidated financial statements
continued
19. Shareholders’ equity continued
There are no provisions in the Company’s memorandum of incorporation or articles of incorporation that would have
the effect of delaying, deferring or preventing a change in control of the Company and that would operate only with
respect to a merger, acquisition or corporate restructuring involving the Company or any of its subsidiaries.
Dividends
Dividends on the Company’s issued and outstanding ordinary shares are payable at the discretion of the Board.
Each year, once the prior year’s results of operation are known, the Board reviews the Company’s profits, cash
generation and cash needs and recommends a dividend level to shareholders for consideration at the Company’s annual
general meeting. The Company may declare dividends by ordinary resolution at a general meeting in accordance with
the respective rights of any class of shares. No dividend may exceed the amount recommended by the Board. Subject
to the provisions of the Guernsey Companies Law, the Board may, if it thinks fit, from time to time pay interim
dividends if it appears to the Board they are justified by the assets of the Company. Subject to rights which may attach
to any other class of shares, holders of the Company’s ordinary shares are entitled to receive ratably all dividends, if
any, that are declared. Dividends may be paid in any currency that the Board determines. The declaration and payment
of dividends and distributions, if any, is subject to the discretion of the Board and the requirements of Guernsey law
(including, among others, satisfaction of a statutory solvency test). The timing and amount of any dividends or
distributions declared depends on, among others, the Company’s cash flows from operations and available liquidity, its
earnings and financial position and any applicable contractual restrictions. Any dividend that has not been claimed
after a period of 12 years from the date it became due for payment will, if the Board so resolves, be forfeited.
The table below sets forth dividends for the years ended December 31, 2021, 2020 and 2019:
Interim dividend
Final dividend
Total dividend
2021
6.25 ¢
6.25 ¢
12.50 ¢
Record date
November 12, 2021
May 27, 2022
2020
-
12.50 ¢
12.50 ¢
Record date
May 28, 2021
2019
4.17 ¢
-
4.17 ¢
Record date
November 15, 2019
Employee benefit trust
The Burford Capital Limited Employee Benefit Trust was established to assist in the Group’s administration of the LTIP.
While the Group does not have legal ownership of the Burford Capital Limited Employee Benefit Trust and the Group’s
ability to influence the actions of the Burford Capital Limited Employee Benefit Trust is limited by the trust deed, the
Burford Capital Limited Employee Benefit Trust is treated as being controlled by the Group for accounting purposes
and, therefore, is consolidated. Shares held in the Burford Capital Limited Employee Benefit Trust at the period end
are included in issued shares.
Contingent share capital
The acquisition of BCIM Holdings LLC in December 2016 included $15,000,000 of contingent equity consideration. In
calculating the fair value of the contingent equity consideration, a discount of 10% was applied for non-performance
risk, hence the contingent equity consideration was valued at $13,500,000 at the acquisition date. 2,461,682 ordinary
shares will be issued after BCIM Holdings LLC’s investment funds contribute more than $100 million in performance fee
income (and, in certain instances, fee income from new funds or other capital provision income) to the Group. If the
$100 million income target is not achieved, no contingent equity consideration will be payable.
20. Share-based compensation
In 2016, shareholders approved the LTIP, which was amended and extended by shareholder approval on May 13, 2020.
The LTIP creates alignment between participants in the LTIP and public shareholders and creates a long-term retention
vehicle. All of the Group’s employees may be granted awards under the LTIP, and the Group typically makes an initial
LTIP grant to each new employee and periodic grants thereafter.
The LTIP is administered by the Compensation Committee of the Board. The Compensation Committee has discretion to
select plan participants, determine the type and the number of awards and set the performance targets or adjust them
in certain circumstances; provided that, in the period from 2016 to 2030, awards may not be granted under the LTIP if
such grant would cause the number of shares that could be issued under the LTIP or any other share plan adopted by
114 Burford Capital Annual Report 2021
Notes to the consolidated financial statements
continued
20. Share-based compensation continued
the Group to exceed 10% of the Company’s issued ordinary share capital at the proposed date of grant. The satisfaction
of awards through the purchase of shares on the open market will be treated as an issuance of ordinary shares for the
purposes of the above limit for so long as institutional shareholder guidelines recommend this. If awards are satisfied
through a transfer of existing ordinary shares, the percentage limit stated above will not apply.
Awards under the LTIP are typically conditional share awards, which entitle participants to the right to acquire or
receive shares for no or only a nominal payment or as phantom awards for tax and legal purposes. Vesting of awards is
subject to satisfaction of service-based conditions, requiring that the participant remains employed by the Group at
the time of vesting, and may also require satisfaction of performance-based conditions set by the Compensation
Committee at the time of grant and including total shareholder return over a three to five year period. The LTIP
awards granted in 2020 and prior years included both service- and performance-based conditions. Beginning in 2021,
the LTIP awards have continued to have service-based conditions while at least 50% of the awards granted to the
employees who are part of the Company’s senior management must also have a performance-based condition. Awards
generally cliff vest three years from the grant date, and each performance-based condition is measured over the three
financial years beginning with the financial year in which the award was granted.
In the event of a participant’s termination of employment for any reason prior to vesting, other than death, disability
or, in certain circumstances, at the discretion of the Compensation Committee (i.e., good leavers), all outstanding
awards will be forfeited. In the event of the participant’s death, disability or, in certain circumstances, at the
discretion of the Compensation Committee, outstanding awards will continue to vest until the end of the performance
period and will be prorated based on the number of full months the participant was employed during the performance
period. In special circumstances, the Compensation Committee has the discretion to accelerate vesting of the awards
or alter proration or performance targets for outstanding awards.
Awards granted under the LTIP are subject to clawback provisions for up to five years from the vesting date in the
following circumstances: (i) a material financial misstatement or miscalculation of the Group’s audited financial
statements; (ii) the assessment of any performance-based condition on vesting which was based on error, misleading
information or inaccurate assumptions; or (iii) the gross misconduct of a participant.
The Compensation Committee has the discretion, in relation to the performance-based conditions, to adjust the vesting
level if it considers that the performance-based conditions would have been met to a greater or lesser extent at the
end of the full performance period. The Compensation Committee also has the discretion to modify award proration if
it considers that the contribution of the Company’s management team to the creation of shareholder value during the
applicable performance or vesting period would not otherwise be properly recognized.
During the period since the LTIP’s inception, the Group has issued awards in respect of approximately 2.3% of the
Company issued ordinary share capital and, at December 31, 2021, there was a total of approximately 5.1 million
awards issued under the LTIP. Awards granted under the LTIP may be satisfied with new issue shares, a transfer of
treasury shares or shares purchased on the open market. At December 31, 2021, approximately 17.8 million ordinary
shares remained available for future grants under the LTIP through 2030.
The table below sets forth the LTIP activity for the years ended December 31, 2021 and 2020:
(Shares in thousands)
Unvested awards at January 1, 2020
Granted
Earned/vested
Forfeited
Unvested awards at December 31, 2020
Granted
Earned/vested
Forfeited
Unvested awards at December 31, 2021
Weighted-average
grant date fair value
per share
13.97
4.16
9.01
14.68
8.35
8.74
16.24
12.22
7.94
$
$
$
$
$
$
$
$
$
Shares
1,346
1,715
(384)
(21)
2,656
1,895
(156)
(301)
4,094
The estimated grant date fair value of the LTIP awards granted during the year ended December 31, 2021 was
$16,557,000 (2020: $7,132,000; 2019: $11,053,000). The weighted-average remaining contractual term of unvested
Burford Capital Annual Report 2021 115
Notes to the consolidated financial statements
Continued
20. Share-based compensation continued
LTIP awards was 1.7 years at December 31, 2021. At December 31, 2021, the compensation cost related to non-vested
awards not yet recognized was $18,820,000 (2020: $13,151,000; 2019: $12,574,000)
For the years ended December 31, 2021, 2020 and 2019, the Group used the Monte-Carlo model to estimate the fair
value of the LTIP awards granted during such periods.
The table below sets forth the fair values and key assumptions used for valuing the LTIP awards made during the years
December 31, 2021, 2020 and 2019:
Dividend yield
Expected volatility
Risk-free interest rate
Expected term of awards (years)
Weighted-average fair value ($)
Weighted-average share price ($)
2021
0.48 %
54.70 %
0.34 %
3.00
8.74
9.10
2020
0.48 %
53.70 %
(0.02)%
3.00
4.16
6.37
2019
1.00 %
40.80 %
0.63 %
3.00
15.85
16.78
The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the LTIP
awards is indicative of future trends, which may not necessarily be the actual outcome.
21. Earnings per ordinary share
The table below sets forth the computation for basic and diluted net income per ordinary share for the years ending
December 31, 2021, 2020 and 2019:
($ in thousands, except share data)
Net (loss)/income attributable to ordinary shares
Weighted-average shares outstanding:
Basic
Dilutive effect of share-based awards
Diluted
Net (loss)/income per share (in cents):
Basic
Diluted
2021
2020
(72,066)
165,115
2019
180,962
219,049,877
649,582
219,699,459
218,919,822
-
218,919,822
218,649,877
412,122
219,061,999
(33)
(33)
75
75
83
83
22. Financial commitments and contingent liabilities
The table below sets forth the maturity profile of the Group’s financial liabilities based on contractual undiscounted
payments at December 31, 2021:
($ in thousands)
Leases
Debt interest payable
Other liabilities
Debt issued
Financial liabilities related to third-party
interests in capital provision assets
Commitments to financing arrangements
Less than 3
6 to 12
3 to 6
months months months
1,207
30,753
-
83,595
601
22,524
-
-
601
8,229
41,249
-
Total
1 to 5 Greater than No contractual undiscounted
5 years maturity date cash outflows
years
14,859
8,057
295,760
196,754
99,938
4,805
1,034,212
550,617
4,393
37,500
-
400,000
-
-
53,884
-
-
-
-
-
-
398,595
398,595
As a normal part of its business, the Group routinely enters into financing agreements that may require the Group to
provide continuing funding over time, whereas other financing agreements provide for the immediate funding of the
total commitment. The terms of the former type of financing agreements vary widely—e.g., in cases of discretionary
commitments, the Group is not contractually obligated to advance capital and generally would not suffer adverse
financial consequences from failing to do so and, therefore, has broad discretion as to each incremental funding of a
continuing investment and, in cases of definitive commitments, the Group is contractually obligated to fund
116 Burford Capital Annual Report 2021
Notes to the consolidated financial statements
continued
22. Financial commitments and contingent liabilities continued
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).
The Group’s commitments are capped at a fixed amount in its financing agreements. At December 31, 2021, the Group
had outstanding commitments of $1,404,524,000 (2020: $1,160,642,000). In addition, at December 31, 2021, the Group
had $88,260,000 (2020: $93,970,000) of exposure to assets where the Group provided some form of legal risk
arrangement pursuant to which the Group does not generally expect to deploy the full committed capital unless there
is a failure of the claim, such as providing an indemnity for adverse legal costs (assuming the GBP to USD exchange rate
of 1.3477 at December 31, 2021).
Leases
Leases consist primarily of the Group’s leased office space in (i) New York, New York, (ii) Chicago, Illinois, (iii)
Washington, DC, (iv) London, United Kingdom, (v) Singapore, Singapore, (vi) Hong Kong, China and (vii) Sydney,
Australia, which we have determined to be operating leases under US GAAP.
The table below sets forth right-of-use assets and lease liabilities at December 31, 2021 and 2020:
($ in thousands)
Right-of-use assets:
Property and equipment
Lease liabilities:
Other current liabilities
2021
2020
10,948
12,386
11,896
13,520
The table below sets forth the components of lease costs for the years ended December 31, 2021, 2020 and 2019:
Lease Cost
Operating lease cost
Net lease cost
2021
2,273
2,273
$
$
2020
3,005
3,005
$
$
2019
2,220
2,220
$
$
The table below sets forth future total lease payments and total lease liabilities under the operating leases at
December 31, 2021:
($ in thousands)
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: Interest
Total lease liability
Payments
2,450
2,181
2,090
1,735
2,188
4,393
15,037
(3,141)
11,896
The table below sets forth future operating cash flows from operating leases for the years ended December 31, 2021,
2020 and 2019:
($ in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
2021
2020
2019
$
2,456
$
2,943 $
1,433
The table below sets forth weighted-average remaining lease term and weighted average discount rate for the
operating leases at December 31, 2021 and 2020:
Weighted-average remaining lease term (years)
Operating leases
Weighted-average discount rate
Operating leases
2021
2020
7.1
6.7%
7.9
6.7%
Burford Capital Annual Report 2021 117
Notes to the consolidated financial statements
continued
22. Financial commitments and contingent liabilities continued
Litigation
Given the nature of the Group’s business, the Group may from time to time receive claims against it or be subject to
inbound litigation. Having considered the legal merits of any relevant claims or progressed litigation and having
received relevant legal advice (including any legal advice from external advisers), the Group considers there to be no
material contingent liability in respect of any such litigation requiring disclosure in the consolidated financial
statements.
23. Related party transactions
The Group holds investments in associates and joint ventures. See note 18 (“Joint ventures and equity method
investments”) for additional information with respect to the balances held with associates and joint ventures. During
the year ended December 31, 2021, funding on the investments in associates and joint ventures was $19,327,000 (2020:
$11,373,000).
24. Credit risk from financial instruments
The Group is exposed to credit risk in various asset structures (see note 2), most of which involve financing sums
recoverable only out of successful capital provision assets with a concomitant risk of loss of invested cost. Upon
becoming contractually entitled to proceeds, depending on the structure of the particular capital provision asset, the
Group could be a creditor of, and subject to direct or indirect credit risk from, a claimant, a defendant and/or other
parties, or a combination thereof. Moreover, the Group may be indirectly subject to credit risk to the extent a
defendant does not pay a claimant immediately notwithstanding successful adjudication of a claim in the claimant’s
favor. The Group’s credit risk is uncertain given that its entitlement pursuant to its assets is generally not established
until a successful resolution of claims, and its potential credit risk is mitigated by the diversity of its counterparties and
indirect creditors.
The Group is also exposed to credit risk in respect of the marketable securities and cash and cash equivalents. The
credit risk of the cash and cash equivalents is mitigated as all cash is placed with reputable banks with a sound credit
rating (A - 2 or higher by S&P and P - 2 or higher by Moody’s). Marketable securities principally consist of investment
grade corporate bonds and asset-backed securities, as well as investment in investment funds and US treasuries.
In addition, the Group is exposed to credit risk from opponents in litigation insurance. The underwriting process
includes an assessment of counterparty credit risk, and there is a large diversification of counterparties.
The maximum credit risk exposure represented by cash, cash equivalents, marketable securities, due from settlement
of capital provision assets and capital provision assets is specified in the consolidated statements of financial position.
Further, the Group is exposed to credit risk on financial assets held at amortized cost and receivables in other assets.
The maximum credit exposure for such amounts is the carrying value at December 31, 2021 of $22,255,000 (2020:
$22,340,000). The Group reviews the lifetime expected credit loss based on historical collection performance, the
specific provisions of any settlement agreement and a forward-looking assessment of macro-economic factors. Based on
this review, the Group has not identified any material expected credit loss relating to the financial assets held at
amortized cost except for as set out in note 6, the Group recognized $500,000 of impairment during the year ended
December 31, 2021 (2020: $nil; 2019: $1,000,000).
The Group is not exposed to concentration of credit risk from a particular region or customer.
25. Subsequent events
There have been no significant subsequent events.
118 Burford Capital Annual Report 2021
Governance
Directors and senior management
Directors
We are managed by the Board, which consists of six directors. Given our SEC registration and NYSE listing, we assess
director independence under the listing standards of the NYSE and the applicable rules and regulations of the SEC. The
Board has determined that five of our directors (other than Mr. Bogart, our Chief Executive Officer) are independent
under the listing standards of the NYSE and the applicable rules and regulations of the SEC.
There is no minimum or maximum number of directors required to be on the Board. Any person may be appointed or
removed as director by an ordinary resolution. At each annual general meeting all of the directors retire from the
Board and may, if willing to continue to act, be reappointed to the Board at such annual general meeting. If a director
is not reappointed to the Board, such director retains office until another person is appointed in his or her place at
such annual general meeting or, if no person is appointed, until the end of such annual general meeting. There is no
age limit at which a director is required to retire from the Board.
Sir Peter Middleton, former chairman of the Board, retired from the Board at the annual general meeting in 2021, and
Mr. Hugh Steven Wilson, former deputy chairman of the Board, was appointed as the chairman of the Board. Mr. Wilson
is expected to serve as the chairman of the Board (if reelected) until the annual general meeting in 2024. In addition,
Mr. Charles Nigel Kennedy Parkinson, another of our original directors and the chairman of the audit committee of the
Board (the “Audit Committee”), is expected to serve as a member of the Board (if reelected) until the annual general
meeting in 2023. We expect to nominate for election an additional director to the Board at the annual general meeting
in 2022.
The table below sets forth the names, ages and positions of our directors at the date of this Annual Report:
Name
Hugh Steven Wilson*
Christopher Bogart
Robert Gillespie
Andrea Muller
Charles Nigel Kennedy Parkinson
John Sievwright
Age
74
56
66
62
68
67
Position
Chairman
Chief Executive Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
*
Appointed as the chairman of the Board at the annual general meeting in May 2021.
Hugh Steven Wilson, Chairman
Mr. Wilson spent more than 30 years at Latham & Watkins, one of the world’s largest law firms,
where he was Global Co-Chair of the Mergers and Acquisitions Practice Group and chairman of
both the National Litigation Department and the National Mergers and Acquisitions Litigation
Practice. He then joined Tennenbaum Capital Partners, a US-based private investment business,
as Managing Partner and served as the Chief Executive Officer of multiple registered investment
funds managed by Tennenbaum Capital Partners. After his retirement, Mr. Wilson continued to
serve as a Senior Adviser to Tennenbaum Capital Partners through its acquisition by BlackRock. Mr. Wilson has served as
the chairman of the boards of directors and a director of numerous public and private companies. Mr. Wilson also
serves as the chairman of Burford Capital Holdings (UK) Limited, one of our principal subsidiaries, to ensure non-
executive oversight. Mr. Wilson holds a BA from Indiana University, a JD from the University of Chicago Law School and
a Master of Laws degree from Harvard Law School. Mr. Wilson has served as a director on the Board since 2009.
Burford Capital Annual Report 2021 119
Governance
continued
Christopher Bogart, Chief Executive Officer
Before co-founding Burford, Mr. Bogart held numerous senior executive positions with Time
Warner. As Executive Vice President and General Counsel of Time Warner Inc., he managed one of
the largest legal functions in the world. He also served as Chief Executive Officer and one of four
senior executives operating of Time Warner Cable Ventures, with $9 billion in revenue and 30,000
employees, and as Chief Executive Officer of Time Warner Entertainment Ventures. Mr. Bogart
came to Time Warner from Cravath Swaine & Moore, where he was a litigator representing
companies such as IBM, General Electric and Time Warner. He has also served as Chief Executive Officer of Glenavy
Capital LLC, an international investment firm whose projects included Churchill Ventures, a publicly traded media and
technology investment vehicle of which he also served as Chief Executive Officer, as well as the Glenavy Arbitration
Investment Fund, a pioneering litigation finance vehicle. He began his professional career as an investment banker with
what is now JPMorgan Chase. Mr. Bogart earned his law degree with distinction from the Faculty of Law of the
University of Western Ontario, where he was the gold medalist. He clerked for the Chief Justice of Ontario. Mr. Bogart
has been married to Ms. Elizabeth O’Connell, Burford’s Chief Strategy Officer, since 1992. Mr. Bogart has served as a
director on the Board since May 2020.
Robert Gillespie, Non-Executive Director
Mr. Gillespie was most recently the Director General of the UK Takeover Panel. He had a lengthy
career as an investment banker, spending more than 25 years at UBS and its predecessors in a
range of senior positions, including Vice Chairman, Chief Executive Officer, EMEA and Joint Global
Head of Investment Banking, while also serving on the Group Managing Board and the Management
Committee for many years. Mr. Gillespie started his career as a Chartered Accountant at PwC. He
is currently a director of NatWest Group plc (formerly known as Royal Bank of Scotland plc) and
certain of its principal subsidiary companies, including NatWest Holdings Ltd. and Ulster Bank Ltd. He has previously
served as a director of Citizens Financial Group and Ashurst, a law firm, and as the chairman of the board of directors
of Boat Race Company Ltd., Somerset House Trust and the Council of Durham University, from which he graduated with
a degree in economics. Mr. Gillespie has served as a director on the Board since May 2020.
