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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                            ------------------------

                                   FORM 10-K

     [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

     [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

      FOR THE TRANSITION PERIOD FROM                 TO                 .
                                     ---------------    ---------------

                         COMMISSION FILE NUMBER 0-23466

                         SHURGARD STORAGE CENTERS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                            <C>
                  WASHINGTON                                     91-1603837
           (STATE OF ORGANIZATION)                   (IRS EMPLOYER IDENTIFICATION NO.)
</TABLE>

            1155 VALLEY STREET, SUITE 400, SEATTLE, WASHINGTON 98109
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (206) 624-8100

          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

<TABLE>
<CAPTION>
                    TITLE OF EACH CLASS                      NAME OF EACH EXCHANGE ON WHICH REGISTERED
                    -------------------                      -----------------------------------------
<S>                                                          <C>
Class A Common Stock, par value $.001 per share                  New York Stock Exchange
Preferred Share Purchase Rights                                  New York Stock Exchange
8.8% Series B Cumulative Redeemable Preferred Stock, par         New York Stock Exchange
  value $.001 per share
8.7% Series C Cumulative Redeemable Preferred Stock, par         New York Stock Exchange
  value $.001 per share
8.75% Series D Cumulative Redeemable Preferred Stock; par        New York Stock Exchange
  value $.001 per share
</TABLE>

        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.  [X]

     Aggregate market value of voting stock held by nonaffiliates of the
registrant as of February 23, 2001: $713,148,701.

  Class A Common Stock outstanding as of February 23, 2001: 29,725,217 shares
    Class B Common Stock outstanding as of February 23, 2001: 154,604 shares

     Documents incorporated by reference: Part III is incorporated by reference
from the Proxy Statement to be filed in connection with our Annual Shareholders
Meeting to be held May 8, 2001.

                              THERE ARE 69 PAGES.

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                                     PART I

ITEM 1 -- BUSINESS

OVERVIEW

     Shurgard Storage Centers, Inc. (the Company or SSCI) is a real estate
investment trust (REIT) that develops, acquires, owns and manages self storage
centers and related operations. Our self storage centers offer easily accessible
storage space for personal and business uses. We are one of the four largest
operators of self storage centers in the United States. As of December 31, 2000,
we operated a network of 428 storage centers and three business parks located
throughout the United States and in Europe. Of these properties, we own,
directly and through our subsidiaries and joint ventures, 399 properties
containing approximately 25.3 million net rentable square feet. Of the 399
properties, 352 are located in 19 states in the U.S., and 47 are located in
Europe. We also manage for third parties 31 self storage centers and one
business park containing approximately 1.9 million net rentable square feet. For
the year ended December 31, 2000, our properties had a weighted average annual
net rentable square foot occupancy rate of 83% and a weighted average rent per
net rentable square foot of $10.80.

     We were incorporated in Delaware on July 23, 1993 and began operations
through the consolidation on March 1, 1994 of 17 publicly held real estate
limited partnerships (the Consolidation) that were sponsored by Shurgard
Incorporated (the Management Company). On March 24, 1995, the Management Company
merged with and into the Company (the Merger) and we became self-administered
and self-managed. In May 1997, we reincorporated in the state of Washington.

BUSINESS STRATEGY

     Our mission is to become the global leader in storage products and services
and to ensure satisfaction and value for our customers through security, quality
and innovation. Our strategy involves an emphasis on customer service and
satisfaction; portfolio management; development and acquisitions; and property
management systems.

  Customer Service and Satisfaction

     - Quality Employees. We view the quality of customers' interaction with
       employees as critical to our long-term success. Accordingly, we emphasize
       teamwork in our employee training programs. Through our emphasis on
       training, personnel development and decentralized decision-making, we
       believe we attract well-qualified, highly motivated employees committed
       to providing superior levels of customer service.

     - Convenient and Secure Stores. Our stores are easily accessible, offer a
       range of storage products and services for customer convenience, and
       emphasize security and product quality. We believe that our strategy of
       offering high-quality, convenient stores strengthens the brand image of
       Shurgard, attracts customers and enables us to maintain premium rents.

       -- Store Location and Hours. Our stores are generally located in major
          metropolitan areas along retail and high-traffic corridors for easy
          customer access, and usually have significant road frontage for high
          visibility. Although hours vary from store to store, customers can
          generally access their individual units between 6 a.m. and 9 p.m.

       -- One-Stop Convenience. Our stores offer a range of storage products and
          ancillary services, including supplies such as packing and storage
          materials, locks and boxes, as well as services such as property
          insurance referrals, moving company referrals, and Ryder truck rentals
          that we believe conveniently and efficiently address customers'
          storage needs. In addition, we generally offer premium features such
          as computer-controlled access and electronic security systems.
          Finally, a number of our stores offer climate-controlled storage
          space.

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       -- Property Security. A variety of measures are used at our stores, as
          appropriate, to enhance security. Such measures may include, among
          others, on-site personnel, electronic devices such as intrusion and
          fire alarms, access controls, video and intercom surveillance devices,
          individual unit alarms, perimeter beams, fencing and lighting.
          Customers are each assigned a designated personal identification
          number for use in connection with a computerized gate access system.
          Each access is logged into a computer database. In addition, we have
          developed and plan to continue to improve our package of security
          controls, including software, video and interactive communication.

       -- Capital Expenditures and Maintenance. We budget for a level of capital
          expenditures consistent with our commitment to maintaining attractive,
          well-maintained and secure self storage centers, which enable us to
          pursue a premium pricing strategy. In addition, capital expenditures
          for consistent signage and color scheme among our properties
          strengthens the brand image of Shurgard.

       -- Selective Disposition. We regularly review our portfolio compared to
          established internal standards, identify those properties which cannot
          meet these standards and dispose of such properties. We intend to
          continue this policy.

     - Marketing and Marketing Research. We place primary marketing emphasis on
       providing managers with sales skills to elicit customer needs and turn
       prospects into customers. We also have a national sales center to field
       telephone sales calls from individual properties. Employees at the
       national sales center are able to rent a unit at the store most
       convenient to the customer. In 2000, we implemented additional sales and
       marketing programs to broaden our distribution channels, such as a web
       site for our enhanced e-commerce business and an expanded commercial
       accounts and direct sales force in selected markets. We will continue to
       implement additional programs through the first half of 2001.

     We maintain an extensive market research database on our primary markets
and closely track occupancy levels, rental rates and other operational data
regarding self storage properties within these markets. We have also conducted
focus group research and telephone surveys, and utilize customer comment cards
to identify the primary considerations in customers' self storage choices and
satisfaction so that we can better attract and service customers.

     We employ various means to increase our share of the self storage market.
We place prominent advertisements in the yellow pages and seek to promote
customer awareness of our stores through highly visible store locations, site
signage and architectural features. We locate our stores along retail and
high-traffic corridors, usually with significant road frontage to increase
visibility. We build on most newly developed stores a distinctive "lighthouse"
office to distinguish us from competitors and to increase customer awareness of
the Shurgard brand.

  Portfolio Management

     Our portfolio management strategy is to increase same store cash flow by
achieving the highest rental rate structure consistent with strong occupancy
rates, cost containment, improved operating leverage, and expansion of our
existing stores.

     - Revenue Optimization. We seek to optimize our revenue by achieving the
       highest rental rate structure for our stores, consistent with strong
       levels of occupancy, through the use of teams of store employees and
       district managers who are trained and authorized to set rental rates and
       make rental rate changes based on their analysis of demand and
       availability at a particular store. We empower local market personnel to
       change marginal rental rates in order to ensure a fast, flexible response
       to changing market conditions. Market personnel evaluate their
       properties' rental rates on a periodic basis, based on unit demand and
       unit availability, and can quickly change marginal rental rates to ensure
       that revenue is optimized.

     - Cost Containment and Improved Operating Leverage. We seek to increase
       cash flow by carefully containing operating expenses. For example, we
       appeal our real estate tax assessments. In addition, as we increase the
       number of properties in our targeted markets, we achieve economies of
       scale and lessen
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       the impact of corporate overhead expense. We believe that our management
       and operational procedures, which can be implemented over a large number
       of properties, enable us to add new properties with little additional
       overhead expense.

     - Strategic Build-Outs. We seek to increase revenue by building out
       additional rentable storage space at suitable stores either through on
       site expansion or acquisition of property adjacent to existing stores. We
       typically receive high incremental returns on such build-out investments,
       because resulting revenue increases are achieved with little increase in
       fixed operating costs.

  Development and Acquisitions

     Our external growth strategy is to develop new, high-quality self storage
properties and to selectively acquire additional self storage properties that
meet or can be upgraded to meet our standards. In general, we plan to develop or
acquire new properties primarily in our existing markets and in new markets that
create economies of scale with our current network of stores. In most markets,
we seek to own at least 15 stores in order to realize operating and marketing
efficiencies and increase brand awareness. We believe that the experience of our
management team in developing and acquiring self storage properties strengthens
our ability to pursue our external growth strategy.

     We favor development or acquisition of self storage properties in major
metropolitan markets, located near retail or high-traffic corridors, usually
with significant road frontage to increase visibility. We rely on our market
personnel to target areas in which to develop and acquire new stores. We utilize
our staff of real estate professionals in various markets to develop and acquire
new stores in the markets presenting the best opportunities. We have developed
comprehensive market expansion plans for each of our target markets, and use
these plans as the basis for selecting new store locations and acquisition
targets. The market expansion plans utilize a demographic analysis of an area
along with an evaluation of competitors' locations, rates and product quality to
determine the optimum number and location of new stores. Management believes
that, under current market conditions, development will generally provide
superior long-term returns when compared to acquisitions of similar size,
quality and location. Based on this belief, our current growth plan focuses
heavily on property development; however, management continually analyzes market
conditions and acquisition opportunities.

     - Development. We believe that several factors favor our development
       strategy:

       -- Development Expertise. We have substantial construction management and
          architectural experience that was acquired over the past 26 years.
          Along with our predecessors, we developed more than a third of the
          properties we currently own or manage, and, since 1972, we have
          maintained an internal development staff, which currently employs 34
          people.

       -- Strategic Site Selection to Maximize Revenues. To obtain the best
          store locations, we target sites for development in urban areas and
          up-scale retail areas that often require rezoning and other complex
          development measures. We believe that the difficulties of developing
          storage properties in such in-fill areas may discourage competitors
          from locating nearby and, as a result, enable us to operate in
          underserved areas. This in turn enables us to charge higher rental
          rates.

       -- Focus on Quality and Brand Image Development. We have greater control
          of quality and brand image by developing our own self storage
          properties. This enables us to focus on high construction quality and
          standards and a consistent and inviting building design. We believe
          our focus on quality and consistency will enable us to further
          strengthen awareness of the Shurgard brand, obtain repeat business,
          maintain premium prices and differentiate us from our competitors.

     - Acquisitions. We also selectively acquire high-quality properties that
       are consistent with our business plan. Additional acquisitions allow us
       to spread overhead and certain management, marketing and advertising
       costs over a greater number of revenue-producing assets. As a result, we
       can achieve increasing economies of scale with each new property
       acquired. We complete a thorough analysis of each property that we intend
       to acquire, including, but not limited to, a review of capital
       expenditures

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       that will be required for the property to meet our standards and, at a
       minimum, a Phase I environmental assessment report.

     - European Investment. The strategies mentioned above also apply to our
       European investment. During the past seven years, our European partners
       have cautiously tested the product on local consumers and have tailored
       their self storage product to meet the needs of European consumers.
       During that time they built the infrastructure necessary to support an
       accelerated expansion program. Today, these European operations employ
       over 225 employees with a senior management team made up of seasoned
       managers with substantial local development, finance, operations and
       marketing experience. As of December 31, 2000, we had a 7.57% interest in
       47 storage centers operating in five countries.

     - Shurgard Storage To Go, Inc. Our customer service focus means that we are
       continually exploring new ways to serve our customers' storage needs. One
       of the ways we have broadened our ability to meet customer needs is by
       bringing storage directly to the customer through containerized storage
       through Shurgard Storage To Go. Weatherized 8'x5'x8' storage containers
       are delivered to customers for packing. The containers are then picked up
       and delivered to a warehouse for storage. Customers may access their
       storage container in a showroom at the warehouse or have it redelivered
       to their home. In addition to the monthly rental charge, service fees may
       be charged for transportation of the container. This business venture is
       currently operating in the Seattle, Portland, San Francisco, Chicago and
       Atlanta markets. We are currently in the process of exiting the Chicago
       market.

  Property Management Systems

     We have integrated property management systems and procedures for
marketing, advertising, leasing, operations, maintenance and security of
properties and the management of on-site personnel. Our computerized management
information system links our corporate office with each store. During 1997, we
completed the development and installation of proprietary software that
expedites internal auditing, financial statement and budget preparations, allows
the daily exchange of information with our corporate office, and manages
detailed information with respect to the tenant mix, demographics, occupancy
levels, rental rates, revenue optimization, payroll and other information
relating to each store. Additionally, we purchased a new network-based
accounting package that has aided in the compilation and dissemination of
information from and to our stores. During 1998, as part of our move to our new
corporate offices, we installed an enterprise wide-area network and remote
access capability. We believe that this new information system is adequate to
support the management of our currently owned properties as well as planned
future growth. During 1999, we were recognized for our centralized sales
management software (Aladdin) under Microsoft's Best Business Operations
Solution award. This software enables our national sales center, commercial
accounts, and our corporate employees to have remote sales access to our entire
network of stores.

  Other Activities

     We also manage, under the Shurgard name, self storage properties owned by
others that meet our quality standards. Management of such properties enables us
to spread the cost of overhead across a greater number of properties.
Additionally, it enables us to expand our presence in the markets in which we
operate, to offer customers a broader geographic selection of self storage
properties to suit their needs, and to establish relationships with property
owners that may lead to future acquisitions. Management fees that we earn are
not qualifying income for REIT qualification purposes. Accordingly, we closely
monitor the level of these activities to ensure our continued qualification as a
REIT.

     For financial information about our industry segments, see our consolidated
financial statements and related notes, including NOTE M. For financial
information about our foreign and domestic operations, see the consolidated
financial statements and the related notes, including NOTE E.

CAPITAL STRATEGY

     Our stated long-term capital objectives include: maintaining conservative
leverage ratios; maintaining our investment grade rating; extending our debt
maturity schedule; and increasing the percentage of our
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unencumbered assets. We anticipate funding our growth primarily through a
combination of our lines of credit, unsecured debt, preferred equity, and
alternative capital sources. We have established a revolving domestic credit
facility of up to $360 million which we expect to meet our borrowing needs over
the next several years. In order to continue to grow at historical rates and to
meet our capital objectives, it will be necessary to obtain equity capital
during the next two to three years. We will evaluate various alternatives,
including joint ventures with private institutions and public pension funds and
the issuance of additional common stock. Additionally, we anticipate reducing
our dividend payout ratio in order to retain cash flow for growth.

     In order to mitigate our interest rate risk, we contract with financial
institutions for derivative products that help us manage this exposure. Our
policy specifically prohibits us from entering into any such contract solely to
secure profit by speculating on the direction of currency exchange or interest
rates if unrelated to capital borrowed, lent or invested by us.

THE SELF STORAGE INDUSTRY

     The self storage industry serves an important function in the commercial
and residential real estate markets. Self storage properties were first
developed in the early 1960's in the southwestern United States in response to
the growing need for low-cost, accessible storage. A number of factors
accelerated the demand for low-cost storage, including, among others, a more
mobile society, with individuals moving to new homes and new cities needing
short-term storage for their belongings, the increasing cost of housing
(resulting in smaller houses), the increased popularity of apartments and
condominiums, more individuals with growing discretionary income (resulting in
the purchase of items such as boats and recreational vehicles that often cannot
be stored at residences), the growing number of small businesses and the
escalating cost of other storage alternatives. As the demand for such storage
increased, and the acceptance of self storage became more widespread, self
storage properties were built throughout the United States. Generally, such
properties were constructed along major thoroughfares that provided ready access
and public visibility or in outlying areas where land was inexpensive. In
certain areas of the country, where new construction was impractical because of
construction costs, lack of suitable sites or other restrictions, older
structures have been converted into self storage properties.

     We believe, based on our experience, that the self storage industry is
characterized by fragmented ownership, high gross margins, low levels of price
sensitivity and increasing customer demand. Typical customers of a self storage
property include individuals, ranging from homeowners to college students, and
commercial users, such as sales representatives and distributors, who require
frequent access, and business owners requiring seasonal storage. A single
customer rarely occupies more than 1% or 2% of the net rentable area in any
particular store.

     Capital expenditures are generally less for self storage properties as
compared to other types of commercial real estate due to the properties'
structural simplicity and durable materials and the lack of tenant improvement
demands. Capital expenditures include periodic expenditures for replacing roofs
and pavement, as well as improvements such as expansions and unit
reconfigurations. Expense items include repairing asphalt, doors, fences and
masonry walls, maintaining landscaping, and repairing damage caused by customer
vehicles. Minimal maintenance is required when a storage unit is vacated to
prepare it for the next customer.

COMPETITION

     Competition exists in every market in which our stores are located. We
compete with, among others, national, regional and local self storage operators
and developers. The primary factors on which competition is based are location,
rental rates, security, suitability of the property's design to prospective
tenants' needs and the manner in which the property is operated and marketed. We
believe that the primary competition for potential customers of any of our self
storage centers comes from other self storage properties within a three-to
five-mile radius of that store. We have positioned our stores within their
respective markets as a high-quality operator that emphasizes customer service
and security. We do not seek to be the lowest-price storage provider.

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     To the extent we experience new supply added to our markets, the increased
available storage space may reduce occupancy levels per storage property and
further intensify competition among storage providers for available tenants in
those markets. The extent to which we are affected by competition will depend in
significant part on market conditions within a three- to five-mile radius of our
stores. Overall, development starts have declined during the past year and we
believe, given our geographic diversification, that there continues to be both
internal and external growth opportunities.

REGULATION

  Environmental Regulations

     The Company is subject to federal, state and local environmental
regulations that apply to the ownership, management and development of real
property, including regulations affecting both construction activities and the
operation of self storage properties.

     In developing properties and constructing improvements, we utilize
environmental consultants and/or governmental data to determine whether there
are any flood plains, wetlands or environmentally sensitive areas that are part
of the property to be developed. If any such areas are identified, development
and construction are planned in conformance with federal, state, and local
environmental and land-use requirements.

     Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real property may become liable for the costs of removal or
remediation of certain hazardous substances released on or in its property. Such
laws may impose liability without regard to whether the owner or operator knew
of, or was responsible for, the release of such hazardous substances. The
presence of hazardous substances on a property may adversely affect the owner's
ability to sell the property or to borrow using the property as collateral, and
may cause the owner or manager of the property to incur substantial remediation
costs. In addition to claims for cleanup costs, the presence of hazardous
substances on a property could result in the owner or manager incurring
substantial liabilities as a result of a claim by a private party for personal
injury or a claim by an adjacent property owner for property damage.

     We have notified the Missouri Department of Natural Resources (MDNR) of
elevated levels of hydrocarbons found in groundwater monitoring wells on a
property in St. Louis, Missouri. We have been monitoring in accordance with a
work plan approved by the MDNR. During 1998, a quarterly monitoring report
revealed continued contamination in the groundwater samples. The source of the
contamination is still unknown. The MDNR notified us that it will continue
requiring quarterly groundwater monitoring. During 1999, at MDNR's request, a
work plan was developed to address its question on whether on-site contamination
might be spreading to adjacent properties. The work plan encompasses a broader
scope of monitoring, including installation of four additional monitoring wells
on adjacent properties. We obtained permission from neighboring property owners
to install the four new wells on their properties. Ground water samples were
taken from the new locations on the adjacent properties as well as the existing
locations. Those samples showed contamination on one (1) adjacent property,
however, it is not established whether this contamination is the result of
migration from the Shurgard property. Our consultant is revising the work plan
to incorporate the sample results. The MDNR must approve any revision to the
work plan. It is anticipated that the revised work plan would include continued
sampling and monitoring. In the event significant contamination has spread to
adjacent properties, the MDNR could be more aggressive in the future, and may
require identification of the location of the groundwater contamination and
construction of a system to remediate the problem.

     Except for this property in St. Louis, we have not been notified by any
governmental authority of any current, material environmental noncompliance,
claim or liability in connection with any of the properties we own or manage. We
have not been notified of a current claim for personal injury or property damage
by a private party in connection with environmental conditions at any of the
properties we own or manage. We have obtained a Phase I environmental assessment
report prepared by an independent environmental consultant for each of the
properties we own.

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     We are not aware of any environmental condition with respect to the
properties we own or manage that could have a material adverse effect on our
financial condition or results of operations. We cannot give assurance however,
that any environmental assessments undertaken with respect to the properties
have revealed all potential environmental liabilities, that any prior owner or
operator of the properties did not create any material environmental condition
not known to us, or that an environmental condition does not otherwise exist as
to any one or more of the properties that could have a material adverse effect
on our financial condition or results of operation. In addition, we cannot give
assurance that (i) future laws, ordinances or regulations will not impose any
material environmental liability, (ii) the current environmental condition of
our owned or managed properties will not be affected by the condition of
properties in the vicinity of such properties (such as the presence of leaking
underground storage tanks) or by third parties unrelated to us, or (iii) tenants
will not violate their leases by introducing hazardous or toxic substances into
our owned or managed properties that could expose us to liability under federal
or state environmental laws.

  Americans with Disabilities Act; Fire and Safety Regulations

     Under the ADA, all public accommodations are required to meet certain
federal requirements relating to physical access and use by disabled persons.
Compliance might require, among other things, removal of access barriers. A
determination that we are not in compliance with the ADA could result in the
imposition of fines, injunctive relief, damages or attorneys' fees. If we were
required to make modifications to comply with the ADA, our ability to make
expected distributions to our shareholders could be adversely affected; however,
management believes that such effect would not be material. In addition, we are
required to operate our properties in compliance with fire and safety
regulations, building codes and other land use regulations, as they may be
adopted by governmental agencies and bodies and become applicable to our
properties. Compliance with such requirements may require substantial capital
expenditures, which would reduce money otherwise available for distribution to
shareholders.

INSURANCE

     We believe that our self storage properties are covered by adequate fire,
flood, wind, earthquake and property insurance, as well as business interruption
insurance, provided by reputable companies and with commercially reasonable
deductibles and limits. We purchase title insurance on all of our properties at
the time of acquisition. We use our discretion in determining amounts, coverage
limits and deductibility provisions of title, casualty and other insurance,
based on the purchase price paid for such property, in each case with a view to
obtaining appropriate insurance coverage on our properties at a reasonable cost
and on suitable terms.

EMPLOYEES

     As of December 31, 2000, the Company employed approximately 1,000 persons.
None of our employees are covered by a collective bargaining agreement. We
believe that our relations with our employees are good.

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EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth certain information regarding the executive
officers of the Company as of December 31, 2000.

<TABLE>
<CAPTION>
            NAME              AGE               POSITIONS AND OFFICES WITH THE COMPANY
            ----              ---               --------------------------------------
<S>                           <C>    <C>
Charles Barbo...............  59     Chairman of the Board, President and Chief Executive Officer
Harrell Beck................  44     Director, Senior Vice President, Chief Financial Officer and
                                     Treasurer
David Grant.................  47     Executive Vice President
Christine McKay.............  39     Senior Vice President, Secretary and General Counsel
John Steckler...............  43     Senior Vice President, Marketing
Steve Tyler.................  48     Senior Vice President, Operations
</TABLE>

---------------
For Mr. Barbo's and Mr. Beck's biographies, see our proxy statement for the
annual meeting of shareholders to be held on May 8, 2001.

     David Grant has served as our Executive Vice President and Director of Real
Estate Investment since July 1993. He became Managing Director of SSC Benelux &
Co., SCA (formerly SSC Benelux & Co., SCS) effective January 1, 1996. Mr. Grant
joined Shurgard Incorporated in November 1985 as Director of Real Estate
Investment and continued to serve in that capacity until the Merger. He also
served as an Executive Vice President of Shurgard Incorporated. Mr. Grant was
previously a manager with Touche Ross & Co., where he was employed for
approximately 10 years providing financial consulting, accounting and auditing
services primarily to clients in the real estate, construction and engineering
industries. Mr. Grant has a Bachelor of Arts degree in Business Administration
and a Bachelor of Science degree in Accounting, both from Washington State
University.

     Christine McKay has served as Senior Vice President, Secretary and General
Counsel since October 1999. She joined Shurgard Incorporated in June 1993, as an
Assistant General Counsel. She has served as our Assistant Secretary since
October 1998, and as Assistant Secretary and Division Counsel for Shurgard
Storage To Go, Inc., since July 1997. Ms. McKay was previously an attorney with
Williams, Kastner & Gibbs, in Seattle. She has a Bachelor of Arts degree in
Business Administration from Chadron State College, and a Juris Doctorate, with
honors, from Creighton University. She is a member of the Washington State Bar
Association and the Corporate Counsel Section of the Washington State Bar
Association.

     John Steckler has served as Senior Vice President, Marketing since October
1999. He joined SSCI in April 1996 as Vice President of Marketing. Prior to
Shurgard, Mr. Steckler was Vice President of Sales and Marketing for Pro-Tec
Sport Helmets and Gargoyles Performance Eyewear, where he was responsible for
new product development and expanded sales and distribution. He has a Bachelor
of Arts degree in Communications from the University of Washington. He is a
member of the American Marketing Association and Sales Marketing Executives.

     Steve Tyler joined SSCI in May 1996 as Vice President of Operations
covering the Midwest and East Coast markets. Since October, 1999 he has served
as Senior Vice President of Operations. Prior to joining Shurgard, he was a
Regional Operations Manager with Victoria's Secret (a division of the Limited),
Casual Corner (a division of US Shoe), and a District Operating manager with The
Gap and Sears. He has a Bachelor of Arts degree in Business Administration from
the University of Minnesota-Duluth.

ITEM 2 -- PROPERTIES

     The Company owns, as of December 31, 2000, directly and through its
subsidiaries and joint ventures, 399 properties (including 397 self storage
properties), 352 of which are located in 19 states and 47 which are located in
Europe. Our self storage properties are designed to offer accessible storage
space for personal and business use. Individuals typically rent individual units
in self storage properties for storage of personal belongings such as furniture,
appliances, boats and other household and recreational goods. Businesses
typically rent space for storage of business property such as equipment,
seasonal goods, records and fixtures. We believe that it is desirable to have
commercial customers because they tend to rent larger units, stay for

                                        8
<PAGE>   10

longer terms, are more reliable payers and are less sensitive to price
increases. Accordingly, we have marketing and direct sales programs that target
commercial users. Based on a survey of our customers conducted during 2000, we
estimate that commercial users account for approximately 25 - 30% of our total
customer base.

     Our self storage properties are divided into a number of self-enclosed
rental units that generally range in size from 25 to 360 square feet. Many
properties have uncovered storage outside the buildings for parking motor
vehicles, boats, campers and other similar items suitable for outside storage.
Additionally, a number of our properties include climate-controlled storage
units for which we charge rents at substantial premiums.

     Customers of self storage properties are generally responsible for
delivering and retrieving their goods. Many leased spaces can be accessed
directly by automobile or truck, but some properties, in particular the
multistory buildings, have separate loading docks and elevators available for
delivery and retrieval of stored goods. Customers generally have access to their
unit without additional charge during normal business hours and control access
to such space through the use of their personal padlocks. We offer Ryder truck
rentals at a majority of our properties for added convenience to our customers
and to differentiate our stores from most of our competitors. In addition to
truck rentals, we sell locks, boxes and packing and storage materials at our
stores.

     The leasing, maintenance and operation of our stores are the responsibility
of store managers. The property's security is provided through a variety of
systems that may include, among others, on-site personnel, electronic devices
such as intrusion and fire alarms, access controls, video and intercom
surveillance devices, property fencing and lighting.

     Although our stores range considerably in size, most properties consist of
one or more single-story buildings that are located on a site of 1.5 to 5 acres.
The smallest store has approximately 21,000 net rentable square feet, while the
largest store has approximately 290,000 net rentable square feet. The properties
generally are constructed with concrete block or tilt-up concrete panels, with
steel columns or precast concrete columns that rest on concrete footings and
slabs, and have built-up tar roofs or pitched truss roofs with shingles or
standing seam metal roofs. The interior walls are generally constructed with
metal studs and partitions or other construction materials that are secure but
readily movable. The parking areas and driveways are generally asphalt or
concrete. All stores have fencing, floodlights, and electronic gates.

     In some cases, multistory buildings able to bear substantial weight loads,
such as warehouses and newspaper plants, have been converted into self storage
properties. In addition, similar multistory buildings for self storage have been
constructed in dense urban areas where land costs, zoning and other development
considerations make it impractical or undesirable to construct single-story
buildings.

