ANNUAL REPORT 2019/2020 Important Information
Contents
ABOUT THIS REPORT ENTITIES n OUR BUSINESS Welcome to National Storage REIT’s 2020 Annual National Storage Holdings Limited ACN 166 572 n Report which reports our performance for the 845 (“NSH” or the “Company”) National Storage FY20 PERFORMANCE financial year 1 July 2019 – 30 June 2020. Property Trust ARSN 101 227 712 (“NSPT”) together n NSR STRATEGY form the stapled entity National Storage REIT (“NSR” THE 2020 REPORTING SUITE INCLUDES: or the “Consolidated Group”). n NSR PORTFOLIO Annual Report – a review of FY20 performance, RESPONSIBLE ENTITY OF NSPT strategy and governance. n CHAIRMAN & MANAGING DIRECTORS’ REPORT National Storage Financial Services Limited (NSFL) Financial Report – FY20 financial accounts and ACN 600 787 246 AFSL 475 228 n INVESTMENT PARTNERS detailed financial performance. Level 16, 1 Eagle Street, Brisbane QLD 4000 n THE YEAR IN REVIEW All of NSR’s reporting is available online at Sustainability Report – outlines NSR’s approach to www.nationalstorageinvest.com.au. sustainability. The 2020 Sustainability Report n BOARD OF DIRECTORS will be released prior to National Storage REIT’s AGM and will be available online at n CORPORATE GOVERNANCE www.nationalstorageinvest.com.au at that time. n DIRECTORS’ REPORT
n FINANCIAL STATEMENTS
n INVESTOR RELATIONS
n CORPORATE DIRECTORY
DISCLAIMER statements and forecasts are not guarantees of future performance, and involve known and unknown risks, uncertainties and other factors, many of This is the Annual Report for National Storage REIT which comprises the which are beyond the control of NSH and/or NSFL, and which may cause combined assets and operations of National Storage Holdings Limited actual results or performance to differ materially from those expressed or implied (ACN 166 572 845) (“NSH”) and the National Storage Property Trust (ARSN 101 by the forward looking statements and forecasts contained in this report. 227 712) (“NSPT”). This report has been prepared by NSH and NSFL (ACN 600 787 No representation is made that any of these statements or forecasts will come 246 AFSL 475 228) as responsible entity for NSPT. National Storage REIT (ASX: NSR) to pass or that any forecast result will be achieved. Similarly, no representation currently has stapled securities on issue on the Australian Securities Exchange is given that the assumptions upon which forward looking statements and (“ASX”) each comprising one unit in NSPT and one ordinary share in NSH forecasts may be based are reasonable. These forward looking statements and (“Stapled Securities”). forecasts are based on information available to NSH and/or NSFL as of the date The information contained in this report should not be taken as financial of this report. Except as required by law or regulation (including the ASX Listing product advice and has been prepared as general information only without Rules) each of NSH and NSFL undertake no obligation to update or revise these consideration of your particular investment objectives, financial circumstances forward looking statements or forecasts. or particular needs. This report is not an invitation, offer or recommendation Certain financial information in this report is prepared on a different basis to the (express or implied) to apply for or purchase or take any other action in respect Financial Report, which is prepared in accordance with Australian Accounting of Stapled Securities. Standards. Any additional financial information in this report which is not This report contains forward looking statements and forecasts, including included in the Financial Report was not subject to independent audit or review statements regarding future earnings and distributions. These forward looking by Ernst & Young.
Annual Report 2019 / 2020 3 Our Business
National Storage is Australasia’s largest self-storage provider, tailoring self-storage solutions to over 70,000 residential and commercial customers at 194 storage centres across Australia and New Zealand. National Storage REIT is the only publicly listed, pure play, fully integrated, owner and operator of self-storage centres in Australasia. The National Storage offering spans self-storage, business storage, climate-controlled wine storage 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 customers' 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.
Annual Report 2019 / 2020 5 FY20 Performance
Financial Highlights $177.9m $121.8m $67.7m 8.3cps 8.1cps $2.28b
Total Revenue IFRS Profit Underying Earnings1 Underlying Earnings Distribution per Assets Under per Stapled Security Stapled Security Management (AUM)
FY19: $159.2m FY19: $144.8m FY19: $62.4m FY19: 9.6cps FY19: 9.6cps FY19: $1.95b
12% 16% 9% 13.5% 15.6% 17%
Operational Highlights 188 946,000 95,600 77.8% $195m 84.7%
Number of Centres Square Metres of Net Number of Like-for-like Like-for-like Revenue New Zealand (30 June 2020) Lettable Area Storage Units Occupancy2 per Available Metre Occupancy FY19: 169 FY19: 887,000 FY19: 88,900 FY19: 81.2% FY19: $203m FY19: 85.7%
19 59,000 6,700 3.4% 4% 1%
Capital Strength $2.64b 25% 2.8 $1.65
Total Asset Value Gearing Weighted Average Net Tangible Assets Debt Tenor per Stapled Security
FY19: $2.39b FY19: 33% FY19: 4.0 FY19: $1.63
250m 8% 1.2 years 1%
1 Underlying earnings is a non-IFRS measure (unaudited).
2 Same centre 30 June 2018 (105 centres), excluding WIne Ark, New Zealand and developng centres.
Annual Report 2019 / 2020 7 NSR Strategy
FOUR PILLARS OF GROWTH
ORGANIC ACQUISITIONS DEVELOPMENT TECHNOLOGY GROWTH AND EXPANSION AND INNOVATION
NSR achieves organic NSR has executed NSR has a highly NSR leads the Australasian growth through over 120 high-quality developed and proven storage industry with a combination of acquisitions since its in-house expertise which new technology and occupancy and rate IPO in 2013 – a growth enables it to identify, innovation projects increases assessed rate unmatched in the negotiate and deliver providing an important on an individual Australasian market strategic development competitive advantage centre basis and expansion projects over its peers
Annual Report 2019 / 2020 9 NSR Portfolio
The National Storage portfolio continues to grow across Australia and New Zealand with storage centres conveniently located in capital cities and regional areas that exhibit drivers of storage demand.
As at 30 June 2020.
*Map not to scale.
Annual Report 2019 / 2020 11 Portfolio Statistics
PORTFOLIO DIVERSIFICATION BY NLA PORTFOLIO DIVERSIFICATION BY VALUE
QLD 28% QLD 27% NSW 14% NSW 16% ACT 3% ACT 4% VIC 18% VIC 25% SA 6% SA 5% WA 14% WA 9% TAS 2% TAS 2% NT 2% NT 1% NZ 13% NZ 11%
PORTFOLIO BY NLA JUNE 2020 PORTFOLIO BY NLA JUNE 2020
North Queensland 45,000 Auckland 18,000 Sunshine Coast / Noosa 28,700 Hamilton 22,600 Gold Coast 67,500 Wellington 34,900 Brisbane 129,500 Christchurch 18,600 Sydney 88,700 Dunedin 17,800 Canberra 26,300 Regional NZ 11,600 Melbourne 151,200 TOTAL 123,500 Geelong 12,100 Adelaide 52,300 FY20 PORTFOLIO Tasmania 17,300 COMPOSITION JUNE 2020 Perth 139,100 Freehold 170 Darwin 17,000 Leasehold 14 Wollongong 19,500 Managed 2 Central Coast (NSW) 28,500 Licensed 2 TOTAL 822,700 TOTAL 188
PORTFOLIO VALUATION NSR Portfolio Vaue $2.28 billion Weighted Average Primary Cap Rate 6.49% National Storage Bundall
Annual Report 2019 / 2020 13 Chairman & Managing Directors’ Report
The 2019-2020 year has been, by any estimation, an to support their company at this difficult time. This in high tech innovations into new buildings including extraordinary year for all of us - no less so for NSR. has ensured that any larger scale stand-downs our Bluetooth Smart Access keyless entry system or redundancies have not been required across recently launched at our new Robina centre on the Our company has faced, along with the rest of the organisation, preserving the employment of Gold Coast. Our delivery methodology continues the world, many challenges, yet has continued approximately 500 people across Australia and to include on-balance sheet development and to deliver highly beneficial outcomes for all New Zealand. expansion projects, joint ventures, turnkey and build- stakeholders. We have focused on our core “Four to-own arrangements. FY20 delivered 5 new projects, Pillars” growth strategy - combining organic growth, We have learnt to operate remotely using technology on time and on budget and this is a testament to our acquisitions, development and expansion activity to maintain our strong collaborative team-based accomplished development team. with a strong overriding focus on technology approach across different centres and regions, as and innovation. well as with our head office support team. NSR’s continuing focus on harnessing technology and innovation to assist its business has been critical Over the last 12 months our results have continued the Our contact centre team has not only maintained to our success over the last 12 months. The ability robust growth trajectory of previous years, growing their performance targets over this period but to react quickly to the challenges of COVID-19 revenue from $159 million to $178 million, with slightly improved their conversion rates. This enabled us to and facilitate our staff working remotely, including reduced occupancy - despite some significant mitigate any occupancy losses during the worst of operating from three decentralised contact centre Our commitment to quality ESG outcomes continues operating constraints as a result of the COVID-19 the pandemic and then quickly return to positive locations, was pivotal in mitigating risks associated with solar PV systems now installed at over 120 pandemic. Pleasingly, occupancy has rebounded occupancy growth. with COVID-19. NSR’s new website, together with centres. Phase 2 of this program is embracing other strongly post the first wave of COVID-19 and this other significant improvements to our technology energy efficient initiatives including LED lighting and growth has continued through July and early August We rapidly implemented a contact-free move-in strategy, has further enhanced the robust nature of an expanded solar foot-print. This program will result 2020. The strong performance of our business through process, allowing customers to book a storage unit, our operating platform which supports our continued in further operational efficiencies minimising NSR's the COVID-19 pandemic further demonstrates the e-sign their agreements and move in without any growth into the future. environmental impact. resilience of self-storage as an asset class and the direct physical staff contact. This has proven to be proactive capability of the NSR team in responding extremely successful and very popular with many The achievement of the 2020 Canstar Blue Award During the year we continued to evolve the suite quickly and effectively to such challenges. customers moving in over the COVID-19 period and for Australia’s most satisfied self-storage customers of employee benefit offerings to NSR employees, beyond. Likewise, our new online box shop with boxes is a testament to NSR's commitment to excellence including a parental leave program which NSR delivered total shareholder return for FY20 and packaging ordered online and delivered to in customer service and the provision of best value considerably exceeds the statutory allowance of 10.1%, one of the best results of any A-REIT over your door has significantly increased packaging sales storage solutions across Australia. provided by the Federal Government. the last 12 months, and 43.9% for the 3 years to 30 over recent months. June 2020. Our acquisition activity has continued at pace, Operationally, our team has remained united, with 22 acquisitions totalling $218 million executed relentless and strong in the face of numerous and integrated into the NSR portfolio over the challenges, including recent highly publicised M&A last 12 months. In addition, we have settled activity involving NSR, and the COVID-19 restrictions $134 million of new acquisitions since 1 July 2020 which impacted all major markets in which NSR and have a further $100 million currently under operates. Our centre staff and head office teams active negotiation. We have entered promising have performed admirably over this period with new markets and expanded our coverage in all 188+ centres across Australia and New Zealand Melbourne and Sydney as well as consolidated remaining open and operational. NSR has not our position as Australia and New Zealand’s requested or received any JobKeeper support and leading provider of tailored self-storage solutions. has maintained full staffing and wage rates across the organisation. Our staff, including centre, head From a development and expansion perspective, office and Senior Executive, have voluntarily taken NSR has 15 projects ranging from concept, to nearing one day of annual leave per week throughout the completion. Our commitment to industry leading pandemic and thus made a significant contribution technology means that we are adopting the latest
Annual Report 2019 / 2020 15 From a capital management perspective NSR is in a strong position, having recently raised approximately $348 million by way of an institutional placement and up-scaled security purchase plan. This has reset NSR’s balance sheet and fortified our financial position during these uncertain times. We are well advanced in deploying this capital into income producing core storage investments across a number of acquisition opportunities and development projects.
We would like to formally acknowledge the strong guidance provided by our independent directors and executive management team during this most challenging year. We would also like to express our gratitude to our staff, securityholders and other stakeholders for their ongoing support without which the above achievements would not have been possible.
Laurence Brindle Independent Non-Executive Chairman
Andrew Catsoulis Managing Director
National Storage Robina
Annual Report 2019 / 2020 17 Investment Partners
National Storage continues to work with its SPACER current investment partners, and engage with National Storage has been an investor in Spacer since a number of new investment partners, to assess 2017. Spacer.com.au is Australia’s premier peer-to- options for future acquisition, development and peer marketplace for self-storage, leveraging existing redevelopment opportunities. infrastructure and assets by linking hosts (people with space) with renters (people who need space). Parkhound is a Spacer company and is the #1 parking PERTH DEVELOPMENT PORTFOLIO marketplace and app in Australia, helping both local The Perth Development Portfolio is a construction residents who have unused parking spaces, and and management arrangement with one of Perth’s commercial property and carpark operators increase leading self-storage construction companies, Parsons utilisation whilst saving consumers time and money. Group. This venture continues to reinforce the National Storage strives to be a leader in industry National Storage brand as a prominent player in the evolution with its digital transformation and saw an Perth market. Various sites in and around Perth have opportunity in partnering with Spacer given the rapid been identified as part of the arrangement, whereby growth of the sharing economy. The investment was Parsons Group constructs quality self-storage centres a strategic decision to stay ahead of any impacts of branded as National Storage. The arrangement will disruption and technology on the storage industry. see some centres acquired by National Storage on completion, and others managed by Parsons Group under the guidelines of the National Storage National Storage operating platform. The partnership to date has Fremantle delivered multiple centres with Fremantle, Martin and Port Kennedy added to the NSR portfolio over the last year. The Frances Bay and Kelmscott centres are owned by Parsons Group and managed by National Storage. Additional centres are under construction at East Perth and Byford. Other sites are currently in due diligence and planning stages. National Storage retains certain rights to purchase the assets under this arrangement.
BRYAN FAMILY GROUP (BFG, formerly known as Leyshon) National Storage and BFG are currently jointly developing the site at Biggera Waters on the Gold Coast with completion due in the first half of FY21. National Storage and BFG extended their partnership in FY20 to jointly acquire and develop a site at Moorooka in Brisbane on which a high-quality storage centre and service station will be developed in FY21.
National Storage Fremantle
Annual Report 2019 / 2020 19 The Year in Review
ASSET MANAGEMENT ACQUISITIONS The past year has seen a continued focus on our National Storage has successfully transacted 20 active revenue management platform with a acquisitions and 2 development sites in FY20 and changeover to a new software program and provider. continues to pursue high-quality acquisitions across The new program is predominantly automated and Australia and New Zealand. The ability to acquire uses artificial intelligence in a predictive modelling and integrate strategic accretive acquisitions is one capacity. The continued refinement of our advanced of National Storage’s major competitive advantages revenue management modelling system, together and a cornerstone of its growth strategy. This active with a storage-specific data analytics platform growth strategy also strengthens and scales the continues to deliver efficiencies and enhance National Storage operating platform which drives scalability across the operating platform. With our efficiencies across the business. operational state structure in place, significant improvements were made through efficiency programs NUMBER OF TOTAL NLA and the rollout of a new revenue training package to REGION CENTRES (SQM) all centre and contact centre staff. Conversion rates Brisbane 2 11,900 across all channels increased this year due to improved Gold Coast 2 4,100 data analysis and stronger operational leadership. As the portfolio continues to grow, the NSR operating Sunshine Coast / Noosa 1 5,700 model will continue to evolve in order to meet the Melbourne 6 22,600 challenges of trading environments, and to optimise Sydney 3 7,800 operating performance through automation Perth 3 16,200 and efficiency programs. Our ongoing strategic partnerships with ParcelPoint and Hubbed, Australia’s Launceston 2 4,900 largest network of locations for parcel collection, Wellington (NZ) 1 4,700 and U-Haul, a leading national trailer rental provider, TOTAL ACQUISITIONS 20 77,900 continue to drive foot traffic and generate awareness of centres in local areas.
This year, we introduced a number of bulk buys in our WINE ARK packaging range and revenue in this area has been Wine Ark, Australia’s largest wine storage provider is growing year-on-year. Other ancillary income streams part of the National Storage group and houses over including insurance and vehicle/trailer hire continued two million bottles of fine wine across 15 centres for to increase across the year and deliver important clients located in over 30 countries. There are few additional revenue to the model. The operations businesses in Australia with more experience when management team maintain a focus on driving it comes to storing and managing premium wine. Revenue per Available Square Metre (REVPAM) using Throughout FY20 Wine Ark continued to strengthen a balanced approach to rate per square metre its relationship and involvement in the greater and occupancy growth on an individual centre and wine trade supporting the Wine Communicators unit type basis. At 30 June 2020, REVPAM across the of Australia, Sommeliers Association of Australia, Australian portfolio on a like-for-like basis (105 owned Wine Australia and Commanderie de Bordeaux centres at June 2018, excluding developing centres) (Australian Chapter). was $195/sqm (June 2019: $203/sqm). Occupancy across the portfolio on a like-for-like basis decreased slightly to 77.8% (June 2019: 81.2%).
National Storage Robina
Annual Report 2019 / 2020 21 MARKETING AND CUSTOMER EXPERIENCE Growing awareness, engagement and conversion were once again key drivers of the marketing strategy during the year. National Storage has committed to investing in a new digital presence in order to create a fresh, clean and simple customer experience with a focus on ensuring that our e-commerce offering is in line with industry best practice. The importance of delivering an engaging and user-friendly online experience has seen the business invest in the development of a new website. The launch commenced in December 2019, enabling customers to book and pay across all device types. We have since seen improved online conversion rates and continue to user test the new site and make changes to ensure an industry best online user experience. This year we moved away from external digital agencies, and are now managing our paid search, search engine optimisation (SEO) and sponsorship campaigns internally. We employ an in-house digital marketing team and have seen significant improvements across all digital platforms in enquiry and conversion numbers. The improved results combined with detailed analysis on customer behaviour assist our decision-making process across all revenue streams. Our improved social media and public relations strategy has significantly increased online engagement. Our sponsorship portfolio also continues to be an important focus, driving above the line brand awareness and differentiation in both Australia and New Zealand. As a result of the integration of our new Customer Relationship Management (CRM) tool, we have commenced regular Electronic Direct Mail (eDM) communication with our customer databases, promoting retail campaigns and packaging sales, along with important customer updates.
SUSTAINABILITY This year will see the release of National Storage’s fourth stand-alone sustainability report. The report is expected to be released by early October 2020, prior to National Storage’s AGM and will be published online at www.nationalstorageinvest.com.au. The report will detail National Storage’s performance across environmental, social and governance aspects of the organisation as well as our overall vision and strategy. This will ensure that we set realistic and achievable goals and appropriate sustainability targets in the short, medium and long-term.
Annual AnnualReport Report2019 / 20202019 / 2020 23 Board of Directors
Independent Non-Executive Chairman Independent Non-Executive Director BCom BE (Hons) MBA BEc
Laurence has extensive experience in funds management, finance Howard has over 30 years’ involvement in the Australian and investment. Until 2009 he was an executive with Queensland property industry, as an analyst, investor and fund manager. Investment Corporation (QIC). During his twenty one years with He is now a professional company director and consultant QIC he served in various senior positions including Head of Global to the property funds industry. Howard co founded Property Real Estate where he was responsible for a portfolio of $9 billion. Investment Research Pty Ltd (PIR) in 1989, which during the 1990s Laurence was also a long-term member of QIC’s Investment was considered a leading researcher of both listed and unlisted Laurence Brindle Strategy Committee. He provides advice to a number of investment Howard Brenchley property funds. In 1998 Howard was instrumental in establishing institutions on real estate investment and funds management the funds management business of APN Property Group Limited. matters. Laurence holds a Bachelor of Engineering (Honours) and During this period he was responsible for the establishment and a Bachelor of Commerce from the University of Queensland, and operations of a number of funds investing both directly and a Master of Business Administration from Cass Business School, indirectly in real estate. Howard is currently a Non-Executive London where he graduated with distinction. He is a former Director of the ASX listed APN Property Group Limited (APD) Chairman of the Shopping Centre Council of Australia and a former and is also a non executive director of APN Funds Management director of Westfield Retail Trust and Scentre Group, which owns, Limited, responsible entity for ASX listed APN Industria REIT (ADI) operates and develops Westfield shopping centres in Australia and APN Convenience Retail REIT (AQR). Until July 2017, APN and New Zealand. Laurence is also currently the Non-Executive Funds Management Limited was also responsible entity for Chairman of the listed entity, Waypoint REIT. Laurence serves on the Generation Healthcare REIT (GHC). Howard is a member of the Audit and Risk Committees and is Chairman of the Nomination and Audit and Risk Committees. Remuneration Committees
Independent Non-Executive Director Independent Non-Executive Director BSc (Maths) GradDipCorpFin Grad Dip Proj Mgmt
Anthony is an experienced finance and business executive with Steven Leigh has more than 30 years’ experience in the real estate an extensive background in banking and business management. investment management and development industry. He joined Prior to accepting his directorship with National Storage, QIC Global Real Estate in 1991 and was a key member of the senior Anthony held numerous leadership roles with a major trading executive team that acquired and created through development a bank principally in business, corporate and institutional banking. portfolio of high-quality retail and commercial assets in Australia, USA He is actively involved in the business community through and the UK. Steven has had significant experience in the wholesale Anthony Keane Non-Executive Director and Advisory Board roles, and finance Steven Leigh funds management business through various market cycles and advisory consultancies. He is a Director of Queensland Symphony conditions and has a strong background in retail, commercial Orchestra Pty Ltd and EMvision Medical Devices Ltd. Anthony has and industrial property with a particular focus on shopping centre a Bachelor of Science (Mathematics) from University of Adelaide acquisitions and redevelopments. After time as the Managing Director and a Graduate Diploma in Corporate Finance from Swinburne. of Trinity Limited, and later Head of Australia for LaSalle Investment He is a Fellow of the Financial Services Institute of Australasia, a Management, Steven re-joined QIC as Managing Director QIC Graduate of the Australian Institute of Company Directors and Global Real Estate in 2012 where he was responsible for the group’s a Fellow of the CEO Institute. Anthony acts as Chairman of the $20bn plus property portfolio. Steven is a Non-Executive Director of Audit and Risk Committees and is a member of the Nomination ASX-listed company, Scentre Group Limited, is a founding member and Remuneration Committees. of Male Champions of Change established by the Property Council of Australia and he has qualifications in real estate valuation and project management. Steven is a member of the Remuneration and Nomination Committees.
Annual Report 2019 / 2020 25 Board of Directors / Executives
Managing Director Chief Financial Officer BA LLB Grad Dip Project Mgmt (Hons) BBus CPA GAICD
A founder of the National Storage business, Andrew has over 25 Stuart joined National Storage in late 2014, with extensive years' of specific self-storage industry expertise including in the experience in the energy sector in coal and gas fired areas of acquisitions, developments, integration and operation power generation. He has held wide ranging finance and of ‘greenfield’ and developed self-storage centres. Andrew is a commercial management roles, including as Commercial qualified solicitor who has been admitted to the Supreme Court Manager for Energy Developments Limited. Prior to this, Stuart of Queensland. He has had extensive experience in the fields of was Commercial Manager on the delivery of a multi-site gas Andrew Catsoulis finance, commercial and property law during his tenure at major Stuart Owen fired power generation project and micro LNG plant. He has law firms both in Australia and overseas. He is also a qualified significant experience in project financing, mergers and project manager and has considerable property development acquisitions and project development. Stuart holds a Bachelor of experience both within the storage industry and in broader Business, is a Certified Practising Accountant and is a graduate markets. Andrew was instrumental in the successful acquisition of the Australian Institute of Company Directors. and integration of the original pre-existing Group portfolio and led the Company through the IPO and planned and negotiated the acquisition of the Southern Cross portfolio in 2016. He has led the company in its growth from a single centre in 1996 to over 190 centres today and has been primarily responsible for charting its strategy over that period.
Executive Director & Company Secretary LLB (Hons) BBus (Intl) GAICD FGIA
Claire was appointed an Executive Director in July 2017 and has been the principal Company Secretary of National Storage since November 2015. She was appointed Head of Legal & Governance in June 2020 and now oversees the legal, governance and risk functions of the organisation. Claire holds legal and international business qualifications and is admitted as Claire Fidler a solicitor of the Supreme Court of Queensland. Claire has twenty years’ experience in corporate and commercial law, both in private practise and in-house. She practiced in the litigation, resources and corporate areas of two large law firms and as Corporate Counsel and Company Secretary at Rio Tinto Coal Australia, prior to joining National Storage. Claire has also worked in corporate compliance with the Australian Securities and Investments Commission. Claire is a Graduate of the Australian Institute of Company Directors and a Fellow of the Governance Institute of Australia and is a Non-Executive Director of Spacer Marketplaces Pty Limited.
Annual Report 2019 / 2020 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 2020 Corporate Governance Statement, which can be found online at www.nationalstorageinvest.com.au.
Annual Report 2019 / 2020 29
KEY HIGHLIGHTS Group FY20 FY19 Change Directors’ Report Total Revenue $177.9m $159.2m 12% IFRS profit after tax $121.8m $144.8m (16%) Earnings per stapled security 14.67cps 21.59cps (32%) Underlying earnings(1) $67.7m $62.4m 9% Underlying earnings per stapled security(1) 8.3cps 9.6cps (13.5%) Net operating cashflow $89.5m $93.3m (4%) Distribution per security 8.1cps 9.6cps (15.6%)
At June At June Portfolio Change 2020 2019 Number of Centres owned/managed & licenced (Total) 184/4 (188) 163/6 (169) 21(2) (19) Australian occupancy (2) 77.8% 81.2% (3.4%) New Zealand occupancy 84.7% 85.7% (1.0%) Like for like Revenue per available metre (REVPAM)(2) $195 $203 (4.0%) Weighted Average Primary Cap Rate 6.49% 6.85% (0.36%) Assets Under Management (AUM)(3) $2.28b $1.95b 17% Portfolio Valuation Uplift $67m $136m (51%) Acquisitions / Centres(4,5) $204m/20 $358m/35 ($154m)/(15) NLA (sqm) 946,000 887,000 7%
At June At June Balance Sheet Change 2020 2019 Total Assets(5) $2.64b $2.39b 10% Debt drawn(5) $681m $848m ($167m) Interest Rate Hedges(5) $507m $470m $37m Gearing 25% 33% (8%) Weighted average cost of debt 1.9% 3.1% (1.2%) Weighted average debt tenor (years) 2.8 4.0 (1.2) NTA $1.65 $1.63 1.2%
PRINCIPAL ACTIVITIES NSR is the first and only internally managed and fully integrated owner and operator of self-storage centres to be listed on the ASX. NSR is the largest self-storage owner/operator across Australia and New Zealand, with 194 self-storage centres under operation, management or licence, tailoring storage to over 70,000 customers.
