ANNUAL REPORT
2013/2014
Important Information
National Storage Holdings Limited ACN 166 572 845 (“NSH” or the “Company”)
National Storage Property Trust ARSN 101 227 712 (“NSPT”)
together form the stapled entity National Storage REIT (“NSR” or the “Consolidated Group”)
Responsible Entity of NSPT
The Trust Company (RE Services) Limited (“The Responsible Entity”)
ACN 003 278 831 AFSL 235 150
Level 15, 20 Bond Street, Sydney NSW 2000
DISCLAIMER
This is the Annual Report for National Storage REIT which comprises the combined assets and operations of National Storage Holdings Limited (ACN 166 572 845)
(“NSH”) and the National Storage Property Trust (ARSN 101 227 712) (“NSPT”). This report has been prepared by NSH and The Trust Company (RE Services) Limited
(ACN 003 278 831) (“Trust Co”) as responsible entity for NSPT. National Storage REIT (ASX: NSR) currently has stapled securities on issue on the Australian Securities
Exchange (“ASX”) each comprising one unit in NSPT and one ordinary share in NSH (“Stapled Securities”).
The information contained in this report should not be taken as financial product advice and has been prepared as general information only without consideration
of your particular investment objectives, financial circumstances or particular needs. This report is not an invitation, offer or recommendation (express or implied) to
apply for or purchase or take any other action in respect of Stapled Securities.
This report contains forward-looking statements and forecasts, including statements regarding future earnings and distributions. These forward-looking statements and
forecasts are not guarantees of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of
NSH and/or Trust Co, and which may cause actual results or performance to differ materially from those expressed or implied by the forward-looking statements and
forecasts contained in this report.
No representation is made that any of these statements or forecasts will come to pass or that any forecast result will be achieved. Similarly, no representation is given
that the assumptions upon which forward-looking statements and forecasts may be based are reasonable.
These forward-looking statements and forecasts are based on information available to NSH and/or Trust Co as of the date of this report. Except as required by law or
regulation (including the ASX Listing Rules) each of NSH and Trust Co undertake no obligation to update or revise these forward-looking statements or forecasts.
Certain financial information in this report is prepared on a different basis to the Financial Report, which is prepared in accordance with Australian Accounting
Standards. Any additional financial information in this report which is not included in the Financial Report was not subject to independent audit or review by Ernst &
Young.
Table of Contents
Investor Relations 140
Corporate Directory 142
Table of Contents
Overview 5
Highlights 2014 6
The Self Storage Industry 16
NSR: Australia’s First Self-Storage REIT 18
12 Chairman’s Report
14 Managing Director’s Report
Corporate Governance 36
Directors’ Report 40
32 Board of Directors
34 Senior Executives
Investor Relations 140
Corporate Directory 142
55 Remuneration Report
138 Stapled Security Holder Information
143 National Storage History
3
National Storage Annual Report 2013/2014
Overview
Overview
National Storage is one of
Australia’s largest self-storage
providers, tailoring self-storage
solutions to over 25,000
residential and commercial
customers in 69 centres across
the country.
The National Storage
offering spans self-storage,
business storage, records
management, climate
controlled wine storage,
vehicle storage, vehicle
and trailer hire, packaging,
insurance and other value
added services.
In December 2013, National Storage listed on the Australian Securities
Exchange (ASX) forming National Storage REIT (NSR), the first publicly
listed independent, internally managed and fully integrated owner and
operator of self-storage centres in Australia.
The establishment of NSR brought together:
• 28 freehold self-storage properties and businesses1;
• Long term leasehold interests over an additional 10 self-storage centres;
• Management rights and a 10% investment interest in an additional
24 self-storage centres owned by Southern Cross Storage Group
(an investment fund co-owned by NSR and funds managed by global
real estate investment manager Heitman);
• The National Storage operating platform, providing fully integrated
management services to self-storage centres across Australia.
NSR is a stapled entity comprising units in the National Storage Property
Trust and shares in National Storage Holdings Limited. The responsible
entity of the NSPT is The Trust Company (RE Services) Limited.
Since listing, the NSR portfolio has grown rapidly with the acquisition
of a further eight centres, representing an additional 58,000 sqm of
net lettable area (NLA) and bringing the total number of self-storage
centres under operation or management to 69 at September 2014.
1 The Artarmon centre was managed by National Storage prior to the IPO and is included in the 28 centres
was formally purchased immediately after listing.
5
National Storage Annual Report 2013/2014 Highlights 2014
A-IFRS profit after
tax for FY14 of
$15.6m
Underlying profit
for 2H FY14 of
$8.8m
(3.6 cents per security)
8
acquisitions
transacted in FY14
EPS guidance for
CY14 reaffirmed at
7.8 cents
per security
($19.1million)
$305
million
portfolio valuation
( freehold owned
centres)
$582
million
total assets under
management
Highlights
Total net
lettable area2
372,000
sqm
69 centres
under management
and operation
at September 2014
41,000
storage
units
at September 2014
10% increase
in rate / sqm
occupied for FY141
25,000
customers
launch
of dedicated third party
centre management
platform designed to
expand reach and
provide additional
revenue.
At 30 June 2014 unless otherwise noted.
1 From $249 per sqm at 1 July 2013 to $275 per sqm
at 30 June 2014 excluding all CY 2014 acquisitions.
2 Approximate as at September 2014.
7
National Storage Annual Report 2013/2014 Strategy
NSR’s objective is to deliver
investors a stable and growing
income stream from a
diversified portfolio of quality
self-storage assets and to drive
income and capital value
growth through active asset
and portfolio management.
Strategy
+
+
+
+
Asset Management
drive organic same
centre growth
Portfolio and Development Management
execute accretive acquisitions, portfolio
recycling and development opportunities
Centre Management
drive revenue from
third party management
Capital Management
maintain an efficient capital structure
develop multiple
revenue streams
to maximise returns
9
National Storage Annual Report 2013/2014 Portfolio
PERTH NLA
67,000
11 centres
ADELAIDE NLA
35,000
6 centres
All figures are rounded to the nearest thousand and expressed in square metres.
Portfolio
TOWNSVILLE NLA
17,000
1 centre
SEQ NLA
112,000
22 centres
SYDNEY NLA
43,000
50.5k cases
9 centres
MELBOURNE NLA
88,000
17 centres
HOBART NLA
10,000
3 centres
11
National Storage Annual Report 2013/2014 Chairman’s Report
On behalf of the Board of NSH I am pleased to present the National
Storage REIT 2014 Annual Report.
This inaugural annual report represents an important milestone for NSR,
having successfully transitioned from a private company to Australia’s
first publicly listed self-storage real estate investment trust in December
2013. Listing National Storage provided an opportunity to reinvent the
business model, taking into account 20 years of industry learnings and
working to develop a strong platform for future growth.
Importantly, the founding shareholders of National Storage remain
integrally involved as shareholders and management in NSR.
The new structure is designed to improve productivity and profit.
NSR provides an opportunity to invest in an operating retail business
with the relative security and capital growth inherent in more traditional
property investment classes. Multiple revenue streams and the benefits
of scale are now directed into a single structure, in order to deliver a
stable and growing income stream for investors with the potential for
future capital growth.
Since listing, NSR has executed its acquisition and consolidation strategy,
transacting on $85 million in acquisitions representing an additional
six assets in the NSR portfolio. In addition a further two acquisitions
were made on behalf of Southern Cross Storage Group. The Board is
confident NSR will continue to grow market presence and assets under
management into 2015 and beyond.
NSR adopts a disciplined approach in its capital management
strategy, with conservative gearing targets and a strong balance sheet
providing significant additional acquisition capacity. In August 2014,
NSR undertook a placement offer which raised $45.9 million to replenish
the balance sheet and provide further capacity for accretive potential
acquisitions. A Security Purchase Plan for retail investors is anticipated to
raise a further $5 million.
The successful listing of NSR is an important achievement for both the
company and the broader self-storage industry. Self-storage has long
been accepted as an institutional investment quality asset class in the
United States of America, and more recently in the United Kingdom.
The formation of Australia’s first internally managed sector specific
self-storage REIT in NSR has seen the asset class gain acceptance and
support with institutional investors and the broader investment market,
as well as facilitating important independent analysis and research.
NSR has set the standard for the future of investment in self-storage in
Australia.
Yours faithfully
Laurence Brindle
Chairman
Chairman’s Report
13
National Storage Annual Report 2013/2014 Managing Director’s Report
December 2013 was an historic moment for our company. After 14 years
of private ownership National Storage became the first sector specific
storage company to successfully undertake a public listing on the ASX,
fulfilling a long term strategic goal of the founding management team.
In doing so we have brought together a number of diverse business and
property interests into a single integrated platform whereby all future
activities of NSR will be directed towards achieving long term business
growth and enhancing returns to our stakeholders.
This growth will come primarily from the following areas:
• organic same centre growth - from gradual increases in occupancy,
rate per square metre and ancillary sales achieved from existing
centres over time;
• acquisition based growth - from capitalising on high quality
consolidation opportunities, by acquiring individual maturing or
established storage centres in the highly fragmented Australian self-
storage market;
• management opportunities - through leveraging our existing platform
to generate additional management fee revenue and share expenses
across operations, as well as providing an important pipeline of future
potential acquisitions;
• development / project management opportunities - providing
additional development, project management and acquisition
opportunities; and
• portfolio recycling - assessing the highest and best use of properties
within the NSR portfolio on an ongoing basis and capitalising on
appropriate opportunities.
As one of Australia’s largest dedicated storage operators and the only
listed self-storage REIT in the fragmented Australian market, National
Storage has a number of advantages in terms of size and scalability
which allow us to compete effectively. Our existing competitive
advantage has been enhanced by our growth this year having
expanded our portfolio by eight centres, with a further 6,400 storage
units being added into the National Storage portfolio.
Our customer service specialists at Australia’s only dedicated self-storage
contact centre and at our centres are focused on creating “tailored
storage solutions”, while providing positive and proactive advice
designed to help our customers find the perfect sized space for their
needs and budget. We are constantly striving to improve our customer
service and training interfaces, together with sharing our company’s
vision for the future with our staff, who are our most important assets.
Sales enquiry conversion rates are currently tracking at 50% which is
pleasing given the competitive market conditions. Further training
and development will focus on building on these skills to ensure our
personalised service continues to deliver a significant competitive
advantage over other self-storage operators.
Our focus on internet technology and digital marketing has seen our
web traffic improve, and our search engine optimisation results grow in
Managing Director’s Report
ranking to consistently place in the top three in organic search results for
“self storage” in specific markets. As the marketing landscape changes
and continues to move in a digital direction, it has become increasingly
more important for us to focus on digital marketing and direct marketing
initiatives that will serve to build our brand locally, regionally and
nationally. This focus is also reflected in our ongoing sponsorship of the
Brisbane Lions Australian Football Club, providing exposure to over
eight million television viewers last year as well as a myriad of direct fan
engagement and business to business marketing opportunities.
Our yield management system and dynamic pricing model, which
has been born out of twenty years of storage industry experience
and extensive industry specific research and development, has been
enhanced considerably in the last year and allows us to react rapidly
to changing market conditions and new trends in customer activity.
These systems provide us with the capacity to apply our pricing
seamlessly across the portfolio’s 41,000 individual storage units, allowing
us to more appropriately position our rental rates and “move in”
incentives.
On the acquisition front we are actively engaged in confidential
negotiations with multiple owners with a view to continuing to expand
our storage portfolio earnings via accretive, quality acquisitions. We
are also focused on securing a number of new management deals,
which in addition to providing us with an important new revenue stream
and expanded operations over which to share expenses, will provide a
potential pipeline for future acquisitions.
We are tremendously excited about the future of NSR and strongly
believe in the growth potential for our business. With our experienced
senior management team, dedicated storage staff, state-of-the-art
operating systems and an ongoing commitment to our core values of
“teamwork, care and excellence”, we are well placed to continue our
growth on a number of fronts.
We sincerely appreciate your overwhelming support during the NSR
IPO process late last year and we are deeply grateful for your ongoing
support during 2014 and beyond.
Yours faithfully
Andrew Catsoulis
Managing Director
15
National Storage Annual Report 2013/2014 The Self Storage Industry
Self-storage centres emerged in Australia in the late
1970s, following the development of the self-storage
industry in the USA. Today, according to industry
research, there are more than 1,100 self-storage
centres operating in Australia.
Self-storage centres offer individual lock-up units,
hardstand storage and managed storage facilities
typically rented on a month-to-month basis. High
quality centres generally provide secure premises,
extended access hours, an on-site manager, drive-
up access, undercover loading areas and the sale of
ancillary products and services including packaging
solutions, insurance and vehicle hire.
The performance of a self-storage centre is primarily
driven by its management, location, level of
customer service, quality of offering, relative pricing
and level of promotion. Financial performance is
driven by rental rates, area occupied, ancillary
services and cost control.
Demand for self-storage is influenced by
socioeconomic factors and demand drivers, such
as population growth, new housing developments,
increasing density of medium to high residential
development and proximity to retail shopping
centres, small business centres and retirement
villages. The typical tenant mix at a self-storage
centre is approximately 70% residential users, who
generally require self-storage due to “change of life”
events, and 30% small business or commercial users
who require storage for inventory or archives.
Further industry growth is expected as a result of
several underlying trends, including a shift to smaller
living spaces (exemplified by an aging population
and apartment living trends), a desire by individuals,
business and government to utilise existing space
more efficiently, an increase in online retailing which
requires flexible storage space, and an increased
customer awareness of the benefits offered by self-
storage generally.
There is a lower supply of storage on a per capita
basis in Australia compared to international markets
such as the USA and Canada, which may indicate
there is scope for continued growth in the sector.
The greatest barrier to entry into the market is
the availability of suitable and reasonably priced
development sites, which adds further value to
existing sites which can be acquired or expanded.
The Self Storage Industry
A TYPICAL SELF STORAGE CENTRE
A typical self-storage centre sits on approximately
6,000 – 8,000 sqm of land area, with 4,000 sqm of
net lettable area. A centre of this size would house
approximately 450 storage units ranging from one to
20 sqm, with nine sqm being the most popular unit
size. The centre would be staffed by two to four staff.
Consolidation provides opportunities for cost savings
through lower individual centre staffing numbers
due to centralised enquiry management via a
call centre, accounting, training, maintenance,
management systems, common branding and
advertising campaigns.
Storage units are typically rented on a month to
month basis with a minimum term of one month, and
can generally be terminated by giving two weeks
to one month’s notice. Payments are monthly in
advance, with credit card and automatic direct
debit being the most common and preferred
payment methods. The rate of delinquency in a well-
managed centre should be low with bad debts in a
strong operation running at less than 2%.
Revenue
New centres often require five years to reach
maturity.
Typically, a self-storage centre derives approximately
95% of its income from storage rental income, and
approximately 5% from the sale of ancillary services/
products (including sale of packaging, insurance
and vehicle hire).
The pricing of self-storage units varies by unit size,
type and location. Smaller units typically achieve
higher rates per square metre than larger units. In
many self-storage centres, the internal space can
be reconfigured to produce variations of unit size
to optimise income based on customer demand.
Generally the closer a storage centre is to the inner
city, the greater the demand for smaller unit sizes
and the higher the rate per square metre which can
be achieved.
Costs
Recurring operating expenses are generally fixed
in nature and represent between 25 – 35% of total
income, depending upon the size of a centre, with
the major components being labour, rates/taxes
and advertising.
Capital Expenditure
Development of a storage centre requires a
relatively high upfront capital commitment in order
to acquire appropriate land and construct a state-
of-the-art storage centre. Once established, self-
storage is a property sector that generally requires
low levels of ongoing capital expenditure and
maintenance. In an average year, excluding any
major works, a typical centre should have costs of
under $20,000 for capital expenditure.
THE NATIONAL STORAGE ADVANTAGE
There are two goals at the heart of the National
Storage business – to provide reliable income for
investors, and to provide value-added, tailored
storage solutions to our customers.
At the corporate level, our business model provides
our competitive advantage. NSR’s ability to drive
economies of scale, gain efficiences through
centralisation and derive value from the REIT
structure, allows multiple revenue streams to be
delivered into a single source, increasing value for
our investors.
At a centre level, our staff and their commitment
to excellence in customer service and the provision
of high quality, clean and secure facilities drives
value for our customers. Our offering of a quality
product in clean, modern and secure centres that
are conveniently located and easy to access, with
a range of related ancillary products and services,
all helps create value in the mind of the customer.
However, a number of our competitors also offer
modern, secure centres with similar features and
benefits.
Our difference lies in the focus and dedication
of our staff who strive to tailor storage solutions
for our customers, to offer peace of mind and a
reassurance that at National Storage, we handle
their possessions with care.
17
National Storage Annual Report 2013/2014 NSR: Australia’s First Self-Storage REIT
The key to achieving growth across the NSR business will be to leverage the operating
platform and develop multiple revenue streams:
• Storage income (driven by increasing rate per square metre and occupancy)
• Ancillary income (sale of merchandise, insurance and value added services)
• Wine income (derived from Australia’s premier wine storage business, Wine Ark)
• Third party centre management income
• Project/development management fees from Southern Cross and third party vendors/developers
• Portfolio recycling/redevelopment opportunities
• Acquisition fees
• Supplementary income from telecommunications towers and outdoor advertising
The Self Storage Industry
PROPERTY PORTFOLIO
The NSR portfolio currently comprises 33 freehold centres and 10 long term leasehold centres, all managed or
operated by National Storage.
Sydney
Perth
St Marys
5,035 sqm
Hornsby
3,371 sqm
Seven Hills
4,040 sqm
Minchinbury
5,739 sqm
Gladesville
3,740 sqm
Belfield
4,709 sqm
Chatswood
20.5k cases
Artarmon
16,597 sqm
Alexandria
30.0 cases
Joondalup
7,946 sqm
Osborne Park
5,126 sqm
Subiaco
11,653 sqm
East Perth
2,989 sqm
Cockburn
4,566 sqm
Rockingham
4929 sqm
Hobart
Melbourne
Wangara
5,407 sqm
Bayswater
5,442 sqm
Guildford
5,871 sqm
Belmont
5,332 sqm
Canning Vale
7,425 sqm
Montrose
3,688 sqm
Moonah
3,064 sqm
Mornington
3,639 sqm
Adelaide
Port Adelaide
3,644 sqm
Cheltenham
4,141 sqm
Hindmarsh
7,002 sqm
Reynella
5,754 sqm
Klemzig
7,003 sqm
Marion
7,115 sqm
Sunbury
2,299 sqm
Tullamarine
6,322 sqm
Brunswick
8,443 sqm
Northcote
3,394 sqm
North Melbourne
4,913 sqm
Hoppers Crossing
4,669 sqm
Brooklyn
9,753 sqm
Port Melbourne
7,240 sqm
Box Hill
6,374 sqm
Croydon
3,070 sqm
Kilsyth
4,092 sqm
Mulgrave
4,155 sqm
Breakwater
3,271 sqm
Prahran
4,461 sqm
Moorabbin
4,547 sqm
Moolap
5,383 sqm
Collingwood
5,050 sqm
19
National Storage Annual Report 2013/2014 Brisbane
Townsville
Aspley
5,896 sqm
Kedron
4,621 sqm
Brisbane City
3,002 sqm
Indooroopilly
5,896 sqm
Oxley
5,716 sqm
Browns Plains
7,075 sqm
Virginia
3,910 sqm
Fortitude Valley
7,034 sqm
Coorparoo
5,259 sqm
Macgregor
4,545 sqm
Cannon Hill
4,517 sqm
Capalaba
5,109 sqm
Mt Gravatt
3,948 sqm
Springwood
6,328 sqm
Regional Queensland
Nerang
6,750 sqm
Currumbin
6,285 sqm
Tweed Heads
3,009 sqm
Townsville
16,899 sqm
Hervey Bay
4,602 sqm
Yandina
2,660 sqm
Caboolture South
4,867 sqm
Coolum
6,968 sqm
Kawana
4,951 sqm
Portfolio Metrics
Freehold Centres
Leasehold Centres
Southern Cross Centres
Freehold net lettable area
Total net lettable area
Total storage units
IPO
28
10
24
30 June 2014
31 July 2014
31
10
26
33
10
26
212,062 sqm
238,343 sqm
247,484 sqm
329,544 sqm
363,157 sqm
374,661 sqm
36,210
39,924
41,039
Portfolio valuation (Freehold Centres)*
$270 million
$305 million
$321 million
Sustainable occupancy as per independent valuation
Weighted average cap rate
Weighted average remaining term on Leasehold Centres
83%
9.7%
15.5 years
at August 2013
83%
9.6%
83%
9.6%
16 years
16 years
*summed on an individual basis
NSR: Australia’s First Self-Storage REIT
Portfolio Diversification by State
NLA by State1
3
11
10,000
23
67,000
130,000
6
35,000
17
9
89,000
43,000
Queensland
New South Wales
Victoria
South Australia
Western Australia
Tasmania
Queensland
New South Wales
Victoria
South Australia
Western Australia
Tasmania
1 Rounded to the nearest thousand square metre.
Southern Cross Portfolio
The Southern Cross Storage Group (Southern Cross) is
an unlisted investment fund established in September
2011 via a joint venture between National Storage
and Heitman, a global real estate investment
manager.
Funds managed by Heitman own 90% of the equity
interest in Southern Cross. NSR holds a 10% interest
in Southern Cross with returns to NSR based on the
performance of the fund.
The current investment term expires in August 2016.
NSR and Heitman have reciprocal pre-emptive rights
with respect to the Southern Cross portfolio.
The portfolio comprises 26 assets around Australia.
21
National Storage Annual Report 2013/2014 WINE ARK
Established in 1999, Wine Ark is Australia’s largest and most
recommended wine storage provider. State-of-the-art storage
facilities have set international benchmarks and allowed Wine
Ark to develop one of the most respected brands within the
industry. With over two million bottles of wine in our cellars,
stored for clients located in over 30 countries, there are few
other businesses in Australia with more experience when it
comes to collecting, storing and managing premium wine.
Wine Ark has three dedicated
wine storage sites at Chatswood,
Alexandria and Artarmon in
Sydney, New South Wales. There
are an additional nine National
Storage centres across Australia
that house a Wine Ark facility.
Wine Ark’s managed cellarage
combines the benefits of
off-site climate controlled
storage with value-added
cellar services, including the
Wine Ark Provenance Program.
Each case of wine put into
managed cellarage is inspected,
catalogued and labelled with a
NSR: Australia’s First Self-Storage REIT
unique identification barcode. The client’s inventory
is then uploaded into the online cellar management
system where it records movements in or out of
storage by Wine Ark staff at the client’s request.
The wine is then made available for collection or
delivered to Wine Ark clients directly.
Wine Ark’s private wine vaults offer clients storage for
10 to 100,000 bottles of wine. With secure personal
access 365 days a year, it offers serious collectors
the ultimate in security and convenience. Each vault
is individually alarmed and monitored by closed
circuit television cameras. Wine Ark’s sophisticated
biometric, proximity tag and PIN code access control
systems allow clients to access their wine on any day
between 7am and midnight.
Wine Ark regularly hosts wine tastings and events,
and offers clients exclusive access to wine specials
direct from winemakers or wholesalers. Wine Ark
clients are also invited to participate in Wine Ark’s
renowned vintage wine room and online trading
platform. The platform allows Wine Ark clients to list
bottles or collections for sale online, with Wine Ark
facilitating the delivery of wine directly into storage.
Over 10,000 bottles of wine were sold through Wine
Ark during 2013.
In August 2013, Wine Ark produced Australia’s Most
Collected Wine 2013, which ranked the top 50 most
collectable wines in Australia. Seen as an industry
resource, the campaign generated significant
industry press and media attention and is scheduled
to run every two years.
23
National Storage Annual Report 2013/2014 ACQUISITION SNAPSHOT
National Storage Townsville
The Townsville acquisition is a landmark asset in a
significant regional market. It is well located in an
anticipated potential growth area with access
to a broad customer base, including residential,
government and military markets.
The centre is constructed on 20,000 sqm of land
with a net lettable area of 16,899 sqm. The assessed
replacement cost is approximately $27.6 million. The
centre has a large frontage with excellent visibility to
passing traffic and features two two-level buildings
which offer all-weather loading, a large reception
area, serviced offices, meeting rooms and an on-site
manager’s residence. The centre was constructed
in 2005 to a very high standard which affords a local
competitive advantage.
Centre Details
Address
Date acquired
Number of units
Net lettable area
Occupancy upon acquisition
Residential dwellings nearby
Distance from CBD
Number of competitors
within 5km radius
Purchase price
399 Woolcock
Street, Garbutt
May 2014
1475
16,899 sqm
c 50%
c 24,000
6km
4
$17 million
Projected year one passing income yield 7%
National Storage Port Adelaide
The Port Adelaide acquisition strengthened National
Storage’s position in the Adelaide market, bringing
the NSR portfolio to six centres. The Port Adelaide
centre is located within a converted heritage wool
store in an urban renewal precinct, which is an area
of anticipated growth and ongoing gentrification.
The property offers a range of unit sizes across three
levels with a well-proportioned retail shopfront inside
an impressive building façade. It is well positioned in
the market with few direct competitors, good arterial
road access and three street frontage.
Centre Details
Address
Date acquired
Number of units
Net lettable area
Occupancy upon acquisition
Residential dwellings nearby
Distance from CBD
Number of competitors within 5km
radius
9 Santos Parade,
Port Adelaide
July 2014
511
4,192 sqm
c 50%
c 50,000
8km
3
Purchase price
$5.2 million
Projected year one passing income
yield
9.8%
NSR: Australia’s First Self-Storage REIT
VALUATIONS
There are few valuers in Australia who specialise in
self-storage and their methodologies and valuation
models may vary.
NSR’s self-storage facilities are valued utilising the
capitalisation of passing and potential income as
the primary approach, with the discounted cash flow
and direct comparison approaches employed for
reconciliatory purposes.
Within the capitalisation approach, a market-derived
capitalisation rate is applied to the passing income
with a secondary capitalisation rate, typically of
between 50 and 200 basis points higher, applied
to the additional ‘potential’ income forecast to be
received at the assessed sustainable occupancy
level. This undertaking of discrete calculations allows
an explicit assessment of the risks inherent to each
income stream. Below-the-line adjustments are then
made to adjust the capitalised value for income and
expenses not received or incurred during the letting-
up of the facility to the sustainable level.
NSR’s valuation policy is to undertake rolling
valuations on a three year basis. Freehold and
leasehold centres will therefore be independently
revalued at least every three years, or earlier if NSR
believes there has been a significant change in the
value of the property.
Since listing the NSR portfolio valuation has increased
by approximately 4% on a stand alone centre basis.
25
National Storage Annual Report 2013/2014 ASSET MANAGEMENT
Asset Management
at National Storage
encompasses all functions of
operational management,
human resources, marketing
and property management.
The functions all work together
to achieve continuous
improvement as well as to
enhance the overall customer
experience at a National
Storage centre.
Operational Management
National Storage’s operating platform has been developed with the
cumulative experience of over twenty years of industry knowledge and
expertise. The focus for the year in review has been to systemise and
automate as many functions as possible so as to improve scalability and
performance.
OPERATIONAL PERFORMANCE
Dynamic Pricing Model
Market Indicators
Systems
Policies
Procedures
Technology
Dynamic Pricing Model
Market Indicators
National Storage’s Dynamic
Pricing Model is a complex
system that takes into account
market indicators, occupancy,
centre tenancy mix and unit
size/type mix when modelling
pricing decisions. Pricing decisions
can be made on an individual
unit basis right through to
centre, regional and national
movements.
Generally, retail rates for the
broader portfolio will increase
every nine months. Tenants will
receive individual price increases
once in a nine month period
based on their length of stay and
payment profile.
Regular reviews of
macroeconomic conditions,
macro and micro industry
indicators, competitor activity
and internal operational
indicators stimulate and influence
operational decision making.
Technology
National Storage uses SiteLink,
a market leading cloud based
technology developed in the
USA. SiteLink facilitates the day-
to-day operations of self-storage
centres, and provides real time
data to management on the
operational performance of the
portfolio.
Systems, Policies and
Procedures
The National Storage operating
platform is founded on a set
of detailed operating policies
and procedures. Training and
guidance on the implementation
of systems and procedures at
a centre level is undertaken
on a regular basis and internal
audits ensure compliance.
Operating guidelines for centre
management and performance
are designed to deliver a
consistent product and a
scalable operating system. NSR’s
focus on continuous improvement
of its systems and procedures
allows us to remain consistently
at the forefront of the Australian
storage industry.
NSR: Australia’s First Self-Storage REIT
Driving and converting online traffic is a key focus
for the National Storage marketing team, with up to
20% of enquiries received via the website. Sponsored
search listings deliver the most paid traffic, though it is
important to note approximately 62% of the traffic to
the National Storage website is organic which places
great importance on the search engine optimisation
program. A continuous improvement project is
underway to further develop the website and online
sales channel with the aim of delivering a simple and
seamless customer experience and increasing our
conversion rates of enquiries into sales.
Brisbane Lions
National Storage was the first self-storage company
to sponsor a national sporting team when it became
a major sponsor of the Brisbane Lions Australian
Football Club in 2013.
As Australia’s largest participation and spectator
sport, AFL offers NSR exposure in all of its key markets
across Australia.
The sponsorship has afforded high levels of brand
awareness with over nine million people seeing
the National Storage brand in association with the
Brisbane Lions either in person, on television or online
in 2013.
National Contact Centre
The National Contact Centre is housed in Brisbane
head office. Centralising sales enquiries to a small,
trained workforce facilitates consistency, accuracy,
measurability, feedback and improves the overall
customer experience. The operational visibility and
access to customer sentiment and trends provides
valuable insight for management and allows for
timely and agile decision-making. Calls are recorded
and monitored for improvement purposes, with
regular feedback and training provided to customer
service representatives.
Marketing and Customer Experience
As a relatively new industry with a needs based
product and historically low levels of customer
awareness, the Australian self-storage industry faces
a number of specific marketing challenges. Across
the industry there are generally low levels of brand
recognition, product differentiation and general
public awareness of the attributes and benefits of
self storage.
To date, National Storage’s marketing has centred
on high level brand awareness and being top-of-
mind. With the establishment of NSR and the drive
to be Australia’s leading self-storage provider, a new
targeted integrated marketing communications
strategy has been developed for 2014/2015.
The marketing strategy for National Storage centres
around three key objectives – broadening the
customer base, increasing brand awareness and
driving customer enquiry – and employs five
key disciplines.
BROADEN CUSTOMER BASE, INCREASE
AWARENESS AND DRIVE ENQUIRIES
Above the Line
(Sponsorships and Advertising)
Below the Line
(Direct Mail)
Digital Marketing
Local Area Marketing
Customer Experience
27
National Storage Annual Report 2013/2014 PORTFOLIO AND
DEVELOPMENT MANAGEMENT
Human Resources
Portfolio Management
Teamwork, Care and Excellence are the core values
of the National Storage team.
NSR employs over 200 people – 190 operational staff,
12 sales staff in the national contact centre and 25
staff in head office. 60 of our staff have been part of
the National Storage family for longer than five years.
The Senior Centre Managers who manage regional
groups of centres collectively have over 90 years’
experience with National Storage and on average
have been with National Storage for five years.
Staff engagement focuses on a program of
training, performance management and a
reward and recognition program. The NS Intranet
aims to overcome the challenge of engaging a
geographically diverse workforce by providing
a platform for staff to connect and share ideas,
knowledge and success.
Property Management
The National Storage property maintenance team
undertake a preventative and cyclical maintenance
program and manage all repair work for the portfolio.
The basis of construction for self-storage centres is
concrete and steel, which generally requires minimal
repair and maintenance work. Lifts, goods hoists and
other working equipment require a regular repair
and maintenance program, though the nature of
the business and internalising as much of this work as
possible allows the team to keep the quality of the
work to a high standard, and costs to a minimum.
Over the period, the property maintenance team
have executed 14 signage upgrades and two new
retail fit outs, with further signage and retail upgrades
planned for 2014/15 to maintain a high presentation
standard across the portfolio.
The Australian self-storage industry is highly
fragmented, with the majority of centres owned
by independent operators. NSR has successfully
completed, and continues to seek acquisition
opportunities within the industry, with a clear focus
on acquiring assets that deliver positive yields.
NSR considers its ability to acquire and integrate
accretive and strategic assets to be a cornerstone of
its growth strategy.
Since listing, the number of centres in the portfolio
has grown by eight to 69 and has resulted in the
increased value of the NSR property portfolio
(including indirect interests) by $89.9million.
The new assets in the portfolio are detailed as follows:
Centre
Price
Artarmon
$36.5m
Townsville
$17m
Moorabbin
$8.2m
Mulgrave
$7m
Wangara
$10.9m
Port
Adelaide
Hervey Bay
(SX)
Yandina
(SX)
$5.2m
N/A
N/A
Forecast year
one passing
income yield
10.5% (actual at
30 June 2014)
7%
8.7%
7.9%
9%
9.8%
N/A
N/A
Settlement
Dec 2013
May 2014
June 2014
June 2014
July 2014
July 2014
May 2014
May 2014
Investment Guidelines
NSR seeks accretive and strategic assets that feature:
• prominent location and high visibility to
passing traffic
• proximity to drivers of self-storage demand
including commercial, retail and/or
• residential markets with strong growing
local populations
• quality, modern designs with good access
and security
• ability to value add to existing operations to
enhance the potential for future growth or
further development
NSR works to acquire assets that deliver a year one
passing income yield of 8% – 10% post integration
into the National Storage portfolio.
NSR: Australia’s First Self-Storage REIT
Acquisition Pipeline
The three major players in the Australian self-storage
industry have a combined modest market share of
approximately 25%. The industry is highly fragmented,
with the majority of owners being independent
operators who own a single asset or a small region
specific portfolio of assets.
For the most part, acquisition opportunities are
generated off-market and come from a deep
understanding of the industry and a well-established
network of relationships.
There are currently a number of identified investment
opportunities under review, including some under
advanced negotiation.
A typical due diligence process takes six to eight
weeks and involves the National Storage acquisition
team and external consultants. An independent
valuation together with commercial, financial,
building, environment and legal due diligence are
all undertaken to produce a feasibility report for
approval by the Investment Committee and Board.
Once transacted, a typical centre takes four to
six weeks to integrate into the National Storage
operating platform, with ongoing synergies derived
over the ensuing 12 – 18 months.
Development Management and Portfolio
Recycling
Development management presents an opportunity
for NSR to add value to development projects and
demonstrates the depth of the team’s experience in
project managing self-storage development.
