Comparison of Financing Decisions of the Bank Of Tanzania (BOT),

Tanzania Breweries Limited (TBL), and Twiga Bancorp Ltd.

By:

GABRIEL BYABATO BAKILANA

 Table of Contents
Pg.
Introduction ……………………………………………………………………… 2

Background of the Organisations …………………………………………….. 2

- Bank of Tanzania (BOT) ………………………………………………. 2
- Tanzania Breweries Limited (TBL) …………………………………… 6
- TWIGA Bancorp ………………………………………………………… 7

Financing Decisions…………………………………………………………….. 9

Factors influencing Financing Decisions ……………………………………… 11

Summarized Comparison of financing Decisions of BOT, TBL

and Twiga Bancorp ……………………………………………………………… 12
References ………………………………………………………………………..15
Appendix 1 ……………………………………………………………………….. 16
Appendix 2 ……………………………………………………………………….. 17
Appendix 3 ……………………………………………………………………….. 18
Appendix 4 ……………………………………………………………………….. 19
Appendix 5 ……………………………………………………………………….. 20
Appendix 6 ……………………………………………………………………….. 21
Appendix 7 ……………………………………………………………………….. 22
Appendix 8 ……………………………………………………………………….. 23
Appendix 9 ……………………………………………………………………….. 24
Appendix 10………………………………………………………………………. 25

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1. Introduction
Financial Management, essentially studies how entities, business or otherwise,
make financing and investment decisions. On top of that, Financial Managers do
anticipate, analyze and administer the use of funds within the organization.

This paper analyses the financing decisions made by the Bank of Tanzania
(BOT), Tanzania Breweries Limited (TBL) and Twiga Bancorp; observing if there
are any similarities or differences among the organizations’ financing decisions.

2. Background of the Organisations

2.1 Bank of Tanzania (BOT)

Bank of Tanzania (BOT) was established by the act of Parliament following the
decision to establish separate Central Banks in Tanzania, Kenya, and Uganda
back in 1965. The Bank of Tanzania Act, 1966, was passed by the National
Assembly in December 1965, and the Bank was opened by the first President of
Tanzania J. K. Nyerere on June 14, 1966.

The Act empowered the BOT to perform all the inherent central banking
functions, but within eight months of its establishment (in February 1967), the
Arusha Declaration was proclaimed, and, with it, BOT had to readjust its policies.
Most of the traditional instruments of indirect monetary policy stipulated in the Act
became inoperative due to non-competitive nature of the economy.

The Government devised the Annual Finance and Credit Plan (AFCP), supported
by a system of administered interest rates, as the main instrument of monetary
policy from 1971-72. At the same time, the Foreign Exchange Plan (FEP) was
devised to control the use of foreign exchange in accordance with national
priorities. The plans were formulated in the Ministry of Development Planning, in
consultation with the Bank. However, the Bank and the banking system were
responsible for their implementation. A system of direct controls was used for this
purpose, as stipulated in the Exchange Control Ordinance and the Import Control
Ordinance.

Operational Features of BOT:

The Bank of Tanzania is a body corporate and in its corporate name, the bank: -

 has perpetual succession and a common seal;

 is capable of suing and being sued; and
 in the pursuit of its objectives and performance of its tasks, the Bank is
autonomous and independently accountable.
 Is capable of acquiring, holding and alienating any movable or immovable
property.

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Functions of BOT:
In the wake of new developments in the world economies and the macro-
economic challenges caused by inflation over the years, it is generally taken that
Central Bank's most significant function is to develop a monetary policy which is
geared towards the pursuit of general and long term price stability. This will
contribute greatly to the achievement of maximum growth for a nation's economic
prosperity.

Apart from the primary function, the Bank of Tanzania has important subsidiary
central banking functions. These include: -

 The Bank of Issue

The Bank has the sole right to issue notes and coins in Tanzania for the purpose
of directly influencing the amount of currency in circulation outside banks,
thereby providing the economy with sufficient, but if possible, non-inflationary
liquidity.

 The Bankers' Bank

This function includes the acceptance of deposits to act as prudential reserves
for these banks (i.e., the Minimum Reserves), the willingness to discount
commercial and government paper, and the commitment to act as lender of last
resort to these banks. It also involves the provision of central clearance facilities
for interbank transactions.

 The Governments' Bank

The Bank is the banker and the fiscal agent for the Governments, and may be
the depository of the Governments. The Bank may make temporary advances to
the Governments through its overdraft facility, subject to repayment within 180
days and through purchases (direct or rediscounting) of treasury bills issued by
the Governments, which mature not later than 12 months from the date of issue.
The total amount outstanding at any time of advances made in this manner shall
not exceed one eighth of the average budgeted revenues (average of the actual
collected revenues of the previous three fiscal years, excluding loans, grants,
other forms of economic aid, and all borrowing, whether short-or long-term) of
each Government.

