Exhibit 99.1

Contents

 

Strategic report
2	At a glance
3	Financial summary
5	Management statement
7	Our business model
9	Key definitions
12	Financial and operational review
43	Financial statements
77	Further information

 

FORWARD-LOOKING STATEMENTS

In addition to statements of historical fact, this report contains “forward-looking statements” within the meaning of Section 21E of the US Securities Exchange Act of 1934. The disclosure and analysis set forth in this 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 periodic reports that we file with the US Securities and Exchange Commission, 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 and that our actual results of operations, including our financial condition 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 report. In addition, even if our results of operations, including our financial condition and liquidity and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods.

Factors that might cause future results to differ include, but are not limited to, the following:

Except as required by law, we undertake no obligation to update or revise the forward-looking statements contained in this report, whether as a result of new information, future events, a change in our views or expectations or otherwise. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess 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.

At a glance

1H 2020 highlights

Burford Capital is the leading global finance and asset 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, Washington, Singapore and Sydney.

Significant acceleration of realisations		Substantial realised gains
Group-wide realisations ($ in millions)		Burford balance sheet only ($ in millions)
For more details see page 33		For more details see pages 34

Attractive and increased returns
Capital provision-direct cumulative recoveries since inception Burford balance sheet only
($ in millions)
For more details see pages 23-26

We assess the performance of the Group using a variety of alternative performance measures, which are explained on pages 10-11. We refer readers to greater detail and explanation about all of the data above in our financial and operational review beginning on page 12 and the key definitions on page 9.

Financial summary

IFRS requires us to present financials that consolidate some of the limited partner interests in funds we manage as well as assets held by our balance sheet where we have a partner or minority investor. We refer to this presentation as “Consolidated” or “IFRS”. We endeavour to provide clarity on Burford as a stand-alone business by furnishing information on a non-IFRS basis that eliminates the effect of this consolidation. We refer to this presentation as “Burford-only”, “Burford standalone” and “Burford-only balance sheet” as the context requires. We also strive to provide clarity on the business of Burford and its managed funds as a whole by furnishing information on a non-IFRS basis that reflects the contribution of both our consolidated and unconsolidated funds. We refer to this presentation as “Group-wide”. Throughout this document reference is made to various terms associated with the Burford structure. These include Burford balance sheet only, the Company, Group, Group-wide, BOF, BOF-C and the Strategic Value Fund. These, along with other key terms, are set out among the key definitions on pages 9 to 11 of this interim report and in the glossary of terms on pages 154 to 158 of our Annual Report 2019.

The 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 Burford-only performance discussion to our published accounts.

Statement of financial position

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Management statement

2020: Leading the way today

Sir Peter Middleton GCB Chairman		Hugh Steven Wilson Deputy Chairman		Christopher Bogart Chief Executive Officer		Jonathan Molot Chief Investment Officer

Burford posted a very strong first half in which some substantial portfolio matters resolved with a clear path to cash—cash which has been rolling in since the period ended. Income from realised gains in our Buford-only capital provision-direct portfolio rose 57% over the first half of 2019, and excluding YPF-related assets, our Burford-only total income rose 155% over the prior period. Unsurprisingly, however, in a world buffeted by COVID-19 and its ensuing economic consequences, while our team and our operations have been largely unaffected, new business has declined as lawyers and clients focus on other priorities—a state of affairs we expect to be temporary.

Burford’s most concentrated position¹ was successful, adding yet another example of outperformance to Burford’s long track record and generating $172 million of balance sheet income, a 182% ROIC. We deployed $144 million Group-wide ($94 million on the balance sheet) into a related group of 18 cases in the 2016, 2017 and 2019 vintages. Those cases were all resolved in our clients’ favour in the first half of 2020 and their judgments have begun to be paid; when all cases are paid, we expect to receive cash proceeds of $423 million Group-wide (balance sheet: $266 million), for a Group-wide ROIC of almost 200% and an IRR of 56%. At the end of 2019, those cases were all held at cost, as no objective event had occurred under our valuation policy to cause us to recognise gains prior to this period. As a result, the balance sheet generated $172 million in realised gains from these matters in 1H 2020, not including the asset management fees they will ultimately produce.

Given this latest substantial success, Burford’s ROIC since inception for its capital provision-direct business has risen to 97% from 88% at the end of 2019.

