Public Storage 2010 Annual Report Download - page 31

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We may pay some taxes, reducing cash available for shareholders.
Even if we qualify as a REIT for federal income tax purposes, we are required to pay some federal, foreign,
state and local taxes on our income and property. Since January 1, 2001, certain corporate subsidiaries of the
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A taxable REIT subsidiary is taxable as a regular corporation and may be limited in its ability to deduct interest
payments made to us in excess of a certain amount. In addition, if we receive or accrue certain amounts and the
underlying economic arrangements among our taxable REIT subsidiaries and us are not comparable to similar
arrangements among unrelated parties, we could be subject to a 100% penalty tax on those payments in excess of
amounts the Internal Revenue Service deems reasonable between unrelated parties. To the extent that the Company
is required to pay federal, foreign, state or local taxes, we will have less cash available for distribution to
shareholders.
We have become increasingly dependent upon automated processes, telecommunications, and the Internet
and are faced with system security and system failure risks.
We have become increasingly centralized and dependent upon automated information technology
processes, and certain critical components of our operating systems are dependent upon third party providers. As a
result, we could be severely impacted by a catastrophic occurrence, such as a natural disaster or a terrorist attack, or
a circumstance that disrupted operations at our third party providers. Even though we believe we utilize appropriate
duplication and back-up procedures, a significant outage in our third party providers could negatively impact our
operations. In addition, a portion of our business operations are conducted over the Internet, increasing the risk of
viruses that could cause system failures and disruptions of operations. Experienced computer programmers may be
able to penetrate our network security and misappropriate our confidential information, create system disruptions or
cause shutdowns. Nearly half of our new tenants come from sales channels dependent upon telecommunications
(telephone or Internet).
We have no ownership interest in Canadian self-storage facilities owned or operated by the Hughes Family.
At December 31, 2010, the Hughes Family had ownership interests in, and operated, 52 self-storage
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Canada on a royalty-free, non-exclusive basis. We currently do not own any interests in these facilities nor do we
own any facilities in Canada. We have a right of first refusal to acquire the stock or assets of the corporation
engaged in the operation of the self-storage facilities in Canada if the Hughes Family or the corporation agrees to
sell them. However, we have no ownership interest in the operations of this corporation, have no right to acquire
their stock or assets unless the Hughes family decides to sell, and receive no benefit from the profits and increases in
value of the Canadian self-storage facilities. Although we have no current plans to enter the Canadian self-storage
market, if we choose to do so without acquiring the Hughes Family interests in their Canadian self-storage
properties, our right to use the Public Storage name in Canada may be shared with the Hughes Family unless we are
able to terminate the license agreement.
Through our subsidiaries, we continue to reinsure risks relating to loss of goods stored by tenants in the
self-storage facilities in Canada in which the Hughes Family has ownership interests. We acquired the tenant
insurance business on December 31, 2001 through our acquisition of PS Insurance Company, or PSICH. During the
years ended December 31, 2010, 2009 and 2008, we received $605,000, $642,000 and $768,000 (based upon
historical exchange rates between the U.S. Dollar and Canadian Dollar in effect as the revenues were earned),
respectively, in reinsurance premiums attributable to the Canadian facilities. 6LQFH36,&+¶VULJKWWRSURYLGHWHQDQW
reinsurance to the Canadian Facilities may be qualified, there is no assurance that these premiums will continue.
We are subject to laws and governmental regulations and actions that affect our operating results and
financial condition.
Our business is subject to regulation under a wide variety of U.S. federal, state and local laws, regulations
and policies including those imposed by the SEC, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street
Reform and Consumer Protection Act and New York Stock Exchange, as well as applicable labor laws. Although