Annual Report 2006 - Faisal Finance Switzerland SA

Bridging Swiss private banking 

traditions with our ethical heritage

Annual Report 2006

Bank’s Profile 2-3 

Board of Directors, Management, Auditors 4 

Chairman’s Statement 5-7 

Message from the Chief Executive 8-9 

Our Corporate Statement: Vision, Mission, 

Strategy and Values 

Directors’ Report: 

� Finance and Operations 11-13 

� Private Banking 14-16 

� Investment Banking & Asset Management: 

� Real Estate 17-20 

� Structured Finance 20-21 

� Capital Markets and Leasing 21-22 

� Parallel Purchase and Sale of 

Currencies and Commodities (PPSC&C) 

10 

22-23 

Portfolio, Commercial and Financial Services 24 

Traditional Islamic Financial Instruments 25 

Report of the Statutory Auditors 26 

Financial Statements: 

Table of Contents 

� Balance Sheet, Statement of Income and 

Proposed Appropriation of Retained Earnings 27-29 

� Notes to the Financial Statements 30-40 


Bank’s Profile 

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. 

Thanks to the quality of its infrastructure, management and financial 

health, Faisal Finance (Switzerland) SA became a bank in October 2006 

and has joined 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 leverages the city’s financial infrastructure, 

services and expertise to support its activities. 

The Bank is 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 anti-money 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. 

Annual Report 2006 

2 

Bank History, Legal 

Structure and Current 

Shareholding

Bank’s Profile (cont’d) 

Ithmaar Bank B.S.C. Bahrain holds 79.6% of the Bank and figures 

among the world’s most powerful Arab banking institutions. For 

customers of Faisal Private Bank, this represents a firm guarantee of 

financial solidity. As such, the Bank falls also under the consolidated 

supervision of the Central Bank of Bahrain. 

In addition, the prestigious 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’ personal 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 perform 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. 


3 

Bank History, Legal 

Structure and Current 

Shareholding

Board of Directors 

Khalid Abdulla-Janahi Chairman 

Ziad Rawashdeh Vice-Chairman 

Pierre Besuchet Director 

William Burkle Director 

Gilbert Coutau Director 

Management Committee 

Marco Rochat Chief Executive 

Oliver Bertheau Head of Legal 

Jacqueline Consoli Bernasconi Head of Compliance and Risk Management 

Islam Hassan Chief Financial Officer 

Sayed Hassan Head of Private Banking, Middle-East 

Jeremy Howarth Head of Asset Management 

Giovanni Perin Head of Investment Banking 

Alexander Theocharides Head of Private Banking 

Reflecting 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 autonomy 

and the Board of Directors exercises a clear supervisory role comprising the Bank’s strategy 

performance and control mechanisms. 

Auditors 

PricewaterhouseCoopers SA - Geneva 


4

Chairman’s Statement 

It is my pleasure to present the seventeenth Annual Report of Faisal 

Private Bank (Switzerland) SA, and the very first as a bank in accordance 

with the laws of Switzerland. 

As a note of introduction and in congratulating the Board of Directors 

and staff of Faisal Private Bank for the attainment of a banking status, it 

is perhaps worthwhile to emphasize the important albeit discreet role that 

Switzerland as a country, and as a financial metropolis, has played in the 

history of the Islamic banking industry. Our Group elected Geneva over 20 

years ago as the hub from where to provide administrative services to the 

first international Islamic financial group under the guidance and pioneering 

leadership of HRH Prince Mohammed Al Faisal bin Abdulaziz Al Saud. 

Today the Islamic financial industry is no longer in its infancy and has 

witnessed years of sustained development, both in terms of assets, 

professionalism and through the gradual proliferation of institutions offering 

Sharia compliant services. By granting a full banking license to Faisal Private 

Bank in August 2006 – the first Islamic bank to focus uniquely on private 

banking activities - the Swiss Federal Banking Commission has once again 

renewed with the country’s tradition of foresight and support for Islamic 

banking and finance. In reality, whereas this Swiss license is undeniably 

a key achievement of our Group, it can arguably also be recognised as 

landmark in the history of the Islamic financial industry as a whole. 

Our Group flagship, Ithmaar Bank B.S.C. Bahrain, aims to be a truly holistic 

institution that consolidates the whole value chain of banking, insurance 

and financial activities. In this respect the transformation of its company 

in Geneva into a fully fledged Swiss bank is entirely in line with an overall 

vision: namely to develop a complete spectrum of best in class specialist 

franchises where each has a focussed area of expertise to specifically cater 

to their market segment. To achieve this strategy and to provide added value 

to all our stakeholders, the Group also privileges innovation and dynamic 


5 

Islamic Banking in 

Switzerland

Chairman’s Statement (cont’d) 

growth and encourages each entity to provide an increasingly diversified 

platform to expand its overall client base. 

Today, through Faisal Private Bank, we are arguably the first to support a 

specialist and yet comprehensive model that merges a rigorous commitment 

to our ethical heritage with a world renowned Swiss tradition for excellence 

in private wealth management. 