NSR has grown its portfolio of owned, managed and licenced centres from 62 centres in December 2013 to 194 centres at the date of this Directors’ Report, with additional centres expected to settle in the coming months. NSR now manages approximately 95,000 storage units across approximately 950,000 square metres of net lettable area in Australia and New Zealand. Assets Under Management (AUM) have increased by 17% during the Reporting Period to $2.28 billion as at 30 June 2020.
Of the 194 self-storage properties in the NSR portfolio at the date of this report, ownership is as follows: • 176 self-storage centres owned by NSPT • 14 self-storage centres operated as long-term leasehold centres (Leasehold Centres) • 2 third party managed centres • 2 licenced branding rights centres in New Zealand
NSR operates a focused business model encompassing a “Four Pillar” growth strategy, focussing on Organic Growth, Acquisitions, Development and Expansion with an overarching focus on Technology and Innovation.
1 Underlying earnings is a non-IFRS measure (unaudited), see table within Operating Results for reconciliation 2 Same centre 30 June 2018 (105 centres), excluding WineArk, New Zealand and developing centres 3 Investment properties (including Assets held for sale) net of finance lease liability 4 Excluding transaction costs 5 NZD/AUD exchange rate of 1.07 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 31 Annual Report 2019 / 2020 31
BUSINESS STRATEGY CASH MANAGEMENT
NSR’s ob ective is to deliver investors a stable and growing income stream from a diversified portfolio of Cash and cash e uivalents as at 30 June 2020 were 90 million compared to 1 million at 30 June high ualit self storage assets and to drive income and capital growth through active asset and 2019 which included cash raised b the capital raise undertaken on 2 June 2019 prior to the portfolio management including the ac uisition development or redevelopment and portfolio repa ment of debt facilities Subse uent to 30 June 2020 the ma orit of the cash balance has been rec cling of self storage centres utilised to facilitate further ac uisitions and provisioned for pa ment of the distribution on September 2020 Net operating cashflow for the ear was 9 million 2019 93 3 million The ke drivers of the business are During the ear NSR successfull completed a capital raising of approximatel 3 million b wa of an • Organic Growth NSR achieves organic growth through a combination of occupanc and rate institutional placement and a Securit Purchase Plan The purpose of the e uit raising was to increases assessed on an individual centre basis strengthen the balance sheet replenish investment capacit and provide additional funding flexibilit • Ac uisitions NSR has executed over 120 high ualit ac uisitions since its IPO in 2013 – a growth to ensure the organisation had certaint of funding be ond the expected period of volatilit as a result rate unmatched in the Australasian market of the CO ID 19 pandemic NSR took advantage of the Temporar Extra Placement Capacit of 2 implemented under AS isting Rule 1 1 • Development and Expansion NSR has a highl developed and proven inhouse expertise which enables it to identif negotiate and deliver strategic development and expansion pro ects in an An interim distribution of cents per stapled securit 3 0 million was paid on 2 Februar 2020 with efficient and effective manner an estimated final distribution of 3 cents per stapled securit 3 million declared on 1 June 2020 with a pa ment date of September 2020 totalling a full ear distribution of 1 cents per stapled • Technolog and Innovation NSR leads the Australasian storage industr with new technolog securit against underl ing earnings per securit of 3 cents and innovation pro ects designed to improve operational efficienc and enhance the customer and emplo ee experience providing an important competitive advantage over its peers During the Reporting Period NSR once again offered a Distribution Reinvestment Plan DRP which Further details on these ke business drivers can be found elsewhere in the NSR 2020 Annual Report enables eligible securit holders to receive part or all of their distribution b wa of securities rather than cash REVIEW AND RESULTS OF OPERATIONS For the December 2019 interim distribution approximatel 22 of eligible securit holders b number of The Financial Statements of NSR are prepared in compliance with Australian Accounting Standards securities elected to receive their distributions as securities totalling approximatel 1 million The DRP and the re uirements of the Corporations Act 2001 Cth price was set at 2 13 which resulted in 3 09 2 new securities being issued
OPERATING RESULTS The June 2020 final distribution has seen approximatel 21 of eligible securit holders b number of securities elect to receive their distributions as securities totalling approximatel 1 million The DRP IFRS Profit after tax for the Reporting Period was 121 million with EPS of 1 cents Underl ing price was set at 1 9 which resulted in approximatel 000 000 new securities being issued earnings increased b 9 to million Underl ing earnings per stapled securit was 3cps for the 2020 financial ear and was impacted b dela s in oint venture development income as a result NSR’s finance facilities are structured on a “Club” arrangement involving the four ma or Australian of the takeover activit in the three months up to CO ID 19 and then CO ID 19 which also impacted banks and a ma or Australian superannuation fund During the ear NSR introduced JP organ into the on short term operational results The impact on operations was relativel minor and manifested banking group to increase the available banking limits and enhance the diversit of the funding group through a drop in total occupanc including et up centres of approximatel 2 which has been JP organ have committed a 100 million facilit which is currentl in the process of having a number recouped as at the date of this Report with total occupanc increasing 2 since 1 Jul 2020 of conditions precedent to drawdown satisfied The Consolidated Group’s borrowing facilities are AUD 930 million and N D 22 million As at the Reporting Date AUD e uivalent of approximatel 1 $m FY20 FY19 million was undrawn and available NSR activel manages its debt facilities and continues to increase IFRS Profit after tax 121 1 these when and where re uired to ensure that NSR has ade uate capacit for future ac uisitions and Plus tax expense benefit 2 3 0 3 working capital re uirements NSR’s weighted average debt tenor as at the Reporting Date is 2 Plus restructure and other non recurring costs 3 1 ears a reduction from 0 ears as at 30 June 2019 Debt refinancing activities were paused through Plus contracted gain in respect of sale of investment propert 3 0 3 9 the A activities and CO ID 19 and have recommenced with the aim of extending NSR’s debt tenor Plus amortisation of interest rate swap reset 0 1 be ond ears NSR’s gearing level at 30 June 2020 was 2 against target gearing range of 2 ess fair value ad ustment 3 0 0 providing flexibilit and the abilit to act expeditiousl on ac uisition opportunities as the arise ess lease diminution on leasehold investment properties 3 3 3 Underlying Earnings $67.7 $62.4 NSR maintains interest rate hedges in accordance with NSR’s hedging polic This hedging polic is eighted average securities on issue refer Note 19 1 9 3 32 0 319 1 reviewed on a regular basis Additional interest rate hedges were entered into during the ear to Underlying earnings per stapled security 8.3cps 9.6cps continue the prudent management of NSR’s interest rate risks Following the e uit raising undertaken in a 2020 NSR took advantage of the low interest rate environment and reset its Australian and New Total revenue increased b 12 to 1 9 million Occupanc across the June 201 portfolio excluding ealand swap book The cost of the reset was 1 3 million with the average swap rate reduced b New ealand and developing centres suffered as a result of CO ID 19 and decreased to down approximatel 0 As at the Reporting Date interest rate hedges totalling A 07 million were in place from 1 2 at 30 June 2019 New ealand occupanc was also impacted b CO ID 19 and with expir dates ranging from 0 2 ears to 2 ears decreased to down from at 30 June 2020 This was offset b strong occupanc growth in the et Up centres those recentl built or expanded resulting in total occupanc reducing b 2 ACQUISITIONS AND INVESTMENTS
These results demonstrate the highl resilient nature of self storage as an asset class and are a NSR considers its abilit to ac uire and integrate ualit self storage assets to be one of the ke drivers testament to the proactive response provided by NSR’s management team, which limited the impact of its growth strateg and success to date NSR’s dedicated in house ac uisitions team has continued of losses related to the CO ID 19 pandemic Given the challenging economic conditions that have to identif facilitate and transact on ac uisitions that are considered to be appropriate for inclusion in been experienced b man of its residential and businesses customers during CO ID 19 it is the NSR portfolio NSR criticall assess each potential ac uisition against criteria such as encouraging to see that NSR’s portfolio has uickl returned to positive occupanc growth in June Jul • location and surrounding demographics of local catchment area and August recovering a large percentage of the occupanc that was lost during the initial CO ID 19 • competition and potential for future competition within the primar 3km and secondar lockdown Same centre revenue per available metre RE PA decreased to 19 s m from km competitive radial areas 203 s m at June 2019 driven b the loss in occupanc due to CO ID 19 Rate remained strong at • exposure to passing traffic – t picall a minimum of 30 000 cars per da targeted 2 2 s m a slight reduction from 2 s m at June 2019 The CO ID 19 situation remains • build ualit and opportunities for value adding such as expansion potential surplus land unpredictable and NSR will continue to monitor the situation closel and is well positioned to respond occupanc runwa or potential for rate per s uare metre improvement and uickl and effectivel to an ongoing impacts on operating performance
Underl ing earnings is a non IFRS measure unaudited DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 32 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 33 Annual Report 2019 / 2020 33
• proximity to ma or drivers of storage demand such as retirement villages ne housing • development and e pansion activity foc sed on high ality new self storage developments in development and or medium density apartment or to nhouse developments and ma or ey locations and eval ating its e isting portfolio for e pansion, development or re shopping centres. development opport nities, while contin ing to e plore portfolio recycling opport nities and • technology and innovation – harnessing new technology and innovation to bring f rther The year ended 30 June 2020 as impacted by the takeover activity as ell as CO ID . Despite efficiencies and economies of scale to NSR’s existing business model. these challenges NSR continued ith the execution of its focused ac uisition strategy ith a resultant 20 ne centres and 2 development sites ac uired during the Reporting period totalling approximately 220 million. Since Reporting Date to the date of this Directors’ Report a further seven centres valued at DIVIDENDS AND DISTRIBUTIONS 3 million have settled ith one additional centre valued at million expected to settle by the end NSR has paid or declared distrib tions totalling cents per stapled sec rity for the Reporting Period, of September 2020. comprising
NSR re values all assets each Reporting Period through a combined process undertaken by both • An estimated final distrib tion of 3 cents per stapled sec rity for the months to 30 J ne 2020 external valuers and the Directors valuations based on valuations and methodologies from The distrib tion is e pected to be paid on September 2020 and is e pected to contain a ta independent valuers m3 Property and Urbis . During this process the eighted average primary deferred component capitalisation rate reduced 3 basis points to . and the value of the 30 June 20 portfolio • An interim distrib tion of cents per stapled sec rity for the period J ly 20 to 3 increased by million or 3. . This is despite the valuation process being undertaken at the height of December 20 which was paid on 2 Febr ary 2020 which incl ded a ta deferred the CO ID crisis and this timing negatively impacting on 30 June 2020 valuations. Ho ever the said component impact as relatively minor and trading conditions have improved considerably since the time that the valuations ere completed ith a resultant improvement in valuations expected to be experienced in OPTIONS OVER STAPLED SECURITIES the current period sub ect to any further unforeseen impacts from the CO ID pandemic . No options over iss ed stapled sec rities or interests in a Controlled Entity have been granted in NSR d ring the Reporting Period There are no options in stapled sec rities o tstanding as at the date of this Acquisitions for the Year Ended 30 June 2020 report Number of Region NLA (Sqm) Centres ENVIRONMENTAL REGULATION risbane 2 00 NSR’s operations are not reg lated by any environmental law of the Commonwealth or a State or old Coast 2 00 Territory that is enacted specifically for NSR However, as part of its operations, NSR m st comply with broader environmental laws NSH management on behalf of NSR has in place proced res to identify Sunshine Coast 00 and ens re compliance with s ch laws incl ding identifying and obtaining of necessary approvals, consents or licences Sydney 3 00 There have been no nown material breaches d ring the Reporting Period of any environmental laws elbourne 22 00 to which NSR is s b ect Perth 3 200 ENVIRONMENTAL, ECONOMIC AND OTHER SUSTAINABILITY RISKS aunceston 2 00 NSR recognises that its operating activities and strategic goal of delivering sec rityholder growth and ret rns e pose it to potential ris s NSR management ta es a pro active approach to ris ellington N 00 management elimination and recognises the importance of a strong ris c lt re which is instilled and lead by the oard and the senior e ec tive team so as to form a core tenet of the organisation Total 20 77,900 Ris is managed centrally to minimise potential adverse effects on the financial performance of NSR and protect long term sec rityholder val e, and its broader corporate rep tation A copy of NSR’s Risk anagement Policy can be fo nd at www nationalstorageinvest com a INVESTMENT IN JOINT VENTURES AND ASSOCIATES The Head of egal overnance is responsible for management of NSR’s risk function and in turn NSR as a cornerstone investor in the Australia Prime Storage Fund APSF ith an e uity interest of reports to the anaging Director and the Ris Committee The Ris Committee is charged with ris 2 . . APSF as established to facilitate the development and o nership of premium self storage oversight and reports to the f ll oard The f ll oard is then actively involved in the ltimate review of centres in select ma or cities around Australia over the life of the fund. APSF focused its activity in inner and determination of ris to within sensible tolerances city markets here there has been demand for a premium storage product developing ne institutional grade assets ith state of the art facilities and freehold tenure. Potential ris s faced by NSR incl de b t are not limited to
In July 20 NSR contracted ith APSF to purchase the remaining three assets in the fund Albion elvin RISK rove and Canterbury for million hich ere subse uently settled. Follo ing the sale of the last Strategic Risk Poor development and or e ec tion of b siness strategy by the e ec tive centre the fund as ound up. management team can lead to the ris of loss and or poor performance To mitigate this ris , strategies are developed by the relevant responsible e ec tive or senior officer These are then In June 20 NSR ith Bryan Family Group (“BFG”) ac uired a combined commercial and self storage reviewed and disc ssed, as appropriate, by other e ec tive officers and approved by the development site at iggera aters on the old Coast. Construction of a multi level state of the art anaging Director Strategic decisions of a significant nat re are f rther p t before the oard and self storage facility has commenced and construction is expected to be completed in late calendar disc ssed in detail and re ire oard approval The senior e ec tive team meets a n mber of times year 2020. each year to disc ss strategy and ens re that it remains c rrent and appropriate This allows management to ens re it is employing strategies that are pdated for changes in the operating NSR has been appointed to manage the iggera aters pro ect and ill generate income from its environment of the b siness provision of a range of services including design and development pro ect management and Economic Conditions Fl ct ations in economic conditions incl ding cons mer confidence may corporate administration. adversely impact pon demand for storage space aterial macroeconomic events occ rring or any significant trading downt rns d e to factors beyond the control of management have the LIKELY DEVELOPMENTS potential to negatively impact on forecast trading performance. The results of NSR’s operating NSR continues to utilise its position as Australia s first and only AS listed pure play fully integrated activities are dependent on the performance of the properties in which it invests and those it sector specific self storage REIT to continue to execute its stated “Four Pillars” strategy. This embodies: manages on behalf of other parties This performance in t rn depends on economic factors these • organic gro th through increases in rate and occupancy at an individual centre level incl de economic growth rates, inflation rates and ta ation levels There are also ind stry and • gro th by ac uisition of uality storage centres across Australia and Ne ealand location specific ris s to consider, incl ding competitor behavio r NSR mitigates the potential
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 3 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 3 Annual Report 2019 / 2020 35
RISK RISK impacts of fluctuating economic conditions by see ing to maintain a strong and conservative these underlying factors could lead to an increase in the cost of funding limit the a ailability of balance sheet and financial position. funding and increase the ris that NSR may not be able to refinance its debt and or interest rate Operational Risk Ris of loss due to its overall operations and management of other ris s exists as a hedges before expiry or may not be able to refinance them on substantially the same terms as the function of any operating business. NSR aims to ensure that the necessary processes, training and existing facility or hedge instruments. If alternati e financing is not a ailable this could ad ersely supervision are in place and effected to eliminate such loss wherever possible. The ris of loss from affect NSR’s ability to acquire new properties and to fund capital expenditure, and NSR may need to system failures is reduced through system bac ups and disaster recovery contingency procedures, realise assets at less than aluation hich may result in financial loss to NSR. which aim to ensure the maintenance of NSR’s critical data availability. Leasehold interests NSR holds lease agreements ith certain third parties hich allo it to operate General commercial property risks Ris s commonly associated with commercial property storage centres from these properties. ease terms for these properties are typically long (greater investment apply equally to NSR, including levels of occupancy, capital expenditure requirements, than 0 years). Ho e er there is no guarantee that these lease arrangements ill be able to be development and refurbishment ris , environmental and compliance issues, changes to government rene ed upon expiry or if so on suitable terms to NSR. and planning regulations, including oning and damage caused by flood or other extreme weather Environmental issues Unforeseen en ironmental issues may affect the properties in the property to the extent that it is not or could not be insured against . NSR utilises a comprehensive due portfolio o ned by NSR. These liabilities may be imposed irrespecti e of hether or not NSR is diligence process when acquiring centres to mitigate or eliminate ris where possible. responsible for the circumstances to hich they relate. NSR may also be re uired to remediate sites Tenure Storage agreements are typically month to month and there is no guarantee customers will affected by en ironmental liabilities. The cost of remediation of sites could be substantial. If NSR is renew or that other customers will be found to ta e their place upon departure. To mitigate this ris , not able to remediate the site properly this may ad ersely affect its ability to sell the rele ant customer relationships are carefully managed to maximise duration of stay and highly developed property or to use it as collateral for future borro ings. aterial expenditure may also be re uired to mar eting and management systems are in place to maximise conversion of new customer enquiries comply ith ne or more stringent en ironmental la s or regulations introduced in the future. and to continue to maintain and build occupancy at an individual centre level. Data and Cyber Attack Loss – During the course of its operations NSR is re uired to handle data from Competition Entry by new competing storage centres or discounting by existing storage centres arious sources including sensiti e customer data. As a result there is the possibility that data could may adversely impact upon occupancy and rental rates on a centre specific basis. While there are be either damaged or lost. This creates the ris of potential legal exposure from both commercial barriers to entry for new competition, NSR constantly monitors its competitors activities to ensure third parties and regulators depending on the nature and the extent of any possible loss or damage pricing and terms remain competitive. to the data. There is also the ris that NSR could suffer a cyber attac from a third party that could Valuations - Valuations ascribed to NSR’s assets will be influenced by a number of ongoing factors disrupt its operations and functionality or result in the lea ing of sensiti e data. NSR employs state of including supply and demand for self storage centres and general property mar et conditions. the art cyber security systems processes and consultants in order to attempt to minimise this ris . aluations represent the analysis and opinion of qualified experts at a certain point in time. There is Climate Change Extreme eather e ents or progressi e damage from climate related causes may no guarantee that a property will achieve a capital gain on its sale or that the value of the property cause loss to NSR through either physical impact 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 income. NSR has enacted a specific regular re ie process for its centres to ensure such incorrect. impacts or their li elihood is mitigated to the maximum extent possible. aterial expenditure may Property liquidity Self storage centres are property based illiquid assets and sub ect to supply and also be re uired to comply ith ne or more stringent la s or regulations introduced in the future. demand factors dependent upon prevailing mar et conditions. As a result it may not be possible for Impact of COVID-19 The e ents relating to CO ID ha e resulted in unprecedented restrictions NSR to dispose of assets in a timely or price accretive fashion should the need to do so arise. and loc do ns including in relation to domestic and international tra el and general disruption to Future acquisitions and expansions NSR may consider opportunities to ma e further acquisitions of business acti ities. These restrictions ha e been imposed by Australian and Ne ealand state self storage assets. NSR may also develop and expand the lettable area at a number of NSR’s pro incial and federal go ernments and international go ernments and regulatory authorities centres. The rate at which NSR is able to expand will reflect mar et forces and the availability of and/or implemented as a matter of best practice during the ongoing crisis. While all of NSR’s centres capital at the time. Forecast distributions may be affected by such actions. The ris s faced by NSR in ha e remained open and operational throughout the CO ID pandemic the e ents relating to relation to any future development pro ects will depend on the terms of the transaction at the time. CO ID 19 may have a material adverse effect on, or cause a material adverse change to, NSR’s There can be no assurance that NSR will successfully identify, acquire and integrate further self business. Gi en the high degree of uncertainty surrounding the extent and duration of CO ID it is storage assets, or successfully implement acquisitions on time and on budget. Furthermore, there is not currently possible to assess the full impact of CO ID on the NSR business. There is also no guarantee that any acquisition will perform as expected. Future acquisitions may also expose continued uncertainty as to the duration and further impact of CO ID including (but not limited NSR to unanticipated business ris s and liabilities. to) in relation to go ernment regulatory or health authority actions or stoppages loc do ns Personnel risk NSR relies upon the expertise and experience of the senior management team. As a uarantines tra el restrictions and the impact on global economies. There is no certainty that consequence, if the services of ey personnel were no longer available this may have an adverse property values or NSR’s business activities will normalise to a level existing prior to the impact of impact on the financial performance of NSR. However, NSR’s senior management team are CO ID (or ho long such normalisation could ta e). If the duration of e ents surrounding CO ID considered internally to be stable and committed and succession planning is underta en are prolonged NSR may need to ta e additional measures in order to respond appropriately. periodically by the NSH oard and anaging Director. Interest rate fluctuations and derivative exposure Unfavourable movements in interest rates could lead to increased interest expense to the extent that these rates are not hedged. NSR uses DIRECTORS 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. NATIONAL STORAGE HOLDINGS LIMITED Workplace health and safety There is a ris that liability arising from occupational health and safety The NSH Directors in office during the Reporting Period, or appointed prior to the date of this Directors’ matters at a property in NSR’s portfolio may be attributable to NSR as the registered proprietor. To Report and continuing as at the 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 Brindle Non Executi e Chairman (Appointed No ember 20 3) health and safety including comprehensive reporting to assist in the mitigation or elimination of such ris s and eep our team members, customers and contractors safe. Andre Catsoulis anaging Director (Appointed No ember 20 3) Insurance risk - There is no certainty that appropriate insurance will be available for all ris s on Anthony eane Non Executi e Director (Appointed No ember 20 3) acceptable commercial terms or that the cost of insurance premiums will not continue to rise. Some Ho ard Brenchley Non Executi e Director (Appointed 2 No ember 20 ) ris s 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 Ste en eigh Non Executi e Director (Appointed 2 No ember 20 ) damaged or destroyed by an event for which NSR does not have cover, or a loss occurs which is in Claire Fidler Executi e Director (Appointed July 20 ) excess of the insured amounts, NSR could incur a capital loss and lost income which could reduce returns for holders of stapled securities. Any failure by the company or companies providing insurance (or any reinsurance) may adversely affect NSR’s right of recovery under its insurance. Funding NSR’s ability to raise funds from either debt or equity sources in the future depends on a number of factors, including the state of debt and equity mar ets, the general economic and political climate and the performance, reputation and financial strength of NSR. Changes to any of
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 3 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 3 Annual Report 2019 / 2020 37
