LCt4-$ b4'Ji-TtJ

8§D747 \. (CrlS\WI 'IO; 1, w AL a R E SRESTRICTED

Report. No. DDB='53ya

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL, BANK FOR RECONSTRUCTION AND DEVELOPMEN IXT"~T1 ~'T1 T k 'fT

1/%kT I. T rTl.TT ). XTr-IT' f"/ -% nr'NT) A 'r/"X

UIN TERIINATIZIONAL r INAN .' CR'RIN

TMTTPDM A rTn\jAT nT:XJTT (hPMFJNT A Sc)C'ATTCN

APPRAISAL OF

SOC:IETTE NATTONAT,E DITNVESTISSEMENT

MT TTUTTIS A

ovenier 10, 1 6L n

Development Finance Companies Department

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

C URR EN C Y EQ UI VA L E NT S

US$ leOO 3 Dinar 0.525

Dinar 1.000 - US$ 1.905

D 1.000.000 = US$ )5905,000

TUNISIA

APPRAISAL OF THE

SOCIETE LTATIOQALE DITiTVrESTISSEIENT (SiNI)

Table of Contents Pat Paragraph

f71 MJ*ARY

I. INTRODUCTION 1 1 - 2

II. ECONO"4IC AND FINANCIAL ENVIRON,ENT 1 3 -16

1960 Developments . - eBIvestment Trends and Role of the Public

and Private Sectors 2 6-12Fiznancing of New Investments 3 13 -16

1II. OBJECTIVES, RESOURCES AND ORGANIZATION 4 17- 35reWorganiza tlon 17Objectives and Policies 5 18- 20Reso-u.res 5 21 23Organization 6 24 - 35

IV. OPERATIONS 8 36 -4SiuLnmary 8 36Loans and Operational Policies 8 37- 39Changes in the Equity Portfolio 9 40

Contribution to the Economy 10 41- Uh

V. PORTFOLIO EVAILATION 10 45 -48

VI. OPERATIN:G RESULTS AND FINANCIAL POSITION 12 49 - 52

T I. REIATIONS WITH GOVERMINT 14 53- 57

.JII. FORECASTS 1969-1973 15 58- 77

Fcrecast Operations 15 58 -64~~-So7ureeS~~~~~~~~~ ----- -I 14 ( 7%

Reso-rce i;teed 16 -70 _

Increase in Debt Limit 18 70- 71Ev-olution of Capital Structure 18 72 -73Projected. Profitability 19 74- 75Use of Bank Funds for PuDblic Enterprise

Financing 20 74- 75

IX. CONCLUSIONS AND RECOM40E-!DATIONS 20 78- 85

Conclusions 20 78- 81Recomendations 21 82- 85

This report is based on the findings of a mission to Tunisia ini'.>erI )Q69, composed. of i4essrs. oLegawim and Hidalgo. They were joined :bi-iCL c ,p ~v a ucis.cor. of- Vne ;S"Iediah -,hternai ional revlo:' Aumtt,c , *r;

");.'e.-ed o He llesrs. DnErynrr and Or-e%l.. The rep-ort also incor..!.'.e..r .::r. -5}.: ,Aci oLv.J a xt .li.) : L,Ye - t ;'j >

CONTENTS

Annexes

Annex 1 - List of Shareholders as of December 31, 1968

Annex 2 - Statement of General Policies and Cperations

Annex 3 - Resources as of September 30, 1969

Annex 4 - Board of Directors and Executive Committee

Annex 5 - Organization Chart

Annex 6 - Past Ipprovals and Forecast of Future Operations

Annex 7 - Summa.y of Loan Operations 1961-1968

Annex 8 - Compamltive Statement of Loans Approved

Annex 9 - Changes in Equity Portfolio 1960-1968

Annex 10 - Equity Portfolio as of Decerrber 31, 1968

Annex 11 - Approvals in Tourism Compared with TotalApprcals nd Outsta>nding r P. mi tm.entso

A--.~.. 1 'i A-.A4t.eA T.,..e z+~ Q I QA - Q6,R nriJUL.ex L2 _-I. A tdLLncome Stat;ements 16-1968 and

Six linths 1969

Annex 13 - Audited Balance Sheets 1966-1968 and03r. 1.10 S-. ,%C,7

Annex 14 - Estvimated rinancing Of Hotel Facilities 1969-1972

Annex 'L - Projected Income Statements 1969-1973

Annex 16 - rrojected oa'Lance Sheets 1969=1973

Annex 17 - Projected Cash Flow Stateements 1969=1973

SUMARY

(i) Total approvals of loans and equity investments by SHI totalledD 3.8 million ($7.2 million) in each of 1967 and 1968. This was higherthan had been expected wrhen a fivst loan of $5.0 million to SNI was anoroved

by the Bank in Nay 1966. A second loan for $10 million was approved inSeptember 1967, and a ti rd Bank loa n for $10 mllion is now recoammended.

(ii) ONI's increase in busine.ss was largely due to the dym.m,c> growt.^,.h

of tourism iwith hotel investments, mostly in the private sector, averagingD 10 million per year and projected to increase under the present foul-yearplan (1969-72) to an average of D 16 million per year. Nhile tourism haSbeen booming, industrial investments have been maintanled at about D 16million per year, with 15% of new investments being undertaken by the

private sector. Industrial investments are expected to remain at about Lhe

same level dluring the 1969-72 period, although the private sector share 'is

expected to increase to 25% of the total. The slower growth of industry

as compared to tourism reflects the relative scarcity of attractive invest-

ment opportunities due to the smal. market and the gradual exhaustion ofimport substitution possibilities.

(iii) Late in 1968, SNlI operations seemed to have reached a plateau,and in order to increase its level of business and participate in thetourism expansion while diversifying its risks, SNI's Board approved achange in its Policy Statement to allow SNI to finance public enterprisesup to a limit of 25% of its outstanding commitments.

(iv) In January 1969, i4r. Mbncef Belkhodja, who was Director of Creditat the Central Bank and a member oI the Board of Directors of SNI, was

appointed President of SNI.

(v) SNI has been developing satisfactorily and despite shortcomingsin internal organization and high staff turnover, its appraisals have beenrelatively good. SNI's loan portfolio has few arrears and its equity po:rt--

folio has improved in quality. SNI's profits have increased from D 158,500

in 1967 to D 167,700 in 1968, representing a rate of return of 11.2' on

share capital. Profits are expected to decline sligh-tly in 1969 since SNI

will no longer be enjoving a tax exemption and Government subsidy. They

are projected to increase again to D 240,000 in 1970 and D 362,000 in 1971.

(vi) SNI will have exhausted its IBRD and Swedish resources by the

end of 1969, and its business forecasts of D 12.5 million for the 1970-71period imply a resource gap of $20.5 million of which $4.4 millionequivalent will be needed for loca: cost financing. SNI has applied for a

$5.0 million equivalent loan from the Swedish Government, half of whichwould be available for local cost financing. To cover the balance of its

resource needs for the next 18 mon-ths, SMI has applied for a Bank loan of

- ii -

$10 million of which $1.0 million could be used for the financing of localexpenditulre - SNT is a sui-table and creditworthy borrower for this sum.The 10% allotment for local cost financing is justified by virtue of thehigh level of demand on MT! and its ownm efforts; which have been successful.to increase its domestic currency resources.

(vii) The proposed loan to SNI should be made on the terms and condi-tions app]-ic3ble 4--c--ao recent ank oa to develo?'Wr,t. fjinanee coManries.h qSNI should 'be allowed to commit up to 35% of the loan for the financing ofpublic e-4te:-,pr-4es.

(-i It". i4 s r-ecomm-,ended that SNI,s preser-st"~ Lib u1," of31b edefined according to current Bank practice and set at 4:1 and that SNI'sJree limit or, pivabe secuor projeCts e 'creaseud from WLtLOOj000 to 0 t 00,0| 0.There shouldi be no free limit with respect to public sector projects.

PTINT ST A

APPRAISAL OF THESOCIETE NATIONALE D'INVESTISSEMENT (SI)

I. INTRODUCTION

1. rinT-g 1965 and 1966, 9NI was reorganized and transformed from acompany devoted mainly to equity investment into a privately controlleddevelopment finance company providing medium and long-term capital (equitr 'nloans) to the private sector. The reorganization involved an IFC investment inMay 1966 of D 300,000 (US $57l,428) in MI shares, and FC became the large-<:single shareholder with 20% of the share capital. This investment wasco-upled with a first Bank loan of $5.0 million to SrI.

2. A second Bank loan to SNI, for $10.0 million, was approved inSeptember 1967 and soon thereafter a Swedish loan for Sw.Kr. 15.0 million('$2.9 million equivalent) was approved by the Swedish Government. TheSwedish loan complemented the Bank loan by allowing local currency expen-ditures for subloans whose foreign exchange component was financed by theBank. By May 1969, SMI had credited approximately $6.0 million of thesecond loan and it expected that it would need new resources by the begin-ning of 1970. It therefore requested a third loan from the Bank for $10.0million and applied to the Swedish Government for a new loan, part of whichwould be utilizable in local currency.

II. ECONOMIC AND FINANCIAL ENVIRONNENT -'

3. Tunisia is still Dredominantly an agricu11lturall coi-it.-r, althoughthe share of agriculture in GDP declined from 25% in 1960 to 17% in 1968.Important recent growth sectors have been tourism and crude oil which in1968 replaced exports of phosphates and olive oil as Tunisia's main sourcesof foreign exchange. Manufactulring activ.ity has been growing at a slowerpace, from 13% of GDP in 1960 to 15% in 1968. Industry is highly protectedand although this has led to some high cost heavyrj industries, most-ly in thepublic sector, prices on consumer goods manufactured in Tunisia are notexcessive. Prospects for dramatic growth in Manufacturing are da=pened byTunisia's small market and the gradual exhaustion of import-substitutionpossibilities. On the other hand, favorable factors are TLnisia's recenttrading association uith the Common Market and the adaptability of its workforce which may allow it to crease its eports of 'igh labor content pro-ducts. Tunisia's greatest possibilities lie in the further development ofits high toulrism potential and tourist cornnected industries.

j968 Develfopmen+ts

D1uring 1968, the Tunisian econom, made good progress and outputincreased by 8% after stagnating for two years. Ilost of the improvement yaccointed for by- an i.cr-ease in agricull'tural output. In industry, grotuy

;./ Tieference is made trn the Report entitled "The Eccrc-, of Tunisi,(iReport N; J -sq 19., dc_te1 Augaust 21;.l',)

- 2 -

nominal since increases in the outpult of some industries were offset bydeclines in textiles and fertilizers. Tourism continued its remarkablegrowth and the number of tourist arrivals increased by M3% and total bed-nights by 5C% over 1967.

5. There was a change in the composition of total investments whichat D 118 million W.AS D 9.0 million below that for 1967, with a greater shnreof the tota]. going to productive investments. As a result of a shortfall insav1ings of thp nnblic sector and in foreigm public capi+r ) infJoz, f ixedcapital outlays of the Government were reduced by 10% and of public enter-prises by over 20% while pvrivate investrment in touris.m, -ariculture andtransport (including cooperatives in these last two sectors) increased by2-L-1- " < e . +V Ne +es n r; J0 n .2. .LuLrn a,Iiou.LI t D 12.3 mlJlo';or of wlch

35% was accounted for by the private sector (against 27% in 1967) andtouri in v sUJVL1LJ ,moLUnted Co ' 12.4L- il±H'n o.ro WL:chl U8JUO was uu-e to tileprivate sector (against 73% in 1967).

Investment Trends and Role of the lublic and Private Sectors

6. Industry. A major share of new industrial investments since 1960has taken place in the public sector, particularly in the steel, lightengineering and textile industries. As a result of these initial heavy iLnves4..-me nts, the rate of government investment in manufacturing amounted to 8%5'70of the D 64 million total for the over-all 1965-68 plan period.

7. The Tunisian Government pursues a fairly pragnatic poliCy ;f cS -existence between public enterprises, cooperatives and the priva-.\e sector arcCthere appears to be a growing appreciation in some govermnent circles of therelative efficiency of the private sector. There is also a realization ofthe need for a more stringent approval mechanism for new public investmentE,and particularly over the lack of follow-up on these. A n.w Investment Code,consolidating in one law various advantages already granted private investcrs,was passed in May 1969, and a conference of foreign private investors wasalso held in Tunis in May.

8. Some predominantly private industries, such as food canning arLdlignat engirneering enterprises, have not been successful due largely to theuneconomically small size of individual enterprises wh-ch could, in somecases, be profitably merged. SNI is working on facilitating some suchvoluntary mergers between individual enterprises whose facilities appearcomplementary.

9. All enterprises, whether public or private, operate under a set ofgovernment regulations comprising direct controls over domestic prices andforeign trade and payments. The Tunisian authorities have recently saidl thatthey intend to introduce policies more effectively oriented towards themarket. These policies would act as a further incentive to private investors.However, Tiuisia's tight foreign exchange position implies that not all directcontrcls can be abolished inmiediately.

- 3 -

10. For the 1969-72 plan period, total new investments of D 64 millfionin manufacturi-ng are projectedj of which approximately 25% woultd be in theprivate sector (as against 15% of the same total for the previous plan).Mhior new public investments have been programmed in chei-cals (s1 huricacid, phosphates), building materials and paper products whicle complementaryinvestments are planned for existing public enterprises in the textiles andengineering industries. Planned investments by the private sector consistlargely of expansions by already successful enterprises Uainly in the fIeldsof textiles, clothing, leather, furniture, printing and engineering indus-

11 mo-ar-sm.. Te extremel'- good perfurmance of this sector, wnich hasregistered a 150% increase in the number of tourist nights in the 1965-68period, is due to an active private sector guided by an enlightened TouristAdministration. The latter, through its powers to approve new investmentsand grant incentives, influenced the building of hotel accommodations which,while fairly attractive and comfortable, were characterized by low investmerntcosts per bed and were designed for the economy type travel business. Thispolicy iwas successful, and because of Tunisia's extended season, has macdepossible the achievement of very high occupancy rates; these, coupled withthe low investment cost, have led to high financial returns.

