伯福德资本 2025年度报告

Shareholder letter John SievwrightChair Christopher HalmyVice Chair Jonathan MolotChief Investment Officer In the part of our business we can most influence – new business - we had a terrific 2025. New definitivecommitments increased by 39% compared to 2024. Our base portfolio grew by 20%, well ahead of the paceneeded to meet our goal of doubling it by 2030. Modeled realizations grew by $700 million. We are verypleased with these results and pace of growth, which reflect our strong market position and the continuingdemand for legal finance solutions around the world. In the part of our business over which we have much less influence – case progress and realizations - we had amediocre 2025, which reduced short-term earnings. The simple fact is that we saw fewer realization dollarsfrom cases than we would have liked, even though we hit a new high in our rolling three-year average ofrealizations. This wasn’t a portfolio quality issue; our loss rate barely budged and remains below its 2024peak, and unlike 2024 we had no individual eight-figure realized losses in 2025. Instead, this was more aboutcourt timing and case progression. While the structural effects of the pandemic are now behind us, we stillface the litigation equivalent of four lanes of traffic needing to merge into two lanes, and matters are simplytaking longer. Nevertheless, even in a year of mediocre realizations, we still brought in $530 million in cash,less than 2024’s $699 million but substantially above our operating needs. As shareholders know, we believe in looking at the business on a cash basis. Our accounting and valuationprocesses incorporate several non-merits-driven variables – including interest rate movements and durationchanges – that can obscure underlying performance in any given period. We report these figurestransparently, but what ultimately matters is the cash realized from successful outcomes. This year illustrates that dynamic. When including the accounting impact of unrealized gains and losses, wehad higher gains than last year but we also had higher offsetting losses. However, the largest of those lossesare unrealized, and more of them were driven by dynamics such as duration changes and other non-adjudicative events than from permanent setbacks in the underlying merits litigation. As some of thoseunrealized losses are in matters in which our role has been publicly disclosed, we’re able to comment onthem in some detail, which we do in our earnings presentation1. We don’t mean to sugarcoat this year’s performance. Unrealized losses occur when something has happenedto make the underlying asset less valuable at the moment, and that is never a good thing. But it is importantto distinguish between valuation changes driven by timing or interim developments versus a true meritssetback. In 2025, we were afflicted by more of the former than the latter. Our portfolio-wide loss rateremains desirably low. And given the new business we are doing, our modeling suggests that the portfolio isconsiderably more valuable – to the tune of $700 million in net additional value - than it was a year agonotwithstanding these developments. We continue to manage the portfolio – and the business – with the objective of delivering a long-term returnon shareholders’ equity of around 20%. Share price The share price had a disappointing year, declining from around $14 in August to around $9 at the end of theyear. The principal catalyst for that decline appears to have been market uncertainty surrounding the YPF case; wenoted in our last quarterly earnings call that we believed that the market reaction was overdone. This is acase with only upside for us from a cash perspective:we have already covered our costs a couple of times over and pocketed a desirable profit of more than $100 million in cash. That is ours to keep; there is no claimon it ever being returned. The only remaining question is whether the case will produce yet more cash profitsfor us. But as the end of the case has drawn closer, the market has focused on it more than ever, often tothe exclusion of the rest of the business. The market is also acting as though a loss on appeal would be theend of the case and would essentially take its asset value to zero, which is simply not the case as we discussfurther below. There is, we suggest, undue downside bias in the market’s approach at present. To be sure, the ultimateoutcome of the YPF case is uncertain. Litigation risk remains, and even if we surmount the litigation risk, theduration and ultimate settlement level of the case is unknown. But there is certainly substantial option valueassociated with YPF under whatever set of assumptions one uses, and the market does not appear to us to beeven-handedly pricing that option value into our share price. We have had a number of suggestions from shareholders reacting to the share price, which we appreciate,and along with the board and our advisors we have carefully and thoughtfully consi