NATIONAL STORAGE FINANCIAL SERVICES LIMITED (NSFL) Howard Brenchley, Independent Non-executive Director BEc NSFL was appointed as responsible entity on 10 November 201 . The Directors of NSFL in office during the Reporting Period, or appointed prior to the date of this Directors’ Report, and continuing as at the Howard has over 30 years’ involvement in the Australian property industry, as an analyst, investor and date of this Directors’ Report are set out below. fund manager. He is now a professional company director and consultant to the property funds industry. Howard co founded Property Investment Research Pty td (PIR) in , which during the NAME POSITION 1990’s was considered a leading researcher of both listed and unlisted property funds. In Howard Laurence rindle Non Executive Chairman appointed 1 July 201 was instrumental in establishing the funds management business of APN Property roup imited. During this period he was responsible for the establishment and operations of a number of funds investing both Andrew Catsoulis anaging Director appointed 1 July 201 directly and indirectly in real estate. Howard is currently a non executive director of the AS listed APN Anthony eane Non Executive Director appointed 1 July 201 Property roup imited (APD) and is also a non executive director of APN Funds anagement imited, Howard renchley Non Executive Director appointed September 201 responsible entity for AS listed APN Industria REIT (ADI) and APN Convenience Retail REIT (A R). Until July 20 , APN Funds anagement imited was also responsible entity for eneration Healthcare REIT Steven Leigh Non Executive Director appointed September 201 ( HC). Claire Fidler Executive Director appointed 1 July 201 Howard is a member of the Audit and Ris Committees. Steven Leigh, Independent Non-executive Director
DIRECTORS’ QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES Grad Dip Proj Mgmt
Boards of National Storage Holdings Limited and National Storage Financial Services Limited Steven Leigh has more than 30 years’ experience in the real estate investment management and development industry. He oined IC lobal Real Estate in and was a ey member of the senior Laurence Brindle, Independent Non-executive Chairman executive team that ac uired and created through development a portfolio of high uality retail and BCom, BE (Hons), MBA commercial assets in Australia, USA and the U . Steven has had significant experience in the wholesale funds management business through various mar et cycles and conditions and has a strong Laurence has extensive experience in funds management, finance and investment. Until 2009 he was bac ground in retail, commercial and industrial property with a particular focus on shopping centre an executive with Queensland Investment Corporation QIC . During his twenty one years with QIC he ac uisitions and redevelopments. After time as the anaging Director of Trinity imited, and later served in various senior positions including Head of Global Real Estate where he was responsible for a Head of Australia for aSalle Investment anagement, Steven re oined IC as anaging Director of portfolio of $9 billion. Laurence was also a long term member of QIC’s Investment Strategy Committee. QIC Global Real Estate in 2012 where he was responsible for the group’s $20bn plus property portfolio. He provides advice to a number of investment institutions on real estate investment and funds Steven is a non executive director of AS listed company, Scentre roup imited, and is a founding management matters. Laurence holds a achelor of Engineering Honours and a achelor of member of ale Champions of Change established by the Property Council of Australia. He has Commerce from the University of Queensland, and a aster of usiness Administration from Cass ualifications in real estate valuation and pro ect management. usiness School, London where he graduated with distinction. He is a former Chairman of the Shopping Centre Council of Australia and a former director of estfield Retail Trust and Scentre Group, which Steven is a member of the Remuneration and Nomination Committees. owns, operates and develops estfield shopping centres in Australia and New ealand. Laurence is also currently the Non executive Chairman of the listed entity, aypoint REIT. Claire Fidler, Executive Director LLB (Hons), B Bus (Int), GAICD, FGIA Laurence serves on the Audit and Ris Committees and is Chairman of the Nomination and Remuneration Committees. Claire was appointed an Executive Director in July 20 and has been the principal company secretary Andrew Catsoulis, Managing Director of National Storage since November 20 . She was appointed Head of egal overnance in June 2020 and now oversees the legal, governance and ris functions of the organisation. Claire holds legal BA, LLB, Grad Dip Proj Mgmt (Hons) and international business ualifications and is admitted as a solicitor of the Supreme Court of ueensland. Claire has over 10 years’ experience in corporate and commercial law in private A founder of the National Storage business, Andrew has over 2 years of specific self storage industry practice, having practiced in the litigation, resources and corporate areas of two large law firms. Prior expertise including in the areas of ac uisitions, developments, integration and operation of ‘greenfield’ to oining National Storage, Claire was Corporate Counsel and Company Secretary at Rio Tinto Coal and developed self storage centres. Andrew is a ualified solicitor who has been admitted to the Australia. During this time, in addition to providing legal services to the business, she was responsible for Supreme Court of Queensland. He has had extensive experience in the fields of finance, commercial the corporate governance and ASX compliance of one of Rio Tinto’s listed subsidiaries as well as and property law during his tenure at ma or law firms both in Australia and overseas. He is also a managing the corporate secretarial responsibilities of over 0 subsidiaries within the group and ualified pro ect manager and has considerable property development experience both within the providing oint venture support. Claire has also wor ed in corporate compliance with the Australian storage industry and in broader mar ets. Andrew was instrumental in the successful ac uisition and Securities and Investments Commission. Claire is a raduate of the Australian Institute of Company integration of the original pre existing Group portfolio and led the Company through the IPO and Directors and a Fellow of the overnance Institute of Australia and is a non executive director of planned and negotiated the ac uisition of the Southern Cross portfolio in 201 . He has led the Spacer ar etplaces Pty imited. company in its growth from a single centre in 199 to over 190 centres today and has been primarily responsible for charting its strategy over that period. DIRECTORSHIPS OF OTHER LISTED COMPANIES Anthony Keane, Independent Non-executive Director BSc (Maths), Grad Dip Corp Fin Directorships of other listed companies held by current Directors in the three years immediately before the end of the financial year are as follows Anthony is an experienced finance and business executive with an extensive bac ground in ban ing NAME COMPANY PERIOD OF DIRECTORSHIP and business management. Prior to accepting his directorship with National Storage, Anthony held aurence rindle aypoint REIT (AS PR) 0 0 20 Current numerous leadership roles with a ma or trading ban principally in business, corporate and institutional (Previously Viva Energy REIT (AS VVR)) ban ing. He is actively involved in the business community through Non Executive Director and Advisory Howard renchley APN Property roup (AS APD) Current oard roles, and finance advisory consultancies. He is a Director of Queensland Symphony Orchestra APN Funds anagement imited, Pty Ltd and ASX listed E vision edical Devices Ltd. Anthony has a achelor of Science athematics responsible entity for from University of Adelaide and a Graduate Diploma in Corporate Finance from Swinburne. He is a APN Industria REIT (AS ADI) 03 2 20 3 Current Fellow of the Financial Services Institute of Australasia, a Graduate of the Australian Institute of APN Convenience Retail REIT (AS A R) 2 2 20 Current Company Directors and a Fellow of the CEO Institute. And previously eneration Healthcare REIT (AS HC) 2 0 20 – July 20 Anthony acts as Chairman of the Audit and Ris Committees and is a member of the Nomination and Steven eigh Scentre roup imited (AS SC ) 0 0 20 – Current Remuneration Committees. Anthony eane E vision edical Devices td (AS E V) 2 20 – Current
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 3 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 3 Annual Report 2019 / 2020 39
DIRECTORS’ INTERESTS IN NSR SECURITIES CORPORATE O ERNANCE NSH and the Responsible Entity have their own respective oards and constitutions. The relationship As at the date of this Directors’ Report, the interests of the Directors (including indirect interests) in the between NSH and the Responsible Entity is governed by a Cooperation Deed and anagement stapled securities of NSR were 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 DIRECT INDIRECT TOT provision of staff and e uipment. aurence rindle 23 23 Anthony eane 0 000 2 20 2 The NSH and Responsible Entity oards and NSH management are committed to achieving and Andrew Catsoulis 3 3 3 00 3 2 demonstrating to securityholders high standards of corporate governance and to ensure NSH acts in Howard renchley 0 0 the best interests of its securityholders balanced with its broader community obligations. Steven eigh 20 00 20 00 Claire Fidler 2 00 2 00 An important component of the NSR corporate governance structure is the ASX Corporate Governance Principles and Recommendations (the “ASX Recommendations”). A statement of the extent of NSR’s compliance with the ASX Recommendations can be viewed on the NSR website at DIRECTORS’ EETIN S www.nationalstorageinvest.com.au. Full copies of all NSR governance policies and Charters can also be found in the Governance section of the website. The number of meetings of directors of NSH (including meetings of sub committees of directors) held during the Reporting Period and the number of meetings attended by each director were as follows INDE NIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has agreed to indemnify all the Directors and executive officers of the Company and its DIRECTOR O RD UDIT RIS RE UNER TION NO IN TION group entities to the extent permitted by law for the amount of any liability loss cost charge CO ITTEE CO ITTEE CO ITTEE CO ITTEE damage expense or other liability suffered by the Director or executive officer as an officer of the aurence rindle ( ) ( ) ( ) 3 (3) 3 (3) Company or group entity or as a result of having been an officer of the Company or any Group entity. Anthony eane ( ) ( ) ( ) 3 (3) 3 (3) This includes any liability arising out of or in connection with any negligence breach of duty or breach Andrew Catsoulis ( ) of trust (“Indemnity”). Howard renchley ( ) ( ) ( ) Steven eigh ( ) 3 (3) 3 (3) However the Indemnity does not extend to a claim in the nature of Claire Fidler ( ) (a) a challenge to any rejection of a Director’s claim by the provider of the Company’s insurance Notes cover or . Figures in brac ets indicate the number of meetings held whilst the director was in office or was (b) a cross claim or a third party claim for contribution or indemnity in and results directly from any a member of the relevant Committee during the Reporting Period. Figures not in brac ets Proceedings in respect of which the Director has made a claim under the Indemnity. indicate the number of meetings or Committee meetings that the director attended. 2. r. Catsoulis and s Fidler attend Nomination Remuneration Ris and Audit Committee Deeds of indemnity to effect the above have been formally entered into by the Company and each meetings by invitation. of the Directors. 3. The Company has an Investment Committee Charter to govern an Investment Committee. The oard has determined that at this time the full oard will act as the Investment Committee The Deeds of Indemnity re uire the Company to obtain a bac to bac indemnity to the Company and therefore there are no separate Investment Committee meetings noted. from the Responsible Entity out of the assets of the NSPT. This has been procured by the Company and is in place. The bac to bac indemnity re uires the Responsible Entity to indemnify the Company for CO N SECRET R any liability under the Directors officers indemnity to the extent that the Company is not able to meet that obligation. The indemnity does not extend to any payment made or due as a result of a breach by the Company of its obligations under a Director officer indemnity or to any payment which the N TION STOR E O DIN S I ITED Company ma es voluntarily but is not due and payable under the terms of a Director officer indemnity.
N E OINT ENT D TE The total amount of insurance contract premiums paid for Directors and Officers insurance for NSR Claire Fidler 2 November 20 (including subsidiary entities) during the Reporting Period was 32 .
Patric Rogers November 20 3 (resigned ay 2020) No insurance premiums are paid out of the assets of the NSPT in regards to insurance cover provided to either the Responsible Entity or the auditors of the NSPT. So long as the officers of the Responsible Entity act in accordance with the constitution and the law the officers remain indemnified out of the assets of the NSPT against losses incurred while acting on behalf of the NSPT. The auditors of the NSPT are in no N TION STOR E IN NCI SER ICES I ITED way indemnified out of the assets of the NSPT.
N E OINT ENT D TE INDE NIFICATION OF AUDITORS Claire Fidler 2 November 20 To the extent permitted by law the Company has agreed to indemnify its auditors Ernst Young as part of the terms of its audit engagement agreement against claims by third parties arising from the Patric Rogers July 20 (resigned ay 2020) audit (for an unspecified amount). No payment has been made or claim received by NSR to indemnify
Ernst Young during the Reporting Period or up to the date of this report. Claire Fidler LLB (Hons), B Bus (Int), GAICD, FGIA
Refer to page 2
Patrick Rogers (resigned 15 May 2020) LLB, B Bus – Accounting, FGIA
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 0
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 Annual Report 2019 / 2020 41
RE UNER TION RE ORT UDITED – NS ROU The deli erations of the Re uneration Co ittee, including an reco endations ade on re uneration issues, are considered the full NSH oard In a ing its reco endations to the ESS E RO T E O RD oard, the Re uneration Co ittee ta es into account ad ice fro independent re uneration ad isers on trends in re uneration for P The independent re uneration ad isors consider a range The NSH oard is committed to ensuring that its remuneration arrangements are structured to support of factors including the specific responsi ilities assu ed P An independent consultant has een and reinforce NSR’s overall business strategy, are consistent with the requirements of governance engaged the Re uneration Co ittee on a iennial asis in the past to assess the directors and standards and meet the expectations of investors and the community at large. y linking the Short senior executives’ current remuneration and remuneration structure and to provide a summary on Term Incentive (“STI”) and Long Term Incentive (“LTI”) (at risk remuneration) of executive remuneration ar et practice relating to e ecuti e re uneration and re uneration structures E en though an to the drivers that support NSR’s business strategy including financial, governance, cultural and independent consultant ould ordinaril ha e een appointed during the Reporting Period, as a result community measures, the remuneration of executives is aligned with the creation of long term value for of CO ID and the uncertaint surrounding the pande ic, the Re uneration Co ittee opted not securityholders. The oard believes that the remuneration practices of NSR should fairly and to engage a consultant during that ti e Su se uent to Reporting Date the Re uneration Co ittee responsibly reward Key Management Personnel (“KMP”) having regard to their individual performance, engaged S Corporate, an independent re uneration consultant, to pro ide co entar on the the performance of NSH and NSPT and the broader external environment as it relates to P reward. re uneration arrange ents currentl in place for the NSR e ecuti e anage ent tea , as ell as o ser ations a out the use of e uit ased co ponents ithin incenti e plans The Re uneration The policy also aims to provide a platform for sustainable value creation for securityholders by Co ittee also re ie ed a nu er of other reports and co entar through industr odies such as attracting, motivating and retaining quality P. the o ernance Institute and the Australian Institute of Co pan Directors, as ell as onitoring co parator co panies, to deter ine the current landscape The ad ice fro S Corporate did not constitute a re uneration reco endation as defined in the Corporations Act 2001 (Cth) S CO ER E O T IS RE ORT Corporate as paid , 0 for its ser ices, after the end of the financial ear
The following remuneration report has been prepared to provide information to NSR securityholders of The Re uneration Co ittee co prises three independent non e ecuti e directors and is chaired the remuneration details of the P of NSH involved in the management of NSH and the NSPT. aurence rindle The Re uneration co ittee et 3 ti es during the Reporting Period
Directors of the Responsible Entity do not receive any remuneration from the Responsible Entity in RINCI ES USED TO DETER INE T E N TURE ND OUNT O RE UNER TION respect to their roles with the Responsible Entity. However, the director fees paid by NSR take into The o ecti e of the re uneration polic is to ensure that roup re uneration is co petiti e, reflects account the complexity involved, and additional duties required to be undertaken, in relation to the responsi ilities of the officers and ensures that NSR is a le to attract and retain e ecuti es and directors operation of the Responsible Entity as a subsidiary of NSH and as part of the consolidated governance with the skills and capabilities required to sustainably deliver NSR’s objectives group. The Responsible Entity receives a fee for management services rendered. The re uneration of directors and senior e ecuti es is re ie ed at least annuall the Re uneration This information has been audited as required by section 30 (3C) of the Act. Co ittee and the full NSH oard E ternal anal sis and ad ice is sought the Co ittee, here considered appropriate, to ensure that the re uneration for directors and senior e ecuti es is P are defined as “those persons having authority and responsibility for planning, directing and co petiti e in the ar et place and appropriate for the organisation controlling the major activities of NSH, the Consolidated Group and the NSPT, directly or indirectly, including any director (whether executive or otherwise) of NSH.” The polic see s to align e ecuti e re ard ith the achie e ent of strategic o ecti es and the creation of alue for securit holders The pri ar tenets of the polic are ey management personnel covered in this report are as follows • Attract and retain high ualit e ecuti es and to re ard the capa ilities and e perience NON E ECUTI E ND E ECUTI E DIRECTORS rought to NSR those e ecuti es Laurence rindle Chairman (non executive) • Total reward for key executives is to have a significant “at risk” component. Andrew Catsoulis – anaging Director (“MD”) (executive) • The “at risk” component for key executives is to include both short term incentives (“STI”) and Anthony eane Director (non executive) long term incentives (“LTI”) which have a strong focus on quantitative and non uantitati e Howard renchley Director (non executive) easures Steven Leigh Director (non executive) • Pro ide industr co petiti e re ards lin ed to securit holder returns Claire Fidler – Director Head of Legal and Governance (“HoLG”) (executive) • Pro ide recognition for contri ution, co ple it of role and responsi ilities of the officer • Re uneration policies and structures ust e clear and transparent oth to the e ecuti es and E N E ENT ERSONNE – SENIOR E ECUTI ES oard of NSR and to securit holders Stuart Owen – Chief Financial Officer (“CFO”) • Pro ote and encourage a strong, responsi le and positi e culture a ongst all NSR e plo ees Patrick Rogers – eneral Counsel and Chief Risk Officer (“ C CRO”) Pat Rogers ceased employment effective 2 ay 2020 with the responsibilities previously undertaken by r Rogers being allocated across the balance of the executive team. In addition to the a o e tenets, the specific o ecti es of the NSR oard for the ear co encing RE UNER TION O ERN NCE Jul 2020 include RE UNER TION CO ITTEE ND USE O RE UNER TION CONSU T NTS • to ad ust the TFR of the CFO and Ho to reflect the e pansion in the scope and scale of their The Remuneration Committee’s activities are governed by its Charter, a copy of which is available at respecti e roles and their perfor ance in the roles www.nationalstorageinvest.com.au. • achieve a shift in the components of the executive team’s TAR such that there is a greater weighting towards “at risk remuneration”; and The responsibilities of the Remuneration Committee include • To achie e the introduction of partial e uit ased re uneration as part of the TAR for the • Formulate and recommend remuneration policies to apply to the Company’s Managing e ecuti e tea Director, senior executives and non executive Directors; • Formulate the specific remuneration packages for senior executives (including base salary, STIs, T R ET R ET OSITIONIN LTIs and other contractual benefits); Total Annual Re uneration (TAR) is assessed against a road co parator group and ad usted to • Review contractual rights of termination for senior executives; reflect factors such as the criticality and complexity of the role, experience, length of service and NSR’s positioning ithin the group The indi idual co ponents of TAR, co prising Total Fi ed Re uneration • Review the appropriateness of the Company’s succession planning policies; (TFR), STI and TI are indi iduall assessed ithin this fra e or and structured to pro ide oth short • Review management’s recommendation of the total proposed STI and LTI awards; ter and long ter s incenti es to P that align ith deli er of short ter and long ter alue to • Administering the STI and LTI awards; and securit holders • Review management recommendations regarding the remuneration framework for the company as a whole.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 2 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 3 Annual Report 2019 / 2020 43
hen selecting the comparator group the data is collected from a combination of sources including audited Remuneration Reports of the selected companies It provides an appropriate pool of data FY20 Distribution Yield that is statistically relevant. This data is then assessed against NSR’s current size, industry positioning and other relevant factors to determine the appropriate information against which to assess NSR’s remuneration framewor
A REIT 200
NSR continued its recent successful growth strateg ob ectives over the reporting period with the deliver of the ac uisition of 20 storage facilities and 2 development sites totalling 2 million These ac uisitions have been funded b wa of the successful completion of a capital raising providing 3 million underta en b a combination of an institutional placement and an upscaled Securit Purchase Plan This continued the significant development of the business and delivered sustained increases in NSR earnings and assets under management b the successful implementation of NSR’s strateg The identification of development or e pansion opportunities of which NSR currentl has pro ects in various stages of design and construction has continued and during the reporting period NSR has successfull completed 2 new developments at Canterbur in ictoria as part of the APSF Joint enture and Robina on the old Coast 0 0 0 2 0 3 0 0 0 0
Source loomberg Market Data ( NSR has established a strong trac record of consistent growth in underl ing earnings net tangible assets (NTA and total assets under management (AU Despite the significant capital raisings NSR continues to deliver strong Total Shareholder Return “TSR” (a combination of share price growth underta en in the previous months and the combined impacts of the prolonged ta eover activit and distributions received by securityholders) over the past three years to 30 June 2020 of Over and CO ID during the Reporting Period underl ing earnings( per stapled securit remained strong the reporting period NSR delivered 0 TSR compared to the AS 200 A REIT TSR of minus 2 This has in the 2 months to 30 June 2020 NTA has increased during the ear to per stapled securit been achieved during a period of unprecedented uncertainty during the first six months of 2020 and and AU b to 2 2 billion over the 2 months to 30 June 2020 These results have been achieved demonstrates the robustness and resilience of the NSR business model in particular, and the self storage through the disciplined management of NSR’s operations and the continued success of its “Four Pillar” industry as a whole growth strateg The consistent and considered approach to driving underl ing earnings through a combination of organic growth from e isting assets as well as ac uisitions developments and e pansion activit overla ed b a focus on technolog and innovation has been instrumental in Total Shareholder Return achieving this result
Underl ing Earnings 0 0 0 0 A REIT 200
0 0 0 0 0 0 0 0
0 0 0 NSR m 2 30 0 0 2 3
Cents per securit 20 0 0 2 20 0 0 0 0 0 Source loomberg 0 CY FY FY FY FY FY FY20 Note Assumes Dividends are re invested in underlying security Note 2 Excludes securities not listed for the entire year Earnings Per Securut Underl ing Earnings
NSR listed in December 20 3 with an issue price of 0 From that time to 30 June 2020 the stapled security price has increased by (closing price at 30 June 2020 of ), and the market Underl ing earnings per stapled securit for the ear ended 30 June 2020 was impacted b the capitalisation of the REIT has increased to billion (up 3 from 3 billion for the Reporting dilutionar effect of two capital raisings namel the million capital raise underta en in June 20 Period) and the 3 million capital raise in a 2020 In addition the design and development fee income stream that NSR generates from oint venture and development activities was impacted b the NSR Stapled Security Price prolonged ta eover activit and CO ID as some oint ventures and developments were deferred This revenue has been dela ed rather than foregone as the uantum of pro ects has not reduced and 2 0 2, 00 in fact the oint venture and development pipeline remains as strong as ever 2 30 2,000 2 0 NSR has maintained a distribution polic which targets distribution of 0 00 of underl ing 0 , 00 ( earnings to securit holders During financial ear 2020 NSR declared distributions totalling cents m 0 ,000 per stapled securit being at the upper end of the stated polic delivering a DPS ield of slightl 0 00 below that of the AS 200 A REIT average of 0 This was impacted b the relativel strong 30 performance of the NSR share price that closed at on 30 June 2020 up from ( over the 0 prior ear Jul Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec 20 Mar 20 Jun
Mkt Cap Share Price
Underl ing earnings is a non IFRS measure (unaudited See page 32 of Directors’ Report for reconciliation of underlying earnings DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 Annual Report 2019 / 2020 45
Security price performance over the period 1 July 201 to 30 June 2020 has shown a increase. This compares to an increase of 13 for the AS 200 A REIT index and 10 for the broader AS 200 Index The anaging Director and senior e ecutives are paid a ase salary that includes employer over the same period. contri utions to superannuation funds. The remuneration of the anaging Director is reviewed annually y the Remuneration Committee and the oard. iven the uncertainty caused y the CO ID pandemic and the economic conditions, the Remuneration Committee determined that the Relative Performance Managing Director’s base remuneration would not be adjusted for the year commencing 1 July 2020 2.00 and as such there would e no increase in his fi ed remuneration at this time. Consistent with NSR’s 1. 0 a ovementioned specific o ectives for the coming year, the ’at ris ’ component of the anaging 1. 0 Director’s renumeration will e ad usted as shown on page of this report to more align the at ris 1. 0 components with the mar et peer group. 1.20 1.00 The remuneration of senior e ecutives is reviewed annually y the anaging Director who ma es a 0. 0 recommendation to the Remuneration Committee. The Committee then considers, ut is not o liged Jul 1 Jul 1 Sep 1 Dec 1 Mar 1 Jun 1 Sep 1 Dec 1 Mar 1 Jun 1 Sep 1 Dec 1 Mar 1 Jun 1 Sep 1 Dec 1 Mar 1 Jun 1 Sep 1 Dec 1 Mar 1 Jun 1 Sep 1 Dec 20 Mar 20 Jun to accept, the recommendation of the anaging Director and ta es whatever additional steps it determines as appropriate to assess the senior e ecutive salaries. There is no guarantee of ase salary increases included in any e ecutive director or senior e ecutive contracts or through the annual review NSR S P AS 200 A REIT S P AS 200 process.
