bmic_annual_report_2019

Notes to the Financial Statements

and a reliable estimate can be made of the amount of the A financial asset is measured at amortized cost if it meets
obligation. both of the following conditions and is not designated as at
FVTPL:
2.6.8. Other non-financial assets - It is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
All other non-financial assets are valued net of specific - Its contractual terms give rise on specified dates to cash
provision, where necessary, so as to reduce the carrying flows that are solely payments of principal and interest on
value of such assets to their estimated realizable value. the principal amount outstanding.

2.6.9. Other non-financial liabilities A debt investment is measured at FVOCI if it meets both of
the following conditions and is not designated as at FVTPL:
Other Non-Financial Liabilities are recognized at their -It is held within a business model whose objective is
nominal amount. achieved by both collecting contractual cash flows and
selling financial assets; and
2.6.10. Impairment of non-financial assets - Its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on
The Company assesses at each reporting date whether the principal amount outstanding.
there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for Financial assets - Business model assessment
an asset is required, the Company estimates the asset’s The Company makes an assessment of the objective of the
recoverable amount. An asset’s recoverable amount is higher business model in which a financial asset is held at a portfolio
of asset’s fair value less costs to sell and its value in use. It is level because this best reflects the way the business is
determined for an individual asset, unless the asset does managed and information is provided to management. The
not generate cash inflows that are largely independent information considered includes:
of those from other assets or groups of assets Where the - The stated policies and objectives for the portfolio
carrying amount of an asset exceeds its recoverable amount,
the asset is considered impaired and is written down to its and the operation of those policies in practice. These
recoverable amount. include whether management’s strategy focuses on
earning contractual interest income, maintaining a
2.6.11. Financial instruments – Initial particular interest rate profile, matching the duration
recognition and subsequent measurement of the financial assets to the duration of any related
liabilities or expected cash outflows or realizing cash
Recognition and initial measurement flows through the sale of the assets;
Loans and receivables and debt securities issued are initially - How the performance of the portfolio is evaluated and
recognized when they are originated. All other financial reported to the Company’s management;
assets and financial liabilities are initially recognized when - The risks that affect the performance of the business
the Company becomes a party to the contractual provisions model (and the financial assets held within that busi-
of the instrument. ness model) and how those risks are managed;
- How managers of the business are compensated - e.g.
A financial asset or financial liability is initially measured at whether compensation is based on the fair value of the
fair value plus, for an item not at fair value through profit or assets managed or the contractual cash flows collect-
loss (FVTPL), transaction costs that are directly attributable ed; and
to its acquisition or issue. - The frequency, volume and timing of sales of financial
assets in prior periods, the reasons for such sales and
Classification and subsequent measurement of financial expectations about future sales activity.
assets
On initial recognition, a financial asset is classified and Transfers of financial assets to third parties in transactions
measured at amortized cost; fair value through other that do not qualify for derecognition are not considered sales
comprehensive income (FVOCI) - debt investment; fair value for this purpose, consistent with the Company’s continuing
through other comprehensive income (FVOCI) - equity recognition of the assets.
investment; or fair value through profit or loss (FVTPL).
Financial assets that are held for trading or are managed
Financial assets are not reclassified subsequent to their initial and whose performance is evaluated on a fair value basis are
recognition unless the Company changes its business model measured at FVTPL.
for managing financial assets, in which case all affected
financial assets are reclassified on the first day of the first
reporting period following the change in the business model.

100 Berendina Micro Investments Company Limited | Annual Report-2019

Notes to the Financial Statements

Financial assets -Assessment whether contractual cash Debt invest- These assets are subsequently measured
flows are solely payments of principal and interest ments at at fair value. Interest income calculated
For the purposes of this assessment, ‘principal’ is defined FVOCI using the effective interest method,
as the fair value of the financial asset on initial recognition. foreign exchange gains and losses and
‘Interest’ is defined as consideration for the time value of Equity in- impairment are recognized in profit or loss.
money and for the credit risk associated with the principal vestments at Other net gains and losses are recognized
amount outstanding during a particular period of time and FVOCI in OCI. On derecognition, gains and losses
for other basic lending risks and costs (e.g. liquidity risk and accumulated in OCI are reclassified to
administrative costs), as well as a profit margin. profit or loss.

In assessing whether the contractual cash flows are solely These assets are subsequently measured
payments of principal and interest, the Company considers at fair value. Dividends are recognized as
the contractual terms of the instrument. This includes income in profit or loss unless the dividend
assessing whether the financial asset contains a contractual clearly represents a recovery of part of the
term that could change the timing or amount of contractual cost of the investment. Other net gains
cash flows such that it would not meet this condition. In and losses are recognized in OCI and are
making this assessment, the Company considers: never reclassified to profit or loss.

- Contingent events that would change the amount or 2.6.12. Revenue recognition
timing of cash flows;
Revenue is recognized to the extent that it is probable that
- Terms that may adjust the contractual coupon rate, the economic benefits will flow to the Company and the
including variable-rate features revenue and associated costs incurred or to be incurred can
be reliably measured, regardless of when the payment is
- Prepayment and extension features; and being made. The following specific criteria are used for the
purpose of recognition of revenue.
- Terms that limit the Company’s claim to cash flows from
specified assets (e.g. non-recourse features).

A prepayment feature is consistent with the solely payments a) Interest income and expenses
of principal and interest criterion if the prepayment amount Interest income and expense are recognized in Statement
substantially represents unpaid amounts of principal and of Comprehensive of Income using the effective interest
interest on the principal amount outstanding, which may method. The effective interest rate is the rate that exactly
include reasonable additional compensation for early discounts the estimated future cash payments and receipts
termination of the contract. Additionally, for a financial through the expected life of the financial assets or liability
asset acquired at a discount or premium to its contractual (or, where appropriate, a shorter period) to the carrying
par amount, a feature that permits or requires prepayment amount of the financial asset and liability. When calculating
at an amount that substantially represents the contractual the effective interest rate, the Company estimates future
par amount plus accrued (but unpaid) contractual interest cash flows considering all contractual terms of the financial
(which may also include reasonable additional compensation instrument, but not future credit losses.
for early termination) is treated as consistent with this
criterion if the fair value of the prepayment feature is The calculation of the effective interest rate includes all fees
insignificant at initial recognition. and points paid or received that are an integral part of the
effective interest rate. Transaction costs include incremental
Financial assets - Subsequent measurement and gains and costs that are directly attributable to the acquisition or issue
losses of a financial asset or liability.

Financial as- These assets are subsequently measured b) Fee and commission income
sets at FVTPL at fair value. Net gains and losses, Fee and commission income earned for the period of services
including any interest or dividend income, over a period of time are accrued over that period. Other fee
are recognized in profit or loss. including admission fee, service charges are recognized as
related services are performed.
Financial as- These assets are subsequently measured
sets at amor- at amortized cost using the effective c) Other Income
tized cost interest method. The amortized cost is Non-operational interest income and fees are accounted for
reduced by impairment losses. Interest on accrual basis.
income, foreign exchange gains and losses
and impairment are recognized in profit or
loss. Any gain or loss on derecognition is
recognized in profit or loss.