On the wide scene of Sharia compliant institutions, the role and mission 

of Faisal Private Bank is unique and stands out. In the universe of Islamic 

banks either situated in the Muslim world or recently in countries with 

prominent local Muslim communities and Islamic windows or affiliates of 

conventional institutions, none were to date specifically tailored to service 

the wealth management needs of affluent or high net worth individuals. In 

their vast majority other banks are centred on retail and investment banking 

activities, on institutional distribution services and on systematic product 

structuring, all of which lack the specific advisory skill sets demanded by 

private banking. In this respect Faisal Private Bank now addresses a specific 

need that has been recognised over the past few years by the market and 

which to date was only available through conventional private banking. 

In this respect, Faisal Private Bank is structured to continue expanding 

its platform of personalised services and products for a growing private 

clientele. By joining the banking sector of Switzerland, a country which 

performs a reputed and sizeable intermediation function within the global 

financial system, the Bank is strategically positioned to prove increasingly 

competitive and appealing in the years come. 

In the future the Bank – which enjoys an sought after track-record as a day 

one Islamic financial institution- is increasingly poised to be the privileged 

partner boutique for global banks in Switzerland that are seeking to expand 

their legitimacy within the Islamic private banking market by integrating their 


6 



Chairman’s Statement (cont’d) 

well tested expertise and resources in conventional structuring products 

with the prerequisites and ethical guidelines of Sharia compliance. 

As such our ongoing strategic objective for growth is to focus on 

better leveraging our competitive advantage and prestigious location in 

order to expand our product and service offering to clients, whilst seeking 

to adapt the sophisticated portfolio management tools practised by 

conventional Swiss bank into the Islamic banking world. Already reputed 

for a unique real estate specialisation, the Banks diversification into new 

asset classes and product structures will be accompanied by an incremental 

effort to open representative offices outside Geneva, and within the Bank’s 

key markets. 

In light of the above it is our view that the Bank is - perhaps more than 

ever before- well equipped and capable to continue demonstrating healthy 

financial results, and more importantly to grow into a fully fledged private 

banking institution by streamlining a wider platform of client services 

that encompass a new investment horizon and accrued geographical 

presence. 

To this effect, on behalf of the Board of Directors, I would like to 

reiterate our complete confidence that the commitment, prudence and 

professionalism of the Management and Staff of Faisal Private Bank will 

amply suffice to successfully match the challenges that lay ahead. 

My gratitude is extended to our Board of Directors for their precious 

guidance and on-going support and also to our clients for their continued 

loyalty without which Faisal Private Bank would not have been in what 

possibly appears to be the most optimistic business development phase 

since its creation. 

Khalid Abdulla-Jahani 


7 



Message from the Chief Executive 

The decision of the Swiss Federal Banking 

Commission to award a full banking license to our 

institution will undoubtedly be engraved in the 

history of Faisal Private Bank (Switzerland) SA. 

We are also proud to propose the first Annual 

Report of the Bank that is placed within the 

context of our revisited corporate identity and 

marketing strategy, which is represented by our 

new logo which merges the two central themes 

of our bank: an ethical heritage derived from the 

Islamic financial principles and a clear belonging to 

the prestigious Swiss banking sector. 

Since joining the Bank as Chief Executive in 

2002, our intrinsic commitment to better service 

the needs of our clients was crystallised in one 

clear strategic vision: to become the world’s most 

prominent specialist private bank that is exclusively 

specialised in wealth management delivered from 

Switzerland and dedicated to the observance of 

the ethical framework of the Sharia. 

During the past four years, and as was gradually 

unveiled on the occasion of my messages in 

previous Annual Reports, the realization of our 

growth objectives and selective transformation 

was in all cases not to be achieved at the cost of 

quality and prudence when managing our clients 

expectations and, ultimately, their financial well 

being. 

The Bank’s efforts were therefore centred on 

optimising the company’s existing core qualities, in 

streamlining our business model and in leveraging 


new competencies and strategic partners to 

achieve growth and financial success. This was 

placed against a backdrop with one central theme; 

to service our clients by demonstrating innovation 

and prudence but without mitigating our unique 

identity and ethical heritage. 

As a first priority we leveraged and extended 

our specialisation and global reach in real estate 

to propose more systematic and diversified 

investments opportunities within what is today 

our core portfolio. This resulted in transforming our 

investment capacity from less than five projects 

a year in the United States to an annual average 

of approximately ten investments that are spread 

across niche markets in Europe, Eastern Europe 

and the United States, and thereby offer sufficient 

diversification both in terms of duration, risk/ 

reward profile and currency. 

Today the overall size of our real estate portfolio 

is more than CHF one billion and covers 8 countries, 

with an objective of covering new countries such 

as Bulgaria and Ukraine before the end of 2007. 