The senior e ecutive remuneration review underta en for the year commencing July 2020 has determined that the previous all cash remuneration plan in place for ey e ecutives is no longer typical in the mar et and recommended to the Remuneration Committee that introducing an e uity component as part of an overall revised incentive plan. Based on the Managing Director’s extensive interaction with investors and sta eholders it is li ely to e oth well received y securityholders and Fees and payments to non executive directors reflect the demands which are made on, and the provide greater alignment etween senior e ecutive incentives and overall securityholder outcomes. responsibilities of, the non executive directors and their contribution towards the performance of NSR as well as the complexity of the National Storage Property Trust, National Storage Financial Services Over the last 2 months the e ecutive management team has successfully dealt with numerous imited and the operating business. The remuneration policy seeks to ensure that NSR attracts and significant internal and e ternal challenges, to achieve an outcome which is ac nowledged to e one retains directors with appropriate experience and ualifications to oversee the operations of NSR on of the est performances in the A REIT sector from oth an operational and security price performance behalf of the securityholders. perspective. These challenges have included
The number of meetings of directors is shown on page 0 of this report. i. Internally, the departure of two ey senior employees and the assumption of their responsi ilities y the remaining e ecutive management team The Constitution of NSH specifies that the amount of the remuneration of the non executive directors is ii. Externally, protecting securityholders’ best interests through the challenge of takeover activity a yearly sum not exceeding the sum from time to time determined by the Company in a general with three non binding indicative offers (“NBIO’s”) received from various parties. This process meeting. Under the AS isting Rules, the total amount paid to all NSH non executive directors for their involved data room esta lishment and management, e tensive A and travel related due services must not exceed in aggregate in any financial year the amount fixed by NSH’s annual general diligence, multiple presentations with senior management and intense media and regulatory meeting. The amount approved by securityholders at the 201 Annual eneral meeting was scrutiny of the process and 1,200,000. iii. Responding uic ly and effectively to the CO ID pandemic across multiple urisdictions in two countries, providing strong leadership with the successful implementation of uic and Annual NSH non executive directors’ fees and Committee fees currently agreed to be paid by NSH decisive plans. The outcome of this comprehensive top down response was that all National effective from 1 July 2020 are detailed below. These amounts are consistent with the previous period Storage centres remained operational throughout the pandemic with zero staff infections to and given CO ID 1 pandemic impacts and the general economic conditions the Board has not date, and well controlled and minimised impact on the usiness. increased non executive directors’ fees for the year commencing 1 July 2020. Non executive directors are not eligible to participate in NSR’s incentive plan. ith the departure of the eneral Counsel and Chief Ris Officer during the Reporting Period, the roles and responsi ilities previously filled y r Rogers have een allocated across the remaining three senior e ecutives. This was ta en into account in determining the ase salaries for the remaining senior e ecutives for the year commencing July 2020. In addition, the proposed remuneration increases ta e into account the senior e ecutives’ respective aurence Brindlea. 2 ,000 highly demanding roles and their increasing tenure and growing competency in their respective areas. Anthony eaneb. 122, 00 2 ,000 ,000 1 3, 00 The team assem led is highly competent, cohesive, colla orative and has the capacity to continue to Steven eigh 122, 00 ,000 12 , 00 successfully manage and drive usiness growth well into the future. The e ecutive team as a whole has Howard Brenchley 122, 00 10,000 132, 00 a. Chairman and chair of the Remuneration and Nomination Committees and receives a single fee for all roles consistently demonstrated its willingness to ma e decisions in the est long term strategic, corporate b. Chair of the of Audit and Risk Committees and securityholder interests of National Storage regardless of potential negative short term impacts on e ecutive rewards. This has een seen as NSR has underta en multiple capital raises since IPO, resulting here applicable, NSH non executive directors’ fees include superannuation at the required statutory in significant dilution of its earnings per security, without ever changing its threshold predetermined rate. hurdles for e ecutive achievement of STI TI. These capital raisings have een essential in order to fund the company’s e traordinary growth tra ectory from 2 to centres, growing assets under management from 2 m to over 2.2 illion in the process. Primarily due to this factor, the e ecutive The primary objective of the remuneration arrangements for executive directors and senior executives team over the last three financial years 20 2020 has earned in aggregate appro imately of its is to motivate, incentivise and retain key employees whilst creating maximum alignment with corporate com ined potential STI TI arrangements. During the same period NSR’s security price has increased and stakeholder best interests. All remuneration paid to executive directors and senior executives from . 3 to . providing a total securityholder return of . comprises four components The performance of National Storage against its peers has een at the highest level despite multiple • Base pay and benefits (including superannuation) challenges encountered throughout the last 2 months including ta eover activity, CO ID and • Short term performance incentives considera le media, regulatory and investor interest during this time. This is in no small part due to the • ong term performance incentives unrelenting and ongoing efforts of the e ecutive team. It is also of note that throughout the CO ID • Other remuneration (if applicable) pandemic NSR was a le to manage the myriad of challenges to its usiness while not receiving any DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 Annual Report 2019 / 2020 47
Jo eeper government assistance and ensuring its wor force remained full engaged with no reduction in general salaries and enefits P senior executives may also be entitled to participate in the STI and TI programs that are in place The at risk components of the KMP’s total remuneration packages were recommended to increase to from time to time. The incentive programs are at the discretion of the oard and do not constitute an reflect the feed ac received from investors and prox advisors as well as the deferred pa ment entitlement under the executive service agreements of the respective P. Total incentive programs structure associated scrip component of the STI and TI as outlined elow The increased at ris are assessed against a broad comparator group and ad usted to reflect factors such as the criticality components of STI and TI should e considered to e genuinel at ris as evidenced the fact that in of the role, experience, length of service and NSR’s positioning within the comparator group including the past three financial ears approximatel of total potential executive STI and TI has een the AS 200 A REIT index. earned the current executive team In addition, the fact that a component of the STI and TI is to e paid over a three ear period acts as a further alignment and a retention tool –
The effect of this has seen aggregate fixed remuneration for the K P for the ear commencing Jul The oard regularly assesses the structure of the incentive plans based on mar et best practice and 2020 reduce and aggregate total remuneration increase , reflecting the higher at ris feedbac received from both investors and proxy advisors and has determined that going for ard components of K P remuneration when compared to the Reporting Period This anal sis includes the payments made under these plans ill be paid through a combination of cash and scrip rather than position of eneral Counsel Chief Ris Officer within the Reporting Period and excludes this position for all cash to further align executive remuneration ith current investor expectations and returns. ased the ear commencing Jul 2020 with the roles and responsi ilities having een a sor ed the on this the oard has determined that from 1 July 2020 the payment of any STI earned ill be in the remaining K P The anaging Director and senior executives can potentiall e paid a onus as part form of 0 cash and 30 scrip and any TI earned ill be in the form of 30 cash and 0 scrip. The of their remuneration hether such a onus is paid and the amount of such a onus is at the quantum of scrip ill be determined using the 30 day AP up to 30 June in the relevant year. discretion of the Remuneration Committee and the oard An onuses paid would fall into the category of “other remuneration”. The scrip based component ill be structured in three equal tranches ith tranche 1 being scrip issued immediately and the remaining t o tranches issued as rights to vest over a 2 year period. This provides an upfront component to recognise the contributions made during the current year and a further Remuneration and other terms of emplo ment for the K P senior executives are formalised in service incentive for executive retention. The scrip components ill be issued as follo s agreements The service agreements specif the components of remuneration, enefits and notice periods Termination enefits are designed to fall within the limits relevant to the orporations ct • T1 – issued immediately as scrip Cth such that the do not re uire securit holder approval However, in addition, all executive • T2 – issued as rights vesting on 30 June 12 months from the end of the relevant financial year contracts ma e an such enefits su ect to the orporations ct Cth , all other applica le laws • T3 – issued as rights vesting on 30 June 2 months from the end of the relevant financial year and where necessar securit holder approval The also contain provisions which allow NSH to reduce an such pa ments to ensure compliance with the law The vesting of subsequent tranches ill be sub ect to conditions around continuity of employment and change in control such as The terms of emplo ment for the K P effective from Jul 2020 period are set out in the ta le elow • Dismissal termination for cause • Resignation • Death or Total Permanent Disablement termination for illness • Retirement ith the approval of the oard Andrew No fixed term ,0 ,000 • months in lieu of notice if re uired NSH • Company initiated termination ithout cause e.g. retrenchment and redundancy • Change in control Catsoulis months • months in the event of incapacit or illness
Any scrip component earned as part of this payment structure ill be submitted if required for Stuart Owen No fixed term 00,000 • months in lieu of notice if re uired NSH securityholder approval at a general meeting of securityholders. months • months in the event of incapacit or illness • months fixed remuneration plus 2 wee s for each ear of service – capped at 2 months in the event of redundanc Short Term Incentive STI The STI contains four separate elements that ill be assessed independently of the other elements. The Claire Fidler No fixed term 00,000 • months in lieu of notice if re uired NSH STI is an annual incentive and as outlined above is to be paid 0 cash and 30 scrip. months • months in the event of incapacit or illness • months fixed remuneration plus 2 wee s for each ear of service – capped at 2 months in the event of redundanc Financial 0 Achieve Underlying Earnings as determined by the oard ase salaries are annual salaries for the financial ear commencing Jul 2020 The are reviewed annuall the Remuneration Committee Actual salaries paid in the ear ended 30 June 2020 are shown on page 2 Financial – Out 10 Exceeding Underlying Earnings targets Performance The composition of TAR for the ear ending 30 June 202 for K P is detailed in the ta le elow Individual KPI’s 1 Individual performance criteria set in con unction ith D oard Strategic 1 Assessment in accordance ith performance in the follo ing D 2 2 0 0 areas CFO 22 22 22 22 0 0 • Implementation of ma or pro ects Ho 2 0 30 30 • Staff continuity • Ris anagement This structure reflects and is consistent with NSR’s policy objectives for executive TAR for the year • Innovation and enhancement of processes and procedures commencing Jul 2020 as outline a ove The Financial Out Performance STI is only payable to the extent that the total STI payable does not exceed 100 . The minimum STI payable is ero and maximum STI payable is 1 113 000 for FY21 in aggregate for all P.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 Annual Report 2019 / 2020 49
ong Term Incentive TI The oard continues to assess both short term and long term incentives against a strict set of criteria The TI criteria have een set so as to align the interests of P with those of securityholders The TI and believes that delivering superior results to securityholders is re uired for KMP to achieve full contains two separate components which are independently tested The TI is an annual incentive and incentive payments. as outlined a ove is to e paid 30 cash and 0 scrip
The oard has determined that it is appropriate to recognise and reward the executive team with a one off discretionary bonus which will supplement the STI and TI achieved during the Reporting Period Total Shareholder 0 inimum total shareholder return a ove the 0th percentile in such that KMP will individually earn of their potential STI and TI arrangements for the year ended Return comparison to the AS 200 A REIT inde The TI ecomes paya le 30 June 2020. Total KMP combined incentive payments for the period will represent approximately in accordance with the sliding scale elow once the 0th percentile of total STI and TI available across the KMP group. This decision has been made on the basis of their hurdle is met extraordinary performance over that period. This discretionary payment will form part of 202 Earnings Per Share 30 Earnings per share growth of per annum remuneration and is not included in the 2020 Remuneration table on page 2. rowth Reasons for this increased and extraordinary workload have included
• NSR having received three unsolicited NBIO’s from institutional counterparties which were For the purposes of determining the TI attri uta le to Total Shareholder Return in any given period the re uired to run in parallel through a full due diligence process following scale is applied • Having engaged in a high level of dialogue with its stakeholders including investors analysts
employees various banks and regulators • NSR having undertaken significant capital raises over the period with additional regulatory scrutiny and involvement from both AS and ASIC as a result of temporary changes to th 0 percentile 0 regulations and th 0 percentile 0 • Ongoing debt refinancing and related work which was undertaken personally by the senior 0th th percentile Pro rata from 0 00 executive following a senior employee’s departure. th percentile 00 Over this period the executive team has maintained a highly driven motivated and committed team The TI is assessed over a rolling 3 year period and as such to e eligi le for payment of the TI P ethos which has ensured that staff members across two countries have remained highly engaged must have een employed y NSR for three years or shorter period as determined y the Board Post resulting in minimised business disruption and impact to the business from CO ID . This has been three years’ service the LTI will be paid on an annual basis on the previous three years’ performance reflected in NSR’s strong performance over this period with minimised loss of occupancy and the against the pre determined criteria For the year commencing July 2020 the Earnings Per Share resilience of NSR’s security price. rowth target has een set at 0 cents per stapled security The KMP bonus will be paid in cash and structured in part to act as a retention tool as it will be paid in The minimum TI paya le is ero and ma imum TI paya le is 3 000 for FY2 in aggregate for all two tranches and subject to additional ualification criteria as set out below. P The KMP were eligible for payment of STI’s and LTI’s for the financial year ended 30 June 2020 in accordance with the incentive program outlined in the 20 Annual Report The assessment criteria for Andrew Catsoulis MD 33 00 .3 0 000 3 00 .3 the program are consistent with those outlined on pages 3 3 a ove Incentives achieved for the Stuart Owen CFO 2 2 .3 00 32 2 .3 year ending 30 June 2020 are paya le in cash as descri ed in the 20 Annual Report Patrick Rogers C CRO 0 0 0 0 0.0 Claire Fidler Ho 02 .3 00 2 02 .3 The STI’s and LTI’s were agreed with the KMP to reward them for performance against both financial and operational o ectives The minimum paya le was ero and ma imum paya le was 00 000 for Patrick Rogers ceased employment effective 2 May 2020 FY20 in aggregate for all P The discretionary payment will be structured and paid in two e ual tranches as follows The STI and TI hurdles included • T – paid immediately Underlying earnings e ual to or e ceeding 0 0 cents per security • T2 – paid on July 202 – forfeited if employee resigns prior or does not satisfy the criteria 2 TSR over the three year period to 30 June 2020 eing greater than the 0th percentile of the below comparator group AS A REIT 200 3 Rolling three year compound EPS growth e ceeding June 2020 target 0 cps Other factors re uired to ualify for the deferred payment are as follows • ood citi en – employee has not acted in a fashion which could reasonably be considered The Board has assessed the performance of the Company and the P against the performance to be contrary to the best interests of NSR criteria and have determined that the following STI and LTI’s have been earned and are payable, • Diligence – employee has performed their role in a diligent fashion inclusive of statutory Superannuation amounts for the period July 20 to 30 June 2020 • Any other factors that the oard determines at its absolute discretion
The proposed discretionary bonus structure is seen as • A recognition of the outstanding efforts of the executive team in producing a strong result for the period in the face of significant adversity • This result being at the very top end of NSR’s peer related performance Andrew Catsoulis D 2 00 2 30 000 0 0 33 00 • An acknowledgement of the unbiased decision making undertaken by the executive team in Stuart Owen CFO 02 2 00 0 0 2 2 recommending various strategic actions which have placed NSR in a strong financial and Patric Rogers C CRO 0 0 0 0 0 0 operational position leading into FY2 . Claire Fidler Ho 2 2 00 0 0 02
Patric Rogers ceased employment effective 2 ay 2020
Underlying earnings is a non IFRS measure unaudited See page 32 of Directors’ Report for reconciliation of underlying earnings
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 0 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 Annual Report 2019 / 2020 51
0 0 0 0 0 0 0 0 0
2 2 3 2 20
2 The movement during the Reporting Period in the number of stapled securities, directly, indirectly or
beneficially held by Directors and KMP senior e ecutives, including parties related to them, is as follows
30 32 2 0 2 2 3 2 000 000 2 0 2 000 3 22 32 2 02 3 2 3
irectors of NSH
Laurence rindle , 23, , 23, Anthony Keane , 2 , 0 20 , 2 32 ,0 ,2 ,000 , ,2 Andrew Catsoulis
Howard renchley , , 0 0 ,
, 00 , 0 20 ,00 Steven Leigh Claire Fidler 0, 2,3 2, 00 30 2 2 2 3 2 22 03 30
xecutives of NSH
Stuart Owen 00,000 00,000 Patric Rogers , 3
00 3 2 2 00 2 2 0 30 000 00 0 000 Patric Rogers ceased to be KMP effective 2 May 2020
There were no other transactions with KMP and their related parties during the reporting period 003
2 3 20 23 2 2 2 003 2 003 2 003 20 3 2 0 20 3 20 3 20 3 20 3
0 0 0 0 030 000 000 000 000 000
0 20 2 02 3 2 3 2 00 3 000
3 2 2 32 2 302 22 3 33 330 2 33 333 2 0 0 02 00 2 2 3 3 2 3 2 details of the remuneration received by the Company’s KMP for Period. Reporting KMP the received by the Company’s remuneration details of the
R 2 2020 executive directors executive directors executive
P Non A H S directors xecutive C A C F executives Senior O S R P Non A H S directors xecutive C A C F executives Senior O S R P
T YEAR30 ENDED20 REPORTDIRECTORS’ JUNE THE FOR
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 3
Annual Report 2019 / 2020 53
SI NI ICANT E ENTS A TER ALANCE S EET DATE AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under Section 307C of the orporations ct A Cth is set out on page .
Since Reportin Date the roup has settled se en stora e centres in estern Australia centre Ne Non audit services South ales 2 centres and ueensland centres for a total co ined purchase price of 33 illion The follo ing non audit services ere provided by the entity s auditor Ernst Young Australia. The Directors of NSH are satisfied that the provision of non audit services is compatible ith the general ROUNDIN standard of independence for auditors imposed by the orporations ct Cth . The nature and scope of each type of non audit service provided means that auditor independence as not The amounts contained in this Directors’ Report and in the Financial Report have been rounded to the compromised. nearest 000 unless other ise stated under the option a aila le under ASIC Corporations Roundin in Financial/Directors’ Reports) Instrument 2016/191 The Consolidated roup and NSPT roup are entities to Ernst Young Australia received or are due to receive for the provision of Category fees for other hich the ASIC Instru ent applies services conducted during the financial year. Refer Note 20 of the financial statements.
EES PAID TO AND INTERESTS ELD IN T E NSPT T E RESPONSI LE ENTIT OR ITS ASSOCIATES Fees paid to the Responsible Entity and its associates out of NSPT property during the year are disclosed in the Statement of Comprehensive Income and are detailed in Note to the financial statements. No fees ere paid to the Directors of the Responsible Entity during the year out of NSPT.
INTERESTS IN T E NSPT The movement in units on issue by the NSPT during the year is set out in Note 3 to the financial statements.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 Annual Report 2019 / 2020 55
Ernst & Young Tel: +61 7 3011 3333 111 Eagle Street Fax: +61 7 3011 3100 This Directors’ Report is made on 2 Au ust 2020 in accordance ith a resolution o the oard o Directors Brisbane QLD 4000 Australia ey.com/au o National Stora e Holdin s imited and is si ned or and on behal o the Directors GPO Box 7878 Brisbane QLD 4001
Auditor’s Independence Declaration to the Directors of National
Storage REIT and its controlled entities
As lead auditor for the audit of the financial report of National Storage REIT and its controlled entities aurence rindle Andre Catsoulis for the financial year ended 30 June 2020, I declare to the best of my knowledge and belief, there Chairman ana in Director have been: National Stora e Holdin s imited National Stora e Holdin s imited risbane risbane a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of National Storage REIT and the entities it controlled during the financial year.
Ernst & Young
Ric Roach Partner 25 August 2020
A member firm of Ernst & Young Global Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020 6 Liability limited by a scheme approved under Professional Standards Legislation
Annual Report 2019 / 2020 57 Financial Statements CONSOLIDATED STATEMENT OF PROFIT OR LOSS For the year ended 30 June 2020
2020 2019 Notes $'000 $'000
Revenue from rental income 164,078 144,147 Revenue from contracts with customers 5 12,563 13,510 Interest income 7 1,272 1,531 Total revenue 177,913 159,188
Employee expenses 6 (32,085) (28,744) Premises costs (22,481) (19,141) Advertising and marketing costs (4,277) (4,243) Insurance costs (4,084) (2,607) Other operational expenses 6 (14,895) (11,891) Finance costs 7 (39,401) (33,747) Share of (loss) / profit from joint ventures and associates 12 (491) 3,171 Gain from fair value adjustments 10.4 63,019 84,663 Restructuring and other non-recurring costs (3,704) (1,538)
Profit before income tax 119,514 145,111
Income tax benefit / (expense) 8 2,265 (271)
Profit after tax 121,779 144,840
Profit / (loss) for the year attributable to: Members of National Storage Holdings Limited (5,981) 5,406 Non-controlling interest (unitholders of NSPT) 127,760 139,434 121,779 144,840
Basic and diluted earnings per stapled security (cents) 19 14.67 21.59
The above Consolidated Statement of Profit or Loss should be read in conjunction with the accompanying notes.
59 Annual Report 2019 / 2020 59
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2020 INCOME 2020 2019 For the year ended 30 June 2020 Notes $'000 $'000
ASSETS 2020 2019 Current assets $'000 $'000 Cash and cash equivalents 9.1 90,352 178,842
Trade and other receivables 9.2 15,975 19,738 Profit after tax 121,779 144,840 Inventories 10.1 833 682 Assets held for sale 10.2 - 1,107 Other comprehensive income Income tax receivable 331 - Items that may be reclassified to profit or loss Other current assets 9.3 10,469 7,014 Exchange differences on translation of foreign operations (1,731) 858 Total current assets 117,960 207,383 Net loss on cash flow hedges (5,857) (21,808) Other comprehensive loss for the year, net of tax (7,588) (20,950) Non-current assets Trade and other receivables 9.2 518 118 Total comprehensive income for the year 114,191 123,890 Property, plant and equipment 10.3 1,091 856 Right of use assets 9.7 6,540 - Investment properties 10.4 2,452,085 2,117,176 Total comprehensive income for the year attributable to: Investment in joint ventures and associates 12 8,451 16,731 Intangible assets 10.5 46,629 46,500 Members of National Storage Holdings Limited (5,944) 5,391 Deferred tax assets 8 7,041 2,980 Unitholders of National Storage Property Trust 120,135 118,499 Other non-current assets 9.3 19 569 114,191 123,890 Total non-current assets 2,522,374 2,184,930
Total assets 2,640,334 2,392,313
LIABILITIES Current liabilities Trade and other payables 9.4 14,875 18,993 Lease liabilities 9.7 6,011 5,327 Deferred revenue 10.6 12,236 12,719 Income tax payable 418 1,264 Provisions 10.7 2,460 2,463 Distribution payable 16 34,467 34,370 Other liabilities 9.6 50 713 Total current liabilities 70,517 75,849
Non-current liabilities Borrowings 9.5 677,702 843,927 Lease liabilities 9.7 164,582 163,827 Provisions 10.7 2,655 1,964 Deferred tax liabilities 8 2,697 1,097 Other liabilities 9.6 357 1,375 Total non-current liabilities 847,993 1,012,190
Total liabilities 918,510 1,088,039
Net assets 1,721,824 1,304,274
EQUITY Non-controlling interest (unitholders of NSPT) 1,578,615 1,188,147 Contributed equity 13 133,169 100,143 Other reserves 14 10 (27) Retained earnings 10,030 16,011 Total equity 1,721,824 1,304,274
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. 60 61
Annual Report 2019 / 2020 61 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2020 For the year ended 30 June 2020
2020 2019 Notes $’000 $’000 Operating activities Receipts from customers 190,954 174,782 $ 000 $ 000 $ 000 $ 000 $ 000 Payments to suppliers and employees (101,140) (82,341) Interest received 1,202 2,024 0 00 0 0 Income tax paid (1,538) (1,153) Net cash flows from operating activities 9.1 89,478 93,312 Profit / (loss) for the year - (5,981) - 127,760 121,779 Other comprehensive income 14 - - 37 (7,625) (7,588) Investing activities 0 Purchase of investment properties (236,601) (416,648) Proceeds on sale of investment property 5,091 26,961 Issue of stapled securities 13 33,444 - - 348,091 381,535 Improvements to investment properties (8,246) (10,762) Costs associated with issue Development of investment properties under construction (37,550) (13,027) of stapled securities (598) - - (6,252) (6,850) (633) (233) Deferred tax on cost of stapled Purchase of property, plant and equipment 10.3 securities 8 180 - - - 180 Purchase of intangible assets (918) (777) Distributions 16 - - - (71,506) (71,506) Distribution received from joint ventures and associates 12 10,319 5,064 0 0 0 Return of capital on sale of units in joint venture 12 - 3,000 Investments in associates and joint ventures 12 (2,530) (3,499) 0 0 0 0 0 0 0 Net cash flows used in investing activities (271,068) (409,921)
Financing activities Proceeds from issue of stapled securities 13 361,877 345,425 Transaction costs on issue of stapled securities (7,025) (7,427) 0 0 0 0 Distributions paid to stapled security holders 16 (51,751) (41,301) Proceeds from borrowings 267,558 398,876 Profit for the year - 5,406 - 139,434 144,840 Repayment of borrowings (430,000) (155,100) Other comprehensive income 14 - - (15) (20,935) (20,950) Payments associated with resetting interest rate swaps 9.5 (14,303) (22,913) Financing provided to joint ventures 17 (2,125) (4,125) 0 0 Repayment of financing provided to joint ventures 6,950 - Payment of principal and interest on lease liabilities (13,599) (12,836) Issue of stapled securities 13 18,047 - - 173,555 191,602 Interest and other finance costs paid (24,525) (26,531) Contract for future issue of equity 13 16,451 - - 153,549 170,000 Net cash flows from financing activities 93,057 474,068 Costs associated with issue of stapled securities (690) - - (6,562) (7,252) Deferred tax on cost of stapled Net (decrease) / increase in cash and cash equivalents (88,533) 157,459 securities 8 207 - - - 207 Net foreign exchange difference 43 50 Distributions 16 - - - (64,452) (64,452) Cash and cash equivalents at 1 July 178,842 21,333 0 0 0 0 0 Cash and cash equivalents at 30 June 9.1 90,352 178,842
0 0 00 0 0
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.
62 63 Annual Report 2019 / 2020 63 of Transactions Involving the Legal Form of a Lease. The Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most or the year ended une leases on the balance sheet. The Group adopted AASB 16 Leases using the modified retrospective method from 1 July 2019. National Storage REIT (“ ” or “ ”) is a oint uotation of ational Storage oldings imited Under this method, the Standard is applied retrospectively with the cumulative effect of initially applying “ ” or “ ”) and its controlled entities (“ ”) and ational Storage roperty rust the Standard recognised at the date of initial application. The Group has not restated comparative “ ” or “ ”) and its controlled entities “ ” on the Australian Securities change periods, as permitted under the specific transitional provisions in the Standard. The reclassification and (“ ”) the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 July 2019. he onstitutions of S and S ensure that, for so long as the t o entities remain ointly uoted, the number of shares in the ompany and the number of units in the rust shall be e ual and that the Adjustments recognised on adoption of AASB 16 shareholders and unitholders be identical Both the ompany and the esponsible ntity ational On adoption of AASB 16, the Group recognised lease liabilities in relation to leases which had previously Storage inancial Services imited of the rust must at all times act in the best interest of S he been classified as ‘operating leases’ under the principles of AASB 117 Leases. The liabilities were stapling arrangement ill continue until either the inding up of the ompany or the rust, or termination measured at the present value of the remaining lease payment, discounted using the lessee’s by either entity incremental borrowing rate as of 1 July 2019.
he financial report of S for the year ended une as approved on August , in The adoption of AASB 16 at 1 July 2019 results in the recognition of following assets and liabilities: accordance ith a resolution of the Board of irectors of S $’000 he nature of the operations and principal activities of the roup are described in the irectors eport Right of use assets 1,086 Lease liabilities 1,086
hese general purpose financial statements have been prepared in accordance ith Australian The Group recognised right of use assets and lease liabilities for those leases previously classified as Accounting Standards and nterpretations issued by the Australian Accounting Standards Board (“ ”) operating leases, except for short term leases and leases of low value assets. The right of use assets were and the orporations Act he financial statements have been prepared on a historical cost basis, recognised based on the carrying amount of lease liabilities on application of the standard, using the e cept for selected non current assets, financial assets and financial liabilities for hich the fair value incremental borrowing rate at the date of initial application. Lease liabilities were recognised based on basis of accounting has been applied S is a for profit entity for the purpose of preparing the financial the present value of the remaining lease payments, discounted using the incremental borrowing rate at statements the date of initial application. A single discount rate was applied across the lease portfolios due to the similar characteristics of each arrangement. he financial statements are presented in Australian ollars “ ” and all values are rounded to the nearest thousand dollars ’ unless other ise stated refer to note In applying AASB 16 for the first time, the Group has applied the short-term leases exemption to leases with lease term that ends within 12 months of the date of initial application as a practical expedient he accounting policies applied by S in these financial statements are the same as the une permitted by the standard. The Group had one premises lease that expired in April 2020, to which this financial statements e cept for the accounting policies impacted by ne or amended accounting expedient was applied. standards detailed in this note The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as of 30 June he roup has elected to present only financial information relating to S ithin these financial 2019: statements A separate financial report for the S roup has also been prepared for the year ended $’000 une his is available at nationalstorageinvest com au Operating lease commitments as at 30 June 2019 1,382 Weighted average incremental borrowing rate as at 1 July 2019 2.93% Discounted operating lease commitments as at 1 July 2019 1,317 Less: he consolidated financial statements of the roup comply ith nternational inancial eporting Commitments relating to short-term leases (385) Standards “ ” as issued by the nternational Accounting Standards Board Add: Commitments relating to leases recognised for the first time under AASB 16 154 Lease liabilities as at 1 July 2019 0
he roup has adopted all of the ne and revised Standards and nterpretations issued by the AASB that The Group continues to recognise a lease liability on its leasehold investment properties previously are relevant to its operations and effective for the current year he roup has applied AASB Leases measured under AASB 117. They are now accounted for under AASB 16 and there was no impact on for the first time in these financial statements these leases upon transition.