                                        9
<PAGE>   11

     The following table provides information regarding the year developed or
acquired, year built, approximate net rentable square feet and acreage of each
of the self storage properties and business parks owned and operated by us as of
December 31, 2000. As of December 31, 2000, 134 properties with square footage
of 9.3 million are encumbered. We own additional properties which are under
development, but not reflected in this table. This table includes stores in
which we own an interest (either fee title or leasehold), but whose results are
not consolidated for financial reporting purposes. There are 326 stores whose
results are consolidated in the financial statements. These stores represent
21.0 million net rentable square feet and are built on approximately 1,205 acres
of land. This table does not include properties under development or leased to
others, nor does it include undeveloped land. At December 31, 2000, we leased
one 99,000 square foot storage center to an unrelated third party built on 2.5
acres, owned 6 parcels of land under development totaling 23.8 acres and 2
parcels of undeveloped land totalling 6.1 acres.

<TABLE>
<CAPTION>
                                                                                 APPROXIMATE
                                                     STATE/     OWNED   YEAR     NET RENTABLE
        PROPERTY NAME          PROPERTY LOCATION     COUNTRY    SINCE   BUILT    SQUARE FEET     ACREAGE
        -------------          ------------------  -----------  -----   -----   --------------   -------
                                                                                (IN THOUSANDS)
<S>                            <C>                 <C>          <C>     <C>     <C>              <C>
Ahwatukee(6)(8)..............  Phoenix             AZ           1998    1998            70          4.1
Airpark......................  Scottsdale          AZ           1997    1997            49          1.3
Arrowhead(6)(8)..............  Phoenix             AZ           1997    1997            67          3.2
Chandler.....................  Chandler            AZ           1986    1986            71          4.0
Colonade(2)..................  Phoenix             AZ           1998    1997            30
Dobson Ranch.................  Mesa                AZ           1996    1978            58          4.2
Houghton Road(7)(8)..........  Tucson              AZ           1999    2000            68          3.9
Mesa.........................  Mesa                AZ           1987    1985            99          4.8
Mill Avenue(8)...............  Tempe               AZ           1999    1998            30          0.6
Phoenix......................  Phoenix             AZ           1985    1984            78          2.7
Phoenix East.................  Phoenix             AZ           1987    1984            66          2.0
Scottsdale...................  Scottsdale          AZ           1985    1976            47          3.0
Scottsdale North.............  Scottsdale          AZ           1985    1985           112          4.1
Shea.........................  Scottsdale          AZ           1997    1996            43          1.3
Speedway(8)..................  Tucson              AZ           1998    1998            71          3.0
Tempe........................  Tempe               AZ           1984    1976            54          3.0
Union Hills(8)...............  Phoenix             AZ           1998    1998            65          3.8
Val Vista(6)(8)..............  Gilbert             AZ           1999    1999            52          5.5
Warner(1)....................  Mesa                AZ           1995    1985            61          3.1
Alicia Parkway...............  Laguna Hills        CA           1998    1991           100          4.5
Aliso Viejo..................  Aliso Viejo         CA           1996    1996            86          3.5
Antioch(7)(8)................  Antioch             CA           1999    1999            57          1.8
Bloomington..................  Bloomington         CA           1997    1983            50          2.8
Blossom Valley(6)(8).........  San Jose            CA           1998    1998            64          1.4
Capital Expressway(2)(8).....  San Jose            CA           2000    2000            66          1.7
Castro Valley................  Castro Valley       CA           1996    1975            50          2.3
Colton.......................  Colton              CA           1985    1984            73          3.8
Costa Mesa(8)(1).............  Costa Mesa          CA           1999    1998            40          1.5
Culver City..................  Los Angeles         CA           1988    1989            77          1.4
Daly City....................  Daly City           CA           1995    1989            96          5.2
El Cajon.....................  El Cajon            CA           1986    1977           129          6.0
El Cerrito...................  Richmond            CA           1986    1987            62          1.5
Fontana Sierra...............  Fontana             CA           1987    1980            85          3.6
Hayward......................  Hayward             CA           1985    1983            48          2.8
Huntington Beach.............  Huntington Beach    CA           1988    1986            99          3.3
</TABLE>

                                        10
<PAGE>   12

<TABLE>
<CAPTION>
                                                                                 APPROXIMATE
                                                     STATE/     OWNED   YEAR     NET RENTABLE
        PROPERTY NAME          PROPERTY LOCATION     COUNTRY    SINCE   BUILT    SQUARE FEET     ACREAGE
        -------------          ------------------  -----------  -----   -----   --------------   -------
                                                                                (IN THOUSANDS)
<S>                            <C>                 <C>          <C>     <C>     <C>              <C>
Kearney-Balboa...............  San Diego           CA           1986    1984            90          2.3
La Habra.....................  La Habra            CA           1986    1979            95          7.1
Martinez(1)..................  Martinez            CA           1995    1987            56          3.0
Mountain View................  Mountain View       CA           1987    1986            28          0.7
Newark.......................  Newark              CA           1996    1991            61          3.1
Ontario......................  Ontario             CA           1996    1984            57          2.1
Orange.......................  Orange              CA           1996    1985            89          2.8
Palo Alto....................  Palo Alto           CA           1986    1987            48          1.4
Pinole(1)....................  Pinole              CA           1995    1988            37          2.5
S. San Francisco.............  San Francisco       CA           1987    1985            56          2.1
Sacramento...................  Sacramento          CA           1996    1991            53          2.6
San Leandro..................  San Leandro         CA           1996    1991            59          2.7
San Lorenzo..................  San Lorenzo         CA           1996    1990            54          1.9
Santa Ana....................  Santa Ana           CA           1986    1975           167          8.1
Solana Beach(2)..............  Solana Beach        CA           1987    1984            87          4.5
Sunnyvale....................  Sunnyvale           CA           1986    1974           101          6.5
Tracy........................  Tracy               CA           1996    1986            70          3.0
Union City...................  Hayward             CA           1985    1985            41          2.9
Van Ness(6)(8)...............  San Francisco       CA           1999    1934            84          1.6
Walnut.......................  Walnut              CA           1996    1986            97          3.6
Walnut Creek(2)(7)(8)........  Walnut Creek        CA           1999    1987           105
Westpark(1)(8)...............  Irvine              CA           2000    1999           110          5.6
Westwood.....................  Santa Monica        CA           1986    1988            64          0.3
Lakewood.....................  Golden              CO           1986    1985            67          2.7
Northglenn...................  Northglenn          CO           1987    1979            75          5.5
Tamarac......................  Denver              CO           1984    1977            25          1.9
Thornton.....................  Denver              CO           1984    1984            41          2.4
Windermere...................  Littleton           CO           1984    1977            80          5.3
Blue Heron...................  West Palm Beach     FL           1987    1975           167         11.8
Brandon(1)(8)................  Brandon             FL           1999    1999            69          9.5
Carrollwood(1)(8)............  Tampa               FL           1999    1999            62          2.1
Davie(1).....................  Davie               FL           1996    1990            76          5.5
Daytona Beach(1)(8)..........  Daytona Beach       FL           1999    1999            74          7.2
Delray Beach.................  Delray Beach        FL           1996    1986            77          4.5
Eau Galllie(1)(8)............  Melbourne           FL           1999    1999            59          3.7
Hyde Park(1)(8)..............  Tampa               FL           1999    1999            62          2.5
Lauderhill...................  Lauderhill          FL           1997    1986            62          4.0
Maitland(1)..................  Orlando             FL           1997    1997            78          8.7
Margate......................  Margate             FL           1996    1984            75          4.0
Military Trail...............  West Palm Beach     FL           1987    1981           124          9.4
Oakland Park.................  Ft. Lauderdale      FL           1985    1974           290         13.4
Oldsmar(1)(8)................  Tampa               FL           2000    2000            53          2.9
Ormond Beach(1)(8)...........  Ormond Beach        FL           1999    1999            60          6.8
Oviedo(1)....................  Orlando             FL           1997    1997            65          9.0
Red Bug(1)...................  Seminole County     FL           1997    1997            75          4.3
S. Semoran(1)................  Orlando             FL           1997    1997            68          5.2
</TABLE>

                                        11
<PAGE>   13

<TABLE>
<CAPTION>
                                                                                 APPROXIMATE
                                                     STATE/     OWNED   YEAR     NET RENTABLE
        PROPERTY NAME          PROPERTY LOCATION     COUNTRY    SINCE   BUILT    SQUARE FEET     ACREAGE
        -------------          ------------------  -----------  -----   -----   --------------   -------
                                                                                (IN THOUSANDS)
<S>                            <C>                 <C>          <C>     <C>     <C>              <C>
Seminole.....................  Seminole            FL           1986    1984            61          2.7
South Orange(1)..............  Orlando             FL           1997    1997            71          5.0
Vineland(1)(8)...............  Orlando             FL           1999    1998            48          3.3
West Town(1)(8)..............  Altamonte Springs   FL           1998    1998            50          2.8
West Waters(1)(8)............  Tampa               FL           2000    2000            71         14.4
Ansley Park..................  Atlanta             GA           1995    1991            69          1.4
Brookhaven...................  Atlanta             GA           1995    1992            66          2.0
Clairemont...................  Atlanta             GA           1996    1990            41          1.1
Decatur......................  Atlanta             GA           1995    1992            65          2.5
Forest Park..................  Forest Park         GA           1996    1980            65          7.9
Gwinnett.....................  Lawrenceville       GA           1996    1996            71          4.4
Holcomb Bridge(7)(8).........  Roswell             GA           1999    2000            57          3.8
Jones Bridge(6)..............  Atlanta             GA           1997    1997            75          5.3
Lawrenceville(6)(8)..........  Lawrenceville       GA           1997    1997            74          3.4
Morgan Falls.................  Dunwoody            GA           1996    1990            76          3.7
Norcross.....................  Norcross            GA           1996    1984            62          9.3
Peachtree....................  Duluth              GA           1997    1996           100          6.2
Perimeter....................  Atlanta             GA           1996    1996            72          3.3
Roswell......................  Roswell             GA           1986    1986            57          3.8
Sandy Plains(6)(8)...........  Marietta            GA           1998    1998            68          6.9
Satellite Blvd. .............  Duluth              GA           1997    1994            75          5.2
Stone Mountain...............  Stone Mountain      GA           1996    1985            61         10.1
Tucker.......................  Tucker              GA           1996    1987            60          4.6
Alsip........................  Alsip               IL           1982    1980            79          4.6
Bolingbrook..................  Bolingbrook         IL           1997    1997            68          1.5
Bridgeview...................  Bridgeview          IL           1985    1983            75          4.1
Country Club Hills(6)(8).....  Country Club Hills  IL           1999    1999            74          4.9
Dolton.......................  Calumet City        IL           1982    1979            79          3.0
Fox Valley(6)(8).............  Chicago             IL           1998    1998            71          4.6
Hillside.....................  Hillside            IL           1988    1988            66          5.3
Lisle........................  Lisle               IL           1986    1976            53          3.4
Lombard......................  Lombard             IL           1982    1980            53          3.1
Oak Forest...................  Orland Park         IL           1995    1991            87          3.9
Palatine(7)(8)...............  Palatine            IL           2000    2000            52          3.9
Rolling Meadows..............  Rolling Meadows     IL           1982    1980            71          4.5
Schaumburg...................  Schaumburg          IL           1982    1980            71          4.3
Schaumburg South(6)(8).......  Schaumburg          IL           1999    1999            72          5.2
Willowbrook..................  Willowbrook         IL           1986    1979            44          3.3
Allisonville.................  Indianapolis        IN           1997    1987            90          7.4
Carmel.......................  Carmel              IN           1996    1996            61          4.3
Castleton....................  Indianapolis        IN           1998    1988            48          3.6
College Park.................  Indianapolis        IN           1986    1984            68          6.0
County Line(2)(6)(8).........  SouthPort           IN           1998    1998            72          4.5
Downtown Indy(7)(8)..........  Indianapolis        IN           1999    1999            61          1.2
Eaglecreek(6)(8).............  Indianapolis        IN           1998    1998            73          5.1
East Washington(7)(8)........  Indianapolis        IN           1999    1999            69          4.7
</TABLE>

                                        12
<PAGE>   14

<TABLE>
<CAPTION>
                                                                                 APPROXIMATE
                                                     STATE/     OWNED   YEAR     NET RENTABLE
        PROPERTY NAME          PROPERTY LOCATION     COUNTRY    SINCE   BUILT    SQUARE FEET     ACREAGE
        -------------          ------------------  -----------  -----   -----   --------------   -------
                                                                                (IN THOUSANDS)
<S>                            <C>                 <C>          <C>     <C>     <C>              <C>
Georgetown...................  Indianapolis        IN           1996    1996            72          4.2
Glendale.....................  Indianapolis        IN           1986    1985            60          5.6
Annapolis(2)(6)(8)...........  Annapolis           MD           1998    1998            69          3.2
Briggs Chaney................  Silver Spring       MD           1994    1987            28          2.0
Clinton......................  Clinton             MD           1986    1985            30          2.0
Crofton......................  Gambrills           MD           1988    1985            40          2.1
Frederick....................  Frederick           MD           1994    1987            32          1.7
Gaithersburg.................  Gaithersburg        MD           1994    1986            77          5.4
Germantown...................  Germantown          MD           1994    1988            45          1.9
Laurel.......................  Laurel              MD           1988    1984            30          2.0
Oxon Hill....................  Ft. Washington      MD           1994    1987            28          1.3
Suitland.....................  Suitland            MD           1987    1985            45          2.7
Ann Arbor....................  Ann Arbor           MI           1988    1977            62          3.9
Canton.......................  Canton              MI           1988    1986            56          3.3
Canton Township(7)(8)........  Canton Township     MI           2000    2000            68          4.1
Clinton Township(6)(8).......  Clinton Township    MI           1999    1999            70          5.0
Flint East...................  Flint               MI           1997    1977            45          2.7
Fraser.......................  Fraser              MI           1988    1985            73          5.2
Grand Rapids.................  Grand Rapids        MI           1983    1978            45          3.2
Jackson......................  Jackson             MI           1997    1978            49          3.1
Kalamazoo....................  Kalamazoo           MI           1980    1980            41          3.0
Lansing......................  Lansing             MI           1983    1978            40          2.5
Livonia......................  Livonia             MI           1988    1985            67          4.8
Madison Heights..............  Detroit             MI           1995    1977            66          4.1
Plymouth.....................  Canton Township     MI           1985    1979            62          5.3
Rochester....................  Utica               MI           1996    1989            57          4.8
Southfield...................  Southfield          MI           1983    1976            76          4.3
Sterling Heights.............  Sterling Heights    MI           1996    1986           105          8.9
Taylor.......................  Taylor              MI           1995    1980            83          4.2
Troy East....................  Troy                MI           1981    1975            81          4.8
Troy West....................  Troy                MI           1983    1979            88          5.2
Walled Lake..................  Walled Lake         MI           1985    1984            69          4.3
Warren.......................  Warren              MI           1988    1985            68          4.6
SouthHaven(1)(8).............  Memphis             MS           1998    1998            43          7.7
Capital Blvd. ...............  Raleigh             NC           1994    1984            34          2.1
Cary.........................  Cary                NC           1994    1984            58          4.7
Creedmoor(6)(8)..............  Raleigh             NC           1997    1997            72          5.1
Garner.......................  Garner              NC           1994    1987            28          3.1
Glenwood.....................  Raleigh             NC           1994    1983            31          1.9
Morrisville..................  Morrisville         NC           1994    1988            40          3.3
Bricktown(7)(8)..............  Bricktown           NJ           1999    2000            71          4.6
Old Bridge...................  Matawan             NJ           1987    1987            77          6.1
Beth Page(7)(8)..............  Long Island         NY           2000    2000            81          3.5
Commack(7)(8)................  Huntington          NY           1999    1999            80          5.2
Gold.........................  Brooklyn            NY           1986    1940           102          0.4
Great Neck(7)(8).............  Long Island         NY           1999    1929            20          0.4
</TABLE>

                                        13
<PAGE>   15

<TABLE>
<CAPTION>
                                                                                 APPROXIMATE
                                                     STATE/     OWNED   YEAR     NET RENTABLE
        PROPERTY NAME          PROPERTY LOCATION     COUNTRY    SINCE   BUILT    SQUARE FEET     ACREAGE
        -------------          ------------------  -----------  -----   -----   --------------   -------
                                                                                (IN THOUSANDS)
<S>                            <C>                 <C>          <C>     <C>     <C>              <C>
Hempstead(7)(8)..............  Hempstead           NY           1999    1999            66          2.3
Melville(6)(8)...............  Long Island         NY           1998    1998            74          7.4
Nesconset(7)(8)..............  Long Island         NY           2000    2000            50          3.1
Northern(2)..................  Long Island City    NY           1987    1940            76          1.9
Utica........................  Brooklyn            NY           1986    1964            75          1.1
Van Dam......................  Long Island City    NY           1986    1925            56          0.5
Yonkers......................  Yonkers             NY           1986    1928           100          1.6
16th and Sandy(1)............  Portland            OR           1995    1973            26          0.5
Allen Blvd. .................  Beaverton           OR           1996    1973            42          2.6
Barbur Boulevard.............  Portland            OR           1995    1993            67          2.8
Beaverton....................  Beaverton           OR           1985    1974            25          2.0
Denny Road...................  Beaverton           OR           1989    1988            65          6.2
Division(1)..................  Portland            OR           1996    1992            47          2.0
Gresham......................  Portland            OR           1996    1996            64          4.4
Hillsboro....................  Portland            OR           1996    1996            65          8.9
King City....................  Tigard              OR           1987    1986            83          4.9
Liberty Road.................  Salem               OR           1995    1993            54          4.4
Milwaukie(1).................  Milwaukie           OR           1996    1990            62          3.3
Oregon City..................  Portland            OR           1995    1992            57          3.2
Portland.....................  Portland            OR           1988    1988            49          2.1
Salem........................  Salem               OR           1983    1979            67          3.8
Airport......................  Philadelphia        PA           1986    1985            96          6.7
Edgemont.....................  Philadelphia        PA           1995    1992            64          5.5
Painter's Crossing(6)(8).....  Philadelphia        PA           1998    1998            49          3.3
West Chester(2)..............  West Chester        PA           1986    1980            84          7.0
Franklin(1)..................  Nashville           TN           1995    1995            55          3.3
Hermitage(1).................  Nashville           TN           1995    1995            65          2.8
Hickory Hollow(1)............  Nashville           TN           1997    1997            46          2.5
Medical Center(1)............  Nashville           TN           1994    1995            60          2.3
Rivergate(1).................  Nashville           TN           1996    1996            46          4.7
South Main(1)(8).............  Memphis             TN           1999    1999            27          1.6
Stones River(1)(8)...........  Murfeesboro         TN           1998    1998            39          3.3
Sycamore(1)..................  Memphis             TN           1998    1984            45          3.1
Winchester(1)................  Memphis             TN           1998    1988            65          8.9
Wolfchase(1).................  Memphis             TN           1997    1997            39          1.8
Arlington/Forum 303..........  Arlington           TX           1986    1984            57          2.7
Bandera Road.................  San Antonio         TX           1988    1981            75          3.6
Bedford......................  Bedford             TX           1985    1984            69          2.7
Bee Caves Road(6)(8).........  Austin              TX           1999    1999            68         11.0
Beltline Road................  Irving              TX           1989    1985            68          6.3
Blanco Road..................  San Antonio         TX           1988    1989            66          3.6
Champions(6)(8)..............  Houston             TX           1998    1998            65          3.7
Cinco Ranch(8)...............  Houston             TX           1999    1998            57          3.0
Cityplace(6)(8)..............  Dallas              TX           1999    1999            60          2.8
East Lamar...................  Arlington           TX           1996    1996            43          3.0
Federal......................  Houston             TX           1988    1988            55          3.4
</TABLE>

                                        14
<PAGE>   16

<TABLE>
<CAPTION>
                                                                                 APPROXIMATE
                                                     STATE/     OWNED   YEAR     NET RENTABLE
        PROPERTY NAME          PROPERTY LOCATION     COUNTRY    SINCE   BUILT    SQUARE FEET     ACREAGE
        -------------          ------------------  -----------  -----   -----   --------------   -------
                                                                                (IN THOUSANDS)
<S>                            <C>                 <C>          <C>     <C>     <C>              <C>
First Colony(8)..............  Missouri City       TX           2000    1994            42          2.8
Fredicksburg.................  San Antonio         TX           1987    1978            82          4.5
Georgetown...................  Austin              TX           1997    1996            58          4.1
Greenville(6)(8).............  Dallas              TX           1998    1998            61          2.8
Helotes(7)(8)................  San Antonio         TX           2000    2000            56          3.4
Henderson Street(6)(8).......  Fort Worth          TX           1999    1999            66          0.9
Henderson Pass...............  San Antonio         TX           1998    1995            46          2.5
Highway 78...................  San Antonio         TX           1998    1997            55          4.4
Hill Country Village.........  San Antonio         TX           1985    1982            79          4.0
Hillcroft(2).................  Houston             TX           1991    1988            59          3.4
Hurst........................  Hurst               TX           1987    1974            67          4.7
Imperial Valley..............  Houston             TX           1988    1987            54          3.1
Irving/MacArthur Blvd.(3)....  Irving              TX           1985    1975           141         11.4
Kingwood.....................  Kingwood            TX           1988    1988            54          3.3
Las Colinas(7)(8)............  Irving              TX           2000    2000            54          1.9
Lewisville...................  Dallas              TX           1997    1997            62          4.0
McArthur Crossing............  Irving              TX           1996    1996            65          4.1
Medical Center...............  Houston             TX           1989    1989            57          2.6
Medical Center SA(7)(8)......  San Antonio         TX           1998    1999            58          3.0
Mission Bend.................  Houston             TX           1995    1995            69          4.1
Nacodoches...................  San Antonio         TX           1998    1996            39          2.5
North Austin.................  Austin              TX           1986    1982            67          5.9
North Carrollton(8)..........  Carrollton          TX           2000    1999            65          3.6
North Park(8)................  Kingwood            TX           2000    1996            48          3.6
Oak Farm Dairy(6)(8).........  Houston             TX           1999    1999            65          1.8
Oak Hills(7)(8)..............  Austin              TX           1999    1999            65          2.9
Olympia(7)(8)................  Missouri City       TX           1998    1999            63          4.0
Park Cities East.............  Dallas              TX           1995    1995            68          4.3
Parker Road..................  Dallas              TX           1995    1995            65          3.5
Preston Road.................  Dallas              TX           1997    1997            62          3.2
Quarry(8)....................  San Antonio         TX           1999    1999            66          1.4
River Oaks(1)................  Houston             TX           1996    1989            67          2.4
Round Rock...................  Austin              TX           1997    1995            55          3.6
San Antonio NE...............  San Antonio         TX           1985    1982            74          3.6
Slaughter Lane...............  Austin              TX           1997    1994            76          4.6
South Cooper.................  Arlington           TX           1996    1996            66          3.7
South Main(8)................  Houston             TX           2000    1999            25          3.6
Southlake(6)(8)..............  Dallas              TX           1998    1998            66          4.6
Spring Branch(8).............  Houston             TX           2000    1996            27          2.0
Sugarland....................  Sugarland           TX           1988    1987            55          3.0
T.C. Jester..................  Houston             TX           1996    1990            64          2.8
Thousand Oaks................  San Antonio         TX           1986    1987            53          2.9
Universal City(1)............  San Antonio         TX           1995    1985            82          5.1
Valley Ranch.................  Coppell             TX           1997    1995            94          5.1
West U.......................  Houston             TX           1989    1988            60          1.8
Westchase(8).................  Houston             TX           2000    1998            52          2.3
</TABLE>

                                        15
<PAGE>   17

<TABLE>
<CAPTION>
                                                                                 APPROXIMATE
                                                     STATE/     OWNED   YEAR     NET RENTABLE
        PROPERTY NAME          PROPERTY LOCATION     COUNTRY    SINCE   BUILT    SQUARE FEET     ACREAGE
        -------------          ------------------  -----------  -----   -----   --------------   -------
                                                                                (IN THOUSANDS)
<S>                            <C>                 <C>          <C>     <C>     <C>              <C>
Westheimer...................  Houston             TX           1986    1977            73          3.7
Windcrest....................  San Antonio         TX           1996    1975            87          6.3
Woodforest...................  Houston             TX           1996    1996            54          6.2
Woodlands....................  Houston             TX           1988    1988            64          3.8
Bayside......................  Virginia Beach      VA           1988    1984            28          1.7
Burke........................  Fairfax             VA           1996    1984            32          1.7
Cascades(6)(8)...............  Sterling            VA           1998    1998            63          7.7
Cedar Road...................  Chesapeake          VA           1994    1989            36          2.1
Charlottesville..............  Charlottesville     VA           1994    1984            32          2.1
Chesapeake...................  Chesapeake          VA           1996    1986            58          5.2
Crater Road..................  Petersburg          VA           1994    1987            36          3.8
Dale City....................  Dale City           VA           1994    1986            31          1.6
Fairfax......................  Fairfax             VA           1986    1980            62          5.6
Falls Church.................  Falls Church        VA           1987    1988            93          1.5
Gainesville..................  Gainesville         VA           1994    1988            31          2.0
Herndon......................  Herndon             VA           1988    1985            39          3.0
Holland Road.................  Virginia Beach      VA           1994    1985            34          3.9
Jeff Davis Hwy...............  Richmond            VA           1994    1990            35          5.2
Kempsville...................  Virginia Beach      VA           1989    1985            33          2.0
Laskin Road..................  Virginia Beach      VA           1994    1984            39          2.5
Leesburg.....................  Leesburg            VA           1996    1986            28          1.6
Manassas E. & W.(3)..........  Manassas            VA           1988    1984            69          3.5
McLean(2)....................  McLean              VA           1997    1997            38          4.2
Merrifield(6)(8).............  Fairfax             VA           1999    1999            73          4.7
Midlothian Turnpike..........  Richmond            VA           1996    1984            44          2.9
Newport News North...........  Newport News        VA           1996    1986            59          3.8
Newport News. S..............  Newport News        VA           1985    1985            59          3.9
North Richmond...............  Richmond            VA           1988    1984            37          2.6
Old Towne(7)(8)..............  Alexandria          VA           1999    1999            77          0.9
Potomac Mills(6).............  Potomac Mills       VA           1997    1997            69          3.8
Princess Anne Road...........  Virginia Beach      VA           1994    1985            40          2.2
S. Military Highway..........  Virginia Beach      VA           1996    1984            48          2.7
Temple Avenue................  Petersburg          VA           1994    1989            34          4.0
Virginia Beach...............  Virginia Beach      VA           1989    1985            65          2.3
Auburn.......................  Auburn              WA           1996    1996            62          7.3
Bellefield...................  Bellevue            WA           1996    1978            65          2.9
Bellevue East & West(3)......  Bellevue            WA           1984    1975           165         10.8
Bellingham...................  Bellingham          WA           1981    1981            74          5.7
Bremerton....................  Bremerton           WA           1997    1976            41          2.5
Burien.......................  Seattle             WA           1985    1974            92          5.3
Burien II....................  Seattle             WA           1985    1979            60          3.0
Canyon Park JV(1)............  Bothell             WA           1996    1990            58          4.4
Canyon Rd. ..................  Puyallup            WA           1996    1986            28          1.7
Capitol Hill(1)..............  Seattle             WA           1987    1988            71          0.7
E. Bremerton.................  Bremerton           WA           1996    1985            66          3.1
East Lynnwood................  Lynnwood            WA           1986    1978            80          3.8
</TABLE>