 The Advisor to the Governments

The Bank may advise the Governments on any matter relating to its functions,
powers, and duties. The Bank may also be requested to advise the Governments
on any matter related to its functions, powers, duties, the credit conditions in
Tanzania, or any proposal, measures, and transactions relating thereto.

 The Guardian of the Country's International Reserves

The Bank is the depository of the official external assets of Tanzania, including
gold and foreign currency reserves. Guarding international reserves may imply

4
the determination of buying and selling rates of gold and foreign exchange in
foreign exchange markets and/or the buying and selling of reserve assets for the
purpose of sustaining the national currency's external value. It also includes
reserve management, with a view to the prudential investment of the funds, with
due regard to safety, liquidity, and profitability, and external debt management.

 Supervision of Banks and Financial Institutions

In general, this activity involves ensuring that commercial banks and other
financial institutions conduct their business on a sound prudential basis and
according to the various laws and regulations in force. It includes the supervision
of banking conduct and the licensing of financial institutions.

According to the Banking and Financial Institutions Act of 1991, and the new
BOT Act, the main responsibilities of the Bank of Tanzania are:

(a) implementation of prudential controls concerning capital adequacy,

liquidity, concentration of credit and risk diversification, asset classification
and provisioning, and prohibited activities;
(b) licensing of banks and financial institutions;
(c) facilitation and monitoring of a Deposit Insurance Fund, the purpose of
which is the protection of small depositors; and
(d) modification and monitoring of the Minimum Reserve Requirements and
foreign exchange exposure.

 Promotion of Financial Development

This refers to the establishment of an effective financial system, with the aid of
which financial transactions necessary for the smooth functioning of the economy
can be carried out with a minimum amount of cost and time involved. In this
connection, the Bank has to be a facilitator of advanced clearing and transfer
systems. It also implies that the necessary banking services, as, for example,
deposit facilities and loan facilities, are made available. Included here is also the
availability of certain specialized institutions, which could be represented, for
example, by an industrial development bank and/or an agricultural development
bank and micro-finance institutions, and the facilitation of a money market, a
capital market, and a foreign exchange market.

The Current Institutional Framework of the Bank of Tanzania:

 Relations with the Government

It has been generally accepted by now that there is quite a valid case for Central
Bank independence, since price stability is an important public good, like peace
and civil rights, and politicians in a multi-party system, who have to work within
the constraints of an electoral timetable, will always be tempted to engineer pre-
electoral booms (vote-maximizing behavior), regardless of the longer-run
inflationary consequences. Politicians tend to prefer monetary expansion to

5
monetary contraction, since the following short-term trade-off exists between
inflation and production and employment: -
(a) monetary expansion first results in a stimulation of production and
increased employment, and only later there is an increase in the rate of
inflation, and
(b) Monetary contraction first results in reduced production and less
employment, and only after some time there is a reduction in the rate of
inflation.

Within the framework outlined above, there is also a tendency among politicians
to avoid expenditure cuts and tax increases by borrowing from the Central Bank,
which is the most inflationary method of financing government deficits. It is,
therefore, very important to separate the powers of spending from those creating
money.

Experiences the world over in the past decades unambiguously suggest that
countries, in which Central Banks enjoyed considerable autonomy in monetary
policy, recorded low inflation, while the opposite was the case in countries where
Central Banks were under government influence. However, it has also been
generally recognized that the Central Bank has to be accountable. Accountability
relates to the responsibility of the Central Bankers to explain to the Public
(Government, Parliament, and the General Public) what they are doing and why,
i.e., there should be a genuine two-way communication (close consultations)
between the Public and the Central Bank. This also implies educating the public
on economic principles, i.e., the harmful effects of inflation have to be explained,
in order to maintain public support.

Concerning day-to-day monetary policy operations, the Bank of Tanzania is

autonomous. However, commensurate with the accountability postulate, regular
consultations shall be held between the Governor and the Governments on
monetary policy. Furthermore, twice a year, prior to the commencement of the
new fiscal year, and not more than six months, thereafter, the Governor has to
present to the Union Minister of Finance the Monetary Policy Statement, for
submission to the National Assembly, giving an indication of monetary and
economic developments at present and the recent past, and expected economic
developments and the monetary policy stance during the next 12 months. In the
case of irreconcilable differences between the Governor and the Union Minister
of Finance, the Governor can be directed to formulate and implement Monetary
Policy for a period not exceeding 12 months, as specified by the Minister. The
directive shall be published in the Gazette.

The Board of Directors, the Bank's top decision making body, consists of the
Governor and the Deputy Governor, who are appointed by the President for a
period of five years (they shall not hold office for more than two terms), one
representative each for the Governments (Principal Secretaries to the respective
Ministries of Finance), and six other Directors. The latter are appointed by the
Union Minister of Finance for a term of three years; they shall not hold office for
more than three terms. In order to keep Government borrowing from the Central

6
Bank within reasonable limits, borrowing benchmarks have been established for
the Governments on the basis of revenue collected. As indicated already, the
Bank of Tanzania is the advisor to the Governments on matters relating to
finance.

