Government Securities Fund

Condensed Interim Financial Statements forFor The Nine Months And Quarter Ended March 31, 2021 (Un-audited)

Government Securities Fund

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ITMinds LimitedCentral Depository Company of Pakistan, LimitedCDC House, 99B, Block-B, S.M.C.H.S.,Main Shahra-e-Faisal, Karachi.

Faysal Bank LimitedAllied Bank LimitedHabib Bank LimitedJS Bank Limited

2 Faysal Asset Management Faysal Government Securities Fund

MISSION AND VISIONTo provide world class investment managementand advisory services for the benefit of clientelelooking to maximize their financial returns whileminimizing risk.

To amplify our client-centricity by inspiringinnovation, championing customer service,generating competitive returns, and honoring theutmost ethical and professional standards.

MISSION STATEMENTThe objective of the Scheme is to providecompetitive returns by investing primarily inGovernment Securities.


Condensed Interim Statement of Assets and LiabilitiesAs At March 31, 2021

DirectorChief Executive OfficerChief Financial Officer

For Faysal Asset Management Limited(Management Company)


Condensed Interim Income StatementFor The Nine Months Period And Quarter Ended March 31, 2021




Condensed Interim Statement of Comprehensive IncomeFor The Nine Months Period And Quarter Ended March 31, 2021




Condensed Interim Statement of Movement in Unit Holders’ FundFor The Nine Months Period And Quarter Ended March 31, 2021




Condensed Interim Cash Flows StatementFor The Nine Months Period And Quarter Ended March 31, 2021




1 LEGAL STATUS AND NATURE OF BUSINESS

1.1 Faysal Government Securities Fund (the Fund) is an open end mutual fund constitutedunder a trust deed entered into on July 31, 2019 between Faysal Asset ManagementLimited as the Management Company and Central Depository Company of PakistanLimited (CDC) as the Trustee. The investment activities and administration of the Fundare managed by the Management Company.

'The Management Company of the Fund has been licensed to act as an AssetManagement Company under the Non-Banking Finance Companies (Establishmentand Regulation) Rules, 2003 through a certificate of registration issued by the Securitiesand Exchange Commission of Pakistan (SECP). The registered office of the ManagementCompany is situated at 7th Floor, West Wing, Faysal House, Shahrah-e-Faisal, Karachi.The Management Company is a member of the Mutual Funds Association of Pakistan(MUFAP).

The Fund is categorised as 'Income Scheme' by the Board of Directors of the ManagementCompany pursuant to the provisions contained in Circular 7 of 2009 and is listed onthe Pakistan Stock Exchange Limited. The units of the Fund were initially offered forpublic subscription at a par value of Rs.100 per unit. Thereafter, the units are beingoffered for public subscription on a continuous basis from March 16, 2020 and aretransferable and redeemable by surrendering them to the Fund.

1.2 The objective of the Scheme is to provide competitive returns by investing primarilyin Government Securities.

1.3 The title to the assets of the Fund is held in the name of Central Depository Companyof Pakistan Limited (CDC) as the Trustee of the Fund.

1.4 The Management Company has been assigned a quality rating of 'AM2' by VIS CreditRating Company Limited dated March 31, 2021 (2019: 'AM2' dated February 18, 2020).

The rating reflects the Company’s experienced management team, structured investmentprocess and sound quality of systems and processes. The fund has not been rated.The fund has not been rated by Pakistan Credit Rating Agency (PACRA).

2 BASIS OF PREPARATION

2.1 STATEMENT OF COMPLIANCE `

These condensed interim financial statement have been prepared in acordance withthe accounting and reporting standards as applicable in Pakistan for interim financialreporting. The accounting and reporting standards as applicable in Pakistan for interimfinancial reporting comprise of:

Notes to and forming part of the Condensed Interim Financial StatementsFor The 9th Months Period and Quarter Ended March 31, 2021




- International Accounting Standard (IAS) 34, 'Interim Financial Reporting' issued bythe International Accounting Standards Board (IASB) as notified under the CompaniesAct, 2017;

- Provisions of and directives issued under the Companies Act, 2017 along with partVIIIA of the repealed Companies Ordinance, 1984; and

- Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003 (theNBFC Rules), Non-Banking Finance Companies and Notified Entities Regulations,2008 (the NBFC Regulations) and requirements of the Trust Deed.

