ANNUALonly use personal For REPORT 2018/2019 IMPORTANT INFORMATION

ABOUT THIS REPORT Welcome to National Storage REIT’s 2019 Annual Report which reports our performance for the financial year 1 July 2018 – 30 June 2019. The 2019 Reporting Suite includes: Annual Report – a review of FY19 performance, strategy and governance Financial Report – FY19 financial accounts and detailed financial performance All of NSR’s reporting is available online at www.nationalstorageinvest.com.au ENTITIES 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 Sustainability Report – outlines NSR’s approach to sustainability. The 2019 Sustainability Report will be released prior to National Storage REIT’s AGM and will be available online at www.nationalstorageinvest.com.au at that time

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.

For personal use only use personal For 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.

NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 1 CONTENTS

04 OUR BUSINESS

06 OUR FY19 PERFORMANCE

08 OUR STRATEGY

10 OUR PORTFOLIO

14 CHAIRMAN & MANAGING DIRECTORS’ REPORT

18 INVESTMENT PARTNERS

20 THE YEAR IN REVIEW

24 BOARD OF DIRECTORS

27 SENIOR EXECUTIVES

29 CORPORATE GOVERNANCE

30 DIRECTORS’ REPORT

56 FINANCIAL STATEMENTS

126 INVESTOR RELATIONS

128 CORPORATE DIRECTORY For personal use only use personal For

2 NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 3 OUR BUSINESS

National Storage is one of Australasia’s largest self-storage providers, tailoring self-storage solutions to over 60,000 residential and commercial customers at 168 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, Wine Ark - Climate-controlled wine storage, collection management and trading, vehicle storage, vehicle and trailer hire, packaging supplies, and insurance. In addition to the traditional self-storage offering, National Storage provides value-add services for businesses including receipt and dispatch, corporate account management, forklifts and pallet jacks, and versatile, adaptable spaces to suit every customer’s needs. 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 team of professionals trained in the

exacting task of providing efficient storage. For personal use only use personal For

NATIONAL STORAGE BUNDALL

4 OUR BUSINESS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 5 OUR FY19 PERFORMANCE

FINANCIAL HIGHLIGHTS

$159.2m $144.8m $62.4m 2 Same centre9.6 30 June cps2016 9.6cps $1.95b

Underlying Earnings (1) Distribution per Total Revenue IFRS profit Underlying Earnings (1) Assets Under per Stapled Security Stapled Security Management (AUM)

FY18: $139.1m FY18: $145.8m FY18: $51.4m FY18: 9.6cps FY18: 9.6cps FY18: $1.43b 14% 1% 21% - - 36%

OPERATIONAL HIGHLIGHTS

169 887,000 90,000 81.4% $206 m 85.7% Like-for-like Revenue Number of Centres Square Metres of Number of Storage Units Like-for-like per Available Metre NZ (30 June 2019) Net Lettable Area (2) (2) Occupancy (REVPAM) Occupancy

FY18: 135 FY18: 703,000 FY18: 73,000 FY18: 80.3% FY18: $205m FY18: 84.7% 34 184,000 23% 1.1% 0.5% 1.0%

CAPITAL STRENGTH

$2.39b 33% 4.0 $1.63

Total Asset Value Gearing

For personal use only use personal For Weighted Average Net Tangible Assets

Debt Tenor per Stapled Security

FY18: $1.71b FY18: 38% FY18: 4.7 FY18: $1.51

1 Underlying earnings is a non-IFRS measure (unaudited) $680m 5% 0.7years 8% 2 Same centre 30 June 2018 (104 centres), excluding Wine Ark, New Zealand and developing centres

6 OUR FY19 PERFORMANCE NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 7 OUR STRATEGY

Product & Innovation

NSR’s objective is to deliver investors a stable Explore market and growing income stream from a diversified opportunities for revenue portfolio of high-quality self-storage assets and generation, focus on to drive income and capital growth through Acquisitions digital transformation, active asset and portfolio management. drive innovation and Execute high-quality sustainability at a product acquisitions in a and portfolio level fragmented industry

Asset Management Multiple Balance occupancy and rate to achieve organic revenue growth and drive revenue growth streams to Leverage management platform and economies + + + + = of scale to extract value maximise driven cost efficiencies across the portfolio returns

Portfolio,Development & Centre Management

Focus on development in markets where acquisition is challenging, maximise portfolio potential through expansion of Capital outperforming assets, align with Management investment partners to execute

For personal use only use personal For development opportunities and Maintain an efficient undertake portfolio recycling capital structure opportunities to maximise value

8 OUR STRATEGY NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 9 OUR PORTFOLIO

DARWIN

NORTHERN TERRITORY NORTH QUEENSLAND 3 CENTRES

QUEENSLAND WESTERN AUSTRALIA 48 21 CENTRES SUNSHINE COAST CENTRES SOUTH BRISBANE AUSTRALIA GOLD COAST

9 NEW SOUTH WALES CENTRES 25 HUNTER & CENTRAL COAST PERTH CENTRES SYDNEY VICTORIA WOLLONGONG & ILLAWARRA ADELAIDE CANBERRA AUCKLAND 30 BAY OF PLENTY CENTRES 4 HAMILTON CENTRES

GEELONG MELBOURNE NEW ZEALAND 168 24 WELLINGTON CENTRES TOTAL CENTRES HOBART CHRISTCHURCH

For personal use only use personal For The National Storage portfolio continues to TASMANIA grow across Australia and New Zealand, with storage centres well located in capital DUNEDIN cities and regional areas that exhibit drivers 4 CENTRES of storage demand.

As at the date of this Report.

*Map not to scale.

10 OUR PORTFOLIO NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 11 PORTFOLIO STATISTICS 30 JUNE 2019

PORTFOLIO DIVERSIFICATION BY NLA PORTFOLIO DIVERSIFICATION BY VALUE

QLD 29% QLD 25%

NSW 14% NSW 16%

ACT 3% ACT 4%

VIC 18% VIC 24%

SA 6% SA 5%

WA 13% WA 9%

TAS 1% TAS 2%

NT 2% NT 2%

NZ 14% NZ 13%

JUNE JUNE PORTFOLIO BY NLA PORTFOLIO BY NLA 2019 2019 North Queensland 45,200 Auckland 16,500 Sunshine Coast 23,100 Hamilton 24,700 Gold Coast 56,600 Wellington 29,800 Brisbane 132,400 Christchurch 18,300 Sydney 82,500 Dunedin 22,100 Canberra 26,200 Regional 8,600 Melbourne 139,000 TOTAL 120,000 Geelong 12,400 Adelaide 52,500 Tasmania 12,700 FY19 PORTFOLIO NUMBER OF CENTRES COMPOSITION Perth 119,600 Freehold 148 Darwin 17,000 Leasehold 15 Wollongong 19,400 Managed 4 Central Coast NSW 28,400 Licensed 2 TOTAL 767,000 TOTAL 169

For personal use only use personal For PORTFOLIO VALUATION NSR Portfolio Value $1.95 billion Weighted Average Primary Cap Rate 6.85%

12 PORTFOLIO STATISTICS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 13 CHAIRMAN AND MANAGING DIRECTORS’ REPORT

The 2018-2019 year has heralded a number ORGANIC GROWTH bookings and enquiries flowing into our number of new centre acquisitions to NSR of major milestones in the growth and maturity dedicated contact centre. A new webchat across Australia and New Zealand. This has Organic growth in NSR’s business is derived from of National Storage REIT (“NSR”). Today we are platform and online booking portal are in included 35 individual storage centres plus a combination of occupancy growth and our pleased to announce that NSR has reported the process of finalisation and testing. Our 4 new development sites, in excess of $400 ability to drive an increased rate per square an A-IFRS profit of $144.8 million with underlying new-look website is currently being completely million. This reflects one new centre acquired metre from occupied space, the assessment earnings of $62.4 million, up 21% and in line with redesigned and rebuilt from the ground up after and integrated on average every 10 days, of which is based on storage demand on an forecast. Total underlying earnings per security extensive feedback from internal and external which is an impressive achievement for a individual centre-by-centre basis. Residential for FY19 are 9.6 cents per stapled security. focus groups. The new website is due to be small but highly efficient team. storage accounts for approximately 70% of NSR’s active asset management has seen its launched in coming months. total occupied space with the remaining These acquisitions have strengthened our NTA increase by 8% to $1.63 per stapled security. space being filled by small to medium Our sponsorship activity continues to drive coverage in existing markets and added Combined with our distribution yield, this has enterprises, including online retailers or brand awareness and engagement across a number of important new regions to the resulted in a total security holder return of 15% ecommerce platforms, corporate businesses a range of new and existing organisations in NSR portfolio in Australia and New Zealand. in FY19. The Australian portfolio (same centre - and specialty storage offerings such as wine Australia and New Zealand. These include Importantly, this includes three new Auckland June 2018) occupancy has risen to 81.4% while storage, boat/caravan storage and Queensland Performing Arts Centre, men’s centre acquisitions and three new Auckland REVPAM has increased to $206 per square climate-controlled storage. and women’s Brisbane Broncos and Melbourne development sites now under planning or metre. NSR’s market capitalisation now exceeds Storm in the NRL, men’s and women’s construction. NSR now has 22 operating $1.3 billion with total assets approaching $2.4 Despite soft housing market conditions Richmond AFL teams, 888 Racing in the centres, 2 licensed centres and a further billion. With 168 centres currently owned and impacting a number of key markets around V8 Supercars, Wellington Hurricanes in the three under development in New Zealand, under management, NSR has cemented its Australia, NSR has maintained an average Super Rugby Competition, men’s and women’s making it the largest owner operator in the position as the largest owner operator of storage occupancy of over 81% across its existing Brisbane Heat teams in the Big Bash League, country. In addition, NSR has extended its centres in Australia and New Zealand. NSR now portfolio (on a same-centre basis) and a along with the Perth Glory in the A-League, Australian coverage in New South Wales to has approximately 880,000m2 of net lettable strong rate per square metre of $260. We are and Perth Wildcats in the NBL. include Wollongong with three new centres, area, over 88,000 individual storage units in already seeing early signs of positive growth various sizes and over 60,000 residential and in FY20. Pleasingly, earnings from our corporate ACQUISITIONS commercial customers. storage business have grown by almost 20% Our acquisitions and integrations team on a year-on-year basis and this remains a The past year has been our most active have been working tirelessly throughout the strong focus in FY20. and challenging year to date, with 35 2018-2019 year in their efforts to bring a record individual centre acquisitions, totaling in excess Our target stabilised NSR Group occupancy of $350 million in value. In addition, we have remains in the high 80% range on a portfolio acquired 4 new development sites, either on a basis and we have already reached a standalone basis or through various joint venture historically high level of average occupancy arrangements. These projects are designed to of 86% across our NZ centres in FY19, where deliver high-quality, state-of-the-art new storage market conditions remain buoyant and centres in key locations across Australia and demand continues to be strong in all key New Zealand. markets in which NSR operates. We are introducing a number of new initiatives to The NSR business model has continued to target similar outcomes in Australia. These focus on generating multiple revenue streams new initiatives include an Operational across the key focus areas of our business – Transformation Plan, which has been organic growth, acquisitions, developments implemented after a 360-degree review of and harnessing technology and innovation the operating business, and is designed to to maximise our existing revenue streams. The invest more authority in state and territory

For personal use only use personal For 2018-2019 year has demonstrated the strength based leadership teams with higher level and resilience of NSR’s business, providing state managers already in place and making solid returns to investors, despite challenging a positive impact on our business. macroeconomic and microeconomic conditions in some markets, particularly in the We also have a new strategic marketing plan residential housing sector. We will now take in place, designed to increase enquiries at a moment to examine NSR’s achievements in an individual centre level, as well as online each of these areas in more detail.

14 CHAIRMAN AND MANAGING DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 15 high-quality, state-of-the-art storage centres CHARITABLE AND COMMUNITY INVOLVEMENT for NSR in key locations and generate income We continue our strong support for for NSR from services including development charitable organisations, providing pro-bono management, project management and storage units, staff time and resources, and ongoing asset management of these assets. much-needed funds to a wide range of not TECHNOLOGY AND INNOVATION for profit organisations, facilitating community initiatives and supporting a variety of NSR continues to enhance its operating worthy causes. platform through the use of new technology and other innovations applicable to its In conclusion, the hard work of our team of business. This includes automation, enhanced storage industry experts continues to place analytics, improvements to its existing operating NSR at the forefront of the storage industry in systems, a completely new website and online both Australia and New Zealand. Our booking portal and enhanced search engine employees remain the greatest asset of our optimisation (SEO) and search engine marketing organisation and we are indebted to each and (SEM) techniques designed to drive increased every one of them for their efforts in continuing enquiries and convert these into sales. NSR’s to make NSR the number one storage owner investment in the “Spacer” online booking operator in the region. This would not be possible platform continues to generate growth in without the strong guidance and leadership enquiries each month which are directed received from our Board and the tireless work to NSR centres. of our senior executives. SUSTAINABILITY Finally, we remain sincerely grateful for the ongoing support we receive from our NSR leads the Australian storage industry with and Newcastle and the Central Coast with DEVELOPMENTS valued securityholders and we look forward its proactive approach to sustainability which multiple new centres acquired in that region. to delivering beneficial outcomes to all our The NSR development team continues to ultimately seeks to establish a low emission, In Queensland we have acquired nine new stakeholders in FY20 and beyond. identify locations that embody strong demand reduced carbon footprint. These initiatives centres, providing important additional demographics for new centre development include plans to plant additional new native Yours sincerely coverage and opportunities to build further opportunities. During the year 4 developments trees and plants indigenous to the location efficiencies and economies of scale into the were completed totalling approximately $30 of each centre across our 168 locations. operating platform. In Melbourne and its million and delivering an additional 17,400sqm Phase two of our solar PV installation strategy surrounds, NSR has acquired two new centres, of NLA. Currently, 13 new development and nears completion with 110 centres having bringing the total coverage in Victoria to 30 expansion projects are on foot, with a total solar installations. These systems will generate centres. NSR is the largest owner operator on-completion value exceeding $150 million approximately 4,800MWh of electricity annually Laurence Brindle of centres in Perth with 21 centres, providing and which will deliver an additional 80,000sqm and reduce our carbon emissions by over Chairman extensive coverage in this important market. of NLA. NSR will continue to develop these sites 4,000 t-Co²-e per year, making NSR one of NSR has also grown its coverage in other areas either in its own right, or by a combination the largest multi-site solar power generators in of Australia including the Gold Coast, Sunshine of joint venture or turnkey arrangements Australia. NSR’s packaging recycling program Coast, Townsville, Cairns, Darwin and Adelaide. through a number of existing and new continues with 211 tonnes of cardboard Our acquisition activity continues in FY20, relationships. These include important recycled over the last 12 months. and the pipeline of new opportunities remains long-term relationships with the Bryan Family Andrew Catsoulis strong for the foreseeable future. We continue Group in Queensland and the Australia Prime Managing Director to be focused on acquiring high-quality centres Storage Fund, and turnkey construction inkey growth areas with opportunities to arrangements with the Parsons Group in Perth value-add either by expansion, improvement and Quigg Constructions in Queensland. In to existing levels of occupancy or rate addition, a number of new arrangements are

For personal use only use personal For per square metre, automation, or through being actively investigated in other states harnessing economies of scale by integrating of Australia and in New Zealand. These joint individual centres into the existing NSR ventures and development arrangements operating platform. provide an important pipeline of new

16 CHAIRMAN AND MANAGING DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 17 INVESTMENT PARTNERS

National Storage continues to work with AUSTRALIA PRIME STORAGE FUND BRYAN FAMILY GROUP SPACER its investment partners and potential new (BFG, FORMERLY KNOWN AS LEYSHON) NSR was a cornerstone investor in the Australia National Storage has been an investor investment partners to assess options for Prime Storage Fund (APSF) with an equity interest National Storage acquired the remaining in Spacer since 2017. The Spacer platform, future acquisition, development and of 24.9%. APSF was established to facilitate the interest in the Bundall and Milton self-storage also incorporating the Parkhound brand, is an redevelopment opportunities. development and ownership of premium centres from its long-term investment partner, online marketplace for storage, parking and PERTH DEVELOPMENT PORTFOLIO self-storage centres in select major cities around BFG, at the end of FY19. National Storage and warehousing, leveraging existing infrastructure Australia over the life of the fund. APSF focused BFG partnered to acquire the high quality sites and assets. Spacer source demand and offer The Perth Development Portfolio is a its activity in inner city markets where there has at Bundall on the Gold Coast and Milton in solutions to thousands of customers searching construction and management arrangement been demand for a premium storage product, Brisbane’s inner-west. Construction of these two for parking and storage across major cities with one of Perth’s leading self-storage developing new institutional grade assets with multi level state of the art storage centres was in Australia. National Storage strives to be construction companies, Parsons Group. state-of-the-art facilities and freehold tenure. completed in early 2019. In June 2019, National a leader in industry evolution with its digital This venture continues to reinforce the National National Storage successfully completed the Storage and BFG extended their partnership to transformation and saw an opportunity in Storage brand as a prominent player in the acquisition of National Storage Albion jointly acquire and develop the site at Biggera partnering with Spacer given the rapid growth Perth market. Various sites in and around and Kelvin Grove from APSF in July 2019. Waters on the Gold Coast. National Storage and of the sharing economy. The investment was a Perth have been identified as part of the National Storage also entered into a contract BFG will construct another high-quality storage strategic decision to stay ahead of any impacts arrangement, whereby Parsons Group to acquire, at completion, the final site being centre at the site in FY20. of disruption and technology on the storage constructs quality self-storage centres branded constructed by APSF, in Canterbury Victoria. industry. Spacer Marketplaces was awarded National Storage. The arrangement will see The Canterbury centre is currently under 7th place amongst the Rising Stars of the some centres acquired by National Storage on construction and is expected to complete Deloitte Technology Fast 50 awards in FY19, completion and others managed by Parsons by the end of September 2019. Following in recognition of its outstanding growth across Group under the guidelines of the National the acquisition of the Canterbury centre by the Parkhound and Spacer platforms. Storage operating platform. The partnership National Storage, it is intended that APSF to date has delivered centres at Jandakot, will be wound up. Butler, Perth Airport, Yanchep, Frances Bay and Fremantle. National Storage acquired Jandakot and Butler during FY17, Perth Airport during FY18 and Yanchep and Fremantle during FY19. The Frances Bay centre is owned by Parsons Group and managed by National Storage. Additional centres are under construction at Martin and Port Kennedy. Other sites are currently in due diligence and planning stages. National Storage retains certain rights to purchase the assets

under this arrangement. For personal use only use personal For

18 INVESTMENT PARTNERS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 19 THE YEAR IN REVIEW

ASSET MANAGEMENT Revenue per Available Square Metre (REVPAM) REGION NUMBER OF TOTAL WINE ARK is the key operational metric for the NSR CENTRES NLA The past year has seen a continued focus on portfolio. The Operations Management Team Wine Ark, Australia’s largest wine storage Brisbane 5 25,000 the active revenue management platform that maintain a focus on driving REVPAM using a provider is part of the National Storage group Gold Coast 4 6,500 has delivered growth across previous years. balanced approach to rate per square metre and houses over two million bottles of fine wine The refinement of our advanced revenue and occupancy growth on an individual Sunshine Coast 1 6,500 across 15 centres for clients located in over 30 management modelling system, together with centre and unit type basis. At 30 June 2019, Central Coast (NSW) 6 20,600 countries. There are few businesses in Australia a storage specific data analytics platform REVPAM across the Australian portfolio on a Wollongong 3 12,700 with more experience when it comes to storing continues to deliver efficiencies and enhance and managing premium wine. Throughout like-for-like basis (104 owned centres at June Melbourne 2 8,600 scalability across the operating platform. These 2018, excluding developing centres) was FY19 Wine Ark continued to strengthen its Adelaide 3 15,500 results have been delivered in a year that has $206/sqm (June 2018: $205/sqm). Occupancy relationship and involvement in the greater wine Perth 2 10,800 seen some of the toughest economic conditions across the portfolio on a like-for-like basis trade supporting the Wine Communicators of across Australia, particularly in the Sydney and increased to 81.4% (June 2018: 80.3%). Auckland (NZ) 3 27,000 Australia, Sommeliers Association of Australia, Melbourne markets. Hamilton (NZ) 4 21,600 Wine Australia and Commanderie de Bordeaux (Australian Chapter). Further enhancements were made to Rotorua (NZ) 1 5,000 the management structure across storage ACQUISITIONS Tauranga (NZ) 1 3,200 operations over the year with a focus on National Storage has successfully transacted Total Acquisitions 35 163,000 increasing accountability for the operational 35 acquisitions and 4 development sites in FY19 results. As the portfolio continues to grow, the and continues to pursue high-quality acquisitions NSR operating model will continue to evolve across Australia and New Zealand. The ability in order to meet the challenges of trading to acquire and integrate strategic accretive environments, and to optimise operating acquisitions is one of National Storage’s major performance. Partnerships with ParcelPoint, competitive advantages and a cornerstone of Australia’s largest network of locations for parcel its growth strategy. This active growth strategy collection, and U-Haul, a leading national trailer also strengthens and scales the National Storage rental provider continue to work to drive foot operating platform which drives efficiencies traffic and generate awareness of centres in across the business. local areas. Ancillary income streams including packaging sales, insurance and vehicle/trailer hire continued to increase across the year and deliver important additional revenue to the model. FY19 has been our most active year to date with 35 individual centre acquisitions which have been undertaken in conjunction with 13 new development and expansion projects, either on a standalone basis or through various joint venture arrangements. These projects are designed to deliver high-quality, state-of-the-art new storage centres in key

locations across Australia and New Zealand For personal use only use personal For

20 THE YEAR IN REVIEW NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 21 NATIONAL STORAGE MITCHELL SOLAR

MARKETING AND as we look to expand our network through CUSTOMER EXPERIENCE affiliated corporate partners and tap into team’s membership data bases. As a business, we have Growing awareness, engagement and also placed high importance on supporting conversion were once again key drivers of the women in sport, ensuring that we sponsor both marketing strategy in FY19. The importance men’s and women’s sides in the majority of of delivering an engaging and user-friendly leagues. In the same way, we endeavour to online experience has seen the business invest utilise our sponsorships to give back to local in ongoing digital improvements, including the communities, by hosting regional junior clinics development of a new online booking platform. and supporting local charity initiatives through Due to launch in early FY20, this new booking our activations. platform will provide an enhanced customer journey, help drive higher conversion rates and SUSTAINABILITY further improve data security. National Storage is committed to investing in a new digital This year will see the release of National presence in order to create a fresh, clean and Storage’s third standalone sustainability simple customer experience with a focus on report. The report is expected to be released ensuring that our e-ecommerce offering is in in November 2019, prior to National Storage’s line with best industry practice. AGM and will be published online at www.nationalstorageinvest.com.au. The report A new social media and public relations strategy will detail National Storage’s performance has been implemented to increase online across environmental, social and governance engagement, better leverage our sponsorships, aspects of the organisation as well as our overall promote business developments, and solidify vision and strategy to ensure we set realistic and our media presence. This has already seen our achievable goals whilst ensuring appropriate online following grow by 500% in the 6 months sustainability targets in the short, medium to June 2019 and will continue to be a priority and long term. These targets are designed to going forward. manage any potentially significant economic, Year on year, the volume of traffic to the National environmental, and social impacts that Storage website continues to build. A consistent National Storage causes, contributes to, or focus on search engine optimisation initiatives that may be directly linked to our service has resulted in an outstanding volume of traffic delivery, products or as a result of arriving on the website through organic, rather relationships with others, including than paid channels. our suppliers and communities.