Berendina Micro Investments Company Limited | Annual Report-2019 101

Notes to the Financial Statements

2.6.13. Expenses recognition 2.6.17. Saving deposits from customers

Expenditure is recognized in the Statement of Comprehensive In June 2019, the Company commenced accepting
Income on the basis of direct association between the cost collateralized savings deposits in accordance with Direction
incurred and the earning of specific items of income. All No. 1 of 2019 issued by the Monetary Board of the Central
expenditure incurred in the running of the business and in Bank of Sri Lanka under Section 11 of the Microfinance Act
maintaining the property,plant and equipment or investment No. 6 of 2016.
properties in a rate of efficiency has been charged to income
in arriving at the profit for the year. The Compulsory saving deposit product was introduced to
new loan clients as a pilot project in two of the branches. The
For the purpose of presentation of the Statement of customers were required to save LKR 100 per month in their
Comprehensive Income the directors are of the opinion that Savings Account along with the monthly loan installment.
the nature of expense method presents fairly the elements However, this amount is subject to change based on
of the Company’s performance, and hence such presentation operational requirements in future.
method is adopted. Repairs and renewals are charged to the
Statement of Comprehensive Income in the year in which Savings deposits are initially recognized at fair value net
the expenditure is incurred. of transaction cost. Subsequent to initial recognition
deposits are measured at their amortized cost using the
Lease payments associated to the underlying asset is low effective interest rate (EIR) method. The interest paid/
value, short term contract or no contract are recognized as payable on these deposits is recognized in the statement of
an expenses under the operating lease expenses on either a comprehensive income.
straight line basis or another systematic basis over the lease
term. Interest cost of the right to use asset is recognized as 2.7 Effect of Sri Lanka Accounting
a finance. Standards issued, but not effective

2.6.14. Statement of Cash Flows A number of new standards are effective for annual periods
beginning on or after 1 January 2019 and earlier application
The cash flows statement has been prepared using the is permitted; however, the following amended standards and
‘Indirect Method’ of preparing cash flows in accordance with interpretations are not expected to have a significant impact
the Sri Lanka Accounting Standard LKAS - 7 ‘Statement of on the Company’s financial statements.
Cash Flows.’ Cash and cash equivalents comprise short term,
highly liquid investments that are readily convertible to - Amendments to references to Conceptual Framework in
known amounts of cash and are subject to an insignificant SLFRS standards.
risk of changes in value. Cash and cash equivalents comprise - Definition of a business (amendments to SLFRS 3)
of cash in hand and cash at banks and other highly liquid - Definition of material (amendments to LKAS 1 and LKAS 8).
financial assets which are held for the purpose of meeting
short-term cash commitments with original maturities of
less than three months which are subject to insignificant risk
of changes in their fair value.

2.6.15. Related party disclosures

Transactions with related parties are conducted in the
normal course of business.

2.6.16. Commitments and contingencies

All discernible risks are accounted for in determining the
amount of all known liabilities. Contingent liabilities are
possible obligations whose existence will be confirmed only
by uncertain future events or present obligations where the
transfer of economic benefit is not probable or cannot be
reliably measured. Contingent liabilities are not recognized
in the Statement of Financial Position but are disclosed
unless they are remote.

102 Berendina Micro Investments Company Limited | Annual Report-2019

Notes to the Financial Statements

3. GROSS INCOME Notes 2019 2018
LKR LKR
For the year ended 31 December 4 786,084,413 863,038,231
Interest income 6
Fee, commission and other income 52,090,452 51,699,229
Gross income
838,174,865 914,737,460
4. INTEREST INCOME
2019 2018
For the year ended 31 December LKR LKR
Interest from loans and advances 771,312,485 854,110,187
Interest income from bank deposits
Staff loan interest 14,545,904 8,135,429

5. INTEREST AND SIMILAR EXPENSES 226,024 792,615

For the year ended 31 December 786,084,413 863,038,231
Interest on long term borrowings
Bank charges Notes 2019 2018
Guarantee fee for loans 17.1 LKR LKR
Exchange loss and loan processing charges 193,591,660 253,337,970
Interest on staff security fund 2,022,463 2,026,456
Interest on customer deposit 1,058,134 1,845,486
Interest expense on right-of-use assets 1,078,827
60,792
6. FEE, COMMISSION AND OTHER INCOME 790,321 627,493
-
For the year ended 31 December 2,987 -
Written-off loans recoveries 5,391,279
Enterprise Development Service (EDS) income 202,917,636 258,916,232
Miscellaneous income
2019 2018
LKR LKR

515,034 431,118

36,069,266 34,062,631

15,506,152 17,205,480

52,090,452 51,699,229

7. PERSONNEL EXPENSES Notes 2019 2018
18 LKR LKR
For the year ended 31 December 244,229,941 219,317,500
23,809,428
Salaries and other benefits 26,339,291 6,053,185
Defined contribution plan-EPF and ETF 249,180,113
Defined benefit plan-Gratuity 6,557,779
103
277,127,011

Berendina Micro Investments Company Limited | Annual Report-2019

Notes to the Financial Statements

8. OTHER OPERATING EXPENSES 2019 2018
LKR LKR
For the year ended 31 December 135,654,371 122,874,161
Office administration and establishment expenses 17,509,267 17,690,701
Enterprise Development Service (EDS) expenses 2,855,711 4,638,399
Professional and legal expenses 1,408,347 1,664,074
Auditor's remuneration 157,427,696 146,867,335

9. INCOME TAX EXPENSE Notes 2019 2018
15 LKR LKR
For the year ended 31 December 24,465,390 71,587,774
Current tax
Over Provision of current taxes - (2,096,347)
Deferred tax charge/(reversal)
403,371 (1,540,273)

24,868,761 67,951,154

9.1 Taxable Income 2019 2018
LKR LKR
For the year ended 31 December 13,294,485 114,305,109
225,701,986 151,530,872
Accounting profit before tax (151,620,080) (10,065,365)
Aggregated disallowed items 87,376,391 255,770,616
Aggregated allowable items 87,376,391 255,770,616
Adjusted profit from trade
Total statutory income - (100,000)
Less: 87,376,391 255,670,616
Qualifying Payments
Taxable income

9.2 Statutory Tax Rate 24,465,389 71,587,774
Tax liability for the year @ 28% 24,465,389 71,587,774
Current income tax expenses

Income tax is calculated at the rate mentioned as above of the assessable profit for the period.

10. CASH AND CASH EQUIVALENTS

As at 31 December 2019 2018
LKR LKR
Petty cash
Cash in hand 116,819 118,554
Cash at bank
3,993,138 6,852,627

111,511,968 173,074,136

115,621,925 180,045,317

104 Berendina Micro Investments Company Limited | Annual Report-2019

Notes to the Financial Statements

11. BALANCES WITH BANKS AND FINANCIAL INSTITUTIONS

As at 31 December 2019 2018
LKR LKR
Sri Lanka Savings Bank 52,788,324 48,035,058
Hatton National Bank 2,500,000
Interest receivables -
801,822
56,090,146 543,990

48,579,048

12. LOANS AND RECEIVABLES Notes 2019 2018
LKR LKR
As at 31 December 12.1 2,989,697,004 2,951,448,813
Loan receivables 12.2
Less : Collective allowance for impairment (229,906,299) (115,792,590)

2,759,790,705 2,835,656,223

12.1. Loans and Receivables - Analysis (By Product) 2019 2018
LKR LKR
As at 31 December 1,717,833,300 1,260,377,859
201,715,263 550,294,476
Business development loan 780,424,034 574,336,494
Business starting loan 195,150,502 477,910,346
Assets building loan 32,284,944 38,530,940
Business expansions loan 8,938,991 9,343,401
Estate individual loan 6,383,888 6,960,781
Dairy loan 1,248,207 3,783,586
Agriculture loan
Emergency loan - 274,400
Sanitary loan 436,824 894,110
Livelihood development loan 20,137,432 21,842,542
Staff loans 25,143,619 6,899,878
Interest receivables 2,989,697,004 2,951,448,813

12.2. Movement in Impairment Charge During the Year 2019 2018
LKR LKR
As at 31 December 115,792,590 41,367,425
(6,436,115) (2,666,125)
Balance as at 01 January
Written off during the year 120,549,824 77,091,290
Charge for the year 229,906,299 115,792,590
Balance as at 31 December

Berendina Micro Investments Company Limited | Annual Report-2019 105

Notes to the Financial Statements

12.3. Movement in Impairment Charge During the Year 2019

As at 31 December Stage 01 Stage 02 Stage 03 Total ECL
LKR LKR LKR LKR
Balance as at 01 January
Written off during the year 36,609,740 36,206,855 42,975,995 115,792,590
Charge for the year
Balance as at 31 December - - (6,436,115) (6,436,115)

39,200,011 (29,974,872) 111,324,685 120,549,824

75,809,751 6,231,983 147,864,565 229,906,299

13. PROPERTY, PLANT AND EQUIPMENT AND RIGHT-OF-USE ASSETS
13. 1. Property, plant and equipment

As at 31 December 2019 Office Computers Furniture Motor Total 2019
Equipment and Network and Fittings Vehicle LKR
Cost
Balance as at 01 January 2019 LKR LKR LKR LKR
Additions
Scrap and disposals 9,271,275 16,747,676 17,018,634 19,220,000 62,257,585
Adjustments 727,508 5,030,680 1,790,034 - 7,548,222
Balance as at 31 December 2019 (17,500) - - - (17,500)
62,000 (62,000) - - -