Wherever provisions of and directives issued under the Companies Act, 2017, partVIIIA of the repealed Companies Ordinance, 1984, the NBFC Rules, the NBFCRegulations and the requirements of the Trust Deed differ from the requirements ofIAS 34, the provisions of and directives issued under the Companies Act, 2017, partVIIIA of the repealed Companies Ordinance, 1984, the NBFC Rules, the NBFC

Regulations and requirements of the Trust Deed have been followed.

The disclosures made in these condensed interim financial statements have, however,been limited based on the requirements of the International Accounting Standard 34:'Interim Financial Reporting'. These condensed interim financial statements do notinclude all the information and disclosures required in a full set of financial statementsand should be read in conjunction with the published audited financial statements ofthe Fund for the period from March 16, 2020 to June 30, 2020.

2.2 In compliance with Schedule V of the Non-Banking Finance Companies and NotifiedEntities Regulations, 2008, the directors of the Management Company hereby declarethat these condensed interim financial statements give a true and fair view of the stateof affairs of the Fund as at March 31, 2021.

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES,JUDGMENTS AND RISK MANAGEMENT POLICIES

3.1 The accounting policies applied and the methods of computations of balances usedin the preparation of these condensed interim financial statements are the same asthose applied in the preparation of the financial statements of the Fund for the periodfrom March 16, 2020 to June 30, 2020.

3.2 The preparation of these condensed interim financial statements is in conformity withthe accounting and reporting standards as applicable in Pakistan requires managementto make estimates, assumptions and use judgments that affect the application ofaccounting policies and reported amounts of assets, liabilities, income and expenses.



Estimates, assumptions and judgments are continually evaluated and are based onhistorical experience and other factors, including reasonable expectations of futureevents. Revisions to accounting estimates are recognised prospectively commencingfrom the period of revision. In preparing these condensed interim financial statements,the significant judgments made by the management in applying the Fund’s accountingpolicies and the key sources of estimation and uncertainty were the same as thoseapplied to the financial statements as at and for the period ended June 30, 2020. TheFund’s financial risk management objectives and policies are consistent with thosedisclosed in the financial statements of the Fund for the period ended June 30, 2020.

3.3 Standards, interpretations and amendments to the published accounting and reportingstandards that are effective in the current period

There are certain amendments to the published accounting and reporting standards that are mandatory for the Fund's annual accounting period beginning on July 1, 2020.

However, these do not have any significant impact on the Fund's operations and,therefore, have not been detailed in these condensed interim financial statements.

3.4 Standards, interpretations and amendments to the published accounting and reportingstandards that are not yet effective

There are certain new amendments to the published accounting and reporting standardsthat are mandatory for the Fund's annual accounting period beginning on or after July1, 2021. However, these will not have any significant impact on the Fund's operationsand, therefore, have not been detailed in these condensed interim financial statements.

4.1 These accounts carry profit at rates ranging between 5.5% to 7.75% (June 30, 2020:6.5% to 8.8% ) per annum. Deposits in savings accounts also include Rs. 1.170 million(June 30, 2020: 2.832 million) maintained with Faysal Bank Limited, a related partycarrying profit at the rate of 5.50% (June 30, 2020: 6.50%) per annum.





5.6 Investments - non-compliance

Cash and near cash instruments have to be maintained in 10% -100% range of netassets on monthly average basis.