12. Investments in tourism facilities amounted to approximately D 40mi'llion ir. 1965-68, of which 70% was in the private sector. The 1969-72 planforecasts total investments of D 60 million of which 90% will come from. pri-vate sources to finance approximately 32,000 new hotel beds. The balance ofD 6.0 million will go mainly for infrastructure projects. Foreign exchangerequiremenits are expected to amount to slightly more than 20% of the t otalhotel financing or approximately D 11 million equivalent. In viewi of thefact that some Italian and 'Danish credits, equivalent to approximately D 5.0million, are likely to be available for the four-year period, there will bea gap of D 6.0 million needed in foreign exchange.

Financing of New Investments

13. Since 1959-60, financing of public investments has been done by theGovernment, either directly through budget appropriations or indirectiLythrough the Government's banking and insurance subsidiaries. A significantamount of financing for both the public and private sectors was also donethrough renewiable short-term advances, extended largely by the government-controlled Societe Tunisienne de Banque (STB), and through short-tern 5up-pliers' credits. The Government and the Central Bank have moved within thepast three years to restric.t these two forms of financing. Thus disbur--ementsof suppliers' credits of less than ten years' duration are projected; by the I'lan.to decline to D 15 million in 1969, compared to D 17 million in 1968 and D 24million in 1967.

14. The reorganization of SNI in 1965-66 was a first step in the Gov rr>-ment's and the Central Dank's efforts at improrving the supply of long-termcreditE. Another was the new banking law, passed in December 1967 to d-iStin-glish between ]ong-term finance institut-ions and short-terra 11deposit"' banks.

1Tho min n.1nrno of the Tnuw is to nrepvent. the financing of long-term asEetswith short-.term resources, and SNI has emerged as the main source of long-term fina.nce for the piate sector+

15. Wjfrl+' respect to the public sectorn there is no specialized lone-term credit institution, although STB can do a limited amount of lendingwVith some speciall resources,j--"-A-, ivfd a 1,nlo gr'an+ted in 196R for llUM 10

million. LSNI has recently amended its Policy Statement, with Bank approval,to allow some lend.ig to goverlmmental enterrises (paras. 18-19) Suchlending is limited to 25% of SNI's total outstanding commitments and indivi-uu-al operat;ions have to carr-y heu -u- L-1 apdprIval of SNI's BoadV

10. A major role in local currency Lrianc±u-,g u± L'w n investmntsand in consolidating the financial structure of existing hotel enterprises,is to be played by the new COrILTOUR (Compagnie hrianciere et Touristique)promoted by IFC ancd SNI, of which IFC holds 20% and SNI 16.5% of the sharecapital of D 5.0 millionc_/ COFITOUR wiii borrow an additional IJ ,1 ± L,llio

equivalent from IFC and the Government, and is expected to use these resourcesfor equity participations and loans to hotel enterprises. Although CurFiTUrdoes not exclude the possibility of doing some foreign exchange lending tohotels, SNI is expected to do the bulk of this financing.

III. OBJECTIVES, RESOURCES AND ORGANIZATION

Reorganizaltion

17. ]?rior to the 1965-66 reorganization, SNI's share capital was held58% by the Government and its agencies and 42% by more than 80,000 smallTunisian shareho]errs. From 1959 to 1965, SNI devoted its resources to theprovision of equity capital to new enterprises and it exhausted its resourcesin its first few years of operation. The reorganization of SNI involved areduction of its share capital from D 2.0 million to D 1.5 million, the pro-vision of -a goverriment grant and a long-term low-cost subordinated loan,and the sale by tale Gove.nment and the Central Bank of some of their sharesto IFC and to private banks, both Tunisian and foreign. Annex 1 provides alist of SNI's major shareholders as of December 31, 1968.

Obiectives and Policies

18. SNT's Policy Statement. adopted at the time of the reorganization,was amended by SNI's Board in June 1969 and is shown as Annex 2. Thesechanges, which were introduced in consultation with the Bank and IFC, may besummarized as follows:

(i) SNI may finance government enterprises up to a limitof 25%A of its totnal ontstanding commitments, providedthat each such financing proposal receives the unanimousapproval of NTI's Board.

1/ IFC/R69-25 dated May 21, 1969 and entitled "Proposed Investment inCompagnie Financiere et Touristique (Tunisia)."

(ii') SNI may acquire securities not only by way of subscrip-tion but also by purchase of existing securities; forsuch operations, the lower limit of D 15,000 is notapplicable. SNI's Board has set an upper limitD 50,000 for the total amount outstanding for thesetransactions.

(iii) SNI may increase its equity portfolio up to the equiva-lent of its own equity plus the Government loan(D 615,O00) ranking pari passu with share capital.

(iv) Justified exceptions may be rade to the upper limit ofequity investments in single enterprises (10% ofequity plus subordinated Government loan).

19. Tn view of the relatively small size of the private industrialsector as contrasted to the groiwing tourism sector. SNI felt that it coulddiversify its operations and increase its lending volume by engaging inlimited nublic Rsen.tor lendiinr FTii-rt.hprmnrp_ +.hp in+.rnoduc^+.inn t.n the publicsector of SNI's stricter criteria for approving new investments (particularlyin vi TTr of l-.1P needl fo'r ia.rus rraP r approval), shold hal e a beneficial

demonstration effect on the public sector as a whole. Since these commitmentstoJtohJ ~ hJ'to ~..IJIJ..LUtMJ. p e il l*et 2,'% of S flS ptlio,the t5Yg

is not likel'y to divert SNI from its main business of financing the privateslector.

2'0. Th±~ze JJIfhiU±d.ije obJect of.L Ule tirUd. IU fouth changes was tuo alLo-V.

for the participation of D 1.0 million by SNI in the share capital of COFITOUIR.JA±l sUUU±orJ-!iana We verIi-ien' 'oarl or D U 00UUU is6 r'ti-±VelJ.y smalinai ±11 £'LbVIi

to SNI's present eqLity of D 2.5 million and repayments of D 41,000 per yearvi ll not stacrt until 1980, and will represent only a small portion of Slq: Sprojected cash flow and profits.

Resources

21. Annex 3 is a description of SNI's total long-term resources as ofSeptemDer 3(, 1969. They can be summarized as folo-ws:

DIOOO

Share capital 1,500Reserves 517Government grant 500Government subordinated loans 615Central Bank loan 185Caisse Nationale de SecuriteSociale (CNSS) loan 439

IBRD loans (449-TUN and 512-TUN) 7,611Swedish Government loan 1,520

12,887

-6-

22. Dinars. Most of the local currency resources made available to SNIat the time nf its reorgnanization oha-ve- been enmr.rit-ted, Tn c additi on; un 1ot-wo thirds of the 1967 loan from the Swedish Government can be used by SWI tocover local cl-orency costs no projercts whose foreign exchange component isfinanced wiith IBRD funds. As of March 1969, about 70% of the portion of theSwedish Gove- ment lon usable for local currency expenditures hand alreadybeen committed, and SNI had few dinar resources left, available for new pro-jects. The position has become tighltuer withU11 LXJI's invest,ent I D 1. -1-'LIor.

in the equity of COFITOUR.

23. Foreign Exchange. The first Balk loan of $5.0 million (D 2.6 iril-lion) is fully credited. The second Bank loan, signed on September 14, :L96L.is for $10 million (D 5.25 million) and as of October 31, 1969, $8.1 mil:lionhad been credited. As of March 1, $580,000 equivalent was still availab:Le crthat portion of the Swedish loan to be used for foreign exchange commitmentz.

Organizationa

24. Board and Executive Committee. Annex 4 is a list of members ofSNI's Board and of its Executive Committee. In addition to the changes ster.-ming from the rotation arrangement agreed among the five foreign institutior!clshareholders in 1966 and among the private Tunisian banks, Mr. MoncefBelkhodja, previously director of Credit at the Central Bank and SNI's newPresident, was elected Chairman on January 24, 1969 to replace Mr. Mathariwho became a member of the Board representing STB. Mr. Zghal replaced Mr.Belkhodja as the Central Bank representative. Since June 7, 1968, Mr. A.A.Khosropur has replaced Mr. E. Kuiper as IFC's representative on the Board.The Board meets only twice a year, and the meetings are characterized byfranlc and effective discussions, which have led on occasion to projects being:restructured.

25. Daring the intervals between Board meetings,. SNI's ExecutiveCommittee meets three or four times a year to consider applications for :lc'ui:or eouitv investments not exceeding a total commitment of D 200,000 to arnysingle enterprise. Although the intervals between the meetings are relativelylong, this has not caused any inconvenience to SNI.

26. Managemery Tn, his first few.1 months in officer Mr. Belkhodna hasalready shown energy in dealing with some of SNI's outstanding problems.

27. Mr. Rachid Ben Yedder, SNI's General Manager, was recently nomax. {Afor a Governm.en.t position and is due to leave SNI soon * . Belkhod,a plansto appoint a Deputy as soon as a candidate with the required experience ua,ibe found.

28. Ml.U. Mar-celoU Lur±- Oi± f oeLign auvisor on 'eave fromi IBanca rom,.

merciale Italiana, left SNI in June after a three-year term. He has beersvaluable to SNI in providing technical advice and in training yourngerTunisians. A French advisor, who iwill be paid in part by a French techr.ir1aI.assistance program to Tunisia, nas recently been engaged by IMr. Belkhodia.

-7-

The management of Banca Commerciale Italiana has agreed to make Mr. Luriavaila.1"ble to0 ISi5.I for-L occasioneal hr-el asgnn.

29. UOganization and Otaff. * rmex 5 is an organization chart of Sn,reflecting recent organizational changes introduced last summer. The CrEditDepartment, headed by IVr. hiajou'., is in charge of ail customer contacts fromthe appraisal stage, to the drawing of the 'Loan contracts and through thedisbursement stage. Once loans and equity investments have been disbursed,they are supervised by the Follow-up_Department, headed by Mr. El Goulli,1whose departbment is also in c-large of managing SNI's equity portfolio and ofsupervising relations with SITI's 80,000 shareholders. The Administration andAccounting :DepartIent, headed by Mr. Ferhat, has recently been given theadded responsibility of supervising SNTI's promotional work. A separate pro-motion department may be established in the future if the volume of promotioractivity warrants it.

30. SNI has experienced in the past a fairly high rate of turnover,caused partly by SNI's reputation as a good training institution for otherjobs. The present Tunisian analysts have good potential, and in view of theforecast increase in business, SNI should make a greater effort at keepingthem and at hiring others. Mr. Belklodja is aware of this need and hasalready begun some additional recru%ting efforts. The recent internal re-organization has created a greater number of first-line supervisory jobs. astep which may lead to less turnover as a result of the increased advancementopportunities for SNI's younger staff.

31. Appraisals are on the whole of good auality and the underlyine workis quite thorough. SNI recognizes that it could use more market researchexpertise, especially if it is to give some heln to new promoters rn expnor+-oriented industries. Hotel appraisals which account for a large proportionof SNI's business are of good q'l -itir and are basd on sor. +ihorogh cos;t andprofitability studies of existing hotels carried out by SNI. SNI'Ms "freelimit" on ITnriin c TAnit+h T-RPT f-ndrs -i rscln+I tr 1(Th (0:0 T n ,- e ' o T J]:I"l _ -- 4 -- --L -ll. - -h, - W.A Lv~J U.,-

satisfactory appraisals, and the good quality of its portfolio (paras. 45-48),an increase of the "free liTnit" to 0n0,000 is recommended.

32. Followff-up activities on loans, hi;ch used to be tbe repn ib:L4-of the Credit Department, have increased and SNI has introduced new formsTfhirh give a-better picture of the financial and operation situation of theenterprises under review. Not enough field visits were made, however, asituat-or. whl .ay .prove now that a sep-ate fo'ow-u p dep ia been

set up.

33. Although SNI did not have a separate _omotion department, it en-gaged actively in several studies (dry- cells plastics, toys, packaging)which were conducted in the Credit Department by a chemical engineer who didnot fill a, definite organizational slot. Tnese studies are expected to yieldsome new industrial projects in the near future. SNI would like to ex-andfurther its promotional role (see paras. 55-56) and the setting-up of aseparate division which might be expanded later into a full department, wasa first st;ep in this direction.

- 8 -

34. Evaluation and Summarv. Internal orzanization and staff developmenthave not been given enough attention in the past and turnover has been hLigh.The quality- of appraisals has been reasonably high desnite these handicans.However, other activities such as follow-up and promotion have tended tosuffer.

35. Ifhe rpcen+t nt.rn_n1 reorgar.izationof NT, includtng, +the Q ing-1of separate follow-up and promotion functions and the creation of a greaternimihr nf, 1navr1-iontr psitions, -n relierv some QN hA I C!7T s

--- -- v-~ vY &--V=z -A& vV w_w 4ILW I -s1fi , - ,l, .

President is also engaged in active recruiting of additional staff to enableSNI to deal with its forecast'~ higher volume of business.