The announced $8 million turnkey development in
Kardinya, Perth is expected to complete in late 2014.
The purpose built site will house approximately 400
units over approximately 4,400 sqm of net lettable
area and bolster National Storage’s already strong
presence in the Perth market.
The announced expansion of the Cockburn centre
in Perth, Western Australia will generate project
management fees and facilitate a portfolio
recycling opportunity for the existing nearby Dobra
Road centre. It is envisaged customers would be
transitioned into the new Cockburn facility, leaving
the Dobra Road centre available for higher and
better use opportunities.
Portfolio Valuation
A revaluation of NSR centres on a stand-alone
basis at 30 June 2014 (based on valuations and
methodologies from independent property valuer
m3 Property) yielded an increase of 4% from
$269.6 million to $281.7 million.
29
National Storage Annual Report 2013/2014 CENTRE MANAGEMENT
CAPITAL MANAGEMENT
The National Storage Centre Management platform
was launched at the Self Storage Association of
Australasia Convention in August 2014. The National
Storage Centre Management platform is an
extension of National Storage’s quality offering of
tailored storage solutions into existing self-storage
centres, currently managed by owner-operators,
franchisees or investors. Centre management can be
applied to a single centre or across a multiple asset
portfolio.
The National Storage Centre Management platform
capitalises on:
• national, state and local marketing programs
including access to the National Storage
web platform with dedicated in-house
management of search engine optimisation
and digital marketing initiatives
• prudent financial management and reporting
• economies of scale and purchasing power
• established sales, yield management and
performance management practices
• Australia’s only dedicated national self-storage
contact centre
• the national property maintenance team; and
• ancillary products including packaging
and insurance
Importantly for NSR, centre management provides
• increased income derived from the provision of
management services, with limited increase to
the cost base and limited capital requirements
• greater economies of scale through a
broader number of centres across which to share
expenses; and
• the establishment of a possible future
acquisition pipeline.
NSR practices a conservative and disciplined
approach to capital management.
At 30 June 2014, NSR was 23% geared against a loan
to value ratio covenant of 50%, and had an interest
cover ratio of 9.4 times against a covenant of two
times. Debt of $87.9 million was drawn of $100 million
debt capacity, with the NAB facility further extended
to $135 million capacity in July 2014.
In August 2014, NSR undertook a placement offer
which raised $45.9 million to replenish the balance
sheet and provide further capacity for accretive
potential acquisitions. A Security Purchase Plan
for retail investors is anticipated to raise a further
$5 million.
This capital has been used to pay down debt and
afforded NSR significant balance sheet acquisition
capacity.
NSR adopts the following approach to minimise
financial risk:
• maintain significant headroom relative to key
financial covenants;
• maintain sufficient liquidity to meet NSR’s objectives;
• when possible, reduce refinancing risk by having
staggered debt maturities (or managing debt
refinancing well in advance of debt expiry); and
• manage interest rate risk by hedging an appropriate
level of NSR’s drawn debt and generally matching
the terms of the hedges with debt maturities.
NSR intends to distribute 90% – 100% of its underlying
earnings which will include all taxable income and
reflects the underlying net cash flow from operating
activities.
NSR: Australia’s First Self-Storage REIT
SUSTAINABLE BUSINESS PRACTICES
National Storage is committed to building a
sustainable business and minimising its environmental
footprint.
The NS Energy Efficiency Project commenced in
June 2014 and will see a full centre audit undertaken
with energy efficiency outcomes to be delivered in
2015. The audit will review energy usage throughout
the portfolio and determine the best approach for
energy at a centre level, whether through installation
of solar panels, upgrading existing lighting or
transitioning to light-emitting-diode (LED) lighting. The
project will also review refrigeration and associated
energy usages to ensure the most efficient structures
are in place.
Recycling is a day-to-day activity at National
Storage centres, with every centre equipped with
large paper and cardboard bins. 98% of NSR’s
paper supplies are derived from environmentally
friendly sources. In addition, National Storage offers
a box buy-back program, where customers are
encouraged to return their used National Storage
cartons for a small cash payment. The cartons are
then on-sold as second hand cartons to customers
seeking to be more environmentally friendly and cost
efficient during their move.
SOCIAL RESPONSIBILITY
Each National Storage centre plays an active role
in its local community and the broader business
is committed to maintaining socially responsible
business practices.
In CY2013, National Storage offered over half a
million dollars of in-kind storage to local community
groups and charities across the country.
Each centre has a local community engagement
budget which is used to further its presence in the
community and support local clubs, groups and
businesses where possible. The majority of centres
direct community engagement budgets to assisting
sporting clubs and schools in the local catchment
areas.
At the corporate level, National Storage supports
a number of larger charities and not-for-profit
organisations including the Mater Foundation and
local Crime Stoppers networks.
31
National Storage Annual Report 2013/2014 L – R: Anthony Keane, Laurence Brindle, Andrew Catsoulis
Board of NSH Directors
Anthony Keane
Laurence Brindle
Independent Non-executive Director
BSc(Maths), GradDipCorpFin
Independent Non-executive Chairman
BCom, BEng(Hons), MBA
Anthony is an experienced finance and business
executive with over 30 years background in
corporate, institutional, business and retail banking.
Prior to accepting his directorship with the Company,
Anthony was most recently Head of Corporate
Banking Queensland for National Australia Bank and
was responsible for the bank’s relationships with large
privately owned and public listed companies across
a broad range of industries including manufacturing,
retail, wholesale, property, professional services,
technology, leisure and tourism, transport, mining
and associated services. Anthony has a Bachelor of
Science (Mathematics) from University of Adelaide
and a Graduate Diploma in Corporate Finance from
Swinburne. He is a Fellow of the Financial Services
Institute of Australasia, a Graduate of the Australian
Institute of Company Directors and a Fellow of
the CEO Institute. He is a Director of Queensland
Symphony Orchestra Pty Ltd.
Anthony acts as Chairman of the Audit and Risk
Committee and is a member of the Nomination and
Remuneration Committee.
Laurence has extensive experience in funds
management, finance and investment. Until 2009
he was an executive with Queensland Investment
Corporation (QIC). During his twentyone years with
QIC he served in various senior positions including
Head of Global Real Estate where he was responsible
for a portfolio of $9 billion. Laurence was also a
long term member of QIC’s Investment Strategy
Committee. Since 2010, Laurence has been a
director of Westfield Retail Trust (now Scentre Group).
He provides advice to a number of investment
institutions on real estate investment and funds
management matters. Laurence holds a Bachelor of
Engineering (Honours) and a Bachelor of Commerce
from the University of Queensland, and a Master of
Business Administration from Cass Business School,
London. He is a former Chairman of the Shopping
Centre Council of Australia.
Laurence serves on the NSR Audit and Risk
Committee and is Chairman of the Nomination and
Remuneration Committee.
Board of Directors
The Board of Directors of The Trust Company
(RE Services) Limited are detailed on page 48.
Andrew Catsoulis
Managing Director
LLB, GradDip Project Mgmt
Andrew is a qualified lawyer who has been admitted
to the Supreme Court of Queensland and the
Federal Court of Australia. He has had extensive
experience in the fields of finance, commercial and
property law during his tenure at major law firms
both in Australia and overseas. He is also a qualified
project manager and has considerable property
development experience both within the storage
industry and in broader markets. A founder of the
original National Storage business, he has over
18 years of specific self-storage industry expertise
including in the areas of acquisition, development,
integration and operation of ‘greenfield’ and
developed self-storage centres. Andrew was
instrumental in the successful acquisition and
integration of the original portfolio and led the
company through the IPO.
33
National Storage Annual Report 2013/2014 Senior Executives
Andrew Catsoulis
Managing Director
LLB GradDip Project Mgmt
See page 32.
Peter Greer
Chief Operating Officer
Peter gained his experience over 15 years in the
finance industry with one of Australia’s largest
banking organisations. He developed extensive
experience in relation to the self storage industry,
specifically in the financing, operations and
development of self-storage centres. Peter then
transferred these skills and has exclusively worked
in the self-storage industry for the last 15 years
with a focus on operations, human resource
management, strategic business planning and
day-to-day operational management. He was one
of the founding shareholders of National Storage
and has worked side by side with Andrew to grow
the National Storage business. Peter is a former
board member of the Self Storage Association of
Australasia (SSAA), including a term as the President
of this body and a regular speaker at the national
SSAA conference.
Senior Executives
Patrick Rogers
Company Secretary and General Counsel
LLB BBus – Accty
Patrick holds both legal and accounting
qualifications and is admitted as a solicitor of the
Supreme Court of Queensland. He has practiced as
a solicitor for over 15 years in both fields. During his
time in private practice, Patrick has had significant
experience in corporate, property, commercial,
taxation and transactional work. In addition to
private practice, Patrick was the general counsel
and company secretary of the Super A-Mart Group
for over eight years, (including holding the role of
CFO for a time) where he was a part of the senior
management team and had extensive involvement
in the operations of the company.
Thomas Rice
Chief Financial Officer
BCom BEcon Grad Dip AppFin
Thomas is a Chartered Accountant who
commenced his career at PwC, and then built on
his commercial acumen in subsequent positions
in London and Brisbane working for a variety of
multi-national, listed and government owned
corporations. In addition to a Graduate Diploma of
Applied Finance, Thomas holds bachelor degrees in
both Commerce and Economics. As Chief Financial
Officer for National Storage Group for the past eight
years, Thomas is primarily responsible for the financial
operations, reporting and transaction support.
Makala Ffrench Castelli
Marketing and Corporate Affairs Manager
BBus (Marketing/E-Business) Grad Dip Arts
Makala has over eight years experience in corporate
communications, investor relations and marketing
communications. She has worked with leading
companies in the place management, property
and finance industries, including one of Australia’s
major investment banks. Makala is responsible for the
strategic development and implementation of retail
marketing, corporate affairs and investor relations at
National Storage. She holds a Bachelor of Business
(Marketing/E-Business) from Queensland University
of Technology and a Graduate Diploma in Arts from
University of Adelaide.
35
National Storage Annual Report 2013/2014 Corporate Governance
NSH and The Responsible Entity have their own
respective Boards and constitutions. The relationship
between NSH and the Responsible Entity is governed
by a Cooperation Deed and Management
Agreement that facilitate common processes and
governances for NSR. Pursuant to the NSR Board
Charter, it is the function of the NSH Board to provide
overall strategic guidance and effective oversight of
management of NSR.
GOVERNANCE FRAMEWORK
The NSH and Responsible Entity Boards and NSH
management are committed to achieving and
demonstrating to Securityholders high standards
of corporate governance and to ensure NSH acts
in the best interests of its Securityholders balanced
with its broader community obligations. To achieve
this, the NSH Board has created a framework for
managing National Storage Group including internal
controls and a business risk management process.
The governance system is reviewed during each year
by the Company Secretary and the Board to ensure
that it reflects changes in the law.
The NSH Board’s obligations are discharged through
a number of mechanisms including meetings and its
committees. During the financial year ended 30 June
2014, the NSH Board has convened the following
committees as part of its corporate governance
framework:
Committee
Chair
Members
Audit and Risk
Anthony Keane
(Independent
Director)
Laurence Brindle
(Independent
Director)
Nomination and
Remuneration
Laurence Brindle
(Independent
Director)
Anthony Keane
(Independent
Director)
Disclosure
Committee
Andrew Catsoulis
(Managing
Director)
Thomas Rice (CFO),
Patrick Rogers
(Company
Secretary)
Corporate Governance
NSH committees are governed by their respective
Charters. Please note, that effective 30 September
2014, the Audit and Risk Committee has been split
into two separate committees being the Audit
Committee and the Risk Committee. This has been
undertaken in accordance with the third edition
of the ASX Corporate Governance Principles and
Recommendations.
The composition of NSR’s committees as of
30 September 2014 is as follows:
Committee
Chair
Members
Audit
Committee
Anthony Keane
(Independent
Director)
Risk Committee Anthony Keane
(Independent
Director)
Laurence Brindle
(Independent
Director)
Laurence Brindle
(Independent
Director)
Nomination and
Remuneration
Laurence Brindle
(Independent
Director)
Anthony Keane
(Independent
Director)
Disclosure
Committee
Andrew Catsoulis
(Managing
Director)
Thomas Rice (CFO),
Patrick Rogers
(Company
Secretary)
Given the size of the NSH Board it was determined
that the Investment Committee and Diversity
Committee functions be undertaken by the full Board.
As a result these Committees have not been formally
convened at this time, however this will be reviewed
upon the size of the Board of NSH increasing.
An important component of the NSR corporate
governance structure is the ASX Corporate
Governance Principles and Recommendations
(the “ASX Recommendations”). The NSH Board
considers that throughout the financial year ended
30 June 2014 and as the date of this statement, the
governance practices adopted by NSR comply with
the second edition of the ASX Recommendations,
with the exception of Principle 4.2 which had partial
compliance.
Principle 4.2 requires the audit committee to have
at least three members. The initial Board of NSH was
comprised of three Directors, with two Directors
being non-executive and one Director being the
Managing Director. As a result, the audit committee
could only consist of two nonexecutive Directors. The
intention of the Board on listing was that the Board
size would be expanded by the addition of further
non-executive Directors.
BOARD AND MANAGEMENT RESPONSIBILITY
The role of the NSH Board is to provide overall
strategic guidance for NSR and effective oversight
of management. It is responsible for monitoring the
financial performance of NSR and the performance
of the Managing Director and senior management
team. The NSH Board ensures the activities of NSR
comply with its Constitutions, from which NSH Board
derives its authority to act, and with legal and
regulatory requirements.
The responsibility for the daily operation and
management of NSR is delegated to the Managing
Director who undertakes this task in accordance with
the strategy, policies and plans approved by the NSH
Board. The Managing Director has authority to sub-
delegate to the senior management team.
This has been implemented by the Board by it
nominating a further two non-executive Directors
at this year’s AGM. Upon the election of the two
further Directors, all of the Board committees will be
expanded by at least one further member and will
then have at least three non-executive Directors as
members.
The NSH Board and Responsible Entity Board has
early adopted the third edition of the ASX Corporate
Governance Principles and Recommendations
as at 30 September 2014 with the extent of NSR’s
compliance detailed in its Appendix 4G.
Full copies of the NSR Corporate Governance
Statement, Appendix 4G and all NSR governance
Policies and Charters can also be found in the
Governance section of the website at
www.nationalstorageinvest.com.au.
Additionally, the Responsible Entity has established
a compliance committee comprising three
independent members. NSPT is a registered
managed investment scheme and the rights and
obligations of the Responsible Entity as a responsible
entity of NSPT and NSPT Unitholders are governed by
the constitution of NSPT.
As the responsible entity of NSPT, the Responsible
Entity must comply with all obligations set out in
the constitution and the Corporations Act. The
Responsible Entity is also subject to duties including
duties to act in the best interests of NSPT Unitholders,
act honestly, exercise care and diligence, and treat
NSPT Unitholders of the same class equally. In order
to ensure compliance with the constitution and the
Corporations Act, the Responsible Entity has in place
a compliance plan which sets out the measures it will
apply in operating NSPT.
A copy of the compliance plan can be inspected at
National Storage’s head office at any time between
8:30am and 5:00pm on a business day in Brisbane or
a free copy may be requested by contacting NSH or
the Responsible Entity.
37
National Storage Annual Report 2013/2014 BOARD COMPOSITION AND INDEPENDENCE
RISK MANAGEMENT
The current NSH Board is comprised of three
Directors, the composition of which being two
non-executive Directors (one of whom is the
Chairman) and the Managing Director. Detailed
information about the Directors is set out on
pages 32 – 33.
The NSH Board considers that its current members
have had an appropriate balance of skills,
independence and experience to discharge their
obligations and affect the strategy of NSR through
its initial post listing period. However, the NSH Board
considers that it is appropriate and in the best
interests of NSR and the stapled security holders to
increase the number of Board members. This will
strengthen and broaden the skills and experience
base of the current highly experienced Board
members and also the number of independent
Directors.
To achieve this, a resolution will be put to the AGM
on 20 November 2014 seeking the appointment of
two new Directors, Mr. Howard Brenchley and Mr.
Steven Leigh. Details of the proposed new Directors
can be found in the explanatory notes to the Notice
of Meeting for the AGM.
The NSH Board considers all of the current non-
executive Directors, being the Chairman Mr.
Laurence Brindle and Mr. Anthony Keane, to be
independent.
The Directors of the Responsible Entity are set out on
page 48.
COMPANY SECRETARIES
The Company Secretary of NSH is Mr. Patrick Rogers.
Detailed information on Mr. Rogers is contained on
page 34 on this report. The Company Secretaries of
the Responsible Entity are listed on page 52 of this
report.
NSR’s operations expose it to risks. A summary of
potential risks is set out on pages 47 and 116 – 121
of this report. Risks can be either of a controllable
nature or of a non-controllable / less controllable
nature. Examples of controllable risks are systems,
processes and staff based risk. Non-controllable or
less controllable risks are generally risks considered
to be “external” to the Company such as
macroeconomic factors, financial, regulatory or
market risks.
Assumption of operating risks is undertaken through
the risk management framework which seeks to
identify, control and minimise risk where possible.
NSR maintains a Risk Management Policy which
lays a foundation for the NSH Board and senior
management to manage risk and decision making
by officers of NSR. A copy of the Risk Management
Policy can be found on the website at
www.nationalstorageinvest.com.au.
Senior management of NSR and the NSH Board are
committed to effective risk management in the
operation of NSR.
CONFIRMATION
NSR confirms it has, from the date of admission to the
Australian Securities Exchange (19 December 2013)
to the end of the reporting period (30 June 2014),
used the cash and/or cash equivalents that it had
on hand at the date of admission to the Australian
Securities Exchange in a manner consistent with its
business objectives. Detailed commentary relating to
NSR’s business activities and strategy can be found
at pages 41-44 of this Report.
Corporate Governance
39
National Storage Annual Report 2013/2014 Directors’ Report
The Directors of NSH jointly with the Directors of the Responsible Entity
as responsible entity of the NSPT present their report together with the
financial statements of NSR which incorporates NSH and its controlled
entities (“NSH Group”) and NSPT and its controlled entities (“NSPT Group”)
for the financial year ended 30 June 2014 (the “Reporting Period”)
and the Independent Auditor’s Report. The Directors Report has been
prepared in accordance with the requirements of Division 1 of Part 2M
of the Corporations Act Cth 2001.
On 19 December 2013, the shares in NSH were stapled to the units in
NSPT as part of the Initial Public Offering of NSR and its quotation on the
Australian Securities Exchange (“ASX”). This is known throughout the
Directors’ Report as the “IPO”.
As NSR only came into existence on 19 December 2013, the information
presented in the Financial Statements does not reflect NSR’s operations
for the entire Reporting Period. Further, the comparative information
is reported to the extent possible due to the recent creation of NSR.
Please note the commentary in the section on “Review and Results
of Operations” – users of the financial information should familiarise
themselves with the “Corporate Information” and “Basis of Preparation”
in Notes 1 and 2(a) in the Financial Statements.
Additionally, as part of the IPO on 19 December 2013, the Responsible
Entity became the responsible entity of NSPT, replacing the former
responsible entity APN Funds Management Limited.
Directors’ Report
Key Highlights
Principal Activities
• A-IFRS (“Australian International Financial
Reporting Standards”) profit after tax for
the Reporting Period of $15.565 million and
earnings per Stapled Security (“EPSS”) for
the Reporting Period of 8.98 cents.1
• 10% increase in rate per square metre
(“psqm”) from $249 psqm at July 1 2013
to $275 psqm at June 30 2014 (excluding
all 2014 calendar year acquisitions).
• 12% increase in gross trading income2
from $21.25 million (July - December 2013)
to $23.8 million (Jan -June 2014).
• 8 contracted or completed acquisitions (6 by
NSR, 2 in Southern Cross) totalling $89.9 million
adding 59,000 sqm in net lettable area.
NSR is the first internally managed and fully
integrated owner and operator of self-storage
centres to be listed on the ASX.
NSR is one of Australia’s largest self-storage owner/
operators, with 69 self-storage centres under
operation or management, tailoring storage solutions
to approximately 25,000 customers across Australia.
NSR has grown its portfolio by 13% from 61 centres at
the time of the IPO to 67 centres as at 30 June 2014
and 69 centres at the time of this Directors’ Report.
It has grown total storage units by approximately
8% with NSR now managing over 41,000 storage
units across 372,000 sqm of net lettable area around
Australia. AUM has increased to be $582 million as at
30 June 2014.
• Total Assets Under Manager (AUM) increased
by 13.5% to $582 million at 30 June 2014.
Of the 69 self-storage properties in the NSR portfolio,
ownership is as follows:
• 4% increase in underlying portfolio revaluation
from $269.6 million to $281.4 million.
• 33 self-storage centres owned by NSPT;
• 10 self-storage centres operated as long-term
leasehold centres (Leasehold Centres); and
• 26 self-storage centres managed for the
Southern Cross Storage Group (Southern
Cross) in respect of which NSR holds a 10%
interest through a wholly owned subsidiary.
Southern Cross is an unlisted investment fund
established by National Storage and real estate
investment firm Heitman in September 2011 that
owns self-storage centres throughout Australia.
The National Storage core product offering covers
self-storage, business storage, vehicle storage and
wine storage at National Storage’s climate controlled
storage facilities and via Wine Ark (which operates
dedicated self-access and managed cellars).
Ancillary income streams are derived from other
related activities including packaging sales and
vehicle/trailer hire.
1 NSH prefers to state EPSS pursuant to the combine financial statement methodology as we concur with ASIC’s view expressed in Consultation Paper 217 and
consider it more useful and a better indicator of performance than utilising the consolidated accounting methodology which must be used in the formal financial
statements and reflects EPSS of 11 cents.
2 Definition is total revenue less cost of packaging and other products sold.
41
National Storage Annual Report 2013/2014 BUSINESS STRATEGY
ASSET MANAGEMENT
NSR’s objective is to deliver Securityholders a
stable income stream from a diversified portfolio of
quality self-storage centres, and consistent income
and capital value growth through active asset
management, and portfolio management (including
the acquisition, development or redevelopment of
self-storage centres).
The key drivers of the business are:
• Asset management – driving an appropriate
balance between rental rate and
occupancy growth and actively pursuing
other business development initiatives;
• Portfolio management – acquiring and
integrating quality assets into either the
NSPT or Southern Cross portfolios;
• Centre Management – effective operation
of individual assets and the expansion of
the National Storage Centre Management
platform (revenue from third parties);
• Development management – development
/ refurbishment / redevelopment of new
and existing centres and actively managing
portfolio recycling opportunities; and
• Capital management – maintaining an
appropriate and efficient capital structure.
NSR is firm in its belief that the effective management
of rental yields and occupancy levels at centres are
key factors in driving operating income and, in turn,
Securityholder value. To ensure a balance between
these two related yet competing factors is achieved,
management focuses on the following:
• Indicator Reviews – NSR’s holistic
approach involves regular review
of key operational indicators.
• Dynamic Pricing Model – Inputs from indicator
reviews and general market conditions are taken
into account when modelling and determining
pricing at unit, centre and regional levels.
• Staff Engagement – Staff engagement via
performance management, training and a reward
and recognition program encourages our staff to
increase conversion rates on enquiries over time.
• Marketing and Customer Experience – The
strategic marketing plan aims to broaden
the customer base, increase brand
awareness and drive customer enquiry.
• Systems and Policies – Since IPO, management
has been seeking to automate and
systemise as many functions as possible
(this remains an ongoing initiative).
Directors’ Report
PORTFOLIO MANAGEMENT
CENTRE MANAGEMENT
The self-storage industry is highly fragmented with
the majority of centres being owned by small
independent operators. NSR has successfully sought,
and continues to seek, acquisition opportunities within
the industry with a clear focus on acquiring strategic
quality assets that deliver positive yields to NSR.
During and subsequent to the Reporting Period,
the following assets were acquired by NSR and
integrated into the National Storage portfolio:
• centre in Artarmon (NSW) – acquired in
December 2013;
NSR launched the NS Centre Management platform
at the Self-Storage Association of Australasia
Convention in August 2014.
The potential benefits to NSR include:
• Increased income derived from provision of the
management service with limited increase to
the cost base and limited capital requirements;
• Greater economies of scale to the group
due to the larger number of centres operating
as “National Storage” branded and managed
centres; and
• centre in Townsville (QLD) – acquired in May 2014;
• The establishment of a possible future
• centre in Mulgrave (VIC) – acquired in June 2014;
acquisition pipeline.
• centre in Moorabbin (VIC) – acquired in June 2014;
• centre in Wangara (WA) – acquired in July 2014;
• centre in Port Adelaide (SA) – acquired in July 2014.
A centre currently under construction in Kardinya
(WA) is the subject of a contract to be acquired by
NSR. It is anticipated the centre will be operational
by November 2014. In addition to the above
acquisitions by NSR, the former “Box n Lock” centres
at Hervey Bay and Yandina (both in QLD) were
acquired by Southern Cross. They have also been
integrated into the National Storage operating platform.
DEVELOPMENT MANAGEMENT
NSR considers the evaluation of the NSPT centres for
development or redevelopment as an important
part of its ongoing strategy to maximise value
to Securityholders. Management periodically
assesses the centres in light of the prevailing
market conditions and available information to
determine if any development opportunity exists
and the appropriate timing for engaging in such
opportunities.
43
National Storage Annual Report 2013/2014 Review and Results of Operations
To facilitate the IPO, NSH was incorporated as the
holding company for National Storage Pty Ltd
(“NSPL”). Units in the NSPT were stapled to shares
of NSH (“Stapled Securities”). The Stapled Securities
were quoted on the ASX on 19 December 2013.
The Financial Statements of NSR are prepared in
compliance with Australian Accounting Standards
and the requirements of the Corporations Act 2001.
In order to ensure accurate and compliant financial
reporting for comparative purposes, the financial
accounts of NSH are treated as a continuation of NSPL.
The comparative period (the “Comparative Period”
or “2013”), for the purposes of the Financial Statements,
is the year ended 30 June 2013 for NSPL and its then
consolidated group (the “Pre-Existing Group”).
However, given NSR only came into existence on
19 December 2013, the information presented in
the Financial Statements does not reflect NSR’s
operations for the entire Reporting Period. Further,
the comparative information is reported to the
extent possible due to the recent creation of NSR.
Users of the financial information should familiarise
themselves with the “Corporate Information” and
“Basis of Preparation” in Notes 1 and 2(a) in the
Financial Statements.
CHANGE IN NAME OF TRUST
During the Reporting Period, and as required by
the constitution of the NSPT and as noted in the
PDS, the Directors of the Responsible Entity resolved
to change the name of “APN National Storage
Property Trust” to “National Storage Property Trust”.
Approval of this change was received from ASIC on
17 February 2014.
OPERATING RESULTS
A-IFRS profit after tax for the Reporting Period was
$15.565 million and EPSS for the Reporting Period
was 11 cents.3
Gross trading income rose by 12% from $21.25 million
(July – December 2013) to $23.8 million (January – June
2014). The rate per square metre achieved across
the group increased by 10.4% from $249/sqm at 1
July 2013 to $275/sqm at 30 June 2014 (excluding all
calendar year 2014 acquisitions).
Negative retail and consumer sentiment and
increasing levels of unemployment have
characterised the subject Reporting Period as one
presenting challenging trading conditions. Early
indications for the 2015 Financial Year are that these
conditions are easing with a pick-up in inquiries and
bookings starting to become evident. Seasonally, the
traditionally busier spring and summer months should
present improved trading conditions in the second
half of CY 2014.
NSR’s acquisition strategy has positively impacted
overall revenue during the Reporting Period. The
acquisitions made during 2014 had not been held
by NSR long enough for their incremental effect
on revenue to be fully realised in the Reporting
Period, however this is expected to be reflected
in the 2015 financial year results. The acquisitions
made by NSR have also increased its market share
(due to NSR acquiring centres previously owned/
operated by others). Management anticipates this
increased market share and improved efficiencies
through scalability will allow NSR to leverage off any
improvement of macroeconomic conditions.
Aside from the positive input of acquisitions, earnings
for this period were impacted by a number of
factors. First, the anticipated increase in physical
occupancy forecast for this period did not occur
primarily due to weaker than expected trading
conditions and aggressive competitor discounting
in some markets. This has negatively impacted
earnings growth during the 6 months to 30 June
2014 compared to our expectations. In response
to these conditions, management has elected to
focus on achieving rate per square meter growth
objectives. As at the date of this Directors’ Report
group occupancy stands at 71% (excluding 2014
acquisitions). Second, higher than anticipated
costs, primarily in relation to the establishment of a
dedicated acquisition team and related acquisition
activity increased overall expenses. The positive
earnings impact of completed acquisitions will be
seen more fully in future reporting periods.
In light of the increased rate per square metre
being achieved and the additional earnings
generated by NSR from completed acquisition
activity, management forecasts EPSS for the period
1 July 2014 to 31 December 2014 to be 4.2 cents per
Stapled Security and 4.3 cents per Stapled Security
for the period 1 January 2015 to 30 June 2015. Any
3 NSH prefers to state EPSS pursuant to the combine financial statement methodology as we concur with ASIC’s view expressed in Consultation Paper 217 and
consider it more useful and a better indicator of performance than utilising the consolidated accounting methodology which must be used in the formal financial
statements and reflects EPSS of 11 cents.
Directors’ Report
forecast result is subject to economic or other factors
that are beyond the control of management (eg:
macro-economic trends in the Australian economy
such as consumer confidence). Forecasts are based
on the number of Stapled Securities on issue as at 30
June 2014 and do not reflect the financial impact of
any future capital raisings or acquisitions that may or
may not occur.
In July 2014, the facility was increased by a
further $35 million to $135 million which has been
subsequently drawn upon to fund acquisitions. As
at the date of this Directors’ Report, the facility limit
of $135 million was drawn to $106.03 million with
a remaining limit of $28.97 million. Net operating
cashflow for the year was $12.45 million compared to
$12.02 million in 2013.
CASH MANAGEMENT
ACQUISITIONS AND INVESTMENTS
Cash and cash equivalents as at 30 June 2014 were
$8.26 million compared to $382,000 in 2013.
As part of the IPO, the NSPT previous debt finance
facility of $109 million with National Australia Bank
Limited (“NAB”) was repaid and a new debt finance
facility of $50 million entered into with NAB. In May
2014, the facility was increased by a further $50
million to $100 million to fund acquisitions. The facility
has been drawn down a number of times during
the Reporting Period to facilitate those acquisitions.
As at 30 June 2014, the facility limit of $100 million
was drawn to $87.9 million with a remaining limit of
$12.1 million.
NSR considers its ability to acquire and integrate
accretive and strategic assets to be a cornerstone
of its growth strategy. During the course of the
Reporting Period, a dedicated acquisitions team
was formed to identify, facilitate and transact on
acquisitions that were considered appropriate for
the portfolio.
The acquisition strategy has seen the number of
centres in the NSR portfolio grow by 8 centres as at
the date of this Directors’ Report, and has resulted
in the value of the NSR property portfolio (including
indirect interests) increasing by $89.9 million . Further,
a revaluation of the NSR centres on a stand-alone
basis as at 30 June 2014 (based on valuations
and methodologies from independent valuer
m3Property) yielded an increase of 4% from
$269.6 million to $281.7 million.
45
National Storage Annual Report 2013/2014 Options over
Stapled Securities
No options over issued Stapled Securities or interests
in a Controlled Entity have been granted in NSR since
the IPO. There are no options in Stapled Securities
outstanding as at the date of this report.
Environmental
Regulation
The Consolidated Group’s operations are not
regulated by any environmental law of the
Commonwealth or a State or Territory that is enacted
specifically for NSR. However, NSR must comply with
broader environmental laws. NSH management on
behalf of NSR has in place procedures to identify
and ensure compliance with such laws including
identifying and obtaining of necessary approvals,
consents or licences.
There have been no known material breaches during
the Reporting Period of any environmental laws to
which NSR is subject.
Likely Developments
NSR intends to utilise its position as Australia’s first
listed self-storage REIT to continue to consolidate
independently owned storage centres under NSR’s
ownership and management structure.
In accordance with its strategy, NSR continues to
seek accretive acquisition opportunities, evaluate its
existing portfolio for development or re-development
opportunities and further develop its third party
management offer.
Dividends &
Distributions
NSR announced to the ASX on 24 June 2014 that
NSPT will make a distribution of 3.8 cents per Stapled
Security for the 6 months to 30 June 2014. The
distribution is expected to be paid on 26 August
2014 and is expected to contain a tax deferred
component.
On 19 December 2013, as part of the IPO NSPT paid
a cash-out distribution of $2,077,000 to the exiting
NSPT unitholders in accordance with the details
disclosed in the PDS.
On 31 October 2013, NSPT paid a distribution of
$1,861,000.
On 24 October 2013, NSPL, the then head-entity
of the former National Storage corporate group,
declared a fully franked dividend of $5,598,000 to
shareholders. This amount was offset against loans
owed by the former shareholders of NSPL.
On 31 July 2013, NSPT paid a distribution of $1,681,000
to the unitholders. This distribution was declared prior
to the Reporting Period.
During the Comparison Period, NSPL, the then head-
entity of the former National Storage corporate
group, paid a fully franked dividend of $900,000 and
NSPT paid distributions totalling $5,041,000.
Directors’ Report
Environmental, Economic and Other
Sustainability Risks
NSR’s operating activities expose it to a number of
potential risks. Overall risk is managed centrally by
management to minimise potential adverse effects
on the financial performance of NSR and protect
Securityholder value.
A summary of the potential risks faced by NSR and its
mitigation strategies is as follows:
• Economic Conditions – Fluctuations in economic
conditions including consumer confidence may
adversely impact upon demand for storage
space. Material macroeconomic events occurring
or any significant trading downturns due to
factors beyond the control of management
have the potential to negatively impact on
forecast trading performance. The results of
NSR’s operating activities are dependent on
the performance of the properties in which it
invests and those it manages on behalf of other
parties. This performance in turn depends on
economic factors; these include economic
growth rates, inflation rates and taxation levels.
There are also industry and location specific risks
to consider, including competitor behaviour.
• Tenure – storage agreements are typically month
to month and there is no guarantee customers
will renew or that other customers will be found
to take their place upon departure. To mitigate
this risk, customer relationships are carefully
managed to maximise duration of stay.
• Competition – Entry by new competing storage
centres or discounting by existing storage centres
may adversely impact upon occupancy and
rental rates on a centre specific basis. While there
are barriers to entry for new competition, NSR
constantly monitors its competitors’ activities to
ensure pricing and terms remain competitive.
• Valuations – property valuations in self-storage are
subject to multiple micro and macroeconomic
factors which are outside the control of NSR.
