Annual report 2007 - Faisal Finance Switzerland SA

Strength in Unity 

Faisal Private Bank 

(Switzerland) SA 

Annual Report ‘07 

ANNUAL REPORT ‘07

www.faisalprivatebank.com 

Faisal Private Bank (Switzerland) SA 

3, Quai du Mont-Blanc 

P.O. Box 1494 

1211 Geneva 1 

Switzerland 

Telephone: +41 (0) 22 908 53 00 

Facsimile: +41 (0) 22 908 53 99 

info@faisalprivatebank.com

The Ithmaar banking group is a global fi nancial services powerhouse whose fl agship subsidiaries and 

associates include Shamil Bank, Solidarity, Faisal Private Bank (Switzerland) SA, Faysal Bank Limited (Pakistan), 

First Leasing Bank and Ithmaar Development Company. 

The Annual Reports of the group’s diff erent entities for this year showcase the concept of 'Strength in Unity'. 

The diff erent companies, while unique and pioneering in their respective fi elds, together are components of a 

bigger picture, a bigger enterprise ... the Ithmaar banking group.

Table of 

CONTENTS 

Bank Profi le 1 

Board of Directors, Management, Auditors 2 

Chairman’s Statement 3 

Message from the Chief Executive 5 

Management Committee 8 

Corporate Statement 9 

Highlights: Finance and Operations 10 

Highlights: Private Banking 11 

Highlights: Investment Banking & Asset Management 14 

Portfolio, Commercial and Financial Services 18 

Traditional Islamic Financial Instruments 19 

Report of the Statutory Auditors 20 

Financial Statements 21

Bank Profi le 

Faisal Private Bank (Switzerland) SA (the “Bank”) is 

the first Swiss bank exclusively dedicated to innovative 

wealth and asset management in accordance with the 

principles of Islamic finance. 

The Bank was originally established in 1980 as Sharia 

Investment Services SA in Geneva. In 1990 Faisal 

Finance (Switzerland) SA was born of an innovative 

vision of asset management consisting of successfully 

marrying ethical values of Islamic finance with the 

traditional Swiss banking model. The Company 

continued to act as a financing company offering 

financial services for more than 20 years and, in April 

2002, obtained the Securities Dealer License under the 

terms of the Swiss Federal Law on Stock Exchange and 

Trading in Securities, regulated and supervised by the 

Swiss Federal Banking Commission. 

Thanks to the quality of its infrastructure, management 

and financial wherewithal the erstwhile, Faisal Finance 

(Switzerland) SA became a bank in October 2006 

thereby joining the prestigious circle of Swiss banks 

regulated by the Swiss Federal Banking Commission. 

Being located in Geneva, the birthplace and capital of 

the world’s private banking industry, the Bank is well 

placed to leverage the city’s financial infrastructure, 

services and expertise to deliver best-in-class services 

Faisal Private Bank continues to be regulated and 

supervised by the Swiss Federal Banking Commission. 

The Bank is thus fully compliant with Swiss banking 

and financial law pertaining to, amongst others, capital 

adequacy, risk diversification, accounting and antimoney 

laundering regulations. The Bank is a member 

of the Association of Foreign Banks in Switzerland and 

also a member of the European Private Equity and 

Venture Capital Association. 

Ithmaar Bank B.S.C. Bahrain (through sister-company 

Shamil Bank, Bahrain) holds 100% of the Bank and 

figures among the world’s most prestigious Arab 

banking institutions. For customers of Faisal Private 

Bank, this can be a firm guarantee of financial solidity. 

Due to this ownership structure, the Bank falls also 

under the consolidated supervision of the Central Bank 

of Bahrain. Being a member of the Gulf Corporation 

Council (GCC), Bahrain is a party to the Financial Action 

Task Force on money laundering as is the country of 

Switzerland. 

In addition, the esteemed and jurisprudential 

Religious Supervisory Board of our Group ensures 

that Faisal Private Bank offers investment products 

and advisory services that are structured according to 

the application of traditional instruments of Islamic 

finance. This ensures also that all activities of the Bank 

and employees’ professional integrity are compliant 

with the highest ethical standards. 

The Bank has a history of working with first class 

global financial institutions and engages in strategic 

partnerships with leading specialists in each asset 

class. This ensures that clients are only proposed the 

best products on the market. The Bank is structured 

and specialised to cater to the individual financial 

well-being of its clients. The Bank commitment is to 

provide state-of-the-art Sharia compliant investment 

opportunities, to privilege good ethics, trust and 

transparency and to operate in a spirit of confidentiality 

and partnership. 

With Faisal Private Bank, all stakeholders will benefit 

from a banking model that is highly personalised, 

global and competitive, the result of our deep 

experience in the Swiss private banking sector and 

our unique ethical heritage. 

Ethical banking is a concern for clients who are keen to 

enjoy good returns on their investments whilst limiting 

any adverse effects to their community and society at 

large.

Board of Directors 

Khalid Abdulla-Janahi Chairman 

Ziad Rawashdeh Vice-Chairman 

Pierre Besuchet Member of the Board 

William Burkle Member of the Board 

Gilbert Coutau Member of the Board 

Management 

Marco Rochat Chief Executive and acting Head of Private Banking 

Oliver Bertheau Head of Legal 

Jacqueline Consoli Bernasconi Head of Compliance and Risk Management 

Islam Hassan Chief Financial Offi cer 

Sayed Hassan Head of Private Banking, Middle-East 

Jeremy Howarth Head of Asset Management 

Giovanni Perin Head of Investment Banking 

Refl ecting international best practice in transparent governance structures and in conformity with applicable Swiss 

legislation, the Board of Directors and Management of Faisal Private Bank are two distinct bodies both in their composition 

and their function. Management has operational responsibility and the Board of Directors exercises a clear supervisory 

role managing the Bank’s strategy, performance and control mechanisms. 

Auditors 

PricewaterhouseCoopers SA – Geneva 

1/2 

ANNUAL REPORT ‘07 

Faisal Private Private Bank

Chairman’s Statement 

It is my great pleasure to present the eighteenth Annual 

Report of Faisal Private Bank (Switzerland) SA following 

its fi rst full year as a bank in accordance with Swiss law. 

By granting a banking license in late 2006 to Faisal 

Private Bank, the Swiss Federal Banking Commission 

confi rmed the Bank’s status as a duly-recognized 

institution by making it Switzerland’s fi rst Islamic bank, 

focusing uniquely on private banking activities. Whereas 

the Swiss license is undeniably a crowning achievement 

for the Ithmaar Bank Group, it can also be considered a 

milestone for the Islamic fi nancial industry as a whole 

since the granting of the much coveted license may be 

seen to refl ect the formal acceptance and recognition 

of Islamic Finance in an industry clearly dominated by 

non-Islamic institutions. The license is well merited 

and consistent with a track record of lasting fi nancial 

performance dating back to the early 1980s, when the 

Geneva offi ce was set up to provide services under the 

fi rst international Islamic fi nancial group through the 

pioneering leadership of HRH Prince Mohammed Al 

Faisal bin Abdulaziz Al Saud. 

The transformation of Faisal Private Bank into a fullfl 

edged Swiss bank is a major stride towards meeting 

the overall goal of the Ithmaar Bank Group to operate as 

a truly holistic institution. The Group aim is to develop 

and off er, through its subsidiaries and associates, a 

complete palette of Islamic banking services, including 

retail, corporate and private banking, investment 

banking, insurance, equipment leasing, real estate 

development and other client-centered specializations. 

