S E C T I O N 3 S T R A T E G I C P E R F O R M A N C E 53 MANAGEMENT DISCUSSION AND ANALYSIS CAPITAL REVIEW CAPITAL MANAGEMENT The Manager’s capital management strategy for Al-Salām REIT is to maintain an appropriate gearing level and supportive financing rate to ensure that the Fund is able to service its Islamic financings and liabilities. The capital management strategy also seeks to reduce the fund's exposure to fluctuations in financing rates. The approach ensures improved cashflows and cash position while optimising Al-Salām REIT’s distributable income. The following capital management strategies were implemented in FY2021: • Maintaining a diverse range of sources for debt funding. These include Islamic term financing and Sukuk; • Retaining sufficient cash flows and cash position to service all financing obligations • Constantly reviewing the Fund’s debt portfolio towards identifying optimal debt refinancing strategy towards reducing cost of financing and • Actively managing the range of maturities of its various financing obligations such as Sukuk to reduce refinancing risk and to optimise the cost of capital. As at 31 December 2021, Al-Salām REIT’s Islamic financing portfolio comprises the following: FY2020 FY2021 Total Islamic Financings (RM mil) 633.9 635.7 Average Cost of Financing (%) 4.27 3.82 Fixed/Floating Ratio 100% floating 100% floating Average Maturity Period (years) 3 3 Financing Service Cover ratio (times) 2.57 2.45 Gearing ratio (%) 50.5 50.7 2020 2021 (RM) (RM) Non Current: Term Financing-i 118,000,000 118,000,000 Business Financing-i - 70,000,000 Sukuk Ijarah 468,000,000 451,000,000 586,000,000 639,000,000 Less: Transaction Cost (4,144,099) (3,343,062) 581,855,901 635,656,938 Current: Sukuk Ijarah 52,000,000 - Total Islamic Financing 633,855,901 635,656,938
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