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CHAPTER FIVE

FINDING AND ANALYSIS:

5.0 INTRODUCTION:

This chapter discusses the findings and analysis the study. The study aimed at

collecting data from the investors and potential investors of Umoja unit trust fund as well

as the management of Unit Trust of Tanzania on their various opinions on the relevance

collective investment scheme in Tanzania. The objectives of the study were as follows;

1. To examine the linkages between collective investment scheme and saving

culture in financial assets among Tanzanian citizens

2. To examine how the Umoja Unit Fund has achieved to diversify the portfolio and

whether the diversified portfolio brings capital growth and wellbeing to investors.

3. To examine whether the compulsory minimum number of unit set (50 unit at

Tshs 100/-) are affordable to majority of Tanzanian:

5.1Description of individuals who responded

There were 55 respondents in this study.54 respondents were investors and potential

investors of Umoja Fund. One respondent was the head of investment management of the

Unit Trust of Tanzania (UTT). Of the 54 respondents, 28 (51.9%) were male and 26

respondents (48.1) were female

GenderITEM FREQUENCY PERCENT

Male 28 51.9%

Female 26 48.1%

Total 54 100%


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Over 78% of the respondents had a saving size of more than Tanzanian shillings 1000,

000/- per year while the remaining 22% respondents had saving of less than Tanzanian

shillings 1000, 000/- per annum. The table below summarizes the size of household

savings.

Savings at household level

ITEM FREQUENCY PERCENT

Income less than Tshs 100,000/- 2 3.9%

Between Tshs 100,000/- and 500,000/- 6 11.8%

Between Tshs 500,000/- and 1000,000/- 3 5.9%

Over Tshs 1000,0000/- 40 78.4%

Total 51 100%

As at 31st July 2006; the Umoja Fund had the net asset value of Tanzanian shillings

114,476,096,812/-(1$=Tshs 1,287/-)mostly owned by Tanzanian citizens.The board of trustee of Unit Trust of Tanzania (UTT) declared income distribution to unit

holders amounting to Tanzanian shillings 9/-(9%) per unit which will be paid on15

September 2006.

Umoja Fund is a balanced fund with 70% in debt and 30% in equity.Of the

portfolio 46% is parked in instruments of less than one year maturity and 54% of the

portfolio is parked in longer term assets. Also due care has been taken to minimize risk

while constructing the portfolio. As a result 53% of the assets have been parked in risk

free assets like treasury bills and treasury bonds and the rest in equities (30%) and bank

deposits (17%). The fund investment decision is undertaken by the investment team

which is made up of in-house staff. The team is responsible for recommendations to the


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Chief Executive Officer. The table below gives a summary of the portfolio of the Unit

Trust of Tanzania

Item Percent

Debt 70%

Equity 30%

Instrument of less than 1 year 46%

Long term asset 54%

Risk free assets 53%

Equity 30%

Bank deposit 17%

To achieve the above objectives the following questions were answered by respondents

as follows:-

5.1.0In your opinion, do you think that the existence of Umoja Fund stimulates the

saving culture in the society?

46 individuals who responded (86.6%) agreed that the existence of Umoja Fund

stimulates the saving culture among Tanzanians citizens while 7 individuals ( 13.2%)

disagreed..

Umoja stimulates savings

Item Frequency Percent

Yes 46 86.8%

No 6 13.2%

Total 52 100%


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Similarly,both female and male respondents agreed that the existence of Umoja Fund

stimulates the saving culture as the table below shows:-

Gender TotalMale Female

umoja

stimulatessavings

yes

22 24 46

no 4 2 6

Total26 26 52

The above table indicates that most of the respondents agree that the Umoja Fundstimulates saving culture to Tanzanian citizens. In addition, the respondents with 30-39

age category seem to have more saving than other age categories the table below

shows:-

Savings at household level

Totalless than1000000

between

100000 and500000

between5

00000and

1000,0000

over1000000

Age 20 - 29 0 3 0 4 7

30 - 39 1 2 2 21 2640 - 49 1 0 1 14 16

50 and

above0 1 0 1 2

Total 2 6 3 40 51

5.1.0 Do you expect to sell off your interest after the lock in period ends on

30/07/2006?


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When responding to this question 17 respondents (36.2%) were of the opinion that

they would sell off their units when the lock in period ends on 31/07/2006.30 respondents

(63.6%) disagreed to sell their units after the lock in period.

5.1.1 What reasons have prompted you to choose the Umoja Fund rather than other

types of investments?

Respondents gave different views to as to why they choose to invest in Umoja Fund

such as to beat bank interest, spreading the financial risk, advice of professional financial

adviser and buy and sell units to make money. The following are the results given by

respondents:-

5 respondents (10.9%) gave the reason for them to invest in Umoja Fund as to beat bank

interest rates, 5 respondents (10.9%) invested in the fund simply because they saw their

colleagues buying the units.15 respondents (32.6%) invested in the fund for the sake of

spreading the risk, 7 respondents (15.2%) invested in the fund in order to get professional

advise while 14 respondents (30.4%) invest in the fund in order to buy and sell units for

profit. The table below gives a summary:-

Frequency Percent

Beat bank interest 5 10.9%

Friends buying units 5 10.9%

Spreading financial risk 15 32.6%

Professional advisor 7 15.2%

Buy and sale units 14 30.4%


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This shows that the majority of investors in Umoja Fund invest for two main reasons.

