AL-SALAM REIT ANNUAL REPORT 2019

43 ANNUAL REPORT 2019 Capital Management AL-SALĀM REIT • FY2018 FY2019 Total Borrowings (RM Mil) 509.5 597.5 Average Cost Of Debts (%) 5.38 5.41 Fixed/Floating Ratio 100% Floating 100% Floating Average Maturity Period (years) 1 1 Financing Service Cover ratio (times) 3.13 3.32 Gearing ratio (%) 44.1 47.8 The Manager’s ongoing capital management strategy involves adopting and maintaining an appropriate gearing level and adopting an active financing rate management strategy to manage the risks associated with changes in financing rates. By doing so, the Manager intends to maximise Al-Salām REIT’s Distributable Income while maintaining an appropriate level of risk associated with debt financing. The Manager intends to implement this strategy by; • diversifying sources of debt funding • maintaining a reasonable level of loan service capability • securing the most favourable terms of funding • managing its financial obligations • where appropriate, managing the exposures arising from adverse market financing rates • actively manage the range of maturities to reduce refinancing risk and optimize the cost of capital Al-Salām REIT’s financing currently comprises the following: The Group As at As at 31-12-2019 31-12-2018 RM'000 RM'000 Non-current Secured - Term Financing-i ("TF-i") 87,026 - - Commodity Murabahah Term Financing-i ("CMTF-i") - 350,000 - Sukuk Ijarah - Islamic Medium Term Notes ("IMTN") - 162,785 87,026 512,785 Less: Transaction costs (1,025) (3,257) 86,001 509,528 Current Secured - Commodity Murabahah Term Financing-i ("CMTF-i") 350,000 - - Sukuk Ijarah - Islamic Medium Term Notes ("IMTN") 162,785 - 512,785 - Less : Transaction costs (1,253) - 511,532 - Total Islamic Financing 597,533 509,528 Non-current Term Financing-i On 27 February 2019, the Fund obtained the Term Financing ("TF-i") of up to RM118 million from Commerce International Merchant Bankers (“CIMB”) to finance the proposed acquisition of 22 QSR properties. On 19 March 2019, the Fund drawdown RM87.03 million to complete the acquisition of 17 properties. The TF-i profit is payable over a period of 60 months from the date of first disbursement. The effective profit rate for the TF-i will be based on COF which is based on the Bank’s COF + 1.45% per annum for the duration of the TF-i. The average effective profit rate for the TF-i is 5.15% (2018: Nil%). The principal amount is to be expected to be paid in March 2024.