ANNUAL REPORT
2016/2017
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IMPORTANT INFORMATION
ABOUT THIS REPORT
Welcome to National Storage REIT’s 2017 Annual Report which reports our performance for the
financial year 1 July 2016 – 30 June 2017.
The 2017 Reporting Suite includes:
Annual Report – a review of FY17 performance, strategy and governance
Financial Report – FY17 financial accounts and detailed financial performance
Sustainability Report – outlines NSR’s approach to sustainability based on the Global Reporting Initiatives
(GRI) G4 framework
The 2017 Reporting Suite is available online at www.nationalstorageinvest.com.au
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
National Storage Financial Services Limited (NSFL)
ACN 600 787 246 AFSL 475 228
Level 23, 71 Eagle Street, Brisbane QLD 4000
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 NSFL (ACN 600 787 246 AFSL 475 228) 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 NSFL, 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 NSFL as of the date of this report. Except as required by law or regulation (including the ASX Listing Rules) each of NSH and NSFL
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
TABLE OF CONTENTS
04
06
08
10
14
18
20
26
30
32
34
60
OUR BUSINESS
OUR FY17 PERFORMANCE
OUR STRATEGY
OUR PORTFOLIO
CHAIRMAN & MANAGING
DIRECTOR’S REPORT
INVESTMENT PARTNERS
THE YEAR IN REVIEW
BOARD OF DIRECTORS
SENIOR EXECUTIVES
CORPORATE GOVERNANCE
DIRECTORS' REPORT
FINANCIAL STATEMENTS
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
3
OUR BUSINESS
National Storage is one of Australasia’s largest self-
storage providers, tailoring self-storage solutions to
40,000 residential and commercial customers at
more than 115 storage centres across Australia
and New Zealand.
National Storage REIT is the only publicly listed fully
integrated owner and operator of self-storage
centres in Australasia.
The National Storage offering spans self-storage,
business storage, records management, climate
controlled wine storage, vehicle storage, vehicle
and trailer hire, packaging, insurance and other
value added services.
Each National Storage centre reflects our
commitment to quality, convenience and service.
At National Storage, you can expect secure,
clean and modern premises and a wide range of
packaging materials on offer, together with a team
of professionals trained in the exacting task of
efficient storage.
OUR BUSINESS
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
5
OUR FY17 PERFORMANCE at 30 June 2017
Financial Highlights
$117.5m $103.4m
$45.7m
Total Revenue
IFRS profit
Underlying Earnings1
FY16: $79.8m
47%
FY16: $44.0m
FY16: $29.2m
135%
57%
Operational Highlights
116
Number of Centres
622,000
Square Metres of
Net Lettable Area
65,000
Number of Storage Units
FY16: 105
FY16: 542,000
FY16: 59,000
11
81,000
10%
Capital Strength
$1,437m
Total Asset Value
37%
Gearing
4.6
Weight Average
Debt Tenor
FY16: $900m
FY16: 38%
FY16: 2.0
$537m
1%
2.6years
OUR FY17 PERFORMANCE
9.2cps
Underlying Earnings
per Stapled Security1
9.2cps
Distribution per
Stapled Security
FY16: 8.7cps
FY16: 8.7cps
5.7%
5.7%
1 Underlying earnings is a non-IFRS measure
(unaudited)
2 Same centre 30 June 2016 excluding
New Zealand and developing centres
3 Investment properties net of finance lease
liabilities
77.5%
Like for Like
Occupancy 2
FY16: 75.4%
2.1%
$1.34
Net Tangible Assets
per Stapled Security
FY16: $1.14
18%
$212m
$1,163m
Like for Like Revenue
per Available Metre
(REVPAM)2
FY16: $202.0m
5.0%
Assets Under
Management (AUM)3
FY16: $959m
21%
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
7
OUR 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.
Acquisitions
execute high quality acquisitions in a
fragmented industry
+
+
+
Asset
Management
balance occupancy and rate to achieve
organic growth and drive revenue growth
leverage management platform and
economies of scale to extract value
drive cost efficiencies across the portfolio
Portfolio,
Development
& Centre Management
focus on development in markets where
acquisition is challenging
maximise portfolio potential through
expansion of outperforming assets
align with investment partners to execute
development opportunities
undertake portfolio recycling opportunities
to maximise value
OUR STRATEGY
Product &
Innovation
explore market opportunities for
revenue generation
focus on digital transformation
drive innovation and sustainability at a
product and portfolio level
Develop multiple revenue
streams to maximise returns
+
=
Portfolio,
Development
& Centre Management
Capital
Management
maintain an efficient capital structure
9
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017 DARWIN
1
CENTRE
PERTH
19
CENTRES
OUR PORTFOLIO
The National Storage portfolio continues to grow
across Australia and New Zealand, with storage
centres well located in capital cities and regional
areas that exhibit drivers of storage demand.
OUR PORTFOLIO
OUR PORTFOLIO
116
CENTRES
ADELAIDE
6
CENTRES
NORTH QUEENSLAND
3
CENTRES
SUNSHINE COAST
4
CENTRES
BRISBANE
19
CENTRES
GOLD COAST
4
CENTRES
SYDNEY
16
CENTRES
CANBERRA
4
CENTRES
HAMILTON
1
CENTRE
MELBOURNE
23
CENTRES
HOBART
4
CENTRES
GEELONG
2
CENTRES
WELLINGTON
3
CENTRES
5
CENTRES
CHRISTCHURCH
2
CENTRES
DUNEDIN
11
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017 PORTFOLIO STATISTICS
PORTFOLIO DIVERSIFICATION BY NLA
PORTFOLIO DIVERSIFICATION BY VALUE
10%
1%
16%
6%
29%
12%
6%
1%
2%
23%
12%
6%
17%
20%
4%
28%
5%
Queensland
South Australia
Queensland
South Australia
New South Wales
Western Australia
New South Wales
Western Australia
Australian Capital Territory
Northern Territory
Australian Capital Territory
Tasmania
Victoria
New Zealand
Victoria
Northern Territory
New Zealand
PORTFOLIO VALUATION
NSR Portfolio Value $1.16 billion
Weighted Average Cap Rate 7.86%
PORTFOLIO COMPOSITION
NUMBER OF CENTRES
NSR Freehold
NSR Leasehold
Managed for third party owner
TOTAL
98
15
3
116
NUMBER OF
CENTRES
3
4
4
19
16
4
23
2
6
4
19
1
5
1
3
2
JUNE
2017
30,100
19,500
22,100
106,100
85,700
27,800
111,400
8,700
35,000
13,100
97,300
6,200
17,900
5,200
12,300
24,100
116
622,500
PORTFOLIO BY NLA
North Queensland
Sunshine Coast
Gold Coast
Brisbane
Sydney
Canberra
Melbourne
Geelong
Adelaide
Hobart
Perth
Darwin
Christchurch
Hamilton
Wellington
Dunedin
TOTAL
OUR PORTFOLIO
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
13
13
CHAIRMAN & MANAGING DIRECTOR’S REPORT
National Storage has experienced significant growth
since listing in December 2013, with our share price
increasing from 98 cents at IPO to over $1.50 and our
market capitalisation rising from $200 million to over
$750 million. At the same time our portfolio of storage
assets has grown from an initial 28 owned storage
properties and 62 operating business to over 100
owned properties and 116 operating business today.
Our shareholders have enjoyed increasing earnings
and distributions with earnings per share growing from
7.5 cps in year one to 9.2 cps or 23% growth over the
period to the end of FY17. Total distributions paid or
declared to securityholders over the period from IPO
to date has been 29.9 cps and when combined with
share price appreciation total securityholder returns of
93.0% or 19.8% compound annual return have been
achieved. Given our significant expansion since listing,
this year we have focused on consolidating our growth
and ensuring our systems and processes are at the
forefront of industry best practice.
We commenced FY17 with two transformational
transactions – announcing the acquisition of a 100%
interest in the 26 centre Southern Cross Storage portfolio
and a concurrent $260 million capital raising. For the
balance of FY17 we have focused on improving our
operating fundamentals and transacting high quality
acquisitions while continuing to evolve our business
model to deliver synergies and scalability.
CHAIRMAN & MANAGING DIRECTOR’S REPORT
We have achieved a strong result with 5.7% growth
in underlying earnings per stapled security to $45.7
million, supported by revenue growth of 47% to
$117.5 million. Our organic revenue growth in FY17
has been underpinned by the delivery of combined
improvement in our twin drivers of occupancy and rate
per square metre, resulting in revenue per available
metre (REVPAM) growth of 5.0% from $202 to $212. We
have continued to successfully execute our acquisition
strategy with a further $138 million in acquisitions
transacted across the year at an average weighted
passing income yield of 7.2%, highlighting the long
term accretive nature of our acquisitions. An additional
$100 million of assets are actively under consideration
as we move into FY18 and we continue to execute
our strategy in the highly fragmented Australian and
New Zealand self storage markets. Assets under
management have grown by 21% to surpass $1.1
billion, firmly cementing our position as the largest
storage owner-operator in Australasia.
A range of tools are assisting us to deliver increasing
underlying earnings, including our industry leading
revenue management system and a greater focus
on data analytics. This is consistent with industry best
practice as witnessed in the storage industry globally.
Our successful investment partnerships and third
party construction arrangements provide ongoing
development and project management fee income
through our joint ventures and, when combined with
a select number of on-balance sheet expansions,
will provide a highly accretive mix of NTA growth
and revenue generation from these new projects.
Strategically, this will help enhance our long term
revenue and capital growth prospects, to the benefit
of all of our stakeholders.
We continue to reinforce our prudent approach
to capital management, having entered into an
institutional term loan securing $100 million of long
term debt funding. Under this loan arrangement,
the lender acceded into NSR’s existing club finance
group providing two $50 million tranches of debt
with tenors of eight and ten years. This arrangement
illustrates the continued evolution and maturation
of our capital management strategy as we seek
to broaden our funding sources, better manage
refinance risk and balance funding costs with
significantly extended tenor.
Over the year we have placed an emphasis
on building our sustainability expertise and FY17
marks the first year NSR will release a standalone
sustainability report – an important milestone
in the continued growth of our business. The
NSR Sustainability Report has been prepared in
accordance with the Global Reporting Initiative’s
G4 reporting guidelines, the global benchmark and
leading framework for sustainability reporting. As
part of our work in this area, we have conducted a
feasibility and impact study on the installation of a
solar network across the NSR portfolio. NSR currently
consumes approximately 9 Megawatt hours of
electricity and phase one of the program (involving
an initial tranche of 50 storage centres) seeks to save
approximately 2 Megawatt hours once operational,
with the potential for this to reduce our emissions by
up to 2,600 tonnes of carbon dioxide and electricity
costs by approximately one third.
This will be an ongoing process and represents a
landmark project for the broader industry and will be a
significant contributor to the long term sustainability and
energy efficiency of our portfolio.
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
15
MANAGING DIRECTOR'S REPORT
At a Board level, we are pleased to welcome Ms Claire
Fidler onto the NSR Board as an executive director.
Claire is an outstanding candidate and has already
added significant value to the business in her roles as co-
company secretary and senior legal counsel. She has a
strong legal and commercial background together with
a focus on governance and compliance and will bolster
the Board’s skills in these areas.
The Board is confident National Storage is well placed
to continue the success of the past year, with the senior
executive team focused on driving growth across the
business and developing multiple revenue streams to
deliver stable and growing returns for our investors.
We would like to thank the Board and the broader
National Storage team for their continued commitment
to the growth of National Storage. To our valued
investors we thank you for your continued support and
look forward to the year ahead.
Yours sincerely
Laurence Brindle
Chairman
Andrew Catsoulis
Managing Director
At every level of our organisation, our team is
committed to the growth and the success of the
business. Their engagement and dedication is
paramount to our success and we remain deeply
appreciative of their efforts. Over the year we
completed a health program that witnessed the
National Storage team collectively take more than
99 million steps and delivered wellbeing outcomes
across a range of factors. We continue to embrace
the diversity of our team and we are pleased to
support the Pride in Diversity workplace initiative. A truly
inclusive workplace fosters a diversity of views, greater
creativity and ultimately allows all employees to work in
an environment where they feel safe, valued and able
to be their true selves, creating a fully engaged, highly
motivated and united National Storage team.
We continued our strong commitment to community
engagement throughout the year, supporting more
than 80 not-for-profit organisations with more than
$300,000 in in-kind support for important community
initiatives. The National Storage senior management
team led by example, committing more than 200 hours
to community service and actively encouraging their
teams to do the same.
As an extension of commitment to our team,
throughout the year we embarked on a number of
innovations in process optimisation and automation,
with a strong technology program under development
to better support and engage our workforce. By using
technology as an enabler we are also building the
efficiency of our operating platform and focusing
on reduction opportunities. These projects include
upgrading our operating environments, transitioning to
paperless ways of working and providing an improved,
simple and streamlined experience for our internal and
external customers.
Our customers provide valuable feedback on their
tailored storage solutions, and this year we were proud
to receive the coveted Canstar Blue award for the Most
Satisfied Customers in self-storage in 2017. An ongoing
focus on multi-channel marketing and leveraging
our strong branding across a range of mediums
has delivered improvements in brand and product
awareness. Our brand will be viewed more than 70
million times across the calendar year in Australia
and New Zealand – an amazing result for a storage
business and illustrated by our marketing model being
showcased internationally within the storage industry.
The National Storage business has reached a critical
mass of centres. Looking further into the future we
have a superb platform from which to continue to
build the business and drive significant efficiencies of
scale which will ultimately serve to provide long term
value for shareholders.
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
17
INVESTMENT PARTNERS
SOUTHERN CROSS PORTFOLIO
The Southern Cross Storage Group (Southern
Cross) was an unlisted joint venture between
National Storage and Heitman, a global real estate
investment manager. The Southern Cross portfolio
comprised 26 storage centres operated by National
Storage, and in which NSR held a 10% interest.
In August 2016, NSR acquired the Southern Cross
portfolio for a net consideration of $285 million.
Importantly, this transaction secured the long term
ownership of these strategically important assets and
will provide NSR the opportunity to unlock further
value as the centres continue to mature.
PERTH DEVELOPMENT PORTFOLIO
The Perth Development Portfolio is a construction
and management arrangement with one of Perth’s
leading self-storage construction companies, Parsons
Group. 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
constructs quality self-storage centres 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 partnership has delivered centres at Jandakot,
Butler and Perth Airport. NSR acquired Jandakot
and Butler during FY17, and Perth Airport is currently
operating as a managed centre. NSR retains certain
rights to purchase the assets under this arrangement
AUSTRALIAN PRIME STORAGE FUND
NSR is a cornerstone investor in the Australian
Prime Storage Fund (APSF) with an equity interest
of up to 25%. APSF was established to facilitate the
development and ownership of premium self-storage
centres in select major cities around Australia. APSF
focuses 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.
INVESTMENT PARTNERS
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 provides assistance
and advice to the Fund on a range of matters
including site identification, selection and acquisition,
feasibility and input into design and development.
On completion of construction, assets will be
integrated onto the National Storage operating
platform and managed as part of the National
Storage portfolio. NSR holds certain rights to
purchase the assets upon termination of the Fund, or
earlier sale.
National Storage Carrara and National Storage
Albion opened successfully during FY17 and are
performing in line with expectations.
National Storage Kelvin Grove is currently under
construction and is scheduled to open in late 2017.
LEYSHON GROUP
In March 2017, NSR entered into arrangements with long
term investment partner Leyshon Group to acquire a site
on Bundall Road, Bundall on the Gold Coast.
Bundall is located approximately 2.5km west of
Surfers Paradise, in close proximity to established
drivers of storage demand including residential
markets and substantial retail and commercial
developments. The 6,900 sqm site currently comprises
retail and warehouse components, and is located
immediately adjacent to the former Masters
Hardware store which is proposed for large format
retail redevelopment.
It is anticipated the 2,400 sqm existing retail
component of the site will be retained and
enhanced, with the warehouse component
redeveloped into a multi-level state-of-the-art
storage centre comprising approximately 7,000sqm
of net lettable area.
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
19
THE YEAR IN REVIEW
ASSET MANAGEMENT
Revenue per Available Square Metre (REVPAM) is the key operational metric for the NSR portfolio. The
Operations Management Team maintain a focus on driving REVPAM using a balanced approach to rate per
square metre and occupancy growth on an individual centre and unit type basis. At 30 June 2017, REVPAM
on a like-for-like basis (all owned centres at June 2016) was $212/sqm (June 2016: $202/sqm). Occupancy
across the portfolio on a like-for-like basis increased to 77.5% (June 2016: 75.4%).
A continued focus on active revenue management delivered growth across FY17. The progressive
implementation of an advanced multiple signal revenue management modelling system, together with a
storage specific data analytics platform continues to deliver efficiencies and enhance scalability across the
operating platform.
FY17 saw an evolution of the management structure across storage operations, with a number of senior
operational management roles created to strengthen accountability at a regional level. As the portfolio
continues to grow, the NSR operating model will continue to evolve in order to meet the challenges of
trading environments, and to optimise operating performance.
Partnerships with ParcelPoint, Australia’s largest network of locations for parcel collection, and U-Haul, a
leading national trailer rental provider work to drive foot traffic and generate awareness of centres in local
areas. ParcelPoint delivered more than 11,500 parcels to National Storage centres in FY17, while U-Haul
rented more than 1,700 trailers from National Storage centres across Australia.
Ancillary income streams including packaging sales, insurance and vehicle/trailer hire increased by 27%
across FY17.
THE YEAR IN REVIEW
ACQUISITIONS
National Storage has successfully completed 12 acquisitions (excluding the Southern Cross portfolio) in FY17
and continues to pursue high quality acquisitions across Australia and New Zealand.
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. This active growth strategy also
strengthens and scales the National Storage operating platform which drives efficiencies across the business.
CENTRE
Butler1,2
Kurnell1
STATE
DATE
Western Australia
August 2016
NLA
(Sqm)
5,100
New South Wales
August 2016
12,400
Moonah Central
Artarmon Central
Tasmania
September 2016
New South Wales
December 2016
Guilford, Rockingham, Subiaco2
Western Australia
January 2017
Kenepuru
Brooklyn
Gardens, Kaikorai
Jandakot1
Wellington (NZ)
January 2017
Victoria
March 2017
Western Australia
May 2017
Brendale, Lawnton, Rothwell
Queensland
June 2017
Total (since 1 July 2016) - 12 Centres
1 - Developing Centres
2 - Purchase of leasehold interest and renegotiation of lease terms in Subiaco
STORAGE
UNITS
PURCHASE
PRICE
480
750
200
560
-
500
350
$8.8m
$17.5m
$3.3m
$10.8m
$30.0m
NZ $9.8m
$9.0m
2,400
3,400
-
4,300
5,300
5,200
19,700
78,600
500
1,800
6,690
$8.1m
$28.0m
$138.0m
21
Dunedin (NZ)
March 2017
20,800
1,550
NZ $14.0m
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
WINE ARK
Wine Ark, Australia’s largest wine storage provider is part of the National Storage group and houses over
two million bottles of fine wine across 16 centres for clients located in over thirty countries. There are few
businesses in Australia with more experience when it comes to storing and managing premium wine.
During FY17, Wine Ark released its highly anticipated Australia's Most Collected Wines 2016, with Penfolds Bin
389 atop the list, toppling big brother Penfolds Grange after nine years in the top spot. Wine Ark’s list of the
50 most collectable wines, released every three years, has become the go-to guide on the subject and the
results are a clear indication of trends when it comes to cellaring. Jeremy Oliver, wine writer and presenter
believes “There are lists and rankings of Australian wine labels but none are more current than this list from
Wine Ark, which presents a genuine reflection of what Australian wines are being cellared in this country in
almost real time”. This campaign received broad media coverage across main stream and specialist wine
media.
Wine Ark’s growing customer base and calendar of wine events, hosted in bespoke event spaces in
Alexandria NSW, Brisbane City QLD and Hawthorn VIC, contributed to more than 50% growth in wine sales
across the business. This increase in wine sales continues to drive capacity into both managed cellarage
and private wine vaults.
Throughout FY17 Wine Ark continued to strengthen its relationship and involvement in the greater wine
trade supporting the Wine Communicators of Australia, Sommeliers Association of Australia, Wine Australia,
Commanderie de Bordeaux (Australian Chapter). Wine Ark proudly supports women in wine, and is the
principal sponsor of the Australian Women in Wine Winemaker of the Year Awards.
Wine Australia is the governing body of wine in Australia and invests in research and development,
marketing, disseminating knowledge, encouraging adoption and protecting the reputation of Australian
wine. Wine Australia has centralised its wine storage, logistics and consolidation requirements for Australian
and International Tasting activities within Wine Ark’s national cellars. It is important for Wine Australia to
showcase Australian wine that has been stored in optimum conditions to demonstrate the best of Australian
wine, its finest characters and vibrancy. In April 2017 Wine Ark was the exclusive storage and logistics
provider for the Sommeliers of the World and Top 50 Restaurants in the World campaign in Melbourne. More
than 2,600 bottles were managed for over 20 events spanning seven days and 18 event venues.
THE YEAR IN REVIEW
MARKETING & CUSTOMER EXPERIENCE
Awareness, engagement and conversion continued to drive marketing strategy in FY17 to deliver growth
across the business.
A strong focus on digital channels and platforms saw website traffic increase by 50% over the year. Search
engine optimisation strategies delivered results with more customers finding the National Storage website
organically than via paid advertising channels, and the emphasis on creating authentic, helpful content on
the National Storage blog, The Store-y, contributed to this growth. Engaging content from The Store-y is also
gaining reach and momentum on social media, which is playing a more prominent role in our strategy as a
platform for building product and brand awareness, reach and engagement. The National Storage Online
Box Shop successfully launched during the year, with a new click-and-collect platform to encourage foot
traffic into the centres. Investment continues into digital channels including search engine optimisation and
online advertising platforms to drive brand awareness and deliver conversions, with the aim of nurturing a
digital competitive advantage to capitalise on the shift to digital across the storage landscape.
Sponsorship continued generating high level brand awareness across FY17, engaging fans across Australia
and New Zealand and bringing product and brand awareness to a broad demographic across a range
of capital city markets and sporting codes. In FY17, collectively the National Storage brand was seen by
audiences of over 35 million and tens of thousands of fans engaged with the National Storage Locker Room
platform online, through social channels and on game days.
Delivering excellent customer experience is central to the National Storage ethos and this dedication to
customer service saw Canstar Blue award National Storage “Most Satisfied Customers” in 2017. National
Storage received five stars across all categories, including overall satisfaction, value for money, customer
service, safety and security and quality of storage. Customers continue to share their experiences with
National Storage on independent review websites, which currently rank National Storage 8.6 out of 10.
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
23
SUSTAINABILITY
This year National Storage releases its first standalone sustainability report. The report can be found online at
www.nationalstorage.com.au and details performance across environmental, social and governance aspects
based on the Global Reporting Initiative framework.
The overall vision and strategy for National Storage is to ensure we set realistic and achievable goals whilst
ensuring rigorous and appropriate sustainability targets in the short, medium and long-term. These targets are
designed to manage any potentially significant economic, environmental, and social impacts that National
Storage causes, contributes to, or that may be directly linked to our service delivery, products or as a result of
relationships with others, including our suppliers and communities.
NSR’s key stakeholders have been identified and prioritised according to the level of sustainability impact we
believe our operations have on their day to day activities, and, in turn, their sustainability impact on day to day
activities. These impacts span our identified material economic, social and environmental sustainability risks.
NSR's key stakeholder groups are:
• Employees
• Customers
•
Investors
• Suppliers
• Community
• Government and Regulators
THE YEAR IN REVIEW
In preparation for this report, the GRI Reporting Principles were incorporated into a review as follows:
• A review of stakeholders and associated engagement throughout the reporting year was conducted,
but not specifically for compilation of this report (GRI Principle ‘Stakeholder Inclusiveness’)
• Economic, social and environmental impacts of National Storage operations were identified and
reviewed (GRI Principle ‘Sustainability Context’)
• Economic, social and environmental impacts were assessed and ranked in terms of risk to the
organisation and stakeholders (GRI Principle ‘Materiality’)
• The GRI and other topics included in this report are those that have been identified as material to
National Storage and its stakeholders in FY17 (GRI Principle ‘Completeness’) and are:
ECONOMIC
SOCIAL
ENVIRONMENTAL
GENERAL
Economic Performance
Employment
Materials
Data Management Systems
Anti-Corruption
Anti-Competitive Behaviour
Labour / Management
Relations
Occupational Health
and Safety
Energy
Emissions
Cyber Security
Governance / Shareholder
Rights
Access to Markets
Training and Education
Effluents and Waste
Technology / Connectivity
Maintenance of Investments
Land Remediation
Natural Hazards
Diversity and Equal
Opportunity
Non-Discrimination
Local Communities
Customer Health and Safety
Customer Privacy
Socio-economic Compliance
Ageing population/Changing
demographics
Changes in consumer
expectations
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
25
BOARD OF DIRECTORS
LAURENCE BRINDLE
ANTHONY KEANE
Independent Non-executive Chairman
BCom BE (Hons) MBA
Independent Non-executive Director
BSc(Maths) GradDipCorpFin
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 is also currently the Non-
executive Chairman of the listed entity, Viva Energy REIT.
Laurence serves on the 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 National
Storage, Anthony was most recently Head of
Corporate Banking Queensland for National
Australia Bank and was responsible for the bank’s
relationships with large privately owned and public
listed companies across a broad range of industries
including manufacturing, retail, wholesale, property,
professional services, technology, leisure and tourism,
transport, mining and associated services. Anthony
has a Bachelor of Science (Mathematics) from
University of Adelaide and a Graduate Diploma in
Corporate Finance from Swinburne. He is a Fellow
of the Financial Services Institute of Australasia, a
Graduate of the Australian Institute of Company
Directors and a member of the CEO Institute. He is a
Director of Queensland Symphony Orchestra Pty Ltd.
