UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(Mark One)

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

    For the fiscal year ended December 31, 1997

                                       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 0-18294

                        METRIC INCOME TRUST SERIES, INC.
             (Exact name of Registrant as specified in its charter)

             CALIFORNIA                                  94-3087630
----------------------------------------    ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

       One California Street
      San Francisco, California                        94111-5415
---------------------------------------     ------------------------------------
(Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code: (415) 678-2000
                                                    (800) 347-6707 in all states

Securities registered pursuant to Section 12(b) of the Act:      None
Securities registered pursuant to Section 12(g) of the Act:      Common Stock

         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 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 ]

         No market for the Shares of Common Stock exists and  therefore a market
value for such Shares cannot be determined.

         Shares of Common Stock outstanding as of February 26, 1998:  6,321,641

                   DOCUMENTS INCORPORATED HEREIN BY REFERENCE:

Information with respect to directors in Item 10 and the information required by
Items  11-13 is  incorporated  by  reference  from  the  proxy  material  of the
Registrant in connection with its Annual Meeting of  Shareholders  scheduled for
June 1998.



<PAGE>



                        METRIC INCOME TRUST SERIES, INC.,
                            a California Corporation

                                     PART I

Item 1.  Business.

Metric Income Trust Series, Inc., a California corporation (hereinafter referred
to as the "Fund" or  "Registrant"),  was formed in 1989.  On April 1, 1997,  the
operations  of Metric  Realty,  which had been the Advisor to the Fund since the
Fund's inception,  and certain related companies were merged with MetLife Realty
Group,  Inc. ("MRG") into SSR Realty Advisors,  Inc. ("SSR Realty"),  a Delaware
corporation.  All  companies  involved in this  transaction  are wholly owned by
Metropolitan  Life Insurance  Company.  Metric Realty's  managing  partner as of
April 1, 1997 became SSR Realty,  which maintains its principal  office in White
Plains, New York, and a major corporate office in San Francisco, California. The
Advisory  Agreement  between  Metric  Realty and the Fund was assigned by Metric
Realty to SSR Realty,  effective  March 27, 1997, with the consent of the Fund's
Independent  Directors.  This  assignment  has  had no  material  effect  on the
advisory  services  provided to the Fund.  At the Board Meeting held on February
26, 1998, the Independent  Directors also approved the extension of the Advisory
Agreement to December 31, 1998.

The Fund's initial Registration Statement,  filed pursuant to the Securities Act
of 1933 (No.  33-27083),  was declared  effective by the Securities and Exchange
Commission on June 30, 1989. The Registrant  marketed its securities pursuant to
its Prospectus dated June 30, 1989 and thereafter supplemented  (hereinafter the
"Prospectus").  Such  Prospectus was filed with the Commission  pursuant to Rule
424(b) of the Securities Act of 1933.

The principal business of the Fund is to acquire income producing net lease real
properties and investments in mortgage-backed securities which are guaranteed as
to payment of principal  and interest by the U.S.  Government,  U.S.  Government
agencies or  instrumentalities,  or federally chartered  corporations.  The Fund
qualifies as a real estate  investment trust ("REIT") under Sections 856 through
860 of the Internal  Revenue  Code.  The  proceeds of the offering  were used to
purchase  mortgage-backed  securities and twenty-five net lease properties which
are described in Item 2.

Beginning in July 1989  through June 1990 the Fund offered and sold  $60,254,000
in Shares of Common  Stock.  Through  December 31, 1991,  additional  funding of
$2,800,000 was provided from the Dividend  Reinvestment Plan ("DRP").  Effective
with the dividend paid on January 15, 1992 to Shareholders of record on December
31, 1991, the DRP was suspended as a result of the Chapter 11 bankruptcy  filing
by  National  Convenience  Stores,  Inc.  ("NCS"),  which  was the  lessee of 19
convenience  stores  owned  by the  Fund  (see  Item 7 for  further  information
regarding the NCS bankruptcy and related events). All DRP participants  received
the 1992,  1993 and January 15, 1994 dividends in cash. In September,  1993, the
Board of  Directors  voted  unanimously  to  reinstate  the DRP and activate the
Liquidity  Option Program ("LOP")  effective for the first quarter 1994 dividend
which  was  paid in May  1994.  In June  1996,  the  Board  of  Directors  voted
unanimously to terminate the DRP and LOP effective as to dividend  payments made
after  August  15,  1996 and to  proceed  with  the  liquidation  of the  Fund's
portfolio  over  the  next  several  years.  To date  all but one of the  Fund's
properties have been sold.

Environmental site assessments were performed for five of the Fund's convenience
stores and all other properties at the time of property acquisition. No material
adverse environmental conditions or liabilities were identified at that time. In
no case has the Fund received notice that it is a potentially  responsible party
with respect to an environmental  clean-up site. However,  Phase I Environmental
Site Assessments  commissioned by MITS in connection with the marketing for sale
of the convenience  stores revealed that the tenant of the property in Rubidoux,
California  had  reported  hydrocarbon  contaminants  at the site to  regulatory
authorities in April 1994.  Per the terms of the lease,  the lessee was required
to notify MITS at the time of  discovery of these  contaminants  and to promptly
remediate  the problem but no such action was taken.  The Advisor  notified  the
tenant of its default and asserted the rights and remedies  available  under the
lease.  In December 1997 San Bernardino  County approved a plan submitted by the
tenant  requiring  that the  contamination  be  monitored  only.  The Advisor is
finalizing negotiations for an agreement with the tenant whereby the tenant will
agree to indemnify  both MITS and any purchaser of the property,  and is working
with the tenant to define the exact terms of the indemnification.

The Fund or its tenant maintains  property and liability  insurance  coverage on
the Fund's one property and the Fund believes such coverage to be adequate.


                                        1

<PAGE>



Investment  in the Fund is subject to certain  risks,  including the lack of any
public  market for the Fund's  Shares which  adversely  affects the liquidity of
Shareholders'  investments in the Fund;  potential  restrictions on transfers of
Shares which might jeopardize the Fund's qualification as a REIT; limitations on
the  percentage  of the Fund's  Shares owned by any one person;  market risks of
mortgage-backed securities related to their sensitivity to interest rate changes
(such as the fact that an increase  in interest  rates will result in a decrease
in the  value of such  securities  and a  decrease  in rates  may  result  in an
increased  incidence of prepayment of principal at a time when  reinvestment  at
favorable  rates would be impossible);  the possibility  that the Fund might not
continue  to  qualify  as a REIT;  normal  risks  generally  attendant  upon the
ownership  of real estate such as  vacancies,  rent  levels,  changes in general
economic or fiscal conditions, regulatory risks, including zoning and other land
use laws, and natural  disasters;  costs or liabilities which may arise from any
hazardous  materials affecting the Fund's properties;  potential  non-compliance
with Americans with Disabilities Act; losses which could result from the default
or bankruptcy of any tenant of the Fund; and uninsured losses.

In   anticipation  of  the  year  2000,  the  Advisor  is  implementing  a  Year
2000-compliant  accounting  software product to replace its existing system. The
new system  will be fully  operational  by early  1999.  All  software  programs
currently  in use  by the  Advisor  have  been  inventoried  and  programs  were
identified which will require modification to correct date handling methodology.
Any  necessary  modifications  will be completed by the end of 1998.  The Fund's
Servicing  and  Transfer  Agent,  Gemisys,  utilizes  a platform  programmed  to
correctly interpret the change to the new century. All necessary changes will be
undertaken at no cost to the Fund.

Item 2.  Properties.

A description of the properties now or formerly owned by the Fund is as follows:


                                    Date of     Date of
Name and Location                   Purchase      Sale       Type       Size
-----------------                   --------      ----       ----       ----

Pearle Express Stores: (3)
   24 Orland Square Drive             11/89       7/96      Retail     5,900
     Orland Park, Illinois                                             sq. ft.

   1281 Southlake Circle              11/89       3/98      Retail     5,800
     Morrow, Georgia                                                   sq. ft.

National Convenience Stores:
   Stop N Go Store #2092 (5)          11/89        --       Retail     3,100
     Mission Road                                                      sq. ft.
     Rubidoux, California

   Stop N Go Store #1332 (12)         11/89       12/97     Retail     3,100
     N. Little School Road                                             sq. ft.
     Arlington (Kennedale), Texas

   Stop N Go Store #1386 (12)         11/89       12/97     Retail     3,100
     Babcock Road                                                      sq. ft.
     San Antonio, Texas

   Stop N Go Store #2065 (5)          11/89       12/97     Retail     3,100
     Baseline Road                                                     sq. ft.
     Fontana, California

   Stop N Go Store #2374 (5)          11/89       12/97     Retail     3,100
     E. Orangethorpe Road                                              sq. ft.
     Placentia, California


                                        2

<PAGE>



Item 2.  Properties (continued).

                                  Date of    Date of
Name and Location                Purchase      Sale       Type       Size
-----------------                --------      ----       ----       ----

Stop N Go Store #2406 (5)          11/89       12/97     Retail     3,100
  Windy Hill                                                        sq. ft.
  Marietta, Georgia

Stop N Go Store #285 (12)          11/89       12/97     Retail     3,100
  Altamesa Blvd                                                     sq. ft.
  Fort Worth, Texas

Stop N Go Store #308 (12)          11/89       12/97     Retail     3,100
  West Tarrant Blvd                                                 sq. ft.
  Grand Prairie, Texas

Stop N Go #328 (12)                11/89       12/97     Retail     3,600
  Fredericksburg Blvd                                               sq. ft.
  San Antonio, Texas

Stop N Go Store #2378 (11)         11/89       7/97      Retail     3,100
  Green Oaks Blvd                                                   sq. ft.
  Arlington, Texas

Stop N Go #3592 (10)               11/89       3/97      Retail     2,400
  25th/Loop 197                                                     sq. ft.
  Texas City, Texas

Stop N Go Store #655 (9)           11/89       3/97      Retail     3,100
  Northwest Highway                                                 sq. ft.
  Dallas, Texas

Stop N Go #3571 (8)                11/89       3/97      Retail     2,400
  N. Circle                                                         sq. ft.
  Sealy, Texas

Stop N Go #3583 (7)                11/89       2/97      Retail     2,400
  Hwy 288                                                           sq. ft.
  Clute, Texas

Stop N Go Store #674 (5)           11/89       11/96     Retail     3,100
  Archibald                                                         sq. ft.
  Rancho Cucamonga, California

Stop N Go Store #3755 (6)          11/89       12/96     Retail     2,900
  FM 1960                                                           sq. ft.
  Houston, Texas

Stop N Go Store #1714 (1)          11/89       12/93     Retail     3,100
  Grand Avenue Parkway                                              sq. ft.
  Pflugerville, Texas

Stop N Go Store #3531 (1)          11/89       08/93     Retail     2,400
  Seawall Blvd                                                      sq. ft.
  Galveston, Texas

Stop N Go Store #3254 (1)          11/89       06/93     Retail     2,400
  Stedwick Street                                                   sq. ft.
  San Antonio, Texas

                                       3
<PAGE>
Item 2.  Properties (continued).

                                    Date of   Date of
Name and Location                   Purchase    Sale       Type        Size
-----------------                   --------    ----       ----        ----

Other Stores:

   Wickes Furniture Store           1/90        12/97     Retail      51,000
     Torrance, California                                             sq. ft.

   Haverty's Furniture Store        12/94       10/97     Retail      55,000
     Plano, Texas                                                     sq. ft.

   Sam's Club (2)                   5/90        6/96      Retail      108,000
     Menomonee Falls, Wisconsin                                       sq. ft.

   Former Phar-Mor Store (4)        12/90       3/95      Retail      56,400
     Franklin Township, Ohio                                          sq. ft.