IV. OPERATIONS

W"L1" Y

3i6.Annex u Is a s-ummary OI totai approvais in i9o6 ana i96o as weii asa forecast made by SNI of its likely level of future approvals. During 1968)SNI approved D 3.8041 million ($7.3 million equivalent) of new loans and _gLi3utinvestments, or D 48,ooo less than in 1967 in which approvals net of cancel-lations totalled D 3.852 million. Reflecting the tourism boom and the factthat SNI was the main source of long-term credit in both dinars and foreignexchange, approvals of hotel projects increased from D 2.02 million in 1967to D 2.37 million in 1968, or 62% of total approvals during the year. SNI'_industrial operations, however, lagged behind the previous year decreasingfrom D 1.83 million in 1967 to D 1.43 million in 1968. This decrease can beattributed to a slow-down in new industrial private investments which haveconsisted mainly of extensions of existing enterprises. Planagement changesand staff turnover at SNI may also have restricted SNI's operations and totalapprovals during the first six months of 1969 amrounted to D 2.085 million,of which D 325,000 was accounted for by SNI's investment in COFITOUR. SNl'sproject pipeline increased, however, to over D 5.0 million by September 1969,of which D 3.0 million approximately will be presented to SNI's Board meetirigin December.

Loans and Operational Policies

37. Approvals. Annex 7 is an analvsis of loans apnroved, committed anddisbursed b;y SNI until the end of 1968. It shows in recent years considerablelags between approvals and commitments and also between commitments and dis-bursements. Although the reason probably is that some projects were approvedat a premature stage, most delays were due to excentional circumstances andfew cancellations are expected. MNI's management thinks that the lag be-tweenapprovals and commitment will be reduced significantly during the next fewmonths.

.38. SNI approved in 1968 thirty-three loans for D 3.252 million (41loans for D 3.709 .million i 1967). 7 8 sh-ows SArs loan approvals ;las=,3ified by cEurrency, size and sector. 65.5% of loan approvals in 1968 were

tor tounis,i, another 10.1% for the textile industry arid 6.6% to mechanicalindr,Mries. About 80% of the amount of the loans approved by S3I in 1958will finance foreign exchange costs of projects, and the average size ofSNTI's Ionqn decreasd from D 90ADO0 in 1967 to D 75,700 in 1968. This is aresult of the fact that most industrial loans were for expansions. While:the average size of SN tS touI rim lans was D 2n6.oO0n industrial loansaveraged on:ly D 47,000.

39. Interest Rate. SNI increased its lending rate from 8% to 8-1/2%in 1968 to rlaintain a spread of 2ra on 1toav fvm IBPf, '1his r cnmrr-able to or about 1/2% higher than rates charged by other banks except that

1I'J.L haLs pLaLLicaliv noco,.etton in LoreiL ecag fln.cing except f

some limited suppliers' credits and as a result of the tight liquidity situa-i-loni UoL 'rle utnEsS very ieiw d±riar resoureUi svc daVd±idU4l ify LU,lin ±IJU1L.

In view of the recent increase in the Bank's lending rate to 7%, a furthe!rincrease in SNI:s lending rate to 9% wiii be considered by SNI if it cannotlower the average cost of its new resources. The spread on the presentSwedish Government loan amounts to 4-l/2%, of wnich 2-1/2% is -o be allocatecto a special studies and technical assistance fund for SNI's clients. Sincedisbursement;s on this loan have barely started, this fund is not yet sigrifi-cant. SNI charges a commitment fee of 1% on the undisbursed portion of itsloans. In addition, a study commission of 1/2% of the amount of the loan ischarged for loan applications approved. SNI also charges a 1/2% fee on itsforeign exchange loans to cover possible small losses associated with smallfluctuations of the dinar around its par value. The foreign exchange riskassociated with a change in the official parity of the dinar is assumed bythe Government.

Changes in the Equity Portfolio

40. knnex 9 shows changes in SNI's equity portfolio from January 1,1966 to December 31, 1968. During 1968, SNI sold back to the Government uLfl5erthe Government Guarantee!/ equity participations at book value of D 236,UC(consisting rnainly of SNI's holdings in SOGIC, SOGICOT and SOGILAINE (threeunprofitable Government-owned textile companies) and STOPA, a canned fruitjuice manufacturer. SNI approved in 1968 11 new equity investments for atotal of D '552 000. four times the total equity approvals during the previmc,--year. Only D 182,000 of this amount had been subscribed as of December 31,1968. This verv high level of equity approvals was partly due to the increas-ing realization by SNI that it should obtain a larger share of hotel coralrani3

-rofits (thrkee f'rrD T) 91 C n snnno) n v YP.11 A.s to a laree eauitvparticipation of D 100,000 as part of a progran to privatize Union Generalo.a .larges ^^nstXuc,ion -o,w,p. rhie balanen ofl D 9192,0n0 (onJc_isted of invest-

0. 5L. C. 5 010 .l*L In tJ4..'.JZ ~¼l.cJ .S -*S*t.. I - 1- ___ -__

ments in siz industrial companies and an open-end mutual fund (SICAV) ofwhich SNI is a co=sponsor.

1/ The Govern.m-ernt Guarantee, givrenr at +he time nf Sl\TTIs rPecrgani_zation.enables SNI to sell within five years (expiring in 1970) all or part ofits 1°65 equity portfolio, at its book value, am!ournting then to D 1.i!million. If SNI cannot find purchasers willing to pay SNI's book va].Jeor bettler, the GoVeU;-1-,L%ent4 VL-L- either make upi th osortk-ve t

shares at book value. At the same time, capital gains on the g-ran. ee'port,folio, realized on shalres sovlu UL-LVIvor t Uo D,be 10 aru. tc-twe

(Y,'nv"rrn1ent.

Contribution to the Economy

41. By the end of 1968, SNI had provided finance to over 100 companiesby way of 3I4 equity investments and 93 loans. MI's assistance is notlimited to the provision of finance, and it uses its extensive knowledge ofthe Tunisian market to help promoters adapt their projects to local marketlimitations. It has been particularly active in advising hotel promotersabout the most suitable characteristics for their projects. MI has alsocarried out independently some market studies which have led to new projects(automobile parts, printing services) and it advises clients who encounteroperating difficulties (Sotuver-elass bottles).

42. SNI estimates that the total investment related to the 93 projectsto which it granted loans in 1966-68 will represent, at completion, aboutD 20 millione The proJects- inwnvirng SNI loans of D 8.8 million and a totalforeign exchange cost of D 6.8 million, are expected to earn or save foreignexchange at an annual rate of D 7.7 .million, to generate annual value addedof D 7.0 million and to give employment to about 3,700 workers.

43. SNI's appraisals include comparisons between projected prices ofindustrial products and the CIf'T + cost o quivaler.t -Iported products. M4;Dst

of the industrial projects financedl by SNI appear competitive on this basis.Alarge prop-ortmon of r I. assnTI s as.4 stancehsAgone to touosm p rhn cn

create significant employment opportunities and have particularly high for-eign exchange earnings in relationr to their low ±Uvestmilent costs (see paras.42 and 47).

44. SRI is attempting to encourage savings and the beginnings of asecurities market by promoting, together with other financial institutions,an open-end mutual fund. Shares of the fund will be sold to the publicthrough the sponsoring institutions wiho hope that the capital of the fundwill increase gradually from the initial D 320,000 to D 2.0 million over thenect three years. sNI has also requested the authorization to pay higherrates of interest on deposits with a term longer than one year.

V. PORTFOLIO EVALUATION

45. Portfolio Risks. SNI's outstanding portfolio as at December 31,1968 was composed as follows:

(Dinars thousands)Covered by

Totail as per Government SNI' s OwnBalance Sheet Guarantee -idsk

Short-term advances 768 768 -

Loans 3,664 357 3,307Equity investments 1,557 1,228 329Guarantees 1L2 Lh2 -

6;131 2.h95 3,636

- 11 -

The short-term adv&nces, guaranteed by the Government, were granted prior tr,SNIts reorg,anization. The largoest of these. a D) q00.0,0 advance to SOGILAT h;has been repaid to SNI to the extent of D 400,00i and the balance has be)entransformecl into a medinmri-term lnan. n-Fhpr loanns minrntnfeed1 hv the Govern-ment have had sa-tisfactory repayments. Of the 61 outstanding loans underNTI's own risk totalling D 3,307,000 five for D 12797il in principal (3 8of total portfolio) were in arrears of more than three months as of December31' 1968. The amonts actually overdue at that date were D 27,50Y0 in prin-cipal and D 7,657 in interest. Since December 31, 1968 arrears on two ofthese loans 1,-ve been settled -1a +hee loans .-rh 4- total a u,nt onuf+-

standing of D 83,000 (2.5% of the loan portfolio), are causing concern toCTh1T 71- I- _4 - -,-P m 0 rniV .4. .- 4-4-1 -- Th 1IA - ,0

±Iv S .'v .L.C&L. r Iu " C.L J. UC. I,uvc±uuV~_ V LI '1J V. .LI . 1u L'L.J I .L , I JU.J'7 ..'

interests oin an outstanding amount of D 37,000) is a loan to an air char-tercom.,pany -Wich l ost a plan-e in u arI ace and- is4.4u±±II_ now s l i- snce

claim. It appears that the company will be acquired shortly by Tunis Air,the national airlinUe company; SJN.I will then be reimbursed not only for theamount of the loan but also for its small equity participation in this com-pany, D i,2uO. The other two arrears are on loans which are adequatelysecured and. SNI has started legal steps to get reimbursed. Although thequality of SNI'is loan portfolio appears satisfactory, a well founded judgmenton SNI's exposure to risk which lies mainly in its loan portfolio is difficultconsidering the short time elapsed since SNI began making these loans afterthe reorganization in 1966.

46. Exposure in Tourism. SNI's Board has set a limit of 50% of appro-vals and outstanding commitments for SNI's financing in tourism. As ofDecember 31, 1968, 42% of SNI's approvals and outstanding commitments werein tourism (Annex 11). This level has recently increased to approximately50% with the recent participation of D 825,000 in COFITOUR's share capitaland the sale of some industrial equity participations and the refunding ofshort-term advances to industry. ODn the basis of forecasts of future business(paras. 59 to 63), including some prospective lending to the industrial publicsector, the 50% limit is not likely to inhibit future hotel business.

47. Typical hotels financed by SNI show, on the basis of conservativeassumptions, projected returns of :15-20% on share capital. Many hotels pre-sently in operation have higher returns. Normally, projected occupancyratios range from 60% upwards after the third year of operations but theircost structure is such that they would break even at about 50% occupancy,and would have a positive cash flow with an occupancy ratio of only 44%.Thus, these hotels could weather a decline in business of as much as 25%without endangering their debt-service capacity. Such a decline is notforeseen. however, in view of the increasing number of tourists visitingTunisia and the fact that arrivals increased greatly in 1967 despite thesituation in the MitHdlp Eacst anrd in 1968 andi thp first half of 1969 desnitefinancial restrictions in the U.K. and France. SNI's hotel investments ap-ncn:y' T.Tc.11 i r]=ncf;co,A t-,erd,- p;r,1 r T*i.A+l. nml-,y+. R702- vn .mqx, ...MAnn::c +.;r sRN0

in Hammamet, 15% in Djerba, 9% near Tunis and 11% in other locations. Thefirst- three locations are the fasteDst growing tq a n 'w's

- 12 -

48. Present Equity Portfolio. .Annex 10 is a detailed tabulation ofSArrl's eqv;-t -^ortPoli a+ Dee,.e 1,16,Pri_aon 3c..pieCS\ITTC -,,,-+ .- V- T O~ P44m+__~ v

had a book value of D 1.56 million. The annex is divided into four main

( Jni dir.aurs)% of Distributable

BoOK value buboal e a.L-1iuLg5 DJv-ien's

rroI itable companiesdistributing dividends 840,135 54.0 213,199 45,495

Profitable companies notdistributing dividends 88,420 5.7 43,o96 -

Companies starting up orunder construction 247,660 15.8 - -

Uprofitable companies 380,000 24.5 - -

1,557,015 100.0 256,295 4L495

The over-a:Ll quality of SNI's portfolio improved in 1968 witl the sale ofsome unprofitable equity holdings to the Government. The dividend return of2.8% is stiLl very low and is due largely to a low payout ratio, but SKEexpects a higher yield in the future. Since January 1966, SNI has rece:ivedstock dividends for a nominal value of D 166,207 and although these cannotbe equated in the short run with monetary returns, they represent in fact adevice for ensuring greater returns to shareholders in the future.

VI. OPERATING RESULTS AND FINANCIAL POSITION

49. Deposits and Mloney Market Operations. A new banking law in ].967restricted denosits receivable by investment banks to those with a termlonger than one year. In the past, SNI had engaged to a considerable extentin money market placementq miade frcm shnrt-term rPs.qrx,in arnd had derivedthe major source of its income from these operations. In order not to per-tmrnh STI's situation, the Central Rank tacitly apreed to a tJemporarv continvia-

tion of SNI's short-term operations until such time as SNI's deposits at cali(largely fro.rGn nve.nrnit a gencies and onv Tuhich SN\T pays no interest) werewithdrawi. As a result of these developments, deposits decreased from D I.553m;11; n~ ; r 10A;7 +- T nn o0m -414- m_a+ + h e-1 ^- 104AR ;^-i- lCQ.rn-n; wrnn- *- _.dt ..l, I -- -v '. / .U LL, ,% , .v.J.a i Lb v / vv -.- v ..- --

on the short-term money market maintained by the Central Bank has decreased-o,,- 4, toV -- 1 27EfC), SNIT deposit --ts liui res -ces ~ in n co,L,eril a...- 111IL (4Jj U i C . f._,;JO, L.J L J J VO .L U 0 _ _L'j4. _L%t.% ~0W I. I~WJd -41 1 -- -1-

50o ratin4 e su lt s - * 19 4969 financial statcments are shown inAnnexes L2 and 13. 196T marked the first year in which Sr'I's major intencledac.v thaV f. UJ, bIimC.U J.L _LVLA6Q U1.LUJI U.J'II, ULItar -CLgLeUstAU contr.iLuutor Lt its) netlJ

income and interest:received of D 254,000 on loans exceeded cost of borrolTein-by D l2C,i4OO; at the sasr, time, incomv from mone-y mar1ket operationsUard depos:.Ldecreased from D 107,003 in 1967 to D 37,000 in 1968. 1968 was also thelast year in which SI'js income was tax-exempt and the last year du-ing ^iei-it W3S entitled to D 50,000 in subsidy payments from the Government.