Each entity is encouraged to develop an increasingly 

diversifi ed platform to satisfy its overall client base while 

conforming to the overall Group identity. Through Faisal 

Private Bank with its specialized banking services, our 

Group is proud to have a comprehensive model that 

merges a rigorous commitment to our ethical heritage 

with a world-renowned Swiss tradition for excellence in 

private wealth management. 

The role and mission of Faisal Private Bank are unique 

among Sharia-compliant institutions. To date, it is 

the fi rst such institution to specifi cally tailor Shariacompliant 

fi nancial products to meet the wealth 

management needs of affl uent or high net worth 

individuals. The majority of other Islamic banks focus on 

retail, corporate and investment banking activities, all 

of which lack the specifi c advisory skill sets demanded 

by private banking. Faisal Private Bank now addresses 

a specifi c need that to date was available only through 

conventional private banking and is being increasingly 

recognized on the market. 

I am proud to report a healthy fi nancial year for the 

Ithmaar Group as a whole, as consolidated earnings from 

its operations and that of its subsidiaries and associates, 

including Faisal Private Bank, continued their upward 

trend. And if these trends extend among our dynamic 

Group, we can only look forward to continuous and 

healthy growth in 2008. 

The scenario for Faisal Private Bank in 2008 is to continue 

to leverage its competitive edge and privileged location 

in order to expand its product and service off erings while 

simultaneously adapting sophisticated conventional 

portfolio management tools into Islamic banking. 

Although the Bank will make a major eff ort to diversify 

into new asset classes and product structures, its main 

focus will be to continue its expert management of 

its ever-growing real estate portfolio. The Bank also 

expects to gain footholds in key markets by opening 

representative offi ces outside Switzerland. 

On behalf of the Board of Directors, I extend our gratitude 

to the management and staff of Faisal Private Bank for 

their eff orts in 2007 towards building the foundation to 

meet tomorrow’s challenges. 

I also extend my appreciation to our Board of Directors 

for their invaluable guidance and to our clients for their 

exceptional loyalty. Thanks to all of you, the fi nancial 

outlook for Faisal Private Bank is optimistic and bright. 

Khalid Abdulla-Jahani, CHAIRMAN

Khalid Abdullah-Janahi 

CHAIRMAN

Message from the Chief Executive 

Planning for expansion, diversification, innovation 

and growth were the key moving forces behind the 

activities of Faisal Private Bank in 2007, its premier full 

year as the first Swiss private bank to operate according 

to Sharia principles. 

Thanks to the banking license granted by the Swiss 

Federal Banking Commission in late 2006, many 

new lucrative avenues were opened to the Bank to 

better meet client needs and satisfy the objectives 

of our shareholders. We accordingly grasped these 

opportunities to optimise on our core qualities by 

laying out a series of new Sharia-compliant projects 

while at the same time beginning to shape future 

growth. 

The true reward for our efforts was not only bringing 

in new customers but more importantly, existing 

clients showed their confidence in our capabilities by 

increasing the investments they currently hold within 

the Bank. A major selling point has been Switzerland’s 

stable socio-political climate in addition to the Bank’s 

impeccable track record and governance. Our new 

banking status has allowed us to work in multiple ways 

to realize the Bank’s aim of becoming a specialist private 

bank internationally recognized for its innovative but 

prudent financial solutions that provide attractive 

returns for clients. 

Establishing a direct physical presence in key markets 

outside Switzerland is currently an important part 

of the Bank’s strategic plan. In Southeast Asia, for 

example, we are finalizing the procedure for opening 

a representative office in Kuala Lumpur in Malaysia, 

where Islamic finance is more advanced than in other 

countries in the Southeast Asia region. Other targeted 

sites for the presence of Faisal Private Bank include the 

Arabian Gulf, which would give us additional coverage 

of the entire region. 

To meet growth objectives and client expectations, 

priority in 2007 was placed on diversifying investment 

opportunities, particularly in real estate, our core 

portfolio, with a focus on the potentially advantageous 

Central and East European market, where the 

economies are starting to take off, real estate prices are 

relatively low and the middle-class is growing. In 2007 

the Bank’s real estate portfolio reached CHF1.2 billion, 

up 20 percent on 2006, and covered ten countries: 

Bulgaria, Germany, Italy, Latvia, Lithuania, Portugal, 

Romania, Slovakia, the UK and the US. 

Building on its unrivalled expertise in real estate and 

following two previous successful real estate funds, 

the Bank prepared for a 2008 launch of the Central and 

Eastern Europe Real Estate Fund, designed to invest in 

commercial, residential, industrial and land properties 

that offer high potential for capital growth. The Fund, 

which is registered in Jersey, will initially target real 

estate investments in Romania, Bulgaria and Poland, 

because of their relatively robust economies, with the 

option to invest later in Croatia, the Czech Republic, 

Montenegro, Serbia and Ukraine. 

Ithmaar increased its indirect holding of FPB to 100%, 

following the former’s complete acquisition of Shamil 

Bank, our majority shareholder. This new organizational 

structure, known as the Ithmaar Banking Group, 

whereby member companies adhere to an overall 

group identity and mission, has resulted in improved 

efficiencies and synergies throughout the Bank and in 

other entities under the Ithmaar umbrella. Under the 

new scheme, we will continue to collaborate closely 

with both Shamil and Ithmaar banks to provide a wide 

range of investment and wealth management solutions 

for both institutional and high net-worth investors.

Marco Rochat 

CHIEF EXECUTIVE 

5/6 


Faisal Faisal Private Bank

... MESSAGE FROM THE CEO CONTINUED 

In 2007 we also developed a global marketing strategy 

to publicize the Bank’s new international image and 

identity in selected media and at appropriate events. 

One example of our campaign efforts is the Bank’s 

sponsorship of Romain Grosjean, a talented young 

Swiss-French motor-sports star who drives in the GP2 

series, a competition ranking just below Formula 1 

in global stature. Communication of Ithmaar Group 

company brands features prominently on the car and 

driver, emphasizing our new Group identity. 

The institution was further enhanced with investments 

in developing the Bank’s human resources and 

technical capabilities. To better serve clients with our 

upcoming range of new products, we have accordingly 

strengthened our professional team with expert 

personnel who can ensure a collective know-how 

drawn from their previous experience in reputable 

international finance organizations. 

Both clients and staff can only benefit from the recent 

deployment of a fully integrated front-to-back-office 

banking system that will significantly enhance our 

performance, productivity and regulatory compliance. 

To heighten the effectiveness of our Private Banking, 

client-facing staff, a CRM (Customer Relationship 

Management) system has also been implemented. 

With it, private bankers are expected to be able to 

better maintain relationship with existing customers 

as well as to more effectively build rapport with new 

and future clients. 

2007 proved to be a year of turbulence in the world 

financial markets due to the US sub-prime mortgage 

crisis. 2008 is likely to be a challenging year through 

the subsequent liquidity contractions in the market, 

and further negative developments may well occur. 

The aftermath of such a far-reaching crisis is, in all 

probability, not yet fully realized and the Bank will 

continue to remain vigilent with regards to its existing 

investments in areas more susceptible to difficulties 

associated with the current and negative economic 

events. 

Looking forward, Bank strategy will continue to focus 

on diversification and minimal-risk investments in real 

estate - particularly in the promising East European 

region- and potentially in renewable energy projects. 

When propitious, the Bank will also continue to form 

strategic partnerships to expand its services and 

products to satisfy the needs of an ever-growing 

exigent clientele while at the same time complying 

with the highest ethical principles of Islamic finance. 