In parallel, by building new strategic 

partnerships, the Bank aimed at expanding 

its product offering in order to propose wealth 

management solutions that encompass other 

Sharia compliant products and asset classes. For 

example in 2005 we revealed a re-invigorated 

version of the Bank’s global equity benchmark 

index (the DMI 150) and listed our first basket 

that is derived from the index on the Swiss stock 

exchange. Today the bank is fully able to offer a 

8

Message from the Chief Executive (cont’d) 

comprehensive platform of solutions for those 

clients who wish to have exposure in listed global 

equities. Similarly, we also are in a position to 

recommend products in Asian equity markets, 

treasury and liquidity management and open 

architecture services that are perfectly compliant 

with the highest ethical principles of Islamic 

finance. 

A second milestone on the path to becoming 

a bank was the need to upgrade our internal risk 

management tools and processes to be constantly 

up-to-date with the increasing regulatory 

responsibilities that are bestowed on Swiss banks 

and financial institutions. This was implemented 

throughout the Bank’s areas of activity and 

mainly through improved legal and compliance 

processes and the establishment of the asset 

management team. The final major change will 

be the introduction of a new financial and reporting 

system that will be operational during the summer 

of 2007. 

Looking towards the future, the Bank’s strategy 

to fully capitalise on our banking license is to 

continue delivering growth to our stakeholders and 

investment innovation for our clients. 

As approved by the Board of Directors, the Bank 

will therefore accrue efforts to diversify our product 

and investment platform, and is investigating 

the possibility of establishing a direct physical 

presence in important core markets. In parallel, 


this will enable our Private Bankers to provide a 

higher spectrum and quality of advisory services 

to an ever-increasing and sophisticated clientele. 

Further, fully understanding that aside from our 

financial and growth targets, another important 

yardstick to measure success and indeed a 

necessary corollary to create it, is the level to which 

Management can cater to the self-improvement 

and evolution of staff. The Bank will continue to 

value meritocracy in its management style and 

human resources by rewarding performance and 

commitment whilst at the same time fostering 

a professional environment that is constructive 

for each ones career aspirations and needs for 

personal development. 

To conclude, with the continued support of our 

clients, Board of Directors and Staff for which I 

stand grateful, I am confident that we have laid 

the grand work for a highly competitive Bank. 

We are confident that we will continue growing 

with the unique satisfaction to be the very first 

Bank that symbolises a universal appeal by bridging 

two distinct traditions; an ethical philosophy that 

is deeply rooted in the traditions of the Muslim 

world and private banking expertise with an 

unambiguous Swiss flavour. 

Marco Rochat 

9

Our Corporate Statement 

Our Vision 

� As a veritable market-maker on the global banking scene, 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. 

Our Mission 

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

stakeholders to gradually extend our services and international presence on the basis of a dynamic 

and yet prudent roadmap. 

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, stakeholders and our communities at large; 

� In respecting our ethical heritage; 

� In realising the aspirations of our staff. 


10

Directors’ Report 



Organisation, Management and Staff 

Management continued to focus on delivering quality services by ensuring that 

all transactions are based on a well-structured decision-making process. The aim is 

to continue to maintain the professionalism that has distinguished the Bank within 

a competitive financial market. In this context, a new Asset Management team 

has complemented our existing organization. 

Our strategic objective is to expand our ethical and specialist wealth management 

platform and to develop our human and technical capital so as to be in a position 

to continue delivering a pristine service-offering for our expanding client base. 

The Bank continued to engage qualified and experienced professionals in order to 

maintain the level of quality. The Bank has also embarked upon the comprehensive 

replacement of its client and corporate IT banking systems which will greatly 

enhance the Bank’s productivity and financial reporting to clients, management 

and regulatory authorities. 

For a high profile investment boutique, now the first Islamic private bank in the 

world, dedicated and well qualified employees are a key success factor. 

Human R esources 

Business Support 

Legal 

Compliance & 

R isk 

M anagement 

(1) Report directly to the Board of Directors 

Investment 

Banking 

Chief Executive 


Internal Audit (1) 

Business Functions Organisation S upport 

Asset 

M anagement 

Private 

Banking 

Finance & 

Operations 

11 

Finance and 

Operations


Financial Overview 

Although last year was a positive one for our industry, technology, the 

globalisation of the financial markets and the rapid expansion of Islamic banking 

have increased the complexity and risk environment of the financial services 

industry. Our core businesses responded very well to the rapidly changing 

market environment, capturing emerging opportunities and producing substantial 

revenues. 

As the main portion of the Bank’s assets are held in US Dollars, the depreciation 

of the US Dollar against the Swiss Franc resulted once again, in the financial 

statements expressed in Swiss Franc terms in a substantial unrealized exchange 

variation: this year being a loss of CHF 2.3 million. Exceptional and non-recurring 

items included in the captions “Result from Islamic financing” and “Other operating 

results” also adversely affected the Bank’s operating and net results for the year 

for about CHF 1.8 million. 

Net profit for the year, including Extraordinary income of CHF 5.9 million, 

amounted to CHF 1.7 million against CHF 4.2 million last year. 

Financial Highlights 

� In 2006, the Bank posted a net profit after taxes and extraordinary items of 

CHF 1.7 million. 