                                        16
<PAGE>   18

<TABLE>
<CAPTION>
                                                                                 APPROXIMATE
                                                     STATE/     OWNED   YEAR     NET RENTABLE
        PROPERTY NAME          PROPERTY LOCATION     COUNTRY    SINCE   BUILT    SQUARE FEET     ACREAGE
        -------------          ------------------  -----------  -----   -----   --------------   -------
                                                                                (IN THOUSANDS)
<S>                            <C>                 <C>          <C>     <C>     <C>              <C>
Edmonds......................  Edmonds             WA           1984    1974           121          6.5
Everett......................  Everett             WA           1981    1978            63          4.2
Factoria.....................  Bellevue            WA           1984    1984            57          3.8
Factoria Square..............  Bellevue            WA           1996    1989            70          1.9
Federal Way..................  Federal Way         WA           1984    1975           134          5.7
Fife(4)......................  Tacoma              WA           1984    1977            63          3.9
Gig Harbor(8)................  Gig Harbor          WA           1999    1980            35          2.7
Hazel Dell(1)................  Vancouver           WA           1996    1989            56          3.4
Highland Hill................  Tacoma              WA           1981    1982            60          3.9
Interbay.....................  Seattle             WA           1987    1988            84          0.4
Issaquah.....................  Issaquah            WA           1985    1986            56          4.7
Juanita(7)(8)................  Kirkland            WA           1998    1999            65          2.0
Kennydale....................  Renton              WA           1996    1991            57          2.8
Kent.........................  Kent                WA           1997    1977            44          2.5
Lacey........................  Olympia             WA           1997    1977            25          1.4
Lake City(1).................  Seattle             WA           1995    1987            51          1.1
Lake Union(8)................  Seattle             WA           1998    1998            68          2.1
Lakewood 512(4)..............  Tacoma              WA           1987    1979           130         12.2
Lynnwood.....................  Lynnwood            WA           1997    1979            54          4.0
Mill Creek(6)(8).............  Everett             WA           1998    1998            68          3.1
North Spokane................  Spokane             WA           1984    1976            78          4.1
Parkland.....................  Tacoma              WA           1997    1980            52          4.2
Pier 57(6)(8)................  Seattle             WA           1986    1912            59          0.3
Portt Orchard................  Portt Orchard       WA           1997    1991            46          3.0
Redmond(6)(8)................  Redmond             WA           1998    1998            52          3.0
Renton.......................  Renton              WA           1984    1979            80          4.5
Salmon Creek.................  Vancouver           WA           1997    1997            68          2.6
Sammamish(6)(8)..............  Redmond             WA           1998    1998            76          5.0
Shoreline/Aurora N.(3).......  Seattle             WA           1986    1978           136          6.1
Smokey Point.................  Arlington           WA           1987    1984            35          2.2
South Center.................  Renton              WA           1985    1979            68          4.1
South Hill...................  Seattle             WA           1995    1980            45          2.8
South Tacoma.................  Tacoma              WA           1987    1975            46          3.1
Spokane......................  Spokane             WA           1997    1976            49          2.6
Sprague(1)...................  Tacoma              WA           1996    1950            52          2.8
Totem Lake...................  Kirkland            WA           1984    1978            61          2.6
Vancouver Mall...............  Vancouver           WA           1980    1982            46          3.3
West Olympia.................  Olympia             WA           1997    1978            30          2.2
West Seattle.................  Seattle             WA           1997    1997            66          3.4
Whitecenter..................  Seattle             WA           1980    1981            48          3.4
Woodinville..................  Woodinville         WA           1984    1982            70          3.5
Aartselaar(5)................  Antwerpen           Belgium      1997    1997            76          1.7
Antwerpen Bredabann(5).......  Antwerpen           Belgium      2000    2000            67          1.5
Brugge(5)....................  Flanders            Belgium      1999    1999            74          1.7
Forest(5)(9).................  Brussels            Belgium      1995    1995            49          0.4
Ghent(5).....................  Flanders            Belgium      1998    1998            72          1.7
</TABLE>

                                        17
<PAGE>   19

<TABLE>
<CAPTION>
                                                                                 APPROXIMATE
                                                     STATE/     OWNED   YEAR     NET RENTABLE
        PROPERTY NAME          PROPERTY LOCATION     COUNTRY    SINCE   BUILT    SQUARE FEET     ACREAGE
        -------------          ------------------  -----------  -----   -----   --------------   -------
                                                                                (IN THOUSANDS)
<S>                            <C>                 <C>          <C>     <C>     <C>              <C>
Jette(5).....................  Brussels            Belgium      2000    2000            67          1.6
Kortjik(5)...................  Flanders            Belgium      1999    1999            63          1.5
Leuven(5)....................  Brussels            Belgium      1998    1998            63          1.7
Liege(5).....................  Liege               Belgium      2000    2000            52          1.2
Machalein(5).................  Brussels            Belgium      1997    1997            65          1.5
Molenbeek(5)(9)..............  Brussels            Belgium      1995    1995            34          0.5
Overijse(5)..................  Brussels            Belgium      1998    1998            49          1.4
Waterloo(5)..................  Brussels            Belgium      1995    1995            86          3.5
Zaventem(5)..................  Brussels            Belgium      1996    1996            75          3.0
Ballainvilliers(5)...........  Paris               France       2000    2000            58          1.3
Fresnes(5)...................  Paris               France       2000    2000            56          1.3
Montrouge(2)(5)..............  Paris               France       1997    1996            59          1.4
Nantere(5)...................  Paris               France       2000    2000            68          1.6
Nice(5)......................  Nice                France       1997    1991            42          1.0
Osny(5)......................  Paris               France       2000    2000            54          1.2
Pontault-Combault(5).........  Paris               France       1999    1999            54          1.2
Port Marly(5)................  Paris               France       2000    2000            46          1.1
Rosny(5).....................  Paris               France       2000    2000            64          1.5
Varlin(2)(5).................  Paris               France       1997    1997            23          0.5
Villejuste(5)................  Paris               France       2000    2000            61          1.4
Amersfoot(5).................  Amersfoot           Netherlands  2000    2000            66          1.5
Amsterdam(5).................  Amsterdam           Netherlands  2000    2000            54          1.2
Den Haag(5)..................  Den Haag            Netherlands  1999    1999            61          1.4
Maastricht(5)................  Maastricht          Netherlands  2000    2000            51          1.2
Rotterdam(5).................  Rotterdam           Netherlands  2000    2000            52          1.2
Utrecht Nieuwegein(5)........  Utrecht             Netherlands  2000    2000            61          1.4
Handen(5)....................  Stockholm           Sweden       1999    1999            65          1.5
Jacobsberg(2)(5).............  Stockholm           Sweden       1998    1998            60          2.6
Kungens Kurva(5).............  Stockholm           Sweden       1998    1998            72          6.8
Lundavagen(5)................  Malmo               Sweden       2000    2000            70          1.6
Molndal(2)(5)................  Gothenburg          Sweden       1999    1999            65          1.5
Rissne(5)....................  Stockholm           Sweden       1998    1998            67          2.3
Sodertalje(5)................  Stockholm           Sweden       2000    2000            53          1.2
Sodermalm(2)(5)..............  Stockholm           Sweden       1999    1999            26          0.6
Solna(5).....................  Stockholm           Sweden       1999    1999            69          1.6
Taby(5)......................  Stockholm           Sweden       1998    1998            60          2.5
Uppsala(5)...................  Uppsala             Sweden       1999    1999            63          1.5
Croydon(5)...................  London              UK           1999    1999            67          1.5
Norbury(5)...................  London              UK           1999    1999            45          1.0
Hanworth(5)..................  London              UK           2000    2000            44          1.0
Hayes(5).....................  London              UK           1999    1999            67          1.5
Reading(5)...................  London              UK           2000    2000            51          1.2
                                                                                    ------        -----
          Total..............                                                       25,469        1,406
                                                                                    ======        =====
</TABLE>

                                        18
<PAGE>   20

---------------
(1) We own between 50 - 90% of the entities that own these properties.

(2) We do not have fee title, but have a long-term lease, with respect to the
    storage facility or the land on which this property is located. We have not
    included acreage on properties with building leases.

(3) These properties are now operated as one property.

(4) Property is a business park.

(5) We own a 7.57% interest in the entity that owns this unconsolidated property

(6) We own a 10% interest in the entity that owns this consolidated property.
    This property is consolidated due to our continuing interest.

(7) We own a 20% interest in the entity that owns this consolidated property.
    This property is consolidated due to our continuing interest.

(8) This property is included in our New Store operating results. All other
    domestic properties are included in our Same Store operating results. (See
    Note M)

(9) We have a capital lease on this property with an option to purchase the
    property at the end of the lease term.

     The following table sets forth information by state regarding weighted
average occupancy and weighted average rent per square foot for the domestic
self storage properties and business parks owned by the Company for the years
ended December 31, 2000, 1999 and 1998. The occupancy and rental information in
this and the following table is affected by new stores, which, once opened, go
through a "rent-up" period during which occupancy is generally lower than at
later stages.

<TABLE>
<CAPTION>
                                                          AVERAGE OCCUPANCY    AVERAGE RENT PER SQUARE FOOT
                                              % OF 2000   ------------------   ----------------------------
                   STATE                       REVENUE    2000   1999   1998    2000      1999       1998
                   -----                      ---------   ----   ----   ----   -------   -------   --------
<S>                                           <C>         <C>    <C>    <C>    <C>       <C>       <C>
Arizona.....................................       5%      82%    76%    77%   $ 9.69    $ 9.45    $  9.38
California..................................      16       88     89     91     12.71     11.63      10.97
Florida.....................................       7       73     78     83     10.52     10.09       9.80
Georgia.....................................       5       79     74     75     10.04     10.07       9.87
Illinois....................................       4       84     84     85     10.51     10.12       9.60
Michigan....................................       6       90     86     89      9.33      8.72       8.23
New York....................................       5       80     83     88     19.59     18.99      18.35
Oregon......................................       3       89     85     84      9.54      9.29       9.19
Texas.......................................      14       80     82     84      9.40      9.11       8.69
Virginia....................................       8       84     81     84     11.93     11.24      10.60
Washington..................................      17       87     84     87     10.95     10.39       9.87
Other.......................................      10       78     78     78     10.04      9.79       9.72
Weighted Average............................     100%      83%    82%    84%   $10.82    $10.30    $  9.90
</TABLE>

     The following table sets forth information for all domestic properties
owned by the Company regarding weighted average occupancy and weighted average
rent per square foot for the years ended December 31, 2000 through December 31,
1996.

<TABLE>
<CAPTION>
                                                    2000      1999     1998     1997     1996
                                                   ------    ------    -----    -----    -----
<S>                                                <C>       <C>       <C>      <C>      <C>
Weighted average occupancy.......................      83%       82%      84%      86%      87%
Weighted average rent per square foot............  $10.82    $10.30    $9.90    $9.37    $9.23
</TABLE>

     Leasing of Properties. Rental units are usually rented on a month-to-month
basis. Based on our most recent evaluation of customer move-outs for the year
ended 1999, the average rental period for a tenant is approximately 11 months.
This average is comprised of the rental periods of business tenants, whose
average stay is 18 months, and those of residential customers, whose average
stay is 10 months. Rental income from leased space constitutes the primary
revenue from such properties, but additional revenue is received from incidental
services rendered at the properties, such as lock and box sales and truck
rentals. Rental rates vary

                                        19
<PAGE>   21

substantially depending on the size of the storage space, the property location,
the quality of the property and the proximity of competition.

     Other Properties. The Company owns two business parks, both of which are
located near Tacoma, Washington. The business parks were built in 1977 and 1979
and contain an aggregate of approximately 191,000 net rentable square feet. We
also manage one additional business park for an unaffiliated owner. In addition,
we own a property in downtown Seattle, Washington that, until 1997, was leased
to a records storage company affiliated with our management, on terms approved
by our disinterested directors. The building was then converted to self storage
and reopened for operations in 1998.

ITEM 3 -- LEGAL PROCEEDINGS

     None.

ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of shareholders during the fourth
quarter of 2000.

                                        20
<PAGE>   22

                                    PART II

ITEM 5 -- MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

     The Company's common stock is traded on the NYSE under the symbol "SHU." As
of February 23, 2001 there were 19,739 holders of record of our common stock and
the reported NYSE closing price per share of common stock was $24.88.

     The table below sets forth for the fiscal periods indicated the high and
low closing prices per share of Common Stock as reported in published financial
sources, and distributions declared.

<TABLE>
<CAPTION>
                                                        PRICE PER SHARE OF
                                                           COMMON STOCK
                                                        ------------------    DISTRIBUTIONS
                                                         HIGH        LOW       DECLARED(1)
                                                        -------    -------    -------------
<S>                                                     <C>        <C>        <C>
2000
Fourth Quarter........................................  $24.69     $21.88         $.51
Third Quarter.........................................   25.00      22.38          .51
Second Quarter........................................   27.25      21.88          .51
First Quarter.........................................   26.13      22.13          .51

1999
Fourth Quarter........................................  $24.69     $20.94         $.50
Third Quarter.........................................   27.31      24.63          .50
Second Quarter........................................   27.63      24.88          .50
First Quarter.........................................   25.88      24.00          .50
</TABLE>

---------------
(1) Distributions declared by the Board of Directors based on financial results
    for the quarter specified, but declared and paid in the following quarter.

     Holders of shares of common stock are entitled to receive distributions
when declared by our Board of Directors out of any assets legally available for
payment. Our bank line of credit limits our dividends to no more than 95% of
funds from operations. (See Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations -- FUNDS FROM OPERATIONS) For
years prior to January 1, 2001, we were required to distribute annually to our
shareholders at least 95% of our "REIT taxable income," which, as defined by the
relevant tax statutes and regulations, is generally equivalent to net taxable
ordinary income. As a result of legislation passed in December 1999, this
distribution requirement has been reduced to 90%.

                                        21
<PAGE>   23

ITEM 6 -- SELECTED FINANCIAL DATA

     The following selected consolidated financial data of the Company should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the other financial information
included elsewhere in this Form 10-K.

<TABLE>
<CAPTION>
                                                AT OR FOR YEAR ENDED DECEMBER 31,
                                  --------------------------------------------------------------
                                   2000(1)       1999(1)         1998         1997        1996
                                  ----------    ----------    ----------    --------    --------
                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                               <C>           <C>           <C>           <C>         <C>
OPERATING DATA:
Total revenue...................  $  195,867    $  173,154    $  159,254    $140,434    $110,399
Income before accounting
  change........................      52,632        51,771        44,734      42,311      32,785
Income before accounting change
  per common share:
  Basic.........................        1.48          1.48          1.40        1.40        1.39
  Diluted.......................        1.47          1.48          1.39        1.40        1.39
Distributions per common share:
  Ordinary income...............        1.73          1.91          1.80        1.80        1.41
  Capital gain..................                       .05           .01
  Return of capital.............         .30           .03           .14         .11
                                  ----------    ----------    ----------    --------    --------
          Total.................        2.03          1.99          1.95        1.91        1.41(2)
                                  ==========    ==========    ==========    ========    ========
BALANCE SHEET DATA:
Total assets....................   1,239,157     1,154,269     1,153,907     955,488     804,483
Total borrowings................     495,354       434,349       426,026     296,971     272,791
</TABLE>

---------------
(1) For 1999 and 2000, the Company's European operations are no longer being
    consolidated, but are now reported under the equity method. This reporting
    change was made retroactive to January 1999.

(2) Does not include the distribution of $.47 per share declared in January 1997
    based on financial results for the quarter ended December 31, 1996. Reflects
    only three quarterly distributions due to a change in our policy regarding
    the timing of dividend declaration.

                                        22
<PAGE>   24

ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

     Shurgard Storage Centers, Inc. is a REIT headquartered in Seattle,
Washington, specializing in all aspects of the self storage industry. As of
December 31, 2000, we operated a network of 428 storage centers and three
business parks located throughout the United States and in Europe. Of these
properties, we own, directly and through our subsidiaries and joint ventures,
399 operating properties containing approximately 25.5 million net rentable
square feet. Of the 399 operating properties, 352 are located in 19 states in
the U.S. and 47 are located in Europe. We also manage for third parties, 31 self
storage centers and one business park containing approximately 1.9 million net
rentable square feet. Self storage properties offer low-cost, easily accessible
storage space for personal and business uses.

     Our investment objective is to maximize shareholder value by increasing
funds from operations through internal growth and through the acquisition and
development of additional self storage properties. We believe that the
experience of our management team in acquiring, developing, and operating self
storage properties, our geographic diversification and our emphasis on quality
will enhance our ability to achieve this objective.

     Our mission is to be the global leader in storage products and services. We
believe we can obtain this goal by focusing on providing exceptional customer
service and the highest quality products to our customers.

     As part of our focus on providing the highest quality products to our
customers, we look for those storage centers that are located in well-populated
retail areas. When entering a market, we seek dominant locations within specific
three to five mile trade areas. "Dominant locations" refers to highly visible
and accessible locations in retail corridors which create customer awareness.
Through multiple locations of this kind within a metropolitan area, we establish
brand recognition as well as economies of scale in operating our stores. In most
markets, we seek to own at least 15 stores in order to realize these
efficiencies. To further enhance brand recognition, we strive to achieve a
uniform look to our properties. This is accomplished through the use of signage,
color schemes, quality of the building and our trademark "lighthouse" office
design in new developments.

     During 2000, we acquired 7 and developed 21 new domestic storage centers
directly or through joint ventures. Additionally, our European partners opened
19 developments during 2000. These European developments are located as follows:
three in Belgium, seven in France, five in the Netherlands, two in Sweden, and
two in the United Kingdom. The following discussion of operations provides
additional comparative financial information and discussion of each of the areas
of growth, including internal or Same Store growth, direct acquisitions,
domestic development, European operations, property management operations and
other forms of real estate investments. A discussion of capital expenditures,
financing transactions and liquidity is also included.

     When used in this discussion and elsewhere in this Annual Report on Form
10-K, the words "believes," "anticipates," "projects" and similar expressions
are intended to identify forward-looking statements regarding financial
performance. ACTUAL RESULTS MAY DIFFER MATERIALLY DUE TO UNCERTAINTIES INCLUDING
THE RISK THAT COMPETITION FROM NEW SELF STORAGE FACILITIES OR OTHER STORAGE
ALTERNATIVES MAY CAUSE RENT TO DECLINE AND MAY CAUSE OCCUPANCY RATES TO DROP,
TAX LAW CHANGES MAY CHANGE THE TAXABILITY OF FUTURE INCOME, INCREASES IN
INTEREST RATES MAY INCREASE THE COST OF REFINANCING LONG TERM DEBT, AND WE MAY
BE AFFECTED BY LEGISLATION RELATING TO LATE FEES. ACTUAL RESULTS MAY DIFFER IF
INCREASES IN LABOR, TAXES, MARKETING AND OTHER OPERATING AND CONSTRUCTION
EXPENSES OCCUR. Other factors which could affect our financial results are
described below and in Item 1 (Business) of this Annual Report on Form 10-K.
Forward-looking statements are based on estimates as of the date of this report.
The Company disclaims any obligation to publicly release the results of any
revisions to these forward-looking statements reflecting new estimates, events
or circumstances after the date of this report.

                                        23
<PAGE>   25

SEGMENT PERFORMANCE

     When managing our real estate assets, we evaluate performance in two
segments. The first segment, Same Stores, represents those storage centers and
business parks that are not in the rent up stage and for which historical
information is available. The second segment, New Stores, represents those
storage centers recently acquired or developed for which performance is measured
primarily based on original investment expectations. The following sections
discuss the performance of these segments.

SAME STORES

     In 2000, we continued our focus on increasing net operating income (NOI)
from our existing real estate assets. The primary way we analyze our performance
is to measure year over year improvements in Same Store operating results. Our
definition of Same Stores includes existing stores acquired prior to January 1
of the previous year as well as developed properties that have been operating
for a full two years as of January 1 of the current year. We project that newly
developed properties will reach stabilization in an average of approximately 24
months. Please note that our definition of Same Stores results in the addition
of stores each year as new acquisitions and developments meet the criteria for
inclusion, and that we then include these stores in the previous year's
comparable data. Other storage companies may define Same Stores differently,
which will affect the comparability of the data. The following table summarizes
Same Store operating performance as defined at December 31, 2000 and 1999.

SAME STORE RESULTS

<TABLE>
<CAPTION>
                                    YEAR ENDED DECEMBER 31,              YEAR ENDED DECEMBER 31,
                               ----------------------------------   ----------------------------------
                                                             %                                    %
                                  2000          1999       CHANGE      1999          1998       CHANGE
                               -----------   -----------   ------   -----------   -----------   ------
                                             (DOLLARS IN THOUSANDS EXCEPT AVERAGE RENT)
<S>                            <C>           <C>           <C>      <C>           <C>           <C>
Rental revenue...............  $   183,726   $   172,112     6.7%   $   166,291   $   159,451     4.3%
Direct operating and real
  estate tax expense(1)......       52,924        49,506     6.9%        47,472        46,394     2.3%
                               -----------   -----------            -----------   -----------
NOI..........................      130,802       122,606     6.7%       118,819       113,057     5.1%
Leasehold expense............          860           799     7.7%           621           545    13.9%
Indirect operating
  expense(2).................       10,749         9,246    16.3%         8,651         9,474    -8.7%
                               -----------   -----------            -----------   -----------
NOI after indirect and
  leasehold expense..........  $   119,193   $   112,561     5.9%   $   109,547   $   103,038     6.3%
                               ===========   ===========            ===========   ===========
Avg. annual rent per
  sq.ft.(3)..................  $     10.83   $     10.35     4.6%   $     10.37   $      9.93     4.4%
Avg. sq.ft. occupancy........           88%           86%                    86%           86%
Total net rentable sq.ft.....   18,000,000    18,000,000             17,300,000    17,300,000
No. of properties............          277           277                    264           264
</TABLE>

---------------
(1) Includes all direct property and real estate tax expenses. Does not include
    any allocation of indirect expense.

(2) Indirect operating expense includes certain shared property costs such as
    bank fees, district and corporate management, purchasing, national contracts
    personnel and marketing, as well as certain overhead costs allocated to
    property operations such as business information technology, legal services,
    human resources, and accounting. Does not include internal real estate
    acquisition cost or abandoned development expense. Indirect operating
    expense is allocated to stores based on number of months in operation during
    the period.

(3) Average annual rent per square foot is calculated by dividing actual rent
    collected by the average number of square feet occupied during the period.

     Similar to last year, the business trends in most of our markets continue
to be positive. This is a direct reflection of the strength of the demand in
most of our trade areas and the quality of our stores and our people. During
2000, we experienced increased competition in several of our markets where
competitors have opened in the vicinity of some of our stores. Markets impacted
by this increased competition include Indianapolis,

                                        24
<PAGE>   26

Houston, and South Florida. We believe that the quality of our storage centers
as well as our geographic diversity helps mitigate the impact of competition in
individual markets. Market conditions in California, New York and Virginia
contributed to above average revenue and NOI increases.

     NOI has risen over the last three years due to increases in revenue, which
are a function of changes in rental rates and occupancy. While the storage
business is seasonal, spring and summer being peak occupancy periods, the cycle
is annual and the annual revenue trend from 1998 to 2000 reflects general market
changes. Revenue gains from 1999 to 2000 resulted primarily from rental rate
increases with some occupancy improvements, while gains from 1998 to 1999
resulted entirely from rate increases.

     Over the past two years the self storage and other industries have been
involved in lawsuits challenging their late fee policies. Shurgard is currently
not a party to any such late fee litigation. However, we have reevaluated our
late fee structures in each state and have, where appropriate, reduced the late
fees charged to customers. We expect that this will affect year over year
results through the second quarter of 2001.

     Direct operating expenses were up 6.9% in 2000 as compared to 1999
primarily due to increases in marketing and sales expenditures of approximately
50% over 1999 for new marketing campaigns and sales center programs implemented
during 2000. Increases in personnel costs, utilities and real estate taxes also
contributed to the increase. During 1999, declines in personnel costs, which
include decreased workers compensation costs and lower on-site employee bonuses,
were offset by increases in real estate taxes, costs of retail goods, and repair
and maintenance expenditures.

     In the first quarter of 2000, we began implementation of several new sales
initiatives. These initiatives involved the roll out of an enhanced e-commerce
program to allow on line sales of all of our products and services. Other sales
initiatives implemented during 2000 include the expansion of our commercial
accounts, the telemarketing sales force and the direct sales force. These new
sales initiatives resulted in increases in both direct and indirect operating
expense and resulted in increased revenue growth in the second half of 2000.
Year over year Same Store revenue growth accelerated from 5.0% in the first
quarter of 2000 to 7.5% in the fourth quarter of 2000. We expect to continue to
see expense increases through the first half of 2001 when compared to 2000.

     While we have seen improvement in our revenue growth, rising indirect
operating expenses resulted in NOI after indirect costs growing at only 5.9% for
2000 compared to 6.3% for 1999. Our definition of indirect operating expense
includes certain shared property costs like bank fees, district and corporate
management, purchasing, national contracts personnel and marketing, as well as
certain overhead costs allocated to property operations like business
information technology, legal services, human resources, and accounting. Same
Store indirect operating expenses rose 16.3% from 1999 to 2000 primarily due to
marketing, sales and technology expenses related to the new initiatives
described above. Although, as discussed above, we expect to continue to see
above normal increases for the first of 2001, expense growth should moderate
during the last half of the year. In 1999, Same Store indirect operating
expenses fell 8.7% because many of these expenses are fixed costs that do not
grow in proportion to the number of stores we operate.

                                        25
<PAGE>   27

NEW STORES

     Our definition of New Stores, as shown in the table below, includes
existing domestic facilities that had not been acquired as of January 1 the
previous year as well as domestic developed properties that have not been
operating a full two years as of January 1 of the current year. The following
table summarizes New Store operating performance as defined at December 31, 2000
and 1999.

NEW STORE RESULTS

<TABLE>
<CAPTION>
                                                           YEAR ENDED           YEAR ENDED
                                                          DECEMBER 31,         DECEMBER 31,
                                                       ------------------    -----------------
                                                        2000       1999       1999       1998
                                                       -------    -------    -------    ------
                                                               (DOLLARS IN THOUSANDS )
<S>                                                    <C>        <C>        <C>        <C>
Rental revenue.......................................  $27,076    $11,732    $17,833    $6,106
Direct operating and real estate tax expenses(1).....   10,615      5,741      7,878     2,896
                                                       -------    -------    -------    ------
NOI..................................................   16,461      5,991      9,955     3,210
Leasehold expense....................................      731        175        353       241
Indirect operating expense(2)........................    2,412        937      1,532       721
                                                       -------    -------    -------    ------
NOI after indirect and leasehold expense.............  $13,318    $ 4,879    $ 8,070    $2,248
                                                       =======    =======    =======    ======
No. of properties....................................       80         80         65        65
No. of property months(3)............................      746        337        561       241
</TABLE>

---------------
(1) Includes all direct property and real estate tax expenses. Does not include
    any allocation of indirect expense.

(2) Indirect operating expense includes certain shared property costs such as
    bank fees, district and corporate management, purchasing, national contracts
    personnel and marketing, as well as certain overhead costs allocated to
    property operations such as business information technology, legal services,
    human resources and accounting. Does not include internal real estate
    acquisition cost or abandoned development expense. Indirect operating
    expense is allocated to stores based on number of months in operation during
    the period.

(3) Represents the sum of the number of months we operated each property during
    the year.

     Increases from year to year in NOI for the new store portfolio reflect the
greater number of property months included for the periods presented. Although
this increase gives some indication of how much of our overall NOI growth
results from this segment, it is not a good method of evaluating the performance
of assets within this segment. We use several different methods when evaluating
the performance of domestic acquisitions and developments in this segment.
Acquisitions and development properties are evaluated based on comparisons of
actual results to pro forma NOI for the appropriate period from opening or at
maturity. The performance of our acquisitions and developments are discussed in
the sections that follow. Additionally, increases in the expense per property
month represent the expanded marketing and sales initiatives discussed
previously.

                                        26
<PAGE>   28

  Domestic Acquisitions

     We continue to selectively seek acquisition opportunities for high quality
storage centers that meet our investment standards. We have limited our efforts
to pursue only those centers that enhance our existing network of stores (i.e.
establish greater market presence or expand an established market to create
greater economies of scale). The operating results of our acquisitions are
presented in the tables below in order to show the impact of our operating
strategies since the acquisition date.

                          RESULTS OF 2000 ACQUISITIONS

<TABLE>
<CAPTION>
                                                                  YEAR ENDED
                                                               DECEMBER 31, 2000
                                                               -----------------
                                                             (DOLLARS IN THOUSANDS
                                                             EXCEPT AVERAGE RENT)
<S>                                                          <C>
Rental revenue.............................................        $  1,938
Direct operating and real estate tax expense(1)............             650
                                                                   --------
NOI........................................................           1,288
Leasehold expense
Indirect operating expense(2)..............................             133
                                                                   --------
NOI after indirect and leasehold expense...................        $  1,155
                                                                   ========
Avg. annual rent per sq.ft.(3).............................        $  10.84
Avg. sq.ft. occupancy......................................              83%
Total net rentable sq.ft...................................         368,000
Number of properties.......................................               7
Number of property-months(4)...............................              41
Purchase price.............................................        $ 24,870
</TABLE>

---------------
(1) Includes all direct property and real estate tax expenses. Does not include
    any allocation of indirect expense.

(2) Indirect operating expense includes certain shared property costs such as
    bank fees, district and corporate management, purchasing, national contracts
    personnel and marketing, as well as certain overhead costs allocated to
    property operations such as business information technology, legal services,
    human resources and accounting. Does not include internal real estate
    acquisition cost or abandoned development expense. Indirect operating
    expense is allocated to stores based on number of months in operation during
    the period.

(3) Average annual rent per square foot is calculated by dividing actual rents
    collected by the average number of square feet occupied during the period.

(4) Represents the sum of the number of months we operated each property during
    the year.

