UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[x] Annual Report Pursuant to Section 15(D) of the Securities Exchange Act of
1934
For the fiscal year ended December 31, 2006
-----------------
OR
[] Transition Report Pursuant to Section 15(D) of the Securities Exchange
Act of 1934
For the transition period from ____________ to ____________.
Commission File Number: 001-33519
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
PS 401(k) PROFIT SHARING PLAN
701 Western Avenue
Glendale, CA 91201-2349
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
PUBLIC STORAGE
701 Western Avenue
Glendale, CA 91201-2349
PS 401(k) PROFIT SHARING PLAN
FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULE
TABLE OF CONTENTS
Page
----
Report of Independent Registered Public Accounting Firm 1
Financial Statements:
Statements of Net Assets Available
for Benefits at December 31, 2006 and 2005 2
Statement of Changes in Net Assets
Available for Benefits for the year ended December 31, 2006 3
Notes to Financial Statements 4 - 9
Supplemental Schedule:
Schedule I - Schedule of Assets (Held at End of Year) 10
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Administrative Committee
PS 401(k) Profit Sharing Plan
We have audited the accompanying statements of net assets available for benefits
of PS 401(k) Profit Sharing Plan as of December 31, 2006 and 2005, and the
related statement of changes in net assets available for benefits for the year
ended December 31, 2006. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Plan's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2006 and 2005, and the changes in its net assets available for
benefits for the year ended December 31, 2006, in conformity with U.S. generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2006, is presented for purposes of
additional analysis and is not a required part of the financial statements but
is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audit of the financial statements and, in our opinion,
is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
Los Angeles, California
June 22, 2007
PS 401(k) PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE
FOR BENEFITS
At December 31,
--------------------------------
2006 2005
------------- ------------
ASSETS
Investments at fair value.......................................... $75,944,310 $61,797,501
Receivables:
Participant contributions....................................... 110,246 121,045
Employer contributions.......................................... 279,481 139,461
------------- ------------
Total receivables.................................................. 389,727 260,506
------------- ------------
Total assets....................................................... 76,334,037 62,058,007
LIABILITIES
Accrued expenses................................................... - 19,860
------------- ------------
Total liabilities.................................................. - 19,860
------------- ------------
Net assets available for benefits at fair value 76,334,037 62,038,147
Adjustment from fair value to contract value for fully
benefit-responsive investment contracts............................ 142,222 142,316
------------- ------------
Net assets available for benefits.................................. $76,476,259 $62,180,463
============= ============
See accompanying notes.
2
PS 401(k) PROFIT SHARING PLAN
STATEMENT OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
For the Year Ended December 31, 2006
Additions to Net Assets Attributed to:
Investment income:
Net appreciation in fair value of investments....... $ 10,282,144
Interest income..................................... 329,742
Dividend income..................................... 2,269,065
---------------
12,880,951
Contributions:
Participant......................................... 3,634,285
Participant rollovers............................... 408,572
Employer............................................ 1,964,635
---------------
6,007,492
---------------
Total additions....................................... 18,888,443
Deductions from Net Assets Attributed to:
Benefits paid to participants......................... 4,546,060
Administrative expenses............................... 46,587
---------------
Total deductions...................................... 4,592,647
---------------
Increase in net assets available for benefits............. 14,295,796
Net assets available for benefits - beginning of year..... 62,180,463
---------------
Net assets available for benefits - end of year........... $ 76,476,259
===============
See accompanying notes.
3
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2006
1. Description of the Plan
-----------------------
General
-------
The PS 401(k) Profit Sharing Plan (the "Plan") encompasses Public
Storage, PS Business Parks, Inc. and certain of their majority owned
subsidiaries, collectively, (the "Company"). The following description
of the Plan provides only general information. Participants should
refer to the Plan documentation for a more complete description of the
Plan's provisions.