Excluding the unrealized foreign exchange result and before extraordinary 

items and taxes, the Bank recorded an operating loss of CHF 1.2 million. This 

is mainly due to exceptional and non-recurring write-off and provisioning of 

respectively certain assets and investment securities. 

� Operating expenses have increased by 22% to CHF 12.6 million in line with 

the investment program which included an extension of commercial and 

administrative activities, an increase in staff count, the deployment of a new 

IT system and the procedures related to the granting of the banking license. 


12 


Operations


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

short-term financial instruments (up to three months). 

� The Bank has a paid-up capital of CHF 20 million. At the end of 2006, the total 

shareholders’ equity of the Bank amounted to CHF 56.9 million against CHF 

55.1 million at the end of 2005, reflecting a net increase of 3.3%. 

� 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 the greater majority of its 

business is conducted in US Dollars. The table below highlights the financial 

position of the Bank at December 31, 2006 and 2005. 

Overview of Financial Highlights expressed in USD (million)* 

31.12.2006 31.12.2005 

Total Operating Income 10.1 13.8 

Total Operating Expenses 9.7 8.7 

Operating Profit 0.4 5.1 

Net Profit for the Year 1.9 2.4 

Total Equity 48.7 46.8 

Fund Under Management 671.2 623.5 

*USD as functional currency. 


13 


Operations


The transformation of our department’s name from Wealth 

Management to Private Banking was not only a question of semantics. 

This change actually symbolises our team’s commitment to the 

new banking license and is placed against a backdrop of a mission to 

continuously serve our clientele in accordance with the best standards 

of the industry. The acceptance of Faisal Private Bank amidst the select 

club of Swiss private bankers was more than merely a reward after four 

years of relentless efforts to change and improve. It is also to be viewed 

as a challenge because now we are arguably better equipped than ever 

to meet the needs of our clients and to satisfy the objectives of our 

stakeholders. 

Indeed, the work of all Private Bankers is centred on one single – albeit 

at times multi-faceted – responsibility; to cater to the financial well being 

of their clients, and to continuously honour the trust that is bestowed 

upon them. As such, Private Bankers are also the de facto voice of their 

clients towards the rest of the Bank, and perhaps consequently, they 

are also the most prominent “ambassadors” of the Bank to the outside 

world. 

It is undoubtedly for this reason that the overall strategy with respect 

to Faisal Private Bank’s corporate identity overhaul was the responsibility 

of our Department, of-course under the guidance of the Board of Directors 

and the Chief Executive. 

To reflect our new regulatory status, we developed an umbrella 

corporate statement and visual identity that crystallises the two pillars 

of Faisal Private Bank: a pioneering business model in Islamic private 

banking and the pursuit of excellence in creating a distinct blend and an 

ethical heritage founded on the Sharia within a markedly Swiss private 

banking tradition. 


14 

Private Banking


The results of our mission to create, capture and convey the Bank’s 

new identity are best viewed through our new logo and web-site (www. 

faisalprivatebank.com). Also, the gradual change from what was up until 

now relatively discreet curiosity to what has become the media’s genuine 

interest for Faisal Private Bank’s wealth management and investment 

paradigm, can also be viewed as an accomplishment. 

Another recent development is our Bank’s achievement of comprehensive 

peer recognition within the competitive financial services industry, which 

is partially - and certainly not uniquely - a positive by-product of our new 

strategic positioning in the market. 

What is certainly more relevant to the objectives of the Private Banking 

department as set forth at the beginning of 2006 by the Board of Directors 

and by the Chief Executive, was to contribute to the financial growth 

of the Bank. To this effect, when looking back, we do express a certain 

degree of satisfaction at the increase of funds under management from 

direct private / individual clients. 

However, the true reward is that this quantitative objective is being 

attained without jeopardising our overall qualitative commitment. Fully 

aware that the opposite scenario would have been a collective but also an 

individual failure for our team, in 2006 we also concentrated on delivering a 

personalised service to clients, and on how to leverage the bank’s investment 

platform and advisory skills to the fullest. 

In light of the above, the challenges for 2007 can be summarised under 

the following headlines. 

To Increase our Service Offering 

This will be achieved through a dual strategy: the selective introduction 

of additional professionals in the team to propose new capacities and 

complementary skill-sets; the geographical expansion of our Department 

by opening representative offices within our key markets to deliver our 

services directly. 


15 

Private Banking


To Expand our Investment Platform 

By providing pro-active feedback to the Bank’s Asset Management and 

Investment Banking departments concerning our clients’ needs, to develop 

a wider platform of wealth management solutions. Supported by the 

possibilities available through the dynamic group-wide spectrum of Ithmaar 

Bank, to structure an offering that combines both innovative niche investment 

products with other, more traditional, portfolio management tools. 

To Leverage our Position Within the Private Banking Metropolis 

Understanding that private banking is not solely a wealth management 

industry, we seek to have a more holistic approach towards our clients 

by acting as a one-stop-shop hub for other client-centred specialisations 

such as – but not limited to - trust advisory services, international legal and 

fiscal advise and entrepreneurial support . This will be achieved by further 

streamlining the Bank’s wide and tested network of best-in-class specialists, 

internationally. 