Our sponsorship portfolio continues to be an important focus, driving above the line brand awareness and differentiation in both Australia and New Zealand. The breadth of codes supported by National Storage ensures we are reaching a broad demographic of people and building a positive association with the brand. We have recently moved towards a heavy

business-to-business focus in our sponsorships, For personal use only use personal For

22 THE YEAR IN REVIEW NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 23 BOARD OF DIRECTORS

Laurence has extensive experience in funds Howard has over 30 years’ involvement in the management, finance and investment. Until 2009 Australian property industry, as an analyst, investor he was an executive with Queensland Investment and fund manager. He is now a professional company Corporation (QIC). During his twenty one years with director and consultant to the property funds industry. QIC he served in various senior positions including Head Howard co founded Property Investment Research of Global Real Estate where he was responsible for a Pty Ltd (PIR) in 1989, which during the 1990s was portfolio of $9 billion. Laurence was also a long term considered a leading researcher of both listed and member of QIC’s Investment Strategy Committee. He unlisted property funds. In 1998 Howard was instrumental provides advice to a number of investment institutions in establishing the funds management business of on real estate investment and funds management APN Property Group Limited. During this period he was matters. Laurence holds a Bachelor of Engineering responsible for the establishment and operations of a (Honours) and a Bachelor of Commerce from the number of funds investing both directly and indirectly University of Queensland, and a Master of Business in real estate. Howard is currently a non executive Administration from Cass Business School, London where director of the ASX listed APN Property Group Limited he graduated with distinction. He is a former Chairman (APD) and is also a non executive director of APN Funds of the Shopping Centre Council of Australia and a former Management Limited, responsible entity for ASX listed director of Westfield Retail Trust and Scentre Group, APN Industria REIT (ADI) and APN Convenience Retail REIT which owns, operates and develops Westfield shopping (AQR). Until July 2017, APN Funds Management Limited centres in Australia and New Zealand. Laurence is also was also responsible entity for Generation Healthcare LAURENCE BRINDLE currently the Non-executive Chairman of the listed entity, HOWARD BRENCHLEY REIT (GHC). Howard is a member of the Audit and Viva Energy REIT. Laurence serves on the Audit and Risk Risk Committees. Independent Non‑executive Chairman Independent Non-executive Director Committees and is Chairman of the Nomination and BCom BE (Hons) MBA BEc Remuneration Committees.

Anthony is an experienced finance and business Steven Leigh has more than 30 years’ experience in the executive with an extensive background in banking real estate investment management and development and business management. Prior to accepting his industry. He joined QIC Global Real Estate in 1991 and directorship with National Storage, Anthony held was a key member of the senior executive team that numerous leadership roles with a major trading bank acquired and created through development a portfolio principally in business, corporate and institutional of high-quality retail and commercial assets in Australia, banking. He is actively involved in the business USA and the UK. Steven has had significant experience community through Non Executive Director and Advisory in the wholesale funds management business through Board roles, and finance advisory consultancies. He is various market cycles and conditions and has a strong a Director of Queensland Symphony Orchestra Pty Ltd, background in retail, commercial and industrial property Chairman of Oncore Group Holdings Pty Ltd, and a with a particular focus on shopping centre acquisitions Director of EMvision Medical Devices Ltd. Anthony has and redevelopments. After time as the Managing a Bachelor of Science (Mathematics) from University Director of Trinity Limited, and later Head of Australia for of Adelaide and a Graduate Diploma in Corporate LaSalle Investment Management, Steven re-joined QIC Finance from Swinburne. He is a Fellow of the Financial as Managing Director QIC Global Real Estate in 2012 Services Institute of Australasia, a Graduate of the where he was responsible for the group’s $20bn plus

For personal use only use personal For Australian Institute of Company Directors and a Fellow of property portfolio. Steven is a non-executive director the CEO Institute. Anthony acts as Chairman of the Audit of ASX-listed company, Scentre Group Limited and is and Risk Committees and is a member of the Nomination a founding member of Male Champions of Change ANTHONY KEANE and Remuneration Committees. STEVEN LEIGH established by the Property Council of Australia. He has qualifications in real estate valuation and project Independent Non-executive Director Independent Non‑executive Director management, and is an associate member of the BSc (Maths) GradDipCorpFin Grad Dip Proj Mgmt Australian Property Institute. Steven is a member of the Remuneration and Nomination Committees

24 BOARD OF DIRECTORS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 25 SENIOR EXECUTIVES

Andrew is a qualified lawyer who has been admitted Stuart joined National Storage in late 2014, with to the Supreme Court of Queensland and the Federal extensive experience in the energy sector in coal Court of Australia. He has had extensive experience and gas fired power generation. He has held wide in the fields of finance, commercial and property law ranging finance and commercial management during his tenure at major law firms both in Australia and roles, including as Commercial Manager for Energy overseas. He is also a qualified project manager and has Developments Limited. Prior to this, Stuart was considerable property development experience both commercial manager on the delivery of a multi site within the storage industry and in broader markets. gas fired power generation project and micro A founder of the original National Storage business, LNG plant. he has over 20 years of specific self-storage industry He has significant experience in project financing, expertise including in the areas of acquisition, mergers and acquisitions and project development. development, integration and operation of ‘greenfield’ Stuart holds a Bachelor of Business, is a Certified and developed self-storage centres. Andrew was Practising Accountant and is a graduate of the instrumental in the successful acquisition and integration Australian Institute of Company Directors. of the original portfolio and led the company through the IPO.

ANDREW CATSOULIS STUART OWEN

Managing Director Chief Financial Officer BA, LLB, Grad Dip Project Mgmt (Hons) BBus, CPA, GAICD

Claire was appointed an Executive Director in July Patrick holds both legal and accounting qualifications 2017 and has been the principal company secretary of and is admitted as a solicitor of the Supreme Court of National Storage since November 2015 . She holds legal Queensland. He has practiced as a solicitor for over and international business qualifications and is admitted 20 years in both fields. During his time in private practice, as a solicitor of the Supreme Court of Queensland. Patrick has had significant experience in corporate, Claire has over ten years’ experience in corporate and property, commercial, taxation and transactional commercial law in private practice, having practiced in work. In addition to private practice, Patrick held senior the litigation, resources and corporate areas of two large finance roles and was the general counsel and company law firms. Prior to joining National Storage, Claire spent secretary of the Super A Mart Group for over eight years four and a half years as Corporate Counsel and Company where he was extensively involved in the operations of Secretary at Rio Tinto Coal Australia. During this time, the company. Patrick was appointed Chief Risk Officer of in addition to providing legal services to the business, she National Storage REIT in June 2016, in addition to his role was responsible for the corporate governance and ASX as General Counsel and a Company Secretary of NSR. compliance of one of Rio Tinto’s listed subsidiaries as well Patrick is a Fellow of the Governance Institute of Australia. as managing the corporate secretarial responsibilities

For personal use only use personal For 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. Claire is a Graduate of the CLAIRE FIDLER Australian Institute of Company Directors and a Fellow PATRICK ROGERS of the Governance Institute of Australia and is a General Counsel and Chief Risk Officer Executive Director and Company Secretary non-executive director of Spacer Marketplaces LLB, BBus (Accty), FGIA LLB (Honours) B Bus (Intl Bus) GAICD, FGIA Pty Limited.

26 BOARD OF DIRECTORS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 27 CORPORATE GOVERNANCE

The National Storage Boards are responsible for ensuring that the organisation has an appropriate corporate governance framework in place to protect and enhance the entity’s performance and build sustainable value for securityholders. The corporate governance framework is based on the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. More information is provided in NSR’s 2019 Corporate Governance Statement, which can be found online at www.nationalstorageinvest.com.au. Additional detail will also be included in National Storage’s Sustainability Report, which is

expected to be released prior to the 2019 AGM. For personal use only use personal For

NATIONAL STORAGE BRENDALE GRAND OPENING NATIONAL STORAGE DEVELOPMENT TEAM

28 SENIOR EXECUTIVES NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 29 KEY HIGHLIGHTS Group FY19 FY18 Change DIRECTORS’ Total Reene IFRS profit after ta Earnins per stapled secrit cps cps nderlin earnins REPORT nderlin earnins per stapled secrit cps cps Net operatin cashflow Distribtion per secrit cps cps

At June At June Portfolio Change 2019 2018 Nber of Centres ownedanaed licenced Total ie for lie occpanc New Zealand occpanc ie for lie Reene per aailable etre REP eihted erae Priar Cap Rate ssets nder anaeent b b Portfolio alation plift cisitions Centres N s

At June At June Balance Sheet Change 2019 2018 Total ssets b b Debt drawn Interest Rate Hedes earin eiht aerae cost of debt eiht aerae debt tenor ears NT

PRINCIPAL ACTIVITIES NSR is the first and onl internall anaed and fll interated owner and operator of selfstorae centres to be listed on the S

NSR is stralias and New Zealand’s larest selfstorae owneroperator with selfstorae centres nder operation anaeent or licence tailorin storae soltions to oer cstoers across stralia and New Zealand NSR has rown its portfolio of owned anaed and licenced centres fro centres in Deceber to centres at the date of this Directors’ Report with a frther fie centres epected to settle in the coin onths NSR now anaes approiatel storae nits across approiatel sare etres of net lettable area arond stralia and New Zealand ssets nder anaeent hae increased to billion as at ne increasin drin the Reportin Period

Of the selfstorae properties in the NSR portfolio at the date of this report ownership is as follows • selfstorae centres owned b NSPT • selfstorae centres operated as lonter leasehold centres easehold Centres • third part anaed centres andarah centre in ceased to be anaed effectie l • licenced brandin rihts centres in New Zealand

NSR operates a dierse bsiness odel with ltiple reene driers incldin selfstorae which

encopasses priate storae bsiness storae hard standehicle storae and wine storae at NSR’s For personal use only use personal For cliate controlled storae facilities branded “ine r” deelopents and proect anaeent

nderlin earnins is a nonIFRS easre nadited see table within Operatin Reslts for reconciliation Sae centre ne centres ecldin iner New Zealand and deelopin centres Inestent properties incldin ssets held for sale net of finance lease liabilit Ecldin transaction costs NZDD echane rate of DIRECTORS’ REPORT FOR THE ER ENDED NE

30 DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 31 BUSINESSBUSINESS STRATEGY STRATEGY CASH MANAGEMENT

NSR’sNSR’s objective objective is to is deliver to deliver investors investors a stable a stable and and growing growing income income stream stream from from a diversified a diversified portfolio portfolio of of Cash and cash euialents as at une were . million compared to . million at une igigalitalit self selfstoragestorage assets assets and and to drive to drive income income and and capital capital growt growt trog trog active active asset asset and and impacted b the capital raise undertaken on une . Subseuent to balance date the portfolioportfolio management management inclding inclding te teacisition acisition development development or redevelopment or redevelopment and and portfolio portfolio maorit of the cash balance has been used to repa debt and facilitate further acuisitions. Net recclingreccling of self of selfstoragestorage centres centres operating cashflow for the ear increased to . million . million.

TeTe e e drivers drivers of te of tebsiness bsiness are are During the ear NSR successfull completed two capital raisings proiding million. These were undertaken b a combination of a rights issue two institutional placements and a Securit Purchase • •sset sset management management – driving – driving an appropriatean appropriate balance balance between between rental rental rate rate and and occpanc occpanc Plan. The purpose of the euit raisings was to execute acuisition opportunities and strengthen the growtgrowt and and activel activel prs prsinging oter oter bsiness bsiness development development initiatives initiatives in complementar in complementar areas areas NSR balance sheet. scsc as wine as wine storage storage docment docment storage storage and and mini minilogisticslogistics for SEsfor SEs • •Portfolio Portfolio management management – aciring – aciring and and integrating integrating alit alit self selfstoragestorage assets assets into into te teNSR NS R n interim distribution of . cents per stapled securit . million was paid on arch with an portfolioportfolio estimated final distribution of . cents per stapled securit . million declared on une with • •Centre Centre anagement anagement – effective – effective operation operation of individal of individal self selfstoragestorage assets assets and and te teepansion epansion a pament date of September totalling a full ear distribution of . cents per stapled securit. of teof teNational National Storage Storage Centre Centre anagement anagement platform platform revene revene from from tird tird parties parties During the reporting period NSR once again offered a Distribution Reinestment Plan DRP which • •Development Development management management – development – development refrbisment refrbisment redevelopment redevelopment of new of new and and enables eligible securitholders to receie part or all of their distribution b wa of securities rather than eistingeisting centres centres and and activel activel managing managing portfolio portfolio reccling reccling opportnities opportnities cash. • •Capital Capital management management – maintaining – maintaining an appropriatean appropriate and and efficient efficient capital capital strctre strctre wit wit a focs a focs on ris minimisation and te development of long term sstainable and growing revene on ris minimisation and te development of long term sstainable and growing revene For the December interim distribution approximatel of eligible securitholders b number of streams and streams and securities elected to receie their distributions as securities totalling approximatel . million. The DRP • •Prodct Prodct and and innovation innovation – eploring – eploring opportnities opportnities for revenefor revene generation generation across across new new sales sales price was set at . which resulted in new securities being issued. cannelscannels digital digital strategie strategies ands and ancillar ancillar prodct prodct ranges ranges The une final distribution has seen approximatel . of eligible securitholders b number of FrterFrter details details on teseon tese e e bsiness bsiness drivers drivers can can be fondbe fond elsewere elsewere in te in teNSR NSR nnal nnal Report Report securities elect to receie their distributions as securities totalling approximatel . million. The DRP

price was set at . which resulted in approximatel new securities being issued.

REVIEWREVIEW AND AND RESULTS RESULTS OF OFOPERA OPERATIONSTIONS NSR’s finance facilities are structured on a “Club” arrangement with the four maor ustralian banks and a maor ustralian superannuation fund. During the ear NSR introduced the N anking Group TeTe Financial Financial Statements Statements of NSR of NSR are areprepared prepared in compliance in compliance wit wit stralian stralian cconting cconting Standards Standards into the banking group to increase the aailable banking limits and the diersit of the group. The andand te tereirements reirements of te of teCorporations Corporations Act Act Cth Cth 2001 2001 Consolidated Group’s borrowing facilities are D million and ND million. s at the reporting date D euialent of approximatel million was undrawn and aailable. Subseuent to OPERATINGOPERATING RESULTS RESULTS reporting date million raised ia the euit raising completed on une was repaid and has become aailable. NSR actiel manages its debt facilities and continues to increase when and where IFRSIFRS Profit Profit after after ta tafor tefor teReporting Reporting Period Period was was million million wit wit EPS EPSof of cents cents nderling nderling reuired to ensure adeuate capacit for future acuisitions and working capital reuirements. The earningsearnings increase increased bd b to to million million nderling nderling earnings earnings per perstaple stapled secritd secrit was was cpscps for for weighted aerage debt tenor as at the reporting date is . ears down from . ears as at une te te financial financial ear ear . NSR’s target gearing range remains to proide flexibilit and the abilit to act on acuisition opportunities. $m $m FY1FY19 9 FY1FY18 8 IFRSIFRS Profit Profit after after ta ta NSR maintains interest rate hedges in accordance with NSR’s hedging polic which is reiewed on a PlsPls ta taepensebenefit epensebenefit regular basis. dditional interest rate hedges were entered into during the ear to continue the PlsPls bsiness bsiness combination combination restrctre restrctre and and oter oter non nonrecrringrecrring costs costs prudent management of NSR’s interest rate risks. In conunction with the euit raising undertaken in PlsPls contracted contracted gain gain in respect in respect of sale of sale of investment of investment propert propert une NSR took adantage of the low interest rate enironment and reset its ustralian swap book. PlsPls amortisation amortisation of interest of interest rate rate swap swap reset reset The cost of the reset was . million with the aerage swap rate reduced b approximatel .. s essess fair fairvale vale adjstment adjstment at the reporting date interest rate hedges totalling million were in place with expir dates essess finance finance lease lease dimintion dimintion ranging from . ears to . ears. UnderlyingUnderlying Earnings Earnings $62.4$62.4 $51.4$51.4 eigtedeigted average average secrities secrities on isseon isse refer refer Note Note ACQUISITIONS AND INVESTMENTS UnderlyingUnderlying earnings earnings per perstapled stapled security security 9.6cps9.6cps 9.6cps9.6cps NSR considers its abilit to acuire and integrate ualit assets to be one of the ke driers of its growth TotalTotal revene revene increased increased b b to to million million Occpanc Occpanc across across te tene ne portfolio portfolio eclding eclding strateg. The dedicated acuisitions team has continued to identif facilitate and transact on NewNew ealand ealand and and developing developing centres centres increased increased to to p fromp from at at ne ne New New acuisitions that were considered appropriate for the portfolio. ealandealand occpanc occpanc increase increased tod to p fromp from at at ne ne Tese Tese are arepleasing pleasing reslt reslts s The ear ended une was the most successful ear since listing with the execution of NSR’s givengiven te tecallenging callenging economic economic conditions conditions tat tat ave ave been been eperience eperienced overd over te tepast past monts monts and and acuisition strateg seeing new centres and deelopment sites acuired totalling approximatel demonstratesdemonstrates tat tat te tecontined contined focs focs on drivingon driving increased increased occpanc occpanc is delivering is delivering reslts reslts Same Same million. Since balance date to the date of this Directors’ Report a further two centres alued at centrecentre revene revene per peravailable available metre metre REP REP increased increased b b to to smsm from from smsm at ne at ne million hae settled with additional centres alued at million expected to settle b the end of delivering delivering contined contined revene revene growt growt September . The combined process undertaken b both external aluers and the Directors to realue the une NSR owned centres as at une based on aluations and

methodologies from independent aluers m Propert and rbis ielded an increase in aluation of

For personal use only use personal For million with the weighted aerage primar capitalisation rate reducing basis points to ..

nderling nderling earnings earnings is a non is a nonIFRS measreIFRS measre nadited nadited

DIRECTORS’DIRECTORS’ REPORT REPORT FOR FOR THE THEER ER ENDED ENDED NE NE DIRECTORS’ REPORT FOR THE ER ENDED NE

32 DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 33 Acquisitions for the Year Ended 30 June 2019 DIVIDENDS AND DISTRIBUTIONS NSR has paid or declared distributions totalling . cents per stapled security for the Reporting Period Number of Region NLA (Sqm) comprising Centres Brisbane , • An estimated final distribution of . cents per stapled security for the months to une . The distribution is epected to be paid on September and is epected to contain a ta ol Coast , deferred component. Snsine Coast , • An interim distribution of . cents per stapled security for the period uly to December hich as paid on arch hich included a ta deferred component. Central Coast S , OPTIONS OVER STAPLED SECURITIES ollonon , No options over issued stapled securities or interests in a Controlled Entity have been granted in NSR Melborne , during the Reporting Period. There are no options in stapled securities outstanding as at the date of this report. elaie ,

Pert , ENVIRONMENTAL REGULATION NSR’s operations are not regulated by any environmental la of the Commonealth or a State or lan , Territory that is enacted specifically for NSR. Hoever as part of its operations NSR must comply ith broader environmental las. NSH management on behalf of NSR has in place procedures to identify Hailton , and ensure compliance ith such las including identifying and obtaining of necessary approvals consents or licences. Rotora , There have been no knon material breaches during the Reporting Period of any environmental las Tarana , to hich NSR is subect.

