NBFIRA Proposed Supervisory Levies and Licensing Fees 2022

3rd Floor Exponential Building Plot 54351 CED, off PG Matante Road Gaborone Private Bag 00314 Gaborone Botswana Telephone +267 310 2595 / 368 6100 Facsimile +267 310 2353 / 310 2376 Website: www.nbfira.org.bw

MEMORANDUM

TO: ALL NON-BANK FINANCIAL INSTITUTIONS FROM: CHIEF EXECUTIVE OFFICER, NBFIRA DATE: 2ND DECEMBER 2020 RE: ADJUSTMENT OF SUPERVISORY LEVIES AND LICENSING FEES FOR THE YEAR ENDING 31ST MARCH 2022

[Signature] ODUETSE A. MOTSHIDISI

1. The above subject matter refers.

2. The Authority informs all Non-Bank Financial Institutions (NBFIs) that there will be no physical industry meetings to consult on annual supervisory levies and licensing fees for financial year ending 31st March 2022.

3. The Authority will call for comments from the NBFIs through available electronic platforms such as its Facebook page, and through email.

4. For the financial year ending 31st March 2022, NBFIRA proposes to maintain supervisory levies and licensing fees as at the current year's rates.

5. The above proposal was made after taking due consideration of the effect that the Covid-19 pandemic has had on the NBFI sector and the economy at large.

6. This memo is issued in line with Section 23 of the NBFIRA Act, which requires the Authority to consult accordingly with the industry and to allow for industry participation in the setting of annual supervisory levies and licensing fees.

7. The Authority makes recommendations to the Honourable Minister concerning supervisory levies and licensing fees and his decision is final.

Directors: M.V. Kabomo (Chairperson), H. Hlanti, L. Lephole, P. Masalela, K. Olebile, I.M. Ramalohlanye, Dr. L. Senatla

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8. All comments and enquiries are to be submitted electronically through BudgetComments@nbfira.org.bw by latest 31st December 2020.

Directors: M.V. Kabomo (Chairperson), H. Hlanti, L. Lephole, P. Masalela, K. Olebile, I.M. Ramalohlanye, Dr. L. Senatla

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NON – BANK FINANCIAL INSTITUTIONS REGULATORY AUTHORITY ACT

(PROPOSED SUPERVISORY LEVIES AND LICENSING FEES PROPOSAL 2022)

Non – Bank Financial Institution (NBFI)	Supervisory Levies
1. Asset Managers (excluding International Financial services Centre Asset Managers)	P36,691 and 0.0230% per annum of the total values of investments managed by an Asset Manager at the end of each month of the financial year.
2. Central Securities Depositories	P200,100
3. Securities Exchanges	P200,100
4. Custodians of Collective Investment undertakings	P73,376
5. Insurance Brokers	P14,680 and 0.1755% of the gross commissions received as reported in their most recently audited financial statements.
6. Insurance Companies	P73,376 and 0.1755% of the gross premiums written, as reported in their most recently audited financial statements.
7. Corporate Insurance Agents	P7,004
8. International Financial Services Centre companies	P40,354
9. Management Companies of Collective Investment Undertaking	P36,691 and 0.0230% per annum of the total value of the Assets controlled by a management company in respect of each scheme at the end of each month of the financial year.
10. Micro lenders <br> a) Average loan book values above P1,000,000 <br> b) Average loan book values up to P1,000,000	0.702% per annum of a micro lenders total loan book at the end of each month at the financial year. <br> P7, 018 per annum
11. Transfer Agents/ Transfer Secretaries.	P12,100
12. Trustees of Collective Investment Undertakings	P73, 376
13. Central Counter Party	P220,110

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Non – Bank Financial Institution (NBFI)	Supervisory Levies
14. Pawnshops <br> a) Average loan book values above P1,000,000 <br> b) Average loan book values up to P1,000,000	0.702% per annum of a micro lenders total loan book at the end of each month at the financial year. <br> P7,018 per annum
15. Retirement Funds	P292 and P19 in respect of each member at the end of each financial year
16. Participants / Market Maker	P33,358
17. Security Brokers / Dealers	P66,704
18. Medical Aid Funds	P7,170 and P19.35 in respect of each member at the end of each financial year.
19. Finance & Leasing Companies <br> a) Average loan book values above P1,000,000 <br> b) Average loan book values up to P1,000,000	0.702% per annum of a micro lenders total loan book at the end of each month at the financial year. <br> P7,018 per annum
20. Retirement Fund Administrator	P8,069 and P666 per fund
21. Investment Advisors	P9,086 per annum

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NON – BANK FINANCIAL INSTITUTIONS REGULATORY AUTHORITY ACT (PROPOSED SUPERVISORY LEVIES AND LICENSING FEES 2022) LICENSING FEES