Andrea Muller, Non-Executive Director
Ms. Muller was most recently an Executive Director and Global Head Institutional Business at
Principal Global Investors, where she was previously Chief Executive Officer of Asia. Before that,
Ms. Muller was a Managing Director and Head of Asia Pacific for Fitch Ratings and a Managing
Director at UBS in both Singapore and Paris. She began her career at Shearman & Sterling, where
she worked as a corporate lawyer in both New York and Paris. Ms. Muller has served as a senior
advisor to Forward Risk and Intelligence LLC, a firm focused on corporate investigations, since
April 2020 and has served as a non-executive director of Grantham, Mayo, Van Otterloo & Co since May 2021. Her law
degree is from Georgetown University Law Center, where she served on the Law Review, as is her undergraduate
degree (cum laude), from its School of Foreign Service. Ms. Muller also received a Masters in European Union Studies at
the College of Europe in Bruges, Belgium. Ms. Muller has served as a director on the Board since December 2020.
Charles Nigel Kennedy Parkinson, Non-Executive Director
Mr. Parkinson is a director of a private Guernsey investment company, Mapeley Limited (owned by
the Fortress Investment Group). Mr. Parkinson has served as a People’s Deputy in the States of
Guernsey for all but three years since 2004. He was Treasury Minister from 2008 to 2012 and is a
past President of both the Committee for Economic Development and the States Trading
Supervisory Board. Mr. Parkinson was also a director of Bailiwick Investments Limited, which is
quoted on The International Stock Exchange. Mr. Parkinson is a past partner and director of PKF
(Guernsey) Limited, accountants and fiduciaries. Mr. Parkinson is also a qualified barrister and holds a Master’s degree
in Law from Cambridge University. Mr. Parkinson has been called to the Bar in London and is a Fellow of the Institute of
Chartered Accountants in England and Wales. Mr. Parkinson has served as a director on the Board since 2009.
120 Burford Capital Annual Report 2021
Governance
continued
John Sievwright, Non-Executive Director
Mr. Sievwright is the former Chief Operating Officer, International, of Merrill Lynch.
Mr. Sievwright had a 20 - year career with Merrill Lynch with a range of global leadership positions,
including Chief Operating Officer, Global Markets and Investment Banking; President and Chief
Operating Officer, Merrill Lynch Japan; and Head of Global Futures and Options (during which
time he also served as the President of the Futures Industry Association). Prior to Merrill Lynch,
Mr. Sievwright held finance and accounting functions at Bankers Trust and the Bank of Tokyo. He
began his career as an auditor at Ernst & Young and qualified as a Chartered Accountant. He has an MA in accountancy
and economics from the University of Aberdeen. Mr. Sievwright also serves as a trustee and chairman of the audit
committee for a number of Aberdeen Standard Investments funds and as a non-executive director and the chairman of
the risk committee of Revolut, a financial services company. Mr. Sievwright has previously served as the senior
independent director and chairman of the audit and risk committee at ICAP plc (now NEX Group plc) and the senior
independent director and chairman of the audit committee of FirstGroup plc. Mr. Sievwright has served as a director on
the Board since May 2020.
Senior management
The table below sets forth the names, ages and positions of the members of the Management Committee at the date of
this Annual Report:
Name
Craig Arnott
Christopher Bogart
Kenneth Brause*
Mark Klein
Jonathan Molot
Elizabeth O’Connell
David Perla
Aviva Will
Age
55
56
57
54
55
55
52
53
Position
Deputy Chief Investment Officer
Chief Executive Officer
Chief Financial Officer
Chief Administrative Officer and General Counsel
Chief Investment Officer
Chief Strategy Officer
Co-Chief Operating Officer
Co-Chief Operating Officer
*
Mr. Kenneth Brause joined Burford as our Chief Financial Officer on May 3, 2021. Mr. Jim Kilman served as our
Chief Financial Officer until Mr. Brause joined.
Craig Arnott, Deputy Chief Investment Officer
Prior to joining Burford in August 2016, Mr. Arnott was a barrister at Sixth Floor Selborne and
Wentworth Chambers in Sydney. Previously, he was a Partner and Head of Competition/Antitrust
Law in London at the international law firm Fried Frank. During his time at Fried Frank, Mr. Arnott
oversaw many significant transactions, serving as counsel to the pharmaceuticals company Merck
in its acquisition of Schering-Plough and as European Counsel to Delta & Pine Land in its
acquisition by The Monsanto Company. Before his time at Fried Frank, Mr. Arnott worked at
Cravath Swaine & Moore in New York, Gilbert + Tobin in Sydney and Ashurst in London. Mr. Arnott earned his BCL and
DPhil from the University of Oxford, where he is an alumnus of Balliol College and a Rhodes Scholar. He graduated from
the University of Queensland with First Class Honours in both his Law and Arts degrees, with the University Medals in
both. He clerked for the Honorable W. Pincus of the Federal Court of Australia.
See “—Directors” for biographical information relating to Christopher Bogart, our Chief Executive Officer.
Burford Capital Annual Report 2021 121
Governance
continued
Kenneth Brause, Chief Financial Officer
Prior to joining Burford in May 2021, Mr. Brause was Chief Financial Officer of NYSE-listed OnDeck
Capital (ONDK). He previously served as Executive Vice President and Treasurer of CIT Group and
CIT Bank with responsibility for all areas of CIT’s Treasury function, including funding and liquidity,
investments, balance sheet management and capital management. After beginning his career at
Booz, Allen & Hamilton, he spent over 30 years in the financial services industry with leadership
positions and senior finance roles at Bank of New York (now BNY Mellon), Horizon Blue Cross Blue
Shield, American General (now AIG) and Bankers Trust (now Deutsche Bank). Mr. Brause received his MBA in Finance
and Accounting from the University of Chicago Graduate School of Business (now known as the Booth School of
Business) and his BS of Economics in Finance and Management from The Wharton School of the University of
Pennsylvania.
Mark Klein, Chief Administrative Officer and General Counsel
Prior to joining Burford in September 2017, Mr. Klein spent 13 years at UBS in a wide range of
corporate roles, including as Managing Director and General Counsel of its infrastructure and
private equity business. Most recently, he was a General Counsel and Chief Compliance Officer at
Marketfield Asset Management, a large US-registered investment adviser. Prior to that, Mr. Klein
was General Counsel and Chief Compliance Officer at NewGlobe Capital, a registered investment
adviser. Mr. Klein began his career at Weil, Gotshal & Manges. Mr. Klein earned his JD from New
York University School of Law.
Jonathan Molot, Chief Investment Officer
Prior to co-founding Burford in October 2009, Mr. Molot founded Litigation Risk Solutions, a
business that assisted hedge funds, private equity funds, investment banks, insurance companies
and insurance brokers to develop litigation risk transfers where lawsuits threaten to interfere with
M&A and private equity deals. In addition to his role at Burford, Mr. Molot is a Professor of Law at
Georgetown University. Mr. Molot has also taught courses on litigation risk management and
finance at Harvard Law School, Georgetown University Law Center and George Washington
University Law School. Mr. Molot served as counsel to the economic policy team on the Obama-Biden Presidential
Transition Team and as senior advisor in the Department of the Treasury at the start of the Obama Administration. He
practiced law at Cleary Gottlieb in New York and at Kellogg Hansen in Washington, D.C. Mr. Molot earned his BA magna
cum laude from Yale College and his JD magna cum laude from Harvard Law School, where he was Articles Co-Chair of
the Harvard Law Review and won the Sears Prize, awarded to the two top-performing students in a class of over 500.
He clerked for US Supreme Court Justice Stephen Breyer.
Elizabeth O’Connell CFA, Chief Strategy Officer
One of Burford’s founders, Ms. O’Connell assumed the role of Chief Strategy Officer in
August 2019, having previously served as Chief Financial Officer and as a Managing Director
responsible for overseeing the company’s finance function and investor relations. Prior to
founding Burford, Ms. O’Connell was a Managing Director and Chief Financial Officer of Glenavy
Capital, an international investment firm and a founding shareholder of Burford. Ms. O’Connell
was also Chief Financial Officer of Churchill Ventures Limited, a technology and media company
listed on the American Stock Exchange. Earlier in her career, Ms. O’Connell was a senior Equity Syndicate Director at
Credit Suisse. Before that, she spent the bulk of her investment banking career at Salomon Brothers (later Citigroup).
She began her finance career in foreign exchange sales at Bank of America. Ms. O’Connell is a Chartered Financial
Analyst. Ms. O’Connell earned her MBA in finance from the University of Western Ontario Richard Ivey School of
Business and her BA from the University of Western Ontario. Ms. O’Connell has been married to Christopher Bogart,
Burford’s Chief Executive Officer, since 1992.
122 Burford Capital Annual Report 2021
Governance
continued
David Perla, Co-Chief Operating Officer
Prior to joining Burford in May 2018, Mr. Perla served as President of Bloomberg BNA Legal
Division/Bloomberg Law, where he oversaw Bloomberg BNA’s legal and related products, including
its flagship Bloomberg Law enterprise legal news, information and tools platform. Previously,
Mr. Perla co-founded and was co-Chief Executive Officer and a director of Pangea3, the top-
ranked global legal process outsourcing provider. Pangea3 was acquired by Thomson Reuters in
2010 and grew to over 1,000 employees globally under Mr. Perla’s leadership. Before launching
Pangea3, he was Vice President of Business & Legal Affairs for Monster.com. Mr. Perla began his career in the New York
office of Katten Muchin. Mr. Perla earned both his BA and JD degrees from the University of Pennsylvania.
Aviva Will, Co-Chief Operating Officer
Prior to joining Burford in March 2010, Ms. Will was a senior litigation manager and Assistant
General Counsel at Time Warner Inc., where she managed a portfolio of significant antitrust,
intellectual property and complex commercial litigation. She was also the company’s Chief
Antitrust and Regulatory Counsel, advising senior management on antitrust risk and overseeing all
government antitrust investigations and merger clearances worldwide. Ms. Will also served as the
Assistant Secretary for the company, managing corporate compliance and governance for the
company and the board of directors. Prior to joining Time Warner Inc., Ms. Will was a senior litigator at Cravath,
Swaine & Moore. Ms. Will earned her JD cum laude from Fordham University School of Law, where she was the
Writing & Research Editor of the Fordham Law Review and a member of the Order of the Coif. She earned her BA from
Columbia University. She clerked for the Honorable Stewart G. Pollock on the New Jersey Supreme Court.
Corporate governance
Policies
We have adopted the Finance Sector Code of Corporate Governance issued by the Guernsey Financial Services
Commission, as amended from time to time (the “Guernsey Code of Corporate Governance”), and our compliance has
been the subject of regular reporting to, and oversight by, the Board.
Other than during the Covid - 19 pandemic, the Board holds an in-person meeting every quarter during which it reviews
thoroughly all aspects of the businesses’ strategy and performance. The directors spend at least one evening and one
full day together for each meeting of the Board. During the year ended December 31, 2021, the Board held three of its
quarterly meetings virtually as a result of the Covid - 19 pandemic and held one of its quarterly meetings in person. All
directors attended every meeting of the Board for which they were eligible. Our Chief Executive Officer and our Chief
Investment Officer participated in the entirety of each meeting of the Board (other than the closed session discussed
below), joined as appropriate by other members of senior management. The Board reviews its performance and
director compensation annually and regularly discusses succession planning and management oversight. The Board
meets in closed session without management present at each of its meetings.
The Board also operates through three committees composed entirely of independent directors, the Audit Committee,
the Compensation Committee and the Nominating and Governance Committee, all of which meet throughout the year
as required. The Audit Committee plays an active role not only in overseeing the audit process and managing non-audit
services to ensure the continued independence of the auditors, but also in addressing investment valuations, an area of
key judgment for the business, and enterprise risk. The Compensation Committee reviews and approves compensation
policy and the LTIP awards for all employees. The Nominating and Governance Committee reviews, and makes
recommendations to the Board regarding, the composition of the Board and its committees and also oversees
environmental, social and governance matters generally. In addition to chairing the Board, Mr. Wilson also chairs the
board of directors of Burford Capital Holdings (UK) Limited, a significant subsidiary of Burford, to ensure non-executive
oversight.
Our directors are experienced and collectively well-versed in the legislative and regulatory environment in which we
operate. They are provided with relevant information in a timely manner (including a daily business update) and kept
abreast of relevant information so that they can discharge their duties. The Board has overall responsibility for our
governance, strategy, risk management and key policies and engages in robust scrutiny of the business and our
investment portfolios. The Board regularly evaluates its own performance and discusses improvements to its structure
and processes.
Burford Capital Annual Report 2021 123
Governance
continued
The Board is subject to our various integrity policies, including with respect to conflicts of interest, self-dealing and
fiduciary duties.
At its quarterly meetings, the Board is presented with materials so it can meaningfully assess our performance,
measure the impact of the businesses’ strategy and evaluate its position. We have a significant professional finance
function that provides detailed management reporting and prepares financial statements pursuant to US GAAP. The
Board is in regular contact with Ernst & Young LLP, our independent registered public accounting firm. The Board has
ultimate responsibility for our objectives and business plans.
The Board maintains oversight of balance sheet risk by way of a comprehensive risk presentation at every quarterly
meeting of the Board. The Board is also responsible for considering the impact of climate change on our business
strategy and risk profile. We have a robust management team focused on risk, including a Chief Compliance Officer, a
General Counsel and a number of other in-house lawyers. In addition, dozens of the businesses’ professional staff are
lawyers, including many of the businesses’ most senior members of management.
The Board is responsible for overseeing timely and balanced disclosure and reporting pursuant to applicable
obligations.
The Board’s general practice is to publicly disclose materials that are relevant to our performance whenever necessary
or practical. The Board provides the annual general meeting as a forum for shareholders to exercise their rights as well
as supervises a robust investor relations program.
Our adoption of the Guernsey Code of Corporate Governance is current at February 16, 2022, and is reviewed as part of
our annual reporting process. There are no material departures from our obligations under the Guernsey Code of
Corporate Governance.
Performance
The Board is responsible for our corporate governance. In order to progress our objectives, the Board meets regularly
and is responsible for organizing and directing us in a way that promotes our success. The Board is provided with full
and timely access to all relevant information.
The principal matters considered by the Board during the year ended December 31, 2021, included, among other
things:
▪ Burford’s strategy, related key performance measures and annual budget
▪ Regular reports from our Chief Executive Officer
▪ Reviews and updates on Burford’s businesses and functions
▪ Reports and updates on the investment portfolio and specific investments
▪ Regular reports from the Board’s committees
▪ Compensation and retirement matters, including rewards
▪ Philosophy and strategy
▪ Reports of the Audit Committee on the process and deliberations related to the fair value of investments
▪ The annual report and accounts, the interim report and other ad hoc updates
▪ Capital management strategy, dividend policy and dividends
▪ Enterprise capability and individual succession plans
▪ Burford’s response to the Covid - 19 pandemic
We have an established organizational structure with clearly defined lines of responsibility to, and delegation of
authority by, the Board.
We have adopted a number of key documents related to our corporate governance, including:
▪ Audit Committee Charter
124 Burford Capital Annual Report 2021
Governance
continued
▪ Compensation Committee Charter
▪ Nominating and Governance Committee Charter
These documents and other important information on our governance are posted on our website and may be viewed at
https://www.burfordcapital.com. Shareholders may direct their requests to the attention of our Investor Relations
team at IR@burfordcapital.com. 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.
Committees of the Board
Audit Committee
At the date of this Annual Report, the Audit Committee is comprised of Charles Parkinson (chairman), Robert Gillespie,
Andrea Muller and John Sievwright. The Board has determined that each member of the Audit Committee meets the
definition of “independent director” for purposes of serving on an audit committee under the listing standards of the
NYSE and the applicable rules and regulations of the SEC. Each member of the Audit Committee is financially literate,
and the Board has determined that each of Messrs. Parkinson, Gillespie and Sievwright qualifies as an “audit committee
financial expert”, as defined in the applicable rules and regulations of the SEC.
The Audit Committee is responsible for, among other things:
▪ Monitoring the integrity of our financial statements
▪ Reviewing the effectiveness of our internal controls and risk management systems and considering the management
of enterprise risk
▪ Reviewing our arrangements for concerns to be raised, in confidence, about possible wrongdoing in financial
reporting or other matters and reviewing our procedures for detecting fraud
▪ Reviewing and advising the Board on the need for an internal audit function as we and our business develop
▪ Overseeing the external audit process, including making recommendations relating to the appointment, re-
appointment and removal of our external auditors, evaluation and approval of their remuneration and terms of
engagement and assessing their independence and qualifications
▪ Developing and implementing a policy on the supply of non-audit services by the external auditor
▪ Meeting regularly with the external auditor, including at least once a year without senior management present, and
review the findings of the audit
▪ Considering such other matters as may be requested by the Board
Compensation Committee
At the date of this Annual Report, the Compensation Committee is comprised of John Sievwright (chairman), Charles
Parkinson and Hugh Steven Wilson. The Board has determined that each member of the Compensation Committee
meets the definition of “independent director” for purposes of serving on a compensation committee under the listing
standards of the NYSE and the applicable rules and regulations of the SEC. The Compensation Committee is responsible
for, among other things:
▪ Determining and agreeing with the Board the remuneration for our Chief Executive Officer and our Chief
Investment Officer and the framework or remuneration policy for other senior employees
▪ Within the terms of the agreed remuneration policy and in consultation with our Chief Executive Officer,
determining the total individual remuneration package of each designated senior executive
▪ Approving the design of, and determining targets for, and performance-related pay structures and approving the
total annual payments made under such structures
▪ Reviewing the design of all share incentive plans
▪ Determining the policy for, and scope of, any pension arrangements
▪ Overseeing succession planning for key positions in our senior management
Burford Capital Annual Report 2021 125
Governance
continued
Nominating and Governance Committee
At the date of this Annual Report, the Nominating and Governance Committee is comprised of Hugh Steven Wilson
(chairman), Robert Gillespie and Andrea Muller. The Board has determined that each member of the Nominating and
Governance Committee meets the definition of “independent director” for purposes of serving on a nominating and
governance committee under the listing standards of the NYSE and the applicable rules and regulations of the SEC. The
Nominating and Governance Committee is responsible for, among other things:
▪ Regularly reviewing the structure, size and composition of the Board and making recommendations to the Board
with respect to any changes
▪
Identifying and nominating candidates for the approval of the Board to fill vacancies on the Board as and when they
arise
▪ Formulating plans for succession for directors and senior management
▪ Assisting the Board in its oversight of our management in defining and implementing our strategy relating to
environmental, social and governance matters
▪ Reviewing our leadership needs with a view to ensuring our continued ability to compete effectively in the
marketplace
Code of ethics
In addition to our code of ethics that is part of our compliance manual, which is applicable to all of our employees, we
have adopted the Ethical Conduct Code for Senior Financial Officers that imposes additional obligations on our principal
executive officer, principal financial officer, principal accounting officer and persons performing similar functions. The
Ethical Conduct Code for Senior Financial Officers is accessible on our website at https://www.burfordcapital.com. We
intend to disclose on our website any amendments to, or waivers from, a provision of the Ethical Conduct Code for
Senior Financial Officers to the extent required under the listing standards of the NYSE and the applicable rules and
regulations of the SEC.
Exemptions from NYSE corporate governance rules
We are a “foreign private issuer” under the securities laws of the United States and the rules of the NYSE. Under the
securities laws of the United States, “foreign private issuers” are subject to different disclosure requirements than US-
domiciled registrants, as well as different financial reporting requirements. Subject to certain exceptions, the rules of
the NYSE permit a “foreign private issuer” to follow its home country practice in lieu of the corporate governance
requirements of the NYSE. We are not required to, and do not meet, the following NYSE corporate governance
requirements: (i) the requirement for an annual performance evaluation of the Audit Committee and the Compensation
Committee; (ii) the requirement to adopt and disclose corporate governance guidelines; and (iii) the requirement to
have an internal audit function.