To conclude, and in light of the above, the new banking license is both a 

reward and a challenge for the future. 

In all cases, our success to date and our prerequisite for the future 

could not be envisaged without the continuous loyalty of our clients. Thus, 

on behalf of all the Private Banking team, our gratitude to clients can only 

be effectively conveyed by reiterating our ongoing motivation to perform 

beyond the line of duty. 


16 

Private Banking


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. 

Today, Faisal Private Bank is not only active in niche real estate 

markets (such as Eastern Europe) but is active in small cap equities in 

Asia and Japan, in specialized sectors such as carbon certificates and 

in the contemporary art market, among others. 

Investment Products: Real Estate 

Whereas economies and trends may change, stone is built to last. 

Faisal Private Bank has developed unrivalled expertise in the 

selection, structure and management of investment products with an 

underlying diverse and international real estate portfolio. 

Principles and Markets 

Approximately 36% 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 this field of activity. 


17 

Investment Banking & 

Asset Management


� The investments are set up by the means of a well tested legal 

structure which ensures the safeguard of the asset and tax 

efficiency. This structure significantly enhances the Bank’s real 

estate portfolio. 

As with all other Bank investments, the real estate investments 

are subject to a thorough analysis from acquisition through exit. 

We seek to build our decisions on fundamental due diligence and 

a commitment to analyse the characteristics of all investments 

down to the finest detail including competitive market conditions, 

credit attributes, financial performance, construction quality, with 

a skilled and efficient negotiation team, we are 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. In general, the US investments 

are relatively high-yield, low risk investments in quality real estate 

projects. 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. 

� Since 2003, the Bank developed real estate investment in the 

UK and Central/Eastern Europe, targeting investments in those 

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. 


18 


Asset Management


In 2005, the Bank reviewed the real estate markets of countries 

that are candidates for the EU accession in 2007 (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 purpose and optimization of overall 

return to investors, the Bank also invested in the city of Lisbon, 

Portugal which offers excellent growth potential. Besides the 

above mentioned markets, the Bank is also reviewing a number of 

emerging markets such as India, China and Ukraine. 

In 2006, the Bank exited the first investment in Romania with 

significant returns to investors and further strengthened its position 

in the Romanian market by entering into new investments. In the 

US, the Bank expanded its multifamily apartment development 

holdings and exited real estate investments with a total of USD 153 

million in real estate value, and achieving or exceeding the projected 

returns. 

Activities 

The Bank has structured a most 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 of CHF 1.1 billion. 

� The average period of investment ranges from 3 to 5 years. 

� The average annual rate of return turns around 12%. 


19 


Asset Management


Investment Products: Real Estate (cont’d) 

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 the Sharia compliant trade finance 

investments, such as the following: 

� 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 

has never been compromised. This strategy has helped the Bank 

in developing a network of business relations in various Islamic 

markets. 


20 


Asset Management


� The Bank uses Islamic structured financing documents and 

procedures which satisfy all 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 an extremely cautious 

approach when investing in capital markets and has followed the most 

conservative investment principles guided by a stop-loss policy. 

� 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, timely liquidation of nonperforming 

investments, etc. 


21 


Asset Management


Activities 

The Bank, on behalf of its clients and Group companies, manages 

a total portfolio of CHF 65.9 million of equities. The Bank is involved 

in a variety of capital market activities, such as the following: 

� Purchase and sale of stocks for clients either at the discretion of 

clients or based on a discretionary mandate. 

� Private equity investments through a selection of individual 

opportunities from various deal flows sourced from major 

specialised investment houses. 

� Acts as advisor to Group companies for investment, specifically in 

private equity. 

� Launches and manages various kinds of syndicated investments. 

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. 


22 


Asset Management


� 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 only. During the year, nine 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 several months. 

Treasury Services 

� The Bank provides currency-trading services to facilitate its clients 

and sister companies. 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 stock markets 

and alert the Management and the clients, if need be or to provide 

suitable advice. 

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. 


23 


Asset Management 

87%

Portfolio, Commercial and Financial Services 

Portfolio Management Services 

� Fiduciary Investment 

� Investment Advisory Services 

� Foreign Exchange Transactions 

Commercial Services 

� Export/Import Financing 

� Documentary Credit 

� Leasing 

� Islamic Trade Syndications 

� Forex and Precious Metal Trading 

Financial Services 

� Medium and Long-Term Morabaha Financing 

� Custodian Services 

� Islamic Securities 

� Inventory Financing 

� Fund Transfer 

� Documentary Collections 


24

Traditional Islamic - Financial Instruments 

The Bank offers financial products and services structured as traditional Islamic 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. 

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. The client agrees to make payments into 

an Islamic investment account that will eventually 

lead, as promised 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 benefit of the client. 

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 

(Conventional bonds) 

25 

Financial certificates but can be viewed as an 

Islamic equivalent of bonds. Sukuk are classified in 

accordance with their tradability and non-tradability 

in secondary markets, depending on the underlying 

operations / assets. The sukuk represent a pro-rata 

of the asset that is allocated to the client of the 

sukuk, which in turn ensures the profitability of the 

instrument. The risk of the sukuk is the risk of the 

asset or transaction which forms the underlying. 

