Public Storage

Public Storage, Inc.
1996 Annual Report

2 th5Anniversary

Total Revenues
In Millions

Net Income
In Millions

Funds From Operations
Allocable To Common Shareholders
In Millions

$360

260

160

60

$160

120

80

40

0

$160

120

80

40

0

1994

1995

1996

1994

1995

1996

1994

1995

1996

Funds From Operations Per
Fully Diluted Common Share(1)

Annual Realized Rent 
Per Square Foot
Same Store Facilities(1)

Stock Price Performance Graph(1)
Comparison of Cumulative Total Return
Public Storage, Inc., S&P 500 Index and NAREIT Equity Index
December 31, 1991 – December 31, 1996

$2.00

1.75

1.50

1.25

$8.80

8.60

8.40

8.20

8.00

1994

1995

1996

1994

1995

1996

$500

400

300

200

100

0

12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96

Public Storage, Inc.
S&P 500
NAREIT Equity

$100.00
$100.00
$100.00

$117.80
$107.62
$114.59

$201.84
$118.46
$137.11

$215.57
$120.03
$141.46

$299.36
$165.13
$163.06

$507.39
$203.05
$220.56

(1) Assumes the conversion of the

(1) “Same Store” refers to mini-

(1) The graph compares the yearly change in the Company’s

Company’s Convertible Preferred
Stock into common stock.

warehouses in which the Company
had an interest since January 1, 1993.

cumulative total shareholder return on its common stock for 
the five-year period ended December 31, 1996 to the cumula-
tive total return of the Standard and Poor’s 500 Stock Index
(“S&P 500 Index”) and the National Association of Real Estate
Investment Trusts Equity Index (“NAREIT Equity Index”) for the
same period (total shareholder return equals price appreciation
plus dividends). The stock price performance graph assumes
that the value of the investment in the Company’s common stock
and each index was $100 on December 31, 1991 and that all
dividends were reinvested. The stock price performance shown in
the graph is not necessarily indicative of future price performance.

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Selected Financial Highlights

(In thousands, except per share data)
For the year ended December 31,

R E V E N U E S :

Rental income
Equity in earnings of real estate entities
Facility management fees
Ancillary business income
Interest and other income

E X P E N S E S :

Cost of operations
Cost of facility management
Cost of operations – ancillary business
Depreciation and amortization
General and administrative
Interest expense
Environmental cost
Advisory fee

Income before minority interest and gain on 

disposition of real estate
Minority interest in income

Income before gain on disposition of real estate
Gain on disposition of real estate, net

1996(1)

1995(1)

1994

1993

1992

$ 294,005
22,121
14,428
3,504
7,064

$ 202,134
3,763
2,144
112
4,497

341,122

212,650

$ 141,845
764
–
–
4,587

147,196

$ 109,203
563
–
–
4,914

114,680

$ 95,886
–
–
–
1,562

97,448

93,244
2,575
3,418
64,967
5,524
8,482
–
–

72,247
352
100
40,760
3,982
8,508
2,741
6,437

178,210

135,127

162,912
(9,363)

153,549
–

77,523
(7,137)

70,386
–

52,816
–
–
28,274
2,631
6,893
–
4,983

95,597

51,599
(9,481)

42,118
–

42,116
–
–
24,998
2,541
6,079
–
3,619

79,353

35,327
(7,291)

28,036
–

38,348
–
–
22,405
2,629
9,834
–
2,612

75,828

21,620
(6,895)

14,725
398

Net income

$ 153,549

$

70,386

$ 42,118

$ 28,036

$ 15,123

P E R C O M M O N S H A R E :

Income before gain on disposition of real estate
Gain on disposition of real estate

Net income

Distributions per common share

Weighted average common shares

Total assets
Total debt
Minority interest
Shareholders’ equity

O T H E R D A T A :
Net cash provided by operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Funds from operations(2)

$1.10
–

$1.10

$0.88

$0.95
–

$0.95

$0.88

77,358

41,171

$2,572,152
$ 108,443
$ 116,805
$2,305,437

$1,937,461
$ 158,052
$ 112,373
$1,634,503

$1.05
–

$1.05

$0.85

24,077

$ 820,309
$ 77,235
$ 141,227
$ 587,786

$0.98
–

$0.98

$0.84

17,558

$ 666,133
$ 84,076
$ 193,712
$ 376,066

$ 245,237

$ 123,466

$ 79,180

$ 59,477

$ (479,626)

$ (248,672)

$(169,590)

$(137,429)

$ 180,809

$ 185,491

$ 224,384

$ 105,086

$ 100,029

$ 56,143

$ 80,100

$ 35,830

$0.88
0.02

$0.90

$0.84

15,981

$537,724
$ 69,478
$202,797
$253,669

$ 44,025

$ (21,010)

$ (21,010)

$ 21,133

(1) During 1996 and 1995 the Company completed several significant business combinations and equity transactions. See Notes 3 and 11 to the Company’s

consolidated financial statements.

(2) Funds from operations (“FFO”), means net income (loss) (computed in accordance with GAAP) before (i) gain (loss) on early extinguishment of debt, (ii) minority
interest in income and (iii) gain (loss) on disposition of real estate, adjusted as follows: (i) plus depreciation and amortization (including the Company’s pro-rata
share of depreciation and amortization of unconsolidated equity interests and amortization of assets acquired in the PSMI Merger, including property manage-
ment agreements and excess purchase cost over net assets acquired), and (ii) less FFO attributable to minority interest. FFO is a supplemental performance
measure for equity REITs as defined by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). The NAREIT definition does not specifically
address the treatment of minority interest in the determination of FFO or the treatment of the amortization of property management agreements and excess
purchase cost over net assets acquired. In the case of the Company, FFO represents amounts attributable to its shareholders after deducting amounts attributable
to the minority interests and before deductions for the amortization of property management agreements and excess purchase cost over net assets acquired.
FFO is presented because many analysts consider FFO to be one measure of the performance of the Company and it is used in certain aspects of the terms 
of the Class B Common Stock. FFO does not take into consideration scheduled principal payments on debt, capital improvements distributions and other 
obligations of the Company. Accordingly, FFO is not a substitute for the Company’s cash flow or net income as a measure of the Company’s liquidity or operating
performance or ability to pay distributions.

1

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

In Memoriam

Kenneth Q. Volk, Jr.
Co-founder and 
Chairman Emeritus
August 14, 1918 – June 3, 1996

He had the rare vision and 
talent to nearly single-handedly 
create an entire industry. 
We will miss his quiet and 
dignified leadership.

To Our Shareholders

For the last 25 years Public Storage,

Inc. has successfully provided self-
storage solutions to a wide-range of
Americans. We have grown and adapted in
response to the changing needs of our cus-
tomers. The theme of this year’s annual
report is how we are adding value for both
our shareholders and our customers. We are
adding value for shareholders by:

• Diversifying our self-storage operations

with complementary businesses

• Utilizing retained cash flow for property

acquisition and development

• Increasing funds from operations and

cash available for distributions

• Leveraging our competitive strengths
Our customers are the engine that propel
our enterprise. We are adding value to the
self-storage experience for our 540,000
tenants by:

• Augmenting and improving the inter-
action between Public Storage and our
customers

• Offering competitive pricing structures
• Providing professionally managed,
clean, quality self-storage space in met-
ropolitan markets

• Enhancing our property operations
through new marketing mechanisms,
systems and controls, and property
repackaging programs

This letter will explain how and why we
now see Public Storage as an umbrella under
which four closely related business lines fit,
the mechanisms through which we are 
promoting our established and developing
business segments, our distinct competitive
attributes, and our future plans. 

A   F U L L Y I N T E G R A T E D C O M P A N Y
Public Storage is a diversified, nationwide
enterprise possessing a strong operating bus-
iness coupled with strong and flexible finan-
cial resources. In tandem, these strengths
result in an organization that generates rising
funds from operations and reinvests a sub-
stantial portion of its cash flows generated
from operations. We use our established core
operating business, solid financial strength,
size and national presence, and trade name
to support distinct, yet interrelated, existing
and emerging lines of business. Along with
our established core business, these comple-
mentary activities of our subsidiaries are
designed to generate consumer demand for
portable self-storage space, truck rentals,
and purchase of move-related merchandise.
Public Storage Pickup & Delivery,SM Truck
Rentals, and Retail Stores are a logical

2

extension of our core activity – owning and
operating self-storage properties in major
metropolitan markets throughout the United
States. We can, for example, respond to
cross-marketing opportunities with our self-
storage properties at the nucleus of our
services. Our national call reservation center
contributes to our ability to offer “one-stop-
shop” convenience. Indeed, a goal of our
national call reservation center is to provide
customers with a single point of contact for
all their storage-related needs. We look at it
as smart business. For our customers, it is as
easy as calling one of our properties or our
national toll-free number.

Public Storage offers the benefits of
professional management, diversification,
current income, infinite life and liquidity.
However, we believe Public Storage has
moved beyond the traditional expectation 
of real estate investment trusts as being
primarily passive real estate portfolios.
Specifically, we operate like a traditional
operating company within the structure of a
real estate investment trust. Public Storage
is self-administered and self-managed. We
have expertise in real estate development,
construction, acquisition, operations and
leasing services. We are fully involved in our
self-storage, portable self-storage, truck
rentals, and retail stores businesses. We
believe that our multiple business line infra-
structure adds value to Public Storage for
shareholders and our customers. 

We use our retained operating cash as an
internal source of capital for property acqui-
sition, development and debt reduction.
Approximately $71 million of funds from
operations were retained in 1996 and we
expect to retain approximately $100 million
in 1997. We believe cash retention enhances
Public Storage’s value and anticipate contin-
uing this long-term goal.

R E A L I Z I N G B E N E F I T S O F
T H E 19 9 5   M E R G E R
The major merger on November 16, 1995
consolidating Storage Equities, Inc. and
Public Storage, Inc. helped position us for
growth in 1996. It enhanced our competitive
position and made Public Storage’s structure
more efficient. The merger produced a com-
pany of substantial size and diversification.
Based on capitalized market value, we are
now one of the largest real estate investment
trusts in the United States. We own and oper-
ate more self-storage space than any of our
competitors. As a direct result of the merger,
the three major credit rating agencies

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

upgraded our credit rating, reducing our cost
of new capital. The merger significantly
reduced internal conflicts inherent in the
separate advisor/property manager format.
Institutional investor interest in our corpora-
tion has improved. We believe we experi-
enced numerous positives from the merger
throughout 1996 and expect this direction to
be maintained in the future.

C A P I T A L I Z I N G O N E S T A B L I S H E D
C O M P E T I T I V E S T R E N G T H S
We believe that Public Storage possesses
strengths which are difficult for our competi-
tors to reproduce. These include:
• Strong operating business
• Financial strength
• Trade name
• Market share
• Geographic diversification
• Management

Strong operating business. Funds from
operations (FFO) per common share is con-
sidered a key measure of the performance of
Public Storage. FFO per common share
advanced 14 percent, from $1.73 per share for
the year ended December 31, 1995, to $1.98
per share for the year ended December 31,
1996. We are adding to shareholder value by
practicing a conservative approach to distri-
butions. Retaining a substantial portion of
funds from operations (after funding Public
Storage’s distributions and capital improve-
ments) enables us to acquire and develop
properties and reduce debt using internal
cash resources. In this regard, Public Storage
differs significantly from its competitors, a
difference we believe is a favorable factor in
our long-term business plans. We distributed
44 percent of FFO per common share for
1996 and 52 percent for 1995. Through our
relatively moderate payout ratio in 1996 
we retained $71 million of free capital to
purchase and develop properties. 

Occupancy levels have historically repre-
sented one of the simplest but most efficient
windows into the strength and success of our
business. They show the balance between the

The industry’s most enduring icon.

forces of supply and demand and the effects
of our promotional activities. For the year
ended December 31, 1996, occupancy at the
self-storage properties on a Same Store 
basis averaged 91.2 percent, compared 
to 90.1 percent one year earlier. Same 
Stores are the 951 mini-warehouses that
Public Storage has had an interest in since
January 1, 1993. 

The amount of rent Public Storage collects
bears an important connection to occupancy
trends. To the extent feasible we try to
generate rising or high occupancy levels and
rising rental rates. Same Store average
annual realized rent represents the actual
revenue earned per occupied square foot
and is a more relevant measure than posted
rental rates. Same Store average annual
realized rent was $8.76 per square foot for
the year ended December 31, 1996, com-
pared to $8.40 per square foot for the same
period of 1995, an increase of 4.3 percent.
Same Store revenues equaled $445.6 million
for the year ended December 31, 1996, com-
pared to $422.9 million for the same period
one year earlier, an increase of 5.4 percent.
Financial strength. We have a strong bal-
ance sheet. Total assets, total debt, and total
shareholders’ equity are barometers of our
balance sheet strength. As of December 31,
1996, Public Storage’s assets totaled approx-
imately $2.6 billion, a $635 million increase
from approximately $1.9 billion one year
earlier. Public Storage’s debt-to-equity ratio
was reduced from approximately 10 per-
cent at December 31, 1995 to 5 percent at
December 31, 1996. Low debt leverage in
conjunction with our access to capital should
position us to respond to investment oppor-
tunities in our industry. Shareholders’ equity
equaled $2.3 billion as of December 31, 1996,
approximately 41 percent greater than the
$1.6 billion reported one year earlier.

Public Storage’s common stock achieved
all-time highs during 1996. Public Storage
responded to its strong financial position dur-
ing 1996 by completing two separate pre-
ferred stock offerings, raising $260 million,
and two common stock offerings,
raising approximately $129 million.
In March 1997, Public Storage com-
pleted a common stock offering that
raised approximately $127 million.
Since January 1, 1993, Public
Storage has issued approximately
$1.022 billion of  equity capital, the
proceeds of which were used to
reduce debt and acquire interests in
self-storage properties.

3

Stock Performance(1)

The value of the Company’s common stock 
has increased, reflecting in part growth 
opportunities in the Company’s business.

STOCK PRICE RANGE
Low

High

1996
1st quarter
2nd quarter
3rd quarter
4th quarter

1995
1st quarter
2nd quarter
3rd quarter
4th quarter

$217⁄8
211⁄2
225⁄8
313⁄8

$171⁄8
171⁄8
183⁄4
193⁄4

$187⁄8
193⁄8
197⁄8
221⁄4

$131⁄2
151⁄4
163⁄8
173⁄8

Close

$203⁄8
205⁄8
225⁄8
31

$17
163⁄8
185⁄8
19

(1) The common stock has been listed on the New
York Stock Exchange since October 19, 1984. 
The ticker symbol is PSA.

Public Storage completed eight merger
transactions with affiliates in 1996, acquiring
105 properties.

In December 1996, Public Storage and two
affiliates, Public Storage Properties XIV, Inc.,
and Public Storage Properties XV, Inc.,
agreed, subject to certain conditions, to
merge. Requirements for the mergers include
the approval by the shareholders of each of
the affiliates. If approved, the mergers are
expected to be completed during the first half
of 1997. These affiliates collectively own 31
self-storage properties and two business
parks. Public Storage currently owns about
one-third of the capital stock of each of these
affiliates and manages the properties. We are
continuing to evaluate transactions with
other affiliates whose properties are man-
aged by Public Storage. 

From January 1, 1994 through Decem-
ber 31, 1996, Public Storage acquired, in
cash tender offers, limited partnership inter-
ests in partnerships of which Public Storage
is a general partner for an aggregate pur-
chase price of approximately $86 million.
These acquisitions are intended to reduce
minority interest in the long-term and increase
Public Storage’s ownership interest in its
current property portfolio. 
Trade name. Public Storage’s 1,064 self-
storage or self-storage/ business park combi-
nations operate under the most recognized
trade name in the self-storage industry. We
believe that this enables us to provide conti-
nuity from one rental experience to the next,
customers being able to expect the same
level of quality and professionalism regard-
less of which Public Storage property they

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

choose 
to  rent  or  which 
of our other storage-related ser-
vices they choose to use.
Market share. By concentrating
our properties in or near major
metropolitan areas we can take
advantage of market share and
economies of scale. Indeed, clus-
tering our properties around a
common economic focal point
allows for the cost effective distri-
bution of marketing expenditures,
economies of scale, and manage-
ment supervision. These factors
contribute to our properties’ oper-
ating margins. Additionally, operat-
ing numerous properties in a market helps
our national reservation center maximize its
capacity to effectively shop space for cus-
tomers, simplifying their search for the
exact size, location, and price. 
Geographic diversification. Our sizeable
portfolio is geographically diversified, pro-
viding additional competitive advantages. No
single self-storage property accounts for more
than one percent of revenues. We also believe
that we can generate more stable cash flows
because a large, diversified portfolio can
better absorb local economic downturns.
Management. Another strength of Public
Storage is the substantial experience and
expertise of our senior officers. They have
significant operating and financial experi-
ence. They have been responsible for the
acquisition of more than 350 self-storage
properties, the development of more than
650 self-storage properties and the man-
agement of more than 1,000 self-storage
properties over the last 25 years. We also
benefit from our efficient property manage-
ment team. They use systems and controls,
performance standards, and operating
procedures to effectively manage the day-
to-day demands of our enterprise. The
property management division is comprised
of approximately 2,800 personnel. A
continuing objective of our management
system is to cultivate a customer base
which is satisfied with our product and
services.

D E V E L O P I N G N E W
C O M P E T I T I V E S T R E N G T H S
We are developing new ways to market our
self-storage properties, portable self-storage,
truck rentals and retail stores, to enhance
the visual appeal of our properties, to
improve how customers locate a Public
Storage property and how we manage our

a property through our directory
ads. We have an internal Yellow
Pages agency.
Visual repackaging. Many of our
properties have now had their
appearance improved to augment
their competitiveness in an increas-
ingly cluttered visual landscape.
Modernizing the look of the old
orange and black “Ps” logo and
facility signage should also add to
the customer-friendliness of our
image and convey the cutting-edge
nature of our approach to property
management. Reaction to our new
orange and plum logo and signage
has been favorable. The program should also
help promote consistency in appearance
from property to property. We added to the
value of our properties by investing about $6
million in 1996 with this program and expect
to invest approximately that amount in 1997.
Systems and controls.Last year we began
to update and expand the software used in
our computerized property management
system. The system, installed at each of our
properties, transmits and receives data
regarding unit availability, delinquencies,
accounting and cash management. We
enhanced the software package to allow us to
track the sales activity of all the merchandise
products and to monitor the effectiveness of
our national reservation center.
The Internet. The number of hits our 
user-friendly home page receives is steadily
growing. Customers can complete rental
applications through our Internet site. We use
our national reservation center to follow-up
on rental applications received through the
Internet. We expanded our investor service
function on our home page, providing alter-
native methods for shareholders to commu-
nicate with us and with Public Storage’s
transfer agent. We are exploring additional
ways to benefit from the Internet. Our Internet
address is http://www.publicstorage.com.
We welcome your suggestions or comments.