• Property liquidity – self storage centres are
property based illiquid assets and subject
to supply and demand factors dependent
upon prevailing market conditions. As a result
it may not be possible for NSR to dispose
of assets in a timely or price accretive
fashion should the need to do so arise.
• Exposure to Southern Cross – NSR has entered into
a management agreement with Southern Cross
which provides management fees for its services.
This agreement may be terminated in certain
circumstances and if so these management fees
would be lost. The investors agreement pursuant
to which NSR holds its investment in Southern Cross
contains termination rights. If Heitman exercised
these, the assets of the trust may have to be sold.
• Leasehold interests – NSR holds lease
agreements with certain third parties which
allow it to operate storage centres from these
properties. Lease terms for these properties
are typically long (greater than 10 years).
However there is no guarantee that these
lease arrangements will be able to be renewed
upon expiry or if so on suitable terms to NSR.
• Future acquisitions and expansions – the
rate at which NSR will be able to expand will
depend upon prevailing market forces including
availability of appropriately priced acquisition
opportunities and availability and pricing of
both debt and equity capital. It is possible
for a number of reasons that acquisitions
made or to be made may not perform at the
forecast level. NSR conducts extensive due
diligence and financial modelling and has
detailed integration and operational systems
and processes designed to minimise this risk.
• Personnel risk – NSR relies upon the expertise
and experience of the senior management
team. As a consequence, if the services of
key personnel were no longer available this
may have an adverse impact on the financial
performance of NSR. However, NSR’s senior
management team are considered internally
to be stable and committed and succession
planning is undertaken periodically by the Board
and Managing Director. Further, the Managing
Director and Chief Operating Officer are subject
to the clawback agreement over their Stapled
Securities as detailed later in this Directors’ Report.
• Interest rate fluctuations and derivative exposure
– unfavourable movements in interest rates
could lead to increased interest expense to the
extent that these rates are not hedged. NSR uses
derivative instruments to hedge a percentage
of its exposure to interest rates however the
interest rate movements could result in an
adverse effect on financial performance.
47
National Storage Annual Report 2013/2014 Directors
NATIONAL STORAGE HOLDINGS LIMITED
The NSH Directors in office during the Reporting Period and continuing as at the date of this Directors’ Report
are set out below. The Directors were the inaugural directors of the Company on incorporation on 1 November
2013 and have remained in office during the remainder of the Reporting Period.
Laurence Brindle Non-Executive Chairman (appointed 1 November 2013)
Andrew Catsoulis Managing Director (appointed 1 November 2013)
Anthony Keane
Non-Executive Director (appointed 1 November 2013)
THE TRUST COMPANY (RE SERVICES) LIMITED
The Directors of the Responsible Entity in office during the Reporting Period and continuing as at the date of
this Directors’ Report are set out below.
Andrew Cannane Director (appointed 31 March 2011)
Christopher Green Director (appointed 7 March 2014)
Gillian Larkins
Director (appointed 7 March 2014)
David Grbin
Director (appointed 22 July 2008, resigned 7 March 2014)
Rupert Smoker
Director (appointed 18 December 2013, resigned 7 March 2014)
Alternate Director for John Atkin, David Grbin and Andrew Cannane
(appointed 20 February 2013, resigned 18 December 2013)
John Atkin
Director (appointed 27 January 2009, resigned 18 December 2013)
Anna O’Sullivan
Alternate Director for Andrew Cannane (appointed 7 March 2014) and
Alternate Director for Christopher Green (appointed 7 March 2014)
Joanne Hawkins Alternate Director for Gillian Larkins (appointed 7 March 2014)
Glenn Foster
Alternate Director for Gillian Larkins (appointed 7 March 2014)
On 28 November 2013, shareholders of The Trust Company Limited (the then ultimate parent of the Responsible
Entity) voted to accept a proposal from Perpetual Limited for it to acquire 100% of The Trust Company Limited
by way of a Scheme of Arrangement. On 18 December 2013, the Scheme of Arrangement was formally
implemented and The Trust Company Limited became wholly owned by Perpetual Limited.
The responsible entity prior to The Trust Company (RE Services) Limited was APN Funds Management Limited
(“APN”). APN ceased to be the responsible entity of the NSPT on 19 December 2013 as part of the IPO. The
Directors of APN at the time of it ceasing to be the responsible entity were Geoff Brunston, David Blight,
Howard Brenchley, Michael Johnstone, and Jennifer Horrigan.
Directors’ Report
DIRECTORS’ QUALIFICATIONS, EXPERIENCE
AND SPECIAL RESPONSIBILITIES
Board of National Storage Holdings Limited
Laurence Brindle, Independent Non-executive
Chairman (appointed 1 November 2013)
BComm, BEng(Hons), MBA
Anthony Keane, Independent Non-executive
Director (appointed 1 November 2013)
BSc(Maths), GradDipCorpFin
Anthony is an experienced finance and business
executive with over 30 years background in
corporate, institutional, business and retail banking.
Prior to accepting his directorship with the Company,
Anthony was most recently Head of Corporate
Banking Queensland for National Australia Bank and
was responsible for the bank’s relationships with large
privately owned and public listed companies across
a broad range of industries including manufacturing,
retail, wholesale, property, professional services,
technology, leisure and tourism, transport, mining
and associated services. Anthony has a Bachelor of
Science (Mathematics) from University of Adelaide
and a Graduate Diploma in Corporate Finance from
Swinburne. He is a Fellow of the Financial Services
Institute of Australasia, a Graduate of the Australian
Institute of Company Directors and a member of
the CEO Institute. He is a Director of Queensland
Symphony Orchestra Pty Ltd.
Anthony acts as Chairman of the Audit and Risk
Committee and is a member of the Nomination and
Remuneration Committee.
Laurence has extensive experience in funds
management, finance and investment. Until 2009
he was an executive with Queensland Investment
Corporation (QIC). During his twenty-one years with
QIC he served in various senior positions including
Head of Global Real Estate where he was responsible
for a portfolio of $9 billion. Laurence was also a
long term member of QIC’s Investment Strategy
Committee. Since 2010, Laurence has been a
director of Westfield Retail Trust (now Scentre Group).
He provides advice to a number of investment
institutions on real estate investment and funds
management matters. Laurence holds a Bachelor of
Engineering (Honours) and a Bachelor of Commerce
from the University of Queensland, and a Master of
Business Administration from Cass Business School,
London. He is a former Chairman of the Shopping
Centre Council of Australia.
Laurence serves on the NSR Audit and Risk
Committee and is Chairman of the Nomination and
Remuneration Committee.
Andrew Catsoulis, Managing Director
(appointed 1 November 2013)
LLB, GradDip Project Mgmt
Andrew is a qualified lawyer who has been admitted
to the Supreme Court of Queensland. He has
had extensive experience in the fields of finance,
commercial and property law during his tenure
at major law firms both in Australia and overseas.
He is also a qualified project manager and has
considerable property development experience
both within the storage industry and in broader
markets. A founder of the original National Storage
business, he has over 18 years of specific self-
storage industry expertise including in the areas of
acquisition, development, integration and operation
of ‘greenfield’ and developed self-storage centres.
Andrew was instrumental in the successful acquisition
and integration of the original Pre-Existing Group
portfolio and led the Company through the IPO.
49
National Storage Annual Report 2013/2014 Board of The Trust Company
(RE Services) Limited
Andrew Cannane, Director (appointed 31 March 2011)
BEcon, MBA
Andrew is responsible for leadership of the Corporate
Client Services team at Perpetual Corporate Trust
which provides Wholesale Trustee and Custodial
services for managed investment schemes and
Corporate Trustee services for Singapore collective
investment schemes. Andrew is a Director of the
Responsible Entity licensed subsidiaries and was a
Singapore Qualified Resident Manager. Andrew has
worked in wealth management, financial markets
and retail banking in Australia, Singapore and the
UK for over 20 years. A graduate of the Australian
Graduate School of Management, Andrew holds a
Master of Business Administration (Executive) (AGSM),
a Bachelor of Economics from Sydney University
and is a Fellow of the Financial Services Institute
of Australasia (FINSIA). He currently sits on the Asia
Pacific Real Estate Association’s (APREA) Australian
Chapter Board, the Property Council of Australia’s
(PCA) Unlisted Property Roundtable and the Property
Funds Association’s Executive Committee.
Christopher Green, Director (appointed 7 March 2014)
B Comm, LLB, MBA
Chris joined Perpetual from JPMorgan where he
spent ten years with the Institutional Trust Services
business firstly in Europe covering the European,
Middle Eastern and African markets and then as
head of its Australian business. His career began as
a solicitor for Corrs Chambers Westgarth. He holds a
Masters of Business Administration (London Business
School) and a Bachelor of Laws and a Bachelor
of Commerce (University of Queensland). Chris is
Deputy Chairman of the Australian Securitisation
Forum and a member of the Australian Institute of
Company Directors. Chris is currently completing a
BA in Philosophy through the University of London.
Gillian Larkins, Director (appointed 7 March 2014)
B Comm, GradDip Accounting & Finance MBA CA
GAICD
Ms Gillian Larkins joined Perpetual as Group
Executive, Transformation Office in October 2012,
and assumed the role of Chief Financial Officer in
January 2013. Ms Larkins has approximately 20 years
of experience in finance, strategy and management
roles across a number of industries. Most recently,
she was Chief Financial Officer, Managing Director
of Westpac Institutional Bank, responsible for Finance
and Strategy, and prior to that, Chief Financial
Officer Australia and New Zealand of Citigroup. Ms
Larkins has also served on the board of Hastings Fund
Management as a non-executive director from 2009
to 2011. As a member of the Executive Leadership
Team reporting to the CEO, Ms Larkins heads
Perpetual’s Finance, IT, and Risk functions, which
include Audit, Legal and Company Secretariat. Ms
Larkins holds a Master of Business Administration from
the Macquarie Graduate School of Management,
as well as a Graduate Diploma in Accounting and
Finance and a Bachelor’s Degree of Commerce,
majoring in Economics, both from the University of
Otago, New Zealand. She is a member of the NZ
Chartered Accountant’s Society and a Graduate of
the Australian Institute of Company Directors.
Alternate Directors
Anna O’Sullivan – LLB
Joanne Hawkins – B Comm, LLB, Grad Dip CoSec
Practice, Fellow of the Institute
of Chartered Secretaries and
Administration, Graduate of the
Australian Institute of Company
Directors.
Glenn Foster – B Comm, CA, MAICD
Directors’ Report
Directors’ interests in NSR Securities
As at the date of this Directors’ Report, the interests of the Directors (including indirect interests) in the Stapled
Securities of NSR were:
Director
Laurence Brindle
Anthony Keane
Andrew Catsoulis
Andrew Cannane
Christopher Green
Gillian Larkins
Anna O’Sullivan (1) (2)
Joanne Hawkins (3)
Glenn Foster (3)
Direct
-
-
1,093,082
-
-
-
-
-
-
Indirect
1,020,400
102,000
11,454,081
Total
1,020,400
102,000
12,547,163
-
-
-
-
-
-
-
-
-
-
-
-
(1) Alternate for Andrew Cannane (2) Alternate for Christopher Green (3) Alternate for Gillian Larkins
The Responsible Entity’s interests in NSR Securities
Entities related to the Responsible Entity within the Perpetual Group manage funds that own 199,675 Stapled
Securities in NSR.
Directors’ Meetings
The number of meetings of directors of NSH (including meetings of sub-committees of directors) held during
the Reporting Period and the number of meetings attended by each director were as follows:
Director
Laurence Brindle
Anthony Keane
Andrew Catsoulis
Notes:
Board
13 (13)
13 (13)
13 (13)
Audit and Risk Committee
Nomination and
Remuneration Committee
1 (1)
1 (1)
1 (1)
1 (1)
1. Figures in brackets indicate the number of meetings held whilst the director was in office or was a member of the relevant Committee during the Reporting Period.
Figures not in brackets indicate the number of meetings or Committee meetings that the director attended.
2. Mr. Catsoulis attends Nomination and Remuneration Committee meetings and Audit Committee meetings by invitation.
3. A meeting was held by circular resolution during the Reporting Period in addition to the meetings listed in the above table.
4. The Company has an Investment Committee Charter to govern an Investment Committee. The Board has determined that given its size, at this time, the full Board
will act as the Investment Committee and therefore there are no separate Investment Committee meetings noted.
51
National Storage Annual Report 2013/2014
Company Secretary
National Storage Holdings Limited
The Trust Company (RE Services) Limited
Patrick Rogers (appointed 1 November 2013)
LLB, B Bus – Accty
Patrick holds both legal and accounting
qualifications and is admitted as a solicitor of the
Supreme Court of Queensland. He has practiced as
a solicitor for over 15 years in both fields. During his
time in private practice, Patrick has had significant
experience in corporate, property, commercial,
taxation and transactional work. In addition to
private practice, Patrick was the general counsel
and company secretary of the Super A-Mart Group
for over 8 years, (including holding the role of
CFO for a time) where he was a part of the senior
management team and had extensive involvement
in the operations of the company.
Corporate Governance
NSH and the Responsible Entity have their own
respective Boards and constitutions. The relationship
between NSH and the Responsible Entity is governed
by a Cooperation Deed and Management
Agreement that facilitate common processes and
governances for NSR. Pursuant to the NSR Charter,
it is the function of the NSH Board to provide overall
strategic guidance and effective oversight of
management of NSR.
The NSH and Responsible Entity Boards and NSH
management are committed to achieving and
Glenda Charles
Thornton Christensen
Sylvie Di Marco
Joanne Hawkins
Geoffrey Stirton
Alexander Carrodus
(appointed 28 February 2014)
(appointed 28 February 2014)
(appointed 1 May 2014)
(appointed 1 May 2014)
(resigned 28 February 2014)
(resigned 5 July 2013)
demonstrating to Securityholders high standards
of corporate governance and to ensure NSH acts
in the best interests of its Securityholders balanced
with its broader community obligations. To achieve
this, the NSH Board has created a framework for
managing National Storage Group including internal
controls and a business risk management process.
The governance system is reviewed during each year
by the Company Secretary and the Board to ensure
that it reflects changes in the law.
NSH has convened the following committees as part
of its corporate governance framework:
Committee
Audit and Risk
Nomination and Remuneration
Disclosure Committee
Chair
Anthony Keane
(Independent Director)
Laurence Brindle
(Independent Director)
Andrew Catsoulis
(Managing Director)
Members
Laurence Brindle
(Independent Director)
Anthony Keane
(Independent Director)
Thomas Rice (CFO), Patrick Rogers
(Company Secretary)
Directors’ Report
NSH committees are governed by their
respective Charters.
Additionally, the Responsible Entity has established
a compliance committee comprising three
independent members. NSPT is a registered
managed investment scheme and the rights and
obligations of the Responsible Entity as a responsible
entity of NSPT and NSPT Unitholders are governed by
the constitution of NSPT.
As the responsible entity of NSPT, the Responsible
Entity must comply with all obligations set out in
the constitution and the Corporations Act. The
Responsible Entity is also subject to duties including
duties to act in the best interests of NSPT Unitholders,
act honestly, exercise care and diligence, and treat
NSPT Unitholders of the same class equally. In order
to ensure compliance with the constitution and the
Corporations Act, the Responsible Entity has in place
a compliance plan which sets out the measures it will
apply in operating NSPT.
A copy of the compliance plan can be inspected at
National Storage’s head office at any time between
8:30am and 5:00pm on a business day in Brisbane
or request a free copy by contacting NSH or the
Responsible Entity.
An important component of the NSR corporate
governance structure is the ASX Corporate
Governance Principles and Recommendations
(the “ASX Recommendations”). A statement of
the extent of NSR’s compliance with the ASX
Recommendations can be viewed on the NSR
website at www.nationalstorageinvest.com.au/
corporate/governance/.
Full copies of all NSR governance policies and
Charters can also be found in the Governance
section of the website.
53
National Storage Annual Report 2013/2014 Indemnification and Insurance of Directors
and Officers
The Company has agreed to indemnify all the
Directors and executive officers of the Company
and its group entities to the extent permitted by law,
for the amount of any liability, loss, cost, charge,
damage, expense or other liability suffered by the
Director or executive officer as an officer of the
Company or group entity or as a result of having
been an officer of the Company or any group
entity. This includes any liability arising out of or in
connection with any negligence, breach of duty, or
breach of trust (“Indemnity”).
However, the Indemnity does not extend to a claim
in the nature of:
(a) a challenge to any rejection of a Director’s
claim by the provider of the Company’s
insurance cover; or
(b) a cross-claim or a third-party claim for
contribution or indemnity in, and results directly
from, any Proceedings in respect of which the
Director has made a claim under the Indemnity.
Deeds of indemnity to affect the above have
been formally entered into by the Company and
the Directors. It is anticipated that the Company
will enter into similar deeds of indemnity with the
executive officers of the Company during the 2015
financial year.
The Deeds of Indemnity require the Company to
obtain a back to back indemnity to the Company
from the Responsible Entity out of the assets of the
NSPT. This has been procured by the Company and
is in place. The back to back indemnity requires the
Responsible Entity to indemnify the Company for any
liability under the Directors/officers indemnity to the
extent that the Company is not able to meet that
obligation. The indemnity does not extend to any
payment made or due as a result of a breach by the
Company of its obligations under a Director/officer
indemnity or to any payment which the Company
makes voluntarily but is not due and payable under
the terms of a Director/officer indemnity.
The total amount of insurance contract premiums
paid for Directors and Officers insurance for NSR
(including subsidiary entities) during the Reporting
Period was $35,501.56.
No insurance premiums are paid out of the assets
of the NSPT in regards to insurance cover provided
to either the Responsible Entity or the auditors of the
NSPT. So long as the officers of the Responsible Entity
act in accordance with the constitution and the
law, the officers remain indemnified out of the assets
of the NSPT against losses incurred while acting on
behalf of the NSPT. The auditors of the NSPT are in no
way indemnified out of the assets of the NSPT.
Indemnification of
Auditors
To the extent permitted by law, the Company has
agreed to indemnify its auditors, Ernst & Young, as
part of the terms of its audit engagement agreement
against claims by third parties arising from the audit
(for an unspecified amount). No payment has been
made or claim received by NSR to indemnify Ernst &
Young during the Reporting Period or up to the date
of this report.
Director’s Report
Remuneration Report (Audited) – NSH Group
MESSAGE FROM THE BOARD
REMUNERATION GOVERNANCE
The NSH Board is committed to ensuring that
strategies and policies are adopted by NSR that align
the interests of our Securityholders with operational
performances and management. The Board believes
that the remuneration practices of NSR should fairly
and responsibly reward KMP having regard to their
individual performance, the performance of NSH
and NSPT and the broader external environment as it
relates to KMP reward.
The policy also aims to provide a platform for
sustainable value creation for Securityholders by
attracting and retaining quality KMP.
COVERAGE OF THIS REPORT
The following remuneration report has been
prepared to provide information to Securityholders of
the remuneration details of the KMP of NSH involved
in the management of the NSPT.
Directors of the Responsible Entity do not receive any
remuneration from NSR as KMP. The Responsible Entity
receives a fee for management services rendered.
This information has been audited as required by
section 308(3C) of the Act.
KMP are defined as “those persons having
authority and responsibility for planning, directing
and controlling the major activities of NSH, the
Consolidated Group and the NSPT, directly or
indirectly, including any director (whether executive
or otherwise) of NSH.”
Key management personnel covered in this report
are as follows:
Non-executive and executive directors
Laurence Brindle – Chairman (non-executive)
Anthony Keane – Director (non-executive)
Andrew Catsoulis – Managing Director (executive)
Key Management Personnel – senior executives
Peter Greer – Chief Operating Officer (COO)
Thomas Rice – Chief Financial Officer (CFO)
Nomination and Remuneration Committee and use
of remuneration consultants
The Nomination and Remuneration Committee’s
activities are governed by its Charter, a copy of
which is available at www.nationalstorage.com.au.
The responsibilities of the Nomination and
Remuneration Committee include:
• Determining and reviewing remuneration policies
to apply to the Company’s Managing Director,
senior executives and non-executive Directors;
• Determining the specific remuneration packages
for senior executives (including base salary,
STIs, LTIs and other contractual benefits);
• Reviewing contractual rights of termination for
senior executives;
• Reviewing the appropriateness of the
Company’s succession planning policies;
• Reviewing management’s recommendation
of the total proposed LTI awards; and
• Administering the LTI awards.
The deliberations of the Nomination and
Remuneration Committee, including any
recommendations made on remuneration issues,
are considered by the NSH Board. In making its
recommendations to the Board, the Nomination
and Remuneration Committee takes into account
advice from independent remuneration advisers on
trends in remuneration for KMP. The independent
remuneration advisers consider a range of factors
including the specific responsibilities assumed by
KMP. No remuneration consultant was utilised during
the Reporting Period.
The Remuneration Committee comprises two
independent non-executive directors and is chaired
by Laurence Brindle. Due to NSR only being formed in
December 2013, the Remuneration Committee met
once during the Reporting Period. As at the date of
this Remuneration Report, the Committee has met
an additional 3 times since the conclusion of the
Reporting Period.
55
National Storage Annual Report 2013/2014 Principles used to determine the nature and amount
of remuneration
The objective of the remuneration policy is to ensure
that group remuneration is competitive, reflects
responsibilities of the officers and ensures that NSR is
able to attract and retain executives and directors
with the skills and capabilities required to sustainably
deliver NSR’s objectives.
The remuneration of directors and senior executives
is reviewed annually by the Nomination and
Remuneration Committee and the full NSH Board.
External analysis and advice is sought by the
Committee, where considered appropriate, to
ensure that the remuneration for directors and
senior executives is competitive in the market
place and appropriate for the organisation. KMP
remuneration was not reviewed during the Reporting
Period, but will be reviewed before the end of the
2014 calendar year.
The policy seeks to align executive reward with
the achievement of strategic objectives and the
creation of value for Stapled Securityholder. The
primary tenets of the policy are:
• Attract and retain high quality executives and
to reward the capabilities and experience
brought to NSR by those executives.
• Total reward for key executives are to
have a significant “at risk” component.
• The “at risk” component for key executives is
to include both short term incentives (“STI”)
and long term incentives (“LTI”) which have
a strong focus on quantitative measures.
• Provide industry competitive rewards
linked to Securityholder returns.
• Provide recognition for contribution, complexity
of role and responsibilities of the officer.
• Remuneration policies and structures must be
clear and transparent both to the executives
and Board of NSR and to Securityholders.
Remuneration Report
NSR Remuneration Framework
Non-executive directors:
Fees and payments to non-executive directors
reflect the demands which are made on, and the
responsibilities of, the non-executive directors and
their contribution towards the performance of NSR
as well as the complexity of the National Storage
Trust and operating business. The remuneration policy
seeks to ensure that NSR attracts and retains directors
with appropriate experience and qualifications
to oversee the operations of NSR on behalf of the
Securityholder.
The Constitution of NSH specifies that the amount of
the remuneration of the non-executive directors is a
yearly sum not exceeding the sum from time to time
determined by the Company in general meeting.
Under the ASX Listing Rules, the total amount paid to
all NSH non-executive directors for their services must
not exceed in aggregate in any financial year the
amount fixed by NSH’s annual general meeting.
The amount initially fixed at the IPO by NSH for
the Reporting Period (as disclosed in the PDS)
was $600,000.
Annual NSH non-executive directors’ fees and
Committee fees currently agreed to be paid by NSH
are as follows:
Non-Executive
Directors
Laurence Brindle
Anthony Keane
Base Fee $
Chair Fee $
70,000
70,000
70,000
-
Audit and Risk
Committee Fee $
Remuneration
Committee Fee $
4,000
10,000
5,000
2,500
Total $
149,000
82,500
All NSH non-executive directors’ fees include superannuation at the required statutory rate.
Key management personnel – executive director
and senior executives:
All remuneration paid to executive directors and
senior executives comprises four components:
• Base pay and benefits (including superannuation).
• Short-term performance incentives.
• Long-term incentives .
• Other remuneration (if applicable).
Base salary and benefits
The executive director and senior executives
are paid a base salary that includes employer
contributions to superannuation funds. The
remuneration of the Managing Director is reviewed
annually by the Nomination and Remuneration
Committee and Board. The remuneration of senior
executives is reviewed annually by the Managing
Director who makes a recommendation to the
Nomination and Remuneration Committee. The
Committee then considers, but is not obliged to
accept, the recommendation of the Managing
Director and takes whatever additional steps
it determines appropriate to assess the senior
executive salaries.
There is no guarantee of base salary increases included
in any executive director or senior executive
contracts or through the annual review process.
The Managing Director and senior executives
can potentially be paid a bonus as part of their
remuneration. Whether a bonus is paid and the
amount of such a bonus is at the discretion of the
Nomination and Remuneration Committee and the
Board. Any bonuses paid would fall into the category
of “other remuneration”.
Short and long term incentives
During the Reporting Period and at the date of this
Remuneration Report, the Managing Director was
and remains the only executive director of NSH.
There were no short and long term incentives paid
to the Managing Director or KMP senior executives
during the Reporting Period. However, the Managing
Director and Chief Operating Officer (the “Incentive
Officers”) will potentially be eligible for payment
of STI’s and LTI’s for the calendar year ended 31
December 2014 (which includes a portion of the
Reporting Period).
STI’s agreed with the Incentive Officers reward
them for performance against both financial and
operational objectives which are considered to
be aligned to the interest of NSR Securityholders.
The incentives that may potentially be earned
are expressed as a percentage of total fixed
remuneration. At the end of calendar year 2014,
the Nomination and Remuneration Committee will
determine the actual STI entitlement of the Incentive
Officers against the agreed objectives.
57
National Storage Annual Report 2013/2014
The STI and LTI hurdles included:
1. If the EBITDA hurdle ($30.8 million) is exceeded,
an entitlement to a portion of the STI and LTI
incentive is triggered according to a sliding
scale from 25% of the incentive to 100%. The
EBITDA hurdle is weighted at 30% of the total
possible incentive.
2. If the DPU hurdle (8 cents) is exceeded, an
entitlement to a portion of the STI and LTI
incentive (being 50% of) is triggered according
to a sliding scale from 25% of the incentive to
100%. The DPU hurdle is weight at 50% of the total
possible incentive.
3. Non-financial hurdles for both STI and LTI
comprised of staff retention of senior staff and
executives and performance against the A_REIT
average. These combined comprised a potential
entitlement of 20% of the total fixed remuneration.
The non-financial hurdles are weighted, in total,
at 20% of the total possible incentive.
If an LTI is achieved, it will be paid in equal amounts
over a 3 year period as a function of the number of
Stapled Securities the LTI equates to in the first year the
incentive when first multiplied by the price at which
the Stapled Security is trading at the end of each
relevant financial year over the three year period.
An overview of the remuneration structure for NSR
during the Reporting Period is as follows:
Remuneration
Base Salary
STI
LTI
Type
Fixed
Variable
Variable
Considerations
Experience, capabilities and skills, performance.
Performance against set financial and non-financial hurdles.
Performance against set financial and non-financial hurdles.
LTI have a deferred payment structure across 3 years.
Non-executive director security holding
All of the non-executive directors hold Stapled Securities in NSR.
Details of remuneration
The following tables sets out details of the remuneration received by the Company’s KMP
for the Reporting Period.
Short-term Employee benefits
Post-employment Benefits
Salary and fees
Superannuation
$
98,616
54,603
$
8,070
4,469
Total
$
106,686
59,072
249,082
20,722
269,804
236,092
166,622
805,015
19,520
15,413
68,194
255,612
182,035
873,209
2014
Non-executive directors
Laurence Brindle
Anthony Keane
Executive director
Andrew Catsoulis
Senior executives
Peter Greer
Thomas Rice
Total
Remuneration Report
KMP Clawback Agreement
The Managing Director and Chief Operating Officer
have agreed, in relation to the Stapled Securities that
they hold, to performance hurdles and clawback
mechanisms if the performance hurdles are not
achieved. The performance hurdles are in place
until the earlier of the date the performance hurdles
are achieved for 2 consecutive test dates or 5 years.
If the performance hurdles are not achieved, any
distribution from the NSPT or a dividend from NSH (a
“Securities Payment”) will be clawed back from the
relevant officer.
If a dividend/distribution is declared for a half year,
it must be determined if the EPSS of NSR for the
relevant period is at least 8.75 cents. The relevant
period is the rolling 12 month period ending on the
last day of the relevant half year period.
If:
1. the EPSS are less than 8.25 cents then the
clawback will be 100% of any distribution or
dividend;
2. the EPSS are greater than 8.75 cents then there
will be no clawback;
3. the EPSS are greater than 8.25 cents but less than
8.75 cents, the clawback will be calculated using
the following formulae:
CP = 1 – ((E – 8.25 cents) / (8.75 cents – 8.25 cents))
where
CP = the Clawback Proportion
E = the EPSS of NSR for the relevant period
In addition to the above, for the first half year period
ending on 30 June 2014, the cash consideration
received by each of the Managing Director and
the Chief Operating Officer under this agreement
shall be reduced by the amount of the respective
Securities Payment. In each subsequent half year
where there is a clawback amount, the cash
consideration will be reduced by the respective
clawback amounts.
Voluntary Escrow
The Managing Director and Chief Operating Officer
have agreed not to transfer any part of their vendor
Stapled Securities whilst the performance hurdles
apply and agree to the application of a holding lock
on their vendor Stapled Securities. The exception to
this escrow is if a court orders the transfer provided
the transferee enters a deed agreeing to be bound
by the provisions of this escrow.
Service agreements
Remuneration and other terms of employment for the KMP senior executives are formalised in service
agreements. The service agreements specify the components of remuneration, benefits and notice periods.
Termination benefits are within the limits set by the Corporations Act 2001 such that they do not require
Securityholder approval.
Name
Term of Agreement and
Notice Period*
Base Salary including
Superannuation**
Termination Payments
Andrew Catsoulis
No fixed term
$350,000
• 6 months in lieu of notice if required by NSH.
6 months
• 6 months in the event of incapacity or illness.
Peter Greer
No fixed term
$320,000
• 6 months in lieu of notice if required by NSH.
6 months
• 6 months in the event of incapacity or illness.
Thomas Rice
No fixed term
$230,000
• 6 months in lieu of notice if required by NSH.
6 months
• 6 months in the event of incapacity or illness.
• 1 months fixed remuneration plus 1 week for
each week of service – capped at 2 months
in the event of redundancy
* This notice applies equally to all the executives listed in the table.
** Base salaries are annual salaries for the financial year ended 30 June 2014. They are reviewed annually by the Nomination and Remuneration Committee.
59
National Storage Annual Report 2013/2014
Security Holdings of Directors and Executives
The movement during the Reporting Period in the number of Stapled Securities, directly, indirectly or
beneficially held by Directors and KMP senior executives, including parties related to them, is as follows:
Balance
19 Dec 2013
Granted as
Remuneration
On Exercise
of Options
Directors of NSH
Laurence Brindle
Anthony Keane
-
-
Andrew Catsoulis
11,454,081
Directors of The
Responsible Entity
Andrew Cannane
Christopher Green
Gillian Larkins
Executives of NSH
Peter Greer
Thomas Rice
-
-
-
5,586,735
-
Total
17,040,816
RELATED PARTY TRANSACTIONS – PRE IPO
-
-
-
-
-
-
-
-
-
Acquired
1,020,400
102,000
1,093,082
-
-
-
-
152,000
Balance
30 June 2014
1,020,400
102,000
12,547,163
-
-
-
5,586,735
152,000
-
-
-
-
-
-
-
-
-
2,367,482
19,408,298
Directors’ remuneration
Shareholders’ loans
No amounts were paid by the Pre-Existing Group
to 18 December 2013 directly to the directors.
Administration and director remuneration were
provided to the Pre-Existing Group by Strategic
Storage Consulting Pty Ltd (“SSC”), a related
entity to the Pre-Existing Group. SSC received a
management fee directly from the Pre-Existing
Group. Pre-Existing Group director Geoff McMahon,
did not receive any remuneration for his roles as a
Non-Executive Director.
Transactions with directors and other
related entities
During the year, management fees of $1,342,491
(2013: $2,732,169) were paid or payable by the
NS Pty Ltd Group. As SSC was acquired by NSH at
30 June 2014 the amount paid by and to the NSR
was nil. At 30 June 2013 the NS Pty Ltd Group owed
SSC $222,765 and SSC owed the NS Pty Ltd Group
$1,207,655.
Historically the Pre-Existing Group has made loans
to the shareholders, repayable within seven years
from the date of disbursement. Such loans were
unsecured and the interest rate was the average
rate incurred on long-term loans (2013: 7.5%). There
are no shareholders loans remaining as they were all
extinguished prior to the IPO.
Director related entities
Up to 18 December 2013 the shareholders of
National Storage Pty Ltd had an investment (in the
same shareholding proportions as National Storage
Pty Ltd) in a trust NS APAC (and its trustee NS APAC
Pty Ltd) which in turn has a 10% investment in
Southern Cross. Southern Cross has an investment in
24 centres operated under the National Storage and
Wine Ark brands. This shareholding was sold into NSPT
as part of the IPO/stapling.
The previous executive directors (Catsoulis, Greer and
Berry) were shareholders in SSC, which was contracted
to provide management services to both the Pre-
Existing Group and Southern Cross. This shareholding
was sold into NSH as part of the IPO/stapling.
Remuneration Report
RELATED PARTY TRANSACTIONS
– AT STAPLING (IPO)
The implementation of the IPO and the ongoing
management of NSR necessarily involve a number of
related party transactions outlined in the PDS:
In respect of the KMPs in their Respective Proportions
under the Sale and Purchase Agreement, they
received the following:
Purchase from NSPL vendors:
The purchase prices for the respective acquisitions
were as follows:
(a) $1,047,000 plus 25,510,204 Shares in NSH for the
NSPL Sale;
(b) 25,510,204 Units in NSPT for the NSIT Sale; and
(c) $4,750,000 for the NS APAC Sale.
In respect of the KMPs in their Respective Proportions
under the Sale and Purchase Agreement (as
detailed in the PDS), they received the following:
(a) Andrew Catsoulis – 44.90% for Stowaway Self
Storage Pty Ltd as trustee for the Catsoulis
Development Trust, Stowaway Self Storage Pty
Ltd as trustee for the Catsoulis Family Trust and
Storcat Pty Ltd as trustee for the Andrew Catsoulis
Family Trust – Andrew Catsoulis is a director and
company secretary for Stowaway Self Storage Pty
Ltd, a director and shareholder of Storcat Pty Ltd
and a potential discretionary beneficiary of the
Catsoulis Development Trust, the Catsoulis Family
Trust and the Andrew Catsoulis Family Trust;
(b) Peter Greer – 21.90% for Palomere Pty Ltd as
trustee for the Peter Edward Greer Family Trust
– Peter Greer is the sole director, company
secretary and shareholder of Palomere Pty Ltd
and a potential discretionary beneficiary of the
Peter Edward Greer Family Trust; and
Purchase from SSC vendors:
The purchase price for the company was $5,828,000.