(1)      In December  1991 NCS filed a petition with the U.S.  Bankruptcy  Court
         for reorganization  under Chapter 11 of the federal Bankruptcy Code. As
         a result of the  bankruptcy  proceedings,  three  stores were closed in
         1992 for which the  leases  were  rejected  and those  properties  were
         subsequently sold to unaffiliated buyers (see Item 7).
(2)      Formerly Wholesale Club. The Fund's store was vacated in April 1992 and
         100% of the building was  subleased in 1994 and 1995. On June 25, 1996,
         the building was sold to an unaffiliated buyer.
(3)      Formerly  Eyelab  Superstores.  On July  10,  1996,  the  Orland  Park,
         Illinois store was sold to an unaffiliated buyer, and on March 3, 1998,
         the Morrow, Georgia store was sold to an unaffiliated buyer.
(4)      On March 15, 1995, the building was sold to an unaffiliated buyer.
(5)      In April 1994,  through a purchase and exchange  transaction  with NCS,
         Circle K became  the  operator  of five of the Fund's  stores,  four in
         California  and  one  in  Georgia.  Although  lease  payments  for  the
         remaining  store owned by the Fund are now received  from Circle K, NCS
         remains  financially  liable under the terms of the lease.  On November
         12, 1996, the store located in Rancho Cucamonga, California was sold to
         an unaffiliated  buyer, and on December 23, 1997, the stores located in
         Fontana and Placentia,  California,  and the store located in Marietta,
         Georgia were sold to an unaffiliated buyer.
(6)      In August 1994, a portion of the land  was  sold  through condemnation.
         On December 19, 1996, the store was sold to an unaffiliated buyer.
(7)      On  February  28, 1997  the  store in  Clute,  Texas  was  sold  to  an
         unaffiliated buyer. (8) On March 5, 1997  the  store  in  Sealy,  Texas
         was  sold  to an unaffiliated buyer. (9) On March 12, 1997 the store in
         Dallas, Texas was sold to an unaffiliated buyer. (10) On March 28, 1997
         the store in Texas City, Texas was sold to an  unaffiliated  buyer.(11)
         On July 24,  1997 the store in  Arlington (Green Oaks Blvd.), Texas was
         sold to an unaffiliated buyer.
(12)     On December  23,  1997 the stores in San  Antonio,  Arlington  (Babcock
         Road), Arlington (Kennedale),  Grand Prairie and Fort Worth, Texas were
         sold to an unaffiliated buyer.

All of the Registrant's properties are or were owned in fee.


                                        4

<PAGE>



See Selected  Financial  Data in Item 6 for lease income.  See the  Consolidated
Financial Statements in Item 8 for information  regarding the Fund's properties.
An occupancy summary is set forth on the chart following:

                                OCCUPANCY SUMMARY


                                              Occupancy rate (%)
                                                at December 31
                                        1997         1996          1995
                                        ----         ----          ----
COMMERCIAL BUILDINGS:
Pearle Express Stores (1) .....          100%         100%          100%

National Convenience Stores (2)          100          100           100

Wickes Furniture Store ........          N/A          100           100

Sam's Club (4) ................          N/A          N/A           100

Former Phar-Mor Store (3) .....          N/A          N/A           N/A

Haverty's Furniture Store .....          N/A          100           100



(1)      Represents  occupancy  at  the Pearle Express store in Morrow, Georgia,
         which was sold in March 1998.  In July 1996, the Orland  Park, Illinois
         store was sold.
(2)      Represents occupancy at the remaining store owned by the Fund. In April
         1994,  through a purchase and exchange  transaction  with NCS, Circle K
         became the operator of five of the Fund's  stores,  four in  California
         and one in Georgia.  In November and December  1996,  two of the stores
         were sold,  followed by another in February 1997,  three in March 1997,
         one in July  1997,  and  eight  in  December  1997.  See  Note 9 to the
         consolidated  financial  statements.  Although  lease  payments for the
         remaining store, located in Rubidoux, California, are now received from
         Circle K, NCS remains financially liable under the terms of the lease.
(3)      In August 1992 Phar-Mor  filed for  protection  under Chapter 11 of the
         federal  Bankruptcy  Code  (see  Item  7 and  Item  8,  Note  7 to  the
         consolidated financial statements).  Phar-Mor rejected the Fund's lease
         effective May 15, 1993 after closing the store at the end of April. The
         store was  subdivided  in 1994 and  24,709  square  feet was  leased to
         Superpetz, Inc. The building was subsequently sold on March 15, 1995.
(4)      Represents  economic occupancy at December 31, 1995. Lessee vacated the
         store in April 1992, but remained  current in its lease  obligations to
         the Fund.  During the fourth quarter of 1994 and first quarter of 1995,
         the Fund's Advisor reviewed and approved two subleases presented by the
         lessee and the  building  was 100%  occupied  until it was sold in June
         1996.

Item 3.  Legal Proceedings.

The Fund has been a creditor in  bankruptcy  proceedings  filed by Phar-Mor (See
Item 7 and Item 8, Note 7 to the consolidated financial statements). In December
1994,  Phar-Mor filed in these proceedings a preference  recovery action against
several  hundred  vendors and  landlords,  including the Fund. The amount of the
preferential  payments  alleged  to have  been  made to the  Fund  was  $90,250,
consisting of rent paid to the Fund within 90 days of the filing of the Phar-Mor
bankruptcy  petitions.  This preference  action was dismissed in connection with
the  confirmation  of a  reorganization  plan for Phar-Mor.  In August 1995, the
Court  confirmed  Phar-Mor's  proposed  reorganization  plan  which  called  for
unsecured  creditors to receive a portion of a pool of the  company's new stock,
as well as warrants to purchase  additional  stock at a fixed price.  In October
1996,  the Fund  received  approximately  $19,000  from  Phar-Mor to satisfy its
administrative  claim and  agreed  to settle  its  remaining  outstanding  lease
rejection claim for approximately  $629,000. This settlement was approved by the
Bankruptcy  Court in January 1997. To satisfy its claim, in March 1997, the Fund
received  1,058 shares of stock and 881  warrants,  which were sold in June 1997
for approximately $7,000.

                                        5

<PAGE>



Item 4.  Submission of Matters to a Vote of Security Holders.

No matter was submitted to a vote of security  holders during the period covered
by this Report.

                                     PART II

Item 5.  Market for  Registrant's Shares of Common Stock and Related Stockholder
         Matters.

No public market for the Shares exists, nor is one expected to develop. However,
Shares of Common Stock were sold through the  Dividend  Reinvestment  Plan (DRP)
pursuant to the Liquidity  Option Program (LOP).  The per Share price for Shares
acquired  through the DRP with the proceeds of the dividends was  established by
the Fund's Board of Directors,  pursuant to a formula  having as its  components
independent third-party appraisals of the Fund's properties as of December 31 of
each year, the market value of the Fund's  mortgage-backed  securities,  and the
net book value of its other assets and  liabilities as of each quarter end prior
to the dividend payment.  In June 1996 the Board of Directors voted to terminate
the DRP and LOP  effective as to dividend  payments  made after August 15, 1996.
The  Board  of  Directors  believed  that  with the  implementation  of a formal
disposition  strategy for the Fund, the Plan was no longer a viable purchase and
liquidation  vehicle.  It is the intention of the Fund's  Advisor,  however,  to
continue to provide,  on a quarterly  basis,  an  estimated  net asset value per
Share  utilizing  the same method as  previously  used to determine  the DRP per
Share price. The estimated net asset value per Share as of December 31, 1997 has
been  determined  to be $0.597.  The change in the estimated net asset value per
Share from $3.34 as of  September  30, 1997 to $0.597 as of December 31, 1997 is
primarily  the  result of the  dividend  paid from the  proceeds  of the sale of
Haverty's, Wickes, and eight convenience store properties.

Many  factors are  involved in  determining  the actual fair market value of the
shares of stock of a  company.  Therefore,  no  assurance  can be given that the
estimated net asset value per Share  determined by the Advisor to the Fund as of
any valuation date will  represent  actual fair market value of a Share of stock
of the Fund.

In addition,  the property values  utilized in the  calculation  were based upon
estimated net proceeds  should the two  properties  held at December 31, 1997 be
sold at their  asking  prices.  One of the Fund's two  remaining  properties  at
December 31, 1997,  the Pearle  Express  store in Morrow,  Georgia,  was sold in
March  1998  at the  price  utilized  for the  valuation.  These  values  do not
necessarily  reflect the price which the Fund would ultimately  receive upon the
sale of the asset.  Since methods for  determining  values vary, if an alternate
method of valuation  were used,  it could result in a value  different  from the
value utilized.

As of December 31, 1997 the approximate number of Shareholders was as follows:

                                                        Number of
              Title of Class                         Record Holders
              --------------                         --------------
               Common Stock                              4,587

Item 6.  Selected Financial Data.

The following table presents selected  financial data for the Fund for the years
ended December 31, 1997,  1996,  1995, 1994 and 1993. The data should be read in
conjunction  with  the  consolidated  financial  statements  included  elsewhere
herein.  Dividends  were  declared  from  operations  and  sales  and were  paid
quarterly or subsequent to sale upon  recommendation  and approval of the Fund's
Board of Directors.
<TABLE>
<CAPTION>
                                                   For-the-Year-Ended
                                                      December 31
                                    ---------------------------------------------------
                                       1997(1)    1996      1995       1994      1993
                                       ----       ----      ----       ----      ----
<S>                                 <C>         <C>       <C>       <C>         <C>
                                         (Amounts in thousands except per unit data)
TOTAL REVENUES ..................   $  3,954    $ 4,886   $ 5,156   $  4,670    $ 4,886
GAIN (LOSS) ON SALE OF PROPERTIES   $   (469)   $   760   $   126   $    (32)      --
NET INCOME ......................   $  2,459    $ 4,552   $ 3,930   $  2,888    $ 2,644
NET INCOME PER SHARE ............   $    .39    $   .72   $   .62   $    .46    $   .42
TOTAL ASSETS ....................   $ 21,625    $35,939   $42,211   $ 45,603    $49,510
DIVIDENDS PER SHARE .............   $   4.79    $  2.08   $  1.26   $    .85    $   .85

<FN>
(1) See discussion in Item 7 regarding future results of operations.
</FN>
</TABLE>
                                        6

<PAGE>

                                  Lease Income

The following  Lease Income table  presents  lease income for the  properties by
lessee included in the Fund's consolidated financial statements:


                                                For the Year Ended
                                                    December 31
                                     -------------------------------------------
                                      1997     1996     1995     1994     1993
                                      ----     ----     ----     ----     ----

National Convenience Stores (1)(2)   $1,238   $1,825   $1,852   $1,552   $1,527
Pearle Express Stores (5) ........      119      217      283      282      265
Wickes Furniture Store (7) .......    1,365    1,372    1,202    1,135    1,036
Sam's Club (6) ...................     --        284      524      511      511
Former Phar-Mor Store (3) ........     --       --         28        6      135
Haverty's Furniture Store (4) ....      330      411      411       11     --
                                     ------   ------   ------   ------   ------

Total ............................   $3,052   $4,109   $4,300   $3,497   $3,474
                                     ======   ======   ======   ======   ======

-------

(1)      As a result of bankruptcy proceedings, three stores were closed in 1992
         for which the leases were rejected and the properties were subsequently
         sold in June,  August and  December  1993 (see Item 7). In April  1994,
         through a purchase and exchange  transaction  with NCS, Circle K became
         the operator of five of the Fund's  stores,  four in California and one
         in Georgia. Lease payments for the one remaining Circle K store are now
         received from Circle K; however,  NCS remains  financially liable under
         the terms of the lease. In December 1995 Diamond Shamrock purchased the
         outstanding  stock  of  NCS  and  subsequently   merged  with  Ultramar
         Corporation to form Ultramar Diamond Shamrock Corporation.  In November
         and December  1996,  two stores were sold (one of which was operated by
         Circle K),  followed  by another  in  February  1997 and three in March
         1997,  one in July 1997,  and eight in December 1997 (See Note 9 to the
         consolidated financial statements).
(2)      Includes $151,000, $245,000 and $279,000 deferred lease income in 1997,
         1996 and 1995, respectively.
(3)      On March 15, 1995, the building was sold to an unaffiliated buyer.
(4)      Acquired  in  December  1994,  and  sold  to  an unaffiliated buyer in
         December 1997.
(5)      The Orland Park, Illinois  store was  sold in July 1996. See  Note 9 to
         the consolidated  financial statements.
(6)      The  property  was sold  in  June 1996.  See Note 9 to the consolidated
         financial statements.
(7)      Includes $79,000 and  $162,000 deferred lease income in  1997 and 1996,
         respectively.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

This  Item  should  be read  in  conjunction  with  the  Consolidated  Financial
Statements and other Items contained elsewhere in this Report.

