Public Storage
Annual Report 1998

Plain-text annual report

Public Storage, Inc. 1998 Annual Report PS ® Thinking Outside the Box TRUCK RENTALS INTERNET COMMERCE NATIONAL RESERVATION CENTER MERGERS Public Storage, Inc. and The System Public Storage, Inc. is a fully integrated, self-administered and self-managed real estate investment trust that primarily acquires, develops, owns and operates self-storage facilities. The Company’s self-storage properties are located in 37 states. At December 31, 1998, the Company owned interests in 1,094 self-storage properties (1,309 when the portfolios of Public Storage, Inc. and Storage Trust Realty are combined). The Public Storage System is a national infrastructure operated by thousands of people. The system is designed to respond efficiently to the needs of its 700,000 customers. The system also encompasses subsidiaries operating portable self-storage, truck rentals and retail stores. Location Alabama Arizona California Colorado Connecticut Delaware Florida Georgia Hawaii Illinois Indiana Kansas Kentucky Louisiana Maryland Massachusetts Michigan Minnesota Missouri Nebraska Nevada New Hampshire New Jersey New York North Carolina Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina Tennessee Texas Utah Virginia Washington Wisconsin Totals Number of Properties(1) Public Storage, Inc. Combined Portfolio(2) Net Rentable Square Feet Public Storage, Inc. Combi Portfolio(2) 16 11 281 38 13 4 101 36 5 67 14 15 4 8 35 10 12 6 19 1 22 2 35 29 10 27 8 25 18 2 2 11 123 6 33 38 7 1,094 21 11 281 50 13 4 129 61 5 90 14 22 8 11 35 10 12 6 41 1 22 2 35 29 20 31 8 25 18 2 24 22 156 6 37 38 9 1,309 633,000 735,000 16,799,000 2,374,000 710,000 230,000 5,905,000 1,898,000 247,000 4,224,000 799,000 882,000 213,000 542,000 1,989,000 580,000 694,000 341,000 1,018,000 46,000 1,409,000 123,000 2,018,000 1,692,000 570,000 1,650,000 429,000 1,171,000 1,224,000 64,000 81,000 706,000 8,110,000 324,000 2,040,000 2,360,000 448,000 65,278,000 835,000 735,000 16,799,000 3,137,000 710,000 230,000 7,253,000 3,525,000 247,000 5,404,000 799,000 1,274,000 424,000 831,000 1,989,000 580,000 694,000 341,000 2,212,000 46,000 1,409,000 123,000 2,018,000 1,692,000 1,005,000 1,899,000 429,000 1,171,000 1,224,000 64,000 1,081,000 1,312,000 10,125,000 324,000 2,241,000 2,360,000 703,000 77,245,000 (1) Self-storage and properties combining self-storage and commercial space. (2) Public Storage, Inc. and Storage Trust Realty combined assets as of December 31, 1998. Selected Financial Highlights (In thousands, except per share data) For the year ended December 31, Revenues: Rental income Equity in earnings of real estate entities Facility management fees Interest and other income Expenses: Cost of operations Cost of facility management Depreciation and amortization General and administrative Interest expense Environmental cost Advisory fee Income before minority interest Minority interest in income Net income Per Common Share: Distributions Net income — Basic Net income — Diluted Weighted average common shares — Basic Weighted average common shares — Diluted Balance Sheet Data: Total assets Total debt Minority interest Shareholders’ equity Public Storage, Inc. 1998 Annual Report 1998(1) 1997(1) 1996(1) 1995(1) 1994 $ 535,869 26,602 6,221 13,459 582,151 $ 434,008 17,569 10,141 9,126 470,844 $ 294,426 22,121 14,428 7,976 338,951 $ 202,134 3,763 2,144 4,509 212,550 212,815 1,066 107,482 8,972 4,507 — — 334,842 247,309 (20,290) $ 227,019 174,186 1,793 91,356 6,384 6,792 — — 280,511 190,333 (11,684) $ 178,649 94,491 2,575 64,967 5,524 8,482 — — 176,039 162,912 (9,363) $ 153,549 $ $ $ 0.88 1.30 1.30 113,929 114,357 $ $ $ 0.88 0.92 0.91 98,446 98,961 $ $ $ 0.88 1.10 1.10 77,117 77,358 72,247 352 40,760 3,982 8,508 2,741 6,437 135,027 77,523 (7,137) 70,386 0.88 0.96 0.95 41,039 41,171 $ $ $ $ $3,403,904 $ 81,426 $ 139,325 $3,119,340 $3,311,645 $ 103,558 $ 288,479 $2,848,960 $2,572,152 $ 108,443 $ 116,805 $2,305,437 $1,937,461 $ 158,052 $ 112,373 $1,634,503 $ 141,845 764 — 4,587 147,196 52,816 — 28,274 2,631 6,893 — 4,983 95,597 51,599 (9,481) $ 42,118 $ $ $ 0.85 1.05 1.05 23,978 24,077 $ 820,309 $ 77,235 $ 141,227 $ 587,786 Other Data: Net cash provided by operating activities $ 368,675 $ 293,163 $ 245,329 $ 123,579 $ 79,180 Net cash used in investing activities $ (345,774) $ (409,151) $ (484,730) $ (248,672) $ (169,590) Net cash provided by (used in) financing activities $ (13,131) $ 130,587 $ 185,821 $ 185,378 $ 100,029 Funds from operations(2) $ 336,363 $ 272,234 $ 224,476 $ 105,199 $ 56,143 1. During 1998, 1997, 1996 and 1995 the Company completed several significant business combinations and equity transactions. See Notes 3 and 10 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 a merger, including property management 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 management, as well as many ana- lysts, 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 sub- stitute 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. FFO is not compa- rable to similarly entitled items reported by other REITs that do not define it exactly as the Company defines it. 1 Public Storage, Inc. Public Storage, Inc. 1998 Annual Report 1998 Annual Report To Our Shareholders In today’s hectic, fast-changing society, Americans want solutions, not problems. When it comes to self-storage, customers demand first-class service, convenience and dependability. To maintain industry leadership, we are responding to customer demand for value and satisfaction, differentiating ourselves from competitors and incorporating the most effective ways available to manage and market our properties. We make selecting Public Storage an easier decision for customers by providing Self-Storage Plus, a strategy our competitors have not been able to copy. Self-Storage Plus affords customers the best possible combination of value and satisfaction. Successfully implementing Self-Storage Plus allows us to attract a wider variety of customers and generate new sources of revenue. Self-Storage Plus is mani- fested in everything from our clean, accessible, well-managed properties to a national reservation center generating solutions to practically any self-storage need. Self-Storage Plus enables us to offer products and services that enhance the basic Public Storage experience. At the center of our activities is our established primary operating business, self-storage properties, which we use to sup- port our emerging complementary lines of business. In turn, these emerging complementary businesses allow us to rent more self- storage spaces at higher prices. Through our Self-Storage Plus strategy, our self-storage properties support our complementary businesses and activities and our complementary businesses and activities contribute to operating our self-storage properties. Self-Storage Plus is a compelling strategy for growth, for thinking outside the box, for pushing ourselves to excel. As self-storage evolves and an increasing percentage of American households rely on self-storage, Self-Storage Plus should facilitate the interaction between Public Storage and our customers, competitive pricing structures, professionally managed, quality self-storage space in metropolitan markets and enhanced property operations. Providing a full line of moving and storage supplies is part of Self-Storage Plus. 2 Portfolio Growth (1980-1998) 1,309* 260 290 Properties 1,400 1,200 1,000 800 600 400 200 0 80 82 84 86 88 90 92 94 96 98 Years *Self-storage properties in which Public Storage has an interest at December 31, 1998, plus the March 1999 merger with Storage Trust. Sharing Success In addition to benefiting our customers and shareholders, through Self-Storage Plus we can increase community involvement. Children may be one-fourth of our population, but they are 100 percent of our future. Many of our charitable activities are designed to assist children, our nation’s most precious resource. For the second year in a row, Public Storage employees helped the Marine Corps with its annual Toys for Tots program. Using modified Pak & Store™ containers, our subsidiary collected over 19,000 toys. Although we believe our Self-Storage Plus strategy will help propel our company forward, we recognize that successfully implementing our strategy is only part of the equation. Under- standing the self-storage industry is the other component required for success. We are a national enterprise in an essentially localized, fragmented business. We own interests in over 1,300 self-storage properties, are the dominant operator in the self-storage industry, yet we know our staying power depends on continued aggressive innovation in multiple local markets. Broadening Our Customer Base Self-Storage Plus took center stage last year as we began the merger process with Storage Trust Realty. In March 1999, we merged with Storage Trust Realty, a teaming that we expect will extend and Public Storage, Inc. Public Storage, Inc. 1998 Annual Report 1998 Annual Report How to Calculate the Growth of Our Business: Add up the strong demand for our properties and services and multiply that by about 700,000 customers. This growth was built over 25 years of investing in our business. broaden the Public Storage trade name in dynamic markets where self-storage demand is favorable. Storage Trust Realty was a fully integrated, self-managed and self-administered REIT headquartered in Columbia, Missouri with 215 self-storage properties located in 16 states. Each share of beneficial interest of Storage Trust Realty is being exchanged for 0.86 shares of Public Storage’s common stock. This exchange ratio implies an enterprise value of approximately $600 million for Storage Trust Realty, including the assumption of approximately $192 million of debt. The merger was structured as a tax-free transaction. Daniel C. Staton, Storage Trust Realty’s Chairman of the Board, is now a member of our Board of Directors. Numerous employees in both companies pulled together to complete the merger. We want everyone involved to know we are enormously proud of their dedication. To our shareholders and customers we express appreciation for accompanying us on this leg of the journey. Sincerely, B. Wayne Hughes Chairman of the Board and Chief Executive Officer March 31, 1999 Harvey Lenkin President Public Storage / Storage Trust Combined Portfolio (12/31/98) Public Storage Non-shared Markets Public Storage and Storage Trust Shared Markets Number of Public Storage Facilities Number of Storage Trust Facilities STATE(cid:13)0 0 3 Public Storage, Inc. Public Storage, Inc. 1998 Annual Report 1998 Annual Report Self-Storage Plus: A Strategy for Sustained Growth In an environment where customer demands predominate because of intense competitive pressures, Public Storage is concentrating on fundamentals we believe can respond to our Self-Storage Plus strategy: PS • Quality of property management. • Differentiating technologies and businesses. • Profitability management. • Capital and asset base expansion. Providing superior property management The basis of our Self-Storage Plus strategy — which ultimately aims to cultivate a customer base that is satisfied with our product and services — is our efficient property management team. We know the quality of our property management professionals affects financial performance. One reason for this is that self-storage opera- tion is management intensive. Another is that with rising customer demands, the relative value of a high-quality property management system rises as well. A sometimes unrecognized benefit of a strong management system is new product launch capability. A superior property management team and system can provide needed support as a new business or technology transitions from start-up to profit- ability. Although self-storage properties are our primary business, our subsidiaries have expanded into portable container storage, truck rentals and retail stores. A factor contributing to our ability to develop such complementary businesses is our confidence in our management system. As competitive pressures mount and Advertising Expenditures* Yellow Pages (1996-1998) $6.1 Million $4.0 Million $3.2 Million 1996 1997 1998 *Same Store properties (984) and PSPUD. Directory advertising is the most important print media for advertising our services. Approximately 30 percent of our customers locate a property through our directory ads. 4 ® The industry’s most recognized name. differentiation declines in our industry, the relative effect of a superior property management team grows. We expect our extensive property management systems and controls, performance standards, operating procedures and cutting-edge technologies will provide advantages in the day-to-day demands of our national enterprise. However, such efficiencies can be duplicated by competitors; competitive advantages can slip away. Presently, we maintain a significant edge in our ability to use a powerful marketing and inventory control tool, the national reservation system, operated by our subsidiary and staffed by approximately 225 trained agents located at corporate headquarters in Los Angeles. Customers calling either our toll-free telephone referral system (800) 44-STORE, or a self-storage property can converse with a representative in the national reservation center who will analyze the customer’s space requirements and price and location preferences in conjunction with informing the customer about other products and services Public Storage and its subsidiaries provide. The national reservation system is now able to process approximately 250,000 calls per month during the peak periods of self-storage demand, spring and summer. We anticipate augmenting the advantages we currently gain with our national reservation center by opening an additional reservation facility during mid-1999. The additional reservation center, staffed by approximately 200 trained men and women, will be located in Plano, Texas. Differentiating Public Storage from its competitors Operating complementary businesses through our subsidiaries provides important cross-marketing opportunities. First, we gain by using our core activity — owning and operating self-storage properties — to facilitate other activities. Second, with our national reservation center as the cornerstone, we can cross competitive boundaries as we build new revenue sources. For example, retailing locks, tape, boxes and other move-related merchandise provides point-of-purchase convenience, eliminating any need for our customers to travel to hardware stores or similar suppliers. Public Storage Pickup & Delivery,SM (PSPUD) also exemplifies the crossover marketing concept. This emerging business rents portable storage containers to customers for storage in central warehouses, allow- ing customers to avoid renting and driving moving trucks. We are also using high technology to help differentiate us from competitors and to develop additional avenues for advertising, marketing and customer interaction. We are creating an Internet Marketing Department as we expand into e-commerce in the marketing of storage products. Public Storage intends to lead the nation in one-stop shopping for storage needs, with the online solution for storage, truck rentals, move-related merchandise and portable container storage. We have entered into an agreement with Apollo Interactive, a firm that has designed web sites for THE WB Television Network, Jack in the Box Restaurants and the Hard Rock Hotel and Casino. This is our first step in more fully capitalizing on the marketing power of the Internet. A formula for profitability We are confident about our long-term prospects to grow in the competitive self-storage marketplace, building on our Self-Storage Plus approach. One way we are implementing the strategy is by deleveraging. By paying off debt early, we further strengthen our balance sheet. Our balance sheet reflects our declining total debt. All of the debt is fixed rate, eliminating uncertainties commonly associated with floating rate debt. There were no borrowings as of December 31, 1998 on our $150 million unsecured line of credit. Total debt and related interest expense is low in relation to our overall asset base. As of December 31, 1998, Public Storage’s assets totaled approximately $3.4 billion, a $92 million increase from approximately $3.3 billion one year earlier. The ratio of debt-to-equity equaled 2.6 percent at December 31, 1998, compared to 3.6 percent one year earlier. An advantage of carrying low debt is our ability to concentrate on investment opportunities within the self-storage industry, such as the merger with Storage Trust Realty. Our liquidity provides significant discretionary investment resources, a major advantage compared to other self-storage real estate investment trusts. We believe our conservative capital structure, including minimizing distributions and repurchasing stock are adding to long-term shareholder value. Industry leadership through capital and asset base expansion Our Self-Storage Plus strategy also creates access to capital. Since 1992, we have issued approximately $1.7 billion of common equity Public Storage, Inc. 1998 Annual Report and perpetual preferred stock in public offerings. We believe our access to capital stems from a number of strengths, including our trade name. A centerpiece of Self-Storage Plus is consumer recogni- tion of the Public Storage name. We have invested tens of millions of dollars over the last 25+ years in our trade name through media including Yellow Pages, television and radio advertising. In addition, our access to capital at favorable costs is connected to our quality properties in prime locations, industry position, experienced executives and directors, real estate development/acquisition expert- ise, long history of successful operations, property management operational systems, innovation and flexibility and conservative distribution policy. Access to capital at favorable costs is not the only chapter in the story; we benefit from being able to get capital invested. Our real estate development and acquisition department provides comprehensive real estate expertise. The property development decision calls upon disciplines including engineering, design and architecture, subcontractor bidding, construction scheduling, con- struction supervision and cost control. Properties are selected for development by thorough market analysis of key elements includ- ing population, traffic counts, accessibility, visibility, growth pat- terns, zoning, comparable land values, area economics and the mix and density of nearby residential, commercial and industrial development. Major areas for financial analysis regarding acquiring existing properties include financial information such as rental income, operating expenses, property level debt, tenants and ten- ant leases, quality and appearance of the property’s construction and geographic and demographic data. Our developed and acquired properties benefit from one of the most technologically advanced property management systems in the self-storage industry, enabling new properties to be absorbed efficiently. Self-storage properties such as this facility in Orlando, Florida can incorporate state-of-the-art design, climate controlled spaces, retail outlets and truck rental operations. 5 Public Storage, Inc. 1998 Annual Report Analyzing Financial Performance Revenues for 1998 increased to $582,151,000 compared to $470,844,000 in 1997, an increase of $111,307,000 or 24 percent. Net income for 1998 was $227,019,000 compared to $178,649,000 in 1997, an increase of $48,370,000 or 27 percent. The increase in net income for 1998 compared to 1997 was primarily the result of improved property operations and the acquisition of additional real estate facilities and partnership interests during 1997 and 1998. Net income allocable to common shareholders was $148,644,000 or $1.30 per common share on a diluted basis (based upon 114,357,000 weighted average diluted shares) for the year ended December 31, 1998 compared to $90,256,000 or $0.91 per common share on a diluted basis (based upon 98,961,000 weighted average diluted shares) for the same period in 1997. In computing net income per common share, dividends to the Company’s preferred shareholders ($78,375,000 and $88,393,000 for the year ended December 31, 1998 and 1997, respectively) have been deducted from net income in determining net income allocable to the Company’s common shareholders. Operating losses from the portable self-storage business for the year ended December 31, 1998 were $31,022,000 or approximately $0.27 per common share, compared to $31,665,000 or approximately $0.32 per common share for the same period in 1997. For the year ended December 31, 1997, net income allocable to common shareholders was reduced by $13,412,000 or $0.14 per common share as a result of a special one-time dividend paid to the holder of the Series CC Convertible Preferred Stock. Funds from operations per common share on a fully-diluted basis for 1998 were $2.24, compared to $1.97 for 1997, increasing $0.27 per common share. Funds from operations per common share on a fully-diluted basis for 1998 were negatively affected by the dilutive effects of start-up losses from Public Storage Pickup & Delivery,SM (PSPUD). PSPUD incurred approximately $31,022,000 of operating losses for the year ended December 31, 1998, compared to operating losses of approximately $31,665,000 for the previous year. Operating losses for this business are declining, reflected by results for the 1998 fourth quarter, $5,865,000 in losses versus results for the 1997 fourth quarter, $10,480,000 in such losses. As PSPUD has strengthened its infrastructure and efficiencies, operat- ing effectiveness has risen; we believe operating losses from PSPUD will continue to decrease. Same stores benefit from a winning strategy. Rental income and net operating income are two of the notable measurements of financial performance that responded to our Self-Storage Plus strategy. For 1998, occupancy at the self-storage properties on a Same Store basis averaged 92.5 percent, compared to 91.7 percent during 1997. Same Store average annual realized rents were $9.84 per square foot for 1998, a 6.8 percent increase compared to $9.21 per square foot for 1997. Realized rent per square foot represents the actual revenue earned per occupied square foot, a more relevant measure than posted or scheduled rates, because posted rates can be dis- counted through promotions. Same Store rental income increased to $523,394,000 for 1998, compared to $486,510,000 for 1997, a 7.6 percent rise. Same Store cost of operations increased 6.5 percent, to $183,629,000 for 1998, from $172,455,000 for 1997. Net operating income equaled $339,765,000 for 1998, compared to $314,055,000 for 1997. 