ANNUAL REPORT
2014/2015
TABLE OF CONTENTS
HIGHLIGHTS
PORTFOLIO
CHAIRMAN’S REPORT
MANAGING DIRECTOR’S REPORT
BOARD OF DIRECTORS
SENIOR EXECUTIVES
CORPORATE GOVERNANCE
DIRECTORS' REPORT
FINANCIAL STATEMENTS
INVESTOR RELATIONS
CORPORATE DIRECTORY
NATIONAL STORAGE HISTORY
6
10
14
16
26
30
32
36
62
134
135
137
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
3
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 OVERVIEW
National Storage is one of Australia’s largest self-
storage providers, tailoring self-storage solutions to
over 30,000 residential and commercial customers
at 82 centres across the country.
In August 2015, National Storage entered the
New Zealand market with the acquisition of five
centres in Christchurch, expanding the portfolio
internationally and creating a platform for future
growth in New Zealand.
National Storage owns, manages or operates 87
storage centres across Australia and New Zealand.
OVERVIEW
5
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 22%
gearing as at
30 June 2015
HIGHLIGHTS
87 centres
under management
and operation
$521million
NSR portfolio valuation
Net Tangible Assets
per stapled security
at 30 June 2015
$1.11
Underlying
earnings for FY15
$24.3
million
(8.2 cents per
stapled security)
21
acquisitions
transacted
A-IFRS profit
after tax for FY15
$48.7m
7% increase
in rate per sqm occupied
in FY15 from $275 per sqm
to $293 per sqm across
total portfolio (excluding
developing centres)
Total net
lettable area of
460,000 sqm
Over
30,000
customers
44%
101,000 sqm
of additional net
lettable area
25%
10,000
additional storage units
HIGHLIGHTS
2%
increase in portfolio
occupancy up to
72%
(excluding developing centres)
35%
increase in total
assets under
management to
$740 million
51,000
storage units
At 26 August 2015 unless otherwise noted.
7
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 STRATEGY
NSR’s objective is to deliver investors a stable
and growing income stream from a diversified
portfolio of high quality self-storage assets and to
drive income and capital growth through active
asset and portfolio management.
+
Capital
Management
maintain an efficient
capital structure
+
+
Acquisitions
execute accretive acquisitions
Portfolio,
Development
& Centre
Management
undertake portfolio recycling
and development opportunities
Develop multiple
revenue streams to
maximise returns
^
Asset
Management
drive organic revenue growth
STRATEGY
9
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 PORTFOLIO
PERTH
14
CENTRES
ADELAIDE
6
CENTRES
NET LETTABLE AREA PER REGION
Queensland
New South Wales
Australian Capital Territory
Victoria
South Australia
Western Australia
Tasmania
New Zealand
TOTAL
As as 26 August 2015
*Total including managed centres and Southern Cross
NSR
68,000
20,000
28,000
91,000
39,000
58,000
-
17,000
321,000
TOTAL*
130,000
39,000
28,000
117,000
39,000
80,000
10,000
17,000
460,000
TOWNSVILLE
1
CENTRE
SUNSHINE COAST
4
CENTRES
GOLD COAST
3
CENTRES
BRISBANE
15
CENTRES
SYDNEY
10
CENTRES
CANBERRA
4
CENTRES
MELBOURNE
20
CENTRES
HOBART
3
CENTRES
GEELONG
2
CENTRES
CHRISTCHURCH
5
CENTRES
PORTFOLIO
11
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 PORTFOLIO STATISTICS
NSR PORTFOLIO DIVERSIFICATION
NSR PORTFOLIO BY VALUATION
17%
12%
9%
20%
$21million
$89 million
$63 million
3%
9%
$54 million
$47 million
$46 million
28%
$201 million
Queensland
New South Wales
Australian Capital Territory
Victoria
South Australia
Western Australia
New Zealand
Queensland
New South Wales
Australian Capital Territory
Victoria
South Australia
Western Australia
New Zealand
OVERALL ASSET CLASSIFICATION
CENTRES
TOTAL PORTFOLIO COMPOSITION
CENTRES
Original IPO Portfolio
Acquired
Developing
TOTAL
62
22
3
87
NSR Freehold
NSR Leasehold
Southern Cross
Managed
TOTAL
47
12
26
2
87
13
PORTFOLIO STATISTICS
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 "The Board is confident
National Storage is well
positioned to continue
the success of the past
year."
CHAIRMAN’S REPORT
On behalf of the Board I am pleased to present the National Storage
REIT 2015 Annual Report.
FY15 has seen continued focus on our strategy of driving income growth
through intensive asset management and by leveraging the capacity of our
operating platform through selective asset acquisitions and development.
In a year of challenges and opportunities, we have successfully executed
this strategy to deliver a 39% increase in total revenue to $63.7 million,
producing underlying earnings of $24.3 million, in line with guidance.
These results build upon the progress our portfolio has made since listing
in December 2013, growing from 62 to 87 centres and placing NSR at the
forefront of industry consolidation in the Australian self-storage market.
Our focus on asset management has seen rental rates per sqm increase
by 7% this year. Our acquisition programme has seen the successful
addition of 21 new centres to the portfolio, including our strategic move
into the New Zealand self-storage market. These achievements have
established a strong foundation for the future growth of NSR.
We continue our disciplined approach to capital management, with
conservative gearing targets and a strong balance sheet. A new debt
facility arrangement that delivered savings in interest costs and reduced
refinancing risk was implemented during the year. With the support
of our securityholders, we successfully raised over $115 million via
institutional placements and a security purchase plan which replenished
the balance sheet and supported our business strategy.
In 2014 we welcomed two new Directors to the Board, Steven Leigh
and Howard Brenchley, who bring a breadth of experience in property
and funds management. We also welcomed our new Chief Financial
Officer, Stuart Owen to the senior executive team. The Board and senior
executive team continue to work closely to formulate strategy and act
on opportunities which we identify in the marketplace.
It has been pleasing to see the institutional investor market take an
increasingly active interest in self-storage as an asset class. The
investment proposition offered by NSR as an integrated property trust
and operating business in the self-storage sector is unique and has
generated much interest from investors.
In what has been a period of firsts for National Storage, NSR’s promotion
into the S&P/ASX 200 is another milestone that recognises the achievements
of our team and sets the tone for the year ahead. The Board is confident
National Storage is well positioned to continue the success of the past year.
I would like to thank the Board, senior executive and all staff for their
energy, dedication and commitment to achieving our vision and
delivering on our strategy of creating multiple revenue streams to deliver
stable and growing returns for our securityholders.
Yours sincerely
Laurence Brindle
Chairman
CHAIRMAN'S REPORT
15
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
MANAGING DIRECTOR’S REPORT
Dear Investors
FY15 was a busy year for National Storage REIT.
We have created value for our shareholders, delivering a total shareholder
return of 39%, underlying earnings of $24.3 million and earnings of 8.2 cents
per stapled security in line with guidance.
In FY15 we have transacted 21 acquisitions totalling over $189 million in
value, adding over 101,000 sqm of net lettable area to our portfolio. We
have successfully expanded our business into new markets, including
Canberra and New Zealand, and grown our presence in key markets
such as Melbourne, Sydney and Perth.
We have centred our business strategies on enhancing shareholder
value, with a strong focus on:
OPTIMISING INDIVIDUAL CENTRE PERFORMANCE
We continue to improve the National Storage Management platform
and practice proactive asset management across our portfolio. Our
call centre, on-site centre management and head office teams
have access to sophisticated software for operations and yield
management which enable us to manage rates across individual
unit sizes and locations in real time. This helps us tailor storage
solutions specific to each customer, which improves our conversion
rates and allows us to drive rate and/or occupancy in line with
individual centre performance.
ACCRETIVE ACQUISITIONS IN KEY LOCATIONS
We have continued the implementation of our industry consolidation
strategy in key markets around Australia. This has resulted in a number
of successful portfolio and single centre acquisitions which have
been acquired on terms accretive to EPS and which are designed
to enhance long term shareholder value. We continue to uphold our
reputation as a respected counterparty and we consider this has
helped create a long term acquisition pipeline.
We will, of course, remain a buyer which seeks opportunities to value
add to acquisitions, identifying opportunities for growth in underlying
rate per square metre and via expansion of net lettable area or
reconfiguration of unit sizing. This will serve to continue to improve our
portfolio metrics and increase long term shareholder value.
EXPANDING ANCILLARY REVENUE STREAMS
Developing multiple revenue streams has been a key focus for us
over the past year. One of our primary projects for FY15 has been
the development of our management business for third party
owned centres. This platform enables us to expand our geographic
coverage, lowers our operating costs per centre and provides an
important future pipeline of potential acquisitions. FY15 has also
seen us partner with companies including Parcelpoint and U-Haul
to generate new revenue streams from the utilisation of National
Storage centres as locations for third-party business expansion.
DRIVING PORTFOLIO DEVELOPMENT
The later part of FY15 and into FY16 has seen us focused on a
number of development activities with key partners in local markets.
These partnerships allows us to further expand our footprint with the
greenfield development of state-of-the-art storage centres in prime
locations. The provision of site identification, design, development,
project management and post construction management services
will generate additional revenue. These developments also provide
an important long term potential acquisition pipeline of high quality,
institutional grade assets.
STRENGTHENING OUR BRAND AND CULTURE
Our staff embody our core values of teamwork, care and excellence
and it is these values together with our focus on customer service
that deliver results for our business, and for shareholders. We
are proud that our customers have given National Storage an
average rating of 4.8/5 in independent online reviews and that a
significant proportion of our customers find us through referrals or are
returning to us based on previous experience. This offline success
complements our digital marketing strategy which is playing a
greater role in our business year-on-year as we continue to challenge
our competitors in the online space.
The storage industry in Australia remains highly competitive, and
external factors including macroeconomic conditions, localised
competition, discounting and seasonal fluctuations have potential to
impact on the performance of our centres. Our operating results will be
dependent upon our ability to balance periodic increases in our overall
rate per square metre with our ability to manage occupancy to drive
overall performance. By proactively responding to changes in local
business conditions through our dynamic pricing model, together with
our call centre sales team and our online platforms, we will continue to
strive to maximise the performance of our centres.
National Storage has grown significantly over the last year but we
have remained true to our core values. We are fortunate to have an
exceptional team of highly committed and passionate individuals who
endeavour to build on the legacy of family company values which lie at
the heart of our company. These values encourage and reward a high
degree of accountability and ownership, which we consider to be an
important factor in delivering results into the future.
Yours sincerely
Andrew Catsoulis
Managing Director
MANAGING DIRECTOR'S REPORT
17
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
INVESTMENT PARTNERS
SOUTHERN CROSS PORTFOLIO
PERTH DEVELOPMENT PORTFOLIO
AUSTRALIAN PRIME STORAGE FUND
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.
NSR has certain rights to purchase Southern Cross
assets upon termination of the fund or earlier sale.
The portfolio comprises 26 assets around Australia.
The Perth Development Portfolio is a construction
and management arrangement with one of Perth’s
leading self-storage construction companies, Parsons
Group. Importantly, this venture reinforces the
National Storage brand as a prominent player in the
Perth market.
Five sites in and around Perth have been identified as
part of the arrangement, whereby Parsons Group will
construct quality self storage centres to be branded
National Storage.
The arrangement will see some centres acquired by
NSR on completion and others managed by Parsons
Group under the guidelines of the National Storage
operating platform.
The first centre at Jandakot will be a managed
centre and is scheduled for completion in September
2015. NSR will retain certain rights to purchase the
assets under this arrangement.
NSR is a cornerstone investor in the Australian Prime
Storage Fund (APSF) with an equity interest of up
to 25%. APSF has been established to facilitate the
development and ownership of premium self-storage
centres in select capital cities around Australia.
APSF will focus its activity in inner city markets where
there is demand for a premium storage product,
developing new institutional grade assets with state-
of-the-art facilities and freehold tenure. The strategy
underpins APSF's mandate to maximise absolute
investment returns over the investment term. NSR's
involvement will serve to grow market share for the
National Storage brand.
NSR will provide assistance and advice to the Fund
on a range of matters including site identification,
selection and acquisition, feasibility and input into
design and development. The assets will be integrated
onto the National Storage operating platform and
managed as part of the National Storage portfolio.
It is anticipated the Fund will develop up to
$100 million of assets with project construction
scheduled to commence later this year. NSR will hold
certain rights to purchase the assets upon termination
of the Fund, or earlier sale.
INVESTMENT PARTNERS
19
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
THE YEAR IN REVIEW
ASSET MANAGEMENT & BUSINESS OPERATIONS
ACQUISITIONS
NSR delivered an A-IFRS profit after tax for FY15 of $48.7 million, representing earnings per security of 16.56 cents.
Underlying earnings, after adjusting (excluding) movements in the fair value of assets and other one-off
items, was $24.3 million or 8.2 cents per security.
Distributions totalling of 8.2 cents were declared and paid for the period, in line with guidance. Total
revenue increased by 39% for FY15 to $63.7 million and Net Tangible Assets per security increased from $0.94
to $1.11 during FY15.
The rate per square metre achieved across the original IPO portfolio has increased by 3% from $275 per sqm at
30 June 2014 to $282 per sqm at 30 June 2015 (excluding all developing centres and post IPO acquisitions). The
overall rate per square metre achieved for the group (excluding developing centres but including all post IPO
acquisitions) increased by 7% from $275 per sqm to $293 per sqm over the same period.
Occupancy in the the total portfolio (excluding developing centres) grew from 70% to 72% over the year.
Occupancy in the original IPO portfolio was steady at 71% as management continued its focus on driving
total revenue.
Trading conditions were mixed and challenging overall, with weak business and consumer confidence and
a high level of discounting prevalent across the industry. The Operations Management Team continues to
manage rate per square metre growth against occupancy growth across the portfolio to optimise revenues and
profitability. The trading metrics stated above demonstrate that despite the challenging conditions, real rental
growth has been achieved on a like-for-like basis across the portfolio.
The Australian self-storage industry remains highly fragmented with approximately 75% of centres owned by
small independent operators. National Storage has successfully completed, and continues to seek, accretive
acquisition opportunities within the industry with a clear focus on acquiring strategic quality assets that deliver
reliable yields. The ability to acquire and integrate strategic accretive acquisitions is one of National Storage’s
major competitive advantages and a cornerstone of its growth strategy.
NSR PORTFOLIO NLA (sqm)
350,000
During FY15, 21 acquisitions were transacted totalling $189 million and expanding the portfolio by 101,000 sqm
(or 44%). The details of FY15 acquisitions follow:
300,000
DATE
PURCHASE PRICE
CENTRE
Mulgrave
Moorabbin
Wangara
Port Adelaide
250,000
200,000
STATE
Victoria
Victoria
Western Australia
150,000
South Australia
July 2014
July 2014
July 2014
July 2014
Hume, Phillip, Mitchell & Queanbeyan
ACT/NSW
October 2014
Forrestdale
O’Connor
Richmond, Hawthorn,
South Melbourne & Glen Iris
Dandenong South
Dee Why
100,000
50,000
Western Australia
November 2014
Western Australia
November 2014
Victoria
January 2015
Victoria
January 2015
0
New South Wales
February/June 2015
Christchurch (NZ)
Dec 13
August 2015
Jun 14
$7.0m
$8.2m
$10.9m
$5.2m
$46.5m
$11.0m
$8.0m
$48.8m
$15.2m
$7.2m
$20.9m
Dec 14
Jun 15
Ancillary income streams including packaging and insurance continue to deliver additional revenues across the
portfolio, with packaging sales up 38% for the period to $1.6 million and total ancillary income rising to $3.9 million.
Belfast, Opawa, Ferrymead, Hornby & Redwood
Annualised EPS
NSR PORTFOLIO NLA (sqm)
Total
Occupied
y
t
i
r
u
c
e
S
r
e
p
s
t
n
e
C
9
8.5
8
7.5
7
6.5
6
5.5
5
4.5
4
Jan - Jun 14
Jul - Dec 14
Jan - Jun 15
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Dec 13
Jun 14
Dec 14
Jun 15
Excluding NZ assets which settled in August 2015.
Total
Occupied
THE YEAR IN REVIEW
21
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
MARKETING & CUSTOMER EXPERIENCE
The pace of change continues to accelerate
across our marketing landscape. In the past twelve
months unique visits to the National Storage website
have increased over 30%, a sign the shift to digital is
continuing and that storage customers are ready and
willing to engage online. Strategies to generate online
sales including the development of a new online
booking system have simplified the sales process while
still producing a tailored storage solution to customers.
Online conversions have increased by 6% since June
2014 and search engine marketing and search engine
optimisation continue to be a major focus with the
visibility of the National Storage brand demonstrating
21% growth year-on-year. New online advertising
strategies are generating brand awareness, with over
26 million impressions of the National Storage brand
delivered in FY15.
A focus on innovation for 2015/16 will see new
strategies deliver improvements in customer
experience, digital platforms and high level brand
awareness across multiple mediums and markets.
WINE ARK
Wine Ark, Australia’s largest provider of storage for
fine wine, houses over two million bottles across 16
centres for clients located in over forty countries.
There are few other businesses in Australia with more
experience when it comes to storing and managing
premium wine. The Wine Ark business continued to
increase revenues across FY15 and delivered a 17%
increase in new wine sales. Wine Ark is embarking
on a new phase of growth into FY16 with a focus on
expanding key markets and developing multiple
income streams.
THE YEAR IN REVIEW
23
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
PORTFOLIO MANAGEMENT, DEVELOPMENT
MANAGEMENT & CENTRE MANAGEMENT
CAPITAL MANAGEMENT
SUSTAINABILITY
National Storage launched its centre management
platform in August 2014 as a means of diversifying
storage income streams, expanding market
coverage and reducing operational unit costs.
National Storage has entered into a number of
agreements with investment partners that will see
National Storage managing up to thirteen additional
centres progressively over the next two to three years.
National Storage remains actively engaged in
portfolio recycling and development activities. In
FY15, development income was generated from
the O’Connor (Kardinya) transaction and the
portfolio recycling opportunity underway at Brooklyn.
A number of portfolio recycling opportunities,
particularly in Victoria, continue to be progressed.
The APSF and the Perth Development Portfolio will
provide positive exposure to development activities
with additional revenue generated through various
service and management fees anticipated in FY16.
Throughout FY15 all financial covenants were in
compliance, with a gearing ratio of 22% and an
interest cover ratio of 5.6 times at 30 June 2015.
At August 2015, the facility limit of $200 million was
drawn to $123.5 million with a remaining limit of
$76.5 million.
A total of 89,559,313 stapled securities were issued
as part of two institutional placements, a security
purchase plan and private placement (as part
consideration for acquisitions) in FY15. Each capital
raising initiative was well received by the market and
provided $121 million to replenish the balance sheet
and provide capacity to execute NSR’s ongoing
acquisition strategy.
Distributions totalling 8.2 cents were paid to investors
in FY15, representing a 100% payout ratio and in line
with guidance.
During July 2015 a New Zealand denominated (NZ$)
facility for NZ$25 million was entered into to facilitate
the recently announced Christchurch acquisitions.
This NZ$ loan provides a natural hedge to the
acquisition costs of the New Zealand assets with only
nominal translation risk.
Human Capital
Corporate Social Responsibility
The growth of the National Storage business has seen
an additional 120 people join National Storage in FY15.
National Storage is committed to building a
sustainable business and minimising its environmental
footprint.
Diversity and inclusion continue to be key aspects of
staff engagement at National Storage, with a focus
on improving female representation in management
roles and being an equal opportunity employer. The
National Storage workforce is evenly split, with 140
males and 143 females.
The National Standard, a reward and recognition
program for National Storage staff was launched in
August 2015. The program will progressively roll out
over 2015/2016 together with an upgraded intranet
to facilitate staff engagement and communication
across a geographically diverse business.
NATIONAL STORAGE GENDER DIVERSITY
NATIONAL STORAGE GENDER DIVERSITY
MANAGERS
NATIONAL STORAGE GENDER DIVERSITY
MANAGERS
MANAGERS
The NS Energy Efficiency Project is underway with
works progressed in priority centres, where lighting is
being transitioned to LED. The possibility of retrofitting
solar to some centres is also under investigation.
However, the portfolio overall remains a relatively low
user of utilities.
In FY15 National Storage, through the box buy-back
program, recycled over 12,000 branded boxes.
Recycling continues to be a major focus for centres
with every centre equipped with large paper and
cardboard bins.
ALL STAFF
Each National Storage centre plays an active role
in its local community and the broader business
is committed to maintaining socially responsible
business practices.
ALL STAFF
ALL STAFF
Local community engagement programs see
National Storage centres and staff provide support,
resources or storage to local clubs, not-for-profit
groups and community groups where appropriate.
53%
47%
ALL STAFF
ALL STAFF
NATIONAL STORAGE GENDER DIVERSITY
NATIONAL STORAGE GENDER DIVERSITY
MANAGERS
MANAGERS
NATIONAL STORAGE GENDER DIVERSITY
MANAGERS
NATIONAL STORAGE GENDER DIVERSITY
MANAGERS
ALL STAFF
ALL STAFF
Females
Males
Females
Males
Females
Males
Females
Males
49%
Females
51%
Males
Females
Males
THE YEAR IN REVIEW
25
Females
Males
Females
Males
Females
Males
Females
Males
Females
Males
Females
Males
Females
Males
Females
Males
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
BOARD OF
NSH DIRECTORS
Laurence Brindle
Anthony Keane
Howard Brenchley
Steven Leigh
Independent Non-executive Chairman
BCom, BE (Hons), MBA
Independent Non-executive Director
BSc(Maths), Grad Dip Corp Fin
Independent Non-executive Director
BEc
Independent Non-executive Director
Cert Practising Valuer, Grad Dip Proj Mgmt
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. 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 and a former
director of Westfield Retail Trust and Scentre Group.
Laurence serves on the NSR Audit and Risk
Committees and is Chairman of the Nomination and
Remuneration Committees.
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
Committees and is a member of the Nomination and
Remuneration Committees.
Howard has nearly 30 years' involvement in
the Australian property industry, as an analyst,
investor and fund manager. Howard co-founded
Property Investment Research Pty Ltd (PIR) in 1989
which during the 1990s was considered a leading
researcher of both listed and unlisted property funds
In 1998 Howard was responsible for the establishment
of APN Funds Management Limited, part of the APN
Property Group Limited. During this period he was
responsible for the establishment and operations of a
number of funds investing both directly and indirectly
in real estate.