126 Burford Capital Annual Report 2021
Compensation
Director compensation
For the year ended December 31, 2021, our independent non-executive directors received cash fees and grants of our
ordinary shares under the Burford Capital Limited 2021 Non-Employee Directors’ Share Plan (the “NED Plan”) for their
service on the Board and the committees of the Board, with additional compensation for their service on the boards of
directors of our subsidiaries. The cash fees are paid quarterly in arrears, prorated for any partial period, and converted
into a director’s local currency at the exchange rate on the date of payment. The grants of our ordinary shares under
the NED Plan were made on September 16, 2021. No director (other than Mr. Bogart) has an employment agreement or
is entitled to any retirement benefits.
The table below sets forth the cash fees paid to each of our directors and our ordinary shares granted under the NED
Plan as compensation for their service on the Board and the committees of the Board for the year ended December 31,
2021:
Directors
Sir Peter Middleton2,3
Hugh Steven Wilson3
Christopher Bogart5
Robert Gillespie
Andrea Muller
Charles Nigel Kennedy Parkinson3
John Sievwright
Total:
Cash fees
(in US dollar thousands)1
79
162
—
81
81
94
81
578
Ordinary shares
—
4,5754
—
2,3086
2,2884
2,3086
2,3086
13,787
1.
2.
3.
Based on the average exchange rate of $1.3742 per GBP at December 31, 2021.
Sir Peter Middleton retired from the Board during the year ended December 31, 2021, and, as a result, the fees reflect partial-year compensation.
Includes fees for service on the boards of directors of our subsidiaries – Burford Capital Holdings (UK) Limited for Mr. Wilson and Sir Peter Middleton (until
retirement) and Burford Worldwide Insurance Limited for Mr. Parkinson.
4.
Based on the average per share closing price on September 10, September 13 and September 14, 2021, on the NYSE of $10.93.
5. Mr. Bogart does not receive compensation for his service on the Board in addition to his compensation as Burford’s Chief Executive Officer.
6.
Based on the average per share closing price on September 10, September 13 and September 14, 2021, on AIM of £7.83.
Senior management and employee compensation
Our compensation programs are designed to incentivize performance and retention. For many of our employees, the
primary forms of compensation are base salaries and performance-based annual bonuses. The more senior an
employee, the more his or her compensation reflects corporate performance. This compensation mix in part reflects
the origins of our team members, who typically hail from law firms and financial firms that also use this compensation
approach. Most of our employees also participate in the LTIP and the retirement plans. In addition, we offer certain
employees, depending on function and compensation level, participation in our “carry pools” program and our deferred
compensation plan as well as offer all eligible employees the ability to invest in our private investment funds on a fee-
less basis.
At February 28, 2022, our employees (excluding members of our senior management) held an aggregate of 532,370
ordinary shares and had 2,420,221 unvested LTIP awards. See “—Holdings and commitments to managed funds of
directors and senior management—Senior management” for holdings of our ordinary shares by members of our senior
management.
LTIP
In 2016, shareholders approved the LTIP, which was amended and extended by shareholder approval on May 13, 2020.
The LTIP creates alignment between participants in the LTIP and public shareholders and creates a long-term retention
vehicle. All of our employees may be granted awards under the LTIP, and we typically make an initial LTIP grant to
each new employee and periodic grants thereafter.
The LTIP is administered by the compensation committee of the Board (the “Compensation Committee”). The
Compensation Committee has discretion to select plan participants, determine the type and the number of awards and
set the performance targets or adjust them in certain circumstances; provided that, in the period from 2016 to 2030,
awards may not be granted under the LTIP if such grant would cause the number of shares that could be issued under
Burford Capital Annual Report 2021 127
Compensation
continued
the LTIP or any other share plan adopted by us to exceed 10% of our issued ordinary share capital at the proposed date
of grant. The satisfaction of awards through the purchase of shares on the open market will be treated as an issuance
of ordinary shares for the purposes of the above limit for so long as institutional shareholder guidelines recommend
this. If awards are satisfied through a transfer of existing ordinary shares, the percentage limit stated above will not
apply.
Awards under the LTIP are typically conditional share awards, which entitle participants to the right to acquire or
receive shares for no or only a nominal payment or as phantom awards for tax and legal purposes. Vesting of awards is
subject to satisfaction of service-based conditions, requiring that the participant remains employed by us at the time
of vesting, and may also require satisfaction of performance-based conditions set by the Compensation Committee at
the time of grant and including total shareholder return over a three to five year period. The LTIP awards granted in
2020 and prior years included both service- and performance-based conditions. Beginning in 2021, the LTIP awards have
continued to have service-based conditions while at least 50% of the awards granted to the employees who are part of
our senior management must also have a performance-based condition. Awards generally cliff vest three years from the
grant date, and each performance-based condition is measured over the three financial years beginning with the
financial year in which the award was granted.
In the event of a participant’s termination of employment for any reason prior to vesting, other than death, disability
or, in certain circumstances, at the discretion of the Compensation Committee (i.e., good leavers), all outstanding
awards will be forfeited. In the event of the participant’s death, disability or, in certain circumstances, at the
discretion of the Compensation Committee, outstanding awards will continue to vest until the end of the performance
period and will be prorated based on the number of full months the participant was employed during the performance
period. In special circumstances, the Compensation Committee has the discretion to accelerate vesting of the awards
or alter proration or performance targets for outstanding awards.
Awards granted under the LTIP are subject to clawback provisions for up to five years from the vesting date in the
following circumstances: (i) a material financial misstatement or miscalculation of our audited financial statements;
(ii) the assessment of any performance-based condition on vesting which was based on error, misleading information or
inaccurate assumptions; or (iii) the gross misconduct of a participant.
The Compensation Committee has the discretion, in relation to the performance-based conditions, to adjust the vesting
level if it considers that the performance-based conditions would have been met to a greater or lesser extent at the
end of the full performance period. The Compensation Committee also has the discretion to modify award proration if
it considers that the contribution of our management team to the creation of shareholder value during the applicable
performance or vesting period would not otherwise be properly recognized.
During the period since the LTIP’s inception, we have issued awards in respect of approximately 2.3% of our issued
ordinary share capital and, at December 31, 2021, there was a total of approximately 5.1 million awards issued under
the LTIP. Awards granted under the LTIP may be satisfied with new issue shares, a transfer of treasury shares or shares
purchased on the open market. To satisfy vesting of awards under the LTIP for the year ended December 31, 2021, we
purchased approximately 351,000 ordinary shares on the open market. See “Purchases of equity securities by the issuer
and affiliated purchasers” for additional information relating to our purchases of ordinary shares. At December 31,
2021, approximately 17.8 million ordinary shares remained available for future grants under the LTIP through 2030.
The table below sets forth the LTIP activity for the year ended December 31, 2021, and the LTIP awards scheduled to
vest during the year ending December 31, 2022:
LTIP Activity
Unvested LTIP awards at January 1
Granted
Earned / vested
Forfeited
Unvested LTIP awards at December 31
LTIP awards scheduled to vest during the year ending December 31, 2022
“Phantom carry pools” program
2021
(Shares in thousands)
2,656
1,895
(156)
(301)
4,094
634
In 2018, we began operating a “carry pools” program where a portion of the return from certain pools of assets
(including nearly all capital provision–direct matters, except for asset recovery investments, and excluding investments
in capital provision–indirect matters) originated in a calendar year is included in separate legal entities. Certain
128 Burford Capital Annual Report 2021
Compensation
continued
employees were invited to participate in a profits interest arrangement under which a portion of the cash profits in the
carry pools are available for allocation to those employees. The “carry pools” program provides employees with direct
alignment to the cash performance of our assets. Those employees who participated in “carry pools” program paid full
market value for the interests at the time of acquisition with funds that we loaned to them (other than in the case of
our senior management, to whom we do not extend loans). The profits interest was not remuneration for services
provided to us or our subsidiaries. With effect from the end of 2020, in order to reduce operational complexity and
align better with future anticipated accounting requirements, we restructured our “carry pools” program to terminate
the existing plan and replace it with a “phantom carry pool” program that will continue to reference the same assets
and pay out to participating employees (including senior management) as profits are received on those assets.
Payments under the “phantom carry pool” program are treated as compensation.
Payments under the “phantom carry pool” program are awarded on a vintage year basis. Accordingly, each year, we
award eligible employees the right to receive a portion of the realized cash gains generated over time by the matters
for which financing was originated during such vintage year. In each subsequent year, we determine the realized
performance of all of the matters for such vintage year and make payments under the “phantom carry pool” program
based on their collective performance in such year, so that realized losses offset realized gains. Payments under the
“phantom carry pool” program continue until each vintage year is fully resolved. We awarded approximately 9% of
realized gains in the vintage year 2021 in that year’s “phantom carry pool”.
Deferred Compensation Plan
We maintain a deferred compensation plan (the “Deferred Compensation Plan”), under which a select group of highly
compensated and management employees can elect to defer a portion of their compensation until future years.
Participants may elect to defer base salary, bonuses, payments under our “carry pools” program and/or LTIP awards.
The deferral period is a minimum of three years, and deferral distributions may be elected to be received in a lump
sum or in annual installments. During the deferral period, the participant’s deferral account is notionally invested in
investment funds available under the Deferred Compensation Plan. In addition, we will make a matching contribution
to the participant’s deferral account to the extent it is notionally invested in our ordinary shares. Distributions from
the Deferred Compensation Plan will be made in accordance with the timing and form selected by the individual
participant when the deferral is first elected. The Deferred Compensation Plan is administered and maintained by an
independent third party.
Retirement savings
We offer a defined contribution 401(k) retirement plan to our US employees, under which employees make pre-tax or
Roth contributions to a retirement savings account and we make a corresponding contribution to their accounts. A
similar arrangement is in effect for our UK employees. For the year ended December 31, 2021, we contributed a total
of $0.6 million for US employees and $0.6 million for UK employees under these retirement plans. In addition, we had a
total of $0.03 million in pension costs for our employees in jurisdictions other than the United States and the United
Kingdom.
Senior management compensation
The table below sets forth the aggregate compensation paid or accrued during the year ended December 31, 2021
(including cash bonus and other incentive compensation for the year ended December 31, 2021, that was paid or is
expected to be paid in the year ending December 31, 2022) for the senior management as a group:
Compensation type
Salary1
Annual incentive bonus2
Performance related-other3
LTIP grant
Burford matching contribution to 401(k) retirement plan
Senior management as a group (8 people)4:
2021
($ in thousands)
5,605
9,208
4,883
4,229
102
24,027
1.
2.
3.
4.
Includes approximately $0.5 million deferred under the Deferred Compensation Plan.
Includes approximately $2.9 million deferred under the Deferred Compensation Plan.
Consists of payments under the “phantom carry pool” program and gains on capital provision assets.
Includes compensation for services as our Chief Financial Officer for (i) Mr. Jim Kilman from January 1, 2021, through April 30, 202,1 and (ii) Mr. Ken
Brause from May 3, 2021, through December 31, 2021.
Burford Capital Annual Report 2021 129
Compensation
continued
Executive compensation
Mr. Bogart, our Chief Executive Officer, and Mr. Molot, our Chief Investment Officer, are employed under identical
employment agreements which expire on December 31, 2024. Upon expiration of their respective terms, the
employment agreements will renew automatically for successive one-year periods if neither we nor the relevant
executive provides notice of an intent to terminate the agreement. Mr. Bogart and Mr. Molot receive identical
compensation reflecting their roles as joint founders and leaders of our business, and both report directly to the Board.
Each of the employment agreements provides for a base salary of $950,000 and an annual bonus tied to our income,
excluding the impact of any fair value adjustments.
For the year ended December 31, 2021, (i) Mr. Bogart and Mr. Molot will receive $2.25 million each in cash bonus, the
same level as last year, (ii) Mr. Bogart and Mr. Molot will receive $1.391 million each in LTIP awards, consistent with
their employment agreements, which permit us to pay up to 50% of their bonuses in LTIP awards (or such lesser amount
as necessary to comply with the LTIP), and (iii) under an election made when we adopted the Deferred Compensation
Plan in January 2021, Mr. Bogart and Mr. Molot will defer the remainder of their bonus, $1.178 million each, to the
Deferred Compensation Plan and allocate it 100% to the Burford Stock Fund in the Deferred Compensation Plan.
Mr. Bogart and Mr. Molot are also participants in the defined contribution 401(k) retirement plan and the “carry pools”
program. For the year ended December 31, 2021, each executive contributed to the defined contribution
401(k) retirement plan, and we made a matching contribution of $11,400 for each of them. For the year ended
December 31, 2021, each of Mr. Bogart and Mr. Molot received or is expected to receive in the year ending
December 31, 2022, a payment of $99,000 from the “carry pools” program and elected to defer an additional $81,000
to the Deferred Compensation Plan.
In addition, Mr. Bogart and Mr. Molot take advantage of the opportunity offered to all eligible employees to invest in
our private investment funds on a fee-less basis, again showing their alignment with investors. At December 31, 2021,
each executive’s total commitments to such funds totaled $2.0 million.
Holdings and commitments to managed funds of directors and senior management
The tables below set forth the holdings of our securities and commitments to managed funds of our directors and senior
management at February 28, 2022. Beneficial ownership does not necessarily imply that the named person has the
economic or other benefits of ownership. For purposes of this table, in accordance with applicable SEC rules regarding
the determination of beneficial ownership, shares that a person or entity has the right to acquire within 60 days of
February 28, 2022, through the exercise of any option, warrant or other right are considered as beneficially owned by
the person holding those options, warrants or other rights. The applicable percentage of ownership of each shareholder
is based on 219,049,877 ordinary shares outstanding at February 28, 2022.
Directors
Sir Peter Middleton GCB2
Hugh Steven Wilson
Robert Gillespie
Andrea Muller
Charles Nigel Kennedy Parkinson
John Sievwright
Total:
Ordinary shares % of ordinary shares
owned
100,000
279,575
7,308
2,288
10,308
12,308
411,787
Bonds owned Commitments to
outstanding (principal amount) managed funds1
—
1,500,000
—
—
50,000
—
1,550,000
* $
*
*
*
*
*
0.19% $
400,000
—
—
— $
650,000 $
250,000
— $
*
1.
2.
Represents less than 0.1%.
Represents commitments to the Strategic Value Fund and/or Burford Opportunity Fund B LP, as applicable.
Retired from the Board at the annual general meeting in May 2021.
130 Burford Capital Annual Report 2021
Compensation
continued
Senior management
Craig Arnott
Christopher Bogart3
Kenneth Brause
Mark Klein
Jonathan Molot
Elizabeth O’Connell
David Perla
Aviva Will
Senior management as a group (8 people)9
Ordinary shares % of ordinary shares
owned
39,1792
9,148,108
—
21,1124
9,762,7565
91,0186
30,2407
262,7118
19,355,124
Bonds owned Commitments to
outstanding (principal amount) managed funds1
75,000
2,000,000
—
25,000
2,000,000
—
75,000
250,000
4,425,000
— $
500,000 $
— $
— $
500,000 $
— $
— $
— $
1,000,000 $
* $
4.18% $
— $
* $
4.46% $
* $
* $
* $
8.84% $
*
1.
2.
3.
4.
5.
6.
7.
8.
Represents less than 0.1%.
Represents commitments to the Strategic Value Fund and/or Burford Opportunity Fund B LP, as applicable.
Includes 17,430 ordinary shares underlying the LTIP awards that are expected to vest within 60 days of February 28, 2022.
Represents securities beneficially owned, directly and indirectly, by Mr. Bogart, over which he has or shares voting and dispositive control, but does not
include securities held by Ms. O’Connell, Mr. Bogart’s spouse and our Chief Strategy Officer, as to which Mr. Bogart disclaims beneficial ownership.
Includes 216,350 ordinary shares held by a US charitable foundation established by Mr. Bogart.
Includes 8,715 ordinary shares underlying the LTIP awards that are expected to vest within 60 days of February 28, 2022.
Includes 241,035 ordinary shares held by a US charitable foundation established by Mr. Molot.
Includes 26,144 ordinary shares underlying the LTIP awards that are expected to vest within 60 days of February 28, 2022.
Includes 21,787 ordinary shares underlying the LTIP awards that are expected to vest within 60 days of February 28, 2022.
Includes 39,216 ordinary shares underlying the LTIP awards that are expected to vest within 60 days of February 28, 2022.
9. Does not include any securities held by Mr. Kilman who served as our Chief Financial Officer until Mr. Brause joined on May 3, 2021.
Burford Capital Annual Report 2021 131
Major shareholders and related party transactions
Major Shareholders
The table below sets forth certain information regarding the beneficial ownership of our outstanding ordinary shares at
February 28, 2022, held by each person or entity that we know beneficially owns 5% or more of our ordinary shares.
Beneficial ownership does not necessarily imply that the named person has the economic or other benefits of
ownership. For purposes of this table, in accordance with applicable SEC rules regarding the determination of
beneficial ownership, shares that a person or entity has the right to acquire within 60 days of February 28, 2022,
through the exercise of any option, warrant or other right are considered as beneficially owned by the person holding
those options, warrants or other rights. The applicable percentage of ownership of each shareholder is based on
219,049,877 ordinary shares outstanding at February 28, 2022.
Identity of person or group
Mithaq Capital SPC
Invesco Ltd.
Ameriprise Financial, Inc.
CI Investments Inc.
Number
of ordinary shares
23,021,070 (1)
12,416,792 (2)
11,122,631 (3)
10,934,272 (4)
% of ordinary shares
outstanding
10.51 %
5.67 %
5.08 %
5.00 %
(1) Based solely on the Schedule 13G filed on December 31, 2020. Represents ordinary shares beneficially owned at December 31, 2020, by Mithaq Capital
SPC, having received the shares without consideration from Mithaq Capital, an affiliated entity. Based on the absence of any disclosures on the
Form TR - 1, Mithaq Capital did not beneficially own a disclosable shareholding in Burford at March 31, 2018. As previously reported on the Form TR - 1,
(i) at March 31, 2019, Mithaq Capital beneficially owned 11,122,413 ordinary shares, constituting 5.10% of the then outstanding ordinary shares, and (ii) at
August 18, 2020, Mithaq Capital beneficially owned 23,021,070 ordinary shares, constituting 10.51% of the then outstanding ordinary shares.
(2) Based solely on the Schedule 13G/A filed on February 9, 2022. Represents ordinary shares beneficially owned at February 4, 2022, by Invesco Ltd. As
previously reported on the Form TR - 1, (i) at March 31, 2019, Invesco Ltd. beneficially owned 30,399,798 ordinary shares, constituting 13.90% of the then
outstanding ordinary shares, and (ii) at February 24, 2020, Invesco Ltd. beneficially owned 20,793,302 ordinary shares, constituting 9.49% of the then
outstanding ordinary shares and, as previously reported on the Schedule 13G, at February 16, 2020, Invesco Ltd. beneficially owned 13,987,058 ordinary
shares, constituting 6.39% of the then outstanding ordinary shares.
(3) Based solely on the Schedule 13G filed on February 14, 2022. Represents ordinary shares beneficially owned at February 14, 2022, by Ameriprise
Financial, Inc. Based on the absence of any disclosures on the Form TR - 1, Ameriprise Financial, Inc. did not beneficially own a disclosable shareholding in
Burford at March 31, 2019, or March 31, 2020. As previously reported on the Form TR - 1, at December 20, 2021, Ameriprise Financial, Inc. beneficially
owned 11,020,999 ordinary shares, constituting 5.03% of the then outstanding ordinary shares.
(4) Based solely on the Form TR - 1 included as exhibit 99.1 to the Form 6 - K furnished on January 19, 2022. Represents ordinary shares beneficially owned at
January 17, 2022, by CI Investments Inc. Based on the absence of any disclosures on the Form TR - 1, CI Investments Inc. did not beneficially own a
disclosable shareholding in Burford at March 31, 2019, March 31, 2020 or March 31, 2021.
We have a single class of ordinary shares and, accordingly, our major shareholders have the same voting rights as our
other shareholders.
At February 28, 2022, based on a preliminary analysis of our shareholders and share register, approximately 39% of our
outstanding ordinary shares were held by residents of the United States, with 13 holders of record in the United States
and additional holdings through banks, brokers and other nominees.
See “Compensation—Holdings and commitments to managed funds of directors and senior management” for
information relating to holdings of our directors and members of our senior management.
Related party transactions
At February 28, 2022, our directors and members of our senior management held our ordinary shares and/or bonds
and/or had commitments to certain of our managed funds. See “Compensation—Holdings and commitments to
managed funds of directors and senior management” for additional information relating to holdings and commitments
to managed funds of our directors and members of our senior management.