     During 2000, we purchased seven storage centers totaling 368,000 net
rentable square feet for a total cost of $24.9 million (including the cost
associated with the related non-competition agreements). One of these properties
is located in California and six are located in Texas. The 2001 projected yield
on these properties is 11% - 12% (calculated as projected 2001 NOI divided by
purchase price). These projections are based on numerous assumptions and actual
results may vary due to the factors discussed in the OVERVIEW. For a discussion
of purchases of partnership units, see INVESTING TRANSACTIONS.

     Additionally, we have an agreement with a California developer under which
it purchases sites in Southern California and constructs storage centers on them
according to our specifications. Upon completion of the rent up period, the
storage centers are purchased by a joint venture in which we owned 77.3% as of
December 31, 2000. Prior to such purchase, we have no ownership in the
properties and as such, they are not included in any discussions of operating
results under SEGMENT PERFORMANCE. The developer's interest in the corporation
is based upon a predetermined formula and the current value of each property at
the time of purchase. During the fourth quarter of 1999, the joint venture
purchased one of the completed storage centers for $3.1 million and during the
second quarter of 2000 the joint venture purchased one additional storage

                                        27
<PAGE>   29

center for $11.0 million. At December 31, 2000, this developer had two
properties under construction in connection with this agreement, land purchased
pending construction for one property and two completed stores in rent up. At
December 31, 2000, we had guaranteed $22.4 million in outstanding debt for five
properties related to this agreement and may guarantee additional amounts as
future properties are developed.

                          RESULTS OF 1999 ACQUISITIONS

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                              --------------------------------------------
                                                                  2000            1999          % CHANGE
                                                              ------------    ------------    ------------
                                                              (DOLLARS IN THOUSANDS, EXCEPT AVERAGE RENT)
<S>                                                           <C>             <C>             <C>
Rental revenue..............................................    $  2,116        $    774           173%
Direct operating and real estate tax expense(1).............         760             263           189%
                                                                --------        --------
NOI.........................................................       1,356             511           165%
Leasehold expense...........................................
Indirect operating expense(2)...............................         197              67           194%
                                                                --------        --------
NOI after indirect and leasehold expense....................    $  1,159        $    444           161%
                                                                ========        ========
Avg. annual rent per sq. ft.(3).............................    $  11.72        $  10.36
Avg. sq. ft. occupancy......................................          82%             80%
Total net rentable sq. ft...................................     209,000         209,000
Number of properties........................................           5               5
Number of property-months(4)................................          60              24
Purchase price..............................................                    $ 13,251
</TABLE>

---------------
(1) Includes all direct property and real estate tax expenses. Does not include
    any allocation of indirect expenses.

(2) Indirect operating expense includes certain shared property costs such as
    bank fees, district and corporate management, purchasing, national contracts
    personnel and marketing, as well as certain overhead costs allocated to
    property operations such as business information technology, legal services,
    human resources and accounting. Does not include internal real estate
    acquisition cost or abandoned development expense. Indirect operating
    expense is allocated to stores based on number of months in operation during
    the period.

(3) Average annual rent per square foot is calculated by dividing actual rents
    collected by the average number of square feet occupied during the period.

(4) Represents the sum of the number of months we operated each property during
    the year.

                                        28
<PAGE>   30

     During 1999, we purchased five storage centers totaling 209,000 net
rentable square feet for a total cost of $13.3 million (including the cost
associated with the related non-competition agreements). These properties are
located in Arizona, California, Florida, Texas and Washington.

                          RESULTS OF 1998 ACQUISITIONS

<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31,        YEAR ENDED DECEMBER 31,
                                         ----------------------------   ----------------------------
                                                                 %                              %
                                           2000       1999     CHANGE     1999       1998     CHANGE
                                         --------   --------   ------   --------   --------   ------
                                                 (DOLLARS IN THOUSANDS, EXCEPT AVERAGE RENT)
<S>                                      <C>        <C>        <C>      <C>        <C>        <C>
Rental revenue.........................  $  3,869   $  3,560    8.7%    $  3,560   $  1,552    129%
Direct operating and real estate tax
  expense(1)...........................     1,344      1,237    8.6%       1,237        587    111%
                                         --------   --------            --------   --------
NOI....................................     2,525      2,323    8.7%       2,323        965    141%
Leasehold expense
Indirect operating expense(2)..........       310        267     16%         262        158     66%
                                         --------   --------            --------   --------
NOI after indirect and leasehold
  expense..............................  $  2,215   $  2,056    7.7%    $  2,061   $    807    155%
                                         ========   ========            ========   ========
Avg. annual rent per sq. ft.(3)........  $   9.45   $   9.10            $   9.10   $   8.40
Avg. sq. ft. occupancy.................        81%        83%                 83%        91%
Total net rentable sq. ft..............   467,000    467,000             467,000    347,000
Number of properties(4)................         8          8                   8          7
Number of property-months(5)...........        96         96                  96         53
Purchase price.........................                                            $ 24,908
</TABLE>

---------------
(1) Includes all direct property and real estate tax expenses. Does not include
    any allocation of indirect expense.

(2) Indirect operating expense includes certain shared property costs such as
    bank fees, district and corporate management, purchasing, national contracts
    personnel and marketing, as well as certain overhead costs allocated to
    property operations such as business information technology, legal services,
    human resources and accounting. Does not include internal real estate
    acquisition cost or abandoned development expense. Indirect operating
    expense is allocated to stores based on number of months in operation during
    the period.

(3) Average annual rent per square foot is calculated by dividing actual rents
    collected by the average number of square feet occupied during the period.

(4) The California property was purchased on December 22, 1998 and therefore had
    no material impact on our operations and has been excluded from the 1998
    data. The inclusion of this property in 1999, as well as build outs on two
    properties, represents the increase in total net rentable square feet over
    1998.

(5) Represents the sum of the number of months we operated each property during
    the year.

     During 1998, we purchased seven storage centers totaling 426,000 net
rentable square feet for a total cost of $23.8 million (including the cost
associated with the related non-competition agreements). We also acquired a
leasehold in an existing self storage center containing 41,000 net rentable
square feet for $1.2 million. These acquisitions were located as follows: one in
Arizona, one in California, one in Indiana, two in Tennessee and three in Texas.
The operating results of these 1998 acquisitions are included in Same Stores
Results for 2000.

  Domestic Development

     Our long-term growth plan includes significant development of new storage
centers in markets in which we currently operate. This is primarily due to our
focus on maintaining high quality standards and consistent building design to
develop brand awareness. Implementation of this development strategy is expected
to continue at least through 2001. Each development project progresses through a
series of review processes from initial review, through due diligence, final
review and finally to the land purchase and construction. We believe

                                        29
<PAGE>   31

the success of this strategy has been greatly enhanced as a result of the
substantial experience we, or our predecessors, have gained through the
development of over one third of our properties.

     We, or our joint venture partners, opened 21 domestic storage centers in
2000, and, when all phases are complete, these 21 projects will total
approximately 1.3 million net rentable square feet with an estimated total cost
of $98.3 million. Three of these storage centers were developed through our
Tennessee and Florida joint ventures and 18 were contributed to CCP/Shurgard
Venture, LLC (CCP/Shurgard). (For a further discussion of CCP/Shurgard, see
DEVELOPMENT FINANCING ARRANGEMENTS).

     We, or our joint venture partners, opened 21 storage centers in 1999,
representing approximately 1.5 million net rentable square feet. Of the 21
stores opened, six were developed through our Florida joint ventures, three were
contributed to CCP/Shurgard and nine were contributed to Shurgard/Fremont
Partners II (SFPII). These 1999 developments together generated $4.7 million in
NOI for the 12 months of 2000. For the month of December 2000, these
developments had NOI of $301,000, which represents 18% of projected monthly NOI
at maturity, and averaged 67% occupancy. The operating results of these 1999
developments are included in the New Store Results in the previous section. The
2001 projected yield on these properties is 12% - 13% (calculated as projected
NOI at stabilization divided by invested cost).

     Of the 23 storage centers opened in 1998, representing approximately 1.6
million net rentable square feet, three were developed through our Tennessee and
Florida joint ventures, and 16 were contributed to either Shurgard/Fremont
Partners I (SFPI) or SFPII, joint ventures. For the month of December 2000,
these developments had NOI of $754,000 and averaged 78% occupancy. These 1998
developments together generated $8.1 million in NOI for the 12 months of 2000.
The operating results of these 1998 developments are included in either the SAME
STORE RESULTS or the NEW STORE RESULTS in the previous section depending on
whether they have met the criteria for inclusion in Same Stores. Total cost to
develop these properties was $113.0 million.

     We can give no assurance that these projections regarding the 1999
development projects will occur. Actual occupancy levels and rates could be
lower if we experience competition from other self storage properties and other
storage alternatives in close proximity to our developments. Actual yields may
also be lower if major expenses such as property taxes, labor and marketing,
among others, increase more than projected.

     In addition to the above completed developments, six storage centers were
under construction (one of these is being developed in Florida through an
unconsolidated joint venture) as of December 31, 2000. As a general rule, to
limit the risks of development, we typically do not purchase land until the
entitlement process is complete. Construction usually begins shortly after we
obtain title to the land. The following table summarizes domestic development
projects in progress at December 31, 2000.

<TABLE>
<CAPTION>
                                                                                 TOTAL COST TO
                                                 NUMBER         ESTIMATED         DATE AS OF
                                                   OF        COMPLETED COST      DECEMBER 31,
                                                PROJECTS    OF PROJECTS(1)(2)       2000(1)
                                                --------    -----------------    -------------
<S>                                             <C>         <C>                  <C>
CONSOLIDATED DEVELOPMENTS:
Construction in progress......................     5             $23.0m             $13.1m
Land purchased pending construction...........     2             $ 7.9m             $ 2.2m
UNCONSOLIDATED DEVELOPMENTS:
Construction in progress......................     1             $ 5.1m             $ 3.2m
EXPANSION OF EXISTING PROPERTIES:
Opened during 2000............................     1             $ 1.9m             $ 1.9m
Construction in progress......................     1             $ 1.2m             $ 1.0m
</TABLE>

---------------
(1) Table includes 100% of the costs of projects regardless of our ownership
    percentage

(2) The actual completed cost of projects could vary due to delays during
    construction caused by weather, unforeseen site conditions and problems with
    subcontractors or contractors. For a further discussion of events that could
    impact this estimate, see the discussion below.

                                        30
<PAGE>   32

     We believe that a long-term strategy of growth through development will
result in superior returns over the long-term. A development strategy, however,
creates a short-term dilution of earnings during the rent-up phase of a project.
Although certain costs, including real estate taxes and interest, are
capitalized during the construction period, NOI does not generally exceed
interest expense on development projects for at least the first year of
operations. This rent-up deficit for our pro-rata interest in developments was
$1.6 million (NOI of $3.0 million, less $4.6 million of interest assuming 8.5%
on invested capital) for 2000 compared to $1.9 million in 1999 and $1.5 million
in 1998. The rent-up deficit for a typical $4.0 million project, assuming it
takes an average of 24 months to rent up and is financed with debt at 8.5%, is
estimated to be approximately $332,000 in the first year of operations. The
total cost of a development varies significantly based on the cost of the land.
The cost of some future projects may be higher than the typical project
described above based on the markets in which we develop those future sites. The
amount of rent-up deficit and the timing of positive cash flow cannot be
predicted with certainty as it is based on a number of factors including length
of rent up, ability to collect stated rental rates on leased units, actual
operating expenses incurred, and the time of year a property opens. Another
result of this rent-up period is a decrease in our operating margins as new
property expenses are added, but the related revenue stream does not hit
stabilized levels until occupancy reaches 85%.

     We anticipate opening 15-20 domestic developments in 2001, including the
eight listed in the table above. The actual number of projects could be reduced
by zoning and permitting delays outside of our control, increased competition
for sites, delays during construction caused by, among other things, weather,
unforeseen site conditions, labor shortages, personnel turnover, scheduling
problems with contractors, subcontractors or suppliers, or resource constraints.

     In addition to utilizing the experience of our in-house real estate
development personnel, in the past few years we have begun establishing
relationships with quality storage operators outside our current markets. We
believe that the most efficient way to operate storage centers is to saturate a
market to create brand awareness and allow certain economies of scale in
operation processes and advertisement. These relationships create an instant
presence in a new market as affiliate owned centers begin using the "Shurgard"
name. In exchange for the use of our name, computer systems and general
operations support services, the affiliate pays us an affiliation fee.
Additionally, these affiliation agreements provide the framework for the joint
development of additional storage centers, allowing us to take advantage of the
local operator's market knowledge. We have signed three such affiliation
agreements, which include (1) an agreement with a Tennessee developer that
opened three jointly developed centers in 1995, one in 1996, two in 1997, two in
1998 and one in 2000 (2) an agreement with a Florida developer that opened five
jointly developed centers in 1997, one in 1998, six in 1999, two in 2000, and
had one under construction in 2000 and (3) an agreement with a San Antonio
developer to develop properties in Oklahoma and Texas. As of December 31, 2000,
one property was under construction in connection with this third affiliation
agreement.

DEVELOPMENT FINANCING ARRANGEMENTS

     In order to expand our development capacity, broaden our access to capital
and minimize the effect of the rent-up deficit on funds from operations (FFO,
see FUNDS FROM OPERATIONS), we have pursued alternative financing options. In
connection with this initiative, we have formed three joint ventures, SFPI in
May 1998, SFPII in March 1999, and CCP/Shurgard in May 2000 and in 2001, we
executed an agreement to enter into up to $250 million of tax retention
operating leases.

     Under the joint venture agreements, we constructed storage centers and,
upon completion, contributed those storage centers to the joint ventures. At the
time of contribution, we were reimbursed to the extent our incurred costs
exceeded our pro rata portion of required equity. We either retain an option to
purchase the storage centers from the joint venture or the joint venture has a
right to put those storage centers to us at a future date based on annualized
NOI, less management fees, divided by 9.25%. As a result of this option or put,
we have continuing involvement with these joint ventures and do not recognize
the contribution of the storage centers as a transfer in ownership under
accounting principles generally accepted in the United States of America. As all
the joint venture's real estate assets are subject to our continuing
involvement, we consolidate these entities in our financial statements.

                                        31
<PAGE>   33

     Under a Management Services Agreement between Shurgard and each of these
joint ventures, Shurgard acts as property manager for the properties owned by
the joint venture, and receives a monthly management fee equal to the greater of
$2,000 per property or 5% of gross revenues, as well as certain other fees
relating to accounting and administrative services that Shurgard will perform on
behalf of the joint venture.

<TABLE>
<CAPTION>
                                         SFPI             SFP II         CCP/SHURGARD
                                      -----------    ----------------    ------------
                                                  (DOLLARS IN THOUSANDS)
<S>                                   <C>            <C>                 <C>
                                      At 12/31/00      At 12/31/00       At 12/31/00
Total equity contributions..........    $20,083          $26,471           $40,267
Total debt..........................    $45,050          $62,266           $60,400
Properties contributed at December                          16               21
  31, 2000..........................      15
Our ownership percentage............      10%              10%               20%
Purchase option/put exercise                         December 2001 to     Beginning
  period............................   Exercised       October 2003       May 2002
</TABLE>

     In 2001, we executed an agreement to enter into up to $250 million worth of
tax retention operating leases. We anticipate that this arrangement will be able
to fund most of our development pipeline for the next two years. Under the lease
and related agreements, we will function as construction agent and tenant. At
the end of the lease term, we may acquire a property or it may be sold to a
third party, or the lease may be extended by mutual agreement; we have the
option to acquire a property at or before the end of its lease term. If we elect
to purchase the property, the purchase price will be equal to the total property
cost plus interest carry and a fixed equity return to the Landlord at a combined
rate of approximately 150 basis points over LIBOR. Prior to such purchase, we
will have no ownership in these properties.

EUROPEAN OPERATIONS

     On October 12, 1999, we along with the other existing investors of SSC
Benelux & Co., SCA, (Benelux SCA) entered into a European joint venture
agreement with certain unaffiliated third party investors. The new investors
have committed 122 million Euro to Benelux SCA, in exchange for a 43% interest
in this company. Concurrently, Benelux SCA established a 140 million Euro credit
facility with a commercial bank group. On February 27, 2001 the investors in
Benelux SCA committed to invest an additional 28 million Euro in Benelux SCA.
Concurrent with this undertaking the existing Euro credit facility was increased
from 140 million Euro to 215 million Euro. These additional financial resources
will be used to execute the European expansion plan and are sufficient to fund
projected development openings through the end of 2001 (See European
Development). In order to fund new developments beyond 2001, our European
partners are currently evaluating various capital alternatives.

     Under the terms of the joint venture agreement, the 122 million Euro in
equity capital will be funded through periodic contributions until December 31,
2001, the 28 million Euro may be funded through periodic contributions until
December 31, 2002. Additionally, the terms of the agreement provide for an earn
out that allows the original Benelux SCA shareholders to receive up to 10
million Euro in additional equity based on exceeding certain development targets
prior to December 31, 2001. Benelux SCA is managed by a board of managers, which
consists of all the parties of the transaction. Substantially all major
decisions of the board require agreement of at least two thirds of the parties.
As a general partner, we are contingently liable for $135 million of this joint
venture's debt.

     We now own 7.57% of Benelux SCA, but continue to have significant influence
over operations through our control of half of the seats on the board of
managers. From July 1998 until October 1999, we owned 13.06% and during the
first half of 1998, we owned 12.5%. Approximately two thirds of our interest in
Benelux SCA is owned through a joint venture with two unaffiliated entities. We,
together with one of our partners, have the right to increase our participation
in the joint venture through an equity contribution. Our portion of operating
losses, based on the percentages described above, before the cumulative effect
of a change in accounting principle for European operations was $1.4 million,
$1.1 million (our portion of the cumulative effect of a change in accounting
principle was $268,000) and $412,000 for the years ended December 31,

                                        32
<PAGE>   34

2000, 1999 and 1998, respectively. Our carrying value of this investment was
($2.4) million, ($1.0) million and $0.3 million as of December 31, 2000, 1999
and 1998, respectively.

     Our pro rata portion of FFO losses was $855,000, $587,000 and $185,000 for
the years ended December 31, 2000, 1999 and 1998, respectively. In order to take
advantage of the investment opportunity, Benelux SCA is accelerating its
expansion rate in Europe. Although the operations of existing stores are
improving, this expansion will produce losses for the next three to four years
as financing costs, start up losses from the additional stores and overhead
costs necessary to carry out current expansion plans will continue to exceed
operating income. The results of the European operations are consolidated in our
financial statements for the year ended December 31, 1998. Beginning in 1999,
the results are no longer consolidated due to the October 1999 transaction
discussed previously, and our remaining interest is accounted for under the
equity method of accounting. The data included in the following discussion and
tables reflect total European operations, not our pro rata percentage.

     As a result of SSCI's investment in Europe, we face certain risks inherent
in international business operations, including currency risks, unexpected
changes in regulatory requirements, longer accounts receivable payment cycles,
difficulties in staffing and managing international operations, potentially
adverse tax burdens, obstacles to the repatriation of earnings and cash, and the
burdens of complying with different permitting standards and a wide variety of
foreign laws.

  European Business Summary

     Since 1992, Benelux SCA has tested the self storage product on local
consumers and has tailored its product to meet the needs of European consumers.
European consumers tend to live in more crowded population densities and smaller
living spaces that make self storage an attractive option. Our partners have
learned that government regulations, cultural differences, building practices
and marketing techniques are all factors to be considered in each country.
Through experience, they have built the infrastructure necessary to support an
accelerated expansion program. As of December 31, 2000, Benelux SCA had 47
storage centers operating in five countries. Today, Benelux SCA employs over 225
employees including a senior management team with substantial local development,
finance, operations and marketing experience. The following tables include
certain financial and operating information that illustrates the performance and
growth of Benelux SCA.

                        SUMMARY OF EUROPEAN PROPERTIES:

<TABLE>
<CAPTION>
                                                                                                   DECEMBER 31,
                               NUMBER OF     TOTAL NET    ESTIMATED       DECEMBER 31, 2000            2000
                                 OPEN         RENTABLE      TOTAL     --------------------------      % RATE
                             PROPERTIES(5)   SQ. FT.(1)    COST(1)    OCCUPANCY(2)   RATES(2)(3)   INCREASES(4)
                             -------------   ----------   ---------   ------------   -----------   ------------
<S>                          <C>             <C>          <C>         <C>            <C>           <C>
COUNTRY
  Belgium..................       14           855,000     $ 48.0m        72.7%        $11.50           2.5%
  France...................       11           585,000     $ 40.0m        81.8%        $20.08           3.7%
  Netherlands..............        6           345,000     $ 26.0m        56.1%        $14.68          (9.1)%(6)
  Sweden...................       11           660,000     $ 46.0m        65.5%        $16.33           4.5%
  United Kingdom...........        5           273,000     $ 36.6m        39.4%        $23.84          (1.8)%(6)
                                  --         ---------     -------
                                  47         2,718,000     $196.6m
</TABLE>

---------------
(1) Total net rentable square feet and estimated total cost when all phases are
    complete.

(2) Includes stores that have been operating more than 12 months.

(3) Average annual rent per square foot is calculated by dividing actual rent
    collected by the average number of square feet occupied during the period.

(4) In the respective local currencies.

(5) Six of these stores opened in late December and will experience their first
    accounting month in January.

                                        33
<PAGE>   35

(6) The year over year decrease in the average rental rate is due to significant
    fluctuations in the occupied unit mix. Stores opened in December 1999 rented
    a very limited unit mix that overstated the average rental rate for that
    month as the rate per square foot is higher on smaller units.

                     CERTAIN FINANCIAL DATA OF BENELUX SCA

<TABLE>
<CAPTION>
                                                        2000       1999       1998
                                                       -------    -------    ------
<S>                                                    <C>        <C>        <C>
Total Revenue........................................  $ 14.4m    $  9.2m    $ 4.3m
Total Assets.........................................  $251.9m    $168.9m    $90.7m
Total Bank Debt(1)...................................  $193.3m    $133.8m    $70.5m
</TABLE>

---------------
(1) Includes unsecured debt between Benelux SCA and affiliate of $88.9, $93.5
    and $25.8 million as of December 31, 2000, 1999 and 1998, respectively.

     The self storage industry is not well established in much of Europe and we
believe this presents Benelux SCA with the opportunity to become a dominant
player throughout Western Europe. Although we are seeing other industry players
entering the European markets, we believe the supply being added to the market
still leaves significant opportunity when compared to the overall size of the
market. Benelux SCA and its subsidiaries have established expansion plans that
focus in four markets: the Benelux region (which includes Belgium, Luxembourg
and the Netherlands), France, Scandinavia (including Sweden and Denmark) and the
UK. The following sections discuss in detail the performance of existing stores
as well as the progress in carrying out these expansion plans.

  European Same Store Operations

     The definition for European Same Stores includes existing stores acquired
prior to January 1 of the previous year as well as developed properties that
have been operating for a full two years as of January 1 of the current year.
The following table summarizes Same Store operating performance as defined at
December 31, 2000 and 1999.

<TABLE>
<CAPTION>
                                        YEAR ENDED DECEMBER 31,(1)       YEAR ENDED DECEMBER 31,(2)
                                      ------------------------------   ------------------------------
                                        2000       1999     % CHANGE     1999       1998     % CHANGE
                                      --------   --------   --------   --------   --------   --------
                                                (DOLLARS IN THOUSANDS, EXCEPT AVERAGE RENT)
<S>                                   <C>        <C>        <C>        <C>        <C>        <C>
Rental revenue......................  $  5,866   $  4,954      18%     $  5,660   $  4,160      36%
Direct operating and real estate tax
  expense(3)........................     1,801      1,741       3%        1,946      2,128      (9)%
                                      --------   --------              --------   --------
NOI.................................     4,065      3,213      27%        3,714      2,032      83%
Leasehold expense...................       492        429      15%          496        353      40%
Indirect operating expense(4).......     1,667      2,472     (33)%       2,860      2,337      22%
                                      --------   --------              --------   --------
NOI after indirect and leasehold
  expense...........................  $  1,906   $    312     511%     $    358   $   (658)    154%
                                      ========   ========              ========   ========
Avg. annual rent per sq. ft.(5).....  $  13.10   $  12.00       9%     $  14.39   $  12.35      16%
Avg. sq. ft. occupancy..............        88%        80%                   83%        70%
Total net rentable sq. ft...........   492,000    492,000               492,000    492,000
# of properties.....................         9          9                     9          9
</TABLE>

---------------
(1) Amounts have been translated from local currencies using the average
    exchange rate for 2000.

(2) Amounts have been translated from local currencies using the average
    exchange rate for 1999.

(3) Includes all direct property and real estate tax expenses. Does not include
    any allocation of indirect expense.

(4) Indirect operating expense includes certain shared property costs such as
    bank fees, district and corporate management, purchasing, national contracts
    personnel and marketing, as well as certain overhead costs allocated to
    property operations such as business information technology, legal services,
    human resources,

                                        34
<PAGE>   36

    and accounting. Does not include internal real estate acquisition cost or
    abandoned development expense. Indirect operating expense is allocated to
    stores based on number of months in operation during the period.

(5) Average annual rent per square foot is calculated by dividing actual rent
    collected by the average number of square feet occupied during the period.

     In 2000, our European partners increased rental rates of Same Stores an
average of 9% while occupancy rose eight percentage points. These rate
increases, as well as increases in occupancy, resulted in the 18% revenue
increase from 1999 to 2000. Increases in revenue combined with maintaining
expenses at a 3% growth resulted in the 27% Same Store NOI growth over 1999.
These nine same stores had an occupancy of 90% at the end of December 2000.
Decreases in indirect operating expense are the result of spreading certain
fixed costs over more stores as our European partners expand.

     In 1999, our European partners increased rental rates of Same Stores an
average of 16%. These rate increases, as well as increases in occupancy,
resulted in the 36% revenue increase from 1998 to 1999. Property operating
expenses decreased 9% in 1999 over 1998 due to improved expense controls,
decreases in repair and maintenance expenses due to renegotiation of maintenance
contracts, and improved operating efficiencies resulting from economies of
scale.

  European Development

     Benelux SCA's strategy is to quickly dominate markets they enter by
building a network of high quality storage centers that can be managed with
economies of scale. There are few storage centers available for acquisition, so
our European joint venture has focused on a strategy of in-house development.
Through this strategy, they are able to maintain high quality standards and
consistent building design to develop brand and product awareness. Each
development project progresses through a series of review processes from initial
review, through due diligence, final review and finally to the land purchase and
construction. We believe the success of this strategy has been greatly enhanced
as a result of the substantial experience gained through the development of over
90% of the European properties. Benelux SCA opened 19 storage centers in 2000,
12 in 1999 and seven in 1998. The following table summarizes European
developments by country in U.S. dollars:

<TABLE>
<CAPTION>
                                                                                TOTAL NET
                                                                             RENTABLE SQ. FT.
                                              NUMBER OF       ESTIMATED      WHEN ALL PHASES
                                              PROPERTIES    TOTAL COST(1)      ARE COMPLETE
                                              ----------    -------------    ----------------
<S>                                           <C>           <C>              <C>
OPENED IN 2000
  France....................................      7            $29.9m            407,000
  United Kingdom............................      2            $15.8m             95,000
  Netherlands...............................      5            $20.4m            284,000
  Belgium...................................      3            $10.9m            186,000
  Sweden....................................      2            $ 9.4m            123,000
OPENED IN 1999
  Belgium...................................      2            $ 5.5m            137,000
  France....................................      1            $ 3.4m             54,000
  Netherlands...............................      1            $ 5.6m             61,000
  Sweden....................................      5            $20.6m            282,000
  United Kingdom............................      3            $20.7m            179,000
OPENED IN 1998
  Belgium...................................      3            $10.1m            185,000
  Sweden....................................      4            $15.9m            260,000
</TABLE>

---------------
(1) The actual completed cost of these projects could vary due to delays during
    construction caused by weather, unforeseen site conditions and problems with
    subcontractors or contractors. For a further discussion of events that could
    impact this estimate, see DOMESTIC DEVELOPMENT.

                                        35
<PAGE>   37

     During 2000, Benelux SCA opened 19 storage centers with an estimated total
cost of $86.4 million and net rentable square feet of 1.1 million when all
phases are complete. Six of these stores opened in late December and will
experience their first full month of operations in January 2001. After an
average of five months of operation, the remaining 13 openings of this year have
an average occupancy of 33% and generated $1.2 million in net operating losses
in 2000.

     Of the 12 storage centers opened in 1999, 11 opened in the last two months
of the year. These 12 storage centers have an estimated total cost of $55.8
million and net rentable square feet of 713,000 when all phases are complete.
The average occupancy at the end of December 2000 was 48% after an average of 14
months of operations. These storage centers generated $250,000 of NOI for the
year ended December 31, 2000.