Howard is currently a non-executive director of
the ASX-listed APN Property Group Limited (APD)
and is also a non-executive director of APN Funds
Management Limited, responsible entity for
Generation Healthcare REIT and Industria REIT. He
is also a member of the Board of Advisors of the
Property Industry Foundation (Victoria).
Howard is a member of the Audit and Risk Committees.
Steven Leigh joined QIC Global Real Estate in 1991
and was a key member of the senior executive team
that acquired and or created through development
a portfolio of high quality retail and commercial assets
in Australia, USA and the UK. Steven has had significant
experience in the wholesale funds management
business through various market cycles and conditions
and has a strong background in retail, commercial and
industrial property with a particular focus on shopping
centre acquisitions and redevelopments.
After time as the Managing Director of Trinity Limited,
and later Head of Australia for LaSalle Investment
Management, Steven re-joined QIC as Managing
Director QIC Global Real Estate in 2012 where he is
responsible for the group’s $12bn plus property portfolio.
Steven is a certified practising valuer and holds a
Graduate Diploma in Project Management from the
Queensland University of Technology. Steven is an
associate member of the Australian Property Institute.
Steven is a member of the Remuneration and
Nomination Committees.
BOARD OF NSH DIRECTORS
27
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
The Board of Directors of The Trust Company
(RE Services) Limited are detailed on page 43.
Andrew Catsoulis
Managing Director
BA, LLB, Grad Dip Project Mgmt (Hons)
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.
BOARD OF NSH DIRECTORS
29
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 SENIOR EXECUTIVES
Andrew Catsoulis
Managing Director
LLB, Grad Dip Project Mgmt
See page 28.
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 Australia (SSAA), including a
term as the President of this body and a regular speaker
at the national SSAA conference.
Stuart Owen
Chief Financial Officer
BBus, CPA, GAICD
Stuart joined National Storage in late 2014, with
extensive experience in the energy sector in coal
and gas fired power generation. He has held wide
ranging finance and commercial management
roles, including as Commercial Manager for Energy
Developments Limited. Prior to this, Stuart was
commercial manager on the delivery of a multi-site
gas fired power generation project and micro LNG
plant.
He has significant experience in project financing,
mergers and acquisitions and project development.
Stuart holds a Bachelor of Business, is a Certified
Practising Accountant and is a graduate of the
Australian Institute of Company Directors.
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.
Makala Ffrench Castelli
Marketing and Corporate Affairs Manager
BBus, Grad Dip Arts
Makala has over nine 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.
SENIOR EXECUTIVES
31
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 The NSH Policies provide for an Investment
Committee and a Diversity Committee. The Board
has determined that the Investment Committee and
Diversity Committee functions be undertaken by the
full Board at this time.
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 as of 25 February 2015 upon the appointment
of Howard Brenchley to the Audit and Risk
committees and Steven Leigh to the Remuneration
and Nomination committees and as the date of
this statement, the governance practices adopted
by NSR comply with the third edition of the ASX
Recommendations.
The Board and Responsible Entity early adopted the
third edition of the ASX Recommendations as at 30
September 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
governance 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
2015, the NSH Board has convened the following
committees as part of its corporate governance
framework:
COMMITTEE
CHAIR
MEMBERS
Audit
Anthony Keane
Risk
Anthony Keane
Nomination
Laurence Brindle
Remuneration
Laurence Brindle
Laurence Brindle,
Howard Brenchley
Laurence Brindle,
Howard Brenchley
Anthony Keane,
Steven Leigh
Anthony Keane,
Steven Leigh
NSH committees are governed by their respective
Charters.
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 executive
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.
BOARD & MANAGEMENT RESPONSIBILITY
NSR’s compliance with the ASX Recommendations
are detailed in the NSR Corporate Governance
Statement, Appendix 4G and all NSR governance
Policies and Charters full copies of which can be
found in the Governance section of the website
at www.nationalstorageinvest.com.au. The current
Corporate Governance Statement was adopted
by the Board and Responsible Entity's Board on 26
August 2015.
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.
CORPORATE GOVERNANCE
33
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 BOARD COMPOSITION & INDEPENDENCE
RISK MANAGEMENT
The current NSH Board is comprised of five Directors,
being four non-executive Directors (one of whom is
the Chairman) and the Managing Director. Detailed
information about the Directors is set out on
pages 26 - 28.
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. However,
the NSH Board considers that it is appropriate and
in the best interests of NSR and the stapled security
holders to periodically review the size of the Board
and its skill set to ensure that it remains appropriate
for NSR. To this end and reflecting the continued
growth in the business, the Board has identified its
desire to appoint an additional director to further
enhance the skill set of the Board and to enhance
the gender diversity of the Board. Significant progress
has been made towards this goal during the year.
The NSH Board considers all of the current non-
executive Directors, being the Chairman Mr Laurence
Brindle, Mr Anthony Keane, Mr Howard Brenchley and
Mr Steven Leigh to be independent.
The Directors of the Responsible Entity are set out on
page 43.
COMPANY SECRETARIES
The Company Secretary of NSH is Mr Patrick Rogers.
Detailed information on Mr Rogers is contained on
page 31 of this report. The Company Secretaries of the
Responsible Entity are listed on page 45 of this report.
NSR’s operations expose it to risks. A summary of
potential risks is set out on page 40 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, for the whole of the Reporting
Period (1 July 2014 to the end of 30 June 2015),
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 8 through 25 of this Report.
CORPORATE GOVERNANCE
35
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 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 2015 (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.
KEY HIGHLIGHTS
A-IFRS profit after tax of $48.7 million (2014: $15.6 million) and earnings per Stapled Security
(“EPS”) of 16.56 cents (2014: 11.00 cents)
Underlying earnings1 of $24.3 million, 8.2 cents per stapled security in line with guidance
IPO Portfolio
Increase in rate per square metre to $282/sqm (2014: $275/sqm)
o
o Occupancy steady at 71%
Total Portfolio (excluding dev eloping centres)
Rate per square metre of $293/sqm (2014: $275/sqm)
o
o Occupancy increased from 70% to 72%
Total Rev enue increased by 39% to $63.7 million (2014: $45.7 million)
Distributions of 8.2 cents per stapled security in line with guidance
Completed 21 acquisitions totalling $189 million and added 101,000 sqm in
net lettable area
Total Assets Under Management (AUM) increased by 27% from $582 million to $740 million at 30
June 2015
Increase of 12% in the v aluation of the 30 June 2014 portfolio from $310 million to
$346 million
New country entry into New Zealand with the purchase of fiv e storage centres in Christchurch
(transaction completed August 2015)
Portfolio v alue post completion of the New Zealand acquisition of $521 million
Completed first asset recycling project with the sale of the Brooklyn centre
Successfully conducted two equity raisings contributing $115 million
PRINCIPAL ACTIVITIES
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 87 self-storage centres under
operation or management, tailoring storage solutions to ov er 30,000 customers across Australia and
New Zealand. NSR has grown its portfolio of owned and managed centres by 40% from 62 centres at
the time of the IPO to 87 centres at the date of this Directors’ Report. It has grown total storage units by
approximately 28% with NSR now managing 51,000 storage units across 460,000 sqm of net lettable
area around Australia and New Zealand. AUM has increased to $740 million as at 30 June 2015.
Of the 87 self-storage properties in the NSR portfolio, ownership is as follows:
47 self-storage centres owned by NSPT
12 self-storage centres operated as long-term leasehold centres (Leasehold Cent res);
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; and
2 third party managed centres.
Southern Cross is an unlisted inv estment fund established by National Storage and real estate
inv estment firm Heitman in September 2011 that owns self-storage centres throughout Australia,
operated as National Storage branded centres.
The National Storage core product offering cov ers self-storage, business storage, v ehicle storage and
wine storage at National Storage’s climate controlled storage facilities and v ia W ine Ark (which
operates dedicated self-access and managed cellars). Ancillary income streams are deriv ed from
other related activ ities including packaging sales and v ehicle/trailer hire.
1 A-I FRS profit aft er t ax adjust ed for t ax ex pense (+$0.3 million), Ot her non-operat ing ex penses (+$0.9 million), Fair v alue adjust ment s
(-$21.0 million) and Net loss from fair v alue adjus t ment s of Leasehold inv est ment propert ies ( -$4.6 million)
DIRECTORS' REPORT
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
37
37
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
BUSINESS STRATEGY
NSR’s objective is to develop multiple revenue streams so as to deliver Securityholders a stable and
growing income stream from a diversified portfolio of high quality self-storage centres, and consistent
income and capital growth through active asset management, and portfolio management strategies
(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 the NSPT portfolio;
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.
Further details on these key business drivers can be found on pages 8 – 25 of this 2015 Annual Report.
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 Cth 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 for the comparative period (the “Comparative Period” or “2014”).
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 Comparative Period. Further, the
comparative information is reported to the extent possible due to the 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.
OPERATING RESULTS
A-IFRS Profit after tax for the Reporting Period was $48.7 million and EPS for the Reporting Period was
16.56 cents. Underlying earnings, after adjusting (excluding) movements in the fair value of assets and
other one off items, was $24.3 million or 8.2 cents per stapled security.
Gross trading income rose by 39% to $69.7 million. The rate per square metre achieved across the total
portfolio (excluding developing centres) increased by 7% to $293/sqm at 30 June 2015.
Further details on these key business drivers can be found on pages 8 – 25 of this 2015 Annual Report.
CASH MANAGEMENT
Cash and cash equivalents as at 30 June 2015 were $9.5 million compared to $8.3 million in 2014. Net
operating cashflow for the year was $37.6 million (2014: $22.4 million).
During the year NSR successfully completed two private placements and a security purchase plan
raising $114,876,629 via the issue of 84,759,313 NSR ordinary securities. A further 4,800,000 ordinary
securities valued at $7,152,000 were issued during November 2014 as part consideration for the
acquisition of the Hume, Mitchell, Phillip and Queanbeyan storage centres.
An interim distribution of 4.0 cents per security ($11,825,266) was paid on 27 February 2015 with a final
distribution of 4.2 cents per security ($14,047,169) declared on 23 June 2015 with an estimated payment
date of 27 August 2015.
The Consolidated Group refinanced its debt facilities during December 2014. The new facilities are on
a “Club” arrangement with National Australia Bank, Westpac Banking Corporation and
Commonwealth Bank of Australia. The new facilities have increased the Consolidated Group’s
borrowing capacity to $200 million and delivered savings in the overall cost of debt. Additional interest
rate hedges were entered into during December 2014 to take advantage of the current low interest
rate environment. As at the Reporting Date, the facility limit of $200 million was drawn to $123.5 million
with $76.5 million remaining available.
During the reporting period two additional interest rate hedges were entered into totalling $80 million.
The new interest rate hedges have enabled NSR to extend the tenor of its hedge portfolio and lock in
historically low interest rates for an extended period.
Subsequent to the Reporting Date an additional New Zealand denominated (NZ$) facility for NZ$25
million has been entered into to facilitate the recently announced Christchurch acquisition. The facility
is on terms consistent with the existing club facility. As at the date of this report the facility was drawn to
NZ$23.5 million.
ACQUISITIONS AND INVESTMENTS
NSR considers its ability to acquire and integrate quality accretive assets to be a key driver of its growth
strategy. During the course of the Reporting Period, the dedicated acquisitions team continued 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 21 centres from 1
July 2014 to the date of this Directors’ Report, and has resulted in the value of the NSR property portfolio
(including indirect interests) increasing by $189 million. Further, a revaluation of the NSR owned centres
on a like for like stand-alone basis as at 30 June 2015 (based on valuations and methodologies from
independent valuer m3 Property) yielded an increase of 12% from $310 million to $346 million.
LIKELY DEVELOPMENTS
NSR intends to utilise its position as Australia's first listed self-storage REIT to continue to bring quality
independently owned storage centres across Australia and New Zealand under NSR's ownership and/or
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 and refine its third party management offer.
DIVIDENDS AND DISTRIBUTIONS
NSR has paid or declared distributions totalling 8.2 cents per Stapled Security for the Reporting Period,
comprising:
An estimated distribution of 4.2 cents per Stapled Security for the 6 months to 30 June 2015. The
distribution is expected to be paid on 27 August 2015 and is expected to contain a tax
deferred component.
A distribution of 4.0 cents per Stapled Security for the period 1 July 2014 to 31 December 2014
which was paid on 27 February 2015 which included a tax deferred component.
OPTIONS OVER STAPLED SECURITIES
No options over issued Stapled Securities or interests in a Controlled Entity have been granted in NSR
during the Reporting Period. 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.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
DIRECTORS' REPORT
38
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
39
39
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 ENVIROMENTAL, ECONOMIC AND OTHER SUSTAINABILITY RISKS
NSR’s operating activ ities expose it to a number of potential risks. Ov erall risk is managed centrally by
management to minimise potential adv erse effects on the financial performance of NSR and protect
Securityholder v alue.
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 adv ersely impact upon demand for storage space. Material macroeconomic ev ents
occurring or any significant trading downturns due to factors beyond the control of
management hav e the potential to negativ ely impact on forecast trading performance. The
results of NSR’s operating activ ities are dependent on the performance of the properties in
which it inv ests 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 lev els. There are also industry and location specific risks to consider, including
competitor behav iour.
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
and highly dev eloped marketing and management systems are in place to maximise
conv ersion of new customer enquiries.
Competition - Entry by new competing storage centres or discounting by existing storage
centres may adv ersely impact upon occupancy and rental rates on a centre specific basis.
W hile there are barriers to entry for new competition, NSR constantly monitors its competitors'
activ ities to ensure pricing and terms remain competitive.
Valuations - property v aluations 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 prev ailing market conditions. As a result i t may not be
possible for NSR to dispose of assets in a timely or price accretiv e fashion should the need to do
so arise.
Exposure to Southern Cross - NSR has entered into a management agreement with Southern
Cross which prov ides management fees for its serv ices. This agreement may be terminated in
certain circumstances including a material breach of the agreement that is not rectified within
the remedy period. If the agreement was terminated these management fees would be lost.
The inv estors’ agreement pursuant to which NSR holds its inv estment in Southern Cross contains
termination prov isions. If Heitman exercised these, the assets of the trust may hav e 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). Howev er 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 prev ailing market forces including av ailability of appropriately priced acquisition
opportunities and av ailability 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
lev el. 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 serv ices of key personnel were no longer av ailable this may hav e an
adv erse impact on the financial performance of NSR. Howev er, NSR’s senior management
team are considered internally to be stable and committed and succession planning is
undertaken periodically by the NSH Board and Managing Director. Further, the Managing
Director and Chief Operating Officer are subject to the clawback agreement ov er their
Stapled Securities as detailed later in this Directors’ Report.
Interest rate fluctuations and derivative exposure - unfav ourable mov ements in interest rates
could lead to increased interest expense to the extent that these rates are not hedged. NSR
uses deriv ative instruments to hedge a percentage of its exposure to interest rates however the
interest rate mov ements could still result in an adv erse effect on financial performance.
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.
NAME
POSITION
Laurence Brindle
Non-Executive Chairman
Andrew Catsoulis
Managing Director
Anthony Keane
Non-Executive Director
Howard Brenchley
Non-Executive Director (appointed 21 November 2014)
Steven Leigh
Non-Executive Director (appointed 21 November 2014)
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, unless stated, are set out below.
NAME
POSITION
Andrew Cannane
Director
Christopher Green
Director
Gillian Larkins
Director (resigned 31 July 2015)
Anna O’Sullivan
alternate Director for Andrew Cannane
alternate Director for Christopher Green
Joanne Hawkins
alternate Director for Gillian Larkins (resigned 26 June 2015)
Glenn Foster
Glenn Foster
alternate Director for Gillian Larkins (resigned 31 July 2015)
Director (appointed 31 July 2015)
Michael Vainauskas
Director (appointed 02 March 2015)
DIRECTORS’ QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES
Board of National Storage Holdings Limited
Laurence Brindle, Independent Non-executive Chairman (Appointed 1 November 2013)
BCom, BE (Hons), MBA
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.
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 and a
former director of Westfield Retail Trust and Scentre Group, which owns, operates and develops
Westfield shopping centres in Australia and New Zealand.
Laurence serves on the Audit and Risk Committees and is Chairman of the Nomination and
Remuneration Committees.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
DIRECTORS' REPORT
40
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
41
41
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
Andrew Catsoulis, Managing Director (Appointed 1 November 2013)
BA, LLB, Grad Dip Proj Mgmt (Hons)
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.
Anthony Keane, Independent Non-executive Director (Appointed 1 November 2013)
BSc(Maths), Grad Dip Corp Fin
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 Committees and is a member of the Remuneration
and Nomination Committees.
Howard Brenchley, Independent Non-executive Director (Appointed 21 November 2014)
BEc
Howard has nearly 30 years' involvement in the Australian property industry, as an analyst, investor and
fund manager. Howard co-founded Property Investment Research Pty Ltd (PIR) in 1989 which during
the 1990s was considered a leading researcher of both listed and unlisted property funds. In 1998
Howard was responsible for the establishment of APN Funds Management Limited, part of the APN
Property Group Limited. During this period he was responsible for the establishment and operations of a
number of funds investing both directly and indirectly in real estate.
Howard is currently a non-executive director of the ASX-listed APN Property Group Limited (APD) and is
also a non-executive director of APN Funds Management Limited, responsible entity for Generation
Healthcare REIT and Industria REIT. He is also a member of the Board of Advisors of the Property Industry
Foundation (Victoria).
Howard is a member of the Audit and Risk Committees.
Steven Leigh, Independent Non-executive Director (Appointed 21 November 2014)
Certified practising valuer, Grad Dip Proj Mgmt
Steven joined QIC Global Real Estate in 1991 and was a key member of the senior executive team that
acquired and or created through development a portfolio of high quality retail and commercial assets
in Australia, USA and the UK. Steven has had significant experience in the wholesale funds
management business through various market cycles and conditions and has a strong background in
retail, commercial and industrial property with a particular focus on shopping centre acquisitions and
redevelopments.
After time as the Managing Director of Trinity Limited, and later Head of Australia for LaSalle Investment
Management, Steven re-joined QIC as Managing Director QIC Global Real Estate in 2012 where he is
responsible for the group’s $12bn plus property portfolio. Steven is a certified practising valuer and holds
a Graduate Diploma in Project Management from the Queensland University of Technology. Steven is
an associate member of the Australian Property Institute.
Steven is a member of the Remuneration and Nomination Committees.
Board of The Trust Company (RE Services) Limited
Andrew Cannane, Director
BEcon, MBA
Andrew Cannane is General Manager, Corporate Client Serv ices and has responsibility for wholesale
trustee and custodial serv ices for registered and unregistered funds and our Singapore Corporate
Trustee business. Prior to Perpetual’s acquisition of The Trust Company, Andrew was the General
Manager of Corporate Client Serv ices for The Trust Company where he was responsible for business
dev elopment and client relationship management. He was also an Executiv e Director on The Trust
Company’s RE and Debt Capital Markets Boards. Prior to this, Andrew established The Trust Company’s
office in Singapore and has led the strategic direction of The Trust Company’s international business for
the past sev en years. Prior to joining The Trust Company, Andrew spent 15 years in wealth
management, financial markets and retail banking in Australia, Singapore, and the UK. He holds a MBA
(Executiv e) degree from the Australian Graduate School of Management, a Bachelor of Economics
degree from Sydney Univ ersity and he is a Fellow of the Financial Serv ices Institute of Australasia
(FINSIA).
Christopher Green, Director
B Com, LLB, MBA
Christopher joined Perpetual from JPMorgan where he spent ten years with the Institutional Trust
Serv ices business firstly in Europe cov ering the European, Middle Eastern and African markets and then
as head of its Australian business. His career began as a solicitor for Corrs Chambers W estgarth. He
holds a Masters of Business Administration (London Business School) and a Bachelor of Laws and a
Bachelor of Commerce (Univ ersity of Queensland). Christopher is Deputy Chairman of the Australian
Securitisation Forum and a member of the Australian Institute of Company Directors. Christopher is
currently completing a BA in Philosophy through the Univ ersity of London.
Gillian Larkins, Director (resigned 31 July 2015)
B Com, GradDip Accounting & Finance MBA CA GAICD
Ms Gillian Larkins joined Perpetual as Group Executiv e Transformation Officer 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 W estpac Institutional Bank, responsible for
Finance and Strategy, and prior to that, Chief Financial Officer Australia and New Zealand of Citigroup.
Ms Larkins has also serv ed on the board of Hastings Fund Management as a non-executiv e director
from 2009 to 2011. As a member of the Executiv e 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 Univ ersity 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.
Michael Vainauskas, Director (appointed 2 March 2014)
MBF
Michael joined Perpetual Limited as the Chief Risk Officer (CRO) in October 2014. In this role he is
responsible for both risk management and internal audit functions across the Group. Prior to this he was
the Head of Risk Operations within the International Financial Services (IFS) Div ision of the
Commonwealth Bank of Australia (CBA) where he held this role from March 2012 until Nov 2013. In this
role Michael was responsible for managing and supporting all risk management functions (other than
large credit approv als) of the IFS businesses which include China, India, Indonesia, Japan and Vietnam.
Michael was prev iously the CRO for PT Commonwealth Bank Indonesia for 1 year, a subsidiary of CBA.
In this role Michael was responsible for all risk and legal areas across the subsidiary. Michael’s
background in finance extends back to 1983 and cov ers business, operational, compliance, legal and
risk related responsibilities, from line-staff positions through to executive management lev el within a
decentralised and centralised framework. Michael prev iously worked for 15 years at Household Finance
Ltd which was subsequently acquired by AVCO Finance and is known as GE Capital today in Australia.
Michael holds a Master of Business in Finance.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
DIRECTORS' REPORT
42
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
43
43
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
Glenn Foster (appointed 31 July 2015)
B Comm, CA, GAICD
Glenn is responsible for the Perpetual Limited Group Finance function including external, regulatory and
statutory reporting, financial operations, corporate tax compliance, and treasury and capital
management. He is also responsible for Business Support Services, including Facilities Management.
Glenn commenced his career with Coopers and Lybrand (now part of PricewaterhouseCoopers)
before entering the financial services industry in 1994. Prior to joining Perpetual in 2003, Glenn worked in
a number of senior finance roles with AIDC Ltd., Babcock and Brown, State Street Bank & Trust
Company and RAMS.