Total 35 163,000 ENVIRONMENTAL, ECONOMIC AND OTHER SUSTAINABILITY RISKS NSR recognises that its operating activities and strategic goal of delivering securityholder groth and returns epose it to potential risks. NSR management takes a proactive approach to risk INVESTMENT IN JOINT VENTURES AND ASSOCIATES managementelimination and recognises the importance of a strong risk culture hich is instilled and lead by the oard and the senior eecutive team so as to form a core tenet of the organisation. SR as a ornerstone inestor in te stralia Prie Storae Fn PSF it an eit interest o PSF as establise to ailitate te eeloent an onersi o rei selstorae Risk is managed centrally to minimise potential adverse effects on the financial performance of NSR entres in selet aor ities aron stralia oer te lie o te n PSF ose its atiit in inner and protect longterm securityholder value and its broader Corporate reputation. A copy of NSR’s Risk it arets ere tere as been ean or a rei storae rot, eeloin ne anagement Policy can be found at .nationalstorageinvest.com.augovernance. instittional rae assets it stateoteart ailities an reeol tenre The Chief Risk Officer is responsible for management of NSR’s risk function and in turn reports to the In l SR ontrate it PSF to rase te reainin tree assets in te n lbion, elin anaging Director and the Risk Committee. The Risk Committee is charged ith risk oversight and roe an Canterbr or illion Te lbion an elin roe entres settle on l it reports to the full oard. The full oard is then actively involved in the ultimate revie of and te Canterbr entre to settle one onstrtion as been olete Folloin te sale o te determination of risk to ithin sensible tolerances. Canterbr entre te n ill be on Potential risks faced by NSR include but are not limited to SR as reiosl entere into arraneents it inestent artner Bran Fail ro “BF” orerl eson to aire ialit sites on Bnall Roa, Bnall on te ol Coast an Dorse RISK Street, Milton in Brisbane’s innerest tro te “BF ” Constrtion o tese to entres as Strategic Risk Poor development and or eecution of business strategy by the eecutive olete rin te Reortin Perio an oerations oene In ne SR ontrate management team can lead to the risk of loss and or poor performance. To mitigate this risk it te BF to aire te Bnall an Milton entres or illion it settleent orrin on strategies are developed by the relevant responsible eecutive or senior officer. These are then ne revieed and discussed as appropriate by other eecutive officers and approved by the anaging Director. Strategic decisions of a significant nature are further put before the oard and In ne , SR it BF aire a obine oerial an selstorae eeloent site at discussed in detail and reuire oard approval. The senior eecutive team meet a number of times Biera aters on te ol Coast Te BF rase te site ro SR o a reiosl a year to discuss strategy and ensure that it remains current and appropriate. This allos rase te site in Deeber or illion Deeloent aroal to onstrt a ltileel, management to ensure it is employing strategies that are updated for changes in the operating stateoteart selstorae ailit as been rante it onstrtion eete to oene late environment of the business. Economic Conditions Fluctuations in economic conditions including consumer confidence may adversely impact upon demand for storage space. aterial macroeconomic events occurring or SR as been aointe to anae te Biera aters roet an ill enerate inoe ro any significant trading donturns due to factors beyond the control of management have the roiin a rane o series inlin esin an eeloent, roet anaeent an ororate potential to negatively impact on forecast trading performance. The results of NSR’s operating ainistration activities are dependent on the performance of the properties in hich it invests and those it manages on behalf of other parties. This performance in turn depends on economic factors these LIKELY DEVELOPMENTS include economic groth rates inflation rates and taation levels. There are also industry and

For personal use only use personal For SR ontines to tilise its osition as stralias irst S liste, ll interate, setor seii, sel location specific risks to consider including competitor behaviour. NSR mitigates the potential storae REIT to ontine to brin alit ineenentl one storae entres aross stralia an impacts of fluctuating economic conditions by seeking to maintain a strong and conservative e ealan ner SRs onersi anor anaeent strtre In aorane it its state balance sheet and financial position. strate, SR ontines to see ialit aisition oortnities, ealate its eistin ortolio or Operational Risk Risk of loss due to its overall operations and management of other risks eists as a eeloent or reeeloent, elore ortolio relin oortnities an rter eelo an function of any operating business. NSR aims to ensure that the necessary processes training and reine its tir art anaeent oerins supervision is in place and effected to eliminate such loss herever possible. The risk of loss from system failures is reduced through system backups and disaster recovery contingency procedures hich aim to ensure the maintenance of NSR’s critical data availability.

DIRECTORS’ REPORT FOR THE ER EDED E DIRECTORS’ REPORT FOR THE EAR ENDED NE

34 DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 35 RISK RISK General commercial property risks Riss commonly associated with commercial property Leasehold interests SR holds lease agreeents with certain third parties which allow it to operate investment apply equally to NSR, including levels of occupancy, capital expenditure requirements, storage centres fro these properties. ease ters for these properties are tpicall long greater development and refurbishment ris, environmental or compliance issues, changes to government than ears. Howeer, there is no guarantee that these lease arrangeents will be able to be and planning regulations, including oning and damage caused by flood or other extreme weather renewed upon epir or if so on suitable ters to SR. (to the extent that it is not or could not be insured against). NSR utilises a comprehensive due Environmental issues nforeseen enironental issues a affect the properties in the propert diligence process when acquiring centres to mitigate or eliminate ris where possible. portfolio owned b SR. These liabilities a be iposed irrespectie of whether or not SR is Tenure Storage agreements are typically month to month and there is no guarantee customers will responsible for the circustances to which the relate. SR a also be reuired to reediate sites renew or that other customers will be found to tae their place upon departure. To mitigate this ris, affected b enironental liabilities. The cost of reediation of sites could be substantial. If SR is customer relationships are carefully managed to maximise duration of stay and highly developed not able to reediate the site properl, this a adersel affect its abilit to sell the releant mareting and management systems are in place to maximise conversion of new customer propert or to use it as collateral for future borrowings. aterial ependiture a also be reuired to enquiries. copl with new or ore stringent enironental laws or regulations introduced in the future. Competition Entry by new competing storage centres or discounting by existing storage centres Data and Cyber Attack Loss – During the course of effecting its operations, SR is reuired to handle may adversely impact upon occupancy and rental rates on a centre specific basis. hile there are data fro arious sources. s a result, there is the possibilit that data could be either daaged or barriers to entry for new competition, NSR constantly monitors its competitors activities to ensure lost. This creates the ris of potential legal eposure fro both coercial third parties and pricing and terms remain competitive. regulators depending on the nature and the etent of an possible loss or daage to the data. Valuations - Valuations ascribed to NSR’s assets will be influenced by a number of ongoing factors There is also the ris that SR could suffer a cber attac fro a third part that could disrupt its including supply and demand for selfstorage centres and general property maret conditions. operations and functionalit. Valuations represent the analysis and opinion of qualified experts at a certain point in time. There is Climate Change Etree weather eents or progressie daage fro cliate related causes a no guarantee that a property will achieve a capital gain on its sale or that the value of the property cause loss to SR through either phsical ipact on storage centres or disrupting operations and will not fall as a result of the assumptions on which the relevant valuations are based proving to be attendant incoe. SR has enacted a specific regular reiew process for its centres to ensure such incorrect. ipacts or their lielihood is itigated to the aiu etent possible. Property liquidity Self storage centres are property based illiquid assets and subect to supply and demand factors dependent upon prevailing maret conditions. s 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. DIRECTORS Future acquisitions and expansions NSR may consider opportunities to mae further acquisitions of selfstorage assets. NSR may also develop and expand the lettable area at a number of NSR’s NATIONAL STORAGE HOLDINGS LIMITED centres. The rate at which NSR is able to expand will reflect maret forces and the availability of The SH Directors in office during the Reporting Period, or appointed prior to the date of this Directors’ capital at the time. Forecast distributions may be affected by such actions. The riss faced by NSR in Report, and continuing as at the date of this Directors’ Report are set out below. relation to any future development proects 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 NAME POSITION storage assets, or successfully implement acquisitions on time and on budget. Furthermore, there is aurence rindle onEecutie Chairan ppointed oeber no guarantee that any acquisition will perform as expected. Future acquisitions may also expose NSR to unanticipated business riss and liabilities. ndrew Catsoulis anaging Director ppointed oeber Personnel risk NSR relies upon the expertise and experience of the senior management team. s a nthon eane onEecutie Director ppointed oeber consequence, if the services of ey personnel were no longer available this may have an adverse Howard renchle onEecutie Director ppointed oeber 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 undertaen Steen eigh onEecutie Director ppointed oeber periodically by the NSH oard and anaging Director. Claire Fidler Eecutie Director ppointed ul Interest rate fluctuations and derivative exposure nfavourable movements in interest rates could lead to increased interest expense to the extent that these rates are not hedged. NSR uses NATIONAL STORAGE FINANCIAL SERVICES LIMITED (NSFL) 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. SF was appointed as responsible entit on oeber . The Directors of SF in office during Workplace health and safety There is a ris that liability arising from occupational health and safety the Reporting Period, or appointed prior to the date of this Directors’ Report, and continuing as at the matters at a property in NSR’s portfolio may be attributable to NSR as the registered proprietor. To date of this Directors’ Report are set out below. 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 NAME POSITION imposed upon NSR which may have an adverse impact on NSR. NSR has a dedicated focus on aurence rindle onEecutie Chairan appointed ul Health and Safety including comprehensive reporting to assist in the mitigation or elimination of such riss and eep our team members, customers and contractors safe. ndrew Catsoulis anaging Director appointed ul Insurance risk - There is no certainty that appropriate insurance will be available for all riss on nthon eane onEecutie Director appointed ul acceptable commercial terms or that the cost of insurance premiums will not continue to rise. Some Howard renchle onEecutie Director appointed Septeber riss 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 Steen eigh onEecutie Director appointed Septeber damaged or destroyed by an event for which NSR does not have cover, or a loss occurs which is in Claire Fidler Eecutie Director appointed ul excess of the insured amounts, NSR could incur a capital loss and lost income which could reduce returns for holders of stapled securities. ny 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 marets, the general economic and

For personal use only use personal For 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 ris that NSR may not be able to refinance its debt andor 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.

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36 DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 37 DIRECTORS’ QUALIFICATIOS EERIECE AD SECIAL RESOSIILITIES Steven Leigh, Independent Non-executive Director Grad Dip Proj Mgmt S L S F S L Steven Leigh has more than 30 years’ experience in the real estate investment management and Laurence Brindle, Independent Non-executive Chairman development industry. He oined IC lobal Real Estate in 11 and was a ey member of the senior BCom, BE (Hons), MBA executive team that acuired and created through development a portfolio of highuality retail and commercial assets in Australia, SA and the . Steven has had significant experience in the wholesale Laurence has etensive eperience in funds management, finance and investment. ntil 009 he was funds management business through various maret cycles and conditions and has a strong an eecutive with Queensland Investment Corporation QIC. During his twentyone years with QIC he bacground in retail, commercial and industrial property with a particular focus on shopping centre served in various senior positions including Head of lobal Real Estate where he was responsible for a acuisitions and redevelopments. 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 After time as the anaging Director of Trinity Limited, and later Head of Australia for LaSalle Investment management matters. Laurence holds a achelor of Engineering Honours and a achelor of anagement, Steven reoined IC as anaging Director of IC lobal Real Estate in 2012 where he Commerce from the niversity of Queensland, and a aster of usiness Administration from Cass was responsible for the group’s $20bn plus property portfolio. Steven is a nonexecutive director of AS usiness School, London where he graduated with distinction. He is a former Chairman of the Shopping listed company, Scentre roup Limited, and is a founding member of ale Champions of Change Centre Council of Australia and a former director of estfield Retail Trust and Scentre roup, which established by the Property Council of Australia. He has ualifications in real estate valuation and owns, operates and develops estfield shopping centres in Australia and ew ealand. Laurence is proect management, and is an associate member of the Australian Property Institute. also currently the oneecutive Chairman of the listed entity, iva Energy REIT. Steven is a member of the Remuneration and omination Committees. Laurence serves on the Audit and Ris Committees and is Chairman of the omination and Remuneration Committees. Claire Fidler, Executive Director LLB (Hons), B Bus (Int), GAICD, FGIA Andrew Catsoulis, Managing Director BA, LLB, Grad Dip Proj Mgmt (Hons) Claire was appointed an Executive Director in uly 201 and has been the principal company secretary of ational Storage since ovember 201. She holds legal and international business ualifications and A founder of the ational Storage business, Andrew has over 0 years of specific selfstorage industry is admitted as a solicitor of the Supreme Court of ueensland. Claire has over 10 years’ experience in epertise including in the areas of acuisitions, developments, integration and operation of ‘greenfield’ corporate and commercial law in private practice, having practiced in the litigation, resources and and developed selfstorage centres. Andrew is a ualified solicitor who has been admitted to the corporate areas of two large law firms. Prior to oining ational Storage, Claire was Corporate Counsel Supreme Court of Queensland. He has had etensive eperience in the fields of finance, commercial and Company Secretary at Rio Tinto Coal Australia. During this time, in addition to providing legal and property law during his tenure at maor law firms both in Australia and overseas. He is also a services to the business, she was responsible for the corporate governance and AS compliance of one ualified proect manager and has considerable property development eperience both within the of Rio Tinto’s listed subsidiaries as well as managing the corporate secretarial responsibilities of over 0 storage industry and in broader marets. Andrew was instrumental in the successful acuisition and subsidiaries within the group and providing oint venture support. Claire has also wored in corporate integration of the original preeisting roup portfolio and led the Company through the IPO and compliance with the Australian Securities and Investments Commission. Claire is a raduate of the planned and negotiated the acuisition of the Southern Cross portfolio in 01. Australian Institute of Company Directors and a Fellow of the overnance Institute of Australia and is a nonexecutive director of Spacer aretplaces Pty Limited. Anthony Keane, Independent Non-executive Director BSc (Maths), Grad Dip Corp Fin DIRECTORSIS OF OTER LISTED COAIES

Anthony is an eperienced finance and business eecutive with an etensive bacground in baning Directorships of other listed companies held by current Directors in the three years immediately before and business management. Prior to accepting his directorship with ational Storage, Anthony held the end of the financial year are as follows numerous leadership roles with a maor trading ban principally in business, corporate and institutional baning. He is actively involved in the business community through onEecutive Director and Advisory AE COA ERIOD OF DIRECTORSI oard roles, and finance advisory consultancies. He is a Director of Queensland Symphony Orchestra Laurence rindle iva Energy REIT (ASR) 100201 Current Pty Ltd, Chairman of Oncore roup Holdings Pty Ltd, and a Director of ASlisted Evision edical Howard renchley AP Property roup (ASAPD) 1 Current Devices Ltd. Anthony has a achelor of Science athematics from niversity of Adelaide and a AP Funds anagement Limited, raduate Diploma in Corporate Finance from Swinburne. He is a Fellow of the Financial Services responsible entity for Institute of Australasia, a raduate of the Australian Institute of Company Directors and a Fellow of the AP Industria REIT (ASADI) 03122013 Current CEO Institute. AP Convenience Retail REIT (ASAR) 212201 Current And previously eneration Healthcare Anthony acts as Chairman of the Audit and Ris Committees and is a member of the omination and REIT (ASHC) 1202011 – uly 201 Remuneration Committees. Steven Leigh Scentre roup Limited (AS SC) 00201 – Current Anthony eane Evision edical Devices Ltd (ASE) 1112201 – Current Howard Brenchley, Independent Non-executive Director BEc DIRECTORS’ INTERESTS I SR SECURITIES 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 As at the date of this Directors’ Report, the interests of the Directors (including indirect interests) in the industry. Howard cofounded Property Investment Research Pty Ltd PIR in 199, which during the stapled securities of SR were 1990’s was considered a leading researcher of both listed and unlisted property funds. DIRECTOR DIRECT IDIRECT TOTAL In 199 Howard was instrumental in establishing the funds management business of AP Property roup Laurence rindle 1,23, 1,23, For personal use only use personal For Limited. During this period he was responsible for the establishment and operations of a number of Anthony eane 1,1 1,1 funds investing both directly and indirectly in real estate. Andrew Catsoulis 3,3 13,,31 1,01,2 Howard renchley , , Howard is currently a noneecutive director of the ASlisted AP Property roup Limited APD and is Steven Leigh 1,00 1,00 also a noneecutive director of AP Funds anagement Limited, responsible entity for ASlisted AP Claire Fidler 10,1 10,1 Industria REIT ADI and AP Convenience Retail REIT AQR. ntil uly 01, AP Funds anagement Limited was also responsible entity for eneration Healthcare REIT HC.

Howard is a member of the Audit and Ris Committees.

DIRECTORS’ REPORT FOR THE EAR EDED 30 E 019 3 DIRECTORS’ REPORT FOR THE EAR EDED 30 E 201 3

38 DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 39 DIRECTORS’ EETINS NSH and The Responsible Entity have their own respective oards and constitutions. The relationship T SH between NSH and the Responsible Entity is governed by a Cooperation Deed and anagement R P Agreement that allows NSH to provide ey services to NSF as Responsible Entity in exchange for a monthly fee. These services include finance and administrative services property management DIRECTOR ORD DIT RIS RENERTION NOINTION provision of staff and euipment. COITTEE COITTEE COITTEE COITTEE The NSH and Responsible Entity oards and NSH management are committed to achieving and demonstrating to securityholders high standards of corporate governance and to ensure NSH acts in C the best interests of its securityholders balanced with its broader community obligations. H An important component of the NSR corporate governance structure is the ASX Corporate S Governance Principles and Recommendations (the “ASX Recommendations”). A statement of the C F 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. Additional information regarding governance at F NSR will be contained in the Sustainability Report expected to be released in November . C R P F C C F R R C The Company has agreed to indemnify all the Directors and executive officers of the Company and its T C I C C I C group entities to the extent permitted by law for the amount of any liability loss cost charge T I C damage expense or other liability suffered by the Director or executive officer as an officer of the I C 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 CON SECRETR of trust (“Indemnity”).

However the Indemnity does not extend to a claim in the nature of NTION STORE ODINS IITED (a) a challenge to any rejection of a Director’s claim by the provider of the Company’s insurance NE OINTENT DTE cover or C F (b) a crossclaim or a thirdparty 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. P R Deeds of indemnity to effect the above have been formally entered into by the Company and each of the Directors.

NTION STORE INNCI SERICES IITED The Deeds of Indemnity reuire the Company to obtain a bac to bac indemnity to the Company from the Responsible Entity out of the assets of the NSPT. This has been procured by the Company and NE OINTENT DTE is in place. The bac to bac indemnity reuires the Responsible Entity to indemnify the Company for C F any liability under the Directorsofficers 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 P R by the Company of its obligations under a Directorofficer indemnity or to any payment which the Company maes voluntarily but is not due and payable under the terms of a Directorofficer indemnity.

Claire Fidler The total amount of insurance contract premiums paid for Directors and Officers insurance for NSR LLB (Hons), B Bus (Int), GAICD, FGIA (including subsidiary entities) during the Reporting Period was .

R 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 Patrick Rogers act in accordance with the constitution and the law the officers remain indemnified out of the assets LLB, B Bus – Accounting, FGIA 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. P S C H D P P To the extent permitted by law the Company has agreed to indemnify its auditors Ernst oung as S P C R O SR part of the terms of its audit engagement agreement against claims by third parties arising from the C C S P F audit (for an unspecified amount). No payment has been made or claim received by NSR to indemnify I Ernst oung during the Reporting Period or up to the date of this report.

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40 DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 41 – The Remuneration Committees’ activities are governed by its Charter a copy of which is available at Te NSH oar is committe to ensuring tat its remuneration strategies are structure to suort an www.nationalstorageinvest.com.au. reinforce NSR’s overall business strategy are consistent it te reuirements of governance stanars an meet te eectations of investors an te community at large y lining te Sort Term Incentive The responsibilities of the Remuneration Committee include (“STI”) an Long Term Incentive (“LTI”) (at ris remuneration) of eecutive remuneration to te rivers • Formulate and recommend remuneration policies to apply to the Company’s Managing tat suort te business strategy incluing financial governance cultural an community measures Director senior executives and nonexecutive Directors; te remuneration of eecutives is aligne it te creation of longterm value for securityolers Te • Formulate the specific remuneration packages for senior executives (including base salary STIs oar believes tat te remuneration ractices of NSR soul fairly an resonsibly rear ey LTIs and other contractual benefits); Management Personnel (“MP”) aving regar to teir iniviual erformance te erformance of • Review contractual rights of termination for senior executives; NSH an NSPT an te broaer eternal environment as it relates to MP rear • Review the appropriateness of the Company’s succession planning policies;

Te olicy also aims to rovie a latform for sustainable value creation for securityolers by • Review management’s recommendation of the total proposed STI and LTI awards; attracting an retaining uality MP • dministering the STI and LTI awards; and • Review management recommendations regarding the remuneration framework for the company as a whole. The deliberations of the Remuneration Committee including any recommendations made on Te folloing remuneration reort as been reare to rovie information to NSR securityolers of remuneration issues are considered by the NSH oard. In making its recommendations to the oard te remuneration etails of te MP of NSH involve in te management of NSH an te NSPT the Remuneration Committee takes into account advice from independent remuneration advisers on trends in remuneration for MP. The independent remuneration advisors consider a range of factors Directors of te Resonsible Entity o not receive any remuneration from te Resonsible Entity in including the specific responsibilities assumed by MP. n independent consultant Crichton resect to teir roles it te Resonsible Entity Hoever te irector fees ai by NSR tae into ssociates was engaged during the previous Reporting Period to assess the directors and senior account te comleity involve an aitional uties in te oeration of te Resonsible Entity as a executives’ current remuneration and remuneration structure and to provide a summary on market subsiiary of NSH an as art of te consoliate governance grou Te Resonsible Entity receives a practice relating to executive remuneration and remuneration structures. The advice did not constitute fee for management services renere a remuneration recommendation as defined in the Corporations Act Cth 2001. No fees were paid during this financial year to any remuneration consultant. Tis information as been auite as reuire by section (C) of te ct The Remuneration Committee comprises three independent nonexecutive directors and is chaired by MP are efine as “those persons having authority and responsibility for planning, directing and Laurence rindle. The Remuneration committee met times during the Reporting Period. controlling the aor activities of NSH, the onsolidated roup and the NS, directly or indirectly, including any director (whether executive or otherwise) of NSH.” The objective of the remuneration policy is to ensure that roup remuneration is competitive reflects ey management ersonnel covere in tis reort are as follos 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. Laurence rinle Cairman (noneecutive) The remuneration of directors and senior executives is reviewed at least annually by the Remuneration nre Catsoulis – Managing Director (eecutive) Committee and the full NSH oard. External analysis and advice is sought by the Committee where ntony eane Director (noneecutive) considered appropriate to ensure that the remuneration for directors and senior executives is Hoar rencley Director (noneecutive) competitive in the market place and appropriate for the organisation. Steven Leig Director (noneecutive) Claire Filer – Director Comany Secretary (eecutive) 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 – Stuart Oen – Cief Financial Officer (CFO) • ttract and retain high quality executives and to reward the capabilities and experience Patric Rogers – eneral Counsel an Cief Ris Officer (CCRO) brought to NSR by those executives. Peter reer – Cief Oerating Officer (COO) • Total reward for key executives is to have a significant “at risk” component. Te COO role as mae reunant effective December it te resonsibilities reviously unertaen by te COO • The “at risk” component for key executives is to include both short term incentives (“STI”) and allocate across te balance of te eecutive team long term incentives (“LTI”) which have a strong focus on quantitative and nonquantitative

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 oard of NSR and to securityholders. • Promote and encourage a strong responsible and positive culture amongst all NSR employees.