Non – Bank Financial Institution (NBFI)	Narration	Fee Amount (Pula)
1. Asset Managers	Application for license	12,000
2. Custodians and Trustees	Application for license	12,000
3. Central Securities Depositories	Application for license	96,000
4. Securities Exchanges	Application for license	100,000
5. International Financial Services Centre registered companies	Application for license	12,000
6. Insurance Brokers	Application for license <br> Renewal of license	5,000 <br> 3,300
7. Insurance Companies	Application for license <br> Renewal of license	25,000 <br> 15,000
8. Corporate Insurance Agents	Application for license <br> Renewal of license	1,200 <br> 750
9. Management companies of Collective Investments Undertakings	Application for license <br> License fee for each additional fund	12,000 <br> 2,200
10. Micro Lenders	Application for license <br> License fee for each additional branch	6,000 <br> 1,200
11. Retirement Funds	Application for license	250
12. Securities Exchanges	Application for license	100,000
13. Securities Brokers / Dealers	Application for license	50,000
14. Transfer Agents / Transfer Secretaries	Application for license	12,000
15. Central Counter Party	Application for license	100,000
16. Participant / Market Maker	Application for license	10,000
17. Retirement Fund Administrator	Application for license	10,000
18. Medical Aids Fund	Application for license	10,000
19. Pawnshop	Application for license <br> License fee for each additional branch	6,000 <br> 1,200
20. Finance & Leasing Company	Application for license <br> License fee for each additional branch	6,000 <br> 1,200

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NON-BANK FINANCIAL INSTITUTIONS REGULATORY AUTHORITY PROPOSED BUDGET ESTIMATES FOR THE FINANCIAL YEAR 2021/22

NO.	DETAILS	2021/22 PROPOSED BUDGET (P)	2020/21 BUDGET (P)
	Income
1	Supervisory Levies	63,506,978	63,506,978
2	Government Subvention - Recurrent	20,400,000	20,400,000
3	AML /CFT Subvention	-	-
4	Other Income	750,000	750,000
5	Licence Registrations & Renewals	1,425,600	1,782,000
7	Profit/loss on disposal	-	-
	Total Income	86,082,578	86,438,978
	Operating Expenditure
8	Advertising	614,000	669,746
10	Audit Fee	128,112	118,622
11	Bank Charges	67,180	63,377
12	Cleaning	321,246	252,949
13	Computer Support and Maintenance	577,530	621,000
14	Consulting Fees	1,182,080	1,182,080
15	Directors' Cost	204,000	204,000
16	Documents, Storage & Management	12,006	10,915
17	Insurance	490,735	446,122
18	Internet Leased Lines	802,080	668,400
19	Investigations/ Inspections	1,559,882	1,559,882
20	Legal Fees	2,000,000	2,000,000
21	Repairs and Maintenance	60,500	60,500
22	Printing & Stationery	497,889	497,889
23	Public Relations & Promotions	925,800	925,800
24	Recruitment	232,350	309,800
25	Rental Office	3,725,363	3,449,411
26	Security	144,232	136,068
27	Software Licenses & Maintenance	4,182,850	3,802,591
28	Staff Costs	597,146	597,146
29	Staff Salaries & Allowances	63,976,571	60,355,256
30	Strategy	30,000	790,000
31	Subscriptions	1,090,485	991,350
32	Telephone	739,462	672,238
33	Training	2,461,466	3,281,955
34	Travel	1,709,356	2,279,141
35	Utilities (Water & Electricity)	676,147	573,006
36	Total Operating Expenditure	89,008,469	86,519,245
37	Operating Deficit	(2,925,891)	(80,267)
	Capital Expenditure
38	Computer Equipment	2,088,056	4,176,113
39	Furniture & Fittings	-	155,000
45	Total Capital Expenditure	2,088,056	4,331,113
46	Total Operating & Capital Expenditure (A)	91,096,525	90,850,358
47
48	Statutory Reserve (SR) Top Up	-	-
49	Drawdown from Accumulated Cash & Cash Equivalents (B)	2,088,056	4,331,113
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50	Total Operating & Capital Expenditure and SR Drawdown (A) + (B)	89,008,469	86,519,245
51
52	Budget Deficit	(2,925,891)	(80,267)