Mosharaka 

(Profit Sharing) 

A joint venture agreement by which an Islamic 

financial institution advances funds to client’s funds 

in order to participate in the equity. The parties 

bear any losses incurred in direct proportion to 

their contributions. Likewise, profits are shares 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.


26


Financial Statements 


Balance Sheet as at December 31, 

Assets 


27 

(in ‘000 CHF) 

Notes 2006 2005 

Due from Bank 3.10 41’452 34’547 

Due from Customers 3.1, 3.10 14’844 18’655 

Financial Investments 3.2, 3.5, 3.10 25’584 28’417 

Participations 3.2, 3.3 2’442 2’442 

Fixed Assets 3.4 2’980 3’034 

Accrued Income and Prepaid Expenses 15’902 9’983 

Other Assets 4.2 0 126 

Total Assets 103’204 97’204 

Included in the above: 

Total amounts due from Group companies and Holders 

of qualified participations 0 0 

Liabilities and Shareholders’ Equity 

Due to Banks 3.5, 3.10 9’926 16’589 

Due to Clients 3.10 24’481 8’493 

Accrued Expenses and Deferred Income 4’726 4’851 

Other Liabilities 0 126 

Valuation Adjustments and Provisions 3.7 7’213 12’031 

Share Capital 3.8, 3.9 20’000 20’000 

General Legal Reserve 3.9 4’100 4’100 

Retained Earnings 3.9 32’758 31’014 

Total Liabilities and Shareholders’ Equity 103’204 97’204 

Included in the above: 

Total amounts due from Group companies and Holders 

of qualified participations 9’926 0 

Off-Balance Sheet Transactions 

Contingent Liabilities 3.1, 4.1 5’073 512 

Irrevocable Facilities Granted 

Derivative Financial Instruments: 

3.1 22 0 

- Positive replacement values 0 126 

- Negative replacement values 0 126 

- Underlying exposure 0 65’740 

Fiduciary Transactions 4.2 454’711 99’522

Income Statement for the Year Ended December 31, 

Results from Islamic Financing 


28 

(in ‘000 CHF) 


Income from Parallel Purchase and Sale of Currencies 

& Commodities 280 410 

Results from Financing Activities (230) 1’002 

Cost of Financings (1’938) (421) 

Net Results from Fee Businesses 

(1’888) 991 

Fee Income on Islamic Financing Activities 

Management Fees and Profit Participations on 

9’052 6’961 

Assets Under Management 4’833 7’190 

Net Results from Foreign Exchange 

13’885 14’151 

Foreign Exchange Loss (Gain) (2’259) 5’963 

Other Ordinary Results 

Results from Financial Investments (1’066) 562 

Results from Participations 793 1’497 

Results from Real Estate 27 319 

(246) 2’378 

Total Income 9’492 23’483 

Operating Expenses 

Personnel Expenses 5.1 7’848 6’915 

Other Operating Expenses 5.2 4’786 3’336 

Total Operating Expenses 12’634 10’251 

Gross (Loss) Profit (3’142) 13’232 

Depreciation on Fixed Assets and Write-Offs (362) (381) 

(Loss) Profit before Extraordinary Items and Taxes (3’504) 12’851 

Extraordinary Income 5.3 5’855 245 

Extraordinary Expense 5.4 0 (8’250) 

Taxes (607) (598) 

Profit for the Year 1’744 4’248 

Retained Earnings at Beginning of the Year 31’014 26’766 

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


Proposed Appropriation of Retained Earnings 

as at December 31, 29 


(in ‘000 CHF) 


Retained Earnings Available for Appropriation 32’758 31’014 

Retained Earnings Carried Forward 32’758 31’014 


Notes to the Financial Statements 

as at December December 31, 2006 and 2005 30 

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 2006, the Bank employed 38 staff 

on a full time basis (2005: 33). 

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 

(in ‘000 CHF) 

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 Activities 

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 

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. 



as at December 31, 2006 and 2005 31 

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 18, 2002). 

All transactions are recorded on the date of the 

transaction and regularly valued thereafter. 


2.2 Income recognition 

(in ‘000 CHF) 

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 31.12.2005 1.31 1.56 

Average for 2006 1.26 1.58 

At 31.12.2006 1.22 1.61 

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 

(in ‘000 CHF) 

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”, a Swiss pension fund organised in 

accordance with the Law on Pension Funds and 

providing pension, disability and death coverages 

under a defined benefit scheme to three DMI 

entities. 

Pension obligations are accounted for according 

to Swiss GAAP FER 16. The economical impact 

of pension obligations is presented according to 

IAS 19. 

Actuarial valuations of the Bank’s pension 

obligations are commissioned yearly on the 

projected unit credit basis. Deficits arising from 

actuarial pension obligations are recorded under 

Valuation adjustments and provisions while 

assets are, under certain conditions, carried in 

“Other assets”. 