AASB supersedes AASB eases, nterpretation etermining hether an Arrangement contains a ease, nterpretation perating eases ncentives and nterpretation valuating the Substance
65 Annual Report 2019 / 2020 65 he roup adopted Amendments to Australian Accounting Standards – Definition of a Business fro uly as detailed in note . he roup has also adopted nterpretation Uncertainty over Income Tax Treatments hi h has had no i pa t on these finan ial state ents. S end ents to S a ends AASB 10 an ar l stralian Consolidated Financial Statements and e eral other a end ents and interpretations apply for the first ti e in the reportin period ut do not cco nting S Investments in Associates and ha e a aterial i pa t on the onsolidated finan ial report of the roup. he roup has not early Standards – Sale oint ent res to address an inconsistenc adopted any other standards. or ontri tion o et een t e re ire ents in S and ssets et een t ose in S in dealing it t e sale an In estor and or contri tion o assets et een an its ssociate or in estor and its associate or oint ent re oint ent re ustralian ountin tandards and nterpretations relevant to the Group’s operations, that ha e re ently een issued or a ended ut are not yet effe ti e or ha e not een adopted for the annual reportin year ended une are outlined in the follo in ta le n di erence et een t e a o nt o t e T e inancial State ents o NSR as at ne ad st ent to non controlling interests and an co rises t e consolidated inancial consideration aid or recei ed is recognised in state ents o t e NS ro and t e NS T a se arate reser e it in e it attri ta le to ro o ners o t e arent entit on eptual he re ised on eptual ra e or anuary uly T e inancial state ents or t e ro are Associates ra e or for in ludes so e ne on epts pro ides re ared on t e asis t at NS as t e ac irer ssociates are all entities o er ic t e ro inan ial updated definitions and re o nition o NS T T e non controlling interest is as signi icant in l ence t not control or oint eportin and riteria for assets and lia ilities and larifies attri ta le to sta led sec rit olders resented control T is is generall t e case ere t e rele ant so e i portant on epts in ludin se aratel in t e state ent o co re ensi e ro olds et een and o t e a endin inco e and it in e it in t e state ent o oting rig ts In est ents in associates are standards • he o e ti e of finan ial reportin inancial osition se aratel ro arent acco nted or sing t e e it et od • ualitati e hara teristi s of useful finan ial infor ation shareholders’ equity. Joint arrangements • inan ial state ents and the reportin entity Subsidiaries nder S Joint Arrangements, in est ents • he ele ents of finan ial state ents S sidiaries are all entities o er ic t e ro in oint arrange ents are classi ied as eit er oint • e o nition and dere o nition as control T e ro controls an entit en it o erations or oint ent res T e classi ication • easure ent is e osed to or as rig ts to aria le ret rns de ends on t e contract al rig ts and • resentation and dis losure ro its in ol e ent it t e entit and as t e o ligations o eac in estor rat er t an t e • on epts of apital and apital a ilit to a ect t ose ret rns t ro g t e o er legal str ct re o t e oint arrange ent aintenan e to direct t e acti ities o t e entit In est ents in oint ent res are acco nted or he han es to the on eptual onsolidation o a s sidiar egins en t e sing t e e it et od ra e or ay affe t the appli ation of ro o tains control o er t e s sidiar and in situations here no standard applies ceases en t e ro loses control T e to a parti ular transa tion or e ent. ac isition et od o acco nting is sed to Equity method acco nt or siness co inations (see note nder t e e it et od t e in est ent in an end ents to his tandard a ends anuary uly (g) associate or a oint ent re is initiall recognised ustralian resentation of inan ial tate ents and at cost T e carr ing a o nt o t e in est ent is ountin ountin oli ies han es in Interco an transactions alances and ad sted to recognise c anges in t e ro ’s tandards – ountin sti ates and rrors to ali n nrealised gains on transactions et een gro s are o net assets since t e ac isition date efinition of the definition of ‘material’ across the entities are eli inated nrealised losses are also ood ill relating to t e associate or oint aterial standards and to larify aspe ts of the ent re is incl ded in t e carr ing a o nt o t e definition. his larifies that ateriality ill eli inated nless t e transaction ro ides in est ent and is neit er a ortised nor depend on the nature or a nitude of e idence o an i air ent o t e trans erred infor ation. n entity ill need to assess asset cco nting olicies o all s sidiaries are indi id all tested or i air ent hether the infor ation either indi idually consistent it t e olicies ado ted t e or in o ination ith other infor ation is ro T e state ent o ro it or loss re lects t e aterial in the onte t of the finan ial ro ’s share of the results of operations of the state ents. isstate ent of infor ation T e ro treats transactions it non associate or oint ent re n c ange in ot er is aterial if it ould reasona ly e controlling interests t at do not res lt in a loss o co re ensi e inco e o t ose in estees is e pe ted to influen e de isions ade y control as transactions it e it o ners o t e resented as art o t e ro ’s ot er the pri ary users. ro c ange in o ners i interest res lts in co re ensi e inco e In addition en t ere an ad st ent et een t e carr ing a o nts o as een a c ange recognised directl in t e t e controlling and non controlling interests to e it o t e associate or oint ent re t e re lect t eir relati e interests in t e s sidiar ro recognises its s are o an c anges
Annual Report 2019 / 2020 67 when applicable in the statement of changes Group e ercises udgement ta ing into ana ement periodicall evaluates ta in e uity nrealised gains and losses resulting consideration all of the rele ant facts and The Group’s desi n and development fees to positions here the interpretation of applica le from transactions between the Group and the circumstances when applying each step of the customers consist of one performance ta re ulations is su ective and esta lishes associate or oint enture are eliminated to the model to contracts with their customers o li ation he Group reco nises revenue from provisions here appropriate e tent of the interest in the associate or oint desi n and development fees over the relevant enture e enue is recognised to the e tent that it is period of the performance o li ations as the probable that the economic benefits will flow to Group’s performance creates or enhances an eferred ta is provided usin the lia ilit The aggregate of the Group’s share of profit or the Group and the re enue can be reliably asset that the customer controls method, on temporar differences arisin loss from associates and oint entures is shown measured regardless of when the payment is et een the ta ases of assets and lia ilities on the face of the consolidated statement of recei ed e enue is measured at the fair alue and their carr in amounts for financial profit or loss and represents profit or loss after ta of the consideration recei ed or recei able he Group’s contracts ith customers for reportin purposes at the reportin date and non controlling interests in the subsidiaries of ta ing into account contractually defined terms mana ement fees are reco nised over the eferred ta lia ilities are reco nised for all associates or oint entures of payment and e cluding ta es or duty period of the mana ement a reement, in line ta a le temporar differences, e cept ith recurrin performance o li ations The financial statements of associates and oint The Group assesses its re enue arrangements • hen the deferred ta lia ilit arises from entures are prepared for the same reporting against specific criteria to determine if it is the initial reco nition of ood ill or an asset period as the Group hen necessary acting as principal or agent The specific nterest income is reco nised usin the effective or lia ilit in a transaction that is not a ad ustments are made to bring the accounting recognition criteria described below must also interest method hen a receiva le is impaired, usiness com ination and, at the time of policies in line with those of the Group be met before re enue is recognised the Group reduces the carr in amount to its the transaction, affects neither the recovera le amount, ein the estimated accountin profit nor ta a le profit or loss After application of the e uity method the The Group’s revenue is disaggregated in the future cash flo discounted at the ori inal Group determines whether it is necessary to statement of profit or loss with the e ception of effective interest rate of the instrument and • n respect of ta a le temporar differences recognise an impairment loss on its in estment in e enue from ontracts with ustomers which is continues un indin the discount as interest associated ith investments in su sidiaries, its associates or oint entures At each reporting disaggregated into categories in note that income nterest income on impaired loans is associates and interest in oint date the Group determines whether there is depict how the nature amount timing and reco nised usin the ori inal effective interest arran ements, hen the timin of the ob ecti e e idence that the in estment in the uncertainty of re enue and cash flows are rate reversal of temporar differences can e associate or oint enture is impaired f there is affected by economic factors controlled and it is pro a le that the such e idence the Group calculates the temporar difference ill not reverse in the amount of impairment as the difference foreseea le future between the reco erable amount of the e enue from rental income relating to the he Group comprises ta a le and non ta a le associate or oint enture and its carrying alue pro ision of storage space and commercial entities lia ilit for current and deferred ta he deferred ta lia ilities in relation to then recognises the loss as ‘Share of profit or loss units is recognised less any amount e pense is onl reco nised in respect of ta a le investment propert is reco nised dependent of oint entures and associates’ in the contractually refundable to customers o er the entities that are su ect to income ta upon the ta a le impact in the relevant consolidated statement of profit or loss pon term of the general agreement The alue of urisdiction he Group assumes that the current loss of significant influence o er an associate or discounts offered to customers at the end of an NSPT is a ‘flow through’ entity for Australian measurement at fair value ill e recovered oint control o er the oint enture the Group incenti e period is recognised o er the income ta purposes and is an ttri ution entirel throu h a sale measures and recognises any retained e pected rental period ana ed nvestment rust, such that the in estment at its fair alue Any difference determined ta components of ill e n e ealand, as an capital ain on sale ill between the carrying amount of the associate ta a le in the hands of unitholders on an enerall e e empt from ta , the deferred ta or oint enture upon loss of significant influence attri ution asis NSPT’s subsidiary National lia ilit in relation to these assets ould or oint control and the fair alue of the retained e enue from the sale of goods is recognised Storage New Zealand Property Trust (“ ”) enerall e calculated ased on the amount in estment and proceeds from disposal is on fulfilment of performance obligations The is an ustralian re istered trust hich o ns of an ta depreciation recover recognised in profit or loss Group recognises re enue at the point in time investment propert in e ealand or e when control of the asset is transferred to the ealand ta purposes is classed as a unit eferred ta assets are reco nised for all customer generally on deli ery of the goods or trust and is su ect to e ealand income ta deducti le temporar differences, the carr ser ice for ard of unused ta credits and unused ta e enue is recognised under AAS e enue losses eferred ta assets are reco nised to the from ontracts with ustomers and applies to all urrent income ta assets and lia ilities are e tent that it is pro a le that ta a le profit ill The Group acts as an agent in the pro ision of re enue from contracts with customers unless measured at the amount e pected to e e availa le a ainst hich the deducti le insurance ser ices pro ided by a third party those contracts are in the scope of other recovered or paid to the ta ation authorities temporar differences, and the carr for ard of insurance company to storage rental customers standards he ta rates and la s used to compute the unused ta credits and unused ta losses can e The Group’s contracts with customers for amount are those that are enacted or utilised, e cept agency fees and commissions consist of one The Group follows a fi e step model to account su stantivel enacted at the reportin date in performance obligation The Group recognises for re enue arising from contracts with the countries here the Group operates and • hen the deferred ta asset relatin to the re enue at the point in time when the customers e enue is recognised at an amount enerates ta a le income deducti le temporar difference arises from commission is generated and is recei able that reflects the consideration to which an entity urrent income ta relatin to items reco nised the initial reco nition of an asset or lia ilit e pects to be entitled to in e change for directl in e uit is reco nised in e uit and not that is not a usiness com ination and, at transferring goods or ser ices to a customer The in the statement of profit or loss the time of the transaction, affects neither
Annual Report 2019 / 2020 69
the acc u ti r it r ta a e r it r • he the i curre a sa e r on monetar items that are measured in terms ss urchase assets is t a a e r of historica cost in a foreign currenc are s part of this assessment the Group has ear rec era e r the ta ati auth rit i trans ated using the e change rates at the adopted the amendments to the definition of a • res ect e ucti e te rar hich case the is rec ise as art dates of the initia transactions on monetar usiness under S and has app ied the i ere ces ass ciate ith i est e ts i the re e ue r e e se ite r art the items measured at fair va ue in a foreign optiona fair va ue concentration test f the su si iaries ass ciates a i terests i i t c st acquisiti the asset as currenc are trans ated using the e change concentration test is passed the set of activities arra e e ts e erre ta assets are a ica e rates at the date when the fair va ue is and assets is determined not to e a usiness rec ise t the e te t that it is determined and therefore the transaction is not accounted r a e that the te rar i ere ce i • he recei a es a a a es are state The gain or oss arising on trans ation of non for as a usiness com ination ut rather as an t re erse i the reseea e uture a ith the a u t i c u e monetar items measured at fair va ue is treated asset ac uisition ta a e r it i e a ai a e a ai st in ine with the recognition of the gain or oss on hich the te rar i ere ces ca e he et a u t rec era e r r the change in fair va ue of the item i e usiness com inations are accounted for using uti ise a a e t the ta ati auth rit is i c u e as trans ation differences on items whose fair va ue the ac uisition method The cost of an art recei a es r a a es i the state e t gain or oss is recognised in other ac uisition is measured as the aggregate of the he carr i a u t e erre ta assets is i a cia siti it e ts a comprehensive income or profit or oss are a so consideration transferred which is measured at re ie e at each re rti ate a a uste c ti e cies are isc se et the a u t recognised in other comprehensive income or ac uisition date fair va ue and the amount of t the e te t that it is r a e that su icie t rec era e r r a a e t the profit or oss respective an non contro ing interests in the ac uiree or ta a e r it i e a ai a e t a a r ta ati auth rit each usiness com ination the Group e ects art the e erre ta asset t e uti ise whether to measure the non contro ing interests ash s are i c u e i the state e t n conso idation the assets and ia i ities of in the ac uiree at fair va ue or at the e erre ta assets a ia i ities are easure cash s a r ss asis a the foreign operations are trans ated into ustra ian proportionate share of the acquiree’s at the ta rates that are e ecte t a i c e t cash s arisi r i esti do ars at the rate of e change prevai ing at the identifia e net assets c uisition re ated costs the ear he the asset is rea ise r the ia i it a i a ci acti ities hich is rec era e reporting date and their statements of profit or are e pensed as incurred and inc uded in is sett e ase the ta rates a a s that r r a a e t the ta ati auth rit is oss are trans ated at e change rates prevai ing usiness com ination e penses in the statement ha e ee e acte r su sta tia e acte at c asse as art erati cash s at the dates of the transactions The e change of profit or oss the re rti ate differences arising on trans ation for conso idation are recognised in other hen the Group ac uires a usiness it assesses e erre ta re ati t ite s rec ise comprehensive income n disposa of a the financia assets and ia i ities assumed for utsi e r it r ss is rec ise utsi e r it The Group’s consolidated financial statements foreign operation the component of other appropriate c assification and designation in r ss e erre ta ite s are rec ise i are rese te i ustra ia ars r each comprehensive income re ating to that accordance with the contractua terms c rre ati t the u er i tra sacti either e tit the r u eter i es the u cti a particu ar foreign operation is recognised in economic circumstances and pertinent i ther c rehe si e i c e r irect i curre c a ite s i c u e i the i a cia profit or oss conditions as at the ac uisition date This equit state e ts each e tit are easure usi inc udes the separation of em edded that u cti a curre c n goodwi arising on the ac uisition of a derivatives in host contracts the ac uiree e erre ta assets a ia i ities are set i a foreign operation and an fair va ue e a e rcea e ri ht t set curre t ta ad ustments to the carr ing amounts of assets n contingent consideration to e transferred assets a ia i ities e ists a he the ra sacti s i rei curre cies are i itia and ia i ities arising on the ac uisition are the ac uirer wi e recognised at fair va ue e erre ta a a ces re ate t the sa e recorded by the Group’s entities at their treated as assets and ia i ities of the foreign at the ac uisition date ontingent ta ati auth rit res ecti e u cti a curre c s t rates at the operation and trans ated at the spot rate of consideration c assified as an asset or ia i it ate the tra sacti irst qua i ies r e change at the reporting date that is a financia instrument and within the rec iti etar assets a ia i ities scope of S is a its h e ustra ia c tr e e i ate i rei curre cies are measured at fair va ue with the changes in fair e tities ha e i e e te the ta c s i ati tra s ate at the u cti a curre c s t rates va ue recognised in the statement of profit or e is ati s a c seque ce these e tities are e cha e at the re rti ate The Group accounts for a transaction as a oss ta e as a si e e tit a the e erre ta usiness com ination if it meets the definition assets a ia i ities these e tities are set i i ere ces arisi sett e e t r tra s ati under S which re uires that the assets and Goodwi is initia measured at cost eing the the c s i ate i a cia state e ts etar ite s are rec ise i r it r ss ia i ities ac uired constitute a usiness e cess of the aggregate of the consideration cc u ti r the ta c s i ati e is ati ith the e ce ti etar ite s that are usiness is defined as an integrated set of transferred and the amount recognised for non is re e a t r the i i i ua i a cia esi ate as art the he e the r up’s activities and assets that is capa e of eing contro ing interests and an previous interest state e ts the are t e tit hea e tit i et i est e t a rei erati hese are conducted and managed for the purpose of he d over the net identifia e assets ac uired the ta c s i ate r u ut t r the rec ise i ther c rehe si e i c e u ti providing goods or services to customers and ia i ities assumed f the fair va ue of the c s i ate i a cia state e ts the et i est e t is is se at hich ti e generating investment income such as net assets ac uired is in e cess of the the cu u ati e a u t is rec assi ie t r it r dividends or interest or generating other aggregate consideration transferred the Group “GST” ss a char es a cre its attri uta e t income from ordinar activities n order to re assesses whether it has correct identified a e e ue e e ses assets a ia i ities are e cha e i ere ces th se etar ite s determine an integrated set of activities an of the assets ac uired and a of the ia i ities rec ise et the a u t e ce t are a s rec r e i ther c rehe si e assessment of minimum usiness re uirements assumed and reviews the procedures used to i c e and what su stantive processes have een measure the amounts to e recognised at the ac uired is app ied ac uisition date f the reassessment sti resu ts in
Annual Report 2019 / 2020 71 an e cess of the fair value of net assets and lease pa ments made at or before the eases a ue assets are rec ise a rec ise er the ease ter the sa e ac uired over the aggregate consideration commencement date less an lease incentives strai ht i e asis er the ease ter asis as re ta i c e ti e t re ts are transferred then the gain is recognised in profit received. ight of use assets are depreciated on rec ise as re e ue i the eri i hich or loss. a straight line basis over the shorter of the lease r the ri r re rti eri e e u e the are ear e term and the estimated useful lives of the assets. the eter i ati hether a fter initial recognition good ill is measured at arra e e t is a ease as ase the r the ri r re rti eri e i u e cost less an accumulated impairment losses. easehold investment propert assets are su sta ce the arra e e t at the i ce ti ease i c e r erati eases here or the purpose of impairment testing good ill measured at fair value as detailed in note p . the ease he arra e e t as r the r u as a ess r as rec ise i ac uired in a business combination is from the f o nership of the leased asset transfers to the c tai e a ease i u i e t the re e ue ess a a u t c tractua ac uisition date allocated to each of the Group at the end of the lease term or the cost arra e e t as e e e t the use a re u a e t cust ers er the ter ease Group’s cash generating units that are reflects the e ercise of a purchase option s eci ic asset r assets a the arra e e t e pected to benefit from the combination depreciation is calculated using the estimated c e e the ri ht t use the asset r assets useful life of the asset. he right of use assets are irrespective of hether other assets or liabilities also sub ect to impairment as detailed in note of the ac uiree are assigned to those units. eases i est e t r ert a r ert r . ash a cash equi a e ts i the state e t a t a equi e t here the r u as i a cia siti c rise cash at a cash here good ill has been allocated to a cash Lease liabilities essee ha su sta tia a the ris s a re ar s ha a ter e sits that are rea i generating unit “ ” and part of the t the commencement date of the lease the ershi ere c assi ie as i a ce eases c erti e t a u ts cash a operation ithin that unit is disposed of the Group recognises lease liabilities measured at easeh i est e t r ert a r ert hich are su ect t a i si i ica t ris good ill associated ith the disposed operation the present value of lease pa ments to be a t a equi e t i a ce eases ere cha e i a ue is included in the carr ing amount of the made over the lease term. he lease pa ments capitalised at the lease’s inception at air a ue operation hen determining the gain or loss on include fi ed pa ments less an lease incentives r the ur ses the state e t cash s disposal. Good ill disposed in these receivable variable lease pa ments that he c rres i re ta i ati s et cash a cash equi a e ts c sist cash a circumstances is measured based on the depend on an inde or a rate and amounts i a ce char es ere i c u e i ther sh rt ter e sits as e i e a e relative values of the disposed operation and e pected to be paid under residual value ter a ter ia i ities ach ease the portion of the G retained. guarantees. he lease pa ments also a e t as a cate et ee the ia i it include the e ercise price of a purchase option a i a ce c st he i a ce c st ei reasonabl certain to be e ercised b the char e t the r it r ss er the ease e t ries are a ue at the er c st a Group and pa ments of penalties for eri he i est e t r erties acquire et rea isa e a ue sts are assi e a he Group leases properties hich are classified terminating the lease if the lease term reflects u er i a ce eases ere carrie at air a ue irst i irst ut asis et rea isa e a ue is the as investment properties note . . he Group the Group e ercising the option to terminate. ith cha es i a ue rese te i r it r ss esti ate se i rice i the r i ar c urse also leases office premises and items of plant usi ess ess the esti ate c sts ecessar t and e uipment. n calculating the present value of lease he r ert a t a equi e t acquire a e the sa e pa ments the Group uses its incremental u er i a ce eases as e reciate er the rom ul the Group assesses at contract borro ing rate at the lease commencement asset’s useful life or over the shorter of the asset’s inception hether a contract is or contains a date because the interest rate implicit in the use u i e a the ease ter i there as lease. hat is if the contract conve s the right to lease is not readil determinable. fter the reas a e certai t that the r u i tai control the use of an identified asset for a period commencement date the amount of lease ershi at the e the ease ter of time in e change for consideration. liabilities is increased to reflect the accretion of t i itia rec iti i a cia assets are interest and reduced for the lease pa ments c assi ie a easure at a rtise c st air made. n addition the carr ing amount of lease eases i hich a si i ica t rti the ris s a ue thr u h ther c rehe si e i c e r he Group applies a single recognition and liabilities is remeasured if there is a modification a re ar s ershi ere t tra s erre air a ue thr u h r it r ss measurement approach for all leases e cept a change in the lease term a change in the t the r u ere c assi ie as erati eases for short term leases and leases of lo value lease pa ments e.g. changes to future a e ts a e u er erati eases et assets. he Group recognises lease liabilities to he c assi icati i a cia assets at i itia a i ce ti es recei e r the ess r ere ma e lease pa ments and right of use assets pa ments resulting from a change in an inde or recognition depends on the financial asset’s char e t r it r ss a strai ht i e asis representing the right to use the underl ing rate used to determine such lease pa ments or c tractua cash characteristics a the er the eri the ease assets. a change in the assessment of an option to Group’s business model for managing them. purchase the underl ing asset. ith the e ce ti tra e recei a es that t c tai a si i ica t i a ci c e t r u eases i hich the r u es he Group recognises right of use assets at the Short term leases and leases of low value assets r r hich the r u has a ie the ractica t tra s er su sta tia a the ris s a re ar s commencement date of the lease i.e. the he Group applies the short term lease e e ie t the r u i itia easures a i ci e ta t ershi a asset are c assi ie date the underl ing asset is available for use . recognition e emption to its short term leases of i a cia asset at its air a ue us i the case as erati eases e ta i c e arisi is ight of use assets e cluding leasehold e uipment i.e. those leases that have a lease a i a cia asset t at air a ue thr u h r it acc u te r a strai ht i e asis er the investment properties are measured at cost term of months or less from the r ss tra sacti c sts ra e recei a es that ease ter s a is i c u e i re e ue i the less an accumulated depreciation and commencement date and do not contain a t c tai a si i ica t i a ci state e t r it r ss ue t its erati impairment losses and ad usted for an purchase option . t also applies the lease of lo c e t r r hich the r u has a ie ature itia irect c sts i curre i e tiati remeasurement of lease liabilities. he cost of value assets recognition e emption to leases of the ractica e e ie t are easure at the a arra i a erati ease are a e t right of use assets includes the amount of lease office e uipment that are considered to be lo tra sacti rice eter i e u er the carr i a u t the ease asset a liabilities recognised initial direct costs incurred value. ease pa ments on short term leases and
Annual Report 2019 / 2020 73
n or er or a inancial asset to be classi ie an s a ach r por a h Group ass ss s proc s o ra sac o cos s a h easure at a ortise cost or air alue This cate or inclu es inancial assets hel or h s a o a c as o s h s or ca cr oss r p o a ou s r co s pro or oss throu h other co prehensi e inco e it nee s tra in an inancial assets esi nate upon p r c a us or or ar oo ac ors o r h p r o o h orro s us h to i e rise to cash lo s that are solel initial reco nition at air alue throu h pro it or sp c c o h ors c r s ho pa ents o principal an interest “ ” on loss. inancial assets are classi ie as hel or the principal a ount outstan in . This tra in i the are ac uire or the purpose o h Group co s rs a a c a ass o a s pa o h s a sh o oa ac s assess ent is re erre to as the test an is sellin or repurchasin in the near ter . r s o au h co rac ua pa s ar ar cap a s as ra sac o cos s o h oa per or e at an instru ent le el. eri ati es inclu in separate e be e a s pas u o r c r a cas s h a su s u a or s o r h p r o o The Group’s business model for managing eri ati es are also classi ie as hel or tra in Group a a so co s r a a c a ass o h ac o h ch r a s inancial assets re ers to ho it ana es its unless the are esi nate as e ecti e he in au h r a or r a or a o inancial assets in or er to enerate cash lo s. instru ents. inancial assets at air alue throu h ca s ha h Group s u o r c orro cos s ar r co s as a p s The business o el eter ines hether cash pro it or loss are carrie in the state ent o h ou s a co rac ua a ou s u h curr u ss h r a o h lo s ill result ro collectin contractual cash inancial position at air alue ith net chan es or a o accou a cr ac u s o co s ruc o or pro uc o o a lo s sellin the inancial assets or both. in air alue reco nise in the state ent o pro it ha c s h h Group ua ass or o up ro orro or loss. s a sh a arra cos s h ch a c a ass s r o h h r s o ar rr a a or s as a p s o r r aso a p c a o o r co r h h o h ac orro cos s curr co rac ua cash o s or h co s ruc o o a ua ass ar The Group easures inancial assets at inancial assets are ereco nise hen the cap a s ur h p r o o ha s a ortise cost i the inancial asset is hel ith ri hts to recei e cash lo s ro the assets ha e r u r o co p a pr par h ass or the ob ecti e to collect contractual cash lo s e pire an the Group has trans erre s us or sa an the contractual ter s o the inancial asset substantiall all the ris s an re ar s o i e rise on speci ie ates to cash lo s that o nership or control o the asset. are solel pa ents o principal an interest on a c a a s ar c ass a a the principal a ount outstan in . r co o as a c a a s a a r a u a c a a s r co s h h hrou h pro or oss oa s a orro s o a o u r h a s schar inancial assets hel at a ortise cost are The Group uses AASB 9’s incurred loss approach pa a s or as r a s s a as ca c or p r h a s a c a subse uentl easure usin the e ecti e ith a or ar loo in e pecte cre it loss h s ru s a c h as a s r p ac a o h r ro h sa interest etho an are sub ect to i pair ent. (“ ”) approach to reco nise an or all appropr a r o su s a a r r s or h Gains an losses are reco nise in pro it or loss ebt instru ents not hel at air alue throu h r s o a s a ar su s a a hen the asset is ereco nise o i ie or pro it or loss. s are base on the i erence a c a a s ar r co s a a o such a cha or o ca o s i paire . The Group’s financial assets at bet een the contractual cash lo s ue in a r a u a h cas o oa s a r a as h r co o o h or a a ortise cost inclu es tra e an other accor ance ith the contract an all the cash orro s a pa a s o r c a a h r co o o a a h recei ables an eposits. lo s that the Group e pects to recei e attributable transaction costs. The Group’s r c h r sp c carr a ou s s iscounte at an appro i ation o the ori inal a c a a s c u ra a o h r r co s h s a o pro or oss e ecti e interest rate. The e pecte cash lo s pa a s oa s a orro s a r a orro s ar c ass as curr a s ill inclu e cash lo s ro the sale o collateral a c a s ru s u ss h roup has a u co o a r h o The Group easures ebt instru ents at air hel or other cre it enhance ents that are r s o h a or a as alue throu h other co prehensi e inco e i inte ral to the contractual ter s. o hs a r h r por p r o the inancial asset is hel ith the ob ecti e o both hol in to collect contractual cash lo s s are reco nise in t o sta es. or cre it an sale an the contractual ter s o the e posures or hich there has not been a inancial asset i e rise on speci ie ates to si ni icant increase in cre it ris since initial h s ca or c u s a c a a s h or cash lo s that are solel pa ents o principal reco nition s are pro i e or cre it losses ra a a c a a s s a upo an interest on the principal a ount that result ro e ault e ents that are possible a r co o as a a r a u hrou h pro outstan in . ithin the ne t onths a onth . or or oss h Group us s r a a c a s ru s those cre it e posures or hich there has been such as r s ra s aps or ar curr c or ebt instru ents at air alue throu h other a si ni icant increase in cre it ris since initial a c a a s s a upo a cha co rac s a a s co prehensi e inco e interest inco e orei n reco nition a loss allo ance is re uire or r co o a a r a u hrou h pro or oss ar h o h s or curr c a r s e chan e re aluation an i pair ent losses or cre it losses e pecte o er the re ainin li e o s a a h a a o r co o ra r s s re ersals are reco nise in the state ent o the e posure irrespecti e o the ti in o the a o h cr r a ar sa s h pro it or loss an co pute in the sa e anner e ault a li eti e . Group has o s a a a c a a r a s ar a r co s a a r a u as or inancial assets easure at a ortise as a a r a u hrou h pro or oss o h a a r a co rac s r o cost. The re ainin air alue chan es are or tra e recei ables an contract assets the a ar su s u r asur o h r a r reco nise in other co prehensi e inco e. Group applies a si pli ie approach in a u a h o ach r por p r o pon ereco nition the cu ulati e air alue calculatin s. There ore the Group oes not r a r co o r s ar oa s chan e reco nise in other co prehensi e trac chan es in cre it ris but instea a orro s ar su s u asur a h accou or su s u cha s a r inco e is rec cle to pro it or loss. reco nises a loss allo ance base on li eti e a or s cos r c h a u p s o h h r h r a s