6 Dividend. The Board of Directors declared a $0.22 per common share quarterly dividend on March 4, 1999, along with quarterly dividends on the Company’s various series of preferred stock. Distributions are payable on March 31, 1999 to shareholders of record as of the close of business on March 15, 1999. Dividends of $0.88 per share were paid on the common stock in 1998. Minimizing distributions is one method available to us to enhance common shareholder value. Retaining a substantial por- tion of funds from operations (after funding distributions and capital improvements) enables us to acquire and develop proper- ties, invest in our other operations and reduce debt using internal cash resources. This is an example of our Self-Storage Plus strategy benefiting shareholders. We distributed 39 percent of funds from operations available to common shareholders for 1998 and 44 per- cent for 1997. Through this relatively moderate payout ratio in 1998, we retained $128,000,000 of funds to purchase and develop prop- erties and invest in our other operations. An efficient external growth strategy. Our development joint venture minimizes earnings dilution and provides a portfolio of properties we can purchase in the future. We formed the joint venture partnership with a state pension fund to develop up to $220,000,000 of self-storage facilities. The venture is funded solely with equity capital provided 30 percent by the Company and 70 percent by the state pension fund. The Company has invested approximately $42,500,000 in the joint venture at December 31,1998. During the year ended December 31, 1998, the joint venture partnership opened 17 new self-storage facilities that it had devel- oped. As of December 31, 1998, the joint venture partnership was committed to developing six additional facilities that were in process, with total costs incurred of about $28,600,000 and estimated remaining costs to complete of about $3,900,000. The joint venture partnership is reviewing the final 20 projects and upon approval the joint venture will be fully committed. These properties are currently being developed by the Company until they are approved by the joint venture partnership. As of December 31, 1998, the Company has incurred total development costs of approximately $44,800,000 (estimated remaining costs to complete of approximately $49,700,000) with respect to these 20 projects. The Company has identified 34 additional self-storage development projects with total estimated development costs of approximately $143,200,000. These projects are subject to significant contingencies. The 10 facilities which have been opened by the joint venture partnership or the Company between January 1, 1996 and July 1, 1997 have occupancies averaging 81.9 percent at December 31, 1998. The 19 facilities which opened between July 1, 1997 and December 1, 1998 have been open an average of 7 months and have occupancies averaging 49.4 percent at December 31, 1998. Improving market value of outstanding shares. Last year, the Company’s Board of Directors authorized the repurchase from time to time of up to 10,000,000 shares of the Company’s common stock on the open market or in privately negotiated transactions. Through December 31, 1998 the Company has repurchased a total of 2,819,400 shares of common stock at an aggregate cost of approximately $72,300,000. Public Storage, Inc. Public Storage, Inc. 1998 Annual Report 1998 Annual Report Total Revenues In Millions Net Income In Millions Weighted Average Occupancy Levels Same Store Facilities(1) $600 450 300 150 0 $250 200 150 100 50 0 1996 1997 1998 1996 1997 1998 92.5% 91.7% 91.1% 94% 92 90 88 86 84 1996 1997 1998 (1) “Same Store” refers to self-storage facilities in which the Company had an interest since January 1, 1994. Funds From Operations Allocable to Common Shareholders In Millions Funds From Operations Per Diluted Common Share(1) Annual Realized Rent Per Square Foot Same Store Facilities(1) $2.24 $1.98 $1.97 $2.50 2.00 1.50 1.00 .50 0 1996 1997 1998 1996 1997 1998 (1) Assumes conversion of the Company's Convertible Preferred Stock into common stock. Total Assets In Billions Shareholders' Equity In Billions $4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 $300 250 200 150 100 50 0 $4.0 3.0 2.0 1.0 0 $9.84 $9.21 $8.71 $10.00 8.00 6.00 4.00 2.00 0 1996 1997 1998 (1) “Same Store” refers to self-storage facilities in which the Company had an interest since January 1, 1994. Debt as Percent of Shareholders' Equity 5% 4.7% 3.6% 2.6% 4 3 2 1 0 1996 1997 1998 1996 1997 1998 1996 1997 1998 7 Public Storage, Inc. 1998 Annual Report Property Locations (12/31/98) 428 Commons Drive 8 W. Oxmoor Road 1224 Old Monrovia Road 9856 Parkway East 1224 27th Place South 1900 Mini Warehouse Road 6917 Oporto-Madrid Boulevard South 1055 Pebble Creek Parkway 1120 Huffman Road 1147 Gadsden Highway 209 Oxmoor Boulevard 3232 Lorna Road 575 Bessemer Super Highway 3052 Leeman Ferry Road 2902 Drake Avenue 4314 Whiteside Drive 1265 Hillcrest Road 664 Azalea Road 5100 Moffat Road 6200 Grelot Road 4253 Government Boulevard 669 W. Union Hills Dr & 7th Avenue 1910 E. Broadway 4717 N. 43rd Avenue 2421 N. Black Canyon Highway 810 S. Country Club Drive 1737 E. McKellips Road 11236 19th Avenue 3851 N. Romero Road 3027 N. 70th Street 4140 E. Chandler Boulevard 7990 East Tanque Verde 2065 Placentia Avenue 15360 Oxnard Street 8551 Beverly Boulevard 211 W. Allen Avenue 4140 Cherry Avenue 4889 Valley Boulevard 3810 Eagle Rock Boulevard 1240 N. Lincoln Avenue 2050 Workman Mill Road 4444 Enterprise Street 1601 Watson Court 501 East Pacific Coast Highway 9036 Glenoaks Boulevard 1510 Pomona Road 2567 Hamner Avenue 10810 Vanowen Street 1350 Concord Avenue 14861 Franklin Avenue 150 N Halstead Street 791 S. Azusa Avenue 1781 Industrial Park Avenue 6379 Mission Boulevard 6201 San Leandro Street 3235 Jacuzzi Street 630 Laurelwood Road 375 Shoreway Road 1940 Howe Avenue 3961 West Capitol Avenue 6324 Florin Road 1 Dairy Lane 160 S. Spruce Avenue 39501 5th Street West 888 S. Fair Oaks Avenue 6536 Fair Oaks Boulevard 1734 East Carson Street 965 Felipe Avenue 2380 Quimby Road 1925 San Ramon Valley Boulevard 23572 Moulton Parkway 3911 Snell Avenue 195 Tully Road 145 Shoreway Road 1055 San Leandro Avenue 20565 Valley Green Drive 11303 Sorrento Valley Road 13241 Jeffrey Road 2105 South Myrtle Avenue 9350 Topanga Canyon Boulevard 9341 Shirley Avenue 881 Duane Avenue 1 Oyster Point Boulevard 19102 Walnut Drive 8118 Mariners Drive 2099 Placentia Avenue 1498 Oddstad Drive 985 Fairway Drive 925 Felipe Avenue 13249 Garvey Avenue 6240 Sylvan Road 2075 Newport Boulevard 23811 Ventura Boulevard 7719 Fair Oaks Boulevard 1018 Duane Avenue 5741 W. Jefferson Boulevard 5915 San Juan 127 S. Euclid Avenue 601 N. Main Street 317 E. Weddell Drive 1510 N. Magnolia 2361 W. Commonwealth Avenue 3752 Cerritos Avenue 14209 Western Avenue 1096 North Fair Oaks Avenue 4900 Roseville Road 4583 Huntington Drive South 1220 Dempsey Road 4610 Van Nuys Boulevard 2340 Central Avenue Birmingham Birmingham Huntsville Birmingham Birmingham Birmingham Birmingham Birmingham Birmingham Birmingham Birmingham Birmingham Midfield Huntsville Huntsville Anniston Mobile Mobile Mobile Mobile Mobile Phoenix Tempe Phoenix Phoenix Mesa Tempe Phoenix Tucson Scottsdale Phoenix Tucson Costa Mesa Van Nuys Pico Rivera San Dimas Long Beach Los Angeles Los Angeles Pasadena Whittier Fremont Milpitas Wilmington Sun Valley Corona Norco North Hollywood Concord Tustin Pasadena Azusa Redlands Riverside Oakland Richmond Santa Clara San Carlos Sacramento West Sacramento Sacramento Belmont South San Francisco Palmdale Pasadena Carmichael Carson San Jose San Jose San Ramon Laguna Hills San Jose San Jose San Carlos Mountain View Cupertino San Diego Irvine Monrovia Chatsworth Northridge Santa Clara South San Francisco Rowland Heights Stockton Costa Mesa Redwood City Walnut San Jose Baldwin Park Citrus Heights Costa Mesa Calabasas Carmichael Santa Clara Los Angeles Citrus Heights Upland Orange Sunnyvale El Cajon Fullerton Los Alamitos Gardena Sunnyvale North Highlands Los Angeles Milpitas Sherman Oaks Duarte AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AL AZ AZ AZ AZ AZ AZ AZ AZ AZ AZ AZ CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA 15285 Hesperian Boulevard 2587 Marin Street 190 10th Street 240 E. Whittier Boulevard 2317 Main Street 12345 Ventura Court 2350 Monument Boulevard 200 Calle Del Oaks 3207 South Street 2590 San Ramon Valley Boulevard 380 Merrydale Road 18440 Burbank Boulevard 1600 Watson Court 5941 Venice Boulevard 1199 Western Street 245 Hookston Road 1987 Old Middlefield Road 88 Blossom Hill Road 13300 Paxton Street 836 East Airway Boulevard 475 Tully Road 5175 Pacific Highway 3716 Stanley Boulevard 2445 Grove Way 16212 Gothard Street 29824 Mission Boulevard 830 N. Rengstorff Avenue 6007 Venice Boulevard 12302 Bellflower Boulevard 107 Lincoln Road West 1761 Adrian Road 640 San Pablo Avenue 5005 Firestone Place 1395 Mabury Road 13822 E. Valley Boulevard 231 W. Capitol Expressway 4568 E. Los Angeles Avenue 8200 Balboa Boulevard 15951 Hesperian Boulevard 1747 N. Eastern Avenue 3636 Beverly Boulevard 398 Carlson Boulevard 680 Hegenberger Road 12299 Saratoga/Sunnyvale Road 18 Hughes 3501 Lomita Boulevard 798 Baywood Drive 20140 Sherman Way 3491 Santa Rosa Avenue 1900 El Camino Real 171 S. Arroyo Parkway 4820 San Fernando Road 17792 Cowan 2690 Geary Boulevard 175 S. Curtner Avenue 115 Capitola Extension 17300 Newhope Street 5055 S. Front Road 1500 Story Road 601 Sunset Drive 2656 Sunrise Boulevard 12235 Whittier Boulevard 3200 Mather Field Road 24180 S. Vermont Avenue 1820 Frienza Avenue 760 South Beach Boulevard 990 Beck Avenue 6380 Tupelo Drive 3620 Snell Avenue 10792 Knott Avenue 6433 Verner Avenue 1230 Olive Drive 11625 Olympic Boulevard 1121 Triton Drive 10100 S. La Cienega Boulevard 560 16th Street 649 S. Boyle Avenue 801 57th Street 5917 Burchard Avenue 5570 Airdrome Street 914 Hopper Avenue 2065 Placentia Avenue 6041 Sunrise Vista Drive 2012 West Briggsmore Avenue 80 S. Spruce Avenue 150 S. Buchanan Circle 3470 Boulder Street 6701 S. Sepulveda Boulevard 365 W. Manchester Boulevard 35360 Fircrest Street 4415 Treat Boulevard 2250 S. Delaware Avenue 1120 2nd Street 7640 Fair Oaks Boulevard 1775 Industrial Way 6840 Santa Monica Boulevard 15146 E. Whittier Boulevard 525 California Avenue 2370 Colorado Boulevard 3300 Northgate Boulevard 1910 Hughes Way 2325 Soquel Drive 740 Arcturus Avenue 761 University Avenue 12940 Saticoy Street 900 Transport Way 5679 Santa Teresa Boulevard 984 Sherman Street 4101 North Figueroa Street 7510 Folsom Boulevard CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA San Leandro San Francisco San Francisco Montebello Chula Vista Studio City Concord Monterey Long Beach San Ramon San Rafael Tarzana Milpitas Los Angeles Fairfield Pleasant Hill Mountain View San Jose Pacoima Livermore San Jose San Diego Pleasanton Castro Valley Huntington Beach Hayward Mountain View Los Angeles Downey Vallejo Burlingame Pinole South Gate San Jose La Puente San Jose Simi Valley Van Nuys San Lorenzo Los Angeles Los Angeles Richmond Oakland Saratoga Irvine Torrance Petaluma Canoga Park Santa Rosa South San Francisco Pasadena Glendale Irvine San Francisco Campbell Santa Cruz Fountain Valley Livermore San Jose Antioch Rancho Cordova Whittier Rancho Cordova Harbor City Sacramento La Habra Fairfield Citrus Heights San Jose Stanton Sacramento Davis Los Angeles Foster City Lennox San Diego Los Angeles Sacramento Los Angeles Los Angeles Santa Rosa Costa Mesa Citrus Heights Modesto South San Francisco Pacheco Pleasanton Los Angeles Los Angeles Newark Concord San Mateo Berkeley Carmichael Napa Los Angeles Whittier Pittsburg Los Angeles Sacramento El Segundo Santa Cruz Oxnard Los Gatos North Hollywood Petaluma San Jose San Diego Los Angeles Sacramento 8 Ventura Campbell Fremont Pico Rivera Simi Valley Laguna Hills San Diego North Hollywood North Hollywood Milpitas Pleasanton Costa Mesa Brea Sun Valley Westlake Village Sacramento Los Angeles Fremont Arleta City of Industry Anaheim San Francisco San Gabriel Santa Monica Whittier Van Nuys Huntington Beach Monterey Park Downey Rowland Heights Stockton Torrance Carson Fresno San Jose West Hollywood Sunland Sacramento San Pablo Torrance Simi Valley Artesia Arcadia Los Angeles Los Angeles Montebello Vallejo San Diego Los Angeles Venice Ventura Studio City Lennox Burbank Pinole Emeryville Del Rey Oaks San Leandro Daly City Novato Oakland Stockton Los Angeles Los Angeles San Leandro North Hollywood Santa Cruz Dublin Vallejo Fremont Lake Forest East Palo Alto Gardena Oakland Hawthorne Los Angeles Tujunga Canoga Park Los Angeles Los Angeles Alameda Concord Anaheim Spring Valley Newark Huntington Beach San Diego Huntington Beach Northridge Union City Tujunga El Cajon El Monte Northglenn Westminster Denver Lakewood Colorado Springs 5515 Walker Street 509 Salmar Avenue 42101 Albrae Street 9011 Bermudez Street 2167 First Street 22992 El Pacifico 9550 Kearny Mesa Road 12510 Raymer Street 7500 Whitsett Avenue 1080 Pecten Court 2500 Santa Rita Road 1725 Pomona Avenue 2750 E. Imperial Highway 11838 Sheldon Street 30921 W. Agoura Road 6938 Franklin Boulevard 2300 Purdue Avenue 4555 Peralta Boulevard 13333 Osborne Street 15920 Amar Road 1290 N. Lakeview Avenue 611 Second Street 550 S. San Gabriel Boulevard 3010 Wilshire Boulevard 12320 E. Whittier Boulevard 7660 Balboa Boulevard 5892 Mc Fadden Avenue 4400 Ramona Boulevard 12245 Woodruff Avenue 19102 Walnut Drive 3901 N. West Lane 4460 Del Amo Boulevard 1421 E. Del Amo Boulevard 5045 N. Gates Avenue 1685 Aborn Road 6801 Santa Monica Boulevard 10400 Sunland Boulevard 311 N. 16th Street 14820 San Pablo Avenue 1724 S. Crenshaw Boulevard 120 West Easy Street 11635 Artesia Boulevard 12340 Lower Azusa Road 1702 S. San Pedro Street 6202 Willoughby Avenue 1012 S. Maple Avenue 265 Mini Drive 1925 54th Street 1712 Glendale Boulevard 315 S. 4th Avenue 6435 Ventura Boulevard 10830 Ventura Boulevard 11102 La Cienega Boulevard 7521 N. San Fernando Road 2624 Appian Way 6501 Shellmound Street 180 Calle Del Oaks 14280 Washington Boulevard 6676 Mission Street 130 Landing Court 1327 International Boulevard 1011 E. March Lane 3821 Jefferson Boulevard 2703 Martin Luther King Boulevard 15984 East 14th Street 5410 Vineland Avenue 3840 Portola Avenue 7420 San Ramon Road 920 Humboldt Street 47209 Warm Springs Boulevard 20292 Cooks Bay Drive 1961 E. Bayshore Road 1546 W. El Segundo 1551 Mac Arthur Boulevard 14107 Crenshaw Boulevard 3770 Crenshaw Boulevard 6467 Foothill Boulevard 21321 Vanowen 1776 Blake Street 3017 San Fernando Road 1829 Webster Street 1870 Arnold Industrial Place 4880 E. La Palma Avenue 1247 Sweetwater Road 38290 Cedar Boulevard 17952 Gothard Street 8000 Raytheon Road 5566 Bolsa Avenue 19121 Parthenia Street 33476 Alvarado Niles Road 6400 Foothill Boulevard 573 Raleigh Avenue 10212 E. Valley Boulevard 11550 Huron Street & 115th Avenue 5005 W. 80th 2190 S. Federal Boulevard 5788 W. 6th Avenue 5250 Tomah Drive 5500 W. Hampden & S. Frontage Road Denver Littleton 7980 Southpark Way Aurora 1150 S. Idalia Aurora 1710 S. Abilene Street Denver 2100 Blake Street Wheat Ridge 6161 West 48th Avenue Littleton 1801 W. Belleview Avenue Denver 4101 E. Evans Avenue Aurora 16606 Smoky Hill Road Littleton 6351 S. Kipling Street Englewood 9600 East Costilla Wheat Ridge 11901 W. 44th Avenue CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO Federal Heights Denver Colorado Springs Colorado Springs Aurora Colorado Springs Colorado Springs Thornton Denver Colorado Springs Colorado Springs Lakewood Denver Englewood Denver Denver Denver Denver 1293 W. 84th Avenue 5005 E. Evans Avenue 4403 E. Platte Avenue 2761 Delta Drive 565 Hanover Way 5240 Edison Avenue 210 Mount View Lane 7333 York Street 6611 Leetsdale Drive 3436 N. Sinton Road 6055 Hollow Tree Court 7701 W. 6th Avenue 680 Sheridan Boulevard 4550 South Federal Boulevard 4405 South Quebec 5080 Leetsdale 2600 Sheridan Boulevard 4403 S. Tamarac Parkway 10201 W. Hampden Avenue & Frontage Lakewood 10299 Centennial Road 12351 W. 44th Avenue 2331 Wedgewood Avenue 5929 South College Avenue 2460 North Powers Boulevard 3725 Parkmoor Village Drive 3845 Van Teylingen Drive 1492 South Clinton Street 7700 North Washington Street 5055 Centennial Boulevard 115 Park Avenue 3440 Astrozon Court 13999 West 64th Avenue 1398 Simms Street 168 Bull Hill Lane 1296 Kings Highway Cutoff 125 Railroad Avenue 6 Summit Place 120 Wilbur Cross Highway 440 Tolland Turnpike 100 Spring Street 113 Spring Street 188 Roberts Street 76 Captain Neville Drive 115-D Elm Street 299 Wordin Avenue 35 Hoyt Street 1230 South Capitol Street SE 3801 Dupont Parkway 653 Jefferic Boulevard 425 New Churchmans Road 201 Bellevue Road 2445 N.W. 38th Street 10505 Marlin Road 3080 Pembroke Road 1480 N.W. 23rd Avenue 1020 N.W. 23rd Avenue 3700 N.W. 29th Avenue 15760 N.W 27th Avenue 900 S. Kirkman Road 301 Sunny Isles Boulevard 3150 N. Hiawassee Road 360 State Road 434 East 9210 Lazy Lane 6940 N. 56th Street 8230 N. Dale Mabry Highway 3900 W. Colonial Drive 6333 Arlington Expressway 2415 Phillips Highway 11810 N. Nebraska Avenue 6543 34th Street North 903 S. Semoran Boulevard 8421 W. Hillsborough Avenue 7550 McNab Road 4660 Babcock Street 7200 W. 20th Avenue 3505 N.W. 167th Street 1801 Hypoluxo Road 5221 Okeechobee Road 8150 State Road 84 14401 S.W. 119th Avenue 5880 66th Street North 350 N. Nova Road 8305 Ulmerton Road 8755 N. Military Trail 3000 N. Federal Highway 5900 Lakehurst Drive 5014 S. Dale Mabry Highway 16970 NW 4th Avenue 21288 Biscayne Boulevard 1400 34th Street South 18450 N.E. 5th Avenue 1801 W. Oak Ridge Road 1500 North State Road 7 271 Blanding Boulevard 4500 34th Street North 1080 E. Altamonte Springs Drive 8523 Baymeadows Road 6133 S. Tamiami Trail 979 S. Lane Avenue 5340 Catoma Street 2001 S.W. 70th Avenue 2990 S.W. 28th Lane 5080 N. State Road 7 141 W. State Road Route 434 13611 N. 15th Street 850 S. Dixie Highway 5503 N. Australian Avenue 5850 Powerline Road 3800 Jog Road 1600 W. Sample Road Littleton Wheat Ridge Longmont Fort Collins Colorado Springs Colorado Springs Colorado Springs Denver Denver Colorado Springs Basalt Colorado Springs Arvada Golden West Haven Fairfield West Haven Branford Berlin Manchester Southington Southington East Hartford Waterbury Enfield Bridgeport Norwalk Washington D.C. New Castle Dover New Castle Newark Miami Miami Hallandale Ft. Lauderdale Ft. Lauderdale Miami Opa-Locka Orlando North Miami Beach Hiawassee Longwood Tampa Tampa Tampa Orlando Jacksonville Jacksonville Tampa Pinellas Park Orlando Tampa North Lauderdale Palm Bay Hialeah Opa-Locka Lantana Fort Pierce Davie Miami St. Petersburg Daytona Beach Largo Palm Beach Gardens Delray Beach Orlando Tampa Miami Aventura St. Petersburg Miami Orlando Lauderhill Orange Park St. Petersburg Altamonte Springs Jacksonville Sarasota Jacksonville Jacksonville Davie Miami Ft. Lauderdale Winter Springs Tampa Pompano Beach Mangonia Park Ft. Lauderdale Green Acres Pompano Beach Public Storage, Inc. 1998 Annual Report 2940 North Decatur Road 5487 Westmoreland Plaza 3679 McElroy Road 11195 Alpharetta Highway 3985 Atlanta Highway 45 Whitlock Place SW 201 Cobb Parkway North 3055 Jones Mill Road 6770 Dawson Boulevard 4889 Old Dixie Highway 3748 Covington Highway 11455 Maxwell Road 632 North Main Street 2436 Bolton Road NW 6255 Georgia Highway 85 3003 Rutledge Road 495 Buford Drive 8490 Dura Lee Lane 3313 Highway 5, Suite F 4474 Jonesboro Road 1891 North Columbia Street 2888 Waialae Avenue 99-819 Iwaena Street 45-1021 Kam Highway 94-559 Ukee Street 4100 Waialae Avenue 777 W. Wise Road 8220 Skokie Boulevard 2433 S. Washington Street 412 W. North Avenue 12730 S. Pulaski Road 1001 N. Frontage Road 1010 E. Ogden Avenue 1414 S. Wabash Avenue 990 S. Milwaukee Road 3501 Belvidere Road 4430 N. Clark Street 1385 E. Dundee Road 3327 W. 47th Street 2626 W. Jefferson Street 3835 W. 159th Place 17204 S. Halsted Street 297 W. Lake Frontage Road 1110 E. Roosevelt Road 1556 West Ogden Avenue 17208 S. Halsted Street 1916 N. Elston 2901 Touhy Avenue 945 N. Farnsworth 8484 S. South Chicago Avenue 9700 W. Irving Park Road 2345 173rd Street 6990 W. 79th Street 3902 River Road 4072 N. Broadway 1505 Western Avenue 20 E. University Drive 5829 W. Ogden Avenue 2101 W. Howard Street 2835 North Western Avenue 5778 North Northwest Highway 1129 N. Wells Street 5838 N. Pulaski Road 2040 S. 25th Avenue 4849 W. 115th Street 7000 S. Cicero Avenue 903 E. Algonquin Road 2640 W. 79th Street 5643 N. Broadway 1001 W. 111th Street 8050 McCormick Boulevard 17 W. 170 Roosevelt Road 2115 Bernice Road 8201 159th Street 556 North York Road 8901 W. 159th Street 11644 S. Kedzie Avenue 2638 N. Pulaski Road 939 E. 95th Street 5901 S. Harlem Avenue 341 Frontage Road 2351 N. Harlem Avenue 615 E. Boughton Road 1040 E. State Street 440 E. Street Charles Road 8550 West 83rd Street 1295 W. Lake Street 8790 W. Golf Road 8625 Waukegan Road 3659 S. Ashland Avenue 2050 Greenbay Road 115 N. 25th Avenue 2401 Lois Drive 1000 West Lake Street 1512 West Jarvis Avenue 5733 North Broadway Street 499 Phillips Court 28 W. 650 Roosevelt Road 930 S. Roselle Road 16161 Brennan Highway 2400 Palmer Drive 2324 Gary Avenue 1852 LaSalle Avenue 2222 North Natchez Avenue 4520 West Cermak Road 4220 West 47th Street 280 South Main Place 243 North Western Avenue 1300 East Chicago Street 665 Big Timber Road Decatur Douglasville Doraville Roswell Bogart Marietta Marietta Norcross Norcross Forest Park Decatur Alpharetta Alpharetta Atlanta Riverdale Kennesaw Lawrenceville Douglasville Douglasville Forest Park Milledgeville Honolulu Aiea Kaneohe Waipio Honolulu Schaumburg Skokie Naperville Lombard Alsip Darien Naperville Chicago Wheeling Park City Chicago Palatine Chicago Joliet Markham East Hazel Crest Elmhurst Lombard Naperville East Hazel Crest Chicago Elk Grove Village Aurora Chicago Schiller Park Lansing Burbank Schiller Park Chicago Chicago Heights Arlington Heights Cicero Chicago Chicago Chicago Chicago Chicago Broadview Alsip Bedford Park Arlington Heights Chicago Chicago Chicago Skokie Oakbrook Terrace Lansing Tinley Park Bensenville Orland Hills Merrionette Park Chicago Chicago Chicago Burr Ridge Chicago Bolingbrook Geneva Carol Stream Justice Roselle Des Plaines Morton Grove Chicago Evanston Melrose Park Rolling Meadows Hanover Park Chicago Chicago Carol Stream Winfield Schaumburg Tinley Park Schaumburg Geneva Naperville Chicago Chicago Chicago Carol Stream Carpentersville Elgin Elgin GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA HI HI HI HI HI IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL IL CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CT CT CT CT CT CT CT CT CT CT CT CT CT DC DE DE DE DE FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL 1155 Belvedere Road 2701 Lake Worth Road 10460 S.W. 72nd Street 4080 Tampa Road East 4501 SW 54th Street 7511 NW 73rd Street 2275 N. Semoran Boulevard 4100 John Young Parkway 1313 45th Street 7996 N.W. South River Drive 200 S.W. 2nd Street 6800 W 4th Avenue 570 North Highway 17-92 7190 South Highway 17-92 6665 Wiley Road 911 S. State Road 7 15800 Old US 41 7480 S. Military Trail 1351 West Brandon Boulevard 12123 West Sample Road 14101 South Military Trail 