Anthony acts as Chairman of the Audit and Risk
Committee and is a member of the Nomination and
Remuneration Committee.
BOARD OF DIRECTORS
HOWARD BRENCHLEY
STEVEN LEIGH
Independent Non-executive Director
BEc
Independent Non-executive Director
Cert Practising Valuer Grad Dip Proj Mgmt
Howard has over 30 years’ involvement in the
Australian property industry, as an analyst, investor
and fund manager. He is now a professional
company director and consultant to the property
funds industry. Howard co-founded Property
Investment Research Pty Ltd (PIR) in 1989, which
during the 1990’s was considered a leading
researcher of both listed and unlisted property funds.
In 1998 Howard was instrumental in establishing the
funds management business of 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 ASX-
listed Industria REIT (IDR) and Convenience Retail
REIT (CRR). Until July 2017, APN Funds Management
Limited was also responsible entity for Generation
Healthcare REIT (GHC).
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
27
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017 ANDREW CATSOULIS
CLAIRE FIDLER
Managing Director
BA, LLB, Grad Dip Project Mgmt (Hons)
Executive Director and Company Secretary
LLB (Honours) BBus (Intl Bus)
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 20 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.
Claire was appointed as the principal company
secretary of National Storage on 26 November 2015
and was appointed Executive Director on 18 July
2017. She holds legal and international business
qualifications and is admitted as a solicitor of the
Supreme Court of Queensland.
Claire has over ten years’ experience in corporate
and commercial law in private practice, having
practiced in the litigation, resources and corporate
areas of two large law firms. Prior to joining National
Storage, Claire spent four and a half years as
Corporate Counsel and Company Secretary at Rio
Tinto Coal Australia. During this time, in addition
to providing legal services to the business, she was
responsible for the corporate governance and ASX
compliance of one of Rio Tinto’s listed subsidiaries
as well as managing the corporate secretarial
responsibilities of approximately 60 subsidiaries within
the group and providing joint venture support.
Claire has also worked in corporate compliance with
the Australian Securities and Investments Commission.
BOARD OF DIRECTORS
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
29
SENIOR EXECUTIVES
Andrew Catsoulis
Managing Director
BA, LLB, Grad Dip Project Mgmt (Honours)
Claire Fidler
Executive Director and Company Secretary
LLB (Honours) BBus (Intl Bus)
See page 28.
PETER GREER
Chief Operating Officer
STUART OWEN
Chief Financial Officer
BBus, CPA, GAICD
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 20 years with a focus on commercial
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 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.
SENIOR EXECUTIVES
PATRICK ROGERS
MAKALA FFRENCH CASTELLI
General Counsel and Chief Risk Officer
LLB, BBus (Accty)
General Manager - Marketing and Corporate
BBus (Marketing/E-Business), Grad Dip Arts
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 18
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 held
senior finance roles and was the general counsel and
company secretary of the Super A-Mart Group for over
eight years where he was extensively involved in the
operations of the company. Patrick was appointed
Chief Risk Officer of National Storage REIT in June
2016, in addition to his role as General Counsel and a
Company Secretary of NSR.
Makala has twelve years’ experience in corporate
communications, investor relations and marketing
communications. She has worked with leading
companies in the property and finance industries,
including one of Australia's major investment banks.
A range of roles across marketing, customer
experience, corporate affairs and compliance
have afforded her commercial and transactional
experience in property and funds management
environments. She joined National Storage pre-
IPO and oversees a broad portfolio including
retail marketing, technology, innovation, business
improvement and corporate affairs.
Makala holds a Bachelor of Business (Marketing/E-
Business) and a Graduate Diploma in Arts. She is
the Deputy Chair of the Self Storage Association of
Australasia.
31
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017 CORPORATE GOVERNANCE
The boards of NSH and NSFSL are comprised of the
same members. NSH and NSFSL have their own
constitutions. The relationship between NSH and the
Responsible Entity is governed by a Cooperation
Deed and Management Agreement. These
documents facilitate common processes and
governance for NSR. Through the Board Charter, the
NSH Board is charged with the function of providing
overall strategic guidance and effective oversight
of management of NSR.
GOVERNANCE FRAMEWORK
The NSH and Responsible Entity Boards and NSH
management are committed to high standards
of corporate governance and to ensure NSH
acts in the best interests of the Stapled Entity and
its Securityholders as a whole, 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, Chief Risk Officer and
the Board to ensure that it reflects changes in the
law. In its ongoing commitment to solid corporate
governance, NSR completed the roll out of its
broad-scoped enterprise risk project during FY17.
The NSH Board’s obligations are discharged through
a number of mechanisms including meetings and
its committees. During the financial year ended
30 June 2017, 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 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.
CORPORATE GOVERNANCE
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 at the date of this statement, the
governance practices adopted by NSR comply with
the third edition of the ASX Recommendations.
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. NSFSL became
the responsible entity for the NSPT in November
2015. The majority of the board of NSFSL have been
determined to be external directors and therefore
a compliance committee has not been convened.
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. 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 subdelegate to the senior
management team.
BOARD COMPOSITION & INDEPENDENCE
RISK MANAGEMENT
NSR’s operations expose it to risks. A summary of
potential risks is set out on pages 39-40 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.
The current NSH Board is comprised of six Directors,
being four non-executive Directors (one of whom
is the Chairman), the Managing Director and an
Executive Director. Detailed information about
the Directors is set out on pages 26-28. The NSH
Board considers that its current members have
an appropriate balance of skills, independence
and experience to discharge their obligations and
effectively chart the strategy of NSR. The NSH Board
considers that it is appropriate and in the best interests
of NSR and the stapled securityholders to periodically
review the size of the Board and its skill set to ensure
that it remains appropriate for NSR. In July 2017, the
NSH Board resolved to expand the size and skill set of
the Board by appointing Ms Claire Fidler as a director
of the Board. Ms Fidler has been the Company
Secretary of NSH and NSFSL since November 2015
and has worked in the senior executive team during
this period. She brings to the Board an extensive legal
and compliance background.
The Boards of NSH and NSFSL, as responsible entity,
consider that 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.
COMPANY SECRETARIES
Ms Claire Fidler is the principal Company Secretary
of NSH and NSFSL. Mr Patrick Rogers is an additional
Company Secretary for each of NSH and NSFSL.
Detailed information on Ms Fidler and Mr Rogers is
contained on page 28 and 31 in this report.
33
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017 DIRECTORS' REPORT
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2017
KEY HIGHLIGHTS
Group
Total Revenue
IFRS profit after tax
Earnings per stapled security
Underlying earnings(1)
Underlying earnings per stapled security(1)
Net operating cashflow
Distribution per security
Portfolio
Number of Centres owned/managed (Total)
Like for like occupancy (2)
Like for like Revenue per available metre (REVPAM)(2)
Weighted Average Primary Cap Rate (AU)
Assets Under Management (AUM)(3)
June 2016 Portfolio
Acquisitions / Centres(4,5)
NLA (sqm)
Completed acquisition of remaining 90% interest in
the Southern Cross portfolio of 26 storage centres for
$285 million(6)
Balance Sheet
Total Assets(5)
Debt drawn(5)
Interest Rate Hedges(5)
Gearing
Weight average cost of debt
Weight average debt tenor (years)
NTA
Entered into $100 million Long Term Institutional Loan
FY16
$79.8m
$44.0m
13.06cps
$29.2m
8.7cps
$49.3m
8.7cps
FY17
$117.5m
$103.4m
20.74cps
$45.7m
9.2cps
$65.1m
9.2cps
At June
2016
76/29 (105)
75.4%
$202
8.24%
$959m
$666m
$145m / 23
541,000
At June
2017
113/3 (116)
77.5%
$212
7.86%
$1,163m
$739m
$138m / 11
622,000
Change
47%
135%
59%
57%
5.7%
32%
5.7%
Change
37/(26) (11)
2.1%
5.2%
(0.38%)
21%
11%
($7m)/(12)
15%
At June
2016
$900m
$286m
$120m
38%
4.1%
2.0
$1.14
At June
2017
$1,437m
$485m
$268m
37%
3.7%
4.6
$1.34
Change
$537m
$199m
$148m
(1%)
(0.40%)
2.6
18%
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 116 self-storage centres under
operation or management, tailoring storage solutions to over 40,000 customers across Australia and
New Zealand. NSR has grown its portfolio of owned and managed centres by over 87% from 62 centres
in December 2013 to 116 centres at the date of this Directors’ Report. NSR now manages over 65,400
storage units across approximately 622,000 sqm (of which 459,000 sqm is occupied) of net lettable area
around Australia and New Zealand. AUM has increased to $1,163 million as at 30 June 2017.
Of the 116 self-storage properties in the NSR portfolio, ownership is as follows:
98 self-storage centres owned by NSPT
15 self-storage centres operated as long-term leasehold centres (Leasehold Centres);
3 third party managed centres.
1 Underlying earnings is a non-IFRS measure (unaudited), see table within Operating Results for reconciliation
2 Same centre 30 June 2016 excluding New Zealand and developing centres
3 Investment properties net of finance lease liability
4 Excluding transaction costs
5 Applying a NZD/AUD exchange rate of 1.05
6 Net consideration pre transaction costs
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
2
35
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017 The National Storage core product offering covers self-storage, business storage, hard stand/vehicle
storage and wine storage at National Storage’s climate controlled storage facilities and via Wine Ark
(which operates dedicated self-access and managed cellars). Ancillary income streams are derived
from other related activities including packaging sales and vehicle/trailer hire.
BUSINESS 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 (including the acquisition, development or redevelopment and portfolio
recycling 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 in complementary areas
such as wine storage, document storage and mini-logistics for SMEs;
Portfolio management – acquiring and integrating quality self-storage assets into the NSR
portfolio;
Centre Management – effective operation of individual self-storage 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;
Capital management – maintaining an appropriate and efficient capital structure with a focus
on risk minimisation and the development of long term sustainable and growing revenue
streams; and
Product and innovation – exploring opportunities for revenue generation across new sales
channels, digital strategies and ancillary product ranges.
Further details on these key business drivers can be found in the National Storage 2017 Annual Report.
REVIEW AND RESULTS OF OPERATIONS
The Financial Statements of NSR are prepared in compliance with Australian Accounting Standards
and the requirements of the Corporations Act Cth 2001.
OPERATING RESULTS
IFRS Profit after tax for the Reporting Period was $103.4 million with EPS of 20.74 cents. Underlying
earnings(7), increased by 57% to $45.7 million. NSR also delivered solid growth of 5.7% in underlying
earnings(7) per stapled security to 9.2cps for the 2017 financial year.
IFRS Profit
Plus tax expense/(benefit)
Plus business combination, restructure and other non-recurring costs
Plus contracted gain in respect of sale of investment property
Less fair value adjustment
Less finance lease diminution
Underlying Earnings(7)
FY17
$103.4m
$4.2m
$17.0m
$1.5m
($76.8m)
($3.6m)
$45.7m
FY16
$44.0m
($0.25m)
-
-
($10.0m)
($4.55m)
$29.2m
Total revenue rose by 47% to $117.5 million. Occupancy across the June 2016 portfolio including
Southern Cross (excluding developing centres) increased to 77.5%, up from 75.4% at 30 June 2016. This
is a pleasing result and demonstrates that the continued focus on driving increased occupancy is
delivering results. Revenue per available metre (REVPAM) increased by 5% to $212/sqm from $202/sqm
at June 2016 demonstrating strong revenue growth via the combination of growing occupancy and
rental rates.
7 Underlying earnings is a non-IFRS measure (unaudited)
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2017
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
3
CASH MANAGEMENT
Cash and cash equivalents as at 30 June 2017 were $23.2 million compared to $13.4 million at 30 June
2016. Net operating cashflow for the year increased to $65.1 million (2016: $49.3 million).
On 28 June 2016 NSR announced a fully underwritten $260 million equity raising, comprising a $101
million institutional placement of new stapled securities in NSR and a $159 million pro-rata accelerated
non-renounceable entitlement offer. The purpose of the equity raising was to fund the acquisition of
the remaining 90% interest in the Southern Cross Joint Venture and four new centres as well as to
strengthen the balance sheet and provide funding for future acquisitions in accordance with NSR’s
acquisition strategy. The Entitlement Offer closed on 15 July 2016 and completion of the issuance of
new securities to investors was finalised on 22 July 2016.
An interim distribution of 4.6 cents per stapled security ($23.1 million) was paid on 27 February 2017 with
a final distribution of 4.6 cents per stapled security ($23.6 million) declared on 22 June 2017 with an
estimated payment date of 30 August 2017, delivering a 5.7% increase in the total distribution for the
year to 9.2 cents per stapled security.
During the reporting period NSR once again offered the Distribution Reinvestment Plan (DRP) which
enables eligible securityholders to receive part or all of their distribution by way of securities rather than
cash.
For the December 2016 interim distribution approximately 24% of eligible securityholders (by number of
securities) elected to receive their distributions as securities totalling $5,542,929. The DRP price was set
at $1.4099 which resulted in 3,931,434 new securities being issued.
The June 2017 final distribution has seen approximately 20.8% of eligible securityholders (by number of
securities) elect to receive their distributions as securities totalling approximately $4.9million. The price
of the DRP securities will be determined on a 10-day volume weighted average market price (VWAP)
commencing on and including 9 August 2017 less a 2.0% discount.
NSR’s finance facilities are on a “Club” arrangement with a selection of major Australian banks and a
major Australian superannuation fund. The Consolidated Group’s borrowing facilities are AUD $455
million and NZD $96 million. As at the reporting date AUD $62 million was undrawn and available. NSR
actively manages its debt facilities and continues to increase when and where required to ensure
adequate capacity for future acquisitions and working capital requirements. The weighted average
debt tenor as at the reporting date is 4.6 years, up from 2.0 years as at 30 June 2016. NSR’s target
gearing range remains 25%-40% to provide flexibility and the ability to act on acquisition opportunities.
NSR maintains interest rate hedges in accordance with NSR’s hedging policy which is reviewed on a
regular basis. Additional interest rate hedges were entered into during the year to enable NSR to
extend the tenor of its hedge portfolio and lock in historically low interest rates for an extended period.
As at the reporting date interest rate hedges totalling A$461 million were in place with expiry dates
ranging from 0.5 years to 9.5 years.
ACQUISITIONS AND INVESTMENTS
NSR considers its ability to acquire and integrate quality assets to be one of the key drivers 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 successful execution of NSR’s acquisition strategy has seen 11 new centres acquired and the
freehold interest in three existing leasehold centres from 1 July 2016 to the date of this Directors’ Report,
valued at $138 million(8). Further, a combined process was undertaken by both external valuers and the
Directors to revalue the 30 June 2016 NSR owned centres as at 30 June 2017 (based on valuations and
methodologies from independent valuers (m3 Property and Landmark White)), which yielded an
increase in valuation of 11% from $666 million to $739 million.
8 Excluding transaction costs
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
4
37
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
Centre
Butler1,2
Kurnell 1
Moonah Central
Artarmon Central
State
Western Australia
New South Wales
Date
August 2016
August 2016
Tasmania
September 2016
New South Wales
December 2016
Guilford, Rockingham, Subiaco2
Western Australia
January 2017
Kenepuru
Brooklyn
Gardens, Kaikorai
Jandakot1
Wellington (NZ)
January 2017
Victoria
Dunedin (NZ)
Western Australia
March 2017
March 2017
May 2017
June 2017
Brendale, Lawnton, Rothwell
Queensland
Total (Since 1 July 2016) - 11 Centres
NLA (Sqm)
Units
Purchase Price
5,100
12,400
2,400
3,400
-
4,300
5,300
20,800
5,200
19,700
78,600
480
750
200
560
-
500
350
1,550
500
1,800
6,690
$8.8m
$17.5m
$3.3m
$10.8m
$30.0m
NZ$9.8m
$9.0m
NZ$14.0m
$8.1m
$28.0m
$138.0m
1 - Developing Centres
2 - Purchase of leasehold interest and renegotiation of lease terms on Subiaco
INVESTMENT IN JOINT VENTURES
NSR invested $6.25 million in 2015 to take a cornerstone 24.9% holding in the Australian Prime Storage
Fund (APSF or the fund). APSF is an arrangement with Universal Self Storage to facilitate the
development and ownership of multiple premium grade self-storage centres in major cities around
Australia. The fund anticipates potentially investing up to $100 million of funds – initially funded to $50
million with a target gearing of 50%, to be deployed on assets to be built and operated over a five year
term. NSR is entitled to a number of fees associated with the provision of various services including
acquisition, design and development, centre management and fund support services. The fund now
has two operational centres at Carrara and Albion in South East Queensland and also has another
under construction at Kelvin Grove. An additional site has been acquired in Canterbury Victoria and is
progressing through the development application stage.
In March 2017 NSR entered into arrangements together with Leyshon Group to acquire a high quality
site on Bundall Road, Bundall on the Gold Coast. NSR will invest 25% and Leyshon 75% to develop the
site which is located approximately 2.5km west of Surfers Paradise, in close proximity to established
drivers of storage demand including residential markets and substantial retail and commercial
developments. It is anticipated the 2,400sqm existing retail component of the site will be retained and
enhanced, with the warehouse component redeveloped into a multi-level state-of-the-art storage
centre comprising approximately 7,000sqm of net lettable area. NSR has been appointed the
manager of the project and will generate additional income from providing a range of services
including design and development, project management and corporate administration.
LIKELY DEVELOPMENTS
NSR intends to utilise its position as Australia's first ASX listed fully integrated sector specific 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 stated strategy,
NSR continues to seek high-quality acquisition opportunities, to evaluate its existing portfolio for
development or re-development or portfolio recycling opportunities and further develop and refine its
third party management offerings.
DIVIDENDS AND DISTRIBUTIONS
NSR has paid or declared distributions totalling 9.2 cents per stapled security for the Reporting Period,
comprising:
A final distribution of 4.6 cents per stapled security for the 6 months to 30 June 2017. The
distribution is expected to be paid on 30 August 2017 and is expected to contain a tax
deferred component.
A distribution of 4.6 cents per stapled security for the period 1 July 2016 to 31 December 2016
which was paid on 27 February 2017 which included a tax deferred component.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2017
5
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
NSR’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.
ENVIRONMENTAL, ECONOMIC AND OTHER SUSTAINABILITY RISKS
NSR recognises that it’s operating activities and strategic goal of delivering securityholder growth and
returns expose it to potential risks. The identification, management and where possible elimination or
mitigation of those risks is a key facet of our daily operations.
Risk is managed centrally by management to minimise potential adverse effects on the financial
performance of NSR and protect long-term securityholder value.
The Chief Risk Officer is responsible for management of NSR’s risk function and in turn reports to the
Managing Director and the Risk Committee. The Risk Committee is charged with risk oversight and
reports to the full Board. The full Board is then actively involved in the ultimate review of and
determination of risk to within sensible tolerances.
Potential risks faced by NSR and its mitigation strategies include but are not limited to:
RISK
Strategic Risk - Poor development and or execution of business strategy by the executive
management team can lead to the risk of loss and or poor performance. To mitigate this risk,
strategies are developed by the relevant responsible executive or senior officer. These are then
reviewed and discussed, as appropriate, by other executive officers and approved by the Managing
Director and or Chief Operating Officer. Strategic decisions of a significant nature are further put
before the Board and discussed in detail and require Board approval. The senior executive team
meet a number of times a year to discuss strategy and ensure that it remains current and
appropriate. This allows management to ensure it is employing strategies that are updated for
changes in the operating environment of the business.
Economic Conditions - Fluctuations in economic conditions including consumer confidence may
adversely impact upon demand for storage space. Material macroeconomic events occurring or
any significant trading downturns due to factors beyond the control of management have the
potential to negatively impact on forecast trading performance. The results of NSR’s operating
activities are dependent on the performance of the properties in which it invests and those it
manages on behalf of other parties. This performance in turn depends on economic factors; these
include economic growth rates, inflation rates and taxation levels. There are also industry and
location specific risks to consider, including competitor behaviour.
Operational Risk - Risk of loss due to its overall operations and management of other risks exists as a
function of any operating business. NSR aims to ensure that the necessary processes, training and
supervision is in place and effected to eliminate such loss wherever possible. The risk of loss from
system failures is reduced through system backups and disaster recovery (contingency) procedures,
which aim to ensure the maintenance of NSR’s critical data availability.
General commercial property risks - Risks commonly associated with commercial property
investment apply equally to NSR, including levels of occupancy, capital expenditure requirements,
development and refurbishment risk, environmental or compliance issues, changes to government
and planning regulations, including zoning and damage caused by flood or other extreme weather
(to the extent that it is not or could not be insured against). NSR utilises a comprehensive due
diligence process when acquiring centres to mitigate or eliminate risk where possible.
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 developed
marketing and management systems are in place to maximise conversion of new customer
enquiries.
Competition - Entry by new competing storage centres or discounting by existing storage centres
may adversely impact upon occupancy and rental rates on a centre specific basis. While there are
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
6
39
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017 RISK
barriers to entry for new competition, NSR constantly monitors its competitors' activities to ensure
pricing and terms remain competitive.
Valuations - Valuations ascribed to NSR’s assets will be influenced by a number of ongoing factors
including supply and demand for self-storage centres and general property market conditions.
Valuations represent only the analysis and opinion of qualified experts at a certain point in time.
There is no guarantee that a property will achieve a capital gain on its sale or that the value of the
property will not fall as a result of the assumptions on which the relevant valuations are based
proving to be incorrect.
Property liquidity - Self storage centres are property based illiquid assets and subject to supply and
demand factors dependent upon prevailing market conditions. As a result it may not be possible for
NSR to dispose of assets in a timely or price accretive fashion should the need to do so arise.
Future acquisitions and expansions - NSR may consider opportunities to make further acquisitions of
self-storage assets. NSR may also develop and expand the lettable area at a number of NSR’s
centres. The rate at which NSR is able to expand will reflect market forces and the availability of
capital at the time. Forecast distributions may be affected by such actions. The risks faced by NSR in
relation to any future development projects will depend on the terms of the transaction at the time.
There can be no assurance that NSR will successfully identify, acquire and integrate further self-
storage assets, or successfully implement acquisitions on time and on budget. Furthermore, there is
no guarantee that any acquisition will perform as expected. Future acquisitions may also expose
NSR to unanticipated business risks and liabilities.
Personnel risk - NSR relies upon the expertise and experience of the senior management team. As a
consequence, if the services of key personnel were no longer available this may have an adverse
impact on the financial performance of NSR. However, NSR’s senior management team are
considered internally to be stable and committed and succession planning is undertaken
periodically by the NSH Board and Managing Director.
Interest rate fluctuations and derivative exposure - unfavourable movements in interest rates could
lead to increased interest expense to the extent that these rates are not hedged. NSR uses
derivative instruments to hedge a percentage of its exposure to interest rates however the interest
rate movements could still result in an adverse effect on financial performance.
Workplace health and safety - There is a risk that liability arising from occupational health and safety
matters at a property in NSR’s portfolio may be attributable to NSR as the registered proprietor. To
the extent that any liabilities may be incurred by NSR, this may impact upon the financial position
and performance of NSR (to the extent not covered by insurance). In addition, penalties may be
imposed upon NSR which may have an adverse impact on NSR. NSR has a dedicated focus on
Health and Safety including comprehensive reporting to assist in the mitigation or elimination of such
risks and keep our team members, customers and contractors safe.
Insurance risk - There is no certainty that appropriate insurance will be available for all risks on
acceptable commercial terms or that the cost of insurance premiums will not continue to rise. Some
risks are not able to be insured at acceptable premiums. Examples of losses that are generally not
insured against include war or acts of terrorism and natural phenomena. If any of NSR’s assets are
damaged or destroyed by an event for which NSR does not have cover, or a loss occurs which is in
excess of the insured amounts, NSR could incur a capital loss and lost income which could reduce
returns for holders of stapled securities. Any failure by the company or companies providing
insurance (or any reinsurance) may adversely affect NSR’s right of recovery under its insurance.
Funding - NSR’s ability to raise funds from either debt or equity sources in the future depends on a
number of factors, including the state of debt and equity markets, the general economic and
political climate and the performance, reputation and financial strength of NSR. Changes to any of
these underlying factors could lead to an increase in the cost of funding, limit the availability of
funding, and increase the risk that NSR may not be able to refinance its debt and/or interest rate
hedges before expiry or may not be able to refinance them on substantially the same terms as the
existing facility or hedge instruments. If alternative financing is not available, this could adversely
affect NSR’s ability to acquire new properties and to fund capital expenditure, and NSR may need to
realise assets at less than valuation, which may result in financial loss to NSR.
Leasehold interests - NSR holds lease agreements with certain third parties which allow it to operate
storage centres from these properties. Lease terms for these properties are typically long (greater
than 10 years). However, there is no guarantee that these lease arrangements will be able to be
renewed upon expiry or if so on suitable terms to NSR.
Environmental issues - Unforeseen environmental issues may affect the properties in the property
portfolio owned by NSR. These liabilities may be imposed irrespective of whether or not NSR is
responsible for the circumstances to which they relate. NSR may also be required to remediate sites
affected by environmental liabilities. The cost of remediation of sites could be substantial. If NSR is
not able to remediate the site properly, this may adversely affect its ability to sell the relevant
property or to use it as collateral for future borrowings. Material expenditure may also be required to
comply with new or more stringent environmental laws or regulations introduced in the future, for
example in relation to climate change.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2017
7
DIRECTORS
NATIONAL STORAGE HOLDINGS LIMITED
The NSH Directors in office during the Reporting Period, or appointed prior to the date of this Directors’
Report, and continuing as at the date of this Directors’ Report are set out below.