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

General Information

Country of domicile | Botswana Nature of operations and principal activities | Safeguard the fairness, stability and efficiency of the non-bank financial sector. Directors | Ms. M. V. Kabomo (Chairperson) <br> Ms. L. T. Tema <br> Ms. A. T. Khunwana (Tenure ended 30 September 2019) <br> Ms. P. Masalela <br> Dr. L. S. Senatla <br> Mr. K. Olebile <br> Ms. I. M. Ramalohlanye <br> Ms. H. D. Hlanti Chief Executive Officer | Mr. S. Gade (Acting) <br> Mr. O. M. Ramasedi (Tenure ended 28 February 2020) Registered office | 3rd Floor <br> Exponential Building <br> Plot 54351 <br> Central Business District <br> Off P G Matante <br> Gaborone Business address | Plot 54351 <br> Central Business District <br> Off PG Matante <br> Gaborone Botswana Bankers | Stanbic Bank of Botswana Limited Auditors | Grant Thornton <br> Chartered Accountants <br> A Botswana Member of Grant Thornton International Ltd Functional currency | Botswana Pula BWP

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Contents

	Page
Board Responsibilities and Approval of the Annual Financial Statements	3
Independent Auditor's Report	4 - 7
Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 March 2020	8
Statement of Financial Position	9
Statement of Changes in Funds for the year ended 31 March 2020	10
Statement of Cash Flows for the year ended 31 March 2020	11
Accounting Policies	12 - 21
Notes to the Annual Financial Statements	22 - 36
The following supplementary information does not form part of the annual financial statements and is unaudited
Detailed Income Statement	37 - 38

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Board Responsibilities and Approval of the Annual Financial Statements

The directors are required in terms of the Non-Bank Financial Institutions Regulatory Authority Act 2016 to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the Authority as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the annual financial statements.

The annual financial statements are prepared in accordance with International Financial Reporting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Authority and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board of directors sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Authority and all employees are required to maintain the highest ethical standards in ensuring the Authority's business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Authority is on identifying, assessing, managing and monitoring all known forms of risk across the Authority. While operating risk cannot be fully eliminated, the Authority endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The directors have reviewed the Authority's cash flow forecast for the year to 31 March 2021 and, in light of this review and the current financial position, they are satisfied that the Authority has or had access to adequate resources to continue in operational existence for the foreseeable future.

The external auditors are responsible for independently auditing and reporting on the Authority's annual financial statements. The annual financial statements have been examined by the Authority's external auditors and their report is presented on pages 4 to 7.

The annual financial statements set out on pages 9 to 38, which have been prepared on the going concern basis, were approved by the board of directors on 10/09/20 and were signed on their behalf by:

Approval of financial statements

[Signature] Director

[Signature] Director

Gaborone

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Chartered Accountants

Grant Thornton Acumen Park, Plot 50370 Fairgrounds, Gaborone P O Box 1157 Gaborone, Botswana

T +267 395 2313 F +267 397 2357 linkedin.com/company/Grant-Thornton Botswana twitter.com/GrantThorntonBW

Independent Auditor's Report

To the members of Non-Bank Financial Institutions Regulatory Authority

Opinion

We have audited the accompanying annual financial statements of Non-Bank Financial Institutions Regulatory Authority set out on pages 8 to 35, which comprise the statement of financial position as at 31 March 2020, and the statement of profit or loss and other comprehensive income, statement of changes in funds and statement of cash flows for the year then ended, and notes to the annual financial statements, including a summary of accounting policies.

In our opinion, the annual financial statements give a true and fair view of, the financial position of Non-Bank Financial Institutions Regulatory Authority as at 31 March 2020, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Non-Bank Financial Institutions Regulatory Authority Act, 2016.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the audit of the annual financial statements section of our report. We are independent of the Authority in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B) (IESBA Code) and other independence requirements applicable to performing audits of annual financial statements in Botswana. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code and in accordance with other ethical requirements applicable to performing audits in Botswana. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

[Stamp: GRANT THORNTON]

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Botswana Accountancy Oversight Authority registration number FAP 005 2016 (Audit Firm of Public Interest Entity) Botswana Institute of Chartered Accountants membership number MsFBW11013 (Audit and Non-Audit) Partners Kalyanaraman Vijay (Managing), Diresh R Mallan (Deputy Managing), Aswin Vaidyanathan*, Madhavan Venkatachary*, Narayanaswamy Narasimhan*, Anthony Quashie, Sunny K Mulakulam*, Aparna Vijay* (*Indian) Member of Grant Thornton International Ltd Offices in Gaborone & Francistown www.grantthornton.co.bw

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Independent Auditor's Report

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the annual financial statements of the current period. These matters were addressed in the context of our audit of the annual financial statements as a whole, and in forming our opinion thereon, and the report below is not intended to constitute separate opinions on those key audit matters.