The Plan is a defined contribution plan for the benefit of all
permanent employees of the Company who have completed at least 30 days
of service and are 21 years of age. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Although it has not expressed the intention to do
so, the Company has the right to terminate the Plan subject to ERISA
provisions. The Plan allows interim allocations of Company
contributions and earnings or losses of trust fund assets among
participants.
The Company appoints a committee to administer the Plan. At December
31, 2006, the Plan Administrative Committee is comprised of seven
officers of the Company with Union Bank of California acting as Trustee
(the "Trustee").
Through December 31, 2006, Union Bank of California served as Trustee
(the "Trustee") of the Plan. Effective January 1, 2007, Wells Fargo
Bank became the Plan trustee.
On August 22, 2006, Public Storage merged with Shurgard Storage
Centers, Inc. ("Shurgard"). Shurgard was the plan sponsor and
administrator of the Shurgard Employee Retirement Savings Plan (the
"Shurgard Plan"). Effective January 1, 2007, pursuant to an amendment
of the Plan, the Shurgard Plan was merged into the Plan and all
participants active in the Shurgard Plan as of that date became
eligible employees of the Plan on that date.
Other significant provisions of the Plan are as follows:
Contributions
-------------
Employee contributions to the Plan (voluntary contributions) are
deferrals of the employee's compensation made through a direct
reduction of compensation in each payroll period. During 2006, each
eligible participant could elect a pretax contribution rate from 1% to
100% of their compensation, as defined in the Plan document, subject to
the maximum annual elective deferral amount set by the Internal Revenue
Code. Participants may also contribute amounts representing
distributions from other qualified benefit or defined contribution
plans.
The Company contributes one dollar ($1.00) for each dollar deferred by
a participant up to three percent (3%) of compensation, as defined and
subject to certain limitations as described in the Plan document. The
Company also contributes an additional fifty cents ($.50) for each
dollar that each participant defers in excess of three percent (3%) of
compensation up to five percent (5%) of compensation. The Company's
aggregate contributions are limited to four percent (4%) of
compensation, as defined and subject to certain limitations as
described in the Plan document. The matching contribution is 100%
vested. Additional amounts may be contributed at the discretion of the
Company. No such additional contributions were made in 2006.
Vesting
-------
Since January 1, 2005 employee deferrals and the Company's matching
contribution are 100% vested and non-forfeitable. Prior to January 1,
2005, the Company contributed a guaranteed 3% to all eligible Plan
participants; these amounts vested over a seven year period.
4
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2006
With respect to Company contributions before January 1, 2005, each
participant's account became 10 percent vested (non-forfeitable) after
two years of service (as defined), 20 percent after three years of
service and an additional 20 percent for each additional year of
service thereafter.
Upon death, severance by reason of disability, or the attainment of the
participant's sixty-fifth birthday, a participant automatically becomes
fully vested to the extent of the balance in their account. In the
event the Plan is terminated or contributions are completely
discontinued, each participant becomes fully vested.
Investment Options
Since December 19, 2005, upon enrollment in the Plan, a participant may
direct their contributions and holdings in any of the following 15
investment options:
1. Dodge & Cox International Stock Fund
2. American Funds EuroPacific Growth Fund/R5
3. American Funds Growth Fund of America/R5
4. Individually Directed Account
5. Oakmark Equity & Income I Fund
6. PIMCO Total Return Institutional Fund
7. Selected American Shares D
8. T. Rowe Price Equity Income Fund
9. T. Rowe Price Real Estate Fund (since October 31, 2006)
10. UBOC Stable Value B Fund
11. Vanguard Explorer Admiral Fund
12. Vanguard Extended Market Index Fund
13. Vanguard 500 Index Admiral Fund
14. Vanguard Short Term Federal Admiral Fund
15. Vanguard Windsor II Admiral Fund
Prior to December 19, 2005, participants had the option to direct
contributions to the Company's securities. Effective December 19, 2005,
participants no longer have that option. Existing holdings of the
Company's securities on December 19, 2005, were either held or
transferred to other Plan investment alternatives at the option of each
participant (see Note 5).