NAME
POSITION
Laurence Brindle
Non-Executive Chairman (Appointed 1 November 2013)
Andrew Catsoulis
Managing Director (Appointed 1 November 2013)
Anthony Keane
Non-Executive Director (Appointed 1 November 2013)
Howard Brenchley
Non-Executive Director (Appointed 21 November 2014)
Steven Leigh
Claire Fidler
Non-Executive Director (Appointed 21 November 2014)
Executive Director (Appointed 18 July 2017)
NATIONAL STORAGE FINANCIAL SERVICES LIMITED (NSFSL)
NSFSL was appointed as responsible entity on 10 November 2015. The Directors of NSFSL in office during
the Reporting Period, or appointed prior to the date of this Directors’ Report, and continuing as at the
date of this Directors’ Report are set out below.
NAME
POSITION
Laurence Brindle
Non-Executive Chairman (appointed 18 July 2014)
Andrew Catsoulis
Managing Director (appointed 18 July 2014)
Anthony Keane
Non-Executive Director (appointed 18 July 2014)
Howard Brenchley
Non-Executive Director (appointed 8 September 2015)
Steven Leigh
Claire Fidler
Non-Executive Director (appointed 8 September 2015)
Executive Director (appointed 18 July 2017)
DIRECTORS’ QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES
Boards of National Storage Holdings Limited and National Storage Financial Services Limited
Laurence Brindle, Independent Non-executive Chairman
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 is also currently the Non-executive
Chairman of the listed entity, Viva Energy REIT.
Laurence serves on the Audit and Risk Committees and is Chairman of the Nomination and
Remuneration Committees.
Andrew Catsoulis, Managing Director
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 20 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 and planned and negotiated the acquisition of the Southern Cross portfolio in 2016.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
8
41
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
Anthony Keane, Independent Non-executive Director
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 Holdings Limited and an Independent
Non-executive director of Oncore Group Holdings 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
BEc
Howard has over 30 years’ involvement in the Australian property industry, as an analyst, investor and
fund manager. He is now a professional company director and consultant to the property funds
industry. Howard co-founded Property Investment Research Pty Ltd (PIR) in 1989, which during the
1990’s was considered a leading researcher of both listed and unlisted property funds.
In 1998 Howard was instrumental in establishing the funds management business of 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 ASX-listed
Industria REIT (IDR) and Convenience Retail REIT (CRR). Until July 2017, APN Funds Management Limited
was also responsible entity for Generation Healthcare REIT (GHC).
Howard is a member of the Audit and Risk Committees.
Steven Leigh, Independent Non-executive Director
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.
Claire Fidler, Executive Director
LLB (Hons), B Bus (Int)
Claire was appointed as an executive director on 18 July 2017 after acting as the principal company
secretary of National Storage since 26 November 2015. She holds legal and international business
qualifications and is admitted as a solicitor of the Supreme Court of Queensland. Claire has over 10
years’ experience in corporate and commercial law in private practice, having practiced in the
litigation, resources and corporate areas of two large law firms. Prior to joining National Storage, Claire
was Corporate Counsel and Company Secretary at Rio Tinto Coal Australia. During this time, in
addition to providing legal services to the business, she was responsible for the corporate governance
and ASX compliance of one of Rio Tinto’s listed subsidiaries as well as managing the corporate
secretarial responsibilities of over 50 subsidiaries within the group and providing joint venture
support. Claire has also worked in corporate compliance with the Australian Securities and Investments
Commission.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2017
9
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)
Viva Energy REIT (ASX:VVR)
APN Property Group (ASX:APD)
APN Funds Management Limited,
responsible entity for:
Industria REIT (ASX:IDR)
Convenience Retail REIT (ASX:CRR)
And previously Generation Healthcare
REIT (ASX:GHC)
PERIOD OF DIRECTORSHIP
01/07/2014 – 07/05/2015
December 2010 - 30/06/2014
10/07/2016 - Current
1998 - Current
03/12/2013 - Current
27/07/2017 - Current
12/08/2011 – July 2017
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
Claire Fidler
DIRECTORS’ MEETINGS
DIRECT
-
-
463,900
-
-
-
INDIRECT
1,342,120
148,200
12,857,845
50,000
81,900
8,938
TOTAL
1,342,120
148,200
13,321,745
50,000
81,900
8,938
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
Steven Leigh
11 (11)
11 (11)
11 (11)
11 (11)
10 (11)
7 (7)
7 (7)
-
7 (7)
-
6 (6)
6 (6)
-
6 (6)
-
4 (4)
4 (4)
-
-
4 (4)
3 (3)
3 (3)
-
-
3 (3)
Notes:
1.
Figures in brackets indicate the number of meetings held whilst the director was in office or was
a member of the relevant Committee during the Reporting Period. Figures not in brackets
indicate the number of meetings or Committee meetings that the director attended.
2. Mr. Catsoulis attends Nomination, Remuneration, Risk and Audit Committee meetings by
3.
invitation.
The Company has an Investment Committee Charter to govern an Investment Committee.
The Board has determined that at this time, the full Board will act as the Investment Committee
and therefore there are no separate Investment Committee meetings noted.
4. Ms Fidler was ineligible to attend Directors’ meetings through the period as her appointment as
Director being post 30 June 2017.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
10
43
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017 COMPANY SECRETARY
NATIONAL STORAGE HOLDINGS LIMITED
NAME
APPOINTMENT DATE
Claire Fidler
26 November 2015
Patrick Rogers
1 November 2013
NATIONAL STORAGE FINANCIAL SERVICES LIMITED
NAME
APPOINTMENT DATE
Claire Fidler
26 November 2015
Patrick Rogers
18 July 2014
Claire Fidler
LLB (Hons), B Bus (Int)
Refer to page 28.
Patrick Rogers
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 over 18 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 held senior finance roles and was the
general counsel and company secretary of the Super A-Mart Group for over 8 years. Patrick was
appointed Chief Risk Officer of NSR in June 2016 in addition to his role as General Counsel and
Company Secretary.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2017
44
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 allows NSH to provide key services to NSFSL as Responsible Entity in exchange for a
monthly fee. These services include finance and administrative services, property management,
provision of staff and equipment.
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.
An important component of the NSR corporate governance structure is the 3rd edition of the ASX
Corporate Governance Principles and Recommendations (the “ASX Recommendations”). A more
detailed discussion of NSR’s Corporate Governance is found on pages 32 - 33 of the Annual Report
and a statement of the extent of NSR’s compliance with the ASX Recommendations can be viewed
on the NSR website at www.nationalstorageinvest.com.au. Full copies of all NSR governance policies
and Charters can also be found in the Governance section of the website.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has agreed to indemnify all the Directors and executive officers of the Company and its
group entities to the extent permitted by law, for the amount of any liability, loss, cost, charge,
damage, expense or other liability suffered by the Director or executive officer as an officer of the
Company or group entity or as a result of having been an officer of the Company or any Group entity.
This includes any liability arising out of or in connection with any negligence, breach of duty, or breach
of trust (“Indemnity”).
However, the Indemnity does not extend to a claim in the nature of:
(a)
(b)
a challenge to any rejection of a Director’s claim by the provider of the Company’s insurance
cover; 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 above have been formally entered into by the Company and each
of the Directors.
The Deeds of Indemnity require the Company to obtain a back to back indemnity to the Company
from the Responsible Entity out of the assets of the NSPT. This has been procured by the Company and
is in place. The back to back indemnity requires the Responsible Entity to indemnify the Company for
any liability under the Directors/officers indemnity to the extent that the Company is not able to meet
that obligation. The indemnity does not extend to any payment made or due as a result of a breach
by the Company of its obligations under a Director/officer indemnity or to any payment which the
Company makes voluntarily but is not due and payable under the terms of a Director/officer indemnity.
The total amount of insurance contract premiums paid for Directors and Officers insurance for NSR
(including subsidiary entities) during the Reporting Period was $156,015.
No insurance premiums are paid out of the assets of the NSPT in regards to insurance cover provided to
either the Responsible Entity or the auditors of the NSPT. So long as the officers of the Responsible Entity
act in accordance with the constitution and the law, the officers remain indemnified out of the assets
of the NSPT against losses incurred while acting on behalf of the NSPT. The auditors of the NSPT are in no
way indemnified out of the assets of the NSPT.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as
part of the terms of its audit engagement agreement against claims by third parties arising from the
audit (for an unspecified amount). No payment has been made or claim received by NSR to indemnify
Ernst & Young during the Reporting Period or up to the date of this report.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
12
45
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017 REMUNERATION REPORT (AUDITED) – NSH GROUP
MESSAGE FROM THE BOARD
The NSH Board remains committed to ensuring that remuneration strategies are structured to support
and reinforce NSR’s overall business strategy. By linking the Short Term Incentive (“STI”) and Long Term
Incentive (“LTI”) (at risk remuneration) of executive remuneration to the drivers that support the business
strategy, the remuneration of executives is aligned with the creation of long-term value for
securityholders. The Board believes that the remuneration practices of NSR should fairly and
responsibly reward Key Management Personnel (“KMP”) having regard to their individual performance,
the performance of NSH and NSPT and the broader external environment as it relates to KMP reward.
The policy also aims to provide a platform for sustainable value creation for securityholders by
attracting and retaining quality KMP.
COVERAGE OF THIS REPORT
The following remuneration report has been prepared to provide information to securityholders of the
remuneration details of the KMP of NSH involved in the management of the NSPT.
Directors of the Responsible Entity do not receive any remuneration from the Responsible Entity in
respect to their roles with the Responsible Entity. However, the director fees paid by NSR take into
account the complexity involved and additional duties in the operation of the Responsible Entity as a
subsidiary of NSH and as part of the consolidated governance group. The Responsible Entity receives a
fee for management services rendered.
This information has been audited as required by section 308(3C) of the Act.
KMP are defined as “those persons having authority and responsibility for planning, directing and
controlling the major activities of NSH, the Consolidated Group and the NSPT, directly or indirectly,
including any director (whether executive or otherwise) of NSH.”
Key management personnel covered in this report are as follows:
NON-EXECUTIVE AND EXECUTIVE DIRECTORS
Laurence Brindle - Chairman (non-executive)
Andrew Catsoulis – Managing Director (executive)
Anthony Keane - Director (non-executive)
Howard Brenchley - Director (non-executive)
Steven Leigh - Director (non-executive)
Claire Fidler – Company Secretary (appointed executive Director effective 18 July 2017)
KEY MANAGEMENT PERSONNEL – SENIOR EXECUTIVES
Peter Greer – Chief Operating Officer (COO)
Stuart Owen – Chief Financial Officer (CFO)
Patrick Rogers – General Counsel and Chief Risk Officer (GC/CRO)
REMUNERATION GOVERNANCE
REMUNERATION COMMITTEE AND USE OF REMUNERATION CONSULTANTS
The Remuneration Committees activities are governed by its Charter, a copy of which is available at
www.nationalstorageinvest.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-executive Directors;
Formulate the specific remuneration packages for senior executives (including base salary, STIs,
LTIs and other contractual benefits);
Review contractual rights of termination for senior executives;
Review the appropriateness of the Company’s succession planning policies;
Review management’s recommendation of the total proposed STI and LTI awards;
Administering the STI and LTI awards; and
Review management recommendations regarding the remuneration framework for the
company as a whole.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2017
13
The deliberations of the Remuneration Committee, including 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 advice from independent remuneration advisers on
trends in remuneration for KMP. The independent remuneration advisors consider a range of factors
including the specific responsibilities assumed by KMP. The Remuneration Committee determined it
was not necessary to engage an independent remuneration consultant during the reporting period.
An independent report was previously commissioned in the 2016 financial year. The Board reviewed
the independent consultants previous report and determined that there had been no significant
changes to either the Board and Executive structure or the market parameters used in the
independent consultants previous report and determined that a new independent consultants report
was not required.
The Remuneration Committee comprises three independent non-executive 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 deliver NSR’s objectives.
The remuneration of directors and senior executives is reviewed at least annually by the Remuneration
Committee and the full NSH Board. External analysis and advice is sought by the Committee, where
considered appropriate, to ensure that the remuneration for directors and senior executives is
competitive in the market place and appropriate for the organisation.
The policy seeks to align executive reward with the achievement of strategic objectives and the
creation of value 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 executives.
Total reward for key executives is to have a significant “at risk” component.
The “at risk” component for key executives is to include both short term incentives (“STI”) and
long term incentives (“LTI”) which have a strong focus on quantitative measures.
Provide industry competitive rewards linked to securityholder returns.
Provide recognition for contribution, complexity of role and responsibilities of the officer.
Remuneration policies and structures must be clear and transparent both to the executives and
Board of NSR and to securityholders.
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, experience, length of service and NSR’s positioning
within the comparator group. The individual components of TAR, comprising Total Fixed Remuneration
(TFR), STI and LTI are individually assessed within this framework and structured to provide both short
term and long terms incentives to KMP that align with delivery of short term and long term value to
securityholders.
When selecting the comparator group the data is collected from a combination of sources including
audited Remuneration Reports of the selected companies. It provides an appropriate pool of data
that is statistically relevant. This data is then assessed against NSR’s current size, industry positioning and
other relevant factors to determine the appropriate information against which to assess NSR’s
remuneration framework.
The composition of 2017-18 TAR for KMP is detailed in the table below.
ROLE
MD
COO
CFO
GC/CRO
CoSec
TFR
57.4%
57.2%
65.6%
74.8%
80.0%
STI
21.3%
21.4%
17.2%
12.6%
10.0%
LTI
21.3%
21.4%
17.2%
12.6%
10.0%
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
14
47
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017 NSR PERFORMANCE
NSR has delivered its growth objectives over the reporting period including the acquisition of $138
million in new storage centres in addition to the successful completion of the $260 million capital raise
associated with the finalisation of the $285 million acquisition of the remaining 90% interest in the
Southern Cross Storage Joint Venture. This is a significant achievement for the company which can be
attributed to a combination of a strong share price, continued growth in 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 delivered returns to securityholders.
The Company has established a track record of delivering strong and consistent underlying earnings(9)
growth since listing, increasing underlying earnings(1) per stapled security by 5.7% in the 12 months to 30
June 2017 over the corresponding period to 30 June 2016. A consistent and considered approach to
driving increased underlying earnings through a combination of organic growth from existing assets as
well as targeted EPS accretive acquisitions has been instrumental in achieving this result.
Underlying Earnings Per Security
9.3%
8.2
6.1%
8.7
7.5
5.7%
9.2
s
t
n
e
C
10.0
9.0
8.0
7.0
6.0
5.0
4.0
CY 14
FY15
FY16
FY17
NSR has maintained a distribution policy which targets distribution of 90% - 100% of underlying
earnings(1) to securityholders. During financial year 2017 NSR declared distributions totalling 9.2 cents
per stapled security, being at the upper end of the stated policy, delivering DPS yield of 6.1%, some 22%
above that of the A-REIT 200 average of 5.0%.
FY17 Distribution Yield
A-REIT 200
NSR
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
Source: Bloomberg. Market Data as at 24 July 2017
9 Underlying earnings is a non-IFRS measure (unaudited). See page 36 of Directors’ Report for reconciliation of underlying earnings
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2017
48
NSR has delivered Total Shareholder Return “TSR” (a combination of share price growth and distributions
received by securityholders) over the past three years to 30 June 2017 of 42%, outperforming the A-REIT
200 index average of 41%.
Total Shareholder Return
A-REIT 200
NSR
25%
27%
29%
31%
33%
35%
37%
39%
41%
43%
Source: Bloomberg. Market Data as at 24 July 2017
Total shareholder return, assuming dividends are re-invested in the underlying shares. Calculated daily over 3 years to 30 June 2017
NSR listed in December 2013 with an issue price of $0.98. From that time to 30 June 2017 the stapled
security price has increased by 54% with 30 June 2017 closing price of $1.51.
NSR Stapled Security Price
$
1.90
1.80
1.70
1.60
1.50
1.40
1.30
1.20
900
800
700
600
500
400
300
200
100
-
m
$
'
Jul 14
Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Jun 17
Mkt Cap
Share Price
Security price performance over the period 1 July 2014 to 30 June 2017 has shown a 21% increase. This
compares to an increase of 23% for the A-REIT 200 index and 6% for the broader ASX 200 Index over the
same period.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
49
16
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
Relative Performance
1.60
1.50
1.40
1.30
1.20
1.10
1.00
0.90
0.80
Jul 14
Sep 14
Dec 14 Mar 15
Jun 15
Sep 15
Dec 15 Mar 16
Jun 16
Sep 16
Dec 16 Mar 17
Jun 17
NSR
S&P/ASX 200 A-REIT
S&P/ASX 200
NSR REMUNERATION FRAMEWORK
NON-EXECUTIVE DIRECTORS
Fees and payments to non-executive directors reflect the demands which are made on, and the
responsibilities of, the non-executive directors and their contribution towards the performance of NSR as
well as the complexity of the National Storage Property Trust, National Storage Financial Services
Limited and the operating business. The remuneration policy seeks to ensure that NSR attracts and
retains directors with appropriate experience and qualifications to oversee the operations of NSR on
behalf of the securityholders.
The number of meetings of directors is shown on page 43 of this report.
The Constitution of NSH specifies that the amount of the remuneration of the non-executive directors is
a yearly sum not exceeding the sum from time to time determined by the Company in general
meeting. Under the ASX Listing Rules, the total amount paid to all NSH non-executive directors for their
services must not exceed in aggregate in any financial year the amount fixed by NSH’s annual general
meeting. The amount approved by securityholders at the 2014 Annual General meeting is $900,000.
Annual NSH non-executive directors’ fees and Committee fees currently agreed to be paid by NSH
effective from 1 July 2017 are detailed below. Non-executive directors are not eligible to participate in
NSR’s incentive plan.
NON-EXECUTIVE DIRECTORS
BASE FEE
AUDIT AND RISK
COMMITTEE FEES
Laurence Brindlea.
Anthony Keaneb.
Steven Leigh
Howard Brenchley
$108,000
$108,000
$108,000
$21,500
-
$8,500
REMUNERATION
AND NOMINATION
COMMITTEE
FEES
TOTAL
$5,500
$5,500
-
$270,000
$135,000
$113,500
$116,500
a. Chairman and chair of the Remuneration and Nomination Committees and receives a single fee for all roles
b. Chair of the of Audit and Risk Committees
All NSH non-executive directors’ fees include superannuation at the required statutory rate.
KEY MANAGEMENT PERSONNEL - EXECUTIVE DIRECTOR AND SENIOR EXECUTIVES
All remuneration paid to executive directors and senior executives comprises four components:
Base pay and benefits (including superannuation)
Short-term performance incentives
Long-term performance incentives
Other remuneration (if applicable)
Base salary and benefits
The Managing Director and senior executives are paid a base salary that includes employer
contributions to superannuation funds. The remuneration of the Managing Director is reviewed annually
by the Remuneration Committee and Board. The remuneration of senior executives is reviewed
annually by the Managing Director who makes a recommendation to the Remuneration Committee.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2017
50
The Committee then considers, but is not obliged to accept, the recommendation of the Managing
Director and takes whatever additional steps it determines appropriate to assess the senior executive
salaries.
There is no guarantee of base salary increases included in any executive director or senior executive
contracts or through the annual review process. The remuneration of all KMP was reviewed during the
year.
The Managing Director and senior executives can potentially be paid a bonus as part of their
remuneration. Whether 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 service
agreements. The service agreements specify the components of remuneration, benefits and notice
periods. Termination benefits are designed to fall within the limits relevant to the Corporations Act Cth
2001 such that they do not require securityholder approval. However, in addition, all executive
contracts make any such benefits subject to the Corporations Act Cth 2001, all other applicable laws
and where necessary securityholder approval. They also contain provisions which allow NSH to reduce
any such payments to ensure compliance with the law.
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
$890,000
$800,000
$420,000
Patrick Rogers
No fixed term
6 months
$325,000
Claire Fidler
(Part time)
No fixed term
6 months
$200,000
6 months in lieu of notice if required by NSH.
6 months in the event of incapacity or illness.
6 months in lieu of notice if required by NSH.
6 months in the event of incapacity or illness.
6 months in lieu of notice if required by NSH.
6 months in the event of incapacity or illness.
1 months fixed remuneration plus 2 weeks for
each year of service – capped at 2 months
in the event of redundancy
6 months in lieu of notice if required by NSH.
6 months in the event of incapacity or illness.
1 months fixed remuneration plus 2 weeks for
each year of service – capped at 2 months
in the event of redundancy
6 months in lieu of notice if required by NSH.
6 months in the event of incapacity or illness.
1 months fixed remuneration plus 2 weeks for
each year of service – capped at 2 months
in the event of redundancy
* Base salaries are annual salaries for the financial year commencing 1 July 2017. They are reviewed annually by the
Remuneration Committee. Actual salaries paid in the year ended 30 June 2017 are shown on page 54.
Short and long term incentives
KMP senior executives may also be entitled to participate in the STI and LTI 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 respective KMP. Total incentive programs
are assessed against a broad comparator group and adjusted to reflect factors such as the criticality
of the role, experience, length of service and NSR’s positioning within the comparator group including
the ASX A-REIT 200 index. The Board continually assesses the structure of the incentive plans and has
determined that at this point in time payments made under these plans will be paid in cash. The Board
considers that there is a sufficient nexus between the cash remuneration and the equity based
payments given the link between security price performance and TSR.
An independent consultant was engaged during the 2016 Reporting Period to assess the
appropriateness of the remuneration structure currently in place and to provide advice on market
practice relating to executive remunerations structures. The advice did not constitute a remuneration
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
51
51
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
recommendation as defined in the Corporations Act Cth 2001. After considering all the relevant
information the Board has determined that the existing short and long term incentive program is
appropriate. The following incentive program is effective from 1 July 2017.
Short Term Incentive (STI)
The STI contains four separate elements that will be assessed independently of the other elements. The
STI is an annual incentive and is to be paid in cash annually.
ELEMENT
Financial
Financial – Out
Performance*
Individual KPI’s
Strategic
PERCENTAGE
OF STI
CRITERIA
70%
10%
15%
15%
Underlying Earnings(1) as determined by the Board
Exceeding Underlying Earnings(1) targets
Individual 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
Innovation 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 $820,000 for FY18 in aggregate for all KMP.
100% (Max)
Long Term Incentive (LTI)
The LTI criteria have been set so as to align the interests of KMP with those of securityholders. The LTI
contains two separate components which are independently tested:
ELEMENT
PERCENTAGE
OF LTI
CRITERIA
Total Shareholder
Return
Earnings Per Share
Growth
70%
30%
Minimum total shareholder return above the 50th percentile in
comparison to the ASX 200 A-REIT index. The LTI becomes payable
in accordance with the sliding scale below once the 50th percentile
hurdle is met.
Earnings per share growth of 5% per annum
For the purposes of determining the LTI attributable to Total Shareholder Return in any given period, the
following scale is applied:
NSR TSR v ASX 200 A-REIT INDEX
LTI PAYABLE
<50th percentile
50th percentile
>50th - <75th percentile
>= 75th percentile
0%
50%
Pro-rata from 50% - 100%
100%
The LTI is assessed over a rolling 3 year period and as such to be eligible for payment of the LTI, KMP
must have been employed by NSR for three years (or shorter period as determined by the Board). Post
three years’ service the LTI will be paid on an annual basis on the previous three years’ performance
against the pre-determined criteria.
The minimum LTI payable is zero and maximum LTI payable is $820,000 for FY18 in aggregate for all KMP.
Other Incentives
An additional one-off incentive relating to the successful delivery of the aspects of the sustainability
program, cost saving initiatives, and other measures is available to KMP during FY18. The sustainability
program relates to the roll out of solar initiatives which may deliver reduced energy costs as well as
improved asset valuations. Any payment under this incentive program will be at the discretion of the
Board. The minimum payable is zero and maximum payable is $345,100 (in aggregate for all KMP).
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2017
19
Short and long term incentives in place during reporting period:
The KMP were eligible for payment of STI’s and LTI’s for the financial year ended 30 June 2017 in
accordance with the incentive program outlined in the 2016 Annual Report. The program is the same
as that outlined above.
The STI’s and LTI’s were agreed with the KMP to reward them for performance against both financial
and operational objectives. The minimum payable was zero and maximum payable was $1,450,000 for
FY17 in aggregate for all KMP.
The STI and LTI hurdles included:
1. Underlying earnings1 exceeding 9.2 cents per security
2.
TSR over the period three years to 30 June 2017 being greater than the 50th percentile of the
comparator group (ASX A-REIT 200)
3. Rolling three year compound EPS growth exceeding 5% - (June 2017 target 9.1cps)
The Board has assessed the performance of the Company and the KMP against the performance
criteria and have determined that the following STI and LTI’s has been earned and is payable, inclusive
of statutory Superannuation amounts, for the period 1 July 2016 to 30 June 2017. In addition to the
formalised incentive scheme the Board deemed it appropriate, in view of the significance of the
transaction, to pay a one-off discretionary bonus in relation to the successful completion of the $285
million acquisition of the remaining 90% interest in the Southern Cross Storage Joint Venture and
associated $260 million capital raising which is shown as Other Remuneration below.
INCENTIVE OFFICER
STI
LTI
Andrew Catsoulis (MD)
Peter Greer (COO)
Stuart Owen (CFO)
Patrick Rogers (GC/CRO)
Claire Fidler (CoSec)*
Total
AMOUNT
$148,200
$119,350
$50,900
$23,200
-
$341,650
* Ms Fidler was not an Incentivised Officer during FY17
%
EARNED
49%
43%
51%
46%
-
47%
AMOUNT
$90,000
$82,500
$30,000
$15,000
-
$217,500
%
EARNED
30%
30%
30%
30%
-
30%
OTHER
REMUNERATION
$50,000
$50,000
$30,000
$20,000
$17,500
$167,500
TOTAL
$288,200
$251,850
$110,900
$58,200
$17,500
$726,650
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
20
53
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
DETAILS OF REMUNERATION
DETAILS OF REMUNERATION
The following tables set out details of the remuneration received by the Company’s KMP for the Reporting Period.