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42 DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 43

Total nnual Remuneration TR is assessed against a road comparator group and adusted to nderlying Earnings Per Security reflect factors such as the criticality and complexity of the role, experience, length of service and NSR’s positioning within the group. The individual components of TR, comprising Total Fixed Remuneration TFR, STI and TI are individually assessed within this framewor and structured to provide oth short term and long terms incentives to P that align with delivery of short term and long term value to securityholders.

hen selecting the comparator group the data is collected from a comination of sources including Cents 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 sie, industry positioning and other relevant factors to determine the appropriate information against which to assess NSR’s remuneration framewor. C F F F F F

Earnings per security for the F year were impacted by the dilutionary effect of the million NSR has had an outstanding year in the furthering of our continued growth and delivered in excess of capital raise undertaen in ugust its growth oectives over the reporting period with the acuisition of storage facilities and development sites totalling in excess of million. The acuisitions have een funded via the SR has maintained a distribution policy which targets distribution of of underlying earnings successful completion of two capital raises providing million undertaen y a comination of a to securityholders During financial year SR declared distributions totalling cents per stapled rights issue, institutional placements and a Security Purchase Plan. This continued the significant security being at the upper end of the stated policy deliering DPS yield of some aboe that development of the company and delivered sustained increases in earnings and assets under of the S REIT aerage of management y the successful implementation of the Company’s strategy. This has een further enhanced through the identification of development or expansion opportunities, of which NSR currently has proects in various stages of design and construction and has successfully completed F Distribution ield new developments during the Reporting Period.

The Company has estalished a trac record of strong and consistent growth in underlying earnings, net tangile assets NT and total assets under management . nderlying earnings per REIT stapled security have remained steady in the months to une as a result of the dilutionary impact of the capital raisings and have increased since listing in Decemer from .cps to .cps in the year ended une , an increase of . NT has increased y to . per stapled security and y to . illion over the months to une . These results have een achieved through the disciplined management of NSR operations and the success of our multiple SR revenue streams and acuisition strategy. The consistent and considered approach to driving increased underlying earnings through a comination of organic growth from existing assets as well as acuisitions has een instrumental in achieving this result.

Source loomberg aret Data nderlying Earnings SR has deliered Total Shareholder Return “TSR” (a combination of share price growth and distributions . receied by securityholders oer the past three years to une in ecess of

. SR listed in December with an issue price of From that time to une the stapled security price has increased by with the une closing price of with the maret

. capitalisation of the company increasing to b as at une

. SR Stapled Security Price

m . . . . .

. . . m .

. C F F F F F

ul Sep Dec ar un Sep Dec ar un Sep Dec ar un Sep Dec ar un Sep Dec ar un

For personal use only use personal For t Cap Share Price

Security price performance oer the period uly to une has shown a increase This compares to an increase of for the S REIT inde and for the broader S Inde oer the same period

nderlying earnings is a nonIFRS measure unaudited. See page of Directors’ Report for reconciliation of underlying earnings nderlying earnings is a nonIFRS measure (unaudited See page of Directors’ Report for reconciliation of underlying earnings DIRECTORS’ REPORT FOR THE ER ENDED NE

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44 DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 45

The terms of emploment for the P effective from ul period are set out in the tale elow

Fees and payments to nonexecutive directors reflect the demands which are made on and the responsibilities of the nonexecutive directors and their contribution towards the performance of NSR as well as the complexity of the National Storage Property Trust National Storage Financial Services ndrew No fixed term ,, • months in lieu of notice if reuired NSH imited and the operating business. The remuneration policy sees to ensure that NSR attracts and Catsoulis months • months in the event of incapacit or illness retains directors with appropriate experience and qualifications to oversee the operations of NSR on

behalf of the securityholders. Stuart Owen No fixed term , • months in lieu of notice if reuired NSH months The number of meetings of directors is shown on page of this report. • months in the event of incapacit or illness • months fixed remuneration plus wees for The Constitution of NSH specifies that the amount of the remuneration of the nonexecutive directors is each ear of service – capped at months a yearly sum not exceeding the sum from time to time determined by the Company in a general in the event of redundanc meeting. nder the AS isting Rules the total amount paid to all NSH nonexecutive directors for their services must not exceed in aggregate in any financial year the amount fixed by NSH’s annual general Patric Rogers No fixed term , • months in lieu of notice if reuired NSH meeting. The amount approved by securityholders at the Annual eneral meeting is . months • months in the event of incapacit or illness • months fixed remuneration plus wees for Annual NSH nonexecutive directors’ fees and Committee fees currently agreed to be paid by NSH each ear of service – capped at months effective from uly are detailed below. Nonexecutive directors are not eligible to participate in in the event of redundanc NSR’s incentive plan. Claire Fidler No fixed term , • months in lieu of notice if reuired NSH months • months in the event of incapacit or illness • months fixed remuneration plus wees for each ear of service – capped at months aurence Brindlea. in the event of redundanc Anthony eaneb. Steven eigh ase salaries are annual salaries for the financial ear commencing ul The are reviewed annuall the Howard Brenchley Remuneration Committee ctual salaries paid in the ear ended une are shown on page 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 Ris Committees The composition of TR for the ear ending une for P is detailed in the tale elow

here applicable NSH nonexecutive directors’ fees include superannuation at the required statutory rate. D CFO CCRO All remuneration paid to executive directors and senior executives comprises four components CoSec

• Base pay and benefits including superannuation • Shortterm performance incentives • ongterm performance incentives P senior executives ma also e entitled to participate in the STI and TI programs that are in place • Other remuneration if applicable from time to time The incentive programs are at the discretion of the oard and do not constitute an entitlement under the executive service agreements of the respective P Total incentive programs are assessed against a road comparator group and adusted to reflect factors such as the criticalit The anaging Director and senior executives are paid a base salary that includes employer of the role, experience, length of service and NSR’s positioning within the comparator group including contributions to superannuation funds. The remuneration of the anaging Director is reviewed annually the S REIT index The oard continuall assesses the structure of the incentive plans and has by the Remuneration Committee and Board. The remuneration of senior executives is reviewed determined that at this point in time paments made under these plans will e paid in cash The oard annually by the anaging Director who maes a recommendation to the Remuneration Committee. considers that there is a sufficient nexus etween the cash remuneration and the euit ased The Committee then considers but is not obliged to accept the recommendation of the anaging paments given the lin etween securit price performance and TSR Director and taes whatever additional steps it determines appropriate to assess the senior executive salaries. n independent consultant was engaged during the previous Reporting Period to assess the appropriateness of the remuneration structure currentl in place and to provide advice on maret There is no guarantee of base salary increases included in any executive director or senior executive practice relating to executive remuneration structures The advice did not constitute a remuneration contracts or through the annual review process. The remuneration of all P was reviewed during the recommendation as defined in the orporations ct th fter considering all the relevant year. information the oard has determined that the existing short and long term incentive program is appropriate The following incentive program is effective from ul The anaging Director and senior executives can potentially be paid a bonus as part of their remuneration. hether such a bonus is paid and the amount of such a bonus is at the discretion of the Remuneration Committee and the Board. Any bonuses paid would fall into the category of “other remuneration”.

For personal use only use personal For Remuneration and other terms of employment for the P 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 orporations ct (th) such that they do not require securityholder approval. However in addition all executive contracts mae any such benefits subect to the orporations ct (th) all other applicable laws and where necessary securityholder approval. They also contain provisions which allow NSH to reduce DIRECTORS’ REPORT FOR THE ER ENDED NE any such payments to ensure compliance with the law.

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46 DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 47

Short Term Incentive STI The STI contains four separate elements that will be assessed independently of the other elements The The P were eligible for payment of STI’s and LTI’s for the financial year ended une in STI is an annual incentive and is to be paid in cash annually accordance with the incentive program outlined in the nnual Report The program is the same as that outlined above The STI’s and LTI’s were agreed with the P to reward them for performance against both financial and operational obectives The minimum payable was ero and maimum payable was for Financial chieve nderlyin Earnins as determined by the oard F in aggregate for all P

Financial – Out Eceedin nderlyin Earnins tarets The STI and LTI hurdles included Performance nderlying earnings eual to or eceeding cents per security

th Individual KPI’s Individual performance criteria set in conunction with D oard TSR over the three year period to une being greater than the percentile of the comparator group S REIT Strateic ssessment in accordance with performance in the followin Rolling threeyear compound EPS growth eceeding une target cps areas • Implementation of maor proects The oard has assessed the performance of the Company and the P against the performance • Staff continuity criteria and have determined that the following STI and LTI’s have been earned and are payable • Ris anaement inclusive of statutory Superannuation amounts for the period uly to une • Innovation and enhancement of processes and procedures The Financial OutPerformance STI is only payable to the etent that the total STI payable does not eceed The minimum STI payable is ero and maimum STI payable is for F in areate for all KP Lon Term Incentive LTI ndrew Catsoulis D The LTI criteria have been set so as to alin the interests of KP with those of securityholders The LTI Stuart Owen CFO contains two separate components which are independently tested Patric Rogers CCRO Claire Fidler CoSec

Total Shareholder inimum total shareholder return above the th percentile in Return comparison to the S REIT inde The LTI becomes payable The oard continues to asses both shortterm and longterm incentives against a strict set of criteria and in accordance with the slidin scale below once the th percentile believes that delivering superior results to security holders is reuired for P to achieve full incentive hurdle is met payments Earnins Per Share Earnins per share rowth of per annum rowth

For the purposes of determinin the LTI attributable to Total Shareholder Return in any iven period the followin scale is applied

th percentile th percentile th th percentile Prorata from th percentile

The LTI is assessed over a rollin year period and as such to be eliible for payment of the LTI KP must have been employed by SR for three years or shorter period as determined by the oard Post three years’ service the LTI will be paid on an annual basis on the previous three years’ performance aainst the predetermined criteria

The minimum LTI payable is ero and maimum LTI payable is for F in areate for all KP

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DIRECTORS’ REPORT FOR THE ER EDED E nderlying earnings is a nonIFRS measure unaudited See page of Directors’ Report for reconciliation of underlying earnings

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48 DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 49

0 0 0 0 0 0 0 0 0 3 3 1 27 20 2 1 1 T R P D P

0

7

2000 1000 120 121000 3122 7732 1202 27000 13000 1100 11300 231 123 2 3 irectors of NSH 1213 127001 132120 113 123 123 11

A 2133 A C 13010 1 1012 H 0000 00000 S 100 100 C F 3 120 101

27 2 70 132 720

xecutives of NSH 2203 11301 20320

S O

P R 13 13

1312 200 220 011 30137 10 10000 T P

7 23 2031 127 10 2031 2031 2031 2031 200 11712 2 212 23100 217

000 000 000 000 000 000 000 000 00 000 000

7 3721 73 7 37 3000 17 221233

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2 133333 1207 11002 00 2 12 37323 2 1232 1100 1033 00 20373 3201 02 270

ER 30 201EDED E ER

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executive directors executive directors executive

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 201 1

Non rindle aurence Keane nthony renchley Howard eigh Steven directors xecutive ndrew Catsoulis Fidler Claire executives Senior Owen Stuart Rogers Patric Non rindle aurence Keane nthony renchley Howard eigh Steven directors xecutive ndrew Catsoulis Fidler Claire executives Senior * Greer Peter Owen Stuart Rogers Patric

for Period. Reporting KMP the received by the Company’s following out details remuneration set ofThe tables the 2017 December 31 effective was redundant made Mr* role Greer’s REPORT THE FOR DIRECTORS’

50 DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 51 AUDITOR’S INDEPENDENE DEARATION

A copy of the auditor’s independence declaration as required under Section 307C of the orporations ct th is set out on pae

On 26 Jul 2019 the roup purchased to storae centre investment properties rom APSF or 26 Nonaudit services million and reached an areement to purchase a third asset rom APSF or 213 million on The folloin nonaudit serices ere proided y the entitys auditor Ernst Youn Australia The completion o construction Directors of NSH are satisfied that the proision of nonaudit serices is copatile ith the eneral standard of independence for auditors iposed y the orporations ct th The nature and scope of each type of nonaudit serice proided eans that auditor independence as not coproised On 2 Jul 2019 the roup issued 99120 ne stapled securities as a result o the 10 million euit raisin announced on 2 June 2019 The roup received proceeds or this raisin on 2 June 2019 Ernst Youn Australia receied or are due to receie the folloin aounts for the proision of non audit serices conducted durin the financial year On 30 Jul 2019 the roup raised 13 million rom a nonunderritten securit purchase plan This resulted in the issue o 913 ne stapled securities 1 Taation serices 1320 2 Assurance related 300

EES PAID TO AND INTERESTS ED IN TE NSPT TE RESPONSIE ENTIT OR ITS ASSOIATES Fees paid to the Responsile Entity and its associates out of NSPT property durin the year are disclosed in the Stateent of Coprehensie Incoe and are detailed in Note 17 to the financial stateents The amounts contained in this Directors’ Report and in the Financial Report have been rounded to the No fees ere paid to the Directors of the Responsile Entity durin the year out of NSPT nearest 1000 unless otherise stated) under the option available under ASIC Corporations Roundin in Financial/Directors’ Reports) Instrument 2016/191 The Consolidated roup and NSPT roup are INTERESTS IN TE NSPT entities to hich the ASIC Instrument applies The oeent in units on issue y the NSPT durin the year is set out in Note 13 to the financial

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DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 2 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 201 3

52 DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 53

Tis Directors’ Report is made on 2 Ast 201 in accordance it a resotion o te oard o AUDITOR’S INDEPENDENE DEARATION Directors o Nationa Storae Hodins imited and is sined or and on ea o te Directors

arence rinde Andre Catsois Cairman anain Director Nationa Storae Hodins imited Nationa Storae Hodins imited risane risane

For personal use only use personal For

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 201 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 201

54 DIRECTORS’ REPORT NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 55

FINANCIAL CONSOLIDATED STATEMENT OF PROFIT OR LOSS For the year ended 30 June 2019

STATEMENTS 2019 2018 Notes $'000 $'000 Restated

Revenue from rental income 144,147 126,093 Revenue from contracts with customers 5 13,510 12,250 Interest income 7 1,531 756 Total revenue 159,188 139,099

Employee expenses 6 (28,744) (24,746) Premises costs (19,141) (16,064) Advertising and marketing (4,243) (5,313) Insurance costs (2,607) (1,800) Other operational expenses 6 (11,891) (10,910) Finance costs 7 (33,747) (28,912) Share of profit of joint ventures and associates 12 3,171 1,342 Fair value adjustments 10.4 84,663 92,368 Restructuring and other non-recurring costs (1,538) (1,310)

Profit before income tax 145,111 143,754

Income tax (expense)/ benefit 8 (271) 2,019

Profit after tax 144,840 145,773

Profit for the year attributable to: Members of National Storage Holdings Limited 5,406 1,771 Non-controlling interest (unitholders of NSPT) 139,434 144,002 144,840 145,773

Basic and diluted earnings per stapled security (cents) 19 22.13 26.82

For personal use only use personal For

NATIONAL STORAGE BUNDALL The above Consolidated Statement of Profit or Loss should be read in conjunction with the accompanying notes.

57

56 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 57

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2019 INCOME For the year ended 30 June 2019 2019 2018 Notes $'000 $'000 2019 2018 ASSETS $'000 $'000 Current assets Cash and cash equivalents 9.1 178,842 21,333 Profit after tax 144,840 145,773 Trade and other receivables 9.2 19,738 15,152 Inventories 10.1 682 656 Other comprehensive income Assets held for sale 10.2 1,107 5,713 Items that may be reclassified to profit or loss Other current assets 9.3 7,014 5,424 Exchange differences on translation of foreign operations 858 (370) Total current assets 207,383 48,278 Net loss on cash flow hedges (21,808) (2,028) Other comprehensive loss for the year, net of tax (20,950) (2,398) Non-current assets Trade and other receivables 9.2 118 601 Total comprehensive income for the year 123,890 143,375 Property, plant and equipment 10.3 856 1,024 Investment properties 10.4 2,117,176 1,592,798 Investment in joint ventures and associates 12 16,731 18,125 Total comprehensive income for the year attributable to: Intangible assets 10.5 46,500 46,005 Deferred tax assets 8 2,980 1,019 Members of National Storage Holdings Limited 5,391 1,748 Other non-current assets 9.3 569 2,099 Unitholders of National Storage Property Trust 118,499 141,627 Total non-current assets 2,184,930 1,661,671 123,890 143,375 Total assets 2,392,313 1,709,949

LIABILITIES Current liabilities Trade and other payables 9.4 18,993 12,318 Finance lease liability 9.7 5,327 4,446 Deferred revenue 10.6 12,719 12,584 Income tax payable 1,264 1,142 Provisions 10.7 2,463 1,930 Distribution payable 16 34,370 27,396 Other liabilities 9.6 713 3 Total current liabilities 75,849 59,819

Non-current liabilities Borrowings 9.5 843,927 596,410 Finance lease liability 9.7 163,827 156,942 Provisions 10.7 1,964 1,513 Deferred tax liability 8 1,097 606 Other liabilities 9.6 1,375 4,380 Total non-current liabilities 1,012,190 759,851

Total liabilities 1,088,039 819,670

Net assets 1,304,274 890,279

EQUITY

For personal use only use personal For Non-controlling interest (unitholders of NSPT) 1,188,147 813,558 Contributed equity 13 100,143 66,128 Other reserves 14 (27) (12) Retained earnings 16,011 10,605 Total equity 1,304,274 890,279

The above Consolidated Statement of Other Comprehensive Income should be read in conjunction The above Consolidated Statement of Financial Position should be read in conjunction with the with the accompanying notes. accompanying notes. 58 59

58 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 59

CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2019 For the year ended 30 June 2019

2019 2018 Notes $’000 $’000

Operating activities $000 $000 $000 $000 $000 Receipts from customers 174,782 150,094 Payments to suppliers and employees (82,341) (73,282) 0 00 0 Interest received 2,024 265 Income tax paid (1,153) (85) Profit for the year - 5,406 - 139,434 144,840 Net cash flows from operating activities 9.1 93,312 76,992 Other comprehensive income 14 - - (15) (20,935) (20,950)

0 0 Investing activities

Purchase of investment properties (416,648) (168,733) Issue of stapled securities via Proceeds on sale of investment property 26,961 6,820 institutional and retail placements 13 16,498 - - 158,927 175,425 Improvements to investment properties (10,762) (7,926) Issue of stapled securities via Development of investment property under construction (13,027) (3,661) distribution reinvestment plans 13 1,549 - - 14,628 16,177 (233) (154) Contract for future issue of equity Purchase of property, plant and equipment 10.3 via institutional placement 13 16,451 - - 153,549 170,000 Purchase of intangible assets (777) (590) Costs associated with issue Distribution received from joint ventures and associates 12 5,064 1,016 of stapled securities (690) - - (6,562) (7,252) Return of capital on sale of units in joint venture 12 3,000 - Deferred tax on cost of stapled Investments in associate and joint ventures 12 (3,499) (7,440) securities 8 207 - - - 207 Net cash flows used in investing activities (409,921) (180,668) Distributions provided for or paid 16 - - - (64,452) (64,452)

0 00 00 Financing activities Proceeds from issue of stapled securities 13 345,425 59,536 0 0 00 0 0 Transaction costs on issue of stapled securities (7,427) (1,642) Distributions paid to stapled security holders 15 (41,301) (40,045) Proceeds from borrowings 398,876 195,222 Repayment of borrowings (155,100) (76,820) 0 Payments associated with resetting interest rate swaps 9.5 (22,913) - Financing provided to joint venture 17 (4,125) - Profit for the year - 1,771 - 144,002 145,773 Payment of finance lease liabilities (12,836) (12,561) Other comprehensive income 14 - - (23) (2,375) (2,398) Interest and other finance costs paid (26,531) (21,824) Net cash flows from financing activities 474,068 101,866

Issue of stapled securities via Net increase / (decrease) in cash and cash equivalents 157,459 (1,810) institutional and retail placements 13 5,983 - - 53,553 59,536 Net foreign exchange difference 50 (23) Issue of stapled securities via Cash and cash equivalents at 1 July 21,333 23,166 distribution reinvestment plans 13 926 - - 8,654 9,580 Cash and cash equivalents at 30 June 9.1 178,842 21,333 Costs associated with issue of stapled securities (166) - - (1,476) (1,642) Deferred tax on cost of stapled securities 8 240 - - - 240 Distributions provided for or paid 16 - - - (53,427) (53,427) 0

0 0 00 0

For personal use only use personal For

The above Consolidated Statement of Changes in Equity should be read in conjunction with the The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying accompanying notes. notes.

60 61

60 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 61

Several other amendments and interpretations apply for the first time in these financial statements, but do not have an impact on the financial report. or the ear ended une Revenue from Contracts with Customers

National Storage REIT (“ ” or “”) is a oint uotation of ational torage oldings imited AASB 15 supersedes AASB 111 Construction Contracts, AASB 118 Revenue and related Interpretations “” or “ ”) and its controlled entities (“ ”) and ational torage ropert Trust and applies to all revenue arising from contracts with customers, unless those contracts are in the scope “” or “ ”) and its controlled entities “ ” on the ustralian ecurities change of other standards. The new standard establishes a five-step model to account for revenue arising from (“”). contracts with customers. Under AASB 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled to, in exchange for transferring goods or services The onstitutions of and T ensure that, for so long as the two entities remain ointl uoted, the to a customer. The standard requires entities to exercise judgement, taking into consideration all of the number of shares in the ompan and the number of units in the Trust shall be eual and that the relevant facts and circumstances when applying each step of the model to contracts with their shareholders and unitholders be identical. oth the ompan and the esponsible ntit ational customers. torage inancial ervices imited of the Trust must at all times act in the best interest of . The stapling arrangement will continue until either the winding up of the ompan or the Trust, or termination The Group adopted AASB 15 using the full retrospective method of adoption. The effect of the transition b either entit. on the current and comparative periods was not material.

The financial report of for the ear ended une was approved on ugust , in Under the full retrospective method, the comparative period’s revenue classifications have been accordance with a resolution of the oard of irectors of . restated to present revenue streams under the requirements of AASB 15. The effect of these changes is limited to the reclassification of balances. There was no impact on the amount of revenue recognised. The nature of the operations and principal activities of the Group are described in the irectors eport. The Group did not apply any of the practical expedients available under the full retrospective method.