2.2 Tanzania Breweries Limited (TBL)

Tanzania Breweries Limited (TBL) is a Tanzania-based company principally
engaged in production, distribution and sale of malt beer and alcoholic fruit
beverages (AFBs) in Tanzania. It operates breweries in Dar es Salaam, Arusha
and Mwanza and thirteen depots throughout the country. On top of that, the
company also farms barley, which is used to produce malt at its malting plant in
Moshi. The Company operates in three segments: clear beer, wines and spirits,
and traditional beer. The brands offered by the Company include Safari Lager,
49er, Balimi Extra, Bia Bingwa, Castle Lager, Ndovu, Redds Premium Gold,
Pilsner Ice, Kibo Gold, Trophy Lager, and Kilimanjaro Premium Lager (in the
clear beer category), Konyagi and Konyagi Ice (in the wines and spirits category),
and Kibuku (in the traditional beer category). Its subsidiaries include Tanzania
Distilleries Limited, Mountainside Farms Limited and Kibo Breweries Limited.

The Company produces and distributes Castle Lager, Castle Milk Stout and
Redds Premium Cold under licence from SABMiller Plc. The company further
manufactures and distributes certain East African Breweries (EABL) brands
under licence, the most notable being Tusker Lager, Pilsner Lager and Guinness.
Konyagi Ice is manufactured and distributed under licence from Tanzania
Distillers Limited. The subsidiary undertaking, Tanzania Distilleries Limited, also
distributes Amarula and various other international brands of wines and spirits
under licence from Distell (Pty) Limited of South Africa.

The company was listed on the Dar es Salaam Stock Exchange (DSE) on 9th
September, 1998. Tanzania Breweries Limited is a subsidiary of SABMiller, a
South African Company which bought the company after the Government’s
decision to privatize the then called Tanzania Breweries Corporation.

TBL Vision Statement

To be the most admired Company in the beer industry in East Africa, i.e.
• The investment of choice
• The employer of choice
• The partner of choice

TBL Mission Statement

To own and nurture local and international brands which are the first choice of the
consumer.

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 2.3 TWIGA Bancorp

History:
Twiga Bancorp Ltd., formerly known as National Bureau de Change Ltd., was
established in 1992 as a wholly-owned subsidiary of the then National Bank of
Comemerce. In 1998 The National Bureau De Change was transformed into a
non-bank financial institution, empowered to handle all banking transactions with
the exception of taking deposits on current accounts.

In January 2005, the then National Bureau de Change changed its name to
TWIGA BANCORP LIMITED. The official launching the Bank's new name took
place on the 14th January 2005 and graced by the then Deputy Minister for
Finance Dr. Festus Limbu (MP), who represented the then Minister for Finance
Hon. Basil P. Mramba (MP).

Operations:
Twiga Bancorp Limited operates in the three major cities of Tanzania namely Dar
es Salaam, Arusha and Mwanza. The head office is located at Twiga House,
54/55 Samora Avenue in Dar es Salaam. The Bank also has sub-branches at the
Julius Kambarage Nyerere International Airport (JKNIA) in both terminals, i.e.
JKNIA Terminal I (also known as Cargo) and JKNIA Terminal II where services
are full time (24 Hrs every day).

All the branches are connected together with a Wide Area computer Network
(WAN) using modern technologies.

Products:

 Savings Account
With a savings account, a customer can make deposits and withdrawals at any of
Twiga Bancorp's branches in Dar es Salaam: at Twiga House along Samora
Avenue, at Julius Kambarage Nyerere International Airport; Mlimani City, in
Arusha along Sokoine Road; and in Mwanza along Liberty Street.

 Instant Access Accounts

(a) Personal Instant Access Accounts
(b) Accounts for Limited Companies
(c) Joint Accounts
(d) Partnership Accounts
(e) Accounts for Clubs, Societies and Associations

 Fixed Deposit Accounts

8
This form of account offers competitive rates, higher rates for longer durations.
Fixed Deposit Receipt is offered to the depositor.

 Twiga Bancorp’s Insurance Premium Financing (IPF)

Twiga Bancorp’s IPF product provides for individuals and companies seeking or
on insurance cover with the option to pay at their insurance premiums in monthly
installments up to a maximum of 10 months an affordable interest rate.

Features of the IPF product:

o The product is suitable for both retail and corporate entities.

o The product only covers insurance policies issued by reputable

insurance companies. List of acceptable insurance companies are
available at Twiga Bancorp.

o To qualify, the insured parties are required to provide a deposit of a

quarter or 15% of the premium amount payable as collateral.

o Twiga will open for each IPF customer an account through which the
IPF facility will be serviced.

o Twiga Bancorp will then provide loans to the insured parties and pay
their insurance premium obligations in lump sum amounts to the
insurance companies.

o The insured party will service the loan on monthly basis over a period
which will range from 3 to 10 months depending on the time period
agreed with the bank.

o In the event that an insured party defaults, Twiga Bancorp will recover
the interest and principal amounts due by liquidating the collateral and
by canceling the policy and collecting from the insurance company, the
unutilized portion of the insurance premium.