10,043,283 21,716,356 18,808,668 19,220,000 69,788,307

Accumulated depreciation 3,952,482 10,946,108 10,642,262 12,873,640 38,414,492
Balance as at 01 January 2019 1,135,613 3,254,715 2,657,984 2,554,368 9,602,680
Charge for the year - - - (12,914)
Accumulated depreciation on scrap and (12,914)
disposed assets
Adjustments 73,152 (73,152) - - -
Balance as at 31 December 2019 5,148,333 14,127,671 13,300,246 15,428,008 48,004,258
Net book value as at 31 December 2019 4,894,950 21,784,049
7,588,685 5,508,422 3,791,992

As at 31 December 2018 Office Computers Furniture Motor Total 2018
Equipment and Network and Fittings Vehicle LKR
Cost
Balance as at 01 January 2018 LKR LKR LKR LKR
Additions
Scrap and disposals 8,041,827 13,961,686 15,172,590 31,098,400 68,274,503
Balance as at 31 December 2018 1,229,448 2,785,990 1,846,044 140,000 6,001,482
- -
Accumulated depreciation - (12,018,400) (12,018,400)
Balance as at 01 January 2018 9,271,275 16,747,676 17,018,634 19,220,000 62,257,585
Charge for the year
Accumulated depreciation on scrap and 2,908,042 8,361,615 8,146,113 20,934,025 40,349,795
disposed assets 1,044,440 2,584,493 2,496,149 3,958,015 10,083,097
Balance as at 31 December 2018 (12,018,400)
Net book value as at 31 December 2018 - - - (12,018,400)

3,952,482 10,946,108 10,642,262 12,873,640 38,414,492
5,318,793 5,801,568 6,376,372 6,346,360 23,843,093

106 Berendina Micro Investments Company Limited | Annual Report-2019

Notes to the Financial Statements

13.2

The value of fully depreciated assets as at 31 December 2019 is Rs.26,860,261/- (2018 - Rs.13,811,706/-) )

13.3. Right-of-use assets 2019 2018
LKR LKR
Cost
Balance as at 01 January - -
Recognition of right-of-use-assets on initial application of SLFRS 16 44,645,433 -
Additions -
Balance as at 31 December - -
44,645,433
Less: Accumulated amortization
Balance as at 01 January - -
Charged for the year 11,111,064 -
Balance as at 31 December -
- -
Net book value as at 31 December 11,111,064 -
33,534,369

14. INTANGIBLE ASSETS 2019 2018
LKR LKR
As at 31 December
7,880,551 7,880,551
Cost 2,831,944 -
Balance as at 01 January 10,712,495
Additions 7,880,551
Balance as at 31 December 4,542,936
Amortization 1,757,346 3,121,598
Balance as at 01 January 6,300,282 1,421,338
Amortization 4,412,213 4,542,936
Balance as at 31 December 3,337,615
Net book value as at 31 December

Berendina Micro Investments Company Limited | Annual Report-2019 107

Notes to the Financial Statements

15. DEFERRED TAXATION

Statement of Financial Income Statement Other Comprehensive
Position Income
As at 31 December
2019 2018 2019 2018 2019 2018
Deferred tax liability LKR LKR LKR LKR LKR LKR
Accelerated depreciation allowances
for tax purposes on property, plant 1,265,542 1,102,532 (163,010) 116,004 - -
and equipment
Net right-of-use of assets 665,192 - (665,192) -- -
1,930,734 1,102,532
(828,202) 116,004 - -

Deferred tax assets 5,391,726 6,294,467 424,831 1,424,269 (1,327,572) 1,068,049
Post employment benefit obligation 5,391,726 6,294,467 424,831 1,424,269 (1,327,572) 1,068,049
(403,371) 1,540,273 (1,327,572) 1,068,049
Deferred tax (charge)/reversal
Net deferred tax assets 3,460,992 5,191,935

As at 01 January 2019 Property, Long Net right- Total
Charge (credit) to profit or loss for the year Plant and service of-use of LKR
As at 31 December 2019 Equipment benefits
assets 5,191,935
LKR LKR LKR
(1,102,532) 6,294,467
-
(163,010) (902,741)
(665,192) (1,730,943)
(1,265,542) 5,391,726
(665,192) 3,460,992

Long service benefits are not tax deductible until the benefit is actually paid but it has already been recognized as an
expense in measuring the company profit for the year.

16. OTHER ASSETS As at 31 December 2019 2018
LKR LKR
Other financial assets
Refundable deposit 2,491,140 2,546,140
Other receivable 4,666,055 7,251,237
EDS coupon receivable 133,306,463 113,405,378
140,463,658 123,202,755

Other non-financial assets 5,690,549 8,766,215
Pre-paid expenses 3,426,234 1,103,179
Other advances and receivable 4,033,055 2,442,367
Stationary Stock 13,149,838 12,311,761
153,613,496 135,514,516

108 Berendina Micro Investments Company Limited | Annual Report-2019

Notes to the Financial Statements

17. INTEREST BEARING BORROWINGS 2019 2018
LKR LKR
As at 31 December 333,423,610 575,049,408
Borrowings from banks
Borrowings from financial and other institutions 1,241,375,580 1,196,575,443

1,574,799,190 1,771,624,851

17.1. Movement In Interest Bearing Borrowings

Banks borrowings Balance as at Loan Repayments Loan interest Balance as at
01 January obtained LKR charged 31 December
Financial and other institutions LKR
borrowings 2019 LKR 486,317,648 2019
LKR 54,695,850 LKR
189,996,000
575,049,408 333,423,610

1,196,575,443 532,000,000 626,095,673 138,895,810 1,241,375,580
1,771,624,851 721,996,000 1,112,413,321 193,591,660 1,574,799,190

18. POST EMPLOYMENT BENEFIT OBLIGATION Notes 2019 2018
18.1 LKR LKR
As at 31 December 22,480,242 13,579,107
6,557,779 6,053,185
Balance as at 01 January (5,531,550) 3,814,460
Amount recognized in income statement (1,040,945) (928,990)
Amount recognized in other comprehensive income
Payments made during the year - (37,520)
Balance transfer to BEC 22,465,526 22,480,242
Balance as at 31 December

18.1. Amount Recognized in Statement of Comprehensive Income

As at 31 December 2019 2018
LKR LKR
Current service cost 4,084,952 4,695,274
Interest cost
2,472,827 1,357,911

6,557,779 6,053,185

18.2. The Principal Assumptions Used for Compute the Gratuity Liability are as
Follows:

As at 31 December 2019 2018

Rate of interest 10.5% 11%
Salary increment rate 9.24% 15%
Staff turnover 20%
Retirement age 17% 55 years
55 years

Berendina Micro Investments Company Limited | Annual Report-2019 109

Notes to the Financial Statements

18.3. Sensitivity of Assumptions Employed in Computation

A quantitative sensitivity analysis for significant assumption as at 31 December 2019 is shown below:

Assumptions Discount rate Salary increment rate

Sensitivity level 1% increase 1% decrease 1% increase 1% decrease
Impact on defined benefit liability 1,139,734 (1,058,033)
(997,430) 1,092,322

19. OTHER LIABILITIES Notes 2019 2018
LKR LKR
As at 31 December
448,875 797,887
Financial liabilities
Payables to vendor 16,336,966 18,502,026
Other financial liabilities
Lease Creditor - Right-of-use assets 19.1 30,762,735 -
Loan risk fund
EDS coupon liability 288,459,995 244,929,064

Non financial liabilities 196,987,500 170,740,524
Income tax payable
Finance VAT and NBT payable 532,996,071 434,969,501
WHT payable
Other payables 7,936,582 63,654,973
972,233 1,930,722
1,545,970
1,685,889
29,420,142 29,568,135
40,014,846 96,699,800
573,010,917 531,669,301