Annual Report 2019 / 2020 75
designated as a hedging instrument and i so uantity o the hedged item that the rou The Group designates onl the spot element of The criteria for held for sale classification is met the nature o the item eing hedged he rou actually hedges and the uantity o the for ard contracts as a hedging instrument The onl hen the sale is highl probable and the asset or disposal group is a ailable for designates certain deri ati es as either hedging instrument that the rou actually for ard element is recognised in other immediate sale in its present condition Actions uses to hedge that uantity o hedged item comprehensi e income and accumulated in a re uired to complete the sale should indicate separate component of e uit ithin the • edges o the air alue o recognised that it is unli el that significant changes to the hedging reser e assets or lia ilities or a irm commitment air he air alues o arious deri ati e inancial sale ill be made or that the decision to sell ill alue hedges instruments used or hedging ur oses are The amounts accumulated in other be ithdra n anagement must be • edges o a articular ris associated ith disclosed in note o ements in the hedging comprehensi e income are accounted for committed to the plan to sell the asset and the the cash lo s o recognised assets and reser e in e uity are sho n in note he ull depending on the nature of the underl ing sale e pected to be completed ithin one ear lia ilities and highly ro a le orecast air alue o a hedging deri ati e is classi ied as hedged transaction from the date of the classification transactions cash lo hedges or a non current asset or lia ility hen the • edges o a net in estment in a oreign remaining maturity o the hedged item is more The amount accumulated in other ropert plant and e uipment and intangible o eration net in estment hedges than months t is classi ied as a current asset comprehensi e income is reclassified to profit or assets are not depreciated or amortised once or lia ility hen the remaining maturity o the loss as a reclassification ad ustment in the same classified as held for sale Assets and liabilities classified as held for sale are presented t the ince tion o a hedge relationshi the hedged item is less than months rading period or periods during hich the hedged cash separatel as current items in the statement of rou ormally designates and documents the deri ati es are classi ied as a current asset or flo s affect profit or loss financial position A disposal group ualifies as a hedge relationshi to hich it ishes to a ly lia ility discontinued operation if it is a component of f cash flo hedge accounting is discontinued hedge accounting and the ris management an entit that has been disposed of or is the amount that has been accumulated in o ecti e and strategy or underta ing the classified as held for sale and hedge hanges in the air alue o deri ati es that are other comprehensi e income must remain in designated and uali y as air alue hedges are other comprehensi e income if the hedged • epresents a separate ma or line of business or hedges that ere initially entered into rior recorded in ro it or loss together ith any future cash flo s are still e pected to occur or geographical area of operations to uly the documentation includes changes in the air alue o the hedged asset or ther ise the amount ill be immediatel • s part of a single co ordinated plan to identi ication o the hedging instrument the lia ility that are attri uta le to the hedged ris reclassified to profit or loss as a reclassification dispose of a separate ma or line of business hedged item or transaction the nature o the he gain or loss relating to the e ecti e ortion ad ustment After discontinuation once the or geographical area of operations or ris eing hedged and ho the rou ill assess o interest rate s a s hedging i ed rate hedged cash flo occurs an accumulated • s a subsidiar ac uired e clusi el ith a the e ecti eness o changes in the hedging orro ings is recognised in ro it or loss ithin amount remaining in other comprehensi e ie to resale instrument’s fair value in offsetting the exposure inance costs together ith changes in the air income must be accounted for depending on to changes in the hedged item’s fair value or alue o the hedged i ed rate orro ings the nature of the underl ing transaction iscontinued operations are e cluded from the cash attri uta le to the hedged ris uch attri uta le to interest rate ris he gain or loss results of continuing operations and are hedges are e ected to e highly e ecti e in relating to the ine ecti e ortion is recognised presented as a single amount as profit or loss achie ing o setting changes in air alue or in ro it or loss ithin other income or other edges of a net in estment in a foreign after ta from discontinued operations in the cash lo s and are assessed on an ongoing e enses operation including a hedge of a monetar statement of profit or loss item that is accounted for as part of the net asis to determine that they actually ha e een in estment are accounted for in a a similar highly e ecti e throughout the inancial the hedge no longer meets the criteria or to cash flo hedges Gains or losses on the re orting eriods or hich they ere hedge accounting the ad ustment to the hedging instrument relating to the effecti e ropert plant and e uipment is stated at designated carrying amount o a hedged item or hich the portion of the hedge are recognised as other historical cost less depreciation istorical cost e ecti e interest method is used is amortised to comprehensi e income hile an gains or losses rom uly the documentation includes ro it or loss o er the eriod to maturity using a relating to the ineffecti e portion are includes e penditure that is directl attributable identi ication o the hedging instrument the recalculated e ecti e interest rate recognised in the statement of profit or loss n to the ac uisition of the items Subse uent costs hedged item the nature o the ris eing disposal of the foreign operation the are included in the asset’s carrying amount or hedged and ho the rou ill assess hether cumulati e alue of an such gains or losses recognised as a separate asset as appropriate the hedging relationshi meets the hedge he e ecti e ortion o changes in the air alue recorded in e uit is transferred to the onl hen it is probable that future economic e ecti eness re uirements including the o deri ati es that are designated and uali y as statement of profit or loss benefits associated ith the item ill flo to the analysis o sources o hedge ine ecti eness and a cash lo hedge is recognised in other group and the cost of the item can be ho the hedge ratio is determined hedging measured reliabl The carr ing amount of an relationshi uali ies or hedge accounting i it com rehensi e income and accumulated in component asset is derecognised hen meets all o the ollo ing e ecti eness reser es in e uity he gain or loss relating to the The Group classifies non current assets and replaced All repairs and maintenance are re uirements ine ecti e ortion is recognised immediately in disposal groups as held for sale if their carr ing ro it or loss ithin interest income or inance charged to profit or loss during the reporting amounts ill be reco ered principall through a period in hich the are incurred • costs There is ‘an economic relationship’ between sale transaction rather than through continuing the hedged item and the hedging use on current assets and disposal groups he rou uses or ard currency contracts as epreciation is calculated on a straight line instrument classified as held for sale are measured at the hedges o its e osure to oreign currency ris in basis o er the estimated useful life of the assets lo er of their carr ing amount and fair alue less orecast transactions he ine ecti e ortion as follo s • The effect of credit risk does not ‘dominate costs to sell osts to sell are the incremental relating to oreign currency contracts is the value changes’ that result from that costs directl attributable to the disposal of an recognised as other o erational e enses • easehold impro ements remaining length economic relationshi asset or disposal group e cluding finance costs of lease term • he hedge ratio o the hedging relationshi and income ta e pense • lant and e uipment to ears is the same as that resulting rom the
Annual Report 2019 / 2020 77
ach asset’s residual value and useful life is Under this treatment for each ro erty the changes in accounting estimates and ad usted might be impaired ther assets are tested for reviewed and ad usted if a ro riate at the resent value of the minimum lease ayments is on a prospective basis The amortisation impairment whenever events or changes in end of each re orting eriod determined and carried as a lease liability and expense on intangible assets with finite lives is circumstances indicate that the carr ing the fair value of the lease to the Grou is recognised in the statement of profit or loss as amount ma not be recoverable An asset’s carrying amount is written down recorded each eriod as investment ro erty the expense categor that is consistent with the immediately to its recoverable amount if the function of the intangible assets n impairment loss is recognised for the amount asset’s carrying amount is greater than its Gains or losses arising from changes in the fair by which the asset’s carrying amount exceeds estimated recoverable amount note r values of investment ro erties are included in ntangible assets with indefinite useful lives such its recoverable amount The recoverable Gains and losses on dis osals are determined by rofit or loss in the eriod in which they arise as goodwill are not amortised but are tested for amount is the higher of an asset’s fair value less com aring roceeds with carrying amount including the corres onding tax effect air impairment at each reporting period either costs of disposal and value in use or the hese are included in rofit or loss values are determined using the same valuation individuall or at the level The assessment purposes of assessing impairment assets are rocess a lied to freehold investment of indefinite life is reviewed at each reporting grouped at the lowest levels for which there are ro erty period to determine whether the indefinite life separatel identifiable cash inflows which are continues to be supportable f not the change largel independent of the cash inflows from rom uly lease ayments are in useful life from indefinite to finite is made on a other assets or groups of assets CGU’s on nvestment ro erties are measured initially at accounted for under see note h prospective basis ains or losses arising from financial assets other than goodwill that have cost including transaction costs ubse uent to and for the rior re orting eriod under derecognition of an intangible asset are been impaired in previous periods are reviewed initial recognition investment ro erties are Under both a roaches the ease measured as the difference between the net for possible reversal of the impairment at the stated at fair value which reflects mar et ayments are allocated between the rinci al disposal proceeds and the carr ing amount of end of each reporting period conditions at the re orting date Gains or losses com onent of the lease liability and interest the asset and are recognised in the statement arising from changes in the fair values of ex ense as to achieve a constant rate of of profit or loss when the asset is derecognised investment ro erties are included in rofit or interest on the remaining balance of the liability loss in the eriod in which they arise nterest ex ense is recognised in finance costs in esearch costs are expensed as incurred rovisions are recognised when the roup has a the consolidated statements of rofit and loss evelopment expenditure on an individual present obligation legal or constructive as a air values are determined by a combination of and within ayment of lease liabilities within the pro ect is recognised as an intangible asset result of a past event it is probable that an inde endent valuations and irector valuations consolidated statements of cash flows when the roup can demonstrate outflow of resources embod ing economic he inde endent valuations are erformed by benefits will be re uired to settle the obligation an accredited inde endent valuer nvestment • The technical feasibilit of completing the and a reliable estimate can be made of the ro erties are inde endently valued on a intangible asset so that the asset will be amount of the obligation hen the roup rotational basis every three years unless ntangible assets ac uired se arately are available for use or sale expects some or all of a provision to be re uired by the underlying financing or the measured on initial recognition at cost he cost • ts intention to complete and its abilit and reimbursed the reimbursement is recognised as irectors determine a more fre uent valuation of intangible assets ac uired in a business intention to use or sell the asset a separate asset but onl when the cycle combination is their fair value at the date of • ow the asset will generate future reimbursement is virtuall certain ac uisition ollowing initial recognition economic benefits or ro erties sub ect to an inde endent intangible assets are carried at cost less any • The availabilit of resources to complete the rovisions are measured at the present value of valuation re ort the irectors verify all ma or accumulated amortisation and accumulated asset and management’s best estimate of the in uts to the valuation and review the results im airment losses nternally generated • The abilit to measure reliabl the expenditure re uired to settle the present with the inde endent valuer he irector intangibles excluding ca italised develo ment expenditure during development obligation at the end of the reporting period valuations are com leted by the Grou costs are not ca italised and the related The discount rate used to determine the present oard he valuations are determined using the ex enditure is reflected in rofit or loss in the ollowing initial recognition of the development value is a pre tax rate that reflects current same techni ues and similar estimates to those eriod in which the ex enditure is incurred expenditure as an asset the asset is carried at market assessments of the time value of mone a lied by the inde endent valuer cost less an accumulated amortisation and and the risks specific to the liabilit The increase he useful lives of intangible assets are assessed accumulated impairment losses mortisation of in the provision due to the passage of time is nvestment ro erties are derecognised either as either finite or indefinite ntangible assets with the asset begins when development is recognised as interest expense when they have been dis osed of or when they finite lives are amortised over the useful complete and the asset is available for use t is are ermanently withdrawn from use and no economic life and assessed for im airment amortised over the period of expected future n accordance with lease agreements the future economic benefit is ex ected from their whenever there is an indication that the benefit mortisation is recorded in other roup must restore the leased premises in a dis osal he difference between the net intangible asset may be im aired he operational expenses uring the period of number of leasehold premises to its original dis osal roceeds and the carrying amount of amortisation eriod and the amortisation development the asset is tested for impairment condition at lease expir provision has been the asset is recognised in the statement of rofit method for an intangible asset with a finite annuall recognised for the obligation to remove or loss in the eriod of derecognition useful life are reviewed at least at the end of leasehold improvements from the leased each re orting eriod premises note ransfers are made to or from investment ro erty only when there is a change in use Changes in the ex ected useful life or the oodwill and intangible assets that have an ex ected attern of consum tion of future indefinite useful life are not sub ect to he Grou as lessee has ro erties that in economic benefits embodied in the asset are amortisation and are tested annuall for accordance with considered to modify the amortisation eriod or impairment or more fre uentl if events or iabilities for wages and salaries including non ualify for recognition as investment ro erties method as a ro riate and are treated as changes in circumstances indicate that the monetar benefits and accumulating annual
Annual Report 2019 / 2020 79
leave which are e pected to be settled within of the assets distributed is reco nised in the Assets or ia i ities arising under ta unding the air a ue measurement is direct y or onths of the reportin date are reco nised state ent of profit or loss agreements with the ta conso idated entities indirect y o ser a e in respect of e ployees services up to the are recognised as current amounts recei a e • e e — a uation techni ues or which reportin date hey are easured at the rom or aya e to other entities in the rou the owest e e in ut that is signi icant to a ounts e pected to be paid when the the air a ue measurement is uno ser a e liabilities are settled he Group is of a ind referred to in orporations oundin in inancial irectors’ or assets and ia i ities that are recognised in eports nstru ent , relatin to the he rou measures inancia instruments such the inancia statements on a recurring asis the he Group does not e pect its lon service ‘rounding off’ of amounts in the financial as deri ati es and non inancia assets such as rou determines whether trans ers ha e leave benefits to be settled wholly within state ents ounts in the financial state ents in estment ro erties at air a ue at each occurred etween e e s in the hierarchy y re onths of each reportin date he Group have been rounded off to the nearest thousand a ance sheet date assessing categorisation ased on the owest reco nises a liability for lon service leave dollars, or in certain cases, the nearest dollar e e in ut that is signi icant to the air a ue easured as the present value of e pected air a ue is the rice that wou d e recei ed to measurement as a who e at the end o each future pay ents to be ade in respect of se an asset or aid to trans er a ia i ity in an re orting eriod services provided by e ployees up to the order y transaction etween mar et artici ants reportin date usin the pro ected unit credit he financial infor ation for the parent entity, at the measurement date he air a ue or urther detai s on air a ue measurement ethod onsideration is iven to previous , disclosed in note has been prepared on measurement is ased on the resum tion that re er to notes and e perience of e ployee departures, and the sa e basis as the consolidated financial the transaction to se the asset or trans er the periods of service pected future pay ents state ents, e cept as set out below ia i ity ta es ace either are discounted usin ar et yields at the reportin date on the applicable corporate • n the rinci a mar et or the asset or bonds with ter s to aturity and currencies that nvest ents in subsidiaries are accounted for at ia i ity or atch, as closely as possible, the esti ated cost in the financial state ents of • n the a sence o a rinci a mar et in the he re aration o the rou ’s consolidated future cash outflows most ad antageous mar et or the asset or inancia statements re uires management to ia i ity ma e udgements estimates and assum tions and its wholly owned entities have that a ect the re orted amounts o re enues ll e ployees can direct the Group to a e i ple ented the ta consolidation le islation he rinci a or the most ad antageous mar et e enses assets and ia i ities and the contributions to a defined contribution plan of he head entity, , and the controlled entities must e accessi e y the grou accom anying disc osures and the disc osure their choice ontributions to defined that are in the ta consolidated roup, account o contingent assets and ia i ities ncertainty contribution superannuation funds are for their own current and deferred ta a ounts he air a ue o an asset or ia i ity is measured a out these assum tions and estimates cou d reco nised as an e pense as they beco e hese ta a ounts are easured as if each using the assum tions that mar et artici ants resu t in outcomes that re uire a materia payable repaid contributions are reco nised entity in the ta consolidated roup continues to wou d use when ricing the asset or ia i ity ad ustment to the carrying amount o the assets as an asset to the e tent that a cash refund or a be a stand alone ta payer in its own ri ht assuming that mar et artici ants act in their or ia i ities a ected in uture eriods reduction in the future pay ents is available n addition to its own current and deferred ta economic est interest A air a ue a ounts, also reco nises the current ta measurement o a non inancia asset ta es into liabilities or assets and the deferred ta assets account a mar et artici ant s a i ity to arisin fro unused ta losses and unused ta generate economic ene its y using the asset n the rocess o a ying the rou ’s tapled securities are classified as e uity ssued credits assu ed fro controlled entities in the in its highest and est use or y se ing it to accounting o icies management has made and paid up capital is reco nised at the fair ta consolidated roup another mar et artici ant the o owing udgements which ha e a value of the consideration received by the signi icant e ect on the amounts recognised in Group ncre ental costs directly attributable to he entities have also entered into a ta fundin he rou uses a uation techni ues that are the conso idated inancia statements the issue of securities are shown in e uity as a a ree ent under which the wholly owned a ro riate in the circumstances and or which deduction, net of ta , fro the proceeds entities fully co pensate for any current ta su icient data is a ai a e to measure air a ue payable assu ed and are co pensated by ma imising the use o re e ant o ser a e in uts for any current ta receivable and deferred and minimising the use o uno ser a e in uts ta assets relatin to unused ta losses or unused A assets and ia i ities or which air a ue is or the ac uisition o storage centres the ta credits that are transferred to under the measured or disc osed in the inancia Group’s policy is to review the nature of the he Group reco nises a liability to a e cash or ta consolidation le islation he fundin statements are categorised within the air a ue transaction and assess i the transaction shou d non cash distributions to e uity holders when a ounts are deter ined by reference to the hierarchy ased on the owest e e in ut that is e accounted or under the distribution is authorised and is no lon er at a ounts reco nised in the wholly owned signi icant to the air a ue measurement as a or the discretion of the o pany or the entities financial state ents he a ounts who e as a urchase o in estment ro erty he ey esponsible ntity correspondin a ount is receivable payable under the ta fundin assessment is whether the transaction reco nised directly in e uity a ree ent are due upon receipt of the fundin • e e — uoted unad usted mar et constitutes a purchase of a ‘business’, and i so on cash distributions are easured at the fair advice fro the head entity he head entity rices in acti e mar ets or identica assets it wi e accounted or under AA it is value of the assets to be distributed with fair ay also re uire pay ent of interi fundin or ia i ities determined that the transaction does not meet value re easure ent reco nised directly in a ounts to assist with its obli ations to pay ta • e e — a uation techni ues or which this de inition the transaction is accounted or e uity ny difference between the carryin instal ents the owest e e in ut that is signi icant to as a urchase o an asset under AA as an a ount of the liability and the carryin a ount
Annual Report 2019 / 2020 81 ac uisition of a storage centre s he for renta return an capita appreciation he Group ho s a interest in the un a torage rust an the Group ho s uring the and financial ears the rou o erated holl ithin one usiness segment s escri e in note c the Group has a interest in the un a o ercia rust eing the o eration and management of storage centres in ustralia and e ealand a opte the a en ents to a efinition of a an the trust usiness containe in his pro i es n each arrange ent in est ents are c assifie he anaging irector is the Group’s chief o erating decision ma er and monitors the o erating results c arit on hat is consi ere as a usiness an as oint entures as a parties are su ect to a on a ortfolio ide asis onthl management re orts are e aluated ased u on the o erall a s an operationa concentration test that ecurit ho ers gree ent that has een erformance of consistent ith the resentation ithin the consolidated financial statements he si p ifies the assess ent of hether an ac uire contractua structure such that each part Group’s financing including finance costs and interest income are managed on a rou asis and set of acti ities an assets is not a usiness has e ua representation on the a isor oar not allocated to o erating segments responsi e for the o era irection an or the ears en e une an une super ision of each trust ecisions a out the he o erating results resented in the statement of rofit or loss re resent the same segment the Group has assesse that a of its re e ant acti ities re uire the unani ous information as re orted in internal management information storage centre ac uisitions o not eet the consent of the parties sharing contro efinitions set out in an are therefore accounte for as purchases of in est ent propert per 0 0 0 he e assu ptions at the reporting ate $ 000 $ 000 concerning the future an other e sources of – esti ation uncertaint that ha e significant ris ustralia of causing a ateria a ust ent to the carr ing e ealand a ounts of assets an ia i ities ithin the ne t he Group eter ines the ease ter as the financia ear are escri e e o non cance a e ter of the ease together ith he re enue information a o e e cludes interest income and is ased on the location of storage an perio s co ere an option to e ten the ssu ptions an esti ates are ase on centres ease if it is reasona certain to e e ercise para eters a ai a e hen the conso i ate or an perio s co ere an option to financia state ents ere prepare isting ter inate the ease if it is reasona certain not circu stances an assu ptions a out the to e e ercise future e e op ents a change ue to 0 0 0 ar et changes or circu stances arising $ 000 $ 000 he Group has se era ease contracts that e on the Group’s contro uch changes are inc u e e tension an ter ination options he ref ecte in the assu ptions hen the occur ustralia Group app ies u ge ent in e a uating hether e ealand it is reasona certain to e ercise the option to rene or ter inate the ease consi ering factors he Group carries its in est ent properties at fair that create an econo ic incenti e to e ercise a ue ith changes in fair a ue eing on current assets for this ur ose consists of ro ert lant and e ui ment in estment ro erties either the rene a or ter ination c ause he recognise in the state ent of profit or oss and intangi le assets e cluding good ill Group inc u e the e tension perio as part of un er fair a ue a ust ents air a ues are the ease ter for eases of in est ent propert eter ine a co ination of in epen ent he rou has no indi idual customer hich re resents greater than of total re enue he Group t pica e ercises its option to rene a uations assesse on a rotationa asis an these eases ue to the econo ic a ue eri e irector a uations eter ine using the sa e fro the operating usiness ocate at these techni ues an si i ar esti ates to those pre ises he rene a perio for the ease of app ie the in epen ent a uer he e 0 0 0 hea office pre ises is not inc u e as part of assu ptions use to eter ine the fair a ue of $ 000 $ 000 the ease ter as there is no reasona e the properties an the sensiti it ana ses are certaint that this i e e ercise at the en of pro i e in note the initia contractua ter ale of goods and ser ices – genc fees and commissions n i pair ent e ists hen the carr ing a ue of esign and de elo ment fees eferre ta assets are recognise the an asset or G e cee s its reco era e anagement fees Group for unuse ta osses to the e tent that it a ount hich is the higher of its fair a ue ess is pro a e that ta a e profit i e a ai a e costs to se an its a ue in use he fair a ue against hich the osses can e uti ise ess costs to se ca cu ation is ase on the fair a ue of the Group’s stap e securities as iste u ge ent is re uire to eter ine the a ount on the ustra ian ecurities change hich has of eferre ta assets that can e recognise een assesse as one G for goo i ase upon the i e ti ing an the e e of i pair ent assess ent purposes ess costs of future ta a e profits isposa
Annual Report 2019 / 2020 83
NSPT is a ‘flow through’ entity for Australian income tax purposes and is an Attribution Managed otes s rus su r o po s o s o t er o eratio al ex e ses u o rs o r u o s s NSPT’s subsidiary Nation or rop r rus Professional fees (“ ”) is an Australian registered trust which owns investment property in New Zealand. For New nformation technology costs purpos s s ss s u rus s su o o ost of pac aging and other products sold r o ommunications costs an charges or o po s o o p s or rs u Motor vehicle expenses u r epreciation Amortisation of intangible assets . 0 0 0 Travel and entertainment costs $ 000 $ 000 ther expenses otal ot er o eratio al ex e ses urr rr m lo ee ex e ses us r o o pr or p r o s ages and salaries Post employment benefits ther employee costs otal em lo ee ex e ses oss o r u o o s o s A A os o ssu s r p terest i come an interest nterest income from related parties Australia’s domestic tax rate for 0 0 0 otal i terest i come ro or u pro or ro rus s o us r prop r s i a ce costs ou pro or o nterest on borrowings eclassification from cash flow hedge reserve to us r r o – statement of profit or loss (see note ) nterest on lease liabilities relating to investment property o u ss ss ou s nterest on other lease liabilities u o ss ss ou s otal fi a ce costs us s r sp o pr ous rs o o r r s o o o pr ous u r o s oss s
Annual Report 2019 / 2020 85 A A A A A A A eferred tax e efit i cluded i i come tax e efit com rises The roup holds the following financial instruments otes i a cial assets ash and cash e uivalents . Trade and other receivables . eposits . otal deferred tax e efit erivatives used for hedging . eferred tax assets a d lia ilities Total financial assets Deferred tax assets i a cial lia ilities Trade and other payables . orrowings . ease liabilities . erivatives used for hedging . Total financial liabilities Deferred tax liabilities 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 mentioned above. All derivatives relate to interest rate swaps and forward currency exchange contracts held by the group. These have been designated as cash flow hedges and are presented as current assets or liabilities if they are expected to be settled within months after the end of the reporting period.