Benefits provided by IPF To the Insured:

o Assists the insured party, manage their cash-flow better by providing
them with the option to pay insurance premiums monthly as opposed
to hefty yearly lump-sum amounts payments.

o Due to the reduced payment burden, the insured party can increase
policy amount or take additional insurance cover i.e. increased
protection of the insured party.

o General improvement in quality of life through increased security for

business and personal property.

9
 Interest and Charges

o Flat rate of TShs 20,000/= processing fees regardless of the loan

amount.
o Interest rate on IPF Loan depends on the repayment period, as
detailed below
o Maximum repayment period will be 10 months while minimum period is
3 months: -
3 Months 5%
6 Months 8%
10 Months 10%

 International Banking Operations

o International Money Transfers
(a) Telegraphic Transfers
(b) Drafts
(b) MoneyGram®
o Trade bills financing

o Other Services

 Credit Facilities: Loans to Individuals and Companies.

3. Financing Decisions

3.1 Financing
Financing refers to the act of providing funds for business activities,
making purchases, investing, or covering operational costs. Financial institutions
and banks are in the business of financing as they provide capital to businesses,
consumers and investors to help them achieve their goals.

There is a large variety of financing techniques that businesses and consumers

can use to receive financing; these techniques range from IPOs to bank
loans. The use of financing is vital in any economic system as it allows
consumers to purchase products out of their immediate reach, like houses,
and businesses to finance large investment projects.

3.2 Forms of Financing

There are three main forms of financing used by Organisations. These are Debt
Financing, Equity financing, and Venturing (Venture Capital).

10
 Debt Financing
This is when the company borrows money (obtaining Loans which can be
secured or non-secured) from Financial Institutions or from other sources (Public
or private), and Issuing of Debentures. Debt Financing can be long-term or short
spanned. When a firm raises money for working capital or capital expenditures
by selling bonds, bills, or notes to individual and/or institutional investors, this is
also some form of Debt Financing. In return for lending the money, the individuals
or institutions become creditors and receive a promise that the principal and
interest on the debt will be repaid.

Companies can also obtain short-term loans through accruals and short term
IOUs. This also forms part of Debt Financing.

 Equity Financing
The other way of raising capital is to issue shares of stock. This is called equity
financing. It is actually the act of raising money for company activities by selling
common or preferred stock to individual or institutional investors. In return for the
money paid, shareholders receive ownership interests in the corporation.
Also known as "share capital". Equity Financing can be done privately (In House
Financing – from within the Organisation through Rights Issue) or publicly
through Initial Public Offering (IPOs).

 Venture Capital
This is a type of private equity capital typically provided to early-stage, high-
potential, growth companies in the interest of generating a return through an
eventual realization event such as an IPO or trade sale of the company. Venture
capital investments are generally made as cash in exchange for shares in the
invested company. Venture capital typically comes from institutional investors
and high net worth individuals and is pooled together by dedicated investment
firms.

3.3 Capital Structure

This is a mix of a company's long-term debt, specific short-term debt, common
equity and preferred equity. The capital structure shows how a firm finances its
overall operations and growth by using different sources of funds.

Debt comes in the form of bond issues or long-term notes payable, while
equity is classified as common stock, preferred stock or retained earnings. Short-
term debt such as working capital requirements is also considered to be part of
the capital structure.

11
A company's proportion of short and long-term debt is considered when
analyzing capital structure. When people refer to capital structure they are most
likely referring to a firm's debt-to-equity ratio, which provides insight into how
risky a company is. Usually a company more heavily financed by debt
poses greater risk, as this firm is relatively highly levered.

3.4 Examples of Financing Decisions

Financing decisions are those which have an impact on the capital structure of
an Organisation. Examples of such decisions are Repayment of Long-term loan,
issuance of long-term debt (debentures/notes/etc.), issuance of share capital
(common or preference stock), Payment of cash dividends, and any net change
in other borrowings or long term financing.

4. Factors influencing Financing Decisions

When making corporate financing decisions, one needs to consider many
factors. One must think about the type of Organisation and its objectives,
Organisation’s affairs in the short and long term, and the potential implications of
the decisions to the employees and stockholders. Looking at the situation from
several different angles better equips the analyst to make good financing
decisions.

An Organisation has to spend money to make money. This is one theory that
many business owners have a hard time coming to terms with, but it's a valuable
one to consider. Often, it's better to overspend one quarter to beef up your
inventory or marketing efforts, knowing that the investment will show a return
over the course of a year or a few years.

Shareholders are the toughest to please with corporate financing decisions, but
without them, management will be “dead in the water”. Shareholders’ wealth
should be the first priority of management. With this in mind, the type of owners
can be seen to influence greatly the kind of financing decisions the firm will
make. E.g. Private Individual and corporate shareholders will most definitely have
a different inclination compared to a Government owned corporation.