(a) Andrew Catsoulis – 35% for Storcat Pty Ltd as
trustee for the Andrew Catsoulis Family Trust –
Andrew Catsoulis is a director and shareholder
of Storcat Pty Ltd and a potential discretionary
beneficiary of the Andrew Catsoulis Family Trust;
(b) Peter Greer – 34.5% for Palomere Pty Ltd as
trustee for the Peter Edward Greer Family Trust
– Peter Greer is the sole director, company
secretary and shareholder of Palomere Pty Ltd
and a potential discretionary beneficiary of the
Peter Edward Greer Family Trust; and
(c) Thomas Rice – 9.5% for Saxtom Pty Ltd as trustee
for the Saxtom Family Trust – Thomas Rice is the sole
director, company secretary and shareholder
of Saxtom Pty Ltd and a potential discretionary
beneficiary of the Saxtom Family Trust.
RELATED PARTY TRANSACTIONS – POST IPO
As noted in the PDS, on 23 December 2013,
an NSR subsidiary trust NSIT purchased a property at
961–963 Marion Rd, Mitchell Park, South Australia
for $1,576,000 from Australian Storage Developments
Pty Ltd (“ASD”) which is owned by a KMP and
Director of NSH.
The KMP shareholders of ASD comprise:
Andrew Catsoulis – 75% for Storcat Pty Ltd as trustee
for the Andrew Catsoulis Family Trust – Andrew
Catsoulis is a director and shareholder of Storcat Pty
Ltd and a potential discretionary beneficiary of the
Andrew Catsoulis Family Trust
61
National Storage Annual Report 2013/2014 Significant Events after Balance Sheet Date
ACQUISITION OF STORAGE CENTRES
On 15 July 2014, NSR acquired a storage centre in
Wangara, Western Australia for $10.9 million. This centre
has 580 units and 4,407 sqm of net lettable area.
On 25 July 2014, NSR acquired a storage centre in
Port Adelaide, South Australia for $5.2 million. This centre
has 538 units and 4,192 sqm of net lettable area.
NSR has contracted to acquire a centre in Kardinya,
Western Australia for $8 million. Upon completion
this centre will comprise approximately 420 units
and 4,400 sqm of net lettable area. NSR will receive
development management fees for its involvement
in the project, completion of which is scheduled for
late calendar year 2014.
As these centres are, or will be, recorded as
investment properties, they are initially recorded at
their purchase price. This value is supported by an
independent valuation.
CAPITAL RAISING
As at the date of this Directors’ Report, NSR has
determined to raise additional capital. This will be
undertaken by the following two mechanisms:
1. A Placement Offer, details of which are as follows:
A fully underwritten placement to institutional,
professional and sophisticated investors of
approximately 36.73 million stapled securities
(Placement).
The issue price will be determined in relation to a
discount on the last closing price of NSR Stapled
Securities on Friday 22 August 2014. Settlement of
the Placement is scheduled to occur on Friday, 29
August 2014 with allotment to occur on Monday,
1 September 2014.
The purpose of the capital raising is to provide
NSR with financial flexibility to pursue growth
consistent with NSR’s strategic planning,
strengthen its balance sheet and maintain a
sound financial position.
2. A Security Purchase Plan (“SPP”) pursuant to
which NSR will offer to eligible Securityholders
the opportunity to acquire up to approximately
$15,000 of Stapled Securities (subject to scaleback).
The issue price of Stapled Securities issued under
the SPP will be the lesser of the Placement price
and the volume weighted average price of NSR’s
Stapled Securities during the five trading days
before the closing date for applications under the
SPP. The SPP is not underwritten.
The SPP will be open to eligible Australian and
New Zealand resident Securityholders on the
register as at the record date who are eligible to
participate under the terms of the SPP. Stapled
Securities issued under the SPP will rank equally
with existing stapled securities on issue.
INCREASE IN DEBT FACILITY
On 8 July 2014 NSR announced it had negotiated
a $35 million increase to its debt facility with
National Australia Bank (NAB) subject to standard
conditions precedent. The increase resulted in
NSR’s debt facility being extended to $135 million on
substantially the same terms previously agreed with
NAB, due to mature in December 2016. The facility
is intended to be used primarily to fund strategic
acquisitions for the portfolio.
No other matter or circumstance has arisen since
30 June 2014 that has significantly affected, or may
significantly affect the Consolidated Group’s or
the NSPT Group’s operations, the results of those
operations, or the Consolidated Group’s or the NSPT
Group’s state of affairs in the future financial periods.
Directors’ Report
Fees Paid to and
Interests held in the
NSPT by the Responsible
Entity or its Associates
Fees paid to the Responsible Entity and its associates
out of NSPT property during the year are disclosed in
the Statement of Comprehensive Income and are
detailed in Note 18 to the financial statements.
No fees were paid to the Directors of the Responsible
Entity during the year out of NSPT property.
Interests in the NSPT
The movement in units on issue by the NSPT during the
year is set out in note 14 to the financial statements.
Rounding
The amounts contained in this Directors’ Report and
in the Financial Report have been rounded to the
nearest $1,000 (unless otherwise stated) under the
option available under ASIC Class Order 98/0100. The
Consolidated Group and NSPT Group are entities to
which the class order applies.
Auditor’s
Independence
Declaration
A copy of the auditor’s independence declaration
as required under Section 307C of the Corporations
Act 2001 is set out on page 65.
Non-audit services
The following non-audit services were provided by
the entity’s auditor, Ernst & Young Australia. The
Directors of NSH are satisfied that the provision of
non-audit services is compatible with the general
standard of independence for auditors imposed by
the Corporations Act 2001. The nature and scope of
each type of non-audit service provided means that
auditor independence was not compromised.
Ernst & Young Australia received or are due to receive
the following amounts for the provision of non-audit
services conducted during the financial year:
1. Tax compliance
$180,158
2. Assurance related to the IPO of NSR
$850,829
3. Other
$80,175
During the financial year Ernst and Young were
appointed as auditor of NSPT in accordance with
section 327A of the Corporations Act 2001.
63
National Storage Annual Report 2013/2014 This Directors’ Report is made on 24 August 2014 in accordance with a resolution of the Board of Directors of
National Storage Holdings Limited and is signed for and on behalf of the Directors.
Laurence Brindle
Chairman
Andrew Catsoulis
Managing Director
National Storage Holdings Limited
Brisbane
National Storage Holdings Limited
Brisbane
This Directors’ Report is made on 24 August 2014 in accordance with a resolution of the Responsible Entity and
is signed for and on behalf of the Responsible Entity.
Christopher Green
Director
The Trust Company (RE Services) Limited
Sydney
Directors’ Report
Independence Declaration
65
National Storage Annual Report 2013/2014 CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
For the year ended 30 June 2014
Revenue from storage rent
Rental revenue
Revenue from sale of goods and services
Other revenue
Total revenue
Salaries and employee benefits expense
Management fees — operational
Property rates and taxes
Repairs and maintenance
Cost of packaging and other products sold
Depreciation and amortisation
Finance costs
Professional fees
Other operational expenses
Total operational expenses
Gross operating profit
Fair value adjustments
Impairment
Net gain/(loss) on disposal of non-current assets
Other non-operational expenses
Share of profit of a joint venture
Profit/(Loss) before income tax
Income tax benefit/(expense)
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
2014
$'000
2013
$'000
39,762
37,386
-
-
-
2,349
3,557
-
20,382
18,575
2,392
6,033
67
181
-
130
45,668
45,811
20,630
18,705
(6,832)
(1,573)
(2,766)
(785)
(548)
(300)
(9,915)
(4,221)
(5,743)
(4,475)
(2,732)
(2,374)
(891)
(557)
(319)
(13,217)
(369)
(4,781)
-
(2,553)
(264)
-
-
-
(5,431)
(3,457)
(293)
-
(907)
(250)
-
-
-
(10,294)
-
(240)
(32,683)
(29,715)
(11,998)
(11,691)
12,985
16,096
8,632
7,014
(4,403)
(15,348)
30,217
468
-
(92)
(236)
151
8,405
7,160
(450)
(306)
-
-
(8)
(524)
-
-
-
151
-
-
-
-
39,000
-
7,482
-
5
6
6
7
6
6
6
13
8
Profit/(Loss) after tax
15,565
(532)
39,000
7,482
Profit/(loss) for the year attributable to:
Members of National Storage Holdings Limited
(17,122)
(532)
39,000
Non-controlling interest (unit holders of NSPT)
32,687
15,565
-
-
(532)
39,000
7,482
-
7,482
Basic and diluted earnings per stapled security (cents)
20
11.00
(2.09)
21.04
6.31
The above Consolidated Statements of Profit or Loss should be read in conjunction with the accompanying notes.
Financial Statements
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2014
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
2014
$'000
2013
$'000
Profit/(Loss) after tax
15,565
(532)
39,000
7,482
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair value of cash flow hedges
Income tax relating to this item
Other comprehensive income for the year, net of tax
15
15
(393)
-
(393)
-
-
-
(393)
-
(393)
-
-
-
Total comprehensive income for the year
15,172
(532)
38,607
7,482
Total comprehensive income for the year attributable to:
Members of National Storage Holdings Limited
(17,122)
(532)
38,607
Non-controlling interest (unit holders of NSPT)
32,294
15,172
-
-
(532)
38,607
7,482
-
7,482
The above Consolidated Statements of Other Comprehensive Income should be read in conjunction with the accompanying notes.
67
National Storage Annual Report 2013/2014 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at 30 June 2014
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
2014
$'000
2013
$'000
-
-
975
7,685
-
-
382
102
6,710
8,264
3,767
258
2,359
11,709
17,642
180
2,304
-
1,053
18,797
14,648
14,575
220
1,447
1,122
931
-
-
381,301
201,328
305,250
198,810
5,077
8
13,896
-
109
434
5,077
-
-
-
-
-
401,949
203,924
310,327
198,810
416,597
218,499
329,124
206,495
6,329
15,476
3,326
-
4,330
4,952
1,069
9,306
-
16,243
5,005
494
-
5,025
109,171
-
-
-
-
-
-
-
22,983
28,071
9,306
24,782
3,477
117,673
87,460
60,619
393
588
227
-
87,587
153,742
-
424
7,541
-
393
-
-
149,287
161,707
87,980
-
-
-
-
-
-
172,270
189,778
112,762
117,673
244,327
28,721
216,362
88,822
9.1
9.2
10.1
9.3
9.2
10.2
10.3
13
9.3
10.4
9.4
9.5
9.7
10.5
10.6
9.6
9.5
9.7
9.6
10.6
8
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Investment properties
Investment in joint venture
Other non-current assets
Intangibles
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Finance lease liability
Deferred revenue
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Finance lease liability
Other liabilities
Provisions
Deferred tax liability
Total non-current liabilities
Total Liabilities
Net Assets
Financial Statements
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION – cont’d
As at 30 June 2014
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
2014
$'000
2013
$'000
EQUITY
Non-controlling interest (unit holders of NSPT)
Contributed equity
Other reserves
Retained earnings/(Accumulated losses)
Total equity
14
15
223,368
17,758
-
3,201
244,327
-
-
-
2,800
191,499
89,322
-
25,921
28,721
(393)
25,256
216,362
-
(500)
88,822
The above Consolidated Statements of Financial Position should be read in conjunction with the accompanying notes.
69
National Storage Annual Report 2013/2014 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the year ended 30 June 2014
Attributable to securityholders of the National Storage REIT
Contributed
equity
Notes
$'000
Retained
earnings /
(Accumulated
losses)
$'000
Non-
controlling
interest
$'000
Total
$'000
Balance at 1 July 2013
2,800
25,921
-
28,721
(Loss)/Profit for the year
Other comprehensive income/(loss)
9.6
Total comprehensive income/(loss) for the year
-
-
-
(17,122)
-
(17,122)
32,687
(393)
32,294
15,565
(393)
15,172
Transactions with owners
in their capacity as owners:
Vendor issue
Equity uplift upon Stapling
Issue of Stapled Units in Public Offering
Costs associated with Public Offering
Contingent consideration
Dividends/Distribution provided for or paid
14
11
14
14
14
17
(1,047)
-
16,860
(1,189)
334
-
14,958
-
-
-
-
-
(5,598)
(5,598)
(2,800)
98,203
106,944
(5,716)
3,749
(9,306)
191,074
(3,847)
98,203
123,804
(6,905)
4,083
(14,904)
200,434
Balance at 30 June 2014
17,758
3,201
223,368
244,327
Balance at 1 July 2012
2,800
27,353
Loss for the year
Other comprehensive income
Total comprehensive income/(loss) for the year
Transactions with owners
in their capacity as owners:
Dividends provided for or paid
-
-
-
-
(532)
-
(532)
(900)
Balance at 30 June 2013
2,800
25,921
The above Consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes.
-
-
-
-
-
-
30,153
(532)
-
(532)
(900)
28,721
Financial Statements
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY – cont’d
For the year ended 30 June 2014
Attributable to unitholders of the National Storage Property Trust Group
Contributed
equity
Notes
$'000
Retained
earnings /
(Accumulated
losses)
$'000
Balance at 1 July 2013
89,322
(500)
Profit for the year
Other comprehensive income
Total comprehensive income/(loss) for the year
Transactions with owners
in their capacity as owners:
Vendor payments
Issue of units in Public Offering
Costs associated with Public Offering
Contingent consideration
Distribution provided for or paid
15
14
14
14
14
17
-
-
-
39,000
-
39,000
(2,800)
106,944
(5,716)
3,749
-
102,177
-
-
-
-
(13,244)
(13,244)
Other
reserve
$'000
-
-
(393)
(393)
-
-
-
-
-
-
Total
$'000
88,822
39,000
(393)
38,607
(2,800)
106,944
(5,716)
3,749
(13,244)
88,933
Balance at 30 June 2014
191,499
25,256
(393)
216,362
Balance at 1 July 2012
89,322
(1,260)
Profit for the year
Other comprehensive income
Total comprehensive income/(loss) for the year
Transactions with owners
in their capacity as owners:
Distribution provided for or paid
17
-
-
-
-
7,482
-
7,482
(6,722)
Balance at 30 June 2013
89,322
(500)
The above Consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes.
-
-
-
-
-
-
88,062
7,482
-
7,482
(6,722)
88,822
71
National Storage Annual Report 2013/2014
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended 30 June 2014
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
2014
$'000
2013
$'000
Operating activities
Receipts from customers
Payments to suppliers and employees
Interest and bill discounts received
Interest and other finance costs paid
Net cash provided by / (used in) operating activities
9.1
Investing activities
Payment for investment properties
Payments for property, plant and equipment
Proceeds on sale of business
Acquisition of subsidiary
Investment joint venture
Net cash provided by / (used in) investing activities
Financing activities
Proceeds from issue of shares
Costs associated with Public Offering
Dividends/distributions paid/(received) to owners
of the parent
Repayment of lease principal
Repayment of borrowings
Proceeds from borrowings
Loans repaid to share holders
47,190
44,453
(25,463)
(19,218)
631
(9,915)
12,443
30
(13,250)
12,015
9,849
(4,277)
104
(7,227)
(1,551)
19,239
(1,442)
130
(9,231)
8,696
(74,156)
(838)
-
(5,828)
(4,925)
(85,747)
123,804
(6,905)
(2,077)
-
(74,156)
(143)
(21)
2,689
-
-
-
-
-
(4,925)
-
-
-
-
2,668
(79,081)
(143)
-
-
-
106,943
(5,716)
-
-
(5,619)
(6,651)
(12,552)
(14,752)
-
(109,000)
87,916
-
-
(109,171)
87,587
-
(283)
-
-
-
-
-
Net cash provided by /(used in) financing activities
81,186
(15,035)
74,024
(6,651)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
9.1
7,882
382
8,264
(352)
(6,608)
734
382
6,710
102
1,902
4,808
6,710
The above Consolidated Statements of Cash Flows should be read in conjunction with the accompanying notes.
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2014
1. CORPORATE INFORMATION
National Storage REIT (“the Consolidated Group”
or “NSR”) was established during the year for the
purpose of establishing a joint quotation of National
Storage Holdings Limited (“NSH” or “the Company”)
and its controlled entities (“NSH Group”) and
National Storage Property Trust (“NSPT” or “the Trust”)
and its controlled entities (“NSPT Group”) on the
Australian Securities Exchange (“ASX”).
NSH, a new company, was incorporated as the
holding company for National Storage Pty Ltd
(“NSPL”) as part of the reorganisation to facilitate the
Initial Public Offering (“IPO”) as per the Prospectus
and Product Disclosure Statement dated 19
November 2013 (“the PDS”). In order to establish
NSR and to facilitate the IPO, units in the NSPT were
stapled to the shares of NSH. The stapled securities
were quoted on the ASX on 19 December 2013.
For financial reporting purposes, NSH is seen
as a continuation of the NSPL entity and the
accounting policies for NSPL continue to apply to
NSH and the Consolidated Group. The comparative
period in this report is the year ending 30 June 2013
for NSPL and its then consolidated group. (“the
Pre-Existing Group”).
The Cooperation Deed of NSH and NSPT ensure that,
for so long as the two entities remain jointly quoted,
the number of shares in the Company and the
number of units in the Trust shall be equal and that
the shareholders and unitholders be identical. Both
the Company and the Responsible Entity (The Trust
Company (RE Services) Limited) of the Trust must at
all times act in the best interest of NSR. The stapling
arrangement will continue until either the winding
up of the Company or the Trust, or either entity
terminates the stapling arrangements.
The financial report of NSR for the year ended
30 June 2014 was approved on 24 August 2014,
in accordance with a resolution of the Board of
Directors of National Storage Holdings Limited.
The financial report of NSPT for the year ended
30 June 2014 was approved on 24 August 2014,
in accordance with a resolution of the Board of
Directors of The Trust Company (RE Services) Limited
as the responsible entity for NSPT.
The nature of the operations and principal activities
of the Consolidated Group are described in the
Directors’ Report.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(a) Basis of preparation
These general purpose financial statements have
been prepared in accordance with Australian
Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board and the
Corporations Act 2001. The financial statements have
been prepared on a historical cost basis, except
for selected non-current assets, financial assets and
financial liabilities for which the fair value basis of
accounting has been applied. Both National Storage
Holdings Limited and National Storage Property Trust
are for-profit entities for the purpose of preparing the
financial statements. The financial statements are
presented in Australian Dollars (AUD) and all values
are rounded to the nearest thousand dollars ($000)
unless otherwise stated.
The accounting policies applied by NSH Group
and the NSPT Group in these Financial Reports are
the same as the 30 June 2013 financial report for
NSPL and NSPT except for the accounting policies
impacted by the new or amended Accounting
Standards detailed in this note 2.
The Consolidated Group has elected to utilise
CO 05/642 and present the NSPT Group within the
financial statements of NSR.
In this note reference to “the group” or “group” is
used to refer to the Consolidated Group and to the
NSPT Group, unless otherwise indicated.
Deficiency of Net Current Assets NSH Group
As at 30 June 2014, the Consolidated Group had
an excess of current liabilities over current assets
of $8,339,000. The financial report has been
prepared on a going concern basis as the Directors
of NSH believe the Consolidated Group will
continue to generate operating cash flows to
meet liability obligations.
This assessment considers the two liabilities
noted below:
•
•
Deferred revenue: $4,952,000 - This represents
customer prepayments and as such no future
cash outflows are required for this liability.
Lease liability: $4,330,000 - Accounting standard
AASB 140 Investment Property requires the
finance lease liability to be split between current
73
National Storage Annual Report 2013/2014 and non-current. While the corresponding
asset is all non-current, the net impact on the
Consolidated Group is a deficiency of net current
assets. The directors believe the excess of the
total investment property over the finance lease
liability reflects the positive position in both the
immediate and long-term and sufficient cash
inflows from operations will occur to enable the
liabilities to be paid as and when due.
On this basis, the directors of NSH believe the
deficiency of the net current assets does not impact
the underlying going concern assumption applied in
preparing these financial statements.
NSPT Group
As at 30 June 2014, the NSPT Group has an excess
of current liabilities over current assets of $5,985,000.
This shortfall is due to the distribution payable
$9,306,000. To service the distribution payment, loans
receivable from the NSH Group will be called ahead
of the planned payment date of 26 August 2014.
On this basis, the Directors of the Responsible Entity
believe the deficiency of the net current assets does
not impact the underlying going concern assumption
applied in preparing the financial statements for NSPT.
(b) Compliance with IFRS
The consolidated financial statements of the
Consolidated Group and the NSPT Group comply
with International Financial Reporting Standards
(IFRS) as issued by the International Accounting
Standards Board.
For the year ended 30 June 2013, the NSPL group
prepared tier 1 General Purpose Financial statements
(GPFS) in accordance with AASB 101. The Company
is applying AASB 1 and has considered the potential
impact on its 1 July 2012 balances. There has been
no impact (other than the voluntary change in
policy, note 2(v)) in adopting AASB 1.
(c) Changes in accounting policy,
disclosures, standards and interpretations
The accounting policies adopted are consistent
with those of the previous financial year except as
detailed below.
New and amended standards adopted by the group
The group has applied the following standards and
amendments for first time for their annual reporting
period commencing 1 July 2013:
• AASB 10 Consolidated Financial Statements,
AASB 11 Joint Arrangements, AASB 12 Disclosure
of Interests in Other Entities, AASB 128 Investments
in Associates and Joint Ventures, AASB 127
Separate Financial Statements and AASB
2011–7 Amendments to Australian Accounting
Standards arising from the Consolidation
and Joint Arrangements Standards
• AASB 2012–10 Amendments to Australian
Accounting Standards—Transition Guidance
and other Amendments which provides
an exemption from the requirement to
disclose the impact of the change in
accounting policy on the current period
• AASB 13 Fair Value Measurement and
AASB 2011–8 Amendments to Australian
Accounting Standards arising from AASB 13
• AASB 119 Employee Benefits (September
2011) and AASB 2011–10 Amendments to
Australian Accounting Standards arising
from AASB 119 (September 2011)
• AASB 2012–5 Amendments to Australian
Accounting Standards arising from Annual
Improvements 2009-2011 Cycle, and
• AASB 2012–2 Amendments to Australian
Accounting Standards —Disclosures—Offsetting
Financial Assets and Financial Liabilities.
The nature and the impact of each new standard
and amendment is described below:
The revisions to AASB 11, AASB 13 and AASB 119
were adopted. The adoption of these policies
did not result in any adjustments to the amounts
recognised in the financial statements. The other
standards only affected the disclosures in the notes
to the financial statements.
AASB 10 Consolidated Financial Statements
AASB 10 supersedes AASB 127 Consolidated and
Separate Financial Statements (AASB 127) and
AASB Interpretation 112 Consolidation —Special
Purpose Entities. AASB 10 revises the definition of
control and provides extensive new guidance
on its application. These new requirements have
the potential to affect which of the Consolidated
Group’s investees are considered to be subsidiaries
and therefore to change the scope of consolidation.
The requirements on consolidation procedures,
accounting for changes in non-controlling interests
and accounting for loss of control of a subsidiary
are unchanged.
Notes to the Financial Statements
Management has reviewed its control assessments in
accordance with AASB 10 and has concluded that
there is no effect on the classification (as subsidiaries
or otherwise) of any of the Consolidated Group’s
or NSPT Group’s investees held during the period
covered by these financial statements.
AASB 11 Joint Arrangements
AASB 11 supersedes AASB 131 Interests in Joint Ventures
(AAS 131) and AASB Interpretation 113 Jointly
Controlled Entities– Non-Monetary–Contributions
by Venturers. AASB 11 revises the categories of joint
arrangement, and the criteria for classification into
the categories, with the objective of more closely
aligning the accounting with the investor’s rights
and obligations relating to the arrangement. In
addition, AASB 131’s option of using proportionate
consolidation for arrangements classified as jointly
controlled entities under that Standard has been
eliminated. AASB 11 now requires the use of the
equity method for arrangements classified as joint
ventures (as for investments in associates).
The Consolidated Group’s and the NSPT Group’s
only joint arrangement within the scope of AASB 11
is an investment in Southern Cross Storage Group,
which is accounted for as a joint venture using the
equity method.
AASB 12 Disclosure of Interests in Other Entities
AASB 12 sets out the requirements for disclosures
relating to an entity’s interests in subsidiaries, joint
arrangements, associates and structured entities. The
requirements in AASB 12 are more comprehensive
than the previously existing disclosure requirements
for subsidiaries. For example, where a subsidiary is
controlled with less than a majority of voting rights.
Neither the NSH Group nor the NSPT Group have any
subsidiaries with material non-controlling interests.
While the Consolidated Group includes the NSPT
Group, owing to the stapling of their individual
securities, the NSPT Group equity is considered
as a non-controlling interest as the NSH Group
does not own the units in NSPT. The NSPT Group is
presented within these financial statements. There
are no unconsolidated structured entities. AASB 12
disclosures are provided in notes 12–13.
AASB 13 Fair Value Measurement
AASB 13 establishes a single source of guidance
under Australian Accounting Standards for all fair
value measurements. AASB 13 does not change
when an entity is required to use fair value, but
rather provides guidance on how to measure fair
value under Australian Accounting Standards. AASB
13 defines fair value as an exit price. As a result of
the guidance in AASB 13, the Consolidated Group
and the NSPT Group re-assessed their policies for
measuring fair values, in particular, their valuation
inputs such as non-performance risk for fair value
measurement of liabilities. AASB 13 also requires
additional disclosures.
Application of AASB 13 has not materially impacted
the fair value measurements of the Consolidated
Group or the NSPT Group. Additional disclosures
where required, are provided in the individual notes
relating to the assets and liabilities whose fair values
were determined. Fair value hierarchy are provided
in notes 9.8 and 10.7.
AASB 101 Presentation of Items of Other
Comprehensive Income – Amendments to AASB 101
The amendments to AASB 101 introduce a grouping
of items presented in Other Comprehensive Income
(“OCI”). Items that will be reclassified (‘recycled’)
to profit or loss at a future point in time (e.g., net loss
or gain on available for sale (AFS) financial assets)
have to be presented separately from items that
will not be reclassified (e.g., revaluation of land and
buildings). The amendments affect presentation only
and have no impact on the Consolidated Group’s and
the NSPT Group’s financial position or performance.
AASB 119 Employee Benefits (Revised 2011)
The Consolidated Group applied AASB 119 (Revised
2011) retrospectively in the current period in
accordance with the transitional provisions set out
in the revised standard. The application has not
resulted in any restatement of comparative amounts.
AASB 119 (revised2011) does not affect the NSPT
Group as it does not have any employees.
The Consolidated Group and NSPT Group have
elected to apply AASB 2013-3 Amendments to AASB
136 – Recoverable Amount Disclosures for Non-
Financial Assets, which had a small impact on the
impairment disclosures.
Accounting Standards and Interpretations issued but
not yet effective.
The Consolidated Group and NSPT Group have not
elected to apply any other pronouncements before
their operative date in the annual reporting period
beginning 1 July 2013 except as disclosed above.
New Australian Accounting Standards and
Interpretations have been published that are not
compulsory for the 30 June 2014 reporting period.
The Consolidated Group’s and the NSPT Group’s
assessment of the impact of the new standards and
interpretations that may have affected the financial
report, had these standards been early adopted, are
set out below.
75
National Storage Annual Report 2013/2014 AASB 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
AASB 9 Financial Instruments addresses the
classification, measurement and derecognition
of financial assets and financial liabilities. Since
December 2013, it also sets out new rules for hedge
accounting. The standard is not applicable until 1
January 2018 but is available for early adoption.
The new rules for hedge accounting should make it
easier to apply hedge accounting going forward.
The new standard also introduces expanded
disclosure requirements and changes in presentation.
The group has not yet assessed how its own hedging
arrangements would be affected by the new rules,
and it has not yet decided whether to adopt any
parts of AASB 9 early. In order to apply the new
hedging rules, the group would have to adopt AASB
9 and the consequential amendments to AASB 7 and
AASB 139 in their entirety.
In May 2014, the IASB issued IFRS 15 Revenue from
Contracts with Customers, which replaces IAS 11
Construction Contracts, IAS 18 Revenue and related
Interpretations (IFRIC 13 Customer Loyalty Programmes,
IFRIC 15 Agreements for the Construction of Real
Estate, IFRIC 18 Transfers of Assets from Customers
and SIC-31 Revenue—Barter Transactions Involving
Advertising Services). The group is currently
evaluating the impact of the new standard.
The Group does not believe that there will be a
material financial impact once the following accounting
standards and interpretations are adopted:
Reference
AASB 2012–3
Title
Amendments to Australian Accounting
Standards – Offsetting Financial Assets and
Financial Liabilities
Interpretation 21
Levies
AASB 1055
AASB 2013–4
AASB 2013–5
AASB 2013–7
AASB 1031
AASB 14
Amendments to
IAS 16 and IAS 38
Budgetary Reporting
Amendments to Australian Accounting
Standards – Novation of Derivatives and
Continuation of Hedge Accounting [AASB 139]
Amendments to Australian Accounting
Standards – Investment Entities [AASB 1,
AASB 3, AASB 7, AASB 10, AASB 12, AASB 107,
AASB 112, AASB 124, AASB 127, AASB 132,
AASB 134 & AASB 139]
Amendments to AASB 1038 arising from
AASB 10 in relation to Consolidation and
Interests of Policyholders [AASB 1038]
Materiality
Regulatory deferral accounts
Clarification of Acceptable Methods of
Depreciation and Amortisation (Amendments
to IAS 16 and IAS 38)
Application date
of standard
Application date
for Group
1 January 2014
1 July 2014
1 January 2014
1 July 2014
1 July 2014
1 July 2014
1 January 2014
1 July 2014
1 January 2014
1 July 2014
1 January 2014
1 July 2014
1 January 2014
1 July 2014
1 January 2016
1 July 2016
1 January 2016
1 July 2016
Notes to the Financial Statements
(d) Basis of consolidation
The Financial Report of NSR as at and for the year
ended 30 June 2014 comprises the consolidated
financial statements of the NSH Group and the NSPT
Group.
The consolidated financial statements of NSPT as at
and for the year ended 30 June 2014 comprises the
consolidated financial statements of the NSPT Group.
The consolidated financial statements for NSR
are prepared on the basis that National Storage
Holdings Limited was the acquirer of the National
Storage Property Trust. The non-controlling interest
is attributable to stapled securityholders presented
separately in the statement of profit or loss, the
statement of other comprehensive income and
within equity in the statement of financial position,
separately from parent shareholders’ equity.
Accordingly, NSPT Group’s net result after tax from 19
December 2013 to 30 June 2014 and its contributed
equity, reserves and retained earnings at 30 June 2014
is attributed to non-controlling interest in the NSH
Group consolidated financial report to 30 June 2014.
The group treats transactions with non-controlling
interests that do not result in a loss of control as
transactions with equity owners of the group. A
change in ownership interest results in an adjustment
between the carrying amounts of the controlling
and non-controlling interests to reflect their relative
interests in the subsidiary. Any difference between
the amount of the adjustment to non-controlling
interests and any consideration paid or received
is recognised in a separate reserve within equity
attributable to owners of the parent entity.
Associates
Associates are all entities over which the group
has significant influence but not control or joint
control. This is generally the case where the group
holds between 20% and 50% of the voting rights.
Investments in associates are accounted for using
the equity method of accounting (see below),
after initially being recognised at cost. Neither the
Consolidated Group nor the NSPT Group have any
associates as at 30 June 2014.
Subsidiaries
Joint arrangements
Subsidiaries are all entities (including structured
entities) over which the group has control. The group
controls an entity when the group is exposed to, or
has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns
through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on
which control is transferred to the group. They are
deconsolidated from the date that control ceases.
The acquisition method of accounting is used to
account for business combinations by the group (see
note 2 (g)).
Intercompany transactions, balances and unrealised
gains on transactions between group entities are
eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an
impairment of the transferred asset. Accounting
policies of subsidiaries have been changed where
necessary to ensure consistency with the policies
adopted by the group.
Non-controlling interests in the results and equity of
subsidiaries are shown separately in the consolidated
statement of profit or loss, statement of other
comprehensive income, consolidated statement of
changes in equity and consolidated statement of
financial position respectively.
Under AASB 11 Joint Arrangements investments
in joint arrangements are classified as either joint
operations or joint ventures. The classification
depends on the contractual rights and obligations
of each investor, rather than the legal structure
of the joint arrangement. NSPT has a joint venture
that is recognised in both the NSPT Group and
the Consolidated Group. Interests in joint ventures
are accounted for using the equity method (see
below), after initially being recognised at cost in the
consolidated statement of financial position.
Equity method
Under the equity method, the investment in an
associate or a joint venture is initially recognised
at cost. The carrying amount of the investment
is adjusted to recognise changes in the group’s
share of net assets of the associate or joint venture
since the acquisition date. Goodwill relating to the
associate or joint venture is included in the carrying
amount of the investment and is neither amortised
nor individually tested for impairment.
The statement of profit or loss reflects the group’s
share of the results of operations of the associate or
joint venture. Any change in other comprehensive
income of those investees is presented as part of the
group’s other comprehensive income. In addition,
when there has been a change recognised directly
77
National Storage Annual Report 2013/2014 Rental and storage revenue
Revenue from the provision of storage space
is recognised less any amount contractually
refundable to customers over the term of the
general agreement. In the NSPT Group rental
income from investment properties is recognised
on a straight-line basis over the lease terms and is
included in revenue in the statement of profit or
loss due to its operating nature.
Sale of goods
Revenue from the sale of goods is recognised when
the significant risks and rewards of ownership of the
goods have passed to the buyer, usually on delivery
of the goods.
Interest income
Interest income is recognised using the effective
interest method. When a receivable is impaired,
the group reduces the carrying amount to its
recoverable amount, being the estimated future
cash flow discounted at the original effective interest
rate of the instrument, and continues unwinding
the discount as interest income. Interest income
on impaired loans is recognised using the original
effective interest rate.
(f) Income tax
NSPT Group — Trust income tax
Under current Australian income tax legislation trusts
within the NSPT Group are not liable to Australian
income tax provided securityholders are presently
entitled to the taxable income of the trusts and the
trusts generally distribute their taxable income.