F U T U R E O P P O R T U N I T I E S
During 1996 Public Storage continued to
grow. However, not everything is clear sailing
in the mini-warehouse industry and there
could be a squall or two on the horizon. Supply
and demand factors fluctuate, variables which
are intensified by new construction activities.
Supply/demand disequilibrium could result in
negative trends in mini-warehouse occupancy
levels and rental rates in affected markets.
Nevertheless, we are optimistic that our com-

The Public Storage Property System

operations. These new activities encompass:

• National reservation center
• Directory advertising
• Visual repackaging
• Systems and controls
• The Internet

National reservation center. We designed
the national reservation center to contribute
to our competitive edge by continuously offer-
ing our customers new and better services
and products. We inaugurated the center in
December 1995. At December 31, 1996, 87
representatives were on staff using an inte-
grated telephone and computer system to
access current information about space avail-
ability and rates for the majority of Public
Storage’s properties. A customer calling a
property, or Public Storage’s national toll-free
number (1-800-44-STORE), can be connected
with the center. The center currently receives
about 120,000 calls per month. We can mar-
ket all of our business lines through the
national reservation center. We believe that
improving and expanding upon our ability to
generate customer demand enables us to
support favorable occupancy trends through
the national reservation center. We believe
that we alone offer a broad, technologically-
advanced service such as this.
Directory advertising. We are expanding
the number of markets in which directory
advertising is used and the number of direc-
tories in which a Public Storage display ad
appears. We are currently using Yellow Pages
advertising in over 700 directories in 80 mar-
kets. We are utilizing larger-sized ads to
identify all the properties in a given market,
and where appropriate are using ads for our
portable self-storage business in tandem
with ads for traditional self-storage space.
Directory advertising is the most important
of the print media in promoting our services
since about one-third of our customers locate

4

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

petitive advantages will continue to attenuate
the effects of these pressures. Our strengths
include the significant operating and financial
experience of our executive officers and
directors, Public Storage’s strong operating
business and financial strength, national
investment scope, geographic diversification,
economies of scale, and our trade name.

In February 1997 we reached an agree-
ment in principle with a joint venture partner
to participate in funding the development 
of approximately $220 million of mini-
warehouses (including the properties cur-
rently under development by Public Storage).
The joint venture partner would contribute
about 70 percent of the venture’s capital 
with the balance provided by Public Storage.
After a period of time, Public Storage would
have an option to acquire the other venture
partner’s interest. The construction of self-
storage properties and the relatively long
“fill-up” period to reach a stabilized occu-
pancy level creates short-term earnings dilu-
tion. We expect that the development joint
venture will alleviate this earnings dilution.
There can be no assurance that a definitive
agreement can be reached between Public
Storage and the joint venture partner.
Assuming an agreement is finalized, it is
expected that the joint venture would be
funded in April 1997.

As of December 31, 1996 we had five
recently developed self-storage properties
(costs of $23.5 million) open and in the fill-
up stage. An additional 11 facilities were
under construction (estimated costs of 
$56 million) with expected opening dates
ranging from January 1997 through March
1998. Our investment strategy will continue
to include developing mini-warehouses.
Consequently, we have approved the develop-
ment of an additional 17 facilities (estimated
costs of $70.2 million) with construction and
completion dates through mid-1998. We are
currently evaluating the feasibility of devel-
oping additional mini-warehouses in selected
markets in which there are few, if any, facili-
ties to acquire at attractive prices and where
the scarcity of other undeveloped parcels of
land or other impediments to development
make it difficult to construct additional com-
peting facilities. 

At the end of 1996 Public Storage and HFS
Incorporated, the world’s largest franchisor 
of residential real estate brokerage offices,
entered into a three-year preferred vendor
agreement to co-market rental storage 
space to franchisees and customers of 
HFS Incorporated’s three real estate brands.

The agreement provides certain pricing
discounts on self-storage rental space for
CENTURY 21,® Coldwell Banker,® and ERA®
franchised brokerages and their customers.
We should be able to use our national reser-
vation center to offer these services to the
clientele of some of the largest real estate
brand names in the country.

Last year we opened, on an experimental
basis, complete storage-related retail centers
at self-storage locations in Atlanta, Georgia
and Southern California. We plan to continue
opening retail stores in selected markets.
Currently, we have 13 retail stores in opera-
tion and 20 retail store conversions. If the
previously discussed joint venture agreement
is reached, all future development projects,
including projects currently under construc-
tion and development, will be presented to
the joint venture for approval and acceptance
into their portfolio. Public Storage will then

Portfolio Growth
1980-1996

)
6
9
/
1
3
/
2
1
h
g
u
o
r
h
t
(

s
t
s
e
r
e
t
n
i

y
t
r
e
p
o
r
P

1,200

1,100

1,000

900

800

700

600

500

400

300

200

100

0

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96
Years (through 12/31/96)

have the option to construct any project not
approved by the joint venture. Almost all
newly constructed Public Storage self-
storage properties will feature a retail oper-
ation. The retail operations are performed
through a subsidiary of the Company.

In 1996 we organized Public Storage
Pickup & DeliverySM (PSPUD) as a separate
corporation to operate a portable self-
storage business that rents storage contain-
ers to customers for storage in central
warehouses and provides related transporta-
tion services. PSPUD currently operates a
total of twelve facilities in six greater metro-
politan areas in California and Texas. PSPUD
anticipates opening four additional facilities

5

in these areas and in three additional metro-
politan areas by the end of the first quarter of
1997. PSPUD presently anticipates expand-
ing its operations to a significant number of
additional areas during the remainder of
1997 and in 1998, subject to continuing eval-
uation of the feasibility of this business and
the satisfaction of regulatory requirements.
There can be no assurance on the level of
PSPUD’s expansion or profitability. 

M A I N TA I N I N G I N D U S T R Y
L E A D E R S H I P
We entered 1996 with substantial momentum
from the merger that was consummated on
November 16, 1995. That merger increased
our competitive position and provided for a
more efficient organizational structure. As
we progressed through 1996 we enhanced
the economic value of our business at the
property level. We did this primarily by com-
pleting financial transactions that improved
our balance sheet, incorporating new infor-
mation and operating technologies into our
property management system, and expand-
ing the complementary businesses that 
now constitute part of the Public Storage
infrastructure.

In evaluating how effectively we are
accommodating our customers’ needs, we
emphasize certain key elements: value, ser-
vice, location, product, and marketing. To our
540,000 customers, adding value to their
self-storage experience means maximizing
the “what they receive” side of the equation
while minimizing the “what they pay” side of
the equation. We anticipate our shareholders
will benefit from our long-term operating and
investment strategies and our substantial
strengths in 1997 and beyond, and we thank
our shareholders for their continued support.

Sincerely,

B. Wayne Hughes
Chairman of the Board
and Chief Executive Officer

Harvey Lenkin
President

March 31, 1997

 
 
 
P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Under the Public Storage Umbrella

Self Storage.We offered over half a million self-storage spaces, encompass-
ing about sixty-four million net rentable square feet, to the market at the 
end of 1996. At December 31, 1996, we had direct and indirect equity inter-
ests in 1,109 properties located in 38 states, including 1,064 self-storage
facilities and 45 commercial properties. This level of market penetration,
complemented by our property management system’s practice of operating
properties in groups in major markets, provided competitive advantages to
Public Storage last year. We believe Public Storage enjoys strengths which
are difficult to imitate and, as such, are competitive advantages. These
strengths include a strong operating business, size and national presence,
trade name, and financial solidity. Our mini-warehouses are our primary real
estate product. We plan to continue finding ways to ensure that we maintain
our position as the preeminent provider of quality mini-warehouse space in
major metropolitan markets in the United States.

Container Storage. Public Storage Pickup & Delivery SM (PSPUD) is our newest
complementary business activity. Customers of this service enjoy certain benefits.
Customers do not need to rent a truck or unload their possessions. PSPUD delivers 
a storage container to the customer’s home or business. The container, made of
wood, holds the items found in a typical living room. These containers feature remov-
able center posts for easier access and locking hasps. Customers pack their items,
lock the container and retain the key. We can provide any needed boxes and packing
supplies. The customer takes as much time as needed to load the container. When
finished, we will pick it up and transport it to our storage center. Customers can
access their containers at any time during regular business hours at our storage
center or we can deliver the container to their home or business.

Truck Rentals.Our truck rental operation meets the public’s
need for transportation of personal possessions. We currently
have about 65 trucks available for rent in 45 locations. The
trucks feature the amenities users demand, including automatic
transmissions, low loading ramps, and air conditioning.

Retail Stores.Retail stores address additional aspects of a customer’s relocation
decision. Retail stores expand how Public Storage’s mini-warehouses accommodate
customers’ needs. Tenants and other customers can purchase a variety of move-
related merchandise, including corrugated boxes in a range of sizes, locks, packing
supplies, and furniture covers. We are opening stores which are devoted primarily
to selling these products, and have 13 so far. We have also converted 20 traditional
mini-warehouses to offer enhanced retail products. Almost all newly constructed
Public Storage mini-warehouses will feature a retail operation.

6

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Maximizing Competitive Strengths

Sizeable, diversified customer base. At the end of 1996, 540,000 individuals and businesses
comprised the Public Storage customer base. Our customers come from all walks of life. 
The majority of our customers can be categorized as commercial, residential, military and
students. Since our customer base is broad, the Company avoids relying on a few major
tenants or upon tenants in the same or similar business. Many of the Company’s properties
are located in areas possessing growing populations and diversified economies, which often
result in strong self-storage demand. Moving, home downsizing, marriage, divorce, job 
loss and attending college are some of the events that trigger an individual’s demand for 
self-storage space. Commercial users such as regional salesmen, small corporations and
retailers use mini-warehouse properties to meet a multitude of record keeping and inventory
storage needs.

Enhancing our competitive edge. The national reservation center augments 
our competitive edge by continuously offering our customers new and better
services and products. We can market mini-warehouses, container storage, truck
rentals, retail stores, and our HFS preferred-vendor marketing arrangement to
customers through the national reservation center. A customer calling a property,
or our Company’s national toll-free number (1-800-44-STORE) can be connected
with the center. The center currently receives about 120,000 calls per month. 
We plan to continue expanding the number of personnel staffing the reservation
center and the product and services offered through it. We believe that improving
and expanding upon our ability to increase customer demand has enabled us to
support favorable occupancy trends through the national reservation center.

Change stimulates self-storage demand. Part of the expanding need for storage
space in many of the Company’s properties’ markets and across America is linked
to economic and social changes, such as population movement. In fact, planned
and unplanned relocation activity is one of the most important generators of self-
storage demand: 46,000 American households relocate on any given day. Many of
the Company’s properties are in locations that have about 100,000 people living
in a five-mile marketing area around the property. The average city dweller moves
every 7.5 years and will (according to the U.S. Postal Service) move 12 times in a
lifetime. Accordingly, each year about 13,000 of the 100,000 people living within
the market area of a typical Public Storage mini-warehouse may be seeking
traditional or container self-storage and move-related supplies, a demand which
the Company’s properties can accommodate.

Simple construction/low costs yet high rental rates. Compare mini-warehouse construction costs to
apartment costs and the resulting yield per square foot. The newly constructed Lake Forrest, California
mini-warehouse featured throughout this annual report has an average per square foot rent of about 
$.92 a month. Surveys indicate a typical two bedroom apartment unit (approximately 1,000 square feet) in
this property’s market area rents for about the same amount on a square foot basis. However, the costs to
construct this mini-warehouse property were, on a square foot basis, significantly less. The 10¢ x 10¢ unit 
in the photo is essentially a simple box made of tilt-up concrete, corrugated steel and a reinforced roll up
door. Mini-warehouses require a low level of capital expenditure to maintain their condition and appearance.
Moreover, capital outlays are usually not required after a tenant vacates. Additionally, repricing risks are
minimized since tenancy is usually less than one year, enabling revenues to parallel current market conditions.

7

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Consolidated Balance Sheets

(In thousands, except per share data)
For the year ended December 31,

A S S E T S

Cash and cash equivalents

Real estate facilities, at cost:

Land

Buildings

Accumulated depreciation

Investment in real estate entities

Intangible assets, net

Mortgage notes receivable from affiliates

Other assets

Total assets

L I A B I L I T I E S A N D S H A R E H O L D E R S ’   E Q U I T Y

Notes payable

Accrued and other liabilities

Total liabilities

Minority interest

Commitments and contingencies

S H A R E H O L D E R S ’   E Q U I T Y :

Preferred Stock, $.01 par value, 50,000,000 shares authorized, 

13,421,580 shares issued and outstanding (13,444,100 issued 

and outstanding at December 31, 1995), at liquidation preference:

Cumulative Preferred Stock, issued in series

Convertible Preferred Stock

Common stock, $.10 par value, 200,000,000 shares authorized, 

88,362,026 shares issued and outstanding (71,513,799 at December 31, 1995)

Class B Common Stock, $.10 par value, 7,000,000 shares authorized and issued

Paid-in capital

Cumulative net income

Cumulative distributions paid

Total shareholders’ equity

Total liabilities and shareholders’ equity

See accompanying notes.

8

1996

1995

$

26,856

$

80,436

596,141

1,625,172

2,221,313

382,144

1,030,990

1,413,134

(297,655)

(241,966)

1,923,658

1,171,168

350,190

222,253

25,016

24,179

416,216

231,562

23,699

14,380

$2,572,152

$1,937,461

$ 108,443

$ 158,052

41,467

149,910

116,805

32,533

190,585

112,373

718,900

114,929

8,837

700

450,150

85,970

7,152

700

1,454,387

1,100,088

396,420

(388,736)

242,871

(252,428)

2,305,437

1,634,503

$2,572,152

$1,937,461

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Consolidated Statements of Income

(In thousands, except per share data)
For each of the three years in the period ended December 31, 1996

1996

1995

1994

$270,429

23,576

22,121

14,428

3,504

7,064

$184,100

18,034

3,763

2,144

112

4,497

341,122

212,650

82,494

10,750

2,575

3,418

64,967

5,524

8,482

–

–

178,210

162,912

(9,363)

63,396

8,851

352

100

40,760

3,982

8,508

2,741

6,437

135,127

77,523

(7,137)

$126,997

14,848

764

–

–

4,587

147,196

45,266

7,550

–

–

28,274

2,631

6,893

–

4,983

95,597

51,599

(9,481)

$153,549

$ 70,386

$ 42,118

$ 68,599

84,950

$153,549

$ 31,124

39,262

$ 70,386

$ 16,846

25,272

$ 42,118

$

1.10

77,358

$

0.95

41,171

$

1.05

24,077

R E V E N U E S :

Rental income:

Self-storage facilities

Commercial properties

Equity in earnings of real estate entities

Facility management fee

Ancillary business income

Interest and other income

E X P E N S E S :

Cost of operations:

Self-storage facilities

Commercial properties

Cost of facility management

Cost of operations – ancillary business

Depreciation and amortization 

General and administrative

Interest expense

Environmental cost

Advisory fee 

Income before minority interest

Minority interest in income

Net income

Net income allocation:

Allocable to preferred shareholders

Allocable to common shareholders

P E R C O M M O N S H A R E :

Net income

Weighted average common shares outstanding

See accompanying notes.

9

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Consolidated Statements of Shareholders’ Equity

(In thousands, except share and per share amounts)
For each of the three years in the period ended December 31, 1996

B A L A N C E S A T D E C E M B E R 3 1 ,   19 9 3

Issuance of Preferred Stock, net of issuance costs:

Series B, C and D (2,486,000 shares)

Issuance of Common Stock (10,770,437 shares)

Net income

Cash distributions:

Preferred Stock

Common Stock, $0.85 per share

B A L A N C E S A T D E C E M B E R 31,   19 9 4

Issuance of Preferred Stock, net of issuance costs:

Series E, F, G (4,501,900 shares)

Convertible Participating (31,200 shares)

Issuance of Common Stock (42,687,092 shares)

Issuance of Class B Common Stock (7,000,000 shares)

Net income

Cash distributions:

Preferred Stock

Common Stock, $0.88 per share

B A L A N C E S A T D E C E M B E R 3 1,   19 9 5

Issuance of Preferred Stock, net of issuance costs:

Series H and I (10,750 shares)

Mandatory Convertible, Series CC (58,955 shares)

Issuance of Common Stock (15,134,241 shares)

Conversion of Mandatory Convertible Participating Preferred Stock into 

Common Stock (1,611,265 shares)

Conversion of 8.25% Convertible Preferred Stock into 

Common Stock (102,721 shares)

Net income

Cash distributions:

Preferred Stock

Common Stock, $0.88 per share

Preferred Stock

Cumulative

Convertible

$103,125

$ 57,500

62,150

–

–

–

–

165,275

284,875

–

–

–

–

–

450,150

268,750

–

–

–

–

–

–

–

–

–

–

–

–

57,500

–

28,470

–

–

–

–

–

85,970

–

58,955

–

(28,470)

(1,526)

–

–

–

B A L A N C E S A T D E C E M B E R 31,   19 9 6

$718,900

$114,929

See accompanying notes.