Furthermore, the availability of Capital from Internal sources, also affects the kind
of financing decisions a company makes. If it is possible to raise funds from
within the company, say through rights issue, then the company can decide to
take that route instead of taking a loan.

Availability of Capital from the Banks/other financial Institutions also affects how
a company makes its financing decisions. If the banks are on a tight money
system, then however deserving or needy a company might be, taking a loan
might not be feasible.

Cost of Capital (Interest) charged on loans affect the company’s inclination

towards opting for debt as a financing method. When interest rates and other
12
costs associated with borrowing are high, then most companies will be
discouraged from borrowing; different from when interest rate is low.

Profitability of the company and the Dividend Policy of the Company also affect
the financing decisions of a company. Some companies resort to the system of
ploughing back the retained profits and increase the capital of the company, or to
finance further investment. Only a profitable company can do this, if the dividend
policy allows for such action to be taken at that time.

All in all, the choice of the financing method to be adopted is at the discretion of
the owners of the company. Whatever they decide will be adopted, after
considering the options at their disposal, the availability of such financing options,
and the benefits to be reaped.

5. Summarized Comparison of financing Decisions of BOT, TBL and Twiga

Bancorp.
The following data has been summarized from the Financial Statements of the
three Institutions for the respective financial years ending at different dates in
2008, with the exception of Bank of Tanzania (BOT) for which both 2005 and
2008 financial statements have been used.
(All amounts in TShs. M)
CAPITAL ITEM ORGANISATION
BOT TBL TWIGA
Equity:
Share Capital 10,000 29,493 2,500

Reserves
- Share Premium - 45,346 -
- Capital Reserve 66,262 - -
- Special Reserve - - 224
Debentures - - -
Short Term Financing
- Accts Payable /Accruals 11,722.53 65,981 665
- Deferred Taxes 9.79 9,691 -
- Other Short Term Loans - 57,899 211
Repayment of Long-term
debt - - -
Proceeds from issuance of
long term debt - - -
Proceeds from issuance of
share capital - - -
Payment of cash dividends - (60,649) -
Net change in other
borrowings - - -
Increase in Inter-group

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 indebtedness - 8,173 -
Other-Long term Financing - - -

6. Observation
 Share Capital:
These three establishments have different groups of shareholders, the
Government for BOT and Twiga Bancorp and private investors (Corporate &
Individuals) in the case of TBL. All have issued shares, but only those of TBL can
be traded in the Stock Exchange. Since their inception, the share capital are
constant, except for TBL whose share capital increased when in went public.

 Payment of Dividends:
TBL’s most financing decisions and movements are around the payment of
dividends to group shareholders and the minority interest groups. This dividend
policy is greatly determined by the company’s profitability and the fact that TBL
has been listed at the DSE, and not paying dividends would spell disaster for the
company share value. Most other financing decisions were done by the company
at its inception and at the time of going public, effects of which still seen on the
Balance sheet as the figures of Authorized, Issued and paid up Share capital and
Premium.

BOT, on the other hand, is a Government Institution, solely owned by the

Government of the United Republic of Tanzania. BOT is a non-profit, Government
Institution. Its financing decisions differ from those of other trading concerns.
Whatever profit/gain obtained from its operations (e.g. foreign exchange gains, or
interest income from foreign operations) is not for distribution. Therefore all
Financing decisions made are not backed up by profit motive, but rather the
attainment of macro-economic stability in Tanzania.

There are cases when the Bank issues Treasury Bills/Bonds is or the attainment
of macro-economic stability (for influencing the economy, not financing its
operations) although these operations occasionally result into gains. Profits
recorded by BOT also include net unrealized exchange gains. In accordance with
the Bank of Tanzania Act, 2006, Section 18 (5), both realized and unrealized
gains and losses shall be included in the profit calculation but only the residual of
any net realized profits of the Bank shall be paid, within three months of the close
of each financial year, into the Consolidated Fund; subject to the condition that if
at the end of any financial year any of the Governments is indebted to the Bank,
the Bank shall first apply the remainder of its net realized profits to the reduction
or discharge of the indebtedness and thereafter such amount as relates to the
net realized profits of the Bank in the relevant financial year shall be paid out of
the Consolidated Fund to the Treasury of the Government of the United Republic
and the Revolutionary Government of Zanzibar in accordance with the formula
agreed upon by the Governments.

 Reserves:

14
BOT also maintains a Capital reserve. At 30th June 2005, The Capital Reserve
Account stood at 66,262,617,000/=, and this formed part of the Reserves
depicted on the Balance Sheet as on that day. The Capital Reserve was
established back in 2001/2002. On an annual basis the amount spent to finance
capital projects from the Reserve for Projects account is transferred to this
reserve. The reserve is permanent in nature and can only be available for
enhancement of Share Capital when need arises.

