2017 - burfordcapital.com

1 Burford Capital annual report 20172017 annual REPORTB urford Capital is a leading global finance and investment management firm focused on law. Its businesses include litigation finance and risk management, asset recovery and a wide range of legal finance and advisory activities. Burford is publicly traded on the London Stock Exchange, and it works with law firms and clients around the world from its principal offices in New York, London, Chicago and Burford CapitalContentsThis report is for the use of Burford s public shareholders and does not constitutean offer of any Burford s core business5 Investment management25 Insurance29 New initiatives30 Forecasting and guidance30 Corporate and financial matters32 report to Shareholders3 Corporate governance37 Reconciliation40 Director s Report42 Independent Auditor s Report44 Consolidated Financial Statements53 Notes to the Consolidated Financial Statements59 Corporate Information92 Financial Summary2 Highlights1 Full Year Highlights201720136120148220151032016163 2017341 Income ($m)Profit After Tax ($m) 2013402014542015662016115201726520135320 1490201515920162303622017 Cash Receipts ($m)Total Assets ($m)

2 201337620145332015594201696820171,318 Return on Equity of37%Profit after tax up 130% to$265mCash generation up 57% to$362mFull year dividend up 20% to Income up 109% to$341mNote: As adjusted and defined in each annual report . Please refer to note on page 2 for further details on 2017 Burford annual report 2017 HIGHLIGHTS2 Burford annual report 2017 FINANCIAL SUMMARYI nvestment incomeInvestment management incomeInsurance incomeNew initiatives incomeOther incomeTotal income*Operating expenses investmentsOperating expenses investment managementOperating expenses insuranceOperating expenses new initiativesOperating expenses corporateOperating profit*Finance costsProfit before tax*TaxationProfit after tax*US$ 000$318,234$15,626 $7,613 $2,968 ($3,199)$341,242($33,540)($7,159)($2,001 )($2,271)($7,298)$288,973($24,251)$264,7 22$123 $264,8452017$140,187 $647 $12,923 $8,849 $797 $163,403 ($26,017)($443)($1,696)($4,895)($5,975)$ 124,377 ($14,108)

3 $110,269 $4,817 $115,086 2016+ 109%+ 140%+ 127%+ 132%+ 130%% Change* Income, operating profit, profit before tax and profit after tax exclude the impact of amortisation of intangible asset and non-recurring acquisition costs relating to the acquisition of GKC Holdings, LLC, investment banking and brokerage fees and also exclude third-party interests in consolidated funds. Refer to pages 40 and 41 for a reconciliation to the corresponding amounts reported on a consolidated IFRS basis.* Income, operating profit, profit before tax and profit after tax exclude the impact of amortisation of intangible asset and non-recurring acquisition costs relating to the acquisition of GKC Holdings, LLC, investment banking and brokerage fees and also exclude third-party interests in consolidated funds.

4 Refer to pages 40 and 41 for a reconciliation to the corresponding amounts reported on a consolidated IFRS audited IFRS consolidated financial statements can be found in the following pages. Below is a summary of Burford s results without third-party interests in consolidated funds. The figures for operating profit, profit before tax and profit after tax also exclude the impact of the amortisation of intangible asset and non-recurring acquisition costs relating to the acquisition of GKC Holdings, LLC and investment banking and brokerage fees and are shown to assist in understanding the underlying performance of the Company. Without these adjustments, reported profit after tax would have been $ million, and the increase over 2016 would have been 129%.

5 Financial summaryOur volume of new commitments in 2017 $ billion, more than triple the 2016 level and more than 30x the level in 2013, only four years ago shows that what was once a novel concept is now Burford annual report 2017 report TO SHAREHOLDERSI ntroductionBurford emerged in 2009 from the ashes of the global financial crisis to meet nascent demand from corporate clients for financial alternatives to conventional law firm economic arrangements. Little did we imagine that less than nine years later we would have become a global commercial finance enterprise, committing more than $ billion to new investments in a single year from offices spanning the globe with more than $ billion invested and available for we did know was that the legal industry was sorely in need of a financial revolution.

6 Although law firms account for hundreds of billions of dollars of direct economic activity every year, and trillions of dollars of indirect activity, the legal sector has traditionally operated with an antiquated approach to capital, generally eschewing it and running large, highly profitable businesses on a pure cash basis. And corporate clients, beleaguered by ever-increasing spending burdens for regulatory compliance and litigation, have a desperate need for the kind of financial alternatives commonplace in other aspects of their provides those financial alternatives through an ever-growing range of products and services, all of which build on our core competency, the assessment of legal and regulatory risk as applied to investment assets.

7 This is our entire business; we have remained true to our core principles and maintained a relentless focus on execution. Indeed, we surely sacrifice some growth given our focus on profitability and quality, and we believe that is the prudent course as stewards of investor capital. Moreover, Burford makes a positive social and economic contribution by ameliorating the negative effects of litigation risk and expense on productive business activity and on the civil justice we have always been confident about the market opportunity, law is a conservative sector that embraces change slowly. It has thus taken some years to move what were novel concepts into the legal mainstream. Our volume of new business in 2017 $ billion in new commitments, more than triple the 2016 level of $378 million and more than 30x the level in 2013, only four years ago shows that this move to the mainstream has now are also taking note of Burford s consistent financial performance and attractive, uncorrelated investment returns, which are generated through its legal and financial underwriting acumen.

8 This business can seem esoteric to investors, primarily because investors lack not just exposure to legal finance but generally to the legal industry altogether. Burford is not just the only listed legal finance firm of scale, it is also virtually the only way to invest publicly in the legal sector as a whole. The past year saw yet more investors focusing on the opportunity here. Our share price doubled in 2017 and we created more than $ billion in shareholder value. A shareholder who purchased our stock at our IPO in 2009, a bit more than eight years ago, will have enjoyed 1250% in total shareholder return through the end of 2017 on that initial investment, a 37% annualised Burford annual report 2017 report TO SHAREHOLDERSC ontinuedOur financial performance1 which for the most part reflects the outcomes of investment decisions made years ago continues to be robust, and to increase alongside our larger investment portfolio.

9 This is an important point: Our income predominantly comes from the performance of investments made in prior periods. Virtually none of our 2017 income came from investments made in 2017, and thus we are not seeing today the income potentially associated with the higher volume of new investments made this year. Our income rose 109% to $341 million, and our profit after tax rose 130% to $265 million Realised gains from investments also more than doubled 20 different investments contributed to 2017 s realised gains Unrealised gains remained generally consistent with prior year levels at 53% of income (2016: 54%) and 36% of investments (2016: 31%) We generated $362 million in cash, more than the prior year s level (2016: $230 million) Our total assets rose to $ billion (2016: $968 million) Our operating expenses declined sharply as a percentage of income, to (2016: ) Our return on equity rose to (2016.)

10 Our 2017 results were generated by a combination of a couple of large cases and a significant number of more moderate successes, with 20 investments reporting realised gains. Rather than being unusual or exceptional, this is the nature of our business. Most litigation matters settle, and settlements produce nice returns, while our best returns come from cases that go to trial and win. Cases that produce large returns for us at trial could easily have settled and produced only moderate returns (and vice versa). Part of the secret of litigation investing is having a large, diversified portfolio so that we always have some cases going to trial, with the potential of high returns but the presence of binary risk of complete loss, while benefiting from the tendency of matters to settle and produce desirable returns from the majority of the portfolio without litigation risk.