19.1 Amount recognized in statement of comprehensive income 5,391,279

2019 - Lease under SLFRS 16
Interest on lease liabilities

2018 - Operating lease under LKAS 17 13,440,028
Lease expense (Rent expense)

Amount recognized in statement of cash flows 15,188,624
2019 - Total cash outflows for leases

110 Berendina Micro Investments Company Limited | Annual Report-2019

Notes to the Financial Statements

20. FUNDS AND RESERVES

As at 31 December Notes 2019 2018
LKR LKR
Unrestricted funds 20.1
Restricted funds 20.2 865,800 865,800

149,348,645 70,693,750

150,214,445 71,559,550

20.1. Unrestricted Funds 865,800 865,800
865,800 865,800
Balance as at 01 January 865,800 865,800
Balance as at 31 December
Total unrestricted Funds 70,693,750 70,693,750
78,654,895 -
20.2. Restricted Funds 149,348,645
149,348,645 70,693,750
Whole Planet Foundation 70,693,750
Balance as at 01 January
Received during the year Note 2019 2018 2019 2018
Balance as at 31 December 21.1 No. No. LKR LKR
Total restricted funds
76,346,175 76,346,175 763,461,750 763,461,750
21. STATED CAPITAL

As at 31 December

Fully paid ordinary shares

21.1. Fully Paid Ordinary Shares 76,346,175 74,802,821 763,461,750 748,028,210
-
Balance at beginning of the year 1,543,354 - 15,433,540
Issue of shares for net assets transfer from BMI 76,346,175
Balance at end of the year 76,346,175 763,461,750 763,461,750

22. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
22.1 Capital Commitments

There were no material capital commitments as at the reporting date that require adjustments to or disclosure in the

financial statement.



22.2 Contingent Liabilities

There were no material contingent liabilities outstanding as at the reporting date that require adjustments to or disclosure

in the financial statements of the Company.

23. EVENTS OCCURRING AFTER THE REPORTING DATE

No circumstance have arisen since the reporting date which would require adjustment to or disclosure in the financial

statements other than the following;

Berendina Stichting (BS), Berendina Development Services (Guarantee) Limited (BDS) and Berendina Micro Investments
Company Limited (BMIC) entered into a shareholders’ agreement on 11 November 2019. The salient features of the
agreement are as follows,

Berendina Micro Investments Company Limited | Annual Report-2019 111

Notes to the Financial Statements

1 ) BDS being the legal and beneficial owner of 76,346,175 ordinary shares representing 100% of the issued shares of
BMIC agreed with BS & BMIC to alter the shareholding structure of BMIC by converting 75% of the issued ordinary shares in
BMIC into class A shares and to transfer such shares to BS so that BS will hold 75% of the voting rights in BMIC and all other
ordinary shares in the Company shall be classified as Class B shares.

The rights and privilege of each class of shares are as follows;

• The holder of a Class A share, has the right to one vote for one share on a poll at a meeting of BMIC on any resolution, and
the right to an equal share in the distribution of the surplus assets of BMIC in liquidation, unless the holder of a Class A share
decides to waive the right in favour of any person of holder’s choice. However, a holder of a Class A share shall not have a
right to any dividends paid by BMIC.

• A holder of a Class B share, has the right to one vote for one share on a poll at a meeting of BMIC on any resolution and the
right to an equal share in dividends paid by BMIC and the right to an equal share in the distribution of the surplus assets of
BMIC in liquidation.

2 ) BDS agreed to sell and transfer 75% of the issued shares by 15th January 2020 or any date agreed by the parties in
writing, to BS at a consideration of LKR 10/= per share. The total consideration of the transfer is LKR 572,596,310/= (Rupees
Five Hundred and Seventy-Two Millions Five Hundred and Ninety-Six Thousand Three Hundred and Ten). BDS and BMIC
should ensure that the said shares are free from encumbrances on the transfer date.

3) BDS and BMIC agreed to amend the Articles of Association of BMIC and replace with the amended Articles of Association
prior to the transfer date.

On 14th of January 2020 BMIC converted seventy-five percent (75%) of its issued shares currently held by BDS into a special
class of shares (Class A shares) which do not have dividend rights, and the same was transferred by BDS to BS on 16th of
January 2020 on receipt of consideration for same on 14th of January 2020.

24. ASSETS PLEDGED

Fixed deposits represents the mandatory deposit as per the borrowing agreement made with “Sri Lanka Saving Bank” is not
available for use until the loans are settled.

25. CAPITAL MANAGEMENT

The primary objective of the Company’s capital management is to ensure that it maintains healthy capital ratios in order to
support its business and maximize shareholder value. The Company manages its capital structure and makes adjustments to
it, in light, of changes in economic conditions. Capital of the Company comprises of stated capital, funds and reserves and
retained earnings and is measured at LKR 977,677,953/- as at 31 December 2019 and it was LKR 906,393,354/- as at 31
December 2018.

Capital and reserves

I. Ordinary shares
The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote
per share at meetings of the company. All ordinary shares rank equally with regard to the company’s residual assets.

II. Nature and purpose of reserves
Unrestricted Funds - Note 20.1
The fund was received in 2016 for the purpose of expansion of EDS services.

Restricted funds - Note 20.2
The fund was set up for the purpose of loan disbursement of Kaluwanchikudy and Welimada branch

II. Dividends
Company has not declared dividends during the year ended 31 December 2019 and 2018.

112 Berendina Micro Investments Company Limited | Annual Report-2019

Notes to the Financial Statements

26. RELATED PARTY DISCLOSURES

Details of significant related party disclosures are as follows;

26.1 Transactions with Key Management Personnel (KMP) and their family members

As per the Sri Lanka Accounting Standard (LKAS -24 ) - “Related Party Disclosures”, the KMPs include those who are having
authority and responsibility for planning, directing and controlling the activities of the Company. Accordingly, the Board of
Directors of the Company has been classified as KMPs of the Company.

26.1.1 Key Management Personnel Compensation 2019 2018
LKR LKR
As at 31 December
Short term employment benefits 13,657,717 10,363,545
Short term employee benefits 13,657,717 10,363,545

*Further, the company has not provided any non cash benefits to Key Management Personnel in terms of employment contracts with
them.
* The Company has not entered into any transactions, arrangements and agreements involving Key Management Personnel (KMPs), their
Close Family Members (CFMs) and their related entities.

26.2 Transactions with Related Entities

26.2.1 Name of the Nature of the transaction During the year Balance During the year Balance
related party transaction 2019 transaction 2018
2019 LKR 2018 LKR
LKR LKR
152,394
Berendina Shared expenses 1,974,426 251,831 2,112,753
Development Balance brought forward (1,986,849) (2,013,316) 99,437
Services Shared expenses (12,423) 251,831
(Guarantee) Amount received 239,408
Limited Balance carried forward 793,257,072

Borrowings 57,103,121
850,360,193
Balance brought forward 850,360,193
748,028,210
Amount borrowed - capital 459,000,000 96,265,985 332,000,000
(362,734,015) 946,626,178 (274,896,879) 15,433,540
Amount settled - capital 763,461,750

Balance carried forward 235,447

Share capital (89,133)
146,314
Balance brought forward 763,461,750

Issue of shares for net as- -- 15,433,540
sets transfer from BMI 763,461,750

Balance carried forward

Berendina Shared expenses 2,447,189 146,314 2,741,700
Employment Balance brought forward (1,927,261) (2,830,833)
Centre Shared expenses 519,928
(Guarantee) Amount received 666,242
Limited Balance carried forward

Berendina Micro Investments Company Limited | Annual Report-2019 113

Notes to the Financial Statements

26.2.2 Terms and Conditions of Transactions with Related Parties

Outstanding balances as at the year-end are unsecured, interest free and due on demand. There have been no guarantees
provided or received for any related party receivables or payables. The company has not recorded any impairment of
receivables relating to amounts owed by related parties.

Outstanding balances due from shared expenses as at the year-end are unsecured, interest free and due on demand.

There have been no guarantees provided or received for any related party other than the following guarantees provided to
BMIC by BDS.