The following tables set out details of the remuneration received by the Company’s KMP for the Reporting Period.
SALARY & FEES
SALARY & FEES
SHORT TERM
INCENTIVE
(CASH)
SHORT TERM
INCENTIVE
(CASH)
SHORT TERM
SHORT TERM
INCENTIVE (NON-
INCENTIVE (NON-
MONETARY)
MONETARY)
POST-EMPLOYMENT
POST-EMPLOYMENT
BENEFITS
BENEFITS
SUPERANNUATION
SUPERANNUATION
LONG TERM
LONG TERM
INCENTIVE
INCENTIVE
(CASH)
(CASH)
LONG
LONG
SERVICE
SERVICE
LEAVE
LEAVE
TOTAL
TOTAL
PERFORMANCE
PERFORMANCE
RELATED
RELATED
2017
2017
Non-executive
Non-executive
directors
directors
Laurence Brindle
Laurence Brindle
Anthony Keane
Anthony Keane
Howard Brenchley
Howard Brenchley
Steven Leigh
Steven Leigh
Executive director
Andrew Catsoulis
Executive director
Andrew Catsoulis
Senior executives
Peter Greer
Senior executives
Stuart Owen
Peter Greer
Patrick Rogers
Stuart Owen
Claire Fidler
Patrick Rogers
Total
Claire Fidler
Total
$
$
229,189
114,594
108,000
95,153
229,189
114,594
108,000
95,153
$
$
-
-
-
-
-
-
-
-
799,592
184,193
799,592
184,193
685,222
358,915
270,008
166,572
2,827,245
685,222
358,915
270,008
166,572
2,827,245
157,155
74,293
39,617
15,982
471,240
157,155
74,293
39,617
15,982
471,240
$
$
-
-
-
-
-
-
-
-
8,762
8,762
8,762
8,762
8,762
8,762
8,762
8,762
8,762
43,810
8,762
43,810
$
$
21,773
21,773
10,887
10,887
-
-
9,040
9,040
50,917
50,917
47,739
37,130
47,739
32,912
37,130
17,135
32,912
227,533
17,135
227,533
$
$
-
-
-
-
-
-
-
-
82,192
82,192
75,342
27,397
75,342
13,699
27,397
-
13,699
198,630
-
198,630
$
$
$
$
%
%
-
-
-
-
-
-
-
-
18,836
18,836
16,895
8,904
16,895
6,849
8,904
5,137
6,849
56,621
5,137
56,621
250,962
125,481
108,000
104,193
250,962
125,481
108,000
104,193
1,144,492
1,144,492
991,115
515,401
371,847
213,588
3,825,079
991,115
515,401
371,847
213,588
3,825,079
0%
0%
0%
0%
0%
0%
0%
0%
23%
23%
23%
20%
14%
7%
23%
20%
14%
7%
2016
Non-executive directors
Laurence Brindle
Anthony Keane
Howard Brenchley
Steven Leigh
Executive director
Andrew Catsoulis
SALARY & FEES
SHORT TERM
INCENTIVE
(CASH)
POST-EMPLOYMENT
BENEFITS
SUPERANNUATION
LONG TERM
INCENTIVE
(CASH)
LONG
SERVICE
LEAVE
TOTAL
PERFORMANCE
RELATED
$
169,129
92,123
89,000
82,201
$
-
-
-
-
$
16,067
8,752
-
7,809
$
-
-
-
-
$
-
-
-
-
$
185,196
100,875
89,000
90,010
%
0%
0%
0%
0%
766,532
61,088
49,474
79,118
17,536
973,748
14%
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
Senior executives
Peter Greer
Stuart Owen
Patrick Rogers
Total
700,791
337,887
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
243,355
2,481,018
42,761
47,625
8,439
159,913
46,745
32,266
23,922
185,035
71,269
-
9,661
160,048
15,784
7,973
5,788
47,081
877,350
425,751
291,165
3,033,095
21
13%
11%
6%
21
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
22
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2017
SECURITY HOLDINGS OF DIRECTORS AND EXECUTIVES
The movement during the Reporting Period in the number of stapled securities, directly, indirectly or
beneficially held by Directors and KMP senior executives, including parties related to them, is as follows:
BALANCE
30 JUNE 2016
GRANTED AS
REMUNERATION
ON
EXERCISE
OF OPTIONS
ACQUIRED
BALANCE
30 JUNE 2017
Directors of NSH
Laurence Brindle
Anthony Keane
Andrew Catsoulis
Howard Brenchley
Steven Leigh
1,032,400
114,000
12,695,163
50,000
63,000
Executives of NSH
Peter Greer
Stuart Owen
Patrick Rogers
Claire Fidler*
Total
* Claire Fidler became an Executive of NSH on 1 July 2016
5,586,735
-
-
-
19,541,298
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
309,720
34,200
626,582
-
18,900
-
-
5,163
-
994,565
1,342,120
148,200
13,321,745
50,000
81,900
5,586,735
-
5,163
8,938
20,544,801
RELATED PARTY TRANSACTIONS
There were no other transactions with KMP and their related parties during the reporting period.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
2
55
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE
No subsequent events have occurred since the reporting date and the issue date of the annual report
which require disclosure in the financial statements.
ROUNDING
The amounts contained in this Directors’ Report and in the Financial Report have been rounded to the
nearest $1,000 (unless otherwise stated) under the option available under ASIC Corporations (Rounding
in Financial/Directors’ Reports) Instrument 2016/191. The Consolidated Group and NSPT Group are
entities to which the ASIC Instrument applies.
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2017
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
3
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 59.
Non-audit services
The following non-audit services were provided by the entity's auditor, Ernst & Young Australia. The
Directors of NSH are satisfied that the provision of non-audit services is compatible with the general
standard of independence for auditors imposed by the Corporations Act Cth 2001. The nature and
scope of each type of non-audit service provided means that auditor independence was not
compromised.
Ernst & Young Australia received or are due to receive the following amounts for the provision of non-
audit services conducted during the financial year:
1.
Tax compliance
2. Assurance Related
3. Other
$50,350
$145,976
$34,037
FEES PAID TO AND INTERESTS HELD IN THE NSPT BY THE RESPONSIBLE ENTITY OR ITS ASSOCIATES
Fees paid to the Responsible Entity and its associates out of NSPT property during the year are disclosed
in the Statement of Comprehensive Income and are detailed in Note 18 to the financial statements.
No fees were paid to the Directors of the Responsible Entity during the year out of NSPT.
INTERESTS IN THE NSPT
The movement in units on issue by the NSPT during the year is set out in Note 14 to the financial
statements.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
57
57
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
This Directors’ Report is made on 22 August 2017 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.
This Directors’ Report is made on 22 August 2017 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
Laurence Brindle
Brisbane
Chairman
National Storage Holdings Limited
Brisbane
Andrew Catsoulis
Managing Director
National Storage Holdings Limited
Andrew Catsoulis
Brisbane
Managing Director
National Storage Holdings Limited
Brisbane
This Directors’ Report is made on 22 August 2017 in accordance with a resolution of the Responsible
Entity and is signed for and on behalf of the Responsible Entity.
This Directors’ Report is made on 22 August 2017 in accordance with a resolution of the Responsible
Entity and is signed for and on behalf of the Responsible Entity.
Laurence Brindle
Director
National Storage Financial Services Limited
Laurence Brindle
Brisbane
Director
National Storage Financial Services Limited
Brisbane
DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2017
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2017
5
5
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
As lead auditor for the audit of National Storage REIT for the financial year ended 30 June 2017, I
declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of National Storage REIT and the entities it controlled during the financial
year.
Ernst & Young
Ric Roach
Partner
22 August 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
59
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
For the year ended 30 June 2017
Consolidated Group
NSPT Group
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
For the year ended 30 June 2017
Notes
2017
$'000
2016
$'000
2017
$'000
2016
$'000
Revenue from storage rent
Rental revenue
Revenue from sale of goods and services
Other revenue
Total revenue
Revenue from storage rent
Rental revenue
Revenue from sale of goods and services
Employee expenses
Other revenue
Premises costs
Total revenue
Advertising and marketing
Cost of packaging and other products
Management fees - operational
Employee expenses
Other operational expenses
Premises costs
Finance costs
Advertising and marketing
Share of profit of joint ventures and
Cost of packaging and other products
associates
Management fees - operational
Fair value adjustments
Other operational expenses
Business combination costs
Finance costs
Restructuring and other non-recurring costs
Share of profit of joint ventures and
associates
Profit before income tax
Fair value adjustments
Business combination costs
Income tax (expense) / benefit
Restructuring and other non-recurring costs
Notes
6
7
6
7
7
8
11.4
7
5
8
11.4
5
9
Profit after tax
Profit before income tax
Consolidated Group
70,574
2016
-
$'000
6,651
2,525
79,750
70,574
-
6,651
(15,460)
2,525
(8,956)
79,750
(1,646)
(954)
(215)
(15,460)
(4,753)
(8,956)
(15,787)
(1,646)
(954)
1,732
(215)
10,025
(4,753)
-
(15,787)
-
105,814
2017
-
$'000
6,999
4,689
117,502
105,814
-
6,999
(22,472)
4,689
(13,284)
117,502
(2,683)
(1,433)
(27)
(22,472)
(7,967)
(13,284)
(24,160)
(2,683)
(1,433)
2,110
(27)
76,803
(7,967)
(13,837)
(24,160)
(2,971)
NSPT Group
-
2017
52,511
$'000
-
258
52,769
-
52,511
-
-
258
-
52,769
-
-
(2,311)
-
(327)
-
(15,137)
-
-
1,509
(2,311)
73,975
(327)
(13,536)
(15,137)
-
-
2016
34,894
$'000
-
146
35,040
-
34,894
-
-
146
(15)
35,040
-
-
(908)
-
(39)
(15)
(7,011)
-
-
1,732
(908)
15,531
(39)
-
(7,011)
-
2,110
107,581
76,803
(13,837)
(4,168)
(2,971)
103,413
107,581
1,732
43,736
10,025
-
250
-
43,986
43,736
1,509
96,942
73,975
(13,536)
(676)
-
96,266
96,942
1,732
44,330
15,531
-
(165)
-
44,165
44,330
Income tax (expense) / benefit
9
(4,168)
250
(676)
(165)
Profit / (loss) for the year attributable to:
Profit after tax
Members of National Storage Holdings Limited
Non-controlling interest (unit holders of NSPT)
Profit / (loss) for the year attributable to:
Basic and diluted earnings per stapled
Members of National Storage Holdings Limited
security / unit (cents)
Non-controlling interest (unit holders of NSPT)
20
103,413
7,147
96,266
103,413
43,986
(179)
44,165
43,986
96,266
-
96,266
96,266
44,165
-
44,165
44,165
7,147
20.74
96,266
103,413
(179)
13.06
44,165
43,986
-
19.31
96,266
96,266
-
13.11
44,165
44,165
Basic and diluted earnings per stapled
security / unit (cents)
20
20.74
13.06
19.31
13.11
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.
62
61
62
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
For the year ended 30 June 2017
Consolidated Group
NSPT Group
Notes
2017
$'000
2016
$'000
2017
$'000
2016
$'000
CONSOLIDATED STATEMENTS OF OTHER
COMPREHENSIVE INCOME
Revenue from storage rent
For the year ended 30 June 2017
Rental revenue
Revenue from sale of goods and services
Other revenue
Total revenue
6
Notes
Employee expenses
Premises costs
Profit after tax
Advertising and marketing
Cost of packaging and other products
Other comprehensive income
Management fees - operational
Items that may be reclassified to profit or loss
Other operational expenses
Exchange differences on translation
Finance costs
of foreign operations
Share of profit of joint ventures and
Net gain / (loss) on cash flow hedges
associates
Other comprehensive income / (loss)
Fair value adjustments
for the year, net of tax
Business combination costs
Restructuring and other non-recurring costs
Total comprehensive income for the
year
Profit before income tax
7
7
8
15
11.4
5
105,814
-
6,999
4,689
117,502
2017
$'000
70,574
-
6,651
2,525
79,750
2016
$'000
Consolidated
Group
103,413
43,986
(22,472)
(13,284)
(2,683)
(1,433)
(27)
(7,967)
(24,160)
38
6,403
2,110
76,803
(13,837)
(2,971)
6,441
(15,460)
(8,956)
(1,646)
(954)
(215)
(4,753)
(15,787)
205
(5,176)
1,732
10,025
(4,971)
-
-
-
-
34,894
52,511
-
-
146
258
NSPT Group
35,040
52,769
2016
2017
$'000
$'000
-
-
96,266
-
-
(2,311)
(327)
(15,137)
5
6,403
1,509
73,975
6,408
(13,536)
-
-
(15)
44,165
-
-
(908)
(39)
(7,011)
227
(5,176)
1,732
15,531
(4,949)
-
-
109,854
107,581
39,015 102,674
96,942
43,736
39,216
44,330
Income tax (expense) / benefit
Total comprehensive income for the
year attributable to:
Profit after tax
Members of National Storage Holdings Limited
Unit holders of National Storage Property Trust
Profit / (loss) for the year attributable to:
Members of National Storage Holdings Limited
Non-controlling interest (unit holders of NSPT)
9
(4,168)
250
(676)
(165)
103,413
43,986
96,266
44,165
7,180
102,674
109,854
(201)
-
39,216 102,674
39,015 102,674
7,147
96,266
103,413
(179)
44,165
43,986
-
96,266
96,266
-
39,216
39,216
-
44,165
44,165
Basic and diluted earnings per stapled
security / unit (cents)
20
20.74
13.06
19.31
13.11
The above Consolidated Statements of Profit or Loss should be read in conjunction with the
accompanying notes.
FINANCIAL STATEMENTS
The above Consolidated Statements of Other Comprehensive Income should be read in conjunction
with the accompanying notes.
63
62
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at 30 June 2017
Consolidated Group
2016
$'000
2017
$'000
NSPT Group
2017
$'000
2016
$'000
Notes
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Assets held for sale
Other current assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Investment properties
Investment in joint ventures and
associates
Intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total Assets
LIABILITIES
Current liabilities
Trade and other payables
Finance lease liability
Deferred revenue
Income tax payable
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Finance lease liability
Provisions
Deferred tax liability
Other liabilities
Total non-current liabilities
Total Liabilities
Net Assets
10.1
10.2
11.1
11.2
10.3
10.2
11.3
11.4
13
11.5
9
10.3
10.4
10.7
11.6
11.7
10.6
10.5
10.7
11.7
9
10.6
23,166
11,340
600
5,713
4,309
45,128
13,374
7,329
373
-
2,743
23,819
8,748
58,756
-
5,713
7
73,224
9,367
9,224
-
-
206
18,797
110
1,229
1,330,878
220
1,684
-
-
844,130 1,089,111
-
-
621,030
10,591
45,536
525
3,328
8,441
-
61
-
1,392,197 875,908 1,093,352 629,532
15,101
14,648
125
-
913
-
-
3,328
1,437,325 899,727 1,166,576 648,329
8,778
4,504
11,585
314
2,188
23,760
51,129
6,198
4,425
7,726
152
1,750
14,803
35,054
642
-
138
314
-
23,760
24,854
4,095
-
59
152
-
14,803
19,109
481,770
163,851
1,331
3,368
3,259
284,526
173,823
1,316
136
6,522
653,579 466,323
480,520
-
-
322
3,259
264,726
-
-
-
6,522
484,101 271,248
704,708 501,377
508,955 290,357
732,617 398,350
657,621 357,972
EQUITY
Non-controlling interest (unit holders of NSPT)
Contributed equity
Other reserves
Retained earnings
Total Equity
14
15
664,627
59,145
11
8,834
364,978
31,707
(22)
1,687
732,617 398,350
-
-
299,760
543,476
(6,221)
187
113,958
64,433
657,621 357,972
The above Consolidated Statements of Financial Position should be read in conjunction with the
accompanying notes.
64
63
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
For the year ended 30 June 2017
Consolidated Group
NSPT Group
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the year ended 30 June 2017
Notes
2017
$'000
2016
$'000
2017
$'000
105,814
-
6,999
4,689
117,502
Retained
earnings
$'000
(22,472)
(13,284)
1,687
(2,683)
(1,433)
7,147
(27)
(7,967)
-
(24,160)
7,147
70,574
-
6,651
2,525
79,750
Foreign
currency
translation
reserve
$'000
(15,460)
(8,956)
(22)
(1,646)
(954)
-
(215)
(4,753)
33
(15,787)
6
7
7
8
11.4
5
26,354
2,110
76,803
(13,837)
-
(2,971)
33
1,732
10,025
-
-
-
-
52,511
-
258
Non-
52,769
controlling
interest
$'000
-
-
364,978
-
-
96,266
(2,311)
(327)
6,408
(15,137)
102,674
1,509
73,975
(13,536)
233,646
-
Attributable to securityholders of National Storage REIT
Revenue from storage rent
Rental revenue
Revenue from sale of goods and services
Other revenue
Total revenue
Contributed
equity
$'000
Notes
31,707
-
-
-
Employee expenses
Premises costs
Balance at 1 July 2016
Advertising and marketing
Cost of packaging and other products
Profit for the year
Management fees - operational
Other comprehensive
Other operational expenses
15
income
Finance costs
Total comprehensive
Share of profit of joint ventures and
income
associates
Fair value adjustments
Issue of stapled units through
Business combination costs
institutional and retail placement
Restructuring and other non-recurring costs
Issue of stapled units through
distribution reinvestment plan
Profit before income tax
Issue of stapled units through
vendor scrip issue
Income tax (expense) / benefit
Costs associated with issue of units
Distributions provided for
Profit after tax
or paid
17
897
828
(641)
-
27,438
107,581
-
-
43,736
8,106
96,942
9,003
44,330
9
-
(4,168)
-
103,413
-
-
-
250
-
7,572
(676)
(5,608)
43,986
-
-
96,266
(46,741)
196,975
8,400
(165)
(6,249)
44,165
(46,741)
224,413
2016
$'000
-
34,894
-
146
35,040
Total
Equity
$'000
-
(15)
398,350
-
-
103,413
(908)
(39)
6,441
(7,011)
109,854
1,732
15,531
-
-
260,000
Balance at 30 June 2017
Profit / (loss) for the year attributable to:
Members of National Storage Holdings Limited
Non-controlling interest (unit holders of NSPT)
59,145
Balance at 1 July 2015
31,419
Basic and diluted earnings per stapled
(Loss) / profit for the year
Other comprehensive
security / unit (cents)
income / (loss)
Total comprehensive
income / (loss)
15
20
-
-
-
8,834
11
664,627
732,617
7,147
96,266
103,413
1,866
(179)
20.74
-
(179)
44,165
43,986
-
-
96,266
96,266
352,377
-
44,165
44,165
385,662
-
13.06
(22)
44,165
19.31
(4,949)
43,986
13.11
(4,971)
(179)
(22)
39,216
39,015
Issue of stapled securities through
distribution reinvestment plan
Distributions provided for
or paid
17
288
-
288
-
-
-
-
-
-
2,569
2,857
(29,184)
(26,615)
(29,184)
(26,327)
Balance at 30 June 2016
31,707
1,687
(22)
364,978
398,350
The above Consolidated Statements of Profit or Loss 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.
FINANCIAL STATEMENTS
62
65
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
For the year ended 30 June 2017
Consolidated Group
NSPT Group
Notes
2017
$'000
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(CONTINUED)
Revenue from storage rent
For the year ended 30 June 2017
Rental revenue
Revenue from sale of goods and services
Other revenue
Total revenue
Attributable to unitholders of the National Storage Property Trust Group
105,814
-
6,999
4,689
117,502
2016
$'000
2017
$'000
6
Contributed
7
equity
$'000
299,760
15
Notes
Employee expenses
Premises costs
Advertising and marketing
Balance at 1 July 2016
Cost of packaging and other products
Management fees - operational
Profit for the year
Other operational expenses
Other comprehensive
Finance costs
income
Share of profit of joint ventures and
Total comprehensive
associates
income
Fair value adjustments
Business combination costs
Issue of stapled units through
Restructuring and other non-recurring costs
institutional and retail placement
Issue of stapled units through
Profit before income tax
distribution reinvestment plan
Issue of stapled units
Income tax (expense) / benefit
through vendor scrip issue
Costs associated with issue of units
Profit after tax
Distributions provided for
or paid
17
-
7
8
-
-
11.4
5
233,646
8,106
9
7,572
(5,608)
-
243,716
Profit / (loss) for the year attributable to:
Balance at 30 June 2017
Members of National Storage Holdings Limited
Non-controlling interest (unit holders of NSPT)
543,476
Balance at 1 July 2015
297,191
Retained
(22,472)
earnings
$'000
(13,284)
(2,683)
64,433
(1,433)
(27)
96,266
(7,967)
(24,160)
-
2,110
96,266
76,803
(13,837)
(2,971)
-
107,581
-
(4,168)
-
-
103,413
(46,741)
(46,741)
113,958
7,147
96,266
103,413
49,452
2016
$'000
-
34,894
-
146
35,040
-
Total
$'000
(15)
-
357,972
-
(908)
96,266
(39)
(7,011)
6,408
1,732
102,674
15,531
-
-
233,646
44,330
8,106
(165)
7,572
(5,608)
44,165
(46,741)
196,975
70,574
-
6,651
2,525
79,750
Foreign
currency
translation
(15,460)
reserve
$'000
(8,956)
(1,646)
(954)
(215)
(4,753)
(15,787)
227
-
-
52,511
-
258
52,769
Cash
flow
hedge
-
reserve
$'000
-
-
(6,448)
-
(2,311)
(327)
(15,137)
-
5
6,403
1,732
5
10,025
-
-
6,403
1,509
73,975
(13,536)
-
96,942
(676)
96,266
-
-
-
-
-
-
43,736
250
43,986
-
-
-
-
-
-
232
(179)
44,165
43,986
-
-
(45)
-
96,266
96,266
(1,272)
657,621
-
44,165
44,165
345,371
19.31
-
44,165
13.11
Basic and diluted earnings per stapled
Profit for the year
security / unit (cents)
Other comprehensive
income / (loss)
Total comprehensive
income / (loss)
15
Issue of units through distribution
reinvestment plan
Distributions provided for
or paid
17
-
20
44,165
20.74
13.06
-
-
227
(5,176)
(4,949)
44,165
227
(5,176)
39,216
2,569
-
2,569
-
(29,184)
(29,184)
-
-
-
-
-
-
2,569
(29,184)
(26,615)
Balance at 30 June 2016
299,760
64,433
227
(6,448)
357,972
The above Consolidated Statements of Profit or Loss 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.
62
65
66
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
For the year ended 30 June 2017
Consolidated Group
NSPT Group
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended 30 June 2017
Notes
2017
$'000
2016
$'000
2017
$'000
2016
$'000
Revenue from storage rent
Rental revenue
Revenue from sale of goods and services
Other revenue
Total revenue
Operating activities
Receipts from customers
Payments to suppliers and employees
Employee expenses
Interest received
Premises costs
Income tax paid
Advertising and marketing
Net cash flows from operating
Cost of packaging and other products
activities
Management fees - operational
Other operational expenses
Investing activities
Finance costs
Purchase of investment properties
Share of profit of joint ventures and
Proceeds on sale of investment property
associates
Acquisition of subsidiary and property
Fair value adjustments
portfolio, net of cash acquired
Business combination costs
Return of capital on dissolution of joint
Restructuring and other non-recurring costs
venture
Improvements to investment properties
Purchase of property, plant and
equipment
Income tax (expense) / benefit
Purchase of intangible assets
Investments in associate and joint
venture
Net cash flows used in investing activities
Profit before income tax
Profit after tax
105,814
Consolidated Group
-
2016
6,999
$’000
4,689
117,502
70,574
-
6,651
2,525
79,750
2017
$’000
6
-
52,511
2017
-
$’000
258
52,769
-
34,894
2016
-
$’000
146
35,040
NSPT Group
Notes
7
10.1
7
8
11.4
5
5
13
125,923
(61,355)
(22,472)
683
(13,284)
(155)
(2,683)
(1,433)
(27)
(7,967)
(24,160)
65,096
(303,081)
(141,958)
1,600
2,110
76,803
(13,837)
(2,971)
9,950
(5,571)
107,581
85,676
(36,546)
(15,460)
155
(8,956)
-
(1,646)
(954)
(215)
(4,753)
(15,787)
49,285
(145,597)
-
1,732
10,025
-
-
-
-
(3,801)
43,736
42,205
(2,465)
-
52
-
(155)
-
-
39,637
(2,311)
(327)
(15,137)
(135,159)
1,600
1,509
73,975
(273,138)
(13,536)
-
9,950
(342)
96,942
30,613
(2,083)
-
79
(15)
-
-
-
28,609
(908)
(39)
(7,011)
(132,425)
-
1,732
15,531
-
-
-
-
(462)
44,330
11.3
9
13
(900)
(4,168)
(364)
103,413
(3,330)
(443,654)
250
(1,164)
(739)
43,986
(6,660)
(157,961)
-
(676)
-
96,266
(913)
(398,002)
-
(165)
-
44,165
-
(132,887)
Profit / (loss) for the year attributable to:
Members of National Storage Holdings Limited
Non-controlling interest (unit holders of NSPT)
Financing activities
Proceeds from issue of stapled
securities
Transaction costs on issue of stapled
securities
Distributions paid to stapled security
Basic and diluted earnings per stapled
holders
security / unit (cents)
Proceeds from borrowings
Repayment of borrowings
Financing provided to joint venture
Payment of finance lease liabilities
Financing provided to related party
Interest and other finance costs paid
Net cash flows from financing activities
14
260,000
7,147
96,266
103,413
(6,249)
(179)
-
44,165
43,986
-
-
233,646
96,266
96,266
(5,608)
20
18
20.74
(28,947)
409,291
(210,580)
(5,625)
(12,494)
-
(17,105)
388,291
13.06
(25,572)
160,469
-
-
(12,800)
-
(9,537)
112,560
(28,947)
19.31
408,041
(190,780)
-
-
(41,745)
(16,897)
357,710
-
-
44,165
44,165
-
(25,860)
13.11
140,669
-
-
-
-
(9,070)
105,739
Net increase / (decrease) in cash and
cash equivalents
Net foreign exchange difference
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
9,733
59
13,374
23,166
3,884
(4)
9,494
13,374
(655)
36
9,367
8,748
1,461
44
7,862
9,367
10.1
The above Consolidated Statements of Profit or Loss 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.