- 13 -

51. Dividends received decreased from D 55,300 in 1967 (which included,however, an extraordinary dividend of D 22,000 paid out on the shares of acompany sold back to its majority shareholder) to D 45,000 in 1968, repre-senting a return of just under 3% on the average equity portfolio. Admini-strative expenses and deDreciation fell from 2.1% to 1.9% of average totalassets. This is still high. SNI's income rose from D 158,500 in 1967 toD 167.SO0 in 1968: this renresents a rate of return of 11.2% on share capita!and 6.8% on average equity. This rate of return is low.

52. Financial Position. Balance sheets for Decerhber 31, 1966, 1967n nl I QR 1968 cr 4tro in i n A"nx 13 a"A can bh n__rri as follows:

1966 1967 1968uJ.L4UjLL aL.U , .ccoUJnsI C;±LVCIUJ.L,

Government securities 1/ 2,625 2,463 1,552Short-termu advances 673 835 768Medium- and long-term loans 602 1,440 3,664Equity investments 1,837 1,61 1,557Fixed costs, establishment costs

/ ,' \knet;)i )Y yU c

Assets 5,842 6,044 7 7,663

Deposits and other currentliabilities 2.170 2,136 1,308

Conventional borrowings 745 1,291 3,193Subordinated Government loan 615 615 615Share capital 1,500 1,500o 1,50JReserve,s and undistributed earnings 812 905 1,017

Liabilities and Equity 5,842 6,447 7,633

SNI has a reasonably liquid position, with a current ratio of 1.2:1. Itsliquid asset,s consist mainly of bank deposits (D 1.11 million at 4% in S7Band 3-3.5% in other banks), and accounts receivables (D 390,000 includineGovernment subsidies of D 150,000 not yet paid to SNI). Wqhile average totalassets grew only by 10.3% and 18.4% in 1967 and 1968, partly as a result ofthe decrease in deposits, the equity and loan portfolio as a percentage oftotal assets increased to 47.1% and 70.1% respectively in these two years.3NI's present borrcning capacity in terms of its Loan Agreement with the Bank(512-TUN dated September 14, 1967) is about D 9.0 million (three times thetotal of its own equity plus subordinated Government loan) of which onlyD 3.1 million has been drawn down. SNI's zrant and reserves at the end of1968 amounted to D 1,017,000, equivalent to almost 20% of the loan and ecluityportfolio outstanding. SNI's book value at the end of 1968 was 160% of parvralue. Dividends were restricted to 4% as long as SNI's tax exemption wcls ir.effect (19L`6-68R) they are proiected to increase to 5% on 1969 profit. S'I'sshares, which traded in the range of D 3.5 to D 4.0 in 1966, are now tradinKat D 5T , slightly abovre pnr -of D 5.0.

1/ CovernmonGl s cuwritics amount to D 26>31)' and. ae:e a carryover .L'omb:efure $ii'-s rEorgan`La;io,-.

- 14i -

VII. REIATIONS 1.TH GOVERNTMENT

53. The influence of the Government over business activity is great,and SNI could not function unless it enjoyed excellent relations with theGovernment, which indeed it does. Despite the many important advantages itgranted SNI at the t:Lme of reorganization, the Government has left SNI inde-pendent in i-ts investment decisions.

54. The Government has been satisfied with SNI's performance in financ-ing the private sector. However, in the face of the shortcomings of existingmechanisms to finance the public sector, the Government has welcomed thepossibility for SNI to engage in some limited public sector financing (paras318-19). Tn addition, a recent Bank mission. which discussed with the Tunisiarauthorities the performance of public sector enterprises, reported thatofficinls concerned.… were r d in im"n1-mntAno one of t.h, alternativessuggested to the Government for the financing of public enterprises, namely+.thn+. of ntru ncs i TT i with an nvrPrnton+ fuond w.hich i+. wnoldi P.-acTinisqt.r for

a fee. This possibility has not yet been elaborated and cannot therefore be

I-,2 UV.L.L f 4.W j .sL '' ±±I V'. L WI~/U L'.lO ~ *.J V .-- .. U±'. '.JV ... if-,1 *LL

that SNI has not been active enough and, partly in response to this view,1I'Ps r.ew m.anagementU is 0c01ntsiderin.g the expW .L ¶Jo oth 4aV.Ltity.

56. she.I uuvrIIMIIU hias rLecently set: U, UJ, WLUII UiJIDJJJ', hepitJ, CU. nL1LULAOUL

Studies Research Center. The Center is still too young to be able to comeup with many feasible projects soon. In thie long rurn, sore of its9 basictechnical studies, coupled with SNI's practical knowledge on how to implementthem, should result in the promotion of financially and economically vUiavenew projec-ts.

57. Government Obligations. WJith respect to SNI's guaranteed equi.yportfolio, the Government has adhered to the letter of its agreement to re-purchase up to specified amounts every year according to a calendar agreadupon during negotiations for the second Bank loan. Some negotiations aretaking place at present between 5NI and the Government about the compositionof the last batch of shares to be sold back. This may put an end to theguarantee agreement in advance of December 1970, thereby releasing SNI tosell shares from the portfolio for its own account (see note, para. 40). SIVNIis presen-tly thinking of selling back a final package of approximatelyD 320,000 in participations (para. 64).

- 15 -

VIII. FORECASTS 1969-1973

RnrAnn.q+. fnnPrnt;Ann

58. A Anex 6isa sun-.ry of past apprIQl7 invR 1967-68 nnrl a fraof future operations during the next five years if the necessary resources

ments, balance sheets and cash flow statements for 1969 through 1973.

59. Frivate Industry. Total new investment in private industry between1969 and 1772 is expected to average approxiMately D 4.0 i-,llion per year(see para. 10) which is 25% of total manufacturing investment. The list ofprojects, form-ing the underlying base oI these estimates and summarized inpara. 10, would indicate that at least for the private sector, the projectionsare fairly realistic since they are made up of definite projects, mainlyexpansion plans to existing enterprises. SNI plans to increase its financingpossibilities in this sector by adopting a more active promotional role andby increasing the number of customers eligible for its financing by privatiz-ing some medtium-size public enterprises through equity investments by SNIand other private investors. Thus, financing in this sector is projected atD 1.7 million in 1970 and D 1,825,000 in 1971. This appears reasonable, and1969 approvals on the basis of projects in the pipeline are expected toreach D 2.15 million in this sector.

60. E'ublic Sector Industry. SNI has indicated that it intends toextend loans only to those public enterprises wihich are economically viableand financially sound both in terms of their prospects and their existingstructure. Although many of the larger public enterprises in Tunisia dc notmeet these criteria, there are a number of others in such industries asbuilding materials, textiles and food products which appear to have economicmerit and grood profitability prospects. Assuming that the necessary resourcesare available, SNI ts lending to the industrial public sector would only beconstrainedi by its level of lending to the private sector, in view of SfI'sBoard decision to limit public enterprise financing to 25% of SNI's out--standing commitments. SNI's management plans to further restrict suchfinancing to 30% of SNI'snow commitmentn- Tn v-inw of tho pron ctod levelof financing of the private sector, public sector approvals are expectedl toamount to D 1.85 million in each of 1970 and 1971.

61. Fourism. Annex IL snimmrizes the infornation alreadv discussed inpara. 12 about projected investments and financing sources for the hotelsector through 1972_ Pnrpirfn rhnnnope resources needpd -imount to Tl 1 1 millionof which approximately D 5.0 million might be provided by Danish (D 1.0mnillin) and itali-ar (n 4l 0riioin) n.-er +altog these inntende invest-

ments are far from certain. Thus, it can be reasonably assumed that SNI willbe called upon to provide the builk of the balance in foren;in ecnhnge need,r

i.e. D 5.0 million for the four-year period. SNI will therefore continueits role of the pastn cigree years as the m.an sou--c o ore' e-TIOnge inTunLisia for hotel financing.

- 16 -

62. With respect to local currency financing needed of approximatelyD 43 million, COFITOUR is expected to provide a major share of this orapproximately D 20 million while private Tunisian entrepreneurs are expectedto provide another D 9.0 million mainly in the form of equity investments.The balance of D 14 million is expected to be provided by SNI and by localbanks and insurance companies and SNI estimates that it can provide at leastD 5.0 million of this amount or approximately D 1.3 million per year in bothloans and equity. This aDpears realistic considering the present and fore-seeable tight liquidity situation of the commercial banking system and itslack of available resources to commit on a longer term basis.

63. Thus. altogether SNI nlans to apnrove loans and eauity investmentsto be closely followed by commitments of approximately D 6.15 million in1970 and D 6.h1 million in 1971, including D 1.85 million for public sectorindustry in each of the two years. This appears reasonable.

64. Planned Equity Portfolio Changes. In addition to its recentinvestment of D 10 m-n-ion inC OFITOUR, \NIT nnq Prmlity nirticipatiorns ofD 450,000 per year of which two thirds in hotels. SNI also plans to sell-wnder the Goverm.ent G-nrant-e (LO IC nd 5~7) holdings totalling aypronn ,-mately D 320,000 including D 135,000 in El Fouladh, a Government steel milland D 60,00() in (rTri the C-'-rr -owned hotel ch-in. Thee sales Two111

cover most of SNI's unprofitable equity investments, except for SOTUVERwhich SN thinks it can turnl arond anLd for which it feels it has someresponsibility as the largest shareholder. This program appears reasonable.

Resources Needed

65. Foreign Exchange. At the beginning of 1969, SNI had uncommitted,alances Of D 2.9 mdilion equivaien.t under 512-TMM and the Swedish loan.As against these resources, SNI will have approved foreign exchange operationsfor a total of D 1144 million for the period 1969-71. Tnus a resource gcapof D 8.5 mi:Llion in foreign exchange remains to be covered.

66. SNI has applied to the Swedish Government for a loan of D 2.5 aillionequivalent (:>5 million), half of which (D 1.25 million) would be available forforeign exchange financing. SNI is looking to the Bank to cover the balanceof its resource gap amounting to D 7.3 million ($13.8 million equivalent'! fora two-year period. A decision on the Swedish loan is expected in the firstnalf of 1970.

67. Local Currency. SrlI is in an extremely tight dinar resource situa-tion; even :if no new dinar loans or equity investments are approved during1969, SNI will end the year with a shortfall of D 533,000 in local currencyas compared to its commitments. At present, potential borrowers are turnedaway from SNI, and they often have to postpone their local expenditure invest-ment plans or resort in the more extreme cases to unsound financing schemnesinvolving the use of short-term commercial bank credits (when these areavailable) to finance long-term assets. Some potential foreign exchangeborrowers, when they cannot find their local financing complement at SNI,turn to competing foreign suppliers' credits for their foreign exchange needs.The situation is particularly critical in the tourism sector where projectshave a relatively low foreign exchange component and SNI lending for both

-,17 7

foreign exchlange and dinar loans is restricted due to SNI's lack of dinairresources Vflt% il, es is unfortnate sincn e ho'e l are, h- h ea4 , rners- of foreign

exchange and normally achieve good financial returns.

68. Di order to meet this situation, SNI has made significant effortsIto Uo<L)J Jloc;aL UrUrenIcy resoUurfIe fUor ±sell W±LaU±11 XUia. 1.-UU 01± 1was

able to obtain refinancing by loca'l banks of a D 400,000 "advance"' to Sogitex;_ _L i- 1- I L _ I -t u was abule to secure the Governmenet's payment of subsidies, wh1-icl hidU loing

been in arrears, and is planning on sales of D 620,000 from SNI's equity port-folio of DL.9 million, D 320,000 of wnich will be repurchased by the Govern-ment. (Government repurchases of D 697,000 of undesirable shares have alreadytaken place). More importantly, however, SNI would like to moDilize addi -tional local resources and has therefore asked the Central Bank and theriinistry of Finance to be allowed to pay higher rates of interest on long-term deposits which, together with some requested rediscounting facility atthe Central Bank, would allow SNI to undertake some additional local currencymedium-term financing. The Government and the Central Bank have agreed inprinciple to this proposal. If this is allowed, it would take some time,however, for SNI's deposits to increase enough so as to significantly improveits ability to finance such operations.

69. In addition, SNI is planning on a share capital increase ofbetween D 1.0 and D 1.5 million to take place late in 1970 (see belowparagraph 73) and has applied for ,a '. of the requested Swedish loan of$ 5.0 million equivalent to be avai:Lable for local currency financing.Even with these efforts, the resource gap may still amount to about D 1.0million for the period ending in 1971, and the shortage will be particularlycritical in the first part of 1970, before the proceeds of the proposedshare capital increase are available to SNI. The following table summarizesSNI's local currency needs and available resources, and its resource gapfor the 1969-71 period:

Total1969-1971

(D '000)

1. QDerations apnroved q.716Less:

Resources available beginning of npriod 28New resources during period

C'olecItion I rp.nqvmPnts lJ,120Retained earnings and depreciation 3207Eflhltv rr+fl sals6ASecond Swedish loan 1,250Share r.!lTit +n1 -I P1,00

2, Available resources during period 1 ,638

3. L cur.rencItAy .eours LL Vs.uruusj (sho lf I .J)

- 18 -

70. On the 'basis of paras. 66 and 69 above, and assuming that asecond Swedish loan of $5.0 million is made available to SNI with half ofthis amount for local currency expenditures, SNI would have a total resourcegap through 1971 of about $16.0 million, of which $2.0 million for localcost financing. In view of the Bank's commitment charge, SNI has requestedonly a $10 million loan from the Bank, to cover its needs through the firsthalf of 1971. It also asked for part of the Bank loan's proceeds to be madeavailable for local currency expenditures. On the basis of SNI's forecasts,and taking into account the timing of various cash flows, an amount of $1.0million would cover SNI's remaining dinar gap for this period. Should suchlocal cost financing be made availaLble to SNI, it is likely that the greaterpart of it would be for financing hlotels and industrial buildings while the

balance would be for the procurement of some locally produced capital goodswhich SNI believes to be comnetitive on a CIF basis with imported equipment.It is therefore recommended that a $1.0 million local cost component be in-cluded in the proposed Bank loan of t10 millionn

Increase in Tt+. Ti mni+t

71. A new loan to STI should embodt the Bankt's current formulation ofdebt limits. On that basis, SNI's present contractual limit of 3:1 would beequivalent to approximately 3.3:1 It *T 'e' that SNIt's borrowjnp'limitation 'be raised to 4:1. The marginal increase from 3.3 to 4.0 is justi-fied by t,he followi ng:

(ffi) SNI's portfolio, as discussed in paras. " _ appears sound.Arrears on the non Government guaranteed part of SNI's :Loansare small, and the equlty portfolio has improved consideralYjin quality since the previous debt/equity limit was estab-lished.