975 Military Trail 1814 Lake Worth Road 3555 Radio Road 6609 State Road 54 2250 West Copans Road 2905 South Orlando Drive 21000 Boca Rio Road 1120 S. U.S. 41 By-Pass 235 E. Oakridge Road 8226 South Highway 17-92 3400 S. Congress Avenue 151 N.W. 5th Street 109 N.W. 20th Street 2250 Blount Road 1625 North Semoran Boulevard 5757 University Boulevard West 920 Cortez Road West 11800 Cleveland Avenue 7930 W. 20th Avenue 20865 U.S. Highway 19 North 16079 U.S. Highway 19 North 399 Brent Lane 944 Creighton Road 210 Park Avenue 8727 Phillips Highway 1615 North Highland Avenue 6401 Third Street/Stock Island 1730 U.S. Highway 19 1131 Semoran Boulevard 1200 U.S. Highway 1 38800 U.S. Highway 19 North 5036 S. Cleveland Avenue 5708 Ft. Caroline Road 2275 South Semoran Boulevard 3424 Southside Boulevard 155 South U.S. Highway 1 5295 Palm Valley Road 6050 N.W. 153rd Street 3350 S.W. 10th Street 2431 South Orange Blossom Trail 5408 South University Drive 5401 L.B. McLeod Road 6219 Roosevelt Boulevard 14060 S.W. 84th Street 331 69th Street 1301 Dade Boulevard 4729 S. Orange Blossom Trail 10821 N.W. 14th Street 10855 N.W. 7th Avenue 1795 Cobb Parkway 1438 Montreal Road 1844 Mtn. Industrial Boulevard 3291 Camp Creek Parkway 1387 Northside Drive 1700 Roswell Street S.E. 6289 Jimmy Carter Boulevard 10468 Alpharetta Street 1790 Woodberry Avenue 2791 Cumberland Bl, Suite #200 6000 Lawrenceville Highway 5038 Covington Highway 3400 Lawrenceville Highway 3369 Canton Road N.E. 3687 Flat Shoals Road 5301 S. Cobb Drive 2519 Chantilly Drive 4200 Snapfinger Woods Drive 95 Arcado Road NW 460 Beaver Ruin Road NW 4343 Covington Highway 4554 Jonesboro Road 1067 Memorial Drive 1525 Crescent Drive 1780 S. Cobb Drive 615 Indian Trail Road NW 7493 Jonesboro Road 1679 Cobb Parkway South 4560 I-75 Frontage Road 134 John Wesley Dobbs Avenue NE 1471 Forest Parkway 3300 Austell Road SW 895 Cobb Parkway North 5711 Roswell Road 3265 Holcomb Bridge Road 1964 Rockbridge Road 3350 Peach Orchard Road 3503 Old Petersburg Road 6906 Tara Boulevard 2080 Briarcliff Road NE FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA GA West Palm Beach Lake Worth Miami Oldsmar Ft. Lauderdale Miami Orlando Orlando Orlando Medley Pompano Beach Hialeah Longwood Fern Park Jacksonville Plantation Naples Lake Worth Brandon Coral Springs Delray Beach Jupiter Lake Worth Naples New Port Richey Pompano Beach Sanford Boca Raton Venice Orlando Fern Park Boynton Beach Miami Boca Raton Pompano Beach Winter Park Jacksonville Bradenton Ft. Myers Hialeah Clearwater Clearwater Pensacola Pensacola Orange Park Jacksonville Clearwater Key West Tarpon Springs Casselberry Big Coppitt Key Tarpon Springs Ft. Myers Jacksonville Orlando Jacksonville Vero Beach Ponte Vedra Beach Miami Lakes Deerfield Beach Apopka Davie Orlando Jacksonville Miami Miami Beach Miami Beach Orlando Miami Miami Marietta Tucker Tucker East Point Atlanta Smyrna Norcross Roswell East Point Smyrna Tucker Decatur Tucker Marietta Decatur Smyrna Atlanta Decatur Lilburn Lilburn Decatur Forest Park Atlanta Augusta Marietta Lilburn Jonesboro Marietta Forest Park Atlanta Lake City Marietta Marietta Atlanta Norcross Stone Mountain Augusta Augusta Jonesboro Atlanta 9 Public Storage, Inc. 1998 Annual Report Property Locations (12/31/98) (continued) 7455 South Pulaski Road 184 Business 30 1700 North 5th Avenue 4100 East Main Street 1500 Old Church Road 708 Central Road 8651 E. Washington Street 4305 Lafayette Road 4350 S. East Street 1920 N. Green River Road 6817 W. Washington Street 2410 First Avenue 1915 N. Cline Avenue 4001 West 37th Avenue 1801 W. Coliseum Boulevard 5020 Bluffton Road 5151 Pike Plaza 5505 Elmwood Avenue 5519 Illinois Road 4015 Calumet Avenue 11240 Mastin Street 710 S.E. 8th Street 7100 W. Frontage Road 1525 E. Spruce 12716 W. 63rd Street 1850 S.W. 41st Street 1175 S. Rock Road 6805 E. Harry 1930 S. Woodlawn 12127 E. Kellogg 1445 S. Tyler Road 3515 W. Maple 1201 West Carey Lane 206 E. Macarthur 3150 S. 44th Street 2223 Haskell Avenue 12501 Hemlock Street 8830 Long Street 6855 Hedge Lane Terrace 6560 Foxridge Drive 6600 State Avenue 12100 Santa Fe Trail Drive 4127 Bardstown Road 7551 Industrial Road 7866 Tanners Lane 6714 Preston Highway 1601 Twilight Trail 3120 Breckenridge Lane 4324 Poplar Road 750 Winchester Road 12320 I-10 Service Road/Bullard 3440 S. Carrollton Avenue 10010 E. I-10 Service Road/Read 3000 Belle Chasse Highway 2930 Clearview Parkway 1015 Gould Drive 4614 Barksdale Boulevard 1901 St. Charles Avenue 3900 Tchoupitoulas Street 4040 Tulane Avenue 1515 Church Street 351 Parker Street 240 Newbury Street Route 1 277 Littleton Road 31 Jamrog Drive 195 Ward Street 2030 Main Street 432 Washington Street 595 Lynnway 87 Warren Street 800 River Street 1904 West Street 8396 Veterans Highway, Ste 200 1701 Whitehead Road 500 E. Diamond Avenue 396 Prospect Boulevard 3700 St. Barnabas Road 842 Hillen Street 7700 Central Avenue 7050 Old Waterloo Road 9201 Liberty Road 7 Wever Road 370 Christopher Avenue 7800 Fenton Street 8550 Catalpa Street 4215 Shannon Drive 14950 Bowie Road 8701 Central Avenue 3607 Fort Meade Road 16001 Frederick Road 7130 Furnace Branch Road 3005 Kenilworth Avenue 5000 Indianhead Highway 5800 Woodcliff Road 7901 Malcolm Road 5420 Randolph Road 1000 West Patapsco Avenue 10717 Hillwood Drive 5423 Butler Road 8800 Wise Avenue 4343 York Road 8355 Telegraph Road 7807 Marlboro Pike 455 E. Gude Drive 2308 Chillum Road 20080 Allen Road 3650 Enterprise Drive 35800 Mound Road 24455 Schoenherr Road 34050 9 Mile Road Chicago Aurora River Grove St. Charles Streamwood Mt. Prospect Indianapolis Indianapolis Indianapolis Evansville Indianapolis Evansville Griffith Hobart Fort Wayne Fort Wayne Indianapolis Indianapolis Fort Wayne Hammond Overland Park Topeka Merriam Olathe Shawnee Topeka Wichita Wichita Wichita Wichita Wichita Wichita Wichita Wichita Kansas City Lawrence Overland Park Lenexa Shawnee Mission Kansas City Lenexa Louisville FLorence FLorence Louisville Frankfort Louisville Louisville Lexington New Orleans New Orleans New Orleans Gretna Metairie Bossier City Bossier City New Orleans New Orleans New Orleans Lake Charles Springfield Peabody Westford Chicopee Revere Brockton Weymouth Lynn Randolph Boston Annapolis Millersville Baltimore Gaithersburg Frederick Suitland Baltimore Cheverly Baltimore Randallstown Baltimore Gaithersburg Silver Spring Laurel Baltimore Laurel Capitol Heights Laurel Rockville Glen Burnie Hyattsville Oxon Hill Bowie Clinton Rockville Baltimore Silver Spring Bethesda Dundalk Baltimore Odenton Forestville Rockville Hyattsville Trenton Allen Park Sterling Heights Warren Farmington IL IL IL IL IL IL IN IN IN IN IN IN IN IN IN IN IN IN IN IN KS KS KS KS KS KS KS KS KS KS KS KS KS KS KS KS KS KS KS KS KS KS KY KY KY KY KY KY KY KY LA LA LA LA LA LA LA LA LA LA LA MA MA MA MA MA MA MA MA MA MA MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MD MI MI MI MI MI 2745 Dixie Highway 12900 Newburgh Road 31505 Groesbeck Highway 29250 John R. Road 24305 Mound Road 5060 Coolidge Highway 20950 Greenfield Road 15075 Foliage Avenue 2300 Winnetka Avenue North 1830 Buerkle Road 10201 Woodcrest Drive 2000 Old County Road/34th Place 9033 Lyndale Avenue 9030 Watson Road 3760 Pennridge Drive 11580 Page Service Drive 13620 East 42nd Terrace 11837 Benham Road 9722 Gravois Road 15505 S. 71 Highway 7707 N. Oak Trafficway 5601 E. 112th Street Terrace 9820 Holmes 109 E. 31st Street 2629 S. Range Line 3850 Forder Road 200 E. Kirkham Road 3940 Reavis Barracks Road 2211 Barrett Station Road 1539 Old Highway 94 South 831 Meramec Station Road 6030 North Lindbergh Boulevard 1550 North Lindbergh Boulevard 11 North Vandeventer 2956 North Lindbergh Boulevard 1795 North Highway 67 9291 West Florissant Avenue 2403 Rangeline Street 2310 Paris Road 2420 St. Mary’s Boulevard 1723 East Florida Street 11575 New Halls Ferry Road 4653 World Parkway Circle 4000 South Providence Road 3500 I-70 Drive SE 9104 East 47th Street 8601 East 67th Terrace 9527 James A. Reed Road 2700 M291 Frontage Road 7900 Woodson Road 3440 Main Street 9600 Marion Ridge Drive 1250 South Third Street Bus Barn / South Third Street 1508 Ashley Road 4920 Capital Boulevard 7233 South Boulevard 5714 W. Market Street 4329 South Boulevard 4605 W. Market Street 3010 Electra Drive 2610 Yonkers Road 5105 Departure Drive 1079 Concord Parkway North 8520 East W.T. Harris Boulevard 5748 North Tryon Street 7921 South Boulevard 810 Oregon Street 620 East Club Boulevard 3933 North Duke Street 3500 Maitland Drive 3206 N. O’Henry Boulevard 2675 South York Road 3600 Kangaroo Drive 6425 S. 86th Street 3035 S. Willow Street 2028 S. Willow Street 168 Route 17 North 3825 Highway 1 950 Shrewsbury Avenue 50 Milltown Road 3828 Quakerbridge Road 1204 How Lane 2100 Tonnelle Avenue Box 447 - Road40 Erial Road 593 Route 38 West 110 Route 73 North 6 Dobbs Lane 4351 Route 130 South 2629 Brunswick Avenue 328-332 Route 22 2820 State Highway No.42 55 Harker Avenue 515 Broad Street 669 Glenwood Avenue 51 Peters Lane 4001 Route 130 South 124 Rudderow Avenue / Rte 38 68 Groveville Road 341 Highway 35 1861 Old Cuthbert 541 Bypass - P.O. Box 37 5900 State Highway No.42 550 Woodbury Glassboro Road 460 South Fellowship Road 1411 Parkside Avenue 805 E. Main Street 282 U.S. Route 46 4 Orben Drive 1062 U.S. Route 22 Waterford Livonia Fraser Madison Heights Warren Royal Oak Oak Park Apple Valley Golden Valley White Bear Lake Coon Rapids Burnsville Bloomington Crestwood Bridgeton St. Louis Independence St. Louis St. Louis Belton Gladstone Kansas City Kansas City Independence Joplin St. Louis St. Louis St. Louis Ballwin St. Charles Valley Park Hazelwood St. Louis St. Louis St. Ann FLorissant St. Louis Columbia Columbia Jefferson City Springfield Florissant St. Louis Columbia Columbia Kansas City Kansas City Kansas City Independence Raytown Kansas City Kansas City Street Louis Street Louis Charlotte Raleigh Charlotte Greensboro Charlotte Greensboro Greensboro Raleigh Raleigh Concord Charlotte Charlotte Charlotte Kannapolis Durham Durham Raleigh Greensboro Gastonia Durham Omaha Manchester Manchester Rochelle Park South Brunswick Tinton Falls East Brunswick Mercerville North Brunswick North Bergen Blackwood Maple Shade Marlton Cherry Hill Edgewater Park Lawrenceville Greenbrook Sicklerville Berlin Clifton Hillside Blackwood Delran Mapleshade Trenton Eatontown Cherry Hill Mt. Holly Turnersville Sewell Maple Shade Trenton Bridge Water Rockaway Ledgewood Mountainside 10 MI MI MI MI MI MI MI MN MN MN MN MN MN MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO MO NC NC NC NC NC NC NC NC NC NC NC NC NC NC NC NC NC NC NC NC NE NH NH NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ NJ 289 Old Post Road 96 Brick Boulevard 295 S. Martin Luther King Boulevard 4685 E. Tropicana Avenue 2225 Green Valley Parkway 1204 S. Valley View Boulevard 38 N. Lamb Boulevard 4875 S. McCarron Boulevard 1900 N. Jones Boulevard 1881 N. Decatur Boulevard 3345 S. Rainbow 4300 Boulder Highway 5050 W. Charleston Boulevard 1400 E. Tropicana Avenue 2727 S. Decatur Boulevard 4425 S. Eastern Avenue / Harmon 6601 W. Charleston Boulevard 3550 S. Arvill 3851 E. Charleston Boulevard 351 S. Martin Luther King Boulevard 200 Telegraph Street 2830 E. Desert Inn 4056 E. Sunset Road 5925 W. Flamingo 1055 Stewart Avenue 817 Peninsula Boulevard 605 Lee Road 4871 Transit Road 3671 Sheridan Drive 50 Foreman Drive 7345 Oswego Road 1693 East Avenue 185-Route 59 & Remsin Street 72 Southern Boulevard 47 Broad Hollow Road 1107 Goethals Road North 925 Spring Road 72 Emerson Place 601 W. Sunrise Highway 1250 Rockaway Avenue Box 597 Route 94 2855 Niagara Falls Boulevard 7 S. Pascack Road 550 Middle Country Road 4116 Austin Boulevard 955 Saw Mill River Road 24-01 Brooklyn-Queens Expressway 4040 Hempstead Turnpike 400 Fort Salonga Road 1062 St. Johns Place 363 Portion Road 137 Saw Mill River Road 60 E. Kingsbridge Road 3677 E. Kemper 6010 N. Dixie Highway 4511 Eastland Drive 11395 Brookpark Road 2250 W. 117th Street 4070 Mt. Carmel-Tobasco Road 7353 Dixie Highway 4060 Morse Road 4600 Kenny Road 6401 Busch Boulevard 786 Kinnear Road 4021 Marlane Drive 2995 Gender Road 2655 Billingsley Road 5711 Westerville Road 4780 Arlington Centre Boulevard 601 W. Leffel Lane 3560 Needmore Road 6207 Executive Boulevard 2555 E. Kemper Road 9660 Colerain Avenue 4990 Sinclair Road 27533 Helen Drive 6750 Ambleside Drive 22800 Miles Road 1561 Brittain Road 2120 Harshman Road 2719 Morse Road 6068 Branch Hill Guinea Pike 5201 Dixie Highway 3220 Westbourne Drive 5016 W. Reno Avenue / Route 5 7220 West Reno / Route 5 11120 N. Pennsylvania Avenue 2120 N.W. 39th Expressway 802 W. Hefner 2809 W. I-240 Service Road #100 8012 S. Santa Fe 4105 S. May 11995 S.W. Corby Drive 10905 S. W. Denny Road 19350 S.W. Shaw 2730 N.W. Division Street 11800 S.E. 40th Avenue 6525 N. Lombard Street 13515 N.E. Prescott Court 7402 S.E. 92nd Avenue 6500 S.W. 110th Court 1921 N. Gantenbein Avenue 2542 S.E. 105th Avenue 1621 N.E. 71st Avenue (Halsey) 17990 S.W. Mc Ewan 8928 N.E. Halsey Street 13325 Mc Loughlin Boulevard 1608 N.E. 92nd Avenue 17501 S.E. McLoughlin 11485 S.E. 82nd Avenue Edison Brick Las Vegas Las Vegas Henderson Las Vegas Las Vegas Reno Las Vegas Las Vegas Las Vegas Las Vegas Las Vegas Las Vegas Las Vegas Las Vegas Las Vegas Las Vegas Las Vegas Las Vegas Reno Las Vegas Henderson Las Vegas Garden City Hempstead Rochester Williamsville Amherst Spring Valley Liverpool Rochester Monsey Nesconset Farmingdale Staten Island Pelham Manor Brooklyn Patchogue Brooklyn Vails Gate Amherst Spring Valley Coram Island Park Yonkers Woodside Bethpage Northport Brooklyn Lake Ronkonkoma Yonkers Mt. Vernon Sharonville Fairfield Columbus Parma Cleveland Cincinnati Fairfield Columbus Columbus Columbus Columbus Grove City Reynoldsburg Columbus Westerville Upper Arlington Springfield Dayton Dayton Cincinnati Cincinnati Columbus Perrysburg Columbus Bedford Heights Akron Dayton Columbus Milford Fairfield Cincinnati Oklahoma City Oklahoma City Oklahoma City Oklahoma City Oklahoma City Oklahoma City Oklahoma City Oklahoma City Portland Beaverton Aloha Gresham Milwaukie Portland Portland Portland Beaverton Portland Portland Portland Tigard Portland Milwaukie Portland Milwaukie Portland NJ NJ NV NV NV NV NV NV NV NV NV NV NV NV NV NV NV NV NV NV NV NV NV NV NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY NY OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OH OK OK OK OK OK OK OK OK OR OR OR OR OR OR OR OR OR OR OR OR OR OR OR OR OR OR 2190 N.W. Burnside 1203 S.E. Tualatin Valley Highway 3508 S.W. Moody Street 13473 S.W. Pacific Highway 1421 E. Powell Boulevard 801 N. State Street 2600 N.W. Burnside Court 4021 Market Street 2535 Maryland Road 3751 Bristol Pike 7571 Ridge Avenue 245 West Chester Pike 8401 Lansdowne Avenue 2025 Chemical Road 1251 Byberry Road 6225 Oxford 1431 Ivy Hill Road 6330 Market Street 950 Jaymor Road 500 S. Flowers Mill Road 2750 Old Lincoln Highway 2700 Grant Avenue 1075 Bethlehem Pike 6301 Tacony Street 2977 Macarthur Road 1130 Mineral Spring Avenue 71 Freeway Drive 3415 Broad River Road 3415 Broad River Road 3901 River Drive 401 Buckner Road 120 Decker Park Road 4479 Rosewood Drive 240 Orchard Drive 1648 Airport Boulevard 1749 Whitehorse Road 114 North Main Street 3112 Grand View Drive 3129 Wade Hampton Boulevard 2560 Ashley Phosphate Road 5715 Dorchester Road 6654 Dorchester Road 1833 Sam Rittenburg Boulevard 27 Office Park Road 229 Plumbers Road 36 Pineknoll Road 5 Yacht Cove Drive 2155 Chesnee Highway 2373 Ashley River Road 3034 Broad River Road 28 Woods Lake Road 4409 Summer Avenue 7822 E. Brainerd Road 6712 Ringgold Road 142 Airport Plaza Drive 1997 Elm Hill Pike 4709 Chapman Highway 3125 Dickerson Pike 1546 North Gallatin Road 8713 Unicorn Drive 4811 Central Avenue Pike 1 Pryor Drive 411 Lafayette Street 424 Metroplex Drive 671 Myatt Drive 5624 Highway 153 1015 Gadd Road 101 Harding Road 408 Welshwood Drive 201 Williams Avenue 450 McNally Drive 1412 Central Court 5426 Cane Ridge Road 12915 Research Boulevard 1213 W. 6th Street 3703 Westheimer Boulevard 8555 Larkwood Drive 3443 Sorrento Drive 10540 Walnut Street 8101 North Lamar Boulevard 7112 South Congress Avenue 8129 North Lamar Boulevard 5151 S. Shaver Street 1205 North Loop 12 10931 Research Boulevard 3750 Marsh Lane 2300 West Park Row 100 N. Collins #101 12335 Bellaire Boulevard 8128 Lamar Boulevard 6456 Highway 6 North 12710 Nacogdoches Road 1425 Austin Highway 3550 West Mockingbird Lane 11020-A Audelia Road 1408 N.W. 19th Street 11770 S.W. Freewy 14050 N.W. Freeway 8400 W. Highway 80 1507 East Beltway 8 2801 Avenue K 12090 Fondren 1707 I-35 East 8939 East R.L. Thornton Freeway 9811 North Freeway 11434 Sprowles Street 1419 S. Stemmons 14451 Tomball Parkway 5685 De Soto Drive 10950 I-10 East Freeway Gresham Hillsboro Portland Tigard Gresham Lake Oswego Gresham Aston Willow Grove Bensalem Philadelphia Havertown Upper Darby Plymouth Meeting Philadelphia Philadelphia Wyndmoor Upper Darby Southampton Langhorne Trevose Philadelphia Montgomeryville Philadelphia Whitehall North Providence Cranston Columbia Columbia Columbia Columbia Columbia Columbia West Columbia West Columbia Greenville Mauldin Simpsonville Taylors Charleston Charleston Charleston Charleston Hilton Head Island Columbia Greenville Hilton Head Island Spartanburg Charleston Columbia Greenville Memphis Chattanooga Chattanooga Alcoa Nashville Knoxville Nashville Madison Knoxville Knoxville Chattanooga Nashville Nashville Madison Hixson Hixson Red Bank Nashville Madison Nashville Hermitage Antioch Austin Austin Houston Houston Mesquite Dallas Austin Austin Austin Houston Irving Austin Carrollton Pantego Arlington Houston Austin Houston San Antonio San Antonio Dallas Dallas Grand Prairie Houston Houston Fort Worth Pasadena Plano Houston Carrollton Dallas Houston Dallas Lewisville Houston Houston Houston OR OR OR OR OR OR OR PA PA PA PA PA PA PA PA PA PA PA PA PA PA PA PA PA PA RI RI SC SC SC SC SC SC SC SC SC SC SC SC SC SC SC SC SC SC SC SC SC SC SC SC TN TN TN TN TN TN TN TN TN TN TN TN TN TN TN TN TN TN TN TN TN TN TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX 5016 E. Ben White Boulevard 3150 E. Pioneer Parkway 4901 Brentwood Stair 7780 Harwin Drive 8430 Gulf Freeway 7601 Airport Freeway 8801 W. Freeway 2105 Winsted Drive 406 S. Plano Road 888 Eldridge Road 4401 S. Westmoreland 10100 North I-35 2715 Realty Drive 655 E. Kingsley Road 5342 E. Mockingbird Lane 4550 Louetta Road 2305 South Dairy Ashford 2550 East Trinity Mills 12670 Veterans Memorial Drive 1605 Vilbig Road 3501 Country Club Road North 3309 Alma Drive 3500 E. 14th Street 7412 Lemmon Avenue 9110 Markville Drive 20602 Gulf Freeway 401 N.A.S.A., Road 1 1822 West Kingsley Road 1212 East Airport Freeway 2861 Walnut Hill Lane 4925 Cockrell Hill Road 2301 E. Ben White 8525 N. Lamar 4750 Hemphill 1147 West Hurst Boulevard 7200 S. 1st Street 13403 Wetmore Road 4343 Callaghan 4910 S. Zarzamora 2505 Hackberry 9529 Fredricksburg Road 2840 S. Westmoreland 11038 Alvin Street 1001 W. Beach Street 1048 E. Seminary Drive 3700 Cockrell Avenue 2377 E. Loop 820 South 7501 Baker Boulevard 8610 Glenvista Street 9030 North Freeway 2850 Rogerdale Road 6615 S. Gessner 6336 Fairdale 5200 Gulfton Drive 8950 Westpark Drive 3555 S. Loop West 9710 Plainfield Road 17050 North Freeway 11900 Old Katy Road 9223 Long Point 9205 Research Boulevard 555 West Sunset Road 1314 Austin Highway 16639 San Pedro 937 Reinli 4202 Santiago 12343 E. Northwest Highway 12075 Denton Drive 13300 Hempstead Highway 2700 S. Shaver 175 S. Watson Road 500 E. Arapaho, Ste 1000 2603 Joel Wheaton Dr., Ste. 400 4111 U.S. Highway 80 9576 West F.M. 1960 3732a Westheimer Road 5615 Westheimer Road 11085 Kingsley Road 1033 E. 41st Street 4921 Davis Boulevard 1616 W. Airport Freeway 6502 Highway 6 South 6014 N.W. Loop 410 5204 Mc Cart Avenue 10944 Millridge North Drive 3521 W. Pioneer Parkway Ste. A 3008 West Division Street 732 South Cedar Ridge Drive 1225 West Trinity Mills Road 380 Bolen Road 14880 Wallisville Road 12400 Fondren Road 5460 Addicks Satsuma Road 14729 Inwood Road 6222 S.W. Freeway 4333 Jackson Drive 321 East Buckingham Road 9420 Main Street 3401 Avenue K 5707 Bingle Road 2415 Mangum Road 2055 Hayes Road 150 Dominion Drive 2510 FM 1960 Road West 2930 FM 528 Road 16303 Loch Katrine Lane 5323 Milwee Street 690 East Highway 121 1100 North Central Expressway 7770 Highway 6 South Public Storage original properties = orange. Storage Trust original properties = black TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX Austin Arlington Fort Worth Houston Houston Richland Hills Fort Worth Dallas Garland Sugar Land Dallas Austin Carrollton Garland Dallas Spring Houston Carrollton Houston Dallas Irving Plano Plano Dallas Dallas Webster Webster Garland Irving Dallas Dallas Austin Austin Fort Worth Hurst Austin San Antonio San Antonio San Antonio San Antonio San Antonio Dallas Dallas Fort Worth Fort Worth Fort Worth Fort Worth Richland Hills Houston Houston Houston Houston Houston Houston Houston Houston Houston Houston Houston Houston Austin San Antonio San Antonio San Antonio Austin Austin Dallas Dallas Houston Pasadena Arlington Richardson Houston Mesquite Houston Houston Houston Dallas Austin North Richland Hills Irving Houston San Antonio Fort Worth Houston Pantego Arlington Duncanville Carrollton Kennedale Houston Houston Houston Addison Houston Garland Garland Houston Plano Houston Houston Houston Katy Houston Webster Houston Houston Lewisville Richardson Houston 11 Public Storage, Inc. 1998 Annual Report TX TX TX TX TX TX TX TX TX UT UT UT UT UT UT VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA VA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WI WI WI WI WI WI WI WI WI 11810 Westheimer Road 6899 Granbury Road 4341 Southwest Freeway 3540 Inwood Road 799 East Loop 820 2422 Marsh Lane 11550 Forest Central Drive 2531 South Cooper Street 15114 Highway 3 1545 E. 3900 South Street 1829 West 3500 South Street 1560 West North Temple 9101 S. State Street 4065 W. Sams Blvd/5295 South Street 2935 S. 3600 West 11885 Jefferson Avenue 1409 Diamond Springs Road 1489 General Booth Boulevard 2921 Centreville Road 399 Old Jefferson Davis Highway 401 S. Pickett Street 3005 Gallows Road 13410 Warwick Boulevard 4400 Backlick Road 1510 Springhill Road 5610 General Washington Drive 7400 Alban Station Boulevard 3380 Holland Road 4805 Jefferson Davis Highway 10305 Balls Ford Road 448 S. Independence Boulevard 9915 Richmond Highway 12600 Jefferson Avenue 4312 Ravensworth Road 5728 Southern Boulevard 1430 S. Military Highway 1205 W. Pembroke Avenue 880 Widgeon Road 1717 Bloom Lane 5440 Midlothian Turnpike 2918 Peters Creek Road 7901 Centreville Road 700 S. Pickett Street 13887 Smoketown Road 5819 Columbia Pike 8523 Lee Highway 14123 Jefferson Davis Highway 1365 Old Bridge Road 3281 Western Branch Boulevard 14601 Lee Highway 1800 South Sterling Boulevard 8046 Sudley Road 5806 221st Place Southeast 1515 13th Avenue 12020 Highway 99 South 15400 1st Avenue South 6850 South 238th Street 5200 180th Street Southwest 25700 Pacific Highway South 724 Eighth Street 34701 Pacific Highway South 7133 Delridge Way Southwest 14034 1st Avenue South 11512 North Aurora Avenue 12249 N.E. 124th Street 10020 Martin Luther King Wy South 13640 Bell-Red Road 23010 Highway 99 2824 172nd Street Southwest 15244 Pacific Highway South 1801 R Street Southeast 27000 Pacific Highway South 10636 S.E. 174th Street 20065 15th Avenue Northeast 4103 Orchard Street South 9901 S.E. Millplain Boulevard 6720 24th Street West 8520 Phillips Road Southwest 9011 Evergreen Way 10404 Martin Luther King Wy South 2215 196th Street Southwest 3624 Auburn Way North 23600 Military Road South 18023 Des Moines Memorial Drive 12465 Northup Way 8611 S. 222nd. 21818 66th Avenue West 3600 Stone Way North 1618 Blacklake Boulevard Southwest 7421 S. 180th Street 5730 N. Lovers Lane Road 8824 W. Brown Deer Road 4750 S. 108th Street 900 W. Layton Avenue 6414 Copps Avenue 535 S. 84th Street 6676 W. Appleton Avenue 7415 West Dean Road W229 N590 Foster Court Houston Fort Worth Houston Dallas Fort Worth Carrollton Dallas Arlington Webster Salt Lake City West Valley City Salt Lake City Sandy Kearns West Valley City Newport News Virginia Beach Virginia Beach Herndon Arlington Alexandria Falls Church Newport News Annandale Mc Lean Alexandria Springfield Virginia Beach Richmond Manassas Virginia Beach Lorton Newport News Annandale Virginia Beach Chesapeake Hampton Norfolk Richmond Richmond Roanoke Manassas Alexandria Woodbridge Falls Church Fairfax Woodbridge Woodbridge Chesapeake Centreville Sterling Monassas Issaquah Seattle Everett Burien Kent Lynnwood Kent Kirkland Federal Way Seattle Seattle Seattle Kirkland Seattle Bellevue Edmonds Lynnwood Seattle Auburn Kent Renton Seattle Tacoma Vancouver Tacoma Tacoma Everett Seattle Lynnwood Auburn Kent Seattle Bellevue Kent Mountlake Terrace Seattle Olympia Kent Milwaukee Milwaukee Greenfield Milwaukee Madison Milwaukee Milwaukee Milwaukee Waukesha Total Properties = 1,309 (12/31/98) December 31, 1998 December 31, 1997 $ 51,225 $ 41,455 803,226 2,159,065 2,962,291 (411,176) 2,551,115 83,138 2,634,253 450,513 203,635 5,415 58,863 $3,403,904 $ — 81,426 63,813 145,239 139,325 845,299 2,232,230 3,077,529 (378,248) 2,699,281 42,635 2,741,916 225,873 212,944 21,807 67,650 $3,311,645 $ 7,000 96,558 70,648 174,206 288,479 868,900 — 868,900 53,308 11,598 700 2,178,465 802,088 (742,411) 3,119,340 $3,403,904 10,511 700 1,903,782 575,069 (563,310) 2,848,960 $3,311,645 Public Storage, Inc. 1998 Annual Report Consolidated Balance Sheets (Amounts in thousands, except share data) Assets Cash and cash equivalents Real estate facilities, at cost: Land Buildings Accumulated depreciation Construction in process Investment in real estate entities Intangible assets, net Mortgage notes receivable from affiliates Other assets Total assets Liabilities and Shareholders’ Equity Revolving line of credit Notes payable Accrued and other liabilities Total liabilities Minority interest Commitments and contingencies Shareholders’ Equity: Preferred Stock, $0.01 par value, 50,000,000 shares authorized, 11,129,650 shares issued and outstanding (13,261,984 issued and outstanding at December 31, 1997), at liquidation preference: Cumulative Preferred Stock, issued in series Convertible Preferred Stock Common stock, $0.10 par value, 200,000,000 shares authorized, 115,965,945 shares issued and outstanding (105,102,145 at December 31, 1997) Class B Common Stock, $0.10 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. 