FINANCIAL STATEMENTS
62
67
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
1.
CORPORATE INFORMATION
National Storage REIT (“the Consolidated Group” or “NSR”) is 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”).
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 (National
Storage Financial 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 termination
by either entity.
The financial report of NSR for the year ended 30 June 2017 was approved on 22 August 2017, in
accordance with a resolution of the Board of Directors of NSH.
The financial report of NSPT for the year ended 30 June 2017 was approved on 22 August 2017, in
accordance with a resolution of the Board of National Storage Financial Services Limited as the
Responsible Entity for NSPT.
The nature of the operations and principal activities of the Consolidated Group are described in the
Directors' Report.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian
accounting standards and interpretations issued by the Australian Accounting Standards Board and the
Corporations Act 2001. The financial statements have been prepared on a historical cost basis, except
for selected non-current assets, financial assets and financial liabilities for which the fair value basis of
accounting has been applied. Both NSH and NSPT 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 statements are the
same as the 30 June 2016 financial statements 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 ASIC Corporations (Stapled Group
reports) Instruments 2015/838 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.
Deficiency of net current assets
As at 30 June 2017, the Consolidated Group had an excess of current liabilities over current assets of $6m.
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.
67
68
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
Current liabilities also include deferred revenue of $11.6m 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 $61.8m (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 payment
obligations.
(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 2016.
Reference
Title
Application
date of
standard
Application
date for
Group
AASB 2014-3 Amendments to Australian Accounting Standards –
1 January 2016 1 July 2016
Accounting for Acquisitions of Interests in Joint Operations
(AASB 1 and AASB 11)
AASB 2014-4 Clarification of Acceptable Methods of Depreciation and
1 January 2016 1 July 2016
Amortisation (Amendments to AASB 116 and AASB 138)
AASB 2014-9
Amendments to Australian Accounting Standards – Equity
Method in Separate Financial Statements
1 January 2016 1 July 2016
AASB 2015-1 Amendments to Australian Accounting Standards –
1 January 2016 1 July 2016
– Annual Improvements to Australian Accounting
Standards 2012–2014 Cycle
AASB 2015-2 Amendments to Australian Accounting Standards –
1 January 2016 1 July 2016
Disclosure Initiative: Amendments to AASB 101
AASB 2015-5 Amendments to Australian Accounting Standards –
1 January 2016 1 July 2016
Investment Entities: Applying the Consolidation Exception
Adoption 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 2017 are outlined in the following table.
FINANCIAL STATEMENTS
69
Reference
Title
Summary and impact on Group
financial report
AASB 9
Financial
Instruments
AASB 15
Revenue from
Contracts with
Customers
AASB 9 is a new standard which replaces
AASB 139. AASB 9 addresses the
classification, measurement and
derecognition of financial assets and
financial liabilities. 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.
AASB 9 introduces a new expected-loss
impairment model that will require more
timely recognition of expected credit losses.
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.
On adoption of AASB 9, the Group expects
no material changes in the classification of
financial assets and liabilities. The Group
already adopts hedge accounting under
AASB139 for interest rate swaps designated
as a cash flow hedge and a net investment
hedge against foreign currency risk. The
new standard does not materially change
the amounts recognised in relation to
existing arrangements but will simplify the
requirements for measuring hedge
effectiveness and eligibility for applying
hedge accounting. AASB9 is expected to
have no notable impact on the financial risk
and capital management structure
adopted by the Group as detailed in notes
16 and 17. The introduction of the expected
loss impairment model for determining any
provision on trade receivables and other
financial assets is not expected to have a
material impact on the Group’s results.
AASB 15 Revenue from Contracts with
Customers replaces the existing revenue
recognition standards AASB 111
Construction Contracts, AASB 118 Revenue
and related Interpretations.
The core principle of AASB 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
Application
date of
standard
Application
date for
Group
1 January
2018
1 July 2018
1 January
2018
1 July 2018
69
70
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
Reference
Title
Summary and impact on Group
financial report
Application
date of
standard
Application
date for
Group
applying the following steps:
Step 1: Identify the contract(s) with a
customer
Step 2: Identify the performance obligations
in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the
performance obligations in the contract
Step 5: Recognise revenue when (or as) the
entity satisfies a performance obligation
To date, the Group’s focus has been on
evaluating the impact of AASB 15 on
revenue from storage rent which in the
current year represents 90% of total
revenue. The Group has reviewed the
performance obligations under AASB 15
and revenue recognition in this area is
expected to be unchanged under the new
standard.
The Group also recognises revenue from the
sale of goods and services. AASB 15
includes additional guidance to determine
an entity’s role as either principal or agent.
It can occur in some cases that some
revenue streams will no longer qualify as a
principal under the new guidance, but
instead generate commission revenue from
their agent activities. Each of the revenue
streams in this category will be reviewed in
the upcoming financial year. Any
adjustment is likely to be one of
presentation and the Group is currently
quantifying any impact of this change.
Within other revenue, the Group also
recognises revenue from design,
development and project management
fees based upon the achievement of
contractual project milestones. AASB 15
requires the separation of performance
obligations within a contract and
recognition of revenue when a customer
obtains control of a good of service.
Depending on management’s assessment
of the separation or combination of
performance standards under AASB 15
there could be changes in timing of
revenue recognition. The Group is currently
quantifying any impact of this change.
AASB 16 requires lessees to account for all
leases under a single on-balance sheet
model in a similar way to finance leases
under AASB 117 Leases. The standard
includes two recognition exemptions for
leases of ’low-value’ assets and short-term
leases with a term of 12 months or less. At
1 January
2019
1 July 2019
71
AASB 16
Leases
FINANCIAL STATEMENTS
Reference
Title
Summary and impact on Group
financial report
Application
date of
standard
Application
date for
Group
the commencement date of a lease, a
lessee will recognise a liability to make lease
payments (i.e. the lease liability) and an
asset representing the right to use the
underlying asset during the lease term (i.e.
the right-of-use asset).
Lessees will be required to separately
recognise the interest expense on the lease
liability and the depreciation expense on
the right-of-use asset. Lessees will be
required to remeasure the lease liability
upon the occurrence of certain events (e.g.
a change in the lease term). The lessee will
generally recognise the amount of the
remeasurement of the lease liability as an
adjustment to the right-of-use asset.
The Group has conducted a provisional
assessment of the impact of the new
standard. The standard removes the
distinction between operating leases and
finance leases and requires that, where a
lease is identified in a contract, a right-of-
use asset and lease liability is recognised.
The Group anticipates that adoption is likely
to result in the majority of arrangements
currently accounted for as operating leases
being recognised in the consolidated
statement of financial position as right-of-
use assets and liabilities. The Group’s current
commitments under operating leases are
detailed in note 19. Due to the relative size
of these commitments to the Group’s total
assets, adoption of AASB16 is not expected
to have a material impact on the Group’s
financial statements. The Group’s leasehold
investment properties will continue to be
accounted for under AASB140 and will be
unaffected by the application of AASB16.
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 amendments clarify certain
requirements in:
AASB 1 First-time Adoption of Australian
Accounting Standards – deletion of
exemptions for first-time adopters and
addition of an exemption arising from
AASB Interpretation 22 Foreign Currency
Transactions and Advance
Consideration
AASB 12 Disclosure of Interests in Other
1 January
2018
1 July 2018
1 January
2018
1 July 2018
71
72
AASB 2014-10 Amendments to
Australian
Accounting
Standards – Sale
or Contribution of
Assets between
an Investor and
its Associate or
Joint Venture
AASB 2017-1 Amendments to
Australian
Accounting
Standards –
Transfers of
Investments
Property, Annual
Improvements
2014-2016 Cycle
and Other
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
Reference
Title
Summary and impact on Group
financial report
Application
date of
standard
Application
date for
Group
Amendments
Entities – clarification of scope
AASB
Interpretation
22
Foreign Currency
Transactions and
Advance
Consideration
AASB 2016-1 Amendments to
Australian
Accounting
Standards –
Recognition of
Deferred Tax
Assets for
Unrealised Losses
AASB 2016-2 Amendments to
Australian
Accounting
Standards –
Disclosure
Initiative:
Amendments to
AASB 107
IFRIC 23
Uncertainty over
Income Tax
Treatments
1 January
2018
1 July 2018
1 January
2017
1 July 2017
1 January
2017
1 July 2017
1 January
2019
1 July 2019
AASB 128 Investments in Associates and
Joint Ventures – measuring an associate
or joint venture at fair value
AASB 140 Investment Property – change
in use.
The Interpretation clarifies that in
determining the spot exchange rate to use
on initial recognition of the related asset,
expense or income (or part of it) on the
derecognition of a non-monetary asset or
non-monetary liability relating to advance
consideration, the date of the transaction is
the date on which an entity initially
recognises the non-monetary asset or non-
monetary liability arising from the advance
consideration. If there are multiple
payments or receipts in advance, then the
entity must determine a date of the
transactions for each payment or receipt of
advance consideration.
This standard makes amendments to AASB
112 Income Taxes to clarify the accounting
for deferred tax assets for unrealised losses
on debt instruments measured at fair value.
The amendments to AASB 107 Statement of
Cash Flows are part of the IASB’s Disclosure
Initiative and help users of financial
statements better understand changes in
an entity’s debt. The amendments require
entities to provide disclosures about
changes in their liabilities arising from
financing activities, including both changes
arising from cash flows and non-cash
changes (such as foreign exchange gains
or losses).
The Interpretation clarifies the application of
the recognition and measurement criteria in
IAS 12 Income Taxes when there is
uncertainty over income tax treatments.
The Interpretation specifically addresses the
following:
Whether an entity considers uncertain
tax treatments separately
The assumptions an entity makes about
the examination of tax treatments by
taxation authorities
How an entity determines taxable profit,
tax bases, unused tax losses, unused tax
credits and tax rates
How an entity considers changes in
facts and circumstances.
FINANCIAL STATEMENTS
73
Basis of consolidation
The Financial Report of NSR as at 30 June 2017
comprises the consolidated financial statements
of the NSH Group and the NSPT Group.
The consolidated financial statements of NSPT as
at 30 June 2017 comprises the consolidated
financial statements of the NSPT Group.
The financial statements for the Consolidated
Group are prepared on the basis that NSH
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 loses 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
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. The
Consolidated Group has an associate
investment that is accounted for using the
equity method.
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. The
Consolidated Group and NSPT have investments
in joint ventures that 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 consolidated statement of profit
or loss and represents profit or loss after tax and
non-controlling interests in the subsidiaries of
associates or joint ventures.
73
74
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
The financial statements of the associate and
joint venture are prepared for the same
reporting period as the Group. When necessary,
adjustments are made to bring the accounting
policies in line with those of the Group.
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 consolidated
statement of profit or loss.
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 or loss
of joint ventures and associates’ in the
consolidated 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.
(d) 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
received. 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 material 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. The value of discounts
offered to customers at the end of an incentive
period is recognised on a straight-line basis over
the same period.
FINANCIAL STATEMENTS
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.
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.
Other revenue
Design, development, and project
management fees are recognised on the
fulfillment of contractual conditions, and the
achievement of project milestones.
Other 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.
(e)
Taxes
The Consolidated Group comprises taxable and
non-taxable entities. A liability for current and
deferred tax expense is only recognised in
respect of taxable entities that are subject to
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 distribute their taxable
income. NSPT’s subsidiary National Storage New
Zealand Property Trust (“NSNZPT”) is an
Australian registered trust which owns
investment property in New Zealand. For New
Zealand tax purposes NSNZPT is classed as a unit
trust and is subject to New Zealand income tax.
Current income tax
Current income tax assets and liabilities are
measured at the amount expected to be
recovered or paid to the taxation authorities.
75
The tax rates and tax laws used to compute the
amount are those that are enacted or
substantively enacted at the reporting date in
the countries where the Group operates and
generates taxable income.
Current income tax relating to items recognised
directly in equity is recognised in equity and not
in the statement of profit or loss. Management
periodically evaluates positions taken in the tax
returns with respect to situations in which
applicable tax regulations are subject to
interpretation and establishes provisions where
appropriate.
Deferred tax
Deferred tax is provided using the liability
method, on temporary differences arising
between the tax bases of assets and liabilities
and their carrying amounts for financial
reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all
taxable temporary differences, except:
When the deferred tax liability arises from
the initial recognition of goodwill or an asset
or liability in a transaction that is not a
business combination and, at the time of
the transaction, affects neither the
accounting profit nor taxable profit or loss.
In respect of taxable temporary differences
associated with investments in subsidiaries,
associates and interest in joint
arrangements, when the timing of the
reversal of temporary differences can be
controlled and it is probable that the
temporary difference will not reverse in the
foreseeable future.
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.
Deferred tax assets are recognised for all
deductible temporary differences, the carry
forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised to
the extent that it is probable that taxable profit
will be available against which the deductible
temporary differences, and the carry forward of
unused tax credits and unused tax losses can be
utilised, except:
that is not a business combination and, at
the time of the transaction, affects neither
the accounting profit nor taxable profit or
loss.
In respect of deductible temporary
differences associated with investments in
subsidiaries, associates and interests in joint
arrangements, deferred tax assets are
recognised only to the extent that it is
probable that the temporary difference will
not reverse in the foreseeable future and
taxable profit will be available against
which the temporary differences can be
utilised.
The carrying amount of deferred tax assets is
reviewed at each reporting date and adjusted
to the extent that it is probable that sufficient
taxable profit will be available to allow all or
part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply in
the year when the asset is realised or the liability
is settled, based on the tax rates (and laws) that
have been enacted or substantially enacted at
the reporting date.
Deferred tax relating to items recognised
outside profit or loss is recognised outside profit
or loss. Deferred tax items are recognised in
correlation to the underlying transaction either
in other comprehensive income or directly in
equity.
Deferred tax assets and liabilities are offset if a
legally enforceable right to offset current tax
assets and liabilities exists and when the
deferred tax balances relate to the same
taxation authority.
Tax consolidation legislation
NSH 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.
When the deferred tax asset relating to the
deductible temporary difference arises from
the initial recognition of an asset or liability
Goods and services tax (“GST”)
Revenue, expenses, assets, and liabilities are
recognised net of the amount of GST, except:
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When the GST incurred on a sale or
purchase of assets is not payable or
recoverable from the taxation authority, in
which case the GST is recognised as part of
the revenue or expense item or part of the
cost of acquisition of the asset, as
applicable.
When receivables and payables are stated
with the amount of GST included.
The net amount of GST recoverable from, or
payable to, the taxation authority is included as
part of receivables or payables in the statement
of financial position. Commitments and
contingencies are disclosed net of the amount
of GST recoverable from, or payable to, the
taxation authority.
Cash flows are included in the statement of
cash flows on a gross basis and the GST
component of cash flows arising from investing
and financing activities, which is recoverable
from, or payable to, the taxation authority is
classed as part of operating cash flows.
(f)
Foreign currencies
The Group’s consolidated financial statements
are presented in Australian dollars. For each
entity, the Group determines the functional
currency and items included in the financial
statements of each entity are measured using
that functional currency.
Transactions and balances
Transactions in foreign currencies are initially
recorded by the Group’s entities at their
respective functional currency spot rates at the
date the transaction first qualifies for
recognition. Monetary assets and liabilities
denominated in foreign currencies are
translated at the functional currency spot rates
of exchange at the reporting date.
Differences arising on settlement or translation of
monetary items are recognised in profit or loss
with the exception of monetary items that are
designated as part of the hedge of the Group’s
net investment of a foreign operation. These are
recognised in other comprehensive income until
the net investment is disposed of, at which time,
the cumulative amount is reclassified to profit or
loss. Tax charges and credits attributable to
exchange differences on those monetary items
are also recorded in other comprehensive
income.
FINANCIAL STATEMENTS
Non-monetary items that are measured in terms
of historical cost in a foreign currency are
translated using the exchange rates at the
dates of the initial transactions. Non-monetary
items measured at fair value in a foreign
currency are translated using the exchange
rates at the date when the fair value is
determined.
The gain or loss arising on translation of non-
monetary items measured at fair value is treated
in line with the recognition of the gain or loss on
the change in fair value of the item (i.e.
translation differences on items whose fair value
gain or loss is recognised in other
comprehensive income or profit or loss are also
recognised in other comprehensive income or
profit or loss, respectively).
Group companies
On consolidation, the assets and liabilities of
foreign operations are translated into Australian
dollars at the rate of exchange prevailing at the
reporting date and their statements of profit or
loss are translated at exchange rates prevailing
at the dates of the transactions. The exchange
differences arising on translation for
consolidation are recognised in other
comprehensive income. On disposal of a
foreign operation, the component of other
comprehensive income relating to that
particular foreign operation is recognised in
profit or loss.
Any goodwill arising on the acquisition of a
foreign operation and any fair value
adjustments to the carrying amounts of assets
and liabilities arising on the acquisition are
treated as assets and liabilities of the foreign
operation and translated at the spot rate of
exchange at the reporting date.
(g) Business combinations and goodwill
Business combinations are accounted for using
the acquisition method. The cost of an
acquisition is measured as the aggregate of the
consideration transferred, which is measured at
acquisition date fair value, and the amount of
any non-controlling interests in the acquiree. For
each business combination, the Group elects
whether to measure the non-controlling interests
in the acquiree at fair value or at the
proportionate share of the acquiree’s
identifiable net assets. Acquisition related costs
are expensed as incurred and included in
business combination expenses in the statement
of profit or loss.
77
When the Group acquires a business, it assesses
the financial assets and liabilities assumed for
appropriate classification and designation in
accordance with the contractual terms,
economic circumstances and pertinent
conditions as at the acquisition date. This
includes the separation of embedded
derivatives in host contracts by the acquiree.
Any contingent consideration to be transferred
by the acquirer will be recognised at fair value
at the acquisition date. Contingent
consideration classified as an asset or liability
that is a financial instrument and within the
scope of IAS 39 Financial Instruments:
Recognition and Measurement, is measured at
fair value with the changes in fair value
recognised in the statement of profit or loss.
Goodwill is initially measured at cost (being the
excess of the aggregate of the consideration
transferred and the amount recognised for non-
controlling interests and any previous interest
held over the net identifiable assets acquired
and liabilities assumed). If the fair value of the
net assets acquired is in excess of the
aggregate consideration transferred, the Group
re-assesses whether it has correctly identified all
of the assets acquired and all of the liabilities
assumed and reviews the procedures used to
measure the amounts to be recognised at the
acquisition date. If the reassessment still results in
an excess of the fair value of net assets
acquired over the aggregate consideration
transferred, then the gain is recognised in profit
or loss.
After initial recognition, goodwill is measured at
cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill
acquired in a business combination is, from the
acquisition date, allocated to each of the
Group’s cash-generating units that are
expected to benefit from the combination,
irrespective of whether other assets or liabilities
of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-
generating unit (“CGU”) and part of the
operation within that unit is disposed of, the
goodwill associated with the disposed operation
is included in the carrying amount of the
operation when determining the gain or loss on
disposal. Goodwill disposed in these
circumstances is measured based on the
relative values of the disposed operation and
the portion of the CGU retained.
(h)
Leases
The determination of whether an arrangement is
a lease is based on the substance of the
arrangement at the inception of the lease. The
arrangement is, or contains, a lease if fulfilment
of the arrangement is dependent on the use of
a specific asset or assets and the arrangement
conveys a right to use the asset or assets, even if
that right is not explicitly specified in an
arrangement.
The Consolidated Group leases properties which
are classified as investment properties (note
11.4). The Consolidated Group also leases office
premises and 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 liabilities. 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.
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NSPT Group as lessor
Lease income from operating leases where the
group is a lessor is recognised in revenue less
any amount contractually refundable to
customers over the term of lease.
(i)
Cash and cash equivalents
Cash and cash equivalents in the statement of
financial position comprise cash at bank and on
hand and term deposits 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
term deposits as defined above.
(j)
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 10.2 for
further information about the Group’s
accounting for trade receivables and note 16
for a description of the group’s impairment
policies).
(k)
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 the
estimated costs necessary to make the sale.
(l)
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.
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.
FINANCIAL STATEMENTS
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.
Derecognition
Financial assets are derecognised when the
rights to receive cash flows from the financial
assets have expired or have been transferred
and the Group has transferred substantially all
the risks and rewards of ownership. When
79
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.
(m) Derivatives and hedging activities
The Group uses derivative financial instruments,
such as interest rate swaps and a net investment
hedge to hedge its foreign currency and interest
rate risks.
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 10.8. 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
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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
FINANCIAL STATEMENTS
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.
(n)
Property, plant and equipment
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 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 to 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(q)).
Gains and losses on disposals are determined by
comparing proceeds with carrying amount.
These are included in profit or loss.
81
(o)
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
rotational basis every three years, unless the
underlying financing requires or the Directors
determine 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 the 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 derecognition.
Transfers are made to or from investment
property only when there is a change in use. For
a transfer from investment property to property,
plant and equipment the deemed cost for
subsequent accounting is the fair value at the
date of change in use. If property, plant and
equipment 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 lease 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 within payment of finance lease
liabilities within the consolidated statements of
cash flows.
(p)
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
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the expense category that is consistent with the
function of the intangible assets.
Intangible assets with indefinite useful lives, such
as goodwill, are not amortised but are tested for
impairment at each reporting period, either
individually or at the CGU 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
derecognition 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.
Research costs are expensed as incurred.
Development expenditure on an individual
project is recognised as an intangible asset
when the Group can demonstrate:
The technical feasibility of completing the
intangible asset so that the asset will be
available for use or sale
Its intention to complete and its ability and
intention to use or sell the asset
How the asset will generate future
economic benefits
The availability of resources to complete the
asset
The ability to measure reliably the
expenditure during development.
Following initial recognition of the development
expenditure as an asset, the asset is carried at
cost less any accumulated amortisation and
accumulated impairment losses. Amortisation of
the asset begins when development is
complete and the asset is available for use. It is
amortised over the period of expected future
benefit. Amortisation is recorded in other
operational expenses. During the period of
development, the asset is tested for impairment
annually.
(q)
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 have been impaired in previous periods are
reviewed for possible reversal of the impairment
at the end of each reporting 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)
Interest bearing loans and borrowings
Interest bearing loans and borrowings are
initially recognised at fair value, net of
transaction costs incurred. Interest bearing loans
and 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 interest bearing loans and
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.
Interest bearing loans and borrowings are
removed from the balance sheet when the
FINANCIAL STATEMENTS
83
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.
Interest bearing loans and 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 the
acquisition, construction or production of 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 lease agreements, the
Consolidated Group must restore the leased
premises in a number of leasehold premises to its
original condition at lease expiry. A provision has
been recognised for the obligation to remove
leasehold improvements from the leased
premises (note 11.7).
The Consolidated Group has also recognised an
onerous lease provision related to future lease
payments payable on former head office
premises no longer occupied by the Group.
(v)
Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-
monetary benefits, and accumulating annual
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.
Other long-term employee benefits obligations
The Group does not expect its long service
leave benefits to be settled wholly within 12
months of each reporting date. The Group
recognises a liability for long service 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 can direct the Group to make
contributions to a defined contribution plan of
their choice. Contributions to defined
contribution superannuation funds are
recognised as an expense as they become
payable. Prepaid contributions are recognised
as an asset to the extent that a cash refund or a
reduction in the future payments is available.
(w) Contributed equity
Issued and paid up capital is recognised at the
fair value of the consideration received by the
Consolidated Group and the NSPT Group.
83
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NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
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)
Rounding of amounts
The Company and NSPT are of a kind referred to
in ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument
2016/191, relating to the ‘rounding off’ of
amounts in the financial statements. Amounts in
the financial statements have been rounded off
to the nearest thousand dollars, or in certain
cases, the nearest dollar.
(z)
Parent entity financial information
The financial information for the parent entities,
NSH and 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
FINANCIAL STATEMENTS
arising from unused tax losses and unused tax
credits assumed from controlled entities in the
tax consolidated group.
The entities have also entered into a tax funding
agreement under which the wholly-owned
entities fully compensate NSH for any current tax
payable assumed and are compensated by
NSH for any current tax receivable and deferred
tax assets relating to unused tax losses or unused
tax credits that are transferred to NSH under the
tax consolidation legislation. The funding
amounts are determined by reference to the
amounts recognised in the wholly-owned
entities' financial statements. The amounts
receivable/payable under the tax funding
agreement are due upon receipt of the funding
advice from the head entity. 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.
(aa) 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 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
85
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.
All assets and liabilities for which fair value is
measured or disclosed in the financial
statements are categorised within the fair value
hierarchy, 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 10.8
and 11.8.
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 judgements
Classification of joint arrangement
During the year, the NSPT Group acquired a 25%
interest in the Bundall Storage Trust, and the NSH
Group acquired a 25% interest in the Bundall
Commercial Trust. These investments have been
classified as a joint venture as both trusts are
subject to a Securityholders Agreement that has
been contractually structured such that the
parties to the agreement have equal
representation on the advisory board
responsible for the overall direction and
supervision of each trust.