 Liabilities:
BOT liabilities are mainly made of Deposits from Banks and non-bank financial
institutions, Government deposits, foreign currency financial liabilities,
Repurchase agreements (REPOs), BOT liquidity papers, IMF related liabilities
and Special Drawing Rights allocations. (See Appendix 2)

However, as is the case with other trading companies like TBL and Twiga
Bancorp, BOT also uses Accruals (Payables) as a form of short term financing.
The “Other Liabilities” for TBL (which include the accounts payable and deferred
taxes) have grown from 6,476,735,000/= in June 2004, to 12,985,342,000/= in
June 2005, to 16,971,881,000 in May 2008/=. Twiga Bancorp’s Accounts Payable
and Accruals amounted to 665 Million at the end of June 2008, rising from 128
Million in December 2007.

All three firms try greatly to avoid the use of long term debt financing. This could
be due to high borrowing interest rates, or sufficiency n other sources of
financing like Equity financing. Contrary to this, the three establishments greatly
use the opportunity of short term financing from creditors deferred expenses
such as deferred Corporate Tax and PAYE.

7. Concluding Remarks
Financing decisions form a basic pillar of any organization’s survival. Adequacy
of financing options determines the survival and investment risk for the
companies. The responsibility of making financing decisions lies with the owners.
If they make a mistake in this aspect, it would spell disaster for the future of the
company. Financing decisions also form part of the strategic decisions of any
Organisation, for they have a long-lasting impact.

15
 References

1. Bank of Tanzania Act, 2006

2. Tanzania Breweries Limited Annual Report and Accounts 2008

3. Bank of Tanzania Balance Sheet as on 30th May 2008

4. Bank of Tanzania Financial Statements for the year ended on 30th June 2005

5. Twiga Bancorp, Financial Report for the Quarter ended on 30th June 2008

6. Baisi M.D., Corporate Financial Management, University of Dar es Salaam

Web Resources
7. http://www.bot-tzorg/

8. http://finance.google.com/finance?q=DAR:TBL

9. www.investopedia.com/terms/d/debtfinancing.asp

10. http://www.ehow.com/how_4454747_make-corporate-financing-
decisions.html

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 Appendix 1:
BANK OF TANZANIA: BALANCE SHEET AS ON 30TH MAY 2008

17
 Appendix 2:
BANK OF TANZANIA: BALANCE SHEET AS AT 30TH JUNE 2005

18
 Appendix 3:
BANK OF TANZANIA
INCOME STATEMENT FOR THE YEAR ENDED 30TH MAY 2008

19
 Appendix 4:
Tanzania Breweries Limited

20
 Cash Flow Statements
For the year ended 31 March 2008

(All amounts in TShs. M)

Notes Group Company

2008 2007 2008 2007
Cash flows from operating activities:
Operating Profit 12,712 97,582 102,395 92,233
Adjusted for:
Depreciation, amortisation, impairment and adjustments 13,794 10,708 13,519 10,437
Movement on provisions 502 577 509 603
Profit on disposal of fixed assets (143) (156) (143) (59)
Profit on disposal of subsidiary - (229) - (229)
Other non-cash items - (628) - (221)
Changes in working capital 24(i) (9,192) 609 (6,988) 18
Net cash inflow from operating activities 117,673 108,463 109,292 102,782
Interest paid (3,544) (1,979) (3,095) (1,832)
Taxation paid 24(ii) (30,662 (27,473 (27,421 (24,600)
) ) )
Net cash inflow from operating activities 83,467 79,011 78,776 76,350

Cash flows from investing activities:

Purchase of property, plant and equipment 13 (58,72 (30,475 (57,186 (29,811)
3) ) )
Purchase of intangible assets 26 (73) (195) (73) (195)
Proceeds from disposals 152 293 152 59
Proceeds from disposal of subsidiary - 952 - 952
Net cash used in investing activities (58,644 (29,425 (57,107 (28,995)
) ) )

Cash flows from financing activities:

Dividend paid to group shareholders (59,268) (58,534) (58,171) (58,534)
Dividend paid to minority interests (1,381) (1,777) - -
Increase in intergroup indebtedness 8,173 3,932 8,865 4,245
Net cash used in financing activities (52,476) (56,379) (49,306) (54,289)

Net decrease in cash and cash equivalents (27,653 (6,793) (27,637 (6,934)
) )
Cash and cash equivalents at the start of year (19,674 (12,881 (20,860 (13,926)
) ) )

Cash and cash equivalents at the end of year (Note 17) (47,327 (19,674 (48,497 (20,860)
) ) )

Notes and related statements forming part of these financial statements appear on pages 26 to 47 of the Annual Report

21
 Appendix 5:
Tanzania Breweries Limited

Profit & Loss Accounts

For the year ended 31 March 2008

(All amounts in TShs. M)

Note Group Company

s 2008 2007 2008 2007
Sales 383,181 314,878 346,771 287,144
Cost of sales 6 (205,722) 167,948) (186,418) (152,968)
Gross profit 177,459 146,930 160,353 134,176
Selling and distribution costs 6 (44,537) (31,663) (41,896) (30,646)
Administrative expenses 6 (21,062) (18,110) (19,473) (16,088)
Other income 8 852 425 3,411 4,791