10

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Paid-in
Capital

$ 227,891

(2,300)

146,770

–

–

–

Cumulative
Net Income

$130,367

–

–

42,118

–

–

Cumulative
Distributions

$(144,623)

–

–

–

(16,846)

(21,249)

372,361

172,485

(182,718)

(9,718)

664,645

72,800

–

–

–

–

–

–

70,386

–

–

–

–

–

–

(31,124)

(38,586)

Total
Shareholders’
Equity

$ 376,066

59,850

147,847

42,118

(16,846)

(21,249)

587,786

275,157

28,470

668,914

73,500

70,386

(31,124)

(38,586)

1,100,088

242,871

(252,428)

1,634,503

(8,972)

–

333,956

27,799

1,516

–

–

–

–

–

–

–

–

153,549

–

–

–

–

–

–

–

–

(68,599)

(67,709)

259,778

58,955

335,470

(510)

–

153,549

(68,599)

(67,709)

Class B
Common
Stock

$ –

–

–

–

–

–

–

–

–

700

–

–

–

700

–

–

–

–

–

–

–

–

Common
Stock

$1,806

–

1,077

–

–

–

2,883

–

4,269

–

–

–

–

7,152

–

–

1,514

161

10

–

–

–

$8,837

$700

$1,454,387

$396,420

$(388,736)

$2,305,437

11

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Consolidated Statements of Cash Flows

(In thousands)
For each of the three years in the period ended December 31, 1996

C A S H F L O W S F R O M O P E R A T I N G A C T I V I T I E S :

1996

1995

1994

Net income

$ 153,549

$ 70,386

$ 42,118

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization (net of amortization of 

mortgage notes receivable discounts)

Depreciation included in equity in earnings of real estate entities

Environmental accrual (including $510 from equity 

in earnings of real estate entities)

Minority interest in income

Total adjustments

Net cash provided by operating activities

C A S H F L O W S F R O M I N V E S T I N G A C T I V I T I E S :

Principal payments received on mortgage notes receivable

Proceeds from disposition of real estate facilities, net

Acquisition of minority interests in consolidated real estate partnerships

Acquisition of mortgage notes receivable

Acquisition of real estate facilities

Acquisition cost of business combinations

Acquisition of interests in real estate entities

Construction in process

Capital improvements to real estate facilities

Net cash used in investing activities

C A S H F L O W S F R O M F I N A N C I N G A C T I V I T I E S :

Net paydowns on revolving line of credit

Net proceeds from the issuances of preferred stock

Net proceeds from the issuances of common stock

Principal payments on mortgage notes payable

Distributions paid to shareholders

Distributions from operations to minority interests in 

consolidated real estate partnerships

Net reinvestment by minority interests in consolidated real estate partnerships

Other

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

64,875

17,450

–

9,363

91,688

245,237

1,784

–

(15,419)

(3,709)

(198,404)

(113,522)

(83,893)

(46,097)

(20,366)

40,647

2,045

3,251

7,137

53,080

123,466

2,063

–

(32,683)

(12,355)

(108,326)

(57,374)

(20,657)

(7,979)

(11,361)

27,581

–

–

9,481

37,062

79,180

6,785

1,666

(51,711)

(4,020)

(93,026)

(20,972)

–

–

(8,312)

(479,626)

(248,672)

(169,590)

–

259,778

130,538

(51,310)

(136,308)

(20,853)

3,976

(5,012)

180,809

(53,580)

80,436

(37,607)

275,157

80,526

(39,212)

(69,072)

(18,380)

(1,739)

(4,182)

185,491

60,285

20,151

(10,323)

57,899

110,280

(8,233)

(38,095)

(23,037)

7,962

3,576

100,029

9,619

10,532

Cash and cash equivalents at the end of the year

$ 26,856

$ 80,436

$ 20,151

See accompanying notes.

12

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

1996

1995

1994

(In thousands)
For each of the three years in the period ended December 31, 1996

Supplemental schedule of noncash investing and financing activities

I N V E S T I N G A C T I V I T I E S :

Acquisition of real estate facilities in exchange for common and preferred stock, 

the assumption of mortgage notes payable, the cancellation of mortgage 

notes receivable and the reduction of investment in real estate entities

$ (4,292)

$ (87,941)

$(42,656)

Business combinations (Note 3):

Real estate facilities

Investment in real estate entities

Mortgage notes receivable

Other assets

Intangible assets

Accrued and other liabilities

Notes payable

Minority interest

Reduction of investment in real estate entities in exchange for real estate facilities

Acquisition of partnership interests in real estate entities in exchange for common stock

Reduction in other assets – deposits on pending real estate acquisitions

F I N A N C I N G A C T I V I T I E S :

Cancellation of mortgage notes receivable to acquire real estate facilities

Assumption of mortgage notes payable upon the acquisition of real estate facilities

Accrued and unpaid distributions

Issuance of Preferred Stock:

Series B Preferred Stock to acquire real estate facilities

Mandatory Convertible Preferred Stock, Series CC to acquire interest in 

consolidated real estate partnerships

Mandatory Convertible Participating Preferred Stock to acquire interest in 

(531,794)

124,696

–

(5,849)

–

15,399

–

20,139

1,891

–

–

700

1,701

–

–

58,955

(230,519)

(385,222)

(6,667)

(8,862)

(232,726)

17,134

96,728

17,034

–

(4,034)

–

16,435

60,908

638

–

–

consolidated real estate partnerships

–

28,470

Issuance of Common Stock:

In connection with mergers

Acquire real estate facilities

Acquire partnership interests in real estate entities

In connection with conversion of Convertible Preferred Stock

Issuance of Class B Common Stock in connection with mergers

Conversion of 8.25% Convertible Preferred Stock

Conversion of Mandatory Convertible Preferred Stock

See accompanying notes.

204,932

–

–

29,486

–

(1,526)

(28,470)

573,756

10,598

4,034

–

73,500

–

–

(57,415)

–

–

(1,620)

–

695

–

–

–

–

4,350

24,441

11,715

–

2,150

–

–

37,369

–

–

–

–

–

–

13

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Notes to Consolidated Financial Statements

D E C E M B E R   31,   19 9 6

1 .   D E S C R I P T I O N O F T H E B U S I N E S S

Public Storage, Inc. (the “Company”) is a California corporation which was organized in 1980. The Company is a fully integrated, self-administered
and self-managed real estate investment trust (“REIT”) that acquires, develops, owns and operates self-storage facilities which offer self-storage
spaces for lease, usually on a month-to-month basis, for personal and business use. The Company, to a lesser extent, also owns and operates 
commercial properties facilities containing commercial and industrial rental space.

Prior to November 16, 1995, the Company’s operations were managed, pursuant to contractual arrangements, by Public Storage Advisers, Inc.
(the “Adviser”), the Company’s investment advisor, by Public Storage Management, Inc. (“PSMI”), its self-storage facilities property operator and
by Public Storage Commercial Properties Group, Inc. (“PSCP”), its business park facility operator. On November 16, 1995, in a series of mergers
among PSMI and its affiliates, culminating in the merger of PSMI into the Company (the “PSMI Merger’’), the Company became self-administered
and self-managed and acquired substantially all of the United States real estate operations of PSMI (Note 3).

The Company invests in real estate facilities primarily through the acquisition of wholly-owned facilities combined with the acquisition of equity
interests in real estate entities owning real estate facilities. At December 31, 1996, the Company had direct and indirect equity interests in 1,109
properties located in 38 states, including 1,064 self-storage facilities and 45 commercial properties. All of these facilities are operated by the
Company under the “Public Storage” name.

2 .   S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S

Basis of presentation
The consolidated financial statements include the accounts of (i) the Company, (ii) majority-owned subsidiaries involved in the sale of locks and
boxes, rental of trucks and portable self-storage, and (iii) twenty-one limited partnerships in which the Company has significant economic interest
(generally in excess of 50%) and is able to exercise significant control (the “Consolidated Partnerships”). Collectively, the Company and the
Consolidated Partnerships own a total of 756 real estate facilities, consisting of 721 self-storage facilities and 35 commercial properties.

The Company also has equity investments in 41 other affiliated limited partnerships and REITs owning in aggregate 353 real estate facilities 
(343 self-storage facilities and 10 commercial properties) which are managed by the Company. The Company’s ownership interest in such real
estate entities is less than 50% of the total equity interest and, accordingly, the Company’s investments in these real estate entities are accounted
for using the equity method.

Use of estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.

Income taxes
For all taxable years subsequent to 1980, the Company qualified and intends to continue to qualify as a REIT, as defined in Section 856 of the
Internal Revenue Code. As a REIT, the Company is not taxed on that portion of its taxable income which is distributed to its shareholders provided
that the Company meets certain tests. The Company believes it has met these tests during 1996, 1995 and 1994; accordingly, no provision for
income taxes has been made in the accompanying financial statements. 

Financial instruments
For purposes of financial statement presentation, the Company considers all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents. 

The carrying amount of cash and cash equivalents and mortgage notes receivable approximates fair value because, with respect to cash and cash
equivalents, maturities are less than three months and with respect to the mortgage notes receivable interest rates approximate market rates for
the type of real estate securing such loans. The carrying amount of the Company’s fixed rate long-term debt is estimated using discounted cash flow
analyses based on incremental borrowing rates the Company believes it could obtain with similar terms and maturities.

14

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Real estate facilities
Real estate facilities are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the buildings
and improvements, which are generally between 5 and 25 years. 

Allowance for possible losses
The Company has no allowance for possible losses relating to any of its real estate investments, long-lived assets and mortgage notes receivable.
The need for such an allowance is evaluated by management by means of periodic reviews of its investment portfolio. 

Intangible assets
Intangible assets consist of property management contracts ($165,000,000) and the cost over the fair value of net tangible and identifiable intan-
gible assets ($67,726,000) acquired in the PSMI Merger. Intangible assets are amortized straight-line over 25 years. At December 31, 1996 and
1995, intangible assets are net of accumulated amortization of $10,473,000 and $1,164,000, respectively. Included in depreciation and amortization
expense is $9,309,000 in 1996 and $1,164,000 in 1995 (for the period from November 16, 1995 through December 31, 1995) related to the 
amortization of intangible assets.

Revenue and expense recognition
Property rents are recognized as earned. Equity in earnings of real estate entities are recognized based on the Company’s ownership interest in the
earnings of each of the unconsolidated real estate entities. Leasing commissions relating to the business park operations are expensed as incurred.

Environmental costs
The Company’s policy is to accrue environmental assessments and/or remediation costs when it is probable that such efforts will be required and
the related costs can be reasonably estimated. The majority of the Company’s real estate facilities were acquired prior to the time that it was 
customary to conduct environmental assessments. During 1995, the Company and the Consolidated Partnerships conducted independent environ-
mental investigations of their real estate facilities. As a result of these investigations, the Company recorded an amount which, in management’s
best estimate and based upon independent analysis, was sufficient to satisfy anticipated costs of known remediation requirements. At December 31,
1995, the Company accrued $2,741,000 for estimated environmental remediation costs. Similar to the Company, real estate entities in which the
Company accounts for using the equity method recorded environmental accruals at the end of 1995. The Company’s pro rata share, based on its own-
ership interest, totaled $510,000 and is included in “Equity in earnings of real estate entities” in  1995. Although there can be no assurance, the
Company is not aware of any environmental contamination of any of its facilities which individually or in the aggregate would be material to the
Company’s overall business, financial condition, or results of operations.

Net income per common share
Net income per common share is computed using the weighted average common shares outstanding (adjusted for stock options). The inclusion of
the Class B Common Stock in the determination of earnings per common share has been determined to be anti-dilutive – after giving effect to the
pro forma additional income required to satisfy certain contingencies (Note 11) required for the Class B common stock to convert into common stock –
and, accordingly, the conversion of the Class B common stock into common stock has not been assumed.

The Company’s preferred stocks (Note 11) were determined not to be common stock equivalents. In computing earnings per common share, pre-
ferred stock dividends totaling $68,599,000, $31,124,000 and $16,846,000 for the years ended December 31, 1996, 1995 and 1994, respectively,
reduced income available to common stockholders. 

Fully diluted earnings per common share are not presented, as the assumed conversion of the Company’s convertible preferred stock (Note 11)

would be anti-dilutive. 

Stock-based compensation
In October 1995, the FASB issued SFAS No. 123 “Accounting for Stock-Based Compensation” (“Statement 123”) which provides companies an alter-
native to accounting for stock-based compensation as prescribed under APB Opinion No. 25 (APB 25). Statement  123 encourages, but does not
require companies to recognize expense for stock-based awards based on their fair value at date of grant. Statement 123 allows companies to con-
tinue to follow existing accounting rules (intrinsic value method under APB 25) provided that pro-forma disclosures are made of what net income
and earnings per share would have been had the new fair value method been used. The Company has elected to adopt the disclosure requirements
of Statement 123 but will continue to account for stock-based compensation under APB 25. Statement 123’s disclosure requirements are applicable
to stock-based awards granted in fiscal years beginning after December 15, 1994.

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P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Notes to Consolidated Financial Statements (continued)

Reclassifications
Certain reclassifications have been made to the consolidated financial statements for the years ended December  31, 1995 and 1994 in order to 
conform with the 1996 presentation.

3 .   B U S I N E S S C O M B I N A T I O N S

Mergers with affiliated REITs
During 1996, the Company completed merger transactions with eight affiliated public REITs whereby the Company acquired all the outstanding
stock of the REITs which it did not previously own in exchange for cash and common stock of the Company. The aggregate acquisition cost of these
mergers is summarized as follows:

Entity

(In thousands)
Public Storage Properties IX, Inc. (“Properties 9”)
PS Business Parks, Inc. (“PSBP”)
Storage Properties, Inc. (“SPI”)
Public Storage Properties X, Inc. (“Properties 10”)
Public Storage Properties XII, Inc. (“Properties 12”)
Partners Preferred Yield, Inc. (“PPY”),
Partners Preferred Yield II, Inc. (“PPY-2”)
Partners Preferred Yield III, Inc. (“PPY-3”)

Date of merger

March 26, 1996
March 26, 1996
June 27, 1996
September 16, 1996
September 16, 1996
December 23, 1996
December 23, 1996
December 23, 1996

Common
Stock

$ 24,719
5,249
17,148
26,012
33,157
38,076
41,790
18,781

$204,932

Merger consideration

Cash

$ 9,907
2,719
4,801
14,178
7,436
13,922
13,692
5,787

$72,442

Pre-existing
investment

Total

$12,937
3,337
1,799
9,333
9,472
18,179
18,077
6,327

$79,461

$ 47,563
11,305
23,748
49,523
50,065
70,177
73,559
30,895

$356,835

During 1995, the Company completed merger transactions with two affiliated public REITs whereby the Company acquired all the outstanding
stock of the REITs for an aggregate cost of $135,406,000, consisting of the issuance of 6,664,287 shares of the Company’s common stock
($99,972,000) and $35,434,000 in cash. The fair market values of the assets acquired and liabilities assumed were: (i) real estate facilities –
$140,775,000, (ii) other assets – $1,440,000, and (iii) accrued and other liabilities – $6,809,000.

Affiliated Partnership acquisitions:
During 1996, the Company increased its ownership interest in three affiliated limited partnerships. Prior to the acquisitions, the Company accounted
for its investment in each of the three partnerships using the equity method. As a result of increasing its ownership interest and control of the part-
nerships, the Company began to consolidate the accounts of the partnerships in the Company’s consolidated financial statements. These trans-
actions are summarized as follows:

Entity

(In thousands)
PS Institutional Fund (“PSIF”)
Diversified Storage Fund (“Diversified”)
Diversified Storage Fund II (“Diversified II”)

Percentage of
Limited Partner
Units Purchased

64%
100%
100%

Date
Purchased

March 1996
April 1996
April 1996

Consideration paid to
acquired Limited
Partnership Units

Preferred
Stock

$
–
39,410
19,545

$58,955

Cash

$41,080
–
–

$41,080

The Company’s
Pre-existing
investment

$27,863
11,565
5,807

$45,235

Total

$ 68,943
50,975
25,352

$145,270

During 1995, the Company increased its ownership interest and control of twelve limited partnerships. As a result, commencing in  1995, the
Company began to consolidate the accounts of these partnerships for financial statement purposes. The aggregate amount of the interests acquired
totaled $48,410,000, consisting of the issuance of $28,470,000 of Mandatory Convertible Participating Preferred Stock and cash of $19,940,000.

PSMI merger
On November 16, 1995, in a series of mergers among PSMI and its affiliates, culminating in the merger of PSMI into the Company (the ‘’PSMI
Merger’’), the Company became self-administered and self-managed and acquired substantially all of the United States real estate operations of
PSMI. As a result of the PSMI Merger, the Company’s name was changed from Storage Equities, Inc. to Public Storage, Inc.

The aggregate consideration paid by the Company for the net assets acquired in the PSMI Merger (including expenses of $2.0 million) was

16

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

$549,284,000, consisting of 29,449,513 shares of common stock ($473,784,000), 7,000,000 shares of Class B common stock ($73,500,000) 
(Note 11). The real estate operations acquired in the PSMI Merger included: (1) the ‘’Public Storage’’ name, (2) general and limited partnership
interests in 47 limited partnerships owning an aggregate of 286 self-storage facilities, (3) shares of common stock in 16 REITs owning an aggregate
of 218 self-storage facilities and 14 business park properties, (4) seven wholly-owned properties, (5) all-inclusive deeds of trust secured by ten self-
storage facilities, (6) property management contracts, exclusive of facilities owned by the Company, for 563 self-storage facilities and, through
ownership of a 95% economic interest in a subsidiary, 24 business park properties and (7) a 95% economic interest in another subsidiary that 
currently sells locks and boxes in self-storage facilities operated by the Company.