(i., i) S,:,I! 5presen' rie' wort[h co-uLU cover losses equal o abL ou

20% of the total loan and equity portfolio. It seems ex-tremely unlikely that SNI would experience losses for any-where near that arnount.

(iii) SNI should be in a comfortable position to meet its debtservice. Collections on S,I' s foreign exchange sub-boanlsare high in relation to SNI's repayments to its creditorsbecause tne sub-projects using foreign exchange fromSwedish funds have a much shorter repayment period thanthe 25-year maturity of the Swedish loan to 1NI. Debt ser-vice coverage, which is quite high at 2.3 in 1970 decreasesgradually to 1.0 by 1982 when MI's indebtedness to theBank will have been substantially repaid leaving about $1million outstanding. (This calcuiation assumes that 4SMIceases new operations and does not contract any new bor-rowings after 1972.)

P':volution cf Capital Structure

7?. IF SNI's investment and lending program is carried out, and if

SI T's present share capital is not increased, its debt/equity ratio, asdefined in its proposed loan agreement with the Bank, wouild be as fo1lo7rs3

- 19 -

(D I000)

1969 1970 1971 1972

Borroi^ring base 2,995 3,1h5 3,357 3,523Debt 6,625 11,090 15,556 20,091Debt/Equity ratio 2.2 3.5 4.6 5.7

Thus, even with a new limitation of 4:1, S.3I would reach its borrowingJ.LJJiL.LiCULU1i .14 _L7 fL.L <211U dt ULU~LUdU11ULU Uj. _LUD LJ%LL1V! 11,UUOU WLLL L) L L..LU

to support its borrowing program.

73. SNI's management plans to carry out a share capital increase ofbetween D 1.0 and D 1.5 miiiion in 1970, and has discussed its plans withIFC. In view of the fact that some of the 80,000 small shareholders are no*-likely to exercise their rights to the increase, SI would like to use thiaunsubscribecd portion of the increase, likely to amount to between D 400,000and D 600,000 according to the size of the share capital increase, to attraeLadditional fioreign institutional shareholders. IFC is prepared to consicersubscribing to its portion of the increase and in helping SNI attract nevrforeign shareholders. Annex 16 shows the projected evolution of SNI's debt/equity ratic) with a D 1.0 to D 1.5 million share capital increase.

Proj ected Piofitability

74. AAnnex 15 compares income projections for SNI for 1969-73 withactual results for 1968. The projections do not take into account the poss--bility of 3LflI obtaining some long-term deposits at 5% or 5-1/2% locally, toreplace some of the projected local currency borrowings abroad at 6-1/2%(Sweden) ancL 7% (IBRD). Administrative expenses will increase only slightl'i,despite the hiring of additional staff, because of savings on the foreiznadvisor's salary; they wrill decrease, however, as a percentage of totalassets from 1.9%9 in 1968 to 0.9% in 1971. SNI plans to begin in 1969 toconstitute provisions for doubtful loans.

75. SMI's tax exemption and Government subsidy ended in 1968, andalthoglih prcfif.s hef'ore t-es irll inerease 'from Tl 167_00)0 in 1968 toD 205,000 in 1969, tney will decrease on an after-tax basis to D 153,000,

prpresenting an rp+.irn on shnrp canitalf 1 09 n %. n Rp+m-rnn on .hnite-

capital is expected to increase, however, to 14.5% in 1971, when the highervorlume of loaIns to be approvzed in 1969 and 1970 wirll have been disbuzrsed andwhen SNI wi]l begin to realize some capital gains on sales from its equi±y-no Ifoliv. CJTIT aeu+ a P - _o + af''ows nth a D 1 4 1o

share increase in 1970:-I n4pJ~ .L1.J 0L/ ln7n I Q . L1 1 £7. 'I ../'-

(actual)af cv cv ~~~d of

/P /O /A /O /0

Profits before tax/Average equity 6.8 8.0 10.1 12.6 14.4 :;4'

Net profits after tax/Share capital 11.2 10.2 9.6 14.5 17.6 20:.

- 20 -

SNI's management expects that dividends will increase gradually to 5% in1969, 6% in 1970 and 7% in 1972. This dividend nolicy will a laow SUT tcconstitute an adequate level of reserves, expected to increase to D 1,723,0C;in 1972, representing 7.11 of STTIq loan and reiiitfv portfolio then out-standing.

Use of Bank: Funds for Public Enterprise Lending

76. ALS already mentioned (para. 18), SNI has amended its Policy State-ment to alo for some public enterprise lending li4ited to 25%4 of its out-standing commitments. Lending on this scale is not likely to divert SNIfrcm its main business of fiangg the private sector, and will represen4tonly a small portion of the total financing needed by the public sector. Itsman'.~-~~ V L%A &J oo wo LdL be tUII sor,te m.eas-ae of po,-tfolio eA-dLsio.Lu w,.l.ediversifying its risks and to introduce to the public sector stricter cri-teria fLor approvirlj g nlew-Iv ±LlVt I0If1t::laj * JDI1U_ IRJnW IUzloan WiLl. neediu tIIe wUaiJimo-usapproval of SNI's Board, it is likely that they will be made only to finan-cially viable and ecUUUxicUially sounwd projects.

77. SNi'U. pians to iimit its pubiic enterprise financing to 307%U of itsnew commitments. In view of the fact that most public enterprise lendingwill be for foreign exchange needs, a limit of 35% of the Bank loan proceedsfor this purpose would allow SNI to achieve its goal and is therefore recom-mended. With respect to public projects, there should be no "free limit"under the proposed Bank loan, so as to permit careful evaluation of SNI'spe-rformance in processing such Drojects.

IX. CONCLUSIONS AND RECOMMENDATIONS

Conclusions

78. I^hile tourism is booming in Tunisia, industrial investments havebeen maintained at D 16 million per year with about 15% of new industrialinvestments being undertaken by the private sector; this proportion is ex-pected to increase to 25% in the 1969-72 period. SNI is making an importanteconomic contribution to Tunisia and has developed as the leading long-termfinancing institution for the private sector. These trends are reflectedin SNI's business volume which increased from D 2.0 million in 1966 to D 3.8million in each of 1967 and 1968 with an increasing proportion of approvalsgoing to the tourism sector. Approvals are projected to increase to D L.6million in 1969 and to over D 6.0 million in each of 1970 and 1971 as aresult of some limited financing of public sector enterprises. This appearsreasonable.

79. Despite shortcomings in SNI's internal organization and its rela-tively high turnover of staff, appraisals have been relatively good. However,in view of its nrnionted innrease in bu.iT nehmilsi mnl r'oeioontiniue

efforts at strengthening its staff. Such staff strengthening is planned byinTdal ng.AT wrsitehso. who inis uitstandig pw oberms. in office Indin dealing with some of SNI's outs-banding problems.

- 21 -

80. SNIts loan portfolio has few arrears and its equity portfolio hasimproved with the sale of many unprofitable holdings to the Government.SNI's profits have increased from D 158,500 in 1967 to D 167,700 in 1968representing a rate of return of 11.2% on share capital. Net profits are

expected to decrease to D 153,000 in 19659 when SNI will no longer be enjoying

a tax exemption and Government subsidy. They are projected to increase sig-

nificantly. however, to D 362.000 in 1971 and D 441,000 in 1972.

81. Forei n resources which account for 70% of SNI's total resources

are expected to remain at about the same level. This is still high and it

isencoua to ntthat n addition to a share capital increase of El 1_0-D 1.5 million, SNI is continuing its successful efforts to obtain additionaldi nar r n Sn oe in 1n' sia

RMc .-=I end aqt i onS

82. * C"TT is developin satisfactorily and it deserves continued financialsupport from the Bank Group. SNI will have exhausted its IBRD and Swedishresources by the end of 1969. its business forecasts of over D 6.1 million

per year for each of 1970 and 1971 imply a resource gap of $20.5 million for* .t' 1 Nchw. ' equiv1er. for local e-penc1itire finfnlirig.

U,ILLs perioLdJLL of1 -WIU.L-LI p. )ULU..i1 -S1 -___

SNI has applied for a $5 million loan from the Swedish Government, half of

which to be used for local cost financinrg. To cover the balance of its needsf

for the next 18 months, SRI has applied for a third Bank loan of $10 million,$1.0 million of which could be used for the financing of local expenditutes

83. flIj would be a suitaDle borrower for a new loan of $10 millionfrcm the Bamk. Such a loan would cover SNI's resource gap for approximatelyone and a half years from the beginning of 1970 on the assum-ption that:

(i) a aSedish loan of approximately $5.0 million eq-uivalentis granted to SNI, part of which would be utilizable inlocal currency; and

(ii) the use of Bank funds is allowed for public enterprisefinancing up to a 35% aggregate limit of the loan, andfor local currency financing for an aggregate amount of'$1.0 million.

If no Swedish loan is granted to SNI, the proposed loan would cover SNI'sresource gap for approximately one year while SNI's dinar lending might be

curtailed "by as much as 50%.

84. The proposed loan to SNI should be made on the terms and condi-tions applicable to recent Bank loans to development finance companies and

should be aDplied to the financing of the cost of goods and servicesutilized by clients of SNI. SNI should be allowed to commit up to 35% ofthe loan for the financing of public enterprises and up to $1.0 millionfor local cost financing. It is recommended that SNI's present debt limit

of 3:1 be re-defined and set at 1:1 by excluding from equity and includingin debt those maturities oI the subordinated Government loan falling dueprior to the last maturity of any sub-loan or investment made out of theproceeds of the Bank loans.

85. SM]Ni:s free limit on lending with IBRD funds is at present $u100,0Lu.In view of SMI's satisfactory portfolio and the steps it is taking towards2urther improving its performance, an increase to $200,000 is recommendedin respect of private sector projects to be financed by the proposed loan.Judging from SNI's experience of projects financed in 1967 and 1968, pro-jects reviewed by the Bank would represent roughly 75% of private sectorcommitments tnder the proposed Bank loan. With respect to public sectorprojects, however, there should be no free limit under the present loan,the use of which will enable evaluation of SNI's performance in processingsuch projects.

SOCIETE NATIONALE D'INVESTISSEMTEN

List of Shareholders as of December 31. 1968

Par Value of Shares Percentame(T)inars)

TUNISIAN GOVE1NM4ENT 5O0O 3.3

CENTRAL BANK 70jn000 _.

GOVERNIINr BANYSSociete Tinisienne de Banque 36,915UJni-on Tn ationale de Banques 15,000Banque Nationale Agricole 15,000 66,915 1.5

GiVERNMENT-COTRO LLED AGENCIESSo^--ietve T;unisienn,e d'PAssur-ances

et de Reassurances 10,000Co,mpag-ne Gaz em iwaux l0,000

Societe LLoyd Tunisien 8,000Societbe NIUAtIMlkeu 1000 49Y0 3.3Societe Fi.nanciere et de Gestion 11,500 _

TOTAL GOVEM3ZENT 236,.15 15.8

TGNISIAN PRIVIATE BANKSUnion Banc-aire pour le ;oomnerce

et l'Irlustrie 15,000Banque de -Tunisie 15, 000Banque d'Escompte et de Credite

a la Tunisie 15,000 45,000 3.0

TUN1ISIAN SMALL PRIVATE SHAREHOLDERS(about 50,000) 798,585 53.2

FORK GN BANKSBanca Coxmierciale Italiana -

Holding Luxembourg 1/ 30,000Bank fur GJemeinwirtschift 30,000Stockholms Enskilda Bank 30,000Caisse Centrale de Cooperation

Economique 15,000Caisse des IDpots et Consignations 15,000 120,000 8.c0

INTERNATIONAL FINANCE CORPORATION 300,000 20.0

1,500,000 100. C)

1/ lCC7, omed by Banca Cormerc.iale Italiana.

IBPJD/IFCUov ember 5, [.)69

AMllTEX 2

SOCIETE 'FIXTIO- ALE DiEWvFST-ISSUIIfld'T

Statement of General Policies and OperationsAdopted by the Board of Directors on July [, 1966

and Subsequently Modified on June 7, 196- 1/

I. Purpose of this Statement

These provisions define the general policies and the guidingprinciples governing the operations of the Societe Nationale d'Investisse-ment.

It is evidentt thet t.hp mnnqagment may pnrnnp to the Board ofDirectors of the SNI any necessary amencnent which may be justified, inthe light of xperien.ce, in order that the CT?I may perform its servicesto the Tunisian economy with greater efficiency. In view of the impor-tance of the subject matter to be discussed, the noard shall be givenample time *to study such proposals.