Another important dynamic in our future strategy will be 

to introduce new high-yielding alternative investment 

opportunities catering to different levels of risk and 

allocation preferences. The Bank is already active in 

such specialised sectors as contemporary art and is 

considering to set up a further series of investments 

in environmentally-friendly and alternative energy 

projects, including solar energy. 

In conclusion, I am assured that the Bank will continue 

its forward-growth path, which has been made possible 

by the exemplary work of our dedicated and resourceful 

Board of Directors, management and staff as well as by 

the confidence of our esteemed clientele. My heartfelt 

thanks go to all of you for your commitment and 

contributions in making 2007 another successful year 

and in further advancing the Bank’s goal of becoming a 

world leader in specialised private banking. 

Marco Rochat, CHIEF EXECUTIVE

Management Committee 

Jacqueline Consoli Bernasconi 

Head of Compliance & Risk Management 

Oliver Bertheau 

Head of Legal 

Giovanni Perin 

Head of Investment Banking 

Islam Hassan 

Chief Financial Offi cer 

Sayed Hassan 

Head of Private Banking - Middle East 

Jeremy Howarth 

Head of Asset Management 

7/8 


Faisal Private Bank Bank

Corporate Statement 

Our Vision 

� At Faisal Private Bank our objective is to “stay ahead of the curve”. For us, this requires that we demonstrate 

consciousness and responsibility whilst seeking performance within a partnership model that integrates Swiss 

private banking excellence with our unique ethical heritage of Islamic finance. 

Our Mission 

� First and foremost, we are committed to serving the specific requirements of our clients and stakeholders 

by planning a dynamic portfolio offering for the near future and by soon effecting a much stronger regional 

presence. 

Our Strategy 

� We focus on wealth management and advisory services and aim to offer a diversified and 

innovative investment platform by combining entrepreneurship and professionalism, and by leveraging 

our key competencies through a network of strategic partners. 

Our Core Values 

� Excellence: 

� In demonstrating professionalism and service; 

� In balancing opportunities with prudence; 

� In innovation within a culture of entrepreneurship. 

� Teamwork: 

� When implementing our strategy within the scope of our vision; 

� When sharing knowledge and expertise; 

� When promoting respect and dialogue of cultures. 

� 

Leadership: 

� With clients and stakeholders at large; 

� In respecting our ethical heritage; 

� In realising the aspirations of our staff; 

� In helping others in the community.

HIGHLIGHTS: Finance and Operations 

Financial Overview 

Needless to say, 2007 was a challenging year for the 

banking industry. The tightening of credit in the wake of 

the subprime episode has led to increased scrutiny of 

banks’ dealings and heightened market tension. In 2007 

our core business of real estate was mildly infl uenced 

by these developments and business remained stable. 

The continuing rapid expansion of Islamic banking should 

mitigate the long-term impact of recent events on the 

Bank’s operations. 

As a material portion of the Bank’s assets are held in 

Euros, the appreciation of the Euro against the Swiss 

Franc resulted once again, in the fi nancial statements 

expressed in Swiss Francs, in a signifi cant unrealized 

exchange variation - this year being a gain of CHF1.4 

million. This is in spite of the depreciation of the USD 

as refl ected in Bank’s USD net asset position which also 

remains signifi cant. Exceptional and non-recurring 

items of CHF 1.8 million in 2006 included under “Result 

from Islamic fi nancing” and “Other operating results” are 

absent from the 2007 Income Statement, which yielded 

an operating profi t of CHF3.6 million. 

Net profi t for the year, after extraordinary income of CHF1.6 

million and extraordinary expense of CHF3.1 million (for 

the constitution of a general risks provision), amounted to 

CHF1.3 million against CHF1.8 million last year. 

Financial Points 

� In 2007, the Bank posted a net profi t after taxes and 

extraordinary items of CHF1.3 million. 

� Excluding the unrealized foreign exchange result 

and before extraordinary items and taxes, the Bank 

recorded an operating profi t of CHF2.2 million (2006: 

CHF1.2 million loss). 

� Operating expenses have decreased slightly to 

CHF12.5 million from last year’s CHF12.6 million. 

� More than 55% of the income-earning assets are 

invested in short-term fi nancial instruments. 

� The Bank has a paid-up capital of CHF20 million. At 

the end of 2007, the total shareholders’ equity of the 

Bank amounted to CHF58.1 million against CHF 56.9 

million at the end of 2006, refl ecting a net increase 

of 2.1%. 

� A decrease in funds under management of about 

USD90 million was mainly due to certain planned 

withdrawals by related parties. 

� The Bank also prepares a set of annual accounts 

with the US Dollar as functional currency for Group 

reporting purposes. These accounts give a more 

accurate and realistic picture of the Bank’s activity 

given that a good deal of its business is conducted 

in US Dollars; one of the major impacts of this 

presentation is the recording of a material USD4.0 

million foreign exchange gain on the Bank’s Eurodenominated 

assets with respect to the USD in 

2007. The following table highlights our fi nancial 

position at December 31, 2007 and 2006. 

Overview of Financial Highlights expressed in 

USD (million)* 

31.12.2007 31.12.2006 

Total Operating Income 13.9 10.1 

Total Operating Expenses 10.5 9.7 

Operating Profi t 3.4 0.4 

Net Profi t for the Year 6.6 1.9 

Total Equity 55.3 48.7 

Fund Under Management 581.1 671.2 

*USD as functional currency. 


Faisal Private Bank Bank 

9/10

HIGHLIGHTS: Private Banking 

The steady efforts undertaken during the last years 

to transform our institution into a Swiss Private Bank 

and that have culminated in the granting of a banking 

license, have been continued in 2007, in particular 

within the Private Bank department in order to deliver 

the best possible service for our valued clients. 

In last year’s annual report, we highlighted the 

challenges we faced in 2007 towards achieving our 

ambition of transforming ourselves into a true Private 

Bank. The main challenges were: 

- to increase our service offering and, 

- to expand our investment platform. 

The Increase of our Service Offering 

The increase in 2007 of our service offering has been 

partially achieved by the selective introduction of 

additional professionals in the team to bring in new 

talent and complementary skill-sets. This enables 

us to deliver faster and more targeted service to our 

customers. Further recruitments are planned for 2008. 

The other source of increase of our service offering 

will be through the geographical expansion of our 

Department by reinforcing our presence within our 

key markets to deliver our services directly to clients. 

Significant efforts have been deployed in 2007 towards 

the establishment of a representative office in Malaysia. 

From the planned Kuala Lumpur hub we can reach out 

to the Muslim communities in Malaysia, Singapore 

and Indonesia and even to other locations such as 

Brunei, Thailand, India and Hong Kong. We have strong 

expectations that such a representative office can be 

opened in 2008. 

Also in 2007, we worked on the analysis and evaluation 

of the options available to us in order to strengthen 

our presence in the Gulf and neighboring countries. 

At the same time, we reinforced our ties in the area of 

Private Banking with our Group companies in Bahrain, 

Ithmaar Bank and Shamil Bank of Bahrain. In 2008, we 

will also be examining the solutions to better cover 

other regions/countries such as Turkey, North Africa 

and Pakistan. 

Finally, we have developed several relations with 

local partners, independent consultants and business 

introducers to improve overall geographical coverage, 

thereby consolidating a well organized hybrid sales and 

support force to better serve our clients. 

The Expansion of our Investment 

Platform 

In 2007, the plans for an expansion of our investment 

platform have taken significant steps forward with 

several developments that occurred at the level of 

our Sharia compliant investment product offering, our 

banking systems as well as our customer relationship 

information technology. 

The expansion of our investment product range will 

be based around two pillars: the creation of a range 

of investment grids that allow us to offer to our clients 

a tailored portfolio approach and the creation of a 

product catalogue which includes proprietary products 

as well as third-parties offerings. 