Each of the above mergers with affiliated REIT’s, acquisitions of partnership interests, and merger with PSMI discussed above has been accounted
for as a purchase; accordingly, allocations of the total acquisition cost to the net assets acquired were made based on the fair value of such assets
and liabilities as of the dates of each respective transaction. The fair market values of the assets acquired and liabilities assumed with respect to
the transactions occurring in 1996 and 1995 are summarized as follows:

(In thousands)

1996 business combinations:
Real estate facilities
Other assets
Accrued and other liabilities
Minority interest

1995 business combinations:
Real estate facilities
Investments in real estate facilities
Mortgage notes receivable
Other assets
Intangible assets
Accrued and other liabilities
Notes payable
Minority interest

REIT
mergers

Partnership
Acquisitions

PSMI Merger

Total

$364,984
5,032
(13,181)
–

$356,835

$140,775
–
–
1,440
–
(6,809)
–
–

$135,406

$166,810
817
(2,218)
(20,139)

$145,270

$ 69,801
(4,464)
–
2,851
–
(701)
(3,387)
(15,690)

$ 48,410

$

$

–
–
–
–

–

$ 19,943
389,686
6,667
4,571
232,726
(9.624)
(93,341)
(1,344)

$549,284

$531,794
5,849
(15,399)
(20,139)

$502,105

$230,519
385,222
6,667
8,862
232,726
(17,134)
(96,728)
(17,034)

$733,100

The historical operating results of the above business combinations prior to each respective acquisition date have not been included in the
Company’s historical operating results. Pro forma data (unaudited) for the years ended December 31, 1996, 1995 and 1994 as though (i) business
combinations and (ii) the public issuances of common and preferred stock (with the exception of the Series G, Series H, and Series I) during 1996,
1995 and 1994 and the use of the proceeds therefrom had been effective at the beginning of each period as follows: 

(In thousands except per share data)

Revenues
Net income
Net income per common share

For the Year Ended December 31,

1996

$378,718
$163,731
$1.11

1995

$343,135
$129,829
$1.10

1994

$354,936
$139,956
$1.26

The pro forma data does not purport to be indicative either of results of operations that would have occurred had the transactions occurred at
the beginning of each period or future results of operations of the Company. Certain pro forma adjustments were made to the combined historical
amounts to reflect (i) expected reductions in general and administrative expenses, (ii) estimated increased interest expense from bank borrowings
to finance the cash portion of the acquisition cost, (iii) estimated increase in depreciation and amortization expense, and (iv) elimination of 
advisory fee expense. 

4 .   R E A L E S T A T E F A C I L I T I E S

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P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Notes to Consolidated Financial Statements (continued)

Activity in real estate facilities during 1996, 1995 and 1994 is as follows: 

(In thousands)

Operating Facilities:
Beginning balance
Property acquisitions:

Business combinations (Note 3) 
Other acquisitions

Developed facilities
Acquisition of minority interest (Note 9)
Capital improvements
Property dispositions

Ending balance

Construction in progress:
Beginning balance
Current development cost
Newly opened development facilities

Ending balance

Accumulated depreciation:

Beginning balance
Additions during the year
Property dispositions 

Ending balance

1996

1995

1994

$1,405,155

$ 967,718

$ 764,126

531,794
202,696
18,261
7,226
20,366
–

230,519
191,002
5,265
(223)
11,361
(487)

2,185,498

1,405,155

7,979
46,097
(18,261)

35,815

(241,966)
(55,689)
–

(297,655)

–
13,244
(5,265)

7,979

(202,745)
(39,376)
155

(241,966)

57,415
135,682
–
4,820
8,312
(2,637)

967,718

–
–
–

–

(175,621)
(28,099)
975

(202,745)

Total real estate facilities

$1,923,658

$1,171,168

$ 764,973

During 1996, the Company acquired a total of 154 real estate facilities for an aggregate cost of $531,794,000, in connection with certain busi-
ness combinations (Note 3). The Company also acquired an additional 58 real estate facilities from third parties with an aggregate acquisition cost
of $202,696,000 consisting of the cancellation of mortgage notes receivable ($700,000), cancellation of pre-existing investments ($1,891,000),
assumption of mortgage notes payable ($1,701,000), and cash ($198,404,000).

Commencing in 1995, the Company began to construct self-storage facilities. Through December 31, 1996, the Company constructed and opened
for operation five facilities, one of which began operations in August 1995 and four in 1996. Included in real estate facilities at December 31, 1996
is approximately $35,815,000 of costs related to the remaining 11 facilities under construction and the 17 additional facilities that the Company
has plans to develop. 

During 1995, the Company acquired a total of 95 real estate facilities for an aggregate cost of $230,519,000 in connection with certain business
combinations. During 1995, the Company also acquired an additional 58 real estate facilities for an aggregate cost of $184,861,000 (including the
facility developed in 1995), consisting of the cancellation of mortgage notes receivable ($16,435,000), the assumption of mortgage notes payable
($60,908,000) and cash ($107,518,000). 

A substantial number of the real estate facilities acquired during 1996, 1995 and 1994 were acquired from affiliates with an aggregate acquisi-

tion cost of approximately $531,794,000, $300,193,000 and $119,211,000 respectively.

At December 31, 1996, the adjusted basis of real estate facilities for Federal income tax purposes was approximately $1,404.0 million, net of

accumulated depreciation of $598.3 million. 

5 .   I N V E S T M E N T S I N R E A L E S T A T E E N T I T I E S

During 1996, the Company’s equity in real estate entities decreased principally as a result of business combinations whereby the Company elimi-
nated approximately $124.7 million of pre-existing equity in real estate entity investments. Offsetting this decrease were additional investments in
numerous other unconsolidated affiliates for $83,893,000 in cash.

During 1995, the Company (i) acquired limited and general partnership interest in 47 partnerships and common stock in 16 REITs in connection
with the PSMI Merger at an aggregate cost of $389,686,000, (ii) acquired additional interests in some of the same partnerships and REITs for an
aggregate cost of $23,953,000, consisting of Common Stock ($4,034,000) and cash ($19,919,000), and (iii) reclassified investments in partnerships
which, commencing in 1995, are consolidated with the Company ($4,464,000). Prior to 1995, the Company’s investment in real estate entities 
generally consisted of limited and general partnership interests in real estate limited partnerships which were accounted for using the cost method.
At December 31, 1996, the Company’s investments in these real estate entities consist generally of ownership interests in 41 affiliated partner-

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P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

ships and common stock in eight affiliated REITs. Such interests consist of ownership interests ranging from 15% to 45% and are accounted for using
the equity method of accounting. Accordingly, earnings are recognized by the Company based upon the Company’s ownership interest in each of the
partnerships and REITs. Provisions of the governing documents of the partnerships and REITs provide for the payment of preferred cash distribu-
tions to other investors (until certain specified amounts have been paid) without regard to the pro rata interest of investors in current earnings.

Equity in earnings of real estate entities for 1996 and 1995 principally consists of the Company’s pro rata share of earnings for those interests
acquired in the PSMI Merger. During 1996 and 1995, the Company recognized earnings from its investments of $22,121,000 and $3,763,000,
respectively, and received cash distributions totaling $27,326,000 and $5,580,000, respectively. Included in equity in earnings of real estate enti-
ties for 1996 and 1995 is the Company’s share of depreciation expense ($9,556,000 and $926,000, respectively) and environmental costs ($510,000
in 1995, none in 1996) of the real estate entities. In addition, equity in earnings of real estate entities includes amortization totaling $7,894,000 in
1996 and $1,119,000 in 1995 (from date of the PSMI Merger through the end of the year) representing the amortization of the Company’s cost basis
over the underlying book value of the Company’s equity interest in each of the entities. At December 31, 1996, the unamortized excess of the
Company’s investment over its equity in the underlying net assets of these real estate entities at the date of acquisition was approximately 
$154.5 million. 

Summarized combined financial data (based on historical cost) with respect to those real estate entities in which the Company had an owner-

ship interest at December 31, 1996 are as follows:

(In thousands)

Rental income
Total revenues
Cost of operations
Depreciation
Net income

Total assets, net of accumulated depreciation
Total debt
Total equity

Year ended December 31,

1996

$180,197
182,036
65,417
27,332
75,937

834,695
89,349
710,118

1995

$172,675
175,150
62,542
27,368
69,467

839,775
95,305
708,768

6 .   M O R T G A G E N O T E S R E C E I V A B L E F R O M A F F I L I A T E S

At December 31, 1996, mortgage notes receivable of $25,016,000 bear interest at stated rates ranging from 7.4% to 14.0% and are secured by 
13 self-storage facilities owned by affiliates of the Company.

During 1996, the Company acquired a $1,970,000 mortgage note receivable from a third party (secured by a self-storage facility) and provided
loans totaling $1,739,000 to affiliated limited partnerships. During 1995, in connection with the PSMI Merger, the Company acquired mortgage notes
receivable totaling $6,667,000 which are secured by self-storage facilities owned by affiliated entities.

The Company canceled mortgage notes with a net carrying value of $700,000 and $16,435,000 during 1996 and 1995, respectively, as part of

the acquisition cost of the underlying real estate facilities securing the mortgage notes (Note 4).

7 .   R E V O L V I N G L I N E O F C R E D I T

As of December 31, 1996, the Company had no borrowings on its unsecured credit agreement with a group of commercial banks. On February 25,
1997, the credit agreement was amended (the “Credit Facility”) to increase the available borrowings to $150.0 million and extend the expiration
date to July 31, 2001. The expiration date may be extended by one year on each anniversary of the credit agreement. Interest on outstanding 
borrowings is payable monthly. At the option of the Company, the rate of interest charged is equal to (i) the prime rate or (ii) a rate ranging from
the London Interbank Offered Rate (“LIBOR”) plus 0.40% to LIBOR plus 1.10% depending on the Company’s credit ratings and coverage ratios, as
defined. In addition, the Company is required to pay a quarterly commitment fee of 0.250% (per annum) of the unused portion of the Credit Facility.
The Credit Facility allows the Company, at its option, to request the group of banks to propose the interest rate they would charge on specific bor-
rowings not to exceed $50 million. However, in no case may the interest rate proposal be greater than the amount provided by the Credit Facility.
Under covenants of the Credit Facility, the Company is required to (i) maintain a balance sheet leverage ratio of less than 0.40 to 1.00, (ii) main-
tain net income of not less than $1.00 for each fiscal quarter, (iii) maintain certain cash flow and interest coverage ratios (as defined) of not less
than 1.0 to 1.0 and 5.0 to 1.0, respectively and (iv) maintain a minimum total shareholders’ equity (as defined). In addition, the Company is limited
in its ability to incur additional borrowings (the Company is required to maintain unencumbered assets with an aggregate book value equal to or
greater than three times the Company’s unsecured recourse debt) or sell assets. The Company was in compliance with the covenants of the Credit
Facility at December 31, 1996.

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P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Notes to Consolidated Financial Statements (continued)

8 .   N O T E S P A Y A B L E

Notes payable at December 31, 1996 and 1995 consist of the following:

(In thousands)

7.08% unsecured senior notes, due November 2003
Mortgage notes payable:

10.55% mortgage notes secured by real estate facilities, 

principal and interest payable monthly, due August 2004

7.07% to 11.10% mortgage notes secured by real estate facilities, 
principal and interest payable monthly, due at varying dates 
between December 1997 and September 2028

Variable rate mortgage notes secured by real estate facilities

1996

1995

Carrying
amount

$ 59,750

Fair value

$ 59,750

Carrying
amount

$ 65,500

Fair value

$ 65,500

32,115

34,964

33,699

36,959

16,578
–

$108,443

16,578
–

22,875
35,978

22,875
35,978

$111,292

$158,052

$161,312

During 1995, in connection with the PSMI Merger, the Company assumed the 7.08% unsecured senior notes payable. The senior notes require
interest and principal payments to be paid semi-annually and have various restrictive covenants, all of which have been met at December 31, 1996.
The 10.55% mortgage notes consist of five notes which are cross-collateralized by 19 properties and are due to a life insurance company. 
Although there is a negative spread between the carrying value and the estimated fair value of the notes, the notes provide for the prepayment 
of principal subject to the payment of penalties which exceed this negative spread. Accordingly, prepayment of the notes at this time would not be 
economically practicable.

Mortgage notes payable are secured by 30 of the Company’s real estate facilities having an aggregate net book value of $68.1 million at 

December 31, 1996. 

At December 31, 1996, approximate principal maturities of notes payable are as follows: 

(in thousands)

1997
1998
1999
2000
2001
Thereafter

7.08% Unsecured
Senior Notes

Fixed Rate
Mortgage Debt
(weighted average
rate of 10.28%)

$ 6,500
7,250
8,000
8,750
9,500
19,750

$59,750

$ 4,744
7,908
6,484
2,721
2,238
24,598

$48,693

Total

$ 11,244
15,158
14,484
11,471
11,738
44,348

$108,443

Interest paid (including interest related to the borrowings on the Credit Facility) during 1996, 1995 and 1994 was $10,312,000, $8,595,000 and
$5,940,000, respectively. In addition, in 1996 and 1995, the Company capitalized interest totaling $1,861,000 and $307,000, respectively, related
to construction of real estate facilities.

9 .   M I N O R I T Y I N T E R E S T

In consolidation, the Company classifies ownership interests other than its own in the net assets of each of the Consolidated Partnerships as minority
interest on the consolidated financial statements. Minority interest in income consists of the minority interests’ share of the operating results of
the Company relating to the consolidated operations of the Consolidated Partnerships.

During 1996, the Company acquired limited partnership interests in the Consolidated Partnerships in several transactions for an aggregate cost
of $15,419,000. These transactions had the effect of reducing minority interest by approximately $8,193,000 (the historical book value of such
interests in the underlying net assets of the partnerships). The excess of the underlying book value over cost ($7,226,000) has been allocated to
real estate facilities in consolidation. In 1995 and 1994, the Company acquired interests in the Consolidated Partnerships at an aggregate cost of
$32,683,000 and $51,711,000, respectively, reducing minority interest by approximately $32,906,000 and $46,891,000, respectively. The excess
of cost over underlying book values was allocated to real estate facilities in consolidation.

During 1996 and 1995, in connection with certain business combinations (Note 3) minority interest was increased by $20,139,000 and

$17,034,000, respectively, representing the remaining partners’ equity interests in the aggregate net assets of the consolidated partnerships.

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P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

10 .   P R O P E R T Y M A N A G E M E N T A N D A D V I S O R Y C O N T R A C T S

Pursuant to the PSMI Merger, the Company became self-advised and self-managed; accordingly, effective November 16, 1995, the Company no
longer incurs either advisory fees or property management fees.

Prior to the PSMI Merger, PSMI provided property operation services for a fee to the Company under a management agreement and an affiliate
of PSMI administered the day-to-day investment operations for a fee pursuant to an advisory contract. Pursuant to the management agreement,
PSMI or an affiliate of PSMI operated all of the properties in which the Company invested in for a fee which is equal to 6% of the gross revenues of
the self-storage facilities spaces managed and 5% of the gross revenues of the business park facilities operated. Management fees relating to the
Company’s real estate facilities, which are included in cost of operations, amounted to $10,232,000 and $8,355,000 in 1995 and 1994, respectively.
During 1994 and 1995 (from January 1, 1995 through November 16, 1995), the Company paid advisory fees equal to $4,983,000 and $6,437,000
pursuant to the advisory contract. 

In connection with the PSMI Merger, the Company acquired property management contracts for (i) self-storage facilities owned by affiliated 
entities and, to a lesser extent, third parties and (ii) through ownership of a 95% economic interest in a subsidiary, commercial properties. These
facilities constitute all of the United States self-storage facilities and commercial properties doing business under the “Public Storage” name and,
with the exception of third party properties, all those in which the Company had an interest. At December 31, 1996, the Company managed 1,101
self-storage facilities (721 owned by consolidated facilities, 343 owned by unconsolidated affiliates and 37 owned by third parties) and 45 com-
mercial properties (35 owned by consolidated facilities and 10 owned by unconsolidated affiliates).

The property management contracts generally provide for compensation equal to 6%, in the case of the self-storage facilities, and 5%, in the case
of the commercial properties of gross revenues of the facilities managed. Under the supervision of the property owners, the Company coordinates
rental policies, rent collections, marketing activities, the purchase of equipment and supplies, maintenance activity, and the selection and engage-
ment of vendors, suppliers and independent contractors. In addition, the Company assists and advises the property owners in establishing policies
for the hire, discharge and supervision of employees for the operation of these facilities, including resident managers, assistant managers, relief
managers and billing and maintenance personnel.

11 .   S H A R E H O L D E R S ’   E Q U I T Y

Preferred Stock
At December 31, 1996 and 1995, the Company had the following series of Preferred Stock outstanding:

Series

Series A 
Series B 
Series C
Series D
Series E
Series F
Series G 
Series H 
Series I 

Total Senior Preferred Stock

Convertible
Mandatory Convertible – Series CC
Mandatory Convertible Participating

Total Convertible Preferred Stock

Dividend
Rate

10.000%
9.200%
Adjustable
9.500%
10.000%
9.750%
8.875%
8.45%
8.625%

8.25%
13.00%
Variable

At December 31, 1996

At December 31, 1995

Shares
Outstanding

1,825,000
2,386,000
1,200,000
1,200,000
2,195,000
2,300,000
6,900
6,750
4,000

Carrying
Amount

$ 45,625,000
59,650,000
30,000,000
30,000,000
54,875,000
57,500,000
172,500,000
168,750,000
100,000,000

Shares
Outstanding

1,825,000
2,386,000
1,200,000
1,200,000
2,195,000
2,300,000
6,900
–
–

Carrying
Amount

$ 45,625,000
59,650,000
30,000,000
30,000,000
54,875,000
57,500,000
172,500,000
–
–

11,123,650

718,900,000

11,112,900

450,150,000

2,238,975
58,955
–

55,974,000
58,955,000
–

2,297,930

114,929,000

2,300,000
–
31,200

2,331,200

57,500,000
–
28,470,000

85,970,000

13,421,580

$833,829,000

13,444,100

$536,120,000

During 1996, the Company issued 6,750,000 depositary shares (depositary shares, each representing 1/1,000 of a share) of its 8.45% Series H
Preferred Stock (January 25, 1996) raising net proceeds of approximately $163.1 million and 4,000,000 depositary shares (depositary shares,
each representing 1/1,000 of a share) of its 85⁄8% Series I Preferred Stock (November 1, 1996) raising net proceeds of approximately $96.7 million.
In April 1996, in connection with the acquisition of limited partnership interests (Note 3), the Company issued $58,955,000 (58,955 shares) of
its Mandatory Convertible Preferred Stock, Series CC (the “Series CC Preferred Stock”). The Series CC Preferred Stock ranks junior to the Company’s
Cumulative Senior Preferred Stock with respect to general preference rights and has a liquidation value of $1,000 per share. Other significant

21

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Notes to Consolidated Financial Statements (continued)

terms of the Series CC Preferred Stock include: (i) quarterly distributions equal to $32.50 per share, (ii) conversion, at anytime at the option of the
holder, into common stock of the Company at a conversion price of $28.56 or 35.014 shares of common stock for each share of Series CC Preferred
Stock, and (iii) automatic conversion into common stock of the Company on March 31, 2000 at the conversion price described above.