Key audit matter	How the matter was addressed in our audit
Recognition of revenue <br> The Authority relies on Supervisory levies and Government grants to sustain its activities. The activities include those that are recurrent in nature for administrative purpose and for the remuneration of its employees.	• We have performed walkthroughs on the revenue cycle to gain an understanding of when the revenue is recognised. <br> • We obtained the invoice listing from the operating system and determined that income has been appropriately recorded in the general ledger. We selected a sample of invoices raised from each category to verify that the levy has been appropriately recognised in the system and compare the details of the invoice to the information in the Authority's system. <br> • We have reviewed the Authority's credit policy on receivables and assessed that appropriate provision is made on overdue accounts where the recoverability of the balances was doubtful, in line with requirements of IFRS 9, which was adopted by the Authority.
Valuation of the intangible asset <br> The Authority has invested significant amount in the development and implementation of its systems namely the Risk Based Supervisory System (RBSS) and Enterprise Resource Planning (ERP). The total amount of intangible assets of the Authority is stated at P 3 126 460 as at the year-end.	• Our audit procedure included considering the appropriateness of the assumptions used in the valuation of the intangible assets by management. <br> • We have evaluated the assumptions used by the management to assess the useful lives of the intangible assets. <br> • We noted that the assumptions used by management were reasonable, consistent with prior year and the accounting policies of the Authority.

Other information

The directors are responsible for the other information. The other information comprises the general information and Statement of Director Responsibility, which we obtained prior to the date of this auditor's report, and other sections of the annual report, which are expected to be made available to us after that date. Other information does not include the annual financial statements and our auditor's report thereon.

Our opinion on the annual financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the annual financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the annual financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

[Stamp: GRANT THORNTON]

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Independent Auditor's Report

Responsibilities of the directors for the Annual Financial Statements

The directors are responsible for the preparation and fair presentation of the annual financial statements in accordance with International Financial Reporting Standards, and for such internal control as the directors determine is necessary to enable the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the annual financial statements, the directors are responsible for assessing the Authority's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Authority or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Authority's financial reporting process.

Auditor's responsibilities for the audit of the Annual Financial Statements

Our objectives are to obtain reasonable assurance about whether the annual financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual financial statements.

As part of an audit in accordance with International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the annual financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Authority's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors' use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Authority's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the annual financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Authority to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the annual financial statements, including the disclosures, and whether the annual financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

[Stamp: GRANT THORNTON]

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Independent Auditor's Report

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the annual financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Reporting on Other Legal and Regulatory Requirements

As required by the Non-Bank Financial Institutions Regulatory Authority Act, 2016, we report to you, based on our audit, that: • all the information and explanation which, to the best of the auditor's knowledge and belief, were necessary for the performance of the auditor's duties; • the accounts and related records of the Regulatory Authority have been properly kept • The Regulatory Authority has complied with all the financial provisions of this Act with which it is its duty to comply with; and • The statement of accounts prepared by the Authority was prepared on a basis consistent with that of the preceding year and represents a true and fair view of the transactions and financial affairs of the Regulatory Authority.

GRANT THORNTON Chartered Accountants Certified Auditor: Sunny Mulakulam (Memb No:20050097) Certified Auditor of Public Interest Entity Certificate Number: CAP 0034 2020

10 SEPT 2020 Gaborone

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 March 2020

Figures in Pula	Note	2020	2019
Government grants	4	19 978 053	18 468 572
Amortisation of governments grants	5	6 326 829	6 588 644
Other operating income	6	2 604 811	2 834 409
Supervisory levies	7	58 766 691	50 845 452
Total revenue		87 676 384	78 737 077
Staff costs	8	(54 361 666)	(49 574 012)
Consultancy costs	9	(1 914 144)	(616 085)
Administrative expenses	10	(11 977 329)	(14 713 390)
Other operating expenses	11	(13 574 714)	(12 483 090)
Total operating expenses		(81 827 853)	(77 386 577)
Operating surplus/(deficit)		5 848 531	1 350 500
Finance income	12	861 701	716 484
Finance costs	13	(278 273)	-
Total operating (deficit)/surplus		6 431 959	2 066 984
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Gains on property revaluation		-	442 795
Other comprehensive income for the year net of taxation		-	442 795
Total comprehensive income (loss) for the year		6 431 959	2 509 779

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Statement of Financial Position as at 31 March 2020

Figures in Pula	Note	2020	2019
Assets
Non-Current Assets
Property, plant and equipment	14	3 595 084	4 131 511
Right-of-use assets	15	2 497 061	-
Intangible assets	16	3 126 460	8 545 617
		9 218 605	12 677 128
Current Assets
Trade and other receivables	17	295 660	372 583
Cash and cash equivalents	18	20 384 967	14 175 001
		20 680 627	14 547 584
Total Assets		29 899 232	27 224 712
Funds and Liabilities
Funds
Revaluation reserve		442 795	442 795
Reserves		2 830 792	2 830 792
Retained income		6 558 700	126 743
		9 832 287	3 400 330
Liabilities
Non-Current Liabilities
Government grants	19	10 723 898	15 096 072
African Development Bank Grant	20	255 451	1 788 159
		10 979 349	16 884 231
Current Liabilities
Trade and other payables	21	2 011 026	2 002 502
Lease liabilities	15	2 793 855	-
Operating lease liability	23	-	140 341
Short term employee benefits	22	4 282 715	4 797 308
		9 087 596	6 940 151
Total Liabilities		20 066 945	23 824 382
Total Funds and Liabilities		29 899 232	27 224 712

