Berenberg European Micro Cap
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Berenberg European Micro Cap Annual Report as at 31 December 2020 An investment fund (Fonds commun de placement) pursuant to Part I of the Luxembourg Law of 17 December 2010 on undertakings for collective investment R.C.S. Lux K1821 Berenberg European Micro Cap Contents Organisational structure 3 Report of the Management Board 4 Derivative exposure 4 Key risk data 5 Remuneration policy of the Management Company 5 Remuneration policy of the portfolio manager 6 Portfolio manager report 7 Notes to the statement of assets 8 - 12 Balance sheet 13 Statement of assets 14 - 18 Statement of income and expenditure 19 Performance of fund assets 20 Comparative overview since launch 21 - 23 Report of the Réviseur d'Entreprises agréé 24-25 Supplementary information for investors in Switzerland 26 - 27 Page 2 Berenberg European Micro Cap Organisational structure Management Company Executive Board of the Management Company Representative in Switzerland Universal-Investment-Luxembourg S.A. Chairman of the Board 1741 Fund Solutions AG R.C.S. Lux B 75,014 Burggraben 16, CH-9000 St. Gallen 15, rue de Flaxweiler, L-6776 Grevenmacher Sean O'Driscoll Managing Director of Paying Agent in Switzerland Supervisory Board of the Management Company Universal-Investment-Luxembourg S.A., Grevenmacher Tellco AG Chairman of the Supervisory Board Board members Bahnhofstrasse 4, CH-6431 Schwyz Michael Reinhard Stefan Rockel (until 31 December 2020) Portfolio manager Chair of the Management Board of the Managing Director of Universal-Investment-Gesellschaft mbH, Frankfurt am Main Universal-Investment-Luxembourg S.A., Grevenmacher Joh. Berenberg, Gossler & Co. KG Neuer Jungfernstieg 20, D-20354 Hamburg Members of the Supervisory Board Matthias Müller Managing Director of Facilities Agent Services Frank Eggloff Universal-Investment-Luxembourg S.A., Grevenmacher Managing Director of United Kingdom Universal-Investment-Gesellschaft mbH, Frankfurt am Main Depositary, Registrar and Transfer Agent and Paying Agent ZEIDLER LEGAL SERVICES (UK) Limited Markus Neubauer State Street Bank International GmbH, Luxembourg Branch 4th Floor, 2 Leman Street, London E1 8FA Managing Director of 49, avenue John F. Kennedy, L-1855 Luxembourg Universal-Investment-Gesellschaft mbH, Frankfurt am Main Cabinet de révision agréé Information Agent in the Federal Republic of Germany KPMG Luxembourg, Société coopérative Joh. Berenberg, Gossler & Co. KG 39, avenue John F. Kennedy, L-1855 Luxembourg Neuer Jungfernstieg 20, D-20354 Hamburg Page 3 Berenberg European Micro Cap Report of the Management Board Dear Sir/Madam, We hereby present the annual report of the Berenberg European Micro Cap with the unit classes R, M (previously I) and B. The report covers the period from 01 January 2020 to 31 December 2020. The Berenberg European Micro Cap Fund (the “Fund”) is a legally dependent pooled investment fund ("fonds commun de placement" (FCP)) established under the law of the Grand Duchy of Luxembourg for an indefinite period and subject to Part I of the Luxembourg Law of 17 December 2010 on undertakings for collective investment (“Law of 2010”) and Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities. The financial year begins on 1 January and ends on 31 December of each year. The name of unit class I was changed to unit class M as at 1 June 2020. The Management Board of the Management Company has analysed the current developments in relation to the pandemic caused by the coronavirus and is satisfied that the plans of the contracted service providers to ensure the continuity of business operations take current operating risks into account and ensure that the activities of the Fund are not negatively impacted. As a result of the coronavirus, there is a high degree of uncertainty regarding the Fund's performance in 2021. Your attention is drawn to the section 'Post balance-sheet date events' in the notes to the statement of assets. On 11 March 2020, the World Health Organisation declared the COVID-19 outbreak a pandemic. Ongoing concerns about the impact of the virus on the global economy and the resulting uncertainty with regard to the valuation of the investments in this report could therefore lead to significant deviations from the actual value if the investments were sold today. Significant corrections in the market and the increased volatility in recent months could have a significant impact on the Fund with regard to the future valuation of investments. The relevant committees will closely monitor further developments at national and international level, particularly with regard to the economic impact on the Fund. As at 31 December 2020, the fund assets and price performance of the Fund during the reporting period were as follows: Unit class ISIN Fund assets in EUR Price performance in % Berenberg European Micro Cap - R LU1637618742 47,722,803.33 31.58 Berenberg European Micro Cap - M (previously I) LU1637618825 572,332,429.89 32.20 Berenberg European Micro Cap - B