If it were not already clear, this latest outcome should put an end once and for all to any question about Burford not being able to repeat the selection and management of outperforming matters. It should also put an end to any liquidity concerns. The simple fact is that such outperformance is a regular part of our litigation outcomes, just as losses are, albeit with asymmetrically lower financial impact. Burford has demonstrated its ability, time and time again, to include such outperformers in its portfolio.

That was not our only success in the period. We discuss in more detail the portfolio’s performance in the pages that follow, but we saw other substantial trial-level wins in the period and also settlements that generated meaningful cash—more than $200 million for the balance sheet, including significant amounts from our capital provision-indirect portfolio.

Burford’s robust performance during this period occurred without a single dollar of assistance from its YPF-related assets.

Investors could be forgiven for asking why, in light of such strong results, our Burford-only *********** profit after tax has declined ******. In addition to the impact of our YPF-related assets in 2019, part of the answer is because of the sharp discrepancy between our cash and “book” taxes. We paid less than $2 million in cash taxes in the period, but we recognised $36 million in tax expense. The explanation for this borders on the occult (and is set out in more detail later) but that is how tax accounting appears to work these days.

One big piece of news is that the SEC has declared our Registration Statement effective and the New York Stock Exchange has approved the listing of our shares, to coexist with our London listing. We believe a US listing has the potential to increase liquidity in Burford stock and expose us to a new, deep pool of possible investors. And of course, voluntarily submitting to the enhanced scrutiny of US securities regulators should provide further assurance even to investors who continue to trade our shares in London. We expect trading to begin on the NYSE on or around 19 October.

Looking ahead, we see significant opportunity. As the last six months have demonstrated, the sizeable investments we have made in the last few years are beginning to come to fruition. Moreover, much as we deplore the suffering we have seen this year across the world, no one disputes that the tumult of both the pandemic and the ensuing economic consequences will inevitably lead to a vast landscape of disputes for years to come. We are brimming with optimism about Burford’s future.

As usual, we keep our interim report much briefer than our Annual Report, although we have stepped up some amount of disclosure that investors told us they found helpful in the expanded Annual Report, and we comment below on a few significant areas.

¹ Measured by cash invested; previously discussed on page 47 of Burford’s 2019 Annual Report.

Liquidity

In spite of the worst capital markets downturn in Burford’s history, our liquidity—already robust—strengthened considerably, buoyed by asset realisations, including from the optionality provided by our allocation of a portion of our balance sheet to short-duration capital provision-indirect assets. We opened 2020 with $206 million of cash and cash management assets on Burford’s balance sheet; at 30 June 2020 our cash and cash management asset balance had grown to $262 million and it stands at $316 million at 15 September 2020. And because we co-invest with our managed funds, with the balance sheet generally taking 42% of new deployments in core litigation finance, that level of cash at 30 June 2020 unlocks over $600 million of total core litigation finance deployment potential and even more today—in short, a lot of dry powder that we’re excited to deploy.

We also ended the period with $281 million in receivables on Burford’s balance sheet; at 15 September, $86 million had already been paid and we expect continued conversion of those receivables to cash as the year proceeds, just as has occurred in prior periods.

In addition to our robust cash balances, we continue to have a wide range of other capital options. We have a substantial fund management business with the ability to seek incremental capital from private investors. We have a very low leverage level and satisfactory bond ratings from both S&P and Moody’s; we have always been and expect to continue to be opportunistic with respect to cash and debt management, both in terms of future issuance and as to potential debt repurchases in advance of scheduled maturities. We continue to take steps to develop a secondary market for our assets. We do not, however, consider further equity issuance to be part of our current toolkit and we will not be issuing equity in connection with our anticipated US listing.

COVID-19

As we discussed in Burford’s 2019 Annual Report, we expected the global pandemic to have both short-term negative and long-term positive impacts on our business.

In the early months of the pandemic, we saw a collapse in new business. Lawyers and clients were spending all of their time on immediate crises, and seeking legal finance was not a priority as they sheltered-in-place and tried to adjust to a new normal of practising law from their living rooms with their kids running around. Thus, we are not surprised to see a sharp fall in new commitments and deployments in the first half. Our pipeline is considerably busier now and we do not expect that level of downturn to persist in the second half, although like the rest of the world we find predicting the next few months difficult.