II. Purposes of the SNI

(1) The SNI, through the various forms of operation as specifiedin III below, 9L411 deavor toJ. VW +he id u- i-

zation of the country and the development of tourism throughpoVUUU , X UULJdllU c .Ul1U LdIlU Ly UJt DO*

(:') The SNI shall also seek methods which may reactivate anddevelop the capital market and, in particular, broaden thesecurities market.

III. Investment Policy

(1) The 3NI will assist the Tunisian economy by one of thefollowing methods, or a combination of several of them:

(a) medium- and long-term loans for the foreign currencyneeds of a borrowing company;

(b) medium- and long-term loans for its local currencyneeds;

(c) equity investments;

(d) underwriting syndicates for issue to the public ofshares of a borrowing company.

1 The additions to tho Policy Statcecnt approved by SNI's Boardavnd by Th. Bank ar given in capital letluirs iu he npprocpriate

paragraphs.

AR 2Page 2

(2) The SNI shall concentrate its assistance in the industrialand tourism sectors.

(3) It will provide financial assistance MAINLY 1/ to privateenterprises or ente:rprises with a majority of private share-holders. The following may be considered as private enter-prises or enterprises with a majoritv of private shareholder-:

(a) companies where the capital is held solely by privatenatural or juridical persons;

(b) companies where more than half of the capital is heldby nrivate natural or juridic1 persons, thou.h theremainder is held by the Government or public agencies,or institut-ions where the Govermn-.ent is a maioriyrshareholder.

SNI WILL ALSO BE ABLE TO FINANCE COMPANIES WHERE MOPETHALN HALF OF THE CAPITAT IS HTZD BY DTHE G-OlvEPLMT- TT ]BYPUBLIC AGENCIES, OR BY INSTITUTIONS HIHERE THE GOVEREY0TIS A MA.jORTI'w c,UADMWUOTMO D DDR1T7MDED fTUA'.T:

- .usE ntYCITQTnTT r(O AMTTJCr TMIESE ' S l OnVTES

THE UNANIMOUS APPROVAL OF THE BOARD OF DIRECTORSOF Im,LLG SI3TU

- THE TOTAL AM".JIOfUTOUNT OF FINANCIAL ASSISTAPUNCE TJ'HICH THESNI WILL GRANT TO THESE ENTERPRISES SHALL NOT EX-CEED AT \NY TIIE 25% OF TOTAL OUTSTANDING COi1MIT-MENTS (TOTAL AMOUNT OF EQUITY INVESTIENDTS, MEDIUMAND LiNiG TEtI LOUAI\iS AID GUU AANTEES).

(14) The total amount of financial assistance which the SNI! shallgrant to any single company, in the form of loans or equityinvestments, shall not nonnally exceed i5% of the SNI's ownresources (share capital plus free reserves plus grant plusGovernment loan ranking pari passu with the share capital).In exceDtional cases, where the financial assistance of theSNI exceeds such limit, the Board of Directors shall exam:inethe project particularly carefully after a detailed andthorough study conducted by the Management.

The S1N7I shall not engage in operations, whether loan or equityinvestment, BY SUBSCRIPTION, requiring less than D 15,000from SNI.

No equity investment in an industrial or turist enterpriseshall exceed 10% of the SNI's own resources as defined above.IN THE EXCEPTICNAL CASES INT WHICH THE EQUITY PARTICIPATIO14 OFSNI WILL EXCEED THIS LIMIT, THE BOARD OF DIRECTORS WTILL HAVETHE OPPORTUNITY TO STUDY THE PROJECT IN ESPECIALLY GREAT DEPTH.

/ Before., "solely".

Page 3

2e ;-,otal .-mctunt of SNI is equity inve'txrmelnts shall irz iio .;;tseor at any time exceed the total of the rapitai, free rese."V26,grant, AND THE GOVERNMENT LOAN RANKING .'Fl.- PASO[JU i-Tti TMRSAARE CAPJ1TAL.

(')) The SI',s equity investments in industrial and tourist en-terprises shall be as diversified as possible between theindustrial and toursit sectors and within a specific sector.

(a) With regard to industry, among various groups such as:mining, chemicals, mechanical industry, textile industtry-;.food industry, etc.

(b) With regard to tourism: both among various types ofhotels (de luxe and intenmediate categories), vacationcenters, etc; and between hotels located in the southern)central and northern regicns of the country.

(6) The SNI shall not, as a matter of principle, hold a majorityof shares in a company, except:

(a) where SI acts as promoter of an enterprise and expect.sto place shares among private subscribers which willbring its holcing down to a minority position (below

(h) where the company under nonsideration is in a difficultfinancial situation requiring the direct interventionof the .\IT iin the hbst *nterests of .SMT.

Aq a general rule, the SNI shall nrot l-low itself to asswnrethe managerial responsibility of enterprises in which itshal:L have an equity 4-r.irnsme.n+t.

7%A -oan "hc' the SITT Js requested to -a+ +o% a c-r.pany -dr%. I At .J.A- U WJLU.. LA VtLO LJIV .L A. A. v ~' - * r -an*'r'

rected by a member of SNI's Board of Directors, and in wh:..chthis director holds a large equity participa+-ion. shall b>:

- on thLAe one hL-Aarvd, 6ranteud only alfter dUA.ue con.si.deration

and approval by the Board of Directors as a whole;

- on the other hand, subject to a special report of theauditors to the next OrUnlary General Meeting, in accord-ance with the provisions of the Code of Commerce.

(8) The SNI will support all initiatives for the development o1Xthe capital and securities markets. In particular, iJA w.2)take the following measures:

- it will endeavor to ensure the maximum turnover of itsportfolio by giving preference to the resale of all orpart of the good securities held;

- it will subscribe to share issues, whether the compaI..esa-re borrowers or not from the SNI;

ANNEX 2Page 4

it rill take part in the promotion of "rvariable capitall"investment companies (mutual funds) or any other type ofportfolio investment cnmpanies.

TT ITTT.T. TLPKE PA-qT TN\J .RG1TMTT?TmTF. T.4AT(F.Tq oPERATTnMS T.3BUY SiARES AND ANY OTZiER SECURITIES (BONDS FOR CANPMTLE).

IV. Financial Policy

(1) The SNI shall ensure that the total of medium- and long-termdebts ~ .L ous L^ ( i.e mu- beyond o. ea)does notU~LJU IJU.UOU~4U.JA ~ ~ £e J ,,L1U.L.LL1r, LJ'-,YIJLJ.U L .L ~L %A.J J *4J

exceed at any time three times the total of its share capitalplus fr-ee reser-ves, plu LU 1f-an I.U UVLJU1Lt, plusLL 1CUr,er oa A.Ur,r.

pari passu with the share capital.

(2) For each foreign borrowing, the SNI shall protect itselfagalunst any- exclange risk arising from loans in foreigricurrencies. It shall consider with the proper Tunisiana-uthorities the measure to be taken in this respect.

(3) The SNI sna-U obtain from its lending, guarantee and otheroperations a rate of interest and commission sufficientlyhigh for it to be reasonably profitable, build adequatereserves and distribute a small dividend.

(4) From the profits of each year of operations, the SNI shaLl,in addition to the legal reserve, establish a provision forcontingencies and extraordinary reserves reasonably commen-surate with its commitments and the nature of the risksinvolved. It shall also pay reasonable dividends in accor-dance with its annual profits.

V. Organization

(1) The SNI shall recruit a highly qualified personnel for thefinancial and technical analysis of the projects to befinanced.

(2) The SNI shall also set up an organization adequate to givetechnical assistance to its clients and to enable them toadopt modern management techniques.

IBRD/JFCvYoibor 5, 1969

ANNEX 3

SOCITE NATIONALE D'INVESTISSEENT

Resources as at Septerde2r 30, 6 8

Sturce Net ofntia Interest Date Repayment aamarks

--ource (thcusandlc of Dinars) Contracted Period

ZQuitz

Share capital 1,500 - 19

Reserve:3 and unallccated surplus 5-i7 _ -

Gverniment grant 500 1964; _ Non-Repayable

Qu,&sJL-Bqui ty

Government subordinated loai. 515 F*e 1966 1981-1996

Borrim-ings

Long-term Central Bank 185 1965 1969-1980

ClSS (Caisse Nationale d(L SecuriteSocials) 439 4 1961J 1966-l9yr8

l3t IBRD loan ($5 million) 2,376 Variable 196S 1968-lEii4

2nd IBR.D loan ($10 millJiom) 5,235 Variable 1967 1969-1985

Swedish Oovei,imant t1 5L20 4 1967 1972-19137 (1) Tbe difference between 6% and SMI'a lendin.g

rate mus t be alctdec ei oa"pca

Total Rescuirces 12,887 st.uies and technical assistance fundt to 'be

admninistered 'by SNI.

(2) Up to 2/3 of the loan can be used to firmncelocal currency cost of projects whose foreignexchange ccats are financed from IBRD funds

1/ Net of' repayments

I BRD/DFCNovember 5, 1969

.1^o A! I

SOCIETE NATIONALE D'INVESTISSENUT

Board of Directors and Executive Committee

* Moncef Belkhodja Chairman (President Directeur General)

* Rachid Ben Yedder General Manager (Administrateur Delegue)

* Abdelaziz M4athlari President and General Manager of SocieteTunisienne de Banque

Sadouk Bahroun Lirector of Plan (Government representati-VE,

* Ezzeddine Ben Achour Secretary General of UTICA ('Union Tunisienrnede l'Industrie, du Commerce et de lArtisanat)

* Hassen Zghal Director, Central Bank (Central Bank repre-.sentative)

Ali M I Renni Private businessman

Mabmoud Dbghra Private businessman

B Banque de Tun.Lsie Represented by its President-Directeur General,Boubaker HIabrouk

Stockholms Enskilda Bank Represented by IHarc Wallenberg

Caisse des Depots etConsignations Represented by Yves Rolland Billecart

l iA. Khosroptir International Finance Corporation

* Members of the Executive Committee.

IBRD/tFCMocTc , 196

ANNEX 5

TUNISIA: SOCIETE NATIONALE D'INVESTISSEMENTORGANIZATION CHART

SEPTEMBER 1969

PRESIDENTI Belkhodja

|GENERAL MANAGERBen Yedder

.~~~~~ .

ADMINISTRATION 1AND ACCOUNTING LKtUJI CDTPARTMtNT FiULLUW-UP DEPARTMtNT

PROMOtION Majoul j El-Goulli

I ~~Ferh ot I _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

I i~ ~~~I [ II I fA.1 IItk

ACCOUNTING AND APPAISALS LOANS AND EQUITYCOLLECTI ONS A INVESTMENTS

| | I I | | | INDUSTRY

FOLLOW1UP ONL-4 PERSONNEL LEGAL V4 ~~~~~LOANS AND EQUITYPERS ON N EL _L EGA L | KI /rcAcSTMENT

| .1 I I|.--_______ I I TOURISM

Ll 1 IL I Li EQUITY PORTFOLIO

PROMOT'ONIf~kI IL.........J r~ieM1 IDCCkACLi1 C I MANAGEMENT

________________________ I I I n I SNI SHAREHOLDERS

* Mr. Ben Yedder was nominated in September 1969 for a Government position. CASHIERHe is due to leave SNI.

TOTAL STAFF:

Management 2Professionals 1 7Non-Professionais 37

56 IBRD - 4644

ANNEX 6

SOQTETET NATTONALE D' ThTVESTTSSEMET

Pq.t Annrnvrlq R Foreoa.t of Future Onerations(Dinars Thousands)

Actuainl SzT Proictonsc

TT67 619 1969 1970 1971 1972 Ji6173

Private Industry

Eauity 93 312 50 150 150 200 2'.,D-inar "loans 180 13% 231oo 400c CW5 50rn

Fcreign exchange loans 1,560 1,109 1,864- 1,150 1,250 1,400 ,1.1'a

1,833 1,434 2,i45 1,700 1,825 2,100 2,456c

Publlc Sector Industry

Dinrar loans - - - 350 350 400 c

foreign exchange loans - - 500 1,500 1,500 1,600 1,7$'1

500 1,850 1,850 2,000 2,10')

Tourism

Equity 50 240 825 300 300 300 300Dinar loans 819 655 185 1,000 1,000 1,000 1,0-)0Foreign exchange loans 1,150 1,h75 980 1,300 1,400 1,500 1,550

2,019 2,370 1,990 2,600 2,700 2,800 2,850

o)tCal Equity 143 552 875 )450 )450 500 550Tutal Dinar Loans 999 668 416 1,750 1,775 1,900 2,000Tu:lI Foreign Exchange 2,710 2,584 3,344 3,950 4,150 L,500 4,850

3,852 3,804 )4,635 6,150 6,375 6,900 7,400

1/ This amount may be increased by an amount of D 1 million to D 1.5 million($2-3 million equivalent) according to whether SNI will finance part of an.expansion of STIR: a. joint Tunisian-Italian refining company.

