41 MANAGEMENT DISCUSSION AND ANALYSIS CAPITAL MANAGEMENT BUSINESS OVERVIEW The Manager’s capital management strategy for Al-Salām REIT is to maintain an appropriate gearing level and accommodative financing rate to ensure that the Fund is able to service its Islamic financings and liabilities. The capital management strategy also seeks to reduce exposure to fluctuations in financing rates. This approach will ensure an improved cash flow and liquidity position while optimising AlSalām REIT’s distributable earnings. The following capital management strategies were implemented in FY2023: • Maintaining a diverse range of sources for debt funding. These include Islamic term financing and Sukuk; • Retaining sufficient cash flow and cash position to service all financing obligations; • Ongoing review of the Fund’s debt portfolio to determine the optimal debt refinancing strategy to reduce funding costs; 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 2023, Al-Salām REIT’s Islamic financing portfolio comprises the following: FY2022 FY2023 Total Islamic Financings (RM Mil) 637.3 639.6 Average Cost of Financing (%) 4.17 5.54 Fixed/Floating Ratio 100% floating 100% floating Average Maturity Period (years) 2 2 Financing Service Cover ratio (times) 1.57 1.60 Gearing ratio (%) 48.8 48.6 FY2022 FY2023 (RM) (RM) Non Current: Term Financing-i 118,000,000 - Business Financing-i 70,000,000 70,000,000 Sukuk Ijarah - 455,000,000 188,000,000 525,000,000 Less: Transaction Cost (937,578) (3,318,926) Sub Total 187,062,422 521,681,074 Current: Sukuk Ijarah 451,000,000 - Term Financing-i - 118,000,000 451,000,000 118,000,000 Less: Transaction Cost (792,120) (65,675) Sub Total 450,207,880 117,934,325 Total Islamic Financing 637,270,302 639,615,399
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