12 Consolidated Statements of Income (Amounts in thousands, except per share data) For each of the three years in the period ended December 31, 1998 Revenues: Rental income: Self-storage facilities Commercial properties Portable self-storage Equity in earnings of real estate entities Facility management fee Interest and other income Expenses: Cost of operations: Self-storage facilities Commercial properties Portable self-storage Cost of facility management Depreciation and amortization General and administrative Interest expense Income before minority interest Minority interest in income Net income Net income allocation: Allocable to preferred shareholders Allocable to common shareholders Per common share: Basic net income per share Diluted net income per share Basic weighted average common shares outstanding Diluted weighted average common shares outstanding See accompanying notes. Public Storage, Inc. 1998 Annual Report 1998 1997 1996 $488,291 23,112 24,466 26,602 6,221 13,459 582,151 149,376 7,951 55,488 1,066 107,482 8,972 4,507 334,842 247,309 (20,290) $227,019 $ 78,375 148,644 $227,019 $ $ 1.30 1.30 113,929 114,357 $385,540 40,575 7,893 17,569 10,141 9,126 470,844 117,963 16,665 39,558 1,793 91,356 6,384 6,792 280,511 190,333 (11,684) $178,649 $ 88,393 90,256 $178,649 $ $ 0.92 0.91 98,446 98,961 $270,429 23,576 421 22,121 14,428 7,976 338,951 82,494 10,750 1,247 2,575 64,967 5,524 8,482 176,039 162,912 (9,363) $153,549 $ 68,599 84,950 $153,549 $ $ 1.10 1.10 77,117 77,358 13 Public Storage, Inc. 1998 Annual Report Consolidated Statements of Shareholders’ Equity (Amounts in thousands, except share and per share amounts) For each of the three years in the period ended December 31, 1998 Balances at December 31, 1995 Issuance of Preferred Stock, net of issuance costs: Series H and I (10,750 shares) Convertible, Series CC (58,955 shares) Issuance of Common Stock (15,134,241 shares) Conversion of 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 Balances at December 31, 1996 Issuance of Preferred Stock, net of issuance costs: Series J (6,000 shares) Issuance of Common Stock (14,376,218 shares) Conversion of Series CC Convertible Preferred Stock into Common Stock (2,184,250 shares) Conversion of 8.25% Convertible Preferred Stock into Common Stock (179,651 shares) Net income Cash distributions: Preferred Stock Common Stock, $0.88 per share Balances at December 31, 1997 Issuance of Common Stock (10,093,648 shares) Conversion of 8.25% Convertible Preferred Stock into Common Stock (3,589,552 shares) Repurchase of Common Stock (2,819,400 shares) Net income Cash distributions: Preferred Stock Common Stock, $0.88 per share Balances at December 31, 1998 See accompanying notes. Cumulative $450,150 268,750 — — — — — — — 718,900 150,000 — — — — — — 868,900 — — — — — — Preferred Stock Convertible $ 85,970 — 58,955 — (28,470) (1,526) — — — 114,929 — — (58,955) (2,666) — — — 53,308 — (53,308) — — — — Common Stock $ 7,152 — — 1,514 161 10 — — — 8,837 — 1,438 218 18 — — — 10,511 1,010 359 (282) — — — $868,900 $ — $11,598 14 Public Storage, Inc. 1998 Annual Report Cumulative Distributions $(252,428) — — — — — — (68,599) (67,709) (388,736) — — — — — (88,393) (86,181) (563,310) — — — — (78,375) (100,726) $(742,411) Total Shareholders’ Equity $1,634,503 259,778 58,955 335,470 (510) — 153,549 (68,599) (67,709) 2,305,437 144,925 394,523 — — 178,649 (88,393) (86,181) 2,848,960 294,718 — (72,256) 227,019 (78,375) (100,726) $3,119,340 Class B Common Stock $ 700 — — — — — — — — 700 — — — — — — — 700 — — — — — — Paid-in Capital $1,100,088 (8,972) — 333,956 27,799 1,516 — — — 1,454,387 (5,075) 393,085 58,737 2,648 — — — 1,903,782 293,708 52,949 (71,974) — — — $ 700 $2,178,465 Cumulative Net Income $242,871 — — — — — 153,549 — — 396,420 — — — — 178,649 — — 575,069 — — — 227,019 — — $802,088 15 Public Storage, Inc. 1998 Annual Report Consolidated Statements of Cash Flows (Amounts in thousands) For each of the three years in the period ended December 31, 1998 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Depreciation included in equity in earnings of real estate entities Minority interest in income Total adjustments Net cash provided by operating activities Cash flows from investing activities: Principal payments received on mortgage notes receivable Acquisition of minority interests in consolidated real estate partnerships Acquisition of mortgage notes receivable Acquisition of real estate facilities Acquisition cost of business combinations Reduction in cash due to the deconsolidation of PS Business Parks (See Note 2) Acquisition of interests in real estate entities Construction in process Investment in portable self-storage business Capital improvements to real estate facilities Other Net cash used in investing activities Cash flows from financing activities: Net (paydowns) borrowings on revolving line of credit Net proceeds from the issuances of preferred stock Net proceeds from the issuances of common stock Repurchase of the Company’s common stock Principal payments on mortgage notes payable Distributions paid to shareholders Distributions from operations to minority interests in consolidated real estate entities Net reinvestment by minority interests in consolidated real estate entities Net cash (used in) provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year See accompanying notes. 16 1998 1997 1996 $ 227,019 $ 178,649 $ 153,549 107,482 91,356 64,967 13,884 20,290 141,656 368,675 11,474 11,684 114,514 293,163 17,450 9,363 91,780 245,329 46,897 409 1,784 (22,845) (33,000) (46,064) (85,883) (11,260) (99,934) (79,132) (2,571) (31,714) 19,732 (345,774) (7,000) — 237,860 (72,256) (15,131) (179,101) (21,559) — (65,225) (164,808) — (46,151) (45,865) (29,997) (35,117) (838) (409,151) 7,000 144,925 182,523 — (11,885) (174,574) (15,419) (3,709) (198,404) (113,522) — (83,893) (46,097) — (20,366) (5,104) (484,730) — 259,778 130,538 — (51,310) (136,308) (32,312) (20,929) (20,853) 54,809 (13,131) 9,770 41,455 $ 51,225 3,527 130,587 14,599 26,856 $ 41,455 3,976 185,821 (53,580) 80,436 $ 26,856 Public Storage, Inc. 1998 Annual Report 1998 1997 1996 $ (42,047) $(119,279) $ (4,292) (657,347) 189,400 (4,119) 21,190 74,068 (531,794) 124,696 (5,849) 15,399 20,139 (224,999) 86,966 (670) 3,793 35,210 (219,225) 433,446 2,048 (10,106) (14,526) (202,897) (25,460) (17,133) 527 — 1,206 — 13,817 25,908 17,133 53,308 (53,308) — 14,526 — — — — — — — — 30,406 2,495 — (30,406) 119,279 — — — — — — — — — 1,701 1,891 — — — 58,955 212,000 — — 61,621 (2,666) (58,955) 204,932 — — 29,486 (1,526) (28,470) (Amounts in thousands) For each of the three years in the period ended December 31, 1998 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Investing activities: Acquisition of real estate facilities in exchange for minority interests, common stock, the assumption of mortgage notes payable, the cancellation of mortgage notes receivable and the reduction of investment in real estate entities Business combinations (Note 3): Real estate facilities Investment in real estate entities Other assets Accrued and other liabilities Minority interest Effect of the deconsolidation of PS Business Parks (Note 2) Investments in real estate entities Real estate facilities, net of accumulated depreciation Other assets Accrued and other liabilities Notes payable Minority interest Acquisition of minority interest in exchange for common stock Investment in real estate entities Financing activities: Cancellation of mortgage notes receivable to acquire real estate facilities 700 Assumption of mortgage notes payable upon the acquisition of real estate facilities Reduction of investment in real estate entities in exchange for real estate facilities Reduction in construction in process — contribution to joint venture Minority interest issued in exchange for real estate facilities Issuance of Mandatory Convertible Preferred Stock, Series CC to acquire interest in consolidated real estate partnerships Issuance of Common Stock: In connection with mergers To acquire minority interests Acquire partnership interests in real estate entities In connection with conversion of Convertible Preferred Stock Conversion of 8.25% Convertible Preferred Stock Conversion of Mandatory Convertible Preferred Stock See accompanying notes. 17 Public Storage, Inc. 1998 Annual Report Notes to Consolidated Financial Statements (December 31, 1998) Note 1. Description of the Business 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 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, 1998, the Company had direct and indirect equity interests in 1,206 properties located in 38 states, including 1,094 self-storage facilities and 107 commercial properties and five facilities for use in its portable self-storage operations. All of the self-storage facilities are operated by the Company under the “Public Storage” name. In 1996 and 1997, the Company organized Public Storage Pickup and Delivery, Inc. as a separate corporation and a related partnership (the corporation and partnership are collectively referred to as “PSPUD”) to operate a portable self-storage business that rents storage containers to customers for storage in central warehouses. At December 31, 1998, PSPUD operated 43 facilities in 11 states. On January 2, 1997, the Company reorganized its commercial property operations into a separate private REIT (the “Private REIT”). The Private REIT contributed its assets to a newly created operating partnership (the “Operating Partnership”) in exchange for a general partnership interest and limited partnership interests. The Company and certain partnerships in which the Company has a controlling interest contributed substantially all of their commercial properties to the Operating Partnership in exchange for limited partnership interests or to the Private REIT in exchange for common stock. On March 17, 1998, the Private REIT merged into Public Storage Properties XI, Inc., an affiliated publicly traded REIT and the name of the surviving corporation was changed to PS Business Parks, Inc. (the REIT and Operating Partnership are referred to hereafter as “PSB”). As of December 31, 1998, the Company owned approximately 40% of PSB. At December 31, 1998, PSB owned 106 properties located in 11 states. PSB also manages the commercial properties owned by the Company and certain of its unconsolidated affiliates. Note 2. Summary of Significant Accounting Policies Basis of presentation The consolidated financial statements include the accounts of the Company, PSPUD, and 21 controlled limited partnerships (the “Consolidated Entities”). Collectively, these entities own a total of 957 real estate facilities, consisting of 951 self-storage facilities, one commercial property, and five facilities for use by PSPUD. At December 31, 1998, the Company also had equity investments in 26 other affiliated limited partnerships whose principal business is the ownership of 143 self-storage facilities in aggregate which are managed by the Company. The Company does not control these entities, accordingly, the Company’s investments in these entities are accounted for using the equity method. From the time of PSB’s formation through March 31, 1998, the Company consolidated the accounts of PSB in its financial statements. During the second quarter of 1998, the Company’s ownership interest in PSB was reduced below 50%, and accordingly, the Company ceased to have a controlling interest in PSB. As a result, the Company, effective April 1, 1998, no longer includes the accounts of PSB in its consolidated financial statements and has accounted for its investment during the nine months ended December 31, 1998 using the equity method. The consolidated statement of income for the year ended December 31, 1998 includes the consolidated operating results of PSB for the three months ended March 31, 1998, however, for the nine months ended December 31, 1998 the Company’s investment is 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 1998, 1997 and 1996; 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. 18 Public Storage, Inc. 1998 Annual Report 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 applicable interest rates approximate market rates for these 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. 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 intangible assets ($67,726,000) acquired. Intangible assets are amortized straight-line over 25 years. At December 31, 1998 and 1997, intangible assets are net of accumulated amortization of $29,091,000 and $19,782,000, respectively. Included in depreciation and amortization expense is $9,309,000 in each of the three fiscal years ended December 31, 1998 with respect 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. Advertising costs are expensed as incurred. 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 be reasonably estimated. The Company’s current practice is to conduct environmental investigations in connection with property acquisitions. As a result of environmental investigations of its properties, which commenced in 1995, the Company recorded an amount which, in management’s best estimate, will be sufficient to satisfy anticipated costs of known investigation and remediation requirements. 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 In 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share. Statement 128 replaced the calculation of primary and fully diluted net income per share with basic and diluted net income per share. Unlike primary net income per share, basic net income per share excludes any dilutive effects of options, warrants and convertible securities. Diluted net income per share is very similar to the previously reported fully diluted net income per share. All net income per share amounts for all periods have been presented and where appropriate, restated to conform to Statement 128 requirements. Diluted net income per common share is computed using the weighted average common shares outstanding (adjusted for stock options). The Class B Common Stock is not included in the determination of net income per common share because all contingencies required for the conversion to common stock have not been satisfied as of December 31, 1998. In addition, the inclusion of the Company’s convertible preferred stock in the determination of net income per common share has been determined to be anti-dilutive. In computing earnings per common share, preferred stock dividends totaling $78,375,000, $88,393,000 and $68,599,000 for the years ended December 31, 1998, 1997 and 1996, respectively, reduced income available to common stockholders. Stock-based compensation In October 1995, the FASB issued SFAS No. 123 “Accounting for Stock-Based Compensation” (“Statement 123”) which provides companies an alternative 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 continue 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. 19 Public Storage, Inc. 1998 Annual Report Note 3. Business Combinations Mergers with affiliated REITs During 1998, the Company completed merger transactions with two 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 merger transaction with Public Storage Properties XI, Inc. was accomplished through a merger of Public Storage Properties XI, Inc. with the Private REIT. The aggregate acquisition cost of these mergers is summarized as follows (amounts in thousands): Entity Public Storage Properties XI, Inc. Public Storage Properties XX, Inc. Date of Merger March 17, 1998 May 8, 1998 Merger Consideration PSI Common Stock $ — 13,817 $13,817 Pre-Existing Investment $14,774 3,797 $18,571 Cash $ — 4,744 $4,744 Total $14,774 22,358 $37,132 During 1997, the Company completed merger transactions with six affiliated public REITs whereby the Company acquired all the outstanding stock of the REITs for an aggregate cost of $404,907,000, consisting of the issuance of 7,681,432 shares of the Company’s common stock ($212,000,000), a $124,045,000 reduction of the Company’s pre-existing investment and $68,862,000 in cash. Affiliated partnership acquisitions: During 1998, the Company increased its ownership interest in three affiliated limited partnerships in which the Company is the general partner. 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 obtaining control of the partnerships, the Company began to consolidate the accounts of the partnerships in the Company’s consolidated financial statements. These transactions are summarized as follows (amounts in thousands): Entity Mid-Atlantic I and II Public Storage Institutional Fund III Economic Interest after Acquisition Month Purchased 95% 98% January 1998 September 1998 Cash $ 5,710 75,429 $81,139 Pre-existing Investment $ 1,551 66,844 $68,395 Total $ 7,261 142,273 $149,534 During 1997, the Company increased its ownership interest in twelve affiliated limited partnerships in which the Company is the general partner. Prior to the acquisitions, the Company accounted for its investment in each of the twelve partnerships using the equity method. As a result, commencing in 1997, the Company began to consolidate the accounts of these partnerships for financial statement purposes. The aggregate amount of the interests acquired totaled $161,301,000 consisting of a $65,355,000 reduction of the Company’s pre-existing investment and cash of $95,946,000. Each of the above mergers with affiliated REITs and acquisitions of partnership interests 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 1998 and 1997 are summarized as follows: (amounts in thousands) 1998 business combinations: Real estate facilities Other assets Accrued and other liabilities Minority interest 1997 business combinations: Real estate facilities Other assets Accrued and other liabilities Minority interest REIT Mergers Partnership Acquisitions $ 73,971 271 (2,280) (34,830) $ 37,132 $413,597 2,424 (11,114) — $404,907 $151,028 399 (1,513) (380) $149,534 $243,750 1,695 (10,076) (74,068) $161,301 Total $224,999 670 (3,793) (35,210) $186,666 $657,347 4,119 (21,190) (74,068) $566,208 20 Public Storage, Inc. 1998 Annual Report The historical operating results of the above acquisitions 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, 1998 and 1997 as though the business combinations above had been effective at the beginning of fiscal 1997 are as follows: (in thousands except per share data) For the year ended December 31, Revenues Net income Net income per common share (Basic) Net income per common share (Diluted) 1998 $593,180 $226,353 1.30 $ 1.29 $ 1997 $496,977 $176,716 0.89 $ 0.89 $ 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 fiscal 1997 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 and (iii) estimated increase in depreciation and amortization expense. Note 4. Real Estate Facilities Activity in real estate facilities during 1998, 1997 and 1996 is as follows: (amounts in thousands) Operating facilities, at cost: Beginning balance Property acquisitions Business combinations (Note 3) Other acquisitions Developed facilities Acquisition of minority interest (Note 8) Capital improvements PSB deconsolidation (see below) Ending balance Accumulated depreciation: Beginning balance Additions during the year PSB deconsolidation (see below) Ending balance Construction in progress: Beginning balance Current development cost Property contribution to real estate entities Newly opened development facilities Ending balance Total real estate facilities 1998 1997 1996 $3,077,529 $2,185,498 $1,405,155 224,999 64,818 38,629 23,293 31,714 (498,691) 657,347 184,504 8,639 8,904 35,117 (2,480) 531,794 202,696 18,261 7,226 20,366 — 2,962,291 3,077,529 2,185,498 (378,248) (98,173) 65,245 (411,176) 42,635 79,132 — (38,629) 83,138 (297,655) (82,047) 1,454 (378,248) 35,815 45,865 (30,406) (8,639) 42,635 (241,966) (55,689) — (297,655) 7,979 46,097 — (18,261) 35,815 $2,634,253 $2,741,916 $1,923,658 During 1998, the Company acquired a total of 53 real estate facilities for an aggregate cost of $224,999,000 in connection with certain business combinations (Note 3). In addition, the Company also acquired two self-storage facilities for an aggregate cost of $9,384,000, consisting of the cancellation of mortgage notes receivable ($2,495,000), the Company’s existing investment ($527,000), and cash ($6,362,000) and three commercial facilities for an aggregate cost of $55,434,000 consisting of the assumption of mortgage notes payable ($14,526,000), the issuance of minority interests ($1,206,000) and cash ($39,702,000). Effective April 1, 1998, the Company no longer included the accounts of PSB in its consolidated financial statements (Note 2). As a result of this change, real estate facilities and accumulated depreciation were reduced by $498,691,000 and $65,245,000, respectively, reflecting the cost basis of the PSB real estate facilities which are no longer included in the Company’s consolidated financial statements. During 1997, the Company acquired a total of 176 real estate facilities for an aggregate cost of $657,347,000 in connection with certain business combinations (Note 3). The Company also acquired an additional 14 real estate facilities from third parties with an aggregate acquisition cost of $184,504,000 consisting of the issuance of minority interests ($119,279,000) and cash ($65,225,000). 