At the same time, while some courts shifted into remote operation without missing a beat, a number of courts slowed down significantly. Many corporate defendants used the pandemic as a device to try to avoid progressing with litigation and were reluctant to settle cases due to liquidity concerns. We did not see settlement activity return in earnest until June, and we still see court slowdowns and defendant efforts to capitalise on the virus. It is important to bear in mind that delay for us is simply deferral—and is often profitable for us.

However, there is likely to be a significant uptick in litigation activity as the world normalizes, which will continue for years. The US has already seen more than 5,000 COVID-related lawsuits filed.² US business groups believe that to be the tip of the iceberg.

Operationally, COVID-19 has not had a significant impact on Burford’s business. We already had a culture of collaborative, geographically dispersed people and we were able to move to remote work pretty seamlessly. To be sure, we think there are some benefits in teams re-assembling in offices when that becomes feasible, but that is a desire as opposed to an urgent need.

Governance

Our evolution of the Board is continuing. David Lowe retired at the May 2020 AGM; we are grateful to Mr. Lowe for his wise counsel since Burford’s founding. Three new directors were also appointed at the May 2020 AGM, Robert Gillespie and John Sievwright as non-executive directors and Christopher Bogart, our CEO, as an executive director. Messrs Gillespie and Sievwright have also joined the audit committee. Sir Peter Middleton will retire at the May 2021 AGM and we have retained Spencer Stuart to lead a search for a new female director to join the board at that time. Upon Sir Peter’s retirement, Steve Wilson, currently Deputy Chairman, will become the Chairman; Mr. Wilson is already actively engaged in that transition process.

We look forward to an active fall and hope for the continuing resumption of normalcy in the world around us.

² See https://www.huntonak.com/en/covid-19-tracker.html.

Our business model

How we deliver value

Commercial legal claims, defences, settlements, judgments, awards and fee receivables are financial assets. We help companies and law firms unlock the value of these financial assets by providing a range of financing and risk management solutions based on their expected future value. We fund these solutions by deploying capital from our own balance sheet and private investment funds that we manage.

Details on the figures contained on pages 7 and 8 can be found in the Financial and operational review section starting on page 12.

Key definitions

Definitions related to Burford’s activities

Throughout this report, we will refer to our activities as follows:

Legal finance

includes our traditional core litigation finance activities in which we are providing clients with financing against the future value of legal claims. It also encompasses our asset recovery and legal risk management activities, which often are provided to the same clients.

Complex strategies

encompasses our activities providing capital as a principal in legal-related assets, often securities, loans and other financial assets where a significant portion of the expected return arises from the outcome of legal or regulatory activity. Most of our complex strategies activities over the past several years have been conducted through our Strategic Value Fund.

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.

Asset management

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

Our funding sources, however, are not organised based on these services but by expected return, risk and life of the assets we originate. We use our balance sheet and certain dedicated funds to provide capital for higher risk, higher return, longer-lived assets such as those created in our legal finance business. We typically use dedicated funds, in which our balance sheet is an investor, to provide capital for the kind of lower risk, lower return, shorter-lived assets that typify complex strategies activities. And we use still other dedicated funds (without balance sheet investment) for low risk, low return, very short-lived assets, such as post-settlement and law firm receivables financing.

To present our business in line with this stratification of asset types, beginning with our 2019 Annual Report, we provide our financing and other services through three principal operating segments:

Capital provision, which includes both

Direct, where we provide our capital directly to clients or as principal in our legal finance activities

Indirect, where we provide our capital by investing through funds that we manage

Asset management, which includes our activities in managing our eight investment funds and the resulting fee stream, including managing the funds that hold assets originated by our post-settlement finance activity.

Services and other corporate, which includes fees generated for services provided by our asset recovery and legal risk management (including insurance) activities as well as corporate financial activity.  

In order to provide greater clarity on our capital provision assets, beginning with the 2019 Annual Report, we have sub-divided for purposes of reporting a number of financial metrics into:

Direct

which includes all our legal finance assets (including those generated by asset recovery and legal risk management activities) that we have made directly (i.e., not through participation in a fund) from our balance sheet. We also include direct (not through a fund) complex strategies assets in this category. Broadly, when we originate all these types of assets, we are targeting risk-adjusted IRRs in the mid-20s to mid-30s with an expected weighted average life between two and five years, though we can, on occasion, accept a lower return on a shorter-lived, more liquid or less risky asset.

Indirect

which includes our balance sheet’s participations in one of our funds. Currently, this category is comprised entirely of our position in the Burford Strategic Value Fund. At present, with this type of asset, we are targeting risk-adjusted IRRs in the mid-to-high teens with an expected weighted average life of one year or less.