Lender Loan Amount Guarantee Loan Outstanding as
LKR LKR at 31 December 2019
Sri Lanka Savings Bank
Sri Lanka Savings Bank 250 Mn 250 Mn BDS Corporate Guarantee LKR
Stromme Microcredit (Guarantee) 300 Mn 300 Mn BDS Corporate Guarantee 2,000,000
Limited 100 Mn 25 Mn BDS Land Mortgage
Consorzio ETIMOS s.c. 140,991,420
Consorzio ETIMOS s.c. 100 Mn 50 Mn BDS Corporate Guarantee 
100 Mn 50 Mn BDS Corporate Guarantee  38,333,328
22,192,213
54,404,434

Land & Building belongs to BDS has been pledged to Stromme Microcredit (Guarantee) Limited to obtain a loan for Berendina
Micro Investments Company Limited.

27. FAIR VALUE

For all financial instruments where fair values are determined by referring to externally quoted prices or observable pricing
inputs to models, independent price determination or validation is obtained. In an inactive market, direct observation of a
traded price may not be possible. In these circumstances, the Company uses alternative market information to validate the
financial instrument’s fair value, with greater weight given to information that is considered to be more relevant and reliable.

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique:

Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2:
Other techniques for which all inputs which have a significant effect on the recorded fair value are observable,
Level 3: either directly or indirectly

Techniques which use inputs that have a significant effect on the recorded fair value that are not based on
observable market data

Set out below is a comparison, by class, of the carrying amount and fair values of the Company’s financial instruments that
are not carried at fair value in the financial statements.

114 Berendina Micro Investments Company Limited | Annual Report-2019

Notes to the Financial Statements

As at 31 December 2019 As at 31 December 2018

Carrying Value Fair Value Carrying Value Fair Value
LKR LKR LKR LKR

Financial assets 115,621,925 115,621,925 180,045,317 180,045,317
Cash and cash equivalents 56,090,146 56,090,146 48,579,048 48,579,048
Balances with banks and financial institutions
Loans and receivables 2,759,790,705 2,759,790,705 2,835,656,223 2,828,756,345
Other financial assets 140,463,658 140,463,658 123,202,755 123,202,755
Total
Financial liabilities 3,071,966,434 3,071,966,434 3,187,483,343 3,180,583,465
Interest bearing borrowings
Other financial liabilities 1,574,799,190 1,333,788,945 1,771,624,851 1,494,644,346
Saving deposits from customers 532,996,071 532,996,071 434,969,501 434,969,501
Total 354,311 354,311 - -

2,108,149,572 1,867,139,327 2,206,594,352 1,929,613,847

a) For financial assets and financial liabilities that have a short term maturity (less than three months) it is assumed that
the carrying amounts approximate their fair value. This assumption is also applied to cash in hand, balances with banks and
financial institutions, other financial assets, bank overdraft and other financial liabilities without a specific maturity.

b) Loan receivables with fixed interest rates were fair valued using market rates at which fresh loans were granted during
the fourth quarter of the reporting period. Conversely, interest bearing loans and borrowings with original tenors above
one year were discounted using current market interest rates offered by lenders during the fourth quarter of the reporting
period.

28. MATURITY OF ASSETS AND LIABILITIES

As at 31 December 2019 As at 31 December 2018

Less than More than Total Less than More than Total
one year one year carrying value one year one year carrying value

LKR LKR LKR LKR LKR LKR

Assests

Cash and cash equivalents 115,621,925 - 115,621,925 180,045,317 - 180,045,317

Balances with banks and 2,500,000 53,590,146 56,090,146 - 48,579,048 48,579,048
financial institutions 2,060,786,743
Loan and receivables 928,910,261 2,989,697,004 1,969,932,501 981,516,312 2,951,448,813
-
Property plant and - 55,318,418 55,318,418 - 23,843,093 23,843,093
equipment 4,412,213 4,412,213 - 3,337,615 3,337,615
Intangible assets

Deferred tax assets - 3,460,992 3,460,992 - 5,191,935 5,191,935

Other assets 100,290,911 53,322,585 153,613,496 97,712,724 37,801,793 135,514,517

Total assets 2,279,199,579 1,099,014,615 3,378,214,194 2,247,690,542 1,100,269,796 3,347,960,338

Liabilities 829,126,613 745,672,577 1,574,799,190 789,998,458 981,626,393 1,771,624,851
Interest bearing
borrowings - 22,465,526 22,465,526 - 22,480,242 22,480,242
Post employment benefit
obligation

Other liabilities 257,617,740 315,747,488 573,365,228 249,626,729 282,042,572 531,669,301
1,086,744,353 1,083,885,591 2,170,629,944 1,039,625,187 1,286,149,207 2,325,774,394

Berendina Micro Investments Company Limited | Annual Report-2019 115

Notes to the Financial Statements

29. RISK MANAGEMENT
29.1 Introduction

The Company has exposure to the following risks from its use of financial instruments:
• Credit risk
• Liquidity risk
• Market risk

This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies
and processes for measuring and managing risk.

29.2 Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to financial instruments fails to meet its
contractual obligations. Credit risk is mainly arising from Company’s receivables in terms of loan receivable and deposits with
banks & financial institutions.

Credit risk is managed by evaluating the credit worthiness and by periodical review on the credit granted.

The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of receivables
in terms of loans and receivables. The Company policy on impairment consists of allowance for a collective impairment
established for similar receivables in term of their credit risk on product basis where the loss event has occurred but not yet
identified. The collective impairment is determined based on the historical data of payments statistics for similar financial
assets.

Credit quality analysis

The tables below sets out information about the credit quality of financial assets held by Company net of allowance for
impairment/expected credit losses against those assets.


Expected credit losses

With the adoption of SLFRS 9 - “Financial Instrument” the Company manages credit quality using a three stage approach
which is inline with the new standard requirements as well.

Stage one : 12-month expected credit losses (ECL)
Stage two : Lifetime expected credit losses (ECL) - Not credit impaired
Stage three : Lifetime expected credit losses (ECL) - credit impaired

Explanation of the terms of 12-month ECL and Lifetime ECL included in note number 2.5.3.
Table below shows the classification of assets and liabilities based on the above-mentioned three stage model.

As at 31 December 2019 Note 12-month ECL Life time ECL Life time ECL - Total
LKR - Not credit credit impaired LKR
Cash and cash equivalents 10
Balances with banks and 11 115,621,925 impaired LKR 115,621,925
financial institutions 56,090,146 LKR 56,090,146
Loan and receivables - -
Other financial assets -
-

12 2,588,196,834 14,385,014 157,208,857 2,759,790,705
16 140,463,658 - - 140,463,658

116 Berendina Micro Investments Company Limited | Annual Report-2019

Notes to the Financial Statements

As at 31 December 2018 Note 12-month ECL Life time ECL Life time ECL - Total
LKR - Not credit credit impaired LKR
Cash and cash equivalents 10
11 180,045,317 impaired LKR 180,045,317
Balances with banks and 48,579,048 LKR 48,579,048
financial institutions 12 - -
Loan and receivables 16 -
-
Other financial assets
2,728,833,800 68,017,992 38,804,431 2,835,656,223
123,202,755 - - 123,202,755

Impairment allowance for loans and advances to customers

31 December 2019 31 December 2018
LKR LKR

Loans and advances 2,618,725,533 2,736,701,121
Gross loans and advances : Stage 01 20,616,998 104,224,847
81,780,425
Stage 02 305,073,422
Stage 03 2,944,415,953 2,922,706,393
Gross Loans and advances 36,609,740
Less expected credit loss : Stage 01 75,809,751 36,206,855
Stage 02 6,231,983 42,975,995
Stage 03
Total expected credit loss 147,864,565 115,792,590
Total Loans and advances - Net 229,906,299 2,806,913,803
2,714,509,654

29.2.1 Fair Value of Collateral and Credit Enhancements Held

The following table shows the fair value of collateral and credit enhancements held by the Company.

