AL-SALAM REIT ANNUAL REPORT 2019

24. CAPITAL MANAGEMENT The Group and the Fund manage their capital to ensure that the Group and the Fund will be able to continue as going concern while maximising the return to unitholders through the optimisation of the debt and equity balance. The Group’s and the Fund’s overall strategy remain unchanged from 2018. The capital structure of the Group and the Fund consist of net debt (borrowings as detailed in Note 17) offset by cash and cash equivalents in Note 15 and Unitholders’ fund of the Fund (Note 18) (comprising Unitholders’ capital and undistributed income). The Group and the Fund are not subject to any externally imposed capital requirements. However, the Group and the Fund are required to comply with the SC Guidelines on borrowings. The SC Guidelines requires that the total borrowings of the Group and the Fund (including borrowings through issuance of debt securities) should not exceed 50% of the total asset value of the Group and the Fund at the time the borrowings are incurred. Notwithstanding, the Group’s and the Fund’s total borrowings may exceed this limit with the sanction of the unitholders by way of an ordinary resolution. The Manager’s risk management committee reviews the capital structure of the Group and of the Fund on a regular basis to ensure that the SC Guidelines are complied with. Gearing ratios The Group’s and the Fund’s gearing ratios are calculated based on the proportion of total borrowings to the total asset value in accordance with the SC Guidelines. The gearing ratios at the end of the reporting period is as follows. The Group The Fund 2019 2018 2019 2018 RM RM RM RM Total borrowings (Note 17) 597,532,653 509,527,596 435,487,807 348,592,979 Amount owing to a subsidiary - - 160,303,801 159,317,928 597,532,653 509,527,596 595,791,608 507,910,907 Total assets value as per statements of financial position 1,249,179,745 1,157,161,151 1,246,628,307 1,154,656,300 Total borrowings to total assets value ratio 47.8% 44.0% 47.8% 44.0% 25. COMMITMENTS The Group and the Fund lease out their investment properties under operating leases. The future minimum lease payments to be received under non-cancellable leases are as follows: The Group The Fund 2019 2018 2019 2018 RM RM RM RM Less than one year 33,901,493 32,681,429 33,901,493 32,681,429 Between one and five years 174,687,104 172,931,734 174,687,104 172,931,734 More than five years 471,089,070 506,745,893 471,089,070 506,745,893 679,677,667 712,359,056 679,677,667 712,359,056 As of 31 December 2019, the deposit payables amounting RM566,400 (2018: RM3,820,698) has been included as part of capital commitments for the acquisition of 5 (2018: 17) QSR properties which would be realised upon the completion of the acquisition. AL-SALĀM REIT • 150 ANNUAL REPORT 2019 For The Financial Year Ended 31 December 2019 (Cont’d) Notes To The Financial Statements