et deferred tax assets
eco ciliatio to stateme t of fi a cial ositio et deferred tax assets
otal
Annual Report 2019 / 2020 87 as a d cas e ui ale ts lassificatio as trade a d ot er recei a les
urre t assets otal cas a d cas e ui ale ts as flo reco ciliatio of et rofit after tax to et cas flo s from o eratio s At ul At u e as flo s from o erati acti ities t er assets
urre t et cas flo s from o erati acti ities rade a d ot er recei a les o curre t otes urre t otal curre t a d o curre t o curre t
otal curre t a d o curre t
Annual Report 2019 / 2020 89
rade a d ot er a a les urre t terest rate s a s rade payables 9 9 8 ccrued expenses G and e ploy ent taxes payable ther payables otal 8 8 99 terest rate s a s A at face alue rade payables are unsecured and are usually paid within days of recognition. ther payables and accruals are paid when a ounts fall due. he carrying a ounts of trade and other payables are assu ed to be the sa e as their fair alues due to their short ter nature. terest rate s a s at face alue . orro i s
A e ui ale t of i terest rate s a s o curre t an finance facilities 8 8 8 8 on a ortised borrowing costs 9 otal orro i s 8 9
he Group has non current borrowing facilities denominated in Australian Dollars (“A ”) and New Zealand Dollars (“ ”). ll facilities are interest only facilities with any drawn balances payable at which reduced the Group’s financial liability presented in note 9.8. aturity. rawn a ounts and facility li its are as follows
controlling interest in the Group’s a fi a ce facilities A rawn a ount 8 8 acility li it 8 8
a fi a ce facilities ed e of et i estme ts i forei o eratio s rawn a ount 9 9 acility li it 9 being used to hedge the Group’s exposure to A e ui ale t of facilities rawn a ount 9 8 8 acility li it 9 88 he a or ter s of these agree ents are as follows
• t une aturity dates on these facilities range fro uly to ece ber . une 9 aturity dates fro uly to ece ber . • he interest rate applied is the ban bill rate plus a argin depending on the gearing ratio. • ecurity has been granted o er the Group s freehold in est ent properties.
he Group has a ban o erdraft facility with a li it of that was undrawn at une and une 9. uring the year ended une the Group refinanced part of the existing debt facilities and increased its club ban ing facilities by and . ear ended une 9 the Group con erted an existing facility of into an facility of . and facilities increased by and .
9 Annual Report 2019 / 2020 91
0 0 0 u e u e $’000 $’000 $’000 $’000 nterest rate swa s . Amou ts reco ised i stateme t of rofit or loss orward currenc e c ange contract . De reciation e ense of rig t of use assets nterest e ense on lease liabilities enses relating to s ort term leases resented wit in remises costs nterest rate swa s . ease diminution on lease old in estment ro erties resented wit in fair alue ad ustments otal
or details on t e classification of financial instruments see note . rou as a lessor
uture minimum rentals recei able under non cancellable o erating leases as at une are as follows e rig t of use assets and lease liabilities a e arisen u on ado tion of AA from ul . efer to note c for furt er information. u e u e $’000 $’000 it in one ear After one ear but not more t an fi e ears ore t an fi e ears $ 000 $ 000 $ 000 $ 000 otal Ad ustments on t e ado tion of AA Additions in t e ear ended une i a cial i strume ts fair alue measureme t De reciation c arge ( ) ( ) ( ) ( ) 0 0 0 air alue ierarc is note e lains t e udgements and estimates made in determining t e fair alues of t e financial instruments recognised in t e financial statements as detailed in notes . to . . o ro ide an indication about t e reliabilit of t e in uts used in determining fair alue financial instruments are classified into t e following t ree le els. 0 0 0 0 e el e fair alue of financial instruments traded in acti e mar ets (suc as ublicl traded $’000 $’000 deri ati es and trading and a ailable for sale securities) is based on uoted mar et rices at t e end of t e re orting eriod. e uoted mar et rice used for an financial assets eld is t e current bid ease liabilities relating to rig t of use assets rice. ese instruments are included in le el . ease liabilities relating to rig t of use assets resented as lease old e el e fair alue of financial instruments t at are not traded in an acti e mar et (for e am le in estment ro erties o er t e counter deri ati es) is determined using aluation tec ni ues w ic ma imise t e use of otal current lease liabilities obser able mar et data and rel as little as ossible on entit s ecific estimates. f all significant in uts re uired to fair alue an instrument are obser able t e instrument is included in le el . ease liabilities relating to rig t of use assets e el f one or more of t e significant in uts is not based on obser able mar et data t e instrument is ease liabilities relating to rig t of use assets resented as lease old included in le el . in estment ro erties otal non current lease liabilities ecific fair aluation tec ni ues used to determine fair alues include
• e fair alue of interest rate swa s is calculated as t e resent alue of t e estimated future cas flows based on obser able ield cur es ad usted for counter art or own credit ris . e rou as se eral lease contracts t at include e tension and termination o tions. e rou as • e fair alue of forward currenc e c ange contracts is based on mar et obser able in uts to included t e e tension eriod as art of t e lease term for leases of in estment ro ert in t e table obtain a resent alue. ncor orated into t e calculation are arious in uts including t e credit abo e. e rou as an o tion to e tend its lease of ead office t is as not been included as art ualit of counter arties foreign e c ange s ot and forward rates ield cur es of t e res ecti e of t e lease term as t ere is no reasonable certaint t at t is will be e ercised at t e end of t e initial currencies currenc basis s reads between t e res ecti e currencies interest rate cur es and contractual term. Had the extension period been recognised the Group’s lease liabilities at 30 June forward rate cur es of t e underl ing commodit . would a e increased b . m. e resulting fair alue estimates for interest rate swa s are included in le el .
Annual Report 2019 / 2020 93
0
0 0 0 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 0 0 0 t cost 3 ccu ulated depreciation 0 on current inancial assets 3 0 urrent inancial liabilities 0 0 on current inancial liabilities 3 3 econciliation o the carr ing a ounts o propert plant and e uip ent at the beginning and end o 3 3 the current inancial period is sho n belo
0 0 0 0 0 – $ 000 $ 000 urrent inancial liabilities arr ing a ount at beginning o the ear 0 dditions 33 33 isposals epreciation 3 3 on current inancial assets 3 ect o o e ent in oreign exchange urrent inancial liabilities 3 3 0 on current inancial liabilities 3 3 0 0
here ere no trans ers bet een le els o air alue hierarch during the ears ended 30 June 0 0 and 30 June 0
0
This note provides information about the Group’s non inancial assets and liabilities including
• n o er ie o all non inancial assets and liabilities held b the Group • peci ic in or ation about each t pe o non inancial asset and non inancial liabilit and • n or ation about deter ining the air alue o the non inancial assets and liabilities including areas o udge ent esti ates and other assu ptions
0
0 0 0 $’000 $’000
33
0
0 0 0 $ 000 $ 000 pening balance at Jul 0 3 te reclassi ied ro reehold in est ent properties 0 0 te reclassi ied to reehold in est ent properties 0 3 isposals during the ear 0 0 0
s at 30 June 0 the Group held an agree ent or the sale o co ercial in est ent propert in unedin e ealand or 3 less cost o sale o 0 his transaction settled on 0 epte ber 0
Annual Report 2019 / 2020 95
0 0
0 0 0 0 0 0 $ 000 $ 000 $ 000 $ 000 ease o n est ent propert es ree o n est ent propert es n operat on penin and osin net boo va ue ree o n est ent propert es un er onstru t on penin net boo va ue dditions pen n a an e at u ere o nition osses presented ithin restru turin and ropert a u s t ons other non re urrin osts pro e ents to n est ent propert es mortisation eassess ent o ease ter s osin net boo va ue ease nut on presente as a r a ue a ust ents et oss ro ot er a r a ue a ust ents 0 Good i has been a o ated to the isted roup ana ement have determined that the isted pen n a an e at u roup hi h is onsidered one operatin se ment see note is the appropriate G a ainst hi h ropert a u s t ons to a o ate these intan ib e assets o in to the s ner ies arisin from ombinin the portfo ios of the sposa o ree o n est ent propert Group pro e ents to n est ent propert es te s re ass e to ree o n est ent propert un er The re overab e amount of the isted roup has been determined based on the fair va ue ess osts of onstru t on disposa method usin the fair va ue uoted on an a tive mar et s at une had te s re ass e ro ree o n est ent propert stap ed se urities uoted on the ustra ian e urities han e at per se urit un er onstru t on providin a mar et apita isation of m This amount is in e ess of the arr in amount of the te s re ass e to assets e or sa e Group’s net assets at une ad the se urit pri e de reased b the mar et apita isation te s re ass e ro assets e or sa e ou d sti have been in e ess of the arr in amount et a n ro a r a ue a ust ents e t o o e ent n ore n e an e 0 0 0 0 0 $ 000 $ 000 pen n a an e at u ropert a u s t ons e e op ent osts te s re ass e to ree o n est ent propert es eferred rent revenue from renta in ome represents funds re eived in advan e from ustomers te s re ass e ro ree o n est ent propert es e t o o e ent n ore n e an e 0
0 0 0 $ 000 $ 000 ea se a ns ea se osses – ease nut on o ease o propert nrea se a ns asso ate t n est ent propert o e ent n pro s ons presente n a r a ue a ust ents
n u e t n net a n ro a r a ue a ust ents are rea se a ns o re at n to t e est ent o ree o n est ent propert es ur n t e ear en e une une rea se a n o re at n to ease o n est ent propert es an re at n to ree o n est ent propert es
Annual Report 2019 / 2020 97
0
0 0 0 $ 000 $ 000 a e good provisions nnual leave , ong service leave , , a e good provisions , , ong service leave , , s at uly , , rising during the year Group’s policy is to maintain the valuation of the investment property hanges in discount rates an indication of a significant change to the property’s valuation Un inding of discount rates Utilised ( ) 0 , , he Group is re uired to restore the leased premises in a number of leasehold properties to their original condition at the end of lease term provision has been recognised for the present value of the estimated expenditure re uired to remove any leasehold improvements 0
he Group has classified its non financial assets held at fair value into the three levels prescribed in note to provide an indication about the reliability of inputs used to determine fair value 0 0 0 $ 000 $ 000 $ 000 $ 000 0 0 0 0 0 easehold investment properties , , reehold investment properties , , , , , , , , 0 0 ssets held for sale , , 0 0 easehold investment properties , , 0 0 0 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 bet een levels and or bet een levels and for recurring fair value measurements during the year n the prior year ended une the Group transferred m from level to level and m from level to level follo ing the reclassification of assets bet een freehold investment properties and assets held for sale (see note ) Under the income capitalisation method, a property’s fair value is estimated based he fair value of assets held for sale is determined using valuation techni ues hich maximise the use of earnings before interest, tax, depreciation and amortisation (“ ”) observable mar et data or the year ended une , the Group valued assets classified as held for sale at the contractually agreed sale price less estimated cost of sale or other observable evidence of mar et value
Annual Report 2019 / 2020 99
iscounte to account for the estimate time an the a itional costs re uire to eli er this a itional alue. u o o p o Group s o or o s s s o The capitalisation rates are eri e from recent sales of similar properties. The secon ar capitalisation us r rate is t picall higher than the primar capitalisation rate to reflect the a itional ris associate with these cashflows. Generall an increase in sta ilise a erage T will result in an increase in fair o so s s o Group s u u alue of an in estment propert . n increase in the acanc rate will result in a re uction of the sta ilise a erage T . n estment properties are alue on a highest an est use asis. The current use of all of the in estment properties self storage is consi ere to e the highest an est 0 0 0 use. o or p r o s us r o or r s us r The capitalisation rate a opte reflects the inherent ris associate with the propert . or e ample if r us r the lease e pir profile of a particular propert is short the capitalisation rate is li el to e higher to ou r ross or p r o s us r reflect a itional ris to income. The higher capitalisation rate then re uces the aluation of the o or s s us r propert . o or o or s rus us r The following ta les present the sensiti it of in estment propert fair alues to changes in input o or or rop r rus us r assumptions. o or rop r rus us r o or ou r rus us r o r su o s o so u o s p rr o s u s u r u o s pr s s o o ro r s $’000 $’000
rimar capitalisation rate 1 1 1 1 11 7
econ ar capitalisation 1 1 1 18 rate
ustaina le occupanc 1 1 11 1 7 7 0 0 0 ta ilise a erage T 1 7 1 77 1 $ 000 $ 000
p u u s o o s r o p o r u o o ur
r o oss pro ro o ur s s r u o s r ro o ur spos o u s o ur 0 $’000 $’000 Group o s r s u or rus Group o s rimar capitalisation rate 1 1 7 71 1 1 188 78 r s u o r rus rus econ ar capitalisation 8 7 1 rate ur r u Group su s r p o o u s rus or ustaina le occupanc 7 7 7 11 81 1 rus su s u pur s op s or s or r ta ilise a erage T 8 77 7 o r prop r u s us r s u s r r s u r o s ru o
u o r rus r s r prop r o ro s o o r u s u or rus ops s prop r s u u or rus s o s or r s prop r u r o s ru o
ur pr or r u Group o u o r u o o o u or rus o u o r rus Group so u r o s or r s prop r ss s ro u or rus or so op s o u or rus or sso o r u s o u o r rus or $17.8m. There was no change in the share of the Group’s interest following these r s o s
1 Annual Report 2019 / 2020 101
During the year ended une the Group sold its units in nvestments o. nit rust for m. 11 a an 78 78 new staple securities on une . The issue price represente a iscount of 7.1 on the last closing price of staple securities on a . hese investments are classified as oint ventures as all parties are sub ect to a ecurityholders greement that has been contractually structured such that the parties to the agreement have e ual representation on the advisory board responsible for the overall direction and supervision of each trust. uring the ear 1 1 1 77 staple securities were issue to securit hol ers participating in the Group’s Distribution Reinvestment Plan for consideration of $1 .7m 1 $1 . m . The staple securities were issue at the olume weighte a erage mar et price of the Group s staple securities o er a perio of ten tra ing a s less a iscount. 0 0 0 $ 000 $ 000
pening balance at uly apital contribution in associate staple securit represents one share in an one unit in T. taple securit hol ers ha e the hare of profit from associates right to recei e eclare i i en s from an istri utions from T an are entitle to one ote Distributions from associate per stapled security at securityholders’ meetings. ol ers of staple securities can ote their shares an 0 units in accor ance with the orporations ct 1 either in person or pro at a meeting of either or T. The staple securities ha e no par alue.
representing NSR’s share n the e ent of the win ing up of an T staple securit hol ers ha e the right to participate in the procee s from the sale of all surplus assets in proportion to the num er of an amounts pai up on staple securities hel . r inar staple securit hol ers ran after all cre itors in repa ment of capital.
There is no current on or off mar et securit u ac . s at une the Group o ned . of the Australia Prime Storage Fund (“ ”). During the year ended une the Group purchased three storage centre investment properties in ustralia from P for m. ollo ing these transactions the Group received distributions from P totalling . m and the P entities ere subse uently dissolved. 0 0 0 he Group holds a . une holding in Spacer Marketplaces Pty Ltd (“ ”). $ 000 $ 000 pacer operate online peer to peer mar etplaces for self storage and par ing. During the year ended une the Group made a capital contribution of . m into pacer as part of an e uity raise. pening alance at 1 ul 7 1 oreign e change translation ifferences 7 1 ee note for fees received and purchases from oint ventures and associates. None of the Group’s losing alance at une 1 7 oint ventures or associates are listed on any public e change. The financial statements for the Group are prepare on the asis that was the ac uirer of T. n this asis foreign currenc translation reser e mo ements relating to the Group are presente within other reser es. The mo ements elow in foreign currenc translation reser e an cashflow he ge 0 0 0 reser e relating to the T Group are presente within non controlling interest in the Group’s $ 000 $ 000 consoli ate statement of changes in e uit .
ssued and paid up capital ontract for future issue of e uity 0 0 0 $ 000 $ 000 pening alance at 1 ul 7 8 11 0 0 0 et in estment he ge 1 1 7 1 1 oreign e change translation ifferences 8 nstitutional and retail placements losing alance at une 1 1 7 8 Distribution reinvestment plan 0 pening alance at 1 ul 881 7 e aluation of cash flow he ges 1 8 18 n une in the prior year the Group announced a fully under ritten m e uity raising. eclassification to statement of profit or loss see note 7 7 7 1 Proceeds ere received on une resulting in the issue of ne stapled securities on Ta ation impact on re aluation 1 uly . n une the Group also announced a non under ritten security purchase plan. his losing alance at une 7 8 881 completed on uly raising . m and resulted in the issue of ne stapled securities. 7 8 1 n ay the Group announced a fully under ritten m e uity raising and non under ritten security purchase plan raising . m. his resulted in the issue of ne stapled securities on
1 Annual Report 2019 / 2020 103
he he reser e s use to re or s or osses o er t es th t re es te s sh f o air a e eas re ent he es re o se other o prehe s e o e s es r e ote ou ts re For information a out the methods and assumptions used in determining fair alues of deri ati es refer re ss f e to prof t or oss the per o he the sso te he e tr s t o t es p e to note . .
the e r e e u e the Group reset the terest r tes sso te th e o te terest r te s ps es te s sh f o he es h s resu te sh outf o of Market risk is the risk that the fair alue of future cash flo s of a financial instrument ill fluctuate m which reduced the Group’s financial liability as presented in note 9.8 u e ecause of changes in market prices. Market risk comprises of three types of risk interest rate risk or e th inan ia instr ents s the ture of the u er he e stru e t s currency risk and other price risk such as e uity price and commodity risk. Financial instruments u h e the f r ue of th s outf o re s the sh f o he e reser e e ort se affected y market risk include loans and orro ings deposits de t and e uity in estments and to the st te e t of prof t or oss future per o s re t to the prof e of the or stru e t deri ati e financial instruments.
t o p t o re u t o pp es o to sh f o he es he su trust of he sensiti ity analysis in the follo ing sections relate to the position as at une and une h h s su e t to e e t e s t o eferre t oes ot pp to sh f o he es he . he sensiti ity analysis has een prepared on the asis that the amount of net de t the ratio of the Group u er urre t ustr t e s t o fi ed to floating interest rates of de t and deri ati es and the proportion of financial instruments in foreign currencies are all constant on the asis of hedge designations in place at une . he sh f o he e s u e o o tro terest the o so te Group he analysis e cludes the impact of mo ements in market aria les on pro isions and the non financial assets and lia ilities of foreign operations.
h s ote out es the Group’s e posure to f r s s ho these r s s ou ffe t future f he follo ing assumptions ha e een made in calculating sensiti ity analysis perfor e • he sensiti ity of the rele ant statement of profit or loss item is the effect of the assumed changes in he Group’s o er r s e e t pro r fo uses o the u pre t t of f r ets respecti e market risks. his is ased on the financial assets held at une and une see s to se pote t erse effe ts o the f perfor e of the us ess he Group including the effect of hedge accounting. uses er t e f stru e ts su h s terest r te s ps to he e ert r et r s e posures • he sensiti ity of e uity is calculated y considering the effect of any associated cash flo hedges and hedges of a net in estment in a foreign su sidiary at une for the effects of the s e e t for the Group s rr e out the o r e e e t perso e of assumed changes of the underlying risk. he o r of re tors ses o eh f of the Group terest r te e posure e u tes tre sur e e t str te es the o te t of the ost re e t e o o o t o s fore sts nterest rate risk is the risk that the fair alue or future cash flo s of a financial instrument ill fluctuate ecause of changes in market interest rates. he Group’s e posure to the risk of changes in market er t es re o use for e o o he purposes ot s tr or spe u t e interest rates relate primarily to their long term de t o ligations ith floating interest rates. stru e ts he Group h s the fo o er t e f stru e ts he Group manages its interest rate risk y ha ing a alanced portfolio of fi ed and aria le rate loans 0 0 0 and orro ings. o manage this the Group enters into interest rate s aps in hich it agrees to $ 000 $ 000 e change at specified inter als the difference et een fi ed and aria le rate interest amounts calculated y reference to an agreed upon notional principal amount. At une after taking into account the effect of interest rate s aps . ( . ) of the Group’s orro ings are at a urre t t es fi ed rate of interest.
o urre t ssets urre t t es o urre t t es et t
assi i ati n eri ati es er t es h e ee es te s sh f o he es he re prese te s urre t ssets or t es f the re e pe te to e sett e th o ths fter the e of the report per o
The Group’s accounting policy for cash flow hedges is set out in note 2( or he e fore st tr s t o s th t resu t the re o t o of o f sset the Group h s u e re te he s osses the t e sure e t of the ost of the sset he effe t e ess re o se the st te e t of prof t or oss s ter
Annual Report 2019 / 2020 105
nterest rate sensiti it e o o ing tab e demonstrates t e sensitivity to a possib e c ange in interest rates on t e portion o redit ris is the ris that a counterparty will not meet its obligations under a financial instrument or oans and borro ings a ected a ter t e impact o edge accounting it a ot er variab es e d customer contract leading to a financial loss. The Group is e posed to credit ris from its operating constant t e Group’s pro it be ore ta is a ected t roug t e impact on oating rate borro ings as acti ities (primarily trade recei ables and from its financing acti ities including deposits with ban s o o s and other financial instruments.
ra e re ei a es The e posure to credit ris for trade and other recei ables is influenced mainly by the indi idual $ 000 characteristics of each customer. The Group’s customer credit risk is managed by re uiring customers 0 0 to pay monthly rentals in ad ance. ustomer credit ris is reduced through a contractual lien o er the ustra ian do ar denominated debt contents stored in the rented units. The terms of the storage agreement pro ide for the auction of the e ea and do ar denominated debt customer’s stored contents to recover any unpaid amounts. utstanding customer recei ables are
regularly monitored and credit concerns re iewed. ustra ian do ar denominated debt e ea and do ar denominated debt The allowance for e pected credit losses represents an estimate of trade recei ables that are not considered to be reco erable. or the year ended une 2 2 the Group has recognised an 0 e pected loss pro ision of 89 ( une 2 9 based on lifetime e pected credit losses at ustra ian do ar denominated debt each reporting date. The Group assesses this allowance based on its historical credit loss e perience e ea and do ar denominated debt ad usted for forward loo ing factors specific to classification groups of recei ables.
ustra ian do ar denominated debt ash an ash e i a ents e ea and do ar denominated debt The Group’s credit ris on cash and cash e ui alents is limited as the counterparties are ban s with high credit ratings assigned by international credit rating agencies. The ma imum e posure to credit ris for e assumed movement in basis points or t e interest rate sensitivity ana ysis is based on t e current y the components of the statement of financial position at une 2 2 and une 2 9 is the carrying observab e market environment amounts as indicated in the statement of financial position. oreign currency risk is t e risk t at t e air va ue o uture cas o s o an e posure i uctuate arantees because o c anges in oreign e c ange rates e Group’s exposure to the risk of changes in foreign redit ris also arises in relation to financial guarantees gi en to certain parties (refer to notes 8 2 e c ange rates re ates primari y to t e Group’s operating activities en revenue or e pense is and 22 . uch guarantees are only pro ided in e ceptional circumstances and are sub ect to specific denominated in a oreign currency , and the Group’s net investment in foreign subsidiaries oard appro al.
e Group edges its e posure to uctuations on t e trans ation into ustra ian do ars o its oreign operations by o ding net borro ings in oreign currencies i uidity ris is the ris that the group will not be able to meet its financial obligations as they fall due. The ob ecti e of managing li uidity ris is to ensure as far as possible the group will ha e sufficient reign rren sensiti it li uidity to meet its liabilities when they fall due under both normal and stressed conditions. on e o o ing tab es demonstrate t e sensitivity to a reasonab y possib e c ange in e ea and o ar behalf of the Group has established a number of policies and processes for managing li uidity ris . e c ange rate it a ot er variab es e d constant e impact on t e Group’s profit before tax is due These include to c anges in t e air va ue o monetary assets and iabi ities The impact on the Group’s pre ta e uity • is due to net investment edges ontinuously monitoring cash flows on a daily basis as well as forecasting cash flows on a medium and long term basis. • onitoring the maturity profiles of financial assets and liabilities in order to match cashflows. • aintaining ade uate reser es and support facilities. • $ 000 $ 000 onitoring li uidity ratios and all constituent elements of wor ing capital. • 0 0 aintaining ade uate borrowing and finance facilities. 0 inan ing arrange ents The Group had access to the following undrawn borrowing facilities at the end of the reporting period
e movement in t e pro it be ore ta is a resu t o a c ange in t e air va ue o t e monetary assets 0 0 0 and iabi ities denominated in $ 000 $ 000 piring within one year (ban o erdraft e movement in pre ta e uity arises rom c anges in borro ings in t e edge o net investments piring beyond one year (loans 89 2 8 in e ea and operations and cas o edges ese movements i o set t e trans ation o e 89 2 8 ea and operations’ net assets into The ban o erdraft facilities may be drawn at any time and may be terminated by the ban without notice. ll other secured ban loans may be drawn at any time and is sub ect to an annual re iew. urther details of the ban loans are detailed in notes 9. and .