We hold certain of our capital provision assets through joint ventures or companies with equity method investments
that are our related parties. See note 18 (“Joint ventures and equity method investments”) and note 23 (“Related
party transactions”) to our consolidated financial statements for additional information relating to joint ventures and
companies with equity method investments.
132 Burford Capital Annual Report 2021
Risk factors
Investing in our securities involves risk. Persons investing in our securities should carefully consider the risks set forth
below and the other information contained in this Annual Report and our other reports that we file with, or furnish to,
the SEC, including our consolidated financial statements and accompanying notes. Any of the following risks could
materially and adversely affect our business, financial position, results of operations and/or liquidity. Our business,
financial position, results of operations and/or liquidity could also be materially and adversely affected by additional
factors that apply to all companies generally as well as other risks that are not currently known to us or that we
currently view to be immaterial. In any such case, the trading price of our securities could decline, and you may lose
all or part of your original investment. While we attempt to mitigate known risks to the extent we believe to be
practicable and reasonable, we can provide no assurance, and we make no representation, that our mitigation efforts
will be successful. See “Forward-looking statements” for additional information.
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.
It is difficult to predict the outcome of litigation, particularly complex commercial litigation of the type in which we
specialize. We typically advance capital to our counterparties on a non-recourse basis and are therefore entirely
dependent on a positive, cash-generative outcome in the underlying litigation matter in order to recover our principal
and earn a return. If our counterparty is unsuccessful in the underlying litigation matter, if the damages awarded in
favor of our counterparty are less than we expect or if it is not possible to successfully enforce a favorable judgment,
we could suffer a variety of adverse consequences, including the total loss of our deployed capital and, in some
jurisdictions, liability for the adverse costs of the successful party to the litigation. In addition, to the extent we have
provided insurance coverage in respect of adverse cost risk in the matter, a loss resulting from an adverse outcome
would be compounded with additional adverse cost loss. Unfavorable outcomes in litigation matters we have financed
could, individually or in the aggregate, have a material adverse effect on our business, financial position, results of
operations and/or liquidity.
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 revenues, earnings and cash flows can vary materially from period to period due to the nature of our business,
including the fact that litigation matters often take many years to resolve and the processes involved are subject to
change and uncertainty. We are unable to control the progress and resolution of most of our assets because their
timing depends upon parties working through the legal systems in various jurisdictions. As a result, the timelines for
our receipt of any potential return on our assets and the related cash inflows can be long and are difficult to predict.
Events or conditions that have not been anticipated may occur and may have a significant effect on the outcome or
process of a litigation matter, which may reduce the actual rate of return on an asset. Moreover, the substantive or
procedural law relevant to the litigation matters brought by our counterparties may change after we have committed
capital. The time, complexity and expense involved in collecting returns on our assets, including the enforcement of
judgments and the release of funds held in escrow pending the resolution of a litigation matter, also affect our cash
flows. All of these factors contribute to potentially significant volatility in our financial performance and the trading
price of our ordinary shares. In addition, we cannot assure you that we will generate cash flows from the returns on our
assets in an amount sufficient to enable us to meet all of our obligations or to fund our working capital, asset and other
business needs.
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 success depends on our ability to source and select legal finance assets that will be successful and pay returns,
which in turn depends upon the conclusion, management and realization of suitable funding opportunities. The
Commitments Committee is primarily responsible for approving the opportunities that have been identified for us to
fund. There can be no assurance that we will be successful in sourcing suitable legal finance assets in a timely manner
or at all or in sourcing a sufficient number of suitable legal assets to finance that meet our diversification, underwriting
and other requirements. Our ability to select such legal finance assets depends on the availability of desirable funding
opportunities, which is subject to market conditions, client demand, pricing, competition and other factors outside of
Burford Capital Annual Report 2021 133
Risk factors
continued
our control, including changes in regulations in various jurisdictions in which we operate and limitations on our ability
to adequately investigate the merits of the case or parties involved, among others. A failure by us to identify and
select suitable legal finance assets to fund could have a material adverse effect on our business, financial position,
results of operations and/or liquidity and 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.
We obtain privileged information as part of our analysis of potential legal finance assets and as part of our ongoing
asset monitoring. When we receive privileged information, we are under a strict obligation to protect it. Among other
things, this obligation requires us to tightly restrict access to the privileged information itself.
As described under “—Information technology, third-party service providers and cybersecurity risks—Cybersecurity
risks could result in the loss of data, interruptions in our business, damage to our reputation and subject us to
regulatory actions, increased costs and financial losses, each of which could have a material adverse effect on our
business, financial position, results of operations and/or liquidity”, attempts to gain unauthorized access to our
information technology systems have become increasingly sophisticated over time, and our efforts to detect and
investigate all security incidents and to prevent their recurrence may be unsuccessful. In addition to the risk of a
breach of confidentiality as a result of a cyber incident, privileged information could be compromised in other ways.
Although we have implemented controls to protect privileged information, there can be no assurance that such controls
will be effective. If our employees, third-party service providers or counterparties engage in misconduct or fail to
follow appropriate security measures, the improper release or use of privileged information could result.
The improper use or disclosure of, or access to, our intellectual property or litigation or business strategy or those of
our clients due to a cybersecurity breach, unauthorized use or theft could harm our competitive position, reduce the
value of our capital provision assets and have a negative impact on our reputation or otherwise adversely affect our
business, financial position, results of operations and/or liquidity. In addition, if the courts were to find that we have
improperly used or disclosed privileged information, there could be significant adverse consequences for the litigant,
and we could be subject to complaints or lawsuits for damages or regulatory action as a result.
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.
We use internally developed models and other decision science tools in our operations, including to assist us in
evaluating the expected return of potential legal finance assets. At the time we enter into a contract to finance a legal
asset, however, we are likely to have imperfect information about the litigation matter in question and the likely
future outcome. In addition, our historical information about cases or portfolios of cases may not be indicative of the
characteristics of subsequent cases or portfolios of cases within the same industry or with comparable other
characteristics, and our internal databases and external statistical data may not be as extensive as needed for
comprehensive decision science. In addition, we disclose calculations derived from our internal modeling of individual
matters and our portfolio as a whole. The inherent volatility and unpredictability of legal finance assets precludes
forecasting and limits the predictive nature of our internal models. The inherent nature of probabilistic modeling is
that actual results will differ from the modeled results, and such differences could be material. If the statistical
models and decision science tools we use fail to accurately evaluate and predict returns, there could be 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.
To make informed financing decisions, we often need access to information beyond that which is publicly available
about a litigation matter and regularly seek and obtain privileged information, which is 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. Such privileged information can lose its protection and become
accessible to a litigation opponent if it is used publicly (a concept called “waiver”), which could have significant
adverse consequences for the litigant. The laws relating to privileged information are complex and continue to evolve,
and we could be adversely affected by court rulings, changes in law or other developments. If a court in a particular
jurisdiction were to find that disclosure to litigation funders effected a waiver of applicable legal privileges, our access
134 Burford Capital Annual Report 2021
Risk factors
continued
to such privileged information could become constrained in that jurisdiction. Any significant limitations on our ability
to access such privileged information could adversely affect our ability to conduct due diligence and make informed
financing decisions with respect to certain 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.
Before offering to fund legal finance assets on specified economic and other terms, we conduct due diligence based on
the facts and circumstances applicable to the matter that may be the subject of such funding. As part of our due
diligence, we may be required to evaluate important and complex business, financial, tax, accounting, technological,
environmental, social, governance, ethical, political, legal and regulatory issues. When conducting due diligence and
making an assessment regarding funding a legal finance asset, we rely on the information available to us, including
information provided by the parties involved in the case we intend to finance. We have no control over the accuracy or
sufficiency of information received from such third parties and, in some cases, we have limited experience or no prior
dealings with such third parties and are unable to assess their integrity.
The due diligence investigation that we carry out with respect to any funding opportunity may not reveal or highlight
all relevant facts (including, among others, bribery, fraud or other illegal activities) or risks that would be helpful in
evaluating such opportunity. Particularly where we fund a case that is at an early stage, such as before the conclusion
of the fact discovery stage in a US litigation, we may have limited ability to ascertain the facts that may have a
material impact on the outcome of the litigation. In addition, although we regularly perform factual and legal research
beyond what is provided to us by our prospective counterparties, we may underestimate the importance of a legal or
factual risk of funding an asset that ends up being conclusive. There are also material factors that contribute to the
outcome of funding a legal finance asset that are impossible to research or predict at the outset, such as a judge’s or
jury’s positive or negative disposition towards a particular party, witness or lawyer.
Further, we may not identify or foresee future developments that could have a material adverse effect on our return
on a legal finance asset, such as the credit risk from our counterparty or from a party in a case. For example, we may
not uncover the risk associated with poor management of general finances or the litigation itself by a counterparty or
other party, any insolvency risk or potential key-person risk from a counterparty or other party or a misalignment of
economic incentives between us and a counterparty because of the economics of our funding and developments in the
litigation. In addition, financial fraud or other deceptive practices, failures by personnel at our counterparties to
comply with anti-bribery, trade or economic sanctions or other legal and regulatory requirements or our counterparties
being or becoming subject to trade or economic sanctions could cause significant legal, reputational and business harm
to us.
Poor returns on our legal finance assets due to failures in our due diligence process or unforeseen developments could
adversely affect our reputation and could materially and adversely affect our business, financial position, results of
operations and/or liquidity.
Investors will not have an opportunity to independently evaluate our legal finance assets.
We generally do not disclose details of our existing or prospective legal finance assets (including their valuations for
accounting purposes) on an individual basis because of confidentiality, attorney work product and other restrictions. As
a result, investors will not have an opportunity to evaluate our legal finance assets and will be dependent upon our
judgment and ability in selecting, managing and valuing our 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.
Prior to the conclusion of a litigation matter, we are subject to the risk that a claimant who is our counterparty, a
party against whom our counterparty is making a claim, a law firm or another relevant party will encounter financial
difficulties or become insolvent, which could delay or prevent the litigation matter from being resolved and may
adversely affect our ability to earn a return on the relevant legal finance asset. On becoming contractually entitled to
proceeds after the conclusion of a litigation matter, depending on the structure of the particular legal finance asset,
we could be a creditor of, or otherwise subject to credit risk from, a claimant, a party against whom our counterparty
is making a claim, a law firm or another relevant party. Moreover, we may be indirectly subject to credit risk to the
extent a defendant does not pay a claimant immediately, notwithstanding successful adjudication of a claim in the
claimant’s favor. If the defendant is unable or unwilling to pay or perform or if any of the parties challenges the
Burford Capital Annual Report 2021 135
Risk factors
continued
judgment or award, we may encounter difficulties in realization. In addition to the credit risk associated with
individual parties to a litigation matter, losses as a result of the credit exposures inherent in our business may
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.
Our capital provision-direct portfolio includes certain related exposures where we have financed multiple different
counterparties in relation to the same or very similar claims, such that outcomes on these related exposures are likely
to be correlated. We estimate that the carrying value of the assets (excluding YPF) underlying our largest correlated
exposure represented approximately 9% of the Burford-only balance sheet’s carrying value of capital provision-direct
assets (excluding YPF) at December 31, 2021. In addition, we estimate that the carrying value of the assets (excluding
YPF) underlying our largest correlated exposure represented approximately 11% of the Group-wide carrying value of
capital provision-direct assets (excluding YPF) at December 31, 2021. An adverse litigation outcome in respect of any of
these individual claims may result in, or increase the likelihood of, losses on the other related claims.
In addition, we have a number of assets involving the same counterparty. See “Financial and operational review—
Current portfolio—Portfolio concentrations” for information with respect to our portfolio concentration with a law firm
and a corporate client. Accordingly, although our direct financial exposure to such law firm and/or corporate client is
limited to matters in which such law firm or corporate client, as applicable, is our counterparty, if such law firm or
corporate client were to encounter financial difficulties, dissolve or suffer a substantial loss of personnel, there could
be a material adverse effect on our business, financial position, results of operations and/or liquidity.
Our exposure to cases likely to have correlated results or counterparty concentration could lead to increased volatility
and could materially and adversely affect our business, financial position, results of operations and/or liquidity.
The lack of liquidity of our legal finance assets may adversely affect our business, financial position, results of
operations and/or liquidity.
Our legal finance assets typically require significant advances of funds with no guarantee of return or repayment. It
may be difficult or impossible to find willing buyers for these assets at prices we believe are representative of their
underlying value or at all. Volatility in markets generally also could negatively impact the liquidity of our assets.
Illiquid assets typically experience greater price volatility as a ready market does not exist and therefore they can be
more difficult to value. In addition, the prices prospective buyers are willing to pay for illiquid assets may be more
subjective than the prices for more liquid assets. The illiquidity of legal finance assets also is exacerbated by the fact
that third parties may be limited in their ability to value these assets because they cannot perform full legal due
diligence on a case due to the limitations imposed by applicable legal privileges and protections. The illiquidity of our
assets may make it difficult for us to sell such assets if the need or desire arises. If we are required to liquidate all or a
portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded
our assets. As a result, our ability to change the makeup of our portfolio of assets in response to changes in economic
and other conditions may be relatively limited, which could adversely affect our business, financial position, results of
operations and/or liquidity.
We have commitments that are in excess of funds raised.
We typically have commitments to fund legal finance assets that exceed our total funds available. We seek to manage
our available capital and our capital provision assets portfolio to minimize the risk of a mismatch between the timing of
when our commitments will be drawn and available cash, and many of our capital provision agreements set forth
timetables for draws or structure draws with reference to case events, which provides us with some control over the
timing and amounts of capital we provide in respect of our commitments. However, as we do not control the timing of
developments with respect to the matters that we fund, it is possible that such a mismatch will occur, in which case
we would need either to raise additional capital (which could include the potential sale of an interest in one or more of
our existing legal finance assets) or to decline to meet a commitment. There can be no assurance that we will be able
to raise capital on reasonable terms or at all, and our inability to do so could cause damage to our business and the
potential loss of business and financial relationships. A failure by us to fund our definitive commitments may result in
adverse consequences to our business such as a loss of entitlement to any returns with respect to such definitive
commitments, a loss of capital we have invested or a claim by a counterparty for damages. Some of our funds also have
commitments in excess of funds available and, accordingly, have some of the foregoing risks.
136 Burford Capital Annual Report 2021
Risk factors
continued
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.
Our strategy includes raising external capital to finance growth of our business. If market conditions were to restrict
our access to external capital, our growth prospects could be adversely affected, especially if cases resolve at a
significantly slower pace or if we are unable to attract new business due to the market conditions. In addition, to the
extent that conditions in the credit markets impair our ability to refinance or extend maturities on our outstanding
indebtedness, either on favorable terms or at all, our performance may be negatively impacted and may result in our
inability to repay debt at maturity or pay interests when due. Any of the above factors, individually or in the
aggregate, could adversely affect our growth prospects, business, financial position, results of operations and/or
liquidity.
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.
Competition for attractive opportunities to finance legal assets may affect our ability to finance on terms which we
consider attractive. We compete to acquire legal finance assets with a wide variety of other entities. Our competitors
may have access to greater financial resources, technical capabilities or better relationships than we do, may have
businesses that are smaller and more flexible than ours or may develop or market alternative financial arrangements
that are more effective or less susceptible to challenge than ours. For example, some competitors may have a lower
cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may
have higher risk tolerances or different risk assessments than we have. These characteristics could allow our
competitors to consider a wider variety of legal assets to finance, establish more relationships and offer better pricing
and more flexible structuring than we are able to do. We may also face competition from smaller industry participants
or law firms using alternative financing models on a smaller scale as well as market entrants that have a regional,
industry or specific claims-based approach. Such entities may offer more competitive terms or more tailored
approaches to specific industries or claims. We may lose funding opportunities if we do not match our competitors’
pricing, terms and/or structure. If we are forced to match our competitors’ pricing, terms and/or structure to commit
and/or deploy our capital, we may not be able to achieve acceptable returns on our legal finance assets or may bear
substantial risk of capital loss.
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.
We are particularly reliant on lawyers to prosecute and/or defend claims with due skill and care. If they are unable or
unwilling to do this for any reason, it is likely to have a material adverse effect on the value of our legal finance assets.
While we will typically evaluate the lawyers involved in any legal finance asset we acquire, we do not select such
lawyers or we may have limited experience or no prior dealings with such lawyers, and there can be no assurance that
the outcome of a case will be in line with our or the lawyers’ assessment of the case or that such lawyers will perform
with the expected skill and care. As a matter of legal ethics in most jurisdictions, we are also unable to prevent our
counterparties from discharging the lawyers who were originally in place in a case and replacing them with lawyers
who may be less capable.
In addition, lawyers owe a duty to their clients as well as an overriding duty to the courts. We generally do not own or
control a claim which we have financed and, as a result, we will not be the client of the law firm representing the
claimant in a case that is the subject of our commitment or financing. Accordingly, that law firm may be required to
act in accordance with its client’s instructions and interests rather than our own. If the interests of the claimants in
the cases we have financed are not aligned with ours, the actions of the lawyers representing such claimants could
have a material adverse effect on the value of our legal finance assets and, therefore, our business, financial position,
results of operations and/or liquidity.
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.
Our income from our asset management business is derived from fees earned for our management of our funds and
performance fees or carried interest with respect to those funds. If the commitments we make on behalf of our funds
Burford Capital Annual Report 2021 137
Risk factors
continued
perform poorly, we may not earn performance fees. Further, if a fund does not achieve certain investment returns over
its life and carried interest that was previously distributed to us exceeds the amounts to which we are ultimately
entitled, we may be required to repay such amounts under a “clawback” obligation. Moreover, to the extent we have
invested balance sheet capital in our funds, we could experience losses on investments of our own principal as a result
of poor performance by our funds or individual assets.
In addition, poor performance by our funds could make it more difficult for us to raise capital for new funds in the
future. Investors and potential investors in our funds continually assess our funds’ performance, and our ability to raise
capital for future funds will depend on our funds’ continued satisfactory performance. Poor performance may deter
future investments in our funds or result in investors demanding lower fees which would adversely affect our asset
management fees and/or performance fees and, therefore, our business, financial position, results of operations
and/or liquidity.
A significant portion of our AUM is attributable to funds with a single investor.
At December 31, 2021, BOF-C and one of our “sidecar” funds, both funds with a single investor which is a sovereign
wealth fund, represented approximately 28% of our AUM. While the sovereign wealth fund is contractually obligated to
fund its commitments to such funds, if it fails to do so we will no longer have access to this capital and our cash flows
from these funds will decline. This could result in our inability to meet a commitment, which in turn could cause
damage to our business and the potential loss of business and financial relationships. See “—We have commitments
that are in excess of funds raised”.
We face competition for investments in our asset management business and may not be successful in raising
funds in the future.
The asset management business is highly competitive and, if investors determine that our product offerings are not
attractive, we may have difficulty raising additional funds in the future. In order to attract capital, we may be required
to structure funds on terms that are less favorable to us or otherwise different from the terms that we have been able
to obtain in the past. These risks could occur for reasons beyond our control, including general economic or market
conditions, regulatory changes or increased competition. Our inability to grow our asset management business could
result in a decrease in AUM, asset management fees and/or performance fees, in which case our business, financial
position, results of operations and/or liquidity may be adversely affected. Because we rely on the capital available in
our funds to acquire legal finance assets, our inability to maintain or increase this source of capital could reduce our
overall ability to grow our business.
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.
Negative publicity about the legal finance industry in general or us specifically, even if inaccurate, could adversely
affect our reputation and the confidence in our business model. For example, there is regular negative political and
media activity in the United States with respect to the US consumer litigation funding industry. Although we do not
participate in the US consumer litigation funding industry, negative publicity about that industry could adversely affect
the public perception of the commercial legal finance industry or lead to overly broad regulation of legal finance in
general.
Failure to protect our reputation and brand in the face of negative publicity and ethical, legal or moral challenges
could lead to a loss of trust and confidence. There are various factors that may cause litigants, law firms and other
actual and potential customers to be more reluctant to pursue external financing, such as publication in the online,
print and broadcast media of stories about us or the legal finance industry, about real or perceived abusive practices or
about regulatory investigations or enforcement actions. Online articles, blogs and tweets may lead to the increasingly
rapid dissemination of a story and increase our exposure to negative publicity. Adverse public perception of the legal
finance industry or us may increase media scrutiny of our business and could make it more likely that we receive
negative attention if our employees engage in unlawful or questionable behavior, if we engage in internal disputes or
disputes with former employees or if any of our counterparties is subject to negative publicity. Negative publicity
relating to legal or regulatory violations by any of the third parties we engage, or negative publicity relating to the kind
of matters we pursue, could also result in reputational damage to us.