Consolidated Group
The Consolidated Group comprises taxable and non-
taxable entities. A liability for current and deferred
tax and tax expense is only recognised in respect of
taxable entities that are subject to income tax and
potential capital gains tax as detailed below.
Income tax
Current and deferred tax is recognised in profit or
loss, except to the extent that it relates to items
recognised in other comprehensive income
or directly in equity. In this case, the tax is also
recognised in other comprehensive income or
directly in equity, respectively.
in the equity of the associate or joint venture,
the group recognises its share of any changes,
when applicable, in the statement of changes in
equity. Unrealised gains and losses resulting from
transactions between the group and the associate
or joint venture are eliminated to the extent of the
interest in the associate or joint venture.
The aggregate of the group’s share of profit or loss
of associates and joint ventures is shown on the face
of the statement of profit or loss outside operating
profit and represents profit or loss after tax and non-
controlling interests in the subsidiaries of associates or
joint ventures.
The financial statements of the associate or joint
venture are prepared for the same reporting period
as the group. When necessary, adjustments are
made to bring the accounting policies in line with
those of the group.
After application of the equity method, the group
determines whether it is necessary to recognise an
impairment loss on its investment in its associate or
joint venture. At each reporting date, the group
determines whether there is objective evidence
that the investment in the associate or joint venture
is impaired. If there is such evidence, the group
calculates the amount of impairment as the
difference between the recoverable amount of the
associate or joint venture and its carrying value, then
recognises the loss as ‘Share of profit of an associate
and a joint venture’ in the statement of profit or loss.
Upon loss of significant influence over an associate
or joint control over the joint venture, the group
measures and recognises any retained investment
at its fair value. Any difference between the carrying
amount of the associate or joint venture upon loss
of significant influence or joint control and the fair
value of the retained investment and proceeds from
disposal is recognised in profit or loss.
(e) Revenue recognition
Revenue is recognised to the extent that it is
probable that the economic benefits will flow to the
group and the revenue can be reliably measured,
regardless of when the payment is being made.
Revenue is measured at the fair value of the
consideration received or receivable, taking into
account contractually defined terms of payment
and excluding taxes or duty. The group assesses its
revenue arrangements against specific criteria to
determine if it is acting as principal or agent. The
group has concluded that it is acting as a principal
in all of its revenue arrangements. The specific
recognition criteria described below must also be
met before revenue is recognised.
Notes to the Financial Statements
Current income tax – NSH Group
The income tax expense or revenue for the period
is the tax payable on the current period’s taxable
income based on the applicable income tax rate
for each jurisdiction adjusted by changes in deferred
tax assets and liabilities attributable to temporary
differences and to unused tax losses.
The current income tax charge is calculated on
the basis of the tax laws enacted or substantively
enacted at the end of the reporting period in
Australia. Management periodically evaluates
positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to
interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be
paid to the ATO.
Deferred tax – NSH Group
Deferred income tax is provided in full, using the
liability method, on temporary differences arising
between the tax bases of assets and liabilities and
their carrying amounts in the consolidated financial
statements. However, deferred tax liabilities are not
recognised if they arise from the initial recognition of
goodwill. Deferred income tax is also not accounted
for if it arises from initial recognition of an asset
or liability in a transaction other than a business
combination that at the time of the transaction
affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially
enacted by the end of the reporting period and
are expected to apply when the related deferred
income tax asset is realised or the deferred income
tax liability is settled.
The deferred tax liabilities in relation to freehold
investment property that is measured at fair value is
determined assuming the property will be recovered
entirely through sale.
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only
if it is probable that future taxable amounts will be
available to utilise those temporary differences
and losses.
Deferred tax liabilities and assets are not recognised
for temporary differences between the carrying
amount and tax bases of investments in foreign
operations where the company is able to control the
timing of the reversal of the temporary differences
and it is probable that the differences will not reverse
in the foreseeable future.
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to offset current
tax assets and liabilities and when the deferred tax
balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset where
the entity has a legally enforceable right to offset
and intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
Tax consolidation legislation
National Storage Holdings Limited and its wholly-
owned Australian controlled entities have
implemented the tax consolidation legislation. As a
consequence, these entities are taxed as a single
entity and the deferred tax assets and liabilities of
these entities are set off in the consolidated financial
statements. Accounting for the tax consolidation
legislation is only relevant for the individual financial
statements of the parent entity (head entity) in the
tax consolidated group, but not for the consolidated
financial statements. Explanations of how the parent
entity accounts for the tax consolidation legislation
are included in note 22.
(g) Business combinations
The acquisition method of accounting is used to
account for all business combinations, regardless
of whether equity instruments or other assets are
acquired. The consideration transferred for the
acquisition of a subsidiary comprises the
• fair values of the assets transferred
• liabilities incurred
• equity interests issued by the group
• fair value of any asset or liability resulting from
a contingent consideration arrangement, and
• fair value of any pre-existing equity interest
in the subsidiary.
Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business
combination are, with limited exceptions, measured
initially at their fair values at the acquisition date.
The group recognises any non-controlling interest in
the acquired entity on an acquisition-by-acquisition
basis either at fair value or at the non-controlling
interest’s proportionate share of the acquired entity’s
net identifiable assets. Acquisition-related costs are
expensed as incurred.
79
National Storage Annual Report 2013/2014 The excess of the:
• consideration transferred,
• amount of any non-controlling interest
in the acquired entity, and
• acquisition-date fair value of any previous
equity interest in the acquired entity
over the fair value of the net identifiable assets
acquired is recorded as goodwill. If those amounts are
less than the fair value of the net identifiable assets of
the subsidiary acquired, the difference is recognised
directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration
is deferred, the amounts payable in the future are
discounted to their present value as at the date
of exchange. The discount rate used is the entity’s
incremental borrowing rate, being the rate at which
a similar borrowing could be obtained from an
independent financier under comparable terms and
conditions. Contingent consideration is classified
either as equity or a financial liability. Amounts
classified as a financial liability are subsequently
remeasured to fair value with changes in fair value
recognised in profit or loss.
If the business combination is achieved in stages,
the acquisition date carrying value of the acquirer’s
previously held equity interest in the acquire is
remeasured to fair value at the acquisition date. Any
gains or losses arising from such remeasurement are
recognised in profit or loss.
(h) Leases
The Consolidated Group leases properties which are
classified as investment properties (refer note 10.3).
The Consolidated Group also leases various items
of plant and equipment. The NSPT Group does not
have any finance leases for investment properties or
property plant and equipment.
Leased investment properties
Leases of investment property, where the group
as lessee has substantially all the risks and rewards
of ownership, are classified as finance leases and
recognised as leasehold investment properties.
Leasehold investment property finance leases are
capitalised at the lease’s inception at the fair value
of the leased property. The corresponding rental
obligations, net of finance charges, are included
in other short-term and long-term payables. Each
lease payment is allocated between the liability
and finance cost. The finance cost is charged
to the profit or loss over the lease period so as to
produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
The investment properties acquired under finance
leases are carried at fair value. Changes in value are
presented in profit or loss. (See note 10.3 for further
information on investment properties.)
Property, plant and equipment
Leases of property, plant and equipment where
the group, as lessee, has substantially all the risks
and rewards of ownership are classified as finance
leases (note 9.7). Finance leases are capitalised
at the lease’s inception at the fair value of the
leased property or, if lower, the present value of the
minimum lease payments. The corresponding rental
obligations, net of finance charges, are included
in other short-term and long-term payables. Each
lease payment is allocated between the liability
and finance cost. The finance cost is charged to the
profit or loss over the lease period so as to produce
a constant periodic rate of interest on the remaining
balance of the liability for each period. The property,
plant and equipment acquired under finance leases
is depreciated over the asset’s useful life or over the
shorter of the asset’s useful life and the lease term if
there is no reasonable certainty that the group will
obtain ownership at the end of the lease term.
Operating leases
Leases in which a significant portion of the risks and
rewards of ownership are not transferred to the
group as lessee are classified as operating leases
(note 19). Payments made under operating leases
(net of any incentives received from the lessor) are
charged to profit or loss on a straight-line basis over
the period of the lease.
NSPT Group as lessor
Lease income from operating leases where the
group is a lessor is recognised in income less any
amount contractually refundable to customers over
the term of the general agreement. (See revenue
policy note 2 (e)).
(i) Impairment of assets
Goodwill and intangible assets that have an
indefinite useful life are not subject to amortisation
and are tested annually for impairment, or more
frequently if events or changes in circumstances
indicate that they might be impaired. Other assets
are tested for impairment whenever events or
changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s
fair value less costs of disposal and value in use. For
Notes to the Financial Statements
the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are
separately identifiable cash inflows which are largely
independent of the cash inflows from other assets
or groups of assets (cash-generating units). Non-
financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the
impairment at the end of each reporting period.
(j) Cash and cash equivalents
Cash and cash equivalents in the statement of
financial position comprise cash at bank and on
hand and short-term deposits with an original
maturity of three months or less that are readily
convertible to known amounts of cash and which
are subject to an insignificant risk of change in value.
For the purposes of the statement of cash flows,
cash and cash equivalents consist of cash and cash
equivalents as defined above.
(k) Trade receivables
Trade receivables are recognised initially at fair
value and subsequently measured at amortised cost
using the effective interest method, less provision
for impairment. (See note 9.2 for further information
about the group’s accounting for trade receivables
and note 16 for a description of the group’s
impairment policies.)
(l) Inventories
Inventories are valued at the lower of cost and net
realisable value. Costs are assigned on a first-in first-
out basis.
Net realisable value is the estimated selling price in
the ordinary course of business, less estimated costs
of completion and the estimated costs necessary to
make the sale.
(m) Investments and other financial assets
Classification
The group classifies its financial assets in the
following categories:
initial recognition and, in the case of assets classified
as held-to-maturity, re-evaluates this designation
at the end of each reporting period. See note 9 for
details about each type of financial asset.
Reclassification
The group may choose to reclassify a non-derivative
trading financial asset out of the held for trading
category if the financial asset is no longer held for the
purpose of selling it in the near term. Financial assets
other than loans and receivables are permitted to
be reclassified out of the held for trading category
only in rare circumstances arising from a single event
that is unusual and highly unlikely to recur in the near
term. In addition, the group may choose to reclassify
financial assets that would meet the definition of
loans and receivables out of the held for trading or
available-for-sale categories if the group has the
intention and ability to hold these financial assets for
the foreseeable future or until maturity at the date
of reclassification.
Reclassifications are made at fair value as of the
reclassification date. Fair value becomes the
new cost or amortised cost as applicable, and
no reversals of fair value gains or losses recorded
before reclassification date are subsequently made.
Effective interest rates for financial assets reclassified
to loans and receivables and held-to-maturity
categories are determined at the reclassification
date. Further increases in estimates of cash flows
adjust effective interest rates prospectively.
Recognition and derecognition
Regular way purchases and sales of financial assets
are recognised on trade-date, the date on which the
group commits to purchase or sell the asset. Financial
assets are derecognised when the rights to receive
cash flows from the financial assets have expired or
have been transferred and the group has transferred
substantially all the risks and rewards of ownership.
When securities classified as available-for-sale
are sold, the accumulated fair value adjustments
recognised in other comprehensive income are
reclassified to profit or loss as gains and losses from
investment securities.
• financial assets at fair value through profit or loss,
Measurement
• loans and receivables,
• held-to-maturity investments, and
• available-for-sale financial assets.
The classification depends on the purpose for which
the investments were acquired. Management
determines the classification of its investments at
At initial recognition, the group measures a
financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss,
transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of
financial assets carried at fair value through profit or
loss are expensed in profit or loss when incurred.
81
National Storage Annual Report 2013/2014 Loans and receivables and held-to-maturity
investments are subsequently carried at amortised
cost using the effective interest method.
Available-for-sale financial assets and financial assets
at fair value through profit or loss are subsequently
carried at fair value. Gains or losses arising from
changes in the fair value of the ‘financial assets
at fair value through profit or loss’ category are
presented in profit or loss within other income or
other expenses in the period in which they arise.
Dividend income from financial assets at fair value
through profit or loss is recognised in profit or loss as
part of revenue from continuing operations when
the group’s right to receive payments is established.
Interest income from these financial assets is included
in the net gains/(losses).
Details on how the fair value of financial instruments
is determined are disclosed in note 9.8.
Impairment
The group assesses at the end of each reporting
period whether there is objective evidence that a
financial asset or group of financial assets is impaired.
A financial asset or a group of financial assets is
impaired and impairment losses are incurred only if
there is objective evidence of impairment as a result
of one or more events that occurred after the initial
recognition of the asset (a ‘loss event’) and that loss
event (or events) has an impact on the estimated
future cash flows of the financial asset or group of
financial assets that can be reliably estimated. In the
case of equity investments classified as available-
for-sale, a significant or prolonged decline in the fair
value of the security below its cost is considered an
indicator that the assets are impaired.
Assets carried at amortised cost
For loans and receivables and held to maturity
investments, the amount of the loss is measured as
the difference between the asset’s carrying amount
and the present value of estimated future cash
flows (excluding future credit losses that have not
been incurred) discounted at the financial asset’s
original effective interest rate. The carrying amount
of the asset is reduced and the amount of the loss
is recognised in profit or loss. If a loan or held-to-
maturity investment has a variable interest rate, the
discount rate for measuring any impairment loss is the
current effective interest rate determined under the
contract. As a practical expedient, the group may
measure impairment on the basis of an instrument’s
fair value using an observable market price.
If, in a subsequent period, the amount of the
impairment loss decreases and the decrease
can be related objectively to an event occurring
after the impairment was recognised (such as an
improvement in the debtor’s credit rating), the
reversal of the previously recognised impairment loss
is recognised in profit or loss.
Impairment testing of trade receivables is described
in note 16.
Assets classified as available for sale
If there is objective evidence of impairment for
available-for-sale financial assets, the cumulative
loss – measured as the difference between the
acquisition cost and the current fair value, less any
impairment loss on that financial asset previously
recognised in profit or loss – is removed from equity
and recognised in profit or loss.
Impairment losses on equity instruments that were
recognised in profit or loss are not reversed through
profit or loss in a subsequent period.
If the fair value of a debt instrument classified as
available-for-sale increases in a subsequent period
and the increase can be objectively related to
an event occurring after the impairment loss was
recognised in profit or loss, the impairment loss is
reversed through profit or loss.
(n) Derivatives and hedging activities
Derivatives are initially recognised at fair value on
the date a derivative contract is entered into and
are subsequently remeasured to their fair value at
the end of each reporting period. The accounting
for subsequent changes in fair value depends on
whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being
hedged. The group designates certain derivatives as
either:
• hedges of the fair value of recognised assets or
liabilities or a firm commitment (fair value hedges)
• hedges of a particular risk associated with the
cash flows of recognised assets and liabilities and
• highly probable forecast transactions
(cash flow hedges), or
• hedges of a net investment in a foreign
operation (net investment hedges).
The group documents at the inception of the
hedging transaction the relationship between
hedging instruments and hedged items, as well
as its risk management objective and strategy for
undertaking various hedge transactions. The group
also documents its assessment, both at hedge
inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions
Notes to the Financial Statements
have been and will continue to be highly effective
in offsetting changes in fair values or cash flows of
hedged items.
The fair values of various derivative financial
instruments used for hedging purposes are disclosed
in note 9.8. Movements in the hedging reserve in
equity are shown in note 15. The full fair value of
a hedging derivative is classified as a non-current
asset or liability when the remaining maturity of the
hedged item is more than 12 months; it is classified
as a current asset or liability when the remaining
maturity of the hedged item is less than 12 months.
Trading derivatives are classified as a current asset
or liability.
Fair value hedge
Changes in the fair value of derivatives that are
designated and qualify as fair value hedges are
recorded in profit or loss, together with any changes
in the fair value of the hedged asset or liability that
are attributable to the hedged risk. The gain or loss
relating to the effective portion of interest rate swaps
hedging fixed rate borrowings is recognised in profit
or loss within finance costs, together with changes
in the fair value of the hedged fixed rate borrowings
attributable to interest rate risk. The gain or loss
relating to the ineffective portion is recognised in
profit or loss within other income or other expenses.
If the hedge no longer meets the criteria for hedge
accounting, the adjustment to the carrying amount
of a hedged item for which the effective interest
method is used is amortised to profit or loss over the
period to maturity using a recalculated effective
interest rate.
Cash flow hedge
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash
flow hedges is recognised in other comprehensive
income and accumulated in reserves in equity.
The gain or loss relating to the ineffective portion is
recognised immediately in profit or loss within other
income or other expenses.
Amounts accumulated in equity are reclassified to
profit or loss in the periods when the hedged item
affects profit or loss (for instance when the forecast
sale that is hedged takes place). The gain or loss
relating to the effective portion of interest rate swaps
hedging variable rate borrowings is recognised in
profit or loss within ‘finance costs’. However, when
the forecast transaction that is hedged results in the
recognition of a non-financial asset (for example,
inventory or fixed assets) the gains and losses
previously deferred in equity are reclassified from
equity and included in the initial measurement of
the cost of the asset. The deferred amounts are
ultimately recognised in profit or loss as cost of goods
sold in the case of inventory, or as depreciation or
impairment in the case of fixed assets.
When a hedging instrument expires or is sold or
terminated, or when a hedge no longer meets the
criteria for hedge accounting, any cumulative gain
or loss existing in equity at that time remains in equity
and is recognised when the forecast transaction
is ultimately recognised in profit or loss. When a
forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported in
equity is immediately reclassified to profit or loss.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for
hedge accounting. Changes in the fair value of any
derivative instrument that does not qualify for hedge
accounting are recognised immediately in profit or loss
and are included in other income or other expenses.
(o) Property, plant and equipment
The NSPT Group does not have property, plant
and equipment. The term “the group” in this note
therefore applies to the Consolidated Group, and in
particular the NSH Group.
Property, plant and equipment is stated at
historical cost less depreciation. Historical cost
includes expenditure that is directly attributable
to the acquisition of the items. Subsequent costs
are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits
associated with the item will flow to the group and
the cost of the item can be measured reliably. The
carrying amount of any component accounted for
as a separate asset is derecognised when replaced.
All other repairs and maintenance are charged to
profit or loss during the reporting period in which they
are incurred.
Increases in the carrying amounts arising on
revaluation of land and buildings are recognised,
net of tax, in other comprehensive income and
accumulated in reserves in shareholders’ equity. To
the extent that the increase reverses a decrease
previously recognised in profit or loss, the increase is
first recognised in profit or loss.
Decreases that reverse previous increases of
the same asset are first recognised in other
comprehensive income to the extent of the
remaining surplus attributable to the asset; all other
decreases are charged to profit or loss. Each year,
the difference between depreciation based on the
83
National Storage Annual Report 2013/2014 a staggered basis every 3 years unless the underlying
financing requires a more frequent valuation cycle.
For properties subject to an independent valuation
report the finance department of NSH verifies all
major inputs to the valuation and reviews the results
with the independent valuer.
Investment properties are de-recognised either
when they have been disposed of or when they
are permanently withdrawn from use and no future
economic benefit is expected from their disposal.
The difference between the net disposal proceeds
and the carrying amount of the asset is recognised
in the statement of profit or loss in the period of
de-recognition.
Transfers are made to or from investment property
only when there is a change in use. For a transfer
from investment property to owner-occupied
property, the deemed cost for subsequent
accounting is the fair value at the date of change
in use. If owner-occupied property becomes an
investment property, the Group accounts for such
property in accordance with the policy stated under
property, plant and equipment up to the date of
change in use.
Leasehold investment properties
The NSH Group, as lessee, has properties under
operating leases that, in accordance with AASB
140 Investment Property, qualify for treatment as
investment properties. Under this treatment, for each
property, the present value of the minimum lease
payments is determined and carried as a lease
liability as if it were a finance lease and the fair value
of the lease to the NSH Group is recorded at fair
value each period as investment property under an
operating lease.
Gains or losses arising from changes in the fair values
of investment properties are included in profit or
loss in the period in which they arise, including the
corresponding tax effect. Fair values are determined
based on an annual evaluation performed by an
independent valuer or by directors’ valuation. Lease
payments on these leases are allocated between
the principal component of the leases liability and
interest expense so as to achieve a constant rate
of interest on the remaining balance of the liability.
Interest expense is recognised in finance costs
in the consolidated statements of profit and loss
and interest paid is presented within consolidated
statements of cash flows.
revalued carrying amount of the asset charged to
profit or loss and depreciation based on the asset’s
original cost, net of tax, is reclassified from the
property, plant and equipment revaluation surplus to
retained earnings.
Depreciation
Depreciation is calculated using the straight-line
method to allocate their cost or revalued amounts,
net of their residual values, over their estimated
useful lives or, in the case of leasehold improvements
and certain leased plant and equipment, the shorter
lease term as follows::
• Leasehold improvements
15 years
• Plant and equipment
2.5 – 20 years
Each asset’s residual value and useful life is reviewed,
and adjusted if appropriate, at the end of each
reporting period.
An asset’s carrying amount is written down
immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated
recoverable amount (note 2(i).
Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These
are included in profit or loss. When revalued assets
are sold, it is group policy to transfer any amounts
included in other reserves in respect of those assets
to retained earnings.
(p) Investment properties
Freehold investment properties
Investment properties are measured initially at
cost, including transaction costs. Subsequent to
initial recognition, investment properties are stated
at fair value, which reflects market conditions at
the reporting date. Gains or losses arising from
changes in the fair values of investment properties
are included in profit or loss in the period in which
they arise, including the corresponding tax effect.
Investment properties are carried at fair value as
determined by a combination of independent
valuations and Director valuations. The independent
valuations are performed by m3property, an
accredited independent valuer. The Directors of NSH
review and discuss the valuations with the CFO of
NSH Group. The Director valuations are completed
by NSH Group Board on behalf of the Responsible
Entity for Freehold Properties. The valuations are
determined using the same techniques and similar
estimates to those used by the independent valuer.
Investment properties are independently valued on
Notes to the Financial Statements
(q) Intangible assets
Goodwill
Goodwill is measured as described in note 2(g).
Goodwill on acquisitions of subsidiaries is included
in intangible assets. Goodwill is not amortised but it
is tested for impairment annually or more frequently
if events or changes in circumstances indicate
that it might be impaired, and is carried at cost less
accumulated impairment losses. Gains and losses on
the disposal of an entity include the carrying amount
of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for
the purpose of impairment testing. The allocation is
made to those cash-generating units or groups of
cash-generating units that are expected to benefit
from the business combination in which the goodwill
arose.
IT software
Costs incurred in developing products or systems and
costs incurred in acquiring software and licences
that will contribute to future period financial benefits
through revenue generation and/or cost reduction
are capitalised to software and systems. Costs
capitalised include external direct costs of materials
and service, employee costs and an appropriate
portion of relevant overheads.
IT development costs include only those costs directly
attributable to the development phase and are
only recognised following completion of technical
feasibility and where the group has an intention and
ability to use the asset.
IT software is amortised over a period of five years,
unless events or changes in circumstances indicate
that it might be impaired in which case it is are
amortised over an appropriate shorter period.
(r) Trade and other payables
These amounts represent liabilities for goods and
services provided to the group prior to the end
of financial year which are unpaid. The amounts
are unsecured and are usually paid within 30 days
of recognition. Trade and other payables are
presented as current liabilities unless payment is not
due within 12 months after the reporting period.
They are recognised initially at their fair value and
subsequently measured at amortised cost using the
effective interest method.
Payables to related parties are carried at the principal
amount. No interest is charged on these payables.
(s) Borrowings
Borrowings are initially recognised at fair value,
net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction
costs) and the redemption amount is recognised
in profit or loss over the period of the borrowings
using the effective interest method. Fees paid on
the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn
down. In this case, the fee is deferred until the draw
down occurs. To the extent there is no evidence that
it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment
for liquidity services and amortised over the period of
the facility to which it relates.
Borrowings are removed from the balance sheet when
the obligation specified in the contract is discharged,
cancelled or expired. The difference between the
carrying amount of a financial liability that has been
extinguished or transferred to another party and the
consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in
profit or loss as other income or finance costs.
Where the terms of a financial liability are
renegotiated and the entity issues equity instruments
to a creditor to extinguish all or part of the liability
(debt for equity swap), a gain or loss is recognised
in profit or loss, which is measured as the difference
between the carrying amount of the financial liability
and the fair value of the equity instruments issued.
Borrowings are classified as current liabilities unless
the group has an unconditional right to defer
settlement of the liability for at least 12 months after
the reporting period.
(t) Borrowing costs
Borrowing costs are recognised as an expense when
incurred unless they relate to a qualifying asset or to
upfront borrowing establishment and arrangement
costs, which are deferred and amortised as an
expense over the life of the facility. Borrowing costs
incurred for the construction of any qualifying asset
are capitalised during the period of time that is
required to complete and prepare the asset for its
intended use or sale.
85
National Storage Annual Report 2013/2014 (u) Provisions
Provisions for legal claims and make good
obligations are recognised when the group has a
present legal or constructive obligation as a result
of past events, it is probable that an outflow of
resources will be required to settle the obligation and
the amount can be reliably estimated. Provisions are
not recognised for future operating losses.
Where there are a number of similar obligations,
the likelihood that an outflow will be required in
settlement is determined by considering the class
of obligations as a whole. A provision is recognised
even if the likelihood of an outflow with respect
to any one item included in the same class of
obligations may be small.
Provisions are measured at the present value of
management’s best estimate of the expenditure
required to settle the present obligation at the end
of the reporting period. The discount rate used to
determine the present value is a pre-tax rate that
reflects current market assessments of the time value
of money and the risks specific to the liability. The
increase in the provision due to the passage of time
is recognised as interest expense.
Neither the Consolidated Group nor the NSPT Group
have any provision for legal claims. In accordance
with a lease agreement, the Consolidated Group
must restore the leased premises in the Hornsby
centre to their original condition upon expiration
of the lease. Accordingly, a provision has been
recognised for the obligation to remove leasehold
improvements from the leased premises (note 10.6).
(v) Employee benefits
The NSPT Group does not have any employees.
Therefore this note applies only to the Consolidated
Group and where the term “group” is used in this
note, it applies only to the Consolidated Group.
Short-term obligations
Liabilities for wages and salaries, including non-
monetary benefits and accumulating sick leave
and annual leave that are expected to be settled
wholly within 12 months after the end of the period in
which the employees render the related service are
recognised in respect of employees’ services up to
the end of the reporting period and are measured at
the amounts expected to be paid when the liabilities
are settled. The liability for accumulating sick leave
is recognised in the provision for employee benefits.
All other short-term employee benefit obligations are
presented as payables.
Notes to the Financial Statements
Other long-term employee benefits obligations
The liabilities for long service leave are not expected
to be settled wholly within 12 months after the end
of the period in which the employees render the
related service. They are therefore recognised in the
provision for employee benefits and measured as the
present value of expected future payments to be
made in respect of services provided by employees
up to the end of the reporting period using the
projected unit credit method. Consideration is
given to expected future wage and salary levels,
experience of employee departures and periods of
service. Expected future payments are discounted
using market yields at the end of the reporting period
of government bonds with terms and currencies
that match, as closely as possible, the estimated
future cash outflows. Remeasurements as a result of
experience adjustments and changes in actuarial
assumptions are recognised in profit or loss.
The obligations are presented as current liabilities
in the balance sheet if the entity does not have an
unconditional right to defer settlement for at least
twelve months after the reporting period, regardless
of when the actual settlement is expected to occur.
Retirement benefit obligations
All employees of the group can direct the group to
make contributions to a defined contribution plan of
their choice. Contributions to defined contribution
superannuation funds are recognised as an expense
as they become payable. Prepaid contributions are
recognised as an asset to the extent that a cash refund
or a reduction in the future payments is available.
(w) Contributed equity
Issued and paid up capital is recognised at the
fair value of the consideration received by the
Consolidated Group and the NSPT Group. Stapled
securities are classified as equity. Incremental costs
directly attributable to the issue of securities are
shown in equity as a deduction, net of tax, from
the proceeds.
(x) Cash dividend and non-cash distribution
to securityholders
The Consolidated Group and the NSPT Group recognise
a liability to make cash or non-cash distributions to
equity holders when the distribution is authorised and
the distribution is no longer at the discretion of the
Company or the Responsible Entity. A corresponding
amount is recognised directly in equity.
(aa) Rounding of amounts
Non-cash distributions are measured at the fair
value of the assets to be distributed with fair value
re-measurement recognised directly in equity.
Any difference between the carrying amount of the
liability and the carrying amount of the assets distributed
is recognised in the statement of profit or loss.
The Company and NSPT are of a kind referred to in
Class Order 98/100, issued by the Australian Securities
and Investments Commission, relating to the ‘rounding
off’ of amounts in the financial statements. Amounts
in the financial statements have been rounded off
in accordance with that Class Order to the nearest
thousand dollars, or in certain cases, the nearest dollar.
(y) Earnings per stapled security (EPSS)
Basic earnings is calculated as net profit attributable
to stapled securityholders, adjusted to exclude
costs of servicing equity (other than distributions)
divided by the weighted average number of stapled
securities on issue during the period under review.
Diluted EPSS is calculated as net profit attributable to
stapled securityholders, adjusted for:
• costs of servicing equity (other than distributions)
• the after tax effect of dividends and interest
associated with dilutive potential stapled securities
that have been recognised as expenses
• other non-discretionary changes in revenues
or expenses during the period that would result
from the dilution of potential stapled securities
divided by the weighted average number of stapled
securities and dilutive potential stapled securities,
adjusted for any bonus element.
(z) Goods and services tax (GST)
Revenues, expenses and assets are recognised net
of the amount of associated GST, unless the GST
incurred is not recoverable from the taxation authority.
In this case it is recognised as part of the cost of
acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of
the amount of GST receivable or payable. The net
amount of GST recoverable from, or payable to, the
taxation authority is included with other receivables
or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST
components of cash flows arising from investing or
financing activities which are recoverable from, or
payable to the taxation authority, are presented as
operating cash flows.
(bb) Parent entity financial information
The financial information for the parent entities,
National Storage Holdings Limited (“NSH”) and
National Storage Property Trust (“NSPT”), disclosed
in note 22 has been prepared on the same basis as
the consolidated financial statements, except as set
out below.
Investments in subsidiaries
Investments in subsidiaries are accounted for at cost
in the financial statements of NSH and NSPT.
Tax consolidation legislation
NSH and its wholly-owned entities have implemented
the tax consolidation legislation.
The head entity, NSH, and the controlled entities that
are in the tax consolidated group, account for their
own current and deferred tax amounts. These tax
amounts are measured as if each entity in the tax
consolidated group continues to be a stand-alone
tax payer in its own right.
In addition to its own current and deferred tax
amounts, NSH also recognises the current tax
liabilities (or assets) and the deferred tax assets
arising from unused tax losses and unused tax
credits assumed from controlled entities in the tax
consolidated group.
The entities have also entered into a tax funding
agreement under which the wholly-owned
entities fully compensate NSH for any current tax
payable assumed and are compensated by NSH
for any current tax receivable and deferred tax
assets relating to unused tax losses or unused tax
credits that are transferred to NSH under the tax
consolidation legislation. The funding amounts are
determined by reference to the amounts recognised
in the wholly-owned entities’ financial statements.
The amounts receivable/payable under the tax
funding agreement are due upon receipt of the
funding advice from the head entity, which is
issued as soon as practicable after the end of each
financial year. The head entity may also require
payment of interim funding amounts to assist with its
obligations to pay tax installments.
87
National Storage Annual Report 2013/2014 Assets or liabilities arising under tax funding
agreements with the tax consolidated entities are
recognised as current amounts receivable from or
payable to other entities in the Consolidated Group.
Any difference between the amounts assumed
and amounts receivable or payable under the
tax funding agreement are recognised as a
contribution to (or distribution from) wholly-owned
tax consolidated entities.
(cc) Fair value measurement
The Consolidated Group and the NSPT Group
measure financial instruments, such as, derivatives,
and non-financial assets such as investment
properties, at fair value at each balance sheet date.
Also, fair values of financial instruments measured at
amortised cost are disclosed in note 9.
Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date. The fair value measurement is
based on the presumption that the transaction to sell
the asset or transfer the liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most
advantageous market for the asset or liability
The principal or the most advantageous market must
be accessible to by the group.
The fair value of an asset or a liability is measured using
the assumptions that market participants would use
when pricing the asset or liability, assuming that market
participants act in their economic best interest.
A fair value measurement of a non-financial asset
takes into account a market participant’s ability to
generate economic benefits by using the asset in its
highest and best use or by selling it to another market
participant that would use the asset in its highest and
best use.
The group uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data is available to measure fair value,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
All assets and liabilities for which fair value is
measured or disclosed in the financial statements are
categorised within the fair value hierarchy, described
as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in
active markets for identical assets or liabilities
• Level 2 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is directly or indirectly observable
• Level 3 — Valuation techniques for which
the lowest level input that is significant to the
fair value measurement is unobservable
For assets and liabilities that are recognised in
the financial statements on a recurring basis, the
group determines whether transfers have occurred
between levels in the hierarchy by re-assessing
categorisation (based on the lowest level input that
is significant to the fair value measurement as a
whole) at the end of each reporting period.
For further details on fair value refer to notes 9.8
and 10.7.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS,
ESTIMATES AND ASSUMPTIONS
The preparation of the Consolidated Group’s and
the NSPT Group’s consolidated financial statements
requires management to make judgements,
estimates and assumptions that affect the reported
amounts of revenues, expenses, assets and
liabilities, and the accompanying disclosures, and
the disclosure of contingent assets and liabilities.
Uncertainty about these assumptions and estimates
could result in outcomes that require a material
adjustment to the carrying amount of the assets or
liabilities affected in future periods.
Judgements
In the process of applying the Consolidated
Group’s and the NSPT Group’s accounting policies,
management has made the following judgements,
which have the most significant effect on the
amounts recognised in the consolidated financial
statements:
Significant judgement:
classification of joint arrangement
The Consolidated Group and the NSPT Group have
a 10% interest in a joint arrangement known as The
Southern Cross Group which consists of Southern
Cross Operations Pty Ltd and Southern Cross Property
Trust. Joint control of the joint venture has been
contractually structured whereby the parties to the
agreement have agreed to an equal number of
director positions with equal votes and participation
in decision making. The Southern Cross Group is
considered a joint venture as it is a separate vehicle,
being the consolidation of Southern Cross Operations
Pty Ltd and Southern Cross Property Trust (refer to
note 13).