For each of these two categories, we also provide separate asset data tables with a complete list of every investment in each category (available on our website) and separate return metrics (IRR, ROIC, weighted average life).

Definitions related to Burford’s business structure

We use Burford-only and Group-wide financial measures, which are calculated and presented using methodologies other than in accordance with IFRS, to supplement our analysis and discussion of our operating performance. 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 performance, including the performance of our managed funds, is an important measure by which to assess our ability to attract additional capital and to grow our business, whether directly or through managed funds. These non-IFRS financial measures should not be considered as a substitute for, or superior to, financial measures calculated in accordance with IFRS.

To that end, throughout this report, we will refer to our funding configuration as follows:

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 IFRS accounting. This presentation conforms to the presentation of Burford on a consolidated basis in our financials. The major entities consolidated into Burford include the Strategic Value Fund, BOF-C and several entities in which Burford holds investments where there is also a third-party partner in or owner of those entities. Note that in our financial statements, our consolidated presentation is referred to as Group.

Burford-only

Burford standalone, Burford-only, Burford-only balance sheet, “balance sheet” or similar terms refers to assets, liabilities and activities that pertain only to Burford itself, excluding any third-party interests and the portions of jointly owned entities owned by others.

Group-wide

refers to Burford and its managed funds taken together, including those portions of the funds owned by third parties and including funds that are not consolidated into Burford’s interim condensed consolidated financials. In addition to the consolidated funds, Group-wide includes the Partners funds, Burford Opportunity Fund and Burford Alternative Income Fund and its predecessor.

Definitions related to calculating returns

Alternative performance measures:

This report presents certain unaudited alternative performance measures (“APMs”), which are not presented in accordance with IFRS.

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

In discussing cash returns, we refer to several metrics that we have applied consistently for many years in our financial disclosure:

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 we receive all cash proceeds associated with the asset in the same period. Sometimes, non-cash assets are received or cash will be paid over time. In those instances, a balance sheet due from settlement of capital provision assets receivable is recorded, in which event we estimate the future date we expect to receive cash for purposes of calculating return or other metrics such as IRR and WAL. 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 as of 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:

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 (only requiring us to provide funding after reviewing and approving a future matter). Unless otherwise indicated, commitments include deployed cost and undrawn commitments.

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 inflows and outflows from that pool, allocating investment cost appropriately. IRRs do not include unrealised gains.

ROIC means the absolute amount of realisations from a concluded asset divided by the amount of expenditure incurred in funding that asset, 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 an ROIC basis. MOICs include the return of capital and thus are 1x higher than ROICs. In other words, a 70% ROIC is the same as 1.70x MOIC.

The WAL of one of our legal finance assets represents the average length of time until we receive a cash realisation from that asset weighted by the amount of that realisation. WAL is, simply, how long our asset will be outstanding on average. In calculating a portfolio WAL, we compute a weighted average of the individual asset WALs.

We previously 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 analysing 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. Historically, in doing this, we weighted the individual WALs (durations) by the costs deployed on the asset. We now also provide portfolio WAL data weighted by the recoveries on the individual assets.

In addition to these measures of cash returns and asset life, we also refer to two other alternative performance measures in this report:

Consistent with its status as a registered investment advisor with the SEC, Burford reports publicly on its asset management business on the basis of regulatory assets under management. For the benefit of non-US investors, the SEC’s definition of AUM may well differ from that used by European asset managers. 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. Our AUM will fluctuate as we raise new funds and other investment vehicles, and as existing funds and vehicles mature and no longer represent sources of callable capital in the future; there is no direct translation from AUM to asset management income.

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For a full list of terms we use to discuss our business, please see the Glossary of Terms beginning on page 154 of our Annual Report 2019.

Financial and operational review

We have organised the topics in this financial and operational review in the way that we think about and manage Burford’s business. First, we provide a set of financial statements for Burford balance sheet only, eliminating consolidated third-party interests and adjusting for certain unusual items to provide a view of the underlying performance of Burford. In conjunction with those financial statements, we offer a short narrative on trends and highlights on Burford’s performance during 1H 2020. Then, we address a series of financial and operating topics. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Our cash derives from returns on our portfolio, which we examine next. Those returns reflect the scale, scope and quality of our portfolio, so we provide select data on the portfolio after that. We construct our portfolio by making financing commitments on which we deploy capital that ultimately turns into asset realisations, so we review each of those topics in turn. We carry and measure our capital provision assets at fair value under IFRS accounting even though management focus for performance reporting is primarily on cash based metrics, so we provide a section that walks through the impact of fair value adjustments on our balance sheet and income, including a brief discussion of our YPF-related assets which have been the primary driver of our fair value unrealised gains. Our asset management business has been growing in breadth and depth, so we provide some additional detail on that business. Finally, we conclude with a look at our liquidity and funding.