Alternate Directors:
Anna O’Sullivan - LLB
Glenn Foster – B Comm, CA, GAICD (resigned 31 July 2015)
Joanne Hawkins – B Comm, LLB, Grad Dip CSP FGIA (resigned 26 June 2015)
DIRECTORSHIPS OF OTHER LISTED COMPANIES
Directorships of other listed companies held by current Directors in the three years immediately before
the end of the financial year are as follows:
NAME
Laurence Brindle
Howard Brenchley
COMPANY
Scentre Group (ASX:SCG)
Westfield Retail Trust (ASX:WRT)
APN Property Group (ASX:APD)
Generation Healthcare REIT (ASX:GHC)
Industria REIT (ASX:IDR)
PERIOD OF DIRECTORSHIP
01/07/2014 – 07/05/2015
December 2010 - 30/06/2014
1998 - Current
12/08/2011 - Current
03/12/2013 - Current
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
Howard Brenchley
Steven Leigh
Andrew Cannane
Christopher Green
Anna O’Sullivan (1) (2)
Glenn Foster
Michael Vainauskas
DIRECT
-
-
397,900
-
-
-
-
-
-
-
INDIRECT
1,032,400
114,000
12,161,263
-
63,000
-
-
-
-
-
TOTAL
1,032,400
114,000
12,559,163
-
63,000
-
-
-
-
-
(1)
(2)
Alternate for Andrew Cannane
Alternate for Christopher Green
THE RESPONSIBLE ENTITY’S INTERESTS IN NSR SECURITIES
Entities related to the Responsible Entity within the Perpetual Group manage funds that own 575,648
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
BOARD
AUDIT
COMMITTEE
RISK
COMMITTEE
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
Laurence Brindle
Anthony Keane
Andrew Catsoulis
Howard Brenchley
Stev en Leigh
Notes:
20 (20)
20 (20)
20 (20)
9 (9)
9 (9)
4 (4)
4 (4)
-
1 (1)
-
3 (3)
3 (3)
-
1 (1)
-
4 (4)
4 (4)
-
-
3 (3)
4 (4)
4 (4)
-
-
3 (3)
1.
Figures in brackets indicate the number of meetings held whilst the director was in office or was
a member of the relev ant 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, Remuneration, Risk and Audit Committee meetings by
3.
4.
5.
inv itation.
The Audit and Risk Committees were combined up until 30 September 2014
The Remuneration and Nomination Committees were combined up until 25 February 2015
The Company has an Inv estment Committee Charter to gov ern an Inv estment Committee.
The Board has determined that at this time, the full Board will act as the Inv estment Committee
and therefore there are no separate Inv estment Committee meetings noted.
COMPANY SECRETARY
NATIONAL STORAGE HOLDINGS LIMITED
Patrick Rogers (appointed 1 November 2013)
LLB, B Bus - Accounting
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 ov er 15 years in both fields. During his time in
priv ate practice, Patrick has had significant experience in corporate, property, commercial, taxation
and transactional work. In addition to priv ate practice, Patrick was the general counsel and company
secretary of the Super A-Mart Group for ov er 8 years, (including holding the role of CFO for a time)
where he was a part of the senior management team and had extensiv e involvement in the operations
of the company.
THE TRUST COMPANY (RE SERVICES) LIMITED
Glenda Charles (appointed 28 February 2014)
Thornton Christensen (appointed 28 February 2014, resigned 1 May 2015)
Sylv ie Di Marco (appointed 1 May 2014)
Joanne Hawkins (appointed 1 May 2014)
CORPORATE GOVERNANCE
NSH and The Responsible Entity hav e their own respective Boards and constitutions. The relationship
between NSH and the Responsible Entity is gov erned by a Cooperation Deed and Management
Agreement that facilitate common processes and gov ernances for NSR. Pursuant to the NSR Charter, it
is the function of the NSH Board to prov ide ov erall strategic guidance and effective ov ersight of
management of NSR.
The NSH and Responsible Entity Boards and NSH management are committed to achiev ing and
demonstrating to Securityholders high standards of corporate gov ernance and to ensure NSH acts in
the best interests of its Securityholders balanced with its broader community obligations.
An important component of the NSR corporate gov ernance structure is the ASX Corporate
Gov ernance Principles and Recommendations (the “ASX Recommendations”). A more detailed
discussion of NSR’s Corporate Gov ernance is found at page 32 of this Annual Report and a statement
of the extent of NSR’s compliance with the ASX Recommendations can be v iewed on the NSR website
at www.nationalstorageinvest.com.au/corporate/governance/. Full copies of all NSR gov ernance
policies and Charters can also be found in the Gov ernance section of the website.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
DIRECTORS' REPORT
44
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
45
45
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has agreed to indemnify all the Directors and executiv e 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 hav ing been an offi cer 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”).
Howev er, the Indemnity does not extend to a claim in the nature of:
(a)
(b)
a challenge to any rejection of a Director’s claim by the prov ider of the Company’s insurance
cov er; or
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 effect the abov e hav e been formally entered into by the Company and
Laurence Brindle and Anthony Keane. The Company will enter into similar deeds of indemnity with the
other Directors and executiv e officers of the Company during the 2016 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 v oluntarily 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 $109,982.
No insurance premiums are paid out of the assets of the NSPT in regards to insurance cov er prov ided 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 receiv ed by NSR to indemnify
Ernst & Young during the Reporting Period or up to the date of this report.
REMUNERATION REPORT (AUDITED) – NSH GROUP
MESSAGE FROM THE BOARD
The NSH Board is committed to ensuring that remuneration strategies are structured to support and
reinforce NSR’s ov erall business strategy. By linking the Short Term Incentiv e (“STI”) and Long Term
Incentiv e (“LTI”) (at risk remuneration) of executive remuneration to the driv ers that support the business
strategy, the remuneration of executives is aligned with the creation of long-term v alue for
Securityholders. The Board believ es that the remuneration practices of NSR should fairly and
responsibly reward Key Management Personnel (“KMP”) hav ing regard to their indiv idual performance,
the performance of NSH and NSPT and the broader external env ironment as it relates to KMP reward.
The policy also aims to prov ide a platform for sustainable v alue creation for Securityholders by
attracting and retaining quality KMP.
COVERAGE OF THIS REPORT
The following remuneration report has been prepared to prov ide information to Securityholders of the
remuneration details of the KMP of NSH inv olv ed in the management of the NSPT.
Directors of the Responsible Entity do not receiv e any remuneration from NSR as KMP. The Responsible
Entity receiv es a fee for management serv ices 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 m ajor activities of NSH, the Consolidated Group and the NSPT, directly or indirectly,
including any director (whether executive or otherwise) of NSH.”
Key management personnel cov ered in this report are as follows:
NON-EXECUTIVE AND EXECUTIVE DIRECTORS
Laurence Brindle - Chairman (non-executiv e)
Andrew Catsoulis – Managing Director (executive)
Anthony Keane - Director (non-executive)
Howard Brenchley - Director (non-executive) (appointed 21 Nov ember 2014)
Stev en Leigh - Director (non-executive) (appointed 21 Nov ember 2014)
KEY MANAGEMENT PERSONNEL – SENIOR EXECUTIVES
Peter Greer – Chief Operating Officer (COO)
Stuart Owen – Chief Financial Officer (CFO) (appointed 26 October 2014)
Thomas Rice – Chief Financial Officer (CFO) (resigned effective 13 February 2015)
REMUNERATION GOVERNANCE
REMUNERATION COMMITT EE AND USE OF REMUNERATION CONSULTANTS
The Remuneration Committees activities are gov erned by its Charter, a copy of which is av ailable at
www.nationalstorage.com .au.
The responsibilities of the Remuneration Committee include:
Formulate and recommend remuneration policies to apply to the Company’s Managing
Director, senior executives and non-executiv e Directors;
Formulate the specific remuneration packages for senior executiv es (including base salary, STIs,
LTIs and other contractual benefits);
Rev iew contractual rights of termination for senior executives;
Rev iew the appropriateness of the Company’s succession planning policies;
Rev iew management’s recommendation of the total proposed STI and LTI awards;
Administering the STI and LTI awards; and
Rev iew management recommendations regarding the remuneration framework for the
company as a whole.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
DIRECTORS' REPORT
46
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
47
47
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
The deliberations of the Remuneration Committee, incl uding any recommendations made on
remuneration issues, are considered by the NSH Board. In making its recommendations to the Board,
the Remuneration Committee takes into account adv ice from independent remuneration adv isers on
trends in remuneration for KMP. The independent remuneration adv isors consider a range of factors
including the specific responsibilities assumed by KMP. An independent consultant , CRA Plan
Managers Pty Limited (CRA), was engaged during the Reporting Period to assess the remuneration
structure that was established on listing and to prov ide adv ice on market practice relating to executive
remunerations structures. The adv ice did not constitute a remuneration recommendation as defined in
the Corporations Act Cth 2001.
The Remuneration Committee comprises three independent non-executiv e directors and is chaired by
Laurence Brindle. The Remuneration committee met four times during the Reporting Period.
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 deliv er NSR’s objectives.
The remuneration of directors and senior executives is rev iewed at least annually by the Remuneration
Committee and the full NSH Board. External analysis and adv ice is sought by the Committee, where
considered appropriate, to ensure that the remuneration for directors and senior executiv es is
competitive in the market place and appropriate for the organisation.
The policy seeks to align executiv e reward with the achiev ement of strategic objectives and the
creation of v alue for Securityholders. 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 executiv es.
Total reward for key executives is to hav e a significant “at risk” component.
The “at risk” component for key executiv es is to include both short term incentiv es (“STI”) and
long term incentiv es (“LTI”) which hav e a strong focus on quantitative measures.
Prov ide industry competitive rewards linked to Securityholder returns.
Prov ide 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.
TARGET MARKET POSITIONING
Total Annual Remuneration (TAR) is assessed against a broad comparator group and adjusted to
reflect factors such as the criticality of the role, industry experience, length of serv ice and NSR’s
positioning within the comparator group. The indiv idual components of TAR, comprising fixed
remuneration, STI and LTI are indiv idually assessed within this framework and structured to prov ide both
short term and long terms incentives to KMP that align with deliv ery of short term and long term v alue to
Securityholders.
W hen selecting the comparator group the data is collected from a combination of sources including
audited Remuneration Reports of the selected companies. It prov ides an appropriate pool of data that
is statistically relevant. This data is then assessed against NSR’s current size, industry positioning and
other relev ant factors to determine the appropriate information against which to assess NSR’s
remuneration framework.
The composition TAR for KMP is detailed in the table below.
ROLE
MD
COO
CFO
TFR
60%
60%
66%
STI
20%
20%
17%
LTI
20%
20%
17%
NSR PERFORMANCE
NSR has deliv ered its growth objectives over the reporting period culminating in NSR’s admission to the
S&P ASX 200 index in June 2015. This is a significant achiev ement for the company which can be
attributed to a combination of growth in share price, increased earnings and the successful
implementation of the Company’s growth strategy. This has resulted in significant growth in assets
under management during this time which in turn has deliv ered superior returns to security holders.
The Company has established a track record of deliv ering strong and consistent earnings growth since
listing in December 2013, increasing earnings per security by 20% in the six months to 30 June 2015 ov er
the corresponding period to 30 June 2014. A consistent and considered approach to driv ing increased
earnings through a combination of organic growth from existing assets as well as targeted EPS
accretive acquisitions has been instrumental in achiev ing this result.
Annualised EPS
y
t
i
r
u
c
e
S
r
e
p
s
t
n
e
C
9.0
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
Jan-Jun 14
Jul-Dec 14
Jan-Jun 15
NSR has an established distribution policy which targets distribution of 90% - 100% of underlying earnings
to security holders. During financial year 2015 NSR declared distributions totalling 8.2 cents per stapled
security, being at the upper end of the stated policy, deliv ering DPS yield of 5.1%, some 15% abov e that
of the A-REIT 200 av erage.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
DIRECTORS' REPORT
48
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
49
49
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
FY15 Dividend Yield
A-REIT 200
NSR
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Source: IRESS and Bloomberg. Market Data as at 27 July 2015.
Yield calculated using actual dividends receiv ed over the period.
NSR was ranked the number one performing REIT in Australia for Total Shareholder Return “TSR” (a
combination of share price growth and distributions received by security holder s), ov er the twelv e
months to 30 June 2015 deliv ering a 39% return to security holders. This was 90% abov e the A-REIT 200
index av erage of 20%.
Total Shareholder Return
A-REIT 200
NSR
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Source: Bloomberg. Market Data as at 27 July 2015.
Annualised total return, assuming dividends are re-invested in the underlying shares. Calculated monthly over 12
months to 30 June 2015.
NSR listed in December 2013 with an issue price of $0.98. From that time to 30 June 2015 the security
price has increased by 70% with a 30 June 2015 closing price of $1.68. This has occurred during a time
in which two additional capital raisings were undertaken to facilitate the acquisition of twenty one new
storage centres from IPO to the date of this Directors Report.
Security price performance ov er the twelve months to 30 June 2015 has shown a 31% increase. This
compares to an increase of 15% for the A-REIT 200 index and 2% for the broader ASX 200 Index.
NSR Share Price
1.70
1.65
1.60
1.55
1.50
1.45
1.40
1.35
1.30
1.25
1.20
Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 Feb 15Mar 15 Apr 15 May 15 Jun 15
Relative Performance
1.40
1.35
1.30
1.25
1.20
1.15
1.10
1.05
1.00
0.95
0.90
Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15
NSR
S&P/ASX 200 A-REIT
S&P/ASX 200
NSR REMUNERATION FRAMEWORK
NON-EXECUTIVE DIRECTORS
Fees and payments to non-executiv e directors reflect the demands which are made on, and the
responsibilities of, the non-executiv e directors and their contribution towards the performance of NSR as
well as the complexity of the National Storage Property Trust and operating business. The remuneration
policy seeks to ensure that NSR attracts and retains directors with appropriate experience and
qualifications to ov ersee the operations of NSR on behalf of the Securityholder s.
The number of meeting of directors of shown on page 45 of this report.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
DIRECTORS' REPORT
50
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
51
51
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
The Constitution of NSH specifies that the amount of the remuneration of the non-executiv e directors is
a yearly sum not exceeding the sum from time to time determined by the Company i n general
meeting. Under the ASX Listing Rules, the total amount paid to all NSH non-executiv e directors for their
serv ices must not exceed in aggregate in any financial year the amount fixed by NSH’s annual general
meeting.
The amount approv ed by Securityholders at the 2014 Annual General meeting is $900,000.
Annual NSH non-executiv e directors’ fees and Committee fees currently agreed to be paid by NSH are
as follows:
NON-EXECUTIVE DIRECTORS
BASE FEE
CHAIR FEE
AUDIT AND RISK
COMMITTEE FEES
Laurence Brindle
Anthony Keane
Stev en Leigh
Howard Brenchley
$85,000
$85,000
$85,000
$85,000
$85,000
-
-
-
$4,000
$10,000
-
$4,000
REMUNERATION
COMMITTEE
FEES
$5,000
$2,500
$2,500
-
TOTAL
$179,000
$97,500
$87,500
$89,000
All NSH non-executiv e directors’ fees include superannuation at the required statutory rate.
KEY MANAGEMENT PERSONNEL - EXECUTIVE DIRECTOR AND SENIOR EXECUTIVES
All remuneration paid to executiv e directors and senior executives comprises four components:
Base pay and benefits (including superannuation)
Short-term performance incentiv es
Long-term incentiv es
Other remuneration (if applicable)
Base salary and benefits
The Managing Director and senior executiv es are paid a base salary that includes employer
contributions to superannuation funds. The remuneration of the Managing Director is rev iewed annually
by the Remuneration Committee and Board. The remuneration of senior executives is reviewed
annually by the Managing Director who makes a recommendation t o the Remuneration Committee.
The Committee then considers, but is not obliged to accept, the recommendation of the Managing
Director and takes whatev er additional steps it determines appropriate to assess the senior executive
salaries.
There is no guarantee of base salary increases included in any executiv e director or senior executive
contracts or through the annual rev iew process. The remuneration of all KMP was rev iewed during the
year.
The Managing Director and senior executiv es can potentially be paid a bonus as part of their
remuneration. W hether such a bonus is paid and the amount of such a bonus is at the discretion of the
Remuneration Committee and the Board. Any bonuses paid would fall into the category of “other
remuneration”.
Service agreements
Remuneration and other terms of employment for the KMP senior executives are formalised in serv ice
agreements. The serv ice agreements specify the components of remuneration, benefits and notice
periods. Termination benefits are within the limits set by the Corporations Act Cth 2001 such that they
do not require Securityholder approv al.
NAME
TERM OF
AGREEMENT AND
NOTICE PERIOD
BASE SALARY
INCLUDING
SUPERANNUATION*
TERMINATION PAYMENTS
Andrew
Catsoulis
No fixed term
6 months
Peter Greer
Stuart Owen
No fixed term
6 months
No fixed term
6 months
$750,000
$675,000
$330,000
6 months in lieu of notice if required by NSH.
6 months in the ev ent of incapacity or illness.
6 months in lieu of notice if required by NSH.
6 months in the ev ent of incapacity or illness.
6 months in lieu of notice if required by NSH.
6 months in the ev ent of incapacity or illness.
1 months fixed remuneration plus 2 weeks for
each week of serv ice – capped at 2 months
in the ev ent of redundancy
* Base salaries are annual salaries for the financial year commencing 1 July 2015. They are rev iewed annually by the
Remuneration Committee. Actual salaries paid in the year ended 30 June 2015 are shown on page 55.
Short and long term incentives
KMP senior executives are also entitled to participate in the short and long term incentive programs
that are in place from time to time. The incentive programs are at the discretion of the Board and do
not constitute an entitlement under the executive service agreements of the respect ive KMP. Total
incentiv e programs are assessed against a broad comparator group and adjusted to reflect factors
such as the criticality of the role, industry experience, length of serv ice and NSR’s positioning within the
comparator group.
An independent consultant was engaged during the Reporting Period to assess the appropriateness of
the remuneration structure that was in established on listing and to prov ide adv ice on market practice
relating to executive remunerations structures. The adv ice did not constitute a remuneration
recommendation as defined in the Corporations Act Cth 2001. After considering all the relev ant
information the Board has determined that a rev ised short and long term incentiv e program should be
implemented for KMP. The following incentive program is effective from 1 July 2015.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
DIRECTORS' REPORT
52
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
53
53
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
Short Term Incentiv e (STI)
The STI will contain four separate elements that will be assessed independently of the other elements.
The STI will be an annual incentiv e and be paid annually.
ELEMENT
Financial
Financial – Out
Performance*
Indiv idual KPI’s
Strategic
PERCENTAGE
OF STI
CRITERIA
70%
10%
15%
15%
Underlying Earnings as determined by the Board
Exceeding Underlying Earnings targets
Indiv idual performance criteria set in conjunction with MD / Board
Assessment in accordance with performance in the following
areas:
Implementation of major projects
Staff continuity
Risk Management
Innov ation and enhancement of processes and procedures
Total
* The Financial Out-Performance STI is only payable to the extent that the total STI payable does not exceed 100%.
The minimum STI payable is zero and maximum STI payable is $560,000.
100% (Max)
Long Term Incentiv e (LTI)
The LTI criteria hav e been set so as to align the interests of KMP with those of security holders. The LTI will
contain two separate components which are independently tested:
Total Shareholder Return
EPS growth
70% of LTI
30% of LTI
The LTI will be assessed ov er a rolling 3 year period and as such to be eligible for payment of the LTI KMP
must hav e been employed by NSR for three years (or shorter period as determined by the Board). The
minimum LTI payable is zero and maximum LTI payable is $560,000.
Short and long term incentives in place during reporting period:
The Managing Director and Chief Operating Officer (the “Incentiv ised Officers”) were eligible for
payment of STI’s and LTI’s for the calendar year ended 31 December 2014 in accordance with the
initial incentive program put in place and disclosed as part of the NSR Initial Public Offering.
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
The STI’s and LTI’s were agreed with the Incentiv ised Officers to reward them for performance against
both financial and operational objectives. The minimum payable is zero and maximum payable is
$1,226,500.
The STI and LTI hurdles included:
1.
2.
If the EBITDA hurdle ($30.8 million) is exceeded, an entitlement to a portion of the STI and LTI
incentiv e is triggered according to a sliding scale from 25% of the incentiv e to 100%. The
EBITDA hurdle is weighted at 30% of the total possible incentive.
If the Distribution per Unit (“DPU”) hurdle (8 cents) is exceeded, an entitlement to a portion of
the STI and LTI incentiv e (being 50% of) is triggered according to a sliding scale from 25% of the
incentiv e to 100%. The DPU hurdle is weight ed at 50% of the total possible incentive.
3. Non-Financial hurdles for both STI and LTI comprised of retention of senior staff and executive s
and performance against the A-REIT av erage. 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.
An ov erview of the remuneration structure for NSR during the Reporting Period was as follows:
The Board has assessed the performance of the Company and the Incentiv ised Officers against the
performance criteria and hav e determined that the following STI and LTI’s has been earned by the
Incentiv ised Officers for the period 1 January 2014 to 31 December 2014. The Board has determined
that it does not wish to use equity or shadow equity instruments as an element of the ongoing ov erall
remuneration framework. As result the Board has used its discretion to pay the LTI component as cash.
INCENTIVE OFFICER
Andrew Catsoulis (MD)
Peter Greer (COO)
Total
STI
$42,875
$39,200
$82,075
LTI
$76,563
$56,000
$132,563
TOTAL
$119,438
$95,200
$214,638
Other Remuneration:
The Board has determined that the Managing Director and Chief Operating Officer are to be paid a
discretionary bonus of $104,081 and $81,813 respectively for the period 1 January 2015 to 30 June 2015
as a reward for the superior performance of the Company ov er this period in comparison to its market
segment. The decision to pay a discretionary bonus reflected the fact that no formal STI or LTI
performance incentive program was in effect throughout this period. The STI and LTI performance
incentiv e program outlined abov e was implemented as part of the IPO and cov ered the period from
IPO to 31 December 2014.
DETAILS OF REMUNERAT ION
The following tables set out details of the remuneration receiv ed by the Company’s KMP for the
Reporting Period.