Deferred income tax
Deferred tax assets are recognised by the
Consolidated 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.
Assumptions and estimates are based on
parameters available when the consolidated
financial statements were prepared. Existing
circumstances and assumptions about the
future developments may change due to
market changes or circumstances arising
beyond the control of the Group. 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
85
86
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
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 rotational 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 11.8.
Impairment of non-financial assets – intangibles
An impairment exists when the carrying value of
an asset or 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 the fair
value of the Consolidated Group’s stapled
securities as listed on the Australian Securities
Exchange which has been assessed as one
CGU, less costs of disposal.
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.
Development costs
The Consolidated Group capitalises
development costs for a project in accordance
with the Group’s accounting policy. Initial
capitalisation of costs is based on
management’s judgement that economic
feasibility is confirmed, usually when a product
development project has reached a defined
milestone. In determining the amounts to be
capitalised, management makes
assumptions regarding the expected future
economic benefits of the project.
FINANCIAL STATEMENTS
87
4.
SEGMENT INFORMATION
The Consolidated Group has identified its operating segments based on the internal management
information used by the Group’s executive management team, the Consolidated Group’s chief decision
makers.
The Consolidated Group operates wholly within one business segment being the operation and
management of storage centres in Australia and New Zealand. The operating results presented in the
statements of profit or loss represent the same segment information as reported to the Group’s executive
management team. The Group’s financing is managed on a Group basis and not allocated to operating
segments.
Geographic information
Revenue from external customers
Australia
New Zealand
Total
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2017
$'000
2016
$'000
110,669
6,833
117,502
77,002
2,748
79,750
48,250
4,519
52,769
33,559
1,481
35,040
The revenue information above is based on the location of storage centres.
Geographic information
Consolidated Group
2016
$'000
2017
$'000
NSPT Group
2017
$'000
2016
$'000
Non-current operating assets
Australia
New Zealand
Total
1,302,454
74,895
1,377,349
822,801 1,020,559 578,103
51,429
875,908 1,089,111 629,532
68,552
53,107
Non-current assets for this purpose consists of property, plant and equipment, investment properties and
intangible assets.
The Consolidated Group has no individual customer which represents greater than 10% of total revenue.
87
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NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
5.
BUSINESS COMBINATIONS
Business combination and acquisition of Southern Cross Storage Group
On 30 August 2016, National Storage (Operations) Pty Ltd, a subsidiary of the Consolidated Group
acquired 100% of the share capital of Southern Cross Storage Operations Pty Ltd. National Storage
Property Trust and National Storage Southern Trust, subsidiaries of both the Consolidated Group and NSPT
Group, acquired the investment properties of Southern Cross Storage Trust.
The assets and liabilities assumed as part of this transaction constitute those of a business. On this basis,
the Consolidated Group has determined that this transaction meets the definition of a Business
Combination and accounted for this transaction following the requirements of AASB 3.
The acquisition secured long term ownership of strategically important assets which were complementary
to the Consolidated Group and NSPT Group’s pre-existing property portfolio and already integrated into
the Consolidated Group’s operating platform.
Prior to completion the Consolidated Group and NSPT Group held a 10% interest in the Southern Cross
Storage Group which consisted of Southern Cross Operations Pty Ltd and Southern Cross Storage Trust.
This resulted in a disposal of the investment in a joint venture (see note 13).
Assets acquired and liabilities assumed
The fair value of the identifiable assets and liabilities acquired of the Southern Cross Storage Group as at
the date of acquisition were:
Notes
Consolidated
Group
$'000
Assets
Investment properties
Cash and cash equivalents
Trade and other receivables
Inventories
Deferred tax asset
Other current assets
Liabilities
Trade and other payables
Deferred revenue
Provisions
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
11.5
267,096
1,261
219
138
1,039
241
269,994
(6,639)
(2,681)
(364)
(9,684)
260,310
30,195
290,505
The goodwill of $30.2m represents the premium attached to a portfolio purchase of investment properties
and the expected synergies arising from the acquisition.
From the date of acquisition Southern Cross Storage Operations Pty Ltd contributed $23.1m of revenue
and $2.2m of profit before tax to the Consolidated Group. From the date of acquisition National Storage
Property Trust and National Storage Southern Trust received $11.4m of rental income from Southern Cross
Storage Operations Pty Ltd which contributed to revenue and profit before tax of the Consolidated
Group and NSPT Group.
FINANCIAL STATEMENTS
89
If the combination had taken place at the beginning of the period, revenue for the Consolidated Group
would have been $122m. Due to the terms and conditions agreed at inception of the venture, on wind
up the Group achieved a management performance fee equal to the profit of Southern Cross for the
period 1 July 2016 to the date of acquisition. Therefore, profit before tax for the Consolidated Group
would have been unchanged.
Purchase consideration
Cash and cash equivalents
Total consideration
Analysis of cash flows on acquisition
Transaction costs of the acquisition (included in
cash flows from investing activities)
Net cash acquired with the subsidiary (included in
acquisition of subsidiary and property portfolio,
net of cash acquired per statement of cashflows
Consolidated
Group
$'000
290,505
290,505
13,837
(1,261)
303,081
The acquisition had no elements of contingent consideration.
The Consolidated Group incurred transaction costs of $13.8m which were expensed and are included
within business combination costs in the income statement.
6.
OTHER REVENUE
Other revenue
Interest revenue
Design, development and project
management fees
Other revenue
Total other revenue
Consolidated
Group
2017
$'000
2016
$'000
Notes
8
853
155
1,630
2,206
4,689
1,239
1,131
2,525
NSPT Group
2017
$'000
2016
$'000
52
-
206
258
79
-
67
146
89
90
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017 7.
EXPENSES AND OTHER INCOME
Other operational expenses
Insurance
Professional fees
Communications costs
Information technology costs
Bank charges
Motor vehicle expenses
Depreciation of non-current assets
Amortisation of intangible assets
Other
Total other operational expenses
Employee expenses
Wages and salaries
Post-employment benefits
Other employee costs
Total employee expenses
Minimum lease payments recognised
as an operating lease expense
Fair value adjustments
Investment property – net gain
8.
FINANCE INCOME AND EXPENSES
Notes
11.3
11.5
Consolidated
Group
2017
$'000
1,894
1,353
1,259
924
701
373
309
266
888
7,967
2016
$'000
839
562
946
637
468
247
310
261
483
4,753
17,635
1,621
3,216
22,472
11,978
1,084
2,398
15,460
459
323
NSPT Group
2017
$'000
2016
$'000
-
310
-
-
-
-
-
-
17
327
-
-
-
-
-
-
39
-
-
-
-
-
-
-
39
-
-
-
-
-
11.4
76,803
10,025
73,975
15,531
Finance income
Bank interest
Interest income from related parties
Total finance income
Finance costs
Interest on interest bearing loans and
borrowings
Finance charges on finance leases
Total finance costs
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2017
$'000
2016
$'000
715
138
853
155
-
155
52
-
52
79
-
79
Notes
6
15,345
8,815
24,160
7,546
8,241
15,787
15,137
-
15,137
7,011
-
7,011
FINANCIAL STATEMENTS
91
9.
INCOME TAX
Under current Australian tax legislation, NSPT is not liable to pay income tax provided its taxable income
and taxable realised gains are fully distributed to unit holders. NSPT’s subsidiary National Storage New
Zealand Property Trust (“NSNZPT”) is an Australian registered trust which owns investment property in New
Zealand. For New Zealand tax purposes NSNZPT is classed as a unit trust and is subject to New Zealand
income tax at a rate of 28%. Future distributions from NSNZPT to NSPT may have attached Foreign Income
Tax Offsets, which when subsequently distributed by NSPT may be claimed by an Australian tax resident,
depending on their personal circumstances.
The major components of income tax expense / (benefit) for the years ended 30 June 2017 and 30 June
2016 are:
Consolidated statement of profit or loss
Current tax
Deferred tax
Total income tax expense / (benefit)
Notes
Consolidated
Group
2017
$'000
1,548
2,620
4,168
2016
$'000
152
(402)
(250)
NSPT Group
2017
$'000
2016
$'000
317
359
676
152
13
165
Consolidated statement of other
comprehensive income
Deferred tax relating to items recognised in
other comprehensive income during the year
Net gain / (loss) on revaluation of cash
flow hedges
Deferred tax charged to other
comprehensive income
15
Reconciliation of tax expense and the
accounting profit multiplied by Australia’s
domestic tax rate for 2017 and 2016:
Profit from continuing operations
Deduct profit before tax from Trusts
owning Australian property
Accounting profit / (loss) before
income tax
Tax at the Australian tax rate of 30% (2016 –
30%)
Non-assessable income
Adjustments in respect of previous years
Other non-deductible expenses
Derecognition of previously recognised tax
losses
Effect of lower tax rates in New Zealand
Income tax expense / (benefit)
24
24
(74)
(74)
24
24
(74)
(74)
107,581
43,736
96,942
44,330
(96,248)
(45,579)
(96,248)
(45,579)
11,333
(1,843)
694
(1,249)
3,400
(553)
208
(375)
(240)
27
581
371
29
4,168
-
(241)
514
-
30
(250)
-
(41)
510
-
(1)
676
-
-
514
-
26
165
91
92
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2017
$'000
2016
$'000
(63,626)
66,458
(44,680)
44,204
39
344
(110)
49
Deferred tax expense included in income tax
expense / (benefit) comprises:
(Increase) / decrease in deferred tax assets
Increase in deferred tax liabilities
Deferred tax assets acquired in business
combinations
Movement of deferred tax asset on carry
forward losses shown in current tax expense
Exchange variations
Movement in deferred tax asset recognised in
other comprehensive income
Total deferred tax expense / (benefit)
Deferred tax assets and liabilities
Deferred tax assets
The balance comprises temporary differences
attributable to:
Lease liability
Employee benefits
Accrued expenses
Carry forward losses
Formation expenses
Make-good provision
Revaluation of cash flow hedges
Other
Total deferred tax assets
Deferred tax liabilities
The balance comprises temporary differences
attributable to:
Prepayments
Other receivables
Revaluations of investment properties
Unrealised foreign exchange losses
Total deferred tax liabilities
1,039
(1,232)
5
-
-
-
-
-
-
(24)
2,620
74
(402)
(24)
359
181,333 117,536
623
179
2,462
177
70
74
36
184,783 121,157
620
602
1,973
10
164
50
31
9
47
217
-
187,555 120,944
7
187,626 121,168
15
-
-
-
-
-
-
50
21
71
-
-
391
2
393
Net deferred tax (liability) / asset
(2,843)
(11)
(322)
Reconciliation to statement of financial position
Deferred tax asset
Deferred tax liability
Net deferred tax (liability) / asset
525
(3,368)
(2,843)
125
(136)
(11)
-
(322)
(322)
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 total gross tax losses which arose in Australia of $12,456,902 (2016:
$8,041,665). These losses are available for offsetting against future taxable profits of the NSH Australian
tax group. These losses are subject to the satisfaction of the same business test and a reduced rate of
utilisation under the 'available fraction' rules. The Consolidated Group has assessed the expected
utilisation profile of these tax losses and has recognised a deferred tax asset of $1,418,148 on NSH
Australian group tax losses of $4,727,160 on the basis it is probable that there will be sufficient future
FINANCIAL STATEMENTS
93
-
-
-
74
13
-
-
7
-
-
-
74
29
110
-
-
42
7
49
61
61
-
61
taxable profits in the Group against which this deferred tax asset will be recovered. The NSH Australian
group also has gross tax losses of $7,729,742 for which a deferred tax asset has not been recognised, as
the future utilisation of these losses is more uncertain.
The Consolidated Group has gross tax losses of NZD $2,070,495 (AUD $1,981,879) (2016: NZD $193,799
(AUD: $178,464)) These losses are available indefinitely for offsetting against future taxable profits of
National Storage Limited which arose in New Zealand. The Group has assessed the expected utilisation
profile of these tax losses and has recognised a deferred tax asset of NZD $579,739 (AUD: $554,926) (2016:
NZD $54,264) (AUD: $49,970)). The NSPT Group has no tax losses that are available for offsetting against
future taxable profits of the NSPT Group (2016: none).
10.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES
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 *
Notes
10.1
10.2
10.3
Derivatives used for hedging – at fair value
through other comprehensive income
Other assets
10.3
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2017
$'000
2016
$'000
23,166
11,450
631
35,247
13,374
7,549
970
21,893
8,748
58,756
-
67,504
9,367
9,224
199
18,790
3,328
-
3,328
-
Total financial assets
38,575
21,893
70,832
18,790
Financial liabilities
At amortised cost
Trade and other payables
Interest-bearing loans and
borrowings
Finance leases
10.4
8,778
6,198
642
4,095
10.5
10.7
481,770
168,355
658,903
284,526
178,248
468,972
480,520
-
481,162
264,726
-
268,821
Derivatives used for hedging – at fair value
through other comprehensive income
Other liabilities
10.6
3,425
6,522
3,425
6,522
Total financial liabilities
662,328
475,494
484,587
275,343
*Excluding prepayments
Other liabilities for the Consolidated Group and NSPT Group include a distribution payable of $23.6m
(2016: $14,.8m) not included in the table above.
93
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NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
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.
10.1. Cash and cash equivalents
Current assets
Cash on hand
Cash at bank
Total cash and cash equivalents
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2017
$'000
2016
$'000
41
23,125
23,166
30
13,344
13,374
-
8,748
8,748
-
9,367
9,367
Cash at bank 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
2017
$'000
2016
$'000
NSPT Group
2017
$'000
2016
$'000
Profit after income tax
Income tax expense / (benefit)
Profit before tax
103,413
4,168
107,581
43,986
(250)
43,736
96,266
676
96,942
44,165
165
44,330
Adjustments to reconcile profit before tax to
net cash flows:
Depreciation and amortisation
Amortisation of intangible assets
Impairment of assets included within
restructuring and other non-recurring costs
Fair value adjustment to investment
properties
Share of profit of joint venture
Finance income
Finance costs
Business combination costs
Changes in operating assets and liabilities:
Increase in receivables
Increase in inventories
(Increase) / decrease in other assets
Increase in payables
Increase in deferred revenue
Increase in provisions
Cash flows from operating activities
Interest received
Income tax paid
309
266
633
310
261
-
-
-
-
-
-
-
(76,803)
(2,110)
(853)
24,160
13,837
(10,025)
(1,732)
(155)
15,787
-
(73,975)
(1,509)
(52)
15,137
13,536
(15,531)
(1,732)
(79)
7,011
-
(3,518)
(89)
(991)
879
1,178
89
64,568
(3,357)
(73)
-
2,614
1,326
438
49,130
(10,587)
-
119
50
79
-
39,740
(7,985)
-
-
2,457
59
-
28,530
683
(155)
155
-
52
(155)
79
-
Net cash flows from operating activities
65,096
49,285
39,637
28,609
FINANCIAL STATEMENTS
95
10.2.
Trade and other receivables
Current
Trade receivables
Provision for doubtful debts
Notes
Other receivables
Receivables from related parties
18
Non-current
Other receivables
Consolidated
Group
2017
$'000
2,291
(42)
2,249
2,390
6,701
11,340
2016
$'000
1,517
-
1,517
2,095
3,717
7,329
NSPT Group
2016
$'000
2017
$'000
-
-
-
-
-
-
319
58,437
58,756
285
8,939
9,224
110
220
-
-
Total current and non-current
11,450
7,549
58,756
9,224
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.
Impairment of receivables
The provision for impairment (doubtful debts) of receivables represents an estimate of trade debtors that
are not considered to be recoverable. At 30 June 2017 the Consolidated Group recognised a provision
for trade receivables relating to receivables acquired on the purchase of investment properties and via a
business combination where there are specific risks around recoverability. At 30 June 2016 the
Consolidated Group recognised no provision for trade receivables. As at 30 June 2017 and 30 June 2016
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
Recognised on acquisition of investment properties /
business combination
Utilised
At 30 June
The age of trade receivables not impaired was as follows:
0 to 3 months
3 to 6 months
Over 6 months
2017
$'000
-
-
238
(196)
42
2017
$'000
1,570
331
348
2,249
2016
$'000
-
-
-
-
-
2016
$'000
1,236
232
49
1,517
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.
95
96
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
10.3. Other assets
Current
Deposits
Prepayments
Non-current
Financial assets (derivatives)
Consolidated
Group
2017
$'000
631
3,678
4,309
3,328
2016
$'000
970
1,773
2,743
NSPT Group
2017
$'000
2016
$'000
-
7
7
199
7
206
-
-
3,328
Total current and non-current
7,637
2,743
3,335
206
All derivatives have been designated as cash flow 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
derivatives above relate to interest rate swaps held by the Consolidated Group and NSPT Group, for
further details see note 10.5.
10.4.
Trade and other payables
Current
Trade payables
Accrued expenses
GST and employment taxes payable
Other payables
Related party payables
Notes
18
Consolidated
Group
2017
$'000
530
5,951
1,301
996
-
2016
$'000
403
2,615
935
2,245
-
NSPT Group
2016
$'000
2017
$'000
-
537
77
28
-
-
2,003
-
1,707
385
Total
8,778
6,198
642
4,095
Trade payables are unsecured and are usually paid within 30 days of recognition. Other payables and
accruals are paid when amounts fall due. The carrying amounts of trade and other payables are
assumed to be the same as their fair values, due to their short-term nature.
10.5.
Interest-bearing loans and borrowings
Non-current
Bank finance facility
Non-amortised borrowing costs
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2017
$'000
2016
$'000
484,615
(2,845)
286,073
(1,547)
483,365
(2,845)
266,273
(1,547)
Total interest-bearing loans and borrowings
481,770
284,526
480,520
264,726
The Consolidated Group and NSPT Group has non-current borrowing facilities denominated in Australian
Dollars (“AUD”) and New Zealand Dollars (“NZD”).
The major terms of these agreements are as follows:
FINANCIAL STATEMENTS
97
The facility limits are AUD $455m (2016: $280m) and NZD $96m (AUD $91.5m) (2016: NZD $46m (AUD
$44m) of which AUD $417.5m (2016: $242.1m), and NZD $70.5m (AUD $67.2m) (2016: NZD $46m (AUD
$44m)) was drawn at the year end.
Maturity dates on the facilities range from 23 December 2019 to 23 December 2026 (2016: 23
December 2019 to 23 July 2023).
All facilities are interest only facilities with any drawn balances payable at maturity.
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 $3m that was undrawn at 30 June
2017 and 30 June 2016. During the year, the Consolidated Group and NSPT Group refinanced part of the
existing debt portfolio via an institutional term loan.
The Consolidated Group and the NSPT Group have complied with the financial covenants of their
borrowing facilities during the 2017 and 2016 reporting periods (see note 17). The fair value of interest
bearing loans and borrowings approximates carrying value. Details of the exposure to risk arising from
current and non-current interest bearing loans and borrowings are set out in note 16.
Interest rate swaps
The Consolidated Group and NSPT Group have AUD $410m (2016: $140m), and NZD $53.5m (AUD $50.1m)
(2016: NZD $23.5m (AUD $22.5m)) of current and future interest rate hedges in place as at the end of the
reporting period with maturity dates ranging from 22 December 2017 to 23 September 2026 (2016: 23
December 2016 to 23 December 2024).
Under this arrangement the Consolidated Group and the NSPT Group pay a fixed rate of interest of 2.29%
(2016: 3.05%) and receive interest at a variable rate equal to BBSY plus a margin on the notional amount.
The swaps are 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.
Hedge of net investments in foreign operations
Included in interest bearing loans and borrowings at 30 June 2017 was a borrowing of NZD $23.1m (AUD
$22m) which has been designated as a hedge of the net investments against the value of investment
property held in New Zealand (2016: NZD $13m, (AUD $12.4m)). This borrowing is being used to hedge the
Group’s exposure to the NZD foreign exchange risk on these investments. Gains or losses on the
retranslation of this borrowing are transferred to other comprehensive income to offset any gains or losses
on translation of the net investments in the subsidiaries. There is no ineffectiveness in the years ended 30
June 2017 or 30 June 2016.
10.6. Other liabilities
Current
Distribution payable
Financial liabilities (derivatives)
Total current
Non-current
Financial liabilities (derivatives)
Consolidated
Group
2017
$’000
2016
$’000
NSPT Group
2017
$’000
2016
$’000
23,594
166
23,760
14,803
-
14,803
23,594
166
23,760
14,803
-
14,803
Notes
17
10.8
10.8
3,259
6,522
3,259
6,522
Total current and non-current
27,019
21,325
27,019
21,325
For details on the classification of derivatives see note 10.3.
97
98
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
10.7.
Finance leases
The Consolidated Group has finance leases for investment. 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
2017
2016
Minimum
payments
$'000
Present
value of
payments
$'000
Minimum
payments
$'000
Present
value of
payments
$'000
12,885
4,504
13,694
4,425
53,240
241,941
308,066
(139,711)
22,800
141,051
168,355
-
57,708
249,973
321,375
(143,127)
23,896
149,927
178,248
-
168,355
168,355
178,248
178,248
The NSPT Group’s investment properties are leased to entities within the NSH Group under long-term
finance leases (see note 11.4).
10.8.
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 10.1 to 10.7. 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, adjusted for counterparty or own credit risk.
The resulting fair value estimates for interest rate swaps are included in level 2.
FINANCIAL STATEMENTS
99
Consolidated Group and NSPT Group
At 30 June 2017
Derivative used for hedging - interest
rate swap
Non-current financial assets
Current financial liabilities
Non-current financial liabilities
Consolidated Group and NSPT Group
At 30 June 2016
Derivative used for hedging - Interest
rate swap
Non-current financial liabilities
Notes
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
10.3
10.6
10.6
-
-
-
-
3,328
(166)
(3,259)
(97)
-
-
-
-
3,328
(166)
(3,259)
(97)
10.6
-
(6,522)
-
(6,522)
There were no transfers between levels of fair value hierarchy during the year ended 30 June 2017.
11.
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 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.
11.1.
Inventories
Consolidated
Group
2017
$’000
2016
$’000
NSPT Group
2017
$’000
2016
$’000
Finished goods - at lower of cost and
net realisable value
600
373
-
-
11.2. Assets held for sale
Current assets
Opening balance at 1 July
Items reclassified from freehold
investment property
Total assets held for sale
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2016
$'000
2017
$'000
-
5,713
5,713
-
-
-
-
5,713
5,713
-
-
-
Notes
11.4
On 19 October 2016, the Consolidated Group and NSPT Group entered into a contractual agreement for
the sale of the land and buildings of the Croydon self-storage centre for $5.8m, less cost of sale of $0.1m.
100
99
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
This has resulted in an unrealised gain of $0.8m from the assets’ carrying value within freehold investment
property at 30 June 2016. This has been included within fair value adjustments in the statement of profit or
loss. The transaction is expected to settle in February 2018.
As a result of the transaction the asset has been reclassified from investment property to current assets
held for sale.
11.3. Property, plant and equipment
At cost
Accumulated depreciation
Total property, plant and equipment
Consolidated
Group
2017
$'000
2016
$'000
1,748
(519)
1,229
2,589
(905)
1,684
NSPT Group
2016
$'000
2017
$'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:
Notes
Plant and equipment
Carrying amount at beginning of the year
Additions
Items reclassified as investment
property
Depreciation
Impairment of assets on restructuring*
Effect of movement in foreign exchange
Carrying amount at end of the year
11.4
Consolidated
Group
2017
$'000
1,684
900
(464)
(309)
(592)
10
1,229
2016
$'000
832
1,164
-
(310)
-
(2)
1,684
NSPT Group
2016
$'000
2017
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*Presented within restructuring costs in the consolidated statements of profit or loss.
Plant and equipment under finance lease arrangements included in the totals noted above are as
follows:
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2016
$'000
2017
$'000
Leasehold plant and equipment at cost
Accumulated depreciation
Carrying amount
-
-
-
51
(26)
25
-
-
-
-
-
-
FINANCIAL STATEMENTS
101
11.4.
Investment properties
Investment properties at valuation
Leasehold investment properties
Freehold investment properties
Investment property at cost
Freehold investment property
under construction
Total investment properties
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2017
$'000
2016
$'000
Notes
11.8
11.8
226,955 218,430
1,101,860 625,700
-
-
1,087,048 621,030
2,063
-
1,330,878 844,130
2,063
-
1,089,111 621,030
5
Leasehold investment properties
Opening balance at 1 July
Property acquired through
business combinations*
Other property acquisitions
Improvements to investment properties
Items reclassified from freehold investment
properties
Items reclassified to freehold investment
properties
Reassessment of lease terms
Finance lease diminution, presented as fair
value adjustments
Other fair value adjustments
Closing balance at 30 June
218,430 125,304
10,809
8,317
497
-
83,241
1,431
1,200
-
(4,303)
(10,823)
(5,715)
19,675
(3,586)
6,414
(4,559)
(947)
226,955 218,430
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5
Freehold investment properties at valuation
Opening balance at 1 July
Property acquired through
business combinations
Other property acquisitions
Property disposals
Improvements to investment properties
Items reclassified to leasehold
investment properties
Items reclassified from leasehold
investment properties
Items reclassified from property,
plant and equipment
Items reclassified to assets held for
sale
Net gain from fair value adjustments
Effect of movement in foreign exchange
Closing balance at 30 June
11.3
11.2
625,700 467,100
621,030 465,293
260,900
-
140,497 132,645
-
(1,600)
2,370
4,736
259,602
-
140,730 137,437
-
(2,800)
462
422
(1,200)
-
4,303
5,715
464
-
-
-
-
-
-
-
(5,713)
73,975
(202)
-
15,531
2,339
1,101,860 625,700
(5,713)
73,975
(198)
-
15,531
2,307
1,087,048 621,030
Freehold investment property under construction at cost
-
Opening balance at 1 July
2,063
Property acquisitions
2,063
Closing balance at 30 June
-
-
-
-
2,063
2,063
-
-
-
101
102
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
Gains for the year in profit or loss
(recognised in fair value adjustments)
Realised gains
Unrealised gains
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2017
$'000
2016
$'000
750
76,053
76,803
-
10,025
10,025
750
73,225
73,975
-
15,531
15,531
*Represents acquisition of leasehold investment property of $6,196,000 plus net gross up of $4,613,000 relating to the
adoption of investment property accounting under AASB 140.