IFRS requires the consolidation of certain investment entities that contain third-party capital, principally including the Strategic Value Fund and the BOF-C fund, through which our sovereign wealth fund arrangement is conducted. We use Burford-only and Group-wide financial measures, which are calculated and presented using methodologies other than in accordance with IFRS, to supplement our analysis and discussion of our operating performance. 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 performance, including the performance of our managed funds, is an important measure by which to assess our ability to attract additional capital and to grow our business, whether directly or through managed funds. These non-IFRS financial measures should not be considered as a substitute for, or superior to, financial measures calculated in accordance with IFRS.

Burford balance sheet only results

The 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 Burford-only performance discussion to our published accounts.

Statement of comprehensive income

Statement of financial position

Overview of 1H 2020

Burford delivered strong results during 1H 2020 despite the difficult environment and operating challenges posed by the COVID-19 pandemic. Burford-only capital provision income was down 6% in 1H 2020 compared to 1H 2019, though much more income was from realised gains during 1H 2020: Realised gains during the period were up 49% while unrealised gains (net of transfers to realised) were down 53% due to the absence of any fair value changes in our YPF-related assets. Burford-only income from other segments was modestly lower in 1H 2020 than in the prior year period. *********** ******** ******** ************ ****** ********** ******** taxation expense was higher by over $30 million because of the jurisdictions in which gains occurred in 1H 2020. ***** ****** **** **** **** **** ******* ***** ****** ***** ***** ******* ******** **** ******** ****** ******* ******

Realisations from Capital Provision-Direct Portfolio. As previewed in our 28 April 2020 trading update that accompanied the release of Burford’s 2019 Annual Report, the first half of 2020 delivered significant progress in several cases in our capital provision-direct portfolio. These successes, distributed among several of our recent vintages, underpinned $308 million of capital provision-direct asset realisations for the balance sheet during the period, which in turn gave rise to $183 million of realised gains from the capital provision-direct portfolio. Realisations of $308 million were generated from $125 million of deployed capital, around 14% of total balance sheet capital provision-direct deployments at the start of the period. As is often the case, those results generated a mix of immediate cash ($46 million) and short-term receivables. These capital provision-direct realised gains (73% of Burford-only capital provision income in the period) along with $68 million in capital provision-direct unrealised gains drove $251 million in total capital provision income during 1H 2020, down only 6% from 1H 2019. Burford-only capital provision-direct realised gains increased as a share of adjusted profit before tax to 93% in 1H 2020 from 50% in 1H 2019, reflecting the capacity of the portfolio to generate attractive profits. It is worth noting that, in 1H 2019, $188 million or 70% of our capital provision income came from YPF-related assets; during 1H 2020, none of our capital provision income came from YPF-related assets. In other words, the strategy we outlined in our 2019 Annual Report of the YPF-related assets serving as a bridge to substantial performance from the rest of the portfolio has started to materialise.

A key driver of our capital provision-direct realisations and income during 1H 2020 was a set of ten related assets consisting of 18 cases in which Burford’s balance sheet had invested $94 million ($144 million Group-wide). From this set of cases, we had $266 million of balance sheet realisations ($423 million Group-wide), for realised gains on the balance sheet of $172 million ($279 million Group-wide), an ROIC of 182% for the balance sheet (194% Group-wide) and an IRR of 49% for the balance sheet (56% Group-wide). This set of cases concluded late in the period, giving rise over period end to receivables that constituted a substantial portion of the $281 million in due from settlement receivables carried on the Burford balance sheet at 30 June 2020 (consolidated basis: $287 million). Those receivables have already begun to pay cash; by 15 September 2020, $86 million of them have been converted to cash.

Returns. Since this set of related concluded cases in 1H 2020 was both relatively large (taken together) and produced attractive returns, it has had a positive impact on our cumulative return metrics. Since Burford began operations in 2009 through 30 June 2020, on $1.6 billion of capital provision-direct realisations on our balance sheet, we have generated an ROIC of 97% (up from 88% at 31 December 2019).