The timing of revenue recognition in the year ended 30 June 2019 has not been materially impacted following the adoption of AASB 15. As required for the financial report information for the year ended 30 June 2019, the Group’s revenue is These general purpose financial statements have been prepared in accordance with ustralian disaggregated at the statement of profit or loss with the exception of Revenue from Contracts with ccounting tandards and nterpretations issued b the ustralian ccounting tandards oard (“”) Customers which is disaggregated into categories in note 5 that depict how the nature, amount, timing and the orporations ct . The financial statements have been prepared on a historical cost basis, and uncertainty of revenue and cash flows are affected by economic factors. ecept for selected noncurrent assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. is a forprofit entit for the purpose of preparing the financial statements. The Group’s contracts with customers for the sale of goods and services consist of one performance

obligation. The Group has concluded that revenue from the sale of goods and services should be The financial statements are presented in ustralian ollars “” and all values are rounded to the recognised at the point in time when control of the asset is transferred to the customer, generally on nearest thousand dollars ’ unless otherwise stated refer to note w. delivery of the goods or service. Therefore, the adoption of AASB 15 has not had an impact on the timing

of the revenue recognition. The accounting policies applied b in these financial statements are the same as the une

financial statements ecept for the accounting policies impacted b new or amended accounting standards detailed in this note.

The Group’s contracts with customers for agency fees and commissions consist of one performance The Group has elected to present onl financial information relating to within these financial obligation. The Group has concluded that revenue from agency fees and commissions should be statements. separate financial report for the T Group has also been prepared for the ear ended recognised at the point in time when the commission is generated and is receivable. Therefore, the une , this is available at www.nationalstorageinvest.com.au. adoption of AASB 15 has not had an impact on the timing of revenue recognition.

The consolidated financial statements of the Group compl with nternational inancial eporting The Group’s design and development fees to customers consist of one performance obligation. The tandards “” as issued b the nternational ccounting tandards oard. Group has concluded that revenue from design and development fees is to be recognised over time

because the Group’s performance creates or enhances an asset that the customer controls. The adoption of AASB 15 has not had an impact on the timing of revenue recognition.

The Group has adopted all of the new and revised tandards and nterpretations issued b the ustralian

For personal use only use personal For ccounting tandards oard that are relevant to its operations and effective for the current ear.

The Group has applied, for the first time, Revenue from Contracts with Customers and Financial Instruments.

63

62 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 63

The Group’s contracts with customers for management fees consist of recurring performance oligations to e recognised over the period of the management agreement he adoption of AASB 1 has not had an impact on the timing of revenue recognition aents (ie te lease liailit) and an asset reresenting te rigt to se te Financial Instruments nderling asset dring te lease ter (ie te rigtose asset) Te initial

easreent incldes aents to e AASB inancial nstruments replaces AASB 1 Financial Instruments: Recognition and Measurement for ade in otional eriods i te lessee is annual periods eginning on or after 1 anuar 1, ringing together all three aspects of the reasonal certain to eercise an otion to accounting for financial instruments classification and measurement impairment and hedge etend te lease or not to eercise an accounting otion to terinate te lease

ith the eception of hedge accounting, which the Group applied prospectivel, the Group has applied essees ill e reired to searatel AASB retrospectivel he effect of initial application was not material he classification and recognise te interest eense on te measurement reuirements of AASB did not have a material impact on the Group lease liailit and te dereciation eense on te rigtose asset essees The adoption of AASB 9 has changed the Group’s accounting for impairment losses for financial assets by ill e reired to reeasre te lease replacing AASB 139’s incurred loss approach with a forwardlooing epected credit loss “” liailit on te occrrence o certain eents (eg a cange in te lease ter) approach AASB reuires the Group to recognise an allowance for ’s for all det instruments not Te lessee ill generall recognise te held at fair value through profit or loss and contract assets he adoption of the impairment aspect of the aont o te reeasreent o te lease new standard did not have a material impact on the Group liailit as an adstent to te rigtose asset The Group applied hedge accounting prospectively. At the date of initial application, all of the Group’s eisting hedging relationships were eligile to e treated as continuing hedging relationships he essors contine to classi leases as hedging reuirements of AASB did not have a material impact on the Group operating or finance, with AASB 16’s aroac to lessor acconting sstantiall ncanged ro S

Several other amendments and interpretations appl for the first time in 1, ut do not have an impact Te ro is condcting an assessent o te iact o S s in relation to on the consolidated financial report of the Group he Group has elected to earl adopt AASB 16 the Group’s current commitments under Amendments to Australian Accounting Standards – Definition of a Business. his Standard amends the oerating leases e to te relatie sie o definition of a usiness in AASB 3 Business Combinations he amendments clarif the minimum these commitments to the Group’s total reuirements for a usiness, remove the assessment of whether maret participants are capale of assets adotion o S is not eected replacing missing elements, add guidance to help entities assess whether an acuired process is to have a material impact on the Group’s sustantive, narrows the definitions of a usiness and of outputs, and introduces an optional fair value inancial stateents Te rop’s leasehold concentration test This amendment has been applied to the Group’s assessment on whether the inestent roerties ill contine to e acuisition of storage centres should e accounted for under AASB Business Combinations or AASB1 acconted or nder S and ill e Investment Properties as a purchase of investment propert see note naected te alication o S

he Group has not earl adopted an other standards S nnal Te aendents clari certain anar l Iroeents to reireents in IRS Standards • S and cle S Australian Accounting Standards and nterpretations relevant to the Group’s operations, that have reiosl eld interest in a oint recentl een issued or amended ut are not et effective or have not een adopted for the annual oeration • reporting ear ended une 1 are outlined in the following tale S incoe ta conseences o aents on

inancial instrents classiied as eit • S orroing costs eligile or caitalisation AASB 16 eases AASB 16 introduces a single lessee 1 anuar 1 ul 1 S ncertaint oer Te Interretation clariies te alication anar l For personal use only use personal For accounting model and reuires a lessee to 1 Interretation Incoe Ta o te recognition and easreent recognise assets and liailities for all leases and Treatents criteria in S en with a term of more than 1 months with releant tere is ncertaint oer incoe ta the eception of low value assets At the aending treatents Te Interretation seciicall commencement date of a lease, a lessee standards addresses will recognise a liailit to mae lease

6

64 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 65

Group has associate investments that are The inancial eport of S as at 3 une 19 accounted for using the euity method. comprises the consolidated financial statements of the S Group and the ST Group. • hether an entity considers uncertain nder AASB 11 investments tax treatents separately The financial statements for the Group are in oint arrangements are classified as either oint • he assuptions an entity aes prepared on the basis that S was the acuirer operations or oint ventures. The classification aout the exaination of tax depends on the contractual rights and treatents y taxation authorities of ST. The noncontrolling interest is obligations of each investor, rather than the • ow an entity deterines taxale attributable to stapled securityholders presented legal structure of the oint arrangement. profit tax ases unused tax losses separately in the statement of comprehensive unused tax credits and tax rates income and within euity in the statement of • ow an entity considers chanes in financial position, separately from parent uring the year ended 3 une 19 and 3 facts and circustances. shareholders’ equity. une 1, the Group had an arrangement, where the Group’s equity interest exceeded endents to his tandard aends anuary uly . This was classified as a oint venture as all ustralian parties are subect to a Securityholders ccountin to clarify that an entity is required Subsidiaries are all entities over which the Group tandards – to account for lonter interests in an has control. The Group controls an entity when it Agreement that has been contractually onter associate or oint enture which in is eposed to, or has rights to, variable returns structured such that the parties to the nterests in sustance for part of the net inestent from its involvement with the entity and has the agreement have eual representation on the ssociates and in the associate or oint enture ut to ability to affect those returns through the power advisory board responsible for the overall oint entures which the equity ethod is not applied to direct the activities of the entity. direction, supervision and decision maing of usin inancial nstruents efore onsolidation of a subsidiary begins when the the entity. applyin the loss allocation and Group obtains control over the subsidiary and ipairent requireents in . ceases when the Group loses control. The nvestments in oint ventures are accounted for onceptual he reised onceptual raewor anuary uly acuisition method of accounting is used to using the euity method. raewor for includes soe new concepts proides account for business combinations see note inancial updated definitions and reconition g. eportin and criteria for assets and liailities and clarifies nder the euity method, the investment in an releant soe iportant concepts includin ntercompany transactions, balances and associate or a oint venture is initially recognised aendin unrealised gains on transactions between group at cost. The carrying amount of the investment is standards • he oectie of financial reportin entities are eliminated. nrealised losses are also adusted to recognise changes in the Group’s • ualitatie characteristics of useful share of net assets since the acuisition date. financial inforation eliminated unless the transaction provides Goodwill relating to the associate or oint • inancial stateents and the reportin evidence of an impairment of the transferred entity asset. Accounting policies of all subsidiaries are venture is included in the carrying amount of the • he eleents of financial stateents consistent with the policies adopted by the investment and is neither amortised nor • econition and dereconition Group. individually tested for impairment. • easureent • resentation and disclosure The Group treats transactions with non The statement of profit or loss reflects the • oncepts of capital and capital controlling interests that do not result in a loss of Group’s share of the results of operations of the aintenance control as transactions with euity owners of the associate or oint venture. Any change in other comprehensive income of those investees is he chanes to the onceptual Group. A change in ownership interest results in presented as part of the Group’s other raewor ay affect the application of an adustment between the carrying amounts of comprehensive income. n addition, when there in situations where no standard applies the controlling and noncontrolling interests to to a particular transaction or eent. reflect their relative interests in the subsidiary. has been a change recognised directly in the Any difference between the amount of the euity of the associate or oint venture, the endents to aends anuary uly adustment to noncontrolling interests and any Group recognises its share of any changes, ustralian and when applicable, in the statement of changes ccountin to address an inconsistency consideration paid or received is recognised in in euity. nrealised gains and losses resulting tandards – ale etween the requireents in and a separate reserve within euity attributable to or ontriution of those in in dealin with the sale owners of the parent entity. from transactions between the Group and the ssets etween or contriution of assets etween an associate or oint venture are eliminated to the an nestor and inestor and its associate or oint enture. etent of the interest in the associate or oint its ssociate or Associates are all entities over which the Group venture.

oint enture has significant influence but not control or oint For personal use only use personal For The aggregate of the Group’s share of profit or control. This is generally the case where the Group holds between and of the loss from associates and oint ventures is shown voting rights. nvestments in associates are on the face of the consolidated statement of accounted for using the euity method. The profit or loss and represents profit or loss after ta

66 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 67

• • ‘Share of profit ’ in the the Group’s performance creates or enhances ’ • • NSPT is a ‘flow through’ entity for Australian Attribution Managed Investment Trust (“”)

For personal use only use personal For NSPT’s subsidiary National Storage New Zealand Property Trust (“”) is an Australian

68 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 69

is o reea or he iiiua iacia e iese o a orei operaio hese are actiities and assets that is capable of bein controllin interests and any preious interest saees o he pare ei hea ei i recoise i oher coprehesie icoe ui conducted and manaed for the purpose of held oer the net identifiable assets acuired he a cosoiae roup u o or he he e iese is ispose o a hich ie proidin oods or serices to customers and liabilities assumed f the fair alue of the cosoiae iacia saees he cuuaie aou is recassiie o proi or eneratin inestment income such as net assets acuired is in ecess of the oss a chares a creis ariuae o diidends or interest or eneratin other areate consideration transferred the Group “GST” echae iereces o hose oear ies income from ordinary actiities n order to reassesses hether it has correctly identified all eeue epeses asses a iaiiies are are aso recore i oher coprehesie determine an interated set of actiities an of the assets acuired and all of the liabilities recoise e o he aou o G ecep icoe assessment of minimum business reuirements assumed and reies the procedures used to and hat substantie processes hae been measure the amounts to be reconised at the • he he G icurre o a sae or ooear ies ha are easure i ers acuired is applied acuisition date f the reassessment still results in purchase o asses is o paae or o hisorica cos i a orei currec are an ecess of the fair alue of net assets recoerae ro he aaio auhori i rasae usi he echae raes a he s part of this assessment the Group has early acuired oer the areate consideration hich case he G is recoise as par o aes o he iiia rasacios ooear adopted the amendments to the definition of a transferred then the ain is reconised in profit he reeue or epese ie or par o he ies easure a air aue i a orei business under and has applied the or loss cos o acuisiio o he asse as currec are rasae usi he echae optional fair alue concentration test f the appicae raes a he ae he he air aue is concentration test is passed the set of actiities fter initial reconition oodill is measured at eerie and assets is determined not to be a business cost less any accumulated impairment losses • he receiaes a paaes are sae and therefore the transaction is not accounted or the purpose of impairment testin oodill ih he aou o G icue he ai or oss arisi o rasaio o o for as a business combination but rather as an acuired in a business combination is from the oear ies easure a air aue is reae asset acusition acuisition date allocated to each of the he e aou o G recoerae ro or i ie ih he recoiio o he ai or oss o Group’s casheneratin units that are paae o he aaio auhori is icue as he chae i air aue o he ie ie usiness combinations are accounted for usin epected to benefit from the combination par o receiaes or paaes i he saee rasaio iereces o ies hose air aue the acuisition method The cost of an irrespectie of hether other assets or liabilities o iacia posiio oies a ai or oss is recoise i oher acuisition is measured as the areate of the of the acuiree are assined to those units coiecies are iscose e o he aou coprehesie icoe or proi or oss are aso consideration transferred hich is measured at o G recoerae ro or paae o he recoise i oher coprehesie icoe or acuisition date fair alue and the amount of here oodill has been allocated to a cash aaio auhori proi or oss respecie any noncontrollin interests in the acuiree or eneratin unit “” and part of the each business combination the Group elects operation ithin that unit is disposed of the ash os are icue i he saee o hether to measure the noncontrollin interests oodill associated ith the disposed operation cash os o a ross asis a he G cosoiaio he asses a iaiiies o in the acuiree at fair alue or at the is included in the carryin amount of the copoe o cash os arisi ro iesi orei operaios are rasae io usraia proportionate share of the acuiree’s operation hen determinin the ain or loss on a iaci aciiies hich is recoerae oars a he rae o echae preaii a he identifiable net assets cuisition related costs disposal Goodill disposed in these ro or paae o he aaio auhori is repori ae a heir saees o proi or are epensed as incurred and included in circumstances is measured based on the casse as par o operai cash os oss are rasae a echae raes preaii business combination epenses in the statement relatie alues of the disposed operation and a he aes o he rasacios he echae of profit or loss the portion of the G retained iereces arisi o rasaio or cosoiaio are recoise i oher hen the Group acuires a business it assesses The Group’s consolidated financial statements coprehesie icoe isposa o a the financial assets and liabilities assumed for are presee i usraia oars or each orei operaio he copoe o oher appropriate classification and desination in The determination of hether an arranement is ei he Group eeries he ucioa coprehesie icoe reai o ha accordance ith the contractual terms a lease is based on the substance of the currec a ies icue i he iacia paricuar orei operaio is recoise i economic circumstances and pertinent arranement at the inception of the lease The saees o each ei are easure usi proi or oss conditions as at the acuisition date This arranement is or contains a lease if fulfilment ha ucioa currec includes the separation of embedded of the arranement is dependent on the use of ooi arisi o he acuisiio o a deriaties in host contracts by the acuiree a specific asset or assets and the arranement orei operaio a a air aue coneys a riht to use the asset or assets een if rasacios i orei currecies are iiia auses o he carri aous o asses ny continent consideration to be transferred that riht is not eplicitly specified in an recorded by the Group’s entities a heir a iaiiies arisi o he acuisiio are by the acuirer ill be reconised at fair alue arranement respecie ucioa currec spo raes a he reae as asses a iaiiies o he orei at the acuisition date ontinent ae he rasacio irs uaiies or operaio a rasae a he spo rae o consideration classified as an asset or liability The Group leases properties hich are classified recoiio oear asses a iaiiies echae a he repori ae that is a financial instrument and ithin the as inestment properties note The Group eoiae i orei currecies are scope of is also leases office premises and items of plant rasae a he ucioa currec spo raes measured at fair alue ith the chanes in fair and euipment

o echae a he repori ae alue reconised in the statement of profit or For personal use only use personal For he Group accous or a rasacio as a loss iereces arisi o seee or rasaio o usiess coiaio i i ees he eiiio oear ies are recoise i proi or oss uer hich reuires ha he asses a Goodill is initially measured at cost bein the eases of inestment property and property ih he ecepio o oear ies ha are iaiiies acuire cosiue a usiess ecess of the areate of the consideration plant and euipment here the roup as esiae as par o he hee o he Group’s usiess is eie as a ierae se o transferred and the amount reconised for non lessee has substantially all the riss and reards

70 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 71

of onership are classified as finance leases. estimated selling price in the ordinary course of iacia asses he a aorise cos are easehold inestment property and property business less the estimated costs necessary to suseue easure usi he eecie plant and euipment finance leases are mae the sale. ieres eho a are suec o ipaire he aopio o has chae he capitalised at the lease’s inception at the fair Gais a osses are recoise i proi or oss Group’s accoui or ipaire osses or alue of the leased property. he he asse is erecoise oiie or financial assets by replacing AASB 139’s incurred impaired. The Group’s fiacia asses a oss approach ih a orarooi epece The corresponding rental obligations net of aorise cos icues rae receiaes a crei oss “” approach finance charges are included in other short eposis term and longterm liabilities. ach lease At initial recognition inancial assets are he Group recoises a or a e payment is allocated beteen the liability and classified as subseuently measured at isrues o he a air aue hrouh proi finance cost. The finance cost is charged to the amortised cost fair alue through other or oss s are ase o he ierece profit or loss oer the lease period so as to comprehensie income or fair alue through he Group easures e isrues a air eee he coracua cash os ue i produce a constant periodic rate of interest on profit or loss. aue hrouh oher coprehesie icoe i accorace ih he corac a a he cash the remaining balance of the liability for each he iacia asse is he ih he oecie o os ha he Group epecs o receie period. The inestment properties acuired The classification of financial assets at initial oh hoi o coec coracua cash os iscoue a a approiaio o he oriia under finance leases are carried at fair alue. recognition depends on the financial asset’s a sae a he coracua ers o he eecie ieres rae he epece cash os hanges in alue are presented in profit or loss. contractual cash flo characteristics and the iacia asse ie rise o speciie aes o i icue cash os ro he sae o coaera Group’s business model for managing them. cash os ha are soe paes o pricipa he or oher crei ehacees ha are The property plant and euipment acuired ith the eception of trade receiables that do a ieres o he pricipa aou iera o he coracua ers under finance leases is depreciated oer the not contain a significant financing component ousai asset’s useful life or over the shorter of the asset’s or for hich the Group has applied the practical s are recoise i o saes or crei useful life and the lease term if there is no epedient the Group initially measures a or e isrues a air aue hrouh oher eposures or hich here has o ee a reasonable certainty that the Group ill obtain financial asset at its fair alue plus in the case of coprehesie icoe ieres icoe orei siiica icrease i crei ris sice iiia onership at the end of the lease term. a financial asset not at fair alue through profit echae reauaio a ipaire osses or recoiio s are proie or crei osses or loss transaction costs. Trade receiables that reersas are recoise i he saee o ha resu ro eau ees ha are possie do not contain a significant financing proi or oss a copue i he sae aer ihi he e ohs a oh or eases in hich a significant portion of the riss component or for hich the Group has applied as or iacia asses easure a aorise hose crei eposures or hich here has ee and reards of onership are not transferred to the practical epedient are measured at the cos he reaii air aue chaes are a siiica icrease i crei ris sice iiia the Group as lessee are classified as operating transaction price determined under AASB 1. recoise i oher coprehesie icoe recoiio a oss aoace is reuire or leases note 1. ayments made under po erecoiio he cuuaie air aue crei osses epece oer he reaii ie o operating leases net of any incenties receied n order for a financial asset to be classified and chae recoise i oher coprehesie he eposure irrespecie o he ii o he from the lessor are charged to profit or loss on a measured at amortised cost or fair alue icoe is recce o proi or oss eau a ieie straightline basis oer the period of the lease. through other comprehensie income it needs to give rise to cash flows that are ‘solely or rae receiaes a corac asses he payments of principal and interest “” on his caeor icues iacia asses he or Group appies a sipiie approach i ease income from operating leases here the the principal amount outstanding. This rai a iacia asses esiae upo cacuai s hereore he Group oes o group is a lessor is recognised in reenue less assessment is referred to as the S test and is iiia recoiio a air aue hrouh proi or rac chaes i crei ris u isea any amount contractually refundable to performed at an instrument leel. oss iacia asses are cassiie as he or recoises a oss aoace ase o ieie customers oer the term of lease. rai i he are acuire or he purpose o s a each repori ae he Group assesses The Group’s business model for managing sei or repurchasi i he ear er his aoace ase o is hisorica crei oss financial assets refers to ho it manages its eriaies icui separae eee eperiece ause or orarooi acors financial assets in order to generate cash flos. eriaies are aso cassiie as he or rai speciic o he eors ash and cash euialents in the statement of The business model determines hether cash uess he are esiae as eecie hei financial position comprise cash at ban and on flos ill result from collecting contractual cash isrues iacia asses a air aue hrouh The Group cosiers a iacia asse o e a hand and term deposits that are readily flos selling the financial assets or both. proi or oss are carrie i he saee o ris o eau he coracua paes are conertible to non amounts of cash and iacia posiio a air aue ih e chaes as pas ue oeer i cerai cases he Group a aso cosier a iacia asse o e hich are subect to an insignificant ris of i air aue recoise i he saee o proi change in alue. or oss i eau he iera or eera ioraio iicaes ha he Group is uie o receie

he ousai coracua aous i u or the purposes of the statement of cash flos The Group measures financial assets at eore ai io accou a crei

cash and cash euialents consist of cash and amortised cost if the financial asset is held ith ehacees he he Group iacia term deposits as defined aboe. the obectie to collect contractual cash flos iacia asses are erecoise he he asse is rie o he here is o reasoae rihs o receie cash os ro he asses hae For personal use only use personal For and the contractual terms of the financial asset epecaio o recoeri he coracua cash gie rise on specified dates to cash flos that epire or hae ee raserre a he Group os are solely payments of principal and interest on has raserre susaia a he riss a nentories are alued at the loer of cost and the principal amount outstanding. rears o oership or coro o he asse net realisable alue. osts are assigned on a firstin firstout basis. et realisable alue is the