SHORT TERM
INCENTIVES
SALARY &
FEES
CASH
BONUS
POST-
EMPLOYMENT
BENEFITS
SUPER-
ANNUATION
LONG TERM INCENTIVES
CASH
INCENTIVES
LONG
SERVICE
LEAVE
$
149,094
81,862
55,519
38,453
$
-
-
-
-
$
14,164
7,777
-
3,653
$
-
-
-
-
$
-
-
-
-
431,438
146,956
40,987
76,563
10,138
391,152
121,013
37,159
56,000
9,215
TERMINATION
PAYMENTS
TOTAL
PERFORMANCE
RELATED
$
-
-
-
-
-
-
$
163,258
89,639
55,519
42,106
706,082
614,539
%
0%
0%
0%
0%
32%
29%
0%
137,652
150,158
-
-
19,558
-
3,644
94,982
255,386
14,265
-
3,732
-
168,155
0%
2015
Non-execut ive
directors
Laurence Brindle
Anthony Keane
Howard
Brenchley
Stev en Leigh
Execut ive
director
Andrew Catsoulis
Senior executives
Peter Greer
Thomas Rice
(Resigned
13 February
2015)
Stuart Owen
(Appointed 26
October 2014)
Total
1,435,328
267,969
137,563
132,563
26,729
94,982
2,095,134
The termination payment made to Thomas Rice was in accordance with the prov isions of his
employment contract.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
DIRECTORS' REPORT
54
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
55
55
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
SHORT TERM
INCENTIVES
SALARY &
FEES
CASH
BONUS
POST-
EMPLOYMENT
BENEFITS
SUPER-
ANNUATION
LONG TERM INCENTIVES
CASH
INCENTIVES
LONG
SERVICE
LEAVE
TERMINATION
PAYMENTS
TOTAL PERFORMANCE
RELATED
2014
Non-execut ive
directors
Laurence Brindle
Anthony Keane
Execut ive
director
Andrew Catsoulis
Senior executives
Peter Greer
Thomas Rice
Total
$
98,616
54,603
249,082
236,092
166,622
805,015
$
-
-
-
-
-
-
$
$
$
$
$
8,070
4,469
20,722
19,520
15,413
68,194
-
-
-
-
-
-
-
-
-
-
-
-
-
-
106,686
59,072
-
269,804
-
-
-
255,612
182,035
873,209
* This represents the period from IPO (13 December 2013) to 30 June 2014.
%
0%
0%
0%
0%
0%
KMP CLAWBACK AGREEMENT
The Managing Director and Chief Operating Officer hav e agreed, in relation to the Stapled Securities
issued in the IPO that they hold, to performance hurdles and clawback mechanisms if the performance
hurdles are not achiev ed. The performance hurdles are in place until the earlier of the date the
performance hurdles are achiev ed for two consecutiv e test dates or fiv e years. If the performance
hurdles are not achiev ed, any distribution from the NSPT or a div idend from NSH (a "Securities Payment")
will be clawed back from the relev ant officer.
If a div idend/distribution is declared it must be determined if the EPSS of NSR for the relev ant period is at
least 8.75 cents. The relev ant period is the rolling twelve month period ending on the last day of the
relev ant period, If:
1.
2.
3.
the EPSS are less than 8.25 cents then the clawback will be 100% of any distribution or div idend;
the EPSS are greater than 8.75 cents then there will be no clawback;
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 EPS of NSR for the relev ant period
Voluntary Escrow
The Managing Director and Chief Operating Officer hav e agreed not to transfer any part of their
v endor Stapled Securities whilst the performance hurdles apply and agree to the application of a
holding lock on their v endor Stapled Securities. The exception to this escrow is if a court orders the
transfer prov ided the transferee enters a deed agreeing to be bound by the prov isions of this escrow.
SECURITY HOLDINGS OF DIRECTORS AND EXECUTIVES
The mov ement 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
30 JUNE 2014
GRANTED AS
REMUNERATION
ON
EXERCISE
OF OPTIONS
ACQUIRED
BALANCE
30 JUNE 2015
1,032,400
114,000
12,559,163
-
63,000
-
-
-
-
5,586,735
**
-
Directors of NSH
Laurence Brindle#
Anthony Keane#
Andrew Catsoulis#
Howard Brenchley*
Stev en Leigh*
Directors of
The Responsible
Entity
Andrew Cannane
Christopher Green
Gillian Larkins
Michael
Vainauskas***
Executives of NSH
Peter Greer
Thomas Rice**
Stuart Owen
1,020,400
102,000
12,547,163
-
*
-
-
-
-
5,586,735
152,000
-
Total
19,408,298
-
-
-
-
*
-
-
-
-
-
**
-
-
-
-
-
-
*
-
-
-
-
-
**
-
12,000
12,000
12,000
-
*
-
-
-
-
-
**
-
-
36,000
19,355,298
# Securities acquired were pursuant to the Security Purchase Plan (SPP) conducted during the
Reporting Period
* Appointed 21Nov ember 2014
** Resigned 13 February 2015
*** Appointed 2 March 2015
RELATED PARTY TRANSACTIONS
There were no related party transactions during the reporting period.
SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE
ACQUISITION OF STORAGE CENTRES
As announced on 26 June 2015 NSR has purchased a portfolio of fiv e storage centres in Christchurch,
New Zealand. The centres were purchased for NZ$23 million and the transaction settled on 6 August
2015.
On 10 August 2015 NSR announced that it had entered into arrangements to acquire a self -storage
asset in Croydon, Victoria. The cent re will be purchased for $4.7 million and be funded v ia NSR’s
existing debt facilities. The transaction remains conditional and should it proceed, settlement is
expected in September 2015.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
DIRECTORS' REPORT
56
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
57
57
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
NEW ZEALAND DENOMINATED DEBT FACILITY
Subsequent to the Reporting Date a New Zealand Dollar denominated (NZ$) debt facility for NZ$25
million has been entered into, to facilitate the recently announced Christchurch acquisitions. The
facility is on terms consistent with the existing debt facil ities and has been incorporated into the existing
facility documentation. As at the date of this report, the New Zealand facility was drawn to NZ$23.5
million.
INVESTMENT IN PRIME DEVELOPMENT FUND
On 6 August 2015 NSR announced that it had entered into a heads of agreement with Univ ersal Self
Storage to establish the Australian Prime Storage Fund which aims to facilitate the dev elopment and
ownership of multiple premium grade self- storage centres in select capital cities around Australia. NSR
will be cornerstone inv estor in the unlisted Fund with an equity interest of up to 25% (approximately
$12.5 million) v ia a staged contribution. NSR will undertake, and receiv e fees for, a range of activ ities
on behalf of the Fund, including assisting with site identification, selection and acquisition, feasibility
and prov iding input into design and dev elopment. The assets will be integrated onto the National
Storage operating platform and managed as part of the National Storage portfolio.
PERTH DEVELOPMENT PORTFOLIO
On 11 August 2015 NSR announced it had entered into an exclusiv e arrangement with Parsons Group
to establish the Perth Dev elopment Portfolio. The arrangement is a construction and management
agreement with one of Perth’s leading self-storage construction companies, Parsons Group with fiv e
sites in and around Perth hav ing been identified. It is anticipated NSR will acquire up to three assets on
completion of construction, with the remaining centres to be operated as National Storage centres by
Parsons Group. The first centre at Jandakot, south of Perth, is scheduled to open in September 2015 and
will be owned by Parsons Group and managed by National Storage under its third-party management
platform.
ROUNDING
The amounts contained in this Directors’ Report and in the Financial Report hav e been rounded to the
nearest $1,000 (unless otherwise stated) under the option av ailable 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 Cth 2001 is set out on page 61.
Non-audit services
The following non-audit serv ices were provided by the entity's auditor, Ernst & Young Australia. The
Directors of NSH are satisfied that the prov ision of non-audit serv ices is compatible with the general
standard of independence for auditors imposed by the Corporations Act Cth 2001. The nature and
scope of each type of non-audit serv ice provided means that auditor independence was not
compromised.
Ernst & Young Australia received or are due to receiv e the following amounts for the prov ision of non-
audit serv ices conducted during the financial year:
Tax compliance
1.
2. Other
$73,314
$74,994
FEES PAID TO AND INT ERESTS 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 Comprehensiv e 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 mov ement in units on issue by the NSPT during the year is set out in note 14 to the financial
statements.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
DIRECTORS' REPORT
58
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
59
59
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
This Directors’ Report is made on 26 August 2015 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
National Storage Holdings Limited
Brisbane
Andrew Catsoulis
Managing Director
National Storage Holdings Limited
Brisbane
This Directors’ Report is made on 26 August 2015 in accordance with a resolution of the Responsible
Entity and is signed for and on behalf of the Responsible Entity.
Andrew Cannane
Director
The Trust Company (RE Serv ices) Limited
Sydney
AUDITOR’S INDEPENDENCE DECLARATION
INDEPENDENCE DECLARATION
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Auditor’s Independence Declaration to the Directors of National
Storage REIT
In relation to our audit of the financial report of National Storage REIT, a stapled entity comprised of
National Storage Holdings Limited and National Storage Property Trust and its related entities for the
financial year ended 30 June 2015, to the best of my knowledge and belief, there have been no
contraventions of the auditor independence requirements of the Corporations Act 2001 or any
applicable code of professional conduct.
Ernst & Young
Mark Hayward
Partner
26 August 2015
DIRECTORS' REPORT
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
60
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
61
61
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
FINANCIAL STATEMENTS
30 JUNE 2015
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
For the year ended 30 June 2015
For the year ended 30 June 2015
Consolidated Group
Consolidated Group
2014
2014
$'000
$'000
2015
2015
$'000
$'000
Notes
Notes
NSPT Group
NSPT Group
2015
2015
$'000
$'000
2014
2014
$'000
$'000
Revenue from storage rent
Revenue from storage rent
Rental revenue
Rental revenue
Revenue from sale of goods and
Revenue from sale of goods and
services
services
Other revenue
Other revenue
Total revenue
Total revenue
Salaries and employee benefits
Salaries and employee benefits
expense
expense
Management fees - operational
Management fees - operational
Property rates and taxes
Property rates and taxes
Repairs and maintenance
Repairs and maintenance
Cost of packaging and other products
Cost of packaging and other products
sold
sold
Depreciation and amortisation
Depreciation and amortisation
Finance costs
Finance costs
Professional fees
Professional fees
Other operational expenses
Other operational expenses
Total operational expenses
Total operational expenses
55,141
-
55,141
-
3,864
3,864
4,682
4,682
63,687
63,687
39,762
-
39,762
-
2,349
2,349
3,557
3,557
45,668
45,668
-
28,581
-
28,581
345
345
787
787
29,713
29,713
-
20,382
-
20,382
67
67
181
181
20,630
20,630
(11,579)
(11,579)
(474)
(474)
(3,651)
(3,651)
(759)
(759)
(834)
(834)
(277)
(277)
(11,121)
(11,121)
(634)
(634)
(7,141)
(7,141)
(36,470)
(36,470)
(6,832)
(1,573)
(2,766)
(785)
(6,832)
(1,573)
(2,766)
(785)
(548)
(548)
(300)
(300)
(9,915)
(9,915)
(4,221)
(4,221)
(5,743)
(5,743)
(32,683)
(32,683)
-
-
(474)
(474)
(229)
(229)
(7)
(7)
-
-
(2,553)
(2,553)
(264)
(264)
-
-
-
-
-
-
(5,677)
(5,677)
(57)
(57)
(5)
(5)
(6,449)
(6,449)
-
-
-
-
(5,431)
(5,431)
(3,457)
(3,457)
(293)
(293)
(11,998)
(11,998)
5
5
6
6
6
7
6
7
6
6
Gross operating profit
Gross operating profit
27,217
27,217
12,985
12,985
23,264
23,264
8,632
8,632
Fair value adjustments
Fair value adjustments
Loss on disposal of property, plant, and
Loss on disposal of property, plant, and
equipment
equipment
Other non-operational expenses
Other non-operational expenses
Share of profit of a joint venture
Share of profit of a joint venture
Profit before income tax
Income tax (expense) / benefit
Profit before income tax
Income tax (expense) / benefit
6
6
20,996
20,996
(4,403)
(4,403)
25,611
25,611
30,217
30,217
(1)
(1)
(851)
(851)
1,632
1,632
(92)
(92)
(236)
(236)
151
151
-
-
(439)
(439)
1,632
1,632
-
-
-
-
151
151
48,993
(260)
48,993
(260)
8,405
7,160
8,405
7,160
50,068
-
50,068
-
39,000
-
39,000
-
13
13
8
8
Profit after tax
Profit after tax
48,733
48,733
15,565
15,565
50,068
50,068
39,000
39,000
Profit/(loss) for the year attributable to:
Members of National Storage Holdings
Limited
Non-controlling interest (unit holders of
NSPT)
Profit/(loss) for the year attributable to:
Members of National Storage Holdings
Limited
Non-controlling interest (unit holders of
NSPT)
(1,335)
(1,335)
(17,122)
(17,122)
50,068
50,068
39,000
39,000
50,068
48,733
50,068
48,733
32,687
15,565
32,687
15,565
-
50,068
-
50,068
-
39,000
-
39,000
Basic and diluted earnings per stapled
security / unit (cents)
Basic and diluted earnings per stapled
security / unit (cents)
20
20
16.56
16.56
11.00
11.00
17.01
17.01
21.04
21.04
FINANCIAL STATEMENTS
The above Consolidated Statements of Profit or Loss should be read in conjunction with the
accompanying notes.
The above Consolidated Statements of Profit or Loss should be read in conjunction with the
accompanying notes.
64
64
63
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 CONSOLIDATED STATEMENTS OF OTHER
CONSOLIDATED STATEMENTS OF OTHER
COMPREHENSIVE INCOME
COMPREHENSIVE INCOME
For the year ended 30 June 2015
For the year ended 30 June 2015
Consolidated Group
Consolidated Group
2014
2014
$'000
$'000
2015
2015
$'000
$'000
NSPT Group
NSPT Group
2015
2015
$'000
$'000
2014
2014
$'000
$'000
Notes
Notes
Profit after tax
Profit after tax
48,733
48,733
15,565
15,565
50,068
50,068
39,000
39,000
Other comprehensive income
Other comprehensive income
Items that may be reclassified to profit
Items that may be reclassified to profit
or loss
or loss
Changes in the fair value of cash flow
Changes in the fair value of cash flow
hedges
hedges
Income tax relating to this item
Income tax relating to this item
Other comprehensive income for the
Other comprehensive income for the
year, net of tax
year, net of tax
Total comprehensive income for the
Total comprehensive income for the
year
year
Total comprehensive income for the
Total comprehensive income for the
year attributable to:
year attributable to:
Members of National Storage Holdings
Members of National Storage Holdings
Limited
Limited
Non-controlling interest (unit holders of
Non-controlling interest (unit holders of
NSPT)
NSPT)
15
15
(879)
(879)
-
-
(393)
(393)
-
-
(879)
(879)
-
-
(393)
(393)
-
-
(879)
(879)
(393)
(393)
(879)
(879)
(393)
(393)
47,854
47,854
15,172
15,172
49,189
49,189
38,607
38,607
(1,335)
(1,335)
(17,122)
(17,122)
49,189
49,189
38,607
38,607
49,189
49,189
47,854
47,854
32,294
32,294
15,172
15,172
-
-
49,189
49,189
-
-
38,607
38,607
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at 30 June 2015
As at 30 June 2015
ASSETS
ASSETS
Current assets
Current assets
Cash and cash equivalents
Cash and cash equivalents
Trade and other receivables
Trade and other receivables
Inventories
Inventories
Other current assets
Other current assets
Total current assets
Total current assets
Non-current assets
Non-current assets
Trade and other receivables
Trade and other receivables
Property, plant and equipment
Property, plant and equipment
Investment properties
Investment properties
Investment in joint venture
Investment in joint venture
Other non-current assets
Other non-current assets
Intangibles
Intangibles
Total non-current assets
Total non-current assets
Total assets
Total assets
LIABILITIES
LIABILITIES
Current liabilities
Current liabilities
Trade and other payables
Trade and other payables
Finance lease liability
Finance lease liability
Deferred revenue
Deferred revenue
Provisions
Provisions
Other liabilities
Other liabilities
Total current liabilities
Total current liabilities
Non-current liabilities
Non-current liabilities
Trade and other payables
Trade and other payables
Borrowings
Borrowings
Finance lease liability
Finance lease liability
Other liabilities
Other liabilities
Provisions
Provisions
Deferred tax liability
Deferred tax liability
Total non-current liabilities
Total non-current liabilities
Total Liabilities
Total Liabilities
Net Assets
Net Assets
EQUITY
EQUITY
Non-controlling interest (unit holders of
Non-controlling interest (unit holders of
NSPT)
NSPT)
Contributed equity
Contributed equity
Other reserves
Other reserves
Retained earnings
Retained earnings
Total equity
Total equity
Notes
Notes
9.1
9.1
9.2
9.2
10.1
10.1
9.3
9.3
9.2
9.2
10.2
10.2
10.3
10.3
13
13
9.3
9.3
10.4
10.4
9.4
9.4
9.7
9.7
10.5
10.5
10.6
10.6
9.6
9.6
9.4
9.4
9.5
9.5
9.7
9.7
9.6
9.6
10.6
10.6
8
8
14
14
15
15
Consolidated Group
Consolidated Group
NSPT Group
NSPT Group
2015
2015
$'000
$'000
2014
2014
$'000
$'000
2015
2015
$'000
$'000
2014
2014
$'000
$'000
9,494
9,494
3,972
3,972
300
300
2,814
2,814
16,580
16,580
220
220
832
832
592,404
592,404
6,709
6,709
-
-
14,170
14,170
614,335
614,335
630,915
630,915
4,003
4,003
5,022
5,022
6,400
6,400
1,172
1,172
14,047
14,047
30,644
30,644
1,700
1,700
123,012
123,012
87,439
87,439
1,272
1,272
699
699
487
487
214,609
214,609
245,253
245,253
385,662
385,662
352,377
352,377
31,419
31,419
-
-
1,866
1,866
385,662
385,662
8,264
8,264
3,767
3,767
258
258
2,359
2,359
14,648
14,648
220
220
1,447
1,447
381,301
381,301
5,077
5,077
8
8
13,896
13,896
401,949
401,949
416,597
416,597
3,326
3,326
4,330
4,330
4,952
4,952
1,069
1,069
9,306
9,306
22,983
22,983
-
-
87,460
87,460
60,619
60,619
393
393
588
588
227
227
149,287
149,287
172,270
172,270
244,327
244,327
223,368
223,368
17,758
17,758
-
-
3,201
3,201
244,327
244,327
7,862
7,862
6,954
6,954
-
-
126
126
14,942
14,942
-
-
-
-
465,293
465,293
6,709
6,709
-
-
-
-
472,002
472,002
486,944
486,944
1,542
1,542
-
-
-
-
-
-
14,047
14,047
15,589
15,589
1,700
1,700
123,012
123,012
-
-
1,272
1,272
-
-
-
-
125,984
125,984
141,573
141,573
345,371
345,371
102
102
17,642
17,642
-
-
1,053
1,053
18,797
18,797
-
-
-
-
305,250
305,250
5,077
5,077
-
-
-
-
310,327
310,327
329,124
329,124
15,476
15,476
-
-
-
-
-
-
9,306
9,306
24,782
24,782
-
-
87,587
87,587
-
-
393
393
-
-
-
-
87,980
87,980
112,762
112,762
216,362
216,362
-
-
297,191
297,191
(1,272)
(1,272)
49,452
49,452
345,371
345,371
-
-
191,499
191,499
(393)
(393)
25,256
25,256
216,362
216,362
The above Consolidated Statements of Other Comprehensive Income should be read in conjunction
with the accompanying notes.
The above Consolidated Statements of Other Comprehensive Income should be read in conjunction
with the accompanying notes.
65
65
The above Consolidated Statements of Financial Position should be read in conjunction with the
The above Consolidated Statements of Financial Position should be read in conjunction with the
accompanying notes.
accompanying notes.
FINANCIAL STATEMENTS
66
66
65
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the year ended 30 June 2015
For the year ended 30 June 2015
Attributable to securityholders of the National Storage REIT
Attributable to securityholders of the National Storage REIT
Balance at 1 July 2014
Balance at 1 July 2014
(Loss)/Profit for the year
Other comprehensive
(Loss)/Profit for the year
income/(loss)
Other comprehensive
Total comprehensive
income/(loss)
income/(loss)
Total comprehensive
income/(loss)
Issue of stapled securities through
institutional placement
Issue of stapled securities through
Issue of stapled securities through
institutional placement
share purchase plan
Issue of stapled securities through
Issue of stapled securities as part
share purchase plan
of property acquisition
Issue of stapled securities as part
Costs associated with issue of
of property acquisition
securities
Costs associated with issue of
Dividends/distributions provided
securities
for or paid
Dividends/distributions provided
for or paid
Balance at 30 June 2015
Balance at 30 June 2015
Balance at 1 July 2013
Balance at 1 July 2013
(Loss)/Profit for the year
Other comprehensive
(Loss)/Profit for the year
income/(loss)
Other comprehensive
Total comprehensive
income/(loss)
income/(loss)
Total comprehensive
income/(loss)
Vendor issue
Equity uplift upon Stapling
Vendor issue
Issue of Stapled Units in Public
Equity uplift upon Stapling
Offering
Issue of Stapled Units in Public
Costs associated with Public
Offering
Offering
Costs associated with Public
Contingent consideration
Offering
Dividends/distributions provided
Contingent consideration
for or paid
Dividends/distributions provided
for or paid
Balance at 30 June 2014
Balance at 30 June 2014
Notes
Notes
Contributed
equity
Contributed
$'000
equity
$'000
17,758
17,758
15
15
14
14
14
14
14
14
14
14
17
17
15
15
14
11
14
11
14
14
14
14
17
17
-
-
-
-
-
-
11,832
11,832
1,316
1,316
819
819
(306)
(306)
-
13,661
-
13,661
31,419
31,419
2,800
2,800
-
-
-
-
-
-
(1,047)
-
(1,047)
-
16,860
16,860
(1,189)
334
(1,189)
334
-
14,958
-
14,958
17,758
17,758
Retained
earnings
Retained
$'000
earnings
$'000
3,201
3,201
(1,335)
(1,335)
-
-
(1,335)
(1,335)
Non-
controlling
Non-
interest
controlling
$'000
interest
$'000
223,368
223,368
50,068
50,068
(879)
(879)
49,189
49,189
-
-
-
-
-
-
-
-
-
-
-
-
1,866
1,866
25,921
25,921
(17,122)
(17,122)
-
-
(17,122)
(17,122)
-
-
-
-
-
-
-
-
-
-
(5,598)
(5,598)
(5,598)
(5,598)
3,201
3,201
91,546
91,546
10,184
10,184
6,333
6,333
(2,371)
(2,371)
(25,872)
79,820
(25,872)
79,820
352,377
352,377
-
-
32,687
32,687
(393)
(393)
32,294
32,294
(2,800)
98,203
(2,800)
98,203
106,944
106,944
(5,716)
3,749
(5,716)
3,749
(9,306)
191,074
(9,306)
191,074
223,368
223,368
Total
$'000
Total
$'000
244,327
244,327
48,733
48,733
(879)
(879)
47,854
47,854
103,378
103,378
11,500
11,500
7,152
7,152
(2,677)
(2,677)
(25,872)
93,481
(25,872)
93,481
385,662
385,662
28,721
28,721
15,565
15,565
(393)
(393)
15,172
15,172
(3,847)
98,203
(3,847)
98,203
123,804
123,804
(6,905)
4,083
(6,905)
4,083
(14,904)
200,434
(14,904)
200,434
244,327
244,327
The above Consolidated Statements of Changes in Equity should be read in conjunction with the
accompanying notes.