The Fund is in the  process  of  winding  down its  operations  and has sold the
majority  of  its  assets  as of  December  31,  1997.  Accordingly,  historical
financial  information  will not be  representative  of future  results.  Future
results  of  operations  will be  limited  to the sale of the  Fund's  remaining
properties and the orderly liquidation of its assets and liabilities.

Results of Operations

Income before net gain (loss) on sale of properties decreased $864,000 from 1997
compared to 1996. The 1997 decrease was primarily due to sales-related decreases
in lease income and interest on mortgage-backed securities, which were partially
offset by gain on sale of  mortgage-backed  securities  and an increase in other
income as well as a decrease in expenses.

Lease income decreased  $1,057,000 in 1997 compared to 1996 primarily due to the
sale of Sam's  Club in June  1996,  the  Pearle  Express  Store in Orland  Park,
Illinois  in July  1996,  the NCS  Stores in Rancho  Cucamonga,  California  and
Houston  Texas in November and  December  1996,  respectively,  the NCS store in
Clute,  Texas in February  1997, the NCS stores  located in Sealy,  Dallas,  and

                                       7

<PAGE>


Texas City,  Texas in March 1997, the NCS stores located in Arlington,  Texas in
July 1997, and Haverty's Furniture Store located in Plano, Texas in October 1997
(see Note 9 to the consolidated financial statements).

Interest  on the Fund's  mortgage-backed  securities  declined  $210,000 in 1997
compared to 1996 due to the reduction in the amount of  securities  owned by the
Fund resulting from principal  repayments  prior to the end of the third quarter
of 1997  and to the  sale of the  remaining  portfolio  at the end of the  third
quarter.  The  sale  resulted  in a net  gain  of  $226,000  (see  Note 3 to the
consolidated financial statements).

Interest  and other  income  increased  $109,000  in 1997  compared  to 1996 due
primarily to the receipt of $76,000 towards settlement of the Fund's claim filed
in conjunction  with the bankruptcy  and subsequent  reorganization  of NCS (see
Note 7 to the consolidated financial statements).  There was also an increase in
interest  income due primarily to interest  income earned on the proceeds of the
sales of  mortgage-backed  securities  and the proceeds of the sale of Haverty's
Furniture Store.

Depreciation  expense  decreased  $269,000  in  1997  compared  to  1996  due to
depreciation  not being  provided for the NCS stores in 1997, nor for any of the
remaining  properties  after  the  second  quarter  of 1997  (see  Note 5 to the
consolidated  financial  statements)  and the  sale of the  Orland  Park  Pearle
Express  Store  in  July  1996  (see  Note  9  to  the  consolidated   financial
statements).

General and  administrative  expense increased $159,000 in 1997 compared to 1996
due  primarily  to an accrual  for the  purchase of a  directors  and  officers'
liability insurance policy at a cost of $274,000. This was partially offset by a
decrease in advisory  and  appraisal  fees due to the sale of several  stores in
1997 and 1996 as discussed above.

An impairment provision for real estate held for sale was booked in 1997 for the
Pearle  Express  store in order to reduce the carrying  value of the property to
its  estimated  fair  market  value  less  cost  to  sell  (see  Note  5 to  the
consolidated financial statements).

As discussed in Note 9 to the consolidated  financial statements,  the Fund sold
thirteen  convenience  stores,  Haverty's  Furniture Store and Wickes  Furniture
Store in 1997, resulting in a net loss of $469,000.


1996 Compared to 1995

Income before net gain on sale of properties  decreased $12,000 in 1996 compared
to 1995.  The 1996  decrease was  primarily due to decreases in lease income and
interest  on  mortgage-backed  securities,  which were  partially  offset by the
decrease in depreciation, as discussed below.

Lease income in 1996  decreased  $191,000 when compared to 1995 primarily due to
the sale of Sam's Club in June 1996,  the Pearle  Express  store in Orland Park,
Illinois in July 1996,  and the NCS stores in Rancho  Cucamonga,  California and
Houston, Texas in November and December 1996,  respectively,  which decrease was
partially offset by the increase in lease income from the Wickes Furniture store
as a result of recording deferred lease income of $162,000 in 1996.

Interest on the Fund's mortgage-backed securities portfolio declined 13% in 1996
compared to 1995 due to the reduction in the amount of  securities  owned by the
Fund.  The total of the Fund's  mortgage-backed  securities  was  reduced due to
principal  repayments.  These repayment  proceeds were used to support  dividend
payments  to  Shareholders.  Other  income  increased  in 1996  compared to 1995
primarily  due to the  receipt  of the  administrative  claim  of  approximately
$19,000 from Phar-Mor for post-petition real estate taxes for the period through
May 15, 1993 (see Note 7 to the consolidated financial statements).

Depreciation  expense  decreased in 1996  compared to 1995  primarily due to the
sale of the Pearle  Express store in July 1996 and the  classification  of Sam's
Club in 1995 and the NCS  properties in the third quarter of 1996 as Real Estate
Held for  Sale  and  depreciation  not  being  provided  for  subsequent  to the
classification (see Note 9 and Note 5 to the consolidated financial statements).

General and  administrative  expense  decreased  slightly in 1996 as compared to
1995  primarily  due to the decrease in advisory fee as a result of the sales of
properties  in  1996  and  1995  (see  Note  9  to  the  consolidated  financial
statements)  and the decrease in legal fees relating to the Phar-Mor  bankruptcy
proceedings (see Note 7 to the consolidated financial statements). The decreases
were partially offset by the increase in administrative  expenses  reimbursed to
the Fund's Advisor.

                                        8

<PAGE>




As discussed in Item 8, Note 9, in June, July, November,  and December 1996, the
Fund sold the Sam's Club,  Pearle Express -Orland Park,  Illinois,  NCS store in
Rancho Cucamonga,  California and NCS store in Houston, Texas, respectively, and
recognized a net gain totaling $760,000.

Fund Liquidity and Capital Resources

Introduction

The  Fund  intends  to meet its cash  needs  from  cash  flow  generated  by its
remaining  property and  securities  and from the proceeds from the sale of such
property  and  securities.  In order to continue to qualify as a REIT for income
tax purposes, the Fund is required, among other things, to distribute 95 percent
of its REIT taxable income to its Shareholders  annually. The level of quarterly
cash dividends to  Shareholders  in 1997 was sustained by cash provided from net
operating   activities,   from  principal   repayments  on  the  mortgage-backed
securities,  from capital gains from the sale of  securities,  and from property
sale proceeds.

Since  inception,  the principal  source of capital  resources has been proceeds
from the sale of the Fund's common stock.  Through June 30, 1992,  proceeds from
the sale of common stock totaled $63,054,000,  including proceeds raised through
the DRP of $2,800,000.  The DRP was to have purchased  newly issued Shares until
June 30, 1992, and thereafter,  Shares from Shareholders wishing to sell Shares,
if any.  However,  the DRP was  suspended  effective  with the  January 15, 1992
distribution  to  Shareholders of record on December 31, 1991 as a result of the
Chapter 11 bankruptcy filing by National  Convenience Stores ("NCS").  The Board
of Directors  extended the  suspension  of the DRP with respect to the dividends
paid in 1992,  1993 and January 20, 1994 and all DRP  participants  received the
dividends in cash.

In September,  1993, the Board of Directors  voted  unanimously to reinstate the
DRP and activate the LOP.  Purchases of Shares through the DRP (to the extent of
participation  in the DRP)  commenced  with respect to the dividend paid for the
first quarter of 1994. In June 1996 the Board of Directors voted  unanimously to
terminate the DRP and LOP  effective as to dividends  paid after August 15, 1996
as the Fund had begun its disposition phase. The Fund's Advisor will continue to
provide,  on a quarterly basis, an estimated net asset value per Share utilizing
the same methods  previously  utilized to calculate  the DRP per Share  purchase
price.  Based on the  anticipated  net  sales  proceeds  to the Fund for its two
remaining properties at December 31, 1997 and carrying value of its other assets
and liabilities as of December 31, 1997, the Advisor estimated the per Share net
asset value to be $0.597.

As presented in the Consolidated  Statement of Cash Flows,  cash was provided by
operating  activities.  In addition,  cash was provided by investing  activities
from  proceeds  from sales of  properties  and  mortgage-backed  securities  and
principal  payments  received on  mortgage-backed  securities.  Cash was used by
investing activities for expenses incurred in the sales of properties. Cash  was
used by financing activities for dividends paid to Shareholders.

NCS was the seller and lessee of 19 properties operated as Stop N Go convenience
stores  acquired  by the  Fund  in  November  1989.  In  March  1993,  NCS had a
reorganization  plan confirmed by the Court which became effective March 9, 1993
(NCS had filed a petition for reorganization under Chapter 11 in December 1991).
As payment for a claim filed by the Fund with the Bankruptcy  Court with respect
to three rejected leases,  NCS agreed to issue new shares of its common stock to
the Fund.  Through May 1995, the Fund received  17,161 shares of NCS stock which
were immediately sold and resulted in net proceeds of $230,000. In June 1996 the
Fund  received  $32,000 in lieu of 1,170 shares of NCS common stock from Diamond
Shamrock  Corporation,  the firm which purchased the majority of the outstanding
NCS stock in December  1995. In late 1996 Diamond  Shamrock  Corporation  merged
with Ultramar  Corporation to form Ultramar Diamond Shamrock  Corporation (UDS).
In August 1997 the Fund received $76,000 in lieu of 2,638 shares of common stock
plus accrued interest,  bringing the total compensation received under the terms
of the settlement to approximately $338,000.

In April  1994,  NCS  completed  an  exchange  and sale of stores  with  another
convenience  store  operator,  Circle K Corporation.  NCS exchanged 53 stores in
Southern California for 88 Circle K stores in the Dallas and Houston markets. In
addition,  Circle K purchased 27 NCS stores in the Atlanta  market.  Five of the
Fund's stores, four in Southern California and one in Atlanta,  were included in
the transactions and during the third quarter of 1994 were converted to Circle K
operations.  Although  lease  payments for the Fund's  single  remaining  store,
operated  as Circle K, are  received  from  Circle K  Corporation,  NCS  remains
financially liable under the terms of the lease.


                                        9

<PAGE>



In November 1996 the Fund sold the store located in Rancho Cucamonga, California
(operated by Circle K), and in December 1996 the Fund sold the store in Houston,
Texas.  In  February  1997,  the Fund sold the store  located  in Clute,  Texas,
followed by the sales of the stores  located in Texas City,  Dallas,  and Sealy,
Texas in March 1997. In July 1997, the Fund sold the store located in Arlington,
Texas.  In  December  1997,  the Fund sold the  stores  located  in San  Antonio
(Fredericksburg Blvd. and Babcock Road),  Arlington (Kennedale- N. Little School
Road),  Grand Prairie,  and Fort Worth,  Texas.  Also in December 1997, the Fund
sold the stores  located in Marietta,  Georgia,  and in  Placentia  and Fontana,
California (all operated by Circle K) (see Note 9 to the consolidated  financial
statements).

