Public Storage Annual Report 1998

← All annual reports

FY1998 Annual Report · Public Storage

Loading PDF…

Public Storage, Inc.
1998 Annual Report

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.

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.

Portfolio Growth
(1980-1998)

1,309*

260

290

Properties
1,400

1,200

1,000

800

600

400

200

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

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:

• 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.

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.

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.

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

$250

200

150

100

1996 1997 1998

92.5%

91.7%

91.1%

94%

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

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

$300

250

200

150

100

$4.0

3.0

2.0

1.0

$9.84

$9.21

$8.71

$10.00

8.00

6.00

4.00

2.00

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

4.7%

3.6%

2.6%

1996 1997 1998

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

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

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

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

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

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.

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

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

77,117

77,358

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

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

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.

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.

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.

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.

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

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).

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

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.

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

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.

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

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)

6,600,000
7,681,432
94,786
—

Amount

$181,448
212,000
1,075
—

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

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

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.

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,

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

(dollar amounts in thousands)

1998

1997

Change

1997

1996

Change

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.

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.

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

March 31,
1997

$100,740

$ 42,318

$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

Three Months Ended

June 30,
1997

$109,345

$ 44,251

$0.14(1)

September 30,
1997

$126,007

$ 46,548

$0.27

December 31,
1998

$148,575

$ 59,170

$0.35

December 31,
1997

$134,752

$ 45,532

$0.24

1. Includes the effect of a $13,412,000 special dividend on the Company’s Series CC Convertible Preferred Stock.

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.

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.

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.

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%

$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:

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,

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.

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.

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)

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.

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

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.

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.

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

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

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

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.

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.

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.

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.

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

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.

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