The above Consolidated Statements of Changes in Equity should be read in conjunction with the
accompanying notes.
67
67
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(CONT’D)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the year ended 30 June 2015
(CONT’D)
Attributable to unitholders of the National Storage Property Trust Group
For the year ended 30 June 2015
Attributable to unitholders of the National Storage Property Trust Group
Contributed
equity
Contributed
$'000
equity
$'000
191,499
Retained
earnings
Retained
$'000
earnings
$'000
25,256
Balance at 1 July 2014
Balance at 1 July 2014
Profit for the year
Other comprehensive income/(loss)
Profit for the year
Total comprehensive income/(loss)
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Issue of stapled units through
institutional placement
Issue of stapled units through
Issue of stapled units through share
institutional placement
purchase plan
Issue of stapled units through share
Issue of stapled units as part of
purchase plan
property acquisition
Issue of stapled units as part of
Costs associated with issue of units
property acquisition
Distributions provided for or paid
Costs associated with issue of units
Distributions provided for or paid
Balance at 30 June 2015
Balance at 30 June 2015
Balance at 1 July 2013
Balance at 1 July 2013
Profit for the year
Other comprehensive income/(loss)
Profit for the year
Total comprehensive income/(loss)
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Vendor payments
Issue of units in Public Offering
Vendor payments
Costs associated with Public
Issue of units in Public Offering
Offering
Costs associated with Public
Contingent consideration
Offering
Distributions provided for or paid
Contingent consideration
Distributions provided for or paid
Balance at 30 June 2014
Notes
Notes
15
15
14
14
14
14
14
14
14
17
14
17
15
15
14
14
14
14
14
14
14
17
14
17
191,499
-
-
-
-
-
-
91,546
91,546
10,184
10,184
6,333
(2,371)
6,333
-
(2,371)
105,692
-
105,692
297,191
297,191
89,322
89,322
-
-
-
-
-
-
(2,800)
106,944
(2,800)
106,944
(5,716)
3,749
(5,716)
-
3,749
102,177
-
102,177
191,499
Other
reserve
Other
$'000
reserve
$'000
(393)
Total
$'000
Total
$'000
216,362
(393)
-
(879)
-
(879)
(879)
(879)
-
216,362
50,068
(879)
50,068
49,189
(879)
49,189
91,546
25,256
50,068
-
50,068
50,068
-
50,068
-
-
-
-
-
91,546
10,184
-
-
-
-
(25,872)
-
(25,872)
(25,872)
(25,872)
49,452
-
-
-
-
-
-
-
-
-
(1,272)
10,184
6,333
(2,371)
6,333
(25,872)
(2,371)
79,820
(25,872)
79,820
345,371
49,452
(1,272)
345,371
(500)
-
88,822
(500)
39,000
-
39,000
39,000
-
39,000
-
-
-
-
-
-
-
(13,244)
-
(13,244)
(13,244)
(13,244)
25,256
-
-
(393)
-
(393)
(393)
(393)
-
-
-
-
-
-
-
-
-
-
-
-
(393)
88,822
39,000
(393)
39,000
38,607
(393)
38,607
(2,800)
106,944
(2,800)
106,944
(5,716)
3,749
(5,716)
(13,244)
3,749
88,933
(13,244)
88,933
216,362
Balance at 30 June 2014
191,499
25,256
(393)
216,362
The above Consolidated Statements of Changes in Equity should be read in conjunction with the
accompanying notes.
The above Consolidated Statements of Changes in Equity should be read in conjunction with the
accompanying notes.
68
68
67
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended 30 June 2015
For the year ended 30 June 2015
NSPT Group
1.
CORPORATE INFORMATION
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
Operating activities
Receipts from customers
Operating activities
Payments to suppliers and
Receipts from customers
employees
Payments to suppliers and
Interest received
employees
Net cash flows from operating
Interest received
activities
Net cash flows from operating
activities
Investing activities
Purchase of investment properties
Investing activities
Improvements to investment
Purchase of investment properties
properties
Improvements to investment
Purchase of property, plant and
properties
equipment
Purchase of property, plant and
Purchase of intangible assets
equipment
Proceeds on sale of investment
Purchase of intangible assets
properties
Proceeds on sale of investment
Proceeds on disposal of property,
properties
plant, and equipment
Proceeds on disposal of property,
Acquisition of subsidiary, net of cash
plant, and equipment
acquired
Acquisition of subsidiary, net of cash
Investment in joint venture
acquired
Net cash flows used in investing
Investment in joint venture
activities
Net cash flows used in investing
activities
Financing activities
Proceeds from issue of stapled
Financing activities
securities
Proceeds from issue of stapled
Transaction costs on issue of stapled
securities
securities
Transaction costs on issue of stapled
Distributions paid to stapled security
securities
holders
Distributions paid to stapled security
Distributions clawed back from
holders
former owners of National Storage
Distributions clawed back from
Pty Ltd
former owners of National Storage
Repayment of borrowings
Pty Ltd
Proceeds from borrowings
Repayment of borrowings
Payment of finance lease liabilities
Proceeds from borrowings
Interest and other finance costs paid
Payment of finance lease liabilities
Net cash flows from financing
Interest and other finance costs paid
activities
Net cash flows from financing
activities
Net increase in cash and cash
equivalents
Net increase in cash and cash
Cash and cash equivalents at 1 July
equivalents
Cash and cash equivalents at 30
Cash and cash equivalents at 1 July
June
Cash and cash equivalents at 30
June
Notes
Notes
9.1
9.1
Consolidated Group
2014
Consolidated Group
$’000
2014
$’000
2015
$’000
2015
$’000
NSPT Group
2015
$’000
2015
$’000
2014
$’000
2014
$’000
70,779
47,190
28,821
11,989
70,779
(33,353)
170
(33,353)
170
37,596
47,190
(25,463)
631
(25,463)
631
22,358
28,821
(4,182)
44
(4,182)
44
24,683
11,989
(6,417)
104
(6,417)
104
5,676
37,596
22,358
24,683
5,676
(153,653)
(74,156)
(133,261)
(74,156)
(153,653)
(2,133)
(74,156)
-
(133,261)
(715)
(74,156)
(2,133)
(563)
(218)
(563)
(218)
7,250
7,250
53
53
-
-
-
-
(149,264)
-
(838)
-
(838)
-
-
-
-
-
(5,828)
(4,925)
(5,828)
(4,925)
(85,747)
(715)
-
-
-
-
7,250
7,250
-
-
-
-
-
-
-
-
-
-
-
-
-
(126,726)
-
-
(4,925)
-
(4,925)
(79,081)
(149,264)
(85,747)
(126,726)
(79,081)
114,878
123,804
101,730
106,943
114,878
(2,677)
123,804
(6,905)
101,730
(2,371)
106,943
(5,716)
(2,677)
(21,131)
(21,131)
1,990
(105,750)
1,990
141,334
(105,750)
(10,027)
141,334
(5,719)
(10,027)
(5,719)
112,898
(6,905)
(2,077)
(2,077)
-
(109,000)
-
87,916
(109,000)
(12,552)
87,916
(9,915)
(12,552)
(9,915)
71,271
(2,371)
(21,131)
(5,716)
(5,619)
(21,131)
(5,619)
1,827
(105,750)
1,827
141,334
(105,750)
-
141,334
(5,836)
-
(5,836)
109,803
-
(109,171)
-
87,587
(109,171)
-
87,587
(7,227)
-
(7,227)
66,797
112,898
71,271
109,803
66,797
1,230
8,264
1,230
8,264
9,494
9,494
7,882
382
7,882
382
8,264
8,264
7,760
102
7,760
102
7,862
7,862
(6,608)
6,710
(6,608)
6,710
102
102
9.1
9.1
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 an 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 2014 financial
report except for the accounting policies
impacted by new or amended Accounting
Standards detailed in this note.
In this note reference to “the Group” or “Group”
is used to refer to the Consolidated Group and
the NSPT Group, unless otherwise indicated. The
Group has elected to utilise CO 05/642 and
present the NSPT Group within the financial
statements of NSR. In some circumstances the
categorisation of prior year comparative figures
has been adjusted to conform to changes in
presentation for the current financial year.
National Storage REIT (“the Consolidated
Group” or “NSR”) was established in December
2013 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 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 2014 for NSPL and its then
consolidated group (“the Pre-Existing Group”).
The Constitutions 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 2015 was approved on 26 August 2015, 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 2015 was approved on 26 August 2015,
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.
The above Consolidated Statements of Cash Flows should be read in conjunction with the
accompanying notes.
The above Consolidated Statements of Cash Flows should be read in conjunction with the
accompanying notes.
69
69
FINANCIAL STATEMENTS
70
69
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 Deficiency of Net Current Assets
As at 30 June 2015, the Consolidated Group
had an excess of current liabilities over current
assets of $14,064,000.
Accounting standard AASB 140 Investment
Property requires the financial lease liability to
be split between current and non-current while
the corresponding asset is classed as non-
current. The Directors believe the excess value
of the total investment property over the
finance lease liability reflects the positive
position in both the immediate and long-term
and that sufficient cash inflows from operations
will occur to enable all liabilities to be paid when
due. Current liabilities also include deferred
revenue of $6,400,000 associated with prepaid
storage rentals which are not expected to result
in a significant cash outflow. The Consolidated
Group also has available funding facilities
beyond 12 months of $56.5m (see note 16).
On this basis, 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 all liability obligations.
The NSPT Group has an excess of current
liabilities over current assets of $647,000. The
deficiency in net current assets in NSPT Group is
largely attributable to the distribution payable of
$14,047,169. To service the distribution payment,
loans receivable from the NSH Group will be
called ahead of the planned payment date.
On this basis, the Directors of the Responsible
Entity believe the deficiency of net current
assets does not impact the going concern
assumption applied in the preparation of the
financial statements of the NSPT Group.
(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.
(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.
The following new and amended standards relevant to the Group’s activities have been adopted for the
reporting period commencing 1 July 2014.
Reference
Title
AASB 2012-3
AASB 2013-3
AASB 2013-4
AASB 2013-7
Amendments to Australian Accounting Standards -
Offsetting Financial Assets and Financial Liabilities
Amendments to AASB 136 – Recoverable
Amount Disclosures for Non-Financial Assets
Amendments to Australian Accounting Standards –
Novation of Derivatives and Continuation of Hedge
Accounting (AASB 139)
Amendments to AASB 1038 arising from AASB 10 in
relation to Consolidation and Interests of Policyholders
(AASB 1038)
AASB 1031
Materiality
Application
date of
standard*
Application
date for
Group*
1 January
2014
1 January
2014
1 January
2014
1 January
2014
1 January
2014
1 July 2014
1 July 2014
1 July 2014
1 July 2014
1 July 2014
Adoptions of these standards have had no material impact in the presentation or disclosures within the
financial statements and are not likely to affect future periods.
Accounting Standards and Interpretations issued but not yet effective.
Australian Accounting Standards and interpretations relevant to the Group’s operations, that have
recently been issued or amended but are not yet effective and have not been adopted by the Group
for the annual reporting period ended 30 June 2015 are outlined in the table below.
The Group is currently evaluating the full impact of AASB 9 and AASB 15, however the Group does not
believe that there will be a material impact once the following accounting stands and interpretations are
adopted.
Application
date of
standard
Application
date for
Group
1 January
2018
1 July 2018
Reference Title
Summary and impact on Group
financial report
AASB 9
Financial
Instruments
AASB 9 (December 2014) is a new Principal
standard which replaces AASB 139. The
standard includes a model for classification
and measurement, a single, forward-looking
‘expected loss’ impairment model and a
substantially-reformed approach to hedge
accounting.
AASB 9 Financial Instruments addresses the
classification, measurement and de-
recognition of financial assets and financial
liabilities. The standard is not applicable until
1 January 2018 but is available for early
adoption.
AASB 9 introduces a new expected-loss
impairment model that will require more
timely recognition of expected credit losses.
FINANCIAL STATEMENTS
71
72
71
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 Reference Title
Summary and impact on Group
financial report
Application
date of
standard
Application
date for
Group
Reference Title
Summary and impact on Group
financial report
Application
date of
standard
Application
date for
Group
AASB 2014-3 Amendments to
Australian
Accounting
Standards –
Accounting for
Acquisitions of
Interests in Joint
Operations
(AASB 1 and
AASB 11)
AASB 2014-4 Clarification of
Acceptable
Methods of
Depreciation and
Amortisation
(Amendments to
AASB 116 and
AASB 138)
Revenue from
Contracts with
Customers
AASB 15
Specifically, the new Standard requires
entities to account for expected credit
losses from when financial instruments are
first recognised and to recognise full lifetime
expected losses on a more timely basis.
This includes new hedge accounting
requirements, including changes to hedge
effectiveness testing, treatment of hedging
costs, risk components that can be hedged
and disclosures. The new rules should make
it easier to apply hedge accounting going
forward. The new standard also introduces
expanded disclosure requirements and
changes in presentation.
The group is in the process of assessing how
its own hedging arrangements would be
affected by the new rules.
AASB 2014-3 amends AASB 11 to provide
guidance on the accounting for
acquisitions of interests in joint operations in
which the activity constitutes a business.
AASB 116 and AASB 138 both establish the
principle for the basis of depreciation and
amortisation as being the expected pattern
of consumption of the future economic
benefits of an asset.
The IASB has clarified that the use of
revenue-based methods to calculate the
depreciation of an asset is not appropriate.
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.
The core principle of IFRS 15 is that an entity
recognises revenue to depict the transfer of
promised goods or services to customers in
an amount that reflects the consideration to
which the entity expects to be entitled in
exchange for those goods or services. An
entity recognises revenue in accordance
with that core principle by applying the
following steps:
(a) Step 1: Identify the contract(s) with a
customer
(b) Step 2: Identify the performance
obligations in the contract
(c) Step 3: Determine the transaction price
(d) Step 4: Allocate the transaction price to
the performance obligations in the contract
1 January
2016
1 July 2016
1 January
2016
1 July 2016
1 January
2017
1 July 2017*
(e) Step 5: Recognise revenue when (or as)
the entity satisfies a performance obligation
The group is currently evaluating the impact
of the new standard.
AASB 2014-10 amends AASB 10
Consolidated Financial Statements and
AASB 128 to address an inconsistency
between the requirements in AASB 10 and
those in AASB 128, in dealing with the sale or
contribution of assets between an investor
and its associate or joint venture.
The subjects of the principal amendments to
the Standards are set out below:
AASB 5 Non-current Assets Held for Sale and
Discontinued Operations
AASB 7 Financial Instruments: Disclosures:
AASB 119 Employee Benefits:
AASB 134 Interim Financial Reporting:
1 January
2016
1 July 2016
1 January
2016
1 July 2016
The Standard makes amendments to AASB
101 Presentation of Financial Statements
arising from the IASB’s Disclosure Initiative
project. The amendments are designed to
further encourage companies to apply
professional judgment in determining what
information to disclose in the financial
statements.
The Standard completes the AASB’s project
to remove Australian guidance on
materiality from Australian Accounting
Standards.
1 January
2016
1 July 2016
1 July 2015
1 July 2015
AASB 2014-
10
Amendments to
Australian
Accounting
Standards – Sale
or Contribution of
Assets between
an Investor and its
Associate or Joint
Venture
AASB 2015-1 Amendments to
Australian
Accounting
Standards –
Annual
Improvements to
Australian
Accounting
Standards 2012–
2014 Cycle
AASB 2015-2 Amendments to
Australian
Accounting
Standards –
Disclosure
Initiative:
Amendments to
AASB 101
AASB 2015-3 Amendments to
Australian
Accounting
Standards arising
from the
Withdrawal of
AASB 1031
Materiality
*The International Accounting Standards Board (IASB) in its July 2015 meeting confirmed its proposal to
defer the effective date of IFRS 15 (the international equivalent of AASB 15) from 1 January 2017 to 1
January 2018. The amendment to give effect to the new effective date for IFRS 15 is expected to be
issued in September 2015. At this time, it is expected that the AASB will make a corresponding
amendment to AASB 15, which will mean that the application date of this standard for the Group will
move from 1 July 2017 to 1 July 2018.
FINANCIAL STATEMENTS
73
74
73
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 (d)
Basis of consolidation
The Financial Report of NSR as at and for the
year ended 30 June 2015 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 2015
comprises the consolidated financial statements
of the NSPT Group.
The financial statements for the Consolidated
Group are prepared on the basis that National
Storage Holdings Limited was the acquirer of
NSPT. The non-controlling interest is attributable
to stapled security holders presented separately
in the statement of comprehensive income and
within equity in the statement of financial
position, separately from parent shareholders’
equity.
Subsidiaries
Subsidiaries are all entities over which the group
has control. The group controls an entity when it
is exposed to, or has rights to, variable returns
from its involvement with the entity and has the
ability to affect those returns through the power
to direct the activities of the entity.
Consolidation of a subsidiary begins when the
Group obtains control over the subsidiary and
ceases when the Group losses control. The
acquisition method of accounting is used to
account for business combinations (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 all subsidiaries are
consistent with the policies adopted by the
group.
Non-controlling interests 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.
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
FINANCIAL STATEMENTS
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. Neither the
Consolidated Group nor the NSPT Group have
any associates at 30 June 2015.
Joint arrangements
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.
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 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 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,
75
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.
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 term 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 have passed to the buyer, usually on
delivery of the goods. Gains / (losses) on the sale
of assets are calculated on the carrying amount
in the financial statements at the last full period.
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.
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 recognised in other comprehensive income or
directly in equity.
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 situations in which
applicable tax regulation is subject to
interpretation. It establishes provisions where
appropriate on the basis of amounts expected
to be paid.
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. Deferred tax
liabilities are not recognised if they arise from the
76
75
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 (g)
Business combinations
(h)
Leases
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 either
the accounting or 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 measured at fair value is
determined assuming the property value will be
recovered entirely through a sale.
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
fair value of any pre-existing equity interest
in the subsidiary.
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.
FINANCIAL STATEMENTS
Identifiable assets, 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.
The excess of the consideration transferred, the
amount of any non-controlling interest in the
acquired entity, and the fair value of any
previous equity interest in the acquired entity at
the date of acquisition, over the fair value of the
net identifiable assets acquired is recorded as
goodwill. If this is 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
re-measurement are recognised in profit or loss.
77
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 and property,
plant and equipment
Leases of investment property and property
plant and equipment, where the group as
lessee has substantially all the risks and rewards
of ownership, are classified as finance leases.
Leasehold investment property and property,
plant and equipment 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.
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.
(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 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 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
short term deposits 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
Initial recognition and measurement
Financial assets are classified, at initial
recognition, as financial assets at fair value
through profit or loss, loans and receivables,
held-to-maturity investments, and available-for-
sale financial assets.
78
77
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 All financial assets are recognised initially at fair
value, plus in the case of financial assets not
subsequently measured at fair value through
profit or loss, transaction costs that are
attributable to the acquisition of the financial
asset.
Subsequent measurement
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
include financial assets held for trading and
financial assets designated upon initial
recognition at fair value through profit or loss.
Financial assets are classified as held for trading
if they are acquired for the purpose of selling or
repurchasing in the near term. Derivatives,
including separated embedded derivatives are
also classified as held for trading unless they are
designated as effective hedging instruments as
defined by AASB 139.
Loans and receivables
Loans and receivables are non-derivative
financial assets with fixed or determinable
payments that are not quoted in an active
market. After initial measurement, such financial
assets are subsequently measured at amortised
cost using the effective interest rate method,
less impairment. The losses arising from
impairment are recognised in the statement of
profit or loss in finance costs for loans and other
operational expenses for receivables.
Held-to-maturity investments
Non-derivative financial assets with fixed or
determinable payments and fixed maturities are
classified as held-to-maturity when the Group
has the positive intention and ability to hold
them to maturity. After initial measurement,
held-to-maturity investments are measured at
amortised cost using the effective interest rate,
less impairment.
Available-for-sale financial assets
Available-for-sale financial assets include equity
investments and debt securities. Equity
investments classified as available-for-sale are
those that are neither classified as held for
trading nor designated at fair value through
profit or loss. Debt securities in this category are
those that are intended to be held for an
indefinite period of time and that may be sold in
response to needs for liquidity or in response to
changes in the market conditions.
The Group currently has no available-for-sale
financial assets.
De-recognition
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.
FINANCIAL STATEMENTS
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.
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. An impairment exists if one or more
events that has occurred since the initial
recognition of the asset (an incurred ‘loss
event’) has an impact on the estimated future
cash flows of the financial asset or the group of
financial assets that can be reliably estimated.
Financial 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. 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.
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.
79
(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 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
a cash flow hedge 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 finance income or finance
costs.
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). On
reclassification, 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.
80
79
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 (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 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 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.
Depreciation is calculated on a straight-line
basis over the estimated useful life of the assets
as follows:
Leasehold improvements - Remaining
length of lease term
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.
(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.
Fair values are determined by a combination of
independent valuations and Director valuations.