Operating profit 112,71 97,582 102,395 92,233

2

Finance costs 9 (3,544) (1,979) (3,095) (1,832)

Profit before income tax 109,168 95,603 99,300 90,401

Income tax expense 10 (34,973) (31,690) (31,453) ) (28,925)
Profit for the year 74,195 63,913 67,847 61,476
Attributable to:
Minority interests 2,763 2,248
Equity holders of the Company 71,432 61,665

Basic earnings per share (TShs) 11 242.2 209.1

Diluted earning per share (TShs) 11 242.2 209.1
Dividend per Share (TShs) 12 200.0 200.0

Notes and related statements forming part of these financial statements appear on pages 26 to 47 of the
Annual Report

22
 Appendix 6:
Tanzania Breweries Limited

Balance Sheets
For the year ended 31 March 2008

(All amounts in TShs. M)

Notes Group Company

2008 2007 2008 2007
ASSETS
Non-current assets:
Property, plant and equipment 13 137,737 92,652 134,840 91,017
Intangible assets 26 40,017 40,108 387 478
Investments 14 369 369 45,388 45,388
178,123 133,129 180,615 136,883
Current assets:
Inventories 15 49,874 32,843 44,250 29,817
Accounts receivable 16 21,766 13,512 23,329 14,806
Bank and cash balances 17 10,572 17,100 8,940 14,691
82,212 63,455 76,519 59,314
Total assets 260,335 196,584 257,134 196,197

EQUITY
Capital and reserves attributable to the Company’s
equity holders:
Share capital 23 29,493 29,493 29,493 29,493
Share premium 45,346 45,346 45,346 45,346
Retained earnings 46,379 33,933 46,529 37,668
121,218 108,772 121,368 112,507
Minority interests 2,041 659 - -
Total equity 123,259 109,431 121,368 112,507

LIABILITIES
Non-current liabilities:
Deferred income tax 20 9,691 7,594 9,405 7,430
Provisions 27 417 401 417 401
10,108 7,995 9,822 7,831

Current liabilities:
Trade and other payables 18 65,981 41,510 65,669 39,527
Borrowings 19 57,899 36,774 57,437 35,551
Income tax payable 3,088 874 2,838 781
126,968 79,158 125,944 75,859

Total liabilities 137,076 87,153 135,766 83,690

Total equity and liabilities 260,335 196,584 257,134 196,197

Notes and related statements forming part of these financial statements appear on pages 26 to 47 of the
Annual Report

23
Directors approved the financial statements on pages 21 to 47 on 4 June 2008 and they were
signed on their behalf by:-

……………………
Hon. C. D. Msuya

Appendix 7:
Tanzania Breweries Limited

Statement of Changes in
Equity
(All amounts in TShs. M)

Group Attributable to equity holders of the Group Total

Share Capital Share Retained Minority
Premium Earnings Interest
Balance at 1 April 2006 29,493 45,346 31,254 1,032 107,125
Profit for the year - - 61,665 2,248 63,913
Dividend paid - - (58,986) (2,228) (61,214)
Sale of Subsidiary - - - (393) (393)
Balance at 31 March 2007 29,493 45,346 33,933 659 109,431

Balance at 1 April 2007 29,493 45,346 33,933 659 109,431

Profit for the year - - 71,432 2,763 74,195
Dividend paid - - (58,986) (1,381) (60,367)
Balance at 31 March 2008 29,493 45,436 46,379 2,041 123,259

Attributable to equity holders of the Company

COMPANY Share Capital Share Retained Minority Total
Premium Earnings Interest
Balance at 1 April 2006 29,493 45,346 35,178 - 110,017
Profit for the year - - 61,476 - 61,476
Dividends - - (58,986) - (58,986)
Balance at 31 March 2007 29,493 45,346 37,668 - 112,507

Balance at 1 April 2007 29,493 45,346 37,668 - 112,507

Profit for the year - - 67,847 - 67,847
Dividends - - (58,986) - (58,986)
Balance at 31 March 2008 29,493 45,346 46,529 - 121,368

Notes and related statements forming part of these financial statements appear on pages 26 to 47 of the
Annual Report

24
 Appendix 8:
TWIGA BANCORP
CASHFLOW STATEMENT FOR THE QUARTER ENDED 30TH JUNE 2008
Particulars Current Quarter Previous Quarter
30th June 2008 31st March 2008
Cash from operating activities
Net Operating Income/(Loss) 128 258
Adjustment for non cash items:
Depreciation 70 70
Provision for impairement(for bad debts) 0 0
Net change in Loan & Advances -1,987 -495
Net change in deposits 3,220 1220
Investment in Government securitities -990 2246
Net change in Short term negotiable securities 0 0
Net change in Other Liabilities 6,174 -93
Net change in Other Assets 294 -843
Tax paid 0 0
Gain /Loss on sale of assets 0 0