The Fund  remains  the  owner of one  convenience  store  property,  located  in
Rubidoux,  California.  In  connection  with the  marketing  of the  convenience
stores,  the Fund had commissioned  Phase I Environmental Site Assessments which
revealed  that  Circle K, the  tenant of the  Rubidoux  property,  had  reported
hydrocarbon  contaminants to regulatory authorities in April 1994. Per the terms
of the  lease,  the  lessee  was  required  to  notify  the  Fund at the time of
discovery  and to promptly  remediate  the problem but no such action was taken.
The Advisor has been  assured by Circle K that it will  indemnify  both the Fund
and any purchaser of the property.  The Fund is currently in  negotiations  with
the tenant for adequate  indemnification  and  security,  as required  under the
terms of the  lease.  With  this  indemnification,  the Fund  believes  that the
contamination,  as it is now defined,  will not materially  adversely  affect an
ultimate sales price. Marketing efforts for the property continue.

In June 1996 the Fund sold Sam's Club located in Menomonee Falls, Wisconsin (see
Note 9 to the consolidated  financial  statements).  Of the proceeds received by
the Fund,  $108,000 was deposited  into an escrow  account to secure payment for
construction  work to be  completed  by the tenant at the  property.  The tenant
subsequently  claimed that the work specified was beyond the requirements  under
the original  lease.  The tenant will  complete the work to the extent  required
under the  lease,  and the  remainder  will be  completed  and paid for from the
escrowed funds.  Once the work is complete,  any remaining funds from the escrow
account will be released to the Fund.  As of December 31 1997,  it was estimated
that $72,000 of the construction work would be paid from the escrowed funds.

During the fourth  quarter of 1995,  the Fund  successfully  negotiated  a three
year,  eight month lease  extension  for the Pearle  Express  location in Orland
Park,  Illinois,  which took effect December 1, 1995. In July 1996 the Fund sold
the Orland Park location (see Note 9 to the consolidated  financial statements).
In the  first  quarter  of 1997 the Fund  negotiated  an  amended  lease for the
Morrow, Georgia location, which extended the term of the lease by eight years in
exchange  for a blending of existing  market  rental rates with the terms of the
original  lease.  Subsequent to the close of 1997, the Fund entered into a sales
contract for the property, and the sale was completed on March 3, 1998 (see Note
10 to the consolidated financial statements).

The  Fund's  former  Phar-Mor  store was sold  March  15,  1995,  subsequent  to
negotiations  following an unsolicited purchase offer for the building (see Note
9 to the consolidated financial statements).

In October 1997,  the Fund sold  Haverty's  Furniture  store,  located in Plano,
Texas (see Note 9 to the consolidated financial statements).

In December  1997 the Fund sold Wickes  Furniture  Store,  located in  Torrance,
California (see Note 9 to the consolidated financial statements).

The Fund will request that its  Shareholders  approve a plan of liquidation (the
"Liquidation  Plan") at its Annual  Meeting,  scheduled  for June 17, 1998.  The
Liquidation  Plan will be  described  in the  Fund's  Proxy  Statement  and will
specify  a  two-year  wind-down  period.  The Fund  has  requested  a letter  of
"no-action"  from the Securities and Exchange  Commission,  allowing for reduced
filing and  reporting  requirements  during this period.  The Board of Directors
voted  unanimously at its December 10, 1997 meeting to maintain  $2,000,000 as a
reserve  to  protect   the  Fund  from  any   unforseen   claims  or   operating
contingencies.  At this  time the  proceeds  from the  March 3, 1998 sale of the
Morrow, Georgia Pearle Express Store and from the anticipated sale of the Fund's
remaining convenience store property, located in Rubidoux, California, will also
be maintained as reserves until such time as the Board  determines to distribute
such   proceeds.   The   majority  of  these   reserves   will  be  invested  in
mortgage-backed securities. Income generated by the reserves will be utilized to
cover operating costs during the wind-down period.  Any income in excess of that
used  for  operating  expenses  will  be paid to  Shareholders,  subject  to the
approval  of the  Board  of  Directors.  All  remaining  funds  will  be paid to
Shareholders at the end of the wind-down  period, at which time the Fund will be
dissolved.

                                       10

<PAGE>



Item 8.  Financial Statements and Financial Statement Schedules.


                        METRIC INCOME TRUST SERIES, INC.,
                            a California corporation

                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----

Report of Independent Auditors...........................................  12
Consolidated Financial Statements:
       Balance Sheets at December 31, 1997 and 1996 .....................  13
       Statements of Operations for the Years Ended December 31, 1997,
         1996 and 1995...................................................  14
       Statements of Shareholders' Equity for the Years Ended December
         31, 1997, 1996 and 1995.........................................  15
       Statements of Cash Flows for the Years Ended December 31, 1997,
         1996 and 1995...................................................  16
       Notes to Consolidated Financial Statements........................  17
Financial Statement Schedule:
       Schedule III - Real Estate and Accumulated Depreciation at
         December 31, 1997...............................................  24



                                       11

<PAGE>










                         REPORT OF INDEPENDENT AUDITORS

Metric Income Trust Series, Inc., a California corporation:

We have audited the  accompanying  consolidated  balance sheets of Metric Income
Trust Series,  Inc., a California  corporation  ("the Fund"), as of December 31,
1997  and  1996  and  the  related   consolidated   statements  of   operations,
Shareholders'  equity  and cash flows for the three  years in the  period  ended
December 31, 1997. Our audits also included the financial  statement schedule of
the  Fund  listed  in  the  accompanying  table  of  contents.  These  financial
statements and financial statement schedule are the responsibility of the Fund's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and financial statement schedule based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of the
Fund at  December  31,  1997  and  1996,  and the  consolidated  results  of its
operations  and its cash flows for the three years in the period ended  December
31, 1997, in conformity with generally accepted accounting principles.  Also, in
our opinion,  the related  financial  statement  schedule,  when  considered  in
relation  to the  basic  consolidated  financial  statements  taken  as a whole,
presents fairly in all material respects the information shown therein.







                                                               Ernst & Young LLP

San Francisco,  California
February 2, 1998, except Note 10 as
to which the date is March 3, 1998.

                                       12

<PAGE>


                        METRIC INCOME TRUST SERIES, INC.,
                            A California corporation

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1997 and 1996

                                                     1997            1996
                                                     ----            ----

ASSETS

Cash                                            $ 19,762,000    $  3,781,000
Accounts and Interest Receivable                      65,000         669,000
Investment in Mortgage-Backed Securities - Net          --         7,251,000

Rental Properties                                       --        14,798,000
Accumulated Depreciation                                --        (1,286,000)
                                                ------------    ------------
     Properties and Improvements - Net                  --        13,512,000

Real Estate Held for Sale                          1,744,000      10,612,000
Prepaid and Other Assets                              54,000         114,000
                                                ------------    ------------

     Total Assets                               $ 21,625,000    $ 35,939,000
                                                ============    ============

LIABILITIES AND SHAREHOLDER'S EQUITY

Liabilities

Dividends Payable                               $ 17,385,000    $  3,888,000
Payable to Sponsor and Affiliates                     50,000           9,000
Other Accounts Payable and Accrued Liabilities       326,000         187,000
                                                ------------    ------------

    Total Liabilities                             17,761,000       4,084,000
                                                ------------    ------------

Commitments and Contingencies

Shareholder's Equity:
Common Stock - no par value, stated at $0.001,
   12,250,000 Shares authorized and 6,321,641
   Shares issued and outstanding                       6,000           6,000
Additional Paid-in Capital                        55,200,000      55,200,000
Accumulated Dividends in Excess of Net Income    (51,342,000)    (23,521,000)
Unrealized Holding Gain on Investment
   in Mortgage-Backed Securities - Net                  --           170,000
                                                ------------    ------------

   Total Shareholder's Equity                      3,864,000      31,855,000
                                                ------------    ------------

   Total Liabilities and Shareholder's Equity   $ 21,625,000    $ 35,939,000
                                                ============    ============

                 See notes to consolidated financial statements


                                       13
<PAGE>


                        METRIC INCOME TRUST SERIES, INC.,
                            a California corporation

                      CONSOLIDATED STATEMENTS OF OPERATIONS
              For the Years Ended December 31, 1997, 1996 and 1995


                                               1997         1996         1995
                                               ----         ----         ----


Revenues:

Lease income                               $ 3,052,000  $ 4,109,000  $ 4,300,000
Interest on mortgage-backed securities         401,000      611,000      702,000
Interest and other income                      275,000      166,000      138,000
Gain on sale of mortgage-backed
 securities - net                              226,000         --         16,000
                                           -----------  -----------  -----------
     Total Revenues                          3,954,000    4,886,000    5,156,000
                                           -----------  -----------  -----------


Expenses (including $389,000, $467,000
 and $454,000 paid or payable to advisor
 and affiliates in 1997, 1996 and 1995):

Depreciation                                   128,000      397,000      652,000
General and administrative                     856,000      697,000      700,000
Impairment provision for real estate
 held for sale                                  42,000         --           --
                                           -----------  -----------  -----------
      Total Expenses                         1,026,000    1,094,000    1,352,000
                                           -----------  -----------  -----------


Income before Gain (Loss) on Sale
 of Properties                               2,928,000    3,792,000    3,804,000


Gain (Loss) on Sale of Properties - Net       (469,000)     760,000      126,000
                                           -----------  -----------  -----------


Net Income                                 $ 2,459,000  $ 4,552,000  $ 3,930,000
                                           ===========  ===========  ===========

Net Income per Share
Income before gain (loss) on sale
 of properties                             $      0.46  $      0.60  $      0.60
Gain (loss) on sale of properties - net          (0.07)        0.12         0.02
                                           -----------  -----------  -----------

     Net Income per Share                  $      0.39  $      0.72  $      0.62
                                           ===========  ===========  ===========

Dividends per Share                        $      4.79  $      2.08  $      1.26
                                           ===========  ===========  ===========

                 See notes to consolidated financial statements


                                     14
<PAGE>

<TABLE>

                                                 METRIC INCOME TRUST SERIES, INC.,
                                                     A California corporation

                                         CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
                                      For the Years Ended December 31, 1997, 1996 and 1995

                                                                                                    Unrealized
                                                                                                      Holding
                                                                               Accumulated          Gain/(Loss)
                                          Common Stock          Additional      Dividends        on Investment in
                                          ------------            Paid-in       in Excess        Mortgage-Backed
                                      Shares        Amount        Capital     of Net Income      Securities - Net     Total
                                      ------        ------        -------     -------------      ----------------     -----
<S>                               <C>           <C>            <C>             <C>                <C>             <C>
Balance, January 1, 1995            6,321,641   $      6,000   $ 55,200,000    $(10,912,000)      $   (319,000)   $ 43,975,000

Unrealized Holding Gain
 on Investment in Mortgage-Backed
 Securities - Net                         --             --             --             --              677,000        677,000

Income Before Gain on
 Sale of Property                         --             --             --        3,804,000               --        3,804,000

Gain on Sale of Property                  --             --             --          126,000               --          126,000

Dividends Declared                        --             --             --       (7,965,000)              --       (7,965,000)
                                  ------------   ------------   ------------   ------------       ------------   ------------
Balance, December 31, 1995           6,321,641          6,000     55,200,000    (14,947,000)           358,000     40,617,000

Unrealized Holding Loss
 on Investment in Mortgage-Backed
 Securities - Net                         --             --             --             --             (188,000)      (188,000)

Income Before Gain on
 Sale of Properties                       --             --             --        3,792,000               --        3,792,000

Gain on Sale of Properties - Net          --             --             --          760,000               --          760,000

Dividends Declared                        --             --             --      (13,126,000)              --      (13,126,000)
                                  ------------   ------------   ------------   ------------       ------------   ------------
Balance, December 31, 1996           6,321,641          6,000     55,200,000    (23,521,000)           170,000     31,855,000