     The seven storage centers opened during 1998 had an average occupancy of
70% after an average of 27 months of operations and together generated $2.0
million in NOI for 2000. For the month of December 2000, NOI for these
developments represented 70% of projected monthly NOI at stabilization (as
measured in the relevant local currency).

     The average projected yield on total cost of the storage centers included
in the table above is 13%. The projected yield is based on projected monthly NOI
at stabilization less leasehold expense and an estimate of indirect operating
costs of 6% of revenue. There can be no assurance that this projected yield will
be achieved as many factors affect the performance of the stores. The stores
could fail to reach projected rental rate and occupancy levels if customer
product knowledge and acceptance is slower than anticipated, and if they
experience competition from other self-storage properties and other storage
alternatives. Actual yields may also be lower if major expenses such as property
taxes, labor, and marketing, among others, increase more than projected or if
indirect operating expenses exceed assumed levels.

     In addition to the above completed developments, Benelux SCA currently has
another six storage centers under construction. These developments are located
as follows: two in France, two in the Netherlands, one in Sweden, and one in the
UK. Additionally, it has purchased one Belgian site on which construction has
not yet started. The following table summarizes European development projects in
progress at December 31, 2000:

<TABLE>
<CAPTION>
                                                            ESTIMATED           TOTAL COST TO
                                          NUMBER OF         COMPLETED            DATE AS OF
                                          PROJECTS     COST OF PROJECTS(1)    DECEMBER 31, 2000
                                          ---------    -------------------    -----------------
<S>                                       <C>          <C>                    <C>
NEW DEVELOPMENTS
Construction in Progress
  France................................      2               $9.6m                 $5.1m
  Sweden................................      1               $4.8m                 $1.4m
  Netherlands...........................      2               $8.4m                 $3.2m
  UK....................................      1               $7.1m                 $4.6m

Land purchased pending construction
  Belgium...............................      1               $3.9m                 $1.8m
</TABLE>

---------------
(1) The actual completed cost of projects could vary due to delays during
    construction caused by weather, unforeseen site conditions and problems with
    subcontractors or contractors. For a further discussion of events that could
    impact this estimate, see DOMESTIC DEVELOPMENT.

     In the current state of the European self storage market, we believe that a
strategy of growth through development will result in higher returns over the
long term. However, as discussed earlier, this expansion and development
strategy creates a short-term dilution of earnings during the rent-up phase of a
project. For further discussion, see DOMESTIC DEVELOPMENT.

     We currently anticipate that in 2001, our European partner will open 20 to
30 developments, including the six listed in the table above. The actual number
of projects could be reduced due to zoning and permit delays outside of its
control, increased competition for sites, delays during construction caused by,
among other things, weather, unforeseen site conditions, labor shortages,
personnel turnover, scheduling problems with contractors, subcontractors or
suppliers, or resource constraints.

                                        36
<PAGE>   38

OTHER REAL ESTATE INVESTMENTS

     The following table shows income (loss) from unconsolidated real estate
investments for the years ended December 31, 2000, 1999 and 1998. All income and
loss amounts reflect our pro rata ownership percentage.

                INCOME (LOSS) FROM OTHER REAL ESTATE INVESTMENTS

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                        -----------------------------
                                                         2000       1999       1998
                                                        -------    -------    -------
                                                           (DOLLARS IN THOUSANDS)
<S>                                                     <C>        <C>        <C>
Containerized storage.................................  $(1,842)   $(2,654)   $(3,133)
Unconsolidated joint ventures.........................   (1,668)      (684)      (135)
Participating mortgages...............................    1,659      1,631      1,639
European Operations...................................   (1,569)    (1,595)      (136)
Other partnership investments.........................                            137
                                                        -------    -------    -------
          Total.......................................  $(3,420)   $(3,302)   $(1,628)
                                                        =======    =======    =======
</TABLE>

  Containerized Storage

     Shurgard Storage To Go, Inc. (STG) is operating in five major U.S. markets,
including Seattle, Portland, San Francisco, Atlanta and Chicago. We are
currently in the process of exiting the Chicago market. During 2001, STG intends
to concentrate on maximizing revenue growth through effective marketing and
pricing strategies and optimizing warehouse capacity and logistics. For the year
ended December 31, 2000, STG had an average of 5,161 containers rented with an
average rental rate of $59.76 per container, compared to 5,229 containers rented
for the year ended December 31, 1999, with an average rental rate of $47.02 per
container, and 3,524 containers rented for the year ended December 31, 1998,
with an average rental rate of $56.34 per container.

     At December 31, 2000, our gross investment in STG was $5.0 million. At
December 31, 2000, SSCI owns 95.5% of the nonvoting stock in STG, which is not a
qualified REIT Subsidiary and is subject to corporate level tax. As of December
31, 2000, we had committed to lend up to $13.40 million under unsecured five
year notes to fund negative cash flow during the rent up stage, of which, $12.92
million was outstanding. Subsequent to December 31, 2000, we committed to lend
an additional $500,000. We also currently guarantee $8.7 million in lease
obligations. In 2000, our pro rata percentage of STG losses was $1.8 million,
compared to losses of $2.7 million for the 12 months ended December 1999, which
includes a $92,000 cumulative effect of a change in accounting principle
reflecting the write-off of start-up costs in accordance with SOP 98-5, and $3.1
million for the 12 months ended December 1998. During 2001, we plan to
recapitalize STG by converting substantially all of our existing loan to STG
into equity and acquiring all or substantially all of the voting stock of STG.
As a result of this transaction, we will take control and consolidate STG's
operating results. Additionally, STG will no longer incur interest expense for
the loan and we will no longer receive interest income of approximately
$900,000. Due to continuing improvement in STG operating results, we expect
losses to be reduced to $1.6 million for 2001, including $1.0 million for
depreciation. This projected 2001 loss is based on several assumptions,
including meeting the projected number of container rentals and lengthening the
average customer rental period. There is, of course, no assurance that this
expectation will be met as numerous factors affect profitability. These factors
include, among other things, the possible inability to attract new customers,
the expense of sales and marketing efforts, the potential of new competition
(both containerized and other forms of storage) entering our markets and the
possibility that customers may not be willing to pay the rates projected.
Subsequent to December 31, 2000, we purchased the remaining non-voting shares of
STG increasing our ownership percentage from 90.68% to 95.0%.

  Unconsolidated Joint Ventures

     Pursuant to our affiliation agreements with two storage operators, we have
entered into 24 joint ventures in which our ownership interests range from 50%
to 90%, and over which we do not exercise effective control because all major
decisions require the agreement of both parties. As of December 31, 2000, we had
invested a

                                        37
<PAGE>   39

total of $25.6 million in these joint ventures. Our pro rata portion of joint
venture losses totaled $1.7 million ($522,000 of income before depreciation and
amortization) for the 12 months ended December 31, 2000, as losses from new
properties added during the previous and current year offset earnings from
stabilized properties. Our pro rata portion of losses for these joint ventures
totaled $684,000 ($1.0 million of income before depreciation and amortization)
and $135,000 ($1.2 million of income before depreciation and amortization) for
1999 and 1998, respectively. Three new properties were added in 2000 and six new
properties were added in both 1999 and 1998. We have guaranteed certain joint
venture loans totaling $25.5 million. Performance related to stores developed
through these joint ventures is included in the appropriate tables and section
discussions (SAME STORES, Domestic Acquisitions or Domestic Development) under
SEGMENT PERFORMANCE.

  Participating Mortgages

     We have $13.1 million invested in three participating mortgage loans. All
three mortgages are non-recourse to the borrower, bear interest at 8% per annum
and mature in January 2005. These loans are secured by real estate, including
four storage centers and office/warehouse space. We receive contingent interest
payments from the mortgaged properties equal to 50% of both operating cash flow
and distributions from the gain on sale of real property, as defined. We have
options to purchase the properties at established prices, which are exercisable
from January 2000 until January 2005.

  Other

     Income from other partnership investments for 1998 represents income from
investments in Shurgard Institutional Fund LP. Shurgard Institutional Fund LP
was consolidated for financial statement purposes beginning September 1998. For
a further discussion of investments in partnership units, see INVESTING
TRANSACTIONS.

CONSOLIDATED STATEMENT OF INCOME

     Net income grew 13.3% from 1998 to 1999 and 3.9% from 1999 to 2000.
Comparability of individual line items is effected by the consolidation of
Benelux SCA in 1998 and the use of equity accounting for this investment during
1999 and 2000. For a complete discussion of our investment in Benelux SCA, see
EUROPEAN OPERATIONS.

     Excluding the impact of Benelux SCA in 1998, rental income rose 13.1% from
1998 to 1999 and 12.8% from 1999 to 2000. Domestic operating expense rose 10.6%
from 1998 to 1999 and 16.5% from 1999 to 2000, while domestic real estate tax
expense rose 20.8% from 1998 to 1999 and 13.7% from 1999 to 2000. Included in
operating expenses are internal acquisition costs and development expenses
related to discontinued efforts of $376,000, $461,000 and $926,000 for 1998,
1999 and 2000, respectively. All other amounts are included in NOI after
indirect operating and leasehold expenses discussed in SAME STORES and NEW
STORES.

     Excluding the effect of Benelux SCA on 1998, depreciation and amortization
increased 15.6% from 1998 to 1999 and 10.9% from 1999 to 2000. This increase
reflects the increased number of stores included in our consolidated financial
statements over the same period of time.

     Domestic general and administrative expenses rose 1% from 1998 to 1999 and
17.1% from 1999 to 2000. Increases include higher personnel and information
technology expenses which are primarily related to our growth. Over the same
period, these expenses decreased as a percentage of rental revenue from 2.7% in
1998 to 2.5% in 2000.

     Property management revenue decreased $482,000 from 1998 to 1999 and rose
$477,000 from 1999 to 2000. The decrease from 1998 to 1999 reflects the
consolidation of Shurgard Institutional Fund LP whose management fees were
eliminated upon consolidation after 1998. The increase from 1999 to 2000
reflects increases in management fees and cost reimbursements. Loss from other
real estate investments is discussed in the section OTHER REAL ESTATE
INVESTMENTS.

                                        38
<PAGE>   40

     Interest and other income rose $1.4 million from 1998 to 1999 and an
additional $1 million from 1999 to 2000. Increases relate to the amortization of
income received for a non-compete agreement signed in late 1999 and interest
income earned on our loan to STG (see discussion under OTHER REAL ESTATE
INVESTMENTS).

     Domestic interest expense increased $10.3 million from 1998 to 2000 due to
an increase in the outstanding debt balance. This rise represents borrowings to
purchase partnership units and to fund development of new storage centers and
acquisitions. Additionally, during 2000, we capitalized $8.6 million in interest
related to the construction of domestic storage centers while $9.0 million and
$6.6 million were capitalized in 1999 and 1998, respectively. Included in 1998
is interest expense related to Benelux SCA of $1.8 million, net of capitalized
interest of $1.0 million. Amortization of loan costs of $1.0 million, $1.2
million and $1.1 million is included in amortization expense for 2000, 1999 and
1998, respectively.

     Minority interest decreased $239,000 from 1998 to 1999 and increased
$882,000 from 1999 to 2000. The change from 1998 to 1999 included a $2.8 million
decrease due to no longer consolidating Benelux SCA. The remaining increase each
year relates primarily to the operations of the newly formed SFPI and SFPII
partnerships, which are consolidated due to our continuing interest in their
storage centers, but in which we only own at 10% interest.

RECENT ACCOUNTING PRONOUNCEMENTS

     In accordance with Emerging Issues Task Force 97-11 (EITF 97-11),
"Accounting for Internal Costs Related to Real Estate Property Acquisitions",
SSCI has expensed all internal pre-acquisition costs beginning in April 1998.

     On April 3, 1998, the AICPA Accounting Standards Executive Committee
(AcSEC) issued Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of
Start-Up Activities", which was effective for fiscal years beginning after
December 15, 1998. SOP 98-5 requires start-up activities and organization
expenses to be expensed as incurred. We implemented SOP 98-5 in the first
quarter of 1999. This initial application for consolidated entities is reported
as a cumulative effect of a change in accounting principle.

     Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," is effective for all fiscal
years beginning after June 15, 2000. SFAS 133, as amended, establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
Under SFAS 133, certain contracts that were not formerly considered derivatives
may now meet the definition of a derivative. We adopted SFAS 133 effective
January 1, 2001. We use interest rate swaps to fix a portion of our variable
rate debt. We do not expect the adoption of SFAS 133 to have a significant
impact on our financial position, results of operations, or cash flows.

     Although we expect the derivative instruments we currently use to hedge to
continue to be highly effective, if they are determined not to be highly
effective in the future, or if we use derivative instruments that do not meet
the stringent requirements for hedge accounting under SFAS 133, our future
earnings could reflect greater volatility. Additionally, if a cash flow hedge is
discontinued because the forecasted transaction is no longer expected to occur,
any gain or loss in accumulated comprehensive income associated with the hedged
transaction will be immediately recognized in net income.

                                        39
<PAGE>   41

FUNDS FROM OPERATIONS

     Funds from operations (FFO), pursuant to the National Association of Real
Estate Investment Trusts' (NAREIT) October 1999, White Paper on Funds from
Operations, is defined as net income, calculated in accordance with accounting
principles generally accepted in the United States of America (GAAP) including
non-recurring events, except for those defined as "extraordinary items" under
GAAP and gains and losses from sales of depreciable operating property, plus
depreciation of real estate assets and amortization of intangible assets
exclusive of deferred financing costs less dividends paid to preferred
stockholders. Contributions to FFO from unconsolidated entities in which the
reporting entity holds an active interest are to be reflected in FFO on the same
basis. We believe FFO is a meaningful disclosure as a supplement to net income
because net income implicitly assumes that the value of assets diminish
predictably over time while we believe that real estate values have historically
risen or fallen with market conditions. FFO is not a substitute for net cash
provided by operating activities or net income computed in accordance with GAAP,
nor should it be considered an alternative indication of our operating
performance or liquidity. In addition, FFO is not comparable to "funds from
operations" reported by other REITs that do not define funds from operations in
accordance with the NAREIT definition. Our 1999 and 1998 financial information
has been restated to reflect the new definition. The following table sets forth
the calculation of FFO in accordance with the NAREIT definition (in thousands):

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                        -----------------------------
                                                         2000       1999       1998
                                                        -------    -------    -------
<S>                                                     <C>        <C>        <C>
Net income............................................  $52,632    $50,673    $44,734
Cumulative effect of change in accounting principle...               1,098
Adjustment to cumulative effect of a change in
  accounting principle for unconsolidated joint
  ventures............................................                 447
Gain on sale of operating real estate.................                (370)      (216)
Preferred dividend....................................   (8,750)    (8,750)    (4,690)
Depreciation/amortization.............................   40,893     36,858     33,644
Adjustment to depreciation/amortization for
  unconsolidated joint ventures and subsidiaries......   (1,615)       (59)      (252)
Deferred financing costs..............................   (1,025)    (1,209)    (1,120)
                                                        -------    -------    -------
FFO...................................................  $82,135    $78,688    $72,100
                                                        =======    =======    =======
</TABLE>

     FFO for 2000 increased $3.4 million over 1999 FFO, which had risen $6.6
million over 1998. As previously discussed, this growth rate reflects the
improved performance of the original portfolio of properties as well as the
addition of properties over the past three years through acquisitions and
developments. In 2001, assuming we grow Same Store NOI after indirect operating
and leasehold expense at 7 1/2 to 8%, we continue to finance development
primarily through third party equity and STG meets our expectation, we expect
FFO to increase 7 - 8%. This expectation regarding FFO growth constitutes a
forward-looking statement within the meaning of the Private Securities
Litigation Reform Act and is based on several assumptions. If any of these
assumptions are not satisfied or prove to be incorrect, actual results could
differ materially from those indicated in the statement. The risks and
uncertainties that may cause these assumptions and this forward-looking
statement to prove to be incorrect include the risks that implementation of the
business plan, including marketing and sales initiatives, will not be successful
and that our earnings, expenses or revenues may be affected by other factors,
such as the risk that competition from new self storage facilities or other
storage alternatives may cause rents to decline, occupancy rates to drop, or
delays in rent up of newly developed properties. We may experience increases in
labor, taxes, marketing and other operating and construction expenses. For a
discussion of the factors that might cause these assumptions not to occur see
SEGMENT PERFORMANCE, Domestic Development, OTHER REAL ESTATE INVESTMENTS and
Containerized Storage.

INVESTING TRANSACTIONS

     In 2000, we invested $24.9 million in the acquisition of seven storage
centers, $71.5 million in domestic development and expansion projects, and $7.0
million in capital improvements to our existing portfolio. The

                                        40
<PAGE>   42

$4.9 million increase in other real estate investments reflects primarily the
$4.7 million invested in joint ventures and the $0.2 million invested in our
containerized storage operation. Additionally, during 2000, loans to affiliates
included in other real estate investments increased $2.2 million due to
additional loans to our containerized storage operation.

     Under the Management Company Merger Agreement, we were contingently
obligated to issue additional shares as consideration for certain partnership
interests held by the Management Company which were not valued at the time of
the merger. In 1998, we recorded the issuance of 145,286 shares and in 2000
issued the final 387,933 shares related to this obligation.

     In 1999, we invested $13.3 million in the acquisition of five storage
centers, $106.0 million in domestic development and expansion projects, and $6.3
million in capital improvements to our existing portfolio. The $8.2 million
increase in other real estate investments reflects primarily the $8.0 million
invested in joint ventures and the $0.2 million invested in our containerized
storage operation. Additionally, during 1999, loans to affiliates increased $2.0
million primarily due to the loan we made to our containerized storage operation

     During 1999, we purchased one limited partner unit in Shurgard
Institutional Fund LP II, from an unaffiliated third party, for $1.2 million in
cash. During 2000, we purchased the remaining limited partner units for $3.8
million in cash. We now own all of the limited partner units and are entitled to
100% of limited partner distributions. We continue to own a general partnership
interest in this partnership which is consolidated in our financial statements.

     During 1998, we invested $24.9 million in the acquisition of eight storage
centers, $111.9 million in domestic development and expansion projects, $44.1
million in European development projects, and $5.1 million in capital
improvements to our existing portfolio. The $9.5 million increase in other real
estate investments reflects primarily the $9.3 million invested in joint
ventures and the $0.2 million invested in our containerized storage operation.
Additionally, during 1998, loans to affiliates increased $6 million due to the
loan we made to our containerized storage operation.

     During 1998, we purchased 18 limited partner units in Shurgard
Institutional Fund LP, from unaffiliated third parties, for $22.6 million in
cash ($21.2 million, net of cash received). We now own 22 of 25 units and are
entitled to 88% of this partnership's limited partner distributions. Three out
of these 22 units were purchased in 1997 from an unaffiliated third party, for
$3.7 million in cash. We continue to own a general partnership interest in this
partnership. Due to our majority interest, effective September 24, 1998,
Shurgard Institutional Fund LP is consolidated for financial statement purposes.
Prior to this date, earnings were included in income from other real estate
investments.

CAPITAL EXPENDITURES

     In addition to continued investments in acquisitions and developments, we
invest in improving our current portfolio of real estate. Investments in
existing storage properties include primarily expansions, conversions (i.e.,
size of units or climate control) and certain recurring improvements to roofs,
pavement, sealant and other items such as security upgrades that we believe are
necessary to maintain our quality standards and our ability to generate premium
returns.

     Of the $7.0 million in capital improvements expended during 2000, $1.7
million was for roofs, pavement and sealant, representing approximately $0.07
per net rentable square foot, while $1.9 million out of a total of $6.2 million
was spent for these items during 1999 representing approximately $0.10 per net
rentable square foot. During 1998, $1.8 million out of $5.0 million was spent
for these items, representing approximately $0.09 per net rentable square foot.
Specifically identified capital improvements expected for 2001 total $4.1 to
$5.0 million, of which $1.9 to $2.7 million represents roofs, pavement and
sealant. During 1996, we completed an extensive research and evaluation program
through which we selected an updated logo. In order to maintain our brand
awareness across all Shurgard businesses, we implemented a process to replace
signs, awnings, etc. to incorporate our new logo over 1997 and 1998. In
connection with this branding, during 1999, we installed signs at five stores at
a cost of approximately $45,000, and we installed signs at 132 stores and 134
stores during 1998 and 1997 at a cost of about $1.1 million and $0.8 million,
respectively.

                                        41
<PAGE>   43

FINANCING TRANSACTIONS

  Line of Credit

     The balance on the domestic line of credit decreased $12.1 million from
December 31, 1999 to December 31, 2000. Draws on the line were used to fund
acquisitions, the purchase of partnership units, development activity and
general corporate purposes, and payments were made from reimbursements from
joint ventures for development costs. At December 31, 2000, we had an unsecured
domestic line of credit to borrow up to $200 million at a spread over LIBOR,
maturing September 30, 2001, with the option to extend until September 2002. The
amount available and the spread vary based on the terms of the agreement; at
December 31, 2000, the current available amount was $200 million, of which
approximately $90.0 million was outstanding. At December 31, 2000, the weighted
average interest rate was 7.9%.

     Net borrowings under the domestic line of credit during 1999 totaled $20.6
million. Draws on the line were used to fund acquisitions, purchases of
partnership units, development activity and general corporate purposes. As of
December 31, 1999, $102.0 million was outstanding, and the interest rate spread
was 115 basis points over LIBOR.

     Net borrowings under the domestic line of credit during 1998 totaled $37
million. Draws on the line were used to fund acquisitions, purchases of
partnership units, development activity and general corporate purposes. As of
December 31, 1998, $81.5 million was outstanding, and the interest rate spread
was 95 basis points over LIBOR.

     At December 31, 1998, we had seven European credit lines (denominated in
local currencies) to borrow up to a total of $14.7 million of which $13.5
million was outstanding. Since January 1999, our European results have been
reported under the equity method of accounting.

     In February 2001, we expanded our revolving credit facility from $200 to
$360 million. This amended facility matures in February 2005 and requires
monthly interest payments at 125 basis points over LIBOR. Availability under
this line of credit is limited based on various financial covenants and
guarantees under certain tax retention operating leases.

  Long-term Financing

     During 2000, SFPII borrowed an additional $12.9 million under its
non-recourse credit facility. At December 31, 2000, $62.2 million was
outstanding under this credit facility. We have swap agreements in effect for
each borrowing which fix the weighted average interest rate at 8.48% until March
2002 for the balances outstanding as of December 31, 2000. Additionally, during
2000, CCP/Shurgard obtained a non-recourse credit facility to borrow up to $67.7
million of which $60.4 million was outstanding as of December 31, 2000. The note
matures December 2003, is secured by the 21 properties owned by CCP/ Shurgard,
and requires monthly payments of interest only at 275 basis points above LIBOR.
We have an interest rate cap in effect for the $60.4 million which limits the
interest rate to 7.50% plus the spread on the LIBOR indexed floating rate. We
have a 20% equity interest in CCP/Shurgard.

     During 1999, SFPI borrowed an additional $2.3 million under its
non-recourse credit facility. At December 31, 1999, $45.0 million was
outstanding under this credit facility. This loan was repaid in full on January
31, 2001.

     Additionally, K&S I, LLC, a partnership, formed on October 15, 1999, has a
non-recourse credit facility from a commercial bank of $6.5 million. The note
matures October 2001, is secured by the property owned by K&S I, LLC, and
requires monthly payments of interest only at 320 basis points above LIBOR. As
of December 31, 2000, the interest rate was 9.94%.

     In December 1998, we raised net proceeds after offering costs of $48.1
million through the sale of 2 million shares of Series C Cumulative Redeemable
Preferred Stock. These preferred shares require quarterly distribution payments
totaling 8.7% per year and are callable at our option after five years at a
redemption price of $25 per share.

                                        42
<PAGE>   44

     In February 2001, we issued $200 million in senior unsecured notes
(approximately $198.4 million in net proceeds) which are ten year notes bearing
interest at 7.75% and are due 2011. The notes require semi-annual interest
payments due February 22 and August 22. Additionally, in February 2001, we
raised $86.25 million (approximately $83.4 million in net proceeds) through the
sale of 3.45 million shares of Series D Cumulative Redeemable Preferred Stock.
These preferred shares require quarterly distributions of 8.75% per year and are
callable at our option after five years, at a redemption price of $25 per share.
A portion of these proceeds were used to repay balances outstanding under our
line of credit. Remaining proceeds will be used to pay off our $122.6 million
note payable prior to its maturity in June 2001. In connection with this payoff,
we expect to incur approximately $750,000 to $1 million in expense related to
the early extinguishment of this debt.

SHORT-TERM AND LONG-TERM LIQUIDITY

     Cash balances decreased from $11.6 million at December 31, 1999 to $7.7
million at December 31, 2000 as capital expenditures were funded primarily
through cash flow and financing alternatives obtained by forming joint ventures
as discussed previously in Development Financing Arrangements. The following
table summarizes certain information regarding our liquidity and capital
resources:

<TABLE>
<CAPTION>
                                                             AT DECEMBER 31,
                                                      ------------------------------
                                                       2000       1999      1998(1)
                                                      -------    -------    --------
<S>                                                   <C>        <C>        <C>
Debt to total assets before depreciation............       35%        34%        34%
Total market capitalization(2)......................  $1,318m    $1,194m    $1,274m
Debt to total market capitalization(2)..............       38%        36%        33%
Weighted avg. interest rate(3)......................     8.25%      8.05%      7.89%
</TABLE>

---------------
(1) Includes European operations. Beginning in 1999, the Company's European
    operations are no longer being consolidated, but are now reported under the
    equity method.

(2) Total market capitalization is based on the closing market price of the
    Class A Common Stock, Series B Preferred Stock, and the Series C Preferred
    Stock multiplied by their respective total number of outstanding shares plus
    total debt.

(3) Represents weighted average interest rate on our outstanding domestic debt.

     Our total domestic debt at December 31, 2000 was $495.4 million, of which
$338.5 million is fixed rate debt or variable rate debt fixed by swap
agreements. We limit our use of variable rate debt; however, at times balances
could be significant enough that fluctuations in interest rates would impact our
earnings. We believe that we will be able to minimize the impact of such rate
fluctuations through the use of interest rate swaps and caps, refinancing or
other strategies.

     Cash provided by operating activities for the years ended December 31,
2000, 1999 and 1998 was $82.5 million, $88.7 million and $79.1 million,
respectively. We believe that our cash flow in 2001 will be sufficient to make
required principal payments and distribution payments in accordance with REIT
requirements.

REIT QUALIFICATION AND DISTRIBUTION REQUIREMENTS

     As a REIT, we are not required to pay federal income tax on annual taxable
income that we currently distribute to our shareholders, provided that we
distribute an amount equal to at least 95% of our taxable income. Such
distributions must be made in the taxable year to which they relate or in the
following taxable year if declared before the REIT timely files its tax return
for such years and is paid on or before the first regular distribution payment
date after such declaration. For the years ended December 31, 2000, 1999 and
1998, 14.7%, 1.8% and 7.1% of distributions were return of capital,
respectively.

     As a REIT, we must derive at least 95% of our total gross income from
specified classes of income related to real property, distributions, interest or
certain gains from the sale or other disposition of stock or other securities.
Our revenue from truck rentals, sales of locks and boxes and management services
performed for other owners of properties do not qualify under this 95% gross
income test. Such nonqualifying income was

                                        43
<PAGE>   45

approximately 2% of gross revenue in 2000 and we expect to meet the 95% test in
2001. Our acquisition of additional properties will tend to reduce the
percentage of nonqualifying income, while additional management contracts,
including those with off balance sheet joint ventures and partnerships, and the
sales of properties from the existing portfolio will tend to increase the
percentage of nonqualifying income. While we intend to manage our activities so
that we continue to satisfy the 95% test in the future, we can provide no
assurance that nonqualifying income will not exceed 5% in future years.

     In December 1999, legislation was passed to reduce the taxable income
distribution requirements for a REIT from 95% to 90%. This change applies to
distributions made beginning in the year 2001.

ITEM 7A -- QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE AND FOREIGN CURRENCY EXCHANGE RATE RISK

     Our primary market risks are interest rate exposure and foreign currency
exchange rate exposure. We do not enter into speculative derivative transactions
or leveraged swap agreements. The derivative instruments that we own are not
held as investments and it is our intent to hold such instruments for their
respective terms. Therefore, changes in their values will not have a significant
effect on our operations, cash flows or financial position.

     We have foreign currency exposures related to our investment in the
construction, acquisition, and operation of storage centers in countries outside
the US to the extent such activities are financed with financial instruments or
equity denominated in non-functional currencies. Since all foreign debt is
denominated in the corresponding functional currency, our currency exposure is
limited to our equity investment in those countries. Countries in which we have
exposure to foreign currency fluctuations include Belgium, France, the
Netherlands, Sweden, and the United Kingdom. Our gross investment in these
foreign operations at December 31, 2000 was $3.5 million and is not considered
material. At December 31, 2000, cumulative losses, including depreciation
expense, have exceeded our gross investment by $2 million. During 2000, all
foreign investments are accounted for under the equity method.