21 Public Storage, Inc. 1998 Annual Report During 1996, the Company acquired a total of 154 real estate facilities for an aggregate cost of $531,794,000 in connection with certain business combinations. 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). A substantial number of the real estate facilities acquired during 1998, 1997, and 1996 were acquired from affiliates in connection with business combinations with an aggregate acquisition cost of approximately $224,999,000, $657,347,000, and $531,794,000 respectively. Construction in progress consists of land and development costs relating principally to the development of self-storage facilities. In April 1997, the Company and an insitutional investor created a joint venture partnership (the “Development Joint Venture”) for the purpose of developing up to $220 million of self-storage facilities. The Company owns 30% of the partnership interest and the institutional investor owns the remaining 70% interest. In connection with the formation of the Development Joint Venture, the Company contributed eight self-storage facilities ($30,406,000), which were under construction, to the partnership in exchange for its partnership interest. The Company will periodically transfer newly developed properties, the cost of which were included in real estate, to the partnership as part of the Company’s capital contribution to the partnership. The Company’s investment in the partnership is accounted for using the equity method (See Note 5). At December 31, 1998, the unaudited adjusted basis of real estate facilities for Federal income tax purposes was approximately $2.2 billion. Note 5. Investments in Real Estate Entities At December 31, 1998, the Company’s investments in real estate entities consist generally of ownership interests in 26 partnerships. Such interests consists of noncontrolling interests of less than 50% 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. During 1998, 1997, and 1996, the Company recognized earnings from its investments of $26,602,000, $17,569,000 and $22,121,000, respectively, and received cash distributions totaling $17,968,000, $15,673,000 and $27,326,000, respectively. During 1998 and 1997, respectively, the Company’s investment in real estate entities decreased principally as a result of business combinations whereby the Company eliminated approximately $87.0 million and $189.4 million, respectively, of pre-existing investments in real estate entity investments. Offsetting these decreases are additional investments made by the Company in other unconsolidated entities totaling $319.1 million (including $219.2 million due to the deconsolidation of PSB) and $46.2 million in 1998 and 1997, respectively. Summarized combined financial data with respect to those real estate entities in which the Company had an ownership interest at December 31, 1998 (amounts for the Development Joint Venture are from its formation on April 10, 1997) are as follows: (amounts in thousands) For the year ended December 31, 1998: Rental income Other income Total revenues Cost of operations Depreciation and amortization Other expenses Total expenses Net income before minority interest Minority interest Net income At December 31, 1998: Real estate, net Total assets Total liabilities Minority interest Total equity Other Equity Investments $ 65,813 1,755 Development Joint Venture $ 6,003 555 67,568 21,882 7,990 8,119 37,991 29,577 — $ 29,577 $ 6,558 3,703 1,879 100 5,682 876 — 876 PSB $ 88,320 1,940 90,260 26,150 18,908 4,594 49,652 40,608 (11,208) Total $ 160,136 4,250 164,386 51,735 28,777 12,813 93,325 71,061 (11,208) $ 29,400 $ 59,853 $169,775 $213,762 $ 76,657 — $ $137,105 $138,948 $146,666 $ 4,927 — $ $141,739 $698,137 $709,414 $ 66,494 $153,015 $489,905 $1,006,860 $1,069,842 $ 148,078 $ 153,015 $ 768,749 The Company’s investment (book value) at December 31, 1998 $175,383 $ 42,522 $232,608 $ 450,513 The Company’s effective average ownership interest at December 31, 1998 37% 30% 40% 33% As indicated above, in April 1997, the Company and an institutional investor formed a joint venture partnership for the purpose of developing up to $220 million of self-storage facilities. As of December 31, 1998, the joint venture partnership had completed construction on 24 self-storage facilities 22 Public Storage, Inc. 1998 Annual Report with a total cost of approximately $112.2 million, and had 6 facilities under construction with an aggregate cost incurred to date of approximately $28.6 million and total additional estimated cost to complete of $3.9 million. The partnership is funded solely with equity capital consisting of 30% from the Company and 70% from the institutional investor. Note 6. Revolving Line of Credit The credit agreement (the “Credit Facility”) has a borrowing limit of $150 million and an expiration date of 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 borrowings 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) maintain 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, 1998. Note 7. Notes Payable Notes payable at December 31, 1998 and 1997 consist of the following: (amounts 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 7.134% to 11.00% mortgage notes secured by real estate facilities, principal and interest payable monthly, due at varying dates between May 1999 and September 2028 1998 1997 Carrying Amount $46,000 Fair Value $46,000 Carrying Amount $53,250 Fair Value $ 53,250 28,401 30,942 30,355 34,571 7,025 $81,426 7,025 $83,967 12,953 $96,558 12,953 $100,774 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, 1998. 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 25 of the Company’s real estate facilities having an aggregate net book value of $53.8 million at December 31, 1998. At December 31, 1998, approximate principal maturities of notes payable are as follows: (in thousands) 1999 2000 2001 2002 2003 Thereafter 7.08% Unsecured Senior Notes Fixed Rate Mortgage Debt (weighted average rate of 10.44%) $ 8,000 8,750 9,500 9,750 10,000 — $46,000 $ 6,398 2,622 2,910 3,229 3,584 16,683 $35,426 Total $14,398 11,372 12,410 12,979 13,584 16,683 $81,426 Interest paid (including interest related to the borrowings on the Credit Facility) during 1998, 1997 and 1996 was $7,690,000, $8,884,000 and $10,312,000, respectively. In addition, in 1998, 1997 and 1996, the Company capitalized interest totaling $3,481,000, $2,428,000 and $1,861,000, respectively, related to construction of real estate facilities. 23 Public Storage, Inc. 1998 Annual Report The maturities above do not include the notes payable assumed on March 12, 1999 by the Company in connection with the merger with Storage Trust in the unaudited principal amount of $100 million (unaudited — $14.7 million of which is due in 2003, with the remainder due thereafter). See Note 13 for further discussion of the merger. Note 8. Minority Interest In consolidation, the Company classifies ownership interests other than its own in the net assets of each of the Consolidated Entities 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 Entities. During 1998, the Company acquired limited partnership interests in the Consolidated Entities in several transactions for an aggregate cost of $48,753,000. These transactions had the effect of reducing minority interest by approximately $25,460,000 (the historical book value of such interests in the underlying net assets of the partnerships). The excess of the cost over the underlying book value ($23,293,000) has been allocated to real estate facilities in consolidation. In 1997 and 1996, the Company acquired interests in the Consolidated Entities at an aggregate cost of $21,559,000 and $15,419,000, respectively, reducing minority interest by approximately $12,655,000 and $8,193,000, respectively. The excess of cost over underlying book values was allocated to real estate facilities in consolidation. During 1998, 1997 and 1996, in connection with certain business combinations (Note 3) minority interest was increased by $35,210,000, $74,068,000 and $20,139,000, respectively, representing the remaining partners’ equity interests in the aggregate net assets of the Consolidated Entities. Note 9. Property Management Throughout the three year period ended December 31, 1998, the Company, pursuant to property management contracts, managed real estate facilities owned by affiliated entities and to a lesser extent by third parties. The property management contracts generally provide for compensation equal to 6% of gross revenues of the facilities managed. Note 10. Shareholders’ Equity Preferred Stock At December 31, 1998 and 1997, the Company had the following series of Preferred Stock outstanding (dollar amounts in thousands): Series Series A Series B Series C Series D Series E Series F Series G Series H Series I Series J Total Senior Preferred Stock Convertible Preferred Stock At December 31, 1998 At December 31, 1997 Dividend Rate 10.000% 9.200% Adjustable 9.500% 10.000% 9.750% 8.875% 8.450% 8.625% 8.000% 8.250% 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 6,000 11,129,650 — $ Carrying Amount 45,625 59,650 30,000 30,000 54,875 57,500 172,500 168,750 100,000 150,000 868,900 — 11,129,650 $ 868,900 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 6,000 11,129,650 2,132,334 13,261,984 Carrying Amount $ 45,625 59,650 30,000 30,000 54,875 57,500 172,500 168,750 100,000 150,000 868,900 53,308 $922,208 On June 1, 1998, the Company exercised its option to redeem the Convertible Preferred Stock for common stock at the conversion rate of 1.6835 shares of common stock for each share of Convertible Preferred Stock. Pursuant to the redemption, which was effective July 1, 1998, the Company issued 3,503,303 shares of common stock. On January 19, 1999, the Company issued 4.6 million depository shares (each representing 1/1,000 of a share) of its Preferred Stock, Series K, raising net proceeds of approximately $111.4 million. On March 10, 1999, the Company issued 4.6 million depositary shares (each representing 1/1,000 of a share) of its Preferred Stock, Series L, raising net proceeds of approximately $111.4 million. The Series A through Series L (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. 24 Public Storage, Inc. 1998 Annual Report 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, 1998, there were no dividends in arrears and the Debt Ratio was 2.4%. 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, Series J — August 31, 2002, Series K — January 19, 2004, Series L — March 10, 2004. 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, Series I, Series J, Series K, and Series L), plus accrued and unpaid dividends. Common stock During 1998, 1997 and 1996, the Company issued and repurchased shares of its common stock as follows: (dollar amounts in thousands) Public offerings In connection with mergers (Note 3) Exercise of stock options Issuance to affiliates Conversion of Mandatory Convertible Preferred Stock Conversion of Series CC Convertible Preferred Stock Acquisition of interests in real estate entities Repurchases of stock Conversion of 8.25% Convertible Preferred Stock 1998 1997 1996 Shares 7,951,821 433,526 219,596 853,700 — — 635,005 (2,819,400) 3,589,552 10,863,800 Amount $234,521 13,817 3,339 26,362 — — 16,679 (72,256) Shares 6,600,000 7,681,432 94,786 — Amount $181,448 212,000 1,075 — Shares 6,151,200 8,839,181 100,663 43,197 Amount $128,501 204,932 1,037 1,000 — — 1,611,265 27,960 2,184,250 58,955 — — — — — — — — — — 53,308 179,651 2,666 102,721 1,526 $275,770 16,740,119 $456,144 16,848,227 $364,956 Shares of common stock issued to affiliates in 1998 were in exchange for interests in real estate entities. Shares of common stock issued to affiliates in 1996 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. On June 12, 1998, the Company announced that the Board of Directors authorized the repurchase from time to time of up to 10,000,000 shares of the Company’s common stock on the open market or in privately negotiated transactions. Through December 31, 1998 the Company has repurchased a total of 2,819,400 shares of common stock at an aggregate cost of approximately $72,256,000. At December 31, 1998, the Company had 4,935,642 shares of common stock reserved in connection with the Company’s stock option plans (Note 11) and 7,000,000 shares of common stock reserved for the conversion of the Class B Common Stock. On March 12, 1999, the Company issued approximately 13.0 million unaudited shares of common stock pursuant to the merger with Storage Trust Realty and reserved approximately 1.0 million additional unaudited shares for issuance upon conversion of units in Storage Trust Realty’s operating partnership (Note 13). Class B Common Stock 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 liquidating 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 depreciation and amortization (including the Company’s pro-rata share of depreciation and amortization of unconsolidated equity interests and amortization of 25 Public Storage, Inc. 1998 Annual Report assets acquired in a 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 $2.11 for the year ended December 31, 1998. 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. In June 1997, the Company contributed $22,500,000 (225,000 shares) of its Equity Stock, Series A (“Equity Stock”) to a partnership in which the Company is the general partner. As a result of this contribution, the Company obtained a controlling interest in the Partnership and began to consolidate the accounts of the Partnership and therefore the equity stock is eliminated in consolidation. The Equity Stock ranks on a parity with Common Stock and junior to the Company’s Cumulative Senior Preferred Stock and Convertible Preferred Stock with respect to general preference rights and has a liquidation amount of ten times the amount paid to each Common Share up to a maximum of $100 per share. Quarterly distributions per share on the Equity Stock are equal to the lesser of (i) 10 times the amount paid per Common Stock or (ii) $2.20. Dividends The unaudited 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 1997 and 1996 were characterized entirely as ordinary income. For 1998, the Company’s dividends for the first, third, and fourth quarter were characterized as ordinary income in their entirety. For the second quarter of 1998, 86.11% of the Company’s dividends were characterized as ordinary income, and the remainder was characterized as a capital gain. The following summarizes dividends paid during 1998, 1997 and 1996: 1998 1997 1996 (in thousands, except per share data) Per share Total Series A Series B Series C Series D Series E Series F Series G Series H Series I Series J Convertible Series CC Mandatory Convertible Participating Common $2.500 $2.300 $1.688 $2.375 $2.500 $2.437 $2.219 $2.112 $2.156 $2.000 $1.032 — — $0.880 $ 4,563 5,488 2,024 2,850 5,488 5,606 15,309 14,259 8,625 12,000 2,163 — — 78,375 100,726 $179,101 Per share $ 2.500 $ 2.300 $ 1.844 $ 2.375 $ 2.500 $ 2.437 $ 2.219 $ 2.112 $ 2.156 $ 0.689 $ 2.062 $260.000 — $ 0.880 Total $ 4,563 5,488 2,213 2,850 5,488 5,606 15,309 14,259 8,625 4,133 4,531 15,328 — 88,393 86,181 $174,574 Per share $ 2.500 $ 2.300 $ 1.840 $ 2.375 $ 2.500 $ 2.437 $ 2.219 $ 1.978 $ 0.359 — $ 2.063 $97.500 $54.487 $ 0.880 Total $ 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 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 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 1999 will be equal to 6.75% per annum. Note 11. Stock Options 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 26 Public Storage, Inc. 1998 Annual Report 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 1998 and 1997 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 1998 1997 Number of Options 1,696,215 590,000 (219,596) (12,334) 2,054,285 1,044,249 Average Price per Share $20.03 28.23 15.20 28.66 $22.85 $9.375 to $33.563 $19.94 2,881,337 Number of Options 1,752,169 111,000 (94,786) (72,168) 1,696,215 778,012 Average Price per Share $19.02 28.59 11.34 20.73 $20.03 $8.125 to $30.00 $17.74 3,459,003 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, 1998 and 1997 there were 1,900,837 and 1,412,734 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, 1998 and 1997. The remaining contractual lives were 7.8 years and 7.9 years, respectively, at December 31, 1998 and 1997. Note 12. Disclosures Regarding Segment Reporting In July 1997, the FASB issued Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“FAS 131”), which establishes standards for the way that public business enterprises report information about operating segments. This statement is effective for financial statements for periods beginning after December 15, 1997. The Company has adopted this standard effective for the year ended December 31, 1998. Description of each reportable segment The Company’s reportable segments reflect the Company’s significant operating activities that are evaluated separately by management. The Company has three reportable segments: self-storage operations, commercial property operations, and portable self-storage operations. The self-storage segment comprises the direct ownership, development, and operation of traditional self-storage facilities, management of these properties for third parties and affiliated entities, and the ownership of equity interests in entities that own self-storage properties. The commercial property segment reflects the Company’s interest in the ownership, operation, and management of commercial properties. The vast majority of the Company’s commercial property operations are conducted through PSB, and to a much lesser extent the Company and certain of its unconsolidated subsidiaries own commercial space, managed by PSB, within facilities that combine self-storage and commercial space for rent. The portable self- storage segment reflects the activities conducted entirely through PSPUD, the Company’s subsidiary. Measurement of segment profit or loss The Company evaluates performance and allocates resources based upon the net segment income of each segment. Net segment income represents net income in conformity with Generally Accepted Accounting Principles and the Company’s significant accounting policies as denoted in Note 2, before interest and other income, depreciation expense, interest expense, general and administrative expense, and minority interest in income. This net segment income is reflected on the Company’s financial statements not only as rental income and cost of operations, but also as a component of equity in earnings of real estate entities. The accounting policies of the reportable segments are the same as those described in the Summary of Significant Accounting Policies. Corporate general and administrative expense, interest expense, interest and other income, depreciation expense, and minority interest in income are not allocated to segments because management does not utilize them to evaluate the results of operations of each segment. 