Faisal Finance Jersey Limited Financial & Business Analysis: 1998 "Another year of strong growth in net assets, funds under management and profitability"

Financial Trends

Ownership and Legal Status

Faisal Finance (Jersey) Limited (FFJ) was established in early 1996 to provide management and administrative services to Faisal Finance Real Estate Income Fund II L.P. Since that time, the Company's activities have become much more extensive, covering a wide range of investment categories. FFJ is a subsidiary of Dar Al-Maal Al-Islami Trust.

The Year in Brief1998 was a highly successful year for FFJ. During the year, funds under management grew by US$73 million to US$169 million at 31 December 1998, up by 76% from US$96 million at 31 December 1997. Other assets managed grew by US$1 million to US$33 million, taking total assets under management to US$ 202 million, an increase of 59% from the 1997 figure of US$ 127 million. Net Assets (on balance sheet) increased by 125% to US$7.96 million (1997: US$3.54 million).

Financial results were strong, continuing the successful trend of the two previous years. Income for the year was US$ 8.77 million, up 92.1% from 1997. This income was derived from management fees and other revenues across the full range of the Company's products. Expenditure, at US$4.34 million, was well controlled, up 56.3% from 1997 but limited to 50.0% of revenues (61% for 1997).

Business Highlights

•  During the year, FFJ devoted resources to the identification, configuration, administration and distribution of real estate investments, structured according to Shari'a guidelines. The goal is to become pre-eminent in this investment field, and considerable resources have been devoted to building expertise and developing strong relationships with the best real estate industry professionals. Progress to date has been impressive, with US$ 143 million or 71% of assets under management invested in real estate at 31 December 1998. These investments, mainly located throughout the United States, are well diversified according to location, usage and tenor.

• Five major real estate transactions were completed for the Special Program Investments portfolio, totalling US$32.33 million. These investments included property in Cambridge, Massachusetts; Muncie, Indiana; Honolulu, Hawaii; San Francisco, California and five shopping centers in Massachusetts.

• The Faisal Finance Real Estate Income Fund II L.P. acquired three properties in the United States, bringing the Fund's capitalisation at 31 Dec 1998 to US$97.3 million. Investors in the Fund received an 8% gross current return for the period. This Fund is now closed to further investment.

• The Islamic Multi-Investment Fund, domiciled in Luxembourg as an open-ended unincorporated mutual investment fund, sponsored jointly by American Express Bank Ltd. and Faisal Finance had a mixed performance. Strong performance from the Global Equities portfolio (NAV + 31.66%), and on target performance from the Trade Finance (NAV +6.46%) and PPSC&C (NAV +4.37%) portfolios was offset by below target performance from Islamic Market Opportunities (NAV +0.33%) and Emerging Markets Equities (NAV --38.29%).

• Faisal Fund for Egyptian Equities Limited, launched on 15^th March 1998, performed relatively well in very difficult markets. Although NAV was -4.30% for the period, this contrasts with a fall of -20.29% in the World Bank Egyptian Equity Index.

• The Mezzanine Investment Pool, which invests in pre-IPO and young public companies that meet Islamic criteria, launched in July 1996, has outperformed the target average annual return of 40%. In view of the high success of this product, FFJ is in the process of changing the structure to a Mezzanine Fund

• The Adil Islamic Growth Fund performed poorly (NAV -15.02%) reflecting volatility in Far Eastern equity markets, with downward pressures the common factor.