The independent valuations are performed by
an accredited independent valuer. Investment
properties are independently valued on a
rotation basis every three years unless the
underlying financing requires a more frequent
valuation cycle. For properties subject to an
independent valuation report the Directors
verify all major inputs to the valuation and
review the results with the independent valuer.
The Director valuations are completed by NSH
Group Board. The valuations are determined
using the same techniques and similar estimates
to those applied by the independent valuer.
Investment properties are derecognised 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 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 using the same valuation
process applied to freehold investment
property.
Lease payments 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.
(q)
Intangible assets
Intangible assets acquired separately are
measured on initial recognition at cost. The cost
of intangible assets acquired in a business
combination is their fair value at the date of
acquisition. Following initial recognition,
intangible assets are carried at cost less any
accumulated amortisation and accumulated
impairment losses. Internally generated
intangibles, excluding capitalised development
costs, are not capitalised and the related
expenditure is reflected in profit or loss in the
period in which the expenditure is incurred.
The useful lives of intangible assets are assessed
as either finite or indefinite. Intangible assets with
finite lives are amortised over the useful
economic life and assessed for impairment
whenever there is an indication that the
intangible asset may be impaired. The
amortisation period and the amortisation
method for an intangible asset with a finite
useful life are reviewed at least at the end of
each reporting period. Changes in the
expected useful life or the expected pattern of
consumption of future economic benefits
embodied in the asset are considered to modify
the amortisation period or method, as
appropriate, and are treated as changes in
accounting estimates and adjusted on a
prospective basis. The amortisation expense on
intangible assets with finite lives is recognised in
the statement of profit or loss as the expense
category that is consistent with the function of
the intangible assets.
Intangible assets, such as goodwill, with
indefinite useful lives are not amortised, but are
tested for impairment at each reporting period,
either individually or at the cash-generating unit
level. The assessment of indefinite life is reviewed
at each reporting period to determine whether
the indefinite life continues to be supportable. If
not, the change in useful life from indefinite to
finite is made on a prospective basis. Gains or
losses arising from de-recognition of an
intangible asset are measured as the difference
between the net disposal proceeds and the
carrying amount of the asset and are
recognised in the statement of profit or loss
when the asset is derecognised.
Costs incurred in developing products or systems
and acquiring software and licences that will
contribute to future economic benefits are
capitalised as an intangible asset. 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
FINANCIAL STATEMENTS
81
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81
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 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.
(u)
Provisions
Provisions are recognised when the Group has a
present obligation (legal or constructive) as a
result of a past event, it is probable that an
outflow of resources embodying economic
benefits will be required to settle the obligation
and a reliable estimate can be made of the
amount of the obligation. When the Group
expects some or all of a provision to be
reimbursed, the reimbursement is recognised as
a separate asset, but only when the
reimbursement is virtually certain. Provisions are
not recognised for future operating losses.
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 its original
condition at lease expiry. A provision has been
recognised for the obligation to remove
leasehold improvements from the leased
premises (note 10.6).
(v)
Employee benefits
(w) Contributed equity
The NSPT Group does not have any employees.
Therefore this note applies only to the
Consolidated Group and where the term
“group” is used below, it applies only to the
Consolidated Group.
Short-term obligations
Liabilities for wages and salaries, including non-
monetary benefits, and accumulating sick leave
which are expected to be settled within 12
months of the reporting date are recognised in
respect of employees' services up to the
reporting date. They are measured at the
amounts expected to be paid when the
liabilities are settled. Expenses for non-
accumulating sick leave are recognised when
the leave is taken and are measured at the
rates paid or payable.
Other long-term employee benefits obligations
The Group does not expect its long service
leave or annual leave benefits to be settled
wholly within 12 months of each reporting date.
The Group recognises a liability for long service
leave and annual leave measured as the
present value of expected future payments to
be made in respect of services provided by
employees up to the reporting date using the
projected unit credit method. Consideration is
given to previous experience of employee
departures, and periods of service. Expected
future payments are discounted using market
yields at the reporting date on the applicable
corporate bonds with terms to maturity and
currencies that match, as closely as possible, the
estimated future cash outflows.
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.
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)
Dividends and 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 is no longer at the
discretion of the Company or the Responsible
Entity. A corresponding amount is recognised
directly in equity.
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.
(y)
Earnings per stapled security and
earnings per unit (EPS)
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 earnings per stapled security adjust the
figures used in the determination of basic
earnings per share to take into account
the after tax effect of interest and other
financing costs associated with dilutive
potential stapled securities and;
the weighted average number of additional
stapled securities that would have been
outstanding assuming the conversion of all
dilutive potential stapled securities.
(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.
(aa) Rounding of amounts
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 to the nearest
thousand dollars, or in certain cases, the nearest
dollar.
(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
FINANCIAL STATEMENTS
83
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NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 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.
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 instalments.
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.
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 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.
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.
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 a 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. 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 (see
note 13).
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.
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.
Revaluation of investment properties
The Consolidated Group and NSPT Group carries
its investment properties at fair value, with
changes in fair value being recognised in the
statement of profit or loss under fair value
adjustments. Fair values are determined by a
combination of independent valuations
assessed on a rotation basis and Director
valuations, determined using the same
techniques and similar estimates to those
applied by the independent valuer. The key
assumptions used to determine the fair value of
the properties and the sensitivity analyses are
provided in note 10.7.
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 which can impact
on the expected value of the future
consideration to be received.
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 CGU, are disclosed in note 10.4.
FINANCIAL STATEMENTS
85
86
85
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 4.
SEGMENT INFORMATION
6.
EXPENSES AND OTHER INCOME
The Consolidated Group has identified its operating segments based on the internal management
information used by Directors of National Storage Holdings Limited, the Consolidated Group’s chief
decision makers.
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 Board of National
Storage Holdings Limited.
The Consolidated Group has no individual customer which represents greater than 10% of total revenue.
5.
OTHER REVENUE
Other revenue
Interest revenue
Transaction facilitation fees
Coupon fee (pre-stapling)
Management fees
Other revenue
Total other revenue
Notes
7
Consolidated
Group
2015
$'000
170
-
-
1,807
2,705
4,682
2014
$'000
37
24
1,333
1,147
1,016
3,557
NSPT Group
2015
$'000
2014
$'000
337
-
-
-
450
787
104
-
-
-
77
181
Depreciation and amortisation
Depreciation of non-current assets
Amortisation of intangible assets
Total depreciation and amortisation
Notes
10.2
10.4
Other operational expenses
Advertising and marketing
Bank charges
Electricity
Insurance
Communications costs
Other
Total other operational expenses
Employee benefits expense
Wages and salaries
Post-employment benefits
Other employee costs
Total employee benefits expense
116
161
277
757
468
1,239
923
861
2,893
7,141
9,148
877
1,554
11,579
223
77
300
744
317
973
807
742
2,160
5,743
5,538
573
721
6,832
Consolidated
Group
2015
$'000
2014
$'000
NSPT Group
2015
$'000
2014
$'000
-
-
-
-
1
-
-
-
4
5
-
-
-
-
-
-
-
-
-
-
-
41
-
252
293
-
-
-
-
-
Minimum lease payments recognised
as an operating lease expense
323
148
Fair value adjustments
Investment property – (gain) / loss
Contingent consideration at fair value
through profit or loss – (gain) / loss
Total fair value adjustments
7.
FINANCE INCOME AND EXPENSES
(20,252)
2,307
(24,934)
(32,141)
9.8
(744)
(20,996)
2,096
4,403
(677)
(25,611)
1,924
(30,217)
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*
Total finance costs
Consolidated
Group
2015
$'000
2014
$'000
NSPT Group
2015
$'000
2014
$'000
Notes
5
9.6
170
-
170
5,687
-
5,434
-
11,121
37
-
37
1,352
-
8,563
-
9,915
44
293
337
5,677
-
-
-
5,677
51
53
104
5,310
1,285
-
(1,164)
5,431
*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 was closed out during the year ended 30 June 2014.
**The related party interest in 2014 relates to pre-stapling interest costs.
FINANCIAL STATEMENTS
87
88
87
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 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
Total income tax expense/(benefit)
Numerical reconciliation of income tax expense to prima
facie tax payable
Profit from continuing operations
Deduct profit before tax from Trust
Accounting profit/(loss) before income tax
Tax at the Australian tax rate of 30% (2014 – 30%)
Tax effect of amounts which are not deductible/(taxable)
in calculating taxable income:
Prepayments
Adjustments in respect of previous years
Origination and reversal of temporary
differences
Income tax expense/(benefit)
Consolidated Group
2014
$'000
2015
$'000
-
260
260
-
(7,160)
(7,160)
48,993
(50,068)
(1,075)
8,405
(32,687)
(24,282)
(323)
(7,285)
76
651
(144)
260
45
(42)
122
(7,160)
Deferred tax (revenue)/expense included in income tax
expense comprises:
Decrease/(increase) in deferred tax assets
Decrease/(increase) in deferred tax assets acquired
Increase / (decrease) in deferred tax liabilities
Total income tax expense/(benefit)
Deferred tax assets and liabilities
Deferred tax liability
The balance comprises temporary differences attributable
to:
Prepayments
Revaluations of investment properties
Total deferred tax liabilities
Deferred tax assets
The balance comprises temporary
differences attributable to:
Lease liability
Employee benefits
Accrued expenses
Carry forward losses
Formation expenses
Provision for doubtful debts
Make-good provision
Deferred tax assets expected to be recovered after more
than 12 months
Net deferred tax liability
Consolidated Group
2014
$'000
2015
$'000
(25,391)
-
25,651
260
2,472
155
(9,787)
(7,160)
79
76,885
76,964
3
51,310
51,313
73,515
494
190
2,036
175
-
67
47,935
433
46
2,364
234
10
64
76,477
51,086
487
227
The Consolidated Group offsets tax assets and liabilities 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
$6,786,471 (2014: $7,881,400) 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.
FINANCIAL STATEMENTS
89
90
89
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 9.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES
9.1
Cash and cash equivalents
This note provides information about the Consolidated Group’s and the NSPT Group’s current and non-
current financial instruments including:
an overview of all financial instruments held by both groups
specific information about each type of financial instrument
information about determining the fair value of the instruments, including areas of judgement,
estimates and other assumptions.
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
Derivatives used for hedging – at fair
value through other comprehensive
income
Other liabilities
Consolidated
Group
2015
$'000
2014
$'000
Notes
NSPT Group
2015
$'000
2014
$'000
9.1
9.2
9.3
9.3
9.4
9.5
9.7
9,494
4,192
533
14,219
8,264
3,987
308
12,559
7,862
6,954
119
14,935
102
17,642
46
17,790
-
1,097
-
1,007
14,219
13,656
14,935
18,797
5,703
123,012
92,461
221,176
3,326
87,460
64,949
155,735
3,242
123,012
-
126,254
15,476
87,587
-
103,063
9.6
1,272
393
1,272
393
Total financial liabilities
222,448
156,128
127,526
103,456
*excluding prepayments
Other liabilities for the Consolidated Group and NSPT Group include a distribution payable of $14,047,169
(2014: $9,306,090) not included in the table above.
The Consolidated Group and NSPT Group’s approach to financial risk management 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.
Current assets
Cash on hand
Cash at bank
Total cash and cash equivalents
Consolidated
Group
2015
$'000
25
9,469
9,494
2014
$'000
42
8,222
8,264
NSPT Group
2015
$'000
2014
$'000
-
7,862
7,862
21
81
102
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
2015
$'000
2014
$'000
NSPT Group
2015
$'000
2014
$'000
Profit after income tax
48,733
15,565
50,068
39,000
Adjustments to reconcile profit before tax to
net cash flows:
Depreciation
Amortisation of intangible assets
Fair value adjustment to investment
properties
Fair value adjustment of contingent
consideration
Impairment - intangible assets
Loss on disposal of plant and equipment
Gain on disposal of investment property
Share of profit of joint venture
Finance income
Finance costs
Changes in operating assets and liabilities:
(Increase)/decrease in receivables
(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
116
161
223
77
-
-
-
-
(20,252)
2,307
(24,934)
(32,141)
(744)
-
1
(350)
(1,632)
(170)
11,121
(205)
(42)
-
(1,910)
677
1,448
-
260
-
214
2,096
(126)
100
-
(151)
(37)
9,915
(1,633)
(78)
(524)
1,041
646
(53)
(456)
(7,374)
-
783
(677)
-
-
(350)
(1,632)
(337)
5,677
10,981
-
-
(223)
(13,934)
-
-
-
-
-
1,924
-
-
-
(151)
(104)
7,227
(11,393)
-
(143)
212
2,220
-
-
-
(1,079)
-
Cash flows from operating activities
37,426
22,321
24,639
5,572
Interest received
170
37
44
104
Net cash flows from operating activities
37,596
22,358
24,683
5,676
FINANCIAL STATEMENTS
91
92
91
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 9.2
Trade and other receivables
9.3
Other assets
Consolidated
Group
2015
$'000
2014
$'000
Notes
Current
Trade receivables
Provision for doubtful debts
Other receivables
Loans to related parties
18
916
-
916
2,526
530
3,972
697
(44)
653
2,041
1,073
3,767
NSPT Group
2014
$'000
2015
$'000
-
-
-
-
-
-
756
6,198
6,954
827
16,815
17,642
Non-current
Other receivables
220
220
-
-
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
2015
$'000
2014
$'000
533
308
-
2,281
2,814
1,097
954
2,359
-
-
8
8
NSPT Group
2015
$'000
2014
$'000
119
-
7
126
-
-
46
1,007
-
1,053
-
-
Total current and non-current
4,192
3,987
6,954
17,642
Total current and non-current
2,814
2,367
126
1,053
Classification as trade and other 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
Other receivables include $814,000 in the Consolidated Group, and $748,000 in the NSPT Group of
clawback receivable upon payment of the final distribution (2014: Consolidated Group $890,000, NSPT
Group $818,000).
Impairment of receivables
The provision for impairment (doubtful debts) of receivables represents an estimate of trade debtors that
are impaired due to an inability to collect the remaining rent owing after customers goods have been
sold. At 30 June 2015, the Consolidated Group recognised no provision for trade receivables (2014:
$44,000). As at 30 June 2015 and 30 June 2014 the NSPT Group had no trade receivables and therefore
recognised no provision.
See below for the movements in the provision for impairment of receivables in the Consolidated Group.
At 1 July
Charge for the year
Utilised
At 30 June
The age of trade receivables not impaired was as follows:
1 to 3 months
3 to 6 months
Over 6 months
2015
$'000
44
-
(44)
-
2015
$'000
789
74
53
916
2014
$'000
-
44
-
44
2014
$'000
588
62
47
697
The carrying amounts of current receivables are assumed to be the same as their fair values, due to their
short-term nature. The fair value of non-current receivables approximates carrying value.
FINANCIAL STATEMENTS
93
Contingent consideration at FVTPL
The Vendor Stapled Securities are subject to voluntary escrow and distribution “claw back”
arrangements based on the performance of National Storage REIT for each distribution period:
if the earnings per stapled security (EPS) 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 EPS 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
if the EPS 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”.
The above arrangements will lapse and the Vendor Stapled Securities will become fully transferable at
the earlier of:
the EPS of National Storage REIT for a 12 months period being greater than 8.75 cents for two
consecutive testing periods;
three years in respect of Vendor Stapled Securities issued to non-executive NS Vendors; and
five years in respect to Vendor Stapled Securities issued to executive NS Vendors who will continue as
senior managers of National Storage REIT.
At the 30 June 2015 76% of the final distribution paid to Vendor Stapled Securities was “clawed back” (30
June 2014: 100%). See note 9.8 for more information on the valuation of contingent consideration.
94
93
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 9.4
Trade and other payables
Current
Trade payables
Other payables and accruals
Related party payables
Total current trade and other
payables
Non-current
Other payables and accruals
Total non-current trade and other
payables
Consolidated
Group
2015
$'000
203
3,800
-
2014
$'000
1,032
2,248
46
Notes
18
NSPT Group
2014
$'000
2015
$'000
-
1,040
502
21
678
14,777
4,003
3,326
1,542
15,476
1,700
1,700
-
-
1,700
1,700
-
-
Total current and non-current
5,703
3,326
3,242
15,476
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. The fair value of non-current trade and other payables approximates carrying
value.
9.5
Borrowings
Non-current
Bank finance facility
Non-amortised borrowing costs
Total borrowings
Consolidated
Group
2015
$'000
2014
$'000
NSPT Group
2015
$'000
2014
$'000
123,500
(488)
123,012
87,916
(456)
87,460
123,500
(488)
123,012
87,916
(329)
87,587
The Consolidated Group and NSPT Group refinanced its debt facilities during December 2014. The
facilities in place as of 30 June 2015 are on a “Club” arrangement with National Australia Bank, Westpac
Banking Corporation and Commonwealth Bank of Australia. The main terms of these agreements are as
follows:
The facility limit is $200 million.
The facility is an interest only facility with any drawn balance payable at maturity.
The facility contains the following Tranches.
Tranche
1
2
3
Total
Limit
$’000
20,000
140,000
40,000
200,000
Drawn
$’000
0
83,500
40,000
123,500
Undrawn
$’000
Term
Maturity Date
20,000 1.5 Years
56,500 3 Years
0 5 Years
76,500
23 Jun 2016
22 Dec 2017
23 Dec 2019
The interest rate applied is the bank bill rate (BBSY) plus a margin depending on the gearing ratio.
Security has been granted over the Consolidated Group's owned and leased storage centre
properties.
The Consolidated Group has a bank overdraft facility with a limit of $3 million that was undrawn at
balance date.
FINANCIAL STATEMENTS
95
The Consolidated Group and the NSPT Group have complied with the financial covenants of their
borrowing facilities during the 2015 and 2014 reporting periods (see note 17).
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
Non-current
Financial liabilities (derivatives)
Consolidated
Group
2015
$’000
2014
$’000
Notes
NSPT Group
2015
$’000
2014
$’000
17
14,047
9,306
14,047
9,306
9.8
1,272
393
1,272
393
Total other liabilities
15,319
9,699
15,319
9,699
Derivatives are classified as held for trading and accounted for at fair value through profit or loss unless
designated as a cash flow hedge. 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 2015, the Consolidated Group and the NSPT Group had various interest rate swap agreements
in place with a notional amount of $110,000,000 (2014: $30,000,000) whereby the Consolidated Group
and the NSPT Group pay a fixed rate of interest of 2.84% (2014: 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, recognised through other comprehensive income.
In the prior reporting period, the NSPT Group had interest rate swap agreements 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 in 2014 of $1,164,000 was recognised in finance
costs. This interest rate swap was closed out during the year ended 30 June 2014.
96
95
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 9.7
Finance leases
The NSPT Group does not have any finance lease liabilities. The Consolidated Group has finance leases
for investment properties and 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
2015
2014
Minimum
payments
$'000
Present
value of
payments
$'000
10,821
5,022
43,902
83,561
138,284
(45,823)
24,171
63,268
92,461
-
Minimum
payments
$'000
9,098
38,923
55,124
103,145
(38,196)
Present
value of
payments
$'000
4,330
19,557
41,062
64,949
-
92,461
92,461
64,949
64,949
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 recognised in the financial statements, as detailed in notes 9.1 to 9.7. To provide an indication
about the reliability of the inputs used in determining fair value, financial instruments are classified into the
following three levels.
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.
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.
Consolidated Group
At 30 June 2015
Financial assets
Derivative - contingent consideration
Financial liabilities
Derivative used for hedging - Interest
rate swap
Consolidated Group
At 30 June 2014
Financial assets
Derivative – contingent consideration
Financial liabilities
Derivative used for hedging - Interest
rate swap
NSPT Group
At 30 June 2015
Financial assets
Derivative - contingent consideration
Financial liabilities
Derivative used for hedging - Interest
rate swap
NSPT Group
At 30 June 2014
Financial assets
Derivative – contingent consideration
Financial liabilities
Derivative used for hedging - Interest
rate swap
Notes
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
9.3
-
-
9.6
-
1,272
-
-
-
1,272
9.3
9.6
-
-
-
1,097
1,097
393
-
393
Notes
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
9.3
-
-
9.6
-
1,272
-
-
-
1,272
9.3
9.6
-
-
-
1,007
1,007
393
-
393
There were no transfers between levels of fair value hierarchy during the year ended 30 June 2015.
FINANCIAL STATEMENTS
97
98
97
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 Fair value measurements using significant unobservable inputs (Level 3)
10.2
Property, plant and equipment
The following table presents changes in level 3 financial instruments:
Consolidated
Group
Opening balance 1 July
Derivative - contingent consideration initially
recognised in contributed equity
Distribution receivable (clawback)
Derivative - contingent consideration
recognised in profit or loss
Closing balance 30 June
2015
$’000
1,097
2014
$’000
NSPT Group
2015
$’000
2014
$’000
-
1,007
-
-
(1,841)
4,083
(890)
-
(1,684)
3,749
(818)
744
-
(2,096)
1,097
677
-
(1,924)
1,007
A distribution clawback agreement was entered into as part of the purchase agreement with the
previous owners of National Storage Pty Ltd.
The fair value of the contingent consideration has been determined using a discounted cash flow
analysis on the expected future cash flows of the Consolidated Group. The valuation includes certain
assumptions over unobservable inputs to the model including the assessment of expected future net
profits, and setting of an appropriate discount rate. A 2% change in the discount rate would not have
any material effect on the fair value in 2015 or 2014. A decrease of 2% in the stapled net profit after tax
would increase fair value by $292,000 (2014: $305,000). An increase of 2% in the stapled net profit after
tax would have no impact on fair value in 2015 as expected future net profits are already projected to
be above clawback hurdles (2014: decrease $120,000). There were no significant inter-relationships
between unobservable inputs that materially affect fair values.
10. NON-FINANCIAL ASSETS AND LIABILITIES
This note provides information about the Consolidated Group’s and the NSPT Group’s non-financial assets
and liabilities including:
an overview of all non-financial assets and liabilities held by the both groups
specific information about each type of non-financial asset and non-financial liability
information about determining the fair value of the non-financial assets and liabilities, including areas
of judgement, estimates and other assumptions.
10.1
Inventories
Consolidated
Group
2015
$'000
2014
$'000
NSPT Group
2015
$'000
2014
$'000
Finished goods - at cost
300
258
-
-
Inventories recognised as an expense during the year ended 30 June 2015 amounted to $834,000 (2014:
$548,000). These were included in cost of packaging and other products sold.