IBRD/DFCNovember 5, 1969

ANNEI 7

SOCIETE NATIONALE D' INVESTISSEMENT

S2=ry of Toan ODerations 1961-19658( Dinar Thousands)

1961-65 1966 15967 1968 Total

No. Amounlt No. Amzount No. Amount No. Amount Nbo Amount

TOTAL LOANS

Loans approved- 10 494.E3 19 1,811.9 41 3,7059.2 33 3,252.0 103 9,267.9

Ccntracts signed- 10 494.,8 18 1,)i62.C 36 2,885).1 11 761.5 75 5,607.4

Disbursed 103 494.!8 18 1,236.5 36 2,12L,.6 6, 97.9 70 3,953.5

Repaid 9 160.18 10 96.0 11 39.0 - - 30 259.8

Outstanding 13 3 5 7 .2 -/ 1 1,14o0.5 36 2,o85s.6 6 97.9 68 3,681.2

L0OAL CURREICY LOANS

Loans approved 10 494.13 4 t 259.5 15 9951.0 9 668.0 38 2, 1421.3

Ccntracts siged 10 494.18 4 259.5 12 8159.0 2 208.0 28 1,781.3

Disbursed 1O 494.13 4 t 194.1 12 811.o 7 8.o 27 1,507.9

Repai. ' 160.! 3 1 2.0 3 S.0 - - 13 if. 8

Outstanding 18 357 .,2 -/ 4 192.1 12 802.0 1 8.0 25 1,359.3

FOREIGN EXCHANGE LOANS V

Loans approved - 16 1, 552.4 35 2,710.2 33 2,584.C 84 6,846.6

Conatracts signed .. 15 1, 202 .5 30 2,070.1 11 553.5 56 3,826.1

Disbursed *- 14 1,0h2.4 29 1,313.6 6 89.9 49 2,445.9

Repaid *- 9 94.0 a 30. 0 - - 1±7 124.0

Outstanding .. 14 9I48-4 29 1,2831.6 6 89.9I 49 2,321.9

1/ Net of cancellations

2/ Includes arre'rs in interest D 23,166 related to a lcan to SOMWIIt, granted irn 1961and guaranteed by the Governrent.

IBRD/DFCNoverInoer S, l9f,7

ANNEX B

SOCIETE NATIONALE D INI ESTISSEMNT

Comparative Statement of Loans Approved(Dinars Thousarnds)

1 961-65 1 966 1967 1968 Total

Types of Loans No. Amount % No. Amounit % No. Amount % No. Amount. No. Amount %

Local currency 10 494.8 100.0 4 259.5 14.3 18 999.0 26.9 9 668.0 2D.6 37 2421.3 26.1

Fm ign n-. renev - 16 1552.14 85.7 3j 2710.2 713. L 7 258.t 94 84 6846.6 _I;.9

TDtal 10 494.8 100.0 19 1811.9 I0C.O 41 3709.2 (10.0 33 3252.() 100.0 103 9267.9 loc1.0

Size of Loan

6elaM D 50.000 7 131.8 27.2 13 371.9 20.5 22 597.2 16.1 22 723.0 22.4 64 1826.9 19.7

D 50.000 to D 150.000 3 360.o 72.8 1 60.o 3.2 8 582.0 15.7 2 269.0 8.3 14 1271.0 1:3.8

Above D 150.000 0 -Z 5 1380.0 76.3 11 2530.0 68.2 9 2260.0 69.3 25 61700 6.5

Total 10 4914.8 100.0 19 1811.9 1.00.0 41 3709.2 100.0 33 3252.0 100.0 103 9267.9 100.0

Average size of Le loanl 4i'.5 64.9 71.3 66.13 63.1

Average size of Fs loansl - 97.0 77.4 78.3 84.2

Average sizse of loans 4y.5 95.3 90.5 75.7 77.7

Categcry

Tourism 2 52.0 10.5 4 577.0 31.8 13 1969.0 53.1 9 2130.0 65.5 28 4728.0 51.1

Construction 1 25.0 5.0 3 75.6 4.1 3 600.0 16.2 2 68.0 2.1 9 768.s6 8.3

Salt dxtractim 1 80.0 16.2 - - - 1 150.0 4.0 - - - 2 230.0 2.5

Plastics - - - - - - 3 127.7 3.4 2 45.5 1.5 5 173.2 1.8

Wood - - - 1 300 .0 16.9 - - - - - - 1 300.0 3.3

Mechanical - - - 1 50.0 2.7 10 490.0 13.2 3 215.0 6.6 14 755.() 8.1

Jute bags 1 150.0 30.3 - - - - - - - - . 1 150.() 1.6

Transp*rt 1 130.0 26.3 - - - - - - - - 1 130.0 1.5

Food products 1 4.0 0.8 3 61i.5 34.1 3 76.4 2.1 2 85.o 2.6 9 7841 . 8.4

Other consumer industry 2 49.0 9.9 7 189.8 10.4 6 178.0 4.8 - - - 15 416.13 4.4

Textile inimstry - - - - . - - _ _ 3 329.0 10.1 3 329.0 3.5

Others 1 _4.8 1.0 _ _ _ 2 118.1 3.2 12 379.5 L1.6 11 502.4 5.5

Total 10 494.8 100.0 19 1811.9 100.0 (ii 3709.2 100.0 33 3252.0 100.0 103 9267.9 100.0

IBRIl/DFO0owenlber 5, 1S65

SO,I 'OE NA1IONALE D'INV ':TIe:EM -NT

Cha uitY Portfolio 1966-1968

13onk value of SNI's holdings as at December 31, 1965 - D 1,908,80h

Company and Industry Book value(Dinars)

1966 S:-ax Gabsa Phosphate 52,355EL Athir Ra&io assembly 82,750SiNED Publishing 10,000

1967 Djbel -jEricsa Iron mine h8,032Sfax Gafsa phosphato h,247

Marble caves 15,000IONM Chemicals 10,000,,omvik Transport 3,250

SITT Luxury hotel 20,050SIHK Construction hotel [3,000Solefruit Food processing 40,000

te. Ii Vi r s Edible oil 16,000STOPA Fruit drinks 50,590E:l Mouezz:ia Commerce 1,000Tunis Afrique Press 2,100SOJTUTvR Gm a;s bottles 10,000HParvester Tractor assembly 1,000NTIB Wood pn nnels n00

At. M'Henni Mechanical 35,000HOTUSAL S alt ext.raction 30!STS Societe du Sucre 10,000SN Liege Cork R650SATPEC Movie production 1,000STUFIT Jute bags 20,000Marhaba Hotel in Sousse 14,000

SIGOAC Asbestos-cement 7,0001968 STOPA Fruit drinks 29, A10

Qry1TT SOGICO TTATrT Sv-JTAtE Trex;I es 2031

STECHI Studies 3,500

TOTAI. ATSA 7LE1S9

A7KTh1rt'V n~ALL JIE v

Page 2

1,,w_ Invnstmpnts (Subscn4--rons

Ccmp2an arxI IUus LZ Book value(Din-a7s

1966 Skanes Furniture 19,50001 UE IT Jute bags 35, --At. M'Henni Mechanical. 17,500SlI.A s.R Air Charter 1,200

1967 SICOAC Asbestos cement 29,7001UIlTAiJ Metal working 20,000

SETID Hotel in Djerba 25,000TAT Car rental 25,000

1968 SICOAC Asbestos cement 10,000Chakira Electric cables 30,000SOMATRAL Mattresses 17,000Union Generale Brick and Construction 100,000Ste. Levure Food processing-Yeast 25,000

TOTAL -l y

IBRD/DFC;v-enbtzr 5, 1969

ANNEX 10

wky Pnrkfol± #A cc Deoeete 31i je6

Nominal

TEa of SN! ^ ldis 5 of Share S of al ain 1S67 Div tidas var LdfdE4t&abih-Bok Naoe8t Aocot Ceta1 Hold UqO1 A%%r1Ja18J)l8 to ros in in J. nerr a,a

Copcany mod Industry mont iot) _Luo bs SKI pB! frAM' a ! ma mag. 1 S l o 'dAo Coitente7V&r) kLIlJ- 73MM71JEiiii

PROFITASLE COMPANIES DISThIBUTINO DIVIZNDS

CO 9M SATPEC Movie production as1 ProfitaOle diotribution monopoly

dietribution 1960 ;,Ooo 24,090 5 0.3 1.i61 250 5 10,000 ow0ed by the Govern_nt Similar

1968. Low dvide.nd payo.t.

03 BM STS Sugar proceeing 1961 262,000 558,479 15.b4 6. 68,762 100o41 7 - Highly profitable mOnopoly withrestrained policy. Divi*.

denda paid correepond to only 8months (fiscal year wae changed).7% dividend expected for 1968 and

03 BM S1'UFIT Jute Bage 1940 48,165 91,738 289 3.1 18,540 5,379 10 38,692 The Coopanycs eajon increased by140% in 1968, end profite wer 25%f .apital- f. niv4d.nd pavent nov

bM 5Y du Liege Cork 1962 116,300 322,151 46.5 7.5 64,495 9,566 10 H ighly profitable monopoly. Saleare decreasing, but diviied or

10% 10 expected for 1968.

CO bM COTUSAL Salt extraction 1949 187,470 268,182 25.0 12.0 14,030 9,252 - E.panding capacity. Similar reaulto

GO EM Skaneo Furniture 1962 34,500 97,560 30.0 2.3 16,467 3,454 7 30,000 Profit decreaced in 1967 hut ere'expected to in.reaae oharply d'or196d.

9/1 BK STUMETAL Tin Cam 1965 45,000 63,985 16.6 2.9 14,229 1,028 3 - No infcrmation on 1968 recults.

GQer bM SICUAG Asbeetos cement i96i i22,700 , 25390 30r.7, 7.S 1,478 5,385 5 _ Ditritated dividede for the firsttime1 ic. 1968. Higher ;rofiStaexpected.

GO nii SI Griliege Wire mesh 1964 10,000 11,1435 27.5 0.6 1,71 600 6 1.000 Batter rerulte expected aflorchangixg inmentory policy -whichproduceid etockouta in 16.

CO b-^ Msr,iahbo Htal 19614 9,000 v,seo 6.0 0.6 5SO26 540 6 9,000 HiehlY onfitabla hotel.. Profitsof 1001. on capital expected for1968.

TvTAL v!;0,135 1,e19,490 5140 21;199 4h:495 88.692

PROFITABLE COMPANIES NOT DISTRIBUTING DIVIDE21N

0GG 91 Societe El Regional Development 1965 3,1420 24,235 23.0 1.5 805 _ . _ Subsid!Led Dovernmem iholding. SitI

Iddikhur plans lo cell in 1969/1970.

(10 91M STTA Car and truck asesebly 1961 140,000 76.904 26.6 2.6 40,538 - - - Very profitable conyarf. Expe,ctedto pay dvivdendo Sn 1969.

BM TAT Car rental 1967 25,000 26,107 25 1.6 1,753 _- _ _ relLo1t prospecte wiLh tourLem

- - - - ~~~~~~~~~~~~~~~~~~~~~boom. Proits o-f g50, en oapitais *xp ~~~~~~~~~~~~~~~~~~~~~~~~~~r4cted for 1969.

TOTAL 88,420 127,2146 5.7 43,096 _ _ _

IOTA,. OP PO,ITA:LE CO--ANT.S 928 5551 ,710 736 59.7 256,295 - -

CO>MPANIES STArNTrOUP OR 9UNDER COt3TRLUCTION

EM ST Lbvre Food proceesing. TYaet 1968 25,000 - 10 1.6 , Coopac.r not setablichei yet.

GoG 914 Bernardawd Ceramics 1966 40,500 * iS 2.6 - - - Eet d am-; profits-. SNI pl-. oto selt in 1969/1970.

EX B.nion Generale Brick PFctory 19147 100,000 - 14 6.4 _ _ - Difficiltiec to fonm capital.

D 500,200 nd doubling productio,mo isitalled. No atock endoperating at fuln capacity.

bM (hakirn ELectric Cable, 1963 30,000 _ 15 1.9 - _ _ _ May distribute dividenea iSc 1970.Ha a groving market.

-i Fcpan-ion Nat-l 1967 25,000 Z 15.7 1.6 - - = cn - hel, trtd in

Touristique JanuarT, 1969.

Djerba (SLTIC)

n-ttr.D 1967 17,000 = 12.6 L. St.rt^ operations i-n 1969, d .nuln tbe profitable but no imsedistedivideond are expected.

CO Y STIB Wood Pnals o1060 10,160 - 3.3 0D6 - _ _ _ Coean. reorgcnt-ad ic 1968 -d

started operotionn In Maroh. Oo-d

- - - - dividend prnpecta.

TOTAL -7,6 = - - -

ANNEX 10.gr

rna ngs NoinalTor. of SNI Sharholding % of Shtre S of SN!'. in 1967 Difidusda Dieldwd.s Vsloe ofstaish- wrk V-':;Q 5-:¶ U-WA C- - -*-5 Att-,ibOthale to Pid 1n to % of Par stock

Company and Inde try mont ( Got. Value by SNI Portfolio suvo o _ 1968 t Il Shareholdina dividensd Coosento

UtIPROFPTABLE COMPANIES

GG- BX SHTT Gover7snt hotel 1959 60,000 60,198 1.2 3.8 - _ _ Brpakeven explIted in 1967. SNIa --Rr Plena to sell J. 1969/1970.

GG- BM AMS Goversant metalusekiog co±pany 1962 26,000 26,000 39.3 1.7 - - - - SNI plans to sell in 1969/1970.

GIS BM Garsoarth Hotel 1963 10,000 9,023 3.3 o.6 - - - - SNI plane to sell in 1969/1970.

GGe E1 FoaleId Stool mill 1962 135,000 - 3.2 8.7 - - - - SNI plans to sell in 1969/1970.

WG- BM S do Kef Regional Development 1965 10,175 10,175 5.0 0.7 - - - - Made profits in 1968 anl th-r aredieldend prop.eto for 1969 and1970, hut SNI sny -oAl -der th.Govrnet SNarantee in 1969/1970.

SOTL7F.R Glass bottls 1963 120,310 - 26.7 7.5 - - - - SNI hot endH a thoro-gh otody ofoperations in 1968 -d thinks thatthe .o..paey has very good p-sp-ctoif it is coll eacagod. 1NI wIll no-sell.

GO* LI sSrnen Metallie et-iebre 1964 2,000 - 10.0 0.1 - _ _ _ ) Government owned. The three co.na.. .esand H-arvester will -rgc in 1969.SNI plans to soil its holdings in

GG* HM SOTUMO Diesel engines 1964 5,000 5,146 3.5 0.3 _ _ _ _ ) these four companies in 1969/1970.