Distributions from the Trust Fund
---------------------------------
Distributions of each participant's vested account balance upon
severance or death are made in a single lump sum payment; however, upon
severance if the participant's vested account balance exceeds $5,000,
payment may be deferred at the election of the participant until April
1st of the calendar year in which the participant reaches 70 1/2 years
of age.
Additionally, the Plan provides for hardship distributions (as defined)
at the discretion of the Plan Administrative Committee.
Generally, distributions are made no later than 60 days after the close
of the Plan year in which the participant becomes eligible for such
distributions. Under certain circumstances, participants enrolled in
the Plan prior to and including December 31, 1983 may elect alternative
distribution methods.
Forfeited Accounts
------------------
Forfeitures of profit sharing contributions will be used (i) as a
non-elective allocation to all eligible Plan participants, (ii) to
reduce the Company's safe harbor matching contribution or (iii) reduce
Plan expenses. During 2006, a total of $106,000 in non-vested amounts
were forfeited and will be allocated to eligible Plan participants in
2007.
5
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2006
During 2006, $948,000 was allocated to eligible Plan participants based
upon the extent an individual participant's compensation bears to the
total eligible compensation of all such eligible participants in the
Plan year the amounts were forfeited. These amounts represent
forfeitures during 2005.
2. Summary of Significant Accounting Principles
--------------------------------------------
Basis of Accounting
-------------------
The accompanying financial statements of the Plan have been prepared on
the accrual basis of accounting and are in conformity with U.S.
generally accepted accounting principles.
Estimates
---------
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires the Plan
administrator to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Income Tax Status
-----------------
The Plan has received a determination letter from the Internal Revenue
Service dated March 13, 2003, stating that the Plan is qualified under
Section 401(a) of the Internal Revenue Code (the "Code") and,
therefore, the related trust is exempt from taxation. Subsequent to
this determination by the Internal Revenue Service, the Plan was
amended and restated. Once qualified, the Plan is required to operate
in conformity with the Code to maintain its qualification. The plan
administrator believes the Plan is being operated in compliance with
the applicable requirements of the Code and, therefore, believes that
the Plan, as amended and restated is qualified and the related trust is
tax exempt. The Company has indicated it will take the necessary steps,
if any, to maintain the Plan's qualified status.
Recently Issued Accounting Standards
------------------------------------
In December 2005, the Financial Accounting Standards Board (FASB)
issued FASB Staff Position AAG INV-1 and SOP 94-4-1, Reporting of Fully
Benefit-Responsive Investment Contracts Held by Certain Investment
Companies Subject to the AICPA Investment Company Guide and
Defined-Contribution Health and Welfare and Pension Plans (the FSP).
The FSP defines the circumstances in which an investment contract is
considered fully benefit responsive and provides certain reporting and
disclosure requirements for fully benefit responsive investment
contracts in defined contribution health and welfare and pension plans.
The financial statement presentation and disclosure provisions of the
FSP are effective for financial statements issued for annual periods
ending after December 15, 2006 and are required to be applied
retroactively to all prior periods presented for comparative purposes.
The Plan has adopted the provisions of the FSP at December 31, 2006.
As required by the FSP, investments in the accompanying Statements of
Net Assets Available for Benefits include fully benefit responsive
investment contracts recognized at fair value. SOP 94-4- 1, Reporting
of Investment Contracts Held by Health and Welfare Benefit Plans and
Defined Contribution Pension Plans, as amended, requires fully benefit
responsive investment contracts to be reported at fair value in the
Plan's Statement of Net Assets Available for Benefits with a
corresponding adjustment to reflect these investments at contract
value. The requirements of the FSP have been applied retroactively to
the Statement of Net Assets Available for Benefits as of December 31,
2005 presented for comparative purposes. Adoption of the FSP had no
effect on the Statement of Changes in Net Assets Available for Benefits
for the year ended December 31, 2006.