The Tailored Portfolio Approach 

Our team’s commitment to the new banking license 

is placed against the backdrop of a mission to 

continuously serve our clientele in accordance with the 

best standards of the industry. Part of this commitment 

is manifest in the work done during 2007 to put the 

Bank in 2008 in a position to propose to its clients a 

diversified portfolio approach. Although in the past, a 

number of different products had been available to our 

customers to choose from, our desire for the future is to

... .. HIGHLIGHTS: Private Banking CONTINUED 

improve diversification and give our clients the means to 

place their funds through an asset allocation approach. 

Starting from a pro-forma optimized investment grid 

corresponding to the risk/return profile of our clients, 

we then adapt the definitive asset allocation to their 

personal characteristics and individual desires thus 

creating tailored portfolios. 

The Product Catalogue 

In order to be in a position to offer this managed 

portfolio approach, we have invested a lot of effort 

in developing our catalogue of products. We will very 

soon be able to offer our clients a large number of new 

Sharia compliant products, each with a different risk/ 

reward profile. 

In our catalogue of new products, we have been looking, 

and will continue to look for, Sharia compliant products 

such as structured notes with full or partial capital 

protection, sukuks, equity funds, exchange traded funds, 

commodity funds, preferred stocks, private equity and 

even hedge funds though the latter are difficult to find 

given that they are rarely Sharia compliant. We have 

developed numerous relations with external asset 

managers and product providers, carefully selected 

according to their historical track-records and/or their 

ability to structure products according to the specific 

needs of our clients. 

The construction of our clients portfolios will also 

include some of the Bank’s existing products such as 

a range of diverse real estate products and Parallel 

Purchase Sale of Currency and Commodities (PPSC&C) 

short term solutions. The Bank will also be launching in 

2008 a full-fledged real estate fund focused on Central 

and Eastern Europe. The size of the Fund is €150 million. 

The Bank will be its distributor and investment advisor. 

Other new products we are developing include an 

Ijara leasing fund in Swiss Francs offering a very stable 

platform for investors interested in such fixed income 

products. We have also been investigating investments 

in alternative energies. 

Also in 2008, we will be analysing the possibility of 

developing a short-term mutual fund which will be 

investing in a series of PPSC&C positions. Currently, our 

clients are enjoying the benefits of such a short-term 

investment by placing/exiting in an “ad hoc” manner. 

Having the PPSC&C structured within a formal fund 

would have the advantages of offering a higher liquidity 

and optimized risk management thanks to counterparty 

diversification. 

New Banking and Customer Customer Relationship 

Management Systems 

2007 has seen the implementation of two major 

Information Technology systems within the Bank. First 

and foremost, in order to be well prepared for the 

significant amount of new products and services we 

have launched in January 2008 our new banking system. 

This system will enable us to process, in a very efficient 

manner, all sorts of transactions and was carefully 

selected over a wide range of competing applications for 

its flexibility and especially scalability. Installation and 

deployment kept a full-time team of three software and 

system engineers busy for over six months. The “live” 

operation of the system, virtually error free and with 

minimal processing time on a per-transaction-basis has 

confirmed our sound choice. 

We also deployed a Customer Relationship Management 

system (CRM) in 2007. The CRM system is a 

cutting edge application that will enable our team 

of Relationship Managers to better serve the Bank’s 

existing clients through the efficient use of personal 

data and workflow management and especially 

coordinate the acquisition of new clients through a 



11/12

... .. HIGHLIGHTS: Private Banking CONTINUED 

systematic targeting approach as well as through a 

rationalized marketing campaign philosophy. 

Funds Under Management 

Funds under Management, with the exception of 

certain planned withdrawals by related parties, are 

comparatively on the rise. This is a direct reflection of 

the overall satisfaction we believe our clients have been 

expressing on the quality of service they receive as well 

as the stable returns they realised. Also, the average 

amount of funds invested by a given client is on the rise, 

suggesting again, a certain degree of satisfaction on the 

part of our customers. 

We are in the planning stages to ramp up the size 

of our Private Banking and Client Administration teams 

in order to meet the ambitious plans of increasing 

Funds under Management set forth by the Bank’s 

Management Committee and Board of Directors 

for 2008 and beyond. This planned increase is in 

anticipation of the likelihood that a large number of 

new clients are to be attracted to our institution, partly 

thanks to the significantly enhanced product range 

discussed earlier and partly through a systematic and 

wide-scale new client acquisition plan.

HIGHLIGHTS: Investment Banking 

and Asset Mangement 

By practicing a cautious approach to risk management 

we have forged solid partnerships with international 

specialists in each asset class. By doing this, Faisal 

Private Bank is able to maintain a constant flow of 

investment opportunities that are ethical, innovative 

and diversified. 

During the last five years, our Investment Banking, 

Asset Management and Legal teams have concentrated 

on developing and strengthening a unique model of 

international real estate investment products. Our 

experts are able to penetrate new markets whilst 

continuing to invest in other key markets so that we can 

continue to provide our investors with returns above 

the market average with an equivalent risk profile. 

Investment Products: Real Estate 

Faisal Private Bank has developed unrivalled expertise in 

the selection, structuring and management of investment 

products with an underlying diverse international real 

estate portfolio. 

Principles and Markets 

Approximately 56% of the Funds Under Management 

are invested in real estate assets. Over the years, the 

Bank has been able to develop significant know-how 

and expertise in real estate. 

The real estate investments are set up by the means of a 

well-tested legal structure which ensures the safeguard 

of the asset and tax efficiency. 

Like our Bank’s other investments the real estate 

investments are subject to a thorough analysis from 

acquisition through exit. We build our decisions on 

fundamental due diligence and a commitment to 

analyzing the characteristics of all investments down 

to the finest details, including competitive market 

conditions, credit attributes, financial performance, 

construction quality and legal aspects. A skilled 

and efficient negotiation team is able to conclude 

transactions that ultimately produce the right balance 

between reward and risk. 

The Bank has developed a remarkable footprint in the US 

market with a large and well diversified portfolio of real 

estate assets. The Bank is involved in the development of 

new sites as well as the management of existing ones. 

The project sites are typically located in desirable growth 

or barrier-to-market-entry areas, demonstrating strong 

occupancy and growth rates, close to transportation lines 

and employment centres. 

Although the US real estate market has recently 

performed in a turbulent manner, the Bank’s US real 

estate portfolio is not directly linked to the subprime 

market, unlike the much publicised transactions 

of some of the world’s larger investment banks, 

meaning the Bank is not engaged in the purchase or 

trade of mortgage-related financial products. There 

are, however, certain downside risks associated 

with the portfolio of investments which may affect 

it. For example, timing of the realization of assets 

and property stabilization periods will probably be 

impacted. Even with attractive inherent values, the 

overall lack of liquidity and confidence in the market 

means that trading of many assets has slowed down 

and may remain contracted for some time. 

Since 2003, the Bank developed real estate investments 

in Europe starting with the UK and Central European 

countries that entered the EU on May 1, 2004. The 

Bank is continuously exploring new investment 

opportunities with an acceptable risk/reward ratio in 

developed and developing markets in Europe and the 

rest of the world. 

In 2005, the Bank reviewed the real estate markets of 

countries that are candidates for EU accession in 2007 



13/14

... HIGHLIGHTS: Investment Banking and Asset Management CONTINUED 

(Romania and Bulgaria). Based on this review, the 

Bank made its first investment in Bucharest, Romania. 