Annual Report 2019 / 2020 107
at rit inan ia ia i ities The tab es be o summarise the maturity profile of the Group’s financial liabilities based on contractual undiscounted pa ments s amounts disc osed in the tab e are the contractua undiscounted cash 0 f o s inc uding future interest pa ments, these ba ances i not necessari agree ith the amounts 0 0 0 disc osed on the statement of financia position $ 000 $ 000 $ 000 $ 000 $’000 $ 000 $ 000
eri ati es r ar rren e hange ntra t $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 urrent financia iabi ities 0 0 0 nterest rate s ap N n eri ati es urrent financia iabi ities 0 Trade and other pa ab es , on current financia orro ings , , , , iabi ities , ease iabi ities , , , ,
istribution pa ab e , istributions pa ab e , , , , , , , 0
on current eri ati es borro ings , , , , 0 nf o s , , utf o s , , ease ia i ities urrent iabi ities , , , 0 on current iabi ities , , , , , , , 0 0 , , , , , , ,
The opening ba ances at u above are stated after the adoption of eases $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 ther ba ances presented above represent distributions dec ared in the ear m see note 0 0 , ess units issued under the distribution reinvestment p an hich do not resu t in a cash outf o N n eri ati es m see note Trade and other pa ab es , orro ings , , , , 0 e ates to principa portion of ease iabi it pa ment Tota ease pa ments for the ear ended ease iabi ities , , , , 0 une ere m as disc osed in the onso idated tatement of ashf o s istribution pa ab e , 0 , , , , 0 0 eri ati es 0 0 nf o s , , , , $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 utf o s , , , , eri ati es , , r ar rren e hange ntra t , , , , 0 interest rate s aps urrent financia iabi ities on current financia iabi ities , ,
istributions pa ab e , , , 0 on current borro ings , , ,
ease ia i ities urrent ease iabi ities , , , on current iabi ities , ,
, , , , , 0
Annual Report 2019 / 2020 109
he ro ’s o ecti es hen managing ca ital are t o ol to sa eg ar its a ilit to contin e as a 0 0 0 going concern an to maintain an o timal str ct re to re ce the cost o ca ital an ma imise long $ 000 $ 000 term al e or the sec rit hol er. ran in credits a ailable for subse uent financial years based on a ta rate of n or er to achie e these o ecti es the ro ’s ca ital management strateg aims to ens re that it meets inancial co enants attache to interest earing loans an orro ings. reaches in meeting a he abo e amounts are calculated from the balance of the fran in account at the end of the inancial co enant co l ermit the len er to imme iatel call loans an orro ings. here ha e een reportin period no reaches o inancial co enants relating to an loans an orro ings in the c rrent or rior ear.
he ro manages its ca ital str ct re an ma es a stments to re lect changes in economic he Group does not ha e fran in credits as distributions are paid from hich is not liable to con itions an the re irements o its inancial co enants. o maintain or a st the ca ital str ct re pay income ta pro ided all ta able income is distributed the ro ma a st the istri tion a ment to sec rit hol ers ret rn ca ital to sec rit hol ers or iss e ne sec rities.
he ro monitors ca ital sing a gearing ratio re resente net e t i i e total assets less he follo in tables pro ide the total amount of transactions that ha e been entered into ith related cash an short term e osits an lease lia ilities. he ro ’s target is to ee the gearing ratio parties for the rele ant financial years et een an . et e t incl es orro ings less cash an short term e osits.
0 0 0 $ 000 $ 000
nterest earing loans . ess cash an short term e osits . $ $ $ $ et e t ustralia rime tora e und otal assets ess cash an short term e osits ess lease lia ilities . undall ommercial rust
undall tora e rust Loan covenants inancial co enants n er the terms o the Group’s orro ing agreement re ire the ro to ens re undall tora e perations ty td that the gearing ratio oes not e cee an the ratio o o erating earnings a ste or interest ta e reciation an inance amortisation costs e als or e cee s a m lti le o t o. he ro has com lie ith these co enants thro gho t the re orting erio . pacer ar etplaces ty td istri tions ha e een ma e an eclare as note elo . he rust 0 0 0 $ 000 $ 000 he sales to and purchases from related parties are made on terms e ui alent to those that pre ail in interim istri tion o . cents er nit ai on arm’s length transactions. e r ar . cents er nit inal istri tion o . cents er nit a a le s at une the Group had recei ables outstandin of une on e tem er . cents er nit ith the undall ommercial rust and une ith the undall tora e rust relatin to amounts dra n do n under facility a reements bet een the entities he facility a reements are interest bearin on commercial rates and been classed as a current recei able in the here are no ro ose istri tions not recognise as a lia ilit or the ear en e ne . statement of financial position ll other outstandin balances are unsecured and interest free he irectors o ha e not eclare an interim or inal i i en or the ear en e ne . here ha e been no uarantees pro ided or recei ed for any related party recei ables or payables or the years ended une and une the Group has not recorded any impairment of recei ables relatin to amounts o ed by related parties
Annual Report 2019 / 2020 111
e mana ement ersonnel om ensation “ ”
onsolidated rou s r s p r s p s ur s u s pro r u o s p s ur o rs us o u os s o s r u o r s r u o s r u r o s p s ur s o ssu ur p r o u r r 0 u r s p r s p s ur us ur s us r o o s r s p r s r o o ou • r o r s o r os s sso u po s p s ur s • r u r o o s p s ur s ou ou s
ssu o rs o o u po s p s ur s 0 0 0 remuneration report which is included in the Directors’ Rep
T T T r u r o s ur s o ssu ur r
us u r o r s ou o r pr a ital ommitments o ssu o p
0 0 0 r u r o s ur s us o u s $ u r s p r s p s ur s
0 0 0 $ 0 $ ( $ ) ( ) ( 0 0 $ $ 0 ( $ ) ) 0 0 0 pro r u o rs ($’000) 0 0 0 $ ( 0 0 $ ) s r u r arnings per share or p r s s ur r u r u r o s ur s o ssu us o u s u or s u r s p r s p s ur s s us o r r ssu pr r ease lia ilit ommitments u o s ur s pr or o ssu o u s ur s r ssu r o s us r u r o s p s ur s or r u us o u uarantees and ontin ent lia ilities s u r s p r s p s ur s s so r s o s s s The Group’s parent entit $ ( 0 $ ) 0 0 0 0 0 0 ’
u or o Group s r s ou us r
0 0 0 $ $ ou s r or u r r s ou us r or
or – s or u s u or r por o roup o r roup or – s or ssur s r s r r u r s o o pro u or or s or o r ssur s r s u r o r s o or o r u rr s r r s s r o o s r pro r or s or o r s r s Total auditors’ remuneration
Annual Report 2019 / 2020 113
T T T T T T T onsolidated statement o inan ial osition ummar inan ial in ormation urrent assets The indi idual inancial statements or the parent entit show the ollowin a re ate amounts ash and cash e ui alents Trade and other recei a les n entories $’000 $’000 ncome ta recei a le urrent assets ther current assets Total assets Total current assets urrent lia ilities on urrent assets Total lia ilities Trade and other recei a les ropert plant and e uipment et assets Ri ht o use assets n estment properties ssued capital n estments Retained earnin s ntan i les De erred ta asset Total non current assets oss a ter ta Total comprehensi e income loss Total assets
uarantees entered into t e arent entit ia ilities The Group’s parent entit has pro ided an uarantees o m m to third part lessors urrent lia ilities n addition there are cross uarantees i en ational tora e oldin s imited ational tora e Trade and other pa a les perations t td outhern ross tora e perations t td and ational tora e t td as ease lia ilities descri ed in note o de iciencies o assets e ist in an o these companies De erred re enue ncome ta pa a le ontin ent lia ilities o t e arent entit ro isions The parent entit o Group did not ha e an contin ent lia ilities as at une or une Total current lia ilities on urrent lia ilities T orrowin s ease lia ilities s at une and une ational tora e oldin s imited ational tora e perations ro isions t td outhern ross tora e perations t td and ational tora e t td are parties to a deed Total non current lia ilities o cross uarantee under which each compan uarantees the de ts o the others enterin into the deed the wholl owned entities ha e een relie ed rom the re uirement to prepare a inancial report and Directors’ report under orporations wholl owned companies instrument Total lia ilities issued the ustralian ecurities and n estments ommission et assets et out elow is a consolidated statement o comprehensi e income and statement o inancial position o the entities that are parties to a deed o cross uarantee uit ontri uted e uit onsolidated statement o om re ensi e in ome Retained pro its Total e uit ro it loss e ore income ta ncome ta ene it ro it loss a ter ta T T T
Retained earnin s at the e innin o the ear or the period rom ul to the date o this report the Group purchased se en stora e centre Di idends recei ed in estment properties or a total cost o m etained earnin s at t e end o t e ear
Annual Report 2019 / 2020 115
Ernst & Young Tel: +61 7 3011 3333 111 Eagle Street Fax: +61 7 3011 3100 Brisbane QLD 4000 Australia ey.com/au DIRECTOR ’ DECLARATION GPO Box 7878 Brisbane QLD 4001
n accordance with a resolution of the irectors of ational torage oldings i ited the irectors state that
n the opinion of the irectors Independent Auditor's Report to the Members of National Storage a the financial state ents and notes of the roup for the year ended une REIT are in accordance with the rp rati ns t including
i giving a true and fair view of the consolidated entity’s financial position as Report on the Audit of the Financial Report at une and of its perfor ance for the year ended on that date Opinion and ii co plying with ccounting tandards and the rp rati ns Reg ati ns We have audited the financial report of National Storage REIT (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss, consolidated statement of other the financial state ents and notes also co ply with nternational inancial comprehensive income, consolidated statement of changes in equity and consolidated statement of eporting tandards as disclosed in note and cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration.
c there are reasona le grounds to elieve that will e a le to pay its de ts as In our opinion, the accompanying financial report of the Group is in accordance with the Corporations and when they eco e due and paya le Act 2001, including:
d as at the date of this declaration there are reasona le grounds to elieve that a) giving a true and fair view of the consolidated financial position of the Group as at 30 June the e ers of the losed roup identified in ote will e a le to eet any 2020 and of its consolidated financial performance for the year ended on that date; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. o ligations or lia ilities to which they are or ay eco e su ect y virtue of the eed of ross uarantee Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under his declaration has een ade after receiving the declarations re uired to e ade those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial to the irectors y the hief ecutive fficer and hief inancial fficer in Report section of our report. We are independent of the Group in accordance with the auditor accordance with section of the rp rati ns t for the financial year independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional ended une Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with n ehalf of the oard the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
aurence rindle ndrew atsoulis Key Audit Matters irector anaging irector Key audit matters are those matters that, in our professional judgment, were of most significance in ugust ugust our audit of the financial report of the current year. These matters were addressed in the context of ris ane ris ane our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report.
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Annual Report 2019 / 2020 117
nde endent Auditor s e ort n epen ent u itor s eport ational Storage E ational tora e T Page a e 3
1. Investment property valuation 2. Carrying value of goodwill Why significant How our audit addressed the key audit matter Why significant How our audit addressed the key audit matter n est ent ro erties re resent a ro i atel ur audit rocedures included the follo ing 93% of the Group’s total assets. These assets are • ith the in ol e ent of our real estate The oo will balance of 3.9 illion relates to ur au it proce ures inclu e the followin carried at fair alue hich is assessed the aluation s ecialists e assessed the the ac uisition of portfolios of invest ent directors ith reference to either e ternal • e consi ere whether the i pair ent suita ilit of the aluation ethodologies properties purchase in previous perio s. The inde endent ro ert aluations or internal testin etho olo y applie by the Group the co etence ualifications and oo will is teste for i pair ent annually. aluations and are ased on ar et conditions inclu in the eter ination of cash objectivity of both the Group’s internal e isting at re orting date pair ent testin involves the application of eneratin units to which oo will was aluers and e ternal aluation e erts and subjective ju ent about future business allocate et the re uire ents of ustralian his as considered a e audit atter due to the assu tions used in the aluations perfor ance an the application of valuation ccountin tan ar s the nu er of udg ents re uired in hese assu tions and in uts included etho olo ies in accor ance with ustralian deter ining fair alue hese udg ents include ca italisation rates occu anc rates ccountin tan ar s. ccor in ly this was • We assessed the Group’s appropriateness in assessing the ca italisation rates sustaina le including forecast occu anc le els and consi ere a ey au it atter. respect of the eter ination of the G to occu anc and sta ilised a erage EB A sta ilised a erage EB A e e aluated which the oo will is allocate earnings efore interest ta de reciation and how the Group’s valuation experts • e evaluate the suitability of the valuation a ortisation he 1 ande ic has gi en considered the i act of 1 on the etho olo y an vali ate the inputs to rise to ar et uncertaint hich i acts e assu tions and in uts in their calculate the fair value less costs of isposal udg ents and in uts used to deter ine fair aluations as isclose in ote . ntan ible assets alue and in turn gi es rise to aluation • Agreed a sa le of the source data used in uncertaint the aluations to su orting tenanc • e consi ere the a e uacy of the isclosures in ote . of the financial isclosure relating to in est ent ro erties and schedules and accounting su ledgers report. the associated significant udg ents are included • ested the athe atical accurac of the in otes 10 and 10 to the financial internal aluation odel including assessing re ort e aluation in uts ith reference to those Information Other than the Financial Report and Auditor’s Report a lied the e ternal aluation e erts and
here rele ant e assessed the The irectors are responsible for the other infor ation. The other infor ation co prises the reasona leness of co ara le transactions infor ation inclu e in the ational tora e T nnual eport but oes not inclu e the used in the aluation rocess financial report and our auditor’s report thereon.
• here rele ant e e aluated the o e ent ur opinion on the financial report oes not cover the other infor ation an accor in ly we o not in the ca italisation rates occu anc rates express any for of assurance conclusion thereon with the exception of the e uneration eport and sta ilised a erage EB A across the an our relate assurance opinion. ortfolio ased on our no ledge of the ro ert ortfolio u lished industr re orts n connection with our au it of the financial report our responsibility is to rea the other infor ation and co ara le e ternal aluations and an in oin so consi er whether the other infor ation is aterially inconsistent with the financial report or our nowle e obtaine in the au it or otherwise appears to be aterially isstate . • e considered the ade uac of disclosures in relation to the aluation ethods and f base on the wor we have perfor e we conclu e that there is a aterial isstate ent of this rinci les disclosed in ote u ar of other infor ation we are re uire to report that fact. e have nothin to report in this re ar . si nificant accountin policies n est ent properties ote i nificant accountin Responsi ilities of the irectors for the Financial Report ud e ents esti ates and assu ptions ote 10 n est ent properties and ote The irectors of the o pany are responsible for the preparation of the financial report that ives a 10 on financial assets fair alue true an fair view in accor ance with ustralian ccountin tan ar s an the orporations Act easure ent an for such internal control as the irectors eter ine is necessary to enable the preparation of the financial report that ives a true an fair view an is free fro aterial isstate ent whether ue to frau or error.
A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation
Annual Report 2019 / 2020 119
ndependent uditor s eport ndependent uditor s eport ational torage ational torage age age
e also provide the directors with a statement that we have complied with relevant ethical n preparing the inancial report the directors are responsible or assessing the roup’s ability to re uirements regarding independence, and to communicate with them all relationships and other continue as a going concern disclosing as applicable matters relating to going concern and using the matters that may reasonably be thought to bear on our independence, and where applicable, actions going concern basis o accounting unless the directors either intend to li uidate the roup or to cease ta en to eliminate threats or safeguards applied. operations or ha e no realistic alternati e but to do so. rom the matters communicated to the directors, we determine those matters that were of most Auditor s Responsi ilities for the Audit of the Financial Report significance in the audit of the financial report of the current year and are therefore the ey audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public ur ob ecti es are to obtain reasonable assurance about whether the inancial report as a whole is disclosure about the matter or when, in e tremely rare circumstances, we determine that a matter free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that should not be communicated in our report because the adverse conse uences of doing so would includes our opinion. easonable assurance is a high le el o assurance but is not a guarantee that an reasonably be e pected to outweigh the public interest benefits of such communication. audit conducted in accordance with the ustralian uditing tandards will alwa s detect a material misstatement when it e ists. isstatements can arise rom raud or error and are considered material Report on the Audit of the Remuneration Report i indi iduall or in the aggregate the could reasonabl be e pected to in luence the economic decisions o users ta en on the basis o this inancial report. Opinion on the Remuneration Report
s part o an audit in accordance with the ustralian uditing tandards we e ercise pro essional e have audited the emuneration eport included in pages to of the directors report for the udgment and maintain pro essional scepticism throughout the audit. We also year ended une .
• denti and assess the ris s o material misstatement o the inancial report whether due to n our opinion, the emuneration eport of ational torage for the year ended une , raud or error design and per orm audit procedures responsi e to those ris s and obtain audit complies with section of the orporations Act e idence that is su icient and appropriate to pro ide a basis or our opinion. he ris o not detecting a material misstatement resulting rom raud is higher than or one resulting rom Responsi ilities error as raud ma in ol e collusion orger intentional omissions misrepresentations or the o erride o internal control. he directors of the Company are responsible for the preparation and presentation of the • btain an understanding o internal control rele ant to the audit in order to design audit emuneration eport in accordance with section of the orporations Act . ur procedures that are appropriate in the circumstances but not or the purpose o e pressing an responsibility is to e press an opinion on the emuneration eport, based on our audit conducted in opinion on the e ecti eness o the roup’s internal control. accordance with ustralian uditing tandards. • aluate the appropriateness o accounting policies used and the reasonableness o accounting estimates and related disclosures made b the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis o accounting and based on the audit e idence obtained whether a material uncertaint e ists related to e ents or conditions that ma cast signi icant doubt on the roup’s ability to continue as a going concern. we conclude that a material uncertaint e ists we are re uired to draw attention in rnst oung our auditor’s report to the related disclosures in the financial report or, if such disclosures are inade uate to modi our opinion. ur conclusions are based on the audit e idence obtained up to the date of our auditor’s report. However, future events or conditions may cause the roup to cease to continue as a going concern. • aluate the o erall presentation structure and content o the inancial report including the disclosures and whether the inancial report represents the underl ing transactions and e ents in a manner that achie es air presentation. ic oach • btain su icient appropriate audit e idence regarding the inancial in ormation o the entities artner or business acti ities within the roup to e press an opinion on the inancial report. We are risbane responsible or the direction super ision and per ormance o the roup audit. We remain solel ugust responsible or our audit opinion. • We communicate with the directors regarding among other matters the planned scope and timing o the audit and signi icant audit indings including an signi icant de iciencies in internal control that we identi during our audit.
A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation
Annual Report 2019 / 2020 121 n te e it se rities A ADDITIONAL IN OR ATION here are no un uoted securities
dditional infor ation re uired y the ustralian ecurities change and not shown elsewhere in this report is as follows he infor ation is current as at uly unless stated elow u stantial securityholders as at uly are set out elow
D N N nalysis of nu ers of ordinary fully paid stapled security holders y si e of holding T acus torage unds anage ent i ited anguard nvest ents ustralia td nvest ent anage ent he voting rights attached to the ordinary fully paid stapled securities is one vote per stapled security nd over otal
here were holders of less than a ar eta le parcel of stapled securities representing units
E ent argest te e it se rit h ers he na es of the twenty largest holders of uoted e uity securities are listed elow N N ustody o inees ustralia i ited organ o inees ustralia i ited iticorp o inees ty i ited erpetual rustee o pany td ational o inees i ited ari as o inees ty td gency ending ari as o s ty td iticorp o inees ty i ited olonial irst tate nv torcat ty td ndrew atsoulis a ily ustody o inees ustralia i ited – ational o inees i ited uttonwood o inees ty td oo s nterprises ty td oe se a uperfund ustody o inees ustralia i ited – le ueensland ty td atsoulis evelop ent rispot o inees ty td ouse ead o inee ustralian ecutor rustees i ited uper yna ic upplies nvest ents ty td ari as o s td ari as o inees ty td u ustodial erv td
Annual Report 2019 / 2020 123 Investor Relations
National Storage REIT is listed on the Australian DISTRIBUTION DETAILS Securities Exchange under the code NSR. Distributions are expected to be paid within NSR CALENDAR 8 to 10 weeks following the end of each semi NATIONAL STORAGE REIT SECURITIES annual distribution period, which occur in June August A stapled security comprises: and December each year. To ensure timely Full Year Results and Annual Report released. • one share in National Storage Holdings receipt of your distributions, please consider Limited; and the following: September • one unit in the National Storage Property Trust, Direct Credit Distribution paid for the six months ended 30 June. stapled and traded together as one stapled NSR encourages securityholders to receive Annual tax statements released. security. Notice of Annual General Meeting released. distribution payments by direct credit. If you CONTACT DETAILS wish to register for direct credit or update your October All changes of name, address, TFN, payment payment details, log in to your holding online Annual General Meeting. instructions and document requests should be or telephone the registry on 1300 850 505 directed to the registry. for assistance. February SECURITIES REGISTRY Tax File Number (TFN) Half Year Results released. Distribution paid for six months ended 31 December. Computershare Investor Services Pty Limited You are not required by law to provide your TFN, GPO Box 2975 Melbourne VIC 3001 Australia Australian Business Number (ABN) or exemption Telephone: 1300 850 505 (Australia only) status. However, if you do not provide your TFN, International: +61 (0)3 9415 4000 ABN or exemption, withholding tax at the highest The dates listed above are indicative only Email using the online form: https://www-au. marginal rate for Australian resident members may and subject to change. computershare.com/Investor/#Contact/Enquiry be deducted from distributions paid to you. If you wish to update your TFN, ABN or exemption status, ELECTRONIC INFORMATION log in to your holding online or telephone the registry By becoming an electronic investor and registering on 1300 850 505 for assistance. your email address, you can receive via email notifications and announcements, distribution UNPRESENTED CHEQUES statements, taxation statements and annual reports. If you believe you have unpresented cheques, please contact the registry and request a search SECURE ACCESS TO YOUR SECURITYHOLDING to assist in recovering your funds. If you wish to You will need to have your securityholder reference register for direct credit or update your payment number or holder identification number (SRN/HIN) details, log in to your holding online or telephone available to access your holding details. the registry on 1300 850 505 for assistance. ONLINE ANNUAL TAXATION STATEMENT AND TAX GUIDE You can access your securityholding information The Annual Taxation Statement and Tax Guide via link in the Investor Centre section of the are dispatched to securityholders in August corporate website, www.nationalstorageinvest. each year. A copy of the Tax Guide is available com.au, or via the Investor Centre link on registry at www.nationalstorageinvest.com.au. website at www. computershare.com. au. To view your securityholding, you will need your SRN/HIN INVESTOR FEEDBACK and will be asked to verify your registered postcode If you have any fund specific queries or (inside Australia) or your country of residence feedback please telephone NSR Investor (outside Australia). Relations on 1800 683 290. Please direct any complaints in writing to NSR Company Secretary PHONE at GPO Box 3239, Brisbane QLD 4001, Australia. You can confirm your holding balance, request forms and access distribution and trading information by phoning: 1300 850 505 (Australia only) or calling International: +61 (0)3 9415 4000 (outside Australia).
Annual Report 2019 / 2020 125 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 16, 1 Eagle Street (NSFSL) Brisbane QLD 4000 ACN 600 787 246 AFSL 475 228 Level 16, 1 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 AUDITORS Claire Fidler Ernst & Young 111 Eagle Street COMPANY SECRETARY Brisbane QLD 4000 Claire Fidler
REGISTERED OFFICE Level 16, 1 Eagle Street Brisbane QLD 4000
Bluetooth Smart Access
Annual Report 2019 / 2020 127