27 Public Storage, Inc. 1998 Annual Report Measurement of segment assets No segment data relative to assets or liabilities is presented by the Company, because management does not evaluate performance based upon the assets or liabilities of the segments. Management believes that the historical cost of the Company’s real property does not have any significant bearing upon the performance of the commercial property and self-storage segments. In the same manner, management believes that the book value of investment in real estate entities as having no bearing upon the results of those investments. The only other types of assets that might be allocated to individual segments are trade receivables, payables, and other assets which arise in the ordinary course of business, but they are also not a significant factor in the measurement of segment performance. The Company performs post-acquisition analysis of various investments; however, such evaluations are beyond the scope of FAS 131. Presentation of segment information The Company’s income statement provides most of the information required in order to determine the performance of each of the Company’s three segments. The following tables reconcile the performance of each segment, in terms of segment revenues and segment income, to the consolidated revenues and net income of the Company. It further provides details of the segment components of the income statement item, “Equity in earnings of real estate entities.” (dollar amounts in thousands) 1998 1997 Change 1997 1996 Change Year Ended December 31, Year Ended December 31, Reconciliation of Revenues by Segment: Self storage Self-storage property rentals Facility management fees Equity in earnings – self storage property operations Self storage segment revenues Portable self storage Commercial properties Commercial property rentals Facility management Equity in earnings – commercial property operations Commercial properties — segment revenues Other items not allocated to segments: Equity in earnings — Depreciation (self storage) Equity in earnings — Depreciation (commercial properties) Equity in earnings — general and administrative and other Interest and other income $488,291 6,123 20,704 515,118 24,466 23,112 98 23,655 $385,540 9,706 31,026 426,272 7,893 40,575 435 1,428 $102,751 (3,583) $385,540 9,706 (10,322) 88,846 16,573 (17,463) (337) 22,227 31,026 426,272 7,893 40,575 435 1,428 $270,429 13,474 41,722 325,625 421 23,576 954 2,667 $115,111 (3,768) (10,696) 100,647 7,472 16,999 (519) (1,239) 46,865 42,438 4,427 42,438 27,197 15,241 (6,522) (10,935) 4,413 (10,935) (15,709) (7,362) (3,873) 13,459 (539) (6,823) (539) (1,741) (3,411) 9,126 (5,759) (462) 4,333 1,461 (3,411) 9,126 (5,759) (4,818) 7,976 (14,292) 4,774 1,202 1,407 1,150 8,533 Total other items not allocated to segments (4,298) Total consolidated Company revenues $582,151 $470,844 $111,307 $470,844 $338,951 $131,893 28 (dollar amounts in thousands) 1998 1997 Change 1997 1996 Change Year Ended December 31, Year Ended December 31, Public Storage, Inc. 1998 Annual Report Reconciliation of Net Income by Segment: Self storage Self-storage properties Facility management Equity in earnings — self storage property operations Total self storage segment income Portable self storage segment income Commercial properties Commercial properties Facility management Equity in earnings — commercial property operations Total commercial property segment income Other items not allocated to segments: Equity in earnings — depreciation (self-storage) Equity in earnings — depreciation (commercial properties) Equity in earnings — general and administrative and other Depreciation — self storage Depreciation — commercial properties Interest and other income General and administrative Interest expense Minority interest in income Total other items not allocated to segments $ 338,915 5,069 $ 267,577 8,257 20,704 364,688 (31,022) 15,161 86 23,655 38,902 31,026 306,860 (31,665) 23,910 91 1,428 25,429 $ 71,338 (3,188) (10,322) 57,828 643 (8,749) (5) 22,227 13,473 $ 267,577 8,257 $ 187,935 11,654 31,026 306,860 (31,665) 23,910 91 1,428 25,429 41,722 241,311 (826) 12,826 199 2,667 15,692 (6,522) (10,935) 4,413 (10,935) (15,709) (7,362) (539) (6,823) (539) (1,741) (3,873) (102,537) (4,945) 13,459 (8,972) (4,507) (20,290) (3,411) (82,165) (9,191) 9,126 (6,384) (6,792) (11,684) (462) (20,372) 4,246 4,333 (2,588) 2,285 (8,606) (3,411) (82,165) (9,191) 9,126 (6,384) (6,792) (11,684) (4,818) (59,757) (5,210) 7,976 (5,524) (8,482) (9,363) $ 79,642 (3,397) (10,696) 65,549 (30,839) 11,084 (108) (1,239) 9,737 4,774 1,202 1,407 (22,408) (3,981) 1,150 (860) 1,690 (2,321) Total consolidated company net income $ 227,019 $ 178,649 (145,549) (121,975) (23,574) $ 48,370 (121,975) (102,628) $ 178,649 $ 153,549 (19,347) $ 25,100 Note 13. Events Subsequent to Date of Report of Independent Auditors (unaudited) On March 12, 1999, the Company and Storage Trust Realty (“Storage Trust”), a New York Stock Exchange listed REIT, completed a merger. As a result of the merger the Company acquired 215 self-storage facilities located in 16 states totaling approximately 12.0 million net rentable square feet and 104,000 units. In the merger, each share of beneficial interest of Storage Trust was exchanged for 0.86 shares of the Company’s common stock (approximately 13.0 million shares of the Company’s stock were issued and an additional approximately 1.0 million shares were reserved for issuance upon conversion of units in Storage Trust’s operating partnership). This exchange ratio implied an enterprise value for Storage Trust of approximately $600 million, including the assumption of approximately $198 million of indebtedness. The merger was structured as a tax-free transaction, and will be accounted for using the purchase method of accounting. The historical operating results of Storage Trust has not been included in the Company’s historical operating results. Pro forma data (unaudited) for the years ended December 31, 1998 and 1997 as though the merger with Storage Trust had been effective at the beginning of fiscal 1997 is set forth below. These amounts are based upon the Company’s historical amounts as adjusted for the impact of the merger with Storage Trust: (in thousands except per share data) For the years ended December 31, Revenues Net income Net income per common share (Basic) Net income per common share (Diluted) 1998 $661,932 $240,364 1.28 $ 1.27 $ 1997 $546,510 $196,202 0.97 $ 0.96 $ 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 fiscal 1997 or future results of operations of the Company. Certain pro forma adjustments were made to the historical amounts to reflect (i) expected reductions in general and administrative expenses, (ii) certain significant acquisitions made by Storage Trust throughout 1997 and 1998, (iii) estimated increased interest costs to finance the cash portion of the acquisition cost and (iv) estimated increase in depreciation and amortization expense. 29 Public Storage, Inc. 1998 Annual Report Note 14. Recent Accounting Pronouncements and Guidance Reporting Comprehensive Income In June 1997, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income” (“FAS 130”), which establishes standards for reporting and display of comprehensive income and its components. This statement requires a separate statement to report the components of comprehensive income for each period reported. The provisions of this statement are effective for fiscal years beginning after December 15, 1997. The Company has implemented FAS 130 for the fiscal year ended December 31, 1998, but the implementation has no impact because the Company has no items of comprehensive income (as defined by FAS 130). Accounting for Derivative Instruments and Hedging Activities In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”). This statement provides a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. The provisions of this statement are effective for years beginning after June 15, 1999, but companies can early adopt as of the beginning of any fiscal quarter that begins after June 1998. The Company expects that FAS 133 will have no impact upon the Company’s financial statements because the Company has no financial instruments or hedging activities that are addressed by FAS 133. Emerging Issues Task Force Discussion of Capitalization of Acquisition Costs In March 1998, The Emerging Issues Task Force (“EITF”) of the FASB issued guidance (the “97-11 Guidance”) with respect to Issue No. 97-11, “Accounting for Internal Costs Relating to Real Estate Property Acquisitions.” The 97-11 Guidance provides that a Company shall expense internal preacquisition costs (such as costs of an internal acquisitions department) related to the purchase of an operating property. The Company does not capitalize such internal preacquisition costs with respect to the acquisition of operating real estate facilities. Accordingly, the 97-11 Guidance had no impact upon the Company’s financial statements and would have had no impact upon the Company’s financial statements for periods prior to the issuance of the 97-11 Guidance. Note 15. Commitments and Contingencies Lease obligations Thirty-eight of the forty-three facilities operated by PSPUD as of December 31, 1998 are located in buildings leased from third parties. The lease terms range from four to nine years with renewal options at varying terms. Future minimum lease payments at December 31, 1998 under non-cancelable operating leases are as follows: 1999 2000 2001 2002 2003 Thereafter $10,480 10,069 9,221 6,263 1,531 1,867 $39,431 Legal proceedings During 1997, three cases were filed against the Company. Each of the plaintiffs in these cases is suing the Company on behalf of a purported class of California tenants who rented storage spaces from the Company and contends that the Company’s fees for late payments under its rental agreements for storage space constitutes unlawful “penalties” under California law. None of the plaintiffs has assigned any dollar amount to the claims. The lower court has dismissed one of the cases and the plaintiff in that case has appealed that dismissal. The Company is continuing to vigorously contest the claims in all three cases. There are no other material proceedings pending against the Company or any of its subsidiaries, other than ordinary routine litigation incidental to their business. 30 Note 16. Supplementary Quarterly Financial Data (unaudited) (in thousands, except per share data) Revenues Net income Per Common Share (Note 2): Net income — Basic Net income — Diluted (in thousands, except per share data) Revenues Net income Per Common Share (Note 2): Net income — Basic Net income — Diluted Public Storage, Inc. 1998 Annual Report March 31, 1998 $142,566 $ 48,364 $0.26 $0.26 March 31, 1997 $100,740 $ 42,318 $0.26 $0.26 Three Months Ended June 30, 1998 $141,041 $ 57,199 $0.33 $0.32 September 30, 1998 $149,969 $ 62,286 $0.37 $0.37 Three Months Ended June 30, 1997 $109,345 $ 44,251 $0.14(1) $0.14(1) September 30, 1997 $126,007 $ 46,548 $0.27 $0.27 December 31, 1998 $148,575 $ 59,170 $0.35 $0.35 December 31, 1997 $134,752 $ 45,532 $0.24 $0.24 1. Includes the effect of a $13,412,000 special dividend on the Company’s Series CC Convertible Preferred Stock. 31 Public Storage, Inc. 1998 Annual Report 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, 1998 and 1997, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Los Angeles, California February 10, 1999, except for Note 10, as to which the date is March 10, 1999. 32 Public Storage, Inc. 1998 Annual Report 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. Forward Looking Statements When used within this document, the words “expects,” “believes,” “anticipates,” “should,” “estimates,” and similar expressions are intended to identify “forward-looking statements” within the meaning of that term in Section 27A of the Securities Exchange Act of 1933, as amended, and in Section 21F of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results and performance of the Company to be materially different from those expressed or implied in the forward-looking statements. Such factors include the impact of competition from new and existing self-storage and commercial facilities which could impact rents and occupancy levels at the Company’s facilities; the Company’s ability to evaluate, finance, and integrate acquired and developed properties into the Company’s existing operations; the Company’s ability to effectively compete in the markets that it does business in; the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing Real Estate Investment Trusts; the acceptance by consumers of the Pickup and Delivery concept; the impact of general economic conditions upon rental rates and occupancy levels at the Company’s facilities; and the availability of permanent capital at attractive rates. Overview The self-storage industry is highly fragmented and is composed predominantly of numerous local and regional operators. Competition in the markets in which the Company operates is significant and is increasing from additional development of self-storage facilities in many markets which may negatively impact occupancy levels and rental rates at the Company’s self-storage facilities. However, the Company believes it possesses several distinguishing characteristics which enable it to compete effectively with other owners and operators. The Company is the largest owner and operator of self-storage facilities in the United States with ownership interests as of December 31, 1998 in 1,094 self-storage facilities containing approximately 65.3 million net rentable square feet. All of the Company’s facilities are operated under the “Public Storage” brand name, which the Company believes is the most recognized and established name in the self-storage industry. Located in the major metropolitan markets of 37 states, the Company’s self-storage facilities are geographically diverse, giving it national recognition and prominence. This concentration establishes the Company as one of the most significant providers of storage space in each market in which it operates and enables it to use a variety of promotional activities, such as television and radio advertising as well as targeted discounting and referrals, which are generally not economically viable for its competitors. In addition, the Company believes that geographic diversity of the portfolio reduces the impact from regional economic downturns and provides a greater degree of revenue stability. Commencing in early 1996, the Company implemented 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 self-storage facility are directed to the national reservation system where a 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 and its subsidiaries. The national telephone reservation system was not fully operational for most of the Company’s facilities until the latter part of the fourth quarter of 1996. Currently, the national telephone reservation system receives approximately 175,000 calls per month and has approximately 225 representatives. The Company believes that the national telephone reservation system permits effective marketing for both self-storage and portable self-storage facilities and is primarily responsible for increasing occupancy levels and realized rental rates experienced at the self-storage facilities during the past three years. The Company will continue to focus its growth strategies on: (i) improving the operating performance of its existing portfolio of properties, (ii) increasing its ownership of self-storage facilities through acquisitions of facilities owned by affiliates or third party owners, (iii) developing new self-storage facilities, (iv) improving the operations of its portable self-storage operations, and (v) to a limited extent through its existing ownership interest, participating in the growth of PS Business Parks, Inc. (“PSB”), a publicly traded real estate investment trust focusing on the ownership and operation of commercial properties. On March 12, 1999, the Company completed a merger transaction with Storage Trust Realty (“Storage Trust”), a publicly traded real estate investment trust. In connection with the merger, the Company acquired 215 self-storage properties located in 16 states. The Company believes that the merger will benefit the shareholders of both companies by eliminating duplicative general and administrative expenses and creating economies of scale and cost efficiencies through greater critical mass. In addition, the Company believes that its national telephone reservation system will present an opportunity for increased revenues through higher occupancies of the properties acquired. 33 Public Storage, Inc. 1998 Annual Report Results of Operations Net income and earnings per common share: Net income for 1998, 1997 and 1996 was $227,019,000, $178,649,000 and $153,549,000, respectively. Net income allocable to common shareholders (net income less preferred stock dividends) for 1998, 1997 and 1996 was $148,644,000, $90,256,000 and $84,950,000, respectively. On a diluted basis, net income per common share was $1.30 per common share (based on weighted average shares outstanding of 114,357,000) for 1998, $0.91 (based on weighted average shares outstanding of 98,961,000) for 1997 and $1.10 per common share (based on weighted average shares outstanding of 77,358,000) for 1996. The increase in net income per share for 1998 compared to 1997 was principally the result of improved real estate operations, combined with lower operating losses generated by PSPUD’s portable self-storage business totaling $31,022,000 or $0.27 per diluted common share. The decrease in net income per share for 1997 compared to 1996 was principally the result of losses generated from PSPUD’s portable self-storage business which generated operating losses totaling $31,665,000 or $0.32 per diluted common share and the effect of the special dividend, discussed below. Net income allocable to common shareholders and net income per common share for the year ended December 31, 1997 was negatively impacted by a special dividend totaling $13,412,000, paid on the Company’s Series CC Convertible Preferred Stock (“Series CC”) during the first quarter of 1997. As a result of this special dividend, the Company would not be required to pay another dividend with respect to this stock until the quarter ended March 31, 1999. During the second quarter of 1997, the Series CC stock converted into common stock of the Company. Accordingly during 1997, all of the $13,412,000 ($0.14 per common share, on a diluted basis) of dividends were treated as an allocation of net income to the preferred shareholders in determining the allocation of net income to the common shareholders. The special dividend eliminated the quarterly dividend of $1.9 million (annual fixed charges of $7.6 million). Net income includes depreciation and amortization expense (including depreciation included in equity in earnings of real estate entities and excluding depreciation allocated to minority interests) of approximately $109,344,000 ($0.96 per common share on a diluted basis) for 1998, $93,585,000 ($0.95 per common share on a diluted basis) for 1997 and $70,927,000 ($0.92 per common share on a diluted basis) for 1996. Real Estate Operations Self-storage Operations: The Company’s self-storage operations are by far the largest component of the Company’s operations, representing approximately 91% of total rental revenues generated during 1998. At the end of 1995, the Company had a total of 520 self-storage facilities included in its consolidated financial statements. Since that time, the Company through acquisition and development activities has increased the number of self- storage facilities by 431 (1996 — 201 facilities, 1997 — 173 facilities and 1998 — 57 facilities). As a result of significant acquisitions of self-storage facilities in each of the past three years, year-over-year comparisons as presented on the Company’s consolidated statements of income are not meaningful. 34 Public Storage, Inc. 1998 Annual Report In order to enhance the year-over-year comparisons, the following table summarizes the operating results (before depreciation) of (i) the 546 self- storage facilities (which includes the 520 facilities owned at the end of 1995 as well as facilities which were acquired on January 1, 1996) that were reflected in the Company’s financial statements for the entire three years ended December 31, 1998 (the “Consistent Group”) and (ii) all other facilities for which operations were not reflected in the Company’s financial statement for the entire three years ended December 31, 1998 (the “Other Facilities”): Self-storage operations: (dollar amounts in thousands, except rents per square foot) Rental income: Consistent Group Other Facilities Cost of operations: Consistent Group Other Facilities Net operating income: Consistent Group Other Facilities Consistent Group data: Gross margin Weighted average : Occupancy Realized annual rent per square foot Scheduled annual rent per square foot Number of facilities: Consistent Group Other Facilities Net rentable sq. ft.: Consistent Group Other Facilities Year Ended December 31, 1998 1997 Percentage Change Year Ended December 31, 1997 1996 Percentage Change $271,922 216,369 488,291 81,235 68,141 149,376 190,687 148,228 $338,915 70.1% 91.9% $9.25 $9.57 546 405 31,979 25,130 $254,489 131,051 385,540 76,591 41,372 117,963 177,898 89,679 $267,577 69.9% 91.4% $8.69 $9.21 546 348 31,979 21,592 6.9% 65.1% 26.7% 6.1% 64.7% 26.6% 7.2% 65.3% 26.7% 0.2% 0.5% 6.4% 3.9% — 16.4% — 16.4% $254,489 131,051 385,540 76,591 41,372 117,963 177,898 89,679 $267,577 69.9% 91.4% $8.69 $9.21 546 348 31,979 21,592 $239,717 30,712 270,429 72,983 9,511 82,494 166,734 21,201 $187,935 69.6% 90.6% $8.26 $8.47 546 175 31,979 11,438 6.2% 326.7% 42.6% 4.9% 335.0% 43.0% 6.7% 323.0% 42.4% 0.3% 0.8% 5.2% 8.7% — 98.9% — 88.8% For the Consistent Group of facilities, year-over-year improvements in rental income of 6.9% in 1998 and 6.2% in 1997 are the result of increases in realized rent per square foot and weighted average occupancy levels, as reflected in the table above. The Company believes that the improvement in each of these areas is due to (i) the national telephone reservation system which was implemented during 1996 and the first part of 1997, (ii) increased scheduled rental rates, and (iii) media advertising and promotional activities. As indicated above, the Company implemented a national telephone reservation system 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 and its subsidiaries. Total cost of operations includes expenses with respect to the national telephone reservation center totaling $7,021,000 in 1998, $3,875,000 in 1997, and $1,257,000 in 1996. 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 1997, scheduled rents per square foot increased compared to 1996. In connection with the national telephone reservation system, the Company experimented with pricing and promotional discounts designed to increase rental activity. Consistent Group promotional discounts (which are included as a reduction to gross rents to arrive at rental income) were $3,401,000 in 1996, $9,587.000 in 1997, and $8,724,000 in 1998. Despite the impact of discounts, the Consistent Group of facilities experienced increased realized rents per square foot of 6.4% in 1998 compared to 1997 and 5.2% in 1997 compared to 1996. In 1996, 1997, and 1998, the Company acquired a total of 431 self-storage facilities. Eight of these acquired facilities were newly developed facilities and 390 of these facilities were existing mature facilities that the Company previously managed. The Company has knowledge of the historical operations of the facilities it acquired that it previously managed, and has information as to the historical operating results of the 33 facilities (substantially all of which were existing mature facilities) it acquired that it did not previously manage. The following table summarizes the pro forma operating results of all of the Company’s self-storage facilities at December 31, 1998 assuming that the Company owned all of the facilities as of January 1, 1996: 35 Public Storage, Inc. 1998 Annual Report Pro forma summary of self-storage operations: (amounts in thousands) Rental income Cost of operations Net operating income Year Ended December 31, 1998 1997 Pro forma $497,699 151,866 $345,833 $464,244 143,623 $320,621 Year Ended December 31, Change 1997 1996 Change Pro forma 7.2% 5.7% 7.9% $464,244 143,623 $320,621 $436,589 135,537 $301,052 6.3% 6.0% 6.5% The above table excludes the property operations of the Company’s eight newly developed properties (two opened in 1998, two opened in 1997 and four opened in 1996) which are in various stages of “fill-up.” The aggregate development cost of these eight properties totaled approximately $38.5 million. Commercial Property Operations: The Company’s commercial property operations principally consist of the Company’s investment in PSB, an affiliated real estate investment trust, and to a much lesser extent commercial space owned by the Company and Consolidated Entities. The following table sets forth the historical commercial property amounts included in the Company’s financial statements: Commercial Property Operations — Historical (amounts in thousands) Rental income Cost of operations Net operating income Year Ended December 31, Year Ended December 31, 1998 $23,112 7,951 $15,161 1997 $40,575 16,665 $23,910 Change (43.0)% (52.3)% (36.6)% 1997 $40,575 16,665 $23,910 1996 $23,576 10,750 $12,826 Change 72.1% 55.0% 86.4% During the second quarter of 1998, the Company ceased to have a controlling interest in PSB. As a result, effective April 1, 1998, the Company no longer includes the accounts of PSB in its consolidated financial statements and has accounted for its investment during the nine months ended December 31, 1998 using the equity method (see “Equity in earnings of real estate entities”). The income statement for the year ended December 31, 1998 includes the consolidated operating results of PSB for the three months ended March 31, 1998. The significant decrease in rental income and cost of operations for the year ended December 31, 1998 reflects the Company’s deconsolidation of PSB. The significant increase in rental income and cost of operations for 1997 reflects the impact of the Company’s business combinations in 1996 and 1997, as well as property acquisitions completed by PSB in 1997. 