Realization of Unrealized Holding
 Gain on Investmentin Mortgage-
 Backed Securities - Net                  --             --             --             --             (170,000)      (170,000)

Income Before Net Loss on
    Sale of Properties                    --             --             --        2,928,000               --        2,928,000

Loss on Sale of Properties - Net          --             --             --         (469,000)              --         (469,000)

Dividends Declared                        --             --             --      (30,280,000)              --      (30,280,000)
                                  ------------   ------------   ------------   ------------       ------------   ------------
Balance, December 31, 1997           6,321,641   $      6,000   $ 55,200,000   $(51,342,000)      $       --     $  3,864,000
                                  ============   ============   ============   ============       ============   ============

                                                See consolidated financial statements


                                                                  15
</TABLE>

<PAGE>
<TABLE>


                                     METRIC INCOME TRUST SERIES, INC.,
                                         a California corporation

                                  CONSOLIDATED  STATEMENTS OF CASH FLOWS
                            For the Years Ended December 31, 1997, 1996 and 1995

                                                                     1997            1996            1995
                                                                     ----            ----            ----
<S>                                                             <C>             <C>             <C>
Operating Activities

Net Income                                                      $  2,459,000    $  4,552,000    $  3,930,000
Adjustments to reconcile net income to net cash provided
 by operating activities:
    Depreciation and amortization                                    122,000         389,000         642,000
    Gain on sale of mortgage-backed securities - net                (226,000)           --           (16,000)
    Impairment provision for real estate held for sale                42,000
    (Gain) loss on sale of properties - net                          469,000        (760,000)       (126,000)
    Changes in operating assets and liabilities:
    Increase in accounts and interest receivable                    (178,000)       (332,000)       (296,000)
    (Increase) decrease in prepaid and other assets                    1,000        (106,000)          9,000
    Increase (decrease) in payable to sponsor and affiliates          41,000         (13,000)        (48,000)
    Increase (decrease) in other accounts payable and
     accrued liabilities                                             139,000        (121,000)         93,000
                                                                ------------    ------------    ------------
Net cash provided by operating activities                          2,869,000       3,609,000       4,188,000
                                                                ------------    ------------    ------------
Investing Activities

Rental properties acquisitions and additions                            --              --           (59,000)
Purchase of cash investments                                            --              --        (2,855,000)
Proceeds from cash investments                                          --              --         2,855,000
Purchase of mortgage-backed securities                                  --              --          (301,000)
Proceeds from sale of mortgage-backed securities                   6,698,000            --           303,000
Principal payments received on mortgage-backed securities            615,000       1,144,000         626,000
Proceeds from sales of properties                                 23,812,000       9,039,000       3,050,000
Cash used for selling costs of properties                         (1,229,000)       (485,000)       (126,000)
                                                                ------------    ------------    ------------
Net cash provided by investing activities                         29,896,000       9,698,000       3,493,000
                                                                ------------    ------------    ------------
Financing Activities

Dividends paid to Shareholders                                   (16,784,000)    (10,502,000)     (8,044,000)
                                                                ------------    ------------    ------------
Cash used by financing activities                                (16,784,000)    (10,502,000)     (8,044,000)
                                                                ------------    ------------    ------------

Increase (Decrease) in Cash and Cash Equivalents                  15,981,000       2,805,000        (363,000)
Cash and cash equivalents at beginning of year                     3,781,000         976,000       1,339,000
                                                                ------------    ------------    ------------

Cash and Cash Equivalents at End of Year                        $ 19,762,000    $  3,781,000    $    976,000
                                                                ============    ============    ============

                  SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES

 Unrealized holding gain (loss) on investment in mortgage-backed securities - see Note 3

 Sale of rental properties - see Note 9

                               See notes to consolidated financial statements

                                                     16
</TABLE>



<PAGE>




                        METRIC INCOME TRUST SERIES, INC.,
                            a California corporation

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Organization and Summary of Significant Accounting Policies

         Organization   -  Metric  Income  Trust  Series,   Inc.,  a  California
         corporation ("Fund"), was organized in 1989 under the laws of the State
         of  California  to  acquire  income   producing  real   properties  and
         investments  in  securities  which  are  guaranteed  as to  payment  of
         principal and interest by the U.S. Government, U.S. Government agencies
         or  instrumentalities,  or federally chartered  corporations.  The Fund
         qualifies as a real estate investment trust ("REIT") under Sections 856
         through 860 of the Internal Revenue Code.

         Effective  April 1, 1997,  Metric Holdings Inc., the indirect Parent of
         Metric  Realty,  the former  Advisor,  was merged  into a newly  formed
         entity known as SSR Realty Advisors, Inc. ("SSR"). SSR was incorporated
         under the laws of  Delaware on  February  25, 1997 and is a  registered
         investment  adviser in accordance  with the Investment  Advisers Act of
         1940. With the consent of the Fund, the Advisory Agreement was assigned
         to SSR by Metric  Realty  on March 27,  1997.  SSR is a  subsidiary  of
         Metropolitan Life Insurance Company. Under the advisory agreement,  SSR
         furnishes   day-to-day   management  and  carries  out  the  investment
         objectives  and  policies  established  by the Board of  Directors.  An
         affiliate of the advisor owns 21,506 shares of common  stock.  The Fund
         is currently in the process of  liquidating  its real estate assets and
         winding down its affairs.

         Consolidation  - The  consolidated  financial  statements  include  the
         statements of the Fund and its wholly-owned  subsidiary which owned all
         properties  located  in  Texas  prior to their  sale.  All  significant
         intercompany transactions and balances have been eliminated.

         Fair Value of Financial  Instruments - Except for the Fund's investment
         in mortgaged-backed securities, the fair values of the Fund's financial
         instruments approximate their historic cost, as reported in the balance
         sheet. In accordance with FASB Statement 115, the Fund's investments in
         mortgage-backed securities are reported at fair value.

         Accounting  Pronouncement  - The Fund has  adopted  Statement  No. 121,
         "Accounting for the Impairment of Long-Lived  Assets and for Long-Lived
         Assets  to Be  Disposed  of"  ("SFAS  121").  This  statement  requires
         impairment   losses  to  be  recorded  on  long-lived  assets  used  in
         operations   when   indicators  of  impairment   are  present  and  the
         undiscounted  cash flows  estimated  to be  generated  by those  assets
         during the holding  period are less than the assets'  carrying  amount.
         SFAS 121 also  provides for  long-lived  assets that are expected to be
         disposed  of to be  recorded  at the  lower of  carrying  value or fair
         market value less estimated  cost to sell. An impairment  provision for
         real estate held for sale was recorded in 1997 (See Note 5).

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

         Cash  and  Cash   Equivalents  -  The  Fund  considers   highly  liquid
         investments  with an original  maturity date of three months or less at
         the time of purchase to be cash equivalents.

         Rental  Properties - Rental  properties were stated at cost at December
         31, 1996.

         Real  Estate Held for Sale - Real estate held for sale is stated at the
         lower of its  carrying  amount or  estimated  fair value less  disposal
         costs.  Depreciation  is not recorded on assets  classified as held for
         sale.

         Revenue  Recognition - Rental revenue under tenant lease  agreements is
         recognized  on the  straight-line  method over the lease  terms  except
         where such amounts are immaterial or where the  underlying  tenants are
         experiencing  financial  difficulties.  Once difficulties are resolved,
         rental  revenue is straight lined (unless the adjustment is immaterial)
         on  prospective  rental  streams  for  tenants  who  have  resolved  or
         mitigated their financial difficulties.


                                       17

<PAGE>



         Depreciation - Depreciation is computed using the straight-line  method
         over estimated useful lives of 30 years for buildings and improvements.
         Beginning in the fourth quarter of 1995, properties categorized as real
         estate  held  for  sale are not  depreciated  as a  result  of the Fund
         adopting SFAS 121.

         Mortgage-Backed  Securities - Mortgage-backed  securities  consisted of
         certificates  originated  under or in connection  with Federal  housing
         programs of the  Government  National  Mortgage  Association  ("GNMA"),
         Federal National Mortgage Association  ("FNMA"),  and Federal Home Loan
         Mortgage  Corporation  ("FHLMC")  and are  guaranteed  as to payment of
         principal   and   interest.   The  Fund  held   these   securities   as
         available-for-sale   investments   until  the  sale  of  the  remaining
         portfolio  in 1997.  Discounts  were  amortized  over the  terms of the
         related  securities using the interest method.  In accordance with FASB
         Statement  No. 115,  mortgage-backed  securities  were  carried at fair
         value.

         Net Income and Dividends Per Share - Net income and dividends per Share
         are based upon 6,321,641 Shares outstanding for each of the years ended
         December 31, 1997, 1996 and 1995.  Dividends per Share were composed of
         $.37 ordinary income, $.02 capital gains and $4.40 return of capital in
         1997,  $.52  ordinary  income,  $.10 capital  gains and $1.46 return of
         capital in 1996, and $.47 ordinary income,  $.01 capital gains and $.78
         return of capital in 1995.

         Income Taxes - The Internal  Revenue Code  provides  that a corporation
         can  qualify  as  a  REIT  if,  among  other  things,  the  corporation
         distributes at least 95 percent of its taxable  income to  Shareholders
         each year. If the  corporation  distributes  at least 95 percent of its
         taxable income to Shareholders,  such  distributions  can be treated as
         deductions  for income tax  purposes.  Because the Fund  qualifies as a
         REIT and had  distributed  amounts in excess of its taxable  income for
         1997,  1996,  and 1995,  no provision for income taxes has been made in
         the accompanying consolidated financial statements.

         The tax basis of the Shareholders'  equity differs at December 31, 1997
         from  the  amounts  presented  in the  consolidated  balance  sheet  as
         follows:


         Financial statement basis of Shareholders' equity     $ 3,864,000
         Tax basis of Shareholders' equity                       3,910,000
                                                               -----------
         Difference                                            $   (46,000)
                                                               ===========

         The difference  consists primarily of adjustments made for depreciation
         less straight-lined rental revenue.


2.       Transactions with Advisor and Affiliates

         In accordance  with the Advisory  Agreement,  the Fund pays the Advisor
         and affiliates  compensation for services provided to the Fund. Amounts
         earned by the Advisor and its  affiliates  for the years ended December
         31, 1997, 1996 and 1995 were as follows:



                                                    1997        1996      1995
                                                    ----        ----      ----

       Reimbursement of administrative expenses   $200,000   $200,000   $160,000
       Securities management fee ..............     25,000     38,000     44,000
       Advisory fee ...........................    164,000    229,000    250,000
                                                  --------   --------   --------

                                                  $389,000   $467,000   $454,000
                                                  ========   ========   ========

         The  securities  management  fee was earned by State Street  Research &
         Management   Company,  an  affiliate  of  Metropolitan  Life  Insurance
         Company.

         Pursuant to an  amendment  of the  Advisory  Agreement  approved by the
         Independent  Directors  in March  1994,  the  quarterly  advisory  fees
         payable to the Advisor under the Advisory Agreement commencing April 1,
         1994,  are  calculated  at a rate  of 0.75  percent  per  annum  of the
         appraised value of the  properties.  Such fees are payable in full only
         if the Fund makes annualized  dividend  payments  equaling at least 8.5


                                       18

<PAGE>



         percent of the  Shareholders'  adjusted  capital  contribution.  To the
         extent that the dividend  paid for a calendar  quarter is less than 8.5
         percent on an annualized basis, the advisory fee payable to the Advisor
         will be proportionately reduced.

3.       Mortgage-Backed Securities

         In September  1997,  the Fund sold the remainder of its  investments in
         mortgage-backed  securities. Net proceeds from the sale were $6,698,000
         resulting in gross realized gains of $244,000 and gross realized losses
         of $18,000.  Proceeds  from the sale of mortgage  backed  securities in
         1995  were  $303,000  resulting  in gross  realized  gains of  $16,000.
         Specific  identification  was  used  to  determine  amortized  cost  in
         computing the gains and losses.