As at 31 December 2019 As at 31 December 2018

Maximum Net exposure Maximum Net exposure
exposure to LKR exposure to LKR
credit risk credit risk

LKR LKR

Cash and cash equivalents 115,621,925 111,511,968 180,045,317 173,074,136
Balances with banks and financial institutions
Loan and receivables 56,090,146 56,090,146 48,579,048 48,579,048
Other financial assets
2,989,697,004 2,989,697,004 2,951,448,813 2,951,448,813

140,463,658 140,463,658 123,202,755 123,202,755

3,301,872,733 3,297,762,776 3,303,275,933 3,296,304,752

Berendina Micro Investments Company Limited | Annual Report-2019 117

Notes to the Financial Statements

29.2.2 Credit Quality by Class of Financial Assets
(a)

As at 31 December 2019 Neither past due Past due but not Credit Unclassified Total
nor impaired impaired impaired LKR LKR
Assets LKR LKR
Cash and cash equivalents LKR
Balances with banks and 115,621,925 - - 115,621,925
financial institutions 56,090,146 - - - 56,090,146
Loan and receivables -
Other financial assets 2,636,093,415 48,530,165 - 2,989,697,004
Total financial assets 140,463,658 - 305,073,424 - 140,463,658
- - 3,301,872,733
2,948,269,144 48,530,165
305,073,424

Age analysis of past due but not impaired loans by class of financial assets

Overdue

 Description Less than 31 Days 31 to 60 Days 61 to 90 Days More than 90 Total
Loan and receivables LKR LKR LKR Days LKR
LKR
27,913,170 13,803,354 6,813,641 353,603,589
27,913,170 13,803,354 6,813,641 305,073,424 353,603,589

305,073,424

(b)

As at 31 December 2018 Neither past due Past due but not Credit Unclassified Total
nor impaired impaired impaired LKR LKR
Assets LKR LKR
Cash and cash equivalents LKR - 180,045,317
Balances with banks and 180,045,317 - - 48,579,048
financial institutions 48,579,048 - -
Loan and receivables - - 2,951,448,813
Other financial assets 2,653,308,996 149,368,951 - 123,202,755
Total financial assets 123,202,755 - 148,770,866 - 3,303,275,933
3,005,136,116 -
149,368,951
148,770,866

Age analysis of past due but not impaired loans by class of financial assets

Overdue

 Description Less than 31 Days 31 to 60 Days 61 to 90 Days More than 90 Total
Loan and receivables LKR LKR LKR Days LKR
LKR
76,967,001 39,215,899 33,186,051 298,139,817
76,967,001 39,215,899 33,186,051 148,770,866 298,139,817

148,770,866

29.3 Liquidity Risk

Liquidity risk is the risk that the company will encounter difficulty in meeting the obligations associated with its financial

liabilities that are settled by delivering cash or another financial asset.

The company uses the maturity analysis of all the financial instruments to manage the liquidity risk.

118 Berendina Micro Investments Company Limited | Annual Report-2019

Notes to the Financial Statements

a) Exposure to liquidity risk

The Company relies on borrowing as its primary source of funding. Company actively manages this risk through maintaining

competitive pricing and constant monitoring of market trends.



b) Management of liquidity risk

The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity

to meet its liabilities when due without incurring unacceptable losses or risking financial position of the company while

maintaining regulatory requirements and debt covenants agreed with the fund providers.

29.3.1

The maturity analysis of financial liabilities based on undiscounted gross outflow is reflected below,

(a)

As at 31 December 2019 Carrying Gross nominal On Up to 3 3 to 12 More than
amounts outflow demand months months 1 year
Interest bearing borrowings LKR LKR
LKR LKR LKR LKR
Other financial liabilities
Saving deposits from 1,574,799,190 1,766,129,355 - 357,004,623 598,677,482 810,447,250
customers 532,996,071 532,996,071 52,190,192 149,836,358 330,969,521
-
(b) 354,311 354,311 - - 354,311
- 409,194,815 748,513,840 1,141,771,082
As at 31 December 2018 2,108,149,572 2,299,479,737
-
Interest bearing borrowings Carrying Gross nominal Up to 3 3 to 12 More than
Other financial liabilities amounts outflow On months months 1 year
LKR demand LKR
LKR LKR LKR
LKR
1,771,624,851 2,078,976,885 - 296,026,214 662,534,875 1,120,415,796
-
434,969,501 434,969,501 - 52,706,666 100,220,262 282,042,573

2,206,594,352 2,513,946,386 348,732,880 762,755,137 1,402,458,369

29.4 Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market
prices. Market risk of the company mainly comprises of interest rate risk and currency risk.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters,
while optimizing the return.

Berendina Micro Investments Company Limited | Annual Report-2019 119

Notes to the Financial Statements

29.4.1

The table below analyses the Company’s interest rate risk exposure on non-trading financial assets and liabilities. The

Company’s assets and liabilities are included at carrying amount and categorized by the earlier of contractual re-pricing or

maturity dates.

(a)

As at 31 December 2019 On Less than 4 to 12 1 to 5 Total as at
demand 3 Months Months Years 31 December
LKR
LKR LKR LKR 2019
LKR

Interest earning assets

Cash and cash equivalents 115,621,925 - - - 115,621,925

Balances with banks and financial - - 2,500,000 53,590,146 56,090,146
institutions
- 549,543,131 1,511,243,611 928,910,262 2,989,697,004
Loan and receivables

Other financial assets - 31,358,632 83,623,019 25,482,007 140,463,658

Total interest earning assets 115,621,925 580,901,763 1,597,366,630 1,007,982,415 3,301,872,733

Interest bearing liabilities - 241,828,595 587,298,018 745,672,577 1,574,799,190
Interest bearing borrowings - 43,931,918 131,795,755 357,268,398 532,996,071
Other financial liabilities -- 354,311
Saving deposits from customers - 285,760,513 - 354,311
Total interest bearing liabilities 719,093,773 1,103,295,286 2,108,149,572

Gap in interest earning assets and 115,621,925 295,141,250 878,272,857 (95,312,871) 1,193,723,161
interest bearing liabilities - net
assets / (liabilities)

(b)

As at 31 December 2018 On Less than 4 to 12 1 to 5 Total as at
Interest earning assets demand 3 Months Months Years 31 December
LKR
LKR LKR LKR 2018
LKR

Cash and cash equivalents 180,045,317 - - - 180,045,317

Balances with banks and financial -- - 48,579,048 48,579,048
institutions
- 572,551,182 1,390,481,442 988,416,189 2,951,448,813
Loan and receivables

Other financial assets - 28,698,272 56,702,689 37,801,793 123,202,755

Total interest earning assets 180,045,317 601,249,454 1,447,184,131 1,074,797,030 3,303,275,932

Interest bearing liabilities - 243,781,144 546,217,314 981,626,393 1,771,624,851
Interest bearing borrowings - 52,706,665 100,220,262 282,042,572 434,969,501
Other financial liabilities - 296,487,809 646,437,576 1,263,668,965
Total interest bearing liabilities 2,206,594,350

Gap in interest earning assets and 180,045,317 304,761,645 800,746,555 (188,871,935) 1,096,681,582
interest bearing liabilities - net
assets

30. LOAN RISK FUND

The maximum value that can be utilized to write off the loan outstanding of the eligible customers under the loan risk fund
is limited to LKR 288,459,995/- (2018 - LKR 244,929,064/-). The total loan portfolio of the Company as at 31 December 2019
is LKR 2,944,415,353/- (2018 - LKR 2,922,706,393/-).