2.10 Off-balance sheet transactions 

Off-balance sheet transactions are presented at 

nominal value. 

2.11 Derivative financial instruments 

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 

Due from Customers 

Secured by 

Mortgage 


With 

collateral 

other than 

mortgage 

(in ‘000 CHF) 

Without 

collateral Total 

Trade and Real Estate Financing 0 3’976 7’951 11’927 

Loans to Employees 0 0 647 647 

Other Debtors 0 0 2’270 2’270 

Total Due from Customers 0 3’976 10’868 14’844 

Previous Year 0 13’183 5’472 18’655 

Off-Balance Sheet 

Contingent Liabilities 2’818 2’255 0 5’073 

Irrevocable Facilities Granted 0 0 22 22 

Total Off-Balance Sheet 2’818 2’255 22 5’095 

Previous Year 0 512 0 512 

Total Debt 

Outstanding 

Estimated 

Liquidation 

Value of 

Collateral 

Net Debt 

Outstanding 

Sum of 

Individual 

Value 

Adjustments 

Impaired Loans and Receivables 

Trade Financing 2’149 0 2’149 2’149 

Previous Year 2’307 0 2’307 2’307 




3.2 Financial Investment and Participations 

Financial Investments Book Value Fair Value 

Equity Instruments: 


(in ‘000 CHF) 

31/12/2006 31/12/2005 31/12/2006 31/12/2005 

Listed 0 0 0 0 

Unlisted 24’669 24’915 24’779 25’033 

Real Estate Owned 915 3’502 915 3’502 

Total Financial Investments 25’584 28’417 25’694 28’535 

of which admitted under repurchase 

agreements in accordance with liquidity 

requirements. 

Participations 

Listed 2’127 2’127 16’626 11’209 

Unlisted 315 315 7’692 7’125 

Total Participations 2’442 2’442 24’318 18’334 

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. 




3.4 Fixed Assets 

Cost at 

Beginning of 

the Year 

Accu. Depr. 

at Beginning 

of the Year 

Book Value 

at Beginning 

of the 

Year 


Additions 

(Disposals) 

2006 

Depreciation 

for the 

Year 

(in ‘000 CHF) 

Book Value 

at the End 

of the Year 

Building 2’683 675 2’008 0 (54) 1’954 

Other Fixed Assets 2’801 1’775 1’026 308 (308) 1’026 

Total 5’484 2’450 3’034 308 (362) 2’980 

Fire insurance value of Bank building. 2’345 

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 2006 (year end 2005: pledged assets with 

a net book value of CHF 18,408,000 securing own commitments of CHF 16,589,000). 

3.6 Pension Fund Obligations 

All employees of the Bank are affiliated with the “Fondation de prévoyance en faveur du personnel de DMI 

Administrative Services (DMI) SA et des sociétés du groupe”, a Swiss pension fund organised in accordance 

with the Law on Pension Funds and providing pension, disability and death coverages under a defined 

benefit scheme to three DMI entities. 

Actuarial valuations of the Bank’s pension obligations are commissioned yearly by independent actuaries on 

the projected unit credit basis. The latest valuation as at December 31, 2006 was based on the following 

assumptions and gave the following results: 

31/12/2006 31/12/2005 

Assumptions underlying the Computation of Pension Obligations 

Discount Rate 2.70% 3.10% 

Long-Term Rate of Capital Return on Pension Assets 3.70% 3.40% 

Anticipated Annual Salary Increases 2.00% 2.00% 

Anticipated Pension Increase 0% 0% 

31/12/2006 31/12/2005 

Status of Pension Obligation 

Net Assets of the Pension Fund at Fair Value 11’949 11’581 

Net Present Value of Future Pension Obligations 13’576 12’473 

Deficit of Pension Obligation (1’627) (892) 

Unrecognised Actuarial Gains (Loss) 213 (582) 

Liability Recognised under Valuation Adjustments (see Note 3.7) (1’414) (1’474) 





(in ‘000 CHF) 

Pension Costs 31/12/2006 31/12/2005 

Current Service Costs 241 758 

Financing Costs 361 379 

Expected Return on Assets (411) (371) 

Employee Contributions 450 (188) 

Total Pension Costs Charged as Personnel Expenses 641 578 

3.7 Valuation Adjustments and Provisions 

Balance at 

Beginning 

of Year 

Used 

Conforming 

with 

Purpose 

Foreign 

Currency 

Movements 

Provisions 

Released 

to the 

Income 

Statement 

Provisions 

Charged 

to the 

Income 

Statement 

Balance 

at End 

of Year 

Valuation Adjustments 

and Provisions for 

Credit and Country 

Risk 2’307 0 (158) 0 0 2’149 

Pension Fund Obligations 1’474 0 0 (60) 0 1’414 

Other Provisions 

Total Valuation Adjust- 

8’250 0 0 0 (4’600) 3’650 

ments and Provision 12’031 0 (158) (60) (4’600) 7’213 

3.8 Share Capital and Major Shareholders 

Share Capital 31/12/2006 31/12/2005 

Total 

Nominal 

Value 

Number 

of 

Shares 

Total 

Nominal 

Value 

Number 

of 

Shares 

20’000 20’000 20’000 20’000 

Major Shareholders and Voting Rights 31/12/2006 31/12/2005 

Nominal 

Value 

CHF 

Participation 

in % 

Nominal 

Value 

CHF 

Participation 

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 




All the Bank’s shares are dividend-bearing. 