36 Public Storage, Inc. 1998 Annual Report The following table summarizes the pro forma commercial operations of the Company assuming that the operations of PSB were not consolidated with the Company’s accounts (i.e., as if the Company had consistently used the equity method of accounting for its investment in PSB): Pro forma summary of commercial operations: (amounts in thousands) Rental income Cost of operations Net operating income Year Ended December 31, 1998 1997 Pro forma $7,252 2,840 $4,412 $6,810 2,966 $3,844 Year Ended December 31, Change 1997 1996 Change Pro forma 6.5% (4.2)% 14.8% $6,810 2,966 $3,844 $6,169 2,788 $3,381 10.4% 6.4% 13.7% Equity in earnings of real estate entities: In addition to its ownership of equity interests in PSB, the Company had general and limited partnership interests in 26 limited partnerships at December 31, 1998 (PSB and the limited partnerships are collectively referred to as the “Unconsolidated Entities”). 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, and accounts for such investments using the equity method. Equity in earnings of real estate entities for the year ended December 31, 1998 consists of the Company’s pro rata share of the Unconsolidated Entities based upon the Company’s ownership interest for the period. 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 249 real estate facilities, 143 of which are self-storage facilities. The following table sets forth the significant components of the Company’s equity in earnings of real estate entities: Historical summary: (amounts in thousands) Property operations: PSB Development Joint Venture Other investments — self storage Other investments — commercial properties Depreciation: PSB Development Joint Venture Other investments — self storage Other investments — commercial properties Other: (1) PSB Development Joint Venture Other investments Year Ended December 31, 1998 1997 $ 23,301 729 19,975 354 44,359 (7,303) (564) (5,958) (59) (13,884) (1,220) 97 (2,750) (3,873) $ — 86 30,940 1,428 32,454 — (137) (10,798) (539) (11,474) — 44 (3,455) (3,411) Dollar Change $ 23,301 643 (10,965) (1,074) 11,905 (7,303) (427) 4,840 480 (2,410) (1,220) 53 705 (462) Year Ended December 31, 1997 1996 $ — 86 30,940 1,428 32,454 — (137) (10,798) (539) (11,474) — 44 (3,455) (3,411) $ — — 41,722 2,667 44,389 — — (15,709) (1,741) (17,450) — — (4,818) (4,818) Dollar Change $ — 86 (10,782) (1,239) (11,935) — (137) 4,911 1,202 5,976 — 44 1,363 1,407 Total equity in earnings of real estate entities $ 26,602 $ 17,569 $ 9,033 $ 17,569 $ 22,121 $ (4,552) 1. “Other” reflects the Company’s share of general and administrative expense, interest expense, interest income, and other non-property, non-depreciation related operat- ing results of these entities. 37 Public Storage, Inc. 1998 Annual Report The increase in 1998 earnings compared to 1997 is principally the result of the deconsolidation of PSB whereby the accounts of PSB, effective April 1, 1998, were no longer consolidated with the Company’s and the Company began to account for its investment in PSB using the equity method. This increase is partially offset by the impact of certain business combinations occurring in 1997 and 1998 whereby the Company acquired a controlling interest in certain affiliated entities and began to include the accounts of such entities in the Company’s consolidated financial statements. Prior to the inclusion of these entities in the Company’s consolidated financial statements, the Company used the equity method to report its share of the entities’ earnings. Likewise, the decrease in 1997 earnings compared to 1996 is principally the result of the Company acquiring during 1997 a controlling interest in certain entities and beginning to include the accounts of such entities in the Company’s consolidated financial statements. Prior to the inclusion of these entities in the Company’s consolidated financial statements, the Company used the equity method to report its share of these entities’ earnings. PSB is a publicly traded real estate investment trust organized by the Company on January 2, 1997. During 1997, the Company and certain partnerships in which the Company has a controlling interest contributed substantially all of their commercial properties to PSB in exchange for equity interests. At December 31, 1998, PSB owned 106 properties located in 11 states. PSB also manages the commercial properties owned by the Company and affiliated entities. As of December 31, 1998, the Company and certain partnerships in which the Company has a controlling interest owned approximately 40% of the equity interest of PSB. During 1998, a significant portion of the Company’s self-storage development activities have been conducted within the Development Joint Venture, a partnership created in April 1997 between the Company and an institutional investor to fund the development of approximately $220 million of self-storage facilities. The Development Joint Venture is funded solely with equity capital consisting of 30% from the Company and 70% from the institutional investor. The Company’s investment in the Development Joint Venture was $42.5 million at December 31, 1998. Since inception through December 31, 1998, the Development Joint Venture has developed and opened 24 self-storage facilities (approximately 1,470,000 square feet) and at December 31, 1998 had six facilities under development (approximately 384,000 square feet). Generally the construction period takes nine 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%. For fiscal 1998 and 1997, substantially all of the completed facilities were in the fill-up process and had not reached a stabilized occupancy level. The Company expects that its earnings with respect to its investment in the Development Joint Venture will continue to increase in 1999 as compared to 1998 as the existing properties continue to fill-up and newly completed properties are opened for business. Portable Self-Storage Operations In August 1996, PSPUD, a subsidiary of the Company, made its initial entry into the portable self-storage business through its acquisition of a single facility operator located in Irvine, California. At December 31, 1998, PSPUD operated 43 facilities in 11 states. The facilities are located in major markets in which the Company has significant market presence with respect to its traditional self-storage facilities. Due to the start-up nature of the business, PSPUD incurred operating losses totaling approximately $31.0 million, $31.7 million and $826,000 for the years ended December 31, 1998, 1997 and 1996, respectively, summarized as follows. Portable self-storage: (dollar amounts in thousands) Rental and other income Cost of operations: Direct operating costs Marketing and advertising Depreciation General and administrative Year Ended December 31, 1998 $ 24,466 1997 $ 7,893 39,302 9,206 4,317 2,663 55,488 20,645 10,441 1,394 7,078 39,558 Dollar Change $16,573 18,657 (1,235) 2,923 (4,415) 15,930 Year Ended December 31, 1997 $ 7,893 20,645 10,441 1,394 7,078 39,558 1996 $ 421 1,022 19 32 174 1,247 Dollar Change $ 7,472 19,623 10,422 1,362 6,904 38,311 Operating losses $(31,022) $(31,665) $ 643 $(31,665) $ (826) $(30,839) 38 Public Storage, Inc. 1998 Annual Report The Company believes that the quarterly losses from the PSPUD operations peaked during the third quarter of 1997. PSPUD’s operating losses were approximately $12.1 million for the third quarter of 1997, $10.5 million for the fourth quarter of 1997, $9.9 million for the first quarter of 1998, $8.3 million for the second quarter of 1998, $6.9 million for the third quarter of 1998, and $5.9 million in the fourth quarter of 1998. The Company believes this trend of decreasing operating losses will continue with increases in PSPUD’s revenues. Five of the 13 facilities opened in 1998 were developed by and are owned by PSPUD, while the remaining facilities are operated in buildings which are leased from third parties. Included in direct operating cost is building lease expense of $14.4 million, $6.2 million and $167,000 during 1998, 1997 and 1996, respectively. A typical facility generally has six employees (a manager, a warehouseman, and truck drivers), two trucks, and a corresponding number of forklifts. Substantially all the equipment is leased. Direct operating costs principally includes payroll, facility and equipment (truck and forklift) lease expense. PSPUD believes that marketing and advertising activities positively impact move-in activity. Commencing in the third quarter of 1997, PSPUD began to advertise the portable self-storage product on television in selected markets. Television advertising was curtailed in the second half of 1998. Customers are directed to call the national reservation system where representatives discuss the customers’ storage needs and are able to schedule delivery of containers to customers locations. During 1998, approximately $6.6 million and $2.6 million was incurred in television and yellow page advertising, respectively, compared to approximately $9.2 million and $1.2 million in television and yellow page advertising, respectively, incurred during 1997. Marketing and advertising activities have not been consistently implemented in all markets. During 1998 and 1997, PSPUD incurred significant general and administrative costs related to recruiting and training personnel, equipment, computer software and professional fees in organizing this business. PSPUD will continue to expend funds during 1999 in connection with these activities. However, the amounts are expected to be less than in 1998. The Company has not determined the number of new store openings in 1999; however, the Company expects that future openings will predominantly be in existing markets in which PSPUD currently operates. By opening in existing markets, PSPUD will seek to gain benefits from economies of scale. As of December 31, 1998, PSPUD is developing six facilities and has identified one additional site for development. All of these development projects are located in existing markets with expected opening dates commencing during 1999 and will predominantly replace existing PSPUD facilities which are currently being leased from third parties. Until the PSPUD facilities are operating profitably, PSPUD’s operations are expected to continue to adversely impact the Company’s earnings and cash flow. PSPUD believes that its business is likely to be more successful in certain markets than in others. There can be no assurances as to the level of PSPUD’s expansion, level of gross rentals, level of move-outs or profitability. 39 Public Storage, Inc. 1998 Annual Report Property Management Operations At December 31, 1998, the Company managed 178 self-storage facilities (143 owned by Unconsolidated Entities and 35 owned by third parties) pursuant to property management contracts. The property management contracts generally provide for compensation equal to 6% 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 engagement 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. Property management operations: (dollar amounts in thousands) Facility management fees: Self-storage Commercial properties Cost of operations: Self-storage Commercial properties Net operating income: Self-storage Commercial properties Year Ended December 31, 1998 1997 $6,123 98 6,221 1,054 12 1,066 5,069 86 $5,155 $9,706 435 10,141 1,449 344 1,793 8,257 91 $8,348 Dollar Change $(3,583) (337) (3,920) (395) (332) (727) (3,188) (5) $(3,193) Year Ended December 31, 1997 1996 $9,706 435 10,141 1,449 344 1,793 8,257 91 $8,348 $13,474 954 14,428 1,820 755 2,575 11,654 199 $11,853 Dollar Change $(3,768) (519) (4,287) (371) (411) (782) (3,397) (108) $(3,505) Throughout the three year period ended December 31, 1998, the Company completed several acquisitions of self-storage facilities from affiliated entities and, as a result, self-storage properties which were managed by the Company became owned facilities and the related management fee income with respect to these facilities ceased. Accordingly, property management operations with respect to self-storage facilities has continuously decreased during the three year period ended December 31, 1998. Since the Company has acquired 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 and related cost of operations should decrease in 1999 compared to 1998. The decrease in property management operations with respect to commercial properties for 1998 as compared to 1997 is due to the deconsolidation of PSB, which eliminated commercial properties management fee income and cost of operations after April 1, 1998. Other Income and Expense Items Interest and other income: 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 through the Company’s subsidiaries that 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 a retail expansion program and truck rental program. The net results of these businesses are presented along with interest and other income, as “interest and other income.” The components of interest and other income are detailed as follows: (dollar amounts in thousands) Sales of packaging material and truck rental income: Revenues Cost of operations Net operating income Interest and other income Total interest and other income Year Ended December 31, 1998 1997 $ 8,345 6,625 1,720 11,739 $13,459 $5,272 4,134 1,138 7,988 $9,126 40 Dollar Change $3,073 2,491 582 3,751 $4,333 Year Ended December 31, 1997 1996 $5,272 4,134 1,138 7,988 $9,126 $3,083 2,171 912 7,064 $7,976 Dollar Change $2,189 1,963 226 924 $1,150 Public Storage, Inc. 1998 Annual Report 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. The increases in revenues and cost of operations reflect the opening of additional stores, as well as increases at the Company’s existing stores. Interest and other income is primarily attributable to interest income on cash balances and interest income from mortgage notes receivable. Interest income from mortgage notes receivable was $1,878,000, $2,938,000, $2,710,000 in 1998, 1997 and 1996, respectively. The Company canceled mortgage notes receivable of approximately $2,495,000 in 1998 and $700,000 in 1996 in connection with the acquisition of the real estate facilities securing such notes. The Company also acquired notes receivable of $3,709,000 in 1996 from affiliated parties. The other increases in interest income are primarily attributable to fluctuations in the level of invested cash balances, which are caused by the timing of investing equity offering proceeds in real estate assets. Depreciation and amortization: Depreciation and amortization expense was $107,482,000 in 1998, $91,356,000 in 1997 and $64,967,000 in 1996. These increases are principally due to the acquisition of additional real estate facilities in each period. Depreciation expense with respect to the real estate facilities was $98,173,000 in 1998, $82,047,000 in 1997, and $55,689,000 in 1996; the increases are due to the acquisition of additional real estate facilities in 1996 through 1998. Amortization expense with respect to intangible assets totaled $9,309,000 for each of the three years ended December 31, 1998. General and administrative expense: General and administrative expense was $8,972,000 in 1998, $6,384,000 in 1997 and $5,524,000 in 1996. 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, and (ii) the Company’s property acquisition and development activities have continued to expand, resulting in certain additional costs incurred in connection with the acquisition of additional real estate facilities. General and administrative 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 $4,507,000 in 1998, $6,792,000 in 1997 and $8,482,000 in 1996. 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 Company capitalized interest expense of $3,481,000 in 1998, $2,428,000 in 1997 and $1,861,000 in 1996 in connection with the Company’s development activities. Interest expense before the capitalization of interest was $7,988,000 in 1998, $9,220,000 in 1997 and $10,343,000 in 1996. The decrease in interest expense in 1997 as compared to 1996 principally is due to the retirement of debt in 1997 of approximately $11.9 million. The decrease in interest expense in 1998 as compared to 1997 also includes the impact of the retirement of debt in 1998 of approximately $15.1 million. Minority interest in income: Minority interest in income represents the income allocable to equity interests in Consolidated Entities which are not owned by the Company. Since 1990, the Company has acquired portions of these equity interests through its acquisition of limited and general partnership interests in the Consolidated Entities. 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 Entities’ income. However, offsetting the reduction in minority interest in 1998 and 1997 caused by the acquisition of additional equity interests are the inclusion of additional partnerships in the Company’s consolidated financial statements as well as improved property operations. During 1998 and 1997, the Company acquired sufficient ownership interest and control in three and twelve partnerships, respectively, and commenced including the accounts of these partnerships in the Company’s consolidated financial statements which resulted in an increase in minority interest in income of approximately $5,413,000 in 1998 and $1,961,000 in 1997. Minority interest for the year ended December 31, 1998 also reflects additional minority interests with respect to PSB prior to April 1, 1998. In determining income allocable to the minority interest for 1998, 1997 and 1996 consolidated depreciation and amortization expense of approximately $12,022,000, $9,245,000 and $11,490,000, respectively, was allocated to the minority interest. The changes in depreciation allocated to the minority interest were principally the result of the factors denoted above with respect to minority interest in income. 41 Public Storage, Inc. 1998 Annual Report Supplemental Property Data and Trends At December 31, 1998, there were approximately 47 ownership entities owning in aggregate 1,094 self-storage facilities, including the facilities which the Company owns and/or operates. At December 31, 1998, 143 of these facilities were owned by Unconsolidated Entities, entities in which the Company has an ownership interest and uses the equity method for financial statement presentation. The remaining 951 facilities are owned by the Company and Consolidated Entities, many of which were acquired through business combinations with affiliates during 1998, 1997 and 1996. The following table summarizes the Company’s investment in real estate facilities as of December 31, 1998, excluding the five real estate facilities used in PSPUD’s operations: 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 Entities Total consolidated facilities Facilities owned by Unconsolidated Entities Total facilities in which the Company has an ownership interest 628 323 951 143 1,094 1 — 1 106 107 Total 629 323 952 249 Self-Storage Facilities Commercial Properties 38,419 18,690 57,109 8,169 9 — 9 10,930 Total 38,428 18,690 57,118 19,099 1,201 65,278 10,939 76,217 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 984 (57.5 million net rentable square feet) of the 1,094 self-storage facilities (herein referred to as “Same Store” self- storage facilities). The 984 facilities represent a consistent pool of properties which have been operated under the “Public Storage” name, at a stabilized level, by the Company since January 1, 1994. From time to time, the Company removes facilities from the “Same Store” pool as a result of expansions or other activities which make such facilities’ results not comparable to previous periods. The Same Store group of properties includes 861 consolidated facilities (many of which were not included in the Company’s consolidated financial statements throughout each of the three years presented) and 123 facilities owned by Unconsolidated Entities. The following table summarizes the pre-depreciation historical operating results of the Same Store self-storage facilities: Same Store self-storage facilities: (historical property operations) (dollar amounts in thousands) Rental income Cost of operations (includes an imputed 6% property management fee)(1) Net operating income Gross profit margin(2) Weighted Average: Occupancy Realized annual rent per sq. ft (3) Scheduled annual rent per sq. ft (3) Year Ended December 31, 1998 1997 $523,394 $486,510 183,629 $339,765 172,455 $314,055 64.9% 92.5% $ 9.84 $10.24 64.6% 91.7% $9.21 $9.83 Percentage Change Year Ended December 31, 1997 1996 Percentage Change 7.6% 6.5% 8.2% 0.3% 0.8% 6.8% 4.2% $486,510 $456,414 172,455 $314,055 162,721 $293,693 64.6% 91.7% $9.21 $9.83 64.3% 91.1% $8.71 $9.00 6.6% 6.0% 6.9% 0.3% 0.6% 5.7% 9.2% 1. Assumes payment of property management fees on all facilities, including those facilities owned by the Company for which no fee is paid. Cost of operations consists of the following: Payroll expense Property taxes Imputed 6% property management fees Advertising Telephone reservation center costs Other 1998 1997 1996 $ 46,501 48,760 31,424 5,372 7,353 44,219 $ 45,581 45,817 29,211 4,209 4,625 43,012 $ 44,816 42,043 27,385 3,975 1,996 42,506 $183,629 $172,455 $162,721 2. Gross profit margin is computed by dividing property net operating income (before depreciation expense) by rental revenues. Cost of operations includes a 6% management fee. The gross profit margin excluding the facility management fee was 70.9%, 70.6% and 70.3% in 1998, 1997 and 1996, respectively. 3. Realized rent per square foot as presented throughout this report 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. 