At cost
Accumulated depreciation
Total property, plant and equipment
Consolidated
Group
2015
$'000
2014
$'000
1,439
(607)
832
4,251
(2,804)
1,447
NSPT Group
2014
$'000
2015
$'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:
Plant and equipment
Carrying amount at beginning of the year
Additions
Disposals
Items reclassified as investment property
Additions through acquisition of entities
Depreciation
Carrying amount at end of the year
Consolidated
Group
2015
$'000
2014
$'000
1,447
563
(54)
(1,008)
-
(116)
832
931
509
(100)
-
330
(223)
1,447
NSPT Group
2014
$'000
2015
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Plant and equipment under finance lease arrangements included in the totals noted above are as
follows:
Consolidated
Group
2015
$'000
2014
$'000
NSPT Group
2014
$'000
2015
$'000
Leasehold plant and equipment at cost
Accumulated depreciation
Carrying amount
48
(18)
30
48
(12)
36
-
-
-
-
-
-
FINANCIAL STATEMENTS
99
100
99
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
10.3
Investment properties
Investment properties at valuation
Leasehold investment properties
Freehold investment properties
Total investment properties
Consolidated
Group
2015
$'000
2014
$'000
NSPT Group
2014
$'000
2015
$'000
125,304
467,100
592,404
76,051
305,250
381,301
-
465,293
465,293
-
305,250
305,250
Notes
10.7
10.7
Leasehold investment properties
Opening balance
Elimination through stapling
Fair value adjustment arising on stapling
Property acquisitions
Items reclassified from property, plant, and
equipment
Improvements to investment properties
Reassessment of lease terms
Net gain / (loss) from fair value adjustments
Closing balance
76,051
-
-
42,742
201,328
(95,403)
(20,515)
-
190
335
10,574
(4,588)
125,304
-
-
-
(9,359)
76,051
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Freehold investment properties
Opening balance
Acquired through stapling
Fair value adjustment arising on stapling
Improvements to investment properties
Property acquisitions
Property disposals
Items reclassified from property,
plant and equipment
Net gain from fair value adjustments
Closing balance
Unrealised gains/(losses) for the period
included in profit or loss (recognised in fair
value adjustments)
305,250
-
-
1,798
141,294
(6,900)
818
24,840
467,100
-
203,003
20,515
524
74,156
-
-
7,052
305,250
305,250
-
-
715
141,294
(6,900)
-
24,934
465,293
198,810
-
20,515
143
74,156
-
-
11,626
305,250
20,252
(2,307)
24,934
32,141
Adjustment upon stapling
In December 2013 the National Storage REIT was formed by the stapling of the shares in NSH and the units
in NSPT. Prior to stapling, the NS Group had leasehold investment properties where the
lessor/owner/landlord was NSPT. On stapling the Consolidated Group reclassified these leasehold
investment properties to freehold investment properties residing within NSPT. A fair value adjustment of
$20,515,000 was recognised to increase the value associated with the property portfolio.
Significant estimate
Leasehold and freehold investment properties are held for lease to customers requiring 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.
Leasing arrangements
The Consolidated Group leasehold and freehold investment properties are largely leased to customers
under a short-term lease with most rentals payable monthly in advance. Most leases can be terminated
by either party giving not less than seven days’ notice.
FINANCIAL STATEMENTS
101
The NSPT Group’s investment properties are leased to entities within the NSH Group under long-term
finance leases with rentals payable monthly. Minimum lease payments receivable on leases of
investment properties are as follows:
Within one year
Later than one year but not later than five years
Later than five years
NSPT Group
2015
$'000
2014
$'000
31,460
98,250
46,196
175,906
25,586
145,603
13,114
184,303
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.
10.4
Intangibles
Goodwill
Opening net book amount
Arising on stapling
Acquisition of entity
Other
Closing net book amount
Software
Opening net book amount
Additions
Amortisation
Closing net book amount
Consolidated
Group
2015
$'000
13,542
-
-
217
13,759
2014
$'000
129
7,005
6,384
24
13,542
354
218
(161)
411
305
126
(77)
354
Notes
11
11
6
Total intangibles
14,170
13,896
NSPT Group
2014
$'000
2015
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Goodwill is an asset acquired through business combinations, these acquisitions include the purchase of
Strategic Storage Consulting Pty Ltd and the stapling of the shares of NSH and the units of NSPT.
102
101
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 Impairment testing of goodwill
Goodwill arising on stapling and the acquisition of SSC has been allocated to the listed group (NSR).
Management have determined that the listed group is the appropriate cash generating unit against
which to allocate these intangible assets owing to the synergies arising from combining the portfolios of
the NSH Group and NSPT Group and the transfer of the management functions and associated revenues
and expenses to the Consolidated Group.
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 2015 NSR had
334,456,409 stapled securities quoted on the Australian Securities Exchange (ASX) at $1.675 per security
providing a market capitalisation of $560,214,485 (2014: 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 have been in excess of the carrying amount.
10.5
Deferred revenue
Consolidated
Group
2015
$'000
2014
$'000
NSPT Group
2014
$'000
2015
$'000
Deferred storage rent revenue
6,400
4,952
-
-
Deferred storage rent revenue represents funds received in advance from customers for rental storage.
10.6
Provisions
Current
Annual leave
Long service leave
Non-current
Make good provision
Annual leave
Long service leave
Reconciliation of movement in make good provision
Opening balance
Provision raised/(amortised)
Amounts used
Closing balance
214
9
-
223
Consolidated
Group
2015
$'000
683
489
1,172
223
142
334
699
2014
$'000
707
362
1,069
214
-
374
588
221
(7)
-
214
NSPT Group
2015
$'000
2014
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10.7
Non-financial assets fair value measurement
The group has classified its non-financial assets into the three levels prescribed in note 9.8 to provide an
indication about the reliability of inputs used to determine fair value.
Investment properties
Consolidated Group
At 30 June 2015
Leasehold
Freehold
At 30 June 2014
Leasehold
Freehold
NSPT Group
At 30 June 2015
Leasehold
Freehold
At 30 June 2014
Leasehold
Freehold
Notes
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
10.3
10.3
10.3
10.3
10.3
10.3
10.3
10.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
125,304
467,100
592,404
125,304
467,100
592,404
76,051
305,250
381,301
76,051
305,250
381,301
-
465,293
465,293
-
465,293
465,293
-
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 out of fair value
hierarchy levels 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.
Fair values are determined by a combination of independent valuations and Director valuations. The
independent valuations are performed by an accredited independent valuer. Investment properties are
independently valued on a rotation basis every three years unless the underlying financing requires a
more frequent valuation cycle. For properties subject to an independent valuation report the Directors
verify all major inputs to the valuation and review the results with the independent valuer. The Director
valuations are completed by NSH Group Board. The valuations are determined using the same
techniques and similar estimates to those applied by the independent valuer.
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 asset.
FINANCIAL STATEMENTS
103
104
103
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 The table below details the percentage of the number of investment properties subject to internal and
external valuations during the current and comparable reporting periods:
The following tables present the sensitivity of the fair values of investment property to changes in input
assumptions.
Consolidated Group
NSPT Group
External
valuation %
Internal
valuation %
External
valuation %
Internal
valuation %
Year ended 30 June 2015
Leasehold
Freehold
23%
26%
Year ended 30 June 2014
Leasehold
Freehold
10%
19%
77%
74%
90%
81%
-
26%
-
19%
-
74%
-
81%
The Consolidated Group and NSPT Group also obtained external valuations on 12 freehold investment
properties and 3 leasehold properties acquired during the reporting period. These external valuations
provide the basis of the Directors valuations applied to these properties at 30 June 2015. Including these
valuations, 54% of freehold investment properties, and 46% of leasehold properties were subject to
external valuations during the year.
Valuation inputs and relationship to fair value
The following table presents the significant unobservable inputs in level 3 valuations:
Description
Valuation
technique
Significant unobservable
inputs
Range at 30
June 2015
Range at 30
June 2014
Investment
properties -
leasehold
Investment
properties -
freehold
Capitalisation
method
Capitalisation
rate
Sustainable occupancy
Stabilised average EBIT
Primary
Secondary
9% to 26%
12% to 29%
77% to 96%
$426,883
Capitalisation
method
Capitalisation
rate
Primary
Secondary
Sustainable occupancy
Stabilised average EBIT
8% to 11%
11% to 14%
68% to 94%
$986,043
10% to 40%
11% to 50%
75% to 93%
$405,038
9% to 12%
10% to 14%
65% to 95%
$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.
FINANCIAL STATEMENTS
105
At 30 June 2015:
Unobservable inputs
Leasehold
Freehold
Increase/
(decrease)
in input
Increase/
(decrease)
In fair value
$’000
Increase/
(decrease)
in input
Increase/
(decrease)
in fair value
$’000
Primary
Secondary
Capitalis-
ation rate
Sustainable occupancy
Stabilised average EBIT
5% / (5%)
7% / (7%)
5% / (5%)
5% / (5%)
(1,350) / 2,950
(900) /2,200
1,600 / (1,700)
300 / (450)
1% / (1%)
2% / (2%)
5% / (5%)
5% / (5%)
(31,350) / 39,650
(9,700) / 13,500
22,150 / (22,450)
12,650 / (12,800)
At 30 June 2014:
Unobservable inputs
Leasehold
Freehold
Increase/
(decrease)
in input
Increase/
(decrease)
In fair value
$’000
Increase/
(decrease)
in input
Increase/
(decrease)
in fair value
$’000
Primary
Secondary
Capitalis-
ation rate
Sustainable occupancy
Stabilised average EBIT
1% / (1%)
2% / (2%)
5% / (5%)
5% / (5%)
(360) / 770
(200) / 500
1,540 / (1,330)
760 / (450)
1% / (1%)
2% / (2%)
5% / (5%)
5% / (5%)
(22,330) / 27,460
(6,210) / 8,670
12,250 / (12,650)
11,180 / (11,490)
11.
BUSINESS COMBINATIONS
The Consolidated Group and NSPT Group made no business combinations during the current reporting
period.
Business combinations in the reporting period ended 30 June 2014.
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 fair values of the identifiable assets and liabilities of NSPT as at the date of acquisition were:
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
$’000
50
137
203,003
203,190
(2,502)
(109,490)
(111,992)
91,198
(98,203)
7,005
-
106
105
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 The Consolidated Group measured the non-controlling interest at fair value with reference to the
underlying assets and liabilities. The major component of assets is investment properties which were
subject to a Director's valuation at 19 December 2013 supported by external valuations performed by
m3property. The bank loan was recognised at fair value at acquisition date.
Acquisition of Strategic Storage Consulting Pty Ltd
On 19 December 2013, the Consolidated Group acquired 100% of shares of Strategic Storage Consulting
Pty Ltd. The fair values of the identifiable assets and liabilities of Strategic Storage Consulting Pty Ltd as at
the date of acquisition were:
Assets
Plant and equipment
Other receivables
Liabilities
Other payables
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
Analysis of cash flows on acquisition
Cash paid
Transaction costs (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
The goodwill of $6,384,000 comprises the intangible assets associated with the business, including but not
limited to reputation and operational procedures.
Acquisition of NS APAC Trust
On 19 December 2013, the NSPT acquired NS APAC Trust. The fair values of the identifiable assets and
liabilities of NS APAC Trust as at the date of acquisition were:
Investment in associate
(10% interest in Southern Cross Storage Group)
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
Analysis of cash flows on acquisition
Cash paid
Transaction costs (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
25
4,775
This acquisition of the joint venture was 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
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.
The consolidated financial statements of the NSH Group as at 30 June 2015 include:
Name of Controlled Entity
Place of incorporation
Equity interest
National Storage Pty Ltd
National Storage (Operations) Pty Ltd
National Storage Investments Pty Ltd
National Storage Financial Services
Pty Ltd*
Wine Ark Pty Ltd
Strategic Storage Consulting Pty Ltd
*Registered on 18 July 2014.
Australia
Australia
Australia
Australia
Australia
Australia
2015
100%
100%
100%
100%
100%
100%
2014
100%
100%
100%
-
100%
100%
The consolidated financial statements of the NSPT Group include:
Name of Controlled Entity
Place of domicile
Equity interest
NS APAC Trust
National Storage Investment Trust
National Storage Victoria Property Trust
Australia
Australia
Australia
2015
100%
100%
100%
2014
100%
100%
100%
Joint venture
The NSPT Group has a 10% interest in Southern Cross Storage Group (2014: 10%).
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 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.
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.
FINANCIAL STATEMENTS
107
108
107
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 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
2015
$'000
1,424
1,651
3,075
239,790
242,865
234
6,324
6,558
107,340
4,622
111,962
118,520
2014
$'000
2,848
9,084
11,932
216,619
228,551
161
17,161
17,322
107,457
166
107,623
124,945
Net assets
124,345
103,606
Summarised statement of profit or loss for the year ended 30 June
Revenue
Administration expenses
Depreciation and amortisation
Interest expense
Accounting policy alignment **
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
26,664
(11,736)
(4,017)
(6,180)
24,411
29,142
-
29,142
-
29,142
25,237
(11,251)
(4,032)
(7,039)
1,354
4,269
-
4,269
(1,561)
2,708
Consolidated Group's and NSPT Group's share in % *
5.6%
5.6%
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
Carrying amount
5,077
-
-
1,632
6,709
-
4,750
176
151
5,077
Dividends/distributions received from joint venture
-
-
* Under the terms of the Southern Cross Investors Agreement the payment of progressive operating
returns are subject to the passing of certain hurdles 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 recognised by the NSPT Group and the Consolidated Group is therefore not directly
reflective of the percentage of equity share.
** Southern Cross measures investment properties at historical cost less depreciation and does not apply
hedge accounting to financial liabilities. An adjustment has been made to align these accounting
policies with those of the Consolidated Group and NSPT Group.
The joint venture had no contingent liabilities or capital commitments as at 30 June 2015 or 30 June 2014.
FINANCIAL STATEMENTS
109
14. CONTRIBUTED EQUITY
Issued and Paid Up Capital
Ordinary shares
Units
Number of Stapled Securities on Issue
Consolidated Group
2014
$'000
2015
$'000
NSPT Group
2015
$'000
2014
$'000
31,419
-
31,419
17,758
-
17,758
-
297,191
297,191
-
191,499
191,499
Consolidated Group
2015
No. of
shares
2014
No. of
shares
NSPT Group
2015
No. of
units
2014
No. of
units
Opening balance at 1 July
Ordinary shares
Units
Restructure distribution
Public offering
Vendor issue
Institutional placements
Security purchase plan
Script issue on property acquisition
Closing balance at 30 June
244,897,096
-
-
-
-
75,559,313
9,200,000
4,800,000
334,456,409
2,000
-
- 244,897,096
-
-
-
75,559,313
9,200,000
4,800,000
334,456,409
93,055,632
126,329,260
25,510,204
-
-
-
244,897,096
-
93,055,632
-
126,331,260
25,510,204
-
-
-
244,897,096
As at 30 June 2015 there were 334,456,409 stapled securities on issue equivalent to the number of issued
NSH shares and NSPT units (30 June 2014: 244,897,096). 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.
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. 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 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 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.
110
109
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 15. OTHER RESERVES
Cash flow hedge
Opening balance at 1 July
Revaluation – gross*
Closing balance at 30 June
Consolidated
Group
2015
$'000
2014
$'000
Notes
NSPT Group
2014
$'000
2015
$'000
-
-
-
-
-
-
(393)
(879)
(1,272)
-
(393)
(393)
*Gross revaluation excludes deferred tax as tax does not apply to the NSPT Group under current
legislation.
The hedging reserve is used to record gains or losses on derivatives that are designated as cash flow
hedges and recognised in other comprehensive income, as described in note 2(n). Amounts are
reclassified to profit or loss in the period when the associated hedged transaction takes place.
The cash flow hedge is included in non-controlling interest in the Consolidated Group and is not classified
within other reserves.
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.
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.
Risk management for the Consolidated Group and the NSPT Group is carried out by the NSH Board and
key management personnel of NSH. 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.
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:
Non-current liabilities
Interest rate swap contract – cash
flow hedge
Current assets
Contingent consideration
Consolidated
Group
2015
$'000
2014
$'000
Notes
NSPT Group
2014
$'000
2015
$'000
9.6
(1,272)
(393)
(1,272)
(393)
9.3
-
1,097
-
1,007
Classification of derivatives
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.
FINANCIAL STATEMENTS
111
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 comprises of three types of risk: interest rate risk, currency risk and
other price risk, such as equity price 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 were exposed to foreign currency risk or
price risk during the reporting period.
Interest rate 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. 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 2015,
after taking into account the effect of interest rate swaps, approximately 89.1% of the Consolidated
Group’s borrowings are at a fixed rate of interest (2014: 34.1%).
The Consolidated Group and NSPT Group have the following interest rate hedges in place as at the end
of the reporting period.
Swap
Amount
$’000
Fixed
Rate
Floating
Rate*
Effective Date
Term
Maturity Date
1a
2b
3b
30,000
3.420%
BBSY 24 March 2014
2.75 Years
23 Dec 2016
40,000
2.490%
BBSY 23 December 2014
3.0 Years
22 Dec 2017
40,000
2.765%
BBSY 23 December 2014
5.0 Years
23 Dec 2019
Total
110,000
* - BBSY – Bank Bill Swap Bid Rate
a - In place at the end of the prior reporting period.
b – New Swaps entered into during the current reporting period.
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 contracts outstanding:
Consolidated Group and
NSPT Group
Bank loans
Interest rate swaps
(notional principal amount)
Net exposure to cash flow
interest rate risk
2015
2014
Weighted
average
interest
rate %
Balance
$'000
% of
total
loans
Weighted
average
Interest
rate %
Balance
$'000
% of
total
loans
3.28%
123,500
100%
4.19%
87,916
100%
2.84%
(110,000)
3.42%
(30,000)
13,500
10.9%
57,916
65.9%
112
111
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 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, the group 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.
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 within one year (bank loans)
Expiring beyond one year (bank loans)
Consolidated
Group
2015
$'000
3,000
20,000
56,500
79,500
2014
$'000
3,000
-
12,084
15,084
NSPT Group
2014
$'000
2015
$'000
3,000
20,000
56,500
79,500
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 loans may be drawn at any time and is subject to an annual review. Further
details of the bank loans are detailed in note 9.5 and note 17.
Amounts recognised in profit or loss
During the year, the following amounts were recognised in profit or loss in relation to interest rate swaps.
Current liabilities
Gain recognised in profit or loss
Consolidated Group
NSPT Group
2015
$'000
2014
$'000
2015
$'000
2014
$'000
-
-
-
1,164
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
$135,000 (2014: $579,000) for the Consolidated Group and 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 to the Consolidated Group entity, National Storage Operations Pty Ltd.
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.
At 30 June 2015 and 30 June 2014 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.
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. Other non-related parties are rented
facilities and these rental revenues are not significant compared with related party rental revenues.
The Consolidated Group’s and the NSPT Group’s maximum exposure to credit risk, is the carrying amount
of those assets as indicated in the statement of financial position. 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 refer to note 9.2.
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 2015 and 30 June 2014 is the carrying amounts as indicated in the statement of financial
position.
Guarantees
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.
FINANCIAL STATEMENTS
113
114
113
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 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.
Consolidated Group
At 30 June 2015
Non-derivatives
Trade and other
payables
Borrowings
Finance leases
Distribution payable
Total non-derivatives
Derivatives
Inflows
Outflows
Total derivatives
At 30 June 2014
Non-derivatives
Trade and other
payables
Borrowings
Finance leases
Distribution payable
Total non-derivatives
Derivatives
Inflows
Outflows
Total derivatives
On
demand
$'000
Less than
3 months
$'000
3 to 12
months
$'000
1 to 5
years
$'000
Over 5
years
$'000
Total
$'000
-
-
-
-
-
-
-
-
-
4,003
1,142
2,773
14,047
21,965
-
3,437
8,047
-
11,484
1,700
132,806
43,902
-
178,408
-
-
83,561
-
83,561
5,703
137,385
138,283
14,047
295,418
-
202
202
-
609
609
-
1,361
1,361
-
-
-
-
2,172
2,172
22,167
12,093
179,769
83,561
297,500
On
demand
$'000
Less than
3 months
$'000
3 to 12
months
$'000
1 to 5
years
$'000
Over 5
years
$'000
Total
$'000
3,280
97,162
103,145
9,306
212,893
-
-
-
-
-
-
-
-
-
3,280
930
2,275
9,306
15,791
-
2,762
6,823
-
9,585
-
93,470
38,923
-
132,393
-
-
55,124
-
55,124
(208)
259
51
(599)
767
168
(1,357)
1,543
186
-
-
-
(2,164)
2,569
405
15,842
9,753
132,579
55,124
213,298
NSPT Group
At 30 June 2015
Non-derivatives
Trade and other
payables
Borrowings
Distribution payable
Total non-derivatives
Derivatives
Inflows
Outflows
Total derivatives
At 30 June 2014
Non-derivatives
Trade and other
payables
Borrowings
Distribution payable
Total non-derivatives
Derivatives
Inflows
Outflows
Total derivatives
On
demand
$'000
Less than
3 months
$'000
3 to 12
months
$'000
1 to 5
years
$'000
Over 5
years
$'000
Total
$'000
-
-
-
-
-
-
-
-
1,542
1,142
14,047
16,731
-
202
202
-
3,437
-
3,437
-
609
609
1,700
132,806
-
134,506
-
1,361
1,361
16,933
4,046
135,867
-
-
-
-
-
-
-
-
On
demand
$'000
Less than
3 months
$'000
3 to 12
months
$'000
1 to 5
years
$'000
Over 5
years
$'000
-
-
-
-
-
-
-
-
698
930
9,306
10,934
6,547
2,762
-
9,309
-
93,470
-
93,470
(208)
259
51
(599)
767
168
(1,357)
1,543
186
10,985
9,477
93,656
-
-
-
-
-
-
-
-
3,242
137,385
14,047
154,674
-
2,172
2,172
156,846
Total
$'000
7,245
97,162
9,306
113,713
(2,164)
2,569
405
114,118
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 value for the securityholder. 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 objective, the Consolidated Group’s and the NSPT Group’s capital management
strategy, aims to ensure that they meet financial covenants attached to interest-bearing loans and
borrowings. Breaches in meeting a financial covenant would permit the lender 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, represented by 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, less cash
and short-term deposits, excluding discontinued operations.