The following are the details of non-compliant investments held by the Fund:

6.1 Preliminary expenses and floatation costs represent expenditure incurred prior to thecommencement of the operations of the Fund. These are being amortised over fiveyears commencing from March 16, 2020 in accordance with the trust deed of the Fundand the NBFC Regulations.



7.1 As per regulation 61 of the NBFC Regulations, the Management Company is entitledto a remuneration equal to an amount not exceeding the maximum rate of managementfee as disclosed in the offering document subject to the total expense ratio limit.

Keeping in view the maximum allowable threshold, the Management Company hascharged remuneration at the following rates:

7.2 During the period, Sindh sales tax on management remuneration has been chargedat the rate of 13% (June 30, 2020: 13%).

8.1 As a consequence of the 18th amendment to the Constitution of Pakistan, in May 2015the Sindh Workers’ Welfare Fund Act, 2014 (SWWF Act) had been passed by theGovernment of Sindh as a result of which every industrial establishment located in theProvince of Sindh, the total income of which in any accounting year is not less thanRs 0.50 million, is required to pay Sindh Workers’ Welfare Fund (SWWF) in respectof that year a sum equal to two percent of such income. The matter was taken up bythe MUFAP with the Sindh Revenue Board (SRB) collectively on behalf of various assetmanagement companies and their CISs whereby it was contested that mutual fundsshould be excluded from the ambit of the SWWF Act as these were not industrialestablishments but were pass through investment vehicles and did not employ workers.The SRB held that mutual funds were included in the definition of financial institutionsas per the Financial Institution (Recovery of Finances) Ordinance, 2001 and were,hence, required to register and pay SWWF under the SWWF Act. Thereafter, MUFAPhas taken up the matter with the Sindh Finance Ministry to have CISs / mutual funds

excluded from the applicability of SWWF. In view of the above developments regardingthe applicability of SWWF on CISs / mutual funds, the MUFAP recommended that asa matter of abundant caution provision in respect of SWWF should be made on a

prudent basis with effect from the date of enactment of the SWWF Act.



Considering the above, the fund has made provision against SWWF amounting to Rs3.622 million as at March 31, 2021. Had the provision for SWWF not been recordedin these condensed interim financial statements of the Fund, the net asset value of theFund as at March 31, 2021 would have been higher by Re. 0.293 per unit (June 30,2020: 0.0486 per unit).

9 CONTINGENCIES AND COMMITMENTS

There were no contingencies and commitments outstanding as at March 31, 2021 andJune 30, 2020.

10 EXPENSE RATIO

The total expense ratio (TER) of the Fund for the period is 0.45% which includes 0.18%representing government levies on the Fund such as sales taxes, Sindh Workers'Welfare Fund and annual fee payable to the SECP, etc. This ratio is within the prescribedregulatory limit of 2.5%.

11 TAXATION

The income of the fund is exempt from income tax under Clause (99) of Part 1 of theSecond Schedule to the Income Tax Ordinance, 2001, subject to the condition that notless than 90 percent of the accounting income for the year, as reduced by capital gains,whether realised or unrealised, is distributed amongst the unit holders. Since themanagement intends to distribute the income earned by the Fund during the periodending June 30, 2020 to the unit holders in the manner as explained above, accordingly,no provision for taxation has been made in these condensed interim financial statementsfor the period ended March 31, 2021.

The Fund is also exempt from the provisions of section 113 (minimum tax) under clause 11A of Part IV of the Second Schedule to the Income Tax Ordinance, 2001.

12 EARNINGS PER UNIT

Earnings per unit (EPU) has not been disclosed in these condensed interim financialstatements as in the opinion of the management, determination of weighted averageoutstanding number of units for calculating EPU is not practicable.