     The table below provides information about our derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates, including loans to shareholders, debt obligations and interest
rate swaps. For loans to shareholders, the table presents contractual principal
cash flows to be received and the weighted average interest rates. For debt
obligations, the table presents principal cash flows and related weighted
average interest rates by expected maturity dates. For interest rate swaps, the
table presents notional amounts and weighted average interest rates by
contractual maturity dates. Notional amounts are used to calculate the
contractual payments to be exchanged under the contract.

<TABLE>
<CAPTION>
     EXPECTED MATURITY DATE         2001       2002       2003       2004      2005    THERE-AFTER     TOTAL     FAIR VALUE
     ----------------------       --------    -------    -------    -------    ----    -----------    --------   ----------
                                                                       (IN THOUSANDS)
<S>                               <C>         <C>        <C>        <C>        <C>     <C>            <C>        <C>
Liabilities
Lines of Credit:
Variable Rate (US$).............  $ 89,925                                                            $ 89,925    $ 89,925
  Interest rate.................      7.72%
Notes Payable:
Fixed Rate (US$)................  $123,956                          $57,275              $50,000      $231,252    $231,258
  Interest rate.................      7.97%      7.59%      7.59%      7.59%   7.63%        7.63%
Variable Rate (US$).............  $ 51,531    $62,266    $60,400                                      $174,197    $174,197
  Interest rate.................      8.96%      7.25%      7.94%
Equity Loans to Shareholders....  $  1,836    $ 1,339    $   501                                      $  3,676    $  3,321
  Interest rate.................      0.66%      1.40%      5.32%
Interest Rate Derivatives
Interest Rate Swaps:
Variable to Fixed (US$).........  $ 45,050    $62,266                                                 $107,316    $108,446
  Avg. pay rate.................      5.96%      6.23%
  Avg. received rate............      4.75%      5.19%
</TABLE>

                                        44
<PAGE>   46

ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              DECEMBER 31,    DECEMBER 31,
                                                                  2000            1999
                                                              ------------    ------------
                                                              (IN THOUSANDS, EXCEPT SHARE
                                                                         DATA)
<S>                                                           <C>             <C>
ASSETS:
  Storage centers:
     Land...................................................   $  248,741      $  228,601
     Buildings and equipment, net...........................      843,027         761,921
     Construction in progress...............................       22,686          49,939
                                                               ----------      ----------
          Total storage centers.............................    1,114,454       1,040,461
  Other real estate investments.............................       49,501          47,451
  Cash and cash equivalents.................................        7,664          11,645
  Restricted cash and investments...........................        8,510           7,166
  Other assets..............................................       59,028          47,546
                                                               ----------      ----------
          Total assets......................................   $1,239,157      $1,154,269
                                                               ==========      ==========

LIABILITIES AND SHAREHOLDERS' EQUITY:
  Accounts payable and other liabilities....................   $   34,394      $   35,355
  Lines of credit...........................................       89,925         102,002
  Notes payable.............................................      405,429         332,347
                                                               ----------      ----------
          Total liabilities.................................      529,748         469,704
  Minority interest in other real estate investments........       68,844          40,763
  Commitments and contingencies (Notes C, D, E, H and O)
  Shareholders' equity:
     Series B Cumulative Redeemable Preferred Stock, $0.001
      par value: 2,300,000 authorized; 2,000,000 shares
      issued and outstanding; liquidation preference of
      $50,000,000...........................................       48,056          48,056
     Series C Cumulative Redeemable Preferred Stock, $0.001
      par value: 2,000,000 authorized; 2,000,000 shares
      issued and outstanding; liquidation preference of
      $50,000,000...........................................       48,115          48,115
     Class A Common Stock, $0.001 par value;
      120,000,000,authorized; 29,620,225 and 29,093,474
      shares issued and outstanding.........................      624,464         611,973
     Class B Common Stock, $0.001 par value; 500,000 shares
      authorized, 154,604 issued and outstanding; net of
      loans to shareholders of $3,676 and $4,002............         (760)         (1,086)
     Accumulated net income less distributions..............      (79,310)        (63,256)
                                                               ----------      ----------
          Total shareholders' equity........................      640,565         643,802
                                                               ----------      ----------
          Total liabilities and shareholders' equity........   $1,239,157      $1,154,269
                                                               ==========      ==========
</TABLE>

                 See notes to consolidated financial statements
                                        45
<PAGE>   47

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                               YEAR ENDED           YEAR ENDED           YEAR ENDED
                                              DECEMBER 31,         DECEMBER 31,         DECEMBER 31,
                                                  2000                 1999                 1998
                                            -----------------    -----------------    -----------------
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                         <C>                  <C>                  <C>
REVENUE:
  Rental..................................      $197,399             $175,045             $158,989
  Loss from other real estate
     investments..........................        (3,420)              (3,302)              (1,628)
  Property management.....................         1,888                1,411                1,893
                                                --------             --------             --------
          Total revenue...................       195,867              173,154              159,254
EXPENSES:
  Operating...............................        55,511               47,660               46,421
  Depreciation and amortization...........        40,893               36,858               33,644
  Real estates taxes......................        17,940               15,777               13,195
  General, administrative and other.......         4,911                4,193                4,578
                                                --------             --------             --------
          Total expenses..................       119,255              104,488               97,838
                                                --------             --------             --------
     Income from operations...............        76,612               68,666               61,416
OTHER INCOME (EXPENSE):
  Interest expense........................       (31,411)             (22,445)             (21,076)
  Interest and other income...............         3,825                2,826                1,431
                                                --------             --------             --------
     Other income (expense), net..........       (27,586)             (19,619)             (19,645)
  Minority interest.......................         3,606                2,724                2,963
                                                --------             --------             --------
  Income before cumulative effect of a
     change in accounting principle.......        52,632               51,771               44,734
  Cumulative effect of a change in
     accounting principle.................                             (1,098)
                                                --------             --------             --------
     Net income...........................      $ 52,632             $ 50,673             $ 44,734
                                                ========             ========             ========
Net income allocation:
  Allocable to preferred shareholders.....      $  8,750             $  8,750             $  4,690
  Allocable to common shareholders........        43,882               41,923               40,044
                                                --------             --------             --------
                                                $ 52,632             $ 50,673             $ 44,734
                                                ========             ========             ========
NET INCOME PER COMMON SHARE:
Basic net income per share:
  Income before accounting change.........      $   1.48             $   1.48             $   1.40
  Accounting change.......................                               (.04)
                                                --------             --------             --------
  Net income..............................      $   1.48             $   1.44             $   1.40
                                                ========             ========             ========
Diluted net income per share:
  Income before accounting change.........      $   1.47             $   1.48             $   1.39
  Accounting change.......................                               (.04)
                                                --------             --------             --------
  Net income..............................      $   1.47             $   1.44             $   1.39
                                                ========             ========             ========
Distributions per common share............      $   2.03             $   1.99             $   1.95
                                                ========             ========             ========
</TABLE>

                 See notes to consolidated financial statements
                                        46
<PAGE>   48

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                        CLASS A            CLASS B
                                PREFERRED STOCK      COMMON STOCK       COMMON STOCK       LOANS TO       ACCUMULATED
                                ----------------   -----------------   ---------------     CLASS B      NET INCOME LESS
                                SHARES   AMOUNT    SHARES    AMOUNT    SHARES   AMOUNT   SHAREHOLDERS    DISTRIBUTIONS
                                ------   -------   ------   --------   ------   ------   ------------   ---------------
                                                                    (IN THOUSANDS)
<S>                             <C>      <C>       <C>      <C>        <C>      <C>      <C>            <C>
Balance, Jan. 1, 1998.........  2,000    $48,056   28,432   $595,269    155     $2,916     $(4,002)        $(31,452)
Comprehensive income:
  Net income..................                                                                               44,734
  Other comprehensive income:
    Foreign currency
      translation.............
        Total comprehensive
          income..............
Issuance of Series C Preferred
  Stock.......................  2,000     48,115
Issuance of common stock......                        390     10,215
Distributions
  Preferred...................                                                                               (4,690)
  Common......................                                                                              (55,904)
                                -----    -------   ------   --------    ---     ------     -------         --------
Balance, Dec. 31 1998.........  4,000     96,171   28,822    605,424    155     2,916       (4,002)         (47,312)
Comprehensive income:
  Net income..................                                                                               50,673
  Other comprehensive income:
    Foreign currency
      translation.............
Total comprehensive income....
Issuance of common stock......                        271      6,489
Distributions:
  Preferred...................                                                                               (8,750)
  Common......................                                                                              (57,867)
                                -----    -------   ------   --------    ---     ------     -------         --------
Balance, Dec. 31, 1999........  4,000     96,171   29,093    611,973    155     2,916       (4,002)         (63,256)
Comprehensive income:
  Net income..................                                                                               52,632
Issuance of Common stock......                        527     12,491
Payment on loan to
  shareholder.................                                                                 326
Distributions:
  Preferred...................                                                                               (8,750)
  Common......................                                                                              (59,936)
                                -----    -------   ------   --------    ---     ------     -------         --------
Balance, Dec. 31, 2000........  4,000    $96,171   29,620   $624,464    155     $2,916     $(3,676)        $(79,310)
                                =====    =======   ======   ========    ===     ======     =======         ========

<CAPTION>
                                 ACCUMULATED
                                    OTHER
                                COMPREHENSIVE
                                   INCOME        TOTAL
                                -------------   --------
                                     (IN THOUSANDS)
<S>                             <C>             <C>
Balance, Jan. 1, 1998.........     $(2,095)     $608,692
Comprehensive income:
  Net income..................                    44,734
  Other comprehensive income:
    Foreign currency
      translation.............         648           648
                                                --------
        Total comprehensive
          income..............                    45,382
Issuance of Series C Preferred
  Stock.......................                    48,115
Issuance of common stock......                    10,215
Distributions
  Preferred...................                    (4,690)
  Common......................                   (55,904)
                                   -------      --------
Balance, Dec. 31 1998.........      (1,447)      651,810
Comprehensive income:
  Net income..................                    50,673
  Other comprehensive income:
    Foreign currency
      translation.............       1,447         1,447
                                                --------
Total comprehensive income....                    52,120
Issuance of common stock......                     6,489
Distributions:
  Preferred...................                    (8,750)
  Common......................                   (57,867)
                                   -------      --------
Balance, Dec. 31, 1999........          --       643,802
Comprehensive income:
  Net income..................                    52,632
Issuance of Common stock......                    12,491
Payment on loan to
  shareholder.................                       326
Distributions:
  Preferred...................                    (8,750)
  Common......................                   (59,936)
                                   -------      --------
Balance, Dec. 31, 2000........     $    --      $640,565
                                   =======      ========
</TABLE>

                 See notes to consolidated financial statements
                                        47
<PAGE>   49

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                  YEAR            YEAR            YEAR
                                                                 ENDED           ENDED           ENDED
                                                              DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                                  2000            1999            1998
                                                              ------------    ------------    ------------
                                                                             (IN THOUSANDS)
<S>                                                           <C>             <C>             <C>
OPERATING ACTIVITIES:
  Net income................................................   $  52,632       $  50,673       $  44,734
  Adjustments to reconcile earnings to net cash provided by
    operating activities:
    Cumulative change in accounting principle...............                       1,098
    Depreciation and amortization...........................      40,893          36,858          33,644
    Other...................................................                      (1,049)           (294)
    Loss from other real estate investments.................       5,932           5,747           4,092
    Minority interest in earnings from investments in other
      real estate investments...............................      (3,606)         (2,724)         (2,959)
    Changes in operating accounts:
      Restricted cash and investments.......................      (1,344)           (302)            164
      Other assets..........................................     (13,102)         (3,844)         (4,682)
      Accounts payable and other liabilities................       1,113           2,212           4,350
                                                               ---------       ---------       ---------
        Net cash provided by operating activities...........      82,518          88,669          79,049
                                                               ---------       ---------       ---------
INVESTING ACTIVITIES:
  Proceeds from sale of real estate and equipment...........                      14,421           2,000
  Purchase of other real estate investments.................      (4,908)         (8,172)         (9,498)
  Purchase of non-competition agreements and other
    amortizable assets......................................        (583)           (994)         (3,175)
  Decrease in cash and cash equivalents as a result of
    deconsolidation
    (Note B)................................................                      (1,301)
  Distributions in excess of earnings from other real estate
    investments.............................................         483             999           5,860
  Purchase of units of an affiliated partnership............      (3,807)         (1,191)
  Investment in limited partnerships........................                                     (21,181)
  Increase in loans to affiliates...........................      (2,204)         (2,041)         (5,950)
  Construction, acquisition and improvements to storage
    centers.................................................    (103,394)       (125,556)       (186,041)
                                                               ---------       ---------       ---------
        Net cash used in investing activities...............    (114,413)       (123,835)       (217,985)
                                                               ---------       ---------       ---------
FINANCING ACTIVITIES:
  Proceeds from preferred stock offering, net...............                                      48,115
  Proceeds from exercise of stock options and dividend
    reinvestment plan.......................................       3,284           6,489          10,199
  Distributions paid........................................     (68,686)        (66,617)        (60,594)
  Net proceeds from (payments on) lines of credit...........     (12,077)         20,552          37,024
  Proceeds from notes payable...............................      73,103          58,342          90,765
  Payments of financing costs...............................      (2,237)         (2,054)         (1,166)
  Proceeds from payment on loan to shareholder..............         326
  Principal payments on notes payable.......................         (21)           (222)            (26)
  Contributions by minority partners........................      37,425          22,222          17,525
  Distributions to minority partners........................      (3,203)         (1,375)           (748)
                                                               ---------       ---------       ---------
        Net cash provided by financing activities...........      27,914          37,337         141,094
        Net effect of translation on cash...................                                          68
                                                               ---------       ---------       ---------
  (Decrease) increase in cash and cash equivalents..........      (3,981)          2,171           2,226
  Cash and cash equivalents at beginning of period..........      11,645           9,474           7,248
                                                               ---------       ---------       ---------
  Cash and cash equivalents at end of period................   $   7,664       $  11,645       $   9,474
                                                               =========       =========       =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid for interest....................................   $  39,789       $  31,094       $  28,102
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING INFORMATION:
  Note receivable in connection with non-compete
    Agreement...............................................                   $   1,435
  Liabilities incurred in connection with the construction
    of storage centers......................................   $   6,143       $   9,573       $  11,035
  Stock issued as additional consideration for merger.......   $   9,207       $   3,814
</TABLE>

                 See notes to consolidated financial statements

                                        48
<PAGE>   50

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A -- ORGANIZATION

     Shurgard Storage Centers, Inc. (SSCI), a Washington corporation, was
organized on July 23, 1993 to serve as a vehicle for investments in, and
ownership of, a professionally managed, internationally diverse real estate
portfolio consisting primarily of self-service storage properties which provides
month-to-month leases for business and personal use. We intend to qualify as a
real estate investment trust (REIT) as defined in Section 856 of the Internal
Revenue Code.

NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of presentation: The consolidated financial statements include the
accounts of SSCI and its subsidiaries. All inter-company balances and
transactions have been eliminated upon consolidation. We consolidate the
accounts of those subsidiaries or joint ventures in which we have effective
control as evidenced by, among other factors, a majority interest in the
investment and the ability to cause a sale of assets. Additionally, we
consolidate joint ventures to which we have contributed substantially all the
real estate assets, subject to repurchase or put options that qualify as
continuing involvement under Statement of Financial Accounting Standards No. 66,
"Accounting for Sales of Real Estate". All investments in joint ventures that do
not qualify for consolidation, but in which we exercise significant influence,
are accounted for under the equity method and are included in other real estate
investments.

     In October 1999, a group of unaffiliated investors purchased a 42% interest
in SSC Benelux & Co., SCA (Benelux SCA). As a result of this transaction, we no
longer control Benelux SCA and for the years ended December 31, 2000 and 1999,
our remaining 7.57% interest has been accounted for under the equity method of
accounting. (See Note E).

     Use of estimates: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.

     New accounting principles: Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities",
is effective for all fiscal years beginning after June 15, 2000. SFAS 133, as
amended, establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. Under SFAS 133, certain contracts that
were not formerly considered derivatives may now meet the definition of a
derivative. We adopted SFAS 133 effective January 1, 2001. We use interest rate
swaps to fix a portion of our variable rate debt. We do not expect the adoption
of SFAS 133 to have a significant impact on our financial position, results of
operations, or cash flows.

     We implemented the AICPA Accounting Standards Executive Committee (AcSEC)
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities", in
the first quarter of 1999. The initial application is reported as a cumulative
effect of change in accounting principle.

     Storage centers: Storage centers are recorded at cost. Depreciation on
buildings and equipment is recorded on a straight-line basis over their
estimated useful lives which range from three to 30 years.

     Other real estate investments: As of December 31, 2000, investments
accounted for under the equity method included 24 joint ventures. Also, included
in other real estate investments are participating mortgages, which are
accounted for as loans.

     Cash equivalents: Cash equivalents consist of money market instruments and
securities with original maturities of 90 days or less.

     Restricted cash and investments: Restricted cash and investments consist of
cash deposits and securities held in trust in connection with certain notes
payable. Restricted cash deposits represent expense reserves

                                        49
<PAGE>   51
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

required by lenders. Restricted securities (Note I), per the loan agreement,
must be held to maturity and thus are carried at amortized cost. The related
premium is amortized over the estimated remaining life of the security using the
constant yield method.

     Other assets: Other assets include financing costs, non-competition
agreements, and goodwill, which are presented net of accumulated amortization of
$23,189,000 and $18,748,000 as of December 31, 2000 and 1999, respectively.
Financing costs are amortized on the effective interest method over the life of
the related debt and the related expense is included in amortization.
Non-competition agreements and goodwill are amortized over their estimated
useful lives which range from three to 30 years.

     Federal income taxes: To qualify as a REIT, we must distribute annually at
least 95% of our taxable income and meet certain other requirements.
Additionally, as a REIT, we will not be subject to federal income taxes to the
extent of distributions. We were not required to pay any federal income tax in
1998 or 1999 and we intend to make elections regarding distributions such that
we will not pay federal taxes for 2000. As a result, no provision for federal
income taxes has been made in our financial statements. We are subject to
certain international and state income taxes as well as certain franchise taxes;
however, these taxes are currently immaterial. Legislation passed in December
1999 reduces the taxable income distribution requirements for a REIT from 95% to
90% beginning January 2001.

     Revenue recognition: The majority of our customers rent under
month-to-month lease agreements and revenue is recognized at the contracted rate
for each month occupied. Revenue related to customers who sign longer period
leases is recognized ratably over the term of the lease. Management fee revenue
is recognized each month for which services are rendered; these contracts are
generally cancelable by either party upon specified advance of notice.
Management fees from related parties were $250,000, $293,000 and $257,000 for
the years ended December 31, 2000, 1999 and 1998, respectively.

     Valuation of long-lived assets: Using our best estimates based on
reasonable and supportable assumptions and projections, we review storage
centers and other long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of our assets might not be
recoverable. At December 31, 2000, no assets had been impaired.

     Financial instruments: The carrying values reflected on the balance sheet
at December 31, 2000, reasonably approximate the fair value of cash and cash
equivalents, other assets, accounts payable, lines of credit, variable rate debt
and other liabilities. We estimate that the fair value of loans to shareholders
is $3.3 million and the fair value of participating mortgages is $14.4 million.
Based on the borrowing rates currently available to us for bank loans with
similar terms and average maturities, we estimate the fair value of fixed rate
long-term debt including swap arrangements is $339.7 million compared to a book
value of $338.5 million.

     Environmental costs: Our policy is to accrue environmental assessments
and/or remediation costs when it is probable that such efforts will be required
and the related costs can be reasonably estimated. The majority of our real
estate facilities have undergone independent environmental investigations and
our policy is to have such investigations conducted on all new real estate
acquired. Although there can be no assurance that there is not environmental
contamination at our facilities, we are not aware of any such contamination at
any of our facilities which individually or in aggregate would be material to
our business, financial condition, or results of operations.

     Reclassification: Certain amounts in the prior year financial statements
have been reclassified to conform to the current presentation.

                                        50
<PAGE>   52
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE C -- STORAGE CENTERS

<TABLE>
<CAPTION>
                                                     DECEMBER 31,    DECEMBER 31,
                                                         2000            1999
                                                     ------------    ------------
                                                            (IN THOUSANDS)
<S>                                                  <C>             <C>
Land...............................................   $  248,741      $  228,601
Buildings..........................................      971,028         861,192
Equipment & other..................................       39,876          34,662
                                                      ----------      ----------
                                                       1,259,645       1,124,455
Less accumulated depreciation......................     (167,877)       (133,933)
                                                      ----------      ----------
                                                       1,091,768         990,522
Construction in progress, including land of $6,930
  and $14,193, respectively........................       22,686          49,939
                                                      ----------      ----------
                                                      $1,114,454      $1,040,461
                                                      ==========      ==========
</TABLE>

     We have entered into various construction contracts for development of new
or improvements to existing storage centers. Outstanding commitments under these
contracts total $51.0 million. In 2000, 1999 and 1998, we capitalized
approximately $8.6 million, $9.0 million and $7.6 million, respectively, of
interest related to the development of storage centers.

NOTE D -- ACQUISITIONS

     In March 1999, we purchased from an unaffiliated third party one limited
partner unit in Shurgard Institutional Fund LP II, an affiliated partnership,
for $1.2 million in cash. In September of 2000, we purchased the remaining 3
units for $3.8 million in cash. We currently own all of the 9.5 limited partner
units and are entitled to 100% of LP distributions. We continue to own a general
partnership interest in this partnership. Due to our majority interest, Shurgard
Institutional Fund LP II is consolidated for financial statement purposes.

     In July 1998, we purchased eighteen limited partner units for $22.6 million
in cash ($21.2 million, net of cash received). All purchases were from
unaffiliated third parties. We currently own 22 of 25 units and are entitled to
88% of this partnership's limited partner distributions. As this represents a
majority interest, Shurgard Institutional Fund LP has been consolidated for
financial statement purposes since July 1998. We continue to own a general
partnership interest in this partnership.

     We have an agreement with a California developer under which it purchases
sites in southern California and constructs storage centers on them according to
our specifications. Upon completion of the rent up period, the storage centers
are purchased by a joint venture in which we owned 77.3% as of December 31,
2000. Prior to such purchase, we have no ownership in the properties and as
such, they are not included in any discussions in our operating results. The
developer's interest in the entity is based upon a predetermined formula and the
fair value of the property at contribution. During 1999, the joint venture
purchased one of the completed storage centers for $3.1 million, and during 2000
the joint venture purchased an additional completed storage center for $11.0
million. At December 31, 2000, we had guaranteed $22.4 million in outstanding
debt for three properties related to this agreement and may guarantee additional
amounts as future properties are developed.

                                        51
<PAGE>   53
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE E -- OTHER REAL ESTATE INVESTMENTS

<TABLE>
<CAPTION>
                                                     DECEMBER 31,    DECEMBER 31,
                                                         2000            1999
                                                     ------------    ------------
                                                            (IN THOUSANDS)
<S>                                                  <C>             <C>
Investments in participating mortgages.............    $13,071         $13,230
Investments in joint ventures......................     27,799          24,429
Investment in containerized storage business.......      8,631           9,792
                                                       -------         -------
                                                       $49,501         $47,451
                                                       =======         =======
</TABLE>

     We have invested $13.1 million in three participating mortgage loans. All
three mortgages are non-recourse to the borrower, bear interest at 8% per annum
and mature in January 2005. These loans are secured by real estate, including
four storage centers and office/warehouse space. Additionally, we receive
contingent interest payments from the mortgaged properties equal to 50% of both
operating cash flow and distributions from the gain on sale of real property, in
accordance with the terms of the applicable agreements. We received $422,000,
$562,000 and $685,000 in the years 2000, 1999 and 1998 in connection with these
agreements. We have options to purchase the properties at established prices,
which are exercisable from January 2001 to January 2006.

     Pursuant to affiliation agreements with two storage operators, we have
entered into 24 joint ventures in which our ownership interests range from 50%
to 90%. As of December 31, 2000, we had invested a total of $25.6 million in
these joint ventures. We have guaranteed $25.5 million of loans. The financial
results for these projects are not consolidated in our financial statements
because each affiliation agreement allows the local operator to control the
daily operations of the property, and all significant investment decisions
require the approval of both parties regardless of ownership percentage.

     In July 1998, we increased our participation in Benelux SCA to 13.06% from
12.5% by purchasing an additional interest from a joint venture partner for
$300,000. In October 1999, a group of unaffiliated investors purchased a 42%
interest in Benelux SCA for 122 million Euro ($114.5 million in U.S. dollars at
December 31, 2000). As a result of this agreement, our interest decreased to
7.57%, and we no longer have effective control of Benelux SCA. The joint venture
agreement requires a vote of two thirds of the Board of Managers for all major
decisions; however, we continue to exercise significant influence over Benelux
SCA through our control of half of the seats on the Board of Managers. The
negative investment balances of $2.4 million and $1.0 million are included in
other liabilities as of December 31, 2000 and 1999, respectively.

     As of December 31, 2000, we had invested $5.0 million in Shurgard Storage
to Go, Inc. (STG), a containerized storage business. Our investment was offset
by our portion of STG losses. As of December 31, 2000, we had committed to lend
STG up to $13.4 million under unsecured five-year notes of which $12.92 million
was outstanding and included in other real estate investments as of December 31,
2000. The outstanding principal balances bear interest at the 12 month London
Interbank Offer Rate (LIBOR) plus 375 basis points per annum, and are due from
July 15, 2002 to January 28, 2005. Additionally, we have currently guaranteed
$8.7 million in lease obligations. At December 31, 2000, we owned 95.5% of the
nonvoting stock in this start-up venture which is not a qualified REIT
subsidiary and is subject to corporate level tax. In order to comply with the
changes in REIT rules, we plan to recapitalize STG by converting substantially
all of our existing loan to STG into equity and acquiring all or substantially
all of the voting stock of STG.

NOTE F -- LINES OF CREDIT

     We have an unsecured domestic line of credit to borrow up to $200 million
at a spread over LIBOR, maturing September 30, 2001, with the option to extend
until September 2002. The amount available and the spread vary based on the
terms of the agreement; as of December 31, 2000, the current available amount
was $200 million, of which approximately $90 million was outstanding. At
December 31, 2000, the weighted average interest rate was 7.87%. Covenants on
this line of credit restrict our dividends to no more than 95% of funds from
operations and require us to maintain certain financial ratios.

                                        52
<PAGE>   54
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE G -- NOTES PAYABLE

<TABLE>
<CAPTION>
                                                       DECEMBER 31,   DECEMBER 31,
                                                           2000           1999
                                                       ------------   ------------
                                                             (IN THOUSANDS)
<S>                                                    <C>            <C>
Note payable to financial services company...........    $122,580       $122,580
Senior notes payable.................................     100,000        100,000
Mortgage notes payable...............................     182,849        109,767
                                                         --------       --------
                                                         $405,429       $332,347
                                                         ========       ========
</TABLE>

     The $122.6 million non-recourse note payable to a financial services
company requires monthly payments of interest only at 8.28% until it matures
June 2001 and is secured by 86 properties. As required by the loan agreement, we
deposit cash in restricted accounts to fund certain expenses including real
estate taxes and insurance. Subsequent to the establishment of this note, we
have removed three properties from the assets securing this note, and, as part
of the defeasance, were required to place US treasury notes costing $3.8 million
into a trust account. These treasury notes mature in June 2001 and carry an
effective interest rate of 5.6%.

     In April 1997, we issued $100 million in senior unsecured notes, $50
million of which are seven year notes due April 2004 bearing interest at 7.5%
and $50 million of which are ten year notes due April 2007 bearing interest at
7.625%. The notes require semi-annual interest due April 25th and October 25th.

     At December 31, 2000, there are six mortgage notes payable.
Shurgard/Fremont Partners I (SFPI), a consolidated partnership, formed on April
28, 1998, has a non-recourse credit facility from a group of commercial banks.
As of December 31, 2000, $45.0 million was outstanding on this note. The note
matures May 2001, is secured by the 15 properties owned by SFPI, and requires
monthly payments of interest only at 200 basis points above LIBOR. We have swap
agreements in effect for each borrowing which fix the weighted average interest
rate at 7.57% until May 2001 for the balances outstanding as of December 31,
2000. This note was paid off on January 30, 2001 (See NOTE P).