Notes to the Financial Statements
Estimates and assumptions
The key assumptions concerning the future and
other key sources of estimation uncertainty at the
reporting date, that have significant risk of causing
a material adjustment to the carrying amounts of
assets and liabilities within the next financial year, are
described below. The Consolidated Group and the
NSPT Group based their assumptions and estimates
on parameters available when the consolidated
financial statements for both groups were prepared.
Existing circumstances and assumptions about the
future developments, however, may change due to
market changes or circumstances arising beyond the
control of the Groups. Such changes are reflected in
the assumptions when they occur.
Fair value of contingent consideration
The fair value of the contingent consideration (note
9.3) has been determined using a discounted cash
flow analysis using expected future cash flows of
the Consolidated Group. The valuation requires
management of NSH to make certain assumptions
about unobservable inputs to the valuation model.
Revaluation of investment properties
carried at fair value
Investment properties are held for lease to customers
wanting self-storage facilities. They are carried at fair
value. Changes in fair value are presented in profit or
loss under fair value adjustments. Information about
the valuation of investment properties is provided in
note 10.7.
Impairment of non-financial assets – intangibles
(goodwill)
An impairment exists when the carrying value of
an asset or cash-generating unit (CGU) exceeds
its recoverable amount, which is the higher of its
fair value less costs to sell and its value in use. The
fair value less costs to sell calculation is based on
available data from binding sales transactions,
conducted at arm’s length, for similar assets or
observable market prices less incremental costs for
disposing of the asset. The value in use calculation is
based on a discounted cash flow model. The cash
flows are derived from the budget for the next five
years and do not include restructuring activities that
the Consolidated Group is not yet committed to
or significant future investments that will enhance
the performance of the CGU being tested. The
recoverable amount is most sensitive to the discount
rate used for the discounted cash flow model as
well as the expected future cash-inflows and the
growth rate used for extrapolation purposes. The
key assumptions used to determine the recoverable
amount for the different CGUs, including a sensitivity
analysis, are disclosed and further explained in
note 10.4.
Deferred income tax
Deferred tax assets are recognised by the NSH Group
for unused tax losses to the extent that it is probable
that taxable profit will be available against which
the losses can be utilised. Significant management
judgement is required to determine the amount of
deferred tax assets that can be recognised, based
upon the likely timing and the level of future taxable
profits together with future tax planning strategies.
4. SEGMENT INFORMATION
The Consolidated Group has identified its operating
segments based on the internal reporting that is
reviewed and used by the Consolidated Group’s
chief decision makers, being the Directors of National
Storage Holdings Limited.
The Consolidated Group operates wholly within one
business and geographic segment being the operation
and management of storage centres in Australia.
The operating results presented in the statements
of profit or loss represent the same segment
information as reported to the Chief Executive
Officer and the Chief Operating Officer of National
Storage Holdings Limited.
The Consolidated Group does not have any
individual customer which represents greater than
10% of total revenue.
89
National Storage Annual Report 2013/2014 Notes
7
Notes
10.2
10.4
5. OTHER REVENUE
Other revenue
Interest revenue
Transaction facilitation fees
Coupon fee (pre-stapling)
Management fees
Proceeds from sale of storage centres
Other revenue
Total other revenue
6. EXPENSES AND OTHER INCOME
Depreciation and amortisation
Depreciation of non-current assets
Amortisation of intangible assets
Other operational expenses
Advertising and marketing
Bank charges
Electricity
Insurance
Communications costs
Other
Total other operational expenses
Net loss from sale of non-current assets
Disposal of property, plant and equipment
Employee benefits expense
Included in salaries and employee benefits expense
in profit or loss
Wages and salaries
Post-employment benefits
Other employee costs
Total employee benefits expense
Consolidated Group
NSPT Group
2014
$'000
2013
$'000
2014
$'000
2013
$'000
37
24
1,333
1,147
-
1,016
3,557
316
131
2,818
163
2,410
195
6,033
104
130
-
-
-
-
77
181
-
-
-
-
-
130
Consolidated Group
NSPT Group
2014
$'000
2013
$'000
2014
$'000
2013
$'000
223
77
300
567
317
973
631
452
244
75
319
597
289
894
405
182
2,803
5,743
2,414
4,781
92
306
5,538
3,441
573
721
346
688
6,832
4,475
-
-
-
-
-
-
41
-
252
293
-
-
-
-
-
-
-
-
-
-
-
-
-
-
240
240
-
-
-
-
-
-
Minimum lease payments recognised as an operating
lease expense
148
-
Notes to the Financial Statements
In 2013 a management fee was paid to SSC.
SSC recovered their rental costs through this
management fee. Therefore there are no
comparative minimum lease payments for 2013.
Fair value adjustments
Investment property – loss/(gain)
Contingent consideration at fair value
through profit or loss – loss/(gain)
7. FINANCE INCOME AND EXPENSES
Finance income
Bank interest
Interest income from related parties
Total finance income
Finance costs
Interest on borrowings
Related party interest**
Finance charges on finance leases
Net gain on financial instruments
at fair value through profit or loss*
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
2014
$'000
2013
$'000
10.3
9.8
2,307
2,096
15,348
(32,141)
-
1,924
(468)
-
4,403
15,348
(30,217)
(468)
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
2014
$'000
5
37
-
37
1,352
-
31
285
316
-
-
8,563
13,217
9.6
-
-
9,915
13,217
51
53
104
5,310
1,285
-
(1,164)
5,431
2013
$'000
130
-
130
11,882
-
-
(1,588)
10,294
*Net gain on financial instruments at fair value through profit or loss relates to an interest rate swap that was not designated as a hedging instrument. This interest rate
swap was closed out during the year ended 30 June 2014.
**The related party interest relates to pre-stapling interest costs.
91
National Storage Annual Report 2013/2014
8. INCOME TAX
Under current tax legislation, NSPT is not liable to pay income tax provided its taxable income and taxable
realised gains are fully distributed to unit holders. Therefore, this note applies only to the Consolidated Group
and does not apply to the NSPT Group.
Income tax expense/(benefit)
Current tax
Deferred tax
Numerical reconciliation of income tax expense to prima facie tax payable
Profit/(Loss) from continuing operations
Deduct profit/(loss) before tax from Trust
Accounting profit/(loss) before income tax
Tax at the Australian tax rate of 30% (2013 – 30%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Goodwill impairment
Prepayments
Prior year unders/overs
Other
Income tax expense/(benefit)
Amounts recognised directly in equity
Deferred tax related to items recognised in other comprehensive income during the year:
Net loss on revaluation of cash flow hedge
Income tax charged to other comprehensive income
Deferred tax (revenue)/expense included in income tax expense comprises:
Decrease/(increase) in deferred tax assets
Decrease/(increase) in deferred tax assets acquired
(Decrease)/increase in deferred tax liabilities
Consolidated Group
2014
$'000
2013
$'000
-
(7,160)
(7,160)
8,405
32,687
(24,282)
(7,285)
-
45
(42)
122
(7,160)
-
524
524
(8)
-
(8)
(2)
135
11
321
59
524
-
-
-
-
2,472
155
(9,787)
(7,160)
1,128
-
(604)
524
Notes to the Financial Statements
Deferred tax assets and liabilities
Deferred tax liability
The balance comprises temporary differences attributable to:
Prepayments
Accrued income
Formation Expenses
Revaluations of investment properties to fair value
Coupon fee receivable
Deferred tax assets
The balance comprises temporary differences attributable to:
Lease liability
Employee benefits
Accrued expenses
Deferred revenue
Carry forward losses
Difference between book and tax depreciation
Formation expenses
Lease incentive
Provision for doubtful debts
Provision for make-good
Consolidated Group
2014
$'000
2013
$'000
3
-
-
51,310
-
51,313
48
14
10
60,398
630
61,100
47,935
50,978
433
46
-
2,364
-
234
-
10
64
209
10
215
1,069
939
34
39
-
66
Deferred tax assets expected to be recovered after more than 12 months
51,086
53,559
Net deferred tax liability
227
7,541
The Consolidated Group offsets tax assets and liabilities if, and only, if it has a legally enforceable right to set
off current tax assets and current tax liabilities and the deferred tax asset and deferred tax liabilities relate to
income taxes levied by the same tax authority.
The Consolidated Group has tax losses recognised as a deferred tax asset, which arose in Australia, of
$7,881,400 (2013: $3,563,847) that are available indefinitely for offsetting against future taxable profits of the
Consolidated Group.
Tax consolidation
National Storage Pty Ltd and its then wholly-owned controlled entities implemented the tax consolidation
legislation as of 1 July 2003. As a result of corporate reorganisation in December 2013, National Storage
Holdings Limited became the new head entity of the tax consolidation group. Members of the new tax
consolidation group include National Storage Ltd, National Storage (Operations) Pty Ltd, National Storage
Investments Pty Ltd and Wine-Ark Pty Ltd. Members of the tax consolidation group have entered into a
tax sharing agreement that provides for the allocation of income tax liabilities between the entities should
the head entity default on its tax payment obligations. No amounts have been recognised in the financial
statements in respect of this agreement on the basis that the possibility of default is remote. (See note 22 for
further details on the tax consolidation.)
93
National Storage Annual Report 2013/2014 9. FINANCIAL ASSETS AND FINANCIAL LIABILITIES
This note provides information about the Consolidated Group’s and the NSPT Group’s financial instruments
including:
• an overview of all financial instruments held by the both groups
• specific information about each type of financial instrument
• information about determining the fair value of the instruments, including
judgements and estimation uncertainty involved.
The Consolidated Group and the NSPT Group hold the following financial instruments:
Financial assets
At amortised cost
Cash and cash equivalents
Trade and other receivables
Other assets *
At fair value through profit or loss
Other assets *
Total financial assets
Financial liabilities
At amortised cost
Trade and other payables **
Borrowings
Finance leases
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
2014
$'000
2013
$'000
9.1
9.2
9.3
9.3
9.4
9.5
9.7
8,264
3,767
308
382
102
6,710
12,831
17,642
128
46
-
-
12,339
13,341
17,790
6,710
1,097
13,436
-
13,341
1,007
18,797
-
6,710
3,326
87,460
64,949
155,735
6,329
-
169,985
176,314
15,476
87,587
-
5,025
109,171
-
103,063
114,196
Derivative not designated as hedge – at fair value
through profit or loss
Other liabilities
9.6
-
Derivatives used for hedging – at fair value through
other comprehensive income
Other liabilities
Total financial liabilities
* excluding prepayments.
**excluding non-financial liabilities
-
-
-
1,796
393
-
9.6
393
156,128
176,314
103,456
115,992
Other liabilities includes a distribution payable of $9,306,090 that is not included in this table, and $1,681,000 for
NSPT in 2013.
Exposure to various risks associated with the financial instruments is discussed in note 16. The maximum
exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial asset
mentioned above.
Notes to the Financial Statements
9.1 CASH AND CASH EQUIVALENTS
Current assets
Cash on hand
Cash at bank
Consolidated Group
NSPT Group
2014
$'000
42
8,222
8,264
2013
$'000
2014
$'000
18
364
382
21
81
102
2013
$'000
-
6,710
6,710
The above figures reconcile to the amounts of cash shown in the statements of cash flows at the end of the
financial year.
Cash at banks earns interest at floating rates based on daily bank deposit rates.
Cash flow reconciliation of net profit after tax to net cash flows from operations
Consolidated Group
NSPT Group
2014
$'000
2013
$'000
2014
$'000
2013
$'000
Operating profit/(loss) after income tax
15,565
(532)
39,000
7,482
Adjust for non-cash items:
Rental income recognised on straight line basis
Depreciation
Amortisation of intangible asset
Amortisation on borrowing costs
Fair value adjustment to investment properties
Fair value adjustment of contingent consideration
Impairment – investment property
Impairment – intangible asset
Net (gain)/loss on financial instruments at fair value through
profit or loss
(Profit)/loss on disposal of plant and equipment
Share of profit of joint venture
Changes in operating assets and liabilities:
(Increase)/decrease in receivables
(Increase)/decrease in related party loan
(Increase)/decrease in inventories
(Increase)/decrease in investment properties
(Increase)/decrease in other assets
Increase/(decrease) in payables
Increase/(decrease) in deferred revenue
Increase/(decrease) in borrowings
Increase/(decrease) in deferred tax liabilities
Increase/(decrease) in other liabilities
Increase/(decrease) in provisions
-
223
77
-
2,307
2,096
-
(126)
-
100
(151)
(902)
(731)
(78)
(524)
1,041
646
(53)
(456)
(7,374)
-
783
-
244
75
-
-
-
-
-
15,348
(32,141)
-
-
450
-
(2,105)
1,924
-
-
-
-
-
(151)
(3,171)
(11,393)
-
(11)
-
232
(98)
832
-
523
-
228
-
-
(143)
212
2,220
-
-
-
(1,079)
-
611
-
-
1,276
143
-
(611)
-
(1,588)
-
-
-
-
-
-
(790)
-
-
-
2,173
-
-
Net cash provided by/(used in) operating activities
12,443
12,015
(1,551)
8,696
95
National Storage Annual Report 2013/2014
Non-cash investing and financing activities
On 24 October 2013 the Directors of National Storage Pty Ltd declared a final franked dividend for 2013
of $2,799 per share. This amount was offset against the loans owed by the former shareholders of National
Storage Pty Ltd. There were no other non-cash investing and financing activities.
9.2 TRADE AND OTHER RECEIVABLES
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
2014
$'000
2013
$'000
Current
Trade receivables
Provision for doubtful debts
Other receivables
Loans to related parties
Loans to former National Storage Pty Ltd shareholders
18
18
Non-current
Other receivables
697
(44)
653
2,041
1,073
-
565
-
565
2,459
3,087
5,598
-
-
-
827
16,815
-
3,767
11,709
17,642
220
1,122
-
Total current and non-current
3,987
12,831
17,642
Further information relating to related parties and key management personnel is set out in note 18.
Classification as trade and other receivables
Impairment of receivables
-
-
-
-
-
-
-
-
-
Trade receivables are amounts due from customers
for storage rental, goods sold or services performed
in the ordinary course of business. Loans and other
receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted
in an active market. If collection is expected in one
year or less they are classified as current assets. If not,
they are presented as non-current assets.
Other current receivables
In the NSPT Group, other receivables include
$818,000 clawback receivable upon the payment
of the distribution and $9,000 GST receivable. In the
Consolidated Group, other receivables includes
$890,000 clawback receivable, $453,000 GST
receivable, $300,000 design fee receivable, $84,000
commercial rent receivable and $314,000 sundry
receivables.
The provision for impairment (doubtful debts) of
receivables represents an estimate of trade debtors
that have become impaired as a result of an inability
to collect the amount of rent owing after customers
goods have been sold.
As at 30 June 2014 and 30 June 2013 the NSPT Group
trade receivables were not impaired and there was
no provision for impaired trade receivables.
At 30 June 2014, the Consolidated Group trade
receivables of an initial value of $44,000 (2013: Nil)
were impaired and fully provided for. See below for
the movements in the provision for impairment of
receivables.
Notes to the Financial Statements
At 1 July 2013
Charge for the year
Utilised
Unused amounts reversed
At 30 June 2014
Individually
impaired
$'000
Collectively
impaired
$'000
-
-
-
-
-
-
44
-
-
44
Total
$'000
-
44
-
-
44
The age of trade receivables that were past due but not impaired was as follows:
1 to 3 months
3 to 6 months
Over 6 months
Consolidated Group
NSPT Group
2014
$'000
588
62
47
697
2013
$'000
560
5
-
565
2014
$'000
2013
$'000
-
-
-
-
-
-
-
-
Amounts recognised in profit or loss
During the year, the following gains/(losses) were recognised in profit or loss in relation to impaired receivables:
Impairment losses
- individually impaired receivables
- movement for provision in impairment
Reversal of previous impairment losses
Consolidated Group
NSPT Group
2014
$'000
2013
$'000
2014
$'000
2013
$'000
-
44
-
-
-
-
-
-
-
-
-
-
The other classes within trade and other receivables do not contain impaired assets and are not past due.
Based on the credit history of these other classes, it is expected that these amounts will be received when due.
Fair values of trade and other receivables
Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same
as their fair value. For the non-current receivables, the fair values are also not significantly different to their
carrying amounts.
Refer to note 16 for more information on the Consolidated Group’s and NSPT Group’s risk management policy,
the credit quality of trade receivables and credit risk.
97
National Storage Annual Report 2013/2014
9.3 OTHER ASSETS
Current
Deposits
Contingent consideration at fair value through profit or loss
(FVTPL)
Prepayments
Total current other assets
Non-current
Prepayments
Total non-current other assets
Consolidated Group
NSPT Group
2014
$'000
2013
$'000
2014
$'000
2013
$'000
308
128
46
1,097
954
2,359
-
2,176
2,304
8
8
109
109
1,007
-
1,053
-
-
-
-
975
975
-
-
Total current and non-current
2,367
2,413
1,053
975
Contingent consideration at FVTPL
The Vendor Stapled Securities (refer note 14 (d)) are
subject to voluntary escrow and distribution “claw
back” arrangements based on the performance of
National Storage REIT with the following effects:
• if the EPSS of National Storage REIT is greater
than 8.75 cents for a 12 month period then
no distribution paid in relation to the Vendor
Stapled Securities will be “clawed back”.
• 100% of the distributions paid in relation
to the Vendor Stapled Securities for
the distribution period ending 30 June
2014 was “clawed back”; and
for subsequent distribution periods:
• if the earnings per stapled security (EPSS) of
National Storage REIT for a 12 month period
is less than or equal to 8.25 cents then all of
the distributions paid in relation to the Vendor
Stapled Securities will be “clawed back”;
• if the EPSS of National Storage REIT is greater than
8.25 cents and is less than or equal to 8.75 cents
for a 12 month period then a proportion of
the distributions paid in relation to the Vendor
Stapled Securities will be “clawed back”; and
The above arrangements will lapse and the Vendor
Stapled Securities will become fully transferable at
the earlier of:
• the EPSS of National Storage REIT for a 12 months
period being greater than 8.75 cents
for two consecutive testing periods;
• 3 years in respect of Vendor Stapled Securities
issued to non-executive NS Vendors; and
• 5 years in respect to Vendor Stapled Securities
issued to executive NS Vendors who will continue
as senior managers of National Storage REIT.
Refer to note 9.8 for more information on the
valuation of the contingent consideration.
Notes to the Financial Statements
9.4 TRADE AND OTHER PAYABLES
Current
Trade payables
Other payables and accruals
Related party payables
Deferred rent liability
Total trade and other payables
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
2014
$'000
18
1,032
2,248
46
-
1,067
1,447
3,815
-
21
678
14,777
-
3,326
6,329
15,476
2013
$'000
623
442
2,149
1,811
5,025
Further information relating to related parties is set out in note 18.
Trade payables are unsecured and are usually paid within 30 days of recognition.
The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to
their short-term nature.
9.5 BORROWINGS
Current
Bank finance facility
Total current borrowings
Non-current
Bank finance facility
Non-amortised borrowing costs
Total non-current borrowings
Total current and non-current
Consolidated Group
NSPT Group
2014
$'000
2013
$'000
2014
$'000
2013
$'000
-
-
87,916
(456)
87,460
87,460
-
-
-
-
-
-
-
-
109,171
109,171
87,916
(329)
87,587
-
-
-
87,587
109,171
Secured liabilities and assets pledged as security
National Australia Bank (NAB) – secured finance facility
The NSPT Group and the Consolidated Group have a $100,000,000 finance facility with National Australia Bank
(NAB). The facility is for a three year term and expires on 23 December 2016, at which time the principal is due.
The facility is a variable interest rate loan at BBSY plus a margin in the range of 1.50% and 4.10%, depending on
the gearing ratio. The facility is secured by a mortgage over certain of the Consolidated Group’s and the NSPT
Group’s freehold investment properties with a carrying value of $305,250,000, and the Consolidated Group’s
leasehold investment properties with a carrying value of $76,051,000. The loan is also secured by a negative
pledge that imposes certain restrictions on the pledging of assets for other security.
National Australia Bank (NAB) – secured overdraft facility
The NSPT Group and the Consolidated Group have a $3,000,000 bank overdraft facility, with NAB. The facility
was undrawn at balance date. The overdraft facility is secured by a mortgage over the Consolidated
Group’s and the NSPT Group’s freehold investment properties with a carrying value of $305,250,000, and
the Consolidated Group’s leasehold investment properties with a carrying value of $76,051,000.
99
National Storage Annual Report 2013/2014 Compliance with loan covenants
The Consolidated Group and the NSPT Group have complied with the financial covenants of their borrowing
facilities during the 2014 and 2013 reporting periods. (See note 17 for bank covenant details.)
Fair value
The fair value of borrowings approximates carrying value.
Details of the exposure to risk arising from current and non-current borrowings are set out in note 16.
9.6 OTHER LIABILITIES
Current
Distribution payable
Financial liabilities (derivatives)
Notes
17
Consolidated Group
NSPT Group
2014
$'000
2013
$'000
2014
$'000
9,306
-
9,306
9,306
-
9,306
2013
$'000
1,681
1,796
3,477
Non-current
Financial liabilities (derivatives)
9.8
393
Total other liabilities
9,699
393
-
9,699
3,477
-
-
-
-
-
At 30 June 2013, the NSPT Group had an interest rate
swap agreement in place with a notional amount of
$109,490,000 whereby the NSPT Group paid a fixed
rate of interest of 4.89% and received interest at a
variable rate equal to BBSW. The NSPT Group elected
not to account for this instrument as an effective
hedge; as such, the movement in fair value of
$1,164,000 (2013: $1,588,000) has been recognised in
finance costs. This interest rate swap was closed out
during the year ended 30 June 2014.
Derivatives are classified as held for trading and
accounted for at fair value through profit or loss
unless they are designated as hedges. They are
presented as current assets or liabilities if they are
expected to be settled within 12 months after the
end of the reporting period.
At 30 June 2014, the Consolidated Group and the
NSPT Group had an interest rate swap agreement in
place with a notional amount of $30,000,000 (2013:
$Nil) whereby the Consolidated Group and the
NSPT Group pay a fixed rate of interest of 3.42% and
receive interest at a variable rate equal to BBSY plus
a margin on the notional amount. The swap is being
used to hedge the exposure to changes in cash flows
arising from its secured variable interest rate loan
and has been designated as a cash flow hedge and
is recognised through other comprehensive income.
Notes to the Financial Statements
9.7 FINANCE LEASES
The NSPT Group does not have any finance lease liabilities.
The Consolidated Group has finance leases for investment properties and various items of plant and
machinery. These leases have terms of renewal but no purchase options. Renewals are at the option of the
specific entity that holds the lease. Future minimum lease payments under finance lease contracts together
with the present value of the net minimum lease payments are as follows:
Consolidated Group
Within one year
After one year but not more than five years
More than five years
Minimum lease payments
Future finance charges
Recognised as a liability/present
value of minimum lease payments
2014
2013
Minimum
payments
Present value
of payments
Minimum
payments
Present value
of payments
$'000
$'000
$'000
$'000
9,098
38,923
55,124
103,145
(38,196)
4,330
19,557
41,062
64,949
-
28,554
138,483
73,442
240,479
(70,494)
16,243
98,560
55,182
169,985
-
64,949
64,949
169,985
169,985
9.8 FINANCIAL INSTRUMENTS FAIR VALUE MEASUREMENT
Fair value hierarchy
This note explains the judgements and estimates made in determining the fair values of the financial
instruments, as detailed in notes 9.1 to 9.7 above, that are recognised and measured at fair value in the
financial statements. To provide an indication about the reliability of the inputs used in determining fair
value financial instruments are classified into the three levels prescribed under the accounting standards. An
explanation of each level follows underneath the table.
Notes
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Consolidated Group
At 30 June 2014
Financial assets
Derivative – contingent consideration
9.3
Total financial assets
Financial liabilities
Derivative used for hedging – Interest rate swap
9.6
Total financial liabilities
NSPT Group
At 30 June 2014
Financial assets
Derivative – contingent consideration
9.3
Total financial assets
Financial liabilities
Derivative used for hedging – Interest rate swap
9.6
Total financial liabilities
-
-
-
-
-
-
-
-
-
-
1,097
1,097
1,097
1,097
393
393
-
-
393
393
-
-
1,007
1,007
1,007
1,007
393
393
-
-
393
393
101
National Storage Annual Report 2013/2014
There were no transfers between levels of fair value
hierarchy during the year ended 30 June 2014.
The policy is to recognise transfers into and transfers
out of fair value hierarchy levels at the end of the
reporting period.
Level 1: The fair value of financial instruments traded
in active markets (such as publicly traded
derivatives, and trading and available-for-
sale securities) is based on quoted market
prices at the end of the reporting period. The
quoted market price used for any financial
assets held is the current bid price. These
instruments are included in Level 1.
Level 2: The fair value of financial instruments that are
not traded in an active market (for example,
over-the-counter derivatives) is determined
using valuation techniques which maximise
the use of observable market data and
rely as little as possible on entity-specific
estimates. If all significant inputs required to
fair value an instrument are observable, the
instrument is included in Level 2.
Level 3: If one or more of the significant inputs is
not based on observable market data, the
instrument is included in level 3.
Valuation techniques used to determine fair values
Specific fair valuation techniques used to determine
fair values include:
• The fair value of interest rate swaps is calculated
as the present value of the estimated future
cash flows based on observable yield curves.
• The fair value of the derivative contingent
consideration is calculated using a discounted
cash flow analysis using expected future
cash flows of the Consolidated Group.
The resulting fair value estimates for interest rate
swaps are included in Level 2. The fair value
estimates for the derivative contingent consideration
is included in level 3 where the fair value has been
determined based on present values and the
discount rate used was adjusted for counterparty or
own credit risk.
Fair value measurements using significant
unobservable inputs (Level 3)
The following table presents changes in level 3 for the
periods ended 30 June 2014.
Notes
Opening balance 1 July 2013
Derivative – contingent consideration initially recognised
in contributed equity
Distribution receivable (clawback)
Derivative – contingent consideration subsequently recognised
in profit or loss in fair value adjustments
6
Closing balance 30 June 2014
2014 Contingent Consideration
Consolidated Group
NSPT Group
$'000
-
4,083
(890)
(2,096)
1,097
$'000
-
3,749
(818)
(1,924)
1,007
Valuation inputs and relationships to fair value
Derivative financial asset – contingent consideration
As part of the purchase agreement with the previous
owners of National Storage Pty Ltd, a distribution
clawback was entered into.
The fair value of the contingent consideration
has been determined using a discounted cash
flow analysis using expected future cash flows of
the Consolidated Group. The valuation requires
management of NSH to make certain assumptions
about unobservable inputs to the model including
a discount rate of 8.5% and initial stapled net profit
after tax per the financial statements of $15,122,000.
A 2% change in the discount rate would not have
any material effect on the fair value. An increase of
2% in the stapled net profit after tax would decrease
fair value by $120,000. A decrease of 2% in the
stapled net profit after tax would increase fair value
by $305,000.
There were no significant inter-relationships between
unobservable inputs that materially affect fair values.
Notes to the Financial Statements
10. NON-FINANCIAL ASSETS AND LIABILITIES
This note provides information about the group’s non-financial assets and liabilities, including:
• specific information about each type of non-financial asset and non-financial liability
• inventories (note 10.1)
• property, plant and equipment (note 10.2)
• investment properties (note 10.3)
• intangible assets (note 10.4)
• deferred revenue (note 10.5)
• provisions (note 10.6)
The note also includes information about determining the fair value of the non-financial assets and liabilities,
including judgements and estimation uncertainty involved.
10.1 INVENTORIES
Finished goods – at cost
Total Inventories
Consolidated Group
NSPT Group
2014
$'000
258
258
2013
$'000
180
180
2014
$'000
-
-
2013
$'000
-
-
Inventories recognised as an expense during the year ended 30 June 2014 amounted to $548,000
(2013: $557,000). These were included in cost of packaging and other products sold.
10.2 PROPERTY, PLANT AND EQUIPMENT
At cost
Accumulated depreciation
Total property, plant and equipment
Consolidated Group
NSPT Group
2014
$'000
4,251
(2,804)
1,447
2013
$'000
3,542
(2,611)
931
2014
$'000
2013
$'000
-
-
-
-
-
-
Reconciliation of the carrying amounts for each class of property, plant and equipment at the beginning and
end of the current financial period are shown below:
Consolidated Group
NSPT Group
2014
$'000
2013
$'000
2014
$'000
2013
$'000
Plant and equipment
Carrying amount at beginning of the year
Additions
Disposals
Additions through acquisition of entities
Depreciation
Carrying amount at end of the year
931
509
(100)
330
(223)
1,447
1,460
340
(625)
-
(244)
931
-
-
-
-
-
-
-
-
-
-
-
-
103
National Storage Annual Report 2013/2014 Plant and equipment under finance lease arrangements included in the totals noted above are as follows:
Leasehold plant and equipment at cost
Accumulated depreciation
Carrying amount
Consolidated Group
NSPT Group
2014
$'000
48
(12)
36
2013
$'000
14
(5)
9
2014
$'000
2013
$'000
-
-
-
-
-
-
Refer to note 9.5 for information on non-current assets pledged as security.
10.3 INVESTMENT PROPERTIES
Investment properties at valuation
Leasehold investment properties
Freehold investment properties
Leasehold investment properties
Opening balance
Elimination through stapling
Fair value adjustment arising on stapling
Additions
Net loss from fair value adjustment
Closing balance
Freehold investment properties
Opening balance
Acquired through stapling
Fair value adjustment arising on stapling
Change in fair value of investment properties
Building improvements of investment properties
Property acquisitions
Reclassification of leased asset receivable
Closing balance
Notes
10.7
10.7
Consolidated Group
NSPT Group
2014
$'000
2013
$'000
2014
$'000
2013
$'000
76,051
305,250
381,301
201,328
-
201,328
-
305,250
305,250
-
198,810
198,810
201,328
205,441
-
-
11,235
(15,348)
201,328
-
-
-
-
-
-
-
-
-
-
-
-
(95,403)
(20,515)
-
(9,359)
76,051
-
203,003
20,515
7,052
524
74,156
-
305,250
-
-
-
-
-
-
-
-
198,810
184,342
-
20,515
11,626
143
74,156
-
305,250
-
-
468
-
143
13,857
198,810
Unrealised gains/(losses) for the period included
in profit or loss (recognised in fair value adjustments)
6
(2,307)
(15,348)
32,141
468
Notes to the Financial Statements
Adjustment upon stapling
Leasing arrangements
In December 2013 the National Storage REIT was
formed by the stapling of the shares in NSH and
the units in NSPT. In the 2013 financial year the NS
Group had leasehold investment properties where
the lessor/owner/landlord was NSPT. The effect of
stapling was that the Consolidated Group reclassified
these leasehold investment properties to freehold
investment properties residing within NSPT.
Upon stapling, a fair value adjustment of $20,515,000
was recognised to increase the value associated
with the property portfolio.
NSPT recognised a fair value adjustment of
$4,193,000 to reflect the fair value of its properties
prior to stapling; this is included within the $11,626,000
of fair value adjustments presented above.
Property acquisitions
The freehold property portfolio was increased in 2014
following the acquisition of the following properties:
Centre
Acquired
Artarmon, NSW
23 December 2013
Marion, SA
23 December 2013
28 May 2014
28 June 2014
30 June 2014
Townsville, QLD
Mulgrave, VIC
Moorabbin, VIC
Total
Significant estimate
$’000
38,493
1,667
17,838
7,452
8,706
74,156
Leasehold and freehold investment properties are
held for lease to customers wanting self-storage
facilities. They are carried at fair value. Changes in
fair value are presented in profit or loss under fair
value adjustments. Information about the valuation
of leasehold investment properties is provided in note
10.7 below.
The Consolidated Group leasehold and freehold
investment properties are largely leased to customers
under short-term lease with most rentals payable
monthly in advance. Most leases can be terminated
by either party giving not less than 7 days’ notice to
the other party.
The NSPT Group’s investment properties are leased
to entities within the NSH Group under long-term
operating leases with rentals payable monthly.
Minimum lease payments receivable on leases of
investment properties are as follows:
Minimum lease receivable
under non-cancellable finance
leases of investment properties
not recognised in the financial
statements are receivable as
follows:
Within one year
Later than one year but not later
than 5 years
Later than 5 years
NSPT Group
2014
$'000
2013
$'000
25,586
145,603
19,761
85,154
13,114
24,021
184,303
128,936
Contractual obligations
The Consolidated Group is required to restore the
leased premises in the Hornsby centre to their original
condition at the end of lease term. A provision
has been recognised for the present value of the
estimated expenditure required to remove any
leasehold improvements (refer to note 10.7).
Leasehold and freehold investment properties
pledged as security
Refer to note 9.5 for information on non-current
assets pledged as security.
105
National Storage Annual Report 2013/2014 10.4 INTANGIBLES
Consolidated Group
NSPT Group
Goodwill
Opening net book amount
Arising on stapling
Acquisition of entity
Impairment charge
Other
Closing net book amount
Software
Opening net book amount
Additions
Amortisation
Closing net book amount
Total
Opening net book amount
Arising on stapling
Acquisition of entity
Additions
Impairment charge
Amortisation
Other
Closing net book amount
Notes
11
11
6
2014
$'000
129
7,005
6,384
-
24
13,542
305
126
(77)
354
434
7,005
6,384
126
-
(77)
24
13,896
2013
$'000
579
-
-
(450)
-
129
375
5
(75)
305
954
-
-
5
(450)
(75)
-
434
2014
$'000
2013
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Software amortisation and useful life
Significant estimate
Software is an asset with an estimated limited useful
life of 5 year and is therefore amortised over 5 years.
The estimate of 5 years is based on the expected
technical obsolescence of the software. However,
the actual life may be shorter or longer than 5 years,
depending on technical innovations that occur in
the future.
combining the portfolios of the NSH Group and the
NSPT Group. The goodwill arising on the acquisition
of SSC is allocated to the listed group owing to
the transfer of the management functions and
associated revenues and expenses of this entity to
the Consolidated Group. SSC no longer generates its
own cash but provides a service to the listed group.
Impairment testing of goodwill
Goodwill arising on stapling ($7,005,000) and on
acquisition of entity (Strategic Storage Consulting Pty
Ltd (SSC)) ($6,384,000)
Goodwill arising on stapling and on the acquisition
of SSC have been allocated to the listed company
NSH. Management have determined that the
listed group is the appropriate cash generating unit
against which to allocate these intangible assets.
The goodwill arising on stapling is allocated to the
listed group (NSR) owing to the synergies arising from
The recoverable amount of the listed group has
been determined based on the fair value less costs
of disposal method using the fair value quoted on an
active market. As at 30 June 2014 NSR had 244,897,096
stapled securities quoted on the Australian Securities
Exchange (ASX) at $1.27 per security providing a
market capitalisation of $311,019,312. This amount is
in excess of the carrying amount of the Consolidated
Group’s net assets. Had the security price decreased
by 10% the market capitalisation would still be in
excess of the carrying amount.