         In accordance with FASB statement No. 115 and Management's  intentions,
         the Fund's investment in  mortgage-backed  securities was classified as
         "available-for-sale  securities"  and  reported  at  fair  value,  with
         unrealized  gains and  losses  reported  as a net  amount in a separate
         component of Shareholder's Equity. In 1996 and 1995 the Fund incurred a
         $188,000  unrealized holding loss and $677,000  unrealized holding gain
         on investments in mortgage-backed securities,  respectively,  resulting
         in a cumulative net unrealized holding gain of $170,000 at December 31,
         1996.  Fair values of  mortgage-backed  securities at December 31, 1996
         were as follows:


                                            Gross         Gross
                                          Unrealized    Unrealized    Estimated
                              Amortized     Holding       Holding       Fair
                                Cost         Gains        Losses        Value
                                ----         -----        ------        -----


         GNMA...........     $5,227,000    $113,000    $   82,000    $5,258,000

         FNMA...........      1,049,000      75,000          --       1,124,000

         FHLMC..........        806,000      63,000          --         869,000
                             ----------    --------    ----------    ----------

                             $7,082,000    $251,000    $   82,000    $7,251,000
                             ==========    ========    ==========    ==========

         Maturities of the  individual  securities  ranged from 2009 to 2024 and
         the coupon rates ranged from 7 to 10 percent per annum.



4.       Rental Properties

         Rental  properties  at cost at  December  31,  1996 are  summarized  as
         follows:

             Land...................................          $   7,145,000
             Buildings and improvements.............              7,653,000
             Accumulated depreciation...............             (1,286,000)
                                                              --------------

             Total..................................          $  13,512,000
                                                              =============

         In June 1997, the Fund reclassified all the remaining Rental Properties
         as Real Estate Held for Sale (see Note 5).

5.       Real Estate Held for Sale

         In the third quarter of 1996, the Fund's Board of Directors  approved a
         plan to market for sale the sixteen National Convenience Stores located
         in California,  Georgia and Texas. Two of the stores were  subsequently
         sold in the fourth  quarter of 1996 and thirteen were sold in 1997 (see
         Note 9). The remaining one store (Rubidoux National  Convenience Store)
         and  fourteen  stores were  classified  as Real Estate Held for Sale at
         December  31,  1997 and 1996  respectively.  The lease  income from the
         fourteen  stores  for  1997,  1996 and 1995 was  $1,238,000  (including
         deferred lease income  recognized of $151,000),  $1,536,000  (including
         deferred lease income recognized of $212,000) and $1,536,000 (including
         deferred   lease  income   recognized   of   $238,000),   respectively.


                                       19

<PAGE>

         Depreciation  was $106,000  for the six months ended June 30, 1996, and
         $212,000 for 1995. No depreciation was provided for 1997 or for the six
         months ended  December 31, 1996.  The Fund expects to sell the Rubidoux
         National Convenience Store in 1998.

         As a result of the Board of  Directors'  decision  to  proceed  with an
         orderly  liquidation  of the Fund,  as of June 30, 1997,  the remaining
         Rental Properties owned by the Fund (Haverty's  Furniture Store, Wickes
         Furniture  Store and the Pearle Express Store) were  classified as Real
         Estate Held for Sale in accordance with SFAS 121.  Haverty's  Furniture
         Store and Wickes Furniture Store were  subsequently  sold in the fourth
         quarter (see Note 9). The Pearle  Express  Store is  classified as Real
         Estate Held for Sale at December 31, 1997.  The lease income from these
         properties in 1997,  1996 and 1995 was $1,814,000  (including  deferred
         lease income  recognized of $79,000),  $1,931,000  (including  deferred
         lease income  recognized of  $162,000),  and  $1,760,000  respectively.
         Depreciation  was  $128,000  for the six months ended June 30, 1997 and
         $255,000 for 1996 and 1995.  No  depreciation  was provided for the six
         months ended December 31, 1997.

         In  accordance  with SFAS 121, an  impairment  provision of $42,000 was
         recorded  in 1997 to reduce the  carrying  value of the Pearle  Express
         Store to its  estimated  fair  market  value  less cost to sell.  Lease
         income for this property  totaled $119,000 and expenses were immaterial
         for 1997.

6.       Other Accounts Payable and Accrued Liabilities

         In the fourth quarter of 1997,  the Fund's Board of Directors  approved
         the purchase of a directors and officers' liability insurance policy at
         a cost of $274,000.  This amount was recorded as an accrual in the 1997
         financial  statements and was subsequently  paid in January,  1998. The
         insurance covers the period from inception of the Fund's  operations to
         six years  after sale of the Fund's  last  property.  As the premium is
         non-refundable and most of the Fund's assets have been liquidated as of
         December 31, 1997, the entire premium was expensed in 1997.

7.       Contingencies and Major Tenant Developments

         In 1997, in connection  with the marketing of the  convenience  stores,
         the Fund  commissioned  Phase I Environmental  Site  Assessments  which
         revealed that Circle K, the tenant of the Rubidoux National Convenience
         Store  property,  had reported  hydrocarbon  contaminants to regulatory
         authorities  in April 1994. It is estimated that the total cost to cure
         the contamination will not exceed $120,000. Per the terms of the lease,
         the lessee was required to notify the Fund at the time of discovery and
         to promptly  remediate  the  problem but no such action was taken.  The
         Advisor has been  assured by Circle K that it will  indemnify  both the
         Fund  and any  purchaser  of the  property.  The Fund is  currently  in
         negotiations with the tenant for adequate indemnification and security,
         as required  under the terms of the lease.  With this  indemnification,
         the Fund believes that the  contamination,  as it is now defined,  will
         not  materially  adversely  affect an ultimate  sales price.  Marketing
         efforts for the property continue.

         National  Convenience  Stores  ("NCS")  was the seller and lessee of 19
         properties  operated as Stop N Go  convenience  stores  acquired by the
         Fund. In December 1991,  NCS filed a petition with the U.S.  Bankruptcy
         Court in  Houston,  Texas for  reorganization  under  Chapter 11 of the
         federal Bankruptcy Code. Its  reorganization  plan was confirmed by the
         Court and became  effective in March 1993.  The Fund filed a claim with
         the Bankruptcy  Court and reached a settlement with NCS. As payment for
         the claim,  the Fund has received  cash as well as shares of NCS common
         stock which were subsequently sold. In August,  1997, the Fund received
         $76,000  in lieu of 2,638  shares  of NCS  common  stock  plus  accrued
         interest. Total compensation received to date by the Fund in connection
         with the settlement approximates $338,000.

         Phar-Mor,  a former lessee of one property,  filed for protection under
         Chapter 11 of the Federal  Bankruptcy  Code in August 1992 and rejected
         the Fund's lease  effective May 15, 1993.  The Fund filed claims in the
         bankruptcy  proceeding  totaling $794,000.  In December 1994,  Phar-Mor
         filed in the  proceedings a preference  recovery action against several
         hundred  vendors and  landlords,  including the Fund. The amount of the
         preferential  payments  alleged  to  have  been  made to the  Fund  was
         $90,250,  consisting  of rent  paid to the Fund  within  90 days of the
         filing of the Phar-Mor bankruptcy petitions. This preference action was
         dismissed in connection  with the  confirmation  of the  reorganization
         plan of  Phar-Mor.  In  August  1995,  the Court  confirmed  Phar-Mor's
         proposed  reorganization  plan which called for unsecured  creditors to
         receive a portion  of a pool of the  company's  new  stock,  as well as
         warrants  to purchase  additional  stock at a fixed  price.  In October
         1996, the Fund received  approximately $19,000 from Phar-Mor to satisfy
         its administrative claim and agreed to settle its remaining outstanding
         lease rejection claim for  approximately  $629,000.  The settlement was

                                       20
<PAGE>



         approved by the Bankruptcy Court in January 1997. To satisfy the claim,
         in March 1997, the Fund received 1,058 shares of stock and 881 warrants
         which were sold in June 1997 for $7,000.

8.       General and Administrative

         According to Section 6.3 of the Fund's Bylaws,  Operating  Expenses (as
         defined)  may not exceed the greater of (a) 2 percent of the Average of
         Invested  Assets  for that year or (b) 25  percent of the Net Income of
         the  Fund  (as  defined)  for  that  year,  unless  a  majority  of the
         Independent  Directors find this excess justified.  In 1997,  Operating
         Expenses did exceed 2 percent of the Fund's Average of Invested  Assets
         and 25 percent of the Fund's Net Income. It was determined  unanimously
         by the Independent Directors that the excess was justified based on the
         reduction in the amount of the Fund's Invested Assets and Net Income as
         a result of the ongoing  liquidation of the Fund's properties while the
         Fund's expenses had not declined proportionately.

9.       Sale of Rental Properties

         In  December  1997 the Fund sold  Wickes  Furniture  Store  located  in
         Torrance,  California for $7,550,000. After payment of expenses of sale
         of $255,000  (including  real estate  commissions  of $227,000  paid to
         outside  brokers),  the  proceeds  to the  Fund  were  $7,295,000.  The
         carrying value at the time of sale was $8,846,000  (including  $241,000
         deferred lease income receivable), resulting in a loss of $1,551,000.

         In December 1997 the Fund sold the Circle K store (originally Stop N Go
         Store #2406) located in Marietta, Georgia for $1,228,000. After payment
         of expenses of sale of $68,000  (including  real estate  commissions of
         $49,000  paid to  outside  brokers),  the  proceeds  to the  Fund  were
         $1,160,000.  The  carrying  value at the  time of sale  was  $1,169,000
         (including  $73,000 deferred lease income  receivable),  resulting in a
         loss of $9,000.

         In December 1997 the Fund sold the Circle K store (originally Stop N Go
         Store #2374) located in Placentia,  California for  $1,417,0000.  After
         payment  of  expenses  of  sale  of  $76,000   (including  real  estate
         commissions  of $57,000 paid to outside  brokers),  the proceeds to the
         Fund  were  $1,341,000.  The  carrying  value  at the  time of sale was
         $917,000   (including   $56,000  deferred  lease  income   receivable),
         resulting in a gain of $424,000.

         In December 1997 the Fund sold the Circle K store (originally Stop N Go
         Store #2065)  located in Fontana,  California  for  $1,417,0000.  After
         payment  of  expenses  of  sale  of  $75,000   (including  real  estate
         commissions  of $57,000 paid to outside  brokers),  the proceeds to the
         Fund  were  $1,342,000.  The  carrying  value  at the  time of sale was
         $890,000   (including   $56,000  deferred  lease  income   receivable),
         resulting in a gain of $452,000.

         In December 1997 the Fund's subsidiary,  Metric Real Estate, L.P., sold
         Stop N Go Store #285 located in Fort Worth,  Texas for $636,000.  After
         payment  of  expenses  of  sale  of  $42,000   (including  real  estate
         commissions  of $25,000 paid to outside  brokers),  the proceeds to the
         Fund were $594,000. The carrying value at the time of sale was $790,000
         (including  $38,000 deferred lease income  receivable),  resulting in a
         loss of $196,000.

         In December 1997 the Fund's subsidiary,  Metric Real Estate, L.P., sold
         Stop N Go Store #308 located in Grand  Prairie,  Texas for  $1,004,000.
         After  payment of  expenses of sale of $59,000  (including  real estate
         commissions  of $40,000 paid to outside  brokers),  the proceeds to the
         Fund were $945,000. The carrying value at the time of sale was $764,000
         (including  $40,000 deferred lease income  receivable),  resulting in a
         gain of $181,000.