FINANCIAL STATEMENTS
115
116
115
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 Interest bearing loans
Less: cash and short term deposits
Net Debt
Total equity
Notes
9.5
9.1
Consolidated
Group
2015
$'000
2014
$'000
NSPT Group
2014
$'000
2015
$'000
123,500
(9,494)
114,006
384,362
498,368
87,916
(8,264)
79,652
244,327
323,979
123,500
(7,862)
115,638
344,071
459,709
87,916
(102)
87,814
216,362
304,176
Gearing ratio
23%
25%
25%
29%
Loan covenants
Under the terms of the borrowing facilities as a financial covenant the Consolidated Group and the NSPT
Group are required to ensure that the gearing ratio must not be more than 50% and the ratio of earnings
before interest, tax, depreciation and amortisation to finance costs must exceed a multiple of two. For
the purposes of the financial covenants gearing is defined as total borrowings divided by total
borrowings plus equity. Both the Consolidated Group and the NSPT Group have complied with these
covenants throughout the reporting period.
Dividends and distributions
Ordinary share dividends
Recognised amounts
National Storage Pty Ltd final franked dividend for
2013 of $2,799 per share declared on 24 October
2013.
Consolidated Group
2014
$'000
2015
$'000
-
-
5,598
5,598
The Directors of NSH have not declared an interim or final dividend for the year ending 30 June 2015.
A distribution has been declared as noted below.
Unit distributions
Distributions declared
National Storage Property Trust interim distribution
of 4.0 cents per unit paid on 27 February 2015
(2014: distributions of 2.223 cents per unit, and 2
cents per unit prior to IPO)
National Storage Property Trust final distribution of
4.2 cents per unit payable on 27 August 2015 (2014:
3.8 cents per unit)
NSPT Group
2015
$'000
2014
$'000
11,825
3,938
14,047
9,306
25,872
13,244
There are no proposed distributions not recognised as a liability for the year ended 30 June 2015.
FINANCIAL STATEMENTS
117
Franking credit balance
Ordinary share dividends
Recognised amounts
Franking credits available for subsequent financial
years based on a tax rate of 30% (2014: 30%)
Consolidated Group
2015
$'000
2014
$'000
1,376
1,376
The above amounts are calculated from the balance of the NSH franking account 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.
18.
RELATED PARTY TRANSACTIONS
This related party’s note is separated into two time periods for the previous corresponding period as the
related parties changed upon stapling on 19 December 2013. As such this note is presented in two
sections: stapled entity (current and prior period), and pre-stapling entity including related party
transactions on stapling (prior period).
Stapled Entity – from 19 December 2013
The following tables provide the total amount of transactions that have been entered into with related
parties for the relevant financial year.
Transactions with Related Parties –
Consolidated Group
Southern Cross Storage Operations Pty
Ltd
Southern Cross Storage Trust
The Trust Company (RE Services)
Limited and its associates *
Australian Storage Developments
* not a related party pre-stapling in 2014
2015
2014
2015
2014
2015
2014
2015
2014
Revenue
from
related
parties
$
1,790,020
1,147,271
Purchases
from
related
parties
$
Amount
owed by
related
parties
$
Amount
owed to
related
parties
$
-
-
529,508
1,028,712
-
-
-
-
-
-
165,000
-
448,938
130,306
-
-
-
-
-
-
44,465
40,000
-
-
-
-
220,576
-
-
5,794
118
117
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 Transactions with Related Parties – NSPT
Group
Revenue
from
related
parties
Purchases
from
related
parties
National Storage Holdings Limited
Southern Cross Storage Trust
2015
2014
2015
2014
$
-
-
-
-
Amount
owed by
related
parties
$
Amount
owed to
related
parties
$
-
8,230,421
8,964,575
-
$
-
-
165,000
-
-
-
-
40,000
National Storage (Operations Limited)
2015
2014
28,563,075
20,431,395
-
1,284,814
15,1632,750
8,585,032
281,434
14,736,943
APN Funds Management Limited
2015
2014
The Trust Company (RE Services) Limited
and its associates
2015
2014
-
-
-
-
-
2,423,104
448,938
143,441
-
-
-
-
-
-
220,576
-
Terms and conditions of transactions with related parties
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 2015, the Consolidated Group has not recorded
any impairment of receivables relating to amounts owed by related parties (2014: $Nil).
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Consolidated Group
2014
$'000
2015
$'000
NSPT Group
2015
$'000
2014
$'000
1,703
138
159
95
2,095
805
68
-
-
873
-
-
-
-
-
-
-
-
-
-
Detailed remuneration disclosures are provided in the remuneration report which is included in the
Directors’ Report.
Transactions with former Directors of National Storage Pty Ltd subsequent to stapling in the prior
period
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 former Director of National Storage Pty Ltd
The shareholders who were former Directors and are not KMP of ASD comprise:
(a) 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, and therefore became a related party.
During the year, the Responsible Entity and its associates accrued fees of $448,938 for responsible entity
and custodian services (2014: 143,441).
Payments made from the NSPT to the Responsible Entity did not include any amounts attributable to the
compensation of Directors in respect of services rendered to NSPT.
Pre-Stapling – up to 18 December 2013
National Storage Pty Ltd
Directors
The following persons were Directors during the pre- stapling period and as such are classified as key
management personnel.
Andrew Catsoulis
Peter Greer
Michael Berry
Geoff McMahon
Laurie Brindle
Anthony Keane
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
National Storage Property Trust
The Responsible Entity of the 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). APN Funds Management Limited also acted as the manager of the Trust.
The following transactions with entities related to the APN Property Group took place during the period:
Investment management fees of $2,423,103 were paid to the Responsible Entity.
Registry and accounting fees of $9,292 were paid to the Responsible Entity.
All transactions took place at arms-length and in the ordinary course of business.
Key management personnel
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 NSPT.
The names of the key management personnel of the Responsible Entity up to 19 December 2013 were:
119
Howard Brenchley (Director)
Christopher Aylward
Clive Appleton
Geoff Brunsdon (Chairman and Independent Non Executive Director)
Michael Johnstone (Independent Non Executive Director)
FINANCIAL STATEMENTS
120
119
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
John Freemantle (Chief Financial Officer)
Jennifer Horrigan (Non Executive Director)
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable
as follows:
The positions noted above are the positions held within the Responsible Entity and not 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.
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. No units were held in the Trust at 30 June 2014.
Transactions with former Directors of National Storage Pty Ltd at stapling and listing
Within one year
Later than one year but not later than five years
Later than five years
There were no non-cancellable operating lease commitments in the NSPT Group.
Finance lease commitments
For details of finance lease commitments see note 9.7.
Consolidated Group
2015
$’000
321
739
-
1,060
2014
$’000
251
887
-
1,138
The implementation of the stapling transaction and the ongoing management of National Storage REIT
involved a number of related party transactions outlined in the Prospectus:
Contingent liabilities
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.
The former Directors in their Respective Proportions under the Sale and Purchase Agreement, 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:
(a) 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
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.
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 five years. The lease has an escalation clause and a right of
renewal. The NSPT Group does not have any operating lease commitments.
FINANCIAL STATEMENTS
121
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 (EPS)
Basic earnings is calculated as net profit attributable to stapled security holders, 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 earnings per share adjust the figures used in the determination of basic earnings per share to take
into account:
The after tax effect of interest and other financing costs associated with dilutive potential stapled
securities and;
The weighted average number of additional stapled securities that would have been outstanding
assuming the conversion of all dilutive potential stapled securities.
Basic and diluted earnings per stapled
security / unit
Reconciliation of earnings used in
calculating earnings per stapled
security / unit
Basic and diluted earnings per
security
Net profit attributable to members
Weighted average number of
securities:
Weighted average number of
securities for basic and diluted
earnings per stapled security
Consolidated Group
NSPT Group
2015
cents
16.56
2014
cents
11.00
2015
cents
17.01
2014
cents
21.04
$’000
48,733
$’000
15,565
$’000
50,068
$’000
39,000
No. of
securities
No. of
securities
No. of units
No. of units
294,318,578
141,514,780
294,318,578
185,365,653
122
121
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 Contingent liabilities of the parent entities
The parent entities of the Consolidated Group and the NSPT Group did not have any contingent liabilities
as at 30 June 2015 or 30 June 2014.
Contractual commitments
The parent entities of the Consolidated Group and the NSPT Group were contractually committed to the
purchase of five storage centres in Christchurch, New Zealand at the 30 June 2015, as disclosed in note
24. The Consolidated Group and the NSPT Group did not have any other contractual commitments as at
30 June 2015 or 30 June 2014.
23.
DEED OF CROSS GUARANTEE
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.
21. AUDITOR’S REMUNERATION
The auditor of the Consolidated Group and NSPT Group is Ernst & Young Australia.
Amounts received or due and receivable by
Ernst & Young Australia for:
Consolidated Group
2015
$
2014
$
NSPT Group
2015
$
2014
$
An audit or review of the financial report of the
entity and any other group entity
256,289
495,471
27,875
25,750
Other services in relation to the entity and any
group other entity
Tax compliance
Assurance related to the IPO of NSR
Other
Total auditors’ remuneration
73,314
-
74,994
404,597
188,141
850,829
80,175
30,040
-
45,894
1,614,616 103,809
-
-
-
25,750
22.
INFORMATION RELATING TO THE PARENT ENTITIES
Summary financial information
The individual financial statements for National Storage Holdings Limited and National Storage Property
Trust, the parent entities, show the following aggregate amounts:
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Cash flow hedge reserve
Retained earnings
2015
$’000
65,671
72,546
47,534
48,020
29,665
-
(5,139)
24,526
NSH
2014
$’000
56,305
63,180
48,827
48,827
16,004
-
(1,651)
14,353
NSPT
2015
$’000
2014
$’000
37,472
461,746
15,769
141,753
297,192
(1,272)
24,073
319,993
27,181
302,102
10,274
98,190
191,499
(393)
12,806
203,912
Profit /(Loss) after tax
Total comprehensive income
(3,488)
(3,488)
(1,651)
(1,651)
23,860
22,981
23,984
23,591
Guarantees entered into by the parent entities
The Consolidated Group and NSPT Group’s parent entities have provided financial guarantees in
respect of bank overdrafts and loans of subsidiaries amounting to $123,500,000 (2014: $87,916,000),
secured by registered mortgages over the freehold and leasehold investment properties of the
subsidiaries.
The Consolidated Groups parent entity has also provided bank guarantees of $2,137,000 (2014:
$1,213,000) in the event of lease payment default to third party lessors.
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 exist in any of these companies.
FINANCIAL STATEMENTS
123
124
123
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 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.
24.
EVENTS AFTER REPORTING PERIOD
ACQUISITION OF STORAGE CENTRES
As announced on 26 June 2015 NSR has purchased a portfolio of five storage centres in Christchurch,
New Zealand. The centres were purchased for NZ$23 million and the transaction settled on 6 August
2015.
On 10 August 2015 NSR announced that it had entered into arrangements to acquire a self-storage asset
in Croydon, Victoria. The centre will be purchased for $4.7 million and be funded via NSR’s existing debt
facilities. The transaction remains conditional and should it proceed, settlement is expected in September
2015.
NEW ZEALAND DENOMINATED DEBT FACILITY
Subsequent to the Reporting Date a New Zealand denominated (NZ$) debt facility for NZ$25 million has
been entered into, to facilitate the recently announced Christchurch acquisitions. The facility is on terms
consistent with the existing debt facilities and has been incorporated into the existing facility
documentation. As at the date of this report, the New Zealand facility was drawn to NZ$23.5 million.
INVESTMENT IN PRIME DEVELOPMENT FUND
On 6 August 2015 NSR announced that it had entered into a heads of agreement with Universal Self
Storage to establish the Australian Prime Storage Fund which aims to facilitate the development and
ownership of multiple premium grade self- storage centres in select capital cities around Australia. NSR
will be cornerstone investor in the unlisted Fund with an equity interest of up to 25% (approximately $6.5
million) via a staged contribution. NSR will undertake, and receive fees for, a range of activities on
behalf of the Fund, including assisting with site identification, selection and acquisition, feasibility and
providing input into design and development. The assets will be integrated onto the National Storage
operating platform and managed as part of the National Storage portfolio.
PERTH DEVELOPMENT PORTFOLIO
On 11 August 2015 NSR announced it had entered into an exclusive arrangement with Parsons Group to
establish the Perth Development Portfolio. The arrangement is a construction and management
agreement with one of Perth’s leading self-storage construction companies, Parsons Group with five sites
in and around Perth having been identified. It is anticipated NSR will acquire up to three assets on
completion of construction, with the remaining centres to be operated as National Storage centres by
Parsons Group. The first centre at Jandakot, south of Perth, is scheduled to open in September 2015 and
will be owned by Parsons Group and managed by National Storage under its third-party management
platform.
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
Retained earnings at the end of the year
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
Investments
Other non-current assets
Intangibles
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
Contributed equity
Retained profits
Total equity
2015
$'000
(1,026)
(260)
(1,286)
3,440
-
2,154
2014
$'000
(25,721)
7,315
(18,406)
27,444
(5,598)
3,440
2015
$'000
1,265
12,251
300
2,603
16,419
2014
$'000
7,416
9,535
258
1,296
18,505
220
630
271,523
7,685
-
540
280,598
220
1,187
171,034
7,685
136
483
180,745
297,017
199,250
17,882
10,789
6,400
1,172
36,243
11,387
4,298
4,952
1,069
21,706
226,014
700
487
227,201
155,532
589
225
156,346
263,444
178,052
33,573
21,198
31,419
2,154
33,573
17,758
3,440
21,198
FINANCIAL STATEMENTS
125
126
125
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 DIRECTORS’ DECLARATION
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
2015 are in accordance with the Corporations Act 2001, including:
i.
ii.
giving a true and fair view of the consolidated entity’s financial position as at 30
June 2015 and of its performance for the year ended on that date; and
complying with Accounting Standards and the Corporations Regulations 2001;
the financial statements and notes also comply with International Financial Reporting
Standards as disclosed in note 2(b); and
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.
as at the date of this declaration, there are reasonable grounds to believe that the
members of the Closed Group identified in Note 23 will be able to meet any obligations or
liabilities to which they are or may become subject, by virtue of the Deed of Cross
Guarantee.
(b)
(c)
(d)
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 2015.
On behalf of the Board,
Laurence Brindle
Chairman
26 August 2015
Brisbane
Andrew Catsoulis
Managing Director
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 2015 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 2015
and of its performance for the year ended on that date; and
(b)
(c)
(ii)
complying with Accounting Standards and the Corporations Regulations 2001;
the financial statements and notes also comply with International Financial Reporting
Standards as disclosed in note 2(b); and
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 2015.
On behalf of the Responsible Entity,
Andrew Cannane
Director
26 August 2015
Sydney
DIRECTOR'S DECLARATION
127
128
127
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 AUDITOR’S INDEPENDENCE DECLARATION
INDEPENDENT AUDITOR’S REPORT
AUDITOR’S INDEPENDENCE DECLARATION
INDEPENDENT AUDITOR’S REPORT – CONT’D
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Independent auditor's report to the members of National Storage REIT
Report on the financial report
We have audited the accompanying financial report of National Storage REIT comprising National
Storage Holdings Limited and National Storage Property Trust and the entities they controlled during
the year, which comprises the consolidated statements of financial position as at 30 June 2015,
consolidated statements of profit or loss, the consolidated statements of other comprehensive
income, the consolidated statements of changes in equity and the consolidated statements of cash
flows for the year then ended, notes comprising a summary of significant accounting policies and
other explanatory information, and the directors' declarations of National Storage Holdings Limited
and National Storage Property Trust and the entities they controlled at the year's end or from time to
time during the financial year.
Directors' responsibility for the financial report
The directors of National Storage Holdings Limited and the Directors of the Responsible Entity of
National Storage Property Trust are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal controls as the directors determine are necessary to enable the preparation of
the financial report that is free from material misstatement, whether due to fraud or error. In Note 2,
the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor's judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or
error. In making those risk assessments, the auditor considers internal controls relevant to the entity's
preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations
Act 2001. We have given to the directors of the companies a written Auditor’s Independence
Declaration, a copy of which is included in the directors’ report.
Opinion
In our opinion:
a.
the financial report of National Storage REIT is in accordance with the Corporations Act
2001, including:
i
ii
giving a true and fair view of National Storage Holdings Limited and National Storage
Property Trust and consolidated entities’ financial positions as at 30 June 2015 and of
their performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001; and
b.
the financial report also complies with International Financial Reporting Standards as
disclosed in Note 2.
Report on the remuneration report
We have audited the Remuneration Report included in the directors' report for the year ended 30
June 2015. The directors of the tabled companies are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of National Storage REIT for the year ended 30 June 2015,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
Mark Hayward
Partner
Brisbane
26 August 2015
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
INDEPENDENT AUDITOR’S REPORT
61
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2015
61
129
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
Unquoted equity securities
There are no unquoted securities.
(c) Substantial shareholders
Substantial securityholders are set out below:
Name
Commonwealth Bank
Bennelong Funds Management Group
Cohen & Steers Inc
Diam Co Ltd
The Vanguard Group Inc
Number held
55,183,219
23,138,345
22,713,519
21,075,375
20,598,895
Percentage
16.49
6.92
6.79
6.30
6.16
(d) Voting rights
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
Leyshon Investments (Australia)
Pty Ltd
Storcat Pty Ltd
Palomere Pty Ltd
Stowaway Self Storage Pty Ltd
Stowaway Self Storage Pty Ltd
Green 9 Pty Ltd
Leyshon Operations Unit Trust
Andrew Catsoulis Family A/C
Peter Edward Greer Family Ac
Catsoulis Development A/C
Catsoulis Family A/C
Michael Berry Family A/C
Number of Stapled
Securities
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 of Storcat Pty Ltd and Palomere Pty Ltd are set out on page
56 (Storcat Pty Ltd equates to the Managing Director and Palomere Pty Ltd 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.
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this
report is as follows. The information is current as at 31 July 2015:
(a) Distribution of equity securities
Analysis of numbers of ordinary fully paid stapled security holders by size of holding:
Holding
1
1,001
5,001
10,001
100,001
Total
- 1,000
- 5,000
- 10,000
- 100,000
- And over
Securities
179
397
414
990
111
2,091
There were 66 holders of less than a marketable parcel of stapled securities, representing 538 units.
(b) Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
Clarence Property Corporation Ltd (Westlawn Property A/C)
Leyshon Investments (Australia) Pty Ltd (Leyshon Operations Unit
A/C)
Storcat Pty Ltd (Andrew Catsoulis Family A/C)
BNP Paribas Noms Pty Ltd (DRP)
Palomere Pty Ltd (Peter Edward Greer Family A/C)
RBC Investor Services Australia Nominees Pty Limited
Stowaway Self Storage Pty Ltd (Catsoulis Development A/C)
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
Capital Business Park (Holdings) Pty Ltd
Stowaway Self Storage Pty Ltd (Catsoulis Family A/C)
Antares Pty Ltd
HSBC Custody Nominees (Australia) Limited – GSCO ECA
UBS Wealth Management Australia Nominees Pty Ltd
BNP Paribas Noms (NZ) Ltd
Brindle Super Pty Ltd (The Brindle Super Fund A/C)
Green 9 Pty Ltd (Michael Berry Family A/C)
Stapled Securities
Number
held
118,397,613
51,570,228
39,876,727
13,325,733
7,738,711
7,448,980
6,173,469
5,735,842
5,586,735
3,510,967
3,469,388
3,384,736
3,200,000
1,811,224
1,600,000
1,465,459
1,134,200
1,069,560
1,032,400
1,020,408
278,552,380
Percentage
of issued
securities
35.40
15.42
11.92
3.98
2.31
2.23
1.85
1.71
1.67
1.05
1.04
1.01
0.96
0.54
0.48
0.44
0.34
0.32
0.31
0.31
83.29
131
ASX ADDITIONAL INFORMATION
132
131
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015 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).
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 9946 4471
Facsimile: +61 3 9473 2500
Email: web.queries@computershare.com.au
ELECTRONIC INFORMATION
By becoming an electronic investor and registering
your email address, you can 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.
DISTRIBUTION DETAILS
NSR intends to distribute 90% to 100% of underlying
net profits after tax each year. Distributions are
expected to be paid within 8 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 on 1300 850 505 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 on 1300 850 505 for assistance.
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 on 1300 850 505 for assistance.
ANNUAL TAXATION STATEMENT
AND TAX GUIDE
The Annual Taxation Statement and Tax Guide are
dispatched to securityholders in August each year.
A copy of the Tax Guide is available at
www.nationalstorageinvest.com.au.
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 3239, 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.
INVESTOR RELATIONS
133
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015
CORPORATE DIRECTORY
NATIONAL STORAGE HISTORY
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
Howard Brenchley (appointed 21 November 2014)
Steven Leigh (appointed 21 November 2014)
Directors – The Responsible Entity
Andrew Cannane
Christopher Green
Gillian Larkins (resigned 31 July 2015)
Michael Vainauskas (appointed 2 March 2015)
Alternate Directors:
Glenda Charles, Thornton Christensen (resigned
1 May 2015), Sylive Dimarco 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 (NSR).
Anna O’Sullivan (for Andrew Cannane and
Christopher Green)
Glenn Foster (for Gillian Larkins) (resigned 31 July 2015)
Joanne Hawkins (for Gillian Larkins) (resigned 26
June 2015)
Auditors
Ernst & Young
111 Eagle Street
Brisbane QLD 4000
Company Secretary – NSH
Patrick Rogers
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 forty individual storage brands to grow the business to over 80 centres at August 2015.
2000
2003
2004
–
2007
2007
2008
2011
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.
2012
A further two acquisitions were made by the Southern Cross Storage Group.
2013
2014
2015
The first Australian 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 raises $121 million, completes 11 acquisitions and launches its third
party management platform.
NSR to invest in the Australian Prime Storage Fund, launches the Perth Development
Portfolio, undertakes six acquisitions in Australia and enters the New Zealand market
with a portfolio acquisition of five centres, with additional capacity for further
acquisitions into FY15/16.
CORPORATE DIRECTORY
135
NATIONAL STORAGE REIT ANNUAL REPORT 2014/2015