     Shurgard/Fremont Partners II (SFPII), a consolidated partnership formed on
March 17, 1999, has a non-recourse credit facility from a group of commercial
banks to borrow up to $64.7 million of which $62.2 million was outstanding as of
December 31, 2000. The note matures March 2002, is secured by the 16 properties
owned by SFPII, and requires monthly payments of interest only at 225 basis
points above LIBOR. We have swap agreements in effect for each borrowing which
fix the weighted average interest rate at 8.48% until March 2002 for the
balances outstanding as of December 31, 2000.

     Shurgard/K&S I, LLC, a consolidated entity, formed on October 15, 1999, has
a non-recourse credit facility from a commercial bank of $6.5 million. The note
matures October 2001, is secured by the property owned by Shurgard/K&S I, LLC,
and requires monthly payments of interest only at 320 basis points above LIBOR.
As of December 31, 2000, the interest rate was 9.94%.

     CCP/Shurgard Venture, LLC (CCP/Shurgard), a consolidated entity formed on
May 15, 2000, in which we own a 20% interest, has a non-recourse credit facility
to borrow up to $67.7 million of which $60.4 million was outstanding as of
December 31, 2000. The note matures December 31, 2003, is secured by the 21
properties owned by CCP/Shurgard and requires monthly payments of interest only
at 275 basis points above LIBOR. We have an interest rate cap in effect for the
borrowing which limits the interest rate to 7.50% plus the spread on the LIBOR
indexed floating rate.

     The remaining two mortgage notes are secured by a deed of trust on two
storage centers. The first is a recourse mortgage due in monthly installments of
$13,441, including principal and interest at 10.25%, and matures April 2001. The
second is a non-recourse participating mortgage for $7.3 million requiring fixed
monthly payments of interest only at 8% plus quarterly payments of 90% of excess
cash flow, as defined in the agreement. This mortgage also requires payment of
90% of the storage center's appreciation upon maturity, January 2004.

                                        53
<PAGE>   55
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The maturities of principal on debt over the next five fiscal years are
approximately $175.4 million in 2001; $62.6 million in 2002; $60.4 million in
2003; $57 million in 2004; $50 million in 2007. Each of these notes contains
covenants which require us to submit financial information and maintain certain
financial ratios. The book value of storage centers securing our notes payable
is $462.5 million.

NOTE H -- LEASE OBLIGATIONS

     We lease certain parcels of land and buildings under operating leases with
terms up to 50 years. The future minimum rental payments required under these
leases are as follows (in thousands):

<TABLE>
<S>                                                          <C>
2001.......................................................  $ 1,321
2002.......................................................    1,350
2003.......................................................    1,394
2004.......................................................    1,415
2005.......................................................    1,426
Thereafter.................................................   30,242
                                                             -------
                                                             $37,148
                                                             =======
</TABLE>

     Expense under these leases was approximately $1,157,000, $690,000 and
$600,000 for the years ended December 31, 2000, 1999, and 1998, respectively.

NOTE I -- SHAREHOLDERS' EQUITY

     In addition to the rights, privileges and powers of Class A Common Stock,
Class B common stockholders received loans from SSCI to fund certain obligations
to the 17 partnerships which comprise our predecessor. The loans are due between
2000 and 2003 and are secured by the Class B Common Stock. Class B Common Stock
is convertible to Class A Common Stock at a one-to-one ratio as the loans are
repaid. During 2000, $326,000 was paid on these notes and 76,529 Class B shares
are currently convertible to Class A shares. Substantially all these notes are
non-interest bearing.

     SSCI has 40 million shares of preferred stock authorized, of which 2.8
million shares have been designated as Series A Junior Participating Preferred
Stock, (none are issued and outstanding at December 31, 2000); 2.3 million
shares have been designated as Series B Cumulative Redeemable Preferred Stock (2
million of which are issued and outstanding at December 31, 2000, as discussed
below) and 2 million shares have been designated as Series C Cumulative
Redeemable preferred stock (2 million of which are issued and outstanding at
December 31, 2000, as discussed below). The Board of Directors is authorized to
determine the rights, preferences and privileges of the preferred stock
including the number of shares constituting any such series, and the designation
thereof.

     Series B Cumulative Redeemable Preferred Stock require quarterly
distribution payments totaling 8.8% per year and are callable at our option
after five years, at a redemption price of $25 per share. In December 1998, we
raised net proceeds after offering costs of $48.1 million through the sale of 2
million shares of Series C Cumulative Redeemable Preferred Stock. These
preferred shares require quarterly distribution payments totaling 8.7% per year
and are callable at our option after five years, at a redemption price of $25
per share.

     On March 24, 1995, SSCI acquired Shurgard Incorporated (the Management
Company) through a merger. Under the Management Company Merger Agreement, we
were contingently obligated to issue additional shares as consideration for
certain partnership interests held by the Management Company, which were not
valued at the time of the merger. On February 4, 1999, we issued 145,286 Class A
common shares for $3.8 million related to this obligation. On June 5, 2000, we
issued the final 387,933 Class A common shares due under this obligation for
$9.2 million.

                                        54
<PAGE>   56
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE J -- STOCK COMPENSATION AND BENEFIT PLANS

     The 1993 Stock Option Plan (the 1993 Plan) provides for the granting of
options for up to 3% of our outstanding shares of Class A Common Stock at the
end of each year, limited in the aggregate to 5,000,000 shares. In general, the
options vest ratably over five years and must be exercised within ten years from
date of grant. The exercise price for qualified incentive options under the 1993
Plan must be at least equal to fair market value at date of grant and at least
85% of fair market value at date of grant for non qualified options. The 1993
Plan expires in 2003.

     The 1995 Long-Term Incentive Compensation Plan (the 1995 Plan) provided for
the granting of options for up to 2% of the adjusted average shares of our Class
A Common Stock outstanding during the preceding calendar year, as well as stock
appreciation rights, stock awards (including restricted stock), performance
awards, other stock-based awards and distribution equivalent rights. The 1995
Plan required mandatory acceleration of vesting in the event of certain mergers
and consolidations or a sale of substantially all the assets or a liquidation of
SSCI, except where such awards were assumed or replaced in the transaction. The
1995 Plan permitted the plan administrator to authorize loans, loan guarantees
or installment payments to assist award recipients in acquiring shares pursuant
to awards and contains certain limitations imposed by tax legislation. The 1995
Plan allowed for grants to consultants and agents, as well as our officers and
key employees. The plan expired in July 2000.

     The 2000 Long-Term Incentive Compensation Plan (the 2000 Plan) provides for
the granting of options for up to 1.4 million shares of our Class A Common
Stock, as well as stock appreciation rights, stock awards (including restricted
stock), performance awards, other stock-based awards and distribution equivalent
rights. The 2000 Plan requires mandatory acceleration of vesting in the event of
certain mergers and consolidations or a sale of substantially all the assets or
a liquidation of SSCI, except where such awards are assumed or replaced in the
transaction. The 2000 Plan permits the plan administrator to authorize loans,
loan guarantees or installment payments to assist award recipients in acquiring
shares pursuant to awards and contains certain limitations imposed by tax
legislation. The 2000 Plan allows for grants to consultants and agents, as well
as our officers and key employees. In December 2000, we granted 39,525 shares of
restricted Class A common stock to officers and key employees. The shares
granted entitle the grantee to all shareholder rights: however, the shares will
vest ratably over 5 years. If a grantee's employment is terminated prior to the
end of the five year period, the unvested shares will be forfeited.

     In 1993, we also established the Stock Option Plan for Nonemployee
Directors (the Directors Plan) for the purpose of attracting and retaining the
services of experienced and knowledgeable outside directors. This plan was
amended during 1995 and provided current outside directors with 6,000 shares
each in 1995 and 3,000 shares each annually thereafter. Such options vest upon
continued service until our next annual meeting. In 1998 the Director's Plan was
amended and restated to provide for discretionary grants. The total number of
shares reserved under the Plan did not change and remains at 200,000. The
exercise price for options granted under the Directors Plan is equal to fair
market value at date of grant. As of December 31, 2000, 78,920 of these options
were outstanding.

     We have an employee incentive savings and stock ownership plan, in which
substantially all employees are eligible to participate. Each year, employees
may contribute an amount up to 15% of their annual compensation not to exceed
the maximum allowable by law. We match a portion of employee contributions and
may make annual discretionary contributions to purchase company stock. Our
expense for contributions to this plan was approximately, $809,000, $989,000,
and $921,000 for 2000, 1999, and 1998, respectively. We do not offer
post-employment or post-retirement benefits.

     In 1996, we established an Employee Stock Purchase Plan under which
employees can elect to purchase SSCI stock through regular periodic payroll
deductions without paying broker commissions. This plan provides for potential
price discounts of up to 15%. Effective January 2000, a 10% discount was offered
to employees under this plan.

                                        55
<PAGE>   57
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The weighted average remaining contractual life of options outstanding at
December 31, 2000 was 8.5 years and option prices ranged from $18.90 to $29.00
per share. The following table summarizes the outstanding and exercisable
options under all of our plans:

<TABLE>
<CAPTION>
                                                                              WEIGHTED
                                                              NUMBER OF       AVERAGE
                                                               SHARES      EXERCISE PRICE
                                                              ---------    --------------
<S>                                                           <C>          <C>
Outstanding, January 1, 1998................................    479,932        $25.82
  Granted...................................................    417,500         28.98
  Forfeited.................................................    (53,227)        23.53
  Exercised.................................................    (18,639)        27.50
                                                              ---------
Outstanding, December 31, 1998..............................    825,566         27.36
  Granted...................................................  1,582,270         23.14
  Forfeited.................................................   (150,685)        23.96
  Exercised.................................................     (9,575)        26.54
                                                              ---------
Outstanding, December 31, 1999..............................  2,247,576         24.46
  Granted...................................................  1,164,500         23.15
  Forfeited.................................................   (385,583)        24.40
  Exercised.................................................    (36,854)        23.01
                                                              ---------
Outstanding, December 31, 2000..............................  2,989,639         23.98
                                                              =========
Exercisable, December 31, 1998..............................    231,278         25.57
                                                              =========
Exercisable, December 31, 1999..............................    471,051         26.67
                                                              =========
Exercisable, December 31, 2000..............................    999,709         25.34
                                                              =========
</TABLE>

     The following table summarizes information about stock options outstanding
and exercisable at December 31, 2000:

<TABLE>
<CAPTION>
                                        NUMBER OF OPTIONS   WEIGHTED AVERAGE        NUMBER OF
                                           OUTSTANDING         REMAINING       OPTIONS EXERCISABLE
       RANGE OF EXERCISE PRICES         DECEMBER 31, 2000   CONTRACTUAL LIFE    DECEMBER 31, 2000
       ------------------------         -----------------   ----------------   -------------------
<S>                                     <C>                 <C>                <C>
$18.90 to $18.90......................          6,000          3.3 years               6,000
$20.75 to $23.88......................        108,200          4.3 years             108,200
$25.50 to $27.00......................         32,513          5.0 years              32,513
$28.25 to $28.25......................        164,858          6.0 years             164,858
$27.88 to $29.00......................        306,979          7.0 years             228,559
$21.63 to $27.56......................      1,210,339          8.8 years             457,912
$22.63 to $23.94......................      1,160,750          9.8 years               1,667
                                            ---------                                -------
                                            2,989,639                                999,709
                                            =========                                =======
</TABLE>

     During 1999, 8,696 shares were issued related to performance awards granted
in 1996, which were contingent on meeting performance objectives over a three
year period.

     In January 2001, we granted 76,000 options at an average of $24.85 per
share which represented the market price at the time of the grants. Of these
options, 26,000 were granted to employees and vest ratably over three years, and
50,000 were granted to directors which vest upon continued service at the
following year's annual meeting.

     During 1999, a bonus plan was established under which employees will share
a one time bonus payment of $50 million. The bonus is an all or nothing bonus,
and is earned upon achievement of the equivalent of $5.00 funds from operations
(FFO, as defined by National Association of Real Estate Investment Trusts) per
share annually. The $5.00 FFO threshold is measured by annualizing any single
quarter FFO; i.e., a fiscal quarter FFO of $1.25 is equivalent to $5.00 FFO
annually. This goal must be achieved by December 31, 2003, or no

                                        56
<PAGE>   58
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

bonus will be paid. The bonus is payable to all employees based on length of
service and position within the company and is subject to adjustment by the
Board for unplanned expansion of existing business or new business ventures.

     We have adopted the disclosure only provisions of the Statement of
Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation." No compensation cost has been recognized for the stock option
plans. Had compensation cost for options granted under our two stock option
plans been determined based on the fair value at the grant date for awards in
1998, 1999 and 2000 consistent with the provisions of SFAS No. 123, our net
income and net income per share would have been reduced to the pro forma amounts
indicated below (in thousands):

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                        -----------------------------
                                                         2000       1999       1998
                                                        -------    -------    -------
<S>                                                     <C>        <C>        <C>
Net income:
  As reported.........................................  $52,632    $50,673    $44,734
  Pro forma...........................................   51,154     49,642     44,132
Dilutive net income per share:
  As reported.........................................     1.47       1.44       1.39
  Pro forma...........................................     1.42       1.40       1.37
Weighted average fair value of options granted........     2.54       2.38       2.90
</TABLE>

     The fair value of options granted under our stock option plans during 2000,
1999 and 1998 was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used:
dividend yield of 8.81%, 8.64% and 6.76%, expected volatility of 28%, 22% and
21%, risk free interest rate of 5.12%, 6.39% and 4.64%, and expected life of
6.5, 6.5 and 6.5 years, respectively.

NOTE K -- SHAREHOLDER RIGHTS PLAN

     In March 1994, we adopted a Shareholder Rights Plan and declared a
distribution of one Right for each outstanding share of common stock. Under
certain conditions, each Right may be exercised to purchase one one-hundredth of
a share of Series A Junior Participating Preferred Stock at a purchase price of
$65, subject to adjustment. The Rights will be exercisable only if a person or
group has acquired 10% or more of the outstanding shares of common stock, or
following the commencement of a tender or exchange offer for 10% or more of such
outstanding shares of common stock. If a person or group acquires more than 10%
of the then outstanding shares of common stock, each Right will entitle its
holder to receive, upon exercise, common stock (or, in certain circumstances,
cash, property or other securities of SSCI) having a value equal to two times
the exercise price of the Right. In addition, if SSCI is acquired in a merger or
other business combination transaction, each Right will entitle its holder to
purchase that number of the acquiring company's common shares having a market
value of twice the Right's exercise price. We will be entitled to redeem the
Rights at $.0001 per Right at any time prior to the earlier of the expiration of
the Rights in March 2004 or the time that a person has acquired a 10% position.
The Rights do not have voting or distribution rights, and until they become
exercisable, have no dilutive effect on our earnings.

                                        57
<PAGE>   59
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE L -- NET INCOME PER SHARE

     The following summarizes the computation of basic and diluted net income
per share:

<TABLE>
<CAPTION>
                                                                           WEIGHTED
                                                                           AVERAGE     NET INCOME
                                                             NET INCOME     SHARES     PER SHARE
                                                             ----------    --------    ----------
                                                             (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                                          <C>           <C>         <C>
FOR THE YEAR ENDED DECEMBER 31, 1998
Net income.................................................   $44,734
Less: Preferred dividends..................................    (4,690)
                                                              -------
Basic net income...........................................    40,044       28,693       $1.40
Effect of dilutive stock options...........................                     31        (.01)
                                                              -------       ------       -----
Diluted net income.........................................   $40,044       28,724       $1.39
                                                              =======       ======       =====
FOR THE YEAR ENDED DECEMBER 31, 1999
Net income.................................................   $50,673
Less: Preferred dividends..................................    (8,750)
                                                              -------
Basic net income...........................................    41,923       29,087       $1.44
Effect of dilutive stock options...........................                     43
                                                              -------       ------       -----
Diluted net income.........................................   $41,923       29,130       $1.44
                                                              =======       ======       =====
FOR THE YEAR ENDED DECEMBER 31, 2000
Net income.................................................   $52,632
Less: Preferred dividends..................................    (8,750)
                                                              -------
Basic net income...........................................    43,882       29,561       $1.48
Effect of dilutive stock options...........................                    200        (.01)
                                                              -------       ------       -----
Diluted net income.........................................   $43,882       29,761       $1.47
                                                              =======       ======       =====
</TABLE>

NOTE M -- SEGMENT REPORTING

     SSCI currently has two reportable segments: Same and New Stores. Our
definition of Same Stores includes existing stores acquired prior to January 1
of the previous year as well as developed properties that have been operating
for a full two years as of January 1 of the current year. We project that newly
developed properties will reach stabilization in an average of approximately 24
months. New Stores include existing domestic facilities that had not been
acquired as of January 1 of the previous year as well as domestic developed
properties that have not been operating a full two years as of January 1 of the
current year. Additionally, prior to 1999, we consolidated the European
operations and reported a third segment: European Stores. Disposed stores
represents properties sold during the year.

     These reportable segments allow us to focus on improving results from our
existing domestic real estate assets and renting up our new domestic facilities.
We evaluate each segment's performance based on net operating income (NOI) and
NOI after indirect and leasehold expenses. NOI is defined as rental revenue less
direct operating expenses and real estate taxes, but does not include any
allocation of indirect operating expense. Indirect and leasehold expense
includes land or building lease expense and certain shared property costs such
as bank fees, district and corporate management, purchasing, national contracts
personnel and marketing, as well as certain overhead costs allocated to property
operations such as business information technology, legal services, human
resources, and accounting. Indirect operating expense is allocated to stores
based on number of months in operation during the period and does not include
internal real estate acquisition costs or abandoned development expense.

     The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. There are no inter-segment sales
and transfers. SSCI does not allocate development and

                                        58
<PAGE>   60
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

acquisition expense, depreciation and amortization, general, administrative and
other, interest expense, interest and other income (net) and minority interest
to the segments.

     Using the definition of Same Store and New Store described above, the
portfolio of assets reported in these segments changes from year to year. Assets
transition from New Store to Same Store over time. The following tables
illustrates the results using the 2000 Same Store and New Store base for
reportable segments as of and for the years ended December 31, 2000 and 1999.
Same stores includes all stores acquired prior to January 1, 1999, and domestic
developments opened prior to January 1, 1998. New stores represents all stores
acquired after January 1, 1999, and domestic developments opened after January
1, 1998:

<TABLE>
<CAPTION>
                                                SAME STORES    NEW STORES    DISPOSED      TOTAL
                                                -----------    ----------    --------    ----------
                                                                  (IN THOUSANDS)
<S>                                             <C>            <C>           <C>         <C>
YEAR ENDED DECEMBER 31, 2000
Rental revenue................................   $183,726       $ 27,076      $   --     $  210,802
Less unconsolidated joint ventures............    (10,309)        (3,094)                   (13,403)
                                                 --------       --------      ------     ----------
Consolidated revenue..........................    173,417         23,982                    197,399
Direct operating and real estate tax
  expense.....................................     52,924         10,615                     63,539
Less unconsolidated joint ventures............     (3,105)        (1,925)                    (5,030)
                                                 --------       --------      ------     ----------
Consolidated direct operating and real estate
  tax expense.................................     49,819          8,690                     58,509
                                                 --------       --------      ------     ----------
Consolidated NOI..............................    123,598         15,292          --        138,890
Indirect and leasehold expense................     11,609          3,143                     14,752
Less unconsolidated joint ventures............       (459)          (277)                      (736)
Consolidated indirect and leasehold expense...     11,150          2,866                     14,016
                                                 --------       --------      ------     ----------
Consolidated NOI after indirect and leasehold
  expense.....................................   $112,448       $ 12,426      $   --     $  124,874
                                                 ========       ========      ======     ==========
          Total Assets........................   $781,065       $352,549                 $1,133,614
                                                 ========       ========                 ==========
YEAR ENDED DECEMBER 31, 1999
Rental revenue................................   $172,112       $ 11,731      $2,121     $  185,964
Less unconsolidated joint ventures............     (9,686)        (1,233)                   (10,919)
                                                 --------       --------      ------     ----------
Consolidated revenue..........................    162,426         10,498       2,121        175,045
Direct operating and real estate tax
  expense.....................................     49,506          5,740         801         56,047
Less unconsolidated joint ventures............     (2,960)          (770)                    (3,730)
                                                 --------       --------      ------     ----------
Consolidated direct operating and real estate
  tax expenses................................     46,546          4,970         801         52,317
                                                 --------       --------      ------     ----------
Consolidated NOI..............................    115,880          5,528       1,320        122,728
Indirect and leasehold expense................     10,045          1,112                     11,157
Less unconsolidated joint ventures............       (418)           (80)                      (498)
                                                 --------       --------      ------     ----------
Consolidated indirect and leasehold expense...      9,627          1,032                     10,659
                                                 ========       ========      ======     ==========
Consolidated NOI after indirect and leasehold
  expense.....................................   $106,253       $  4,496      $1,320     $  112,069
                                                 ========       ========      ======     ==========
          Total Assets........................   $803,119       $233,480                 $1,036,599
                                                 ========       ========                 ==========
</TABLE>

                                        59
<PAGE>   61
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following table illustrates the results using the 1999 Same Store, New
Store and European store base for reportable segments as of and for the years
ended December 31, 1999 and 1998. Same stores includes all stores acquired prior
to January 1, 1998, and all domestic developments opened prior to January 1,
1997. New stores represents all stores acquired after January 1, 1998 and
domestic developments opened after January 1, 1997:

<TABLE>
<CAPTION>
                                                                        EUROPEAN
                                             SAME STORES   NEW STORES    STORES    DISPOSED     TOTAL
                                             -----------   ----------   --------   --------   ----------
                                                                   (IN THOUSANDS)
<S>                                          <C>           <C>          <C>        <C>        <C>
YEAR ENDED DECEMBER 31, 1999
Rental revenue.............................   $166,291      $ 17,833    $    --     $1,840    $  185,964
Less unconsolidated joint ventures.........     (7,619)       (3,300)                            (10,919)
                                              --------      --------    -------     ------    ----------
Consolidated revenue.......................    158,672        14,533                 1,840       175,045
Direct operating and real estate tax
  expense..................................     47,472         7,878                   697        56,047
Less unconsolidated joint ventures.........     (2,076)       (1,654)                             (3,730)
                                              --------      --------    -------     ------    ----------
Consolidated direct operating and real
  estate tax expenses......................     45,396         6,224                   697        52,317
                                              --------      --------    -------     ------    ----------
Consolidated NOI...........................   $113,276      $  8,309    $    --     $1,143    $  122,728
                                              ========      ========    =======     ======    ==========
Indirect and leasehold expense.............      9,272         1,885                              11,157
Less unconsolidated ventures...............       (282)         (216)                               (498)
Consolidated indirect and leasehold
  expense..................................      8,990         1,669                              10,659
                                              --------      --------    -------     ------    ----------
Consolidated NOI after indirect and
  leasehold expense........................   $104,286      $  6,640    $    --     $1,143    $  112,069
                                              ========      ========    =======     ======    ==========
          Total Assets.....................   $755,447      $281,152                          $1,036,599
                                              ========      ========                          ==========
YEAR ENDED DECEMBER 31, 1998
Rental revenue.............................   $159,451      $  6,106    $ 4,243     $2,160    $  171,960
Less unconsolidated joint ventures.........     (9,507)       (3,464)                            (12,971)
                                              --------      --------    -------     ------    ----------
Consolidated revenue.......................    149,944         2,642      4,243      2,160       158,989
Direct operating and real estate tax
  expenses.................................     46,394         2,896      2,545        963        52,798
Less unconsolidated joint ventures.........     (2,772)       (1,642)                             (4,414)
                                              --------      --------    -------     ------    ----------
Consolidated direct operating and real
  estate tax expenses......................     43,622         1,254      2,545        963        48,384
                                              --------      --------    -------     ------    ----------
Consolidated NOI...........................    106,322         1,388      1,698      1,197       110,605
Indirect and leasehold expense.............     10,019           962        720                   11,701
Less unconsolidated joint ventures.........       (437)         (408)                               (845)
Consolidated indirect and leasehold
  expense..................................      9,582           554        720                   10,856
                                              --------      --------    -------     ------    ----------
Consolidated NOI after indirect and
  leasehold expense........................   $ 96,740      $    834    $   978     $1,197    $   99,749
                                              ========      ========    =======     ======    ==========
          Total Assets.....................   $784,549      $164,082    $90,664               $1,039,295
                                              ========      ========    =======               ==========
</TABLE>

     The following table reconciles the reportable segments' revenue per the
table above to consolidated total revenue for the years ended December 31, 2000,
1999 and 1998:

<TABLE>
<CAPTION>
                                                       2000        1999        1998
                                                     --------    --------    --------
                                                              (IN THOUSANDS)
<S>                                                  <C>         <C>         <C>
Consolidated rental revenue........................  $197,399    $175,045    $158,989
Loss from other real estate investments............    (3,420)     (3,302)     (1,628)
Property management revenue........................     1,888       1,411       1,893
                                                     --------    --------    --------
          Total revenue............................  $195,867    $173,154    $159,254
                                                     ========    ========    ========
</TABLE>

                                        60
<PAGE>   62
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following table reconciles the reportable segments direct and indirect
operating expense to consolidated operating expense and real estate taxes for
the years ending December 31, 2000, 1999, and 1998:

<TABLE>
<CAPTION>
                                                         2000       1999       1998
                                                        -------    -------    -------
                                                               (IN THOUSANDS)
<S>                                                     <C>        <C>        <C>
Consolidated direct operating and real estate tax
  expense.............................................  $58,509    $52,317    $48,384
Consolidated indirect operating and leasehold
  expense.............................................   14,016     10,659     10,856
Development and acquisition expense...................      926        461        376
                                                        -------    -------    -------
Consolidated operating and real estate tax expense....  $73,451    $63,437    $59,616
                                                        =======    =======    =======
</TABLE>

     The following table reconciles the reportable segments' NOI per the table
above to consolidated net income for the years ending December 31, 2000, 1999
and 1998:

<TABLE>
<CAPTION>
                                                       2000        1999        1998
                                                     --------    --------    --------
                                                              (IN THOUSANDS)
<S>                                                  <C>         <C>         <C>
Consolidated NOI after indirect and leasehold
  expense..........................................  $124,874    $112,069    $ 99,749
Loss from other real estate investments............    (3,420)     (3,302)     (1,628)
Property management revenue........................     1,888       1,411       1,893
Development and acquisition expense................      (926)       (461)       (376)
Depreciation/amortization..........................   (40,893)    (36,858)    (33,644)
Interest expense...................................   (31,411)    (22,445)    (21,076)
General and Administrative.........................    (4,911)     (4,193)     (4,578)
Interest and other income..........................     3,825       2,826       1,431
Minority interest..................................     3,606       2,724       2,963
Change in accounting principle.....................                (1,098)
                                                     --------    --------    --------
Net income.........................................  $ 52,632    $ 50,673    $ 44,734
                                                     ========    ========    ========
</TABLE>

     The following table reconciles the reportable segments' assets to
consolidated assets as of December 31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                    2000          1999          1998
                                                 ----------    ----------    ----------
                                                             (IN THOUSANDS)
<S>                                              <C>           <C>           <C>
Segment assets.................................  $1,133,614    $1,036,599    $1,039,295
Unconsolidated joint ventures..................     (88,167)      (70,771)      (51,605)
Corporate assets...............................     193,710       188,441       166,217
                                                 ----------    ----------    ----------
Consolidated assets............................  $1,239,157    $1,154,269    $1,153,907
                                                 ==========    ==========    ==========
</TABLE>

NOTE N -- SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                               ------------------------------------------------------
                                               MARCH 31,    JUNE 30,    SEPTEMBER 30,    DECEMBER 31,
                                                 2000         2000          2000             2000
                                               ---------    --------    -------------    ------------
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                            <C>          <C>         <C>              <C>
Revenue......................................   $44,259     $48,682        $51,719         $51,207
Income from operations.......................    16,086      18,990         21,464          20,072
Net income...................................    11,299      13,313         14,787          13,233
Net income per common share
  Basic......................................      0.31        0.38           0.42            0.37
  Diluted....................................      0.31        0.38           0.42            0.37
</TABLE>

                                        61
<PAGE>   63
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED
                                                     ---------------------------------------------------
                                                     MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,
                                                       1999        1999         1999            1999
                                                     ---------   --------   -------------   ------------
                                                            (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                  <C>         <C>        <C>             <C>
Revenue............................................   $40,016    $42,843       $45,272        $45,023
Income from operations.............................    14,966     17,484        18,795         17,421
Net income.........................................     9,798     13,142        14,018         13,715
Net income per common share
  Basic............................................      0.26       0.38          0.41           0.39
  Diluted..........................................      0.26       0.38          0.41           0.39
</TABLE>

NOTE O -- CONTINGENT LIABILITIES AND COMMITMENTS

     As a general partner, we are contingently liable for $135 million of an
unconsolidated joint venture's debt.

     Under the terms of the SFPII agreements we are committed to make an option
payment of approximately $14 million. If we choose to exercise the option to
purchase SFP II properties or our partner's interest, the option payment will be
applied toward the purchase price of the properties.