         In December 1997 the Fund's subsidiary,  Metric Real Estate, L.P., sold
         Stop N Go Store #1322 located in Kennedale,  Texas for $991,000.  After
         payment  of  expenses  of  sale  of  $57,000   (including  real  estate
         commissions  of $40,000 paid to outside  brokers),  the proceeds to the
         Fund were $934,000. The carrying value at the time of sale was $899,000
         (including  $39,000 deferred lease income  receivable),  resulting in a
         gain of $35,000.

         In December 1997 the Fund's subsidiary,  Metric Real Estate, L.P., sold
         Stop N Go Store #1386 located in San Antonio, Texas for $841,000. After
         payment  of  expenses  of  sale  of  $49,000   (including  real  estate
         commissions  of $34,000 paid to outside  brokers),  the proceeds to the
         Fund were $792,000. The carrying value at the time of sale was $922,000
         (including  $50,000 deferred lease income  receivable),  resulting in a
         loss of $130,000.

                                       21
<PAGE>

         In December 1997 the Fund's subsidiary,  Metric Real Estate, L.P., sold
         Stop N Go Store #328 located in San Antonio, Texas for $834,000.  After
         payment  of  expenses  of  sale  of  $49,000   (including  real  estate
         commissions  of $33,000 paid to outside  brokers),  the proceeds to the
         Fund were $785,000. The carrying value at the time of sale was $902,000
         (including  $49,000 deferred lease income  receivable),  resulting in a
         loss of $117,000.

         In October 1997 the Fund's subsidiary,  Metric Real Estate,  L.P., sold
         Haverty's Furniture Store located in Plano, Texas for $4,425,000. After
         payment  of  expenses  of sale of  $194,000  (including  a real  estate
         commission of $154,000 paid to an outside broker),  the proceeds to the
         Fund  were  $4,231,000.  The  carrying  value  at the  time of sale was
         $3,822,000 resulting in a gain of $409,000.

         In July 1997 the Fund's subsidiary, Metric Real Estate, L.P., sold Stop
         N Go Store #2378  located in  Arlington,  Texas for  $1,413,000.  After
         payment  of  expenses  of sale of  $110,000  (including  a real  estate
         commission of $81,000 paid to an outside  broker),  the proceeds to the
         Fund  were  $1,303,000.  The  carrying  value  at the  time of sale was
         $1,408,000   (including  $73,000  deferred  lease  income  receivable),
         resulting in a loss of $105,000.

         In March 1997 the Fund's  subsidiary,  Metric Real Estate,  L.P.,  sold
         Stop N Go Store  #3571  located  in Sealy,  Texas for  $265,000.  After
         payment  of  expenses  of  sale  of  $28,000   (including  real  estate
         commissions  of $16,000 paid to outside  brokers),  the proceeds to the
         Fund were $237,000. The carrying value at the time of sale was $303,000
         (including  $9,000  deferred lease income  receivable),  resulting in a
         loss of $66,000.

         In March 1997 the Fund's  subsidiary,  Metric Real Estate,  L.P.,  sold
         Stop N Go Store #655  located  in Dallas  Texas for  $1,392,000.  After
         payment  of  expenses  of sale of  $103,000  (including  a real  estate
         commission of $80,000 paid to an outside  broker),  the proceeds to the
         Fund  were  $1,289,000.  The  carrying  value  at the  time of sale was
         $715,000   (including   $43,000  deferred  lease  income   receivable),
         resulting in a gain of $574,000.

         In March 1997 the Fund's  subsidiary,  Metric Real Estate,  L.P.,  sold
         Stop N Go Store #3592 located in Texas City, Texas for $135,000.  After
         payment  of  expenses  of  sale  of  $23,000   (including  real  estate
         commissions  of $8,000 paid to outside  brokers),  the  proceeds to the
         Fund were $112,000. The carrying value at the time of sale was $272,000
         (including  $7,000  deferred lease income  receivable),  resulting in a
         loss of $160,000.

         In February 1997 the Fund's subsidiary,  Metric Real Estate, L.P., sold
         Stop N Go Store  #3583  located  in Clute,  Texas for  $264,000.  After
         payment  of  expenses  of  sale  of  $29,000   (including  real  estate
         commissions  of $16,000 paid to outside  brokers),  the proceeds to the
         Fund were $235,000. The carrying value at the time of sale was $373,000
         (including  $9,000  deferred lease income  receivable),  resulting in a
         loss of $138,000.

         In December 1996 the Fund's subsidiary,  Metric Real Estate, L.P., sold
         Stop N Go Store #3755 located in Houston,  Texas for $1,410,000.  After
         payment  of  expenses  of  sale  of  $100,000  (including  real  estate
         commissions of $81,000 paid to outside  brokers) the proceeds  received
         by the Fund were $1,310,000. The carrying value at the time of sale was
         $1,587,000   (including  $38,000  deferred  lease  income  receivable),
         resulting in a loss of $277,000.

         In November 1996 the Fund sold the Circle K store (originally Stop N Go
         Store #674) located in Rancho  Cucamonga,  California  for  $1,650,000.
         After  payment of the  expenses  of sale of  $103,000  (including  real
         estate  commissions  of $93,000  paid to outside  brokers) the proceeds
         received by the Fund were $1,547,000. The carrying value at the time of
         sale  was   $1,038,000   (including   $37,000   deferred  lease  income
         receivable) resulting in a gain of $509,000.

         In July 1996 the Fund sold the Pearle  Express  Store located in Orland
         Park, Illinois for $1,069,000. After payment of the expenses of sale of
         $81,000  (including real estate  commissions of $64,000 paid to outside
         brokers) the proceeds received by the Fund were $988,000.  The carrying
         value  at the  time  of  sale  was  $1,034,000  resulting  in a loss of
         $46,000.

         In June 1996 the Fund sold the Sam's Club property located in Menomonee
         Falls,   Wisconsin  for  $4,910,000  (after  credit  to  seller  for  a
         construction  holdback of  $28,000).  After  payment of the expenses of
         sale of $201,000  (including real estate commission of $168,000 paid to
         an outside broker),  the proceeds received by the Fund were $4,709,000.
         The carrying  value at the time of sale was  $4,135,000  resulting in a
         gain of $574,000.  Of the proceeds  received by the Fund,  $108,000 was
         deposited  into an escrow  account to secure  payment for  construction
                                       22
<PAGE>



         work  to be  completed  by the  tenant  at  the  property.  The  tenant
         subsequently   claimed   that  the  work   specified   was  beyond  the
         requirements  under the original  lease.  The tenant will  complete the
         work to the extent required under the lease,  and the remainder will be
         completed  and  paid  for from  the  escrowed  funds.  Once the work is
         complete,  any remaining funds from the escrow account will be released
         to the Fund. As of December 31 1997,  it was estimated  that $72,000 of
         the  construction  work  would be paid from the  escrowed  funds.  This
         amount  was  recognized  in  1997  as a  reduction  of  the  previously
         recognized gain on sale.

         In March 1995 the Fund sold the  former  Phar-Mor  building  located in
         Franklin Township, Ohio for $3,050,000.  After payment of the estimated
         expenses of sale of $126,000  (including  real  estate  commissions  of
         $91,000 paid to outside brokers) the proceeds received by the Fund were
         $2,924,000.  The carrying value at the time of sale was $2,798,000 (net
         of the $780,000  provision for impairment of value recognized in 1993),
         resulting in a net gain on sale of $126,000.

10.      Subsequent Events

         On March 3, 1998,  the Fund sold the Pearle  Express  Store  located in
         Morrow, Georgia for $1,005,000. After payment of the estimated expenses
         of sale of $103,000  (including real estate commissions of $80,000 paid
         to outside  brokers) the proceeds  received by the Fund were  $902,000.
         The carrying value at the time of sale was $916,000 (net of the $42,000
         provision for impairment of value recognized in 1997),  resulting in an
         estimated net loss on sale of $14,000.

         On  January  12,  1998,  the Fund paid a  dividend  of  $17,385,000  to
         Shareholders of record at December 31, 1997.

                                       23

<PAGE>


<TABLE>
                                                                                                                  SCHEDULE III

                                                  METRIC INCOME TRUST SERIES, INC.,
                                                      a California corporation

                                              REAL ESTATE AND ACCUMULATED DEPRECIATION
                                                          December 31, 1996


<CAPTION>
                            All amounts in thousands
                                     COLUMNS
       A                     B                 C                         D                     E              F          G
------------------------------------------------------------------------------------------------------------------------------
                          Initial     Cost capitalized sub-   Gross amount at which
                       Cost to Fund  sequent to acquisition carried at close of period(1)
                                                                    Buildings
                           Buildings                                   and                                  Date
                              and      Improve- Carrying             Improve-             Accumulated      of con-    Date ac-
  Description        Land Improvements  ments    Costs      Land      ments      Total  depreciation(2)   struction    quired
  -----------        ---- ------------  -----    -----      ----      -----      -----  --------------    ---------    ------
<S>                <C>       <C>         <C>     <C>       <C>       <C>       <C>          <C>             <C>         <C>
Pearle Express
Store
Morrow, GA         $  333    $  838      $--     $ --      $  333    $  838    $ 1,171      $  200          1977        11/89
Wickes
Furniture Store
Torrance, CA
                    5,801     3,740       --       --       5,801     3,740      9,541         873          1988        01/90
Haverty's
Furniture Store
Plano, TX
                    1,011     3,072        3       --       1,011     3,075      4,086         213          1988        12/94
                   ------    ------      ---     ------    ------    ------    -------      ------       -------       ------
Total              $7,145    $7,650      $ 3     $ --     $ 7,145    $7,653    $14,798      $1,286
                   ======    ======      ===     ======    ======    ======    =======      ======


<FN>
(1)    The aggregate cost for Federal income tax purposes is $14,798,000.
(2)    Depreciation is computed on life of thirty years.
</FN>
</TABLE>



                                       24

<PAGE>
                                                                    SCHEDULE III

                        METRIC INCOME TRUST SERIES, INC.,
                            a California Corporation

                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 1997

Land, Buildings, and Improvements

Balance, January 1, 1995                                         $ 39,527,000
Property Acquisitions (initial cost to Fund)                           28,000
Improvements capitalized subsequent to acquisition                     31,000
Cost of property and improvements sold                             (3,832,000)
Property reclassified to real estate held for sale                 (4,865,000)
                                                                 ------------

Balance, December 31, 1995                                         30,889,000
Cost of property and improvements sold                             (1,255,000)
Property reclassified to real estate held for sale                (14,836,000)
                                                                 ------------

Balance, December 31, 1996                                         14,798,000
Cost of property and improvements sold                            (13,627,000)
Property reclassified to real estate held for sale                 (1,171,000)
                                                                 ------------

Balance, December 31, 1997                                       $       --
                                                                 ============

Accumulated Depreciation

Balance, January 1, 1995                                         $  3,988,000
Additions charged to expense                                          652,000
Accumulated depreciation on improvements sold                        (346,000)
Provision on property sold                                           (780,000)
Accumulated depreciation on property reclassified
 to real estate held for sale                                        (730,000)
                                                                 ------------

Balance, December 31, 1995                                          2,784,000
Additions charged to expense                                          397,000
Accumulated depreciation on improvements sold                        (221,000)
Accumulated depreciation on property reclassified
 to real estate held for sale                                      (1,674,000)
                                                                 ------------

Balance, December 31, 1996                                          1,286,000
Additions charged to expense                                          128,000
Accumulated depreciation on improvements sold                      (1,200,000)
Accumulated depreciation on property reclassified
 to real estate held for sale                                        (214,000)
                                                                 ------------

Balance, December 31, 1997                                       $       --
                                                                 ============
                                       25
<PAGE>





Item 9.      Changes in and Disagreements with Accountants on Accounting and
             Financial Disclosure.

Not Applicable.

                                    PART III

Information  with respect to directors and executive  officers of the Registrant
in Item 10 and the  information  required  by Items 11 - 13 is  incorporated  by
reference to the proxy material of the Registrant in connection  with its Annual
Meeting of Shareholders scheduled for June 1998.