Negative publicity could jeopardize our relationships with existing counterparties or our ability to establish new
relationships or diminish our attractiveness as counterparties generally. Any of the foregoing could impact our ability to
138 Burford Capital Annual Report 2021
Risk factors
continued
fund commitments, pursue our legal rights or collect amounts due to us and may materially and adversely affect our
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.
The Covid - 19 pandemic has adversely affected the global economy, disrupted global supply chains and created
significant volatility in the financial markets. As in other areas, the Covid - 19 pandemic has continued to disrupt the
operation of courts around the world with the advent of the Omicron variant adding greater uncertainty. This
disruption has elongated the duration of a number of our matters, and we believe the weighted average life of our
portfolio is extending. In addition to delays in current matters, there is a slowdown in new litigation activity. As a
result, we expect that our cash proceeds from litigation resolutions will be lower in the near term as the courts work
through these issues.
In addition, in a period of constrained liquidity, litigants may be less willing to settle litigation matters, extending
duration and therefore restricting our ability to recycle capital. There is also an increased risk that litigants may
encounter financial difficulties or become insolvent, which could impact the timing and quantum of litigation
realizations. To the extent that litigants in our matters do become insolvent, the impact of a litigant’s insolvency on
pending litigation is very difficult to predict and is not only case specific but dependent on the insolvency process in
the jurisdiction in issue. Our expected realizations may be delayed and could be reduced during the restructuring or
liquidation process.
The counterparties to whom we provide capital may also encounter financial difficulties or become insolvent in a
period of constrained liquidity. We typically provide capital to our counterparties on a non-recourse basis and only
receive a return upon the conclusion of a successful claim. If our counterparties encounter financial difficulties or
become insolvent before the final resolution of their claims and are otherwise unable or unwilling to continue with
their claims, we may decide to advance additional funds to them on terms that are less favorable to us. If we decide
not to advance additional funds to such counterparties, it is possible that they will not be able to pursue their claims
and we may therefore not earn any returns from such counterparties. While it is not possible to ascertain the precise
impact the Covid - 19 pandemic may have on us from an economic, financial or regulatory perspective, any of the above
factors, individually or in the aggregate, could have material adverse consequences on our business, financial condition
and results of operations 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.
Our capital provision assets are classified as financial instruments and are accounted for at fair value through the
consolidated statements of comprehensive income in accordance with US GAAP. See note 2 (“Summary of significant
accounting policies”) and note 6 (“Capital provision assets”) to our consolidated financial statements and “Financial
and operational review—Consolidated Results of Operations—Year ended December 31, 2021, compared to year ended
December 31, 2020—Fair value of capital provisions assets” for additional information relating to fair value of our
capital provision assets. Due to the illiquid nature of our capital provision assets, there is inherent valuation
uncertainty in the assessment of fair value. Our valuation methodologies involve subjective assessments and require us
to make significant and complex judgments about legal matters that are intrinsically difficult to predict. There is a risk
that our judgments in the assessment of fair value could lead to valuations of capital provision assets differing
significantly from their ultimate outcomes. This could materially misstate the value of the capital provision assets in
our consolidated statements of financial position and relevant fair value movements recognized in our consolidated
statements of comprehensive income.
Certain of our individual assets represent a significant portion of the fair value of our capital provision assets. We have
one set of exposures on the YPF-related assets that, by virtue of fair value adjustments to our carrying value of the
YPF-related assets, accounted for approximately 40% of our capital provision assets at December 31, 2021. The carrying
value of the YPF-related assets (both Petersen and Eton Park combined) on our consolidated balance sheet was $1,160
million with $1,103 million of unrealized gains at December 31, 2021. There have been no transfers of unrealized to
realized gains, so the fair value adjustment remains $1,103 million.
Accordingly, the application of fair value accounting may result in us recognizing non-cash income that may never be
realized, which could have a material adverse effect on our business, financial position, results of operations and/or
liquidity.
Burford Capital Annual Report 2021 139
Risk factors
continued
There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of
our consolidated financial statements.
The preparation of our consolidated financial statements requires management and the Board to make estimates,
judgments and assumptions that affect the application of policies and the reported amounts of assets and liabilities,
income and expenses. Estimates, judgments and assumptions are inherently subject to change in the future, and any
such changes in these estimates, judgments or assumptions, including any changes as a result of changes in accounting
principles and guidance or their interpretation, could result in corresponding changes to the amounts of assets and
liabilities, income and expenses and therefore unfavorable accounting charges or effects. Any errors or misstatements
in our consolidated financial statements could have a material adverse effect on our business, financial position,
results of operations and/or liquidity.
Our past performance may not be indicative of our future results of operations.
Our past performance should not be considered indicative of our future results of operations. Our past returns have
benefited from funding opportunities and general market conditions that may not continue or recur, and there can be
no assurance that we or our funds will be able to avail ourselves of comparable opportunities and conditions. As the
market in which we operate matures, we may be subject to increased competition for talent and financing
opportunities and potentially new regulations in various jurisdictions. There can be no assurance that any of the
current or future single matters or matters contained in our portfolios will eventually be successful. Failure to achieve
results of operations consistent with our historical performance could have a material adverse effect on our business,
financial position, results of operations and/or liquidity.
Litigation and legal proceedings against us could adversely impact our business, financial position, results of
operations and/or liquidity.
We are regularly subject to litigation and arbitration incidental to our business, including tactical litigation against us
in the context of an ongoing funded matter. The types of claims made against us in lawsuits include claims for
compensatory damages, punitive and consequential damages or injunctive relief. When we fund cases against
sovereigns, there is the further risk of retaliatory criminal investigation or prosecution.
In the past, purported securities class action litigation has been instituted against companies following periods of
volatility in the overall market and in the price of a company’s securities. We have previously been the subject of one
purported class action litigation of this nature. Although that litigation was withdrawn, listing our ordinary shares on
the NYSE means that we may be more likely to be subject to similar litigation in the future, which, even if not
successful, may divert our management’s attention and cause us to incur significant expenses in defending these
lawsuits. Any insurance or indemnification rights that we may have may be insufficient or unavailable to protect us
against such losses.
Any of these developments could materially adversely affect 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 performance is, to a large extent, dependent upon the judgment and abilities of our management, including, in
particular, our co-founders, Chief Executive Officer Christopher Bogart and Chief Investment Officer Jonathan Molot.
We also depend on other key personnel, including the members of the Commitments Committee and the Management
Committee. Our success will therefore depend largely upon the abilities of certain members of our management and
other key personnel and our ability to retain them and to compensate them appropriately, especially in light of the
high levels of remuneration available from the major law firms from which they have typically come and the potential
pressures on such remuneration levels from the public markets. The death, incapacity or loss of the service of any of
our management or other key personnel could have a material adverse impact on our business. In addition, our
performance may be limited by our ability to employ and retain sufficiently qualified personnel. Such a failure to retain
qualified personnel or recruit suitable replacements for significant numbers of qualified personnel could materially
adversely affect our business and growth prospects.
140 Burford Capital Annual Report 2021
Risk factors
continued
Our international operations subject us to increased risks.
We operate internationally and, accordingly, our business is subject to risks resulting from differing legal and
regulatory requirements, political, social and economic conditions and unforeseeable developments in a variety of
jurisdictions. Our non-US operations are subject to the following risks, among others:
▪ Political instability
▪
International hostilities, military actions, terrorist or cyber-terrorist activities, climate change, natural disasters,
pandemics (including the Covid - 19 pandemic) and infrastructure disruptions
▪ Differing economic cycles and adverse economic conditions
▪ Unexpected changes in regulatory and tax environments and government interference in the economy
▪ Changes to trade and economic sanctions laws and regulations
▪ Foreign exchange controls and restrictions on repatriation of funds
▪ Fluctuations in currency exchange rates
▪
▪ Difficulties in attracting and retaining qualified management and personnel
▪ Difficulties in penetrating new markets due to entrenched competitors or lack of local acceptance of our services
Our overall success as a global business depends, in part, on our ability to anticipate and effectively manage these
risks, and there can be no assurance that we will be able to do so without incurring unexpected costs. If we are not
able to manage the risks related to our non-US operations, our business, financial position, results of operations and/or
liquidity may be materially adversely affected.
Inability to collect payments or seek recourse under, or comply with, ambiguous or vague commercial or other laws
We may face exposure to foreign currency exchange rate fluctuations and may hold unhedged securities
positions.
Three of our five series of outstanding notes are denominated in pounds sterling and some of our legal finance
contracts and intercompany loans are denominated in local currencies. Fluctuations in the value of the US dollar and
foreign currencies, particularly pounds sterling, may affect our results of operations when translated into US dollars.
We do not currently engage in any currency-hedging activities to seek to limit the risk of exchange rate fluctuations.
However, in the future, we may use derivative instruments, such as foreign currency forward and option contracts, to
seek to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities
may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign
exchange rates over the limited time the hedges are in place. Moreover, the use of hedging instruments may introduce
additional risks if we are unable to structure effective hedges.
In addition, from time to time, we may take substantial positions in the securities of companies that are subject to a
corporate or regulatory event or to litigation. While we may seek to hedge these positions, appropriate hedging may
not be available at a cost we consider reasonable or at all. If the value of the underlying securities were to decline, we
would experience losses, which may have a materially adverse effect on our business, financial position, results of
operations and/or liquidity.
The tax treatment of our financing agreements is subject to significant uncertainty.
We structure our financings on a case-by-case basis in consultation with our professional advisers and seek to comply
with applicable law. However, there is limited authority and significant uncertainty regarding the tax treatment of
legal finance, or the structures through which we provide our financing, in the applicable jurisdictions in which they
are made. Accordingly, there can be no assurance that an applicable tax authority will accept our position on the tax
treatment of a financing, or the structures we employ. If an applicable tax authority were to successfully maintain a
different position, the value of our assets could be adversely affected or we could be subject to additional tax liability,
or both. In addition, tax laws and regulations are under constant development and often subject to change as a result
of government policy, frequently with retroactive effect. Changes in applicable tax laws could adversely affect the
taxation of us or our assets.
Burford Capital Annual Report 2021 141
Risk factors
continued
Regulatory risks
The regulatory and legal requirements that apply to our business and operations are subject to change from time to
time and may become more restrictive, which may make compliance with applicable requirements more difficult or
expensive or otherwise restrict our ability to conduct our business and operations in the manner in which they are now
conducted. Changes in applicable regulatory and legal requirements, including changes in their enforcement, could
materially and adversely affect our business, financial position, results of operations and/or liquidity. As a matter of
public policy, the regulatory bodies that regulate our business and operations are generally responsible for safeguarding
the integrity of the securities and financial markets and protecting fund investors who participate in those markets
rather than protecting the interests of our shareholders.
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.
The laws, regulations and rules in the area of acquiring or otherwise taking a financial position or a commercial interest
with respect to legal claims and defenses is evolving and can be complex and uncertain in the United States and
elsewhere. Our legal finance assets could be open to challenge or subsequently reduced in value or extinguished as a
result of these regulations. In various jurisdictions there are prohibitions or restrictions in connection with funding
claims (known in many common law jurisdictions as maintenance, and a form of maintenance, called champerty) or the
assignment of, or other economic participation in, legal claims. For example, in the State of New York, Judiciary Law §
489 prohibits the assignment of a legal claim in certain circumstances, and certain other jurisdictions have similar
laws. In the State of New York, the relevant case law currently provides that the contracts underlying our legal finance
assets are valid. However, such case law may be overruled or the statutory and other laws in the State of New York or
other jurisdictions could be amended to include additional prohibitions or restrictions, which may adversely affect our
business. The ability to participate financially in a lawyer’s fees is also limited in certain jurisdictions (including by
ethical rules prohibiting a lawyer from sharing fees with non-lawyers). Such prohibitions and restrictions are governed
by the laws, regulations and rules of each relevant jurisdiction and vary in degrees of strength and enforcement in
different state, federal or non-US jurisdictions. This is a complex issue that involves both substantive law and choice of
law principles. However, in many jurisdictions, the relevant issues may not have been considered by the courts nor
addressed by statute and thus obtaining legal advice or clarity is difficult. If we, our counterparties or the lawyers
handling the underlying matters were to be found to have violated the relevant prohibitions or restrictions in
connection with certain matters, there could be a materially adverse effect on the value of the affected legal finance
assets, our ability to enforce the relevant contractual agreements with our counterparties and the amounts we would
be able to recover with respect to such matters or our costs for such matters.
In addition, politicians, advocacy groups and media reports have, in the past, advocated action to restrict legal
financing. Some jurisdictions have enacted or are considering enacting laws, regulations or rules requiring the
disclosure of litigation funding or other non-prohibitory regulation. Such laws, regulations or rules or other future laws,
regulations or rules may deter parties from engaging us, result in a reduction in the overall number of potential legal
finance assets or adversely affect the value of legal finance assets already in existence in such jurisdictions.
The laws, regulations, rules and supervisory guidance and policies applicable to our business activities are subject to
regular modification and change, including by institutions such as US state and federal legislatures, bar associations,
courts and other US and non-US legislative, regulatory, judicial or advisory bodies. For example, in the United States,
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 future. In addition, similar legislation is introduced in various
US state legislatures from time to time. The Australian federal government imposed regulations on the funding of
Australian class actions, requiring third-party funders of certain litigation funding schemes to hold an Australian
Financial Services License and to register litigation funding schemes as managed investment schemes under Australian
corporations laws. The Joint Parliamentary Committee on Corporations and Financial Services also recommended that
the Parliament impose additional regulatory burdens on class action procedures and the funding of class actions in
Australia, and while the bill passed a vote in the Australian House of Representative, it has not been voted on by the
Australian Senate and it has been reported that it will not be voted on; or considered further, until after the upcoming
142 Burford Capital Annual Report 2021
Risk factors
continued
Federal elections in 2022. Some 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.
Changes to laws, regulations or rules, including changes in interpretation or implementation of laws, regulations or
rules, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, delay
new funding arrangements, limit the quantity and size of our financing arrangements, limit the types of services we
may offer or our funding opportunities, decrease returns on our legal finance or other assets and allow certain clients
to void our contracts with them, any of which may have a materially adverse effect on our business, financial position,
results of operations and/or liquidity.
Our asset management business is highly regulated, and changes in regulation or regulatory violations could
adversely affect our business.
Our asset management business is highly regulated, and the applicable regulations are subject to change. Compliance
with these regulations requires a significant investment of management and financial resources and any liability
imposed on us for violations of existing or future regulations could adversely affect our asset management business.
The SEC regulates our investment management activities and is empowered to conduct investigations and
administrative proceedings that can potentially result in fines, suspensions of personnel, changes in policies,
procedures or disclosure or other sanctions, including censure, the issuance of cease-and-desist orders, the suspension
or expulsion of an investment advisor from registration or memberships or the commencement of a civil or criminal
lawsuit against us or our personnel. Any SEC actions or initiatives against us could have an adverse effect on our
business, financial position, results of operations and/or liquidity. Even if an investigation or proceeding does not result
in a sanction or the sanction imposed against us or our personnel were small in monetary amount, the adverse publicity
relating to the investigation, proceeding or imposition of these sanctions could harm our reputation.
We are subject to the risk of being deemed an investment company.
If we were deemed an “investment company” under the US Investment Company Act of 1940, as amended (the
“Investment Company Act”), applicable restrictions could make it impractical for us to continue our business as
contemplated and could have a material adverse effect on our business. An entity will generally be deemed to be an
“investment company” for purposes of the Investment Company Act if (i) it is or holds itself out as being engaged
primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (frequently
referred to as an “orthodox” investment company) or (ii) absent an applicable exemption, it owns or proposes to
acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of US government
securities and cash items) on an unconsolidated basis (frequently referred to as an “inadvertent” investment company).
Excluded from the term “investment securities”, among others, are US federal government securities and securities
issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the
exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment
Company Act.
We are and hold ourselves out as a leading global finance and asset management firm focused on law. We believe that,
even if our legal finance assets were to be determined to constitute investment securities for purposes of the
Investment Company Act, we should be exempt from registration as an investment company under Section 3(c)(5) of
the Investment Company Act. Section 3(c)(5) of the Investment Company Act excludes from the definition of
investment company “[a]ny person who is not engaged in the business of issuing redeemable securities, face-amount
certificates of the installment type or periodic payment plan certificates, and who is primarily engaged in one or more
of the following businesses: (A) [p]urchasing or otherwise acquiring notes, drafts, acceptances, open accounts
receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services or
(B) making loans to manufacturers, wholesalers, and retailers of, and to prospective purchasers of, specified
merchandise, insurance, and services”. We and our subsidiaries that conduct our core legal finance business are not in
the business of issuing redeemable securities, face-amount certificates of the installment type or periodic payment
plan certificates and are primarily engaged in the business of legal finance by way of financing and acquiring notes
evidencing financing, for purposes of the Investment Company Act, to parties engaged in litigation or arbitration and
their law firms. The purpose of such financing is to provide the counterparties with the capital necessary to finance the
costs associated with litigation.
The Investment Company Act and the rules thereunder contain detailed parameters for the organization and operation
of investment companies. Among others, the Investment Company Act and the rules thereunder limit or prohibit
Burford Capital Annual Report 2021 143
Risk factors
continued
transactions with affiliates, impose limitations on the issuance of debt and equity securities, generally prohibit the
issuance of options and impose certain governance requirements. We intend to conduct our operations so that we will
not be deemed an investment company under the Investment Company Act, which will require us to conduct our
business in a manner that does not subject us to the registration and other requirements of the Investment Company
Act. If we are deemed to be an investment company under the Investment Company Act, requirements imposed by the
Investment Company Act, including limitations on our capital structure, ability to transact business with affiliates and
ability to compensate key employees, could make it impractical for us to continue our business as currently conducted,
impair the agreements and arrangements between and among us and our customers and materially adversely affect our
business, financial position, results of operations and/or liquidity.
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.
Our systems may fail to operate properly or become disabled as a result of tampering or a breach of our network
security systems or otherwise. In addition, our systems face ongoing cybersecurity threats and attacks. Attacks on our
systems could involve, and in some instances have in the past involved, attempts intended to obtain unauthorized
access to our proprietary information, destroy data or disable, degrade or sabotage our systems, or divert or otherwise
steal funds, including through the introduction of computer viruses, “phishing” attempts and other forms of social
engineering. Cyberattacks and other security threats could originate from a wide variety of external sources, including
cyber criminals, nation state hackers, hacktivists and other outside parties. Cyberattacks and other security threats
could also originate from the malicious or accidental acts of insiders, such as employees. There has been an increase in
the frequency and sophistication of the cyber and security threats we face, with attacks ranging from those common to
businesses generally to those that are more advanced and persistent, which may target us because we hold a
significant amount of privileged information about our legal finance assets. As a result, we may face a heightened risk
of a security breach or disruption with respect to this information. There can be no assurance that measures we take to
ensure the integrity of our systems will provide protection, especially because cyberattack techniques change
frequently or are not recognized until successful. If our systems are compromised, do not operate properly or are
disabled, or if we fail to provide the appropriate regulatory or other notifications in a timely manner, we could suffer
financial loss, a disruption of our business, liability to our investment funds and fund investors, regulatory intervention
or reputational damage. Furthermore, if we fail to comply with the relevant laws, rules and regulations, it could result
in regulatory investigations and penalties, which could lead to negative publicity and reputational harm and may cause
our fund investors and counterparties to lose confidence in the effectiveness of our security measures.
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.
We depend on third-party service providers for fund administration and for provision of a variety of corporate services
to manage our multi-jurisdictional structure. There can be no assurance that our internal controls and procedures will
be effective in monitoring and managing such third-party service providers. The failure of our third-party service
providers to fulfill their obligations to us, or misconduct by our third-party service providers, could disrupt our
operations and lead to reputational harm, which 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.
We rely on our information technology systems to conduct our business, including case management and
documentation, as well as producing financial and management reports on a timely basis and maintaining accurate
records. Our information technology processes and systems may not operate as expected, may not fulfil their intended
purpose or may be damaged or interrupted by increases in usage, human error, unauthorized access, natural hazards or
disasters or similarly disruptive events. Any failure of the information technology systems or third-party infrastructure
on which we rely could lead to costs and disruptions that could adversely affect our reputation, prospects, business,
financial position, results of operations and/or liquidity.