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Statement of Changes in Funds for the year ended 31 March 2020

Figures in Pula	Revaluation reserve	Statutory Reserve	Accumulated loss/gain	Total Funds
Balance at 1 April 2018	-	3 390 792	(2 500 241)	890 551
Deficit for the year	-	-	2 066 984	2 066 984
Other comprehensive income	442 795	-	-	442 795
Surplus for the year	442 795	-	2 066 984	2 509 779
Transfer between reserves	-	(560 000)	560 000	-
Total changes recognised directly in Statement of Funds	-	(560 000)	560 000	-
Balance at 31 March 2019	442 795	2 830 792	126 743	3 400 330
Balance at 1 April 2019	442 795	2 830 792	126 741	3 400 328
Surplus for the year	-	-	6 431 959	6 431 959
Surplus for the year	-	-	6 431 959	6 431 959
Balance at 31 March 2020	442 795	2 830 792	6 558 700	9 832 287

Statutory Reserve

Section 23 (2) of the Non-Bank Financial Institutions Regulatory Authority Act 2016 requires that an annual estimate not exceeding 10 per cent (10%) of the total expenditure provided for in the estimates, be provided for as a reserve. The Statutory Reserve provided is adequate for the level of expenditure incurred. The purpose of the reserve is to be utilised for unforseen regulatory expenditure.

The Regulatory Authority believes that based on the current budget, the statutory reserve is adequate and in compliance with section 23(2) of the Non-Bank Financial Institutions Regulatory Authority Act, 2016.

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Statement of Cash Flows for the year ended 31 March 2020

Figures in Pula	Note(s)	2020	2019
Cash flows from operating activities
Cash generated / ( utilised) in operations	25	8 494 627	1 840 481
Finance costs		(278 273)	-
Net cash from operating activities		8 216 354	1 840 481
Cash flows from investing activities
Purchase of property, plant and equipment	14	(421 946)	(396 335)
Sale of property, plant and equipment	14	-	88
Interest income		861 701	716 484
Net cash from investing activities		439 755	320 237
Cash flows from financing activities
Government grants		421 946	396 338
Payment on lease liabilities		(2 868 089)	-
Net cash from financing activities		(2 446 143)	396 338
Total cash and cash equivalents movement for the year		6 209 966	2 557 056
Cash and cash equivalents at the beginning of the year		14 175 001	11 617 945
Total cash and cash equivalents at end of the year	18	20 384 967	14 175 001

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Accounting Policies

1. Significant accounting policies

The annual financial statements have been prepared in accordance with International Financial Reporting Standards. The annual financial statements have been prepared on the historical cost basis, except for certain financial instruments measured at fair value, and incorporate the principal accounting policies set out below. They are presented in Pula.

These accounting policies are consistent with the previous period except for the new standards and interpretations effective and adopted in the current year as set out in note 2.

1.1 Statement of Compliance

The financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) and the Non-Bank Financial Institutions Regulatory Authority Act 2016.

1.2 Significant judgements and sources of estimation uncertainty

The preparation of financial statements in conformity with the International Financial Reporting Standards requires the use of certain critical accounting estimates and judgements concerning the future. Estimates and judgements are continually evaluated and are based on historical factors coupled with expectations about future events that are considered reasonable. In the process of applying the Authority's accounting policies, management has made the following estimates that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next year.

Key Areas of estimation and judgement

The key assumption concerning the future and other key sources of estimation uncertainty and judgements at the reporting date that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year as this involves assessments or decisions that are particularly complex or subjective, are discussed below:

Depreciation charges and residual values

For depreciation purposes, a significant component is defined as equal to or greater than 20% of total cost of the asset and each significant component with different useful lives is depreciated separately. The depreciation methods reflects the pattern in which economic benefits attributable to the assets flow to the entity. The useful lives of these assets can vary depending on a variety of factors, including but not limited to the technological obsolescence, maintenance programs, refurbishments, product life cycles and the intention of management. Residual values of assets are determined by estimating the amount that the entity would currently obtain from the disposal of the asset already of age and in the condition expected at the end of its useful life. The estimation of the useful life and residual values of an asset is a matter of judgement based on the past experience of the Authority with similar assets and the intention of management. Assessment of the asset condition and usefulness are key assumptions used to determine the assets' useful lives and residual values.