120 Berendina Micro Investments Company Limited | Annual Report-2019

SUPPLEMENTARY
INFORMATION

Berendina Micro Investments Company Limited | Annual Report-2019 121

Value Added Statement

31 December 31 December Change
2019 2018 %
LKR LKR
-8.37%
Value Added 838,174,865 914,737,460
Gross Income -21.63%
(202,917,636) (258,916,232) 7.19%
Less (157,427,699) (146,867,335)
Interest and similar expenses (120,549,824) 56.37%
Payment towards support services (77,091,290) -17.27%
Impairment charges for loans and receivables 357,279,706 431,862,602

DISTRIBUTION OF VALUE ADDITION

2019 2018 Change
LKR % share LKR % share

To employees as 229,737,684 64.30% 211,308,610 48.93%
Remuneration 47,389,327 13.26% 37,871,501 8.77%

Other benefit and development cost 24,465,388 6.85% 69,491,425 16.09%
44,387,124 12.42% 56,872,945 13.17%
To government as
Income taxation 22,874,463 6.40% 9,964,163 2.31%
(11,574,280) -3.24% 46,353,956.2 10.73%
VAT and NBT on Financial Services 357,279,706 431,862,602
and NBT on other services

Retained within the business as
Depreciation for replacement of
assets and deffered taxation

Reserve

Distribution of Value Addition -2019 Distribution of Value Addition -2018
3%
13%
19% LKR 78%
LKR
357.27
29% 431.86 58%
Million
Million

To Employee To Government Retained with the Business To Employee To Government Retained with the Business

122 Berendina Micro Investments Company Limited | Annual Report-2019

Capital Adequacy

CORE CAPITAL OF THE COMPANY LIQUID ASSETS RATIO (LAR)

Under the Section 11 of the Microfinance Act, No.06 of 2016 The company is required to maintain the liquid assets ratio
and direction no.01 of 2016 issued on 27th October 2016, under section 11 of the Microfinance Act. No 06 of 2016
every Licensed Microfinance Company (LMFC) shall, at all and direction no.04 of 2016 issued on 27th October 2016.
times, maintain a core capital at a level not less than LKR.100 As per the direction every Licensed Microfinance Company is
Million with effect from 15th January 2018 and maintain a required , at all times, to maintain minimum average monthly
core capital at a level not less than LKR.150 Million from 15th liquid assets at not less than Fifteen percent (15%) of its
January 2019. The company maintains a core capital of LKR. total monthly deposit liabilities.
828 Million which far exceeds the stipulated requirement by
the regulation. In June 2019 the Company commenced accepting
collateralized savings deposits in accordance with Direction
Description 31 December 31 December No 1 of 2019 issued by the Monetary Board of the Central
2019 2018 Bank of Sri Lanka under section 11 of the Microfinance Act
Issued and fully paid LKR LKR No. 6 of 2016. The Compulsory saving deposit product was
ordinary shares introduced to new loan clients as a pilot project in two of
Funds & Reserves - 763,461,750 763,461,750 the branches. The customers were required to save LKR 100
Unrestricted Funds per month in their Savings Account. Due to the low amount
Retained profit as 865,800 865,800 of deposits mobilized during the year the Liquid Assets ratio
shown in previous was way above the stipulated ratio of 15%.
year audited financial 71,372,058 27,764,511
statement
Current year’s profit (7,370,302) 43,607,545 Description Amount
/(loss) LKR (‘000s)
Core Capital 828,329,306 835,699,606 Total deposits as at 31st December 2019
Average statutory liquid assets for the 354
STATUTORY RESERVE month of December 2019 ( Maintenance 113,857
Period)
The company is required to maintain the statutory reserve Cash 3,993
under section 11 of the Microfinance Act. No 06 of 2016 and Balance in the current accounts in the 19,810
direction no.02 of 2016 issued on 27th October 2016. commercial banks free from any bankers lien
or charge 90,054
Every Licensed Microfinance Company is required to Balance in the deposit accounts in the
maintain a statutory reserve and shall, out of the net profits commercial banks free from any bankers lien 32,163%
after the payment of tax of each year, before any dividend is or charge
declared, transfer to such reserve fund; Liquid Assets Ratio

a) a sum equivalent to not less than Five percent (5%)
of such profits until the amount of the said statutory
reserve is equal to fifty percent (50%) of the stated
capital of such LMFC; and

b) a further sum equivalent to not less than Two Point
Five percent (2.5%) of such profits until the amount
of the said statutory reserve is equal to the stated
capital of such LMFC.

The company did not transfer an amount to statutory
reserve for the year ended 31st December 2019, since the

company ended up with a net loss of 7,370,298 in 2019.

Berendina Micro Investments Company Limited | Annual Report-2019 123

Shareholder Information

STATED CAPITAL 2019 (LKR) 2018 (LKR) 2019 (No.) 2018 (No.)

Fully paid ordinary shares – (Beginning of the year) 763,461,750 748,028,210 76,346,175 74,802,821
Share issue during the year for cash -- - -
Share issue during the year for net assets transfer
from BMI - 15,433,540 - 1,543,354
Fully paid ordinary shares – 763,461,750 763,461,750 76,346,175 76,346,175
(End of the year) 763,461,750 763,461,750 76,346,175 76,346,175

SHAREHOLDER DETAILS No. of shares Value (LKR) Ownership as a %

Name of the Shareholder 2019 2018 2019 2018

Berendina Development Services 76,346,175 763,461,750 763,461,750 100% 100%
(Gte) Ltd

DIRECTOR SHAREHOLDING STATED CAPITAL

2019 2018

Value Percentage Value Percentage
(LKR) (%) (LKR) (%)

Jagath Chandana Godakandage Nil 0% Nil 0%
Thebuwange Duminda Charith Fernando
Josef Gomathi Vinodini Shankar Nil 0% Nil 0%
Anura Hewa Athapaththuge
Sarath Chandra Fernando Nil 0% Nil 0%
Ponnahennedige Harshini Andradi
Nil 0% Nil 0%

Nil 0% N/A N/A

Nil 0% N/A N/A

124 Berendina Micro Investments Company Limited | Annual Report-2019

Operational Results 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 10 Year Summary
LKR LKR LKR LKR LKR LKR LKR LKR LKR LKR

Total Income 72,002,121 129,682,407 204,919,596 300,829,393 384,175,615 478,631,357 640,332,324 839,793,973 914,737,460 838,174,865

Depreciation 1,990,881 2,829,996 3,347,721 6,941,838 7,382,441 8,530,467 9,292,406 9,435,330 11,504,435 22,471,091

PBT 4,516,005 6,732,830 8,044,197 37,673,209 55,895,390 80,013,617 101,034,064 138,615,709 114,305,109 13,294,480

Taxation 4,357,255 4,954,035 6,536,543 (2,430,590) 9,888,560 11,584,607 20,506,302 36,372,013 67,951,154 24,868,760

PAT 158,750 1,778,795 1,507,654 40,103,799 46,006,830 68,429,010 80,527,762 102,243,696 46,353,955 -11,574,280

Share Capital -- - - - 120,028,210 180,028,210 748,028,210 763,461,750 763,461,750

Berendina Micro Investments Company Limited | Annual Report-2019 Reserves

Retained Earnings 2,009,789 3,788,584 5,296,238 45,400,036 91,406,866 161,415,060 240,762,466 27,764,510 71,372,054 64,001,756

Funds & Reserves 110,135,987 128,400,018 183,682,558 252,245,350 256,518,831 291,759,231 309,821,731 86,993,090 71,559,550 150,214,445

Liabilities

Current Liabilities 127,744,756 235,792,848 395,131,852 489,490,202 444,974,102 1,328,012,514 838,017,875 1,102,518,647 1,039,625,182 1,086,744,349

Long term Liabilities 285,146,924 399,506,589 629,911,588 708,988,585 982,239,279 520,938,316 1,368,523,254 1,469,648,083 1,286,149,210 1,083,885,591

Assets

PPE 4,637,006 11,365,244 17,155,054 14,063,240 16,821,343 21,375,538 23,695,823 27,924,708 23,843,093 21,784,049

Loans & Receivables 474,891,948 714,735,072 1,145,509,842 1,392,071,332 1,631,731,019 2,022,594,339 2,624,278,875 3,121,810,225 2,835,656,223 2,759,790,703

Other Assets 45,508,502 41,387,723 51,357,340 89,989,601 126,586,717 378,183,454 289,178,838 285,217,607 372,668,430 366,733,138

125

Glossary

A change in Accounting Estimate Deferred Tax Liability

An adjustment of the carrying amount of an asset or liability, Amounts of income taxes payable in future periods in respect
or related expense, resulting from reassessing the expected of taxable temporary differences.
future benefits and obligations associated with that asset
or liability. Defined Benefit Plans

Accounting Policies Retirement benefit plans under which amounts to be paid
as retirement benefits are determined by reference to a
Specific Principles, bases, conventions, rules and practices formula usually based on employees’ earnings and/or years
applied by an entity in preparing and presenting Financial of service.
Statements.
Depreciation
Accrual Basis
Systematic allocation of the depreciable amount of an asset
Recognition of the effects of transactions and other events over its useful life.
when they occur without waiting for receipt or
payment of cash or cash equivalent. Derecognition