Go Ell SOCO1ENA Ship repair and con-straction 1963 3,500 - 3.5 0.2 - - - -

GGC HARVESTEiR Tractor assembly 1964 4,000 4,161 1.9 0.3 - - - -

STTA Air charter 1966 1,200 1,333 7.1 0.1 - - - - Operational difficulties. Loot oneplane. 'dill nerge with Tonic Air,SNI expects to be reirbursed.

GGe BM STPP Ferme extraction 1964 3,475 3,525 34.7 0.2 - - - - Bad mneageaert. S11I plans tI Sellit 1969/970.

GG* Tlisle Consult Studies 140 - 14.0 - - - - - Coepsey inbankr-uptcy. SNI .i lloell in 1969/1970.

SOIElX Goverreent textile 1961 - - - - - - - 73,515 Stoce di-oaends received in 1966.No iidiate dividend proecp-ts batwill be kept.

TOTAI UNPROFITABLE COMPANHES 380,800 24.5 . 73,515

GSHND TOTA/ 1,557,015 100.0 162,207

3_ HOT PAID IS

Mas.cheat Hctal 40,000hotel Syria Hotel 100,000hill Diar Hotel 100,000SAC H! 10,000RECTIF 80,000SICAV .tu fnd 4.0

370,000

SNI: Sales plnned for 1969

El Iddikhar 23,420 GG - Dnrte.d bh GMaensotBsrnardaud 40,500 BM - SNI i. a B ard DAher of the CosapwSH7T 60,000AMS 26,000 Th rn4 guarantee nvr D 15ODO.Garath 10.000 / Th: zr ntot "vr: D 25 000.El Fouladh 135,000 T/ he goat.t covers D 89,775.S. do Kef 10,000 guaThe rantee wcers D 86,890.SOC 343, SOTUMO, SOrOMENk and HARVESllC 14,5oo the owernet gaarsntes c.vers holdings totalliSTPP 3.475 D 1.227,950, i.e.. 78.8% of SNI's essity portfolio.Tunis C-onit 1

Total 333,210

1B RD/I3CNov.eber 5, 1969

A I pp ISM~ ~ ~ ~ ~~~~~.~KTI*;-OGIP r R 1\TATfI\T'P fT. DTN55TTIT.FM,.1

Commitment as of December 31, 1968

Tourism Other Sectors Total

A. OutstandinE (Dinars '000)

loans 1,383.6 2,297.6 3,681.2EAqit.Luy -ViI .LUI4:-.U-. 40,L453U . 0 .)n 55 . 0Short-term assistance 767.7 767.7

,ar ar-te e s - l., I .

S-Lu±oUal A i,487.6/ 4.9 6,O> 147.5

D. Approved but not yetDisburse"d/Utilized

Loans 3,344.4 2,242.3 5,586.7Equity investments 240.0 130.0 370Q0Short-term assistance - - -Guarantees 25.0 o- 25.0

Sub-Total B 3 609 4 2 372.j 5, 1.1

Total (A + B) 5,097.0 7,032,2 1 291 2

In % 42/, 58% 100Q'

IB3RD/IFCTceviier 5, 196j9

ANNEX I!2

SOCIETE NA TIONALE D' INVESTISSEI;ENT

Audited Income Statements 1966-1968 and 6 months 1969(Diner Thousands)

(Unaudited)6 months

1966 1967 1968 1969INCOME

Interest on loans and advances 86A5 126.7 25l.1 17h. 5Money market operations 122.9 107.7 37,2 8.6Dividends 38o 0 553 Jt5 5 0.9Other income 15.4 21.4 61.3 46.0

262.8 311.1 398.1 230.0

Irnterest on dsposits 21.5 14.3 12.6 0.3Interest on borrowi.ngs 26.7 hS.3 130.0 84.2Administrative expenses 86.9 116.8 128.9 54.2D e p r ci aAtio and Wm .or+iza+ri 18 9. 00.9

153.3 185.9 281. 7 138.7

Net 1 operational i ncorm09e I2. 116. 9 I-I,1.314 T pert- J- A. 1CWC t7 1O 0 r_ 1 0

Plus: Government subsidy 50.0 50.0 50.0WLA,UraorULi1dLUy "±iaLz/ tzenss ( k4. 4) (1* ) 1.2

Net profit of period 155.1 158.5 167.6 91.3Net profit relating to previous years - - 11.9 7.3

155.1 158.5 179.5 98.6Allocation of Profits

Dividend 60.0 60.0 60.0Reserves 94.8 92.9 110.7Social fund - 5.0 7.5Bcard mermber fees - 0.5 -

'arried forward 0.8 0.9 1.3

155.6 159.3 179.5

Administrative expenses as %of average total assets 1.7 2.1 1.9

Profit before tax and provisionsas % of average equity 7.0 6.7 6.8

Profit before tax and provisionsas % of share capital 10.3 10.6 11.2

total assets 4.7 5.0 6.3

IBRD/DFCNovember 5, 19659

AMNEX 13

RfTRT.T N.ATTnNArTA nfl 'T?PW~TTc7.IT

A4uditedl BalanMmc Shi,,eet,s 11066=196 n" s -6 tmonths -1 c'A

(Dinar Thousands)

(Unaudited)TDec. 31 Dlec. 3_1 Dee. 31 uTi- 30,~~fl Tha,., _J1 _han tiU" 1W

1966 1967 1968 1969Ap 5'.TRr

Cash and banks 73.4 201.4 1,138.0 1,320.3honeu- market psl.. 2l,32.0 1., (700 .0. - 29.0%

Aczounts receivable 232.2 535.7 387.8 267.1

A *......4.- nnO a ~~~~~~~~~~~- n.~ a a a f ,r'r, f

I),-Vr tte rMA advances 673. _3* 7uu.4V 4 733.9

ClAur-rent. , PSset3 ^--^ -, -3-2 2I . 2 ,_.3

I'MAd&-wS-_ ad lclg-a loan9 I0. iP4.3Y . 3)63.%0J 4,001.7Fqulity investments 1,836.7 1,611.1 1,557.0 1,704.6

UovernenitWIeD securities - 26.2 26.2 26.3

Fixed assets (net) 90.4 83.3 78.5 81.7Establishmentv costs (net) 15.4 14.3 13.2 13.2

L,843.h 6,446. 7,632.7 9,o63.8I.ITB LITIES

Deposits 1,949.8 1,841.8 991.5 1,393.2Accounts payable 221.h 29L.1 316.1 1L3.9

Current liabilities 2.171.2 2.135.9 1.307.6 1.537.1

Loans: IBRD 90A 3 62.0 2,283.1 3;215.2CNSS 469.9 438.7 438.6 406.1BCT 1 0qn 1 85.o 185o 1 85 oSIDA 273.6 486.7

Subordinated Crovernment loan -1A.0n 615.0 Ai 5 6L.I0

Social fund - 5.0 12.7 5.2

Long-term liabilities 1,360.2 1,905.7 3,808.0 4,913.2

SPhare capital 1,500.0 1,500.0 1,500.0 1,500.0iJ:a-1 reevE lh.6 22.5 35-4 35-b.-yorernnment grant 500.0 500.0 500.0 500.0

e.^r r se-es 157. 24. 1. 4.

r,serves resulting from-nral uat; on lof4 -- 4-t -13. 139. I62.5 0 62,e E

TInallocated surplus 0.8 0.9 2.2 98.6,

Net worth 2,312.0 2,h45.0 2,517.1 2,613.5'

5,843.4 6,446.6 7,632.7 9,_063E

Outstanding gUarantees6given by SN-[ 547.8 341.5 i41.6

IBRD/DFCNov ezber 5, 1969

A WThT~ -I I.IliwizflA ILl.

Estimated Financing of Hotel Faciilities 1969-J.972

1. Approximately 32,000 beds at an average cost of D 1700 per bed.

Total investment required is estimated at D 54.0 million ofwhich 40% in the form of equity. Also, foreign exchange needsare assumed to be about 20% of total financing.

2. Estimated sources of financing are as follows: (millions of dinars).

Equity

Foreign Currency Local Currency Total

Tunisian Entrepreneurs 9.0 '.0

COFITOUR - 8.0 8.o

Foreign lavestors 4.0 - L.0

SNI - 1.0 1.0

h.0 18.0 22.0

Tcans

COU ± 'VUEL -1 .O 12 .O-:

SNITr a' ~ I 5. f'

VdILJ01 CI.LtU LU 0V - 1. 0

Balance (Local banks -

suppliers' credits) 1.0 9.0 10.0

7.0 25.0 32.0

NoePnb/er 9N4ovember 5, 1969

Aj'n'j i".x 15

SOCIETE NATiONAh: - D"l-vSlSaN

Projected Income Statements 1969-1973(Dinar thousands)

1968 1969 1970 1971 1972 1973(Actual)

Trcome

Interest on loans and advances 254 525 896 1,316 1,705 2,090nhcome from short-term investments,deposits, etc. 37 30 18 20 22 25

Dividend income 46 63 80 92 98 ILo-Capital gains - - - 40 40 40Ot1her income (commitment charges& other commissions) 63 80 90 95 100 L05

Qovernment subsidy 50 - - - - -

Total income 450 698 1,090 1,563 1,965 2,:365

ExpensesIn+,erest on deposits 13 12 12 15 18 22mnterest and c:harges on borrowings 130 34&6 607 903 1,193 1,. 89Administrative & depreciation expenses 135 130 140 147 150 160O';her expenses 5 5 10 14 15 20

283 h.93 769 1.079 1.376 1.691R is1 iiS

Profits before taxes L67 20 q 321 484 589 i67hJ.Taxes - 52 81 122 148 169

llet income after taxes 167 153 240 362 441 505

Dividends 60(4h%) 75(5%) 90(6%)150(6) 175(7%)200(8%)Reserves I M 7R I c~n O1 9 944 _rt

Gjss income/ verage total assets 6.3% 7.8% 8.3% 8.6% 8.6% 8.6%A Arm.n

4+,,s+

4ra+v n-unnoc, /Averarrrr

total assets 1.9% 1.5% 1.2% 0.9% 0.7% 0.7%Droit beo9a,Aeaeeqiy68; d1.6% 14.5% 17.6% 1.deot profits after tax/Share capital 11.2% 10.2% 9.6% 14.5% 17.6% 20.2%

L.L) ru ,' ±JL 96

Ncvc:nber 5., 1969

ANNEX 16

TtrfTV'1 TA rVITnV(hTf IT nm IJVV| J .L. L ILVr .i JLJLj .LIV Vi ± . lM .

PL-ojecteeu )Dwalane sheiu"snnc

(Dinars I 000)

1968 1969 1970 1971 1972 17(actual)

Ca.h and deposits 1,138 253 265 313 392 ir53Ad-vances and receivables 1,182 682 600 500 400 30ULoans outstanding 3,664 7,178 12,317 16,896 21,367 .25,858Equity investments 1,557 2,032 2,562 2,712 2,912 3,162FYixed assets (net) 92 8.3 74 65 56 4-

7,633 10,228 15,818 20,486 25,127 29,818T r r, T YM m-1rr _______

Short-term liabilities 1,321 608 583 563 513

Lon.g-term loans,IBRD 2,283 4,659 8,056 10,552 13,220 :L5,8243wedish/other 274 1,174 2,288 4,214 6,117 7,995CNSS 438 407 376 345 314 253BCT 185 170 155 140 125 110

Subordinated government loan 615 615 615 615 615 615

EquityShare capital 1,500 1,50C) 2,500 2,500 2,500 2,500Reserves 1,017 1,095 1,245 1,457 1,723 2,028

7,633 10,228 15.818 20J186 259127 29.818

Borrowing base 2.917 2,995 4,145 4,357 14,523 4,828

Debt 3.395 6,625 11,090 15,566 20,091 2L.,527

Ijeb-/Eauitv with D 1.0 millions;are increase in 1970 1.16 2.21 2.68 3.57 4.44 5.06

Debt/Equity with D 1.5 millionre inGrease in 1970 1.16 2 21 2=319 3=20 4.0 4=60

.L) uJ/ jjrv

November 5, 1969

SOCIETE NATIONALE D'INVESTISSE1YMT

Pro.jected Cash Flow Statements 1969 - 1973~~T~~Dhars '000)

1969 1970 1971 1972 1973Sources

Profit before tax 205 321 484 589 674T)nre,ini on 9 9 9 9 9Share capital increase - 1,000 - - -Thin-urri ofjn

IBRD 2,604 3,862 3,401 3,633 3,926Swedish/fother 900 1,114 1,926 1,963 1,938

Collections on subloansiERD ' 228 465 805 1,065 1,322Swedishj/other 27 117 228 431 641OTwnma resoulrces 111 13' 198 193 173

366 717 1,231 1,699 2,133Sales from equity portfolio - 320 300 300 300

Decrease in short-term advances 500 82 100 100 100

4,584 7,425 7,451 8,293 9,083

ApplicationsRepapments

IBRD 228 465 605 1,065 1,322Swedish loan/other - - - 60 60CNSS 31 31 31 31 31BCT 15 15 15 I5 i5

274 511 851 1,171 1,428

Disbursements of loansOn IBRD :resources 2,604 3,862 3,401 3,633 :3,926On Swedish (or) other 900 1,114 1,926 1,963 1L,93dOn own resources 376 880 483 564 761

3,880 5,856 5,810 6,160 (5,625

Equity investments 4 U85 450 ;0Vv

Decrease in current liabilities 713 25 20 50 5052 u-i. -1^n -1.L-1 UTaxes 52 81 122 L4U 169

Dividends 75 90 150 175 200Increase (decrease) in cash (885) 12 48 79 61

4,584 7,1425 7,1451 8o9,3 99083

IBRD/DFCNovember 5, 1969