Included within net gain from fair value adjustment for freehold investment properties is a realised gain of
$750,000 and an unrealised gain of $779,000 relating to the contracted divestment of self-storage centres
during the period. As a result of this divestment one investment property has been reclassified to assets
held for sale and is recorded at fair value within current assets (see note 11.2).
Leasing arrangements
Leasehold and freehold investment properties are held for lease to customers requiring self-storage
facilities and are carried at fair value. These 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. 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 11.8.
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
Total
11.5.
Intangible assets
Goodwill
Opening net book value
Arising through business
combinations
Closing net book value
Other intangible assets
Opening net book value
Additions
Amortisation
Impairment
Closing net book value
Notes
5
7
Consolidated
Group
2017
$'000
2016
$'000
13,759
13,759
30,195
43,954
-
13,759
889
1,000
(266)
(41)
1,582
411
739
(261)
-
889
Total intangible assets
45,536
14,648
FINANCIAL STATEMENTS
NSPT Group
2017
$'000
57,392
167,517
389,751
614,660
2016
$'000
42,415
123,229
158,505
324,149
NSPT Group
2016
$'000
2017
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
103
Goodwill is an asset acquired through business combinations. As described in note 5, during the period
the Consolidated Group recognised $30.2m of goodwill on the acquisition of Southern Cross Storage
Group.
Impairment testing of goodwill
Goodwill has been allocated to the listed group (NSR). Management have determined that the listed
group, which is considered one operating segment (see note 4), is the appropriate CGU against which to
allocate these intangible assets owing to the synergies arising from combining the portfolios of the NSH
Group, NSPT Group, and Southern Cross Storage 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 2017 NSR had
512,913,914 stapled securities quoted on the Australian Securities Exchange at $1.51 per security
providing a market capitalisation of $774.5m. This amount is in excess of the carrying amount of the
Consolidated Group’s net assets. Had the security price decreased by 5% the market capitalisation
would still have been in excess of the carrying amount.
11.6. Deferred revenue
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2016
$'000
2017
$'000
Deferred rent revenue
11,585
7,726
138
59
In the Consolidated Group, deferred rent revenue represents funds received in advance from customers
for rental storage. In the NSPT Group, deferred rent revenue relates to rental income received in advance
from sub-tenants within investment properties.
11.7. Provisions
Current
Onerous operating lease
Annual leave
Long service leave
Non-current
Make good provision
Onerous operating lease
Long service leave
Consolidated
Group
Notes
2017
$'000
353
1,069
766
2,188
1,030
67
234
1,331
2016
$'000
-
1,072
678
1,750
990
-
326
1,316
223
-
757
10
-
990
NSPT Group
2017
$'000
2016
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
104
103
Reconciliation of movement in make good provisions
Opening balance
Arising on business combination
Arising on acquisition of leasehold
investment properties
Provision raised
Unwinding of discount and changes
in discount rates
Closing balance
5
990
364
-
-
(324)
1,030
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
The Consolidated Group has recognised an onerous lease provision related to future operating lease
payments payable on former head office premises no longer occupied by the Group
The Consolidated Group is required to restore the leased premises in a number of leasehold properties 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.
11.8. Non-financial assets fair value measurement
The group has classified its non-financial assets into the three levels prescribed in note 10.8 to provide an
indication about the reliability of inputs used to determine fair value.
Notes
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Consolidated Group
At 30 June 2017
Assets held for sale
Leasehold investment properties
Freehold investment properties
At 30 June 2016
Leasehold investment properties
Freehold investment properties
NSPT Group
At 30 June 2017
Assets held for sale
Leasehold investment properties
Freehold investment properties
At 30 June 2016
Leasehold investment properties
Freehold investment properties
11.2
11.4
11.4
11.4
11.4
11.2
11.4
11.4
11.4
11.4
Recognised fair value measurements
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,713
-
-
5,713
-
226,955
5,713
226,955
1,101,860 1,101,860
1,328,815 1,334,528
-
-
-
218,430
625,700
844,130
218,430
625,700
844,130
5,713
-
-
5,713
-
-
5,713
-
1,087,048 1,087,048
1,087,048 1,092,761
-
-
-
-
621,030
621,030
-
621,030
621,030
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. During the year ended 30 June 2017 the Consolidated
Group and NSPT Group transferred $5.7m from level 3 to level 2 following the reclassification of an asset
from freehold investment properties to assets held for sale as detailed in note 11.2.
In the year ended 30 June 2016 there were no transfers in and out of level 3.
Fair value measurements using significant observable inputs (level 2)
The fair value of assets held for sale is determined using valuation techniques which maximise the use of
observable market data. For the year ended 30 June 2017, the Consolidated Group and NSPT has valued
assets classified at held for sale at the contractually agreed sales price less estimated cost of sale.
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.
FINANCIAL STATEMENTS
105
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 rotational 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 the NSH Group Board. The valuations are determined using the same
techniques and similar estimates to those applied by the independent valuer.
In previous financial years, independent valuations were obtained at both 31 December and 30 June
financial reporting periods. For the 2017 financial year, the Consolidated Group and NSPT Group have
elected to obtain independent valuations for a proportion of the portfolio at 30 June financial year end.
This is consistent with the valuation cycle applied by other real estate investment trusts.
The Directors’ valuations are applied to all investment properties which have not been valued by an
independent valuer in the preceding 12 months. The carrying value of investment properties which have
been independently valued within this timescale have been maintained at the independent valuation,
unless there is evidence of impairment.
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
Consolidated Group
NSPT Group
External
valuation %
Internal
valuation %
External
valuation %
Internal
valuation %
Year ended 30 June 2017
Leasehold
Freehold
15%
38%
Year ended 30 June 2016
Leasehold
Freehold
50%
24%
85%
62%
50%
76%
-
38%
-
24%
-
62%
-
76%
The Consolidated Group and NSPT Group also obtained external valuations on 12 freehold investment
properties and 1 leasehold property acquired during the reporting period. These external valuations
provide the basis of the Directors valuations applied to these properties at 30 June 2017. Including these
valuations, 57% of freehold investment properties, and 31% of leasehold properties were subject to
external valuations during the year.
Valuation inputs and relationship to fair value
Description
Valuation
technique
Significant unobservable
inputs
Range at 30
June 2017
Range at 30
June 2016
Investment
properties -
leasehold
Capitalisation
method
Primary capitalisation rate
Secondary capitalisation rate
Sustainable occupancy
Stabilised average EBITDA
9% to 26%
9% to 26%
76% to 93%
$489,073
Investment
properties -
freehold
Capitalisation
method
Primary capitalisation rate
Secondary capitalisation rate
Sustainable occupancy
Stabilised average EBITDA
7% to 10%
7% to 12%
75% to 95%
$947,512
9% to 26%
10% to 28%
73% to 92%
$446,015
7% to 11%
8% to 12%
73% to 96%
$949,054
Under the income capitalisation method, a property’s fair value is estimated based on the stabilised
average earnings before interest, tax, depreciation and amortisation (“EBITDA”) generated by the
105
106
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
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 primary capitalisation rate is used to discount future cashflows to present value based upon an
investment property’s current occupancy and EBITDA. The secondary capitalisation rate is used to
discount to present value additional cashflows generated at sustainable occupancy and stabilised
average EBITDA. The secondary capitalisation rate is typically higher than the primary capitalisation rate
to reflect the additional risk associated with these cashflows.
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 EBITDA 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 EBITDA 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 EBITDA.
Investment properties are valued on a highest and best use basis. The current use of all of the investment
properties (self-storage) is considered to be the highest and best use.
The following tables present the sensitivity of the fair values of investment property to changes in input
assumptions.
At 30 June 2017:
Unobservable inputs
Primary capitalisation rate
Secondary capitalisation
rate
Sustainable occupancy
Stabilised average EBITDA
At 30 June 2016:
Leasehold
Freehold
Increase/
(decrease)
in input
Increase/
(decrease)
In fair value
$’000
Increase/
(decrease)
in input
Increase/
(decrease)
in fair value
$’000
1% / (1%)
(3,200) / 5,290
1% / (1%)
(107,140) / 139,950
2% / (2%)
(1,220) / 3,320
2% / (2%)
(31,860) / 50,320
5% / (5%)
5% / (5%)
9,210 / (5,290)
2,210 / (2,720)
5% / (5%)
5% / (5%)
102,400 / (78,350)
46,080 / (46,350)
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 capitalisation rate
Secondary capitalisation
rate
Sustainable occupancy
Stabilised average EBITDA
1% / (1%)
(3,247) / 4,008
1% / (1%)
(53,627) / 69,302
2% / (2%)
(1,266) / 1,458
2% / (2%)
(15,431) / 23,979
5% / (5%)
5% / (5%)
2,606 / (2,498)
1,515 / (1,715)
5% / (5%)
5% / (5%)
25,048 / (24,765)
21,965 / (21,765)
FINANCIAL STATEMENTS
107
12.
INFORMATION RELATING TO SUBSIDIARIES
The holding entities
The ultimate holding company of the NSH Group is National Storage Holdings Limited. 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 2017 include:
Name of controlled entity
Place of incorporation
National Storage (Operations) Pty Ltd
National Storage Financial Services Limited
Wine Ark Pty Ltd
Southern Cross Storage Operations Pty Ltd*
National Storage Investments Pty Ltd
National Storage Limited
Australia
Australia
Australia
Australia
Australia
New Zealand
*Acquired on 30 August 2016
The consolidated financial statements of the NSPT Group include:
Name of Controlled Entity
Place of domicile
National Storage Investment Trust
National Storage Victorian Property Trust
National Storage New Zealand Property Trust*
National Storage Southern Trust
NS APAC Trust**
Australia
Australia
Australia
Australia
Australia
Equity interest
2016
100%
100%
100%
10%
100%
100%
2017
100%
100%
100%
100%
100%
100%
Equity interest
2016
100%
100%
100%
100%
100%
2017
100%
100%
100%
100%
0%
* NSNZPT is an Australian registered trust which holds investment property in New Zealand
** NS APAC Trust was dissolved on 31 March 2017.
Joint ventures and associates
The NSH Group holds a 24.9% interest in the Australia Prime Storage Fund (2016: 24.9%).
The NSH Group holds a 25% interest in the Bundall Commercial Trust (2016: nil)
The NSPT Group holds a 25% interest in the Bundall Storage Trust (2016: nil)
13.
INTEREST IN JOINT VENTURES AND ASSOCIATES
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2016
$'000
2017
$'000
15,101
6,709
8,441
6,709
1,350
1,980
-
6,660
-
913
-
-
2,110
1,732
1,509
1,732
(9,950)
10,591
-
15,101
(9,950)
913
-
8,441
Opening balance at 1 July
Capital contribution / acquisition of
shareholding in associate
Acquisition of shareholding in joint venture
Share of profit from associate and
joint ventures
Return of capital on dissolution of joint
venture
Closing balance at 30 June
Interest in an associate
The Consolidated Group holds a 24.9% holding in the Australia Prime Storage Fund (“APSF”). APSF is a
partnership with Universal Self Storage to facilitate the development and ownership of multiple premium
108
107
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
grade self-storage centres in select cities around Australia. During the year the Consolidated Group
invested a further $1.4m in units of APSF as part of a capital raise conducted by the fund to finance
further development opportunities. As a result of this investment the Consolidated Group’s holding
remained at 24.9%.
APSF is in the process of developing multiple storage centres in Australia, the first two of which opened
during the financial year ended 30 June 2017. Once open the storage centres operate under the
National Storage brand and are managed by National Storage (Operations) Pty Ltd. In the year ended
30 June 2017 National Storage (Operations) Pty Ltd earned fees of $389,000 from APSF associated with
the design, development, financing of the construction process, and ongoing management of centres
(see note 18).
The associate had no contingent liabilities or capital commitments at 30 June 2017 or 30 June 2016.
Investment in joint ventures
As described in note 5, on 30 August 2016, the Consolidated Group purchased the share capital of
Southern Cross Storage Operations Pty Ltd and the investment properties of Southern Cross Storage Trust.
Prior to completion the Consolidated Group and NSPT Group held a 10% interest in the Southern Cross
Storage Group which consisted of Southern Cross Storage Operations Pty Ltd and Southern Cross Storage
Trust. This resulted in a disposal of the investment in the joint venture.
During the year, the NSPT Group acquired a 25% interest in the Bundall Storage Trust, and the NSH Group
acquired a 25% interest in the Bundall Commercial Trust. Following this investment, the Bundall Storage
Trust and Bundall Commercial Trust purchased land in the Gold Coast, Queensland. The land is proposed
to be developed for the construction of a storage centre and upgrade to existing commercial units.
Neither the Bundall Storage Trust and Bundall Commercial Trust are listed on any public exchange.
These investments have been classified as a joint venture as both trusts are subject to a Securityholders
Agreement that has been contractually structured such that the parties to the agreement have equal
representation on the advisory board responsible for the overall direction and supervision of each trust.
The Bundall Storage Trust and Bundall Commercial Trust had no contingent liabilities or capital
commitments at 30 June 2017.
14.
CONTRIBUTED EQUITY
Issued and paid up capital
Ordinary shares
Units
Number of stapled securities on Issue
Opening balance at 1 July
Institutional and retail
placement
Distribution reinvestment plan
Scrip issue on investment property
acquisition
Closing balance at 30 June
FINANCIAL STATEMENTS
Consolidated Group
2016
$'000
2017
$'000
NSPT Group
2017
$'000
2016
$'000
59,145
-
59,145
31,707
-
31,707
-
543,476
543,476
-
299,760
299,760
Consolidated Group
2017
No. of
stapled
securities
336,422,143
2016
No. of
stapled
securities
334,456,409
NSPT Group
2017
2016
No. of
units
336,422,143
No. of
units
334,456,409
164,557,412
6,144,051
-
1,965,734
164,557,412
6,144,051
-
1,965,734
5,790,308
512,913,914
-
336,422,143
5,790,308
512,913,914
-
336,422,143
109
As at 30 June 2017 and 30 June 2016 the number of stapled securities on issue were equivalent to the
number of issued NSH shares and NSPT units. The issued units of NSPT are not owned by NSH and therefore
are shown under non-controlling interest in the statement of financial position.
Capital raise
During the year the Consolidated Group undertook a fully underwritten $260m equity raising, comprising
a $101m institutional placement and a $159m pro-rata accelerated non-renounceable entitlement offer
of new stapled securities in NSR. This resulted in the issue of 164,557,412 new stapled securities.
Distribution reinvestment plan
During the year 6,144,051 (2016: 1,965,734) stapled securities were issued to security holders participating
in the Consolidated Group’s Distribution Reinvestment Plan for consideration of $9m (2016: $2.8m). The
stapled securities were issued at the volume weighted average market price of the Group's stapled
securities over a period of 10 trading days commencing on and including the 15th trading day prior to the
distribution payment date less a 2% discount.
Scrip issue on investment property acquisition
During the year 5,790,308 stapled securities were issued as part of the consideration payable for the
acquisition of freehold investment property. The amount of consideration that was paid by the way of
stapled securities was $8.4m. The stapled securities were issued at the volume weighted average market
price of the Consolidated Group's stapled securities over a period of 10 trading days commencing on 8
June 2017 less a 2.5% discount.
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 unit 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
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NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
15.
OTHER RESERVES
Foreign currency translation reserve
Opening balance at 1 July
Net Investment hedging
Foreign exchange translation differences
Closing balance at 30 June
Cash flow hedge reserve
Opening balance at 1 July
Revaluation of derivates
Taxation impact on revaluation
Closing balance at 30 June
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2016
$'000
2017
$'000
(22)
-
33
11
-
-
-
-
-
-
(22)
(22)
227
(103)
108
232
-
(724)
951
227
-
-
-
-
(6,448)
6,427
(24)
(45)
(1,272)
(5,250)
74
(6,448)
Other reserves
11
(22)
187
(6,221)
Taxation impact on revaluation applies only to cash flow hedges held in NSNZPT, a sub-trust of NSPT,
which is subject to New Zealand tax legislation. Deferred tax does not apply to any other cash flow
hedges held in the NSPT Group under current Australian tax 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(m). 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 outlines 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 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.
FINANCIAL STATEMENTS
111
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:
Interest rate swaps designated as
cash flow hedges presented in:
Non-current assets
Current liabilities
Non-current liabilities
Net liability
Notes
10.3
10.6
10.6
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2016
$'000
2017
$'000
3,328
(166)
(3,259)
(97)
-
-
(6,522)
(6,522)
3,328
(166)
(3,259)
(97)
-
-
(6,522)
(6,522)
Classification of derivatives
All derivatives have been designated as cash 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(m). For hedged forecast transactions that result in the recognition of a non-financial asset, the Groups
have elected to include related hedging gains and losses in the initial measurement of the cost of the
asset.
Fair value measurement
For information about the methods and assumptions used in determining fair values of derivatives refer to
note 10.8.
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.
The sensitivity analysis in the following sections relate to the position as at 30 June in 2017 and 30 June
2016. The sensitivity analysis has been prepared on the basis that the amount of net debt, the ratio of
fixed to floating interest rates of debt and derivatives and the proportion of financial instruments in
foreign currencies are all constant on the basis of hedge designations in place at 30 June 2017.
The analysis excludes the impact of movements in market variables on provisions and the non-financial
assets and liabilities of foreign operations.
The following assumptions have been made in calculating sensitivity analysis:
The sensitivity of the relevant statement of profit or loss item is the effect of the assumed changes in
respective market risks. This is based on the financial assets held at 30 June 2017 and 30 June 2016
including the effect of hedge accounting.
The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges
and hedges of a net investment in a foreign subsidiary at 30 June 2017 for the effects of the assumed
changes of the underlying risk.
111
112
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
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 manages its interest rate risk by having a balanced
portfolio of fixed and variable rate loans and borrowings. To manage this, the Group enter into interest
rate swaps, in which it agrees 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 2017, after taking into account the effect of interest rate swaps, 55.3% (2016: 41.8%) of the
Consolidated Group’s and 55.5% (2016: 44.9%) of the NSPT Group’s borrowings are at a fixed rate of
interest.
Interest rate sensitivity
The following table demonstrates the sensitivity to a possible change in interest rates on the portion of
loans and borrowings affected, after the impact of hedge accounting. With all other variables held
constant, the Consolidated Group’s and the NSPT Group’s profit before tax is affected through the
impact on floating rate borrowings, as follows:
2017
Australian dollar dominated debt
New Zealand dollar dominated debt
Australian dollar dominated debt
New Zealand dollar dominated debt
2016
Australian dollar dominated debt
New Zealand dollar dominated debt
Australian dollar dominated debt
New Zealand dollar dominated debt
Consolidated Group
Increase/
decrease
in basis
points
Effect on
profit
before
tax
$'000
NSPT Group
Increase/
decrease
in basis
points
Effect on
profit
before
tax
$'000
+50
+50
-50
-50
+50
+50
-50
-50
(992)
(212)
992
212
(660)
(180)
660
180
+50
+50
-50
-50
+50
+50
-50
-50
(982)
(212)
982
212
(561)
(180)
561
180
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently
observable market environment.
Foreign currency risk
Foreign currency risk is the risk that the fair value of future cash flows of an exposure will fluctuate
because of changes in foreign exchange rates. The Consolidated Group’s exposure to the risk of
changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or
expense is denominated in a foreign currency), and the Group’s net investment in foreign subsidiaries.
The NSPT exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s net
investment in foreign subsidiaries.
The Consolidated Group and the NSPT Group hedges its exposure to fluctuations on the translation into
Australian dollars of its foreign operations by holding net borrowings in foreign currencies.
FINANCIAL STATEMENTS
113
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in New Zealand Dollar
exchange rate with all other variables held constant. The impact on the Consolidated Group’s and the
NSPT Group’s profit before tax is due to changes in the fair value of monetary assets and liabilities. The
impact on the Consolidated Group’s and the NSPT Group’s pre-tax equity is due to net investment
hedges.
2017
2016
Consolidated Group
NSPT Group
Effect on
profit
before tax
$'000
52
(58)
Effect on
pre-tax
equity
$'000
(494)
481
Effect on
profit
before tax
$'000
(7)
8
Effect on
pre-tax
equity
$'000
(465)
514
9
(10)
452
(500)
27
(30)
441
(487)
Change in
NZD rate
+5%
-5%
+5%
-5%
The movement in the pre-tax effect is a result of a change in the fair value of the monetary assets and
liabilities denominated in NZD, where the functional currency of the entity is a currency other than NZD.
The movement in pre-tax equity arises from changes in NZD borrowings (net of cash and cash
equivalents) in the hedge of net investments in New Zealand operations and cash flow hedges. These
movements will offset the translation of New Zealand operations’ net assets into AUD.
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 receivables predominantly relate to the Consolidated Group entities, National Storage
(Operations) Pty Ltd and National Storage Limited.
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 2017 and 30 June 2016 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 and New Zealand. As at 30 June 2017 a provision of $42,000 has
been recognised relating to the increased credit risk associated with customer balances acquired via
the acquisition of investment properties which were not subject to the same terms and conditions as the
Consolidated Group’s storage agreement.
The NSPT Group’s customer credit risk is managed by renting the majority of properties to the NSH Group
entities: National Storage (Operations) Pty Ltd, Southern Cross Storage Operations Pty Ltd, and National
Storage Limited. Other non-related parties also have rented facilities at some NSPT investment properties.
These rental revenues are not significant compared with related party rental revenues and overall credit
risk is considered low.
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 exposure to credit
risk relating to receivables at the end of the financial year refer to note 10.2.
113
114
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
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 2017 and 30 June 2016 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, 22, and
23). Such guarantees are only provided in exceptional circumstances and are subject to specific Board
approval.
Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The
objective of managing liquidity risk is to ensure, as far as possible, 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 (loans)
Expiring beyond one year (loans)
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2016
$'000
2017
$'000
3,000
-
61,844
64,844
3,000
-
137,920
140,920
3,000
-
61,844
64,844
3,000
-
137,290
140,290
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without
notice. All other 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 10.5 and note 17.
Maturity of financial liabilities
The tables below summarises the maturity profile of the Consolidated Group and NSPT Group’s financial
liabilities based on contractual undiscounted payments.
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.
FINANCIAL STATEMENTS
115
Consolidated Group
At 30 June 2017
Non-derivatives
Trade and other
payables
Interest bearing loans
and borrowings
Finance leases
Distribution payable
Total non-derivatives
Derivatives
Inflows
Outflows
Total derivatives
At 30 June 2016
Non-derivatives
Trade and other
payables
Interest bearing loans
and borrowings
Finance leases
Distribution payable
Total non-derivatives
Derivatives
Inflows
Outflows
Total derivatives
NSPT Group
At 30 June 2017
Non-derivatives
Trade and other
payables
Interest bearing loans
and 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
201
-
-
-
201
-
-
-
8,577
-
-
-
8,778
4,339
3,191
23,594
39,701
12,876
9,695
-
22,571
357,119
53,240
-
410,359
196,932
241,941
-
438,873
571,266
308,067
23,594
911,705
-
410
410
(70)
937
867
(1,445)
2,136
691
(2,215)
344
(1,871)
(3,730)
3,827
97
201
40,111
23,438
411,050
437,002
911,802
167
-
-
-
167
-
-
-
167
On
demand
$'000
5,981
50
-
-
6,198
2,558
3,427
14,803
26,769
7,592
10,267
-
17,909
115,398
57,708
-
173,106
212,305
249,973
-
462,278
337,853
321,375
14,803
680,229
-
269
269
-
590
590
-
3,683
3,683
-
1,295
1,295
-
5,837
5,837
27,038
18,499
176,789
463,573
686,066
Less than
3 months
$'000
3 to 12
months
$'000
1 to 5
years
$'000
Over 5
years
$'000
Total
$'000
-
-
-
-
-
-
-
-
642
-
-
-
642
4,329
23,594
28,565
12,845
-
12,845
355,742
-
355,742
196,932
-
196,932
569,848
23,594
594,084
-
410
410
(70)
937
867
(1,445)
2,136
691
(2,215)
344
(1,871)
(3,730)
3,827
97
28,975
13,712
356,433
195,061
594,181
115
116
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
At 30 June 2016
Non-derivatives
Trade and other
payables
Interest bearing loans
and 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
-
-
-
-
-
-
-
-
4,045
50
-
-
4,095
2,373
14,803
21,221
7,042
-
7,092
112,452
-
112,452
191,612
-
191,612
313,479
14,803
332,377
-
269
269
-
590
590
-
3,683
3,683
-
1,295
1,295
-
5,837
5,837
21,490
7,682
116,135
192,907
338,214
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.
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 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 assets less cash and short term deposits and finance lease liabilities. The
Consolidated Group’s target is to keep the gearing ratio between 25% and 40%. Net debt includes
interest bearing loans and borrowings, less cash and short-term deposits.