Notes to the Financial Statements
Hornsby goodwill
Key assumptions used in value-in-use calculations
Goodwill acquired through business combinations
has been allocated to the Hornsby business
operation.
The calculation of fair value less cost of disposal
calculation for the Hornsby business unit is most
sensitive to the following assumptions:
The Consolidated Group performed an impairment
test at 30 June 2014. The recoverable amount of the
Hornsby CGU has been determined based on the fair
value less cost of disposal, using a calculation based
on the capitalisation of earnings methodology,
as utilised in the determination of valuation of
investment properties.
Primary Capitalisation Rate
Secondary Capitalisation Rate
20%
13%
Maximum sustainable occupancy 80%
A change of 3% in the primary and secondary
capitalisation rates did not have a material effect on
the fair value of the Hornsby CGU. A change of 5% in
the maximum sustainable occupancy did not have a
material effect on the fair value of the Hornsby CGU.
10.5 DEFERRED REVENUE
Deferred storage rent revenue
Prepaid coupon fee
Consolidated Group
NSPT Group
2014
$'000
4,952
-
4,952
2013
$'000
4,288
717
5,005
2014
$'000
2013
$'000
-
-
-
-
-
-
Deferred storage rent revenue is funds received in advance from customers for rental storage in future periods.
Once the period is past, and the service is deemed to be provided, it is recognised as revenue.
10.6 PROVISIONS
Consolidated Group
NSPT Group
Current
Annual leave
Long service leave
Non-current
Make good provision
Long service leave
Reconciliation of movement in make good provision
Opening balance
Additional provisions raised/(amortised) during the year
Amounts used
Closing balance
2014
$'000
707
362
1,069
214
374
588
221
(7)
-
214
2013
$'000
2014
$'000
2013
$'000
412
82
494
221
203
424
-
221
-
221
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
107
National Storage Annual Report 2013/2014 The Consolidated Group is required to restore
the leased premises in the Hornsby centre to their
original condition at the end of lease term. A
provision has been recognised for the present value
of the estimated expenditure required to remove
any leasehold improvements. These costs have
been capitalised as part of the cost of leasehold
improvements and are amortised over the shorter of
the term of the lease or the useful life of the assets.
10.7 NON-FINANCIAL ASSETS FAIR VALUE MEASUREMENT
This note explains the judgements and estimates made in determining the fair values of the non-financial
assets that are recognised and measured at fair value in the financial statements. To provide an indication
about the reliability of the inputs used in determining fair value, the group has classified its financial assets
and liabilities into the three levels prescribed under the accounting standards. An explanation of each level is
provided in note 9.8.
Notes
Level1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Consolidated Group
At 30 June 2014
Investment properties
Leasehold
Freehold
NSPT Group
At 30 June 2014
Investment properties
Leasehold
Freehold
10.3
10.3
10.3
10.3
-
-
-
-
-
-
-
-
-
-
-
-
76,051
305,250
381,301
76,051
305,250
381,301
-
305,250
305,250
-
305,250
305,250
Recognised fair value measurements
The Consolidated Group’s and the NSPT Group’s
policy is to recognise transfers into and transfers out
of fair value hierarchy levels as at the end of the
reporting period.
There were no transfers between levels 1 and 2 for
recurring fair value measurements during the year.
There were no transfers in and out of Level 3.
Fair value measurements using significant
unobservable inputs (Level 3)
Valuation techniques used to determine level 3 fair
values and valuation process
Investment properties, principally storage buildings,
are held for rental to customers requiring self-storage
facilities. They are carried at fair value. Changes in
fair values are presented in profit or loss as fair value
adjustments.
Investment properties are carried at fair value as
determined by a combination of independent
valuations and Director valuations. The independent
valuations are performed by m3property, an
accredited independent valuer. The Directors
review and discuss the valuations with the CFO of
NSH Group. The Director valuations are completed
by NSH Group Board on behalf of the Responsible
Entity for Freehold Properties. The valuations are
determined using the same techniques and similar
estimates to those used by the independent valuer.
Investment properties are independently valued on
a staggered basis every 3 years unless the underlying
financing requires a more frequent valuation cycle.
For properties subject to an independent valuation
report the finance department of NSH verifies all
major inputs to the valuation and reviews the results
with the independent valuer.
Notes to the Financial Statements
The table below details the percentage of the number of investment properties subject to internal and
external valuations during as at 30 June 2014:
Consolidated Group
NSPT Group
External valuation %
Internal valuation % External valuation %
Internal valuation %
Leasehold
Freehold
10%
19%
90%
81%
-
19%
-
81%
Valuation inputs and relationship to fair value
The tables and narrative below provide information on the significant unobservable inputs in Level 3 valuations.
In the table below freehold applies to both the Consolidated Group and to the NSPT Group. Leasehold applies
to only the Consolidated Group as the NSPT Group does not have any leasehold investment properties.
Description
Valuation technique
Significant unobservable inputs
Investment properties –
leasehold
Capitalisation
method
Investment properties –
freehold
Capitalisation
method
Capitalisation rate
Sustainable occupancy
Stabilised average EBIT
Capitalisation rate
Sustainable occupancy
Stabilised average EBIT
Primary
Secondary
Primary
Secondary
Range
10% to 40%
11% to 50%
75% to 93%
$405,038
9% to 11.6%
9.8% to 13.8%
65% to 94.5%
$980,526
Under the income capitalisation method, a property’s fair value is estimated based on the stabilised average
earnings before interest and tax (EBIT) generated by the property, which is divided by the capitalisation rate
(the investor’s required rate of return). The capitalisation rate is derived from recent sales of similar properties.
The capitalisation rate adopted reflects the inherent risk associated with the property. For example, if the lease
expiry profile of a particular property is short, the capitalisation rate is likely to be higher to reflect additional risk
to income. The higher capitalisation rate then reduces the valuation of the property.
The stabilised average EBIT is derived from a property’s revenues less property operating expenses adjusted
for items such as average lease up costs, long-term vacancy rates, forecast non-recoverable capital
expenditures, management fees, straight-line rents and other non-recurring items. Generally, an increase
in stabilised average EBIT will result in an increase in fair value of an investment property. An increase in the
vacancy rate will result in a reduction of the stabilised average EBIT.
Investment properties are valued on a highest and best use basis. The current use of all of the investment
properties (self-storage) is considered to be the highest and best use.
The following table presents the sensitivity analysis of fair value at 30 June 2014:
Leasehold
Freehold
Unobservable inputs
Capitalisation
rate
Primary
Secondary
Sustainable occupancy
Stabilised average EBIT
Increase /
(decrease) in input
1% / (1%)
2% / (2%)
5% / (5%)
5% / (5%)
Increase /
(decrease) in fair
value $’000
(360) / 770
(200) / 500
1,540 / (1,330)
760 / (450)
Increase /
(decrease) in input
1% / (1%)
2% / (2%)
5% / (5%)
5% / (5%)
Increase /
(decrease) in fair
value $’000
(22,330) / 27,460
(6,210) / 8,670
12,250 / (12,650)
11,180 / (11,490)
109
National Storage Annual Report 2013/2014
11. BUSINESS COMBINATIONS
Stapling of National Storage Holdings Limited and National Storage Property Trust
On 19 December 2013, the shares in NSH and the units in NSPT were stapled pursuant to a stapling deed.
Under AASB 3, it was deemed that NSH gained control over NSPT by way of stapling with no ownership.
The Consolidated Group has measured the non-controlling interest at fair value.
Assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of NSPT as at the date of acquisition were:
Fair value recognised on acquisition
$'000
50
137
203,003
203,190
(2,502)
(109,490)
(111,992)
91,198
(98,203)
7,005
-
As part of the reorganisation to facilitate the Initial
Public Offering and Listing on the ASX, specific
vendors entered into “claw back” arrangements if
certain performance hurdles are not achieved by
the Consolidated Group. If the performance hurdles
are not achieved, any distribution from NSPT or a
dividend from NSH will be clawed back from the
relevant securityholder.
The goodwill of $7,005,000 arises due to the
recognition of the stapling portfolio value of the NSPT
property. The portfolio value was determined by an
independent valuer. The goodwill was assessed for
impairment at 30 June 2014.
Assets
Cash at Bank
Prepayments
Investment properties – freehold
Liabilities
Trade and other payables
Bank Loan
Net identifiable assets at fair value
Non-controlling interests measured at fair value
Goodwill arising on acquisition
Purchase consideration transferred
The Consolidated Group has measured the non-
controlling interest at fair value with reference to the
underlying assets and liabilities of the statement of
financial position. The major component of assets
is investment properties which were subject to a
Director’s valuation at 19 December 2013 which
were supported by external valuations performed by
m3property. The bank loan was recognised at fair
market value at acquisition date.
Transaction costs of $165,000 were expensed during
the period and are included in other operational
expenses.
From the date of acquisition NSPT has contributed
revenue of $9,400,000 and net profit of $9,100,000
(excluding fair value adjustments) for the
Consolidated Group in the reporting period. If the
combination had taken place at the beginning
of the period, revenue from continued operations
would have been $20,630,000 and the profit from
continuing operations would have been $8,632,000
(excluding fair value adjustments).
Notes to the Financial Statements
Acquisition of Strategic Storage Consulting Pty Ltd
On 19 December 2013, the Consolidated Group acquired 100% of shares of Strategic Storage Consulting Pty Ltd.
Provisional assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of Strategic Storage Consulting Pty Ltd as at the date of
acquisition were:
Provisional fair value recognised on acquisition
Plant and equipment
Other receivables
Liabilities
Other payables
Net identifiable assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
Analysis of cash flows on acquisition
Cash paid
Transaction costs of the acquisition (expensed and included in other
operational expenses)
Net cash outflow on acquisition
$'000
282
2,284
2,566
(3,122)
(3,122)
(556)
6,384
5,828
5,828
33
5,861
None of the trade debtors were impaired and all
were collected in full.
The goodwill of $6,384,000 comprises the intangible
assets associated with the business, including but not
limited to reputation and operational procedures.
Fair values measured on a provisional basis
The acquired entity contributed revenues
of $1,553,000 and net loss of $101,000 to the
Consolidated Group for the period 19 December
2013 to 30 June 2014. If the acquisition had occurred
on 1 July 2013, consolidated revenue and profit for
the year ended 30 June 2014 would have been
$2,519,000 and net loss of $258,000 respectively.
The property plant and equipment, and goodwill
recognised upon acquisition of Strategic Storage
Consulting Pty Ltd have been measured on a
provisional basis. If new information obtained within
one year of the acquisition date about facts and
circumstances that existed at the acquisition date
identifies adjustments to the above amounts, or any
additional provisions that existed at the acquisition
date, then the accounting for the acquisition will
be revised.
Acquisition of NS APAC Trust
On 19 December 2013, the NSPT Group, and
consequently the Consolidated Group, acquired NS
APAC Trust.
111
National Storage Annual Report 2013/2014
Assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of NS APAC Trust as at the date of acquisition were:
Fair value recognised on acquisition
Investment in joint venture – (Southern Cross Storage Group)
Net identifiable assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
Analysis of cash flows on acquisition
Cash paid
Transaction costs of the acquisition (expensed and included in other
operational expenses)
Net cash outflow on acquisition
There was no goodwill arising on acquisition.
$'000
4,750
4,750
4,750
-
4,750
4,750
25
4,775
The acquired entity contributed net profit of $151,000 to the NSPT Group and the Consolidated Group for the
period 19 December 2013 to 30 June 2014. If the acquisition had occurred on 1 July 2013, consolidated profit
for the year ended 30 June 2014 would have been $239,064.
This acquisition of the joint venture is equity accounted under AASB 11 Joint Arrangements. Therefore only the
Consolidated Group’s and the NSPT Group’s share of net profit is recognised in the consolidated accounts
(see note 13 for further details).
12. INFORMATION RELATING TO SUBSIDIARIES
The holding entities
The ultimate holding company of the NSH Group is National Storage Holdings Limited. NSH was incorporated
on 1 November 2013. As at 30 June 2013, the holding company was National Storage Pty Ltd (refer note 1).
The holding entity of the NSPT Group is National Storage Property Trust.
These two entities are domiciled in Australia and through a stapling agreement are jointly quoted on the ASX
under the ticker NSR.
The consolidated financial statements of the NSH Group as at 30 June 2014 include:
Name of Controlled Entity
National Storage Pty Ltd
National Storage (Operations) Pty Ltd
National Storage Investments Pty Ltd
Wine Ark Pty Ltd
Strategic Storage Consulting Pty Ltd (1)
(1) Acquired on 19 December 2013.
Place of incorporation
% Equity interest
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
Notes to the Financial Statements
The consolidated financial statements of the NSPL Group as at 30 June 2013 include:
Name of Controlled Entity
Place of incorporation
% Equity interest
National Storage (Operations) Pty Ltd
National Storage (Properties) Pty Ltd
NS Victoria Pty Ltd
National Storage Investments Pty Ltd
Wine Ark Pty Ltd
Australia
Australia
Australia
Australia
Australia
The consolidated financial statements of the NSPT Group include:
Name of Controlled Entity
Place of domicile
NS APAC Trust
National Storage Investment Trust
National Storage Victoria Property Trust
Australia
Australia
Australia
100
100
100
100
100
2014
100%
100%
100%
% Equity interest
2013
-
100%
100%
Joint venture
The NSPT Group has a 10% interest in Southern Cross Storage Group (2013: 0%).
Summarised financial information
The tables below provide summarised financial
information for the Southern Cross Group joint
venture. The information disclosed reflects the
amounts presented in the financial statements of
the joint venture and not the Consolidated Group’s
or the NSPT Group’s share of those amounts. Where
necessary they have been amended to reflect
adjustments made by the entity when using the
equity method, including fair value adjustments and
modifications for differences in accounting policy.
13. INTEREST IN A JOINT VENTURE
On 19 December 2013 the NSPT Group (and as a
result the Consolidated Group) acquired a 10%
interest in Southern Cross Storage Group which
consists of Southern Cross Operations Pty Ltd and
Southern Cross Property Trust. The Southern Cross
Storage Group owns storage centres and businesses
operated under the National Storage brand and
is managed by NSH subsidiary National Storage
Operations Pty Ltd. Southern Cross Storage Group
entities are not listed on any public exchange.
The principle place of business of the joint venture
is Australia. The Consolidated Group’s and the
NSPT Group’s interest in the Southern Cross Group
is accounted for using the equity method in the
consolidated financial statements.
Significant judgement: classification of joint
arrangement
Joint control of the joint venture has been
contractually structured whereby the parties to the
agreement have agreed to an equal number of
director positions with equal votes and participation
in decision making. The Southern Cross Storage
Group is considered a joint venture as it is a separate
vehicle, being the consolidation of Southern Cross
Operations Pty Ltd and Southern Cross Property Trust.
113
National Storage Annual Report 2013/2014
Summarised statement of financial position
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current assets
Total assets
Current liabilities
Financial liabilities (excluding trade payables)
Other current liabilities
Total current liabilities
Non-current liabilities
Financial liabilities (excluding trade payables)
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Summarised statement of profit or loss for the year ended 30 June 2014
Revenue
Interest income
Depreciation and amortisation
Interest expense
Other expenses
Profit before tax
Income tax expense
Profit for the year from continuing operations
Less pre-acquisition profit
Profit attributable to the Consolidated and NSPT Group
Accounting policy alignment adjustment ***
Consolidated Group's and NSPT Group's share in % *
Reconciliation to carrying amounts
Opening investment in joint venture
Acquisition of joint venture
Contribution to investment during the period
Share of profit for the period **
Share of accounting policy alignment adjustment
Carrying amount
Dividends/distributions received from joint venture
2014
$'000
2,848
9,084
11,932
216,619
228,551
161
17,161
17,322
107,457
166
107,623
124,945
103,606
25,143
94
(4,032)
(7,039)
(11,251)
2,915
-
2,915
(1,561)
1,354
1,354
2,708
5.6%
-
4,750
176
76
75
5,077
-
* The NSPT Group and the Consolidated Group have an agreement with the joint venture that the profits of the joint venture will be distributed under certain
conditions. Under the terms of the Southern Cross Investors Agreement the payment of progressive operating returns are subject to a preference shares/units,
whereby certain hurdles have to be met before NS APAC will receive any payment. At the conclusion of the investment period NS APAC is entitled to returns on a
similar basis. The percentage share of profit is therefore not directly reflective of percentage of equity share.
** NSPT acquired NS APAC Trust on 19 December 2013.
*** Southern Cross measures investment properties under the cost method. An adjustment has been made to align this accounting policy with the Consolidated
Group’s and NSPT Group’s accounting policy which measures investment properties at fair value.
The joint venture had no contingent liabilities or capital commitments as at 30 June 2014 or 2013.
Notes to the Financial Statements
14. CONTRIBUTED EQUITY
Issued and Paid Up Capital
Ordinary shares
Units
Movements in securities
Opening balance 1 July 2012
- A Class ordinary shares
- Ordinary shares
- Units
Balance 30 June 2013
Restructure distribution
Public offering
Vendor issue
Less: Transaction costs associated with Public Offering
Contingent consideration
Balance 30 June 2014
(a) The A Class ordinary shares were converted into
ordinary shares on 19 December 2013. All shares
in the Company on issue from this date are
ordinary shares.
(b) The restructure distribution relates to the issue of
shares in NSH to existing eligible NSPT unitholders
as part of the initial restructure required to take
place in order to implement the stapling of the
NSH shares and NSPT units. The shares were issued
to provide an equivalent number of shares and
units for stapling. These stapled securities were
issued to existing share and unit holders prior to
the Public Offer. The restructure distribution did not
provide any additional capital.
(c) On 23 December 2013, $123,804,000 was raised
from the Public Offering of 126,329,260 stapled
securities at 98 cents each. Securityholders
received an equal number of shares in NSH and
units in NSPT.
(d) The owners of the National Storage Group who
sold 100% of their interest in National Storage
Group to NSH received 25,510,204 stapled
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
2014
$'000
2013
$'000
17,758
2,800
-
-
17,758
2,800
Number
of shares
1,000
1,000
-
2,000
$’000
1
2,799
-
191,499
191,499
Number
of units
-
-
-
93,055,632
2,800
93,055,632
93,055,632
-
-
126,329,260
16,860
126,331,260
25,510,204
(1,047)
25,510,204
244,897,096
18,613
244,897,096
-
-
(1,189)
334
-
-
(a)
(b)
(c)
(d)
(e)
-
89,322
89,322
$’000
-
-
89,322
89,322
-
106,944
(2,800)
193,466
(5,716)
3,749
244,897,096
17,758
244,897,096
191,499
securities as part payment. These securities are
subject to escrow arrangements and distribution
“claw back” based on the achievement of future
performance hurdles for National Storage REIT for
up to 3 years (with respect to securities issued to
non-executive vendors) and for up to 5 years (with
respect to securities issued to executive vendors).
Refer to note 9.3 for further details.
(e) The contingent consideration is the initial fair
value of the derivative financial asset recognised
in relation to the claw-back referred to in note
9.8 above. The fair value of the contingent
consideration has been determined using a
discounted cash flow analysis using expected
future cash flows of the Consolidated Group (see
note 9.8 for further details).
As at 30 June 2014 there were 244,897,096 stapled
securities on issue equivalent to the number of NSH
shares and NSPT units on issue at that date. The
issued units of NSPT are not owned by the Company
(NSH) and therefore are shown under non-controlling
interest in the statement of financial position.
115
National Storage Annual Report 2013/2014
Terms and Conditions of Contributed Equity
Stapled securities
A stapled security represents one share in NSH and
one unit in NSPT. Stapled securityholders have the
right to receive declared dividends from NSH and
distributions from NSPT and are entitled to one vote
per stapled security at securityholders’ meetings.
Holders of stapled securities can vote their shares
and units in accordance with the Corporations Act
2001, either in person or by proxy, at a meeting of
either NSH or NSPT (as the case may be). The stapled
securities have no par value.
In the event of the winding up of NSH and NSPT,
stapled securityholders have the right to participate
15. OTHER RESERVES
Cash flow hedge
Opening balance 1 July 2013
Revaluation – gross*
Closing balance 30 June 2014
in the proceeds from the sale of all surplus assets
in proportion to the number of and amounts paid
up on stapled securities held. Ordinary stapled
securityholders rank after all creditors in repayment
of capital.
Units
Each unit represents a right to an individual share in
the NSPT per the Constitution. There are no separate
classes of units and each unit has the same rights
attaching to it as all other units in the NSPT.
Security buy-back
There is no current on or off market buy-back.
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
-
-
-
-
-
-
2014
$'000
-
(393)
(393)
2013
$'000
-
-
-
* Gross revaluation excludes deferred tax as tax does not apply to the NSPT Group under current legislation.
The cash flow hedge is not included in the Consolidated Group as it is included in non-controlling interest in
the consolidated statement of financial position. This owing to the issued units of NSPT not being owned by
the Company (NSH) and therefore equity, including reserves, is shown under non-controlling interest in the
statement of financial position.
Cash flow hedge
The hedging reserve is used to record gains or losses on derivatives that are designated and qualify as cash
flow hedges and that are recognised in other comprehensive income, as described in note 2(n). Amounts are
reclassified to profit or loss when the associated hedged transaction affects profit or loss.
16. FINANCIAL RISK MANAGEMENT
This note explains the Consolidated Group’s and
NSPT Group’s exposure to financial risks and how
these risks could affect future financial performance.
Risk management for the NSH Group and the NSPT
Group is carried out by the NSH Board and the key
management personnel of NSH.
The Consolidated Group’s and the NSPT Group’s
overall risk management program focuses on the
unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial
performance of the business. Both Groups use, when
necessary, derivative financial instruments such as
interest rate swaps to hedge certain market risk
exposures.
The Board of Directors of NSH analyses, on behalf of
the Consolidated Group and NSPT Group, interest
rate exposure and evaluates treasury management
strategies in the context of the most recent
economic conditions and forecasts.
Notes to the Financial Statements
Derivatives
Derivatives are only used for economic hedging purposes and not as trading or speculative instruments. The
Consolidated Group and the NSPT Group have the following derivative financial instruments:
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
Non-current liabilities
Interest rate swap contract – cash flow hedge
9.6
-
Current assets
Contingent consideration
9.3
1,097
Classification of derivatives
Interest rate risk
-
-
2014
$'000
(393)
1,007
2013
$'000
-
-
Derivatives are classified as held for trading and
accounted for at fair value through profit or loss
unless they are designated as hedges. They are
presented as current assets or liabilities if they are
expected to be settled within 12 months after the
end of the reporting period.
The Consolidated Group’s and NSPT Group’s
accounting policy for cash flow hedges is set out
in note 2(n). For hedged forecast transactions that
result in the recognition of a non-financial asset, the
groups have elected to include related hedging
gains and losses in the initial measurement of the
cost of the asset.
Fair value measurement
For information about the methods and assumptions
used in determining fair values of derivatives refer to
note 9.8.
Market risk
Market risk is the risk that the fair value of future cash
flows of a financial instrument will fluctuate because
of changes in market prices. Market risk comprise
three types of risk: interest rate risk, currency risk
and other price risk, such as equity price risk and
commodity risk. Financial instruments affected by
market risk include loans and borrowings, deposits,
available-for-sale investments and derivative
financial instruments.
Neither the Consolidated Group nor the NSPT Group
are exposed to foreign currency risk or to price risk.
Interest rate risk is the risk that the fair value or
future cash flows of a financial instrument will
fluctuate because of changes in market interest
rates. The Consolidated Group’s and the NSPT
Group’s exposure to the risk of changes in market
interest rates relate primarily to their long-term debt
obligations with floating interest rates.
The Consolidated Group and the NSPT Group
manage interest rate risk by having a balanced
portfolio of fixed and variable rate loans and
borrowings. The policy is to keep a minimum of
between 0% and 50% of borrowings at fixed rates
of interest, dependant on the terms of individual
loans. To manage this interest rate swaps are entered
into, in which it is agreed to exchange, at specified
intervals, the difference between fixed and variable
rate interest amounts calculated by reference to
an agreed-upon notional principal amount. At 30
June 2014, after taking into account the effect of
interest rate swaps, approximately 34.1% of the
Consolidated Group’s borrowings are at a fixed rate
of interest (2013: nil). The fixed interest rate is 3.42%
(2013: nil) and variable rates are between 1.50% and
4.10% above the 90 day bank bill rate of 2.76% (2013:
nil). At 30 June 2014, after taking into account the
effect of interest rate swaps, approximately 34.1% of
the NSPT Group’s borrowings are at a fixed rate of
interest (2013: 100%). The fixed interest rate is 3.42%
(2013: 4.89%) and variable rates are between 1.50%
and 4.10% above the 90 day bank bill rate of 2.76%
(2013: 7.14%).
The contract requires settlement of net interest
receivable or payable each 90 days. The settlement
dates coincide with the dates on which interest is
payable on the underlying debt. The contract is
settled on a net basis.
117
National Storage Annual Report 2013/2014 As at the end of the reporting period, the Consolidated Group and the NSPT Group had the following variable
rate borrowings and interest rate swap contract outstanding:
2014
Weighted
average
interest rate
%
Balance
$'000
% of
total loans
%
4.19%
87,916
100%
3.42%
(30,000)
57,916
65.9%
Weighted
average
interest rate
%
-
-
2013
Balance
$'000
-
-
-
% of
total loans
%
-
-
-
4.19%
87,916
100%
7.14%
109,171
100%
3.42%
(30,000)
4.89%
(109,490)
57,916
65.9%
(319)
(0.3%)
Consolidated Group
Bank loans
Interest rate swaps
(notional principal amount)
Net exposure to cash flow
interest rate risk
NSPT Group
Bank loans
Interest rate swaps
(notional principal amount)
Net exposure to cash flow
interest rate risk
An analysis by maturities is provided below in this note. The percentage of total loans shows the proportion of
loans that are currently at variable rates in relation to the total amount of borrowings.
Amounts recognised in profit or loss
During the year, the following gains/(losses) were recognised in profit or loss in relation to interest rate swaps.
Consolidated Group
NSPT Group
2014
$’000
2013
$’000
2014
$’000
2013
$’000
Current liabilities
(Loss)/gain recognised in profit or loss
-
-
1,164
1,588
Interest rate sensitivity
Based on the simulations performed, the annual
impact on profit or loss of a one per cent shift in
interest rates, with all other variables held constant, is
estimated to be a maximum increase or decrease of
$579,000 (2013: $nil) for the Consolidated Group and
a maximum increase or decrease of $579,000 (2013:
$11,000) for the NSPT Group. The assumed movement
in basis points for the interest rate sensitivity analysis
is based on the currently observable market
environment, showing a reduced volatility compared
to prior years.
Credit Risk
Credit risk is the risk that a counterparty will not
meet its obligations under a financial instrument or
customer contract, leading to a financial loss. The
Consolidated Group is exposed to credit risk from its
operating activities (primarily trade receivables) and
from its financing activities, including deposits with
banks and other financial instruments.
The NSPT Group has the same risk as the
Consolidated Group except that trade debtors
relate mostly to the Consolidated Group entity,
National Storage Operations Pty Ltd, with only two
other customers that are well known businesses that
have not defaulted on any payments.
Trade receivables
The exposure to credit risk for trade and other
receivables is influenced mainly by the individual
characteristics of each customer. The Consolidated
Group’s customer credit risk is managed by requiring
customers to pay monthly rentals in advance. The
Directors are of the opinion that customer credit
risk is reduced through a contractual lien over the
contents stored in the rented units. The terms of
the storage agreement provide for the auction
of the customer’s stored contents to recover any
unpaid amounts. Outstanding customer receivables
are regularly monitored and any credit concerns
highlighted to senior management.
Notes to the Financial Statements
Guarantees
At 30 June 2014 and 30 June 2013 the Consolidated
Group has no significant concentrations of credit risk
with respect to trade receivables, whether through
exposure to individual customers, specific industry
sectors and/or regions within Australia.
Credit risk also arises in relation to financial
guarantees given to certain parties. (Refer to notes
19 and 20 for details). Such guarantees are only
provided in exceptional circumstances and are
subject to specific Board approval.
Liquidity Risk
Liquidity risk is the risk that the group will not be able
to meet its financial obligations as they fall due. The
objective of managing liquidity risk is to ensure, as far
as possible, that it will always have sufficient liquidity
to meet its liabilities when they fall due, under both
normal and stressed conditions. NSH on behalf of
the Consolidated Group and the NSPT Group has
established a number of policies and processes for
managing liquidity risk. These include:
• Continuously monitoring cash flows on a
daily basis as well as forecasting cash flows
on a medium and long-term basis.
• Monitoring the maturity profiles of financial
assets and liabilities in order to match inflows
and outflows.
• Maintaining adequate reserves and support facilities.
• Monitoring liquidity ratios and all constituent
elements of working capital.
• Maintaining adequate borrowing and
finance facilities.
The NSPT Group’s customer credit risk is managed by
renting the majority of properties to the Consolidated
Group entity National Storage Operations Pty Ltd.
Two other non-related parties are rented facilities
and these rental revenues are not significant
compared with related party rental revenues.
At 30 June 2014 and 30 June 2013 the NSPT Group’s
only significant concentration of credit risk with
respect to trade receivables, was the Consolidated
Group entity National Storage Operations Pty Ltd
with an outstanding balance of $8,585,032 (2013:
$Nil) (refer note 18).
The Consolidated Group’s and the NSPT Group’s
maximum exposure to credit risk, without taking into
account the value of any collateral or other security,
in the event that other parties fail to perform their
obligations under financial instruments for each
class of reporting recognised financial asset at the
reporting date is the carrying amount of those assets
as indicated in the statement of financial position.
Refer note 9.2 for a summary of the Consolidated
Group’s and the NSPT Group’s exposure to credit risk
relating to receivables at the end of the financial
year.
Cash and cash equivalents
The Consolidated Group’s and the NSPT Group’s
credit risk on cash and cash equivalents is limited
because the counterparties are banks with high
credit-ratings assigned by international credit-rating
agencies. The maximum exposure to credit risk for
the components of the statement of financial position
at 30 June 2014 and 2013 is the carrying amounts as
indicated in the statement of financial position.
119
National Storage Annual Report 2013/2014 Financing arrangements
The Consolidated Group and the NSPT Group had access to the following undrawn borrowing facilities at the
end of the reporting period:
Floating rate
Expiring within one year (bank overdraft)
Expiring beyond one year (bank loan)
Consolidated Group
NSPT Group
Notes
2014
$'000
2013
$'000
2014
$'000
2013
$'000
3,000
12,084
15,084
-
-
-
3,000
12,084
15,084
-
-
-
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice.
The secured bank loan may be drawn at any time and is subject to annual review. Further details of the bank
loan are detailed in note 9.5 and note 17.
Maturity of financial liabilities
The tables below analyse the financial liabilities into maturity groupings based on the remaining period from
the balance date to the contractual maturity date. The groupings are split into all non-derivative financial
liabilities and net gross settled derivative financial instruments for which the contractual maturities are essential
for an understanding of the timing of cash flows. As amounts disclosed in the table are the contractual
undiscounted cash flows including future interest payments, these balances will not necessarily agree with the
amounts disclosed on the statement of financial position.
On
demand
Less than
3 months
$’000
$’000
3 to 12
months
$'000
1 to 5
years
$'000
Over 5
years
$'000
Total
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,280
930
2,275
9,306
-
2,762
6,823
-
-
93,470
38,923
-
-
-
3,280
97,162
55,124
103,145
-
9,306
15,791
9,585
132,393
55,124
212,893
(208)
259
51
(599)
(1,357)
767
168
1,543
186
-
-
-
(2,164)
2,569
405
15,842
9,753
132,579
55,124
213,298
2,514
-
7,196
9,710
3,815
-
21,358
25,173
-
-
-
-
138,483
138,483
73,442
73,442
6,329
-
240,479
246,808
-
-
-
-
-
9,710
25,173
138,483
73,442
246,808
Consolidated Group
At 30 June 2014
Non-derivatives
Trade and other payables
Borrowings
Finance leases
Distribution payable
Total non-derivatives
Derivatives
Inflows
Outflows
Total derivatives
At 30 June 2013
Non-derivatives
Trade and other payables
Borrowings
Finance leases
Total non-derivatives
Derivatives
Total derivatives
Notes to the Financial Statements
NSPT Group
At 30 June 2014
Non-derivatives
Trade and other payables
Borrowings
Distribution payable
Total non-derivatives
Derivatives
Inflows
Outflows
Total derivatives
At 30 June 2013
Non-derivatives
Trade and other payables
Distribution payable
Borrowings
Total
On
demand
Less than
3 months
$’000
$’000
3 to 12
months
$'000
1 to 5
years
$'000
Over 5
years
$'000
Total
$'000
-
-
-
-
-
-
-
-
-
-
-
-
698
930
9,306
10,934
(208)
259
51
6,547
2,762
-
-
93,470
-
9,309
93,470
(599)
(1,357)
767
168
1,543
186
10,985
9,477
93,656
5,025
1,681
111,916
118,622
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,245
97,162
9,306
113,713
(2,164)
2,569
405
114,118
5,025
1,681
111,916
118,622
17. CAPITAL MANAGEMENT
The Consolidated Group’s and the NSPT Group’s
objectives, when managing capital, are to
safeguard its ability to continue as a going concern,
so that it can continue to provide returns to
securityholders and to maintain an optimal structure
to reduce the cost of capital. The primary objective
of the Group’s capital management is to maximise
the securityholder value. The Responsible Entity has
outsourced capital management for the NSPT Group
to NSH under a management agreement effective
from 19 December 2013.
In order to achieve this overall objective, the
Consolidated Group’s and the NSPT Group’s capital
management strategy, amongst other things, aims to
ensure that they meet financial covenants attached
to the interest-bearing loans and borrowings that
define capital structure requirements. Breaches in
meeting the financial covenants would permit the
bank to immediately call loans and borrowings. There
have been no breaches in the financial covenants
of any interest-bearing loans and borrowings in the
current period.
The Consolidated Group and the NSPT Group
manage their capital structure and make
adjustments in light of changes in economic
conditions and the requirements of the financial
covenants. To maintain or adjust the capital
structure, the Consolidated Group and the NSPT
Group may adjust the dividend/distribution payment
to securityholders, return capital to securityholders
or issue new securities. The Consolidated Group and
the NSPT Group monitor capital using a gearing ratio,
which is net debt divided by total capital plus net
debt. The Consolidated Group’s and NSPT’s policy is
to keep the gearing ratio between 20% and 40%. Net
debt includes interest bearing loans and borrowings,
trade and other payables, less cash and short-term
deposits, excluding discontinued operations.