Net cash provided(used) by Operating activities 6,909 2,363

Cash Flow from Investment activities
Dividend Received ` `
Purchase of fixed Assets -37 -14
Proceeds from sale of fixed Assets
Purchase of non-dealing securities
Proceeds from sale of non-dealing securities
Proceeds from maturity of treasury Bills
Net cash provided (used) by investing activities -37 -14
Cash Flow from financing activities
Repayment of Long-term debt
Proceeds from issuance of long term debt
Proceeds from issuance of share capital
Payment of cash dividends
Net change in other borrowings
Other-Long term Financing
Net cash provided(used) by financing activities 0 0
Cash and Cash Equivalents:

Net Increase/ (Decrease) in Cash and Cash Equivalent 6,872 2,349

Cash and Cash equivalents at the beginning of the period 21,977 19,628

Cash and Cash equivalents at the end of the period 28,849 21,977

……………………………. ………………………………

25
H.H.MBULULO F.N.NGUNGO
General Manager Head of Finance, Planning & Admin.

We the undersigned directors, attest to the correctness of the above statements. We declare that the statements have
been examined by us, and to the best of our knowledge and belief have been prepared in conformance with the
institutions and are true and correct.
………………………………… ……………………………….
DR. ABDALLAH O. KIGODA HON. HULDA S. KIBACHA
Chairperson Director
Appendix 9:
TWIGA BANCORP
INCOME STATEMENT FOR THE QUARTER ENDED 30TH JUNE 2008

Particulars Current Quarter Previous Quarter Current Year Previous Year

30th June 2008 31st March 2008 30th June 2008 30th June 2007
TShs (million) TShs (million) TShs (million) TShs (million)
Interest Income 606 605 1211 1221
Interest Expense -185 -175 -360 -219
Net Interest Income 421 430 851 1002
Bad Debts Written off 0 0 0 0
Provision for Bad ans Doubtful debts 0 0 0 0
Non Interest Income
Exchange profit 128 245 373 240
Commissions and fees 394 286 680 655
Other Income 274 287 561 311
Non Interest Expenses -1089 -990 -2079 -1637
Operating Income/Loss before tax and
extra ordinary items 128 258 386 571
Extra Ordinary Items 0 0 0 0
Net Income/Loss before Tax 128 258 386 571
Income Tax Provision 0 0 0 0
Net Income/Loss After Tax 128 258 386 571
Prior Year Adjustment 0 0 0 0
Net Profit Carried Forward 128 258 386 571

Number of Employees 96 96 96 80

Performance Indicators
Return on Average Total Assets 0.30% 1.00% 0.9% 2.0%
Return on Ordinary Shareholders' Fund 2.91% 6.00% 8.8% 14.0%
Non Interest Expense to Gross Income 77.67% 69.50% 73.6% 67.4%
Interest Margin to Average earning Assets 1.70% 1.90% 3.5% 7.0%

26
 Appendix 10:
TWIGA BANCORP
BALANCE SHEET AS AT 31ST MARCH 2008
PREVIOUS
PARTICULARS CURRENT QUARTER QUARTER
31st March
2008 31st December 2007
TShs (Million) TShs (Million)
ASSETS
Cash 653 914

Balances with Bank of Tanzania 1,271 478

Balances with Other Banks 20,053 18,236

Cheques and Items for Clearing 0 0

Investment in Government Securities 0 2,246

Investment in Other Securities 0 0

Loans, Advances and Overdraft (Net) 11,266 10,771

Accounts Receivable 96 84
Bills Negotiated 0 0
Equity Investments 300 300
Customers Liabilities on Acceptance 0 0
Fixed Assets (Less Depreciation) 1,037 1,091

Inter Branch Accounts (Net) 1,491 1,388

Other Assets 1,783 1,301

TOTAL ASSETS 37,950 36,809

LIABILITIES
Customer Deposits 28,947 27,727
Deposits from Other Banks 0 0

Cash Letters of Credit 3,849 4,545

Bills Payable 0 0
Bankers Cheques and Drafts Issued 0 0
Accounts Payable 393 62
Accrued Expenses 272 66
Acceptances Outstanding 0 0
Inter Branch Accounts (Net) 0 0
Other Liabilities 211 145

TOTAL LIABILITIES 33,672 32,545

NET ASSETS/(LIABILITIES) 4,278 4,264

CAPITAL AND RESERVES

Paid up Share Capital 2,500 2,500

Capital Reserve 0 0

27
Special Reserve 224 224

Retaining Earnings/ (Loss) 1,296 997

Net Profit /(Loss) Year to date 258 543

TOTAL SHAREHOLDERS' FUND 4,278 4,264

Contingent Liabilities
Contingent Liabilities 8,197 6,560

Non performing Loans & Overdrafts 1,193 1,192

Allowance for Probable Loss 309 329

Other Non Performing Assets

PERFORMANCE INDICATORS
Total Capital to Total Assets 11.27% 11.58%
Non performing Assets to Total Loans and Advances 10.59% 11.16%
Gross Loans & Advances to Total deposits 39.98% 39.71%
Loans and Advances to Total Assets 29.69% 29.26%
Current Ratio 1.07:1 1.09:1

28