Wah Seong Corporation Berhad Annual Report 2020

192 WAH SEONG CORPORATION BERHAD NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020 46 FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED) Fair value hierarchy (continued) Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000 Group 2020 Financial assets/(liabilities) Investment in equity instruments 5 - - 5 Derivative financial assets - 2,256 - 2,256 Derivative financial liabilities - (99) - (99) Short term investments - 642 - 642 5 2,799 - 2,804 2019 Financial assets/(liabilities) Investment in equity instruments 6 - - 6 Derivative financial assets - 1,101 - 1,101 Derivative financial liabilities - (1,860) - (1,860) Short term investments - 623 - 623 6 (136) - (130) Company 2020 Financial assets Short term investments - 642 - 642 2019 Financial assets Short term investments - 623 - 623 47 CAPITAL MANAGEMENT The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital structure in order to continue supporting its businesses, maximise shareholders’ value and sustain future development of businesses within the Group. The Group strives to monitor and maintain an optimal gearing ratio. The gearing ratio is calculated as net debt divided by total capital. Net debt is calculated as loans and borrowings less time deposits, cash and bank balances. Total capital includes paid-up share capital and reserves attributable to owners of the Company. The Group’s net gearing ratio is 0.91 times (2019: 0.82 times). In addition to disclosure in Note 27, during the financial year ended 31 December 2020, other revolving credit facility of a subsidiary received an indulgence from meeting a specific financial covenant from the bank. The indulgence was obtained before the balance sheet date to 31 December 2021.