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:

5.1 Description 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
Gender

ITEM Male Female Total

FREQUENCY 28 26 54

PERCENT 51.9% 48.1% 100%

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 Income less than Tshs 100,000/Between Tshs 100,000/- and 500,000/Between Tshs 500,000/- and 1000,000/Over Tshs 1000,0000/Total FREQUENCY 2 6 3 40 51 PERCENT 3.9% 11.8% 5.9% 78.4% 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

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

Item Debt Equity Instrument of less than 1 year Long term asset Risk free assets Equity Bank deposit

Percent 70% 30% 46% 54% 53% 30% 17%

To achieve the above objectives the following questions were answered by respondents as follows:-

5.1.0 In 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 Yes No Total

Frequency 46 6 52

Percent 86.8% 13.2% 100%

Similarly,both female and male respondents agreed that the existence of Umoja Fund stimulates the saving culture as the table below shows:-

Gender Male Female umoja stimulates savings Total yes 22 no 4 26 24 2 26

Total

46 6 52

The above table indicates that most of the respondents agree that the Umoja Fund stimulates 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 between5 00000 between and less than 100000 and 1000,000 over 1000000 500000 0 1000000 0 3 0 4 1 2 2 21 1 0 1 14 0 2 1 6 0 3 1 40

Age

20 - 29 30 - 39 40 - 49 50 and above Total

Total 7 26 16 2 51

5.1.0 Do you expect to sell off your interest after the lock in period ends on 30/07/2006?

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:-

Beat bank interest Friends buying units Spreading financial risk Professional advisor Buy and sale units

Frequency 5 5 15 7 14

Percent 10.9% 10.9% 32.6% 15.2% 30.4%

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 10 23 14 7 Percent 18.5 42.6 25.9 13.0

very good good fair poor

Total

54

100.0

5.1.3 In 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.

majority afford to buy units?

40

30

Frequency

20

10

0 yes no

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.

Objectiveofinvestment
25 20

Frequency

15 10 5 0 income only income and capitalgrowth balance and capital growth capital growth only

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

Unit Trust of Tanzania (UTT) through Umoja Fund is not fully achieved. The chart below depicts the opinions that were given by respondents:-

Degree of achievement of Umoja

40

30

Frequency

20

10

0 fully achieved partially achieved inadequately achieved

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 nor pessimistic 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.

Interm of tanzanian pop future success of policy

25

20

Frequency

15

10

0 very optimistic somewhat optimistic neither opt nor pessimistic somewhat pessimistic very pessimistic

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.

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.