Computer and data-processing systems are susceptible to malfunctions and interruptions (including those due to
equipment damage, power outages, computer viruses and a range of other hardware, software and network problems).
144 Burford Capital Annual Report 2021
Risk factors
continued
A significant malfunction or interruption of one or more of our computer or data-processing systems could adversely
affect our ability to keep our operations running efficiently and affect service availability. In addition, it is possible
that a malfunction of our data system security measures could enable unauthorized persons to access sensitive data,
including information relating to our intellectual property or litigation or business strategy or those of our clients. Any
such malfunction or disruptions could cause economic losses. A failure of our information technology systems could also
cause damage to our reputation which could harm our business. Any of these developments, alone or in combination,
could have a material adverse effect on our business, financial position, results of operations and/or liquidity.
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.
We have significant debt service obligations. Our ability to make principal or interest payments when due on our
indebtedness and to fund our ongoing operations will depend on our future performance and our ability to generate
cash, which is subject to general economic, financial, competitive, legislative, legal, regulatory and other factors,
many of which are beyond our control. In addition, our cash flows, to a large extent, depend on the outcome of
litigation matters in respect to which we have made a capital commitment. Such outcomes are inherently uncertain,
and it is difficult to accurately forecast our cash flows for any future period. While the interest payment dates on our
debt obligations are fixed, the cash inflows from litigation matters fluctuates materially. In addition, the trust deeds
and the indenture governing our debt obligations contain various covenants, including the requirement to maintain a
certain leverage ratio in the case of the deeds. If we are unable to comply with these covenants, payment on our debt
obligations may become due early. If we do not have sufficient cash at the required time, we may have difficulty
meeting our payment obligations under our existing indebtedness.
At the maturity of the obligations under our existing indebtedness and any other indebtedness that we may incur in the
future, if we do not have sufficient cash flows from operations and other capital resources to pay our debt obligations
or to fund our other liquidity needs, or if we are otherwise restricted from doing so due to corporate, tax or
contractual limitations, we may be required to refinance our indebtedness. If we are unable to refinance all or a
portion of our indebtedness or obtain such refinancing on terms acceptable to us, we may be forced to reduce or delay
our business obligations, activities or capital expenditures, sell assets, raise additional debt or equity financing in
amounts that could be substantial or restructure or refinance all or a portion of our debt, on or before maturity. There
can be no assurance that we would be able to accomplish any of these alternatives on a timely basis or on satisfactory
terms, if at all, or that those actions would secure sufficient funds to meet our obligations under our indebtedness.
In particular, our ability to restructure or refinance our indebtedness will depend, in part, on our financial condition at
the time of refinancing or restructuring, as the case may be, as well as on many factors outside of our control,
including then-prevailing conditions in the international credit and capital markets. Any refinancing of our
indebtedness could be at higher interest rates than our existing indebtedness and may require us to comply with more
onerous covenants. The terms of our existing or future debt instruments may restrict us from adopting some of these
alternatives. In addition, any failure to make payments of interest or principal on our outstanding indebtedness on a
timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional
indebtedness.
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.
Despite our level of indebtedness, we may be able to incur substantial additional indebtedness in the future. Although
the agreements governing our indebtedness contain restrictions on the incurrence of additional indebtedness, these
restrictions are subject to a number of significant qualifications and exceptions and, under certain circumstances, the
amount of indebtedness that could be incurred in compliance with these restrictions could be substantial. If additional
indebtedness is added to our existing levels of indebtedness, the related risks that we now face would increase, and we
may not be able to meet all of the obligations under our existing indebtedness. In addition, our debt instruments do not
prevent us from incurring obligations that do not constitute indebtedness.
Burford Capital Annual Report 2021 145
Risk factors
continued
Risks related to our ordinary shares
Our ordinary shares are traded on more than one market, which may result in price and volume variations.
Our ordinary shares have traded on the NYSE since October 2020 and on AIM since 2009. Trading in our ordinary shares
on these markets takes place in different currencies (US dollars on the NYSE and pounds sterling on AIM) and at
different times (resulting from different time zones, different trading days and different public holidays in the United
States and the United Kingdom). The trading prices, volatility and liquidity of our ordinary shares on these two markets
may differ due to these and other factors, including different custody and settlement arrangements that may affect
cross-market trading. Any decrease in the price of our ordinary shares on AIM could cause a decrease in the trading
price of our ordinary shares on the NYSE, and vice versa. Investors could seek to sell or buy our ordinary shares to take
advantage of any price differences between the markets through a practice referred to as arbitrage. Any arbitrage
activity could create unexpected volatility in the trading price of our ordinary shares.
The trading price of our ordinary shares may fluctuate significantly.
The market price of our ordinary shares has been highly volatile. During the period from October 19, 2020 (i.e., our
listing on the NYSE) to December 31, 2021, the closing price of our ordinary shares has ranged on the NYSE from a high
of $13.55 per ordinary share on May 7, 2021, to a low of $8.09 per ordinary share on March 26, 2021. During the period
from January 1, 2019, to December 31, 2021, the closing price of our ordinary shares has ranged on AIM from a high of
£18.70 per ordinary share on March 14, 2019 (approximately $24.84 using the exchange rate of $1.3282 on March 14,
2019) to a low of £2.81 per ordinary share on March 18, 2020 (approximately $3.31 using the exchange rate of $1.1763
on March 18, 2020). The market price of our ordinary shares could continue to be volatile as a result of the risks set
forth in this Annual Report and others beyond our control, including:
▪ Regulatory actions or changes in laws with respect to legal finance or practices commonly used in the legal finance
industry
▪ Actual or anticipated fluctuations in our financial position and/or results of operations
▪
Increased competition and actual or anticipated changes in our growth rate relative to our competitors
▪ Announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures,
collaborations or capital commitments
▪ Failure to meet or exceed financial estimates and projections of the investment community or that we provide to
the public
Issuance of research reports by securities analysts or other members of the financial community
▪
▪ Fluctuations in the valuation of companies perceived by investors to be comparable to us
▪ Additions or departures of key management
▪ Sales or issuances of our ordinary shares by us, our insiders or our other shareholders
▪ General economic and market conditions
These and other market and industry factors may cause the market price and demand for our ordinary shares to
fluctuate substantially, regardless of our actual operating performance.
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.
The trading market for our ordinary shares is affected by the research and reports that equity research analysts publish
about us and our business, over which we have no control. The price of our ordinary shares could decline if one or more
equity analysts issues unfavorable commentary or ceases publishing reports about us.
There can be no assurance that we will pay dividends or distributions.
The Board has declared a final cash dividend for the year ended December 31, 2021, of 6.25 cents per share, payable in
June 2022, and will recommend shareholder approval for the final cash dividend at our upcoming annual general
meeting in May 2022. In the past, the Board did not declare an interim cash dividend for 2020 and, given the economic
uncertainties surrounding the Covid - 19 pandemic, the Board did not propose payment of a final cash dividend for the
146 Burford Capital Annual Report 2021
Risk factors
continued
year ended December 31, 2019. We cannot assure you that we will declare dividends or distributions in the future. The
declaration and payment of dividends and distributions, if any, will always be subject to the discretion of the Board
and the requirements of Guernsey law (including, among others, satisfaction of a statutory solvency test). The timing
and amount of any dividends or distributions declared will depend on, among others, our cash flows from operations
and available liquidity, our earnings and financial position and any applicable contractual restrictions, including
restrictions in our debt instruments.
Given the demand for our capital in the legal finance marketplace and the tax inefficiency of our dividend payment to
US investors, we do not anticipate regular increases in our dividend levels but rather will review dividend levels with
shareholders and the Board from time to time.
In addition, we are a holding company with no material assets, other than the ownership of our subsidiaries, and no
independent means of generating revenues. Accordingly, our ability to pay dividends or distributions will be subject to
the ability of our subsidiaries to transfer funds to us.
Future issuances or sales of our securities may cause the market price of our ordinary shares to decline.
The market price of our ordinary shares could decline as a result of issuances of securities (including our ordinary
shares) by us or sales by our existing shareholders of ordinary shares in the market, or the perception that such
issuances or sales could occur. Sales of our ordinary shares by shareholders may make it more difficult for us to sell
equity securities at a time and price that we deem appropriate. See “Compensation—Senior management and
employee compensation—LTIP” for information relating to our ordinary shares issued, and available for future grants,
under the LTIP. Issuances or sales of substantial numbers of our ordinary shares, or the perception that such issuances
or sales could occur, may adversely affect the market price of 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.
Because we qualify as a foreign private issuer within the meaning of the rules under the Exchange Act, we are exempt
from certain provisions of the securities rules and regulations that are applicable to US domestic public companies,
including, among others:
▪ The rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10 - Q and current
reports on Form 8 - K
▪ The sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a
security registered under the Exchange Act
▪ The sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading
activities and liability for insiders who profit from trades made in a short period of time
▪ The Regulation FD rules governing the selective disclosure of material non-public information
We are required to file an annual report on Form 20 - F within four months of the end of each fiscal year. In addition,
we publish our interim unaudited consolidated financial statements on a semi-annual basis. Press releases relating to
financial results and material events are also furnished to the SEC on Form 6 - K. However, the information we are
required to file with, or furnish to, the SEC is less extensive and less timely compared to that required to be filed with
the SEC by US domestic public companies. As a result, you will not receive the same information that would be made
available to you if we were a US domestic public company.
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.
We are incorporated under the laws of Guernsey and our corporate affairs, including with respect to corporate
governance, are principally governed by the Guernsey Companies Law. We are a foreign private issuer within the
meaning of the rules under the Exchange Act and the NYSE. Under the NYSE rules, a foreign private issuer is subject to
less stringent corporate governance requirements. Subject to certain exceptions, the rules of the NYSE permit a foreign
private issuer to follow its home country practice in lieu of the listing requirements of the NYSE, including (i) the
requirement for an annual performance evaluation of the Audit Committee and the Compensation Committee, (ii) the
requirement to adopt and disclose corporate governance guidelines and (iii) the requirement to have an internal audit
Burford Capital Annual Report 2021 147
Risk factors
continued
function. Accordingly, our shareholders may not have the same protections afforded to shareholders of companies that
are subject to all of the NYSE corporate governance requirements for US domestic public companies.
Losing foreign private issuer status will increase our regulatory and compliance costs.
We will lose foreign private issuer status if the majority of our ordinary shares are held in the United States. Losing
foreign private issuer status in the future would require us to comply with the reporting regime that applies to US
domestic public companies. The regulatory and compliance costs to us under US securities laws as a US domestic public
company will potentially be greater than the costs incurred as an SEC foreign private issuer. Among other
consequences, if we are not a foreign private issuer, we would be required to file periodic and current reports and
registration statements on US domestic public company forms with the SEC, which are generally more detailed and
extensive than the forms available to a foreign private issuer and are generally required to be filed within shorter time
periods. In addition, if the majority of our ordinary shares are held in the United States, we would be required to
comply with the proxy requirements applicable to US domestic public companies as well as lose the ability to rely on
exemptions from corporate governance requirements that are available to foreign private issuers.
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.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, as amended (the
“Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended, the
listing requirements of the NYSE and other securities rules and regulations applicable to a foreign private issuer within
the meaning of the rules under the Exchange Act. Compliance with these rules and regulations has increased our legal
and financial compliance costs, making some activities more difficult, time-consuming and costly, and has increased
demand on our systems and resources. Such demands would likely continue to increase, particularly if we were to lose
our status as a foreign private issuer. As a result of the complexity involved in complying with the rules and regulations
applicable to US public companies, our management’s attention may be diverted from other business concerns, which
could adversely affect our reputation, prospects, business, financial position, results of operations and/or liquidity. In
addition, as a US public company, it is more expensive for us to maintain adequate director and officer liability
insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
These factors could also make it more difficult for us to attract and retain 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.
As a Guernsey-incorporated company traded on AIM, a market operated by the London Stock Exchange, we have, since
our inception in 2009, produced annual consolidated financial statements that have been prepared under the
International Financial Reporting Standards and audited pursuant to the International Standards on Auditing (UK) (the
“ISA UK”). We made a voluntary election to begin reporting under US GAAP for the year ended December 31, 2021, and
comparative periods. As a US registrant, we are also subject to an audit by a firm subject to the oversight of the Public
Company Accounting Oversight Board (the “PCAOB”), which imposes a different set of auditing standards than those of
the ISA UK. We are also subject to the requirements of the Sarbanes-Oxley Act. The SEC rules implementing Section
404(a) of the Sarbanes-Oxley Act require a company subject to the reporting requirements of the Exchange Act to
complete a comprehensive evaluation of its internal control over financial reporting. To comply with these rules, we
are required to assess, document and test our internal control procedures, and our management is required to assess
and issue a report concerning our internal control over financial reporting. In addition, because we no longer qualify as
an emerging growth company under the Jumpstart Our Business Startups Act of 2012, as amended, we are subject to
the independent auditor attestation requirements under Section 404(b) of the Sarbanes-Oxley Act, pursuant to which
our independent auditor is required to attest to and report on management’s assessment of our internal control over
financial reporting.
148 Burford Capital Annual Report 2021
Risk factors
continued
Under the PCAOB auditing standards applicable to us as a reporting company under the Exchange Act, a “material
weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented
or detected on a timely basis. As disclosed under “Controls and procedures”, material weaknesses existed in our
internal control over financial reporting at December 31, 2021. See “Controls and procedures—Management’s annual
report on internal control over financial reporting” for additional information relating to such material weaknesses.
While we intend to establish remediation controls that are designed to address such material weaknesses and have
generally enhanced our compliance program under the Sarbanes-Oxley Act during the year ended December 31, 2021,
there can be no assurance that additional material weaknesses will not be identified in the future.
As disclosed in our Forms 6 - K, dated December 22, 2021 and February 14, 2022, we identified errors related to the
accounting treatment for accruals of compensation expense related to our “carry pools” program and our historical
approach to the consolidation of certain subsidiaries that require us to restate our historical consolidated financial
statements at and for the years ended December 31, 2020, 2019 and 2018 and the unaudited condensed consolidated
financial statements for the six months ended June 30, 2021 and 2020.
If additional material weaknesses or accounting errors are identified in the future, our ability to record, process and
report financial information accurately and to prepare consolidated financial statements within the time periods
specified by the rules and regulations of the SEC could be adversely affected. This could in turn subject us to
shareholder litigation or adverse regulatory consequences, including sanctions by the SEC or violations of the applicable
listing rules of the NYSE, which may result in a breach of the covenants under our existing or future debt instruments.
In addition, any failure to implement and maintain effective internal control over financial reporting could adversely
affect the results of periodic management evaluations and the independent registered public accounting firm’s annual
attestation reports regarding the effectiveness of our internal control over financial reporting. There could also be a
negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our
consolidated financial statements, which could have a material adverse effect on our business, financial position,
results of operations and/or liquidity and lead to a decline in the market price of our ordinary shares or debt securities
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.
If we are treated as a passive foreign investment company (“PFIC”) in any year during which a US Holder holds our
ordinary shares, such US Holder could be subject to significant adverse US federal income tax consequences as a result
of the ownership and disposition of our ordinary shares. See “Tax considerations—Material US federal income tax
considerations” for additional information relating to PFIC classification and consequences to 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.
Our corporate affairs are governed principally by our memorandum and articles of incorporation and by the Guernsey
Companies Law. The Guernsey Companies Law differs in certain material respects from laws applicable to companies
incorporated in the United States. See “Memorandum and Articles of Incorporation”. As a result, your rights and
protections as our shareholder 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 Royal Court of Guernsey may require a party to litigation to reimburse the prevailing party for its costs associated
with the litigation. Accordingly, if a shareholder were to bring an action against us in the Royal Court of Guernsey and
we prevail in the litigation, the Royal Court of Guernsey may order the shareholder to reimburse us for our fees, costs
and expenses incurred in connection with the defense of such action.
Article 40 of our articles of incorporation provides that we are entitled to security for costs in connection with any
proceedings brought against us by a shareholder (which may include proceedings in jurisdictions outside of Guernsey).
Burford Capital Annual Report 2021 149
Risk factors
continued
This provision, for example, applies to any proceeding brought against us by a shareholder in its capacity as a
shareholder under the Guernsey Companies Law or our articles of incorporation. Article 40 of our articles of
incorporation does not apply to any proceeding brought against any of our directors, officers or affiliates. This means
that, if a shareholder brings an action against us in the Royal Court of Guernsey, we may request that the Royal Court
of Guernsey order such shareholder to provide security (which will need to be in a form acceptable to the Royal Court
of Guernsey and may be direct or through a third-party surety) to satisfy any award of costs the Royal Court of
Guernsey may award to us.
The Royal Court of Guernsey’s ability to award costs to us, and the provision in our articles of incorporation requiring
shareholders to provide security for any such award of costs to us, could discourage shareholders from bringing lawsuits
that might otherwise benefit our shareholders.
The insolvency laws of Guernsey and other jurisdictions may not be as favorable to you as the US bankruptcy
laws.
We are incorporated under the laws of Guernsey. In the event of a bankruptcy, insolvency or similar event, proceedings
could be initiated in Guernsey or another relevant jurisdiction. The bankruptcy, insolvency, administrative and other
laws of our and our subsidiaries’ jurisdictions of organization or incorporation may be materially different from, or in
conflict with, each other and those of the United States, including in the areas of rights of creditors, shareholders,
priority of governmental and other creditors and duration of the proceedings. The application of these laws, or any
conflict among them, could call into question whether any particular jurisdiction’s law should apply, adversely
affecting our shareholders’ ability to enforce their rights under the ordinary shares in those jurisdictions or limit any
amounts that they may receive.
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.
We are incorporated under the laws of Guernsey, and certain of our directors and officers reside outside of the United
States. In addition, a substantial portion of our assets is located outside the United States. It may be more complex or
time-consuming to serve US court process on us or our officers or directors or to enforce US court judgments against us
than if we were a US company with all of our officers and directors located in the United States, including judgments
predicated upon civil liabilities under US federal securities laws.
150 Burford Capital Annual Report 2021
Memorandum and articles of incorporation
The information required by Item 10.B of Form 20 - F has been provided in Exhibit 2.1 to this Annual Report and is
incorporated herein by reference.
Material contracts
Set forth below are material contracts outside the ordinary course of business to which we are a party. See note 14
(“Debt issued”) for additional information with respect to the material contracts required by Item 10.C of Form 20 - F,
which information is incorporated herein by reference. Summaries of the material contracts are not intended to be
complete and reference is made to the contracts themselves, which are exhibits to this Annual Report.
Indenture, dated as of April 5, 2021, by and among Burford Capital Global Finance LLC, as issuer, Burford Capital
Limited, as parent guarantor, the other guarantors party thereto from time to time and U.S. Bank Trust Company,
National Association, as trustee
On April 5, 2021, Burford Capital Global Finance LLC issued $400 million aggregate principal amount of 6.250% senior
notes due 2028 under an indenture among Burford Capital Global Finance LLC, as issuer, Burford Capital Limited, as
parent guarantor, the other guarantors party thereto from time to time and U.S. Bank Trust Company, National
Association, as successor to U.S. Bank National Association, as trustee. The 2028 Notes bear interest at a rate of 6.250%
per annum, payable semiannually in arrears on April 15 and October 15 of each year.
Trust Deed, dated as of February 12, 2018, by and among Burford Capital Finance LLC, as issuer, Burford Capital
Limited, Burford Capital PLC and Burford Capital Global Finance LLC, as guarantors, and U.S. Bank Trustees
Limited, as trustee
On February 12, 2018, Burford Capital Finance LLC issued $180 million aggregate principal amount of 6.125% notes due
2025 under a trust deed among Burford Capital Finance LLC, as issuer, Burford Capital Limited, Burford Capital PLC and
Burford Capital Global Finance LLC, as guarantors, and U.S. Bank Trustees Limited, as trustee. The 2025 Notes bear
interest at a rate of 6.125% per annum, payable semiannually in arrears on February 12 and August 12 of each year.
Trust Deed, dated as of June 1, 2017, by and among Burford Capital PLC, as issuer, Burford Capital Limited,
Burford Capital Finance LLC and Burford Capital Global Finance LLC, as guarantor, and U.S. Bank Trustees Limited,
as trustee
On June 1, 2017, Burford Capital PLC issued £175 million aggregate principal amount of 5.000% notes due 2026 under a
trust deed among Burford Capital PLC, as issuer, Burford Capital Limited, Burford Capital Finance LLC and Burford
Capital Global Finance LLC, as guarantors, and U.S. Bank Trustees Limited, as trustee. The 2026 Notes bear interest at
a rate of 5.000% per annum, payable semiannually in arrears on December 1 and June 1 of each year.