Supervisory Levies

Where supervisory levies are calculated on information that has not been audited, the Regulatory Authority assumes that estimates have been used and will place reliance on the information submitted by the regulated entities as a basis for calculation.

Impairment testing

The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-inuse calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the assumption may change which may then impact our estimations and may then require a material adjustment to the carrying value of assets.

The entity reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including supply and demand, together with economic factors such as exchange rates, inflation and interest.

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Accounting Policies

1.2 Significant judgements and sources of estimation uncertainty (continued)

Provisions

Provisions were raised and management determined an estimate based on the information available.

1.3 Intangible assets

An intangible asset is recognised when: • it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity, and • the cost of the asset can be measured reliably

Intangible assets are initially recognised at cost.

Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred.

An intangible asset arising from development (or from the development phase of an internal project) is recognised when: • it is technically feasible to complete the asset so that it will be available for use or sale • there is an intention to complete and use or sell it. • there is an ability to use or sell it • it will generate probable future economic benefits • there are available technical, financial and other resources to complete the development and to use or sell the asset • the expenditure attributable to the asset during its development can be measured reliably.

The amortisation period and the amortisation method for intangible assets are reviewed every period-end.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:

Item	Average useful life
Risk Based Supervisory System (RBSS)	5 years
Enterprise Resource Planning (ERP)	5 years

1.4 Property, plant and equipment

Property, Plant and Equipment is stated at cost net of accumulated depreciation and / or accumulated impairment losses if any. All plant and equipment are measured at historical cost less depreciation and impairment losses. Historical costs includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs such as replacement parts and major inspections are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Authority and the cost of the item can be measured reliably. All day-to-day repairs and maintenance are charged to the surplus or deficit during the financial period in which they are incurred.

Motor vehicles is subsequently measured at revalued amounts, being the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Revaluations are made with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting year. The assets are revalued every 2-3 years.

When an item of property, plant and equipment is revalued, the gross carrying amount is adjusted consistently with the revaluation of the carrying amount. The accumulated depreciation at that date is adjusted to equal the difference between the gross carrying amount and the carrying amount after taking into account accumulated impairment losses.

When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation is eliminated against the gross carrying amount of the asset.

Any increase in an asset's carrying amount, as a result of a revaluation, is recognised in other comprehensive income and accumulated in the revaluation reserve in equity. The increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss.

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Accounting Policies

1.4 Property, plant and equipment (continued)

Any decrease in an asset's carrying amount, as a result of a revaluation, is recognised in profit or loss in the current year. The decrease is recognised in other comprehensive income to the extent of any credit balance existing in the revaluation reserve in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in the revaluation reserve in equity.

The revaluation reserve related to a specific item of property, plant and equipment is transferred directly to retained income when the asset is derecognised.

The revaluation reserve related to a specific item of property, plant and equipment is transferred directly to retained income as the asset is used. The amount transferred is equal to the difference between depreciation based on the revalued carrying amount and depreciation based on the original cost of the asset, net of deferred tax.

Depreciation is charged so as to write off the cost of the assets over their estimated useful lives on a straight-line basis, to estimated residual values. Where significant parts of an item have different useful lives to the item itself, these parts are depreciated separately over their useful lives. The methods of depreciation, useful lives and residual values are reviewed annually, with the effect of any change in estimates accounted for prospectively. Depreciation is not charged to an asset if its estimated residual value exceeds or is equal to its carrying amount. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or derecognised.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item	Depreciation method	Average useful life
Leasehold property	Lease term	Lease term
Furniture and fixtures	Straight line	10 years
Motor vehicles	Straight line	5 years
Office equipment	Straight line	6-7 years
Computer equipment	Straight line	3-7 years

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its continued use or disposal. Any gain or loss arising from the derecognition of an item of property, plant and equipment, determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, is included in profit or loss when the item is derecognised.

1.5 Impairment of non-financial assets

At each financial reporting date, the Authority reviews the carrying amount of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indications exist, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Authority estimates the recoverable amount of the cash generating section to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating section) is estimated to be less than its carrying amount, its carrying amount is reduced to its recoverable amount. Impairment losses are recognised in the surplus or deficit in those categories consistent with the function of the impaired asset.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating-section) is increased to the revised estimate of its recoverable amount. This is done so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in the prior years. A reversal of an impairment loss is recognised in the surplus or deficit.

1.6 Revenue from contracts with customers

The Authority recognises revenue from the following major sources: • supervisory levies • License fees • Penalties

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Accounting Policies

1.6 Revenue from contracts with customers (continued) • Finance income • Government Grant

Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Authority recognises revenue when it transfers control of a product or service to a customer.