LU1637619047 28,930,268.17 32.95 Derivative exposure As at 31 December 2020, there was the following derivative exposure. Fund Derivative exposure in % Berenberg European Micro Cap 0.00 Page 4 Berenberg European Micro Cap Key risk data General The Value at Risk for the Fund was calculated using a historic simulation based on the individual securities. A one-year observation period, a confidence interval of 99% and a holding period of one day were chosen for the calculation. The calculations comply with the regulatory requirements of the CSSF pursuant to the Law of 17 December 2010 and Circular no. 11/512. Method of determining overall risk The relative Value at Risk approach was used for monitoring overall risk during the period from 01 January 2020 to 31 December 2020. In the relative VaR approach, the VaR (99% confidence level, one-day holding period, one-year period under consideration) of the Fund may not exceed an amount equal to twice the VaR of a derivative-free reference asset. The reference assets are basically an approximate representation of the Fund's investment policy. Derivative-free reference assets as at 31 December 2020: 50% MSCI Europe + 50% MSCI Europe Micro Cap The following VaR key figures were determined in the reporting period: Lowest VaR: 77.13% Highest VaR: 118.39% Average VaR: 106.03% The leverage is calculated according to Guideline CESR/10-788 based on the sum of notionals method, excluding any netting and hedging effects. In this context, a portfolio with 100% leverage is considered unleveraged. The average leverage of the Fund during the reporting period was 100.32%. Remuneration policy of the Management Company (unaudited) Information on employee remuneration (as at 30 September 2020) is listed below: Total employee remuneration paid during the company's last completed financial year 11.60 EUR million - of which fixed remuneration 9.80 EUR million - of which variable remuneration 1.80 EUR million Number of company employees 105.9 Full-time equivalent Amount of carried interest paid n/a Total risk taker remuneration paid during the company's last completed financial year 1.90 EUR million - of which managers 1.90 EUR million - of which other risk takers 0.00 EUR million The remuneration system of the Management Company can be found on the website of Universal-Investment-Gesellschaft mbH at http://www.universal-investment.com/de/permanent-seiten/profil/luxemburg/regulatorische- informationen/verguetungssystem-luxemburg and in the Sales Prospectus. The remuneration committee verifies compliance with the remuneration policy once a year. This includes the alignment with the business strategy, the goals, values and interests of Universal-Investment-Luxembourg S.A. and the funds it manages, and measures to avoid conflicts of interest. There were no findings that would have required an adjustment. No changes were made to the remuneration system compared to the previous year. Page 5 Berenberg European Micro Cap Remuneration policy of the portfolio manager (unaudited) Information on employee remuneration (as at 31 December 2019) is listed below: Total employee remuneration paid during the company's last completed financial year 212.6 EUR million - of which fixed remuneration 155.1 EUR million - of which variable remuneration 57.5 EUR million Number of company employees 1,474 Full-time equivalent Page 6 Berenberg European Micro Cap Portfolio manager report While the capital market year 2019 was characterised by low volatility and only short-term fluctuations, the first quarter of 2020 saw a crash on the financial markets. The global spread of the coronavirus triggered widespread lockdowns in the first quarter, massive restrictions on global travel and freight and subsequently slumping corporate profits. Risk assets in particular – but also temporarily gold and supposedly safe US government bonds – were sold as a result of investors' increasing need for liquidity. Implicit volatilities in equities rose to over 80 (VIX or VSTOXX) before a combination of massive global central bank responses (interest rate cuts and bond purchases) and government bailout packages (including EUR 750 billion from the German government, USD 2,000 billion from the US government) were able to put capital markets back on the road to recovery from the second quarter onwards. Similar to the crisis months of February 2020 and March 2020, defensive quality and growth stocks initially remained in demand in the second quarter, before economic activity picked up again with a gradual easing of the coronavirus restrictions and, with positive economic data from mid-May onwards, a catch-up movement of more cyclical assets became noticeable and safe havens such as gold, the yen or the US dollar came under some pressure. The recovery on the capital markets continued in the third quarter. Economic data that exceeded expectations, a pleasantly surprising corporate reporting season for the second quarter and the EU's agreement on the EUR 750 billion reconstruction fund were corresponding drivers for the stock markets.