Realisations from Capital Provision-Indirect Portfolio. Despite the COVID-19 pandemic and resulting challenging market conditions, we were also able to realise significant cash proceeds from our capital provision-indirect portfolio, where we shifted to favouring settlements even at discounted returns given adverse market conditions. During 1H 2020, we resolved four assets in this portfolio, resulting in cash proceeds to Burford’s balance sheet of $170 million. Though returns on these resolved assets were dampened by the market environment, we believe it is nonetheless an indicator of the resilience of the strategy that we were able to realise significant cash proceeds during this period. Our ability to harvest cash from our capital provision-indirect portfolio during 1H 2020 also reinforces our view of this portfolio as a medium-term source of liquidity for Burford’s balance sheet.

Liquidity. We finished 1H 2020 with $262 million in cash and cash management assets, an increase of $56 million over 31 December 2019. We expect additional cash to arise from our due from settlement receivables, putting us in a position of having significant liquidity to re-deploy into attractive new assets going forward. Our cash balance at 15 September 2020 was $316 million.

Commitments. Although we had good success in realisations during 1H 2020 despite the COVID-19 pandemic, our capital provision-direct new business efforts were more significantly impacted. As the pandemic hit, many clients paused from pursuing legal finance to transition to working remotely and to determine the impact on legal processes. At the same time, given the uncertain environment, we took a cautious stance on potential cases and counterparties. As a result, Burford’s new commitments during 1H 2020 declined significantly. As legal processes and the overall environment have stabilised, our pipeline has begun to build once again. Ultimately, we expect the pandemic and resulting environment to produce a significant amount of future litigation and arbitration, which should produce a substantial volume of attractive future financing opportunities.

At the same time, we have refrained from making new commitments in our capital provision-indirect portfolio during 1H 2020. The strategy that underlies this portfolio depends upon a robust merger and acquisition market, which has been significantly negatively impacted by the pandemic.

Other Income. Touching briefly on a couple of other, smaller components of Burford balance sheet only income during 1H 2020:

Operating Expenses. *********** ******** ******** ************ ****** ********** ******** *********** ******** * Because of the uncertainty caused by the pandemic and market environment, we managed expenses carefully during the period, including by limiting growth in headcount and compensation expense, while expenses for travel and marketing declined because of the work-from-home environment. We did incur $4 million in added expenses because of our preparation for a US listing and certain other share-related expenses; *********** ******** ******** **** ******** ****** **********

Taxes. We saw a significant increase in the tax expense recorded on our statement of comprehensive income this period. It is important to understand that there is a substantial discrepancy between our “book” taxes (i.e., the tax expense shown on the income statement) and our “cash” taxes (i.e., the amount of tax we actually pay). That discrepancy can be particularly pronounced in the United States and is illustrated in note 4 to the financial statements but, as the accounting approach to tax is complex, we discuss the topic here.

We have commented in the past that our book tax expense was lower than our cash taxes, and in some instances was even positive (i.e. we had a tax credit); this period, our book tax expense of $36 million was substantially higher than our cash taxes paid of $2 million. That difference arose largely because we had sufficiently high realised gains to make use of the bulk of the net operating loss carry forward shown in our deferred tax assets at year-end 2019. As we have always expected to be able to offset these losses against future taxable gains, we had recognised the benefit of this asset in our financial statement tax computations in prior years. The impact of using these net operating losses during the current period primarily reduces the amount of cash taxes payable for the relevant jurisdiction and not the tax expense recognised in the income statement.

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

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Current portfolio

At 30 June 2020, the Group-wide portfolio was $4.0 billion, including funded cost, unrealised gain and undrawn commitments. Of this amount, $2.6 billion was attributable to the Burford-only 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. The second table below provides additional details on the reconciliation.

Reconciliation of current portfolio-consolidated IFRS financials to Group-wide

Additional details on reconciliation

In the “Current Portfolio-Group-wide” table above, the “Funds” column includes some funds that are consolidated into our IFRS financial statements and some funds that are not; these funds are presented in separate columns in the “Reconciliation of Current Portfolio-IFRS Financials to Group-wide” table above. When the consolidated funds are added to the “Burford-only Balance Sheet” and “BOF-C” columns in the “Current Portfolio-Group-wide” table above, the sum corresponds to the amounts presented in note 6 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 above correspond to the amounts included in note 17 to our consolidated financial statements, as indicated above.