72 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 73

the life of the facilit orrowing costs incurred hedge relationship to which it wishes to apply derivatives are classified as a current asset or for the construction of an ualifing asset are hedge accounting and the ris management liability. capitalised during the period of time that is obective and strategy for undertaing the reuired to complete and prepare the asset for hedge. inancial liabilities are classified at initial its intended use or sale hanges in the fair value of derivatives that are recognition as financial liabilities at fair value efore uly the documentation includes designated and ualify as fair value hedges are through profit or loss loans and borrowings identification of the hedging instrument the recorded in profit or loss together with any paables or as derivatives designated as hedged item or transaction the nature of the changes in the fair value of the hedged asset or hedging instruments in an effective hedge as financial liabilit is derecognised when the ris being hedged and how the Group will assess liability that are attributable to the hedged ris. appropriate obligation under the liabilit is discharged the effectiveness of changes in the hedging The gain or loss relating to the effective portion

instrument’s fair value in offsetting the exposure of interest rate swaps hedging fied rate ll financial liabilities are recognised initiall at cancelled or expired hen an existing financial fair value and in the case of loans and liabilit is replaced b another from the same to changes in the hedged item’s fair value or borrowings is recognised in profit or loss within borrowings and paables net of directl lender on substantiall different terms or the cash attributable to the hedged ris. uch finance costs together with changes in the fair attributable transaction costs. The Group’s terms of an existing liabilit are substantiall hedges are epected to be highly effective in value of the hedged fied rate borrowings financial liabilities include trade and other modified such an exchange or modification is achieving offsetting changes in fair value or attributable to interest rate ris. The gain or loss paables loans and borrowings and derivative treated as the derecognition of the original cash flows and are assessed on an ongoing relating to the ineffective portion is recognised financial instruments liabilit and the recognition of a new liabilit The basis to determine that they actually have been in profit or loss within other income or other difference in the respective carring amounts is highly effective throughout the financial epenses. recognised in the statement of profit or loss reporting periods for which they were orrowings are classified as current liabilities designated. f the hedge no longer meets the criteria for unless the group has an unconditional right to hedge accounting the adustment to the defer settlement of the liabilit for at least rom uly the documentation includes carrying amount of a hedged item for which the This categor includes financial liabilities held for months after the reporting period identification of the hedging instrument the effective interest method is used is amortised to trading and financial liabilities designated upon hedged item the nature of the ris being profit or loss over the period to maturity using a initial recognition as at fair value through profit hedged and how the Group will assess whether recalculated effective interest rate. or loss the hedging relationship meets the hedge effectiveness reuirements including the inancial liabilities designated upon initial analysis of sources of hedge ineffectiveness and recognition at fair value through profit or loss are how the hedge ratio is determined. hedging The effective portion of changes in the fair value designated at the initial date of recognition relationship ualifies for hedge accounting if it of derivatives that are designated and ualify as and onl if the criteria in are satisfied The The roup uses derivative financial instruments meets all of the following effectiveness a cash flow hedge is recognised in other roup has not designated an financial liabilit such as interest rate swaps forward currenc reuirements comprehensive income and accumulated in as at fair value through profit or loss exchange contracts and a net investment reserves in euity. The gain or loss relating to the

hedge to hedge its foreign currenc and interest • There is ‘an economic relationship’ between ineffective portion is recognised immediately in rate risks the hedged item and the hedging profit or loss within finance income or finance fter initial recognition interestbearing loans instrument. costs. and borrowings are subseuentl measured at erivatives are initiall recognised at fair value amortised cost n difference between the on the date a derivative contract is entered into The Group uses forward currency contracts as proceeds net of transaction costs and the • The effect of credit risk does not ‘dominate and are subseuentl remeasured to their fair hedges of its eposure to foreign currency ris in redemption amount is recognised in profit or loss the value changes’ that result from that value at the end of each reporting period forecast transactions. The ineffective portion over the period of the borrowings using the economic relationship. relating to foreign currency contracts is effective interest method The accounting for subseuent changes in fair • The hedge ratio of the hedging relationship recognised as other operational epenses. ees paid on the establishment of loan facilities value depends on whether the derivative is is the same as that resulting from the are recognised as transaction costs of the loan designated as a hedging instrument and if so uantity of the hedged item that the Group efore uly the Group designated all of to the extent it is probable that some or all of the nature of the item being hedged The roup actually hedges and the uantity of the the forward contracts as hedging instruments. the facilit will be drawn down n this case the designates certain derivatives as either hedging instrument that the Group actually ny gains or losses arising from changes in the fee is deferred until the draw down occurs uses to hedge that uantity of hedged item. fair value of derivatives were taen directly to here there is no evidence that it is probable • edges of the fair value of recognised profit or loss ecept for the effective portion of that some or all of the facilit will be drawn assets or liabilities or a firm commitment fair The fair values of various derivative financial cash flow hedges which were recognised in down the fee is capitalised as a prepament for value hedges instruments used for hedging purposes are other comprehensive income and later liuidit services and amortised over the period • edges of a particular risk associated with disclosed in note .. ovements in the hedging reclassified to profit or loss when the hedge item of the facilit to which it relates the cash flows of recognised assets and reserve in euity are shown in note . The full affects profit or loss. liabilities and highl probable forecast fair value of a hedging derivative is classified as transactions cash flow hedges or rom uly the Group designates only the

For personal use only use personal For orrowing costs are recognised as an expense a noncurrent asset or liability when the when incurred unless the relate to the • edges of a net investment in a foreign remaining maturity of the hedged item is more spot element of forward contracts as a hedging acuisition construction or production of a operation net investment hedges than months. t is classified as a current asset instrument. The forward element is recognised in ualifing asset or to upfront borrowing or liability when the remaining maturity of the other comprehensive income and establishment and arrangement costs which t the inception of a hedge relationship the hedged item is less than months. Trading accumulated in a separate component of are deferred and amortised as an expense over roup formall designates and documents the euity under cost of hedging reserve.

74 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 75

he amounts accumuated in other that it is uniey that signiicant changes to the An asset’s carrying amount is written down comrehensie income are accounted or sae wi e made or that the decision to se wi immediately to its recoerale amount i the he rou as lessee has roerties under deending on the nature o the underying e withdrawn anagement must e asset’s carrying amount is greater than its oerating leases that in accordance ith hedged transaction committed to the an to se the asset and the estimated recoerale amount note r ualiy or treatment as sae eected to e cometed within one year ains and losses on disosals are determined y inestment roerties nder this treatment or rom the date o the cassiication he amount accumuated in other comaring roceeds ith carrying amount each roerty the resent alue o the

comrehensie income is recassiied to roit or hese are included in roit or loss minimum lease ayments is determined and roerty ant and euiment and intangie carried as a lease liaility as i it ere a inance oss as a recassiication adustment in the same assets are not dereciated or amortised once eriod or eriods during which the hedged cash cassiied as hed or sae Assets and iaiities lease and the air alue o the lease to the ows aect roit or oss cassiied as hed or sae are resented rou is recorded each eriod as inestment searatey as current items in the statement o roerty under an oerating lease cash ow hedge accounting is discontinued inancia osition A disosa grou uaiies as a nestment roerties are measured initially at the amount that has een accumuated in discontinued oeration i it is a comonent o cost including transaction costs useuent to ains or losses arising rom changes in the air other comrehensie income must remain in an entity that either has een disosed o or is initial recognition inestment roerties are alues o inestment roerties are included in accumuated other comrehensie income i cassiied as hed or sae and stated at air alue hich relects maret roit or loss in the eriod in hich they arise the hedged uture cash ows are sti eected conditions at the reorting date ains or losses including the corresonding ta eect air to occur therwise the amount wi e • eresents a searate maor ine o usiness arising rom changes in the air alues o alues are determined using the same aluation immediatey recassiied to roit or oss as a or geograhica area o oerations inestment roerties are included in roit or rocess alied to reehold inestment recassiication adustment Ater • s art o a singe coordinated an to loss in the eriod in hich they arise roerty discontinuation once the hedged cash ow disose o a searate maor ine o usiness occurs any amount remaining in accumuated or geograhica area o oerations or air alues are determined y a comination o ease ayments are allocated eteen the other comrehensie income must e • s a susidiary acuired ecusiey with a indeendent aluations and irector aluations rincial comonent o the lease liaility and accounted or deending on the nature o the iew to resae he indeendent aluations are erormed y interest eense so as to achiee a constant

underying transaction an accredited indeendent aluer nestment rate o interest on the remaining alance o the iscontinued oerations are ecuded rom the roerties are indeendently alued on a liaility nterest eense is recognised in inance resuts o continuing oerations and are rotational asis eery three years unless the costs in the consolidated statements o roit resented as a singe amount as roit or oss edges o a net inestment in a oreign ater ta rom discontinued oerations in the underlying inancing reuires or the irectors and loss and ithin ayment o inance lease oeration incuding a hedge o a monetary statement o roit or oss determine a more reuent aluation cycle or liailities ithin the consolidated statements o item that is accounted or as art o the net roerties suect to an indeendent aluation cash los inestment are accounted or in a way simiar reort the irectors eriy all maor inuts to the to cash ow hedges ains or osses on the aluation and reie the results ith the hedging instrument reating to the eectie indeendent aluer he irector aluations are ortion o the hedge are recognised as other roerty ant and euiment is stated at comrehensie income whie any gains or osses historica cost ess dereciation istorica cost comleted y the rou oard he ntangile assets acuired searately are reating to the ineectie ortion are incudes eenditure that is directy attriutae aluations are determined using the same measured on initial recognition at cost he cost recognised in the statement o roit or oss n to the acuisition o the items useuent costs techniues and similar estimates to those o intangile assets acuired in a usiness disosa o the oreign oeration the are included in the asset’s carrying amount or alied y the indeendent aluer comination is their air alue at the date o cumuatie aue o any such gains or osses recognised as a searate asset as aroriate acuisition olloing initial recognition recorded in euity is transerred to the ony when it is roae that uture economic nestment roerties are derecognised either intangile assets are carried at cost less any statement o roit or oss eneits associated with the item wi ow to the hen they hae een disosed o or hen they accumulated amortisation and accumulated

grou and the cost o the item can e are ermanently ithdran rom use and no imairment losses nternally generated measured reiay he carrying amount o any uture economic eneit is eected rom their intangiles ecluding caitalised deeloment

comonent asset is derecognised when disosal he dierence eteen the net costs are not caitalised and the related he rou cassiies noncurrent assets and reaced A reairs and maintenance are disosal roceeds and the carrying amount o eenditure is relected in roit or loss in the disosa grous as hed or sae i their carrying charged to roit or oss during the reorting the asset is recognised in the statement o roit eriod in hich the eenditure is incurred amounts wi e recoered rinciay through a eriod in which they are incurred or loss in the eriod o derecognition sae transaction rather than through continuing he useul lies o intangile assets are assessed use oncurrent assets and disosa grous ereciation is cacuated on a straightine ransers are made to or rom inestment as either inite or indeinite ntangile assets ith cassiied as hed or sae are measured at the asis oer the estimated useu ie o the assets roerty only hen there is a change in use or inite lies are amortised oer the useul ower o their carrying amount and air aue ess as oows a transer rom inestment roerty to roerty economic lie and assessed or imairment costs to se osts to se are the incrementa lant and euiment the deemed cost or heneer there is an indication that the costs directy attriutae to the disosa o an • easehod imroements remaining ength suseuent accounting is the air alue at the intangile asset may e imaired he asset disosa grou ecuding inance costs o ease term date o change in use roerty lant and amortisation eriod and the amortisation and income ta eense euiment ecomes an inestment roerty method or an intangile asset ith a inite

For personal use only use personal For • ant and euiment to years

the rou accounts or such roerty in useul lie are reieed at least at the end o he criteria or hed or sae cassiication is met ach asset’s residua aue and useu ie is accordance ith the olicy stated under each reorting eriod ony when the sae is highy roae and the roerty lant and euiment u to the date asset or disosa grou is aaiae or reiewed and adusted i aroriate at the o change in use hanges in the eected useul lie or the immediate sae in its resent condition Actions end o each reorting eriod eected attern o consumtion o uture reuired to comete the sae shoud indicate

76 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 77

economic enefits emodied in the asset are amortisation and are tested annuall for oncash distributions are measured at the fair considered to modif the amortisation eriod or imairment or more freuentl if eents or value of the assets to be distributed with fair method as aroriate and are treated as changes in circumstances indicate that the value remeasurement recognised directly in changes in accounting estimates and adusted might e imaired ther assets are tested for iabilities for wages and salaries including non euity ny difference between the carrying on a rosectie asis he amortisation imairment heneer eents or changes in monetary benefits and accumulating annual amount of the liability and the carrying amount eense on intangile assets ith finite lies is circumstances indicate that the carring leave which are exected to be settled within of the assets distributed is recognised in the recognised in the statement of rofit or loss as amount ma not e recoerale months of the reorting date are recognised statement of rofit or loss the eense categor that is consistent ith the in resect of emloyees services u to the function of the intangile assets n imairment loss is recognised for the amount reorting date hey are measured at the by which the asset’s carrying amount exceeds amounts exected to be aid when the ntangile assets ith indefinite useful lies such its recoerale amount he recoerale liabilities are settled he Grou is of a ind referred to in C as goodill are not amortised ut are tested for amount is the higher of an asset’s fair value less Cororations ounding in inancialirectors’ imairment at each reorting eriod either costs of disosal and alue in use or the eorts nstrument relating to the indiiduall or at the leel he assessment uroses of assessing imairment assets are he Grou does not exect its long service ‘rounding off’ of amounts in the financial of indefinite life is reieed at each reorting groued at the loest leels for hich there are leave benefits to be settled wholly within statements mounts in the financial statements eriod to determine hether the indefinite life searatel identifiale cash inflos hich are months of each reorting date he Grou have been rounded off to the nearest thousand continues to e suortale f not the change largel indeendent of the cash inflos from recognises a liability for long service leave dollars or in certain cases the nearest dollar in useful life from indefinite to finite is made on a other assets or grous of assets CGU’s on measured as the resent value of exected rosectie asis ains or losses arising from financial assets other than goodill that hae future ayments to be made in resect of derecognition of an intangile asset are een imaired in reious eriods are reieed services rovided by emloyees u to the measured as the difference eteen the net for ossile reersal of the imairment at the reorting date using the roected unit credit he financial information for the arent entity disosal roceeds and the carring amount of end of each reorting eriod method Consideration is given to revious disclosed in note has been reared on the asset and are recognised in the statement exerience of emloyee deartures and the same basis as the consolidated financial of rofit or loss hen the asset is derecognised eriods of service xected future ayments statements excet as set out below are discounted using maret yields at the esearch costs are eensed as incurred roisions are recognised hen the rou has a reorting date on the alicable cororate eeloment eenditure on an indiidual resent oligation legal or constructie as a bonds with terms to maturity and currencies that nvestments in subsidiaries are accounted for at roect is recognised as an intangile asset result of a ast eent it is roale that an match as closely as ossible the estimated cost in the financial statements of hen the rou can demonstrate outflo of resources emoding economic future cash outflows enefits ill e reuired to settle the oligation • he technical feasiilit of comleting the and a reliale estimate can e made of the and its whollyowned entities have intangile asset so that the asset ill e amount of the oligation hen the rou ll emloyees can direct the Grou to mae imlemented the tax consolidation legislation aailale for use or sale eects some or all of a roision to e contributions to a defined contribution lan of he head entity and the controlled entities • ts intention to comlete and its ailit and reimursed the reimursement is recognised as their choice Contributions to defined that are in the tax consolidated grou account intention to use or sell the asset a searate asset ut onl hen the contribution suerannuation funds are for their own current and deferred tax amounts • o the asset ill generate future reimursement is irtuall certain recognised as an exense as they become hese tax amounts are measured as if each economic enefits ayable reaid contributions are recognised entity in the tax consolidated grou continues to • he aailailit of resources to comlete the roisions are measured at the resent alue of as an asset to the extent that a cash refund or a be a standalone tax ayer in its own right asset and management’s best estimate of the reduction in the future ayments is available n addition to its own current and deferred tax • he ailit to measure relial the eenditure reuired to settle the resent amounts also recognises the current tax eenditure during deeloment oligation at the end of the reorting eriod liabilities or assets and the deferred tax assets he discount rate used to determine the resent arising from unused tax losses and unused tax olloing initial recognition of the deeloment alue is a reta rate that reflects current ssued and aid u caital is recognised at the credits assumed from controlled entities in the eenditure as an asset the asset is carried at maret assessments of the time alue of mone fair value of the consideration received by the tax consolidated grou cost less an accumulated amortisation and and the riss secific to the liailit he increase Grou taled securities are classified as euity accumulated imairment losses mortisation of in the roision due to the assage of time is ncremental costs directly attributable to the he entities have also entered into a tax funding the asset egins hen deeloment is recognised as interest eense issue of securities are shown in euity as a agreement under which the whollyowned comlete and the asset is aailale for use t is deduction net of tax from the roceeds entities fully comensate for any current tax amortised oer the eriod of eected future n accordance ith lease agreements the ayable assumed and are comensated by enefit mortisation is recorded in other rou must restore the leased remises in a for any current tax receivable and deferred oerational eenses uring the eriod of numer of leasehold remises to its original tax assets relating to unused tax losses or unused deeloment the asset is tested for imairment condition at lease eir roision has een tax credits that are transferred to under the

annuall recognised for the oligation to remoe he Grou recognises a liability to mae cash or tax consolidation legislation he funding For personal use only use personal For leasehold imroements from the leased noncash distributions to euity holders when amounts are determined by reference to the remises note the distribution is authorised and is no longer at amounts recognised in the whollyowned the discretion of the Comany or the entities financial statements he amounts oodill and intangile assets that hae an esonsible ntity corresonding amount is receivableayable under the tax funding indefinite useful life are not suect to recognised directly in euity agreement are due uon receit of the funding

78 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 79

ro • — uo uus r e accounted for under f it is n each arrangement inestments are classified so rur p o r u prs rs or sss determined that the transaction does not meet as oint entures as all arties are suect to a ous o sss s oos o p or s this definition the transaction is accounted for ecuritholders greement that has een ss • — uo us or as a urchase of an asset under as an contractuall structured such that the arties to os pu s s o acuisition of a storage centres held for rental the agreement hae eual reresentation on sss or s rs ur u r u sur s r or return and caital areciation the adisor oard resonsile for the oerall rs oso s r osr direction and suerision of each trust and r ros s urr ous r • — uo us or s descried in note c the rou has elected here decisions aout the releant actiities ro or p o or s Group os pu s s o to earl adot the amendments to a definition reuire the unanimous consent of the arties r u sur s uosr of a usiness contained in s ell sharing control as roiding clarit on hat is considered as a or sss s r ros usiness this amendment adds an oerational Group sur srus su ss o rurr ss concentration test that ermits a simlified s rs o sss su s Group rs r rsrs assessment of hether an acuired set of he e assumtions at the reorting date s proprs r u ourr s rr r actiities and assets is not a usiness concerning the future and other e sources of s ssss orso s o os estimation uncertaint that hae significant ris pu s s o r u or the ears ended une and une of causing a material adustment to the carring r u s pr ou r o sur s o o the rou has assessed that all of its amounts of assets and liailities ithin the net s ss or p o rsr rpor pro storage centre acuisitions do not meet the financial ear are descried elo orr rso r prps definitions set out in and are therefore sur r u or urr s o r u rr o os accounted for as urchases of inestment ssumtions and estimates are ased on sur s s o prsupo roert er as detailed in note arameters aailale hen the consolidated rso o s ss or rsr financial statements ere reared isting s p r circumstances and assumtions aout the eferred ta assets are recognised the future deeloments ma change due to • prp r or ss or rou for unused ta losses to the etent that it maret changes or circumstances arising or is roale that taale rofit ill e aailale eond the Group’s control uch changes are • s o prp r prpro o Group’s consolidated against hich the losses can e utilised reflected in the assumtions hen the occur os ous r or ss or ss rurs o us ss ssupos ignificant management udgement is reuired rpor ous o rus to determine the amount of deferred ta assets he rou carries its inestment roerties at fair prp or os ous r pss sss s that can e recognised ased uon the liel alue ith changes in fair alue eing us ss roup op sosurs sosur timing and the leel of future taale rofits recognised in the statement of rofit or loss o o sss s r together ith future ta lanning strategies under fair alue adustments air alues are r u o ss or s sur ou s ssupos ss ou determined a comination of indeendent us ssupos r prps rsu ouos rur r he rou has ta losses hich arose in ustralia aluations assessed on a rotational asis and ou us pr ss or us o rr ou o sss and are aailale for offsetting against future irector aluations determined using the same ssu r prps r or s uur pros taale rofits of the ustralian ta grou techniues and similar estimates to those oo s rs r u hese losses are suect to the satisfaction of the alied the indeendent aluer he e sur o o ss s o same usiness test and a reduced rate of assumtions used to determine the fair alue of ou r prps o utilisation under the aailale fraction rules he the roerties and the sensitiit analses are r oo s us ss pross o pp Group’s rou has assessed the eected utilisation roided in note s s s us or s o ou pos s rofile of these ta losses ased uon or r prp oo us forecasted leels of future rofits ithin the – s o ous ros ustralian ta consolidated grou and hae n imairment eists hen the carring alue of Group uss uo us r oso ss recognised a deferred ta asset here it is an asset or eceeds its recoerale ppropr russ or roale that there ill e sufficient future amount hich is the higher of its fair alue less su s o sur r u taale rofits in the rou against hich this costs to sell and its alue in use he fair alue s us o r osr pus deferred ta asset ill e recoered he rou less costs to sell calculation is ased on the fair s us o uosr pus has not recognised a deferred ta asset on a alue of the rou’s staled securities as listed sss s or r u s or uso o sor rs roortion of these losses here the future on the ustralian ecurities change hich has sur or sos Group’s policy is to review the nature of the utilisation of these is more uncertain een assessed as one for goodill

ss r ors r u rso ssss rso sou imairment assessment uroses less costs of For personal use only use personal For rr s o os pu s ou or ur disosal s o r u sur s or he rou holds a interest in the o s purs o s propr undall torage rust and the rou holds ssss s r rso a interest in the undall ommercial rust constitutes a purchase of a ‘business’, if so it will