To capture the foreseen growth potentials in these 

markets, it is the intention of the Bank to strengthen 

its position in these markets through establishing strong 

links with local partners. For diversification purposes and 

optimization of overall return to investors, the Bank also 

invested in Western Europe. 

In 2007, the Bank exited its first investment in Romania 

within expectations and further strengthened its 

position in the Eastern European market by entering 

into new investments. With respect to the US, in 

2007 the Bank expanded its multifamily apartment 

development holdings there, and exited real estate 

investments with a total of USD 221 million in real 

estate value, achieving or exceeding the projected 

returns. 

In 2007, the Bank started its Western European 

investment activities in Nursing Homes and Housing 

for Seniors in Germany. The investment strategy is to 

acquire and consolidate a portfolio of Nursing Homes 

located there, and capitalize on the rising demand, 

driven mainly by an increasingly ageing population. 

The key value drivers of the investments are the 

expectation of decreasing capitalization rates in the 

next 4-5 years and attractive current yields during the 

holding period. 

The Bank is currently considering the launching of 

more structured vehicles, which will be accessible to 

institutional investors and high-net-worth individuals. 

Activities 

The Bank has structured a dynamic, profitable and 

varied real estate portfolio comprising residential, 

commercial and industrial assets which reflects the 

following features: 

� The Bank manages a total investment portfolio with 

an underlying asset value of CHF1.3 billion. 

� The average period of investment ranges from 3 to 5 

years.


� The average annual rate of return varies depending 

on each project and is around 10-12% in the US, 12- 

15% in Western Europe, and 15-20% in Central and 

Eastern Europe. 

Investment Products: Structured Finance 

Principles 

A portion of funds managed by the Bank are invested 

in Islamic structured finance. Islamic structured finance, 

like all other modes of Islamic financing, needs a proper 

structure to combine a modern financing method and 

Sharia compliance. 

Over the years, the Bank has developed procedures and 

instruments to ensure the quality of Sharia compliant 

trade finance investments. This means that: 

� The transactions are specifically tailor-made to 

reflect the effective business transaction. The 

Bank’s investment philosophy is to achieve a proper 

balance between risk and reward. This strategy has 

helped the Bank in developing a wide network of 

business relations across various Islamic markets. 

� The Bank uses Islamic structured financing 

documents and procedures which satisfy legal 

requirements and are in compliance with Sharia 

principles. 

� Risk Management is the standard business practice 

of the Bank. Accordingly, the Bank has developed a 

list of various combinations of acceptable collateral. 

Structured finance facilities of the Bank are 

supported by tangible and enforceable collateral. 

Investment Products: Capital Market and 

Leasing 

Principles 

The Bank has traditionally enforced a cautious 

approach when investing in capital markets and has 

followed conservative investment principles. 

� The Bank invests only in stocks that meet the Sharia 

guidelines. This automatically eliminates speculative 

and intangible elements from the investment. 

� The Bank developed a series of modern analytical 

tools to conservatively evaluate the risks and viability 

of an investment. 

� Qualified and experienced staff perform the due 

diligence on a prospective investment that is 

continuously followed up for market variations. 

� The Bank follows a well structured investment 

strategy which comprises the cautious selection 

of investment vehicles and products, industry and 

country diversification, administration, monitoring 

and follow-up of investments, liquidation of nonperforming 

investments, etc. 

Activities 

The Bank, on behalf of its clients and related entities, 

manages a total portfolio of around CHF97 million of 

equities. The Bank is involved in a variety of equity 

market activities, such as the following: 

� Purchase and sale of stocks. 

� Private equity investments through a selection of 

individual opportunities from various deal flows 

sourced from major specialised investment houses. 

� Acts as advisor to related entities for investment, 

specifically in private equity. 

� Launches and manages various kinds of syndicated 

investments. 



15/16


Investment Products: Parallel Purchase 

and Sale of Currencies & Commodities 

(PPSC&C) 

Principles 

� The Islamic alternative to conventional short-term 

market investment is derived from transactions 

in Parallel Purchase and Sale of Currencies & 

Commodities (PPSC&C), that is, a spot purchase of 

a currency or commodity and a forward sale of the 

same. 

� The investments in PPSC&C are made in 

internationally traded currencies and commodities 

only. Following the Bank’s strategy to minimise 

risks, the PPSC&C transactions are dealt with 

cautiously selected parties. During the year, six 

such counter-party arrangements (mainly top 

banks) were in place and actual investments were 

made in four different currencies for periods from 

one week to a month. 

Treasury Services 

� The Bank provides currency-trading services to 

its clients. Although not a market maker in any 

currency, through the long standing relationship 

with reputed banking institutions, the Bank is in a 

position to obtain very competitive prices both in 

spot and forward transactions. 

� The treasury professionals closely watch the 

world financial markets and alert and advise the 

management and the clients. 

It will remain an express goal of the Bank and of its treasury 

professionals to provide expert advice to its clients 

in all financial matters and to assure maximum security 

for all investments.

Portfolio and Financial Services 

Portfolio Management Services 

� Fiduciary Investment 

� Investment Advisory Services 

� Foreign Exchange Transactions 

Financial Services 

� Forex and Precious Metal Trading 

� Medium and Long-Term Morabaha Financing 

� Custodian Services 

� Islamic Securities 

� Fund Transfer 



17/18

Traditional Islamic Modes of Investment and 

Financial Instruments 

Modaraba (Trust Financing) 

The Modaraba is an Islamic financial instrument in which 

there are two parties: the beneficial owner(s) (Rab Al- 

Maal) and the managing trustee (Modareb). By virtue 

of the Modaraba contract, an Islamic institution may 

act as Modareb and therefore have the responsibility of 

investing funds provided by the client for this purpose. 

It alternatively may act as Rab Al-Maal, providing the 

funds to the client who acts as Modareb. The parties to 

the Modaraba shall agree, prior to any undertaking of 

business, on the ratio of distribution of profit. 

Mosharaka (Profit Sharing) 

A joint venture agreement by which an Islamic financial 

institution advances funds in parallel with clients in 

order to participate in an equity project. The parties 

bear any losses incurred in direct proportion to their 

contributions. Likewise, profits are shared in direct 

proportion to the contribution after payment of any 

agreed management fees. 

Morabaha (Cost-Plus Financing) 

A contract in which a client wishing to purchase 

equipment or goods requests an Islamic financial 

institution to purchase these items on his behalf and 

then sell them to him at cost, plus a reasonable profit. 

Capital and profit are due and payable on terms agreed 

between the parties. 

Ijara (Leasing) 

This instrument permits financing by an Islamic financial 

institution of equipment, building and other facilities as 

requested by a client. The rental rate is agreed between 

the client and the institution. 

Ijara-Wa-Iktina (Leasing Purchase) 

Under such a contract, an Islamic financial institution 

finances (purchases) equipment, building or an entire 

project for the purpose of renting the same to the client 

against an agreed rental fee. The client agrees to make 

payments into an Islamic investment account that will 

eventually lead, as specified in the agreement, to the 

client’s purchase of the equipment or project from the 

institution. Profits accumulating in the investment 

account are for the shared benefit of the client and the 

institution. 

Bei Al-Arboun (Islamic Option) 

The Islamic form of the Western option whereby 

a borrower can contract with an Islamic financial 

institution or investor to purchase goods on its behalf 

at a fixed price, upon instruction from the borrower. 

The borrower pays the Islamic financial institution a 

deposit which it keeps in the event that the borrower 

decides not to proceed with purchase. If the borrower 

does proceed, the balance is paid to the investor. Bei 

Al-Arboun can also be used for structuring capital 

protected funds. 