The Group-wide portfolio at 30 June 2020 was 13% larger than at 30 June 2019 but was down 6% at 30 June 2020 compared to

31 December 2019 because of lower deployments across the capital provision portfolio during 1H 2020 due to the COVID-19 pandemic and significant realisations in both the capital provision-direct and indirect portfolios.

Unfunded commitments

The table below sets forth our Group-wide unfunded (undrawn) commitments outstanding at 30 June 2020 and at 31 December 2019 on a consolidated basis, a Burford-only balance sheet basis and a Group-wide basis and provides reconciliation.

Our unfunded commitments can be divided into two categories: Discretionary and definitive. Discretionary commitments are those commitments 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 obliged to fund incremental capital and failure to do so without good reason (such as a negative change in a case’s prospects) would typically come with adverse contractual consequences.

Capital provision-direct unfunded commitments

Burford balance sheet only

Deployments on unfunded commitments typically occur gradually over time. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *; we have deployed a median of 16% of the prior year’s unfunded commitments in the following year. Deployments on unfunded commitments during 1H 2020 were 5% (11% on an annualised basis) of outstanding unfunded commitments at 31 December 2019.

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Capital provision-direct portfolio

Before considering the performance of the legal finance assets in our capital provision-direct portfolio, it may be worth reviewing the typical life of a litigation matter. While different legal fora have somewhat different approaches, this generic approach is generally applicable.

Once a case is commenced, pre-trial activity begins, including discovery and pre-trial motions. Often, as the case develops through this phase, one side or the other will conclude its position is not as strong as it thought, which can often lead to settlement discussions. If a case doesn’t settle, it moves to trial and a judgment; again, settlement can often occur at or around the trial phase. After a judgment has been entered, there is typically an appeal process (during which settlements can also occur) before the judgment becomes final. This entire process can occur over the course of several years but, in some jurisdictions, can take longer (or, in some lamentably small number of cases, can be faster).

Given the substantial adjudication success during 1H 2020, the percentage of Burford’s deployments on concluded cases that ended in adjudication wins increased to 30% from 21% at 31 December 2019 and recoveries in this category increased to $832 million (31 December 2019: $559 million).

During 1H 2020, Burford continued to demonstrate its ability to generate outsized returns from a number of its concluded capital provision-direct matters, with six matters that fully or partially concluded during the period generating ROICs in excess of 200% (and one more was at 199%). At 30 June 2020, of concluded assets since inception, 22 matters representing 13% of the total of deployed cost of concluded assets have generated an ROIC of greater than 200%.

Portfolio tenor

The chart below presents the historical weighted average lives (beginning at the point of average deployment) of concluded (fully and partially) capital provision-direct assets, weighted both by deployed cost and by recoveries. Weighting by deployed cost provides a view on how long on average a dollar of capital remains deployed, while weighting by recoveries provides a perspective on how long on average it takes to recover a dollar of return.

The weighted average life (weighted by recoveries) on concluded assets did not change at 30 June 2020 compared to 31 December 2019. The large set of related assets that concluded during this period, taken together, had a WAL by recoveries of 2.0 years which was shorter than our typical experience on adjudications. As the capital provision portfolio matures, we would expect to see WALs continue to lengthen over time as more adjudicated cases with longer tenors are realised.

Portfolio returns

As of 30 June 2020, concluded assets in Burford’s balance sheet capital provision-direct portfolio had generated a cumulative ROIC of 97% and an IRR of 32% since Burford’s inception. Realisations during 1H 2020, including particularly the large set of related cases realised during the period, drove an increase in ROIC from year end 2019 levels while helping to maintain cumulative IRRs at a level consistent with historical experience.

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, in response to investor inquiries, we have in the past provided our returns data excluding our YPF-related realisations; at 30 June 2020, excluding proceeds from our sales of YPF-related participations, our capital provision-direct ROIC would have been 69% and our IRR 26% instead of an ROIC of 97% and an IRR of 32%, as reported.

Summary asset portfolio

On our website, we provide a table with details on every asset (concluded and ongoing) that we have funded in our capital provision-direct portfolio over our history. The updated table as of 30 June 2020 will be posted on the website at the time of release of this report. A summary by vintage of the performance data in that table appears below:

Capital provision-direct assets

Burford balance sheet only

Capital provision-direct assets

Burford balance sheet only (continued)