80 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 81

ur rs Group opr o o usss s 0 0 opro o sor rs usr $000 $000 ror is the Group’s opr so r oors opr rsus rosso s o poroo ss o rpors r u s upo or oro oo oss pror o oss prso oso ss os o p or prous so Group’s financing u oss o r o Group ss ouos oss o o o opr ss rs oor pss opr rsus prs s o pro or oss rprs s s pro o ourr sss oro s rpor r oro orso o sss r r r 0 0

$000 $000 s srs usr ospo s r po oss

ru oro o us rs o s s o oo o sor rs

0 0 $000 $000 usr 0 0 $000 $000 ourr sss or s purpos osss o propr p up s proprs rs sss u oo rs o ro r prs Group s o u usor rprss rr o o ru rs o orros rs o ss 0 0 o sou rs o prosos $000 $000 o oos srs s ossos s op s s

For personal use only use personal For

82 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 83

A eferred tax eefit icluded i icome tax eefit comrises

ncrease in eferre ta assets NSPT is a ‘flow through’ entity for Australian income tax purposes and has elected into the AMIT rules fro ul such that the deterned tax coponents of NSPT ll be taxable n the hands of ncrease in eferre ta iaiities untholders on an attrbuton bass NSPT’s subsdar Natonal Storae Ne Zealand Propert Trust oeent of eferre ta asset on carr forar osses shon in (“”) is an Australian registered trust which owns investment property in New Zealand. For New current ta epense Zealand tax purposes NSNZPT s classed as a unt trust and s subect to Ne Zealand ncoe tax at a change ariations rate of uture dstrbutons fro NSNZPT to NSPT a have attached oren ncoe Tax ffsets oeent in eferre ta asset recognise in other coprehensie hch hen subseuentl dstrbuted b NSPT a be claed b an ustralan tax resdent incoe dependn on ther personal crcustances oeent in eferre ta asset recognise in stateent of changes in euit The aor coponents of ncoe tax expense beneft for the ears ended une and otal deferred tax eefit une are eferred tax assets ad liailities otes Deferred tax assets osolidated statemet of rofit or loss urrent tax ease iaiit eferred tax poee enefits otal icome tax exese eefit ccrue epenses arr forar osses eferred tax relati to items recoised i oter comreesie oration epenses icome duri te ear ae goo proisions Net loss on revaluaton of cash flo hedes eauation of cash fo heges eauation of inestent propert assets eferred tax relati to items recoised i statemet of caes ther i euit duri te ear ota eferre ta assets ost of ssun share captal Deferred tax liabilities ecociliatio of tax exese ad accouti rofit multilied Australia’s domestic tax rate for ad repaents Proft before tax ther receiaes educt proft before tax fro Trusts onn ustralan propert ntangies ccountn proft before ncoe tax eauations of inestent properties nreaise foreign echange osses

Tax at the ustralan tax rate of – ota eferre ta iaiities

Nonassessable ncoe et deferred tax asset dustents n respect of prevous ears ther nondeductble expenses ecociliatio to statemet of fiacial ositio econton of prevousl unreconsed tax losses eferre ta asset ffect of loer tax rates n Ne Zealand eferre ta iaiit come tax exese eefit et deferred tax asset

he Group offsets ta assets an iaiities if it has a ega enforceae right to set off current ta assets an current ta iaiities an the eferre ta asset an eferre ta iaiities reate to incoe taes eie the sae ta authorit The deferred tax balances above reflect NSH Group and NSNZPT’s tax oigations an in soe instances are cacuate ith reference to the ta ase of aances that are eiinate on group consoiation ut sti hae a ta ipact on a tapaer asis

he Group has tota gross ta osses hich arose in ustraia of hese

For personal use only use personal For osses are aaiae for offsetting against future taae profits of the ustraian ta group hese osses are suect to the satisfaction of the sae usiness test an a reuce rate of utiisation uner the aaiae fraction rues he Group has assesse the epecte utiisation profie of these ta osses an has recognise a eferre ta asset of on ustraian group ta osses of on the asis it is proae that there i e sufficient future taae profits in the Group against hich this eferre ta asset i e recoere see note

84 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 85

The NS Australian group also has gross tax losses of ( ) for which a deferred as flo recociliatio of et rofit after tax to et cas flos from oeratios tax asset has not een recognised as the future utilisation of these losses is more uncertain. AA A A AA A

This note provides information about the Group’s current and noncurrent financial instruments Profit after income tax including Income tax expense (enefit) () Profit efore tax • An overview of all financial instruments held y the roup • Specific information aout each type of financial instrument and • Information aout determining the fair value of the instruments including areas of udgement epreciation estimates and other assumptions. Amortisation of intangile assets Fair value adustments () () The roup hold the following financial instruments Share of profit of oint ventures and associates () ()

oss on disposal of property plant and euipment Finance income () () otes Finance costs iacial assets

ash and cash euivalents . ecrease (increase) in receivales () Trade and other receivales . Increase in inventories () () eposits . Increase in other assets () () Increase in payales Increase in deferred revenue erivatives used for hedging – at fair value through other Increase (decrease) in provisions () comprehensive income . as flos from oerati actiities

Total financial assets Interest received Income tax paid () () iacial liailities et cas flos from oerati actiities Trade and other payales .

orrowings . Finance leases . rade ad oter receiales erivatives used for hedging . otes urret

Trade receivales Total financial liabilities Allowance for expected credit losses () ()

The roup’s approach to financial ris management is discussed in note . The maximum exposure to

credit ris at the end of the reporting period is the carrying amount of each class of financial asset ther receivales mentioned aove. eceivales from related parties

All derivatives have een designated as cash flow hedges. They are presented as current assets or liailities if they are expected to e settled within months after the end of the reporting period. ocurret The derivatives aove relate to interest rate swaps and forward currency exchange contracts held y ther receivales the roup for further details see note .. otal curret ad ocurret as ad cas euialets lassificatio as trade ad oter receiales

For personal use only use personal For Trade receivales are amounts due from customers for rental income goods sold or services performed urret assets in the ordinary course of usiness. oans and other receivales are nonderivative financial assets with ash on hand fixed or determinale payments that are not uoted in an active maret. If collection is expected in ash at an one year or less they are classified as current assets. If not they are presented as noncurrent assets. otal cas ad cas euialets

86 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 87

e allowance for eected credit losses reresents an estimate of receiables tat are not considered rade ad oter aales to be recoerable. or te ear ended une te rou as recognised an eected loss roision following te adotion of AA . e rou recognises a loss allowance based on lifetime eected credit losses at eac reorting date. e rou assesses tis allowance based on its istorical credit loss eerience adusted for forwardlooing factors secific to te urret debtors. At une te rou recognised a roision for trade receiables relating to receiables Trade paabes acuired on te urcase of inestment roerties were tere are secific riss around recoerabilit. rued epenses GT and empoment taes paabe ee below for te moements in te allowance for eected credit losses in te rou. ther paabes otal ee note for terms and conditions relating to related art receiables. Trade paabes are unseured and are usua paid ithin das of reonition ther paabes and aruas are paid hen amounts fa due The arrin amounts of trade and other paabes are assumed to be the same as their fair vaues due to their shortterm nature At ul arge for te ear . orrois ecognised on acuisition of inestment roerties

tilised () () At ue ocurret e age of trade receiables not imaired was as follows an finane faiit onamortised borroin osts otal orrois

to monts The Group has noncurrent borrowing facilities denominated in Australian Dollars (“A”) and New to monts Zealand Dollars (“”). faiities are interest on faiities ith an dran baanes paabe at er monts maturit ran amounts and faiit imits are as foos e carring amounts of current receiables are assumed to be te same as teir fair alues due to teir sortterm nature. e fair alue of noncurrent receiables aroimates carring alue. a fiace facilities A ran amount ter assets aiit imit

a fiace facilities ran amount urret aiit imit Deosits reaments A euialet of facilities inancial assets (deriaties) ran amount aiit imit ocurret inancial assets (deriaties) The maor terms of these areements are as foos

otal curret ad ocurret • aturit dates on the faiities rane from u to eember u to eember or details on te classification of financial instruments see note . • The interest rate appied is the ban bi rate pus a marin dependin on the earin ratio • eurit has been ranted over the Groups freehod investment properties

The Group has a ban overdraft faiit ith a imit of m that as undran at une and une urin the ear ended une the Group onverted an eistin faiit of m

For personal use only use personal For into an faiit of m refinaned part of the eistin debt faiities and inreased its ub banin faiities b m and m ear ended une faiities inreased b m and m

88 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 89

e rou ae comlied wit te financial coenants of teir borrowing facilities during te and iace leases reorting eriods (see note ). e fair alue of borrowings aroimates carring alue. Details of te eosure to ris arising from current and noncurrent borrowings are set out in note . e rou as finance leases for inestment roerties. ese leases ae terms of renewal but no urcase otions. enewals are at te otion of te secific entit tat olds te lease. uture terest rate sas minimum lease aments under finance lease contracts togeter wit te resent alue of te net e rou as te following interest rate swas in lace as at te end of te reorting eriod minimum lease aments are as follows

reset reset terest rate sas A at face alue iimum alue of iimum alue of urrent interest rate swas amets amets amets amets uture interest rate swas osolidated rou terest rate sas at face alue itin one ear urrent interest rate swas After one but not more tan fie ears uture interest rate swas ore tan fie ears inimum lease aments A euialet of iterest rate sas uture finance carges () () urrent interest rate swas otal uture interest rate swas iacial istrumets fair alue measuremet uture interest rate swas in lace at te end of te reorting eriod ae maturit dates ranging from etember to etember ( etember to etember ). air alue ierarc is note elains te udgements and estimates made in determining te fair alues of te financial n une te rou reset te interest rates associated wit AD denominated interest rate instruments recognised in te financial statements as detailed in notes . to .. o roide an swas. is resulted in a cash outflow of $22.9m which reduced the Group’s financial liability presented indication about te reliabilit of te inuts used in determining fair alue financial instruments are in note .. e cumulatie cange in fair alue of tese edging instruments is carried in a searate classified into te following tree leels. resere in euit (cas flow edge resere of N resented witin noncontrolling interest in te Group’s consolidated statement of changes in equity). is balance will be reccled from te edge eel e fair alue of financial instruments traded in actie marets (suc as ublicl traded resere to finance costs in te statement of rofit and loss in future reorting eriods corresonding to deriaties and trading and aailableforsale securities) is based on uoted maret rices at te end wen te underling edged item imacts rofit or loss. or te ear ended une .m as of te reorting eriod. e uoted maret rice used for an financial assets eld is te current bid been recognised in finance costs relating to tis item. rice. ese instruments are included in leel .

ede of et iestmets i forei oeratios eel e fair alue of financial instruments tat are not traded in an actie maret (for eamle ncluded in borrowings at une was NZD .m (AD .m) wic as been designated as a oertecounter deriaties) is determined using aluation tecniues wic maimise te use of edge of te net inestments against te alue of te New Zealand tangible assets ( NZD .m obserable maret data and rel as little as ossible on entitsecific estimates. f all significant inuts (AD .m)). This borrowing is being used to hedge the Group’s exposure to the NZD foreign reuired to fair alue an instrument are obserable te instrument is included in leel . ecange ris on tese inestments. ains or losses on te retranslation of tis borrowing are transferred to oter comreensie income to offset an gains or losses on translation of te net inestments in te eel f one or more of te significant inuts is not based on obserable maret data te instrument is subsidiaries. ere is no edge ineffectieness in te ears ended une or une included in leel . recognised in te statement of rofit or loss. ecific fair aluation tecniues used to determine fair alues include ter liailities • e fair alue of interest rate swas is calculated as te resent alue of te estimated future cas flows based on obserable ield cures adusted for counterart or own credit ris. otes $’000 $’000 • e fair alue of forward currenc ecange contracts is based on maret obserable inuts to urret fiacial liailities obtain a resent alue. ncororated into te calculation are arious inuts including te credit nterest rate swas . ualit of counterarties foreign ecange sot and forward rates ield cures of te resectie orward currenc ecange contract . currencies currenc basis sreads between te resectie currencies interest rate cures and forward rate cures of te underling commodit. ocurret fiacial liailities

nterest rate swas . e resulting fair alue estimates for interest rate swas are included in leel . For personal use only use personal For

otal curret ad ocurret

or details on te classification of financial instruments see note .

90 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 91

0 $000 $000 $000 $000 0 0 0 0 $000 $000 – pening balance at uly urrent financial liailities . tem reclassified from freehold inestment property . 2 tem reclassified to freehold inestment property . )

Disposals during the year 9) ) 0 oncurrent financial assets . urrent financial liailities . n 2 December 2 the Group entered into an agreement for the diestment of a component of oncurrent financial liailities . freehold inestment property in elbourne ictoria for $m. This has been included within fair alue adustments in the statement of profit or loss. This transaction settled on anuary 29.

n 2 une 29 the Group entered into an agreement for the sale of commercial inestment property 0 0 in Dunedin New Zealand for NZD $.m less cost of sale of NZD $.m D $.2m less cost of sale of $.m). This has resulted in an unrealised gain of NZD $.2m D $.m) on the asset’s carrying value. This has been included within fair alue adustments in the statement of profit or loss. urrent financial assets . oncurrent financial assets . s at uly 2 the Group held a contractual agreement for the sale of the land and buildings of the urrent financial liailities . roydon selfstorage centre for $.m less cost of sale of $.m. This resulted in this asset being oncurrent financial liailities . classified as held for sale. Due to unforeseen circumstances outside of the Group’s control this transaction did not proceed. t une 29 the asset has been classified as freehold inestment property and is no longer held for sale. here ere no transfers eteen levels of fair value hierarchy during the years ended une and une . 0

0 0 0 $000 $000

This note provides information about the Group’s nonfinancial assets and liailities including t cost 9 ccumulated depreciation ) ) • n overvie of all nonfinancial assets and liailities held y the Group 2 • pecific information aout each type of nonfinancial asset and nonfinancial liaility and • nformation aout determining the fair value of the nonfinancial assets and liailities including econciliation of the carrying amounts of property plant and equipment at the beginning and end of areas of udgement estimates and other assumptions. the current financial period is shown below

0 0 0 $000 $000

0 0 arrying amount at beginning of the year 2 229 $’000 $’000 dditions 2

Disposals ) Depreciation 9) ) ffect of moement in foreign exchange 2 2) 2

For personal use only use personal For

9

92 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 93

0 une une reaised ain of reatin to easehod investment properties and reatin to freehod investment properties 0 0 $000 $000 0 easeo nestent propertes 0 0 reeo nestent propertes $000 $000 reeo nestent propert uner onstruton penin and osin net boo vaue penin net boo vaue penn aane at u dditions ropert austons mortisation proeents to nestent propertes osin net boo vaue tes reasse to reeo nestent propertes sposa o easeo nestent propert eassessent o ease ters nane ease nuton presente as ar aue austents et oss ro oter ar aue austents Goodi has been aoated to the isted roup anaement have determined that the isted 0 roup hih is onsidered one operatin sement see note is the appropriate G aainst hih to aoate these intanibe assets oin to the sneries arisin from ombinin the portfoios of the Group penn aane at u ropert austons The reoverabe amount of the isted roup has been determined based on the fair vaue ess osts of sposa o reeo nestent propert disposa method usin the fair vaue uoted on an ative maret s at u had proeents to nestent propertes staped seurities uoted on the ustraian eurities hane at per seurit tes reasse ro easeo nestent propertes providin a maret apitaisation of m This amount is in eess of the arrin amount of the tes reasse ro reeo nestent propert Group’s net assets at une hih inudes the ontrat for future issue of euit reonised as uner onstruton ontributed euit ithin the statement of finania position at this date see note ad the seurit tes reasse to assets e or sae prie dereased b the maret apitaisation oud sti have been in eess of the arrin tes reasse ro assets e or sae amount et an ro ar aue austents et o oeent n oren eane 0 0 0 0 $000 $000 penn aane at u ropert austons eeopent osts tes reasse to reeo nestent propertes eferred rent revenue from renta inome represents funds reeived in advane from ustomers 0

0 0 $000 $000 ease ans ease osses – nane ease nuton o easeo propert nrease ans assoate t nestent propert oeent n prosons presente n ar aue austents For personal use only use personal For

nue tn net an ro ar aue austents are rease ans o an unrease ans o reatn to te estent o reeo nestent propertes urn te ear ene

94 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 95

0

0 0 $000 $000 nerous operating lease ae good provisions nnual leave ong service leave ae good provisions ong service leave pening alance rising during the year hanges in discount rates ninding of discount rates tilised he Group is reuired to restore the leased premises in a numer of leasehold properties to their original Group’s policy is to maintain the valuation of the investment property condition at the end of lease term provision has een recognised for the present value of the an indication of a significant change to the property’s valuation estimated ependiture reuired to remove any leasehold improvements

0 he Group has classified its nonfinancial assets held at fair value into the three levels prescried in note to provide an indication aout the reliaility of inputs used to determine fair value 0 0 $000 $000 $000 $000 0 0 0 0 ssets held for sale easehold investment properties reehold investment properties 0 0 ssets held for sale ’ easehold investment properties reehold investment properties

he Group’s policy is to recognise transfers into and out of fair value hierarchy levels at the end of the reporting period here ere no transfers eteen levels and for recurring fair value measurements during the year uring the year ended une the Group transferred m from level to level folloing the reclassification of assets from freehold investment properties to assets held for sale and m from level to level folloing the reclassification of assets from assets held for sale to freehold

For personal use only use personal For investment properties as detailed in note

n the prior year ended une the Group transferred m from level to level folloing the reclassification of an asset from freehold investment properties to assets held for sale

96 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 97

0 0 0 0 s pso rr pso r o o $’000 $’000 proprs o or pso r o o

so us oup o o rr pso r s r or pso r s pso rr pso r o o us oup proprs o or pso r o o s r ro us oup o o s r Under the income capitalisation method, a property’s fair value is estimated based upo oo o urr earnings before interest, tax, depreciation and amortisation (“”) r propr s prr pso r sors rur u o op o Group s o or os o r o rur o ss ss urr sor o Group s o or ropr rus s o s r o usr pso r s rs s r o propr rs rou sp r r o uo o sus o opros u ru o sor pso s sou o ou or s o oss rur o r s oso ss o Group s u u o u pso rs r r ro r ss o sr proprs sor pso 0 0 r s p r prr pso r o r o rs sso o or pros usr s sos Gr rs ss r rsu rs r o or rs usr u o s propr rs r rsu ruo o r usr ss r s proprs r u o s s us ss our ross or pros usr urr us o o s proprs ssor s osr o s s o or ss usr us o or o or s rus usr pso r op rs r rs sso propr or p o or or ropr rus usr s pr pro o prur propr s sor pso r s o r o o or ropr rus usr r o rs o o r pso r rus uo o o or our rus usr propr oo s prs ss o s propr r us o s pu ssupos 0 0 $000 $000 $’000 $’000 p u

p oruo uso o sro o ur rr pso r r o pro ro o urs or pso sruos r ro o ur r spos o us o ur us oup For personal use only use personal For 0 s r

Group os rs u or rus Group os

rs u or rus

98 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 99

During the year ended une the Group contributed a further .m into the undall Storage s at une , had contractual commitments of m in place for the construction of one rust and .m into the undall ommercial rust as part of a capital raise. here as no change in the storage centre in ictoria, ustralia either associate had any contingent liabilities or any other capital total share of the Group’s interest in either rust folloing this investment. commitments at une or une

n une the Group purchased to storage centre investment property assets from the undall he roup holds a ( une ) holding in Spacer Marketplaces Pty Ltd (“”). Storage rust for .m. pacer operate online peertopeer maretplaces for selfstorage and paring

n une the undall Storage rust purchased a site for a proposed storage centre development from the Group for .m and the undall ommercial rust purchased a commercial property from the Group for .m. 0 0 $000 $000 s at une the undall Storage rust has one storage centre investment property asset under construction. he undall ommercial rust derives rental property income from the leasing of ssued and paid up capital , , commercial units. ontract for future issue of euity , , , During the year ended une the Group subscribed to . of the units in S nvestments o. nit rust (“”). S subseuently purchased a storage centre investment property asset in 0 0 ueensland ustralia. n une the Group sold its units in S for m.

,, ,, hese investments are classified as oint ventures as all parties are subect to a Securityholders nstitutional and retail placement ,, ,, greement that has been contractually structured such that the parties to the agreement have eual istribution reinvestment plan ,, ,, representation on the advisory board responsible for the overall direction and supervision of each trust. 0 ,, ,,

one of the Group’s oint ventures are listed on any public echange. apital raise one of the Group’s other oint ventures have any capital commitments at une . one of the n eptember , the roup undertoo a fully underritten m euity raising his resulted in Group’s joint ventures had any contingent liabilities at une . the issue of ,, ne stapled securities ( m euity raising resulting in the issue of ,, stapled securities) n une , the roup announced a fully underritten m euity raising n une , the 0 0 roup received proceeds for this raising his has been recognised as a contract for future issue of $000 $000 euity under and has been recognised as contributed euity ithin the statement of financial position his resulted in the issue of ,, ne stapled securities on uly hese pening balance at uly securities are not reflected in the securities on issue above as they ere issued subseuent to the year apital contribution acuisition of shareholding in associates end

Share of profit from associates n une , the roup also announced a nonunderritten security purchase plan his Distributions from associate () completed on uly , raising m and resulted in the issue of ,, ne stapled securities 0

istriution reinvestent plan nluded ithin share of profit fro assoiates is representing NSR’s share of fair value gains related to uring the year, ,, ( ,,) stapled securities ere issued to securityholders investent properties held oint ventures and assoiates une participating in the Group’s Distribution Reinvestment Plan for consideration of m ( m) he stapled securities ere issued at the volume eighted average maret price of the he Group ons . ( .) of the Australia Prime Storage Fund (“”). PS is a partnership roups stapled securities over a period of ten trading days, less a discount ith niversal Self Storage to facilitate the development and onership of multiple premium grade self storage centres in select cities around ustralia.