Sukuk (Islamic Bond) 

Sukuks are financial securities reflecting the Islamic 

equivalent of bonds and represent a pro-rata of the 

asset that is allocated to its client. The risk of the sukuk 

is the risk of the asset or transaction which forms the 

underlying.

PWC Letter 



19/20

Financial 

Statements

BALANCE SHEET 

as at December 31, 

(Expressed in thousands of Swiss Francs) 

ASSETS 

Notes 2007 2006 

Liquidities 563 0 

Due from Bank 3.5, 3.10 39’955 41’452 

Due from Customers 3.1, 3.10 63’124 14’844 

Financial Investments 3.2, 3.5, 3.10 31’282 25’584 

Participations 3.2, 3.3 2’442 2’442 

Fixed Assets 3.4 3’452 2’980 

Accrued Income and Prepaid Expenses 11’971 15’902 

Total Assets 152’789 103’204 

Included in the above: 

Total amounts due from Group companies and Holders 

of qualifi ed participations 0 0 

LIABILITIES AND SHAREHOLDERS’ EQUITY 

Due to Banks 3.5, 3.10 48’510 9’926 

Due to Clients 3.10 28’926 24’481 

Accrued Expenses and Deferred Income 8’462 4’726 

Valuation Adjustments and Provisions 3.7 8’770 7’213 

Share Capital 3.8, 3.9 20’000 20’000 

General Legal Reserve 3.9 4’100 4’100 

Retained Earnings 3.9 34’021 32’758 

Total Liabilities and Shareholders’ Equity 152’789 103’204 

Included in the above: 

Total amounts due from Group companies and Holders 

of qualifi ed participations 37’065 9’926 

Off -Balance Sheet Transactions 

Contingent Liabilities 3.1, 4.1 2’539 5’073 

Irrevocable Facilities Granted 

Derivative Financial Instruments: 

3.1 4’082 22 

- Positive replacement values 0 0 

- Negative replacement values 0 0 

- Underlying exposure 0 0 

Fiduciary Transactions 4.2 167’321 454’711

INCOME STATEMENT 



RESULTS FROM ISLAMIC FINANCING 


Income from Parallel Purchase and Sale 

of Currencies & Commodities 275 280 

Results from Financing Activities 2’721 (230) 

Cost of Financings (2’190) (1’938) 

NET RESULTS FROM FEE BUSINESSES 

806 (1’888) 

Fee Income on Islamic Financing Activities 

Management Fees and Profi t Participations on 

8’893 9’052 

Assets Under Management 4’675 4’833 

NET RESULTS FROM FOREIGN EXCHANGE 

13’568 13’885 

Foreign Exchange Gain (Loss) 1’440 (2’259) 

OTHER ORDINARY RESULTS 

Results from Financial Investments 285 (1’066) 

Results from Participations 453 793 

Results from Real Estate 0 27 

738 (246) 

Total Income 16’552 9’492 

OPERATING EXPENSES 

Personnel Expenses 5.1 7’907 7’848 

Other Operating Expenses 5.2 4’597 4’786 

Total Operating Expenses 12’504 12’634 

Gross Profi t (Loss) 4’048 (3’142) 

Depreciation on Fixed Assets and Write-Off s (432) (362) 

Profi t (Loss) before Extraordinary Items and Taxes 3’616 (3’504) 

Extraordinary Income 5.3 1’556 5’855 

Extraordinary Expense 5.4 (3’108) 0 

Taxes (801) (607) 

Profi t for the Year 1’263 1’744 

Retained Earnings at Beginning of the Year 32’758 31’014 

Retained Earnings at End of the Year 34’021 32’758 



21/22

PROPOSED APPROPRIATION OF RETAINED EARNINGS 




Retained Earnings Available for Appropriation 34’021 32’758 

Retained Earnings Carried Forward 34’021 32’758

NOTES TO THE FINANCIAL STATEMENTS 

as at December 31, 2007 and 2006 


1. SUMMARY OF BUSINESS OPERATIONS 

1.1 Introduction 

Faisal Private Bank (Switzerland) SA ("the Bank"), formerly 

Faisal Finance (Switzerland) SA until October 3, 2006, 

was established in Geneva on February 20, 1980 under 

the name of Sharia Services SA and was restructured in 

March 1990 into a bank-like finance company offering 

financial services and financial products in accordance 

with the principles of the Islamic Sharia (laws derived 

from Holy Quran that Muslims observe in their social and 

economic life). 

In April 2002, the former Faisal Finance (Switzerland) SA 

obtained a Securities' Dealer License under the terms 

of the Federal Law on Stock Exchanges and Trading in 

Securities. In October 2006, after having received a 

Swiss banking licence, the company was registered as a 

bank in the Commercial Register. The Bank is supervised 

by the Swiss Federal Banking Commission (SFBC). 

The Bank does not outsource any significant business 

activities in the sense of Federal Banking Commission 

Circular CFB 99/2 “Outsourcing”. 

At the end of 2007, the Bank employed 46 staff on a full 

time basis (2006: 38). 

1.2 Business Activities 

The Bank offers a wide range of Islamic financial services, 

which are conducted in accordance with the principles of 

the Islamic Sharia according to which the investments 

in various industries as well as dealing in interest are 

prohibited. 

In principle, the Bank provides portfolio management 

services to private investors. The following is a summary 

of the main business activities of the Bank: 



1.2.1 Asset Management Operations 

These operations are essentially related to the portfolio 

management (including real estate, equity and leasing 

assets), fiduciary placements and security and foreign 

exchange trading. 

1.2.2 Financing Activity 

Financings are extended as credits (Morabaha) and are 

generally collateralised by a variety of assets or by bank 

guarantees. 

1.3. Risk Management 

The Bank’s Board of Directors promotes a high standard 

of ethical behaviour at all levels of the Bank. The 

Compliance and Risk-Management function ensures the 

Bank’s compliance with all applicable laws, regulations, 

codes of conduct and standards of good practice. 

The Board of Directors also determines, and periodically 

re-examines, a set of credit limits for the financing/ 

investment activities of the Bank. Adherence to these 

limits is monitored on a continuous basis. 

The responsibility for risk management is segregated 

from trading operations, portfolio management and the 

back office function and is divided under the following 

three categories: 

a) Credit Risk 

23/24 

The Bank restricts its exposure to credit risk by 

performing detailed analysis of the borrower’s business 

and credit worthiness, and by ensuring that, the Bank’s 

portfolio of credits is diversified. Credit is granted within 

discretionary limits. 

The credit department of the Bank analyses all credit 

proposals, monitors performance of credits and 

collaterals, and provides for assets which are doubtful of 

recovery, if necessary.




b) Market Risk 

The Bank is exposed to market risks mainly through its 

investments in private equity and structured products. 

Performance of private equity and structured investments 

is monitored on a regular basis and management 

also obtains periodic valuations to assess impairment. 

Individual and aggregate market risk limits are also 

implemented to monitor exposures. 

c) Operational and Legal Risks 

Operational risk is restricted by internal control procedures 

and guidelines which are defined in the internal rules of 

the Bank. The system of internal control is reviewed on 

a regular basis by the Compliance and Risk Management 

officer as well as the internal auditors who report directly 

to the Board of Directors. Legal risk is monitored and 

controlled by the Bank’s in-house Legal Counsel. 

2. SUMMARY OF ACCOUNTING, VALUATION AND 

PRESENTATION POLICIES 

The following is a summary of the significant accounting 

valuation and presentation policies adopted by the 

Bank. 