13 TRANSACTIONS WITH CONNECTED PERSONS AND RELATED PARTIES

13.1Connected persons and related parties include Faysal Asset Management Limitedbeing the Management Company, Central Depository Company of Pakistan Limitedbeing the Trustee, other collective investment schemes managed by the ManagementCompany, Faysal Asset Management Limited - Staff Provident Fund, Faysal Asset



Management Limited - Staff Gratuity Fund, Faysal Bank Limited, Faysal Bank Limited- Staff Provident Fund, Faysal Bank Limited - Staff Gratuity Fund and other entitiesunder common management and / or directorship and the directors and officers of theManagement Company and the Trustee, key management personnel, other associatedundertakings and unit holders holding more than 10% units of the Fund at period end.

13.2Transactions with connected persons essentially comprise sale and redemption ofunits, fee on account of managing the affairs of the Fund, sales load, other chargesand distribution payments to connected persons.

13.3 Remuneration to the Management Company of the Fund is determined in accordance with the provisions of the NBFC Regulations and the trust deed.

13.4 Remuneration to the Trustee is determined in accordance with the provisions of the NBFC Regulations and the trust deed.

13.5 The details of transactions carried out by the Fund with connected persons and relatedparties and balances with them at period end are as follows:



14 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction between market participants at the measurement date.

Underlying the definition of fair value is the presumption that the Fund is a going concernwithout any intention or requirement to curtail materially the scale of its operations orto undertake a transaction on adverse terms.

Financial assets which are traded in an open market are revalued at the market pricesprevailing on the reporting date.

The fair value of all financial assets and financial liabilities of the Fund approximatetheir carrying amounts due to short term maturities of these instruments.

14.1Fair value hierarchy

International Financial Reporting Standard 13, 'Fair value measurement' requires theFund to classify assets using a fair value hierarchy that reflects the significance of theinputs used in making the measurements. The fair value hierarchy has the following

levels:



Level 1: Fair value measurements using quoted price (unadjusted) in an active marketfor identical assets or liabilities;

Level 2: Fair value measurements using inputs other than quoted prices included withinlevel 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); and

Level 3: Fair value measurement using inputs for the asset or liability that are not basedon observable market data (i.e. unobservable inputs).

As at March 31, 2021 the carrying values of all financial assets and liabilities approximatetheir fair values.

*The carrying value of these securities approximate their fair value since these areshort term in nature and are placed with counter parties which have high credit ratings.

15 CORRESPONDING FIGURES

Corresponding figures have been re-classified and re-arranged in these condensedinterim financial statements, wherever necessary, for the purpose of better presentation.No significant rearrangements or reclassifications have been made in these condensedinterim financial statements during the period.

16 GENERAL

16.1Figures are rounded off to the nearest Rupee.

16.2Impact of COVID-19

The COVID-19 pandemic has taken a toll on all economies and emerged as a contagionrisk around the globe, including Pakistan. To reduce the impact on businesses and





economies in general, regulators / governments across the globe have introduced ahost of measures on both the fiscal and economic fronts. The Securities and ExchangeCommission of Pakistan (SECP) had provided the following relaxation to CISs operatingin Pakistan for classification of debt security for a specified period of time commencingfrom April 9, 2020 and expiring on March 31, 2021.

- The timeline for classification of debt security as non performing has been extendedfrom 15 days to 180 days overdue.

The Management Company is closely monitoring the situation and has invoked required actions to ensure safety and security of the staff and an uninterrupted service to the

customers. Business Continuity Plans (BCP) for respective areas are in place andtested. The Management Company has significantly enhanced monitoring for all cybersecurity risk during these times from its information security protocols. The remote workcapabilities were enabled for critical staff and related risk and control measures wereassessed to make sure they are fully protected using virtual private network (“VPN”)connections. Further, the Management Company has also ensured that its remoteaccess systems are sufficiently resilient to any unwanted cyber-attacks.

The Management Company has made an assessment of COVID-19 on the credit riskand liquidity risk and believes that there is no significant impact on the Fund.

17 DATE OF AUTHORISATION FOR ISSUE

These condensed interim financial statements were authorised for issue on19 April 2021 by the Board of Directors of the Management Company.

Documents

Government Securities Fund