Citadel Cap Fund

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	27632
Company name	Citadel Capital S.A.E
Country	Egypt
Sector	Collective Investment Vehicles
Environmental category	FI
Department	Private Equity and Investment Funds
Status	Pending Disbursement

Date SPI disclosed	January 26, 2009
Projected board date	February 27, 2009
Previous Events	Signed: September 30, 2009 Approved: May 12, 2009

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The proposal is to make a commitment of up to $25 million, but in no event to exceed 10% of total commitments, in Citadel Capital Joint Investment Fund L.P. (“CCJI Fund” or the “Fund”). Prior to closing the name, of the Fund will change. CCJI is targeting US$500 million to make, alongside additional capital from the Sponsor and co-investors, 7-10 investments, typically controlling stakes in industrial consolidations, distressed and turnaround companies, buyouts and selective greenfield companies. The Fund will likely focus on mid to large cap companies in industries such as ceramics, oil and gas industries, logistics and transport, financial services, waste recycling, textiles, agricultural products and agribusiness and renewable energy. Geographically, it will focus on Egypt, its home market, other MENA countries particularly Algeria and Libya, and countries which have natural links to its primary markets including Sub-Saharan Africa.

Project sponsor and major shareholders of project company

The Fund sponsor is Citadel Capital S.A.E (“Citadel Capital” or the “Sponsor”), one of the leading private equity fund managers in Egypt with a successful track record. The Fund Manager will be Citadel Capital Management Limited (the “GP”), a subsidiary of Citadel Capital. Citadel Capital will contribute equity alongside the Fund at a fixed ratio of 1:2 for a total of up to US$250 million.

Citadel Capital, a joint stock company incorporated under the laws of the Arab Republic of Egypt, began its operations in 2004 as a two-person partnership between Ahmed Heikal and Hisham El-Khazindar. Over the last four years, Citadel Capital has executed some of the largest and most complex buyouts and corporate turnarounds in the MENA region and is currently one of the leading private equity firms in the region with a total enterprise value of completed and committed transactions of circa US$8 billion as of December 2008. Citadel Capital is headquartered in Cairo, Egypt with an additional office in Algiers, Algeria.

The firm’s investments are generally supported either by the region’s natural competitive advantages — (low energy costs, in certain countries low cost skilled labor, geographic advantages, cheap abundant quality raw materials) and / or the more common positive characteristics of emerging markets (limited competition, a fast growing un-leveraged consumer class, deregulation, supportive demographics).

Total project cost and amount and nature of IFC's investment

The target Fund size is expected to be US$500 million and IFC’s investment will amount to up to US$25 million, but in no event will exceed 10% of total commitments. The first closing for the Fund is expected in April 2009.

Location of project and description of site

The Fund is an exempted limited partnership formed and registered in the Cayman Islands. The Fund Manager is also incorporated in the Cayman Islands. The management team will be based in Cairo.

Anticipated development impact of the project

Private Sector Development: The Fund will provide value addition in the form of managerial and strategic support to improve the competitiveness of investee companies including securing financing for expansions, attracting and securing senior managerial talent, improving management reporting and controls and greenfield investment planning.

Economic Development: The Fund will build companies that will help in the necessary consolidation of certain industries by adding scale through acquisitions, capital investment, and institituting management talent to create local and regional industry leaders thus removing inefficiencies and raising standards. The expansion of investee companies regionally should also foster greater regional integration.

Implemention of best practice environmental and social standards: The Fund will adopt IFC’s environmental and social standards and over the life of its ownership of investee companies transfer this knowledge thus fostering best practice in the market.

IFC's expected development contribution

Risk Mitigation: (i) Non-financial: IFC’s presence as an investor in the Fund will give credibility to Citadel Capital’s efforts to institutionalize its private equity activities in the region. It will also give comfort to prospective institutional investors and help facilitate decisions regarding their participation.
(ii) Financial: IFC will be able to provide debt financing to the Fund’s investee companies at a time of turmoil in global financial markets when there is expected to be a credit crunch.

Knowledge and Innovation: IFC’s global expertise in private equity will enable it to support the institutionalization of Citadel Capital’s activities. IFC will also assist Citadel Capital in its regionalization strategy by using its global knowledge and presence on the ground to support the activities of the Fund.

Standard Setting: IFC will assist Citadel Capital with establishing an environmental and social management system and corporate governance standards and implementing these in the Fund.

Environmental and social issues - Category FI

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC will analyze the fund’s expected portfolio and sectors of investment and determine the Applicable Performance Requirements if any, that would include a combination of:

- The IFC FI Exclusion List and/or
- The applicable National Social and Environmental Laws and regulations and/or
- The IFC Performance Standards

IFC will also review, if required, the capacity of the fund to manage social and environmental risks and to establish and maintain a Social & Environmental Management System (SEMS). IFC may suggest Supplemental Actions to address any gaps in the SEMS if required.

The fund manager will be required to:

- Develop an, or upgrade, if necessary, any existing SEMS, prior to disbursement to the satisfaction of IFC
- Identify responsible, qualified persons to manage and implement the SEMS
- Commit to implement the SEMS over the life of the Fund, to ensure that its investments/activities are in compliance with the Applicable Performance Requirements
- Submit a periodic report to IFC as per a format to be provided by IFC

IFC will review the implementation and performance of the Fund’s SEMS for the first few projects, prior to the Fund’s investment, to ensure that the Fund’s SEMS is robust.

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