42 Public Storage, Inc. 1998 Annual Report As indicated above, in early 1996, the Company implemented a national telephone reservation system designed to provide added customer service 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. Rental income for the Same Store facilities included promotional discounts totaling $15,615,000 in 1998 compared to $17,390,000 in 1997 and $6,227,000 in 1996. The significant increase in 1997 was principally due to experimentation with pricing and promotional discounts designed to increase rental activity; such promotional activities continued in 1998. The self-storage facilities experience minor seasonal fluctuations in occupancy levels with occupancies generally higher in the summer months than in the winter months. The Company believes that these fluctuations result in part from increased moving activities during the summer. Same-Store Operating Trends by Region Northern California Southern California Texas Florida Illinois Other states Total % change from prior year Amount Rental Revenues: 1998 1997 1996 $80,083 $72,555 $66,343 10.4% 9.4% 8.5% Cost of operations 1998 1997 1996 $22,546 $20,650 $18,809 Net operating income: 9.2% 9.8% 3.5% 1998 1997 1996 $57,537 $51,905 $47,534 10.9% 9.2% 10.6% Weighted avg. occupancy % change from prior year 10.1% 8.1% 5.0% 7.4% 5.4% 6.0% 11.2% 9.3% 4.6% Amount $95,051 $86,368 $79,883 $27,902 $25,988 $24,665 $67,149 $60,380 $55,218 1998 1997 1996 94.2% 91.5% 87.4% 94.6% (1.5)% 1.6% 96.1% 3.3% 94.5% Weighted avg. annual realized rents per occupied sq. ft. 11.9% 7.6% 4.6% $11.37 $10.60 $10.27 $12.37 $11.05 $10.27 2.7% 4.1% 2.3% 7.3% 3.2% 2.2% 1998 1997 1996 % change from prior year 5.8% 4.0% 1.2% 10.3% 4.5% 5.6% Amount $48,543 $45,868 $44,101 $21,088 $19,114 $18,299 $27,455 $26,754 $25,802 2.6% 3.7% (1.6%) 92.4% 91.9% 89.5% $7.22 $6.85 $6.78 0.5% 2.4% 1.0% 5.4% 1.0% 0.3% % change from prior year 6.0% 5.5% 2.6% 5.2% 7.9% 3.6% 6.4% 3.9% 2.1% 0.7% 2.4% 0.6% 5.2% 2.8% 2.3% Amount $33,077 $31,219 $29,595 $13,123 $12,474 $11,561 $19,954 $18,745 $18,034 90.9% 90.2% 87.8% $8.77 $8.34 $8.11 % change from prior year % change from prior year % change from prior year Amount Amount Amount $37,698 $34,405 $31,123 $17,236 $16,106 $14,887 $20,462 $18,299 $16,236 9.6% $228,942 10.5% $216,095 9.0% $205,369 5.9% $523,394 5.2% $486,510 5.0% $456,414 7.0% $ 81,734 8.2% $ 78,123 5.5% $ 74,500 4.6% $183,629 4.9% $172,455 6.7% $162,721 11.8% $147,208 12.7% $137,972 12.5% $130,869 6.7% $339,765 5.4% $314,055 4.1% $293,693 1.1% 92.6% 91.5% (1.3)% 0.0% 92.8% 0.7% 91.6% 90.9% (1.3)% 0.5% 92.2% $10.69 $9.89 $8.84 8.1% 11.9% 8.5% $9.41 $8.94 $8.38 5.3% 6.7% 4.6% 92.5% 91.7% 91.1% $9.84 $9.21 $8.71 7.6% 6.6% 5.2% 6.5% 6.0% 5.7% 8.2% 6.9% 5.0% 0.8% 0.6% 1.1% 6.8% 5.7% 3.9% Number of Facilities 127 143 116 74 60 464 984 Liquidity and Capital Resources The Company believes that its internally generated net cash provided by operating activities 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. Operating as a real estate investment trust (“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). However, despite the significant distribution requirements, the Company has been able to retain a significant amount of its operating 43 Public Storage, Inc. 1998 Annual Report cash flow. 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 generated is available to the Company to make both scheduled and optional principal payments on debt and for reinvestment. For the Year Ended December 31, (amounts in thousands) Net income Depreciation and amortization Depreciation from Unconsolidated Entities Minority interest in income Net cash provided by operating activities Distributions from operations to minority interests Cash from operations allocable to the Company’s shareholders Less: preferred stock dividends Add: Non-recurring payment of dividends with respect to the Series CC convertible stock Cash from operations 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 Funds available for principal payments on debt and reinvestment 1998 $ 227,019 107,482 13,884 20,290 368,675 (32,312) 336,363 (78,375) — 257,988 (29,677) (2,037) 2,476 228,750 (100,726) $ 128,024 1997 $178,649 91,356 11,474 11,684 293,163 (20,929) 272,234 (88,393) 13,412 197,253 (30,834) (4,283) 2,513 164,649 (86,181) $ 78,468 1996 $153,549 64,967 17,450 9,363 245,329 (20,853) 224,476 (68,599) — 155,877 (15,957) (4,409) 3,159 138,670 (67,709) $ 70,961 The Company expects to fund its growth strategies with cash on hand at December 31, 1998, internally generated retained cash flows, proceeds from issuing equity securities and borrowings under its $150 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. 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 operations, 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 Poor’s and Duff & Phelps. The Company’s portfolio of real estate facilities remains substantially unencumbered. At December 31, 1998, the Company had mortgage debt out- standing of $35.4 million and had consolidated real estate facilities with a book value of $2.6 billion. The Company 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. Over the past three years the Company has funded substantially all of its acquisitions with permanent capital (both common and preferred stock). The Company has elected to use preferred stock despite the fact that the dividend rates of its preferred stock exceeds current interest 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 requirement, 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) like interest payments, 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. 44 Public Storage, Inc. 1998 Annual Report On January 19, 1999, the Company issued 4.6 million depositary shares (each representing 1/1,000 of a share) of its Preferred Stock, Series K, raising net proceeds of approximately $111.4 million. On March 10, 1999, the Company issued 4.6 million depositary shares (each representing 1/1,000 of a share) of its Preferred Stock, Series L, raising net proceeds of approximately $111.4 million. Proceeds of the offerings were utilized to repay bank borrowings ($98 million) of Storage Trust in connection with the merger (see below). The remaining proceeds will be utilized to fund the Company’s development activities, PSPUD activities and acquisition activities. At March 15, 1999, the Company had cash on hand of approximately $165 million. Distribution requirements: 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 reduce debt. During 1996, 1997 and 1998, the Company distributed to common shareholders approximately 43%, 44% and 39% of its cash available from operations allocable to common shareholders, respectively. During 1998, the Company paid dividends totaling $76,212,000 to the holders of the Company’s Senior Preferred Stock, $2,163,000 to the holders of the Convertible Preferred Stock (which converted to common stock during the third quarter of 1998) and $100,726,000 to the holders of Common Stock. The Company estimates the regular distribution requirements for fiscal 1999 with respect to Senior Preferred Stock outstanding at December 31, 1998 to be approximately $76.2 million. With respect to the preferred stock issued in January and March 1999, the annual distribution requirement is approximately $19.0 million. Distributions with respect to the common stock will be determined based upon the Company’s REIT distribution requirements after taking into consideration distributions to the Company’s preferred shareholders. The Company expects to make a special cash distribution to common shareholders in 1999 assuming a continuation of its increasing level of taxable income. Capital improvement requirements: During 1999, the Company has budgeted approximately $20.1 million for capital improvements ($19.5 mil- lion for its self-storage facilities and $0.6 million for its commercial space). The minority interests’ share of the budgeted capital improvements is approximately $1.5 million. The significant increase in capital improvements in 1997 for the self-storage facilities (as reflected in the table above) is due primarily to the acquisition of new facilities in 1996 and 1997. 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. At December 31, 1998, the Company had total outstanding notes payable of approximately $81,426,000. See Note 7 to the consolidated financial statements for approximate principal maturities of such borrowings. In connection with the March 1999 merger with Storage Trust, the Company assumed $100 million of notes payable. Approximately $14.7 million in principal payments with respect to these notes are due in 2003, with the remainder due after 2003. Growth strategies: During 1999, 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 (iii) the continued funding of the operations of PSPUD’s portable self-storage business. In addition to 628 wholly owned self-storage facilities, the Company operates, on behalf of approximately 47 ownership entities, 466 self- storage facilities under the ‘’Public Storage’’ name in which the Company has a partial equity interest. From time to time, some of these self-storage facilities or interests in them are available for purchase, providing the Company with a source of additional acquisition opportunities. Merger with Storage Trust: On March 12, 1999, the Company and Storage Trust, a public REIT, completed a merger. As a result of the merger, the Company acquired 215 self-storage facilities located in 16 states totaling approximately 12.0 million net rentable square feet and 104,000 units. In connection with the merger, the Company issued 0.86 shares of the Company’s common stock for each share of Storage Trust common stock. This exchange ratio implied an enterprise value for Storage Trust of approximately $600 million, including the assumption of approximately $198 million of indebtedness (including $98 million of borrowings on Storage Trust’s line of credit). The Company immediately repaid the $98 million of borrowings on the line of credit with funds that the Company raised through the issuance of preferred stock in 1999. 45 Public Storage, Inc. 1998 Annual Report Development of self-storage facilities: Commencing in 1995, the Company began to construct self-storage facilities. Since 1995, the Company and its Development Joint Venture have opened a total of 33 facilities, one in 1995, four in 1996, nine in 1997 and 19 in 1998. In April 1997, the Company formed the Development Joint Venture with an institutional investor to participate in the development of approximately $220 million of self-storage facilities. Since inception through December 31, 1998, the Development Joint Venture has developed and opened 24 self- storage facilities (approximately 1,470,000 square feet) with a total cost of approximately $112.2 million, and at December 31, 1998 had six facilities under development (approximately 384,000 square feet) with an aggregate cost incurred to date of approximately $28.6 million and estimated remaining costs to complete of $3.9 million. The partnership is funded solely with equity capital consisting of 30% from the Company and 70% from the institutional investor. The Development Joint Venture is reviewing the final 20 projects (approximately 1,295,000 net rentable sq. ft), and upon approval the Development Joint Venture will be fully committed. These projects are currently being developed by the Company until they are approved by the Development Joint Venture. As of December 31, 1998, the Company has incurred total development costs of $44.8 million (estimated remaining costs to complete of $49.7 million) with respect to these 20 projects. The Company has identified 34 additional self-storage development projects (2,052,000 net rentable square feet) with total estimated development costs of approximately $143.2 million. Most of these projects have already been approved by the Board of Directors, but their development is subject to significant contingencies. The Company is considering entering into an additional development joint venture partnership to finance future development activities, though no such agreement has been entered into and the decision whether to enter into such a partnership will depend upon the availability of appropriate partners at terms acceptable to the Company. 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. At December 31, 1998, PSPUD operated a total of 43 facilities in 20 greater metropolitan areas in 11 states and had six facilities under construction with an aggregate cost incurred to date of approximately $13.4 million and estimated remaining cost to complete of $21.8 million. PSPUD has identified one additional site in an existing market for development of PSPUD facilities at an aggregate estimated cost of $4.3 million. 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, 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. The Company expects to continue its present conservative distribution policy after the merger. The current regular quarterly distribution on the Company’s common stock is $0.22 per share. The Company intends to make a special cash distribution in 1999 assuming a continuation of its increasing level of its taxable income. Funds from operations: Total funds from operations or “FFO” increased to $336,363,000 for the year ended 1998 compared to $272,234,000 in 1997 and $224,476,000 in 1996. FFO available to common shareholders (after deducting preferred stock dividends) increased to $257,988,000 for the year ended December 31, 1998 compared to $197,253,000 in 1997 and $155,877,000 in 1996. 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 a 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 shareholders after deducting amounts attributable to the minority interests and before deductions for the amortization of property management agreements and goodwill. FFO is presented because management, as well as 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 payments 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. FFO is not comparable to similarly entitled items reported by other REITs that do not define it exactly as the Company defines it. 46 Public Storage, Inc. 1998 Annual Report Impact of Year 2000 The Company has completed an assessment of all of its hardware and software applications to identify susceptibility to what is commonly referred to as the “Y2K Issue” whereby certain computer programs have been written using two digits rather than four to define the applicable year. Any of the Company’s computer programs or hardware with the Y2K Issue that have date-sensitive applications or embedded chips may recognize a date using “00” as the year 1900 rather than the year 2000, resulting in miscalculations or system failure causing disruptions of operations. The Company has two phases in its process with respect to each of its systems; (i) assessment, whereby the Company evaluates whether the system is Y2K compliant and identifies the plan of action with respect to remediating any Y2K issues identified and (ii) implementation, whereby the Company completes the plan of action prepared in the assessment phase and verifies that Y2K compliance has been achieved. Many of the Company’s critical applications, relative to the direct management of properties, have recently been replaced and the Company believes they are already Year 2000 compliant. The Company has an implementation in process on the remaining critical applications, including its general ledger and related systems, that are believed to have Y2K issues. The Company expects the implementation to be complete by June 1999. Contingency plans have been developed for use in case the Company’s implementations are not completed on a timely basis. While the Company presently believes that the impact of the Y2K Issue on its systems can be mitigated, if the Company’s plan for ensuring Year 2000 compliance and the related contingency plans were to fail, be insufficient, or not be implemented on a timely basis, Company operations could be materially impacted. Certain of the Company’s other non-computer related systems that may be impacted by the Y2K issue, such as security systems, are currently being evaluated, and the Company expects the evaluation to be complete by June 1999. The Company expects the implementation of any required solutions to be complete in advance of December 31, 1999. The Company has not fully evaluated the impact of lack of Year 2000 compliance on these systems, but has no reason to believe that lack of compliance would materially impact the Company’s operations. The Company exchanges electronic data with certain outside vendors in the banking and payroll processing areas. The Company has been advised by these vendors that their systems are or will be Year 2000 compliant, but has requested a Year 2000 compliance certification from these entities. The Company is not aware of any other vendors, suppliers, or other external agents with a Y2K Issue that would materially impact the Company’s results of operations, liquidity, or capital resources. However, the Company has no means of ensuring that external agents will be Year 2000 compliant, and there can be no assurance that the Company has identified all such external agents. The inability of external agents to complete their Year 2000 compliance process in a timely fashion could materially impact the Company. The effect of non-compliance by external agents is not determinable. The cost of the Company’s Year 2000 compliance activities (which primarily consists of the costs of new systems) is estimated at approximately $4.3 million, of which approximately $3.1 million has been incurred to date. These costs are capitalized. The Company’s Year 2000 compliance efforts have not resulted in any significant deferrals in other information system projects. The costs of the projects and the date on which the Company expects to achieve Year 2000 Compliance are based upon management’s best estimates, and were derived utilizing numerous assumptions of future events. There can be no assurance that these estimates will be achieved, and actual results could differ materially from those anticipated. There can be no assurance that the Company has identified all potential Y2K issues either within the Company or at external agents. In addition, the impact of the Y2K issue on governmental entities and utility providers and the resultant impact on the Company, as well as disruptions in the general economy, may be material but cannot be reasonably determined or quantified. 47 Public Storage, Inc. 1998 Annual Report 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 1998 amount 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 manage- ment’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 shareholders were as follows: Year Ended 1998 1997 1996 Amount Paid $.88 .88 .88 Ordinary Income $.85 .88 .88 Long-term Capital Gain Amount $.03(A) — — Non-taxable Return of Capital $ — — — (A) This reflects 13.890% of the Company’s second quarter 1998 dividend. Shareholders should refer to their Form 1099-DIV. 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 applicable periods. Year 1997 1998 Quarter 1st 2nd 3rd 4th 1st 2nd 3rd 4th High $30.8750 29.2500 30.8750 30.6250 $33.6250 32.7500 29.2500 28.0625 Range Low $26.5000 25.8750 27.0000 26.1250 $28.6875 26.3125 22.6250 24.2500 As of March 15, 1999, there were approximately 22,942 holders of record of the common stock and 128,780,769 common shares outstanding. 48 Corporate Data (as of March 31, 1999) Directors B. Wayne Hughes (1980) Chairman of the Board and Chief Executive Officer Harvey Lenkin (1991) President B. Wayne Hughes, Jr. (1998) Vice President-Acquisitions Robert J. Abernethy (1980) President of American Standard Development Company and Self-Storage Management Company Dann V. Angeloff (1980) President of The Angeloff Company William C. Baker (1991) President of Meditrust Operating Company Thomas J. Barrack, Jr. (1998) Chairman and Chief Executive Officer of Colony Capital, Inc. Uri P. Harkham (1993) President and Chief Executive Officer of the Jonathan Martin Fashion Group Daniel C. Staton (1999) President of Walnut Capital Partners Date in parentheses indicates year director was elected to the board. Professional Services Transfer Agent BankBoston, N.A. c/o Boston EquiServe P.O. Box 8040 Boston, MA 02266-8040 (781) 575-3120 www.EquiServe.com Independent Auditors Ernst & Young LLP Los Angeles, California Executive Officers B. Wayne Hughes Chairman of the Board and Chief Executive Officer Other Corporate Officers Bahman Abtahi Senior Vice President- Construction and Development Harvey Lenkin President Samuel I. Ballard Vice President John Reyes Senior Vice President and Chief Financial Officer James F. Fitzpatrick Vice President-Development Manager Marvin M. Lotz Senior Vice President Carl B. Phelps 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 David P. Singelyn Vice President and Treasurer Sarah Hass Vice President and Secretary Anthony Grillo Vice President Tamara Hughes Gustavson Vice President-Administration Frank Hallford Vice President-Construction Joanne A. Halliday Vice President Ronald L. Harden, Sr. Vice President Gregory S. Houge Vice President Tom McCutchan Vice President-Architecture and Design Angus Goldie-Morrison Vice President Brent C. Peterson Vice President and Chief Information Officer W. David Ristig Vice President-Acquisitions Manager John M. Sambuco Vice President Management Division Marvin M. Lotz President Samuel I. Ballard SVP, DM Anthony Grillo SVP-Marketing Ronald L. Harden, Sr. SVP, DM Gregory S. Houge SVP, DM Angus Goldie-Morrison SVP, DM Brent C. Peterson SVP John M. Sambuco SVP, DM Wendy J. Adler VP, RM Timothy C. Arthurs VP, RM Ira J. Bailey VP, RM Elizabeth Barista VP, RM Kelly M. Barnes VP, RM Jeffery A. Biesz VP, RM Brad A. Boyd VP, RM Stan M. Colona VP, RM Jeff Dunlap VP Les Guttman VP-Marketing Joanne A. Halliday GC Brad C. Helgeson VP, RM Ray Huddleston VP, RM Judith Alby Johnson VP, RM Thomas Law VP, RM Thomas Miller VP Curt Mitchell VP, RM Thomas O. Murphy VP, RM Gary P. Ott VP, RM Amanda Prentice VP, RM Brian J. Ruthsatz VP, RM James Stevens VP, RM Emily J. Tufeld VP-Marketing Gerald Valle VP, RM Christopher White VP, RM Public Storage Pickup & Delivery B. Wayne Hughes President Alan Grossman SVP Randy Weissman VP-Operations Shareholders may obtain, without charge, a copy of Form 10-K, as filed with the Securities and Exchange Commission by addressing a written request to the Investor Services Department at the Corporate Headquarters. The Company’s common stock trades under ticker symbol PSA on the New York Stock Exchange and Pacific Exchange. Printed in USA: Costello Brothers Lithographers, Alhambra, California General Counsel DM Divisional Manager GC RM Regional Manager SVP VP Senior Vice President Vice President Public Storage, Inc. 701 Western Avenue Glendale, California 91201 (818) 244-8080 http:\\www.publicstorage.com Public Storage, Inc. 701 Western Avenue Glendale, California 91201 (818) 244-8080 Address Correction Requested www.publicstorage.com Bulk Rate U.S. Postage PAID Brockton, MA Permit #366 1,300 Properties + 700,000 Customers + 77,000,000 Rentable Square Feet = NUMBER ONE 513-AR-99 

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