2.1 Accounting records 

The Bank’s accounting records and accounting principles 

are set in accordance with the Swiss Code of Obligations, 

the Stock Exchange and Security Dealers Federal Law 

and its Ordinances, and the statutory regulations and 

guidelines for the preparation of financial statements 

issued by the Swiss Federal Banking Commission (DEC- 

CFB as at December 21, 2006). 

All transactions are recorded on the date of the 

transaction and regularly valued thereafter. 

2.2 Income recognition 

Profit-share, fee and commission arising from the 

financing/investment activities of the Bank are 

recognised when earned on an accrual basis. 

2.3 Foreign currencies 

Foreign currency transactions are translated in Swiss 

francs at the rate of exchange prevailing on the transaction 

date. Monetary assets and liabilities denominated in 

foreign currencies are translated into Swiss francs at the 

rate of exchange ruling at the balance sheet date. The 

resulting gains and losses are recorded in the income 

statement. 

The following is an indication of the exchange rates of 

the important foreign currencies used by the Bank: 

Rate in CHF 

USD EUR 

At 31.12.2006 1.22 1.61 

Average for 2007 1.17 1.63 

At 31.12.2007 1.13 1.66 

2.4 Due from banks and customers 

These are recorded at nominal value and are subjected 

to the systematic periodic reviews for default risk on an 

individual basis. The related income is recognised in the 

income statement when earned. 

A provision for impaired receivables, if necessary, is 

accounted for individually under “Valuation adjustments 

and provisions”. Such provision is computed on the basis 

of a set of internal criteria that cover a range of risk 

parameters including the debtor’s solvency as well as the 

state and value of the collateral provided by the debtor. 

During the year, these criteria remained unchanged. The 

Bank does not set aside a global valuation provision for 

latent credit risks.




2.5 Financial investments 

Financial investments are carried at the lower of cost 

and net realisable value on an individual basis. 

Adjustments for the valuation of financial investments 

are recognised through “Other ordinary results”. 

Real estate owned and commodities acquired in 

foreclosing on a credit deal and destined for resale are 

valued at the lower of cost or market value. 

2.6 Participations 

Participations are carried at cost less necessary 

provisions required for permanent impairment in 

value. 

2.7 Fixed assets 

Fixed assets are carried at cost less accumulated 

depreciation. Fixed assets are depreciated over their 

estimated useful lives using the straight line method. 

The estimated useful lives of fixed asset categories are 

as follows: 

Bank building 50 years 

Vehicles and office equipment 5 years 

Computer equipment 3 years 

2.8 Income taxes 

The Bank fully provides for all Swiss taxes payable by 

the Bank on its income earned during the year which is 

included under accrued expenses and deferred income. 

2.9 Pension obligations 

Pension benefit obligations are accounted for according 

to Swiss GAAP FER 16. Pension benefit obligations 

are all obligations from pension plans and pension 

institutions which provide benefits for retirement, 

death and disability. Pension coverage surplus and 



deficits result from the audited financial statements of 

the pension institutions prepared according to Swiss 

GAAP FER 26. This approach represents a change in 

the valuation and presentation policy for pension fund 

obligations as previously, surpluses and deficits in the 

sense of RPC 16 were calculated according to IAS 19. 

This change resulted for the current accounting period 

in the release to extraordinary income in the income 

statement of the provision for Pension obligations 

amounting to CHF1’414’000 included in Valuation 

adjustments and provisions as at 31 December 2006. 

Pension coverage surpluses are only recorded in the 

balance sheet to the extent that, by being used to reduce 

the employer’s contributions, they constitute a financial 

advantage for the Bank. Pension coverage deficits 

are recognised as personnel expenses in the income 

statement and the charge gives rise to a corresponding 

provision in the balance sheet. 

2.10 Off-balance sheet transactions 

Off-balance sheet transactions are presented at nominal 

value. 

2.11 Derivative financial instruments 

25/26 

The Bank does not engage in trading activities with 

derivative financial instruments, all such contracts being 

for purposes of covering client transactions or hedging 

own risk exposures. 

Derivative financial instruments are carried at fair value, 

the variations of which are recorded in the statement of 

income for both the original instrument generating the 

primary risk and the hedging instrument that covers it. 

The resulting gains or losses on revaluation are recorded 

in the compensation account in Other assets and Other 

liabilities until maturity.




3. NOTES IN RESPECT OF THE BALANCE SHEET 

3.1 Collateral Analysis 

Secured by 

With collateral 

other than 

Without 

Mortgage mortgage collateral Total 

Due from Customers 

Trade and Real Estate Financings 0 31’448 1’988 33’436 

Loans to Employees 0 0 613 613 

Other Debtors 0 19’896 9’179 29’075 

Total Due from Customers 0 51’344 11’780 63’124 

Previous Year 0 3’976 10’868 14’844 

Off -Balance Sheet 

Contingent Liabilities 0 2’539 0 2’539 

Irrevocable Facilities Granted 4’048 0 34 4’082 

Total Off -Balance Sheet 4’048 2’539 34 6’621 

Previous Year 2’818 2’255 22 5’095 

Estimated 

Liquidation 

Sum of 

Total Debt 

Value of Net Debt Individual Value 

Outstanding Collateral Outstanding Adjustments 

Impaired Loans and Receivables 

Trade Financing 2’012 0 2’012 2’012 

Previous Year 2’149 0 2’149 2’149




3.2 Financial Investments and Participations 

Financial Investments Book Value Fair Value 

31/12/2007 31/12/2006 31/12/2007 31/12/2006 

Equity Instruments: 

Listed 0 0 0 0 

Unlisted 30’438 24’669 30’539 24’779 

Real Estate Owned 844 915 844 915 

Total Financial Investments 31’282 25’584 31’383 25’694 

of which admitted under repurchase 

agreements in accordance with 

liquidity requirements. 

0 0 0 0 

Participations 

Listed 2’127 2’127 13’700 16’626 

Unlisted 315 315 7’128 7’692 

Total Participations 2’442 2’442 20’827 24’318 

3.3 Analysis of Significant Participations 

Original Business 

% of 

Bank Name Location 

Currency Activity Holding CHF ‘000 

Faysal Bank Limited Karachi, Pakistan PKR 68’689 Banking 2.14% 2’127 

Faisal Finance (Jersey) Ltd. Jersey USD 249 Finance 25.00% 315 

2’442 

Previous Year 2’442 

Participation investments are carried in the Balance Sheet at cost. 



27/28




3.4 Fixed Assets 

Accu. Depr. 

Book 

Value at 

Cost at at 

Beginning 

Deprecia- End 

Beginning Beginning of the Additions tion for of the 

of the Year of the Year Year 

(Disposals) the Year Year 

Building 2’683 729 1’954 0 (53) 1’901 

Other Fixed Assets 3’109 2’083 1’026 904 (379) 1’551 

Total 5’792 2’812 2’980 904 (432) 3’452 

2007 

Book 

Value at the 

Fire insurance value of Bank building. 2’226 

3.5 Indication of Pledged or Assigned Assets to Secure Own Commitments and of Assets Subject to 

Reservation of Title 

The Bank has not pledged or assigned any assets at year end 2007 (year end 2006: Nil). 

3.6 Pension Fund Obligation 

All employees of the Bank are affiliated with the “Fondation de prévoyance en faveur du personnel de Dar al-Maal 

al-Islami (DMI) SA et des sociétés du groupe”, Meyrin, a Swiss pension fund organised in accordance with the Law 

on Pension Funds and providing pension, disability and death coverages under a defined contribution scheme. The 

funding of the pension plan is in line with legal requirements and the rules applicable to pension schemes. 

