Public Storage 2010 Annual Report Download - page 30

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The Hughes Family could control us and take actions adverse to other shareholders.
At December 31, 2010%:D\QH+XJKHV&KDLUPDQRIWKH%RDUGRI7UXVWHHVDQGKLVIDPLO\WKH³+XJKHV
)DPLO\´ RZQHG DSSUR[LPDWHO\ 7% of our aggregate outstanding common shares. Our declaration of trust
permits the Hughes Family to own up to 47.66% of our outstanding common shares and also allows for cumulative
voting in the election of trustees. Consequently, the Hughes Family may significantly influence matters submitted
to a vote of our shareholders, including electing trustees, amending our organizational documents, dissolving and
approving other extraordinary transactions, such as a takeover attempt, even though such actions may not be
favorable to other shareholders.
Certain provisions of Maryland law and in our declaration of trust and bylaws may prevent changes in
control or otherwise discourage takeover attempts beneficial to shareholders.
Certain provisions of Maryland law may have the effect of deterring a third party from making a proposal
to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of our
shares with the opportunity to realize a premium over the then-prevailing market price of our shares. Currently, the
Board has opted not to subject the Company to the statutory limitations of either the business combination
provisions or the control share acquisitions provisions of Maryland law, but the Board may change this option as to
either statute in the future. If the Board chooses to make them applicable to us, these provisions could delay, deter
or prevent a transaction or change of control that might involve a premium price for holders of common shares or
might otherwise be in their best interest. Similarly, (1) limitations on removal of trustees in our declaration of trust,
(2) restrictions on the acquisition of our shares of beneficial interest, (3) the power to issue additional common
shares, preferred shares or equity shares, (4) the advance notice SURYLVLRQVRIRXUE\ODZVDQGWKH%RDUG¶VDELOLW\
under Maryland law, without obtaining shareholder approval, to implement takeover defenses that we may not yet
have and to take, or refrain from taking, other actions without those decisions being subject to any heightened
standard of conduct or standard of review, could have the same effect of delaying, deterring or preventing a
transaction or a change in control that might involve a premium price for holders of the common shares or might
otherwise be in FRPPRQVKDUHKROGHUV¶EHVWLQWHUHVW
To preserve our status as a REIT under the ,QWHUQDO5HYHQXH&RGHRIDVDPHQGHGWKH³&RGH´RXU
declaration of trust contains limitations on the number and value of shares of beneficial interest that any person may
own. These ownership limitations generally limit the ability of a person, other than the Hughes Family (as defined
LQRXUGHFODUDWLRQRIWUXVWDQGRWKHUWKDQ³GHVLJQDWHGLQYHVWPHQWHQWLWLHV´DVGHILQHGLQRXUGHFODUDWLRQRIWUXVWWR
own more than 3% of our outstanding common shares or 9.9% of the outstanding shares of any class or series of
preferred or equity shares, in each case, in value or number of shares, whichever is more restrictive, unless an
exemption is granted by our board of trustees. These limitations could discourage, delay or prevent a transaction
involving a change in control of our company not approved by our board of trustees.
If we failed to qualify as a REIT for income tax purposes, we would be taxed as a corporation, which would
substantially reduce funds available for payment of dividends.
Investors are subject to the risk that we may not qualify as a REIT for income tax purposes. REITs are
subject to a range of complex organizational and operational requirements. As a REIT, we must distribute with
respect to each year at least 90% of our REIT taxable income to our shareholders (which may take into account
certain dividends paid in the subsequent year). Other restrictions apply to our income and assets. Our REIT status
is also dependent upon the ongoing qualification of our affiliate, PSB, as a REIT, as a result of our substantial
ownership interest in that company.
For any taxable year that we fail to qualify as a REIT and are unable to avail ourselves of relief provisions
set forth in the Code, we would be subject to federal income tax at the regular corporate rates on all of our taxable
income, whether or not we make any distributions to our shareholders. Those taxes would reduce the amount of
cash available for distribution to our shareholders or for reinvestment and would adversely affect our earnings. As a
result, our failure to qualify as a REIT during any taxable year could have a material adverse effect upon us and our
shareholders. Furthermore, unless certain relief provisions apply, we would not be eligible to elect REIT status
again until the fifth taxable year that begins after the first year for which we fail to qualify.