The supervisory levies

The supervisory levies and licence fees were promulgated into law through Statutory Instrument No.52 of 2017 of the Republic of Botswana, which was published in the Government Gazette of the 29 March 2019. Supervisory levies are charged and are payable in two equal portions, on or before the 30th April and 31st October of each financial year. Registered non-bank financial institutions are required to pay levies on an annual basis in terms of the Non-Bank Financial Institutions Regulatory Authority Act 2016. Supervisory levies are recognised at point in time. The Regulatory Authority may, on application, waive payment of some or all of a supervisory levy, penalty levy or a fee. The levies are fixed in nature and there are no separate performance obligations identified.

License fees

License fees are recognised on licensing of the relevant supervised entities and are recognised at the point in time. Some classes of regulated entities are charged annual licence fees, such fees are recognised by the Authority as revenue.

Penalties

Penalties are recognised in the surplus or deficit on penalizing those regulated entities that have defaulted in meeting the necessary regulatory guidelines.

Finance income

Revenue is recognised as interest accrues (using the effective interest method). Finance income is recognised in the surplus or deficit.

Government Grant

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to the purchase of an asset, it is recognised as capital grant in the statement of financial position and released to the statement of comprehensive income in equal amounts over the expected useful life of the related asset. Where the Authority receives a nonmonetary grant, the asset and the grant are recorded at nominal amounts and released to the total surplus or deficit over the expected useful life of the relevant asset by equal annual installments.

1.7 Translation of foreign currencies

Foreign currency transactions

Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Foreign exchange translation gains or losses arising on the settlement of monetary items or on translating monetary items at rates different from those used when translating at initial recognition during the period or in the financial statements are taken to the statement of comprehensive income in the period they arise.

1.8 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. The Regulatory Authority had no eligible assets or borrowing costs for the period reported.

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Accounting Policies

1.9 Employee benefits

Pension

The Regulatory Authority operates a defined contribution scheme for the employees. Payments to the scheme are charged as an expense to the statement of comprehensive income as they fall due.

Gratuity

The Regulatory Authority provides for gratuity benefits for employees on fixed term contracts in line with the Employment Act Chapter 47 01 and the relevant employment contracts. Gratuity expenses are recognised immediately, to the extent that the benefits are amortised on a straight-line basis over the period of service, until the benefits become payable. The charge is made to expenses in the statement of comprehensive income and a separate provision in the statement of financial position.

Leave pay provision

The Regulatory Authority recognises, in full, employee's right to annual leave entitlement in respect of past service. The recognition is made each year and is calculated based on accrued leave days not taken during the year. The charge is made to expenses in the statement of comprehensive income and a separate provision in the statement of financial position.

1.10 Government grants

Government grants are recognised when there is reasonable assurance that: • the Authority will comply with the conditions attaching to them, and • the grants will be received.

Government grants are recognised as income over the periods necessary to match them with the related costs that they are intended to compensate.

A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs is recognised as income of the period in which it becomes receivable.

Government grants related to assets, including non-monetary grants at fair value, are presented in the statement of financial position by setting up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset.

Grants relating to the acquisition of property, plant and equipment are credited to the income statement on a straight line basis over the expected useful lives of the related assets. The related costs are shown at cost less accumulated depreciation. When an asset financed through grants is disposed of, the total unamortised portion of the grant relating to the asset is recognised in profit and loss in the year of disposal.

1.11 Financial Instruments

Financial instruments held by the Authority are classified in accordance with the provisions of IFRS 9 Financial Instruments.

Broadly the classification possibilities, which are adopted by the Authority, are as follows:

Financial assets which are debt instruments • Amortised cost ( This category applies only when the contractual terms of the instrument give rise, or specified dates, to cash flows that are solely payments of principal and interest on principal and where the instrument is held under a business model whose objective is met by holding the instrument to collect contractual cash flows).

Financial liabilities • Amortised cost.

Note 28 Financial instruments and risk management presents the financial instruments held by the Authority based on their specific classifications.

All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Accounting Policies

1.12 Provisions

Provisions are recognised when the Authority has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are measured at the directors' best estimate of expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect of the time value of money is material.

1.13 Leases

The company assesses whether a contract is, or contains a lease, at the inception of the contract.

A contract is, or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

In order to assess whether a contract is, or contains a lease, management determine whether the asset under consideration is "identified", which means that the asset is either explicitly or implicitly specified in the contract and that the supplier does not have a substantial right of substitution throughout the period of use. Once management has concluded that the contract deals with an identified asset, the right to control the use thereof is considered. To this end, control over the use of an identified asset only exists when the company has the right to substantially all of the economic benefits from the use of the asset as well as the right to direct the use of the asset.