During the second quarter of 1996, the Mandatory Convertible Participating Preferred Stock was exchanged into 1,611,265 shares of common

stock. Costs incurred in connection with the exchange have been charged to Paid in Capital.

The Series A through Series I (collectively the “Cumulative Senior Preferred Stock”) have general preference rights with respect to liquidation
and quarterly distributions. With respect to the payment of dividends and amounts upon liquidation, all of the Company’s Convertible Preferred
Stock ranks junior to the Cumulative Senior Preferred Stock and any other shares of preferred stock of the Company ranking on a parity with or
senior to the Cumulative Senior Preferred Stock. The Convertible Preferred Stock ranks senior to the common stock, any additional class of 
common stock and any series of preferred stock expressly made junior to the Convertible Preferred Stock.

Holders of the Company’s preferred stock, except under certain conditions and as noted above, will not be entitled to vote on most matters. In
the event of a cumulative arrearage equal to six quarterly dividends or failure to maintain a Debt Ratio (as defined) of 50% or less, holders of all
outstanding series of preferred stock (voting as a single class without regard to series) will have the right to elect two additional members to serve
on the Company’s Board of Directors until events of default have been cured. At December 31, 1996, there were no dividends in arrears and the
Debt Ratio was 4.2%.

Except under certain conditions relating to the Company’s qualification as a REIT, the Senior Preferred Stock are not redeemable prior to the 
following dates: Series A – September 30, 2002, Series B – March 31, 2003, Series C – June 30, 1999, Series D – September 30, 2004, Series E –
January 31, 2005, Series F – April 30, 2005, Series G – December 31, 2000, Series H – January 31, 2001, Series I – October 31, 2001. On or after
the respective dates, each of the series of Senior Preferred Stock will be redeemable at the option of the Company, in whole or in part, at $25 per
share (or depositary share in the case of the Series H and Series I), plus accrued and unpaid dividends. 

The Convertible Preferred Stock is convertible at any time at the option of the holders of such stock into shares of the Company’s common stock
at a conversion rate of 1.6835 shares of common stock for each share of Convertible Preferred Stock, subject to adjustment in certain circum-
stances. On, or after July 1, 1998, the Convertible Stock will be redeemable for shares of the Company’s common stock at the option of the Company,
in whole or in part, at a redemption price of 1.6835 shares of common stock for each share of Convertible Stock (subject to adjustment in certain
circumstances), if for 20 trading days within any period of 30 consecutive trading days (including the last trading day of such period), the closing
price of the common stock on its principal trading market exceeds $14.85 per share (subject to adjustment in certain circumstances). The
Convertible Preferred Stock is not redeemable for cash.

Common stock
During 1996, 1995 and 1994, the Company issued shares of its common stock as follows:

(Dollar amounts in thousands)

Shares

Amount

Shares

Amount

Shares

Amount

1996

1995

1994

Public offerings
In connection with mergers (Note 3)
Issuance costs of mergers
Exercise of stock options
Issuance to affiliates
Conversion of Mandatory Convertible Preferred Stock
Acquisition of interests in real estate entities
Acquisition of real estate facilities (Note 4)
Conversion of 8.25% Convertible Preferred Stock

6,151,200
8,839,181
–
100,663
43,197
1,611,265
–
–
102,721

$127,501
204,932
–
2,037
1,000
27,960
–
–
1,526

5,482,200
36,113,800
–
46,670
40,000
–
257,067
747,355
–

$ 82,068
573,756
(2,527)
403
582
–
4,034
10,598
–

7,984,000
2,593,914
–
82,666
109,857
–
–
–
–

$108,083
38,498
(1,124)
689
1,701
–
–
–
–

16,848,227

$364,956

42,687,092

$668,914

10,770,437

$147,847

Shares of common stock issued to affiliates in 1996, 1995 and 1994 were issued for cash. All the shares of common stock, with the exception 

of the shares issued in connection with the exercise of stock options, were issued at the prevailing market price at the time of issuance. 

At December 31, 1996, the Company had 5,250,004 shares of common stock reserved in connection with the Company’s stock option plans 
(Note 12) and 12,834,000 shares of common stock reserved for the conversion of the Convertible Preferred Stock, Class B Common Stock and
Series CC convertible preferred stock. 

On March 18, 1997, the Company publicly issued 4,600,000 shares of common stock, raising net proceeds of approximately $126.5 million. The
Company intends to use the net proceeds from this offering to make investments in real estate and fund the activities of its portable self-storage
operations.

22

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Class B Common Stock
The Class B Common Stock was issued in connection with the PSMI Merger. Under the terms of the merger agreement, the issuance of the Class B
Common Stock was subject to certain conditions which were satisfied in December 1995 and the Class B Common Stock was issued on January 2,
1996. The Company has reflected the Class B Common Stock as outstanding as of December 31, 1995.

The Class B Common Stock will (i) not participate in distributions until the later to occur of funds from operations (“FFO”) per Common Share
as defined below, aggregating $1.80 during any period of four consecutive calendar quarters, or January 1, 2000; thereafter, the Class B Common
Stock will participate in distributions (other than liquidating distributions), at the rate of 97% of the per share distributions on the Common Stock,
provided that cumulative distributions of at least $0.22 per quarter per share have been paid on the Common Stock, (ii) not participate in liquidat-
ing distributions, (iii) not be entitled to vote (except as expressly required by California law) and (iv) automatically convert into Common Stock, 
on a share for share basis, upon the later to occur of FFO per Common Share aggregating $3.00 during any period of four consecutive calendar 
quarters or January 1, 2003.

For these purposes FFO means net income (loss) (computed in accordance with generally accepted accounting principles) before (i) gain (loss)
on early extinguishment of debt, (ii) minority interest in income and (iii) gain (loss) on disposition of real estate, adjusted as follows: (i) plus depre-
ciation and amortization (including the Company’s pro-rata share of depreciation and amortization of unconsolidated equity interests and amorti-
zation of assets acquired in the Merger, including property management agreements and goodwill), and (ii) less FFO attributable to minority 
interest. For these purposes, FFO per Common Share means FFO less preferred stock dividends (other than dividends on convertible preferred
stock) divided by the outstanding weighted average shares of Common Stock assuming conversion of all outstanding convertible securities and 
the Class B Common Stock. 

For these purposes, FFO per share of Common Stock (as defined) was $1.86 for the year ended December 31, 1996. 

Equity Stock
The Company is authorized to issue 200,000,000 shares of Equity Stock. The Articles of Incorporation provide that the Equity Stock may be issued
from time to time in one or more series and gives the Board of Directors broad authority to fix the dividend and distribution rights, conversion and
voting rights, redemption provisions and liquidation rights of each series of Equity Stock. At December 31, 1996, the Company had no outstanding
shares of Equity Stock.

Dividends
The characterization of dividends for Federal income tax purposes is made based upon earnings and profits of the Company, as defined by the
Internal Revenue Code. Distributions declared by the Board of Directors (including distributions to the holders of preferred stock) in 1996, 1995
and 1994 were characterized as ordinary income. 

The following summarizes dividends paid during 1996, 1995 and 1994 (with the exception of the Series G Preferred Stock distributions which were

accrued and unpaid at December 31, 1995):

(In thousands, except per share data)

Series A
Series B
Series C
Series D
Series E
Series F
Series G
Series H
Series I
Convertible
Series CC
Mandatory Convertible Participating

Common

1996

1995

1994

Per share

Total

$ 2.500
2.300
1.840
2.375
2.500
2.437
2.219
1.978
.359
2.063
97.500
$54.487

$ 0.880

$ 4,563
5,488
2,212
2,850
5,488
5,606
15,479
13,348
1,438
4,679
5,748
1,700

68,599
67,709

$136,308

Per share

$ 2.500
2.300
1.970
2.375
2.292
1.618
0.092
–
–
2.063
–
$55.322

$ 0.880

Total

$ 4,563
5,488
2,364
2,850
5,030
3,721
638
–
–
4,744
–
1,726

31,124
38,586

$69,710

Per share

$ 2.500
2.300
1.042
0.792
–
–
–
–
–
2.063
–
–

$ 0.850

Total

$ 4,563
5,340
1,250
950
–
–
–
–
–
4,743
–
–

16,846
21,249

$38,095

The dividend rate on the Series C Preferred Stock is adjusted quarterly and is equal to the highest of one of three U.S. Treasury indices (Treasury
Bill Rate, Ten-Year Constant Maturity Rate, and Thirty-Year Constant Maturity Rate) multiplied by 110%. However, the dividend rate for any 

23

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Notes to Consolidated Financial Statements (continued)

dividend period will not be less than 6.75% per annum nor greater than 10.75% per annum. The dividend rate with respect to the first quarter of
1997 will be equal to 7.26% per annum. 

The Mandatory Convertible Participating Preferred Stock was issued in connection with the acquisition of all of the limited partnership interests
in a real estate limited partnership in 1995. Dividends with respect to the Mandatory Convertible Participating Preferred Stock varied depending
on operating results of the underlying real estate facilities of the partnership. During June 1996, the Mandatory Convertible Participating Preferred
Stock was exchanged for common stock of the Company. 

12 .   S T O C K O P T I O N S

The Company has a 1990 Stock Option Plan (which was adopted by the Board of Directors in 1990 and approved by the shareholders in 1991) (the
“1990 Plan”) which provides for the grant of non-qualified stock options. The Company has a 1994 Stock Option Plan (which was adopted by the
Board of Directors and approved by the shareholders in 1994) (the “1994 Plan”) and a 1996 Stock Option and Incentive Plan (which was adopted
by the Board of Directors and approved by the shareholders in 1996 (the “1996 Plan”), each of which provides for the grant of non-qualified options
and incentive stock options. (The 1990 Plan, the 1994 Plan and the 1996 Plan are collectively referred to as the “Plans”). Under the Plans, the
Company has granted non-qualified options to certain directors, officers and key employees and service providers to purchase shares of the
Company’s common stock at a price equal to the fair market value of the common stock at the date of grant. Generally, options under the Plans vest
over a three-year period from the date of grant at the rate of one-third per year and expire (i) under the 1990 Plan, five years after the date they
became exercisable and (ii) under the 1994 Plan and 1996 Plan, ten years after the date of grant. The 1996 Plan also provides for the grant of
restricted stock to officers, key employees and service providers on terms determined by the Audit Committee of the Board of Directors. No shares
of restricted stock have been granted.

Information with respect to the Plans during 1996 and 1995 is as follows: 

Options outstanding January 1

Granted
Exercised
Canceled

Options outstanding December 31

Option price range at December 31

Options exercisable at December 31

Options available for grant at December 31

1996

1995

Number
of
Options

693,667
1,183,000
(100,663)
(23,835)

1,752,169

$8.125
to 25.875

367,947

3,497,835

Average
Price per
Share

$13.61
21.39
10.29
16.02

$19.02

$13.05

Number
of
Options

512,834
227,500
(46,667)
–

693,667

$8.125
to $18.00

302,485

807,000

Average
Price per
Share

$11.88
16.48
8.63
–

$13.61

$10.89

In 1996, the Company adopted the disclosure requirement provision of SFAS 123 in accounting for stock-based compensation issued to employees.
As of December 31, 1996 and 1995, there were 1,391,500 and 208,500 options outstanding, respectively, that were subject to SFAS 123 disclosure
requirements. The fair value of these options was estimated utilizing prescribed valuation models and assumptions as of each respective grant date.
Based on the results of such estimates, management determined that there was no material effect on net income or earnings per share for the years
ended December 31, 1996 and 1995. The remaining contractual lives were 8.6 and 7.2 years, respectively, at December 31, 1996 and 1995. 

13 .   P R O P O S E D M E R G E R S

In December 1996, Public Storage Properties XIV, Inc. (“Properties 14”) and Public Storage Properties XV, Inc. (“Properties 15”) each agreed, sub-
ject to certain conditions, to merge with and into the Company. Properties 14 and Properties 15 are affiliated publicly traded equity REITs. Each of
the mergers is conditioned on approval by the respective shareholders of Properties 14 and Properties 15. However, the mergers are not conditioned
on approval of each other. The Company expects that if approved by the shareholders the mergers would be completed in April 1997.

The estimated value of the Properties 14 and Properties 15 merger is approximately $63.8 million and $58.5 million, respectively. Properties 14
and Properties 15 own 14 properties (912,000 square feet) and 19 properties (1,087,000 square feet), respectively. The Company currently owns
approximately 33% and 35% of the economic interest in Properties 14 and Properties 15, respectively.

24

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

14 .   R E S T R U C T U R I N G O F C O M M E R C I A L P R O P E R T I E S O P E R A T I O N S

Effective January 2, 1997, the Company restructured its commercial property operations by forming a new private REIT that will concentrate its
investing efforts in real estate facilities containing commercial and industrial rental space. The Company’s majority-owned subsidiary, Public Storage
Commercial Properties Group, Inc. (which subsequently changed its name to American Office Park Properties, Inc.), its commercial property 
manager, contributed all its property management contracts to a newly created operating partnership in exchange for the general partnership inter-
est. The Company and the Consolidated Partnerships contributed substantially all of their commercial properties to the operating partnership in
exchange for limited partnership interests. The limited partnership interests, pursuant to the terms and conditions of the governing documents, are
convertible into shares of common stock of American Office Park Properties, Inc. American Office Park Properties, Inc. intends to elect to operate
as a REIT as defined in Section 856 of the Internal Revenue Code effective January 1, 1997. The restructuring will not immediately impact total
assets, shareholders’ equity, or the operations of the company. 

The Company believes that the concentration of all the business park facilities and the property manager into one entity will create a vehicle
which should facilitate future growth in this segment of the real estate industry. The Company and the affiliates exchanging real estate assets to the
new REIT will participate in the growth through its ownership interest in the new REIT.

15 .   S U P P L E M E N T A R Y Q U A R T E R L Y F I N A N C I A L D A T A ( U N A U D I T E D )

(In thousands, except per share data)

Revenues 

Net income

Per Common Share (Note 2):

Net income

(In thousands, except per share data)

Revenues

Net income

Per Common Share (Note 2):

Net income

Three months ended

March 31,
1996

$74,967

$32,341

June 30,
1996

$83,133

$37,739

September 30,
1996

December 31,
1996

$88,103

$40,366

$94,919

$43,103

$0.24

$0.27

$0.30

$0.29

Three months ended

March 31,
1996

$43,198

$13,200

June 30,
1996

$47,912

$16,551

September 30,
1996

December 31,
1996

$56,938

$19,470

$64,602

$21,165

$0.24

$0.26

$0.26

$0.20

Revenues for each of the three month periods in 1996 and 1995 reflect reclassification to conform with the fiscal 1996 presentation. The three

months ended December 31, 1995 reflects the effects of the PSMI Merger. 

25

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Report of Independent Auditors

The Board of Directors and Shareholders
Public Storage, Inc.

We have audited the accompanying consolidated balance sheets of Public Storage, Inc. as of December 31, 1996 and 1995, and the related 
consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the 
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An  audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position
of Public Storage, Inc. at December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted accounting principles. 

Los Angeles, California

February 25, 1997

26

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Management’s Discussion and Analysis of 
Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and notes thereto. 

O V E R V I E W :

Over the past three years, the Company has effected several business initiatives which have had, and should continue to have, significant effects
on the Company’s results of operations and financial condition. The Company’s asset base has expanded rapidly through the acquisition of additional
real estate investments which have principally been financed through the issuance of permanent capital in the form of common and preferred stock
and the retention of operating cash flow. Since 1993, the Company’s total assets and shareholders’ equity have increased significantly as total assets
increased from $666.1 million at December 31, 1993 to $2.6 billion at December 31, 1996, and shareholders’ equity increased from $376.1 million
at December 31, 1993 to $2.3 billion at December 31, 1996. Among the more significant transactions that the Company completed during 1994, 1995
and 1996 are summarized as follows:

• Increased interests in real estate facilities: Through the acquisition of wholly-owned facilities and the acquisition of interests in real estate
entities, the Company’s ownership interest in real estate facilities has increased from 331 facilities at the end of 1993 to 1,109 facilities at the
end of 1996. 

• Mergers with affiliated REITs: Since 1993, the Company has completed eleven mergers with affiliated REITs: one in 1994 with an aggregate cost

of $55.8 million, two in 1995 with an aggregate cost of $135.4 million, and eight in 1996 with an aggregate cost of $356.8 million.

• Became self-advised and self-managed: On November 16, 1995, the Company became self-advised and self-managed in connection with the
merger with Public Storage Management, Inc. (“PSMI”) with an aggregate cost of $549.3 million. In the merger with PSMI (the “PSMI Merger”),
the Company acquired all the real estate operations of PSMI, including (i) general and limited partnership interests in 47 limited partnerships
owning an aggregate of 286 self-storage facilities, (ii) shares of common stock in 16 REITs owning an aggregate of 218 self-storage facilities
and 14 commercial properties, (iii) seven wholly-owned properties, (iv) all-inclusive deeds of trust secured by  10 self-storage facilities, 
(v) property management contracts, exclusive of facilities owned by the Company, for 563 self-storage facilities and through ownership of a
95% economic interest in a subsidiary, 24 commercial properties and (vi) a 95% economic interest in another subsidiary that currently sells
locks and boxes in self-storage facilities operated by the Company.

• Issuance of capital stock: To fund the Company’s acquisition activities over the past three years the Company has issued approximately 
$592.8 million of preferred stock and $321.3 million of common stock in public offerings, and approximately $87.4 million of preferred stock
and $830.7 million of common stock in connection with mergers and real estate acquisitions.

• Development activities: In 1995, the Company commenced development of self-storage facilities, opening one in 1995 and four in 1996, with

eleven under construction at December 31, 1996.

• Portable self-storage business: In August 1996, the Company commenced operations in the portable self-storage business facilitated by the
acquisition of an existing operator. As of December 31, 1996, the Company opened three new facilities. From December 31, 1996 through
March 15, 1997 the Company opened an additional eight facilities.