(in ‘000 CHF) 

Shamil Finance (Luxembourg) SA is wholly-owned by Shamil Bank of Bahrain E.C. which is 60% 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 

31/12/2006 31/12/2005 

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 

31’014 26’766 

before Profit Distribution 55’114 50’866 

Profit for the Year 

Total Shareholders’ Equity at End of Year 

1’744 4’248 

before Profit Distribution 56’858 55’114 

Represented by: 

Paid-Up Share Capital 20’000 20’000 

General Legal Reserve 4’100 4’100 

Retained Earnings 32’758 31’014 

56’858 55’114 




3.10 Maturity Structure of Current Assets, Financial Statements 

and Third-Party Liabilities 

3.11 Due From and Due To Related Companies 


(in ‘000 CHF) 

Within 3 3 to 12 

Maturities 

12 

months 

to 5 Over 

At Sight months months years 5 Years Blocked Total 

Current Assets 

Due from Banks 29’548 11’860 0 44 0 0 41’452 

Due from Customers 2’149 439 10’388 1’868 0 0 14’844 

Financial Investments 0 0 11’630 7’387 6’567 0 25’584 

Total Current Assets 31’697 12’299 22’018 9’299 6’567 0 81’880 

Third-Party Liabilities 

Due to Banks 0 9’926 0 0 0 0 9’926 

Due to Clients 24’481 0 0 0 0 0 24’481 

Total Third-Party Liabilities 24’481 9’926 0 0 0 0 34’407 

Excess of Current Assets 

over Third-Party Liabilities 7’216 2’373 22’018 9’299 6’567 0 47’473 

31/12/2006 31/12/2005 

Due from Related Companies 362 1’226 

Due to Related Companies 13’868 1’055 

The Bank has concluded 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 CHF 251’000 (2005: CHF 249’000) and is classified under Fee Income and Islamic 

Financing Activities. 




4. Notes in respect of Off-Balance Sheet Transactions 


(in ‘000 CHF) 

4.1 Contingent Liabilities 

31/12/2006 31/12/2005 

Guarantees 5’073 512 

Included in the above guarantees is a guarantee for CHF 2’818’000 which is secured by the 

value of a building. 

4.2 Fiduciary Transactions 

Fiduciary Placements 

Parallel Purchase and Sale of Currencies & Commodities 

31/12/2006 31/12/2005 

(Islamic money-market deposits) 454’711 99’522 

4.3 Assets Under Administration 

Nature of Client Assets 31/12/2006 31/12/2005 

Assets managed on a discretionary basis 0 2 

Other Client Assets 483’330 726’302 

Total Assets Under Administration 483’330 726’304 

Custody-Only Client Assets 336’031 93’461 

Total Clients Assets 819’361 819’765 

Net deposits / (withdrawals) of Client Funds 13’136 (73’973) 

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 Company on loans granted to clients are taken into account as withdraw- 

Client 

als of 

assets 

client funds. 

managed 

Such 

on a 

profits 

custody-only 

were insignificant 

basis are defined 

with respect 

as those 

to 

on 

client 

which 

deposits/withdrawals 

annual management 

during 

fees of 

less the than year. 

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 

Company 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 


(in ‘000 CHF) 

31/12/2006 31/12/2005 

Salaries 6’018 5’546 

Social Benefits 748 635 

Pension Costs 641 578 

Other Personnel Expenses 441 156 

Total Personnel Expenses 7’848 6’915 

5.2 Details of Other Operating Expenses 

31/12/2006 31/12/2005 

Premises Related Expenses 700 654 

Communication Expenses 355 288 

Computer Related Expenses 179 202 

Travel Expenses 738 594 

Professional Fees 2’146 1’332 

Client Relations and Advertising 256 186 

Stamp Taxes and VAT 25 (156) 

Other Operating Expenses 387 236 

Total Operating Expenses 4’786 3’336 

5.3 Extraordinary Income 

31/12/2006 31/12/2005 

Release of Valuation for Country Risks 0 245 

Release of General Risks Provision, included under 

Other Provisions 4’600 0 

Other Extraordinary Income 1’255 0 

Total Extraordinary Income 5’855 245 

Other extraordinary income is mainly composed of cash relating to profit earned on the Bank’s bank 

deposits which had not been recognised in prior years. 

The release of the Pakistan country risk provision in 2005 was made as a consequence of that country’s 

improved economic situation and outlook at year end. 

5.4 Extraordinary Expense 

31/12/2006 31/12/2005 

Constitution of a General Risk Provision 

included under Other Provisions 0 8’250 


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 

www.faisalprivatebank.com

Annual Report 2006 - Faisal Finance Switzerland SA

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