Interest bearing loans
Less: cash and short term deposits
Net Debt
Notes
10.5
10.1
Total assets
Less cash and short term deposits
Less finance lease liabilities
10.7
Consolidated
Group
2017
$'000
2016
$'000
NSPT Group
2017
$'000
2016
$'000
484,615
(23,166)
461,449
286,073
(13,374)
272,699
483,365 266,273
(9,367)
(8,748)
474,617 256,906
1,437,322
(23,166)
(168,355)
1,245,801
899,727
(13,374)
(178,248)
708,105
1,166,576 648,329
(9,367)
(8,748)
-
-
1,157,828 638,962
Gearing ratio
37%
39%
41%
40%
FINANCIAL STATEMENTS
117
Loan covenants
Financial covenants under the terms of the borrowing agreement requires the Consolidated Group to
ensure that the gearing ratio does not exceed 55% and the ratio of operating earnings before interest,
tax, depreciation and amortisation to finance costs must exceed a multiple of two. The Consolidated
Group has complied with these covenants throughout the reporting period.
Dividends and distributions
Distributions have been made and declared as noted below.
Unit distributions
NSPT interim distribution of 4.6 cents per unit paid
on 27 February 2017 (2016: 4.3 cents per unit)
NSPT final distribution of 4.6 cents per unit payable
on 30 August 2017 (2016: 4.4 cents per unit)
NSPT Group
2017
$'000
2016
$'000
23,147
14,381
23,594
46,741
14,803
29,184
There are no proposed distributions not recognised as a liability for the year ended 30 June 2017.
The Directors of NSH have not declared an interim or final dividend for the year ending 30 June 2017.
Franking credit balance
Franking credits available for subsequent financial
years based on a tax rate of 30% (2016: 30%)
Consolidated Group
2016
$'000
2017
$'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.
The NSPT Group does not have franking credits as distributions are paid from NSPT which is not liable to
pay income tax provided all taxable income is distributed.
117
118
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
18.
RELATED PARTY TRANSACTIONS
The following tables provide the total amount of transactions that have been entered into with related
parties for the relevant financial years.
Transactions with Related Parties –
Consolidated Group
Southern Cross Storage Operations
Pty Ltd*
Southern Cross Storage Trust
Australia Prime Storage Fund
Bundall Commercial Trust
Bundall Storage Trust
Transactions with Related Parties –
NSPT Group
National Storage Holdings Limited
National Storage (Operations) Pty
Ltd
Southern Cross Storage Operations
Pty Ltd*
Revenue
from related
parties
$
310,536
2,419,150
Purchases
from
related
parties
$
-
-
100,000
-
388,941
444,459
456,772
-
398,391
-
-
-
-
-
-
-
-
-
Amount
owed by
related
parties
$
-
3,344,606
-
-
221,115
372,053
3,494,272
-
2,985,891
-
Amount
owed to
related
parties
$
-
-
-
-
-
-
-
-
-
-
Revenue
from
related
parties
Purchases
from
related
parties
$
-
-
$
-
-
Amount
owed by
related
parties
$
49,201,085
6,960,507
47,050,482
32,697,698
410,435
300,226
11,370,000
-
-
-
-
-
-
-
Amount
owed to
related
parties
$
-
-
-
379,493
-
-
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
National Storage Financial Services
Limited
2017
2016
-
-
966,433
388,821
109,047
-
-
5,611
National Storage Limited
2017
2016
3,697,968
1,434,280
-
-
9,126,721
1,978,178
-
-
*Southern Cross Storage Operations Pty Ltd is classified as a related party of the Consolidated Group until 30 August
2016 and is a related party for the NSPT Group for the full year ended 30 June 2017.
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.
As at 30 June 2017, National Storage Investments Pty Ltd, a subsidiary of NSH had receivables outstanding
of $3,037,500 with the Bundall Commercial Trust and $2,587,500 with the Bundall Storage Trust relating to
FINANCIAL STATEMENTS
119
amounts drawn down under a facility agreement between the entities. The facility agreement has a term
of 5 years, and is interest bearing on commercial rates. The receivables have been classed as a current
receivable in the statement of financial position as this receivable is expected to be repaid within 12
months of 30 June 2017. As at 30 June 2017 National Storage Investments Pty Ltd also recognised
receivables of $456,772 with the Bundall Commercial Trust and $398,891 relating to other fees and
accrued interest outstanding at the year end.
All other outstanding balances at the year-end are unsecured and interest free. There have been no
guarantees provided or received for any related party receivables or payables. For the years ended 30
June 2017 and 30 June 2016, the Consolidated Group has not recorded any impairment of receivables
relating to amounts owed by related parties.
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Consolidated Group
2016
$'000
2,641
185
207
3,033
2017
$'000
3,342
228
255
3,825
2016
$'000
NSPT Group
2017
$'000
-
-
-
-
-
-
-
-
The amounts disclosed in the table are the amounts recognised as an expense during the reporting
period relating to key management personnel. Detailed remuneration disclosures are provided in the
remuneration report which is included in the Directors’ Report.
19.
COMMITMENTS AND CONTINGENCIES
Capital commitments
As at 30 June 2017 the Consolidated Group and the NSPT Group held a commitment to purchase the
freehold of an investment property in Perth, Western Australia for $6.2m. This commitment is subject to
the fulfillment of a number of contractual conditions by the property vendor.
As at 30 June 2017 the Consolidated Group and the NSPT Group also held a commitment to purchase a
commercial storage facility, currently under construction in Melbourne, Victoria for $4.4m.
There was no other 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 and other equipment with terms expiring under various time periods. The
NSPT Group does not have any operating lease commitments.
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable
as follows:
Within one year
Later than one year but not later than five years
Later than five years
Finance lease commitments
For details of finance lease commitments see note 10.7.
Consolidated Group
2016
$’000
334
405
-
739
2017
$’000
591
1,334
121
2,046
119
120
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
Contingent liabilities
For information about guarantees given by entities within the group, including the parent entity, see
notes 22 and 23.
20.
EARNINGS PER STAPLED SECURITY (“EPS”)
Basic earnings per stapled security 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 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.
Basic and diluted earnings per stapled
security / unit
Reconciliation of earnings used in
calculating earnings per stapled
security / unit
Consolidated Group
NSPT Group
2017
cents
2016
cents
2017
cents
2016
cents
20.74
13.06
19.31
13.11
$’000
$’000
$’000
$’000
Net profit attributable to members
103,413
43,986
96,266
44,165
Weighted average number of securities
for basic and diluted earnings per
stapled security
498,524,137 335,129,606
498,524,137
335,129,606
No. of
securities
No. of
securities
No. of units
No. of units
The weighted average number of securities / units for the year ending 30 June 2016 used to calculate
basic and diluted earnings per share has been restated for the effect of stapled securities / units issued in
the current year ending 30 June 2017 under the institutional and retail placement, distribution
reinvestment plan and vendor scrip issue.
FINANCIAL STATEMENTS
121
21.
AUDITORS’ 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
2017
$
2016
$
NSPT Group
2017
$
2016
$
An audit or review of the financial report of the
entity and any other group entity
525,342
385,334
50,000
30,375
Other services in relation to the entity and any
other group entity
Tax compliance
Assurance related
Other
Total auditors’ remuneration
50,350
145,976
34,037
755,705
22.
INFORMATION RELATING TO THE PARENT ENTITIES
Summary financial information
87,225
28,060
- 109,482
34,037
524,974 221,579
52,415
51,663
-
19,130
101,168
The individual financial statements for NSH and NSPT, the parent entities, show the following aggregate
amounts:
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Cash flow hedge reserve
Foreign currency translation reserve
Retained earnings
(Loss) / profit after tax
Total comprehensive income
Distributions provided for or paid
Guarantees entered into by the parent entities
NSH
2017
$’000
2016
$’000
NSPT
2017
$’000
2016
$’000
99,174
106,047
60,203
64,508
41,539
57,400
-
-
(15,861)
41,539
(7,205)
(7,205)
-
48,757
36,821
178,600
55,626 1,084,372 576,135
14,393
19,037
475,847 258,517
34,329
608,525 317,618
21,297
37,247
29,953
-
-
(8,656)
21,297
(3,516)
(3,516)
-
543,470 299,762
(6,264)
(724)
24,844
608,525 317,618
76
(827)
65,806
34,726
87,703
(46,741)
37,074
35,589
(29,184)
The Consolidated Group and NSPT Group’s parent entities have provided financial guarantees in respect
of bank overdrafts and loans of subsidiaries amounting to $484.6m (2016: $286.1m), secured by registered
mortgages over the freehold and leasehold investment properties of the subsidiaries.
The Consolidated Group’s parent entity has also provided bank guarantees of $8.1m (2016: $6,5m) in the
event of lease payment default to third party lessors.
In addition, there are cross guarantees given by National Storage Holdings Limited, 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.
121
122
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
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 2017 or 30 June 2016.
Contractual commitments
As at 30 June 2017 NSPT held a commitment to purchase the freehold of an investment property in Perth,
Western Australia for $6.2m. This commitment is subject to the fulfillment of a number of contractual
conditions by the property vendor.
As at 30 June 2017 NSPT also held a commitment to purchase a commercial storage facility, currently
under construction, in Melbourne, Victoria for $4.4m.
At 30 June 2017, NSH had no contractual commitments not recognised as liabilities in the Statement of
Financial Position.
23.
DEED OF CROSS GUARANTEE
National Storage Holdings Limited, National Storage (Operations) Pty Ltd and National Storage Pty Ltd
are parties to a deed of cross guarantee under which each company guarantees the debts of the
others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to
prepare a financial report and Directors’ report under Class Order 98/1418 (as amended) issued by the
Australian Securities and Investments Commission.
Set out below is a consolidated statement of comprehensive income and statement of financial position
of the entities that are members of the Closed Group.
Consolidated statement of comprehensive income
Profit / (loss) from continuing operations before income tax
Income tax (expense) / benefit
Profit / (loss) after tax
Retained earnings at the beginning of the year
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
Intangibles
Total non-current assets
Total assets
FINANCIAL STATEMENTS
2017
$'000
8,203
(3,747)
4,456
1,171
5,627
2016
$'000
(1,403)
351
(1,052)
2,154
1,102
2017
$'000
2016
$'000
11,433
20,725
444
4,195
36,797
3,064
13,310
351
2,524
19,249
110
1,154
426,962
78,360
1,366
507,952
220
1,145
402,624
7,685
747
412,421
544,749
431,670
123
Liabilities
Current liabilities
Trade and other payables
Finance lease liability
Deferred revenue
Provisions
Total current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Finance lease liability
Provisions
Deferred tax liability
Total non-current liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Retained profits
Total equity
2017
$'000
2016
$'000
96,499
4,338
8,175
1,772
110,784
9,444
4,376
7,405
1,728
22,953
1,250
363,930
947
3,057
369,184
19,800
354,583
1,316
142
375,841
479,968
398,794
64,781
32,876
59,154
5,627
64,781
31,707
1,169
32,876
24.
EVENTS AFTER REPORTING PERIOD
No subsequent events have occurred since the reporting date and the issue date of the annual report
which require disclosure in the financial statements.
123
124
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
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 2017 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 2017 and of its performance for the year ended on that date;
and
complying with Accounting Standards and the Corporations Regulations
2001;
(b)
the financial statements and notes also comply with International Financial
Reporting Standards as disclosed in note 2(b); and
(c) with reference to note 2(a) in the financial statements, there are reasonable
grounds to believe that the Consolidated Group will be able to pay its debts as
and when they become due and payable.
(d) 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.
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 2017.
On behalf of the Board,
Andrew Catsoulis
Managing Director
Laurence Brindle
Director
22 August 2017
Brisbane
FINANCIAL STATEMENTS
125
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of National Storage Financial 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
2017 are in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the NSPT Group’s financial position as at 30
June 2017 and of its performance for the year ended on that date; and
complying with Accounting Standards and the Corporations Regulations
2001;
(b)
the financial statements and notes also comply with International Financial
Reporting Standards as disclosed in note 2(b); and
(c) with reference to note 2(a) in the financial statements, there are reasonable
grounds to believe that NSPT will be able to pay its debts as and when they
become due and payable.
2.
This declaration has been made after receiving the declarations required to be made
to the Directors of National Storage Financial 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 2017.
On behalf of the Responsible Entity,
Laurence Brindle
Chairman
22 August 2017
Brisbane
Andrew Catsoulis
Managing Director
125
126
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
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 Audit of the Financial Report
Opinion
We have audited the financial report of National Storage REIT comprising National Storage Holdings
Limited and National Storage Property Trust and the entities they controlled during the year
(collectively National Storage REIT), which comprises:
the consolidated statements of financial position as at 30 June 2017;
the consolidated statements of comprehensive income, statements of changes in equity and
statements of cash flows for the year then ended;
notes to the financial statements, including a summary of significant accounting policies; and
the directors' declaration;
of National Storage Holdings Limited and National Storage Property Trust.
In our opinion, the accompanying financial report of National Storage REIT is in accordance with the
Corporations Act 2001, including:
a)
b)
giving a true and fair view of National Storage Holdings Limited’s and National Storage Property
Trust’s financial positions as at 30 June 2017 and of their financial performance for the year
ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of National Storage REIT in accordance with the
auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
FINANCIAL STATEMENTS
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
1. Acquisition of Southern Cross (applicable to both National Storage Holdings Limited and
National Storage Property Trust)
Why significant
How our audit addressed the key audit matter
The acquisition of Southern Cross Storage
Operations Pty Ltd (‘Southern Cross’)
represented the largest single acquisition of
storage centres undertaken by National Storage
REIT (‘NSR’) during the year, resulting in the
acquisition of 26 new centres at a total cost of
$293m.
For this acquisition, NSR made a purchase price
allocation in which the consideration was
allocated to the various assets and liabilities of
the acquired company. This is outlined in note 5
to the financial report. The audit of the purchase
price allocation is a key audit matter given the
magnitude of the acquisition amount, as well as
given significant judgment is required to
determine the allocation of the purchase price to
investment properties, deferred tax assets and
goodwill.
We performed the following audit procedures:
We read and assessed the purchase
agreements and the Group’s position paper
on the purchase price allocation and
determination of the consideration paid;
We assessed whether the accounting for the
acquisition complied with Australian
Accounting Standard - AASB 3 Business
Combinations;
With respect to our audit procedures on the
fair value of the investment properties
acquired we refer to key audit matter 2 –
“Investment property valuation”;
We evaluated the suitability of the valuation
methodology and assessed the inputs to
calculate the recognition and recoverability
of the Group’s deferred tax assets with
involvement from our taxation specialists;
We assessed the adequacy of the Group's
disclosures relating to the acquisition of
Southern Cross; and
With respect to our audit procedures on
goodwill we refer to key audit matter 3 –
“Carrying value of goodwill”.
127
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
2. Investment property valuation (applicable to both National Storage Holdings Limited and
National Storage Property Trust)
Why significant
How our audit addressed the key audit matter
Approximately 96% of the Group’s total assets is
comprised of investment properties. These
assets are carried at fair value, which is assessed
by the directors with reference to either external
independent property valuations or internal
valuations, and based on market conditions
existing at reporting date.
This is considered a key audit matter due to the
number of judgments required in determining fair
value. These judgments include assessing the
capitalisation rates, discount rates, market rent
rates and forecast occupancy levels.
Disclosure of investment properties and the
related significant judgments are included in
notes 2 (o), 11.4 and 11.8 to the financial
report.
We obtained and evaluated a sample of both the
external independent valuations and the valuations
prepared by the Group. We performed the following
procedures with involvement from our real estate
valuation specialists:
We assessed the valuation methodologies, the
competence of the valuers, the independence
of the external valuers, and the assumptions
used in the valuations;
We tested a sample of the source data used in
the valuations by agreeing the source data to
supporting tenancy schedules;
We performed testing of the clerical accuracy
and calculation methodology of the internal
valuation model, including assessing key
valuation inputs with reference to those
applied by the external valuation experts and
current period market transactions, as well as
performing sensitivity analysis; and
We considered the adequacy of the valuation
methods and principles disclosed in Note 2 (o)
Investment Properties, Note 11.4 ‘Investment
Properties’ and Note 11.8 ‘Non-financial assets
fair value measurement’.
FINANCIAL STATEMENTS
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3. Carrying value of goodwill (applicable to National Storage Holdings Limited)
Why significant
How our audit addressed the key audit matter
The goodwill balance of $44.0 million, relates to
the acquisition of portfolios of investment
properties purchased in the previous and current
periods. The goodwill is tested for impairment by
an annual impairment review. No impairment
charge has been recorded against these balances
in the current financial year as disclosed in Note
11.5. The fair value less cost of disposal
assessment used to support the continued
carrying amount of goodwill involves the
application of subjective judgment about future
business performance and the application of
valuation methodologies in accordance with
Australian Accounting Standards.
In performing our procedures:
We obtained and understood the Group’s
impairment testing and assessed that it was
in compliance with the requirements of
Australian Accounting Standard - AASB 136
Impairment of Assets;
We assessed the Group’s appropriateness in
respect of the determination of CGUs to
which the goodwill is allocated;
We evaluated the suitability of the valuation
methodology and validated the inputs to
calculate the fair value less costs of disposal;
We performed a sensitivity analysis over the
significant inputs of the valuation model
disclosed in note 11.5; and
We considered the adequacy of the
disclosures in note 11.5 to the financial
report.
Information Other than the Financial Report and Auditor’s Report
The directors are responsible for the other information. The other information comprises the
information included in the National Storage REIT 2017 Annual Report, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
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129
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
Responsibilities of the Directors for the Financial Report
Responsibilities of the Directors for the Financial Report
The directors of National Storage REIT 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
The directors of National Storage REIT are responsible for the preparation of the financial report that
Responsibilities of the Directors for the Financial Report
Act 2001 and for such internal control as the directors determine is necessary to enable the
gives a true and fair view in accordance with Australian Accounting Standards and the Corporations
preparation of the financial report that gives a true and fair view and is free from material
Act 2001 and for such internal control as the directors determine is necessary to enable the
The directors of National Storage REIT are responsible for the preparation of the financial report that
misstatement, whether due to fraud or error.
preparation of the financial report that gives a true and fair view and is free from material
gives a true and fair view in accordance with Australian Accounting Standards and the Corporations
misstatement, whether due to fraud or error.
Act 2001 and for such internal control as the directors determine is necessary to enable the
In preparing the financial report, the directors are responsible for assessing National Storage REIT’s
preparation of the financial report that gives a true and fair view and is free from material
ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and
In preparing the financial report, the directors are responsible for assessing National Storage REIT’s
misstatement, whether due to fraud or error.
using the going concern basis of accounting unless the directors either intend to liquidate National
ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and
Storage REIT or to cease operations, or have no realistic alternative but to do so.
using the going concern basis of accounting unless the directors either intend to liquidate National
In preparing the financial report, the directors are responsible for assessing National Storage REIT’s
Storage REIT or to cease operations, or have no realistic alternative but to do so.
ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and
Auditor's Responsibilities for the Audit of the Financial Report
using the going concern basis of accounting unless the directors either intend to liquidate National
Auditor's Responsibilities for the Audit of the Financial Report
Storage REIT or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
Auditor's Responsibilities for the Audit of the Financial Report
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
audit conducted in accordance with the Australian Auditing Standards will always detect a material
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
audit conducted in accordance with the Australian Auditing Standards will always detect a material
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
if, individually or in the aggregate, they could reasonably be expected to influence the economic
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
decisions of users taken on the basis of this financial report.
if, individually or in the aggregate, they could reasonably be expected to influence the economic
audit conducted in accordance with the Australian Auditing Standards will always detect a material
decisions of users taken on the basis of this financial report.
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
if, individually or in the aggregate, they could reasonably be expected to influence the economic
judgment and maintain professional scepticism throughout the audit. We also:
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
decisions of users taken on the basis of this financial report.
judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
Identify and assess the risks of material misstatement of the financial report, whether due to
judgment and maintain professional scepticism throughout the audit. We also:
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
detecting a material misstatement resulting from fraud is higher than for one resulting from
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
Identify and assess the risks of material misstatement of the financial report, whether due to
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
detecting a material misstatement resulting from fraud is higher than for one resulting from
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
override of internal control.
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
override of internal control.
detecting a material misstatement resulting from fraud is higher than for one resulting from
Obtain an understanding of internal control relevant to the audit in order to design audit
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
Obtain an understanding of internal control relevant to the audit in order to design audit
override of internal control.
opinion on the effectiveness of the Group’s internal control.
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
estimates and related disclosures made by the directors.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
opinion on the effectiveness of the Group’s internal control.
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
estimates and related disclosures made by the directors.
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
and, based on the audit evidence obtained, whether a material uncertainty exists related to
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
and, based on the audit evidence obtained, whether a material uncertainty exists related to
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
to the date of our auditor’s report. However, future events or conditions may cause the Group
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
to cease to continue as a going concern.
to the date of our auditor’s report. However, future events or conditions may cause the Group
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
to cease to continue as a going concern.
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
Evaluate the overall presentation, structure and content of the financial report, including the
to the date of our auditor’s report. However, future events or conditions may cause the Group
disclosures, and whether the financial report represents the underlying transactions and events
Evaluate the overall presentation, structure and content of the financial report, including the
to cease to continue as a going concern.
in a manner that achieves fair presentation.
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
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
FINANCIAL STATEMENTS
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
A member firm of Ernst & Young Global Limited
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131
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 46 to 55 within the directors' report for
the year ended 30 June 2017.
In our opinion, the Remuneration Report of National Storage REIT for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of National Storage REIT 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.
Ernst & Young
Ric Roach
Partner
Brisbane
22 August 2017
FINANCIAL STATEMENTS
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
133
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 2017 unless stated below:
(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
Total
holders
657
1,349
1,013
1,588
119
4,726
There were 194 holders of less than a marketable parcel of stapled securities, representing 11,600 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
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd (DRP)
Leyshon Investments (Australia) Pty Ltd (Bryan Family Investment A/C)
Storcat Pty Ltd (Andrew Catsoulis Family A/C)
BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)
Mortome Pty Ltd (Hoeksema Property A/C)
Palomere Pty Ltd (Peter Edward Greer Family A/C)
Capital Business Park (Holdings) Pty Ltd
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
Stowaway Self Storage Pty Ltd (Catsoulis Development A/C)
Merill Lynch (Australia) Nominees Pty Limited (MLPRO A/C)
HSBC Custody Nominees (Australia) Limited – GSCO ECA
BNP Paribas Noms (NZ) Ltd
Stowaway Self Storage Pty Ltd (Catsoulis Family A/C)
HSBC Custody Nominees (Australia) Limited – A/C 2
Brindle Super Pty Ltd (The Brindle Super Fund A/c)
Green 9 Pty Ltd (Michael Berry Family A/c)
Unquoted equity securities
There are no unquoted securities.
Stapled Securities
Number
held
259,257,319
71,213,270
20,052,441
17,567,457
11,128,384
7,448,980
6,673,469
6,376,791
5,790,308
5,586,735
4,520,000
4,117,302
2,932,388
2,744,300
2,543,289
1,843,881
1,811,224
1,715,503
1,342,120
1,020,408
435,685,569
Percentage
of issued
securities
50.55
13.88
3.91
3.43
2.17
1.45
1.30
1.24
1.13
1.09
0.88
0.80
0.57
0.54
0.50
0.36
0.35
0.33
0.26
0.20
84.94
FINANCIAL STATEMENTS
134
(c) Substantial shareholders
Substantial securityholders, as at 14 July 2017, are set out below:
Name
Colonial First State Global Asset Management Property
Cohen & Steers Capital Management, Inc
Vanguard Investments Australia Ltd
Number held
83,263,340
36,519,455
29,573,551
Percentage
16.23
7.12
5.77
(d) Voting rights
The voting rights attached to the ordinary fully paid stapled securities is one vote per stapled security.
135
135
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
INVESTOR RELATIONS
National Storage REIT is listed on the Australian
Securities Exchange under the code NSR.
NATIONAL STORAGE REIT SECURITIES
A stapled security comprises:
• one share in National Storage Holdings Limited;
and
• one unit in the National Storage Property Trust;
stapled and traded together as one stapled security.
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
CONTACT DETAILS
All changes of name, address, TFN, payment
instructions and document requests should be
directed to the registry.
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.
INVESTOR RELATIONS
ONLINE
UNPRESENTED CHEQUES
You can access your securityholding information via
link in the Investor Centre section of the corporate
website, www.nationalstorageinvest.com.au, or via
the Investor Centre link on registry website at www.
computershare.com.au.
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).
PHONE
You can confirm your holding balance, request
forms and access distribution and trading
information by phoning: 1300 850 505 (Australia
only) or calling +61 3 9946 4471 (outside Australia).
DISTRIBUTION DETAILS
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.
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.
NSR CALENDAR
FEBRUARY
Half Year Results released
Distribution paid for six months ended 31 December
AUGUST
Full Year Results and Annual Report released
Distribution paid for the six months ended 30 June
Annual tax statements released
OCTOBER
TAX FILE NUMBER (TFN)
Notice of Annual General Meeting released
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.
NOVEMBER
Annual General Meeting
The dates listed above are indicative only and
subject to change.
137
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017 CORPORATE DIRECTORY
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
National Storage Financial Services Limited (NSFL)
ACN 600 787 246 AFSL 475 228
Level 23, 71 Eagle Street, Brisbane QLD 4000
REGISTERED OFFICE
Level 23, 71 Eagle Street
Brisbane QLD 4000
PRINCIPAL PLACE OF BUSINESS
Level 23, 71 Eagle Street
Brisbane QLD 4000
SHARE REGISTRY
Computershare Investor Services Pty Limited
452 Johnston Street
Abbotsford VIC 3067
Stapled Securities are quoted on the Australian
Securities Exchange (ASX).
AUDITORS
Ernst & Young
111 Eagle Street
Brisbane QLD 4000
DIRECTORS
Laurence Brindle
Anthony Keane
Howard Brenchley
Steven Leigh
Andrew Catsoulis
Claire Fidler
COMPANY SECRETARY
Claire Fidler
Patrick Rogers
CORPORATE DIRECTORY
NATIONAL STORAGE REIT ANNUAL REPORT 2016/2017
139