Trust Deed, dated as of April 26, 2016, by and among Burford Capital PLC, as issuer, Burford Capital Limited,
Burford Capital Finance LLC and Burford Capital Global Finance LLC, as guarantor, and U.S. Bank Trustees Limited,
as trustee
On April 26, 2016, Burford Capital PLC issued £100 million aggregate principal amount of 6.125% notes due 2024 under a
trust deed among Burford Capital PLC, as issuer, Burford Capital Limited, Burford Capital Finance LLC and Burford
Capital Global Finance LLC, as guarantors, and U.S. Bank Trustees Limited, as trustee. The 2024 Notes bear interest at
a rate of 6.125% per annum, payable semiannually in arrears on April 26 and October 26 of each year.
Trust Deed, dated as of August 19, 2014, by and among Burford Capital PLC, as issuer, Burford Capital Limited,
Burford Capital Finance LLC and Burford Capital Global Finance LLC, as guarantor, and U.S. Bank Trustees Limited,
as trustee
On August 19, 2014, Burford Capital PLC issued £90 million aggregate principal amount of 6.500% notes due 2022 under
a trust deed among Burford Capital PLC, as issuer, Burford Capital Limited, Burford Capital Finance LLC and Burford
Capital Global Finance LLC, as guarantors, and U.S. Bank Trustees Limited, as trustee. The 2022 Notes bear interest at
a rate of 6.500% per annum, payable semiannually in arrears on February 19 and August 19 of each year.
Burford Capital Annual Report 2021 151
Exchange controls and other limitations affecting security holders
Under Guernsey law, there are currently no restrictions on the export or import of capital, including foreign exchange
controls, or restrictions that affect the remittance of dividends, interest or other payments to non-resident holders of
our ordinary shares.
Tax considerations
For purposes of the discussion below, unless the context otherwise requires, references in this section to “we”, “our”
or “us” are references to Burford Capital Limited.
Guernsey tax considerations
The summary below is based on Guernsey law and published practice in Guernsey at the date of this Annual Report,
both of which are subject to change, possibly with retrospective effect. This summary is intended as a general guide to
certain Guernsey tax matters related to the holders of ordinary shares only and is not, is not intended to be nor should
it be construed to be, legal or tax advice or a summary of all tax matters in Guernsey.
Shareholders, whether corporations or individuals, that are not residents of Guernsey for tax purposes and that do not
carry on business in Guernsey through a permanent establishment situated in Guernsey, will not be subject to Guernsey
income tax or Guernsey withholding tax. Any distributions made by us to non-Guernsey tax resident shareholders will
not be subject to Guernsey income tax or Guernsey withholding tax.
Individual shareholders who are residents of Guernsey for tax purposes will generally be subject to Guernsey income
tax at the individual standard rate of 20% on distributions received from us.
Corporate shareholders that are residents of Guernsey for tax purposes (and that do not have exempt company status
under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989, as amended) will generally be subject to Guernsey
income tax at the company standard rate, which is currently 0%, on distributions received from us.
At the date of this Annual Report, Guernsey does not levy capital gains tax and, therefore, shareholders will not suffer
capital gains tax in Guernsey.
No stamp duty is chargeable in Guernsey on the issue, acquisition, transfer, conversion or redemption or other
disposition of ordinary shares (provided that it does not hold Guernsey real property).
Guernsey has implemented through domestic legislation matters related to (i) the Foreign Account Tax Compliance Act
(“FATCA”) contained in the US Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury
Regulations promulgated thereunder and (ii) the Organisation for Economic Co-operation and Development’s regime
known as the Common Reporting Standard (“CRS”). Pursuant to FATCA and CRS, disclosure and reporting of information
may be required, including disclosure of certain information about shareholders, their ultimate beneficial owners
and/or controllers and their investment in us. Shareholders should consult their tax advisers regarding the possible
implications of FATCA, CRS and other similar regimes that may be relevant to their ownership and disposition of
ordinary shares.
Material US federal income tax considerations
General
The following is a discussion of the material US federal income tax considerations that may be relevant to US Holders
(as defined below). This discussion is based upon provisions of the Code, the Treasury Regulations promulgated
thereunder and administrative rulings and court decisions, all as in effect or existence on the date of this Annual
Report and all of which are subject to change, possibly with retroactive effect. Changes in these authorities may cause
the tax consequences of ownership of ordinary shares to vary substantially from the consequences described below.
The following discussion applies only to beneficial owners of ordinary shares that own ordinary shares as “capital
assets” within the meaning of Section 1221 of the Code (i.e., generally, for investment purposes) and is not intended to
be applicable to all categories of shareholders, such as shareholders subject to special tax rules (i.e., banks or financial
institutions, regulated investment companies, insurance companies, broker-dealers or traders in stocks and securities
or currencies, tax-exempt organizations, real estate investment trusts, retirement plans or individual retirement
152 Burford Capital Annual Report 2021
accounts, US expatriates, persons who hold ordinary shares as part of a straddle, hedge, conversion, constructive sale
or other integrated transaction for US federal income tax purposes, traders in securities that have elected the mark-to-
market method of accounting for their securities, persons liable for alternative minimum tax, persons who are investors
in pass-through entities, persons that own (actually or constructively) 10% or more of our equity securities (by vote or
value), persons who elect to receive dividends in a currency other than the US dollar or persons that have a functional
currency other than the US dollar), each of whom may be subject to tax rules that differ significantly from those
summarized below. If a partnership or other entity classified as a partnership for US federal income tax purposes holds
ordinary shares, the tax treatment of its partners generally will depend upon the status of the partner and the
activities of the partnership. If you are a partner in a partnership holding ordinary shares, you should consult your own
tax advisor regarding the tax consequences to you of the partnership’s ownership of ordinary shares.
No ruling has been or will be requested from the Internal Revenue Service (the “IRS”) in connection with any matter
affecting us or our shareholders. The statements made herein may be challenged by the IRS and, if so challenged, may
not be sustained upon review in a court. This discussion does not contain information regarding any US state, US local
or US estate or gift tax considerations concerning the ownership or disposition of ordinary shares. This discussion does
not comment on all aspects of US federal income taxation that may be important to particular shareholders in light of
their individual circumstances, and each shareholder is encouraged to consult its own tax advisor regarding the US
federal, state, local and other tax consequences of the ownership or disposition of ordinary shares.
As used herein, the term “US Holder” means a beneficial owner of ordinary shares that is:
▪ An individual citizen or resident of the US;
▪ A corporation (including any entity treated as a corporation for US federal income tax purposes) created or
organized in or under the laws of the United States, any state thereof or the District of Columbia;
▪ An estate the income of which is subject to US federal income taxation regardless of its source; or
▪ A trust if (i) its administration is subject to the primary supervision of a court within the United States and one or
more US persons, within the meaning of Section 7701(a)(30) of the Code, have the authority to control all
substantial decisions of the trust or (ii) it has a valid election in effect under applicable Treasury Regulations to be
treated as a US person for US federal income tax purposes.
Distributions
Subject to the discussion below of the rules applicable to PFICs, any distributions to a US Holder made by us with
respect to ordinary shares generally will constitute dividends to the extent of our current and accumulated earnings
and profits, as determined under US federal income tax principles. Distributions in excess of our earnings and profits
will be treated first as a nontaxable return of capital to the extent of the US Holder’s tax basis in its ordinary shares
and thereafter as capital gain. Because we do not maintain calculations of our earnings and profits under US federal
income tax principles, US Holders should expect that distributions generally will be treated as dividends for US federal
income tax purposes. US Holders that are corporations generally will not be entitled to claim a dividends received
deduction with respect to distributions they receive from us. Distributions on ordinary shares to certain non-corporate
US Holders that satisfy a minimum holding period and other generally applicable requirements should generally be
eligible for taxation at preferential rates. However, non-corporate holders that do not meet a minimum holding period
requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as
“investment income” pursuant to Section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation. In
addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related
payments with respect to positions in substantially similar or related property. This disallowance applies even if the
minimum holding period has been met. Shareholders should consult their own tax advisors regarding the application of
these rules to their particular circumstances. Dividends received with respect to ordinary shares generally will be
treated as foreign source “passive category income” for purposes of computing allowable foreign tax credits for US
federal income tax purposes. The US foreign tax credit rules are complex, and US Holders are urged to consult their
own tax advisors regarding the availability of the US foreign tax credits and the application of the US foreign tax credit
rules to their particular situation.
Burford Capital Annual Report 2021 153
Sale, exchange or other disposition of ordinary shares
Subject to the discussion below of the rules applicable to PFICs, a US Holder generally will recognize gain or loss upon a
sale, exchange or other disposition of ordinary shares in an amount equal to the difference between the amount
realized by the US Holder from such sale, exchange or other disposition and the US Holder’s adjusted tax basis in such
ordinary shares. The US Holder’s tax basis in its ordinary shares generally will be the US Holder’s purchase price for
ordinary shares reduced by the amount of any distributions on ordinary shares that are treated as non-taxable returns
of capital (see “—Distributions”). Such gain or loss will be treated as capital gain or loss and will be long-term capital
gain or loss if the US Holder’s holding period is greater than one year at the time of the sale, exchange or other
disposition. Certain US Holders (including individuals) may be eligible for preferential rates of US federal income tax in
respect of long-term capital gains. A US Holder’s ability to deduct capital losses is subject to limitations. Such capital
gain or loss generally will be treated as US source income or loss, as applicable, for US foreign tax credit purposes.
PFIC
In general, we will be treated as a PFIC if, in any tax year in which, after applying certain look-through rules, either
(i) at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends, interest, rents,
royalties and capital gains from the sale or exchange of investment property) or (ii) at least 50% of the average value of
the assets held by us during such taxable year produce, or are held for the production of, passive income. If we were a
PFIC for any year during which a US Holder holds ordinary shares, we generally would continue to be treated as a PFIC
with respect to that US Holder for all succeeding years during which that US Holder holds ordinary shares, even if we
otherwise ceased to meet the requirements for PFIC status in that year.
There is substantial uncertainty regarding the tax treatment of our investments as well as the application of the PFIC
rules to such investments and, in particular, whether all or some of our investments are passive assets or otherwise
produce passive income under the applicable PFIC rules. As a result, although we do not believe we are currently a
PFIC, and we do not expect to be treated as a PFIC in the foreseeable future, there can be no assurance the IRS will
not successfully assert that we are or were a PFIC, that all or some of our investments are passive assets or otherwise
produce passive income or that a change in law or interpretation of current law, possibly with retroactive effect, could
cause us to be treated as a PFIC in a current, future or prior taxable year.
If we were treated as a PFIC, a US Holder would be subject to significant adverse tax consequences, including interest
charges and additional taxes, on certain excess distributions, sales, exchanges or other dispositions of ordinary shares
and certain transactions involving our subsidiaries that are themselves PFICs. A US Holder may mitigate certain, but not
all, of these adverse consequences by making a timely “mark-to-market” election with respect to ordinary shares. In
addition, certain information reporting requirements apply with respect to the ownership of ordinary shares. The US
federal income tax rules relating to PFICs are very complex. Shareholders are strongly encouraged to consult their own
tax advisor with respect to the impact of the PFIC rules on the purchase, ownership and disposition of ordinary shares.
Specified foreign financial assets
Individual US Holders that own “specified foreign financial assets” with an aggregate value in excess of (i) $50,000 on
the last day of the tax year or (ii) $75,000 at any time during the tax year are generally required to report information
relating to such assets. “Specified foreign financial assets” include any financial accounts held at a foreign financial
institution, as well as securities issued by a foreign issuer (which would include ordinary shares) that are not held in
accounts maintained by financial institutions. Higher reporting thresholds apply to certain married individuals. The
applicable Treasury Regulations extend this reporting requirement to certain entities that are treated as formed or
availed of to hold direct or indirect interests in “specified foreign financial assets” based on certain objective criteria.
US Holders who fail to report the required information could be subject to substantial penalties. Shareholders are
encouraged to consult their own tax advisor concerning regarding reporting obligations, if any, that would result from
their purchase, ownership or disposition of ordinary shares.
Backup withholding and information reporting
In general, US Holders will be subject to information reporting requirements on dividends received with respect to
ordinary shares and the proceeds of a disposition of ordinary shares, unless a US Holder is an exempt recipient (such as
a corporation). Backup withholding may apply to such amounts if the US Holder fails to provide an accurate taxpayer
identification number (generally on an IRS Form W - 9) or is otherwise subject to backup withholding. Backup
withholding is not an additional tax. A US Holder generally may obtain a credit for any amount withheld against its
154 Burford Capital Annual Report 2021
liability for US federal income tax (and obtain a refund of any amounts withheld in excess of such liability), provided
that certain required information is timely furnished to the IRS.
Purchases of equity securities by the issuer and affiliated
purchasers
The table below sets forth information about purchases by us and our affiliated purchasers during the year ended
December 31, 2021, of equity securities that are registered by us pursuant to Section 12 of the Exchange Act:
Period
01/01/2021 - 01/31/2021
02/01/2021 - 02/28/2021
03/01/2021 - 03/31/2021
04/01/2021 - 04/30/2021
05/01/2021 - 05/31/2021
06/01/2021 - 06/30/2021
07/01/2021 - 07/31/2021
08/01/2021 - 08/31/2021
09/01/2021 - 09/30/2021
10/01/2021 - 10/31/2021
11/01/2021 - 11/30/2021
12/01/2021 - 12/31/2021
Total number
of
ordinary
shares
purchased
—
—
18,6003
98,1294
—
—
—
—
248,0475
—
—
—
Average price
paid per
ordinary share1
—
—
$ 8.51
$ 10.00
—
—
—
—
$ 10.86
—
—
—
Total number of
ordinary shares
purchased as part
of publicly
announced plans
or programs
Maximum number
(or approximate dollar
value) of ordinary shares
that may yet be
purchased under
the plans or programs2
—
—
18,600
98,129
—
—
—
—
248,047
—
—
—
—
—
21,886,387
21,788,258
—
—
—
—
21,540,211
—
—
—
1.
Excludes broker and transaction fees.
2. On May 13, 2020, our shareholders approved a resolution at our annual general meeting authorizing us to purchase up to 21,904,987 ordinary shares in the
open market, which authority was set to expire at the close of our annual general meeting held in May 2021. On May 18, 2021, our shareholders approved
a resolution at our annual general meeting renewing our authorization to purchase up to 21,904,987 ordinary shares in the open market, which authority
is set to expire at the close of our annual general meeting to be held in May 2022 (or, if earlier, at the close of business on August 17, 2022).
3.
4.
5.
Consists of 18,600 ordinary shares purchased by the Burford Capital Limited Employee Benefit Trust in the open market on the NYSE and AIM on March 30,
2021 and March 31, 2021, to satisfy vested awards under the LTIP. The average price of the ordinary shares purchased on AIM was converted into US
dollars using the closing exchange rate of the Bank of England on the respective date of purchase.
Consists of 98,129 ordinary shares purchased by the Burford Capital Limited Employee Benefit Trust in the open market on the NYSE between April 1,
2021, and April 6, 2021, to satisfy vested awards under the LTIP.
Consists of (i) 13,787 ordinary shares purchased in the open market on the NYSE and AIM on September 15, 2021, to satisfy grants of awards under the
NED Plan and (ii) 234,260 ordinary shares purchased by the Burford Capital Limited Employee Benefit Trust in the open market on AIM between
September 17, 2021, through September 24, 2021, to satisfy vested awards under the LTIP. The average price of the ordinary shares purchased on AIM
was converted into US dollars using the closing exchange rate of the Bank of England on the respective date of purchase.
Documents on display
We are subject to the reporting requirements under the Exchange Act applicable to foreign private
issuers. Accordingly, we file certain reports with, and furnish other information to, the SEC. You may inspect reports
and other information regarding registrants, such as us, that file electronically with the SEC without charge at a
website maintained by the SEC at http://www.sec.gov or call the SEC at 1 - 800 - SEC - 0330 for further information
regarding the Public Reference Room. These documents and other important information on our governance and other
matters are also posted on our website at http://www.burfordcapital.com. 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 155
Quantitative and qualitative disclosures about market risk
Market and asset risk
We are exposed to market and asset risk with respect to our marketable securities, due from settlement of capital
provision assets, capital provision assets and financial liabilities related to third-party interests in capital provision
assets. With respect to our marketable securities, consisting primarily of corporate bonds, investment funds and US
treasuries, market risk is the risk that the fair value of marketable securities will fluctuate due to changes in market
variables, such as interest rates, credit risk, security and bond prices and foreign exchange rates. At December 31,
2021, should the prices of the investments in corporate bonds and investment funds have been 10% higher or lower
while all other variables remained constant, our income and net assets would have increased and decreased,
respectively, by $18 million (2020: $2 million).
We only fund capital provision assets upon undertaking an in-house due diligence process. However, capital provision
assets involve high risk, and there can be no assurance of a particular realization in any individual capital provision
asset. Certain of our capital provision assets are comprised of a portfolio of assets thereby mitigating the impact of the
outcome of any single capital provision asset. While the claims underlying our capital provision assets are generally
diverse, we monitor and manage the portfolio for related exposures that finance different clients relative to the same
or very similar claims, such that the outcomes on those related exposures are likely to be correlated. Capital provision
assets include a portfolio with equity risk where the price of a listed equity security is a determinant of the ultimate
amount of the realization upon the resolution of the litigation risk. At December 31, 2021, should the prices of the due
from settlement of capital provision assets, capital provision assets and financial liabilities related to third-party
interests in capital provision assets have been 10% higher or lower while all other variables remained constant, our
income and net assets would have increased and decreased, respectively, by $259 million (2020: $219 million).
The sensitivity impacts have been provided on a pre-tax basis on both income and net assets as we consider the
fluctuation in our effective tax rate from period to period could indicate changes in sensitivity not driven by the
valuation that are difficult to follow and detract from the comparability of this information.
Liquidity risk
We are exposed to liquidity risk. Our financing of capital provision assets requires funds to meet commitments (as
described in note 22 (Financial commitments and contingent liabilities) to our consolidated financial statements) and
for settlement of operating liabilities. Our capital provision assets typically require significant capital contributions
with little or no immediate return and no guarantee of return or repayment. See note 2 (“Summary of significant
accounting policies”) to our consolidated financial statements. In order to manage liquidity risk, we finance assets with
a range of anticipated lives and hold marketable securities which can be readily realized to meet those liabilities and
commitments.
Marketable securities principally include corporate bonds, asset-backed securities, investment funds, and US treasuries
that can be redeemed on short notice or can be sold on an active trading market.
In 2014, 2016, 2017 and 2018, we issued a total of $699 million (based on the prevailing pound sterling to US dollar
exchange rates at the applicable issue dates) aggregate principal amount of retail bonds raising sufficient extra capital
to help mitigate liquidity risk. In 2021, we issued $400 million aggregate principal amount of the 2028 Notes. At
December 31, 2021, interest payments on the bonds totaled approximately $296 million over the remaining eight
month and three-, five-, six- and seven-year periods until maturity in August 2022, October 2024, August 2025,
December 2026 and April 2028, respectively, at which point the principal amounts are required to be repaid. See
note 22 (“Financial commitments and contingent liabilities”) to our consolidated financial statements for a schedule of
maturities.
Credit risk
We are exposed to credit risk in various asset structures as described in note 2 (“Summary of significant accounting
policies”) to our consolidated financial statements, most of which involve financing sums recoverable only out of
successful capital provision assets with a concomitant risk of loss of invested cost. Upon becoming contractually
entitled to proceeds, depending on the structure of the particular capital provision asset, we could be a creditor of,
and subject to direct or indirect credit risk from, a claimant, a defendant and/or other parties, or a combination
thereof. Moreover, we may be indirectly subject to credit risk to the extent a defendant does not pay a claimant
156 Burford Capital Annual Report 2021
immediately notwithstanding successful adjudication of a claim in the claimant’s favor. Our credit risk is uncertain
given that our entitlement pursuant to our assets is generally not established until a successful resolution of claims,
and our potential credit risk is mitigated by the diversity of our counterparties and indirect creditors.