121
National Storage Annual Report 2013/2014
Interest bearing loans
Less: cash and short term deposits
Net Debt
Total equity
Notes
9.5
9.1
Consolidated Group
NSPT Group
2014
$'000
87,916
(8,264)
79,652
244,327
323,979
2013
$'000
-
(382)
(382)
28,721
28,339
2014
$'000
2013
$'000
87,916
(102)
87,814
216,362
304,176
109,171
(6,710)
102,461
88,822
191,283
25%
-
29%
54%
The increased gearing ratio in the Consolidated Group arises largely from increased borrowings. The improved
ratio in the NSPT Group is attributable to a decrease in borrowings associated with repayment of the previous
NSPT loan facility post IPO.
Risk management
Loan covenants
Under the terms of the major borrowing facilities, NSH and NSPT are required to comply with the following
financial covenants:
• The gearing ratio must not be more than 50%.
• The ratio of EBITDA to finance costs must equal or exceed 2 times.
Both the Consolidated Group and the NSPT Group have complied with these covenants throughout the
reporting period. As at 30 June 2014, the ratio of the Consolidated Group’s EBITDA to finance cost was 7.41
times. The gearing ratio as at 30 June 2014 is as disclosed above.
Dividends and distribution
Ordinary share dividends
Recognised amounts
Consolidated Group
2014
$'000
2013
$'000
Notes
National Storage Pty Ltd final franked dividend for 2013 of $2,799 per share declared
by the Directors of National Storage Pty Ltd on 24 October 2013. This amount was
offset against the loans owed by the former shareholders of National Storage Pty Ltd.
National Storage Pty Ltd franked dividend for of $450 per share paid in the 2013
financial year.
Unrecognised amounts
The directors have not declared a final dividend. A distribution has been declared
as noted below.
-
900
900
5,598
-
5,598
-
Notes to the Financial Statements
Dividends and distribution
Unit distributions
Distributions paid
NSPT Group
2014
$'000
2013
$'000
Notes
National Storage Property Trust distribution of 2.223 cents paid on 19 December 2013
2,077
-
National Storage Property Trust distribution of 2 cents paid on 31 October 2013
(2013: 5.418 cents)
Distribution of 1.806 cents per unit provided for in the National Storage Property Trust
2013 financial year and paid on 31 July 2013
Distribution of 3.8 cents per unit provided for in the National Storage Property Trust
2014 financial year payable on 26 August 2014
1,861
5,041
-
1,681
9,306
13,244
-
6,722
Distributions proposed and not recognised as a liability
There are no proposed distributions not recognised as a liability for the year ended
30 June 2014.
-
Franking credit balance
There is no final dividend recommended after 30 June 2014. Any existing franking credits therefore remain
unused.
Consolidated Group
2014
$'000
2013
$'000
Ordinary share dividends
Recognised amounts
Franking credits available for subsequent financial years based on a tax rate of 30% (2013: 30%)
1,649
3,773
The above amounts are calculated from the balance of the franking account as at the end of the reporting
period, adjusted for franking credits and debits that will arise from the settlement of liabilities or receivables for
income tax after the end of the year.
The NSPT Group does not have franking credits as distributions are paid from National Storage Property Trust
which is not liable to pay income tax provided all taxable income is distributed. There are therefore no franking
credits to attach.
123
National Storage Annual Report 2013/2014
18. RELATED PARTY TRANSACTIONS
This related party’s note is separated into two time periods as the related parties changed upon stapling on 19
December 2013. As such this note is presented in two sections: pre-stapling and stapled entity.
Pre-Stapling – up to 18 December 2013
National Storage Pty Ltd
Directors
The following persons were directors during the reporting period
Andrew Catsoulis
Peter Greer
Michael Berry
Geoff McMahon
Laurie Brindle
Anthony Keane
APN National Storage Property Trust
(now known as NSPT)
The Responsible Entity of APN National Storage
Property Trust was APN Funds Management Limited
(ACN 080 674 479) whose immediate and ultimate
parent entity is APN Property Group Limited (ACN
109 846 068). Accordingly transactions with entities
related to the APN Property Group are disclosed
below.
APN Funds Management Limited also acted as the
manager of the Trust.
Transactions with related parties took place at arms
length and in the ordinary course of business. The
following related party transactions took place
during the period:
• Investment management fees of $2,423,103 (2013:
$854,000) were paid to the Responsible Entity.
• Registry and accounting fees of $9,292 (2013:
$62,000) were paid to the Responsible Entity.
Key management personnel
The NSPT did not employ personnel in its own right.
However it was required to have an incorporated
Responsible Entity to manage the activities of the
NSPT and personnel of this entity are considered the
Key Management Personnel of the NSPT.
Appointed
13 January 2000
13 January 2000
13 January 2000
13 January 2000
1 November 2013
1 November 2013
Resigned
19 December 2013
19 December 2013
19 December 2013
The names of the key management personnel of the
Responsible Entity up to 19 December 2013 were:
• Christopher Aylward
• Howard Brenchley (Director)
• Clive Appleton
• Geoff Brunsdon (Chairman and Independent
Non Executive Director)
• Michael Johnstone (Independent
Non Executive Director)
• John Freemantle (Chief Financial Officer)
• Jennifer Horrigan (Non Executive Director)
The positions noted above for the NSPT’s key
management personnel are the positions held within
the Responsible Entity and not the NSPT itself.
Key management personnel compensation
Key management personnel were paid by the
parent of the Responsible Entity for their services to
APN Property Group Limited. Payments made from
the Trust to the Responsible Entity did not include
any amounts attributable to the compensation of
key management personnel in respect of services
rendered to the Trust itself.
Notes to the Financial Statements
Holdings of units by related parties
Related parties were able to purchase and sell units in the Trust in accordance with their respective
constitutions and product disclosure statements. Details of units held in the Trust by related parties are set out
below:
Number of Units Held at
30 June 2014
30 June 2013
-
-
5,687,656
7,652,164
Responsible entity and its associates
APN Unlisted Property Fund
APN Direct Property Fund
Stapled Entity – from 19 December 2013
Ultimate parent company/holding entity
National Storage Holdings Limited is the ultimate parent company of the Consolidated Group.
The holding entity of the NSPT Group is National Storage Property Trust.
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
Consolidated Group
NSPT Group
2014
$
805,015
68,194
-
-
-
873,209
2013
2014
2013
$
-
-
-
-
-
-
$
-
-
-
-
-
$
-
-
-
-
-
There are no amounts for 2013 as key management personnel were paid by an entity outside of the
Consolidated Group.
Detailed remuneration disclosures are provided in the remuneration report which is included in the
Directors’ Report.
125
National Storage Annual Report 2013/2014 Premier Self Storage Pty Ltd received $2,800,000 for
an Asset Sale – Geoffrey McMahon is a director and
company secretary of Premier Self Storage Pty Ltd
and was also a director of NSPL. Premier Self Storage
Pty Ltd is a related body corporate of Leyshon
Equities Pty Ltd who was a NS Vendor.
Transactions with former Directors of National Storage
Pty Ltd subsequent to stapling and listing
As noted in the Product Disclosure Statement, on
23 December 2013, an NSR subsidiary trust NSIT
purchased a property at 961–963 Marion Rd, Mitchell
Park, South Australia for $1,576,000 from Australian
Storage Developments Pty Ltd which is owned by a
KMP and former Director of National Storage Pty Ltd.
The shareholders who were former directors and are
not KMP of ASD comprise:
• Michael Berry – 25% for Green 9 Pty Ltd as
trustee for the Michael Berry Family Trust –
Michael Berry is the sole director, company
secretary and shareholder of Green 9 Pty
Ltd and a potential discretionary beneficiary
of the Michael Berry Family Trust.
Responsible Entity
On 19 December 2013 the Trust Company (RE
Services) Limited became the responsible entity of
the National Storage Property Trust, in doing so it
became a related party.
Transactions with former Directors of National Storage
Pty Ltd at stapling and listing
The implementation of the Transaction and the
ongoing management of the National Storage
REIT necessarily involve a number of related party
transactions outlined in the Prospectus:
Purchase from National Storage Pty Ltd vendors:
The purchase prices for the respective acquisitions
were as follows:
(a) $1,047,000 plus 25,510,204 Shares in NSH for the
NSPL Sale;
(b) 25,510,204 Units in NSPT for the NSIT Sale; and
(c) $4,750,000 for the NS APAC Sale.
In respect of the former Directors in their Respective
Proportions under the Sale and Purchase Agreement,
they received the following:
(a) Michael Berry – 4.00% for Green 9 Pty Ltd as
trustee for the Michael Berry Family Trust –
Michael Berry is the sole director, company
secretary and shareholder of Green 9 Pty Ltd
and a potential discretionary beneficiary of
the Michael Berry Family Trust ; and
(b) Geoff McMahon 29.20% for Leyshon Equities
Pty Ltd, – Geoff McMahon is a director and
company secretary of Leyshon Equities Pty Ltd.
Purchase from Strategic Storage Consulting Pty Ltd
vendors:
The purchase price for the company was $5,828,000.
In respect of the former Directors in their Respective
Proportions under the Sale and Purchase Agreement,
they received the following:
• 21% for Green 9 Pty Ltd as trustee for the Michael
Berry Family Trust - Michael Berry is the sole
director, company secretary and shareholder
of Green 9 Pty Ltd and a potential discretionary
beneficiary of the Michael Berry Family Trust; and
Notes to the Financial Statements
Directors
The Directors of the Responsible Entity in office during the Reporting Period and continuing as at the date of
these financial statements are set out below.
Andrew Cannane
Director (appointed 31 March 2011)
Christopher Green
Director (appointed 7 March 2014)
Gillian Larkins
Director (appointed 7 March 2014)
David Grbin
Director (appointed 22 July 2008, resigned 7 March 2014)
Rupert Smoker
Director (appointed 18 December 2013, resigned 7 March 2014)
Alternate Director for John Atkin, David Grbin and Andrew Cannane
(appointed 20 February 2013, resigned 18 December 13)
John Atkin
Director (appointed 27 January 2009, resigned 18 December 2013)
Anna O’Sullivan
Alternate Director for Andrew Cannane (appointed 7 March 2014) and
Alternate Director for Christopher Green (appointed 7 March 2014)
Joanne Hawkins
Alternate Director for Gillian Larkins (appointed 7 March 2014)
Glenn Foster
Alternate Director for Gillian Larkins (appointed 7 March 2014)
Directors’ remuneration
Payments made from the NSPT to the Responsible Entity did not include any amounts attributable to the
compensation of these Directors in respect of services rendered to NSPT.
Transactions with the Responsible Entity
During the year, the Responsible Entity and its associates were paid $143,441 for responsible entity and
custodian services.
Transaction with Related Parties – Consolidated Group
Revenue
from related
parties
Purchases
from related
parties
Amount owed
by related
parties
Amount owed
to related
parties
Southern Cross Storage Operations Pty Ltd
National Storage APAC Trust
Former shareholders of NSPL
The Trust Company (RE Services) Limited
and its associates *
Australian Storage Developments
Southern Cross Storage Trust
* not related parties in prior year or pre-stapling
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
$
1,147,271
2,572,866
-
-
-
285,996
$
-
-
-
-
-
-
$
1,028,712
2,361,750
$
-
3,473,580
-
-
348,339
118,564
-
5,598,138
-
-
130,306
-
-
-
-
-
-
5,794
-
-
-
-
-
-
-
-
44,465
-
40,000
-
127
-
-
-
-
National Storage Annual Report 2013/2014
Transaction with Related Parties – NSPT
National Storage Holdings Limited
Southern Cross Storage Trust
National Storage (Operations) Limited
APN Funds Management Limited
The Trust Company (RE Services) Limited and
its associates
Terms and conditions of transactions
with related parties
Revenue
from related
parties
Purchases
from related
parties
Amount owed
by related
parties
Amount owed
to related
parties
$
-
-
$
-
-
$
$
8,230,421
-
-
-
-
-
-
-
-
-
40,000
-
20,431,395
18,575,000
-
-
-
-
1,284,814
8,585,032
14,736,943
-
2,423,104
916,000
143,441
-
-
-
-
-
-
2,149,000
-
-
-
-
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
The sales to and purchases from related parties are
made on terms equivalent to those that prevail in
arm’s length transactions. Outstanding balances
at the year-end are unsecured and interest free
and settlement occurs in cash. There have been no
guarantees provided or received for any related
party receivables or payables. For the year ended
30 June 2014, the Consolidated Group has not
recorded any impairment of receivables relating to
amounts owed by related parties (2013: $Nil). This
assessment was undertaken each financial year
through examining the financial position of the
related party and the market in which the related
party operates.
19. COMMITMENTS AND CONTINGENCIES
Capital commitments
There was no capital expenditure contracted for at the end of the reporting period but not recognised as
liabilities.
Non-cancellable operating leases
The NSH Group leases offices expiring within 5 years. The lease has an escalation clause and a right of renewal.
The NSPT Group does not have any operating lease commitments.
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as
follows:
Within one year
Later than one year but not later than five years
Later than five years
Notes to the Financial Statements
Consolidated Group
2014
$'000
251
887
-
1,138
2013
$'000
-
-
-
-
Finance lease commitments
For details of finance lease commitments see note 9.7.
Contingent liabilities
Guarantees
For information about guarantees given by entities within the group, including the parent entity, please refer to
notes 22 and 23.
20. EARNINGS PER STAPLED SECURITY (EPSS)
Basic EPSS is calculated as net profit attributable to stapled securityholders, adjusted to exclude costs of
services equity (other than distributions) divided by the weighted average number of stapled securities on
issue during the year.
Diluted EPSS is calculated as net profit attributable to stapled securityholders, adjusted for:
• Costs of servicing equity (other than distributions);
• The after tax effect of dividends and interest associated with dilutive potential stapled securities
that have been recognised as expenses; and
• Other non-discretionary changes in revenues or expenses during the period that would result
from the dilution of potential stapled securities;
divided by the weighted average number of stapled securities and dilutive potential stapled securities,
adjusted for any bonus element.
Basic and diluted earnings per stapled security
Reconciliation of earnings used in calculating earnings per
stapled security
Basic and diluted earnings per security
Net profit/(loss) attributable to members of National Storage REIT
Consolidated Group
NSPT Group
2014
cents
11.00
2013
cents
(2.09)
2014
cents
21.04
2013
cents
6.31
$’000
15,565
$’000
(532)
$’000
39,000
$’000
7,482
Weighted average number of securities:
No. of
securities
No. of
securities
No. of
securities
No. of
securities
Weighted average number of securities for basic and diluted
earnings per stapled security
141,514,780
25,510,204
185,365,653
118,565,836
129
National Storage Annual Report 2013/2014
21. AUDITOR’S REMUNERATION
During the year the following fees were paid for services provided by the auditor of the parent entity:
Consolidated Group
2014
$
2013
$
2014
$
Ernst and Young
An audit or review of the financial report of the entity and any
other entity in the Consolidated Group
274,789
22,278
10,300
Other services in relation to the entity and any other entity in the
Consolidated Group
Tax compliance
Assurance related to the IPO of NSR
Other
180,158
850,829
80,175
46,505
-
-
-
-
-
Total remuneration of Ernst and Young
1,385,951
68,783
10,300
NSPT Group
2013
$
-
-
-
-
-
Deloitte
An audit or review of the financial report of the entity and any
other entity in the Consolidated Group
Other services in relation to the entity and any other entity in the
Consolidated Group
Total remuneration of Deloitte
-
-
-
-
-
-
-
-
-
25,328
15,905
41,233
Total auditors’ remuneration
1,385,951
68,783
10,300
41,233
22. INFORMATION RELATING TO THE PARENT COMPANY
Summary financial information
The individual financial statements for National Storage Holdings Limited (2013: National Storage Pty Ltd), the
parent entity, show the following aggregate amounts:
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Cash flow hedge reserve
Retained earnings
Profit or (loss) for the year
Total comprehensive income
NSH
2014
$’000
7,775
16,602
290
495
2013
$’000
6,936
15,878
11,819
11,819
NSPT
2014
$’000
27,181
302,102
10,274
98,190
2013
$’000
12,034
220,734
6,155
131,912
17,758
2,800
191,499
89,322
-
(1,651)
16,107
(1,651)
(1,651)
-
1,259
4,059
(46)
(46)
(393)
12,806
203,912
23,984
24,377
-
(500)
88,822
7,482
7,482
The Consolidated Group discloses the parent entity National Storage Holdings Limited in 2014 and the parent
entity National Storage Pty Ltd in 2013.
Notes to the Financial Statements
Guarantees entered into by the parent entity
The Consolidated Group parent entity has provided
financial guarantees in respect of bank overdrafts
and loans of subsidiaries amounting to $87,916,000
(2013: $nil), secured by registered mortgages over
the freehold and leasehold investment properties of
the subsidiaries.
The Consolidated Group parent entity has also
provided bank guarantees of $1,213,000 in the event
of lease payment default to third party lessors.
The NSPT Group parent entity has provided financial
guarantees in respect of bank overdrafts and loans
of subsidiaries amounting to $87,916,000 (2013:
$109,171,000), secured by registered mortgages over
the freehold properties of the subsidiaries.
In addition, there are cross guarantees given by
National Storage Holdings Limited (NSH), National
Storage Operations Pty Ltd and National Storage Pty
Ltd as described in note 23. No deficiencies of assets
23. DEED OF CROSS GUARANTEE
exist in any of these companies. No liability was
recognised by the parent entity or the Consolidated
Group in relation to this guarantee, as the fair value
of the guarantee is immaterial.
Contingent liabilities of the parent entity
The parent entities of the Consolidated Group
and the NSPT Group did not have any contingent
liabilities as at 30 June 2014 or 30 June 2013. For
information about guarantees given by the parent
entities, please see above.
Contractual commitments for the acquisition of
property, plant or equipment
The parent entities of the Consolidated Group
and the NSPT Group did not have any contractual
commitments for the acquisition of property, plant or
equipment as at 30 June 2014 or 30 June 2013.
National Storage Holdings Limited (NSH), National Storage Operations Pty Ltd and National Storage Pty Ltd
are parties to a deed of cross guarantee under which each company guarantees the debts of the others.
By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare
a financial report and directors’ report under Class Order 98/1418 (as amended) issued by the Australian
Securities and Investments Commission.
Set out below is a consolidated statement of comprehensive income and statement of financial position of
the entities that are members of the Closed Group.
Consolidated statement of comprehensive income
Profit from continuing operations before income tax
Income tax expense
Profit after tax
Retained earnings at the beginning of the year
Dividends provided for or paid
Other – transfer to reserves
Retained earnings at the end of the year
2014
$'000
(25,285)
7,315
(17,970)
27,444
(5,598)
-
2013
$'000
125
(524)
(399)
28,723
(900)
-
3,876
27,424
131
National Storage Annual Report 2013/2014 Consolidated statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Investment properties
Investment in joint venture
Other non-current assets
Intangibles
Deferred tax asset
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Finance Lease Liability
Deferred revenue
Provisions
Total current liabilities
Non-current liabilities
Finance Lease Liability
Provisions
Deferred tax liability
Total non-current liabilities
Total Liabilities
Net Assets
EQUITY
Non-controlling interest
Contributed equity
Other reserve
Retained profits/(Accumulated losses)
Total equity
Notes to the Financial Statements
2014
$'000
7,415
9,214
258
1,329
2013
$'000
331
12,224
180
2,303
18,216
15,038
220
1,186
1,123
913
171,033
201,328
7,685
136
483
-
1,857
1,332
434
-
180,743
206,987
198,959
222,025
10,660
10
4,952
1,069
8,475
16,244
5,001
345
16,691
30,065
159,821
153,741
588
225
454
7,541
160,634
161,736
177,325
191,801
21,634
30,224
-
-
17,758
2,800
-
3,876
21,634
-
27,424
30,224
24. EVENTS AFTER REPORTING PERIOD
ACQUISITION OF STORAGE CENTRES
On 15 July 2014, NSR acquired a storage centre in
Wangara, Western Australia for $10.9 million. This
centre has 580 units and 4,407 sqm of net lettable
area.
On 25 July 2014, NSR acquired a storage centre in
Port Adelaide, South Australia for $5.2 million. This centre
has 538 units and 4,192 sqm of net lettable area.
NSR has contracted to acquire a centre in Kardinya,
Western Australia for $8 million. Upon completion
this centre will comprise approximately 420 units
and 4,400 sqm of net lettable area. NSR will receive
development management fees for its involvement
in the project, completion of which is scheduled for
late calendar year 2014.
As these centres are, or will be, recorded as
investment properties, they are initially recorded at
their purchase price. This value is supported by an
independent valuation.
CAPITAL RAISING
As at the date of this financial report, NSR has
determined to raise additional capital. This will be
undertaken by the following two mechanisms:
1. A Placement Offer, details of which are as follows:
A fully underwritten placement to institutional,
professional and sophisticated investors of
approximately 36.73 million stapled securities
(Placement).
The issue price will be determined in relation to a
discount on the last closing price of NSR Stapled
Securities on Friday 22 August 2014. Settlement of
the Placement is scheduled to occur on Friday, 29
August 2014 with allotment to occur on Monday,
1 September 2014.
The purpose of the capital raising is to provide
NSR with financial flexibility to pursue growth
consistent with NSR’s strategic planning,
strengthen its balance sheet and maintain a
sound financial position.
2. A Security Purchase Plan (“SPP”) pursuant to
which NSR will offer to eligible Securityholders
the opportunity to acquire up to approximately
$15,000 of Stapled Securities (subject to
scaleback).
The issue price of Stapled Securities issued under
the SPP will be the lesser of the Placement price
and the volume weighted average price of NSR’s
Stapled Securities during the five trading days
before the closing date for applications under the
SPP. The SPP is not underwritten.
The SPP will be open to eligible Australian and
New Zealand resident Securityholders on the
register as at the record date who are eligible to
participate under the terms of the SPP. Stapled
Securities issued under the SPP will rank equally
with existing stapled securities on issue.
INCREASE IN DEBT FACILITY
On 8 July 2014 NSR announced it had negotiated
a $35 million increase to its debt facility with
National Australia Bank (NAB) subject to standard
conditions precedent. The increase resulted in NSR’s
debt facility being extended to $135 million on
substantially the same terms previously agreed with
NAB, due to mature in December 2016. The facility
is intended to be used primarily to fund strategic
acquisitions for the portfolio.
No other matter or circumstance has arisen since
30 June 2014 that has significantly affected, or may
significantly affect the Consolidated Group’s or the
NSPT operations, the results of those operations, or
the Consolidated Group’s or the NSPT state of affairs
in the future financial periods.
133
National Storage Annual Report 2013/2014
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of National Storage Holdings Limited, the Directors state that:
1. In the opinion of the Directors:
(a)
the financial statements and notes of the Consolidated Group for the year ended 30 June 2014 are in
accordance with the Corporations Act 2001, including:
i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its
performance for the year ended on that date; and
ii. complying with Accounting Standards and the Corporations Regulations 2001;
(b)
the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in note 2(b); and
(c)
with reference to note 2(a) in the financial statements, there are reasonable grounds to believe that
the Consolidated Group will be able to pay its debts as and when they become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the Directors
by the Chief Executive Officer and Chief Financial Officer in accordance with section 295A of the
Corporations Act 2001 for the financial year ended 30 June 2014.
On behalf of the Board,
Laurence Brindle
Chairman
24 August 2014
Brisbane
Andrew Catsoulis
Managing Director
Directors’ Declaration
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of The Trust Company (RE Services) Limited, the Responsible
Entity states that:
1. In the opinion of the Responsible Entity:
(a)
the financial statements and notes of the NSPT Group for the year ended 30 June 2014 are in
accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the NSPT Group’s financial position as at 30 June 2014 and of its
performance for the year ended on that date; and
(ii) complying with Accounting Standards and the Corporations Regulations 2001;
(b)
the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in note 2(b); and
(c)
with reference to note 2(a) in the financial statements, there are reasonable grounds to believe that
NSPT will be able to pay its debts as and when they become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the Directors of
The Trust Company (RE Services) Limited by the Chief Executive Officer and Chief Financial Officer of the
NSR Group in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30
June 2014.
On behalf of the Responsible Entity,
Christopher Green
Director
24 August 2014
Sydney
135
National Storage Annual Report 2013/2014
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT – CONT’D
137
National Storage Annual Report 2013/2014 Stapled Security Holder Information
Additional information required by the Australian
Securities Exchange Ltd and not shown elsewhere in
this report is as follows. The information is current
as at 31 July 2014:
(a) Distribution of equity securities
Holding
Analysis of numbers of ordinary fully paid stapled
security holders by size of holding:
1
1,001
5,001
10,001
100,001
Total
-
-
-
-
-
1,000
5,000
10,000
100,000
And over
Securities
61
201
225
781
102
1,370
There were 22 holders of less than a marketable
parcel of stapled securities.
(b) Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Number held
Stapled securities
Percentage of
issued securities
54,772,247
37,073,249
25,669,155
24,854,785
7,497,600
7,448,980
6,612,889
6,173,469
5,586,735
3,583,537
3,469,388
2,928,500
2,654,867
2,148,900
1,811,224
1,609,287
1,020,408
1,020,400
1,000,000
810,767
22.37
15.14
10.48
10.15
3.06
3.04
2.70
2.52
2.28
1.46
1.42
1.20
1.08
0.88
0.74
0.66
0.42
0.42
0.41
0.33
197,746,387
80.76
Name
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
Clarence Property Corporation Ltd (Westlawn Property A/C)
Leyshon Equities Pty Ltd
BNP Paribas Noms Pty Ltd (DRP)
Storcat Pty Ltd (Andrew Catsoulis Family A/C)
Palomere Pty Ltd (Peter Edward Greer Family A/C)
RBC Investor Services Australia Nominees Pty Limited (Bkcust A/C)
Stowaway Self Storage Pty Ltd (Catsoulis Development A/C)
UBS Wealth Management Australia Nominees Pty Ltd
RBC Investor Services Australia Nominees Pty Limited (Apn A/C)
HSBC Custody Nominees (Australia) Limited - A/C 2
Stowaway Self Storage Pty Ltd (Catsoulis Family A/C)
Sandhurst Trustees Ltd (LMA A/C)
Green 9 Pty Ltd (Michael Berry Family A/C)
Brindle Super Pty Ltd (The Brindle Super Fund A/C)
Moat Investments Pty Ltd (Moat Investment A/C)
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
Unquoted equity securities
There are no unquoted securities.
Stapled Security Holder Information
(c) Substantial shareholders
Substantial securityholders are set out below:
Commonwealth Bank
Milford Asset Management
Cohen & Steers Inc
Bennelong Funds Management Group
Andrew Catsoulis
(d) Voting rights
Number held
Percentage
30,407,939
19,387,306
16,642,159
15,943,780
12,547,163
12.42
7.92
6.80
6.51
5.12
The voting rights attached to the ordinary fully paid stapled securities is one vote per stapled security.
(e) Escrowed securities
The number of ordinary stapled securities that are on issue that are subject to voluntary escrow is as follows:
Holder
Number of Stapled Securities
Leyshon Investments (Australia) Pty Ltd
Leyshon Operations Unit Trust
Storcat Pty Ltd
Palomere Pty Ltd
Andrew Catsoulis Family A/C
Peter Edward Greer Family Ac
Stowaway Self Storage Pty Ltd
Catsoulis Development A/C
Stowaway Self Storage Pty Ltd
Catsoulis Family A/C
Green 9 Pty Ltd
Michael Berry Family A/C
7,448,980
6,173,469
5,586,735
3,469,388
1,811,224
1,020,408
Details of the escrow period for the escrow for Storcat Pty Ltd and Palomere Pty Ltd are set out on page 59
(Note Storcat Pty Ltd equates to the Managing Director and Palomere Pty Ltd equates to the Chief Operating
Officer). The escrow provisions for the remaining escrowed stapled security holders are the same as for Storcat
Pty Ltd and Palomere Pty Ltd other than the period is three years not five years.
139
National Storage Annual Report 2013/2014 Investor Relations
National Storage REIT is listed on the Australian
Securities Exchange under the code NSR.
NATIONAL STORAGE REIT SECURITIES
To view your securityholding, you will need your
SRN/HIN and will be asked to verify your registered
postcode (inside Australia) or your country of
residence (outside Australia).
A stapled security comprises:
Phone
• one share in National Storage Holdings Limited; and
• one unit in the National Storage Property Trust;
• stapled and traded together as one stapled security.
You can confirm your holding balance, request forms
and access distribution and trading information by
phoning: 1300 850 505 (Australia only) or calling
+61 3 9946 4471 (outside Australia).
DISTRIBUTION DETAILS
NSR intends to distribute 90% to 100% of underlying
net profits after tax each year.
Distributions are expected to be paid within eight
weeks following the end of each semi-annual
distribution period, which occur in June and
December each year.
To ensure timely receipt of your distributions, please
consider the following:
Direct Credit
NSR encourages securityholders to receive
distribution payments by direct credit.
If you wish to register for direct credit or update your
payment details, log in to your holding online or
telephone the registry for assistance.
Tax File Number (TFN)
You are not required by law to provide your TFN,
Australian Business Number (ABN) or exemption
status. However, if you do not provide your TFN,
ABN or exemption, withholding tax at the highest
marginal rate for Australian resident members may
be deducted from distributions paid to you.
If you wish to update your TFN, ABN or exemption
status, log in to your holding online or telephone the
registry for assistance.
CONTACT DETAILS
All changes of name, address, TFN, payment
instructions and document requests should be
directed to the registry.
SECURITIES REGISTRY
Computershare Investor Services Pty Limited
GPO Box 2975
Melbourne VIC 3001 Australia
Telephone: 1300 850 505 (Australia only)
International: +61 3 9415 4000
Facsimile: +61 3 9473 2500
Email: web.queries@computershare.com.au
ELECTRONIC INFORMATION
By registering your email address, you can elect to
receive via email notifications and announcements,
distribution statements, taxation statements and
annual reports.
SECURE ACCESS TO YOUR
SECURITYHOLDING
You will need to have your securityholder reference
number or holder identification number (SRN/HIN)
available to access your holding details.
Online
You can access your securityholding information via
the Investor Centre section of the corporate website,
www.nationalstorageinvest.com.au, or via the
Investor Centre link on the registry’s website at
www.computershare.com.au.
Investor Relations
UNPRESENTED CHEQUES
NSR CALENDAR
If you believe you have unpresented cheques,
please contact the registry and request a search to
assist in recovering your funds.
If you wish to register for direct credit or update your
payment details, log in to your holding online or
telephone the registry for assistance.
ANNUAL TAXATION STATEMENT
AND TAX GUIDE
The Annual Taxation Statement and Tax Guide are
dispatched to securityholders in August each year.
INVESTOR FEEDBACK
If you have any fund specific queries or feedback
please telephone NSR Investor Relations on
1800 683 290. Please direct any complaints in
writing to NSR Company Secretary at GPO Box 3639,
Brisbane QLD 4001, Australia.
February
Half Year Results released
Distribution paid for six months ended 31 December
August
Full Year Results released
Distribution paid for the six months ended 30 June
Annual tax statements released
September
Annual Report released
Notice of Annual General Meeting released
October / November
Annual General Meeting
The dates listed above are indicative only and
subject to change.
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National Storage Annual Report 2013/2014 Corporate Directory
National Storage Holdings Limited ACN 166 572 845 (“NSH” or the “Company”)
National Storage Property Trust ARSN 101 227 712 (“NSPT”)
form the stapled entity National Storage REIT (“NSR” or the “Consolidated Group”)
Responsible Entity of NSPT
Company Secretary – The Responsible Entity
The Trust Company (RE Services) Limited
ACN 003 278 831 AFSL 235 150
Level 15, 20 Bond Street
Sydney NSW 2000
Directors – NSH
Laurence Brindle
Anthony Keane
Andrew Catsoulis
Directors – The Responsible Entity
Andrew Cannane
Christopher Green
Gillian Larkins
Alternate Directors:
Anna O’Sullivan (for Andrew Cannane and
Christopher Green)
Joanne Hawkins and Glenn Foster (for Gillian Larkins)
Company Secretary – NSH
Patrick Rogers
Glenda Charles, Thornton Christensen, Sylvie Di
Marco and Joanne Hawkins
Registered Office
Level 1, 10 Felix Street
Brisbane QLD 4000
Principal Place of Business
Level 1, 10 Felix Street
Brisbane QLD 4000
Share Registry
Computershare Investor Services Pty Limited
452 Johnston Street
Abbotsford VIC 3067
Stapled Securities are quoted on the Australian
Securities Exchange (ASX).
Auditors
Ernst & Young
111 Eagle Street
Brisbane QLD 4000
Corporate Directory
National Storage History
National Storage was established in December 2000, following the merger of Stowaway Self Storage, National
Mini Storage and Premier Self Storage. The union consolidated over 30 years of industry experience, creating a
network of centres with the capacity to deliver tailored storage solutions for residential and commercial needs
across Australia.
Since then, National Storage has enjoyed partnerships with a number of private and institutional investors,
amalgamating over thirty individual storage brands whilst undertaking eight tranches of acquisitions to grow
the business to over 60 centres to December 2013.
2000
2003
2004
–
2007
2007
2008
2011
2012
2013
2014
A merger between Stowaway Self Storage, National Mini Storage and Premier Self
Storage sees the establishment of National Storage as it is known today.
The APN National Storage Property Trust was formed in conjunction with APN Funds
Management. The partnership raised $137.5 million to fund the acquisition of 20 self-
storage properties and grew to peak investment of $350 million.
Six tranches of acquisition activity sees National Storage enter the New South Wales,
Victorian and Western Australian markets.
National Storage acquires Wine Ark, Australia’s premier wine storage provider with two
specialised facilities in Alexandria and Chatswood, NSW.
Investec works with National Storage to form the Investec National Storage Trust which
acquired 11 self-storage properties, six from the APN NSPT portfolio and five from a
third party vendor.
National Storage partners with global real estate investment manager Heitman to
establish the Southern Cross Storage Group which acquired 22 self-storage properties
from APN NSPT and third party vendors.
A further two acquisitions were made by the Southern Cross Storage Group.
The first initial public offering of a self-storage real estate investment trust is
undertaken in December 2013, with NSR established and listed on the Australian
Securities Exchange.
NSR successfully completes eight acquisitions to July 2014, with additional capacity for
further acquisitions into 2015 and beyond.
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National Storage Annual Report 2013/2014