NOTE P -- SUBSEQUENT EVENTS

     On January 30, 2001, we purchased the remaining 90% interest in SFPI for
$27.7 million. As a result of the purchase, the partnership is now wholly owned
by Shurgard. Concurrent with the closing, we repaid the partnership's
outstanding mortgage financing of approximately $45.0 million.

     In February 2001, we issued $200 million in senior unsecured notes
(approximately $198.4 million in net proceeds) which are ten year notes bearing
interest at 7.75% and are due 2011. The notes require semi-annual interest
payments due February 22 and August 22. Additionally, in February 2001, we
raised $86.25 million (approximately $83.4 million in net proceeds) through the
sale of 3.45 million shares of Series D Cumulative Redeemable Preferred Stock.
These preferred shares require quarterly distributions of 8.75% per year and are
callable at our option after five years, at a redemption price of $25 per share.
A portion of these proceeds were used to repay balances outstanding under our
line of credit.

     In February 2001, we expanded our revolving credit facility from $200 to
$360 million. This amended facility matures in February 2005 and requires
monthly interest payments at 125 basis points over LIBOR. Availability under
this line of credit is limited based on various financial covenants and
guarantees under certain tax retention operating leases.

     In February 2001, we executed an agreement to enter into up to $250 million
worth of tax retention operating leases. We anticipate that this arrangement
will fund most of our development pipeline for the next two years. Under the
related agreements, we will function as construction agent and tenant. At the
end of the lease term, we may acquire a property or it may be sold to a third
party, or the lease may be extended by mutual agreement; we have the option to
acquire a property at or before the end of its lease term. The purchase price
for the property will be equal to the total property cost plus interest carry
and a fixed equity return to the landlord at a combined rate of approximately
150 basis points over LIBOR.

     In February 2001, we committed to lend an additional $500,000 to STG.

                                        62
<PAGE>   64

                          INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Shurgard Storage Centers, Inc.
Seattle, Washington

     We have audited the accompanying consolidated balance sheets of Shurgard
Storage Centers, Inc. and subsidiaries (the Company) as of December 31, 2000 and
1999, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
2000. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
2000 and 1999, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America.

                                          /s/ DELOITTE & TOUCHE LLP
                                          Deloitte & Touche LLP

Seattle, Washington
February 8, 2001
(February 28, 2001 as to Note P)

                                        63
<PAGE>   65

ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information regarding the Registrant's executive officers called for by
Part III Item 10 is set forth in Item I of Part I herein under the caption
"Executive Officers of the Registrant." Information regarding directors of the
Company and Section 16 reporting is set forth in our proxy statement for the
annual meeting of shareholders to be held May 8, 2001, and is incorporated
herein by reference.

ITEM 11 -- EXECUTIVE COMPENSATION

     Information regarding executive compensation is set forth in our proxy
statement for the annual meeting of shareholders to be held May 8, 2001, and is
incorporated herein by reference.

ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information regarding security ownership of certain beneficial owners and
management is set forth in our proxy statement for the annual meeting of
shareholders to be held May 8, 2001, and is incorporated herein by reference.

ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information regarding certain relationships and related transactions is set
forth in our proxy statement for the annual meeting of shareholders to be held
May 8, 2001, and is incorporated herein by reference.

                                    PART IV

ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)1. Financial Statements

<TABLE>
<CAPTION>
                                                               PAGE
                                                                NO.
                                                              -------
<S>                                                           <C>
Consolidated Balance Sheets at December 31, 2000 and 1999...      45
For the years ended December 31, 2000, 1999 and 1998:
  Consolidated Statements of Income.........................      46
  Consolidated Statements of Shareholders' Equity...........      47
  Consolidated Statements of Cash Flows.....................      48
  Notes to Consolidated Financial Statements................   49-62
  Independent Auditors' Report..............................      63
</TABLE>

        2. Financial Statement Schedules

     All schedules have been omitted because either they are not applicable or
the required information is shown in the financial statements.

                                        64
<PAGE>   66

        3. Exhibits

<TABLE>
    <C>     <S>
      3.1   Articles of Incorporation of the Registrant(1)
      3.2   Designation of Rights and Preferences of Series A Junior
            Participating Preferred Stock (Exhibit 3.2)(2)
      3.3   Designation of Rights and Preferences of 8.8% Series B
            Cumulative Redeemable Preferred Stock (Exhibit 3.3)(2)
      3.4   Restated Bylaws of the Registrant (Exhibit 3.4)(2)
      3.5   Designation of Rights and Preferences of 8.7% Series C
            Cumulative Redeemable Preferred Stock (Exhibit 3)(3)
      4.1   Rights Agreement between the Registrant and Gemisys
            Corporation dated as of March 17, 1994 (Exhibit 2.1)(4)
      4.2   First Amendment to Rights Agreement between the Registrant
            and Gemisys Corporation dated May 13, 1997 (Exhibit 4.2)(5)
      4.3   Indenture between the Registrant and LaSalle National Bank,
            as Trustee, dated April 25, 1997, (Exhibit 10.4)(6)
      4.4   Supplemental Indenture dated July 11, 1997
      4.5   Form of 7 1/2% Notes due 2001 (Exhibit 4.1)(7)
      4.6   Form of 7 5/8% Notes due 2007 (Exhibit 4.2)(7)
     10.1   Amended and Restated Loan Agreement between Nomura Asset
            Capital Corp., as Lender, and SSC Property Holdings, Inc.,
            as Borrower, dated as of June 8, 1994 (Exhibit 10.4)(8)
     10.2   Amended and Restated Collection Account and Servicing
            Agreement among SSC Property Holdings, Inc., Pacific Mutual
            Life Insurance Company, LaSalle National Bank and Nomura
            Asset Capital Corp. dated as of June 8, 1994 (Exhibit
            10.5)(8)
     10.3   Amended and Restated Loan Agreement among Shurgard Storage
            Centers, Inc., Seattle-First National Bank, KeyBank of
            Washington, U.S. Bank of Washington and LaSalle National
            Bank dated September 9, 1996 (Exhibit 99.40)(9)
     10.4   First Amendment to Amended and Restated Loan Agreement dated
            as of November 14, 1996 (Exhibit 10.8)(5)
     10.5   Second Amendment to Amended and Restated Loan Agreement
            dated as of March 12, 1997 (Exhibit 10.10)(10)
     10.6   Third Amendment to Amended and Restated Loan Agreement dated
            as of July 27, 1997 (Exhibit 10.6)(11)
     10.7   Fourth Amendment to Amended and Restated Loan Agreement
            dated as of January 30, 1998 (Exhibit 10.7)(11)
     10.8   Fifth Amendment to Amended and Restated Loan Agreement dated
            as of May 1, 1998 ((Exhibit 10.1)(12)
     10.9   Sixth Amendment to Amended and Restated Loan Agreement dated
            as of October 27, 1998 (Exhibit 10.1)(13)
     10.10  Agreement and Plan of Merger between the Registrant and
            Shurgard Incorporated dated as of December 19, 1994 (Exhibit
            10.7)(14)
    *10.11  Amended and Restated 1993 Stock Option Plan (Exhibit
            10.7)(11)
    *10.12  Amended and Restated Stock Incentive Plan for Nonemployee
            Directors (Exhibit 10.7)(15)
    *10.13  1995 Long-Term Incentive Compensation Plan(16)
    *10.14  Form of Business Combination Agreement, together with
            schedule of actual agreements
</TABLE>

                                        65
<PAGE>   67
<TABLE>
    <C>     <S>
     10.15  Partnership Agreement, dated April 28, 1998, between
            Shurgard Development I, Inc. and Fremont Storage Partners I,
            L.P. forming Shurgard/Fremont Partners I (Exhibit 1.1)(17)
     10.16  Seventh Amendment to Amended and Restated Loan Agreement
            dated as of April 28, 1999 (Exhibit 10.3)(18)
     10.17  Partnership Agreement, dated March 17, 1999, between
            Shurgard Development II, Inc. and Fremont Storage Partners
            II, L.L.C, forming Shurgard/Fremont Partners II (Exhibit
            10.1)(18)
     10.18  First Amendment to Partnership Agreement between Shurgard
            Development II, Inc. and Fremont Storage Partners II, L.L.C,
            forming Shurgard/Fremont Partners II as of April 27, 1999.
            (Exhibit 10.2)(18)
     10.19  Second Amended and Restated Loan Agreement among Shurgard
            Storage Centers, Inc., Bank of America, N.A., Key Bank
            National Association, U.S. Bank National Association, and
            LaSalle Bank National Association, dated September 30, 1999.
            (Exhibit 10.1)(19)
     10.20  First Amendment to Second Amended and Restated Loan
            agreement among Shurgard Storage Centers, Inc., Bank of
            America, N.A., Key Bank National Association, U.S. Bank
            National Association, and LaSalle Bank National Association,
            dated September 30, 1999(20)
     10.21  Second Amendment to Second Amended and Restated Loan
            agreement among Shurgard Storage Centers, Inc., Bank of
            America, N.A., Key Bank National Association, U.S. Bank
            National Association, LaSalle Bank National Association, The
            Bank of Novia Scotia, and Bank One, dated December 16,
            1999(20)
     10.22  Separation Agreement and Mutual General Release among
            Shurgard Storage Centers, Inc. and Michael and Tina Rowe,
            dated January 26, 2000(20)
     10.23  Third Amendment to the Second Amended and Restated Loan
            Agreement among Shurgard Storage Centers, Inc., Bank of
            America, N.A., Key Bank National Association, U.S. Bank
            National Association, LaSalle Bank National Association, The
            Bank of Nova Scotia and Bank One, N.A., dated March 31,
            2000(21)
     10.24  Service Agreement between Shurgard Storage Centers, Inc.,
            David K. Grant, and SSC Benelux & Co., SCA dated June 7,
            2000(22)
     10.25  Limited Liability Company Agreement between Shurgard
            Development IV, Inc. and Chase Capital Partners Real Estate
            Storage, LLC forming CCP/Shurgard Venture, LLC, dated May
            12, 2000(22)
     10.26  Form of Business Combination Agreement dated July 27, 2000,
            together with schedule of actual agreements(23)
     10.27  2000 Long-Term Incentive Compensation Plan
     10.28  Agency Agreement between Shurgard Storage Centers, Inc. and
            First Security Bank, N. A., dated February 26, 2001
     10.29  Credit Agreement among Shurgard Storage Centers, Inc., First
            Security Bank, N.A. and Bank of America, N.A., dated
            February 26, 2001
     10.30  Lease Agreement between First Security Bank, N.A. and
            Shurgard Storage Centers, Inc., dated February 26, 2001
     10.31  Security Agreement between Shurgard Storage Centers, Inc.,
            First Security Bank, N.A. and Bank of America, N.A., dated
            February 26, 2001
     10.32  Participation Agreement among Shurgard Storage Centers,
            Inc., Shurgard Evergreen, L.P., Shurgard Texas, L.P.,
            Shurgard Institutional Fund, L.P. II, SSC Evergreen, Inc.,
            First Security Bank, N.A., Bank of America, N.A., Bank
            Hapoalim B.M., The Bank of Nova Scotia, Bank One, N.A.,
            Commerzbank, AG, New York and Grand Cayman Branches,
            Keybank, N.A., Suntrust Bank, U.S. Bank, N.A., Washington
            Mutual Bank, Fleet National Bank, and LaSalle Bank, N.A.,
            dated February 26, 2001
</TABLE>

                                        66
<PAGE>   68
<TABLE>
    <C>     <S>
     10.33  Trust Agreement among Shurgard Storage Centers, Inc., First
            Security Bank, N.A., Bank of America, N.A., Bank Hapoalim,
            B.M., Bank of Nova Scotia, Commerzbank, AG, New York and
            Grand Cayman Branches, Keybank, N.A., Suntrust Bank, U.S.
            Bank, N.A., Washington Mutual Bank, Fleet National Bank, and
            LaSalle Bank, N.A., dated February 26, 2001
     10.34  Amended and Restated Limited Liability Company Agreement of
            CCP/Shurgard Venture, LLC, between Shurgard Development IV,
            Inc. and CCPRE-Storage, LLC, dated December 26, 2000.
     10.35  Loan Agreement between CCP/Shurgard Venture, LLC and General
            Electric Capital Corporation, dated December 28, 2000.
     10.36  Contribution Agreement between Shurgard Development IV,
            Inc., Shurgard Storage Centers, Inc., Shurgard Texas L.P.,
            SSC Evergreen, CCPRE-Storage, LLC, and CCP/Shurgard Venture,
            LLC, dated December 28, 2000.
     10.37  Third Amended and Restated Loan Agreement among Shurgard
            Storage Centers, Inc., and Bank of America, N.A., Bank One,
            N.A. Commerzbank AG, New York and Grand Cayman Branches and
            U.S. Bank, N.A. dated February 26, 2001.
     12.1   Statement Re: computation of Earnings to Fixed Charges
     21.1   Subsidiaries of the Registrant
     23.1   Consent of Deloitte & Touche LLP
</TABLE>

---------------
 (1) Incorporated by reference to Exhibit B contained in the Definitive
     Additional Proxy Materials on Form DEF14A filed on April 29, 1997.

 (2) Incorporated by reference to designated exhibit filed with the Registrant's
     Current Report on Form 8-K dated May 14, 1997.

 (3) Incorporated by reference to designated exhibit filed with Registrant's
     Registration Statement on Form 8-A filed on December 4, 1998.

 (4) Incorporated by reference to designated exhibit filed with the Registrant's
     Registration Statement on Form 8-A filed on March 17, 1994.

 (5) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 8-B Registration on July 16, 1997.

 (6) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended March 31, 1997.

 (7) Incorporated by reference to designated exhibit filed with the Registrant's
     Current Reports on Form 8-K dated April 22, 1997.

 (8) Incorporated by reference to designated exhibit filed with the Registrant's
     Registration Statement on Form S-4, Amendment No. 1, filed on January 25,
     1995.

 (9) Incorporated by reference to designated exhibit filed with the Registrant's
     Schedule 13E-3/A Amendment No. 11 filed on October 12, 1996.

(10) Incorporated by reference to designated exhibit filed with the Registrant's
     Annual Report on Form 10-K for the year-ended December 31, 1996.

(11) Incorporated by reference to designated exhibit filed with the Registrant's
     Annual Report on Form 10-K for the year-ended December 31, 1997.

(12) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended March 31, 1998.

(13) Incorporated by reference to designated exhibit filed with the Registrant's
     Current Report on Form 8-K filed December 3, 1998.

(14) Incorporated by reference to Appendix I filed as part of the Registrant's
     definitive Proxy Statement/ Prospectus dated February 15, 1995.

                                        67
<PAGE>   69

(15) Incorporated by reference to designated exhibit filed with the Registrant's
     Annual Report on Form 10-K filed on March 31, 1995.

(16) Incorporated by reference to Appendix B filed as part of the Registrant's
     definitive Proxy Statement dated June 8, 1995.

(17) Incorporated by reference to designated exhibit filed with the Registrant's
     Current Reports on Form 8-K dated May 29, 1998.

(18) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended March 31, 1999.

(19) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended September 30, 1999.

(20) Incorporated by reference to designated exhibit filed with the Registrant's
     Annual Report on Form 10-K filed March 14, 2000.

(21) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended March 31, 2000.

(22) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended June 30, 2000.

(23) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended September 30, 2000.

  *  Management contract or compensatory plan or arrangement

     (b) Reports on Form 8-K

     On December 26, 2000, we filed Form 8-K which announced that the Company
exercised its option to purchase the partnership interest of Fremont Storage
Partners I, L.P. in Shurgard/Fremont Partners I.

                                        68
<PAGE>   70

                                   SIGNATURE

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Seattle, State of Washington, on the 5th day of
March 2001.

                                          SHURGARD STORAGE CENTERS, INC.

                                          By:       /s/ HARRELL BECK
                                            ------------------------------------
                                                        Harrell Beck
                                                   Senior Vice President
                                                  Chief Financial Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Annual Report on Form 10-K has been signed by the following
persons in the capacities indicated below on the 5th day of March 2001.

<TABLE>
<CAPTION>
                      SIGNATURE                                              TITLE
                      ---------                                              -----
<S>                                                        <C>
                /s/ CHARLES K. BARBO                       Chairman of the Board, President and Chief
-----------------------------------------------------        Executive Officer (Principal Executive
                  Charles K. Barbo                         Officer) Senior Vice President, Treasurer,

                  /s/ HARRELL BECK                            Chief Financial Officer and Director
-----------------------------------------------------         (Principal Financial and Accounting
                    Harrell Beck                                            Officer)

                /s/ GEORGE HUTCHINSON                                       Director
-----------------------------------------------------
                  George Hutchinson

                 /s/ RAYMOND JOHNSON                                        Director
-----------------------------------------------------
                   Raymond Johnson

                   /s/ W. J. SMITH                                          Director
-----------------------------------------------------
                     W. J. Smith

                /s/ W. THOMAS PORTER                                        Director
-----------------------------------------------------
                  W. Thomas Porter
</TABLE>

                                        69
<PAGE>   71
                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
   EXHIBIT
     NO.                           DESCRIPTION
   -------                         -----------
    <C>     <S>
      3.1   Articles of Incorporation of the Registrant(1)
      3.2   Designation of Rights and Preferences of Series A Junior
            Participating Preferred Stock (Exhibit 3.2)(2)
      3.3   Designation of Rights and Preferences of 8.8% Series B
            Cumulative Redeemable Preferred Stock (Exhibit 3.3)(2)
      3.4   Restated Bylaws of the Registrant (Exhibit 3.4)(2)
      3.5   Designation of Rights and Preferences of 8.7% Series C
            Cumulative Redeemable Preferred Stock (Exhibit 3)(3)
      4.1   Rights Agreement between the Registrant and Gemisys
            Corporation dated as of March 17, 1994 (Exhibit 2.1)(4)
      4.2   First Amendment to Rights Agreement between the Registrant
            and Gemisys Corporation dated May 13, 1997 (Exhibit 4.2)(5)
      4.3   Indenture between the Registrant and LaSalle National Bank,
            as Trustee, dated April 25, 1997, (Exhibit 10.4)(6)
      4.4   Supplemental Indenture dated July 11, 1997
      4.5   Form of 7 1/2% Notes due 2001 (Exhibit 4.1)(7)
      4.6   Form of 7 5/8% Notes due 2007 (Exhibit 4.2)(7)
     10.1   Amended and Restated Loan Agreement between Nomura Asset
            Capital Corp., as Lender, and SSC Property Holdings, Inc.,
            as Borrower, dated as of June 8, 1994 (Exhibit 10.4)(8)
     10.2   Amended and Restated Collection Account and Servicing
            Agreement among SSC Property Holdings, Inc., Pacific Mutual
            Life Insurance Company, LaSalle National Bank and Nomura
            Asset Capital Corp. dated as of June 8, 1994 (Exhibit
            10.5)(8)
     10.3   Amended and Restated Loan Agreement among Shurgard Storage
            Centers, Inc., Seattle-First National Bank, KeyBank of
            Washington, U.S. Bank of Washington and LaSalle National
            Bank dated September 9, 1996 (Exhibit 99.40)(9)
     10.4   First Amendment to Amended and Restated Loan Agreement dated
            as of November 14, 1996 (Exhibit 10.8)(5)
     10.5   Second Amendment to Amended and Restated Loan Agreement
            dated as of March 12, 1997 (Exhibit 10.10)(10)
     10.6   Third Amendment to Amended and Restated Loan Agreement dated
            as of July 27, 1997 (Exhibit 10.6)(11)
     10.7   Fourth Amendment to Amended and Restated Loan Agreement
            dated as of January 30, 1998 (Exhibit 10.7)(11)
     10.8   Fifth Amendment to Amended and Restated Loan Agreement dated
            as of May 1, 1998 ((Exhibit 10.1)(12)
     10.9   Sixth Amendment to Amended and Restated Loan Agreement dated
            as of October 27, 1998 (Exhibit 10.1)(13)
     10.10  Agreement and Plan of Merger between the Registrant and
            Shurgard Incorporated dated as of December 19, 1994 (Exhibit
            10.7)(14)
    *10.11  Amended and Restated 1993 Stock Option Plan (Exhibit
            10.7)(11)
    *10.12  Amended and Restated Stock Incentive Plan for Nonemployee
            Directors (Exhibit 10.7)(15)
    *10.13  1995 Long-Term Incentive Compensation Plan(16)
    *10.14  Form of Business Combination Agreement, together with
            schedule of actual agreements
</TABLE>

<PAGE>   72
<TABLE>
    <C>     <S>
     10.15  Partnership Agreement, dated April 28, 1998, between
            Shurgard Development I, Inc. and Fremont Storage Partners I,
            L.P. forming Shurgard/Fremont Partners I (Exhibit 1.1)(17)
     10.16  Seventh Amendment to Amended and Restated Loan Agreement
            dated as of April 28, 1999 (Exhibit 10.3)(18)
     10.17  Partnership Agreement, dated March 17, 1999, between
            Shurgard Development II, Inc. and Fremont Storage Partners
            II, L.L.C, forming Shurgard/Fremont Partners II (Exhibit
            10.1)(18)
     10.18  First Amendment to Partnership Agreement between Shurgard
            Development II, Inc. and Fremont Storage Partners II, L.L.C,
            forming Shurgard/Fremont Partners II as of April 27, 1999.
            (Exhibit 10.2)(18)
     10.19  Second Amended and Restated Loan Agreement among Shurgard
            Storage Centers, Inc., Bank of America, N.A., Key Bank
            National Association, U.S. Bank National Association, and
            LaSalle Bank National Association, dated September 30, 1999.
            (Exhibit 10.1)(19)
     10.20  First Amendment to Second Amended and Restated Loan
            agreement among Shurgard Storage Centers, Inc., Bank of
            America, N.A., Key Bank National Association, U.S. Bank
            National Association, and LaSalle Bank National Association,
            dated September 30, 1999(20)
     10.21  Second Amendment to Second Amended and Restated Loan
            agreement among Shurgard Storage Centers, Inc., Bank of
            America, N.A., Key Bank National Association, U.S. Bank
            National Association, LaSalle Bank National Association, The
            Bank of Novia Scotia, and Bank One, dated December 16,
            1999(20)
     10.22  Separation Agreement and Mutual General Release among
            Shurgard Storage Centers, Inc. and Michael and Tina Rowe,
            dated January 26, 2000(20)
     10.23  Third Amendment to the Second Amended and Restated Loan
            Agreement among Shurgard Storage Centers, Inc., Bank of
            America, N.A., Key Bank National Association, U.S. Bank
            National Association, LaSalle Bank National Association, The
            Bank of Nova Scotia and Bank One, N.A., dated March 31,
            2000(21)
     10.24  Service Agreement between Shurgard Storage Centers, Inc.,
            David K. Grant, and SSC Benelux & Co., SCA dated June 7,
            2000(22)
     10.25  Limited Liability Company Agreement between Shurgard
            Development IV, Inc. and Chase Capital Partners Real Estate
            Storage, LLC forming CCP/Shurgard Venture, LLC, dated May
            12, 2000(22)
     10.26  Form of Business Combination Agreement dated July 27, 2000,
            together with schedule of actual agreements(23)
     10.27  2000 Long-Term Incentive Compensation Plan
     10.28  Agency Agreement between Shurgard Storage Centers, Inc. and
            First Security Bank, N. A., dated February 26, 2001
     10.29  Credit Agreement among Shurgard Storage Centers, Inc., First
            Security Bank, N.A. and Bank of America, N.A., dated
            February 26, 2001
     10.30  Lease Agreement between First Security Bank, N.A. and
            Shurgard Storage Centers, Inc., dated February 26, 2001
     10.31  Security Agreement between Shurgard Storage Centers, Inc.,
            First Security Bank, N.A. and Bank of America, N.A., dated
            February 26, 2001
     10.32  Participation Agreement among Shurgard Storage Centers,
            Inc., Shurgard Evergreen, L.P., Shurgard Texas, L.P.,
            Shurgard Institutional Fund, L.P. II, SSC Evergreen, Inc.,
            First Security Bank, N.A., Bank of America, N.A., Bank
            Hapoalim B.M., The Bank of Nova Scotia, Bank One, N.A.,
            Commerzbank, AG, New York and Grand Cayman Branches,
            Keybank, N.A., Suntrust Bank, U.S. Bank, N.A., Washington
            Mutual Bank, Fleet National Bank, and LaSalle Bank, N.A.,
            dated February 26, 2001
</TABLE>

<PAGE>   73
<TABLE>
    <C>     <S>
     10.33  Trust Agreement among Shurgard Storage Centers, Inc., First
            Security Bank, N.A., Bank of America, N.A., Bank Hapoalim,
            B.M., Bank of Nova Scotia, Commerzbank, AG, New York and
            Grand Cayman Branches, Keybank, N.A., Suntrust Bank, U.S.
            Bank, N.A., Washington Mutual Bank, Fleet National Bank, and
            LaSalle Bank, N.A., dated February 26, 2001
     10.34  Amended and Restated Limited Liability Company Agreement of
            CCP/Shurgard Venture, LLC, between Shurgard Development IV,
            Inc. and CCPRE-Storage, LLC, dated December 26, 2000.
     10.35  Loan Agreement between CCP/Shurgard Venture, LLC and General
            Electric Capital Corporation, dated December 28, 2000.
     10.36  Contribution Agreement between Shurgard Development IV,
            Inc., Shurgard Storage Centers, Inc., Shurgard Texas L.P.,
            SSC Evergreen, CCPRE-Storage, LLC, and CCP/Shurgard Venture,
            LLC, dated December 28, 2000.
     10.37  Third Amended and Restated Loan Agreement among Shurgard
            Storage Centers, Inc., and Bank of America, N.A., Bank One,
            N.A. Commerzbank AG, New York and Grand Cayman Branches and
            U.S. Bank, N.A. dated February 26, 2001.
     12.1   Statement Re: computation of Earnings to Fixed Charges
     21.1   Subsidiaries of the Registrant
     23.1   Consent of Deloitte & Touche LLP
</TABLE>

---------------
 (1) Incorporated by reference to Exhibit B contained in the Definitive
     Additional Proxy Materials on Form DEF14A filed on April 29, 1997.

 (2) Incorporated by reference to designated exhibit filed with the Registrant's
     Current Report on Form 8-K dated May 14, 1997.

 (3) Incorporated by reference to designated exhibit filed with Registrant's
     Registration Statement on Form 8-A filed on December 4, 1998.

 (4) Incorporated by reference to designated exhibit filed with the Registrant's
     Registration Statement on Form 8-A filed on March 17, 1994.

 (5) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 8-B Registration on July 16, 1997.

 (6) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended March 31, 1997.

 (7) Incorporated by reference to designated exhibit filed with the Registrant's
     Current Reports on Form 8-K dated April 22, 1997.

 (8) Incorporated by reference to designated exhibit filed with the Registrant's
     Registration Statement on Form S-4, Amendment No. 1, filed on January 25,
     1995.

 (9) Incorporated by reference to designated exhibit filed with the Registrant's
     Schedule 13E-3/A Amendment No. 11 filed on October 12, 1996.

(10) Incorporated by reference to designated exhibit filed with the Registrant's
     Annual Report on Form 10-K for the year-ended December 31, 1996.

(11) Incorporated by reference to designated exhibit filed with the Registrant's
     Annual Report on Form 10-K for the year-ended December 31, 1997.

(12) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended March 31, 1998.

(13) Incorporated by reference to designated exhibit filed with the Registrant's
     Current Report on Form 8-K filed December 3, 1998.

(14) Incorporated by reference to Appendix I filed as part of the Registrant's
     definitive Proxy Statement/ Prospectus dated February 15, 1995.

<PAGE>   74

(15) Incorporated by reference to designated exhibit filed with the Registrant's
     Annual Report on Form 10-K filed on March 31, 1995.

(16) Incorporated by reference to Appendix B filed as part of the Registrant's
     definitive Proxy Statement dated June 8, 1995.

(17) Incorporated by reference to designated exhibit filed with the Registrant's
     Current Reports on Form 8-K dated May 29, 1998.

(18) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended March 31, 1999.

(19) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended September 30, 1999.

(20) Incorporated by reference to designated exhibit filed with the Registrant's
     Annual Report on Form 10-K filed March 14, 2000.

(21) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended March 31, 2000.

(22) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended June 30, 2000.

(23) Incorporated by reference to designated exhibit filed with the Registrant's
     Form 10-Q for the quarter ended September 30, 2000.

  *  Management contract or compensatory plan or arrangement

     (b) Reports on Form 8-K

     On December 26, 2000, we filed Form 8-K which announced that the Company
exercised its option to purchase the partnership interest of Fremont Storage
Partners I, L.P. in Shurgard/Fremont Partners I.