During the year ended une ational Storage (perations) Pty Ltd earned fees of .m from Stapled seurities PS associated ith the design development financing of the construction process and ongoing stapled security represents one share in and one unit in tapled securityholders have the management of centres (see note ) ( une .m). right to receive declared dividends from and distributions from and are entitled to one vote per stapled security at securityholders’ meetings. olders of stapled securities can vote their shares and s at une PS had to operating centres in ueensland ustralia ith a third asset under units in accordance ith the orporations ct , either in person or by proxy, at a meeting of either construction in ictoria ustralia. or he stapled securities have no par value For personal use only use personal For olloing the financial year end on uly the Group purchased to storage centre investment n the event of the inding up of and , stapled securityholders have the right to participate in properties from PS for .m and reached an agreement to purchase a third asset for .m on the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on completion of construction (see note ). During the year ended une the Group purchased a stapled securities held rdinary stapled securityholders ran after all creditors in repayment of capital storage centre investment property asset in ueensland ustralia from PS for m. here is no current on or off maret security buybac

100 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 101

he Group’s overall ris management program focuses on the unpredictability of financial marets and sees to minimise potential adverse effects on the financial performance of the business. he Group use 0 0 derivative financial instruments such as interest rate saps to hedge certain maret ris eposures. $000 $000 is management for the Group is carried out by the S oard and ey management personnel of pening alance at uly (2 S. he S oard of irectors analyses on behalf of the Group interest rate eposure and evaluates oreign echange translation differences ( (2 treasury management strategies in the contet of the most recent economic conditions and forecasts. losing alance at une (2 (2 The financial stateents for the Group are prepared on the asis that was the acuirer of T n erivatives are only used for economic hedging purposes and not as trading or speculative this asis foreign currency translation resere oeents relating to the Group are presented instruments. he Group has the folloing derivative financial instruments within other reseres 0 0 The oeents elow in foreign currency translation resere and cashflow hedge resere relating to $000 $000 the T Group are presented within noncontrolling interest in the Group’s consolidated stateent of changes in euity urrent liabilities . () 0 0 $000 $000 urrent assets . pening alance at uly ( 22 oncurrent assets . et inestent hedge ( urrent liabilities . () () oreign echange translation differences 2 ( oncurrent liabilities . () () losing alance at une ( et liability () ()

lassifiation of derivatives pening alance at uly (2 ( All derivatives have been designated as cash flo hedges. hey are presented as current assets or ealuation of deriaties (22 (22 liabilities if they are epected to be settled ithin months after the end of the reporting period. Taation ipact on realuation 2 losing alance at une (2 (2 The 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 nonfinancial asset the Group has elected to include (22 (2 related hedging gains and losses in the initial measurement of the cost of the asset. he ineffectiveness recognised in the statement of profit or loss as immaterial.

Taation ipact on realuation applies only to cash flow hedges held in T a sutrust of T air value easureent which is suect to ew ealand ta legislation eferred ta does not apply to any other cash flow For information about the methods and assumptions used in determining fair values of derivatives refer hedges held in the T Group under current ustralian ta legislation to note ..

The hedging resere is used to record gains or losses on deriaties that are designated as cash flow hedges and recognised in other coprehensie incoe as descried in note 2( ounts are aret ris is the ris that the fair value of future cash flos of a financial instrument ill fluctuate reclassified to profit or loss in the period when the associated hedged transaction taes place because of changes in maret prices. aret ris comprises of three types of ris interest rate ris

currency ris and other price ris such as euity price and commodity ris. Financial instruments n 2 une 2 the Group reset the interest rates associated with denoinated interest rate affected by maret ris include loans and borroings deposits debt and euity investments and swaps designated as cash flow hedges This resulted in a cash outflow of 22 which reduced the derivative financial instruments. Group’s financial liability as presented in note n accordance with inanial instruents as

the nature of the underlying hedged instruent is unchanged the fair alue of this outflow reains in he sensitivity analysis in the folloing sections relate to the position as at une and une the cash flow hedge resere and will e aortised to the stateent of profit or loss in future periods . he sensitivity analysis has been prepared on the basis that the amount of net debt the ratio of

fied to floating interest rates of debt and derivatives and the proportion of financial instruments in The cash flow hedge is included in noncontrolling interest in the onsolidated Group and is not foreign currencies are all constant on the basis of hedge designations in place at une . classified within other reseres

he analysis ecludes the impact of movements in maret variables on provisions and the nonfinancial For personal use only use personal For assets and liabilities of foreign operations.

This note outlines the Group’s eposure to financial riss and how these riss could affect future financial he folloing assumptions have been made in calculating sensitivity analysis perforance

2

102 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 103

• The sensitivity of the reevant statement of profit or oss item is the effect of the assumed changes in oreign urren sensitivit respective market risks This is based on the financia assets hed at une and une he fooing taes demonstrate the sensitivit to a reasona possie change in e eaand oar incuding the effect of hedge accounting exchange rate ith a other variaes hed constant he impact on Group’s profit before tax from oth • The sensitivity of euity is cacuated by considering the effect of any associated cash fo hedges continuing and discontinued operations is due to changes in the fair vaue of monetar assets and and hedges of a net investment in a foreign subsidiary at une for the effects of the iaiities The impact on the Group’s pretax euit is due to net investment hedges assumed changes of the underying risk nterest rate risk is the risk that the fair vaue or future cash fos of a financia instrument i fuctuate $000 $000 because of changes in market interest rates The Group’s exposure to the risk of changes in market 0 , interest rates reate primariy to their ongterm debt obigations ith foating interest rates ,

The Group manages its interest rate risk by having a baanced portfoio of fixed and variabe rate oans 0 and borroings To manage this the Group enters into interest rate saps in hich it agrees to exchange at specified intervas the difference beteen fixed and variabe rate interest amounts cacuated by reference to an agreedupon notiona principa amount t une after taking he movement in the profit efore tax is a resut of a change in the fair vaue of the monetar assets into account the effect of interest rate saps of the Group’s borroings are at a and iaiities denominated in , here the functiona currenc of the entit is a currenc other than fixed rate of interest nterest rate sensitivit The fooing tabe demonstrates the sensitivity to a possibe change in interest rates on the portion of he movement in pretax euit arises from changes in orroings net of cash and cash oans and borroings affected after the impact of hedge accounting ith a other variabes hed euivaents in the hedge of net investments in e eaand operations and cash fo hedges hese constant the Group’s profit before tax is affected through the impact on foating rate borroings as movements i offset the transation of e eaand operations’ net assets into foos redit risk is the risk that a counterpart i not meet its oigations under a financia instrument or customer contract, eading to a financia oss he Group is exposed to credit risk from its operating $000 activities primari trade receivaes and from its financing activities, incuding deposits ith anks 0 and other financia instruments ustraian doar dominated debt e eaand doar dominated debt rade reeivales he exposure to credit risk for trade and other receivaes is infuenced main the individua ustraian doar dominated debt characteristics of each customer he Group’s customer credit risk is managed by reuiring customers e eaand doar dominated debt to pa month rentas in advance he irectors are of the opinion that customer credit risk is reduced through a contractua ien over the contents stored in the rented units he terms of the storage 0 agreement provide for the auction of the customer’s stored contents to recover an unpaid amounts ustraian doar dominated debt utstanding customer receivaes are reguar monitored and an credit concerns highighted to e eaand doar dominated debt senior management

ustraian doar dominated debt he aoance for expected credit osses represents an estimate of trade receivaes that are not e eaand doar dominated debt considered to e recoverae or the ear ended une , the Group has recognised an expected oss provision of , ased on ifetime expected credit osses at each reporting date The assumed movement in basis points for the interest rate sensitivity anaysis is based on the currenty he Group assesses this aoance ased on its historica credit oss experience, adusted for forard observabe market environment ooking factors specific to the detors t une , the Group recognised a provision for trade receivaes of , reating to receivaes acuired on the purchase of investment properties here there are specific risks around recoveraiit oreign currency risk is the risk that the fair vaue of future cash fos of an exposure i fuctuate because of changes in foreign exchange rates The Group’s exposure to the risk of changes in foreign ash and ash euivalents exchange rates reates primariy to the Group’s operating activities hen revenue or expense is he Group’s credit risk on cash and cash euivaents is imited ecause the counterparties are anks denominated in a foreign currency, and the Group’s net investment in foreign subsidiaries ith high creditratings assigned internationa creditrating agencies he maximum exposure to credit risk for the components of the statement of financia position at une and une is The Group hedges its exposure to fuctuations on the transation into ustraian doars of its foreign the carring amounts as indicated in the statement of financia position operations by hoding net borroings in foreign currencies

For personal use only use personal For uarantees redit risk aso arises in reation to financia guarantees given to certain parties refer to notes , , and uch guarantees are on provided in exceptiona circumstances and are suect to specific oard approva

104 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 105

iuidity risk is the risk that the group i not be abe to meet its financia obigations as they fa due The obective of managing iuidity risk is to ensure as far as possibe the group i aays have sufficient iuidity to meet its iabiities hen they fa due under both norma and stressed conditions $000 $000 $000 $000 $000 $000 on behaf of the Group has estabished a number of poicies and processes for managing iuidity 0 0 risk These incude Nonderivatives Trade and other payabes • ontinuousy monitoring cash fos on a daiy basis as e as forecasting cash fos on a medium orroings and ongterm basis inance eases • onitoring the maturity profies of financia assets and iabiities in order to match cashfos istribution payabe • aintaining adeuate reserves and support faciities 00 • onitoring iuidity ratios and a constituent eements of orking capita • aintaining adeuate borroing and finance faciities erivatives nfos 0 inaning arrangeents utfos The Group had access to the fooing undran borroing faciities at the end of the reporting period

0 0 00 $000 $000

xpiring ithin one year bank overdraft xpiring beyond one year oans 0 The bank overdraft faciities may be dran at any time and may be terminated by the bank ithout 0 0 notice other secured bank oans may be dran at any time and is subect to an annua revie $000 $000 $000 $000 $000 $000 urther detais of the bank oans are detaied in notes and erivative used for hedging orard urren ehange aturit of finanial liailities ontrat The tabes beo summarise the maturity profile of the Group’s financial liabilities based on contractual urrent financia iabiities undiscounted payments s amounts discosed in the tabe are the contractua undiscounted cash nterest rate sap fos incuding future interest payments these baances i not necessariy agree ith the amounts urrent financia iabiities discosed on the statement of financia position oncurrent financia iabiities

istributions payabe 0 $000 $000 $000 $000 $000 $000 oncurrent interest 0 0 bearing oans Nonderivatives Trade and other payabes inane lease liailities orroings 0 urrent iabiities inance eases 0 oncurrent iabiities istribution payabe 0 0 0 erivatives nfos utfos

0

For personal use only use personal For

106 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 107

Loan covenants inancial coenants under the terms of the Group’s borroin areement reuire the Group to ensure 0 that the earin ratio does not eceed and the ratio of operatin earnins before interest ta 0 0 depreciation and amortisation to finance costs must eceed a multiple of to he Group has $000 $000 $000 $000 $000 $000 complied ith these coenants throuhout the reportin period erivative used for hedging interest rate saps urr s istributions hae been made and declared as noted belo ourr s 0 sruos p 0 0 ourr rs $000 $000 r os interim distribution of cents per unit paid on orros 0 arch cents per unit

inane lease liailities final distribution of cents per unit payable urr s s on eptember cents per unit ourr s alance of distributions paid to prestaplin unit holders here are no proposed distributions not reconised as a liability for the year ended une he irectors of hae not declared an interim or final diidend for the year endin une

Group’s os p r o sur s o ou s o or so ou o pro rurs o surors o op sruur o ru os o p prr o o Group’s cap s o 0 0 s u or suror spos s ousour p or $000 $000 Group o ur r ranin credits aailable for subseuent financial years based on a ta rate of orr o s o Group’s p sr s o sur s os o rsr os orros rs he aboe amounts are calculated from the balance of the franin account at the end of the o ou pr r o os orros r reportin period o rs o os r o rsr os orros urr

pro Group s s p sruur s uss o s he Group does not hae franin credits as distributions are paid from hich is not liable to oo oos rurs o s os o or us p pay income ta proided all taable income is distributed sruur Group us sruo p o surors rur p o

surors or ssu surs

Group oors p us r ro rprs o sss ss s sor r poss s s Group’s r s o p r ro us orros ss s sorr poss

0 0 $000 $000

rs r os ss s sor r poss

o sss ss s sor r poss

For personal use only use personal For ss s s

108 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 109

s a u oup as coacua cos pac o cosuco o a s soa c usa usaa s o oup aso a co a pa o supp a sa soa pas a c o “” o a sca u o soa cs o a $ $ $ $ sa oa cos o s a u oup a cu coss o a o s poc c a cass as o s pop u cosuco s o

oup s co o aoa pu o o pa o a sos suc o copo o poc

o o coac capa pu cos a o po po a a o cos as as

oup ass ocs a o up s p u aous pos

os o u as pas ao o ocaca opa ass a paa as oos

0 0 $’000 $’000 o a a a o a u o a a as a a as arm’s length transactions.

o as o ac as cos s o

oup o a a co as as a u o u

“”

asc as p sap scu s cacua as po aua o sap scu os aus o cu coss o sc u o a suos aa u o sap scus o ssu u po u

u as p sap scu aus us us ao o asc as p sa o a o accou

0 0 • a a c o s a o ac coss assoca u poa sap $000 $000 scus a • aa u o aoa sap scus a ou a ousa assu coso o a u poa sap scus

For personal use only use personal For

remuneration report which is included in the Directors’ Repo

110 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 111

0 0 T T T T T TT ummar inanial inormation ete ere nuer o eurte on ue urn te er utent uner to reet ount to ret pre on ue o ne pt ete ere nuer o eurte ue to ute n ute ernn per tpe eurte $’000 $’000

0 0 0 0 et prot ttrute to eer ($’000) () () (0) ()

ete n note n on u te roup ue o ne eurte retn to 0 nttuton eut re n u te roup ue o ne eurte retn to re ro eurt pure pn e roup reee proee or te nttuton rn on une een reone ontrt or uture ue o eut tee eurte (0) () ere not on ue t une te e not een nue tn te ete ere nuer 0 o eurte urn te er on oe (0) (0) reure arnings per share or pt re urn te er ene une n (0) (0) ueuent to te er en te ete ere nuer o eurte on ue ue to ute ttutor n ute ernn per tpe eurte een ute to reet te erene uarantees entered into te arent entit eteen te ue pre n te r ue o eurte pror to ue o tu eurte ere ue retn to t utent ’ $ (0 $)

e ete ere nuer o tpe eurte or te er enn une ue to ute n ute ernn per tpe eurte o een rette on t ()

0 ’ ontinent liailities o te arent entit 0 0 0 0 e utor o te roup rnt oun utr T

ount reee or ue n reee rnt oun utr or 0 0 0 0 () $ $ n ut or ree o te nn report o te entt n n oter (0 0 () roup entt ) ter ere n reton to te entt n n oter roup entt ’ report un ( ) 0 ton ere urne rete ter Total auditors’ remuneration

For personal use only use personal For

112 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 113

et out eo onote tteent o opreene noe n tteent o nn poton o te entte tt re prte to ee o ro urntee 0 0 $000 $000 n u te roup pure to tore entre netent properte ro or rot o eore noe t n ree n reeent to pure tr et ro or on opeton o noe t enet ontruton rot ter t etne ernn t te ennn o te er en reee n u te roup ue ne tpe eurte reut o te eut rn nnoune on une e roup reee proee or t rn on une ee note

n u te roup re ro nonunerrtten eurt pure pn reute 0 0 n te ue o ne tpe eurte $000 $000

n euent re n oter reee nentore ter urrent et ot urrent et re n oter reee ropert pnt n eupent netent properte netent ntne eerre t et ot nonurrent et

re n oter pe nne ee t eerre reenue noe t pe roon ot urrent te orron nne ee t roon ot nonurrent te

For personal use only use personal For ontrute eut etne prot

114 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 115

’ DECLARATION

n accordance with a resolution of the irectors of ational torage oldings iited the irectors state that

n the opinion of the irectors

a the financial stateents and notes of the roup for the year ended une are in accordance with the orporations t including

i giving a true and fair view of the consolidated entity’s financial position as at une and of its perforance for the year ended on that date and ii coplying with ccounting tandards and the orporations Regulations

the financial stateents and notes also coply with nternational inancial eporting tandards as disclosed in note and

c there are reasonale grounds to elieve that will e ale to pay its dets as and when they ecoe due and payale

d as at the date of this declaration there are reasonale grounds to elieve that the eers of the losed roup identified in ote will e ale to eet any oligations or liailities to which they are or ay ecoe suect y virtue of the eed of ross uarantee

his declaration has een ade after receiving the declarations reuired to e ade to the irectors y the hief ecutive fficer and hief inancial fficer in accordance with section of the orporations t for the financial year ended une

n ehalf of the oard

aurence rindle ndrew atsoulis irector anaging irector ugust ugust

risane risane For personal use only use personal For

116 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 117

For personal use only use personal For

118 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 119

For personal use only use personal For

120 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 121

A ADDITIONAL INORATION

dditional inforation reuired y the ustralian ecurities change and not shown elsewhere in this report is as follows he inforation is current as at uly unless stated elow

D nalysis of nuers of ordinary fully paid stapled security holders y sie of holding

T nd over otal

here were holders of less than a aretale parcel of stapled securities representing units

E ent largest uoted euit seurit holders he naes of the twenty largest holders of uoted euity securities are listed elow N N

ustody oinees ustralia iited organ oinees ustralia iited iticorp oinees ty iited ational oinees iited erpetual rustee opany td arias oinees ty td gency ending arias os ty td torcat ty td ndrew atsoulis aily iticorp oinees ty iited olonial irst tate nv ife iited oos nterprises ty td oesea uperfund ustody oinees ustralia iited – onwlth uper orp le ueensland ty td atsoulis evelopent r eendert oesea rs alte oesea ustody oinees ustralia iited – aloere ty td eter dward reer aily aront oinees ty td npaid ntrepot eweconoycoau oiness ty iited ccount

For personal use only use personal For ourth oinees ty td ust o td towaway elf torage ty td atsoulis aily

122 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 123

nuoted euit seurities

N N

For personal use only use personal For

NATIONAL STORAGE PORT MELBOURNE

124 FINANCIAL STATEMENTS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 125 INVESTOR RELATIONS

National Storage REIT is listed on the Australian PHONE Securities Exchange under the code NSR. You can confirm your holding balance, request NATIONAL STORAGE REIT SECURITIES forms and access distribution and trading information by phoning: 1300 850 505 (Australia A stapled security comprises: only) or calling +61 3 9946 4471 (outside • one share in National Storage Holdings Australia). Limited; and DISTRIBUTION DETAILS • one unit in the National Storage Distributions are expected to be paid within Property Trust, 8 to 10 weeks following the end of each semi stapled and traded together as one stapled annual distribution period, which occur in June security. and December each year. To ensure timely receipt of your distributions, please consider CONTACT DETAILS the following: All changes of name, address, TFN, payment Direct Credit instructions and document requests should be directed to the registry. NSR encourages securityholders to receive distribution payments by direct credit. If you SECURITIES REGISTRY wish to register for direct credit or update your Computershare Investor Services Pty Limited payment details, log in to your holding online GPO Box 2975 Melbourne VIC 3001 Australia or telephone the registry on 1300 850 505 for Telephone: 1300 850 505 (Australia only) assistance. International: +61 3 9415 4500 TAX FILE NUMBER (TFN) Facsimile: +61 3 9473 2555 Email: [email protected] You are not required by law to provide your TFN, Australian Business Number (ABN) or exemption ELECTRONIC INFORMATION status. However, if you do not provide your By becoming an electronic investor and TFN, ABN or exemption, withholding tax at the registering your email address, you can receive highest marginal rate for Australian resident via email notifications and announcements, members may be deducted from distributions distribution statements, taxation statements paid to you. If you wish to update your TFN, ABN ANNUAL TAXATION STATEMENT AND TAX GUIDE NSR CALENDAR FY20 and annual reports. or exemption status, log in to your holding online or telephone the registry on 1300 850 505 for The Annual Taxation Statement and Tax Guide AUGUST SECURE ACCESS TO YOUR SECURITYHOLDING assistance. are dispatched to securityholders in August Full Year Results and Annual Report released You will need to have your securityholder each year. A copy of the Tax Guide is available UNPRESENTED CHEQUES Distribution paid for the six months ended 30 June reference number or holder identification at www. nationalstorageinvest.com.au. Annual tax statements released number (SRN/HIN) available to access your If you believe you have unpresented cheques, INVESTOR FEEDBACK OCTOBER holding details. please contact the registry and request a search to assist in recovering your funds. If you wish to If you have any fund specific queries or Notice of Annual General Meeting released ONLINE register for direct credit or update your payment feedback please telephone NSR Investor NOVEMBER You can access your securityholding information details, log in to your holding online or telephone Relations on 1800 683 290. Please direct any Annual General Meeting complaints in writing to NSR Company Secretary via link in the Investor Centre section of the the registry on 1300 850 505 for assistance. FEBRUARY For personal use only use personal For corporate website, www.nationalstorageinvest. at GPO Box 3239, Brisbane QLD 4001, Australia. Half Year Results released com.au, or via the Investor Centre link on registry website at www. computershare.com. Distribution paid for six months ended 31 December au. To view your securityholding, you will need The dates listed above are indicative only and your SRN/HIN and will be asked to verify your subject to change. registered postcode (inside Australia) or your country of residence (outside Australia).

126 INVESTOR RELATIONS NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 127 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 PRINCIPAL PLACE OF BUSINESS National Storage Financial Services Limited Level 23, 71 Eagle Street (NSFSL) Brisbane QLD 4000 ACN 600 787 246 AFSL 475 228 Level 23, 71 Eagle Street, Brisbane QLD 4000 SHARE REGISTRY Computershare Investor Services Pty Limited DIRECTORS 452 Johnston Street Laurence Brindle Abbotsford VIC 3067 Anthony Keane Stapled Securities are quoted on the Howard Brenchley Australian Securities Exchange (ASX). Steven Leigh Andrew Catsoulis Claire Fidler AUDITORS Ernst & Young COMPANY SECRETARY 111 Eagle Street Brisbane QLD 4000 Claire Fidler Patrick Rogers

REGISTERED OFFICE Level 23, 71 Eagle Street

Brisbane QLD 4000 For personal use only use personal For

128 NATIONAL STORAGE REIT ANNUAL REPORT 2018/2019 129 For personal use only