One reason which motivates them to invest is to spread their financial risk. The second

motive is to make profit out of buying and selling units.

5.1.2 What do you believe is your level of understanding of your investment in the

fund?

With respect to level of understanding the Umoja Funds operation, respondents gave

different views as follows:-

10 respondents(18.5%) urged that they have very good knowledge about the way the

Umoja Fund operates.23 respondents (42.6%) said that their knowledge about the fund is

fairly good, whereas 14 respondents(25.9%) and 7 respondents(13%) said that their

knowledge about the fund is fair and poor respectively.Generally,over 60% of the

respondents know how the fund operates. The pie table below gives a summary about the

level of understanding.

Level of understanding Umoja Fund

Frequency Percent

very good 10 18.5

good23 42.6

fair14 25.9

poor 7 13.0


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Total 54 100.0

5.1.3In your opinion, do you think the majority of Tanzanian citizens can afford to

buy the unit at the current set price?

Out of 52 respondents, 32respondents (59.3%) had the opinion that the majority of

Tanzanians can afford to buy the units at the current set price of Tanzanian shillings

100/= per unit while the remaining 20 respondents (38.5%) urged that the current price is

not affordable to majority of Tanzanians.


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noyes

majority afford to buy units?

40

30

20

10

0

Frequency

majority afford to buy units?

The above chart shows that the majority of Tanzanian citizens can afford to buy the units

at the current set price.

5.1.4 Your key objective when considering an investment vehicle is?

In responding to this question, 12 respondents (22.6%) urged that their primary

objective when considering the investment vehicle is to make income only.25

respondents (47.2%) make investment in order to make income and capital growth.12

respondents(22.6%) make investment for the purpose of having a balance and capital

growth while 4 respondents(7.5%) are motivated by capital growth only when

considering investment vehicle. The chart below depicts the various opinions of the

respondents when they consider investment vehicle.


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capital growthonly

balance andcapital growth

income andcapitalgrowth

income only

Objectiveofinvestment

25

20

15

10

5

0

Frequency

Objectiveofinvestment

As far as the above chart is concerned, majority of Tanzanian citizens are mainly

concerned with both income and capital growth while the few citizens give priority to

capital growth when considering investment vehicle.

5.1.5 One of the objectives of the Unit Trust of Tanzania (UTT) is to give opportunity

for majority of Tanzanian citizens to invest, take a stake in privatization, and further

participate in capital market. In your opinion, to what degree is this objective being

achieved by the Umoja Fund?

52 respondents gave their opinions on the degree to which the Umoja Fund achieved

its set objective. Only 4 respondents (7.7%) agreed that the fund has fully achieved its set

objectives.36 respondents (69.25) have the opinion that the fund has partially achieved

its objective.12 respondents (23.1%) had the opinion that the funds objective is

inadequately achieved. The results of the opinion given show that the objective of the


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Unit Trust of Tanzania (UTT) through Umoja Fund is not fully achieved. The chart

below depicts the opinions that were given by respondents:-

inadequately achievedpartially achievedfully achieved

Degree of achievement of Umoja

40

30

20

10

0

F

requency

Degree of achievement of Umoja

5.1.6 In terms of Tanzanian population taken as a whole what is your opinion about

the future success of the economic empowerment policy of Tanzania and Umoja

Fund in particular?

Respondents gave different opinions about the future success of the economic

empowerment policy.17 respondents(32.1%) were very optimistic about the future

success of the policy.21 respondents(38.9%) were somewhat optimistic about the future

economic empowerment policy.6 respondents(11.3%) were neither optimistic norpessimistic and only 1 respondent(1.9%) was very pessimistic about the policy. This

suggests that over 60% of the respondents are optimistic about the future of economic

empowerment policy being undertaken by the government through Unit Trust of

Tanzania and the Umoja Fund.


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verypessimistic

somewhatpessimistic

neither opt norpessimistic

somewhatoptimistic

very optimistic

Interm of tanzanian pop future success of policy

25

20

15

10

5

0

Frequency

Interm of tanzanian pop future success of policy

5.1.7 What do you anticipate will be the effect on the fund, when investors are free to

sell their units on the 1st August 2006?

The opinion given by the head of investment management is that initially there

would be more repurchase applications compared with sales (new investment in the

fund).The equilibrium stage will come when investors realize advantages of collective

investment schemes. As shown in the appendix (Net Asset Value-information), the net

asset value after the lock in period is has been decreasing dramatically. This suggests that

unit holders are liquidating their units.


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5.1.8 What is likely to be the effect of the recent strategies adopted by commercial

banks to provide loans and other products to compete with the Fund?

After the Umoja Fund going open on 1st August 2006 it is expected that the fund will

shrink as some investors would like to liquidate loans through repurchase of units while

other would like to realize gained income from(70 to over 110/-) per unit.

5.2

In the above analysis it is clear that the majority of respondents agree that the Umoja

Fund stimulates the saving culture among Tanzanian citizens and that the majority of

Tanzanian citizens can afford to buy the units at the current set price .Similarly majority

of respondents are more optimistic about the future success of the economic

empowerment policy. The net asset value of the Umoja Fund has been falling

dramatically since the end of the lock in period and the objective of the Unit Trust of

Tanzania (UTT) has not been fully achieved.

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