The significant increases in both the Company’s asset and capital base have translated into significant growth in the Company’s overall operat-
ing results. The comparative growth in operating results between 1996 and 1995 is principally due to the impact of the PSMI Merger combined with
mergers with affiliated REITs. The comparative growth in operating results between 1995 and 1994 is principally due to mergers with affiliated REITs
combined with acquisitions of additional real estate facilities and investments in real estate entities.

R E S U L T S O F O P E R A T I O N S

Net income and earnings per common share: Net income for 1996, 1995 and 1994 was $153,549,000, $70,386,000 and $42,118,000, respec-
tively, representing increases over the prior year of 118.2% for 1996 and 67.1% for 1995. Net income allocable to common shareholders (net income
less preferred stock dividends) for 1996, 1995 and 1994 was $84,950,000, $39,262,000 and $25,272,000, respectively, representing increases over
the prior year of 116.4% for 1996 and 55.4% for 1995. On a per share basis, net income was $1.10 per share (based on weighted average shares
outstanding of 77,358,000) for 1996, $0.95 per share (based on weighted average shares outstanding of 41,171,000) for 1995 and $1.05 per share
(based on weighted average shares outstanding of 24,077,000) for 1994. The increase in net income per share for 1996 compared to 1995 was the
result of improved real estate operations. The 1996 per share amount also reflects earnings dilution caused by (i) development activities ($0.02 per
share), (ii) portable self storage operations ($0.01 per share) and (iii) the temporary uninvested net offering proceeds ($0.02 per share) from the
issuance of the Series H and Series I preferred stock. The decrease in net income per share for  1995 compared to 1994 was principally due to
increasing depreciation expense combined with the accrual of estimated environmental remediation costs at the end of 1995 and a greater number
of shares outstanding in 1995.

Net income includes depreciation and amortization expense (including depreciation included in equity in earnings of real estate entities) of
approximately $70,835,000 ($0.92 per common share) for 1996, $31,449,000 ($0.76 per common share) for 1995, and $14,025,000 ($0.58 per

27

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

common share) for 1994. The fiscal 1995 earnings per common share also includes a reduction of approximately $0.08 per common share 
relating to the accrual of estimated environmental remediation costs (discussed below).

The Company’s business operations consist of its (i) self-storage properties, (ii) commercial properties, (iii) property management activities and
(iv) ancillary operations, including the Company’s portable self-storage operations. The Company’s real estate operations account for substantially all
of the Company operating activities. During 1996, approximately 94% of the Company’s sources of operating income (income prior to deductions for
depreciation, general and administrative expenses, advisory fees and interest expense) was generated from property operations. 

R E A L E S T A T E O P E R A T I O N S

At December 31, 1996, the Company’s investment portfolio consisted of (i) its wholly-owned properties, (ii) properties owned by real estate part-
nerships consolidated with the Company (the “Consolidated Partnerships”) and (iii) properties owned by real estate entities (partnerships and
REITs) in which the Company’s ownership interest and control are not sufficient to warrant the consolidation of such entities (the “Unconsolidated
Entities”). The following table summarizes the Company’s investment in real estate facilities as of December 31, 1996:

Number of Facilities in which the
Company has an ownership interest

Net Rentable Square Footage
(In thousands)

Self-storage
facilities

Commercial
properties

Wholly-owned facilities
Facilities owned by Consolidated Partnerships

Total consolidated facilities

Facilities owned by Unconsolidated Entities

429
292

721
343

Total facilities in which the Company has an ownership interest

1,064

21
14

35
10

45

Total

450
306

756
353

1,109

Self-storage
facilities

Commercial
properties

26,355
17,062

43,417
20,600

64,017

1,503
1,542

3,045
673

3,718

Total

27,858
18,604

43,462
21,273

64,735

The facilities in which the Company has an ownership interest are located in or near major metropolitan markets in 38 states. The Company

believes that geographic diversity reduces the impact from regional economic downturns and provides a greater degree of stability to revenues.

Self-storage operations: Self-storage rental income and cost of operations presented on the consolidated statements of income reflect the opera-
tions of the 721 self-storage facilities owned by the Company and the Consolidated Partnerships. The following table summarizes the operating
results (before depreciation) of these facilities for each of the past three years:

SELF-STORAGE OPERATIONS:

Year Ended December 31,

Year Ended December 31,

(Dollar amounts in thousands, except rents per square foot)

1996

1995

Rental income:

Consistent group
Post-1993 acquisitions

Cost of operations:
Consistent group
Post-1993 acquisitions

Net operating income:
Consistent group
Post-1993 acquisitions

Consistent group data:

Gross margin
Weighted average occupancy
Average realized annual rent per square foot
Average scheduled annual rent per square foot

Number of facilities (at the end of the period):

Consistent group
Cumulative post-1993 acquisitions

Net rentable square feet (at the end of the period):

Consistent group
Cumulative post-1993 acquisitions

$121,481
148,948

270,429

$116,587
67,513

184,100

37,438
45,056

82,494

84,043
103,892

40,319
23,077

63,396

76,268
44,436

$187,935

$128,704

69.2%
90.7%
$7.68
$7.80

298
423

17,641
25,776

65.4%
89.8%
$7.44
$7.20

298
222

17,641
13,137

28

Percentage
Change

4.2%
120.6%

46.9%

(7.2)%
95.2%

30.1%

10.2%
133.8%

55.7%

5.8%
1.0%
3.2%
8.3%

–
90.5%

–
96.2%

1995

1994

Percentage
Change

$116,587
67,513

184,100

$112,763
14,234

126,997

40,319
23,077

63,396

76,268
44,436

40,246
5,020

45,266

72,517
9,214

$120,704

$ 81,731

65.4%
89.8%
$7.44
$7.20

298
222

17,641
13,137

64.3%
90.0%
$7.08
$6.84

298
67

17,641
4,166

3.4%
374.3%

45.0%

0.2%
359.7%

40.1%

5.2%
382.3%

47.7%

1.7%
(0.2)%
5.1%
5.3%

–
231.3%

–
215.3%

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

The comparative increases in the Company’s self-storage operations from 1994 through 1996 are principally due to the acquisition of additional
facilities as indicated in the above table. For the consistent group of facilities owned throughout each of the three fiscal years, year-over-year
improvements in rental income of 4.2% in 1996 and 3.4% in 1995 are principally the result of increased realized rent per square foot and, with
respect to fiscal 1996, increased weighted average occupancy levels.

Commencing in early 1996, the Company began to experiment with a national telephone reservation system designed to provide added customer
service. Customers calling either the Company’s toll-free telephone referral system, (800) 44-STORE, or a local Public Storage facility, are directed
to the national reservation system where a trained representative discusses with the customer space requirements, price and location preferences
and also informs the customer of other products and services provided by the Company. The national telephone reservation system, which is no
longer experimental, was not fully operational for most of the Company’s facilities until the fourth quarter of 1996 and is currently handling in
excess of 100,000 calls per month. As of December 31, 1996, the national telephone reservation system was supporting rental activity at all of the
Company’s properties, with the exception of one major market, which was included in March 1997.

In connection with the national telephone reservation system, the Company experimented with pricing and promotional discounts designed to
increase rental activity. As a result, promotional discounts increased significantly. Rental income for the Company’s self-storage facilities is net of
promotional discounts totaling $4,031,000 and $303,000 for the years ended December 31, 1996 and 1995, respectively. The Company believes that
the use of the national telephone reservation system combined with rental discounts has resulted in increased weighted average occupancies. 

In the second half of 1996, the Company began to increase its scheduled rents charged to new customers (prior to promotional discounts) and
to existing tenants where warranted. As a result, for fiscal 1996, both realized and scheduled rents per square foot increased compared to 1995.
This trend was also applicable throughout the portfolio of self-storage facilities in which the Company has an ownership interest and manages (see
“Supplemental Property Data” below).

With the exception of property management fees, most of the self-storage operating costs (i.e. payroll, property taxes, repairs and maintenance,
etc.) are generally fixed. As a result of becoming self-managed in connection with the PSMI Merger, the Company no longer incurs property man-
agement fees. Cost of operations for 1996 decreased compared to 1995 principally as a result of the elimination of property management fees for
1996. Included in cost of operation for 1995 and 1994 were management fees totaling $9,421,000 and $7,587,000, respectively ($5,966,000 in 1995
and $6,737,000 in 1994 with respect to the consistent group of facilities). However, offsetting the decrease in property management fees in 1996
are expenses with respect to the national telephone reservation system totaling $1,257,000.

Development of self-storage facilities: Commencing in 1995, the Company began to construct self-storage facilities. Through December 31, 1996,
the Company constructed and opened for operation five facilities, one of which began operations in August 1995 and four in 1996. At December 31,
1996, the Company had eleven self-storage facilities (approximately 707,000 square feet) under construction with an aggregate cost incurred to date
of approximately $33.5 million and total additional estimated cost to complete of $22.5 million. Generally the construction period takes 9 to  12
months followed by an 18- to 24-month fill-up process until the newly constructed facility reaches a stabilized occupancy level of approximately
90%. Due to the timing of the employment of the capital to construct the facilities and the relatively long “fill-up” period until the facilities reach a
stabilized occupancy level, the Company believes that its development plans may create earnings dilution in the short-term. However, the Company
has reached an agreement in principle to develop approximately $220 million of self-storage facilities with a joint venture partner (see “Liquidity
and Capital Resources – Development activities”) and expects that the joint development of self-storage facilities will mitigate this earnings 
dilution to the extent of the joint venturer’s interest.

29

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Commercial property operations: Commercial property rental income and cost of operations presented on the consolidated statements of income
reflect the operations of the 35 facilities owned by the Company and the Consolidated Partnerships. The following table summarizes the operating
results (before depreciation) of these facilities for each of the past three years:

COMMERCIAL PROPERTY OPERATIONS:

Year Ended December 31,

Year Ended December 31,

(Dollar amounts in thousands, except rents per square foot)

1996

1995

Percentage
Change

1995

1994

Percentage
Change

Rental income:

Consistent group
Post-1993 acquisitions

Cost of operations:
Consistent group
Post-1993 acquisitions

Net operating income:
Consistent group
Post-1993 acquisitions

Consistent group data:

Gross margin
Weighted average occupancy
Average realized annual rent per square foot

Number of facilities (at the end of the period):

Consistent group
Cumulative post-1993 acquisitions

Net rentable square feet (at the end of the period):

Consistent group
Cumulative post-1993 acquisitions

$14,685
8,891

23,576

7,260
3,490

10,750

7,425
5,401

$14,689
3,345

18,034

7,305
1,546

8.851

7,384
1,799

$12,826

$ 9,183

50.6%
96.0%
$8.64

15
19

1,696
1,041

50.3%
96.3%
$8.64

15
5

1,696
308

–
165.8%

30.7%

(0.6)%
125.7%

21.5%

0.6%
200.2%

39.7%

0.6%
(0.3)%
–

–
280.0%

–
238.0%

$14,689
3,345

18,034

$14,144
704

14,848

7,305
1,546

8.851

7,384
1,799

7,269
281

7,550

6,875
423

$ 9,183

$ 7,298

50.3%
96.3%
$8.64

15
5

1,696
308

48.6%
95.0%
$8.28

15
1

1,696
195

3.9%
375.1%

21.5%

0.5%
450.2%

17.2%

7.4%
325.3%

25.8%

3.4%
1.3%
4.4%

–
400.0%

–
57.9%

As indicated in the above table, the Company’s commercial property operations have grown principally as a result of the addition of new prop-
erties over the past three years. The operations of the consistent group of properties over the past three years has been relatively stable, with
changes in operations principally the result of changing occupancy levels and realized rental rates. Due to the size of the Company’s investment in
commercial properties relative to its self-storage facilities, the Company has not emphasized its growth in this segment of its portfolio.

Effective January 2, 1997, the Company restructured its commercial property operations to concentrate its investing efforts in real estate facil-
ities containing commercial and industrial rental space through a separate entity. See Note 14 to the consolidated financial statements. The Company
believes that restructuring will create a vehicle which should facilitate future growth in this segment of the real estate industry. The Company will
participate in this growth through its ownership interest in the new entity. The Company currently owns approximately 85% of the economic inter-
est in the new entity. Accordingly, due to the Company’s significant ownership interest the Company will continue to consolidate the entity until such
time that the Company’s ownership and control is reduced to a level not warranting consolidation.

Equity in earnings of real estate entities: As of December 31, 1996, the Company had ownership interests in 41 affiliated limited partnerships
and eight affiliated REITs which comprise the Unconsolidated Entities. The Company’s ownership interest in these entities ranges from 15% to 45%,
but generally averages approximately 30%. Due to the Company’s limited ownership interest and control of these entities, the Company does not
consolidate the accounts of these entities for financial reporting purposes.

30

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Equity in earnings of real estate entities represents the Company’s pro rata share of earnings of the Unconsolidated Entities using the equity
method. Similar to the Company, the Unconsolidated Entities generate substantially all of their income from their ownership of self-storage 
facilities which are managed by the Company. In the aggregate, the Unconsolidated Entities own a total of 353 real estate facilities, 343 of which
are self-storage facilities. The following table summarizes the components of the Company’s equity in earnings of real estate entities:

Year Ended December 31,

Year Ended December 31,

(Amounts in thousands)

Self-storage operations
Commercial property operations
Depreciation:

Self-storage facilities
Commercial properties
Other(1)

1996

$ 41,722
2,667

(15,709)
(1,741)
(4,818)

1995

$ 6,573
269

(1,909)
(136)
(1,034)

Dollar
Change

$ 35,149
2,398

(13,800)
(1,605)
(3,784)

Total equity in earnings of real estate entities

$ 22,121

$ 3,763

$ 18,358

(1)Principally the Company’s pro rata share of general and administrative expense and interest expense.

1995

$ 6,573
269

(1,909)
(136)
(1,034)

$ 3,763

1994

$764
-

-
-
-

Dollar
Change

$ 5,809
269

(1,909)
(136)
(1,034)

$764

$ 2,999

The increase in 1995 earnings compared to 1994 is principally the result of the acquisition of ownership interests in the Unconsolidated Entities
acquired pursuant to the PSMI Merger. The increase in earnings in 1996 compared to 1995 is due to (i) the 1996 earnings reflect a full year’s oper-
ations for those interests acquired in the PSMI Merger as opposed to just one and one-half months in 1995, (ii) the Company acquired additional
interests during 1996 in the Unconsolidated Entities which resulted in increased earnings from these entities (See Note 5 to the Consolidated Finan-
cial Statements) offset by (iii) certain business combinations occurring in 1996 whereby the Company’s existing ownership interest in certain 
entities was converted into wholly-owned real estate facilities (See Note 3 to the consolidated financial statements).

The following table summarizes the combined operating data for fiscal 1996 with respect to those Unconsolidated Entities in which the Company

had an ownership interest as of December 31, 1996:

Rental income
Total revenues
Cost of operations
Depreciation
Net income

$180,197,000
182,036,000
65,417,000
27,332,000
75,937,000

P R O P E R T Y M A N A G E M E N T O P E R A T I O N S

In connection with the PSMI Merger, the Company acquired property management contracts, exclusive of facilities owned by the Company, for 
self-storage facilities and, through ownership of a 95% economic interest in a subsidiary, the management contracts for commercial properties.
These facilities constitute all of the United States self-storage facilities and commercial properties doing business under the “Public Storage” name
and all those in which the Company has an interest. At December 31, 1996, the Company managed 1,101 self-storage facilities (1,064 owned by 
affiliates of the Company and 37 owned by third parties) and 45 commercial properties, all of which are owned by affiliates of the Company.

The property management contracts generally provide for compensation equal to 6%, in the case of the self-storage facilities, and 5%, in the case
of the commercial properties, of gross revenues of the facilities managed. Under the supervision of the property owners, the Company coordinates
rental policies, rent collections, marketing activities, the purchase of equipment and supplies, maintenance activity, and the selection and engage-
ment of vendors, suppliers and independent contractors. In addition, the Company assists and advises the property owners in establishing policies
for the hire, discharge and supervision of employees for the operation of these facilities, including resident managers, assistant managers, relief
managers and billing and maintenance personnel.

31

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

PROPERTY MANAGEMENT OPERATIONS:

Year Ended December 31,

Year Ended December 31,

(Amounts in thousands)

Facility management fees:

Self-storage
Commercial properties

Cost of operations: 
Self-storage
Commercial properties

Net operating income:

Self-storage
Commercial properties

1996

1995

$13,474
954

14,428

1,820
755

2,575

11,654
199

$11,853

$1,976
168

2,144

264
88

352

1,712
80

$1,792

Dollar
Change

$11,498
786

12,284

1,556
667

2,223

9,942
119

$10,061

1995

1994

$1,976
168

2,144

264
88

352

1,712
80

$1,792

$

$

–
–

–

–
–

–

–
–

–

Dollar
Change

$1,976
168

2,144

264
88

352

1,712
80

$1,792

Because the Company has significant ownership interests in all but 37 of the facilities it manages, the revenues generated from its property man-
agement operations are generally predictable and are dependent upon the future growth of rental income for those facilities the Company manages.
However, because the Company has in the past, and may continue to seek to acquire in the future, real estate facilities owned by the Unconsolidated
Entities, the Company’s facility management income should decrease in 1997 compared to 1996. The acquisitions of such facilities will reduce man-
agement fee income. However, offsetting the reduction in management fee income will be a corresponding reduction in the cost of property opera-
tions as the facilities acquired by the Company will no longer incur property management fees. 

A N C I L L A R Y B U S I N E S S E S

Although not material to the Company’s overall operations, its ancillary business is expected to play a more important role in the future of the
Company. The following table summarizes the Company’s ancillary business operations:

Year Ended December 31,

Year Ended December 31,

(Amounts in thousands)

Ancillary revenues:

Sales of locks, boxes and packaging material
Truck rental income
Portable self-storage rents

Cost of operations – ancillary business
Locks, boxes and package materials
Truck rentals
Portable self-storage

Net operating income (loss) – ancillary business

Locks, boxes and package materials
Truck rentals
Portable self-storage

1996

1995

$2,540
543
421

3,504

1,660
511
1,247

3,418

880
32
(826)

$101
11
–

112

84
16
–

100

17
(5)
–

Dollar
Change

$2,439
532
421

3,392

1,576
495
1,247

3,318

863
37
(826)

1995

1994

$

$101
11
–

112

84
16
–

100

17
(5)
–

–
–
–

–

–
–
–

–

–
–
–

–

Dollar
Change

$101
11
–

112

84
16
–

100

17
(5)
–

$ 12

$

86

$ 12

$

74

$ 12

$

32

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

In an effort to attract a wider variety of customers, to further differentiate the Company from its competition and to generate new sources of 
revenues, additional businesses are being developed to complement the Company’s self-storage business. These products include the sale of locks,
boxes and packing supplies and the rental of trucks and other moving equipment through the implementation of (i) a retail expansion program, 
(ii) truck rental program and more importantly (iii) a portable self-storage business. 