The pension scheme covers the following entities: DMI Administrative Services SA, Faisal Private Bank (Switzerland) 

SA and Cantara (Switzerland) SA. 

Employers contributions vary between 6% and 22%. Employees contributions are fixed at 6%. Men retire at the 

age of 65 and women at 64. 

The audited financial statements of the pension institution are established under Swiss GAAP PER 26 as at 31 

December each year. The audit financial statements as at 31 December 2006 show a security ratio in the sense 

of art. 44 OPP2 amounting to 117% (2005: 114%) or a CHF7.2 million surplus. The fluctuation reserve is fully 

funded. 

Economic Pension Plan 

Benefit/Commitment and Cost 

31/12/2007 31/12/2007 31/12/2006 

Yearly Adjusted 

Pension 

Contributions 

Pension Costs in Personnel 

Expenses 

Fondation de prévoyance en faveur du personnel 

de Dar al-Maal al-Islami (DMI) SA et des sociétés 

du Groupe 593 593 641




As at 31 December 2007, no economic benefit is recognised on the balance sheet and there was no employer’s 

contribution reserve. As at 31 December 2007, the Bank has no obligation towards the pension institution. 

3.7 Valuation Adjustments and Provisions 

Used 

Provisions Provisions 

Balance at Conforming Foreign Released to Charged to Balance 

Beginning 

with Currency the Income the Income at End of 

of Year Purpose Movements Statement Statement Year 

Valuation Adjustments 

and Provisions for 

Credit and Country 

Risk 2’149 0 (137) 0 0 2’012 

Pension Fund Obligations 1’414 0 0 (1’414) 0 0 

Other Provisions 

Total Valuation Adjust- 

3’650 0 0 0 3’108 6’758 

ments and Provisions 7’213 0 (137) (1’414) 3’108 8’770 

3.8 Share Capital and Major Shareholders 

Share Capital 

31/12/2007 31/12/2006 

Total Nominal Number of 

Total Number of 

Value 

Shares Nominal Value 

Shares 

20’000 20’000 20’000 20’000 

Major Shareholders and Voting Rights 

31/12/2007 31/12/2006 

Nominal Participation 

Nominal Participation 

Value CHF 

in % 

Value CHF 

in % 

Shamil Finance (Luxembourg) SA 10’200 51.00 10’200 51.00 

Faisal Finance (Luxembourg) SA 9’800 49.00 9’800 49.00 

20’000 100 20’000 100 



29/30




All the Bank’s shares are dividend-bearing. 

Shamil Finance (Luxembourg) SA is wholly-owned by Shamil Bank of Bahrain B.S.C. which is in turn wholly-owned 

by Ithmaar Bank B.S.C., Manama, Bahrain. 

Faisal Finance (Luxembourg) SA is ultimately 100% owned by Ithmaar Bank B.S.C., Manama, Bahrain. 

3.9 Changes in Shareholders’ Equity 

31/12/2007 31/12/2006 

Shareholders’ Equity at Beginning of Year 

Paid-Up Share Capital 20’000 20’000 

General Legal Reserve 4’100 4’100 

Retained Earnings 

Total Shareholders’ Equity at Beginning of Year 

32’758 31’014 

before Profit Distribution 56’858 55’114 

Profit for the Year 1’263 1’744 

Total Shareholders’ Equity at End of Year 

before Profit Distribution 58’121 56’858 

Represented by: 

Paid-Up Share Capital 20’000 20’000 

General Legal Reserve 4’100 4’100 

Retained Earnings 34’021 32’758 

58’121 56’858




3.10 Maturity Structure of Current Assets, Financial Statements and Third-Party Liabilities 

At Sight 

3.11 Due From and Due To Related Companies 

Within 3 

months 

3 to 12 

months 

Maturities 

12 months 

to 5 years 

Over 

5 Years Blocked Total 

Current Assets 

Due from Banks 29’955 10’00 0 0 0 0 39’955 

Due from Customers 1’989 6’183 7’790 47’162 0 0 63’124 

Financial Investments 0 3’317 10’441 8’705 8’819 0 31’282 

Total Current Assets 31’944 19’500 18’231 55’867 8’819 0 134’361 

Third-Party Liabilities 

Due to Banks 682 47’828 0 0 0 0 48’510 

Due to Clients 28’926 0 0 0 0 0 28’926 

Total Third-Party Liabilities 29’608 47’828 0 0 0 0 77’436 

Excess of Current Assets 

over Third-Party Liabilities 2’336 (28’328) 18’231 55’867 8’819 0 56’925 

Previous Years 7’216 2’373 22’018 9’299 6’597 0 47’503 

31/12/2007 31/12/2006 

Due from Related Companies 6’187 362 

Due to Related Companies 46’055 13’868 

The Bank has signed an Advisory Agreement with Faisal Finance (Jersey) Limited, a company in which it holds a 

25% interest. According to the provisions of this Agreement, the Bank provides financing and investment advice, 

foreign exchange and investment management services and investment follow-up assistance in return for an 

advisory fee. The fee for such services for the year amounted to CHF303’000 (2006: CHF251’000) and is classified 

under Fee Income and Islamic Financing Activities. 



31/32




4. NOTES IN RESPECT OF OFF-BALANCE SHEET TRANSACTIONS 

4.1 Contingent Liabilities 

31/12/2007 31/12/2006 

Guarantees 2’539 5’073 

4.2 Fiduciary Transactions 

Fiduciary Placements 

Parallel Purchase and Sale of Currencies & Commodities 

31/12/2007 31/12/2006 

(Islamic money-market deposits) 167’321 454’711 

4.3 Client Assets 

Nature of Client Assets 31/12/2007 31/12/2006 

Assets managed on a discretionary basis 0 2 

Other Client Assets 549’698 483’330 

Total Clients Assets 549’698 483’330 

Custody-Only Client Assets 104’333 336’031 

Total Clients Assets including Custody-Only-Assets 654’031 819’361 

Net deposits / (withdrawals) of Client Funds (132’877) 13’136 

Client assets managed on a custody-only basis are defined as those on which annual management fees 

of less than 0.15% are taken. Re-classifications between custody-only and other assets are tracked as and 

when management fee changes occur; there were no such re-classifications during the year. Profits due to 

the Bank on loans granted to clients are taken into account as withdrawals of client funds. Such profits were 

insignificant with respect to client deposits/withdrawals during the year.




5. NOTES IN RESPECT OF THE INCOME STATEMENT 

5.1 Details of Personnel Expenses 

31/12/2007 31/12/2006 

Salaries 6’147 6’018 

Social Benefits 749 748 

Pension Costs 593 641 

Other Personnel Expenses 418 441 

Total Personnel Expenses 7’907 7’848 

5.2 Details of Other Operating Expenses 

31/12/2007 31/12/2006 

Premises Related Expenses 769 700 

Communication Expenses 406 355 

Computer Related Expenses 209 179 

Travel Expenses 941 738 

Professional Fees 1’454 2’146 

Client Relations and Advertising 562 256 

Stamp Taxes and VAT 38 25 

Other Operating Expenses 218 387 

Total Operating Expenses 4’597 4’786 

5.3 Extraordinary Income 

31/12/2007 31/12/2006 

Release of General Risks Provision, included under 

Other Provisions 

Release of Pension Fund Obligations Provision 

0 4’600 

(see Note 2.9) 1’414 

Other Extraordinary Income 142 1’255 

Total Extraordinary Income 1’556 5’855 

5.4 Extraordinary Expense 

31/12/2007 31/12/2006 

Creation of a General Risk Provision 

included Under Other Provisions 3’108 0 



33/34

Annual report 2007 - Faisal Finance Switzerland SA

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