In circumstances where the determination of whether the contract is a lease requires significant judgement, the relevant disclosures are provided in the significant judgements and sources of estimation uncertainty section of these accounting policies.

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Accounting Policies

1.13 Leases (continued)

Company as lessee

A lease liability and corresponding right-of-use asset are recognised at the lease commencement date, for all lease agreements for which the company is a lessee, except for short-term leases of 12 months or less, or leases of low value assets. For these leases, the company recognises the lease payments as an operating expense (note) on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

The various lease and non-lease components of contracts containing leases are accounted for separately, with consideration being allocated to each lease component on the basis of the relative stand-alone prices of the lease components and the aggregate stand-alone price of the non-lease components (where non-lease components exist).

However as an exception to the preceding paragraph, the company has elected not to separate the non-lease components for leases of land and buildings.

Details of leasing arrangements where the company is a lessee are presented in note 15 Leases (company as lessee).

Lease liability

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by the rate implicit in the lease. If this rate cannot be readily determined, the company uses its incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise the following: • fixed lease payments, including in-substance fixed payments, less any lease incentives. • variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; • the amount expected to be payable by the company under residual value guarantees; • the exercise price of purchase options, if the company is reasonably certain to exercise the option. • lease payments in an optional renewal period if the company is reasonably certain to exercise an extension option and • penalties for early termination of a lease, if the lease term reflects the exercise of an option to terminate the lease.

Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability (or right-of-use asset). The related payments are recognised as an expense in the period incurred and are included in operating expenses (note 15).

The lease liability is presented as a separate line item on the Statement of Financial Position.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect lease payments made. Interest charged on the lease liability is included in finance costs (note 13).

The company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) when: • there has been a change to the lease term, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. • there has been a change in the assessment of whether the company will exercise a purchase, termination or extension option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate, • there has been a change to the lease payments due to a change in an index or a rate, in which case the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate in which case a revised discount rate is used), • there has been a change in expected payment under a residual value guarantee, in which case the lease liability is remeasured by discounting the revised lease payments using the initial discount rate, • a lease contract has been modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised payments using a revised discount rate.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recognised in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

Right-of-use assets

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Accounting Policies

1.13 Leases (continued)

Right-of-use assets are presented as a separate line item on the Statement of Financial Position.

Lease payments included in the measurement of the lease liability comprise the following: • the initial amount of the corresponding lease liability. • any lease payments made at or before the commencement date, • any initial direct costs incurred, • any estimated costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, when the company incurs an obligation to do so, unless these costs are incurred to produce inventories, and • less any lease incentives received.

Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. However, if a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. Depreciation starts at the commencement date of a lease.

For right-of-use assets which are depreciated over the shorter period of lease term and useful lives, the useful lives are determined consistently with items of the same class of property, plant and equipment. Refer to the accounting policy for property, plant and equipment for details of useful lives.

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting year. If the expectations differ from previous estimates, the change is accounted for prospectively as a change in accounting estimate. Each part of a right-of-use asset with a cost that is significant in relation to the total cost of the asset is depreciated separately.

The depreciation charge for each year is recognised in profit or loss unless it is included in the carrying amount of another asset.

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Non-Bank Financial Institutions Regulatory Authority Annual Financial Statements for the year ended 31 March 2020

Notes to the Annual Financial Statements

2. New Standards and Interpretations

2.1 Standards and interpretations effective and adopted in the current year

In the current year, the Authority has adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations

IFRS 16 Leases

IFRS 16 Leases is a new standard which replaces IAS 17 Leases, and introduces a single lessee accounting model. The main changes arising from the issue of IFRS 16 which are likely to impact the Authority are as follows:

Authority as lessee • Lessees are required to recognise a right-of-use asset and a lease liability for all leases, except short term leases or leases where the underlying asset has a low value, which are expensed on a straight line or other systematic basis. • The cost of the right-of-use asset includes, where appropriate, the initial amount of the lease liability, lease payments made prior to commencement of the lease less incentives received, initial direct costs of the lessee, and an estimate for any provision for dismantling, restoration and removal related to the underlying asset. • The lease liability takes into consideration, where appropriate, fixed and variable lease payments, residual value guarantees to be made by the lessee, exercise price of purchase options and payments of penalties for terminating the lease. • The right-of-use asset is subsequently measured on the cost model at cost less accumulated depreciation and impairment and adjusted for any re-measurement of the lease liability. However, right-of-use assets are measured at fair value when they meet the definition of investment property and all other investment property is accounted for on the fair value model. If a right-of-use asset relates to a class of property, plant and equipment which is measured on the revaluation model, then that right-of-use asset may be measured on the revaluation model. • The lease liability is subsequently increased by interest,