The strategic objective of the retail expansion program is to create a “Retail Store” that will (i) rent spaces for the attached self-storage facility,
(ii) rent spaces for the other Public Storage facilities in adjacent neighborhoods, (iii) sell locks, boxes and packing materials to the general 
public, including tenants and (iv) rent trucks and other moving equipment, all in an environment that is more retail oriented. Retail stores will be
retrofitted to existing self-storage facility rental offices or “built-in” as part of the development of new self-storage facilities, both in high traffic, 
high visibility locations.

In 1996, the Company organized Public Storage Pickup & Delivery, Inc. (“PSPUD”) as a separate corporation to operate a portable self-
storage business that rents storage containers to customers for storage in central warehouses and provides related transportation services. The
Company believes PSPUD’s business complements the Company’s existing operations and PSPUD is using the national telephone reservation sys-
tem and various marketing initiatives, including radio and television, to promote its rental activity. PSPUD currently operates a total of 12 facilities
in six greater metropolitan areas in California and Texas. PSPUD anticipates opening four additional facilities in these areas and in three additional
areas by the end of the first quarter of 1997. PSPUD presently anticipates expanding its operations to a significant number of additional areas dur-
ing the remainder of 1997 and 1998, subject to continuing evaluation of this business and the satisfaction of regulatory requirements. There can be
no assurance on the level of PSPUD’s expansion or profitability.

Although not material to the Company’s 1996 operating results, the Company expects that this business will have a material impact on the Company
during 1997 and beyond. Generally, PSPUD expects to expend an amount ranging from $850,000 to $1,100,000 per facility during the first full year
of operations, depending on location and pricing structure. This estimate includes approximately $550,000 of capitalized expenditures and assumes
(i) a leased facility for 2,000 storage containers, (ii) a break-even occupancy level of 55% to 65%, (iii) a stabilized occupancy level of 90% reached
in 9 to 12 months, and (iv) monthly rental rates ranging from $35.00 to $45.00 per container. Rental rates will vary based on location and market
conditions. Most of the operating costs of a facility are expected to be fixed. However, certain fixed costs are expected to be reduced as the facility
reaches a stabilized occupancy level and certain economies of scale are expected to be achieved as the number of facilities in operation grows.

PSPUD’s operating experience is limited and its operations may be affected by such factors as the level of competition in the business, the demand
for storage containers, general economic conditions, either nationally or in the market areas in which PSPUD operates, the rate of facility move-
ins and move-outs, the availability of acceptable locations, the level of PSPUD’s operating expenses and the cost of capital equipment. Until the 
facilities are operating profitably, PSPUD’s operations are expected to adversely impact the Company’s earnings growth rate. The extent of the
impact will depend in significant part on the number, timing and performance of new facilities.

O T H E R I N C O M E A N D E X P E N S E I T E M S

Interest and other income: Interest and other income was $7,064,000 in 1996, $4,497,000 in 1995, and $4,587,000 in 1994. This income is pri-
marily attributable to interest income on cash balances (as a result of uninvested net equity offering proceeds during 1996 and 1995) and interest
income from mortgage notes receivable. The Company canceled approximately $700,000 in 1996, $16,435,000 in 1995, and $24,441,000 in 1996
of mortgage notes receivable in connection with the acquisition of real estate facilities securing such notes. The Company also acquired notes receiv-
able of $6,667,000 in the PSMI Merger in 1995 and an additional $3,709,000 in 1996 from affiliated parties. As a result, interest income 
from mortgage notes receivable decreased from $4,333,000 in 1994 to $1,974,000 in 1995, as the average outstanding mortgage notes receivable
balance was significantly lower. Interest income from the mortgage notes receivable increased from $1,974,000 in 1995 to $2,710,000 in 1996 as
a result of the notes acquired in 1995 and 1996.

33

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Depreciation and amortization: Depreciation and amortization expense was $64,967,000 in 1996, $40,760,000 in 1995, and $28,274,000 in 1994.
These increases are principally due to the acquisition of additional real estate facilities in each period combined with amortization of intangible
assets acquired in connection with the PSMI Merger. Depreciation expense with respect to the real estate facilities was $55,689,000 in 1996,
$39,376,000 in 1995, and $28,099,000 in 1994; the increases are due to the acquisition of additional real estate facilities in 1994 through 1996.
Amortization expense with respect to intangible assets acquired in the PSMI Merger totaled $9,309,000 in 1996 and $1,164,000 in 1995 (the 1995
amount representing a pro rated amount from November 16, 1995 through the end of the year). 

General and administrative expense: General and administrative expense was $5,524,000 in 1996, $3,982,000 in 1995, and $2,631,000 in 1994.
The Company has experienced and expects to continue to experience increased general and administrative costs due to the following: (i) the growth
in the size of the Company, (ii) the Company’s property acquisition activities have continued to expand, resulting in certain additional costs incurred
in connection with the acquisition of additional real estate facilities, and (iii) pursuant to the PSMI Merger, the Company became self-advised,
resulting in the Company internalizing management functions which previously were provided by the Company’s investment adviser. However, 
offsetting the expected increases in general and administrative expenses has been the elimination of advisory fee expense. General and adminis-
trative costs for each year principally consist of state income taxes (for states in which the Company is a non-resident), investor relation expenses,
and certain overhead associated with the acquisition and development of real estate facilities.

Interest expense: Interest expense was $8,482,000 in 1996, $8,508,000 in 1995, and $6,893,000 in 1994. Reflecting the Company’s reluctance
to finance its growth with debt, debt and related interest expense remains relatively low compared to the Company’s overall asset base. The decrease
in interest expense in 1996 compared to 1995, principally is due to the early retirement of debt in 1996 of approximately $41.0 million having a
weighted average interest rate of 7.76% partially offset by assumption of a $65.5 million, 7.08% unsecured senior note in connection with the 
PSMI Merger on November 16, 1995.

Environmental costs: The Company’s policy is to accrue environmental assessments and/or remediation cost when it is probable that such efforts
will be required and the related costs can reasonably be estimated. The majority of the Company’s real estate facilities were acquired prior to the
time when it was customary to conduct environmental assessments. During 1995, the Company and the Consolidated Partnerships conducted inde-
pendent environmental investigations of their real estate facilities. As a result of these investigations, the Company has recorded an amount which,
in management’s best estimate, will be sufficient to satisfy anticipated costs of known remediation requirements. At December  31, 1995, the
Company accrued $2,741,000 for estimated environmental remediation costs. Although there can be no assurance, the Company is not aware of
any environmental contamination of any of its facilities which individually or in the aggregate would be material to the Company’s overall business,
financial condition, or results of operations. The Company believes that amounts accrued in 1995 are sufficient to satisfy anticipated costs.

Advisory fees: Advisory fees were $4,983,000 in 1994 and $6,437,000 in 1995. The advisory fee, which was based on a contractual computation,
increased as a result of increased adjusted net income (as defined) per common share combined with the issuance of additional preferred and com-
mon stock during each of the periods. Advisory fees for fiscal 1995 represent such amounts from the beginning of the year through November 16,
1995, when the Company became self-advised pursuant to the PSMI Merger. As a result of becoming self-advised, the Company no longer incurs
advisory fees. 

Minority interest in income: Minority interest in income represents the income allocable to equity interests in the Consolidated Partnerships which
are not owned by the Company. Since 1990, the Company has acquired portions of these equity interests through its acquisition of limited and gen-
eral partnership interests in the Consolidated Partnerships. These acquisitions have resulted in reductions to the “Minority interest in income”
from what it would otherwise have been in the absence of such acquisitions, and accordingly, have increased the Company’s share of the
Consolidated Partnerships’ income. However, offsetting the reduction in minority interest in  1996 caused by the acquisition of additional equity
interests are the inclusion of additional partnerships in the Company’s consolidated financial statements. During 1996, the Company acquired 
sufficient ownership interest and control in three partnerships and commenced including the accounts of these partnerships in the Company’s 
consolidated financial statements which amounted to an increase in minority interest in income of approximately $2,187,000 in 1996.

In determining income allocable to the minority interest for 1996, 1995 and 1994 consolidated depreciation and amortization expense of approx-
imately $11,490,000, $11,243,000 and $13,556,000, respectively, was allocated to the minority interest. The decrease in depreciation allocated to
the minority interest was principally the result of the acquisition of limited partnership units in the Consolidated Partnerships by the Company
throughout fiscal 1994, 1995 and 1996 offset by an increase in 1996 resulting from the above mentioned consolidation of three partnerships. 

34

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

S U P P L E M E N T A L P R O P E R T Y D A T A A N D T R E N D S

There are approximately 81 ownership entities owning in aggregate 1,064 self-storage facilities, including the facilities which the Company owns
and/or operates. At December 31, 1996, 343 of these facilities were owned by Unconsolidated Entities, entities in which the Company has an owner-
ship interest and uses the equity method for financial statement presentation. The remaining 721 facilities are owned by the Company and
Consolidated Partnerships, many of which were acquired through business combinations with affiliates during 1996, 1995, and 1994.

In order to evaluate how the Company’s overall portfolio has performed, management analyzes the operating performance of a consistent 
group of self-storage facilities representing 951 (55.8 million net rentable square feet) of the 1,064 self-storage facilities (herein referred to as
“Same Store” self-storage facilities) which have been operated under the “Public Storage” name for at least the past three years. The Same Store
group of properties includes 613 consolidated facilities and 338 facilities owned by Unconsolidated Entities. The following table summarizes the 
pre-depreciation historical operating results of the Same Store self-storage facilities:

SAME-STORE MINI-WAREHOUSE FACILITIES:
(Historical property operations)

(Dollar amounts in thousands, except rent per square foot)

1996

1995

Change

1995

1994

Change

Year Ended December 31,

Year Ended December 31,

Rental income
Cost of operations(1)

Net operating income

Gross profit margins(3)
Weighted avg. occupancy
Weighted avg. realized rent per sq. ft.(2)
Weighted avg. scheduled annual rent per sq. ft.(2)

$445,586
158,212

$287,374

64.5%
91.2%
$8.76
$9.00

$422,933
149,660

$273,273

64.6%
90.1%
$8.40
$8.16

5.4%
5.7%

5.2%

(0.2)%
1.2%
4.3%
10.3%

$422,933
149,660

$273,273

64.6%
90.1%
$8.40
$8.16

$403,295
144,752

$258,543

64.1%
89.2%
$8.16
$7.80

4.9%
3.4%

5.7%

0.8%
1.0%
2.9%
4.6%

1. Assumes payment of property management fees on all facilities, including those facilities owned by the Company which effective November 16,  1995 no fee is paid. Cost of operations 

consists of the following:

Payroll expense
Property taxes
Property management fees
Advertising
Telephone center costs
Other(4)

1996

$ 43,490
40,799
26,139
3,851
1,956
41,977

$158,212

1995

$ 42,545
38,325
25,391
3,502
–
39,897

$149,660

1994

$ 41,092
36,941
24,214
3,709
–
38,796

$144,752

2. Realized rent per square foot represents the actual revenue earned per occupied square foot. Management believes this is a more relevant measure than the scheduled rental rates,

since scheduled rates can be discounted through the use of promotions.

3. Gross profit margin is computed by dividing property net operating income (before depreciation expense) by rental revenues. Cost of operations include a 6% management fee. The

gross profit margin excluding the facility management fee was 70.5%, 70.6% and 70.1% in 1996, 1995 and 1994, respectively. On November 16, 1995, the Company acquired its facility
manager and no longer incurs such fees on the properties it owns.

4. Other expenses principally include utilities, repairs and maintenance, and other items such as office expenses.

As indicated above, in early 1996, the Company implemented a national telephone reservation system designed to provide added customer ser-
vice for all the self-storage facilities under management by the Company. The Company believes that the improved operating results, as indicated
in the above table, in large part are due to the success of the national telephone reservation system. However, the national telephone reservation
system was not fully operational for most of the self-storage facilities until the latter part of the fourth quarter of 1996. As of December 31, 1996,
the national telephone reservation system was supporting rental activity at all of the self-storage properties managed by the Company, with the
exception of one major market, which will be operational by end of March 1997.

Rental income for the Same Store facilities included promotional discounts totaling $6,000,000 in 1996 ($3,000,000 of which occurred during
the fourth quarter of 1996) compared to $729,000 and $1,466,000 in 1995 and 1994, respectively. The significant increase in 1996 was principally
due to experimentation with pricing and promotional discounts designed to increase rental activity.

In addition to evaluating property operating trends in occupancy, realized rents, expenses and net operating income on a Same Store basis, man-
agement evaluates trends by geographic regions. Operating trends for the Same-Store facilities for the five largest regions are shown in the table
on the following page.

35

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

SAME-STORE OPERATING TRENDS BY REGION

Northern California

Southern California

% change
from prior
year

Amount

% change
from prior
year

Amount

Rental Revenues:

1996
1995
1994

$65,222
60,053
56,777

8.61%
5.77%
4.40%

$79,524
75,826
73,191

4.88%
3.60%
6.73%

Cost of operations:

1996
1995
1994

$18,457
17,856
17,271
Net operating income:

3.37%
3.39%
5.68%

$24,580
23,250
23,633

5.72%
(1.62)%
5.52%

Texas

% change
from prior
year

1.31%
2.69%
4.32%

5.83%
1.51%
9.35%

Amount

$39,704
39,191
38,163

$16,482
15,574
15,342

1996
1995
1994

$46,765 10.83%
6.81%
42,197
3.85%
39,506

$54,944
52,576
49,558

4.50%
6.09%
7.39%

$23,222
23,617
22,821

(1.67)%
3.49%
1.19%

Florida

Illinois

Other states

% change
from prior
year

Amount

% change
from prior
year

Amount

% change
from prior
year

Amount

$27,908
27,066
26,241

$10,772
10,412
10,303

$17,136
16,654
15,938

3.11%
3.14%
3.45%

3.46%
1.06%
4.03%

2.89%
4.49%
3.09%

9.00%
$31,123
7.67%
28,552
26,518 12.64%

$202,105
192,245
182,405

$14,887
5.47%
14,115 16.94%
0.32%
12,070

$73,034
68,453
66,133

5.13%
5.39%
9.94%

6.69%
3.51%
4.19%

$16,236 12.46%
14,437
(0.08)%
14,448 25.51%

4.26%
$129,071
123,792
6.47%
116,272 13.51%

Total

% change
from prior
year

5.35%
4.87%
7.73%

5.71%
3.39%
4.76%

5.16%
5.70%
9.47%

Amount

$445,586
422,933
403,295

$158,212
149,660
144,752

$287,374
273,273
258,543

Weighted avg. occupancy:

1996
1995
1994

94.5% 3.73%
91.1% 3.52%
88.0% 0.57%

87.3% 2.46%
85.2% 2.40%
83.2% 3.35%

89.6% 1.36%
88.4%
–
88.4% 1.61%

88.7% 0.23%
88.5% (1.34)%
89.7% (1.32)%

92.8%
–
92.8% 1.98%
91.0% 7.44%

92.2% 0.55%
91.7% 0.33%
91.4% 2.81%

91.2% 1.22%
90.1% 1.01%
89.2% 2.53%

Weighted avg. realized rents per sq. ft.:
$10.20
9.72
9.48

4.94%
2.53%
2.60%

1996
1995
1994

$10.32
10.08
9.96

2.38%
1.20%
3.75%

$6.84
6.84
6.72

–
1.79%
3.70%

$8.04
7.80
7.44

3.10%
4.84%
3.33%

$8.88
8.16
7.80

8.82%
4.62%
4.84%

$8.40
8.04
7.68

4.48%
4.69%
6.67%

$8.76
8.40
8.16

4.29%
2.94%
6.25%

Factors affecting regional trends in revenues and expenses include: 
• acts of nature, including the Northridge earthquake (Southern California, 1994).
• new competition from property development (Texas)
• property valuations and related reassessments for purposes of property taxes (Illinois, 1995)
These factors have and are expected to continue to affect regional operating trends. During 1997, management expects additional property tax assessments due to higher valuations/rates,
resulting in increased property taxes.

L I Q U I D I T Y A N D C A P I T A L R E S O U R C E S

The Company has operated and intends to continue to operate in a self-sufficient manner without reliance on external sources of financing to fund
its ongoing operating needs. The Company believes that funds internally generated from ongoing operations will continue to be sufficient to enable
it to meet its operating expenses, capital improvements, debt service requirements and distributions to shareholders for the foreseeable future. 

Internally generated cash flows: The Company believes that important measures of its performance as well as its liquidity are cash provided by
operations, funds from operations (“FFO”) and the ability of these measures to fund the Company’s operating requirements (i.e. capital improve-
ments, principal payments on debt, and distribution requirements).

Net cash provided by operating activities (as determined in accordance with generally accepted accounting principles) reflects the cash gener-
ated from the Company’s business before distributions to various equity holders, including the preferred shareholders, capital expenditures or
mandatory principal payments on debt. Net cash provided by operations has increased over the past three years from $79.2 million in  1994 to
$245.2 million in 1996.

36

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Operating as a REIT, the Company’s ability to retain cash flow for reinvestment is restricted. In order for the Company to maintain its REIT status,
a substantial portion of its operating cash flow must be used to make distributions to its shareholders (see “REIT status” below). Remaining cash
flow must then be sufficient to fund necessary capital improvements and scheduled debt service requirements. The following table summarizes the
Company’s ability to pay the minority interests’ distributions, its dividends to the preferred shareholders and capital improvements to maintain the
facilities through the use of cash provided by operating activities. The remaining cash flow is available to the Company to make both scheduled and
optional principal payments on debt, pay distributions to common shareholders and for reinvestment. 