We are also exposed to credit risk in respect of the marketable securities and cash and cash equivalents. The credit
risk of the cash and cash equivalents is mitigated as all cash is placed with reputable banks with a sound credit rating
(A - 2 or higher by S&P and P - 2 or higher by Moody’s). Marketable securities principally consist of investment grade
corporate bonds and asset-backed securities, as well as investment in investment funds and US treasuries.
In addition, we are exposed to credit risk from opponents in litigation insurance. The underwriting process includes an
assessment of counterparty credit risk, and there is a large diversification of counterparties.
The maximum credit risk exposure represented by cash, cash equivalents, marketable securities, due from settlement
of capital provision assets and capital provision assets is specified in our consolidated statements of financial position.
Further, we are exposed to credit risk on financial assets held at amortized cost and receivables in other assets. The
maximum credit exposure for such amounts is the carrying value at December 31, 2021, of approximately $22 million
(2020: $22 million). We review the lifetime expected credit loss based on historical collection performance, the
specific provisions of any settlement agreement and a forward-looking assessment of macro-economic factors. Based on
this review, we have not identified any material expected credit loss relating to the financial assets held at amortized
cost, except for as set forth in note 6 (Capital provision assets) to our consolidated financial statements, we
recognized $500,000 of impairment during the year ended December 31, 2021 (2020: $nil; 2019: $1 million).
Currency risk
We hold assets denominated in currencies other than US dollars, our functional currency, including the British pound
sterling, Euro and the Australian dollar. Further, we issued British pound sterling debt during 2014, 2016 and 2017. We
are therefore exposed to currency risk, as values of the assets and liabilities denominated in other currencies will
fluctuate due to changes in exchange rates. We may use forward exchange contracts from time to time to mitigate
currency risk.
At December 31, 2021, should the British pound sterling, Euro and Australian dollar have strengthened or weakened by
10% against the US dollar while all other variables remained constant, our capital provision assets and other net assets
/(liabilities) would have would have increased/(decreased), respectively, as set forth in the table below:
($ in thousands)
US dollar
Sterling
Euro
Australian dollar
Capital
provision
assets
2,680,614
31,997
180,672
7,182
2,900,465
Other
assets/
(liabilities)
(547,570)
(412,136)
97
(166)
(959,775)
Credit
risk
exposure
of 10 %
—
(38,014)
18,077
702
(19,235)
At December 31, 2020, should the British pound sterling, Euro and Australian dollar have strengthened or weakened by
10% against the US dollar while all other market variables remained constant, our capital provision assets and other net
assets / (liabilities) would have would have increased/(decreased), respectively, as set forth in the table below:
($ in thousands)
US dollar
Sterling
Euro
Australian dollar
Capital
provision
assets
2,312,437
79,748
168,975
3,582
2,564,742
Other
assets/
(liabilities)
(168,543)
(490,626)
78
(157)
(659,248)
Credit
risk
exposure
of 10 %
—
(41,088)
16,905
343
(23,840)
Burford Capital Annual Report 2021 157
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. Our exposure to market risk for changes in floating interest rates relates primarily to
our cash, certain marketable securities and capital provision assets. All cash bears interest at floating rates. There are
certain capital provision assets, due from settlement of capital provision assets and marketable securities that earn
interest based on fixed rates, but those assets do not have interest rate risk as they are not exposed to changes in
market interest rates. Our outstanding debt incurs interest at a fixed rate and, therefore, is not exposed to changes in
market interest rates.
The interest-bearing floating rate assets and liabilities are denominated in both US dollars and British pound sterling. If
interest rates increased/decreased by 25 basis points while all other variables remained constant, the profit for the
year ended December 31, 2021, and net assets at December 31, 2021, would increase/decrease by $0.5 million (2020:
$1.0 million). For fixed rate assets and liabilities, it is estimated that there would be no material impact on profit or
net assets. Fixed rate liabilities include our outstanding indebtedness as described in note 14 (Debt issued) to our
consolidated financial statements.
The table below sets forth respective maturity periods of our floating and fixed rate assets and liabilities at
December 31, 2021:
Maturity period at December 31, 2021 ($ in thousands)
Assets
Less than 3 months
3 to 6 months
6 to 12 months
1 to 2 years
Greater than 2 years
Liabilities
6 to 12 months
Greater than 2 years
Net asset/(liabilities)
Floating
Fixed
Total
180,255
—
—
—
11,110
—
—
191,365
15,844
23,672
2,682
57,493
104,370
(83,595)
(950,618)
(830,152)
196,099
23,672
2,682
57,493
115,480
(83,595)
(950,618)
(638,787)
The table below sets forth respective maturity periods of our floating and fixed rate assets and liabilities at
December 31, 2020:
Maturity period at December 31, 2020 ($ in thousands)
Assets
Less than 3 months
3 to 6 months
6 to 12 months
1 to 2 years
Greater than 2 years
Liabilities
1 to 2 years
Greater than 2 years
Net asset/(liabilities)
Floating
Fixed
Total
329,570
—
—
—
61,092
—
—
390,662
1,154
1,575
1,606
1,717
65,585
(117,823)
(555,347)
(601,533)
330,724
1,575
1,606
1,717
126,677
—
(117,823)
(555,347)
(210,871)
158 Burford Capital Annual Report 2021
Controls and procedures
Disclosure controls and procedures
We maintain disclosure controls and procedures, as defined in Rules 13a - 15(e) and 15d - 15(e) under the Exchange Act,
that are designed to ensure that information required to be disclosed in the reports we file or furnish under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms and that such information is accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, our management necessarily is required to apply its
judgment in evaluating the costs and benefits of possible control and procedure design options. The design of our
disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions. Thus, in designing and evaluating our disclosure controls and procedures, our management, including our
Chief Executive Officer and Chief Financial Officer, recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired objectives of the
disclosure controls and procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls and procedures pursuant to Rule 13a - 15(b) under the Exchange Act at
December 31, 2021. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded
that, at December 31, 2021, our disclosure controls and procedures were not effective due to material weaknesses in
internal control over financial reporting. See “—Management’s annual report on internal control over financial
reporting” for additional information relating to the material weaknesses.
Management’s annual report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting, as defined in Rules 13a - 15(f) and 15d - 15(f) under the Exchange Act, is a
process designed by, or under the supervision of, a company's principal executive officer and principal financial officer
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated
financial statements for external purposes in accordance with generally accepted accounting principles and includes
those policies and procedures that:
▪ pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the company
▪ provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company
▪ provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company’s assets that could have a material effect on the financial statements
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures
may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting at December 31, 2021. In
making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission in Internal Control—Integrated Framework (2013). Based on such assessment, our
management has concluded that, at December 31, 2021, our internal control over financial reporting was not effective
due to material weaknesses in internal control over financial reporting described below. A material weakness is a
deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis.
Burford Capital Annual Report 2021 159
In connection with its assessment, our management identified a number of control deficiencies, each of which would
not result in a determination of material weakness on a standalone basis. However, when aggregating these control
deficiencies, our management concluded there was a material weakness relating to each of (i) the preparation of
evidence to demonstrate completeness and accuracy of information prepared by entity (“IPE”) and (ii) management
review controls. IPE is any information that is produced internally by a company and provided as evidence supporting
controls of such company. Management review controls are the reviews conducted by management of estimates and
other kinds of information for reasonableness.
At the date of this Annual Report, our management, in consultation with the Audit Committee, has identified and
begun to implement a remediation plan to address the timing of the control execution through re-alignment of
resources, hiring of additional personnel, training of personnel and enhancing the timing of the review and close
processes. Our management believes the measures described above will remediate the material weaknesses that we
have identified.
The effectiveness of our internal control over financial reporting at December 31, 2021, has been audited by Ernst &
Young LLP, our independent registered public accounting firm, as stated in their report, which is included herein.
Changes in internal control over financial reporting
Except as otherwise discussed above, no changes in our internal control over financial reporting, as defined in Rules
13a - 15(f) and 15d - 15(f) under the Exchange Act, occurred during the year ended December 31, 2021, that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Attestation report of independent registered public accounting firm
Ernst & Young LLP, our independent registered public accounting firm that audited our consolidated financial
statements included in this Annual Report, has issued its attestation report on our internal control over financial
reporting contained elsewhere in this Annual Report.
Principal accountant fees and services
Ernst & Young LLP has acted as our independent registered public accounting firm during each of the years ended
December 31, 2019, 2020 and 2021.
Pre-approval policies
The Audit Committee monitors and preapproves the fees paid to our independent registered public accounting firm for
all audit and non-audit services. It has developed and adopted a policy with clear guidelines on the engagement of the
independent registered public accounting firm. This policy is designed to help ensure that the independence of our
independent registered public accounting firm is maintained. It limits the scope of services that our independent
registered public accounting firm may provide to Burford, stipulating certain permissible types of audit-related and
non-audit services, including tax services and other services, that have been preapproved by the Audit Committee. The
Audit Committee preapproves all other services on a case-by-case basis. Our independent registered public accounting
firm is required to report periodically to the Audit Committee about the scope of the services it has provided to the
company and the fees for the services it has performed to date.
Audit fees
Audit fees include fees for work performed by our independent registered public accounting firm to issue opinions on
our consolidated financial statements and to issue reports on local statutory financial statements. Ernst & Young LLP
billed us approximately $2.1 million and $4.4 million for audit services for the years ended December 31, 2020 and
2021, respectively.
Audit-related fees
Audit-related fees include fees for other assurance services provided by our independent registered public accounting
firm but not restricted to those that can only be provided by the statutory auditor, such as reviews of interim financial
information and other audit-related services. Ernst & Young LLP billed us approximately $0.1 million and $0.3 million
for audit-related services for the years ended December 31, 2020 and 2021, respectively.
160 Burford Capital Annual Report 2021
Tax fees
Tax fees include fees associated with tax compliance, assistance with historical tax matters and other tax-related
services. Ernst & Young LLP billed us approximately $0.7 million and $0.5 million for tax advice for the years ended
December 31, 2020 and 2021, respectively.
All other fees
All other fees include services related primarily to our listing on the NYSE in October 2020, and the issuance of the
2028 Notes in April 2021. Ernst & Young LLP billed us approximately $1.0 million and $0.2 million for services other
than those described under “—Audit fees”, “—Audit-related fees” and “—Tax fees” for the years ended December 31,
2020 and 2021, respectively.
Burford Capital Annual Report 2021 161
Exhibits
Exhibit
No.
Description
1.1
Articles of Incorporation (incorporated by reference to Exhibit 1.1 to the Registration Statement on
Form 20 - F of Burford Capital Limited (File No. 001 - 39511) as filed with the SEC on September 11, 2020 (the
“Registration Statement”)).
1.2
2.1
Memorandum of Incorporation (incorporated by reference to Exhibit 1.2 to the Registration Statement).
Description of Securities (incorporated by reference to Exhibit 2.1 to the Annual Report on Form 20 - F of
Burford Capital Limited (File No. 001 - 39511) as filed with the SEC on March 24, 2021).
4.1
Trust Deed, dated as of February 12, 2018, by and among Burford Capital Finance LLC, as issuer, Burford
Capital Limited, Burford Capital PLC and Burford Capital Global Finance LLC, as guarantors, and U.S. Bank
Trustees Limited, as trustee (incorporated by reference to Exhibit 4.1 to the Registration Statement).
4.2
Trust Deed, dated as of June 1, 2017, by and among Burford Capital PLC, as issuer, Burford Capital Limited,
Burford Capital Finance LLC and Burford Capital Global Finance LLC, as guarantors, and U.S. Bank Trustees
Limited, as trustee (incorporated by reference to Exhibit 4.2 to the Registration Statement).
4.3
Trust Deed, dated as of April 26, 2016, by and among Burford Capital PLC, as issuer, Burford Capital
Limited, Burford Capital Finance LLC and Burford Capital Global Finance LLC, as guarantors, and U.S. Bank
Trustees Limited, as trustee (incorporated by reference to Exhibit 4.3 to the Registration Statement).
4.4
Trust Deed, dated as of August 19, 2014, by and among Burford Capital PLC, as issuer, Burford Capital
Limited, Burford Capital Finance LLC and Burford Capital Global Finance LLC, as guarantors, and U.S. Bank
Trustees Limited, as trustee (incorporated by reference to Exhibit 4.4 to the Registration Statement).
4.5
Indenture, dated as of April 5, 2021, by and among Burford Capital Global Finance LLC, as issuer, Burford
Capital Limited, as parent guarantor, the other guarantors party thereto from time to time and U.S. Bank
Trust Company, National Association, as successor to U.S. Bank National Association, as trustee
(incorporated by reference to Exhibit 99.1 to the Current Report on Form 6 - K of Burford Capital Limited
(File No. 001 - 39511) as filed with the SEC on April 6, 2021).
4.6
Long-Term Incentive Plan, amended and renewed as of May 13, 2020 (incorporated by reference to Exhibit
8.1*
12.1*
12.2*
13.1**
4.5 to the Registration Statement).
List of Subsidiaries of Burford Capital Limited.
Certification of Chief Executive Officer required pursuant to Rule 13a - 14(a) / 15d - 14(a).
Certification of Chief Financial Officer pursuant to Rule 13a - 14(a) / 15d - 14(a).
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a - 14(b) and Section
1350 of Chapter 63 of Title 18 of the United States Code.
15.1*
Consent of Ernst & Young LLP.
101
The following financial information from Burford Capital Limited’s Annual Report on Form 20 - F for the year
ended December 31, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the
consolidated statements of comprehensive income for the years ended December 31, 2021, 2020 and 2019,
(ii) the consolidated statements of financial position at December 31, 2021 and 2020, (iii) the consolidated
statements of cash flows for the years ended December 31, 2021, 2020 and 2019, (iv) the consolidated
statements of changes in equity for the years ended December 31, 2021, 2020 and 2019 and (v) the notes to
the consolidated financial statements.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
*
**
Filed herewith.
Furnished herewith.
162 Burford Capital Annual Report 2021
The registrant hereby certifies that it meets all of the requirements for filing on Form 20 - F and that it has duly caused
and authorized the undersigned to sign this Annual Report on Form 20 - F on its behalf.
SIGNATURES
BURFORD CAPITAL LIMITED
/s/ Charles Parkinson
By:
Name: Charles Parkinson
Title: Authorized Person
Dated: March 29, 2022
Burford Capital Annual Report 2021 163
Cross reference
Item
Form 20 - F caption
1
2
3
4
4A
5
6
7
8
9
10
11
12
13
14
Identity of directors, senior management and advisers
Offer statistics and expected timetable
Key information
[Reserved]
Capitalization and indebtedness
Reasons for the offer and use of proceeds
Risk factors
Information on the Company
History and development of the Company
Business overview
Organizational structure
Property, plants and equipment
Unresolved staff comments
Operating and financial review and prospects
Operating results
Liquidity and capital resources
Research and development, patents and licenses, etc.
Trend information
Critical accounting estimates
Directors, senior management and employees
Directors and senior management
Compensation
Board practices
Employees
Share ownership
Major shareholders and related party transactions
Major shareholders
Related party transactions
Interests of experts and counsel
Financial information
Consolidated statements and other financial information
Significant changes
The offer and listing
Offer and listing details
Plan of distribution
Markets
Selling shareholders
Dilution
Expenses of the issue
Additional information
Share capital
Memorandum and articles of association
Material contracts
Exchange controls
Taxation
Dividends and paying agents
Statements by experts
Documents on display
Subsidiary information
Quantitative and qualitative disclosures about market risk
Description of securities other than equity securities
Debt securities
Warrants and rights
Other securities
American depositary shares
Defaults, dividend arrearages and delinquencies
Material modifications to the rights of security holders and use of proceeds
A
B
C
D
A
B
C
D
A
B
C
D
E
A
B
C
D
E
A
B
C
A
B
A
B
C
D
E
F
A
B
C
D
E
F
G
H
I
A
B
C
D
Location in this Annual Report
N/A
N/A
N/A
N/A
N/A
133 - 150
12 - 13
8 - 23, 39 - 48, see also Item 5
22
23
N/A
8 - 12, 25 - 51, see also Item 5.D
8 - 12, 35 - 39
36
24 - 48, see also Item 5.A
48 - 49
119 - 123
127 - 131
119, 123 - 126
21
127 - 131
132
132
N/A
38, see also Item 18
118
12
N/A
12
N/A
N/A
N/A
N/A
151
151
152
152 - 155
N/A
N/A
155
N/A
156 - 158
N/A
N/A
N/A
N/A
N/A
N/A
164 Burford Capital Annual Report 2021
Item
Form 20 - F caption
Location in this Annual Report
15
16
16A
16B
16C
16D
16E
16F
16G
16H
16I
17
18
19
Controls and procedures
[Reserved]
Audit committee financial expert
Code of ethics
Principal accountant fees and services
Exemptions from the listing standards for audit committees
Purchases of equity securities by the issuer and affiliated purchasers
Change in registrant’s certifying accountant
Corporate governance
Mine safety disclosure
Disclosure regarding foreign jurisdictions that prevent inspections
Financial statements
Financial statements
Exhibits
159* - 160
N/A
125
126
160 - 161
N/A
155
N/A
123 - 126
N/A
N/A
See Item 18
69 - 118
162
Burford Capital Annual Report 2021 165
Further information
Directors
Hugh Steven Wilson (Chairman)
Christopher Bogart
Robert Gillespie
Andrea Muller
Charles Nigel Kennedy Parkinson
John Sievwright
Registered office
Oak House
Hirzel Street
St. Peter Port
Guernsey GY1 2NP
Independent registered public accounting firm
Ernst & Young LLP (1438)
St. Julian’s Avenue
St. Peter Port
Guernsey GY1 2HH
Advisors to the company on Guernsey law
Ogier (Guernsey) LLP
Redwood House
St. Julian’s Avenue
St. Peter Port
Guernsey GY1 1WA
Advisors to the company on English law
Freshfields Bruckhaus Deringer LLP
100 Bishopsgate
London EC2P 2SR
United Kingdom
Advisors to the company on US law
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, New York 10019
United States of America
Nominated adviser and joint brokers
Numis Securities Ltd
45 Gresham Street
London EC2V 7BF
United Kingdom
Joint brokers
Jefferies International Limited
100 Bishopsgate
London EC2N 4JL
United Kingdom
Registrar
Computershare Investor Services (Guernsey) Limited
Tudor House
Le Bordage
St. Peter Port
Guernsey GY1 1DB
Computershare Investor Services
P.O. Box 505005
Louisville, Kentucky 40233 - 5005
Administrator and company secretary
Oak Fund Services (Guernsey) Limited
Oak House
Hirzel Street
St. Peter Port
Guernsey GY1 3RH
166 Burford Capital Annual Report 2021
Equity and debt securities
Issuer
Security
Exchange
Ticker
ISIN/CUSIP
FIGI
Burford Capital Limited Ordinary Shares New York Stock Exchange
BUR
GG00BMGYLN96 BBG004FJ52G6
G17977110
SEDOL/ID
BMHLZ26 US
London Stock Exchange—AIM
BUR
GG00BMGYLN96 BBG000PN88Q7
BMGYLN9 GB
Burford Capital PLC
Bond
Bond
Bond
London Stock Exchange—Main Market BUR1 XS1088905093
BUR2 XS1391063424
BUR3 XS1614096425
BBG006VZCHM9
BBG00CMS9C56
BBG00GPZLYD7
EK3990638
JK7086578
AN5937551
Burford Capital Finance
LLC
Bond
London Stock Exchange—Main Market
BUR4
XS1756325228
BBG00JWN4HQ2
AQ9291818
Burford Capital Global
Finance LLC
Bond
Unlisted
N/A
Rule 144A:
US12116LAA70 /
12116L AA7
Regulation S:
USU1056LAA99 /
U1056L AA9
Company website
Our website is located at www.burfordcapital.com. 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.
Investor relations enquiries
For all investor relations enquiries about Burford Capital Limited, please contact:
Investor Relations
Burford Capital
Brettenham House
2 - 19 Lancaster Place
London WC2E 7EN
United Kingdom
Telephone: +44 (0)20 3530 2023
Investor Relations
Burford Capital
350 Madison Avenue
New York, New York 10017
United States
Telephone: +1 (212) 235 6820
Email: IR@burfordcapital.com
Visit the investor relations section of our website located at www.burfordcapital.com/shareholders for investor
relations information, including the latest share price, presentations relating to financial position and results of
operations and regulatory news. 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 167