ALBANIA RECONSTRUCTION EQUITY FUND

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The Albania Reconstruction Equity Fund (AREF) is an equity fund established to support small and medium-sized enterprises (SMEs) in Albania. The Fund aims to achieve long-term capital appreciation by contributing to the modernisation, expansion, restructuring and development of SMEs and private enterprises in Albania. The Fund seeks to achieve its objective by taking a significant minority stake in the portfolio company through negotiated transactions while taking an active role in influencing its operations and management. The first investment for US$ 170,000 was signed in February 1999 and is being disbursed. The Fund will be the first non-banking financial institution in Albania to provide medium to long-term financing to Albanian enterprises and foreign investors willing to make investments in the country. The Fund will, therefore, play a critical role in speeding up the on-going privatisation of the Albanian economy and attracting foreign direct investment. The AREF will be established as an unincorporated investment vehicle with a total capital of US$ 14 million (ECU 12.7 million). The Italian Government will contribute equity capital of US$ 7 million (ECU 6.35 million). The Fund Manager is a consortium of companies led by Economisti Associati, and its participants include SEAF and Banca Popolare di Bari. The EBRD will contribute equity capital of US$ 7 million (ECU 6.3 million). The total project cost is US$ 17 million (ECU 15.3 million). The Fund will follow the EBRD's Environmental Procedures for Investment Funds. A US$ 3 million TC Fund will be provided by the Italian Government and used to finance the Fund’s operating expenses and other costs, including the Fund’s management fees.