6
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2006
Investment Valuation and Income Recognition
-------------------------------------------
The Plan's investments are recorded at fair value as determined by the
quoted market price on the last business day of the plan year. The
investment contracts are presented at fair value on the statement of
net assets available for benefits. The fair value of fully
benefit-responsive investment contracts is calculated by discounting
the related cash flows based on current yields of similar instruments
with comparable durations.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date.
3. Investments
-----------
Union Bank has custody of the investments under a non-discretionary
trust agreement with the Plan.
The following presents the fair value of investments at December 31,
2006 and 2005 that represent five percent (5%) or more of the Plan's
net assets available for benefits:
2006 2005
------------- -------------
UBOC Stable Value B Fund $ 8,365,985 $ 8,371,508
Mutual Funds:
Oakmark Equity & Income I 8,889,270 8,307,289
Vanguard Index 500 8,909,086 8,045,759
The Growth Fund of America 6,439,719 5,158,086
Public Storage Common Stock 24,697,256 17,901,822
Public Storage Equity Stock, Series A 3,867,503 3,837,069
During 2006, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year)
appreciated in value as follows:
2006
---------------
Mutual Funds...................................... $ 2,583,890
Common and Equity Stock........................... 7,698,254
---------------
Totals $ 10,282,144
===============
4. Administration Fees
-------------------
For the Plan year ended December 31, 2006, the Plan paid to the Trustee
a quarterly participant fee of $2.50 per eligible participant and
certain transaction related expenses incurred for the administration of
the Plan. The Company directly paid for all other Trustee fees and all
other expenses related to the Plan.
5. Related Party Transactions
--------------------------
Prior to December 19, 2005, participants had the option of directing
contributions to the Company's securities. The Company is the Plan
sponsor as defined by the Plan document. While participants no longer
have the option of directing contributions to the Company's securities,
participants can continue to hold such investments and the Plan held
the following shares in the Company's securities from contributions
prior to December 19, 2005:
7
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2006
At December 31, 2006 At December 31, 2005
---------------------------- -----------------------------
Shares Amount Shares Amount
----------- --------------- ----------- ---------------
Public Storage Common Stock 253,305 $ 24,697,256 264,351 $ 17,901,822
Public Storage Equity Stock, Series A 147,221 3,867,503 138,673 3,837,069
PS Business Parks Common Stock 10,112 715,020 10,126 498,187
----------- --------------- ----------- ---------------
Totals 410,638 $ 29,279,779 413,150 $ 22,237,078
=========== =============== =========== ===============
Ronald L. Havner Jr., the Vice-Chairman, Chief Executive Officer and
President of Public Storage, Inc. and Chairman of the Board of PS
Business Parks, Inc., is a Plan participant and is a member of the
Board of Directors of Union BanCal Corporation, which is the parent
company of the Trustee.
UBOC Stable Value B, is a money market fund offered by the Plan's
Trustee. At December 31, 2006 and 2005, Plan participants' held
$8,365,985 and $8,371,508, respectively, in this investment selection.
6. Risks and Uncertainties
-----------------------
The Plan provides for investment in various investment securities.
Investment securities are exposed to various risks, such as interest
rate, market, and credit risks. Due to the level of risk associated
with certain investment securities, it is at least reasonably possible
that changes in the values of investment securities will occur in the
near term and that such changes could materially affect participants'
account balances and the amounts reported in the financial statements.
7. Concentrations
--------------
Investments in the Company's securities comprised approximately 38% and
36% of the Plan's total investments as of December 31, 2006 and 2005,
respectively.