(In thousands)

Net income
Depreciation and amortization
Depreciation from Unconsolidated Entities
Minority interest in income
Environmental accrual
Amortization of discounts on mortgage notes receivable

Net cash provided by operating activities

Distributions from operations to minority interests

Cash from operations/ FFO allocable to the Company’s shareholders

Less: preferred stock dividends

Cash from operations/ FFO available to common shareholders
Capital improvements to maintain facilities:

Self-storage facilities
Commercial properties

Add back: minority interest share of capital improvements to maintain facilities

Funds available for principal payments on debt, common dividends and reinvestment
Cash distributions to common shareholders

For the Year Ended December 31,

1996

1995

1994

$153,549
64,967
17,450
9,363
–
(92)

245,237
(20,853)

224,384
(68,599)

155,785

(15,957)
(4,409)
3,159

138,578
(67,709)

$ 70,386
40,760
2,045
7,137
3,251
(113)

123,466
(18,380)

105,086
(31,124)

73,962

(8,509)
(2,852)
3,219

65,820
(38,586)

$ 42,118
28,274
–
9,481
–
(693)

79,180
(23,037)

56,143
(16,846)

39,297

(6,360)
(1,952)
2,948

33,933
(21,249)

Funds available for principal payments on debt and reinvestment

$ 70,869

$ 27,234

$ 12,684

See the Consolidated Statements of Cash Flows for the each of the three years in the period ended December 31, 1996 for additional informa-

tion regarding the Company’s investing and financing activities. 

Total FFO increased to $224,384,000 for the year ended December 31, 1996 compared to $105,086,000 in 1995 and $56,143,000 in 1994. FFO
available to common shareholders (after deducting preferred stock dividends) increased to $155,785,000 for the year ended December 31, 1996
compared to $73,962,000 in 1995 and $39,297,000 in 1994. FFO means net income (loss) (computed in accordance with generally accepted
accounting principles) before (i) gain (loss) on early extinguishment of debt, (ii) minority interest in income and (iii) gain (loss) on disposition of
real estate, adjusted as follows: (i) plus depreciation and amortization (including the Company’s pro-rata share of depreciation and amortization of
unconsolidated equity interests and amortization of assets acquired in the PSMI Merger, including property management agreements and goodwill),
and (ii) less FFO attributable to minority interest. 

FFO is a supplemental performance measure for equity REITs as defined by the National Association of Real Estate Investment Trusts, Inc.
(“NAREIT”). The NAREIT definition does not specifically address the treatment of minority interest in the determination of FFO or the treatment of
the amortization of property management agreements and goodwill. In the case of the Company, FFO represents amounts attributable to its share-
holders after deducting amounts attributable to the minority interests and before deductions for the amortization of property management agree-
ments and goodwill. FFO is presented because many industry analysts consider FFO to be one measure of the performance of the Company and it
is used in establishing the terms of the Class B Common Stock. FFO does not take into consideration capital improvements, scheduled principal pay-
ments on debt, distributions and other obligations of the Company. Accordingly, FFO is not a substitute for the Company’s cash flow or net income
(as discussed above) as a measure of the Company’s liquidity or operating performance.

The Company accounts for the Unconsolidated Entities using the equity method of accounting, and, accordingly, earnings are recognized based
upon the Company’s interest in each of the partnerships and REITs. This interest is based on the Company’s share of the increase or decrease in
the net assets of the entities from their operations. Provisions of the partnerships’ and REITs’ governing documents provide for the payment of pre-
ferred cash distributions to other investors (until certain specified amounts have been paid) without regard to the pro-rata interest of all investors
in current earnings. As a result, actual cash distributions paid to the Company for a period of time will be less than the Company’s interest in the
entities’ FFO. During 1996, FFO distributed to the Company was approximately $16.4 million less than the Company’s share of FFO. Preferred cash
distributions paid to other investors during each period have the effect of increasing the Company’s economic interest in each of the respective enti-

37

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

ties and reducing the amount of future preference payments which must be paid to other investors before cash distributions will be shared on a pro-
rata basis with respect to each investor’s actual interest. The aggregate future preference payments to other investors is approximately $81.1 mil-
lion and is expected to be paid over approximately 12 years, with approximately 50% of the amount being paid over the next 3.5 years.

Distributions requirements: Over the past four years, the Company’s conservative distribution policy has been the principal reason for the
Company’s ability to retain significant operating cash flows which have been used to make additional investments and debt reductions. During 1994,
1995 and 1996, the Company distributed to common shareholders approximately 54%, 52% and 44% of its FFO available to common shareholders,
respectively, allowing it to retain approximately $110.8 million over this period of time after satisfying its capital improvements and preferred stock
dividend requirements.

During 1996, the Company paid dividends totaling $56,472,000 to the holders of the Company’s Senior Preferred Stock, $12,127,000 to the hold-
ers of the Convertible Preferred Stock, and $67,709,000 to the holders of Common Stock. Dividends with respect to the Senior Preferred Stock and
the Convertible Preferred Stock include pro-rated amounts for securities issued during 1996. The Company estimates the distribution requirements
for fiscal 1997 with respect to Senior Preferred Stock and the Convertible Preferred Stock to be approximately $76.8 million. Distributions with
respect to the common stock will be determined based upon the Company’s REIT distribution requirements after taking into consideration distrib-
utions to the Company’s preferred shareholders.

Capital improvement requirements: During 1997, the Company has budgeted approximately $26.6 million for capital improvements ($22.4 mil-
lion for its self-storage facilities and $4.2 million for its commercial properties). The minority interests’ share of the budgeted capital improvements
is approximately $3.3 million. 

During 1995, the Company commenced a program to enhance its visual icon and modernize the appearance of its self-storage facilities, includ-
ing modernization of signs, paint color schemes, and rental offices. Included in the 1997 capital improvement budget is approximately $4.8 million
with respect to these expenditures.

The significant increase in capital improvements in 1996 for the self-storage facilities (as reflected in the table on page 37) is due to the acqui-

sition of new facilities in 1996 and 1995 and the aforementioned visual enhancements during 1996.

Debt service requirements: The Company does not believe it has any significant refinancing risks with respect to its mortgage debt, all of which
is fixed rate. During 1996, the Company retired early approximately $43.2 million of mortgage debt. At December 31, 1996, the Company had total
outstanding borrowings of approximately $108.4 million. See Note 8 to the Consolidated Financial Statements for approximate principal maturities
of such borrowings.

The Company uses its $150.0 million of bank credit facility (all of which was unused as of March 18, 1997) primarily to fund acquisitions 
and provide financial flexibility and liquidity. The credit facility currently bears interest at LIBOR plus 0.40% based on the Company’s current 
financial ratios. 

Growth strategies: During 1997, the Company intends to continue to expand its asset and capital base principally through the (i) acquisition of real
estate assets and interests in real estate assets from both unaffiliated and affiliated parties through direct purchases, mergers, tender offers or other
transactions, (ii) development of additional self-storage facilities and (iv) the expected growth in the operations of PSPUD in the portable self-stor-
age business. See further discussion below with respect to each of these activities.

The Company expects to fund these transactions with internally generated retained cash flows and borrowings under its $150.0 million credit
facility. The Company intends to repay amounts borrowed under the credit facility from undistributed operating cash flow or, as market conditions
permit and are determined to be advantageous, from the public or private placement of equity securities. With respect to the development of addi-
tional self-storage facilities, the Company expects to enter into a joint venture arrangement, see “Development Activities” below.

External financing ability: The Company believes that its size and financial flexibility enables it to access capital for growth when appropriate. The
Company’s financial profile is characterized by a low level of debt to total capitalization, increasing net income, increasing cash flow from opera-
tions, and a conservative dividend payout ratio with respect to the common stock. The Company’s credit ratings on its Senior Preferred Stock by
each of the three major credit agencies are Baa2 by Moody’s and BBB+ by Standard and Poors and Duff & Phelps. 

The Company’s portfolio of real estate facilities remains substantially unencumbered. At December 31, 1996, the Company had mortgage debt
outstanding of $48.7 million and had consolidated real estate facilities with a book value of $1.9 billion. The Company, however, has been reluctant
to finance its acquisitions with debt and generally will only increase its mortgage borrowing through the assumption of pre-existing debt on acquired
real estate facilities.

38

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Over the past three years the Company has funded substantially all of its acquisitions with permanent capital (both common and preferred stock).
Unlike many other real estate companies, the Company has elected to use preferred stock despite the fact that the coupon rates of its preferred
stock exceeds current rates on conventional debt. The Company has chosen this method of financing for the following reasons: (i) the Company’s
perpetual preferred stock has no sinking fund requirements or maturity date and does not require redemption, all of which eliminate any future 
refinancing risks, (ii) preferred stock allows the Company to leverage the common stock without the attendant interest rate or refinancing risks of
debt, and (iii) dividends on the preferred stock can be applied to the Company’s REIT distributions requirements, which have helped the Company
to maintain a low common stock dividend payout ratio and retain cash flow. 

On March 18, 1997, the Company publicly issued 4.6 million shares of common stock, raising net proceeds of approximately $126.5 million. The
Company intends to use the net proceeds from this offering to make investments in real estate, primarily self-storage, including mortgage loans and
interest in real estate partnerships, to satisfy cash elections in connection with mergers with affiliated REITs and to fund expenditures of PSPUD.

Proposed mergers with affiliates: In December 1996, Public Storage Properties XIV, Inc. (“Properties 14”) and Public Storage Properties XV, Inc.
(“Properties 15”) each agreed, subject to certain conditions, to merge with and into the Company. Properties 14 and Properties 15 are affiliated, 
publicly traded equity REITs. Each of the mergers is conditioned on approval by the respective shareholders of Properties 14 and Properties 15.
However, the mergers are not conditioned on each other. The Company expects that if approved by the shareholders, the mergers would be com-
pleted in April 1997. The estimated value of the Properties 14 and Properties 15 merger is approximately $63.8 million and $58.5 million, respec-
tively. Properties 14 and Properties 15 own 14 properties (912,000 square feet) and 19 properties (1,087,000 square feet), respectively. The
Company currently owns approximately 33% and 35% of the economic interest in Properties 14 and Properties 15, respectively.

Development activities: At December 31, 1996, the Company had eleven self-storage facilities (approximately 707,000 square feet) under con-
struction with an aggregate cost incurred to date of approximately $33.5 million and total additional estimated cost to complete of $22.5 million.
The Company currently has plans to develop an additional 17 self-storage facilities (approximately 1,026,000 square feet) in various locations at
an estimated cost of approximately $70.2 million. The Company is evaluating the feasibility of developing additional self-storage facilities in selected
markets in which there are few, if any, facilities to acquire at attractive prices and where the scarcity of other undeveloped parcels of land or other
impediments to development make it difficult to construct additional competing facilities.

The Company has reached an agreement in principle with a joint venture partner to participate in funding the development of approximately 
$220 million of self-storage facilities (including the facilities currently under development by the Company). The joint venture partner would 
contribute about 70% of the venture’s capital with the balance provided by the Company. After a period of time, the Company would have an option
to acquire the other venturer’s interest. There can be no assurance that a definitive agreement can be reached between the Company and the joint
venturer partner. Assuming an agreement is finalized, it is expected that the joint venture would be funded in early April 1997.

Portable self-storage business: As indicated above, in 1996 the Company organized PSPUD as a separate corporation to operate a portable self-
storage business that rents storage containers to customers for storage in central warehouses and provides related transportation services. PSPUD
currently operates a total of 12 facilities in six greater metropolitan areas in California and Texas and anticipates opening four additional facilities
in these areas and in three additional areas by the end of the first quarter of 1997. PSPUD presently anticipates expanding its operations to a sig-
nificant number of additional areas during the remainder of 1997 and 1998, subject to continuing evaluation of this business and the satisfaction of
regulatory requirements. There can be no assurance on the level of PSPUD’s expansion or profitability.

Generally, PSPUD expects to expend an amount ranging from $850,000 to $1,100,000 per facility during the first full year of operations, depend-
ing on location and pricing structure. This estimate includes approximately $550,000 of capitalized expenditures combined with estimated first year
operating losses and is based on certain assumptions indicated under “Ancillary Businesses” (pages 32-33).

REIT status: The Company believes that it has operated, and intends to continue to operate, in such a manner as to qualify as a REIT under 
the Internal Revenue Code of 1986, but no assurance can be given that it will at all times so qualify. To the extent that the Company continues to
qualify as a REIT, it will not be taxed, with certain limited exceptions, on the taxable income that is distributed to its shareholders. As a REIT, the
Company is not taxed on that portion of its taxable income which is distributed to its shareholders provided that at least 95% of its taxable income
is so distributed prior to filing of the Company’s tax return. The Company has satisfied the REIT distribution requirement since 1980. 

39

P U B L I C S T O R A G E ,   I N C .   1 9 9 6   A N N U A L R E P O R T

Common Stock Distribution Policy and Stock Price

Public Storage, Inc. has paid continuous quarterly distributions to its shareholders since 1981, its first full year of operations. Distributions paid
per share of common stock for 1996 amounted to $.88.

Holders of common stock are entitled to receive distributions when and if declared by the Company’s Board of Directors out of any funds legally
available for that purpose. The Company is required to distribute at least 95% of its net taxable ordinary income prior to the filing of the Company’s
tax return and 85%, subject to certain adjustments, during the calendar year, to maintain its REIT status for Federal income tax purposes. It is 
management’s intention to pay distributions of not less than this required amount. For Federal tax purposes, distributions to shareholders are
treated as ordinary income, capital gains, return of capital or a combination thereof, and for the past three years distributions to common share-
holders were as follows:

Year Ended

1996
1995
1994

Amount 
Paid

$.88
.88
.85

Ordinary
Income

$.88
.88
.85

Capital Gain
Amount

Non-taxable
Return of Capital

$ –
–
–

$ –
–
–

The common stock has been listed on the New York Stock Exchange since October 19, 1984 and on the Pacific Exchange since December 26, 1996.

The ticker symbol is PSA.

The following table sets forth the high and low sales prices of the common stock on the New York Stock Exchange composite tapes for the applic-

able periods.

Year

1995

1996

Quarter

1st
2nd
3rd
4th

1st
2nd
3rd
4th

Range

Low

$131⁄2
151⁄4
163⁄8
173⁄8

187⁄8
193⁄8
197⁄8
221⁄4

High

$171⁄8
171⁄8
183⁄4
193⁄4

217⁄8
211⁄2
225⁄8
313⁄8

As of February 28, 1997, there were approximately 19,676 holders of record of the common stock.

40

Corporate Data

Public Storage, Inc.

http:// w w w.publicstorage.com

D I R E C T O R S

E x e c u t i v e   O f f i c e r s

O t h e r   C o r p o r a t e
O f f i c e r s

M a n a g e m e n t  
D i v i s i o n

B. Wayne Hughes (1980)
Chairman of the Board and
Chief Executive Officer

B. Wayne Hughes
Chairman of the Board and
Chief Executive Officer

Harvey Lenkin (1991)
President

Harvey Lenkin
President

Robert J. Abernethy (1980)
President, American Standard
Development Company and
Self-Storage Management
Company

Dann V. Angeloff (1980)
President,
The Angeloff Company

William C. Baker (1991)
Chairman and Chief Executive
Officer of Santa Anita Operating
Company and Chairman of Santa
Anita Realty Enterprises, Inc.

Uri P. Harkham (1993)
President and 
Chief Executive Officer of the
Jonathan Martin Fashion Group

Date in parentheses indicates year 
director was elected to the board.

Shareholders may obtain, without
charge, a copy of Form 10-K, as filed
by the Company with the Securities
and Exchange Commission by
addressing a written request to the
Investor Services Department 
at the Corporate Headquarters.

Printed in USA: Costello Brothers
Lithographers, Alhambra, California

John Reyes
Senior Vice President,
Chief Financial Officer and
Assistant Secretary

Hugh W. Horne
Senior Vice President

Marvin M. Lotz
Senior Vice President

David Goldberg
Senior Vice President and
General Counsel

A. Timothy Scott
Senior Vice President and
Tax Counsel

Obren B. Gerich
Senior Vice President and
Assistant Secretary

Sarah Hass
Vice President and Secretary

American Office Park 
Properties, Inc.

Ronald L. Havner, Jr.
President and 
Chief Executive Officer

Mary Jayne Howard
Executive Vice President
President-Operations Group

Mary Piper-Mutz
Vice President

Lee Rippel
Vice President

Samuel I. Ballard
Vice President

Anthony Grillo
Vice President

Alan Grossman
Vice President

Tamara Hughes Gustavson
Vice President - Administration

Joanne A. Halliday
Vice President

Ronald L. Harden, Sr.
Vice President

Gregory S. Houge
Vice President

B. Wayne Hughes, Jr.
Vice President - Acquisitions

Brent C. Peterson
Vice President and
Chief Information Officer

David P. Singelyn
Vice President, Treasurer and
Assistant Secretary

Jill L. Webster
Vice President and 
Director of Taxation

P R O F E S S I O N A L
S E R V I C E S

Transfer Agent
Boston EquiServe
Boston, Massachusetts
http://www.EquiServe.com

Auditors
Ernst & Young LLP
Los Angeles, California

Marvin M. Lotz
President

Samuel I. Ballard
Senior Vice President 

Anthony Grillo
Senior Vice President 

Ronald L. Harden, Sr.
Senior Vice President 

Gregory S. Houge
Senior Vice President

Brent C. Peterson
Senior Vice President 

Timothy C. Arthurs
Vice President

Ira J. Bailey
Vice President 

Kelly M. Barnes
Vice President 

Jeffery A. Biesz
Vice President 

Brad A. Boyd
Vice President

Richard J. Gerner
Vice President 

Alan Grossman
Vice President

Les Guttman
Vice President 

Joanne A. Halliday 
General Counsel 

Kay Merg
Vice President

Thomas O. Murphy
Vice President

Gary P. Ott
Vice President

Brian J. Ruthsatz
Vice President 

John M. Sambuco
Vice President 

Kathleen Steele
Vice President 

James Stevens
Vice President 

Daniel M. Yoshihara
Vice President 

Public Storage, Inc.
701 Western Avenue

Glendale, California 91201

(818) 244-8080

Address Correction Requested

www.publicstorage.com

Bulk Rate
U.S. Postage
PAID
Bank of Boston