Actuarial gain or losses Removal of a previously recognized financial asset or financial
liability from an entity’s statement of financial position.
Changes in the present value of the defined benefit
obligation resulting from: Fair Value
a) experience adjustments (the effects of differences
Price that would be received to sell an asset or paid to
between the previous actuarial assumptions and what transfer a liability in an orderly transaction between market
has actually occurred); and participants as the measurement date.
b) the effects of changes in actuarial assumptions.
Fair Value less Cost to Sell
Amortization
Price that would be received from selling the asset less any
Systematic allocation of the depreciable amount of an costs required and needed to make the sale.
intangible asset over its useful life.
Financial Instruments
Collateral & Credit Enhancement
Any contract that gives rise to a financial asset of one entity
Collateral is a property or other asset that a borrower offers and a financial liability or equity instrument of another entity.
as a way for a lender to secure the loan.
Credit enhancement is a method whereby a company Funds & Reserves
attempts to improve its debt or credit worthiness.
A fund is a source of money that is allocated for a specific
Commitments purpose.
Reserve is any part of shareholders’ equity, except for basic
Binding agreements for the exchange of a specified quantity share capital.
of resources at a specified price on a specified future date
or dates. Going Concern Basis

Core Capital Assumption that the entity is a going concern and will
continue in operation for the foreseeable future.
The part of a financial institution’s capital that comprises
equity and disclosed reserves. Goodwill

Current Service Cost. An asset representing the future economic benefits arising
from other assets acquired in a business combination that
Current service cost, which is the increase in the present are not individually identified and separately recognized.
value of the defined obligation resulting from employee
service in the current period. Historical Cost

Deferred Tax Asset Amount of cash or cash equivalents paid or the fair value of
the consideration given to acquire assets at the time of their
Amounts of income taxes recoverable in future periods in acquisition or the amount of proceeds received in exchange
respect of; for the obligation.
a) deductible temporary differences,
b) the forward of unused tax losses,
c) the carry forward of unused tax credits.

126 Berendina Micro Investments Company Limited | Annual Report-2019

Glossary

Impairment loss Residual Value

Amount by which the carrying amount of an asset or a cash- The residual value is the estimated value of a fixed asset at

generating unit exceeds its recoverable amount. the end of its lease or at the end of its useful life.

Internal Control Restricted Funds

Internal controls are the mechanisms, rules and procedures A restricted fund is a reserve of money that can only be used
implemented by a company to ensure the integrity of financial for specific purposes.
and accounting information, promote accountability and
prevent fraud. Retained Earnings

Liquidate Retained earnings are the cumulative net earnings or profit
of a firm after accounting for dividends
Liquidate means to convert assets into cash or cash
equivalents by selling them on the open market. Risk Assessments

Loans & Receivables A systematic process of evaluating the potential risks that
may be involved in a projected activity or undertaking.
Non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. Stated Capital

Material Misstatement Nominal value (or “par” value) of all the outstanding shares
of a company.
A material misstatement is untrue information in a financial
statement that could affect the financial decisions of one Straight Line Method
who relies on the statement.
Default method used to gradually reduce the carrying
Non-controlling Interest amount of a fixed asset over its useful life

Equity in a subsidiary not attributable, directly or indirectly, Temporary Differences
to a parent.
Differences between the carrying amount of an asset or
Parent liability in the statement of financial position and its tax base.

An entity that controls one or more entities. Unit Credit Method

Post -Employment Benefit Plans An actuarial valuation method that sees each period
of service as giving rise to an additional unit of benefit
Post-Employment benefit plans are formal or informal entitlement and measures each unit separately to build up
arrangement under which an entity provides post the final obligation.
-employment benefit for one or more employees.
Unrestricted Funds
Present Value
Money given to a non-profit organization by a donor that the
Present value (PV) is the current value of a future sum of organization is free to use as they see fit.
money or stream of cash flows given a specified rate of
return. Value In Use

Purchase Consideration Present value of the future cash flows expected to be derived
from an asset or cash-generating unit.
Transfer of assets or equity interests as part of the exchange
for control of the acquiree. Working Capital

Realizable Value Capital required to finance the day to day operations
computed as the excess of current assets over current
Net realizable value (NRV) is the value of an asset that can liabilities.
be realized upon the sale of the asset, less a reasonable
estimate of the costs associated with either the eventual
sale or the disposal of the asset in question.

Remuneration

Remuneration is payment or compensation received for

services or employment.

Berendina Micro Investments Company Limited | Annual Report-2019 127

Notice of Meeting

NOTICE is hereby given that the Annual General Meeting of Berendina Micro Investments Company Limited will be held at
No.44/3,3rd Floor, Narahenpita Road, Nawala, Sri Lanka on Friday 19th June, 2020 at 2.00 p.m. for the following purposes :

AGENDA

1. To receive and consider the Annual Report of the Directors and the Financial Statements of the Company for the
year ended 31st December 2019.

2. To consider and approve the directors’ remuneration and fees.
3. To re-appoint M/s. KPMG, Chartered Accountants, as the Auditors of the Company to hold office until the conclusion

of the next Annual General Meeting of the Company at a remuneration to be agreed with by the Board of Directors
and to audit the Financial Statements of the Company for the accounting period ending 31st December 2020.

By order of the Board

Corporate Services (Private) Limited,
216,
de Saram Place,
Colombo 10,

2nd June, 2020

Encl. 1. Financial Statements for the year ended 31st December, 2019.
2. Proxy Form.

NOTE:
1) A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote instead of him.
2) A proxy need not be a member of the Company.

128 Berendina Micro Investments Company Limited | Annual Report-2019

Form of Proxy

We, .........................................................................................................................................................................................................of
........................................................................................................................................................................................................ being a
shareholder of Berendina Micro Investments Company Limited hereby appoint .............................................................................
.................................................................... of ............................................................................................................................. or failing
him ..........................................................................................of ................................................................................................................
................................................... as my/our proxy to attend and vote at the Annual General Meeting of the Company to be held
on the 19th day of June 2020 at 2.00 pm and at any adjournment thereof.


Signed On this [........] day of [......................] 2020

Name of the Shareholder: .........................................................................................................................................................................

Signature


INSTRUCTIONS AS TO COMPLETION

1 The instrument appointing a proxy may be in writing under the hands of the appointor or of its attorney duly authorised
in writing or if such appointor is a corporation under its common seal or the hand of its attorney or duly authorised
person.

2 The instrument appointing a proxy and the Power of Attorney or other authority, if any, under which it is signed or
a notarially certified copy of that Power of Attorney or other authority will have to be deposited at the Office of the
Company Secretaries, CORPORATE SERVICES (PRIVATE) LIMITED of 216, de Saram Place, Colombo 10, not less than 48
hours before the time appointed for the holding of the meeting.



Corporate Information

NAME

Berendina Micro Investments Company Limited

SHARE HOLDING

Berendina Development Services (Guarantee) Limited

LEGAL FORM

A Public Limited Liability Company incorporated under the Companies Act No. 7 of 2007

DATE OF INCORPORATION

20th November 2014

REGISTRATION NUMBER

PB 5235

REGISTERED OFFICE & HEAD OFFICE

No. 44/3, Narahenpita Road, Nawala, Sri Lanka

PRINCIPAL ACTIVITIES

Provision of microfinance and enterprise development services

BOARD OF DIRECTORS

Mr. Godakandage Jagath Chandana
Mr. Hewa Athapaththuge Anura
Mr. Thebuwanage Duminda Charith Fernando
Ms. Josef Gomathi Vinodini Shankar
Mr. Sarath Chandra Fernando
Ms. Ponnahennedige Harshini Andradi

SECRETARIES

Corporate Services (Private) Limited
No. 216, De Saram Place, Colombo 10, Sri Lanka

AUDITORS

KPMG Chartered Accountants
32A, Sir Mohamed Macan Markar Mawatha, P.O. Box 186, Colombo 3, Sri Lanka

BANKERS

People’s Bank
Bank of Ceylon
Sampath Bank PLC
Hatton National Bank PLC
DFCC Bank PLC
Commercial Bank PLC