8. Plan Amendments
----------------
Effective January 1, 2005, the Plan was amended to incorporate the
following changes:
o An employee is eligible to participate in the Plan if he or she is
at least 21 years old and has completed 30 days of employment.
o The Company no longer offers the guaranteed three percent (3%)
contribution of compensation to each participant.
o The Company contributes one dollar ($1.00) for each dollar
deferred by a participant up to three percent (3%) of
compensation, as defined and subject to certain limitations as
described in the Plan document. The Company also contributes an
additional fifty cents ($.50) for each dollar that each
participant defers in excess of three percent (3%) of compensation
up to five percent (5%) of compensation. The Company's aggregate
contributions are limited to four percent (4%) of compensation, as
defined and subject to certain limitations as described in the
Plan document. The matching contribution is 100% vested.
Effective December 19, 2005, the Plan was amended to incorporate the
following changes:
o Participants no longer have the option to direct contributions to
the Company's securities. Existing holdings of Company securities
on December 19, 2005, were either held or transferred to other
Plan investment alternatives at the option of each participant.
8
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2006
9. Reconciliation of Financial Statements to Form 5500
---------------------------------------------------
The following is a reconciliation of investments per the financial
statements to the Form 5500 as of December 31:
2006 2005
------------ ------------
Investments per the financial statements $ 75,944,310 $ 61,797,501
Plus: Adjustment from fair value to contract value
for fully benefit-responsive investment contracts 142,222 142,316
------------ ------------
Investments per the Form 5500 $ 76,086,532 $ 61,939,817
============ ============
10. Subsequent Event
----------------
Effective January 1, 2007, Participants may designate all or a portion
of his or her elective contributions as "Roth Contributions", subject
to certain limitations and other specific terms delineated in the Plan
document.
9
SUPPLEMENTAL INFORMATION
SCHEDULE I
PS 401(k) PROFIT SHARING PLAN
SCHEDULE H, LINE 4i -
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2006
Employer Identification Number: 95-3551121
Plan Number: 001
(a) (b) (c) (e)
Description of investment including maturity
Identity of issue, borrower, date, rate of interest, collateral, par Current
lessor, or similar party or maturity date Value
------------------------------------ --------------------------------------------- ---------------
* Union Bank of California UBOC Stable Value B Fund $ 8,223,763
* Union Bank of California Stock Liquidity Management Account 1,352
Dodge & Cox Funds Dodge & Cox International Stock Fund 2,044,190
American Funds EuroPacific Growth Fund 258,657
American Funds The Growth Fund of America 6,439,719
The Oakmark Funds Equity & Income I Fund 8,889,270
PIMCO Funds PIMCO Total Return Institutional Fund 889,193
Selected American Funds Selected American D Fund 1,942,798
T. Rowe Price T. Rowe Price Equity Income Fund 104,868
T. Rowe Price T. Rowe Price Real Estate Fund 624,312
The Vanguard Group Mutual Funds Explorer Admiral Fund 2,447,732
The Vanguard Group Mutual Funds Extended Market Index Fund 354,451
The Vanguard Group Mutual Funds Index 500 Fund 8,909,086
The Vanguard Group Mutual Funds Short Term Federal Admiral Fund 3,133,699
The Vanguard Group Mutual Funds Windsor II Admiral Fund 2,314,400
* Public Storage Company common stock 24,697,256
* Public Storage Company equity stock 3,867,503
* PS Business Parks, Inc. Company common stock 715,020
Individually Directed Accounts Various investment securities 87,041
---------------
Total Investments $ 75,944,310
===============
* Indicates a party-in-interest of the Plan.
Note: As all Plan investments are participant directed, column (d) providing
certain participant directed transaction cost information is not applicable
and has been omitted.
10
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-50270) pertaining to the PS 401(k) Profit Sharing Plan of Public
Storage of our report dated June 22, 2007, with respect to the financial
statements and schedule of the PS 401(k) Profit Sharing Plan included in this
Annual Report (Form 11-K) for the year ended December 31, 2006.
/s/ Ernst & Young LLP
Los Angeles, California
June 22, 2007
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
PS 401(k) PROFIT SHARING PLAN
Date: June 28, 2007
By: /s/ Candace Krol
----------------
Candace Krol
Chairman, Administrative Committee