                                     PART IV

Item 14.     Exhibits, Financial Statements Schedules, and Reports on Form 8-K.

(a)     1. and 2.  See  Item 8 of this  Form  10-K  for  consolidated  financial
        statements  for  the  Fund,  Notes  thereto,   and  financial  statement
        schedules. (A table of contents to consolidated financial statements and
        financial  statement  schedules  is included in Item 8 and  incorporated
        herein by reference.)

(b)     The following  reports on Form 8-K were required to be filed during  the
        last quarter covered by this Report:

        On October 10,  1997,  a Report was filed on Form 8-K  reporting  on the
        sale of the Fund's portfolio of mortgage-backed  securities. On November
        3, 1997, a Report was filed on Form 8-K  reporting  the  disposition  of
        Haverty's Furniture store in Plano, Texas. On November 11, 1997 a Report
        was filed on Form 8-K including  additional  information  concerning the
        disposition of the Fund's Arlington (Green Oaks Blvd.) convenience store
        property,  originally reported in the Form 10-Q filed November 12, 1997.
        On January 5, 1998,  subsequent to the close of the  `quarter,  a Report
        was filed on Form 8-K reporting the  disposition  of eight of the Fund's
        convenience store properties (five stores in Texas, one in Georgia,  and
        two in California).  On January 9, 1998,  subsequent to the close of the
        quarter, a Report was filed on Form 8-K reporting the disposition of the
        Fund's Wickes  Furniture store in Torrance,  California.  On January 12,
        1998 a  Report  was  filed  on Form  8-K  including  a  letter  from the
        Registrant to its shareholders.  On February 27, 1998, subsequent to the
        close of the  quarter,  the Form filed on January 5, 1998 was amended to
        include  additional   information  concerning  the  disposition  of  the
        properties.  On March 10,  1998,  the Form filed on November 3, 1997 was
        amended to include additional  information concerning the disposition of
        the property.

(c) List of Exhibits (numbered in accordance with Item 601 of Regulation S-K):

     3.1       Restated   Articles   of   Incorporation   of   the   Registrant.
               Incorporated  by reference to  Post-Effective  Amendment No. 1 to
               the Registrant's Form S-11 Registration  Statement filed with the
               Commission on September 29, 1989.

     3.2       Amended and Restated  Bylaws of the  Registrant.  Incorporated by
               reference to  Post-Effective  Amendment No. 1 to the Registrant's
               Form S-11  Registration  Statement  filed with the  Commission on
               September 29, 1989.

    10.1       Advisory  Agreement  dated June 29, 1989,  between the Registrant
               and Metric Realty.  Incorporated  by reference to  Post-Effective
               Amendment  No.  1 to  the  Registrant's  Form  S-11  Registration
               Statement filed with the Commission on September 29, 1989.

    10.2       First  Amendment  to Advisory  Agreement  dated  January 1, 1991.
               Incorporated  by reference to the  Registrant's  Annual Report on
               Form 10-K for 1990 filed with the Commission on March 25, 1991.

    10.3       Second  Amendment  to  Advisory  Agreement  dated  April 1, 1991.
               Incorporated  by reference to the  Registrant's  Annual Report on
               Form 10-K for 1990 filed with the Commission on March 25, 1991.

    10.4       Third  Amendment  to  Advisory  Agreement  dated  April 1,  1992.
               Incorporated  by reference to the  Registrant's  Annual Report on
               Form 10-K for 1993  filed with the  Commission  on  February  25,
               1994.


                                       26

<PAGE>



    10.5       Fourth  Amendment  to  Advisory  Agreement  dated  April 1, 1993.
               Incorporated  by reference to the  Registrant's  Annual Report on
               Form 10-K for 1993  filed with the  Commission  on  February  25,
               1994.

    10.6       Securities  Management Agreement dated June 29, 1989, between the
               Registrant   and  Federal   Street   Financial   Advisors,   Inc.
               Incorporated  by reference to  Post-Effective  Amendment No. 1 to
               the Registrant's Form S-11 Registration  Statement filed with the
               Commission on September 29, 1989.

    10.7       Custodial   Services   Agreement  dated  July  17,  1989  between
               Citibank,   N.A.  Incorporated  by  reference  to  Post-Effective
               Amendment  No.  2 to  the  Registrant's  Form  S-11  Registration
               Statement filed with the Commission on February 28, 1990.

    10.8       Indemnification  Agreements dated May 7, 1991, between Registrant
               and the  following:  William G. Moeckel,  Jr.,  Donald K. Devine,
               William F.  Garlock,  W.  Patrick  McDowell  and Robert M. Rouse.
               Incorporated  by reference to the  Registrant's  Annual Report on
               Form 10-K for 1993  filed with the  Commission  on  February  25,
               1994.

    10.9       Indemnification  Agreements  dated  February  11,  1994,  between
               Registrant  and  the  following:  Carroll  Archibald,  Robert  A.
               Fiddaman,  Margot M. Giusti,  Herman H. Howerton and Joyce Jaber.
               Incorporated  by reference to the  Registrant's  Annual Report on
               Form 10-K for 1993  filed with the  Commission  on  February  25,
               1994.

    10.10      Fifth Amendment to Advisory  Agreement dated as of April 1, 1994.
               Incorporated by reference to the Registrant's  Report on Form 8-K
               filed with the Commission on February 15, 1995.

    10.11      Sixth Amendment to Advisory  Agreement dated as of April 1, 1995.
               Incorporated by reference to the Registrant's Report on Form 10-Q
               filed with the Commission on May 11, 1995.

    10.12      Seventh  Amendment  to  Advisory  Agreement  dated as of April 1,
               1996.  Incorporated  by reference to the  Registrant's  Report on
               Form 10-Q filed with the Commission on May 14, 1996.

    10.13      Assignment and  Assumption  Agreement  dated as of March 27, 1997
               between Metric Realty and  SSR Realty Advisors, Inc., relating to
               the Advisory Agreement.

    10.14      Agreement  for  Purchase  and Sale of Sam's  Club,  dated May 15,
               1996,  incorporated  by reference to the  Registrant's  Report on
               Form 8-K filed with the Commission on July 9, 1996, as amended on
               Form 8-K/A, filed with the Commission on August 23, 1996.

    10.15      Agreement for Purchase and Sale of Pearle Express Store,  located
               in Orland Park,  Illinois,  dated May 16, 1996,  incorporated  by
               reference to the  Registrant's  Report on Form 8-K filed with the
               Commission on July 25, 1996, as amended on Form 8-K/A, filed with
               the Commission on October 10, 1996.

    10.16      Agreement  for  Purchase  and Sale of Circle K Store,  located in
               Rancho   Cucamonga,   California,   dated   November   12,  1996,
               incorporated by reference to the Registrant's  Report on Form 8-K
               filed with the  Commission  on November 22,  1996,  as amended on
               Form 8-K/A, filed with the Commission on January 8, 1997.

    10.17      Earnest  Money  Contract  for Stop N Go Store,  located in Harris
               County (Houston),  Texas, dated December 3, 1996, incorporated by
               reference to the  Registrant's  Report on Form 8-K filed with the
               Commission on December 23, 1996, as amended on Form 8-K/A,  filed
               with the Commission on January 29, 1997.

    10.18      First  Amendment,  dated  March  31, 1997, to lease  between  the
               Registrant and Pearle, Inc. dated May 4, 1988.

    10.19      Eighth Amendment to Advisory Agreement dated as of April 1, 1997,
               between the Fund and SSR Realty Advisors, Inc.


                                       27

<PAGE>




    10.20      Earnest Money  Contracts  for Stop N Go Stores  located in Clute,
               Sealy, and Dallas,  Texas, dated February 10, 1997,  February 18,
               1997,  and  February  7,  1997,  respectively,   incorporated  by
               reference to the  Registrant's  Report on Form 8-K filed with the
               Commission  on March 14,  1997,  as amended on Form 8-K/A,  filed
               with the Commission on April 18, 1997.

    10.21      Earnest Money Contract for Stop N Go Store located in Texas City,
               Texas,  dated March 13,  1997,  incorporated  by reference to the
               Registrant's  Report on Form 8-K  filed  with the  Commission  on
               March  11,  1997,  as  amended  on Form  8-K/A,  filed  with  the
               Commission on April 18, 1997.

    10.22      Earnest Money  Contract for Stop N Go Store located in Arlington,
               Texas,  dated  June 5, 1997,  incorporated  by  reference  to the
               Registrant's  Report on Form 8-K  filed  with the  Commission  on
               November 10, 1997.

    10.23      Earnest  Money  Contract  for  Stop N Go  Stores  located  in San
               Antonio   (Fredericksburg  Blvd.  and  Babcock  Road),  Arlington
               (Kennedale - No.  Little School Road),  Grand  Prairie,  and Fort
               Worth,  Texas, dated October 31, 1997,  incorporated by reference
               to the Registrant's  Report on Form 8-K filed with the Commission
               on  January 5, 1998,  as  amended on Form  8-K/A,  filed with the
               Commission on February 27, 1998.

    10.24      Earnest Money  Contract for Stop N Go Stores located in Marietta,
               Georgia;  Placentia  and Fontana,  California,  dated October 31,
               1997,  incorporated  by reference to the  Registrant's  Report on
               Form 8-K filed with the Commission on January 5, 1998, as amended
               on Form 8-K/A, filed with the Commission on February 27, 1998.

    10.25      Earnest Money Contract for Haverty's  Furniture  Store located in
               Plano,  Texas,  dated  September 2, 1997,  1997,  incorporated by
               reference to the  Registrant's  Report on Form 8-K filed with the
               Commission on November 3, 1997,  as amended on Form 8-K/A,  filed
               with the Commission on March 10, 1998.

    16.1       Letter from  Deloitte & Touche,  LLP dated  September 27, 1994 to
               the Securities and Exchange Commission. Incorporated by reference
               to the Registrant's  Report on Form 8-K filed with the Commission
               on September 28, 1994.

    20.1       Letter   dated   February  15,  1995  from   Registrant   to  its
               Shareholders.  Incorporated  by  reference  to  the  Registrant's
               Report on Form 8-K filed  with the  Commission  on  February  15,
               1995.

    20.2       Letter   dated   February  15,  1996  from   Registrant   to  its
               Shareholders.  Incorporated  by  reference  to  the  Registrant's
               Report on Form 8-K filed  with the  Commission  on  February  15,
               1996.

    20.3       Letter  dated   September   26,  1997  from   Registrant  to  its
               Shareholders.  Incorporated  by  reference  to  the  Registrant's
               Report on Form 8-K filed with the  Commission  on  September  26,
               1997.

    20.4       Letter   dated   January   12,  1998  from   Registrant   to  its
               Shareholders.  Incorporated  by  reference  to  the  Registrant's
               Report on Form 8-K filed with the Commission on January 12, 1998.

    20.5       Letter   dated   February  27,  1998   from  Registrant  to   its
               Shareholders regarding reimbursement of expenses.



                                       28

<PAGE>



                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                         REGISTRANT

                                         METRIC INCOME TRUST SERIES, INC.,
                                         a California corporation



                                         By:   /s/ Thomas P. Lydon
                                               -------------------------------
                                               Thomas P. Lydon
                                               President, Chairman of the Board,
                                               and Chief Executive Officer
                                               (Principal Executive Officer)


                                         Date: March 31, 1998
                                               --------------------------

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the date indicated.



By:    /s/William A. Finelli             By:   /s/ Robert M. Rouse
       --------------------------              -------------------------
       William A. Finelli                      Robert M. Rouse
       Director                                Director




By:    /s/ William G. Moeckel, Jr.       By:   /s/ William F. Garlock
       ---------------------------             -------------------------
       William G. Moeckel, Jr.                 William F. Garlock
       Director                                Director



Date:   March 31, 1998
        --------------------------


                                       29